ELBERT COUNTY BOARD OF EDUCATION ELBERTON, 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 ELBERT COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS - SECTION I FINANCIAL INDEPENDENT AUDITOR'S COMBINED REPORT ON BASIC FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION - SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS REQUIRED SUPPLEMENTARY INFORMATION MANAGEMENT'S DISCUSSION AND ANALYSIS EXHIBITS BASIC FINANCIAL STATEMENTS DISTRICT-WIDE FINANCIAL STATEMENTS A STATEMENT OF NET ASSETS 1 B STATEMENT OF ACTIVITIES 2 FUND FINANCIAL STATEMENTS C BALANCE SHEET GOVERNMENTAL FUNDS 4 D RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO THE STATEMENT OF NET ASSETS 5 E STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS 6 F RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES TO THE STATEMENT OF ACTIVITIES 7 G STATEMENT OF FIDUCIARY NET ASSETS FIDUCIARY FUNDS 8 H STATEMENT OF CHANGES IN FIDUCIARY NET ASSETS FIDUCIARY FUNDS 9 I NOTES TO THE BASIC FINANCIAL STATEMENTS 11 SCHEDULES REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL GENERAL FUND 27 ELBERT COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS - SECTION I FINANCIAL SCHEDULES SUPPLEMENTARY INFORMATION 2 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS 3 SCHEDULE OF STATE REVENUE 4 SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS 5 ALLOTMENTS AND EXPENDITURES GENERAL FUND - QUALITY BASIC EDUCATION PROGRAMS (QBE) BY PROGRAM Page 28 29 30 31 SECTION II COMPLIANCE AND INTERNAL CONTROL REPORTS REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS REPORT ON COMPLIANCE WITH REQUIREMENTS APPLICABLE TO EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH 0MB CIRCULAR A-133 SECTION III AUDITEE'S RESPONSE TO PRIOR YEAR FINDINGS AND QUESTIONED COSTS SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS SECTION IV FINDINGS AND QUESTIONED COSTS SCHEDULE OF FINDINGS AND QUESTIONED COSTS ELBERT 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 October 1, 2009 Honorable Sonny Perdue, Governor Members ofthe General Assembly Members ofthe State Board of Education and Superintendent and Members of the Elbert 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 I) of the Elbert County Board of Education, 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 ofthe Elbert County Board ofEducation's management. Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States ofAmerica and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General ofthe United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free 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 Elbert 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 of the Elbert County Board of Education, as of June 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. In accordance with Government Auditing Standards, we have also issued our report dated October 1, 2009, on our consideration ofthe Elbert County Board ofEducation's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements and other matters. The purpose of that report is to describe the scope of our testing ofinternal control over financial reporting and compliance and the results ofthat testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit. Management's Discussion and Analysis and the Schedule ofRevenues, Expenditures and Changes in Fund Balances - Budget and Actual, as presented on pages i through vii and page 27 respectively, are not a required part ofthe basic financial statements but are supplementary information required by the accounting principles generally accepted in the United States of America. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods ofmeasurement and presentation ofthe required supplementary information. However, we did not audit the information and express no opinion on it. Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Elbert County Board of Education's basic financial statements. The accompanying supplementary information which consist of Schedules 2 through 5, which includes the Schedule of Expenditures of Federal Awards as required by U.S. Office of Management and Budget Circular A-133, Audits ofStates, Local Governments, and Non-Profit Organizations, are presented for purposes of additional analysis and are not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements, and in our opinion, is fairly stated, in all material respects, in relation to the basic financial statements taken as a whole. A copy of this report has been filed as a permanent record in the office of the State Auditor and made available to the press of the State, as provided for by Official Code of Georgia Annotated section 50-6-24. Respectfully submitted, ~ ...mLo.