City of Carrollton Board of Education, Carroll County, Georgia, report on audit of the financial statements for the fiscal year ended June 30, 2004

CITY OF CARROLLTON BOARD OF EDUCATION
CARROLL COUNTY, GEORGIA REPORT ON AUDIT
OF THE FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2004
STATE OF GEORGIA
DEPARTMENT OF AUDITS AND ACCOUNTS
Russell W. Hinton State Auditor

CITY OF CARROLLTON BOARD OF EDUCATION - CARROLL COUNTY - TABLE OF CONTENTS -

SECTION I

FINANCIAL

INDEPENDENT AUDITOR'S COMBINED REPORT ON BASIC FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION - SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS

REQUIRED SUPPLEMENTARY INFORMATION

MANAGEMENT'S DISCUSSION AND ANALYSIS

EXHIBITS

BASIC FINANCIAL STATEMENTS

DISTRICT-WIDE FINANCIAL STATEMENTS

A

STATEMENT OF NET ASSETS

3

B

STATEMENT OF ACTIVITIES

4

FUND FINANCIAL STATEMENTS

C

BALANCE SHEET

GOVERNMENTAL FUNDS

6

D

RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET

TO THE STATEMENT OF NET ASSETS

7

E

STATEMENT OF REVENUES, EXPENDITURES AND CHANGES

IN FUND BALANCES

GOVERNMENTAL FUNDS

8

F

RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT

OF REVENUES, EXPENDITURES AND CHANGES IN FUND

BALANCES TO THE STATEMENT OF ACTIVITIES

9

G

STATEMENT OF FIDUCIARY NET ASSETS

FIDUCIARY FUNDS

11

H

NOTES TO THE BASIC FINANCIAL STATEMENTS

12

SCHEDULES

REQUIRED SUPPLEMENTARY INFORMATION

1 SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES

IN FUND BALANCES - BUDGET AND ACTUAL

GENERALFUND

25

CITY OF CARROLLTON BOARD OF EDUCATION - CARROLL COUNTY - TABLE OF CONTENTS -

SECTION I

FINANCIAL

SCHEDULES

SUPPLEMENTARY INFORMATION

2 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS

27

3 SCHEDULE OF STATE REVENUE

28

4 SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS

30

5 ALLOTMENTS AND EXPENDITURES

GENERAL FUND - QUALITY BASIC EDUCATION PROGRAMS (QBE)

BY PROGRAM

33

SECTION II
COMPLIANCE AND INTERNAL CONTROL REPORTS
REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS
REPORT ON COMPLIANCE WITH REQUIREMENTS APPLICABLE TO EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH 0MB CIRCULARA-133

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

CITY OF CARROLLTON BOARD OF EDUCATION - CARROLL COUNTY - TABLE OF CONTENTS -
SECTION IV FINDINGS AND QUESTIONED COSTS SCHEDULE OF FINDINGS AND QUESTIONED COSTS
SECTIONV MANAGEMENT'S RESPONSES SCHEDULE OF MANAGEMENT'S RESPONSES

SECTION I FINANCIAL

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

DEPARTMENT OF AUDITS AND ACCOUNTS
254 Washington Street, S.W., Suite 214 Atlanta, Georgia 30334-8400
March 25, 2005

Honorable Sonny Perdue, Governor Members ofthe General Assembly Members of the State Board of Education
and Superintendent and Members ofthe City of Carrollton Board of Education
INDEPENDENT AUDITOR'S COMBINED REPORT ON BASIC FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION - SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
Ladies and Gentlemen:
We have audited the accompanying financial statements ofthe governmental activities, each major fund, and the aggregate remaining fund information (Exhibits A through H) ofthe City ofCarrollton Board of Education, as of and for the year ended June 30, 2004, which collectively comprise the Board's basic financial statements as listed in the table of contents. These financial statements are the responsibility ofthe City ofCarrollton Board ofEducation's management. Our responsibility is to express opinions on these financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United States ofAmerica and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General ofthe United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free ofmaterial misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinions.
In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, each major fund, and the aggregate remaining fund information ofthe City of Carrollton Board of Education, as of June 30, 2004, and the respective changes in financial position thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America.
2004ARL-ll

In accordance with Government Auditing Standards, we have also issued our report dated March 25, 2005, on our consideration of the City of Carrollton Board of Education's internal control over financial reporting and our tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements and other matters. The purpose ofthat report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be read in conjunction with this report in considering the results of our audit.
Management's Discussion and Analysis and the Schedule ofRevenues, Expenditures and Changes in Fund Balances - Budget and Actual, as presented on pages i through ix and page 25 respectively, are not a required part of the basic financial statements but are supplementary information required by the accounting principles generally accepted in the United States of America. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods ofmeasurement and presentation ofthe required supplementary information. However, we did not audit the information and express no opinion on it.
Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City of Carrollton Board of Education's basic financial statements. The accompanying supplementary information which consist of Schedules 2 through 5, which includes the Schedule of Expenditures of Federal Awards as required by U.S. Office of Management and Budget Circular A-133, Audits ofStates, Local Governments, and Non-Profit Organizations, are presented for purposes of additional analysis and are not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements, and in our opinion, is fairly stated, in all material respects, in relation to the basic financial statements taken as a whole.
A copy ofthis report has been filed as a permanent record in the office ofthe State Auditor and made available to the press ofthe State, as provided for by Official Code ofGeorgia Annotated section 506-24.
Respectfully submitted,

RWH:as 2004ARL-11

State Auditor

CITY OF CARROLLTON BOARD OF EDUCATION - CARROLL COUNTY MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2004
INTRODUCTION
Our discussion and analysis of the City of Carrollton Board of Education's financial performance provides an overview of the School District's financial activities for the fiscal year ended June 30, 2004. The intent of this discussion and analysis is to look at the School District's financial performance as a whole; readers should also review the notes to the basic financial statements and financial statements to enhance their understanding of the School District's financial performance.
FINANCIAL HIGHLIGHTS
Key financial highlights for fiscal year 2004 are as follows:
On the District-wide financial statements, the assets of the School District exceeded liabilities by $38.8 million. Of this amount, $3.6 million is unrestricted and is available for spending at the School District's discretion.
The School District had $32.7 million in expenses relating to governmental activities; only $19.8 million of these expenses were offset by program specific charges for services, grants and contributions. However, general revenues (primarily property and sales taxes) of $14 million were adequate to provide for these programs.
As stated above, General Revenues accounted for $14 million or about 41.3% of all revenues totaling $33.9 million. Program specific revenues in the form of charges for services, grants and contributions accounted for the rest.
OVERVIEW OF THE FINANCIAL STATEMENTS
This annual report consists of three parts; management's discussion and analysis (this section), the basic financial statements and required supplementary information. The basic financial statements include two levels of statements that present different views of the School District. These include the district-wide and fund financial statements.
The district-wide financial statements include the 'Statement of Net Assets' and 'Statement of Activities'. These statements provide information about the activities of the School District presenting both short-term and long-term information about the School District's overall financial status.
The fund financial statements focus on individual parts of the School District, reporting the School District's operation in more detail. The 'Governmental Funds' statements disclose how basic services are financed in the short-term as well as what remains for future spending. The 'Fiduciary Funds' statements provide information about the financial relationships in which the School District acts solely as a trustee or agent for the benefit of others. In the case of the City of
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CITY OF CARROLLTON BOARD OF EDUCATION - CARROLL COUNTY MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2004
Carrollton Board of Education, the General Fund, Capital Projects Funds, and Debt Service Funds are all considered to be major funds. The School District has no nonmajor funds as defined by GASB Statement 34 for the purposes of this report.
The financial statements also include notes that explain some of the information in the statements and provide more detailed data. The statements are followed by a section of required supplementary information that further explains and supports the financial statements. Additionally, other supplementary information (not required) is also presented that further supplements understanding of the financial statements.
District-wide Statements
Since the City of Carrollton Board of Education has no operations that have been classified as "Business Activities", the District-wide financial statements are basically a consolidation of all of the School District's operating funds into one column called governmental activities. In reviewing the District-wide financial statements, a reader might ask the question, are we in a better financial position now than last year? The 'Statement of Net Assets' and the 'Statement of Activities' provide the basis for answering this question. These financial statements include all School District's assets and liabilities and uses the accrual basis of accounting similar to the accounting used by most private-sector companies. This basis of accounting takes into account all of the current year's revenues and expenses regardless of when cash is received or paid.
These two statements report the School District's net assets and any changes in those assets. The change in net assets is important because it tells the reader that, for the School District as a whole, the financial position of the School District has improved or diminished. The causes of this change may be the results of many factors, including those not under the School District's control, such as the property tax base, facility conditions, required educational programs, student-teacher ratios, and other factors.
The 'Statement of Net Assets' and the 'Statement of Activities' reflects 100% of the School District's governmental activities.
Fund Financial Statements
The School District uses many funds or sub-funds to account for a multitude of financial transactions during the fiscal year. The fund financial statements presented in this report provide detail information about the School District's significant or major funds. As discussed previously, the District has no nonmajor Funds as defined by GASB Statement 34.
Governmental Funds - Most of the School District's activities are reported in governmental funds, which focus on how money flows into and out of those funds and the balances left at yearend available for spending in future periods. These funds are reported using the modified accrual method of accounting which measures cash and all other financial assets that can readily be converted to cash. The governmental fund statements provide a detailed short-term view of the School District's general government operations and the basic services it provides.
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CITY OF CARROLLTON BOARD OF EDUCATION - CARROLL COUNTY MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2004
Governmental fund information helps determine whether there are more or fewer financial resources that can be spent in the near future to finance educational programs. The differences between government activities (reported in the Statement of Net Assets and the Statement of Activities) and governmental funds are reconciled in the financial statements.
Fiduciary Funds - The School District is the trustee, or fiduciary, for assets that belong to others and school clubs and organizations within the principals' accounts. The School District is responsible for ensuring that the assets reported in these funds are used only for their intended purposes and by those to whom the assets belong. The School District excludes these activities from the district-wide financial statements because it cannot use these assets to finance its operations.
FINANCIAL ANALYSIS OF THE SCHOOL DISTRICT AS A WHOLE
Recall that the Statement of Net Assets provides the perspective of the School District as a whole. The reader can think of the School District's net assets as the difference between its assets (i.e., what the School District owns) and its liabilities (i.e., what the School District owes) at the end of a fiscal year. This balance represents one way to measure the School District's financial health or its financial position. In the case of the City of Carrollton Board of Education, assets exceeded liabilities by $38.8 million at June 30, 2004.
To better understand the School District's actual financial position and ability to deliver services in future periods, the reader will need to review the various components of the net asset category. For example, of the $38.8 million of net assets, approximately $4 million was restricted for continuation of Federal programs, debt service, and completion of ongoing capital projects. Accordingly, these funds were not available to meet the School District's ongoing obligations to citizens and creditors.
In addition, the School District had $31.2 million (net of related debt) invested in capital assets (e.g., land, buildings, and equipment). The School District uses these capital assets to provide educational services to students within geographic boundaries served by the School District. Because of the very nature and on-going use of the assets being reported in this component of net assets, it must be recognized that this portion of the net assets is not available for future spending.
The remaining balance of unrestricted net assets of $3.6 million may be used to meet the School District's ongoing obligations to citizens and creditors.
Table 1 provides a summary of the School District's net assets for this fiscal year compared to fiscal year 2003.
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CITY OF CARROLLTON BOARD OF EDUCATION - CARROLL COUNTY MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2004

