Gadsden County District School Board

REPORT NO. 03 – 152

Gadsden County District School Board

A Financial, Operational, and Federal Single Audit Report

For the Fiscal Year Ended June 30, 2002

WILLIAM O. MONROE, CPA

Gadsden County District School Board members and the Superintendent of Schools who served during

the 2001-02 fiscal year are shown in the following tabulation:

DistrictNo.

Catherine S. James, Vice-Chair 1Walter L. McPherson 2Isaac Simmons, Jr., Chair 3William K. Pitts, Jr. 4Roger P. Milton 5

Sterling D. DuPont, Superintendent

AUDITOR GENERAL

THE AUDITOR GENERAL PROVIDES INDEPENDENT, UNBIASED, TIMELY, AND RELEVANT INFORMATION TO THE LEGISLATURE, ENTITY MANAGEMENT, AND THE CITIZENS OF THE STATE OF FLORIDA WHICH CAN BE USED TO IMPROVE THE OPERATIONS AND ACCOUNTABILITY OF PUBLIC ENTITIES.

GADSDEN COUNTY DISTRICT SCHOOL BOARD

Table of Contents

EXECUTIVE SUMMARY

FINDINGS AND RECOMMENDATIONS

FINANCIAL SECTION

INDEPENDENT AUDITOR’S REPORT ON FINANCIAL STATEMENTS

MANAGEMENT’S DISCUSSION AND ANALYSIS

BASIC FINANCIAL STATEMENTS

OTHER REQUIRED SUPPLEMENTARY INFORMATION

FEDERAL REPORTS AND SCHEDULES

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EXECUTIVE SUMMARY OF AUDIT REPORT NO. 03 - 152

GADSDEN COUNTY DISTRICT SCHOOL BOARD ANNUAL FINANCIAL, OPERATIONAL, AND FEDERAL SINGLE AUDIT

FOR THE FISCAL YEAR ENDED JUNE 30, 2002

Summary of Audit Findings and Recommendations

Finding 1:

Strategic Planning The District could enhance its planning and budgeting procedures by developing a comprehensive strategic plan that establishes long-term and short-term (annual) goals and priorities. The prioritization of the Board’s goals in a strategic plan would provide guidance in budget development and would assist the Board and administrators when making spending decisions.

Recommendation: We again recommend that the Board continue its efforts to develop a strategic plan to include a prioritization of long-term and short-term financial and budgetary goals that will serve as a guide in developing the budget and in making spending decisions.

Finding 2:

Control Environment - Procedures Manual The District could enhance its internal control system with the development and maintenance of a comprehensive procedures manual pertaining to the District’s financial operations. Such procedures manuals serve to document the duties of key business services and finance-related personnel, and may also serve to communicate management’s commitment to, and support of, a strong system of internal control.

Recommendation:

To enhance its internal control system, we again recommend that the District develop a comprehensive procedures manual for financial operations and related activities.

Finding 3:

Land Appraisals The District could enhance its control procedures for purchases of real property. The District obtained one appraisal for 100 acres of land that disclosed that the property was valued at $350,000, consisting of land and timber estimates of $200,000 and $150,000, respectively. However, District records did not indicate that the appraisal was provided to the Board for its consideration in establishing the price to be paid for the land.

Recommendation:

We recommend that, in the future, the Board obtain appraisals for its consideration prior to purchases of land.

Finding 4:

Engineer and Construction Contractor Selections and Expenditure Records The District could make improvements in its procedures for selecting engineer and construction contractor services and maintaining support for contract expenditures. We noted District expenditures totaling approximately $56,000, $131,000, and $644,000 for mechanical engineering, civil engineering, and construction contractor services, respectively, for the East Gadsden High School Project without documentation of the required competitive selection processes for the services. In addition, District records did not contain evidence that expenditures totaling $15,000 to a community college were for District purposes.

Recommendation:

We recommend that the District enhance purchasing procedures to ensure that the District complies with the formal competitive selection and negotiation and bid processes as required, and that the District maintain documentation evidencing such compliance. In

AUDITOR GENERAL WILLIAM O. MONROE, CPA

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addition, the District should obtain documentation to evidence that the $15,000 contingency charge paid to the college was for authorized District purposes.

Finding 5:

Construction Manager Services Improvements are needed regarding the District’s monitoring of its construction manager practices. District records did not evidence that District staff was present at the bid openings conducted by the construction manager or monitored payments made to subcontractors to ensure that such payments were consistent with submitted bid prices and related contracts.

Recommendation:

We recommend that the District monitor the subcontractor selection process by the construction manager for future subcontractor selections, and document such monitoring procedures performed. In addition, the District should enhance procedures to ensure that payments to subcontractors are consistent with submitted bid prices and related contracts.

Finding 6:

Capital Assets The District needs to improve internal controls over certain capital assets. The District failed to record 2001-02 fiscal year acquisitions of tangible personal property and audio visual materials and computer software, totaling approximately $1.3 million, to the detailed property records. Additionally, the District did not perform a physical inventory of tangible personal property with costs of approximately $14.3 million for 27 of its 29 locations.

Recommendation:

We recommend that the Board strengthen internal control over capital assets to provide for timely posting of detailed subsidiary records and to ensure that a complete physical inventory be properly conducted of all tangible personal property.

Finding 7:

Relocatable Building Inspections The District did not provide for the required inspections of 82 relocatable buildings used for classroom purposes or student occupancy. Failure to provide for the required inspections of relocatable buildings could result in unsafe conditions not being corrected in a timely manner.

Recommendation: We recommend that the District provide for the timely inspections of relocatable buildings as required.

Finding 8:

Information Technology – Security Controls We noted improvements were needed in the District’s disaster recovery procedures over its information technology operations.

Recommendation: We again recommend that the District continue its efforts to improve the appropriate control features to enhance the security of District information technology resources.

Finding 9:

School Internal Funds Improvements were needed in accounting for the Chattahoochee Elementary Magnet School internal funds. The auditors noted that the School did not provide various records, such as general ledgers of financial transactions, bank reconciliations, bank statements, and numerous receipt books. As a result, the auditors did not express an opinion for this School’s internal funds.

Recommendation:

We recommend that the District take appropriate action to provide for preparation and maintenance of adequate accounting records for the Chattahoochee Elementary Magnet School internal funds, and provide for the audit of school internal funds as required.

Summary of Report on Financial Statements The Gadsden County District School Board prepared its basic financial statements for the fiscal year ended June 30, 2002, in accordance with prescribed financial reporting standards. Club and class activity funds of the individual schools were not included within the scope of our audit.

Summary of Report on Compliance and Internal Control

The District generally complied with significant provisions of laws, administrative rules, regulations, contracts and grants, and other guidelines. The District had established and implemented procedures that generally provide for internal control of District operations. However, we did note compliance and internal control findings that are summarized in the Summary of Audit Findings and Recommendations.

Summary of Report on Federal Awards We audited the District’s Federal awards for compliance with applicable Federal requirements. The Child Nutrition Cluster, Special Education Cluster, Even Start, and Goals 2000 programs were audited as major

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Federal programs. The results of our audit indicated that the District materially complied with the requirements that were applicable to the major Federal programs tested.

Audit Scope and Objectives The scope of this audit included an examination of the District’s basic financial statements and the Schedule of Expenditures of Federal Awards as of and for the fiscal year ended June 30, 2002. We obtained an understanding of internal control and assessed control risk necessary to plan the audit of the basic financial statements and Federal awards. We also examined various transactions to determine whether they were executed, both in manner and substance, in accordance with governing provisions of laws, administrative rules, regulations, contracts and grants, and other guidelines.

Our audit objectives were to determine whether the Gadsden County District School Board and its officers with administrative and stewardship responsibilities for District operations had:

• Presented the District’s basic financial statements in accordance with generally accepted accounting principles;

• Established and implemented internal control to provide reasonable assurance of proper authorization of financial transactions, to provide for the proper recording and reporting of the District’s financial operations, to adequately safeguard the District’s assets, and to promote and encourage economic and efficient operations and compliance with various provisions of laws, administrative rules, regulations, contracts and grants, and other guidelines;

• Complied with the various provisions of law, administrative rules, regulations, contracts and grants, and other guidelines governing the conduct of its public affairs; and

• Corrected, or are in the process of correcting, all deficiencies disclosed in audit report No. 02-167, dated January 23, 2002.

Audit Methodology The methodology used to develop the findings in this report included the examination of pertinent District records in connection with the application of procedures required by auditing standards generally accepted in the United States of America, applicable standards contained in Government Auditing Standards issued by the Comptroller General of the United States, and Office of Management and Budget Circular A-133.

This audit was conducted by Melissa F. Hall, CPA, and supervised by Gregory L. Centers, CPA. Please address inquiries regarding this report to David W. Martin, CPA, Audit Manager, via e-mail at [email protected] or by telephone at (850) 487-9039. This audit report, as well as other reports prepared by the Auditor General, can be obtained on our Web site at www.state.fl.us/audgen; by telephone at (850) 487-9024; or by mail at G74 Claude Pepper Building, 111 West Madison Street, Tallahassee, Florida 32399-1450.

mailto:[email protected]

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FINDINGS AND RECOMMENDATIONS

Finding 1: Strategic Planning

The District’s planning and budgeting procedures could be enhanced through the development of a comprehensive strategic plan that establishes long-term and short-term (annual) goals and priorities. The District revised a Strategic Plan/School Improvement and Accountability Handbook in May 2001 that set short-term academic performance goals and strategies. However, the plan did not include the financial effects, if any, of established goals and priorities or specific financial-related goals and priorities such as an appropriate level of fund balance to be maintained as a “rainy day” fund. Financial effects of long-term and short-term (annual) goals and priorities are important for District staff developing the budget to ensure that planned expenditures are for activities that will meet the Board’s strategic priorities. Similar findings were noted in previous audit reports.

Section 237.041, Florida Statutes, provides that the annual budget shall be consistent with, and contribute to, the implementation of a planned long-range school program for the District. The prioritization of the Board’s goals in a strategic plan would provide guidance in budget development and would assist the Board and administrators when making spending decisions. With the Board’s financial priorities clearly defined, public awareness of these goals would be enhanced, and a basis would be established to ensure continuity of these goals in the event that administrative changes occurred.

Recommendation: We again recommend that the Board continue its efforts to develop a strategic plan to include a prioritization of long-term and short-term financial and budgetary goals that will serve as a guide in developing the budget and in making spending decisions.

District Response: The Board is continuing to refine its educational strategic plan and will seek ways to include financial and budgetary goals that will provide guidance in budget development in light of all economic uncertainties.

Finding 2: Control Environment - Procedures Manual

The District could enhance its internal control system with the development and maintenance of a comprehensive procedures manual pertaining to the District’s financial operations. The District has established a business services function and assigned and separated various business activities to promote a system of internal control. The District, however, had not developed a comprehensive procedures manual pertaining to the District’s financial operations and related activities. Such procedures manuals serve to document the duties of key business services and finance-related personnel, and may also serve to communicate management’s commitment to, and support of, a strong system of internal control. In addition, procedures manuals are necessary to ensure appropriate training of new staff, as well as to provide an aid in bridging the transition in the event of a change in key business services and finance-related personnel. Similar findings were noted in previous audit reports.

Recommendation: To enhance its internal control system, we again recommend the District develop a comprehensive procedures manual for financial operations and related activities.

District Response: A comprehensive procedures manual for financial operations and related activities has been written, reviewed, and is now in place as recommended.

