WARREN COUNTY BOARD OF EDUCATION WARRENTON, GEORGIA REPORT ON AUDIT OF THE FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2004 STATE OF GEORGIA DEPARTMENT OF AUDITS AND ACCOUNTS Russell W. Hinton State Auditor WARREN 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 4 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 NOTES TO THE BASIC FINANCIAL STATEMENTS 12 SCHEDULES REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL GENERAL FUND 29 WARREN COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS - SECTION I FINANCIAL SCHEDULES SUPPLEMENTARY INFORMATION 2 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS 30 3 SCHEDULE OF STATE REVENUE 31 4 SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS 32 5 ALLOTMENTS AND EXPENDITURES GENERAL FUND - QUALITY BASIC EDUCATION PROGRAMS (QBE) BY PROGRAM 33 SECTION II COMPLIANCE AND INTERNAL CONTROL REPORTS REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS 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 WARREN COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS - SECTIONV MANAGEMENT'S RESPONSES SCHEDULE OF MANAGEMENT'S RESPONSES SECTION I FINANCIAL Russell W. Hinton STATE AUDITOR (404) 656-2174 DEPARTMENT OF AUDITS AND ACCOUNTS 270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400 July 29, 2005 Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education and Superintendent and Members of the Warren 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 Warren County Board of Education, as of and for the year ended June 30, 2004, which collectively comprise the Board's basic financial statements as listed in the table of contents. These financial statements are the responsibility ofthe Warren County Board ofEducation'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 opinions. In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, each major fund, and the aggregate remaining fund information ofthe Warren County Board ofEducation, as ofJune 30, 2004, 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. 2004ARL-11 As discussed in Note 2 to the basic financial statements, during fiscal year 2004, the Board changed its method ofaccounting for the salaries ofcertain ten-month employees from a cash basis to a basis that is generally accepted. This change is in accordance with generally accepted accounting principles. As described in Note 2, the Warren County Board of Education has implemented a new financial reporting model as required by provisions ofGovernmental Accounting Standards Board Statement No. 34, Basic Financial Statements - and Management's Discussion and Analysis - for State and Local Governments, as of June 30, 2004. In accordance with Government Auditing Standards, we have also issued our report dated July 29, 2005, on our consideration ofthe Warren County Board ofEducation's internal control over financial reporting and our tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements and other matters. The purpose ofthat report is to describe the scope ofour testing of internal control over financial reporting and compliance and the results ofthat testing, and not to provide an opinion on the internal control over financial reporting or on compliance. 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 vii 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 Warren 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. 2004ARL-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 of Georgia Annotated section 506-24. Respectfully submitted, ~~-4~ Russell W. Hinton State Auditor RWH:gp 2004ARL-11 WARREN COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2004 The discussion and analysis of the Warren County Board of Education's financial performance provides an overall review of the School District's financial activities for the fiscal year ended June 30, 2004. The intent of this discussion and analysis is to look at the School District'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 School District's financial performance. Financial Highlights Key financial highlights for fiscal year 2004 are as follows: The Governmental Accounting Standards Board (GASB) issued GASB Statement 34 on June 30, 1999, requiring statements to comply with a new reporting model for financial statements. Based upon total revenues, the Warren County Board of Education was a Phase Three implementer, and was required to implement GASB Statement 34 beginning in fiscal year 2004. Due to this being the implementation year for GASB Statement 34, many comparisons are not available that will be available for fiscal year 2005. The School District's financial status remained stable during fiscal year 2004. In total, net assets increased $33,355 due to governmental activities since the School District has no business-type activities. Total revenues were $8,807,021 with program specific revenues in the form of charges for services and sales, grants and contributions accounting for $5,761,969 and general revenues accounting for $3,045,052. The School District had $8,773,666 in expenses related to governmental activities; only $5,761,969 of these expenses were offset by program specific charges for services and grants and contributions. General revenues, primarily taxes, of $3,045,052 were adequate to provide for these programs. Among major funds, the general fund has $8,177,206 in revenues and other financing sources and $8,170,358 in expenditures for an increase in general fund balance of $6,848. Using the Basic Financial Statements This annual report consists of a series of financial statements and notes to those statements. These statements are organized so the reader can understand the Warren 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 School District, presenting an aggregate view of the School District's finances and a longer-term view of those finances. The fund financial statements provide the next level of 1 WARREN COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2004 detail. For governmental funds, these statements tell how services were financed in the shortterm as well as what remains for future spending. The fund financial statements also look at the School District's most significant funds with all other nonmajor funds, if any, presented in total in one column. In the case of the Warren County Board of Education, the general fund is by far the most significant fund. Reporting the School District as a Whole Statement ofNet Assets and Statement ofActivities While these documents contain the large number funds used by the School District to provide programs and activities, the view of the School District as a whole looks at all financial transactions and determines how we concluded fiscal year 2004. The Statement of Net Assets and the Statement of Activities provide this information. These statements include all assets and liabilities using the accrual basis of accounting. 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 School District's net assets and changes in those assets. This change in net assets is important because it tells the reader whether, for the School District as a whole, the financial position of the School District has improved or diminished. The causes of this change may be the result of many factors, some financial, some not. Reductions or increases in state or local funding, change in property tax base, additional requirements in educational programs, and facility conditions are just a few of the causes for such change. In the Statement of Net Assets and the Statement of Activities, the School District has one distinct type of activity: Governmental Activities - All of the School District's programs and services reported here including instruction, pupil services, improvement of instructional services, educational media services, administrative services, maintenance and operation of plant, student transportation services, school food services, and various others. Reporting the School District's Most Significant Funds Fund Financial Statements Fund financial reports provide detailed information about the School District's major funds. The School District uses many funds to account for a multitude of financial statements. However, the fund financial statements focus on the School District's most significant funds. The School District's major governmental funds are the general fund, the District-wide capital projects fund and the debt service fund. Governmental Funds: Most of the School District's activities are reported in governmental funds, which focus on how money flows into and out of those funds and the balances left at yearend available for future spending. These funds are reported using an accounting method called modified accrual spending, which measures cash and all other financial assets that can readily be 11 WARREN COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2004 converted to cash. The governmental fund statements provide a detailed short-term view of the School District'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 between governmental activities and governmental funds is reconciled in the financial statements. Fiduciary Funds: The School District is the trustee, or fiduciary, for assets that belong to others, such as clubs and organizations within the school activity accounts. The School District is responsible for ensuring that the assets reported in these funds are used only for their intended purposes, and used by those to whom the assets belong. The School District excludes these activities from the District-wide financial statements because it cannot use these assets to finance its operations. The School District as a Whole The perspective of the Statement of Net Assets is of the School District as a whole. Table 1 provides a summary of the School