~ Russell W. Hinton, CPA, CGFM State Auditor RWH:as 2008ARL-11 ELBERT COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2008 Introduction Our discussion and analysis of the Elbert County School District's financial performance provides an overview of the School District's financial activities for the fiscal year ended June 30, 2008. The intent of this discussion and analysis is to look at the School District's financial performance as a whole; readers should also review the notes to the basic financial statements and financial statements to enhance their understanding of the School District's financial performance. Financial Highlights Key financial highlights for fiscal year 2008 are as follows: On the District-wide financial statements, the assets of the School District exceeded liabilities by $24.2 million. Of this amount, the School District has a balance of $2.1 million in unrestricted funds. The School District had $37.4 million in expenses relating to governmental activities; only $24.4 million of these expenses are offset by program specific charges for services, grants and contributions. General revenues (primarily property and sales taxes) of $15. 8 million were adequate to provide for these programs with the result that Net Assets were increased by $2.8 million. As stated above, general revenues accounted for $15.8 million or 39.2% of all revenues totaling $40.2 million. Program specific revenues in the form of charges for services, grants and contributions accounted for the rest. Overview of the Financial Statements This annual report consists of three parts; management's discussion and analysis, the basic financial statements and required supplementary information. The basic financial statements include two levels of statements that present different views of the School District. These include the District-wide and fund financial statements. The District-wide financial statements include the Statement of Net Assets and Statement of Activities. These statements provide information about the activities of the School District presenting both short-term and long-term information about the School District's overall financial status. The fund financial statements focus on individual parts of the School District, reporting the School District's operation in more detail. The Governmental Funds statements disclose how basic services are financed in the short-term as well as what remains for future spending. The Fiduciary Funds statements provide information about the financial relationships in which the ELBERT COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2008 School District acts solely as a trustee or agent for the benefit of others. The fund financial statements reflect the School District's most significant funds. In the case of the Elbert County School District, the General Fund, District-wide Capital Projects Fund, and Debt Service Fund are the most significant funds. The financial statements also include notes that explain some of the information in the statements and provide more detailed data. The statements are followed by a section of required supplementary information that further explains and supports the financial statements. Additionally, other supplementary information (not required) is also presented that further supplements understanding of the financial statements. District-wide Statements The District-wide financial statements are basically a consolidation of all of the School District's operating funds into one column called governmental activities. In reviewing the District-wide financial statements, a reader might ask the question, are we in a better financial position than last year? The Statement of Net Assets and the Statement of Activities provides the basis for answering this question. These financial statements include all School District's assets and liabilities and uses the accrual basis of accounting similar to the accounting used by most private-sector companies. This basis of accounting takes into account all of the current year's revenues and expenses regardless of when cash is received or paid. These two statements report the School District's net assets and any changes in those assets. The change in net assets is important because it tells the reader that, for the School District as a whole, the financial position of the School District has improved or diminished. The causes of this change may be the results of many factors, including those not under the School District's control, such as the property tax base, facility conditions, required educational programs and other factors. The Statement of Net Assets and the Statement of Activities reflects the School District's governmental activities. Fund Financial Statements The School District uses many funds to account for a multitude of financial transactions during the fiscal year. However, the fund financial statements presented in this report provide detail information about only the School District's significant or major funds. Governmental Funds: Most of the School District's activities are reported in governmental funds, which focus on how money flows into and out of those funds and the balances left at yearend available for spending in future periods. These funds are reported using the modified accrual method of accounting which measures cash and all other financial assets that can readily be converted to cash. The governmental fund statements provide a detailed short-term view of the School District's general government operations and the basic services it provides. 