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

CLARKE COUNTY BOARD OF EDUCATION ATHENS, 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

CLARKE COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS -

SECTION I

FINANCIAL

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

REQUIRED SUPPLEMENTARY INFORMATION

MANAGEMENT'S DISCUSSION AND ANALYSIS

EXHIBITS

BASIC FINANCIAL STATEMENTS

DISTRICT-WIDE FINANCIAL STATEMENTS

A

STATEMENT OF NET ASSETS

1

B

STATEMENT OF ACTIVITIES

2

FUND FINANCIAL STATEMENTS

C

BALANCE SHEET

GOVERNMENTAL FUNDS

4

D

RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET

TO THE STATEMENT OF NET ASSETS

5

E

STATEMENT OF REVENUES, EXPENDITURES AND CHANGES

IN FUND BALANCES

GOVERNMENTAL FUNDS

6

F

RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT

OF REVENUES, EXPENDITURES AND CHANGES IN FUND

BALANCES TO THE STATEMENT OF ACTIVITIES

7

G

STATEMENT OF FIDUCIARY NET ASSETS

FIDUCIARY FUNDS

8

H

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

27

CLARKE COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS -

SECTION I

FINANCIAL

SCHEDULES

SUPPLEMENTARY INFORMATION

2 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS

28

3 SCHEDULE OF STATE REVENUE

30

4 SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS

31

5 ALLOTMENTS AND EXPENDITURES

GENERAL FUND - QUALITY BASIC EDUCATION PROGRAMS (QBE)

BY PROGRAM

33

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 PRJOR YEAR FINDINGS AND QUESTIONED COSTS SUMMARY SCHEDULE OF PRJOR YEAR FINDINGS AND QUESTIONED COSTS

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

CLARKE 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
August 2, 2007

Honorable Sonny Perdue, Governor Members of the General Assembly Members ofthe State Board of Education
and Superintendent and Members of the Clarke 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 Clarke 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 Clarke 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 opm1ons.
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 Clarke 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

In accordance with Government Auditing Standards, we have also issued our report dated August 2, 2007, on our consideration ofthe Clarke County Board ofEducation'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 ofour testing ofinternal control over financial reporting and compliance and the results ofthat testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit.
Management's Discussion and Analysis and the Schedule ofRevenues, Expenditures and Changes in Fund Balances - Budget and Actual, as presented on pages i through vii and page 27 respectively, are not a required part ofthe basic financial statements but are supplementary information required by the accounting principles generally accepted in the United States ofAmerica. 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 Clarke 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,
~to~~~ State Auditor
RWH:gp 2006ARL-11

CLARKE COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2006
Introduction
The discussion and analysis of Clarke County Board of Education's financial performance provided an overall review of the School District's financial activities for the fiscal year ended June 30, 2006. The intent of this discussion and analysis is to look at the School District's financial performance as a whole; readers should also review the notes to the basic financial statements and the financial statements to enhance their understanding of the School District's financial performance.
Financial Highlights
Key financial highlights for fiscal year 2006 are as follows:
On the District-wide financial statements, the assets of the School District exceeded liabilities by $168.0 million. Of this amount, $6.7 million is unrestricted and is available for spending at the School District's discretion.
The School District has $125.8 million in expenses relating to governmental activities; only $67.7 million of these expenses are offset by program specific charges for services, grants, and contributions. General revenues (primarily property and sales taxes) of $80.4 million were adequate to provide for these programs.
As stated above, general revenues accounted for $80.4 million for 54.3% of all revenues totaling $148.1 million. Program specific revenues in the form of charges for services, grants and contributions accounted for the rest.
Overview of the Financial Statements
This annual report consists of three parts; management's discussion and analysis (this section), the basic financial statements and required supplementary information. The basic financial statements include two levels of statements that present different views of the School District. These include the District-wide and fund financial statements.
The District-wide financial statements include the 'Statement of Net Assets' and 'Statement of Activities'. These statements provide information about the activities of the School District presenting both short-term and long-term information about the School District's overall financial status.
The fund financial statements focus on individual parts of the School District, reporting the School District's operation in more detail. The 'Governmental Funds' statements disclose how basic services are financed in the short-term as well as what remains for future spending. The 'Fiduciary Funds' statements provide information about the financial relationships in which the School District acts solely as a trustee or agent for the benefit of others. The fund financial statements reflect the School District's most significant funds. In the case of the Clarke County School District, the General Fund, District-wide Capital Projects Fund and Debt Service Fund are the most significant funds.

CLARKE COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2006
The financial statements also include notes that explain some of the information in the statements and provide more detailed data. The statements are followed by a section of required supplementary information that further explains and supports the financial statements. Additionally, other supplementary information (not required) is also presented that further supplements understanding of the financial statements.
District-wide Statements
Since Clarke County School District has no operations that have been classified as "Business Activities", the District-wide financial statements are basically a consolidation of all of the School District's operating funds into one column called governmental activities. In reviewing the District-wide financial statements, a reader might ask the question, are we in a better financial position than last year? The 'Statement of Net Assets' and the 'Statement of Activities' provides the basis for answering this question. These financial statements include all School District's assets and liabilities and uses the accrual basis of accounting similar to the accounting used by most private-sector companies. This basis of accounting takes into account all of the current year's revenues and expenses regardless of when cash is received or paid.
These two statements report the School District's net assets and any changes in those assets. The change in net assets is important because it tells the reader that, for the School District as a whole, the financial position of the School District has improved or diminished. The causes of this change may be the results of many factors, including those not under the School District's control, such as the property tax base, facility conditions, required educational programs and other factors.
The 'Statement of Net Assets' and the 'Statement of Activities' reflect the School District's governmental activities.
Fund Financial Statements
The School District uses many funds to account for a multitude of financial transactions during the fiscal year. However, the fund financial statements presented in this report provide detail information about only the School District's significant or major funds.
Governmental Funds - Most of the School District's activities are reported in governmental funds, which focus on how money flows into and out of those funds and the balances left at yearend available for spending in future periods. These funds are reported using the modified accrual method of accounting which measures cash and all other financial assets that can readily be converted to cash. The governmental fund statements provide a detailed short-term view of the School District's general government operations and the basic services it provides. Governmental fund information helps determine whether there are more or fewer financial resources that can be spent in the near future to finance educational programs. The difference between governmental activities (reported in the Statement of Net Assets and the Statement of Activities) and governmental funds is reconciled in the financial statements.
11

CLARKE COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2006

Fiduciary Funds - The School District is the trustee, or fiduciary, for assets that belong to others, such as school clubs and organizations within the principals' accounts. The School District is responsible for ensuring that the assets reported in these funds are used only for their intended purposes and by those to whom the assets belong. The School District excludes these activities from the District-wide financial statements because it cannot use these assets to finance its operations.

Financial Analysis of the School District as a Whole

Recall that the Statement of Net Assets provided the perspective of the School District as a whole. Table 1 provides a summary of the School District's net assets for fiscal year 2006, compared to fiscal year 2005.

Table 1 Net Assets

Governmental Activities

Fiscal

Fiscal

Year 2006

Year 2005

Assets Current and Other Assets Capital Assets, Net

$ 69,135,807 $ 64,696,456

132,557,022

123,803,945

Total Assets

$ 201,692,829 $ 188,500,401

Liabilities Current and Other Liabilities Long-Term Liabilities

$ 17,281,937 $ 18,374,697

16,439,757

24,393,828

Total Liabilities

$ 33,721.694 $ 42,768,525

Net Assets Invested in Capital Assets, Net of Related Debt Restricted Unrestricted

$ 130,605,980 30,598,232 6,766,923

$ 115,921,399 26,836,554 2,973.923

Total Net Assets

$ 167,971,135 $ 145,731,876

Table 2 shows the Changes in Net Assets for fiscal year 2006, compared to the changes in net assets for fiscal year 2005.

lll

CLARKE COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2006

Table 2 Change in Net Assets

Revenues Program Revenues: Charges for Services and Sales Operating Grants and Contributions ,
Capital Grants and Contributions

Governmental Activities

Fiscal

Fiscal

Year 2006

Year 2005

$ 2,199,370 65,290,709 205,144

$ 2,331,531 58,846,124 832,915

Total Program Revenues

$ 67,695,223 $ 62,010,570

General Revenues:

Taxes

Property Taxes

For Maintenance and Operations

$

Railroad Cars

Sales Taxes

Special Purpose Local Option Sales Tax

Intangible Recording Tax

Real Estate

Grants and Contributions not Restricted to

Specific Programs

Investment Earnings

Miscellaneous

55,067,920
19,394,070 1,013,599 359,295
2,473,674 2,046,845

$ 49,052,023 69,992
18,354,344 1,169,709
1,379,696 1,618,851 2,599,313

Total General Revenues

$ 80,355,403 $ 74,243,928

Total Revenues

$ 148,050,626 $ 136,254,498

Program Expenses Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation ofPlant
Student Transportation Services Central Support Services Other Support Services Operations of Non-Instructional Services Enterprise Operations Community Services Food Services Interest on Short-Term and Long-Term Debt

$ 75,598,561
4,073,494 5,540,152 1,998,931 1,708,519 6,166,918 1,796,496 10,771,090 7,303,988 2,743,272
738,156
318,396 759,332 5,700,736 593,326

$ 71,213,740
3,889,320 4,154,474 1,816,688 2,004,501 5,639,309 2,363,311 9,350,613 6,892,451 2,439,451
513,550
352,058 792,745 5,368,654 794,256

Total Expenses

$ 125,811,367 $ 117,585,121

Increase in Net Assets

$ 22,239,259 $ 18,669.377

iv

CLARKE COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2006

Governmental Activities

The Statement of Activities shows the cost of program services and the charges for services and grants offsetting these services. Table 3 shows, for governmental activities, the total cost of services and the net cost of services comparing fiscal year 2006, with fiscal year 2005. Net cost of services can be defined as the total cost less fees generated by the activities and intergovernmental revenue provided for specific programs.

