Effingham County Board of Education, Springfield, Georgia, report on audit of the financial statements for the fiscal year ended June 30, 2008

EFFINGHAM COUNTY BOARD OF EDUCATION
SPRINGFIELD, GEORGIA REPORT ON AUDIT
OF THE FINANCIAL STATEMENTS
FOR THE FISCAL YEAR ENDED JUNE 30, 2008
STATE OF GEORGIA
DEPARTMENT OF AUDITS AND ACCOUNTS
Russell W. Hinton State Auditor

EFFINGHAM COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS -

SECTION I

FINANCIAL

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

EXHIBITS

BASIC FINANCIAL STATEMENTS

DISTRICT-WIDE FINANCIAL STATEMENTS

A

STATEMENTOFNETASSETS

1

B

STATEMENT OF ACTIVITIES

2

FUND FINANCIAL STATEMENTS

C

BALANCE SHEET

GOVERNMENTAL FUNDS

4

D

RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET

TO THE STATEMENT OF NET ASSETS

5

E

STATEMENT OF REVENUES, EXPENDITURES AND CHANGES

IN FUND BALANCES

GOVERNMENTAL FUNDS

6

F

RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT

OF REVENUES, EXPENDITURES AND CHANGES IN FUND

BALANCES TO THE STATEMENT OF ACTIVITIES

7

G

STATEMENT OF FIDUCIARY NET ASSETS

FIDUCIARY FUNDS

8

H

NOTES TO THE BASIC FINANCIAL STATEMENTS

9

SCHEDULES

REQUIRED SUPPLEMENTARY INFORMATION

1 SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES

IN FUND BALANCES - BUDGET AND ACTUAL

GENERAL FUND

27

SUPPLEMENTARY INFORMATION

2 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS

28

3 SCHEDULE OF STATE REVENUE

31

EFFINGHAM COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS -

SECTION I
FINANCIAL
SCHEDULES
SUPPLEMENTARY INFORMATION
4 SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS 5 ALLOTMENTS AND EXPENDITURES
GENERAL FUND - QUALITY BASIC EDUCATION PROGRAMS (QBE) BY PROGRAM

Page
32 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 CIRCULAR A-133

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

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

EFFINGHAM COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS -
SECTIONV MANAGEMENT'S RESPONSES SCHEDULE OF MANAGEMENT'S RESPONSES

SECTION I FINANCIAL

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

DEPARTMENT OF AUDITS AND ACCOUNTS
270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400
September 24, 2009

Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members ofthe Effingham County Board of Education
INDEPENDENT AUDITOR'S COMBINED REPORT ON BASIC FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION - SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
Ladies and Gentlemen:
We have audited the accompanying financial statements ofthe governmental activities, each major fund, and the aggregate remaining fund information (Exhibits A through H) of the Effingham County Board ofEducation, as of and for the year ended June 30, 2008, which collectively comprise the Board's basic financial statements as listed in the table of contents. These financial statements are the responsibility of the Effingham County Board of Education's management. Our responsibility is to express opinions on these financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United States ofAmerica and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General ofthe United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Effingham County Board of Education's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinions.

2008ARL-11

In our opinion, the financial statements referred to previously present fairly, in all material respects, the respective financial position ofthe governmental activities, each major fund, and the aggregate remaining fund information ofthe Effingham County Board ofEducation, as ofJune 30, 2008, and the respective changes in financial position thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America.
The Effingham County Board of Education has not presented Management's Discussion and Analysis that accounting principles generally accepted in the United States of America has determined is necessary to supplement, although not to be part of, the basic financial statements.
In accordance with Government Auditing Standards, we have also issued our report dated September 24, 2009, on our consideration ofthe Effingham County Board of Education's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements and other matters. The purpose 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.
The Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual, as presented on page 27, is not a required part of the basic financial statements but is supplementary information required by the accounting principles generally accepted in the United States of America. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods ofmeasurement and presentation ofthe required supplementary information. However, we did not audit the information and express no opinion on it.
Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Effingham County Board ofEducation's basic financial statements. The accompanying supplementary information which consist of Schedules 2 through 5, which includes the Schedule of Expenditures of Federal Awards as required by U.S. Office of Management and Budget Circular A-133, Audits ofStates, Local Governments, and Non-Profit Organizations, are presented for purposes of additional analysis and are not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements, and in our opinion, is fairly stated, in all material respects, in relation to the basic financial statements taken as a whole.
A copy of this report has been filed as a permanent record in the office of the State Auditor and made available to the press of the State, as provided for by Official Code of Georgia Annotated section 50-6-24.
Respectfully submitted,

RWH:as 2008ARL-ll

~-j)Q~~
Russell W. Hinton, CPA, CGFM State Auditor

EFFINGHAM COUNTY BOARD OF EDUCATION

EFFINGHAM COUNTY BOARD OF EDUCATION STATEMENT OF NET ASSETS JUNE 30, 2008
ASSETS
Cash and Cash Equivalents Investments Accounts Receivable, Net
Taxes State Government Federal Government Other Inventories Capital Assets, Non-Depreciable Capital Assets, Depreciable (Net of Accumulated Depreciation)
Total Assets
LIABILITIES
Accounts Payable Salaries and Benefits Payable Payroll Withholdings Payable Contracts Payable Retainages Payable Deposits and Deferred Revenues Long-Term Liabilities
Due Within One Year Due in More Than One Year
Total Liabilities
NET ASSETS
Invested in Capital Assets, Net of Related Debt Restricted for
Continuation of Federal Programs Debt Service Capital Projects Unrestricted
Total Net Assets
Total Liabilities and Net Assets

EXHIBIT"A"

GOVERNMENTAL ACTIVITIES

$

26,100,963.65

6,928,324.02

3,115,275.89 7,194,152.68
46,567.91 26,240.07 47,632.76 6,607,066.00 90,206,621.00

$ ======1=40::!,~27~2,8, ~4~3-~9~8

$

2,585,990.84

11,025,524.69

4,179.46

1,629,662.54

301,794.94

331,849.00

4,716,011.99 24,520,899.06

$

45,115,912.52

$

82,435,476.95

7,005.42 7,083,572.01 1,389,393.74 4,241,483.34

$

95,156,931.46

$ ====1=4~0,~27;,,;2:;,;;,8;,;4~3=.9=8

The notes to the basic financial statements are an integral part of this statement. -1-

EFFINGHAM COUNTY BOARD OF EDUCATION STATEMENT OF ACTIVITIES
FOR THE YEAR ENDED JUNE 30, 2008

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 Other Support Services Operations of Non-Instructional Services Food Services Interest on Short-Term and Long-Term Debt
Total Governmental Activities
General Revenues Taxes Property Taxes For Maintenance and Operations For Debt Services Railroad Cars Sales Taxes Special Purpose Local Option Sales Tax For Capital Projects Other Sales Tax Grants and Contributions not Restricted to Specific Programs Investment Earnings Miscellaneous
Total General Revenues
Change in Net Assets
Net Assets - Beginning of Year

EXPENSES

CHARGES FOR SERVICES

$

68,623,288.34 $

3,492,514.75 3,456,143.34 2,064,977.71 1,909,971.68 5,402,702.92 1,414,049.06 6,332,852.18 4,844,495.30
79,346.18

5,796,583.54 1,055,845.04

$ 104,472,770.04 $

304,274.04
2,014,627.91 2,318,901.95

Net Assets - End of Year

The notes to the basic financial statements are an integral part of this statement. -2-

EXHIBIT"B"

PROGRAM REVENUES OPERATING GRANTS AND
CONTRIBUTIONS

CAPITAL GRANTS AND CONTRIBUTIONS

NET (EXPENSES) REVENUES
AND CHANGES IN NET ASSETS

$

46,813,927.11 $

1,045,878.54 651,927.49
1,287,897.94 1,936,327.70 2,573,029.65
21,238.81 3,291,667.05
162,510.28 62,601.49

2,441,128.75

$

60,288,134.81 $

2,199,404.11 $
97,093.42 114,509.36 135,919.41 38,413.24 243,915.00
251,131.96
3,080,386.50 $

-19,305,683.08
-2,446,636.21 -2,804,215.85
-679,986.35 26,356.02
-2, 715,163.91 -1,256,890.84 -3,002,771.89 -4,438,070.02
-16,744.69
-1,089,694.92 -1,055,845.04
-38, 785,346.78

$

25,263,206.14

1,902,593.24

37,256.34

9,671,556.33 643,815.86
8,049,941.00 1,049,773.68 2,004,269.62

$

48,622,412.21

$

9,837,065.43

85,319,866.03

$ ===9=5='1=5=6=,9=3=1.=46=

. 3.

