White County Board of Education, Cleveland, Georgia, report on audit of the financial statements for the fiscal year ended June 30, 2004

WHITE COUNTY BOARD OF EDUCATION
CLEVELAND, 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

WHITE 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

I

NOTES TO THE BASIC FINANCIAL STATEMENTS

13

SCHEDULES

REQUIRED SUPPLEMENTARY INFORMATION

1 SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES

IN FUND BALANCES - BUDGET AND ACTUAL

GENERAL FUND

27

WHITE COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS -

SECTION I

FINANCIAL

SCHEDULES

SUPPLEMENTARY INFORMATION

2 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS

28

3 SCHEDULE OF STATE REVENUE

30

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

WHITE COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS -
SECTION IV FINDINGS AND QUESTIONED COSTS SCHEDULE OF FINDINGS AND QUESTIONED COSTS
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
254 Washington Street, S.W., Suite 214 Atlanta, Georgia 30334-8400
March 15, 2005

Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the White 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 White 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 of the White County Board of Education's management. Our responsibility is to express opinions on these financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United States ofAmerica and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General ofthe United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free ofmaterial misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opm10ns.
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 of the White County Board of Education, as of June 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

In accordance with Government Auditing Standards, we have also issued our report dated March 15, 2005, on our consideration ofthe White 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 viii and page 27 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 ofAmerica. 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 White 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.
A copy ofthis report has been filed as a permanent record in the office ofthe State Auditor and made available to the press ofthe State, as provided for by Official Code ofGeorgia Annotated section 506-24.
Respectfully submitted,

RWH:as 2004ARL-11

State Auditor

WHITE COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2004
INTRODUCTION
Our discussion and analysis of the White County School District's financial performance provides an overview 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 notes to the basic financial statements and 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:
On the District-wide financial statements, the assets of the School District exceeded liabilities by $31.2 million. Of this amount, $3.3 million is unrestricted and is available for spending at the School District's discretion.
The School District had $29.9 million in expenses relating to governmental activities; only $18.4 million of these expenses are offset by program specific charges for services, grants and contributions. General revenues (primarily property and sales taxes) of $14.6 million were adequate to provide for these programs.
As stated above, general revenues accounted for $14.6 million or 44% of all revenues totaling $33 million. Program specific revenues in the form of charges for services, grants and contributions accounted for the rest.
OVERVIEW OF THE FINANCIAL STATEMENTS
This annual report consists of three parts; management's discussion and analysis, the basic financial statements and required supplementary information. The basic financial statements include two levels of statements that present different views of the School District. These include the District-wide and fund financial statements.
The District-wide financial statements include the Statement of Net Assets and Statement of Activities. These statements provide information about the activities of the School District presenting both short-term and long-term information about the School District's overall financial status.
The fund financial statements focus on individual parts of the School District, reporting the School District's operation in more detail. The Governmental Funds statements disclose how basic services are financed in the short-term as well as what remains for future spending. The Fiduciary Funds statements provide information about the financial relationships in which the School District acts solely as a trustee or agent for the benefit of others. The fund financial statements reflect the School District's most significant funds. In the case of the White County School District, the General Fund, District-wide Capital Projects Fund, and Debt Service Fund are the most significant funds.
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WHITE COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2004
The financial statements also include notes that explain some of the information in the statements and provide more detailed data. The statements are followed by a section of required supplementary information that further explains and supports the financial statements. Additionally, other supplementary information (not required) is also presented that further supplements understanding of the financial statements.
District-wide Statements
The District-wide financial statements are basically a consolidation of all of the School District's operating funds into one column called governmental activities. In reviewing the District-wide financial statements, a reader might ask the question, are we in a better financial position than last year? The Statement of Net Assets and the Statement of Activities provides the basis for answering this question. These financial statements include all School District's assets and liabilities and uses the accrual basis of accounting similar to the accounting used by most private-sector companies. This basis of accounting takes into account all of the current year's revenues and expenses regardless of when cash is received or paid.
These two statements report the School District's net assets and any changes in those assets. The change in net assets is important because it tells the reader that, 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 results of many factors, including those not under the School District's control, such as the property tax base, facility conditions, required educational programs and other factors.
The Statement of Net Assets and the Statement of Activities reflects the School District's governmental activities.
Fund Financial Statements
The School District uses many funds to account for a multitude of financial transactions during the fiscal year. However, the fund financial statements presented in this report provide detail information about only the School District's significant or major funds.
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 spending in future periods. These funds are reported using the modified accrual method of accounting which measures cash and all other financial assets that can readily be 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 determine whether there are more or fewer financial resources that can be spent in the near future to finance educational programs. The differences between governmental activities (reported in the Statement of Net Assets and the Statement of Activities) and governmental funds are reconciled to the financial statements.
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WHITE COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2004

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

FINANCIAL ANALYSIS OF THE SCHOOL DISTRICT AS A WHOLE

Recall that the Statement of Net Assets provides the perspective of the School District as a whole. Table 1 provides a summary of the School District's net assets for this fiscal year. Net asset comparisons to fiscal year 2003 are available and have been included in the following analysis.

Table 1 Net Assets

Governmental Activities

Fiscal

Fiscal

Year 2004 Year 2003

Assets Current and Other Assets Capital Assets, Net

$ 10,798,723 $ 15,010,586 36,730,748 33,181,410

Total Assets

$ 47,529,471 $48,191,996

Liabilities Current and Other Liabilities Long-Term Liabilities

$ 3,338,402 $ 3,577,609 13,000,000 16,540,000

Total Liabilities

$ 16,338,402 $ 20,117,609

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

$24,774,301 $21,766,520

3,066,870 4,358,804

3,349,898

1,949,063

Total Net Assets

$31,191,069 $ 28,074,387

Table 2 shows the Change in Net Assets for this fiscal year. Revenue and Expense comparisons to fiscal year 2003 are available and are included in the following analysis.