District's net assets for fiscal year 2004. Since this is the first year the School District has been required to prepare financial statements following GASB Statement 34, net asset comparisons to fiscal year 2003 are not available. Table 1 Net Assets Governmental Activities Fiscal Year 2004 Assets Current and Other Assets Capital Assets, Net $ 1,092,731 12,000,572 Total Assets $ 13,093,303 Liabilities Current and Other Liabilities Long-Term Liabilities $ 1,793,080 8,070,000 Total Liabilities $ 9,863,080 Net Assets Invested in Capital Assets, Net of Related Debt Restricted Unrestricted (Deficit) $ 3,930,572 616,257 -1,316,606 Total Net Assets $ 3!230!223 111 WARREN COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2004 Table 2 shows the changes in net assets for fiscal year 2004. Since this is the first year the School District has been required to prepare financial statements following GASB 34, revenue and expense comparisons are not available. The total net assets increased by $33,355. Table 2 Change in Net Assets Revenues Program Revenues: Charges for Services and Sales Operating Grants and Contributions Capital Grants and Contributions Total Program Revenues General Revenues: Taxes Property Taxes Sales Taxes 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 of Non-Instructional Services Community Service Food Services Interest on Short-Term and Long-Term Debt Total Expenses Increase in Net Assets Governmental Activities Fiscal Year 2004 $ 112,193 5,592,775 57,001 $ 5,761,969 $ 2,076,072 490,903 388,040 4,204 85,833 $ 3,045,052 $ 8,807,021 $ 4,447,137 104,503 247,842 196,830 638,515 679,860 223,272 639,716 440,981 27,314 22,909 80,986 577,982 445 819 $ 8,773,666 $====3=='3.==35===5 IV WARREN COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2004 Governmental Activities Instruction comprises 50.7 percent of the governmental program expenses. Additionally, among the revenues, grants and contributions comprise 98.1 percent of the program revenues and 64.2 percent of total revenues while property and sales taxes comprise an additional 29.1 percent of total revenues. Although program revenues make up the majority of total revenues, the School District remains dependent upon tax revenue for governmental activities. 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 of services and the net cost of services. 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 been required to prepare financial statements following GASB Statement 34, cost of service comparisons to fiscal year 2003 are not available. Table 3 Governmental Activities Total Cost of Services Fiscal Year 2004 Net Cost of Services Fiscal Year 2004 Instruction $ 4,447,137 $ Support Services Pupil Services 104,503 Improvement of Instructional Services 247,842 Educational Media Services 196,830 General Administration 638,515 School Administration 679,860 Business Administration 223,272 Maintenance and Operation of Plant 639,716 Student Transportation Services 440,981 Central Support Services 27,314 Other Support Services 22,909 Operations of Non-Instructional Services Community Services 80,986 Food Services 577,982 Interest on Short-Term and Long-Term Debt 445 819 478,475 56,924 207,564 126,363 204,400 442,959 223,272 414,378 242,414 27,314 22,909 23,287 95,619 445,819 Total Expenses $ 8,773,666 $ 3,011,697 V WARREN COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2004 The School District's Funds Highlights in Governmental Funds Governmental funds include the general fund, the District-wide capital projects fund and Debt Service Fund. Total revenues in governmental funds were $8,897,041 while total expenditures in governmental funds were $8,897,593 leaving a short fall in revenue of $552. When added to the beginning fund balance of $-671,487 the short fall in revenue decreases the ending fund balance to $-672,039. Highlights in General Fund Budgeting The School District's budget is prepared according to Georgia law. The most significant budgeted fund is the General Fund. During fiscal year 2004, the School District amended its general fund budget as needed. The School District uses function-based budgeting, which is designed to tightly control total function budgets while providing flexibility for site management. For the General Fund, budgeted revenues increased from $7,293,886 to $7,310,386. Expenditures budgeted increased from $8,055,320 to $8,310,223. These differences were primarily due to an increase in state revenues of $16,500, an increase in instructional expenditures of $150,167, and an increase in improvement of instructional services of $133,953. Total revenues in the General Fund for fiscal year 2004 were $8,124,148 while total expenditures were $8,170,358 leaving a short fall of revenue over expenditures in the general fund of $-46,210. When added to the beginning year fund balance, the net increase of $6,848 placed our ending year general fund balance at $-1,047,393. Capital Assets and Debt Administration Capital Assets At the end of fiscal year 2004, the School District had $12,000,572 invested in capital assets. Table 4, shown below, indicates balances as of June 30, 2004. Since this is the first year the School District has been required to prepare financial statements following GASB Statement 34, capital asset comparisons to fiscal year 2003 are not available. Vl WARREN COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2004 Table 4 Capital Assets (Net of Depreciation) Governmental Activities Fiscal Year 2004 Land Land Improvements Buildings Equipment $ 70,070 63,164 11,141,266 726,072 Total $ 12,000,572 The only increase occurred in equipment. Debt At June 30, 2004, the School District had $8,070,000 in bonds outstanding with $360,000 due within one year. Current Issues The Warren County Board of Education has been no exception in being impacted by the decline in funding due to economic setbacks in the state and national economy over the past few years. As of June 30, 2004, the School District has lost approximately $265,616 in austerity reductions of state funding in the last two fiscal years. To offset this reduction in funds, the School District opted not to rollback the millage rate in a recent property reevaluation, which led to an increase in tax revenue. Contacting the School District's Financial Management This financial report is designed to provide our citizens, taxpayers, investors, and creditors with a general overview of the School District's finances and to reflect the School District's accountability for the money it receives. If you have any questions about this report or need additional information, contact Fran Hutcheson, Finance Director at the Warren County Board of Education, P.O. Box 228, Warrenton, Georgia 30828. Vll WARREN COUNTY BOARD OF EDUCATION WARREN COUNTY BOARD OF EDUCATION STATEMENT OF NET ASSETS JUNE 30, 2004 ASSETS Investments Accounts Receivable, Net Taxes State Government Federal Government Other Inventories Capital Assets Land Land Improvements Buildings Equipment Less: Accumulated Depreciation Total Assets LIABILITIES Cash Overdraft Accounts Payable Salaries 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 (Deficit) 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 $ 186,912 146,330 419,395 329,561 228 10,305 70,070 64,600 11,393,126 1,433,830 -961 054 $ ===1=3=,0=9=3,=3=03= $ 378,347 459,721 748,045 206,967 360,000 7 710 000 $ 9,863,080 $ 3,930,572 96,120 147,920 372,199 18 -1316606 $ 3,230,223 $ ======13=,0=9=3=,3=03= WARREN COUNTY BOARD OF EDUCATION STATEMENT OF ACTIVITIES FOR THE YEAR ENDED JUNE 30, 2004 EXPENSES CHARGES FOR SERVICES 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 Community Services Food Services Interest on Short-Term and Long-Term Debt Total Governmental Activities $ 4,447,137 104,503 247,842 196,830 638,515 679,860 $ 223,272 639,716 440,981 27,314 22,909 80,986 577,982 445 819 8,773,666 $ 27,697 48,067 36,429 112193 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 Intangible Recording Tax Real Estate Grants and Contributions not Restricted to Specific Programs Investment Earnings Miscellaneous Total General Revenues Change in Net Assets Net Assets - Beginning of Year {Restated) Net Assets - End of Year The notes to the basic financial statements are an integral part of this statement. -4- EXHIBIT"B" PROGRAM REVENUES OPERATING CAPITAL GRANTS AND GRANTS AND CONTRIBUTIONS CONTRIBUTIONS NET (EXPENSES) REVENUES AND CHANGES IN NET ASSETS $ 3,952,922 $ 47,579 40,278 69,780 434,115 209,204 224,724 161,566 9,632 442,975 $ 5,592,775 $ 15,740 $ 687 614 37,001 2,959 57 001 $ -478,475 -56,924 -207,564 -126,363 -204,400 -442,959 -223,272 -414,378 -242,414 -27,314 -22,909 -23,287 -95,619 -445 819 -3,011,697 $ 1,762,700 293,320 20,052 447,119 30,301 13,483 388,040 4,204 85833 $ 3,045,052 $ 33,355 3,196,868 $ ======3=,2=3=0=,2=23= -5- WARREN COUNTY BOARD OF EDUCATION BALANCE SHEET GOVERNMENTAL FUNDS JUNE 30. 2004 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 Cash Overdraft Accounts Payable Salaries Payable Deposits and Deferred Revenue Total Liabilities FUND BALANCES Reserved for: Bus Replacement Continuation of Federal Programs Debt Service Inventories Capital Projects Unreserved Undesignated Reported in: General Fund (Deficit) Total Fund Balances Total Liabilities and Fund Balances GENERAL FUND DISTRICTWIDE CAPITAL PROJECTS FUND DEBT SERVICE FUND TOTAL $ $ 67,716 399,395 329,561 228 10,305 $ 81,518 $ 18 186,894 20,000 106,924 81,518 186,912 174,640 419,395 329,561 228 10 305 $ 807,205 $ 20,018 $ 375,336 $ 1,202,559 $ 439,865 $ 459,721 748,045 206,967 $ 1,854,598 $ 20,000 20,000 $ 459,865 459,721 748,045 206,967 $ 1,874,598 $ 96,120 137,615 10,305 $ -1,291,433 $ -1,047,393 $ $ $ 375,336 18 96,120 137,615 375,336 10,305 18 -1,291,433 18 $ 375,336 $ -672,039 $ 807,205 $ 20,018 $ 375,336 $ 1,202,559 The notes to the basic financial statements are an integral part of this statement. -6- WARREN COUNTY BOARD OF EDUCATION RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO THE STATEMENT OF NET ASSETS JUNE 30, 2004 EXHIBIT"D" 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 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 $ -672,039 $ 70,070 64,600 11,393,126 1,433,830 -961,054 12,000,572 -28,310 -8,070,000 Net Assets of Governmental Activities (Exhibit "A") $ ====-3,..,23...,0=,2=2=3 The notes to the basic financial statements are an integral part of this statement. -7- WARREN COUNTY BOARD OF EDUCATION STATEMENT OF REVENUES. EXPENDITURES AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS YEAR ENDED JUNE 30. 