Charlton County Board of Education, Folkston, Georgia, report on audit of the financial statements for the fiscal year ended June 30, 2006

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

CHARLTON COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS -

SECTION I

FINANCIAL

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

EXHIBITS

BASIC FINANCIAL STATEMENTS

DISTRICT-WIDE FINANCIAL STATEMENTS

A

STATEMENT OF NET ASSETS

1

B

STATEMENT OF ACTIVITIES

2

FUND FINANCIAL STATEMENTS

C

BALANCE SHEET

GOVERNMENTAL FUNDS

4

D

RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET

TO THE STATEMENT OF NET ASSETS

5

E

STATEMENT OF REVENUES, EXPENDITURES AND CHANGES

IN FUND BALANCES

GOVERNMENTAL FUNDS

6

F

RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT

OF REVENUES, EXPENDITURES AND CHANGES IN FUND

BALANCES TO THE STATEMENT OF ACTIVITIES

7

G

STATEMENT OF FIDUCIARY NET ASSETS

FIDUCIARY FUNDS

8

H

NOTES TO THE BASIC FINANCIAL STATEMENTS

9

SCHEDULES

REQUIRED SUPPLEMENTARY INFORMATION

1 SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES

IN FUND BALANCES - BUDGET AND ACTUAL

GENERAL FUND

21

SUPPLEMENTARY INFORMATION

2 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS

22

3 SCHEDULE OF STATE REVENUE

24

CHARLTON COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS -

SECTION I

FINANCIAL

SCHEDULES

SUPPLEMENTARY INFORMATION

4 SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS

25

5 ALLOTMENTS AND EXPENDITURES

GENERAL FUND - QUALITY BASIC EDUCATION PROGRAMS (QBE)

BY PROGRAM

27

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

CHARLTON 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
February 15, 2007

Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the Charlton 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 Charlton County Board of Education, as of and for the year ended June 30, 2006, which collectively comprise the Board's basic financial statements as listed in the table of contents. These financial statements are the responsibility ofthe Charlton County Board ofEducation's management. Our responsibility is to express opinions on these financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United States ofAmerica and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General ofthe United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free ofmaterial misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinions.
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 Charlton County Board ofEducation, as ofJune 30, 2006, and the respective changes in financial position thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America.
2006ARL-11

The Charlton County Board ofEducation has not presented Management's Discussion and Analysis that accounting principles generally accepted in the United States has determined is necessary to supplement, although not to be part of, the basic financial statements.
In accordance with Government Auditing Standards, we have also issued our report dated February 15, 2007, on our consideration of the Charlton County Board of Education's internal control over financial reporting and our tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements and other matters. The purpose ofthat report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit.
The Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual, as presented on page 21, is not a required part of the basic financial statements but is supplementary information required by the accounting principles generally accepted in the United States of America. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods ofmeasurement and presentation ofthe required supplementary information. However, we did not audit the information and express no opinion on it.
Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Charlton 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:as 2006ARL-11

ell W. Hinton, CPA, CGFM State Auditor

CHARLTON COUNTY BOARD OF EDUCATION

CHARLTON COUNTY BOARD OF EDUCATION STATEMENT OF NET ASSETS JUNE 30, 2006
ASSETS
Cash and Cash Equivalents Investments Accounts Receivable, Net
Taxes State Government Federal Government Other Inventories Capital Assets Land Land Improvements Buildings Equipment Less: Accumulated Depreciation
Total Assets
LIABILITIES
Salaries 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
Bus Replacement Continuation of Federal Programs Debt Service Capital Projects Unrestricted
Total Net Assets
Total Liabilities and Net Assets

EXHIBIT"A"

GOVERNMENTAL ACTIVITIES

$

3,490,166

27,311

409,578 1,056,805
177,708 1,545
12,622

423,417 824,323 15,701,106 2,261,022 -5 991 904

$ ===1=8=,3=93='=69=9=

$

1,650,583

670,000 695,000

$

3,015,583

$

12,189,511

44,257 180,125
22,591 1,099,801 1 841 831

$

15 378 116

$ ===1=8..,,3=9=3=,6=99=

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

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

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

EXPENSES

CHARGES FOR SERVICES

$

10,369,102 $

576,660 291,118 486,811 467,397 1,146,857
85,619 1,095,439
759,231 35,772

891,389 66 531

$

16,271,926 $

377,384
206,993 584 377

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

$

7,537,397

135,750 113,487 281,787 486,351 537,708

500,285 311,750 $
8,948

632,002

$

10,545,465 $

$ 44,257 44 257 $

-2,454,321
-440,910 -177,631 -205,024
18,954 -609, 149
-85,619 -595,154 -403,224
-26,824
-52,394 -66 531
-5,097,827

$

3,709,836

1,052,491 21,364 15,285
695,958 77,865 171 118

$

5 743 917

$

646,090

14,732,026

$ =====15="'3=7=8-=1=16=

-3-

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

EXHIBIT"C"

ASSETS
Cash and Cash Equivalents Investments Accounts Receivable, Net
Taxes State Government Federal Government Other Inventories

