Ware County Board of Education, Waycross, Georgia, report on audit of the financial statements for the fiscal year ended June 30, 2003

WARE COUNTY BOARD OF EDUCATION
WAYCROSS, GEORGIA REPORT ON AUDIT
OF THE FINANCIAL STATEMENTS
FOR THE FISCAL YEAR ENDED JUNE 30, 2003
STATE OF GEORGIA
DEPARTMENT OF AUDITS AND ACCOUNTS
Russell W. Hinton State Auditor

WARE COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS -

SECTION I

FINANCIAL

INDEPENDENT AUDITOR'S COMBINED REPORT ON BASIC FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION - SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS

REQUIRED SUPPLEMENTARY INFORMATION

MANAGEMENT'S DISCUSSION AND ANALYSIS

EXHIBITS

BASIC FINANCIAL STATEMENTS

DISTRICT-WIDE FINANCIAL STATEMENTS

A

STATEMENT OF NET ASSETS

3

B

STATEMENT OF ACTIVITIES

5

FUND FINANCIAL STATEMENTS

C

BALANCE SHEET

GOVERNMENTAL FUNDS

6

D

RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET

TO THE STATEMENT OF NET ASSETS

7

E

STATEMENT OF REVENUES, EXPENDITURES AND CHANGES

IN FUND BALANCES

GOVERNMENTAL FUNDS

8

F

RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT

OF REVENUES, EXPENDITURES AND CHANGES IN FUND

BALANCES TO THE STATEMENT OF ACTIVITIES

9

G

STATEMENT OF FIDUCIARY NET ASSETS

FIDUCIARY FUNDS

10

H

STATEMENT OF CHANGES IN FIDUCIARY NET ASSETS

FIDUCIARY FUNDS

11

I

NOTES TO THE BASIC FINANCIAL STATEMENTS

12

SCHEDULES

REQUIRED SUPPLEMENTARY INFORMATION

1 SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES

IN FUND BALANCES - BUDGET AND ACTUAL

GENERAL FUND

29

WARECOUNTYBOARDOFEDUCATION - TABLE OF CONTENTS -

SECTION I

FINANCIAL

SCHEDULES

SUPPLEMENTARY INFORMATION

2 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS

30

3 SCHEDULE OF STATE REVENUE

32

4 SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS

34

5 ALLOTMENTS AND EXPENDITURES

GENERAL FUND - QUALITY BASIC EDUCATION PROGRAMS (QBE)

BY PROGRAM

37

SECTION II
COMPLIANCE AND INTERNAL CONTROL REPORTS
REPORT ON COMPLIANCE AND ON INTERNAL CONTROL OVER FINANCIAL REPORTING BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS
REPORT ON COMPLIANCE WITH REQUIREMENTS APPLICABLE TO EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH 0MB CIRCULAR A-133

SECTION III AUDITEE'S RESPONSE TO PRIOR YEAR FINDINGS AND QUESTIONED COSTS SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS

SECTION IV FINDINGS AND QUESTIONED COSTS SCHEDULE OF FINDINGS AND QUESTIONED COSTS

SECTION I FINANCIAL

RUSSELL W. HINTON
STATE AUDITOR
(404) 656-2174

DEPARTMENT OF AUDITS AND ACCOUNTS
254 Washington Street, S.W. Suite 214 Atlanta, Georgia 30334-8400
April 1, 2004

Honorable Sonny Perdue, Governor Members ofthe General Assembly Members of the State Board of Education
and Superintendent and Members of the Ware County Board of Education
INDEPENDENT AUDITOR'S COMBINED REPORT ON BASIC FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION - SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
Ladies and Gentlemen:
We have audited the accompanying financial statements ofthe governmental activities, each major fund, and the aggregate remaining fund information (Exhibits A through I) of the Ware County Board of Education, as of and for the year ended June 30, 2003, which collectively comprise the Board's basic financial statements as listed in the table of contents. These financial statements are the responsibility of the Ware County Board of Education's management. Our responsibility is to express opinions on these financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United States ofAmerica and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General ofthe United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free ofmaterial misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our op1mons.
In our opinion, the financial statements referred to above present fairly, in all material respects, the respective position ofthe governmental activities, each major fund, and the aggregate remaining fund information ofthe Ware County Board ofEducation, as ofJune 30, 2003, and the respective changes in financial position thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America.
2003-34ARL-11

As discussed in Note 2 to the basic financial statements, during fiscal year 2003, the Board completed a comprehensive inventory of its capital assets for inclusion in the basic financial statements, consolidated its individual school activity accounts for inclusion in the basic financial statements and changed its method of accounting for the salaries of certain ten-month employees from a cash basis to a basis that is generally accepted. These changes are in accordance with generally accepted accounting principles.
As described in Note 2, the Ware County Board of Education has implemented a new financial reporting model as required by provisions of Governmental Accounting Standards Board Statement No. 34, Basic Financial Statements - and Management's Discussion and Analysis - for State and Local Governments, as of June 30, 2003.
In accordance with Government Auditing Standards, we have also issued our report dated April 1, 2004, on our consideration ofthe Ware County Board ofEducation's internal control over financial reporting and our tests of its compliance with certain provisions of laws, regulations, contracts and grants. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be read in conjunction with this report in considering the results of our audit.
Management's Discussion and Analysis and the Schedule ofRevenues, Expenditures and Changes in Fund Balances - Budget and Actual, as presented on pages i through ix and page 29 respectively, are not a required part of the basic financial statements but are supplementary information required by the accounting principles generally accepted in the United States of America. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods ofmeasurement and presentation ofthe required supplementary information. However, we did not audit the information and express no opinion on it.
Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Ware County Board of Education's basic financial statements. The accompanying supplementary information which consist of Schedules 2 through 5, which includes the Schedule of Expenditures of Federal Awards as required by U.S. Office of Management and Budget Circular A-133, Audits ofStates, Local Governments, and Non-Profit Organizations, are presented for purposes of additional analysis and are not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements, and in our opinion, is fairly stated, in all material respects, in relation to the basic financial statements taken as a whole.
2003-34ARL-11

A copy ofthis report has been filed as a permanent record in the office ofthe State Auditor and made available to the press ofthe State, as provided for by Official Code ofGeorgia Annotated section 506-24.

Respectfully submitted,

?

,~J.~.el.l.

,
W.

.~
Hinton

w

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State Auditor

RWH:as 2003-34ARL-11

WARE COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2003
The discussion and analysis ofWare County Board ofEducation's financial performance provides an overall review ofthe Board's financial activities for the fiscal year ended June 30, 2003. The intent of this discussion and analysis is to look at the Board's financial performance as a whole; readers should also review the financial statements and the notes to the basic financial statements to enhance their understanding of the Board's financial performance.
Financial Highlights
Key financial highlights for fiscal year 2003 are as follows:
In total, net assets increased $2.1 million, which represents a 5 percent increase from fiscal year 2002. This total increase was due to governmental activities since the Board has no businesstype activities.
General revenues accounted for $18.8 million in revenue or 34 percent ofall revenues. Program specific revenues in the form of charges for services and sales, grants and contributions accounted for $37.2 million or 66 percent of total revenues of $56 million.
The Board had $53.9 million in expenses related to governmental activities; only $37.2 million ofthese expenses were offset by program specific charges for services, grants or contributions. General revenues (primarily taxes) of $18.8 million were adequate to provide for these programs.
Among major funds, the general fund has $50.5 million in revenues and $50.2 million in expenditures. The general fund's balance increased to $3.6 million from $3.3 million.
The Capital Assets balances at July 1, 2002 were adjusted for accounting changes as disclosed in Note 2 ofthe Notes to the Basic Financial Statements.
Using the Basic Financial Statements
This annual report consists of a series offinancial statements and notes to those statements. These statements are organized so the reader can understand the Ware County Board of Education as a financial whole, or as an entire operating entity.
The Statement ofNet Assets and Statement ofActivities provide information about the activities of the whole Board, presenting both an aggregate view ofthe Board's finances and a longer-term view of those finances. Fund financial statements provide the next level of detail. For governmental funds, these statements tell how services were financed in the short-term as well as what remains for future spending. In the case of the Ware County Board of Education, the general fund is by far the most significant fund.

WARE COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2003
Reporting the Board as a Whole
Statement ofNet Assets and the Statement ofActivities
While this document contains the large number offunds used by the Board to provide programs and activities, the view ofthe Board as a whole looks at all financial transactions and asks the question, "How did we do financially during fiscal year 2003 ?" The Statement ofNet Assets and the Statement of Activities answer this question. These statements include all assets and liabilities using the accrual basis ofaccounting similar to the accounting used by most private-sector companies. This basis of accounting takes into account all of the current year's revenues and expenses regardless of when cash is received or paid.
These two statements report the Board's net assets and changes in those assets. This change in net assets is important because it tells the reader whether, for the Board as a whole, thefinancial position of the Board has improved or diminished. The causes of this change may be the result of many factors, some financial, some not. Nonfinancial factors include the Board's property tax base, facility conditions, required educational programs and other factors.
In the Statement of Net Assets and the Statement of Activities, the Board has one distinct type of activity:
D Governmental Activities -All ofthe Board's programs and services are reported here including
instruction, support services, operation and maintenance of plant, pupil transportation, food service, after school program, principal's accounts and various others.
Reporting the Board's Most Significant Funds
Fund Financial Statements
Fund financial reports provide detailed information about the Board's major funds. The Board uses many funds to account for a multitude of financial transactions. However, these fund financial statements focus on the Board's most significant funds. The Board's major governmental funds are the general fund, the capital projects fund and the debt service fund.
Governmental Funds Most of the Board's activities are reported in governmental funds, which focus on how money flows into and out ofthose funds and the balances left at year-end available for spending in future periods. These funds are reported using an accounting method called modified accrual accounting, which measures cash and all otherfinancial assets that can readily be converted to cash. The governmental fund statements provide a detailed short-term view ofthe Board's general government operations and the basic services it provides. Governmental fund information helps you determine whether there are more or fewer financial resources that can be spent in the near future to finance educational programs. The relationship (or differences) between governmental activities (reported in the Statement ofNet Assets and the Statement ofActivities) and governmental funds is reconciled in the financial statements.
11

WARE COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2003

Fiduciary Funds The Board is the trustee, orfiduciary, for assets that belong to others, such as the medical spending account fund and school clubs and organizations within the principals' accounts. The Board is responsible for ensuring that the assets reported in these funds are used only for their intended purposes and by those to whom the assets belong. The Board excludes these activities from the District-wide financial statements because it cannot use these assets to finance its operations.

The Board as a Whole

The perspective of the statement of net assets is of the Board as a whole. Table 1 provides a summary ofthe Board's net assets for fiscal year 2003. The Capital Assets balances at July 1, 2002 were adjusted for accounting changes as disclosed in Note 2 of the Notes to the Basic Financial Statements. Since this is the first year the School District has prepared financial statements following GASB Statement 34, net assets comparisons to fiscal year 2002 are not available.