Table 1 Net Assets

Governmental Activities

Fiscal

Fiscal

Year 2004

Year 2003

Assets Current and Other Assets Capital Assets, Net

$ 15,677,765 37,495,973

$ 20,489,710 30,588,070

Total Assets

$ 53,173,738 $ 51,077,780

Liabilities Current and Other Liabilities Long-Term Liabilities

$ 4,191,592 $ 3,860,199

10,119,031

9,486,101

Total Liabilities

$ 14,310,623 $ 13,346,300

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

$ 31,260,647 3,992,002 3,610,466

$ 29,433,511 3,391,653 4,906,316

Total Net Assets

$ 38,863,115 $ 37,731.480

Table 2 shows the Changes in Net Assets for this fiscal year compared to fiscal year 2003.

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CITY OF CARROLLTON BOARD OF EDUCATION - CARROLL COUNTY MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2004

Table 2 Change in Net Assets

Revenues Program Revenues: Charges for Services and Sales Operating Grants and Contributions Capital Grants and Contributions

Governmental Activities

Fiscal

Fiscal

Year2004

Year 2003

$ 1,243,371 17,746,698 867,356

$ 1,425,055 17,328,713

Total Program Revenues

$ 19,857,425 $ 18,753,768

General Revenues:

Taxes

Property Taxes

For Maintenance and Operations

$

Sales Taxes

Special Purpose Local Option Sales Tax

For Debt Service

For Capital Projects

Intangible Recording Tax

Grants and Contributions not Restricted to

Specific Programs

Investment Earnings

Miscellaneous

8,981,699
2,961,980 3,044
558,149 217,934 1,330,250

$ 8,512,689
1,408,691 1,509,422
554,980 465,769 871,748

Total General Revenues

$ 14,053,056 $ 13,323,299

Total Revenues

$ 33,910,481 $ 32,077,067

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

$ 20,197,339
992,267 1,083,595
512,347 643,256 2,261,509 515,878 2,063,178 1,282,993 106,646
89,591
410,657 359,662 1,764,257 495,671

$ 19,378,320
845,187 1,417,110
502,458 658,578 2,238,454 483,455 2,125,001 992,820 148,501
19,626
318,587 436,232 1,641,987 549,519

Total Expenses

$ 32,778,846 $ 31,755,835

Increase in Net Assets

$ 1,131.635 $ 321,232

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CITY OF CARROLLTON BOARD OF EDUCATION - CARROLL COUNTY MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2004

Governmental Activities

The Statement of Activities shows the cost of program services and the charges for services and grants offsetting these services. Table 3 shows, for governmental activities, the total cost of services and the net cost of services. Net cost of services can be defined as the total cost less fees generated by the activities and intergovernmental revenue provided for specific programs. The net cost reflects the financial burden on the School District's taxpayers by each activity.

Table 3 Governmental Activities

Total Cost of Services

Fiscal

Fiscal

Year 2004 Year 2003

Net Cost of Services

Fiscal

Fiscal

Year 2004 Year 2003

Instruction

$20,197,339 $ 19,378,320 $ 6,037,372 $ 6,149,633

Support Services

Pupil Services

992,267

845,187

392,302

405,138

Improvement of Instructional Services

1,083,595 1,417,110

756,099 1,029,314

Educational Media Services

512,347

502,458

224,475

212,019

General Administration

643,256

658,578

134,699

212,556

School Administration

2,261,509 2,238,454 1,712,767 1,693,767

Business Administration

515,878

483,455

515,878

483,455

Maintenance and Operation of Plant

2,063,178 2,125,001 1,153,877 1,252,300

Student Transportation Services

1,282,993

992,820

888,858

581,043

Central Support Services

106,646

148,501

106,646

146,001

Other Support Services

89,591

19,626

35,911

2,269

Operations of Non-Instructional Services

Enterprise Operations

410,657

318,587

218,591

-10,578

Community Services

359,662

436,232

140,340

207,465

Food Services

1,764,257 1,641,987

107,935

88,166

Interest on Short-Term and Long-Term Debt

495,671

549,519

495,671

549,519

Total Expenses

$ 32,778.846 $ 31.755.835 $ 12,221.421 $ 13,002.067

FINANCIAL ANALYSIS OF THE SCHOOL DISTRICT'S FUNDS

The School District's governmental funds are accounted for using the modified accrual basis of accounting. The governmental funds had total revenues of approximately $34 million and total expenditures of $39.9 million. Included in the expenditures of $39.9 million were capital outlay expenditures of $8.5 million. Revenues to fund these capital outlay expenditures were received in a prior year through a combination of proceeds from a Special Purpose Local Option Sales Tax and sale of General Obligation Bonds.

General Fund Budget Highlights

The School District's budget is prepared according to Georgia Law. The most significant budgeted fund is the General Fund.

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CITY OF CARROLLTON BOARD OF EDUCATION - CARROLL COUNTY MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2004
During the course of fiscal year 2004, the School District amended its general fund budget as needed. The School District uses site-based budgeting as a part of the budget process. The budgeting systems are designed to control total site budgets but provide flexibility for site management. The School District budget is formerly adopted at the aggregate level and maintained at the program, function, object, and site levels to facilitate budgetary control. For the General Fund, the final actual revenues of $30 million exceeded the final budgeted amounts of $28.8 million by over $1.2 million. This difference (final actual vs. final budget) was due primarily to State Funds revenues less than final budget of approximately $0.2 million, charges for services revenues over final budget of approximately $0.3 million, and miscellaneous revenues over final budget of approximately $1 million. The final actual General Fund expenditures of $30.6 million exceeded the final budgeted amount of $30.1 million by $0.5 million. This difference (final actual vs. final budget) was due primarily because expenditures for Enterprise Operations of $0.4 million and for Community Services of $0.3 million were not included as a part of the School District's final budget. Expenditures for the General Fund exceeded revenues by $0.5 million. This current year shortfall was anticipated by the Board as reflected by the School District's final budget which reflected budgeted expenditures over budgeted revenues by $1.3 million. The intent of the Board was to use accumulated reserves to cover this shortfall. At June 30, 2004, the General Fund had a fund balance of $4.3 million, of which $4.2 million was unreserved, undesignated and therefore available for operations in the subsequent fiscal year. CAPITAL ASSETS AND DEBT ADMINISTRATION Capital Assets At June 30, 2004, the School District had $37.5 million invested in capital assets, all in governmental activities. Table 4 reflects a summary of these balances net of accumulated depreciation.
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CITY OF CARROLLTON BOARD OF EDUCATION - CARROLL COUNTY MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2004

Table 4 Capital Assets (Net of Depreciation)

Governmental Activities

Fiscal

Fiscal

Year 2004

Year 2003

Land Construction in Progress Land Improvements Buildings and Improvements Equipment

$ 1,094,500 8,934,324 419,991
25,206,273 1,840,885

$ 1,094,500 2,849,689 529,376
24,426,252 1,688,253

Total

$ 37,495,973 $ 30!5882070

Additional information on the School District's Capital Assets can be found in the Notes to the Financial Statements.

Debt

At June 30, 2004, the School District had approximately $10.1 million in debt outstanding. This debt is primarily the result of Capital Lease agreements to acquire assets to which the School District is a party and General Obligation Bonds sold by the City of Carrollton, on behalf of the City of Carrollton School District, for the purpose of the acquisition, construction, equipping, renovating, and repairing of school facilities. Payment of the General Bond Obligation debt is secured by a local option sales tax.

Table 5 summarizes the School District's debt.

