Calhoun County Board of Education, Morgan, Georgia, report on audit of the financial statements for the fiscal year ended June 30, 2007

CALHOUN COUNTY BOARD OF EDUCATION MORGAN, 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

CALHOUN COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS -

SECTION I

FINANCIAL

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

EXHIBITS

BASIC FINANCIAL STATEMENTS

DISTRICT-WIDE FINANCIAL STATEMENTS

A

STATEMENT OF NET ASSETS

1

B

STATEMENT OF ACTIVITIES

2

FUND FINANCIAL STATEMENTS

C

BALANCE SHEET

GOVERNMENTAL FUNDS

4

D

RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET

TO THE STATEMENT OF NET ASSETS

5

E

STATEMENT OF REVENUES, EXPENDITURES AND CHANGES

IN FUND BALANCES

GOVERNMENTAL FUNDS

6

F

RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT

OF REVENUES, EXPENDITURES AND CHANGES IN FUND

BALANCES TO THE STATEMENT OF ACTIVITIES

7

G

STATEMENT OF FIDUCIARY NET ASSETS

FIDUCIARY FUNDS

9

H

NOTES TO THE BASIC FINANCIAL STATEMENTS

10

SCHEDULES

REQUIRED SUPPLEMENTARY INFORMATION

1 SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES

IN FUND BALANCES - BUDGET AND ACTUAL

GENERAL FUND

25

SUPPLEMENTARY INFORMATION

2 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS

26

3 SCHEDULE OF STATE REVENUE

27

CALHOUN COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS -

SECTION I

FINANCIAL

SCHEDULES

SUPPLEMENTARY INFORMATION

4 SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS

28

5 ALLOTMENTS AND EXPENDITURES

GENERAL FUND - QUALITY BASIC EDUCATION PROGRAMS (QBE)

BY PROGRAM

29

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

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

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

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

SECTION I FINANCIAL

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

DEPARTMENT OF AUDITS AND ACCOUNTS
270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400
September 19, 2008

Honorable Sonny Perdue, Governor Members ofthe General Assembly Members ofthe State Board of Education
and Superintendent and Members of the Calhoun County Board of Education
INDEPENDENT AUDITOR'S COMBINED REPORT ON BASIC FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION - SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
Ladies and Gentlemen:
We have audited the accompanying financial statements ofthe governmental activities, each major fund, and the aggregate remaining fund information (Exhibits A through H) ofthe Calhoun 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 Calhoun 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 Calhoun 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 Calhoun 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 Calhoun 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 September 19, 2008, on our consideration of the Calhoun 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 of that report is to describe the scope ofour testing of internal control over financial reporting and compliance and the results ofthat testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit.
The Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual, as presented on page 25, 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 Calhoun 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,

RWH:gp 2007ARL-11

~A,6A-~~~~
Russell W. Hinton, CPA, CGFM State Auditor

CALHOUN COUNTY BOARD OF EDUCATION

CALHOUN 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 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

EXHIBIT"A"

GOVERNMENTAL ACTIVITIES

$

1,728,512.38

713,189.90

119,421.57 449,097.77 378,412.40
29,702.42 8,637.39

1,483,278.88 98,359.00
561,344.62 5,869,500.40 1,382,081.78 -5,267,387.80

$ ===7=,5=5=4=1,=5=0=7=1

$

193,692.00

693,092.65

246,382.63 653,638.94

$

1,786,806.22

$

3,857,333.51

8,637.39 207,825.00 510,409.47 1,183,139.12

$

5,767,344.49

$ ===7=,5=5=4=1,=5=0.=7=1

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

CALHOUN COUNTY BOARD OF EDUCATION STATEMENT OF ACTIVITIES
FOR THE YEAR ENDED JUNE 30, 2007

GOVERNMENTAL ACTIVITIES
Instruction Support Services
Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Other Support Services Operations of Non-Instructional Services Food Services 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

EXPENSES

CHARGES FOR SERVICES

$

4,249,120.44

328,640.05 $
211,996.71 315,879.74 440,509.29 583,487.01
88,602.88 505,819.87 411,574.68
19,206.76

503,619.86 35,132.51

$

7,693,589.80 $

1,556.76 13,361.46
2,533.53
21,928.56 39,380.31

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

$

3,447,144.63

198,136.55 198,750.12 87,730.22 460,653.60 405,851.47
1,739.90 231,031.80 179,469.53 $
9,382.55

376,366.58

$

5,596,256.95 $

$ 114,502.00 114,502.00 $

-801,975.81
-128,946.74 -13,246.59
-214,788.06 20,144.31
-175, 102.01 -86,862.98
-274,788.07 -117,603.15
-9,824.21
-105,324.72 -35 132.51
-1,943,450.54

$

1,578,237.26

39,638.91

255,007.75 235,059.15
4,269.71 7,366.77 339,062.00 73,248.72 249,493.65

$

2,781,383.92

$

837,933.38

4 929 411.11

$ ======5=7,=67=,3=4=4=.4=9

-3-

CALHOUN 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

GENERAL FUND

DISTRICTWIDE
CAPITAL PROJECTS
FUND

DEBT SERVICE
FUND

TOTAL

$ 1,539,444.98 $
28,462.78 449,097.57 378,412.40
26,134.85 8,637.39

204,484.64 664,079.79 $
95,660.40
3,567.77

$ 49,110.11

1,743,929.62 713,189.90
124,123.18 449,097.57 378,412.40
29,702.62 8 637.39

Total Assets

$ 2,430,189.97 $ 967,792.60 $

49110.11 $===3,=44=7=,0=9=2=.6=8

LIABILITIES AND FUND BALANCES
LIABILITIES
Cash Overdraft Accounts Payable Salaries and Benefits Payable
Total Liabilities
FUND BALANCES
Reserved for: Debt Service Inventories Capital Projects
Unreserved Designated for Student Activities Undesignated Reported in: General Fund
Total Fund Balances

