CHAITAHOOCHEE COUNTY BOARD OF EDUCATION CUSSETA, 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 CHATTAHOOCHEE 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 GENERALFUND 23 SUPPLEMENTARY INFORMATION 2 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS 24 3 SCHEDULE OF STATE REVENUE 26 CHATTAHOOCHEE COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS - SECTION I FINANCIAL SCHEDULES SUPPLEMENTARY INFORMATION 4 SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS 27 5 ALLOTMENTS AND EXPENDITURES GENERAL FUND - QUALITY BASIC EDUCATION PROGRAMS (QBE) BY PROGRAM 29 SECTION II COMPLIANCE AND INTERNAL CONTROL REPORTS REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS REPORT ON COMPLIANCE WITH REQUIREMENTS APPLICABLE TO EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH 0MB CIRCULAR A-133 SECTION III AUDITEE'S RESPONSE TO PRIOR YEAR FINDINGS AND QUESTIONED COSTS SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS SECTION IV FINDINGS AND QUESTIONED COSTS SCHEDULE OF FINDINGS AND QUESTIONED COSTS CHATTAHOOCHEE COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS - SECTIONV MANAGEMENT'S RESPONSES SCHEDULE OF MANAGEMENT'S RESPONSES SECTION I FINANCIAL Russell W. Hinton STATE AUDITOR (404) 656-2174 DEPARTMENT OF AUDITS AND ACCOUNTS 270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400 January 4, 2007 Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education and Superintendent and Members of the Chattahoochee County Board of Education INDEPENDENT AUDITOR'S COMBINED REPORT ON BASIC FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION - SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS Ladies and Gentlemen: We have audited the accompanying financial statements ofthe governmental activities, each major fund, and the aggregate remaining fund information (Exhibits A through H) of the Chattahoochee County Board ofEducation, as ofand 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 of the Chattahoochee County Board of Education'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 opm10ns. In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, each major fund, and the aggregate remaining fund information of the Chattahoochee County Board of Education, as of June 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 Chattahoochee County Board of Education 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 January 4, 2007, on our consideration ofthe Chattahoochee 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 23, is not a required part of the basic financial statements but is supplementary information required by the accounting principles generally accepted in the United States of America. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods ofmeasurement and presentation ofthe required supplementary information. However, we did not audit the information and express no opinion on it. Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Chattahoochee 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 of States, 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-l l Ru sell W. Hinton, CPA, CGFM State Auditor CHATTAHOOCHEE COUNTY BOARD OF EDUCATION CHATTAHOOCHEE COUNTY BOARD OF EDUCATION STATEMENT OF NET ASSETS JUNE 30, 2006 Cash and Cash Equivalents Accounts Receivable, Net Taxes State Government Federal Government Inventories Capital Assets Land Land Improvements Buildings and Improvements Equipment Less: Accumulated Depreciation Total Assets LIABILITIES Accounts Payable Salaries Payable Short-Term Debt 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 (Deficit) Total Net Assets Total Liabilities and Net Assets EXHIBIT"A" GOVERNMENTAL ACTIVITIES $ 195,889 113,712 642,015 388,844 4,445 251,813 275,192 13,886,276 969,744 -1 644 361 $ ===15=,0=8=3=,5=69= $ 226,024 593,015 319,391 443,541 4,054,236 $ 5,636,207 $ 9,567,373 42,389 4,445 5,963 133,604 -306 412 $ 9 447 362 $ ===1=5=,0=8=3'=56=9= The notes to the basic financial statements are an integral part of this statement. -1- CHATTAHOOCHEE 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 Community 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 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 $ 4,687,991 $ 263,091 55,837 118,387 362,727 427,745 166,017 380,253 326,013 218,491 22,801 461,671 43 778 $ 7,534,802 $ 20,283 12,857 96,901 36,542 166 583 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 $ 3,649,619 $ 134,754 32,598 64,773 351,901 333,806 206,232 131,480 61,709 280,875 $ 5 247 747 $ 53,883 $ 5,037 8,803 1,073 413 13,397 3,519 9,743 95868 $ -964,206 -128,337 -23,239 -48,577 -10,826 -72,279 -164,944 -173,608 -181,136 -56,362 -22,801 -134,511 -43 778 -2,024,604 $ 805,349 11,631 58,775 370,872 18,174 309,566 7,724 285 318 $ 1867409 $ -157,195 9 604 557 $ ======9=4=4=7=36=2= - 3- CHATTAHOOCHEE COUNTY BOARD OF EDUCATION BALANCE SHEET GOVERNMENTAL FUNDS JUNE 30, 2006 EXHIBIT"C" ASSETS Cash and Cash Equivalents Accounts Receivable, Net Taxes State Government Federal Government Inventories GENERAL FUND DISTRICTWIDE CAPITAL PROJECTS FUND DEBT SERVICE FUND TOTAL $ 127,549 $ 68,340 $ 37,138 642,015 388,844 4 445 71,227 0 $ 195,889 108,365 642,015 388,844 4445 Total Assets $ 1 199 991 $ 139 567 $ ====o= $ ======1:!:3=3=9=55=8= LIABILITIES AND FUND BALANCES LIABILITIES Accounts Payable Salaries Payable Short-Term Debt Total Liabilities FUND BALANCES Reserved for: Bus Replacement Debt Service Inventories Capital Projects Unreserved Undesignated Reported in: General Fund Total Fund Balances $ 226,024 593,015 319 391 $ 1 138 430 $ 42,389 $ 5,963 4,445 133,604 14 727 $ $ 61 561 $ 139 567 $ $ 226,024 593,015 319 391 $ 1 138 430 $ 0 0 $ 42,389 5,963 4,445 133,604 14 727 201 128 Total Liabilities and Fund Balances $ 1 199,991 $ 139 567 $ 0 $===1=3=3=9,=55=8= The notes to the basic financial statements are an integral part of this statement. -4 - CHATTAHOOCHEE 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 and Improvements 