WHITFIELD COUNTY BOARD OF EDUCATION DALTON, GEORGIA REPORT ON AUDIT OF THE FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2003 STATE OF GEORGIA DEPARTMENT OF AUDITS AND ACCOUNTS Russell W. Hinton State Auditor WHITFIELD 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 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 11 H NOTES TO THE BASIC FINANCIAL STATEMENTS 12 SCHEDULES REQUIRED SUPPLEMENTARY INFORMATION 1 SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL GENERAL FUND 29 WHITFIELD 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 32 4 SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS 34 5 ALLOTMENTS AND EXPENDITURES GENERAL FUND - QUALITY BASIC EDUCATION PROGRAMS (QBE) BY PROGRAM 35 SECTION II COMPLIANCE AND INTERNAL CONTROL REPORTS REPORT ON COMPLIANCE AND ON INTERNAL CONTROL OVER FINANCIAL REPORTING BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS REPORT ON COMPLIANCE WITH REQUIREMENTS APPLICABLE TO EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH 0MB CIRCULAR A-133 SECTION III AUDITEE'S RESPONSE TO PRIOR YEAR FINDINGS AND QUESTIONED COSTS SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS SECTION IV FINDINGS AND QUESTIONED COSTS SCHEDULE OF FINDINGS AND QUESTIONED COSTS SECTION I FINANCIAL RUSSELL W. HINTON STATE AUDITOR (404) 656-2174 DEPARTMENT OF AUDITS AND ACCOUNTS 254 Washington Street, S.W. Suite 214 Atlanta, Georgia 30334-8400 June 10, 2004 Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education and Superintendent and Members of the Whitfield 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 H) ofthe Whitfield County Board of Education, as of and for the year ended June 30, 2003, which collectively comprise the Board's basic financial statements as listed in the table of contents. These financial statements are the responsibility ofthe Whitfield 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 position ofthe governmental activities, each major fund, and the aggregate remaining fund information of the Whitfield County Board of Education, as of June 30, 2003, and the respective changes in financial position thereoffor the year then ended in conformity with accounting principles generally accepted in the United States of America. 2003-34ARL-11 The Whitfield County Board ofEducation has not presented Management's Discussion and Analysis that accounting principles generally accepted in the United States has determined is necessary to supplement, although not to be part of, the basic financial statements. As discussed in Note 2 to the basic financial statements, during fiscal year 2003, the Board completed a comprehensive inventory of its capital assets for inclusion in the basic financial statements and consolidated its individual school activity accounts for inclusion in the basic financial statements. These changes are in accordance with generally accepted accounting principles. As described in Note 2, the Whitfield 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, 2003. In accordance with Government Auditing Standards, we have also issued our report dated June 10, 2004, on our consideration of the Whitfield County Board of Education's internal control over financial reporting and our tests of its compliance with certain provisions of laws, regulations, contracts and grants. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be read in conjunction with this report in considering the results of our audit. The Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual, as presented on page 29 is not a required part of the basic financial statements but is 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 Whitfield County Board of Education's basic financial statements. The accompanying supplementary information which consist of Schedules 2 through 5, which includes the Schedule of Expenditures of Federal Awards as required by U.S. Office of Management and Budget Circular A-133, Audits ofStates, Local Governments, and Non-Profit Organizations, are presented for purposes of additional analysis and are not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements, and in our opinion, is fairly stated, in all material respects, in relation to the basic financial statements taken as a whole. 2003-34ARL-11 A copy ofthis report has been filed as a permanent record in the office ofthe State Auditor and made available to the press ofthe State, as provided for by Official Code of Georgia Annotated section 506-24. Respectfully submitted, RWH:as 2003-34ARL-11 State Auditor WHITFIELD COUNTY BOARD OF EDUCATION WHITFIELD COUNTY BOARD OF EDUCATION STATEMENT OF NET ASSETS JUNE 30. 2003 ASSETS Cash and Cash Equivalents Investments Accounts Receivable. Net Taxes State Government Federal Government Other Inventories Capital Assets Land Construction in Progress Land Improvements Buildings Equipment Less: Accumulated Depreciation Total Assets LIABILITIES Accounts Payable Salaries Payable Contracts Payable Retainages Payable Deferred Revenue Long-Term Liabilities Due Within One Year Due in More Than One Year Total Liabilities NET ASSETS Invested in Capital Assets, Net of Related Debt Restricted for Bus Replacement Continuation of Federal Programs Debt Service Capital Projects Unrestricted Total Net Assets Total Liabilities and Net Assets The notes to the basic financial statements are an integral part of this statement. -3- EXHIBIT"A" GOVERNMENTAL ACTIVITIES $ 9,970.470 46,477.515 3.021.408 7,079.970 931.068 729,556 123,344 2,960.811 4,231,978 3,241,208 67.381,793 7,331,442 -14,754,838 $ ===13=8'67,=2=5,=72=5= $ 2,945,979 8,793,321 1,712,204 380,504 9,587 4,160,000 18,185,000 $ 36,186,595 $ 69,131,321 261,372 432,454 4,493,826 19.635,983 8 584 174 $ 102,539,130 $ ===13=8=7'=2=5'=7=25= WHITFIELD COUNTY BOARD OF EDUCATION STATEMENT OF ACTIVITIES FOR THE YEAR ENDED JUNE 30, 2003 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 General Revenues Taxes Property Taxes For Maintenance and Operations Railroad Cars Sales Taxes Special Purpose Local Option Sales Tax For Capital Projects 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 Net Assets - End of Year EXPENSES CHARGES FOR SERVICES $ 66,288,033 $ 4,733,212 2,283,029 2,415,784 604,970 5,640,805 828,168 6,230,637 4,225,481 1,169,472 382,412 984,260 5,115,463 666,425 $ 101,568,151 $ 2,810,070 60 1,671,137 4,481,267 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 $ 44,698,414 853,543 732,125 1,226,957 1,448,051 2,396,995 4,819 3,278,778 1,389,833 $ 8,897 383,488 99,438 3,173,428 $ 59,694,766 $ $ 278,495 278 495 $ -18,779,549 -3,879,669 -1,550,904 -1, 188,827 843,081 -3,243,810 -823,349 -2,951,799 -2,557,153 -1, 160,575 1,076 -884,822 -270,898 -666,425 -37, 113,623 $ 22,289,682 28,489 11,244,253 544,464 121,111 4,617,013 989,712 2,031,220 $ 41,865,944 $ 4,752,321 97,786,809 $ ===10=2=,5=3=9,=13=0= -5- WHITFIELD COUNTY BOARD OF EDUCATION BALANCE SHEET GOVERNMENTAL FUNDS JUNE 30. 