BACON COUNTY BOARD OF EDUCATION ALMA, GEORGIA REPORT ON AUDIT OF THE FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2007 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 23 SUPPLEMENTARY INFORMATION 2 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS 24 3 SCHEDULE OF STATE REVENUE 26 BACON COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS - SECTION I FINANCIAL SCHEDULES SUPPLEMENTARY INFORMATION 4 SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS 27 5 ALLOTMENTS AND EXPENDITURES GENERAL FUND - QUALITY BASIC EDUCATION PROGRAMS (QBE) BY PROGRAM 29 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 January 7, 2008 Honorable Sonny Perdue, Governor Members ofthe General Assembly Members ofthe State Board of Education and Superintendent and Members ofthe 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, 2007, 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 of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Bacon County Board of Education's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, 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. 2007ARL-11 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, 2007, 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. The Bacon County Board of Education has not presented Management's Discussion and Analysis that accounting principles generally accepted in the United States of America 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 January 7, 2008, on our consideration ofthe Bacon County Board ofEducation's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements and other matters. The purpose of that report is to describe the scope of our testing ofinternal 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 23, 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, ~~ ... ,OJl ~~ ;J:ell W. Hinton, CPA, CGFM State Auditor RWH:gp 2007ARL-11 BACON COUNTY BOARD OF EDUCATION BACON COUNTY BOARD OF EDUCATION STATEMENT OF NET ASSETS JUNE 30, 2007 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 and Benefits 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 $ 738,313 1,041,034 358,046 1,333,946 281,044 29,093 412,463 184,105 882,540 15,254,418 2,198,258 -6,878,907 $ ===15..,.8.=3=4=,3=53= $ 51,635 1,812,685 $ 1,864,320 $ 12,052,877 17,880 79,762 826,135 993,379 $ 13,970,033 $ ===1=5'=83=4=,3=53= 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, 2007 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 Sales Taxes Special Purpose Local Option Sales Tax For Capital Projects Real Estate Grants and Contributions not Restricted to Specific Programs Investment Earnings Miscellaneous Total General Revenues Change in Net Assets Net Assets - Beginning of Year EXPENSES CHARGES FOR SERVICES $ 11,313,417 $ 658,880 426,830 352,174 337,135 964,833 120,671 1,317,154 780,272 264,665 895 374 $====1=7 =43=1 =40=5= $ 46,103 173,396 4,394 14,979 10,099 9,288 22,861 264 750 545 870 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 $ 9,128,371 83,934 209,456 217,604 420,336 538,157 3,246 488,491 387,662 $ 65 584 816 $ 12,062,138 $ $ 289,964 2891964 $ -2,138,943 -401,550 -212,980 -119,591 83,201 -416,577 -117,425 -819,375 -102,646 -241,739 -45 808 -4,533,433 $ 2,588,510 1,244,795 7,818 1,099,475 72,241 372 281 $ 5,385,120 $ 851,687 13,118,346 $ ======13=,9=7=0'=03=3= -3- BACON COUNTY BOARD OF EDUCATION BALANCE SHEET GOVERNMENTAL FUNDS JUNE 30, 2007 EXHIBIT"C" ASSETS Cash and Cash Equivalents Investments Accounts Receivable, Net Taxes State Government Federal Government Inventories Total Assets LIABILITIES AND FUND BALANCES LIABILITIES Accounts Payable Salaries and Benefits Payable Total Liabilities FUND BALANCES Reserved for: Bus Replacement Continuation of Federal Programs Inventories Capital Projects Unreserved Designated for Self-Insurance Designated for Student Activities Undesignated Reported in: General Fund Total Fund Balances Total Liabilities and Fund Balances GENERAL FUND DISTRICTWIDE CAPITAL PROJECTS FUND TOTAL $ 662,558 $ 484,594 1,333,946 281,044 29,093 75,755 $ 556,440 214,722 738,313 1,041,034 214,722 1,333,946 281,044 29,093 $ 2,791,235 $ 846,917 $===3,=63=8=,1=52= $ 30,853 $ 1,812,685 $ 1,843,538 $ 20,782 $ 20,782 $ 51,635 1,812,685 1,864,320 $ 17,880 $ 17,880 50,669 50,669 29,093 29,093 $ 826,135 826,135 62,709 105,636 62,709 105,636 681 710 681,710 $ 947,697 $ 826,135 $ 1,773,832 $ 2,791,235 $ 846 917 $ ====3,=63=8=1,=52= 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, 2007 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. $ 1,773,832 $ 412,463 184,105 882,540 15,254,418 2,198,258 -6,878,907 12,052,877 143,324 Net Assets of Governmental Activities (Exhibit "A") $ 13,970,033 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, 2007 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 $ 2,583,054 $ 7,818 $ 1,244,795 11,559,016 1,892,561 545,870 53,796 18,445 369,214 $ 17,011,329 $ 1,263,240 $ 2,583,054 1,252,613 11,559,016 1,892,561 545,870 72,241 369 214 18,274,569 $ 10,879,136 $ 658,880 426,830 352,174 339,123 956,735 120,671 1,198,427 927,991 264,665 871,526 $ 16,996,158 $ $ 15,171 $ 932,526 78,083 $ 97,724 30,391 422,330 628,528 $ 634,712 $ 191,423 10,957,219 