CITY OF TRION BOARD OF EDUCATION - CHATTOOGA COUNTY - TABLE OF CONTENTS - SECTION I FINANCIAL INDEPENDENT AUDITOR'S COMBINED REPORT ON GENERAL-PURPOSE FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATIONSCHEDULE OF EXPENDITURES OF FEDERAL AWARDS EXHffiITS GENERAL-PURPOSE FINANCIAL STATEMENTS COMBINED STATEMENTS - OVERVIEW A COMBINED BALANCE SHEET ALL FUND TYPES 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 16 F COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES 18 CAPITAL PROJECTS FUND G COMBINING BALANCE SHEET 20 H COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES 21 SCHEDULES 1 . SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS 22 2 SCHEDULE OF STATE R E V E N U E 24 3 SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS 25 ALLOTMENTS AND EXPENDITURES GENERAL FUND - QUALITY BASIC EDUCATION PROGRAMS (QBE) 4 BY PROGRAM 26 5 BY SITE 27 CITY OF TRION BOARD OF EDUCATION - CHATTOOGA 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 ill 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 AlJDITS AND ACCOUNTS 254 Washington Street. S.W, Suite 214 Atlanta, Georgia ~m~4-X4()() .March 28, 2002 Honorable Roy E. Barnes, Governor Members ofthe General Assembly Members of the State Board of Education and Superintendent and Members of the City of Trion 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 ofthe City ofTrion Board of Education, as of and for the year ended June 30, 200 I, as listed in the table of contents. These general-purpose financial statements are the responsibility ofthe City ofTrion Board ofEducation'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 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 anddisclosures 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 opmion. 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: 2001ARL-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 30,2001, a portion of salaries and the corresponding employer's cost of related benefits earned for contractual services completed prior to June 30, 2001. Also funds received, subsequent to June 30, 2001, 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, 2000, were improperly recorded in the year ended June 30, 2001. 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 Board of Education did not record the revenues and expenditures associated with Federal donated commodities in its general-purpose financial statements. To conform to generally accepted accounting principles, these amounts should be recorded in the general-purpose financial statements. 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 ofthe City ofTrion Board ofEducation as of June 30, 2001, and the results of its operations for the year then ended, in conformity with accounting principles generally accepted in the United States of America. In accordance with Government Auditing Standards, we have also issued our report dated March 28, 2002, on our consideration of the City of Trion Board ofEducation's internal control over financial reporting and our tests of its compliance with certain provisionsof 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. 2001ARL-13 Our audit was performed for the purpose of forming an opinion on the general-purpose financial statements ofthe City ofTrion Board ofEducation taken as a whole. The accompanying combining statements (Exhibits E through H) and the financial schedules (Schedules I through 5), which includes the Schedule ofExpenditures ofFederal Awards as required by U. S. Office ofManagement 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 general-purpose financial statements. Such information has been subjected to the auditing procedures applied in the audit of the general-purpose financial statements and in our opinion, except for the effects of the 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 ofthe State Auditor and made available to the press ofthe State, as provided for by Official Code ofGeorgia Annotated Section 506-24. Respectfully submitted, r:?, .... ~.~ ~ll W. Q.Il Hinton . State Auditor RWH:as 2001ARL-13 CITY OF TRION BOARD OF EDUCAnON - CHATTOOGA COUNTY ., .' I CITY OF TRION BOARD OF EDUCATION -CHATIOOGA COUNTY COMBINED BALANCE SHEET ALL FUND TYPES JUNE 30, 2001 ASSETS Cash and Cash Equivalents Accounts Receivable Inventories Food Donated Commodities Purchased Food Total Assets ,GENERAL FUND GOVERNMENTAL SPECIAL REVENUE FUND $ 1,058,937,78 $ 181,702,21 '188,378.64 9,164,00 4,133.09 3,892.51 $ 1,247,316.42 $=====1=98=,=8=91=.=8=1= Total. Liabilities and Fund Equity v, $ 1,247,316.42 $=~ 198~ ,89~ 1.8~ 1 The notes to the general-purpose financial statements are an integral part of this statement. - 2- \ EXHIBIT "A" FUND TYPES CAPITAL PROJECTS FUND $ 271,833.09 $ 28,078.69 DEBT SERVICE FUND TOTALS (Memorandum Only) JUNE 30, 2001 JUNE 30, 2000 770,174.45 $ 2,282,647.53 $ 1,491,274.32 112,314.73 337,936.06 463,698.01 4,133.09 3,892.51 8,002.69 4,068.35 $ 299,911.78 $ 882,489.18 $ 2,628,609.19 $ 1,967,043.37 $ 47,795.63 $ 82,743.39 54,824.62 48,706.84 39,202.97 15,313.37 47,566.94 $ 141,823.22 $ 194,330.54 $ 1,533.18 $ 882,489.18 $ 882,489.18 552,651.88 $ . 