GENERAL FUND

DISTRICTWIDE
CAPITAL PROJECTS
FUND

DEBT SERVICE
FUND

TOTAL

$ 2,461,572 $ 1,028,594 $ 27,311

91,272 1,056,805
177,708 1,545 12,622

193,277

0 $

3,490,166 27,311
284,549 1,056,805
177,708 1,545
12,622

Total Assets

$ 3,828,835 $ 1,221,871 $

0 $ =====5=,0=5=0'=7=06=

LIABILITIES AND FUND BALANCES

LIABILITIES

Salaries Payable

$ 1,650,583

FUND BALANCES

Reserved for: Bus Replacement Continuation of Federal Programs Debt Service Inventories Capital Projects
Unreserved Undesignated Reported in: General Fund

$

44,257

167,503

$

22,591 $

12,622

1,199,280

1,953,870

Total Fund Balances

$ 2,178,252 $ 1,221,871 $

$

1,650,583

$ 0
0 $

44,257 167,503
22,591 12,622 1,199,280
1,953,870
3,400,123

Total Liabilities and Fund Balances

$ 3,828,835 $ 1,221,871 $

0 $ ===5=,0=5=0,.,,.70=6=

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

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

EXHIBIT"D"

Total Fund Balances - Governmental Funds (Exhibit "C")
Amounts reported for Governmental Activities in the Statement of Net Assets are different because:
Capital Assets used in Governmental Activities are not financial resources and therefore are not reported in the funds. These assets consist of:
Land 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.
Bonds Payable, which are Long-Term Liabilities, are not due and payable in the current period and therefore are not reported as liabilities in the funds.
Net Assets of Governmental Activities (Exhibit "A")

$ 3,400,123

$

423,417

824,323

15,701,106

2,261,022

-5,991,904

13,217,964

125,029 -1,365,000

$ 15,378,116

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

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

EXHIBIT"E"

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

GENERAL FUND

DISTRICTWIDE
CAPITAL PROJECTS
FUND

DEBT SERVICE
FUND

TOTAL

$ 3,662,830

36,649 $ 1,052,491

9,237,540

2,041,640

584,377

48,150

29,510 $

178 527

$ 15,789,713 $ 1,082,001 $

$
205 205 $

3,662,830 1,089,140 9,237,540 2,041,640
584,377 77,865
178 527
16 871 919

$ 9,980,818
576,660 291,118 486,811 464,052 1,145,565
78,719 1,098,581
653,861 35,772
869,387 $

$ 15,681,344 $

$

108 369 $

482,380 $
482 380 $ 599,621 $

$
645,000 66 531
711 531 $ -711 326 $

9,980,818
576,660 291,118 486,811 464,052 1,145,565
78,719 1,098,581
653,861 35,772
869,387 482,380
645,000 66 531
16,875,255
-3 336

$ $ -711105

$ -711105 $

$

108,369 $ -111,484 $

2,069,883

1,333,355

711,105 $
711 105 $
-221 $
221

711,105 -711105
0 -3,336 3,403,459

$

2,178,252 $ 1,221,871 $====0= $====3=,4=0=0,=12=3=

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

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

EXHIBIT"F"

Total Net Change in Fund Balances - Governmental Funds (Exhibit "E")
Amounts reported for Governmental Activities in the Statement of Activities are different because:
Capital Outlays are reported as expenditures in Governmental Funds. However, in the Statement of Activities, the cost of Capital Assets is allocated over their estimated useful lives as depreciation expense. In the current period, these amounts are:
Capital Outlay Depreciation Expense
Excess of Capital Outlay over Depreciation Expense
Because some property taxes will not be collected for several months after the School District's fiscal year ends, they are not considered "available" revenues.
In the Statement of Activities, only the gain on the sale of the building is reported, whereas in the Governmental Funds, the entire proceeds from the sale increase financial resources. Thus, the change in net assets differs from the change in fund balances by the carrying value of the building sold.
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.

$

-3,336

$ 423,380 -465,051

-41,671 47,006

-909 645,000

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

$ ===64=6,..,0=90=

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

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

EXHIBIT"G"
AGENCY FUNDS
$ ===23='=25=5=
$ ===2=3,=25=5=

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

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

EXHIBIT"H"

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

-9-

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

EXHIBIT "H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The School District reports the following major governmental funds:
General Fund is the School District's primary operating fund. It accounts for all financial resources ofthe School District, except those resources required to be accounted for in another fund.
District-wide Capital Projects Fund accounts for financial resources including Special Purpose Local Option Sales Tax (SPLOST) 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, grants and donations. On an accrual basis, revenue from property taxes is recognized in the fiscal year for which the taxes are levied. Revenue from sales taxes is recognized in the fiscal year in which the underlying transaction (sale) takes place. Revenue from grants and donations is recognized in the fiscal year in which all eligibility requirements have been satisfied.
The School District uses funds to report on its financial position and the results of its operations. Fund accounting is designed to demonstrate legal compliance and to aid financial management by segregating transactions related to certain governmental functions or activities. A fund is a separate accounting entity with a self-balancing set of accounts.
Governmental funds are reported using the current financial resources measurement focus and the modified accrual basis ofaccounting. Under this method, revenues are recognized when measurable and available. The School District considers all revenues reported in the governmental funds to be available if they are collected within sixty days after year-end. Property taxes, sales taxes and interest are considered to be susceptible to accrual. Expenditures are recorded when the related fund liability is incurred, except for principal and interest on general long-term debt, which are recognized
- 10 -

