Clay County Board of Education, Fort Gaines, Georgia, report on audit of the financial statements for the fiscal year ended June 30, 2006

CLAY COUNTY BOARD OF EDUCATION FORT GAINES, 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

CLAY COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS -

SECTION I

FINANCIAL

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

EXHIBITS

BASIC FINANCIAL STATEMENTS

DISTRICT-WIDE FINANCIAL STATEMENTS

A

STATEMENT OF NET ASSETS

1

B

STATEMENT OF ACTIVITIES

2

FUND FINANCIAL STATEMENTS

C

BALANCE SHEET

GOVERNMENTAL FUNDS

4

D

RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET

TO THE STATEMENT OF NET ASSETS

5

E

STATEMENT OF REVENUES, EXPENDITURES AND CHANGES

IN FUND BALANCES

GOVERNMENTAL FUNDS

6

F

RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT

OF REVENUES, EXPENDITURES AND CHANGES IN FUND

BALANCES TO THE STATEMENT OF ACTIVITIES

7

G

STATEMENT OF FIDUCIARY NET ASSETS

FIDUCIARY FUNDS

8

H

NOTES TO THE BASIC FINANCIAL STATEMENTS

9

SCHEDULES

REQUIRED SUPPLEMENTARY INFORMATION

1 SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES

IN FUND BALANCES - BUDGET AND ACTUAL

GENERAL FUND

23

SUPPLEMENTARY INFORMATION

2 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS

24

3 SCHEDULE OF STATE REVENUE

25

CLAY COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS -

SECTION I

FINANCIAL

SCHEDULES

SUPPLEMENTARY INFORMATION

4 SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS

26

5 ALLOTMENTS AND EXPENDITURES

GENERAL FUND - QUALITY BASIC EDUCATION PROGRAMS (QBE)

BY PROGRAM

27

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

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

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

CLAY 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
July 3, 2007

Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the Clay 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 Clay 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 of the Clay County Board of Education's management. Our responsibility is to express opinions on these financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United States ofAmerica and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General ofthe United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free ofmaterial misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinions.
In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, each major fund, and the aggregate remaining fund information of the Clay County Board of Education, as of June 30, 2006, and the respective changes in financial position thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America.
2006ARL-11

The Clay County Board ofEducation has not presented Management's Discussion and Analysis that accounting principles generally accepted in the United States has determined is necessary to supplement, although not to be part of, the basic financial statements.
In accordance with Government Auditing Standards, we have also issued our report dated July 3, 2007, on our consideration ofthe Clay County Board of Education's internal control over financial reporting and our tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements and other matters. The purpose ofthat report is to describe the scope ofour testing of internal control over financial reporting and compliance and the results ofthat testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit.
The Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual, as presented on page 23, is not a required part of the basic financial statements but is supplementary information required by the accounting principles generally accepted in the United States of America. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods ofmeasurement and presentation ofthe required supplementary information. However, we did not audit the information and express no opinion on it.
Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Clay County Board of Education's basic financial statements. The accompanying supplementary information which consist of Schedules 2 through 5, which includes the Schedule of Expenditures of Federal Awards as required by U. S. Office of Management and Budget Circular A-133, Audits ofStates, Local Governments, and Non-Profit Organizations, are presented for purposes of additional analysis and are not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements, and in our opinion, is fairly stated, in all material respects, in relation to the basic financial statements taken as a whole.
A copy of this report has been filed as a permanent record in the office of the State Auditor and made available to the press of the State, as provided for by Official Code of Georgia Annotated section 50-6-24.
Respectfully submitted,

RWH:gp 2006ARL-11

Rus 11 W. Hinton, CPA, CGFM State Auditor

CLAY COUNTY BOARD OF EDUCATION

CLAY COUNTY BOARD OF EDUCATION STATEMENT OF NET ASSETS JUNE 30, 2006
ASSETS Cash and Cash Equivalents Investments Accounts Receivable, Net
Taxes State Government Federal Government Other Inventories Capital Assets Land Land Improvements Buildings Equipment Less: Accumulated Depreciation
Total Assets
LIABILITIES Accounts Payable Salaries Payable Long-Term Liabilities
Due Within One Year Due in More Than One Year
Total Liabilities NET ASSETS Invested in Capital Assets, Net of Related Debt Restricted for 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

$

603,069

246,910

71,091 161,903 314,764
8,917 1,618

38,520 244,000 4,181,378 916,759 -1,253,933

$ ===5=,5=3=4==,9=96=

$

199,275

353,976

185,000 195 000

$

933 251

$

3,746,724

57,921 203,931 420,677 172 492

$

4 601 745

$ =======5=5=3=4=9=96=

CLAY 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 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

$

2,608,487

60,644 269,836
77,951 334,179 358,119 $
53,598 218,467 296,501
4,582 130,290

17,823 246,056
68 506

$

4 745 039 $

2,013
11,974 13 987

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

$

1,733,978

31,423 184,079
29,738 233,236 147,846

78,225 191,031 $
4,572 75,489

17,793 247,763

$

2,975,173 $

$ 23,430 23430 $

-874,509
-29,221 -85,757 -48,213 -100,943 -208,260 -53,598 -140,242 -82,040
-10 -54,801
-30 13,681 -68 506
-1,732,449

$

1,215,943

196,779 109,666
7,503 10,150 15,411 27 423

$

1,582,875

$

-149,574

4 751 319

$

4 601 745

-3-

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

EXHIBIT"C"

