COFFEE COUNTY BOARD OF EDUCATION DOUGLAS# 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 COFFEE 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 COFFEE COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS - SECTION I FINANCIAL SCHEDULES SUPPLEMENTARY INFORMATION 4 SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS 30 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 CIRCULARA-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 COFFEE 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 May 5, 2008 Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education and Superintendent and Members of the Coffee 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 Coffee 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 ofthe Coffee 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 Coffee 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-1 l 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 Coffee County Board of Education, as of June 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 Coffee 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 May 5, 2008, on our consideration of the Coffee 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 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 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 of measurement 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 Coffee 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, I ~~-~ Russell W. Hinton, CPA, CGFM State Auditor RWH:gp 2007ARL-1 l COFFEE COUNTY BOARD OF EDUCATION COFFEE 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 Construction in Progress Land Improvements Buildings Equipment Less: Accumulated Depreciation Total Assets LIABILITIES Accounts Payable Salaries and Benefits Payable Retainages 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 $ 21,608,576 3,887,361 1,562,986 5,140,416 863,881 24,910 92,612 1,424,524 20,075,549 2,163,350 43,607,569 8,483,428 -18 714,933 $ ======9=0,=22=0=,2=2=9= $ 180,950 7,216,338 1,084,380 2,925,000 9,200,000 $ 20,606,668 $ 45,654,680 1,384,505 3,741,614 13,179,319 5 653,443 $ 69,613,561 $ ===9=0=,2=2=0,=22=9= COFFEE 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 Sales Taxes Special Purpose Local Option Sales Tax For Debt Services For Capital Projects Real Estate Grants and Contributions not Restricted to Specific Programs Investment Earnings Miscellaneous Special Item Gain on Sale of Land Total General Revenues and Special Item Change in Net Assets Net Assets - Beginning of Year EXPENSES CHARGES FOR SERVICES $ 47,109,179 $ 3,288,494 3,470,526 1,362,173 1,152,671 3,204,797 811,851 4,096,442 2,673,463 255,738 468,796 4,178,524 813 750 $===7=2=8=86=4=04= $ 1,256,182 801,826 2,058,008 Net Assets - End of Year 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 $ 35,789,419 $ 11,143,677 $ 1,001,957 1,759,111 853,616 1,239,177 1,739,807 11,517 2,099,768 1,199,264 5,673 188,647 18,893 15,188 137,384 279,244 381,397 36,043 3,259,351 800,858 $ 49 147 307 $ 12,812,684 $ 1,080,099 -2,286,537 -1,692,522 -493,369 223,890 -1,464,990 -800,334 -1,717,430 -1,092,802 -250,065 -244, 106 683,511 -813 750 -8,868,405 $ 11,751,199 2,992,367 3,298,231 85,591 6,558,445 975,617 945,788 846 996 $ 27 454 234 $ 18,585,829 51,027,732 $ ======6=9=6=13='=56=1= -3- COFFEE 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 Total Assets LIABILITIES AND FUND BALANCES LIABILITIES Accounts Payable Salaries and Benefits Payable Retainages Payable Total Liabilities FUND BALANCES Reserved for: Continuation of Federal Programs Debt Service Inventories Capital Projects Unreserved Designated for Student Activities Undesignated Reported in: General Fund Total Fund Balances Total Liabilities and Fund Balances GENERAL FUND DISTRICTWIDE CAPITAL PROJECTS FUND DEBT SERVICE FUND TOTAL $ 8,267,444 $ 13,341,132 $ 21,608,576 25,805 558,927 $ 3,302,629 3,887,361 361,652 5,140,416 863,881 11,800 92 612 494,223 13,110 438,985 1,294,860 5,140,416 863,881 24,910 92 612 $ 14763610 $ 14 407 392 $ 3 741 614 $===32='=9=12=,6=1=6= $ 44,369 $ 136,581 7,216,338 1 084 380 $ 7 260 707 $ 1 220 961 $ 180,950 7,216,338 1 084 380 $ 8 481 668 $ 1,291,912 $ 1,291,912 $ 3,741,614 3,741,614 92,593 92,593 $ 13,186,431 13,186,431 289,032 289,032 5,829,366 5,829,366 $ 7 502 903 $ 13 186 431 $ 3 741 614 $ 24 430 948 $ 14763610 $ 14 407 392 $ 3 741 614 $ ===32='=91=2=,6=1=6= The notes to the basic financial statements are an integral part of this statement. -4 - COFFEE 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 Construction in Progress Land Improvements Buildings Equipment Accumulated Depreciation Total Capital Assets Some of the School District's property tax revenues will be collected after year-end but are not available soon enough to pay for the current period's expenditures. Long-Term Liabilities, including Bonds Payable, are not due and payable in the current period and therefore are not reported as liabilities in the funds. Long-Term Liabilities at year-end consist of: Bonds Payable $ 24,430,948 $ 1,424,524 20,075,549 2,163,350 43,607,569 8,483,428 -18,714,933 57,039,487 268,126 -12,125,000 Net Assets of Governmental Activities (Exhibit "A") $ 69,613,561 The notes to the basic financial statements are an integral part of this statement. -5 - COFFEE 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 SPECIAL ITEM Proceeds from Sale of Land Net Change in Fund Balances Fund Balances - Beginning Fund Balances - Ending GENERAL FUND DISTRICTWIDE CAPITAL PROJECTS FUND DEBT SERVICE FUND TOTAL $ 11,814,677 85,591 $ 3,298,231 $ 47,198,857 12,357,226 8,889,162 2,058,008 302,015 586,282 784 648 200,000 $ 71,132,958 $ 16,441,739 $ $ 2,992,367 87,320 11,814,677 6,376,189 59,556,083 8,889,162 2,058,008 975,617 984,648 3,079,687 $ 90,654,384 $ 44,473,552 $ 1,238,942 3,276,833 3,466,789 1,359,169 1,045,409 3,152,779 803,960 4,010,631 2,767,328 255,738 461,667 4,037,974 11,661 95,005 52,018 7,891 73,730 120,669 12,074,038 $ $ 69,111,829 $ 13,673,954 $ $ 2,021,129 $ 2,767,785 $ $ 45,712,494 3,288,494 3,466,789 