EFFINGHAM COUNTY BOARD OF EDUCATION BALANCE SHEET
GOVERNMENTAL FUNDS JUNE 30, 2008

EXHIBIT"C"

ASSETS
Cash and Cash Equivalents Investments Accounts Receivable, Net
Taxes State Government Federal Government lnterfund Other Inventories

GENERAL FUND

DISTRICTWIDE
CAPITAL PROJECTS
FUND

DEBT SERVICE
FUND

TOTAL

$ 9,462,480.91 $ 13,067,972.35 $ 3,570,510.39 $ 26,100,963.65

3,460,201.72

3,468,122.30

6,928,324.02

558,411.88 7,150,153.48
46,567.91 16,723.76 10,429.83 47,632.76

1,887,907.68 43,999.20
25,000.00 15,810.24

46,939.32

2,493,258.88 7,194,152.68
46,567.91 41,723.76 26,240.07 47,632.76

Total Assets

$ 17,292,400.53 $ 18,500,891.19 $ 7,085,572.01 $ 42,878,863.73

LIABILITIES AND FUND BALANCES
LIABILITIES
Accounts Payable Accounts Payable - lnterfund Salaries and Benefits Payable Payroll Withholdings Payable Contracts Payable Retainages Payable Deposits and Deferred Revenue
Total Liabilities
FUND BALANCES
Reserved for: Continuation of Federal Programs Debt Service Capital Projects
Unreserved Designated for Student Activities Undesignated Reported in: General Fund
Total Fund Balances

$ 2,277,445.58 $ 25,000.00
11,025,524.69 4,179.46
331 849.00

306,545.26 $ 16,723.76
1,629,662.54 301,794.94

$ 13,663,998.73 $ 2,254,726.50 $

2,000.00 $

2,585,990.84 41,723.76
11,025,524.69 4,179.46
1,629,662.54 301,794.94 331,849.00

2,000.00 $ 15,920,725.23

$

7,005.42

$

7,005.42

$ 7,083,572.01

7,083,572.01

$ 16,246,164.69

16,246,164.69

358,422.80

358,422.80

3,262,973.58

3,262,973.58

$ 3,628,401.80 $ 16,246,164.69 $ 7,083,572.01 $ 26,958,138.50

Total Liabilities and Fund Balances

$ 17,292,400.53 $ 18,500,891.19 $ 7,085,572.01 $ 42,878,863.73

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

EFFINGHAM COUNTY BOARD OF EDUCATION RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET
TO THE STATEMENT OF NET ASSETS JUNE 30, 2008

EXHIBIT"D"

Total Fund Balances - Governmental Funds (Exhibit "C")
Amounts reported for Governmental Activities in the Statement of Net Assets are different because:
Capital Assets used in Governmental Activities are not financial resources and therefore are not reported in the funds. These assets consist of:
Land Construction in Progress Land Improvements Buildings Equipment Accumulated Depreciation
Total Capital Assets
Some of the School District's property tax revenues will be collected after year-end but are not available soon enough to pay for the current period's expenditures.
Long-Term Liabilities, including Bonds Payable, are not due and payable in the current period and therefore are not reported as liabilities in the funds. Long-Term Liabilities at year-end consist of:
Bonds Payable Capital Leases Unamortized Bond Premiums
Total Long-Term Liabilities

$ 26,958,138.50

$

3,248,707.00

3,358,359.00

10,751,215.00

109,012,894.00

11,541,745.00

-41,099,233.00

96,813,687.00

622,017.01

$ -20,945,000.00 -7,903, 133.07 -388,777.98

-29,236,911.05

Net Assets of Governmental Activities (Exhibit "A")

$ 95,156,931.46

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

EFFINGHAM COUNTY BOARD OF EDUCATION STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES
GOVERNMENTAL FUNDS YEAR ENDED JUNE 30, 2008

EXHIBIT"E"

GENERAL FUND

DISTRICTWIDE
CAPITAL PROJECTS
FUND

DEBT SERVICE
FUND

TOTAL

REVENUES

Property Taxes Sales Taxes State Funds Federal Funds Charges for Services Investment Earnings Miscellaneous

$ 25,014,086.95 598,533.68 $
62,538,060.50 6,043,930.31 2,318,901.95 269,525.98 1,923,519.62

$ 9,671,556.33 2,836,471.50

1,857,054.84 $ 45,282.18

583,049.72 80,750.00

197,197.98

26,871,141.79 10,315,372.19 65,374,532.00
6,043,930.31 2,318,901.95 1,049,773.68 2,004,269.62

Total Revenues

$ 98,706,558.99 $ 13,171,827.55 $ 2,099,535.00 $ 113,977,921.54

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 Other Support Services Food Services Operation
Capital Outlay Debt Services
Principal Interest

$ 64,043,175.61 $

475,549.72

$ 64,518,725.33

3,492,514.75 3,456,143.34 1,889,979.55 1,921,799.30 5,170,268.25 1,126,370.98 7,009,740.94 4,411,706.22
79,346.18 5,292,024.06
586,263.50

5,250.00 $ 382,988.70
11,996,330.27

6,534.63

3,492,514.75 3,456,143.34 1,889,979.55 1,921,799.30 5,170,268.25 1,138,155.61 7,009,740.94 4,794,694.92
79,346.18 5,292,024.06 12,582,593.77

557,191.91 342,502.65

1,660,000.00 799,737.50

2,217,191.91 1,142,240.15

Total Expenditures

$ 99,379,027.24 $ 12,860,118.69 $ 2,466,272.13 $ 114,705,418.06

Excess of Revenues over (under) Expenditures

$

-672,468.25 $

311,708.86 $ -366,737.13 $

-727,496.52

OTHER FINANCING SOURCES (USES)

Transfers In Transfers Out

$ 2,909,109.04 $ 4,346,995.02 $

$ -2,909, 109.04

-4,346,995.02

7,256,104.06 -7,256,104.06

Total Other Financing Sources (Uses) $ -2,909,109.04 $ -1,437,885.98 $ 4,346,995.02 $

0.00

Net Change in Fund Balances

$ -3,581,577.29 $ -1,126,177.12 $ 3,980,257.89 $

-727,496.52

Fund Balances - Beginning

7,209,979.09

17,372,341.81

3,103,314.12

27,685,635.02

Fund Balances - Ending

$ 3,628,401.80 $ 16,246,164.69 $ 7,083,572.01 $ 26,958,138.50

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

EFFINGHAM 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, 2008

EXHIBIT "F"

Total Net Change in Fund Balances - Governmental Funds (Exhibit "E")
Amounts reported for Governmental Activities in the Statement of Activities are different because:
Capital Outlays are reported as expenditures in Governmental Funds. However, in the Statement of Activities, the cost of Capital Assets is allocated over their estimated useful lives as depreciation expense. In the current period, these amounts are:
Capital Outlay Depreciation Expense
Excess of Capital Outlay over Depreciation Expense
Because some property taxes will not be collected for several months after the School District's fiscal year ends, they are not considered "available" revenues.
Repayment of Long-Term Debi is reported as an expenditure in Governmental Funds, but the repayment reduces Long-Term Liabilities in the Statement of Net Assets. In the current year, these amounts consist of:
Bond Principal Retirements Capital Lease Payments
Total Long-Term Debt Repayments
The amortization of the bond premium is reported in the Statement of Activities and does not require the use of current financial resources and therefore is not reported as an expenditure in Governmental Funds.

$

-727,496.52

$ 11,634,305.00 -3,705,244.00

7,929,061.00

331,913.93

$ 1,660,000.00 557 191.91

2,217,191.91

86,395.11

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

$ 9,837,065.43

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

EFFINGHAM COUNTY BOARD OF EDUCATION STATEMENT OF FIDUCIARY NET ASSETS FIDUCIARY FUNDS JUNE 30, 2008
ASSETS Cash and Cash Equivalents
LIABILITIES Funds Held for Others

EXHIBIT"G"
AGENCY FUNDS
$ 323,070.86
$ 323,070.86

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

EFFINGHAM COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2008

EXHIBIT "H"

Note 1: DESCRIPTION OF SCHOOL DISTRICT AND REPORTING ENTITY
REPORTING ENTITY
The Effingham 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 Effingham County Board of Education.
District-wide Statements: The Statement ofNet Assets and the Statement ofActivities display information about the financial activities ofthe overall School District, except for fiduciary activities. Eliminations have been made to minimize the double counting of internal activities. Governmental activities generally are financed through taxes, intergovernmental revenues, and other nonexchange transactions.
The Statement of Activities presents a comparison between direct expenses and program revenues for each function of the School District's governmental activities.
Direct expenses are those that are specifically associated with a program or function and, therefore, are clearly identifiable to a particular function. Indirect expenses (expenses of the School District related to the administration and support ofthe School District's programs, such as office and maintenance personnel and accounting) are not allocated to programs.
Program revenues include (a) charges paid by the recipients ofgoods or services offered by the programs and (b) grants and contributions that are restricted to meeting the operational or capital requirements of a particular program. Revenues that are not classified as program revenues, including all taxes, are presented as general revenues.
Fund Financial Statements: The fund financial statements provide information about the School District's funds, including fiduciary funds. Eliminations have been made to minimize the double counting ofinternal activities. Separate statements for each category (governmental and fiduciary) are presented. The emphasis of fund financial statements is on major governmental funds, each displayed in a separate column.
The School District reports the following major governmental funds:
-9-

EFFINGHAM COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2008

EXHIBIT "H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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.
The School District reports the following fiduciary fund type:
Agency funds account for assets held by the School District as an agent for various funds, governments or individuals.
BASIS OF ACCOUNTING
The basis ofaccounting determines when transactions are reported on the financial statements. The District-wide governmental and fiduciary fund financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded at the time liabilities are incurred, regardless ofwhen the related cash flows take place. Nonexchange transactions, in which the School District gives (or receives) value without directly receiving (or giving) equal value in exchange, include property taxes, sales taxes, grants and donations. On an accrual basis, revenue from property taxes is recognized in the fiscal year for which the taxes are levied. Revenue from sales taxes is recognized in the fiscal year in which the underlying transaction (sale) takes place. Revenue from grants and donations is recognized in the fiscal year in which all eligibility requirements have been satisfied.
The School District uses funds to report on its financial position and the results of its operations. Fund accounting is designed to demonstrate legal compliance and to aid financial management by segregating transactions related to certain governmental functions or activities. A fund is a separate accounting entity with a self-balancing set of accounts.
Governmental funds are reported using the current financial resources measurement focus and the modified accrual basis ofaccounting. Under this method, revenues are recognized when measurable and available. The School District considers all revenues reported in the governmental funds to be available if they are collected within sixty days after year-end. Property taxes, sales taxes and interest are considered to be susceptible to accrual. Expenditures are recorded when the related fund liability is incurred, except for principal and interest on general long-term debt, which are recognized as expenditures to the extent they have matured. Capital asset acquisitions are reported as expenditures in governmental funds. Proceeds ofgeneral long-term liabilities and acquisitions under capital leases are reported as other financing sources.
- 10 -

