CLINCH COUNTY BOARD OF EDUCATION HOMERVILLE, GEORGIA REPORT ON AUDIT OF THE FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2007 STATE OF GEORGIA DEPARTMENT OF AUDITS AND ACCOUNTS Russell W. Hinton State Auditor CLINCH COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS - SECTION I FINANCIAL INDEPENDENT AUDITOR'S COMBINED REPORT ON BASIC FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION - SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS EXHIBITS BASIC FINANCIAL STATEMENTS DISTRICT-WIDE FINANCIAL STATEMENTS A STATEMENT OF NET ASSETS 1 B STATEMENT OF ACTIVITIES 2 FUND FINANCIAL STATEMENTS C BALANCE SHEET GOVERNMENTAL FUNDS 4 D RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO THE STATEMENT OF NET ASSETS 5 E STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS 6 F RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES TO THE STATEMENT OF ACTIVITIES 7 G STATEMENT OF FIDUCIARY NET ASSETS FIDUCIARY FUNDS 9 H NOTES TO THE BASIC FINANCIAL STATEMENTS 10 SCHEDULES REQUIRED SUPPLEMENTARY INFORMATION 1 SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL GENERAL FUND 25 SUPPLEMENTARY INFORMATION 2 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS 26 3 SCHEDULE OF STATE REVENUE 28 CLINCH COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS - SECTION I FINANCIAL SCHEDULES SUPPLEMENTARY INFORMATION 4 SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS 29 5 ALLOTMENTS AND EXPENDITURES GENERAL FUND - QUALITY BASIC EDUCATION PROGRAMS (QBE) BY PROGRAM 31 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 CLINCH 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 26, 2008 Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education and Superintendent and Members of the Clinch 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 Clinch County Board of Education, as of and for the year ended June 30, 2007, which collectively comprise the Board's basic financial statements as listed in the table of contents. These financial statements are the responsibility of the Clinch 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 of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Clinch County Board of Education's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinions. 2007ARL-11 In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, each major fund, and the aggregate remaining fund information of the Clinch County Board of Education, as ofJune 30, 2007, and the respective changes in financial position thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America. The Clinch County Board of Education has not presented Management's Discussion and Analysis that accounting principles generally accepted in the United States of America has determined is necessary to supplement, although not to be part of, the basic financial statements. In accordance with Government Auditing Standards, we have also issued our report dated August 26, 2008, on our consideration of the Clinch County Board of Education's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit. The Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual, as presented on page 25, is not a required part of the basic financial statements but is supplementary information required by the accounting principles generally accepted in the United States of America. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods ofmeasurement and presentation ofthe required supplementary information. However, we did not audit the information and express no opinion on it. Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Clinch County Board of Education's basic financial statements. The accompanying supplementary information which consist of Schedules 2 through 5, which includes the Schedule of Expenditures of Federal Awards as required by U.S. Office of Management and Budget Circular A-133, Audits ofStates, Local Governments, and Non-Profit Organizations, are presented for purposes of additional analysis and are not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements, and in our opinion, is fairly stated, in all material respects, in relation to the basic financial statements taken as a whole. A copy of this report has been filed as a permanent record in the office of the State Auditor and made available to the press of the State, as provided for by Official Code of Georgia Annotated section 50-6-24. Respectfully submitted, RWH:as 2007ARL-11 LL)~ Ru sell W. Hinton, CPA, CGFM State Auditor CLINCH COUNTY BOARD OF EDUCATION CLINCH COUNTY BOARD OF EDUCATION STATEMENT OF NET ASSETS JUNE 30, 2007 ASSETS Cash and Cash Equivalents Investments Accounts Receivable, Net Taxes State Government Federal Government Other Inventories Capital Assets Land Land Improvements Buildings Equipment Less: Accumulated Depreciation Total Assets LIABILITIES Accounts Payable Salaries and Benefits 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 Bus Replacement 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 $ 3,275,971 65,494 177,528 975,801 463,027 48,541 10,729 449,739 1,293,735 9,396,078 1,856,278 -4,603,391 $ ==~13;'.,!,,4,:,,;;0;,;;,9;,5,;;30= $ 222,281 1,460,765 3,266 525,000 1,350,000 $ 3,561,312 $ 6,517,439 1,168 206,670 29,157 1,187,210 1,906,574 $ 9,848,218 $ ===1~3,,.;,;40;;:;9,!:,5=30= CLINCH COUNTY BOARD OF EDUCATION STATEMENT OF ACTIVITIES FOR THE YEAR ENDED JUNE 30, 2007 GOVERNMENTAL ACTIVITIES Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Operations of Non-Instructional Services Food Services Interest on Short-Term and Long-Term Debt Total Governmental Activities General Revenues Taxes Property Taxes For Maintenance and Operations Railroad Cars Sales Taxes Special Purpose Local Option Sales Tax For Capital Projects Grants and Contributions not Restricted to Specific Programs Investment Earnings Miscellaneous Total General Revenues Change in Net Assets Net Assets - Beginning of Year Net Assets - End of Year EXPENSES CHARGES FOR SERVICES $ 8,903,865 $ 486,837 309,694 278,329 669,244 804,875 168,679 955,160 464,829 25,065 176,325 697,255 71 530 $ 14 011 687 $ 311,193 144,639 455 832 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 $ 6,833,718 232,242 258,763 161,393 460,516 471,318 7,028 400,077 280,317 $ 150,928 507,602 $ 9,763,902 $ $ 177,581 177 581 $ -1,758,954 -254,595 -50,931 -116,936 -208,728 -333,557 -161,651 -555,083 -6,931 -25,065 -25,397 -45,014 -71 530 -3,614,372 $ 3,075,376 65,855 720,066 693,324 112,776 208 809 $ 4 876 206 $ 1,261,834 8 586 384 $ =====9=-,8=4=8=,2=18= -3- CLINCH COUNTY BOARD OF EDUCATION BALANCE SHEET GOVERNMENTAL FUNDS JUNE 30, 2007 EXHIBIT"C" ASSETS Cash and Cash Equivalents Investments Accounts Receivable, Net Taxes State Government Federal Government Other Inventories GENERAL FUND DISTRICTWIDE CAPITAL PROJECTS FUND DEBT SERVICE FUND TOTAL $ 2,132,056 $ 1,143,868 $ 65,494 975,801 463,027 48,541 10 729 136,063 47 $ 3,275,971 65,494 136,063 975,801 463,027 48,541 10 729 Total Assets $ 3,695,648 $ 1 279 931 $ 47 $ ===4,;,i,9;;,;7=5.;;6;;;,26= LIABILITIES AND FUND BALANCES LIABILITIES Accounts Payable $ Salaries and Benefits Payable Deposits and Deferred Revenue Total Liabilities $ FUND BALANCES Reserved for: Bus Replacement $ Continuation of Federal Programs Debt Service Inventories Capital Projects Unreserved Designated for Self-Insurance Designated for Student Activities Undesignated Reported in: General Fund Capital Projects Total Fund Balances $ 198,656 $ 1,460,765 3 266 1,662,687 $ 1,168 195,941 $ 10,729 22,402 168,793 1,633,928 2,032,961 $ 23,625 23,625 29,110 $ 1,187,210 39 986 1,256,306 $ $ 222,281 1,460,765 3 266 $ 1 686 312 $ 47 47 $ 1,168 195,941 29,157 10,729 1,187,210 22,402 168,793 1,633,928 39 986 3 289 314 Total Liabilities and Fund Balances $ 3,695,648 $ 1 279 931 $ 47 $ ===4~97=5'"=6=26= The notes to the basic financial statements are an integral part of this statement. -4 - CLINCH COUNTY BOARD OF EDUCATION RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO THE STATEMENT OF NET ASSETS JUNE 30, 2007 EXHIBIT"D" Total Fund Balances - Governmental Funds (Exhibit "C") Amounts reported for Governmental Activities in the Statement of Net Assets are different because: Capital Assets used in Governmental Activities are not financial