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STATE OF GEORGIA DEPARTMENT OF AUDITS AND ACCOUNTS

I
CITY OF JEFFERSON SOARD OF EDUCATION
A COMPONENT UNIT OF THE CITY OF JEFFERSON, GEORGIA
REPORT ON AUDIT OF THE FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2002
Russell W. Hinton State Auditor

CITY OF JEFFERSON BOARD OF EDUCAnON - JACKSON COUNTY - TABLE OF CONTENTS -

SECTION I

FINANCIAL

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

EXHIBITS

GENERAL-PURPOSE FINANCIAL STATEMENTS

COMBINED STATEMENTS - OVERVIEW

A

COMBINED BALANCE SHEET

ALL FUND TYPES AND ACCOUNT GROUP

2

B

COMBINED STATEMENT OF REVENUES, EXPENDITURES AND

CHANGES IN FUND BALANCES

ALL GOVERNMENTAL FUND TYPES

4

C

COMBINED STATEMENT OF REVENUES, EXPENDITURES AND

CHANGES IN FUND BALANCES - BUDGET AND ACTUAL

(NON-GAAP BASIS)

GENERAL AND SPECIAL REVENUE FUNDS

6

D NOTES TO THE GENERAL-PURPOSE FINANCIAL STATEMENTS

7

ADDITIONAL FINANCIAL INFORMATION

COMBINING STATEMENTS

SPECIAL REVENUE FUND

E

COMBINING BALANCE SHEET

18

F

COMBINING STATEMENT OF REVENUES, EXPENDITURES

AND CHANGES IN FUND BALANCES

20

CAPITAL PROJECTS FUND

G

COMBINING BALANCE SHEET

22

H

COMBINING STATEMENT OF REVENUES, EXPENDITURES

AND CHANGES IN FUND BALANCES

23

SCHEDULES

1 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS

24

2 SCHEDULE OF STATE REVENUE

26

3 SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS

27

ALLOTMENTS AND EXPENDITURES

GENERAL FUND - QUALITY BASIC EDUCATION PROGRAMS (QBE)

4

BY PROGRAM

28

5

~SITE

~

CITY OF JEFFERSON BOARD OF EDUCATION - JACKSON COUNTY - TABLE OF CONTENTS -
SECTION II COMPLIANCE AND INTERNAL CONTROL REPORTS REPORT ON COMPLIANCE AND ON INTERNAL CONTROL OVER FINANCIAL REPORTING BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS REPORT ON COMPLIANCE WITH REQUIREMENTS APPLICABLE TO EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH OMB CIRCULAR A-I33
SECTION 1II AUDITEE'S RESPONSE TO PRIOR YEAR FINDINGS AND QUESTIONED COSTS SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS
SECTION IV FINDINGS AND QUESTIONED COSTS SCHEDULE OF FINDINGS AND QUESTIONED COSTS

SECTION I FINANCIAL

RUSSELL W. HINTON
STATE AUDITOR (404) 6562174

DEPARTMENT OF AUDITS AND ACCOUNTS
254 Washington Street, S.W. Suite 214 Atlanta, Georgia 30334-8400
August 5, 2003

Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the City of Jefferson Board of Education
INDEPENDENT AUDITOR'S COMBINED REPORT ON GENERAL-PURPOSE FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATIONSCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
Ladies and Gentlemen:
We have audited the accompanying general-purpose financial statements of the City of Jefferson Board of Education, a component unit of the City of Jefferson, Georgia, as of and for the year ended June 30, 2002, as listed in the table of contents. These general-purpose financial statements are the responsibility of the City of Jefferson Board of Education's management. Our responsibility is to express an opinion on these general-purpose financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General ofthe United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material 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 opinion.
As described in the notes to the general-purpose financial statements, the Board of Education's financial statements have been prepared using certain accounting practices and policies which, in our opinion, vary in some respects from generally accepted accounting principles. These variances are described as follows:

2002ARL-13

* The general-purpose financial statements of the Board of Education did not contain a
General Fixed Assets Account Group to account for property and equipment owned by the Board of Education which should be included to conform to generally accepted accounting principles.
* School activity accounts maintained at the individual schools are not included in the
general-purpose financial statements. To conform to generally accepted accounting principles, these accounts should be included in the general-purpose financial statements.
* The Board of Education did not recognize as expenditures, in the year ended
June 30, 2002, a portion of salaries and the corresponding employer's cost of related benefits earned for contractual services completed prior to June 30, 2002. Also funds received, subsequent to June 30, 2002, from the Georgia Department of Education for the State's share of these unrecorded salaries and related benefits were not recorded as revenue in the year under review. Conversely, the similar expenditures and related revenues for contractual services completed prior to June 30, 2001, were improperly recorded in the year ended June 30, 2002. To conform to generally accepted accounting principles, revenues should be recorded when available and measurable and expenditures should be recorded when incurred, rather than when funds are received or disbursed.
The aggregate effects on the general-purpose financial statements of these variances or omissions have not been determined, but are believed to be material.
In our opinion, except for the effects on the general-purpose financial statements of the matters referred to in the preceding paragraph, the general-purpose financial statements referred to above present fairly, in all material respects, the financial position of the City of Jefferson Board of Education as of June 30, 2002, and the results of its operations for the year then ended, in conformity with accounting principles generally accepted in the United States of America.
Inaccordance with Government Auditing Standards, we have also issued our report dated August 5, 2003, on our consideration of the City of Jefferson Board of Education's internal control over financial reporting and our tests of its compliance with certain provisions of laws, regulations, contracts and grants. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be read in conjunction with this report in considering the results of our audit.
Our audit was performed for the purpose of forming an opinion on the general-purpose financial statements of the City of Jefferson Board of Education taken as a whole. The accompanying combining statements (Exhibits E through H) and the financial schedules (Schedules 1 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 of States, Local Governments, and Non-Profit Organizations, are presented for purposes of additional analysis and are not a required part of the
2002ARL-13

general-purpose financial statements. Such information has been subjected to the auditing procedures applied in the audit ofthe general-purpose financial statements and in our opinion, except for the effects ofthe matters referred to in the third paragraph, such information is fairly stated, in all material respects, in relation to the general-purpose financial statements taken as a whole.
A copy ofthis 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 506-24.
Respectfully submitted,
~~
Ru ell W. Hinton State Auditor
RWH:as 2002ARL-13

CITY OF JEFFERSON BOARD OF EDUCA nON - JACKSON COUNTY

CITY OF JEFFERSON BOARD OF EDUCATION - JACKSON COUNTY COMBINED BALANCE SHEET
ALL FUND TYPES AND ACCOUNT GROUP JUNE 30, 2002

Cash and Cash Equivalents
Investments
Accounts Receivable
Prepaid Items
Inventories Food Donated Commodities Purchased Food
Amount to be Provided in Future Years For Payment of Capital Lease Agreements

GOVERNMENTAL FUND

SPECIAL

GENERAL

REVENUE

FUND

FUND

$

712,272.20 $

88.039.24

501,789.46

213.038.46

176,595.00

650.00

10.662.92 3,171.11

Total Assets

$ 1,427,750.12 $====2=7=8=,4=6=8=.2=7=

LIABILITIES AND FUND EQUITY
LIABILITIES
Accounts Payable Salaries Payable Expired Grant Balances Payable Contracts Payable Retainages Payable Deferred Revenue Capital Lease Agreements
Total Liabilities
FUND EQUITY
Fund Balances Reserved For Inventories Food Donated Commodities Purchased Food For Purpose of Bond Issue For SPLOST Projects Unreserved Undesignated
Total Fund Equity

s

145,727.75 $

65.087.52

69,972.83

66.170.00

254.16

28,601.98

s

215,954.74 $

159.859.50

$

10.662.92

3,171.11

$ 1.211.795.38 $ 1.211.795.38 $

104,774.74 118,608.77

Total Liabilities and Fund Equity

$ 1,427,750.12 $===2=78=.4~6=8.=27=

The notes to the general-purpose financial statements are an integral part of this statement.