$ 193,692.00 693,092.65
$ 886,784.65

$

15,417.24 $

$

15,417.24 $

$

$

8,637.39

58,179.00 1,476,588.93 $ 1,543,405.32 $

174,132.25 $ 793,660.35
967,792.60 $

33,692.87 $ 33,692.87 $

15,417.24 193,692.00 693,092.65 902,201.89
207,825.12 8,637.39
793,660.35 58,179.00 1,476,588.93 2,544,890.79

Total Liabilities and Fund Balances

$ 2,430,189.97 $ 967,792.60 $

49 110.11 $ ======3=,4=47.,.,0==9=2==.6===8

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

CALHOUN 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
Total Long-Term Liabilities

$ 2,544,890.79

$ 1,483,278.88 98,359.00
561,344.62 5,869,500.40 1,382,081.78 -5,267,387.80

4,127,176.88

-4,701.61

$ -655,000.00 -245,021.57

-900,021.57

Net Assets of Governmental Activities (Exhibit "A")

$ 5,767,344.49

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

CALHOUN COUNTY BOARD OF EDUCATION STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES
GOVERNMENTAL FUNDS YEAR ENDED JUNE 30, 2007

EXHIBIT"E"

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

GENERAL FUND

DISTRICTWIDE
CAPITAL PROJECTS
FUND

DEBT SERVICE
FUND

TOTAL

$ 1,761,653.00 11,636.26 $
4,544,171.54 1,505,649.41
39,380.31 36,180.30 249,493.65

235,059.15 $ 37,068.42

$ 8,148,164.47 $ 272,127.57 $

$ 255,007.75
255,007.75 $

1,761,653.00 501,703.16
4,544,171.54 1,505,649.41
39,380.31 73,248.72 249,493.65
8,675,299.79

$ 4,115,344.58

$ 4,115,344.58

328,640.05 211,996.71 308,864.90 440,509.29 583,487.01
87,687.00 502,936.35 455,038.33 $
19,206.76 484,957.05

$ 29,462.00
119,702.20

915.88

328,640.05 211,996.71 308,864.90 440,509.29 583,487.01
88,602.88 502,936.35 484,500.33
19,206.76 484,957.05 119,702.20

44,472.86 15,124.76

235,000.00 20,007.75

279,472.86 35,132.51

$ 7,598,265.65 $ 149,164.20 $ 255,923.63 $ 8,003,353.48

$ 549,898.82 $ 122,963.37 $

-915.88 $

671,946.31

10,245.00

10,245.00

$ 560,143.82 $ 122,963.37 $

-915.88 $

682,191.31

983,261.50

844,829.23

34,608.75

1,862,699.48

$ 1,543,405.32 $ 967,792.60 $ 33,692.87 $ 2,544,890.79

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

CALHOUN 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.
Some of the Capital Assets acquired this year were financed with capital leases. In Governmental Funds, a capital lease arrangement is considered a source of financing, but in the Statement of Net Assets, the lease 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
Total Long-Term Debt Repayments
Change in Net Assets of Governmental Activities (Exhibit "B")

$

682,191.31

$ 237,260.00 -206,970.74

30,289.26

-143,775.05

-10,245.00

$ 235,000.00 44,472.86

279,472.86

$ ===8=37=,9=3=3=.3=8

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

(This page left intentionally blank)

CALHOUN COUNTY BOARD OF EDUCATION STATEMENT OF FIDUCIARY NET ASSETS FIDUCIARY FUNDS JUNE 30, 2007
ASSETS Accounts Receivable, Net
Other
LIABILITIES Cash Overdraft Accounts Payable Funds Held for Others
Total Liabilities

EXHIBIT"G"

AGENCY FUNDS
$ ==12='=83=9=.4=8

$

13,985.87

79.39

-1,225.78

$ ===1=2,8=39=.4=8

The notes to the basic financial statements are an integral part of this statement. -9-

CALHOUN COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2007

EXHIBIT"H"

Note 1: DESCRIPTION OF SCHOOL DISTRICT AND REPORTING ENTITY
REPORTING ENTITY
The Calhoun County Board of Education (School District) was established under the laws of the 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 truces 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 Calhoun County Board of Education.
District-wide Statements: The Statement ofNet Assets and the Statement ofActivities display information about the financial activities ofthe overall School District, except for fiduciary activities. Eliminations have been made to minimize the double counting of internal activities. Governmental activities generally are financed through taxes, intergovernmental revenues, and other nonexchange transactions.
The Statement ofActivities presents a comparison between direct expenses and program revenues for each function of the School District's governmental activities.
Direct expenses are those that are specifically associated with a program or function and, therefore, are clearly identifiable to a particular function. Indirect expenses (expenses of the School District related to the administration and support ofthe School District's programs, such as office and maintenance personnel and accounting) are not allocated to programs.
Program revenues include (a) charges paid by the recipients ofgoods or services offered by the programs and (b) grants and contributions that are restricted to meeting the operational or capital requirements of a particular program. Revenues that are not classified as program revenues, including all taxes, are presented as general revenues.
Fund Financial Statements: The fund financial statements provide information about the School District's funds, including fiduciary funds. Eliminations have been made to minimize the double counting ofinternal activities. Separate statements for each category (governmental and fiduciary) are presented. The emphasis of fund financial statements is on major governmental funds, each displayed in a separate column.

- 10 - .