Table 5 Debt at June 30

Governmental Activities

Fiscal

Fiscal

Year 2004

Year 2003

Capital Leases General Obligation Bonds

$ 869,031 $ 236,101

9,250,000

9,250,000

Total

$ 10,119,031 $ 9,486.101

Additional information can be found on the School District's Debt obligations in the Notes to the Financial Statements.

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CITY OF CARROLLTON BOARD OF EDUCATION - CARROLL COUNTY MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2004
CURRENT ISSUES
Currently known facts, decisions or conditions that are expected to have a significant effect on financial positions or results of operations in future years are as follows:
As was the case in the prior year, the State of Georgia is suffering from the effects of the prevailing unfavorable economic conditions. This has forced the State's Office of Planning and Budget to continue reducing the budgets of the various government agencies.
State QBE Revenue Reductions - During fiscal year 2003, the State of Georgia implemented a 2.5% QBE revenue formula funding reduction to all state school districts. This funding reduction carried forward into the fiscal year 2004 with an additional 5%. Additionally, because state revenues are falling well below the projected amounts, all state school districts have been warned to expect a 5% reduction of revenues for fiscal year 2005. Considering the stagnant economy of the past few years, these formula funding reductions will seriously affect the long-term financial stability of the School District. Despite these challenges, the City of Carrollton Board of Education is strong financially and we remain optimistic about the ability of the School District to maximize all of the financial resources to provide a quality education to our students.
Capital Improvements - The School District plans capital improvements as future capital needs arise due to increased student population and facility repair and maintenance needs. Specific capital expenditure plans are formalized in conjunction with individual general obligation bond issues, education local option sales taxes and anticipated annual receipts of capital outlay funds from the State of Georgia Department of Education. The School District regularly monitors anticipated capital outlay needs.
CONTACTING THE SCHOOL DISTRICT'S FINANCIAL MANAGEMENT
This financial report is designed to provide our citizens, taxpayers, investors and creditors with a general overview of the School District's finances and to show the School District's accountability for the money it receives. If you have questions about this report or need additional financial information, contact the City of Carrollton Board of Education, 106 Trojan Drive, Carrollton, Georgia 30117.
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CITY OF CARROLLTON BOARD OF EDUCATION - CARROLL COUNTY

CITY OF CARROLLTON BOARD OF EDUCATION - CARROLL COUNTY STATEMENT OF NET ASSETS JUNE 30. 2004

EXHIBIT"A"

ASSETS
Cash and Cash Equivalents Investments Accounts Receivable, Net
Taxes State Government Federal Government Other Inventories Capital Assets Land Construction in Progress Land Improvements Buildings Equipment Less: Accumulated Depreciation
Total Assets
LIABILITIES
Accounts Payable Salaries Payable Contracts Payable Retainages Payable Deferred Revenues Long-Term Liabilities
Due Within One Year Due in More Than One Year
Total Liabilities
NET ASSETS
Invested in Capital Assets, Net of Related Debt Restricted for
Continuation of Federal Programs Debt Service Capital Projects Unrestricted
Total Net Assets
Total Liabilities and Net Assets
The notes to the basic financial statements are an integral part of this statement. -3-

GOVERNMENTAL ACTIVITIES

$

9,185,583

2,837,653

1,157,968 1,808,255
611,784 50,000 26,522

1,094,500 8,934,324 2,006,085 31,760,358 4,101,603 -10,400,897

$ ===5=3=1'..,73_,.7.3.=8=

$

1,003,849

2,226,432

590,548

370,613

150

1,928,516 8,190,515

$

14,310,623

$

31,260,647

128,658 3,611,320
252,024 3,610,466

$

38,863,115

$ ===5=3=1'=73='=73=8=

CITY OF CARROLLTON BOARD OF EDUCATION - CARROLL COUNTY STATEMENT OF ACTIVITIES
FOR THE YEAR ENDED JUNE 30, 2004

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

EXPENSES

CHARGES FOR SERVICES

$

20,197,339 $

992,267 1,083,595
512,347 643,256 2,261,509 515,878 2,063,178 1,282,993 106,646
89,591

410,657 359,662 1,764,257 495 671

$

32,778,846 $

207,881
192,066 219,322 624,102 1,243,371

The notes to the basic financial statements are an integral part of this statement. -4-

EXHIBIT"B"

PROGRAM REVENUES

OPERATING

CAPITAL

GRANTS AND

GRANTS AND

CONTRIBUTIONS CONTRIBUTIONS

NET (EXPENSES) REVENUES
AND CHANGES IN NET ASSETS

$

13,313,280 $

590,288 311,270 286,500 494,609 546,646

872,417 336,021

14,189

981,478

$

17,746,698 $

638,806 $ 9,677 16,226 1,372 13,948 2,096 36,884 58,114 39,491
50,742
867,356 $

-6,037,372
-392,302 -756,099 -224,475 -134,699 -1,712,767 -515,878 -1,153,877 -888,858 -106,646
-35,911
-218,591 -140,340 -107,935 -495 671
-12,921,421

$

8,981,699

2,961,980 3,044
558,149 217,934 1,330,250

$

14,053,056

$

1,131,635

37 731 480

$ ===3=8:!i,8=6=3,.,;,1=15=

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CITY OF CARROLLTON BOARD OF EDUCATION - CARROLL COUNTY BALANCE SHEET
GOVERNMENTAL FUNDS JUNE 30. 2004

EXHIBIT"C"

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

GENERAL FUND

DISTRICTWIDE
CAPITAL PROJECTS
FUND

DEBT SERVICE
FUND

TOTAL

$ 4,522,731 $ 4,227,859 $

434,993 $

48,788

2,788,865

152,548 1,808,255
611,784 50,000 26,522

756,585

9,185,583 2,837,653
909,133 1,808,255
611,784 50,000 26 522

Total Assets

$

7,220,628 $

4,227,859 $

3,980,443 $ ======15=,4=2=8=,9=30=

LIABILITIES AND FUND BALANCES

LIABILITIES

Accounts Payable Salaries Payable Contracts Payable Retainages Payable Deferred Revenue

$

634,726

2,226,432

$

150

$
590,548 370,613

369,123 $

Total Liabilities

$ 2,861,308 $

961 161 $

369,123 $

FUND BALANCES

Reserved for: Continuation of Federal Programs Debt Service Inventories Capital Projects
Unreserved Undesignated Reported in: General Fund

$

102,136

$

$ 3,611,320

26,522

$ 3,266,698

4,230,662

Total Fund Balances

$ 4,359,320 $ 3,266,698 $ 3,611,320 $

1,003,849 2,226,432
590,548 370,613
150
4,191,592
102,136 3,611,320
26,522 3,266,698
4,230,662
11,237,338

Total Liabilities and Fund Balances

$ 7,220,628 $ 4,227,859 $ 3,980,443 $ ======15=,4=2=8-=,9=30=

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

CITY OF CARROLLTON BOARD OF EDUCATION - CARROLL COUNTY RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET
TO THE STATEMENT OF NET ASSETS JUNE 30. 2004

EXHIBIT"D"

Total Fund Balances - Governmental Funds (Exhibit "C")
Amounts reported for Governmental Activities in the Statement of Net Assets are different because:
Capital Assets used in Governmental Activities are not financial resources and therefore are not reported in the funds. These assets consist of:
Land Construction in Progress Land Improvements Buildings Equipment Accumulated Depreciation
Total Capital Assets
Some of the School District's property tax revenues will be collected after year-end but are not available soon enough to pay for the current period's expenditures.
Long-Term Liabilities, including Bonds Payable, are not due and payable in the current period and therefore are not reported as liabilities in the funds. Long-Term Liabilities at year-end consist of:
Bonds Payable Capital Leases
Total Long-Term Liabilities

$ 11,237,338

$

1,094,500

8,934,324

2,006,085

31,760,358

4,101,603

-10.400,897

37,495,973

248,835

$ -9,250,000 -869,031

-10,119,031

Net Assets of Governmental Activities (Exhibit "A")

$ 38,863,115

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

CITY OF CARROLLTON BOARD OF EDUCATION - CARROLL COUNTY STATEMENT OF REVENUES. EXPENDITURES AND CHANGES IN FUND BALANCES
GOVERNMENTAL FUNDS YEAR ENDED JUNE 30. 2004

EXHIBIT"E"

REVENUES
Property Taxes Sales Taxes State Funds Federal Funds Charges for Services Investment Earnings Miscellaneous
Total Revenues
EXPENDITURES
Current Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Enterprise Operations Community Services Food Services Operation
Capital Outlay Debt Services
Principal Interest
Total Expenditures
Excess of Revenues over (under) Expenditures
OTHER FINANCING SOURCES
Capital Leases
Net Change in Fund Balances
Fund Balances - Beginning
Fund Balances - Ending

GENERAL FUND

DISTRICTWIDE
CAPITAL PROJECTS
FUND

DEBT SERVICE
FUND

TOTAL

$ 9,067,552 3,044
14,397,671 $ 3,965,290 1,243,371
63,839 1,330,250
$ 30,071,017 $

$ 809,242

$ 2,961,980

143,678

10,417

952,920 $ 2,972,397 $

9,067,552 2,965,024 15,206,913 3,965,290 1,243,371
217,934 1,330,250
33,996,334

$ 19,116,219

$

1,007,860 1,163,655
509,727 616,624 2,257,506 170,878 2,170,537 790,888 106,646
14,189 410,657 359,662 1,667,371
$

8,483,659

236,101 12 317

$

345,000

483,354

$ 30,610,837 $ 8,483,659 $

828,354 $

$

-539,820 $ -7,530,739 $ 2,144,043 $

19,116,219
1,007,860 1,163,655
509,727 616,624 2,257,506 170,878 2,170,537 790,888 106,646
14,189 410,657 359,662 1,667,371 8,483,659
581,101 495 671
39,922,850
-5,926,516

212,485

656,546

869,031

$

-327,335 $ -6,874,193 $ 2,144,043 $ -5,057,485

4,686,655

10,140,891

1,467,277

16,294,823

$ 4,359,320 $ 3,266,698 $ 3,611,320 $ 11,237,338

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

CITY OF CARROLLTON BOARD OF EDUCATION - CARROLL COUNTY RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT OF
REVENUES. EXPENDITURES AND CHANGES IN FUND BALANCES TO THE STATEMENT OF ACTIVITIES
JUNE 30. 2004

EXHIBIT"F"

Total Net Change in Fund Balances - Governmental Funds (Exhibit "E")

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

Capital Outlays are reported as expenditures in Governmental Funds. However. in the Statement of Activities. the cost of Capital Assets is allocated over their estimated useful lives as depreciation expense. In the current period. these amounts are:

Capital Outlay

$

Depreciation Expense

Excess of Capital Outlay over Depreciation Expense

Because some property taxes will not be collected for several months after the School District"s fiscal year ends, they are not considered "available" revenues.

