BARROW COUNTY BOARD OF EDUCATION WINDER, 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 BARROW 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 STATEMENTOFNETASSETS 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 STATEMENT OF CHANGES IN FIDUCIARY NET ASSETS FIDUCIARY FUNDS 9 I NOTES TO THE BASIC FINANCIAL STATEMENTS 11 SCHEDULES REQUIRED SUPPLEMENTARY INFORMATION 1 SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL GENERALFUND 29 SUPPLEMENTARY INFORMATION 2 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS 30 3 SCHEDULE OF STATE REVENUE 32 BARROW COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS - SECTION I FINANCIAL SCHEDULES SUPPLEMENTARY INFORMATION 4 SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS 34 5 ALLOTMENTS AND EXPENDITURES GENERAL FUND - QUALITY BASIC EDUCATION PROGRAMS (QBE) BY PROGRAM 37 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 BARROW CO:t]NTY 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 June 5, 2008 Honorable Sonny Perdue, Governor Members ofthe General Assembly Members ofthe State Board of Education and Superintendent and Members ofthe Barrow 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 I) of the Barrow 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 ofcontents. These financial statements are the responsibility ofthe Barrow 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 GovernmentAuditing 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 Barrow 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 ofthe Barrow County Board ofEducation, as ofJune 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 Barrow County Board ofEducation 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 June 5, 2008, on our consideration of the Barrow County Board of Education'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 ofthat report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be 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 29, 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 Barrow 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, 0 . 4 h ~H6.QQ, Russell W. Hinton, CPA, CGFM State Auditor RWH:as 2007ARL-11 BARROW COUNTY BOARD OF EDUCATION BARROW 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 Other Inventories Capital Assets Land Construction in Progress Land Improvements Buildings Equipment Less: Accumulated Depreciation Total Assets LIABILITIES Accounts Payable Salaries and Benefits Payable Contracts Payable Retainages Payable Deposits and Deferred Revenues Long-Term Liabilities Due Within One Year Due in More Than One Year Total Liabilities NET ASSETS Invested in Capital Assets, Net of Related Debt Restricted for Continuation of Federal Programs Debt Service Capital Projects Unrestricted Total Net Assets Total Liabilities and Net Assets The notes to the basic financial statements are an integral part of this statement. - 1- EXHIBIT"A" GOVERNMENTAL ACTIVITIES $ 6,042,086 52,640,931 4,073,146 7,034,073 1,081,990 363,623 71,256 1,993,249 37,332,433 2,871,959 89,897,941 11,695,689 -26,604,031 $ ======1=88='=49=4=,3=4=5 $ 1,924,789 10,764,638 4,096,307 2,348,871 3,607 5,744,392 78,291,252 $ 103,173,856 $ 69,701,504 305,766 1,784,064 5,440,147 8,089,008 $ 85,320,489 $ ======1=88..,,4=9=4=,3=4=5 BARROW 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 Central Support Services Other Support Services Operations of Non-Instructional Services Enterprise Operations Food Services Interest on Short-Term and Long-Term Debt Total Governmental Activities General Revenues Taxes Property Taxes For Maintenance and Operations For Debt Services Railroad Cars Sales Taxes Special Purpose Local Option Sales Tax For Capital Projects Intangible Recording Tax Real Estate Grants and Contributions not Restricted to Specific Programs Investment Earnings Miscellaneous Special Item Rutland Psychoeducational Facility Land Donation Total General Revenues and Special Item Change in Net Assets Net Assets - Beginning of Year EXPENSES CHARGES FOR SERVICES $ 63,891,819 $ 3,372,817 2,910,811 1,654,700 1,087,468 6,275,912 1,343,458 8,143,457 4,885,402 641,248 49,200 385,718 5,553,251 2,821,192 $ 103,016,453 $ 9,750 1,485,137 1,819,891 3 314,778 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 GRANTS AND CONTRIBUTIONS CAPITAL GRANTS AND CONTRIBUTIONS NET (EXPENSES) REVENUES AND CHANGES IN NET ASSETS $ 44,562,231 $ 507,181 310,546 1,126,904 3,308,532 2,127,480 2,931,536 1,560,309 3,446 42,069 3,339,856 $ 59,820,090 $ 496,368 $ 21,295 19,175 853 1,576 47,140 372,942 4,009 31,263 994 621 $ -18,823,470 -2,844,341 -2,600,265 -527,796 2,240,239 -4,147,579 -1,341,882 -5,164,781 -2,952, 151 -633,793 -7, 131 1,099,419 -362,241 -2,821, 192 -38,886,964 $ 30,277,104 9,524 10,906 9,330,010 1,157,256 410,772 3,748,108 3,086,751 1,635,917 90 723 $ 49 757 071 $ 10,870,107 74,450,382 $ ====85='=32=0=,4=8=9 -3- BARROW 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 Other Inventories Due From Other Funds GENERAL FUND DISTRICTWIDE CAPITAL PROJECTS FUND DEBT SERVICE FUND TOTAL $ 3,272,601 $ 986,589 $ 1,782,896 $ 7,245,554 45,394,826 551 1,263,478 1,658,664 617 7,034,073 1,081,990 363,623 71,256 125 6,042,086 52,640,931 2,922,759 7,034,073 1,081,990 363,623 71,256 125 Total Assets $ 20,332,700 $ 48,040,079 $ 1,784,064 $ ====7=0,=15=6:!a,8=4==3 LIABILITIES AND FUND BALANCES LIABILITIES Accounts Payable $ Salaries and Benefits Payable Contracts Payable Retainages Payable Deposits and Deferred Revenue Due To Other Funds Total Liabilities $ FUND BALANCES Reserved for: Continuation of Federal Programs $ Debt Service Inventories Capital Projects Unreserved Designated for Student Activities Undesignated Reported in: General Fund Total Fund Balances $ 1,924,789 10,764,638 $ 3,607 12,693,034 $ 234,510 71,256 $ 839,838 6,494 062 7,639,666 $ 4,096,307 2,348,871 125 6 445 303 $ 41,594,776 41,594 776 $ $ $ $ 1,784,064 1,784,064 $ 1,924,789 10,764,638 4,096,307 2,348,871 3,607 125 19,138 337 234,510 1,784,064 71,256 41,594,776 839,838 6 494 062 51,018 506 Total Liabilities and Fund Balances $ 20,332,700 $ 48,040,079 $ 1,784,064 $====10....