CALHOUN COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2007

EXHIBIT"H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The School District reports the following major governmental funds:
General Fund is the School District's primary operating fund. It accounts for all financial resources ofthe School District, except those resources required to be accounted for in another fund.
District-wide Capital Projects Fund accounts for financial resources including Special Purpose Local Option Sales Tax (SPLOST) 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 type:
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 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 and grants. 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 is recognized in the fiscal year in which all eligibility requirements have been satisfied.
The School District uses funds to report on its financial position and the results of its operations. Fund accounting is designed to demonstrate legal compliance and to aid financial management by segregating transactions related to certain governmental functions or activities. A fund is a separate accounting entity with a self-balancing set of accounts.
Governmental funds are reported using the current financial resources measurement focus and the modified accrual basis ofaccounting. Under this method, revenues are recognized when measurable and available. The School District considers all revenues reported in the governmental funds to be available if they are collected within sixty days after year-end. Property taxes, sales taxes and interest are considered to be susceptible to accrual. Expenditures are recorded when the related fund liability is incurred, except for principal and interest on general long-term debt, which are recognized
- 11 -

CALHOUN COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2007

EXHIBIT "H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
as expenditures to the extent they have matured. Capital asset acquisitions are reported as expenditures in governmental funds. Proceeds ofgeneral long-term liabilities 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 ofreturn shall be the objective, given equivalent conditions of safety and liquidity. Funds may be invested in the following:
(1) Obligations issued by the State of Georgia or by other states,
(2) Obligations issued by the United States government,
(3) Obligations fully insured or guaranteed by the United States government or a United States government agency,
(4) Obligations of any corporation of the United States government,
(5) Prime banker's acceptances,

- 12 -

CALHOUN COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2007

EXHIBIT "H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(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 Calhoun County Board of Commissioners fixed the property tax levy for the 2006 tax digest year (calendar year) on August 7, 2006 (levy date). Taxes were due on December 20, 2006 (lien date). Taxes collected within the current fiscal year or within 60 days after year-end on the 2006 tax digest are reported as revenue in the governmental funds for fiscal year 2007. The Calhoun 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 $1,722,014.09.

The tax millage rate levied for the 2006 tax year (calendar year) for the Calhoun 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 $490,066.90 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.

- 13 -

CALHOUN COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2007

EXHIBIT"H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

INVENTORIES

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

CAPITAL ASSETS

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

All

NIA

$ 10,000.00 15 to 30 years

$ 10,000.00 15 to 40 years

$ 10,000.00 10 to 30 years

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

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

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CALHOUN COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2007

EXHIBIT"H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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 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 ofFederal 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.

DEFICIT FUND BALANCES

The funds reporting deficit fund balances at June 30, 2007, are as follows:

Fund Type/Fund Name

Deficit Balances

Governmental Fund Type School Food Service Fund
Fiduciary Fund Type Agency Funds

$ 38,772.00

$

1,225.78

The Calhoun County Board of Education has been reducing expenditures and providing better monitoring to reduce the deficits.

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 ofmoney which has not been secured by surety bond, by guarantee of insurance, or by collateral. The aggregate ofthe face

- 15 -

CALHOUN COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2007

EXHIBIT"H"

Note 3: DEPOSITS AND INVESTMENTS
value of such surety bond and the market value of securities pledged shall be equal to not less than 110 percent ofthe public funds being secured after the deduction ofthe amount ofdeposit insurance. Ifa depository elects the pooled method (OCGA 45-8-13 .1) the aggregate ofthe market value ofthe securities pledged to secure a pool ofpublic funds shall be not less than 110 percent ofthe daily pool balance.
Acceptable security for deposits consists of any one of or any combination of the following:
(1) Surety bond signed by a surety company duly qualified and authorized to transact business within the State of Georgia,
(2) Insurance on accounts provided by the Federal Deposit Insurance Corporation,
(3) Bonds, bills, notes, certificates of indebtedness or other direct obligations of the United States or of the State of Georgia,
(4) Bonds, bills, notes, certificates of indebtedness or other obligations of the counties or municipalities of the State of Georgia,
(5) Bonds of any public authority created by the laws of the State of Georgia, providing that the statute that created the authority authorized the use of the bonds for this purpose,
(6) Industrial revenue bonds and bonds of development authorities created by the laws ofthe State of Georgia, and
(7) Bonds, bills, notes, certificates of indebtedness, or other obligations of a subsidiary corporation of the United States government, which are fully guaranteed by the United States government both as to principal and interest or debt obligations issued by the Federal Land Bank, the Federal Home Loan Bank, the Federal Intermediate Credit Bank, the Central Bank for Cooperatives, the Farm Credit Banks, the Federal Home Loan Mortgage Association, and the Federal National Mortgage Association.
CATEGORIZATION OF DEPOSITS At June 30, 2007, the bank balances were $2,285,478.70. 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 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.

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CALHOUN COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2007

EXHIBIT"H"

Note 3: DEPOSITS AND INVESTMENTS

The School District's uninsured deposits are classified by custodial credit risk category at June 30, 2007, as follows:

Custodial Credit Risk Category

Bank Balance

1

$

0.00

2

2,149,829.88

3

0.00

Total

$2,149,829.88

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 Equity Mutual Funds

$ 713,189.90

Credit Quality Risk Credit quality risk is the risk that an issuer or other counterparty to an investment will not fulfill its obligations. The School District does not have a formal policy for managing credit quality risk.

The U. S. Treasury Money Market Mutual Fund has a credit quality rating ofAAA by Moody's and Standard and Poor's.

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:

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CALHOUN COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2007

EXHIBIT"H"

Note 5: CAPITAL ASSETS

Balances July l, 2006

Increases

Balances Decreases June 30, 2007

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

$ 1,483,278.88 0.00 $ 98,359.00 $

$ 1,483,278.88

0.00

98,359.00

Total Capital Assets Not Being Depreciated $ 1,483,278.88 $ 98,359.00 $

0.00 $ 1,581,637.88

Capital Assets Being Depreciated Buildings and Improvements Equipment Land Improvements

$ 5,860,061.40 $ 9,439.00 $ 1,252,619.78 129,462.00 561,344.62

0.00 $ 5,869,500.40 1,382,081.78 561,344.62

Less Accumulated Depreciation for: Buildings and Improvements Equipment Land Improvements

3,660,003.54 907,720.65 492,692.87

134,748.39 67,191.68
5,030.67

3,794,751.93 974,912.33 497,723.54

Total Capital Assets, Being Depreciated, Net $2,613,608.74 $ -68,069.74 $

0.00 $ 2,545,539.00

Governmental Activity Capital Assets - Net $ 4,026,881.62 $ 30,282.26 $

0.00 $4,121,116.88

Capital assets being acquired under capital leases as of June 30, 2007, are as follows:

Governmental Funds

Equipment Less: Accumulated Depreciation

$ 118,800.00 41,580.00

$ 77,220.00

Current year depreciation expense by function is as follows:

Instruction Support Services
Educational Media Services Maintenance and Operation of Plant Student Transportation Services Food Services

$ 127,133.71

$ 6,666.54 1,705.07
53,729.25

62,100.86 17,736.17

$ 206,970.74

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CALHOUN COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2007

EXHIBIT"H"

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:

District-wide Capital Projects

Bond

SPLOST

Proceeds

Debt Service Funds

Restricted Cash and Cash Equivalents: Debt Services Capital Acquisitions
Restricted Investments: Debt Services Capital Acquisitions

$ 174,132.25 $ 30,352.39
$ 49,110.11 $ 380,828.79 $ 283,251.00

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 of loss associated with torts, assets and errors or omissions. The School District has neither significantly reduced coverage for these risks nor incurred losses (settlements) which exceeded the School District's insurance coverage in any of the past three years.

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

The School District is self-insured with regard to unemployment compensation claims. A premium is charged when needed by the General Fund to each user program on the basis ofthe percentage of that fund's payroll to total payroll in order to cover estimated claims budgeted by management based on known claims and prior experience. The School District accounts for claims with expenses/expenditures and liability being reported when it is probable that a loss has occurred, and the amount of that loss can be reasonably estimated.

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

- 19 -

CALHOUN COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2007

EXHIBIT"H"

Note 7: RISK MANAGEMENT

Beginning ofYear Liability

Claims and Changes in Estimates

Claims Paid

End ofYear Liability

2006 2007

$

0.00 $

2,058.00 $

2,058.00 $

0.00

$

0.00 $

0.00 $

0.00 $

0.00

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 $500,000.00 loss per occurrence, up to $2,000,000.00.

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

Position Covered

Amount

Each Principal

$ 10,000.00

Note 8: LONG-TERM DEBT

CAPITAL LEASES The Calhoun County Board ofEducation has entered into various lease agreements for school buses, copiers and an energy management system. 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 ofthe date oftheir inception.

GENERAL OBLIGATION DEBT OUTSTANDING General Obligation Bonds currently outstanding are as follows:

Purpose

Interest Rate

Amount

General Government - Series 2004

2.59%

$ 655,000.00

The changes in Long-Term Debt during the fiscal year ended June 30, 2007, were as follows:

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CALHOUN COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2007

EXHIBIT"H"

Note 8: LONG-TERM DEBT

Governmental Funds

General

Capital

Obligation

Leases

Bonds

Total

Balance July 1, 2006

$ 279,249.43 $ 890,000.00 $ 1,169,249.43

Additions Capital Leases

10,245.00

10,245.00

Deductions Debt Retired

44,472.86

235,000.00

279,472.86

Balance June 30, 2007

$ 245,021.57 $ 655,000.00 $ 900,021.57

Portion of Long-Term Debt Due within One Year

$ 46,382.63 $ 200,000.00 $ 246,382.63

At June 30, 2007, payments due by fiscal year which includes principal and interest for these items are as follows:

Fiscal Year Ended June 30

Capital Leases

Principal

Interest

2008 2009 2010 2011 2012 2013 -2017 2018 - 2020

$ 46,382.63 $ 13,214.99

15,367.77

11,215.51

12,603.56

9,978.44

13,289.77

9,292.23

14,013.35

8,568.65

82,376.90

30,533.10

60,987.59

6,758.41

Total Principal and Interest

$ 245,021.57 $ 89,561.33

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CALHOUN COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2007

EXHIBIT "H"

Note 8: LONG-TERM DEBT

Fiscal Year Ended June 30

General Obligation

Debt

Principal

Interest

2008 2009 2010

$ 200,000.00 $ 225,000.00 230,000.00

14,633.00 8,871.00 2,979.00

Total Principal and Interest

$ 655 1000.Q0 $ 26A83.oo

Note 9: ON-BEHALF PAYMENTS

The School District has recognized revenues and costs in the amount of $151,197.04 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 ofNon-Certified Personnel In the amount of $147,524.91

Paid to the Teachers Retirement System of Georgia For Teachers Retirement System (TRS) Employer's Cost In the amount of $2,543.13

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 $1,129.00

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 -

CALHOUN COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2007

EXHIBIT"H"

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%

$ 317,317.44 $ 306,142.00 $ 290,585.00

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CALHOUN COUNTY BOARD OF EDUCATION GENERAL FUND
SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL
YEAR ENDED JUNE 30, 2007

SCHEDULE "1"

REVENUES
Property Taxes Sales Taxes State Funds Federal Funds Charges for Services Investment Earnings Miscellaneous
Total Revenues
EXPENDITURES
Current Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Other Support Services Food Services Operation
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

NONAPPROPRIATED BUDGETS

ORIGINAL (1)

FINAL (1)

ACTUAL AMOUNTS

$

1,730,207.00 $

1,730,207.00 $

1,761,653.00

32,487.00

32,487.00

11,636.26

4,128,900.00

4,155,900.00

4,544,171.54

258,359.00

1,257,297.00

1,505,649.41

39,380.31

10,000.00

36,180.30

3 260.26

249,493.65

$

6,149,953.00 $

7,189,151.26 $

8 148 164.47

$

3,631,669.20 $

4,331,150.61 $

4,115,344.58

281,116.37 150,746.00 173,959.00 398,560.00 528,772.00 128,980.00 542,630.00 576,316.00
7,750.00 423,250.00

332,926.00 256,107.28 186,058.00 466,751.83 536,578.00 103,980.00 543,130.00 580,511.00
21,044.00 424,010.26

328,640.05 211,996.71 308,864.90 440,509.29 583,487.01
87,687.00 502,936.35 455,038.33
19,206.76 484,957.05
59 597.62

$

6 843 748.57 $

7,782,246.98 $

7,598,265.65

$

-693 795.57 $

-593,095.72 $

549,898.82

$

8,446.46

-11 317.27 $

$

-2 870.81 $

$

-693,795.57 $

-595,966.53 $

1,004,688.28

1,004,688.28

-22,048.22

-22,048.22

10 245.00 10 245.00 560,143.82 983,261.50

Fund Balances - Ending

$

288,844.49 $

386,673.53 $ ==1='=54=3=,4=0==5==.3=2

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.