In Governmental Funds, a capital lease arrangement is considered a source of financing, but in the Statement of Net Assets, the lease obligation is reported as a Long-Term Liability.

Repayment of Long-Term Debt is reported as an expenditure in Governmental Funds, but the repayment reduces Long-Term Liabilities in the Statement of Net Assets. In the current year, these amounts consist of:

Capital Lease Payments

$ -5,057,485

7,790,454 -882,551

6,907,903 -85,853

-869,031

236,101

Change in Net Assets of Governmental Activities (Exhibit "B")

$ ====='1,=13=1:!:,6=3=5

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

CITY OF CARROLLTON BOARD OF EDUCATION-CARROLL COUNTY STATEMENT OF FIDUCIARY NET ASSETS FIDUCIARY FUNDS JUNE 30, 2004

EXHIBIT G 11 11

ASSETS Cash and Cash Equivalents
LIABILITIES Funds Held for Others

AGENCY FUNDS $ ===17===03=7=
$ ==1=7=03=7=

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

CITY OF CARROLLTON BOARD OF EDUCATION - CARROLL COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2004

EXHIBIT "H"

Note 1: DESCRIPTION OF SCHOOL DISTRICT AND REPORTING ENTITY
REPORTING ENTITY
The City of Carrollton Board of Education (School District) was established under the laws of the State of Georgia and operates under the guidance of a school board elected by the voters and a Superintendent appointed by the Board. The Board is organized as a separate legal entity and has the power to levy taxes. Accordingly, the School District is a primary government and consists ofall the organizations that compose its legal entity.
Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The School District's basic financial statements are collectively comprised of the District-wide financial statements, fund financial statements and notes to the basic financial statements ofthe City of Carrollton Board of Education.
District-wide Statements: The Statement ofNet Assets and the Statement ofActivities display information about the financial activities ofthe overall School District, except for fiduciary activities. Eliminations have been made to minimize the double counting of internal activities. Governmental activities generally are financed through taxes, intergovernmental revenues, and other nonexchange transactions.
The Statement ofActivities presents a comparison between direct expenses and program revenues for each function of the School District's governmental activities.
Direct expenses are those that are specifically associated with a program or function and, therefore, are clearly identifiable to a particular function. Indirect expenses (expenses of the School District related to the administration and support ofthe School District's programs, such as office and maintenance personnel and accounting) are not allocated to programs.
Program revenues include (a) charges paid by the recipients of goods or services offered by the programs and (b) grants and contributions that are restricted to meeting the operational or capital requirements of a particular program. Revenues that are not classified as program revenues, including all taxes, are presented as general revenues.
Fund Financial Statements: The fund financial statements provide information about the School District's funds, including fiduciary funds. Eliminations have been made to minimize the double counting ofinternal activities. Separate statements for each category (governmental and fiduciary) are presented. The emphasis of fund financial statements is on major governmental funds, each displayed in a separate column.
The School District reports the following major governmental funds:

- 12 -

CITY OF CARROLLTON BOARD OF EDUCATION - CARROLL COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2004

EXHIBIT "H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
General Fund is the School District's primary operating fund. It accounts for all financial resources ofthe School District, except those resources required to be accounted for in another fund.
District-wide Capital Projects Fund accounts for financial resources including Bond Proceeds, grants from the Georgia State Financing and Investment Commission and Special Purpose Local Option Sales Tax proceeds to be used for the acquisition, construction or renovation of major capital facilities.
Debt Service Fund accounts for taxes (sales) legally restricted for the payment of general longterm principal, interest and paying agent's fees.
The School District reports the following fiduciary fund type:
Agency funds account for assets held by the School District as an agent for various funds, governments or individuals.
BASIS OF ACCOUNTING
The basis ofaccounting determines when transactions are reported on the financial statements. The District-wide governmental and fiduciary fund financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded at the time liabilities are incurred, regardless of when the related cash flows take place. Nonexchange transactions, in which the School District gives (or receives) value without directly receiving (or giving) equal value in exchange, include property taxes, sales taxes, grants and donations. On an accrual basis, revenue from property taxes is recognized in the fiscal year for which the taxes are levied. Revenue from sales taxes is recognized in the fiscal year in which the underlying transaction (sale) takes place. Revenue from grants and donations is recognized in the fiscal year in which all eligibility requirements have been satisfied.
The School District uses funds to report on its financial position and the results of its operations. Fund accounting is designed to demonstrate legal compliance and to aid financial management by segregating transactions related to certain governmental functions or activities. A fund is a separate accounting entity with a self-balancing set of accounts.
Governmental funds are reported using the current financial resources measurement focus and the modified accrual basis ofaccounting. Under this method, revenues are recognized when measurable and available. The School District considers all revenues reported in the governmental funds to be available if they are collected within sixty days after year-end. Property taxes, sales taxes and interest are considered to be susceptible to accrual. Expenditures are recorded when the related fund

- 13 -

CITY OF CARROLLTON BOARD OF EDUCATION - CARROLL COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2004

EXHIBIT "H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
liability is incurred, except for principal and interest on general long-term debt and claims and judgments, which are recognized as expenditures to the extent they have matured. Capital asset acquisitions are reported as expenditures in governmental funds. Proceeds of general long-term liabilities and acquisitions under capital leases are reported as other financing sources.
The School District funds certain programs by a combination ofspecific cost-reimbursement grants, categorical grants, and general revenues. Thus, when program costs are incurred, there are both restricted and unrestricted net assets available to finance the program. It is the School District's policy to first apply grant resources to such programs, followed by cost-reimbursement grants, then general revenues.
CASH AND CASH EQUIVALENTS
COMPOSITION OF DEPOSITS Cash and cash equivalents consist ofcash on hand, demand deposits and short-term investments with original maturities of three months or less from the date of acquisition in authorized financial institutions. Georgia Laws OCGA 45-8-14 authorize the School District to deposit its funds in one or more solvent banks or insured Federal savings and loan associations.
INVESTMENTS
COMPOSITION OF INVESTMENTS Investments made by the School District in nonparticipating interest-earning contracts (such as certificates ofdeposit) and repurchase agreements are reported at cost. Participating interest-earning contracts and money market investments with a maturity at purchase ofone year or less are reported at amortized cost. Both participating interest-earning contracts and money market investments with a maturity at purchase greater than one year are reported at fair value. The Official Code ofGeorgia Annotated Section 36-83-4 authorizes the School District to invest its funds. In selecting among options for investment or among institutional bids for deposits, the highest rate ofreturn shall be the objective, given equivalent conditions of safety and liquidity. Funds may be invested in the following:
(1) Obligations issued by the State of Georgia or by other states,
(2) Obligations issued by the United States government,
(3) Obligations fully insured or guaranteed by the United States government or a United States government agency,
(4) Obligations of any corporation of the United States government,
(5) Prime banker's acceptances,

- 14 -

CITY OF CARROLLTON BOARD OF EDUCATION - CARROLL COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2004

EXHIBIT "H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(6) The Local Government Investment Pool administered by the State of Georgia, Office of Treasury and Fiscal Services,

(7) Repurchase agreements, and

(8) Obligations of other political subdivisions of the State of Georgia.

RECEIVABLES

Receivables consist of amounts due from property and sales truces, grant reimbursements due on Federal, State or other grants for expenditures made but not reimbursed and other receivables disclosed from information available. Receivables are recorded when either the asset or revenue recognition criteria has been met. Receivables recorded on the basic financial statements do not include any amounts which would necessitate the need for an allowance for uncollectible receivables.

PROPERTY TAXES

The City ofCarrollton Clerk fixed the property tax levy for the 2003 tax digest year (calendar year) on September 17, 2003 (levy date). Taxes were due on December 20, 2003 (lien date). Taxes collected within the current fiscal year or within 60 days after year-end on the 2003 tax digest are reported as revenue in the governmental funds for fiscal year 2004. The City of Carrollton City Clerk bills and collects the property taxes for the School District and remits truces collected to the School District. Property true revenues, at the fund reporting level, during the fiscal year ended June 30, 2004, for maintenance and operations amounted to $9,067,552.