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Finding 3: Land Appraisals

The District could enhance its control procedures for purchases of real property. Section 235.054(1)(b), Florida Statutes, requires the Board to obtain at least one appraisal by a qualified appraiser for each purchase of land with costs between $100,000 and $500,000.

While considering a site for the East Gadsden High School Project, the District obtained one appraisal for 100 acres of land. The appraisal report, dated July 2000, disclosed that the property was valued at $350,000, consisting of land and timber valued at $200,000 and $150,000, respectively. According to District staff, the property owner harvested most of the timber from the property subsequent to the appraisal and, in July 2001, the District purchased the property from the owner for $300,000. However, District records did not indicate that the appraisal was provided to the Board for its consideration in establishing the price to be paid for the land. Absent review and consideration of appraisals, the Board may be limited in its ability to determine fair market value, and there is an increased risk that the Board may purchase property at a price that exceeds its applicable fair market value.

Recommendation: We recommend that, in the future, the Board obtain appraisals for its consideration prior to purchases of land.

District Response: The Board will be provided timely appraisals for all future purchases of land so as to increase its ability to determine fair market value.

Finding 4: Engineer and Construction Contractor Selections and Expenditure Records

The District could make improvements in its procedures for selecting engineer and construction contractor services and maintaining support for contract expenditures. In August 2001, the District contracted with a community college to facilitate installation of water and sewer lines for the East Gadsden High School Project (Project). According to District staff, the community college has a facility that potentially had a need for water and sewer lines and the facility is located near the Project; therefore, the District contracted with the college to obtain the services for both locations. Our review of District records for the Project disclosed disbursements to the college totaling $790,000, consisting of approximately $131,000 and $644,000 for civil engineering services and related construction services, respectively, and a contingency charge of $15,000. The contract with the college required the college to return the contingency charge, if unused, to the District no more than 30 days after the project was completed.

The District indicated that it relied on the college for the competitive selection and negotiation and bid processes for the services, as applicable. Further, the District indicated that the college used the entire contingency charge on the Project and satisfied the terms of the contract to provide water and sewer lines for the Project. Upon audit inquiry, it was determined that the college selected the engineer and relied on a utility company to select the construction contractor. However, District records did not contain sufficient documentation to evidence the competitive selection and negotiation and bid processes for the engineer and construction services, as applicable, or the basis for the use of the $15,000 contingency charge. Without such documentation, it was not apparent of record that the District determined that the lowest and best prices consistent with desired quality and performance were accepted, or that the college properly used the contingency charge for authorized District purposes.

Additionally, we noted that District records did not evidence that the Board had entered into a formal competitive selection and negotiation process for mechanical engineering services with costs totaling approximately $56,000 for the Project.

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Sections 287.055(4) and (5), Florida Statutes, require the Board to enter into a formal competitive selection and negotiation process for certain professional services, including those of engineers, when the services exceed $25,000. Also, State Board of Education Rule 6A-1.012(6), Florida Administrative Code, requires that bids shall be requested from three or more sources for any authorized purchase or contract for services exceeding the amount ($25,000) established in Section 287.017, Florida Statutes. Further, State Board of Education Rule 6A-1.012(5), Florida Administrative Code, states that in lieu of requesting bids from three or more sources, school districts may make purchases at unit prices in contracts awarded by other governmental agencies, when the bidder permits purchases by the school board at the same terms, conditions, and unit prices awarded in such contract.

Recommendation: We recommend that the District enhance purchasing procedures to ensure that the District complies with the formal competitive selection and negotiation and bid processes as required, and that the District maintain documentation evidencing such compliance. In addition, the District should obtain documentation to evidence that the $15,000 contingency charge paid to the college was for authorized District purposes.

District Response: The District plans to fully utilize all options available to it to maximize the benefits of the competitive selection and negotiation bid processes on all future projects.

Finding 5: Construction Manager Services

Improvements are needed in the District’s monitoring of its construction manager practices. In October 2001, the District entered into a contract for construction management services for the construction of East Gadsden High School, pursuant to the provisions of Section 235.211(1)(c), Florida Statutes. The construction manager’s guaranteed maximum price was $23 million and the District incurred expenditures totaling approximately $5 million relating to the contract during the 2001-02 fiscal year. The contract provides that the construction manager will furnish all labor, materials, equipment, and services necessary to complete the project.

According to the contract, the construction manager is responsible for engaging subcontractors, including the advertising, solicitation, and bid opening procedures and awarding the lowest responsive bidders. Our review indicated that the construction manager submitted to the District tabulation sheets summarizing the subcontractor bids. However, although requested, the District did not provide documentation to evidence that District staff was present at the bid openings or monitored payments made to subcontractors to ensure that such payments were consistent with submitted bid prices and related contracts. In the absence of the District’s documented monitoring of the subcontractor selection process and payments to the subcontractors, the District has limited assurance that the construction manager complied with the terms of the contract in the handling and awarding of subcontractor bids or that subcontractors were properly paid.

Recommendation: We recommend that the District monitor the subcontractor selection process by the construction manager for future subcontractor selections, and document such monitoring procedures performed. In addition, the District should enhance procedures to ensure that payments to subcontractors are consistent with submitted bid prices and related contracts.

District Response: After a careful review of many construction managers, the Board entered into a guaranteed maximum price contract with the selected construction manager precisely because the manager had extensive

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expertise in building large educational facilities and the District did not. We will continue to account for every dollar spent and to ensure that the construction manager’s performance is consistent with the contract.

Finding 6: Capital Assets

The District needed to improve internal controls over certain capital assets. The District reported furniture, fixtures, and equipment; motor vehicles; and audio visual materials and computer software with costs of approximately $7 million, net of accumulated depreciation, at June 30, 2002. As similarly noted in several previous audit reports, the District’s controls over these capital assets continued to have weaknesses, as follows:

• As of December 2002, the District had not recorded in the detailed property records many of the 2001-02 fiscal year property purchases for the above capital asset categories. To determine the balance reported on the financial statements for these capital asset accounts at June 30, 2002, District personnel added the 2001-02 fiscal year capital outlay expenditures to, and deducted Board-approved disposals from, the balances reported on the financial statements at June 30, 2001. As a result, in part, of not properly posting the detailed property records, the amount reported for those capital assets exceeded the detailed property records by approximately $1.3 million. To enhance accountability, the District should timely record capital asset purchases in the detailed property records and periodically reconcile the records to the amounts reported for each capital asset category.

• The District did not conduct a physical tangible personal property inventory for 27 of its 29 locations during the 2001-02 fiscal year. The property not inventoried totaled approximately $14.3 million, representing 92 percent of total tangible personal property costs. Section 274.02, Florida Statutes, and Section 10.480, Rules of the Auditor General, require that a complete physical inventory of tangible personal property be taken annually, and that the inventory be compared with property records and all discrepancies traced and reconciled.

Recommendation: We recommend that the Board strengthen internal control over capital assets to provide for timely posting of detailed subsidiary records and to ensure that a complete physical inventory be properly conducted of all tangible personal property.

District Response: We concur with the recommendation and are in the process of strengthening internal control over all capital assets.

Finding 7: Relocatable Building Inspections

The District did not provide for the required annual inspections of 82 relocatable buildings used for classroom purposes or student occupancy during the 2001-02 fiscal year. Failure to provide for the required inspections of relocatable buildings could result in unsafe conditions not being corrected in a timely manner.

Section 5(2) of the Florida Department of Education publication, State Requirements for Educational Facilities – 1999, requires annual inspections for all relocatables designed as classrooms or spaces intended for student occupancy. The inspection standards for relocatable buildings require a review of the structural integrity, accessibility, and other measures to protect the welfare of occupants. Guidance

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by the Florida Department of Education, in DPBM Memo No. 02-46, further provides that a certified Uniform Building Code Inspector should conduct the inspection of relocatables for building construction. As of December 2002, the District’s most recent inspections of relocatables were in May 2001.

Recommendation: We recommend that the District provide for the timely inspection of relocatable buildings as required.

District Response: Inspections have now been scheduled for relocatable buildings and are expected to be completed by May 31, 2003.

Finding 8: Information Technology – Security Controls

Security control features are necessary to protect the integrity, confidentiality, and availability of information systems’ data and resources. During our audit, we identified improvements that could be made in the District’s disaster recovery procedures. Specific details of these improvements are not disclosed in this report to avoid any possibility of compromising District information systems’ data and resources. In the absence of adequate disaster recovery procedures, the District’s ability to timely restore critical operations in the event of a disruption may be limited. A similar finding was noted in the previous audit report.

Recommendation: We again recommend the District continue its efforts to improve the appropriate control features to enhance the security of District information technology resources.

District Response:

The MIS Department is in the process of writing disaster recovery procedures and expects to have such procedures in place in May 2003.

Finding 9: School Internal Funds

Improvements were needed in accounting for the Chattahoochee Elementary Magnet School internal funds. Pursuant to State Board of Education Rule 6A-1.087, Florida Administrative Code, the Board is required to obtain audits of the school and activity funds, commonly called the school internal funds. The District contracted with auditors to perform the audits of the school internal funds for the 2001-02 fiscal year; however, the auditors of the Chattahoochee Elementary Magnet School noted that the School did not provide various records, such as general ledgers of financial transactions, bank reconciliations, bank statements, and numerous receipt books. As a result, the auditors did not express an opinion for this School’s internal funds.

Recommendation: We recommend that the District take appropriate action to provide for preparation and maintenance of adequate accounting records for the Chattahoochee Elementary Magnet School internal funds, and provide for the audit of school internal funds as required.

District Response: The District has already taken the appropriate action to provide for increased internal control and the maintenance of adequate accounting records for the Chattahoochee Elementary Magnet School. Additional assistance and training has been provided and will continue to be provided in order to insure the accuracy and security of all funds and records.

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Other Matters Health Insurance Portability and Accountability Act

The Health Insurance Portability and Accountability Act of 1996 (HIPAA), Public Law 104-191, addresses data interchange, privacy, and information security standards for personal health information. Pursuant to HIPAA, the United States Department of Health and Human Services has published regulations on electronic data interchange standards and privacy, with security regulations not yet published. The final Transaction Rule, which contains electronic data interchange standards, was incorporated as a Federal regulation and has a compliance date of October 16, 2002. The final Privacy Rule was incorporated as a Federal regulation and compliance is required by April 14, 2003. HIPAA also provides for civil and criminal penalties for noncompliance. Because of the significance of these provisions on the handling and transmission of personal health information, the District should continue to evaluate the impact of the HIPAA requirements on the District as new requirements are finalized.

PRIOR AUDIT FINDINGS Except as discussed in the preceding paragraphs and the Summary Schedule of Prior Audit Findings – Federal Awards, the District corrected the deficiencies and exceptions cited in audit report No. 02-167.

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FINANCIAL SECTION



BASIC FINANCIAL STATEMENTS EXHIBIT - A Statement of Net Assets.

EXHIBIT - B Statement of Activities.

EXHIBIT - C Balance Sheet – Governmental Funds.

EXHIBIT - D Reconciliation of the Governmental Funds Balance Sheet to the Statement of Net Assets.

EXHIBIT - E Statement of Revenues, Expenditures, and Changes in Fund Balances – Governmental Funds.

EXHIBIT - F Reconciliation of the Governmental Funds Statement of Revenues, Expenditures, and Changes in Fund Balances to the Statement of Activities.

EXHIBIT - G Statement of Fiduciary Net Assets – Fiduciary Funds.

EXHIBIT - H Notes to Financial Statements.

OTHER REQUIRED SUPPLEMENTARY INFORMATION EXHIBIT - I Budgetary Comparison Schedule – General and Major Special Revenue

Funds.