ASSETS
Cash and Cash Equivalents Investments Accounts Receivable, Net
Taxes State Government Federal Government Other Inventories
Total Assets
LIABILITIES AND FUND BALANCES
LIABILITIES
Cash Overdraft Accounts Payable Salaries Payable
Total Liabilities
FUND BALANCES
Reserved for: Continuation of Federal Programs Debt Service Inventories Capital Projects
Unreserved Designated for Self-Insurance Undesignated Reported in: General Fund Debt Service
Total Fund Balances
Total Liabilities and Fund Balances

GENERAL FUND

DISTRICTWIDE
CAPITAL PROJECTS
FUND

DEBT SERVICE
FUND

TOTAL

$

45,468 $

566,268 $

246,910

8,138 161,903 314,764
8,917 1 618

58,879

0 $

611,736

246,910

67,017 161,903 314,764
8,917 1 618

$

787 718 $

625 147 $

0 $ 1,412,865

$

198,736 $

353,976

$

552 712 $

$ 539
539 $

8,667 $ 8 667 $

8,667 199,275 353,976
561 918

$

56,303

$

203,931

1,618

420,677

27,722

149,363 $

$

235 006 $

624 608 $

$
-8 667 -8 667 $

56,303 203,931
1,618 420,677
27,722
149,363 -8 667
850 947

$

787 718 $

625 147 $

0 $ 1,412,865

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

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

EXHIBIT"D"

Total Fund Balances - Governmental Funds (Exhibit "C")
Amounts reported for Governmental Activities in the Statement of Net Assets are different because:
Capital Assets used in Governmental Activities are not financial resources and therefore are not reported in the funds. These assets consist of:
Land Land Improvements Buildings Equipment Accumulated Depreciation
Total Capital Assets
Some of the School District's property tax revenues will be collected after year-end but are not available soon enough to pay for the current period's expenditures.
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

$

$

38,520

244,000

4,181,378

916,759

-1,253,933

850,947
4,126,724 4,074
-380,000

Net Assets of Governmental Activities (Exhibit "A")

$ =====4,=60=1=7, =4=5

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

CLAY 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 Community Services Food Services Operation
Debt Services Principal Interest
Total Expenditures
Net Change in Fund Balances
Fund Balances - Beginning
Fund Balances - Ending

GENERAL FUND

DISTRICTWIDE
CAPITAL PROJECTS
FUND

DEBT SERVICE
FUND

TOTAL

$

989,179

17,653 $

1,865,804

1,349,482

13,987

7,258

70 454

$ 4,313,817 $

109,666 $ 8,153
117 819 $

$ 196,779
196 779 $

989,179 324,098 1,865,804 1,349,482
13,987 15,411 70454
4,628,415

$ 2,523,210
60,644 269,836
77,951 334,179 353,539 $
53,459 204,221 314,576
4,582 130,290
17,823 235,442

$ 4,579,752 $

$

-265,935 $

500 941

$
4,580 139
10,656

$
15 375 $ 102,444 $ 522 164

875,000 68,506
943,506 $ -746,727 $ 738,060

2,523,210
60,644 269,836
77,951 334,179 358,119
53,598 214,877 314,576
4,582 130,290
17,823 235,442
875,000 68 506
5,538,633
-910,218
1 761 165

$

235,006 $

624,608 $

-8 667 $ ===8=5=0==9=47=

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

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

EXHIBIT"F"

Total Net Change in Fund Balances - Governmental Funds (Exhibit "E")

Amounts reported for Governmental Activities in the Statement of Activities are different because:

Capital Outlays are reported as expenditures in Governmental Funds. However, in the Statement of Activities, the cost of Capital Assets is allocated over their estimated useful lives as depreciation expense. In the current period, these amounts are:

Capital Outlay

$

Depreciation Expense

Excess of Capital Outlay over Depreciation Expense

Because some property taxes will not be collected for several months after the School District's fiscal year ends, they are not considered "available" revenues.

In the Statement of Activities, only the gain on the sale of the land, 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 cost of the land, carrying value of the building and equipment sold.

Repayment of Long-Term Debt is reported as an expenditure in Governmental Funds, but the repayment reduces Long-Term Liabilities in the Statement of Net Assets. In the current year, these amounts consist of:

Bond Principal Retirements

$
67,204 -148 610

-910,218
-81,406 10,081 -43,031 875,000

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

$ ==-..,14=9=5=7=4

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

CLAY COUNTY BOARD OF EDUCATION STATEMENT OF FIDUCIARY NET ASSETS
FIDUCIARY FUNDS
JUNE 30, 2006
ASSETS Accounts Receivable, Net
Other
LIABILITIES Cash Overdraft Funds Held for Others
Total Liabilities

EXHIBIT"G"

AGENCY FUNDS
$ ===1=3,=05=2=

$

13,037

15

$ ===13,.,.,=05=2=

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

CLAY 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 Clay 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 ofthe Clay 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 of Activities 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-

CLAY 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) to be used for the acquisition, construction or renovation of major capital facilities.
Debt Service Fund accounts for taxes (sales) legally restricted for the payment ofgeneral longterm principal, interest and paying agent's fees.
The School District reports the following fiduciary fund type:
Agency funds account for assets held by the School District as an agent for various funds, governments or individuals.
BASIS OF ACCOUNTING
The basis ofaccounting determines when transactions are reported on the financial statements. The District-wide governmental and fiduciary fund financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded at the time liabilities are incurred, regardless ofwhen the related cash flows take place. Nonexchange transactions, in which the School District gives (or receives) value without directly receiving (or giving) equal value in exchange, include property taxes, sales taxes and grants. On an accrual basis, revenue from property taxes is recognized in the fiscal year for which the taxes are levied. Revenue from sales taxes is recognized in the fiscal year in which the underlying transaction (sale) takes place. Revenue from grants is recognized in the fiscal year in which all eligibility requirements have been satisfied.
The School District uses funds to report on its financial position and the results of its operations. Fund accounting is designed to demonstrate legal compliance and to aid financial management by segregating transactions related to certain governmental functions or activities. A fund is a separate accounting entity with a self-balancing set of accounts.
Governmental funds are reported using the current financial resources measurement focus and the modified accrual basis ofaccounting. Under this method, revenues are recognized when measurable and available. The School District considers all revenues reported in the governmental funds to be available if they are collected within sixty days after year-end. Property taxes, sales taxes and interest are considered to be susceptible to accrual. Expenditures are recorded when the related fund liability is incurred, except for principal and interest on general long-term debt, which are recognized
- 10-