-2-

EXHIBIT "A"

TYPES CAPITAL
PROJECTS FUND

$

430,313.10

174,096.91

ACCOUNT GROUP
GENERAL LONG-TERM
DEBT

TOTALS

(Memorandum Only)

JUNE 30, 2002

JUNE 30, 2001

$ 1,230,624.54 $ 1,775,406.74

501,789.46

4,131,191.49

563,730,37

724,417,78

650,00

40,281,90

10,662,92 3,171,11
40,281,90

6,367,81 1,583,98
99,727,64

$

604,410,01 $

40,281,90 $ 2,350,910,30 $ 6.738,695,44

$

1,395,00

154,997,74 50,000,00

$

$

206,392,74 $

$
40,28190 40,281,90 $

212,210,27 $ 136,142,83
28,856,14 154,997,74
50,000,00
40,281,90
622,488,88 $

13,469,17 45,756,94 13,325,97 670,512,18 342,249,39
8,000,00 99,727,64
1,193,041,29

$

398,017,27

0,00

$

398,017,27

$

10,662.92 $

6,367.81

3,171,11

1,583,98

3,033,352.44

398,017,27

736,877,18

1,316,570,12

1,767,472,74

$ 1,728,421.42 $ 5,545,654.15

$

604,410,01 $

40,281,90 $ 2,350,910,30 $ 6,738,695,44

-3-

CITY OF JEFFERSON BOARD OF EDUCATION - JACKSON COUNTY COMBINED STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES
ALL GOVERNMENTAL FUND TYPES YEAR ENDED JUNE 30, 2002

REVENUES
State Funds Federal Funds Taxes Other Funds
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 Food Services Operation Community Services Operations
Capital Outlay Debt Service
Principal Interest
Total Expenditures
Excess of Revenues over (under) Expenditures
OTHER FINANCING SOURCES (USES)
Operating Transfers In Operating Transfers Out
Total Other Financing Sources (Uses)
Excess of Revenues and Other Financing Sources over (under) Expenditures and Other Financing Uses
FUND BALANCE JULY 1
Food Inventory - Net Change in Period Donated Commodities Purchased Food

GENERAL FUND

SPECIAL REVENUE
FUND

$ 6,540,032.51 $
2,400,304.01 230,881.88
$ 9,171,218.40 $

216,134.54 544,988.77
237,949.52
999,072.83

$ 6,897,431.35 $
262,177.79 178,544.02 189,850.95 315,606.18 646,932.96 106,265.21 697,086.58 124,683.03
55,518.63 9,522.52
56,171.87

306,976.54
17,461.63 70,845.03
29,465.87 19,739.49
7,132.92 3,513.04 50,062.66 503,771.81 7,092.44

59,445.74 5,895.59

$ 9,605,132.42 $ 1,016,061.43

$

-433,914.02 $

-16,988.60

$

$

-3,067.16

$

-3,067.16 $

3,067.16 3,067.16

$

-436,981.18 $

1,648,776.56

-13,921.44 126,647.97

4,295.11 1,587.13

FUND BALANCE JUNE 30

$ 1,211,795.38 $ ==;.,.1;1.;8;,6;0,~8=.7=7:=

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

EXHIBIT"B"

CAPITAL PROJECTS
FUND

TOTALS

(Memorandum Only) YEAR ENDED

JUNE 30, 2002

JUNE 30, 2001

$ 6,756,167.05 $ 6,398,759.21

544,988.77

757,824.24

$

975,050.99

3,375,355.00

3,168,738.11

70,563.72

539,395.12

1,032,830.52

$ 1,045,614.71 $ 11,215,905.94 $ 11,358,152.08

$ 7,204,407.89 $ 6,281,983.69

$

2,360.50

4,038,17406

279,639.42 249,389.05 189,850.95 345,072.05 666,672.45 108,625.71 697,086.58 131,815.95
59,031.67 59,585.18 503,771.81 63,264.31 4,038,17406

255,913.08 209,432.02 160,154.28 326,365.45 580,525.83 115,746.33 506,452.68
99,184.32 41,898.28 65,452.50 449,423.95 59,665.04 5,597,447.64

59,445.74 5,895.59

66,713.53 10,635.70

$ 4,040,534.56 $ 14,661,728.41 $ 14,826,994.32

$ -2,994,919.85 $ -3,445,822.47 $ -3,468,842.24

$

3,067.16 $

65.93

$

-377,292.50

-380,359.66

--483,586.69

$

-377,292.50 $

-377,292.50 $

-483,520.76

$ -3,372,212.35 $ -3,823,114.97 $ -3,952,363.00

3,770,229.62

5,545,654.15

9,498,103.73

4,295.11 1,587.13

-364.64 278.06

$

398,017.27 $ 1,728,421.42 $ 5,545,654.15

- 5-

CITY OF JEFFERSON BOARD OF EDUCATION - JACKSON COUNTY COMBINED STATEMENT OF REVENUES EXPENDITURES AND CHANGES IN FUND BALANCES
BUDGET AND ACTUAL - (NON-GAAP BASIS) GENERAL AND SPECIAL REVENUE FUNDS
YEAR ENDED JUNE 30,2002

EXHIBIT"C"

REVENUES
State Funds Federal Funds Taxes Other Funds
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 Food Services Operation Community Services Operations
Debt Service
Total Expenditures
Excess of Revenues over (under) Expenditures
OTHER FINANCING SOURCES (USES)
Other Sources Other Uses
Total Other Financing Sources (Uses)
Excess of Revenues and Other Financing Sources over (under) Expenditures and Other Financing Uses
FUND BALANCE JULY 1 2001
Adjustments Food Inventory - Net Change in Period
Donated Commodities Purchased Food

GENERAL FUND

BUDGET

ACTUAL

$ 6,301,850.70 $ 6,540,03251

2,399,580.00 176,35000

2,400,30401 230,88188

$ 8,877,780.70 $ 9,171,21840

$ 6,885,407 70 $ 6,897,431.35

245,92900 136,705.93 168,83900 285,394.00 643,92800 113,027.00 577,628.00 129,684.00
77,92900

262.17779 178,544.02 189,85095 315.60618 646,93296 106.26521 697,08658 124,68303
55,51863 9,522.52

56,171.87 65,34133

$ 9,264,471.63 $ 9,605,13242

$ -386,69093 $ -433.914.02

$

-3,067.16

$

-3,067.16

$ -386,690.93 $ -436,981.18

1,585,271.34

1,648,77656

FUND BALANCE JUNE 30 2002

$ 1,198,58041 $ 1,211,795.38

SPECIAL REVENUE FUND

BUDGET

ACTUAL

$ 174,262.00 $ 570,244.00
204,492.00
$ 948,998.00 $

216,13454 544,988.77
237,949.52
999,072.83

$ 353,95540 $
14,032.00 65,703.95
5,850.00 8,864.65

306,97654
17,461.63 70,845.03
29,46587 19,73949

9,100.00 8,357.00 48,944.00 462,210.00 3,000.00

7,132.92 3.51304 50,062.66 503,77181 7,09244

$ 980.01700 $ 1,016.06143 $ -31,019.00 $ -16,988.60

$

3,06716

$

3,067.16

$ -31,019.00 $ 179,424.94 35,624.65

-13,92144 126,64797
4,29511 1,587.13

$ 184,030.59 $===11=8=,6~08=.7=7=

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

CITY OF JEFFERSON BOARD OF EDUCATION - JACKSON COUNTY NOTES TO THE GENERAL-PURPOSE FINANCIAL STATEMENTS JUNE 30, 2002

EXHIBIT "D"

Note 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
REPORTING ENTITY
The City of Jefferson 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 School District is not organized as a separate legal entity and does not have the power to levy taxes or issue bonds. Its budget is subject to approval by the City ofJefferson, Georgia. Accordingly, the City of Jefferson Board ofEducation is determined to be a component unit of the City of Jefferson, Georgia, which is the primary government.
FUND ACCOUNTING
The School District uses funds and an account group 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. An account group is a financial reporting device designed to provide accountability for certain assets and liabilities that are not recorded in the funds because they do not directly affect expendable available financial resources.
General Fixed Assets are recorded as expenditures in the various funds at the time of purchase. A General Fixed Assets Account Group is not presently maintained by the School District. To conform to generally accepted accounting principles, a General Fixed Assets Account Group should be maintained for reporting the cost of assets acquired by governmental fund types.
Although "school activity accounts" are maintained at the individual schools, neither the assets, liabilities and fund equity, nor the revenues, expenditures and changes in fund balances of these accounts are reflected in these financial statements. To conform to generally accepted accounting principles, these accounts should be recorded in the general-purpose financial statements.
The general-purpose financial statements account for all State, Federal, Taxes and Other funds under control of the School District, in compliance with generally accepted accounting principles applicable to governmental units, unless otherwise disclosed in these notes. Funds and the account group presented in this report are as follows:
GOVERNMENTAL FUND TYPES - are used to account for all or most of the School District's educational activities. Governmental Fund Types include:
GENERAL FUND - the fund used to account for all financial resources of the School District except those required to be accounted for in another fund. These transactions relate to resources obtained and used for services provided by a board of education.