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AUDITOR GENERAL

STATE OF FLORIDA G74 Claude Pepper Building

111 West Madison Street Tallahassee, Florida 32399-1450

The President of the Senate, the Speaker of the House of Representatives, and the Legislative Auditing Committee


We have audited the accompanying financial statements of the governmental activities, each major fund, and the aggregate remaining fund information of the Gadsden County District School Board as of and for the fiscal year ended June 30, 2002, which collectively comprise the District’s basic financial statements as listed on page 11. These financial statements are the responsibility of the District’s management. Our responsibility is to express opinions on these financial statements based on our audit.

Except as discussed in the following paragraph, 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. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinions.

Pursuant to State Board of Education Rule 6A-1.087, Florida Administrative Code, the Board is required to otherwise provide for audits of the school and activity funds, commonly called the school internal funds. Accordingly, our audit did not extend to the school internal funds reported as Agency Funds on the accompanying basic financial statements. These financial activities represent 25 percent and 90 percent of the assets and liabilities, respectively, of the aggregate remaining fund information.

In our opinion, except for the effects of such adjustments on the aggregate remaining fund information, if any, as might have been determined to be necessary had we extended our audit to school internal funds, the financial statements referred to above present fairly, in all material respects, the financial position of the aggregate remaining fund information of the District as of June 30, 2002, and the changes in financial position thereof for the fiscal year then ended in conformity with accounting principles generally accepted in the United States of America.

WILLIAM O. MONROE, CPA AUDITOR GENERAL

850/488-5534/SC 278-5534 Fax: 488-6975/SC 278-6975

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In addition, in our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities and each major fund of the Gadsden County District School Board as of June 30, 2002, and the respective changes in financial position thereof for the fiscal year then ended in conformity with accounting principles generally accepted in the United States of America.

As described in Note 2 to the financial statements, the District adopted Governmental Accounting Standards Board Statement No. 34, Basic Financial Statements – and Management’s Discussion and Analysis – For State and Local Governments, and related pronouncements as of and for the fiscal year ended June 30, 2002.

In accordance with Government Auditing Standards, we have also issued a report on our consideration of the Gadsden County District School Board's internal control and our tests of its compliance with certain provisions of laws, administrative rules, regulations, contracts and grants, and other guidelines included under the heading INDEPENDENT AUDITOR'S REPORT ON COMPLIANCE AND ON INTERNAL CONTROL BASED ON AN AUDIT OF THE FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS. 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 Management’s Discussion and Analysis (pages 14 through 19) and the Budgetary Comparison Schedule (shown as exhibit I) are not a required part of the basic financial statements but are supplementary information required by 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 of measurement and presentation of the supplementary information. However, we did not audit the information and express no opinion thereon.

Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the District’s basic financial statements. The accompanying Schedule of Expenditures of Federal Awards is presented for purposes of additional analysis as required by the United States Office of Management and Budget’s Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations, and is 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.

Respectfully submitted,

William O. Monroe, CPA February 3, 2003


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The Management of the District School Board of Gadsden County has prepared the following discussion and analysis to (a) assist the reader in focusing on significant financial issues, (b) provide an overview and analysis of the District’s financial activities, (c) identify changes in the District’s financial position, (d) identify material deviations from the approved budget, and (e) highlight significant issues in individual funds.

Because the information contained in the Management’s Discussion and Analysis (MD&A) is intended to highlight significant transactions, events and conditions, it should be considered in conjunction with the District’s financial statements and notes to the financial statements found on pages 20 through 44.

Financial Highlights

• The District’s total net assets increased by $7,874,885.98 (or 23 percent). This change was primarily attributed to the construction project of a new high school.

• During the current year, General Fund expenditures exceeded revenue by $1,141,838.58. This may be compared to last year’s results in which General Fund expenditures exceeded revenues by $95,622.45.

Non-Financial Events

• As which occurred throughout the United States, the District was significantly impacted by the events of September 11, 2001. The State of Florida reduced the Florida Education Finance Program allocation to all school districts by 3.4 percent after budgets had been adopted. In our District, not only had the budget been adopted, but the Board had agreed to a 3 percent raise for all employees.

• The number of students enrolled in the Gadsden School Board’s facilities continued to decline in the 2001-02 year. The decline was about 2.3 percent for the 2001-02 year, bringing the total decline for the last 5 years to almost 14 percent.

Overview of the Financial Statements The primary focus of local government’s financial statements for the last 20 years (summarized fund type information) has been changed. The new focus is on the School District as a whole and the major individual funds. Both perspectives (government-wide and major fund) allow the user to address relevant questions, broaden a basis for comparison (year to year or school district to school district) and enhance the School District’s accountability. The basic financial statements consist of three components:

• Government-wide financial statements.

• Fund financial statements.

• Notes to financial statements.

In addition, this report presents certain required supplementary information which includes management’s discussion and analysis and a budgetary comparison schedule.

Government-wide Financial Statements. The government-wide financial statements provide both short-term and long-term information about the District’s overall financial condition in a manner similar to those of a private-sector business. The statements include a statement of net assets and a statement of activities that are designed to provide consolidated financial information about the governmental activities presented on the accrual basis of accounting. The statement of net assets provides information about the government’s financial position, its assets and liabilities, using an economic resources measurement focus. The difference between the assets and liabilities, the net assets, is a measure of the financial health of the District. The statement of activities presents information about the change in the District’s net assets, the results of operations, during the fiscal year. An increase or decrease in net assets is an indication of whether the District’s financial health is improving or deteriorating.


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The government-wide statements present the District’s governmental activities. These statements represent most of the District’s services, including its educational programs: basic, adult, and exceptional education. Support functions such as transportation and administration are also included. Local property taxes and the State’s education finance program provide most of the resources that support these activities.

Over a period of time, changes in the District’s net assets are an indication of improving or deteriorating financial condition. This information should be evaluated in conjunction with other non-financial factors, such as changes in the District’s property tax base and student enrollment.

Fund Financial Statements. Fund financial statements are one of the components of the basic financial statements. A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. The District uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements and prudent fiscal management. Certain funds are established by law while others are created by legal agreements, such as bond covenants. Fund financial statements provide more detailed information about the District’s financial activities, focusing on its most significant or “major” funds rather than fund types. This is in contrast to the entity-wide perspective contained in the government-wide statements.

All of the District’s funds may be classified within one of two broad categories:

Governmental Funds – Governmental funds are used to account for essentially the same functions reported as governmental activities in the government-wide financial statements. However, the governmental funds utilize a spendable financial resources measurement focus rather than the economic resources measurement focus found in the government-wide financial statements. This financial resources measurement focus allows the governmental fund statements to provide information on near-term inflows and outflows of spendable resources, as well as balances of spendable resources available at the end of the fiscal year. Consequently, the governmental fund statements provide a detailed short-term view that may be used to evaluate the District’s near-term financing requirements. This short-term view is useful when compared to the long-term view presented as governmental activities in the government-wide financial statements. To facilitate this comparison, both the governmental funds balance sheet and the governmental funds statement of revenues, expenditures, and changes in fund balances provide a reconciliation of governmental funds to governmental activities.

Fiduciary Funds – Fiduciary funds are used to report assets held in a trustee or fiduciary capacity for the benefit of external parties, such as student activity funds. Fiduciary funds are not reflected in the government-wide statements because the resources are not available to support the District’s own programs. In its fiduciary capacity, the District is responsible for ensuring that the assets reported in these funds are used only for their intended purposes.

Government-Wide Financial Analysis

This section is used to present condensed financial information from the government-wide statements that compares the current year to the prior year. However, in the first year of implementation of GASB Statement 34, comparative data are not available and will not be presented. In subsequent years, this comparison will be provided.


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Total Assets are comprised of the following elements:

Current Assets 15,092,383.86$ Noncurrent Assets 42,431,794.47

Total Assets 57,524,178.33$

Total Liabilities are comprised of the following elements:

Current Liabilities 5,895,434.66$ Noncurrent Liabilities 10,132,216.84

Total Liabilities 16,027,651.50$

Total Net Assets are comprised of the following elements:

Invested in Capital Assets, Net of Related Debt 39,636,794.47$ Restricted Assets 2,978,160.49 Unrestricted Assets (1,118,428.13)

Total Net Assets 41,496,526.83$

Statement of Activities The following schedule summarizes revenues and expenses for the current year:


-17-

REVENUESProgram Revenues: Charges for Services 609,485.69$

Operating Grants and Contributions 15,893,237.36 Capital Grants and Contributions 11,874,732.82

General Revenues: Property Taxes, Levied for Operational Purposes 5,265,774.35 Property Taxes, Levied for Capital Projects 1,638,812.64 Grants and Contributions Not Restricted to Specific Programs 28,931,656.24 Unrestricted Investment Earnings 177,013.97 Miscellaneous 1,192,022.37

Total Revenues 65,582,735.44

EXPENSESProgram Activities Governmental Activities: Instruction 28,036,544.08 Pupil Personnel Services 2,339,524.44

Instructional Media Services 1,235,619.68 Instruction and Curriculum Development Services 1,825,630.63 Instructional Staff Training 596,166.80 Board of Education 425,093.96 General Administration 819,028.85 School Administration 3,324,587.56 Facilities Acquisition and Construction 1,290,994.62 Fiscal Services 310,191.85 Food Services 3,465,144.21 Central Services 832,929.35 Pupil Transportation Services 3,430,798.96 Operation of Plant 3,631,489.86 Maintenance of Plant 1,775,036.81 Community Services 1,078,090.89 Interest on Long-Term Debt 145,468.23 Unallocated Depreciation Expense 3,145,508.68

Total Expenses 57,707,849.46

INCREASE IN NET ASSETS 7,874,885.98$

Financial Analysis of Individual Funds

This section provides an analysis of the balances and transactions of individual funds. The analysis addresses the reasons for significant changes in fund balances and the effect of the availability of fund resources for future uses.

• Capital Projects Funds. In addition to the operating funds discussed under student enrollment, the District annually receives funding for capital outlay projects. The Board has pledged to use all of these funds and its local capital improvement assessment for the 2001-02 year and the next two fiscal years on the construction of the East Gadsden High School. During the 2001-02 fiscal year, the District received an advance of State Public Education Capital Outlay (PECO) money. This advance is to be repaid without interest, from the allocations of PECO and Capital Outlay and Debt Service Funds and the proceeds of the Local Optional Millage for Capital Outlay during the three fiscal years beginning with the 2001-02 fiscal year.


-18-

A chart of the State capital outlay fund expenditures is shown below.

36,666978,274

2,671,978 3,211,682

8,905,392

0

2,000,000

4,000,000

6,000,000

8,000,000

10,000,000

1998 1999 2000 2001 2002

State Capital OutlayExpenditures

• Workers’ Compensation Insurance Premiums/Settlements. The area of Workers’ Compensation

continues to be a very significant and somewhat unpredictable item to budget for each year. Over the last three years, it has ranged from $526,915 to $910,528. Our past experience seems to indicate that the total cost will continue to be $900,000 or more per year.

Budget Variances in the General Fund

There were no significant variations between the original and final budget amounts or between the final and actual budget amounts for the General Fund.

Significant Capital Outlay Projects and Debt Activity

• As of June 30, 2002, the District had an estimated PECO advance payable totaling $3,133,658.16.

• During the year, the District began construction of a new high school located on the east side of the county. The estimated cost of the school is $29,738,789 and is designed for a capacity of 1,383 students. The new school will open for the 2003-04 school year.