resources and therefore are not reported in the funds. These assets consist of: Land 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 Net Assets of Governmental Activities (Exhibit "A") $ 3,289,314 $ 449,739 1,293,735 9,396,078 1,856,278 -4,603,391 8,392,439 41,465 -1,875,000 $ ==9,=84=8=,2=1=8 The notes to the basic financial statements are an integral part of this statement. -5- CLINCH COUNTY BOARD OF EDUCATION STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS YEAR ENDED JUNE 30, 2007 EXHIBIT"E" REVENUES Property Taxes Sales Taxes State Funds Federal Funds Charges for Services Investment Earnings Miscellaneous Total Revenues EXPENDITURES Current Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Food Services Operation Capital Outlay Debt Services Principal Interest Total Expenditures Excess of Revenues over (under) Expenditures OTHER FINANCING SOURCES (USES) Transfers In Transfers Out Total Other Financing Sources (Uses) Net Change in Fund Balances Fund Balances - Beginning Fund Balances - Ending GENERAL FUND DISTRICTWIDE CAPITAL PROJECTS FUND DEBT SERVICE FUND TOTAL $ 3,170,063 $ 8,607,926 2,026,881 455,832 85,492 208,809 $ 14,555,003 $ $ 720,066 27,284 747 350 $ 0 $ 0 $ 3,170,063 720,066 8,607,926 2,026,881 455,832 112,776 208,809 15,302,353 $ 8,674,396 485,080 307,692 298,662 666,620 788,630 168,679 957,614 581,748 25,065 169,742 705,868 $ $ 13,829,796 $ $ 725,207 $ 98,371 $ 98 371 $ 648,979 $ $ 425,000 71 530 496,530 $ -496,530 $ 8,674,396 485,080 307,692 298,662 666,620 788,630 168,679 957,614 581,748 25,065 169,742 705,868 98,371 425,000 71 530 14,424,697 877,656 $ 88,500 $ $ -88 500 -496,530 $ -88,500 $ -408,030 $ $ 636,707 $ 240,949 $ 1,396,254 1,015,357 496,530 $ 496,530 $ 0 $ 47 585,030 -585,030 0 877,656 2,411,658 $ 2,032,961 $ 1,256,306 $ 47 $ =====l3,528=9,3=14= The notes to the basic financial statements are an integral part of this statement. -6- CLINCH COUNTY BOARD OF EDUCATION RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES TO THE STATEMENT OF ACTIVITIES JUNE 30, 2007 EXHIBIT"F" Total Net Change in Fund Balances - Governmental Funds (Exhibit "E") Amounts reported for Governmental Activities in the Statement of Activities are different because: Capital Outlays are reported as expenditures in Governmental Funds. However, in the Statement of Activities, the cost of Capital Assets is allocated over their estimated useful lives as depreciation expense. In the current period, these amounts are: Capital Outlay Depreciation Expense Excess of Capital Outlay over Depreciation Expense Because some property taxes will not be collected for several months after the School District's fiscal year ends, they are not considered "available" revenues. 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 Change in Net Assets of Governmental Activities (Exhibit "B") $ 877,656 $ 303,337 -315,327 -11,990 -28,832 425,000 $ ===='1,=26=1=,8=34= The notes to the basic financial statements are an integral part of this statement. -7- (This page left intentionally blank) CLINCH COUNTY BOARD OF EDUCATION STATEMENT OF FIDUCIARY NET ASSETS FIDUCIARY FUNDS JUNE_ 30, 2007 ASSETS Cash and Cash Equivalents LIABILITIES Funds Held for Others EXHIBIT"G" AGENCY FUNDS $ ==4=2=,3=08= $ ==4=2=,3=08= The notes to the basic financial statements are an integral part of this statement. -9 - CLINCH COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007 EXHIBIT "H" Note 1: DESCRIPTION OF SCHOOL DISTRICT AND REPORTING ENTITY REPORTING ENTITY The Clinch 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. Blended Component Unit- Fargo Elementary K-4 The Fargo Elementary K-4 (Charter School) is responsible for the public education of all students attending its school. The Charter School was created through a contract between the School District and the Charter School whereby all State funding associated with the students attending the Charter School and certain specified local funds are turned over to the Charter School to cover the cost ofits operations. The financial statements of the Charter School have been blended with the School District's general fund. Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BASIS OF PRESENTATION The School District's basic financial statements are collectively comprised of the District-wide financial statements, fund financial statements and notes to the basic financial statements of the Clinch 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. - 10 - CLINCH COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007 EXHIBIT "H" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Fund Financial Statements: The fund financial statements provide information about the School District's funds, including fiduciary funds. Eliminations have been made to minimize the double counting ofinternal activities. Separate statements for each category (governmental and fiduciary) are presented. The emphasis of fund financial statements is on major governmental funds, each displayed in a separate column. The School District reports the following major governmental funds: General Fund is the School District's primary operating fund. It accounts for all financial resources ofthe School District, except those resources required to be accounted for in another fund. District-wide Capital Projects Fund accounts for financial resources including Special Purpose Local Option Sales Tax (SPLOST) to be used for the acquisition, construction or renovation of major capital facilities. Debt Service Fund accounts for taxes (sales) legally restricted for the payment ofgeneral longterm principal, interest and paying agent's fees. The School District reports the following fiduciary fund type: Agency funds account for assets held by the School District as an agent for various funds, governments or individuals. BASIS OF ACCOUNTING The basis ofaccounting determines when transactions are reported on the financial statements. The District-wide governmental and fiduciary fund financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded at the time liabilities are incurred, regardless ofwhen the related cash flows take place. Nonexchange transactions, in which the School District gives (or receives) value without directly receiving (or giving) equal value in exchange, include property taxes, sales taxes, grants and donations. On an accrual basis, revenue from property taxes is recognized in the fiscal year for which the taxes are levied. Revenue from sales taxes is recognized in the fiscal year in which the underlying transaction (sale) takes place. Revenue from grants and donations is recognized in the fiscal year in which all eligibility requirements have been satisfied. The School District uses funds to report on its financial position and the results of its operations. Fund accounting is designed to demonstrate legal compliance and to aid financial management by segregating transactions related to certain governmental functions or activities. A fund is a separate accounting entity with a self-balancing set of accounts. - 11 - CLINCH COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007 EXHIBIT "H" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Governmental funds are reported using the current financial resources measurement focus and the modified accrual basis ofaccounting. Under this method, revenues are recognized when measurable and available. The School District considers all revenues reported in the governmental funds to be available if they are collected within sixty days after year-end. Property taxes, sales taxes and interest are considered to be susceptible to accrual. Expenditures are recorded when the related fund liability is incurred, except for principal and interest on general long-term debt, which are recognized as expenditures to the extent they have matured. Capital asset acquisitions are reported as expenditures in governmental funds. Proceeds 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. Official Code of Georgia Annotated Section 45-8-14 authorize the School District to deposit its funds in one or more solvent banks or insured Federal savings and loan associations. INVESTMENTS COMPOSITION OF INVESTMENTS Investments made by the School District