299,911.78 0.00 $ 299,911.78 $ 0.00 882,489.18 $ 4,133.09 3,892.51 299,911.78 4,789.70 10,000.00 1,281,569.71 2,486,785.97 $ 8,002.69 4,068.35 273,160.04 4,789.70 10,000.00 918,506.99 1,772,712.83 $ 299,911.78 $ 882,489.18 $ 2,628,609.19 $ 1,967',043.37 I -, - 3- CITY OF TRION BOARD OF EDUCATION - CHATIOOGA COUNTY COMBINED STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES ALL GOVERNMENTAL FUND TYPES YEAR ENDED JUNE 30, 2001 FUND BALANCE JUNE 30 $ 1,231,671,51 $====7=2,~71=3,=50~ 'The notes to the general-purpose financial statements are an integral part of this statement. -4- . EXHIBIT"B" CAPITAL PROJECTS FUND DEBT SERVICE FUND TOTALS (Memorandum Only) YEAR ENDED JUNE 30, 2001 JUNE 30, 2000 $ 6,236,172.11 $ 5,439,495.17 280,931.86 338,082.18 $ 169,623.83 $ 678,495.24 1,784,481.38 1,663,830.94 16,544.06 20,135.06 503,423.42 576,879.50 $ 186;167.89 $ 698,630.30 $ 8,805,008.77 $ 8,018,287.79 $ 5,416,487.21 $ 4,911,631.62 $ 2,865.30 14,763.64 141,787.21 162,271.29 272,041.38 170,710.15 109,948.19 362,088.18 128,263.89 486,886.20 2,494.62 7,560.00 430,366.10 27,192.77 141,787.21 238,883.62 250,265.40 169,345.35 209,304.01 450,143.84 128,068.57 558,651.76 1,647.18 9,022.50 407,198.36 26,193.51 1,576,076.04 $ 324,000.00 44,793.00 324,000.00 44,793.00 4,000.00 34,297.00 $ 159,416.15 $ 368,793.00 $ 8,086,890.19 $ 8,974,728.76 $ 26,751.74 $ 329,837.30 $ 718,118.58 $ -956,440.97 $ 2,212.49 -2,212.49 $ 0.00 $ 26,751.74 $ 329,837.30 $ 718,118.58 $ -956,440.97 273,160.04 552,651.88 1,772,712.83 2,727,232.02 -3,869.60 -175.84 1,914.20 7.58 $ 299,911.78 $ 882,489.18 $ 2,486,785.97 $ 1,772,712.83 - 5- CITY OF TRION BOARD OF EDUCATION - CHATTOOGA 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, 2001 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 Food Services Operation Community Services Operations Total Expenditures Excess of Revenues over (under) Expenditures FUND BALANCE JULY 1, 2000 Food Inventory - Net Change in Period Donated Commodities Purchased Food GENERAL FUND ACTUAL (BUDGET BUDGET BASIS) $ 5,569,692,00 $ 5,881,450,31 . 1,006,609.18 83,790.00 936,362.31 157,114.61 $ 6,660,091.18 $ 6,974,927.23 $ 5,111,496,59 $ 5,029,979,36 172,988,64 202,526,88 166,625,34 14:?,281.75 428,636.71 152,324,37 438,793.28 4,000.00 7,560.00 162,271.29 200,993.67 166,319.15 109,948,19 343,396,21 125,398.59 451,175,24 2,494,62 7,560.00 27,192,77 $ 6,827,233.56 $ 6,626,729.09 $ -167,142,38 $ 348,198.14 755,764,64 883,473,37 FUND BALANCE JUNE 30, 2001 $ 588,622,26 $ 1,231,671.51 SPECIAL REVENUE FUND ACTUAL (BUDGET BUDGET BASIS) $ 310,971.42 $ '354,721.80 251,918.69 280,931,86 315,368.00 309,629.69 $ 878,258,11 $ 945,283.35 $ 417,549,78 $ 386,507,85 16,000,00 4,330.00 71,047,71 4,391,00 18,691.97 20,947.32 427,169.00 430,366,10 $ 865,048.78 $ 931,951.95 $ 13,209,33 $ 13,331.40 78,748.43 63,427.54 -3,869.60 -175.84 $ 91,957.76 $ 72,713,50 The notes to the general-purpose financial statements are an integral part of this statement. - 6- CITY OF TRION BOARD OF EDUCA nON - CHATTOOGA COUNTY NOTES TO THE GENERAL-PURPOSE FINANCIAL STATEMENTS JUNE 30, 2001 EXHIBIT"D" Note 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES REPORTING 'ENTITY The City of Trion 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 organized as a separate legal entity. Accordingly, the School District is a primary government and consists of all the organizations that compose its legal entity. FUND ACCOUNTING 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. 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 Otherfunds under . control of the School District, in compliance with generally accepted accounting principles applicable to governmental units, unless otherwise disclosed in these notes. Funds presented in this report are as follows: GOVERNMENTAL FUND TYPES - are used to account for all or most of a 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. 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. CAPITAL PROJECTS FUND - the fund used to account for financial resources to be used for the acquisition or construction of major capital facilities. -7- CITY OF TRION BOARD OF EDUCAnON - CHATTOOGA COUNTY NOTES TO THE GENERAL-PURPOSE FINANCIAL STATEMENTS JUNE 30, 2001 EXHIBIT ltD" Note 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES DEBT SERVICE FUND - the fund used to account for the accumulation ofresources for, and the payment or, general long-term principal, interest and paying agent fees incurred by the City of Trion (City Government) and to be repaidby the School District. 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. 