-7-

CITY OF JEFFERSON BOARD OF EDUCAnON - JACKSON COUNTY NOTES TO THE GENERAL-PURPOSE FINANCIAL STATEMENTS JUNE 30, 2002

EXHIBIT "D"

Note 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
SPECIAL REVENUE FUND - the fund used to account for the proceeds of specific revenue sources (other than for major capital projects) that are legally restricted to expenditures for specified purposes. These funds are received primarily from the Georgia Department of Education and from the Federal government to accomplish specific educational objectives.
eAPITAL PROJECTS FUND - the fund used to account for financial resources to be used for the acquisition or construction of major capital facilities.
ACCOUNT GROUP
GENERAL LONG-TERM DEBT ACCOUNT GROUP - A financial reporting device used to account for capital lease obligations.
BASIS OF ACCOUNTING
The accounting and financial reporting treatment applied to a fund is determined by its measurement focus. All governmental funds are accounted for using a current financial resources measurement focus. With this measurement focus, only current assets and current liabilities generally are included on the balance sheet. Operating statements ofthese funds present increases (i.e., revenues and other financing sources) and decreases (i.e., expenditures and other financing uses) in net current assets. Their reported fund balance is considered a measure of available spendable resources.
Liabilities which are expected to be financed from available spendable resources are reported as liabilities in the governmental funds. Other liabilities, which are not expected to be financed from available spendable resources, are reported in the General Long-Term Debt Account Group.
Governmental funds are accounted for using the modified accrual basis of accounting under which:
Revenues are recognized when susceptible to accrual (i.e., when they become both measurable and available). "Measurable" means the amount of the transaction can be determined and "available" means collectible within the current period or soon enough thereafter to be used to pay liabilities of the current period. The School District considers receivables collected within sixty days after yearend to be available. Property taxes, sales taxes and interest are considered to be susceptible to accrual. Nonexchange transactions, in which the School District gives (or receives) value without directly receiving (or giving) equal value in exchange, include property taxes, local option sales taxes, intergovernmental grants and donations. Revenue for property taxes is recognized in the fiscal year for which the taxes are levied. Revenue from sales taxes is recognized in the fiscal year the resources are received or susceptible to accrual. Revenue from grants and donations is recognized in the fiscal year in which all eligibility requirements have been satisfied.
Expenditures are generally recognized when the related fund liability is incurred.
A departure from the above definitions is the accounting treatment afforded the final two payments on General Fund teachers' and bus drivers' contracts, and the resources available from the Georgia
-8-
---_._---

CITY OF JEFFERSON BOARD OF EDUCA nON - JACKSON COUNTY NOTES TO THE GENERAL-PURPOSE FINANCIAL STATEMENTS JUNE 30, 2002

EXHIBIT "D"

Note 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Department of Education for the State's share of these contracts. During fiscal year 2002, a substantial number of personnel ofthe School District were employed for a one hundred and ninety day period beginning in August 2001 and ending in early June 2002. Personnel contracts for this employment period specify that compensation be paid in twelve equal monthly payments beginning in September 200 I and ending in August 2002. State grants to fund the State's share of these contracts were disbursed from the Georgia Department of Education to the School District in the same twelve months. As of June 30, 2002, compensation under these employment contracts had been earned, but two of the twelve monthly payments, due for July and August 2002, had not been made. Payments for these two months were made and recorded as expenditures by the School District subsequent to June 30,2002. Also, the State's portion ofthe compensation paid in July and August 2002 was received and recorded as revenue in the fiscal year subsequent to June 30, 2002. Conversely, the similar expenditures and related revenues for contractual services completed prior to June 30, 2001, were recorded in the year ended June 30, 2002. Generally accepted accounting principles require that revenues be recorded when available and measurable and that expenditures be recorded when incurred, rather than when funds are received or disbursed.
BUDGET
The City of Jefferson Board of Education's budget is a complete financial plan for the School District's fiscal year and is based upon estimates of expenditures together with probable funding sources. There is no statutory prohibition regarding overexpenditure ofthe budget at any level. The budget for all governmental funds is prepared by fund, function and object. The legal level of budget control was established by the Board at the aggregate level. The budget for governmental funds was prepared on a basis other than generally accepted accounting principles.
The budget process begins when the School District's administration prepares a tentative budget for the Board's approval. After approval ofthis tentative budget by the Board, such budget is advertised at least once in a newspaper of general circulation in the locality. At the next regular meeting ofthe Board after advertisement, the Board receives comments on the tentative budget, makes revisions as necessary and adopts a final school budget. This final budget is then submitted, in accordance with provisions of the Quality Basic Education Act, OCGA Section 20-2-167(c), to the Georgia Department of Education. The Board may increase or decrease the budget at any time during the year. All unexpended budget authority lapses at fiscal year-end.
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.

- 9-

CITY OF JEFFERSON BOARD OF EDUCATION - JACKSON COUNTY NOTES TO THE GENERAL-PURPOSE FINANCIAL STATEMENTS JUNE 30, 2002

EXHIBIT"D"

Note 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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 and in selecting among options for investment or among institutional bids for deposits, the highest rate ofreturn shall be the objective, given equivalent conditions of safety and liquidity. Funds may be invested in the following:
(1) Obligations issued by the State of Georgia or by other states,
(2) Obligations issued by the United States government,
(3) Obligations fully insured or guaranteed by the United States government or a United States government agency,
(4) Obligations of any corporation of the United States government,
(5) Prime banker's acceptances,
(6) The Local Government Investment Pool administered by the State of Georgia, Office of Treasury and Fiscal Services,
(7) Repurchase agreements, and
(8) Obligations of other political subdivisions of the State of Georgia.
RECEIVABLES
Receivables consist of 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 general-purpose financial statements do not include any amounts which would necessitate the need for an allowance for uncollectible receivables.
PROPERTY TAXES
The City of Jefferson fixed the property tax levy for the 2001 tax digest year (calendar year) on November 30, 2001 (levy date). Taxes were due on January 31,2002 (lien date). Taxes collected within the current fiscal year or within 60 days after year-end on the 2001 tax digest are reported as
- 10-

CITY OF JEFFERSON BOARD OF EDUCA nON - JACKSON COUNTY NOTES TO THE GENERAL-PURPOSE FINANCIAL STATEMENTS JUNE 30, 2002

EXHIBIT "0"

Note 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

revenue in fiscal year 2002. The Jefferson City Clerk bills and collects the property taxes for the School District and remits taxes collected to the School District. Property tax revenues during the fiscal year ended June 30, 2002 for maintenance and operations amounted to $2,400,304.01.

The tax millage rate levied for the 2001 tax year (calendar year) for the City of Jefferson Board of Education was as follows (a mill equals $1 per thousand dollars of assessed value):

School Operations

11.89 mills

SALES TAXES

Special Purpose Local Option Sales Tax revenue during the year amounted to $975,050.99 and is to be used for capital outlay for educational purposes or debt service. This sales tax was authorized by local referendum and the sales tax must be re-authorized at least every five years.

INVENTORIES

FOOD INVENTORIES Inventories of donated food commodities used in the preparation of meals are reported on the Combined Balance Sheet at their Federally assigned value. Purchased foods inventories are reported on the Combined Balance Sheet at cost (first-in, first-out). Donated food commodities are recorded as revenues and expenditures at the time commodity items are received. Purchased foods inventories are recorded as expenditures at the time of purchase. The inventories reported on the balance sheet for donated food commodities and for purchased foods are equally offset by reservations of fund balance which indicates that these amounts do not constitute "available spendable resources" even though they are a component of net current assets.

PREPAID ITEMS

Payments made to vendors for services that will benefit periods subsequent to June 30, 2002, are recorded as prepaid items.

INTERFUND TRANSACTIONS

The School District has the following types of interfund transactions:

Reimbursements of expenditures initially made from a fund that are properly applicable to another fund are recorded as expenditures in the reimbursing fund and as reductions of expenditures in the fund that is reimbursed.

Operating transfers are recorded for all interfund transactions other than reimbursements.