in nonparticipating interest-earning contracts (such as certificates ofdeposit) and repurchase agreements are reported at cost. Participating interest-earning contracts and money market investments with a maturity at purchase ofone year or less are reported at amortized cost. Both participating interest-earning contracts and money market investments with a maturity at purchase greater than one year are reported at fair value. The Official Code ofGeorgia Annotated Section 36-83-4 authorizes the School District to invest its funds. In selecting among options for investment or among institutional bids for deposits, the highest rate ofreturn shall be the objective, given equivalent conditions of safety and liquidity. Funds may be invested in the following: (1) Obligations issued by the State of Georgia or by other states, (2) Obligations issued by the United States government, (3) Obligations fully insured or guaranteed by the United States government or a United States government agency, - 12 - CLINCH COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007 EXHIBIT "H" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (4) Obligations of any corporation of the United States government, (5) Prime banker's acceptances, (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 Clinch County Board of Commissioners fixed the property tax levy for the 2006 tax digest year (calendar year) on August 31, 2006 (levy date). Taxes were due on December 20, 2006 (lien date). Taxes collected within the current fiscal year or within 60 days after year-end on the 2006 tax digest are reported as revenue in the governmental funds for fiscal year 2007. The Clinch 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 of taxes collected to the School District. Property tax revenues, at the fund reporting level, during the fiscal year ended June 30, 2007, for maintenance and operations amounted to $3,104,208. The tax millage rate levied for the 2006 tax year (calendar year) for the Clinch County Board of Education was as follows (a mill equals $ 1 per thousand dollars of assessed value): School Operations 20.00 mills - 13 - CLINCH COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007 EXHIBIT "H" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES SALES TAXES Special Purpose Local Option Sales Tax, at the fund reporting level, during the year amounted to $720,066 and is to be used for capital outlay for educational purposes or debt service. This sales tax was authorized by local referendum and the sales tax must be re-authorized at least every five years. INVENTORIES FOOD INVENTORIES On the basic financial statements, inventories of donated food commodities used in the preparation ofmeals are reported at their Federally assigned value and purchased foods inventories are reported at cost (first-in, first-out). The School District uses the consumption method to account for inventories whereby donated food commodities are recorded as an asset and as revenue when received, and expenses/expenditures are recorded as the inventory items are used. Purchased foods are recorded as an asset when purchased and expenses/expenditures are recorded as the inventory items are used. CAPITAL ASSETS Capital assets purchased, including capital outlay costs, are recorded as expenditures in the fund financial statements at the time of purchase (including ancillary charges). On the District-wide financial statements, all purchased capital assets are valued at cost where historical records are available and at estimated historical cost based on appraisals or deflated current replacement cost where no historical records exist. Donated capital assets are recorded at estimated fair market value on the date donated. Disposals are deleted at depreciated recorded cost. The cost of normal maintenance and repairs that do not add to the value of assets or materially extend the useful lives of the assets is not capitalized. Depreciation is computed using the straight-line method. The School District does not capitalize book collections or works ofart. During the fiscal year under review, no events or changes in circumstances affecting a capital asset that may indicate impairment were known to the School District. Capitalization thresholds and estimated useful lives of capital assets reported in the District-wide statements are as follows: Capitalization Policy Estimated Useful Life Land Land Improvements Buildings and Improvements Equipment Any Amount $ 5,000 $ 5,000 $ 5,000 NIA 15 years 20 to 80 years 5 to 15 years - 14 - CLINCH COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007 EXHIBIT "H" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Depreciation is used to allocate the actual or estimated historical cost of all capital assets over estimated useful lives. GENERAL OBLIGATION BONDS The School District issues general obligation bonds to provide funds for the acquisition and construction of major capital facilities. Bond issuance costs are recognized in the financial statements during the fiscal year bonds are issued. General obligation bonds are direct obligations and pledge the full faith and credit of the government. The outstanding amount of these bonds is recorded in the Statement of Net Assets. NET ASSETS The School District's net assets in the District-wide Statements are classified as follows: Invested in capital assets, net of related debt - This represents the School District's total investment in capital assets, net ofoutstanding debt obligations related to those capital assets. To the extent debt has been incurred but not yet expended for capital assets, such amounts are not included as a component of invested in capital assets, net of related debt. Restricted net assets - These represent resources for which the School District is legally or contractually obligated to spend resources for bus replacement, continuation of Federal programs, debt service and capital projects in accordance with restrictions imposed by external third parties. Unrestricted net assets - Unrestricted net assets represent resources derived from property taxes, sales taxes, grants and contributions not restricted to specific programs, charges for services, and miscellaneous revenues. These resources are used for transactions relating to the educational and general operations of the School District, and may be used at the discretion of the Board to meet current expenses for those purposes. 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 ofinsurance, or by collateral. The aggregate ofthe face value of such surety bond and the market value of securities pledged shall be equal to not less than 110 percent ofthe public funds being secured after the deduction ofthe amount ofdeposit insurance. Ifa depository elects the pooled method (OCGA 45-8-13.1) the aggregate ofthe market value ofthe securities pledged to secure a pool ofpublic funds shall be not less than 1l0percent ofthe daily pool balance. - 15 - CLINCH COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007 EXHIBIT"H" Note 3: DEPOSITS AND INVESTMENTS 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 of the State of Georgia, and (7) Bonds, bills, notes, certificates of indebtedness, or other obligations of a subsidiary corporation of the United States government, which are fully guaranteed by the United States government both as to principal and interest or debt obligations issued by the Federal Land Bank, the Federal Home Loan Bank, the Federal Intermediate Credit Bank, the Central Bank for Cooperatives, the Farm Credit Banks, the Federal Home Loan Mortgage Association, and the Federal National Mortgage Association. CATEGORIZATION OF DEPOSITS At June 30, 2007, the bank balances were $3,828,252. The amounts of the total uninsured bank balances are classified into three categories of custodial credit risk: Category 1 - Uncollateralized, Category 2 - Cash collateralized with securities held by the pledging financial institution, or Category 3 - Cash collateralized with securities held by the pledging financial institution's trust department or agent but not in the School District's name. The School District's uninsured deposits are classified by custodial credit risk