ATLANTA INDEPENDENT SCHOOL SYSTEM
ATLANTA, GEORGIA REPORT ON AUDIT
OF THE FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2005
STATE OF GEORGIA
DEPARTMENT OF AUDITS AND ACCOUNTS
Russell W. Hinton State Auditor

ATLANTA INDEPENDENT SCHOOL SYSTEM
Table Of Contents
INDEPENDENT AUDITOR'S REPORT ON PRIMARY GOVERNMENT FINANCIAL STATEMENTS
FINANCIAL SECTION
Management's Discussion and Analysis Basic Financial Statements:
Statement ofNet Assets Statement of Activities Balance Sheet - Governmental Funds Reconciliation of Governmental Fund Balance Sheet to the
District-wide Statement ofNet Assets Statement of Revenues, Expenditures and Changes in Fund
Balances - Governmental Funds Reconciliation of Governmental Fund Statements of Revenues,
Expenditures and Changes in Fund Balances to the District-wide Statement of Activities Statement of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual - General Fund Statement ofNet Assets - Proprietary Funds Statement of Activities - Proprietary Funds Statement of Cash Flows - Proprietary Funds Statement of Fiduciary Assets and Liabilities Notes to Financial Statements

Page
3
13 14 16 17 18
19
20
21
22
23
24
25

ATLANTA INDEPENDENT SCHOOL SYSTEM Table Of Contents
Supplemental Information: Combining and Individual Fund Statements and Schedules:
Combining Balance Sheet - Nonmajor Governmental Funds Combining Statement of Revenues, Expenditures and
Changes in Fund Balances - Nonmajor Governmental Funds
Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual: Title I Title II Title VI-B Lottery Grants Other Federal Programs Other Special Projects
Capital Assets Used in Operation of Governmental Funds: Comparative Schedules of General Capital Assets By Source Schedule of General Capital Assets By Function and Activity Schedule of Changes of General Capital Assets By Function and Activity
ADDITIONAL FINANCIAL INFORMATION
Quality Basic Education Programs: Schedule of Allotments and Expenditures by Program
Schedule of Expenditures by Object - Lottery Programs
FINDINGS AND QUESTIONED COSTS
Schedule of Findings and Questioned Costs
MANAGEMENT'S RESPONSES Schedule of Management's Responses

Page
50 52
54 55 56 57 58 59
60
61
62
64 65

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

DEPARTMENT OF AUDITS AND ACCOUNTS
270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400
July 26, 2006

Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the Atlanta Independent School System
INDEPENDENT AUDITOR'S REPORT ON PRIMARY GOVERNMENT FINANCIAL STATEMENTS
Ladies and Gentlemen:
We were engaged to audit the accompanying financial statements of the governmental activities, business-type activities, each major fund, and the aggregate remaining fund information of the Atlanta Independent School System (School System), as of and for the year ended June 30, 2005, which collectively comprise the School System's primary government financial statements (financial statements). These financial statements are the responsibility ofthe School System's management.
The School System did not properly perform reconciliation procedures for cash and cash equivalents reflected in the accompanying financial statements as of June 30, 2005. In addition, the School System could not provide adequate supporting documentation for post closing adjustments to cash and cash equivalents. The condition ofthe School System's records does not permit the application of other auditing procedures to cash and cash equivalents.
The School System did not provide adequate supporting documentation for Assets - Due from other governments - of$1,360,294 for Other Federal Funds, $569,079 for Other Special Projects, $70,695 for Title I and $67,067 for Title VI-B. The condition ofthe School System's records does not permit the application of other auditing procedures to accounts receivable and related revenue.
The School System did not provide adequate supporting documentation for capital asset balances and related activity as of and for the year ended June 30, 2005. The School System could not provide adequate documentation for additions and deletions as presented on the financial statements. The condition of the School System's records does not permit the application of other auditing procedures.

The School System did not provide adequate supporting documentation for Liabilities - Accounts Payables - of$2,994,209 for General Fund, $2,480,549 for Other Governmental Funds and $400,256 for Capital Projects Funds. Additionally, the School System did not provide adequate supporting documentation for Liabilities - Due to other governments - of $2,338, 116 for Title I and $1,474,111 for Other Federal Funds. The condition of the School System's records does not permit the application of other auditing procedures to accounts payable and related expenditures. The condition of the School System's records does not permit the application of other auditing procedures to liability and related expenditures.
The School System could not provide evidence to support numerous amounts reflected in the School System's financial statements. Numerous adjustments made to the general ledger and between the general ledger and amounts reported in the School System's financial statements could not be substantiated by the School System. In addition, numerous errors and inconsistencies, as reflected in the audit findings included with this report, were identified in the School System's financial statements. The condition of the records supporting the School System's financial statements does not permit the application of other auditing procedures to the financial statements.
Since Atlanta Independent School System did not provide sufficient evidence to support material amounts reported in the School System's financial statements for: (1) cash and cash equivalents balances; (2) accounts receivable balances; (3) capital asset balances and related current year activity; and (4) liability balances and related current year expenditure activity, and since numerous reporting errors and inconsistencies were noted within the financial statements issued by the School System, and since we were not able to apply other auditing procedures to satisfy ourselves as to the fair presentation of the above, the scope of our work was not sufficient to enable us to express, and we do not express, an opinion on the primary government financial statements referred to in the first paragraph.
Management's Discussion and Analysis as presented on pages 3 through 12 is not a required part of the basic financial statements but is supplementary information required by the Governmental Accounting Standards Board. We did not audit the information and express no opinion on it.
Component unit information presented is not a part ofthe primary government financial statements but was included within the basic financial statements presented by the School System. We did not audit the information and express no opinion on it.
The combining and individual nonmajor fund financial statements, schedules of capital assets used in operation of governmental funds and schedules on the quality basic education programs are presented for purposes of additional analysis and are not a required part of the basic or primary government financial statements. We did not audit the information and express no opinion on it.

A copy of this report has been filed as a permanent record in the office of the State Auditor and made available to the press of the State, as provided for by Official Code of Georgia Annotated section 50-6-24.
Respectfully submitted,
~~4.@. w.4J ~
Russell W. Hinton State Auditor
RWH:gp

THIS PAGE INTENTIONALLY LEFT BLANK

ATLANTA INDEPENDENT SCHOOL SYSTEM Management Discussion and Analysis For the Year Ended June 30, 2005
INTRODUCTION
The discussion and analysis of the Atlanta Independent School System (the "School System") financial performance provides an overview of the financial year ended June 30, 2005. The intent of this discussion and analysis is to examine the School System's financial performance as a whole, identify changes in financial position as well as to provide basic financial statements. The basic :financial statements and notes to .the financial statements should be reviewed by the readers to enhance their understanding of the School System's financial performance as a whole or as an entire operating entity. The basic financial statements contain the following components:
1) District-wide financial statements including the Statement of Net Assets and the Statement of Activities which provide a broad, long-term overview of the School System's finances,
2) Fund-level financial statements provide a greater level of detail about the School System's major funds and focus on how well the School System has performed in the short-term in the most significant funds, and
3) Notes to the financial statements.
This report also presents the highlights for the year ended June 30, 2005, and contains other supplementary information.
FINANCIAL IDGHLIGHTS
Overall, net assets in fiscal year 2005 increased by 7.5% over fiscal year 2004. This is evidence of management's ability to maintain a balanced budget and effectively control expenses, despite austerity reductions due to economic downturns affecting district revenues. The key financial highlights for fiscal year 2005 as represented are:
District-wide financial statements
Total net assets for the School System increased from $839.57 million in fiscal year 2004 to $902.65 in fiscal year 2005, an increase of approximately $63.08 million or 7.5%. Net assets increased by $65.39 million for Governmental Activities and decreased by $2.32 million for Business-type Activities.
3

Total revenues increased from $704.47 million in fiscal year 2004 to $707.63 million in fiscal year 2005, an increase of approximately $3.16 million or 0.4%. Revenue for Governmental Activities increased $3.77 million while revenue for Business-type activities decreased by $610,000.
Total expenses decreased $12.36 million or 1.9% from $663.60 million in fiscal year 2004 to $651.24 million in fiscal year 2005. Expenses decreased in Governmental Activities by $11.53 million and decreased by $830,000 in Business-type Activities.
Fund financial statements The School System has prepared its annual :financial reports corresponding to the Governmental Accounting Standards Board No. 34 :financial reporting model. The following graphic is . provided to give the reader an overview of the new reporting model.
Graph 1
4

OVERVIEW OF FINANCIAL STATEMENTS
District-Wide Financial Statements
The district-wide financial statements are designed to provide the reader with a broad overview of the School System's finances in a manner similar to those used by private-sector businesses. The Statement of Net Assets and the Statement of Activities provide information about the activities of the whole School System, both an aggregate and long-term. view of the finances. These statements include all assets and liabilities using the accrual basis of accounting. This basis of accounting includes all of the current year's revenues and expenses regardless of when cash is received or paid.
o The Statement ofNet Assets presents information on all of the Schools System's assets and liabilities, with the difference between the two reported as net assets. Increases or decreases in net assets may serve as a useful indicator of whether the financial position is improving or deteriorating.
o The Statement ofActivi'lies presents information showing how net assets changed during the fiscal year. All changes in the net assets are reported as soon as the underlying event giving rise to the change occurs, regardless ofthe timing ofthe related cash flows. Thus, revenues and expenses are reported in the statement for some items that will result in cash flows in future fiscal periods (for example, uncollected taxes and earned but unused vacation leave).
Included in the Statement of Net Assets and Statement of Activities for the School System are two distinct kinds of activities:
Governmental Activities - Most of the School System's programs and services are reported here including instruction, pupil services, improvement of instruction, educational media, general administrative, school administrative, business services, maintenance and operations of facilities, student transportation, and central support.
Business-type Activities - This service is provided on a charge for goods or services basis to recover all of the expenses of the goods or services provided. The Food Services proprietary fund is reported as a Business-type activity.
5

Table I - Condensed Statement of Net Assets (in millions of dollars)

Governmental Activities

2005

2004

Business-type Activities

2005

2004

Total School System

Percentage Change

2005

2004

Current and other assets Net capital assets

$ 223.10 814.41

216.30 $ 749.30

(25.06) $ 5.06

3.02 $ 198.03

3.90

819.47

219.32 753.20

-9.7% 8.8%

Total assets

1037.51

965.60

(20.00)

6.92

1017.50

972.52

4.6%

Long-term debt outstanding Other liabilities

15:39

19.80

98.73

87.90

0.00

0.00

0.74

25.30

15.39 99.47

19.80 113.30

-22.3% -12.2%

Total liabilities

114.12

107.70

0.74

25.30

114.86

133.10

-13.7%

Net assets Invested in capital assets, net of related debt Restricted Unrestricted

803.56 3.99
115.84

738.10 7.90
112.00

5.06

3.90

808.62

742.00

9.0%

0.00

0.00

3.99

7.90

4.0

(25.81)

(22.33)

90.04

89.67

0.4%

Total net assets

$ 923.39 $ 858.00 $

(~) $ (J!il) $ 902.65 $ 839.57

7.5%

Total assets increased 4.6% or $44.98 million.
Current and other assets decreased $21.29 million or 9.7%. This decrease was expected due to the depletion of the SPLOST investment portfolio to support the completion of school renovations as that bond referendum nears maturity. Other portfolio depletion from the governmental funds were for on-~oing operating expenses.
Capital assets, net of depreciation for all activities increased $66.27 million or 8.8%. For governmental activities the increase primarily represents additions of $66 million, retirements/transfers of $8 million, and a restatement of $7.1 million for adjustments relative to prior year's E-rate purchases and construction projects.
Long-term debt outstanding decreased 22.3% or $4.41 million as existing leases expired. The district did not enter into additional major long-term commitments during the fiscal year.
6

Table 2- Condensed Changes io:Net Assets (in millions of dollan

Qovemmental Acti:vi~es
m ~

~type Activities

_P ~ ~ Change

Revenues

Program revenues

Charges for services

$

()ptnting gral!ts and < i 9 n t n ~
v.mts Capital anc, contnl>u~

Genera:1 rev~ues
Property mxes

SPLOST

Investment tmnings

Other

0.00 S
204.7(>
2.23

0.00 $ 219.90
2.70

37722 9120 4.66 5.90

36820 85.60 2.00 3.80

3.57 $ 18.09 0.00-

1.97 $ 2030 0.00

3.57 $ 222.85
2.23

1.97 24020
2.70

0.00

0.00

377~

36820

91.20

8S.60

4.66

2.00

0.00

0.00

5.90

3:80

81.4% -12% -17.4%
2.4% 6.5% 132.9% 553%

Total revenues

$ 685.97

68228

21.66

2221

707.63

704.47

0.4%

Expenses:

Instruction

$

Pupil and Instructi~ Services
and .Administration &sinessServi~.
~ons Maintenance-and

Transportafion Services

Food Services

Other

435.35 $ 51.11 75.05 48.32 14.68 0.00 0.96

428.80 $ . 49.80
80.40 61:40 15:20 0.00
1.40

Total Expenses Transfers In
Change in net assets

625.47 ilJID
$

637.00
rum
43.60

. 0.00 S 0.00 0.00 0.00 0.00 2S.77 . 0.00

0.00 S 0.00 0.00 0.00 0.00 26.60 0.00

43S.35 S
S1.11 15.05 . 48.32 14.68 25.77 0~96

428.80 49.89 80.40 6i.40 15.20 26.60
1.40

2S.77

26.60

6S124

663.60

.Lfil!

.1..Q

ilQ

0.00

58.19

40.87

1.5% 2.6% -6.7% -21.3% -3.4% -3.1% -31.3%
42.4%

7

Sources of Revenue

Graph2 Fiscal Year 2005

Expenses

Investment other
13%

Program Revenues

~land Instructional
Services 8%

Admiristration
& Business Services Maintenanal & 11 % Operations 7/4

Transportation Services Food Services

53%

Instruction 68%

Total revenues, overall, remained relatively level, increasing $3.16 million or 0.4%, from fiscal year 2004 to fiscal year 2005. The decrease of program revenues of $16.22 million is materially offset by general revenues which increased $19.38 million.
Programs revenues are primarily grant related and they account for 32.3%, or $228.65 million, of total revenues received. Program revenues continue to decrease as economic conditions at the state level are passed through to the District. Additionally, the decrease in student enrollment has affected state funding.
General revenues represent the major revenue stream for the district. They account for 67.7%, or $478.98 million, of total revenues received in FY 2005. Between fiscal year 2004 and 2005, a combined increase of $14.62 million in property tax collections and SPLOST sales tax collections occurred. Additionally, the growth in the investment portfolio's earnings more than doubled as interest rates improved.
Total expenses also remained relatively level from 2004 to 2005, decreasing by !.9% or $12.36 million. Management continues to accurately forecast spending levels and to manage spending levels throughout the year.
Governmental activities account for 96%, or $625.47 million of total district spending. Four activities account for 97.4%, or $609.83 million of governmental spending: instruction ($435.35 million or 69.6%), pupil and instructional services ($51.llM or 8.2%), administration and business services ($75.05 million or 11.9%), and maintenance and operations ($48.32 million or 7.7%). Moderate increases of 1% in spending occurred in instruction and in pupil and instructional services as the District continued its school reform program to provide a quality education to students
8

Although spending in the business-type activities exceeds revenues, the three-year trend indicates an improvement in managing fund activity. Losses over the last three fiscal years were: fiscal year 2003: ($5.4M); fiscal year 2004: ($2.73M); fiscal year 2005: ($2.31M). These improvements are a direct result of district-wide priorities to operate competitively and control costs. Management of the School Nutrition program has been transferred to an external vendor.