- 11 -

CITY OF JEFFERSON BOARD OF EDUCA nON - JACKSON COUNTY NOTES TO THE GENERAL-PURPOSE FINANCIAL STATEMENTS JUNE 30, 2002

EXHIBIT "D"

Note 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
MEMORANDUM ONLY - TOTAL COLUMNS
Total columns on the general-purpose financial statements are captioned "Memorandum Only" to indicate that they are presented only to facilitate financial analysis. Data in these columns do not present financial position or results of operations in conformity with generally accepted accounting principles. Neither are such data comparable to a consolidation. Interfund eliminations have not been made in the aggregation of this data.
Note 2: DEPOSITS AND INVESTMENTS
COLLA TERALIZATION 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 of money which has not been secured by surety bond, by guarantee of insurance, or by collateral. The aggregate of the face value of such surety bond and the market value of securities pledged shall be equal to not less than 110 percent of the public funds being secured after the deduction ofthe amount ofdeposit insurance. If a depository elects the pooled method (OCGA 45-8-13.1) the aggregate of the 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 of operating funds placed in demand deposit checking accounts.
Acceptable security for deposits consists of anyone of or any combination of the following:
(l) Surety bond signed by a surety company duly qualified and authorized to transact business within the State of Georgia,
(2) Insurance on accounts provided by the Federal Deposit Insurance Corporation,
(3) Bonds, bills, notes, certificates of indebtedness or other direct obligations of the United States or of the State of Georgia,
(4) Bonds, bills, notes, certificates of indebtedness or other obligations of the counties or municipalities of the State of Georgia,
(5) Bonds of any public authority created by the laws of the State of Georgia, providing that the statute that created the authority authorized the use of the bonds for this purpose,
(6) Industrial revenue bonds and bonds of development authorities created by the laws of the State of Georgia, and

- 12 -

CITY OF JEFFERSON BOARD OF EDUCA nON -JACKSON COUNTY NOTES TO THE GENERAL-PURPOSE FINANCIAL STATEMENTS JUNE 30, 2002

EXHIBIT"D"

Note 2: 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.

CATEGORIZAnON OF DEPOSITS At June 30, 2002, the bank balances were $2,511,738.74. 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, 2002, as follows:

Risk Category

Bank Balance

I

$ 219,426.29

2

2,233,807.36

3

58,505.09

Total

$ 2,51 1,738.74

CATEGORIZAnON OF INVESTMENTS At June 30, 2002, the carrying value ofthe School District's total investments was $1,076.37 which is materially the same as fair value. This investment consisted entirely offunds invested in the Local Government Investment Pool administered by the State of Georgia, Office of Treasury and Fiscal Services which are not required to be categorized since the School District did not own any specific identifiable securities in the pool. The investment policy ofthe State of Georgia, Office ofTreasury and Fiscal Services for the Local Government Investment Pool (Primary Liquidity Portfolio) does not provide for investment in derivatives or similar investments. A description of the Primary Liquidity Portfolio is as follows:

The Primary Liquidity Portfolio consists of Georgia Fund 1, which is a combination local and state government investment pool, and Fund 6. Georgia Fund 1 is a stable net asset value investment pool which follows Standard and Poor's criteria for AAAm rated money market funds. The pool is not registered with the SEC as an investment company but does operate Georgia Fund 1 in a manner

- 13 -

CITY OF JEFFERSON BOARD OF EDUCA nON - JACKSON COUNTY NOTES TO THE GENERAL-PURPOSE FINANCIAL STATEMENTS JUNE 30, 2002

EXHIBIT "D"

Note 2: DEPOSITS AND INVESTMENTS
consistent with Rule 2a-7 ofthe Investment Company Act of 1940 and is considered to be a Rule 2a7 like pool. The pool's primary objectives are safety of capital, investment income, liquidity and diversification while maintaining principal ($1.00 per share value). Net asset value is calculated weekly to ensure stability. The pool distributes earnings (net of management fees) on a monthly basis and values participant's shares sold and redeemed based on $1.00 per share. Pooled cash and cash equivalents and investments are reported at cost which approximates fair value. The pool does not issue any legally binding guarantees to support the value ofthe shares. Participation in the pool is voluntary and deposits consist of funds from local governments; operating and trust funds of Georgia's state agencies, colleges and universities; and current operating funds of the State of Georgia's General Fund.
Investments in Georgia Fund 1 and Fund 6 are directed toward short-term instruments such as U. S. Treasury obligations, securities issued or guaranteed as to principal and interest by the U. S. Government or any of its agencies or instrumentalities, banker's acceptances and repurchase agreements. The weighted average maturity of Georgia Fund 1 may not exceed 60 days. The weighted average maturity for Georgia Fund 1 on June 30, 2002, was 0.12 years. The average investment duration for Fund 6 on June 30, 2002, was 0.75 years.
Note 3: 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 1 - Inventories
Note 4: RISK MANAGEMENT
The School District is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors or omissions; job related illness or injuries to employees; acts of God and unemployment compensation.
The School District participates in the Georgia School Boards Association Risk and Insurance Management System, a public entity risk pool organized on July 1, 1994, to develop and administer a plan to reduce risk of loss on account of general liability, motor vehicle liability, or property damage, including safety engineering and other loss prevention and control techniques, and to administer one or more groups of self-insurance funds, including the processing and defense of claims brought against members ofthe system. The School District pays an annual premium to the system for its general insurance coverage. Additional coverage is provided through agreements by the system with other companies according to their specialty for property, boiler and machinery (including coverage for flood and earthquake), general liability (including coverage for sexual harassment, molestation and abuse) and automobile risks. Payment of excess insurance for the system varies by line of coverage.

- 14 -

CITY OF JEFFERSON BOARD OF EDUCA nON - JACKSON COUNTY NOTES TO THE GENERAL-PURPOSE FINANCIAL STATEMENTS JUNE 30, 2002

EXHIBIT"D"

Note 4: RISK MANAGEMENT

The School District is self-insured with regard to unemployment compensation claims, The School District accounts for claims within the General Fund with expenditure 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 of Year Liability

Claims and Changes in Estimates

Claims Paid

End of Year Liability

2001 2002

$

0.00 $

740.61 $

740.61 $

0.00

$

0.00 $

2,136.97 $

2,136.97 $

0.00

The School District participates in the Georgia School Boards Association Workers' Compensation Fund, a public entity risk pool organized on July 1, 1992, to develop, implement, and administer a program of workers' compensation self-insurance for its member organizations. The School District pays an annual premium to the Fund for its general insurance coverage. Additional insurance coverage is provided through an agreement by the Fund with the United States Fidelity and Guaranty Company to provide coverage for potential losses sustained by the Fund in excess of$350,000.00 loss per occurrence, up to the statutory limit.

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

Position Covered

Amount

Superintendent All Employees

$ 50,000.00 $ 200,000.00

Note 5: GENERAL LONG-TERM DEBT

CAPITAL LEASES The City of Jefferson Board of Education has entered into various lease agreements as lessee for buses and equipment. These lease agreements qualify as 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 their inception.

The changes in General Long-Term Debt during the fiscal year ended June 30, 2002, were as follows:

- 15 -

CITY OF JEFFERSON BOARD OF EDUCAnON - JACKSON COUNTY NOTES TO THE GENERAL-PURPOSE FINANCIAL STATEMENTS JUNE 30, 2002

EXHIBIT "D"

Note 5: GENERAL LONG-TERM DEBT

Capital Leases

Balance July 1,2001

$ 99,727.64

Deductions Debt Retired

59,445.74

Balance June 30, 2002

$ 40.281.90

At June 30, 2002, payments due by fiscal year which includes principal and interest for these items are as follows:

Fiscal Year Ended June 30

Capital Leases

2003

$ 41,899.09

Deduct: Imputed Interest

1,617.19

Net Present Value of Future Minimum Lease Payments

$ 40.281.90

Note 6: ON-BEHALF PAYMENTS

The School District has recognized revenues and expenditures in the amount of $90,381.93 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 $78,995.93

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$II,386.00

- 16 -

CITY OF JEFFERSON BOARD OF EDUCA nON - JACKSON COUNTY NOTES TO THE GENERAL-PURPOSE FINANCIAL STATEMENTS JUNE 30, 2002

EXHIBIT "D"

Note 7: 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 expenditures which are disallowed under grant terms. The School District believes that such disallowances, if any, will be immaterial to its overall financial position.

Note 8: RELATED PARTY TRANSACTIONS

Ronald Hopkins, a member ofthe City of Jefferson Board of Education, is a practicing attorney and currently serves as legal counsel for the City of Jefferson. The City Government is the primary government of which the Board of Education is a component unit.