EFFINGHAM COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2008

EXHIBIT"H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The School District funds certain programs by a combination ofspecific cost-reimbursement grants, categorical grants, and general revenues. Thus, when program costs are incurred, there are both restricted and unrestricted net assets available to finance the program. It is the School District's policy to first apply grant resources to such programs, followed by cost-reimbursement grants, then general revenues.
CASH AND CASH EQUIVALENTS
COMPOSITION OF DEPOSITS Cash and cash equivalents consist ofcash on hand, demand deposits and short-term investments with original maturities of three months or less from the date of acquisition in authorized financial institutions. Official Code of Georgia Annotated Section 45-8-14 authorize the School District to deposit its funds in one or more solvent banks, insured Federal savings and loan associations or insured chartered building and loan associations.
INVESTMENTS
COMPOSITION OF INVESTMENTS Investments made by the School District in nonparticipating interest-earning contracts (such as certificates ofdeposit) and repurchase agreements are reported at cost. Participating interest-earning contracts and money market investments with a maturity at purchase ofone year or less are reported at amortized cost. Both participating interest-earning contracts and money market investments with a maturity at purchase greater than one year and equity investments are reported at fair value. The Official Code of Georgia 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 of return 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
- 11 -

EFFINGHAM COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2008

EXHIBIT "H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(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 Effingham County Board ofCommissioners fixed the property tax levy for the 2007 tax digest year (calendar year) on June 19, 2007 (levy date). Taxes were due on November 15, 2007 (lien date). Taxes collected within the current fiscal year or within 60 days after year-end on the 2007 tax digest are reported as revenue in the governmental funds for fiscal year 2008. The Effingham 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, 2008, for maintenance and operations amounted to $24,976,830.60 and for school bonds amounted to $1,857,054.84.

Tax millage rates levied for the 2007 tax year (calendar year) for the Effingham County Board of Education were as follows (a mill equals $1 per thousand dollars of assessed value):

School Operations School Bonds

15.570 mills 1.178 mills

16.748 mills

SALES TAXES

Special Purpose Local Option Sales Tax, at the fund reporting level, during the year amounted to $9,671,556.33 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.

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EFFINGHAM COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2008

EXHIBIT "H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

INVENTORIES

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

CAPITAL ASSETS

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

Capitalization thresholds and estimated useful lives of capital assets reported in the District-wide statements are as fol.lows:

Capitalization Policy

Estimated Useful Life

Land Land Improvements Buildings and Improvements Equipment

Any Amount $ 50,000.00 $ 50,000.00 $ 5,000.00

NIA 15 years 20 to 40 years 5 to 10 years

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

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EFFINGHAM COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2008

EXHIBIT"H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
GENERAL OBLIGATION BONDS
The School District issues general obligation bonds to provide funds for the acquisition and construction of major capital facilities. In the District-wide financial statements, bond premiums and discounts are deferred and amortized over the life of the bonds using the straight-line method.
In the District-wide and fund financial statements, the School District recognizes bond issuance costs during the fiscal year bonds are issued. Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as debt service expenditures. To conform to generally accepted accounting principles, bond issuance costs should be deferred and amortized over the life of the bonds using the straight-line method. The effect ofthis deviation is deemed to be immaterial to the fair presentation of the basic financial statements.
General obligation bonds are direct obligations and pledge the full faith and credit of the government. The outstanding amount of these bonds is recorded in the Statement ofNet Assets.
NET ASSETS
The School District's net assets in the District-wide Statements are classified as follows:
Invested in capital assets, net of related debt - This represents the School District's total investment in capital assets, net ofoutstanding debt obligations related to those capital assets. To the extent debt has been incurred but not yet expended for capital assets, such amounts are not included as a component of invested in capital assets, net of related debt.
Restricted net assets - These represent resources for which the School District is legally or contractually obligated to spend resources for continuation of Federal programs, debt service and capital projects in accordance with restrictions imposed by external third parties.
Unrestricted net assets - Unrestricted net assets represent resources derived from property taxes, sales taxes, grants and contributions not restricted to specific programs, charges for services, and miscellaneous revenues. These resources are used for transactions relating to the educational and general operations of the School District, and may be used at the discretion of the Board to meet current expenses for those purposes.
Note 3: DEPOSITS AND INVESTMENTS
COLLATERALIZATION OF DEPOSITS Official Code of Georgia Annotated (OCGA) Section 45-8-12 provides that there shall not be on deposit at any time in any depository for a time longer than ten days a sum of money which has not been secured by surety bond, by guarantee 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

- 14 -

EFFINGHAM COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2008

EXHIBIT "H"

Note 3: DEPOSITS AND INVESTMENTS
110 percent ofthe public funds being secured after the deduction ofthe amount ofdeposit insurance. Ifa depository elects the pooled method (OCGA 45-8-13 .1) the aggregate ofthe market value ofthe securities pledged to secure a pool ofpublic funds shall be not less than 110 percent ofthe daily pool balance.
Acceptable security for deposits consists of any one of or any combination of the following:
(1) Surety bond signed by a surety company duly qualified and authorized to transact business within the State of Georgia,
(2) Insurance on accounts provided by the Federal Deposit Insurance Corporation,
(3) Bonds, bills, notes, certificates of indebtedness or other direct obligations of the United States or of the State of Georgia,
(4) Bonds, bills, notes, certificates of indebtedness or other obligations of the counties or municipalities 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 of the State of Georgia, and
(7) Bonds, bills, notes, certificates of indebtedness, or other obligations of a subsidiary corporation of the United States government, which are fully guaranteed by the United States government both as to principal and interest or debt obligations issued by or securities guaranteed 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, 2008, the bank balances were $27,496,183.73. The amounts ofthe total uninsured bank balances are classified into three categories of custodial credit risk:
Category 1 - Uncollateralized, Category 2 - Cash collateralized with securities held by the pledging financial institution, or Category 3 - Cash collateralized with securities held by the pledging financial institution's
trust department or agent but not in the School District's name.
The School District's uninsured deposits are classified by custodial credit risk category at June 30, 2008, as follows:
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EFFINGHAM COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2008

EXHIBIT "H"

Note 3: DEPOSITS AND INVESTMENTS

Custodial Credit Risk Category

Bank Balance

1

$

0.00

2

7,474,367.72

3

19,464,528.10

Total

$ 26,938,895.82

CATEGORIZATION OF INVESTMENTS The School District's investments as of June 30, 2008, are presented below. All investments are presented by investment type and debt securities are presented by maturity.

Investment Type

Fair Value

Investment Maturity Less than
1 Year

Debt Securities U.S. Agencies Implicitly Guaranteed Federal National Mortgage Association Discount Notes

$ 3,468,122.30 $ 3,468,122.30

Investment Pools Office of Treasury and Fiscal Services Georgia Fund 1

3,460,201.72

Total Investments

$ 6,928,324.02

The Georgia Fund 1, formerly referred to as LGIP, administered by the State of Georgia, Office of Treasury and Fiscal Services is not required to be categorized since the School District did not own any specific identifiable securities in the pool. The investment policy ofthe State of Georgia, Office of Treasury and Fiscal Services for the Georgia Fund 1 (Primary Liquidity Portfolio) does not provide for investment in derivatives or similar investments. Additional information on the Georgia Fund 1 is disclosed in the State ofGeorgia Comprehensive Annual Financial Report. This audit can be obtained from the Georgia Department of Audits and Accounts at http://www.audits.state.ga.us/intemet/searchRpts.html.

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EFFINGHAM COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2008

EXHIBIT "H"

Note 3: DEPOSITS AND INVESTMENTS

The Primary Liquidity Portfolio consists of Georgia Fund 1 which is not registered with the SEC as an investment company but does operate in a manner consistent with the SEC's Rule 2a-7 of the Investment Company Act of 1940. The investment is valued at the pool's share price, $1.00 per share. The pool is an AAAm rated investment pool by Standard and Poor's. The weighted average maturity of Georgia Fund 1 may not exceed 60 days. The weighted average maturity for Georgia Fund 1 on June 30, 2008, was 40 days.

Interest Rate Risk Interest rate risk is the risk that changes in interest rates of debt investment will adversely affect the fair value ofan investment. The School District does not have a formal policy for managing interest rate risk.

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

At June 30, 2008, $3,468,122.30 ofthe School District's applicable investments were (1) uninsured and unregistered, with securities held by the counterparty's trust department or agent in the name of the School District and (2) uninsured or unregistered, with securities held by the counterparty, or by its trust department or agent, but not in the School District's name.

Credit Quality Risk Credit quality risk is the risk that an issuer or other counterparty to an investment will not fulfill its obligations. The School District does not have a formal policy for managing credit quality risk.

The investments subject to credit quality risk are reflected below:

Rated Debt Investments

Fair Value

Quality Ratings Unrated

Debt Securities U.S. Agencies Implicitly Guaranteed Federal National Mortgage Association Discount Notes

$ 3,468,122.30 $ 3,468,122.30

Concentration of Credit Risk Concentration of credit risk is the risk of loss attributed to the magnitude of a government's investment in a single issuer. The School District does not have a formal policy for managing concentration of credit risk. More than 5% of the School District's investments are in Federal National Mortgage Association Discount Notes. This investment is 50% of the School District's total investments.