2004 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 Community Services Food Services Operation Capital Outlay Debt Services Principal Interest Total Expenditures Excess of Revenues over (under) Expenditures OTHER FINANCING SOURCES (USES) Transfers In Transfers Out Total Other Financing Sources (Uses) Net Change in Fund Balances Fund Balances - Beginning (Restated) GENERAL FUND DISTRICTWIDE CAPITAL PROJECTS FUND DEBT SERVICE FUND TOTAL $ 1,862,438 43,784 3,913,973 $ 2,103,843 112,193 2,084 85,833 $ 8,124,148 $ $ 20,000 20,000 $ 303,654 $ 447,119 2,120, 752,893 $ 2,166,092 490,903 3,933,973 2,103,843 112,193 4,204 85,833 8,897,041 $ 4,345,303 104,503 247,842 191,823 634,731 679,860 221,876 635,236 394,076 27,314 22,909 80,986 569,742 $ $ -29,607 14157 $ 8,170,358 $ $ -46,210 $ -29,607 $ 49607 $ $ 5,180 320,000 431,662 756,842 $ -3 949 $ 4,345,303 104,503 247,842 191,823 634,731 679,860 227,056 635,236 394,076 27,314 22,909 80,986 569,742 -29,607 320,000 445 819 8,897,593 -552 $ 53,058 $ $ 53,058 $ $ 6,848 $ -1,054,241 -49 607 $ -49,607 $ 0 $ 18 $ -3 451 -3451 $ -7,400 $ 382,736 53,058 -53,058 0 -552 -671 487 Fund Balances - Ending $ -1,047,393 $ The notes to the basic financial statements are an integral part of this statement. -8- 18 $ 375,336 $ ==-6=7=2a!=,0=39= WARREN 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, 2004 EXHIBIT F 11 11 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 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 $ -552 $ 26,330 -222,403 -196,073 -90,020 Change in Net Assets of Governmental Activities (Exhibit "B") $ ===3=3=,3=5=5 The notes to the basic financial statements are an integral part of this statement. -9- WARREN COUNTY BOARD OF EDUCATION STATEMENT OF FIDUCIARY NET ASSETS FIDUCIARY FUNDS JUNE 30, 2004 EXHIBIT"G" ASSETS Cash and Cash Equivalents Investments Certificate of Deposit Total Assets LIABILITIES Cash Overdraft Funds Held for Others Total Liabilities NET ASSETS Held in Trust for Private Purposes Total Liabilities and Net Assets PRIVATE PURPOSE TRUSTS AGENCY FUNDS $ 91,011 $ 201000 $ 20,000 $ ===:,;9~1,!,;;0~11,;,,,, $ 492 $ 91 011 $ 492 $ 91 011 $ 191508 $ 201000 $ ===9=1=01=1= The notes to the basic financial statements are an integral part of this statement. - 10 - WARREN COUNTY BOARD OF EDUCATION STATEMENT OF CHANGES IN FIDUCIARY NET ASSETS FIDUCIARY FUNDS YEAR ENDED JUNE 30, 2004 ADDITIONS Investment Earnings Interest DEDUCTIONS Scholarships Change in Net Assets Net Assets - Beginning Net Assets - Ending EXHIBIT"H" PRIVATE PURPOSE TRUSTS $ 169 $ 500 $ -331 19,839 $ ===19:!'=50=8= The notes to the basic financial statements are an integral part of this statement. - 11 - WARREN COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2004 EXHIBIT "I" Note 1: DESCRIPTION OF SCHOOL DISTRICT AND REPORTING ENTITY REPORTING ENTITY The Warren County Board ofEducation (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 ofall 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 Warren 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 ofActivities 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. - 12 - WARREN COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30. 2004 EXHIBIT "I" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The School District reports the following major governmental funds: 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 fund reports a trust arrangement, the Otis E. Williams Memorial Scholarship, under which principal and income benefit an eligible student in Warren County. Agency funds account for assets held by the School District as an agent for various funds, governments, 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, grants and donations. 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 - WARREN COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2004 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. The School District funds certain programs by a combination of specific 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 2004, 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 2004 financial statements to record costs for salaries and fringe benefits earned by employees through June 30, 2004, (even though paid in July and August 2004) 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 2003 and recorded in fiscal year 2004. The net effect of the above accounting treatment results in the accompanying financial statements reflecting costs for those salaries and benefits earned by employees during fiscal year 2004 and the related State revenue to fund these contracts. In addition, both the net assets and fund balance at July 1, 2003, have been restated for salaries and benefits earned by employees in fiscal year 2003 but not paid until July and August 2003 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 and Athletic Fund were reported as Special Revenue Funds. These funds had a combined fund balance of $213,133 at July 1, 2003. For fiscal year 2004, these funds have been reported as part of the General Fund. In addition, Agency Fund activity from certain school activity accounts, which were reported in the prior year's financial statements as governmental fund activity, have been reported within Agency Funds for fiscal year ended June 30, 2004. The Agency Fund activity ofthese school activity accounts had a fund balance of$41,030 at July 1, 2003. This change is in accordance with generally accepted accounting principles. - 14 - WARREN COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2004 EXHIBIT "I" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES General Fund Balance July 1, 2003 $ -763,234 Add Funds Consolidated with General Fund: School Food Services Fund Athletic Fund 238,208 -25,075 Deduct Funds Consolidated with General Fund: School Activity Account - Agency Activity 41,030 Add: State Revenue Related to July and August 2003 Salary Payments Earned by Employees in Fiscal Year 2003 412,603 Deduct: July and August 2003 Salary Payments Earned by Employees in Fiscal Year 2003 875 713 General Fund Balance July 1, 2003 (Restated) $ -1,054,241 CHANGES IN ACCOUNTING PRINCIPLES The Warren 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, 2004. The provisions ofGASB Statement No. 34 require the inclusion of a Statement ofNet Assets. The elements comprising Net Assets - Beginning include the following: General Fund (Restated) July 1, 2003 Capital Projects Fund Debt Service Fund $ -1,054,241 18 382,736 Governmental Funds (Restated) July 1, 2003 Capital Assets Accumulated Depreciation Property Tax Revenue Timing Differences Bonds Payable $ -671,487 12,935,296 -738,651 61,710 -8,390,000 Net Assets Beginning (See Exhibit "B") $ 3)96,868 - 15 - WARREN COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2004 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 School District 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 - WARREN COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2004 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 Warren County Board of Commissioners fixed the property tax levy for the 2003 tax digest year (calendar year) on October 15, 2003 (levy date). Taxes were due on January 7, 2004 (lien date). Taxes collected within the current fiscal year or within 60 days after year-end on the 2003 tax digest are reported as revenue in the governmental funds for fiscal year 2004. The Warren 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 of taxes collected to the School District. Property tax revenues, at the fund reporting level, during the fiscal year ended June 30, 2004, for maintenance and operations amounted to $1,842,386 and for school bonds amounted to $303,654. Tax millage rates levied for the 2003 tax year (calendar year) for the Warren County Board of Education were as follows (a mill equals $1 per thousand dollars of assessed value): School Operations School Bonds 14.98 mills 2.53 mills 17.51mills SALES TAXES Special Purpose Local Option Sales Tax, at the fund reporting level, during the year amounted to $447,119 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 of donated 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. - 17 - WARREN COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2004 EXHIBIT "I" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CAPITAL ASSETS Capital assets purchased, including capital outlay costs, are recorded as expenditures in the fund financial statements at the time of purchase (including ancillary charges). On the District-wide financial statements, all purchased 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 estimated 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 ofassets 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 All NIA $ 5,000 20 to 80 years $ 5,000 50 to 80 years $ 5,000 5 to 50 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. DEFICIT FUND BALANCES Funds reporting a deficit fund balance at June 30, 2004, are as follows: Fund Type/Fund Name Deficit Balance General Fund $ 1,291,433 The School District intends to fund the deficit by reducing expenditures and through the sale of an old school building. - 18 - WARREN COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2004 EXHIBIT "I" 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 ofoperating funds placed in demand deposit checking accounts. 