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

EXHIBIT "H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
as expenditures to the extent they have matured. Capital asset acquisitions are reported as expenditures in governmental funds. Proceeds ofgeneral long-term liabilities are reported as other financing sources.
The School District funds certain programs by a combination ofspecific cost-reimbursement grants, categorical grants, and general revenues. Thus, when program costs are incurred, there are both restricted and unrestricted net assets available to finance the program. It is the School District's policy to first apply grant resources to such programs, followed by cost-reimbursement grants, then general revenues.
CASH AND CASH EQUIVALENTS
COMPOSITION OF DEPOSITS Cash and cash equivalents consist ofcash on hand, demand deposits and short-term investments with original maturities of three months or less from the date of acquisition in authorized financial institutions. Georgia Laws OCGA 45-8-14 authorize the School District to deposit its funds in one or more solvent banks or insured Federal savings and loan associations.
INVESTMENTS
COMPOSITION OF INVESTMENTS Investments made by the School District in nonparticipating interest-earning contracts (such as certificates ofdeposit) and repurchase agreements are reported at cost. Participating interest-earning contracts and money market investments with a maturity at purchase ofone year or less are reported at amortized cost. Both participating interest-earning contracts and money market investments with a maturity at purchase greater than one year are reported at fair value. The Official Code ofGeorgia Annotated Section 36-83-4 authorizes the School District to invest its funds. In selecting among options for investment or among institutional bids for deposits, the highest rate ofreturn shall be the objective, given equivalent conditions of safety and liquidity. Funds may be invested in the following:
(1) Obligations issued by the State of Georgia or by other states,
(2) Obligations issued by the United States government,
(3) Obligations fully insured or guaranteed by the United States government or a United States government agency,
(4) Obligations of any corporation of the United States government,
(5) Prime banker's acceptances,

- 11 -

CLAY 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 ofGeorgia, Office of Treasury and Fiscal Services,

(7) Repurchase agreements, and

(8) Obligations of other political subdivisions of the State of Georgia.

The School District does not have a formal policy regarding investment policies that address credit risks, custodial credit risks, concentration ofcredit risks, interest rate risks or foreign currency risks.

RECEIVABLES

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

PROPERTY TAXES

The Clay County Board of Commissioners fixed the property tax levy for the 2005 tax digest year (calendar year) on July 28, 2005 (levy date). Taxes were due on January 29, 2006 (lien date). Taxes collected within the current fiscal year or within 60 days after year-end on the 2005 tax digest are reported as revenue in the governmental funds for fiscal year 2006. The Clay 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 $989,179.

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

School Operations

12.00 mills

SALES TAXES

Special Purpose Local Option Sales Tax, at the fund reporting level, during the year amounted to $306,445 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 -

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

EXHIBIT"H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

INVENTORIES

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

CAPITAL ASSETS

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

Land Land Improvements Buildings and Improvements Equipment

Capitalization Policy

Estimated Useful Life

Any Amount

$

10,000

$

10,000

$

10,000

NIA 15 to 80 years 10 to 80 years 4 to 20 years

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

GENERAL OBLIGATION BONDS

The School District issues general obligation bonds to provide funds for the acquisition and construction of major capital facilities. Bond issuance costs are recognized in the financial statements during the fiscal year bonds are issued. General obligation bonds are direct obligations and pledge the full faith and credit of the government. The outstanding amount of these bonds is recorded in the Statement ofNet Assets.

- 13 -

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

EXHIBIT "H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

DEFICIT FUND BALANCES

The fund reporting a deficit fund balance at June 30, 2006, is as follows:

Fund Type/Fund Name

Deficit Balance

Governmental Fund Type Debt Service Fund

$

8,667

The balance of the deficit in the Debt Service Fund will be funded by a transfer from the Capital Projects Fund in the amount of $8,667 in fiscal year 2007.

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 ofthe 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 of the State of Georgia, and

- 14 -

CLAY 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 $1,140,855. 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

$ 200,000

2

816,047

3

124,808

4

0

Total

$ 1,140,855

CATEGORIZATION OF INVESTMENTS At June 30, 2006, the carrying value ofthe School District's total investments was $28,919 which is materially the same as fair value. This investment consisted entirely of funds 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 ofthe State ofGeorgia, Office ofTreasury 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:

- 15 -

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

EXHIBIT"H"

Note 3: DEPOSITS AND INVESTMENTS
The Primary Liquidity Portfolio consists of Georgia 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.
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:

- 16 -

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

EXHIBIT "H"

Note 5: CAPITAL ASSETS

Balances July 1. 2005

Increases

Decreases

Balances June 30. 2006

Governmental Activities Capital Assets, Not Being Depreciated:
Land

$

40,659 $

0 $

2,139 $

38,520

Capital Assets Being Depreciated Buildings and Improvements Equipment Land Improvements

$ 4,439,644 887,325 $ 244,000

$ 67,204

258,266 $ 37,770

4,181,378 916,759 244,000

Less Accumulated Depreciation for: Buildings and Improvements Equipment Land Improvements