11 ELBERT COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2008 Governmental fund information helps determine whether there are more or fewer financial resources that can be spent in the near future to finance educational programs. The differences between governmental activities (reported in the Statement of Net Assets and the Statement of Activities) and governmental funds are reconciled to the financial statements. Fiduciary Funds: The School District is the trustee, or fiduciary, for assets that belong to others, such as school clubs and organizations within the principals' accounts. The School District is responsible for ensuring that the assets reported in these funds are used only for their intended purposes and by those to whom the assets belong. The School District excludes these activities from the District-wide financial statements because it cannot use these assets to finance its operations. Financial Analysis of the School District as a Whole Recall that the Statement of Net Assets provides the perspective of the School District as a whole. Table 1 provides a summary of the School District's net assets for this fiscal year as compared to the prior fiscal year. Table 1 Net Assets Governmental Activities Fiscal Fiscal Year 2008 Year 2007 Assets Current and Other Assets Capital Assets, Net $ 8,852,027.11 $ 7,326,751.29 21,083,587.74 21,382,387.30 Total Assets $29,935,614.85 $ 28,709,138.59 Liabilities Current and Other Liabilities Long-Term Liabilities $ 4,418,813.14 $ 3,871,875.41 1,355,833.70 3,485,705.33 Total Liabilities $ 5,774,646.84 $ 7,357,580.74 Net Assets Invested in Capital Assets, Net of Related Debt Restricted Unrestricted $ 19,727,754.04 $ 17,896,681.97 2,297,711.32 3,078,793.52 2,135,502.65 376,082.36 Total Net Assets $ 24,160,968.01 $21,351,557.85 Table 2 shows the Changes in Net Assets for this fiscal year as compared to the prior fiscal year. 111 ELBERT COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2008 Table 2 Change in Net Assets Revenues Program Revenues: Charges for Services and Sales Operating Grants and Contributions Capital Grants and Contributions Governmental Activities Fiscal Fiscal Year 2008 Year 2007 $ 722,444.60 $ 823,641.44 23,570,204.07 21,698,412.11 121,711.00 821,289.01 Total Program Revenues $ 24,414,359.67 $ 23,343,342.56 General Revenues: Taxes Property Taxes For Maintenance and Operations $ 8,841,541.40 Railroad Cars 21,653.87 Sales Taxes Special Purpose Local Option Sales Tax For Debt Service For Capital Projects 2,391,784.91 Intangible Recording Tax 148,479.86 Real Estate 55,486.21 Grants and Contributions not Restricted to Specific Programs 2,999,526.00 Investment Earnings 129,220.60 Miscellaneous 1,176,642.37 $ 7,384,690.22 42,215.68 2,240,138.18 138,613.20 56,212.91 2,573,676.00 101,027.59 300,059.56 Total General Revenues $ 15,764,335.22 $ 12,836,633.34 Total Revenues $ 40,178,694.89 $ 36.179,975.90 Program Expenses Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Operations of Non-Instructional Services Enterprise Operations Food Services Interest on Short-Term and Long-Term Debt $ 24,606,675.80 1,222,420.81 1,367,720.00 819,879.67 420,807.83 2,209,523.52 275,693.90 2,075,225.30 1,520,997.62 61,918.44 87,130.60 334,842.22 2,198,577.17 167,871.85 $ 21,691,254.10 1,144,725.49 1,106,375.41 881,882.72 409,410.31 2,118,240.36 216,546.23 2,112,715.64 1,665,550.98 47,047.32 110,117.92 320,035.01 2,066,679.28 289,941.28 Total Expenses $ 37.369.284.73 $ 34,180,522.05 Increase in Net Assets $ 22809AI0.16 $ l 2999AS3.85 iv ELBERT COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2008 Governmental Activities The Statement of Activities shows the cost of program services and the charges for services and grants offsetting these services. Table 3 shows, for governmental activities, the total cost of services and the net cost of services. Net cost of services can be defined as the total cost less fees generated by the activities and intergovernmental revenue provided for specific programs. The net cost reflects the financial burden on the School District's taxpayers by each activity as compared to the prior fiscal year. Table 3 Governmental Activities Total Cost of Services Fiscal Fiscal Year2008 Year2007 Net Cost of Services Fiscal Fiscal Year 2008 Year2007 Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Operations ofNon-Instructional Services Enterprise Operations Food Services Interest on Short-Term and Long-Term Debt $24,606,675.80 $21,691,254.10 1,222,420.81 1,367,720.00 819,879.67 420,807.83 2,209,523.52 275,693.90 2,075,225.30 1,520,997.62 61,918.44 87,130.60 1,144,725.49 1,106,375.41 881,882.72 409,410.31 2,118,240.36 216,546.23 2,112,715.64 1,665,550.98 47,047.32 110,117.92 334,842.22 2,198,577.17 167,871.85 320,035.01 2,066,679.28 289,941.28 $ 7,557,339.26 $ 5,609,309.10 820,080.05 845,158.40 354,848.38 -321,665.77 1,032,273.06 264,958.17 998,858.76 693,897.23 58,919.92 74,122.11 802,432.36 626,220.71 358,021.91 -259,678.66 1,129,726.23 216,546.23 1,170,244.01 704,564.18 47,047.32 85,077.22 334,842.22 73,421.42 167,871.85 115,921.60 -58,194.00 289,941.28 Total Expenses $ 37.369.284.73 $ 34.180.522.05 $ 12,954.925.06 $]0.837.179.49 Financial Analysis of the School District's Funds The School District's governmental funds are accounted for using the modified accrual basis of accounting. The governmental funds had total revenues and other financing sources of $40.4 million and total expenditures and other financing uses of $39.9 million. General Fund Budgeting Highlights The School District's budget is prepared according to Georgia Law. The most significant budgeted fund is the General Fund. During the course of fiscal year 2008, the School District amended its General Fund budget as needed. For the General Fund, the final actual revenues of $37.2 million exceeded the original budgeted amounts of $31.9 million by $5.3 million. This difference (final actual vs. original budget) was due primarily to Miscellaneous Revenues larger then the original projected amounts and additional State and Federal Funds grants that were not included in the original budget. V ELBERT COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2008 The actual revenues of $37.2 million exceeded the final budgeted amount of $35.4 million by $1.8 million. The final actual expenditures of $36.0 million exceeded the original budgeted amount of $31.9 million by $4.1 million. This difference was primarily due to grants expenditures that were not considered in the budget process. CAPITAL ASSETS AND DEBT ADMINISTRATION Capital Assets At fiscal year ended June 30, 2008, the School District had $21.1 million invested in capital assets, all in governmental activities. Table 4 reflects a summary of these balances net of accumulated depreciation as compared to the prior fiscal year. Table 4 Capital Assets (Net of Depreciation) Governmental Activities Fiscal Fiscal Year 2008 Year 2007 Land Construction in Progress Buildings and Improvements Equipment Land Improvements $ 1,060,647.00 120,714.09 17,342,839.73 2,416,423.26 142,963.66 $ 1,060,647.00 3,182.76 17,974,254.97 2,252,303.14 91,999.43 Total $21,083,587.74 $ 21,382,387.30 Debt At fiscal year ended June 30, 2008, the School District had $1.4 million in other Long-Term Debt. Table 5 summarizes the School District's debt for general obligation bonds and other Long-Term Debt. VI ELBERT COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2008 Table 5 Debt at June 30 Governmental Activities Fiscal Fiscal Year 2008 Year 2007 Bonds Payable Other Long-Term Debt $ 1,850,000.00 $ 1,355,833.70 1,635,705.33 Total $ 1,355,833.70 $ 3,485,705.33 Current Issues Currently known facts, decisions or conditions that are expected to have a significant effect on financial positions or results of operations. State Funding Reductions - The State of Georgia has experienced significant reductions in state revenues and has passed a portion of those reductions to school districts by implementing "Austerity" and other cuts. For the fiscal year ended June 30, 2008, the "Austerity" reduction for the School District was $329,150.00. This is in addition to other smaller cuts in funding for media, transportation and staff development. Contacting the School District's Financial Management This financial report is designed to provide our citizens, taxpayers, investors and creditors with a general overview of the School District's finances and to show the School District's accountability for the money it receives. If you have questions about this report or need additional financial information, contact Mr. Phil Pitts, MBA CPA, Finance Director at (706) 213-4052 or via mail @ Elbert County School District, 50 Laurel Drive, Elberton, Georgia 30635. You may also email your question to Mr. Pitts at ppitts@elbert.kl2.ga.us. Vll ELBERT COUNTY BOARD OF EDUCATION ELBERT 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 Local Inventories Capital Assets, Non-Depreciable Capital Assets, Depreciable (Net of Accumulated Depreciation) Total Assets LIABILITIES Accounts Payable Salaries and Benefits Payable Long-Term Liabilities Due Within One Year Due in More Than One Year Total Liabilities NET ASSETS Invested in Capital Assets, Net of Related Debt Restricted for Continuation of Federal Programs Capital Projects Unrestricted Total Net Assets Total Liabilities and Net Assets EXHIBIT"A" GOVERNMENTAL ACTIVITIES $ 4,531,582.66 100,008.10 1,118,626.03 2,444,980.66 586,131.24 6,988.34 63,710.08 1,181,361.09 19,902,226.65 $ ==2=9,=93=5=,6=1=4=.8=5 $ 621,859.90 3,796,953.24 296,407.53 1,059,426.17 $ 5,774,646.84 $ 19,727,754.04 370,183.55 1,927,527.77 2,135,502.65 $ 24,160,968.01 $ ==2=9,=93=5=,6=1=4=.8=5 The notes to the basic financial statements are an integral part of this statement. - 1- ELBERT 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 Central Support Services Other Support Services Operations of Non-Instructional Services Enterprise Operations Food Services Interest on Short-Term and Long-Term Debt Total Governmental Activities General Revenues Taxes Property Taxes For Maintenance and Operations Railroad Cars Sales Taxes Special Purpose Local Option Sales Tax For Capital Projects