Table 3 - Net Cost of Governmental Activities (in millions of dollars)

Instruction Pupil and Instructional Services Administration and Business Services Maintenance and Operations Transportation Services Other

1lfil

Total Cost of Services

~

Percentage Change

Net Cost of Services

Percentage

2005

~

Change

$ 435.35 $ 428.80

51.11

49.80

75.05

80.40

48.32

61.40

14.68

15.20

0.96

1.40

0.02 $ (262.14) $

0.03

(26.06)

(0.07)

(69.18)

(0.21)

(48.29)

(0.03)

(13.27)

(0.31)

0.48

(238.60) (25.60) (75.50) (61.30) (14.80) 2.50

9.9% 1.8% -8.4% -21.2% -10.3% -80.7%

Total Expenses

$ 625.47 $ 637.00

(0.02) $ (418.47) $ {413.30)

1.3%

The Net Cost of Governmental Activities represents the cost of operating the School System to be covered by general revenues, including property taxes. The net cost of services increase is attributable to reduction in program revenues, primarily Quality Basic Education funds received from the State Department of Education and increases in expenditures as discussed above.

Table 4- Capital Assets (net of depreciation, in millions of dollars)

Governmental Activities
~

Business-type Activities
~

Total School System

2004 *

Percentage Change

land Construction in Progress Buildings Building improvements land Improvements Furniture and Fixtures Equipment Vehicles

$ 20.42 $ 17.68 $

91.05

136. 77

61411

508.63

23.92

22.72

3.71

1.18

21.34

1714

36.13

39.80

3.63

518

0.00 $ 0.00 0.00 0.00 0.00 0.00 5.06 0.00

0.00 $ 0.00 0.00 0.00 0.00 0.00 3.90 0.00

20.42 $ 91.05 61411 23.92 3.71 21.34 41.19 3.63

17.68 136.77 508.63 22.72
1.18 1714 43.70 5.28

15.5% -33.4% 20.8%
5.3% 213.4% 23.8%
-5.8% -312%

Total

$ 814.41 $ 749.30 $

5.06 $ 3.90 $ 819.47 $ 753.20

8.8%

- As restated - See Note P to the basic financial statements

9

Construction in Progress and Buildings The second term 5-year SPLOST construction program to renovate academic facilities is near completion. For more detailed information on the School System's capital assets, see Note Gin the financial statements.

Table S - Outstanding Long-Term Debt ('m millions of dollan)
Total School System Percentage Change

Capital leases

-38.7%

Outstanding long-term debt decreased due to scheduled capital lease payments. For more detailed information on the School System's long-term debt, see Note H in the financial statements.
Fund Financial Statements
Fund financial statements provide detailed information regarding the resources segregated for specific activities or objectives, not district-wide. Funds are used to track specific sources of revenue and expenditures for particular programs.
The School System has three kinds of funds:
Governmentalfunds include most of the School System's basic services and focus on providing cash flow available for spending. These funds include the General Fund, Capital. Projects and Other Governmental Funds of lesser magnitude. Fund accounting statements use the modified accrual method of accounting, which measures cash and other financial assets that can be readily converted to cash. These statements present a short-term view ofthe School System's operations and services and do not include the long-term focus presented in the new district-wide financial statements. For an explanation of the differences see the reconciliations included with the Governmental Fund Statements.
Proprietary funds report on services provided by the School System for a fee and employ the full accrual method of accounting in the same manner as the district-wide statements. The School System has one proprietary fund, Food Service. This fund provides student meals at a cost based on the student's ability to pay, subsidized by federal funds and the School System.
Fiduciary funds account for assets not owned by the School System but for which the School System is responsible for ensuring that the assets in the funds are used for their designated purposes. These funds are not included in the district-wide financial statement because they
10

cannot be used to finance the School System operations. The School System has one fiduciary fund - Agency Funds (Local School, Club and Class Funds).

The following presents a summary of the General Fund, Capital Projects Fund and Other Governmental Funds by type of revenue for the fiscal year ended June 30, 2005 as compared to June 30, 2004.

Table 6 - Revenues (in millions of doUan) Governmental Fnnds

Local taxes Sales taxes State reveunes Federal revenues Investment income Other

1m

~

$ 370.26 91.20 137.31 65.12 4.66 10.47

$ 366.00 86.00 152.00 64.00 2.00 10.00

Percentage
lnc/IDec) lnc/(Dec)

4.26 5.20 (14.69) 1.12 2.66 0.47

1.2% 6.0% -9.7% 1.7% 132.9% 4.7%

Total Revenues

$ 679.02 $ 680.00

(0.98)

-0.1%

The following table presents a swnmary of the General Fund, Capital Projects Fund and Other Governmental Funds by type of expenditure for the fiscal year ended June 30, 2005 as compared to June 30, 2004.

Table 7 - Expenditures ('m millions of doUan) Governmental Funds

Instruction Pupil and instructionalservices Administrative and business services Maintenances and operations Transportation services Other Capital outlays Debt services
Total Expenditues

2005

~

$ 395.38 $ 406.00

51.12

49.00

66.55

73.00

48.44

62.00

12.82

13.00

0.22

1.00

107.64

169.00

4.92

7.00

$ 687.09 $ 780.00

Percentage
Incl(Dec) lnel(Dec)

(10.62) 2.12 (6.45)
(13.56) (0.18) (0.78)
(61.36) (2.08)

-2.6% 4.3% -8.8% -21.9% -1.4% -78.0% -36.3% -29.6%

(92.91)

-11.9%

11

Fluctuations in these accounts are consistent with those discussed in the Changes in Net Assets at the district- wide level. General Fund Budgetary Highlights . The Board's budget is prepared by the Finance Division and is a collaborative effort between the school district and the Atlanta community. The basis for preparation utilizes a zero-based approach because it has systematically provided a more accurate account of anticipated spending levels for the year. Details of the original budget and the amended budget are presented on page 20 in the Financial Section of this report. Budgeted expenditures for unfunded pension and capitalized leases were reclassed to correctly state and match all related expenditures to the same function. Expenditures for capital leases for computers (approx. $7.0 million) and unfunded pension (approx. $23.0 million) were reclassed from Business Services to Instruction. Requests for Information This financial report is designed to provide a general overview of the School System's finances for all those with an interest in the School System's finances. Questions concerning any of the information provided in this report or requests for additional financial information should be addressed to the School System's Chief Financial Officer, 130 Trinity Street, SW, Atlanta Georgia 30303.
12

ATLANTA INDEPENDENT SCHOOL SYSTEM
Statement of Net Assets June 30, 2005

Governmental Activities

Business-type Activities

Total

Com11onent Unit Atlanta Educational Telecommunications Collaborative, Inc.

ASSETS Current Assets:
Cash and cash equivalents Restricted Cash Investments Taxes receivable, net Due from other governments Other receivables Internal balances Inventories and prepaid expenses
Total current assets
Noncurrent assets: Capital assets Less: Accumulated depreciation
Total noncurrent assets
TOTAL ASSETS
LIABILITIES Current liabilities:
Accounts payable and other current liabilities Due to other governments Deferred revenues Current portion of long-term debt
Total current liabilities
Noncurrent liabilities: Noncurrent portion oflong-term debt
TOTAL LIABILITIES
NET ASSETS Invested in capital assets, net ofrelated debt Restricted for:
Capital Projects Unrestricted (Deficit)
TOTAL NET ASSETS

$

49,949,238 $

4,304,508 $

54,253,746 $

2,045,564

2,045,564

72,848,171

72,848,171

16,661,147

16,661,147

46,596,645

144,500

46,741,145

2,582,558

862,247

3,444,805

31,456,476

(31,456,476)

955,658

1,081,972

2,037,630

223,095,457

(25,063,249)

198,032,208

1,061,688,809 (247,274,474)
814,414,335
1,037,509,792

9,507,339 (4,451,376)
5,055,963
(20,007,286)

1,071,196,148 (251,725,850)
819,470,298
1,017,502,506

86,172,952 12,556,897 4 689 526
103,419,375

742,123 742,123

86,915,075 12,556,897 4,689,526
104,161,498

10,698 162 114117537

742 123

10698 162 114 859 660

803,563,172

5,055,963

808,619,135

3,988,606 115 840 477

(25,805 372)

3,988,606 90 035 105

$

923,392,255 $ (20,749,409) $

902,642,846 $

1,941,718 127,971
1,582,682 73,282
3,725,653 1,903,461 (1,591,053)
312,408 4,038,061
461,955 103,244
565,199
565 199 312,408 3 160 454 3,472,862

The accompanying notes are an integral part of the basic financial statements. 13

ATLANTA INDEPENDENT SCHOOL SYSTEM Statement ofActivities
For the Year Ended June 30, 2005

Program Revenues

Capital Grants

Charges for

Operating Grants

and

Functions/Programs

Expenses

Services

and Contributions Contnoutions

Primary Government

Governmental activities:

Instruction

$

435,352,357 $

$

170,977,158 $

2,230,799

Support Services:

Pupil services

24,009,140

8,414,003

Improvement of instruction

20,011,373

16,447,379

Educational media

7,087,158

182,646

General administrative

18,908,200

4,151,612

School administrative

23,247,406

238,704

Business services

6,685,755

366,225

Maintenance and operation offacilities

48,321,284

27,511

Student transportation

14,678,214

1,409,015

Central support

26,204,018

1,105,539

Other support services

423,301

1,444,714

Interest on capital leases

538,613

Total Governmental activities

625,466,819

204,764,506

2,230,799

Business-type activities Food services

25,772,181

3,566,337

18,088,139

Total Business-type activities

25,772,181

3,566,337

18,088,139

Total School System

$

651,239,000 $

3,566,337 $

222,852,645 $

2,230,799

Component Unit Public broadcasting station

$

10,492,634 $

1321023 s

10,509,871 $

237,760

General revenues: Taxes: Property Taxes levied for general purposes Special Local Option Sales Tax Investment earnings Other

Total General revenues

Transfers

Total general revenues and transfers Change in net assets Net assets - beginning ofyear, as previously stated Correction of prior year errors (Note P) Net assets - beginning of year, as restated Net assets - end ofyear

The accompanying notes are an integral part of the basic financial statements. 14

Governmental Activities

Net @xl!!:!!!es) Revenues and Cbanses in Net Assets Com11onent Unit

Business-type Activities

TOTALS

Atlanta Educational Telecommunications Collaborative, Inc.

$

(262,144,400) $

{15,595,137) {3,563,994) (6,904,512) (14,756,588) (23,008,702) (6,319,530) (48,293,773) {13,269,199) (25,098,479) 1,021,413 (538,613)

(418,471,514)

$

(262,144,400)

(15,595,137) (3,563,994) (6,904,512)
(14,756,588) {23,008,702)
(6,319,530) (48,293,773) (13,269,199) (25,098,479)
1,021,413 (538,613)

(418,471,514)

(418,471,514)

$ (4,117,705) (4,117,705) (4,117,705)

(4,117,705) (4,117,705) (422,589,219)

$

387,020

377,215,701 91,202,366 4,658,043 5,900,535

377,215,701 91,202,366 4,658,043 5,900,535

478,976,645

478,976,645

(1,796,292)

1,796,292

477,180,353

1,796,292

478,976,645

58,708,839

(2,321,413)

56,387,426

857,913,461

(18,427,996)

839,485,465

6 769 955

6 769 955

864 683 416

(18 427 996)

846,255,420

$

923,3921255 $

!20,749,409) $

902,642,846 $

387,020 3,085,842
3,472,862

15

ATLANTAINDEPENDENTSCHOOLSYSTEM
Balance Sheet Governmental Funds
June 30, 2005

ASSETS
Cash and cash equivalents Restricted cash Investments Property taxes receivable, net Due from other governments Accrued interest Due from other funds Other receivables Inventories
TOTAL ASSETS

General Fund

Capital Projects Fund

Other Governmental
Funds

Total Governmental
Funds

$

47,318,559 $

$

2,630,679 $

49,949,238

2,045,564

2,045,564

72,848,171

72,848,171

8,501,235

8,501,235

17,230,420

18,977,154

10,389,071

46,596,645

454,543

254,783

709,326

105,003,997

42,080,818

55,949,740

203,034,555

102,667

1,770,564

1,873,231

885,580

70,078

955,658

$

252,345,172 $ 63,428,397 $ 70,740,054 $

386,513,623

LIABILITIES AND FUND BALANCES

Liabilities:

Accounts payable and accrued liabilities

$

Due to other funds

Due to other governments

Deferred revenue

Total Liabilities

Fund Balances: Reserved for: Inventories Encumbrances Umeserved for: Designated Local programs General contingencies Special revenue fund Undesignated, reported in: General fund Capital Projects Special revenue fund

Total Fund Balances

TOTAL LIABILITIES AND FUND BALANCES $

60,386,640 $ 109,591,430
6,942,843
176,920,913

20,091,342 $ 13,206,812
33,298,154

5,694,968 $ 48,779,838
4,396,985
58,871,791

885,580 6,440,104

70,078

4,400,000 32,194,058 31,504,517
75,424,259 252,345,172 $

30,060,165 30,130,243 63,428,397 $

9,646,094
2,222,169 11,868,263 70,740,054 $

86,172,950 171,578,080
4,396,985 6,942,843
269,090,858
955,658 6,440,104
4,400,000 32,194,058
9,646,094
31,504,517 30,060,165 2,222,169
117,422,765
386,513,623

The accompanying notes are an integral part of the basic financial statements. 16

ATLANTA INDEPENDENT SCHOOL SYSTEM
Reconciliation of Governmental Fund Balance Sheet To the District-wide Statement ofNet Assets June 30, 2005

Total fund balances

$

Amounts reported for governmental activities in the Statement ofNet Assets are different because:

Capital assets used in governmental activities are not financial resources and, therefore are not reported in the above funds: Cost of Capital Assets $ Less: Accumulated Depreciation $

1,061,688,809 (247,274,474)

Other liabilities are not recognized as current year revenues and , therefore, are deferred in the above funds

Long-term liabilities, including capital leases, are not due and payable in the current period and therefore are not reported in the above funds:

Capital leases $ Compensated absences Workers' compensation

(6,862,557) (5,735,586) (2,789,545)

NET ASSETS OF GOVERNMENTAL ACTIVITIES

$

117,422,765
814,414,335 6,942,843
(15,387,688) 923,392,255

The accompanying notes are an integral part of the basic financial statements.
17

ATLANTA INDEPENDENT SCHOOL SYSTEM Statement of Revenues, Expenditures and Changes in Fund Balances
Governmental Funds For the Year Ended June 30, 2005

General Fund

Capital Projects Fund

Other Governmental
Funds

Total Governmental Funds

REVENUES Local taxes Sales taxes State revenues Federal revenues Investment income Facility rental fees Tuition charges Other
Total revenues
EXPENDITURES Current:
Instruction Support Services:
Pupil services Improvement of instruction Educational media General administrative School administrative Business services Maintenance and operation of facilities Student transportation Central support Other Capital Outlays Debt Service: Interest Capital lease principal
Total Expenditures
Excess (deficiency) ofrevenues over expenditures
OTHER FINANCING SOURCES (USES) From bonds Transfers in Transfers out
Total Other Financing Sources(Uses)
Net change in fund balances
Fund Balance, Beginning of Year
FUND BALANCE, END OF YEAR

$ 370,256,829 $
126,980,372 1,326,039 4,317,936 876,965 11,707 5,011,865
508,781,713

$ 91,202,366
917,505 340,107
1,313,294
93,773,272

$ 9,412,788 63,792,096
3,253,210 76,458,094

351,928,098
15,635,773 2,139,407 6,855,285 5,306,538 23,265,642 5,830,861 48,096,253 11,358,026 23,841,875
220,262 3,029,090
538,613 4,386,236
502,431,959
6,349,754

