CITY OF VALDOSTA BOARD OF EDUCATION LOWNDES COUNTY, GEORGIA REPORT ON AUDIT OF THE FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2004 STATE OF GEORGIA DEPARTMENT OF AUDITS AND ACCOUNTS Russell W. Hinton State Auditor CITY OF VALDOSTA BOARD OF EDUCATION - LOWNDES COUNTY - TABLE OF CONTENTS - SECTION I FINANCIAL INDEPENDENT AUDITOR'S COMBINED REPORT ON BASIC FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION - SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS EXHIBITS BASIC FINANCIAL STATEMENTS DISTRICT-WIDE FINANCIAL STATEMENTS A STATEMENT OF NET ASSETS 3 B STATEMENT OF ACTIVITIES 4 FUND FINANCIAL STATEMENTS C BALANCE SHEET GOVERNMENTAL FUNDS 6 D RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO THE STATEMENT OF NET ASSETS 7 E STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS 8 F RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES TO THE STATEMENT OF ACTIVITIES 9 G STATEMENT OF FIDUCIARY NET ASSETS FIDUCIARY FUNDS 11 H NOTES TO THE BASIC FINANCIAL STATEMENTS 12 SCHEDULES REQUIRED SUPPLEMENTARY INFORMATION 1 SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL GENERAL FUND 25 SUPPLEMENTARY INFORMATION 2 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS 26 3 SCHEDULE OF STATE REVENUE 28 CITY OF VALDOSTA BOARD OF EDUCATION - LOWNDES COUNTY - TABLE OF CONTENTS - SECTION I FINANCIAL SCHEDULES SUPPLEMENTARY INFORMATION 4 SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS 29 5 ALLOTMENTS AND EXPENDITURES GENERAL FUND - QUALITY BASIC EDUCATION PROGRAMS (QBE) BY PROGRAM 31 SECTION II COMPLIANCE AND INTERNAL CONTROL REPORTS REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS REPORT ON COMPLIANCE WITH REQUIREMENTS APPLICABLE TO EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH 0MB CIRCULAR A-133 SECTION III AUDITEE'S RESPONSE TO PRIOR YEAR FINDINGS AND QUESTIONED COSTS SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS SECTION IV FINDINGS AND QUESTIONED COSTS SCHEDULE OF FINDINGS AND QUESTIONED COSTS CITY OF VALDOSTA BOARD OF EDUCATION - LOWNDES COUNTY - TABLE OF CONTENTS - SECTIONV MANAGEMENT'S RESPONSES SCHEDULE OF MANAGEMENT'S RESPONSES SECTION I FINANCIAL Russell W. Hinton STATE AUDITOR (404) 656-2174 DEPARTMENT OF AUDITS AND ACCOUNTS 254 Washington Street, S.W., Suite 214 Atlanta, Georgia 30334-8400 February 28, 2005 Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education and Superintendent and Members of the City of Valdosta Board of Education INDEPENDENT AUDITOR'S COMBINED REPORT ON BASIC FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION- SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS Ladies and Gentlemen: We have audited the accompanying financial statements ofthe governmental activities, each major fund, and the aggregate remaining fund information (Exhibits A through H) ofthe City ofValdosta Board of Education, as of and for the year ended June 30, 2004, which collectively comprise the Board's basic financial statements as listed in the table of contents. These financial statements are the responsibility ofthe City ofValdosta Board ofEducation's management. Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States ofAmerica and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General ofthe United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free ofmaterial misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our op1mons. In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, each major fund, and the aggregate remaining fund information ofthe City ofValdosta Board ofEducation, as ofJune 30, 2004, and the respective changes in financial position thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America. 2004ARL-11 The City ofValdosta Board ofEducation has not presented Management's Discussion and Analysis that accounting principles generally accepted in the United States has determined is necessary to supplement, although not to be part of, the basic financial statements. In accordance with Government Auditing Standards, we have also issued our report dated February 28, 2005, on our consideration ofthe City ofValdosta Board ofEducation's internal control over financial reporting and our tests ofits compliance with certain provisions oflaws, regulations, contracts and grant agreements and other matters. The purpose ofthat report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be read in conjunction with this report in considering the results of our audit. The Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual, as presented on page 25, is not a required part of the basic financial statements but is supplementary information required by the accounting principles generally accepted in the United States of America. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods ofmeasurement and presentation ofthe required supplementary information. However, we did not audit the information and express no opinion on it. Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City of Valdosta Board of Education's basic financial statements. The accompanying supplementary information which consist of Schedules 2 through 5, which includes the Schedule of Expenditures of Federal Awards as required by U.S. Office of Management and Budget Circular A-133, Audits ofStates, Local Governments, and Non-Profit Organizations, are presented for purposes of additional analysis and are not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements, and in our opinion, is fairly stated, in all material respects, in relation to the basic financial statements taken as a whole. A copy ofthis report has been filed as a permanent record in the office ofthe State Auditor and made available to the press ofthe State, as provided for by Official Code ofGeorgia Annotated section 506-24. Respectfully submitted, RWH:gp 2004ARL-11 kl.~ Russell W. Hinton State Auditor CITY OF VALDOSTA BOARD OF EDUCATION - LOWNDES COUNTY CITY OF VALDOSTA BOARD OF EDUCATION - LOWNDES COUNTY STATEMENT OF NET ASSETS JUNE 30, 2004 EXHIBIT"A" ASSETS Investments Accounts Receivable, Net Taxes State Government Federal Government Other Inventories Capital Assets Land Construction in Progress Land Improvements Buildings Equipment Less: Accumulated Depreciation Total Assets LIABILITIES Cash Overdraft Accounts Payable Salaries Payable Short-Term Debt Interest Payable Retainages Payable Deposits and Deferred Revenues Total Liabilities NET ASSETS Invested in Capital Assets, Net of Related Debt Restricted for Bus Replacement Continuation of Federal Programs Capital Projects Unrestricted Total Net Assets Total Liabilities and Net Assets The notes to the basic financial statements are an integral part of this statement. -3- GOVERNMENTAL ACTIVITIES $ 13,873,832 1,983,227 3,425,358 78,846 7,141 467,034 1,109,579 6,947,073 2,004,414 50,621,339 3,530,143 -11,194,967 $ ===7=2=,8=5=3'=01=9= $ 1,578,089 1,680,323 4,329,638 4,950,000 42,947 662,141 279 974 $ 13,523,112 $ 53,017,581 110,157 1,043,189 3,694,733 1464247 $ 59,329,907 $ ===7=2=,8=5=3'=0=19= CITY OF VALDOSTA BOARD OF EDUCATION - LOWNDES COUNTY STATEMENT OF ACTIVITIES FOR THE YEAR ENDED JUNE 30. 2004 EXPENSES CHARGES FOR SERVICES GOVERNMENTAL ACTIVITIES Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Operations of Non-Instructional Services Enterprise Operations Food Services Interest on Short-Term Debt $ 34,403,812 $ 1,861,584 1,560,868 975,159 773,536 2,964,268 610,732 3,040,283 1,220,212 30,235 266,352 708,619 2,823,189 83450 362,668 549,933 327,882 Total Governmental Activities $ ====5=1=,3=2=2,=29=9= $ General Revenues Taxes Property Taxes For Maintenance and Operations Sales Taxes Special Purpose Local Option Sales Tax For Capital Projects Intangible Recording Tax Real Estate Grants and Contributions not Restricted to Specific Programs Investment Earnings Miscellaneous 1 240,483 Total General Revenues Change In Net Assets Net Assets - Beginning of Year (Restated) Net Assets - End of Year The notes to the basic financial statements are an integral part of this statement. -4- EXHIBIT "B" PROGRAM REVENUES OPERATING CAPITAL GRANTS AND GRANTS AND CONTRIBUTIONS CONTRIBUTIONS NET (EXPENSES) REVENUES AND CHANGES IN NET ASSETS $ 23,703,710 $ 496,832 765,702 575,430 953,945 1,217,236 1,727,805 764,331 153,317 2,577,565 $ 32,935,873 $ 568,127 $ 1,967 3,821 1,528 23,573 109,707 242 587 67,628 777 180 $ -9,769,307 -1,362,785 -795,166 -399,729 184,230 -1,747,032 -609,204 -1,288,905 -346,174 -29,993 -112,448 -158,686 149,886 -83 450 -16,368,763 $ 12,355,468 8,329,969 201,896 80,222 783,397 203,002 658443 $ 22,612,397 $ 6,243,634 53,086,273 $ ===59=,3=2==9'=90=7= -5- CITY OF VALDOSTA BOARD OF EDUCATION - LOWNDES COUNTY BALANCE SHEET GOVERNMENTAL FUNDS JUNE 30. 