BROOKS COUNTY BOARD OF EDUCATION QUITMAN, 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 BROOKS 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 REQUIRED SUPPLEMENTARY INFORMATION MANAGEMENT'S DISCUSSION AND ANALYSIS 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 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 GENERAL FUND 25 BROOKS COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS - SECTION I FINANCIAL SCHEDULES SUPPLEMENTARY INFORMATION 2 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS 26 3 SCHEDULE OF STATE REVENUE 28 4 SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS 29 5 ALLOTMENTS AND EXPENDITURES GENERAL FUND - QUALITY BASIC EDUCATION PROGRAMS (QBE) BY PROGRAM 31 SECTION II COMPLIANCE AND INTERNAL CONTROL REPORTS REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS REPORT ON COMPLIANCE WITH REQUIREMENTS APPLICABLE TO EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH 0MB CIRCULAR A-133 SECTION III AUDITEE'S RESPONSE TO PRIOR YEAR FINDINGS AND QUESTIONED COSTS SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS SECTION IV FINDINGS AND QUESTIONED COSTS SCHEDULE OF FINDINGS AND QUESTIONED COSTS BROOKS 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) 858-2174 DEPARTMENT OF AUDITS AND ACCOUNTS 270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400 February 29, 2008 Honorable Sonny Perdue, Governor Members ofthe General Assembly Members ofthe State Board of Education and Superintendent and Members ofthe Brooks County Board ofEducation 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 Brooks 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 Brooks 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 Brooks 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 Brooks 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. In accordance with Government Auditing Standards, we have also issued our report dated February 29, 2008, on our consideration of the Brooks 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. Management's Discussion and Analysis and the Schedule ofRevenues, Expenditures and Changes in Fund Balances - Budget and Actual, as presented on pages i through ix and page 25 respectively, are not a required part ofthe basic financial statements but are 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 Brooks 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, ~~-~ Russell W. Hinton, CPA, CGFM State Auditor RWH:as 2007ARL-ll BROOKS COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2007 The discussion and analysis of the Brooks County Board of Education's financial performance provides an overall review of the School District's financial activities for the fiscal year ended June 30, 2007. The intent of this discussion and analysis is to look at the School District's financial performance as a whole. Readers are encouraged to review the basic financial statements and the accompanying notes to the basic financial statements to enhance their understanding of the School District's financial performance. Financial Highlights Key financial highlights for 2007 are as follows: The Governmental Accounting Standards Board (GASB) issued GASB Statement 34 on June 30, 1999, requiring governments to comply with a new reporting model for financial statements. Based upon total revenues, the Brooks County Board of Education was a Phase Two implementer, and was required to implement GASB Statement 34 beginning in fiscal year 2003. The School District's financial status improved during fiscal year 2007. In total, net assets increased $0.6 million, which represents a 3 percent increase from fiscal year 2006. This total increase was due to governmental activities since the School District has no business-type activities. General revenues accounted for $8.4 million in revenue or 35 percent of all revenues. Program specific revenues in the form of charges for services and sales, grants and contributions accounted for $16.1 million or 65 percent of total revenues. Total revenues were $ 24.5 million. The School District had $23.8 million in expenses related to governmental activities; only $16.1 million of these expenses were offset by program specific charges for services, grants or contributions. General revenues, primarily taxes, of $8.4 million were adequate to provide for these programs. Among major funds, the general fund had $22.8 million in revenues and $23.2 million in expenditures. The general fund's fund balance decreased from $2.2 million to $1.8 million. The School District received revenues of $1.2 million for the Special Purpose Local Option Sales Tax. Using the Basic Financial Statements This annual report consists of a series of financial statements and notes to those statements. These statements are organized so the reader can understand the Brooks County Board of Education as a financial whole, or as an entire operating entity. -I- BROOKS COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2007 The Statement ofNet Assets and Statement ofActivities provide information about the activities of the whole School District, presenting both an aggregate view of the School District's finances and a longer-term view of those finances. The fundfinancial statements provide the next level of detail. For governmental funds, these statements tell how services are financed in the short-term as well as what remains for future spending. The fund financial statements also look at the School District's most significant funds. In the case of the Brooks County Board of Education, the general fund is by far the most significant fund. Reporting the School District as a Whole Statement ofNet Assets and the Statement ofActivities While these documents contain the large number of funds used by the School District to provide programs and activities, the view of the School District as a whole looks at all financial transactions and asks the question, "How did we do financially during fiscal year 2007?" The Statement ofNet Assets and the Statement ofActivities answer this question. These statements include all assets and all liabilities using the accrual basis of accounting similar