658,880 426,830 352,174 339,123 956,735 120,671 1,296,151 958,382 264,665 871,526 422,330 17,624,686 649,883 1,123,949 $ 947 697 $ 826,135 $ ====1.i,;7, ~7~3,!:8=32= 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, 2007 EXHIBIT"F" Total Net Change in Fund Balances - Governmental Funds {Exhibit "E") Amounts reported for Governmental Activities in the Statement of Activities are different because: Capital Outlays are reported as expenditures in Governmental Funds. However, in the Statement of Activities, the cost of Capital Assets is allocated over their estimated useful lives as depreciation expense. In the current period, these amounts are: Capital Outlay Depreciation Expense Excess of Capital Outlay over Depreciation Expense Because some property taxes will not be collected for several months after the School District's fiscal year ends, they are not considered "available" revenues. In the Statement of Activities, only the gain on the sale of the 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 carrying value of the equipment sold. $ $ 765,348 -572,067 649,883 193,281 5,456 3067 Change in Net Assets of Governmental Activities {Exhibit "B") $ ===85=1=,6=87.,. 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, 2007 ASSETS Cash and Cash Equivalents LIABILITIES Funds Held for Others EXHIBIT"G" AGENCY FUNDS $ ===15==81=3= $ ===15===81=3= 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, 2007 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 ofActivities presents a comparison between direct expenses and program revenues for each function of the School District's governmental activities. Direct expenses are those that are specifically associated with a program or function and, therefore, are clearly identifiable to a particular function. Indirect expenses (expenses of the School District related to the administration and support ofthe School District's programs, such as office and maintenance personnel and accounting) are not allocated to programs. Program revenues include (a) charges paid by the recipients ofgoods or services offered by the programs and (b) grants and contributions that are restricted to meeting the operational or capital requirements of a particular program. Revenues that are not classified as program revenues, including all taxes, are presented as general revenues. Fund Financial Statements: The fund financial statements provide information about the School District's funds, including fiduciary funds. Eliminations have been made to minimize the double counting ofinternal activities. Separate statements for each category (governmental and fiduciary) are presented. The emphasis of fund financial statements is on major governmental funds, each displayed in a separate column. -9- BACON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007 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 of when the related cash flows take place. Nonexchange transactions, in which the School District gives (or receives) value without directly receiving (or giving) equal value in exchange, include property taxes, sales taxes, 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 recognized 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. BACON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007 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. 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. Official Code of Georgia Annotated Section 45-8-14 authorize the School District to deposit its funds in one or more solvent banks or insured Federal savings and loan associations. INVESTMENTS COMPOSITION OF INVESTMENTS Investments made by the School District in nonparticipating interest-earning contracts (such as certificates ofdeposit) and repurchase agreements are reported at cost. Participating interest-earning contracts and money market investments with a maturity at purchase ofone year or less are reported at amortized cost. Both participating interest-earning contracts and money market investments with a maturity at purchase greater than one year are reported at fair value. The Official Code ofGeorgia Annotated Section 36-83-4 authorizes the School District to invest its funds. In selecting among options for investment or among institutional bids for deposits, the highest rate ofreturn shall be the objective, given equivalent conditions of safety and liquidity. Funds may be invested in the following: (1) Obligations issued by the State of Georgia or by other states, (2) Obligations issued by the United States government, (3) Obligations fully insured or guaranteed by the United States government or a United States government agency, (4) Obligations of any corporation of the United States government, (5) Prime banker's acceptances, (6) The Local Government Investment Pool administered by the State of Georgia, Office of Treasury and Fiscal Services, (7) Repurchase agreements, and - 11 - BACON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007 EXHIBIT"H" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (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 2006 tax digest year (calendar year) on July 27, 2006 (levy date). Taxes were due on December 20, 2006 (lien date). Taxes collected within the current fiscal year or within 60 days after year-end on the 2006 tax digest are reported as revenue in the governmental funds for fiscal year 2007. 