Table 3 Governmental Activities

Total Cost of Services

Fiscal

Fiscal

Year 2006 Year 2005

Net Cost of Services

Fiscal

Fiscal

Year 2006 Year 2005

Instruction

$ 75,598,561 $ 71,213,740 $ 29,692,878 $ 36,064,272

Support Services

Pupil Services

4,073,494 3,889,320 2,140,348 -5,178,089

Improvement of Instructional Services

5,540,152 4,154,474 2,990,837 2,491,182

Educational Media Services

1,998,931 1,816,688 1,000,502

914,922

General Administration

1,708,519 2,004,501 -227,445

40,574

School Administration

6,166,918 5,639,309 3,765,555 3,492,813

Business Administration

1,796,496 2,363,311 1,758,678 2,350,499

Maintenance and Operation of Plant

10,771,090 9,350,613 7,982,241 6,643,369

Student Transportation Services

7,303,988 6,892,451 5,798,207 5,593,709

Central Support Services

2,743,272 2,439,451 2,626,775 2,350,456

Other Support Services

738,156

513,550

470,470

200,548

Operations of Non-Instructional Services

Enterprise Operations

318,396

352,058

-53,354

-7,471

Community Services

759,332

792,745

-51,236

31,159

Food Services

5,700,736 5,368,654 -371,638 -207,648

Interest on Short-Term and Long-Term Debt

593,326

794,256

593,326

794,256

Total Expenses

$125,811.367 $117,585,121 $ 58,116.144$ 55.574.551

Financial Analysis Of The School District's Funds

The School District's governmental funds are accounted for using the modified accrual basis of accounting. The governmental funds had total revenues and other financing sources of $148.8 million and total expenditures of $144.1 million.

General Fund Budgeting Highlights

The School District's budget is prepared according to Georgia law. The most significant budgeted fund is the General Fund. During the course of fiscal year 2006, the School District amended its general fund budget as needed.

V

CLARKE COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2006

For the General Fund, the final actual revenues and other financing sources of $128.1 million exceeded the original budgeted amount of $118.9 million by $9.2 million. This difference (final actual vs. original budget) was primarily due to an increase in state revenues over original budget of $4.2 million, sales tax revenues over original budget of $0.7 million, charges for services over original budget of $1.1 million, and other revenues over original budget of $1.3 million.

The actual revenues and other financing sources of $128.1 million exceeded the final budgeted amounts by $6.2 million. Conservative budgeting for property taxes, sales taxes and state funds more than offset any shortfall in other revenue categories.

The final actual expenditures and other financing sources of $123.9 million exceeded the original budgeted amount of $119.4 million by $4.5 million. This difference was due to our school principal's accounts not being included in the original budget process.

The School District had to use financial reserves to balance its fiscal year 2006 budget.

CAPITAL ASSETS AND DEBT ADMINISTRATION

Capital Assets

At fiscal year end June 30, 2006, the School District has $132.6 million invested in capital assets, all in governmental activities. Table 4 reflects a summary of these balances net of accumulated depreciation.

Table 4 Capital Assets (Net of Depreciation)

Governmental Activities

Fiscal

Fiscal

Year 2006

Year 2005

Land Construction in Progress Land Improvements Buildings Equipment

$

684,305

21,677,821

799,065

106,543,112

2,852.719

$

684,305

29,551,205

846,138

89,587,890

3,134,407

Total

$ 132!557!022 $ 123,803!945

The School District has numerous construction projects including new buildings, additions and renovations.

VI

CLARKE COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2006

Debt

At fiscal year end June 30, 2006, the School District had $14.4 million in bonds outstanding and $2.0 million in other long-term debt. Table 5 summarizes the School District's debt for general obligation bonds, capital leases and compensated absences outstanding.

Table 5 Debt at June 30

Governmental Activities

Fiscal

Fiscal

Year 2006

Year 2005

General Obligation Bonds Capital Leases Compensated Absences

$ 14,390,000 1,570,070 479,687

$ 22,365,000 1,495,253 533,575

Total

$ 16,439,757 $ 24,393,828

At June 30, 2006, the School District's assigned bond ratings was "Aa2" and "AA+" as determined by Moody's Investor Service, Inc. and Standard and Poor's Rating Services based on the State Aid Intercept Program.

Current Issues

Athens-Clarke County is the cultural and business center of Northeast Georgia, fifty miles from Atlanta at the foot of the North Georgia Mountains. It is home to the University of Georgia, a strong manufacturing base, and growing high tech and biotech industries. Major international fortune 500 companies as well as home-grown entrepreneurs have found Athens' business climate, educational institutions, location and quality of life conducive to success in business as well as a great place for families. The county has a population of 112,787 with a labor force of 61,628. The unemployment rate is 3.9%.

Contacting the Board's Financial Management

This financial report is designed to provide our citizens, taxpayers, investors and creditors with a general overview of the School District's finances and to show the School District's accountability for the money it receives. If you have questions about this report or need additional information contact Tom Guthrie, Director of Finance and Business Services at Clarke County School District, 240 Mitchell Bridge Road, Athens, Georgia or email at guthriet@c1arke.k12.ga.us.

Vll

CLARKE COUNTY BOARD OF EDUCATION

CLARKE 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 Prepaid Items Inventories Capital Assets Land Construction in Progress Land Improvements Buildings Equipment Less: Accumulated Depreciation
Total Assets
LIABILITIES
Accounts Payable Salaries Payable Contracts Payable Deposits and Deferred Revenues Long-Term Liabilities
Due Within One Year Due in More Than One Year
Total Liabilities
NET ASSETS
Invested in Capital Assets, Net of Related Debt Restricted for
Continuation of Federal Programs Debt Service Capital Projects Unrestricted
Total Net Assets
Total Liabilities and Net Assets
The notes to the basic financial statements are an integral part of this statement.
-1-

EXHIBIT"A"

GOVERNMENTAL ACTIVITIES

$

23,879,467

31,818,951

4,077,800 6,344,393 2,421,620
284,279 104,416 204,881

684,305 21,677,821
1,109,358 135,338,861
12,716,705 -38,970,028

$ ===20..1...,6.=9_2,=8=2.9...

$

6,597,205

9,938,264

607,718

138,750

9,364,304 7,075,453

$

33,721,694

$

130,605,980

2,627,266 8,519,080 19,451,886 6,766,923

$

167,971,135

$ ==2=0.,.1,=69=2=,8=29=

CLARKE 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 Central Support Services Other Support Services Operations of Non-Instructional Services Enterprise Operations Community 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 Debt Services For Capital Projects Intangible Recording Tax Real Estate Investment Earnings Miscellaneous
Total General Revenues
Change in Net Assets
Net Assets - Beginning of Year
Net Assets - End of Year

EXPENSES

CHARGES FOR SERVICES

$

75,598,561 $

4,073,494 5,540,152 1,998,931 1,708,519 6,166,918 1,796,496 10,771,090 7,303,988 2,743,272
738,156

318,396 759,332 5,700,736 593,326

$

125,811,367 $

1,850
371,750 783,569 1,042,201 2 199 370

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

$

45,903,833

1,933,146 2,549,315
998,429 1,935,964 2,401,363
37,818 2,788,849 1,300,637 $
116,497 267,686

26,999 5,030,173

$

65,290,709 $

$ 205,144 205 144 $

-29,692,878
-2,140,348 -2,990,837 -1,000,502
227,445 -3,765,555 -1,758,678 -7,982,241 -5,798,207 -2,626,775
-470,470
53,354 51,236 371,638 -593,326
-58, 116,144

$

55,067,920

8,502,578 10,891,492
1,013,599 359,295
2,473,674 2,046,845

$

80,355,403

$

22,239,259

145,731,876

$ ===1.,.67.,.,9...7.=1=1'=35=

-3-

CLARKE 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 Prepaid Items Inventories

GENERAL FUND

DISTRICTWIDE
CAPITAL PROJECTS
FUND

DEBT SERVICE
FUND

TOTAL

$ 20,932,017 $ 2,947,450 $

24,191

31,794,760

1,008,984 6,278,525 2,421,620
281,518 104,416 204,881

3,285,196 65,868
2,761

0 $ 23,879,467 31,818,951
4,294,180 6,344,393 2,421,620
284,279 104,416 204,881

Total Assets

$ 31,256,152 $ 38,096,035 $

0 $ 69,352,187

LIABILITIES AND FUND BALANCES
LIABILITIES
Accounts Payable Salaries Payable Contracts Payable Deposits and Deferred Revenue
Total Liabilities
FUND BALANCES
Reserved for: Arbitrage Rebate Tax Continuation of Federal Programs Debt Service Inventories Capital Projects
Unreserved Designated for Court Ordered Restitution Payments Designated for Dental Plan Undesignated Reported in: General Fund
Total Fund Balances

$ 6,016,798 $ 9,938,264
138 750
$ 16,093,812 $

580,407 607,718
1,188,125

$

494,341

$ 2,465,243

8,519,080 $

204,881

27,894,489

37,428 524,998

11,929,790

$ 15,162,340 $ 36,907,910 $

$ 6,597,205 9,938,264 607,718 138 750
$ 17,281,937

$

494,341

2,465,243

0

8,519,080

204,881

27,894,489

37,428 524,998

11,929,790

0 $ 52,070,250

Total Liabilities and Fund Balances

$ 31,256,152 $ 38,096,035 $

0 $ 69,352,187

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

CLARKE 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 Construction in Progress Land Improvements Buildings Equipment Accumulated Depreciation
Total Capital Assets
Some of the School District's property tax revenues will be collected after year-end but are not available soon enough to pay for the current period's expenditures.
Long-Term Liabilities, including Bonds Payable, are not due and payable in the current period and therefore are not reported as liabilities in the funds. Long-Term Liabilities at year-end consist of:
Bonds Payable Capital Leases Compensated Absences
Total Long-Term Liabilities

$ 52,070,250

$

684,305

21,677,821

1,109,358

135,338,861

12,716,705

-38,970,028

132,557,022

-216,380

$ -14,390,000 -1,570,070 -479 687

-16,439,757

Net Assets of Governmental Activities (Exhibit "A")

$ 167,971,135

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

CLARKE 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 Central Support Services Other Support Services Enterprise Operations Community Services Food Services Operation
Capital Outlay Debt Services
Principal Interest
Total Expenditures
Excess of Revenues over (under) Expenditures
OTHER FINANCING SOURCES
Capital Leases
Net Change in Fund Balances
Fund Balances - Beginning

GENERAL FUND

DISTRICTWIDE
CAPITAL PROJECTS
FUND

DEBT SERVICE
FUND

TOTAL

$ 54,207,329 1,372,894 $
50,168,338 15,327,515 2,199,370
1,146,721 2,404,878
$ 126,827,045 $

10,891,492 $
1,326,953 20,026
12,238,471 $

$ 8,502,578

54,207,329 20,766,964 50,168,338 15,327,515
2,199,370 2,473,674 2,424,904

8,502,578 $ 147,568,094

$ 73,259,293
4,080,679 5,503,429 2,007,909 1,601,239 6,165,638 1,797,208 10,750,858 7,332,796 2,630,123
737,670 318,396 759,332 5,760,970
$
1,171,046 65 748
$ 123,942,334 $
$ 2,884,711 $

11,697,525 $
11,697,525 $ 540,946 $

$ 73,259,293

4,080,679 5,503,429 2,007,909 1,601,239 6,165,638 1,797,208 10,750,858 7,332,796 2,630,123
737,670 318,396 759,332 5,760,970 11,697,525

7,975,000 527,578

9,146,046 593,326

8,502,578 $ 144,142,437

0 $ 3,425,657

1,245,863

$ 4,130,574 $

540,946 $

11,031,766

36,366,964

1,245,863

0 $ 4,671,520

0

47,398,730

Fund Balances - Ending

$ 15,162,340 $ 36,907,910 $

0 $ 52,070,250

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

CLARKE 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")

$

4,671,520

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

$ 13,109,728 -3,911,298

9,198,430

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.