to the accounting used by most private-sector companies. This basis of accounting considers all of the current year's revenues and expenses regardless of when cash is received or paid. These two statements report the School District's net assets and changes in those assets. This change in net assets is important because it tells the reader whether, for the School District as a whole, the financial position of the School District has improved or diminished. The causes of this change may be the result of many factors, some financial, some not. Nonfinancial factors include the School District's property tax base, facility conditions, required educational programs and other factors. In the Statement of Net Assets and the Statement of Activities, the School District has one distinct type of activity: Governmental Activities - All of the School District's programs and services are reported here including instruction, support services, operation and maintenance of plant, pupil transportation, food service, after school program, school activity accounts and various others. Reporting the School District's Most Significant Funds Fund Financial Statements Fund financial reports provide detailed information about the School District's major funds. The School District uses many funds to account for a multitude of financial transactions. However, these fund financial statements focus on the School District's most significant funds. The School District's major governmental funds are the general fund, the District-wide capital projects fund and the debt service fund. - 11 - BROOKS COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2007 Governmental Funds Most of the School District's activities are reported in governmental funds, which focus on how money flows into and out of those funds and the balances left at the yearend available for spending in future periods. These funds are reported using an accounting method called modified accrual accounting, which measures cash and all other financial assets that can readily be converted to cash. The governmental fund statements provide a detailed short-term view of the School District's general government operations and the basic services it provides. Governmental fund information helps you determine whether there are more or fewer financial resources that can be spent in the near future to finance educational programs. The relationship (or differences) between governmental activities (reported in the Statement of Net Assets and the Statement of Activities) and governmental funds is reconciled in the financial statements. Fiduciary Funds The School District is the trustee, or fiduciary, for assets that belong to others, such as school clubs and organizations within the school activity accounts. The School District is responsible for ensuring that the assets reported in these funds are used only for their intended purposes and by those to whom the assets belong. The School District excludes these activities from the District-wide financial statements because it cannot use these assets to finance its operations. The School District as a Whole The perspective of the Statement of Net Assets is of the School District as a whole. Table 1 provides a summary of the School District's net assets for fiscal year 2007 compared to fiscal year 2006. - iii - BROOKS COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2007 Table 1 Net Assets Governmental Activities Fiscal Fiscal Year 2007 Year 2006 Assets Current and Other Assets Capital Assets, Net $ 15,569,954 $ 14,590,511 14,394,078 14,728,790 Total Assets $ 29,964,032 $ 29,319,301 Liabilities Current and Other Liabilities Long-Term Liabilities $ 2,790,749 $ 2,624,105 7,920,000 8,100,000 Total Liabilities $ 10,710,749 $ 10,724,105 Net Assets Invested in Capital Assets, Net of Related Debt Restricted Unrestricted $ 13,333,267 4,514,785 1,405,231 $ 14,118,170 2,909,648 1,567,378 Total Net Assets $ 19,253.283 $ 18,595.196 Table 2 shows the changes in net assets for fiscal year 2007 compared to the changes in net assets for fiscal year 2006. - lV - BROOKS COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2007 Table 2 Change in Net Assets Revenues Program Revenues: Charges for Services and Sales Operating Grants and Contributions Capital Grants and Contributions Governmental Activities Fiscal Fiscal Year 2007 Year 2006 $ 326,727 15,555,377 199,776 $ 387,024 14,478,070 89,803 Total Program Revenues $ 16,081,880 $ 14,954,897 General Revenues: Taxes Property Taxes For Maintenance and Operations $ Railroad Cars Sales Taxes Special Purpose Local Option Sales Tax For Debt Service For Capital Projects Intangible Recording Tax Real Estate Grants and Contributions not Restricted to Specific Programs Investment Earnings Miscellaneous 5,188,954 39,970 1,128,089 110,377 81,928 30,793 1,017,902 345,767 457,232 $ 4,600,872 20,990 180,000 1,035,883 78,691 31,126 1,510,014 54,086 276,531 Total General Revenues $ 8,401,012 $ 7,788,193 Total Revenues $ 24,482,892 $ 22,743,090 Program Expenses 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 $ 14,562,316 1,034,911 930,874 363,479 700,488 1,580,542 182,741 1,492,263 1,098,024 79,103 35,924 110,772 1,405,623 247,745 $ 13,455,756 848,962 963,248 336,732 617,984 1,388,274 319,592 1,241,102 872,323 117,978 23,370 295,236 1,480,127 Total Expenses $ 23,824,805 $ 21,960,684 Increase in Net Assets $ 658,087 $ 782,406 - V- BROOKS COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2007 Governmental Activities The School District is dependent upon operating grants and property taxes to support governmental activities. Instruction comprises 61 percent, Support Service 31 percent, and Operations of Non-Instructional Services 8 percent of governmental program expenses. The Statement of Activities details the cost of program services and the charges for services and grants offsetting those services. Table 3 shows, for governmental activities, the total cost of services and the net cost of services. It identifies the cost of these services supported by tax revenue and unrestricted State entitlement. Table 3 Governmental Activities Total Cost of