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, 2004, the bank balances were $368,644. The amounts of the total bank balances are classified into three categories of credit risk: - 19 - WARREN COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2004 EXHIBIT "I" Note 3: DEPOSITS AND INVESTMENTS 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, 2004, as follows: Risk Category Bank Balance 1 $ 149,729 2 0 3 218,915 Total $==3==68-,6==4===4 CATEGORIZATION OF INVESTMENTS Investments are classified as to risk by the three categories described below: Category 1 - Insured or registered, or securities held by the School District or the School District's agent in the School District's name. Category 2 - Uninsured or unregistered, with securities held by the counterparty's trust department or agent in the School District's name. Category 3 - Uninsured or unregistered, with securities held by the counterparty, or by its trust department or agent but not in the School District's name. Funds invested in an investment pool managed by another government are not required to be categorized unless the investing entity owns specific, identifiable investment securities in the pool. At June 30, 2004, the carrying value ofthe School District's total investments was $186,912 which is materially the same as fair value. The investments are classified as to risk categories as follows: Txne oflnvestment U.S. Government $ Local Government Investment Pools Total Investments Risk Categories 2 $ 18 $ Carrying Fair 3 Amount Value Q $ 18 $ 18 186,894 186,894 $ 186 212 $ 186,912 -20 - WARREN COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2004 EXHIBIT "I" Note 3: DEPOSITS AND INVESTMENTS The carrying amounts shown above includes amounts maintained in an investment pool by the State of Georgia, Office ofTreasury and Fiscal Services in which the School District owns no identifiable securities. The investment policy ofthe State of Georgia, Office ofTreasury 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 Securities and Exchange Commission (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 weekly 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, 2004, was 24 days. The average investment duration for Fund 6 on June 30, 2004, was 0.22 years. 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 Note 5: CAPITAL ASSETS The following is a summary of changes in the Capital Assets during the fiscal year: - 21 - WARREN COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2004 EXHIBIT "I" Note 5: CAPITAL ASSETS Balances July 1, 2003 (Restated) Increases Balances Decreases June 30, 2004 Governmental Activities Capital Assets, Not Being Depreciated: Land $ 70 070 $ 0 $ 0 $ 70 070 Capital Assets Being Depreciated Buildings and Improvements Equipment Land Improvements $ 11,393,126 1,407,500 $ 64,600 $ 26,330 0 $ 11,393,126 1,433,830 64,600 Less Accumulated Depreciation for: Buildings and Improvements Equipment Land Improvements 125,270 612,663 718 126,590 95,095 718 251,860 707,758 1 436 Total Capital Assets, Being Depreciated, Net $ 12,126,575 $ -196,073 $ 0 $ 11,930,502 Governmental Activity Capital Assets - Net $ 12,196,645 $ -126,Q:Z3 $ 0 $ 12,000,572 Current year depreciation expense by function is as follows: Instruction Support Services Educational Media Services Maintenance and Operation of Plant Student Transportation Services Food Services $ 132,451 $ 5,776 5,168 54,108 65,052 24,900 $.=~2~22~,4~0~3 Note 6: RESTRICTED ASSETS Special Purpose Local Option Sales Tax (SPLOST), general obligation bond proceeds and property tax levied specifically for retirement ofoutstanding 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, 2004, were as follows: - 22 - WARREN COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2004 EXHIBIT "I" Note 6: RESTRICTED ASSETS District-wide Capital Projects Bond Proceeds Debt Service Funds Restricted Cash and Cash Equivalents: Debt Services Restricted Investments: Debt Services Capital Acquisitions $ 81,518 $ 186,894 $ 18 Note 7: INTERFUND TRANSFERS Interfund transfers for the year ended June 30, 2004, consisted of the following: Transfer to Transfers From District-wide Capital Debt Service Projects Funds General Fund $ 49 607 $===='3-4~5~1 Transfers are used to move local funds from the District-wide Capital Projects Fund to the General Fund and to move funds from the Debt Service Fund to the General Fund for the repayment of a loan. Note 8: 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 and unemployment compensation. The School District has obtained commercial insurance for risk of loss associated with torts and assets. The School District has neither significantly reduced coverage for these risks nor incurred losses (settlements) which exceeded the School District's insurance coverage in any ofthe past three years. The School District has elected to self-insure for all losses related to acts of God. In addition, the School District has elected to self-insure for errors or omissions, which includes, among other risks, risks for sexual harassment and discrimination. The School District has not experienced any losses related to these risks in the past three years. - 23 - WARREN COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2004 EXHIBIT "I" Note 8: RISK MANAGEMENT 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: 2003 2004 Beginning ofYear Liability Claims and Changes in Estimates Claims Paid End ofYear Liability $ 3 475 $ 13 149 $ 15 172 $ 1 452 $ 1452 $ 21,851 $ 15,429 $ 7 874 The School District participates in the Georgia Education Workers' Compensation Trust, a public entity risk pool organized on December 1, 1991, to develop, implement and administer a program of workers' compensation self-insurance for its member organizations. The School District pays an annual premium to the Trust for its general insurance coverage. Additional insurance coverage is provided through an agreement by the Trust with the Midwest Employers Casualty Company to provide coverage for potential losses sustained by the Trust in excess of $400,000 loss per occurrence, up to $2,000,000. The School District has purchased surety bonds to provide additional insurance coverage as follows: Position Covered Amount Superintendent Each Principal $ 100,000 $ 10,000 Note 9: SHORT-TERM DEBT The School District issues tax anticipation notes in advance ofproperty tax collections, depositing the proceeds in its General Fund. This short-term debt is to provide cash for operations until property tax collections are received by the School District. Article IX, Section V, Paragraph V of the Constitution ofthe State ofGeorgia limits the aggregate amount ofshort-term debt to 75 percent ofthe total gross income from taxes collected in the preceding year and requires all short-term debt to be repaid no later than December 31 of the calendar year in which the debt was incurred. Short-term debt activity for the fiscal year is as follows: - 24- WARREN COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2004 EXHIBIT "I" Note 9: SHORT-TERM DEBT Beginning Balance Issued Redeemed Ending Balance Tax Anticipation Notes $ 360,000 $ 550,000 $ 910,000 $===0 At December 31, 2003, the School District was unable to repay tax anticipation notes in the amount of $760,000 as required by Georgia laws. Note 10: LONG-TERM DEBT GENERAL OBLIGATION DEBT OUTSTANDING General Obligation Bonds currently outstanding are as follows: Purpose Interest Rates Amount General Government - Series 1999 4.35% - 5.55% $ 8,070,000 The changes in Long-Term Debt during the fiscal year ended June 30, 2004, were as follows: Governmental Funds General Obligation Bonds Balance July 1, 2003 $ 8,390,000 Deductions Debt Retired 320,000 Balance June 30, 2004 $ 8,070.000 Portion of Long-Term Debt Due within One Year $ 360,000 At June 30, 2004, payments due by fiscal year which includes principal and interest for these items are as follows: - 25 - WARREN COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2004 EXHIBIT "I" Note 10: LONG-TERM DEBT Fiscal Year Ended June 30 General Obligation Debt Principal Interest 2005 2006 2007 2008 2009 2010 - 2014 2015 - 2019 $ 360,000 $ 417,103 395,000 400,362 415,000 381,798 435,000 361,877 460,000 340,780 2,710,000 1,333,950 3,295,000 531,668 Total Principal and Interest $ 8,070,000 $ 3,767,538 Note 11: ON-BEHALF PAYMENTS The School District has recognized revenues and costs in the amount of$54,780 for health insurance and retirement contributions paid on the School District's behalf by the following State Agencies. Georgia Department of Education Paid to the Georgia Department of Community Health For Health Insurance of Non-Certified Personnel In the amount of $54,074 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 $706 Note 12: 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. Note 13: SUBSEQUENT EVENTS In the subsequent fiscal year, the School District issued general obligation refunding bonds in the amount of $6,610,000. The proceeds from these bonds will be used for refunding a portion of School bonds dated December 1, 1999. - 26 - WARREN COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30. 