COLUMBIA COUNTY BOARD OF EDUCATION EVANS, GEORGIA REPORT ON AUDIT OF THE FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2006 STATE OF GEORGIA DEPARTMENT OF AUDITS AND ACCOUNTS Russell W. Hinton State Auditor COLUMBIA COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS - SECTION I FINANCIAL INDEPENDENT AUDITOR'S COMBINED REPORT ON BASIC FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION -SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS REQUIRED SUPPLEMENTARY INFORMATION MANAGEMENT'S DISCUSSION AND ANALYSIS EXHIBITS BASIC FINANCIAL STATEMENTS DISTRICT-WIDE FINANCIAL STATEMENTS A STATEMENT OF NET ASSETS 1 B STATEMENT OF ACTIVITIES 2 FUND FINANCIAL STATEMENTS C BALANCE SHEET GOVERNMENTAL FUNDS 4 D RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO THE STATEMENT OF NET ASSETS 5 E STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS 6 F RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES TO THE STATEMENT OF ACTIVITIES 7 G STATEMENT OF NET ASSETS PROPRIETARY FUNDS 8 H STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS PROPRIETARY FUNDS 9 I STATEMENT OF CASH FLOWS PROPRIETARY FUNDS 10 J STATEMENT OF FIDUCIARY NET ASSETS FIDUCIARY FUNDS 11 K NOTES TO THE BASIC FINANCIAL STATEMENTS 12 COLUMBIA COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS - SECTION I FINANCIAL SCHEDULES REQUIRED SUPPLEMENTARY INFORMATION 1 SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL GENERALFUND 29 SUPPLEMENTARY INFORMATION 2 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS 30 3 SCHEDULE OF STATE REVENUE 32 4 SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS 33 5 ALLOTMENTS AND EXPENDITURES GENERAL FUND - QUALITY BASIC EDUCATION PROGRAMS (QBE) BY PROGRAM 35 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 COLUMBIA COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS - SECTION IV FINDINGS AND QUESTIONED COSTS SCHEDULE OF FINDINGS AND QUESTIONED COSTS SECTIONV MANAGEMENT'S RESPONSES SCHEDULE OF MANAGEMENT'S RESPONSES SECTION I FINANCIAL Russell W. Hinton STATE AUDITOR (404) 656-2174 DEPARTMENT OF AUDITS AND ACCOUNTS 270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400 January 23, 2007 Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education and Superintendent and Members of the Columbia 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 K) ofthe Columbia County Board of Education, as of and for the year ended June 30, 2006, which collectively comprise the Board's basic financial statements as listed in the table of contents. These financial statements are the responsibility ofthe Columbia County Board ofEducation's management. Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States ofAmerica and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General ofthe United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free ofmaterial misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our op1mons. 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 Columbia County Board of Education, as of June 30, 2006, and the respective changes in financial position and cash flows thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America. 2006ARL-11 In accordance with Government Auditing Standards, we have also issued our report dated January 23, 2007, on our consideration of the Columbia County Board of Education's internal control over financial reporting and our tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements and other matters. The purpose ofthat report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit. Management's Discussion and Analysis and the Schedule ofRevenues, Expenditures and Changes in Fund Balances - Budget and Actual, as presented on pages i through x and page 29 respectively, are not a required part of the basic financial statements but are 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 Columbia 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, LO, ~ ell W. Hinton, CPA, CGFM State Auditor RWH:as 2006ARL-11 COLUMBIA COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2006 The discussion and analysis of Columbia County School District's financial performance provides an overall review of the School District's financial activities for the fiscal year ended June 30, 2006. The intent of this discussion and analysis is to look at the School District's financial performance as a whole; readers should also review the notes to the basic financial statements and financial statements to enhance their understanding of the School District's financial performance. Financial Highlights Key financial highlights for 2005 - 2006 are as follows: The Columbia County voters passed the third one percent sales tax for educational purposes for another five years (July, 2007 - June, 2012) along with approving the issuance of $30 million in short-term general obligation bonds on March 15, 2005. The school system is in the process of building an elementary school that will open in the fall of 2007 and a middle school that will open in the fall of 2008. The school system completed a new middle school which opened in the fall of 2006. This middle school replaced an existing middle school and the old school was sold in August 2006. Several administrative offices in various locations were combined into one new administration building in May 2006. The school system continues to grow with an average increase of 620 students per year over the last five years. Therefore, the school system continues to hire additional teachers and support staff to accommodate the growth. Net assets increased $19.5 million, which represents a 14.6% increase from 2005. The total increase was due to governmental activities since the Board has no business-type activities. General revenues accounted for $77.8 million in revenue or 43% of all revenues. Program specific revenues in the form of charges for services, grants, and contributions accounted for $101.8 million or 57% of total revenues of $179.6 million. The Board had $160.1 million in expenses related to governmental activities; only $101.8 million of these expenses were offset by program specific charges, grants, or contributions. General revenue (primarily property and sales taxes) of $77.8 million was adequate to provide for these programs. Among major funds, the general fund had $158.4 million in revenues and $153.2 million in expenditures. The general fund balance decreased from $31.7 million to $25 .4 million. The Board transferred funds from general fund to capital project funds to help fund the construction of new schools. Overview of the Financial Statements This annual report consists of a series of financial statements and notes to those statements. These statements are organized so the reader can understand Columbia County School System as a financial whole, an entire operating entity. - 1- COLUMBIA COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2006 Table 1 summarizes the major features of the School District's financial statements, including the portion of the School District's activities they cover and the types of information they contain. Table 1 Major Features of the District-wide and Fund Financial Statements Figure I Maior Features of the District-wide and Fund Financial Statements District-wide Fund Financial Statements Statements Government Funds Proprietary Funds Fiduciary Funds Scope Entire School District The activities of the Activities the School Instances in which (except fiduciary funds) School District that District operates the School District are not proprietary or similar to private administers fiduciary, such as businesses: food resources on behalf special education services and adult of someone else, and building education such as scholarship maintenance programs and student activities monies Required Statement of net Balance sheet Statement of net Statement of financial assets assets fiduciary net assets statements Statement of Statement of activities revenues, Statement of cash Statement of expenditures, and flows changes in fiduciary changes in fund net assets balances Accounting Basis Accrual accounting and Modified accrual Accrual accounting Accrual accounting and measurement economic resources accounting and and economic and economic focus focus current financial resources focus resources focus focus Type of All assets and liabilities, Generally assets All assets and All assets and asset/liability both financial and expected to be used liabilities, both liabilities, both information capital, short-term and up and liabilities that financial and capital, short-term and long- long-term come due during the and short-term and term; funds do not year or soon long-term currently contain thereafter; no capital capital assets, assets or long-term although they can liabilities included Type of All revenues and Revenues for which All revenues and All additions and inflow/outflow expenses during year, cash is received expenses during the deductions during information regardless of when cash during or soon after year, regardless of the year, regardless is received or paid the end of the year; when cash is of when cash is expenditures when received or paid received or paid goods or services have been received and the related liability is due and payable District-Wide Statements The Statement of Net Assets and Statement of Activities provide information about the School District as a whole using accounting methods similar to industry. The increases and decreases in the School District's net assets are an indicator of whether the School District's financial position - 11 - COLUMBIA COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2006 is improving or deteriorating. There are many factors that can affect the overall financial condition of the School District such as School District's property tax base, state and Federal funding, and the condition of buildings and equipment. The Statement of Activities reflects the governmental activities of the School District by programs and services and distinguishes the revenue sources for these activities. The statement also helps identify how much local revenue is required to support the School District's activities. Fund Financial Statements Fund financial reports provide detailed information about the School District's major funds. Funds are accounting devices the School District uses to keep track of general operations, Federal and state grants, building programs, debt payments, and worker's compensation claims. Governmental Funds: Most of the School District's activities are reported in governmental funds, which focus on how money flows into and out of those funds and balances left at year-end available for spending in the future periods. These funds are reported using modified accrual accounting, which measures cash and all other financial assets that can readily be converted to cash. The governmental fund statements provide a detailed short-term view of the School District's general government operations and the basic services it provides. Governmental fund information helps you determine whether there are more or fewer financial resources that can be spent in the near future to finance educational programs. The relationship (or differences) between governmental activities (reported in the Statement of Net Assets and the Statement of Activities) and governmental funds is reconciled in the financial