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CALHOUN COUNTY BOARD OF EDUCATION SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
YEAR ENDED JUNE 30, 2007

SCHEDULE "2"

FUNDING AGENCY PROGRAM/GRANT
Agriculture, U. S. Department of Child Nutrition Cluster Pass-Through From Georgia Department of Education Food Services School Breakfast Program National School Lunch Program
Total Child Nutrition Cluster
Other Programs Pass-Through From Georgia Department of Education Food Donation (1)
Total U.S. Department of Agriculture
Education, U. S. Department of Special Education Cluster Pass-Through From Georgia Department of Education Special Education Grants to States Preschool Grants
Total Special Education Cluster
Other Programs Pass-Through From Georgia Department of Education Enhancing Education Through Technology Program Improving Teacher Quality State Grants Migrant Education Reading First State Grants Rural Education State Grants for Innovative Programs Title I Grants to Local Educational Agencies Vocational Education - Basic Grants to States
Total U. S. Department of Education
Labor, U. S. Department of Pass-Through From Georgia Department of Labor Workforce Investment Act Youth Activities

CFDA NUMBER

PASSTHROUGH
ENTITY ID
NUMBER

EXPENDITURES IN PERIOD

10.553 10.555

N/A NIA $
$

(2) 455,850.10
455,850.10

10.550

NIA $

8,862.89 464,712.99

84.027 84.173

NIA

$

NIA

$

139,350.66 13,966.00
153,316.66

84.318 84.367 84.011 84.357 84.358 84.298 84.010 84.048

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

72,864.32 103,621.43
9,977.30 241,415.65
20,898.77 2,409.84
510,246.28 17,108.02
1,131,858.27

17.259

NIA $

17 645.82

Total Federal Financial Assistance
NIA= Not Available
Notes to the Schedule of Expenditures of Federal Awards
(1) The amount shown for the Food Donation Program represents the Federally assigned value of nonmonetary assistance for donated commodities received and/or consumed by the School District during the current fiscal year.
(2) Expenditures for the funds earned on the School Breakfast Program ($98,653.79) were not maintained separately and are included in the 2007 National School Lunch Program.
Major Programs are identified by an asterisk (*) in front of the CFDA number.
The School District did not provide Federal Assistance to any Subrecipient.
The accompanying schedule of expenditures of Federal awards includes the Federal grant activity of the Calhoun 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.

$==1=,6=1=4=,2=1=7.=08=

See notes to the basic financial statements.

- 26 -

CALHOUN 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 Grades (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 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 Sparsity - Alternative 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 Program Preschool Handicapped Program Pupil Transportation - State Bonds Teachers' Retirement
Office of Treasury and Fiscal Services Public School Employees Retirement
CONTRACTS Human Resources, Georgia Department of Family Connection Peer Mentoring Grant

See notes to the basic financial statements.

- 27 -

SCHEDULE "3"

GOVERNMENTAL FUND TYPE GENERAL FUND

$

97,593.79

174,518.00 137,601.00 393,794.00 263,380.00 224,419.00
65,531.00 360,240.00 292,534.00 195,792.00
4,550.00 176,047.00 111,317.00
34,836.00 58,412.00
1,590.00 17,433.00 32,692.00 71,851.00 22,796.00 13,778.00
265,896.00 202,592.00 183,903.00
167,653.00 14,502.00
219,217.00 12,000.00 31,689.00 2,391.00 8,247.01
339,062.00 20,810.00 13,690.66 -66,794.00
40,075.00 147,524.91
21,316.41 25,993.00 100,000.00
2,543.13
1,129.00

12,006.63 28,020.00

$

4 544 171.54

CALHOUN COUNTY BOARD OF EDUCATION SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS
YEAR ENDED JUNE 30, 2007

SCHEDULE "4"

PROJECT
The funding of the payment of principal and interest on the Calhoun County School District General Obligation Bonds, Series 1999, coming due on October 1, 2004, in an amount up to $100,000.00; rehabilitating, adding to, repairing, renovating, extending and improving Calhoun County Elementary School and Calhoun County Middle/High School, and related facilities useful or desirable in connection therewith, including without limitation, roof replacements and repairs, mechanical system repairs and replacements, wiring and infrastructure modifications, renovations and improvements to physical education and athletic facilities, additional parking and paving, and security systems; acquiring any necessary property therefor, both real and personal, and acquiring any necessary or desirable rights in connection therewith; renovations and repairs to the School District's bus shop; the acquisition and installation of technology additions and improvements; the acquisition of school buses; and purchasing school furnishings, equipment and fixtures; and paying costs incident to accomplishing the foregoing.

ORIGINAL ESTIMATED
COST(1)

CURRENT ESTIMATED COSTS (2)

AMOUNT EXPENDED IN CURRENT
YEAR (3)

AMOUNT EXPENDED
IN PRIOR YEARS (3)

PROJECT STATUS

$ 2,000,000.00 $ 2,000,000.00 $ 169,171.95 $ 778 667.00 Ongoing

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

See notes to the basic financial statements.