2004 EXHIBIT"C" ASSETS Cash and Cash Equivalents Investments Accounts Receivable, Net Taxes State Government Federal Government Other Inventories GENERAL FUND DISTRICTWIDE CAPITAL PROJECTS FUND TOTAL $ 166,402 $ 9,160,571 $ 4,713,261 330,978 3,425,358 78,846 7,141 467 034 1,554,094 166,402 13,873,832 1,885,072 3,425,358 78,846 7,141 467 034 Total Assets $ 13,636,330 $ 6,267,355 $ ==.,.,;.;19;.,;,9;;,;;0~3,~6;;;,,;85~ LIABILITIES AND FUND BALANCES LIABILITIES Cash Overdraft Accounts Payable Salaries Payable Short-Term Debt Interest Payable Retainages Payable Deposits and Deferred Revenue Total Liabilities FUND BALANCES Reserved for: Bus Replacement Continuation of Federal Programs Inventories Capital Projects Unreserved Designated for Self-Insurance Undesignated Reported in: General Fund Capital Projects Total Fund Balances $ $ 1,680,323 4,329,638 4,950,000 42,947 279 974 $ 11,282,882 $ 1,744,491 $ 662,141 2,406,632 $ 1,744,491 1,680,323 4,329,638 4,950,000 42,947 662,141 279 974 13 689 514 $ 110,157 $ 685,730 467,034 $ 3,694,733 100,000 990,527 165,990 $ 2,353,448 $ 3,860,723 $ 110,157 685,730 467,034 3,694,733 100,000 990,527 165 990 6 214 171 Total Liabilities and Fund Balances $ 13,636,330 $ The notes to the basic financial statements are an integral part of this statement. -6 - 6,267,355 $ ==.,.,;.;19;.,;,9;;,;;0~3,~6;;;,,;85~ CITY OF VALDOSTA BOARD OF EDUCATION - LOWNDES COUNTY RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO THE STATEMENT OF NET ASSETS JUNE 30. 2004 EXHIBIT"D" Total Fund Balances - Governmental Funds (Exhibit "C") Amounts reported for Governmental Activities in the Statement of Net Assets are different because: Capital Assets used in Governmental Activities are not financial resources and therefore are not reported in the funds. These assets consist of: Land Construction in Progress Land Improvements Buildings Equipment Accumulated Depreciation Total Capital Assets Some of the School District's property tax revenues will be collected after year end but are not available soon enough to pay for the current period's expenditures. Net Assets of Governmental Activities (Exhibit "A") $ 6,214,171 $ 1,109,579 6,947,073 2,004,414 50,621,339 3,530,143 -11 194 967 53,017,581 98155 $ 59,329,907 The notes to the basic financial statements are an integral part of this statement. -7- CITY OF VALDOSTA BOARD OF EDUCATION - LOWNDES COUNTY STATEMENT OF REVENUES. EXPENDITURES AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS YEAR ENDED JUNE 30. 2004 EXHIBIT"E" REVENUES Property Taxes Sales Taxes State Funds Federal Funds Charges for Services Investment Earnings Miscellaneous Total Revenues EXPENDITURES Current Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Enterprise Operations Food Services Operation Capital Outlay Debt Services Interest Total Expenditures Excess of Revenues over (under) Expenditures OTHER FINANCING SOURCES /USES} Transfers In Transfers Out Total Other Financing Sources (Uses) Net Change in Fund Balances Fund Balances - Beginning GENERAL FUND DISTRICTWIDE CAPITAL PROJECTS FUND TOTAL $ 12,532,775 $ 282,118 $ 8,329,969 26,257,273 667,473 7,658,886 1,240,483 102,715 100,287 675 019 2 492 $ 48,749,269 $ 9,100,221 $ 12,532,775 8,612,087 26,924,746 7,658,886 1,240,483 203,002 677 511 57,849,490 $ 33,169,413 $ 33,169,413 1,857,311 1,560,868 975,159 765,235 2,964,268 607,413 3,006,937 953,798 29,711 265,077 683,864 2,681,640 $ 12,724,254 1,857,311 1,560,868 975,159 765,235 2,964,268 607,413 3,006,937 953,798 29,711 265,077 683,864 2,681,640 12,724,254 83,450 83450 $ 49,604,144 $ 12,724,254 $ 62,328,398 $ -854,875 $ -3,624,033 $ -4,478,908 $ 2,043,820 $ $ -2,043,820 2,043,820 -2,043,820 $ 2,043,820 $ -2,043,820 $ 0 $ 1,188,945 $ -5,667,853 $ -4,478,908 1,164,503 9,528,576 10,693,079 Fund Balances - Ending $ 2,353,448 $ 3,860,723 $ ====6"'=2=1,;.4.;.17=1= The notes to the basic financial statements are an integral part of this statement. -8- CITY OF VALDOSTA BOARD OF EDUCATION - LOWNDES COUNTY RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT OF REVENUES. EXPENDITURES AND CHANGES IN FUND BALANCES TO THE STATEMENT OF ACTIVITIES JUNE 30. 2004 EXHIBIT"F" Total Net Change in Fund Balances - Governmental Funds (Exhibit "E") Amounts reported for Governmental Activities in the Statement of Activities are different because: Capital Outlays are reported as expenditures in Governmental Funds. However. in the Statement of Activities, the cost of Capital Assets is allocated over their estimated useful lives as depreciation expense. In the current period, these amounts are: Capital Outlay $ Depreciation Expense Excess of Capital Outlay over Depreciation Expense Because some property taxes will not be collected for several months after the School District's fiscal year ends, they are not considered "available" revenues. In the Statement of Activities, only the gain on the sale of the land improvement is reported, whereas in the Governmental Funds, the entire proceeds from the sale increase financial resources. Thus, the change in net assets differs from the change in fund balances by the carrying value of the land improvement sold. $ 12,161,454 -1, 155,355 -4.478.908 11,006,099 -264,489 -19 068 Change in Net Assets of Governmental Activities (Exhibit "B") $ ==6='=,2=4=3,,.,6=34= The notes to the basic financial statements are an integral part of this statement. -9- CITY OF VALDOSTA BOARD OF EDUCATION - LOWNDES COUNTY STATEMENT OF FIDUCIARY NET ASSETS FIDUCIARY FUNDS JUNE 30, 2004 EXHIBIT"G" ASSETS Cash and Cash Equivalents LIABILITIES Funds Held for Others AGENCY FUNDS $ ===80='=97=9= $ ===8=0,=97=9= The notes to the basic financial statements are an integral part of this statement. - 11 - CITY OF VALDOSTA BOARD OF EDUCATION - LOWNDES COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2004 EXHIBIT"H" Note 1: DESCRIPTION OF SCHOOL DISTRICT AND REPORTING ENTITY REPORTING ENTITY The City of Valdosta Board of Education (School District) was established under the laws of the State of Georgia and operates under the guidance of a school board elected by the voters and a Superintendent appointed by the Board. The Board is organized as a separate legal entity and has the power to levy taxes and issue bonds. Its budget is not subject to approval by any other entity. Accordingly, the School District is a primary government and consists of all the organizations that compose its legal entity. Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BASIS OF PRESENTATION The School District's basic financial statements are collectively comprised of the District-wide financial statements, fund financial statements and notes to the basic financial statements ofthe City of Valdosta Board of Education. District-wide Statements: The Statement ofNet Assets and the Statement ofActivities display information about the financial activities ofthe overall School District, except for fiduciary activities. Eliminations have been made to minimize the double counting of internal activities. Governmental activities generally are financed through taxes, intergovernmental revenues, and other nonexchange transactions. The Statement ofActivities presents a comparison between direct expenses and program revenues for each function of the School District's governmental activities. Direct expenses are those that are specifically associated with a program or function and, therefore, are clearly identifiable to a particular function. Indirect expenses (expenses of the School District related to the administration and support ofthe School District's programs, such as office and maintenance personnel and accounting) are not allocated to programs. Program revenues include (a) charges paid by the recipients