statements. The School District's major governmental funds are the general fund, capital projects fund, and debt service fund. Proprietary Funds: Services for which the School District charges a fee are generally reported in proprietary funds. Proprietary funds are reported in the same way as the District-wide statements. The School District's enterprise funds (one type of proprietary fund) are the same as its business-type activities but provide more detail and additional information, such as cash flows. The School District uses internal service funds (the other kind of proprietary fund) to report activities that provide supplies and services for other programs and activities. The School District's only internal fund is the worker's compensation fund. Fiduciary Funds: The School District is the trustee, or fiduciary, for assets that belong to others, such as the scholarship fund and some of the student activity funds. The student activity funds are local school accounts the principal uses to collect funds for fieldtrips, school fundraisers, athletic events, and school clubs. The school clubs and fieldtrips are considered to be agency funds. The School District excludes these activities from the District-wide statements because it cannot use these assets to finance its operations. The School District as a Whole The perspective of the statement of net assets is of the School District as a whole. Table 2 provides a summary of the School District's net assets for 2005 compared to 2006. - 111 - COLUMBIA COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2006 Table 2 Net Assets Governmental Activities Fiscal Fiscal Year 2006 Year 2005 Assets Current and Other Assets Capital Assets, Net $ 67,116,657 154,232.225 $ 72,769,568 136,597,340 Total Assets $ 221,348,882 $ 209,366.908 Liabilities Current and Other Liabilities Long-Term Liabilities $ 22,788,458 45,511.915 $ 22,788,902 53,010,101 Total Liabilities $ 68,300.373 $ 75,799,003 Net Assets Invested in Capital Assets, Net of Related Debt Restricted Unrestricted $ 113,369,209 17,207,829 22,471.471 $ 95,683,283 6,741,039 31,143,583 Total Net Assets $ 153,048,509 $ 133,567.905 Total assets of governmental activities increased by $11,981,974, as cash and cash equivalents increased by $4,414,366, investments decreased by $7,532,474, receivables decreased by $2,575,626 and capital assets increased by $17,634,885. Unrestricted net assets, the part of net assets that can be used to finance day-to-day activities without constraints established by grants or legal requirements, of the School District decreased by $8,672,112. Table 3 shows the changes in net assets for fiscal year 2005 compared to 2006. - iv - COLUMBIA COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2006 Table 3 Change in Net Assets Revenues Program Revenues: Charges for Services and Sales Operating Grants and Contributions Capital Grants and Contributions Governmental Activities Fiscal Fiscal Net Year 2006 Year 2005 Change $ 7,870,825 $ 6,853,483 89,242,917 83,521,905 4,667,832 3,809,537 14.84% 6.85% 22.53% Total Program Revenues $ 101,781,574 $ 94,184,925 8.07% General Revenues: Taxes Property Taxes $ 48,669,160 $ 43,621,923 Sales Taxes 17,499,239 14,850,453 Grants and Contributions not Restricted to Specific Programs 7,397,266 7,991,158 Investment Earnings 2,471,130 1,092,386 Miscellaneous 1,799,302 2,244,154 11.57% 17.84% -7.43% 126.21 % -19.82% Total General Revenues $ 77,836,097 $ 69,800,074 11.51 % Total Revenues $ 179,617,671 $ 163,984,999 9.53% Program Expenses Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Operations of Non-Instructional Services Enterprise Operations Community Services Food Services Interest on Short-Term and Long-Term Debt $ 105,883,530 3,161,734 3,279,966 3,489,952 1,295,290 9,799,557 1,090,600 10,641,116 6,655,188 724,767 55,279 4,405,868 147,339 7,318,263 2,188,618 $ 100,361,556 3,277,158 3,198,289 3,313,054 1,867,707 8,675,816 1,219,079 9,514,375 6,246,332 682,792 24,347 3,637,581 131,066 6,887,235 1,016,617 5.50% -3.52% 2.55% 5.34% -30.65% 12.95% -10.54% 11.84% 6.55% 6.15% 127.05% 21.12% 12.42% 6.26% 115.28% Total Expenses $ 160,137,067 $ 150,053,004 6.72% Increase in Net Assets $ 1914801604 $ 1319311995 39.83% -V- COLUMBIA COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2006 Governmental Activities Instruction comprises 66% of governmental program expenses. Support service expenses make up 25% of the expenses. Interest expense was 1%. Interest expense was attributable to the outstanding bonds for capital projects. The state's QBE funding does not provide an adequate level of funding to provide basic education services and to adequately maintain facilities. The school system levies a millage rate of 17.18 to provide the additional local funding along with a 1% (SPLOST) sales tax. The Statement of Activities shows the cost of program services and the changes for services and grants offsetting those services. Table 4 shows, for governmental activities, the total cost of services and the net cost of services. It identifies the cost of these services supported by tax revenue and unrestricted State entitlements. Table4 Governmental Activities Total Cost of Services Fiscal Fiscal Year 2006 Year 2005 Net Cost of Services Fiscal Fiscal Year 2006 Year 2005 Instruction $105,883,530 $100,361,556 $ 36,223,765 $ 36,084,329 Support Services Pupil Services 3,161,734 3,277,158 2,052,450 2,157,061 Improvement of Instructional Services 3,279,966 3,198,289 2,063,119 1,718,845 Educational Media Services 3,489,952 3,313,054 1,192,550 1,167,820 General Administration 1,295,290 1,867,707 -1,134,113 -403,327 School Administration 9,799,557 8,675,816 5,189,940 4,377,024 Business Administration 1,090,600 1,219,079 1,065,986 1,204,942 Maintenance and Operation of Plant 10,641,116 9,514,375 4,039,753 3,344,204 Student Transportation Services 6,655,188 6,246,332 4,044,300 3,885,710 Central Support Services 724,767 682,792 661,728 676,938 Other Support Services 55,279 24,347 54,221 4,516 Operations ofNon-Instructional Services Enterprise Operations 4,405,868 3,637,581 345,784 555,523 Community Services 147,339 131,066 42,364 60,409 Food Services 7,318,263 6,887,235 325,028 17,468 Interest on Short-Term and Long-Term Debt 2,188.618 1.016,617 2,188,618 1.016.617 Total Expenses $160.137.067 $150,053.004 $ 58,355,~23 $ 55,868,079 Instructional expenses include activities directly dealing with the teaching of pupils and the interaction between teacher and pupil. Pupil Services are activities designed to assess and improve the well being of students and to supplement the teaching process. - Vl - COLUMBIA COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2006 Improvement of instruction are activities which are designed primarily for assisting instructional staff in planning, developing, and evaluating the process of providing challenging learning experiences for students. Educational media is directing, managing, and operating educational media centers. General administration establishes and administers policy for operating the local school system. School administration includes principals, assistant principals, and clerical staff who administer the school operations. Business administration includes the financial and warehouse operations of the School District. Maintenance and operation of plant activities involve keeping the school grounds, buildings, and equipment in an effective working condition. Student transportation includes activities involved with the conveyance of students to and from school, as well as to and from school activities, as provided by state law. Central support includes personnel services, strategic planning, and public relations activities. Other support services include all other support services. Community services are student activity accounts used to collect money from students for various fundraisers for the school. The proceeds are spent on media center materials, instructional supplies, and other school needed supplies. Food services prepares and serves breakfast, lunch, and snacks to the students of the school system. Interest involves the transactions associated with the payment of interest related to the school system's outstanding bonds. Although program revenues make up a majority of the revenue, the School District is still dependent upon tax revenues for governmental activities. Over 34% of instructional activities are supported through taxes and other general revenues; for all governmental activities general revenue support is 36%. The School District's Funds The School District's governmental funds are accounted for using the modified accrual basis of accounting. All governmental funds had total revenues of $178,573,793 and expenditures of $185,151,428. The net change in fund balance for the year was significant in the general fund and the capital projects funds, which had a decrease of $6,335,258 and an increase of $292,285, respectively. -vn - COLUMBIA COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2006 The general fund operations decrease was due to funds transferred to the capital projects fund to build additional schools. The increase in capital projects was due to various capital projects funded by SPLOST. General Fund Budgeting Highlights The School District's budget is prepared according to Georgia law. The most significant budgeted fund is the general fund. The general fund consists of the general operations, special revenue grants, and school nutrition program. During 2006 the Board amended its general fund budget numerous times, which resulted in increasing revenue budget by $4.6 million or 3% and increasing expenditure budget by $0.9 million or 0.6%. The increase in the revenue budget is due to amending the budget for the final tax digest and Federal and state grants. The original revenue and expenditure budgets only reflect the anticipated funding for Federal and state grants and are amended to reflect the final award. The School District uses site-based budgeting and the budgeting systems are designed to tightly control total site budgets but to provide flexibility for site management. The majority of the variances between the final budget and actual revenue in 2006 are due to the student activity funds of $4 million that are not budgeted and increase of taxes of $600,000 due to growth. The variances between the final budgeted expenditures and actual are due to over estimates in various areas and the school system does not currently budget for the $3.8 million in student activity funds. This explains the major differences in final budget for revenue ($7.7 million increase) and expenditures ($3 .3 million increase) vs. the actual amounts for general fund. Capital Assets At the end of the fiscal year 2006, the School District had $154,232,225 invested in land, construction in progress, buildings, equipment, and buses. Table 5 shows fiscal 2006 balances compared to 2005. - Vlll - COLUMBIA COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2006 Table 5 Capital Assets (Net of Depreciation) Governmental Activities Fiscal Fiscal Year 2006 Year 2005 Land Construction in Progress Buildings and Building Improvements Equipment Land Improvements $ 5,701,957 16,299,121 118,284,712 13,383,460 562,975 $ 4,761,666 16,176,960 102,425,084 12,509,065 724,565 Total $ 154!232!225 $ 136!597!340 Overall capital assets increased $17,634,885 from fiscal year 2005 to fiscal year 2006. Increases in capital assets (buildings and building improvements, equipment, and land improvements) were offset by depreciation expense for the year. The increase in construction in progress/increase in buildings was due to the completion of a middle school and administrative building; construction of a new elementary school and middle school; and other various small projects within the school system. Most of the equipment purchased during fiscal year 2006 was for classroom computers and network equipment for the schools and departments. Debt At June 30, 2006, the School District had $45.0 million in general obligation bonds outstanding with $6.5 million due within one year. The voters of Columbia County approved on March 18, 1997, the first one percent sales tax for educational purposes for five years (July, 1997 - June, 2002). On March 20, 2001, the voters approved the second one percent sales tax for education purposes for another five years (July, 2002 - June, 2007). On March 15, 2005, the voters approved the third one percent sales tax for educational purposes for another five years (July, 2007 - June, 2012) along with approving $30 million in short-term bonds of which $15 million were issued in fiscal year 2005. The School Board no longer levies a debt millage, instead the proceeds from the sales tax are used to pay the debt. Table 6 summarizes general operation bonds and compensated absences outstanding. - ix - COLUMBIA COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2006 Table 6 Outstanding Debt and Compensated Absences at June 30 Fiscal Year 2006 Fiscal Year 2005 Compensated Absences General Obligation Bonds $ 491,915 $ 470,101 45,020,000 52,540,000 Total $ 452511,915 $ 5320102101 Current Financial Issues and Concerns The Columbia County School District is financially stable. The School District current operating millage is 17.18, which produces approximately $3.1 million per mill. The tax digest has continued to grow at an average rate of 8.9% over the last five years. The residential community is continuing to grow increasing the tax digest at a steady rate. The Columbia County Tax Commissioner's office collects taxes for the School District and the average collection rate has been 98% over the last five years. The School District does not anticipate any significant changes in the local tax digest in the immediate future. The School District continues to grow with an average increase of 620 students per year over the last five years. The School District plans to construct additional schools in the next several years to accommodate the growth and reduce portable classrooms at various schools. The School District plans to fund the additional capital outlays with the one percent local sales tax revenue, general obligation bonds, and state capital outlay grants. The Quality Basic Education Act (QBE) was enacted into law by the 1985 session of the Georgia General Assembly. The Act set out the provisions for educational funding for grades kindergarten through twelve in the State of Georgia. The funding is based on student counts with the expectation that local School Districts fund part of the cost with local tax monies. The School District received approximately 53% of the revenues budgeted for the General Fund from QBE. The School District received $4,152,170 less in funding for 2006. The reductions in QBE funding were due to the economic downturn in the State and the QBE funding for 2007 was reduced by $2,173,211. Currently, the School District has adequate reserves for 2007 to handle the reduction in QBE funding. Contacting the Board's Financial Management This financial report is designed to provide our citizens, taxpayers, investors and creditors with a general overview of the School District's finances and to show the School District's accountability for the money it receives. If you have questions about this report or need additional financial information contact Pat Sullivan, Controller at Columbia County Board of Education, 4781 Hereford Farm Road, Evans, Georgia 30809 or email at psullivan@ccboe.net. -x- COLUMBIA COUNTY BOARD OF EDUCATION COLUMBIA COUNTY BOARD OF EDUCATION STATEMENT OF NET ASSETS JUNE 30, 2006 ASSETS Cash and Cash Equivalents Investments Accounts Receivable, Net Taxes State Government Federal Government Other Prepaid Items Inventories Capital Assets Land Construction in Progress Land Improvements Buildings Equipment Less: Accumulated Depreciation Total Assets LIABILITIES Accounts Payable Salaries Payable Contracts Payable 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 $ 16,317,880 35,406,571 3,328,955 11,010,787 929,649 1,879 9,481 111,455 5,701,957 16,299,121 755,322 158,794,016 34,221,313 -61,539,504 $ ===22=1=,3=4=8,=88=2= $ 1,004,597 17,782,332 2,828,130 1,173,399 6,490,000 39,021,915 $ 68,300,373 $ 113,369,209 1,251,353 4,760,387 11,196,089 22 471 471 $ 153,048,509 $ ==2=2=1=,3=48='=88=2= COLUMBIA COUNTY BOARD OF EDUCATION STATEMENT OF ACTIVITIES FOR THE YEAR ENDED JUNE 30, 2006 GOVERNMENTAL ACTIVITIES Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Operations of Non-Instructional Services Enterprise Operations Community Services Food Services Interest on Short-Term and Long-Term Debt Total Governmental Activities General Revenues Taxes Property Taxes For Maintenance and Operations For Debt Services Sales Taxes Special Purpose Local Option Sales Tax For Debt Services For Capital Projects Intangible Recording Tax Real Estate 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 $ 105,883,530 $ 3,161,734 3,279,966 3,489,952 1,295,290 9,799,557 1,090,600 10,641,116 6,655,188 724,767 55,279 4,405,868 147,339 7,318,263 2,188,618 $ 160,137,067 $ 115,546 4,060,084 3,695,195 7,870,825 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 $ 65,712,869 $ 1,099,627 1,171,442 2,283,952 2,411,939 4,587,558 6,483,686 2,328,435 55,071 3,108,338 $ 89,242,917 $ 3,831,350 $ 9,657 45,405 13,450 17,464 22,059 24,614 117,677 282,453 7,968 1,058 104,975 189,702 4,667,832 $ -36,223,765 -2,052,450 -2,063,119 -1,192,550 1,134,113 -5,189,940 -1,065,986 -4,039,753 -4,044,300 -661,728 -54,221 -345,784 -42,364 -325,028 -2,188,618 -58,355,493 $ 48,669,136 24 9,127,600 6,041,077 1,769,490 561,072 7,397,266 2,471,130 1,799,302 $ 77,836,097 $ 19,480,604 133,567,905 $ ===1=53=,0=4=8!=,5=09= - 3- COLUMBIA COUNTY BOARD OF EDUCATION BALANCE SHEET GOVERNMENTAL FUNDS JUNE 30, 2006 EXHIBIT"C" ASSETS Cash and Cash Equivalents Investments Accounts Receivable, Net Taxes State Government Federal Government Other Prepaid Items Due From Other Funds Inventories GENERAL FUND DISTRICTWIDE CAPITAL PROJECTS FUND DEBT SERVICE FUND TOTAL $ 7,634,344 $ 6,845,129 $ 23,560,238 11,825,039 919,789 11,010,787 929,649 1,379 9,481 111 455 2,690,039 664,516 950,756 $ 21,294 9 15,430,229 35,406,571 3,609,837 11,010,787 929,649 1,379 9,481 664,516 111 455 Total Assets $ 44,177,122 $ 22,024,723 $ 972,059 $ ===6=7=1=1=7=3==90=4= LIABILITIES AND FUND BALANCES LIABILITIES Accounts Payable Salaries Payable Contracts Payable Retainages Payable Due To Other Funds Total Liabilities FUND BALANCES Reserved for: Continuation of Federal Programs Debt Service Inventories Capital Projects Unreserved Undesignated Reported in: General Fund Capital Projects Total Fund Balances $ 339,876 $ 17,782,332 664 516 $ 18,786,724 $ 26,290 2,828,130 1,173,399 4 027 819 $ 1,139,898 $ 3,788,319 $ 111,455 13,429,489 24,139,045 779 096 $ 25,390,398 $ 17,996,904 $ $ $ $ 972,059 972,059 $ 366,166 17,782,332 2,828,130 1,173,399 664 516 22 814 543 1,139,898 4,760,378 111,455 13,429,489 24,139,045 779 096 44 359 361 Total Liabilities and Fund Balances $ 44 177 122 $ 22,024,723 $ 972 059 $ ===6=7=1=7=3=9=04= The notes to the basic financial statements are an integral part of this statement. -4- COLUMBIA COUNTY BOARD OF EDUCATION RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO THE STATEMENT OF NET ASSETS JUNE 30, 2006 EXHIBIT"D" Total Fund Balances - Governmental Funds {Exhibit "C") Amounts reported for Governmental Activities in the Statement of Net Assets are different because: Capital Assets used in Governmental Activities are not financial resources and therefore are not reported in the funds. These assets consist of: Land Construction in Progress Land Improvements Buildings Equipment Accumulated Depreciation Total Capital Assets Some of the School District's property tax revenues will be collected after year-end but are not available soon enough to pay for the current period's expenditures. An Internal Service Fund is used by the School District's management to account for the workers' compensation risk financing related activities. The assets and liabilities of the Internal Service Fund are reported with governmental activities. 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 Compensated Absences Total Long-Term Liabilities $ 44,359,361 $ 5,701,957 16,299,121 755,322 158,794,016 34,221,313 -61,539,504 154,232,225 -280,882 249,720 $ -45,020,000 -491 915 -45,511,915 Net Assets of Governmental Activities {Exhibit "A") $ 153,048,509 The notes to the basic financial statements are an integral part of this statement. -5- COLUMBIA COUNTY BOARD OF EDUCATION STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS YEAR ENDED JUNE 30, 2006 EXHIBIT"E" REVENUES Property Taxes Sales Taxes State Funds Federal Funds Charges for Services Investment Earnings Miscellaneous Total Revenues EXPENDITURES Current Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Enterprise Operations 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 $ 47,311,505 2,330,562 $ 87,978,830 9,121,475 7,870,825 1,805,543 1,975,942 $ 6,041,077 4,385,379 61 $ 9,127,600 570,340 54,654 47,311,566 17,499,239 92,364,209 9,121,475 7,870,825 2,430,537 1,975,942 $ 158,394,682 $ 10,996,796 $ 9,182,315 $ 178,573,793 $ 102,373,628 $ 1,507,214 $ 103,880,842 3,150,523 3,302,602 3,487,632 1,096,549 9,739,280 1,064,536 10,782,516 6,283,007 728,279 54,634 3,878,383 7,238,371 6,361 321,261 42,745 $ 573,393 357,227 19,446,310 8,359 3,150,523 3,302,602 3,493,993 1,417,810 9,782,025 1,072,895 11,355,909 6,640,234 728,279 54,634 3,878,383 7,238,371 19,446,310 7,520,000 2,188,618 7,520,000 2,188,618 $ 153,179,940 $ 22,254,511 $ 9 716 977 $ 185,151,428 $ 5 214 742 $ -11,257,715 $ -534,662 $ -6,577,635 $ 11,550,000 $ -11,550,000 $ 11,550,000 -11,550,000 $ -11,550,000 $ 11,550,000 $ 0 $ -6,335,258 $ 292,285 $ -534,662 $ -6,577,635 31,725,656 17,704,619 1,506,721 50,936,996 $ 25,390,398 $ 17,996,904 $ 972,059 $ 44,359,361 The notes to the basic financial statements are an integral part of this statement. -6 - COLUMBIA COUNTY BOARD OF EDUCATION RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES TO THE STATEMENT OF ACTIVITIES JUNE 30, 2006 EXHIBIT"F" Total Net Change in Fund Balances - Governmental Funds (Exhibit "E") $ Amounts reported for Governmental Activities in the Statement of Activities are different because: Capital Outlays are reported as expenditures in Governmental Funds. However, in the Statement of Activities, the cost of Capital Assets is allocated over their estimated useful lives as depreciation expense. In the current period, these amounts are: Capital Outlay Depreciation Expense Excess of Capital Outlay over Depreciation Expense $ 24,466,923 -6,664,322 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 