Note 9: RETIREMENT PLANS

TEACHERS RETIREMENT SYSTEM OF GEORGIA (TRS)

TRS PLAN DESCRIPTION Substantially all teachers, administrative and clerical personnel employed by local school districts 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

2002 2001 2000

100% 100% 100%

$ 589,297.58 $ 623,635.46 $ 556,444.60

- 17 -

CITY OF JEFFERSON BOARD OF EDUCATION - JACKSON COUNTY COMBINING BALANCE SHEET SPECIAL REVENUE FUND JUNE 30, 2002

ASSETS
Cash and Cash Equivalents
Accounts Receivable
Inventories Food Donated Commodities Purchased Food

SCHOOL FOOD
SERVICES FUND

LOTTERY PROGRAMS

$

146,932.25

$

41,681.00

10,662.92 3,171.11

Total Assets

$

160,766.28 $======4=1,=6=8=1.=0=0=

LIABILITIES AND FUND EQUITY
LIABILITIES
Cash Overdraft Accounts Payable Salaries Payable Expired Grant Balances Payable Deferred Revenue
Total Liabilities
FUND EQUITY
Fund Balances Reserved For Inventories Food Donated Commodities Purchased Food Unreserved Undesignated
Total Fund Equity
Total Liabilities and Fund Equity
See notes to the general-purpose financial statements. - 18 -

$

14,668.90

$

4,896.83

11,890.52

37,260.68

15,104.02

17.56

$

42,157.51 $

41,681.00

$

10,662.92

3,171.11

104,774.74 $

0.00

$

118,608.77 $

0.00

$

160,766.28 $=====4=1=,6=8=1=.0=0=

EXHIBIT"E"

FEDERAL
PROGRAMS

TOTALS

JUNE 30, 2002

JUNE 30, 2001

$

146,932.25 $

166,676.70

$

134,914.00

176,595.00

184,162.51

10,662.92 3,171.11

6,367.81 1,583.98

$

134,914.00 $

337,361.28 $=====35=8=,7=9=1=.0=0=

$

44,224.11 $

58,893.01 $

163,304.26

48,300.17

65,087.52

8,118.52

13,805.30

66,170.00

45,596.06

28,584.42

28,601.98

7,124.19

8,000.00

$

134,914.00 $

218,752.51 $

232,143.03

$

$ - - - _ = . . : . . 0. =.00- -

$

0.00 $

10,662.92 $ 3,171.11

6,367.81 1,583.98

104,774.74

118,696.18

118,608.77 $ _ _1=.2::..6c=,..6..:.4..:.7...:....9::.7..=--

$

134,914.00 $

337,361.28 $ =====3=5=8=,7=9=1=.=0=0=

- 19-

CITY OF JEFFERSON BOARD OF EDUCATION - JACKSON COUNTY COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES
SPECIAL REVENUE FUND YEAR ENDED JUNE 30, 2002

REVENUES
State Funds Federal Funds Other Funds
Total Revenues
EXPENDITURES
Current Instruction Support Services Pupil Services Improvement of Instructional Services General Administration School Administration Student Transportation Services Central Support Services Other Support Services Food Services Operation Community Services Operations
Total Expenditures
Excess of Revenues over (under) Expenditures
OTHER FINANCING SOURCES
Operating Transfers In
Excess of Revenues and Other Financing Sources over (under) Expenditures
FUND BALANCE JULY 1
Food Inventory - Net Change in Period Donated Commodities Purchased Food
FUND BALANCE JUNE 30
See notes to the general-purpose financial statements.
- 20-

SCHOOL FOOD
SERVICES FUND

LOTTERY PROGRAMS

$

39,096.00 $

177,038.54

212,804.85

237,949.52

$

489,850.37 $

177,038.54

$

173,638.35

543.46

$

503,771.81

5,313.44

$

503,771.81 $

179,495.25

$

-13,921.44 $

-2,456.71

$

-13,921.44 $

126,647.97

4,295.11 1,587.13

2,456.71
0.00 0.00

$

118,608.77 $ =======0.=00=

EXHIBIT "F"

FEDERAL PROGRAMS

TOTALS

YEAR ENDED

JUNE 30, 2002

JUNE 30, 2001

$

216,134.54 $

125,204.70

$

332,183.92

544,988.77

757,824.24

237,949.52

195,758.96

$

332,183.92 $

999,072.83 $ 1,078,787.90

$

133,338.19 $

306,976.54 $

435,888.10

17,461.63 70,845.03 29,465.87 19,739.49
6,589.46 3,513.04 50,062.66
1,779.00

17,461.63 70,845.03 29,465.87 19,739.49
7,132.92 3,513.04 50,062.66 503,771.81 7,092.44

26,115.85 110,182.66
11,249.94 1,733.23 376.44
12,356.35 54,021.59 449,327.17
2,200.00

$

332,794.37 $ 1,016,061.43 $ 1,103,451.33

$

-610.45 $

-16,988.60 $

-24,663.43

610.45

3,067.16

65.93

$

0.00 $

-13,921.44 $

-24,597.50

0.00

126,647.97

151,332.05

4,295.11 1,587.13

-364.64 278.06

$

0.00 $

118,608.77 $ ==~~1=26=,6=4=7.=97=

- 21 -

CITY OF JEFFERSON BOARD OF EDUCATION - JACKSON COUNTY COMBINING BALANCE SHEET CAPITAL PROJECTS FUND JUNE 30, 2002

EXHIBIT"G"

ASSETS Cash and Cash Equivalents Investments Accounts Receivable
Total Assets

BOND PROCEEDS

SPECIAL PURPOSE LOCAL OPTION SALES TAX

TOTALS JUNE 30, 2002 JUNE 30, 2001

$ 206,392.74 $

223,920.36 $ 430,313.10 $ 516,547.26

4,027,368.79

174,096.91

174,096.91

239,075.14

$ 206,392.74 $

398,017.27 $ 604,410.01 $ 4,782,991.19

LIABILITIES AND FUND EQUITY

LIABILITIES

Accounts Payable Contracts Payable Retainages Payable

$

1,395.00

154,997.74

50,000.00

Total Liabilities

$ 206,392.74

FUND EQUITY

Fund Balances Reserved For Purpose of Bond Issue For SPLOST Projects Unreserved Undesignated

$

$

0.00

Total Fund Equity

$

0.00 $

$

1,395.00

154,997.74 $ 670,512.18

50,000.00

342,249.39

$ 206,392.74 $ 1,012,761.57

398,017.27 $

$ 3,033,352.44

398,017.27

736,877.18

0.00

0.00

0.00

398,017.27 $ 398,017.27 $ 3,770,229.62

Total Liabilities and Fund Equity $ 206,392.74 $

398,017.27 $ 604,410.01 $ 4,782,991.19

See notes to the general-purpose financial statements.

- 22-

CITY OF JEFFERSON BOARD OF EDUCATION - JACKSON COUNTY COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES
CAPITAL PROJECTS FUND YEAR ENDED JUNE 30, 2002

EXHIBIT"H"

BOND PROCEEDS

SPECIAL PURPOSE LOCAL OPTION SALES TAX

TOTALS YEAR ENDED JUNE 30, 2002 JUNE 30, 2001

REVENUES
Taxes Other Funds
Total Revenues

$

975,050.99 $ 975,050.99 $ 1,023,511.12

$

63,634.40

6,929.32

70,563.72

428,524.50

$

63,634.40 $

981,980.31 $ 1,045,614.71 $ 1,452,035.62

EXPENDITURES

Current Support Services Business Administration
Capital Outlay Land and Land Improvements Building and Building Improvements Equipment
Total Expenditures
Excess of Revenues over (under) Expenditures

$

2,360.50

3,331,787.60 $

$ 3,334,148.10 $ $ -3,270,513.70 $

$

2,360.50 $

1,510.00

669,519.22 36,867.24

4,001,306.82 36,867.24

839,913.72 4,700,974.92
56,559.00

706,386.46 $ 4,040,534.56 $ 5,598,957.64

275,593.85 $ -2,994,919.85 $ -4,146,922.02

OTHER FINANCING SOURCES (USES)
Operating Transfers In Operating Transfers Out
Total Other Financing Sources (Uses)

$ 237,161.26

$ 237,161.26

$ -614,453.76

-614,453.76 $ -483,520.76

$ 237,161.26 $ -614,453.76 $ -377,292.50 $ -483,520.76

Excess of Revenues and Other Financing Sources over (under) Expenditures and Other Financing Uses $ -3,033,352.44 $

FUND BALANCE JULY 1

3,033,352.44

-338,859.91 $ -3,372,212.35 $ -4,630,442.78

736,877.18

3,770,229.62

8,400,672.40

FUND BALANCE JUNE 30

$

0.00 $

398,017.27 $ 398,017.27 $ 3,770,229.62

See notes to the general-purpose financial statements.