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 and therefore 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 Department of Education for the State's share of these contracts. During fiscal year 2001, a substantial number ofpersonnel ofthe School District were employed for a one hundred and ninety day period beginning in August 2000 and ending in early June 2001. Personnel contracts for this employment period specify that compensation be paid in twelve equal monthly payments beginning in September 2000 and ending in August 2001. 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, 2001, compensation under these employment contracts had been earned, but two ofthe twelve monthly payments, due for July and August 2001, had not been made. Payments for these two months were made and recorded as expenditures by the School District subsequent to June 30,2001. Also, the State's portion of the compensation paid in July and -8- CITY OF TRION BOARD OF EDUCAnON - CHATTOOGA COUNTY NOTES TO THE GENERAL-PURPOSE FINANCIAL STATEMENTS JUNE 30. 2001 EXHIBIT "D" Note 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES August 2001 was received and recorded as revenue in the fiscal year subsequent to June 30, 2001. Conversely, the similar expenditures and related revenues for contractual services completed prior to June 30, 2000, were recorded in the year ended June 30, 2001. 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 Trion 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 of the budgetat 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 DEPO'SITS 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.~nsured Federal savings and loan associations. 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. - 9- CITY OF TRION BOARD OF EDUCAnON - CHATTOOGA COUNTY NOTES TO THE GENERAL-PURPOSE FINANCIAL STATEMENTS JUNE 30, 2001 EXHIBIT"D" Note 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES PROPERTY TAXES The City of Trion fixed the property tax levy for the 2000 tax year (calendar year) on October 3, 2000 (levy date). Taxes were due on December 20,2000 (lien date). Taxes collected within the current fiscal year or within 60 days after year-end are reported as revenue in fiscal year 2001. The City of Trion City Clerk bills and collects the property taxes for the School District and remits the balance oftaxes collected to the School District. Property tax revenues during the fiscal year ended June 30, 2001 for maintenance and operations amounted to $936,362.31. .The tax millage rate levied for the 2000 tax year (calendar year) for the City of Trion Board of Education was as follows (a mill equals $1 per thousand dollars of assessed value): . School Operations 3.00 mills SALES TAXES Local Option Sales Tax revenue during the fiscal year amounted to $665,920.70 and was recorded in the General Fund. Local Option Sales Tax is to be used for the maintenance and operation of the School District. Special Purpose Local Option Sales Tax is to be used for capital outlay for educational purposes and debt service. Special Purpose Local Option Sales Tax revenue during the fiscal year amounted to $848,119.07 and was recorded in the Capital Projects and Debt Service Funds. The State will terminate collection ofthis tax once an additional $68,238.49 has been collected or on December 31, 2003-, whichever occurs first. The City ofTrion (City Government) sold general obligation bonds to provide advance funding for Capital Outlay Projects associated with issuance of a Special Purpose Local Option Sales lax (SPLOST). In fiscal year 2001, the School District provided $368,793.00 ofSPLOST proceeds to the City Government for debt service 'on said general obligation debt. 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), The School District uses the purchases method to account for inventories ofpurchased foods whereby expenditures are recorded at the time of purchase. Both the donated food commodities inventory and the purchased foods inventory reported on the balance sheet are equally offset by reservations offund balance which indicates that . ,.~ they do not constitute "available spendable resources" even though they area component of net current assets. The Federally assigned value of donated commodity items received and consumed - 10- CITY OF TRION BOARD OF EDUCAnON - eHAnOOGA COUNTY NOTES TO THE GENERAL-PURPOSE FINANCIAL STATEMENTS JUNE 30, 2001 EXHIBIT "D" . Note 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES has not been reflected as revenues and expenditures in the general-purpose financial statements. To conform to generally accepted accounting principles, these amounts should be recorded in the general-purpose financial statements. INTERFUND TRANSACTIONS The School District has the following type of interfund transactions: Reimbursements ofexpenditures 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. 