526,915

910,528

705,774

0

200,000

400,000

600,000

800,000

1,000,000

2000 2001 2002

Workers' CompensationPremiums/Settlements


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Significant Economic Factors • Student Enrollment and Funding. Revenues from State sources comprise 66 percent of total

available resources of the District. Revenues from State sources for current operations are primarily from the Florida Education Finance Program administered by the Florida Department of Education (Department) under the provisions of Section 236.081, Florida Statutes. In accordance with this law, the District determines and reports the number of full-time equivalent (FTE) students and related data to the Department. As shown in the following chart, the District experienced a significant decline in FTE used for funding purposes over the past several years, and it is anticipated that this trend will continue.

79037792

7321

69866822

6000

6500

7000

7500

8000

1998 1999 2000 2001 2002

Number of Students Enrolled inGadsden Facilities

Requests for Information This report is designed to provide citizens, taxpayers, customers, investors, and creditors with a general overview of the District’s finances. Questions concerning any of the information provided in this report or requests for additional financial information should be addressed to the Gadsden County District School Board; 35 Martin Luther King Boulevard; Quincy, Florida 32351.

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GovernmentalActivities

ASSETS

Cash $ 1,755,208.08Investments 6,905,501.18Accounts Receivable 259.35Due from Other Agencies 5,809,840.79Inventories 621,574.46Capital Assets:

Land 1,351,848.38Construction in Progress 8,666,857.83Improvements Other Than Buildings 3,295,126.69

Less Accumulated Depreciation (1,629,260.66)Buildings and Fixed Equipment 38,413,991.18

Less Accumulated Depreciation (14,662,118.57)Furniture, Fixtures, and Equipment 9,814,937.17

Less Accumulated Depreciation (5,828,268.57)Motor Vehicles 5,623,676.49

Less Accumulated Depreciation (3,363,426.87)Audio Visual Materials and Computer Software 2,343,790.94

Less Accumulated Depreciation (1,595,359.54)

TOTAL ASSETS $ 57,524,178.33

LIABILITIES

Payroll Deductions and Withholdings $ 2,897.97Accounts Payable 1,026,989.62Construction Contracts Payable 1,428,456.55Construction Contracts - Retainage Payable 496,329.44Due to Other Agencies 54.46Matured Bonds Payable 5,550.00Deferred Revenue 2,935,156.62Noncurrent Liabilities:

Portion Due Within One Year:Bonds Payable 115,000.00Estimated Public Education Capital Outlay Advance Payable 1,584,564.95Compensated Absences Payable 612,390.24

Portion Due After One Year:Bonds Payable 2,680,000.00Estimated Public Education Capital Outlay Advance Payable 1,549,093.21Compensated Absences Payable 3,591,168.44

Total Liabilities 16,027,651.50

NET ASSETS

Invested in Capital Assets, Net of Related Debt 39,636,794.47Restricted for:

State Categorical Programs 400,252.06Debt Service 71,576.73Capital Projects 2,506,331.70

Unrestricted (1,118,428.13)

Total Net Assets 41,496,526.83

TOTAL LIABILITIES AND NET ASSETS $ 57,524,178.33

The accompanying notes to financial statements are an integral part of this statement.

EXHIBIT - A

STATEMENT OF NET ASSETSJune 30, 2002

GADSDEN COUNTYDISTRICT SCHOOL BOARD

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Net (Expense)Revenue and

Changes in NetExpenses Assets

Charges Operating Capital Governmentalfor Grants and Grants and Activities

Services Contributions ContributionsFunctions/Programs

Governmental Activities:Instruction $ 28,036,544.08 $ 100,088.67 $ 6,172,214.52 $ $ (21,764,240.89)Pupil Personnel Services 2,339,524.44 791,167.74 (1,548,356.70)Instructional Media Services 1,235,619.68 206,120.63 (1,029,499.05)Instruction and Curriculum Development Services 1,825,630.63 569,129.02 (1,256,501.61)Instructional Staff Training 596,166.80 385,756.46 (210,410.34)Board of Education 425,093.96 (425,093.96)General Administration 819,028.85 201,249.51 (617,779.34)School Administration 3,324,587.56 50,955.60 (3,273,631.96)Facilities Acquisition and Construction 1,290,994.62 1,225,593.01 10,510,553.01 10,445,151.40Fiscal Services 310,191.85 (310,191.85)Food Services 3,465,144.21 388,100.53 3,260,789.16 183,745.48Central Services 832,929.35 101,717.63 (731,211.72)Pupil Transportation Services 3,430,798.96 121,296.49 2,416,804.51 (892,697.96)Operation of Plant 3,631,489.86 56,304.66 (3,575,185.20)Maintenance of Plant 1,775,036.81 97,036.37 1,112,402.00 (565,598.44)Community Services 1,078,090.89 358,398.54 (719,692.35)Interest on Long-Term Debt 145,468.23 251,777.81 106,309.58Unallocated Depreciation Expenses 3,145,508.68 (3,145,508.68)

Total Governmental Activities $ 57,707,849.46 $ 609,485.69 $ 15,893,237.36 $ 11,874,732.82 (29,330,393.59)

General Revenues:Taxes: Property Taxes, Levied for Operational Purposes 5,265,774.35 Property Taxes, Levied for Capital Projects 1,638,812.64 Grants and Contributions Not Restricted to Specific Programs 28,931,656.24 Unrestricted Investment Earnings 177,013.97 Miscellaneous 1,192,022.37

Total General Revenues 37,205,279.57

Change in Net Assets 7,874,885.98

Net Assets - July 1, 2001 33,621,640.85

Net Assets - June 30, 2002 $ 41,496,526.83


Program Revenues

EXHIBIT - BGADSDEN COUNTY

DISTRICT SCHOOL BOARDSTATEMENT OF ACTIVITIES


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General Special CapitalFund Revenue - Projects -

Other Public EducationFund Capital Outlay

Fund

ASSETS

Cash $ 1,725,389.35 $ $Investments 1,054,844.01 5,102,107.72Accounts Receivable 259.35Due from Other Funds 508,925.29 355,830.85 1,291.95Due from Other Agencies 106,316.34 428,744.70 2,324,219.75Inventories 178,720.32

TOTAL ASSETS $ 3,574,454.66 $ 784,575.55 $ 7,427,619.42

LIABILITIES AND FUND BALANCES

Liabilities:Payroll Deductions and Withholdings $ 2,897.97 $ $Accounts Payable 363,032.56 187,421.19 445,179.81Construction Contracts Payable 1,097,027.05Construction Contracts - Retainage Payable 496,329.44Due to Other Funds 476,167.72 499,721.74Due to Other Agencies 54.46Matured Bonds PayableDeferred Revenue 97,432.62

Total Liabilities 842,152.71 784,575.55 2,038,536.30

Fund Balances:Reserved for State Categorical Programs 400,252.06Reserved for Inventories 178,720.32Reserved for Encumbrances 202,638.45 5,389,083.12Reserved for Debt ServiceUnreserved 1,950,691.12Unreserved, Reported in Nonmajor:

Special Revenue FundsDebt Service FundsCapital Projects Funds

Total Fund Balances 2,732,301.95 5,389,083.12

TOTAL LIABILITIES AND FUND BALANCES $ 3,574,454.66 $ 784,575.55 $ 7,427,619.42


June 30, 2002


BALANCE SHEET - GOVERNMENTAL FUNDS

EXHIBIT - C

-23-

Capital Other TotalProjects - Funds Governmental

Other FundsFund

$ 5,112.36 $ 24,706.37 $ 1,755,208.08267,515.91 481,033.54 6,905,501.18

259.3585,097.32 33,807.81 984,953.22

2,837,724.00 112,836.00 5,809,840.79442,854.14 621,574.46

$ 3,195,449.59 $ 1,095,237.86 $ 16,077,337.08

$ $ $ 2,897.977,845.61 23,510.45 1,026,989.62

331,429.50 1,428,456.55496,329.44

9,063.76 984,953.2254.46

5,550.00 5,550.002,837,724.00 2,935,156.62

3,176,999.11 38,124.21 6,880,387.88

400,252.06442,854.14 621,574.46

18,450.48 225,856.24 5,836,028.2971,576.73 71,576.73

1,950,691.12

92,960.43 92,960.43217,266.09 217,266.09

6,600.02 6,600.02

18,450.48 1,057,113.65 9,196,949.20

$ 3,195,449.59 $ 1,095,237.86 $ 16,077,337.08

EXHIBIT - C

-24-

Total Fund Balances - Governmental Funds $ 9,196,949.20

Amounts reported for governmental activities in the statement of net assets are different because:

Capital assets, net of accumulated depreciation, used in governmental activities are notfinancial resources and, therefore, are not reported as assets in governmental funds. 42,431,794.47

Long-term liabilities are not due and payable in the current period and, therefore, are notreported as liabilities in the governmental funds. Long-term liabilities at year-end consist of:

Bonds Payable $ 2,795,000.00Compensated Absences Payable 4,203,558.68 Estimated Public Education Capital Outlay Advance Payable 3,133,658.16 (10,132,216.84)

Total Net Assets - Governmental Activities $ 41,496,526.83


JUNE 30, 2002

DISTRICT SCHOOL BOARD

EXHIBIT - DGADSDEN COUNTY

RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEETTO THE STATEMENT OF NET ASSETS

-25-


-26-

General Special CapitalFund Revenue - Projects -

Other Public EducationFund Capital Outlay

FundRevenues

Intergovernmental:Federal Direct $ 215,684.93 $ 2,300,713.70 $Federal Through State 7,915,878.88Federal Through Local 457,747.76State 32,093,044.23 10,462,877.59

Local 6,323,958.01 1,909.88

Total Revenues 39,090,434.93 10,216,592.58 10,464,787.47

Expenditures

Current - Education:Instruction 21,814,256.95 6,040,400.39Pupil Personnel Services 1,531,656.13 791,167.74Instructional Media Services 1,030,446.20 206,120.63Instruction and Curriculum Development Services 1,251,631.53 569,129.02Instructional Staff Training 209,017.68 385,756.46Board of Education 425,093.96General Administration 615,029.83 201,249.51School Administration 3,378,486.93 50,955.60Facilities Acquisition and Construction 68,487.50 244,618.38 8,540.07Fiscal Services 333,497.75Food ServicesCentral Services 764,542.93 101,717.63Pupil Transportation Services 2,596,775.23 98,386.51Operation of Plant 3,568,071.15 56,304.66Maintenance of Plant 1,666,551.44 97,036.37 1,556.76Community Services 713,051.87 358,398.54

Fixed Capital Outlay:Facilities Acquisition and Construction 2,195.00 10,797.01 7,271,396.55Other Capital Outlay 263,481.43 970,172.62

Debt Service:PrincipalInterest and Fiscal Charges

Total Expenditures 40,232,273.51 10,182,211.07 7,281,493.38

Excess (Deficiency) of Revenues Over Expenditures (1,141,838.58) 34,381.51 3,183,294.09

Other Financing Sources (Uses)

Transfers In 499,711.71Insurance Loss Recoveries 7,866.11Proceeds from Sale of Capital Assets 51,591.99Special Facilities Construction Advances 3,133,658.16Transfers Out (499,711.71) (955,108.79)

Total Other Financing Sources (Uses) 559,169.81 (499,711.71) 2,178,549.37

Net Change in Fund Balances (582,668.77) (465,330.20) 5,361,843.46 Fund Balances, July 1, 2001 3,314,970.72 465,330.20 27,239.66