- 111 -

WHITE COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2004

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 For Maintenance and Operations For Debt Service Sales Taxes Special Purpose Local Option Sales Tax For Debt Service For Capital Projects Intangible Recording Tax Real Estate Grants and Contributions not Restricted to Specific Programs Investment Earnings Miscellaneous
Special Items Gain on Sale of Land
Total General Revenues and Special Items
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 Sup1>0rt Services Operations of Non-Instructional Services Enterprise Operations Food Services Interest on Short-Term and Long-Term Debt
Total Expenses
Increase in Net Assets

Governmental Activities

Fiscal

Fiscal

Year 2004

Year 2003

$ 1,285,624 16,714,306 385,944
$ 18,385,874

$ 838,594 16,730,193 2,399,262
$ 19,968,049

$ 9,797,503 $ 8,952,697

295,954

290,032

2,378,886 329,561 476,610 38,067
498,716 138,202 590,411
93,042
$ 14,636,952
$ 33,022,826

2,311,034 210,411 452,736 76,344
196,869 351,798 1,044,756
$ 13,886,677
$ 33,854,726

$19,449,755
1,069,981 628,827 687,344 451,281
1,622,816 182,608
1,823,750 1,223,470
170,862 131,005
386,835 1,548,346
529,264
$29,906,144
$ 3!116!682

$19,392,116
1,042,641 720,890 657,891 385,897
1,618,026 196,493
1,832,660 1,251,955
161,370 190,055
97,365 1,559,414 1,100,123
$ 30,206,896
$ 3!647!830

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WHITE COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2004

Governmental Activities

The Statement of Activities shows the cost of program services and the charges for services and grants offsetting these services. Table 3 shows, for governmental activities, the total cost of services and the net cost of services. Net cost of services can be defined as the total cost less fees generated by the activities and intergovernmental revenue provided for specific programs. The net cost reflects the financial burden on the School District's taxpayers by each activity. Cost of service comparisons to fiscal year 2003 are available and have been included in the following analysis.

Table 3 Governmental Activities

Total Cost of Services

Fiscal

Fiscal

Year 2004 Year 2003

Net Cost of Services

Fiscal

Fiscal

Year 2004 Year 2003

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

$19,449,755 $19,392,116 $

1,069,981 628,827 687,344 451,281
1,622,816 182,608
1,823,750 1,223,470
170,862 131,005

1,042,641 720,890 657,891 385,897
1,618,026 196,493
1,832,660 1,251,955
161,370 190,055

386,835 1,548,346
529,264

97,365 1,559,414 1,100,123

6,589,505 $
399,047 461,503 297,159 400,285 1,040,487 182,608 921,619 588,043 170,862 109,148
-29, 132 -140,128 529,264

5,211,647
650,777 486,568 348,311 337,691 1,068,185 193,663 929,958 114,501 -265,296 143,946
-2,841 -78,386 1,100,123

Total Expenses

$ 29,906.144 $ 30,206,896 $ 11,520.270 $ 10.238.847

FINANCIAL ANALYSIS OF THE SCHOOL DISTRICT'S FUNDS

The School District's governmental funds are accounted for using the modified accrual basis of accounting. The governmental funds had total revenues, special items and other financing sources of $33.5 million and total expenditures and other financing uses of $37.5 million.

General Fund Budgeting Highlights

The School District's budget is prepared according to Georgia Law. The most significant budgeted fund is the General Fund. During the course of fiscal year 2004, the School District amended its general fund budget as needed.

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WHITE COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2004

For the General Fund, the final actual revenues and other financing sources of $29.8 million exceeded the original budgeted amounts of $28.7 million by $1.1 million. The significant changes (final actual vs. original budget) were the additional austerity reduction of $0.324 million added after the budget was submitted, $0.83 million contribution from a private source, and additional $0.462 million for intangible taxes and the school activity revenues of $0.969 million that were not budgeted.

The actual revenues and other financing sources of $29.8 million exceeded the final budgeted amounts of $28.6 million by $1.2 million. This difference is due primarily to the $0.969 million in school activity budgets not budgeted and from the discussion above.

The final actual expenditures of $29.1 million agreed to the original budgeted amount of $29.1 million. School activity accounts expenses of $0.954 million were not included in the original budget. The School District and Administration froze spending at the January Board meeting. This saved the district $0.950 million in expenses.

The final actual expenditures of $29.1 million exceeded the final budgeted amount of $28.9 million by $0.2 million. School activity accounts budgeted expenditures of $0.954 million were not included in the final budget. Again, the School District saved $0.686 million through the spending freeze in this comparison.

CAPITAL ASSETS AND DEBT ADMINISTRATION

Capital Assets

At fiscal year ended June 30, 2004, the School District had $36.7 million invested in capital assets, all in governmental activities. Table 4 reflects a summary of these balances by category and accumulated depreciation. Capital assets comparisons to fiscal year 2003 are available and have been included in the following analysis.

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

Governmental Activities

Fiscal

Fiscal

Year 2004 Year 2003

Land Construction in Progress Buildings and Building Improvements Equipment Land Improvements

$ 2,021,886 871,420
30,249,743 2,561,530 1,026,169

$ 2,260,994 6,174,228
21,418,381 2,463,220 864,587

Total

$36,730.748 $ 33,181.410

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WHITE COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2004

Due to the ongoing growth in the county, the School District has construction projects including new buildings, additions and renovations.

Debt

At fiscal year ended June 30, 2004, the School District had $13 million in bonds outstanding. Table 5 summarizes the School District's debt for general obligation bonds.

Table 5 Debt at June 30

Governmental Activities

Fiscal

Fiscal

Year 2004 Year 2003

Bonds Payable

$ 13,000,000 $ 16,540,000

CURRENT ISSUES

Currently known facts, decisions or conditions that are expected to have a significant effect on financial positions or results of operations.

Economic Slowdown - State funding for education has been stagnant and as a result more pressure is being placed on the local school districts to prioritize its educational programs and provide additional local funding. Additional costs to the School District will be required with the continued implementation of House Bill 1187, which mandates lower teacher to student ratios, requiring additional teachers and additional classrooms. Despite these challenges, the White County School District is strong financially and we remain optimistic about the ability of the School District to maximize all of the financial resources to provide a quality education to our students.