1,359,169 1,140,414 3,204,797 811,851 4,084,361 2,887,997 255,738 461,667 4,037,974 12,074,038 2,875,000 813 750 2,875,000 813,750 3,688,750 $ 86,474,533 -609,063 $ 4,179,851 850,000 850,000 $ 2,021,129 $ 3,617,785 $ -609,063 $ 5,029,851 5,481,774 9,568,646 4,350,677 19,401,097 $ 7,502,903 $ 13,186,431 $ 3 741 614 $ 24,430,948 The notes to the basic financial statements are an integral part of this statement. -6- COFFEE 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. In the Statement of Activities, only the gain on the sale of the land 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 and carrying value of the equipment sold. Some of the Capital Assets acquired this year were purchased with e-rate funds. In Governmental Funds, these assets, as well as the associated revenue are not recognized, but in the Statement of Activities, the contribution of e-rate funds is recognized as a capital contribution. 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 $ 5,029,851 $ 12,263,207 -1,560,348 10,702,859 -64,348 -31,594 74,061 2,875,000 Change in Net Assets of Governmental Activities (Exhibit "B") $ 18,585,829 The notes to the basic financial statements are an integral part of this statement. -7- (This page left intentionally blank) COFFEE COUNTY BOARD OF EDUCATION STATEMENT OF FIDUCIARY NET ASSETS FIDUCIARY FUNDS JUNE 30, 2007 ASSETS Cash and Cash Equivalents Investments Certificate of Deposit Total Assets LIABILITIES Funds Held for Others EXHIBIT"G" AGENCY FUNDS $ 57,833 120.406 $==1=7=8,=23=9= $==1=7=8,=23=9= The notes to the basic financial statements are an integral part of this statement. -9 - COFFEE 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 Coffee County Board ofEducation (School District) was established under the laws ofthe State of Georgia and operates under the guidance of a school board elected by the voters and a Superintendent appointed by the Board. The Board is organized as a separate legal entity and has the power to levy taxes and issue bonds. Its budget is not subject to approval by any other entity. Accordingly, the School District is a primary government and consists of all the organizations that compose its legal entity. Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BASIS OF PRESENTATION The School District's basic financial statements are collectively comprised of the District-wide financial statements, fund financial statements and notes to the basic financial statements of the Coffee 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. - 10 - COFFEE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007 EXHIBIT "H" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The School District reports the following major governmental funds: General Fund is the School District's primary operating fund. It accounts for all financial resources ofthe School District, except those resources required to be accounted for in another fund. District-wide Capital Projects Fund accounts for financial resources including Special Purpose Local Option Sales Tax (SPLOST), Bond Proceeds and grants from Georgia State Financing and Investment Commission to be used for the acquisition, construction or renovation ofmajor capital facilities. Debt Service Fund accounts for taxes (sales) legally restricted for the payment ofgeneral longterm principal, interest and paying agent's fees. The School District reports the following fiduciary fund type: Agency funds account for assets held by the School District as an agent for various funds, governments or individuals. BASIS OF ACCOUNTING The basis ofaccounting determines when transactions are reported on the financial statements. The District-wide governmental and fiduciary fund financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded at the time liabilities are incurred, regardless ofwhen the related cash flows take place. Nonexchange transactions, in which the School District gives (or receives) value without directly receiving (or giving) equal value in exchange, include property taxes, sales taxes, grants and donations. On an accrual basis, revenue from property taxes is recognized in the fiscal year for which the taxes are levied. Revenue from sales taxes is recognized in the fiscal year in which the underlying transaction (sale) takes place. Revenue from grants and donations is recognized in the fiscal year in which all eligibility requirements have been satisfied. The School District uses funds to report on its financial position and the results of its operations. Fund accounting is designed to demonstrate legal compliance and to aid financial management by segregating transactions related to certain governmental functions or activities. A fund is a separate accounting entity with a self-balancing set of accounts. Governmental funds are reported using the current financial resources measurement focus and the modified accrual basis ofaccounting. Under this method, revenues are recognized when measurable and available. The School District considers all revenues reported in the governmental funds to be available if they are collected within sixty days after year-end. Property taxes, sales taxes and interest are considered to be susceptible to accrual. Expenditures are recorded when the related fund - 11 - COFFEE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007 EXHIBIT "H" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 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 and acquisitions under capital leases are reported as other financing sources. The School District funds certain programs by a combination ofspecific cost-reimbursement grants, categorical grants, and general revenues. Thus, when program costs are incurred, there are both restricted and unrestricted net assets available to finance the program. It is the School District's policy to first apply grant resources to such programs, followed by cost-reimbursement grants, then general revenues. CASH AND CASH EQUIVALENTS COMPOSITION OF DEPOSITS Cash and cash equivalents consist ofcash on hand, demand deposits and short-term investments with original maturities of three months or less from the date of acquisition in authorized financial institutions. 