Fund Balances, June 30, 2002 $ 2,732,301.95 $ 0.00 $ 5,389,083.12



STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES


IN FUND BALANCES -GOVERNMENTAL FUNDS

EXHIBIT - E

-27-

Capital Other TotalProjects - Funds Governmental

Other FundsFund

$ $ $ 2,516,398.633,150,057.16 11,065,936.04

457,747.76155,556.00 405,813.93 43,117,291.75

3,516.80 2,036,518.47 8,365,903.16

159,072.80 5,592,389.56 65,523,277.34

155,309.05 28,009,966.393,657.76 2,326,481.63

1,236,566.831,820,760.55

594,774.14425,093.96816,279.34

3,429,442.531,199,689.56 184,335.74 1,705,671.25

333,497.753,465,144.21 3,465,144.21

866,260.562,695,161.743,624,375.81

21,625.00 1,786,769.571,071,450.41

271,011.45 1,593,379.94 9,148,779.958,990.00 1,242,644.05

110,000.00 110,000.00145,468.23 145,468.23

1,470,701.01 5,687,909.93 64,854,588.90

(1,311,628.21) (95,520.37) 668,688.44

955,108.79 1,454,820.507,866.11

51,591.993,133,658.16

(1,454,820.50)

955,108.79 3,193,116.26

(356,519.42) (95,520.37) 3,861,804.70 374,969.90 1,152,634.02 5,335,144.50

$ 18,450.48 $ 1,057,113.65 $ 9,196,949.20

EXHIBIT - E

-28-

Net Change in Fund Balances - Governmental Funds $ 3,861,804.70

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

Capital outlays are reported in governmental funds as expenditures. However, in thestatement of activities, the cost of those assets is allocated over their estimated useful livesas depreciation expense. This is the amount of capital outlays in excess of depreciationexpense in the current period. 7,116,328.12

In the statement of activities, the cost of compensated absences is measured by the amountsearned during the year, while in the governmental funds expenditures are recognized basedon the amounts actually paid for leave used. This is the net amount of vacation and sick leaveearned in excess of the amount used in the current period. (79,588.68)

Repayment of bond principal is an expenditure in the governmental funds, but the repaymentreduces long-term liabilities in the statement of net assets. 110,000.00

Special Facilities Construction Advances provide current financial resources togovernmental funds, but increase long-term liabilities in the statement of net assets. (3,133,658.16)

Change in Net Assets - Governmental Activities $ 7,874,885.98


FOR THE FISCAL YEAR ENDED JUNE 30, 2002

REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES


EXHIBIT - FGADSDEN COUNTY

RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT OF

TO THE STATEMENT OF ACTIVITIES

-29-

AgencyFunds

(Unaudited)

ASSETS

Cash $ 359,341.01

LIABILITIES

Internal Accounts Payable $ 359,341.01


June 30, 2002


EXHIBIT - GGADSDEN COUNTY

STATEMENT OF FIDUCIARY NET ASSETS -FIDUCIARY FUNDS

-30-

EXHIBIT - H GADSDEN COUNTY

DISTRICT SCHOOL BOARD NOTES TO FINANCIAL STATEMENTS

June 30, 2002

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

• Reporting Entity

The District School Board has direct responsibility for operation, control, and supervision of District schools and is considered a primary government for financial reporting. The Gadsden County School District is considered part of the Florida system of public education. The governing body of the school district is the Gadsden County District School Board which is composed of five elected members. The elected Superintendent of Schools is the executive officer of the School Board. Geographic boundaries of the District correspond with those of Gadsden County.

Criteria for determining if other entities are potential component units which should be reported within the District's basic financial statements are identified and described in the Governmental Accounting Standards Board's (GASB) Codification of Governmental Accounting and Financial Reporting Standards, Sections 2100 and 2600. The application of these criteria provides for identification of any entities for which the District School Board is financially accountable and other organizations for which the nature and significance of their relationship with the School Board are such that exclusion would cause the District's basic financial statements to be misleading or incomplete. Based on these criteria, no component units are included within the reporting entity of the District.

• Basis of Presentation

Government-wide Financial Statements - Government-wide financial statements, including the statement of net assets and statement of activities, present information about the School District as a whole. These statements include the nonfiduciary financial activity of the School District.

Government-wide financial statements are prepared using the economic resources measurement focus. The statement of activities presents a comparison between direct expenses and program revenues for each function or program of the District’s governmental activities. Direct expenses are those that are specifically associated with a service, program, or department and are thereby clearly identifiable to a particular function. Depreciation expenses associated with the District’s transportation department are allocated to the transportation function, while remaining depreciation expenses are reported as unallocated.

Program revenues include charges paid by the recipient of the goods or services offered by the program and 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 are presented as general revenues, with certain exceptions. The comparison of direct expenses with program revenues identifies the extent to which each governmental function is self-financing or draws from the general revenues of the District.

The effects of interfund activity have been eliminated from the government-wide financial statements.

Fund Financial Statements - Fund financial statements report detailed information about the District in the governmental and fiduciary funds. The focus of governmental fund financial statements is on major funds rather than reporting funds by type. Each major fund is reported in a separate column. Nonmajor funds are aggregated and reported in a single column. Because the focus of

EXHIBIT – H (Continued) GADSDEN COUNTY


June 30, 2002

-31-

governmental fund financial statements differs from the focus of government-wide financial statements, a reconciliation is presented with each of the governmental fund financial statements.

The District reports the following major governmental funds:

- General Fund - to account for all financial resources not required to be accounted for in another fund, and for certain revenues from the State that are legally restricted to be expended for specific current operating purposes.

- Special Revenue - Other Fund - to account for certain Federal grant program resources.

- Capital Projects - Public Education Capital Outlay Fund - to account for the financial resources generated by the Legislative appropriation of State Public Education Capital Outlay and Debt Service funds to be used for educational capital outlay needs, including new construction and renovation and remodeling projects.

- Capital Projects - Other Fund - to account for financial resources generated by the Classrooms First Program to be used for educational capital outlay needs, including new construction and renovation and remodeling projects.

Additionally, the District reports the following fund type:

- Agency Funds - to account for resources of the school internal funds which are used to administer moneys collected at the several schools in connection with school, student athletic, class, and club activities.

• Basis of Accounting

Basis of accounting refers to when revenues and expenditures, or expenses, are recognized in the accounts and reported in the financial statements. Basis of accounting relates to the timing of the measurements made, regardless of the measurement focus applied.

The government-wide financial statements are prepared using the accrual basis of accounting, as are the fiduciary funds financial statements. Revenues are recognized when earned and expenses are recognized when a liability is incurred, regardless of the timing of the related cash flows. Property taxes are recognized in the year for which they are levied. Revenues from grants, entitlements, and donations are recognized in the fiscal year in which all eligibility requirements imposed by the provider have been satisfied.

Governmental fund financial statements are prepared using the modified accrual basis of accounting. Revenues, except for certain grant revenues, are recognized when they become measurable and available. Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. The District considers revenues to be available if they are collected within 60 days of the end of the current fiscal year. When grant terms provide that the expenditure of resources is the prime factor for determining eligibility for Federal, State, and other grant resources, revenue is recognized at the time the expenditure is made. Under the modified accrual basis of accounting, expenditures are generally recognized when the related fund liability is incurred. The principal exceptions to this general rule are: (1) prepaid items are generally not accrued; (2) interest on long-term debt is recognized as expenditures when due; and (3) expenditures related to liabilities reported as



June 30, 2002

-32-

long-term debt are recognized when due. Allocations of cost, such as depreciation, are not recognized in governmental funds.

When both restricted and unrestricted resources are available for use, it is the District’s policy to use restricted resources first, then unrestricted resources as they are needed.

• Deposits and Investments

Cash deposits are held by banks qualified as public depositories under Florida law. All deposits are insured by Federal depository insurance and collateralized with securities held in Florida's multiple financial institution collateral pool as required by Chapter 280, Florida Statutes.

Investments consist of amounts placed with the State Board of Administration for participation in the Local Government Surplus Funds Trust Fund investment pool created by Section 218.405, Florida Statutes. This investment pool operates under investment guidelines established by Section 215.47, Florida Statutes. The District’s investments in the Local Government Surplus Funds Trust Fund, a Securities and Exchange Commission Rule 2a7-like external investment pool, are reported at amortized cost.

Types and amounts of investments held at fiscal year-end are described in a subsequent note on investments.

• Inventories

Inventories consist of expendable supplies held for consumption in the course of District operations. Inventories are stated at cost on the first-in, first-out basis for maintenance department inventories, weighted-average for warehouse inventories, and the moving weighted-average price basis for transportation and purchased foods and nonfood inventories. United States Department of Agriculture surplus commodities are stated at their fair value as determined at the time of donation to the District's food service program by the Florida Department of Agriculture and Consumer Services, Bureau of Food Distribution. The costs of inventories are recorded as expenditures when used rather than purchased.

• Capital Assets

Expenditures for capital assets acquired or constructed for general District purposes are reported in the governmental fund that financed the acquisition or construction. The capital assets so acquired are reported at cost in the government-wide statement of net assets but are not reported in the governmental fund financial statements. Capital assets are defined by the District as those costing more than $500. Such assets are recorded at historical cost or estimated historical cost if purchased or constructed. Donated assets are recorded at fair value at the date of donation.

Interest costs incurred during construction of capital assets are not considered material and are not capitalized as part of the cost of construction.

Buildings and fixed equipment are depreciated using the straight-line method, with all other assets being depreciated using the composite method of depreciation, over the following estimated useful lives:



June 30, 2002

-33-

Description Estimated Lives

Improvements Other than Buildings 10 – 35 years

Buildings and Fixed Equipment 15 – 50 years

Furniture, Fixtures, and Equipment 5 – 7 years

Motor Vehicles 5 – 10 years

Computer Software 3 – 5 years

Current-year information relative to changes in capital assets is described in a subsequent note.

• Long-Term Liabilities

Long-term obligations that will be financed from resources to be received in the future by governmental funds are reported as liabilities in the government-wide statement of net assets.

In the governmental fund financial statements, bonds and other long-term obligations are not recognized as liabilities until due.

In the government-wide financial statements, compensated absences (i.e., paid absences for employee vacation leave and sick leave) are accrued as liabilities to the extent that it is probable that the benefits will result in termination payments.

Changes in long-term liabilities for the current year are reported in a subsequent note.

• State Revenue Sources

Revenues from State sources for current operations are primarily from the Florida Education Finance Program administered by the Florida Department of Education (Department) under the provisions of Section 236.081, Florida Statutes. In accordance with this law, the District determines and reports the number of full-time equivalent (FTE) students and related data to the Department. The Department performs certain edit checks on the reported number of FTE and related data, and calculates the allocation of funds to the District. The District is permitted to amend its original reporting for a period of nine months following the date of the original reporting. Such amendments may impact funding allocations for subsequent years. The Department may also adjust subsequent fiscal period allocations based upon an audit of the District's compliance in determining and reporting FTE and related data. Normally, such adjustments are treated as reductions or additions of revenue in the year when the adjustments are made.

The State provides financial assistance to administer certain categorical educational programs. State Board of Education rules require that revenue earmarked for certain programs be expended only for the program for which the money is provided, and require that the money not expended as of the close of the fiscal year be carried forward into the following year to be expended for the same categorical educational programs. The Department generally requires that categorical educational program revenues be accounted for in the General Fund. A portion of the fund balance of the General Fund is reserved in the governmental funds financial statements for the unencumbered balance of categorical educational program resources.



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The State allocates gross receipts taxes, generally known as Public Education Capital Outlay money, to the District on an annual basis. The District also received an allocation under the lottery-funded Public School Capital Outlay Program (commonly called the Classrooms First Program). The District is authorized to expend these funds only upon applying for and receiving an encumbrance authorization from the Department. Accordingly, the District recognizes the allocation of Public Education Capital Outlay and Classrooms First Program funds as deferred revenue until such time as an encumbrance authorization is received.