2004 EXHIBIT "I" Note 13: SUBSEQUENT EVENTS On July 20, 2004, the voters of Warren County voted in favor of a Special Purpose Local Option Sales Tax referendum for educational purposes. The imposition ofthe tax approved by the voters, as stated on the Official Ballot of Warren County, is as follows: "Shall a special one percent sales and use tax for educational purposes be reimposed in Warren County for a period not to exceed 20 calendar quarters (5 years) for the purpose of raising not more than $2,300,000 ofnet proceeds by said tax, to be used for paying a portion of the outstanding principal and interest on the Warren County School District General Obligation School Bonds, Series 1999, the maximum amount of principal and interest to be paid with sales and use tax proceeds will be $2,300,000?" Note 14: 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 of Trustees 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 2004 2003 2002 100% 100% 100% $ 356,761 $ 392,452 $ 355,499 - 27 - WARREN COUNTY BOARD OF EDUCATION GENERAL FUND SCHEDULE OF REVENUES. EXPENDITURES AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL YEAR ENDED JUNE 30. 2004 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 Community Services Food Services Operation Debt Service Total Expenditures Excess of Revenues over (under) Expenditures OTHER FINANCING SOURCES Other Sources Net Change in Fund Balances Fund Balances - Beginning (Restated) Adjustments Fund Balances - Ending NONAPPROPRIATED BUDGETS ORIGINAL (1) FINAL (1) ACTUAL AMOUNTS $ 1,676,920 $ 1,676,920 $ 1,862,438 43,784 3,883,242 3,899,742 3,913,973 1,733,724 1,733,724 2,103,843 112,193 2,084 85 833 $ 7,293,886 $ 7,310,386 $ 8124148 $ 5,077,333 $ 5,227,500 $ 4,345,303 77,528 214,284 165,481 381,565 508,280 122,862 593,685 351,020 29,181 28,527 19,312 486,262 76,254 348,237 173,481 318,010 535,328 122,862 577,310 351,020 29,181 34,567 30,211 486,262 104,503 247,842 191,823 634,731 679,860 221,876 635,236 394,076 27,314 22,909 80,986 569,742 14 157 $ 8,055,320 $ 8,310,223 $ 8,170,358 $ -761,434 $ -999,837 $ -46,210 53 058 $ -761,434 $ -999,837 $ 6,848 -256,997 -256,997 -1,054,241 -243,060 -243,060 $ -1 261 491 $ -1,499,894 $ -1,047,393 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. The accompanying schedule of revenues, expenditures and changes in fund balances budget and actual is presented on the modified accrual basis of accounting which is the basis of accounting used in the presentation of the fund financial statements. See notes to the basic financial statements. - 29 - WARREN COUNTY BOARD OF EDUCATION SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS YEAR ENDED JUNE 30. 2004 SCHEDULE "2" FUNDING AGENCY PROGRAM/GRANT Agriculture, U.S. Department of Child Nutrition Cluster Pass-Through From Georgia Department of Education Food Services School Breakfast Program National School Lunch Program Total Child Nutrition Cluster Other Programs Pass-Through From Georgia Department of Education Food Donation (1) Total U.S. Department of Agriculture Education, U.S. Department of Special Education Cluster Pass-Through From Georgia Department of Education Special Education Grants to States Preschool Grants Total Special Education Cluster Other Programs Direct Twenty-First Century Community Learning Centers Pass-Through From Georgia Department of Education Enhancing Education Through Technology Program Improving Teacher Quality State Grants Reading Excellence - Local Reading Improvement Rural Education Safe and Drug-Free Schools and Communities State Grants for Innovative Programs Title I Grants to Local Educational Agencies Vocational Education - Basic Grants to States Total U. S. Department of Education CFDA NUMBER PASSTHROUGH ENTITY ID NUMBER EXPENDITURES IN PERIOD 10.553 10.555 NIA (2) N/A $ _ _ _-'5'--'1-'-4'-"9-'-12~ $ 514,912 10.550 N/A 26476 $ _ _ _.;:..54.;..;1...:3=8-"--8 84.027 84.173 N/A $ N/A $ 217,118 34,916 252,034 84.287 84.318 84.367 * 84.338 84.358 84.186 84.298 * 84.010 84.048 N/A N/A N/A N/A N/A N/A N/A NIA $ 287,072 51,472 113,910 458,566 24,756 10,987 9,656 463,003 17,766 1,689,222 Total Federal Financial Assistance $ 2,230,610 N/A = Not Available Notes to the Schedule of Expenditures of Federal Awards (1) The amount shown for the Food Donation Program represents 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 ($122,019) were not maintained separately and are included in the 2004 National School Lunch Program. 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 Warren 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 fund financial statements. See notes to the basic financial statements. - 30- WARREN COUNTY BOARD OF EDUCATION SCHEDULE OF STATE REVENUE YEAR ENDED JUNE 30. 2004 SCHEDULE "3" AGENCY/FUNDING GRANTS Bright from the Start: Georgia Department of Early Care and Leaming Pre-Kindergarten Program 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 (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 CategoryV Alternative Education Program 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 Mid-term Adjustment Hold-Harmless Education Equalization Funding Grant Food Services Vocational Education Austerity Reduction Other State Programs At-Risk Summer School Program Health Insurance Limited School Choice Program Mentor Teachers Preschool Handicapped Program Georgia State Financing and Investment Commission Reimbursement on Construction Projects Office of Treasury and Fiscal Services Public School Employees Retirement GOVERNMENTAL FUND TYPES CAPITAL GENERAL PROJECTS FUND FUND TOTAL $ 105,935 $ 105,935 157,097 67,243 343,606 293,131 200,902 113,893 17,466 491,118 452,886 39,564 478 125,607 66,634 13,769 38,432 69,474 23,132 14,022 239,456 192,192 210,343 161,566 37,001 150,370 34,521 2,979 9,008 3,680 295,497 28,354 3,264 -182,091 12,000 54,074 12,811 336 13,517 $ 706 20,000 157,097 67,243 343,606 293,131 200,902 113,893 17,466 491,118 452,886 39,564 478 125,607 66,634 13,769 38,432 69,474 23,132 14,022 239,456 192,192 210,343 161,566 37,001 150,370 34,521 2,979 9,008 3,680 295,497 28,354 3,264 -182,091 12,000 54,074 12,811 336 13,517 20,000 706 See notes to the basic financial statements. $ 3,913,973 $ 20,000 $ 3,933,973 - 31 - WARREN COUNTY BOARD OF EDUCATION SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS YEAR ENDED JUNE 30. 2004 SCHEDULE "4" PROJECT Acquiring land. constructing and equipping a new middle/high school for Warren County and capitalizing interest through October 1. 2000 ORIGINAL ESTIMATED COST (1) CURRENT ESTIMATED COSTS (2) AMOUNT EXPENDED IN CURRENT YEAR (3) AMOUNT EXPENDED IN PRIOR YEARS (3) PROJECT STATUS $ 3,300,000 $ 12,977,802 $ 402,055 $ 12,575,747 Ongoing (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 project. Includes all cost from project inception to completion. (3) The voters of Warren County approved the imposition of a 1% sales tax to fund the above project and retire associated debt. Amounts expended for this project may include sales tax proceeds. state, local property taxes and/or other funds over the life of the project. See notes to the basic financial statements. - 32 - WARREN COUNTY BOARD OF EDUCATION GENERAL FUND- QUALITY BASIC EDUCATION PROGRAM (QBE) ALLOTMENTS AND EXPENDITURES - BY PROGRAM YEAR ENDED JUNE 30. 2004 SCHEDULE "5" DESCRIPTION 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 II Category Ill Alternative Education Program TOTAL DIRECT INSTRUCTIONAL PROGRAMS Media Center Program Staff and Professional Development ALLOTMENTS FROM GEORGIA DEPARTMENT OF EDUCATION (1) (2) ELIGIBLE QBE PROGRAM COSTS SALARIES OPERATIONS TOTAL $ 183,705 $ 219,783 $ 1,200 $ 220,983 78,942 89,032 1,207 90,239 417,478 452,078 3,212 455,290 322,819 274,502 793 275,295 237,078 246,551 3,799 250,350 137,934 93,778 494,798 526,520 55,773 245,896 45 097 77,267 351,844 661,237 115,597 154,618 83,833 25,843 354 11,114 17,555 16,327 355 1,799 24 500 77,621 362,958 678,792 131,924 154,973 85,632 50 343 $ 2,839,818 $ 2,752,185 $ 82,215 $ 2,834,400 81,559 16,389 157,579 24,486 9,937 59,992 167,516 84,478 TOTAL QBE FORMULA FUNDS $ 2,937,766 $ 2,934,250 $ 152144 $==~3,~08~6~,3~9~4 (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. - 33 - SECTION II COMPLIANCE AND INTERNAL CONTROL REPORTS Russell W. Hinton STATE AUDITOR (404) 656-2174 DEPARTMENT OF AUDITS AND ACCOUNTS 270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400 July 29, 2005 Honorable Sonny Perdue, Governor Members ofthe General Assembly Members of the State Board of Education and Superintendent and Members of the Warren County Board of Education REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS 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 Warren County Board of Education as of and for the year ended June 30, 2004, which collectively comprise Warren County Board of Education's basic financial statements and have issued our report thereon dated July 29, 2005. 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. Internal Control Over Financial Reporting In planning and performing our audit, we considered Warren County Board ofEducation'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 an opinion on the internal control over financial reporting. However, we noted certain matters involving the internal control over financial reporting and its operation that we consider to be reportable conditions. 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 Warren County Board ofEducation's ability to record, process, summarize and report financial data consistent with assertions of management in the financial statements. Reportable conditions are described in the accompanying Schedule ofFindings and Questioned Costs as items FS-7491-04-02, FS-7491-04-03, FS-7491-04-04, FS-7491-04-05, FS-7491-04-06, FS-7491-04-07 andFS-7491-0409. 