Table 1 Net Assets

Governmental Activities Fiscal Year 2003

Assets Current and Other Assets Capital Assets, Net

$ 29,757,197 45,338.311

Total Assets

$ 75,095,508

Liabilities Current and Other Liabilities Long-Term Liabilities

$ 6,047,966 23,735,522

Total Liabilities

$ 29,783.488

Net Assets Invested in Capital Assets, Net of Related Debt
Restricted Unrestricted

$ 27,424,437 13,748,365 4,139.218

Total Net Assets

$45,312,020

Total net assets increased $2.1 million in fiscal year 2003.

Table 2 shows the changes in net assets for fiscal year 2003. Since this is the first year the School District has prepared financial statements following GASB Statement 34, revenue and expense comparisons to fiscal year 2002 are not available.

111

WARE COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2003

Table 2 Change in Net Assets
Revenues Program Revenues: Charges for Services Operating Grants and Contributions
Total Program Revenues
General Revenues: Taxes Property Taxes For Maintenance and Operations For Debt Service Railroad Cars Sales Taxes Special Purpose Local Option Sales Tax For Debt Service For Capital Projects Real Estate Grants and Contributions not Restricted to Specific Programs Investment Earnings Miscellaneous
Total General Revenues
Total Revenues
Program Expenses Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Operations ofNon-Instructional Services Enterprise Operations Food Services Interest on Short-Term and Long-Term Debt
Total Expenses
Increase in Net Assets
lV

Governmental Activities Fiscal Year 2003
$ 1,917,769 35,239,043
$ 37,156,812
$ 8,115,594 -63
117,880
4,561,042 566,356 22,549
4,126,732 351,876 940,765
$ 18,802,731
$ 55,959.543
$34,331,850
1,990,691 1,426,773 1,066,188
476,403 2,927,622
320,905 3,198,347 2,585,018
386,239 656,091
402,432 2,954,924 1,145.957
$ 53,869.440
$ 2,090,103

WARE COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2003

Governmental Activities

Instruction comprises 63.7 percent of governmental program expenses. Interest expense was 2.1 percent of governmental program expenses. Interest expense was attributable to capital leases and the outstanding bonds for capital projects.

The Statement of Activities shows the cost of program services and the charges for services and grants offsetting those services. Table 3 shows, for governmental activities, the total cost ofservices and the net cost of services for fiscal year 2003. That is, it identifies the cost of these services supported by tax revenue and unrestricted State entitlements. Since this is the first year the School District has prepared financial statements following GASB Statement 34, cost of service comparisons to fiscal year 2002 are not available.

Table 3 Governmental Activities

Total Cost of Services Fiscal Year 2003

Net Cost of Services Fiscal Year 2003

Instruction Support Services
Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Operations ofNon-Instructional Services Enterprise Operations Community Services Interest on Short-Term and Long-Term Debt

$ 34,331,850 $ 7,054,198

1,990,691 1,426,773 1,066,188
476,403 2,927,622
320,905 3,198,347 2,585,018
386,239 656,091

1,264,900 648,581 489,117 -586,614
1,592,702 319,405
1,498,427 1,608,473
386,239 590,177

402,432 2,954,924 1,145,957

402,432 298,634 1,145,957

Total Expenses

$ 531869A40 $ 16!712!628

V

WARE COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2003
Although program revenues make up a majority of the revenues, the Board is still dependent upon tax revenues for governmental activities. Over 20.6 percent of instruction activities are supported through taxes and other general revenues; for all governmental activities general revenue support is 31 percent.
The Board's Funds
The Board's governmental funds are accounted for using the modified accrual basis of accounting. Total governmental funds had revenues and other financing sources of $55.9 million and expenditures and other financing uses of$58.0 million. There was an increase of $1.1 million in the capital projects fund; the general fund had an increase of $0.3 million and debt service funds had a decrease of $3.5 million. The positive change in the fund balance of the general fund for the year reflects that the Board was able to meet current costs.
General Fund Budgeting Highlights
The Board's budget is prepared according to Georgia law. The most significant budgeted fund is the General Fund.
During the course of fiscal year 2003, the Board amended its general fund budget as needed. The Board uses site-based budgeting. The budgeting systems are designed to tightly control total site budgets but provide flexibility for site management.
For the General Fund, the final budgeted revenues and other financing sources of $50.7 million exceeded the original budgeted amount of $49.5 million by $1.2 million. This difference was due to an increase in Federal revenues of $1.0 million. The original and final budget amounts do not include budgeted revenues of the various principals' accounts. The actual revenues and other financing sources of $50.5 million was less than the budgeted amount by $0.2 million.
The final budgeted expenditures and other financing uses of $50.3 million exceeded the original budgeted amount of $49.5 million by $0.8 million. The original and final budget amounts do not include budgeted expenditures ofthe various principals' accounts. The actual expenditures and other financing uses of $50.2 million was $0.1 million less than budgeted.
General Fund revenues and other financing sources exceeded the expenditures and other financing uses by $0.3 million. The Board has made a concerted effort to raise fund balance and this result is evidence of their work.
Capital Assets and Debt Administration
Capital Assets
At the end of fiscal year 2003 the Board had $45.3 million invested in capital assets, all in governmental activities.
VI

WARE COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2003

Table 4 Capital Assets at June 30
(Net of Depreciation)

Governmental Activities Fiscal Year 2003

Land Construction in Progress Buildings and Building Improvements Equipment Land Improvements

$ 831,951 139,738
41,586,829 . 1,426,368
1,353,425

Total

$ 45,338,311

Debt

At June 30, 2003, the Board had $23.5 million in bonds outstanding with $3.5 million due within one year and $0.3 million in capital leases outstanding with $0.2 million due within one year. Table 5 summarizes general obligation bonds and capital leases.

Table 5 Debt at June 30

Governmental Activities Fiscal Year 2003

General Obligation Bonds Capital Leases
Other

$ 23,470,000 265,522

Total

$ 23,735,522

vii

WARE COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2003
Current Issues
The Ware County School District has experienced the economic challenges caused by declining local advalorem revenues and state funding. For a number of years, the School District benefited from incremental growth in local tax revenues due to reassessment ofproperty values. However, for the past several years changes in state legislation has changed the process and procedures for setting and adopting millage rates. To avoid increasing the millage rates, Ware like many other School Districts adopted the "rollback rates" calculated on the tax notices. In fact, the Ware County Board of Education adopted the rollback millage rate for three consecutive years moving the mill rate downward from 15.75 mills to the current fiscal year 2004 mill rate of 15.261. By adopting the rollback rates over this period, the chiefsource oflocal revenues for the School District was literally frozen in time. The net consequences ofadopting three consecutive rollback rates have resulted in a freeze in any increase in local revenues for the school system. However, the upside ofadopting the rollback rates has enabled the Board of Education to reinforce its commitment to avoid local property tax increases for the citizens ofWare County when possible. The Board has not approved a millage rate increase since 1996.
Coupled with declining local revenues, the School District experienced back-to-back years of declining state revenues. In fiscal year 2003 the Georgia Department of Education applied an "austerity reduction" to the Ware County School District, which cut or reduced the state revenues to the School District by $734,766. The reduction was applied on the mid-term earnings sheet, which had serious consequences to the School District since only three months remained in the fiscal year and most of the system's expenditures were tied up in contractual commitments to salary. Additionally, millage rates and other revenue sources were fixed for the remainder ofthe fiscal year. Through sound fiscal management practices, the School District reduced expenditures in areas where feasible. Reductions in staff were made and program costs were reduced. The School District has relied on portions ofits fund equity to offset the loss of state budgeted revenues. It should be noted that by applying good fiscal practices over the current and previous seven years, the Board of Education had accumulated adequate fund equity to cover the losses of revenue in the immediate difficult economic times.
The Ware County School District has experienced declining student enrollment for the past seven years. The County ofWare has not experienced population growth for a longer period ofyears. The Board of Education re-instituted its out-of-system tuition policies offering nonresident students an opportunity to attend Ware schools. The School District has benefited only slightly from the tuition policy. The chief financial consequence for declining enrollment has been a reduction in QBE funding which is based upon the Full Time Equivalent (FTE) enrollment of students. While enrollments decreased, the requirement for more teachers increased, as smaller pupil-teacher ratios were imposed by HB 1187 passed by the Georgia General Assembly in 2001. N(?t only was additional staff required to meet the new ratios, but in some instances additional classroom space was also needed.
Vlll

WARE COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2003
Despite a loss in population in recent years, the County of Ware has developed into a retail center attracting shoppers from smaller surrounding counties. Yet, while the School District has experienced declining enrollment, declining local revenues and deep cuts in the state allotment of funds, a Sales Tax for Education approved by the voters in 1997 and again in 2001 has tapped into the growing retail business and produced a new source of revenue for facility expansion and improvement. As a result of the sales tax revenues, the School District's facilities are among the finest in the state. Classroom technology has also been enhanced with these funds. Additionally, the Sales Tax for Education has provided the funds to repay the bonded indebtedness for the School District. The balance of 1998 General Obligation Bonds for $10,000,000 were retired in fiscal year 2004 with sales tax revenues. The 1995 series bonds in the amount of$11,965,000 are on schedule to be retired at the earliest possible date of February 2005. Debt service of the 1995 Bonds was shifted from the property tax digest (1.8 mills) to the sales tax collections. Like the 1998 Bonds, the 2002 General Obligations Bonds permitted the School District to "front-load" funding for many worthwhile and necessary facility improvement and construction projects. And like the previous bonds, the obligations on the 2002 Bonds are being serviced with sales tax revenues. The Ware County Board of Education has operated the School District through sound, fiscally responsible practices. While challenges clearly lie ahead, the Board and staff remain committed to continuing these practices. Contacting the Board's Financial Management This financial report is designed to provide our citizens, taxpayers, investors, and creditors with a general overview ofthe School District's finances and to show the School District's accountability for the money it receives. If you have questions about this report or need additional financial information, contact Loretta Holmes, Financial Director at Ware County Board of Education, 1301 Bailey Street, Waycross, Georgia 31501, or email at lholmes@ware.kl2.ga.us.
IX

WARE COUNTY BOARD OF EDUCATION

WARE COUNTY BOARD OF EDUCATION STATEMENT OF NET ASSETS JUNE 30, 2003
ASSETS
Cash and Cash Equivalents Investments Accounts Receivable, Net
Taxes State Government Federal Government Other Inventories Capital Assets Land Construction in Progress Land Improvements Buildings Equipment Less: Accumulated Depreciation
Total Assets
LIABILITIES
Accounts Payable Salaries Payable Contracts Payable Retainages Payable Deposits and Deferred Revenues Long-Term Liabilities
Due Within One Year Due in More Than One Year
Total Liabilities
NET ASSETS
Invested in Capital Assets, Net of Related Debt Restricted for
Bus Replacement Continuation of Federal Programs Debt Service Capital Projects Unrestricted
Total Net Assets
Total Liabilities and Net Assets
The notes to the basic financial statements are an integral part of this statement. -3-