Intangible Recording Tax Real Estate Grants and Contributions not Restricted to Specific Programs Investment Earnings Miscellaneous Total General Revenues Change in Net Assets Net Assets - Beginning of Year Net Assets - End of Year EXPENSES CHARGES FOR SERVICES $ 24,606,675.80 $ 1,222,420.81 1,367,720.00 819,879.67 420,807.83 2,209,523.52 275,693.90 2,075,225.30 1,520,997.62 61,918.44 87,130.60 334,842.22 2,198,577.17 167,871.85 $ 37,369,284.73 $ 178,484.24 543,960.36 722,444.60 The notes to the basic financial statements are an integral part of this statement. -2- EXHIBIT"B" PROGRAM REVENUES OPERATING CAPITAL GRANTS AND GRANTS AND CONTRIBUTIONS CONTRIBUTIONS NET (EXPENSES) REVENUES AND CHANGES IN NET ASSETS $ 16,870,852.30 402,340.76 522,561.60 465,031.29 742,473.60 1,177,250.46 10,735.73 1,076,366.54 705,389.39 $ 2,998.52 13,008.49 1,581,195.39 $ 23,570,204.07 $ $ 121,711.00 121 711.00 $ -7,557,339.26 -820;080.05 -845, 158.40 -354,848.38 321,665.77 -1,032,273.06 -264,958.17 -998,858.76 -693,897.23 -58,919.92 -74, 122.11 -334,842.22 -73,421.42 -167 871.85 -12,954,925.06 $ 8,841,541.40 21,653.87 2,391,784.91 148,479.86 55,486.21 2,999,526.00 129,220.60 1,176,642.37 $ 15,764,335.22 $ 2,809,410.16 21,351,557.85 $ ==2=4=1'6=0=,9=6=8=.0=1 -3- ELBERT COUNTY BOARD OF EDUCATION BALANCE SHEET GOVERNMENTAL FUNDS JUNE 30, 2008 EXHIBIT"C" GENERAL FUND DISTRICTWIDE CAPITAL PROJECTS FUND DEBT SERVICE FUND TOTAL Cash and Cash Equivalents Investments Accounts Receivable, Net Taxes State Government Federal Government Local Inventories $ 3,010,996.73 $ 1,520,585.93 $ 100,008.10 237,644.43 2,444,980.66 586,131.24 6,988.34 63 710.08 401,080.93 0.00 $ 4,531,582.66 100,008.10 638,725.36 2,444,980.66 586,131.24 6,988.34 63 710.08 Total Assets $ 6,450,459.58 $ 1,921,666.86 $ 0.00 $ ===8,!=37=2='=,1=2=6=.4=4 LIABILITIES AND FUND BALANCES LIABILITIES Accounts Payable Salaries and Benefits Payable $ 527,712.71 $ 3,796,953.24 94,147.19 Total Liabilities $ 4,324,665.95 $ 94147.19 FUND BALANCES Reserved for: Continuation of Federal Programs Debt Service Capital Projects Unreserved Designated for Student Activities Undesignated Reported in: General Fund $ 370,183.55 $ 100,008.10 $ 1,827,519.67 316,554.39 1 339 047.59 Total Fund Balances $ 2,125,793.63 $ 1,827,519.67 $ $ 621,859.90 3,796,953.24 $ 4 418 813.14 $ 0.00 0.00 $ 370,183.55 0.00 1,927,527.77 316,554.39 1 339 047.59 3 953 313.30 Total Liabilities and Fund Balances $ 6,450,459.58 $ 1,921,666.86 $ 0.00 $ ===8.;;3,;,,;72;;,.1~2;;;::6;,,;.4.;,4 The notes to the basic financial statements are an integral part of this statement. -4 - ELBERT 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") $ 3,953,313.30 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 $ 1,060,647.00 120,714.09 2,294,322.95 26,324,170.65 5,547,832.69 -14,264,099.64 21,083,587.74 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. 479,900.67 Long-Term Liabilities, 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: Capital Leases Installment Sales Agreement Total Long-Term Liabilities $ -1,199,740.71 -156,092.99 -1,355,833.70 Net Assets of Governmental Activities (Exhibit "A") The notes to the basic financial statements are an integral part of this statement. -5- ELBERT COUNTY BOARD OF EDUCATION STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS YEAR ENDED JUNE 30, 2008 EXHIBIT"E" REVENUES Property Taxes Sales Taxes State Funds Federal Funds Charges for Services Investment Earnings Miscellaneous Total Revenues EXPENDITURES Current Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Enterprise Operations Food Services Operation Capital Outlay Debt Services Principal Interest Total Expenditures Excess of Revenues over (under) Expenditures OTHER FINANCING SOURCES (USES) Transfers In Transfers Out Total Other Financing Sources (Uses) Net Change in Fund Balances Fund Balances - Beginning GENERAL FUND DISTRICTWIDE CAPITAL PROJECTS FUND DEBT SERVICE FUND TOTAL $ 8,367,365.55 203,966.07 $ 2,391,784.91 22,978,204.33 3,713,236.74 722,444.60 49,540.75 19,226.47 $ 1,182,594.73 $ 37,217,352.77 $ 2,411,011.38 $ $ 8,367,365.55 2,595,750.98 22,978,204.33 3,713,236.74 722,444.60 60,453.38 129,220.60 1,182,594.73 60,453.38 $ 39,688,817.53 $ 23,534,187.49 $ 23,534,187.49 1,218,939.66 1,367,720.00 819,879.67 413,832.97 $ 2,083,304.97 275,681.57 2,074,393.09 1,391,589.01 61,918.44 87,130.60 316,905.23 2,204,073.99 79,789.31 420,534.49 12.33 241,269.83 94,687.17 222,714.86 1,218,939.66 1,367,720.00 819,879.67 834,367.46 2,083,304.97 275,693.90 2,074,393.09 1,632,858.84 61,918.44 87,130.60 316,905.23 2,298,761.16 302,504.17 65,784.17 24,530.17 214,087.46 $ 1,850,000.00 53,019.68 90,322.00 2,129,871.63 167,871.85 $ 36,019,660.34 $ 1,246,325.82 $ 1,940,322.00 $ 39,206,308.16 $ 1,197,692.43 $ 1,164,685.56 $ -1,879,868.62 $ 482,509.37 $ 662,834.11 $ $ -662,834.11 662,834.11 -662,834.11 $ 662,834.11 $ -662,834.11 $ 0.00 $ 1,197,692.43 $ 1,827,519.67 $ -2,542,702.73 $ 482,509.37 928,101.20 0.00 2,542,702.73 3,470,803.93 Fund Balances - Ending $ 2,125,793.63 $ 1,827,519.67 $====0=.0=0 $ 3,953,313.30 The notes to the basic financial statements are