Capital Improvements - The School District plans capital improvements as future capital needs arise due to increased student population and facility repair and maintenance needs. Specific capital expenditure plans are formalized in conjunction with individual general obligation bond issues and anticipated annual receipts of capital outlay funds from the State of Georgia Department of Education. The School District regularly monitors anticipated capital outlay needs.

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WHITE COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2004 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 show the School District's accountability for the money it receives. If you have questions about this report or need additional financial information, contact Mr. Tom McLean, Finance Director at White County School District, 113 North Brooks Street, Cleveland, Georgia 30528. Mailing address is same as above. You may also email your question to Mr. McLean at tmc1ean@white.k12.ga.us
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WHITE COUNTY BOARD OF EDUCATION

WHITE COUNTY BOARD OF EDUCATION STATEMENT OF NET ASSETS JUNE 30. 2004
ASSETS
Cash and Cash Equivalents Accounts Receivable, Net
Taxes State Government Federal Government Inventories Capital Assets Land Construction in Progress Land Improvements Buildings Equipment Less: Accumulated Depreciation
Total Assets
LIABILITIES
Accounts Payable Salaries Payable Contracts 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
Continuation of Federal Programs Debt Service Capital Projects Unrestricted
Total Net Assets
Total Liabilities and Net Assets

EXHIBIT"A"

GOVERNMENTAL ACTIVITIES

$

7,988,799

772,751 1,905,329
75,098 56,746

2,021,886 871,420
2,615,610 33,968,230
6,245,527 -8,991,925

$ ===4=7=5=2=9=4=71=

$

681,873

2,464,532

29,612

162,385

2,240,000 10,760,000

$

16,338,402

$

24,774,301

563,390 2,014,835
488,645 3,349,898

$

31 191 069

$ ===4==7=,5=2=9=,4=71=

The notes to the basic financial statements are an integral part of this statement. -3-

WHITE COUNTY BOARD OF EDUCATION STATEMENT OF ACTIVITIES
FOR THE YEAR ENDED JUNE 30. 2004

GOVERNMENTAL ACTIVITIES
Instruction Support Services
Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Operations of Non-Instructional Services Enterprise Operations Food Services Interest on Short-Term and Long-Term Debt
Total Governmental Activities
General Revenues Taxes Property Taxes For Maintenance and Operations For Debt Services Sales Taxes Special Purpose Local Option Sales Tax For Debt Services For Capital Projects Intangible Recording Tax Real Estate Grants and Contributions not Restricted to Specific Programs Investment Earnings Miscellaneous
Special Items Gain on Sale of Land
Total General Revenues and Special Items
Change in Net Assets
Net Assets - Beginning of Year
Net Assets - End of Year

EXPENSES

CHARGES FOR SERVICES

$

19,449,755 $

1,069,981 628,827 687,344 451,281
1,622,816 182,608
1,823,750 1,223,470
170,862 131,005

386,835 1,548,346
529,264

$

29,906,144 $

112,305
415,967 757,352 1,285,624

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

$

12,502,923 $

659,101 167,305 390,185 50,996 582,329

901,967 516,034

21,857

921,609

$

16 714 306 $

245,022 $ 11,833 19
164 119,393
9,513 385 944 $

-6,589,505
-399,047 -461,503 -297,159 -400,285 -1,040,487 -182,608 -921,619 -588,043 -170,862 -109, 148
29,132 140,128 -529 264
-11,520,270

$

9,797,503

295,954

2,378,886 329,561 476,610 38,067 498,716 138,202 590,411

93,042

$

14,636,952

$

3,116,682

28,074,387

$ ===3=1='1=9=1,=06=9=

-5-

WHITE COUNTY BOARD OF EDUCATION BALANCE SHEET
GOVERNMENTAL FUNDS JUNE 30. 2004

EXHIBIT"C"

ASSETS
Cash and Cash Equivalents Accounts Receivable, Net
Taxes State Government Federal Government Inventories

GENERAL FUND

DISTRICTWIDE
CAPITAL PROJECTS
FUND

DEBT SERVICE
FUND

TOTAL

$ 4,965,083 $ 1,490,073 $ 1,533,643 $

286,358 1,905,329
75,098 56 746

480,186

7,988,799
766,544 1,905,329
75,098 56,746

Total Assets

$

7,288,614 $

1,490,073 $

2,013,829 $ ======1o=1, =9=2'=5=16=

LIABILITIES AND FUND BALANCES
LIABILITIES
Accounts Payable Salaries Payable Contracts Payable Deposits and Deferred Revenue
Total Liabilities
FUND BALANCES
Reserved for: Continuation of Federal Programs Debt Service Inventories Capital Projects
Unreserved Undesignated Reported in: General Fund Capital Projects
Total Fund Balances

$

681,873

2,464,532

$

162,385

$ 3,308,790 $

$

506,644

56,746 $

3,416,434

$ 3,979,824 $

29,612 29,612
$ 752,740 707 721 1,460,461 $

$ $ $ 2,013,829
2,013,829 $

681,873 2,464,532
29,612 162,385
3,338,402
506,644 2,013,829
56,746 752,740
3,416,434 707 721
7,454,114

Total Liabilities and Fund Balances

$ 7,288,614 $ 1,490,073 $ 2,013,829 $ ===1=0=,7=9=2,=51=6=

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

WHITE 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")

$

7,454,114

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

Capital Assets used in Governmental Activities are not financial resources and therefore are not reported in the funds. These assets consist of:

Land Construction in Progress Land Improvements Buildings Equipment Accumulated Depreciation
Total Capital Assets

$ 2,021,886 871,420
2,615,610 33,968,230
6,245,527 -8,991,925

36,730,748

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.

