Bacon County Board of Education, Alma, Georgia, report on audit of the financial statments for the fiscal year ended June 30, 2006

BACON COUNTY BOARD OF EDUCATION
ALMA, GEORGIA REPORT ON AUDIT OF THE FINANCIAL STATEMENTS
FOR THE FISCAL YEAR ENDED JUNE 30, 2006
STATE OF GEORGIA
DEPARTMENT OF AUDITS AND ACCOUNTS
Russell W. Hinton State Auditor

BACON COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS -

SECTION I

FINANCIAL

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

EXHIBITS

BASIC FINANCIAL STATEMENTS

DISTRICT-WIDE FINANCIAL STATEMENTS

A

STATEMENT OF NET ASSETS

1

B

STATEMENT OF ACTIVITIES

2

FUND FINANCIAL STATEMENTS

C

BALANCE SHEET

GOVERNMENTAL FUNDS

4

D

RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET

TO THE STATEMENT OF NET ASSETS

5

E

STATEMENT OF REVENUES, EXPENDITURES AND CHANGES

IN FUND BALANCES

GOVERNMENTAL FUNDS

6

F

RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT

OF REVENUES, EXPENDITURES AND CHANGES IN FUND

BALANCES TO THE STATEMENT OF ACTIVITIES

7

G

STATEMENT OF FIDUCIARY NET ASSETS

FIDUCIARY FUNDS

8

H

NOTES TO THE BASIC FINANCIAL STATEMENTS

9

SCHEDULES

REQUIRED SUPPLEMENTARY INFORMATION

1 SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES

IN FUND BALANCES - BUDGET AND ACTUAL

GENERAL FUND

21

SUPPLEMENTARY INFORMATION

2 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS

22

3 SCHEDULE OF STATE REVENUE

23

BACON COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS -

SECTION I

FINANCIAL

SCHEDULES

SUPPLEMENTARY INFORMATION

4 SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS

24

5 ALLOTMENTS AND EXPENDITURES

GENERAL FUND - QUALITY BASIC EDUCATION PROGRAMS (QBE)

BY PROGRAM

25

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

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

SECTION IV FINDINGS AND QUESTIONED COSTS SCHEDULE OF FINDINGS AND QUESTIONED COSTS

BACON COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS -
SECTIONV MANAGEMENT'S RESPONSES SCHEDULE OF MANAGEMENT'S RESPONSES

SECTION I FINANCIAL

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

DEPARTMENT OF AUDITS AND ACCOUNTS
270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400
April 19, 2007

Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the Bacon County Board of Education
INDEPENDENT AUDITOR'S COMBINED REPORT ON BASIC FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION - SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
Ladies and Gentlemen:
We have audited the accompanying financial statements ofthe governmental activities, each major fund, and the aggregate remaining fund information (Exhibits A through H) of the Bacon County Board of Education, as of and for the year ended June 30, 2006, which collectively comprise the Board's basic financial statements as listed in the table of contents. These financial statements are the responsibility ofthe Bacon County Board ofEducation's management. Our responsibility is to express opinions on these financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United States ofAmerica and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General ofthe United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free ofmaterial misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opm1ons.
In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, each major fund, and the aggregate remaining fund information of the Bacon County Board of Education, as of June 30, 2006, and the respective changes in financial position thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America.
2006ARL-11

The Bacon County Board of Education has not presented Management's Discussion and Analysis that accounting principles generally accepted in the United States has determined is necessary to supplement, although not to be part of, the basic financial statements.
In accordance with Government Auditing Standards, we have also issued our report dated April 19, 2007, on our consideration ofthe Bacon County Board ofEducation's internal control over financial reporting and our tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements and other matters. The purpose ofthat report is to describe the scope of our testing of internal control over financial reporting and compliance and the results ofthat testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit.
The Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual, as presented on page 21, is not a required part of the basic financial statements but is supplementary information required by the accounting principles generally accepted in the United States of America. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods ofmeasurement and presentation ofthe required supplementary information. However, we did not audit the information and express no opinion on it.
Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Bacon County Board of Education's basic financial statements. The accompanying supplementary information which consist of Schedules 2 through 5, which includes the Schedule of Expenditures of Federal Awards as required by U.S. Office of Management and Budget Circular A-133, Audits ofStates, Local Governments, and Non-Profit Organizations, are presented for purposes of additional analysis and are not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements, and in our opinion, is fairly stated, in all material respects, in relation to the basic financial statements taken as a whole.
A copy of this report has been filed as a permanent record in the office of the State Auditor and made available to the press of the State, as provided for by Official Code of Georgia Annotated section 50-6-24.
Respectfully submitted,
~ uJ. .:fJ~
Russell W. Hinton, CPA, CGFM State Auditor
RWH:gp 2006ARL-11

BACON COUNTY BOARD OF EDUCATION

BACON COUNTY BOARD OF EDUCATION STATEMENT OF NET ASSETS JUNE 30, 2006
ASSETS
Cash and Cash Equivalents Investments Accounts Receivable, Net
Taxes State Government Federal Government Inventories Capital Assets Land Construction in Progress Land Improvements Buildings Equipment Less: Accumulated Depreciation
Total Assets
LIABILITIES
Accounts Payable Salaries Payable
Total Liabilities
NET ASSETS
Invested in Capital Assets, Net of Related Debt Restricted for
Bus Replacement Continuation of Federal Programs Capital Projects Unrestricted
Total Net Assets
Total Liabilities and Net Assets

EXHIBIT"A"