860,591

In the Statement of Activities, only the gain on the sale of the building and equipment is reported, whereas in the Governmental Funds, the entire proceeds from the sale increase financial resources. Thus, the change in net assets differs from the change in fund balances by the carrying value of the building and equipment sold.

-445,353

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.

-1,245,863

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

$

7,975,000

1 171 046

9,146,046

Some items reported in the Statement of Activities do not require the use of current financial resources and therefore are not reported as expenditures in Governmental Funds. These activities consist of:

Decrease in Compensated Absences

53,888

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

$ 22,239,259

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

CLARKE 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
$ ==9=1=1'=86=
$ ===9=1,=18=6=

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

CLARKE 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 Clarke County Board ofEducation (School District) was established under the laws ofthe State of Georgia and operates under the guidance of a school board elected by the voters and a Superintendent appointed by the Board. The Board is organized as a separate legal entity and has the power to levy taxes and issue bonds. Its budget is not subject to approval by any other entity. Accordingly, the School District is a primary government and consists of all the organizations that compose its legal entity.
Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The School District's basic financial statements are collectively comprised of the District-wide financial statements, fund financial statements and notes to the basic financial statements of the Clarke 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-

CLARKE 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), 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, 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
- 10 -

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

EXHIBIT "H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
liability is incurred, except for principal and interest on general long-term debt and compensated absences, 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.
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 -

CLARKE 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 ofcredit risks, interest rate risks or foreign currency risks.

RECEIVABLES

Receivables consist of amounts due from property and sales taxes, grant reimbursements due on Federal, State or other grants for expenditures made but not reimbursed and other receivables disclosed from information available. Receivables are recorded when either the asset or revenue recognition criteria has been met. Receivables recorded on the basic financial statements do not include any amounts which would necessitate the need for an allowance for uncollectible receivables.

PROPERTY TAXES

The Clarke County Board ofCommissioners fixed the property tax levy for the 2005 tax digest year (calendar year) on August 18, 2005 (levy date). Taxes were due on October 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 Clarke 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, 2006, for maintenance and operations amounted to $54,207,329.

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

School Operations

20.0 mills

SALES TAXES

Special Purpose Local Option Sales Tax, at the fund reporting level, during the year amounted to $19,394,070 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 -

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

EXHIBIT "H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

INVENTORIES

CONSUMABLE SUPPLIES INVENTORIES Inventories ofconsumable supplies are reported at weighted average cost. The School District uses the consumption method to account for consumable supplies inventory whereby supplies are recorded as an asset when purchased and expenses are recorded as the inventory items are used.

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

CAPITAL ASSETS

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

All

NIA

$

5,000 15 to 99 years

$

5,000 up to 99 years

$

5,000 3 to 10 years

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

- 13 -

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

EXHIBIT "H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
GENERAL OBLIGATION BONDS
The School District issues general obligation bonds to provide funds for the acquisition and construction of major capital facilities. Bond issuance costs are recognized in the financial statements during the fiscal year bonds are issued. General obligation bonds are direct obligations and pledge the full faith and credit of the government. The outstanding amount of these bonds is recorded in the Statement of Net Assets.
Note 3: DEPOSITS AND INVESTMENTS
COLLATERALIZATION OF DEPOSITS Official Code of Georgia Annotated (OCGA) Section 45-8-12 provides that there shall not be on deposit at any time in any depository for a time longer than ten days a sum of money which has not been secured by surety bond, by guarantee of insurance, or by collateral. The aggregate ofthe face value of such surety bond and the market value of securities pledged shall be equal to not less than 110 percent ofthe public funds being secured after the deduction ofthe amount ofdeposit insurance. Ifa depository elects the pooled method (OCGA 45-8-13.1) the aggregate ofthe market value ofthe securities pledged to secure a pool ofpublic funds shall be not less than 110 percent ofthe daily pool balance.
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 ofthe 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

- 14 -

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

EXHIBIT"H"

Note 3: DEPOSITS AND INVESTMENTS

(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 $26,070,588. The amounts ofthe 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

$ 427,587

2

0

3

25,643,001

4

0

Total

$ 26,070.588

CATEGORIZATION OF INVESTMENTS Custodial Credit Risk Custodial credit risk for investments is the risk that, in the event ofa failure ofthe counterparty to a transaction, the School District will not be able to recover the value of the investment or collateral securities that are in the possession ofan outside party. The School District does not have a formal policy for managing custodial credit risk.

Investments are classified as to custodial credit risk by the categories described below:

- 15 -

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

EXHIBIT "H"

Note 3: DEPOSITS AND INVESTMENTS
Category 1 - Insured or registered, or securities held by the School District or the School District's agent in the School District's name.
Category 2 - Uninsured or unregistered, with securities held by the counterparty's trust department or agent in the School District's name.
Category 3 - Uninsured or unregistered, with securities held by the counterparty's trust department or agent, but not in the School District's name.
Funds invested in an investment pool managed by another government are not required to be categorized unless the investing entity owns specific, identifiable investment securities in the pool.
At June 30, 2006, the carrying value of the School District's total investments was $31,812,134 which is materially the same as fair value. These investments included funds in the amount of $31,309,702 invested in the Local Government Investment Pool administered by the State of Georgia, Office of Treasury and Fiscal Services which are not required to be categorized since the School District did not own any specific identifiable securities in the pool. The investment policy of the State ofGeorgia, Office of Treasury and Fiscal Services for the Local Government Investment Pool (Primary Liquidity Portfolio) does not provide for investment in derivatives or similar investments. A description of the Primary Liquidity Portfolio is as follows:
The Primary Liquidity Portfolio consists ofGeorgia Fund 1, which is a combination local and state government investment pool. Georgia Fund 1 is a stable net asset value investment pool which follows Standard and Poor's criteria for AAAm rated money market funds. The pool is not registered with the SEC as an investment company but does operate Georgia Fund 1 in a manner consistent with Rule 2a-7 of the Investment Company Act of 1940. The pool's primary objectives are safety of capital, investment income, liquidity and diversification while maintaining principal ($1.00 per share value). Net asset value is calculated daily and reported to the rating agency weekly to ensure stability. The pool distributes earnings (net of management fees) on a monthly basis and values participant's shares sold and redeemed at the pool's share price, $1.00 per share. Pooled cash and cash equivalents and investments are reported at cost. The pool does not issue any legally binding guarantees to support the value of the shares. Participation in the pool is voluntary and deposits consist of funds from local governments; operating and trust funds of Georgia's state agencies, colleges and universities; and current operating funds of the State of Georgia's General Fund.
Investments in Georgia Fund 1 are directed toward short-term instruments such as U.S. Treasury obligations, securities issued or guaranteed as to principal and interest by the U. S. Government or any of its agencies or instrumentalities, banker's acceptances and repurchase agreements. The weighted average maturity of Georgia Fund 1 may not exceed 60 days. The weighted average maturity for Georgia Fund 1 on June 30, 2006, was 28 days.

- 16 -

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

EXHIBIT "H"

Note 3: DEPOSITS AND INVESTMENTS
Funds invested in U. S. Treasury Money Market Mutual Funds (open-end mutual funds) in the amount of $502,432 are not required to be classified by categories of custodial credit risk.
Interest Rate Risk Interest rate risk is the risk that changes in interest rates of debt investment will adversely affect the fair value ofan investment. The School District does not have a formal policy for managing interest rate risk.
At June 30, 2006, the School District's investment consisted of a money market mutual fund which had an investment maturity of less than one year.
Credit Quality Risk Credit quality risk is the risk that an issuer or other counterparty to an investment will not fulfill its obligations. The School District does not have a formal policy for managing credit quality risk.
The Money Market Mutual Fund has a credit quality rating of AAA by Standard and Poor's.
Note 4: NON-MONETARY TRANSACTIONS
The School District receives food commodities from the United States Department of Agriculture (USDA) for school breakfast and lunch programs. These commodities are recorded at their Federally assigned value. See Note 2 - Inventories
Note 5: CAPITAL ASSETS
The following is a summary of changes in the Capital Assets during the fiscal year:

- 17 -

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

EXHIBIT "H"

Note 5: CAPITAL ASSETS

Balances July 1. 2005

Increases

Balances Decreases June 30, 2006

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

$ 684,305

$ 684,305

29,551.205 $ 9,494,400 $ 17.367.784 21.677,821

Total Capital Assets Not Being Depreciated $ 30.235.510 $ 9,494,400 $ 17,367,784 $ 22,362.126

Capital Assets Being Depreciated Buildings and Improvements Equipment Land Improvements

$ 116,329,783 $ 20,052,085 $

12,420,383

917,027

1,095,358

14,000

1,043,007 $ 135,338,861 620,705 12,716,705 1,109,358

Less Accumulated Depreciation for: Buildings and Improvements Equipment Land Improvements

26,741,893 9,285,976 249,220

2,660,634 1,189,591
61.073

606,778 611,581

28,795,749 9,863,986 310,293

Total Capital Assets, Being Depreciated, Net $ 93,568,435 $ 17,071,814 $ 445,353 $ 110.194.896

Governmental Activity Capital Assets - Net $ 123,803,245 $ 26,566,214 $ 11,813,131 $ 132,55:Z,022

Capital assets being acquired under capital leases as of June 30, 2006, are as follows:

Governmental Funds

Equipment Less: Accumulated Depreciation

$ 1,863,725 421.063

$ 1,442,662

Current year depreciation expense by function is as follows:

Instruction Support Services
Improvements of Instructional Services General Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Food Services

$ 2,971,367

$

41,878

129,019

117,034

493,955

137.765

919,651 20.280

$ 3,911.298

- 18 -

CLAR.KE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2006

EXHIBIT "H"

Note 6: RESTRICTED ASSETS

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

District-wide Capital Projects

Bond

SPLOST

Proceeds

GSFIC

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

$ 11,565,465 $

$ 8,519,080 $ 22,773,248 $

502,432

662,907

Note 7: RISK MANAGEMENT

The School District is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors or omissions; job related illness or injuries to employees; acts of God; unemployment compensation and dental, optical and hearing care.