2004YB-40 A material weakness is a reportable condition in which the design or operation ofone or more ofthe internal control components does not reduce to a relatively low level the risk that misstatements caused by error or fraud 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, of the reportable conditions described above, we consider items FS-7491-04-03 and FS-7491-04-07 to be material weaknesses. Compliance and Other Matters As part of obtaining reasonable assurance about whether Warren County Board of Education's financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements, 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 of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. This report is intended solely for the information and use of the management and members of the Warren County Board ofEducation and is not intended to be and should not be used by anyone other than these specified parties. Respectfully submitted, r .,?. (l)__&-0~ Rr,ell W. Hinton State Auditor RWH:gp 2004YB-40 Russell W. Hinton STATE AUDITOR (404) 656-2174 DEPARTMENT OF AUDITS AND ACCOUNTS 270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400 July 29, 2005 Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education and Superintendent and Members of the Warren County Board of Education REPORT ON COMPLIANCE WITH REQUIREMENTS APPLICABLE TO EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH 0MB CIRCULARA-133 Ladies and Gentlemen: Compliance We have audited the compliance of Warren 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 of its major Federal programs for the year ended June 30, 2004. Warren County Board of Education's major Federal programs are identified in the Summary of Auditor's Results Section ofthe 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 Warren County Board of Education's management. Our responsibility is to express an opinion on Warren County Board of Education's compliance based on our audit. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the 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 Warren 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 Warren County Board of Education's compliance with those requirements. 2004SA-65 As described in item FA-7491-04-01 in the accompanying Schedule of Findings and Questioned Costs, Warren County Board of Education did not comply with requirements regarding Allowable Costs/Cost Principles that are applicable to its Reading Excellence - Local Reading Improvement program. Compliance with such requirements is necessary, in our opinion, for Warren County Board of Education to comply with requirements applicable to that program. In our opinion, except for the noncompliance described in the preceding paragraph, the Warren County Board of Education complied, in all material respects, with the requirements referred to above that are applicable to each of its major Federal programs for the year ended June 30, 2004. Internal Control Over Compliance The management of Warren County Board of Education 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 Warren 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 certain matters involving the internal control over compliance and its operation that we consider to be reportable conditions. 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 Warren County Board of Education's ability to administer a major Federal program in accordance with applicable requirements oflaws, regulations, contracts and grants. Reportable conditions are described in the accompanying Schedule ofFindings and Questioned Costs as items FA-7491-04-01, FA-7491-04-02, FA-7491-04-03 and FA-7491-0404. A material weakness is a reportable condition in which the design or operation of one or more ofthe internal control components does not reduce to a relatively low level ofrisk that noncompliance with the applicable requirements of laws, regulations, contracts and grants caused by error or fraud 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 ofthe 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, of the reportable conditions described above, we consider item FA-7491-04-01 to be a material weakness. 2004SA-65 This report is intended solely for the information and use of the management, members of the Warren County Board of Education, 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, ~ w...J.-k Russell W. Hinton State Auditor RWH:gp 2004SA-65 SECTION III AUDITEE'S RESPONSE TO PRIOR YEAR FINDINGS AND QUESTIONED COSTS WARREN COUNTY BOARD OF EDUCATION AUDITEE'S RESPONSE SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2004 PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS FINDING CONTROL NUMBER AND STATUS FS-7491-01-03 FS-7491-01-04 FS-7491-02-01 FS-7491-03-01 FS-7491-03-02 FS-7491-03-03 FS-7491-03-04 Further Action Not Warranted Unresolved - See Corrective Action/Responses Further Action Not Warranted Unresolved - See Corrective Action/Responses Unresolved - See Corrective Action/Responses Previously Reported Corrective Action Implemented Unresolved - See Corrective Action/Responses CORRECTIVE ACTION/RESPONSES EMPLOYEE COMPENSATION Payroll Reporting Amount: $8,404.21 Finding Control Number: FS-7491-01-04 We concur with finding. All efforts are being made to catch this type of error. BUDGET PREPARATION/EXECUTION Deficit Fund Balance Finding Control Number: FS-7491-03-01 We agree with this finding. All efforts are being made to balance the budget. CASH AND CASH EQUIVALENTS GENERAL LEDGER Inadequate Internal Control Procedures Finding Control Number: FS-7491-03-02 We agree with this finding. EMPLOYEE COMPENSATION Payroll Reporting Amount: $6,148.21 Finding Control Number: FS-7491-03-04 We agree with this finding. All efforts are being made to prevent payroll errors. - 1- WARREN COUNTY BOARD OF EDUCATION AUDITEE'S RESPONSE SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2004 PRIOR YEAR FEDERAL AWARD FINDINGS AND QUESTIONED COSTS FINDING CONTROL NUMBER AND STATUS FA-7491-03-01 Previously Reported Corrective Action Implemented -2- SECTION IV FINDINGS AND QUESTIONED COSTS WARREN COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2004 I SUMMARY OF AUDITOR'S RESULTS 1. Type of Report Issued on the Financial Statements The auditor's opinion on the Warren 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 Warren County Board of Education disclosed financial statement reportable conditions related to the following control categories. Cash and Cash Equivalents Revenues/Receivables/Receipts General Ledger Expenditures/Liabilities/Disbursements Employee Compensation Budget Preparation/Execution Of the reportable conditions described above, Cash and Cash Equivalents, Revenues/ Receivables/Receipts, Expenditures/Liabilities/Disbursements and General Ledger are considered to be material weaknesses. 3. Noncompliance Material to the Financial Statements The audit of the Warren County Board of Education disclosed no instances of noncompliance that were deemed to be material to the financial statements. 4. Reportable Conditions in Internal Control Over Major Programs The audit report for the Warren County Board ofEducation disclosed reportable conditions in internal control over major programs for the following compliance requirements. Allowable Costs/Cost Principles Cash Management Special Tests and Provisions Ofthe reportable conditions described above, Allowable Costs/Cost Principles is considered to be a material weakness. 5. Type of Report Issued on Compliance for Major Programs The auditor's opinion on the Warren County Board ofEducation's report on compliance with requirements applicable to major programs was qualified. 6. Audit Findings Required to be Reported by Section .5 IO(a) of 0MB Circular A-133 The Warren County Board of Education's audit disclosed audit findings required to be reported by section .510(a) of 0MB Circular A-133. These audit findings are included in section IV of this report. -I - WARREN COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2004 I SUMMARY OF AUDITOR'S RESULTS 7. Major Programs Federal awards audited as major programs are as follows: 10.553 Food Services - School Breakfast Program 10.555 Food Services - National School Lunch Program 84.010 Title I Grants to Local Educational Agencies 84.338 Reading Excellence - Local Reading Improvement 8. Type "A" Program Dollar Threshold The dollar threshold for type "A" programs was $300,000. 9. Low Risk Auditee The Warren County Board of Education did not qualify as a low risk auditee as defined by Section .530 of 0MB Circular A-133. II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS BOARD MEETINGS Board Meeting Minutes Exceptions Nonmaterial Noncompliance Finding Control Number: FS-7491-04-01 An examination of the minutes of the regular and called meetings of the Warren County Board of Education for the year under review revealed that the minutes from five meetings could not be provided. The Official Code of Georgia Annotated Section 20-2-57(a) states in part: "The superintendent or the board's nominee shall record in a book, to be provided for the purpose, all official proceedings ofthe local board, which shall be a public record open to the inspection of any person interested therein; and all such proceedings, when so recorded, shall be signed by the chairperson and countersigned by the secretary." This condition was a result of the School District's disregard for the specific requirements of the Official Code of Georgia Annotated Section 20-2-57(a). The School District should implement procedures to ensure that all minutes are properly recorded and documented as required. -2- WARREN COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2004 II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS BUDGET PREPARATION/EXECUTION Deficit Fund Balance Reportable Condition Finding Control Number: FS-7491-04-02 At June 30, 2004, the General Fund ofthe Warren County Board ofEducation reported a deficit fund balance in the amount of $1,291,433, which is considered to be