GOVERNMENTAL ACTIVITIES

$

627,191

632,593

409,507 1,144,560
336,956 22,093

412,463 2,025,848
605,295 13,269,031
2,048,405 -6,504,513

$ ===1=5=,0=29='=42=9=

$

107,269

1,803,814

$

1,911,083

$

11,856,529

2,908 88,253 191,423 979,233

$

13,118,346

$ ===1=5=,0=2=9,=42=9=

The notes to the basic financial statements are an integral part of this statement. -1 -

BACON COUNTY BOARD OF EDUCATION STATEMENT OF ACTIVITIES
FOR THE YEAR ENDED JUNE 30, 2006

GOVERNMENTAL ACTIVITIES
Instruction Support Services
Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Other Support Services Operations of Non-Instructional Services Food Services
Total Governmental Activities
General Revenues Taxes Property Taxes For Maintenance and Operations Railroad Cars Sales Taxes Special Purpose Local Option Sales Tax For Capital Projects Real Estate Grants and Contributions not Restricted to Specific Programs Investment Earnings Miscellaneous
Special Items Loss on Donation of Land and Buildings
Total General Revenues and Special Items
Change in Net Assets
Net Assets - Beginning of Year

EXPENSES

CHARGES FOR SERVICES

$

10,733,390 $

637,360 543,648 340,307 310,487 884,939 122,009 1,374,005 730,059 289,241

997 745

16,963,190 $

6,050 305,056
252 171 563 277

Net Assets - End of Year

The notes to the basic financial statements are an integral part of this statement. -2-

EXHIBIT"B"

PROGRAM REVENUES

OPERATING

CAPITAL

GRANTS AND

GRANTS AND

CONTRIBUTIONS CONTRIBUTIONS

NET (EXPENSES) REVENUES
AND CHANGES IN NET ASSETS

$

8,066,804

64,148 367,962 201,108 382,900 479,125

478,149 353,219 $
57,191

554 726

$

11,005,332 $

$
60,266 60,266 $

-2,660,536
-268,156 -175,686 -139, 199
72,413 -405,814 -122,009 -895,856 -316,574 -232,050
-190 848
-5,334,315

$

2,435,323

2,545

1,264,306 9,119
1,136,488 48,999
361,597

-31 202

$

5,227,175

$

-107,140

13,225,486

$ ===13=,1=1=8=,3=46=

- 3-

BACON COUNTY BOARD OF EDUCATION BALANCE SHEET
GOVERNMENTAL FUNDS JUNE 30, 2006

EXHIBIT"C"

ASSETS
Cash and Cash Equivalents Investments Accounts Receivable, Net
Taxes State Government Federal Government Inventories
Total Assets
LIABILITIES AND FUND BALANCES
LIABILITIES
Cash Overdraft Accounts Payable Salaries Payable
Total Liabilities
FUND BALANCES
Reserved for: Bus Replacement Continuation of Federal Programs Inventories Capital Projects
Unreserved Designated for Self-Insurance Undesignated Reported in: General Fund
Total Fund Balances
Total Liabilities and Fund Balances

GENERAL FUND

DISTRICTWIDE
CAPITAL PROJECTS
FUND

TOTAL

$

632,980

632,593

45,421 $ 1,144,560
336,956 22,093

$ 226,218

632,980 632,593
271,639 1,144,560
336,956 22,093

$ 2,814,603 $

226,218 $ ==3='=04=0=,8=2=1

$

$

78,263

1,803,814

$ 1,882,077 $

5,789 $ 29,006
34 795 $

5,789 107,269 1,803,814
1,916,872

$

2,908

$

2,908

66,160

66,160

22,093

22,093

$

191,423

191,423

71,185

71,185

770,180

770,180

$

932,526 $

191,423 $ 1,123,949

$ 2,814,603 $

226,218 $==3='=04=0=,8=21=

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

BACON COUNTY BOARD OF EDUCATION RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET
TO THE STATEMENT OF NET ASSETS JUNE 30, 2006

EXHIBIT"D"

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

$

1,123,949

$

412,463

2,025,848

605,295

13,269,031

2,048,405

-6,504,513

11,856,529

137,868

Net Assets of Governmental Activities (Exhibit "A")

$ 13,118,346

The notes to the basic financial statements are an integral part of this statement. -5-

BACON COUNTY BOARD OF EDUCATION STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES
GOVERNMENTAL FUNDS YEAR ENDED JUNE 30, 2006

EXHIBIT"E"

REVENUES
Property Taxes Sales Taxes State Funds Federal Funds Charges for Services Investment Earnings Miscellaneous
Total Revenues
EXPENDITURES
Current Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Other Support Services Food Services Operation
Capital Outlay
Total Expenditures
Net Change in Fund Balances
Fund Balances - Beginning
Fund Balances - Ending

GENERAL FUND

DISTRICTWIDE
CAPITAL PROJECTS
FUND

TOTAL

$

2,341,639

9,119 $

9,964,209

2,237,877

563,277

40,889

363,889

$ 15,520,899 $

$ 1,264,306
8,110 1,272,416 $

2,341,639 1,273,425 9,964,209 2,237,877
563,277 48,999 363,889
16,793,315

$ 10,222,474 $
637,360 543,648 340,307 308,802 884,579 113,931 1,296,619 652,624 289,241 972,895

$ 16,262,480 $

$

-741,581 $

1 674107

175,641 $
74,561 52,222 1,227,793 1,530,217 $ -257,801 $ 449,224

10,398,115
637,360 543,648 340,307 308,802 884,579 113,931 1,371,180 704,846 289,241 972,895 1,227,793
17,792,697
-999,382
2,123,331

$

932,526 $

191,423 $ =====1,=12=3.,..,94=9=

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

BACON COUNTY BOARD OF EDUCATION RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT OF
REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES TO THE STATEMENT OF ACTIVITIES JUNE 30, 2006

EXHIBIT"F"

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

$

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

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

Capital Outlay Depreciation Expense
Excess of Capital Outlay over Depreciation Expense

$

1,357,687

-528 180

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

In the Statement of Activities, only the gain on the sale of the land and equipment is reported, whereas in the Governmental Funds, the entire proceeds from the sale increase financial resources. Thus, the change in net assets differs from the change in fund balances by the cost of the land and carrying value of the equipment sold.