Services Fiscal Fiscal Year 2007 Year 2006 Net Cost of Services Fiscal Fiscal Year 2007 Year 2006 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 ofNon-Instructional Services Enterprise Operations Food Services Interest on Short-Term and Long-Term Debt $14,562,316 $13,455,756 $ 3,661,543 1,034,911 930,874 363,479 700,488 1,580,542 182,741 1,492,263 1,098,024 79,103 35,924 848,962 963,248 336,732 617,984 1,388,274 319,592 1,241,102 872,323 117,978 23,370 882,935 554,937 86,027 -56,521 818,421 178,416 766,933 423,703 77,591 17,097 110,772 1,405,623 247,745 295,236 1,480,127 48,581 35,518 247,745 $ 2,916,283 687,942 587,155 125,620 -796 931,992 319,592 639,701 407,367 117,978 22,949 99,800 150,204 Total Expenses $23,824.805 $ 21,960.684 $ 7,742,926 $ :Z,005,787 Although program revenues make up a majority of the revenues, the School District is still dependent upon tax revenues for governmental activities. Over 32 percent of all governmental activities are supported by taxes, interest, and other governmental revenues. The School District's Funds The School District's funds are accounted for using the modified accrual basis of accounting. All governmental funds had revenues of $24.4 million and expenditures of $23.7 million. The School District received $0.1 million in proceeds from Special Purpose Local Option Sales Taxes for Capital Projects and $1.1 million for Debt Services. The general fund's fund balance reflected a decrease of $0.3 million and the District-wide capital projects funds increased $0.3 - vi - BROOKS COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2007 million. The decrease in the fund balance of the general fund for the year indicates that the School District was not able to meet current costs from current revenues. The capital projects funds increased due to the investment earnings on the general obligation bonds. The debt service fund is used to pay the future debt service payments on the bonds. General Fund Highlights The School District's budget is prepared according to Georgia law. The most significant budgeted fund is the General Fund. During the course of fiscal year 2007, the School District amended its general fund budget as needed. The School District uses site-based budgeting. The budgeting systems are designed to tightly control total site budgets but provide flexibility for site management. The School District's top management monitors a detailed report comparing actual revenues and expenditures to budget on a monthly basis. Site management has access to this information on a demand basis through a report available using the School District's accounting software. For the General Fund, the final budgeted revenues of $22.4 million exceeded the original budgeted amount of $21.1 million by $1.3 million. This difference was due to an increase in State revenue of $0.6 million and an increase in Federal revenues of $0.7 million. The actual revenue was more than the final budgeted amount by $0.4 million. The final budgeted expenditures of $22.2 million exceed the original budget of $21.4 million by $0.8 million. The difference was due to an increase of instruction by $588,162 a decrease in pupil services of $5,627, an increase in improvement of instructional services of $162,158, an increase in educational media services of $5,278, an increase in general administration of $5,192, a decrease in school administration of $7,330, a decrease in maintenance and operation of plant services of $38,000, an increase in student transportation services of $127,199 and an increase in other support services of $22,000. The actual expenditures were $947,509 more than the final budgeted amount. General Fund expenditures exceeded revenues by $0.3 million. The School District continues to make a concentrated effort to raise fund balance in anticipation of future needs. Capital Assets At the end of fiscal year 2007, the School District had capital assets of $14.4 million, net of depreciation. Table 4 shows fiscal year 2007 balances compared with fiscal year 2006 balances. - Vll - BROOKS COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2007 Table 4 Capital Assets (Net of Depreciation) Governmental Activities Fiscal Fiscal Year 2007 Year 2006 Land Construction in Progress Buildings and Building Improvements Equipment Land Improvements $ 552,029 1,128,875 9,677,469 1,247,390 I, 788,315 $ 552,029 1,196,779 10,087,849 1,136,778 1,755,355 Total $ 14,394.078 $ 14,7281790 The primary increase occurred in equipment. The School District purchased five new buses in fiscal year 2007. Due to funding from a Special Purpose Local Option Sales Tax, the School District is planning for future construction of a new high school and additions to the current middle school. Debt At June 30, 2007 the School District had $7.9 million in bonds outstanding with $0.8 million due within one year and $7.l million due in more than one year. Table 5 summarizes general obligation bonds. Table 5 Debt at June 30 Governmental Activities Fiscal Fiscal Year 2007 Year 2006 General Obligation Bonds $ 7,920.000 $ 8,100.000 At June 30, 2007, the School District's overall legal bonding authority was $322,727,115. The School District maintains an AA bond rating. Current Issues The Brooks County School District is financially sound and relatively stable, especially when the economic condition of the State is considered. The School District has maintained its economic stability by budgeting conservatively and monitoring its expenditures. The Brooks County - Vlll - BROOKS COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2007 Board of Education's current operating millage is 16.23 mills, which produces approximately $344,201 per mill. The tax digest of the county has increased about 0.25 percent in the last year mostly because of an increase in motor vehicles and mobile homes. The School District increased the mill rate for 2007 by 1 mill. Tax collections have been timely and there are no outstanding tax bills not levied due to appeals. The student population in Brooks County Schools had decreased in the past few years; however, for the current school year has shown an