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 Net Assets of Governmental Activities (Exhibit "A") $ 201,128 $ 251,813 275,192 13,886,276 969,744 -1 644 361 13,738,664 5,347 $ -4,051,505 -446,272 -4 497 777 $ ====9,=44=7=,3=62= The notes to the basic financial statements are an integral part of this statement. -5- CHATTAHOOCHEE 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 Community Services Food Services Operation Capital Outlay Debt Services Principal Interest Total Expenditures Excess of Revenues over (under) Expenditures OTHER FINANCING SOURCES {USES) Capital Leases 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 $ 795,492 18,174 $ 4,188,139 1,387,008 166,583 7,133 249,156 $ 6,811,685 $ 370,872 $ 82,471 591 51 712 505,646 $ $ 58,775 58 775 $ 795,492 447,821 4,270,610 1,387,008 166,583 7,724 300,868 7,376,106 $ 4,400,593 263,091 55,837 91,519 362,727 380,795 159,508 $ 378,047 261,248 199,719 22,801 409,706 338,609 130,828 24 518 $ 7,479,546 $ $ -667,861 $ 788 805,589 $ 806,377 $ -300,731 $ $ 298,290 19,260 317,550 $ -258,775 $ 4,400,593 263,091 55,837 91,519 362,727 380,795 160,296 378,047 261,248 199,719 22,801 409,706 1,144,198 429,118 43 778 8,603,473 -1,227,367 $ 407,524 $ $ 358,560 $ 258,775 -617,335 407,524 617,335 -617 335 $ -209,811 $ 358,560 $ 258,775 $ 407 524 $ -877,672 $ 57,829 $ 0 $ -819,843 939,233 81 738 0 1,020,971 $ 61 561 $ 139,567 $ 0 $ ===2=0=1'=12=8= The notes to the basic financial statements are an integral part of this statement. -6- CHATTAHOOCHEE 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 $ 887,328 -247,775 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 loss on disposal of buildings and sale of equipment is reported, whereas in the Governmental Funds, the entire proceeds from the disposal and sale increase financial resources. Thus, the change in net assets differs from the change in fund balances by the carrying value of the buildings disposed and equipment sold. 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 $ 298,290 130,828 -819,843 639,553 17,051 -15,550 -407,524 429 118 Change in Net Assets of Governmental Activities (Exhibit "B") $ ==-=15=7=1=1=9=5 The notes to the basic financial statements are an integral part of this statement. -7 - CHATTAHOOCHEE 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 $ ===1==95=4= $ ======1=95=4= The notes to the basic financial statements are an integral part of this statement. -8- CHATTAHOOCHEE 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 Chattahoochee County Board ofEducation (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. The Chattahoochee County High School, Incorporated (Charter School) is responsible for the public education of all students attending its school. The Charter School was created through a contract between the School District and the Charter School whereby all State funding associated with the students attending the Charter School and certain specified local funds are turned over to the Charter School to cover the cost ofits operations. The financial statements ofthe Charter School have been blended with the School District's general fund. 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 Chattahoochee 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. -9- CHATTAHOOCHEE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2006 EXHIBIT "H" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Fund Financial Statements: The fund financial statements provide information about the School District's funds, including fiduciary funds. Eliminations have been made to minimize the double counting ofinternal activities. Separate statements for each category (governmental and fiduciary) are presented. The emphasis of fund financial statements is on major governmental funds, each displayed in a separate column. The School District reports the following major governmental funds: General Fund is the School District's primary operating fund. It accounts for all financial resources ofthe School District, except those resources required to be accounted for in another fund. District-wide Capital Projects Fund accounts for financial resources including Special Purpose Local Option Sales Tax (SPLOST), Bond Proceeds and grants from Georgia State Financing and Investment Commission to be used for the acquisition, construction or renovation ofmajor capital facilities. Debt Service Fund accounts for taxes (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 or individuals. BASIS OF ACCOUNTING The basis ofaccounting determines when transactions are reported on the financial statements. The District-wide governmental and fiduciary fund financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded at the time liabilities are incurred, regardless of when the related cash flows take place. Nonexchange transactions, in which the School District gives (or receives) value without directly receiving (or giving) equal value in exchange, include property taxes, sales taxes, grants and donations. On an accrual basis, revenue from property taxes is recognized in the fiscal year for which the taxes are levied. Revenue from sales taxes is recognized in the fiscal year in which the underlying transaction (sale) takes place. Revenue from grants and donations is recognized in the fiscal year in which all eligibility requirements have been satisfied. The School District uses funds to report on its financial position and the results of its operations. Fund accounting is designed to demonstrate legal compliance and to aid financial management by segregating transactions related to certain governmental functions or activities. A fund is a separate accounting entity with a self-balancing set of accounts. - 10 - CHATTAHOOCHEE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2006 EXHIBIT "H" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 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 as expenditures to the extent they have matured. Capital asset acquisitions are reported as expenditures in governmental funds. Proceeds of general 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. 