-999,382
829,507 96,229 -33 494

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

$ ==-=10=7=1=4=0

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

BACON COUNTY BOARD OF EDUCATION STATEMENT OF FIDUCIARY NET ASSETS
FIDUCIARY FUNDS JUNE 30, 2006
ASSETS Cash and Cash Equivalents
LIABILITIES Funds Held for Others

EXHIBIT"G"
AGENCY FUNDS
$ ==1=5=,4=00=
$ ===1=5,=40..0. =

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

BACON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2006

EXHIBIT "H"

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

-9-

BACON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2006

EXHIBIT"H"

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

- 10 -

BACON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2006

EXHIBIT "H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The School District funds certain programs by a combination ofspecific cost-reimbursement grants, categorical grants, and general revenues. Thus, when program costs are incurred, there are both restricted and unrestricted net assets available to finance the program. It is the School District's policy to first apply grant resources to such programs, followed by cost-reimbursement grants, then general revenues.
RESTATEMENT OF PRIOR YEAR NET ASSETS
For fiscal year 2006, the School District reclassified various Capital Assets, resulting in the change ofcertain asset classifications. The School District decreased Building and Building Improvements by $605,295 and increased Land Improvements by $605,295. Additionally, the School District decreased accumulated depreciation for Building and Building Improvements by $559,536 and increased accumulated depreciation for Land Improvements by $559,536. The result of the reclassification had no effect on Net assets at July 1, 2005.
CASH AND CASH EQUIVALENTS
COMPOSITION OF DEPOSITS Cash and cash equivalents consist ofcash on hand, demand deposits and short-term investments with original maturities of three months or less from the date of acquisition in authorized financial institutions. Georgia Laws OCGA 45-8-14 authorize the School District to deposit its funds in one or more solvent banks or insured Federal savings and loan associations.
INVESTMENTS
COMPOSITION OF INVESTMENTS Investments made by the School District in nonparticipating interest-earning contracts (such as certificates ofdeposit) and repurchase agreements are reported at cost. Participating interest-earning contracts and money market investments with a maturity at purchase of one year or less are reported at amortized cost. Both participating interest-earning contracts and money market investments with a maturity at purchase greater than one year are reported at fair value. The Official Code of Georgia Annotated Section 36-83-4 authorizes the School District to invest its funds. In selecting among options for investment or among institutional bids for deposits, the highest rate ofreturn shall be the objective, given equivalent conditions of safety and liquidity. Funds may be invested in the following:
(1) Obligations issued by the State of Georgia or by other states,
(2) Obligations issued by the United States government,
(3) Obligations fully insured or guaranteed by the United States government or a United States government agency,

- 11 -

BACON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2006

EXHIBIT "H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(4) Obligations of any corporation of the United States government,

(5) Prime banker's acceptances,

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

(7) Repurchase agreements, and

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

The School District does not have a formal policy regarding investment policies that address credit risks, custodial credit risks, concentration ofcredit risks, interest rate risks or foreign currency risks.

RECEIVABLES

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

PROPERTY TAXES

The Bacon County Board ofCommissioners fixed the property tax levy for the 2005 tax digest year (calendar year) on August 4, 2005 (levy date). Taxes were due on December 20, 2005 (lien date). Taxes collected within the current fiscal year or within 60 days after year-end on the 2005 tax digest are reported as revenue in the governmental funds for fiscal year 2006. The Bacon County Tax Commissioner bills and collects the property taxes for the School District, withholds 2.5% oftaxes collected as a fee for tax collection and remits the balance of taxes collected to the School District. Property tax revenues, at the fund reporting level, during the fiscal year ended June 30, 2006, for maintenance and operations amounted to $2,339,094.

The tax millage rate levied for the 2005 tax year (calendar year) for the Bacon County Board of Education was as follows (a mill equals $1 per thousand dollars of assessed value):

School Operations

13.5 mills

- 12 -

BACON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2006

EXHIBIT "H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

SALES TAXES

Special Purpose Local Option Sales Tax, at the fund reporting level, during the year amounted to $1,264,306 and is to be used for capital outlay for educational purposes or debt service. This sales tax was authorized by local referendum and the sales tax must be re-authorized at least every five years.

INVENTORIES

FOOD INVENTORIES On the basic financial statements, inventories ofdonated food commodities used in the preparation ofmeals are reported at their Federally assigned value and purchased foods inventories are reported at cost (first-in, first-out). The School District uses the consumption method to account for inventories whereby donated food commodities are recorded as an asset and as revenue when received, and expenses/expenditures are recorded as the inventory items are used. Purchased foods are recorded as an asset when purchased and expenses/expenditures are recorded as the inventory items are used.

CAPITAL ASSETS

Capital assets purchased, including capital outlay costs, are recorded as expenditures in the fund financial statements at the time of purchase (including ancillary charges). On the District-wide financial statements, all purchased capital assets are valued at cost where historical records are available and at estimated historical cost based on appraisals or deflated current replacement cost where no historical records exist. Donated capital assets are recorded at estimated fair market value on the date donated. Disposals are deleted at depreciated recorded cost. The cost of normal maintenance and repairs that do not add to the value ofassets or materially extend the useful lives of the assets is not capitalized. Depreciation is computed using the straight-line method. The School District does not capitalize book collections or works of art.