- 28 -

CALHOUN 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 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
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

$

191,076.00 $ 156,570.41 $

20,527.30 $

177,097.71

158,047.00

117,024.60

117,024.60

456,887.00

401,596.89

23,839.92

425,436.81

293,487.00

324,893.34

324,893.34

263,084.00

258,876.91

30,701.52

289,578.43

68,870.00 412,163.00 330,451.00 220,544.00 444,096.00
5,029.00 20,035.00 36 837.00

109,242.40 398,430.08 389,009.94 173,678.47
32,681.29 199,455.93 245,466.92
36,322.91 20,995.42
146.54 63.72
16,458.29

7,315.22 38,113.37 22,822.99

109,242.40 405,745.30 427,123.31 196,501.46
32,681.29 199,455.93 245,466.92
36,322.91 20,995.42
146.54 63.72
16 458.29

$

2,900,606.00 $ 2,880,914.06 $

143,320.32 $

3,024,234.38

82,168.00 15 918.00

166,506.81 2 039.97

32,105.43 15,327.34

198,612.24 17 367.31

TOTAL QBE FORMULA FUNDS

$

2,998,692.00 $ 3,049,460.84 $

190,753.09 $

3,240,213.93

(1) Comprised of State Funds plus Local Five Mill Share. (2) Allotments do not include the impact of the State amended formula adjustment.

See notes to the basic financial statements.

- 29-

SECTION II COMPLIANCE AND INTERNAL CONTROL REPORTS

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

DEPARTMENT OF AUDITS AND ACCOUNTS
270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400
September 19, 2008

Honorable Sonny Perdue, Governor Members ofthe General Assembly Members of the State Board of Education
and Superintendent and Members of the Calhoun 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 Calhoun County Board ofEducation as ofand for the year ended June 30, 2007, which collectively comprise Calhoun County Board of Education's basic financial statements and have issued our report thereon dated September 19, 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 Calhoun 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 Calhoun County Board of Education's internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness of the Calhoun County Board of Education's internal control over financial reporting.
Our consideration of internal control over financial reporting was for the limited purpose described in the preceding paragraph and would not necessarily identify all deficiencies in internal control over financial reporting that might be significant deficiencies or material weaknesses. However, as discussed below, we identified certain deficiencies in internal control over financial reporting that we consider to be significant deficiencies.
2007YB-40

A control deficiency exists when the design or operation ofa control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect misstatements on a timely basis. A significant deficiency is a control deficiency, or combination of control deficiencies, that adversely affect the Calhoun 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 ofthe Calhoun County Board of Education's financial statements that is more than inconsequential will not be prevented or detected by the Calhoun County Board ofEducation's internal control. We consider items FS-6191-07-01 and FS-6191-07-02 in the accompanying Schedule of Findings and Questioned Costs to be significant deficiencies in internal control over financial reporting.
A material weakness is a significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood that a material misstatement ofthe financial statements will not be prevented or detected by the Calhoun County Board of Education's internal control.
Our consideration of the internal control over financial reporting was for the limited purpose described in the first paragraph ofthis section and would not necessarily disclose all deficiencies in internal control that might be significant deficiencies and, accordingly, would not necessarily disclose all significant deficiencies that are also considered to be material weaknesses. However, of the significant deficiencies described above, we consider item FS-6191-07-01 to be a material weakness.
Compliance and Other Matters
As part of obtaining reasonable assurance about whether Calhoun 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 Calhoun County Board of Education in a separate letter dated September 19, 2008.
Calhoun 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 Calhoun County Board of Education's response and, accordingly, we express no opinion on it.
2007YB-40

This report is intended solely for the information and use of the management, members of the Calhoun 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:gp 2007YB-40

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
September 19, 2008

Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the Calhoun 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 of Calhoun County Board of Education with the types of compliance requirements described in the U.S. Office ofManagement and Budget (0MB) Circular A-133 Compliance Supplement that are applicable to each ofits major Federal programs for the year ended June 30, 2007. Calhoun 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 Calhoun County Board of Education's management. Our responsibility is to express an opinion on Calhoun 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 Calhoun County Board of Education's compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Our audit does not provide a legal determination on Calhoun County Board of Education's compliance with those requirements.
2007SA-30

In our opinion, the Calhoun County Board ofEducation 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 Calhoun 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 Calhoun 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 ofthe Calhoun County Board ofEducation's internal control over compliance.
Our consideration ofthe internal control over compliance was for the limited purpose described in the preceding paragraph and would not necessarily identify all deficiencies in the Board's internal control that might be significant deficiencies or material weaknesses as defined below. However, as discussed below, we identified certain deficiencies in internal control over compliance that we consider to be significant deficiencies.
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 ofa Federal program that is more than inconsequential will not be prevented or detected by the entity's internal control. We consider the deficiency in internal control over compliance described in the accompanying Schedule ofFindings and Questioned Costs as item FA6191-07-01 to be a significant deficiency.
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. We do not consider the deficiency described in the accompanying Schedule of Findings and Questioned Costs to be a material weakness.
Calhoun 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 Calhoun County Board of Education's response and, accordingly, we express no opinion on it.
2007SA-30

This report is intended solely for the information and use of the management, members of the Calhoun County Board ofEducation, Federal awarding agencies and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties.
Respectfully submitted,

RWH:gp 2007SA-30

~nto~;A~~ State Auditor

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

CALHOUN 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-6191-03-03 FS-6191-04-03 FS-6191-05-01 FS-6191-05-02 FS-6191-06-01 FS-6191-06-02 FS-6191-06-03

Further Action Not Warranted Unresolved - See Corrective Action/Responses Further Action Not Warranted Further Action Not Warranted Partially Resolved - See Corrective Action/Responses Unresolved - See Corrective Action/Responses Previously Reported Corrective Action Implemented

CORRECTIVE ACTION/RESPONSES

EXPENDITURES/LIABILITIES/DISBURSEMENTS EMPLOYEE COMPENSATION Inadequate Internal Control Procedures Finding Control Number: FS-6191-04-03

A review of employer costs for health insurance indicates that all certificated employees' costs were calculated and prescribed by Georgia Department of Education policy.