EXHIBIT"A"

GOVERNMENTAL ACTIVITIES

$

4,416,119

18,634,513

1,478,313 3,831,211 1,035,884
285,641 75,516

831,951 139,738 3,194,621 57,694,788 4,724,243 -21,247,030

$ ===7=5-,0=95.i,;,5=0=8

$

1,471,902

4,441,495

86,006

5,732

42,831

3,669,526 20,065,996

$

29,783,488

$

27,424,437

396,878 750,318 991,192 11,609,977 4,139,218

$

45,312,020

$ ======7-5,_09=5=,5=0=8

WARE COUNTY BOARD OF EDUCATION STATEMENT OF ACTIVITIES
FOR THE YEAR ENDED JUNE 30. 2003

EXHIBIT"B"

EXPENSES

PROGRAM REVENUES

OPERATING

CHARGES FOR

GRANTS AND

SERVICES

CONTRIBUTIONS

NET (EXPENSES) REVENUES
AND CHANGES IN NET ASSETS

GOVERNMENTAL ACTIVITIES

Instruction Support Services
Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Operations of Non-Instructional Services Enterprise Operations Food Services Interest on Short-Term and Long-Term Debt

$ 34,331,850 $
1,990,691 1,426,773 1,066,188
476,403 2,927,622
320,905 3,198,347 2,585,018
386,239 656,091
402,432 2,954,924 1 145 957

1,289,221 $ 628,548

Total Governmental Activities

$ 53,869,440 $

General Revenues Taxes Property Taxes For Maintenance and Operations For Debt Services Railroad Cars Sales Taxes Special Purpose Local Option Sales Tax For Debt Services For Capital Projects Real Estate Grants and Contributions not Restricted to Specific Programs Investment Earnings Miscellaneous

1 917 769 $ =========== $

8,115,594 -63
117,880
4,561,042 566,356 22,549
4,126,732 351,876 940 765

Total General Revenues

$ _ _ _ _18~8_0_2-7_3_1

Change in Net Assets

$

2,090,103

Net Assets - Beginning of Year

43,221,917

Net Assets - End of Year

$ ===4=5=-,3=1=2,1,.,0.2.=0

The notes to the basic financial statements are an integral part of this statement. . 5.

WARE COUNTY BOARD OF EDUCATION BALANCE SHEET
GOVERNMENTAL FUNDS JUNE 30. 2003

EXHIBIT"C"

ASSETS
Cash and Cash Equivalents Investments Accounts Receivable, Net
Taxes State Government Federal Government Other Inventories
Total Assets
LIABILITIES AND FUND BALANCES
LIABILITIES
Accounts Payable Salaries Payable Contracts Payable Retainages Payable Deposits and Deferred Revenue
Total Liabilities
FUND BALANCES
Reserved for: Bus Replacement Continuation of Federal Programs Debt Service Inventories Capital Projects
Unreserved Designated for Self-Insurance Undesignated Reported in: General Fund Capital Projects
Total Fund Balances
Total Liabilities and Fund Balances

GENERAL FUND

DISTRICTWIDE
CAPITAL PROJECTS
FUND

DEBT SERVICE
FUND

TOTAL

$ 3,423,968 612,765 $
318,981 3,831,211 1,035,884
285,641 75,516

$ 18,021,748
848,687

992,151 $ 4,416,119 18,634,513

105

1,167,773

3,831,211

1,035,884

285,641

75516

$ 9,583,966 $ 18,870,435 $ 992,256 $ 29,446,657

$ 1,471,902 4,441,495 $
42,831
$ 5,956,228 $

86,006 5,732
91 738

$ 1,471,902 4,441,495 86,006 5,732 42,831
$ 6,047,966

$

396,878

674,802

75,516 $

119,576

2,360,966

$ 3,627,738 $

$ 17,431,625
1,347,072 18,778,697 $

$ 992,256

396,878 674,802 992,256
75,516 17,431,625

119,576

2,360,966 1,347,072

992,256 $ 23,398,691

$ 9,583,966 $ 18,870,435 $ 992,256 $ 29,446,657

The notes to the basic financial statements are an integral part of this statement. -6-

WARE COUNTY BOARD OF EDUCATION RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET
TO THE STATEMENT OF NET ASSETS JUNE 30, 2003

EXHIBIT D 11 11

Total Fund Balances - Governmental Funds (Exhibit "C")
Amounts reported for Governmental Activities in the Statement of Net Assets are different because:
Capital Assets used in Governmental Activities are not financial resources and therefore are not reported in the funds. These assets consist of:
Land Construction in Progress Land Improvements Buildings Equipment Accumulated Depreciation
Total Capital Assets
Some of the School District's property tax revenues will be collected after year end but are not available soon enough to pay for the current period's expenditures.
Long-Term Liabilities, including Bonds Payable, are not due and payable in the current period and therefore are not reported as liabilities in the funds. Long-Term Liabilities at year-end consist of:
Bonds Payable Capital Leases
Total Long-Term Liabilities
Net Assets of Governmental Activities (Exhibit "A")

$ 23,398,691

$ 831,951 139,738
3,194,621 57,694,788
4,724,243 -21,247,030

45,338,311

310,540

$ -23,470,000 -265,522

-23,735,522

$ 45,312,020

The notes to the basic financial statements are an integral part of this statement. -7-

WARE COUNTY BOARD OF EDUCATION STATEMENT OF REVENUES. EXPENDITURES AND CHANGES IN FUND BALANCES
GOVERNMENTAL FUNDS YEAR ENDED JUNE 30, 2003

EXHIBIT"E"

REVENUES
Property Taxes Sales Taxes State Funds Federal Funds Charges for Services Investment Earnings Miscellaneous
Total Revenues
EXPENDITURES
Current Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Enterprise Operations Food Services Operation
Capital Outlay Debt Services
Principal Interest
Total Expenditures
Excess of Revenues over (under) Expenditures
OTHER FINANCING SOURCES
Sale of Equipment
Net Change in Fund Balances
Fund Balances - Beginning
Fund Balances - Ending

GENERAL FUND

DISTRICTWIDE
CAPITAL PROJECTS
FUND

DEBT SERVICE
FUND

TOTAL

$ 8,178,413

$

22,549 $ 4,181,928

33,425,306

5,940,468

674,278

96,557

115,884

2,180,106

1,001 $
945,470
139,435

$ 50,517,677 $ 4,297,812 $ 1,085,906 $

8,179,414 5,149,947 33,425,306 5,940,468
674,278 351,876 2,180,106
55,901,395

$ 33,197,821

$

1,918,417 1,462,114
989,040 486,439 2,853,466 295,943 3,114,053
1,669,043 $
356,601 572,238 402,432 2,760,992

$
374,869
2,782,625

10,143

139,574 25,034

3,435,000 1,120,923

$ 50,243,207 $ 3,157,494 $ 4,566,066 $

$

274,470 $ 1,140,318 $ -3,480,160 $

33,197,821
1,918,417 1,462,114
989,040 486,439 2,853,466 306,086 3,114,053 2,043,912 356,601 572,238 402,432 2,760,992 2,782,625
3,574,574 1,145,957
57,966,767
-2,065,372

4150

4150

$

278,620 $ 1,140,318 $ -3,480,160 $

-2,061,222

3,349,118

17,638,379

4,472,416

25,459,913

$ 3,627,738 $ 18,778,697 $

992,256 $ 23,398,691

The notes to the basic financial statements are an integral part of this statement. -8-

WARE COUNTY BOARD OF EDUCATION RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT OF
REVENUES. EXPENDITURES AND CHANGES IN FUND BALANCES TO THE STATEMENT OF ACTIVITIES JUNE 30. 2003

EXHIBIT"F"

Total Net Change in Fund Balances - Governmental Funds (Exhibit "E")

$

Amounts reported for Governmental Activities in the Statement of Activities are different because:

Capital Outlays are reported as expenditures in Governmental Funds. However, in the Statement of Activities, the cost of Capital Assets is allocated over their estimated useful lives as depreciation expense. In the current period, these amounts are:

Capital Outlay Depreciation Expense
Excess of Capital Outlay over Depreciation Expense

$ 2,478,277 -1,955,523

Because some property taxes will not be collected for several months after the School District's fiscal year ends, they are not considered "available" revenues.

Repayment of Long-Term Debt is reported as an expenditure in Governmental Funds, but the repayment reduces Long-Term Liabilities in the Statement of Net Assets. In the current year, these amounts consist of:

Bond Principal Retirements Capital Lease Payments
Total Long-Term Debt Repayments

$ 3,435,000 139,574

-2,061,222
522,754 53,997
3,574,574

Change in Net Assets of Governmental Activities (Exhibit "B")

$ =====2!::,0=90_,1=0=3

The notes to the basic financial statements are an integral part of this statement. -9-

WARE COUNTY BOARD OF EDUCATION STATEMENT OF FIDUCIARY NET ASSETS
FIDUCIARY FUNDS JUNE 30, 2003

EXHIBIT"G"

ASSETS Cash and Cash Equivalents Investments
Certificate of Deposit Accounts Receivable, Net
Other
Total Assets
LIABILITIES Funds Held for Others
NET ASSETS Held in Trust for Private Purposes
Total Liabilities and Net Assets

PRIVATE PURPOSE TRUSTS

AGENCY FUNDS

$

43 $

100,913

4,321

4250

$

4 364 $ ==1=0=5=1'.,.6.3..