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EFFINGHAM COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2008

EXHIBIT"H"

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:

Governmental Activities Capital Assets, Not Being Depreciated:
Land Construction in Progress
Total Capital Assets Not Being Depreciated
Capital Assets Being Depreciated Buildings and Improvements Equipment Land Improvements
Less Accumulated Depreciation for: Buildings and Improvements Equipment Land Improvements
Total Capital Assets, Being Depreciated, Net
Governmental Activity Capital Assets - Net

Balances
July 1. 2007

Increases

Decreases

Balances June 30, 2008

$ 3,248,707.00

$ 3,248,707.00

6,609,551.00 $ 9,775,108.00 $ 13.026.300.00 3.358.359.00

$ 9.858.258.00 $ 9,775,108.00 $ 13.026.300.00 $ 6.607.066.00

$ 95,953,038.00 $ 13,059,856.00

10,220,927.00 1,495,972.00 $

10,421,546.00

329,669.00

$109,012,894.00 175,154.00 11,541,745.00
10,751,215.00

22,583,538.00 6,382,587.00 8,603.018.00

2,512,546.00 810,472.00 382.226.00

175,154.00

25,096,084.00 7,017,905.00 8,985,244.00

$ 79.026.368.00 $11,180,253.00 $

0.00 $ 90,206,621.00

$ 88,884,626,QQ $ 20 255 361 QQ $ 13 Q26,3QQ,QQ $ 26,813,681.QQ

Capital assets being acquired under capital leases as of June 30, 2008, are as follows:

Governmental Funds

Buildings and Improvements Land Less: Accumulated Depreciation

$ 9,728,973.00 275,000.00 851,284.33

$ 9.152,688.67

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EFFINGHAM COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2008

EXHIBIT"H"

Note 5: CAPITAL ASSETS

Current year depreciation expense by function is as follows:

Instruction Support Services
Educational Media Services School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Food Services

$ 2,487,191.00

$ 114,326.00 134,832.00 160,043.00 45,231.00 467,917.00

922,349.00 295,704.00

$ 3,705,244.00

Note 6: RESTRICTED ASSETS

Special Purpose Local Option Sales Tax (SPLOST), general obligation bond proceeds, Qualified Zone Academy Bonds (QZAB) escrow account, and property tax levied specifically for retirement of outstanding bond principal, interest and paying agent's fees (Debt Service Funds) are restricted assets in the Statement ofNet Assets because their use is limited by applicable bond covenants or statutory provisions. Restricted assets at June 30, 2008, 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

$ 3,570,510.39 $ 13,067,972.35
$ 3,468,122.30 $ 1,671,403.12 $ 1,788,798.60

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, 2008, consisted of the following:

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EFFINGHAM COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2008

EXHIBIT "H"

Note 7: INTERFUND ASSETS AND LIABILITIES

Due From Other Funds

Due To Other Funds

General Fund District-wide Capital Projects

$ 16,723.76 $ 25,000.00

25,000.00

16,723.76

$ 41,723.76 $ 41)23.76

Transfers are used to reimburse the General Fund for Capital Projects expenditures and to transfer donations from the General Fund to the Capital Projects Fund.

Note 8: INTERFUND TRANSFERS

Interfund transfers for the year ended June 30, 2008, consisted of the following:

Transfer to

Transfers From

District-wide

General

Capital

Fund

Projects

District-wide Capital Projects
Debt Service Fund

$ 2,909,109.04 $ 4,346,995.02

Total

$ 2,909,109.04 $ 4,346,995.02

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, and to move funds collected by the Capital Projects Fund to the Debt Service Fund as needed for repayment of bond principal and interest.

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 has obtained commercial insurance for risk ofloss associated with torts, assets, errors or omissions,job related illness or injuries to employees and acts ofGod. The School District has neither significantly reduced coverage for these risks nor incurred losses (settlements) which exceeded the School District's insurance coverage in any of the past three years.

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EFFINGHAM COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2008

EXHIBIT "H"

Note 9: RISK MANAGEMENT

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. The Effingham County Board of Education has not incurred any liabilities for unemployment compensation during the past two fiscal years.

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

Position Covered

Amount

Superintendent Each Employee

$ 100,000.00 $ 50,000.00

Note 10: LONG-TERM DEBT

CAPITAL LEASES The Effingham County Board ofEducation entered into an agreement dated February 2003, with the Georgia School Board Association for the construction and subsequent lease of various school facilities. Under the terms ofthe agreement, the School District will make annual payments through August 15, 2018. This lease agreement qualifies as a capital lease for accounting purposes, and, therefore, has been recorded at the present value of the future minimum lease payments as of the date of its inception.

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

Purpose

Interest Rates

Amount

General Government - Series 1994 General Government - QZAB - Series 2001B General Government - Series 2006A General Government - QZAB - Series 2006B

4.20% - 6.25% 0.00%
4.00%- 5.00% 0.00%

$ 1,745,000.00 4,200,000.00 13,000,000.00 2.000.000.00

$ 20,945,000.00

The changes in Long-Term Debt during the fiscal year ended June 30, 2008, were as follows:

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EFFINGHAM COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2008

EXHIBIT "H"

Note 10: LONG-TERM DEBT

Balance July 1, 2007

Governmental Funds

Additions

Deductions

Balance June 30, 2008

Due Within One Year

G.O. Bonds

$ 22,605,000.00 $

0.00 $ 1,660,000.00 $20,945,000.00 $ 4,050,000.00

Capital Leases

8,460,324.98

557,191.91 7,903,133.07 579,616.88

BondPremiumsAmortized

475,173.09 _ _ __

86,395.11 388,777.98

86,395.11

$3J.540,49807 $.===o....,oo $ 2.303.587.02 $22,236,211.05 $ 4,716,011.22

At June 30, 2008, payments due by fiscal year which includes principal and interest for these items are as follows:

Fiscal Year Ended June 30

Capital Leases

Principal

Interest

2009 2010 2011 2012 2013 2014 - 2018 2019

$ 579,616.88 $ 604,794.20 630,119.12 656,504.48 683,371.51
3,873,902.63 874.824.25

319,604.32 293,895.54 268,036.04 241,093.71 213,659.55 601,604.94
18.165.48

Total Principal and Interest

$ 7,903,133.07 $ 1,956,059.58

Fiscal Year Ended June 30

General Obligation

Debt

Principal

Interest

Unamortized Bond
Premium

2009 2010 2011 2012 2013 2014 - 2018 2019 - 2022

$ 4,050,000.00 $ 2,445,000.00 2,590,000.00 2,750,000.00 2,910,000.00 4,200,000.00 2.000.000.00

649,887.00 $ 445,825.00 338,900.00 213,187.50
72,750.00

86,395.11 86,395.11 86,395.11 86,395.11 43,197.54

Total Principal and Interest

$ 20,245,000.00 $ 1,720,549.50 $ 388,777.98

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EFFINGHAM COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2008

EXHIBIT "H"

Note 11: ON-BEHALF PAYMENTS

The School District has recognized revenues and costs in the amount of $1,973,501.48 for health insurance and retirement contributions paid on the School District's behalf by the following State Agencies.

Georgia Department of Education Paid to the Georgia Department of Community Health For Health Insurance ofNon-Certified Personnel In the amount of $1,914,486.57

Paid to the Teachers Retirement System of Georgia For Teachers Retirement System (TRS) Employer's Cost In the amount of $47,911.91

Office of Treasury and Fiscal Services Paid to the Public School Employees Retirement System For Public School Employees Retirement (PSERS) Employer's Cost In the amount of $11,103.00

Note 12: SIGNIFICANT COMMITMENTS

The following is an analysis ofsignificant outstanding construction or renovation contracts executed by the School District as of June 30, 2008, together with funding available:

Project

Unearned Executed Contracts

Funding Available From State

Sandhill Elementary School South Effingham Middle School South Effingham High School Gym 0SG-651-009 08G-651-010 08G-651-011 08G-651-012 0SRA-651-008

$

6,537.82

1,500.00

1,000.00

22,618.00

25,041.24

600.00

600.00

15,342,165.10

$ 113,683.30 39,497.30 113,683.30 43,410.80
8,621,666.80

$ 15A001062.16 $ 8,931,941.50

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

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EFFINGHAM COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2008

EXHIBIT "H"

Note 13: SIGNIFICANT CONTINGENT LIABILITIES

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

The School District is a defendant in various legal proceedings pertaining to matters incidental to the performance ofroutine School District operations. The ultimate disposition ofthese proceedings is not presently determinable, but is not believed to be material to the basic financial statements.

Note 14: POSTEMPLOYMENT BENEFITS

Georgia Retiree Health Benefit Fund

Plan Description. The School District contributes to the Georgia Retiree Health Benefit Fund ("GRHBF"), a cost-sharing multiple-employer defined benefit postemployment healthcare plan administered by the Department ofCommunity Health. GRHBF provides health insurance benefits to eligible retirees and their qualified beneficiaries. Pursuant to Title 45, Chapter 18 ofthe Official Code ofGeorgia Annotated, the authority to establish and amend the benefit provisions ofthe plan is assigned to the Board of Community Health. The Department of Community Health issues a publicly available financial report that includes financial statements and required supplementary information for GRHBF. That report may be obtained from the Department ofCommunity Health at 2 Peachtree Street, Atlanta, Georgia 30303.

Funding Policy. The contribution requirements of plan members and participating employers are established and may be amended by the Board of Community Health. Contributions of plan members or beneficiaries receiving benefits vary based on plan election, dependent coverage, and Medicare eligibility and election. On average, plan members pay approximately twenty-five percent (25%) of the cost of health insurance coverage.

Participating employers are statutorily required to contribute in accordance with the employer contribution rate established by the Board of Community Health. This contribution rate is established to fund both the active and retired employee health insurance plans based on projected pay-as-you-go financing requirements. The employer contribution rates for the combined active and retiree plans for the fiscal year ended June 30, 2008, were as follows:

Teachers Non-Certificated Employees

18.534% of state-based salaries $162.72 per month

The School District's contribution to the health insurance plans for the fiscal year ended June 30, 2008, was $8,694,616.15, which equaled the required contribution.

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EFFINGHAM COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2008

EXHIBIT "H"

Note 15: RETIREMENT PLANS

TEACHERS RETIREMENT SYSTEM OF GEORGIA (TRS)

TRS PLAN DESCRIPTION Substantially all teachers, administrative and clerical personnel employed by local school systems are covered by the Teachers Retirement System ofGeorgia (TRS), which is a cost-sharing multiple employer defined benefit pension plan. TRS provides service retirement, disability retirement and survivors benefits for its members in accordance with State statute. The Teachers Retirement System of Georgia issues a separate stand alone financial audit report and a copy can be obtained from the Georgia Department of Audits and Accounts.