an irregularity in accordance with O.C.G.A. 20-2-67. This condition occurred because management approved expenditures in excess offunds available in the General Fund. The School District should establish appropriate policies and procedures designed to ensure that in future periods the School District does not report a deficit. CASH AND CASH EQUIVALENTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Control Procedures Reportable Condition - Material Weakness Finding Control Number: FS-7491-04-03 A review of the School District's internal control policies and procedures noted deficiencies in providing for adequate internal control over the control categories as noted below: CASH AND CASH EQUIVALENTS The bank reconciliation function was not separated from the record keeping, check preparation, and deposit functions. No administrative review was performed to determine that bank reconciliations were correct and that all required adjustments had been made. The bank reconciliation for the operating account and school activity accounts included unidentified reconciling amounts of $18,230 and $5,206, respectively, at June 30, 2004. REVENUES/RECEIVABLES/RECEIPTS The deposit preparation function was not separated from the record keeping and cash custody functions. Our examination of the principals' accounts disclosed that based on a review of 15 receipts, the School District was unable to provide supporting documentation to ensure that receipts were deposited to the bank account in a timely manner, posted to the proper account or the amount deposited was correct. -3 - WARREN COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2004 II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS CASH AND CASH EQUIVALENTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Control Procedures Reportable Condition - Material Weakness Finding Control Number: FS-7491-04-03 EXPENDITURES/LIABILITIES/DISBURSEMENTS The check writing function was not separated from record keeping or processing of signed checks. Our examination ofthe principals' accounts disclosed that based on a review of 15 items, six had no documentation indicating prior approval ofpurchases included with voucher packets, three had no supporting documentation, three had a check date that preceded the requisition date and one had supporting documentation that did not agree with the check amount. Separation of duties involving key accounting functions is the basis ofachieving an adequate system of internal control. These deficiencies were a result ofmanagement's decision to limit the number of administrative staffmade responsible for accounting functions at each location. Management should periodically review this decision to determine if employee duties can be reassigned to achieve a higher degree of internal control with existing staff. Internal controls should be implemented by the School District to ensure that all bank accounts are reconciled to the general ledger. EXPENDITURES/LIABILITIES/DISBURSEMENTS Failure to Follow State Travel Regulations Reportable Condition Nonmaterial Noncompliance Finding Control Number: FS-7491-04-04 An examination of the School District's travel expenditures was performed to test the validity and accuracy ofexpenditure transactions. The School District did not comply with travel regulations of the Georgia Department of Education as set forth in the Financial Management of Georgia Local Units of Administration. In addition, the School District failed to comply with the requirements of the Georgia Department ofAudits and Accounts for reporting travel on the detail listing of salary and travel. The expenditures examined revealed the following deficiencies: Three employees were paid travel stipends in the total amount of $7,042. State travel regulations require that employees be reimbursed for actual travel expenses incurred. Travel expenses for Board Members in the amount of $2,456 are not included on the detail listing of salary and travel submitted to the Georgia Department of Audits and Accounts. -4 - WARREN COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2004 II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Failure to Follow State Travel Regulations Reportable Condition Nonmaterial Noncompliance Finding Control Number: FS-7491-04-04 These conditions resulted from the School District's failure to implement internal controls to ensure that travel expenditures are in compliance with state travel regulations and are properly reported to the Georgia Department of Audits and Accounts. Internal controls should be implemented by the School District to ensure that all travel expenditures are in compliance with state travel regulations and are properly reported. EMPLOYEE COMPENSATION Payroll Sample Exceptions Reportable Condition Amount: $6,369 Finding Control Number: FS-7491-04-05 A sample of compensation payments to 25 employees disclosed the following deficiencies in regard to the payroll process: A salary overpayment in the amount of $4,747 was made to one employee. The School District used an incorrect salary base rate in calculating pay for this individual. A salary underpayment in the amount of $1,607 was made to one employee. The School District used an incorrect salary base rate in calculating pay for this individual. A salary underpayment in the amount of $15 was made to one employee. The School District used an incorrect daily rate in calculation pay for this individual. Salary payments to Board Members in the amount of $9,287 are not included on the detail listing of salary and travel submitted to the Georgia Department of Audits and Accounts. These deficiencies were a result of management's failure to establish appropriate internal controls over the payroll process and to ensure that all compensation is reported to the Georgia Department of Audits and Accounts. Appropriate action should be taken by the School District to ensure that all personnel are paid in accordance with approved salary schedules and approved policies, and that all compensation is reported to the Georgia Department of Audits and Accounts. The School District should secure reimbursement of$4,747 for the salary overpayment from the employee involved and review the underpayments to determine ifadditional compensation is due to the employees involved. -5- WARREN COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2004 II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS EMPLOYEE COMPENSATION Inadequate Documentation Reportable Condition Amount: $85,497 Finding Control Number: FS-7491-04-06 During fiscal years 2004 and 2005, the finance officer of Warren County Board of Education received total payments of $85,497 for accumulated overtime earned during fiscal years 1996 to 2003. The School District was unable to provide the original records documenting the occurrence of such overtime. In addition, the finance officer received $4,500 in compensation from another local board of education for consulting services that appear to have been performed during normal business hours while employed by the Warren County Board ofEducation. The School District was unable to provide leave records that indicate personal leave was taken by the finance officer while performing these services. Theses deficiencies were a result of management's failure to implement adequate internal controls over the employee compensation function. Management should implement policies and procedures to ensure that all overtime pay is properly documented and employee leave records are maintained. The School District's Board should review these payments to determine if a refund of the undocumented payments is warranted. GENERAL LEDGER Inadequate Accounting Procedures Reportable Condition - Material Weakness Finding Control Number: FS-7491-04-07 An examination of the School District's internal control procedures over the journal entry function noted the following deficiencies: Journal entry documentation and descriptions were not provided for all journal entries. All journal entries were not reviewed and approved by someone independent of the general ledger journal entry function. These deficiencies were a result ofmanagement's decision to limit the number ofadministrative staff made responsible for accounting functions. Internal controls should be implemented by the School District to ensure that all journal entries are properly reviewed and documented. -6- WARREN COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2004 II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS GENERAL LEDGER Outstanding Loan Nonmaterial Noncompliance Finding Control Number: FS-7491-04-08 On December 31, 2003, the General Fund had unpaid tax anticipation notes in the amount of $760,000. Article IX, Section V, Paragraph V ofthe Constitution ofthe State ofGeorgia provides, in part, as follows: "The governing authority ofany county, municipality or other political subdivision ofthis state may incur debt by obtaining temporary loans in each year to pay expenses... Such loans shall be payable on or before December 31 of the calendar year in which such loan is made. No such loan may be obtained when there is a loan unpaid obtained in any prior year." This condition occurred because of management's failure to retire the entire loan on December 31, 2003, as required. Repayment ofloans should be made in conformity with constitutional limitations. GENERAL LEDGER Inadequate Accounting Procedures Reportable Condition Finding Control Number: FS-7491-04-09 The School District's Federal programs had deficit balances at June 30, 2004, totaling $43,514. There were no revenues or related receivables recorded for these deficit balances. This condition occurred because management failed to monitor Federal program