62,016 1,101,418
466,771 317,261
17,557 104,606,23 I
106,571,254 (12,797,982)

43,393,506 8,336,273 16,830,963 224,929 4,525,689 260,050 498,209 28,540 1,439,896 2,551,907
78,089,962
(1,631,868)

11,100,000 (7 028 500)
4,071,500

11,875,815 (] 796,292) 10,079,523

7,028,500 (11,100,000)
(4,071,500)

10,421,254 65,003,005

(2,718,459) 32,848,702

(5,703,368) 17,571,631

$ 75,424,259 $ 30,130,243 $ 11,868,263 $

370,256,829 91,202,366 137,310,665 65,118,135 4,658,043 876,965 11,707 9,578,369
679,013,079
395,383,620
23,972,046 20,071,788
7,080,214 9,832,227 23,525,692 6,795,841 48,442,054 12,815,478 26,393,782
220,262 107,635,321
538,613 4,386,236
687,093,175
(8,080,096)
11,875,815 18,128,500 (19,924,792)
10,079,523
1,999,427
I 15,423,338
117,422,765

The accompanying notes are an integral part of the basic financial statements.
18

ATLANTA INDEPENDENT SCHOOL SYSTEM
Reconciliation of Governmental Funds Statement ofRevenues, Expenditures and Changes in Fund Balances To the District-wide Statement of Activities For the Year Ended June 30, 2005

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

Net change in fund balance - total governmental funds

s

1,999,427

Governmental funds report capital outlays as expenditures. However, in the statement of activities the cost of those assets is allocated over their estimated useful lives and reported as depreciation expense. This is the amount by which capital outlays exceeded depreciation in the current period.
Capital Outlays Less: Depreciation Expenses
Revenues in the statement ofactivities that do not provide current financial resources are not reported as revenues in the funds

102,527,800 (36,588.731) 65,939,069
2,970,266

ln the statement of activities, only the loss on the disposal of equipment is reported, while the proceeds from the sale increase financial resources in the governmental funds. This results in the change in net assets differing from the change in fund balance by the book value ofthe disposed equipment
The issuance oflong-term debt (capitalized leases) provides current financial resources to government funds. Repayment of debt (capitalized leases) is an expenditure in the governmental funds but the repayments reduce long-term liabilities in the statement ofnet assets. This amount is the net effect of these differences in treatment of long-term debt.
Bond funds issued by the City of Atlanta on behalf ofthe School System requested and received that provide current financial resources to governmental funds.
Tax revenues collected by the City ofAtlanta on behalf ofthe School System not recorded at the fund level, but recognized to reduce long-term liabily in the statement of net assets.
Some expenses reported in the statement of activities do not require the use of current financial resources and , therefore, are not reported as expenditures in governmental funds.

(1,246,481)
4,386,236 (11,875,815)
3,988,606 (2,046,920)

Capital expenditures reported in the statement of activities that do not require the use of current financial resources and, therefore, are not reported as expenditures in governmental funds.
CHANGE IN NET ASSETS OF GOVERNMENTAL ACTIVITIES

(5,405,549)

s

58,708,839

The accompanying notes are an integral part ofthe basic financial statements.

19

ATLANTA INDEPENDENT SCHOOL SYSTEM
GENERAL FUND Statement of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual
For the Year Ended June 30, 2005

REVENUES Local taxes Interest income Tuition charges Facility rental fees State revenues Federal revenues Other

Budgeted Amounts

Original

Final

Actual (Budgetary
Basis)

Variance to Final Budget
Over (Under)

$ 356,057,394 $ 356,057,394 $ 371,352,397 $

9,000,000

9,000,000

4,317,936

150,000

150,000

11,707

450,000

450,000

876,965

122,000,000

122,000,000

124,113,881

1,942,606

1,942,606

1,326,039

400,000

400,000

5,011,865

15,295,003 (4,682,064)
(138,293) 426,965 2,113,881 (616,567) 4,611,865

Total revenues

490,000,000

490,000,000

507,010,790

17,010,790

EXPENDITURES Current:
Instruction Support Services:
Pupil services Improvement of instruction Educational media General administrative School administrative Business services Maintenance and operation of facilities Student transportation Central support Other Capital Outlays Debt Service: Capital lease principal
Interest Expense

305,558,944
11,080,668 4,240,864 9,528,089 6,160,524 24,281,089 39,570,574 56,584,420 12,182,258 24,942,769

346,380,106
11,053,938 4,432,514 9,638,621 5,901,907 24,448,161 8,776,427 58,143,610 11,798,033 31,276,907
6,505 3,086,813
4,577,060

355,030,310
15,635,773 2,139,407 6,855,285 5,306,538 23,265,642 5,830,861 48,096,253 11,358,026 23,644,558
220,262 3,029,090
4,583,553 538,613

8,650,204
4,581,835 (2,293,107) (2,783,336)
(595,369) (1,182,519) (2,945,566) (10,047,357)
(440,007) (7,632,349)
213,757 (57,723)
6,493 538,613

Total Expenditures

494,130,199

519,520,602

505,534,171

(13,986,431)

Net change in fund balances Fund Balance, Beginning of Year

(4,130,199) 67,492,048

(29,520,602) 51,169,334

1,476,619 108,118,741

30,997,221 56,949,407

FUND BALANCE, END OF YEAR

$

63,361,849 $

21,648,732 $ 109,595,360 $

87,946,628

The accompanying notes are an integral part of the basic financial statements.
20

ATLANTA INDEPENDENT SCHOOL SYSTEM
Statement of Fund Net Assets Proprietary Fund - Food Services
June 30, 2005

ASSETS
Current assets: Cash and cash equivalents Due from other governments Other receivables Inventories
Total current assets
Noncurrent assets: Furniture and equipment, net
Total Assets
LIABILITIES
Liabilities: Current Liabilities:
Accounts payable and accrued liabilities Due to other funds
Total Liabilities
NET ASSETS Invested in capital assets Unrestricted (Deficit)
Total net assets (deficits)

$

4,304,508

144,500

862,247

1,081,972

6,393,227

5,055,963 11,449,190

742,123 31,456,476 32,198,599
5,055,963 (25,805,372) $ (20,749,409)

The accompanying notes are an integral part of the basic financial statements. 21

ATLANTA INDEPENDENT SCHOOL SYSTEM
Statement of Revenues, Expenses, and Changes in Fund Net Assets Proprietary Fund - Food Services For the Year Ended June 30, 2005

Operating revenues: Sales Miscellaneous
Total operating revenues
Operating expense: Personnel costs Professional and contract services Supplies and materials Depreciation Other operating costs
Total operating expenses
Operating loss
Nonoperating revenues: Grants - Child Nutrition Program Transfer in
Total nonoperating revenues
Changes in net assets
Net Assets (Deficit), Beginning of Year
NET ASSETS (DEFICIT), END OF YEAR

$

3,357,693

208,644

3,566,337

6,004,241 13,081,940 5,068,241
523,393 1,094,366
25,772,181
(22,205,844)

18,088,139 1,796,292
19,884,431 (2,321,413) (18,427,996) $ (20,749,409)

The accompanying notes are an integral part ofthe basic financial statements.
22

ATLANTA INDEPENDENT SCHOOL SYSTEM Statement of Cash Flows
Proprietary Fund - Food Services For the Year Ended June 30, 2005

Cash Flow From Operating Activities Cash received from user charges Cash payments to employees for services Cash payments to suppliers for goods and services Other Cash Receipts
Net cash used for operating activities
Cash Flows From Noncapital Financing Activities Nonoperating grants received
Net change in cash and cash equivalents
Cash and cash equivalents, beginning of year
CASH AND CASH EQUIVALENTS, END OF YEAR
Reconciliation of operating income {loss) to net cash provided (used) by operating activities:
Operating loss Adjustments to reconcile operating loss to net cash provided (used) by operating activities:
Depreciation Donated food commodities Loss of disposal of equipment Write off of deferred revenue Write off accounts receivable Decrease in receivables Decrease in inventories Increase in accrued liabilities
Net cash used for operating activities

$

2,927,798

(6,404,208)

(9,881,473)

208,644

(13,149,239)

17,453,747

4,304,508

$

4,304,508

$ (22,205,844)
523,393 1,149,882
114,004 (731,118) 292,118 128,147 144,859 7,435,320
$ (13,149,239)

The accompanying notes are an integral part of the basic financial statements.
23

ATLANTA INDEPENDENT SCHOOL SYSTEM
Statement of Fiduciary Assets and Liabilities June 30, 2005

ASSETS

Cash and cash equivalents
TOTAL ASSETS LIABILITIES
Liabilities: Due to local schools and student groups TOTAL LIABILITIES

Agency Fund Local School, Club and Class
Funds $ 1,222,570 $ 1,222,570
$ 1,222,570 $ 1,222,570

The accompanying notes are an integral part ofthe basic financial statements. 24

ATLANTA INDEPENDENT SCHOOL SYSTEM
Notes to Financial Statements
June 30, 2005
A. Summary of Significant Accounting Policies
The financial statements of Atlanta Independent School System (the "School System") have been prepared in conformity with generally accepted accounting principles ("GAAP") as applicable to government units. The more significant of the School System's accounting policies are summarized below.
1. Reporting Entity
The Board of Education of the City of Atlanta was established by the Georgia State Legislature and is composed of nine publicly elected members serving four year terms. The City of Atlanta issues and services general obligation debt to be used for the School System. However, the Board is financially independent of the City as it has the authority to approve its own budget and to provide for the levy of taxes to cover the cost of operating and maintaining the School System and to cover debt service payments on lease purchase agreements. Additionally, the Board has decision making authority, the power to approve selection of management personnel, the ability to significantly influence operations, and primary accountability for fiscal matters.
As required by generally accepted accounting principles, these financial statements present the School System and its component units, entities for which the School System is considered to be financially accountable. The blended component unit, although a legally separate entity, is, in substance, part of the School System's operations. Therefore, data from this unit is combined with data of the School System. The School System's financial statements include two component units described below.
Blended Component Unit. School Buildings, Inc. (SBI) (a non-profit corporation) was established by the School System for the purpose of providing financing for some of the School System's buildings and equipment. SBI is governed by a five member board appointed by the School System's board. SBI has issued certificates of participation (COPS) for the acquisition and construction of facilities and equipment used by the School System. The COPS are repayable solely from payments made by the School System to SBI under a lease agreement for the related facilities and equipment. Accordingly, the COPS and the related capital assets are reported in the District-wide financial statements. (See Note H) Separate financial statements are not prepared for this component unit. Since the defeasance of the COPS debt in 2002 no activities have been recorded in SBI.
25

Notes to the Financial Statements, Continued
A. Summary of Significant Accounting Policies, continued
Charter Schools Included within the School System are seven charter schools. Charter schools were created by the Georgia General Assembly to increase student achievement through academic and organizational innovation by encouraging local school systems to utilize the flexibility of a performance based contract called a charter.
A major portion of the funding for the charter schools comes from the School System. Therefore, the School System is considered financially accountable for the charter schools. The financial activities of the charter schools have been blended with those of the School System.
Pursuant to Georgia Statute 20-2-2062, charter schools are considered public schools and are entitled to receive equal treatment as a public school. The major source of funding for public schools includes the State of Georgia Quality Basic Education allotment as prescribed in Georgia Statute 20-2-2068-1. Other funds are received from local grants, tax revenue collections, and donations.
Discretely Presented Component Unit. Atlanta Educational Telecommunications Collaborative, Inc. (AETC) is a non-profit corporation established by the School System for the purpose of operating the Corporation for Public Broadcasting radio and television broadcast station licenses owned by the School System. The Department owns substantially all assets used to operate the stations and is providing support for capital improvements. Separate financial statements of AETC are available from the School System.
2. District-wide and fund financial statements
The District-wide financial statements (i.e., the statement of net assets and the statement of changes in net assets) report information on all of the nonfiduciary activities of the School System and its component units. The effects of interfund activity have been netted in these statements. Governmental activities, which normally are supported by taxes and intergovernmental revenues, are reported separately from business-type activities, which rely to a significant extent on fees and charges for support. Likewise, the School System is reported separately from certain legally separate component units for which the School System is financially accountable.
The statement of activities demonstrates the degree to which the direct expenses of a given function or segment are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or segment. Program revenues include 1) charges to applicants who use, or directly benefit from goods, services, or privileges provided by a given function or segment and 2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function or segment. Taxes and other items not properly included among program revenues are reported instead as general revenues.
26

Notes to the Financial Statements, Continued
A. Summary of Significant Accounting Policies, continued
Separate financial statements are provided for governmental funds, proprietary funds, and fiduciary funds, even though the latter are excluded from the District-wide financial statements. Major individual governmental funds are reported as separate columns in the governmental fund financial statements.
3. Measurement Focus and Basis of Accounting
The District-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting, as are the proprietary .fund and fiduciary fund financial statements. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Property taxes are recognized as revenues in the year for which they are levied. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider have been met.
Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the School System considers revenues to be available if they are collected within 60 days of the end of the current fiscal period. Expenditures generally are recorded when a liability is incurred, as under accrual accounting. However, debt service expenditures, as well as expenditures related to compensated absences and claims and judgments, are recorded only when payment is due.
Property taxes, sales taxes and interest associated with the current fiscal period are all considered to be susceptible to accrual and so have been recognized as revenues of the current fiscal period. All other revenue items are considered to be measurable and available only when cash is received by the School System.
The School System reports the following major government funds:
General Fund - The General Fund is the School System's primary operating fund. It accounts for all financial transactions of the School System, except those required to be accounted for in another fund.
Capital Projects Funds - These funds account for resources which are used exclusively for acquiring school sites, constructing and equipping new school facilities, and renovating existing facilities. The major revenue sources are proceeds from debt proceeds, bond sales, property tax revenue, special purpose local option sales tax revenues and amounts received from the State of Georgia.
27

Notes to the Financial Statements, Continued
A. Summary of Significant Accounting Policies, continued
The School System reports the following major proprietary fund:
Food Service Funds - The primary purpose of the food service funds is to account for activities of the School System's school breakfast and lunch programs, which are funded primarily by the United States Department of Agriculture, passed through the Georgia Department of Education.
Private-sector standards, of accounting and financial reporting issued prior to December 1, 1989, generally are followed in both the District-wide and proprietary fund financial statements to the extent that those standards do not conflict with or contradict guidance of the Governmental Accounting Standards Board. Governments also have the option of following subsequent private-sector guidance for their business-type activities and enterprise funds, subject to this same limitation. The School System has elected not to follow subsequent private-sector guidance.
Proprietary funds distinguish operating revenues and expenses from nonoperating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund's principal ongoing operations. Operating expenses for the enterprises fund includes the cost of sales and services, administrative expenses, and depreciation on capital assets. All revenues and expenses not meeting this definition are reported as nonoperating revenues and expenses.
The AETC component unit is accounted for on a flow of economic resources measurement focus and uses the accrual basis of accounting. This means that all assets and liabilities associated with the component unit's activities are included on the balance sheet. Under this method, revenues are recognized when they are earned, and expenses are recognized when they are incurred.
The Fiduciary fund accounts for assets held by the School System in a trustee capacity or as an agent on behalf of others. The School System reports the following fiduciary fund:
Agency Fund - This fund is used to account for local school student club and class accounts. It is custodial in nature and does not involve measurement of results of operations.
The fiduciary fund is excluded from the District-wide financial statements.
28

Notes to the Financial Statements, Continued

A. Summary of Significant Accounting Policies, continued

4. Assets, liabilities and net assets or equity

a. Cash Equivalents

The School System considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents.

b. Investments

Investments are recorded at fair value based on quoted market prices.

c. Inventories

Inventories are valued at cost using the first-in, first-out method of accounting. The costs of general fund inventories are recorded as expenditures when purchased rather than when consumed (purchase method). The costs of food services fund inventories are recorded as expenses when purchased (purchase method).

d. Capital Assets

Capital assets used in governmental fund types of the School System are recorded in the statements net assets at historical cost (or estimated historical cost). Donated fixed assets are recorded at their estimated market value at the date of donation. The School System maintains a capitalization threshold of $5,000. (See Note P regarding prior period adjustment)

The cost of normal maintenance and repairs that do not add to the value of the asset or materially extend asset lives are not included in the cost of capital assets.