$

105,163

$ _ _ _4-'-"3-"-64-'--

$

4 364 $

105,163

========

The notes to the basic financial statements are an integral part of this statement. - 10 -

WARE COUNTY BOARD OF EDUCATION STATEMENT OF CHANGES IN FIDUCIARY NET ASSETS
FIDUCIARY FUNDS YEAR ENDED JUNE 30, 2003

EXHIBIT H 11 11

REVENUES Investment Earnings Interest
EXPENSES None Noted Change in Net Assets
Net Assets - Beginning
Net Assets - Ending

PRIVATE PURPOSE TRUSTS

$

97

$

0

$

97

4267

$ =====4=3=64=

The notes to the basic financial statements are an integral part of this statement. - 11 -

WARE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2003

EXHIBIT "I"

Note 1: DESCRIPTION OF SCHOOL DISTRICT AND REPORTING ENTITY
REPORTING ENTITY
The Ware County Board of Education (School District) was established under the laws ofthe State of Georgia and operates under the guidance of a school board elected by the voters and a Superintendent appointed by the Board. The Board is organized as a separate legal entity and has the power to levy taxes and issue bonds. Its budget is not subject to approval by any other entity. Accordingly, the School District is a primary government and consists of all the organizations that compose its legal entity.
Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The School District's basic financial statements are collectively comprised of the District-wide financial statements, fund financial statements and notes to the basic financial statements of the Ware County Board of Education.
District-wide Statements: The Statement ofNet Assets and the Statement ofActivities display information about the financial activities ofthe overall School District, except for fiduciary activities. Eliminations have been made to minimize the double counting of internal activities. Governmental activities generally are financed through taxes, intergovernmental revenues, and other nonexchange transactions.
The Statement of Activities presents a comparison between direct expenses and program revenues for each function of the School District's governmental activities.
Direct expenses are those that are specifically associated with a program or function and, therefore, are clearly identifiable to a particular function. Indirect expenses (expenses of the School District related to the administration and support ofthe School District's programs, such as office and maintenance personnel and accounting) are not allocated to programs.
Program revenues include (a) charges paid by the recipients ofgoods or services offered by the programs and (b) grants and contributions that are restricted to meeting the operational or capital requirements of a particular program. Revenues that are not classified as program revenues, including all taxes, are presented as general revenues.
Fund Financial Statements: The fund financial statements provide information about the School District's funds, including fiduciary funds. Eliminations have been made to minimize the double counting ofinternal activities. Separate statements for each category (governmental and fiduciary) are presented. The emphasis of fund financial statements is on major governmental funds, each displayed in a separate column.
The School District reports the following major governmental funds:
- 12 -

WARE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2003

EXHIBIT "I"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
General Fund is the School District's primary operating fund. It accounts for all financial resources ofthe School District, except those resources required to be accounted for in another fund.
District-wide Capital Projects Fund accounts for financial resources including Bond Proceeds and grants from Georgia State Financing and Investment Commission to be used for the acquisition, construction or renovation of major capital facilities.
Debt Service Fund accounts for taxes (property and sales) legally restricted for the payment of general long-term principal, interest and paying agent's fees.
The School District reports the following fiduciary fund types:
Private - Purpose Trust funds reports trust arrangements under which principal and income benefit needy children who reside in the Gilchrist Park Community.
Agency funds account for assets held by the School District as an agent for various clubs, organizations or individuals.
BASIS OF ACCOUNTING
The basis ofaccounting determines when transactions are reported on the financial statements. The District-wide governmental and fiduciary fund financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded at the time liabilities are incurred, regardless of when the related cash flows take place. Nonexchange transactions, in which the School District gives (or receives) value without directly receiving (or giving) equal value in exchange, include property taxes, sales taxes and grants. On an accrual basis, revenue from property taxes is recognized in the fiscal year for which the taxes are levied. Revenue from sales taxes is recognized in the fiscal year in which the underlying transaction (sale) takes place. Revenue from grants and donations is recognized in the fiscal year in which all eligibility requirements have been satisfied.
The School District uses funds to report on its financial position and the results of its operations. Fund accounting is designed to demonstrate legal compliance and to aid financial management by segregating transactions related to certain governmental functions or activities. A fund is a separate accounting entity with a self-balancing set of accounts.
Governmental funds are reported using the current financial resources measurement focus and the modified accrual basis ofaccounting. Under this method, revenues are recognized when measurable and available. The School District considers all revenues reported in the governmental funds to be available if they are collected within sixty days after year-end. Property taxes, sales taxes and

- 13 -

WARE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2003

EXHIBIT "I"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
interest are considered to be susceptible to accrual. Expenditures are recorded when the related fund liability is incurred, except for principal and interest on general long-term debt which are recognized as expenditures to the extent they have matured. Capital asset acquisitions are reported as expenditures in governmental funds. Proceeds ofgeneral long-term liabilities and acquisitions under capital leases are reported as other financing sources.
The School District funds certain programs by a combination ofspecific cost-reimbursement grants, categorical grants, and general revenues. Thus, when program costs are incurred, there are both restricted and unrestricted net assets available to finance the program. It is the School District's policy to first apply grant resources to such programs, followed by cost-reimbursement grants, then general revenues.
For fiscal year 2003, the School District changed its method of accounting for the final two payments on one hundred and ninety day contracts and for the related revenue due from the State to fund these contracts. Adjustments have been made in the fiscal year 2003 financial statements to record costs for salaries and fringe benefits earned by employees through June 30, 2003, (even though paid in July and August 2003) and the related revenue due from the State to fund these contracts. Adjustments were also made for the similar salaries, benefits and related State revenues earned in fiscal year 2002 and recorded in fiscal year 2003.
The net effect ofthe above accounting treatment results in the accompanying financial statements reflecting costs for those salaries and benefits earned by employees during fiscal year 2003 and the related State revenue to fund these contracts. In addition, both the net assets and fund balance at July 1, 2002, have been restated for salaries and benefits earned by employees in fiscal year 2002 but not paid until July and August 2002 and for the related State revenue for these contracts. This change is in accordance with generally accepted accounting principles. See Restatement of Prior Year Fund Balance.
RESTATEMENT OF PRIOR YEAR FUND BALANCE - GENERAL FUND
In prior years, the financial activities of the School District's School Food Services Fund, Lottery Programs and Federal Programs were reported as Special Revenue Funds. These funds had a combined fund balance of $823,558 at July 1, 2002. For fiscal year 2003, these funds have been reported as part of the General Fund. In addition, governmental fund activity from the various school activity accounts, which were not reported in the prior year's financial statements, have been reported within the General Fund for fiscal year ended June 30, 2003. The governmental fund activity ofthe various school activity accounts had a fund balance of$229,306 at July 1, 2002. This change is in accordance with generally accepted accounting principles.

- 14 -

WARE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2003

EXHIBIT "I"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

General Fund Balance July 1, 2002

$ 3,702,566

Add Funds Consolidated with General Fund: School Food Services Fund School Activity Account - Governmental Activity

823,558 229,306

Add: State Revenue Related to July and August 2002 Salary Payments Earned by Employees in Fiscal Year 2002

3,710,037

Deduct: July and August 2002 Salary Payments Earned by Employees in Fiscal Year 2002

5,116,349

General Fund Balance July 1, 2002 (Restated)

$ 3,349,118

CHANGES IN ACCOUNTING PRINCIPLES

The Ware County Board ofEducation has implemented a new financial reporting model as required by provisions of Governmental Accounting Standards Board Statement No. 34, Basic Financial Statements - and Management's Discussion and Analysis -for State and Local Governments, as of June 30, 2003.

The provisions ofGASB Statement No. 34 require the inclusion ofa Statement ofNet Assets. The elements comprising Net Assets - Beginning include the following:

General Fund (Restated) July 1, 2002 Capital Projects Fund Debt Service Fund

$ 3,349,118 17,638,379 4,472,416

Governmental Funds (Restated) July 1, 2002 Capital Assets Accumulated Depreciation Property Tax Revenue Timing Differences Bonds and Notes Payable Capital Leases Payable

$ 25,459,913 64,107,064 -19,291,507 256,543 -26,905,000 -405,096

Net Assets Beginning (See Exhibit "B")

$ 43,221,917

- 15 -

WARE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2003

EXHIBIT "I"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CASH AND CASH EQUIVALENTS
COMPOSITION OF DEPOSITS Cash and cash equivalents consist ofcash on hand, demand deposits and short-term investments with original maturities of three months or less from the date of acquisition in authorized financial institutions. Georgia Laws OCGA 45-8-14 authorize the Board to deposit its funds in one or more solvent banks or insured Federal savings and loan associations.
INVESTMENTS
COMPOSITION OF INVESTMENTS Investments made by the School District in nonparticipating interest-earning contracts (such as certificates ofdeposit) and repurchase agreements are reported at cost. Participating interest-earning contracts and money market investments with a maturity at purchase ofone year or less are reported at amortized cost. Both participating interest-earning contracts and money market investments with a maturity at purchase greater than one year are reported at fair value. The Official Code of Georgia Annotated Section 36-83-4 authorizes the School District to invest its funds. In selecting among options for investment or among institutional bids for deposits, the highest rate ofreturn shall be the objective, given equivalent conditions of safety and liquidity. Funds may be invested in the following:
(1) Obligations issued by the State of Georgia or by other states,
(2) Obligations issued by the United States government,
(3) Obligations fully insured or guaranteed by the United States government or a United States government agency,
(4) Obligations of any corporation of the United States government,
(5) Prime banker's acceptances,
(6) The Local Government Investment Pool administered by the State of Georgia, Office of Treasury and Fiscal Services,
(7) Repurchase agreements, and
(8) Obligations of other political subdivisions of the State of Georgia.
RECEIVABLES
Receivables consist of amounts due from property and sales taxes, grant reimbursements due on Federal, State or other grants for expenditures made but not reimbursed and other receivables
- 16 -

WARE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2003

EXHIBIT"I"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

disclosed from information available. Receivables are recorded when either the asset or revenue recognition criteria has been met. Receivables recorded on the basic financial statements do not include any amounts which would necessitate the need for an allowance for uncollectible receivables.

PROPERTY TAXES

The Ware County Board of Commissioners fixed the property tax levy for the 2002 tax digest year (calendar year) on October 14, 2002 (levy date). Taxes were due on December 20, 2002 (lien date). Taxes collected within the current fiscal year or within 60 days after year-end on the 2002 tax digest are reported as revenue in the governmental funds for fiscal year 2003. The Ware County Tax Commissioner bills and collects the property taxes for the School District, withholds 2.5% oftaxes collected as a fee for tax collection and remits the balance oftaxes collected to the School District. Property tax revenues, at the fund reporting level, during the fiscal year ended June 30, 2003, for maintenance and operations amounted to $8,060,533 and for school bonds amounted to $1,002.

The tax millage rate levied for the 2002 tax year (calendar year) for the Ware County Board of Education was as follows (a mill equals $1 per thousand dollars of assessed value):

School Operations

15.589 mills

SALES TAXES

Special Purpose Local Option Sales Tax, at the fund reporting level, during the year amounted to $5,127,398 and is to be used for capital outlay for educational purposes or debt service. This sales tax was authorized by local referendum and the sales tax must be re-authorized at least every five years.

INVENTORIES

FOOD INVENTORIES On the basic financial statements, inventories ofdonated food commodities used in the preparation ofmeals are reported at their Federally assigned value and purchased foods inventories are reported at cost (first-in, first-out). The School District uses the consumption method to account for inventories whereby donated food commodities are recorded as an asset and as revenue when received, and expenses/expenditures are recorded as the inventory items are used. Purchased foods are recorded as an asset when purchased and expenses/expenditures are recorded as the inventory items are used.

CAPITAL ASSETS

Capital assets purchased, including capital outlay costs, are recorded as expenditures in the fund financial statements at the time ofpurchase. On the District-wide financial statements, all purchased

- 17 -

WARE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2003

EXHIBIT "I"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

capital assets are valued at cost where historical records are available and at estimated historical cost based on appraisals or deflated current replacement cost where no historical records exist. Donated capital assets are recorded at fair market value on the date donated. Disposals are deleted at depreciated recorded cost. The cost of normal maintenance and repairs that do not add to the value of assets or materially extend the useful lives of the assets is not capitalized. Depreciation is computed using the straight-line method. The School District does not capitalize book collections or works of art.