6,207

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

-13,000,000

Net Assets of Governmental Activities (Exhibit "A")

$ 31,191,069

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

WHITE 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 Enterprise Operations 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)
SPECIAL ITEMS
Proceeds from Sale of Land
Net Change in Fund Balances
Fund Balances - Beginning
Fund Balances - Ending

GENERAL FUND

DISTRICTWIDE
CAPITAL PROJECTS
FUND

DEBT SERVICE
FUND

TOTAL

$ 9.839,738 500,197 $
14,849,546 2,375,574 952,419 70,827 980 177
$ 29,568,478 $

$ 329,561 266,551

297,191 $ 2,393,366

44,570 50 734

22,805

691416 $ 2,713,362 $

10,136,929 3,223,124
15,116,097 2,375,574 952,419 138,202 1 030 911
32,973,256

$ 19,081,861

$ 19,081,861

1,428,584 628,782 687,344 451,281
1,622,816 181,495
1,823,359 1,292,255
170,862 131,005
76,232 1,525,648
$

$ 4,062,689

1,113

1,428,584 628,782 687,344 451,281
1,622,816 182,608
1,823,359 1,292,255
170,862 131,005
76,232 1,525,648 4,062,689

3,540,000 529,264

3,540,000 529 264

$ 29,101,524 $ 4,062,689 $ 4,070,377 $ 37,234,590

$

466 954 $ -3,371,273 $ -1,357,015 $ -4,261,334

$

240,000

$ -240 000

$

240,000 $ -240,000

$

240,000

-240 000

$

0

$

332.150

$

332 150

$

706,954 $ -3,279, 123 $ -1,357,015 $ -3,929, 184

3,272,870

4 739 584

3 370 844

11,383,298

$ 3,979,824 $ 1,460,461 $ 2,013,829 $

7454114

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

WHITE 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"

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.
In the Statement of Activities, only the gain on the sale of the land is reported, whereas in the Governmental Funds, the entire proceeds from the sale increase financial resources. Thus, the change in net assets differs from the change in fund balances by the cost of the land sold.
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
Change in Net Assets of Governmental Activities (Exhibit "8")

$ -3,929,184

$ 4,307,009 -518,563

3,788,446 -43,472

-239,108

3,540,000 $ ===='3,=11=6,..,6=8=2

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

WHITE 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 Funds Held for Others
NET ASSETS Held in Trust for Private Purposes
Total Liabilities and Net Assets

PRIVATE PURPOSE TRUSTS

AGENCY FUNDS

$

11,188 $

77,122

23,518

$

34 706 $ ==.;.77~12~2=

$

77,122

$ _ _-=.34...:..i..:...;70=-:6:....

$

34 706 $ ===7::!7'=12=2=

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

WHITE COUNTY BOARD OF EDUCATION STATEMENT OF CHANGES IN FIDUCIARY NET ASSETS
FIDUCIARY FUNDS YEAR ENDED JUNE 30, 2004

EXHIBIT"H"

ADDITIONS Contributions Donors Investment Earnings Interest Total Additions
DEDUCTIONS Scholarships Change in Net Assets
Net Assets - Beginning
Net Assets - Ending

PRIVATE PURPOSE TRUSTS

$

4,679

209

$

4,888

2,500

$

2,388

32,318

$ ===34='=70=6=

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

WHITE 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 White 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 of all the organizations that compose its legal entity.
Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The School District's basic financial statements are collectively comprised of the District-wide financial statements, fund financial statements and notes to the basic financial statements of the White 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.
The School District reports the following major governmental funds:
- 13 -

WHITE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2004

EXHIBIT "I"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
General Fund is the School District's primary operating fund. It accounts for all financial resources ofthe School District, except those resources required to be accounted for in another fund.
District-wide Capital Projects Fund accounts for financial resources including Bond Proceeds, grants from Georgia State Financing and Investment Commission and Special Purpose Local Option Sales Tax proceeds 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 trust arrangements under which principal is to be invested and preserved intact with the resultant income to be used to provide awards or scholarships.
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 ofwhen 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
- 14 -

WHITE 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.
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 of deposit) 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,

- 15 -

WHITE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2004

EXHIBIT "I"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(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 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 White County Board of Commissioners fixed the property tax levy for the 2003 tax digest year (calendar year) on October 14, 2003 (levy date). Taxes were due on December 22, 2003 (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 White 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 $9,839,738 and for school bonds amounted to $297,191.

Tax millage rates levied for the 2003 tax year (calendar year) for the White County Board of Education were as follows (a mill equals $1 per thousand dollars of assessed value):

School Operations School Bonds

13.8 mills _A mills

14.2 mills

SALES TAXES

Special Purpose Local Option Sales Tax, at the fund reporting level, during the year amounted to $2,708,447 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.

- 16 -

WHITE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2004

EXHIBIT "I"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

INVENTORIES

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

CAPITAL ASSETS

Capital assets purchased, including capital outlay costs, are recorded as expenditures in the fund financial statements at the time 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

Any Amount $5,000 or more $5,000 or more $5,000 or more

NIA 20 years up to 80 years 5 to 20 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. In addition, general obligation bonds have been

- 17 -

WHITE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2004

EXHIBIT "I"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
issued to refund existing general obligation bonds. General obligation bonds are direct obligations and pledge the full faith and credit of the government. The outstanding amount of these bonds is recorded in the Statement of Net Assets.
Note 3: DEPOSITS
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. Ifa 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 of the 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.
- 18 -

WHITE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2004

EXHIBIT"!"

Note 3: DEPOSITS

CATEGORIZATION OF DEPOSITS At June 30, 2004, the bank balances were $8,636,803. The amounts of the total bank balances are classified into three categories of credit risk:

Category 1 - Cash that is insured (e.g., Federal depository insurance) or collateralized with securities held by the School District or by the School District's agent in the School District's name.
Category 2 - Cash collateralized with securities held by the pledging financial institution's trust department or agent in the School District's name.
Category 3 - Uncollateralized deposits. (This includes any bank balance that is collateralized with securities held by the pledging financial institution, or by its trust department or agent but not in the School District's name.)