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, (4) Obligations of any corporation of the United States government, (5) Prime banker's acceptances, - 12 - COFFEE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007 EXHIBIT "H" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (6) The Local Government Investment Pool administered by the State of Georgia, Office of Treasury and Fiscal Services, (7) Repurchase agreements, and (8) Obligations of other political subdivisions of the State of Georgia. The School District does not have a formal policy regarding investment policies that address credit risks, custodial credit risks, concentration of credit risks, interest rate risks or foreign currency risks. RECEIVABLES Receivables consist of amounts due from property and sales taxes, grant reimbursements due on Federal, State or other grants for expenditures made but not reimbursed and other receivables disclosed from information available. Receivables are recorded when either the asset or revenue recognition criteria has been met. Receivables recorded on the basic financial statements do not include any amounts which would necessitate the need for an allowance for uncollectible receivables. PROPERTY TAXES The Coffee County Board ofCommissioners fixed the property tax levy for the 2006 tax digest year (calendar year) on August 1, 2006 (levy date). Taxes were due on December 1, 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 Coffee 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 $11,814,677. The tax millage rate levied for the 2006 tax year (calendar year) for the Coffee County Board of Education was as follows (a mill equals $1 per thousand dollars of assessed value): School Operations 15.214 mills SALES TAXES Special Purpose Local Option Sales Tax, at the fund reporting level, during the year amounted to $6,290,598 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. - 13 - COFFEE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007 EXHIBIT "H" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES INVENTORIES FOOD INVENTORIES On the basic financial statements, inventories of donated food commodities used in the preparation ofmeals are reported at their Federally assigned value and purchased foods inventories are reported at cost (first-in, first-out). The School District uses the consumption method to account for inventories whereby donated food commodities are recorded as an asset and as revenue when received, and expenses/expenditures are recorded as the inventory items are used. Purchased foods are recorded as an asset when purchased and expenses/expenditures are recorded as the inventory items are used. CAPITAL ASSETS Capital assets purchased, including capital outlay costs, are recorded as expenditures in the fund financial statements at the time of purchase (including ancillary charges). On the District-wide financial statements, all purchased capital assets are valued at cost where historical records are available and at estimated historical cost based on appraisals or deflated current replacement cost where no historical records exist. Donated capital assets are recorded at estimated fair market value on the date donated. Disposals are deleted at depreciated recorded cost. The cost of normal maintenance and repairs that do not add to the value ofassets or materially extend the useful lives of the assets is not capitalized. Depreciation is computed using the straight-line method. The School District does not capitalize book collections or works 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 $ 10,000 $ 10,000 $ 5,000 NIA 20 to 80 years up to 80 years 5 to 50 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 - 14 - COFFEE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007 EXHIBIT "H" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES statements during the fiscal year bonds are issued. General obligation bonds are direct obligations and pledge the full faith and credit of the government. The outstanding amount of these bonds is recorded in the Statement of Net Assets. 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 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 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, - 15 - COFFEE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007 EXHIBIT"H" Note 3: DEPOSITS AND INVESTMENTS (3) Bonds, bills, notes, certificates of indebtedness or other direct obligations of the United States or of the State of Georgia, (4) Bonds, bills, notes, certificates of indebtedness or other obligations of the counties or municipalities of the State of Georgia, (5) Bonds of any public authority created by the laws of the State of Georgia, providing that the statute that created the authority authorized the use of the bonds for this purpose, (6) Industrial revenue bonds and bonds of development authorities created by the laws ofthe State of Georgia, and (7) Bonds, bills, notes, certificates of indebtedness, or other obligations of a subsidiary corporation of the United States government, which are fully guaranteed by the United States government both as to principal and interest or debt obligations issued by the Federal Land Bank, the Federal Home Loan Bank, the Federal Intermediate Credit Bank, the Central Bank for Cooperatives, the Farm Credit Banks, the Federal Home Loan Mortgage Association, and the Federal National Mortgage Association. CATEGORIZATION OF DEPOSITS At June 30, 2007, the bank balances were $25,582,194. 