- 23-

CITY OF JEFFERSON BOARD OF EDUCATION - JACKSON COUNTY SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS YEAR ENDED JUNE 30, 2002

SCHEDULE "1"

FUNDING AGENCY PROGRAM/GRANT

CFDA NUMBER

PASSTHROUGH
ENTITY ID
NUMBER

FEDERAL REVENUE IN PERIOD

EXPENDITURES IN PERIOD

Agriculture, U. S. Department of Child Nutrition Cluster Pass-Through From Georgia Department of Education Food and Nutrition Program Food Services School Breakfast Program National School Lunch Program

10.553 10.555

N/A

$ 36,560.88

N/A

147,776.90 $

(2) 475,304.74 (3)

Total Child Nutrition Cluster

$ 184,337.78 $

475,304.74

Other Programs

Pass-Through From Georgia Department of Education

Food and Nutrition Program

Food Distribution Program (1)

10.550

N/A

28,467.07

28,467.07

Total U. S. Department of Agriculture

$ 212,804.85 $

503,771.81

Education, U. S. Department of Special Education Cluster Pass-Through From Georgia Department of Education Individuals with Disabilities Education Act Part B - Special Education Flow Through Preschool Capacity Building Grant

84.027 84.173 84.173

N/A

$ 154,835.90 $

N/A

3,248.04

N/A

2,580.00

154,836.03 (3) 3,248.04 2,585.00 (3)

Total Special Education Cluster

$ 160,663.94 $

160,669.07

Other Programs Pass-Through From Georgia Department of Education Elementary and Secondary Education Act Title I Grants to Local Educational Agencies Tille II Eisenhower Professional Development Title III Technology Literacy Challenge Fund Grants Tille VI Innovation Program Class Size Reduction Goals 2000 State and Local Education Systemic Improvement Grants Safe and Drug-Free Schools and Communities Vocational Education - Basic Grants to States High School Program Basic Grant

84.010 84.281 84.318 84.298 84.340
84.276 84.186
84.048

N/A

106,758.34

N/A

17,500.00

N/A

15,604.53

N/A

6,094.23

N/A

N/A

6,818.81

N/A

7,238.77

N/A

11,505.30

106,758.34 17,986.69 (3) 15,655.93 (3) 6,106.81 (3) 27.96 (3)
6,845.50 (3) 7,238.77
11,505.30

Total U. S. Department of Education

$ 332,183.92 $

332,794.37

Total Federal Financial Assistance
= N/A Not Available

- 24-

$ 544,988.77 $=====8=3=6,=5=66=.=18=

CITY OF JEFFERSON BOARD OF EDUCATION - JACKSON COUNTY SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS YEAR ENDED JUNE 30, 2002

SCHEDULE "1"

Notes to the Schedule of Expenditures of Federal Awards
(1) The amounts shown for the Food Distribution Program represents the Federally assigned value of nonmonetary assistance for donated commodities received and/or consumed by the system during the current fiscal year.
(2) Expenditures for the School Breakfast Program were not maintained separately and are included in the 2002 National School Lunch Program.
(3) Expenditures for this program include State, and/or Other Funds. Expenditures are not maintained by fund source.
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 Jefferson 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 general-purpose financial statements.

See notes to the general-purpose financial statements.

- 25-

CITY OF JEFFERSON BOARD OF EDUCATION - JACKSON COUNTY SCHEDULE OF STATE REVENUE YEAR ENDED JUNE 30 2002

SCHEDULE "2"

AGENCY/FUNDING
GRANTS Community Affairs, Georgia Department of Local Assistance Grant
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 III Category IV Category V Gifted Student - Category VI Remedial Education Program Alternative Education Program English Speakers of Other Languages (ESOL) 20 Days Additional Instruction Media Center Program Staff and Professional Development Indirect Cost Categorical Grants Pupil Transportation RegUlar Bus Replacement Sparsity Nursing Services Principal Supplements Vocational Supervisors Education Equalization Funding Grant Food Services Vocational Education Other State Programs Health Insurance Mentor Teachers Post Secondary Option - Spring Preschool Handicapped Program Lottery Program Computers in the Classroom
Office of School Readiness Pre-Kindergarten Program Start-up Funds
Office of Treasury and Fiscal Services Public School Employees Retirement
CONTRACTS Education, Georgia Department of After School Programs Reading First Program

See notes to the general-purpose financial statements

- 26-

GOVERNMENTAL FUND TYPES

SPECIAL

GENERAL

REVENUE

FUND

FUND

TOTAL

$ 10,000.00

$

10,000.00

325,356.00 164,996.00 788,001.00 305,268.00 359,750.00 138,300.00 649,179.00 633,972.00 121,882.00
117,318.00 163,523.00 506,271.00 43,760.00
5,512.00 219,522.00
26,767.00 54,590.00 21,902.00 38,497.00 134,402.00 27,627.00 999,171.00

61,939.00 17,768.00 27,889.00 47,197.00
6,592.00 4,717.00 300,844.00
$ 72,506.09
78,995.93 4,645.82 1,089.00 17,917.00

39,096.00 41,663.44

127,37510 8,000.00

11,386.00

325,356.00 164,996.00 788,001.00 305,268.00 359,750.00 138,300.00 649,179.00 633,972.00 121,882.00
117,318.00 163,523.00 506,271.00
43,760.00 5,512.00
219,52200 26,767.00 54,59000 21,902.00 38,497.00
134,402.00 27,627.00
999,171.00
61,939.00 17,768.00 27,889.00 47,197.00
6,592.00 4,717.00 300,844.00 39,096.00 72,506.09
78,995.93 4,645.82 1,089.00
17,917.00
41,663.44
127,375.10 8,000.00
11,386.00

12,439.00 18,541.67

12,439.00 18,541.67

s $ 6,540,032.51

216,134.54 $ 6,756,167.05

CITY OF JEFFERSON BOARD OF EDUCATION - JACKSON COUNTY SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS
YEAR ENDED JUNE 30, 2002

SCHEDULE "3"

PROJECT
Payment of principal and interest due on Series 1973 and 1996 Bonds
Construction of additional classrooms, remodeling and renovating existing classrooms, instructional and support space, recreational fields and grounds and to provide furnishings, equipment and fixtures for such areas at Jefferson High School, Jefferson Middle School, and Jefferson Elementary School
Payment of principal and interest due on Series 1996 and 2000 Bonds
Acquiring, constructing and equipping new school buildings and other buildings or facilities useful or desirable in connection therewith; acquiring new school equipment; and adding to, renovating, repairing, improving and equipping existing school buildings or other buildings or facilities useful or desirable therefor, both real and personal

ORIGINAL ESTIMATED
COST (1)

CURRENT ESTIMATED COSTS (2)

AMOUNT EXPENDED IN CURRENT
YEAR (3)

AMOUNT EXPENDED
IN PRIOR YEARS (3)

PROJECT STATUS

$ 978,678,00 $ 978,678,00 $ 168,627.50 $ 500,236.00 Ongoing

3,276,322.00

3,665,614.21

706,386.46

2,761,084.28 Ongoing

1,750,000.00

1,750,000.00

445,826.26

Ongoing

6,385,600.00

6,385,600.00

Ongoing

$ 12,390,60000 $ 12,779,892.21 $ 1,320,840.22 $ 3,261,320.28

(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 Jackson County approved the imposition of a 1% sales tax to fund the above projects. Amounts expended for these projects may include sales tax proceeds, state, local property taxes and/or other funds over the life of the projects.

See notes to the general-purpose financial statements.