category at June 30, 2007, as follows: - 16 - CLINCH COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007 EXHIBIT "H" Note 3: DEPOSITS AND INVESTMENTS Custodial Credit Risk Category Bank Balance 1 $ 0 2 3,578,428 3 0 Total $ 3,578.428 CATEGORIZATION OF INVESTMENTS At June 30, 2007, the carrying value ofthe School District's total investments was $17,924, 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. Additional information on the Local Government Investment Pool is disclosed in the State of Georgia Comprehensive Annual Financial Report. This audit can be obtained from the Georgia Department ofAudits and Accounts at http://www.audits.state.ga.us/internet/searchRpts.html. The Primary Liquidity Portfolio consists of Georgia Fund I which is not registered with the SEC as an investment company but does operate in a manner consistent with the SEC's Rule 2a-7 of the Investment Company Act of 1940. The investment is valued at the pool's share price, $1.00 per share. The pool is an AAAm rated investment pool by Standard and Poor's. The weighted average maturity of Georgia Fund 1 may not exceed 60 days. The weighted average maturity for Georgia Fund 1 on June 30, 2007, was 15 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: - 17 - CLINCH COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007 EXHIBIT "H" Note 5: CAPITAL ASSETS Balances July 1. 2006 Increases Decreases Balances June 30, 2007 Governmental Activities Capital Assets, Not Being Depreciated: Land Construction in Progress $ 449,739 $ 828,636 0 $ 449,739 $ 828,636 0 Total Capital Assets Not Being Depreciated $ 1,278,375 $ 0 $ 828,636 $ 449,739 Capital Assets Being Depreciated Buildings and Improvements Equipment Land Improvements $ 8,567,443 $ 1,599,350 1,293,735 828,635 303,338 $ $ 46,410 9,396,078 1,856,278 1,293,735 Less Accumulated Depreciation for: Buildings and Improvements Equipment Land Improvements 2,642,505 1,153,766 538,203 135,029 124,566 55,732 46,410 2,777,534 1,231,922 593,935 Total Capital Assets, Being Depreciated, Net $ 7,126,054 $ 816,646 $ 0 $ 7,942,700 Governmental Activity Capital Assets - Net $ 8.404.429 $ 816.646 $ 828.636 $ 8,392.439 Current year depreciation expense by function is as follows: Instruction Support Services Pupil Services Improvements of Instructional Services Educational Media Services General Administration School Administration Maintenance and Operation of Plant Student Transportation Services Other Support Services Food Services $ 121,890 $ 54,354 1,526 2,340 2,000 32,280 2,626 79,002 5,018 179,146 14,291 Note 6: RESTRICTED ASSETS Special Purpose Local Option Sales Tax (SPLOST) is restricted assets in the Statement ofNet Assets because its use is limited by statutory provisions. Restricted assets at June 30, 2007, were as follows: - 18 - CLINCH COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007 EXHIBIT"H" Note 6: RESTRICTED ASSETS District-wide Capital Projects SPLOST Debt Service Funds Restricted Cash and Cash Equivalents: Debt Services Capital Acquisitions $ 29,110 $ 47 $ 1,051,147 Note 7: INTERFUND TRANSFERS Interfund transfers for the year ended June 30, 2007, consisted of the following: Transfer to Transfers From District-wide General Capital Fund Projects District-wide Capital Projects Debt Service Fund $ 88,500 $_ _4_9~6,~53_0 Total $ 88.500 $ 496,530 Transfers are used to move property tax revenues collected by the General Fund to the District-wide Capital Projects Fund as a supplemental funding source for capital construction projects and to move sales tax revenues collected by the District-wide Capital Projects Fund to the Debt Service Fund for debt repayment. Note 8: RISK MANAGEMENT The School District is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors or omissions; job related illness or injuries to employees; acts of God and unemployment compensation. The School District has obtained commercial insurance for risk ofloss associated with torts, assets, errors or omissions and acts ofGod. 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. - 19 - CLINCH COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007 EXHIBIT "H" Note 8: RISK MANAGEMENT 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: 2006 2007 Beginning of Year Liability Claims and Changes in Estimates Claims Paid End of Year Liability $ 0 $ 0 $ 0 $ 0 $ 0 $ 13,003 $ 12 177 $ 826 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 Board Chairperson Principals Secretaries All Employees High School Assistant Principal $ $ $ 10,000 - $ $ $ $ 25,000 2,500 25,000 25,000 100,000 25,000 Note 9: LONG-TERM DEBT GENERAL OBLIGATION DEBT OUTSTANDING General Obligation Bonds currently outstanding are as follows: Purpose Interest Rate Amount General Government - Series 2005 3.11% $ 1,875,000 - 20 - CLINCH COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007 EXHIBIT "H" Note 9: LONG-TERM DEBT The changes in Long-Term Debt during the fiscal year ended June 30, 2007, were as follows: Governmental Funds General Obligation Bonds Balance July 1, 2006 $ 2,300,000 Deductions Debt Retired 425,000 Balance June 30, 2007 $ 1,875.000 Portion of Long-Term Debt Due within One Year $ 525,000 At June 30, 2007, payments due by fiscal year which includes principal and interest for these items are as follows: Fiscal Year Ended June 30 General Obligation Debt Principal Interest 2008 2009 2010 $ 525,000 $ 600,000 750,000 58,312 41,985 23,325 Total Principal and Interest $ 1,875.000 $ 123,622 Note 10: ON-BEHALF PAYMENTS The School District has recognized revenues and costs in the amount of $226,655 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 $221,287 - 21 - CLINCH COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007 EXHIBIT "H" Note 10: ON-BEHALF PAYMENTS Paid to the Teachers Retirement System of Georgia For Teachers Retirement System (TRS) Employer's Cost In the amount of $3,738 Office of Treasury and Fiscal Services Paid to the Public School Employees Retirement System For Public School Employees Retirement (PSERS) Employer's Cost In the amount of $1,630 Note 11: SIGNIFICANT CONTINGENT LIABILITIES Amounts received or receivable principally from the Federal government are subject to audit and review by grantor agencies. This could result in requests for reimbursement to the grantor agency for any costs which are disallowed under grant terms. The School District believes that such disallowances, if any, will be immaterial to its overall financial position. 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 12: RETIREMENT PLANS TEACHERS RETIREMENT SYSTEM OF GEORGIA (TRS) TRS PLAN DESCRIPTION Substantially all teachers, administrative and clerical personnel employed by local school systems are covered by the Teachers Retirement System of Georgia (TRS), which is a cost-sharing multiple employer defined benefit pension plan. TRS provides service retirement, disability retirement and survivors benefits for its members in accordance with State statute. The Teachers Retirement System of Georgia issues a separate stand alone financial audit report and a copy can be obtained from the Georgia Department of Audits and Accounts. TRS CONTRIBUTIONS REQUIRED AND MADE Employees ofthe School District who are covered by TRS are required by State statute to contribute 5% of their gross earnings to TRS. The School District makes monthly employer contributions to TRS at rates adopted by the TRS Board of Trustees in accordance with State statute and as advised by their independent actuary. The required employer contribution rate is 9.28% and employer contributions for the current fiscal year and the preceding two fiscal years are as follows: - 22 - CLINCH COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007 EXHIBIT"H" Note 12: RETIREMENT PLANS Fiscal Year 2007 2006 2005 Percentage Contributed 100% 100% 100% Required Contribution $ 668,759 $ 660,112 $ 643,926 - 23 - (This page left intentionally blank) CLINCH COUNTY BOARD OF EDUCATION GENERAL FUND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL YEAR ENDED JUNE 30, 2007 SCHEDULE "1" REVENUES Property Taxes Sales Taxes State Funds Federal Funds Charges for Services Investment Earnings Miscellaneous Total Revenues EXPENDITURES