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 ofoperations in conformity with generally accepted accounting principles. Neither are such data comparable to a consolidation. Interfund eliminations have not been made in 'the aggregation ofthis data. Note 2: DEPOSITS COLLATERALIZATION OF DEPOSITS Official Code of Georgia Annotated (OCGA) Section 45-8-12 provides that there shall not be on deposit at any time in any depository for a time longer than ten days a sum ofmoney which has not been secured by surety bond, by guarantee of insurance, or by collateral. The aggregate ofthe face value of such surety bond and the market value of securities pledged shall be equal to not less than 110 percent ofthe public funds being secured after the deduction ofthe amount ofdeposit insurance. If a depository elects the pooled method (OCGA 45-8-13.1) the aggregate ofthe market value ofthe securities pledged to secure a pool ofpublic funds shall be not less than 110 percent ofthe daily pool balance. OCGA Section 45-8-11 (b) provides an officer holding public funds may, in his discretion, waive the requirement for security in the case of operating funds placed in demand deposit checking accounts. Acceptable security for deposits consists of anyone of or any combination of the following: (1) Surety bond signed by a surety company duly qualified and authorized to transact business within the State of Georgia, (2) Insurance on accounts provided by the Federal Deposit Insurance Corporation, (3) Bonds, bills, notes, certificates of indebtedness or other direct obligations of the United States or of the State of Georgia, - 11 - CITY OF TRION BOARD OF EDUCATION - CHATTOOGA COUNTY NOTES TO THE GENERAL-PURPOSE FINANCIAL STATEMENTS JUNE 30, 2001 EXHIBIT liD" Note 2: DEPOSITS (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 ofthe State of Georgia, and (7) 'Bonds, bills, notes, certificates of indebtedness, or other obligations of a subsidiary corporation of the United States government, which are fully guaranteed by the United States government both as to principal and interest or debt obligations issued by the Federal Land Bank, the Federal Home Loan Bank, the Federal Intermediate Credit Bank, the Central BaTIk for Cooperatives, the Farm Credit Banks, the Federal Home Loan Mortgage Association, and the Federal National Mortgage Association. . CATEGORIZATION OF DEPOSITS At June 30, 2001, the bank balances were $2,498,267.55. 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, 2001, as follows: Risk Category Bank Balance 1 $ 970,174.44 2 1,4i 5,840.62 3 112,252.49 Total $2.498,267.55 Note 3: NON-MONETARY TRANSACTIONS the Schooi District receives food commodities from the United States Department of Agriculture (USDA) for school breakfast and lunch programs. See Note 1 - Inventories - 12 - CITY OF TRION BOARD OF EDUCAnON - CHATTOOGA COUNTY NOTES TO THE GENERAL-PURPOSE FINANCIAL STATEMENTS JUNE 30, 2001 EXHIBIT "D" Note 4: RISK MANAGEMENT The School District is exposed to various risks of loss related to torts; theft of, damage to, and destruction ofassets; errors or omissions; job related illness or injuries to employees; natural disaster and unemployment compensation. The School District has obtained commercial insurance for risk of loss 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 ofthe past three years. The School District has elected to self-insure for all losses related to natural disaster, except flood coverage. 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 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: 2000 2001 Beginning of Year Liability Claims and Changes in Estimates Claims Paid End of Year Liability $ 1,934.00 $ 0.00 $ 1,934.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 The School District has purchased surety bonds to provide additionalinsurance coverage as follows: Position Covered Amount Superintendent All Other Employees $ 5,000.00 $ 50,000.00 Note 5: ON-BEHALF PAYMENTS The'School District has recognized revenues and expenditures in the amount of $71,917.58 for health insurance and retirement contributions paid on the School District's behalfby 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$60,119.58 - 13- CITY OF TRION BOARD OF EDUCAnON - CHATTOOGA COUNTY NOTES TO THE GENERAL-PURPOSE FINANCIAL STATEMENTS JUNE 30, 2001 EXHIBIT"D" Note 5: ON-BEHALF PAYMENTS Office of Treasury and Fiscal Services _ Paid to the Public School Employees Retirement System . For Public School Employees Retirement (PSERS) Employer's Cost In the amount of$11,798.00 Note 6: 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 7: SUBSEQUENT EVENTS On September 18, 2001, the voters of Chattooga County voted in favor of a Special Purpose Local .Option Sales Tax referendum for educational purposes. The imposition