ofgoods or services offered by the programs and (b) grants and contributions that are restricted to meeting the operational or capital requirements of a particular program. Revenues that are not classified as program revenues, including all taxes, are presented as general revenues. Fund Financial Statements: The fund financial statements provide information about the School District's funds, including fiduciary funds. Eliminations have been made to minimize the double counting ofinternal activities. Separate statements for each category (governmental and fiduciary) are presented. The emphasis of fund financial statements is on major governmental funds, each displayed in a separate column. - 12 - CITY OF VALDOSTA BOARD OF EDUCATION - LOWNDES COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2004 EXHIBIT"H" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The School District reports the following major governmental funds: General Fund is the School District's primary operating fund. It accounts for all financial resources ofthe School District, except those resources required to be accounted for in another fund. District-wide Capital Projects Fund accounts for financial resources including Special Purpose Local Option Sales Tax and grants from Georgia State Financing and Investment Commission to be used for the acquisition, construction or renovation of major capital facilities. The School District reports the following fiduciary fund type: Agency funds account for assets held by the School District as an agent for various funds, governments or individuals. BASIS OF ACCOUNTING The basis ofaccounting determines when transactions are reported on the financial statements. The District-wide governmental and fiduciary fund financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded at the time liabilities are incurred, regardless of when the related cash flows take place. Nonexchange transactions, in which the School District gives (or receives) value without directly receiving (or giving) equal value in exchange, include property taxes, sales taxes and grants. On an accrual basis, revenue from property taxes is recognized in the fiscal year for which the taxes are levied. Revenue from sales taxes is recognized in the fiscal year in which the underlying transaction (sale) takes place. Revenue from grants is recognized in the fiscal year in which all eligibility requirements have been satisfied. The School District uses funds to report on its financial position and the results of its operations. Fund accounting is designed to demonstrate legal compliance and to aid financial management by segregating transactions related to certain governmental functions or activities. A fund is a separate accounting entity with a self-balancing set of accounts. Governmental funds are reported using the current financial resources measurement focus and the modified accrual basis ofaccounting. Under this method, revenues are recognized when measurable and available. The School District considers all revenues reported in the governmental funds to be available if they are collected within sixty days after year-end. Property taxes, sales taxes and interest are considered to be susceptible to accrual. Expenditures are recorded when the related fund liability is incurred. Capital asset acquisitions are reported as expenditures in governmental funds. The School District funds certain programs by a combination ofspecific cost-reimbursement grants, categorical grants, and general revenues. Thus, when program costs are incurred, there are both restricted and unrestricted net assets available to finance the program. It is the School District's - 13 - CITY OF VALDOSTA BOARD OF EDUCATION - LOWNDES COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2004 EXHIBIT"H" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES policy to first apply grant resources to such programs, followed by cost-reimbursement grants, then general revenues. RESTATEMENT OF NET ASSETS - BEGINNING OF YEAR As a result ofthe adoption of GASB Statement No. 34, the School District was also required to make certain changes in accounting principles, specifically (1) recording construction work in progress and (2) adoption of depreciation on certain capital assets. In the prior year, certain construction work in progress was recorded as buildings and was being depreciated. Also, certain land improvement capital assets were not being depreciated. Net assets at July 1, 2003, were reduced by $22,485 for the cumulative effect of these changes. CASH AND CASH EQUIVALENTS COMPOSITION OF DEPOSITS Cash and cash equivalents consist ofcash on hand, demand deposits and short-term investments with original maturities of three months or less from the date of acquisition in authorized financial institutions. Georgia Laws OCGA 45-8-14 authorize the School District to deposit its funds in one or more solvent banks or insured Federal savings and loan associations. INVESTMENTS COMPOSITION OF INVESTMENTS Investments made by the School District in nonparticipating interest-earning contracts (such as certificates ofdeposit) and repurchase agreements are reported at cost. Participating interest-earning contracts and money market investments with a maturity at purchase ofone year or less are reported at amortized cost. Both participating interest-earning contracts and money market investments with a maturity at purchase greater than one year are reported at fair value. The Official Code ofGeorgia Annotated Section 36-83-4 authorizes the School District to invest its funds. In selecting among options for investment or among institutional bids for deposits, the highest rate ofreturn shall be the objective, given equivalent conditions of safety and liquidity. Funds may be invested in the following: (1) Obligations issued by the State of Georgia or by other states, (2) Obligations issued by the United States government, (3) Obligations fully insured or guaranteed by the United States government or a United States government agency, (4) Obligations of any corporation of the United States government, (5) Prime banker's acceptances, - 14 - CITY OF VALDOSTA BOARD OF EDUCATION - LOWNDES COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2004 EXHIBIT"H" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (6) The Local Government Investment Pool administered by the State of Georgia, Office of Treasury and Fiscal Services, (7) Repurchase agreements, and (8) Obligations of other political subdivisions of the State of Georgia. RECEIVABLES Receivables consist of amounts due from property and sales taxes, grant reimbursements due on Federal, State or other grants for expenditures made but not reimbursed and other receivables disclosed from information available. Receivables are recorded when either the asset or revenue recognition criteria has been met. Receivables recorded on the basic financial statements do not include any amounts which would necessitate the need for an allowance for uncollectible receivables. PROPERTY TAXES The Lowndes County Board of Commissioners fixed the property tax levy for the 2003 tax digest year (calendar year) on October 20, 2003 (levy date). Taxes were due on December 20, 2003 (lien date). Taxes collected within the current fiscal year or within 60 days after year-end on the 2003 tax digest are reported as revenue in the governmental funds for fiscal year 2004. The Lowndes County Tax Commissioner bills and collects the property taxes for the School District and remits the balance of taxes collected to the School District. Property tax revenues, at the fund reporting level, during the fiscal year ended June 30, 2004, for maintenance and operations amounted to $12,532,775. The tax millage rate levied for the 2003 tax year (calendar year) for the City of Valdosta Board of Education was as follows (a mill equals $1 per thousand dollars of assessed value): School Operations 12.29 mills SALES TAXES Special Purpose Local Option Sales Tax, at the fund reporting level, during the year amounted to $8,329,969 and is to be used for capital outlay for educational purposes or debt service. This sales tax was authorized by local