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, 2007, for maintenance and operations amounted to $2,583,054. The tax millage rate levied for the 2006 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 SALES TAXES Special Purpose Local Option Sales Tax, at the fund reporting level, during the year amounted to $1,244,795 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 of donated 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 - 12 - BACON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007 EXHIBIT"H" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES inventories whereby donated food commodities are recorded as an asset and as revenue when received, and expenses/expenditures are recorded as the inventory items are used. Purchased foods are recorded as an asset when purchased and expenses/expenditures are recorded as the inventory items are used. CAPITAL ASSETS Capital assets purchased, including capital outlay costs, are recorded as expenditures in the fund financial statements at the time of purchase (including ancillary charges). On the District-wide financial statements, all purchased capital assets are valued at cost where historical records are available and at estimated historical cost based on appraisals or deflated current replacement cost where no historical records exist. Donated capital assets are recorded at estimated fair market value on the date donated. Disposals are deleted at depreciated recorded cost. The cost of normal maintenance and repairs that do not add to the value ofassets or materially extend the useful lives of the assets is not capitalized. Depreciation is computed using the straight-line method. The School District does not capitalize book collections or works ofart. During the fiscal year under review, no events or changes in circumstances affecting a capital asset that may indicate impairment were known to the School District. 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. NET ASSETS The School District's net assets in the District-wide Statements are classified as follows: Invested in capital assets, net of related debt - This represents the School District's total investment in capital assets, net ofoutstanding debt obligations related to those capital assets. To the extent debt has been incurred but not yet expended for capital assets, such amounts are not included as a component of invested in capital assets, net of related debt. - 13 - BACON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007 EXHIBIT "H" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Restricted net assets - These represent resources for which the School District is legally or contractually obligated to spend resources for bus replacement, continuation of Federal programs, and capital projects in accordance with restrictions imposed by external third parties. Unrestricted net assets - Unrestricted net assets represent resources derived from property taxes, sales taxes, grants and contributions not restricted to specific programs, charges for services, and miscellaneous revenues. These resources are used for transactions relating to the educational and general operations of the School District, and may be used at the discretion of the Board to meet current expenses for those purposes. 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 ofthe State of Georgia, (5) Bonds of any public authority created by the laws of the State of Georgia, providing that the statute that created the authority authorized the use of the bonds for this purpose, (6) Industrial revenue bonds and bonds of development authorities created by the laws of the State of Georgia, and - 14 - BACON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007 EXHIBIT"H" Note 3: DEPOSITS AND INVESTMENTS (7) Bonds, bills, notes, certificates of indebtedness, or other obligations of a subsidiary corporation of the United States government, which are fully guaranteed by the United States government both as to principal and interest or debt obligations issued by the Federal Land Bank, the Federal Home Loan Bank, the Federal Intermediate Credit Bank, the Central Bank for Cooperatives, the Farm Credit Banks, the Federal Home Loan Mortgage Association, and the Federal National Mortgage Association. CATEGORIZATION OF DEPOSITS At June 30, 2007, the bank balances were $935,255. The amounts of the total uninsured bank balances are classified into three categories of custodial credit risk: Category 1 - Uncollateralized, Category 2 - Cash collateralized with securities held by the pledging financial institution, or Category 3 - Cash collateralized with securities held by the pledging financial institution's trust department or agent but not in the School District's name. The School District's uninsured deposits are classified by custodial credit risk category at June 30, 2007, as follows: Custodial Credit Risk Category Bank Balance 1 $ 0 2 727,194 3 0 Total $======7==27-,1==9==4 CATEGORIZATION OF INVESTMENTS