The School District's deposits are classified by risk category at June 30, 2004, as follows:

Risk Category

Bank Balance

1

$ 1,462,480

2

0

3

7,174,323

Total

$ 8,636.803

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:

- 19 -

WHITE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2004

EXHIBIT "I"

Note 5: CAPITAL ASSETS

Balances July 1, 2003

Increases

Balances Decreases June 30, 2004

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

$ 2,260,994

$ 239,108 $ 2,021,886

6,174,228 $ 3,744,654

9,047,462

871,420

Total Capital Assets Not Being Depreciated $ 8,435,222 $ 3,744,654 $ 9,286,570 $ 2,893,306

Capital Assets Being Depreciated Buildings and Improvements Equipment Land Improvements

$ 24,920,768 $ 5,905,544 2,393,238

9,047,462 $ 339,983 222,372

0 $ 33,968,230 6,245,527 2,615,610

Less Accumulated Depreciation for: Buildings and Improvements Equipment Land Improvements

3,502,387 3,442,324 1,528,651

216,100 241,673
60,790

3,718,487 3,683,997 1,589,441

Total Capital Assets, Being Depreciated, Net $ 24,746,188 $ 9,091,254 $

0 $ 33,837,442

Governmental Activity Capital Assets - Net $ 33,181,410 $ 12,835.908 $ 9,286.570 $ 36,730.748

Current year depreciation expense by function is as follows:

Instruction Support Services
Pupil Services Improvements of Instructional Services Maintenance and Operation of Plant Student Transportation Services Food Services

$ 389,955

$

23,020

37

319

86,724

110,100 18,508

Note 6: RESTRICTED ASSETS

$====5==18-,5'="6="=3

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 statutory provisions. Restricted assets at June 30, 2004, were as follows:

- 20-

WHITE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2004

EXHIBIT "I"

Note 6: RESTRICTED ASSETS

District-wide Capital Projects

Bond

SPLOST

Proceeds

Debt Service Funds

Restricted Cash and Cash Equivalents: Debt Services Capital Acquisitions

$ 1,533,643 $ 105,811 $ 676,541

Note 7: INTERFUND TRANSFERS

Interfund transfers for the year ended June 30, 2004, consisted of the following:

Transfer to

Transfers From District-wide
Capital Projects

General Fund

$==2===40=-,o==o==o

Transfers are used to move unused local funding in the District-wide Capital Projects, for unrestricted local projects, back to the General fund for instructional use.

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 participates in the Georgia School Boards Association Risk and Insurance Management System, a public entity risk pool organized on July 1, 1994, to develop and administer a plan to reduce risk of loss on account of general liability, motor vehicle liability, or property damage, including safety engineering and other loss prevention and control techniques, and to administer one or more groups of self-insurance funds, including the processing and defense of claims brought against members ofthe system. The School District pays an annual premium to the system for its general insurance coverage. Additional coverage is provided through agreements by the system with other companies according to their specialty for property, boiler and machinery (including coverage for flood and earthquake), general liability (including coverage for sexual harassment, molestation and abuse) and automobile risks. Payment of excess insurance for the system varies by line of coverage.

- 21 -

WHITE 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:

Beginning of Year Liability

Claims and Changes in Estimates

Claims Paid

End ofYear Liability

2003 2004

$

0 $

4 676 $

4 676 $

0

$

0 $

3 000 $

3 000 $

0

The School District participates in the Georgia School Boards Association Workers' Compensation Fund, a public entity risk pool organized on July 1, 1992, to develop, implement, and administer a program ofworkers' compensation self-insurance for its member organizations. The School District pays an annual premium to the Fund for its general insurance coverage. Additional insurance coverage is provided through an agreement by the Fund with the Safety National Casualty Corporation to provide coverage for potential losses sustained by the Fund in excess of $400,000 loss per occurrence, up to $1,000,000.

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

Position Covered

Amount

Superintendent All Employees

$

50,000

$ 100,000

Note 9: LONG-TERM DEBT

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

Purpose

Interest Rates

Amount

General Government - Series 2001 General Government - Refunding - Series 2003

4.05% 2.90%

$ 7,520,000 5,480,000

$ 13,000.000

The changes in Long-Term Debt during the fiscal year ended June 30, 2004, were as follows:

- 22-

WHITE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2004

EXHIBIT "I"

Note 9: LONG-TERM DEBT

Governmental Funds General
Obligation Bonds

Balance July 1, 2003

$ 16,540,000

Deductions Debt Retired

3,540,000

Balance June 30, 2004

$ 13,000,000

Portion of Long-Term Debt Due within One Year

$ 2,240,000

At June 30, 2004, payments due by fiscal year which includes principal and interest for these items are as follows:

Fiscal Year Ended June 30

General Obligation

Debt

Principal

Interest

2005 2006 2007 2008 2009 2010 - 2014

$ 2,240,000 $ 2,325,000 2,420,000 2,515,000 535,000 2,965,000

456,665 371,133 282,257 189,838 93,742 220,037

Total Principal and Interest

$ 13,000,000 $ 1,613,672

Note 10: ON-BEHALF PAYMENTS

The School District has recognized revenues and costs in the amount of $282,672 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 $280,602

- 23 -

WHITE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2004

EXHIBIT "I"

Note 10: ON-BEHALF PAYMENTS

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 $2,070

Note 11: SIGNIFICANT COMMITMENTS

The following is an analysis ofsignificant outstanding construction or renovation contracts executed by the School District as of June 30, 2004:

Project

Unearned Executed Contracts

Ninth Grade Academy

$==2==79-,2=4==2

The amount described in this note is not reflected in the basic financial statements.

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.

The School District is a defendant in various legal proceedings pertaining to matters incidental to the performance ofroutine School District operations. The ultimate disposition ofthese proceedings is not presently determinable, but is not believed to be material to the basic financial statements.

Note 13: 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.