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

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 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. Georgia Laws OCGA 45-8-14 authorize the School District to deposit its funds in one or more solvent banks or insured Federal savings and loan associations.
INVESTMENTS
COMPOSITION OF INVESTMENTS Investments made by the School District in nonparticipating interest-earning contracts (such as certificates ofdeposit) and repurchase agreements are reported at cost. Participating interest-earning contracts and money market investments with a maturity at purchase 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,

- 11 -

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

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 of credit 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 Charlton County Board of Commissioners fixed the property tax levy for the 2005 tax digest year (calendar year) on November 1, 2005 (levy date). Taxes were due on February 1, 2006 (lien date). Taxes collected within the current fiscal year or within 60 days after year-end on the 2005 tax digest are reported as revenue in the governmental funds for fiscal year 2006. The Charlton 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, 2006, for maintenance and operations amounted to $3,662,830.

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

School Operations

16.416 mills

SALES TAXES

Special Purpose Local Option Sales Tax, at the fund reporting level, during the year amounted to $1,052,491 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.

- 12 -

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

EXHIBIT "H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

INVENTORIES

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

CAPITAL ASSETS

Capital assets purchased, including capital outlay costs, are recorded as expenditures in the fund financial statements at the time of purchase (including ancillary charges). On the District-wide financial statements, all purchased capital assets are valued at cost where historical records are available and at estimated historical cost based on appraisals or deflated current replacement cost where no historical records exist. Donated capital assets are recorded at estimated fair market value on the date donated. Disposals are deleted at depreciated recorded cost. The cost of normal maintenance and repairs that do not add to the value 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 of art.

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

Capitalization Policy

Estimated Useful Life

Land Land Improvements Buildings and Improvements Equipment

Any Amount

$

5,000

$

5,000

$

5,000

NIA 15 years 10 to 60 years 5 to 15 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

- 13 -

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

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.
Note 3: DEPOSITS
COLLATERALIZATION OF DEPOSITS Official Code of Georgia Annotated (OCGA) Section 45-8-12 provides that there shall not be on deposit at any time in any depository for a time longer than ten days a sum of money which has not been secured by surety bond, by guarantee of insurance, or by collateral. The aggregate ofthe face value of such surety bond and the market value of securities pledged shall be equal to not less than 110 percent ofthe public funds being secured after the deduction ofthe amount ofdeposit insurance. Ifa depository elects the pooled method (OCGA 45-8-13 .1) the aggregate ofthe market value ofthe securities pledged to secure a pool ofpublic funds shall be not less than 110 percent ofthe daily pool balance.
Acceptable security for deposits consists of any one of or any combination of the following:
(1) Surety bond signed by a surety company duly qualified and authorized to transact business within the State of Georgia,
(2) Insurance on accounts provided by the Federal Deposit Insurance Corporation,
(3) Bonds, bills, notes, certificates of indebtedness or other direct obligations of the United States or of the State of Georgia,
(4) Bonds, bills, notes, certificates of indebtedness or other obligations of the counties or municipalities of the State of Georgia,
(5) Bonds of any public authority created by the laws of the State of Georgia, providing that the statute that created the authority authorized the use of the bonds for this purpose,
(6) Industrial revenue bonds and bonds of development authorities created by the laws 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.

- 14 -

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

EXHIBIT "H"

Note 3: DEPOSITS

CATEGORIZATION OF DEPOSITS At June 30, 2006, the bank balances were $4,490,186. The amounts of the total bank balances are classified into four categories of custodial credit risk:

Category 1 - Cash that is insured (e.g., Federal Deposit Insurance) or collateralized with securities held by the School District or by the School District's agent in the School District's name.
Category 2 - Cash collateralized with securities held by the pledging financial institution's trust department or agent in the School District's name.
Category 3 - Cash collateralized with securities held by the pledging financial institution, or by its trust department or agent but not in the School District's name.
Category 4 - Uncollateralized.