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. 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 Chattahoochee County Board of Commissioners fixed the property tax levy for the 2005 tax digest year (calendar year) on August 10, 2005 (levy date). Taxes were due on December 20, 2005 (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 Chattahoochee County Tax Commissioner bills and collects the property taxes for the School District, withholds 2.5% oftaxes collected as a fee for tax collection and remits the balance oftaxes collected to the School District. Property tax revenues, at the fund reporting level, during the fiscal year ended June 30, 2005, for maintenance and operations amounted to $783,861. - 11 - CHATTAHOOCHEE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2006 EXHIBIT "H" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The tax millage rate levied for the 2005 tax year (calendar year) for the Chattahoochee County Board of Education was as follows (a mill equals $1 per thousand dollars of assessed value): School Operations 15.75 mills SALES TAXES Special Purpose Local Option Sales Tax, at the fund reporting level, during the year amounted to $429,647 and is to be used for capital outlay for educational purposes or debt service. This sales tax was authorized by local referendum and the sales tax must be re-authorized at least every five years. INVENTORIES FOOD INVENTORIES On the basic financial statements, inventories 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 ofpurchase. 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: - 12 - CHATTAHOOCHEE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2006 EXHIBIT "H" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Capitalization Policy Estimated Useful Life Land Land Improvements Buildings and Improvements Equipment Any Amount $ 5,000 $ 5,000 $ 5,000 NIA 20 to 50 years 50 years 3 to 20 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 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. DEFICIT FUND BALANCES The fund reporting a deficit fund balance at June 30, 2006, is as follows: Fund Type/Fund Name Deficit Balance Governmental Fund Type General Fund - Regular $ 67,448 The School District anticipates an increase in property tax revenue due to an increase of0.65 mills to the tax millage rate levied for the 2006 tax year (calendar year). 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 ofmoney which has not been secured by surety bond, by guarantee ofinsurance, or by collateral. The aggregate ofthe face value of such surety bond and the market value of securities pledged shall be equal to not less than 110 percent ofthe public funds being secured after the deduction ofthe amount ofdeposit insurance. Ifa depository elects the pooled method (OCGA 45-8-13 .1) the aggregate ofthe market value ofthe securities pledged to secure a pool ofpublic funds shall be not less than 110 percent ofthe daily pool balance. - 13 - CHATTAHOOCHEE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2006 EXHIBIT "H" Note 3: DEPOSITS 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, 2006, the bank balances were $725,445. 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: - 14 - CHATTAHOOCHEE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2006 EXHIBIT "H" Note 3: DEPOSITS Custodial Credit Risk Category Bank Balance 1 $ 100,000 2 0 3 625,445 4 0 Total Note 4: NON-MONETARY TRANSACTIONS $==7==2,,,,,,.5,-44==5 The School District receives food commodities from the United States Department of Agriculture (USDA) for school breakfast and lunch programs. These commodities are recorded at their Federally assigned value. See Note 2 - Inventories Note 5: CAPITAL ASSETS The following is a summary of changes in the Capital Assets during the fiscal year: Balances July I, 2005 Increases Decreases Balances June 30, 2006 Governmental Activities Capital Assets, Not Being Depreciated: Land Construction in Progress $ 251,813 9,123,333 $ $ 391,136 $ 9,514,469 251,813 0 Total Capital Assets Not Being Depreciated $ 9,375,146 $ 391,136 $ 9,514,469 $ 251,813 Capital Assets Being Depreciated Buildings and Improvements Equipment Land Improvements $ 4,397,307 $ 9,514,469 $ 730,299 308,079 87,079 188,113 25,500 $ 13,886,276 68,634 969,744 275,192 Less Accumulated Depreciation for: Buildings and Improvements Equipment Land Improvements 976,581 491,744 6 845 183,091 56,088 8 596 15,180 63,404 1,144,492 484,428 15 441 Total Capital Assets, Being Depreciated, Net $ 3,739,515 $ 9,762,886 $ 15,550 $ 13,486,851 Governmental Activity Capital Assets - Net $ 13,114,661 $ 10,154,022 $ 2,530,019 $ 13,738,664 - 15 - CHATTAHOOCHEE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2006 EXHIBIT "H" Note 5: CAPITAL ASSETS Capital assets being acquired under capital leases as of June 30, 2006, are as follows: Governmental Funds Buildings and Improvements Equipment Less: Accumulated Depreciation $ 127,980 140,627 37,405 Current year depreciation expense by function is as follows: $====2-31-,2-0:!!!'c2 Instruction Support Services Educational Media Services School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Other Support Services Food Services $ 141,109 $ 13,192 23,052 2,809 1,083 31,799 9,217 81,152 25.514 $ 247,775 Note 6: RESTRICTED ASSETS Special Purpose Local Option Sales Tax (SPLOST) proceeds are reported as restricted assets in the Statement of Net Assets because their use is limited by statutory provisions. Restricted assets at June 30, 2006, were as follows: District-wide Capital Projects SPLOST Restricted Cash and Cash Equivalents: Debt Services Capital Acquisitions $ 5,963 $ 62,377 - 16 - CHATTAHOOCHEE 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 General Fund District-wide Capital Projects Debt Service Fund $ 358,560 258,775 Total $====6==17=",3==3==5 Transfers are used to move property tax revenues collected by the General Fund to (1) the Districtwide Capital Projects Fund as supplemental funding source for capital construction prnjects, and to (2) the Debt Service Fund to meet debt service requirements. 