The tax millage rate levied for the 2003 tax year (calendar year) for the City of Carrollton Board of Education was as follows (a mill equals $1 per thousand dollars of assessed value):

School Operations

16.5 mills

SALES TAXES

Special Purpose Local Option Sales Tax, at the fund reporting level, during the year amounted to $2,961,980 and is to be used for capital outlay for educational purposes or debt service. This sales true was authorized by local referendum and the sales tax must be re-authorized at least every five years.

The City ofCarrollton Board ofEducation utilized $503,179 in Special Purpose Local Option Sales Tax (SPLOST) proceeds for payment of$345,000 in principal and $158,179 in interest ofthe City of Carrollton's (City Government) general obligation bond debt in accordance with SPLOST project expenditure requirements.

- 15 -

CITY OF CARROLLTON BOARD OF EDUCATION - CARROLL COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2004

EXHIBIT "H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The City of Carrollton Board of Education (City Government) sold general obligation bonds to provide advance funding for Capital Outlay Projects associated with issuance of Special Purpose Local Option Sales Tax (SPLOST). In fiscal year 2004, the School District provided $325,175 of SPLOST proceeds to the City Government for debt services on said general obligation debt.
In fiscal year 2003, the School District filed a lawsuit against the City of Carrollton (Municipality) for recovery of$2,044,519 in ad valorem taxes which were levied for school purposes and collected by the Municipality but not paid to the School District. In fiscal year 2005, a settlement was reached between the School District and the City ofCarrollton (Municipality) in the amount of$1,500,000. This amount was received by the School District on October 31, 2004, and the revenue will be recognized in fiscal year 2005 basic financial statements.
INVENTORIES
FOOD INVENTORIES On the basic financial statements, inventories ofdonated food commodities used in the preparation ofmeals are reported at their Federally assigned value and purchased foods inventories are reported at cost (first-in, first-out). The School District uses the consumption method to account for inventories whereby donated food commodities are recorded as an asset and as revenue when received, and expenses/expenditures are recorded as the inventory items are used. Purchased foods are recorded as an asset when purchased and expenses/expenditures are recorded as the inventory items are used.
CAPITAL ASSETS
Capital assets purchased, including capital outlay costs, are recorded as expenditures in the fund financial statements at the time of purchase (including ancillary charges). On the District-wide financial statements, all purchased capital assets are valued at cost where historical records are available and at estimated historical cost based on appraisals or deflated current replacement cost where no historical records exist. Donated capital assets are recorded at estimated fair market value on the date donated. Disposals are deleted at depreciated recorded cost. The cost of normal maintenance and repairs that do not add to the value ofassets or materially extend the useful lives of the assets is not capitalized. Depreciation is computed using the straight-line method. The School District does not capitalize book collections.
Capitalization thresholds and estimated useful lives of capital assets reported in the District-wide statements are as follows:

- 16 -

CITY OF CARROLLTON BOARD OF EDUCATION - CARROLL COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2004

EXHIBIT "H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Capitalization Policy

Estimated Useful Life

Land Land Improvements Buildings and Improvements Equipment

All

NIA

$

5,000 15 to 20 years

$

5,000 30 to 80 years

$

5,000 5 to 25 years

Depreciation is used to allocate the actual or estimated historical cost of all capital assets over estimated useful lives.

Note 3: DEPOSITS AND INVESTMENTS

COLLATERALIZATION OF DEPOSITS Official Code of Georgia Annotated (OCGA) Section 45-8-12 provides that there shall not be on deposit at any time in any depository for a time longer than ten days a sum ofmoney which has not been secured by surety bond, by guarantee ofinsurance, or by collateral. The aggregate ofthe face value of such surety bond and the market value of securities pledged shall be equal to not less than 110 percent ofthe public funds being secured after the deduction ofthe amount ofdeposit insurance. Ifa depository elects the pooled method (OCGA 45-8-13 .1) the aggregate ofthe market value ofthe securities pledged to secure a pool ofpublic funds shall be not less than 110 percent ofthe daily pool balance. OCGA Section 45-8-11 (b) provides an officer holding public funds may, in his discretion, waive the requirement for security in the case ofoperating funds placed in demand deposit checking accounts.

Acceptable security for deposits consists of any one of or any combination ofthe following:

(1) Surety bond signed by a surety company duly qualified and authorized to transact business within the State of Georgia,

(2) Insurance on accounts provided by the Federal Deposit Insurance Corporation,

(3) Bonds, bills, notes, certificates of indebtedness or other direct obligations of the United States or ofthe State of Georgia,

(4) Bonds, bills, notes, certificates of indebtedness or other obligations of the counties or municipalities ofthe State of Georgia,

(5) Bonds of any public authority created by the laws ofthe State of Georgia, providing that the statute that created the authority authorized the use of the bonds for this purpose,

(6) Industrial revenue bonds and bonds ofdevelopment authorities created by the laws of the State of Georgia, and

- 17 -

CITY OF CARROLLTON BOARD OF EDUCATION - CARROLL COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2004

EXHIBIT "H"

Note 3: DEPOSITS AND INVESTMENTS

(7) Bonds, bills, notes, certificates of indebtedness, or other obligations of a subsidiary corporation of the United States government, which are fully guaranteed by the United States government both as to principal and interest or debt obligations issued by the Federal Land Bank, the Federal Home Loan Bank, the Federal Intermediate Credit Bank, the Central Bank for Cooperatives, the Farm Credit Banks, the Federal Home Loan Mortgage Association, and the Federal National Mortgage Association.

CATEGORIZATION OF DEPOSITS At June 30, 2004, the bank balances were $9,916,260. The amounts ofthe total bank balances are classified into three categories of credit risk:

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

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

Risk Category

Bank Balance

1

$ 583,780

2

0

3

9,332,480

Total

$ 9,916,260

CATEGORIZATION OF INVESTMENTS At June 30, 2004, the fair value of the School District's total investments was $2,788,865 and this entire amount consisted ofU. S. Treasury Money Market Mutual Funds which are not required to be classified by categories of credit risk.

Note 4: NON-MONETARY TRANSACTIONS

The School District receives food commodities from the United States Department of Agriculture (USDA) for school breakfast and lunch programs. These commodities are recorded at their Federally assigned value. See Note 2 - Inventories

Note 5: CAPITAL ASSETS

The following is a summary of changes in the Capital Assets during the fiscal year:

- 18 -

CITY OF CARROLLTON BOARD OF EDUCATION - CARROLL COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2004

EXHIBIT "H"

Note 5: CAPITAL ASSETS

Balances July 1, 2003

Increases

Decreases

Balances June 30, 2004

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

$ 1,094,500

$ 1,094,500

2,849,689 $ 7,259,828 $ 1,175,193

8,934,324

Total Capital Assets Not Being Depreciated $ 3,944,189 $ 7,259,828 $ 1,175,193 $ 10,028,824

Capital Assets Being Depreciated Buildings and Improvements Equipment Land Improvements

$ 30,585,165 $ 3,570,977 2,006,085

1,175,193 $ 530,626

0 $ 31,760,358 4,101,603 2,006,085

Less Accumulated Depreciation for: Buildings and Improvements Equipment Land Improvements

6,158,913 1,882,724 1,476,709

395,172 377,994 109,385

6,554,085 2,260,718 1,586,094

Total Capital Assets, Being Depreciated, Net $ 26,643,881 $ 823,268 $

0 $ 27,467,149

Governmental Activity Capital Assets - Net $ 30,588,070 $ 8,083,096 $ 1,175,193 $ 37,495,973

Current year depreciation expense by function is as follows:

Instruction Support Services
Pupil Services Improvements of Instructional Services Educational Media Services General Administration School Administration Maintenance and Operation of Plant Student Transportation Services Other Support Services Food Services

$ 528,390

$

8,004

13,421

1,135

11,537

1,734

30,509

213,184

32,665

312,189 41,972

$ 882,551

Note 6: RESTRICTED ASSETS

Special Purpose Local Option Sales Tax (SPLOST), general obligation bond proceeds, Georgia State Financing and Investment Commission (GSFIC) funds and property tax levied specifically for retirement of outstanding bond principal, interest and paying agent's fees (Debt Service Funds) are reported as restricted assets in the Statement ofNet Assets because their use is limited by applicable bond covenants or statutory provisions. Restricted assets at June 30, 2004, were as follows:

- 19 -

CITY OF CARROLLTON BOARD OF EDUCATION - CARROLL COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2004

EXHIBIT "H"

Note 6: RESTRICTED ASSETS

Restricted Cash and Cash Equivalents: Debt Services Capital Acquisitions
Restricted Investments: Debt Services
Note 7: RISK MANAGEMENT

District-wide Capital Projects

Bond

SPLOST

Proceeds

GSFIC

Debt Service Funds

$ 434,993 $ 121,918 $ 3,150,545 $ 955,396
$ 2,788,865

The School District is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors or omissions; job related illness or injuries to employees; acts of God and unemployment compensation.

The School District has obtained commercial insurance for risk ofloss associated with torts, assets, errors or omissions and job related illness or injuries to employees. The School District has neither significantly reduced coverage for these risks nor incurred losses (settlements) which exceeded the School District's insurance coverage in any of the past three years.

The School District has elected to self-insure for all losses related to acts of God. The School District has not experienced any losses related to this risk in the past three years.

The School District is self-insured with regard to unemployment compensation claims. The School District accounts for claims within the General Fund with expenses/expenditures and liability being reported when it is probable that a loss has occurred, and the amount ofthat loss can be reasonably estimated.