637,736 600,731 122.000

74,180 58,163 16.267

217,374 37,770

494,542 621,124 138.267

Total Capital Assets, Being Depreciated, Net $ 4,210.502 $

-81,406 $

40,892 $ 4,088,204

Governmental Activity Capital Assets - Net $ 412!H 1 Hil $

-81,406 $

431031 $ ~,126112~

Current year depreciation expense by function is as follows:

Instruction Support Services
Maintenance and Operation ofPlant Student Transportation Services Food Services

$

85,277

$

3,590

49,129

52,719 10,614

Note 6: RESTRICTED ASSETS

$=====14==8-,6===1==0

Special Purpose Local Option Sales Tax (SPLOST) is reported as restricted assets in the Statement of Net Assets because its use is limited by applicable statutory provisions. Restricted assets at June 30, 2006, were as follows:

District-wide Capital Projects SPLOST

Restricted Cash and Cash Equivalents: Capital Acquisitions Debt Services

$ 362,337 $ 203,931

- 17 -

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

EXHIBIT "H"

Note 7: RISK MANAGEMENT

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

The School District has obtained commercial insurance for risk ofloss associated with torts, assets and errors or omissions. However, the errors or omissions policy excludes coverage for sexual harassment and discrimination. The School District has neither significantly reduced coverage for these risks nor incurred losses (settlements) which exceeded the School District's insurance coverage in any of the past three years.

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

The School District is self-insured with regard to unemployment compensation claims. In connection with this program, a self-insurance reserve has been established within the General Fund by the School District. The School District accounts for claims within the General Fund with expenses/expenditures and liability being reported when it is probable that a loss has occurred, and the amount of that loss can be reasonably estimated.

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

Beginning of Year Liability

Claims and Changes in Estimates

Claims Paid

End of Year Liability

2005 2006

$

0 $

4 800 $

0 $

4 800

$

4 800 $

3 000 $

7 800 $

0

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

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

Position Covered

Amount

Principal

$

1,000

- 18 -

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

EXHIBIT"H"

Note 8: LONG-TERM DEBT

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

Purpose

Interest Rate

Amount

General Government - Series 2002

3.57%

$.=====!!:3:!=80-,0~0==0

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

Governmental Funds General
Obligation Bonds

Balance July 1, 2005

$ 1,255,000

Deductions Debt Retired

875,000

Balance June 30, 2006

$ 380,000

Portion of Long-Term Debt Due within One Year

$_------'-18...c...s,"""""ooc..c.o

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

General Obligation

Debt

Principal

Interest

2007

$ 185,000 $

10,264

2008

195,000

3,481

Total Principal and Interest

$ 380.000 $

13,745

Note 9: SIGNIFICANT CONTINGENT LIABILITIES

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

- 19 -

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

EXHIBIT "H"

Note 10: SUBSEQUENT EVENTS
On November 7, 2006, the voters of Clay County voted in favor of a special purpose local option sales and use tax for education purposes and the issuance of $1,200,000 of general obligation debt. The imposition ofthe tax approved by the voters, as stated on the Official Ballot ofClay County, is as follows:
"Shall a one percent sales and use tax be imposed in Clay County for a period not to exceed 20 calendar quarters and for the raising of not more than $1,700,000 for the purpose of (i) improving, renovating, extending, repairing and equipping the gymnasium at the Clay County Elementary School to include concessions, bleachers, dressing rooms and storage area; (ii) acquiring, constructing and equipping a recreation/athletic complex to share with the community to include additional fields and lights; (iii) rehabilitating, repairing, renovating, extending and improving existing schools and related facilities useful or desirable in connection therewith, including without limitation, additional classrooms, roof replacements and repairs, mechanical system repairs and replacements, and wiring and infrastructure modification; (iv) acquiring and installing system-wide instructional and administrative technology, safety and security equipment to include cameras for school buses; (v) acquiring school furnishings, textbooks, music, vocational and athletic equipment; (vi) acquisition of school buses and maintenance vehicles and equipment; (vii) acquiring any necessary property, both real and personal; (viii) payment of capitalized interest through October 1, 2007; and (ix) paying costs incident to accomplishing the foregoing in the amount of $1,700,000? If imposition ofthe tax is approved by the voters, such vote shall also constitute approval of the issuance of general obligation debt ofthe Clay County School District in the principal amount ofup to $1,200,000, repayable from the proceeds ofthe aforesaid sales and use tax, for the purpose of funding such portions ofthe above projects as may be acquired, constructed and equipped with the proceeds ofgeneral obligation debt and to pay capitalized interest on such debt through October 1, 2007, inclusive."
Note 11: RETIREMENT PLANS
TEACHERS RETIREMENT SYSTEM OF GEORGIA (TRS)
TRS PLAN DESCRIPTION Substantially all teachers, administrative and clerical personnel employed by local school systems are covered by the Teachers Retirement System ofGeorgia (TRS), which is a cost-sharing multiple employer defined benefit pension plan. TRS provides service retirement, disability retirement and survivors benefits for its members in accordance with State statute. The Teachers Retirement System of Georgia issues a separate stand alone financial audit report and a copy can be obtained from the Georgia Department of Audits and Accounts.
TRS CONTRIBUTIONS REQUIRED AND MADE Employees ofthe School District who are covered by TRS are required by State statute to contribute 5% of their gross earnings to TRS. The School District makes monthly employer contributions to

-20-

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

EXHIBIT"H"

Note 11: RETIREMENT PLANS

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%

$ 203,217 $ 175,002 $ 184,773

- 21 -

(This page left intentionally blank)

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

SCHEDULE "1"