of the tax approved by the voters, as stated on the Official Ballot of Chattooga County, is as follows: "Shall a special one percent sales and use tax for educational purposes for theChattooga County School District (the "Chattooga District") and the independent school district of the City of Trion (the "Trion District") be imposed within Chattooga County for a period not to exceed 20 calendar quarters and for the purpose of providing funds to pay ... for the Trion District, the cost ofrehabilitating, repairing, renovating, extending and improving Trion High School, Trion Middle School and Trion Elementary School, and related facilities useful or desirable in connection therewith, including without limitation acquisition and construction of -classroom additions, roof replacements and repairs, mechanical system repairs and replacements, additional parking and paving, improvements to athletic and physical education facilities, and upgraded and improved security systems; system-wide technology additions and improvements; and purchasing school furnishings, equipment and fixtures at a maximum cost of $3,550,000?" Note 8: 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. - 14- CITY OF TRlON BOARD OF EDUCAnON - CHATTOOGA COUNTY NOTES TO THE GENERAL-PURPOSE FINANCIAL STATEMENTS JUNE 30, 2001 EXHIBIT"D" Note 8: RETlREMENT PLANS TRS CONTRIBUTIONS REQUlRED 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 11.29% and employer contributions forthe current fiscal year and the preceding two fiscal years are as follows: Fiscal Year Percentage Contributed Required Contribution 2001 2000 1999 100% 100% 100% . $ 521,259.24 $ 481,675.38 $ 483,971.70 - 15 - CITY OF TRION BOARD OF EDUCATION - CHATIOOGA COUNTY COMBINING BALANCE SHEET 'SPECIAL REVENUE FUND JUNE 30, 2001 ASSETS Cash and Cash Equivalents Accounts Receivable Inventories Food Donated Commodities Purchased Food . Total Assets SCHOOL FOOD SERVICES FUND LOTIERY PROGRAMS $ 83,987.46 $ .42,881.64 9.00 4,133.09 3,892.51 $ 92,013.06 $ =====4=2,~8=90=.6=4= Total Liabilities and Fund Equity See notes to the general-purpose financial statements. - 16- $ ============= 92,013.06 $ 42,890.64 EXHIBIT"E" FEDERAL PROGRAMS TOTALS JUNE 30, 2001 JUNE 30, 2000 $ 54,833.11 $ 181,702.21 $ 120,501.02 9,155.00 9,164.00 156,896.00 4,133.09 3,892.51 8,002.69 4,068.35 $ 63,988.11 $ 198,891.81 $=====2=8=9=,4~6=8=.0=6= $ 116,844.68 $ 21,215.88 $ 32,564.34 45,175.63 3,569.26 54,411.00 48,706.84 39,202.97 39,202.97 15,313.37 $ 63,988.11 $ 126,178.31 $ 226,040.52 $ 1,533.18 $ 4,133.09 3,892.51 8,002.69 4,068.35 10,000.00 10,000.00 $ 0.00 54,687.90 39,823.32 $ 0.00 $ 72,713.50 $ 63,427.54 $ 63,988.11 $ 198,891.81 $ =====2=8=9,=4~6=8.=0=6= - 17- CITY OF TRION BOARD OF EDUCATION - CHATIOOGA COUNTY COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES SPECIAL REVENUE FUND YEAR ENDED JUNE 30, 2001 REVENUES State Funds Federal Funds Other Funds Total Revenues EXPENDITURES Current Instruction Support Services Improvement of Instructional Services Educational Media Services School Administration Maintenance and Operation of Plant Food Services Operation 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 SCHOOL FOOD SERVICES FUND LOTIERY PROGRAMS $ 32,212.00 $ 322,509.80 10~,388.99 r 309,629.69 $ 445,230.68 $ 322,509.80 $ 301,562.48 $ 430,366.10 20,947.32 $ 430,366.10 $ 322,509.80 $ 14,864.58 $ 0.00 $ 14,864.58 $ 61,894.36 -3,869.60 -175.84 0.00 0.00 $ 72,713.50 $=======0.=00= See notes to the general-purpose financial statements. - 18- EXHIBIT"F" FEDERAL PROGRAMS TOTALS YEAR ENDED JUNE 30, 2001 JUNE 30, 2000 $ 354,721.80 $ 385,662.20 $ 177,542.87 280,931.86 338,082.18 309,629.69 277,713.52 $ 177,542.87 $ 945,283.35 $ 1,001,457.90 $ 84,945.37 $ 386,507.85 $ 538,325.98 71,047.71 4,391.00 18,691.97 71,047.71 4,391.00 18,691.97 20,947.32 430,366.10 55,854.17 4,330.00 2,920.59 5,014.42 407,198.36 $ 179,076.05 $ 931,951.95 $ 1,013,643.52 $ -1,533.18 $ 13,331.40 $ -12,185.62 2,212.49 $ -1,533.18 $ 13,331.40 $ -9,973.13 1,533.18 63,427.54 71,478.89 -3,869.60 -175.84 1,914.20 7.58 $ 0.00 $ ====="'====== 72,713.50 $ 63,427.54 - 19- CITY OF TRION BOARD OF EDUCATION - CHATIOOGA COUNTY COMBINING BALANCE SHEET CAPITAL PROJECTS FUND JUNE 30, 2001 EXHIBIT"G" ASSETS Cash and Cash Equivalents Accounts Receivable Total Assets BOND PROCEEDS SPECIAL PURPOSE LOCAL OPTION SALES TAX TOTALS JUNE 30,2001 JUNE 30, 2000 $ 0.00 $ 271,833.09 $ 271,833.09 $ 298,515.50 28,078.69 28,078.69 28,279.48 $ 0.00 $ 299,911.78 $ 299,911.78 $ 326,794.98 LIABILITIES AND FUND EQUITY LIABILITIES Accounts Payable Retainages Payable Total Liabilities FUND EQUITY Fund Balances Reserved For SPLOST Projects Unreserved Undesignated $ Total Fund Equity $ Total Liabilities and Fund Equity $ $ 6,068.00 47,566.94 $ 53,634.94 $. 