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

Custodial Credit Risk Category

Bank Balance

1

$ 127,311

2

4,362,875

3

0

4

0

Total

$ 4,490,186

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:

- 15 -

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

EXHIBIT "H"

Note 5: CAPITAL ASSETS

Balances July 1, 2005

Increases

Decreases

Balances June 30, 2006

Governmental Activities

Capital Assets, Not Being Depreciated:

Land

$ 423 417 $

0 $

0 $ 423 417

Capital Assets Being Depreciated Buildings and Improvements Equipment Land Improvements

$ 15,708,684 1,837,642 $ 838,260

$ 423,380

7,578 $ 15,701,106

2,261,022

13,937

824,323

Less Accumulated Depreciation for: Buildings and Improvements Equipment Land Improvements

3,839,545 1,132,605
575 309

286,805 142,165 36 081

6,669 13 937

4,119,681 1,274,770
597 453

Total Capital Assets, Being Depreciated, Net $ 12,837,127 $

-41 671 $

909 $ 12,794,547

Governmental Activity Capital Assets - Net $ 13,260,544 $

-41,611 $

9Q2 $ 13,217,964

Current year depreciation expense by function is as follows:

Instruction Support Services
General Administration School Administration Maintenance and Operation of Plant Student Transportation Services Food Services

$ 340,596

$

2,818

6,900

7,452

88 753

105,923 18,532

Note 6: RESTRICTED ASSETS

$====="'4-65-,0~5-1

Special Purpose Local Option Sales Tax (SPLOST) and general obligation bond proceeds are reported as restricted assets in the Statement ofNet Assets because their use is limited by applicable bond covenants or statutory provisions. Restricted assets at June 30, 2006, were as follows:

District-wide Capital Projects

Bond

SPLOST

Proceeds

Restricted Cash and Cash Equivalents: Debt Services Capital Acquisitions

$

22,591

$ 894,406 $ 111,597

- 16 -

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

EXHIBIT "H"

Note 7: INTERFUND TRANSFERS

Interfund transfers for the year ended June 30, 2006, consisted of the following:

Transfer to

Transfers From District-wide Capital Projects

Debt Service Fund

$=====7"'='11""",1"='0==5

Transfers are used to move sales tax revenues collected by the District-wide Capital Projects Fund to the Debt Service Fund for debt repayment.

Note 8: 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 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. 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. The School District has not incurred any liabilities for unemployment compensation during the two fiscal years.

The School District participates in the Georgia Education Workers' Compensation Trust, a public entity risk pool organized on December 1, 1991, to develop, implement and administer a program of workers' compensation self-insurance for its member organizations. The School District pays an annual premium to the Trust for its general insurance coverage. Additional insurance coverage is provided through an agreement by the Trust with the Midwest Employers Casualty Company to provide coverage for potential losses sustained by the Trust in excess of $500,000 loss per occurrence, up to $2,000,000.

- 17 -

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

EXHIBIT "H"

Note 8: RISK MANAGEMENT

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

Position Covered

Amount

Superintendent All Employees

$

50,000

$ 100,000

Note 9: LONG-TERM DEBT

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

Purpose

Interest Rate

Amount

General Government - Series 2002

3.31%

$ 1,365,000

The changes in Long-Term Debt during the fiscal year ended June 30, 2006, were as follows:

Governmental Funds General
Obligation Bonds

Balance July 1, 2005

$ 2,010,000

Deductions Debt Retired

645,000

Balance June 30, 2006

$ 1,365,000

Portion of Long-Term Debt Due within One Year

$ 670,000

At June 30, 2006, payments due by fiscal year which includes principal and interest for these items are as follows:

- 18 -

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

EXHIBIT "H"

Note 9: LONG-TERM DEBT

Fiscal Year Ended June 30

General Obligation

Debt

Principal

Interest

2007

$ 670,000 $

45,182

2008

695,000

23,004

Total Principal and Interest

$ 1!365!000 $

68!186

Note 10: SIGNIFICANT CONTINGENT LIABILITIES

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

Note 11: RETIREMENT PLANS

TEACHERS RETIREMENT SYSTEM OF GEORGIA (TRS)

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

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

Fiscal Year

Percentage Contributed

Required Contribution

2006 2005 2004

100% 100% 100%

$ 791,667 $ 772,731 $ 781,285

- 19 -

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

SCHEDULE "1"

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

NONAPPROPRIATED BUDGETS

ORIGINAL (1)

FINAL (1)

ACTUAL AMOUNTS

$

3,665,457 $

3,665,457 $

3,662,830

36,649

9,315,696

8,896,855

9,237,540

1,077,059

2,371,248

2,041,640

208,200

208,200

584,377

40,000

40,000

48,150

15 000

15 000

178 527

$

14 321 412 $

15 196 760 $

15 789 713

$

4,751,092 $

9,706,306 $

9,980,818

428,167 108,007 259,333 297,375 608,142
34,687 740,682 241,231
3,866 550 442

722,738 424,550 498,171 546,556 1,155,519
86,873 1,033,638
788,586 38,974
957 518

576,660 291,118 486,811 464,052 1,145,565
78,719 1,098,581
653,861 35,772
869 387

$

8 023 024 $

15 959 429 $

15 681 344

$

6,298,388 $

-762,669 $

108,369

400

400

$

6,298,788 $

-762,269 $

108,369

1 038 538

1 038 538

2 069 883

Fund Balances - Ending

$

7,337,326 $

276,269 $ ===2~17=8:!i,2=5=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.