REVENUES
Property Taxes Sales Taxes State Funds Federal Funds Charges for Services Investment Earnings Miscellaneous
Total Revenues
EXPENDITURES
Current Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Community Services Food Services Operation
Total Expenditures
Net Change in Fund Balances
Fund Balances - Beginning
Adjustments

NONAPPROPRIATED BUDGETS

ORIGINAL (1)

FINAL (1)

ACTUAL AMOUNTS

$

993,800 $

993,800 $

989,179

15,000

15,000

17,653

1,792,309

1,870,759

1,865,804

667,041

1,466,985

1,349,482

5,000

5,000

13,987

6,000

6,000

7,258

3000

8 000

70454

$

3,482,150 $

4,365,544 $

4,313,817

$

2,084,856 $

2,450,281 $

2,523,210

52,427 177,800 84,136 297,961 338,452 60,407 212,760 294,928
3,463 79,054 18,005 238,391

64,764 328,392 84,636 320,855 334,895 60,407 212,760 297,960
6,198 164,427
18,105 238,491

60,644 269,836
77,951 334,179 353,539
53,459 204,221 314,576
4,582 130,290
17,823 235,442

$

3,942,640 $

4,582,171 $

4,579,752

$

-460,490 $

-216,627 $

-265,935

493,712

493,712

500,941

-45 304

-45 304

Fund Balances - Ending

$

-12 082 $

231,781 $======2.,.3.5.,.=0=06...

Notes to the Schedule of Revenues, Expenditures and Changes in Fund Balances Budget and Actual
(1) Original and Final Budget amounts do not include budgeted revenues or expenditures of the various principal accounts.
The accompanying schedule of revenues, expenditures and changes in fund balances budget and actual is presented on the modified accrual basis of accounting which is the basis of accounting used in the presentation of the fund financial statements.

See notes to the basic financial statements.

- 23 -

CLAY 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 Randolph County Board of Education Special Education Grants to States Preschool Grants
Total Special Education Cluster
Other Programs Direct Fund for the Improvement of Education Impact Aid Pass-Through From Georgia Department of Education Enhancing Education Through Technology Program Improving Teacher Quality State Grants Reading First State Grants Safe and Drug-Free Schools and Communities State Grants for Innovative Programs Title I Grants to Local Educational Agencies Pass-Through From Morehouse College Twenty-First Century Community Learning Centers
Total U. S. Department of Education

CFDA NUMBER

PASSTHROUGH
ENTITY ID
NUMBER

EXPENDITURES IN PERIOD

10.553 10.555
10.550

N/A

(2)

N/A $ _ _ _-=20.:.;7'-"5"-"'1'-'--7

$

207,517

N/A

12 460

$ _ _ _.::2..:..:19:.,.;9::.c7~7

84.027 84.173
84.215 * 84.041
84.318 84.367 84.357 84.186 84.298 * 84.010
84.287

N/A $ NIA
$

41,929 3500
45,429

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

43,538 (3)
7,806 90,332 176,323
9,010 2,303 426,062
128 446
929,249

Total Federal Financial Assistance

$

N/A = Not Available

Notes to the Schedule of Expenditures of Federal Awards

(1) The amount shown for the Food Donation Program represents the Federally assigned value of nonmonetary assistance for donated commodities received and/or consumed by the School District during the current fiscal year.
(2) Expenditures for the funds earned on the School Breakfast Program ($78,045) were not maintained separately and are included in the 2006 National School Lunch Program.
(3) Funds earned on the Impact Aid program, in the amount of $216,683, do not require reporting of expenditures.

Major Programs are identified by an asterisk (*) in front of the CFDA number.

The School District did not provide Federal Assistance to any Subrecipient.

The accompanying schedule of expenditures of Federal awards includes the Federal grant activity of the Clay County Board of Education and is presented on the modified accrual basis of accounting which is the basis of accounting used in the presentation of the fund financial statements.

1,149,226

See notes to the basic financial statements.

- 24 -

CLAY COUNTY BOARD OF EDUCATION SCHEDULE OF STATE REVENUE YEAR ENDED JUNE 30, 2006
AGENCY/FUNDING
GRANTS Bright from the Start: Georgia Department of Early Care and Learning Pre-Kindergarten Program
Education, Georgia Department of Quality Basic Education Direct Instructional Cost Kindergarten Program Kindergarten Program - Early Intervention Program Primary Grades (1-3) Program Primary Grades - Early Intervention (1-3) Program Upper Elementary Grades (4-5) Program Upper Elementary Grades - Early Intervention (4-5) Program Middle Grades (6-8) Program Middle School (6-8) Program Students with Disabilities Category II Category Ill CategoryV Alternative Education Program Media Center Program 20 Days Additional Instruction Staff and Professional Development Indirect Cost Central Administration School Administration Facility Maintenance and Operations Categorical Grants Pupil Transportation Regular Bus Replacement Sparsity Nursing Services Principal Supplements Food Services Austerity Reduction Other State Programs Statewide K-8 Reading and Mathematics Program

SCHEDULE "3"

GOVERNMENTAL FUND TYPE GENERAL FUND

$

190,909

152,230 9,707
283,619 43,895 105,140 32,875 -43,425
265,903
32,693 28,591 16,367
6,412 29,738
8,703 5,599
201,648 128,293
78,225
170,861 23,430
124,485 25,588 1,136 11,738 -93,556
25 000
$ ===1=,8=6=5::a,8=04=

See notes to the basic financial statements.