- 27-

CITY OF JEFFERSON BOARD OF EDUCATION - JACKSON COUNTY GENERAL FUND - OUALITY BASIC EDUCATION PROGRAM (aBEl
ALLOTMENTS AND EXPENDITURES - BY PROGRAM YEAR ENDED JUNE 30, 2002

SCHEDULE "4"

DESCRIPTION
Direct Instructional Programs Kindergarten Program Kindergarten Program-Early Intervention Program Primary Grades (1-3) Program Primary Grades-Early Intervention (1-3) Program Upper Elementary Grades (4-5) Program Upper Elementary Grades-Early Intervention (4-5) Program Middle School (6-8) Program High School General Education (9-12) Program Vocational Laboratory (9-12) Program Students with Disabilities Category I Category II Category III Category IV Category V Gifted Student - Category VI Remedial Education Program Alternative Education Program English Speakers of Other Languages (ESOL)
TOTAL DIRECT INSTRUCTIONAL PROGRAMS
Media Center Program Staff and Professional Development

ALLOTMENTS FROM GEORGIA DEPARTMENT OF EDUCATION (1)

ELIGIBLE aBE PROGRAM COSTS

SALARIES

OPERATIONS

TOTAL

$

371,362,00 $ 514,938,34 $

6,386.45 $

521,324.79

188,327.00

174,803.09

4,797,65

179,600.74

899,426.00 1,167,157,19

21,257.34

1,188,414.53

348,434.00

257,749.72

5,314.32

263,064.04

408,555.00

652,782.63

16,862,51

669,645.14

159,921.00 740,974.00 723,617,00 139,116,00 954,651.00
250,563.00 30,552,00 62,309.00 25,000,00

65,777.89 1,001,186.57
932,626.38 204,304.47
200,353.84 654,374,35
30,845.27 128,311.70
33,582.98 57,496.48 24,338.85

1,442.92 38,346.64 26,676.01 21,702.60
3,466.95 5,916.71 11,095.83 3,736.47 1,926.28 2,861,60
677.52 8,026.40
210.73

67,220,81 1,039,533,21
959,302,39 226,007.07
3,466.95 206,270.55 665,470.18
3,736.47 32,771.55 131,173.30 34,260,50 65,522.88 24,549,58

$

5,302,807.00 $ 6,100,629.75 $ 180,704.93 $ 6,281,334.68

153,407.00 31,534.00

155,251.03 15,216.33

32,895.17 21,679.54

188,146.20 36,895.87

TOTAL aBE FORMULA FUNDS

$

5,487,748,00 $ 6,271,097.11 $ 235,279.64 $ 6,506,376.75

(1) Comprised of State Funds plus Local Five Mill Share.

See notes to the general-purpose financial statements.

- 28-

CITY OF JEFFERSON BOARD OF EDUCATION - JACKSON COUNTY GENERAL FUND - aUALITY BASIC EDUCATION PROGRAM (aBE) ALLOTMENTS AND EXPENDITURES - BY SITE YEAR ENDED JUNE 30, 2002

SCHEDULE "5"

Jefferson Middle School Jefferson High School Jefferson Elementary School Central Office (Alternative Education Program)
TOTAL
(1) Comprised of State Funds plus Local Five Mill Share.

ALLOTMENTS FROM GEORGIA DEPARTMENT OF EDUCATION (1)

ELIGIBLE aBE PROGRAM COSTS

$

1,104,097.00 $

1,366,541.20

1,300,500.00

1,554,026.85

2,835,901.00

3,360,766.63

62,309.00

$ 5,302,807.00 $=====6=,=28=1=,=3=3=4=.6=8=

See notes to the general-purpose financial statements. - 29-

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
August 5, 2003

Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the City of Jefferson Board of Education
REPORT ON COMPLIANCE AND ON INTERNAL CONTROL OVER FINANCIAL REPORTING BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS
Ladies and Gentlemen:
We have audited the financial statements of City of Jefferson Board of Education as of and for the year ended June 30,2002, and have issued our report thereon dated August 5,2003. This report was qualified for various departures from generally accepted accounting principles, as identified in the auditor's report on the general-purpose financial statements. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States.
Compliance
As part of obtaining reasonable assurance about whether City of Jefferson Board of Education's financial statements are free of material misstatement, we performed tests of its compliance with certain provisions oflaws, regulations, contracts and grants, noncompliance with which could have a direct and material effect on the determination offinancial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances ofnoncompliance that are required to be reported under Government Auditing Standards.
Internal Control Over Financial Reporting
In planning and performing our audit, we considered City of Jefferson Board ofEducation's internal control over financial reporting in order to determine our auditing procedures for the purpose of expressing our opinion on the financial statements and not to provide assurance on the internal
2002YB-40

control over financial reporting. However, we noted certain matters involving the internal control over financial reporting and its operation that we consider to be reportable conditions. Reportable conditions involve matters coming to our attention relating to significant deficiencies in the design or operation ofthe internal control over financial reporting that, in our judgment, could adversely affect City of Jefferson Board of Education's ability to record, process, summarize and report financial data consistent with assertions of management in the financial statements. Reportable conditions are described in the accompanying Schedule of Findings and Questioned Costs as items FS-7791-02-0 I, FS-7791-02-02, FS-7791-02-03 and FS-7791-02-04.
A material weakness is a condition in which the design or operation of one or more of the internal control components does not reduce to a relatively low level the risk that misstatements in amounts that would be material in relation to the financial statements being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. Our consideration of the internal control over financial reporting would not necessarily disclose all matters in the internal control that might be reportable conditions and, accordingly, would not necessarily disclose all reportable conditions that are also considered to be material weaknesses. All of the reportable conditions described above are considered to be material weaknesses.
This report is intended solely for the information and use ofthe management, members ofthe City of Jefferson 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 2002YB-40

Ru ell W. Hinton 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
August 5, 2003

Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the City of Jefferson Board of Education
REPORT ON COMPLIANCE WITH REQUIREMENTS APPLICABLE TO EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH OMB CIRCULAR A-I33
Ladies and Gentlemen:
Compliance
We have audited the compliance of City of Jefferson Board of Education with the types of compliance requirements described in the US. Office ofManagement and Budget (OMB) Circular A-i33 Compliance Supplement that are applicable to each of its major Federal programs for the year ended June 30, 2002. City of Jefferson Board of Education's major Federal programs are identified in the Summary of Auditor's Results Section of the accompanying Schedule of Findings and Questioned Costs. Compliance with the requirements of laws, regulations, contracts and grants applicable to each of its major Federal programs is the responsibility of City of Jefferson Board of Education's management. Our responsibility is to express an opinion on City of Jefferson Board of Education's compliance based on our audit.
We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and OMB Circular A133, Audits of States, Local Governments, and Non-Profit Organizations. Those standards and OMB 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 Jefferson 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 of Jefferson Board of Education's compliance with those requirements.
2002SA-IO

In our opinion, the City of Jefferson Board of Education complied, in all material respects, with the requirements referred to above that are applicable to each of its major Federal programs for the year ended June 30, 2002.
Internal Control Over Compliance
The management of City of Jefferson 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 Jefferson 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 OMB Circular A-133.
Our consideration ofthe internal control over compliance would not necessarily disclose all matters in the internal control that might be material weaknesses. A material weakness is a condition in which the design or operation ofone or more ofthe internal control components does not reduce to a relatively low level of risk that noncompliance with applicable requirements of laws, regulations, contracts and grants that would be material in relation to a major Federal program being audited may occur and not be detected within a timely period by employees in the normal course 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 Jefferson 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.
RWH:as 2002SA-IO

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

CITY OF JEFFERSON BOARD OF EDUCATION - JACKSON COUNTY AUDITEE'S RESPONSE
SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2002

PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

FINDING CONTROL NUMBER AND STATUS

FS-7791-00-02 FS-7791-01-01 FS-7791-01-02 FS-7791-0 1-03

Further Action Not Warranted Unresolved - See Corrective Action/Responses Unresolved - See Corrective Action/Responses Unresolved - See Corrective Action/Responses

CORRECTIVE ACTIONIRESPONSES

CASH AND CASH EQUIVALENTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS EMPLOYEE COMPENSATION Inadequate Separation of Duties Finding Control Number: FS-7791-01-01

Due to the timing of the fiscal year 2001 audit occurring in May 2002, corrective action was not implemented until fiscal year 2003.

EMPLOYEE COMPENSATION Inadequate Payroll Records Finding Control Number: FS-7791-01-02

Due to the timing of the fiscal year 2001 audit occurring in May 2002, corrective action was not implemented until fiscal year 2003.

GENERAL FIXED ASSETS Failure to Maintain General Fixed Assets Account Group Finding Control Number: FS-7791-01-03

Due to current staffing limitations and budgetary considerations, the School District has decided not to pursue the recording of general fixed assets on the financial statements.

SECTION IV FINDINGS AND QUESTIONED COSTS

CITY OF JEFFERSON BOARD OF EDUCATION - JACKSON COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2002

I SUMMARY OF AUDITOR'S RESULTS

1. Type of Report Issued on the Financial Statements The auditor's opinion on the City ofJefferson Board of Education's financial statements was qualified for various departures from generally accepted accounting principles.

2. Reportable Conditions in Internal Control Disclosed by the Audit of the Financial Statements The audit report for the City of Jefferson Board of Education disclosed financial statement reportable conditions related to the following control categories.

Cash and Cash Equivalents Employee Compensation Revenues/Receivables/Receipts General Fixed Assets

Expenditures/Liabilities/Disbursements General Ledger

All ofthe reportable conditions described above are considered to be material weaknesses.