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 of that loss can be reasonably estimated. Changes in the unemployment compensation claims liability during the last two fiscal years are as follows: 2005 2006 Beginning of Year Liability Claims and Changes in Estimates Claims Paid End ofYear Liability $ 0 $ 0 $ 0 $ 0 $ 0 $ 6 214 $ 6 214 $ 0 - 17 - CHATTAHOOCHEE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2006 EXHIBIT "H" Note 8: RISK MANAGEMENT The School District participates in the Georgia Education Workers' Compensation Trust, a public entity risk pool organized on December 1, 1991, to develop, implement and administer a program of workers' compensation self-insurance for its member organizations. The School District pays an annual premium to the Trust for its general insurance coverage. Additional insurance coverage is provided through an agreement by the Trust with the Midwest Employers Casualty Company to provide coverage for potential losses sustained by the Trust in excess of $500,000 loss per occurrence, up to $2,000,000. The School District has purchased surety bonds to provide additional insurance coverage as follows: Position Covered Amount Superintendent Assistant Superintendent System Bookkeeper School Food Service Manager Maintenance Supervisor Each Principal Each Bookkeeper Each Secretary $ 100,000 $ 10,000 $ 10,000 $ 10,000 $ 10,000 $ 10,000 $ 10,000 $ 10,000 Note 9: SHORT-TERM DEBT The School District obtains temporary loans in advance of property tax collections, depositing the proceeds in its General Fund. This short-term debt is to provide cash for operations until property tax collections are received by the School District. Article IX, Section V, Paragraph V of the Constitution ofthe State of Georgia limits the aggregate amount of short-term debt to 75 percent of the total gross income from taxes collected in the preceding year and requires all short-term debt to be repaid no later than December 31 of the calendar year in which the debt was incurred. Short-term debt activity for the fiscal year is as follows: Beginning Balance Issued Redeemed Ending Balance Temporary Loans $ 330,000 $ 920.817 $ 931,426 $ 319,391 - 18 - CHATTAHOOCHEE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2006 EXHIBIT "H" Note 10: LONG-TERM DEBT CAPITAL LEASES The Chattahoochee County Board of Education has entered into various lease agreements as lessee for modular buildings and buses. These lease agreements qualify as capital leases for accounting purposes and, therefore, have been recorded at the present value of the future minimum lease payments as of the date of their inception. GENERAL OBLIGATION DEBT OUTSTANDING General Obligation Bonds currently outstanding are as follows: Purpose Interest Rates Amount General Government - Series 2003 General Government - Series 2004 2.25% 2.25% $ 530,000 3,521,505 $ 4,051.505 The changes in Long-Term Debt during the fiscal year ended June 30, 2006, were as follows: Governmental Funds General Capital Obligation Leases Bonds Total Balance July 1, 2005 $ 169,576 $ 4,349,795 $ 4,519,371 Additions Capital Leases 407,524 407,524 Deductions Debt Retired 130,828 298,290 429,118 Balance June 30, 2006 $ 446,272 $ 4,051,505 $ 4,497.777 Portion of Long-Term Debt Due within One Year $ 136,618 $ 306,923 $_ _4_4_3,~54_1 At June 30, 2006, payments due by fiscal year which includes principal and interest for these items are as follows: - 19 - CHATTAHOOCHEE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2006 EXHIBIT"H" Note 10: LONG-TERM DEBT Fiscal Year Ended June 30 Ca:gital Leases Princi:gal Interest 2007 2008 2009 2010 2011 2012 - 2016 $ 136,618 $ 125,166 45,254 18,712 20,065 100,457 23,371 19,894 10,966 9,154 7,801 15,652 Total Principal and Interest $ 446,272 $ 86.838 Fiscal Year Ended June 30 General Obligation Debt Princi:gal Interest 2007 2008 2009 2010 2011 2012 - 2016 2017 - 2021 2022 -2026 $ 306,923 $ 310,735 329,848 311,130 296,876 1,258,103 938,857 299,033 15,002 10,340 50,152 63,870 78,124 586,897 876,143 420,965 Total Principal and Interest $ 4,051.505 $ 2,101.493 Note 11: SIGNIFICANT CONTINGENT LIABILITIES Amounts received or receivable principally from the Federal government are subject to audit and review by grantor agencies. This could result in requests for reimbursement to the grantor agency for any costs which are disallowed under grant terms. The School District believes that such disallowances, if any, will be immaterial to its overall financial position. Note 12: RETIREMENT PLANS TEACHERS RETIREMENT SYSTEM OF GEORGIA (TRS) TRS PLAN DESCRIPTION Substantially all teachers, administrative and clerical personnel employed by local school systems are covered by the Teachers Retirement System ofGeorgia (TRS), which is a cost-sharing multiple employer defined benefit pension plan. TRS provides service retirement, disability retirement and - 20 - CHATTAHOOCHEE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2006 EXHIBIT "H" Note 12: RETIREMENT PLANS 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% $ 317,292 $ 266,448 $ 250,774 - 21 - (This page left intentionally blank) CHATTAHOOCHEE COUNTY BOARD OF EDUCATION GENERAL FUND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL 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 Central Support Services Other Support Services Community Services Food Services Operation Capital Outlay Debt Service Total Expenditures Excess of Revenues over (under) Expenditures OTHER FINANCING SOURCES (USES} Other Sources Other Uses Total Other Financing Sources (Uses) Net Change in Fund Balances Fund Balances - Beginning Fund Balances - Ending NONAPPROPRIATED BUDGETS ORIGINAL (1) FINAL (1) ACTUAL AMOUNTS $ 815,618 $ 815,618 $ 795,492 20,000 20,000 18,174 3,364,230 4,151,461 