At June 30, 2007, the carrying value ofthe School District's total investments was $1,032,973, which is materially the same as fair value. This investment consisted entirely offunds invested in the Local Government Investment Pool administered by the State of Georgia, Office of Treasury and Fiscal Services which are not required to be categorized since the School District did not own any specific identifiable securities in the pool. The investment policy ofthe State ofGeorgia, Office ofTreasury and Fiscal Services for the Local Government Investment Pool (Primary Liquidity Portfolio) does not provide for investment in derivatives or similar investments. Additional information on the Local Government Investment Pool is disclosed in the State of Georgia Comprehensive Annual Financial Report. This audit can be obtained from the Georgia Department ofAudits and Accounts at http://www.audits.state.ga.us/internet/searchRpts. html. - 15 - BACON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007 EXHIBIT "H" Note 3: DEPOSITS AND INVESTMENTS The Primary Liquidity Portfolio consists ofGeorgia Fund 1 which is not registered with the SEC as an investment company but does operate in a manner consistent with the SEC's Rule 2a-7 of the Investment Company Act of 1940. The investment is valued at the pool's share price, $1.00 per share. The pool is an AAAm rated investment pool by Standard and Poor's. The weighted average maturity of Georgia Fund 1 may not exceed 60 days. The weighted average maturity for Georgia Fund 1 on June 30, 2007, was 15 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 1, 2006 Increases Balances Decreases June 30, 2007 Governmental Activities Capital Assets, Not Being Depreciated: Land Construction in Progress $ 412,463 2,025,848 $ $ 362,231 $ 2,203,974 412,463 184,105 Total Capital Assets Not Being Depreciated $ 2,438,311 $ 362,231 $ 2,203,974 $ 596,568 Capital Assets Being Depreciated Buildings and Improvements Equipment Land Improvements $ 13,269,031 $ 2,048,405 605,295 1,985,387 344,459 $ 277,245 $ 15,254,418 194,606 2,198,258 882,540 Less Accumulated Depreciation for: Buildings and Improvements Equipment Land Improvements 4,805,723 1,128,257 570,533 350,765 210,305 10 997 197,673 5,156,488 1,140,889 581,530 Total Capital Assets, Being Depreciated, Net $ 9,418,218 $ 2,035,024 $ -3 067 $ 11,456,309 Governmental Activity Capital Assets - Net $ 11,856,529 $ 2,321,255 $ 2,200,901 $ 12,052,811 Current year depreciation expense by function is as follows: - 16 - BACON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007 EXHIBIT"H" Note 5: CAPITAL ASSETS Instruction Support Services General Administration School Administration Maintenance and Operation of Plant Student Transportation Services Food Services $ 365,297 $ 516 8,078 32,501 141,887 182,982 23,788 Note 6: RESTRICTED ASSETS $====5-72-,0-6!:!:7 Special Purpose Local Option Sales Tax (SPLOST) is reported as restricted assets in the Statement ofNet Assets because its use is limited by statutory provisions. Restricted assets at June 30, 2007, were as follows: District-wide Capital Projects SPLOST Restricted Cash and Cash Equivalents: Capital Acquisitions Restricted Investments: Capital Acquisitions $ 75,755 $ 556,440 Note 7: RISK MANAGEMENT The School District is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors or omissions; job related illness or injuries to employees; acts of God; 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. - 17 - BACON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007 EXHIBIT "H" Note 7: RISK MANAGEMENT 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: 2006 2007 Beginning of Year Liability Claims and Changes in Estimates Claims Paid End of Year Liability $ 0 $ 8 754 $ 7 944 $ 810 $ 810 $ 0 $ 810 $ 0 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. Changes in dental claims liability during the last two fiscal years are as follows: Beginning of Year Liability Claims and Changes in Estimates Claims Paid End of Year Liability 2006 2007 $ 0 $ 163 794 $ 163 794 $ 0 $ 0 $ 157 514 $ 157 514 $ 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 8: ON-BEHALF PAYMENTS The School District has recognized revenues and costs in the amount of $312,291 for health insurance and retirement contributions paid on the School District's behalf by the following State Agencies. - 18 - BACON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007 EXHIBIT"H" Note 8: ON-BEHALF PAYMENTS Georgia Department of Education Paid to the Georgia Department of Community Health For Health Insurance ofNon-Certified Personnel In the amount of $307,878 Paid to the Teachers Retirement System of Georgia For Teachers Retirement System (TRS) Employer's Cost In the amount of $1,863 Office of Treasury and Fiscal Services Paid to the Public School Employees Retirement System For Public School Employees Retirement (PSERS) Employer's Cost In the amount of $2,550 Note 9: SIGNIFICANT COMMITMENTS The following is an analysis ofsignificant outstanding construction or renovation contracts executed by the School District as of June 30, 2007: Project Unearned Executed Contracts School Board Office and Bus Barn $ 1,944,837 