2003 EXHIBIT "C" ASSETS Cash and Cash Equivalents Investments Accounts Receivable, Net Taxes State Government Federal Government Other Inventories Total Assets LIABILITIES AND FUND BALANCES LIABILITIES Accounts Payable Salaries Payable Contracts Payable Retainages Payable Deferred Revenue Total Liabilities FUND BALANCES Reserved for: Bus Replacement Continuation of Federal Programs Debt Service Inventories Capital Projects Unreserved Designated for Self-Insurance Undesignated Reported in: General Fund Total Fund Balances Total Liabilities and Fund Balances GENERAL FUND DISTRICTWIDE CAPITAL PROJECTS FUND DEBT SERVICE FUND TOTAL $ 3,472,124 $ 6,498,346 $ 9,970,470 7,693,026 34,290,663 $ 4,493,826 46,477,515 845,901 7,079,970 931,068 580,103 123 344 1,917,727 149,453 2,763,628 7,079,970 931,068 729,556 123 344 $ 20,725,536 $ 42,856,189 $ 4,493,826 $ 68,075,551 $ 2,902,408 $ 43,571 8,793,321 1,712,204 380,504 9,587 $ 11,705,316 $ 2,136,279 $ 2,945,979 8,793,321 1,712,204 380,504 9 587 $ 13,841,595 $ 261,372 $ 261,372 309,110 309,110 $ 4,493,826 4,493,826 123,344 123,344 $ 40,719,910 40,719,910 1,731,816 1,731,816 6,594,578 6,594,578 $ 9,020,220 $ 40,719,910 $ 4,493,826 $ 54,233,956 $ 20,725,536 $ 42,856,189 $ 4,493,826 $ 68,075,551 The notes to the basic financial statements are an integral part of this statement. -6- WHITFIELD COUNTY BOARD OF EDUCATION RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO THE STATEMENT OF NET ASSETS JUNE 30, 2003 EXHIBIT"D" Total Fund Balances - Governmental Funds (Exhibit "C") $ 54,233,956 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 $ 2,960,811 4,231,978 3,241,208 67,381,793 7,331,442 -14,754,838 70,392,394 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. 257,780 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 -22,345,000 Net Assets of Governmental Activities (Exhibit "A") $ 102,539,130 The notes to the basic financial statements are an integral part of this statement. -7- WHITFIELD COUNTY BOARD OF EDUCATION STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS YEAR ENDED JUNE 30, 2003 EXHIBIT"E" REVENUES Property Taxes Sales Taxes State Funds Federal Funds Charges for Services Investment Earnings Miscellaneous Total Revenues EXPENDITURES Current Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Community Services Food Services Operation Capital Outlay Debt Services Interest Total Expenditures Excess of Revenues over (under) Expenditures OTHER FINANCING SOURCES {USES} Sale of Equipment Transfers In Transfers Out Total Other Financing Sources (Uses) Net Change in Fund Balances Fund Balances - Beginning Fund Balances - Ending GENERAL FUND DISTRICTWIDE CAPITAL PROJECTS FUND DEBT SERVICE FUND TOTAL $ 22,766,124 665,575 $ 11,244,253 56,969,120 7,621,154 4,481,267 127,937 861,819 $ 1,998,850 21,390 $ 94,630,027 $ 12,127,462 $ $ -44 22,766,124 11,909,828 56,969,120 7,621,154 4,481,267 989,712 2,020,240 -44 $ 106,757,445 $ 63,499,771 4,733,212 2,283,029 2,321,553 587,524 5,568,910 816,069 6,255,091 2,804,432 1,169,472 414,897 984,260 4,931,799 $ 12,099 12,616,189 $ $ 96,370,019 $ 12,628,288 $ $ -1,739,992 $ -500,826 $ $ 63,499,771 4,733,212 2,283,029 2,321,553 587,524 5,568,910 828,168 6,255,091 2,804,432 1,169,472 414,897 984,260 4,931,799 12,616,189 666,425 666,425 666,425 $ 109,664,732 -666,469 $ -2,907,287 $ 10,980 $ 10,980 $ 117,274 $ 5,109,621 5,226,895 -117 274 -5,109,621 -5,226,895 $ -106,294 $ -4,992,347 $ 5,109,621 $ 10 980 $ -1,846,286 $ -5,493,173 $ 4,443,152 $ -2,896,307 10,866,506 46,213,083 50,674 57,130,263 $ 9,020,220 $ 40,719,910 $ 4,493,826 $ 54,233,956 The notes to the basic financial statements are an integral part of this statement. -8- WHITFIELD COUNTY BOARD OF EDUCATION RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT OF REVENUES. EXPENDITURES AND CHANGES IN FUND BALANCES TO THE STATEMENT OF ACTIVITIES JUNE 30. 2003 EXHIBIT"F" Total Net Change in Fund Balances - Governmental Funds (Exhibit "E") Amounts reported for Governmental Activities in the Statement of Activities are different because: Capital Outlays are reported as expenditures in Governmental Funds. However, in the Statement of Activities, the cost of Capital Assets is allocated over their estimated useful lives as depreciation expense. In the current period, these amounts are: Capital Outlay Depreciation Expense Excess of Capital Outlay over Depreciation Expense 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. Change in Net Assets of Governmental Activities (Exhibit "B") $ -2,896,307 $ 9,588,489 -1,491,908 8,096,581 -447 953 $ =====4,=75=2=,3=2=1 The notes to the basic financial statements are an integral part of this statement. -9- WHITFIELD COUNTY BOARD OF EDUCATION STATEMENT OF FIDUCIARY NET ASSETS FIDUCIARY FUNDS JUNE 30, 2003 ASSETS Cash and Cash Equivalents LIABILITIES Funds Held for Others EXHIBIT"G" AGENCY FUNDS $ ====23=1=,5.3..5= $ =====2=3=1,...,53=5= The notes to the basic financial statements are an integral part of this statement. - 11 - WHITFIELD COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30. 2003 EXHIBIT"H" Note 1: DESCRIPTION OF SCHOOL DISTRICT AND REPORTING ENTITY REPORTING ENTITY The Whitfield County Board of Education (School District) was established under the laws ofthe State of Georgia and operates under the guidance of a school board elected by the voters and a Superintendent appointed by the Board. The Board is organized as a separate legal entity and has the power to levy taxes and issue bonds. Its budget is not subject to approval by any other entity. Accordingly, the School District is a primary government and consists of all the organizations that compose its legal entity. Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BASIS OF PRESENTATION The School District's basic financial statements are collectively comprised of the District-wide financial statements, fund financial statements and notes to the basic financial statements of the Whitfield 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. The School District reports the following major governmental funds: - 12 - WHITFIELD COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2003 EXHIBIT"H" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES General Fund is the School District's primary operating fund. It accounts for all financial resources ofthe School District, except those resources required to be accounted for in another fund. District-wide Capital Projects Fund accounts for financial resources including Bond Proceeds and 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 (sales) legally restricted for the payment ofgeneral longterm principal, interest and paying agent's fees. The School District reports the following fiduciary fund type: Agency funds account for assets held by the School District as an agent for various school activity accounts. 