TRS CONTRIBUTIONS REQUIRED AND MADE Employees ofthe School District who are covered by TRS are required by State statute to contribute 5% oftheir gross earnings to TRS. The School District makes monthly employer contributions to TRS at rates adopted by the TRS Board ofTrustees in accordance with State statute and as advised by their independent actuary. The required employer contribution rate is 9.28% and employer contributions for the current fiscal year and the preceding two fiscal years are as follows:

Fiscal Year

Percentage Contributed

Required Contribution

2008 2007 2006

100% 100% 100%

$ 5,031,068.18 $ 4,518,801.00 $ 3,979,176.00

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EFFINGHAM COUNTY BOARD OF EDUCATION GENERAL FUND
SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL
YEAR ENDED JUNE 30, 2008

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 Other Support Services Food Services Operation
Capital Outlay Debt Service
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

$ 19,250,000.00 $ 24,000,000.00 $ 25,014,086.95

828,000.00

754,000.00

598,533.68

53,720,746.66

58,816,427.00

62,538,060.50

6,533,490.25

6,126,624.40

6,043,930.31

1,974,550.00

2,160,260.15

2,318,901.95

18,000.00

11,000.00

269,525.98

1,224,774.00

1 378 540.66

1,923,519.62

$ 83,549,560.91 $ 93,246,852.21 $ 98,706,558.99

$ 54,942,769.84 $ 60,329,201.32 $ 64,043,175.61

2,872,328.27 1,902,413.23 1,841,658.87 1,230,689.78 4,858,187.95 1,041,355.97 5,300,987.14 3,532,325.75
21,670.00 4,703,124.00
410,200.00 900 167.00

3,506,720.13 3,153,287.70 1,888,637.00 1,862,465.00 4,912,577.91 1,253,268.00 5,908,015.49 4,006,478.00
48,448.00 4,892,814.10
582,190.00 899,693.66

3,492,514.75 3,456,143.34 1,889,979.55 1,921,799.30 5,170,268.25 1,126,370.98 7,009,740.94 4,411,706.22
79,346.18 5,292,024.06
586,263.50 899 694.56

$ 83 557 877.80 $ 93,243,796.31 $ 99,379,027.24

$

-8,316.89 $

3,055.90 $

-672,468.25

$

-8,316.89 $

11 565 496.44

3,055.90 $ 7,760,046.09

-2,909, 109.04 -3,581,577.29 7,209,979.09

Fund Balances - Ending

$ 11 557 179.55 $

7,763,101.99 $ =====3=,6=28=,4=0=1=.8=0

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.

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EFFINGHAM COUNTY BOARD OF EDUCATION SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
YEAR ENDED JUNE 30, 2008

SCHEDULE "2"

FUNDING AGENCY PROGRAM/GRANT
Agriculture, U.S. Department of Child Nutrition Cluster Pass-Through From Georgia Department of Education Food Services School Breakfast Program National School Lunch Program
Total Child Nutrition Cluster
Other Programs Pass-Through From Georgia Department of Education Food Donation (1)
Total U.S. Department of Agriculture
Education, U.S. Department of Special Education Cluster Pass-Through From Georgia Department of Education Special Education Grants to States Preschool Grants
Total Special Education Cluster
Other Programs Pass-Through From Georgia Department of Education Career and Technical Education - Basic Grants to States English Language Acquisition Grants Even Start Improving Teacher Quality State Grants Safe and Drug-Free Schools and Communities - State Grants State Grants for Innovative Programs Title I Grants to Local Educational Agencies
Total U.S. Department of Education
Defense, U. S. Department of Direct Department of the Air Force R.O.T.C. Program Department of the Navy R.O.T.C. Program
Total U.S. Department of Defense

CFDA NUMBER

PASSTHROUGH
ENTITY ID
NUMBER

EXPENDITURES IN PERIOD

. 10.553 . 10.555

N/A N/A $
$

(2) 4,021,179.05
4,021,179.05

10.550

N/A $

181,024.87 4,202,203.92

84.027 84.173

N/A $ N/A
$

1,617,244.93 65,220.53
1,682,465.46

84.048 84.365
. 84.213 84.367 84.186 84.298 84.010

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

70,576.00 10,509.13 279,805.00 371,035.16 47,868.83 13,609.92 1,266,270.86
3,742,140.36

$

51,344.27

72 079.85

$

123,424.12

Total Federal Financial Assistance
NIA = Not Available

$===8'=06=7=,7=6=8.=4=0

- 28 -

EFFINGHAM COUNTY BOARD OF EDUCATION SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
YEAR ENDED JUNE 30, 2008

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 ($447,390.84) were not maintained separately and are included in the 2008 National School Lunch Program.
Major Programs are identified by an asterisk (*) in front of the CFDA number.
The School District did not provide Federal Assistance to any Subrecipient.
The accompanying schedule of expenditures of Federal awards includes the Federal grant activity of the Effingham County Board of Education and is presented on the modified accrual basis of accounting which is the basis of accounting used in the presentation of the fund financial statements.

See notes to the basic financial statements.

- 29 -

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EFFINGHAM COUNTY BOARD OF EDUCATION SCHEDULE OF STATE REVENUE YEAR ENDED JUNE 30, 2008

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 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 Education Equalization Funding Grant Food Services Vocational Education Amended Formula Adjustment Other State Programs Drivers Education Grant Dropout Recovery and Prevention Graduation Coaches Health Insurance Middle School Summer Remedial Program National Teacher Certification Preschool Handicapped Program Teachers' Retirement Technology/Career Education Supervision Virtual Schools Grant
Georgia State Financing and Investment Commission Reimbursement on Construction Projects
Office of Treasury and Fiscal Services Public School Employees Retirement

GOVERNMENTAL FUND TYPES

CAPITAL

GENERAL

PROJECTS

FUND

FUND

TOTAL

$ 2,133,936.54

$ 2,133,936.54

2,629,140.00 927,648.00
6,964,821.00 1,360,365.00 3,476,553.00
776,229.00 6,352,653.00 5,331,686.00 2,404,704.00
6,835,871.00 1,941,992.00
382,167.00 520,727.00 122,895.00 1,105,646.00 339,208.00 219,479.00
1,381,722.00 2,101,126.00 2,799,807.00
1,263,513.00 243,915.00 191,726.00
8,049,941.00 262,040.00 389,633.70 -899,927.00
139,368.91 26,412.00
265,098.87 1,914,486.57
7,395.00 102,752.00 378,812.00 47,911.91 34,653.00
850.00

2,629,140.00 927,648.00
6,964,821.00 1,360,365.00 3,476,553.00
776,229.00 6,352,653.00 5,331,686.00 2,404,704.00
6,835,871.00 1,941,992.00
382,167.00 520,727.00 122,895.00 1,105,646.00 339,208.00 219,479.00
1,381,722.00 2,101,126.00 2,799,807.00
1,263,513.00 243,915.00 191,726.00
8,049,941.00 262,040.00 389,633.70 -899,927.00
139,368.91 26,412.00 265,098.87 1,914,486.57
7,395.00 102,752.00 378,812.00 47,911.91 34,653.00
850.00

$ 2,836,471.50 11103.00

2,836,471.50 11,103.00

See notes to the basic financial statements.

$ 62,538,060.50 $ 2,836,471.50 $ 65,374,532.00 - 31 -

EFFINGHAM COUNTY BOARD OF EDUCATION SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS
YEAR ENDED JUNE 30, 2008

SCHEDULE "4"

PROJECT SPLOST II

ORIGINAL ESTIMATED
COST(1)

CURRENT ESTIMATED COSTS (2)

AMOUNT EXPENDED IN CURRENT
YEAR (3)

AMOUNT EXPENDED
IN PRIOR YEARS (3)

PROJECT STATUS

The constructing, equipping and furnishing of

a new elementary school to replace the present

Springfield Central Elementary School; a new

elementary school to replace the present Marlow

Elementary School; new classroom wings at

Guyton and Sand Hill Elementary Schools,

and Ebenezer Middle School; a new gymnasium

and media center at Rincon Elementary School;

a new band room at South Effingham Middle

School; outdoor physical education/sports

facilities at middle and high schools; a new

middle school to replace the present Effingham

County Middle School; replacing aged roofs

and heating/air conditioning units, as necessary,

at all School District buildings; renovating/

relocating, furnishing and equipping Alternative

School; installing air conditioning units in

gymnasiums at Ebenezer, Guyton, Marlow and

Sand Hill Elementary Schools and at South

Effingham Middle School; installing additional

playground equipment at all elementary schools;

renovating the Board of Education's Bus Shop,

installing bus washing equipment, replacing

maintenance vehicles and purchasing new

buses; constructing an access road behind

Effingham County Middle School; renovating and

modifying to the Board of Education's central

offices in Springfield; purchasing new textbooks

and instructional equipment, including band and

vocational equipment; installing storage buildings

at all schools; purchasing land for Effingham

County School District operations, including future

school sites; adding to, remodeling, renovating,

improving, and equipping existing educational

buildings, properties, and facilities of the School

District, acquiring any necessary personal and

real property and equipment, including computers

and related technology, copiers, energy management

systems, heating and air conditioning systems,

lighting, fencing and paving, security and safety

equipment, and similar equipment at all Effingham

County District schools, including Ebenezer

Elementary, Effingham County High, Effingham

County Middle, Guyton Elementary, Marlow

Elementary, Rincon Elementary, Sand Hill

Elementary, South Effingham Elementary, South

Effingham High, South Effingham Middle, and

Springfield Central Elementary.