The School District participates in the Georgia School Boards Association Risk and Insurance Management System, a public entity risk pool organized on July 1, 1994, to develop and administer a plan to reduce risk of loss on account of general liability, motor vehicle liability, or property damage, including safety engineering and other loss prevention and control techniques, and to administer one or more groups of self-insurance funds, including the processing and defense of claims brought against members ofthe system. The School District pays an annual premium to the system for its general insurance coverage. Additional coverage is provided through agreements by the system with other companies according to their specialty for property, boiler and machinery (including coverage for flood and earthquake), general liability (including coverage for sexual harassment, molestation and abuse), errors and omissions, crime and automobile risks. Payment of excess insurance for the system varies by line of coverage.

The School District has established a limited risk management program for dental, optical and hearing insurance claims. A premium is charged by the General Fund to each user fund on the basis of employee participation in order to cover estimated claims budgeted by management based on known claims and prior experience. The School District accounts for claims with expenditures and liability being reported when it is probable that a loss has occurred, and the amount ofthat loss can be reasonably estimated.

Changes in the dental, optical and hearing claims liability during the last two fiscal years are as follows:

- 19 -

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

EXHIBIT"H"

Note?: RISKMANAGEMENT

2005 2006

Beginning of Year Liability

Claims and Changes in Estimates

Claims Paid

EndofYear Liability

$

0 $

980,910 $

980,910 $

0

$

0 $

962,366 $

962,366 $

0

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

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

Beginning of Year Liability

Claims and Changes in Estimates

Claims Paid

End of Year Liability

2005 2006

$

0 $

44,824 $

44,824 $

0

$

0 $

19 177 $

19 177 $

0

The School District participates in the Georgia School Boards Association Workers' Compensation Fund, a public entity risk pool organized on July 1, 1992, to develop, implement, and administer a program ofworkers' compensation self-insurance for its member organizations. The School District pays an annual premium to the Fund for its general insurance coverage. Additional insurance coverage is provided through an agreement by the Fund with the Safety National Casualty Corporation to provide coverage for potential losses sustained by the Fund in excess of $400,000 loss per occurrence, up to $1,000,000.

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

Position Covered

Amount

Superintendent All Employees Board Chairperson Board Vice-Chairperson

$ 250,000

$ 250,000

$

25,000

$

25,000

-20-

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

EXHIBIT "H"

Note 8: 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 ofshort-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

$=====0 $ 3,000.000 $ 3,000.000 $=====0

Note 9: LONG-TERM DEBT

CAPITAL LEASES The Clarke County Board ofEducation has entered into various lease agreements as lessee for buses and computer equipment. These lease agreements qualify as capital leases for accounting purposes and, therefore, have been recorded at the present value ofthe future minimum lease payments as of the date of their inception.

COMPENSATED ABSENCES Compensated absences represent obligations ofthe School District relating to employees' rights to receive compensation for future absences based upon service already rendered. This obligation relates only to vesting accumulating leave in which payment is probable and can be reasonably estimated. Typically, the General Fund is the fund used to liquidate this long-term debt. The School District uses the vesting method to compute compensated absences.

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

Purpose

Interest Rates

Amount

General Government - Series 2002 General Government - Series 2003 General Government - Series 2005

2.00% - 4.00% 2.38% 2.92%

$ 6,990,000 4,000,000 3,400.000

$ 14,390.000

Voters have authorized $2,600,000 in general obligation debt for the funding of capital outlay projects which was not issued as of June 30, 2006.

- 21 -

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

EXHIBIT "H"

Note 9: LONG-TERM DEBT

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

Balance July 1, 2005
Additions Capital Leases Annual Leave Earned
Deductions Annual Leave Utilized Debt Retired
Balance June 30, 2006
Portion of Long-Term Debt Due within One Year

Capital Leases

Governmental Funds

General

Compensated Obligation

Absences

Bonds

Total

$ 1,495,253 $

533,575 $ 22,365,000 $ 24,393,828

1,245,863

464,722

1,245,863 464,722

1,171,046 $ 1,570.070 $

518,610

7,975,000

518,610 9,146,046

479.687 $ 14.390.000 $ 16.439.757

$

657 549 $

396,755 $ 8,310,000 $ 9,364,304

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

Fiscal Year Ended June 30

Capital Leases

Principal

Interest

2007 2008 2009 2010

$ 657,549 $ 483,345 259,195 169,981

73,479 42,641 19,877 . 7 765

Total Principal and Interest

$ 1,570,070 $ 143,762

Fiscal Year Ended June 30

General Obligation

Debt

Principal

Interest

2007 2008

$ 8,310,000 $ 6,080,000

290,612 81,532

Total Principal and Interest

$ 14,390,000 $ 372,144

- 22 -

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

EXHIBIT "H"

Note 10: ON-BEHALF PAYMENTS

The School District has recognized revenues and costs in the amount of $3,017,625 for health insurance and retirement contributions paid on the School District's behalf by the following State Agencies.

Georgia Department of Education Paid to the Georgia Department of Community Health For Health Insurance of Non-Certified Personnel In the amount of $3,000,403

Office of Treasury and Fiscal Services Paid to the Public School Employees Retirement System For Public School Employees Retirement (PSERS) Employer's Cost In the amount of $17,222

Note 11: SIGNIFICANT COMMITMENTS

The following is an analysis ofsignificant outstanding construction or renovation contracts executed by the School District as of June 30, 2006, together with funding available:

Project

Unearned Executed Contracts

Funding Available From State

04-629-012 Clarke Central High School 0?RA-629-005 Chase Street Elementary School Clarke Central High School Classic City Performance Leaming Center W. R. Coile Middle School Fourth Street Elementary School H. T. Edwards Alternative School Hilsman Middle School Oglethorpe Avenue Elementary School Transportation Building

$ 1,091,347 2,948,941 $ 3,068,928 2,765 160 366,912 8,979 191,111 451,242 303,733 23,144

$ 5,388.334 $ 3,068.928

The amounts described in this note are not reflected in the basic financial statements.

Note 12: SIGNIFICANT CONTINGENT LIABILITIES

ARBITRAGE REBATE TAX The Federal Tax Reform Act of 1986 requires issuers of tax-exempt debt to make payments to the United States Treasury oflnvestment Income received at yields that exceed the issuer's tax-exempt

- 23 -

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

EXHIBIT "H"

Note 12: SIGNIFICANT CONTINGENT LIABILITIES
borrowing rates. The U. S. Treasury requires payment every five years. The estimated future liability of$494,341 at June 30, 2006, is based on tax exempt debt subject to the Tax Reform Act. The estimated liability will be updated annually for any tax-exempt issuances or changes in yields through September 1, 2006, at which time payment of the final calculated liability for the five-year period is required to be remitted.
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.
The School District is a defendant in various legal proceedings pertaining to matters incidental to the performance ofroutine School District operations. The ultimate disposition ofthese proceedings is not presently determinable, but is not believed to be material to the basic financial statements.
Note 13: SUBSEQUENT EVENTS
On November 7, 2006, the voters of Clarke County approved the continuation of the one percent sales and use tax for educational purposes for the raising of not more than $ I04,000,000 for the purpose of providing funds to pay the costs of acquiring additional real property (improved or unimproved) for future school sites; construction of new school facilities; construction of facilities for vocational instruction; construction of, additions to, renovations of, repairs and improvements to and equipping of existing educational buildings, properties and facilities of the School District, which may include, without limitation, existing schools including, Alps Road Elementary School, Barnett Shoals Elementary School, David C. Barrow Elementary School, Chase Street Elementary School, Cleveland Road Elementary School, Fourth Street Elementary School, Fowler Drive Elementary School, Gaines Elementary School, Oglethorpe Avenue Elementary School, Timothy Road Elementary School, Whit Davis Elementary School, Whitehead Road Elementary School, Winterville Elementary School, Burney-Harris-Lyons Middle School, Clarke Middle School, W.R. Coile Middle School, Hilsman Middle School, Cedar Shoals High School, Clarke Central High School, Clarke County Alternative Education Program, H. T. Edwards Sr. Teaching and Leaming Center and Classic City High School - A Performance Leaming Center, athletic facilities, transportation facilities (including bus driver training facilities), maintenance facilities and district service facilities; technology upgrades and additions to School District facilities; security upgrades to School District facilities; purchase and/or lease payoff of school buses; conversion of School District facilities currently on septic systems to public sewer; the acquisition and installation of software for administrative and educational purposes; reimbursement of the School District's expenditures for the I0-year strategic plan for facilities; and paying expenses incident thereto (including the payment of any capitalized interest), and the issuance of general obligation debt of Clarke County School District, in one or more series, in the aggregate principal amount of $50,000,000 for the above purposes. On June 5, 2007, the $50,000,000 ofgeneral obligation bonds as approved by the Clarke County voters was sold.