expenditures and/or request appropriate funds from Federal agencies. The School District should implement procedures to ensure that Federal program expenditures are monitored and/or appropriate funds are requested from Federal agencies. III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS ALLOWABLE COSTS/COST PRINCIPLES Improper Expenditures Reportable Condition - Material Weakness Material Noncompliance Amount: $69,881 U.S. Department of Education Through Georgia Department of Education Finding Control Number: FA-7491-04-01 A review of the expenditures of the Reading Excellence - Local Reading Improvement Program (CFDA 84.338) revealed various charges for expendable equipment ($67,517) and math textbooks -7- WARREN COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2004 III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS ALLOWABLE COSTS/COST PRINCIPLES Improper Expenditures Reportable Condition - Material Weakness Material Noncompliance Amount: $69,881 U. S. Department of Education Through Georgia Department of Education Finding Control Number: FA-7491-04-01 ($2,364) that were not included in the approved program budget. Documentation to determine the allowability ofthese expenditures could not be provided by the School District. This condition was a result of management's failure to implement procedures to ensure that only costs that support the program are charged to the Reading Excellence - Local Reading Improvement Program. Measures need to be implemented to assure that only those costs included in an approved program budget are charged to a Federal program. Further, the Georgia Department of Education should review this matter to determine if, in line with Reading Excellence program requirements, the School District will be responsible for making a refund to Georgia Department of Education for these unallowable expenditures. CASH MANAGEMENT Excessive Cash Balances Reportable Condition U.S. Department of Education Through Georgia Department of Education Finding Control Number: FA-7491-04-02 A review of cash management procedures for the Title I Grants to Local Educational Agencies Program funds (CFDA No. 84.010) disclosed that cash draws were made in advance of immediate cash needs resulting in the accumulation ofexcessive cash balances. The Title I program maintained excessive ending monthly cash balances for six months of the year under review. This condition occurred because the School District did not have procedures in place to accurately forecast cash needs on the required "Contract Budget and Monthly Cumulative Contract Expenditure Report". Procedures should be implemented to accurately forecast cash needs based on actual expenditures incurred in order to minimize or eliminate the time elapsing between the transfer of funds from the Georgia Department ofEducation and the disbursement of such funds by the School District. -8- WARREN COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2004 III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS SPECIAL TESTS AND PROVISIONS Failure to Invite Private Schools to Participate Reportable Condition U.S. Department of Education Through Georgia Department of Education Finding Control Number: FA-7491-04-03 The School District could not provide documentation of contact with appropriate private school officials to determine whether they intended to participate in the Reading Excellence - Local Reading Improvement (CFDA 84.338) Program. This contact is required by 34 CFR 200.10 which states, in part, as follows: "An LEA may receive funds under this part only if it implements programs, activities, and procedures for the involvement ofparents ofparticipating public and private school children." This noncompliance occurred because of the Schools District's failure to monitor the Reading Excellence Program requirements as set forth in 34 CFR 200.10. Procedures should be established to ensure that all eligible private schools are invited to include their eligible students in the participation of the Reading Excellence Program as required. REPORTING Submission of Inaccurate Federal Program Completion Reports Reportable Condition Nonmaterial Noncompliance Amount: $7,921 Finding Control Number: FA-7491-04-04 An examination of the School District's compliance with Georgia Department of Education instructions and regulations for Federal Programs revealed that the School District submitted Federal program completion reports that underreported the amount ofexpenditures incurred by the Board for two Federal assistance programs. As a result, the Board failed to return unearned grant funds. An unearned balance remained at June 30, 2004, per the School District's accounting records, as follows: Special Education (CFDA 84.173) Vocational Education (CFDA 84.048) $6,921 $ 1,000 This deficiency occurred because personnel failed to accurately reflect expenditures on the completion reports and there were no procedures in place to ensure that completion reports are submitted with accurate data. -9 - WARREN COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2004 III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS REPORTING Submission oflnaccurate Federal Program Completion Reports Reportable Condition Nonmaterial Noncompliance Amount: $7,921 Finding Control Number: FA-7491-04-04 The School District should submit corrected completion reports with documentation supporting expenditures and return the unearned Federal grant funds for these two Federal programs to the Georgia Department of Education. - 10 - SECTIONV MANAGEMENT'S RESPONSES WARREN COUNTY BOARD OF EDUCATION SCHEDULE OF MANAGEMENT'S RESPONSES YEAR ENDED JUNE 30, 2004 Finding Control Number: FS-7491-04-01 We concur with this finding. The Board will ensure that all minutes are properly recorded and documented as required. Finding Control Number: FS-7491-04-02 We concur with this finding. We are in the process of trying to reduce this deficit. The millage rate was raised by two (2) mills and several teaching positions were eliminated. Finding Control Number: FS-7491-04-03 We concur with this finding. We are a small school system with very few employees at the central office. We are in the process oftrying to separate duties even more. The General Operating Account bank statement was reviewed and initialed by the Superintendent. The Debt Service and Capital Projects were not. The Superintendent will review and initial all bank statements. The Superintendent will also review and initial any adjustments needed to clear all reconciling amounts on each bank statement. We have a small staff in each of our schools. We are in the process of trying to separate duties in each school. Every month each school will submit to the finance officer a copy ofeach deposit and check that was written. This information will be entered into PC Genesis. Each month all expenditures are approved by the Board. This will allow them to see and approve all expenditures for the school accounts. The Warren County High School has a new bookkeeper and is changing the way the records are kept. Finding Control Number: FS-7491-04-04 We concur with this finding. All Board Member salary is now run through the payroll. This will allow the salary and travel to show up on the CS-1 report. Finding Control Number: FS-7491-04-05 We concur with this finding. A letter will be written to request reimbursement for the salary overpayment. Reimbursement will be made to the employees that were underpaid. The Finance Officer will implement extra checks to stop this type of error in the future. - 1- WARREN COUNTY BOARD OF EDUCATION SCHEDULE OF MANAGEMENT'S RESPONSES YEAR ENDED JUNE 30, 2004 Finding Control Number: FS-7491-04-06 We concur with this finding. Each year a cumulative form is completed with all absences listed. After this is compiled, each individual form is discarded. This would include each monthly personal leave request, sick leave form and professional leave form for each school system employee. Any time that is worked for another school system is deducted from personal leave. All of this is approved by the Superintendent. In the future each individual form will be kept until the financial audit is completed for that school year. Finding Control Number: FS-7491-04-07 We concur with this finding. All journal entries will be placed in a notebook in numerical order. Each one is signed by the Superintendent. Finding Control Number: FS-7491-04-08 We concur with this finding. Due to the financial status of the school system we were unable to retire the loan by December 31s1, All loans are currently paid in full. Finding Control Number: FS-7491-04-09 We concur with this finding. At year end the general fund will transfer fund to any program that has a deficit balance. Finding Control Number: FA-7491-04-01 We concur with this finding. All efforts are being made to ensure that proper expenditures and purchase are being made from all grants and programs. Finding Control Number: FA-7491-04-02 We concur with this finding. All efforts are being made to ensure that the correct amount ofrevenue is drawn that is needed. Finding Control Number: FA-7491-04-03 We concur with this finding. All efforts are being made to ensure that all Federal Programs will be included in the private school letter. -2- WARREN COUNTY BOARD OF EDUCATION SCHEDULE OF MANAGEMENT'S RESPONSES YEAR ENDED JUNE 30, 2004 Finding Control Number: FA-7491-04-04 We concur with this finding. All efforts are being made to accurately report expenditures on completion reports. Any unexpended funds will be returned to the Georgia Department of Education. Contact Person: Fran Hutcheson, Finance Officer Phone: (706) 465-3383 Ext. 303 Fax Number: (706) 465-9141 E-mail Address: fhutches@doe.kl2.ga.us -3 -