referendum and the sales tax must be re-authorized at least every five years. INVENTORIES FOOD INVENTORIES On the basic financial statements, inventories ofdonated food commodities used in the preparation ofmeals are reported at their Federally assigned value and purchased foods inventories are reported at cost (first-in, first-out). The School District uses the consumption method to account for - 15 - CITY OF VALDOSTA BOARD OF EDUCATION - LOWNDES COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2004 EXHIBIT"H" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES inventories whereby donated food commodities are recorded as an asset and as revenue when received, and expenses/expenditures are recorded as the inventory items are used. Purchased foods are recorded as an asset when purchased and expenses/expenditures are recorded as the inventory items are used. CAPITAL ASSETS Capital assets purchased, including capital outlay costs, are recorded as expenditures in the fund financial statements at the time of purchase (including ancillary charges). On the District-wide financial statements, all purchased capital assets are valued at cost where historical records are available and at estimated historical cost based on appraisals or deflated current replacement cost where no historical records exist. Donated capital assets are recorded at estimated fair market value on the date donated. Disposals are deleted at depreciated recorded cost. The cost of normal maintenance and repairs that do not add to the value ofassets or materially extend the useful lives of the assets is not capitalized. Depreciation is computed using the straight-line method. The School District does not capitalize book collections or works of art. Capitalization thresholds and estimated useful lives of capital assets reported in the District-wide statements are as follows: Capitalization Policy Estimated Useful Life Land Land Improvements Buildings and Improvements Equipment $ 5,000 NIA $ 5,000 20 to 80 years $ 5,000 up to 80 years $ 5,000 3 to 20 years Depreciation is used to allocate the actual or estimated historical cost of all capital assets over estimated useful lives. Note 3: DEPOSITS AND INVESTMENTS COLLATERALIZATION OF DEPOSITS Official Code of Georgia Annotated (OCGA) Section 45-8-12 provides that there shall not be on deposit at any time in any depository for a time longer than ten days a sum of money 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 ofoperating funds placed in demand deposit checking accounts. - 16 - CITY OF VALDOSTA BOARD OF EDUCATION - LOWNDES COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2004 EXHIBIT"H" Note 3: DEPOSITS AND INVESTMENTS Acceptable security for deposits consists of any one of or any combination of the following: (1) Surety bond signed by a surety company duly qualified and authorized to transact business within the State of Georgia, (2) Insurance on accounts provided by the Federal Deposit Insurance Corporation, (3) Bonds, bills, notes, certificates of indebtedness or other direct obligations of the United States or of the State of Georgia, (4) Bonds, bills, notes, certificates of indebtedness or other obligations of the counties or municipalities of the State of Georgia, (5) Bonds of any public authority created by the laws of the State of Georgia, providing that the statute that created the authority authorized the use of the bonds for this purpose, (6) Industrial revenue bonds and bonds of development authorities created by the laws of the State of Georgia, and (7) Bonds, bills, notes, certificates of indebtedness, or other obligations of a subsidiary corporation of the United States government, which are fully guaranteed by the United States government both as to principal and interest or debt obligations issued by the Federal Land Bank, the Federal Home Loan Bank, the Federal Intermediate Credit Bank, the Central Bank for Cooperatives, the Farm Credit Banks, the Federal Home Loan Mortgage Association, and the Federal National Mortgage Association. CATEGORIZATION OF DEPOSITS At June 30, 2004, the bank balances were $9,731,209. The amounts of the total bank balances are classified into three categories of credit risk: Category 1 - Cash that is insured (e.g., Federal depository insurance) or collateralized with securities held by the School District or by the School District's agent in the School District's name. Category 2 - Cash collateralized with securities held by the pledging financial institution's trust department or agent in the School District's name. Category 3 - Uncollateralized deposits. (This includes any bank balance that is collateralized with securities held by the pledging financial institution, or by its trust department or agent but not in the School District's name.) The School District's deposits are classified by risk category at June 30, 2004, as follows: - 17 - CITY OF VALDOSTA BOARD OF EDUCATION - LOWNDES COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2004 EXHIBIT"H" Note 3: DEPOSITS AND INVESTMENTS Risk Category Bank Balance 1 $ 689,812 2 7,043,860 3 1,997,537 Total $ 9,731,209 CATEGORIZATION OF INVESTMENTS At June 30, 2004, the carrying value ofthe School District's total investments was $7,319,065 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 ofGeorgia, Office ofTreasury and Fiscal Services for the Local Government Investment Pool (Primary Liquidity Portfolio) does not provide for investment in derivatives or similar investments. A description 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 consistent with Rule 2a-7 of the Investment Company Act of 1940. 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 daily and reported to the rating agency weekly to ensure stability. The pool distributes earnings (net of management fees) on a monthly basis and values participant's shares sold and redeemed at the pool's share price, $1.00 per share. Pooled cash and cash equivalents and investments are reported at cost. The pool does not issue any legally binding guarantees to support the value of the shares. Participation in the pool is voluntary and deposits consist of funds from local governments; operating and trust funds of Georgia's state agencies, colleges and universities; and current operating funds of the State of Georgia's General Fund. Investments in Georgia Fund 1 and Fund 6 are directed toward short-term instruments such as U.S. Treasury obligations, securities issued or guaranteed as to principal and interest by the U. S. Government or any of its agencies or instrumentalities, banker's acceptances and repurchase agreements. The weighted average maturity of Georgia Fund 1 may not exceed 60 days. The weighted average maturity for Georgia Fund 1 on June 30, 2004, was 24 days. The average investment duration for Fund 6 on June 30, 2004, was 0.22 years. - 18 - CITY OF VALDOSTA BOARD OF EDUCATION - LOWNDES COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2004 EXHIBIT"H" Note 4: NON-MONETARY TRANSACTIONS The School District receives food commodities from the United States Department of Agriculture (USDA) for school breakfast and lunch programs. These commodities are recorded at their Federally assigned value. See Note 2 - Inventories Note 5: CAPITAL ASSETS The following is a summary of changes in the Capital Assets during the fiscal year: Balances July 1, 2003 (Restated) Increases Decreases Balances June 30, 2004 Governmental Activities Capital Assets, Not Being Depreciated: Land Construction in Progress $ 775,542 $ 334,037 $ 1,109,579 16,981,677 6,798,625 $ 16,833,229 6,947,073 Total Capital Assets Not Being Depreciated $ 17,757,219 $ 7,132,662 $ 16,833,229 $ 8,056,652 Capital Assets Being Depreciated Buildings and Improvements Equipment Land Improvements $ 29,023,857 $ 21,597,482 3,265,604 264,539 2,228,843 $ $ 50,621,339 3,530,143 224,429 2,004,414 Less Accumulated Depreciation for: Buildings and Improvements Equipment Land Improvements 7,421,702 1,303,339 1,519,932 698,023 323,298 134,034 205,361 8,119,725 1,626,637 1,448,605 Total Capital Assets, Being Depreciated, Net $ 24,273,331 $ 20,706,666 $ 19,068 $ 44,960,929 Governmental Activity Capital Assets - Net $ 42,030,55Q $ 27,832,328 $ 16,852,297 $ 53,017,581 Current year depreciation expense by function is as follows: Instruction Support Services Pupil Services General Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Enterprise Operations Food Services $ 819,021 $ 2,835 5,507 2,202 33,971 176,744 347 846 222,452 16,423 97 459 $ 1,155,355 - 19 - CITY OF VALDOSTA BOARD OF EDUCATION - LOWNDES COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2004 EXHIBIT"H" Note 6: RESTRICTED ASSETS Special Purpose Local Option Sales Tax (SPLOST) funds are reported as restricted assets in the Statement of Net Assets because their use is limited by applicable bond covenants or statutory provisions. Restricted assets at June 30, 2004, were as follows: Restricted Investments: Capital Acquisitions District-wide Capital Projects SPLOST $ 4,712,440 Note 7: INTERFUND TRANSFERS Interfund transfers for the year ended June 30, 2004, consisted of the following: Transfer to General Fund Transfers From District-wide Capital Projects $ 2,043.820 Transfers are used to move unspent local funds in the District-wide Capital Projects Fund back to the General Fund. Note 8: RISK MANAGEMENT The School District is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors or omissions; job related illness or injuries to employees; acts of God and unemployment compensation. The School District has obtained commercial insurance for risk of loss associated with torts, assets and errors or omissions. The School District has neither significantly reduced coverage for these risks nor incurred losses (settlements) which exceeded the School District's insurance coverage in any of the past three years. The School District has elected to self-insure for all losses related to acts of God. The School District has not experienced any losses related to this risk in the past three years. The School District is self-insured with regard to unemployment compensation claims. In connection with this program, a self-insurance reserve has been established within the General Fund by the School District. The School District accounts for claims within the General Fund with expenses/expenditures and liability being reported when it is probable that a loss has occurred, and the amount of that loss can be reasonably estimated. - 20 - CITY OF VALDOSTA BOARD OF EDUCATION - LOWNDES COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2004 EXHIBIT"H" Note 8: RISK MANAGEMENT Changes in the unemployment compensation claims liability during the last two fiscal years are as follows: 2003 2004 Beginning ofYear Liability Claims and Changes in Estimates Claims Paid End ofYear Liability $ 0 $ 2,022 $ 2,022 $ 0 $ 0 $ 0 $ 0 $ 0 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 ofworkers' 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 Safety National Casualty Corporation to provide coverage for potential losses sustained by the Fund in excess of $400,000 loss per occurrence, up to $1,000,000. The School District has purchased surety bonds to provide additional insurance coverage as follows: Position Covered Amount Superintendent Director of Operations Finance Director Business Services Director Payroll Clerk Purchasing Agent All Other Employees $ 20,000 $ 10,000 $ 10,000 $ 10,000 $ 10,000 $ 10,000 $ 5,000 Note 9: SHORT-TERM DEBT The School District issues tax anticipation notes in advance of property tax collections, depositing the proceeds in its General Fund. This short-term debt is to provide cash for operations until property tax collections are received by the School District. Article IX, Section V, Paragraph V of the Constitution ofthe State ofGeorgia limits the aggregate amount of short-term debt to 75 percent ofthe total gross income from taxes collected in the preceding year and requires all short-term debt to be repaid no later than December 31 of the calendar year in which the debt was incurred. Short-term debt activity for the fiscal year is as follows: - 21 - CITY OF VALDOSTA BOARD OF EDUCATION - LOWNDES COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2004 EXHIBIT"H" Note 9: SHORT-TERM DEBT Beginning Balance Issued Redeemed Ending Balance Tax Anticipation Notes $ 4,980.000 $ 4,950.000 $ 4,980.000 $ 4,950.000 Note 10: ON-BEHALF PAYMENTS The School District has recognized revenues and costs in the amount of $339,401 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 $334,676 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 $4,725 Note 11: SIGNIFICANT COMMITMENTS The following is an analysis ofsignificant outstanding construction or renovation contracts executed by the School District as of June 30, 2004: Project Unearned Executed Contracts Lomax-Pinevale Elementary School Bazemore-Hyder Stadium $ 8,453,042 2,080,267 $ 10,533.309 The amounts described in this note are not reflected in the basic financial statements. Note 12: SIGNIFICANT CONTINGENT LIABILITIES Amounts received or receivable principally from the Federal government are subject to audit and review by grantor agencies. This could result in requests for reimbursement to the grantor agency for any costs which are disallowed under grant terms. The School District believes that such disallowances, if any, will be immaterial to its overall financial position. - 22 - CITY OF VALDOSTA BOARD OF EDUCATION - LOWNDES COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2004 EXHIBIT"H" Note 13: RETIREMENT PLANS TEACHERS RETIREMENT SYSTEM OF GEORGIA (TRS) TRS PLAN DESCRIPTION Substantially all teachers, administrative and clerical personnel employed by local school systems are covered by the Teachers Retirement System of Georgia (TRS), which is a cost-sharing multiple employer defined benefit pension plan. TRS provides service retirement, disability retirement and survivors benefits for its members in accordance with State statute. The Teachers Retirement System of Georgia issues a separate stand alone financial audit report and a copy can be obtained from the Georgia Department of Audits and Accounts. TRS CONTRIBUTIONS REQUIRED AND MADE Employees ofthe School District who are covered by TRS are required by State statute to contribute 5% of their gross earnings to TRS. The School District makes monthly employer contributions to TRS at rates adopted by the TRS Board of Trustees in accordance with State statute and as advised by their independent actuary. The required employer contribution rate is 9.24% and employer contributions for the current fiscal year and the preceding two fiscal years are as follows: Fiscal Year Percentage Contributed Required Contribution 2004 2003 2002 100% 100% 100% $ 2,680,226 $ 2,640,903 $ 2,523,188 - 23 - CITY OF VALDOSTA BOARD OF EDUCATION- LOWNDES COUNTY GENERAL FUND SCHEDULE OF REVENUES. EXPENDITURES AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL YEAR ENDED JUNE 30. 2004 SCHEDULE "1" REVENUES Property Taxes Sales Taxes State Funds Federal Funds Charges for Services Investment Earnings Miscellaneous Total Revenues EXPENDITURES Current Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Enterprise Operations Food Services Operation Debt Services Total Expenditures Excess of Revenues over (under) Expenditures OTHER FINANCING SOURCES {USES) Other Sources Other Uses Total Other Financing Sources (Uses) Net Change in Fund Balances Fund Balances - Beginning Adjustments Fund Balances - Ending NONAPPROPRIATED BUDGETS ORIGINAL (1) FINAL (1) ACTUAL AMOUNTS $ 12,085,472 $ 12,085,472 $ 12,532,775 177,368 177,368 282,118 26,659,247 26,659,247 26,257,273 8,209,636 8,209,636 7,658,886 532,130 532,130 1,240,483 115,872 115,872 102,715 490 204 490,204 675,019 $ 48,269,929 $ 48,269,929 $ 48,749,269 $ 33,255,856 $ 33,255,856 $ 33,169,413 1,936,940 1,856,641 986,049 757,827 2,683,011 686,850 3,459,116 938,425 66,902 245,337 349,987 3,025,630 1,936,940 1,856,641 986,049 757,827 2,683,011 686,850 3,459,116 938,425 66,902 245,337 349,987 3,025,630 1,857,311 1,560,868 975,159 765,235 2,964,268 607,413 3,006,937 953,798 29,711 265,077 683,864 2,681,640 83450 $ 50,248,571 $ 50,248,571 $ 49 604144 $ -1,978,642 $ -1,978,642 $ -854 875 $ 646,551 $ 646,551 $ 2,043,820 -11,770 -11,770 $ 634,781 $ 634 781 $ 2,043,820 $ -1,343,861 $ -1,343,861 $ 1,188,945 2,635,262 