The amount described in this note is not reflected in the basic financial statements. Note 10: 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. Note 11: SUBSEQUENT EVENTS On November 6, 2007, the voters ofBacon County voted in favor ofa Special Purpose Local Option Sales Tax referendum for educational purposes. The imposition ofthe tax approved by the voters, as stated in part of the Official Ballot of Bacon County, is as follows: - 19 - BACON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007 EXHIBIT "H" Note 11: SUBSEQUENT EVENTS "Shall a special one percent sales and use tax for educational purposes be continued in Bacon County for a period not to exceed twenty (20) calendar quarters beginning upon expiration of the sales and use tax for educational purposes presently in effect, and for the purpose ofraising not more than $7,800,000 ofnet proceeds by said tax, which net proceeds shall go to the Bacon County School District for the purpose of paying a portion of the cost of (i) acquiring, constructing and equipping new schools and facilities including one new middle/high school, (ii) adding to, renovating, repairing, improving, and equipping existing school buildings and school system facilities, including but not limited to roofrepairs and replacement at the existing elementary school and improvements to athletic facilities, (iii) acquiring miscellaneous new equipment, fixtures and furnishings for the school system, including instructional and administrative technology equipment and safety and security equipment, (iv) acquiring school buses and transportation and maintenance equipment, (v) acquiring band, vocational, and physical education equipment, (vi) acquiring land for new or existing schools, with the maximum cost of the projects described in items (i) - (vi) payable from said tax being $7,800,000, and for the purpose of (vii) paying debt service on the General Obligation Debt of the School District hereinafter described due in 2009 through 2013, the maximum amount of such payment not to exceed $7,000,000, and (viii) paying expenses incident to accomplishing the foregoing; and shall Bacon County School District be authorized to issue general obligation debt in the principal amount of $17,000,000 for the purposes of the Bacon County School District described in items (i) - (vi) and (viii) above and for the purpose ofpayment ofa portion of the interest on such debt?" Note 12: 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 9.28% and employer contributions for the current fiscal year and the preceding two fiscal years are as follows: - 20 - BACON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007 EXHIBIT "H" Note 12: RETIREMENT PLANS Fiscal Year 2007 2006 2005 Percentage Contributed 100% 100% 100% Required Contribution $ 881,826 $ 846,111 $ 784,942 - 21 - (This page left intentionally blank) BACON COUNTY BOARD OF EDUCATION GENERAL FUND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL YEAR ENDED JUNE 30, 2007 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 Inventory- Net Change in Period NONAPPROPRIATED BUDGETS ORIGINAL (1) FINAL (1) ACTUAL AMOUNTS $ 2,450,000 $ 2,450,000 $ 2,583,054 7,818 10,701,520 10,709,936 11,559,016 539,307 1,365,460 1,892,561 281,949 281,949 545,870 2,100 2,100 53,796 369 214 $ 13,974,876 $ 14,809,445 $ 17,011,329 $ 9,278,185 $ 10,162,723 $ 10,879,136 399,143 107,056 331,233 308,214 861,381 133,160 1,135,309 891,241 34,841 889 810 410,143 347,221 334,406 351,062 861,381 133,160 1,135,309 922,838 40,580 889,810 658,880 426,830 352,174 339,123 956,735 120,671 1,198,427 927,991 264,665 871 526 $ 14,369,573 $ 15,588,633 $ 16,996,158 $ -394 697 $ -779188 $ 15171 $ -67,066 $ -67,066 67066 67066 $ 0 $ 0 $ -394,697 $ -779,188 $ 15,171 860,537 860,537 932,526 8 778 4295 Fund Balances - Ending $ 474 618 $ 85 644 $ =====94====7=6=97.... 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. - 23- BACON COUNTY BOARD OF EDUCATION SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS YEAR ENDED JUNE 30, 2007 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 Enhancing Education Through Technology Program 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 Total Federal Financial Assistance N/A = Not Available CFDA NUMBER PASSTHROUGH ENTITY ID NUMBER EXPENDITURES IN PERIOD 10.553 10.555 N/A N/A $ $ (2) 764 141 764,141 10.550 N/A $ 44 580 808,721 . 84.027 84.173 N/A $ N/A $ 308,763 23,056 331,819 84.318 84.367 84.011 84.358 . 84.298 84.010 84.048 84.186 N/A N/A N/A N/A N/A N/A N/A NIA $ 8,901 97,777 34,886 82,413 4,601 587,598 27,710 8495 1,184,200 93.600 N/A $ 175 810 $===2='=16=8..,,7=3=1 -24- BACON COUNTY BOARD OF EDUCATION SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS YEAR ENDED JUNE 30, 2007 SCHEDULE "2" 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 ($102,839) were not maintained separately and are included in the 2007 National School Lunch Program. 