increase. The School District experienced a decrease of 19 student FTE's during the 2007-2008 school year. Sales tax collections have increased and state revenues have dropped. Austerity reductions have been implemented by the governor for fiscal year 2008. Brooks County's unemployment rate of 4.6 percent is slightly above the state average of 4.2 percent. These issues are of concern to the School District as they could have a negative impact on its financial health. Contacting the School District's Financial Management This financial report is designed to provide our citizens, taxpayers, investors, and creditors with a general overview of the School District's finances and to reflect the School District's accountability for the monies it receives. Questions about this report or for additional financial information, please contact Finance Director, Brooks County Board of Education, 489 Barwick Road, Quitman, GA 31643. - lX - BROOKS COUNTY BOARD OF EDUCATION BROOKS COUNTY BOARD OF EDUCATION STATEMENT OF NET ASSETS JUNE 30, 2007 ASSETS Cash and Cash Equivalents Investments Accounts Receivable, Net Interest 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 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 $ 7,213,229.77 6,000,000.00 3,419.20 457,813.00 1,424,043.66 426,902.00 15,996.96 28,549.84 552,029.00 1,128,875.00 2,917,177.00 16,406,822.00 2,973,765.00 -9,584,590.00 $ =====2=9'=96=4=,0=3=2=.4=3 $ 329,254.64 2,459,335.19 2,160.00 805,000.00 7,115,000.00 $ 10,710,749.83 $ 13,333,266.49 389,255.19 955,876.00 3,169,653.55 1,405,231.37 $ 19,253,282.60 $ ==2=9'=96=4=,0=3=2=.4=3 BROOKS 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 Railroad Cars Sales Taxes Special Purpose Local Option Sales Tax For Debt Services For Capital Projects Intangible Recording Tax 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 Net Assets - End of Year EXPENSES CHARGES FOR SERVICES $ 14,562,316.46 $ 1,034,911.18 930,873.80 363,479.04 700,487.94 1,580,541.53 182,741.34 1,492,262.60 1,098,024.34 79,102.58 35,923.95 110,772.01 1,405,623.04 247,745.25 $ 23,824,805.06 $ 70,420.00 62,191.00 194,115.68 326,726.68 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 $ 10,830,353.55 151,975.74 375,937.14 277,451.89 757,009.16 762,120.83 4,325.34 725,330.04 474,545.16 $ 1,511.64 18,827.38 1,175,989.21 $ 15,555,377.08 $ $ 199,776.00 199?76.00 $ -3,661,542.91 -882,935.44 -554,936.66 -86,027.15 56,521.22 -818,420.70 -178,416.00 -766,932.56 -423, 703.18 -77,590.94 -17,096.57 -48,581.01 -35,518.15 -247.745.25 -7,742,925.30 $ 5,188,953.72 39,970.45 1,128,089.35 110,376.56 81,928.19 30,792.59 1,017,902.00 345,767.01 457,232.26 $ 8,401,012.13 $ 658,086.83 18,595,195.77 $ ==1=9..,,2=53..,,2,..8,..2..,.6=0 -3- BROOKS COUNTY BOARD OF EDUCATION BALANCE SHEET GOVERNMENTAL FUNDS JUNE 30, 2007 EXHIBIT"C" ASSETS Cash and Cash Equivalents Investments Accounts Receivable, Net Interest Taxes State Government Federal Government Other Inventories GENERAL FUND DISTRICTWIDE CAPITAL PROJECTS FUND DEBT SERVICE FUND TOTAL $ 2,571,289.00 $ 3,756,550.42 $ 6,000,000.00 152,978.00 1,424,043.24 426,902.00 15,996.96 28,549.84 3,419.20 197,424.42 885,390.35 $ 7,213,229.77 6,000,000.00 3,419.20 350,402.42 1,424,043.24 426,902.00 15,996.96 28,549.84 Total Assets $ 4,619,759.04 $ 9,957,394.04 $ 885,390.35 $====1=5,=46=2==,54====3=4=3 LIABILITIES AND FUND BALANCES LIABILITIES Accounts Payable Salaries and Benefits Payable Contracts Payable 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 $ 329,254.64 2,459,335.19 $ $ 2,788,589.83 $ 2,160.00 2,160.00 $ 360,706.19 $ 70,486.00 $ 28,549.00 9,884,748.04 50,002.46 1,391,911.56 $ 1,831,169.21 $ 9,955,234.04 $ $ $ $ 885,390.35 885,390.35 $ 329,254.64 2,459,335.19 2,160.00 2,790,749.83 360,706.19 955,876.35 28,549.00 9,884,748.04 50,002.46 1,391,911.56 12,671,793.60 Total Liabilities and Fund Balances $ 4,619,759.04 $ 9,957,394.04 $ 885,390.35 $==1=5=,4=62..,.5=4=3=.4=3 The notes to the basic financial statements are an integral part of this statement. -4- BROOKS 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 Net Assets of Governmental Activities (Exhibit "A") $ 12,671,793.60 $ 552,029.00 1,128,875.00 2,917,177.00 16,406,822.00 2,973,765.00 -9,584,590.00 14,394,078.00 107,411.00 -7,920,000.00 $ 19,253,282.60 The notes to the basic financial statements are an integral part of this statement. -5- BROOKS 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 Net Change in Fund Balances Fund Balances - Beginning Fund Balances - Ending GENERAL FUND DISTRICTWIDE CAPITAL PROJECTS FUND DEBT SERVICE FUND TOTAL $ 5,121,404.95 112,721.00 $ 12,616,021.51 4,157,033.59 326,726.68 39,268.63 457,232.26 $ 110,376.56 $ 1,128,089.35 301,531.19 4,967.19 5,121,404.95 1,351,186.91 12,616,021.51 4,157,033.59 326,726.68 345,767.01 457,232.26 $ 22,830,408.62 $ 411 907.75 $ 1,133,056.54 $ 24,375,372.91 $ 14,215,987.53 $ 14,215,987.53 877,915.56 930,873.80 363,479.04 682,461.65 1,579,901.76 182,741.34 1,472,024.96 1,257,638.94 80,239.70 35,923.95 112,747.36 1,371,823.73 $ 78,588.51 877,915.56 930,873.80 363,479.04 682,461.65 1,579,901.76 182,741.34 1,472,024.96 1,257,638.94 80,239.70 35,923.95 112,747.36 1,371,823.73 78,588.51 $ 180,000.00 247,745.25 180,000.00 247,745.25 $ 23,163,759.32 $ 78,588.51 $ 427,745.25 $ 23,670,093.08 $ -333,350.70 $ 333,319.24 $ 705,311.29 $ 705,279.83 2,164,519.91 9,621,914.80 180,079.06 11,966,513.77 $ 1,831,169.21 $ 9,955,234.04 $ 885,390.35 $ 12,671,793.60 The notes to the basic financial statements are an integral part of this statement. -6- BROOKS 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. 