=15=6=,8=4=3 The notes to the basic financial statements are an integral part of this statement. -4 - BARROW 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. Long-Term Liabilities, including Bonds Payable, are not due and payable in the current period and therefore are not reported as liabilities in the funds. Long-Term Liabilities at year-end consist of: Bonds Payable Capital Leases Compensated Absences Installment Sales Agreement Unamortized Bond Premiums Total Long-Term Liabilities Net Assets of Governmental Activities (Exhibit "A") $ 51,018,506 $ 1,993,249 37,332,433 2,871,959 89,897,941 11,695,689 -26,604,031 117,187,240 1,150,387 $ -78,025,000 -2,074,184 -394,216 -872,468 -2,669,776 -84,035,644 $ ====85=!'=32=0a!e=,4=89= The notes to the basic financial statements are an integral part of this statement. -5- BARROW 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 Central Support Services Other Support Services Enterprise Operations Food Services Operation Capital Outlay Debt Services Principal Interest Total Expenditures Excess of Revenues over (under) Expenditures OTHER FINANCING SOURCES {USES} Capital Contributions Installment Sales Agreement Transfers In Transfers Out Total Other Financing Sources (Uses) Net Change in Fund Balances Fund Balances - Beginning GENERAL FUND DISTRICTWIDE CAPITAL PROJECTS FUND DEBT SERVICE FUND TOTAL $ 30,074,440 $ 1,568,028 $ 9,330,010 56,059,261 621,679 7,881,879 3,314,778 405,352 2,558,769 1,737,271 $ 101,041,009 $ 12,510,458 $ 2,928 $ 122,630 125,558 $ 30,077,368 10,898,038 56,680,940 7,881,879 3,314,778 3,086,751 1,737,271 113,677,025 $ 63,739,285 $ 63,739,285 3,287,089 2,910,811 1,654,700 1,150,166 $ 6,272,479 1,337,864 7,881,011 4,443,438 625,109 49,200 385,718 5,427,395 55,058 126,044 128,671 $ 35,462,501 1,698 3,287,089 2,910,811 1,654,700 1,276,210 6,272,479 1,468,233 7,881,011 4,443,438 625,109 49,200 385,718 5,427,395 35,517,559 576,866 7309 39,865 25,586 5,745,000 2,788,297 6,361,731 2,821,192 $ 99,803,498 $ 35,782,667 $ 8,534,995 $ 144,121,160 $ 1,237,511 $ -23,272,209 $ -8,409,437 $ -30,444, 135 $ 90,723 $ 90,723 912,333 912,333 $ 4,939,249 4,939,249 $ -315,905 -4,623,344 -4,939,249 $ -315,905 $ -3,620,288 $ 4,939,249 $ 1,003,056 $ 921,606 $ -26,892,497 $ -3,470,188 $ -29,441,079 6,718,060 68,487,273 5,254,252 80,459,585 Fund Balances - Ending $ 7,639,666 $ 41,594,776 $ 1,784,064 $=====5=1,=0=18=,5=0=6 The notes to the basic financial statements are an integral part of this statement. -6- BARROW COUNTY BOARD OF EDUCATION RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENTS 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. Some of the Capital Assets acquired this year were financed with capital leases. In Governmental Funds, an installment sales agreement is considered a source of financing, but in the Statement of Net Assets, the obligation is reported as a Long-Term Liability. Repayment of Long-Term Debt is reported as an expenditure in Governmental Funds, but the repayment reduces Long-Term Liabilities in the Statement of Net Assets. In the current year, these amounts consist of: Bond Principal Retirements Capital Lease Payments Installment Sales Agreement Payments Total Long-Term Debt Repayments Some items reported in the Statement of Activities do not require the use of current financial resources and therefore are not reported as expenditures in Governmental Funds. These activities consist of: Amortization of Bond Premiums Increase in Compensated Absences Total Additional Expenditures $ -29,441,079 $ 37,371,727 -2,888,681 34,483,046 220,166 -101,354 -912,333 $ 5,500,000 821,866 39,865 6,361,731 $ 333,722 -73,792 259,930 Change in Net Assets of Governmental Activities {Exhibit "B") $ ==10='=87=0='1=0=7 The notes to the basic financial statements are an integral part of this statement. -7- BARROW COUNTY BOARD OF EDUCATION STATEMENT OF FIDUCIARY NET ASSETS FIDUCIARY FUNDS JUNE 30, 2007 EXHIBIT"G" ASSETS Cash and Cash Equivalents LIABILITIES Funds Held for Others NET ASSETS Held in Trust for Private Purposes Total Liabilities and Net Assets PRIVATE PURPOSE TRUSTS AGENCY FUNDS $ 51,954 $ ===1=55:!i,2=5=8 $ 155,258 $ _ _ _5_1~,9_5_4 $ 51,954 $ ====15=5,=25=8 The notes to the basic financial statements are an integral part of this statement. -8- BARROW COUNTY BOARD OF EDUCATION STATEMENT OF CHANGES IN FIDUCIARY NET ASSETS FIDUCIARY FUNDS YEAR ENDED JUNE 30, 2007 EXHIBIT"H" ADDITIONS Contributions Donors Investment Earnings Interest Total Additions DEDUCTIONS Scholarships Change in Net Assets Net Assets - Beginning Net Assets - Ending PRIVATE PURPOSE TRUSTS $ 125 1,543 $ 1,668 $ 4,400 $ -2,732 541686 $ ===5=1=9=5=4 The notes to the basic financial statements are an integral part of this statement. -9- (This page left intentionally blank) BARROW COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007 EXHIBIT "I" Note 1: DESCRIPTION OF SCHOOL DISTRICT AND REPORTING ENTITY REPORTING ENTITY The Barrow 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 Barrow 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. The School District reports the following major governmental funds: - 11 - BARROW COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007 EXHIBIT "I" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 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), Bond Proceeds and grants from Georgia State Financing and Investment Commission to be used for the acquisition, construction or renovation ofmajor capital facilities. Debt Service Fund accounts for taxes (property and sales) legally restricted for the payment of general long-term principal, interest and paying agent's fees. The School District reports the following fiduciary fund types: Private Purpose Trust funds report trust arrangements in which the corpus is to be invested and preserved intact with the resultant income to be used to administer, secure and manage funds and assets to provide educational scholarships for students in Barrow County and for other general purposes. Agency funds account for assets held by the School District as an agent for various funds, governments or individuals. BASIS OF ACCOUNTING The basis ofaccounting determines when transactions are reported on the financial statements. The District-wide governmental and fiduciary fund financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded at the time liabilities are incurred, regardless of when the related cash flows take place. Nonexchange transactions, in which the School District gives (or receives) value without directly receiving (or giving) equal value in exchange, include property taxes, sales taxes, 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 - 12 - BARROW COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007 EXHIBIT "I" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 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, except for principal and interest on general long-term debt, which are recognized as expenditures to the extent they have matured. Capital asset acquisitions are reported as expenditures in governmental funds. Proceeds ofgeneral long-term liabilities, acquisitions under an installment sales agreement and acquisitions under capital leases are reported as other financing sources. 