- 21 -

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

SCHEDULE "2"

FUNDING AGENCY PROGRAM/GRANT
Agriculture, U. S. Department of Child Nutrition Cluster Pass-Through From Georgia Department of Education Food Services School Breakfast Program National School Lunch Program
Total Child Nutrition Cluster
Other Programs Pass-Through From Georgia Department of Education Food Donation (1)
Total U. S. Department of Agriculture
Corporation for National and Community Service Pass-Through From Okefenokee Regional Educational Service Agency Learn and Serve America School and Community Based Programs
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 Rural Education State Grants for Innovative Programs Title I Grants to Local Educational Agencies Vocational Education - Basic Grants to States Pass-Through From Okefenokee Regional Educational Service Agency Safe and Drug-Free Schools and Communities
Total U.S. Department of Education
Interior, U. S. Department of Pass-Through From Charlton County Commissioners Refuge Revenue Sharing Program
Total Federal Financial Assistance
N/A = Not Available

CFDA NUMBER

PASSTHROUGH
ENTITY ID
NUMBER

EXPENDITURES IN PERIOD

10.553 10.555

N/A

NIA

$

$

(2) 791 328
791,328

10.550

NIA $

29 157 820 485

94.004

N/A

$

957

* 84.027 * 84.173

NIA

$

NIA

$

381,346 33405
414,751

84.318 84.367 84.358 84.298 * 84.010 84.048
84.186

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

11,571 118,898
72,568 7,835
677,439 47,534
9 863
1 360 459

15.227

N/A

(3)

$ ===2===18=1=9=0=1

- 22 -

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

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 fund earned on the School Breakfast Program ($132,946) were not maintained separately and are included in the 2006 National School Lunch Program.
(3) Funds earned on this program in the amount of $97,124 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 Charlton 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.

- 23 -

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

AGENCY/FUNDING
GRANTS Bright From the Start: Georgia Department of Early Care and Learning Pre-Kindergarten Program
Education, Georgia Department of Quality Basic Education Direct Instructional Cost Kindergarten Program Kindergarten Program - Early Intervention Program Primary Grades (1-3) Program Primary Grades - Early Intervention (1-3) Program Upper Elementary Grades (4-5) Program Upper Elementary Grades - Early Intervention (4-5) Program Middle 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 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 Nursing Services Principal Supplements Mid-term Adjustment Hold-Harmless Education Equalization Funding Grant Food Services Vocational Education Austerity Reduction Other State Programs National Teacher Certification Preschool Handicapped Program Statewide Local Education Improvement
CONTRACT Human Resources, Georgia Department of Family Connection

See notes to the basic financial statements.

- 24 -

SCHEDULE "3"

GOVERNMENTAL FUND TYPE GENERAL FUND

$

440,006

548,516 102,567 1,203,337 174,738 476,771 274,283 1,060,367 957,914 416,459
4,484 124,183 477,481
74,516 87,334 116,803 93,907 176,181 58,936 33,470
346,128 455,052 488,354
279,741 44,257
146,713 51,574 6,165 81,942
694,408 48,902 12,148
-444,695
11,188 33,407 30,003
50 000
$ ======9=,2=3=7=,5=40=

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

SCHEDULE "4"

PROJECT
Acquisition of instructional and administrative technology improvements for existing schools, adding to, renovating, repairing, improving, and equipping existing school buildings and other buildings and facilities useful or desirable in connections therewith, and acquisition of any necessary property therefore, both real and personal; acquisition of school buses.

ORIGINAL ESTIMATED
COST (1)

CURRENT ESTIMATED COSTS (2)

AMOUNT EXPENDED IN CURRENT
YEAR (3)

AMOUNT EXPENDED
IN PRIOR YEARS (3)

PROJECT STATUS

$ 5,000,000 $ 5,000,000 $

548 911 $ 2,810,598 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 Charlton 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.

- 25 -

(This page left intentionally blank)

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

SCHEDULE "5"

DESCRIPTION

ALLOTMENTS FROM GEORGIA DEPARTMENT OF EDUCATION (1) (2)

ELIGIBLE QBE PROGRAM COSTS

SALARIES

OPERATIONS

TOTAL

Direct Instructional Programs

Kindergarten Program

$

Kindergarten Program-Early Intervention Program

Primary Grades (1-3) Program

Primary Grades-Early Intervention (1-3) Program

Upper Elementary Grades (4-5) Program

Upper Elementary Grades-Early Intervention (4-5)

Program

Middle 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

607,312 $
135,913 1,349,212
214,623 548,398
309,790 1,228,080 1,096,469
474,210 876,038
128,331
108 461

649,870 $
50,256 1,299,684
380,250 746,944
267,636 1,299,430 1,222,964
429,254
23,030 211,299 465,773
34,863 64,737 162,519
11 148 577

7,155 $
2,632 23,930
3,966 13,098
1,911 26,515 38,601 34,565
619 1,661 8,975
966 4,950 1,626
733

657,025 52,888
1,323,614 384,216 760,042
269,547 1,325,945 1,261,565
463,819
23,649 212,960 474,748
35,829 69,687 164,145
11 149 310

TOTAL DIRECT INSTRUCTIONAL PROGRAMS

$

7,076,837 $ 7,457,097 $

171,903 $

7,629,000

Media Center Program Staff and Professional Development

201,234 38 315

303,955 7 354

67,173 44 392

371,128 51 746

TOTAL QBE FORMULA FUNDS

$

7 316 386 $

7,768,406 $

283,468 $ ===8,=05=1=,8=7=4

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

See notes to the basic financial statements.