-24-

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

EXHIBIT "H"

Note 14: 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% oftheir 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%

$ 5,749,564 $ 5,451,674 $ 5,360,297

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CLARKE 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 Enterprise Operations Community Services Food Services Operation
Debt Service
Total Expenditures
Excess of Revenues over (under) Expenditures
OTHER FINANCING SOURCES (USES}
Other Sources Other Uses
Total Other Financing Sources (Uses)
Net Change in Fund Balances
Fund Balances - Beginning
Adjustments

NONAPPROPRIATED BUDGETS

ORIGINAL (1}

FINAL (1}

ACTUAL AMOUNTS

$

54,818,455 $

54,818,455 $

54,207,329

700,000

700,000

1,372,894

46,014,500

47,100,200

50,168,338

14,629,549

16,491,197

15,327,515

1,144,200

1,144,200

2,199,370

228,000

244,000

1,146,721

1,094,502

1,100,322

2,404,878

$

118,629,206 $

121,598,374 $ 126,827,045

$

71,874,396 $

73,236,757 $

73,259,293

4,427,962 4,575,277 1,924,163 1,901,855 6,064,322
793,069 9,867,556 7,829,191 3,148,298
879,093
806,915 5,050,400

4,350,567 6,175,405 1,983,185 1,985,689 6,162,234
796,588 10,587,525 7,701,120 2,189,372
1,051,706
809,915 5,066,315

4,080,679 5,503,429 2,007,909 1,601,239 6,165,638 1,797,208 10,750,858 7,332,796 2,630,123
737,670 318,396 759,332 5,760,970 1,236,794

$

119,142,497 $

122,096,378 $ 123,942,334

$

-513,291 $

-498,004 $

2,884,711

$

270,000 $

270,000 $

1,245,863

-270,000

-270 000

$

0 $

0 $

1,245,863

$

-513,291 $

-498,004 $

4,130,574

8,857,176

8,857,176

11,031,766

-126 597

-126 597

Fund Balances - Ending

$

8,217,288 $

8,232,575 $

15,162,340

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.
- 27 -

CLARKE 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 Smaller Learning Communities Pass-Through From Georgia Department of Education Education for Homeless Children and Youth English Language Acquisition Grants Enhancing Education Through Technology Program Even Start Hurricane Education Recovery Improving Teacher Quality State Grants Mathematics and Science Partnerships Migrant Education Reading First State Grants Safe and Drug-Free Schools and Communities - State Grants State Grants for Innovative Programs Title I Grants to Local Educational Agencies Twenty-First Century Community Learning Centers Vocational Education - Basic Grants to States
Total U. S. Department of Education
Health and Human Services, U.S. Department of Direct Head Start
Labor, U. S. Department of Through Georgia Department of Education Workforce Investment Act

CFDA NUMBER

PASSTHROUGH
ENTITY ID
NUMBER

EXPENDITURES IN PERIOD

* 10.553 * 10.555

N/A

N/A

$

$

(2) 5,198,938
5,198,938

10.550

N/A $

232,910 5 431 848

* 84.027 * 84.173

N/A

$

N/A

$

2,521,729 63 784
2,585,513

84.215
84.196 84.365 84.318 * 84.213
.* 84.938 84.367 84.366 84.011 84.357 84.186
. 84.298 84.010 84.287 84.048

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

214,913
74,820 152,310 133,796 589,264 (3) 776,566 41,843 102,376 37,047 77,318 34,345 3,830,302 314,660 144 582
9,109,655

93.600

$

882 166

17.258

$

5000

- 28 -

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

SCHEDULE "2"

FUNDING AGENCY PROGRAM/GRANT
National Science Foundation Pass-Through From University of Georgia Partnership for Reform in Science and Mathematics (PRISM)
Defense, U. S. Department of Direct Department of the Army R.O.T.C. Program

CFDA NUMBER

PASSTHROUGH
ENTITY ID
NUMBER

EXPENDITURES IN PERIOD

47.076

N/A $ _ _ _3;;;.;0a,.:;0.;:,3=23;:;.

$ _ _ _-'-'15:;.:7...._4'-'1=-2

Total Federal Financial Assistance N/A = Not Available

$ ==1=5-,8=86_,4=0=4

Notes to the Schedule of Expenditures of Federal Awards

(1) The amount shown for the Food Donation Program represents the Federally assigned value of nonmonetary assistance for donated commodities received and/or consumed by the School District during the current fiscal year.
(2) Expenditures for the funds earned on the School Breakfast Program ($1,193,232) were not maintained separately and are included in the 2006 National School Lunch Program.
(3) Funds earned on the Hurricane Education Recovery program, in the amount of $224,753, do not require reporting of expenditures. Additionally, this amount includes Federal assistance of $23,410, provided to non-public schools.

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 Clarke 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.

-29-

CLARKE 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 School (6-8) Program High School General Education (9-12) Program Vocational Laboratory (9-12) Program Students with Disabilities Category I Category II Category Ill Category IV CategoryV Gifted Student - Category VI Remedial Education Program Alternative Education Program English Speakers of Other Languages (ESOL) Media Center Program 20 Days Additional Instruction Staff and Professional Development Indirect Cost Central Administration School Administration Facility Maintenance and Operations Categorical Grants Pupil Transportation Regular Bus Replacement Nursing Services Principal Supplements Migrant Education Food Services Vocational Education Austerity Reduction Other State Programs Grades K-8 Statewide Reading and Mathematics Program Health Insurance National Teacher Certification Preschool Handicapped Program Virtual School Grant
Office of Treasury and Fiscal Services Public School Employees Retirement

See notes to the basic financial statements.

- 30 -

SCHEDULE "3"

GOVERNMENTAL FUND TYPE GENERAL FUND

$

2,515,179

3,233,767 560,934
6,034,042 1,349,629 2,607,461
768,664 4,801,011 4,832,161 1,305,668
656,211 1,054,019 4,885,631
667,256 337,429 2,374,324 120,917 407,004 1,280,069 941,594 279,690 204,505
1,272,867 2,165,925 2,621,731
1,093,091 205,144 210,368 41,439 4,325 290,234 185,209
-2,721,442
229,359 3,000,403
100,085 234,938
275
17222
$===5=0='1=6=8=,3=38=

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

SCHEDULE "4"

PROJECT

ORIGINAL ESTIMATED
COST(1l

CURRENT ESTIMATED COSTS (2)

AMOUNT EXPENDED IN CURRENT YEAR (3) (4)

AMOUNT EXPENDED
IN PRIOR YEAR (3) (4)

PROJECT STATUS

Providing funds to pay the costs of acquiring, constructing and equipping a new Cedar Shoals High School. Adding to, renovating, repairing, improving and equipping Clarke Central High School. Acquiring any necessary real or personal property and equipment and adding to, renovating, repairing, improving and equipping existing educational buildings, properties and facilities of the School District and paying expenses incident thereto, at a cost of approximately $68,000,000.

$ 68,000,000 $ 62,284,524 $

8,724 $ 60,381,123 Ongoing

Providing funds for the purpose of replacing approximately 80 portable classrooms with permanent classrooms, which may involve additions to existing schools or may involve the construction of new school facilities, renovations and or additions to Clarke Central High School, Clarke Middle School, Alps Road Elementary School, Gaines Elementary School, Cedar Shoals High School, Barnett Shoals Elementary School, Barrow Elementary School, Burney-Harris-Lyons Middle School, Chase Street Elementary School, Cleveland Road Elementary School, W. R. Coile Middle School, Fourth Street Elementary School, Fowler Drive Elementary School, H. T. Edwards Building, Hilsman Middle School, Oglethorpe Avenue Elementary School, Timothy Road Elementary School, West Broad School Building (which currently houses the Rutland Center), Whit Davis Road Elementary School, Whiteroad Road Elementary School, Winterville Elementary School, the acquisition, construction and equipping of an alternative learning center, acquiring any necessary real or personal property and equipment (including acquiring improved or unimproved land and existing buildings to renovate for future school sites) and adding to, renovating, repairing, improving and equipping other existing educational buildings, properties and facilities of the School District, including, without limitation, Old Winterville High School, athletic, transportation, maintenance and plant services facilities and technology upgrades to all School District facilities, and paying expenses incident thereto, at a cost of approximately $87,849,000.

87,849,000

90,833,192

11,688,801

43,143,233 Ongoing

$ 155,849,000 $ 153,117.716 $ 11,697,525 $ 103,524,356

(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 Clarke County approved the imposition of a 1% sales tax to fund the above projects and retire associated debt. Amounts expended for these projects may include sales tax proceeds, state, local property taxes and/or other funds over the life of the projects.

(4) In addition to the expenditures shown above, the School District has incurred interest to provide advance funding for the above projects as follows:

Prior Years

$ 10,960,827

Current Year

527,578

Total

$ 11,488,405

See notes to the basic financial statements.

- 31 -

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

SCHEDULE "5"

DESCRIPTION
Direct Instructional Programs Kindergarten Program Kindergarten Program-Early Intervention Program Primary Grades (1-3) Program Primary Grades-Early Intervention (1-3) Program Upper Elementary Grades (4-5) Program Upper Elementary Grades-Early Intervention (4-5) Program Middle School (6-8) Program High School General Education (9-12) Program Vocational Laboratory (9-12) Program Students with Disabilities Category I Category II Category Ill Category IV Category V Gifted Student - Category VI Remedial Education Program Alternative Education Program English Speakers of Other Languages (ESOL)
TOTAL DIRECT INSTRUCTIONAL PROGRAMS
Media Center Program Staff and Professional Development

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

ELIGIBLE QBE PROGRAM COSTS

SALARIES

OPERATIONS

TOTAL

$

4,109,623 $ 3,997,531 $

188,558 $

4,186,089

691,168

198,543

5,532

204,075

7,714,390

10,859,994

360,559

11,220,553

1,680,977

1,152,495

28,021

1,180,516

3,363,872

4,818,921

256,072

5,074,993

981,499 6,166,749 6,194,659 1,684,213 9,717,118
3,015,647 134,753 522,073
1 604 317

996,729 7,579,661 7,733,666 1,269,245
29,124 639,724 9,808,595 249,884
2,799,888 110,846 714,859
1,230,252

62,062 401,931 555,859 301,222
13,458 18,214 653,756 15,155 13,886 40,575
33 3,708 6438

1,058,791 7,981,592 8,289,525 1,570,467
42,582 657,938 10,462,351 265,039
13,886 2,840,463
110,879 718,567 1,236,690

$

47,581,058 $ 54,189,957 $

2,925,039 $

57,114,996

1,203,610 262 926

1,840,578 133,652

105,426 97 244

1,946,004 230,896

TOTAL QBE FORMULA FUNDS

$

49 047 594 $ 56,164,187 $

3,127,709 $==5=9,=29=1,.,,8=9=6

(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.