Pursuant to Section 235.435, Florida Statutes, the District received a special allocation in fiscal year 2001-02 for specific construction needs through the Public Education Capital Outlay and Debt Service Trust Fund – Special Facility Construction Account. As a condition for receiving these funds, other construction funding must be pledged for the project, including the capital outlay millage levied pursuant to Section 236.25(2), Florida Statutes, for the following three fiscal years. During the three-year period, reductions to the special allocations will be made to the extent of collections from the required pledged sources.

A schedule of revenue from State sources for the current year is presented in a subsequent note.

• District Property Taxes

The School Board is authorized by State law to levy property taxes for district school operations, capital improvements, and debt service.

Property taxes consist of ad valorem taxes on real and personal property within the District. Property values are determined by the Gadsden County Property Appraiser, and property taxes are collected by the Gadsden County Tax Collector.

The School Board adopted the 2001 tax levy on September 10, 2001. Tax bills are mailed in October and taxes are payable between November 1 of the year assessed and March 31 of the following year at discounts of up to 4 percent for early payment.

Taxes become delinquent on April 1 of the year following the year of assessment. State law provides for enforcement of collection of personal property taxes by seizure of the property to satisfy unpaid taxes, and for enforcement of collection of real property taxes by the sale of interest-bearing tax certificates to satisfy unpaid taxes. The procedures result in the collection of essentially all taxes prior to June 30 of the year following the year of assessment.

Property tax revenues are recognized in the government-wide financial statements when the Board adopts the tax levy. Property tax revenues are recognized in the governmental fund financial statements when taxes are received by the District, except that revenue is accrued for taxes collected by the Gadsden County Tax Collector at fiscal year-end but not yet remitted to the District.

Millages and taxes levied for the current year are presented in a subsequent note.

• Federal Revenue Sources

The District receives Federal awards for the enhancement of various educational programs. Federal awards are generally received based on applications submitted to, and approved by, various granting agencies. For Federal awards in which a claim to these grant proceeds is based



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on incurring eligible expenditures, revenue is recognized to the extent that eligible expenditures have been incurred.

2. ACCOUNTING CHANGES

The District implemented the provisions of GASB Statement No. 34, Basic Financial Statements – and Management’s Discussion and Analysis – for State and Local Governments, and related GASB pronouncements, during the 2001-02 fiscal year. GASB Statement No. 34 creates new basic financial statements for reporting the District’s financial activities. In addition to fund-basis financial statements, the financial statements now include government-wide financial statements prepared on the accrual basis of accounting.

The beginning net asset amount for governmental activities reflects the following changes required by GASB Statement No. 34:

Fund Balances - Governmental Funds, June 30, 2001 5,335,144.50$ Capital Assets, Net of Accumulated Depreciation 35,315,466.35 Long-Term Liabilities (7,028,970.00)

Net Assets - Governmental Activities, July 1, 2001 33,621,640.85$

3. BUDGETARY COMPLIANCE AND ACCOUNTABILITY

The Board follows procedures established by State statutes and State Board of Education rules in establishing budget balances for governmental funds as described below:

• Budgets are prepared, public hearings are held, and original budgets are adopted annually for all governmental fund types in accordance with procedures and time intervals prescribed by law and State Board of Education rules.

• Appropriations are controlled at the object level (e.g., salaries, purchased services, and capital outlay) within each activity (e.g., instruction, pupil personnel services, and school administration) and may be amended by resolution at any School Board meeting prior to the due date for the annual financial report.

• Budgets are prepared using the same modified accrual basis as is used to account for governmental funds.

• Budgetary information is integrated into the accounting system and, to facilitate budget control, budget balances are encumbered when purchase orders are issued. Appropriations lapse at fiscal year-end and encumbrances outstanding are honored from the subsequent year's appropriations.



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4. INVESTMENTS

Generally accepted accounting principles require that the credit risk of investments be classified into the following three categories:

• Risk Category 1 - Insured or registered, or securities held by the District or its agent in the District's name.

• Risk Category 2 - Uninsured and unregistered, with securities held by the counterparty's trust department or agent in the District's name.

• Risk Category 3 - Uninsured and unregistered, with securities held by the counterparty, or by its trust department or agent but not in the District's name.

Certain investments, such as investment pools managed by other governments, cannot be categorized because the District's investments are not evidenced by specific, identifiable investment securities.

Section 218.415(17), Florida Statutes, authorizes the District to invest in the Local Government Surplus Funds Trust Fund, any intergovernmental investment pool, the money market funds registered with the Securities and Exchange Commission, interest-bearing time deposits or savings accounts, and direct obligations of the U.S. Treasury.

All investments at June 30, 2002, are in the State Board of Administration investment pool with an amortized cost of $6,905,501.18.

5. CHANGES IN CAPITAL ASSETS

Changes in capital assets are presented in the table below:



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Balance Additions Deletions Balance7-1-01 6-30-02

GOVERNMENTAL ACTIVITIES

Capital Assets Not Being Depreciated:Land 1,045,678.76$ 306,169.62$ $ 1,351,848.38$ Construction in Progress 932,786.77 7,734,071.06 8,666,857.83

Total Capital Assets Not Being Depreciated 1,978,465.53 8,040,240.68 10,018,706.21

Capital Assets Being Depreciated:Improvements Other Than Buildings 2,476,148.18 818,978.51 3,295,126.69 Buildings and Fixed Equipment 38,411,796.18 2,195.00 38,413,991.18 Furniture, Fixtures, and Equipment 10,526,349.55 1,334,821.26 2,046,233.64 9,814,937.17 Motor Vehicles 5,351,372.63 376,065.00 103,761.14 5,623,676.49 Audio Visual Materials and Computer Software 1,926,467.91 417,323.03 2,343,790.94

Total Capital Assets Being Depreciated 58,692,134.45 2,949,382.80 2,149,994.78 59,491,522.47

Less Accumulated Depreciation for:Improvements Other Than Buildings 1,497,281.96 131,978.70 1,629,260.66 Buildings and Fixed Equipment 13,791,263.53 870,855.04 14,662,118.57 Furniture, Fixtures, and Equipment 6,213,444.25 1,661,057.96 2,046,233.64 5,828,268.57 Motor Vehicles 2,739,401.33 727,786.68 103,761.14 3,363,426.87 Audio Visual Materials and Computer Software 1,113,742.56 481,616.98 1,595,359.54

Total Accumulated Depreciation 25,355,133.63 3,873,295.36 2,149,994.78 27,078,434.21

Total Capital Assets Being Depreciated, Net 33,337,000.82 (923,912.56) 32,413,088.26

Governmental Activities Capital Assets, Net 35,315,466.35$ 7,116,328.12$ $ 0.00 42,431,794.47$

Depreciation expense was charged to functions as follows:

Function Amount

GOVERNMENTAL ACTIVITIESPupil Transportation Services 727,786.68$ Unallocated 3,145,508.68

Total Depreciation Expense - Governmental Activities 3,873,295.36$



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6. SPECIAL PUBLIC EDUCATION CAPITAL OUTLAY ADVANCE PAYABLE

The liability at June 30, 2002, of $3,133,658.16 represents the amount of the Public Education Capital Outlay Special Facilities allocation expected to be repaid from other District capital outlay sources which are committed under Section 235.435, Florida Statutes, for funding specific construction needs. The amount is expected to be repaid by the close of the 2003-04 fiscal year.

7. BONDS PAYABLE

Bonds payable at June 30, 2002, are as follows:

Bond Type Amount Interest AnnualOutstanding Rates Maturity

(Percent) To

State School Bonds:Series 1998-A 2,550,000$ 4.5 - 5.5 2018Series 1999-A 245,000 4.00 - 4.75 2019

Total Bonds Payable 2,795,000$

The various bonds were issued to finance capital outlay projects of the District. The following is a description of the bonded debt issues:

• State School Bonds

These bonds are issued by the State Board of Education on behalf of the District. The bonds mature serially, and are secured by a pledge of the District's portion of the State-assessed motor vehicle license tax. The State's full faith and credit is also pledged as security for these bonds. Principal and interest payments, investment of Debt Service Fund resources, and compliance with reserve requirements are administered by the State Board of Education and the State Board of Administration.

Annual requirements to amortize all bonded debt outstanding as of June 30, 2002, are as follows:



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Fiscal Year Total Principal Interest Ending June 30

State School Bonds:2003 255,781.25$ 115,000.00$ 140,781.25$ 2004 254,893.75 120,000.00 134,893.75 2005 259,043.75 130,000.00 129,043.75 2006 257,118.75 135,000.00 122,118.75 2007 254,918.75 140,000.00 114,918.75 2008-2012 1,291,862.50 825,000.00 466,862.50 2013-2017 1,292,831.25 1,060,000.00 232,831.25 2018-2019 284,612.50 270,000.00 14,612.50

Total State School Bonds 4,151,062.50$ 2,795,000.00$ 1,356,062.50$

8. CHANGES IN LONG-TERM LIABILITIES

The following is a summary of changes in long-term liabilities:

Description Balance Additions Deductions Balance Due in7-1-01 6-30-02 One Year

GOVERNMENTAL ACTIVITIES

Estimated Public Education Capital Outlay Advance Payable $ 3,133,658.16$ $ 3,133,658.16$ 1,584,564.95$ Bonds Payable 2,905,000.00 110,000.00 2,795,000.00 115,000.00 Compensated Absences Payable 4,123,970.00 556,718.40 477,129.72 4,203,558.68 612,390.24

Total Governmental Activities 7,028,970.00$ 3,690,376.56$ 587,129.72$ 10,132,216.84$ 2,311,955.19$

For the governmental activities, compensated absences are generally liquidated with resources of the General Fund.

9. RESERVE FOR ENCUMBRANCES

Appropriations in governmental funds are encumbered upon issuance of purchase orders for goods and services. Even though appropriations lapse at the end of the fiscal year, unfilled purchase orders of the current year are carried forward and the next year's appropriations are likewise encumbered.

The Florida Department of Education requires that fund balances be reserved at fiscal year-end to report an amount likely to be expended from the 2002-03 fiscal year budget as a result of purchase orders outstanding at June 30, 2002.



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Because revenues of grants accounted for in the Special Revenue – Other Fund are not recognized until expenditures are incurred, these grant funds generally do not accumulate fund balances. Accordingly, no reserve for encumbrances is reported for grant funds. However, purchase orders outstanding for grants accounted for in the Special Revenue – Other Fund total $429,031.49 at June 30, 2002. Additionally, purchase orders and construction contracts totaling approximately $13,900,000 which were outstanding in the Capital Projects Funds are not shown on the financial statements since the funding source for these commitments had not been encumbered at June 30, 2002. These encumbrances are included in a subsequent note on Construction Contract Commitments.

10. INTERFUND RECEIVABLES, PAYABLES, AND TRANSFERS

The following is a summary of interfund receivables and payables reported in the fund financial statements:

FundsReceivables Payables

Major Funds:General 508,925.29$ 476,167.72$ Special Revenue - Other 355,830.85 499,721.74 Capital Projects:

Public Education Capital Outlay 1,291.95 Other 85,097.32

Nonmajor Funds 33,807.81 9,063.76

Total 984,953.22$ 984,953.22$

Interfund

Interfund receivables and payables primarily represent Federal and capital outlay moneys temporarily deposited in the General Fund that were due to the respective funds at year-end and a transfer of unrestricted funds from the Special Revenue – Other Fund to the General Fund. The amounts are expected to be repaid within one year.