All reported capital assets are depreciated. Depreciation is computed using the straightline method over the following estimated useful lives:

Capital Asset

Governmental Activities
Estimate Lives in Years

Business-Type Activities
Estimate Lives in Years

Buildings

20-50

Building Improvements

10-30

Furniture and Equipment

3-10

3-15

Vehicles

5-8

29

Notes to the Financial Statements, Continued
A. Summary of Significant Accounting Policies, continued
Capital assets of the discretely presented component unit are recorded at cost. Capital assets donated to proprietary fund type operation are recorded at their estimated fair value at the date of donation. These capital assets are depreciated using the straight line method over their estimated useful lives of five to twenty years.
e. Compensated Absences
The School System reports compensated absences in accordance with the provisions of GASB Statement No. 16, "Accounting for Compensated Absences". Vacation benefits are accrued as a liability as the benefits are earned if the employees' rights to receive salary related compensation are attributable to services already rendered and it is probable that the School System will compensate the employees for the benefits through paid time off or some other means. The School System records a liability for accumulated unused vacation time when earned for all employees with more than one year of service.
The entire compensated absence liability is reported on the District-wide and proprietary fund :financial statements. For governmental fund financial statements, the current portion of unpaid compensated absences is the amount due and payable at year-end. These amounts are recorded in the account "compensated absences payable" in the fund from which the employees who have accumulated unpaid leave are paid. The noncurrent portion of the liability is not reported.
f. Long-term Obligations
In general, payables, compensated absences and accrued liabilities that will be paid from governmental funds are reported on the governmental fund :financial statements regardless ofwhether they will be liquidated with current resources. However claims and judgments, the noncurrent portion of capital leases, contractually required pension contributions and special termination benefits that will be paid from governmental funds are reported as a liability in the fund :financial statements only to the extent that they will be paid with current, expendable, available :financial resources. In general, payments made within 60 days after year end are considered to have been made with current available :financial resources. Long-term debt and other long-term liabilities that will be paid from governmental funds are not recognized as a liability in the fund :financial statements until due but are reported in the District-wide statements as long-term debt.
Long-term obligations payable from proprietary funds are also reported on the proprietary fund :financial statements.
30

Notes to the Financial Statements, Continued
A. Summary of Significant Accounting Policies, continued
g. Fund Equity
In the fund financial statements, governmental funds report reservations of fund balance for amounts that are not available for appropriations or are legally restricted by outside parties for use for a specific pmpose. The following reservations have been established by the School System:
Fund Balances - Reserved for Inventory - resources of the School System in connection with inventory on hand at year end.
Fund Balance -Reservedfor Encumbrances - resources ofthe School System which have been encumbered or appropriated for purchase orders or constructual obligations.
Fund Balances - Reserved for Capital Outlays - resources of the School System which have been formally set aside for capital outlays.
Designations of Fund Balance represent tentative management plans that are subject to change.
h. Net Assets
Net assets represent the difference between assets and liabilities. Net assets invested in capital assets, net of related debt, consist of capital assets, net of accumulated depreciation, reduced by the outstanding balances of any borrowings used for the acquisition, construction or improvement of those assets. Net assets are reported as restricted when there are limitations imposed on their use either through external restrictions imposed by creditors, grantors or laws or regulations of other governments.
The School System applies restricted resources when an expense is incurred for pmposes for which both restricted and unrestricted net assets are available.
1. New Accounting Pronouncements
The School System will adopt the following new accounting pronouncements in future years:
GASB Statement No. 42 -Accounting and Financial Reporting or Impairment ofCapital Assets andfor Insurance Recoveries, effective for fiscal year ended June 30, 2006.
GASB Statement No. 43 - Financial Reporting for Postemployment Benefits Other Than Pension Plans, effective for fiscal year ended June 30, 2007, for plans in which the sole
31

Notes to the Financial Statements, Continued
A. Summary of Significant Accounting Policies, continued
(single-employer plan) or largest participating employer (multiple-employer plan) was a phase I government for the purpose of implementation of GASB Statement No. 34.
GASB Statement No. 44 - Economic Condition Reporting: The Statistical Section, effective for fiscal year ended June 30, 2006.
GASB Statement No. 45 - Accounting and Financial Reporting by Employers for Postretirement Benefits Other Than Pensions, effective for fiscal year ended June 30, 2008.
GASB Statement No. 46 - Net Assets Restricted by Enabling Legislation - an amendment ofGASB Statement No. 34, effective for fiscal year ended June 30, 2006.
GASB Statement No. 47 -Accounting for Tennination Benefits, effective for fiscal year ended June 30, 2006.
The impact of these pronouncements on the School System's :financial statements has not been assessed.
J. Use of Estimates
The preparation of :financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the :financial statements, and the reported amounts of revenues and .expenses during the reporting period. Actual results could differ from those estimates.
Stewardship, Compliance and Accountability
B. Budgets and Budgetary Accounting
The School System follows these procedures in establishing the budgetary data reflected in the financial statements:
1. Budget requests are completed in January.
2. Proposed budgets are reviewed and prepared by the CFO/Comptroller, Superintendent of Schools and Budget Commission for submission and approval to the Atlanta Board of Education (''the Board"), and ultimately to the grand juries of Fulton and DeKalb counties, the Atlanta City Council, the Atlanta-Fulton Public Library and the Georgia State Auditor.
32

Notes to the Financial Statements, Continued B. Summary of Significant Accounting Policies, continued 3. Public hearings on the proposed budget are held in March through May. 4. The legally adopted annual budget is adopted by the Board in May for the General and
Special Revenue Funds. 5. All budget revisions or changes must be approved as required in the charter of the School
System and administrative policy. The administrative level of budgetary control as the budget is adopted is at the function level within funds where budgets are adopted. The Board must approve revisions that alter the total expenditures of any function or fund. Transfer of budgeted amounts between object categories within program functions requires the approval of the Superintendent. No revisions were made at the function level to the General Fund budget during the year. 6. Revenues and expenditures of the Capital Projects Funds are budgeted on a project basis and are, therefore, excluded from presentation in the financial statements. The budget for the General Fund is adopted on a non-GAAP basis. The budgetary comparisons in these financial statements are presented on a non-GAAP budgetary basis. The primary differences between the budget basis and generally accepted accounting principles are: 1. Salaries and employee benefits paid to teachers under contract are recorded when paid (budget) rather than when the liability is incurred (GAAP). 2. State revenue relating to Quality Basic Education expenditures is recorded when received (budget) rather than when susceptible to accrual (GAAP). 3. Payments made by the State of Georgia for School System employee benefits are recognized as revenues and expenditures under GAAP and are not recognized on the budget basis. 4. Transfer ofprior year General Fund project reserves are not recorded under budgetary basis.
33

Notes to the Financial Statements, Continued

B. Summary of Significant Accounting Policies, continued

Adjustments necessary to convert the General Fund's excess of revenues and other financing sources over (under) expenditures and other financing uses, from the GAAP basis to the budget basis, are shown below:

Excess ofrevenues over (under) expenditures - GAAP basis

$6,349,754

Adjustments for: Change in salary and benefits accrual Change in accounts payable Change in deferred revenue State QBE revenue accrual On-behalfpayments revenue On-behalfpayments expenditures

11,744,790 (17,713,493)
2,970,266 (1,874,698) (2,866,491) 2,866,491

Excess ofrevenues over (under) expenditures - budget basis

$1,476,619

Encumbrances

Encumbrances represent commitments related to unperformed contracts for goods or services. Encumbrance accounting, under which purchase orders, contracts and other commitments for the expenditure of resources are recorded to reserve that portion of the applicable appropriation, is used in the governmental funds. Encumbrances outstanding at year end are reported as reservations of fund balances in the governmental funds and do not constitute expenditures or liabilities because the commitments will be honored during the subsequent year. Unencumbered appropriations lapse at the end of the year. Encumbrances are re-appropriated in the subsequent year, except the Capital Projects Funds encumbrances are continuing.

C. Fund Deficit/Excess Expenditures Over Appropriations of Individual Funds
Food Services Fund
The Food Services Fund had a fund deficit of $25,805,372 at year end. The management of the School System has taken the following actions to stop the annual deficit:
1. Entered into management contract which requires vendor penalties for selected areas of nonperformance.
2. Replaced program management personnel. 3. Installed Point of Sale technology to provide expanded and more accurate cost data for
management decision-making.

34

Notes to the Financial Statements, Continued
C. Fund Deficit/Excess Expenditures Over Appropriations of Individual Funds, continued
4. Initiated actions to adjust staffing levels to better match meal demands. 5. Placed greater emphasis on government commodity utilization to reduce food cost. 6. Developed protocols to focus local school nutrition managers' attention on profitability. 7. Refined outreach and processing for free and reduced-cost meal eligible students.
D. Cash and Investments
Cash and Cash Equivalents
Georgia law authorizes the School System to deposit its funds in one or more federally insured or state chartered banks.
At June 30, 2005, the carrying amount of the School System's deposits, including cash accounts, certificates of deposit, and short-term investments, was $57,521,880 andthe fair value and bank balance was $74,307,148. Of the bank balances at June 30, 2005 $300,000 was covered by federal depository insurance and the remaining balances were collateralized by government securities held by the pledging financial institution's trust department or agent in the School System's name.
At June 30, 2005, the carrying amount of deposits for AETC, the discretely presented component unit, was $1,941,718 and the bank balance was $1,883,324. Of the bank balance $1,783,324 was uninsured and uncollateralized.
Investments
Georgia law authorizes the School System to invest its funds in obligations of the State of Georgia or other states, issues by the United States government, obligations fully insured or guaranteed by the United States government or a United States government agency, obligations of any corporation of the United States government, prime banker's acceptance, the Local Government Investment Pool (LGIP) administered by the Georgia Department of Administrative Services, Fiscal Division, repurchase agreements, and obligations of political subdivisions of the State of Georgia.
Interest Rate Risk - interest rate risk is the possibility that changes in interest rates could adversely affect an investment's fair value. Even though the School System currently has all its investments in maturities under one year, it does not have a formal investment policy that limits investment maturities as a means of managing its exposure to fair value loses arising from increasing interest rates.
35

Notes to the Financial Statements, Continued

D. Cash and Investments, continued

Credit Risk - credit risk exists when there is a possibility that the issuer or other counterparty to an investment may be unable to fulfill its obligations. Credit quality ratings are disclosed below for required investments. The School System has a policy regarding credit risk for repurchase agreements and certificates of deposit.

Concentration of Credit Risk - is the risk of loss that may be attributed to the magnitude of a government's investment in a single issue. The School System does have a policy concerning the composition of its investment portfolio and is in compliance with its investment policy.

Custodial Credit Risk - for an investment, custodial credit risk is the risk that, in the event of the failure of other counterparty, the School System will not be able to recover deposits, the value of its investments or collateral securities that are in possession of an outside party. The School System's investment policy on custodial credit risk clearly specifies the School System as purchaser or owner.

As of June 30, 2005, the School System had the following investments with their maturities, ratings and percentage of investments, respectively:

Investment Type**

Fair Value

Maturity-Less than 1 Year

Ratings*

Percentage of Investment

Money Market Funds Repurchase Agreements
Short-term investments
U.S. Treasury Bills
U.S. Agencies: Federal Home Loan Mortgage Corporation Federal Home Loan Bank Federal National Mortgage Association Federal Farm Credit Bank
Certificates of Deposit
Long-term investments
Total

$10,878,346 23,000,000 33,878,346
5,020,300
27,829,900 5,983,920
22,771,795 1,497,660 9,744,596
72,848,171 $106,7261517

$10,878,346 23,000,000 33,878,346
5,020,300

S&P-AAAm S&P-Al+
NIA

27,829,900 S&P-AAA 5,983,920 S&P-AAA

22,771,795 1,497,660 9,744,596
72,848,171
$106,726,517

S&P-AAA S&P-AAA

10.2% 21.6
4.7
26.1 5.6 21.3 1.4 9.1
100.0%

* S&P is Standard & Poor's ratings ** Certificates of deposit are with community banks. Short-term investments includes cash and
cash equivalents.

36

Notes to the Financial Statements, Continued
D. Cash and Investments, continued
Reconciliation to Financial Statements:
Governmental Funds: Cash and cash equivalents-Unrestricted Cash and cash equivalents-Restricted Investments
Total Governmental Activities

$49,949,238 2,045,564
72,848,171 $124,842,973

Enterprise Funds: Cash-Unrestricted Total Enterprise Activities
Fiduciary Funds: Cash
Total Fiduciary Activities

$4,304,508 $4,304,508
$1,222,570 $1,222,570

E. Due from Other Governments
Due from other governments consists of grant reimbursements due from the Georgia Department of Education for expenditures made but not yet reimbursed, and un-remitted annual bond fund proceeds due from the City of Atlanta (see Note H).

F. Taxes Receivable

Property taxes are levied in early July based on property values assessed as of January 1, on all real and personal property located within the City of Atlanta. Property taxes are due on or before August 15, at which time they become delinquent and penalties and interest may be assessed and liens may be attached to property. An allowance has been established for estimated amounts that will not be collected.

Taxes Receivable

Allowance

Net Taxes Receivable

General Fund

$11,666,522

$ 3,165,287 $8,501.235

37

Notes to the Financial Statements, Continued

G. Capital Assets

Capital asset activity for the year ended June 30, 2005 was as follows:
Primary Government

Governmental activities: Land Contruction in progress

Beginning Balance-PY CAFR
(NoteP)

Additions

Retirements / Reclassifications

Transfers Ending Balance

$

17,683,030 / $ 1,740,068 $

$ 994,062 $ 20,417,160

136,770,227 95,622,568

(4,573,779) (136,768.404) 91,050,612

Total non-depreciable assets
Buildings Building improvements Land improvements Furniture and fixtures Equipment Vehicles
Total depreciable assets

154,453,257
653,049,819 33,523,31o/ 1,245,641/ 22,984,571 / 80,980,133 I 21,660,918.1
813,444,392

97,362,636
339,432 2,930,275
389,816 51,560 1,162,245 291,836
5,165,164

(4,573,779) (135,774,342)

(156,468) (1,623,768)
(233,189) 193,406 (546,550) (2,366,569)

119,219,130 1,839,267 2,351,845 6,704,831 3,862,977
133,978,050

111,467,772
772,451,913 36,669,084 3,987,302 29,507,773 86,198,761 21,406,204
950,221,037

Totals at historical cost

967,897,649 102,527,800

(6,940,348) {1,796,292) 1,061,688,809

Less: Accumulated Depreciation Buildings Building improvements Land improvements Furniture and Fixtures Equipment Vehicles

Total accumulated depreciation

Governmental activities capital assets, net $

Business-type activities:

Equipment

$

Totals at historical cost

144,415,548 10,802,588
62,282 4,418,385 34,400,404 17,706,624

13,930,728 2,313,844
209,889 2,482,280 15,718,388 1,933,602

211,805,831

36,588,731

756,091,818 $ 65,939,069 $

(108,221) (365,858)
7,038 (56,533) (54,526) (541,988)

158,238,055 12,750,574
279,209 6,844,132 50,064,266 19,098,238

{1,120,088)

247,274,474*

(5,820,260) $ (1,796,292) $ 814,414,335 *

8,334,925 $ 8,334,925

$

(623,878) $ 1,796,292 $ 9,507,339

(623,878)

1,796,292

9,507,339

Less: Accumulated Depreciation Equipment
Total accumulated depreciation

4,437,857 4,437,857

523,393 523,393

(509,874) (509,874)

4,451,376 4,451,376

Business-type activities capital assets, net $

3,897,068 $ (523,393) $

(114,004) $ 1,796,292 $ 5,055,963

* Rounding difference from page 13

38

Notes to the Financial Statements, Continued
G. Capital Assets, continued
Depreciation expense was charged to governmental functions as follows: Instruction Pupil services hnprovement ofinstruction Educational media General administrative Support services-Business Maintenance and operation of facilities Student transportation Support services-Central Other outlays
Total
Depreciation expense was charged to business-type activities as follows: Food Service

$ 25,277,915 37,094 7,674 6,944
9,075,973 11,443 60,980
1,862,736 44,933 203,039
$ 36.588.731
$ 523393

Component Unit

Fixed asset balances of AETC (component unit) as of June 30, 2005 are as follows:

Equipment and furniture Equipment purchased under capital leases Leasehold improvements

$ 1,699,610 186,416 17,435

1,903,461

Less: Accumulated depreciation

{1,591,053)

Net Fixed Assets

$ 312,408

Depreciation expense of AETC for the year ended June 30, 2005 was $99,615.