- 27 -

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 15, 2007

Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the Charlton 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 ofCharlton County Board ofEducation as of and for the year ended June 30, 2006, which collectively comprise Charlton County Board of Education's basic financial statements and have issued our report thereon dated February 15, 2007. We conducted our audit in accordance with auditing standards generally accepted in the United States ofAmerica and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States.
Internal Control Over Financial Reporting
In planning and performing our audit, we considered Charlton County Board ofEducation's internal control over financial reporting in order to determine our auditing procedures for the purpose of expressing our opinions on the financial statements and not to provide an opinion on the internal control over financial reporting. However, we noted certain matters involving the internal control over financial reporting and its operation that we consider to be reportable conditions. Reportable conditions involve matters coming to our attention relating to significant deficiencies in the design or operation of the internal control over financial reporting that, in our judgment, could adversely affect Charlton County Board of Education's ability to record, process, summarize and report financial data consistent with assertions of management in the financial statements. Reportable conditions are described in the accompanying Schedule of Findings and Questioned Costs as items FS-6241-06-01 and FS-6241-06-02.
2006YB-30

A material weakness is a reportable condition in which the design or operation ofone or more ofthe internal control components does not reduce to a relatively low level the risk that misstatements caused by error or fraud in amounts that would be material in relation to the financial statements being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. Our consideration of the internal control over financial reporting would not necessarily disclose all matters in the internal control that might be reportable conditions and, accordingly, would not necessarily disclose all reportable conditions that are also considered to be material weaknesses. However, we believe none of the reportable conditions described above are material weaknesses.
Compliance and Other Matters
As part of obtaining reasonable assurance about whether Charlton County Board of Education's financial statements are free of material misstatement, we performed tests of its compliance with certain provisions oflaws, regulations, contracts and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards.
This report is intended solely for the information and use of the management and members of the Charlton County Board of Education and is not intended to be and should not be used by anyone other than these specified parties.
Respectfully submitted,
~-~
Rusell W. Hinton, CPA, CGFM State Auditor
RWH:as 2006YB-30

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

DEPARTMENT OF AUDITS AND ACCOUNTS
270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400
February 15, 2007

Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the Charlton 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 of Charlton 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 of its major Federal programs for the year ended June 30, 2006. Charlton 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 Charlton County Board of Education's management. Our responsibility is to express an opinion on Charlton County Board of Education's compliance based on our audit.
We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States ofAmerica; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General ofthe United States; and 0MB Circular A133, Audits of States, Local Governments, and Non-Profit Organizations. Those standards and 0MB Circular A-133 require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major Federal program occurred. An audit includes

2006SA-15

examining, on a test basis, evidence about the Charlton 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 Charlton County Board of Education's compliance with those requirements.
In our opinion, the Charlton County Board ofEducation complied, in all material respects, with the requirements referred to above that are applicable to each of its major Federal programs for the year ended June 30, 2006. However, the results of our auditing procedures disclosed a nonmaterial instance of noncompliance with those requirements which is described in the accompanying Schedule of Findings and Questioned Costs as item FA-6241-06-01.
Internal Control Over Compliance
The management of Charlton 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 Charlton County Board of Education'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 of expressing our opinion on compliance and to test and report on internal control over compliance in accordance with 0MB Circular A-133.
Our consideration ofthe internal control over compliance would not necessarily disclose all matters in the internal control that might be material weaknesses. A material weakness is a reportable condition in which the design or operation of one or more of the internal control components does not reduce to a relatively low level ofrisk that noncompliance with applicable requirements oflaws, regulations, contracts and grants caused by error or fraud that would be material in relation to a major Federal program being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. We noted no matters involving the internal control over compliance and its operation that we consider to be material weaknesses.
This report is intended solely for the information and use of the management, members of the Charlton 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.~
Ru sell W. Hinton, CPA, CGFM State Auditor
RWH:as 2006SA-15

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

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

PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

FINDING CONTROL NUMBER AND STATUS

FS-6241-04-01 FS-6241-05-01

Further Action Not Warranted Unresolved - See Corrective Action/Reponses

CORRECTIVE ACTION/RESPONSES

CASH AND CASH EQUIVALENTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Control Procedures Finding Control Number: FS-6241-05-01

The Charlton County Board ofEducation is in the process ofpurchasing new software for the school activity accounts, which should help with the separation of duties problems.

PRIOR YEAR FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

No matters were reported.

SECTION IV FINDINGS AND QUESTIONED COSTS

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

I SUMMARY OF AUDITOR'S RESULTS

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

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

Cash and Cash Equivalents Revenues/Receivables/Receipts

Expenditures/Liabilities/Disbursements

None ofthe reportable conditions described above are considered to be material weaknesses.