equipment and land improvements is reported, whereas in the Governmental Funds, the entire proceeds from the sale increase financial resources. Thus, the change in net assets differs from the change in fund balances by the carrying value of the equipment and land improvements sold. Repayment of Long-Term Debt is reported as an expenditure in Governmental Funds, but the repayment reduces Long-Term Liabilities in the Statement of Net Assets. In the current year, these amounts consist of: Bond Principal Retirements Some items reported in the Statement of Activities do not require the use of current financial resources and therefore are not reported as expenditures in Governmental Funds. These activities consist of: Increase in Compensated Absences An Internal Service Fund is used by the School District's management to account for the workers' compensation risk financing related activities. The net revenue of the Internal Service Fund is reported with governmental activities. -6,577,635 17,802,601 1,166,001 -167,716 7,520,000 -21,814 -240,833 Change in Net Assets of Governmental Activities (Exhibit "B") $ 19,480,604 The notes to the basic financial statements are an integral part of this statement. -7- COLUMBIA COUNTY BOARD OF EDUCATION STATEMENT OF NET ASSETS PROPRIETARY FUNDS JUNE 30, 2006 ASSETS Current Assets Cash and Cash Equivalents Accounts Receivable, Net Other Total Current Assets LIABILITIES Current Liabilities Accounts Payable NET ASSETS Unrestricted Total Liabilities and Net Assets EXHIBIT"G" INTERNAL SERVICE FUND $ 887,651 500 $ ===8=8=8,.,.1=51= $ 638,431 249 720 $ ===8=88===15=1= The notes to the basic financial statements are an integral part of this statement. -8 - COLUMBIA COUNTY BOARD OF EDUCATION STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS PROPRIETARY FUNDS YEAR ENDED JUNE 30, 2006 EXHIBIT"H" OPERATING REVENUES Charges for Services OPERATING EXPENSES Contractual Services Insurance Claims and Expenses Total Operating Expenses Operating Loss NONOPERATING REVENUES Interest and Investment Revenue Miscellaneous Revenue Total Nonoperating Revenues Changes in Net Assets Total Net Assets - Beginning Total Net Assets - Ending INTERNAL SERVICE FUND $ 241 069 $ 160,931 366,564 $ 527,495 $ -286,426 $ 40,593 5 000 $ 45 593 $ -240,833 490,553 $ ======2=4=9'=72=0= The notes to the basic financial statements are an integral part of this statement. -9- COLUMBIA COUNTY BOARD OF EDUCATION STATEMENT OF CASH FLOWS PROPRIETARY FUNDS YEAR ENDED JUNE 30, 2006 CASH FLOWS FROM OPERATING ACTIVITIES Cash Received from Charges for Services Cash Paid for Excess Worker's Compensation Insurance Cash Paid for Other Purchased Services Cash Paid for Worker's Compensation Claims Net Cash Used by Operating Activities CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES Other Nonoperating Receipts CASH FLOWS FROM INVESTING ACTIVITIES Interest and Dividends Net Increase in Cash and Cash Equivalents Balances - Beginning of Year Balances - End of Year RECONCILIATION OF OPERATING LOSS TO NET CASH USED BY OPERATING ACTIVITIES Operating Loss Change in Net Assets and Liabilities Receivables, Net Accounts and Other Payables Net Cash (Provided) By Operating Activities EXHIBIT"!" INTERNAL SERVICE FUND $ 256,404 -47,399 -113,532 -98 978 $ -3,505 $ 5 000 $ 40 593 $ 42,088 845,563 $ =====88=7 =65=1 $ -286,426 15,335 267,586 $ ======-3=5=0=5 The notes to the basic financial statements are an integral part of this statement. - 10 - COLUMBIA COUNTY BOARD OF EDUCATION STATEMENT OF FIDUCIARY NET ASSETS FIDUCIARY FUNDS JUNE 30, 2006 ASSETS Cash and Cash Equivalents LIABILITIES Funds Held for Others EXHIBIT "J" AGENCY FUNDS $ ======5=07='=32=1= $ ==5=07='=32=1= The notes to the basic financial statements are an integral part of this statement. - 11 - COLUMBIA COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2006 EXHIBIT "K" Note 1: DESCRIPTION OF SCHOOL DISTRICT AND REPORTING ENTITY REPORTING ENTITY The Columbia County Board of Education (School District) was established under the laws of the State of Georgia and operates under the guidance of a school board elected by the voters and a Superintendent appointed by the Board. The Board is organized as a separate legal entity and has the power to levy taxes and issue bonds. Its budget is not subject to approval by any other entity. Accordingly, the School District is a primary government and consists of all the organizations that compose its legal entity. 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 Columbia 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, proprietary and fiduciary) are presented. The emphasis of fund financial statements is on major governmental funds, each displayed in a separate column. - 12 - COLUMBIA COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2006 EXHIBIT "K" 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 (property and sales) legally restricted for the payment of general long-term principal, interest and paying agent's fees. Proprietary fund operating revenues, such as charges for services, result from exchange transactions associated with the principal activity of the fund. Exchange transactions are those in which each party receives and gives up essentially equal values. Nonoperating revenues, such as subsidies and investment earnings, result from nonexchange transactions or from ancillary activities. Enterprise fund operating revenues are related to charges for workers' compensation risk financing related activities. The primary nonoperating revenues are interest and investment revenues. Principal operating expenses are the costs of providing goods or services and include contractual services and insurance claims and expenses. The School District reports the following major proprietary fund: Internal Service Fund - the fund used to account for the School District's workers' compensation risk financing related activities. 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, proprietary and fiduciary fund financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded at the time liabilities are incurred, regardless of when the related cash flows take place. Nonexchange transactions, in which the School District gives (or receives) value without directly receiving (or giving) equal value in exchange, include - 13 - COLUMBIA COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2006 EXHIBIT "K" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 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 liability is incurred, except for principal and interest on general long-term debt, claims and judgments, and compensated absences, which are recognized as expenditures to the extent they have matured. Capital asset acquisitions are reported as expenditures in governmental funds. Proceeds of general long-term liabilities and acquisitions under capital leases are reported as other financing sources. The School District funds certain programs by a combination ofspecific cost-reimbursement grants, categorical grants, and general revenues. Thus, when program costs are incurred, there are both restricted and unrestricted net assets available to finance the program. It is the School District's policy to first apply grant resources to such programs, followed by cost-reimbursement grants, then general revenues. CASH AND CASH EQUIVALENTS COMPOSITION OF DEPOSITS Cash and cash equivalents consist ofcash on hand, demand deposits and short-term investments with original maturities of three months or less from the date of acquisition in authorized financial institutions. Georgia Laws OCGA 45-8-14 authorize the School District to deposit its funds in one or more solvent banks or insured Federal savings and loan associations. INVESTMENTS COMPOSITION OF INVESTMENTS Investments made by the School District in nonparticipating interest-earning contracts (such as certificates ofdeposit) and repurchase agreements are reported at cost. Participating interest-earning contracts and money market investments with a maturity at purchase of one year or less are reported - 14 - COLUMBIA COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2006 EXHIBIT"K" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 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, (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 Columbia County Board of Commissioners fixed the property tax levy for the 2005 tax digest year (calendar year) on July 19, 2005 (levy date). Taxes were due on November 15, 2005 (lien date). Taxes collected within the current fiscal year or within 60 days after year-end on the 2005 tax - 15 - COLUMBIA COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2006 EXHIBIT "K" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES digest are reported as revenue in the governmental funds for fiscal year 2006. The Columbia County Tax Commissioner bills and collects the property taxes for the School District, withholds 2.5% of taxes 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, 2006, for maintenance and operations amounted to $47,311,505 and for school bonds amounted to $61. The tax millage rate levied for the 2005 tax year (calendar year) for the Columbia County Board of Education was as follows (a mill equals $1 per thousand dollars of assessed value): School Operations 17.18 mills SALES TAXES Special Purpose Local Option Sales Tax, at the fund reporting level, during the year amounted to $15,168,677 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. PREPAID ITEMS Payments made to vendors for services that will benefit periods subsequent to June 30, 2006, are recorded as prepaid items. 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 - 16 - COLUMBIA COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2006 EXHIBIT "K" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES where no historical records exist. Donated capital assets are recorded at estimated fair market value on the date donated. Disposals are deleted at depreciated recorded cost. The cost of normal maintenance and repairs that do not add to the value ofassets or materially extend the useful lives of the assets is not capitalized. Depreciation is computed using the straight-line method. The School District does not capitalize book collections or works of art. Capitalization thresholds and estimated useful lives of capital assets reported in the District-wide statements are as follows: Capitalization Policy Land $ Land Improvements $ Buildings and Improvements $ Computers, Televisions, Laser Disk Players, Digital Cameras and Video Cameras Monitors, Printers, Scanners and Band Equipment $ All Other Equipment $ 1,000 1,000 1,000 All 100 1,000 Estimated Useful Life NIA 10 years 50 years 5 to 20 years 5 to 20 years 5 to 20 years Depreciation is used to allocate the actual or estimated historical cost of all capital assets over estimated useful lives. GENERAL OBLIGATION BONDS The School District issues general obligation bonds to provide funds for the acquisition and construction of major capital facilities. Bond issuance costs are recognized in the financial statements during the fiscal year bonds are issued. In addition, general obligation bonds have been issued to refund existing general obligation bonds. General obligation bonds are direct obligations and pledge the full faith and credit of the government. The outstanding amount of these bonds is