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 $ 705,279.83 $ 442,530.00 -777,242.00 -334,712.00 107,519.00 180,000.00 Change in Net Assets of Governmental Activities (Exhibit "B") $ 658,086.83 The notes to the basic financial statements are an integral part of this statement. -7- BROOKS COUNTY BOARD OF EDUCATION STATEMENT OF FIDUCIARY NET ASSETS FIDUCIARY FUNDS JUNE 30, 2007 EXHIBIT"G" ASSETS Cash and Cash Equivalents Investments Portfolio Accounts Total Assets LIABILITIES Funds Held for Others NET ASSETS Held in Trust for Private Purposes Total Liabilities and Net Assets PRIVATE PURPOSE TRUSTS AGENCY FUNDS $ 20,356.87 $ 96,353.09 $ 96,353.09 $ 20,356.87 $ 20,356.87 $ 96,353.09 $ 96,353.09 $ 20,356.87 The notes to the basic financial statements are an integral part of this statement. -8- BROOKS COUNTY BOARD OF EDUCATION STATEMENT OF CHANGES IN FIDUCIARY NET ASSETS FIDUCIARY FUNDS YEAR ENDED JUNE 30, 2007 ADDITIONS Investment Earnings Net Increase in Fair Value of Investments Interest Total Additions DEDUCTIONS Scholarships Administrative Expenses Total Deductions Change in Net Assets Net Assets - Beginning Net Assets - Ending EXHIBIT"H" PRIVATE PURPOSE TRUSTS $ 14,913.13 1 431.91 $ 16,345.04 $ 1,500.00 656.85 $ 2,156.85 $ 14,188.19 82,164.90 $ 96,353.09 The notes to the basic financial statements are an integral part of this statement. -9- (This page left intentionally blank) BROOKS 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 Brooks 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 Brooks 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 ofinternal 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. - 11 - BROOKS COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007 EXHIBIT "I" 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) and Bond Proceeds to be used for the acquisition, construction or renovation of major capital facilities. Debt Service Fund accounts for taxes (sales) legally restricted for the payment ofgeneral longterm principal, interest and paying agent's fees. The School District reports the following fiduciary fund types: Private Purpose Trust funds report trust arrangements under which income may be expended to provide scholarships for selected students. Agency funds account for assets held by the School District as an agent for various funds 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 ofwhen the related cash flows take place. Nonexchange transactions, in which the School District gives (or receives) value without directly receiving (or giving) equal value in exchange, include property taxes, sales taxes, grants and donations. On an accrual basis, revenue from property taxes is recognized in the fiscal year for which the taxes are levied. Revenue from sales taxes is 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 - BROOKS 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 of general long-term liabilities 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 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, - 13 - BROOKS 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 ofGeorgia, 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 Brooks County Board ofCommissioners fixed the property tax levy for the 2006 tax digest year (calendar year) on September 15, 2006 (levy date). Taxes were due on November 15, 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 Brooks 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 $5,121,404.95. The tax millage rate levied for the 2006 tax year (calendar year) for the Brooks County Board of Education was as follows (a mill equals $1 per thousand dollars of assessed value): School Operations 15.23 mills SALES TAXES Special Purpose Local Option Sales Tax, at the fund reporting level, during the year amounted to $1,238,465.91 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 - BROOKS 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. For fiscal year 2007, the School District began recording inventories ofpurchased foods and donated food commodities. The recording ofthe purchased foods and donated food commodities inventories is a change in accounting principles. 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 of assets 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 $ 5,000.00 NIA $ 5,000.00 5 to 15 years $ 5,000.00 15 to 60 years $ 5,000.00 5 to 15 years Depreciation is used to allocate the actual or estimated historical cost of all capital assets over estimated useful lives. - 15 - BROOKS 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. 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 ofNet 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 ofinsurance, 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, $403,610.18 of deposits 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 - BROOKS 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 of the State of Georgia, and (7) Bonds, bills, notes, certificates of indebtedness, or other obligations of a subsidiary corporation of the United States government, which are fully guaranteed by the United States government both as to principal and interest or debt obligations issued by the Federal Land Bank, the Federal Home Loan Bank, the Federal Intermediate Credit Bank, the Central Bank for Cooperatives, the Farm Credit Banks, the Federal Home Loan Mortgage Association, and the Federal National Mortgage Association. CATEGORIZATION OF DEPOSITS At June 30, 2007, the bank balances were $15,562,124.97. The amounts ofthe 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 by its trust department or agent in the School District's name, 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 1 2 3 Total Bank Balance $ 403,610.18 3,763,720.17 10,221,187.29 $ 14,388,517.64 - 17 - BROOKS 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. Investment Type Fair Value Other Investments Equity Mutual Funds Equity Securities - Domestic $ 64,984.49 31,368.60 Total Investments $ 96,353.09 Custodial Credit Risk Custodial credit risk for investments is the risk that, in the event ofa failure ofthe counterparty to a transaction, the School District will not be able to recover the value of the investment or collateral securities that are in the possession ofan outside party. The School District does not have a formal policy for managing custodial credit risk. Funds invested in Equity Mutual Funds and Equity Securities are not required to be classified by categories of custodial credit risk. 