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 interest are considered to be susceptible to accrual. Expenditures are recorded when the related fund liability is incurred, except for principal and interest on general long-term debt, which are recognized as expenditures to the extent they have matured. Capital asset acquisitions are reported as expenditures in governmental funds. Proceeds ofgeneral long-term liabilities and acquisitions under capital leases are reported as other financing sources. - 13 - WHITFIELD COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2003 EXHIBIT"H" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 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. A substantial number of personnel of the School District were employed for a one hundred and ninety day period beginning in August 2002 and ending in early June 2003. Employment contracts for these employment periods typically specify that compensation be paid in twelve equal monthly payments beginning in September 2002 and ending in August 2003. State grants to fund the State's share of these contracts are disbursed to the School District in the same twelve month period. In accordance with generally accepted accounting principles, salary and fringe benefit costs and the related revenue from the State to fund these contracts are recorded in the fiscal period covered by these financial statements. RESTATEMENT OF PRIOR YEAR FUND BALANCE - GENERAL FUND In prior years, the financial activities of the School District's School Food Services Fund, Lottery Programs and Federal Programs were reported as Special Revenue Funds. These funds had a combined fund balance of $418,619 at July 1, 2002. For fiscal year 2003, these funds have been reported as part of the General Fund. In addition, governmental fund activity from the various school activity accounts, which were not reported in the prior year's financial statements, have been reported within the General Fund for fiscal year ended June 30, 2003. The governmental fund activity ofthe various school activity accounts had a fund balance of$884,623 at July 1, 2002. This change is in accordance with generally accepted accounting principles. General Fund Balance July 1, 2002 $ 9,352,626 Add Funds Consolidated with General Fund: School Food Services Fund School Activity Account - Governmental Activity 418,619 884,623 Add: Change in Inventory Method Adjustment to July and August 2002 Salary Payments Earned by Employees in Fiscal Year 2002 67,664 142,974 General Fund Balance July 1, 2002 (Restated) $ 10.866.506 - 14 - WHITFIELD COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2003 EXHIBIT"H" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CHANGES IN ACCOUNTING PRINCIPLES The Whitfield County Board of Education has implemented a new financial reporting model as required by provisions of Governmental Accounting Standards Board Statement No. 34, Basic Financial Statements - and Management's Discussion and Analysis - for State and Local Governments, as of June 30, 2003. The provisions of GASB 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, 2002 Capital Projects Fund Debt Service Fund $ 10,866,506 46,213,083 50,674 Governmental Funds (Restated) July 1, 2002 Capital Assets Accumulated Depreciation Property Tax Revenue Timing Differences Bonds Payable $ 57,130,263 75,558,743 -13,262,930 705,733 -22,345,000 Net Assets Beginning (See Exhibit "B") $ 97!7861809 CASH AND CASH EQUIVALENTS COMPOSITION OF DEPOSITS Cash and cash equivalents consist ofcash on hand, demand deposits and short-term investments with original maturities of three months or less from the date of acquisition in authorized financial institutions. Georgia Laws OCGA 45-8-14 authorize the Board to deposit its funds in one or more solvent banks or insured Federal savings and loan associations. INVESTMENTS COMPOSITION OF INVESTMENTS Investments made by the School District in nonparticipating interest-earning contracts (such as certificates ofdeposit) and repurchase agreements are reported at cost. Participating interest-earning contracts and money market investments with a maturity at purchase ofone year or less are reported at amortized cost. Both participating interest-earning contracts and money market investments with a maturity at purchase greater than one year are reported at fair value. The Official Code ofGeorgia 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: - 15 - WHITFIELD COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2003 EXHIBIT "H" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (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 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 Whitfield County Board of Commissioners fixed the property tax levy for the 2002 tax digest year (calendar year) on October 14, 2002 (levy date). Taxes were due on December 20, 2002 (lien date). Taxes collected within the current fiscal year or within 60 days after year-end on the 2002 tax digest are reported as revenue in the governmental funds for fiscal year 2003. The Whitfield County Tax Commissioner bills and collects the property taxes for the School District, withholds 2.5% of taxes 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, 2003, for maintenance and operations amounted to $22,289,682. The tax millage rate levied for the 2002 tax year (calendar year) for the Whitfield County Board of Education was as follows (a mill equals $1 per thousand dollars of assessed value): School Operations 18.401 mills - 16 - WHITFIELD COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2003 EXHIBIT"H" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES SALES TAXES Special Purpose Local Option Sales Tax, at the fund reporting level, during the year amounted to $11,244,253 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. CAPITAL ASSETS Capital assets purchased, including capital outlay costs, are recorded as expenditures in the fund financial statements at the time ofpurchase. On the District-wide financial statements, all purchased capital assets are valued at cost where historical records are available and at estimated historical cost based on appraisals or deflated current replacement cost where no historical records exist. Donated capital assets are recorded at fair market value on the date donated. Disposals are deleted at depreciated recorded cost. The cost of normal maintenance and repairs that do not add to the value of assets or materially extend the useful lives of the assets is not capitalized. Depreciation is computed using the straight-line method. The School District does not capitalize book collections or works of art. Capitalization thresholds and estimated useful lives of capital assets reported in the