- 24-

WHITE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2004

EXHIBIT "I"

Note 13: RETIREMENT PLANS

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%

$ 1,486,790 $ 1,444,790 $ 1,304,224

- 25 -

WHITE 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 Enterprise Operations Food Services Operation
Total Expenditures
Excess of Revenues over (under) Expenditures
OTHER FINANCING SOURCES {USES)
Other Sources Other Uses
Total Other Financing Sources (Uses)
Net Change in Fund Balances
Fund Balances - Beginning

NONAPPROPRIATED BUDGETS

ORIGINAL (1)

FINAL (1)

ACTUAL AMOUNTS

$

9,836,696 $

9,836,696 $

9,839,738

500,197

14,852,025

14,462,429

14,849,546

2,576,449

2,731,492

2,375,574

760,000

760,000

952,419

77,375

77,375

70,827

392,325

492 310

980 177

$

28 494 870 $

28,360,302 $

29,568,478

$

19,685,018 $

19,433,291 $

19,081,861

1,042,460 670,083 657,495 490,216
1,586,720 189,855
1,730,085 1,232,130
221,345 60,005
1572778

1,026,194 683,933 657,475 512,434
1,608,539 190,010
1,745,345 1,250,335
189,425 52,445
1 591 234

1,428,584 628,782 687,344 451,281
1,622,816 181,495
1,823,359 1,292,255
170,862 131,005 76,232 1,525,648

$

29,138,190 $

28,940,660 $

29 101 524

$

-643 320 $

-580 358 $

466 954

$

243,200 $

246,082 $

240,000

-3 200

-6 082

$

240 000 $

240 000 $

240 000

$

-403,320 $

-340,358 $

706,954

3,200,000

3,200,000

3,272,870

Fund Balances - Ending

$

2 796 680 $

2,859,642 $

3 979 824

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.

-27-

WHITE 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) Pass-Through From Office of Treasury and Fiscal Services National Forest Reserve Funds
Total U.S. Department of Agriculture
Corporation for National and Community Service Pass-Through From Georgia Department of Education Learn and Serve America School and Community Based Programs
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 Pass-Through From Georgia Department of Education Enhancing Education Through Technology Program Improving Teacher Quality State Grants 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
Health and Human Services, U. S. Department of Pass-Through From Ninth District Opportunity, Incorporated Head Start
Total Federal Financial Assistance
N/A = Not Available

CFDA NUMBER

PASSTHROUGH
ENTITY ID
NUMBER

EXPENDITURES IN PERIOD

.* 10.553 10.555

N/A

N/A

$

$

(2) 1,363,905
1,363,905

10.550 10.665

N/A N/A
$

64,185 (3} 1428090

94.004

NIA $

5 000

84.027 84.173

NIA

$

N/A

$

507,741 23 392
531,133

84.318 84.367 84.186 84.298 84.010 84.048

N/A N/A N/A N/A N/A N/A
$

15,252 134,732 20,419 20,109 648,155 37 457
1,407,257

93.600

N/A $

118 599

$==~2,,;;;;95;;;,;8:;,i;,9;;;;4;,;;;.6

- 28-

WHITE COUNTY BOARD OF EDUCATION SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
YEAR ENDED JUNE 30. 2004

SCHEDULE "2"

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 ($172,425) were not maintained separately and are included in the 2004 National School Lunch Program.
(3) Funds earned on the National Forest Reserve Funds, in the amount of $19,789, do not require reporting of expenditures.
Major Programs are identified by an asterisk (*) in front of the CFDA number.
The School District did not provide Federal Assistance to any Subrecipient.
The accompanying schedule of expenditures of Federal awards includes the Federal grant activity of the White 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.

- 29-

WHITE COUNTY BOARD OF EDUCATION SCHEDULE OF STATE REVENUE YEAR ENDED JUNE 30. 2004

SCHEDULE "3"

AGENCY/FUNDING

GOVERNMENTAL FUND TYPES

CAPITAL

GENERAL

PROJECTS

FUND

FUND

GRANTS Bright From the Start: Georgia Department of Early Care and Learning Pre-Kindergarten Program

$

199,192

$

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 School (6-8) Program High School General Education (9-12) Program Vocational Laboratory (9-12) Program Students with Disabilities Category I Category II Category Ill Category IV CategoryV Gifted Student - Category VI Alternative Program Remedial 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 Education Equalization Funding Grant Food Services Vocational Education Austerity Reduction Other State Programs 4-8 After School Program Health Insurance K-3 Statewide Reading Program Mentor Teachers National Teacher Certification Pay for Performance Preschool Handicapped Program Special Education Low Incidence Grant Student Information Systems

961,198 133,807 2,213,664 204,252 1,008,825 254,111 1,959,605 1,486,183 563,853
136,484 35,042
1,257,159 344,920 40,325 407,175 147,186 27,170 309,629 97,121 62,935
433,945 628,036 901,817
504,965 119,393
19,500 85,317 14,008 27,023 129,558 96,680 83,871 -775,726
23,599 280,602
49,951 1,850
21,777 63,124 47,356
6,424 61,506

TOTAL
199,192
961,198 133,807 2,213,664 204,252 1,008,825 254,111 1,959,605 1,486,183 563,853
136,484 35,042
1,257,159 344,920 40,325 407,175 147,186 27,170 309,629 97,121 62,935
433,945 628,036 901,817
504,965 119,393
19,500 85,317 14,008 27,023 129,558 96,680 83,871 -775,726
23,599 280,602
49,951 1,850
21,777 63,124 47,356
6,424 61,506

- 30-

WHITE COUNTY BOARD OF EDUCATION SCHEDULE OF STATE REVENUE YEAR ENDED JUNE 30. 2004

SCHEDULE "3"

AGENCY/FUNDING
GRANTS Georgia State Financing and Investment Commission Reimbursement on Construction Projects
Office of Treasury and Fiscal Services Public School Employees Retirement
CONTRACTS Community Health, Georgia Department of Mammography Program
Human Resources, Georgia Department of Family Connection
OTHER Natural Resources, Georgia Department of Nature Trail

GOVERNMENTAL FUND TYPES

CAPITAL

GENERAL

PROJECTS

FUND

FUND

TOTAL

$

266,551 $

266,551

$

2,070

2,070

23,964 84,500

23,964 84,500

64600

64 600

$ 14,849,546 $

266,551 $ ====15=1=1=61=0=97=

See notes to the basic financial statements.