an integral part of this statement. -6- ELBERT 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 Debt is reported as an expenditure in Governmental Funds, but the repayment reduces Long-Term Liabilities in the Statement of Net Assets. In the current year, these amounts consist of: Bond Principal Retirements Capital Lease Payments Installment Sales Agreement Total Long-Term Debt Repayments Change in Net Assets of Governmental Activities (Exhibit "B") $ 482,509.37 $ 675,079.39 -973,878.95 -298,799.56 495,828.72 $ 1,850,000.00 269,904.98 9,966.65 2,129,871.63 $ 2,809,410.16 The notes to the basic financial statements are an integral part of this statement. -7- ELBERT COUNTY BOARD OF EDUCATION STATEMENT OF FIDUCIARY NET ASSETS FIDUCIARY FUNDS JUNE 30, 2008 EXHIBIT"G" ASSETS Cash and Cash Equivalents Investments Total Assets LIABILITIES Cash Overdraft Funds Held for Others Total Liabilities NET ASSETS Held in Trust for Private Purposes Total Liabilities and Net Assets PRIVATE PURPOSE TRUSTS AGENCY FUNDS $ 22,003.25 $ 39,232.57 $ 39,232.57 $ 22,003.25 $ 500.00 $ 22,003.25 $ 500.00 $ 22,003.25 38,732.57 $ 39,232.57 $ 22,003.25 The notes to the basic financial statements are an integral part of this statement. -8- ELBERT COUNTY BOARD OF EDUCATION STATEMENT OF CHANGES IN FIDUCIARY NET ASSETS FIDUCIARY FUNDS YEAR ENDED JUNE 30, 2008 EXHIBIT"H" ADDITIONS Investment Earnings Interest DEDUCTIONS Scholarships Change in Net Assets Net Assets - Beginning of Year Net Assets - End of Year PRIVATE PURPOSE TRUSTS $ 2,278.30 $ 1,000.00 $ 1,278.30 37,454.27 $ 38,732.57 The notes to the basic financial statements are an integral part of this statement. -9- (This page left intentionally blank) ELBERT COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2008 EXHIBIT "I" Note 1: DESCRIPTION OF SCHOOL DISTRICT AND REPORTING ENTITY REPORTING ENTITY The Elbert County Board of Education (School District) was established under the laws ofthe State of Georgia and operates under the guidance of a school board elected by the voters and a Superintendent appointed by the Board. The Board is organized as a separate legal entity and has the power to levy taxes and issue bonds. Its budget is not subject to the 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 Elbert 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 ofthe School District related to the administration and support of the 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 and 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 of internal 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. - 11 - ELBERT COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2008 EXHIBIT "I" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The School District reports the following major governmental funds: General Fund is the School District's primary operating fund. It accounts for all financial resources of the School District, except for those resources required to be accounted for in another fund. District-wide Capital Projects Fund accounts for financial resources including Special Purpose Local Option Sales Tax (SPLOST) to be used for the acquisition, construction or renovation of major capital facilities. Debt Service Fund accounts for taxes (sales) legally restricted for the payment of general long-term principal, interest and paying agent's fees. The School District reports the following fiduciary fund types: Private Purpose Trust funds report trust arrangements under which principal and income may be expended to provide scholarships for selected students. Agency funds account for assets held by the School District as an agent for various principals' accounts that include clubs, awards and other school organizations. 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 of when the related cash flows take place. Nonexchange transactions, in which the School District gives (or receives) value without directly receiving (or giving) equal value in exchange, include 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. - 12 - ELBERT COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2008 EXHIBIT "I" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Governmental funds are reported using the current financial resources measurement focus and the modified accrual basis ofaccounting. Under this method, revenues are recognized when measurable and available. The School District considers all revenues reported in the governmental funds to be available if they are collected within sixty days after year-end. Property taxes, sales taxes and interest are considered to be susceptible to accrual. Expenditures are recorded when the related fund liability is incurred, except for principal and interest on general long-term debt, which are recognized as expenditures to the extent they have matured. Capital asset acquisitions are reported as expenditures in governmental funds. Proceeds ofgeneral long-term liabilities, acquisitions under an installment sales agreement and acquisitions under capital leases are reported as other financing sources. The School District funds certain programs by a combination