District-wide statements are as follows: Capitalization Policy Estimated Useful Life Land Land Improvements Buildings and Improvements Vehicles and Equipment All NIA $ 20,000 15 years $ 100,000 70 years $ 10,000 10 to 12 years Depreciation is used to allocate the actual or estimated historical cost of all capital assets over estimated useful lives. - 17 - WHITFIELD COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2003 EXHIBIT"H" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 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 ofNet Assets. Note 3: DEPOSITS AND INVESTMENTS COLLATERALIZATION OF DEPOSITS Official Code of Georgia Annotated (OCGA) Section 45-8-12 provides that there shall not be on deposit at any time in any depository for a time longer than ten days a sum ofmoney which has not been secured by surety bond, by guarantee of insurance, or by collateral. The aggregate of the 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 of the State of Georgia, and - 18 - WHITFIELD COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2003 EXHIBIT"H" Note 3: DEPOSITS AND INVESTMENTS (7) Bonds, bills, notes, certificates of indebtedness, or other obligations of a subsidiary corporation of the United States government, which are fully guaranteed by the United States government both as to principal and interest or debt obligations issued by the Federal Land Bank, the Federal Home Loan Bank, the Federal Intermediate Credit Bank, the Central Bank for Cooperatives, the Farm Credit Banks, the Federal Home Loan Mortgage Association, and the Federal National Mortgage Association. CATEGORIZATION OF DEPOSITS At June 30, 2003, the bank balances were $15,035,215. The amounts ofthe total bank balances are classified into three categories of credit risk: Category 1 - Cash that is insured (e.g., Federal depository insurance) or collateralized with securities held by the School District or by the School District's agent in the School District's name. Category 2 - Cash collateralized with securities held by the pledging financial institution's trust department or agent in the School District's name. Category 3 - Uncollateralized deposits. (This includes any bank balance that is collateralized with securities held by the pledging financial institution, or by its trust department or agent but not in the School District's name.) The School District's deposits are classified by risk category at June 30, 2003, as follows: Risk Category Bank Balance 1 $ 566,384 2 13,444,139 3 1,024,692 Total $ 15,035.215 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. - 19 - WHITFIELD COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2003 EXHIBIT"H" Note 3: DEPOSITS AND INVESTMENTS At June 30, 2003, the carrying value of the School District's total investments was $46,364,141 which is materially the same as fair value. The investments are classified as to risk categories as follows: T~e of Investment U.S. Government $ Repurchase Agreements Total $ Local Government Investment Pools Total Investments Risk Categories 2 0 $ 35,161 $ 25,002,800 0 $ 25 037.961 $ Carrying Fair 3 Amount Value 0 $ 35,161 $ 35,161 25,002,800 25,002,800 0 $ 25,037,961 $ 25,037,961 21,326,180 21,326,180 $ 46.364 141 $ 46364141 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 ofGeorgia, 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 as an investment company but does operate Georgia Fund 1 in a manner consistent with Rule 2a-7 ofthe Investment Company Act of1940. The pool's primary objectives are safety ofcapital, investment income, liquidity and diversification while maintaining principal ($1.00 per share value). Net asset value is calculated daily and reported to the rating agency to ensure stability. The pool distributes earnings (net of management fees) on a monthly basis and values participant's shares sold and redeemed at the pool's share price, $1.00 per share. Pooled cash and cash equivalents and investments are reported at cost. The pool does not issue any legally binding guarantees to support the value of the shares. Participation in the pool is voluntary and deposits consist of funds from local governments; operating and trust funds of Georgia's state agencies, colleges and universities; and current operating funds of the State of Georgia's General Fund. Investments in Georgia Fund 1 and Fund 6 are directed toward short-term instruments such as U.S. Treasury obligations, securities issued or guaranteed as to principal and interest by the U. S. Government or any of its agencies or instrumentalities, banker's acceptances and repurchase agreements. The weighted average maturity of Georgia Fund 1 may not exceed 60 days. The weighted average maturity for Georgia Fund 1 on June 30, 2003, was 30 days. The average investment duration for Fund 6 on June 30, 2003, was 0.39 years. - 20- WHITFIELD COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30. 2003 EXHIBIT"H" 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: Balances July 1. 2002 Increases Decreases Balances June 30, 2003 Governmental Activities Capital Assets, Not Being Depreciated: Land Construction in Progress $ 2,653,548 $ 307,263 $ 2,960,811 21,137,947 8,694,839 $ 25,600,808 4,231,978 Total Capital Assets Not Being Depreciated $ 23,791,495 $ 9,002,102 $ 25,600,808 $ 7,192,789 Capital Assets Being Depreciated Buildings and Building Improvements Equipment Land Improvements $ 41,780,985 $ 25,600,808 $ 6,777,455 553,987 3,208,808 32,400 0 $ 67,381,793 7,331,442 3,241,208 Less Accumulated Depreciation for: Buildings and Building Improvements Equipment Land Improvements 7,662,709 3,529,471 2,070,750 778,589 591,658 121.661 8,441,298 4,121,129 2,192,411 Total Capital Assets, Being Depreciated, Net $ 38,504,318 $ 24,695,287 $ 0 $ 63,199,605 Governmental Activity Capital Assets - Net $ 62,295.813 $ 33,697.389 $ 25,600.808 $ 70.392.394 Current year depreciation expense by function is as follows: Instruction Support Services Educational Media Services General Administration School Administration Maintenance and Operation of Plant Student Transportation Services Food Services $ 819,898 $ 27,709 5,130 21,141 32,204 510,940 597,124 74,886 $ 1,491,908 - 21 - WHITFIELD COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2003 EXHIBIT"H" 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, 2003, were as follows: District-wide Capital Projects Bond SPLOST Proceeds Debt Service Funds Restricted Cash and Cash Equivalents: Capital Acquisitions Restricted Investments: Debt Services Capital Acquisitions $ 1,723,618 $ 4,774,728 $ 4,493,826 $ 17,607,704 $ 16,682,959 Note 7: INTERFUND TRANSFERS Interfund transfers for the year ended June 30, 2003, consisted of the following: Transfer to Transfers From District-wide General Capital Fund Projects District-wide Capital Projects Debt Service Funds $ 117,274 $ 5,109,621 Total $ 117.274 $ 5,109.621 Transfers are used to move property tax revenues collected by the General Fund to (1) the Districtwide Capital Projects Fund as required match or supplemental funding source for capital construction projects, and to (2) move excess SPLOST collections from the Capital Projects Fund to the Debt Service Fund. 