39

Notes to the Financial Statements, Continued
G. Capital Assets, continued
As part of the operation agreement with the School System for the radio and television stations, all real and personal property comprising the physical facilities of the stations remains the property of the School System. The School System is responsible for routine maintenance and insurance of the facilities. AETC, in turn, leases the facilities from the School System for $10.00 a year.

B. Long-term Debt

Changes in long-term debt during the year ended June 30, 2005 were as follows:

Beginning Balance

Additions

Deductions

Ending Balance

Amounts Duewilhin One Year

Fund Level Additional Accrual Accrual

Governmental activities: Long-term debt
Capital leases
Total long-term debt
Other long-term liabilities Compensated absences

$ 11,248,793 $ 11,248,793

$ (4J86,236) $ 6,862,557 $ 2,642,606

(4,386,236)

6,862,557

2,642,606

- -. 2,642,606

5,596,793 3,268,836

(2,750,000)

6,115,629

2,411,549

380,043 2,031,506

Workers' compensation

2,950,438 2,976,551

(2,983,067)

2,943,922

169,791

154,377

15,414

Total other long-term liabilities 8,547,231 6,245,387

(5,733,067)

9,059,551

2,581J40

Total long-term liabilities

$ 19,796,024 $ 6,245~87 $ !10,119,303) $ 15,922,108 $ 5,223,946

534,420 4,689,526

Over the years, the City of Atlanta has issued various annual general obligation bonds, general obligation refunding bonds and a 1993 School Improvement Bond on behalf of the School System. The debt service for the bonds has been funded through the School System's bonded debt portion of the annual tax levy. The bonded debt portion of property taxes collected by the City on behalf of the School System are retained by the City and used to pay the annual debt service on the outstanding bonds. During the current fiscal year, an additional $4,000,000 was issued on behalf of the School System and the 2001 Bond issuance was partially refunded in May 2005. The balance of bonds outstanding as of June 30, 2005 amounted to $15.4 million. As of calendar year 2004, based on millage rates, $7.8 million of taxes were collected to be used to retire the debt.

40

Notes to the Financial Statements; Continued

H. Long-term Debt, continued

The School System reports as due to other governments the amount ofbonds proceeds requested and received from the City. This liability is reduced by the amount of bonded debt portion of property taxes collected by the City and reported to the School System.

The School System has entered into various lease agreements for the purchase of equipment valued at $26,560,355. These lease agreements are capital leases for accounting purposes and, therefore, have been recorded at the present value of the future minimum lease payments as of the date of inception. The following is a schedule of the future minimum lease payments under capital leases and their total present value.

Fiscal Year Ending June 30,

2006 2007 2008 2009

$2,948,466 1,767,608 1,408,818 1,408,818

Total minimum lease payments Less: Amount representing interest

7,533,710 671,153

Present value of minimum lease payments

$6,862.557

Interest expense relating to the lease obligations for the year ended June 30, 2005 totaled $538,613.

Under the terms of the special local option sales tax (SPLOST) that was approved in March 1997, by referendum, the School System was required to use a portion of the tax to prepay outstanding debt -both outstanding bonds and certificates of participation (COPS). During fiscal year 2001, the School System defeased $128,655,000 of outstanding bonds, using $108,114,608 ofproceeds from the SPLOST and the remainder from bond sinking funds. The funds have been placed in an irrevocable trust with an escrow agent for the purpose of generating resources for all future debt service payments on the outstanding bonds as they become due. During fiscal year 2002, the School System defeased $37,430,000 of outstanding COPS debt, using $37,991,608 of proceeds from the SPLOST. The funds have also been placed in an irrevocable trust with an escrow agent for the purpose of generating resources for all future debt service payments on the outstanding bonds as they become due.

41

Notes to the Financial Statements, Continued I. Interfund Receivables and Payables Interfund receivable and payable balance as of June 30, 2005 are as follows:

Due from other funds

Governmental Activities General Fund

$ 105,003,997

Capital Projects Fund

42,080,818

Nonmajor governmental funds

55,949,740

Business-type Activities Food Service Fund

$ 203,034,555

Due to other funds
$ 109,591,429 13,206,812 48,779,838
31,456,476 $ 203,034,555

During the course of its operations, the School System makes transfers between funds to finance operations, provide services, acquire assets, and service debt. To the extent that certain transfers among funds had not been received as of year end, balances of interfund amounts receivable or payable have been recorded. It is management's intent to repay interfund balances within the next fiscal year.
Interfund receivables and payables are not reported in the District-wide financial statements but are netted to zero as internal balances in the District-wide statement of net assets.

J. Interfund Transfers

Transfers within the government and proprietary funds for the year ended June 30, 2005 are as follows:
Transfers In Transfers Out Transfers To/From Primary Government:

Governmental Activities General Fund Capital Projects Funds: Nonmajor governmental funds

$11,100,000 7,028,500

$7,028,500 1,796,292 11,100,000

Business-type Activities Food Services Fund

1,796,292

Total Primary Government

$19,924,792

$19,924,792

42

Notes to the Financial Statements, Continued
J. Interfund Transfers, continued
Transfers are used to (1) move revenues from the fund that statute or budget requires to collect them to the fund that statute or budget requires to expend them, (2) move receipts restricted to debt service from the funds collecting the receipts to the debt service fund as debt service payments become due, and (3) use unrestricted revenues collected in the general fund to finance various programs accounted for in other funds in accordance with budgetary authorizations. The current year transfers do not occur on a routine basis.

Other Information

K. Risk Management

The School System is exposed to various risks of losses related to torts, theft of, damage to, and destruction of assets, errors and omissions, injuries to employees, and natural disasters. The School System is self-insured for workers' compensation claims. The School System purchases commercial insurance in amounts deemed prudent by management for all other risks of loss. Settled claims have not yet exceeded purchased commercial insurance coverage in any of the past three years.

Workers' Compensation:

The School System is fully self-insured for workers' compensation claims of its employees and has accrued a liability for the estimated costs of claims and related settlement costs incurred but not paid as of year end. Liabilities include an amount of $154,377 for claims that have been incurred but not reported (IBNR). The calculation of the present value of future workers' compensation liabilities is based on a discount rate of 7.0%. Changes in the claims liability during the last two fiscal years are as follows:

Balance at Beginning ofYear

Claims and Changes in Estimates

Claim Payments

Balance at End of Year

Fiscal year 2004 Fiscal year 2005

$3,406,134 $2,950,438

$1,732,276 $2,976,551

$(2,187,972) $2,950,438 $(2,983,067) $2,943,922

L. Non-monetary Transactions
The School System received from the United States Department of Agriculture through the Georgia Department of Education approximately $1,149,000 in donated food commodities for its lunchroom programs. The federally assigned value of these commodities is reflected as revenue and expense in the Food Services fund financial statements.

43

Notes to the Financial Statements, Continued
M. On-behalf Payments for Fringe Benefits
The School System has recognized revenues and expenditures in the amount of $2,866,491 for health insurance paid by the Georgia Department of Education to the State Merit System of Personnel Administration for non-certified personnel on the School System's behalf.
N. Retirement Plans
Teachers Retirement System of Georgia {TRS)
Plan Description
Substantially all teachers, administrative and clerical personnel employed by local school systems of the State of Georgia are covered by the Teachers Retirement System of Georgia (TRS), which is a cost-sharing, multiple-employer, public employee retirement system sponsored by the State of Georgia. Most School System employees participate in TRS.
TRS provides service retirement, disability retirement, and survivors benefits for its members. A member is eligible for service retirement after 30 years of creditable service, regardless of age, or after 10 years of service and attainment of age 60. A member is eligible for early retirement after 25 years of creditable service. Early retirement benefits are reduced by the lesser of 1/12 of 7% of each month the member is below age 60, or by 7% of each year or fraction thereof by which the member has less than 30 years of service.
Normal retirement benefits paid to members are equal to 2% of the average of the member's two consecutive highest paid years of service multiplied by the number of years of creditable service up to 40 years. The normal retirement pension is payable monthly for life. Options are available for distribution of the member's monthly pension at a reduced rate to a designated beneficiary on the member's death.
Retirement benefits also include death and disability benefits whereby the disabled member or surviving spouse is entitled to receive annually an amount equal to the member's service retirement benefit or disability retirement, whichever is greater. The benefit is based on member's creditable service (minimum of 10 years) and compensation up to the date of death.
TRS issues a publicly available financial report that includes financial statements and required supplementary information for the Plan. That report may be obtained by calling 404-352-6500, or by accessing their website@ www.trsga.com.
44

Notes to the Financial Statements, Continued

N. Retirement Plans, continued

Funding Policy

Employees of the School System who are covered by TRS are required to pay 5% of their gross earnings to TRS. The School System makes monthly employer contributions to TRS at rates adopted by the TRS Board of Trustees as advised by their independent actuary. The employer contribution rate was 9.24% at June 30, 2005.

Total actual and required contributions at 100% were as follows:

2005

2004

2003

School System Employees

$26,202,224 14,180,084

$27,687,064 14,990,114

$27,639,184 14,956,261

$40,382,308 $42,677,178 $42,595.445

City of Atlanta General Employees Pension Plan

Plan Description

All permanent employees of the School System who are not covered under the TRS are eligible to participate in the City of Atlanta General Employees' Pension Plan (the "Plan"). In addition, certain School System employees employed prior to July 1, 1979, also participate in the Plan.

The Plan provides retirement and disability benefits, annual cost-of-living adjustments, and death benefits to plan members and beneficiaries. The Plan is an agent multiple-employer pension plan administered by a Board of Trustees, which includes the Mayor of the City of Atlanta or designee, the City's Chief Financial Officer, one member of City Council, one member of the Atlanta Board of Education, (the "Board") one member elected by eligible employees of the City, one member elected by eligible employees of the School System, one member elected by retired employees of the School System and one member elected by retired employees of the City. The Board of Trustees has the authority to establish and amend the benefit provisions of the Plan.

The Plan issues a publicly available financial report that includes financial statements and required supplementary information for the Plan. The report may be obtained by writing or by calling the Plan at:

City ofAtlanta General Employees Pension Plan 68 Mitchell Street Atlanta, GA
Telephone Number: (404) 330-6000

45

Notes to the Financial Statements, Continued

N. Retirement Plans, continued

The Plan provides retirement benefits that, initially, are 2% of the employee's highest average monthly base compensation over any 36-month period. A participant may retire at age 65 or, after 15 years of service, at age 60. Cost-of-living increases are awarded annually, up to a 3% maximum increase. Partial vesting percentages based on years of creditable service and provisions for early retirement, are included in the Plan. Benefits also may be payable at termination, death, or disability. The School System's membership in the Plan as of December 31, 2004 is as follows:

Active employees Inactive members Retirees and beneficiaries

1,499 9
2,412

Method Used to Value Investments
Investments are stated at fair value. Fair value of Plan assets at December 31, 2004 was $107,065,469.
Funding Policy and Annual Pension Cost
The School System's funding policy is to contribute a percentage of covered employee payroll as developed in the actuarial valuation for the Plan. Obligations to contribute to the Plan are established by the Board, subject to minimum financing standards established by the State of Georgia.
Active participants are required to contribute 7% of pay (or 8% if participant has a covered beneficiary). The School System's contribution percentage is the actuarial determined amount necessary to fund Plan benefits after consideration of employee contributions.
The actuarial determined contribution amount is the sum of the annual normal cost (determined under the entry age normal actuarial cost method) and the amortization of the unfunded actuarial accrued liability as a level percentage of future payroll (over 40 years from January 1, 1979).

46

Notes to the Financial Statements, Continued

N. Retirement Plans, continued

The Plan's annual pension cost for the current year, based on actuarial valuations performed as of January 1, 2005 and related information for the Plan, is as follows:

Contribution rates as a percent of covered payroll:
Employee Employer
Annual pension cost Contributions made
Actuarial valuation date

7.0% or 8.0% 8.0%
$45,245,762 $43,786,086
12/31/04

Actuarial cost method Amortization method
Actuarial assumptions: Investment rate of return Projected salary increases: Inflation Merit or seniority and productivity Post retirement benefit increases

Entry age normal Level% of pay, closed
8% per year
3.0% per year 4.5% per year
NIA

The asset valuation method used is the actuarial value from the prior year plus net new money plus 20% of the asset appreciation/(depreciation) for the current year and each of the prior four years.

Six Year Trend Information as of January 1 is as follows:

Annual

%of

Net

Pension

APC

Pension

Year

Cost (APC)

Contributed

Obligation

2000 2001 2002 2003 2004 2005

$33,494,000 $35,168,700 $36,321,730 $36,862,022 $39,153,620 $45,245,762

100% 100% 100% 100% 100% 97%

$ $ $ $ $ $1,459,676

47

Notes to the Financial Statements, Continued

N. Retirement Plans, continued

Actuarial Valuation
Date

Actuarial Value of Assets*
(a)

Actuarial Accrued Liability (AAL) Entry Age
(b)

Unfunded AAL
(UAAL) {b-a}

Funded Ratio (alb)

Covered Payroll (c}

UAAL as a Percentage of Covered Payroll ({b-a}/c}

1/1/00 ' 1/1/01
1/1/02 1/1/03 1/1/04 1/1/05

$123,501,000 $120,809,700 $117,546,260 $109,367,500 $107,323,985 $102,301,954

$584,106,700 $566,340,700 $563,396,789 $579,890,481 $581,451,634 $580,470,790

$460,605,700 $445,531,000 $445,850,529 $470,522,981 $474,127,649 $478,168,836

21.1% 21.3% 20.9% 18.9% 18.5% 17.6%

$40,327,000 $39,299,400 $40,666,479 $47,042,418 $45,898,463 $40,366,756

1142.2% 1133.7% 1096.4% 1000.3% 1033.0% 1184.6%

0. Commitments and Contingencies

In 1997 the U. S. Federal Communications Commission adopted the Schools and Libraries Support Mechanism of the Universal Service Fund (USF) (referred to herein as "E-rate program"). Under the E-rate program, eligible schools can receive discounts from the USF on eligible telecommunications equipment and services. Amounts provided by USF ranges from 20 to 90 percent of the cost of the equipment or services, based on the economic need within the demographics of a particular school system. The program is administered by the Universal Service Administrative Company.