Current Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Food Services Operation 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 $ 3,180,000 $ 3,180,000 $ 3,170,063 12,078 12,078 7,724,182 8,354,866 8,607,926 245,646 2,245,345 2,026,881 142,430 455,832 22,230 26,785 85,492 86402 90,225 208,809 $ 11,270,538 $ 14,051,729 $ 14,555,003 $ 7,304,113 $ 8,822,757 $ 8,674,396 297,464 141,153 304,462 649,353 858,968 167,022 1,002,296 704,272 26,000 2,183 680,249 484,548 387,306 311,671 749,534 850,403 175,372 1,029,334 728,596 26,000 164,197 693 421 485,080 307,692 298,662 666,620 788,630 168,679 957,614 581,748 25,065 169,742 705 868 $ 12,137,535 $ 14,423,139 $ 13,829,796 $ -866,997 $ -371 410 $ 725,207 $ 82,000 $ 126,163 -88 500 -132 663 $ -88 500 $ -6 500 $ -6 500 $ -88,500 $ -873,497 $ -377,910 $ 636,707 1,379,658 1,379,658 1,396,254 -11 084 -11 084 Fund Balances - Ending $ 495 077 $ 990 664 $==.,;2;i,;,0;;;;:3~2,~9~61= 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. -25- CLINCH COUNTY BOARD OF EDUCATION SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS YEAR ENDED JUNE 30, 2007 SCHEDULE "2" FUNDING AGENCY PROGRAM/GRANT Agriculture, U.S. Department of Child Nutrition Cluster Pass-Through From Georgia Department of Education Food Services School Breakfast Program National School Lunch Program Total Child Nutrition Cluster Other Programs Pass-Through From Georgia Department of Education Food Donation (1) Total U. S. Department of Agriculture Education, U.S. Department of Special Education Cluster Pass-Through From Georgia Department of Education Special Education Grants to States Preschool Grants Total Special Education Cluster Other Programs Pass-Through From Georgia Department of Education Enhancing Education Through Technology Program Improving Teacher Quality State Grants Migrant Education Rural Education State Grants for Innovative Programs Title I Grants to Local Educational Agencies Vocational Education - Basic Grants to States Pass-Through From Okefenokee Regional Educational Service Agency Safe and Drug-Free Schools and Communities Total U. S. Department of Education Health and Human Services, U. S. Department of Pass-Through From Concerted Services, Inc. Head Start Total Federal Financial Assistance N/A = Not Available CFDA NUMBER PASSTHROUGH ENTITY ID NUMBER EXPENDITURES IN PERIOD 10.553 10.555 NIA N/A $ $ (2) 619 419 619,419 10.550 N/A $ 22197 641 616 * 84.027 * 84.173 N/A $ N/A $ 523,847 26,296 550,143 84.318 * 84.367 84.011 84.358 84.298 * 84.010 84.048 84.186 N/A NIA N/A N/A N/A N/A N/A NIA $ 61,844 104,754 35,311 48,079 2,577 527,881 40,925 7 707 1,379,221 93.600 NIA $ 150 536 $ ===2='=17=1=,3=73= - 26- CLINCH COUNTY BOARD OF EDUCATION SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS YEAR ENDED JUNE 30, 2007 SCHEDULE "2" Notes to the Schedule of Expenditures of Federal Awards (1) The amount shown for the Food Donation Program represents the Federally assigned value of nonmonetary assistance for donated commodities received and/or consumed by the School District during the current fiscal year. (2) Expenditures for the funds earned on the School Breakfast Program ($122,637) were not maintained separately and are included in the 2007 National School Lunch Program. Major Programs are identified by an asterisk (*) in front of the CFDA number. The School District did not provide Federal Assistance to any Subrecipient. The accompanying schedule of expenditures of Federal awards includes the Federal grant activity of the Clinch 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. - 27 - CLINCH COUNTY BOARD OF EDUCATION SCHEDULE OF STATE REVENUE YEAR ENDED JUNE 30, 2007 AGENCY/FUNDING GRANTS Bright From the Start: Georgia Department of Early Care and Learning Pre-Kindergarten Program Education, Georgia Department of Quality Basic Education Direct Instructional Cost Kindergarten Program Kindergarten Program - Early Intervention Program Primary Grades (1-3) Program Primary Grades - Early Intervention (1-3) Program Upper Elementary Grades (4-5) Program Upper Elementary Grades - Early Intervention (4-5) Program Middle Grades (6-8) Program High School General Education (9-12) Program Vocational Laboratory (9-12) Program Students with Disabilities Category I Category II Category Ill Category IV CategoryV Gifted Student - Category VI Remedial Education Program Alternative Education Program Media Center Program 20 Days Additional Instruction Staff and Professional Development Indirect Cost Central Administration School Administration Facility Maintenance and Operations Categorical Grants Pupil Transportation Regular Bus Replacement Sparsity - Alternative Program Sparsity- Regular Nursing Services Principal Supplements Vocational Supervisors Education Equalization Funding Grant Food Services Vocational Education Amended Formula Adjustment Other State Programs Charter Schools - Facilities Comprehensive Academic Performance System Health Insurance Middle School Remediation and Intervention Grant Preschool Handicapped Program Pupil Transportation - State Bonds Special Education Low Incidence Grant Statewide K-8 Reading and Mathematics Program Teachers' Retirement Office of Treasury and Fiscal Services Public School Employees Retirement See notes to the basic financial statements. -28- SCHEDULE "3" GOVERNMENTAL FUND TYPE GENERAL FUND $ 413,191 494,981 133,412 1,008,919 144,573 411,884 93,961 729,976 587,721 347,839 78,848 221,909 439,053 217,744 130,000 36,498 40,492 63,904 142,903 44,576 26,821 334,606 416,975 352,373 251,964 27,581 20,000 60,922 42,116 4,594 9,429 693,324 35,552 29,176 -132,213 125,000 40,075 221,287 530 78,509 150,000 9,053 22,500 3,738 1 630 $ ======8=,6=0=7,=92=6= CLINCH COUNTY BOARD OF EDUCATION SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS YEAR ENDED JUNE 30, 2007 SCHEDULE "4" PROJECT Constructing additional classrooms and remodeling, renovating, improving, and equipping science labs, physical education and athletic facilities, instructional, office and support space and grounds at various schools and administrative facilities in the School District, including furnishings, equipment and fixtures for such schools and other facilities, including lighting of the girl's softball field and the tennis courts at Clinch County High School, renovation of the gymnasium at Clinch County Primary School and Clinch County Elementary School, paving and resurfacing of various parking areas, purchasing school buses, renovation or replacement of electrical, heating and air conditioning systems, ceiling tile and carpeting and acquiring any necessary real or personal property in connection with any of the foregoing. ORIGINAL ESTIMATED COST (1) CURRENT ESTIMATED COSTS (2) AMOUNT EXPENDED IN CURRENT YEAR (3) AMOUNT EXPENDED IN PRIOR YEARS (3) PROJECT STATUS $ 3,600,000 $ 3,600,000 $ 113 501 $ 2,363,803 Ongoing (1) The School District's original cost estimate as specified in the resolution calling for the imposition of the Local Option Sales Tax. (2) The School District's current estimate of total cost for the project. Includes all cost from project inception to completion. (3) The voters of Clinch County approved the imposition of a 1% sales tax to fund the above project and retire associated debt. Amounts expended for this project may include sales tax proceeds, state, local property taxes and/or other funds over the life of the project. See notes to the basic financial statements. - 29- (This page left intentionally blank) CLINCH COUNTY BOARD OF EDUCATION GENERAL FUND - QUALITY BASIC EDUCATION PROGRAM (QBE) ALLOTMENTS AND EXPENDITURES - BY PROGRAM YEAR ENDED JUNE 30, 2007 SCHEDULE "5" DESCRIPTION Direct Instructional Programs Kindergarten Program Kindergarten Program-Early Intervention Program Primary Grades (1-3) Program Primary Grades-Early Intervention (1-3) Program Upper Elementary Grades (4-5) Program Upper Elementary Grades-Early Intervention (4-5) Program Middle Grades (6-8) Program High School General Education (9-12) Program Vocational Laboratory (9-12) Program Students with Disabilities Category I Category II Category Ill Category IV CategoryV Gifted Student - Category VI Remedial Education Program Alternative Education Program TOTAL DIRECT INSTRUCTIONAL PROGRAMS Media Center Program Staff and Professional Development ALLOTMENTS FROM GEORGIA DEPARTMENT OF EDUCATION (1) (2) ELIGIBLE QBE PROGRAM COSTS SALARIES OPERATIONS TOTAL $ 553,426 $ 788,000 $ 3,094 $ 791,094 144,357 82,645 82,645 1,118,310 1,009,428 7,130 1,016,558 162,049 197,702 197,702 474,651 473,237 12,320 485,557 107,754 822,922 664,903 386,881 1,228,148 41,947 41,795 72 037 122,750 1,020,741 814,089 297,039 185,686 328,146 572,489 33,038 30,173 71,065 42,989 80 919 10,387 20,825 72,312 151 1,782 1,588 268 3,399 442 122,750 1,031,128 834,914 369,351 185,837 329,928 574,077 33,306 30,173 74,464 42,989 81 361 $ 5,819,180 $ 6,150,136 $ 133,698 $ 6,283,834 160,815 30 599 245,470 24,632 270,102 30 599 TOTAL QBE FORMULA FUNDS $ ====6=0=1=0=5=94= $ 6,395,606 $ 158 330 $ ===6,!