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. -22 - WHITFIELD COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2003 EXHIBIT"H" Note 8: RISK MANAGEMENT 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. The School District has established a limited risk management program for workers' compensation claims. A premium is charged when needed by the General Fund to each user program on the basis of the percentage of that program's payroll to total payroll in order to cover estimated claims budgeted by management based on known claims and prior experience. The School District accounts for claims 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. An excess coverage insurance policy covers individual claims in excess of $225,000 loss per occurrence, up to the statutory limit. Changes in the workers' 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 2002 2003 $ 0 $ 228,484 $ 228,484 $ 0 $ 0 $ 186,051 $ 186,051 $ 0 The School District is self-insured with regard to unemployment compensation claims. A premium is charged when needed by the General Fund to each user program on the basis ofthe percentage of that fund's payroll to total payroll in order to cover estimated claims budgeted by management based on known claims and prior experience. The School District accounts for claims 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: - 23 - WHITFIELD COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30. 2003 EXHIBIT"H" Note 8: RISK MANAGEMENT 2002 2003 Beginning of Year Liability Claims and Changes in Estimates Claims Paid End ofYear Liability $ 0 $ 4464 $ 4464 $ 0 $ 0 $ 3 161 $ 3 161 $ 0 The School District has purchased surety bonds to provide additional insurance coverage as follows: Position Covered Amount Superintendent All Other Employees $ 100,000 $ 100,000 Note 9: OPERATING LEASES Whitfield County Board ofEducation has entered into various leases as lessee for office equipment and mobile units. These leases are considered for accounting purposes to be operating leases. Lease expenditures for the year ended June 30, 2003, for governmental funds amounted to $279,505. Future minimum lease payments for these leases are as follows: Year Ending Governmental Funds 2004 2005 2006 2007 2008 $ 349,058 344,990 269,769 226,648 61,304 Total $ 1,251,769 Note 10: SHORT-TERM DEBT The School District obtained temporary loans to construct a house for the vocational department to sell, depositing the proceeds in its General Fund. Article IX, Section V, Paragraph V of the Constitution ofthe State of Georgia limits the aggregate amount of short-term debt to 75 percent of the 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- WHITFIELD COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30. 2003 EXHIBIT"H" Note 10: SHORT-TERM DEBT Beginning Balance Issued Redeemed Ending Balance Temporary Loans $ Note 11: LONG-TERM DEBT 40,730 $ 13,180 $ 53.910 $====0 GENERAL OBLIGATION DEBT OUTSTANDING General Obligation Bonds currently outstanding are as follows: Purpose Interest Rates Amount General Government - Series 2002 2.00% - 4.50% $ 22,345.000 The changes in Long-Term Debt during the fiscal year ended June 30, 2003, were as follows: Governmental Funds General Obligation Bonds Balance July 1, 2002 $ 22,345,000 Additions 0 Balance June 30, 2003 $ 22,345.000 Portion of Long-Term Debt Due within One Year $ 4,160.000 At June 30, 2003, payments due by fiscal year which includes principal and interest for these items are as follows: - 25 - WHITFIELD COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2003 EXHIBIT"H" Note 11: LONG-TERM DEBT Fiscal Year Ended June 30 General Obligation Debt Principal Interest 2004 2005 2006 2007 2008 $ 4,160,000 $ 4,370,000 4,505,000 4,650,000 4,660,000 624,825 530,785 413,023 273,300 99,450 Total Principal and Interest $ 2223452000 $ 129412383 Note 12: ON-BEHALF PAYMENTS The Board has recognized revenues and costs in the amount of $836,458 for health insurance and retirement contributions paid on the Board's behalf by the following State Agencies. Georgia Department of Education Paid to the Georgia Department of Community Health For Health Insurance ofNon-Certified Personnel In the amount of $676,430 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 $160,028 Note 13: SIGNIFICANT COMMITMENTS The following is an analysis ofsignificant outstanding construction or renovation contracts executed by the School District as of June 30, 2003: Project Unearned Executed Contracts Cohutta Elementary School Renovations Southeast High School North Classroom Renovations Northwest High School Classroom Renovations $ 3,057,784 440,377 472,634 $ 329702795 The amounts described in this note are not reflected in the basic financial statements. -26- WHITFIELD COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30. 2003 EXHIBIT"H" Note 14: 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 15: 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 2003 2002 2001 100% 100% 100% $ 5,027,391 $ 4,597,632 $ 5,110,381 -27 - WHITFIELD COUNTY BOARD OF EDUCATION GENERAL FUND SCHEDULE OF REVENUES. EXPENDITURES AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL YEAR ENDED JUNE 30. 2003 SCHEDULE "1" REVENUES Property Taxes Sales Taxes State Funds Federal Funds Charges for Services Investment Earnings Miscellaneous Total Revenues EXPENDITURES Current Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Community Services Food Services Operation Capital Outlay 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 $ 25,092,728 $ 25,092,728 $ 22,766,124 665,575 56,097,929 56,682,263 56,969,120 5,283,809 7,549,063 7,621,154 1,960,200 1,960,200 2,269,435 196,000 196,000 127,937 647,199 647 199 4,210,682 $ 89,277,865 $ 92,127,453 $ 94,630,027 $ 62,017,712 $ 63,840,972 $ 63,499,771 3,382,005 1,803,259 2,259,334 701,836 5,407,548 501,628 5,098,085 2,839,803 853,540 146,682 117,240 4,345,679 60 000 3,545,083 2,186,307 2,322,307 750,290 5,442,524 501,628 5,098,085 2,859,348 853,540 380,897 117,240 4,346,079 60,000 4,733,212 2,283,029 2,321,553 587,524 5,568,910 816,069 6,255,091 2,804,432 1,169,472 414,897 984,260 4,931,799 $ 89,534,351 $ 92,304,300 $ 96,370,019 $ -256 486 $ -176 847 $ -1 739 992 $ 1,174,247 $ 1,174,247 $ -1 664 247 -1 664 247 10,980 -117274 $ -490,000 $ -490 000 $ -106 294 $ -746,486 $ -666,847 $ -1,846,286 6,804,459 6,804,459 10,866,506 Fund Balances - Ending $ 6,057,973 $ 6 137 612 $ 9,020,220 Notes to the Schedule of Revenues. Expenditures and Changes in Fund Balances Budget and Actual (1) Original and Final Budget amounts do not include budgeted revenues or expenditures of the various principal accounts. See notes to the basic financial statements. - 29- WHITFIELD COUNTY BOARD OF EDUCATION SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS YEAR ENDED JUNE 30. 