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 ofretum 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, - 13 - BARROW COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007 EXHIBIT "I" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (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 Barrow County Board ofCommissioners fixed the property tax levy for the 2006 tax digest year (calendar year) on October 10, 2006 (levy date). Taxes were due on December 10, 2006. 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 Barrow County Tax Commissioner bills and collects the property taxes for the School District, withholds 2.5% of taxes 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 $30,063,534 and for school bonds amounted to $2,928. The tax millage rate levied for the 2006 tax year (calendar year) for the Barrow County Board of Education was as follows (a mill equals $1 per thousand dollars of assessed value): School Operations 18.5 mills SALES TAXES Special Purpose Local Option Sales Tax, at the fund reporting level, during the year amounted to $9,330,010 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. - 14 - BARROW COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007 EXHIBIT "I" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 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 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. 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 All NIA $ 5,000 20 to 80 years $ 5,000 10 to 80 years $ 5,000 3 to 20 years Depreciation is used to allocate the actual or estimated historical cost of all capital assets over estimated useful lives. - 15 - BARROW COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007 EXHIBIT "I" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES GENERAL OBLIGATION BONDS The School District issues general obligation bonds to provide funds for the acquisition and construction of major capital facilities. Bond issuance costs are recognized in the financial statements during the fiscal year bonds are issued. In addition, general obligation bonds have been issued to refund existing general obligation bonds. General obligation bonds are direct obligations and pledge the full faith and credit of the government. The outstanding amount of these bonds is recorded in the Statement of Net Assets. 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. 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, debt service 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. At June 30, $1,872,532 ofdeposits were not secured by surety bond, insurance or collateral as specified above. The School District is working with the affected financial institutions to ensure appropriate levels of collateral are maintained for all of the School District's deposits. Acceptable security for deposits consists of any one of or any combination of the following: - 16 - BARROW COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007 EXHIBIT "I" Note 3: DEPOSITS AND INVESTMENTS (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, 2007, the bank balances were $8,966,977. 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 $ 1,872,532 2 732,966 3 5,983,997 Total $ 8,589.495 - 17 - BARROW COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007 EXHIBIT "I" Note 3: DEPOSITS AND INVESTMENTS CATEGORIZATION OF INVESTMENTS The School District's investments as of June 30, 2007, are presented below. All investments are presented by investment type and debt securities are presented by maturity. Investment Type Fair Value Other Investments U.S. Treasury Money Market Funds $ 45,395,377 Investment Pools Office of Treasury and Fiscal Services Georgia Fund 1 7,245,554 Total Investments $ 52,640,931 The Local Government Investment Pool administered by the State of Georgia, Office of Treasury and Fiscal Services is not required to be categorized since the School District did not own any specific identifiable securities in the pool. The investment policy ofthe State of Georgia, Office of Treasury 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 of Audits and Accounts at http://www.audits.state.ga.us/internet/searchRpts.html. 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. U. S. Treasury Money Market funds of $906,302 are in a Treasury Portfolio Fund managed by Fidelity Investments. The Treasury Portfolio Fund is rated AAAm by Standard and Poor's and Aaa by Moody's. The weighted average maturity of the fund is approximately 13 days. U. S. Treasury Money Market funds of $44,489,075 are in a Goldman Sachs Financial Square Treasury Obligations Fund managed by Regions Bank. This Fund is rated AAAm by Standard and Poor's and Aaa by Moody's. The weighted average maturity of the fund is approximately 20 days. - 18 - BARROW COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007 EXHIBIT "I" 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 Decreases Balances June 30, 2007 Governmental Activities Capital Assets, Not Being Depreciated: Land Construction in Progress $ 1,838,526 $ 154,723 2,361,284 35,104,556 $ $ 1,993,249 133 407 37,332,433 Total Capital Assets Not Being Depreciated $ 4,199,810 $ 35,259,279 $ 133 407 $ 39,325,682 Capital Assets Being Depreciated Buildings and Improvements Equipment Land Improvements $ 89,879,491 $ 9,963,980 2,723,837 18,450 2,079,283 $ 148,122 $ 89,897,941 347,574 11,695,689 2,871,959 Less Accumulated Depreciation for: Buildings and Improvements Equipment Land Improvements 16,759,987 5,849,038 1,352,545 1,806,971 943,858 137,852 246,220 18,566,958 6,546,676 1,490,397 Total Capital Assets, Being Depreciated, Net $ 78,605,738 $ -642,826 $ 101 354 $ 77,861,558 Governmental Activity Capital Assets - Net $ 82,805.548 $ 34,616.453 $ 234,761 $ 117.187.240 Capital assets being acquired under capital leases as of June 30, 2007, are as follows: Governmental Funds Buildings and Improvements Equipment Less: Accumulated Depreciation $ 2,805,899 2,336,614 943,340 $ 4,199.173 Capital assets being acquired