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. - 25- BACON COUNTY BOARD OF EDUCATION SCHEDULE OF STATE REVENUE YEAR ENDED JUNE 30, 2007 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 Education Equalization Funding Grant Food Services Vocational Education Amended Formula Adjustment Other State Programs Comprehensive Academic Performance System (CAPS) Health Insurance Middle School Summer Remedial Program National Teacher Certification Preschool Handicapped Program Pupil Transportation - State Bonds Special Education Low Incidence Grant Statewide K-8 Reading and Mathematics Program Teachers' Retirement Virtual Schools State Grant Office of Treasury and Fiscal Services Public School Employees Retirement See notes to the basic financial statements. -26- SCHEDULE "3" GOVERNMENTAL FUND TYPE GENERAL FUND $ 242,330 614,043 60,251 1,457,440 71,959 730,915 33,876 1,251,431 839,078 433,259 3,071 129,940 690,300 473,510 311,777 51,948 35,449 97,596 35,565 199,866 62,575 36,213 395,166 503,038 472,139 350,944 39,964 20,000 48,642 5,964 45,351 1,107,997 50,646 143,678 -184,728 40,075 307,878 1,263 12,358 53,103 250,000 3,885 24,748 1,863 100 2550 $ ====1=1,..,55=9=,0=16,... BACON COUNTY BOARD OF EDUCATION SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS YEAR ENDED JUNE 30, 2007 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 $ 918,492 $ 3,260,344 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. - 27 - {This page left intentionally blank) BACON COUNTY BOARD OF EDUCATION GENERAL FUND- QUALITY BASIC EDUCATION PROGRAM (QBE) ALLOTMENTS AND EXPENDITURES BY PROGRAM YEAR ENDED JUNE 30, 2007 SCHEDULE "5" DESCRIPTION ALLOTMENTS FROM GEORGIA DEPARTMENT OF EDUCATION (1) (2) ELIGIBLE QBE PROGRAM COSTS SALARIES OPERATIONS TOTAL 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) 657,905 $ 82,433 1,593,529 82,148 794,798 37,821 1,364,369 917,824 477,156 1,713,697 60,713 35,206 106,185 37 262 479,563 $ 193,352 1,607,982 223,504 860,646 129,299 1,568,930 1,178,490 400,004 146 136,538 768,619 341,886 164,735 113,640 23,374 123,704 61 127 6,616 $ 1,041 25,340 852 15,692 560 19,419 54,060 33,761 49,898 263 486,179 194,393 1,633,322 224,356 876,338 129,859 1,588,349 1,232,550 433,765 146 136,538 818,517 341,886 164,735 113,640 23,374 123,967 61127 TOTAL DIRECT INSTRUCTIONAL PROGRAMS $ 7,961,046 $ 8,375,539 $ 207,502 $ 8,583,041 Media Center Program Staff and Professional Development 218,072 39930 278,354 22,425 300,779 24 760 TOTAL QBE FORMULA FUNDS $ 8219048 $ 8,653,893 $ s 229,927 ===8,.9..0=8=15.,.8...,o (1) Comprised of State Funds plus Local Five Mill Share. (2) Allotments do not include the impact of the State amended formula adjustment. See notes to the basic financial statements. - 29- SECTION II COMPLIANCE AND INTERNAL CONTROL REPORTS 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 January 7, 2008 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 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, 2007, which collectively comprise Bacon County Board of Education's basic financial statements and have issued our report thereon dated January 7, 2008. 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 as a basis for designing our auditing procedures for the purpose of expressing our opinions on the financial statements, but not for the purpose ofexpressing an opinion on the effectiveness of the Bacon County Board of Education's internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness of the Bacon County Board of Education's internal control over financial reporting. Our consideration of internal control over financial reporting was for the limited purpose described in the preceding paragraph and would not necessarily identify all deficiencies in internal control over financial reporting that might be significant deficiencies or material weaknesses. However, as discussed below, we identified certain deficiencies in internal control over financial reporting that we consider to be significant deficiencies. 2007YB-40 A control deficiency exists when the design or operation ofa control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect misstatements on a timely basis. A significant deficiency is a control deficiency, or combination of control deficiencies, that adversely affect the Bacon County Board of Education's ability to initiate, authorize, record, process, or report financial data reliably in accordance with generally accepted accounting principles such that there is more than a remote likelihood that a misstatement of the Bacon County Board ofEducation's financial statements that is more than inconsequential will not be prevented or detected by the Bacon County Board of Education's internal control. We consider items FS-6031-07-01 and FS-6031-07-02 in the accompanying Schedule ofFindings and Questioned Costs to be significant deficiencies in internal control over financial reporting. A material weakness is a significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood that a material misstatement ofthe financial statements will not be prevented or detected by the Bacon County Board of Education's internal control. Our consideration of the internal control over financial reporting was for the limited purpose described in the first paragraph ofthis section and would not necessarily disclose all deficiencies in internal control that might be significant deficiencies and, accordingly, would not necessarily disclose all