CASH AND CASH EQUIVALENTS INVENTORIES REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS EMPLOYEE COMPENSATION GENERAL LEDGER ACCOUNTING CONTROLS (OVERALL) Inadequate Accounting Procedures Finding Control Number: FS-6191-06-01

The Board initiated steps to strengthen procedures to ensure proper coding, documentation and approval of all expenditures, including employee compensation, before disbursing funds. The Board has not reached full implementation of an adequate system of checks and balances to ensure that all receiving, recording, dispersing and reconciling functions are established.

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CALHOUN 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

CORRECTIVE ACTION/RESPONSES

CASH AND CASH EQUIVALENTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Accounting Procedures over School Activity Accounts Finding Control Number: FS-6191-06-02

The Board is working to implement common accounting system for school accounts and establish adequate internal control procedures in staff operations at schools.

PRIOR YEAR FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

FINDING CONTROL NUMBER AND STATUS

FA-6191-04-03 FA-6191-05-01 FA-6191-05-03 FA-6191-06-01 FA-6191-06-02

Previously Reported Corrective Action Implemented Previously Reported Corrective Action Implemented Previously Reported Corrective Action Implemented Previously Reported Corrective Action Implemented Previously Reported Corrective Action Implemented

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SECTION IV FINDINGS AND QUESTIONED COSTS

CALHOUN 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 Calhoun 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 Calhoun County Board of Education disclosed financial statement significant deficiencies related to the following control categories.

Cash and Cash Equivalents Revenues/Receivables/Receipts Accounting Controls (Overall)

Expenditures/Liabilities/Disbursements Employee Compensation General Ledger

All ofthe significant deficiencies described above are considered to be material weaknesses.

3. Noncompliance Material to the Financial Statements The audit of the Calhoun 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 Calhoun County Board of Education disclosed a significant deficiency in internal control over major programs for the following compliance requirement.

Activities Allowed/Unallowed

The significant deficiency described above is not considered to be a material weakness.

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

6. Audit Findings Required to be Reported by Section .510(a) of 0MB Circular A-133 The Calhoun County Board of Education's audit disclosed an audit finding required to be reported by section .510(a) ofOMB Circular A-133. This finding is included in section IV of this report.

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 84.010 Title I Grants to Local Educational Agencies

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CALHOUN COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2007

I SUMMARY OF AUDITOR'S RESULTS

8. Type "A" Program Dollar Threshold The dollar threshold for type "A" programs was $300,000.00.

9. Low Risk Auditee The Calhoun County Board ofEducation did not qualify as a low risk auditee as defined by Section .530 ofOMB Circular A-133.

II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

CASH AND CASH EQUIVALENTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS EMPLOYEE COMPENSATION GENERAL LEDGER ACCOUNTING CONTROLS (OVERALL) Inadequate Accounting Procedures Material Weakness Finding Control Number: FS-6191-07-01

Condition:

This is a repeat finding (FS-6191-06-0 I, FS-6191-05-01, FS-6191-04-01 and FS-6191-03-01) from the years ended June 30, 2006, June 30, 2005, June 30, 2004, and June 30, 2003, respectively. The accounting procedures of the School District were insufficient to provide adequate internal controls over numerous control categories.

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. Such internal controls would limit any one individual's access to both physical assets and the related accounting records.

Questioned Cost: NIA

Information:

Cash and Cash Equivalents The School District's General Operating bank account, School Food Service bank account and High School activity bank account did not reconcile to the general ledger. The reconciled bank account balances did not agree to the general ledger by $11,769.60.

The School District's bank reconciliations did not include evidence of approval by someone other than the person performing the bank reconciliation function.

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CALHOUN 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 EMPLOYEE COMPENSATION GENERAL LEDGER ACCOUNTING CONTROLS (OVERALL) Inadequate Accounting Procedures Material Weakness Finding Control Number: FS-6191-07-01
Revenues/Receivables/Receipts The School District did not have procedures in place to ensure that all revenues and receivables were accurately posted to the accounting records. Numerous errors were made by the School District in recording sales and property tax revenues and receivables. An audit adjustment was proposed and accepted to reconcile tax revenues. Also, numerous errors were made recording Federal and State revenues and receivables.
Expenditures/Liabilities/Disbursements The School District did not have procedures in place to ensure all expenditures were adequately documented, properly coded, checked for accuracy, properly approved before disbursement of funds or paid in accordance with State Law. Our tests of operating expenditures revealed instances where funds were disbursed without proper coding, approval or proper documentation to support the expenditure.
Employee Compensation The School District did not have adequate procedures in place to ensure that employee compensation expenditures were approved before disbursement of funds. Our tests of twenty employee compensation records revealed that fourteen employees were either overpaid or underpaid by a net total of$1 l,785.89 due to errors in salary and leave calculations, including problems with hours worked on the timesheets and advancing leave. The School District also failed to properly calculate two employees' leave balances. In addition, the School District could not provide supporting documentation for extra pay provided to five employees.
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CALHOUN 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 EMPLOYEE COMPENSATION GENERAL LEDGER ACCOUNTING CONTROLS (OVERALL) Inadequate Accounting Procedures Material Weakness Finding Control Number: FS-6191-07-01

General Ledger The School District did not have adequate procedures in place to ensure that journal entries were properly maintained and documented before posting to the general ledger. Our tests of twenty-five journal entries posted to the general ledger revealed one that could not be located. Also, a journal entry was not made to record USDA commodity revenue and expense activity on the general ledger.

Accounting Controls (Overall) Access controls in the Financial and Payroll Systems do not prevent users from accessing accounting functions that are outside oftheir area of responsibility. Our testing revealed that the School Food Service bookkeeper made changes to personnel payroll data without prior supervisory approval.

Cause:

These deficiencies were a result of management's failure to ensure that: (1) bank statements are properly reconciled and reviewed; (2) revenues are properly recorded; (3) expenditures are properly documented, processed, and approved before disbursement of funds; (4) amounts paid to system employees are adequately documented and properly approved; (5) approved sick leave records are properly calculated; (6) journal entries are adequately documented before posting to the general ledger, and (7) access to financial system information is limited.