under installment sales agreement as of June 30, 2007, are as follows: - 19 - BARROW COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007 EXHIBIT "I" Note 5: CAPITAL ASSETS Governmental Funds Construction in Progress Current year depreciation expense by function is as follows: $====16,.,,.,4=a!!3""'=6 Instruction Support Services Pupil Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Food Services $ 1,998,249 $ 85,728 77,194 3,433 6,344 189,775 385,964 16,138 764,576 125,856 $ 2,888.681 Note 6: RESTRICTED ASSETS Special Purpose Local Option Sales Tax (SPLOST), general obligation bond proceeds, installment sales agreement proceeds and property tax levied specifically for retirement of outstanding bond principal, interest and paying agent's fees (Debt Service Funds) are restricted assets in the Statement of Net Assets because their use is limited by applicable bond covenants or statutory provisions. Restricted assets at June 30, 2007, were as follows: Restricted Cash and Cash Equivalents: Debt Services Capital Acquisitions Restricted Investments: Debt Services Capital Acquisitions District-wide Capital Projects Bond Installment Debt Service SPLOST Proceeds Sales Agreement Funds $ 986,589 $ 9,240,197 $ 35,248,327 $ $ 1,782,896 $ 551 906,302 Note 7: INTERFUND ASSETS AND LIABILITIES Due to and due from other funds are recorded for interfund receivables and payables which arise from interfund transactions. Interfund balances at June 30, 2007, consisted of the following: - 20 - BARROW COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007 EXHIBIT "I" Note 7: INTERFUND ASSETS AND LIABILITIES Due From Other Funds Due To Other Funds General Fund District-wide Capital Projects $ 125 $ 125 $ 125 $ 125 Transfers are used to reimburse the General Fund for payments made. Note 8: INTERFUND TRANSFERS Interfund transfers for the year ended June 30, 2007, consisted of the following: Transfer to Transfers From District-wide General Capital Fund Projects Debt Service Fund $ 315 905 $ 4,623,344 Transfers are used to move property and sales tax revenues collected by the General Fund and the District-wide Capital Projects Fund to the Debt Service Fund to pay principal and interest on bonds and to pay agent fees. Note 9: RISK MANAGEMENT The School District is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors or omissions; job related illness or injuries to employees; acts of God and unemployment compensation. The School District has obtained commercial insurance for risk ofloss associated with torts, assets, errors or omissions and acts of God. 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 is self-insured with regard to unemployment compensation claims. 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. - 21 - BARROW COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007 EXHIBIT "I" Note 9: RISK MANAGEMENT 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 $ 18,283 $ 18,283 $ 0 $ 0 $ 10 915 $ 10 915 $ 0 The School District participates in the Georgia Education Workers' Compensation Trust, a public entity risk pool organized on December 1, 1991, to develop, implement and administer a program of workers' compensation self-insurance for its member organizations. The School District pays an annual premium to the Trust for its general insurance coverage. Additional insurance coverage is provided through an agreement by the Trust with the Midwest Employers Casualty Company to provide coverage for potential losses sustained by the Trust in excess of $500,000 loss per occurrence, up to $2,000,000. The School District has purchased surety bonds to provide additional insurance coverage as follows: Position Covered Amount Superintendent All Employees $ 100,000 $ 100,000 Note 10: SHORT-TERM DEBT The School District issues tax anticipation notes in advance of property tax collections, depositing the proceeds in its General Fund. This short-term debt is to provide cash for operations until property tax collections are received by the School District. Article IX, Section V, Paragraph V of the Constitution ofthe State ofGeorgia limits the aggregate amount ofshort-term debtto 75 percent of the total gross income from taxes collected in the preceding year and requires all short-term debt to be repaid no later than December 31 of the calendar year in which the debt was incurred. Short-term debt activity for the fiscal year is as follows: Beginning Balance Issued Redeemed Ending Balance Tax Anticipation Notes $====== $ 4,038.973 $ 4,038.973 $====='= - 22 - BARROW COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007 EXHIBIT "I" Note 11: LONG-TERM DEBT CAPITAL LEASES On February 1, 2002, the Barrow County Board of Education entered into an agreement with the Winder-Barrow Industrial Building Authority, whereby revenue bonds were issued to finance the cost of acquiring, constructing and equipping a certain consolidated central office and related real and personal property. The Barrow County Board of Education also entered into various lease agreements as lessee for school buses and copiers. These lease agreements qualify as capital leases for accounting purposes and, therefore, have been recorded at the present value ofthe future minimum lease payments as of the date of their inception. INSTALLMENT SALES AGREEMENT The Barrow County Board of Education entered into an agreement dated June 1, 2006, with the Northeast Georgia Regional Educational Service Agency for the construction and subsequent lease of the Rutland Center. Under the terms of the agreement, the School District will make annual payments through July 15, 2020. COMPENSATED ABSENCES Compensated absences represent obligations ofthe School District relating to employees' rights to receive compensation for future absences based upon service already rendered. This obligation relates only to vesting accumulating leave in which payment is probable and can be reasonably estimated. Typically, the General Fund is the fund used to liquidate this long-term debt. The School District uses the vesting method to compute compensated absences. GENERAL OBLIGATION DEBT OUTSTANDING General Obligation Bonds currently outstanding are as follows: Purpose Interest Rates Amount General Government- Refunding - Series 1995B 3.90% - 5.40% General Government - Refunding - Series 2004 2.87% General Government- Series 2006 4.00% - 5.00% $ 3,195,000 9,830,000 65,000,000 $ 78.025.QQQ - 23 - BARROW COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007 