Capitalization thresholds and estimated useful lives of capital assets reported in the District-wide statements are as follows:

Capitalization Policy

Estimated Useful Life

Land Land Improvements Buildings and Improvements Equipment

$

0

NIA

$

5,000

15 years

$

5,000 40 to 80 years

$

5,000 5 to 15 years

Depreciation is used to allocate the actual or estimated historical cost of all capital assets over estimated useful lives.

GENERAL OBLIGATION BONDS

The School District issues general obligation bonds to provide funds for the acquisition and construction of major capital facilities. Bond issuance costs are recognized in the financial statements during the fiscal year bonds are issued. General obligation bonds are direct obligations and pledge the full faith and credit of the government. The outstanding amount of these bonds is recorded in the Statement of Net Assets.

Note 3: DEPOSITS AND INVESTMENTS

COLLATERALIZATION OF DEPOSITS Official Code of Georgia Annotated (OCGA) Section 45-8-12 provides that there shall not be on deposit at any time in any depository for a time longer than ten days a sum ofmoney which has not been secured by surety bond, by guarantee of insurance, or by collateral. The aggregate ofthe face value of such surety bond and the market value of securities pledged shall be equal to not less than 110 percent ofthe public funds being secured after the deduction ofthe amount ofdeposit insurance. If a depository elects the pooled method (OCGA 45-8-13.1) the aggregate ofthe market value ofthe securities pledged to secure a pool ofpublic funds shall be not less than 110 percent ofthe daily pool balance. OCGA Section 45-8-11 (b) provides an officer holding public funds may, in his discretion, waive the requirement for security in the case of operating funds placed in demand deposit checking accounts.

- 18 -

WARE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2003

EXHIBIT "I"

Note 3: DEPOSITS AND INVESTMENTS
Acceptable security for deposits consists of any one of or any combination of the following:
(1) Surety bond signed by a surety company duly qualified and authorized to transact business within the State of Georgia,
(2) Insurance on accounts provided by the Federal Deposit Insurance Corporation,
(3) Bonds, bills, notes, certificates of indebtedness or other direct obligations of the United States or of the State of Georgia,
(4) Bonds, bills, notes, certificates of indebtedness or other obligations of the counties or municipalities of the State of Georgia,
(5) Bonds of any public authority created by the laws of the State of Georgia, providing that the statute that created the authority authorized the use of the bonds for this purpose,
(6) Industrial revenue bonds and bonds of development authorities created by the laws ofthe State of Georgia, and
(7) Bonds, bills, notes, certificates of indebtedness, or other obligations of a subsidiary corporation of the United States government, which are fully guaranteed by the United States government both as to principal and interest or debt obligations issued by the Federal Land Bank, the Federal Home Loan Bank, the Federal Intermediate Credit Bank, the Central Bank for Cooperatives, the Farm Credit Banks, the Federal Home Loan Mortgage Association, and the Federal National Mortgage Association.
CATEGORIZATION OF DEPOSITS At June 30, 2003, the bank balances were $6,123,828. The amounts of the total bank balances are classified into three categories of credit risk:
Category 1 - Cash that is insured (e.g., Federal depository insurance) or collateralized with securities held by the School District or by the School District's agent in the School District's name.
Category 2 - Cash collateralized with securities held by the pledging financial institution's trust department or agent in the School District's name.
Category 3 - Uncollateralized deposits. (This includes any bank balance that is collateralized with securities held by the pledging financial institution, or by its trust department or agent but not in the School District's name.)
The School District's deposits are classified by risk category at June 30, 2003, as follows:

- 19 -

WARE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30. 2003

EXHIBIT "I"

Note 3: DEPOSITS AND INVESTMENTS

Risk Category

Bank Balance

1

$ 162,578

2

0

3

5.961,250

Total

$ 6,123,828

CATEGORIZATION OF INVESTMENTS At June 30, 2003, the carrying value of the School District's total investments was $18,634,513 which is materially the same as fair value. This investment consisted entirely of funds invested in the Local Government Investment Pool administered by the State ofGeorgia, Office ofTreasury and Fiscal Services which are not required to be categorized since the School District did not own any specific identifiable securities in the pool. The investment policy ofthe State ofGeorgia, Office of Treasury and Fiscal Services for the Local Government Investment Pool (Primary Liquidity Portfolio) does not provide for investment in derivatives or similar investments. A description ofthe Primary Liquidity Portfolio is as follows:

The Primary Liquidity Portfolio consists of Georgia Fund 1, which is a combination local and state government investment pool, and Fund 6. Georgia Fund 1 is a stable net asset value investment pool which follows Standard and Poor's criteria for AAAm rated money market funds. The pool is not registered with the SEC as an investment company but does operate Georgia Fund 1 in a manner consistent with Rule 2a-7 of the Investment Company Act of 1940. The pool's primary objectives are safety of capital, investment income, liquidity and diversification while maintaining principal ($1.00 per share value). Net asset value is calculated daily and reported to the rating agency to ensure stability. The pool distributes earnings (net of management fees) on a monthly basis and values participant's shares sold and redeemed at the pool's share price, $1.00 per share. Pooled cash and cash equivalents and investments are reported at cost. The pool does not issue any legally binding guarantees to support the value of the shares. Participation in the pool is voluntary and deposits consist of funds from local governments; operating and trust funds of Georgia's state agencies, colleges and universities; and current operating funds of the State of Georgia's General Fund.

Investments in Georgia Fund 1 and Fund 6 are directed toward short-term instruments such as U. S. Treasury obligations, securities issued or guaranteed as to principal and interest by the U. S. Government or any of its agencies or instrumentalities, banker's acceptances and repurchase agreements. The weighted average maturity of Georgia Fund 1 may not exceed 60 days. The weighted average maturity for Georgia Fund 1 on June 30, 2003, was 30 days. The average investment duration for Fund 6 on June 30, 2003, was 0.39 years.

-20-

WARE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2003

EXHIBIT "I"

Note 4: NON-MONETARY TRANSACTIONS

The School District receives food commodities from the United States Department of Agriculture (USDA) for school breakfast and lunch programs. These commodities are recorded at their Federally assigned value. See Note 2 - Inventories

The School District has entered into a three year operating lease for ten acres ofland at no cost from the International Paper Company for use with the Ware County High School Forestry Program. This is the second year of the lease.

Note 5: CAPITAL ASSETS

The following is a summary of changes in the Capital Assets during the fiscal year:

Balances July 1, 2002

Increases

Balances Decreases June 30, 2003

Governmental Activities Capital Assets, Not Being Depreciated:
Land Construction in Progress
Total Capital Assets Not Being Depreciated

$ 831,951 2,206,105 $
$ 3,038,056 $

$ 139,738 $ 2,206,105
139,738 $ 2,206,105 $

831,951 139,738
971,689

Capital Assets Being Depreciated Buildings and Improvements Equipment Land Improvements

$ 53,495,948 $ 4,598,439 2,974,621

4,198,840 $ 125,804 220,000

0 $ 57,694,788 4,724,243 3,194,621

Less Accumulated Depreciation for: Buildings and Improvements Equipment Land Improvements
Total Capital Assets, Being Depreciated, Net
Governmental Activity Capital Assets - Net

14,595,269 3,015,803 1,680,435
$ 41,777,501 $
$ 44.815.557 $

1,512,690 282,072 160,761
2,589,121 $
2.728.859 $

16,107,959 3,297,875 1,841,196
0 $ 44,366,622
2,206.105 $ 45.338.311

Capital assets being acquired under capital leases as of June 30, 2003, are as follows:

Governmental Funds

Buildings Less: Accumulated Depreciation

$ 1,086,522 (l)

$ 1,086.522

(1) The Accumulated Depreciation amount could not be separated for the Building Improvements acquired by capital lease.

- 21 -

WARE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30. 2003

EXHIBIT "I"

Note 5: CAPITAL ASSETS

Current year depreciation expense by function is as follows:

Instruction Support Services
Pupil Services Improvements of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Food Services

$ 935,704

$

59,243

18,221

63,238

41,557

60,785

12,147

69,095

443,541

24,294

68,734

860,855 158,964

$ 1,955.523

Note 6: RESTRICTED ASSETS

Special Purpose Local Option Sales Tax (SPLOST), general obligation bond proceeds and property tax levied specifically for retirement of outstanding bond principal, interest and paying agent's fees (Debt Service Funds) are reported as restricted assets in the Statement ofNet Assets because their use is limited by applicable bond covenants or statutory provisions. Restricted assets at June 30, 2003, were as follows:

District-wide Capital Projects

Bond

SPLOST

Proceeds

Debt Service Funds

Restricted Cash and Cash Equivalents: Debt Services
Restricted Investments: Capital Acquisitions

$
$ 16,674,675 $ 6,001,491

992,151

Note 7: RISK MANAGEMENT

The School District is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors or omissions; job related illness or injuries to employees; acts of God; unemployment compensation and dental claims.

-22-

WARE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2003

EXHIBIT "I"

Note 7: RISK MANAGEMENT

The School District has obtained commercial insurance for risk of loss associated with torts, assets and errors or omissions. The School District has not significantly reduced coverage for these risks but has incurred losses (settlements) which exceeded the School District's insurance coverage in the past three years.

For the 2002 fiscal year, an employee dishonesty claim filed by the School District exceeded commercial insurance coverage by $66,139. Settled claims did not exceed commercial insurance for the fiscal year 2001.

The School District has elected to self-insure for all losses related to flood. The School District has not experienced any losses related to this risk in the past three years.

The School District is self-insured with regard to unemployment compensation claims. The School District accounts for claims within the General Fund with expenses/expenditures and liability being reported when it is probable that a loss has occurred, and the amount of that loss can be reasonably estimated.

Changes in the unemployment compensation claims liability during the last two fiscal years are as follows:

Beginning of Year Liability

Claims and Changes in Estimates

Claims Paid

EndofYear Liability

2002 2003

$

0 $

605 $

372 $

233

$

233 $

10 199 $

2,593 $

7 839

The School District is self-insured with regard to employee and dependent dental claims. The School District accounts for claims within the General Fund with expenditures and liability being reported when it is probable that a loss has occurred, and the amount of that loss can be reasonably estimated. This program is funded through a combination ofemployer and employee contributions.

Changes in the dental claims liability during the last two fiscal years are as follows:

Beginning of Year Liability

Claims and Changes in Estimates

Claims Paid

EndofYear Liability

2002 2003

$

0 $

527,294 $

527,294 $

0

$

0 $

507,824 $

507,824 $

0

The School District participates in the Georgia School Boards Association Workers' Compensation Fund, a public entity risk pool organized on July 1, 1992, to develop, implement, and administer a

- 23 -

WARE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2003

EXHIBIT "I"

Note 7: RISK MANAGEMENT

program ofworkers' compensation self-insurance for its member organizations. The School District pays an annual premium to the Fund for its general insurance coverage. Additional insurance coverage is provided through an agreement by the Fund with the United States Fidelity and Guaranty Company to provide coverage for potential losses sustained by the Fund in excess of $350,000 loss per occurrence, up to $1,000,000.