- 33 -

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
August 2, 2007

Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the Clarke 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 Clarke County Board of Education as of and for the year ended June 30, 2006, which collectively comprise Clarke County Board of Education's basic financial statements and have issued our report thereon dated August 2, 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 Clarke 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 Clarke County Board ofEducation's ability to record, process, summarize and report financial data consistent with assertions ofmanagement in the financial statements. Reportable conditions are described in the accompanying Schedule ofFindings and Questioned Costs as items FS-6291-06-0 I, FS-6291-06-02, FS-6291-06-03, FS-6291-06-04 and FS-6291-06-07.
2006YB-30

A material weakness is a reportable condition in which the design or operation of one 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 Clarke 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 Clarke County Board ofEducation and is not intended to be and should not be used by anyone other than these specified parties.
Respectfully submitted,

RWH:gp 2006YB-30

~LG-~~
Russell W. Hinton, CPA, CGFM State Auditor

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
August 2, 2007

Honorable Sonny Perdue, Governor Members ofthe General Assembly Members ofthe State Board of Education
and Superintendent and Members ofthe Clarke 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 ofClarke County Board ofEducation with the types ofcompliance requirements described in the U.S. Office of Management and Budget (0MB) Circular A-133 Compliance Supplement that are applicable to each ofits major Federal programs for the year ended June 30, 2006. Clarke County Board of Education's major Federal programs are identified in the Summary ofAuditor's Results Section ofthe accompanying Schedule ofFindings 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 Clarke County Board of Education's management. Our responsibility is to express an opinion on Clarke County Board of Education's compliance based on our audit.
We conducted our audit ofcompliance in accordance with auditing standards generally accepted in the United States ofAmerica; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General ofthe United States; and 0MB Circular A133, Audits of States, Local Governments, and Non-Profit Organizations. Those standards and 0MB Circular A-133 require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major Federal program occurred. An audit includes examining, on a test basis, evidence about the Clarke County Board ofEducation'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 Clarke County Board of Education's compliance with those requirements.
2006SA-55

As described in item FA-6291-06-01 in the accompanying Schedule of Findings and Questioned Costs, Clarke County Board of Education did not comply with requirements regarding Allowable Costs/Cost Principles that are applicable to its Special Education - Grants to States (CFDA 84.027). Compliance with such requirements is necessary, in our opinion, for Clarke County Board of Education to comply with requirements applicable to that program.
In our opinion, except for the noncompliance described in the preceding paragraph, the Clarke County Board of Education complied, in all material respects, with the requirements referred to above that are applicable to each of its major Federal programs for the year ended June 30, 2006.
Internal Control Over Compliance
The management of Clarke 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 Clarke County Board ofEducation's internal control over compliance with requirements that could have a direct and material effect on a major Federal program in order to determine our auditing procedures for the purpose ofexpressing our opinion on compliance and to test and report on internal control over compliance in accordance with 0MB Circular A-133.
We noted certain matters involving the internal control over compliance 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 ofthe internal control over compliance that, in our judgment, could adversely affect the Clarke County Board of Education's ability to administer a major Federal program in accordance with applicable requirements oflaws, regulations, contracts and grants. Reportable conditions are described in the accompanying Schedule ofFindings and Questioned Costs as items FA-6291-06-0 I, FA-6291-06-02, FA-6291-06-03 and FA-6291-0604.
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 ofrisk that noncompliance with the 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. Our consideration ofthe internal control over compliance 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, of the reportable conditions described above, we consider item FA-6291-06-01 to be a material weakness.
2006SA-55

This report is intended solely for the information and use ofthe management, members ofthe Clarke 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,
~!AA.rn ~-~
~uJ:~ton, CPA, CGFM State Auditor
RWH:gp 2006SA-55

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

CLARKE 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-6291-04-01 FS-6291-04-03 FS-6291-05-01 FS-6291-05-02

Further Action Not Warranted Further Action Not Warranted Unresolved - See Corrective Action/Responses Unresolved - See Corrective Action/Responses

CORRECTIVE ACTION/RESPONSES

CASH AND CASH EQUIVALENTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Separation of Duties Finding Control Number: FS-6291-05-01

Clarke County School District will divide the duties in the schools and use District Office employees to prepare bank reconciliations. School reviews should be back on schedule after a year of sickness and a special investigative process. The changes will be implemented during fiscal year June 2007.

CAPITAL ASSETS Failure to Adequately Maintain Capital Assets Finding Control Number: FS-6291-05-02

Clarke County School District is preparing to purchase a new financial accounting software system which will establish tighter controls over Capital Assets. A plan for annual inventories of Capital Assets will be instituted. Changes will be implemented during fiscal year June 2007.

PRIOR YEAR FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

FINDING CONTROL NUMBER AND STATUS

FA-6291-04-01 FA-6291-04-02 FA-6291-04-03 FA-6291-05-01 FA-6291-05-02

Unresolved - See Corrective Action/Responses Unresolved - See Corrective Action/Responses Further Action Not Warranted Unresolved - See Corrective Action/Responses Unresolved - See Corrective Action/Responses

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CLARKE COUNTY BOARD OF EDUCATION AUDITEE'S RESPONSE
SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2006
PRIOR YEAR FEDERAL AWARD FINDINGS AND QUESTIONED COSTS
CORRECTIVE ACTION/RESPONSES
ALLOWABLE COSTS/COST PRINCIPLES Lack oflntemal Controls Regarding Payroll Records Finding Control Number: FA-6291-04-01
Subsequent to this finding, the Board did find additional documentation to support this activity and will, in the future, provide information to support the activities of the splitfunded and hourly employees that are charged to the Reading Excellence - Local Reading Improvement and the 21 st Century Community Leaming Centers Programs.
MATCHING, LEVEL OF EFFORT, EARMARKING Supplement, Not Supplant, Requirements Not Supported by Adequate Documentation Finding Control Number: FA-6291-04-02
The Board has provided additional documentation and will continue to tighten procedures and controls to ensure that requirements of Federal Programs regarding supplementing, not supplanting, are followed.
SPECIAL TESTS AND PROVISIONS Lack of Internal Controls in Hiring "Highly Qualified" Personnel Finding Control Number: FA-6291-05-01
Clarke County School District will institute controls to ensure that employees not meeting the "Highly Qualified" status are not offered positions requiring that status. This condition will be corrected during fiscal year June 2007.
SPECIAL TESTS AND PROVISIONS Failure to Invite Private Schools to Participate Finding Control Number: FA-6291-05-02
The Board will monitor the programs to ensure that all eligible private schools are invited to include their eligible students in the participation of the Even Start and 21 st Century Community Leaming Centers Programs. This will be corrected during fiscal year 2007.
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SECTION IV FINDINGS AND QUESTIONED COSTS

CLARKE 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 Clarke 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 Clarke County Board of Education disclosed financial statement reportable conditions related to the following control categories.

Cash and Cash Equivalents Inventories Revenues/Receivables/Receipts

Expenditures/Liabilities/Disbursements Capital Assets

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

3. Noncompliance Material to the Financial Statements The audit ofthe Clarke County Board ofEducation disclosed no instances ofnoncompliance that were deemed to be material to the financial statements.

4. Reportable Conditions in Internal Control Over Major Programs The audit report for the Clarke County Board of Education disclosed reportable conditions in internal control over major programs for the following compliance requirements.

Activities Allowed or Unallowed Allowable Costs/Cost Principles

Eligibility

Ofthe reportable conditions described above, Allowable Costs/Cost Principles is considered to be a material weakness.

5. Type of Report Issued on Compliance for Major Programs The auditor's opinion on the Clarke County Board ofEducation's report on compliance with requirements applicable to major programs was unqualified, except for Special Education Grants to States (CFDA 84.027), which was qualified.

6. Audit Findings Required to be Reported by Section .5 lO(a) of 0MB Circular A-133 The Clarke County Board of Education's audit disclosed audit findings required to be reported by section .510(a) ofOMB Circular A-133. These audit findingst1.re included in section IV of this report.

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

I SUMMARY OF AUDITOR'S RESULTS

7. Major Programs Federal awards audited as major programs are as follows: 10.553 Food Services - School Breakfast Program 10.555 Food Services - National School Lunch Program 84.010 Title I Grants to Local Educational Agencies 84.027 Special Education - Grants to States 84.173 Special Education - Preschool Grants 84.213 Even Start 84.367 Improving Teacher Quality State Grants 84.938 Hurricane Education Recovery

8. Type "A" Program Dollar Threshold The dollar threshold for type "A" programs was $483,335.

9. Low Risk Auditee The Clarke 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

CASH AND CASH EQUIVALENTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Control Procedures at the Central Office Reportable Condition Finding Control Number: FS-6291-06-01

Condition:

The accounting procedures ofthe School District were insufficient to provide for adequate internal controls at the Central Office.

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

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CLARKE 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 Control Procedures at the Central Office Reportable Condition Finding Control Number: FS-6291-06-01

Information:

Cash and Cash Equivalents The bank reconciliation function was not separated from the record keeping and voucher payment functions for the school food service account. The June payroll account was not reconciled timely. The June reconciliations were not tied to the general ledger for the general operating account, the payroll account or the local account. There was no evidence that supervisory approval had been given for the payroll account or the school food service account reconciliations. Old outstanding checks were shown as reconciling items on several bank accounts.

Revenues/Receivables/Receipts Based on a review ofthirty receipts, one receipt totaling $43,481 was held for 20 days prior to being deposited.

Expenditures/Liabilities/Disbursements School food service payables were overstated by $299,826. This overstatement was a result ofthe School District's failure to identify and reverse a prior year salary accrual. An audit entry was proposed and made to remove this item from the financial statements.

Cause:

Management failed to ensure that internal controls have been established, implemented and functioning for assurance that transactions are processed according to approved procedures.

Effect

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

Recommendation:

The School District should review the accounting procedures in place and revise or implement procedures necessary to strengthen the internal controls at the Central Office.

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CLARKE 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-6291-06-02

Condition:

This is a repeat finding (FS-6291-05-01 and FS-6291-04-01) 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 reconciliations for two schools did not include evidence of approval by someone other than the person performing the bank reconciliation. Bank reconciliations for seven schools were not reconciled to the total cash listed on the general ledger as presented for audit.

Revenues/Receivables/Receipts Deposit preparation was not separated from the record keeping and cash custody functions. Based on a review of forty items, it was noted that seven regular receipts and one gate receipt were not deposited in a timely manner.

Expenditures/Liabilities/Disbursements The check writing function was not separated from the record keeping or processing of signed checks. Based upon a review of forty vouchers, the following deficiencies were noted: 1) Two voucher packages did not include an original invoice, 2) There was no evidence of receipt for one voucher package, and 3) One voucher lacked both an original invoice and receiving report; therefore, no determination could be made as to the validity ofthe payment.

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CLARKE 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-6291-06-02

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.

Recommendation:

Management should revise and monitor controls to provide reasonable assurance that transactions are processed according to established procedures and to ensure that the key accounting functions of custody, record keeping and authorization are separated and/or utilize management oversight of incompatible activities.