EXHIBIT "I" Note 11: LONG-TERM DEBT The changes in Long-Term Debt during the fiscal year ended June 30, 2007, were as follows: Balance July I, 2006 Additions Installment Sales Agent Annual Leave Earned Deductions Annual Leave Utilized Debt Retired Bond Premiums Amortized Balance June 30, 2007 Portion of Long-Term Debt Due within One Year Cagital Leases Winder-Barrow Industrial Building Authorill'. Other Total $ 1,630,000 $ 1,266,050 $ 2,896,050 245,000 576,866 821,866 $ I 385 QQQ $ 689,184 $ 2 Q:Z4 184 $ 255,000 $ 165,815 $ 420.815 Installment Sales Agreement Governmental Funds General Compensated Obligation Absences (1) Bonds Unamortized Bond Premium Total Balance July I, 2006 $ 0 $ 320,424 $ 83,525,000 $ 3,003,498 $ 89,744,972 Additions Installment Sales Agent Annual Leave Earned 912,333 425,257 912,333 425,257 Deductions Annual Leave Utilized Debt Retired Bond Premiums Amortized 39,865 351,465 5,500,000 333.722 351,465 6,361,731 333.722 Balance June 30, 2007 $ 872,468 $ 394,216 $ 78,Q25,QQQ $ 2 669,:Z:Z6 $ 84,Q35 644 Portion of Long-Term Debt Due within One Year $ 64 855 $ 0 $ 4,925.000 $ 333.722 $ 5,744.392 (1) The portion of Compensated Absences due within one year has been determined to be immaterial to the basic financial statements. At June 30, 2007, payments due by fiscal year which includes principal and interest for these items are as follows: - 24 - BARROW COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007 EXHIBIT "I" Note 11: LONG-TERM DEBT Fiscal Year Ended June 30 2008 2009 2010 2011 2012 Total Principal and Interest Fiscal Year Ended June 30 2008 2009 2010 2011 2012 2013 - 2017 2018-2022 Total Principal and Interest Fiscal Year Ended June 30 2008 2009 2010 2011 2012 2013 - 2017 Total Principal and Interest Capital Leases Winder-Barrow Industrial Building Authority Principal Interest Principal Other Interest $ 255,000 $ 265,000 275,000 290,000 300,000 60,247 $ 49,155 37,628 25,665 13 050 165,815 $ 172,021 178,453 172,895 25,783 19,577 13,144 6,614 $ 1,385.000 $ 185.745 $ 689.184 $ 65.118 Installment Sales Agreement Principal Interest $ 64,855 $ 53,153 55,533 57,913 60,293 340,340 240,381 44,097 33,597 31,386 29,075 26,666 93,629 20,263 $ 872.468 $ 278.713 General Obligation Debt Principal Interest Unamortized Bond Premium $ 4,925,000 5,520,000 6,465,000 6,015,000 7,780,000 47,320,000 $ 3,568,129 3,344,199 3,104,643 2,792,154 2,484,861 6,725,169 $ 333,722 333,722 333,722 333,722 333,722 1,001,166 $ 78,025,000 $ 22,019,155 $ 2,669.776 Note 12: PRIOR YEAR DEFEASEMENT OF DEBT In fiscal year 2004, the School District defeased certain general obligation bonds by placing the proceeds ofnew bonds in an irrevocable trust to provide for all future debt service payments on the old bonds. Accordingly, the trust account assets and the liability for the defeased bonds are not included in the School District's basic financial statements. At June 30, 2007, none of these bonds are outstanding or considered defeased. - 25 - BARROW COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007 EXHIBIT "I" Note 13: ON-BEHALF PAYMENTS The School District has recognized revenues and costs in the amount of $1,967,970 for health insurance and retirement contributions paid on the School District's behalf by the following State Agencies. Georgia Department of Education Paid to the Georgia Department of Community Health For Health Insurance of Non-Certified Personnel In the amount of $1,956,308 Office of Treasury and Fiscal Services Paid to the Public School Employees Retirement System For Public School Employees Retirement (PSERS) Employer's Cost In the amount of $11,662 Note 14: SIGNIFICANT COMMITMENTS The following is an analysis ofsignificant outstanding construction or renovation contracts executed by the School District as of June 30, 2007, together with funding available: Project Unearned Executed Contracts Funding Available From State Appalachee High School Appalachee High School Bleachers 0SG-607-003 Auburn Elementary School 0SG-607-002 Holsenbeck Elementary School Statham Elementary School 0SG-607-001 Winder-Barrow High School $ 9,219,214 24,640 720,381 $ 1,359,956 1,136,000 1,021,889 1,147,337 8,675,110 4,083.605 $ 20,922,682 $ 6A65A50 The amounts described in this note are not reflected in the basic financial statements. Note 15: 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. -26 - BARROW COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007 EXHIBIT "I" Note 16: 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: Fiscal Year Percentage Contributed Required Contribution 2007 2006 2005 100% 100% 100% $ 4,801,638 $ 3,969,314 $ 3,919,365 - 27 - (This page left intentionally blank) BARROW 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 Central Support Services Other Support Services Enterprise Operations Food Services Operation Capital Outlay Debt Service Total Expenditures Excess of Revenues over (under) Expenditures OTHER FINANCING SOURCES {USES} Other Sources Other Uses Total Other Financing Sources (Uses) Net Change in Fund Balances Fund Balances - Beginning Adjustments Fund Balances - Ending NONAPPROPRIATED BUDGETS ORIGINAL (1) FINAL {1) ACTUAL AMOUNTS $ 29,902,397 $ 30,535,306 $ 30,074,440 1,568,028 48,282,651 51,216,845 56,059,261 2,291,000 7,458,559 7,881,879 1,684,250 1,684,250 3,314,778 95,000 95,000 405,352 328,590 653 786 1 737 271 $ 82,583,888 $ 91643 746 $ 101,041,009 $ 60,104,839 $ 61,820,647 $ 63,739,285 2,189,396 2,455,993 1,717,680 987,716 5,883,293 851,675 8,380,553 3,672,586 559,851 1,000 328,590 4,543,305 2,417,412 2,783,064 1,603,175 1,193,245 5,933,550 1,291,713 8,029,966 3,968,151 616,587 57,261 328,590 5,769,397 134,508 3,287,089 2,910,811 1,654,700 1,150,166 6,272,479 1,337,864 7,881,011 4,443,438 625,109 49,200 385,718 5,427,395 55,058 584 175 $ 91676477 $ 95,947,266 $ 99,803,498 $ -9,092,589 $ -4,303,520 $ 1,237,511 $ 237,000 $ -315 905 -552,905 $ -315 905 $ -315 905 $ -315 905 $ -315 905 $ -9,408,494 $ -4,619,425 $ 921,606 6,347,028 6,347,028 6,718,060 377 282 $ -3,061,466 $ 2,104,885 $ 7,639,666 Notes to the Schedule of Revenues, Ex11enditures and Changes in Fund Balances Budget and Actual (1) Original and Final Budget amounts do not include budgeted revenues or expenditures of the various principal accounts. The accompanying schedule of revenues, expenditures and changes in fund balances budget and actual is presented on the modified accrual basis of accounting which is the basis of accounting used in the presentation of the fund financial statements. See notes to the basic financial statements. -29- BARROW 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 English Language Acquisition Grants Enhancing Education Through Technology Program Hurricane Education Recovery Act Improving Teacher Quality State Grants Mathematics and Science Partnerships Migrant Education Safe and Drug-Free Schools and Communities - State Grants State Grants for Innovative Programs Title I Grants to Local Educational Agencies Vocational Education - Basic Grants to States Total U. S. Department of Education Total Federal Financial Assistance N/A = Not Available CFDA NUMBER PASSTHROUGH ENTITY ID NUMBER EXPENDITURES IN PERIOD 10.553 10.555 N/A NIA $ $ (2) 4,915,808 4,915,808 10.550 N/A $ 186,833 5,102,641 . 