299,911,78 $ 0.00 0.00 0.00 $ 299,911.78 $ 299,911.78 $ 0,00 299,911.78 $ 273,160.04 0.00 273,160.04 0.00 $ 299,911.78 $ 299,911.78 $ 326,794.98 See notes to the general-purpose financial statements, - 20- CITY OF TRION BOARD OF EDUCATION - CHAnOOGA COUNTY COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES CAPITAL PROJECTS FUND YEAR ENDED JUNE 30, 2001 EXHIBIT "H" See notes to the general-purpose financial statements. 21 CITY OF TRION BOARD OF EDUCATION - CHATIOOGA COUNTY SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS YEAR ENDED JUNE 30. 2001 SCHEDULE "1" FUNDING AGENCY PROGRAM/GRANT Agriculture. U. S. Department of Child Nutrition Cluster Pass-Through From Georgia Department of Education Food and Nutrition Program Food Services School Breakfast Program National School Lunch Program Total Child Nutrition Cluster Other Programs Pass-Through From Georgia Department of Education Food and Nutrition Program Food Distribution ~rogram Total U. S. Department of Agriculture Education, U. S. Department of Special Education Cluster Pass-Through From Georgia Department of Education Individuals with Disabilities Education Act Part B - Special Education Flow Through Preschool Total Special Education Cluster Other Programs Pass-Through From Georgia Department of Education Comprehensive School Reform Demonstration Project Elementary and Secondary Education Act Title I Grants to Local Educational Agencies Title" Eisenhower Professional Development' Title VI Innovative Education Program Strategies Vocational Education - Basic Grants to States High School Program Basic Grant Total U. S. Department of Education CFDA NUMBER PASSTHROUGH ENTITY 10 NUMBER FEDERAL REVENUE IN PERIOD EXPENDITURES IN PERIOD 10.553 10.555 N/A $ 12.316.59 N/A 91,072.40 $ $ 103,388.99 $ (2) 430,366.10 (3) 430,366.10 10.550 N/A (1) $ 103.388.99 $ (1) 430,366.10 84.027 84.173 N/A $ 62,392.88 $ N/A 7,312.00 $ 69,704.88 $ 62,392.88 7,312.00 69,704.88 84.332 84.010 84.281 84.298 84.048 N/A 50,000.00 50,000.00 N/A 29.871.82 N/A 13,900.17 N/A 4,391.00 31,405.00 13,900.17 4.391.00 N/A 9,675.00 $ 177,542.87 $ 9,675.00 179,076.05 Total Federal Financial Assistance N/A = Not Available $ 280,931.86 $==~~;,;6;0,9;,4.4;2,.;1;5. - 22- CITY OF TRION BOARD OF EDUCATION - CHATIOOGA COUNTY SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS YEAR ENDED JUNE 30, 2001 Notes to the Schedule of Expenditures of Federal Awards (1) Commodities valued in the amount of $20,640.14 were received during the current fiscal year and were not recorded in the School District's financial statements, (2) Expenditures for the School Breakfast Program were not maintained separately and are included in the 2001 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 Trion 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, SCHEDULE "1" Seenotes to the general-purpose financial statements. - 23- CITY OF TRION BOARD OF EDUCATION - CHATTOOGA COUNTY SCHEDULE OF STATE REVENUE YEAR ENDED JUNE 30, 2001 SCHEDULE "2" AGENCY/FUNDING . GOVERNMENTAL FUND TYPES SPECIAL GENERAL REVENUE FUND FUND GRANTS Education, Georgia Department of Quality Basic Education Direct Instructional Cost Kindergarten Program $ Primary Grades (1-3) Program Upper Elementary Grades (4-5) Program Middle School (6-8) Program High School General Education (9-12) Program Vocational Laboratory (9-12) Program Students with Disabilities Category II Category III Category IV Gifted Student - Category VI Remedial Education Program Alternative Education Program . Media Center Program Staff and Professional Development Indirect Cost Nursing Services Principal Supplements Vocational Supervisors Education Equalization Funding Grant Food Services . Vocational Education Other State Programs . At-Risk Summer School Program Health Insurance Innovative Programs Preschool Handicapped Program Remedial Summer School Lottery Programs Computers in the Classroom 365,497,00 913,622,00 446,014,00 737,831,00 677,350,00 286,379,00 16,508.00 330,797,00 53,723.00 106,493.00 29,924,00 62,392,00 130,040.00 ' 31,008.00 957,795.00 43,168,00 5,048.00 9,419.00 556,403.00 $ 2,684,00 717.67 60,119.58 5,000.00 . 21,686.00 1,789.06 $ 32,212.00 25,999.00 Office of School Readiness Pre-Kindergarten Program 296,510.80 Office of Treasury and Fiscal Services Public School Employees Retirement 11,798.00 CONTRACT Education, Georgia Department of Georgia's Reading Challenge 18,245.00 TOTAL 365,497.00 913,622,00 446,014,00 737,831,00 677,350,00 286,379,00 16,508,00 330,797,00 53,723.00 106,493.00 29,924.00 62,392.00 130,040.00 31,008.00 957,795,00 43,168.00 5,048.00 9,419.00 556,403.00 32,212.00 2,684.00 717.67 60,119.58 5,000,00 21,686.00 1,789.06 25,999.00 296,510.80 11,798.00 18,245.00 $ 5,881,450,31 $ 354,721.80 $ ====6=,2=3=6=,:1.;7=2-=.1=1"", See notes to the general-purpose financial statements. - 24- CITY OF TRION BOARD OF EDUCATION - CHATTOOGA COUNTY SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS YEAR ENDED JUNE 30, 2001 SCHEDULE "3" (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 project. Includes all cost from project inception to completion. (3) The voters of the City of Trion approved the imposition of a 1% sales tax to fund the above project and retire associated debt. Amounts expended for this project may include sales tax proceeds, state, local property taxes and/or other funds over the life of the project. (4) In addition to the expenditures shown above, the School District has incurred interest to provide advance funding for the above project as follows: Prior Years $ 34,297.00 Current Year 44,793.00 Total 79,090.00 See notes to the general-purpose financial statements. - 25- CITY OF TRION BOARD OF EDUCATION - CHATIOOGA COUNTY GENERAL FUND - QUALITY BASIC EDUCATION PROGRAM (QBE) ALLOTMENTS AND EXPENDITURES - BY PROGRAM YEAR ENDED JUNE 30, 2001 SCHEDULE "4" DESCRIPTION Direct Instructional Programs Kindergarten Program Primary Grades (1-3) Program Upper Elementary Grades (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 Gifted Student - Category VI Remedial Education Program . Alternative Education Program TOTAL DIRECT INSTRUCTIONAL PROGRAMS Media Center Program Staff and Professional Development ALLOTMENTS FROM GEORGIA DEPARTMENT OF EDUCATION (1) ELIGIBLE QBE PROGRAM COSTS SALARIES OPERATIONS TOTAL $ 394,437.00 $ 334,477.31 $ 23,296.94 $ 357,774.25 985,964.00 996,213.15 33,047.35 1,029,260.50 481,330.00 465,920.60 13,210.98 479,131.58 796,253.00 896,788.26 15,115.13 911,903.39 730,983.00 1,014,187.72 34,018.30 1,048,206.02 309,055,00 254,274.76 68,230.46 322,505.22 432,783.00 1,505.12 1,505.12 34,895.43 608.19 35,503.62 343,900.16 6,619.60 350,519.76 3,690.38 3,690.38 114,924.00 109,050.19 898.61 109,948.80 32,293.00 35,552.46 567.81 36,120.27 67,332.00 69,874.52 69,874.52 $ 4,345,354,00 $ 4,560,330.06 $ 195,613.37 $ 4,755,943.43 140,337.00 33,464.00 140,057.29 9,555.61 24,590.85 23,908.39 164,648.14 33,464.00 TOTAL QBE FORMULA FUNDS $ 4,519,155.00 $ 4,709,942.96 $ 244,112.61 $ 4,954,055.57 (1) Comprised of State Funds plus Local Five Min Share. See notes to the general-purpose financial statements. - 26- CITY OF TRION BOARD OF EDUCATION - CHATIOOGA COUNTY GENERAL FUND - QUALITY BASIC EDUCATION PROGRAM (QBE) ALLOTMENTS AND EXPENDITURES - BY SITE YEAR ENDED JUNE 30. 2001 'SCHEDULE "5" Trion Elementary School Trion Middle School Trion High School Central Office (Alternative Education Program) TOTAL (1) Comprised of State Funds pius Local Five Mill Share. l ALLOTMENTS FROM GEORGIA DEPARTMENT OF EDUCATION (1) ELIGIBLE QBE PROGRAM COSTS' $ 2,114,270.00 $ 2,354,130.54 973,024.00 957,183.83 1,190,728.00 1,444,629.06 67,332.00 $ 4,345,354.00 $ ===4=,7=55~,9~43~.4=3 See notes to the general-purpose financial statements. - 27- SECTION II COMPLIANCE AND INTERNAL CONTROL REPORTS RUSSELL W. HINTON STATE AUDITOR (404) 6562174 DEPARTMENT OF AUDITS AND ACCOUNTS 254 Washington Street. S. W, Suite 214 Arlanta. Georgia ~()~J4-X4()() March 28, 2002 Honorable Roy E. Barnes, Governor Members of the General Assembly Members of the State Board of Education and Superintendent and Members of the City of Trion 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 Trion Board of Education as of and for the year ended June 30,2001, and have issued our report thereon dated March 28, 2002. 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 ofobtaining reasonable assurance about whether City ofTrion Board ofEducation'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 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 ofour tests disclosed no instances ofnoncompliance that are required to be reported under Government Auditing Standards. Internal Control Over Financial Reporting In planning and performing our audit, we considered City of Trion Board of Education's internal control over financial reporting in order to determine our auditing procedures for the purpose of expressing our opinion on the financial statements and not to provide assurance on the internal 2001YB-40 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 corning 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 Trion Board of Education's ability to record, process, summarize 'and report financial data consistent with assertions of management in the financial statements. The reportable condition is described in the accompanying Schedule ofFindings and Questioned Costs as item FS-7911-01-01. A material weakness is a condition in which the design or operation of one or more ofthe internal control components does not reduce to a relatively low level the risk that misstatements in amounts that would be material in relation to the financial statements being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. Our consideration of the internal control over financial reporting would not necessarily