FundsTransfers In Transfers Out

Major Funds:General 499,711.71$ $Special Revenue - Other 499,711.71 Capital Projects:

Public Education Capital Outlay 955,108.79 Other 955,108.79

Total 1,454,820.50$ 1,454,820.50$

Interfund

The above transfers are to move unrestricted funds to the General Fund and to reimburse capital outlay expenditures within the Capital Projects Funds.



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11. SCHEDULE OF STATE REVENUE SOURCES

The following is a schedule of the District’s State revenue for the 2001-02 fiscal year:

Source Amount

Florida Education Finance Program 24,018,519.00$ Gross Receipts Tax (Public Education Capital Outlay) 11,575,279.59 Categorical Educational Programs: Discretionary Lottery Funds 594,912.00 School Recognition 190,857.00 Pre-K Programs 582,803.00 Other 3,192,495.00 Workforce Development Program 593,952.00 Adults with Disabilities 539,120.00 Teacher Recuritment and Retention 420,133.00 Capital Outlay and Debt Service Withheld for Bonds 299,453.23 Schoolwide Change - HOSTS 286,086.40 Charter School Capital Outlay 155,556.00 Food Service Supplement 103,393.00 Reading Initiative 75,000.00 Mobile Home License Tax 63,992.40 Miscellaneous 425,740.13

Total 43,117,291.75$

Accounting policies relating to certain State revenue sources are described in Note 1.

12. PROPERTY TAXES

The following is a summary of millages and taxes levied on the 2001 tax roll for the 2001-02 fiscal year:

Millages Taxes Levied

GENERAL FUND

Nonvoted School Tax:Required Local Effort 5.761 4,865,154$ Basic Discretionary Local Effort 0.510 430,695 Supplemental Discretionary Local Effort 0.250 211,124

CAPITAL PROJECTS FUNDS

Nonvoted Tax:Local Capital Improvements 2.000 1,688,998

Total 8.521 7,195,971$



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13. STATE RETIREMENT PROGRAM

Plan Description. All regular employees of the District are covered by the Florida Retirement System, a State-administered, cost-sharing, multiple-employer, defined benefit retirement plan (Plan). Plan provisions are established by Chapters 121 and 122, Florida Statutes; Chapter 112, Part IV, Florida Statutes; Chapter 238, Florida Statutes; and Florida Retirement System Rules, Chapter 60S, Florida Administrative Code, wherein Plan eligibility, contributions, and benefits are defined and described in detail. Essentially all regular employees of participating employers are eligible and must enroll as members of the Plan. Benefits vest at six years of service. The Plan also includes an early retirement provision, but imposes a penalty for each year a member retires before the specified retirement age. The Plan provides retirement, disability, and death benefits and annual cost-of-living adjustments, as well as supplements for certain employees to cover social security benefits lost by virtue of retirement system membership.

A Deferred Retirement Option Program (DROP) was established effective July 1, 1998, subject to provisions of Section 121.091, Florida Statutes. It permits employees eligible for normal retirement under the Plan to defer receipt of monthly benefit payments while continuing employment with a Florida Retirement System employer. An employee may participate in the DROP for a period not to exceed 60 months after electing to participate. During the period of DROP participation, deferred monthly benefits are held in the Florida Retirement System Trust Fund and accrue interest.

The Plan's financial statements and other supplemental information are included in the comprehensive annual financial report of the State of Florida which may be obtained by contacting the Florida Department of Financial Services in Tallahassee, Florida. Also, an annual report on the Plan, which includes its financial statements, required supplemental information, actuarial report, and other relevant information, may be obtained from the State of Florida, Division of Retirement in Tallahassee, Florida.

Funding Policy. The contribution rates for Plan members are established, and may be amended, by the State of Florida. During the 2001-02 fiscal year, contribution rates were as follows:

Class or Plan Percent of Gross SalaryEmployee Employer

(A)

Florida Retirement System, Regular 0.00 7.30Florida Retirement System, Elected County Officers 0.00 15.14Teachers' Retirement System, Plan E 6.25 11.35State and County Officers and Employees' Retirement System, Plan B 4.00 9.10Deferred Retirement Option Program - Applicable to Members from All of the Above Classes or Plans 0.00 12.67Florida Retirement System, Reemployed Retiree (B) (B)

Notes: (A)

(B) Contribution rates are dependent upon the retirement class in whichreemployed.

Employer rates include 1.11 percent for the post-employment healthinsurance supplement.



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The District's liability for participation in the Plan is limited to the payment of the required contribution at the rates and frequencies established by law on future payrolls of the District. The District's contributions to the Plan (including employee contributions) for the fiscal years ending June 30, 2000, June 30, 2001, and June 30, 2002, totaled $3,059,305.66, $2,812,326.94, and $2,319,309.37, respectively, which were equal to the required contributions for each fiscal year.

14. POSTEMPLOYMENT BENEFITS

Pursuant to Section 112.0801, Florida Statutes, the Board contributed towards the costs of health, dental, and life insurance for former employees who retired prior to May 2, 2001. For the first quarter of the 2001-02 fiscal year, the District paid 50 percent of the costs of dental care, life insurance, and health care (less $10 or $20 per month depending on the type health care selected) for the retired former employees. Effective October 1, 2001, the Board discontinued its contributions towards the costs of dental care and life insurance and revised its monthly contribution for health insurance to $50 per former retired employee. Premiums totaled $230,863.12 for the 2001-02 fiscal year and, at June 30, 2002, the District provided benefits to 271 retired former employees.

15. CONSTRUCTION CONTRACT COMMITMENTS

The following is a summary of major construction contract commitments remaining at fiscal year-end:

Project Contract Completed BalanceAmount to Date Committed

East Gadsden High School:Architect 1,127,000.00$ 935,410.00$ 191,590.00$ Contractor 23,000,000.00 4,963,294.00 18,036,706.00

West Gadsden High School:Architect 740,000.00 111,000.00 629,000.00

Havana Elementary, George Munroe Elementary, Stewart Street Elementary, Chattahoochee Elementary, and Gretna Elementary Schools - Renovation of Toilet Facilities and Classrooms:

Architect 70,002.00 62,582.00 7,420.00 Contractor 881,584.00 467,652.00 413,932.00

Total 25,818,586.00$ 6,539,938.00$ 19,278,648.00$

16. RISK MANAGEMENT PROGRAMS

The District is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors and omissions; injuries to employees; and natural disasters. Workers' compensation, automobile liability, general liability, buildings and contents, boiler and machinery, errors and omissions, and health and hospitalization coverage are being provided through purchased commercial insurance, with minimum deductibles for each line of coverage.

Settled claims resulting from these risks have not exceeded commercial insurance coverage in any of the past three fiscal years.



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17. LITIGATION

The District is involved in several pending and threatened legal actions. The range of loss from all claims and actions, as estimated by District management, should not materially affect the financial condition of the District.

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Original Final Actual Variance withBudget Budget Final Budget -

Favorable(Unfavorable)

Revenues

Intergovernmental:Federal Direct $ 180,000.00 $ 197,442.03 $ 215,684.93 $ 18,242.90Federal Through StateFederal Through Local 457,747.76 457,747.76State 32,010,328.00 32,186,919.15 32,093,044.23 (93,874.92)

Local 5,780,344.00 6,495,635.17 6,323,958.01 (171,677.16)

Total Revenues 37,970,672.00 38,879,996.35 39,090,434.93 210,438.58

Expenditures

Current - Education:Instruction 22,677,614.30 23,126,612.53 21,814,256.95 1,312,355.58Pupil Personnel Services 1,626,652.76 1,580,127.14 1,531,656.13 48,471.01Instructional Media Services 1,072,181.90 1,149,954.89 1,030,446.20 119,508.69Instruction and Curriculum Development Services 1,572,121.79 1,282,406.25 1,251,631.53 30,774.72Instructional Staff Training 377,692.51 294,978.63 209,017.68 85,960.95Board of Education 363,714.70 425,512.30 425,093.96 418.34General Administration 661,476.57 612,675.67 615,029.83 (2,354.16)School Administration 3,122,073.59 3,450,999.41 3,378,486.93 72,512.48Facilities Acquisition and Construction 89,989.27 70,225.27 68,487.50 1,737.77Fiscal Services 320,697.21 342,644.74 333,497.75 9,146.99Food Services 8.71 8.71Central Services 758,078.22 810,537.23 764,542.93 45,994.30Pupil Transportation Services 2,480,697.22 2,687,388.18 2,596,775.23 90,612.95Operation of Plant 3,560,178.42 3,675,932.71 3,568,071.15 107,861.56Maintenance of Plant 1,416,246.27 1,698,757.76 1,666,551.44 32,206.32Community Services 629,997.71 760,588.93 713,051.87 47,537.06

Fixed Capital Outlay:Facilities Acquisition and Construction 2,195.00 2,195.00Other Capital Outlay 263,481.43 263,481.43

Total Expenditures 40,729,412.44 42,235,026.78 40,232,273.51 2,002,753.27

Excess (Deficiency) of Revenues Over Expenditures (2,758,740.44) (3,355,030.43) (1,141,838.58) 2,213,191.85

Other Financing Sources (Uses)

Transfers In 499,711.71 499,711.71Proceeds from the Sale of Capital Assets 51,591.99 51,591.99Insurance Loss Recoveries 7,866.11 7,866.11Transfers Out

Total Other Financing Sources (Uses) 51,591.99 559,169.81 507,577.82

Excess (Deficiency) of Revenues and Other Sources Over Expenditures and Other Uses (2,758,740.44) (3,303,438.44) (582,668.77) 2,720,769.67 Fund Balances, July 1, 2001 3,303,438.44 3,303,438.44 3,314,970.72 11,532.28

Fund Balances, June 30, 2002 $ 544,698.00 $ 0.00 $ 2,732,301.95 $ 2,732,301.95

General Fund

EXHIBIT - IGADSDEN COUNTY

DISTRICT SCHOOL BOARDREQUIRED SUPPLEMENTARY INFORMATION - BUDGETARY COMPARISON SCHEDULE -

GENERAL AND MAJOR SPECIAL REVENUE FUNDSFor the Fiscal Year Ended June 30, 2002

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Original Final Actual Variance withBudget Budget Final Budget -

Favorable(Unfavorable)

$ 969,107.56 $ 2,975,374.56 $ 2,300,713.70 $ (674,660.86)2,827,024.29 10,314,025.20 7,915,878.88 (2,398,146.32)

3,796,131.85 13,289,399.76 10,216,592.58 (3,072,807.18)

3,000,376.81 8,905,554.60 6,040,400.39 2,865,154.21253,227.40 1,110,772.15 791,167.74 319,604.41100,370.95 346,774.03 206,120.63 140,653.40367,999.79 936,458.87 569,129.02 367,329.85276,591.49 538,083.50 385,756.46 152,327.04

31,787.50 228,780.76 201,249.51 27,531.252,842.93 51,094.60 50,955.60 139.00

24,378.00 438,269.02 244,618.38 193,650.64

20,613.91 104,407.63 101,717.63 2,690.004,666.52 101,369.71 98,386.51 2,983.20

68,540.08 56,304.66 12,235.4225,567.98 161,148.94 97,036.37 64,112.57

126,601.99 395,045.59 358,398.54 36,647.05

10,797.01 10,797.01970,172.62 970,172.62

4,235,025.27 14,367,269.11 10,182,211.07 4,185,058.04

(438,893.42) (1,077,869.35) 34,381.51 1,112,250.86

(499,711.71) (499,711.71)

(499,711.71) (499,711.71)

(438,893.42) (1,077,869.35) (465,330.20) 612,539.15 465,330.20 465,330.20 465,330.20

$ 26,436.78 $ (612,539.15) $ 0.00 $ 612,539.15

EXHIBIT - I

Special Revenue - Other Fund

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FEDERAL REPORTS AND SCHEDULES

INDEPENDENT AUDITOR’S REPORT ON COMPLIANCE AND ON INTERNAL CONTROL BASED ON AN AUDIT OF THE FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS

INDEPENDENT AUDITOR’S REPORT ON AUDIT OF COMPLIANCE WITH REQUIREMENTS APPLICABLE TO EACH MAJOR FEDERAL PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH OMB CIRCULAR A-133

SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS

SCHEDULE OF FINDINGS AND QUESTIONED COSTS - FEDERAL AWARDS

SUMMARY SCHEDULE OF PRIOR AUDIT FINDINGS - FEDERAL AWARDS

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AUDITOR GENERAL




INDEPENDENT AUDITOR’S REPORT ON COMPLIANCE AND ON INTERNAL CONTROL BASED ON AN AUDIT OF THE FINANCIAL STATEMENTS

PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS

We have audited the basic financial statements of the Gadsden County District School Board as of and for the fiscal year ended June 30, 2002, and have issued our report thereon included under the heading INDEPENDENT AUDITOR'S REPORT ON 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. Our audit did not extend to the school and activity funds, commonly called the school internal funds.