2,635,262 1,164,503 -1,397,864 -1,397,864 $ -106,463 $ -106 463 $ 2,353,448 Notes to the Schedule of Revenues. Ex11enditures and Changes in Fund Balances Budget and Actual (1) Original and Final Budget amounts do not include budgeted revenues or expenditures of the various principal accounts. The accompanying schedule of revenues, expenditures and changes in fund balances budget and actual is presented on the modified accrual basis of accounting which is the basis of accounting used in the presentation of the fund financial statements. See notes to the basic financial statements. - 25 - CITY OF VALDOSTA BOARD OF EDUCATION - LOWNDES COUNTY SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS YEAR ENDED JUNE 30, 2004 SCHEDULE "2" FUNDING AGENCY PROGRAM/GRANT Agriculture, U. S. Department of Child Nutrition Cluster Pass-Through From Georgia Department of Education Food Services School Breakfast Program National School Lunch Program National School Snack Program Total Child Nutrition Cluster Other Programs Pass-Through From Georgia Department of Education Food Donation (1) Total U. S. Department of Agriculture Corporation for National and Community Service Pass-Through From Georgia Department of Education Learn and Serve America School and Community Based Programs Education, U. S. Department of Special Education Cluster Pass-Through From Georgia Department of Education Special Education Grants to States Preschool Grants Total Special Education Cluster Other Programs Direct Impact Aid Pass-Through From Georgia Department of Education Enhancing Education Through Technology Program Improving Teacher Quality State Grants Reading Excellence - Local Reading Improvement Safe and Drug-Free Schools and Communities State Grants for Innovative Programs Title I Grants to Local Educational Agencies Vocational Education - Basic Grants to States Pass-Through From South Georgia Regional Educational Service Agency d/b/a Southern Pines Migrant Education Agency Migrant Education Total U. S. Department of Education Defense, U. S. Department of Direct Department of the Navy R.O.T.C. Program CFDA NUMBER PASSTHROUGH ENTITY ID NUMBER EXPENDITURES IN PERIOD * 10.553 * 10.555 * 10.555 N/A N/A $ N/A $ (2) 2,367,891 (2) 2,367,891 10.550 N/A $ 188 159 2,556,050 94.004 N/A $ 48 215 * 84.027 * 84.173 NIA $ N/A $ 1,038,046 62464 1,100,510 84.041 84.318 84.367 84.338 84.186 84.298 84.010 84.048 84.011 N/A N/A N/A N/A N/A N/A N/A N/A $ (3) 69,262 488,271 545,287 64,781 34,138 2,685,884 93,790 951 5,082,874 $ 52,256 - 26- CITY OF VALDOSTA BOARD OF EDUCATION - LOWNDES COUNTY SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS YEAR ENDED JUNE 30. 2004 SCHEDULE "2" FUNDING AGENCY PROGRAM/GRANT Health and Human Services. U.S. Department of Pass-Through From Children and Youth Coordinating Council Abstinence Education CFDA NUMBER PASSTHROUGH ENTITY ID NUMBER EXPENDITURES IN PERIOD 93.235 N/A $ _ _ _ _4'-1..1.:..::2=-9 Total Federal Financial Assistance N/A = Not Available $ ======-7'=74=3=,5=2=4 Notes to the Schedule of Expenditures of Federal Awards (1) The amounts shown for the Food Donation Program represents the Federally assigned value of nonmonetary assistance for donated commodities received and/or consumed by the School District during the current fiscal year. (2) Expenditures for the funds earned on the School Breakfast Program ($582.260) and the National School Snack Program ($11.793) were not maintained separately and are included in the 2004 National School Lunch Program. (3) Funds earned on the Impact Aid program. in the amount of $87.182. do not require reporting of expenditures. Major Programs are identified by an asterisk (*) in front of the CFDA number. The School District did not provide Federal Assistance to any Subrecipient. The accompanying schedule of expenditures of Federal awards includes the Federal grant activity of the City of Valdosta Board of Education and is presented on the modified accrual basis of accounting which is the basis of accounting used in the presentation of the fund financial statements. See notes to the basic financial statements. - 27- CITY OF VALDOSTA BOARD OF EDUCATION - LOWNDES COUNTY SCHEDULE OF STATE REVENUE YEAR ENDED JUNE 30. 2004 SCHEDULE "3" AGENCY/FUNDING GRANTS Children and Youth Coordinating Council Abstinence Education Block 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 Ill Category IV CategoryV Gifted Student - Category VI Remedial Education Program Alternative Education Program English Speakers of Other Languages (ESOL) Media Center Program 20 Days Additional Instruction Staff and Professional Development Indirect Cost Central Administration School Administration Facility Maintenance and Operations Categorical Grants Pupil Transportation Regular Bus Replacement Sparsity Nursing Services Principal Supplements Mid-term Adjustment Hold-Harmless Education Equalization Funding Grant Food Services Vocational Education Austerity Reduction Other State Programs 4-8 Statewide After School Program Health Insurance K-3 Statewide Reading Program National Teacher Certification Preschool Handicapped Program School Improvement (Georgia's Choice) Special Education Support Cost Student Information Systems Lottery Program Student Information Systems Georgia State Financing .and Investment Commission Reimbursement on Construction Projects Office of Treasury and Fiscal Services Public School Employees Retirement Office of Planning and Budget Georgia Council for the Arts Arts Education Challenge Program See notes to the basic financial statements. - 28- GOVERNMENTAL FUND TYPES CAPITAL GENERAL PROJECTS FUND FUND TOTAL $ 1,551 $ 1,551 1,776,595 213,516 3,990,720 835,482 1,762,371 741,847 3,847,569 2,957,866 684,369 43,224 439,148 1,771,089 662,490 34,536 365,630 82,978 274,139 33,044 575,430 183,352 119,408 709,244 1,150,828 1,725,026 504,735 109,707 34,907 142,855 26,116 86,236 661,586 193,336 95,734 -1,450,578 56,899 334,676 97,206 37,369 112,348 60,000 17,000 34,991 96,224 1,776,595 213,516 3,990,720 835,482 1,762,371 741,847 3,847,569 2,957,866 684,369 43,224 439,148 1,771,089 662,490 34,536 365,630 82,978 274,139 33,044 575,430 183,352 119,408 709,244 1,150,828 1,725,026 504,735 109,707 34,907 142,855 26,116 86,236 661,586 193,336 95,734 -1,450,578 56,899 334,676 97,206 37,369 112,348 60,000 17,000 34,991 96,224 $ 4,725 667,473 667,473 4,725 19 749 19 749 $ 26,257,273 $ 667 473 $ 26,924,746 CITY OF VALDOSTA BOARD OF EDUCATION - LOWNDES COUNTY SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS YEAR ENDED JUNE 30. 2004 SCHEDULE "4" PROJECT For the raising of not more than $41,930,941 for the purpose of additions and renovations to Valdosta High School, construction of a new elementary school, construction of a new Valdosta Middle School, additions and renovations to Southeast Elementary School, Lomax-Pinevale Elementary School, W. G. Nunn Elementary School, West Gordon Elementary School, S. L. Mason Elementary School, Newbern Middle School, making system-wide technology improvements and acquiring new school sites for the construction of new school and expansion of existing schools, student transportation services, improvements to school driveways and parking lots, equipping system-wide new construction, additions and renovations. For the raising of not more than $48,641,036 for the purpose of additions and renovations to West Gordon Elementary School or replacement and relocation, as is most feasible and cost effective, construction of a new Elementary School to replace Lomax-Pinevale Elementary School, additions and renovations to Valdosta High School, additions and renovations to Southeast Elementary School or replacement and relocation, as is most feasible and cost effective, additions and renovations to W. G. Nunn Elementary School, additions and renovations to S. L. Mason Elementary School or replacement and relocation, as is most feasible and cost effective, additions and renovations to Newbern Middle School, improvements to or relocation of Bazemore-Hyder Stadium and other physical education/athletic facilities, making system-wide technology improvements and acquiring new school sites for the construction of new schools and expansion of existing schools, acquiring school buses and relocation and replacement of transportation service facilities, improvements to school driveways and parking lots, equipping system-wide new construction, additions and renovations and the renovations and modifications or relocations and replacement of Central Office buildings/complex and Alternative School. ORIGINAL ESTIMATED COST (1) CURRENT ESTIMATED COSTS (2) AMOUNT EXPENDED IN CURRENT YEAR (3) AMOUNT EXPENDED IN PRIOR YEARS (3) PROJECT STATUS $ 41,930,941 $ 41,930,941 $ 34,467, 132 Completed 48,641,036 48,641,036 $ 12,724,254 Ongoing $ 90,571,977 $ 90,571,977 $ 12,724,254 $ 34,467,132 (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 Lowndes County approved the imposition of a 1% sales tax to fund the above projects. Amounts expended for these projects may include sales tax proceeds, state, local property taxes and/or other funds over the life of the projects. See notes to the basic financial statements. - 29- CITY OF VALDOSTA BOARD OF EDUCATION - LOWNDES COUNTY GENERAL FUND - QUALITY BASIC EDUCATION PROGRAM {QBE) ALLOTMENTS AND EXPENDITURES - BY PROGRAM YEAR ENDED JUNE 30. 