- 31 -

WHITE COUNTY BOARD OF EDUCATION SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS
YEAR ENDED JUNE 30, 2004

SCHEDULE "4"

PROJECT

ORIGINAL ESTIMATED
COST (1)

CURRENT ESTIMATED COSTS (2)

AMOUNT EXPENDED IN CURRENT YEAR (3) (4)

AMOUNT EXPENDED
IN PRIOR YEARS (3) (4)

PROJECT STATUS

Payments of principal and interest on the 1993 Bonds from February 1, 1999 to August 1, 2003

$ 3,160,000 $ 2,756,405 $

99,047 $

2,657,358 Completed

Acquisition, construction and equipping of a new elementary school and necessary furnishings and equipment, including the acquisition of all necessary real or personal property and equipment, including computers and related technology, adding to, renovating, repairing, improving and equipping existing educational buildings, properties and facilities of the School District and expenses incident thereto

14,040,000

12,462,152

97,778

12,364,374 Completed

Acquisition, construction and equipping one new elementary school; adding to, renovating, repairing, improving and equipping existing school buildings; acquiring computers and computer technology equipment for the school system, and acquisition of land for additional schools

16,750,000

20,663,324

4,376,473

3,521,878 Ongoing

Paying a portion of the principal and interest due on the White County School District's Series 1993 General Obligation Bonds from August 1, 2003 through and including February 1, 2008

2,250,000

2,250,000

79460

Ongoing

$ 36,200,000 $ 38,131,881 $ 4,652,758 $ 18,543,610

(1) The School District's original cost estimate as specified in the resolution calling for the imposition of the Local Option Sales Tax.
(2) The School District's current estimate of total cost for the projects. Includes all cost from project inception to completion.
(3) The voters of White County approved the imposition of a 1% sales tax to fund the above projects and retire associated debt. Amounts expended for these projects may include sales tax proceeds, state, local property taxes and/or other funds over the life of the projects.
(4) During fiscal year 2003, the White County Board of Education issued General Obligation Refunding Bond Issue 2003 to refund portions of the 1993 Bond Issue. The amount expended in the Current Year includes debt service on the replacement refunding issues.

See notes to the basic financial statements.

- 32-

WHITE COUNTY BOARD OF EDUCATION GENERAL FUND- QUALITY BASIC EDUCATION PROGRAM (QBE)
ALLOTMENTS AND EXPENDITURES - BY PROGRAM YEAR ENDED JUNE 30. 2004

SCHEDULE "5"

DESCRIPTION

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

ELIGIBLE QBE PROGRAM COSTS

SALARIES

OPERATIONS

TOTAL

Direct Instructional Programs

Kindergarten Program

$

Kindergarten Program-Early Intervention Program

Primary Grades (1-3) Program

Primary Grades-Early Intervention (1-3) Program

Upper Elementary Grades (4-5) Program

Upper Elementary Grades-Early Intervention (4-5)

Program

Middle School (6-8) Program

High School General Education (9-12) Program

Vocational Laboratory (9-12) Program

Students with Disabilities

Category I

Category II

Category Ill

Category IV

CategoryV

Gifted Student - Category VI

Remedial Education Program

Alternative Education Program

1,155,313 $ 189,932
2,662,225 325,166
1,237,314

1,143,152 $ 123,575
2,678,870 295,932
1,665,111

318,977 2,402,258 1,813,503
696,262 2,204,532
504,347 36,513
180 438

245,933 2,498,829 2,327,956
555,128
139,784 322,720 1,499,216 355,810
2,183 782,307 128,267 102,686

148,565 $ 7,161
200,008 6,619
121,924
153,741 96,866 81,064
146 1,998 19,187 2,903
7,231
15,690

1,291,717 130,736
2,878,878 302,551
1,787,035
245,933 2,652,570 2,424,822
636,192
139,930 324,718 1,518,403 358,713
2,183 789,538 128,267 118,376

TOTAL DIRECT INSTRUCTIONAL PROGRAMS

$

13,726,780 $ 14,867,459 $

863,103 $

15,730,562

Media Center Program Staff and Professional Development

378,376 77176

493,603 16,295

121,218 47 954

614,821 64249

TOTAL QBE FORMULA FUNDS

$

14,182,332 $ 15,377,357 $

1,032,275 $ ===1,;;_6,.;,40=9;,.;,6=3=2

(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
254 Washington Street, S.W., Suite 214 Atlanta, Georgia 30334-8400
March 15, 2005

Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the White 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 White County Board of Education as of and for the year ended June 30, 2004, which collectively comprise White County Board ofEducation's basic financial statements and have issued our report thereon dated March 15, 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 White County Board of Education's internal control over financial reporting in order to determine our auditing procedures for the purpose of expressing our opinion on the financial statements and not to provide an opinion on the internal control over financial reporting. However, we noted a certain matter involving the internal control over financial reporting and its operation that we consider to be a reportable condition. Reportable conditions involve matters coming to our attention relating to significant deficiencies in the design or operation ofthe internal control over financial reporting that, in ourjudgment, could adversely affect White County Board of Education's ability to record, process, summarize and report financial data consistent with assertions of management in the financial statements. The reportable condition is described in the accompanying Schedule of Findings and Questioned Costs as item FS-7541-04-01.

2004YB-30

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, we believe the reportable condition described above is not a material weakness.
Compliance and Other Matters
As part of obtaining reasonable assurance about whether White 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 White County Board ofEducation and is not intended to be and should not be used by anyone other than these specified parties.
Respectfully submitted,

RWH:as 2004YB-30

State Auditor

Russell W. Hinton
STATE AUDITOR
(404) 656-2174

DEPARTMENT OF AUDITS AND ACCOUNTS
254 Washington Street, S.W., Suite 214 Atlanta, Georgia 30334-8400
March 15, 2005

Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the White 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 ofWhite County Board ofEducation with the types ofcompliance requirements described in the US. Office of Management and Budget (0MB) Circular A-133 Compliance Supplement that are applicable to each ofits major Federal programs for the year ended June 30, 2004. White County Board of Education's major Federal programs are identified in the Summary of Auditor's Results Section of the accompanying Schedule of Findings and Questioned Costs. Compliance with the requirements of laws, regulations, contracts and grants applicable to each of its major Federal programs is the responsibility of White County Board of Education's management. Our responsibility is to express an opinion on White County Board of Education's compliance based on our audit.
We conducted our audit ofcompliance in accordance with auditing standards generally accepted in the United States ofAmerica; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General ofthe United States; and 0MB Circular A133, Audits of States, Local Governments, and Non-Profit Organizations. Those standards and 0MB Circular A-133 require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types ofcompliance requirements referred to above that could have a direct and material effect on a major Federal program occurred. An audit includes examining, on a test basis, evidence about the White 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 White County Board of Education's compliance with those requirements.
2004SA-10