Capitalization thresholds and estimated useful lives of capital assets reported in the District-wide statements are as follows:

Capitalization Policy

Estimated Useful Life

Land Land Improvements Buildings and Improvements Equipment

Any Amount

$

5,000

$

5,000

$

5,000

NIA 20 to 80 years up to 80 years
3 to 20 years

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

- 13 -

BACON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2006

EXHIBIT "H"

Note 3: DEPOSITS AND INVESTMENTS
COLLATERALIZATION OF DEPOSITS Official Code of Georgia Annotated (OCGA) Section 45-8-12 provides that there shall not be on deposit at any time in any depository for a time longer than ten days a sum of money which has not been secured by surety bond, by guarantee of insurance, or by collateral. The aggregate ofthe face value of such surety bond and the market value of securities pledged shall be equal to not less than 110 percent ofthe public funds being secured after the deduction ofthe amount ofdeposit insurance. Ifa depository elects the pooled method (OCGA 45-8-13.1) the aggregate ofthe market value ofthe securities pledged to secure a pool ofpublic funds shall be not less than 110 percent ofthe daily pool balance.
Acceptable security for deposits consists of any one of or any combination of the following:
(1) Surety bond signed by a surety company duly qualified and authorized to transact business within the State of Georgia,
(2) Insurance on accounts provided by the Federal Deposit Insurance Corporation,
(3) Bonds, bills, notes, certificates of indebtedness or other direct obligations of the United States or of the State of Georgia,
(4) Bonds, bills, notes, certificates of indebtedness or other obligations of the counties or municipalities of the State of Georgia,
(5) Bonds of any public authority created by the laws of the State of Georgia, providing that the statute that created the authority authorized the use of the bonds for this purpose,
(6) Industrial revenue bonds and bonds of development authorities created by the laws ofthe State of Georgia, and
(7) Bonds, bills, notes, certificates of indebtedness, or other obligations of a subsidiary corporation of the United States government, which are fully guaranteed by the United States government both as to principal and interest or debt obligations issued by the Federal Land Bank, the Federal Home Loan Bank, the Federal Intermediate Credit Bank, the Central Bank for Cooperatives, the Farm Credit Banks, the Federal Home Loan Mortgage Association, and the Federal National Mortgage Association.
CATEGORIZATION OF DEPOSITS At June 30, 2006, the bank balances were $1,511,000. The amounts of the total bank balances are classified into four categories of custodial credit risk:
Category 1 - Cash that is insured (e.g., Federal Deposit Insurance) or collateralized with securities held by the School District or by the School District's agent in the School District's name.
- 14 -

BACON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2006

EXHIBIT "H"

Note 3: DEPOSITS AND INVESTMENTS

Category 2 - Cash collateralized with securities held by the pledging financial institution's trust department or agent in the School District's name.
Category 3 - Cash collateralized with securities held by the pledging financial institution, or by its trust department or agent but not in the School District's name.
Category 4 - Uncollateralized.

The School District's deposits are classified by custodial credit risk category at June 30, 2006, as follows:

Custodial Credit Risk Category

Bank Balance

1

$ 207,714

2

1,303,286

3

0

4

0

Total

$ 1,511,000

CATEGORIZATION OF INVESTMENTS At June 30, 2006, the carrying value ofthe School District's total investments was $624,879 which is materially the same as fair value. This investment consisted entirely of funds invested in the Local Government Investment Pool administered by the State of Georgia, Office of Treasury and Fiscal Services which are not required to be categorized since the School District did not own any specific identifiable securities in the pool. The investment policy ofthe State ofGeorgia, Office ofTreasury and Fiscal Services for the Local Government Investment Pool (Primary Liquidity Portfolio) does not provide for investment in derivatives or similar investments. A description of the Primary Liquidity Portfolio is as follows:

The Primary Liquidity Portfolio consists of Georgia Fund 1, which is a combination local and state government investment pool. Georgia Fund 1 is a stable net asset value investment pool which follows Standard and Poor's criteria for AAAm rated money market funds. The pool is not registered with the SEC as an investment company but does operate Georgia Fund 1 in a manner consistent with Rule 2a-7 of the Investment Company Act of 1940. The pool's primary objectives are safety of capital, investment income, liquidity and diversification while maintaining principal ($1.00 per share value). Net asset value is calculated daily and reported to the rating agency weekly to ensure stability. The pool distributes earnings (net of management fees) on a monthly basis and values participant's shares sold and redeemed at the pool's share price, $1.00 per share. Pooled cash and cash equivalents and investments are reported at cost. The pool does not issue any legally binding guarantees to support the value of the shares. Participation in the pool is voluntary and deposits consist of funds from local governments; operating and trust funds of Georgia's state agencies, colleges and universities; and current operating funds of the State of Georgia's General Fund.

- 15 -

BACON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2006

EXHIBIT"H"

Note 3: DEPOSITS AND INVESTMENTS

Investments in Georgia Fund 1 are directed toward short-term instruments such as U.S. Treasury obligations, securities issued or guaranteed as to principal and interest by the U. S. Government or any of its agencies or instrumentalities, banker's acceptances and repurchase agreements. The weighted average maturity of Georgia Fund 1 may not exceed 60 days. The weighted average maturity for Georgia Fund 1 on June 30, 2006, was 28 days.