$

35,000,000.00 $

53,833,432.54 $

736,793.66 $ 53,096,638.88 Completed

- 32 -

EFFINGHAM COUNTY BOARD OF EDUCATION SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS
YEAR ENDED JUNE 30, 2008

SCHEDULE "4"

PROJECT SPLOST Ill

ORIGINAL ESTIMATED
COST(1l

CURRENT ESTIMATED COSTS(2l

AMOUNT EXPENDED IN CURRENT
YEAR(3)

The constructing and equipping of a new Effingham

County Middle School. The constructing and

equipping of a new elementary school. Adding to,

remodeling, renovating, improving, and equipping

existing, educational buildings, properties, and

facilities of the School District and acquiring any

necessary real or personal property therefor,

including equipment, school buses and

maintenance vehicles, computers and related

technology, copiers, energy management

systems, heating and air conditioning systems,

lighting, and similar equipment, adding

classrooms, installing floor coverings, renovating

bathrooms, installing fencing, upgrading,

playgrounds, landscaping, installing bus loading

canopies, constructing athletic facilities, replacing

doors and windows, renovating storage facilities,

painting, acquiring instructional equipment and

furniture, paving, and/or otherwise adding to,

remodeling, renovating, improving or equipping

various schools and school related facilities, to

include Ebenezer Elementary School,

Guyton Elementary School, Marlow Elementary

School (new), Marlow Elementary School (old),

Rincon Elementary School, Sandhill Elementary

School, South Effingham Elementary School,

Springfield Elementary School, Blandford

Elementary School, Ebenezer Middle School,

Effingham County Middle School (old), South

Effingham Middle School, Effingham County High

School, South Effingham County High School, the

Central Learning Center, the Board of Education

building and the bus shop.

$ 50,000,000.00 $

50,000,000.00 $ 12,710,250.03

AMOUNT EXPENDED
IN PRIOR YEARS(3l

PROJECT STATUS

Ongoing

$ 85,000,000.00 $ 103,833,432.54 $ 13,447,043.69 $ 53,096,638.88

(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 Effingham 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-

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EFFINGHAM COUNTY BOARD OF EDUCATION GENERAL FUND - QUALITY BASIC EDUCATION PROGRAM (QBE)
ALLOTMENTS AND EXPENDITURES - BY PROGRAM YEAR ENDED JUNE 30, 2008

SCHEDULE "5"

DESCRIPTION

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

ELIGIBLE QBE PROGRAM COSTS

SALARIES

OPERATIONS

TOTAL

Direct Instructional Programs

Kindergarten Program

$

Kindergarten Program-Early Intervention Program

Primary Grades (1-3) Program

Primary Grades-Early Intervention (1-3) Program

Upper Elementary Grades (4-5) Program

Upper Elementary Grades-Early Intervention (4-5)

Program

Middle Grades (6-8) Program

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)

2,926,046.00 $ 1,040,960.00 7,811,024.00 1;494,946.00 3,841,969.00

1,737,634.99 $ 2,518,434.21 9,088,897.29 3,944,172.21 3,301,498.56

889,902.00
7,127,526.00 5,963,680.00 2,662,409.00 7,664,851.00

1,571,263.08 120,047.53
8,110,884.58 8,019,593.11 2,041,364.48
46,174.48 958,817.65 6,113,621.15
8,771.56

2,126,990.00 411,464.00 581,566.00 130,600.00

1,339,158.17 140,994.92 285,995.53 118,804.85

162,464.22 $
342,739.46
99,839.31
227,526.94
171,803.30 432,061.96
10,203.89 11,831.61 105,185.51 35,370.99 52,658.28 25,280.79 12,614.39 476,861.93
2,443.28

1,900,099.21 2,518,434.21 9,431,636.75 3,944,172.21 3,401,337.87
1,571,263.08 347,574.47
8,110,884.58 8,191,396.41 2,473,426.44
56,378.37 970,649.26 6,218,806.66
44,142.55 52,658.28 1,364,438.96 153,609.31 762,857.46 121,248.13

TOTAL DIRECT INSTRUCTIONAL PROGRAMS

$

44,673,933.00 $ 49,466,128.35 $ 2,168,885.86 $ 51,635,014.21

Media Center Program Staff and Professional Development

1,234,714.00 247 527.00

1,305,592.33

544,786.28

1,850,378.61 293,511.72

TOTAL QBE FORMULA FUNDS

$

46,156,174.00 $ 50,771,720.68 $ 2,713,672.14 $ 53,778,904.54

(1) Comprised of State Funds plus Local Five Mill Share. (2) Allotments do not include the impact of the State amended formula adjustment.

See notes to the basic financial statements.

- 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
September 24, 2009

Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the Effingham 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 Effingham County Board of Education as of and for the year ended June 30, 2008, which collectively comprise Effingham County Board of Education's basic financial statements and have issued our report thereon dated September 24, 2009. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States.
Internal Control Over Financial Reporting
In planning and performing our audit, we considered Effingham County Board of Education's internal control over financial reporting as a basis for designing our auditing procedures for the purpose ofexpressing our opinions on the financial statements, but not for the purpose ofexpressing an opinion on the effectiveness ofthe Effingham County Board ofEducation's internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness of the Effingham County Board of Education's internal control over financial reporting.
Our consideration ofinternal control over financial reporting was for the limited purpose described in the preceding paragraph and would not necessarily identify all deficiencies in internal control over financial reporting that might be significant deficiencies or material weaknesses. However, as discussed below, we identified a certain deficiency in internal control over financial reporting that we consider to be a significant deficiency.
2008YB-30

A control deficiency exists when the design or operation ofa control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect misstatements on a timely basis. A significant deficiency is a control deficiency, or combination of control deficiencies, that adversely affects the Effingham County Board of Education's ability to initiate, authorize, record, process, or report financial data reliably in accordance with generally accepted accounting principles such that there is more than a remote likelihood that a misstatement ofthe Effingham County Board ofEducation's financial statements that is more than inconsequential will not be prevented or detected by the Effingham County Board of Education's internal control. We consider item FS-6511-08-01 in the accompanying Schedule ofFindings and Questioned Costs to be a significant deficiency in internal control over financial reporting.
A material weakness is a significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood that a material misstatement ofthe financial statements will not be prevented or detected by the Effingham County Board of Education's internal control.
Our consideration of the internal control over financial reporting was for the limited purpose described in the first paragraph ofthis section and would not necessarily disclose all deficiencies in internal control that might be significant deficiencies and, accordingly, would not necessarily disclose all significant deficiencies that are also considered to be material weaknesses. However, we believe that the significant deficiency described above is not a material weakness.
Compliance and Other Matters
As part of obtaining reasonable assurance about whether Effingham County Board of Education's financial statements are free of material misstatement, we performed tests of its compliance with certain provisions oflaws, regulations, contracts and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards.
We noted certain matters that we have reported to management of Effingham County Board of Education in a separate letter dated September 24, 2009.
Effingham County Board ofEducation's response to the findings identified in our audit is described in the accompanying Schedule of Management's Responses. We did not audit Effingham County Board of Education's response and, accordingly, we express no opinion on it.
2008YB-30

This report is intended solely for the information and use ofmanagement, members ofthe Effingham County Board of Education, others within the entity, 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,
-::Pp._,m__W~
~~sell W. Hinton, CPA, CGFM State Auditor
RWH:as 2008YB-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
September 24, 2009

Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the Effingham County Board of Education
REPORT ON COMPLIANCE WITH REQUIREMENTS APPLICABLE TO EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH 0MB CIRCULARA-133
Ladies and Gentlemen:
Compliance
We have audited the compliance of Effingham County Board of Education with the types of compliance requirements described in the U.S. Office ofManagement and Budget (0MB) Circular A-133 Compliance Supplement that are applicable to each ofits major Federal programs for the year ended June 30, 2008. Effingham County Board ofEducation'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 ofits major Federal programs is the responsibility ofEffingham County Board of Education's management. Our responsibility is to express an opinion on Effingham County Board of Education's compliance based on our audit.
We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States ofAmerica; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General ofthe United States; and 0MB Circular A133, Audits of States, Local Governments, and Non-Profit Organizations. Those standards and 0MB Circular A-133 require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major Federal program occurred. An audit includes examining, on a test basis, evidence about the Effingham County Board of Education's compliance with those requirements and performing such other procedures as we considered necessary in the

2008SA-65

circumstances. We believe that our audit provides a reasonable basis for our opinion. Our audit does not provide a legal determination on Effingham County Board ofEducation's compliance with those requirements.
As described in item FA-6511-08-01 in the accompanying Schedule of Findings and Questioned Costs, Effingham County Board ofEducation did not comply with requirements regarding Activities Allowed or Unallowed and Allowable Costs/Cost Principles that are applicable to its Child Nutrition Cluster (CFDA 10.553 and 10.555). Compliance with such requirements is necessary, in our opinion, for Effingham County Board ofEducation to comply with requirements applicable to those programs.
In our opinion, except for the noncompliance described in the preceding paragraph, the Effingham County Board of Education complied, in all material respects, with the requirements referred to above that are applicable to each of its major Federal programs for the year ended June 30, 2008.
Internal Control Over Compliance
The management of Effingham 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 Effingham County Board of Education's internal control over compliance with requirements that could have a direct and material effect on a major Federal program in order to determine our auditing procedures for the purpose ofexpressing our opinion on compliance, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of the Effingham County Board of Education's internal control over compliance.
Our consideration of the internal control over compliance was for the limited purpose described in the preceding paragraph and would not necessarily identify all deficiencies in the Board's internal control that might be significant deficiencies or material weaknesses as defined below. However, as discussed below, we identified certain deficiencies in internal control over compliance that we consider to be significant deficiencies and others we consider to be material weaknesses.
A control deficiency in an entity's internal control over compliance exists when the design or operation ofa control does not allow management or employees, in the normal course ofperforming their assigned functions, to prevent or detect noncompliance with a type of compliance requirement of a Federal program on a timely basis. A significant deficiency is a control deficiency, or combination ofcontrol deficiencies, that adversely affects the entity's ability to administer a Federal program such that there is more than a remote likelihood that noncompliance with a type of compliance requirement of a Federal program that is more than inconsequential will not be prevented or detected by the entity's internal control. We consider the deficiencies in internal control over compliance described in the accompanying Schedule ofFindings and Questioned Costs as items FA-6511-08-01 and FA-6511-08-02 to be significant deficiencies.
2008SA-65