recorded in the Statement of Net Assets. Note 3: DEPOSITS AND INVESTMENTS COLLATERALIZATION OF DEPOSITS Official Code of Georgia Annotated (OCGA) Section 45-8-12 provides that there shall not be on deposit at any time in any depository for a time longer than ten days a sum of money which has not been secured by surety bond, by guarantee of insurance, or by collateral. The aggregate ofthe face value of such surety bond and the market value of securities pledged shall be equal to not less than 110 percent ofthe public funds being secured after the deduction ofthe amount ofdeposit insurance. Ifa depository elects the pooled method (OCGA 45-8-13.1) the aggregate ofthe market value ofthe securities pledged to secure a pool ofpublic funds shall be not less than 110 percent ofthe daily pool balance. - 17 - COLUMBIA COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2006 EXHIBIT"K" 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 of the State of Georgia, (5) Bonds of any public authority created by the laws of the State of Georgia, providing that the statute that created the authority authorized the use of the bonds for this purpose, (6) Industrial revenue bonds and bonds of development authorities created by the laws ofthe State of Georgia, and (7) Bonds, bills, notes, certificates of indebtedness, or other obligations of a subsidiary corporation of the United States government, which are fully guaranteed by the United States government both as to principal and interest or debt obligations issued by the Federal Land Bank, the Federal Home Loan Bank, the Federal Intermediate Credit Bank, the Central Bank for Cooperatives, the Farm Credit Banks, the Federal Home Loan Mortgage Association, and the Federal National Mortgage Association. CATEGORIZATION OF DEPOSITS At June 30, 2006, the bank balances were $17,633,317. The amounts ofthe total bank balances are classified into four categories of custodial credit risk: Category 1 - Cash that is insured (e.g., Federal Deposit Insurance) or collateralized with securities held by the School District or by the School District's agent in the School District's name. Category 2 - Cash collateralized with securities held by the pledging financial institution's trust department or agent in the School District's name. Category 3 - Cash collateralized with securities held by the pledging financial institution, or by its trust department or agent but not in the School District's name. Category 4 - Uncollateralized. The School District's deposits are classified by custodial credit risk category at June 30, 2006, as follows: - 18 - COLUMBIA COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2006 EXHIBIT "K" Note 3: DEPOSITS AND INVESTMENTS Custodial Credit Risk Category Bank Balance 1 $ 400,000 2 3,375,017 3 13,858,300 4 0 Total $ 17,633.317 CATEGORIZATION OF INVESTMENTS Custodial Credit Risk Custodial credit risk for investments is the risk that, in the event of a failure ofthe counterparty to a transaction, the School District will not be able to recover the value of the investment or collateral securities that are in the possession of an outside party. The School District does not have a formal policy for managing custodial credit risk. Investments are classified as to custodial credit risk by the categories described below: Category 1 - Insured or registered, or securities held by the School District or the School District's agent in the School District's name. Category 2 - Uninsured or unregistered, with securities held by the counterparty's trust department or agent in the School District's name. Category 3 - Uninsured or unregistered, with securities held by the counterparty's trust department or agent, but not in the School District's name. Funds invested in an investment pool managed by another government are not required to be categorized unless the investing entity owns specific, identifiable investment securities in the pool. At June 30, 2006, the carrying value of the School District's total investments was $35,406,571 which is materially the same as fair value. These investments included funds in the amount of $35,290,674 invested in the Local Government Investment Pool administered by the State of Georgia, Office of Treasury and Fiscal Services which are not required to be categorized since the School District did not own any specific identifiable securities in the pool. The investment policy of the State of Georgia, Office of Treasury and Fiscal Services for the Local Government Investment Pool (Primary Liquidity Portfolio) does not provide for investment in derivatives or similar investments. A description of the Primary Liquidity Portfolio is as follows: The Primary Liquidity Portfolio consists of Georgia Fund 1, which is a combination local and state government investment pool. Georgia Fund 1 is a stable net asset value investment pool which follows Standard and Poor's criteria for AAAm rated money market funds. The pool is not registered with the SEC as an investment company but does operate Georgia Fund 1 in a manner consistent with Rule 2a-7 of the Investment Company Act of 1940. The pool's primary objectives - 19 - COLUMBIA COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2006 EXHIBIT "K" Note 3: DEPOSITS AND INVESTMENTS are safety of capital, investment income, liquidity and diversification while maintaining principal ($1.00 per share value). Net asset value is calculated daily and reported to the rating agency weekly to ensure stability. The pool distributes earnings (net of management fees) on a monthly basis and values participant's shares sold and redeemed at the pool's share price, $1.00 per share. Pooled cash and cash equivalents and investments are reported at cost. The pool does not issue any legally binding guarantees to support the value of the shares. Participation in the pool is voluntary and deposits consist of funds from local governments; operating and trust funds of Georgia's state agencies, colleges and universities; and current operating funds of the State of Georgia's General Fund. Investments in Georgia Fund 1 are directed toward short-term instruments such as U.S. Treasury obligations, securities issued or guaranteed as to principal and interest by the U. S. Government or any of its agencies or instrumentalities, banker's acceptances and repurchase agreements. The weighted average maturity of Georgia Fund 1 may not exceed 60 days. The weighted average maturity for Georgia Fund 1 on June 30, 2006, was 28 days. At June 30, 2006, the carrying value ofthe School District's investments was $35,406,571 which is materially the same as fair value. Fair value is based on quoted market prices, unless otherwise noted. The investments are classified as to custodial credit risk categories as follows: Type oflnvestment Common Stock $ Investment Pool Office of Treasury and Fiscal Services Georgia Fund I Total Investments 115 897 Risk Categories 2 3 $===""" $==== Carrying Amount $ 115,897 35,290,674 $ 35 406 57) Fair Value $ 115,897 35.290,674 $ 35 406 57) 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: -20- COLUMBIA COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2006 EXHIBIT "K" Note 5: CAPITAL ASSETS Balances July 1. 2005 Increases Decreases Balances June 30, 2006 Governmental Activities Capital Assets, Not Being Depreciated: Land Construction in Progress $ 4,761,666 $ 940,291 $ 5,701,957 16,176.960 13,035.781 $ 12,913,620 16,299,121 Total Capital Assets Not Being Depreciated $ 20,938.626 $ 13,976,072 $ 12,913,620 $ 22,001,078 Capital Assets Being Depreciated Buildings and Improvements Equipment Land Improvements $ 139,768,270 $ 19,025,746 30,912,378 4,378,725 $ 874,369 $ 158,794,016 1,069,790 34,221,313 119,047 755,322 Less Accumulated Depreciation for: Buildings and Improvements Equipment Land Improvements 37,343,186 18,403,313 149,804 3,166,118 3,442,748 55,456 1,008,208 12,913 40,509,304 20,837,853 192,347 Total Capital Assets, Being Depreciated, Net $ 115,658,714 $ 16,740,149 $ 167.716 $ 132,231.147 Governmental Activity Capital Assets - Net $ 136,521,340 $ 30,116,221 $ 13,081,336 $ 154,232,225 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 Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Community Services Food Services $ 5,106,189 $ 14,675 69,000 20,440 26,540 33,523 37,405 178,830 716,192 12,109 1,608 1,110,322 159,527 288,284 $ 6,664.322 - 21 - COLUMBIA COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2006 EXHIBIT "K" Note 6: RESTRICTED ASSETS Special Purpose Local Option Sales Tax (SPLOST), general obligation bond proceeds, Georgia State Financing and Investment Commission (GSFIC) funds and property tax levied specifically for retirement of outstanding bond principal, interest and paying agent's fees (Debt Service Funds) are reported as restricted assets in the Statement ofNet Assets because their use is limited by applicable bond covenants or statutory provisions. Restricted assets at June 30, 2006, were as follows: District-wide Capital Projects Bond SPLOST Proceeds Debt Service Funds Restricted Cash and Cash Equivalents: Debt Services Capital Acquisitions Restricted Investments: Debt Services Capital Acquisitions $ 3,788,319 $ 2,134,273 $ $ 9,243 $ $ 6,941,984 $ 4,860,055 950,756 21,294 Note 7: INTERFUND ASSETS AND LIABILITIES Due to and due from other funds are recorded for interfund receivables and payables which arise from interfund transactions. Interfund balances at June 30, 2006, consisted of the following: Due From Other Funds Due To Other Funds General Fund District-wide Capital Projects $ 664,516 $ 664,516 $ 664!516 $ 664!516 The balance due to the District-wide Capital Projects Fund resulted from excess expenditures on capital construction projects that were funded by the General Fund. Note 8: INTERFUND TRANSFERS Interfund transfers for the year ended June 30, 2006, consisted of the following: - 22 - COLUMBIA COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2006 EXHIBIT "K" Note 8: INTERFUND TRANSFERS Transfer to Transfers From General Fund District-wide Capital Projects $ 11,550,000 Transfers are used to move property tax revenues collected by the General Fund to the District-wide Capital Projects Fund as required match or supplemental funding source for capital construction projects. Note 9: 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 participates in the Georgia School Boards Association Risk and Insurance Management System, a public entity risk pool organized on July 1, 1994, to develop and administer a plan to reduce risk of loss on account of general liability, motor vehicle liability, or property damage, including safety engineering and other loss prevention and control techniques, and to administer one or more groups of self-insurance funds, including the processing and defense of claims brought against members of the system. The School District pays an annual premium to the system for its general insurance coverage. Additional coverage is provided through agreements by the system with other companies according to their specialty for property, boiler and machinery (including coverage for flood and earthquake), general liability (including coverage for sexual harassment, molestation and abuse), errors and omissions, crime and automobile risks. Payment of excess insurance for the system varies by line of coverage. The School District has established