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: Custodial Credit Risk Category Bank Balance 1 $ 0 2 25,324,559 3 0 Total $ 25,324.559 - 16 - COFFEE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007 EXHIBIT "H" Note 3: DEPOSITS AND INVESTMENTS CATEGORIZATION OF INVESTMENTS The School District's investments as of June 30, 2007, are presented below. All investments are presented by investment type and debt securities are presented by maturity. Investment Type Fair Value Investment Maturity Less Than 1 Year Debt Securities U. S. Treasuries $ 3,861.556 $ 3,861.556 Interest Rate Risk Interest rate risk is the risk that changes in interest rates of debt investment will adversely affect the fair value ofan investment. The School District does not have a formal policy for managing interest rate risk. Custodial Credit Risk Custodial credit risk for investments is the risk that, in the event ofthe failure ofthe counterparty to a transaction, the School District will not be able to recover the value ofthe investment or collateral securities that are in the possession of an outside party. The School District does not have a formal policy for managing custodial credit risk. At June 30, 2007, $3,861,556 ofthe School District's applicable investments were uninsured, are not registered in the name of the School District and are held by either the counterparty or the counterparty's trust department or agent, but not in the School District's name. 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 - COFFEE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007 EXHIBIT "H" Note 5: CAPITAL ASSETS Balances July I. 2006 Increases Decreases Balances June 30, 2007 Governmental Activities Capital Assets, Not Being Depreciated: Land Construction in Progress $ 1,427,528 $ 9,213,908 $ 10,871,911 3,004 $ 1,424,524 10,270 20,075,549 Total Capital Assets Not Being Depreciated $ 10,641,436 $ 10,871,911 $ 13,274 $ 21,500,073 Capital Assets Being Depreciated Buildings and Improvements Equipment Land Improvements $ 43,571,306 $ 7,666,214 1,644,763 36,263 920,777 $ 518,587 $ 43,607,569 103,563 8,483,428 2,163,350 Less Accumulated Depreciation for: Buildings and Improvements Equipment Land Improvements 12,561,961 3,634,020 1,033,577 815,605 674,062 70,681 74,973 13,377,566 4,233,109 1,104,258 Total Capital Assets, Being Depreciated, Net $ 35,652,725 $ -84 721 $ 28,590 $ 35,539,414 Governmental Activity Capital Assets - Net $ 46,294.161 $ 10,787.190 $ 41.864 $ 57,039.487 Current year depreciation expense by function is as follows: Instruction Support Services Improvements of Instructional Services Educational Media Services General Administration Maintenance and Operation of Plant Student Transportation Services Other Support Services Food Services $ 1,113,035 $ 1,887 1,517 13,722 27,891 318,706 3,600 367,323 79,990 $ 1,560.348 Note 6: RESTRICTED ASSETS Special Purpose Local Option Sales Tax (SPLOST) and general obligation bond proceeds are restricted assets in the Statement of Net Assets because their use is limited by applicable bond covenants or statutory provisions. Restricted assets at June 30, 2007, were as follows: - 18 - COFFEE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007 EXHIBIT "H" Note 6: RESTRICTED ASSETS District-wide Capital Projects Bond SPLOST Proceeds Debt Service Funds Restricted Cash and Cash Equivalents: Capital Acquisitions Restricted Investments: Debt Services Capital Acquisitions $ 12,163,497 $ 1,177,635 $ 558,927 $ 3,302,629 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, errors or omissions,job related illness or injuries to employees 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. The School District is self-insured with regard to unemployment compensation claims. A premium is charged when needed by the General Fund to each user program on the basis ofthe percentage of that fund's payroll to total payroll in order to cover estimated claims budgeted by management based on known claims and prior experience. The School District accounts for claims with expenses/expenditures and liability being reported when it is probable that a loss has occurred, and the amount of that loss can be reasonably estimated. Changes in the unemployment compensation claims liability during the last two fiscal years are as follows: 2006 2007 Beginning of Year Liability Claims and Changes in Estimates $ 11 016 $ 16 496 $ $ 2 012 $ 1 436 $ Claims Paid End of Year Liability 25,500 $ 3 277 $ 2,012 171 - 19 - COFFEE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007 EXHIBIT "H" Note?: RISKMANAGEMENT The School District has purchased surety bonds to provide additional insurance coverage as follows: Position Covered Amount Superintendent All Other Employees $ 100,000 $ 100,000 Note 8: LONG-TERM DEBT GENERAL OBLIGATION DEBT OUTSTANDING General Obligation Bonds currently outstanding are as follows: Purpose Interest Rate Amount General Government - Series 2005 6% $ 12,125,000 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 $ 15,000,000 Deductions Debt Retired 2,875,000 Balance June 30, 2007 $ 12,125,000 Portion of Long-Term Debt Due within One Year $ 2,925,000 At June 30, 2007, payments due by fiscal year which includes principal and interest for these items are as follows: - 20 - COFFEE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007 EXHIBIT "H" Note 8: LONG-TERM DEBT Fiscal Year Ended June 30 General Obligation Debt Principal Interest 2008 2009 2010 2011 $ 2,925,000 $ 2,990,000 3,060,000 3,150.000 639,750 462,300 280,800 94,500 Total Principal and Interest $ 12,125,000 $ 1,477.350 Note 9: ON-BEHALF PAYMENTS The School District has recognized revenues and expenditures in the amount of $1,242,996 for health insurance and retirement contributions paid on the School District's behalfby the following State Agencies. Georgia Department of Education Paid to the Georgia Department of Community Health For Health Insurance ofNon-Certified Personnel In the amount of $1,189,820 Paid to the Teachers Retirement System of Georgia For Teachers Retirement System (TRS) Employer's Cost In the amount of $45,610 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 $7,566 Note 10: SPECIAL ITEM In fiscal year 2007, the Coffee County Board of Education sold approximately 2.5 acres ofland to Glenridge Douglas II, LLC. The land was removed from the School District's capital assets listing at its carrying value at the date sold. The sale is reported