Note 4: NON-MONETARY TRANSACTIONS

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

Note 5: CAPITAL ASSETS

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

Balances July I, 2005 (Restated}

Increases

Balances Decreases June 30. 2006

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

$ 443,665

$

821,601 $ 1,204.247

31,202 $ 412,463 2.025,848

Total Capital Assets Not Being Depreciated $ 1,265,266 $ 1,204,247 $

31,202 $ 2,438,311

Capital Assets Being Depreciated Buildings and Improvements Equipment Land Improvements

$ 13,277,949 $ 2,011,028 605,295

22,680 $ 130,760

31,598 $ 13,269,031

93,383

2,048,405

605,295

Less Accumulated Depreciation for: Buildings and Improvements Equipment Land Improvements

4,484,128 1,055,358
559,536

353,193 163,990
10 997

31,598 91,091

4,805,723 1,128,257
570,533

Total Capital Assets, Being Depreciated, Net $ 9,795,250 $ -374.740 $

2,292 $ 9,418.218

Governmental Activity Capital Assets - Net $ 11,060.516 $ 829.507 $

33.494 $ 11,856.529

Current year depreciation expense by function is as follows:

- 16 -

BACON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2006

EXHIBIT "H"

Note 5: CAPITAL ASSETS
Instruction Support Services
General Administration School Administration Maintenance and Operation of Plant Student Transportation Services Food Services
Note 6: RISK MANAGEMENT

$ 336,249

$

1,613

8,078

31,729

126.722

168,142 23.789

$==5==2='='8."=18===0

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

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

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

The School District is self-insured with regard to unemployment compensation claims. In connection with this program, a self-insurance reserve has been established within the General Fund by the School District. The School District accounts for claims within the General Fund with expenses/expenditures and liability being reported when it is probable that a loss has occurred, and the amount of that loss can be reasonably estimated.

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

2005 2006

Beginning ofYear Liability

Claims and Changes in Estimates

Claims
Paid

End of Year Liability

$

0 $

0 $

0 $

0

$

0 $

8 754 $

7 944 $

810

The School District has established a limited risk management program for dental coverage of its employees and their dependents. Estimated claims are budgeted by management based on known claims and prior experience. The employees contribute a premium to the fund and the School District funds any deficits. In connection with this program, a self-insurance reserve has been established within the General Fund by the School District.

- 17 -

BACON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2006

EXHIBIT "H"

Note 6: RISK MANAGEMENT

Changed in dental claims liability during the last two fiscal years are as follows:

2005 2006

Beginning of Year Liability

Claims and Changes in Estimates

Claims Paid

EndofYear Liability

$

0 $

193,678 $

193,678 $

0

$

0 $

163,794 $

163 794 $

0

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

Position Covered

Amount

Superintendent Assistant Superintendent Various Other Employees All Employees

$

50,000

$

20,000

$

5,000

$ 100,000

Note 7: SPECIAL ITEMS

In fiscal year 2006, the Bacon County Board of Education made a donation of .278 acres ofland to the Alma Lions Club and 3.5 acres of land to the Save Our School Committee. The land was removed from the School District's capital assets listing at its carrying value at the date donated. The donations are reported as special items on the Statement of Activities.

Note 8: SIGNIFICANT COMMITMENTS

The following is an analysis ofsignificant outstanding construction or renovation contracts executed by the School District as of June 30, 2006:

Project

Unearned Executed Contracts

Bacon County Elementary School Additions

$==~18-,7="3='=5

The amount described in this note is not reflected in the basic financial statements.

Note 9: SIGNIFICANT CONTINGENT LIABILITIES

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

- 18 -

BACON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2006

EXHIBIT "H"

Note 10: RETIREMENT PLANS

TEACHERS RETIREMENT SYSTEM OF GEORGIA (TRS)

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

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

Fiscal Year

Percentage Contributed

Required Contribution

2006 2005 2004

100% 100% 100%

$ 846,111 $ 784,942 $ 755,814

- 19 -

(This page left intentionally blank)

BACON COUNTY BOARD OF EDUCATION SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES
BUDGET AND ACTUAL GENERAL FUND
YEAR ENDED JUNE 30, 2006

SCHEDULE "1"

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

NONAPPROPRIATED BUDGETS

ORIGINAL (1 l

FINAL (1)

ACTUAL AMOUNTS

$

2,200,000 $

2,200,000 $

2,341,639

9,119

9,124,811

9,120,725

9,964,209

2,102,299

2,140,133

2,237,877

255,933

255,933

563,277

9,947

9,947

40,889

363,889

$

13,692,990 $

13,726,738 $

15,520,899

$

9,433,310 $

9,412,989 $

10,222,474

294,468 365,131 296,979 247,660 866,534 117,663 990,215 617,364 181,841 798 008

292,968 450,819 314,253 267,822 866,534 117,663 990,215 621,614 153,451 798 008

637,360 543,648 340,307 308,802 884,579 113,931 1,296,619 652,624 289,241 972,895

$

14,209,173 $

14,286,336 $

16,262,480

$

-516 183 $

-559,598 $

-741 581

$

62,024 $

62,024

-62 024

-62 024

$

0 $

0

$

-516,183 $

-559,598 $

-741,581

1,518,485

1,518,485

1674107

Fund Balances - Ending

$

1,002,302 $

958 887 $ ===9=3=2..,,5=26=

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

See notes to the basic financial statements.