Effect:

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

Recommendation:

The School District should establish and implement appropriate procedures to strengthen internal controls over the reconciliation of bank statements to the general ledger, the recording ofrevenues, the processing ofexpenditures, the processing of employee compensation, the maintenance of approved leave records, and the posting of journal entries to the general ledger.

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CALHOUN 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 EMPLOYEE COMPENSATION GENERAL LEDGER ACCOUNTING CONTROLS (OVERALL) Inadequate Accounting Procedures Material Weakness Finding Control Number: FS-6191-07-01

Additionally, management should ensure that the access controls in the accounting information system complement the system ofinternal control by limiting an employee's access to only the accounting functions necessary for the performance of that employee's duties. The School District should seek reimbursement for the salary overpayments for deposit to the Schools District's operating account and should make payments for the underpayments to the appropriate employees.

CASH AND CASH EQUIVALENTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Accounting Procedures over School Activity Accounts Significant Deficiency Finding Control Number: FS-6191-07-02

Condition:

This is a repeat finding (FS-6191-06-02, FS-6191-05-02 and FS-6191-04-02) from the years ended June 30, 2006, June 30, 2005, and June 30, 2004, respectively. The accounting procedures of the School District were insufficient to provide adequate internal controls over the school activity accounts.

Criteria:

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

Questioned Cost: NIA

Information:

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

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CALHOUN 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 Accounting Procedures over School Activity Accounts Significant Deficiency Finding Control Number: FS-6191-07-02

The bank reconciliations did not include evidence of approval by someone other than the person performing the bank reconciliation. In addition, the School District has not attempted to reconcile the High School bank account in over one year.

Revenues/Receivables/Receipts Deposit preparation was not separated from the record keeping and cash custody functions.

There were no receipts provided for one of the schools tested. In addition, our tests of five additional receipts revealed two deposit slips that could not be located. It was also not possible to determine where the receipts were recorded on the general ledger.

Expenditures/Liabilities/Disbursements The check writing function was not separated from the record keeping or processing of signed checks.

No information or documentation was found for eleven of thirty expenditures tested. Additionally, the voucher packages did not contain original invoices for eleven of thirty expenditures tested.

Our tests revealed thirty-three signed blank checks were given to employees to make purchases.

Cause:

The School District has not assigned responsibilities to achieve appropriate separation of duties nor utilized management oversight of the incompatible activities to properly safeguard assets. These deficiencies were also a result of management's failure to ensure that internal controls were established, implemented and functioning at the school level.

Effect:

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

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CALHOUN 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 Accounting Procedures over School Activity Accounts Significant Deficiency Finding Control Number: FS-6191-07-02

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 of these incompatible activities. Management should also revise and monitor controls to provide reasonable assurance that transactions are processed according to established procedures.

III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

ACTIVITIES ALLOWED/UNALLOWED Inadequate Accounting Procedures over Expenditures Significant Deficiency U.S. Department of Agriculture Through Georgia Department of Education Child Nutrition Cluster (CFDA 10.553 and 10.555) Finding Control Number: FA-6191-07-01

Condition:

A review of expenditures charged to the Child Nutrition Cluster (CFDA 10.553 and 10.555) program revealed that costs were not adequately documented to ensure compliance with grant requirements.

Criteria:

Provisions of 0MB Circular A-87, Cost Principles for Determining Allowable Costs, require that "to be allowable under Federal awards, costs must be ... authorized or not prohibited under state or local laws or regulations and supported by underlying documentation".

Questioned Cost: NIA

Information:

A review of thirty-two expenditure vouchers for the Child Nutrition Cluster (CFDA 10.553 and 10.555) revealed the following deficiencies:

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CALHOUN COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2007

III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

ACTIVITIES ALLOWED/UNALLOWED Inadequate Accounting Procedures over Expenditures Significant Deficiency U.S. Department ofAgriculture Through Georgia Department of Education Child Nutrition Cluster (CFDA 10.553 and 10.555) Finding Control Number: FA-6191-07-01

One voucher had no indication of administrative approval prior to payment.
Eight vouchers had no evidence of receipt of goods. One voucher was paid for an incorrect amount. Two checks were entered incorrectly into the general ledger.

See Finding Control Number: FS-6191-07-01

Cause:

Management failed to monitor compliance with Federal guidelines to ensure that expenditures charged to the Federal Program were allowable, approved, and properly documented.

Effect:

Failure to ensure that expenditures are allowable, approved, and properly documented can result in noncompliance with the requirements ofthe Federal grant.

Recommendation:

The School District should implement procedures to ensure that all costs are allowable under 0MB Circular A-87, approved by the appropriate management, and properly documented.

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SECTIONV MANAGEMENT'S RESPONSES

CALHOUN COUNTY BOARD OF EDUCATION SCHEDULE OF MANAGEMENT'S RESPONSES
YEAR ENDED JUNE 30, 2007
Finding Control Number: FS-6191-07-0 I
We concur with the finding. The Board will strengthen procedures to ensure proper coding, documentation, and approval of all expenditures, including employee compensation, before disbursing funds.
The Board will strengthen procedures to ensure adequate documentation and approval ofall entries to General Ledger.
The size of central office staff requires that all staff perform multiple roles in accounting system. The Board will review staff access to accounting system to restrict personnel to read only status where full access is not required.
The above will be put in place by September 30, 2008.
Finding Control Number: FS-6191-07-02
We concur with this finding. Calhoun County Board ofEducation will issue procedural regulations to ensure there is a separation of key accounting functions and increased management review of these functions. These regulations will be issued by September 30, 2008.
Finding Control Number: FA-6191-07-01
We concur with this finding. Calhoun County Board of Education will implement procedures to ensure that all costs are allowable under 0MB Circular A-87. We will also implement procedures to ensure documentation and approval of all expenditures. These procedures will be put in place by September 30, 2008.
Contact Person: Harvey Causey Title: Financial Director Phone: (229) 849-2765 Fax: (229) 849-2113 E-mail Address: HarveyCausey@calhoun.k12.ga.us