2003 SCHEDULE "2" FUNDING AGENCY PROGRAM/GRANT Agriculture, U. S. Department of Child Nutrition Cluster Pass-Through From Georgia Department of Education Food and Nutrition Program Food Services School Breakfast Program National School Lunch Program Total Child Nutrition Cluster Other Programs Pass-Through From Georgia Department of Education Food and Nutrition Program Food Distribution Program (1) Pass-Through From Office ofTreasury and Fiscal Services National Forest Reserve Funds Total U.S. Department of Agriculture Education, U. S. Department of Special Education Cluster Pass-Through From Georgia Department of Education Individuals with Disabilities Education Act Part B - Special Education Flow Through Capacity Building Improvement Preschool Total Special Education Cluster Other Programs Pass-Through From Georgia Department of Education Elementary and Secondary Education Act Title I Comprehensive School Reform Demonstration Grant Grants to Local Educational Agencies School Improvement Title II Enhancing Education Through Technology Improving Teacher Quality Title Ill Limited English Proficient TitleV Innovative Education Program Strategies Title VII Immigrant Education Reading Excellence - Local Reading Improvement Vocational Education - Basic Grants to States High School Program Basic Grant CFDA NUMBER PASSTHROUGH ENTITY ID NUMBER EXPENDITURES IN PERIOD 10.553 10.555 N/A N/A $ $ (2) 4,628,923 4,628,923 10.550 10.665 N/A N/A $ 279,173 (3} 4,908,096 * 84.027 * 84.027 * 84.173 N/A $ NIA N/A $ 1,467,214 29,011 79 417 1,575,642 84.332 N/A * 84.010 N/A * 84.010 N/A 84.318 N/A 84.367 N/A 84.365 N/A 84.298 N/A 84.162 N/A * 84.338 N/A 84.048 NIA 50,620 1,577,972 38,351 47,130 293,035 113,548 60,459 25,153 838,300 103,091 - 30- WHITFIELD COUNTY BOARD OF EDUCATION SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS YEAR ENDED JUNE 30, 2003 SCHEDULE "2" FUNDING AGENCY PROGRAM/GRANT Education, U.S. Department of Other Programs Pass-Through From Hall County Board of Education d/b/a Piedmont Migrant Education Agency Elementary and Secondary Education Act Title I Migrant Education Total U. S. Department of Education CFDA NUMBER PASSTHROUGH ENTITY ID NUMBER EXPENDITURES IN PERIOD 84.011 N/A $ $ 61468 4,784,769 Total Federal Financial Assistance N/A = Not Available $ ===9==,6=9=2i!:,8=65= Notes to the Schedule of Expenditures of Federal Awards (1) The amount shown for the Food Distribution 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 ($588,253) were not maintained separately and are included in the 2003 National School Lunch Program. (3) Funds earned on this program in the amount of $5,514 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 Whitfield County Board of Education and is presented on the modified accrual basis of accounting which is the basis of accounting used in the presentation of the basic financial statements. See notes to the basic financial statements. - 31 - WHITFIELD COUNTY BOARD OF EDUCATION SCHEDULE OF STATE REVENUE YEAR ENDED JUNE 30, 2003 AGENCY/FUNDING GRANTS Education, Georgia Department of Quality Basic Education Direct Instructional Cost Kindergarten Program Kindergarten Program - Early Intervention Program Primary Grades (1-3) Program Primary Grades - Early Intervention (1-3) Program Upper Elementary Grades (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 English Speakers of Other Languages (ESOL) Media Center Program 20 Days Additional Instruction Staff and Professional Development Indirect Cost Central Administration School Administration Facility Maintenance and Operations Categorical Grants Pupil Transportation Regular Bus Replacement Nursing Services Principal Supplements Vocational Supervisors Migrant Education Education Equalization Funding Grant Food Services Vocational Education Austerity Reduction Other State Programs 4-8 Statewide After School Program K-3 Statewide Reading Program Apprenticeship Program Health Insurance Mentor Teachers Pay for Performance Preschool Handicapped Program Lottery Programs Assistive Technology Computers in the Classroom Office of School Readiness Pre-Kindergarten Program - 32- SCHEDULE "3" GOVERNMENTAL FUND TYPE GENERAL FUND $ 3,516,736 432,621 8,230,189 1,311,926 4,007,228 769,228 7,300,107 5,065,401 1,946,776 27,895 863,205 2,652,050 1,102,417 14,789 1,773,659 48,250 524,253 1,495,395 1,146,577 376,663 224,149 1,293,458 2,289,744 3,248,501 1,229,275 278,495 239,706 48,511 69,744 3,835 4,611,500 318,852 70,498 -1,384,643 100,434 161,013 29,585 676,430 11,122 91,200 171,997 17,503 252,945 71,920 WHITFIELD COUNTY BOARD OF EDUCATION SCHEDULE OF STATE REVENUE YEAR ENDED JUNE 30, 2003 AGENCY/FUNDING GRANTS Office of Treasury and Fiscal Services Public School Employees Retirement CONTRACT Education, Georgia Department of Foreign Language In Elementary School SCHEDULE "3" GOVERNMENTAL FUND TYPE GENERAL FUND $ 160,028 77 953 $ ===5=6=,9=6=9"=1,=20=== See notes to the basic financial statements. - 33- WHITFIELD COUNTY BOARD OF EDUCATION SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS YEAR ENDED JUNE 30. 2003 SCHEDULE "4" PROJECT Construction of a new elementary school. parking areas and grounds and providing furnishings. equipment and fixtures therefor Construction of additional classrooms, instructional space at nine elementary schools, four middle schools and two high schools, as well as remodeling and renovating existing classrooms, media centers, offices, kitchens, cafeterias, gymnasiums, auditoriums, restrooms, roofs, parking areas and grounds at these schools and providing furnishings, equipment and fixtures therefor Acquisitions, construction and equipping of a new elementary school, a new middle school and a new high school, including the acquisition of any furniture, fixtures and equipment necessary or desirable therefor; renovations and improvements at existing schools, including the acquisition of any furniture, fixtures and equipment necessary or desirable therefor; the acquisition, construction and equipping of a central warehouse facility; the acquisition of school buses; and system-wide technology improvements ORIGINAL ESTIMATED COST (1} CURRENT ESTIMATED COSTS(2} AMOUNT EXPENDED IN CURRENT YEAR(3} AMOUNT EXPENDED IN PRIOR YEAR(3} PROJECT STATUS $ 2.153.000 $ 6,488,397 $ 6,488,397 Completed 46,753,759 53,719,500 $ 12,361,495 30,306,591 Ongoing 53,531,937 53,531,937 815 944 900 000 Ongoing $ 102,438,696 $ 113,739,834 $ 13,177,439 $ 37,694,988 (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 Whitfield County approved the imposition of a 1% sales tax to fund the above projects. Amounts expended for these projects may include sales tax proceeds, state, local property taxes and/or other funds over the life of the projects. See notes to the basic financial statements. - 34- WHITFIELD COUNTY BOARD OF EDUCATION GENERAL FUND - QUALITY BASIC EDUCATION PROGRAM (QBE) ALLOTMENTS AND EXPENDITURES - BY PROGRAM YEAR ENDED JUNE 30. 