a limited risk management program for workers' compensation claims. A premium is charged when needed by the Internal Service Fund to the General Fund to cover actual claims and to build a level of retained earnings. A premium is charged by the Internal Service Fund to the Food and Nutrition Program to cover actual claims. The School District accounts for claims with expense and liability being reported when it is probable that a loss has occurred, and the amount of that loss can be reasonably estimated. An excess coverage insurance policy covers individual claims in excess of$300,000 loss per occurrence, up to the statutory limit. Changes in the workers' compensation claims liability during the last two fiscal years are as follows: - 23 - COLUMBIA COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2006 EXHIBIT "K" Note 9: RISK MANAGEMENT 2005 2006 Beginning of Year Liability Claims and Changes in Estimates Claims Paid EndofYear Liability $ 324,982 $ 371,002 $ 325,139 $ 370,845 $ 370,845 $ 366,564 $ 98,978 $ 638,431 The School District is self-insured with regard to unemployment compensation claims. The School District accounts for claims within the General Fund with expenses/expenditures and liability being reported when it is probable that a loss has occurred, and the amount of that loss can be reasonably estimated. Changes in the unemployment compensation claims liability during the last two fiscal years are as follows: 2005 2006 Beginning of Year Liability Claims and Changes in Estimates Claims Paid End ofYear Liability $ 1,324 $ 6,595 $ 6,584 $ 1,335 $ 1,335 $ 13,308 $ 4,298 $ 10,345 The School District has purchased surety bonds to provide additional insurance coverage as follows: Position Covered Amount Superintendent All Employees $ 50,000 $ 200,000 Note 10: LONG-TERM DEBT COMPENSATED ABSENCES Compensated absences represent obligations ofthe School District relating to employees' rights to receive compensation for future absences based upon service already rendered. This obligation relates only to vesting accumulating leave in which payment is probable and can be reasonably estimated. Typically, the General Fund is the fund used to liquidate this long-term debt. The School District uses the vesting method to compute compensated absences. GENERAL OBLIGATION DEBT OUTSTANDING General Obligation Bonds currently outstanding are as follows: -24- COLUMBIA COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2006 EXHIBIT "K" Note 10: LONG-TERM DEBT Purpose Interest Rates Amount General Government - Series 1994A General Government - Refunding - Series 1998 General Government - Series 2001 General Government - Refunding - Series 2001A General Government - Series 2002 General Government - Refunding - Series 2003 General Government - Series 2005 3.50% - 7.00% 3.10% - 4.35% 3.50% - 4.00% 3.50% - 4.00% 3.00%- 4.00% 2.60% 3.25% - 5.00% $ 8,090,000 7,385,000 3,980,000 2,995,000 2,840,000 4,730,000 15,000,000 $ 45,020.000 Voters have authorized $15,000,000 in general obligation debt for capital outlay purposes which was not issued as of June 30, 2006. The changes in Long-Term Debt during the fiscal year ended June 30, 2006, were as follows: Governmental Funds General Compensated Obligation Absences (1) Bonds Total Balance July 1, 2005 $ 470,101 $ 52,540,000 $ 53,010,101 Additions Annual Leave Earned 521,868 521,868 Deductions Annual Leave Earned Debt Retired 500,054 7,520,000 500,054 7,520,000 Balance June 30, 2006 $ 491,915 $ 45,020.000 $ 45,511.915 Portion of Long-Term Debt Due within One Year $ 0 $ 6,490,000 $ 6,490,000 (1) The portion of Compensated Absences due within one year has been determined to be immaterial to the basic financial statements. At June 30, 2006, payments due by fiscal year which includes principal and interest for these items are as follows: - 25 - COLUMBIA COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2006 EXHIBIT "K" Note 10: LONG-TERM DEBT Fiscal Year Ended June 30 General Obligation Debt Principal Interest 2007 2008 2009 2010 2011 2012 - 2013 $ 6,490,000 $ 6,885,000 3,665,000 3,960,000 5,985,000 18,035,000 1,954,125 1,703,845 1,464,287 1,278,547 1,022,286 900,637 Total Principal and Interest $ 45,020.000 $ 8,323.727 Note 11: SIGNIFICANT COMMITMENTS The following is an analysis ofsignificant outstanding construction or renovation contracts executed by the School District as of June 30, 2006, together with funding available: Project Unearned Executed Contracts Funding Available From State 06-636-009/06G-636-007 $ 738,277 $ 487,264 07-636-016/07G-636-021 2,418,734 5,828,282 Grovetown Elementary School 8,233,339 New Administrative Building - 1st and 2nd Floors 2,694 New Administrative Building - 3rd Floor 553,335 $ 11,946,379 $ 6,315.546 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. -26- COLUMBIA COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2006 EXHIBIT "K" 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 9.24% and employer contributions for the current fiscal year and the preceding two fiscal years are as follows: Fiscal Year Percentage Contributed Required Contribution 2006 2005 2004 100% 100% 100% $ 8,338,175 $ 7,782,267 $ 7,418,540 - 27 - (This page left intentionally blank) COLUMBIA COUNTY BOARD OF EDUCATION GENERAL FUND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL YEAR ENDED JUNE 30, 2006 SCHEDULE "1" REVENUES Property Taxes Sales Taxes State Funds Federal Funds Charges for Services Investment Earnings Miscellaneous Total Revenues EXPENDITURES Current Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Enterprise Operations Food Services Operation Total Expenditures Excess of Revenues over (under) Expenditures OTHER FINANCING USES Other Uses Net Change in Fund Balances Fund Balances - Beginning NONAPPROPRIATED BUDGETS ORIGINAL (1) FINAL (1) ACTUAL AMOUNTS $ 46,800,000 $ 47,764,642 $ 47,311,505 360,000 1,260,000 2,330,562 84,871,036 87,124,345 87,978,830 9,014,206 9,476,422 9,121,475 4,130,000 4,130,000 7,870,825 780,000 780,000 1,805,543 198,000 198 000 1,975,942 $ 146,153,242 $ 150,733,409 $ 158,394,682 $ 102,253,183 $ 102,558,212 $ 102,373,628 3,290,377 3,553,271 3,321,004 995,077 9,422,402 1,167,137 10,767,081 6,208,053 726,139 27,788 7,304,863 3,239,448 3,465,069 3,323,294 1,124,936 9,429,295 1,167,837 10,921,068 6,580,652 740,788 73,990 7,304,863 3,150,523 3,302,602 3,487,632 1,096,549 9,739,280 1,064,536 10,782,516 6,283,007 728,279 54,634 3,878,383 7,238,371 $ 149,036,375 $ 149,929,452 $ 153,179,940 $ -2,883,133 $ 803,957 $ 5,214,742 -180,000 -5,830,000 -11,550,000 $ -3,063,133 $ -5,026,043 $ -6,335,258 31,735,097 31,735,097 31,725,656 Fund Balances - Ending $ 28,671,964 $ 261709,054 $ =====2=5,..,3..,9.o.,..3.9..,.8= 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. -29 - COLUMBIA COUNTY BOARD OF EDUCATION SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS YEAR ENDED JUNE 30, 2006 SCHEDULE "2" FUNDING AGENCY PROGRAM/GRANT Agriculture, U.S. Department of Child Nutrition Cluster Pass-Through From Georgia Department of Education Food Services School Breakfast Program National School Lunch Program Total Child Nutrition Cluster Other Programs Pass-Through From Georgia Department of Education Food Donation (1) Total U.S. Department of Agriculture Education, U.S. Department of Special Education Cluster Pass-Through From Georgia Department of Education Special Education Grants to States Preschool Grants Total Special Education Cluster Other Programs Direct Impact Aid Pass-Through From Georgia Department of Education English Language Acquisition Grants Enhancing Education Through Technology Program Hurricane Education Recovery Improving Teacher Quality State Grants Safe and Drug-Free Schools and Communities State Grants for Innovative Programs Title I Grants to Local Educational Agencies Vocational Education - Basic Grants to States Total U.S. Department of Education Defense, U.S. Department of Direct Department of the Army R.O.T.C. Program Department of the Navy R.O.T.C. Program Total U.S. Department of Defense Total Federal Financial Assistance N/A = Not Available CFDA NUMBER PASSTHROUGH ENTITY ID NUMBER EXPENDITURES IN PERIOD 10.553 10.555 10.550 N/A NIA $ $ (2) 6,549,358 6,549,358 N/A $ 256 577 6,805,935 . 84.027 . 84.173 84.041 84.365 . 84.318 84.938 84.367 84.186 . 84.298 84.010 84.048 N/A $ N/A $ 3,140,912 123 370 3,264,282 N/A NIA N/A N/A N/A N/A NIA N/A $ (3) 36,621 30,369 (4) 605,408 94,687 48,371 1,675,285 138 585 5,893,608 $ 157,278 54 249 $ 211 527 $ ===12=9=1=1=0=70= - 30- COLUMBIA COUNTY BOARD OF EDUCATION SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS YEAR ENDED JUNE 30, 2006 SCHEDULE "2" Notes to the Schedule of Expenditures of Federal Awards (1) The amount shown for the Food Donation Program represents the Federally assigned value of nonmonetary assistance for donated commodities received and/or consumed by the School District during the current fiscal year. (2) Expenditures for the funds earned on the School Breakfast Program ($371,251) were not maintained separately and are included in the 2006 National School Lunch Program. (3) Funds earned on the Impact Aid program, in the amount of $177,669, do not require reporting of expenditures. (4) Funds earned on the Hurricane Education Recovery program, in the amount of $162,769, do not require reporting of expenditures. Additionally, this amount includes Federal Assistance of $990, provided to non-public schools. Major Programs are identified by an asterisk (*) in front of the CFDA number. The School District did not provide Federal Assistance to any Subrecipient. The accompanying schedule of expenditures of Federal awards includes the Federal grant activity of the Columbia 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. - 31 - COLUMBIA COUNTY BOARD OF EDUCATION SCHEDULE OF STATE REVENUE YEAR ENDED JUNE 30, 2006 SCHEDULE "3" AGENCY/FUNDING GRANTS Bright From the Start: Georgia Department of Early Care and Learning Pre-Kindergarten Program Education, Georgia Department of Quality Basic Education Direct Instructional Cost Kindergarten Program Kindergarten Program - Early Intervention Program Primary Grades (1-3) Program Primary Grades - Early Intervention (1-3) Program Upper Elementary Grades (4-5) Program Upper Elementary Grades - Early Intervention (4-5) Program Middle School (6-8) Program High School General Education (9-12) Program Vocational Laboratory (9-12) Program Students with Disabilities Category I Category II Category Ill Category IV CategoryV Gifted Student - Category VI Remedial Education Program Alternative Education Program English Speakers of Other Languages (ESOL) Media Center Program 20 Days Additional Instruction Staff and Professional Development Indirect Cost Central Administration School Administration Facility Maintenance and Operations Categorical Grants Pupil Transportation Regular Bus Replacement Nursing Services Principal Supplements Vocational Supervisors Education Equalization Funding Grant Food Services Vocational Education Austerity Reduction Other State Programs K-3 Statewide Reading Program National Teacher Certification Preschool Handicapped Program Virtual Schools Grant Georgia State Financing and Investment Commission Reimbursement on Construction Projects CONTRACT Education, Georgia Department of Foreign Language Model Program GOVERNMENTAL FUND TYPES CAPITAL GENERAL PROJECTS FUND FUND TOTAL $ 