- 25 -

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

SCHEDULE "4"

PROJECTS
The repayment of principal and interest on the Clay County School District's Series 1996 Bonds maturing February 1, 2016, in the maximum amount of $1,611,090.
Acquiring a site; constructing, equipping and improvements in the Clay County School District at a maximum cost of $950,000.
Adding to, renovating, repairing, improving and equipping Clay County Elementary School, including the acquisition, construction and equipping of six (6) additional classrooms, additional parking areas and improvements to playgrounds and outdoor physical education areas; improvements to the existing central office facilities; the purchase of school buses; the acquisition and installation of system-wide technology improvements and the purchase of school furniture, equipment and fixtures.

ORIGINAL ESTIMATED
COST (1)

CURRENT ESTIMATED COSTS (2)

AMOUNT EXPENDED IN CURRENT YEAR (3) (4)

AMOUNT EXPENDED
IN PRIOR YEARS (3) (4)

PROJECT STATUS

$ 1,611,090 $ 1,611,090 $

746,728 $

480,965 Complete

950,000

950,000

Ongoing

1,600,000

1,600,000

15,375

1,313,619 Ongoing

$

(1) The School District's original cost estimate as specified in the resolution calling for the imposition of the Local Option Sales Tax.

(2) The School District's current estimate of total cost for the projects. Includes all cost from project inception to completion.

(3) The voters of Clay 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

$

73,810

Current Year

16,779

Total

$ ==9=0,..,5.8..9...

See notes to the basic financial statements.

- 26 -

CLAY 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 Students with Disabilities Category II Category Ill Category V Alternative Education Program
TOTAL DIRECT INSTRUCTIONAL PROGRAMS
Media Center Program Staff and Professional Development

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

ELIGIBLE QBE PROGRAM COSTS

SALARIES OPERATIONS

TOTAL

$

196,673 $

217,841 $

1,709 $

219,550

11,514

10,875

57

10,932

365,100

448,801

15,538

464,339

52,144

56,172

185

56,357

139,373

184,971

173

185,144

46,789 290,694 106,806
8 344

53,242 279,471
71,134 15,871
9,677 2 791

10,589
759 25,004
1,247 8 417

53,242 290,060
71,893 40,875 10,924 11 208

$

1,217,437 $ 1,350,846 $

63,678 $

1,414,524

38,628 7 082

68,722 4 250

3,967 3 306

72,689 7 556

TOTAL QBE FORMULA FUNDS

$

1 263 147 $ 1,423,818 $

70 951 $===1.,.49=4=7=6=9

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

See notes to the basic financial statements.

- 27 -

SECTION II COMPLIANCE AND INTERNAL CONTROL REPORTS

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

DEPARTMENT OF AUDITS AND ACCOUNTS
270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400
July 3, 2007

Honorable Sonny Perdue, Governor Members ofthe General Assembly Members ofthe State Board of Education
and Superintendent and Members ofthe Clay 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 Clay County Board of Education as of and for the year ended June 30, 2006, which collectively comprise Clay County Board ofEducation's basic financial statements and have issued our report thereon dated July 3, 2007. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States.
Internal Control Over Financial Reporting
In planning and performing our audit, we considered Clay 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 Clay County Board of Education'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-6301-06-01 and FS-6301-06-02.
2006YB-40

A material weakness is a reportable condition in which the design or operation ofone or more ofthe internal control components does not reduce to a relatively low level the risk that misstatements caused by error or fraud in amounts that would be material in relation to the financial statements being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. Our consideration of the internal control over financial reporting would not necessarily disclose all matters in the internal control that might be reportable conditions and, accordingly, would not necessarily disclose all reportable conditions that are also considered to be material weaknesses. However, of the reportable conditions described above, we consider item FS-6301-06-01 to be a material weakness.
Compliance and Other Matters
As part ofobtaining reasonable assurance about whether Clay County Board ofEducation's financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements, noncompliance with which could have a direct and material effect on the determination 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 Clay County Board of Education and is not intended to be and should not be used by anyone other than these specified parties.
Respectfully submitted,
W.~
ell W. Hinton, CPA, CGFM State Auditor
RWH:gp 2006YB-40

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

DEPARTMENT OF AUDITS AND ACCOUNTS
270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400
July 3, 2007

Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the Clay County Board of Education
REPORT ON COMPLIANCE WITH REQUIREMENTS APPLICABLE TO EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH 0MB CIRCULARA-133
Ladies and Gentlemen:
Compliance
We have audited the compliance of Clay County Board of Education with the types of compliance requirements described in the U.S. Office of Management and Budget (0MB) Circular A-133 Compliance Supplement that are applicable to each of its major Federal programs for the year ended June 30, 2006. Clay County Board of Education's major Federal programs are identified in the Summary ofAuditor's Results Section ofthe accompanying Schedule of Findings and Questioned Costs. Compliance with the requirements of laws, regulations, contracts and grants applicable to each of its major Federal programs is the responsibility of Clay County Board of Education's management. Our responsibility is to express an opinion on Clay County Board of Education's compliance based on our audit.
We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States ofAmerica; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General ofthe United States; and 0MB Circular A133, Audits of States, Local Governments, and Non-Profit Organizations. Those standards and 0MB Circular A-133 require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major Federal program occurred. An audit includes examining, on a test basis, evidence about the Clay County Board of Education's compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Our audit does not provide a legal determination on Clay County Board of Education's compliance with those requirements.
2006SA-10

In our opinion, the Clay County Board of Education complied, in all material respects, with the requirements referred to above that are applicable to each ofits major Federal programs for the year ended June 30, 2006.
Internal Control Over Compliance
The management ofClay County Board ofEducation 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 Clay 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 of expressing our opinion on compliance and to test and report on internal control over compliance in accordance with 0MB Circular A-133.
Our consideration ofthe internal control over compliance would not necessarily disclose all matters in the internal control that might be material weaknesses. A material weakness is a reportable condition in which the design or operation of one or more ofthe internal control components does not reduce to a relatively low level ofrisk that noncompliance with applicable requirements oflaws, regulations, contracts and grants caused by error or fraud that would be material in relation to a major Federal program being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. We noted no matters involving the internal control over compliance and its operation that we consider to be material weaknesses.
This report is intended solely for the information and use ofthe management, members ofthe Clay 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,
l,UM--_:
Rusell W. Hinton, CPA, CGFM State Auditor
RWH:gp 2006SA-10