3. Noncompliance Material to the Financial Statements The audit of the Charlton County Board of Education disclosed no instances of noncompliance that were deemed to be material to the financial statements.

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

5. Type of Report Issued on Compliance for Major Programs The auditor's opinion on the Charlton 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) ofOMB Circular A-133 The Charlton County Board ofEducation's audit did not disclose an audit finding required to be reported by section .5 lO(a) ofOMB Circular A-133; however, we noted a certain instance ofnonmaterial noncompliance which is included in section IV of this report.

7. Major Programs Federal awards audited as major programs are as follows: 84.010 Title I Grants to Local Educational Agencies 84.027 Special Education - Grants to States 84.173 Special Education - Preschool Grants

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

- 1-

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

I SUMMARY OF AUDITOR'S RESULTS

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

II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

CASH AND CASH EQUIVALENTS Inadequate Internal Controls over Central Office Accounts Reportable Condition Finding Control Number: FS-6241-06-01

Condition:

The accounting procedures ofthe School District were insufficient to provide for adequate internal controls over cash and cash equivalents at the central office.

Criteria:

The School District's management is responsible for designing and maintaining internal controls that provide reasonable assurance that cash is properly recorded, maintained according to established procedures and adequately safeguarded.

Questioned Cost: NIA

Information:

The School District failed to record a $95,621 bank account established for a dental plan belonging to the School District on the financial records.

Cause:

This deficiency was a result of management's failure to ensure that internal controls were established, implemented and functioning.

Effect:

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

Recommendation:

The School District should revise and monitor controls to provide reasonable assurance that all cash and cash equivalents are properly recorded, maintained according to established procedures and adequately safeguarded.

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

II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

CASH AND CASH EQUIVALENTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Controls over School Activity Accounts Reportable Condition Finding Control Number: FS-6241-06-02

Condition:

This is a repeat finding (FS-6241-05-01 and FS-6241-04-01) from the years ended June 30, 2005 and June 30, 2004, respectively. The accounting procedures of the School District were insufficient to provide for adequate internal controls over the school activity accounts.

Criteria:

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

Questioned Cost: NIA

Information:

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

Revenues/Receivables/Receipts The cash receipt function was not separated from the deposit preparation and record keeping functions. St. George Elementary School did not issue receipts; therefore, no testing could be performed.

Expenditures/Liabilities/Disbursements The claims processing function was not separated from the record keeping and check preparation functions. Based on a review of twenty-five items, the following deficiencies were noted: 1) Twenty-three vouchers did not contain a signature ofapproval, 2) Three vouchers did not contain an original invoice or any other form of documentation, and 3) Two vouchers did not contain receiving documentation, as required.

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

II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

CASH AND CASH EQUIVALENTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Controls over School Activity Accounts Reportable Condition Finding Control Number: FS-6241-06-02

Cause:

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

Effect:

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

Recommendation:

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

EXPENDITURES/LIABILITIES/DISBURSEMENTS Improper Use of SPLOST Proceeds Nonmaterial Noncompliance Finding Control Number: FS-6241-06-03

Condition:

Improper use of Special Purpose Local Option Sales Tax (SPLOST) proceeds.

Criteria:

O.C.G.A. 48-8-121 states, "The proceeds received from the tax authorized by this part shall be used ... exclusively for the purpose or purposes specified in the resolution or ordinance calling for imposition of the tax."

Additionally, the Attorney General's Official Opinion 97-7 for O.C.G.A. 202-260 (b)(5) states, "The definition of educational facilities specifically excludes swimming pools, tracks, stadiums, and other facilities or portions of facilities used primarily for athletic competition."

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

II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

EXPENDITURES/LIABILITIES/DISBURSEMENTS Improper Use ofSPLOST Proceeds Nonmaterial Noncompliance Finding Control Number: FS-6241-06-03

Questioned Cost: $425,152

Information:

During the year under review, the School District paid for the equipping and renovating of the Charlton County High School ball fields whose primary purpose is for athletic competition. Athletic facility improvements are not specifically denoted in the School District's SPLOST referendum as approved by the voters of Charlton County.

Cause:

The School District believed this project was covered under their referendum that states the following: "adding to, renovating, repairing, improving, and equipping existing school buildings and other buildings and facilities useful or desirable in connection therewith...."

Effect:

Improper use of Special Purpose Local Option Sales Tax (SPLOST) proceeds. Noncompliance with O.C.G.A. 48-8-121.

Recommendation:

The School District should reimburse the SPLOST Capital Project Fund the total cost of the Charlton County High School softball field renovation with local funds. The School District should denote athletic facilities or the actual planned project(s) in the terminology for any future SPLOST referendums to place the Charlton County electorate on fair notice as to which projects the tax proceeds will be devoted.