ofspecific cost-reimbursement grants, categorical grants, and general revenues. Thus when program costs are incurred, there are both restricted and unrestricted net assets available to finance the program. It is the School District's policy to first apply grant resources to such programs, followed by cost-reimbursement grants, then general revenues. CASH AND CASH EQUIVALENTS COMPOSITION OF DEPOSITS Cash and cash equivalents consist ofcash on hand, demand deposits and short-term investments with original maturities of three months or less from the date of acquisition in authorized financial institutions. Official Code ofGeorgia Annotated Section 45-8-14 authorizes 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 are reported at fair value. The Official Code ofGeorgia Annotated Section 36-83-4 authorizes the School District to invest its funds. In selecting among options for investment or among institutional bids for deposits, the highest rate ofreturn shall be the objective, given equivalent conditions of safety and liquidity. Funds may be invested in the following: (1) Obligations issued by the State of Georgia or by other states, (2) Obligations issued by the United States government, - 13 - ELBERT COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2008 EXHIBIT "I" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (3) Obligations fully insured or guaranteed by the United States government or a United States government agency, (4) Obligations of any corporation of the United States government, (5) Prime banker's acceptances, (6) The Local Government Investment Pool administered by the State of Georgia, Office of Treasury and Fiscal Services, (7) Repurchase agreements, and (8) Obligations of other political subdivisions of the State of Georgia. The School District does not have a formal policy regarding investment policies that address credit risks, custodial credit risks, concentration ofcredit risks, interest rate risks or foreign currency risks. RECEIVABLES Receivables consist of amounts due from property and sales taxes, grant reimbursements due on Federal, State or other grants for expenditures made, but not reimbursed and other receivables disclosed from information available. Receivables are recorded when either the asset or revenue recognition criteria has been met. Receivables recorded on the basic financial statements do not include any amounts which would necessitate the need for an allowance for uncollectible receivables. PROPERTY TAXES The Elbert County Board of Commissioners fixed the property tax levy for the 2007 tax digest year (calendar year) on August 9, 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 Elbert County Tax Commissioner bills and collects the property taxes for the School District, withholds 2.5% oftaxes collected as a fee for tax collection and remits the balance of taxes collected to the School District. Property tax revenues, at the fund reporting level, during the fiscal year ended June 30, 2008, for maintenance and operations amounted to $8,345,711.68. The tax millage rate levied for the 2007 tax year (calendar year) for the Elbert County Board of Education was as follows (a mill equals $1 per thousand dollars of assessed value): School Operations 16.50 mills - 14 - ELBERT COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2008 EXHIBIT "I" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES SALES TAXES Special Purpose Local Option Sales Tax, at the fund reporting level, during the year amounted to $2,391,784.91 and is to be used for capital outlay for educational purposes or debt service. This sales tax was authorized by local referendum and the sales tax must be re-authorized at least every five years. INVENTORIES FOOD INVENTORIES On the basic financial statements, inventories of donated food commodities used in the preparation ofmeals are reported at their Federally assigned value and purchased foods inventories are reported at cost (first-in, first-out). The School District uses the consumption method to account for inventories whereby donated food commodities are recorded as an asset and as revenue when received, and expenses/expenditures are recorded as the inventory items are used. Purchased foods are recorded as an asset when purchased and expenses/expenditures are recorded as the inventory items are used. CAPITAL ASSETS Capital assets purchased, including capital outlay costs, are recorded as expenditures in the fund financial statements at the time of purchase (including ancillary charges). On the District-wide financial statements, all purchased capital assets are valued at cost where historical records are available and at estimated historical cost based on appraisals or deflated current replacement cost where no historical records exist. Donated capital assets are recorded at estimated fair market value on the date donated. Disposals are deleted at depreciated recorded cost. The cost of normal maintenance and repairs that do not add to the value 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 the 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 