as a special item on the Statement of Activities. Note 11: SIGNIFICANT COMMITMENTS The following is an analysis ofsignificant outstanding construction or renovation contracts executed by the School District as of June 30, 2007, together with funding available: - 21 - COFFEE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007 EXHIBIT"H" Note 11: SIGNIFICANT COMMITMENTS Project Unearned Executed Contracts Funding Available From State SA0lS-634-380/07 RA-634-006 New Ninth Grade Gym Pre-K Conversion Ninth Grade Conversion Broxton Restroom Renovations Nicholls Restroom Renovations West Green Restroom Renovations East Coffee Middle School Surveillance System Eastside Elementary Surveillance System Satilla Elementary Surveillance System Coffee Middle School Athletic Fields Grading Coffee Middle School Athletic Fields Fencing Coffee Middle School Athletic Fields Lighting Coffee Middle School Athletic Fields Buildings and Walks Coffee Middle School Athletic Fields Base and Paving Indian Creek Elementary Parking and Canopy $ 893,473 $ 1,572,541 502,154 221,784 256,803 66,036 80,476 22,643 20,086 11,127 10,991 735,437 136,363 209,923 1,202,369 141,142 235,630 $ 4,746.437 $ 1,572,541 The amounts described in this note are not reflected in the basic financial statements. Note 12: 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. - 22 - COFFEE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007 EXHIBIT "H" Note 13: 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: Fiscal Year Percentage Contributed Required Contribution 2007 2006 2005 100% 100% 100% $ 3,637,242 $ 3,478,878 $ 3,395,858 - 23 - (This page left intentionally blank) COFFEE 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 $ 11,777,007 $ 11,777,007 $ 11,814,677 60,000 60,000 85,591 44,985,867 45,508,770 47,198,857 7,911,714 8,723,966 8,889,162 765,856 765,856 2,058,008 295,500 295,500 302,015 182 625 182 625 784 648 $ 65,978,569 $ 67 313 724 $ 71 132 958 $ 41,996,956 $ 43,625,334 $ 44,473,552 3,163,727 3,244,794 1,317,624 1,060,507 3,146,722 511,091 4,156,303 2,723,432 238,208 242,042 4 030 893 3,239,354 3,563,468 1,317,624 1,066,362 3,146,722 511,091 4,156,303 3,025,022 238,208 241,914 4,030 893 3,276,833 3,466,789 1,359,169 1,045,409 3,152,779 803,960 4,010,631 2,767,328 255,738 461,667 4 037 974 $ 65,832,299 $ 68,162,295 $ 69 111 829 $ 146 270 $ -848 571 $ 2,021,129 $ 141,500 $ 141,675 -116 500 -116 500 $ 25 000 $ 25 175 $ 171,270 $ -823,396 $ 2,021,129 5,481,770 5,481,770 5,481,774 -12 793 -12 793 Fund Balances - Ending $ 5 640 247 $ 4 645 581 $ ===7==,5=0=2=,9=03=== 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 - COFFEE 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 Corporation for National and Community Service Pass-Through From Okefenokee Regional Educational Service Agency Learn and Serve America School and Community Based Programs Education, U. S. Department of Special Education Cluster Pass-Through From Georgia Department of Education Special Education Grants to States Preschool Grants Total Special Education Cluster Other Programs Direct Fund for the Improvement of Education Impact Aid Pass-Through From Georgia Department of Education Advanced Placement Testing Grant Comprehensive School Reform Demonstration English Language Acquisition Grants Enhancing Education Through Technology Program Hurricane Education Recovery Improving Teacher Quality State Grants Migrant Education Rural Education Safe and Drug-Free Schools and Communities - State Grants State Grants for Innovative Programs Title I Grants to Local Educational Agencies Vocational Education - Basic Grants to States Total U.S. Department of Education Defense, U.S. Department of Direct Department of the Navy R.O.T.C. Program CFDA NUMBER PASSTHROUGH ENTITY ID NUMBER EXPENDITURES IN PERIOD . 10.553 . 10.555 10.550 NIA NIA $ $ (2) 3,582,062 3,582,062 NIA $ 219 937 3,801,999 94.004 NIA $ 1 354 84.027 84.173 NIA $ NIA $ 1,521,411 106 211 1,627,622 84.215 84.041 84.330 84.332 84.365 84.318 84.938 84.367 84.011 84.358 84.186 84.298 84.010 84.048 NIA NIA NIA NIA NIA NIA NIA NIA NIA NIA NIA NIA $ 241,832 (4) (3) 82 9 54,447 75,728 (5) 484,696 167,894 271,744 43,896 14,197 2,897,886 107 050 5 987 083 $ 44248 Total Federal Financial Assistance NIA = Not Available - 26 - $ ====9=83=4=6=8=4 COFFEE 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 ($710,462) were not maintained separately and are included in the 2007 National School Lunch Program. (3) Funds earned on the Impact Aid program, in the amount of $870, do not require reporting of expenditures. (4) Includes Federal Assistance of $204,475 provided to subrecipients. (5) Funds earned and expended in the prior year on the Hurricane Education Recovery Act, in the amount of $4,860, do not require reporting of expenditures. Major Programs are identified by an asterisk (*) in front of the CFDA number. The accompanying schedule of expenditures of Federal awards includes the Federal grant activity of the Coffee 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 - COFFEE COUNTY BOARD OF EDUCATION SCHEDULE OF STATE REVENUE YEAR ENDED JUNE 30, 2007 SCHEDULE "3" AGENCY/FUNDING GRANTS Bright from the Start: Georgia Department of Early Care and Learning Pre-Kindergarten Program Education, Georgia Department of Quality Basic Education Direct Instructional Cost Kindergarten Program Kindergarten Program - Early Intervention Program Primary Grades (1-3) Program Primary Grades - Early Intervention (1-3) Program Upper Elementary Grades (4-5) Program Upper Elementary Grades - Early Intervention (4-5) Program Middle School (6-8) Program High School General Education (9-12) Program Vocational Laboratory (9-12) Program Students with Disabilities Category I Category II Category Ill Category IV CategoryV Gifted Student - Category VI Remedial Education Program Alternative Education Program English Speakers of Other Languages (ESOL) Media Center Program 20 Days Additional Instruction Staff and Professional Development Indirect Cost Central Administration School Administration