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 ~ k 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