3. Noncompliance Material to the Financial Statements The audit of the City of Jefferson 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 Jefferson Board of Education did not disclose any reportable conditions in internal control over major programs.

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

6. Audit Findings Required to be Reported by Section .510fa) ofOMB Circular A-133 The City of Jefferson Board of Education's audit did not disclose audit findings required to be reported by section .510(a) ofOMB Circular A-133.

7. Major Programs Federal awards audited as major programs are as follows: 10.553 Food and Nutrition Program - Food Services - School Breakfast Program 10.555 Food and Nutrition Program - Food Services - National School Lunch Program

8. Type "A" Program Dollar Threshold The dollar threshold for type "A" programs was $300,000.00.

9. Low Risk Auditee The City of Jefferson Board of Education did not qualify as a low risk auditee as defined by Section .530 ofOMB Circular A-133.

- 1-

CITY OF JEFFERSON BOARD OF EDUCATION - JACKSON COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2002
II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS
CASH AND CASH EQUIVALENTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS EMPLOYEE COMPENSATION GENERAL LEDGER Inadequate Separation of Duties Reportable Condition - Material Weakness Repeated from Prior Year Finding Control Number: FS-7791-02-01
An examination of the internal accounting control procedures revealed that the School District did not maintain adequate separation ofemployee duties in the performance ofthe following accounting functions and related procedures:
Cash and Cash Equivalents The bank reconciliation function was not separated from the record keeping and voucher payment authorization functions. No compensating controls such as supervisory review of monthly reconciliations were performed.
Revenues/Recei vables/Recei pts Deposit preparation was not separated from the record keeping and cash custody functions. No compensating controls such as a review and/or recalculation of deposit ticket or comparison to manual receipt books were performed by someone other than deposit preparer.
Expenditures/Liabilities/Disbursements The check writing function was not separated from record keeping, voucher payment authorization, signature plate custody or processing of signed checks. No compensating controls such as supervisory approval of vendor checks prior to check processing were performed.
Employee Compensation All functions related to payroll, i.e. custody of personnel files, record keeping, payroll authorization, check writing and report reconciliation, were performed by one individual. No compensating controls such as cross-training of personnel or supervisory review and reconciliation of payroll reports prior to check processing were performed.
General Ledger The journal entry preparation function was not separate from the posting function. Journal entries were not consistently supported by adequate documentation. No compensating controls such as prior authorization or supervisory review of monthly journal entry reports were performed.
-2-

CITY OF JEFFERSON BOARD OF EDUCATION - JACKSON COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2002
II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS
CASH AND CASH EQUIVALENTS REVENUES/RECEIV ABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS EMPLOYEE COMPENSATION GENERAL LEDGER Inadequate Separation of Duties Reportable Condition - Material Weakness Repeated from Prior Year Finding Control Number: FS-7791-02-0 1
Separation of duties involving key accounting functions is the basis for achieving an adequate system ofinternal control. These deficiencies were a result of management's decision to limit the number of administrative staff made responsible for accounting functions. Management should implement procedures to ensure that the key accounting functions of custody, recordkeeping and authorization are segregated. Additionally, management should periodically review job duties to determine if employee's duties can be reassigned to achieve a higher degree of internal control with existing staff.
Management's Response:
Upon completion of the fiscal year 2001 audit in May 2002, management assessed the duties of the staff members and reassigned responsibilities to ensure that proper level of internal controls would be maintained based on direction ofthe audit team. Key accounting functions have been segregated and staff members have been cross-trained. These changes were implemented in fiscal year 2003.
CASH AND CASH EQUIV ALENTS Inadequate Accounting Procedures Reportable Condition - Material Weakness Finding Control Number: FS-7791-02-02
An examination of the bank reconciliation process revealed that the School District's accounting procedures were inadequate to provide for adequate internal control over cash assets. The following deficiencies were noted:
(1) The June 2002 bank reconciliation for the construction fund account was not reconciled to the general ledger. Audit adjustments were necessary to reconcile the accounting records with bank statements.
(2) Book errors, disclosed through the bank reconciliation process for the general operating account, were carried as reconciling items for extended periods of time.
(3) Bank reconciliations were not prepared in a timely manner for March, April and May 2002. Bank reconciliations were not prepared until July 2002 for each of these months.
-3-

CITY OF JEFFERSON BOARD OF EDUCA nON - JACKSON COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2002
II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS
CASH AND CASH EQUIVALENTS Inadequate Accounting Procedures Reportable Condition - Material Weakness Finding Control Number: FS-7791-02-02
(4) Bank reconciliations did not indicate that an administrative review was performed to determine that bank reconciliations were correct and that all required adjustments had been made.
(5) Manual checks prepared in May 2002 were not posted to the accounting records until July 2002. These checks cleared the bank in May and June 2002 and were carried as reconciling items.
(6) Numerous deposits, not received until after June 30, 2002 were backdated as received before June 30, 2002 in the accounting system and carried as reconciling items on the June 2002 bank statement.
(7) Cleared checks were not posted in the bank reconciliation system in the month actually cleared by the bank. This resulted in automated outstanding check listings being inaccurate and unusable. Manual outstanding check registers contained errors and required audit adjustments.
These deficiencies were a result of management's failure to adequately manage cash assets of the School District. The School District should establish internal controls to ensure that monthly bank statements are reconciled with the accounting records on a timely basis, needed adjustments are recorded on a timely basis, receipts are posted in the accounting records when deposited in the bank and cancelled checks are posted as clearing in the month they clear on the bank statement.
Management's Response:
These deficiencies have been addressed and procedures are in place to ensure timely and proper cash recognition. Staff members have been cross-trained to ensure consistency and to maintain proper level of internal controls. These changes were implemented in fiscal year 2003.
EMPLOYEE COMPENSAnON Inadequate Payroll Records Reportable Condition - Material Weakness Amount: $70,536.44 Repeated from Prior Year Finding Control Number: FS-7791-02-03
A review of the City of Jefferson School District's payroll records identified that salary documentation for certain key accounting personnel was not maintained on file to support amounts paid. Additionally, twenty-four contracted employees were underpaid, according to the State of Georgia salary schedule, due to errors in determining the number ofyears ofcontracted service. This
-4-

CITY OF JEFFERSON BOARD OF EDUCAnON - JACKSON COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2002
II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS
EMPLOYEE COMPENSAnON Inadequate Payroll Records Reportable Condition - Material Weakness Amount: $70,536.44 Repeated from Prior Year Finding Control Number: FS-7791-02-03
deficiency occurred because management failed to implement procedures to ensure that all amounts paid to system employees are adequately documented through salary schedules, salary worksheets or some other written form of agreement as to amounts to be paid and that a secondary review, by someone other than the contract preparer, is performed prior to contracts being signed.
Management should implement procedures to ensure that a salary schedule or some other form of written documentation is maintained on file that both authorizes and supports amounts paid to all system employees and that contracts receive a secondary review prior to being signed.
Management's Response:
Pay scales are maintained for all certified and non-certified positions within the system. All employee payroll records are formally documented and copies are provided to each employee annually. Contract and payroll preparation receives secondary review prior to final implementation. These changes were implemented in fiscal year 2003.
GENERAL FIXED ASSETS Failure to Maintain General Fixed Assets Account Group Reportable Condition - Material Weakness Repeated From Prior Year Finding Control Number: FS-7791-02-04
The City ofJefferson School District did not maintain a system-wide General Fixed Assets Account Group within the formal accounting records as required by generally accepted accounting principles. This condition results in the general-purpose financial statements of the School District being incomplete and not in accordance with generally accepted accounting principles. Appropriate action should be taken by the School District to establish accounting controls and procedures to provide for maintenance ofa General Fixed Assets Account Group. These subsidiary records should include an inventory of land, buildings and equipment owned by the School District and should include, but may not be limited to, date acquired, acquisition cost, estimated replacement cost, location and description. Detailed records should be maintained of all additions and deletions to the General Fixed Assets Account Group.
-5-

CITY OF JEFFERSON BOARD OF EDUCATION - JACKSON COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2002
II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS
GENERAL FIXED ASSETS Failure to Maintain General Fixed Assets Account Group Reportable Condition - Material Weakness Repeated From Prior Year Finding Control Number: FS-7791-02-04
Management's Response:
Due to current staffing limitations and budgetary considerations, the School District has decided not to pursue the recording of general fixed assets on the financial statements.
III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS
No matters were reported.

-6-

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