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

CLAY 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-6301-04-01 FS-6301-05-01 FS-6301-05-02

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

CORRECTIVE ACTION/RESPONSES

EMPLOYEE COMPENSATION ACCOUNTING CONTROLS (OVERALL) Inadequate Separation of Duties Finding Control Number: FS-6301-05-01

Procedures have been implemented to ensure that the process ofadding new employees to the personnel system be separated from the payroll processing. The Financial Assistant adds the new employees to the personnel system; the Receptionist and the Superintendent review the checks for accuracy; the Receptionist and the Financial Assistant prepares the checks for disbursement to the employees.

The system is in the process of strengthening internal controls of accounting functions.

CASH AND CASH EQUIVALENTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Control Procedures Finding Control Number: FS-6301-05-02

Procedures have been implemented with the school activity accounts to ensure adequate documentation for both revenues and expenditures. Duties of the bookkeepers in individual schools have not been adequately separated due to limited staff capable of performing these duties. The cost to achieve adequate separation of duties is beyond the expected benefit to be obtained.

PRIOR YEAR FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

No matters were reported.

SECTION IV FINDINGS AND QUESTIONED COSTS

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

I SUMMARY OF AUDITOR'S RESULTS

I. Type of Report Issued on the Financial Statements The auditor's opinion on the Clay 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 Clay County Board of Education disclosed financial statement reportable conditions related to the following control categories.

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

Expenditures/Liabilities/Disbursements Employee Compensation General Ledger

Of the reportable conditions described above, Expenditures/Liabilities/Disbursements, Employee Compensation, General Ledger, Capital Assets, and Accounting Controls (Overall) are considered to be material weaknesses.

3. Noncompliance Material to the Financial Statements The audit ofthe Clay County Board of Education 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 Clay County Board of Education did not disclose any reportable conditions in internal control over major programs.

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

6. Audit Findings Required to be Reported by Section .5 l0(a) of 0MB Circular A-133 The Clay County Board of Education's audit did not disclose audit findings required to be reported by section .510(a) ofOMB Circular A-133.

7. Major Programs Federal awards audited as major programs are as follows: 10.553 Food Services - School Breakfast Program 10.555 Food Services - National School Lunch Program 84.010 Title I Grants to Local Educational Agencies 84.041 Impact Aid

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

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

I SUMMARY OF AUDITOR'S RESULTS

9. Low Risk Auditee The Clay County Board of Education did not qualify as a low risk auditee as defined by Section .530 of 0MB Circular A-133.

II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

EXPENDITURES/LIABILITIES/DISBURSEMENTS EMPLOYEE COMPENSATION GENERAL LEDGER CAPITAL ASSETS ACCOUNTING CONTROLS (OVERALL) Inadequate Accounting Control Procedures Reportable Condition - Material Weakness Finding Control Number: FS-6301-06-01

Condition:

This is a repeat finding (FS-6301-04-01 and FS-6301-05-01) from the years ended June 30, 2004, and June 30, 2005, respectively. The accounting procedures of the School District were insufficient to provide adequate internal controls over numerous control categories.

Criteria:

The School District's management is responsible for designing and maintaining internal controls that provide reasonable assurance that transactions are processed according to established procedures. Such internal controls would limit any one individual's access to both physical assets and the related accounting records.

Questioned Cost: NIA

Information:

Expenditures/Liabilities/Disbursements The School District did not have procedures in place to ensure all expenditures were adequately documented and approved. The review of 89 vouchers revealed the following deficiencies: 1) Seven vouchers did not have original invoices but were paid from statements, 2) thirteen vouchers did not have evidence of receipt, 3) seventeen vouchers did not have sufficient supporting documentation, 4) three travel vouchers were incomplete and did not include: (1) supporting documentation for parking fees and other expenses, (2) departure and arrival times for trips, and (3) beginning and ending odometer readings for vehicles, and

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CLAY 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 EMPLOYEE COMPENSATION GENERAL LEDGER CAPITAL ASSETS ACCOUNTING CONTROLS (OVERALL) Inadequate Accounting Control Procedures Reportable Condition - Material Weakness Finding Control Number: FS-6301-06-01
5) two vouchers were not manually signed by the Superintendent but were stamped as approved.
Employee Compensation The process of adding new employees to the personnel system was not separated from the processing of payroll checks, reviewing the checks for accuracy and preparing the checks for disbursement to employees. Of the ten employees sampled, one employee was overpaid in the amount of $249 due to an error in calculating excess leave to be deducted. July and August 2006 salaries and benefits accruals were overstated in the amount of $15,378.
General Ledger The School District did not have adequate procedures in place to ensure that journal entries were properly documented and approved before posting to the general ledger. Based upon a review oftwenty journal entries, the following deficiencies were noted: 1) Two journal entries could not be located and 2) two journal entries reclassified travel to the incorrect employee.
Capital Assets The School District did not have adequate procedures in place to ensure that Capital Assets were being properly maintained. Testing revealed the following deficiencies: 1) One automobile was capitalized with a cost of $3,000 even though the asset did not meet the capitalization threshold established in the School District's policy, 2) the School District failed to remove two buses from the listing totaling $75,457 upon disposal, and
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CLAY 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 EMPLOYEE COMPENSATION GENERAL LEDGER CAPITAL ASSETS ACCOUNTING CONTROLS (OVERALL) Inadequate Accounting Control Procedures Reportable Condition - Material Weakness Finding Control Number: FS-6301-06-01

3) the School District failed to remove associated accumulated depreciation in the amount of $213,070 upon disposal of a building. An audit adjustment was proposed and made to correct the accumulated depreciation.