2004 SCHEDULE "5" 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 II Category Ill Category IV CategoryV 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} (2} ELIGIBLE QBE PROGRAM COSTS SALARIES OPERATIONS TOTAL $ 2,151,213 $ 1,921,730 $ 373,034 $ 2,294,764 269,409 244,672 1,950 246,622 4,812,138 5,204,477 116,435 5,320,912 1,029,668 951,542 6,802 958,344 2,185,522 2,896,272 122,928 3,019,200 848,673 4,673,227 3,613,737 841,842 3,546,187 445,695 95,812 334,426 37 511 358,135 4,957,880 4,523,111 701,774 454,758 1,905,416 661,116 33,648 490,083 48,643 591,822 54452 1,394 225,743 243,922 34,164 5,358 18,647 9,578 707 4,228 456 41,807 403 359,529 5,183,623 4,767,033 735,938 460,116 1,924,063 670,694 34,355 494,311 49,099 633,629 54855 $ 24,885,060 $ 25,999,531 $ 1,207,556 $ 27,207,087 696,801 143 982 904,557 27447 62,250 56974 966,807 84421 TOTAL QBE FORMULA FUNDS $ 25,725,843 $ 26,931,535 $ 1,326,780 $ =~2;;;;,8,i;;25~8;,i;,3;;,,;1~5 (1) Comprised of State Funds plus Local Five Mill Share. (2) Allotments do not include the impact of the State budget austerity reduction. See notes to the basic financial statements. - 31 - 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 February 28, 2005 Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education and Superintendent and Members of the City of Valdosta Board of Education REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS Ladies and Gentlemen: We have audited the financial statements of the governmental activities, each major fund, and the aggregate remaining fund information of City ofValdosta Board ofEducation as ofand for the year ended June 30, 2004, which collectively comprise City of Valdosta Board of Education's basic financial statements and have issued our report thereon dated February 28, 2005. 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. Internal Control Over Financial Reporting In planning and performing our audit, we considered City ofValdosta Board ofEducation's internal control over financial reporting in order to determine our auditing procedures for the purpose of expressing our opinion on the financial statements and not to provide an opinion on the internal control over financial reporting. However, we noted a certain matter involving the internal control over financial reporting and its operation that we consider to be a reportable condition. Reportable conditions involve matters coming to our attention relating to significant deficiencies in the design or operation ofthe internal control over financial reporting that, in ourjudgment, could adversely affect City ofValdosta Board ofEducation'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-7921-04-01. 2004YB-30 A material weakness is a reportable condition in which the design or operation ofone or more ofthe internal control components does not reduce to a relatively low level the risk that misstatements caused by error or fraud in amounts that would be material in relation to the financial statements being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. Our consideration of the internal control over financial reporting would not necessarily disclose all matters in the internal control that might be reportable conditions and, accordingly, would not necessarily disclose all reportable conditions that are also considered to be material weaknesses. However, we believe the reportable condition described above is not a material weakness. Compliance and Other Matters As part of obtaining reasonable assurance about whether City of Valdosta Board of Education's financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. This report is intended solely for the information and use of the management and members of the City of Valdosta Board of Education and is not intended to be and should not be used by anyone other than these specified parties. Respectfully submitted, RWH:gp 2004YB-30 LO.~ 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 February 28, 2005 Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education and Superintendent and Members of the City of Valdosta Board of Education REPORT ON COMPLIANCE WITH REQUIREMENTS APPLICABLE TO EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH 0MB CIRCULAR A-133 Ladies and Gentlemen: Compliance We have audited the compliance of City of Valdosta Board of Education with the types of compliance requirements described in the US. Office ofManagement and Budget (0MB) Circular A-133 Compliance Supplement that are applicable to each ofits major Federal programs for the year ended June 30, 2004. City ofValdosta Board ofEducation's major Federal programs are identified in the Summary of Auditor's Results Section of the accompanying Schedule of Findings and Questioned Costs. Compliance with the requirements of laws, regulations, contracts and grants applicable to each of its major Federal programs is the responsibility of City of Valdosta Board of Education's management. Our responsibility is to express an opinion on City of Valdosta 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 of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General ofthe United States; and 0MB Circular A133, Audits of States, Local Governments, and Non-Profit Organizations. Those standards and 0MB Circular A-133 require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types ofcompliance requirements referred to above that could have a direct and material effect on a major Federal program occurred. An audit includes examining, on a test basis, evidence about the City of Valdosta 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 Valdosta Board of Education's compliance with those requirements. 2004SA-30 In our opinion, the City ofValdosta 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, 2004. Internal Control Over Compliance The management of City of Valdosta 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 ofValdosta Board ofEducation's internal control over compliance with requirements that could have a direct and material effect on a major Federal program in order to determine our auditing procedures for the purpose of expressing our opinion on compliance and to test and report on internal control over compliance in accordance with 0MB Circular A-133. We noted a certain matter involving the internal control over compliance and its operation that we consider to be a reportable condition. Reportable conditions involve matters coming to our attention relating to significant deficiencies in the design or operation ofthe internal control over compliance that, in our judgment, could adversely affect the City of Valdosta Board of Education's ability to administer a major Federal program in accordance with applicable requirements oflaws, regulations, contracts and grants. The reportable condition is described in the accompanying Schedule of Findings and Questioned Costs as item FA-7921-04-01. A material weakness is a reportable condition in which the design or operation ofone or more ofthe internal control components does not reduce to a relatively low