disclose all matters in the internal control that might be reportable conditions and, accordingly, would not necessarily disclose all reportable conditions that are also considered to be material . weaknesses. However, the reportable condition described above is considered to be a material weakness. This report is intended solely for the information and use ofthe management, members ofthe City of Trion Board ofEducation, Federal awarding agencies and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties. Respectfully submitted, RWH:as 2001YB-40 Ru ell W. Hinton State Auditor RUSSELL \V. HINTON STATE AUDITOR (404) 6562174 DEPARTMENT OF AUDITS AND ACCOUNTS 254 Washingtou Street. s.w. Suite 214 Atlanta. Georgia 3ln3-l-X40() March 28, 2002 Honorable Roy E. Barnes, Governor Members of the General Assembly Members of the State Board of Education and Superintendent and Members of the City of Trion 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-133 Ladies and Gentlemen: Compliance We have audited the compliance of City of Trion Board of Education with the types of compliance requirements described in the Us. Office of Management and Budget (OMB) Circular A-i33 Compliance Supplement that are applicable to each ofits major Federal programs for the year ended June 30, 2001. City of Trion 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 Trion Board of Education's management. Our responsibility is to express an opinion on City of Trion 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 oftheUnited 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 Trion 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 Trion Board of Education's compliance with those requirements. 2001SA-IO In our opinion, the City of Trion 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, 2001. Internal Control Over Compliance The management of City ofTrion Board ofEducation 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 Trion 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 Trion Board ofEducation, Federal awarding agencies and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties. Respectfully submitted, RWH:as 2001SA-10 Rus ell W. Hinton State Auditor SECTION ill AUDITEE'S RESPONSE TO PRIOR YEAR FINDINGS AND QUESTIONED COSTS CITY OF TRION BOARD OF EDUCATION '- CHATTOOGA COUNTY AUDITEE'S RESPONSE SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2001 PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS FINDING CONTROL NUMBER AND STATUS FS-7911~99-01 FS- 7911-00-01 Further Action Not Warranted Unresolved - See Corrective Action/Responses . CORRECTIVE ACTION/RESPONSES GENERAL FIXED ASSETS Failure to Maintain General Fixed Assets Account Group Finding ControlNumber: FS-7911-00-01 . Due to current staffing limitations and budgetary considerations prohibiting the hiring of additional administrative staff, the School District has decided not to pursue the recording of general fixed assets on the financial statements. SECTIONN FINDINGS AND QUESTIONED COSTS CITY OF TRION BOARD OF EDUCATION - CHATTOOGA COUNTY . SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2001 I SUMMARY OF AUDITOR'S RESULTS 1. Type of Report Issued on the Financial Statements .The auditor's opinion on the City of Trion 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 Trion Board of Education disclosed a financial statement reportable condition related to the following control category. General Fixed Assets The reportable condition described above is considered to be a material weakness. 3. Noncompliance Material to the Financial Statements The audit ofthe City of Trion Board of Education disclosed no instances ofnoncompliance that were deemed to be material to the financial statements. 4. Reportable Conditions in Internal Control Over Maior Programs The audit report for the City of Trion 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 Trion Board of Education's report on compliance with requirements applicable to major programs was unqualified. 6. Audit Findings Required to be Reported by Section .51OCa) of OMB Circular A-133 The City of Trion Board of Education's audit did not disclose audit findings required to be reported by section .51O(a) orOMB 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 Trion Board of Education qualified as a low risk auditee based upon a waiver granted by the U. S. Department of Education.. - 1- CITY OF TRION BOARD OF EDUCATION - CHATTOOGA COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2001 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-7911-01-0l The City ofTrion Board ofEducation 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. Management's Response: Due to current staffing limitations and budgetary considerations prohibiting the hiring ofadditional administrative staff, 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. -2-