4,188,139 107,519 1,344,164 1,387,008 15,000 48,000 166,583 7,133 130 000 249156 $ 4,322,367 $ 6,509,243 $ 6,811,685 $ 2,559,671 $ 4,270,533 $ 4,400,593 88,800 6,000 78,292 152,167 311,757 109,000 243,513 258,500 196,040 105,310 86,132 341,579 381,507 109,000 340,200 269,577 4,392 72,539 345,345 263,091 55,837 91,519 362,727 380,795 159,508 378,047 261,248 199,719 22,801 409,706 338,609 155 346 $ 3,807,700 $ 6,522,154 $ 7 479 546 $ 514 667 $ -12 911 $ -667 861 $ 50,000 $ 407,524 -617 335 $ 50000 $ -209 811 $ 514,667 $ 37,089 $ -877,672 1 057 371 1 057 371 939,233 $ 1,572,038 $ 1094460 $ 61 561 Notes to the Schedule of Revenues, Expenditures and Changes in Fund Balances Budget and Actual (1) Original and Final Budget amounts do not include budgeted revenues or expenditures of the various principal accounts. The accompanying schedule of revenues, expenditures and changes in fund balances budget and actual is presented on the modified accrual basis of accounting which is the basis of accounting used in the presentation of the fund financial statements. See notes to the basic financial statements. -23- CHATTAHOOCHEE 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 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 Direct Impact Aid Pass-Through From Georgia Department of Education Charter Schools Enhancing Education Through Technology Program Hurricane Education Recovery Improving Teacher Quality State Grants Safe and Drug-Free Schools and Communities State Grants for Innovative Programs Title I Grants to Local Educational Agencies Vocational Education - Basic Grants to States Total U. S. Department of Education Health and Human Services, U.S. Department of Pass-Through From Enrichment Services Program Head Start Head Start Defense, U.S. Department of Direct Department of the Army R.O.T.C. Program Total Federal Financial Assistance N/A = Not Available CFDA NUMBER PASSTHROUGH ENTITY ID NUMBER EXPENDITURES IN PERIOD 10.553 10.555 N/A N/A $ $ (2) 286,299 286,299 10.550 NIA $ 10 020 296,319 84.027 84.173 N/A $ N/A $ 171,130 6 050 177,180 84.041 84.282 84.318 84.938 84.367 84.186 . 84.298 84.010 84.048 N/A NIA N/A N/A N/A N/A NIA N/A $ (3) 201,000 88,096 (4) 85,462 7,681 3,751 382,211 921 946 302 93.600 N/A $ 70 381 $ 58 720 $ ===='1,=37=1=,7=2=2 -24 - CHATTAHOOCHEE 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 ($75,291) were not maintained separately and are included in the 2006 National School Lunch Program. (3) Funds earned on the Impact Aid Program, in the amount of $4,437, do not require reporting of expenditures. (4) Funds earned on the Hurricane Education Recovery program, in the amount of $5,453, 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 Chattahoochee County Board of Education and is presented on the modified accrual basis of accounting which is the basis of accounting used in the presentation of the fund financial statements. See notes to the basic financial statements. - 25 - CHATTAHOOCHEE COUNTY BOARD OF EDUCATION SCHEDULE OF STATE REVENUE YEAR ENDED JUNE 30, 2006 SCHEDULE "3" AGENCY/FUNDING GRANTS Bright From the Start: Georgia Department of Early Care and Learning Pre-Kindergarten Program Quality Enhancement Mini Grant 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 Middle School (6-8) Program High School General Education (9-12) Program Vocational Laboratory (9-12) Program Students with Disabilities Category I Category II Category Ill Category IV CategoryV Gifted Student - Category VI 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 Program Nursing Services Principal Supplements Education Equalization Funding Grant Food Services Vocational Education Austerity Reduction Other State Programs K-8 Statewide Reading and Mathematics Program Preschool Handicapped Program Vocational Construction Related Equipment Georgia State Financing and Investment Commission Reimbursement on Construction Projects CONTRACT Human Resources, Georgia Department of Family Connection See notes to the basic financial statements. - 26- GOVERNMENTAL FUND TYPES CAPITAL GENERAL PROJECTS FUND FUND TOTAL $ 179,241 5,000 $ 179,241 5,000 241,446 11,489 373,730 26,317 208,557 32,536 268,915 90,132 435,540 16,707 46,636 58,808 242,996 16,685 40,175 210,457 32,623 64,773 19,954 13,331 276,420 255,745 187,632 106,727 13,397 103,829 27,802 31,495 2,307 309,564 18,880 4,546 -124,688 23,163 36,369 228,503 241,446 11,489 373,730 26,317 208,557 32,536 268,915 90,132 435,540 16,707 46,636 58,808 242,996 16,685 40,175 210,457 32,623 64,773 19,954 13,331 276,420 255,745 187,632 106,727 13,397 103,829 27,802 31,495 2,307 309,564 18,880 4,546 -124,688 23,163 36,369 228,503 $ 82,471 82,471 50 400 50400 $ 4,188,139 $ 82471 $ 4,270,610 CHATTAHOOCHEE COUNTY BOARD OF EDUCATION SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS YEAR ENDED JUNE 30, 2006 SCHEDULE "4" PROJECT Providing funds to pay or to be applied toward the cost of the acquisition, construction and equipping of a new high school; renovating, adding to, repairing, improving and equipping existing school buildings and other buildings and facilities; and acquiring any property necessary or desirable therefor, both real and personal, the maximum cost of such projects not to exceed $2,275,000. Providing funds to finance the cost of the acquisition, construction, furnishing and equipping of new school buildings and facilities useful or desirable, including a new high school; the acquisition of real property; adding to, renovating, repairing, improving and equipping existing school buildings and other buildings and facilities, including classrooms and athletic facilities, acquiring any property necessary or desirable therefor, both real and personal, the maximum cost of such projects not to exceed $2,700,000. ORIGINAL ESTIMATED COST (1) CURRENT ESTIMATED COSTS (2) AMOUNT EXPENDED IN CURRENT YEAR (3) AMOUNT EXPENDED IN PRIOR YEARS (3) PROJECT STATUS $ 2,275,000 $ 10,050,797 $ 584,366 $ 9,466,431 Ongoing 2,700,000 2,700,000 