Facility Maintenance and Operations Categorical Grants Pupil Transportation Regular Bus Replacement Sparsity Nursing Services Principal Supplements Migrant Education Mid-term Adjustment Hold-Harmless Education Equalization Funding Grant Food Services Vocational Education Amended Formula Adjustment Other State Programs Comprehensive Academic Performance System Health Insurance Middle School Remediation and Intervention Grant National Teacher Certification Preschool Handicapped Program Pupil Transportation - State Bonds Residential and Reintegration Services Statewide K-8 Reading and Mathematics Program Teachers' Retirement GOVERNMENTAL FUND TYPES CAPITAL GENERAL PROJECTS FUND FUND TOTAL $ 1,947,644 $ 1,947,644 1,881,305 1,353,093 5,615,515 1,269,974 2,500,670 982,460 4,667,540 3,439,580 1,130,691 111,401 1,359,272 2,333,897 532,532 43,327 679,025 866,077 341,897 391,125 823,027 253,935 158,372 952,197 1,614,596 2,061,793 1,069,518 81,397 20,000 145,682 26,124 2,520 174,614 6,558,806 216,722 182,693 -737,093 40,859 1,189,820 8,534 33,069 161,048 300,000 77,697 164,629 45,610 1,881,305 1,353,093 5,615,515 1,269,974 2,500,670 982,460 4,667,540 3,439,580 1,130,691 111,401 1,359,272 2,333,897 532,532 43,327 679,025 866,077 341,897 391,125 823,027 253,935 158,372 952,197 1,614,596 2,061,793 1,069,518 81,397 20,000 145,682 26,124 2,520 174,614 6,558,806 216,722 182,693 -737,093 40,859 1,189,820 8,534 33,069 161,048 300,000 77,697 164,629 45,610 - 28 - COFFEE COUNTY BOARD OF EDUCATION SCHEDULE OF STATE REVENUE YEAR ENDED JUNE 30, 2007 SCHEDULE "3" AGENCY/FUNDING GRANTS Georgia State Financing and Investment Commission Reimbursement on Construction Projects Office of Treasury and Fiscal Services Public School Employees Retirement CONTRACTS Human Resources, Georgia Department of Family Connection Parents as Teachers GOVERNMENTAL FUND TYPES CAPITAL GENERAL PROJECTS FUND FUND TOTAL $ 12,357,226 $ 12,357,226 $ 7,566 7,566 66,172 51 925 66,172 51 925 $ 47 198 857 $ 12,357,226 $==5=9=,5=5=6=,0=83= See notes to the basic financial statements. - 29 - COFFEE COUNTY BOARD OF EDUCATION SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS YEAR ENDED JUNE 30, 2007 SCHEDULE "4" PROJECT Acquisition, construction, equipping and furnishing of a new middle school and other new school buildings and facilities; adding to, renovating, improving and equipping existing school buildings and facilities, including classrooms and athletic facilities; acquiring technology equipment, safety and security equipment and other school equipment; acquiring school buses and other school vehicles; acquiring textbooks and band instruments; and acquiring any capital property necessary or desirable for the foregoing purposes, both real and personal ORIGINAL ESTIMATED COST (1) CURRENT ESTIMATED COSTS (2) AMOUNT EXPENDED IN CURRENT YEAR (3) AMOUNT EXPENDED IN PRIOR YEARS (3) PROJECT STATUS $ 28,000,000 $ 28,000,000 $ 14 487 704 $ 12,113,886 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 Coffee 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. - 30 - COFFEE 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 School (6-8) Program High School General Education (9-12) Program Vocational Laboratory (9-12) Program Students with Disabilities Category I Category II Category Ill Category IV CategoryV Gifted Student - Category VI Remedial Education Program Alternative Education Program English Speakers of Other Languages (ESOL) 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 $ 2,112,620 $ 2,681,411 $ 56,391 $ 2,737,802 1,456,938 1,140,489 9,219 1,149,708 6,080,796 6,232,371 147,463 6,379,834 1,481,049 1,110,263 15,640 1,125,903 2,757,132 3,300,923 66,060 3,366,983 1,068,439 5,181,803 3,829,533 1,246,263 4,805,845 741,653 831,573 379,414 414 008 578,684 5,879,201 4,513,513 1,167,643 1,700,391 2,897,903 107,641 1,028,519 933,415 465,279 484 075 19,133 133,050 193,451 133,884 6,054 13,728 109,591 9,950 2,109 29,473 19,589 2,794 1 240 597,817 6,012,251 4,706,964 1,301,527 6,054 1,714,119 3,007,494 117,591 2,109 1,057,992 953,004 468,073 485 315 $ 32,387,066 $ 34,221,721 $ 968,819 $ 35,190,540 904,343 175 476 1,156,932 171,646 1,328,578 73 316 TOTAL QBE FORMULA FUNDS $ 33,466,885 $ 35,378,653 $ 1 140 465 $ ====3=6,=59=2=,4=34= (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 May 5, 2008 Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education and Superintendent and Members of the Coffee 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 Coffee County Board of Education as of and for the year ended June 30, 2007, which collectively comprise Coffee County Board of Education's basic financial statements and have issued our report thereon dated May 5, 2008. 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 Coffee 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 Coffee County Board of Education's internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness of the Coffee 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-30 A control deficiency exists when the design or operation ofa 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 Coffee 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 Coffee County Board of Education's financial statements that is more than inconsequential will not be prevented or detected by the Coffee County Board of Education's internal control. We consider items FS-6341-07-01 and FS-6341-07-02 in the accompanying Schedule ofFindings 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 Coffee 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 of this 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, we believe that none of the significant deficiencies described above are material weaknesses. Compliance and Other Matters As part of obtaining reasonable assurance about whether Coffee County Board of Education's financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements, noncompliance with which could have a direct and material effect on the determination 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 Coffee