The School District has purchased surety bonds to provide additional insurance coverage as follows:

Position Covered

Amount

Superintendent Each Employee

$ 100,000 $ 100,000

Note 8: LONG-TERM DEBT

CAPITAL LEASES The Ware County Board of Education has entered into various lease agreements as lessee for security systems, building energy management systems and equipment. These lease agreements qualify as capital leases for accounting purposes and, therefore, have been recorded at the present value of the future minimum lease payments as of the date of their inception.

GENERAL OBLIGATION DEBT OUTSTANDING General Obligation Bonds currently outstanding are as follows:

Purpose

Interest Rates

Amount

General Government - Series 1995 General Government - Series 1998 General Government - Series 2002

4.35% - 5.85% 4.00% - 4.30% 3.00%-4.00%

$ 9,955,000 615,000
12,900,000

$ 23i4101000

The changes in Long-Term Debt during the fiscal year ended June 30, 2003, were as follows:

- 24 -

WARE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2003

EXHIBIT"I"

Note 8: LONG-TERM DEBT

Governmental Funds

General

Capital

Obligation

Leases

Bonds

Total

Balance July 1, 2002

$ 405,096 $ 26,905,000 $ 27,310,096

Deductions Debt Retired

139,574

3,435,000

3,574,574

Balance June 30, 2003

$ 265.522 $ 23,470,000 $ 23,735,522

Portion of Long-Term Debt Due within One Year

$ 149,526 $ 3,520,000 $ 3,669,526

At June 30, 2003, payments due by fiscal year which includes principal and interest for these items are as follows:

Fiscal Year Ended June 30

Ca12ital Leases

Princi12al

Interest

2004 2005

$ 149,526 $ 115,997

15,082 4 914

Total Principal and Interest

$ 265,523 $

19,996

Fiscal Year Ended June 30

General Obligation

Debt

Princfoal

Interest

2004 2005 2006 2007 2008 2009 - 2013 2014 - 2018

$ 3,520,000 $ 1,034,008

3,065,000

923,078

3,200,000

793,750

3,345,000

667,513

3,505,000

538,378

4,505,000

1,504,193

2,330,000

207,090

Total Principal and Interest

$ 23,470,000 $ 5,668,010

- 25 -

WARE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2003

EXHIBIT "I"

Note 9: ON-BEHALF PAYMENTS

The Board has recognized revenues and costs in the amount of $506,266 for health insurance and retirement contributions paid on the Board's behalf by the following State Agencies.

Georgia Department of Education Paid to the Georgia Department of Community Health For Health Insurance ofNon-Certified Personnel In the amount of $377,051

Office of Treasury and Fiscal Services Paid to the Public School Employees Retirement System For Public School Employees Retirement (PSERS) Employer's Cost In the amount of $129,215

Note 10: SIGNIFICANT COMMITMENTS

The following is an analysis ofsignificant outstanding construction or renovation contracts executed by the School District as of June 30, 2003:

Project

Unearned Executed Contracts

Ruskin Elementary School - Six Classroom Additions Ware County High School Corridor Tile Replacement Athletic Field Improvements -
Waycross Middle School and Ware Middle School

$ 711,371 87,137
587,513

$ 1!386!021

The amounts described in this note are not reflected in the basic financial statements.

Note 11: SIGNIFICANT CONTINGENT LIABILITIES

Amounts received or receivable principally from the Federal government are subject to audit and review by grantor agencies. This could result in requests for reimbursement to the grantor agency for any costs which are disallowed under grant terms. The School District believes that such disallowances, if any, will be immaterial to its overall financial position.

-26-

WARE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2003

EXHIBIT "I"

Note 12: RETIREMENT PLANS

TEACHERS RETIREMENT SYSTEM OF GEORGIA (TRS)

TRS PLAN DESCRIPTION Substantially all teachers, administrative and clerical personnel employed by local school systems are covered by the Teachers Retirement System of Georgia (TRS), which is a cost-sharing multiple employer defined benefit pension plan. TRS provides service retirement, disability retirement and survivors benefits for its members in accordance with State statute. The Teachers Retirement System of Georgia issues a separate stand alone financial audit report and a copy can be obtained from the Georgia Department of Audits and Accounts.

TRS CONTRIBUTIONS REQUIRED AND MADE Employees ofthe School District who are covered by TRS are required by State statute to contribute 5% of their gross earnings to TRS. The School District makes monthly employer contributions to TRS at rates adopted by the TRS Board ofTrustees in accordance with State statute and as advised by their independent actuary. The required employer contribution rate is 9.24% and employer contributions for the current fiscal year and the preceding two fiscal years are as follows:

Fiscal Year

Percentage Contributed

Required Contribution

2003 2002 2001

100% 100% 100%

$ 2,732,263 $ 2,603,274 $ 3,045,507

-27 -

WARE COUNTY BOARD OF EDUCATION GENERAL FUND
SCHEDULE OF REVENUES. EXPENDITURES AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL
YEAR ENDED JUNE 30. 2003

SCHEDULE "1"

REVENUES
Property Taxes Sales Taxes State Funds Federal Funds Charges for Services Investment Earnings Miscellaneous
Total Revenues
EXPENDITURES
Current Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Enterprise Operations Food Services Operation
Debt Service
Total Expenditures
Excess of Revenues over (under) Expenditures
OTHER FINANCING SOURCES (USES)
Other Sources Other Uses
Total Other Financing Sources (Uses)
Net Change in Fund Balances
Fund Balances - Beginning
Adjustments

NONAPPROPRIATED BUDGETS

ORIGINAL (1}

FINAL (1}

ACTUAL AMOUNTS

$

8,500,000 $

150,000

33,711,983

5,473,126

688,903

145,000

153 936

$ 48,822,948 $

8,500,000 $ 150,000
33,857,956 6,470,673 688,903 145,000 153 936

8,178,413 22,549
33,425,306 5,940,468 674,278 96,557 2,180,106

49,966,468 $ 50,517,677

$ 33,072,482 $
1,955,341 1,221,515 1,073,268
673,790 2,785,182
313,653 3,308,551 1,873,878
389,414 98,556
2,538,842

$ 49,304,472 $

$

-481 524 $

33,520,923 $ 33,197,821

1,967,553 1,527,227 1,073,268
685,639 2,798,432
313,653 3,317,682 1,920,315
389,414 67,180
2,538,842

1,918,417 1,462,114
989,040 486,439 2,853,466 295,943 3,114,053 1,669,043 356,601 572,238 402,432 2,760,992 164,608

50,120,128 $ 50,243,207

-153 660 $

274 470

$

713,000 $

-173 000

$

540,000 $

$

58,476 $

4,157,070

-956 437

713,000 $ -173 000 540,000 $ 386,340 $ 4,157,070 -956 437

4,150
4150 278,620 3,349,118

Fund Balances - Ending

$

3,259,109 $

3,586,973 $ 3,627,738

Notes to the Schedule of Revenues. Expenditures and Changes in Fund Balances Budget and Actual (1) Original and Final Budget amounts do not include budgeted revenues or expenditures of the various principal accounts. See notes to the basic financial statements.
- 29-

WARE COUNTY BOARD OF EDUCATION SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
YEAR ENDED JUNE 30, 2003

SCHEDULE "2"

FUNDING AGENCY PROGRAM/GRANT
Agriculture, U. S. Department of Child Nutrition Cluster Pass-Through From Georgia Department of Education Food and Nutrition Program Food Services School Breakfast Program National School Lunch Program
Total Child Nutrition Cluster
Other Programs Pass-Through From Georgia Department of Education Food and Nutrition Program Food Distribution Program (1)
Total U.S. Department of Agriculture
Corporation for National and Community Services Pass-Through From Georgia Department of Education Learn and Serve America School and Community Based Programs Pass-Through From Okefenokee Regional Educational Service Agency Learn and Serve America School and Community Based Programs
Total Corporation for National and Community Services
Education, U. S. Department of Special Education Cluster Pass-Through From Georgia Department of Education Individuals with Disabilities Education Act Part B - Special Education Flow Through Preschool Capacity Building Improvement Grant
Total Special Education Cluster
Other Programs Pass-Through From Coastal Plains Regional Educational Service Agency d/b/a Southern Pine Migrant Education Agency Elementary and Secondary Education Act Title I Migrant Education
Pass-Through From Georgia Department of Education Elementary and Secondary Education Act Title I Grants to Local Educational Agencies State School Improvement Grant Title II Enhancing Education Through Technology Improving Teacher Quality
- 30 -

CFDA NUMBER

PASSTHROUGH
ENTITY ID
NUMBER

EXPENDITURES IN PERIOD

10.553 10.555

N/A N/A $
$

(2) 2 451 467
2,451,467

10.550

N/A $

116 531 2,567,998

94.004

NIA $

13,655

94.004

N/A $

(3) 13 655

. 84.027 .. 84.173
84.173

N/A $ N/A N/A
$

848,377 80,961 17 631
946,969

84.011

N/A

. 84.010

N/A

84.218

N/A

. 84.318

N/A

84.367

N/A

60,940
2,091,251 28,504 65,912
445,305

WARE COUNTY BOARD OF EDUCATION SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
YEAR ENDED JUNE 30. 2003

SCHEDULE "2"

FUNDING AGENCY PROGRAM/GRANT
Education, U. S. Department of Other Programs Pass-Through From Georgia Department of Education Elementary and Secondary Education Act Title Ill Limited English Proficient TitleV Innovative Education Program Strategies Title VI Class Size Reduction Rural and Low Income Schools Safe and Drug-Free Schools and Communities Goals2000 State and Local Education Systemic Improvement Grants Vocational Education - Basic Grants to States High School Program Basic Grant
Total U.S. Department of Education
Defense, U. S. Department of Direct Department of the Army R.O.T.C. Program
Labor, U. S. Department of Pass-Through From Southeast Georgia Regional Development Center Workforce Investment Act Youth Activities

CFDA NUMBER

PASSTHROUGH
ENTITY ID
NUMBER

EXPENDITURES IN PERIOD

84.365 84.298 84.340 84.358 84.186 84.276
84.048

N/A

$

N/A

N/A N/A N/A

N/A

N/A $

6,723 64,507
1,690 95,342 47,605
2,959
91 952 3,949,659

$

56 712

17.259

N/A

$

84 038

Total Federal Financial Assistance
N/A = Not Available

$ ===6='=67=2=,0=6==2

Notes to the Schedule of Expenditures of Federal Awards

(1) The amounts shown for the Food Distribution Program represent the Federally assigned value of nonmonetary assistance for donated commodities received and/or consumed by the School District during the current fiscal year.
(2) Expenditures for the funds earned on the School Breakfast Program ($412,874) were not maintained separately and are included in the 2003 National School Lunch Program.
(3) Funds earned on the School and Community Based Program of $1,656 do not require reporting of expenditures.