2003 SCHEDULE "5" DESCRIPTION ALLOTMENTS FROM GEORGIA DEPARTMENT OF EDUCATION (1) (2) ELIGIBLE QBE PROGRAM COSTS SALARIES OPERATIONS TOTAL Direct Instructional Programs Kindergarten Program $ Kindergarten Program-Early Intervention Program Primary Grades (1-3) Program Primary Grades-Early Intervention (1-3) Program Upper Elementary Grades (4-5) Program Upper Elementary Grades-Early Intervention (4-5) Program Middle School (6-8) Program High School General Education (9-12) Program Vocational Laboratory (9-12) Program Students with Disabilities Category I Category II Category Ill Category IV CategoryV Gifted Student - Category VI Remedial Education Program Alternative Education Program English Speakers of Other Languages (ESOL) 3,966,739 $ 494,988 9,245,808 1,462,490 4,501,797 874,941 8,150,824 5,718,027 2,186,055 5,303,769 1,957,208 55,539 587,200 1,628,651 5,748,721 $ 421,150 9,432,026 1,357,178 4,512,131 673,038 8,767,584 8,597,087 1,823,843 4,063 971,131 3,422,097 372,987 48 1,507,971 183,342 914,245 1,482,623 148,740 $ 6,661 436,175 20,886 268,177 9,746 553,719 621,362 234,274 16,351 5,472 19,722 3,153 32 30,897 1,419 17,532 12,254 5,897,461 427,811 9,868,201 1,378,064 4,780,308 682,784 9,321,303 9,218,449 2,058,117 20,414 976,603 3,441,819 376,140 80 1,538,868 184,761 931,777 1494877 TOTAL DIRECT INSTRUCTIONAL PROGRAMS $ 46,134,036 $ 50,191,265 $ 2,406,572 $ 52,597,837 Media Center Program Staff and Professional Development 1,288,728 254 170 1,916,861 191,819 211,183 131 715 2,128,044 323,534 TOTAL QBE FORMULA FUNDS $ 47,676,934 $ 52,299,945 $ 2,749,470 $ ====5=5,=04=9=,4=1=5 (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. - 35- 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 June 10, 2004 Honorable Sonny Perdue, Governor Members ofthe General Assembly Members ofthe State Board of Education and Superintendent and Members of the Whitfield County Board of Education REPORT ON COMPLIANCE AND ON INTERNAL CONTROL OVER FINANCIAL REPORTING BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS Ladies and Gentlemen: We have audited the financial statements of the governmental activities, each major fund, and the aggregate remaining fund information ofWhitfield County Board ofEducation as ofand for the year ended June 30, 2003, which collectively comprise Whitfield County Board of Education's basic financial statements and have issued our report thereon dated June 10, 2004. 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 of the United States. Compliance As part of obtaining reasonable assurance about whether Whitfield County Board of Education's financial statements are free of material misstatement, we performed tests of its compliance with certain provisions oflaws, regulations, contracts and grants, noncompliance with which could have a direct and material effect on the determination offinancial statement amounts. However, providing an opinion on compliance with those provisions was not an objective ofour audit, and accordingly, we do not express such an opinion. The results ofour tests disclosed no instances ofnoncompliance that are required to be reported under Government Auditing Standards. Internal Control Over Financial Reporting In planning and performing our audit, we considered Whitfield 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 assurance on the internal 2003-34YB-30 control over financial reporting. However, we noted a certain matter involving the internal control over financial reporting and its operation that we consider to be a reportable condition. Reportable conditions involve matters coming to our attention relating to significant deficiencies in the design or operation ofthe internal control over financial reporting that, in ourjudgment, could adversely affect Whitfield County Board of Education's ability to record, process, summarize and report financial data consistent with assertions ofmanagement in the financial statements. The reportable condition is described in the accompanying Schedule of Findings and Questioned Costs as item FS-7551-0301. A material weakness is a condition in which the design or operation of one or more ofthe internal control components does not reduce to a relatively low level the risk that misstatements in amounts that would be material in relation to the financial statements being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. Our consideration of the internal control over financial reporting would not necessarily disclose all matters in the internal control that might be reportable conditions and, accordingly, would not necessarily disclose all reportable conditions that are also considered to be material weaknesses. However, we believe the reportable condition described above is not a material weakness. This report is intended solely for the information and use of the management, members of the Whitfield 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, RWH:as 2003-34YB-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 June 10, 2004 Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education and Superintendent and Members of the Whitfield County Board of Education REPORT ON COMPLIANCE WITH REQUIREMENTS APPLICABLE TO EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH 0MB CIRCULAR A-133 Ladies and Gentlemen: Compliance We have audited the compliance of Whitfield County Board of Education with the types of compliance requirements described in the US. Office ofManagement and Budget (0MB) Circular A-133 Compliance Supplement that are applicable to each ofits major Federal programs for the year ended June 30, 2003. Whitfield County Board ofEducation'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 Whitfield County Board of Education's management. Our responsibility is to express an opinion on Whitfield 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 ofStates, 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 Whitfield 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 Whitfield County Board ofEducation's compliance with those requirements. 