A material weakness is a significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood that material noncompliance with a type of compliance requirement of a Federal program will not be prevented or detected by the entity's internal control. Of the significant deficiencies in internal control over compliance described in the accompanying Schedule of Findings and Questioned Costs, we consider item FA-6511-08-01 to be a material weakness.
Effingham County Board ofEducation's response to the findings identified in our audit is described in the accompanying Schedule of Management's Responses. We did not audit Effingham County Board of Education's response and, accordingly, we express no opinion on it.
This report is intended solely for the information and use ofmanagement, members ofthe Effingham County Board ofEducation, Federal awarding agencies and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties.
Respectfully submitted,
~--m \A)-~~
~~ell W. Hinton, CPA, CGFM State Auditor
RWH:as 2008SA-65

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

EFFINGHAM COUNTY BOARD OF EDUCATION AUDITEE'S RESPONSE
SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2008

PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

FINDING CONTROL NUMBER

AUDITEE'S RESPONSE/STATUS

SEE AUDITOR'S COMMENTS

FS-6511-04-03 Further Action Not Warranted

(1)

FS-6511-06-01 Further Action Not Warranted

FS-6511-07-01 Partially Resolved - See Corrective Action/Responses

FS-6511-07-02 Previously Reported Corrective Action Implemented

FS-6511-07-03 Previously Reported Corrective Action Implemented

CORRECTIVE ACTION/RESPONSES

CASH AND CASH EQUIVALENTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS GENERAL LEDGER Inadequate Internal Controls over School Activity Accounts Finding Control Number: FS-6511-07-01

The School Principal Accounts will be reviewed for job task relationships, technical use of software and Policy as stated in the School District's Fiscal Management Handbook. This review will focus on bank statement reconciliations, cash receipt procedures, check writing procedures and Purchase Order preparation. The elimination of incompatible relationships, implementation ofcompensating controls, and compliance with established Policy will result in these accounts having adequate policy and procedural control resulting in increase financial compliance.

AUDITOR'S COMMENTS

(1) The final resolution of this finding rests with the Georgia Department of Community Health.

- 1-

EFFINGHAM COUNTY BOARD OF EDUCATION AUDITEE'S RESPONSE
SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2008

PRIOR YEAR FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

FINDING CONTROL NUMBER AND STATUS

FA-6511-06-01 FA-6511-07-01 FA-6511-07-02 FA-6511-07-03

Previously Reported Corrective Action Implemented Unresolved - See Corrective Action/Responses Previously Reported Corrective Action Implemented Unresolved - See Corrective Action/Responses

CORRECTIVE ACTION/RESPONSES

ACTIVITIES ALLOWED OR UNALLOWED ALLOWABLE COSTS/COST PRINCIPLES Unallowable Catering Activities U. S. Department of Agriculture Through Georgia Department of Education Child Nutrition Cluster (CFDA 10.553 and 10.555) Finding Control Number: FA-6511-07-01

The School District is ensuring that catering for profit services have been eliminated. Procedures have been developed and implemented to ensure these activities will not continue. The School District has established a separate bank account for all catering services performed by the Nutrition Program. The catering services will be recorded in a separate fund on the School District's records. This will include all revenues and expenses associated with the catering activity and will be recorded in the catering fund. These activities will occur only when the full cost ofcommodities is recovered, the revenues are posted to the nonprofit school nutrition account and when students are the primary beneficiaries of the food service. All supplies, commodities and labor will be purchased apart from School Food Service accounts. The School District's Federal Employment Identification (FEI) number has been eliminated from the unallowable bank account and that account has been closed. The catering services and all other activities not related to the School Food Service (SFS) Program will be recorded on separate timesheets. These unrelated activities will not be included in the cost ofthe SFS Program nor will these costs be included in any Federal or State cost reimbursement reports. The School District will monitor the SFS Program to ensure compliance.

-2 -

EFFINGHAM COUNTY BOARD OF EDUCATION AUDITEE'S RESPONSE
SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2008
PRIOR YEAR FEDERAL AWARD FINDINGS AND QUESTIONED COSTS CORRECTIVE ACTION/RESPONSES ALLOWABLE COSTS/COST PRINCIPLES Time and Attendance Records Not Utilized U. S. Department of Agriculture Through Georgia Department of Education Child Nutrition Cluster (CFDA 10.553 and 10.555) Finding Control Number: FA-6511-07-03 The School District procedures will require supervisory personnel to perform semi-annual certifications and PAR documentations to support time and effort ofpersonnel who work on multiple Federal and/or non-Federal Programs. This will include written documentation and appropriate timesheets. This will allow the School District to ensure that all salaries are charged to a Federal Program are commensurate with the actual time devoted to that program.
-3-

SECTION IV FINDINGS AND QUESTIONED COSTS

EFFINGHAM COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2008

I SUMMARY OF AUDITOR'S RESULTS

1. Type of Report Issued on the Financial Statements The auditor's opinion on the Effingham County Board of Education's financial statements was unqualified.

2. Significant Deficiencies in Internal Control Disclosed by the Audit ofthe Financial Statements The audit report for the Effingham County Board of Education disclosed a financial statement significant deficiency related to the following control categories.

Cash and Cash Equivalents Revenues/Receivables/Receipts

Expenditures/Liabilities/Disbursements

The significant deficiency described above is not considered to be a material weakness.

3. Noncompliance Material to the Financial Statements The audit of the Effingham County Board of Education disclosed no instances of noncompliance that were deemed to be material to the financial statements.

4. Significant Deficiencies in Internal Control Over Major Programs The audit report for the Effingham County Board of Education disclosed significant deficiencies in internal control over major programs for the following compliance requirements.

Activities Allowed or Unallowed

Allowable Costs/Cost Principles

All ofthe significant deficiencies described above are considered to be material weaknesses.

5. Type of Report Issued on Compliance for Major Programs The auditor's opinion on the Effingham County Board ofEducation's report on compliance with requirements applicable to major programs was unqualified, except for Child Nutrition Cluster (CFDA 10.553 and 10.555), which was qualified.

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

7. Major Programs Federal awards audited as major programs are as follows: 10.553 Food Services - School Breakfast Program 10.555 Food Services - National School Lunch Program 84.367 Improving Teacher Quality State Grants

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EFFINGHAM COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2008

I SUMMARY OF AUDITOR'S RESULTS

8. Type "A" Program Dollar Threshold The dollar threshold for type "A" programs was $300,000.00.

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

II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

CASH AND CASH EQUIVALENTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Controls over School Activity Accounts Significant Deficiency Finding Control Number: FS-6511-08-01

Condition:

This is a repeat finding (FS-6511-07-01, FS-6511-06-01 and FS-6511-05-01) from the years ended June 30, 2007, June 30, 2006, and June 30, 2005, respectively. The accounting procedures of the School District were insufficient to provide for adequate internal controls over the school activity accounts.

Criteria:

The School District's management is responsible for designing and maintaining internal controls that provide reasonable assurance that transactions are processed according to established procedures.

Questioned Cost: NIA

Information:

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

Revenues/Receivables/Receipts The cash receipts and deposit preparation functions were not separated from the record keeping functions. Deposit reports required by the School District's accounting procedures were not properly completed by those collecting the funds. Cash collections were not deposited into the bank accounts in a timely manner.

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EFFINGHAM COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2008

II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

CASH AND CASH EQUIVALENTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Controls over School Activity Accounts Significant Deficiency Finding Control Number: FS-6511-08-01

Expenditures/Liabilities/Disbursements
The check writing function was not separated from the record keeping function.
Several voucher packages were noted as incomplete and did not
contain invoices, evidence of receipt of items purchased, or other
proper documentation.

Cause:

These deficiencies were a result ofmanagement's failure to properly establish internal controls at the school level by limiting the number ofadministrative staff made responsible for accounting functions.

Effect:

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

Recommendation:

The School District should implement procedures to ensure that the key accounting functions of custody, record keeping, and authorization are separated and/or utilize management oversight for these incomparable activities. In addition, management should monitor controls to provide reasonable assurance that transactions are processed according to established procedures and implement procedures deemed necessary to strengthen internal controls over accounting functions.

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EFFINGHAM COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2008

III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

ACTIVITIES ALLOWED OR UNALLOWED ALLOWABLE COSTS/COST PRINCIPLES Unallowable Catering Activities Material Weakness Material Noncompliance U. S. Department of Agriculture Through Georgia Department of Education Child Nutrition Cluster (CFDA 10.553 and 10.555) Finding Control Number: FA-6511-08-01

Condition:

This is a repeat finding (FA-6511-07-01) from the year ended June 30, 2007. The School Food Service Program's management and personnel participated in unallowable catering and retail sales for profit, utilizing Child Nutrition Cluster resources. This activity was not maintained on the School District's accounting records.

Criteria:

Provisions of the 0MB Circular A-87, Cost Principles for Determining Allowable Costs, require that "to be allowable under Federal awards, cost must be ... authorized or not prohibited under state or local laws or regulations and supported by underlying documentation".

7 CFR Part 210.14(a) requires that "Revenues received by the nonprofit school food service be used only for the operation or improvement of such food service ... " Additionally, regulations require that "Expenditures of nonprofit school food service revenues shall be in accordance with the financial management system established by the State Agency under 210.19(a)(2) of this part".

Georgia Department of Education School Nutrition Financial Management System Criteria and Procedure No: FM-07-02 states in part:
"Ifa School Food Authority (SFA) decides to cater food services, it is recommended they consider three goals: 1. To provide a service to the School District, 2. to generate revenue over expenditures that can be used to enhance the SFA's non-profit school food service program, and 3. to promote positive public relations between the School Nutrition Program (SNP), the school community and schoolrelated organizations...