84.027 . 84.173 N/A $ N/A $ 2,079,523 99888 2,179,411 84.365 84.318 . 84.938 84.367 84.366 84.011 84.186 84.298 84.010 84.048 N/A N/A N/A N/A N/A N/A NIA N/A NIA NIA $ 111,760 8,197 (3) 347,248 110,048 29,472 41,509 14,767 1,799,002 96407 4 737 821 $=====9,i,;;,8.;,;40.,,4=6=2 - 30- BARROW 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 ($887,912) were not maintained separately and are included in the 2007 National School Lunch Program. (3) Funds earned and expended in the prior period on the Hurricane Education Recovery Act, in the amount of $68,345, 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 Barrow 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. - 31 - BARROW COUNTY BOARD OF EDUCATION SCHEDULE OF STATE REVENUE YEAR ENDED JUNE 30, 2007 SCHEDULE "3" 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 State Bonds Nursing Services Principal Supplements Vocational Supervisors Education Equalization Funding Grant Food Services Vocational Education Amended Formula Adjustment Other State Programs Graduation Coaches - High School Health Insurance Middle School Summer Remedial Program National Teacher Certification Preschool Handicapped Program Statewide K-8 Reading and Mathematics Program Virtual Schools Grant GOVERNMENTAL FUND TYPES CAPITAL GENERAL PROJECTS FUND FUND $ 874,679 $ 3,722,115 533,280 8,400,149 753,777 3,686,407 375,745 6,651,747 5,089,757 1,844,235 555,515 631,505 3,138,825 1,053,477 247,686 1,011,967 303,362 501,293 933,553 1,126,904 348,654 218,627 1,256,745 2,089,306 2,931,536 1,297,387 122,942 250,000 208,015 38,174 37,717 3,748,108 264,146 335,395 -1,013,527 80,150 1,956,308 7,827 81,960 207,874 143,452 825 TOTAL 874,679 3,722,115 533,280 8,400,149 753,777 3,686,407 375,745 6,651,747 5,089,757 1,844,235 555,515 631,505 3,138,825 1,053,477 247,686 1,011,967 303,362 501,293 933,553 1,126,904 348,654 218,627 1,256,745 2,089,306 2,931,536 1,297,387 122,942 250,000 208,015 38,174 37,717 3,748,108 264,146 335,395 -1,013,527 80,150 1,956,308 7,827 81,960 207,874 143,452 825 - 32- BARROW COUNTY BOARD OF EDUCATION SCHEDULE OF STATE REVENUE YEAR ENDED JUNE 30, 2007 SCHEDULE "3" AGENCY/FUNDING GRANTS Georgia State Financing and Investment Commission Reimbursement on Construction Projects Office of Treasury and Fiscal Services Public School Employees Retirement GOVERNMENTAL FUND TYPES CAPITAL GENERAL PROJECTS FUND FUND TOTAL $ $ _ _ _1~1,~6_62_ 621,679 $ 621,679 11 662 $ 56,059,261 $ 621,679 $ ===5=6=,6=8=0'=94=0= See notes to the basic financial statements. - 33 - BARROW COUNTY BOARD OF EDUCATION SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS YEAR ENDED JUNE 30, 2007 SCHEDULE "4" PROJECT Provide funds to pay or to be applied toward the cost of the repayment of a portion of the principal and interest on the School District's Series 1993, Series 1995A and 19958 Bonds coming due August 1, 2002, through and including February 1, 2007, the maximum amount of debt to be retired not to exceed $9,000,000. Provide funds to pay or to be applied toward the cost of the acquisition, construction and equipping of new school buildings and facilities, including but not limited to new schools, physical education/athletic facilities and equipment, classrooms, lunchrooms, gymnasiums and auditoriums, the addition, renovation, repair and improvement to existing school buildings and facilities, including, but not limited to, WinderBarrow High School, Auburn Elementary School, Holsenbeck Elementary School, Statham Elementary School and Apalachee High School and other classrooms and physical education/athletic facilities and equipment, the acquisition and purchase of any property necessary and desirable therefore, both real and personal, including but not limited to, technology and transportation facilities and equipment and the purchase of land, the maximum of such projects not to exceed $60,785,000. Provide funds to pay principal and interest on the School District's Series 19958 and Series 2004 Bonds coming due August 2, 2007, through and including February 1, 2012, the maximum amount of debt to be retired not to exceed $9,215,000. ORIGINAL ESTIMATED COST (1) CURRENT ESTIMATED COSTS (2) AMOUNT EXPENDED IN CURRENT YEAR (3) (4) AMOUNT EXPENDED IN PRIOR YEARS (3) (4) PROJECT STATUS $ 9,000,000 $ 9,000,000 $ 1,383,350 $ 6,889,215 Ongoing 60,785,000 60,785,000 35,675,504 2,414,217 Ongoing 9,215,000 9,215,000 282,121 Ongoing $ 79,000,000 $ 79,000,000 $ 37,340,975 $===-9,..,30..,3=,4=32= - 34- BARROW COUNTY BOARD OF EDUCATION SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS YEAR ENDED JUNE 30, 2007 SCHEDULE "4" (1) The School District's original cost estimate as specified in the resolution calling for the imposition of the Local Option Sales Tax. (2) The School District's current estimate of total cost for the projects. Includes all cost from project inception to completion. (3) The voters of Barrow County approved the imposition of a 1% sales tax to fund the above projects and retire associated debt. Amounts expended for these projects may include sales tax proceeds, state, local property taxes and/or other funds over the life of the projects. (4) In addition to the expenditures shown above, the School District has incurred interest to provide advance funding for the above projects as follows: Prior Years $ 0 Current Year 2,077,708 Total $ 2,077,708 See notes to the basic financial statements. - 35- (This page left intentionally blank) BARROW 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 Category V Gifted Student - Category VI Remedial Education Program Alternative Education Program English Speakers of Other Languages (ESOL) 4,245,616 $ 598,465 9,560,729 856,463 4,227,657 4,290,644 $ 436,040 9,597,712 683,879 5,735,026 424,256 7,628,660 5,800,746 2,116,513 6,509,475 1,149,642 331,301 573,325 1 038 872 560,253 7,865,972 7,391,708 1,970,098 78 1,258,752 6,353,572 135,605 70,890 1,268,290 477,190 607,263 999,509 126,436 $ 4,521 516,400 12,904 232,812 3,321 310,407 362,668 678,814 241,944 11,502 121,333 21,121 13,989 15,428 1,704 34,789 3226 4,417,080 440,561 10,114,112 696,783 5,967,838 563,574 8,176,379 7,754,376 2,648,912 242,022 1,270,254 6,474,905 156,726 84,879 1,283,718 478,894 642,052 1 002 735 TOTAL DIRECT INSTRUCTIONAL PROGRAMS $ 45,061,720 $ 49,702,481 $ 2,713,319 $ 52,415,800 Media Center Program Staff and Professional Development 1,289,571 254 867 1,426,775 196,685 1,623,460 235 098 TOTAL QBE FORMULA FUNDS $ 46 606 158 $ 51,129,256 $ (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. - 37- 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 June 5, 2008 Honorable Sonny Perdue, Governor Members ofthe General Assembly Members ofthe State Board of Education and Superintendent and Members of the Barrow 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 ofBarrow County Board ofEducation as of and for the year ended June 30, 2007, which collectively comprise Barrow County Board of Education's basic financial statements and have issued our report thereon dated June 5, 2008. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Internal Control Over Financial Reporting In planning and performing our audit, we considered Barrow County Board ofEducation'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 Barrow County Board of Education's internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness of the Barrow County Board of Education's internal control over financial reporting. Our consideration ofinternal 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 a certain deficiency in internal control over financial reporting that we consider to be a significant deficiency. 2007YB-30 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 Barrow 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 Barrow County Board ofEducation's financial statements that is more than inconsequential will not be prevented or detected by the Barrow County Board of Education's internal control. We consider item FS-6071-07-01 in the accompanying Schedule of Findings and Questioned Costs to be a significant deficiency 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 Barrow 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, we believe that the significant deficiency described above is not a material weakness. Compliance and Other Matters As part of obtaining reasonable assurance about whether Barrow 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 certain matters that we have reported to management of Barrow County Board of Education in a separate letter dated June 5, 2008. Barrow County Board ofEducation's response to the findings identified in our audit is described in the accompanying Schedule ofManagement's Responses. We did not audit Barrow County Board of Education's response and, accordingly, we express no opinion on it. 2007YB-30 This report is intended solely for the information and use of the management, members of the Barrow 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.~~ Russell W. Hinton, CPA, CGFM State Auditor RWH:as 2007YB-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 June 5, 2008 Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education and Superintendent and Members of the Barrow 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 ofBarrow 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. Barrow 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 Barrow County Board of Education's management. Our responsibility is to express an opinion on Barrow 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 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 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 Barrow County Board ofEducation's compliance with those requirements and performing such other procedures as we considered necessary in the 2007SA-10 circumstances. We believe that our audit provides a reasonable basis for our opinion. Our audit does not provide a legal determination on Barrow County Board of Education's compliance with those requirements. In our opinion, the Barrow County Board of Education complied, in all material respects, with the requirements referred to above that are applicable to each of its major Federal programs for the year ended June 30, 2007. Internal Control Over Compliance The management of Barrow 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 Barrow 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 Barrow 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 of the 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 of the management, members of the Barrow 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, 1<~l.0.-4J~ Russell W. Hinton, CPA, CGFM State Auditor RWH:as 2007SA-10 SECTION III AUDITEE'S RESPONSE TO PRIOR YEAR FINDINGS AND QUESTIONED COSTS BARROW 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-6071-05-02 FS-6071-06-01 FS-6071-06-02 FS-6071-06-03 Further Action Not Warranted Unresolved - See Corrective Action/Responses Further Action Not Warranted Previously Reported Corrective Action Implemented CORRECTIVE ACTION/RESPONSES CASH AND CASH EQUIVALENTS REVENUESIRECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Control Procedures over School Activity Accounts Finding Control Number: FS-6071-06-01 To improve the internal control procedures with our system's school activity funds, the Superintendent and Assistant Superintendent ofBusiness Services met with all principals to discuss the fiscal year 2006 audit and their school activity funds. For the first time, principals were also included in the annual bookkeepers meetings at the beginning of fiscal year 2008 to better communicate the guidelines and procedures for reporting school activity accounts. Additionally, each principal and bookkeeper was asked to sign and date a document outlining the responsibilities and guidelines of our system's school activity funds. At the end of fiscal year 2007, a copy of each bank statement for June 2007 was requested directly from the bank to compare to the bank statement supplied by each school in order to verify the ending cash balances as reported for