2003SA-10 In our opinion, the Whitfield County Board ofEducation complied, in all material respects, with the requirements referred to above that are applicable to each ofits major Federal programs for the year ended June 30, 2003. Internal Control Over Compliance The management of Whitfield 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 Whitfield County Board of Education'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 condition in which the design or operation ofone or more ofthe internal control components does not reduce to a relatively low level of risk that noncompliance with applicable requirements of laws, regulations, contracts and grants that would be material in relation to a major Federal program being audited may occur and not be detected within a timely period by employees in the normal course ofperforming 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 of the management, members of the Whitfield 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. q,,Q9 Respectfully submitted, ~ellW.Hi~n State Auditor RWH:as 2003SA-10 SECTION III AUDITEE'S RESPONSE TO PRIOR YEAR FINDINGS AND QUESTIONED COSTS WHITFIELD COUNTY BOARD OF EDUCATION AUDITEE'S RESPONSE SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2003 PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS FINDING CONTROL NUMBER AND STATUS FS-7551-01-01 FS-7551-01-02 FS-7551-02-01 FS-75 51-02-02 Further Action Not Warranted Further Action Not Warranted Previously Reported Corrective Action Implemented Previously Reported Corrective Action Implemented SECTION IV FINDINGS AND QUESTIONED COSTS WHITFIELD COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2003 I SUMMARY OF AUDITOR'S RESULTS 1. Type of Report Issued on the Financial Statements The auditor's opinion on the Whitfield County Board ofEducation's financial statements was unqualified. 2. Reportable Conditions in Internal Control Disclosed by the Audit of the Financial Statements The audit report for the Whitfield County Board ofEducation disclosed a financial statement reportable condition related to the following control categories. Cash and Cash Equivalents Revenues/Receivables/Receipts Expenditures/LiabilitieslDisbursements The reportable condition described above is not considered to be a material weakness. 3. Noncompliance Material to the Financial Statements The audit of the Whitfield 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 Whitfield County Board ofEducation 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 Whitfield 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 .510(a) of 0MB Circular A-133 The Whitfield County Board ofEducation's audit did not disclose audit findings required to be reported by section .510(a) ofOMB Circular A-133. - 1- WHITFIELD COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2003 I SUMMARY OF AUDITOR'S RESULTS 7. Major Programs Federal awards audited as major programs are as follows: 84.010 Elementary and Secondary Education Act - Title I - Grants to Local Educational Agencies 84.010 Elementary and Secondary Education Act - Title I - School Improvement 84.027 Individuals with Disabilities Act - Part B - Special Education Capacity Building Improvement 84.027 Individuals with Disabilities Act - Part B - Special Education Flow Through 84.173 Individuals with Disabilities Act - Part B - Special Education Preschool 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 Whitfield County Board of Education qualified as a low risk auditee as defined by Section .530 of 0MB Circular A-133. II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS CASH AND CASH EQUIVALENTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Control Procedures Reportable Condition Finding Control Number: FS-7551-03-01 Our examination of the principal's accounts disclosed weaknesses in internal control as discussed below: Cash and Cash Equivalents The bank reconciliation function is not separated from the record keeping and voucher payment functions. Thirteen ofthe nineteen principal account reconciliations between bank statements and the general ledger at June 30, 2003 do not agree with the general ledger's ending balance that was provided to the auditors for review. The total variances discovered between the reconciled amount per the bank reconciliation and the ending cash balance per the financial statements is $77,976. -2 - WHITFIELD COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2003 II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS CASH AND CASH EQUIVALENTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Control Procedures Reportable Condition Finding Control Number: FS-7551-03-01 Two bank accounts were listed under a separate tax identification number at the banking institution. It is unclear whether or not these two bank accounts are listed as public funds accounts and are collateralized appropriately. The total bank balance ofthese two accounts atJune 30, 2003 was $21,751. Two bank accounts were discovered during external confirmation procedures that were not included in the financial statements. The balances ofthe two accounts at June 30, 2003 were $39,001. Revenues/Receivables/Receipts Deposit preparation is not separated from the record keeping and cash custody functions. Based on a sample of 40 items, 39 receipts did not contain the necessary supporting documentation. Receipts are not categorized by revenue type on the financial statements. One school did not have adequate documentation to ensure deposits were made in a timely manner. Expenditures/Liabilities/Disbursements Based on a sample of40 items, none ofthe disbursements contained the necessary supporting documentation indicating the approval ofa purchase order and the authorization for payment of invoice. Two checks were made payable to cash. Disbursements are not categorized by expenditure type on the general ledger. These deficiencies were a result ofmanagement's decision to limit the number ofadministrative staff made responsible, at the various principal account sites, for the accounting functions and their failure to ensure established controls were functioning as designed. Management should implement additional procedures to ensure that the key accounting functions of custody, record keeping and authorization are segregated. -3- WHITFIELD COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2003 II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS CASH AND CASH EQUIVALENTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Control Procedures Reportable Condition Finding Control Number: FS-7551-03-01 Management's Response: This is the first year that our School District was required to provide principal account information for examination by the Georgia Department ofAudits in accordance with Governmental Accounting Standard Board pronouncement 34 (GASB 34). Management recognizes that there are weaknesses in the internal controls and will address the findings accordingly. Management will implement updates to the Business Service Manual and improve training and accounting knowledge among school financial personnel. III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS No matters were reported. -4-