During fiscal years 1998 and through 2001, the School System applied for approximately $82 million from the USF. According to USF records, $58.8 million ofE-rate funds were disbursed on behalf of the School System with the large portion of the funds remitted to and disbursed directly by vendors under contract with the School System. The School System has been unable to provide documentation as to the nature of items purchased directly by the outside vendors with the E-rate funds. In the absence of documentation to support the nature of the items purchased, the School System is unable to substantiate the propriety of items purchased in accordance with USF rules and regulations. Purchases outside the guidelines of the E-rate program could result in the School System or its vendors having to return funds to the E-rate program. The possible outcome of these matters is uncertain at this time. Accordingly, no provision for any liability has been made in the financial statements for possible refunds of Erate funds. (See Note P below).

Construction commitments

The School System has active construction projects as of December 31, 2005. The projects relate to construction and renovation of school buildings. At year end the School System's commitments with contractors were $41,851,075.

48

Notes to the Financial Statements, Continued 0. Commitments and Contingencies, continued Litigation and Other Contingencies The School System is a defendant in various lawsuits which arose in the ordinary course of its activities. The School System believes its liability in these matters, if any, will not be material. The School System is currently in discussion with the Georgia Department of Community Health relating to the cost of group insurance which may result in an additional liability.
P. Prior Period Adjustments As discussed in Note 0, the School System received $58.8 million of E-rate funds for telecommunications equipment and services. An analysis of the disbursements indicates that $11.8 million was for services and $10.5 million for ongoing maintenance of purchased equipment with the balance of $36.5 million for equipment. In an effort to properly record in the School System's capital asset records equipment still in service, the School System contracted technology companies to inventory all its facilities to determine the estimated historical costs of technology equipment likely to have been purchased with E-rate funds. From the inventory of the technology equipment and applying estimated historical costs, the consultants placed a value on the equipment of $30.9 million. The School System applied a factor relating to installation costs for the equipment to that number. After considering the fact that some schools have closed or been demolished since the installation of the E-rate equipment and that some equipment was replaced with updated equipment under the SPLOST program, and thus such equipment would be considered fully depreciated, the School System has concluded that capital assets should be adjusted by $13.5 million along with accumulated depreciation of $6.8 million ( a net book value of $6.7 million) for E-rate technology equipment still in service as of June 30, 2004. Appropriate adjustments have been made to the capital assets and investment in capital assets net of related debt accounts in the accompanying financial statements.
49

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NONMAJOR GOVERNMENT FUNDS
Special Revenue Funds
Special Revenue Funds are used to account for the proceeds of specific revenues that are legally restricted to expenditure for specified purposes.
The School System's Special Revenue Funds have been established primarily on the basis of program purpose and include the following funds and primary funding sources:
Title I Fund was established to account for federal grant funds passed through the Georgia Department of Education to provide remedial education in the areas of reading and math and to provide a special education program for children who are physically handicapped.
Title II Fund was established to account for federal grant funds passed through the Georgia Department of Education, for the purpose of improving teacher quality and increasing the number of highly qualified teachers, para-professionals and principals.
Title VI-B Fund was established to account for federal grant funds passed through the Georgia Department of Education, for the purpose of providing special education programs for children in prekindergarten through the twelfth grade.
Lottery Fund was established to account for State of Georgia lottery grant funds passing through the State of Georgia Department of Education for various programs as established by the State.
Other Federal Programs Fund was established to account for other federal funds for which separate presentation is not considered necessary.
Other Special Projects Fund was established to account for other state and local funds for which separate presentation is not considered necessary.

ATLANTA INDEPENDENT SCHOOL SYSTEM Combining Balance Sheet
Nonmajor Governmental Funds June 30, 2005

Cash and cash equivalents Due from other governments Accounts receivable Due from other funds
TOTAL ASSETS

ASSETS

Title I

Title II

Seecial Revenue Funds

Lottery

Title VI-B

Grants

$

-$

7,044,154

640,664 $

-$

1,429,895

5,729,004

2,967,437 2,531,061

2,462,465

$ 12,773,158 $ 3,608,101 $ 3,960,956 $ 2,462,465

LIABILITIES AND FUND BALANCES

Liabilities: Accounts payable Salaries and benefits payable Due to other funds Due to other governments
Total Liabilities

$ 762,562 $ 1,121,157 8,551,323 2,338,116 12,773,158

1,304,046 $ 139,813 $

558

22,598

534,882

23,636

1,160,535 584,758

2,820,239

1,769,245

3,071,937 3,494,934 1,793,439

Fund Balances (deficit): Unreserved/designated for
local programs Unreserved/undesignated
Total Fund Balance (deficit)
TOTAL LIABILITIES AND FUND BALANCES

536,164 536,164

466,022 466,022

669,026 669,026

$ 12,773,158 $ 3,608,101 $ 3,960,956 $ 2,462,465

50

Other

Other Special

Federal Funds Projects

Total

$ 989,469 $ 1,000,546 $ 2,630,679

1,915,022

10,389,071

1,770,564

1,770,564

1,205,542 41,054,231

55,949,740

$ 4,110,033 $ 43,825,341 $ 70,740,054

$ 330,795 $ 1,407,854 $ 3,945,628

47,067

1,749,340

1,707,103 1,474,111

32,771,393 . 48,779,838 4,396,985

3,559,076 34,179,247 58,871,791

550,957 550,957

9,646,094 9,646,094

9,646,094 2,222,169
11,868,263

$ 4,110,033 $ 43,825,341 $ 70,740,054

51

ATLANTA INDEPENDENT SCHOOL SYSTEM Combining Statement ofRevenue, Expenditures and Changes in Fund Balances
Nonmajor Governmental Funds For the Year Ended June 30, 2005

Revenue State funds Federal funds Other funds
Total Revenues
Expenditures Current Instruction Support services Pupil services Improvement of instructions Educational media services General administration School administration Maintenance and operation of facilities Student transportation services Central support services Business services Other support services
Total Expenditures
Excess (deficiency) ofrevenues over (under) expenditures
Other financing sources (uses): Transfers in Transfers out
Total Other Financing Sources (uses)
Excess (deficiency) ofrevenues and other financing sources over
(under) expenditures and other financing uses
Fund Balances (Deficit), Beginning of Year FUND BALANCES (DEFICIT),
END OF YEAR

Title I

Title II

SEecial Revenue Funds

Lottery

Title VI-B

Grants

$

$

$ 1,368,874 $ 2,453,036

39,061,958 8,804,127 11,227,783

39,061,958 8,804,127 12,596,657 2,453,036

25,361,903
928,426 7,871,313
66,307 2,474,114
122,105 16,362
1,009,665 81,115 3,400
1,127,248
39,061,958

4,382,956 5,194,807

40,806 3,853,140

5,645,219 192,812

632 1,941

334,161 4,356 2,413

1,247

919,819

164,690 8,445,412

3,736 12,297,323

1,219,192 1,105,382
85 94
2,544 2,327,297

358,715

299,334

125,739

358,715

299,334

125,739

177,449

166,688

543,287

$

- $ 536,164 $ 466,022 $ 669,026

52

Other Federal Other Special

Funds

Projects

Total

$ 3,129,442 $ 2,461,436 $ 9,412,788

4,562,762

135,466 63,792,096

3,253,210

3,253,210

7,692,204 5,850,112 76,458,094

3,591,284
187,650 3,288,829
327,964 61,468 3,972 363,583 23,182
131,855 7,979,787

3,643,364
428,790 1,624,869
158,537 1,388,724
72,121 3,852 66,648 79,874
494,809 16,597
7,978,185

43,393,506
8,336,273 16,830,963
224,929 4,525,689
260,050 28,540
1,439,896 1,105,237
498,209 1,446,670
78,089,962

(287,583) (2,128,073) (1,631,868)

7,028,500 (11,100,000)
{4;071,500)

7,028,500 {11,100,000)
{4,071,500)

(287,583) (6,199,573) 838,540 15,845,667

(5,703,368) 17,571,631

$ 550,957 $ 9,646,094 $ 11,868,263

53

ATLANTA INDEPENDENT SCHOOL SYSTEM
SPECIAL REVENUE FUND - TITLE I Schedule ofRevenues, Expenditures and Changes in Fund Balance - Budget and Actual
For the Year Ended June 30, 2005

Revenue Federal funds
Total Revenue
Expenditures Current Instruction Support services Pupil services Improvement of instructional services Educational media services General administration School administration Maintenance and operation of facilities Student transportation services Business support services Central support services Other support services Food services
Total Expenditures
Revenues equals expenditures
Fund Balance (Deficit), Beginning of Year
FUND DEFICIT, END OF YEAR

Budgeted Amounts

Original

Final

Actual

Variance to Final Budget
Over (Under)

$ 37,445,409 $ 45,951,829 $

37,445,409

45,951,829

39,061,958 $ (6,889,871)

39,061,958

(6,889,871)

27,169,924 10,275,485

21,016,430
2,118,382 15,219,556
4,378,207 365,681 52,646 685,495

37,445,409

1,952,142 163,290
45,951,829

25,361,902
928,426 7,871,313
66,307 2,474,114
122,105 16,362
1,009,665 3,400
81,115 1,086,410
40,839
39,061,958

4,345,472
(1,189,956) (7,348,243)
66,307 (1,904,093)
(243,576) (36,284) 324,170 3,400 81,115 (865,732) (122,451)
(6,889,871)

$

-$

-$

-$

54

ATLANTA INDEPENDENT SCHOOL SYSTEM
SPECIAL REVENUE FUND - TITLE II Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual
For the Year Ended June 30, 2005

Revenue Federal funds Total Revenue
Expenditures Current Instruction Support services Pupil service Improvement of instructional services General administration Central support services Maintenance/Plant OP. Other support services Total Expenditures
Deficiency of revenues over expenditures
Fund Balance, Beginning of Year
FUND BALANCE, END OF YEAR

Budgeted Amounts

Original

Final

Actual

Variance to Final Budget
Over (Under)

$ 8,515,147 $ 8,515,147

9,044,320 $ 9,044,320

8,804,127 $ 8,804,127

(240,193) (240,193)

8,110,927 404,220
8,515,147 177,449

2,382,810 25,000
6,277,232 48,138 311,140
9,044,320
177,449

4,382,956
40,806 3,853,140
632 1,247 1,941 164,690 8,445,412
358,715
177,449

2,000,146
15,806 (2,424,092)
632 (46,891)
1,941 146,450 (306,008)
65,815

$

177,449 $

177,449 $

536,164 $

65,815

55

ATLANTA INDEPENDENT SCHOOL SYSTEM
SPECIAL REVENUE FUND - TITLE VI-B Schedule of Revenues, Expenditures and
Changes in Fund Balance - Budget and Actual For the Year Ended June 30, 2005

Budgeted Amounts

Original

Final

Actual

Variance to Final Budget
Over (Under)

Revenue State funds Federal funds
Total Revenue

$

$

8,571,474

8,571,474

$ 14,340,975 14,340,975

1,368,874 $ 11,227,783 $ 12,596,657

1,368,874 (3,113,192) (1,744,318)

Expenditures Current Instruction Pupil services Improvement of instructional services General Administration Maintenance and operation of facilities Student Transportation School Administration Other support services
Total Expenditures
Deficiency of revenues under expenditures
Fund Deficit, Beginning of Year

8,530,426 41,048
8,571,474 166,688

5,626,048 7,011,436
275,000 445,180 983,311
14,340,975
166,688

5,194,807 5,645,219
192,812 334,161
2,413 919,819
4,356 3,736 12,297,323
299,334
166,688

(431,241) (1,366,218)
(82,188) (111,019)
2,413 (63,492)
4,356 3,736
(2,043,652)
(3,787,971)

FUND DEFICIT, END OF YEAR

$ 166,688 $

166,688 $

466,022 $ (3,787,971)

56

ATLANTA INDEPENDENT SCHOOL SYSTEM
SPECIAL REVENUE FUND - LOTTERY GRANTS Schedule of Revenues, Expenditures and
Changes in Fund Balance - Budget and Actual For the Year Ended June 30, 2005

Revenue State funds Total Revenue
Expenditures Current Instruction Support services Pupil services Improvement of instruction Educational media service School administration Maintenance and operation of facilities Other support services Total Expenditures
Excess of revenues over expenditures

Budgeted Amounts

Original

Final

Actual

Variance to Final Budget
Over (Under)

$ 2,382,066 $ 2,382,066

2,293,869 $ 2,293,869

2,453,036 $ 2,453,036

159,168 159,168

2,382,066 2,382,066

1,793,869 500,000
2,293,869

1,219,192
1,105,382
85 94 976 1,568 2,327,297
125,739

(574,677)
1,105,382 (500,000)
85 94 976 1,568 33,429
125,739

Fund Balance, Beginning of Year FUND BALANCE, END OF YEAR

543,287

$

543,287 $

543,287 543,287 $

543,287

---~-=-- 669,026 $

125,739

57

ATLANTA INDEPENDENT SCHOOL SYSTEM
SPECIAL REVENUE FUND - OTHER FEDERAL FUNDS Schedule ofRevenues, Expenditures and
Changes in Fund Balance - Budget and Actual For the Year Ended June 30, 2005

Budgeted Amounts

Original

Final

Actual

Variance to Final Budget
Over (Under)

Revenue State funds Federal funds
Total Revenue

$ 11,671,586 $ 12,376,048 $

11,671,586

12,376,048

3,129,442 $ 4,562,762 $
7,692,204

(9,246,606) 4,562,762
(4,683,844)

Expenditures Current Instruction Support services Pupil services Improvement of instructional services General administration School administration Maintenance and Operations Student transportation
Central support services Other support services

8,425,907 308,268
2,844,419 26,125 475
66,392

5,148,742
350,248 5,851,140
420,847 64,758 3,000
459,356 9,201
68,756

3,591,284
187,650 3,288,829
327,964 61,468 3,972
363,583 23,182 131,855

(1,557,459)
{162,598) {2,562,311)
(92,883) (3,290) 972
(95,772) 13,981 63,099

Total Expenditures Excess of revenues under expenditures

11,671,586

12,376,048

7,979,787 (287,583)

(4,396,261) (287,581)

Fund Balance, Beginning of Year

838,540

(838,540)

FUND BALANCE, END OF YEAR

$

-$

-$

550,957 $ (1,126,122)

58

ATLANTA INDEPENDENT SCHOOL SYSTEM
SPECIAL REVENUE FUND - OTHER SPECIAL PROJECTS Schedule ofRevenues, Expenditures and
Changes in Fund Balance - Budget and Actual For the Year Ended June 30, 2005

Revenue State funds Federal funds Local and other funds Total Revenue
Expenditures Current Instruction Support services Pupil services Improvement ofinstructional services Educational media services General administration Business services School administration Maintenance and operation offacilities Student transportation services Central support services Other support services Food services Capital outlay Total Expenditures
Excess of revenues over expenditures
Other financing sources (uses): Operating transfers in Operating transfers out Total Other Financing Sources (uses)
Deficiency ofrevenues and other financing sources under expenditures and other financing uses
Fund Balance, Beginning of Year
FUND BALANCE, END OF YEAR

Budgeted Amounts

Original

Final

Actual

Variance to Final Budget
Over (Under)