each location. An additional staff member has been added to Business Services in the middle of fiscal year 2008. One of the major responsibilities of this new position is to internally audit each location's school activity accounts on an ongoing basis. PRIOR YEAR FEDERAL AWARD FINDINGS AND QUESTIONED COSTS FINDING CONTROL NUMBER AND STATUS FA-6071-06-01 Unresolved - See Corrective Action/Responses - 1- BARROW COUNTY BOARD OF EDUCATION AUDITEE'S RESPONSE SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2007 PRIOR YEAR FEDERAL AWARD FINDINGS AND QUESTIONED COSTS CORRECTIVE ACTION/RESPONSES ACTIVITIES ALLOWED OR UNALLOWED Inadequate Internal Control Procedures U.S. Department of Education Through Georgia Department of Education Hurricane Education Recovery (CFDA 84.938) Finding Control Number: FA-6071-06-01 Hurricane Education Recovery funds were not received during fiscal year 2007. Program managers have been informed to be sure to follow Federal and State guidelines on their programs. They have also been informed to review any websites that may or may not be provided by the Georgia Department of Education's staff members. This finding is pending review by the Georgia Department ofEducation to determine if a refund is appropriate. -2- SECTION IV FINDINGS AND QUESTIONED COSTS BARROW 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 Barrow County Board ofEducation's financial statements was unqualified. 2. Significant Deficiencies in Internal Control Disclosed by the Audit ofthe Financial Statements The audit report for the Barrow County Board of Education disclosed a financial statement significant deficiency related to the following control categories. Cash and Cash Equivalents Revenues/Receivables/Receipts Expenditures/Liabilities/Disbursements The significant deficiency described above is not considered to be a material weakness. 3. Noncompliance Material to the Financial Statements The audit of the Barrow County Board of Education disclosed no instances of noncompliance that were deemed to be material to the financial statements. 4. Significant Deficiencies in Internal Control Over Major Programs The audit report for the Barrow 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 Barrow 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 Barrow 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: 84.027 Special Education - Grants to States 84.173 Special Education - Preschool Grants 84.367 Improving Teacher Quality State Grants 8. Type "A" Program Dollar Threshold The dollar threshold for type "A" programs was $300,000. 9. Low Risk Auditee The Barrow County Board ofEducation qualified as a low risk auditee as defined by Section .530 ofOMB Circular A-133. - 1- BARROW COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2007 II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS CASH AND CASH EQUIVALENTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Controls over School Activity Accounts Significant Deficiency Finding Control Number: FS-6071-07-01 Condition: This is a repeat finding (FS-6071-06-01 and FS-6071-05-02) from the years ended June 30, 2006, and June 30, 2005, 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: Cash and Cash Equivalents The bank reconciliation function was not separated from the record keeping and check preparation functions. The bank reconciliations did not include evidence of approval by an administrator not directly connected with cash operations. The School District's Federal employee identification (FEI) number was used by four unauthorized organizations to open bank accounts. Revenues/Receivables/Receipts The cash receipts and deposit preparation functions were not separated from the record keeping and cash custody functions. Expenditures/Liabilities/Disbursements The check writing function was not separated from the record keeping function. 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. -2 - BARROW COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2007 II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS CASH AND CASH EQUIVALENTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Controls over School Activity Accounts Significant Deficiency Finding Control Number: FS-6071-07-01 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 management oversight for these incompatible activities. In addition, management should monitor controls to provide reasonable assurance that transactions are processed according to established procedures and implement procedures deemed necessary to strengthen internal controls over the accounting functions. III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS No matters were reported. -3- SECTION V MANAGEMENT'S RESPONSES BARROW COUNTY BOARD OF EDUCATION SCHEDULE OF MANAGEMENT'S RESPONSES YEAR ENDED JUNE 30, 2007 Finding Control Number: FS-6071-07-01 We concur with this finding. The Board has already conducted an annual in-service training meeting with Principals and Bookkeepers as ofthis date. The purpose ofthe meeting was to present and discuss the "Standard Operating Procedures Manual" for School Activity Funds. This manual addresses separation of duties and other internal controls. The next updated manual will be presented on August 6, 2008 for the upcoming fiscal year 2009. There will be an annual internal audit done on each School Activity Account by Central office staffthat should be complete for fiscal year 2008 by December 31, 2008. In addition, each School Principal and Bookkeeper have signed off on a document that indicates that not only have they read and understood the school activity accounting guidelines but they also agree to follow the guidelines relative to the management and financial reporting ofeach school's activity accounts. The school activity account guidelines cover topics such as defining what is meant by timely deposits, the staff responsible for bank statement reconciliations and signing and securing school activity fund checks. Also, discussed in the guidelines are the receipting of funds, documentation necessary to properly authorize payment, procedures when making adjustments to the school activity fund, accounts that should or should not have the school system's FEI number, and the approval process for opening new bank accounts using the school system's FEI number. Contact Person: Ken Cato Title: Assistant Superintendent Business Services Phone: (678) 425-2885 Fax: (678) 425-2896 E-mail: ken.cato@barrow.kl2.ga.us