INVENTORIES Failure to Adequately Maintain Inventories Reportable Condition Finding Control Number: FS-6291-06-03

Condition:

The School District failed to adequately maintain their inventory balances for the purchased food inventory and for the United States Department of Agriculture (U.S.D.A.) donated commodities.

Criteria:

Chapter 12 Inventory Accountingfor Consumable Supplies and Chapter 30 Inventor.ies of the Financial Management for Georgia Local Units of Administration indicates that School Districts must properly document and maintain inventory balances so that the independent auditor can give an opinion on the balance reported in the financial statements. Physical inventory counts must be checked against the financial statement balances, at least annually, and adjusted accordingly.

Questioned Cost: NIA

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

II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

INVENTORIES Failure to Adequately Maintain Inventories Reportable Condition Finding Control Number: FS-6291-06-03

Information:

The purchased food and the U.S.D.A. donated commodities financial statement balances were not adjusted to the June 30th physical inventory count as required. Balances reported had not been changed since those reported for the June 30, 2004 audit. This resulted in a combined overstatement of the balances for these inventory types in the amount of $14,004.

Cause:

Management failed to comply with the requirements of the Georgia Department of Education regarding accounting for food inventories.

Effect:

The lack of proper accounting procedures increases the risk of unapproved use or theft of the School District's assets.

Recommendation:

Appropriate procedures should be implemented by the School District to ensure that the financial statement inventory balances are adjusted to and/or agree with the final physical inventory counts at June 30th

EXPENDITURES/LIABILITIES/DISBURSEMENTS Undocumented/Improper Travel Expenditures Reportable Condition Finding Control Number: FS-6291-06-04

Condition:

The School District failed to monitor travel expenditures to ensure that State law and local policies were properly followed.

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. Credit card travel related transactions are considered high risk inherently and should be governed by formal policy.

Chapter 2 Authorizationfor Travel ofthe State ofGeorgia- Statewide Travel Regulations indicates that employees, who are eligible for travel reimbursement, should receive authorization prior to performing the travel. This chapter specifically states, "Signature of the approving official on the travel expense form constitutes authorization of employee travel".

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CLARKE 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 Undocumented/Improper Travel Expenditures Reportable Condition Finding Control Number: FS-6291-06-04

Chapter 3 Reimbursement of Meal Expenses of the State of Georgia Statewide Travel Regulations states, "All meal expenses must be itemized on the employee travel expense statement, indicating the date, location, and the actual cost of each meal". Additionally, the travel regulations identify maximum reimbursement limits for meal expenses when traveling outside of Georgia.

Chapter 9 Reimbursement Procedures of the State of Georgia - Statewide Travel Regulations states, "Employees requesting reimbursement for travel expenses are required to submit their claim to authorized personnel on the employee travel expense statement" ... "Employees are also required to submit receipts for the following expenses; ...Lodging and Airline fares".

Questioned Cost: NIA

Information:

Based on a review of three credit card monthly billings, the following deficiencies were noted:
Four charges were for meals, qualifying as travel related; however, several of these charges exceeded the maximum limits allowed for reimbursement.
One charge for transportation had no evidence of supporting documentation or the original vendor invoice.
None ofthe charges reviewed were supported by an employee travel expense statement.

Based on a review of four travel vouchers, the following deficiencies were noted:
Three vouchers contained requests for meal reimbursements which exceeded the maximum Federal per diem rate for the location visited.

When traveling out of State, employees should try to adhere to State meal reimbursement limits, however, ifthat is not possible State travel regulations provide that published Federal per diem limits should be followed.

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CLARKE 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 Undocumented/Improper Travel Expenditures Reportable Condition Finding Control Number: FS-6291-06-04

Cause:

These deficiencies were a result of management's failure to monitor employee travel expense statements and credit card transactions to ensure that established travel regulations were being followed.

Effect:

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

Recommendation:

Management should revise and monitor controls to provide reasonable assurance that travel expenditures are adequately documented by an employee travel expense statement and processed according to established procedures and State regulations. Also, the School District should review this matter to determine if a recovery of funds is necessary.

EMPLOYEE COMPENSATION Inaccurate Reporting of Senior Management Compensation Nonmaterial Noncompliance Finding Control Number: FS-6291-06-05

Condition:

Our examination of compensation paid to senior management of the School District revealed an error in the amount reported as salary to the Department of Audits and Accounts.

Criteria:

O.C.G.A. 50-6-27 states in part: "Each ... local board of education is required and directed to submit to the state auditor, in a format prescribed by the state auditor, a listing ofall personnel ofsuch ... local board ofeducation showing name, title or functional area, salary and travel expense for each individual".

Questioned Cost: NIA

Information:

The School District failed to include $19,714 as earned compensation for the affected employee's (1) portion of group health insurance of $16,240; (2) portion of dental insurance premiums of $820; (3) portion oflife insurance premiums of$1,642; (4) portion ofshort-term disability insurance premiums of$432; and (5) portion oflong-term disability insurance premiums of$580. These payments were in accordance with the contract between the Superintendent and the School District.

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

II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

EMPLOYEE COMPENSATION Inaccurate Reporting of Senior Management Compensation Nonmaterial Noncompliance Finding Control Number: FS-6291-06-05

The School District reported a salary of $139,021 for Superintendent Dr. Lewis D. Holloway in its salary and travel report for the period ended June 30, 2006. The actual compensation for Dr. Holloway totaled $158,735, which includes the $19,714 in payments referenced above.

Cause:

Management failed to implement procedures to ensure that all employee compensation is reported as salary to the Department of Audits and Accounts.

Effect:

The failure of the School District to submit total compensation paid to employee leads to inaccurate external reporting.

Recommendation:

The School District should implement procedures to ensure that all employee compensation is included in the salary total reported to the Department of Audits and Accounts.

GENERAL LEDGER Detail Listing of Travel Not Reconciled to General Ledger Nonmaterial Noncompliance Finding Control Number: FS-6291-06-06

Condition:

Travel reimbursements paid from School Activity accounts were not included in the detailed listing of travel made to employees as submitted to the Georgia Department of Audits and Accounts.

Criteria:

O.C.G.A. 50-6-27 states in part: "Each ... local board of education is required and directed to submit to the state auditor, in a format prescribed by the state auditor, a listing of all personnel ofsuch ... local board ofeducation showing name, title or functional area, salary, and travel expense for each individual".

Questioned Cost: NIA

Information:

The School District failed to accurately capture all travel paid to employees. Travel reimbursements paid from School Activity accounts, totaling $5,448, were not included in external reporting calculations. Additionally, an unidentified variance of $1,135 was not reflected for reporting purposes.

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

II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

GENERAL LEDGER Detail Listing of Travel Not Reconciled to General Ledger Nonmaterial Noncompliance Finding Control Number: FS-6291-06-06

Cause:

Management did not ensure that a complete listing oftravel was submitted to the Georgia Department ofAudits and Accounts that reconciled to the School District's general ledger.

Effect:

The failure ofthe School District to submit a complete listing oftravel leads to inaccurate external reporting.

Recommendation:

Procedures should be implemented to ensure that travel reimbursements from School Activity accounts are properly reported as part of travel expenses reported to the Georgia Department of Audits and Accounts. Also, the School District should verify that the detailed listing of travel expenses submitted properly reconciles to activity reported in the general ledger.

CAPITAL ASSETS Failure to Adequately Maintain Capital Assets Reportable Condition Finding Control Number: FS-6291-06-07

Condition:

This is a repeat finding (FS-6291-05-02 and FS-6291-04-03) from the years ended June 30, 2005, and June 30, 2004, respectively. The School District failed to adequately maintain the capital assets listing.

Criteria:

Chapter 37 Fixed Assets of the Financial Management for Georgia Local Units of Administration indicates that School Districts must establish fixed asset policies, define system requirements, implement a fixed asset system and maintain fixed asset inventory records.

Questioned Cost: NIA

Information:

The capital assets listing, as presented to auditors for review, contained the following deficiencies:
Capital asset records were incomplete and did not provide an accurate listing to support assets recorded in the financial statements. In addition, no reconciliation was presented to tie the capital assets listing to the general ledger.

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

II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

CAPITAL ASSETS Failure to Adequately Maintain Capital Assets Reportable Condition Finding Control Number: FS-6291-06-07

A review of capital lease activity identified eleven equipment items totaling $179,272 that were not included as current year additions in the capital asset records.
One equipment addition reported at $5,638 was found to be for an item that was never purchased.
Recalculation of accumulated depreciation identified errors totaling $192,231.
A review of Construction in Progress (CIP) activity identified one building project that was completed during the year under review and added to Buildings in an amount $1,071,049 greater than activity reported on construction in progress subsidiary records. Further investigation identified several prior year expenditures, related to this specific building project, that were not captured in the School District's CIP subsidiary records.
The listing as presented, while inaccurate, was also incomplete and failed to provide the various elements of information as required by Chapter 37 Fixed Assets of the Financial Management for Georgia Local Units of Administration.

A physical inspection of fifteen equipment items noted the following: Four items totaling $39,027, should not have been capitalized on the School District's capital asset records.

Cause:

The School District failed to properly maintain its capital assets records in accordance with the School District's approved capital assets policy.

Effect:

The failure ofthe School District to maintain a complete and accurate capital assets listing can lead to inaccurate internal and external reporting, as well as noncompliance with generally accepted accounting principles.

Recommendation:

The School District should review its capital assets records and make appropriate adjustments to ensure that the capital assets records, and procedures in place for maintaining capital assets, conform to the School District's approved capital assets policy and generally accepted accounting principles.

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

III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

ALLOWABLE COSTS/COST PRINCIPLES Time and Attendance Records Not Utilized Reportable Condition - Material Weakness Material Noncompliance U.S. Department of Education Through Georgia Department of Education Special Education - Grants to States (CFDA 84.027) Finding Control Number: FA-6291-06-01

Condition:

A review of the School District's policies and procedures over Special Education - Grants to States (CFDA 84.027) revealed employee time and attendance records were not being utilized as required by 0MB Circular A87.

Criteria:

Provisions of the 0MB Circular A-87, Cost Principles for Determining Allowable Costs, require that "Where employees work on multiple activities or cost objectives, a distribution of their salaries or wages will be supported by personnel activity reports or equivalent documentation that meets the following standards:
(a) They must reflect an after-the-fact distribution ofthe actual activity of each employee,
(b) They must account for the total activity for which the employee is compensated,
(c) They must be prepared at least monthly and must coincide with one or more pay periods, and
(d) They must be signed by the employee.

Such documentary support will be required where employees work on: (a) More than one Federal award, or (b) A Federal award and a non-Federal award".