Major Programs are identified by an asterisk (*) in front of the CFDA number.

The School District did not provide Federal Assistance to any Subrecipient.

The accompanying schedule of expenditures of Federal awards includes the Federal grant activity of the Ware County Board of Education and is presented on the modified accrual basis of accounting which is the basis of accounting used in the presentation of the basic financial statements.

See notes to the basic financial statements.

- 31 -

WARE COUNTY BOARD OF EDUCATION SCHEDULE OF STATE REVENUE YEAR ENDED JUNE 30. 2003
AGENCY/FUNDING
GRANTS Education, Georgia Department of Quality Basic Education Direct Instructional Cost Kindergarten Program Kindergarten Program - Early Intervention Program Primary Grades (1-3) Program Primary Grades - Early Intervention (1-3) Program Upper Elementary Grades (45) Program Upper Elementary Grades - Early Intervention (4-5) Program Middle Grades (6-8) Program Middle School (6-8) Program High School General Education (9-12) Program Vocational Laboratory (9-12) Program Students with Disabilities Category I Category II Category Ill Category IV CategoryV Gifted Student - Category VI Remedial Education Program Alternative Education Program English Speakers of Other Languages (ESOL) Media Center Program 20 Days Additional Instruction Staff and Professional Development Indirect Cost Central Administration School Administration Facility Maintenance and Operations Categorical Grants Pupil Transportation Regular Bus Replacement Sparsity Nursing Services Principal Supplements Vocational Supervisors Migrant Education Mid-term Adjustment Hold-Harmless Education Equalization Funding Grant Food Services Vocational Education Austerity Reduction Other State Programs Health Insurance Preschool Handicapped Program Special Education Low Incidence Grant Statewide 4-8 After School Program Statewide K-3 Reading Program Student Information System Lottery Programs Assistive Technology Computers in the Classroom Post Secondary Options
- 32-

SCHEDULE "3"

GOVERNMENTAL FUND TYPE GENERAL FUND

$

1,557,967

477,033

3,483,563

965,772

1,603,841

726,564

344,328

3,255,916

2,642,499

821,784

56,633 764,190 2,362,396 638,460
72,604 1,846,692
97,533 261,472
35,948 577,045 181,858 120,927

842,201 1,264,121 1,658,514

766,335 136,300
19,000 132,744
25,015 35,265
426 135,708 3,965,367 192,994 150,953 -734,766
377,051 86,582 41,663 59,855 90,502 20,010
10,421 57,346
4,424

WARE COUNTY BOARD OF EDUCATION SCHEDULE OF STATE REVENUE YEAR ENDED JUNE 30. 2003
AGENCY/FUNDING GRANTS Office of School Readiness Pre-Kindergarten Program Office of Treasury and Fiscal Services Public School Employees Retirement

SCHEDULE "3"

GOVERNMENTAL FUND TYPE GENERAL FUND

$

1,063,035

129 215

$ ==~3~3,!=42:;,;:5~,3~0=6

See notes to the basic financial statements.

- 33-

WARE COUNTY BOARD OF EDUCATION SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS
YEAR ENDED JUNE 30, 2003

SCHEDULE "4"

PROJECT
Retiring previously incurred General Obligation Debt of the School District
Acquiring, constructing, and equipping the following Capital Outlay Projects: adding to, remodeling, renovating, improving and equipping existing educational buildings, properties and facilities of the School District, acquiring any necessary personal property and equipment, including computers and related technology, copiers, energy management, HVAC, lighting and similar equipment, relocating or expanding, remodeling and renovating the existing transportation and bus garage and remodeling and renovation necessary to convert Center Junior High School into School District administrative offices, and purchasing school buses
Retiring the School District's General Obligation Bonds, Series 1995 debt
Acquiring, constructing, and equipping the following Capital Outlay Projects: renovations and improvements at Memorial Stadium; acquisition, construction, renovation, and equipping of fine arts facilities, including the construction of a new performing arts center and choral lab at Ware County High School; renovations at the Waycross Middle School auditorium; renovations to the Ware County Middle School auditorium, and enlargements and renovations to the band room at Ware County High School; site improvements including purchase of equipment, providing fencing, demolition, paving, construction of sidewalks and covered areas at various schools; construction of soccer fields and improvements to the softball, football fields, tennis courts, physical education and/ or any other athletic field, providing lighting, bleachers, fencing, and equipment at Ware County High School; improvements to the softball, baseball field, soccer field, football field, physical education and/or any other athletic field, fencing, paving, reworking the bus loading area, and providing lighting and bleachers at Waycross Middle School; improvements to the softball, baseball, soccer, football, physical education and/or any other athletic field, fencing, paving, and providing lighting and bleachers at Ware County Middle School; providing lighting and installing bleachers at the softball and baseball fields at Ware County Magnet School; construction of classrooms at

ORIGINAL ESTIMATED
COST (1)

CURRENT ESTIMATED COSTS(2)

AMOUNT EXPENDED IN CURRENT YEAR (3) (4)

AMOUNT EXPENDED
IN PRIOR YEARS(3)

PROJECT STATUS

$ 15,100,000 $ 15,100,000 $ 1,032,221 $ 3,713,060 Ongoing

15,900,000 15,900,000

1,985,000

1,985,000

3,166,577

11,493,416 Ongoing

Ongoing

- 34-

WARE COUNTY BOARD OF EDUCATION SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS
YEAR ENDED JUNE 30, 2003

SCHEDULE "4"

PROJECT
Ruskin, Memorial Drive, Waresboro, and Wacona Elementary schools; construction of a JROTC building at Ware County High School; acquisition of furnishings and equipment at Ware Middle, Waycross Middle, Memorial Drive, Wacona, Waresboro, and Ware Magnet schools making exterior improvements including painting and repairs to all schools; acquisition of new technology, copiers, materials, and equipment; purchase and installation of HVAC, electrical, and energy controls at Waresboro, Wacona, Memorial Drive elementary schools, Ware County and Waycross Middle schools, Ware Magnet, and Ware County High School acquisition of new school buses and renovations and improvements to the bus shop; and payment of contingencies, surveys, geotechnical services, architectural and engineering fees, testing services, and fees, together with capitalized interest and legal administrative costs related to issuance of the bonds

ORIGINAL ESTIMATED
COST {1)

CURRENT ESTIMATED COSTS(2)

AMOUNT EXPENDED IN CURRENT YEAR (3) (4)

AMOUNT EXPENDED
IN PRIOR YEARS(3)

PROJECT STATUS

$ 25,515,000 $ 25,515,000

$ 4,019,784 Ongoing

$ 58,500,000 $ 58,500,000 $ 4,198,798 $ 19,226,260

(1) The School District's original cost estimate as specified in the resolution calling for the imposition of the Local Option Sales Tax.

(2) The School District's current estimate of total cost for the projects. Includes all cost from project inception to completion.

(3) The voters of Ware County approved the imposition of a 1% sales tax to fund the above projects and retire associated debt. Amounts expended for these projects may include sales tax proceeds, state, local property taxes and/or other funds over the life of the projects.

(4) In addition to the expenditures shown above, the School District has incurred interest to provide advance funding for the above projects as follows:

Current Year

$ =====5=39=,7=6=3

See notes to the basic financial statements.

- 35-

WARE COUNTY BOARD OF EDUCATION GENERAL FUND - QUALITY BASIC EDUCATION PROGRAM (QBE)
ALLOTMENTS AND EXPENDITURES - BY PROGRAM YEAR ENDED JUNE 30. 2003

SCHEDULE "5"

DESCRIPTION

ALLOTMENTS FROM GEORGIA DEPARTMENT OF EDUCATION {1) {2)

ELIGIBLE QBE PROGRAM COSTS

SALARIES

OPERATIONS

TOTAL

Direct Instructional Programs

Kindergarten Program

$

Kindergarten Program-Early Intervention Program

Primary Grades (1-3) Program

Primary Grades-Early Intervention (1-3) Program

Upper Elementary Grades (4-5) Program

Upper Elementary Grades-Early Intervention (4-5)

Program

Middle Grades (6-8) Program

Middle School (6-8) Program

High School General Education (9-12) Program

Vocational Laboratory (9-12) Program

Students with Disabilities

Category I

Category II

Category Ill

Category IV

CategoryV

Gifted Student - Category VI

Remedial Education Program

Alternative Education Program

English Speakers of Other Languages (ESOL)

1,658,450 $ 523,686
3,762,775 1,067,987 1,766,807
757,597 372,665 3,535,889 2,882,861 912,776 4,217,293
1,978,682 107,279 284,833 39115

1,756,561 $ 372,070
4,272,819 734,650
2,250,369
570,984 373,803 3,913,532 3,746,080 1,081,200
60,966 868,687 2,467,950 582,005
21,620 1,321,622
67,837 351,620 55,754

20,338 $ 2,090
144,214 5,740
74,993
2,340 23,418 153,961 263,499 76,671
90 14,384 5,192
731 50
51,218 705
94

1,776,899 374,160
4,417,033 740,390
2,325,362
573,324 397,221 4,067,493 4,009,579 1,157,871
61,056 883,071 2,473,142 582,736
21,670 1,372,840
68,542 351,620
55 848

TOTAL DIRECT INSTRUCTIONAL PROGRAMS

$

23,868,695 $ 24,870,129 $

839,728 $ 25,709,857

Media Center Program Staff and Professional Development

626,480 132,302

897,310 45,836

70,654 86531

967,964 132,367

TOTAL QBE FORMULA FUNDS

$

24,627.477 $ 25,813,275 $

s 996,913 ==2=6'=8=10..,.1=8=8

(1) Comprised of State Funds plus Local Five Mill Share. (2) Allotments do not include the impact of the State budget austerity reduction.

See notes to the basic financial statements.