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: - 18 - BROOKS COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007 EXHIBIT "I" Note 5: CAPITAL ASSETS Governmental Activities Capital Assets, Not Being Depreciated: Land Construction in Progress Total Capital Assets Not Being Depreciated Capital Assets Being Depreciated Buildings and Improvements Equipment Land Improvements Less Accumulated Depreciation for: Buildings and Improvements Equipment Land Improvements Total Capital Assets, Being Depreciated, Net Governmental Activity Capital Assets - Net Balances July I, 2006 Increases Decreases Balances June 30. 2007 $ 552,029.00 1.196,779.00 $ $ I. 748.808.00 $ 105.207.00 $ 105,207.00 $ $ 552,029.00 173 111.00 1.128.875.00 173 111.00 $ 1,680.904.00 $ 16,406,822.00 2,646,727.00 $ 2,744,066.00 337,323.00 $ 173, 111.00 $ 16,406,822.00 10,285.00 2,973,765.00 2,917,177.00 6,318,973.00 1,509,949.00 988,711.00 410,380.00 226,711.00 140 151.00 $ 12.979,982.00 $ -266.808.00 $ $ 14,728190.0Q $ -161 601.00 $ 10,285.00 6,729,353.00 I ,726,375.00 I. 128.862.00 0.00 $ 12.713,174.00 173,111.00 $ 14,394,078.QQ Current year depreciation expense by function is as follows: Instruction Support Services Pupil Services General Administration School Administration Maintenance and Operation of Plant Student Transportation Services Food Services $ 383,527.00 $ 150,620.00 17,949.00 574.00 30,428.00 159,972.00 359,543.00 34,172.00 $ 777,242.00 Note 6: RESTRICTED ASSETS Special Purpose Local Option Sales Tax (SPLOST) and general obligation bond proceeds 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: - 19 - BROOKS COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007 EXHIBIT "I" Note 6: RESTRICTED ASSETS District-wide Capital Projects Bond SPLOST Proceeds Debt Service Funds Restricted Cash and Cash Equivalents: Debt Services Capital Acquisitions Restricted Investments: Capital Acquisitions $ 70,486.00 $ 885,390.35 $ 2,703,219.35 $ 982,845.07 $ 6,000,000.00 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 and unemployment compensation. 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. However, the errors or omissions policy excludes coverage for sexual harassment and discrimination. 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. In addition, the School District has elected to self-insure for sexual harassment and discrimination. The School District has not experienced any losses related to these risks in 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 ofthat 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 $ 0.00 $ 3,774.00 $ 3,774.00 $ 0.00 $ 0.00 $ 412.00 $ 412.00 $ 0.00 - 20- BROOKS COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007 EXHIBIT "I" Note 7: RISK MANAGEMENT The School District has purchased surety bonds to provide additional insurance coverage as follows: Position Covered Amount Superintendent Each Principal $ 100,000.00 $ 14,200.00 Note 8: LONG-TERM DEBT GENERAL OBLIGATION DEBT OUTSTANDING General Obligation Bonds currently outstanding are as follows: Purpose Interest Rate Amount General Government - Series 2006 3.81% $ 7,920,000.00 Voters have authorized $6,000,000.00 in general obligation debt for educational purposes within the School District which was not issued as of June 30, 2007. The changes in Long-Term Debt during the fiscal year ended June 30, 2007, were as follows: Governmental Funds General Obligation Bonds Balance July 1, 2006 $ 8,100,000.00 Deductions Debt Retired 180,000.00 Balance June 30, 2007 $ 7,920,000.00 Portion of Long-Term Debt Due within One Year $ 805,000.00 At June 30, 2007, payments due by fiscal year which includes principal and interest for these items are as follows: - 21 - BROOKS COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007 EXHIBIT "I" Note 8: LONG-TERM DEBT Fiscal Year Ended June 30 General Obligation Debt Principal Interest 2008 2009 2010 2011 2012 2013 - 2015 $ 805,000.00 $ 865,000.00 930,000.00 1,000,000.00 1,030,000.00 3,290,000.00 286,416.75 254,603.25 220,408.50 183,642.00 144,970.50 190,881.00 Total Principal and Interest $ 7.920.000.00 $ 1,280,922.00 Note 9: ON-BEHALF PAYMENTS The School District has recognized revenues and costs in the amount of $423,854.57 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 $394,468.77 Paid to the Teachers Retirement System of Georgia For Teachers Retirement System (TRS) Employer's Cost In the amount of $26,166.80 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 $3,219.00 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. -22 - BROOKS COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007 EXHIBIT "I" Note 11: 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% $ 1,140,407.16 $ 1,077,475.00 $ 1,037,504.00 - 23 - (This page left intentionally blank) BROOKS 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 Total Expenditures Net Change in Fund Balances Fund Balances - Beginning NONAPPROPRIATED BUDGETS ORIGINAL (1 l FINAL (1) ACTUAL AMOUNTS $ 5,288,493.00 $ 5,288,493.00 $ 5,121,404.95 35,000.00 35,000.00 112,721.00 11,500,016.00 12,087,465.00 12,616,021.51 3,848,636.00 4,579,160.00 4,157,033.59 197,800.00 197,800.00 326,726.68 53,500.00 53,500.00 39,268.63 145 675.00 145 675.00 457,232.26 $ 21,069,120.00 $ 22,387,093.00 $ 22,830,408.62 $ 12,708,056.00 $ 13,296,218.00 $ 14,215,987.53 843,263.40 986,426.00 350,233.00 664,293.00 1,532,448.00 192,159.00 1,479,243.00 1,049,543.00 95,041.00 68,363.00 1,358,150.00 100,000.00 837,636.00 1,148,584.00 355,511.00 669,485.00 1,525,118.00 192,159.00 1,441,243.00 1,176,742.00 95,041.00 90,363.00 1,388,150.00 877,915.56 930,873.80 363,479.04 682,461.65 1,579,901.76 182,741.34 1,472,024.96 1,257,638.94 80,239.70 35,923.95 112,747.36 1,371,823.73 $ 21,427,218.40 $ 22,216,250.00 $ 23,163,759.32 $ -358,098.40 $ 170,843.00 $ -333,350.70 1,955,895.91 1,955,896.00 2 164 519.91 Fund Balances - Ending $ 1 597 797.51 $ 21126 I739 .00 $ ==1====83=1=1=6=9=.2=1= 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. - 25 - BROOKS 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 Migrant Education Reading First State Grants Safe and Drug-Free Schools and Communities - State Grants State Grants for Innovative Programs Title I Grants to Local Educational Agencies Twenty-First Century Community Learning Centers Vocational Education - Basic Grants to States Total U. S. Department of Education Labor, U. S. Department of Pass-Through From Georgia Department of Education Workforce Investment Act - Adult Program Total Federal Financial Assistance NIA = Not Available CFDA NUMBER PASSTHROUGH ENTITY ID NUMBER EXPENDITURES IN PERIOD .. 