=58=4;,.,;,5;,;;3=5 (1) Comprised of State Funds plus Local Five Mill Share. (2) Allotments do not include the impact of the State amended formula adjustment. See notes to the basic financial statements. - 31 - 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 26, 2008 Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education and Superintendent and Members of the Clinch 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 Clinch County Board of Education as of and for the year ended June 30, 2007, which collectively comprise Clinch County Board of Education's basic financial statements and have issued our report thereon dated August 26, 2008. We conducted our audit in accordance with auditing standards generally accepted in the United States ofAmerica and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Internal Control Over Financial Reporting In planning and performing our audit, we considered Clinch County Board of Education's internal control over financial reporting as a basis for designing our auditing procedures for the purpose of expressing our opinions on the financial statements, but not for the purpose ofexpressing an opinion on the effectiveness of the Clinch County Board of Education's internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness of the Clinch County Board of Education's internal control over financial reporting. Our consideration of internal control over financial reporting was for the limited purpose described in the preceding paragraph and would not necessarily identify all deficiencies in internal control over financial reporting that might be significant deficiencies or material weaknesses. However, as discussed below, we identified certain deficiencies in internal control over financial reporting that we consider to be significant deficiencies. 2007YB-40 A control deficiency exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect misstatements on a timely basis. A significant deficiency is a control deficiency, or combination of control deficiencies, that adversely affect the Clinch County Board of Education's ability to initiate, authorize, record, process, or report financial data reliably in accordance with generally accepted accounting principles such that there is more than a remote likelihood that a misstatement of the Clinch County Board of Education's financial statements that is more than inconsequential will not be prevented or detected by the Clinch County Board of Education's internal control. We consider items FS-6321-07-01, FS-6321-07-02, FS-6321-07-03 and FS-6321-07-04 in the accompanying Schedule of Findings and Questioned Costs to be significant deficiencies in internal control over financial reporting. A material weakness is a significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood that a material misstatement ofthe financial statements will not be prevented or detected by the Clinch County Board of Education's internal control. Our consideration of the internal control over financial reporting was for the limited purpose described in the first paragraph ofthis section and would not necessarily disclose all deficiencies in internal control that might be significant deficiencies and, accordingly, would not necessarily disclose all significant deficiencies that are also considered to be material weaknesses. However, of the significant deficiencies described above, we consider items FS-6321-07-01 and FS-6321-07-04 to be material weaknesses. Compliance and Other Matters As part of obtaining reasonable assurance about whether Clinch County Board of Education's financial statements are free of material misstatement, we performed tests of its compliance with certain provisions oflaws, regulations, contracts and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. We noted certain matters that we have reported to management of Clinch County Board of Education in a separate letter dated August 26, 2008. Clinch County Board of Education's response to the findings identified in our audit is described in the accompanying Schedule ofManagement's Responses. We did not audit Clinch County Board of Education's response and, accordingly, we express no opinion on it. 2007YB-40 This report is intended solely for the information and use ofthe management, members ofthe Clinch 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, ~(~~~ State Auditor RWH:as 2007YB-40 Russell W. Hinton STATE AUDITOR (404) 656-2174 DEPARTMENT OF AUDITS AND ACCOUNTS 270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400 August 26, 2008 Honorable Sonny Perdue, Governor Members ofthe General Assembly Members of the State Board of Education and Superintendent and Members of the Clinch County Board of Education REPORT ON COMPLIANCE WITH REQUIREMENTS APPLICABLE TO EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH 0MB CIRCULAR A-133 Ladies and Gentlemen: Compliance We have audited the compliance of Clinch 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 of its major Federal programs for the year ended June 30, 2007. Clinch County Board of Education's major Federal programs are identified in the Summary of Auditor's Results Section of the accompanying Schedule of Findings and Questioned Costs. Compliance with the requirements of laws, regulations, contracts and grants applicable to each of its major Federal programs is the responsibility of Clinch County Board of Education's management. Our responsibility is to express an opinion on Clinch 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 Clinch County Board ofEducation's compliance with those requirements and performing such other procedures as we considered necessary in the 2007SA-10 circumstances. We believe that our audit provides a reasonable basis for our opinion. Our audit does not provide a legal determination on Clinch County Board of Education's compliance with those requirements. In our opinion, the Clinch 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, 2007. Internal Control Over Compliance The management of Clinch 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 Clinch County Board ofEducation's internal control over compliance with requirements that could have a direct and material effect on a major Federal program in order to determine our auditing procedures for the purpose ofexpressing our opinion on compliance, but not for the purpose ofexpressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of the Clinch County Board of Education's internal control over compliance. A control deficiency in an entity's internal control over compliance exists when the design or operation ofa control does not allow management or employees, in the normal course ofperforming their assigned functions, to prevent or detect noncompliance with a type ofcompliance requirement of a Federal program on a timely basis. A significant deficiency is a control deficiency, or combination of control deficiencies, that adversely affects the entity's ability to administer a Federal program such that there is more than a remote likelihood that noncompliance with a type of compliance requirement of a Federal program that is more than inconsequential will not be prevented or detected by the entity's internal control. A material weakness is a significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood that material noncompliance with a type of compliance requirement of a Federal program will not be prevented or detected by the entity's internal control. Our consideration of the internal control over compliance was for the limited purpose described in the first paragraph of this section and would not necessarily identify all deficiencies in internal control that might be significant deficiencies or material weaknesses. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses, as defined above. 2007SA-10 This report is intended solely for the information and use ofthe management, members ofthe Clinch 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, ~~nto~ccl~ State Auditor RWH:as 2007SA-10 SECTION III AUDITEE'S RESPONSE TO PRIOR YEAR FINDINGS AND QUESTIONED COSTS CLINCH COUNTY BOARD OF EDUCATION AUDITEE'S RESPONSE SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2007 PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS FINDING CONTROL NUMBER AND STATUS FS-6321-05-01 FS-6321-06-01 FS-6321-06-02 FS-6321-06-03 Further Action Not Warranted Unresolved - See Corrective Action/Responses Unresolved - See Corrective Action/Responses Partially Resolved - See Corrective Action/Responses CORRECTIVE ACTION/RESPONSES CASH AND CASH EQUIVALENTS Failure to Reconcile Bank Statement to Books Finding Control Number: FS-6321-06-01 School level bookkeeper was retrained on the bookkeeping software and the corrective procedures when balancing the bank statement to the activity accounts. The fiscal year 2006 variance was located by the central office bookkeeper and corrected. The central office bookkeeper does reconcile the school activity bank statement on a monthly basis. A new school activity accounting software has been purchased for all three schools and the central office. It will be installed and implemented for the fiscal year 2009 school year by July 1, 2008. The new software will help reduce errors and help track funds in a more accurate and timely manner for the schools and for the central office. CASH AND CASH EQUIVALENTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Control Procedures Finding Control Number: FS-6321-06-02 To address these issues, the following procedures will be implemented. The receipt ofall monetary transactions will no longer be performed by the bookkeeper. These transactions will be performed by other appropriate and appointed office staff in the office at the high school. The bookkeeper's responsibility will be to record the receipts into the bookkeeping software. It will be the responsibility ofdesignated (high school) personnel to take the deposit to the bank (excluding the bookkeeper). The responsibility of balancing the school activity bank statement each month will be the responsibility of a central office bookkeeper and not the bookkeeper at the high school. Central office management is to meet with principal, assistant principal, and bookkeeper to discuss deficiencies found in the area pertaining to proper documentation of invoices, payment requests and approving signatures. A quarterly review is to be conducted by the central office head bookkeeper to verify that proper procedures are being adhered to. These procedures are to be in place by August 1, 2007. - 1- CLINCH COUNTY BOARD OF EDUCATION AUDITEE'S RESPONSE SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2007 PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS CORRECTIVE ACTION/RESPONSES CAPITAL ASSETS Failure to Adequately Maintain Capital Assets Finding Control Number: FS-6321-06-03 This finding has been partially resolved. An item funded bye-rate funds was accidentally left offcapital asset listing. Asset will be added to the capital asset listing to resolve issue. PRIOR YEAR FEDERAL AWARD FINDINGS AND QUESTIONED COSTS FINDING CONTROL NUMBER AUDITEE'S RESPONSE/STATUS SEE AUDITOR'S COMMENTS FA-6321-05-01 Further Action Not Warranted (1) FA-6321-06-01 Further Action Not Warranted (1) FA-6321-06-02 Previously Reported Corrective Action Implemented AUDITOR'S COMMENTS (1) Findings/internal control deficiencies ofthis nature, that are not deemed significant deficiencies or material weaknesses and do not require reporting in the audit report in accordance with Office ofManagement and Budget (0MB) Circular A-133, will be communicated in a management letter in subsequent periods. -2 - SECTION IV FINDINGS AND QUESTIONED COSTS CLINCH COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2007 I SUMMARY OF AUDITOR'S RESULTS 1. Type of Report Issued on the Financial Statements The auditor's opinion on the Clinch County Board of Education's financial statements was unqualified. 2. Significant Deficiencies in Internal Control Disclosed by the Audit ofthe Financial Statements The audit report for the Clinch County Board of Education disclosed financial statement significant deficiencies related to the following control categories. Cash and Cash Equivalents Revenues/Receivables/Receipts Capital Assets Expenditures/Liabilities/Disbursements General Ledger Financial Reporting Ofthe significant deficiencies described above, Cash and Cash Equivalents, General Ledger and Financial Reporting are considered to be material weaknesses. 3. Noncompliance Material to the Financial Statements The audit ofthe Clinch County Board ofEducation disclosed no instances ofnoncompliance that were deemed to be material to the financial statements. 4. Significant Deficiencies in Internal Control Over Major Programs The audit report for the Clinch County Board of Education did not disclose any significant deficiencies in internal control over major programs. 5. Type of Report Issued on Compliance for Major Programs The auditor's opinion on the Clinch County Board ofEducation's report on compliance with requirements applicable to major programs was unqualified. 6. Audit Findings Required to be Reported by Section .5 lO(a) of 0MB Circular A-133 The Clinch County Board ofEducation'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: 84.010 Title I Grants to Local Educational Agencies 84.027 Special Education - Grants to States 84.173 Special Education - Preschool Grants 84.367 Improving Teacher Quality State Grants 8. Type "A" Program Dollar Threshold The dollar threshold for type "A" programs was $300,000. - 1- CLINCH COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2007 I SUMMARY OF AUDITOR'S RESULTS 9. Low Risk Auditee The Clinch County Board of Education did not qualify as a low risk auditee as defined by Section .530 ofOMB Circular A-133. II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS CASH AND CASH EQUIVALENTS GENERAL LEDGER Failure to Properly Report and Reconcile Bank Account Activity Material Weakness Finding Control Number: FS-6321-07-0 I Condition: This is a repeat finding (FS-6321-06-0 I) from the year ending June 30, 2006. The School District did not properly report and/or reconcile School Activity Fund bank 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: Auditors noted the following deficiencies in the above control categories: Four bank accounts belonging to the School District were not recorded on the general ledger. The total of the School Activity Accounts reconciled cash balances did not agree with the amounts recorded on the general ledger. A variance of $1,834 was noted. Cause: These deficiencies were a result of management's failure to ensure that internal controls were established, implemented and functioning as designed. Effect: Errors and/or irregularities may not be detected in a timely manner; and may also lead to inaccurate internal and/or external reporting. Recommendation: The School District should implement policies and procedures necessary to ensure that School Activity Fund bank accounts are properly accounted for, reconciled and accurately reported in the School District's Financial Statements. -2 - CLINCH COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2007 II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS CASH AND CASH EQUIVALENTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Control Procedures over School Activity Accounts Significant Deficiency Finding Control Number: FS-6321-07-02 Condition: This is repeat finding (FS-6321-06-02 and FS-6321-05-01) from the years ending June 30, 2006, and June 30, 2005, respectively. The accounting