$ 25,598,059 $ 30,719,361 $

25,598,059

3,020,000 33,739,361

2,461,436 $ 135,466
3,253,210
5,850,112

(28,257,925) 135,466 233,210
(27,889,249}

4,318,751
2,448,082 2,892,927
49,959 5,923
15,877,417 5,000
25,598,059

6,851,962
493,265 3,399,224 2,905,568 1,819,494
410,281 93,759 3,175
1,579,246 100,000
15,854,226 5,000
224,161
33,739,361

3,643,364
428,790 1,624,869
158,537 1,388,724
494,809 72,121 3,852 66,648 79,874 16,391 206
7,978,185
(2,128,073)

(3,208,598)
(64,475) (1,774,355) (2,747,031)
(430,770) 84,528 (21,638) 678
(1,512,598) (20,126)
(15,837,835) (4,794)
(224,161)
(25,761,176}
(2,128,073)

7,028,500 (11,100,000)
(4,071,500}

(7,028,500) (11,100,000} (18,128,500}

(6,199,573)

(20,256,573)

15,845,667

15,845,667

15,845,667

$ 15,845,667 $ 15,845,667 $

9,646,094 $ ~20,256,573)

59

ATLANTA INDEPENDENT SCHOOL SYSTEM Capital Assets Used in the Operation ofGovernmental Funds

Comparative Schedules ofGeneral Capital Assets by Source June 30, 2005 and 2004

General Fixed Assets Land Land improvements Buildings and improvements Equipment Vehicles Furniture and fixtures Construction in progress

2005

Totals

2004

$ 20,417,160 3,987,301
809,120,997 86,198,762 22,729,857 28,184,120 91,050,612

$ 17,683,030 1,245,641
686,573,129 80,980,132 21,660,918 22,984,571 136,770,227

TOTAL GENERAL FIXED ASSETS

$ 1,061,688,809 $ 967,897,648

Investment in General Fixed Assets by Source: General Fund Capital Projects

$ 970,638,197 91,050,612

$ 831,127,421 136,770,227

TOTAL INVESTMENT IN GENERAL FIXED ASSETS

$ 1,061,688,809 $ 967,897,648

60

ATLANTA INDEPENDENT SCHOOL SYSTEM Capital Assets Used in the Operation ofGovernmental Funds
Schedule of General Capital Assets By Function and Activity June JO, 2005

Land

Buildings and

Construction in

Instruction

Land

lmJ!!!!vements lml!rovements 9uil!ment

Vehicles

s 15,149,809 $

s 3,329,526

748,325,563 $ 49,440,227 $

Furniture $ 19,638,175 $

Proll!!!!!! 91,050,612 $

Pupil services

354,680

Improvement of instruction

46,870

Educational media

75,225

General administrative

3,997,687

657,775

50,124,893

35,845,891

8,366,515

Support Services-Business

110,086

Maintenance and operation offacilities

313,250

24,210

7,500

458,491

Student transportation

22,161,280

Central support services

589,355

428,368

Facilities acquisition and construction

956,414

Other outlays

10,056,976

179,431

Total 926,933,912
354,680 46,870 75,225
98,992,761 110,086 803,451
22,161,280 1,017,723 956,414
10,236,407

TOfAL GENERAL FIXED ASSETS $ 20,417,160

3,987,301 *

809,120,997

86,198,761

22,729,857

28,184,120

91,050,612

1,061,688,809

61

ATLANTA INDEPENDENT SCHOOL SYSTEM
Capital Assets Used in the Operation of Governmental Funds
Schedule of Changes in General Capital Assets By Function and Activity For the Year Ended June 30, 2005

Function and Activity

July 1, 2004

Retirements I Additions Reclassifications June 30, 2005

Instruction

$ 695,860,511 $ 6,378,700

Pupil services

354,680

Improvement of instruction

46,870

Educational media

85,417

General administration

99,476,565

School administration

Maintenance and operation of facilities

619,701

181,750

Student transportation

22,707,830

Central support services

783,026

234,697

Business support services

110,086

Facilities acquisition and contruction

956,414

Other outlays

10,236,407

Construction in progress

136,770,227

95,622,568

133,644,089 $
(10,192) (483,804)

835,883,300 354,680 46,870 75,225
98,992,761

2,000 (546,550)
(141,342,183)

803,451 22,161,280
1,017,723 110,086 956,414
10,236,407 91,050,612

TOTAL GENERAL FIXED ASSETS

$ 967,897,648 $ 102,527,80 I $ (8,736,640) $ 1,061,688,809

62

QUALITY BASIC EDUCATION PROGRAMS - PROGRAM UNDEREXPENDITURES
The Official Code of Georgia Annotated Section 20-2-167 (a) (1), (2) and (3) require local Boards of Education to expend allotments of State funds for certain Quality Basic Education programs in the following percentages by program.
(1) Fourteen Weighted Programs
Ninety percent of the total direct instructional costs from the original allotment plus one hundred percent of the mid-term allotment including salaries and operations of each program must be expended in each program.
One hundred percent of the operations cost plus one hundred percent of the mid-term allotment allocated must be expended for operations summed across all fourteen program areas.
After the ninety and one hundred percent tests have been reached, the operations portions of that program may be expected for operations costs of any other of the fourteen programs.
After the ninety and one hundred percent tests have been satisfied, salary funds may be utilized in operations, but none of the operations funds may be used for salaries.
(2) Media Center Programs
Ninety percent of the original funds allocated plus one hundred percent of the mid-term allotment designated for salaries must be spent for salaries.
One-hundred percent of the original funds allocated plus one hundred percent of the mid-term allotment designated for operation must be spent for operation.
(3) Staff Development Program
One hundred percent of funds designated for staff development must be spent for salaries or operational costs of these programs.
The following pages are presented for purposes of additional analysis and reflect overall minimum expenditure requirements compared to overall program expenditures made by the Board as described above and also reflect minimum program expenditure requirements compared to actual expenditures made by the Board on a program basis.
63

ATLANTA INDEPENDENT SCHOOL SYSTEM SCHEDULE OF ALLOTMENTS AND EXPENDITURES BY PROGRAM
GENERAL FUND QUALITY BASIC EDUCATION PROGRAMS FOR THE FISCAL YEAR ENDED JUNE 30, 2005

ALLOTMENTS FROM GEORGIA DEPARTMENT OF EDUCATION

GENERAL AND CAREER EDUCATION PROGRAMS

KINDERGARTEN

$

KINDERGARTEN EIP

PRIMARY GRADES 1-3

PRIMARY GRADES 1-3 EIP

SUBTOTALK-3

UPPER ELEMENTARY GRADES 4-5

UPPER ELEMENTARY GRADES 4-5 EIP

MIDDLE GRADES 6-8

MIDDLE SCHOOL 6-8

HIGH SCHOOL GENERAL EDUCATION GRADES 9-12

VOCATIONAL EDUCATION LABORATORIES
TOTAL GENERAL AND CAREER EDUCATION PROGRAM s

TOTAL
12,450,773 8,024,201 30,269,454 16,503,383 67,247,811 13,426,543 11,209,837 1,906,657 26,993,626 22,306,952 6,135,277 149,226,703

AUSTERITY REDUCTION

ACTUAL DIRECT INSTRUCTIONAL EXPENDITURES

.I.QIM.

!QLY..

$

(1,321,633) $

(3,042,438)

(4,364,071) (1,553,485)

(87,400) (3,393,580) (2,506,282)
(708,645}
s (12,613,463) s

10,663,681 19,432,771 62,608,598 8,409,248 101,114,299 23,257,668
752,444
29,880,996 29,145,973
7,080,370 191,231,7S0

SPECIAL EDUCATION PROGRAMS

REGULAR PROGRAMS

CATEGORY!

CATEGORY II

CATEGORY III

CATEGORY IV

CATEGORYV

SPECIAL EDUCATION ITINERANT

SPECIAL EDUCATION SUPPLEMENTAL SPEECH

SUBTOTAL REGULAR PROGRAMS

CATEGORY VI GIFTED

TOTAL SPECIAL EDUCATION PROGRAMS

$

REMEDIAL EDUCATION PROGRAMS

ALTERNATIVE EDUCATION PROGRAMS

ENGLISH FOR SPEAKERS OF OTHER LANGUAGES (ESOL}

MIDTERM HOLD HARMLESS

TOTAL DIRECT INSTRUCTION

s

2,343,549 4,687,049 11,410,776 1,676,288
375,720 17,942 68,654
20,579,978 5,931,191
26,Sll,169 s
1,444,80S
2,117,811
1,940,267
7,11S,820
188,356,S7S s

s (12,613,463) s

19,015,379 1,863,086 2,643,196 92,287
23,613,947 4 728 967 28,342,914 1,827,568 9,056,703 3,0691182
233,S28,117

MEDIA CENTER PROGRAMS
TOTAL DIRECTINSTRUCTION AND MEDIA CENTER PROGRAMS

4,988,234

8,386,635

s 193,344,809 s (12,613,463) s

241,914,751

1WENTY ADDITIONAL DAYS
STAFF DEVELOPMENT PROGRAMS
CATEGORICAL GRANTS NURSES STUDENT ACHIEVEMENT PRINCIPAL SUPPLEMENTS
TOTAL CATEGORICAL GRANTS
GRAND TOTAL

l,5S8,839 1,074,122

2,418,181 3,043,312

880,564

249,43S

179,409

$

1,309,408 s

s

$ 197,287,178 $

(12,613,463) s

5,239,887
179,416 S,419,303
2S2,79S,S47

64

ATLANTA INDEPENDENT SCHOOL SYSTEM
Lottery Programs Schedule ofExpenditures by Object For the Year Ended June 30, 2005

Expenditures
Operating Costs:
Salaries Employee Benefits Employee travel Other purchased services Materials and supplies Purchase of computers Other expenses

Pre-Kindergarten Program

Total

2005

2004

$

1,945,150 $ 1,945,150 $ 2,011,272

323,962

323,962

336,001

20,007

8,755

8,755

8,016

49,032

49,032

51,932

399

399

$

2,327,298 $ 2,327,298 $ 2,427,228

65

FINDINGS AND QUESTIONED COSTS

ATLANTA INDEPENDENT SCHOOL SYSTEM SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2005
ACCOUNTING CONTROLS (OVERALL) Inadequate Separation of Duties Reportable Condition Repeated From Prior Year Finding Control Number: FS-7611-05-01
An examination ofthe internal accounting control procedures revealed that the Atlanta Independent School System (APS) did not maintain adequate separation of duties in the Financial Accounting System. Access controls in the Financial Accounting System do not prevent users from accessing accounting functions that are outside of their area of responsibility.
Separation ofduties involving key accounting functions, both manual and automated, is the basis for achieving an adequate system of internal control. The deficiencies noted were a result of management's decision not to limit the access rights of users of the Financial Accounting System. Management should ensure that the access controls in the accounting information system complement the system of internal control by limiting an employee's access to only the accounting functions necessary for the performance of that employee's duties.
BUDGET PREPARATION/EXECUTION Deficit Fund Balance Reportable Condition Repeated From Prior Year Finding Control Number: FS-7611-05-02
At June 30, 2005, the Proprietary Fund - Food Services Fund of the Atlanta Independent School System (APS) reported a deficit fund balance in the amount of$25,805,372 which is considered to be an irregularity in accordance with O.C.G.A. 20-2-67. This condition occurred because management approved expenditures in excess of funds available in the Proprietary Fund - Food Services Fund.
The APS should establish appropriate policies and procedures designed to ensure that in future periods the School District does not incur expenditures in excess of revenues available to fund the food services program. In addition, APS should contact the Georgia Department of Education regarding additional corrective action required by APS to comply with O.C.G.A. 20-2-67.
CASH AND CASH EQUIVALENTS Inadequate Accounting Procedures Reportable Condition - Material Weakness Repeated From Prior Year Finding Control Number: FS-7611-05-03
Accounting procedures of the Atlanta Independent School System (APS) were insufficient to provide adequate control over cash and cash equivalents. The following deficiencies were noted affecting either the general operating or capital projects bank accounts:
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ATLANTA INDEPENDENT SCHOOL SYSTEM SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2005
CASH AND CASH EQUIVALENTS Inadequate Accounting Procedures Reportable Condition - Material Weakness Repeated From Prior Year Finding Control Number: FS-7611-05-03
(1) APS staff did not appear to have adequate training in the operation of pooled bank accounts to ensure proper accountability of funds, nor did staff demonstrate an understanding ofhow to properly account for activity deposited in pooled bank accounts,
(2) Reconciling items were noted within the bank reconciliations, these adjustments were needed to tie the bank balances to the general ledger account balances. Additionally, after auditors requested documentation for and performed further review on the year end post closing entries, it was noted that Atlanta Public Schools could not or was not able to adequately document and/or explain the nature ofsuch entries posted to cash and related due to and due from accounts. These entries included millions of dollars of adjustments posted to cash, due to and due from accounts which were not properly supported, and
(3) Balances due to/from other funds, related to the pooled cash account, included significant errors/variances at year end.
These deficiencies, which result in an irregularity in accordance with O.C.G.A. 20-2-67, occurred because management ofAPS failed to implement appropriate accounting procedures to ensure cash transactions were properly documented, recorded, reconciled and safeguarded. The lack of appropriate accounting procedures increases the risk of not only unapproved but fraudulent use or theft of funds.
The APS should establish accounting procedures adequate to ensure proper documentation exists to support all cash transactions, bank accounts are reconciled to the general ledger in a timely manner, and bank reconciling items are properly posted to the general ledger in a timely manner. In addition, APS should contact the Georgia Department of Education regarding additional corrective action required by APS to comply with O.C.G.A. 20-2-67.
REVENUES/RECEIVABLES/RECEIPTS Inadequate Accounting Procedures Reportable Condition - Material Weakness Finding Control Number: FS-7611-05-04
Management did not ensure proper accounting and reporting for revenue and receivable activities related to State, Federal, and Other Governmental Funds. For fiscal year 2005, based on testing performed and documentation provided by APS, the following issues were noted:
(1) The basic financial statements were overstated by $1,360,294 for Other Federal Funds Due from other governments.
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ATLANTA INDEPENDENT SCHOOL SYSTEM SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2005
REVENUES/RECEIVABLES/RECEIPTS Inadequate Accounting Procedures Reportable Condition - Material Weakness Finding Control Number: FS-7611-05-04
(2) The basic financial statements were overstated by $569,079 for Other Special Projects Due from other governments.
(3) The basic financial statements were overstated by $70,695 for Title I - Due from other governments.
(4) The basic financial statements were overstated by $67,067 for Title VI-B - Due from other governments.
These deficiencies, which result in an irregularity in accordance with O.C.G.A. 20-2-67, occurred because management failed to ensure: (1) adequate accounting policies and procedures were in place to properly accrue revenues and receivables, and (2) expenditures supporting revenues and receivables for other governmental funds were properly reported to the Georgia Department of Education for reimbursement. APS should establish accounting procedures adequate to ensure grant revenues and related receivables are accurately reported within the financial statements and subsidiary detail records should be maintained to ensure proper reporting to Georgia Department of Education. The Georgia Department ofEducation should review this matter to determine if a refund of grant revenues is appropriate. In addition, APS should contact the Georgia Department of Education regarding additional corrective action required by APS to comply with O.C.G.A. 20-2-67.
EXPENDITURES/LIABILITIES/DISBURSEMENTS GENERAL LEDGER Inadequate Accounting Procedures Reportable Condition - Material Weakness Repeated From Prior Year Finding Control Number: FS-7611-05-05
A review ofthe Atlanta Independent School System's (APS) internal control policies and procedures noted deficiencies in providing adequate internal control over liabilities and related transactions. The following errors/deficiencies were attributed to the lack of adequate accounting controls over processing, recording and reporting liabilities and related activity:
(1) General Fund Accounts Payable balances could not be properly supported and $2,994,209 of variances were noted.
(2) Other Governmental Funds Accounts Payable balances could not be properly supported and $2,480,549 of variances were noted.
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ATLANTA INDEPENDENT SCHOOL SYSTEM SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2005
EXPENDITURES/LIABILITIES/DISBURSEMENTS GENERAL LEDGER Inadequate Accounting Procedures Reportable Condition - Material Weakness Repeated From Prior Year Finding Control Number: FS-7611-05-05
(3) Capital Projects Fund Accounts Payable balances could not be properly supported and $400,256 of variances were noted.
(4) No documentation was provided for $2,338,116 for Title I - Due to other governments.
(5) Proper documentation could not be provided for $1,474,111 for Other Federal Funds Due to other governments.
(6) It appears that Atlanta Public Schools is recording Compensated Absences as part of Governmental Funds Liabilities. This treatment may be in conflict with Governmental Accounting Standards Board (GASB) 1-6 which specifically states that unmatured debt should not be recorded at the fund statement level. APS should review to ensure no part ofunmatured debt is recorded at the fund statement level.
These errors/deficiencies, which result in an irregularity in accordance with O.C.G.A. 20-2-67, occurred because management failed to ensure adequate accounting procedures were in place to process and report liabilities and related activity.
APS should establish accounting procedures adequate to ensure that: (1) liabilities and related activity are properly processed and reported, and (2) accounts payable subsidiary records are reconciled to general ledger control totals monthly. APS should contact the Georgia Department of Education regarding additional corrective action required by APS to comply with O.C.G.A. 20-2-67.
CAPITAL ASSETS Inadequate Accounting Procedures Reportable Condition - Material Weakness Repeated From Prior Year Finding Control Number: FS-7611-05-06
A review ofthe Atlanta Independent School System's (APS) internal control policies and procedures noted deficiencies in providing adequate internal control over capital assets and related transactions. The following deficiencies pertaining to capital assets were noted:
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ATLANTA INDEPENDENT SCHOOL SYSTEM SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2005