County Board of Education in a separate letter dated May 5, 2008. Coffee County Board of Education's response to the findings identified in our audit is described in the accompanying Schedule of Management's Responses. We did not audit Coffee County Board of Education's response and, accordingly, we express no opinion on it. 2007YB-30 This report is intended solely for the information and use ofthe management, members ofthe Coffee 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, ~~-~ Russell W. Hinton, CPA, CGFM State Auditor RWH:gp 2007YB-30 Russell W. Hinton STATE AUDITOR (404) 656-2174 DEPARTMENT OF AUDITS AND ACCOUNTS 270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400 May 5, 2008 Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education and Superintendent and Members of the Coffee 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 Coffee County Board of Education 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. Coffee 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 Coffee County Board of Education's management. Our responsibility is to express an opinion on Coffee County Board of Education's compliance based on our audit. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the 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 Coffee 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 Coffee County Board of Education's compliance with those requirements. 2007SA-10 In our opinion, the Coffee 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 Coffee 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 Coffee County Board of Education's internal control over compliance with requirements that could have a direct and material effect on a major Federal program in order to determine our auditing procedures for the purpose ofexpressing our opinion on compliance, but not for the purpose ofexpressing an opinion on the effectiveness ofinternal control over compliance. Accordingly, we do not express an opinion on the effectiveness of the Coffee 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 of a control does not allow management or employees, in the normal course ofperforming their assigned functions, to prevent or detect noncompliance with a type of compliance requirement of a Federal program on a timely basis. A significant deficiency is a control deficiency, or combination ofcontrol 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 ofthe 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. This report is intended solely for the information and use ofthe management, members ofthe Coffee 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, ~to:?~~ State Auditor RWH:gp 2007SA-10 SECTION III AUDITEE'S RESPONSE TO PRIOR YEAR FINDINGS AND QUESTIONED COSTS COFFEE 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-6341-05-01 FS-6341-06-01 FS-6341-06-02 Further Action Not Warranted Unresolved - See Corrective Action/Responses Unresolved - See Corrective Action/Responses CORRECTIVE ACTION/RESPONSES REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Control Procedures over School Activity Accounts Finding Control Number: FS-6341-06-01 At the present time, central office is in the process of training school bookkeepers in the correct procedures for recording revenues and expenditures. Principals are aware ofthe separation of duties required. EXPENDITURES/LIABILITIES/DISBURSEMENTS Undocumented/Improper Procurement Card Expenditures Finding Control Number: FS-6341-06-02 Policy and procedures are in place that directs each principal that credit cards are to be used for school related expenditures. The Superintendent has given the principal of each school the directive that all credit cards are to be used for school related expenditures only. No personal items for principal or staff can be charged to a school credit card. Someone other than the principal must approve school items purchased for the principal. No travel related items could be charged on the credit card. PRIOR YEAR FEDERAL AWARD FINDINGS AND QUESTIONED COSTS No matters were reported. SECTION IV FINDINGS AND QUESTIONED COSTS COFFEE 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 Coffee 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 Coffee County Board of Education disclosed financial statement significant deficiencies related to the following control categories. Revenues/Receivables/Receipts Expenditures/Liabilities/Disbursements None of the significant deficiencies described above are considered to be material weaknesses. 3. Noncompliance Material to the Financial Statements The audit ofthe Coffee 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 Coffee 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 Coffee 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 Coffee 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: 10.553 Food Services - School Breakfast Program 10.555 Food Services - National School Lunch Program 8. Type "A" Program Dollar Threshold The dollar threshold for type "A" programs was $300,000. 9. Low Risk Auditee The Coffee County Board ofEducation qualified as a low risk auditee as defined by Section .530 of 0MB Circular A-133. - 1- COFFEE COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2007 II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Controls over School Activity Accounts Significant Deficiency Finding Control Number: FS-6341-07-01 Condition: This is a repeat finding (FS-6341-06-01, FS-6341-05-01 and FS-6341-04-01) from the years ended June 30, 2006, June 30, 2005, and June 30, 2004, respectively. The accounting procedures of the School District were insufficient to provide for adequate internal controls over the school activity accounts. Criteria: The School District's management is responsible for designing and maintaining internal controls that provide reasonable assurance that transactions are processed according to established procedures. Procedures should also ensure compliance with O.C.G.A. 50-6-27 which states, in part: "Each.. .local board of education is required