Changes in the unemployment compensation claims liability during the last two fiscal years are as follows:

Beginning ofYear Liability

Claims and Changes in Estimates

Claims Paid

End ofYear Liability

2003 2004

$

0 $

8 464 $

8 464 $

0

$

0 $

6 590 $

6 590 $

0

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

Position Covered

Amount

Superintendent All Employees

$ 100,000

$

25,000

- 20 -

CITY OF CARROLLTON BOARD OF EDUCATION - CARROLL COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2004

EXHIBIT "H"

Note 8: LONG-TERM DEBT

CAPITAL LEASES The City ofCarrollton Board ofEducation has entered into a lease agreement as lessee for computer equipment. This lease agreement qualifies as a capital lease for accounting purposes and, therefore, has been recorded at the present value of the future minimum lease payments as of the date of its inception.

CITY OF CARROLLTON DEBT PROCEEDS The School District entered into a joint resolution with the City of Carrollton, Georgia (Municipality) whereby the Municipality issued $9,250,000 of2002 Series general obligation debt on behalfofthe School District to finance the cost ofacquiring, constructing, renovating, modifying, improving, extending and equipping capital outlay projects through the School District. The School District has agreed that Sales and Use Tax proceeds sufficient to retire the principal and interest will be placed in escrow to service the debt.

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

Governmental Funds

City of

Capital

Carrollton

Leases

Debt Proceeds

Total

Balance July 1, 2003

$ 236,101 $ 9,250,000 $ 9,486,101

Additions Capital Leases

869,031

869,031

Deductions Payments

236,101

236,101

Balance June 30, 2004

$ 869,031 $ 9,250.000 $ 10,119.031

Portion of Long-Term Debt Due within One Year

$ 428,516 $ 1,500,000 $ 1,928,516

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

- 21 -

CITY OF CARROLLTON BOARD OF EDUCATION - CARROLL COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2004

EXHIBIT "H"

Note 8: LONG-TERM DEBT

Fiscal Year Ended June 30

Capital Leases

Principal

Interest

2005 2006

$ 428,516 $ 440,515

24,333 12,334

Total Principal and Interest

$ 869.031 $

36,667

Fiscal Year Ended June 30

City of Carrollton

Debt Proceeds

Principal

Interest

2005 2006 2007 2008 2009

$ 1,500,000 $ 1,670,000 1,850,000 2,030,000 2,200,000

295,175 238,038 182,225 118,025
41,250

Total Principal and Interest

$ 9,250.000 $ 874,713

Note 9: ON-BEHALF PAYMENTS

The School District has recognized revenues and costs in the amount of $266,889 for health insurance and retirement contributions paid on the School District's behalf by the following State Agencies.

Georgia Department of Education Paid to the Georgia Department of Community Health For Health Insurance of Non-Certified Personnel In the amount of $264,526

Office of Treasury and Fiscal Services Paid to the Public School Employees Retirement System For Public School Employees Retirement (PSERS) Employer's Cost In the amount of $2,363

Note 10: SIGNIFICANT COMMITMENTS

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

-22-

CITY OF CARROLLTON BOARD OF EDUCATION - CARROLL COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2004

EXHIBIT "H"

Note 10: SIGNIFICANT COMMITMENTS

Project

Unearned Executed Contracts

Funding Available From State

SA0lS-766-161 CHS Band Building and Athletic Field House

$ 1,585,022 $ 5,996

79,545

$ 1,591,018 $

79,545

The amounts described in this note are not reflected in the basic financial statements.

Note 11: SIGNIFICANT CONTINGENT LIABILITIES

Amounts received or receivable principally from the Federal government are subject to audit and review by grantor agencies. This could result in requests for reimbursement to the grantor agency for any costs which are disallowed under grant terms. The School District believes that such disallowances, if any, will be immaterial to its overall financial position.

Note 12: RETIREMENT PLANS

TEACHERS RETIREMENT SYSTEM OF GEORGIA (TRS)

TRS PLAN DESCRIPTION Substantially all teachers, administrative and clerical personnel employed by local school systems are covered by the Teachers Retirement System of Georgia (TRS), which is a cost-sharing multiple employer defined benefit pension plan. TRS provides service retirement, disability retirement and survivors benefits for its members in accordance with State statute. The Teachers Retirement System of Georgia issues a separate stand alone financial audit report and a copy can be obtained from the Georgia Department of Audits and Accounts.

TRS CONTRIBUTIONS REQUIRED AND MADE Employees ofthe School District who are covered by TRS are required by State statute to contribute 5% of their gross earnings to TRS. The School District makes monthly employer contributions to TRS at rates adopted by the TRS Board of Trustees in accordance with State statute and as advised by their independent actuary. The required employer contribution rate is 9.24% and employer contributions for the current fiscal year and the preceding two fiscal years are as follows:

Fiscal Year

Percentage Contributed

Required Contribution

2004 2003 2002

100% 100% 100%

$ 1,492,004 $ 1,518,494 $ 1,372,530

- 23 -

CITY OF CARROLLTON BOARD OF EDUCATION - CARROLL COUNTY GENERAL FUND
SCHEDULE OF REVENUES EXPENDITURES AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL
YEAR ENDED JUNE 30 2004

SCHEDULE "1"

REVENUES
Property Taxes Sales Taxes State Funds Federal Funds Charges for Services Investment Earnings Miscellaneous
Total Revenues
EXPENDITURES
Current Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Enterprise Operations Community Services Food Services Operation
Capital Outlay Debt Service
Total Expenditures
Excess of Revenues over (under) Expenditures
OTHER FINANCING SOURCES
Other Sources
Net Change in Fund Balances
Fund Balances - Beginning
Adjustments

NONAPPROPRIATED BUDGETS

ORIGINAL (1)

FINAL(1)

ACTUAL AMOUNTS

$

8,667,318 $

8,667,318 $

9,067,552

3,044

14,522,533

14,575,105

14,397,671

2,404,429

4,123,052

3,965,290

906,860

906,860

1,243,371

152,149

152,149

63,839

367,820

367,820

1,330,250

$

27,021,109 $

28,792,304 $

30,071,017

$

17,824,591 $

19,283,359 $

19,116,219

936,259 1,039,700
480,377 653,888 1,949,603 158,158 2,120,183 1,003,100 102,517 257,070
1,554,500 270,773

1,004,714 1,189,106
480,377 688,159 1,949,603 158,158 2,127,271 1,032,537 102,517 279,840
1,555,500 270,773

1,007,860 1,163,655
509,727 616,624 2,257,506 170,878 2,170,537 790,888 106,646
14,189 410,657 359,662 1,667,371
248 418

$

28,350,719 $

30 121 914 $

30,610,837

$

-1,329,610 $

-1,329,610 $

-539,820

$

-1,329,610 $

-1,329,610 $

5,126,997

5,126,997

-1 206

-1 206

212 485 -327,335 4,686,655

Fund Balances - Ending

$

3796181 $

3 796181 $_~..;4~,3~5;,:;;9,.;;,3;:.2;;,.0

Notes to the Schedule of Revenues. Expenditures and Changes in Fund Balances Budget and Actual
(1) Original and Final Budget amounts do not include budgeted revenues or expenditures of the various principal accounts.
The accompanying schedule of revenues, expenditures and changes in fund balances budget and actual is presented on the modified accrual basis of accounting which is the basis of accounting used in the presentation of the fund financial statements.

See notes to the basic financial statements.

-25-

CITY OF CARROLLTON BOARD OF EDUCATION - CARROLL COUNTY SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS YEAR ENDED JUNE 30. 2004

SCHEDULE "2"

FUNDING AGENCY PROGRAM/GRANT
Agriculture, U. S. Department of Child Nutrition Cluster Pass-Through From Georgia Department of Education Food Services School Breakfast Program National School Lunch Program
Total Child Nutrition Cluster
Other Programs Pass-Through From Georgia Department of Education Food Donation (1)
Total U. S. Department of Agriculture
Education, U. S. Department of Special Education Cluster Pass-Through From Georgia Department of Education Special Education Grants to States Preschool Grants
Total Special Education Cluster
Other Programs Pass-Through From Georgia Department of Education Education for Homeless Children and Youth English Language Acquisition Grants Enhancing Education Through Technology Program Improving Teacher Quality State Grants Reading Excellence - Local Reading Improvement Safe and Drug-Free Schools and Communities School Renovation - Schools State Grants for Innovative Programs Title I Grants to Local Educational Agencies Vocational Education - Basic Grants to States
Total U. S. Department of Education

CFDA NUMBER

PASSTHROUGH
ENTITY ID
NUMBER

EXPENDITURES IN PERIOD

* 10.553 * 10.555

N/A

(2)

N/A $ _ _---'-'1'-'-4-'-'15'-'-0"-'0=-2

$

1,415,002

10.550

N/A

69284

$ _ _---'-1'--'.4'-"8-"4'-=2-"'86=--

* 84.027 * 84.173

N/A $
NIA
$

544,656 70292
614,948

84.196 84.365 84.318 84.367 84.338 84.186 84.352 84.298 84.010 84.048

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

43,541 7,074
87,018 142,463 1,052,249 29,229 169,041
18,648 890,576
39 242
3,094,029

Total Federal Financial Assistance N/A = Not Available

s ===4=5=7=8=3=15=

Notes to the Schedule of Expenditures of Federal Awards

(1) The amount shown for the Food Donation Program represents the Federally assigned value of nonmonetary assistance for donated commodities received and/or consumed by the School District during the current fiscal year.
(2) Expenditures for the funds earned on the School Breakfast Program ($192,242) were not maintained separately and are included in the 2004 National School Lunch Program.