CAPITAL ASSETS Inadequate Accounting Procedures Reportable Condition - Material Weakness Repeated From Prior Year Finding Control Number: FS-7611-05-06

(1) Additions:
Buildings and Building Improvements
Land Land Improvements Equipment/Furniture
and Fixtures/Vehicles

PER BOOK
$123,970,005 $ 1,264,131 $ 2,460,151
$ 13,750,860

PERCAFR VARIANCES

$124,328,104 $ 2,734,130 $ 2,741,661

$ -358,099 $-1,469,999 $ -281,510

$ 12,073,449 $ 1,677,411

Deletions:

Buildings and Building

Improvements

$ 580,588

Equipment/Furniture

and Fixtures/Vehicles $ 2,361,934

$ 1,780,236 $ 586,333

$-1,199,648 $ 1,775,601

(2) Testing of items from the listing to the physical location noted variances and insufficient documentation.

(3) Adjustments made to the financial statements could not be adequately supported by APS.

These deficiencies occurred because management failed to ensure that adequate accounting procedures were in place to process, record and report capital assets and related activity. The lack of proper accounting procedures increases the risk ofnot only unapproved but fraudulent use or theft of APS assets. In addition, variances between the detailed capital asset records and capital assets reported in APS' financial statements are considered to be irregularities in accordance with O.C.G.A. 20-2-67.

APS should establish accounting procedures adequate to ensure that capital assets are accurately processed, documented and reported within their financial statements and reconciled to subsidiary detail records. APS should contact the Georgia Department of Education regarding additional corrective action required by APS to comply with O.C.G.A. 20-2-67.

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ATLANTA INDEPENDENT SCHOOL SYSTEM SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2005
GENERAL LEDGER FINANCIAL REPORTING Inadequate Accounting Procedures Reportable Condition - Material Weakness Repeated From Prior Year Finding Control Number: FS-7611-05-07
Numerous errors and omissions were noted within the Atlanta Public Schools' (APS) financial statements as presented to the auditors for use in auditing the primary government financial statements. The following is a list of these errors and omissions:
(1) Testing performed noted hundreds of adjustments as post closing entries. When testing 107 ofthese adjustments, proper documentation could not be provided for most ofthese adjustments. These adjustments, which were attempting to convert a cash basis accounting system into modified accrual fund statements, did not include appropriate documentation for auditors to determine the correctness or appropriateness of such entries.
(2) Additionally, accrual adjustments related to the conversion from Governmental Funds (modified accrual basis) to District-wide Activities (accrual basis) could not be supported by Atlanta Public Schools. The following unidentified variances were also noted within the Statement of Net Assets based on information provided:
$8,159,912 for Taxes receivable, net. $2,082,612 for Capital assets. $1,120,088 for Accumulated depreciation. $7,887,209 for Due to other governments. $1,962,524 for Noncurrent liabilities - Noncurrent portion oflong-term debt. Based on information received revenue generated from property taxes to pay
for bonds issued by the City ofAtlanta on behalfofthe School System is not recorded on either set of books. The School System should review this matter to ensure proper reporting ofthe activity related to the bonds issued by the City of Atlanta on behalf of the School System.
These deficiencies, which result in an irregularity in accordance with O.C.G.A. 20-2-67, occurred because management's reporting procedures failed to ensure that the financial statements, as presented for audit, was free of significant errors and omissions.
APS should establish procedures adequate to ensure information reported in their financial statements is accurate, properly prepared, and reviewed before released to the public. APS should contact the Georgia Department ofEducation regarding additional corrective action required by APS to comply with O.C.G.A. 20-2-67.
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MANAGEMENT'S RESPONSES

ATLANTA INDEPENDENT SCHOOL SYSTEM SCHEDULE OF MANAGEMENT'S RESPONSES
YEAR ENDED JUNE 30, 2005
General Statement Related to Audit Findings.
The management ofAtlanta Public Schools ("the District") recognizes that strong internal controls are essential to accurate, complete and timely reporting of financial information. Ensuring the continued adherence to established and newly implemented policies and procedures on a daily basis by staff members is one of our foremost fiduciary responsibilities. As a result, actions have been taken by management to strengthen internal controls, starting in 2005.
It should be noted that the full impact of the new and enhanced policies and procedures will not be evident until the end of fiscal year (FY) 2007. Insufficient time passed between the 2004 and 2005 audits to allow for changes made to have full effect. The 2004 audit was completed in March 2006 and the District submitted its management responses in April 2006. The 2005 audit was completed in July 2006 and the District is submitting its management responses this month (October 2006). The District expects it will take nine to twelve months before the full impact of its changes will take hold.
For the fiscal year 2006 the District management channeled additional resources toward improving internal controls to comply with prior year audit findings. The results of this effort are expected to enhance the integrity of the financial statements and to reduce noncompliance audit findings. The following are the action steps taken by the District to strengthen and improve internal controls. These action steps began in fiscal year 2006 and will be further strengthened going forward.
Implemented and posted to the Atlanta Public Schools intranet, written Finance Division procedures based upon industry best practices and upon the new financial management information system (Lawson).
Started the initial phase ofthe Sarbanes-Oxley (SOX) internal control review in June 2006. The SOX review is to be completed by December 31, 2006. Strengthening the internal controls under Sarbanes-Oxley will provide the financial accounting framework for Atlanta Public Schools' financial reporting.
Provided additional training opportunities on the Lawson system and in other financial related areas to staff.
Hiring experienced leaders in the budget, fixed assets and accounting departments to enhance the performance ofthose areas. A new Budget Director was hired in October 2005. The Executive Director ofAccounting and Financial Reporting was also hired in October. A new Fixed Assets manager was hired in May 2006.
Created a full time trainer position, responsible for the training program for all District personnel in Lawson and other financial areas. The full time trainer was hired in June 2006.
Focused finance training on expanding and improving the general accounting analysis activities through the timely completion of balance sheet reconciliations, revenue and expenditure reporting, and the testing of daily transactions. The Carl Vinson Institute was engaged in June 2006 to provide fund accounting training. The training will take place in October and November 2006. Lawson business analysts were hired in July and began to provide training in August 2006.
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ATLANTA INDEPENDENT SCHOOL SYSTEM SCHEDULE OF MANAGEMENT'S RESPONSES
YEAR ENDED JUNE 30, 2005

General Statement Related to Audit Findings.

Two former CFO's were engaged to aid the District in its review of internal controls. The two CFO's, Bill Rogers and John McLeod, started their review in June 2006.
Initialized the security and disaster recovery review within the Information Technology department. The Disaster and Recovery plan will be issued in October 2006.

Finding Control Number: FS-7611-05-01

We concur. The Lawson system was installed with open access to all modules and required the administrator to individually remove access to specific modules. Some users, key technology and high level management personnel, had more system capabilities than required for their position.

All ofthe inappropriate accesses to the finance modules have been disabled in fiscal year 2006. The Lawson system maintains an audit trail that makes it possible to monitor users' access to the system. In addition, an Information Application Technician was hired, in 2006, to monitor all user access. This action places APS in a position to eliminate this concern in the future.

Finding Control Number: FS-7611-05-02

We concur. Management has planned and implemented steps in fiscal year (FY) 2006 to eliminate the annual operating deficit in Nutrition.

Steps taken to eliminate Nutrition operating deficit:

Plan/Objectives to eliminate operatin2 deficit 1. Increase students eligible for free and reduced price meals
2. Increase meal prices 3. Decrease Nutrition staff labor hours
4. Increase USDA commodities utilization 5. Menu revisions to increase participation
6. Initiate a marketing campaign to improve participation

Action Taken
Targeted outreach program to Atlanta Housing Authority and WIC offices. The result was a participation rate increase from 71.23% in FY 05 to 75.49% in FY 06. Increased meal prices by 14%. Reduced all Nutrition Food Assistant daily work hours from 7.5 hours per day to 5.5 hours per day. Increased USDA utilization by 8% in FY 05. Changed from Nutrient Base Menus to Enhanced Food Base Menus. Resulted in Purchased Food cost decreasing from $6.1 million in FY 05 to $5.1 million in FY 06. Increased training for Food Assistants by employing four certified chefs.

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ATLANTA INDEPENDENT SCHOOL SYSTEM SCHEDULE OF MANAGEMENT'S RESPONSES
YEAR ENDED JUNE 30, 2005
Finding Control Number: FS-7611-05-02
In addition, the following corrective plan has been implemented:
The Board has approved an $11 million transfer from the General Fund to Food Services Fund to reduce the deficit.
The Food Services Fund ended fiscal year 2006 with total revenues exceeding expenses by $1 million.
The following are corrective actions steps that will be completed in fiscal year 2007:
A repayment plan will be presented to the Board covering a three (3) year period to eliminate the remaining deficit balance.
APS will continue to work with Georgia Department ofEducation to prevent this issue in the future.
Finding Control Number: FS-7611-05-03
(1) We concur. Errors in bank reconciliations were caused by a lack of understanding of how the Lawson system treated cash pool transactions resulting in overstatement ofcash balances. The Finance Division has established official written operating procedures for each department within the Division. The procedures have been distributed to all employees. Overall, the staff has been trained and they will consistently follow the established procedures as a part of daily operations. Additionally, as processes change, the Finance Procedure manual is regularly updated to reflect the most current processes.
As offiscal year 2006, management requires that all Balance Sheet accounts be reconciled on a monthly basis. These reconciliations will be reviewed and approved monthly by the Executive Director of Accounting. This Corrective Action plan should ensure that our cash transactions are documented properly and will provide a better control structure.
(2) We concur. As of June 2006, management requires that all Balance Sheet accounts (i.e. cash, due to/from) be reconciled on a monthly basis. These reconciliations are reviewed and approved monthly by the Executive Director of Accounting. This Corrective Action plan will ensure that our cash transactions are documented properly.
(3) We concur. As of June 2006, management requires that all Balance Sheet accounts be reconciled on a monthly basis. These reconciliations are reviewed and approved monthly by management. This Corrective Action Plan will ensure that cash transactions are reconciled and documented properly. The Finance Division has also begun an on-going training initiative. Training will be provided by the Carl Vinson Institute from the University of Georgia, and Lawson business analysts. Training On-Demand, the on-line training module within the Lawson system, is also being utilized.
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ATLANTA INDEPENDENT SCHOOL SYSTEM SCHEDULE OF MANAGEMENT'S RESPONSES
YEAR ENDED JUNE 30, 2005
Finding Control Number: FS-7611-05-04
We concur. These audit findings will be eliminated in fiscal year 2006, due to management requiring that all Balance Sheet accounts be reconciled on a monthly basis. These reconciliations are reviewed and approved monthly by the Executive Director of Accounting. This Corrective Action Plan will ensure accurate financial reporting. Management will also require that all revenue, expenditure and balance sheet accounts agree to the Department ofEducation's Completion reports. Management will eliminate this issue going forward.
Finding Control Number: FS-7611-05-05
We concur. These audit findings will be eliminated in fiscal year 2006, due to management requiring that all Balance Sheet accounts be reconciled on a monthly basis. These reconciliations are reviewed and approved monthly by management. This corrective action plan should ensure accurate financial reporting. Management will also require that all revenue, expenditure and balance sheet accounts agree to the Department of Education's Completion reports. Management will eliminate this issue going forward.
Finding Control Number: FS-7611-05-06
(1) We concur. See Exhibit A for a current reconciliation ofthe Asset Management System to the 2005 CAFR (Comprehensive Annual Financial Report).
(2) We concur. See the note below related to tracking electronic devices.
(3) We concur. Management has implemented a monthly reconciliation that will provide adequate support for asset adjustments and capitalization of capital assets.
Note: Our interpretation is that this comment is directed toward assets that are at a 'High risk' of being stolen (i.e. electronic devices). Currently APS' management is considering a change to its policy and procedures that will require all electronic devices to be purchased centrally either through the Information Technology Department (IT) or Procurement. Implementing this safeguard will enhance APS' ability to log and tag these items. The goal is to be able to readily identify stolen or lost items. The District will form a cross-functional team and task it with developing a final solution prior to the end of fiscal year 2007.
Finding Control Number: FS-7611-05-07
(1) We concur. In fiscal year 2006, the Finance Division has implemented a procedure requiring all journal entries to be fully documented and supported. Journal entries that are not properly supported will not be posted to the General Ledger. Unsupported journal entries will be returned to the preparer identifying those entries that need additional support. This change in procedure will be updated to Finance Division's policies and procedures manual.
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ATLANTA INDEPENDENT SCHOOL SYSTEM SCHEDULE OF MANAGEMENT'S RESPONSES
YEAR ENDED JUNE 30, 2005 Finding Control Number: FS-7611-05-07 (2) We concur. The Accounting Department will work with the State Audit Department to
develop a methodology and process for the conversion of Governmental Fund to the Districtwide level. APS working with the State Audit Department as a team will eliminate this finding in the future.
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Exhibit A

Buildings/Building lmprov. Land Land improvements Machinery & Equip
Total

ATLANTA INDEPENDENT SCHOOL SYSTEM
CAFR versus Asset Books Reconciliation Exhibit A
June 30, 2005

'Capital Astet& Transfe~1

Total Per Books

$ 3,269,708 $ 120,981,973 $ 76,424

$ 124,328,105

$

270,069

$ 994,062 $ 1,469,999 $ 2,734,130

$

389,816 $ 2,351,845

$ 2,741,661

$ 1,505,641 $ 10,534,051 $ 33,757

$ 12,073,449

$ 5,435,234 $ 133,867,869 $ 1,104,243 $ 1,469,999 $ 141,877,344

Per CAFR
$ 124,328,105 $ 2,734,130 $ 2,741,661 $ 12,073,449
$ 141,871-i345