and directed to submit to the state auditor, in a format prescribed by the state auditor, a listing of all personnel of such.. .local board of education showing name, title or functional area, salary and travel expense for each individual". Questioned Cost: NIA Information: Revenues/Receivables/Receipts The deposit preparation function was not separated from the record keeping and cash custody functions. Based on a review offifty receipts, eighteen items were not deposited in a timely manner. Expenditures/Liabilities/Disbursements Based on a review of sixty expenditures, fifteen did not have proper documentation attached. One of sixty items tested was requested and approved by the same official for which the check was made to cash. Two of sixty items tested represented employee travel reimbursements paid at the school level which were not reported to the Department ofAudits and Accounts as required by O.C.G.A. 506-27. Cause: These deficiencies were a result of management's failure to ensure that internal controls were established, implemented and functioning at the school level. -2- COFFEE COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2007 II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Controls over School Activity Accounts Significant Deficiency Finding Control Number: FS-6341-07-01 Effect: Errors and/or irregularities may not be detected in a timely manner. Recommendation: The School District should implement procedures to ensure that the key accounting functions of custody, record keeping and authorization are separated and/or utilize oversight for these incompatible activities. In addition, management should monitor controls to provide reasonable assurance that transactions are processed according to established policies and implement those procedures deemed necessary to strengthen internal controls over accounting functions. EXPENDITURES/LIABILITIES/DISBURSEMENTS Undocumented/Improper Credit and Procurement Card Expenditures Significant Deficiency Finding Control Number: FS-6341-07-02 Condition: This is a repeat finding (FS-6341-06-02) from fiscal year ended June 30, 2006. The School District does not have adequate policies and procedures in place related to credit and procurement cards to ensure that purchases made with the School District's credit and procurement cards were properly documented and/or authorized. Criteria: The School District's management is responsible for establishment ofpolicies and procedures which provide for the adequate design and maintenance of internal controls to ensure that transactions are processed in a proper manner. Questioned Cost: NIA Information: Based on a review of 100% of the charges for four of the thirteen procurement card accounts maintained by the School District, the following deficiencies were noted: Inadequate documentation was maintained for twenty-one expenditures tested. For one ofthe four card accounts tested, the outstanding balance was not paid in full or on a timely basis each month, resulting in late fees and finance charges on the account. -3- COFFEE COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2007 II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Undocumented/Improper Procurement Card Expenditures Significant Deficiency Finding Control Number: FS-6341-07-02 Cause: These deficiencies were a result of management's failure to ensure that internal controls were established, implemented and functioning with regard to the procurement cards. Effect: Errors and/or irregularities may not be detected in a timely manner. Recommendation: The School District should establish policies and procedures to ensure that expenditures are utilized only for educational purposes and are properly documented. Procedures should also be put in place to ensure that finance and service charges are minimized. III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS No matters were reported. -4 - SECTIONV MANAGEMENT'S RESPONSES COFFEE COUNTY BOARD OF EDUCATION SCHEDULE OF MANAGEMENT'S RESPONSES YEAR ENDED JUNE 30, 2007 Finding Control Number: FS-6341-07-01 We concur with this finding. New guidelines were given to principals and bookkeepers regarding our policy on deposits being made in a timely manner and travel reimbursements. We are continuing to follow up on this with training bookkeepers and noting that under no circumstances does an employee receive reimbursement at the school level. Each bookkeeper understands that all reimbursements must be issued through the central office accounting department. The Superintendent has also given the principals of each school the directive that all deposits shall be taken to bank by the foodservice manager or someone other than bookkeeper in keeping with the procedures of school bookkeeping policy. This should alleviate the problem of separation of duties with the bookkeeper making deposits and making them in timely manner. Each receipt will have forms completed with proper documentation attached before giving to bookkeeper so that deposits can be traced to receipts and account ledgers. Finding Control Number: FS-6341-07-02 We concur with this finding. Our Board has approved policy and procedures that are in place that directs each principal that credit cards are to be used for school related expenditures. Guidelines are in place that explains that all charges should have receipts showing exactly what was purchased and for whom. Each person using the procurement card must sign out for the card and sign in when returning the card. The Superintendent has given the principals of each school the directive that all credit cards are their responsibility and use ofthese cards reflect their school business. No personal items for principal or staff can be charged to school credit card. Someone other than the principal must approve school items purchased for the principal. No travel related items can be charged on the credit card. Contact Person: Carolyn Taylor, Director of Finance Phone: (912) 384-2086 Ext. 225 E-mail Address: ctaylor@coffee.k12.ga.us