Compliance

As part of obtaining reasonable assurance about whether the District’s basic financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, administrative rules, regulations, contracts and grants, and other guidelines, 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 that are required to be reported under Government Auditing Standards. However, our procedures did disclose certain instances of noncompliance which are not material to the basic financial statements. These matters are discussed in the FINDINGS AND RECOMMENDATIONS section of this audit report.

Internal Control

In planning and performing our audit of the District's basic financial statements for the fiscal year ended June 30, 2002, we considered the District's internal control in order to determine our auditing procedures for the purpose of expressing our opinion on the District's basic financial statements and not to provide assurance on the District’s internal control. However, we noted certain matters involving the internal control and its


850/488-5534/SC 278-5534 Fax: 488-6975/SC 278-6975

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operation that we consider to be reportable conditions. Reportable conditions involve matters coming to our attention relating to significant deficiencies in the design or operation of internal control that, in our judgment, could adversely affect the District’s ability to record, process, summarize, and report financial data consistent with the assertions of management in the financial statements. These matters are discussed in the FINDINGS AND RECOMMENDATIONS section of this audit report.

A material weakness is a condition in which the design or operation of one or more of the internal control components does not reduce to a relatively low level the risk that misstatements in amounts that would be material in relation to the financial statements being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. Our consideration of internal control 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 none of the reportable conditions referred to above is a material weakness.

This report is intended for the information of the Legislative Auditing Committee, members of the Florida Senate and the Florida House of Representatives, Federal and other granting agencies, and applicable management. Copies of this report are available pursuant to Section 11.45(4), Florida Statutes, and its distribution is not limited.



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AUDITOR GENERAL




INDEPENDENT AUDITOR’S REPORT ON AUDIT OF COMPLIANCE WITH REQUIREMENTS APPLICABLE TO EACH MAJOR FEDERAL PROGRAM

AND ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH OMB CIRCULAR A-133

Compliance

We have audited the District's compliance with the types of compliance requirements described in the United States Office of Management and Budget's (OMB) Circular A-133 Compliance Supplement that are applicable to each of its major Federal programs for the fiscal year ended June 30, 2002. The District’s major Federal programs are identified in the SUMMARY OF AUDIT RESULTS section of the accompanying SCHEDULE OF FINDINGS AND QUESTIONED COSTS - FEDERAL AWARDS. Compliance with the requirements of laws, regulations, contracts, and grants applicable to each of the District’s major Federal programs is the responsibility of District management. Our responsibility is to express an opinion on the District’s compliance based on our audit.

We conducted our audit of the District's compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States; and the OMB’s Circular A-133, 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 of compliance 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 District’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. The legal determination on the District's compliance with these requirements is, however, ultimately the responsibility of the grantor agency.

In our opinion, the District complied, in all material respects, with the requirements referred to above that are applicable to each of its major Federal programs for the fiscal year ended June 30, 2002.


850/488-5534/SC 278-5534 Fax: 488-6975/SC 278-6975

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Internal Control Over Compliance

District management 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 the District’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 of the internal control over compliance and its operation 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 of one or more of the internal control components does not reduce to a relatively low level the 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 for the information of the Legislative Auditing Committee, members of the Florida Senate and the Florida House of Representatives, Federal and other granting agencies, and applicable management. Copies of this report are available pursuant to Section 11.45(4), Florida Statutes, and its distribution is not limited.



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SCHEDULE OF EXPENDITURES OF FEDERAL AWARDSFor the Fiscal Year Ended June 30, 2002

Federal Grantor/Pass-Through Grantor/Program Title Catalog of Pass - Amount of AmountFederal Through Expenditures Provided

Domestic Grantor (1) toAssistance Number Subrecipients

Number

United States Department of Agriculture:Indirect:

Florida Department of Agriculture and Consumer Services:Food Donation 10.550 (2) None $ 347,103.92 $

Florida Department of Education:Child Nutrition Cluster:

School Breakfast Program 10.553 321 572,209.20 National School Lunch Program 10.555 300 1,747,837.80 Summer Food Service Program for Children 10.559 323 142,386.00

Total Child Nutrition Cluster 2,462,433.00

Child and Adult Care Food Program 10.558 None 294,328.00

Total United States Department of Agriculture 3,103,864.92

United States Department of Energy:Indirect:

Florida Department of Community Affairs:State Energy Program 81.041 98-SE-8L-02-30-03-296,

01-SE-35-02-30-03-390 119,979.85 United States Department of Education:

Direct:Magnet Schools Assistance 84.165 N/A 180,053.95 Technology Innovation Challenge Grants 84.303 N/A 211,708.00

Total Direct 391,761.95

Indirect:Florida Department of Education:

Special Education Cluster:Special Education - Grants to States 84.027 262, 263 1,301,107.49 Special Education - Preschool Grants 84.173 267 95,056.31

Total Special Education Cluster 1,396,163.80

Adult Education - State Grant Program 84.002 191 64,797.67 Title I Grants to Local Educational Agencies 84.010 212 2,942,772.05 67,500.00Vocational Education - Basic Grants to States 84.048 151 215,661.43 Safe and Drug-Free Schools and Communities - State Grants 84.186 103 60,161.66 Even Start - State Educational Agencies 84.213 219 56,568.42 56,568.42 Goals 2000 - State and Local Education Systemic Improvement Grants 84.276 133 489,850.68 Eisenhower Professional Development State Grants 84.281 224 42,468.62 Innovative Education Program Strategies 84.298 113 20,110.11 Technology Literacy Challenge Fund Grants 84.318 121 370,654.99 Comprehensive School Reform Demonstration 84.332 128 550,496.67 Reading Excellence 84.338 138 506,225.31 Class Size Reduction 84.340 111 529,911.79 Title I Accountability Grants 84.348 238 205,614.89

Agency for Workforce Innovation:Even Start - State Educational Agencies 84.213 None 190,581.10 190,581.10

Total Indirect 7,642,039.19 314,649.52

Total United States Department of Education 8,033,801.14 314,649.52

United States Department of Health and Human Services:Direct:

Head Start 93.600 (3) N/A 1,908,952.75

Corporation for National and Community Service:Indirect:

Florida Department of Education:Learn and Serve America - School and Community Based Programs 94.004 234 5,713.49

Tallahassee Community College:AmeriCorps 94.006 None 540,418.88

Total Corporation for National and Community Service 546,132.37

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SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS (Continued)For the Fiscal Year Ended June 30, 2002

Federal Grantor/Pass-Through Grantor/Program Title Catalog of Pass - Amount of AmountFederal Through Expenditures Provided

Domestic Grantor (1) toAssistance Number Subrecipients

Number

United States Department of Defense:Direct:

Army Junior Reserve Officers Training Corps None N/A $ 215,684.93 $

Total Expenditures of Federal Awards $ 13,928,415.96 $ 314,649.52

Notes: (1)

(2) Noncash Assistance.

(3)Food Donation - Represents the amount of donated food used during the 2001-02 fiscal year. Commodities are valued at fair value as determined at the time of donation.Head Start. Expenditures include $812,583.61 for grant number/program year 04CH0241/16 and $1,096,369.14 for grant number/program year 04CH0241/17.

Basis of Presentation. The Schedule of Expenditures of Federal Awards represents amounts expended from Federal Programs during the 2001-02 fiscal year as determined basedon the modified accrual basis of accounting. The amounts reported on the Schedule have been reconciled to and are in material agreement with amounts recorded in the District'saccounting records from which the basic financial statements have been reported.

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GADSDEN COUNTY DISTRICT SCHOOL BOARD

SCHEDULE OF FINDINGS AND QUESTIONED COSTS - FEDERAL AWARDS


SUMMARY OF AUDIT RESULTS

As required by United States Office of Management and Budget Circular A-133, Section __.505, the following is a summary of the results of the audit of the Gadsden County District School Board for the fiscal year ended June 30, 2002:

• Except for the exclusion of the school internal funds from the scope of the audit, there was no modification to the opinion on the financial statements.

• Certain matters involving the internal control and its operation were considered to be reportable conditions, though none of the reportable conditions was considered a material weakness.

• No noncompliance was disclosed which is material to the financial statements.

• No reportable conditions in internal control over major Federal programs were disclosed.

• An unqualified opinion was issued on major program compliance.

• No audit findings on Federal programs were disclosed.

• Major Federal programs included: Child Nutrition Cluster [School Breakfast Program (CFDA No. 10.553), National School Lunch Program (CFDA No. 10.555), and Summer Food Service Program for Children (CFDA No. 10.559)]; Special Education Cluster [Special Education – Grants to States (CFDA No. 84.027) and Special Education – Preschool Grants (CFDA No. 84.173)]; Even Start - State Educational Agencies (CFDA No. 84.213); and Goals 2000 – State and Local Education Systemic Improvement Grants (CFDA No. 84.276).

• The dollar threshold used to distinguish between Type A and Type B Federal programs was $417,852.48.

• The low risk entity threshold was applied.

FINDINGS AND QUESTIONED COSTS There were no audit findings on Federal programs required to be reported under OMB Circular A-133, Section __.510.

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SUMMARY SCHEDULE OF PRIOR AUDIT FINDINGS - FEDERAL AWARDSFor the Fiscal Year Ended June 30, 2002

Audit Report No. Program/Area Brief Description Status Commentsand Federal

Awards Finding No.

02-167(1) Corrective action taken. None.

(2) None.

Listed below is the District's summary of the status of prior audit findings on Federal programs:

Inadequate controls were noted in the administrationof the food service program, resulting in ineligiblestudents receiving free or reduced-price meals,instances in which the District failed to use thecorrect average daily participation rates, andinstances of noncompliance with the minimum mealpattern requirements.

Even Start - State Educational Agencies (CFDA No. 84.213) - Matching, Level of Effort, Earmarking

The District could not provide documentation tosupport compliance with the non-Federal matchingrequirements, or approximately $23,500 for the grant.Absent documentation supporting compliance or anapproved waiver from the grantor, the Federalexpenditures for this grant totaling $211,550represent questioned costs.

No corrective action taken.

Child Nutrition Cluster (CFDA Nos. 10.553, 10.555, and 10.559) - Allowable Costs/Cost Principles

Documents

Gadsden County District School Board