158 013 53 906 Ongoing $ 4,975,000 $ 12 750,797 $ 742 379 $ 9,520,337 (1) The School District's original cost estimate as specified in the resolution calling for the imposition of the Local Option Sales Tax. (2) The School District's current estimate of total cost for the projects. Includes all cost from project inception to completion. (3) The voters of Chattahoochee County approved the imposition of a 1% sales tax to fund the above projects and retire associated debt. Amounts expended for these projects may include sales tax proceeds, state, local property taxes and/or other funds over the life of the projects. See notes to the basic financial statements. - 27 - (This page left intentionally blank) CHATTAHOOCHEE 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 Middle School (6-8) Program High School General Education (9-12) Program Vocational Laboratory (9-12) Program Students with Disabilities Category I Gifted Student - Category VI Alternative Education Program 254,749 $ 11,513 407,164 31,282 227,786 41,585 312,716 83,900 419,075 15,738 413,677 205,108 33 371 303,262 $ 81,864 433,188 20,271 415,667 86,238 562,752 613,642 393,957 138,938 23,292 4,585 $ 467 4,786 2,712 9,232 155,855 593 307,847 82,331 437,974 20,271 418,379 86,238 571,984 769,497 393,957 138,938 23,885 TOTAL DIRECT INSTRUCTIONAL PROGRAMS $ 2,457,664 $ 3,073,071 $ 178,230 $ 3,251,301 Media Center Program Staff and Professional Development 68,487 14 461 86,491 5,696 751 92,187 751 TOTAL QBE FORMULA FUNDS $ 2,540,612 $ 3,159,562 $ 184 677 $ ===3,=34..,4..,2.=3=9 (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. - 29- SECTION II COMPLIANCE AND INTERNAL CONTROL REPORTS Russell W. Hinton STATE AUDITOR (404) 656-2174 DEPARTMENT OF AUDITS AND ACCOUNTS 270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400 January 4, 2007 Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education and Superintendent and Members of the Chattahoochee 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 Chattahoochee County Board of Education as of and for the year ended June 30, 2006, which collectively comprise Chattahoochee County Board of Education's basic financial statements and have issued our report thereon dated January 4, 2007. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Internal Control Over Financial Reporting In planning and performing our audit, we considered Chattahoochee County Board of Education'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 Chattahoochee 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-6261-06-01, FS-6261-06-02 and FS-6261-06-04. 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 Chattahoochee County Board of Education's financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements, noncompliance with which could have a direct and material effect on the determination offinancial 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 Chattahoochee County Board of Education and is not intended to be and should not be used by anyone other than these specified parties. Respectfully submitted, ' ~L<'.).~~ Russell 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 January 4, 2007 Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education and Superintendent and Members of the Chattahoochee 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 Chattahoochee 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 its major Federal programs for the year ended June 30, 2006. Chattahoochee County Board of Education's major Federal program is 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 its major Federal program is the responsibility of Chattahoochee County Board of Education's management. Our responsibility is to express an opinion on Chattahoochee 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 of America; 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 Chattahoochee County Board of Education's 2006SA-15 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 Chattahoochee County Board of Education's compliance with those requirements. In our opinion, the Chattahoochee County Board of Education complied, in all material respects, with the requirements referred to above that are applicable to its major Federal program 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-6261-06-01. Internal Control Over Compliance The management of Chattahoochee 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 Chattahoochee 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 Chattahoochee 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, ~~-m~~ ~ J ~ t o n , CPA, CGFM State Auditor RWH:as 2006SA-15 SECTION III AUDITEE'S RESPONSE TO PRIOR YEAR FINDINGS AND QUESTIONED COSTS CHATTAHOOCHEE 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-6261-04-01 FS-6261-05-01 FS-6261-05-02 Further Action Not Warranted Previously Reported Corrective Action Implemented Unresolved - See Corrective Action/Responses CORRECTIVE ACTION/RESPONSES REVENUES/RECEIVABLES/RECEIPTS Inadequate Separation of Duties Finding Control Number: FS-6261-05-02 During fiscal year 2006, new procedures were put in place. The secretary initials the deposit slip, the principal or assistant principal sign's the deposit slip. Accountant deposits the money. Assistant bookkeeper reconciles the bank statement and Accountant initials. In fiscal year 2007, the secretary will begin writing receipts for funds received. PRIOR YEAR FEDERAL AWARDS FINDINGS AND QUESTIONED COSTS No matters were reported. SECTION IV FINDINGS AND QUESTIONED COSTS CHATTAHOOCHEE 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 Chattahoochee County Board of Education's financial statements was unqualified. 2. Reportable Conditions in Internal Control Disclosed by the Audit of the Financial Statements The audit report for the Chattahoochee County Board of Education disclosed financial statement reportable conditions related to the following control categories. Budget Preparation/Execution Revenues/Receivables/Receipts Expenditures/Liabilities/Disbursements General Ledger None ofthe reportable conditions described above are considered to be material weaknesses. 