Accounting Controls (Overall) Access controls in the Financial System do not prevent users from accessing accounting functions that are outside of their area of responsibility.

Cause:

The deficiencies noted above occurred because of management's failure to implement adequate controls to ensure (1) expenditures are properly documented and approved; (2) separation ofduties involving key accounting functions achieves an adequate system of internal control; (3) all amounts paid to system employees are adequately documented and properly approved; (4) all salary and benefits accrued are accurate; (5) journal entries are adequately documented and approved before posting to the general ledger; (6) capital assets records are properly recorded and maintained; and (7) access controls in the accounting information system complement the system of internal control by limiting an employee's access to only the accounting functions necessary for the performance ofthat employee's duties.

Effect:

Without satisfactory accounting controls and procedures in place, the School District could place itself in a position where potential misappropriation of assets could occur. In addition, the lack ofcontrols could impact reporting of its financial position and results of operations.

Recommendation:

The School District should review the accounting procedures in place and design and implement procedures relative to the above control categories to strengthen the internal controls over the accounting functions.

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CLAY 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 over School Activity Accounts Reportable Condition Finding Control Number: FS-6301-06-02

Condition:

This is a repeat finding (FS-6301-05-02) from the year ended June 30, 2005. The accounting procedures ofthe School District were insufficient to provide for adequate internal controls over the school activity accounts.

Criteria:

The School District's management is responsible for designing and maintaining internal controls that provide proper separation of duties and reasonable assurance that transactions are processed according to established procedures. Such internal controls would limit any one individual's access to both physical assets and the related accounting records.

Questioned Cost: NIA

Information:

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

Revenues/Receivables/Receipts Deposit preparation was not separated from the record keeping and cash custody functions. Receipts recorded in the accounting records presented for audit could not be traced to the documentation maintained.

Expenditures/Liabilities/Disbursements The check writing function was not separated from record keeping or processing of signed checks. The accounting records provided did not identify the account number where the expenditures were charged. Based upon a review of 10 vouchers, the following deficiencies were noted: 1) One voucher payment did not agree with supporting documentation, 2) three vouchers were not supported by adequate documentation, and 3) two vouchers appeared to have been signed blank checks distributed to school personnel.

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CLAY 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 over School Activity Accounts Reportable Condition Finding Control Number: FS-6301-06-02

Cause:

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

Effect:

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

Recommendation:

The School District should implement procedures to ensure that the key accounting functions of custody, record keeping and authorization are separated. Additionally, controls should be revised and monitored to provide reasonable assurance that transactions are processed in accordance with established procedures.

III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

No matters were reported.

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SECTIONV MANAGEMENT'S RESPONSES

CLAY COUNTY BOARD OF EDUCATION SCHEDULE OF MANAGEMENT'S RESPONSES
YEAR ENDED JUNE 30, 2006
Finding Control Number: FS-6301-06-01
Expenditures/Liabilities/Disbursements Proper procedures have been implemented to ensure that payment vouchers contain adequate supporting documentation. Procedures will be monitored and revised as needed to provide reasonable assurance that transactions are processed to established procedures. This finding will be resolved in fiscal year 2007.
Employee Compensation Procedures have been implemented to ensure that the process of adding new employees to the personnel system be separated from the payroll processing. The financial assistant adds the new employees to the personnel system; the Superintendent reviews the checks for accuracy; the receptionist and the financial assistant prepare the checks for disbursement to the employees. This will be implemented in fiscal year 2007.
General Ledger Procedures will be implemented to ensure that journal entries will be properly documented and approved before posting to the general ledger. This finding will be partially resolved in fiscal year 2007 and fully resolved in fiscal year 2008.
Capital Assets The School District will ensure that Capital Assets are being properly maintained. This finding will be resolved in fiscal year 2007.
Accounting Controls {Overall) Access controls in the Financial System are being reviewed to ensure that users are not able to access accounting functions that are outside of their area of responsibility. This finding will be resolved in fiscal year 2008.
Finding Control Number: FS-6301-06-02
Cash and Cash Equivalents The school secretary will be responsible for the bank reconciliation and the bookkeeper will be responsible for the record keeping and voucher payment functions.
Revenues/Receivables/Receipts The school secretary will be responsible for cash deposits preparation; the school food service supervisor will physically make the deposits at the bank; the bookkeeper will make the deposit on the ledger. Procedures have been implemented to ensure that documentation will be maintained for the receipts recorded in the accounting records.
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CLAY COUNTY BOARD OF EDUCATION SCHEDULE OF MANAGEMENT'S RESPONSES
YEAR ENDED JUNE 30, 2006 Finding Control Number: FS-6301-06-02 Expenditures/Liabilities/Disbursements Procedures have been implemented to ensure that the check writing function is separated from the record keeping process. The secretary will be responsible for check writing and the bookkeeper will be responsible for record keeping. Proper procedures have been implemented to ensure that payment vouchers contain adequate supporting documentation. Procedures will be monitored and revised as needed to provide reasonable assurance that transactions are processed to established procedures. This finding will be partially resolved in fiscal year 2007 and fully resolved in fiscal year 2008. Contact Person: Latonia DeLoach, Finance Officer Phone: (229) 768-2232 Fax Number: (229) 768-3654 E-mail Address: ldeloach@ccsd.clay.kl2.ga.us
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