Major Programs are identified by an asterisk (*) in front of the CFDA number.

The School District did not provide Federal Assistance to any Subrecipient.

The accompanying schedule of expenditures of Federal awards includes the Federal grant activity of the City of Carrollton Board of Education and is presented on the modified accrual basis of accounting which is the basis of accounting used in the presentation of the fund financial statements.

See notes to the basic financial statements.

-27-

CITY OF CARROLLTON BOARD OF EDUCATION - CARROLL COUNTY SCHEDULE OF STATE REVENUE YEAR ENDED JUNE 30. 2004

SCHEDULE "3"

AGENCY/FUNDING
GRANTS Bright From the Start: Georgia Department of Early Care and Learning Pre-Kindergarten Program
Education, Georgia Department of Quality Basic Education Direct Instructional Cost Kindergarten Program Kindergarten Program - Early Intervention Program Primary Grades (1-3) Program Primary Grades - Early Intervention (1-3) Program Upper Elementary Grades (4-5) Program Upper Elementary Grades - Early Intervention (4-5) Program Middle School (6-8) Program High School General Education (9-12) Program Vocational Laboratory (9-12) Program Students with Disabilities Category I Category II Category Ill Category IV CategoryV Gifted Student - Category VI Remedial Education Program Alternative Education Program English Speakers of Other Languages (ESOL) Media Center Program 20 Days Additional Instruction Staff and Professional Development Indirect Cost Central Administration School Administration Facility Maintenance and Operations Categorical Grants Pupil Transportation Regular Bus Replacement Sparsity Nursing Services Principal Supplements Mid-term Adjustment Hold-Harmless Education Equalization Funding Grant Food Services Austerity Reduction Other State Programs Grades 4-8 Statewide After School Program Health Insurance K-3 Statewide Reading Program Mentor Teachers National Teacher Certification Pay for Performance Preschool Handicapped Program Student Information System (Reporting) Technology/Career Education - Extended Day Technology/Career Education - Supervision Vocational Construction Related Equipment

GOVERNMENTAL FUND TYPES

CAPITAL

GENERAL

PROJECTS

FUND

FUND

TOTAL

$

763,473

$ 763,473

836,271 184,146 1,622,428 437,463 890,807 106,569 1,712,178 1,565,313 521,690
47,488 133,396 867,828 172,965 197,338 1,058,020
18,830 139,882
86,110 286,500
87,134 59,079
458,220 513,742 843,807
240,407 58,114 19,500 80,530 13,011
171,039 180,556 104,168 -751,083
23,368 264,526
43,960 336
27,378 78,555 85,739 22,141 14,558 18,015
1,250

836,271 184,146 1,622,428 437,463 890,807 106,569 1,712,178 1,565,313 521,690
47,488 133,396 867,828 172,965 197,338 1,058,020
18,830 139,882
86,110 286,500
87,134 59,079
458,220 513,742 843,807
240,407 58,114 19,500 80,530 13,011
171,039 180,556 104,168 -751,083
23,368 264,526
43,960 336
27,378 78,555 85,739 22,141 14,558 18,015
1,250

-28-

CITY OF CARROLLTON BOARD OF EDUCATION - CARROLL COUNTY SCHEDULE OF STATE REVENUE YEAR ENDED JUNE 30. 2004

SCHEDULE "3"

AGENCY/FUNDING
GRANTS Education, Georgia Department of Lottery Program Student Information System (Conversion)
Georgia State Financing and Investment Commission Reimbursement on Construction Projects
Office of Treasury and Fiscal Services Public School Employees Retirement

GOVERNMENTAL FUND TYPES

CAPITAL

GENERAL

PROJECTS

FUND

FUND

TOTAL

$

88,563

$

88,563

$ 809,242 2 363

809,242 2,363

$

14,397,671 $ 809,242 $ 15,206,913

See notes to the basic financial statements.

-29-

CITY OF CARROLLTON BOARD OF EDUCATION - CARROLL COUNTY SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS
YEAR ENDED JUNE 30. 2004

SCHEDULE "4"

PROJECT
To pay the principal and interest coming due on the outstanding Series 1990 and Series 1995 General Obligation School Bonds of the City of Carrollton as the same come due on July 1, 1998 through July 1, 2003
Funding the acquisition, construction, renovation, modification, improvement, extending and equipping of capital outlay projects throughout the Carrollton School System, including, but without limitation, renovations, modifications, improvements, extensions and equipping of facilities at the Carrollton High School to include a band room, kitchen expansion and the addition of a science wing; at the Carrollton Junior High School to include a classroom addition of regular classrooms, science classrooms, a technology laboratory and a media center; at the Carrollton Elementary School to include a classroom addition of regular classrooms, restrooms, covered walkways; and improvements to the Maple Street Education Center; including the acquisition of all property, both real and personal
Funding the acquisition, construction, renovation, modification, improvement, extending and equipping of capital outlay projects throughout the Carrollton School System, including, but without limitation, the acquisition and construction of a new elementary school; additions, renovations and improvements at existing facilities of the Carrollton School System: system-wide technology improvements; the acquisition of school transportation vehicles: the acquisition of land for additional school facilities and all other properties, both real and personal, deemed necessary and advisable for the school system (the "Carrollton School Projects"), the maximum cost of such Carrollton School projects not to exceed $21,604,140; to pay principal and interest coming due on the outstanding Series 1995 General Obligation School Bonds of the City of Carrollton as the same come due on January 1, 2004, through and including July 1, 2007, which principal and interest payments total $2,045,860, and calling for redemption at par on July 1, 2007 of all such remaining outstanding Bonds maturing July 1, 2008 through and including July 1, 201 o, which principal and interest payments total $1,375,000; funding capitalized interest on the City of Carrollton debt hereinafter referred to

ORIGINAL ESTIMATED
COST(1)

CURRENT ESTIMATED COSTS(2)

AMOUNT EXPENDED IN CURRENT
YEAR(3)

AMOUNT EXPENDED
IN PRIOR YEARS(3)

PROJECT STATUS

$ 2,916,698 $ 2,916,697 $

428,186 $ 2,488,511 Completed

12,743,303

13,407,126

1,490,862

11,794,346 Ongoing

25,025,000

25,025,000

7,392,965

835,208 Ongoing

$ 40,685,001 $ 41,348,823 $ 9,312,013 $ 15,118,065 - 30 -

CITY OF CARROLLTON BOARD OF EDUCATION - CARROLL COUNTY SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS
YEAR ENDED JUNE 30 2004

SCHEDULE "4"

(1) The School District's original cost estimate as specified in the resolution calling for the imposition of the Local Option Sales Tax.
(2) The School District's current estimate of total cost for the projects. Includes all cost from project inception to completion.
(3) The voters of Carroll County approved the imposition of a 1% sales tax to fund the above projects and retire associated debt. Amounts expended for these projects may include sales tax proceeds, state, local property taxes and/or other funds over the life of the projects.

See notes to the basic financial statements.

- 31 -

CITY OF CARROLLTON BOARD OF EDUCATION - CARROLL COUNTY GENERAL FUND- QUALITY BASIC EDUCATION PROGRAM (QBE) ALLOTMENTS AND EXPENDITURES - BY PROGRAM YEAR ENDED JUNE 30, 2004

SCHEDULE "5"

DESCRIPTION

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

ELIGIBLE QBE PROGRAM COSTS

SALARIES

OPERATIONS

TOTAL

Direct Instructional Programs

Kindergarten Program

$

Kindergarten Program-Early Intervention Program

Primary Grades (1-3) Program

Primary Grades-Early Intervention (1-3) Program

Upper Elementary Grades (4-5) Program

Upper Elementary Grades-Early Intervention (4-5)

Program

Middle School (6-8) Program

High School General Education (9-12) Program

Vocational Laboratory (9-12) Program

Students with Disabilities

Category I

Category II

Category Ill

Category IV

CategoryV

Gifted Student - Category VI

Remedial Education Program

Alternative Education Program

English Speakers of Other Languages (ESOL)

1,009,137 $ 227,863
2,000,098 549,440
1,066,438
143,609 2,093,713 1,915,204
633,219 1,738,035
1,259,024 22,284
170,723 102105

772,478 $ 191,379 2,028,041 565,110 1,291,437
155,993 2,321,410 2,678,992
571,409
191,777 1,368,392
191,940 167,095 354,795
13,811 222,198
98,327

46,646 $ 1,605
94,620 4,662
78,683
10,097 124,666 221,181
53,549
2,034 2,935 17,445 3,034 4,279 7,523
7,119 56

819,124 192,984 2,122,661 569,772 1,370,120
166,090 2,446,076 2,900,173
624,958
2,034 194,712 1,385,837 194,974 171,374 362,318
13,811 229,317
98,383

TOTAL DIRECT INSTRUCTIONAL PROGRAMS

$

12,930,892 $ 13,184,584 $

680,134 $

13,864,718

Media Center Program Staff and Professional Development

348,217 71 753

410,417

74,875 21 433

485,292 21 433

TOTAL QBE FORMULA FUNDS

$

13,350,862 $ 13,595,001 $

776 442 $ =::::1.;,4~3,;,,,71;,.,4,;.:4~3

(1) Comprised of State Funds plus Local Five Mill Share. (2) Allotments do not include the impact of the State budget austerity reduction.

See notes to the basic financial statements.