significant deficiencies that are also considered to be material weaknesses. However, of the significant deficiencies described above, we consider item FS-6031-07-02 to be 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. We noted a certain matter that we have reported to management of Bacon County Board of Education in a separate letter dated January 7, 2008. Bacon County Board of Education's response to the findings identified in our audit is described in the accompanying Schedule ofManagement's Responses. We did not audit Bacon County Board of Education's response and, accordingly, we express no opinion on it. 2007YB-40 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, RWH:gp 2007YB-40 ~lt)-~~ Russell W. Hinton, CPA, CGFM State Auditor 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 January 7, 2008 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 COMPLIANCE WITH REQUIREMENTS APPLICABLE TO EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH 0MB CIRCULARA-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 ofits major Federal programs for the year ended June 30, 2007. Bacon County Board of Education's major Federal programs are identified in the Summary ofAuditor'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 ofcompliance in accordance with auditing standards generally accepted in the United States ofAmerica; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General ofthe United States; and 0MB Circular A133, Audits ofStates, 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 2007SA-10 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. 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, 2007. 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, but not for the purpose ofexpressing an opinion on the effectiveness ofinternal control over compliance. Accordingly, we do not express an opinion on the effectiveness of the Bacon County Board of Education's internal control over compliance. A control deficiency in an entity's internal control over compliance exists when the design or operation ofa control does not allow management or employees, in the normal course ofperforming their assigned functions, to prevent or detect noncompliance with a type ofcompliance requirement of a Federal program on a timely basis. A significant deficiency is a control deficiency, or combination ofcontrol deficiencies, that adversely affects the entity's ability to administer a Federal program such that there is more than a remote likelihood that noncompliance with a type of compliance requirement of a Federal program that is more than inconsequential will not be prevented or detected by the entity's internal control. A material weakness is a significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood that material noncompliance with a type of compliance requirement of a Federal program will not be prevented or detected by the entity's internal control. Our consideration ofthe internal control over compliance was for the limited purpose described in the first paragraph of this section and would not necessarily identify all deficiencies in internal control that might be significant deficiencies or material weaknesses. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses, as defined above. 2007SA-10 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, RWH:gp 2007SA-10 Rusell W. Hinton, CPA, CGFM State Auditor 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, 2007 PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS FINDING CONTROL NUMBER AND STATUS FS-6031-05-0 I FS-6031-06-0 I Further Action Not Warranted Partially Resolved - See Corrective Action/Responses CORRECTIVE ACTION/RESPONSES CASH AND CASH EQUIVALENTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Controls over School Activity Accounts Finding Control Number: FS-6031-06-0 I The Bacon County Board of Education has partially resolved the inadequate internal controls over school activity accounts. We have achieved adequate separation ofduties as outlined in our bookkeeper procedures handbook given to all bookkeepers. We are continuing to work on the remainder of the finding by continuing to implement our bookkeeper handbook (updated September 2007). The central office will periodically check each school to monitor that transactions are being processed according to established policies and that the procedures handbook is being followed. 