- 21 -

BACON COUNTY BOARD OF EDUCATION SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
YEAR ENDED JUNE 30, 2006

SCHEDULE "2"

FUNDING AGENCY PROGRAM/GRANT
Agriculture, U. S. Department of Child Nutrition Cluster Pass-Through From Georgia Department of Education Food Services School Breakfast Program National School Lunch Program
Total Child Nutrition Cluster
Other Programs Pass-Through From Georgia Department of Education Food Donation (1)
Total U. S. Department of Agriculture
Education, U. S. Department of Special Education Cluster Pass-Through From Georgia Department of Education Special Education Grants to States Preschool Grants
Total Special Education Cluster
Other Programs Pass-Through From Georgia Department of Education Comprehensive School Reform Demonstration Enhancing Education Through Technology Program Hurricane Education Recovery Improving Teacher Quality State Grants Migrant Education Rural Education State Grants for Innovative Programs Title I Grants to Local Educational Agencies Vocational Education - Basic Grants to States Pass-Through From Okefenokee Regional Educational Service Agency Safe and Drug-Free Schools and Communities
Total U. S. Department of Education
Health and Human Services, U. S. Department of Pass-Through From Concerted Services, Incorporated Head Start

CFDA NUMBER

PASSTHROUGH
ENTITY ID
NUMBER

EXPENDITURES IN PERIOD

* 10.553 * 10.555
10.550

N/A

(2)

N/A $ _ _ _8""7""'1""7""'38=-

$

871,738

N/A

38497

$ _ _ _.::;,9.:.;10.,2:;;:3a.::.5

84.027 84.173
84.332 84.318 84.938 84.367 84.011 84.358 84.298 84.010 84.048
84.186
93.600

N/A $ NIA
$

371,525 24328
395,853

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

216,301 3,180
(3) 121,017 32,219 61,573 12,683 654,724 29,925
15217
1,542,692

N/A $

182,160

Total Federal Financial Assistance

$

2,635,087

N/A = Not Available

Notes to the Schedule of Expenditures of Federal Awards

(1) The amount shown for the Food Donation Program represents the Federally assigned value of nonmonetary assistance for donated commodities received and/or consumed by the School District during the current fiscal year.
(2) Expenditures for the funds earned on the School Breakfast Program ($99,165) were not maintained separately and are included in the 2006 National School Lunch Program.
(3) Funds earned on the Hurricane Education Recovery program, in the amount of $9,679, do not require reporting of expenditures.

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

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

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

See notes to the basic financial statements.

-22-

BACON COUNTY BOARD OF EDUCATION SCHEDULE OF STATE REVENUE YEAR ENDED JUNE 30, 2006

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

See notes to the basic financial statements.

- 23-

SCHEDULE "3"

GOVERNMENTAL FUND TYPE GENERAL FUND

$

209,351

495,503 166,508 1,396,984
79,870 671,481
30,575 1,169,135
796,829 434,851
34,246 112,740 573,884 385,767 138,737 76,075
11,734 89,690 23,595 182,189 58,974 34,776
368,732 470,532 478,149
328,384 60,266 20,000 49,756 6,111 6,488 25,593
1,134,228 51,752
107,567 -444,064
16,068 26,562 30,622
53 969
$ ===9,..,96=4.!:,2=09==

BACON COUNTY BOARD OF EDUCATION SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS
YEAR ENDED JUNE 30, 2006

SCHEDULE "4"

PROJECT
Acquiring new land for future schools; adding to, renovating, repairing, improving, demolishing, furnishing and equipping existing school buildings and other buildings and facilities useful and desirable in connection therewith, including, but not limited to agriculture and bank buildings and additional classrooms; system-wide technology improvements; acquiring new school equipment, including new buses and maintenance vehicles; acquiring, constructing and equipping new school buildings and facilities useful and desirable in connection therewith, including athletic/physical education facilities and bus maintenance and storage facilities; acquiring any necessary or desirable property, both real and personal, including textbooks.

ORIGINAL ESTIMATED
COST (1)

CURRENT ESTIMATED COSTS (2)

AMOUNT EXPENDED IN CURRENT
YEAR (3)

AMOUNT EXPENDED
IN PRIOR YEARS (3)

PROJECT STATUS

$ 5,500,000 $ 5,500,000 $ 1 530 217 $ 1 730 127 Ongoing

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

See notes to the basic financial statements.

- 24 -

BACON COUNTY BOARD OF EDUCATION GENERAL FUND - QUALITY BASIC EDUCATION PROGRAM (QBE)
ALLOTMENTS AND EXPENDITURES - BY PROGRAM YEAR ENDED JUNE 30, 2006

SCHEDULE "5"

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

ALLOTMENTS FROM GEORGIA DEPARTMENT OF EDUCATION {1} {2}

ELIGIBLE QBE PROGRAM COSTS

SALARIES OPERATIONS

TOTAL

$

545,137 $

486,636 $

5,242 $

491,878

177,852

198,055

198,055

1,517,269

1,383,916

47,226

1,431,142

99,067

390,858

1,101

391,959

730,326

706,224

16,888

723,112

40,684 1,275,385
876,719 477,600 1,350,542
81,468 12,173 97,918 25 757

200,130 1,424,695 1,252,278
459,839
267 133,766 726,116 258,239
54,911 75,783 13,164 75,678 56,055

149 21,110 45,441 54,800
20,739
194

200,279 1,445,805 1,297,719
514,639
267 133,766 746,855 258,239
54,911 75,783 13,164 75,872 56055

$

7,307,897 $ 7,896,610 $

212,890 $

8,109,500

199,187 38 319

273,065 3418

17,493 34 039

290,558 37457

TOTAL QBE FORMULA FUNDS

$

7 545403 $ 8,173,093 $

264,422 $ ===8,==43=7=,5=1=5

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

See notes to the basic financial statements.