- 33-

SECTION II COMPLIANCE AND INTERNAL CONTROL REPORTS

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

DEPARTMENT OF AUDITS AND ACCOUNTS
254 Washington Street, S.W., Suite 214 Atlanta, Georgia 30334-8400
March 25, 2005

Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the City of Carrollton Board of Education
REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS
Ladies and Gentlemen:
We have audited the financial statements of the governmental activities, each major fund, and the aggregate remaining fund information ofCity ofCarrollton Board ofEducation as ofand for the year ended June 30, 2004, which collectively comprise City of Carrollton Board of Education's basic financial statements and have issued our report thereon dated March 25, 2005. We conducted our audit in accordance with auditing standards generally accepted in the United States ofAmerica and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States.
Internal Control Over Financial Reporting
In planning and performing our audit, we considered City ofCarrollton Board ofEducation's internal control over financial reporting in order to determine our auditing procedures for the purpose of expressing our opinion on the financial statements and not to provide an opinion on the internal control over financial reporting. However, we noted a certain matter involving the internal control over financial reporting and its operation that we consider to be a reportable condition. Reportable conditions involve matters coming to our attention relating to significant deficiencies in the design or operation ofthe internal control over financial reporting that, in ourjudgment, could adversely affect City of Carrollton Board of Education's ability to record, process, summarize and report financial data consistent with assertions ofmanagement in the financial statements. The reportable condition is described in the accompanying Schedule of Findings and Questioned Costs as item FS-7661-0401.
2004YB-30

A material weakness is a reportable condition in which the design or operation of one or more ofthe internal control components does not reduce to a relatively low level the risk that misstatements caused by error or fraud in amounts that would be material in relation to the financial statements being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. Our consideration of the internal control over financial reporting would not necessarily disclose all matters in the internal control that might be reportable conditions and, accordingly, would not necessarily disclose all reportable conditions that are also considered to be material weaknesses. However, we believe the reportable condition described above is not a material weakness.
Compliance and Other Matters
As part of obtaining reasonable assurance about whether City of Carrollton Board of Education's financial statements are free of material misstatement, we performed tests of its compliance with certain provisions oflaws, regulations, contracts and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards.
This report is intended solely for the information and use of the management and members of the City of Carrollton Board of Education and is not intended to be and should not be used by anyone other than these specified parties.
Respectfully submitted,

RWH:as 2004YB-30

State Auditor

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

DEPARTMENT OF AUDITS AND ACCOUNTS
254 Washington Street, S.W., Suite 214 Atlanta, Georgia 30334-8400
March 25, 2005

Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members ofthe City of Carrollton Board of Education
REPORT ON COMPLIANCE WITH REQUIREMENTS APPLICABLE TO EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH 0MB CIRCULARA-133
Ladies and Gentlemen:
Compliance
We have audited the compliance of City of Carrollton Board of Education with the types of compliance requirements described in the U.S. Office ofManagement and Budget (0MB) Circular A-133 Compliance Supplement that are applicable to each ofits major Federal programs for the year ended June 30, 2004. City ofCarrollton Board ofEducation's major Federal programs are identified in the Summary of Auditor's Results Section of the accompanying Schedule of Findings and Questioned Costs. Compliance with the requirements of laws, regulations, contracts and grants applicable to each ofits major Federal programs is the responsibility ofCity ofCarrollton Board of Education's management. Our responsibility is to express an opinion on City ofCarrollton Board of Education's compliance based on our audit.
We conducted our audit ofcompliance in accordance with auditing standards generally accepted in the United States ofAmerica; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General ofthe United States; and 0MB Circular A133, Audits of States, Local Governments, and Non-Profit Organizations. Those standards and 0MB Circular A-133 require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types ofcompliance requirements referred to above that could have a direct and material effect on a major Federal program occurred. An audit includes examining, on a test basis, evidence about the City of Carrollton Board of Education's compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Our audit does not provide a legal determination on City ofCarrollton Board ofEducation's compliance with those requirements.
2004SA-10

In our opinion, the City ofCarrollton Board ofEducation complied, in all material respects, with the requirements referred to above that are applicable to each ofits major Federal programs for the year ended June 30, 2004.
Internal Control Over Compliance
The management of City of Carrollton Board of Education is responsible for establishing and maintaining effective internal control over compliance with requirements of laws, regulations, contracts and grants applicable to Federal programs. In planning and performing our audit, we considered City of Carrollton Board of Education's internal control over compliance with requirements that could have a direct and material effect on a major Federal program in order to determine our auditing procedures for the purpose of expressing our opinion on compliance and to test and report on internal control over compliance in accordance with 0MB Circular A-133.
Our consideration ofthe internal control over compliance would not necessarily disclose all matters in the internal control that might be material weaknesses. A material weakness is a reportable condition in which the design or operation of one or more of the internal control components does not reduce to a relatively low level ofrisk that noncompliance with applicable requirements oflaws, regulations, contracts and grants caused by error or fraud that would be material in relation to a major Federal program being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. We noted no matters involving the internal control over compliance and its operation that we consider to be material weaknesses.
This report is intended solely for the information and use ofthe management, members ofthe City of Carrollton Board of Education, Federal awarding agencies and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties.
Respectfully submitted,

RWH:as 2004SA-10

State Auditor

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

CITY OF CARROLLTON BOARD OF EDUCATION - CARROLL COUNTY AUDITEE'S RESPONSE
SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2004

PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

FINDING CONTROL NUMBER AND STATUS

FS-7661-03-01

Unresolved - See Corrective Action/Responses

CORRECTIVE ACTION/RESPONSES

REVENUES/RECEIPTS/RECEIVABLES EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Separation of Duties Finding Control Number: FS-7661-03-01

The School District has developed and implemented an "Accounting and Financial Handbook" that serves as a required guideline for Principals and School Bookkeepers. System level Financial Services will monitor compliance of all required guidelines on a regular basis.

SECTION IV FINDINGS AND QUESTIONED COSTS

CITY OF CARROLLTON BOARD OF EDUCATION - CARROLL COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2004
I SUMMARY OF AUDITOR'S RESULTS
1. Type of Report Issued on the Financial Statements The auditor's opinion on the City ofCarrollton Board ofEducation's financial statements was unqualified.
2. Reportable Conditions in Internal Control Disclosed by the Audit of the Financial Statements The audit report for the City ofCarrollton Board ofEducation disclosed a financial statement reportable condition related to the following control categories.
Expenditures/Liabilities/Disbursements Revenues/Receivables/Receipts
The reportable condition described above is not considered to be a material weakness.
3. Noncompliance Material to the Financial Statements The audit of the City of Carrollton Board of Education disclosed no instances of noncompliance that were deemed to be material to the financial statements.
4. Reportable Conditions in Internal Control Over Major Programs The audit report for the City of Carrollton Board ofEducation did not disclose any reportable conditions in internal control over major programs.
5. Type of Report Issued on Compliance for Major Programs The auditor's opinion on the City of Carrollton Board of Education's report on compliance with requirements applicable to major programs was unqualified.
6. Audit Findings Required to be Reported by Section .510(a) of 0MB Circular A-133 The City ofCarrollton Board ofEducation's audit did not disclose audit findings required to be reported by section .510(a) of 0MB Circular A-133.
7. Major Programs Federal awards audited as major programs are as follows: 10.553 Food Services - School Breakfast Program 10.555 Food Services - National School Lunch Program 84.027 Special Education - Grants to States 84.173 Special Education - Preschool Grants
8. Type "A" Program Dollar Threshold The dollar threshold for type "A" programs was $300,000.
- 1-

CITY OF CARROLLTON BOARD OF EDUCATION - CARROLL COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2004
I SUMMARY OF AUDITOR'S RESULTS
9. Low Risk Auditee The City of Carrollton Board of Education qualified as a low risk auditee as defined by Section .530 of 0MB Circular A-133.
II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS
REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Separation of Duties Reportable Condition Finding Control Number: FS-7661-04-01
Our examination of the principals' accounts disclosed weaknesses in internal control as discussed below:
Revenues/Receivables/Receipts
(1) Deposit preparation was not separated from the record keeping and cash custody functions.
(2) Based on a review of twenty-five items, twenty-four receipts did not have adequate documentation.
Expenditures/Liabilities/Disbursements
Based on a review of twenty-five items, the following deficiencies were noted:
(1) Thirteen voucher packets included purchase request forms which were dated and approved after the invoice date.
(2) Four vouchers did not have invoices attached.
(3) Two voucher packets did not have any evidence of receipt of the goods.
These deficiencies were a result ofmanagement's decision to limit the number ofadministrative staff made responsible for accounting functions and failure to ensure established controls were functioning as designed. Management should implement procedures to ensure that the key accounting functions of custody, record keeping and authorization be segregated. Additionally, controls should be revised and monitored to provide reasonable assurance that transactions are processed according to established procedures.
-2 -

CITY OF CARROLLTON BOARD OF EDUCATION - CARROLL COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2004
III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS No matters were reported.
-3 -

SECTIONV MANAGEMENT'S RESPONSES

CITY OF CARROLLTON BOARD OF EDUCATION - CARROLL COUNTY SCHEDULE OF MANAGEMENT'S RESPONSES YEAR ENDED JUNE 30, 2004
Finding Control Number: FS-7661-04-01
We have developed and implemented an "Accounting and Financial Handbook" that serves as a required guideline for Principals and School Bookkeepers.
System level Financial Services will monitor compliance of all required guidelines on a regular basis.
Contact Person: Delaine Hanson, Financial Services Coordinator Phone: (770) 832-9633 Fax Number (770) 834-9950 E-mail Address: delaine.hanson@carrolltoncityschools.net