1,495,441 $ 1,495,441 5,834,917 203,832 13,768,781 690,488 7,189,737 410,986 13,162,608 12,496,918 2,041,954 314,962 625,398 4,181,637 1,116,411 391,482 1,412,677 182,723 1,030,132 135,474 1,916,500 644,838 363,227 1,789,383 3,892,475 5,435,797 1,756,176 282,453 376,466 67,779 18,183 7,397,266 432,436 109,651 -4,153,925 276,967 330,772 240,974 3,750 5,834,917 203,832 13,768,781 690,488 7,189,737 410,986 13,162,608 12,496,918 2,041,954 314,962 625,398 4,181,637 1,116,411 391,482 1,412,677 182,723 1,030,132 135,474 1,916,500 644,838 363,227 1,789,383 3,892,475 5,435,797 1,756,176 282,453 376,466 67,779 18,183 7,397,266 432,436 109,651 -4,153,925 276,967 330,772 240,974 3,750 $ 4,385,379 4,385,379 111104 111104 See notes to the basic financial statements. $ 87,978,830 $ 4,385,379 $ 92,364,209 - 32- COLUMBIA COUNTY BOARD OF EDUCATION SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS YEAR ENDED JUNE 30, 2006 SCHEDULE "4" PROJECT Acquiring, constructing and equipping one new elementary school and one new middle school, adding and equipping new classrooms at existing high schools, acquiring land for future schools, adding to, renovating, repairing, improving and equipping existing school buildings and other buildings and facilities useful or desirable in connection therewith, and acquiring any necessary property therefor, both real and personal, acquiring instructional and administrative technology improvements for existing schools and acquiring school buses Retiring a portion of the School District's General Obligation Bonds, dated September 1, 1976, General Obligation Refunding Bonds, dated December 1, 1992, General Obligation Refunding Bonds, Series 1993, General Obligation Refunding Bonds, Series 1994, General Obligation Bonds, Series, 1994-A and General Obligation School Refunding Bonds, Series 1998, by paying or making provision of the payment of the principal of and interest on such bonds coming due on April 1, 2003 through October 1, 2007 Acquiring, constructing, and equipping two new elementary schools, three new middle schools, and one new high school, acquiring land for future schools and instructional and administrative technology improvements for existing schools, adding to, renovating, repairing, improving, and equipping existing school buildings and other buildings and facilities useful or desirable iri connection therewith, and acquiring any necessary property therefor, both real and personal, acquiring schools buses Retiring a portion of the School District's General Obligation Bonds, Series 1994-A, General Obligation School Refunding Bonds, Series 1998, General Obligation Refunding Bonds, Series 2001A and General Obligation Refunding Bond, Series 2003, by paying or making provision for the payment of the principal of and interest on such bonds coming due on April 1, 2008 through October 1, 2012 ORIGINAL ESTIMATED COST(1) CURRENT ESTIMATED COSTS(2) AMOUNT EXPENDED IN CURRENT YEAR(3) AMOUNT EXPENDED IN PRIOR YEARS(3) PROJECT STATUS $ 42,067,795 $ 57,166,156 $ 10,621,470 $ 46,544,686 Ongoing 27,932,205 27,406,000 5,605,738 17,030,905 Ongoing 95,100,000 95,100,000 8,045,155 3,668,580 Ongoing 19,900,000 19,900,000 Ongoing $ 185,000,000 $ 199,572,156 $ 24,272,363 $ 67,244,171 (1) The School District's original cost estimate as specified in the resolution calling for the imposition of the Local Option Sales Tax. (2) The School District's current estimate of total cost for the projects. Includes all cost from project inception to completion. (3) The voters of Columbia County approved the imposition of a 1% sales tax to fund the above projects and retire associated debt. Amounts expended for these projects may include sales tax proceeds, state, local property taxes and/or other funds over the life of the projects. See notes to the basic financial statements. - 33- (This page left intentionally blank) COLUMBIA COUNTY BOARD OF EDUCATION GENERAL FUND- QUALITY BASIC EDUCATION PROGRAM (QBE) ALLOTMENTS AND EXPENDITURES BY PROGRAM YEAR ENDED JUNE 30, 2006 SCHEDULE "5" DESCRIPTION Direct Instructional Programs Kindergarten Program Kindergarten Program-Early Intervention Program Primary Grades (1-3) Program Primary Grades-Early Intervention (1-3) Program Upper Elementary Grades (4-5) Program Upper Elementary Grades-Early Intervention (4-5) Program Middle School (6-8) Program High School General Education (9-12) Program Vocational Laboratory (9-12) Program Students with Disabilities Category I Category II Category Ill Category IV 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 $ 6,685,790 $ 7,001,911 $ 222,546 $ 7,224,457 233,626 240,432 2,396 242,828 15,845,677 18,727,029 869,072 19,596,101 790,944 446,664 8,992 455,656 8,226,695 9,620,541 523,376 10,143,917 473,220 15,179,674 14,312,969 2,332,593 7,687,026 1,625,809 201,290 1,182,788 152 624 424,177 16,946,178 16,109,097 2,059,874 302,563 602,655 6,674,514 276,703 198,249 1,656,260 179,891 934,516 199 611 4,791 918,992 1,254,523 191,917 10,798 11,666 332,338 26,657 10,393 52,862 2,868 9,719 10 990 428,968 17,865,170 17,363,620 2,251,791 313,361 614,321 7,006,852 303,360 208,642 1,709,122 182,759 944,235 210 601 $ 74,930,725 $ 82,600,865 $ 4,464,896 $ 87,065,761 2,203,472 421 752 2,766,405 74 851 401,401 297,590 3,167,806 372441 TOTAL QBE FORMULA FUNDS $ 77 555 949 $ 85,442,121 $ 5,163,887 $ 90,606,008 (1) Comprised of State Funds plus Local Five Mill Share. (2) Allotments do not include the impact of the State budget austerity reduction. See notes to the basic financial statements. - 35- SECTION II COMPLIANCE AND INTERNAL CONTROL REPORTS Russell W. Hinton STATE AUDITOR (404) 656-2174 DEPARTMENT OF AUDITS AND ACCOUNTS 270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400 January 23, 2007 Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education and Superintendent and Members of the Columbia 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 Columbia County Board of Education as of and for the year ended June 30, 2006, which collectively comprise Columbia County Board ofEducation's basic financial statements and have issued our report thereon dated January 23, 2007. We conducted our audit in accordance with auditing standards generally accepted in the United States ofAmerica and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Internal Control Over Financial Reporting In planning and performing our audit, we considered Columbia County Board ofEducation's internal control over financial reporting in order to determine our auditing procedures for the purpose of expressing our opinions on the financial statements and not to provide an opinion on the internal control over financial reporting. However, we noted a certain matter involving the internal control over financial reporting and its operation that we consider to be a reportable condition. Reportable conditions involve matters coming to our attention relating to significant deficiencies in the design or operation of the internal control over financial reporting that, in our judgment, could adversely affect Columbia County Board of Education's ability to record, process, summarize and report financial data consistent with assertions ofmanagement in the financial statements. The reportable condition is described in the accompanying Schedule ofFindings and Questioned Costs as item FS6361-06-01. 2006YB-30 A material weakness is a reportable condition in which the design or operation ofone or more ofthe internal control components does not reduce to a relatively low level the risk that misstatements caused by error or fraud in amounts that would be material in relation to the financial statements being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. Our consideration of the internal control over financial reporting would not necessarily disclose all matters in the internal control that might be reportable conditions and, accordingly, would not necessarily disclose all reportable conditions that are also considered to be material weaknesses. However, we believe the reportable condition described above is not a material weakness. Compliance and Other Matters As part of obtaining reasonable assurance about whether Columbia County Board of Education's financial statements are free of material misstatement, we performed tests of its compliance with certain provisions oflaws, regulations, contracts and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. This report is intended solely for the information and use of the management and members of the Columbia County Board of Education and is not intended to be and should not be used by anyone other than these specified parties. Respectfully submitted, lo~ Rusell W. Hinton, CPA, CGFM State Auditor RWH:as 2006YB-30 Russell W. Hinton STATE AUDITOR (404) 656-2174 DEPARTMENT OF AUDITS AND ACCOUNTS 270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400 January 23, 2007 Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education and Superintendent and Members of the Columbia 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 Columbia County Board of Education with the types of compliance requirements described in the U.S. Office of Management and Budget (0MB) Circular A-133 Compliance Supplement that are applicable to each of its major Federal programs for the year ended June 30, 2006. Columbia 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 Columbia County Board of Education's management. Our responsibility is to express an opinion on Columbia 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 Columbia 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 2006SA-30 does not provide a legal determination on Columbia County Board of Education's compliance with those requirements. In our opinion, the Columbia County Board ofEducation complied, in all material respects, with the requirements referred to above that are applicable to each of its major Federal programs for the year ended June 30, 2006. Internal Control Over Compliance The management of Columbia 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 Columbia County Board of Education's internal control over compliance with requirements that could have a direct and material effect on a major Federal program in order to determine our auditing procedures for the purpose of expressing our opinion on compliance and to test and report on internal control over compliance in accordance with 0MB Circular A-133. We noted a certain matter involving the internal control over compliance and its operation that we consider to be a reportable condition. Reportable conditions involve matters coming to our attention relating to significant deficiencies in the design or operation ofthe internal control over compliance that, in our judgment, could adversely affect the Columbia County Board of Education's ability to administer a major Federal program in accordance with applicable requirements oflaws, regulations, contracts and grants. The reportable condition is described in the accompanying Schedule of Findings and Questioned Costs as item FA-6361-06-01. A material weakness is a reportable condition in which the design or operation ofone or more ofthe internal control components does not reduce to a relatively low level ofrisk that noncompliance with the applicable requirements oflaws, regulations, contracts and grants caused by error or fraud that would be material in relation to a major Federal program being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. Our consideration ofthe internal control over compliance would not necessarily disclose all matters in the internal control that might be reportable conditions and, accordingly, would not necessarily disclose all reportable conditions that are also considered to be material weaknesses. However, we believe the reportable condition described above is not a material weakness. This report is intended solely for the information and use of the management, members of the Columbia County Board of Education, 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, ~-c8~ R ssell W. Hinton, CPA, CGFM State Auditor RWH:as 2006SA-30 SECTION III AUDITEE'S RESPONSE TO PRIOR YEAR FINDINGS AND QUESTIONED COSTS COLUMBIA COUNTY BOARD OF EDUCATION AUDITEE'S RESPONSE SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2006 PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS FINDING CONTROL NUMBER AND STATUS FS-6361-05-01 Previously Reported Corrective Action Implemented PRIOR YEAR FEDERAL AWARD FINDINGS AND QUESTIONED COSTS No matters were reported. SECTION IV FINDINGS AND QUESTIONED COSTS COLUMBIA COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2006 I SUMMARY OF AUDITOR'S RESULTS 1. Type of Report Issued on the Financial Statements The auditor's opinion on the Columbia County Board of Education's financial statements was unqualified. 