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EFFINGHAM COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2008
III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS
ACTIVITIES ALLOWED OR UNALLOWED ALLOWABLE COSTS/COST PRINCIPLES Unallowable Catering Activities Material Weakness Material Noncompliance U. S. Department of Agriculture Through Georgia Department of Education Child Nutrition Cluster (CFDA 10.553 and 10.555) Finding Control Number: FA-6511-08-01
Criteria and/or Procedures o A separate bank account must be used for the catering account in Enterprise Fund 693. This account will track expenditures and income separately so that associated expenses and revenues of catering are purged from costs attributable to the school nutrition program and so potential and actual revenues may be tracked... o The full cost of all catering functions must be identified and recovered including clearly identifiable costs of food, labor, small and large equipment, and supplies and indirect costs ... o Co-mingling of labor or food costs must be minimized in an effort to separate the two activities as much as possible ... o Any payment due to a school nutrition program employee for work performed, including catering functions, must be processed through the payroll department, so that the appropriate withholdings are made and the gross income earned is recorded and reported correctly. Time records must be available to demonstrate that the SNP has not compensated employees for work done on catering functions ... o Calculate the cost of all food and supplies used; be sure to include the cost of packaging used for catered items. Foods used for catering events should be ordered and inventoried separately from foods used for the service of reimbursable meals and should NOT be reported on the School Nutrition Form DE 106 Financial Data... o Purchase orders must reflect applicable purchase of goods, time sheets must reflect applicable personnel charges and invoices must reflect charges for events; these expenditures and revenue will be tracked in the appropriate accounts in the catering fund ...
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EFFINGHAM COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2008

III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

ACTIVITIES ALLOWED OR UNALLOWED ALLOWABLE COSTS/COST PRINCIPLES Unallowable Catering Activities Material Weakness Material Noncompliance U. S. Department of Agriculture Through Georgia Department of Education Child Nutrition Cluster (CFDA 10.553 and 10.555) Finding Control Number: FA-6511-08-01

o USDA commodities can only be used (1) when the full cost of commodities are recovered and accrue back to the nonprofit school nutrition account and (2) when students are the primary beneficiaries of the food service... "

Questioned Cost: $55,800.97

Information:

The School Food Service (SFS) Program's management and. personnel participated in unallowable catering and retail sales for profit activities that failed to meet the required Federal and State regulations. The following unallowable activities and deficiencies were noted:

Food sales, school related catering activities and private event catering activities were performed by a private, for profit organization comprised of SFS Nutrition Program management and employees.
$55,800.97 in revenue generated from this venture was not recorded on the School District's general ledger.
Compensation payments, based on a percentage of sales, totaling $15,357.45 were made to the SFS Director, lunchroom managers and other SFS employees by this organization. Payroll taxes were not withheld by the organization for these payments.
SFS Program's management ordered food items from vendors in the name of the SFS Program for these catering activities and resale to the public.
Food used for catering events and resale was inventoried with food used for the SFS program.
SFS employees used SFS equipment and facilities to cater events, bake goods and resale food for this organization.
Time records were not available to separate work performed for the SFS Program from activity performed for this organization.

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EFFINGHAM COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2008

III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

ACTIVITIES ALLOWED OR UNALLOWED ALLOWABLE COSTS/COST PRINCIPLES Unallowable Catering Activities Material Weakness Material Noncompliance U.S. Department of Agriculture Through Georgia Department of Education Child Nutrition Cluster (CFDA 10.553 and 10.555) Finding Control Number: FA-6511-08-01

Documentation provided by the organization did not reveal any labor, equipment, supply or indirect cost reimbursements to the School Food Service Program. The full cost of the catering and resale activities was not identifiable.
The School District's Federal Employee Identification (PEI) number was used by this unauthorized organization for their bank account.

Cause:

These deficiencies were a result of the School District's failure to properly manage the Child Nutrition Program and to ensure that activities and expenditures related to this program were allowable.

Effect:

The School District's failure to ensure that the program was properly managed resulted in unallowable and inappropriate usage ofChild Nutrition Program resources, lost program revenue and material noncompliance with the requirements of the Federal Program.

Recommendation:

The School District should take the necessary steps to ensure that current catering service practices cease. Ifmanagement decides to continue catering services they should implement procedures to ensure that this activity is recorded on the School District's general ledger and that, in line with Federal regulations, the Georgia Department ofEducation School Nutrition Financial Management System Criteria and Procedure No: FM-07-02 is followed. In addition, the School District should monitor the Child Nutrition Program to ensure that employees are not involved in activities that conflict with this Federal Program and that all salaries charged to the Child Nutrition Program are commensurate with actual time devoted to the program. The Georgia Department of Education should further review this matter to determine if a reclaim of funds is necessary.

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EFFINGHAM COUNTY BOARD OF EDUCATION SCHEDULE OF FI,NDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2008

III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

ALLOWABLE COSTS/COSTS PRINCIPLES Time and Attendance Records Not Utilized Significant Deficiency U.S. Department ofAgriculture Through Georgia Department of Education Child Nutrition Cluster (CFDA 10.553 and 10.555) Finding control Number: FA-6511-08-02

Condition:

This is a repeat finding (FA-6511-07-03) from the year ended June 30, 2007. Semi-Annual Certifications and/or Personnel Activity Reports based on time distribution records, as required by Federal guidelines, were not utilized for School District employees paid from the Child Nutrition Cluster - Food Service Program (CFDA 10.553 and 10.555).

Criteria:

Provisions of the 0MB Circular A-87, Cost Principles for Determining Allowable Costs, require that salaries be documented as follows with:
Semi-Annual Certifications for personnel who work on one Federal program. 0MB Circular A-87-B states in part: "Where employees are expected to work solely on a single Federal award or cost object, charges for their salaries and wages will be supported by periodic certifications that the employees worked solely on that program for the period covered by the certification. These certifications will be prepared at least semi-annually and will be signed by the employee or supervisory official having first hand knowledge of the work performed by the employee".
Personnel Activity Reports (PARs) for those personnel who work on multiple Federal programs or Federal and non-Federal activity. Provisions of the 0MB Circular A-87, Cost Principles for Determining Allowable Costs, require that "to be allowable under Federal awards, cost must be... adequately documented" and charges to Federal awards for salaries and wages ... "will be based on payrolls documented in accordance with generally accepted practice of the governmental unit and approved by a responsible official of the governmental unit".

Questioned Cost: NIA

Information:

Based on a review employee's payroll records, the following deficiencies were noted:
Employees whose salaries were charged solely to the Federal program were not supported with the required semi-annual certifications.

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EFFINGHAM COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2008

III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

ALLOWABLE COSTS/COSTS PRINCIPLES Time and Attendance Records Not Utilized Significant Deficiency U. S. Department of Agriculture Through Georgia Department of Education Child Nutrition Cluster (CFDA 10.553 and 10.555) Finding control Number: FA-6511-08-02

Employees whose salaries were paid from multiple Federal programs did not have the required personnel activity reports (PARs) supporting time and effort.

Cause:

The School Food Service Director and employees failed to comply with the Federal requirements for certifying and documenting actual time and effort for Federal personnel and, as a result, the required certifications and PARs were not completed and utilized as a basis for documenting salary and wages charged to the Child Nutrition Cluster - Food Service Program.

Effect:

Because ofthe School District's failure to maintain the required semi-annual certifications and PARs supporting time and effort, it could not be determined if the appropriate amount of salaries for these employees were charged to the Child Nutrition Cluster - Food Service Program. Federal program funding could be lost ifthe School District does not follow Federal requirements.

Recommendation:

The School District should implement procedures to ensure that employee compensation expenses paid from Federal award programs are allowable and properly documented in accordance with 0MB Circular A-87. Management should ensure that all salaries charged to a Federal program are commensurate with actual time devoted to that Federal program. Georgia Department of Education should review documentation to determine if refunds are appropriate.

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SECTIONV MANAGEMENT'S RESPONSES

EFFINGHAM COUNTY BOARD OF EDUCATION SCHEDULE OF MANAGEMENT'S RESPONSES
YEAR ENDED JUNE 30, 2008

Finding Control Number: FS-6511-08-01

The School Principal Accounts will be reviewed for job task relationships, technical use ofsoftware and Policy as stated in the School District's Fiscal Management Handbook. This review will focus on bank statement reconciliations, cash receipt procedures, check writing procedures and Purchase Order preparation. The elimination ofincompatible relationships, implementation ofcompensating controls and transaction compliance with established Policy will result in these accounts having adequate policy and procedural control resulting in increased financial compliance.

Finding Control Number: FA-6511-08-01

The School District is ensuring that catering for profit services have been eliminated. Procedures have been developed and implemented to ensure these activities will not continue. The School District has established a separate bank account for all catering services performed by the Nutrition Program. The catering services will be recorded in a separate fund on the School District's records. This will include all revenues and expenses associated with the catering activity and will be recorded in the catering fund. These activities will occur only when the full cost ofcommodities is recovered, the revenues are posted to the nonprofit school nutrition account and when students are the primary beneficiaries ofthe food service. All supplies, commodities and labor will be purchased apart from School Food Service accounts. The School District's Federal Employment Identification (FEI) number has been eliminated from the unallowable bank account and that account has been closed.

The catering services and all other activities not related to the SFS Program will be recorded on separate timesheets. These unrelated activities will not be included in the cost ofthe SFS Program nor will these costs be included in any Federal or State cost reimbursement reports. The School District will monitor the SFS Program to insure compliance.

Finding Control Number: FA-6511-08-02

The School District procedures will require supervisory personnel to perform semi-annual certifications and PAR documentations to support time and effort ofpersonnel who work on multiple Federal and/or non Federal Programs. This will include written documentation and appropriate timesheets. This will allow the School District to ensure that all salaries charged to a Federal Program are commensurate with the actual time devoted to that program.

Contact Person: Telephone: Fax: Email:

Ronald Wilson, CPA, Director of Finance (912) 754-5885 (912) 754-3489 rlwilson@effingham.kl2.ga.us