10.553 10.555 NIA (2) NIA $ 1,227/79.61 $ 1,227,779.61 10.550 NIA 72 742.36 $ 1,300,521.97 84.027 84.173 N/A $ NIA $ 530,323.96 17 872.48 548,196.44 84.365 84.318 84.938 84.367 84.011 84.357 84.186 84.298 . 84.010 84.287 84.048 NIA 11,126.75 N/A 168,452.58 N/A (3) NIA 261,184.57 NIA 36,894.48 NIA 148,310.72 N/A 21,315.34 NIA 6,481.00 NIA 1,320,308.22 NIA 473,787.84 NIA 45 881.00 $ 3,041,938.94 17.258 NIA $ 7 469.32 $ =====4,==34=9='9=3=0=.2=3 - 26 - BROOKS 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 ($300,520.38) 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 $10,434.00, 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 Brooks 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. - 27 - BROOKS 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 - V 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 Vocational Supervisors Education Equalization Funding Grant Food Services Vocational Education Amended Formula Adjustment Other State Programs Graduation Coaches Health Insurance K-8 Statewide Reading and Math Grants Middle School Summer Remedial Program National Teacher Certification Preschool Handicapped Program Pupil Transportation - State Bonds Special Education Low Incidence Grant Teachers' Retirement Virtual Schools State Grant Office of Treasury and Fiscal Services Public School Employees Retirement See notes to the basic financial statements. -28- SCHEDULE "3" GOVERNMENTAL FUND TYPE GENERAL FUND $ 422,177.81 570,137.00 409,987.00 1,558,893.00 160,833.00 769,495.00 138,474.00 1,424,624.00 987,313.00 467,850.00 1,183,854.00 43,985.00 169,356.00 104,368.00 92,901.00 229,754.00 72,817.00 44,756.00 368,156.00 496,227.00 601,107.00 404,967.00 49,776.00 35,802.00 58,659.00 7,848.00 18,859.00 1,028,336.00 71,106.00 114,875.84 -208, 122.00 40,075.00 394,468.77 35,804.29 2,119.00 22,591.00 33,888.00 150,000.00 8,368.00 26,166.80 150.00 3 219.00 $ ====12=,6=1=6,=02=1=.5=1 BROOKS COUNTY BOARD OF EDUCATION SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS YEAR ENDED JUNE 30, 2007 SCHEDULE "4" PROJECT The acquisition, construction and equipping of capital outlay projects at North Brooks Elementary School, Brooks Middle School, Quitman Elementary School and Brooks County High School, including the Brooks County High School football stadium. The acquisition, construction and equipping a new high school in Brooks County and a facility to house and service the School District's vehicles and adding to, remodeling, renovating, improving, and equipping existing educational buildings, properties, and other facilities of the School District, and acquiring any necessary personal property and equipment, including computers and related technology, safety and security upgrades, and similar equipment. ORIGINAL ESTIMATED COST (1) CURRENT ESTIMATED COSTS (2) AMOUNT EXPENDED IN CURRENT YEAR(3) AMOUNT EXPENDED IN PRIOR YEARS (3) PROJECT STATUS $ 4,000,000.00 $ 4,490,699.00 $ 1,549.70 $ 4,490,699.00 Ongoing 6,300,000.00 6,300,000.00 324,784.06 1,231,461.00 Ongoing $ 10,300,000.00 $ 10,790,699.00 $ 326,333.76 $ 5,722,160.00 (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 Brooks 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. See notes to the basic financial statements. -29- (This page left intentionally blank) BROOKS COUNTY BOARD OF EDUCATION GENERAL FUND - QUALITY BASIC EDUCATION PROGRAM (QBE) ALLOTMENTS AND EXPENDITURES BY PROGRAM YEAR ENDED JUNE 30, 2007 SCHEDULE "5" DESCRIPTION Direct Instructional Programs Kindergarten Program Kindergarten Program-Early Intervention Program Primary Grades (1-3) Program Primary Grades-Early Intervention (1-3) Program Upper Elementary Grades (4-5) Program Upper Elementary Grades-Early Intervention (4-5) Program Middle Grades (6-8) Program Middle School (6-8) Program High School General Education (9-12) Program Vocational Laboratory (9-12) Program Students with Disabilities Category I Category II Category Ill Category IV CategoryV Gifted Student - Category VI Remedial Education Program Alternative Education Program English Speakers of Other Languages (ESOL) TOTAL DIRECT INSTRUCTIONAL PROGRAMS Media Center Program Staff and Professional Development ALLOTMENTS FROM GEORGIA DEPARTMENT OF EDUCATION (1) (2) ELIGIBLE QBE PROGRAM COSTS SALARIES OPERATIONS TOTAL $ 646,532.00 $ 556,579.54 $ 8,317.23 $ 564,896.77 466,610.00 445,090.13 2,567.87 447,658.00 1,798,672.00 1,730,920.77 65,285.43 1,796,206.20 203,440.00 274,569.64 1,497.60 276,067.24 885,466.00 1,026,503.47 21,021.59 1,047,525.06 174,705.00 2,871.00 1,672,011.00 1,144,637.00 542,230.00 1,369,730.00 54,323.00 181,003.00 122,088.00 99 890.00 102,337.31 2,013,577.17 1,598,848.04 647,274.94 43,713.33 310,090.42 826,493.89 128,209.69 784.59 73,342.46 120,089.07 202,485.44 71 281.36 2,689.91 43,679.42 81,544.02 72,265.92 1,353.66 3,965.11 11,950.40 2,401.61 3,482.32 1,206.16 13,604.66 4,133.13 138.84 105,027.22 2,057,256.59 1,680,392.06 719,540.86 45,066.99 314,055.53 838,444.29 130,611.30 4,266.91 74,548.62 133,693.73 206,618.57 71 420.20 $ 9,364,208.00 $ 10,172,191.26 $ 341,104.88 $ 10,513,296.14 266,418.00 52 319.00 291,143.34 8 368.74 33,262.81 42 771.51 324,406.15 51 140.25 TOTAL QBE FORMULA FUNDS $ 9 682 945.00 $ 10 471 703.34 $ 417 139.20 $ 10,888,842.54 (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. - 31 - 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 February 29, 2008 Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education and Superintendent and Members of the Brooks 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 Brooks County Board of Education as of and for the year ended June 30, 2007, which collectively comprise Brooks County Board of Education's basic financial statements and have issued our report thereon dated February 29, 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 Brooks 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 Brooks County Board of