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

III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

SPECIAL TESTS/PROVISIONS Fiscal Requirements of Schoolwide Program Not Fully Implemented Nonmaterial Noncompliance U.S. Department of Education Through Georgia Department of Education Title I Grants to Local Educational Agencies (CFDA 84.010) Title V, Part A State Grants for Innovative Programs (CFDA 84.298) Finding Control Number: FA-6241-06-01

Condition:

The School District did not properly administer Federal funds that supported the schoolwide programs at three ofits schools. All Federal funds supporting each schoolwide program should be consolidated into one account. However, the School District consolidated only Title I and a small portion of its Title V, Part A funds.

Criteria:

In accordance with provisions ofU. S. Department ofEducation Instructions and 0MB Circular A-133, Compliance Supplement provisions, eligible schools are able to use their Title I, Part A funds, in combination with other Federal, State and local funds, in order to upgrade the entire educational program of the school and to raise academic achievements for all students. By combining funds from Title I and other eligible U. S. Department of Education funded programs in support of a schoolwide program, U.S. Department of Education Instructions provide that specific schoolwide program costs lose their identity but only in those circumstances when funds are combined in a schoolwide program.

In line with 0MB Circular A-87 requirements, schoolwide expenditures should be charged to those Federal funding sources supporting the schoolwide program in a reasonable manner. When more than one Federal program supports a schoolwide program, then schoolwide program expenditures may be allocated to specific Federal funds in proportion to the different Federal funds provided in support of the schoolwide program. To distribute such costs, provisions ofOMB Circular A-87, Attachment E, F.3 state that a cost allocation plan should be developed, documented, and maintained for audit.

In July 2004, Georgia Department ofEducation issued accounting guidelines to the school districts so that the school districts would be able to properly consolidate funds from the different Federal programs and allocate schoolwide expenditures in line with Federal requirements.

Questioned Cost: NIA

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

III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

SPECIAL TESTS/PROVISIONS Fiscal Requirements of Schoolwide Program Not Fully Implemented Nonmaterial Noncompliance U.S. Department of Education Through Georgia Department of Education Title I Grants to Local Educational Agencies (CFDA 84.010) Title V, Part A State Grants for Innovative Programs (CFDA 84.298) Finding Control Number: FA-6241-06-01

Information:

The School District identified three schools that administered a schoolwide program. Although required, the School District did not combine funds from the various Federal programs that supported each of the three schoolwide programs. For each schoolwide program, the School District only combined each school's allocation ofTitle I funds with an insignificant amount ofTitle V, Part A funds. We noted that a total of $3,906 ofTitle V, Part A funds was combined with Title I funds and this represented .86% ofthe total amount of funds supporting the schoolwide programs. While there was a considerable amount of funds expended from other Federal programs such as the Rural Education (CFDA No. 84.358) and Low Income and Improving Teacher Quality (CFDA No. 84.367) programs in support of these schools, funding from these programs were not considered for consolidation with Title I and Title V, Part A funds.

Cause:

School District personnel believed the insignificant amount ofTitle V, Part A funds allocated was a sufficient amount in order to comply with the Federal requirements for their schoolwide programs based on the School District's interpretation of GDOE's guidelines. The School District also believed that schoolwide program expenditures lose their identity and therefore any schoolwide program cost can be charged to Title I and other Federally funded programs.

Effect:

Failure to appropriately consolidate Federal program funds in support of a schoolwide program costs can result in noncompliance with Federal and State requirements.

Recommendation:

The School District should, as prescribed by U.S. Department ofEducation, 0MB and Georgia Department of Education, implement procedures to combine funds from the those different Federal programs that support each schoolwide program at the three schools. If needed, the School District should seek additional guidance from the Georgia Department of Education to implement procedures for combining and allocating schoolwide program expenditures.

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SECTIONV MANAGEMENT'S RESPONSES

CHARLTON COUNTY BOARD OF EDUCATION SCHEDULE OF MANAGEMENT'S RESPONSES
YEAR ENDED JUNE 30, 2006
Finding Control Number: FS-6241-06-01
The dental account will be booked into the general ledger for fiscal year 2007.
Contact: Patsy Allen Phone: (912) 496-2596 Fax Number: (912) 496-2595 E-mail Address: pallen@charlton.kl2.ga.us
Finding Control Number: FS-6241-06-02
The Charlton County Board of Education has placed new software for the school activity accounts into each school, which should help with the separation of duties problems.
Contact: Patsy Allen Phone: (912) 496-2596 Fax Number: (912) 496-2595 E-mail Address: pallen@charlton.kl2.ga.us
Finding Control Number: FS-6241-06-03
Charlton County Board of Education disagrees with this finding.
Contact Person: Alexander S. McQueen, Superintendent Phone: (912) 496-2596 Fax Number: (912) 496-2595 E-mail Address: smcqueen@charlton.kl2.ga.us
Finding Control Number: FA-6241-06-01
The local school system has been waiting on recommendations from GDOE on the proper procedures for handling this program. Beginning in fiscal year 2008, the school system will implement procedures received from GDOE.
Contact: Patsy Allen Phone: (912) 496-2596 Fax Number: (912) 496-2595 E-mail Address: pallen@charlton.k12.ga.us