3. Noncompliance Material to the Financial Statements The audit of the Chattahoochee 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 Chattahoochee County Board of Education did not disclose any reportable conditions in internal control over the major program. 5. Type of Report Issued on Compliance for Major Programs The auditor's opinion on the Chattahoochee County Board of Education's report on compliance with requirements applicable to the major program was unqualified. 6. Audit Findings Required to be Reported by Section .510(a) ofOMB Circular A-133 The Chattahoochee County Board of Education's audit did not disclose audit findings required to be reported by section .510(a) ofOMB Circular A-133; however, we noted one instance of noncompliance that is included in section IV of this report. 7. Major Programs The Federal award audited as a major program is as follows: 84.010 Title I Grants to Local Educational Agencies 8. Type "A" Program Dollar Threshold The dollar threshold for type "A" programs was $300,000. - 1- CHATTAHOOCHEE 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 Chattahoochee County Board ofEducation qualified as a low risk auditee as defined by Section .530 of 0MB Circular A-133. II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS BUDGET PREPARATION/EXECUTION Deficit Fund Balance Reportable Condition Finding Control Number: FS-6261-06-01 Condition: Deficit Fund Balance Criteria: Chapter 25 Reporting for LUAs with General Fund Deficit Balances of the Financial Management for Local Units ofAdministration states in part: "The seriousness of fund balance deficits cannot be overstated. The Georgia Department of Education requires those LUAs with deficit balances to meet certain reporting requirements." Questioned Cost: NIA Information: The School District's General Fund - Regular reported a deficit fund balance in the amount of $67,448. Cause: The School District incurred expenditures in excess of revenues during the year under review in the General Fund - Regular. Effect: A financial statement irregularity in accordance with O.C.G.A. 20-2-67. Recommendation: The School District should establish policies and procedures designed to ensure that in future periods the School District does not report a deficit fund balance. -2- CHATTAHOOCHEE COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2006 II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Accounting Procedures over School Activity Accounts Reportable Condition Finding Control Number: FS-6261-06-02 Condition: This is a repeat finding (FS-6261-04-01 and FS-6261-05-02) from the years ended June 30, 2004 and 2005. 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 proper segregation of duties and reasonable assurance that transactions are processed according to established procedures. Questioned Cost: NIA Information: Revenues/Receivables/Receipts Based on a review of21 items, the following deficiencies were noted: 1) Deposit preparation was not separated from cash custody functions. 2) Cash receipts did not contain adequate receipt documentation to support cash collections. Expenditures/Liabilities/Disbursements Based upon a review of 21 vouchers, the following deficiencies were noted: 1) One voucher did not have adequate supporting documentation. 2) One voucher did not have proof of administrative approval. Cause: These deficiencies were a result of 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. -3- CHATTAHOOCHEE COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2006 II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Accounting Procedures over School Activity Accounts Reportable Condition Finding Control Number: FS-6261-06-02 Recommendation: The School District should implement procedures to ensure that the key accounting functions of custody, record keeping and authorization are segregated and/or utilize management oversight of these incompatible activities. Additionally, management should revise and monitor controls to provide reasonable assurance that transactions are processed according to established procedures EXPENDITURES/LIABILITIES/DISBURSEMENTS Principal and Interest Payments for Capital Leases in Excess of Allowable Amount Nonmaterial Noncompliance Finding Control Number: FS-6261-06-03 Condition: The Chattahoochee County Board of Education disregarded specific limitation imposed upon the School District by O.C.G.A. 20-2-506. Criteria: The Official Code of Georgia Annotated (OCGA) Section 20-2-506, provides, in part, as follows: "The total combined annual payments for contracts under this Code section and contracts of such school system under Article IX, Section III, Paragraph I of the constitution in any calendar year, excluding guaranteed energy savings contracts, shall not exceed an amount equal to 7.5 percent of the total local revenue collected for maintenance and operation of the school system in the most recent year. .. " Questioned Cost: NIA Information: The Chattahoochee County Board of Education made multiyear lease payments totaling $155,346 on installment purchase agreements in excess of the 7.5% limitation ($108,174) imposed by Georgia Laws during fiscal year 2006. Cause: The School District disregarded specific limitations imposed by O.C.G.A. 20-2-506. Effect: Nonmaterial noncompliance with respect to Official Code of Georgia Annotated (OCGA) Section 20-2-506. -4 - CHATTAHOOCHEE 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 Principal and Interest Payments for Capital Leases in Excess of Allowable Amount Nonmaterial Noncompliance Finding Control Number: FS-6261-06-03 Recommendation: Management should take appropriate action to ensure the payments for principal and interest are not in excess of the maximum limitation imposed by Georgia Laws. GENERAL LEDGER Incomplete General Ledger/DE046 Financial Report