Questioned Cost: $101,508

Information:

The School District did not have adequate procedures in place to conform to these requirements and ensure that employee compensation payments were allowable.

Cause:

Management failed to require employees to maintain time and attendance records for split-funded Special Education employees.

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

III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

ALLOWABLE COSTS/COST PRINCIPLES Time and Attendance Records Not Utilized Reportable Condition - Material Weakness Material Noncompliance U.S. Department of Education Through Georgia Department of Education Special Education - Grants to States (CFDA 84.027) Finding Control Number: FA-6291-06-01

Effect:

Failure to require timesheets and/or time schedules for split-funded employees can result in material non-compliance with the requirements of the Federal grant.

Recommendation:

The School District should establish procedures to ensure that adequate time records that support the basis for compensation are maintained for all split funded employees.

ELIGIBILITY Inadequate Controls Over Eligibility Determination Process Reportable Condition U. S. Department of Agriculture Through Georgia Department of Agriculture School Breakfast Program (CFDA 10.553) National School Lunch Program (CFA 10.555) Finding Control Number: FA-6291-06-02

Condition:

A review of the School District's eligibility procedures for the Child Nutrition Cluster (CFDA 10.553 and 10.555) indicated that eligibility determinations were not performed in accordance with eligibility requirements.

Criteria:

Provisions included in 7 CFR Parts 210 and 220 provide information to determine students' eligibility for free and reduced price meals specific to the National School Lunch Program and School Breakfast Program.

Questioned Cost: NIA

Information:

Test of controls were performed on forty student Free and Reduced Price Meal Applications to determine that the applications were complete and the students were classified correctly for meals, according to information contained on the applications. Our examination revealed the following:

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

III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

ELIGIBILITY Inadequate Controls Over Eligibility Determination Process Reportable Condition U. S. Department of Agriculture Through Georgia Department of Agriculture School Breakfast Program (CFDA 10.553) National School Lunch Program (CFA 10.555) Finding Control Number: FA-6291-06-02

One student's application was incorrectly calculated resulting in the student being classified for free meals instead ofreduced-price meals.

Two student applications did not contain the social security number of the adult household member who signed the application or an indication that the household member did not have one.

Cause:

Management failed to implement appropriate internal controls to ensure compliance in accordance with Federal guidelines.

Effect:

Failure to ensure proper controls can result in noncompliance with the requirements of the Federal grant.

Recommendation:

Procedures should be implemented to ensure that eligibility determinations for free and reduced-price meal applications are performed in accordance with eligibility requirements. The Georgia Department of Education should evaluate the School District's compliance with program requirements and determine amounts to be reclaimed, if any.

ACTIVITIES ALLOWED OR UNALLOWED Inadequate Internal Control Procedures Reportable Condition U.S. Department of Education Through Georgia Department of Education Hurricane Education Recovery (CFDA No. 84.938) Finding Control Number: FA-6291-06-03

Condition:

The School District did not have procedures in place to ensure that Hurricane Education Recovery Act (HERA) funds provided for displaced students reported as having disabilities were used for the excess costs of providing special education and related services to students with disabilities.

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

III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

ACTIVITIES ALLOWED OR UNALLOWED Inadequate Internal Control Procedures Reportable Condition U.S. Department of Education Through Georgia Department of Education Hurricane Education Recovery (CFDA No. 84.938) Finding Control Number: FA-6291-06-03

Criteria:

The following guidance applied to the management of Emergency Impact Aid for Displaced Students to include funds made available for displaced students:
1. Section 107(e)(4) of HERA, 2. Volumes "I" and "II" of U. S. Department of Education (USED)
guidelines included in "Frequently Asked Questions, Emergency Impact Aid for Displaced Students", and 3. State of Georgia issued publication titled "Georgia Guidance on Federal Emergency Hurricane Act" (GDOE Guidelines).

Provisions of HERA, USED and GDOE Guidelines state that HERA funds for students with disabilities may only be used to pay for special education and related service consistent with the Individuals with Disabilities Education Act (IDEA). Both Volumes "I" and "II" of USED guidance state that the funds provide for students with disabilities must be recorded and tracked separately from those HERA funds provided for non-disabled students. This Federal requirement was not specifically included in GDOE Guidelines.

Provisions of HERA and GDOE guidelines state that these funds may become a part of a Board's special education budget to ensure that they are only used to pay for special education and related service consistent with IDEA. The guidelines further stated that since these funds are to be applied and used in a manner as funds made available under Part B ofIDEA, it was also advised to consult with State and local staffwho are cognizant ofIDEA requirements.

Questioned Cost: $22,276

Information:

HERA funds received by the School District included $22,276 for students with disabilities. Although required by Federal guidelines, the receipt and expenditure of these funds were not maintained separately.

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

III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

ACTIVITIES ALLOWED OR UNALLOWED Inadequate Internal Control Procedures Reportable Condition U.S. Department of Education Through Georgia Department of Education Hurricane Education Recovery (CFDA No. 84.938) Finding Control Number: FA-6291-06-03

We further noted that the budget for special education was not modified for the increase in HERA funds designated for special education and related purposes.

Cause:

The School District relied solely on GDOE Guidelines which did not require that the School District provide separate accountability of HERA funds provided for students with disabilities. Consideration had not been given to consulting with local and State special education staff or revising its special education budget to ensure that these HERA funds were applied in line with IDEA.

Effect:

We were unable to determine if the $22,276 of HERA funds earmarked for students with disabilities were used for special education and related purposes.

Recommendation:

Management should ensure that procedures are in place to comply with Federal and State guidelines when administering HERA funds for special education purposes. GDOE should review this matter and determine ifthese funds were used properly or if a refund is appropriate.

ELIGIBILITY Inadequate Internal Control Procedures Reportable Condition U.S. Department of Education Through Georgia Department of Education Hurricane Education Recovery (CFDA No. 84.938) Finding Control Number: FA-6291-06-04

Condition:

The School District did not have procedures in place to ensure accurate eligibility determinations for displaced students under the Hurricane Education Recovery Act (HERA).

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

III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

ELIGIBILITY Inadequate Internal Control Procedures Reportable Condition U.S. Department of Education Through Georgia Department of Education Hurricane Education Recovery (CFDA No. 84.938) Finding Control Number: FA-6291-06-04

Criteria:

Federal guidelines (34 CFR section 76.731) require School Districts to document that, on August 22, 2005, each reported displaced student was enrolled, or eligible to be enrolled, in a public on non-public school within the disaster areas covered by Hurricane Katrina or Rita.

Questioned Cost: $5,956 (Returned as part of$99,293 refund to GDOE on February 22, 2007)

Information:

HERA funds received by the School District included $5,956 for students who did not qualify as displaced students. We reviewed Georgia Department ofEducation's Monitoring Report ofHERA funds and determined the School District had included two regular impact aid students on the October and December 2005 roster counts. GDOE identified that the School District had received excess funding in the amount of $5,956 due to the over counting of students.

Cause:

These deficiencies resulted from the School District's oversight of Federal guidelines pertaining to eligibility determination ofstudents included on their application to GDOE for Emergency Impact Aid for Displaced Students.

Effect:

These incorrect eligibility determinations resulted in the School District receiving excess funding from GDOE.

Recommendation:

Management should make themselves aware ofFederal guidelines and ensure that procedures are in place to comply with those Federal guidelines in making eligibility determinations.

GDOE has reviewed this matter and requested a refund as part ofthe overall Monitoring Review deficiencies.

The $5,956 in question was returned as part of a $99,293 refund the School District sent to GDOE on February 22, 2007.

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SECTIONV MANAGEMENT'S RESPONSES

CLARKE COUNTY BOARD OF EDUCATION SCHEDULE OF MANAGEMENT'S RESPONSES
YEAR ENDED JUNE 30, 2006
Finding Control Number: FS-6291-06-01
We concur with this finding. Management will review procedures and implement new procedures to strengthen internal controls at the Central Office. These changes will be implemented during fiscal year 2008.
Finding Control Number: FS-6291-06-02
We concur with this finding. Beginning with fiscal year June 2008, there will be at least one additional person in school offices to help with the separation of duties regarding cash collections and the related record keeping. Control will be monitored to provide assurance that established procedures are being followed.
Finding Control Number: FS-6291-06-03
We concur with this finding. Management will implement a procedure to ensure that the financial statement inventory balances agree with physical inventory counts at June 30th This procedure should be in place by June 30, 2008.
Finding Control Number: FS-6291-06-04
We concur with this finding. Procedures for documentation will be changed and will be in place during fiscal year 2008.
Finding Control Number: FS-6291-06-05
We concur with this finding. The School District will implement procedures to ensure that all employee compensation is included in the salary total. This change will be implemented during fiscal year 2008.
Finding Control Number: FS-6291-06-06
We concur with this finding. The School District will implement procedures to ensure that the detailed listing oftravel is reconciled to the general ledger. This change will be implemented during fiscal year 2008.
Finding Control Number: FS-6291-06-07
We partially concur with this finding. The School District is hampered by lack ofmanpower and is trying to keep up with the changing requirements. Numbers noted by bullet point amount to less than one percent ofthe Capital Assets totals and, in management's opinion, should be relegated to a separate management letter. The School District will soon install a new software accounting system to improve the accounting function and is working to assign a full-time employee to Capital Assets. Improved procedures should be implemented during fiscal year 2009.
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CLARKE COUNTY BOARD OF EDUCATION SCHEDULE OF MANAGEMENT'S RESPONSES
YEAR ENDED JUNE 30, 2006
Finding Control Number: FA-6291-06-01 We concur with this finding. Management will establish procedures to ensure that all special education employees furnish time and attendance records. This change will be implemented during fiscal year 2008. Finding Control Number: FA-6291-06-02 We concur with this finding. Management will strengthen the eligibility procedures for determining that applications are complete with no missing information. This change will be implemented during fiscal year 2008. Finding Control Number: FA-6291-06-03 We concur with this finding. Management will put procedures in place to ensure that the School District complies with Federal and State guidelines when administering HERA funds for special education purposes: This change will be implemented during fiscal year 2008. Finding Control Number: FA-6291-06-04 We concur with this finding. Management will install procedures to comply with Federal guidelines in making eligibility determinations. This change will be implemented during fiscal year 2008. Contact Person: Thomas Guthrie, Director of Finance and Business Services Phone: (706) 546-7721 Fax Number: (706) 357-5398 E-mail Address: guthriet@clarke.kl2.ga.us
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