2. Reportable Conditions in Internal Control Disclosed by the Audit of the Financial Statements The audit report for the Columbia County Board of Education disclosed a financial statement reportable condition related to the following control categories. Expenditures/Liabilities/Disbursements Revenues/Receivables/Receipts The reportable condition described above is not considered to be a material weakness. 3. Noncompliance Material to the Financial Statements The audit of the Columbia County Board of Education disclosed no instances of noncompliance that were deemed to be material to the financial statements. 4. Reportable Conditions in Internal Control Over Major Programs The audit report for the Columbia County Board of Education disclosed a reportable condition in internal control over major programs for the following compliance requirement. Activities Allowed or Unallowed The reportable condition described above is not considered to be a material weakness. 5. Type of Report Issued on Compliance for Major Programs The auditor's opinion on the Columbia County Board of Education's report on compliance with requirements applicable to major programs was unqualified. 6. Audit Findings Required to be Reported by Section .5 lO(a) of 0MB Circular A-133 The Columbia County Board of Education's audit disclosed an audit finding required to be reported by section .510(a) ofOMB Circular A-133. This finding is included in Section IV of this report. 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 84.938 Hurricane Education Recovery - 1- COLUMBIA COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2006 I SUMMARY OF AUDITOR'S RESULTS 8. Type "A" Program Dollar Threshold The dollar threshold for type "A" programs was $397,545. 9. Low Risk Auditee The Columbia County Board of Education qualified as a low risk auditee as defined by Section .530 of 0MB Circular A-133. II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Controls over School Activity Accounts Reportable Condition Finding Control Number: FS-6361-06-01 Condition: The accounting procedures ofthe School District were insufficient to provide for adequate internal controls over the school activity accounts. Criteria: The School District's management is responsible for designing and maintaining internal controls that provide reasonable assurance that transactions are processed according to established procedures. Questioned Cost: NIA Information: Revenues/Receivables/Receipts Based on a review of 60 items, two receipts were not deposited in a timely manner. Expenditures/Liabilities/Disbursements Based on a review of 60 vouchers, the following deficiencies were noted: 1) Nine vouchers did not include evidence of proper approval, 2) Five vouchers included a purchase order date that came after the invoice date, 3) Sixteen vouchers did not include signatures indicating proper receipt. 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. -2- COLUMBIA COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2006 II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Controls over School Activity Accounts Reportable Condition Finding Control Number: FS-6361-06-01 Recommendation: Management should revise and monitor controls to provide reasonable assurance that transactions are processed according to established procedures. III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS ACTIVITIES ALLOWED OR UNALLOWED Inadequate Internal Control Procedures Reportable Condition U.S. Department of Education Through Georgia Department of Education Hurricane Education Recovery (CFDA No. 84.938) Finding Control Number: FA-6361-06-01 Condition: There were no procedures in place to ensure that Hurricane Education Recovery Act (HERA) funds provided to the School District for displaced students reported as having disabilities were used for the excess costs of providing special education and related services to students with disabilities. Criteria: The following guidance applied to the management of Emergency Impact Aid for Displaced Students to include funds made available for displaced students: 1. Section 107(e)(4) of HERA, 2. Volumes "I" and "II" of U. S. Department of Education (USED) guidelines included in "Frequently Asked Questions, Emergency Impact Aid for Displaced Students" and 3. State of Georgia issued publication titled "Georgia Guidance on Federal Emergency Hurricane Act" (GDOE Guidelines). Provisions of HERA, USED and GDOE Guidelines state that HERA funds for students with disabilities may only be used to pay for special education and related service consistent with the Individuals with Disabilities Education Act (IDEA). Both Volumes "I" and "II" of USED guidance state that the funds provide for students with disabilities must be recorded and -3 - COLUMBIA COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2006 III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS ACTIVITIES ALLOWED OR UNALLOWED Inadequate Internal Control Procedures Reportable Condition U.S. Department of Education Through Georgia Department of Education Hurricane Education Recovery (CFDA No. 84.938) Finding Control Number: FA-6361-06-01 tracked separately from those HERA funds provided for non-disabled students. This Federal requirement was not specifically included in GDOE Guidelines. Provisions of HERA and GDOE guidelines state that these funds may become a part of a School District's special education budget to ensure that they are only used to pay for special education and related service consistent with IDEA. The guidelines further stated that since these funds are to be applied and used in a manner as funds made available under Part B oflDEA, it was also advised to consult with State and local staff who are cognizant of IDEA requirements. Questioned Cost: $13,613 Information: HERA funds received by the School District included $13,613 for students with disabilities. Although required by Federal guidelines, the receipt and expenditure of these funds were not maintained separately. HERA funds designated for students with disabilities were used to purchase portable classroom buildings which were utilized for the benefit ofall students. While this was a permissible expenditure of HERA funds received for those students without disabilities, HERA funds received for those displaced students with disabilities can only be used for special education and related service consistent with IDEA. We further noted that although advised by GDOE and Federal guidelines, the budget for special education was not modified for the increase in HERA funds designated for special education and related purposes. There was no evidence that State or local special education staff were consulted about the use of these funds in keeping with IDEA requirements. -4- COLUMBIA COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2006 III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS ACTIVITIES ALLOWED OR UNALLOWED Inadequate Internal Control Procedures Reportable Condition U.S. Department of Education Through Georgia Department of Education Hurricane Education Recovery (CFDA No. 84.938) Finding Control Number: FA-6361-06-01 Cause: The School District relied solely on GDOE Guidelines which did not require that the School District provide separate accountability of HERA funds provided for students with disabilities. Consideration had not been given to consulting with local and State special education staff or revising its special education budget to ensure that these HERA funds were applied in line with provisions of IDEA. Effect: HERA funds in the amount of $13,613 earmarked for students with disabilities were not used for special education and related services in accordance with IDEA. Recommendation: Management should ensure that procedures are in place to comply with both Federal and State guidelines when administering HERA funds for special education purposes. GDOE should review this matter and assess a refund of those HERA funds designated for special education purposes that were inappropriately expended by the School District. -5- SECTIONV MANAGEMENT'S RESPONSES COLUMBIA COUNTY BOARD OF EDUCATION SCHEDULE OF MANAGEMENT'S RESPONSES YEAR ENDED JUNE 30, 2006 Finding Control Number: FS-6361-06-01 The school system currently has a handbook that outlines accounting procedures and internal controls for the school activity funds. The school system's internal auditor audits each school's activity accounts annually and completes a report of any findings. The controller and the internal auditor review any findings with the school principal and bookkeeper. Ifthe findings are significant the principal will receive a "needs improvement" in his/her evaluation in this area. The school system will make every attempt to reemphasize the importance of these procedures and internal controls. Finding Control Number: FA-6361-06-01 The school system contacted the GDOE regarding purchasing classroom portables from the Hurricane Education Recovery funds and they indicated that was fine. Approximately 4.8% of the funds were earned for special education students and the school system currently serves 3.2% of special education students. In the guidelines the school system received from the GDOE there was no indication or direction that the money earned for special education students needed to be kept separate or indicated that the GDOE special education department needed to be contacted for specific directions. The State also sent out a separate group to audit these funds and in the audit report it did not indicate the School District had not accounted for the special education portion of this grant correctly. If the School District earns these funds again, the GDOE special education department will be contacted for direction as to how the funds may be accounted for and expended. Contact Person: Pat Sullivan, Controller Phone: (706) 541-2723 Fax Number: (706) 855-3843 E-mail Address: psullivan@ccboe.net