procedures of the School District were insufficient to provide for adequate internal controls over the school activity accounts. Criteria: The School District's management is responsible for designing and maintaining internal controls that provide reasonable assurance that transactions are processed according to established procedures. Questioned Cost: NIA Information: Cash and Cash Equivalents The bank reconciliation function was not separated from the record keeping and voucher payment functions. Revenues/Receivables/Receipts Deposit preparation not separated from the record keeping and cash custody functions. Twenty of thirty-five items tested were not deposited in a timely manner. Expenditures/Liabilities/Disbursements One ofthirty-five items tested was not charged to the correct activity. One of thirty-five items tested did not contain proper approval. Seven of thirty-five items tested did not have an approved purchase order attached. Six of thirty-five items tested did not have an original invoice attached. Cause: These deficiencies were a result of management's failure to ensure that internal controls were established, implemented and functioning at the school level. Effect: Errors and/or irregularities may not be detected in a timely manner. -3- CLINCH COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2007 II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS CASH AND CASH EQUIVALENTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Control Procedures over School Activity Accounts Significant Deficiency Finding Control Number: FS-6321-07-02 Recommendation: The School District should implement procedures to ensure that the key accounting functions of custody, record keeping and authorization are separated and/or utilize management oversight for these incompatible activities. In addition, management should monitor controls to provide reasonable assurance that transactions are processed according to established policies and implement those procedures deemed necessary to strengthen internal controls over the accounting functions. CAPITAL ASSETS Failure to Adequately Maintain Capital Assets Significant Deficiency Finding Control Number: FS-6321-07-03 Condition: This is a repeat finding (FS-6321-06-03) from the year ending June 30, 2006. The School District failed to adequately maintain capital assets records. Criteria: Chapter 37 Fixed Assets of the Financial Management for Georgia Local Units of Administration indicates that School Districts must establish fixed assets policies, define system requirements, implement a fixed assets system and maintain fixed assets inventory records. Questioned Cost: NIA Information: A review ofthe School District's Capital Assets policies and procedures and the related Capital Assets records disclosed the following deficiencies: The School District failed to capitalize $76,897, of costs for a communications tower which was purchased with e-rate funds. The School District under-capitalized the costs associated with the addition of the Elementary School 4th Grade Wing. The amount reported for prior year construction work-in-progress for this project was $828,635 but the School District capitalized $819,168 in the current year which left a variance of $9,467. An audit entry was proposed by auditors and accepted by the School District to correct this error. -4 - CLINCH COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2007 II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS CAPITAL ASSETS Failure to Adequately Maintain Capital Assets Significant Deficiency Finding Control Number: FS-6321-07-03 Cause: The School District failed to properly book its capital assets and maintain the 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 could lead to inaccurate internal and external reporting. Recommendation: The School District should review its capital assets records and make appropriate adjustments to ensure that the capital assets records conform to the School District's approved capital assets policy. FINANCIAL REPORTING Inadequate Controls over Financial Reporting Material Weakness Finding Control Number: FS-6321-07-04 Condition: The School District's controls did not identify all material accounting adjustments. Criteria: Management is responsible for having adequate controls over the financial reporting process, which not only includes proper recording oftransactions to the general ledger, but extends to accurate preparation and presentation ofthe financial statements, including note disclosures. Questioned Cost: NIA Information: The Governmental Accounting Standards Board (GASB) Statement 34 reporting model requires the presentation ofboth fund level and entity-wide level statements in the School District's financial statements. During the audit, correcting entries were proposed by the auditor and accepted by the client to properly present the entity's fund level and entity-wide level financial statements. Cause: The School District's controls failed to identify all material accounting transactions. -5- CLINCH COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2007 II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS FINANCIAL REPORTING Inadequate Controls over Financial Reporting Material Weakness Finding Control Number: FS-6321-07-04 Effect: The School District does not have adequate controls in place to ensure that the financial statements were properly prepared in accordance with generally accepted accounting principles. Recommendation: The School District should develop and implement internal controls over the financial statement reporting process to ensure that activity is properly recorded in the general ledger; to verify that financial statements (including note disclosures) properly reflect activity reported in the general ledger; and to include a monitoring process to evaluate the accuracy of the financials presented for audit. III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS No matters were reported. -6 - SECTIONV MANAGEMENT'S RESPONSES CLINCH COUNTY BOARD OF EDUCATION SCHEDULE OF MANAGEMENT'S RESPONSES YEAR ENDED JUNE 30, 2007 Finding Control Number: FS-6321-07-01 We concur with this finding. The four bank accounts noted have been recorded on the general ledger in fiscal year 2008. The $1,834.00 variance was corrected in the 2008 fiscal year. Beginning with fiscal year 2009, new school activity software was implemented to reduce and eliminate errors and inconsistencies regarding the subsidiary records of school activity accounts. Finding Control Number: FS-6321-07-02 We concur with this finding. Beginning in August of 2007 (after the fiscal year 2007 year had begun), new procedures were implemented to: Separate the bank reconciliation function from the record keeping and voucher payment functions. And, the deposit preparation function was separated from the record keeping and cash custody functions. Beginning in the 2009 fiscal year, periodic testing will be performed by the head bookkeeper to ensure revenue is deposited in a timely manner. The deficiencies noted under expenditures/liabilities/disbursements have been addressed with periodic testing by the head bookkeeper after August 2007 (fiscal year 2008). Periodic testing will continue to be performed quarterly. Finding Control Number: FS-6321-07-03 We concur with these findings. The $76,897.00 communications tower has now been included on the capital asset listing and this was corrected during the fiscal year 2008 year. The correct entry for the 4th grade wing capitalization was $819,168.00 and was corrected on the capital asset listing during the 2008 fiscal year. Finding Control Number: FS-6321-07-04 We concur with this finding. More diligent monitoring of the general ledger began in fiscal year 2008 for possible errors. Also, the head bookkeeper will be attending more financial training sessions offered through the Georgia Department of Education and the Georgia Department of Audits and Accounts in an effort to enhance the ability to recognize and correct misstatement errors in the financial statement process. Contact Person: Patsy Villiers, Head Bookkeeper Phone: (912) 487-5321 Fax: (912) 487-5068 Email Address: pvilliers@clinchcounty.com