Education's internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness of the Brooks 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 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 Brooks 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 Brooks County Board ofEducation's financial statements that is more than inconsequential will not be prevented or detected by the Brooks County Board of Education's internal control. We consider item FS-6141-07-01 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 Brooks 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 the significant deficiency described above is not a material weakness. Compliance and Other Matters As part of obtaining reasonable assurance about whether Brooks 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 Brooks County Board of Education in a separate letter dated February 29, 2008. Brooks 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 Brooks 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 finance committee, management members of the Brooks County Board of Education, Federal awarding agencies and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties. Respectfully submitted, ~b..Um ~.--:J~ 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 February 29, 2008 Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education and Superintendent and Members of the Brooks 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 ofBrooks 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. Brooks 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 Brooks County Board of Education's management. Our responsibility is to express an opinion on Brooks 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 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 Brooks 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 Brooks County Board of Education's compliance with those requirements. In our opinion, the Brooks 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 Brooks 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 Brooks 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 of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of the Brooks 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 of the finance committee, management, members of the Brooks County Board of Education, Federal awarding agencies and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties. Respectfully submitted, ~n.~~.~~ State Auditor RWH:as 2007SA-10 SECTION III AUDITEE'S RESPONSE TO PRIOR YEAR FINDINGS AND QUESTIONED COSTS BROOKS 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-6141-06-01 FS-6141-06-02 Previously Reported Corrective Action Implemented Previously Reported Corrective Action Implemented PRIOR YEAR FEDERAL AWARD FINDINGS AND QUESTIONED COSTS No matters were reported. SECTION IV FINDINGS AND QUESTIONED COSTS BROOKS 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 Brooks 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 Brooks County Board of Education disclosed a financial statement significant deficiency related to the following control category. Cash and Cash Equivalents The significant deficiency described above is not considered to be a material weakness. 3. Noncompliance Material to the Financial Statements The audit of the Brooks 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 Brooks County Board of Education 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 Brooks County Board ofEducation's report on compliance with requirements applicable to major programs was unqualified. 6. Audit Findings Required to be Reported by Section .5 lO{a) of 0MB Circular A-133 The Brooks County Board ofEducation's audit did not disclose audit findings required to be reported by section .510(a) ofOMB Circular A-133. 7. Major Programs Federal awards audited as major programs are as follows: 10.553 Food Services - School Breakfast Program 10.555 Food Services - National School Lunch Program 84.287 Twenty-First Century Community Learning Centers 8. Type "A" Program Dollar Threshold The dollar threshold for type "A" programs was $300,000.00. 9. Low Risk Auditee The Brooks County Board ofEducation qualified as a low risk auditee as defined by Section .530 ofOMB Circular A-133. - 1- BROOKS 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 Payroll Bank Account not Reconciled Significant Deficiency Finding Control Number: FS-6141-07-01 Condition: The School District failed to reconcile the payroll bank account to the general ledger at June 30, 2007. Criteria: Adequate system of internal controls dictate that bank reconciliations be performed at a minimum on a monthly basis and, as appropriate, include the following: (1) adequate supporting documentation, (2) reconciling items correctly identified by description and amount, (3) adjustments are identified and corrected in a timely manner, and (4) evidence of an effective supervisory review and approval. Questioned Cost: NIA Information: At the end of the fiscal year, there was an unlocated variance of $808.63 between the payroll bank account and the general ledger. Cause: Management failed to reconcile the payroll bank account to the general ledger. Effect: Failure to reconcile the bank statements to the general ledger could result in errors in financial reporting and increases the risk ofmaterial misstatement in the financial statements including misstatements due to fraud. Recommendation: The School District should establish sufficient internal control procedures to ensure that all bank accounts owned by the School District are reconciled to the general ledger. III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS No matters were reported. -2 - SECTIONV MANAGEMENT'S RESPONSES BROOKS COUNTY BOARD OF EDUCATION SCHEDULE OF MANAGEMENT'S RESPONSES YEAR ENDED JUNE 30, 2007 Finding Control Number: FS-6141-07-01 We concur with this finding. The Financial Director has implemented controls to ensure that all bank accounts be reconciled to the general ledger on a timely basis. Contact Person: Wanda Thompson, Finance Director Phone: (229) 263-7531 Fax: (229) 263-5206 E-mail Address: wthompson@brooks.k12.ga.us