- 25-

SECTION II COMPLIANCE AND INTERNAL CONTROL REPORTS

Russell W. Hinton
STATE AUDITOR
(404) 856-2174

DEPARTMENT OF AUDITS AND ACCOUNTS
270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400
April 19, 2007

Honorable Sonny Perdue, Governor Members ofthe General Assembly Members ofthe State Board of Education
and Superintendent and Members ofthe Bacon County Board of Education
REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS
Ladies and Gentlemen:
We have audited the financial statements of the governmental activities, each major fund, and the aggregate remaining fund information of Bacon County Board of Education as of and for the year ended June 30, 2006, which collectively comprise Bacon County Board of Education's basic financial statements and have issued our report thereon dated April 19, 2007. We conducted our audit in accordance with auditing standards generally accepted in the United States ofAmerica and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States.
Internal Control Over Financial Reporting
In planning and performing our audit, we considered Bacon County Board of Education's internal control over financial reporting in order to determine our auditing procedures for the purpose of expressing our opinions on the financial statements and not to provide an opinion on the internal control over financial reporting. However, we noted a certain matter involving the internal control over financial reporting and its operation that we consider to be a reportable condition. Reportable conditions involve matters coming to our attention relating to significant deficiencies in the design or operation of the internal control over financial reporting that, in our judgment, could adversely affect Bacon County Board ofEducation's ability to record, process, summarize and report financial data consistent with assertions ofmanagement in the financial statements. The reportable condition is described in the accompanying Schedule ofFindings and Questioned Costs as item FS-6031-0601.
2006YB-30

A material weakness is a reportable condition in which the design or operation ofone or more ofthe internal control components does not reduce to a relatively low level the risk that misstatements caused by error or fraud in amounts that would be material in relation to the financial statements being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. Our consideration of the internal control over financial reporting would not necessarily disclose all matters in the internal control that might be reportable conditions and, accordingly, would not necessarily disclose all reportable conditions that are also considered to be material weaknesses. However, we believe the reportable condition described above is not a material weakness.
Compliance and Other Matters
As part of obtaining reasonable assurance about whether Bacon County Board of Education's financial statements are free of material misstatement, we performed tests of its compliance with certain provisions oflaws, regulations, contracts and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards.
This report is intended solely for the information and use of the management and members of the Bacon County Board ofEducation and is not intended to be and should not be used by anyone other than these specified parties.
Respectfully submitted,
~ w..:fJ~
Russell W. Hinton, CPA, CGFM State Auditor
RWH:gp 2006YB-30

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

DEPARTMENT OF AUDITS AND ACCOUNTS
270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400
April 19, 2007

Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the Bacon County Board of Education
REPORT ON COMPLIANCE WITH REQUIREMENTS APPLICABLE TO EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH 0MB CIRCULAR A-133
Ladies and Gentlemen:
Compliance
We have audited the compliance ofBacon County Board ofEducation with the types ofcompliance requirements described in the U.S. Office of Management and Budget (0MB) Circular A-133 Compliance Supplement that are applicable to each of its major Federal programs for the year ended June 30, 2006. Bacon County Board of Education's major Federal programs are identified in the Summary of Auditor's Results Section of the accompanying Schedule of Findings and Questioned Costs. Compliance with the requirements of laws, regulations, contracts and grants applicable to each of its major Federal programs is the responsibility of Bacon County Board of Education's management. Our responsibility is to express an opinion on Bacon County Board of Education's compliance based on our audit.
We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General ofthe United States; and 0MB Circular A133, Audits of States, Local Governments, and Non-Profit Organizations. Those standards and 0MB Circular A-133 require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types 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 Bacon County Board ofEducation's compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Our audit does not provide a legal determination on Bacon County Board of Education's compliance with those requirements.
2006SA-10

In our opinion, the Bacon County Board of Education complied, in all material respects, with the requirements referred to above that are applicable to each ofits major Federal programs for the year ended June 30, 2006.
Internal Control Over Compliance
The management of Bacon County Board of Education is responsible for establishing and maintaining effective internal control over compliance with requirements of laws, regulations, contracts and grants applicable to Federal programs. In planning and performing our audit, we considered Bacon County Board ofEducation's internal control over compliance with requirements that could have a direct and material effect on a major Federal program in order to determine our auditing procedures for the purpose ofexpressing our opinion on compliance and to test and report on internal control over compliance in accordance with 0MB Circular A-133.
Our consideration ofthe internal control over compliance would not necessarily disclose all matters in the internal control that might be material weaknesses. A material weakness is a reportable condition in which the design or operation of one or more of the internal control components does not reduce to a relatively low level ofrisk that noncompliance with applicable requirements oflaws, regulations, contracts and grants caused by error or fraud that would be material in relation to a major Federal program being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. We noted no matters involving the internal control over compliance and its operation that we consider to be material weaknesses.
This report is intended solely for the information and use ofthe management, members ofthe Bacon County Board ofEducation, Federal awarding agencies and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties.
Respectfully submitted,
~ w..:bL~~
Russell W. Hinton, CPA, CGFM State Auditor
RWH:gp 2006SA-10

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

BACON COUNTY BOARD OF EDUCATION AUDITEE'S RESPONSE
SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2006

PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

FINDING CONTROL NUMBER AND STATUS

FS-6031-05-01

Unresolved - See Corrective Action/Responses

CORRECTIVE ACTION/RESPONSES

CASH AND CASH EQUIVALENTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Control Procedures Finding Control Number: FS-6031-05-01

The Bacon County Board ofEducation implemented the following procedures to address the inadequate internal controls related to principals' (School activity) accounts:

The process ofbank reconciliation is performed by designated personnel separate from the bookkeeper who performs record keeping and voucher payment.