Reportable Condition Finding Control Number: FS-6261-06-04 Condition: The School District failed to include all fiscal year activity in the DE046 financial report submitted to the Georgia Department of Education. Criteria: Chapter 22 Annual Financial Reporting of the Financial Management for Local Units of Administration indicates that School Districts must prepare their financial statements in accordance with generally accepted accounting principles. Questioned Cost: NIA Information: The following adjustments were necessary to present their financial statements in accordance with generally accepted accounting principles: All accounts receivable activity was not recorded in the School District's general ledger as required. An audit adjustment of $228,503 was necessary to record an accounts receivable from Georgia Department of Education. Equipment acquired with a capital lease was not recorded in the School's District's general ledger as required. An audit adjustment of $407,524 was necessary to record the acquisition of equipment purchased with a capital lease. Long-term debt and capital lease activity were not recorded in the School District's general ledger as required. An audit adjustment was necessary to correct general obligation debt of$596,580 and to record capital lease debt of $446,272 in the School District's governmental activities. -5- CHATTAHOOCHEE COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2006 II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS GENERAL LEDGER Incomplete General Ledger/DE046 Financial Report Reportable Condition Finding Control Number: FS-6261-06-04 School activity accounts were not separated by fund type for the Chattahoochee County High School accounts. An audit adjustment was necessary to separate the Agency funds from the school activity accounts Governmental funds. Cause: Management failed to comply with the requirements of the Georgia Department of Education regarding financial reporting. Effect: The failure ofthe School District to maintain a complete and accurate general ledger can lead to inaccurate internal and external reporting. Recommendation: The School District should implement controls to ensure that Georgia Department ofEducation's policies and procedures are followed and establish procedures to ensure that all financial data is properly recorded in the general ledger and reported in the DE046. III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS ELIGIBILITY Failure to Maintain Documentation for Eligible Attendance Areas Nonmaterial Noncompliance U.S. Department of Education Through Georgia Department of Education Title I Grants to Local Educational Agencies (CFDA 84.010) Finding Control Number: FA-6261-06-01 Condition: The School District could not provide accurate documentation to support section IV of the consolidated application pertaining to the determination of eligible and participating attendance areas and school allocations for the Title I Grants to Local Educational Agencies (CFDA 84.010) program. Criteria: As provided in the consolidated grant application and required by 34 CFR 76.730, the School District assured the Georgia Department ofEducation that it would keep records and provide information as may be required for audit purposes. Questioned Cost: NIA -6 - CHATTAHOOCHEE COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2006 III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS ELIGIBILITY Failure to Maintain Documentation for Eligible Attendance Areas Nonmaterial Noncompliance U.S. Department of Education Through Georgia Department of Education Title I Grants to Local Educational Agencies (CFDA 84.010) Finding Control Number: FA-6261-06-01 Information: The School District did not provide appropriate documentation to support section IV of the consolidated grant application. Cause: The School District failed to maintain appropriate documentation supporting the consolidated grant application. Effect: Failure to maintain appropriate documentation could result in material noncompliance with the requirements of the Federal grant. Recommendation: The School District should establish procedures to ensure that the consolidated grant application is complete and accurate. Also, proper documentation should be maintained in compliance with the requirements of the consolidated grant application and 34 CFR 76.730. The Georgia Department of Education should review this matter to determine ifa reclaim of funds is appropriate. -7- SECTIONV MANAGEMENT'S RESPONSES CHATTAHOOCHEE COUNTY BOARD OF EDUCATION SCHEDULE OF MANAGEMENT'S RESPONSES YEAR ENDED JUNE 30, 2006 Finding Control Number: FS-6261-06-01 We concur with this finding. Management will work to ensure that the School District will not report a deficit balance in the future. Finding Control Number: FS-6261-06-02 We concur with this finding. Management will provide more training to and oversight of school employees responsible for maintaining the School Activity Account records. Finding Control Number: FS-6261-06-03 We concur with this finding. Management will take measures to ensure that payments are within the guidelines set in The Official Code of Georgia Annotated Section 20-2-506. Finding Control Number: FS-6261-06-04 We concur with this finding. Management will ensure that year-end entries are made correctly and completely and that the financial data is properly recorded in the general ledger in accordance with generally accepted accounting principals. Finding Control Number: FA-6261-06-01 We concur with this finding. Management will ensure that proper documentation will be kept to support section IV of the consolidated application pertaining to the determination of eligible and participating attendance areas and school allocations for the Title I Grants to Local Educational Agencies (CFDA 84.010) program. Contact Person: Jan Chandler, Accountant Phone: (706) 989-3775 Fax Number: (706) 989-3776 E-mail Address: jchandler@chattahoochee.k12.ga.us