level ofrisk that noncompliance with the applicable requirements of laws, regulations, contracts and grants caused by error or fraud that would be material in relation to a major Federal program being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. Our consideration ofthe internal control over compliance would not necessarily disclose all matters in the internal control that might be reportable conditions and, accordingly, would not necessarily disclose all reportable conditions that are also considered to be material weaknesses. However, we believe the reportable condition described above is not a material weakness. This report is intended solely for the information and use ofthe management, members ofthe City of Valdosta 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:gp 2004SA-30 State Auditor SECTION III AUDITEE'S RESPONSE TO PRIOR YEAR FINDINGS AND QUESTIONED COSTS CITY OF VALDOSTA BOARD OF EDUCATION - LOWNDES COUNTY AUDITEE'S RESPONSE SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2004 PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS FINDING CONTROL NUMBER AND STATUS FS-7921-03-01 Unresolved - See Corrective Action/Responses CORRECTIVE ACTION/RESPONSES CASH AND CASH EQUIVALENTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Control Procedures Finding Control Number: FS-7921-03-01 The system has created their own "Accounting Procedures for Local School Accounts" booklet. The booklet is in the process ofbeing approved by the Superintendent, Board of Education, and the new Finance Director. This will correct any inadequate internal control procedures that may occur in the future. Implementation of this Accounting Procedure booklet should take place before the start of fiscal year 2006. PRIOR YEAR FEDERAL AWARD FINDINGS AND QUESTIONED COSTS FINDING CONTROL NUMBER AND STATUS FA-7921-03-01 Unresolved - See Corrective Action/Responses CORRECTIVE ACTION/RESPONSES SPECIAL TESTS AND PROVISIONS Fiscal Requirements of School-wide Program Not Fully Implemented Finding Control Number: FA-7921-03-01 The School District implemented procedures that follow Georgia Department ofEducation guidelines in fiscal year 2005. Auditor's Note: The School District has implemented changes to resolve this finding in fiscal year 2005 and this finding will be shown as resolved in the fiscal year 2005 audit report. SECTIONN FINDINGS AND QUESTIONED COSTS CITY OF VALDOSTA BOARD OF EDUCATION - LOWNDES COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2004 I SUMMARY OF AUDITOR'S RESULTS 1. Type of Report Issued on the Financial Statements The auditor's opinion on the City ofValdosta Board ofEducation's financial statements was unqualified. 2. Reportable Conditions in Internal Control Disclosed by the Audit of the Financial Statements The audit report for the City ofValdosta Board ofEducation disclosed a financial statement reportable condition related to the following control categories. Cash and Cash Equivalents Revenues/Receivables/Receipts Expenditures/Liabilities/Disbursements The reportable condition described above is not considered to be a material weakness. 3. Noncompliance Material to the Financial Statements The audit of the City of Valdosta 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 ofValdosta Board ofEducation disclosed a reportable condition in internal control over major programs for the following compliance requirement. Cash Management The reportable condition described above is not considered to be a material weakness. 5. Type of Report Issued on Compliance for Major Programs The auditor's opinion on the City of Valdosta Board of Education's report on compliance with requirements applicable to major programs was unqualified. 6. Audit Findings Required to be Reported by Section .510{a) of 0MB Circular A-133 The City of Valdosta Board of Education's audit disclosed an audit finding required to be reported by section .510(a) ofOMB Circular A-133. This audit finding is included in section IV of this report. 7. Major Programs Federal awards audited as major programs are as follows: 10.553 Food Services - School Breakfast Program 10.555 Food Services - National School Lunch Program 10.555 Food Services - National School Snack Program 84.027 Special Education - Grants to States 84.173 Special Education - Preschool Grants - 1- CITY OF VALDOSTA BOARD OF EDUCATION - LOWNDES COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2004 I SUMMARY OF AUDITOR'S RESULTS 8. Type "A" Program Dollar Threshold The dollar threshold for type "A" programs was $300,000. 9. Low Risk Auditee The City of Valdosta Board of Education qualified as a low risk auditee as defined by Section .530 of 0MB Circular A-133. II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS CASH AND CASH EQUIVALENTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Control Procedures Reportable Condition Repeated From Prior Year Finding Control Number: FS-7921-04-01 Our examination of the principal's accounts disclosed weaknesses in internal control as discussed below: Cash and Cash Equivalents The bank reconciliation function is not separated from the cash receipting, record keeping and voucher payment functions. The bank reconciliation function is not performed in a timely manner. Seven bank reconciliations did not reconcile to the general ledger. Revenues/Receivables/Receipts Deposit preparation was not separated from the record keeping and cash custody functions. Based on a review of 25 items, sixteen receipts did not contain supporting documentation and three receipt items contained incomplete documentation. Expenditures/Liabilities/Disbursements The check writing function was not separated from the record keeping or processing of signed checks. Based on a review of 25 items, four vouchers did not contain supporting documentation, sixteen vouchers were not properly approved, and one voucher had only a copy of an mv01ce. -2 - CITY OF VALDOSTA BOARD OF EDUCATION - LOWNDES COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2004 II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS CASH AND CASH EQUIVALENTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Control Procedures Reportable Condition Repeated From Prior Year Finding Control Number: FS-7921-04-01 These deficiencies were a result ofmanagement's decision to limit the number ofadministrative staff made responsible, at the various principal account sites, for the accounting functions and their failure to ensure established controls were functioning as designed. Management should implement additional procedures to ensure that the key accounting functions of custody, record keeping and authorization are segregated. III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS CASH MANAGEMENT Excessive Cash Balances Reportable Condition U.S. Department of Education Through Georgia Department of Education Finding Control Number: FA-7921-04-01 A review ofcash management procedures for the Special Education Cluster programs (CFDA 84.027 and CFDA 84.173) disclosed that cash draws were made in advance of immediate cash needs, resulting in the accumulation of excessive cash balances. The program had excessive ending monthly cash balances for five months of the year under review. This condition occurred because ofthe School District's failure to accurately forecast the cash needs of the program. Procedures should be implemented to minimize the time elapsing between the transfer of funds from the Georgia Department of Education and disbursement of such funds by the School District. -3- SECTIONV MANAGEMENT'S RESPONSES CITY OF VALDOSTA BOARD OF EDUCATION - LOWNDES COUNTY SCHEDULE OF MANAGEMENT'S RESPONSES YEAR ENDED JUNE 30, 2004 Finding Control Number: FS-7921-04-01 We have requested of management its views concerning this finding, its conclusions, its recommendations and the planned corrective actions. We have not received management's views as of the release of this audit report. Finding Control Number: FA-7921-04-01 We have requested of management its views concerning this finding, its conclusions, its recommendations and the planned corrective actions. We have not received management's views as of the release of this audit report.