In our opinion, the White 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 White 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 White 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.
Our consideration ofthe internal control over compliance would not necessarily disclose all matters in the internal control that might be material weaknesses. A material weakness is a reportable condition in which the design or operation of one or more of the internal control components does not reduce to a relatively low level ofrisk that noncompliance with applicable requirements oflaws, 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. We noted no matters involving the internal control over compliance and its operation that we consider to be material weaknesses.
This report is intended solely for the information and use ofthe management, members ofthe White County Board ofEducation, Federal awarding agencies and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties.
Respectfully submitted,
~~m~.~-t
Russell W. Hinton State Auditor
RWH:as 2004SA-10

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

WHITE 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-7541-03-01

Unresolved - See Corrective Action/Responses

CORRECTIVE ACTION/RESPONSES

CASH AND CASH EQUIVALENTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Separation of Duties Finding Control Number: FS-7541-03-01

Management has implemented changes at the various principal account sites for accounting functions. Bank statements are reconciled by the Finance Director. Bookkeepers receipt cash and the cash is deposited at the bank by another employee. Controls have been established and implemented to ensure that athletic tickets sold are reconciled with cash collections. The Finance Director reviews all checks written at each of the schools and reports such to the principals and Superintendent on a quarterly basis.

PRIOR YEAR FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

FINDING CONTROL NUMBER AND STATUS

FA-7541-03-01

Unresolved - See Corrective Action/Responses

CORRECTIVE ACTION/RESPONSES

CASH MANAGEMENT Excessive Cash Balances Finding Control Number: FA-7541-03-01

The fiscal year 2003 audit was done in August 2004 after the close of fiscal year 2004. Therefore, this deficiency continued to exist in fiscal year 2004. Procedures were implemented during the audit to correct the deficiency eliminating excessive ending monthly cash balances in the Title I - Grants to Local Educational Agencies (CFDA 84.010) and Special Education Cluster (CFDA 84.027 and 84.173) programs.

SECTION IV FINDINGS AND QUESTIONED COSTS

WHITE 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 White 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 White County Board of Education disclosed a financial statement reportable condition related to the following control categories.

Cash and Cash Equivalents Revenues/Receivables/Receipts

Expenditures/Liabilities/Disbursements

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

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

4. Reportable Conditions in Internal Control Over Major Programs The audit report for the White County Board of Education did not disclose any reportable conditions in internal control over major programs.

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

6. Audit Findings Required to be Reported by Section .5 IO(a) of 0MB Circular A-133 The White County Board of Education's audit did not disclose audit findings required to be reported by section .510(a) of 0MB Circular A-133.

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

8. Type "A" Program Dollar Threshold The dollar threshold for type "A" programs was $300,000.

9. Low Risk Auditee The White County Board of Education qualified as a low risk auditee as defined by Section .530 of 0MB Circular A-133.

- 1-

WHITE 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 Separation of Duties Reportable Condition Repeated From Prior Year Finding Control Number: FS-7541-04-01
Our examination of the Principal's accounts disclosed weaknesses in internal controls as discussed below:
Cash and Cash Equivalents The bank reconciliation function was not separated from the record keeping and voucher payment function.
Revenues/Receivables/Receipts Deposit preparation was not separated from the record keeping and cash custody functions. Pre-numbered tickets for athletic events are not issued so that cash collections can be reconciled to monies taken in.
Expenditures/Liabilities/Disbursements The check writing function was not separated from record keeping or processing of signed checks.
These deficiencies were a result ofmanagement's decision to limit the number ofadministrative staff made responsible, at the various principal's account sites, for accounting functions. Management should implement procedures to ensure that the key accounting functions ofcustody, record keeping and authorization be segregated. Additionally, controls should be established and implemented to ensure that reconciliations of athletic event tickets sold are reconciled with cash collections.
III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS
CASH MANAGEMENT Excessive Cash Balances Reportable Condition Nonmaterial Noncompliance U.S. Department of Education Through Georgia Department of Education Finding Control Number: FA-7541-04-01
A review of cash management procedures for the Title 1 - Grants to Local Educational Agencies (CFDA 84.010) and Special Education Cluster (CFDA 84.027, 84.173) programs disclosed that cash
-2-

WHITE COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2004
III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS CASH MANAGEMENT Excessive Cash Balances Reportable Condition Nonmaterial Noncompliance U.S. Department of Education Through Georgia Department of Education Finding Control Number: FA-7541-04-01 draws were made in advance of immediate cash needs, resulting in the accumulation of excessive cash balances. During fiscal year 2004, the programs had an average cash balance of $70,407 and $88,430, respectively, and had excessive ending monthly cash balances in nine and twelve months, respectively. The excessive cash balances are a result ofmanagement's failure to accurately forecast the cash needs ofthese programs. Procedures should be implemented to minimize the time elapsing between the transfer of funds from the Georgia Department ofEducation and disbursement of such funds by the School District.
-3-

SECTIONV MANAGEMENT'S RESPONSES

WHITE COUNTY BOARD OF EDUCATION SCHEDULE OF MANAGEMENT'S RESPONSES
YEAR ENDED JUNE 30, 2004
Finding Control Number: FS-7541-04-01
We concur with this finding. The Board has created and hired the position of Staff Accountant to assure that there is separation of those who perform monthly bank reconciliation and recordkeeping/voucher payment functions. Pre-numbered tickets for athletic events are being issued so that cash collections can be reconciled to monies taken in.
Finding Control Number: FA-7541-04-01
We concur with this finding. The Accounts Payable clerk has implemented procedures to assure that the amount ofFederal funds requested for reimbursement from the Georgia Department ofEducation is closely aligned with the actual program expenditures. Prior to requesting the funds, the Finance Director will monitor the requested amount to assure that it is in line with the Board's actual cash needs. These changes were implemented in August 2004 after the fiscal year 2003 audit during August 2004.
Contact Person: Tom McLean, Finance Director Phone: (706) 865-2315 Fax Number: (706) 865-7784 E-mail Address: tmclean@white.k12.ga.us