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, 2007 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. Significant Deficiencies in Internal Control Disclosed by the Audit ofthe Financial Statements The audit report for the Bacon County Board of Education disclosed financial statement significant deficiencies related to the following control categories. Revenues/Receivables/Receipts Financial Reporting Expenditures/Liabilities/Disbursements Of the significant deficiencies described above, Financial Reporting is 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. Significant Deficiencies in Internal Control Over Major Programs The audit report for the Bacon County Board ofEducation did not disclose any significant deficiencies 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: 84.010 Title I Grants to Local Educational Agencies 84.027 Special Education - Grants to States 84.173 Special Education - Preschool Grants 8. Type "A" Program Dollar Threshold The dollar threshold for type "A" programs was $300,000. - 1- BACON COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2007 I SUMMARY OF AUDITOR'S RESULTS 9. Low Risk Auditee The Bacon County Board ofEducation qualified as a low risk auditee as defined by Section .530 ofOMB Circular A-133. II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Controls over School Activity Accounts Significant Deficiency Finding Control Number: FS-6031-07-01 Condition: This is a repeat finding (FS-6031-05-01 and FS-6031-06-01) from the fiscal years ended June 30, 2005 and June 30, 2006, respectively. The accounting procedures of the 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: Revenues/Receivables/Receipts Four of twenty-five receipts tested were not deposited in a timely manner. Expenditures/Liabilities/Disbursements Five ofthirty-five vouchers tested did not contain an original invoice. Cause: These deficiencies were a result ofmanagement's failure to fully implement the procedures as outlined in the "Local School Financial Accounting" handbook developed by the School District and distributed to all accounting personnel. Effect: Errors and/or irregularities may not be detected in a timely manner. -2 - BACON COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2007 II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Controls over School Activity Accounts Significant Deficiency Finding Control Number: FS-6031-07-01 Recommendation: The School District should implement procedures to ensure that the procedures, as outlined in the "Local School Financial Accounting" handbook developed by the School District and distributed to all accounting personnel, are fully implemented. In addition, management should monitor controls to provide reasonable assurance that transactions are processed according to established polices. FINANCIAL REPORTING Inadequate Controls over Financial Reporting Material Weakness Finding Control Number: FS-6031-07-02 Condition: The School District did not have adequate controls in place over the financial statement reporting process. Criteria: Management is responsible for having adequate controls over the financial reporting process, which not only includes proper recording oftransactions to the general ledger, but extends to accurate preparation and presentation ofthe financial statements, including note disclosures. Questioned Cost: NIA Information: The Governmental Accounting Standards Board (GASB) Statement 34 reporting model requires the presentation ofboth fund level and entity-wide level statements in the School District's financial statements. During the audit, correcting entries were proposed by the auditor and accepted by the client to properly present the entity's fund level and entity-wide level financial statements. Cause: The School District did not implement an adequate system ofinternal control over the financial statement reporting process. Effect: The School District does not have adequate controls in place to ensure that the financial statements were properly prepared in accordance with generally accepted accounting principles. -3- BACON COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2007 II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS FINANCIAL REPORTING Inadequate Controls over Financial Reporting Material Weakness Finding Control Number: FS-6031-07-02 Recommendation: The School District should develop and implement internal controls over the financial statement reporting process to ensure that activity is properly recorded in the general ledger; to verify that financial statements (including note disclosures) properly reflect activity reported in the general ledger; and to include a monitoring process to evaluate the accuracy of the financials presented for audit. III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS No matters were reported. -4- SECTIONV MANAGEMENT'S RESPONSES BACON COUNTY BOARD OF EDUCATION SCHEDULE OF MANAGEMENT'S RESPONSES YEAR ENDED JUNE 30, 2007 Finding Control Number: FS-6031-07-01 We concur with this finding. The Bacon County Board of Education implemented the following procedures to address the inadequate controls related to the principals' (School Activity) accounts: Total cash collections totaling $50.00 or more must be deposited daily by the bookkeeper. The bookkeepers have been instructed that ifthey are not able to obtain an original invoice that they are to initial the copy and make a note as to why there is not an original invoice. The central office will periodically check each school to verify that the above procedures are being followed. Finding Control Number: FS-6031-07-02 We concur with this finding. The Bacon County Board ofEducation will accrue the July and August SPLOST receipts for the 2007-08 fiscal year to provide materially correct financial statements. Contact Person: Kathy Courson, Bookkeeper Phone: (912) 632-7363, Fax Number: (912) 632-2454 E-mail Address: kathy@bcraiders.com