- 37-

SECTION II COMPLIANCE AND INTERNAL CONTROL REPORTS

RUSSELL W. HINTON
STATE AUDITOR (404) 656-2174

DEPARTMENT OF AUDITS AND ACCOUNTS
254 Washington Street, S.W. Suite 214 Atlanta, Georgia 30334-8400
April 1, 2004

Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the Ware County Board of Education
REPORT ON COMPLIANCE AND ON INTERNAL CONTROL OVER FINANCIAL REPORTING BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS
Ladies and Gentlemen:
We have audited the financial statements of the governmental activities, each major fund, and the aggregate remaining fund information of Ware County Board of Education as of and for the year ended June 30, 2003, which collectively comprise Ware County Board ofEducation's basic financial statements and have issued our report thereon dated April 1, 2004. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States.
Compliance
As part of obtaining reasonable assurance about whether Ware County Board ofEducation's financial statements are free of material misstatement, we performed tests of its compliance with certain provisions oflaws, regulations, contracts and grants, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective ofour audit, and accordingly, we do not express such an opinion. The results ofour tests disclosed no instances ofnoncompliance that are required to be reported under Government Auditing Standards.
Internal Control Over Financial Reporting
In planning and performing our audit, we considered Ware County Board of Education's internal control over financial reporting in order to determine our auditing procedures for the purpose of expressing our opinion on the financial statements and not to provide assurance on the internal
2003-34YB-30

control over financial reporting. However, we noted a certain matter involving the internal control over financial reporting and its operation that we consider to be a reportable condition. Reportable conditions involve matters coming to our attention relating to significant deficiencies in the design or operation ofthe internal control over financial reporting that, in ourjudgment, could adversely affect Ware County Board of Education's ability to record, process, summarize and report financial data consistent with assertions of management in the financial statements. The reportable condition is described in the accompanying Schedule ofFindings and Questioned Costs as item FS-7481-03-01.
A material weakness is a condition in which the design or operation of one or more of the internal control components does not reduce to a relatively low level the risk that misstatements in amounts that would be material in relation to the financial statements being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. Our consideration of the internal control over financial reporting would not necessarily disclose all matters in the internal control that might be reportable conditions and, accordingly, would not necessarily disclose all reportable conditions that are also considered to be material weaknesses. However, we believe the reportable condition described above is not a material weakness.
This report is intended solely for the information and use ofthe management, members ofthe Ware County Board ofEducation, Federal awarding agencies and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties.
Respectfully submitted,
l<l. ~
sell W. Hinton State Auditor
RWH:as 2003-34YB-30

RUSSELL W. HINTON
STATE AUDITOR (404) 656-2174

DEPARTMENT OF AUDITS AND ACCOUNTS
254 Washington Street, S.W. Suite 214 Atlanta, Georgia 30334-8400
April 1, 2004

Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the Ware County Board of Education
REPORT ON COMPLIANCE WITH REQUIREMENTS APPLICABLE TO EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH 0MB CIRCULAR A-133
Ladies and Gentlemen:
Compliance
We have audited the compliance of Ware County Board ofEducation with the types ofcompliance requirements described in the US. Office of Management and Budget (0MB) Circular A-133 Compliance Supplement that are applicable to each ofits major Federal programs for the year ended June 30, 2003. Ware County Board of Education's major Federal programs are identified in the Summary of Auditor's Results Section of the accompanying Schedule of Findings and Questioned Costs. Compliance with the requirements of laws, regulations, contracts and grants applicable to each of its major Federal programs is the responsibility of Ware County Board of Education's management. Our responsibility is to express an opinion on Ware County Board of Education's compliance based on our audit.
We conducted our audit ofcompliance in accordance with auditing standards generally accepted in the United States ofAmerica; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General ofthe United States; and 0MB Circular A133, Audits of States, Local Governments, and Non-Profit Organizations. Those standards and 0MB Circular A-133 require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types ofcompliance requirements referred to above that could have a direct and material effect on a major Federal program occurred. An audit includes examining, on a test basis, evidence about the Ware County Board of Education's compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Our audit does not provide a legal determination on Ware County Board of Education's compliance with those requirements.
2003SA-30

In our opinion, the Ware County Board of Education complied, in all material respects, with the requirements referred to above that are applicable to each ofits major Federal programs for the year ended June 30, 2003.
Internal Control Over Compliance
The management ofWare County Board ofEducation is responsible for establishing and maintaining effective internal control over compliance with requirements of laws, regulations, contracts and grants applicable to Federal programs. In planning and performing our audit, we considered Ware County Board ofEducation's internal control over compliance with requirements that could have a direct and material effect on a major Federal program in order to determine our auditing procedures for the purpose of expressing our opinion on compliance and to test and report on internal control over compliance in accordance with 0MB Circular A-133.
We noted a certain matter involving the internal control over compliance and its operation that we consider to be a reportable condition. Reportable conditions involve matters coming to our attention relating to significant deficiencies in the design or operation ofthe internal control over compliance that, in our judgment, could adversely affect the Ware County Board of Education's ability to administer a major Federal program in accordance with applicable requirements oflaws, regulations, contracts and grants. The reportable condition is described in the accompanying Schedule of Findings and Questioned Costs as item FA-7481-03-01.
A material weakness is a condition in which the design or operation of one or more of the internal control components does not reduce to a relatively low level of risk that noncompliance with the applicable requirements oflaws, regulations, contracts and grants that would be material in relation to a major Federal program being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. Our consideration of the internal control over compliance would not necessarily disclose all matters in the internal control that might be reportable conditions and, accordingly, would not necessarily disclose all reportable conditions that are also considered to be material weaknesses. However, we believe the reportable condition described above is not a material weakness.
This report is intended solely for the information and use ofthe management, members ofthe Ware County Board ofEducation, Federal awarding agencies and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties.
Respectfully submitted,
&J.<tl:&:
ell W. Hinton State Auditor
RWH:as 2003SA-30

SECTION ill AUDITEE'S RESPONSE TO PRIOR YEAR FINDINGS AND QUESTIONED COSTS

WARE COUNTY BOARD OF EDUCATION AUDITEE'S RESPONSE
SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2003

PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

FINDING CONTROL NUMBER AND STATUS

FS-7481-01-01 FS-7481-02-01

Further Action Not Warranted Previously Reported Corrective Action Implemented

SECTION IV FINDINGS AND QUESTIONED COSTS

WARE COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2003

I SUMMARY OF AUDITOR'S RESULTS

1. Type of Report Issued on the Financial Statements The auditor's opinion on the Ware County Board of Education's financial statements was unqualified.

2. Reportable Conditions in Internal Control Disclosed by the Audit of the Financial Statements The audit report for the Ware County Board of Education disclosed a financial statement reportable condition related to the following control categories.

Cash and Cash Equivalents Revenues/Receivables/Receipts

Expenditures/Liabilities/Disbursements

The reportable condition described above is not considered to be a material weakness.

3. Noncompliance Material to the Financial Statements The audit ofthe Ware County Board ofEducation disclosed no instances ofnoncompliance that were deemed to be material to the financial statements.

4. Reportable Conditions in Internal Control Over Major Programs The audit report for the Ware County Board ofEducation disclosed a reportable condition in internal control over major programs for the following compliance requirements.

Special Tests and Provisions

The reportable condition described above is not considered to be a material weakness.

5. Type of Report Issued on Compliance for Major Programs The auditor's opinion on the Ware County Board ofEducation's report on compliance with requirements applicable to major programs was unqualified.

6. Audit Findings Required to be Reported by Section .510(a) of 0MB Circular A-133 The Ware County Board of Education's audit disclosed an audit finding required to be reported by section .510(a) of 0MB Circular A-133. This audit finding is included in section IV of this report.

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WARE COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2003
I SUMMARY OF AUDITOR'S RESULTS
7. Major Programs Federal awards audited as major programs are as follows: 84.010 Elementary and Secondary Education Act - Title I - Grants to Local Educational Agencies 84.027 Individuals with Disabilities Education Act - Part B - Special Education Flow Through 84.173 Individuals with Disabilities Education Act - Part B - Special Education Preschool 84.173 Individuals with Disabilities Education Act - Part B - Special Education Capacity Building Improvement Grant 84.367 Elementary and Secondary Education Act - Title II - Improving Teacher Quality
8. Type "A" Program Dollar Threshold The dollar threshold for type "A" programs was $300,000.
9. Low Risk Auditee The Ware County Board of Education qualified as a low risk auditee as defined by Section .530 ofOMB Circular A-133.
II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS
CASH AND CASH EQUIVALENTS REVENUE/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Separation of Duties Reportable Condition Finding Control Number: FS-7481-03-01
The Ware County Board of Education did not provide for adequate separation of employee duties related to principals' (school activity) accounts in the performance of the following accounting functions and procedures:
Cash and Cash Equivalents The bank reconciliation function was not separated from the record keeping and voucher payment functions.
Revenues/Receivables/Receipts Cash receipt function was not separated from deposit preparation and record keeping functions.
Expenditures/Liabilities/Disbursements Claims processing function was not separated from record keeping and claims approval functions.
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WARE COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2003
II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS
CASH AND CASH EQUIVALENTS REVENUE/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Separation of Duties Reportable Condition Finding Control Number: FS-7481-03-01
These deficiencies were a result ofmanagement's decision to limit the number ofadministrative staff made responsible, at the various principals' account sites, for the accounting functions. Management should implement additional procedures to ensure that the key accounting functions of custody, record keeping and authorization are segregated.
III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS
SPECIAL TESTS AND PROVISIONS Fiscal Requirements of School-wide Program Not Fully Implemented Reportable Condition U. S. Department of Education Through Georgia Department of Education Finding Control Number: FA-7481-03-01
During the year in review, there were seven schools that the School District identified as participating in a school-wide program. While Federal provisions prescribe that multiple funding sources (Federal State or Local) are required to support a school-wide program, we noted that the Title I program (CFDA No. 84.010) was identified as the only funding source supporting the schoolwide program concept at the participating schools and, in contrast with Federal requirements, the School District arbitrarily charged the Title I fund with school-wide expenditures.
In accordance with provisions ofU. S. Department ofEducation Instructions and 0MB Circular A133, Compliance Supplement provisions, eligible schools are able to use their Title I, Part A funds, in combination with other Federal, State and local funds, in order to upgrade the entire educational program of the school and to raise academic achievements for all students. By combining funds from Title I and other eligible U. S. Department of Education funded programs in support of a school-wide program, U.S. Department ofEducation Instructions provide that specific school-wide program costs lose their identity but only in those circumstances when funds are combined in a school-wide program. In line with 0MB Circular A-87 requirements, school-wide expenditures should be charged to those Federal funding sources supporting the school wide program in a reasonable manner. If there is only one Federal funding source, then costs should be charged to the Federal program based on the specific benefits derived from that cost. When more than one Federal
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WARE COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2003
III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS SPECIAL TESTS AND PROVISIONS Fiscal Requirements of School-wide Program Not Fully Implemented Reportable Condition U.S. Department of Education Through Georgia Department of Education Finding Control Number: FA-7481-03-01 program supports a school-wide program, then school-wide program expenditures may be allocated to specific Federal funds in proportion to the different Federal funds provided in support of the school-wide program. It was the School District's understanding that costs related to a school-wide program lose their identity and therefore any school-wide program cost can be charged to the Title I program. They were unaware that this was only applicable when there is more than one funding source supporting the school-wide program. The School District should implement procedures to assure that ifthe Title I program continues to be the only funding source in support ofa school-wide program, only those costs that specifically relate to the Title I program may be charged to the Title I fund. If more than one funding source is to support the school-wide program in the future, then procedures should be developed to (1) combine such funds as prescribed by U. S. Department ofEducation and (2), in line with 0MB Circular A-87 provisions, allocate such school-wide program costs to the respective Federal fund in a reasonable manner. The School District should seek Georgia Department of Education guidance in implementing fiscal procedures for combining and allocating school-wide program expenditures to Federal programs.
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