Designated personnel separate from bookkeeper will receive all cash receipts. Designated personnel will write a receipt. Bookkeeper handles preparation of deposit and record keeping functions. When deposit is prepared by bookkeeper, receipts for deposit should balance with deposit total. This is verified by deposit total and date documented in receipt book.

Check request/PO's are completed by personnel placing the original order and approved by the principal. The original invoice is attached to check request. (When invoice is unavailable: ex: umpire fee, a standard form is completed and signed by the payee). Packing slips are attached when goods are received or person receiving verifies receipt by signature and date on invoice. Rubber stamps will not be used for approval. Check is issued by bookkeeper and signed by principal and Superintendent.

The central office will periodically check each school to verify that the above procedures are being followed.

The above procedures were implemented February 2006.

PRIOR YEAR FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

No matters were reported.

SECTION IV FINDINGS AND QUESTIONED COSTS

BACON COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2006

I SUMMARY OF AUDITOR'S RESULTS

1. Type of Report Issued on the Financial Statements The auditor's opinion on the Bacon County Board of Education's financial statements was unqualified.

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

Cash and Cash Equivalents Revenues/Receivables/Receipts

Expenditures/Liabilities/Disbursements

The reportable condition described above is not considered to be a material weakness.

3. Noncompliance Material to the Financial Statements The audit ofthe Bacon County Board ofEducation disclosed no instances ofnoncompliance that were deemed to be material to the financial statements.

4. Reportable Conditions in Internal Control Over Major Programs The audit report for the Bacon County Board of Education did not disclose any reportable conditions in internal control over major programs.

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

6. Audit Findings Required to be Reported by Section .510(a) ofOMB Circular A-133 The Bacon County Board ofEducation's audit did not disclose audit findings required to be reported by section .510(a) ofOMB Circular A-133.

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

8. Type "A" Program Dollar Threshold The dollar threshold for type "A" programs was $300,000.

9. Low Risk Auditee The Bacon County Board ofEducation qualified as a low risk auditee as defined by Section .530 of 0MB Circular A-133.

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BACON COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2006

II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

CASH AND CASH EQUIVALENTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Controls over School Activity Accounts Reportable Condition Finding Control Number: FS-6031-06-01

Condition:

This is a repeat finding (FS-6031-05-01) from the year ended June 30, 2005. The accounting procedures ofthe School District were insufficient to provide for adequate internal controls over the school activity accounts.

Criteria:

The School District's management is responsible for designing and maintaining internal controls that provide reasonable assurance that transactions are processed according to established procedures.

Questioned Cost: NIA

Information:

Cash and Cash Equivalents The bank reconciliation function was not separated from the record keeping and voucher payment functions.

Revenues/Receivables/Receipts The cash receipt function was not separated from the deposit preparation and record keeping functions.

Expenditures/Liabilities/Disbursements The claims processing function was not separated from the record keeping and claims approval functions. Based on a review of twenty vouchers, two contained no original invoices, one contained no supporting documentation, five contained no proof that goods were actually received (when applicable), one contained an approval date later than the actual check date and two checks were written to "Cash".

Cause:

These deficiencies were a result of management's decision to limit the number ofadministrative staffmade responsible for accounting functions and management's failure to ensure that internal controls were established, implemented and functioning at the school level.

Effect:

Errors and/or irregularities may not be detected in a timely manner.

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BACON COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2006

II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

CASH AND CASH EQUIVALENTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Controls over School Activity Accounts Reportable Condition Finding Control Number: FS-6031-06-01

Recommendation:

The School District should implement procedures to ensure that the key accounting functions of custody, record keeping and authorization are separated and/or utilize oversight for these incompatible activities. In addition, management should monitor controls to provide reasonable assurance that transactions are processed according to established policies and implement those procedures deemed necessary to strengthen internal controls over the accounting functions.

III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

No matters were reported.

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SECTIONV MANAGEMENT'S RESPONSES

BACON COUNTY BOARD OF EDUCATION SCHEDULE OF MANAGEMENT'S RESPONSES
YEAR ENDED JUNE 30, 2006
Finding Control Number: FS-6031-06-01
We concur with this finding. The Bacon County Board of Education implemented the following procedures to address the inadequate internal controls related to principals' (School activity) accounts:
The process ofbank reconciliation is performed by designated personnel separate from bookkeeper who performs record keeping and voucher payment.
Designated personnel separate from bookkeeper will receive all cash receipts. Designated personnel will write a receipt. Bookkeeper handles preparation ofdeposit and record keeping functions. When deposit is prepared by bookkeeper, receipts for deposit should balance with deposit total. This is verified by deposit total and date documented in receipt book.
Check request/PO's are completed by personnel placing the original order and approved by the principal. The original invoice is attached to check request. (When invoice is unavailable: ex: umpire fee, a standard form is completed and signed by the payee.) Packing slips are attached when goods are received or person receiving verifies receipt by signature and date on invoice. Bookkeeper verifies that approval date is prior to check date. Bookkeepers and principals are instructed that no checks are to be written to "Cash". Check is issued by bookkeeper and signed by principal and Superintendent.
The central office will periodically check each school to verify that the above procedures are being followed.
The above procedures were implemented and included in Bookkeeper Procedures Manual issued August 2006.
Contact Person; Elondia Carter, Financial Director Phone: (912) 632-7363 Fax Number: (912) 632-2454 E-mail Address: ecarter@bcraiders.com