statement are as follows: Capitalization Policy Estimated Useful Life Land Land Improvements Buildings and Improvements Equipment Any Amount $ 5,000.00 $ 5,000.00 $ 5,000.00 NIA 20 years 50 years 5 to 25 years - 15 - ELBERT COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2008 EXHIBIT "I" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Depreciation is used to allocate the actual or estimated historical cost of all capital assets over estimated useful lives. GENERAL OBLIGATION BONDS The School District issues general obligation bonds to provide funds for the acquisition and construction of major capital facilities. In the District-wide and fund financial statements, the School District recognizes bond premiums and discounts, as well as bond issuance costs during the fiscal year bonds are issued. Premiums received on debt issuances are reported as other financing sources while discounts on debt issuances are reported as other financing uses. 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 premiums and discounts, as well as issuance costs, should be deferred and amortized over the life ofthe bonds using the straight-line method. The effect ofthis deviation is deemed to be immaterial to the fair presentation of the basic financial statements. NET ASSETS The School District's net assets in the District-wide Statements are classified as follows: Invested in capital assets, net of related debt - This represents the School District's total investment in capital assets, net ofoutstanding debt obligations related to those capital assets. To the extent debt has been incurred but not yet expended for capital assets, such amounts are not included as a component of invested in capital assets, net of related debt. Restricted net assets - These represent resources for which the School District is legally or contractually obligated to spend resources for bus replacement, continuation of Federal programs, debt service and capital projects in accordance with restrictions imposed by external third parties. Unrestricted net assets - Unrestricted net assets represent resources derived from property taxes, sales taxes, grants and contributions not restricted to specific programs, charges for services, and miscellaneous revenues. These resources are used for transactions relating to the educational and general operations of the School District, and may be used at the discretion of the Board to meet current expenses for those purposes. Note 3: DEPOSITS AND INVESTMENTS COLLATERALIZATION OF DEPOSITS Official Code of Georgia Annotated (OCGA) Section 45-8-12 provides that there shall not be on deposit at any time in any depository for a time longer than ten days a sum of money which has not been secured by surety bond, by guarantee ofinsurance, or by collateral. The aggregate ofthe face - 16 - ELBERT COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2008 EXHIBIT "I" Note 3: DEPOSITS AND INVESTMENTS value ofsuch surety bond and the market value ofsecurities pledged shall be equal to not less than 110 percent ofthe public funds being secured after the deduction ofthe amount ofdeposit insurance. Ifa depository elects the pooled method (OCGA 45-8-13 .1) the aggregate ofthe market value ofthe securities pledged to secure a pool ofpublic funds shall be not less than 110 percent ofthe daily pool balance. Acceptable security for deposits consists of any one of or any combination of the following: (1) Surety bond signed by a surety company duly qualified and authorized to transact business within the State of Georgia, (2) Insurance on accounts provided by the Federal Deposit Insurance Corporation, (3) Bonds, bills, notes, certificates of indebtedness or other direct obligations of the United States or 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 $5,085,220.25. The amounts ofthe total bank balances are classified into four 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. - 17 - ELBERT COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2008 EXHIBIT "I" Note 3: DEPOSITS AND INVESTMENTS The School District's uninsured deposits are classified by custodial credit risk category at June 30, 2008, as follows: Custodial Credit Risk Category Bank Balance 1 $ 0.00 2 3,293,478.67 3 1,491,741.58 Total $ 4,785,220.25 CATEGORIZATION OF INVESTMENTS The School District's investments as of June 30, 2008, are presented below. Investments are presented by investment type. Investment Type Fair Value Other Investments U.S. Treasury Money Market Funds $ 100,008.10 The U. S. Treasury Money Market Funds are in an Institutional Treasury Portfolio fund managed by Fidelity Investments. The Institutional Treasury Portfolio Fund is rated AAAm by Standard and Poor's. The weighted average maturity of the fund is approximately 60 days. Note 4: NON-MONETARY TRANSACTIONS The School District receives food commodities from the United States Department of Agriculture (USDA) for school breakfast and lunch programs. These commodities are recorded at their Federally assigned value. See Note 2 - Inventories Note 5: CAPITAL ASSETS The following is a summary of changes in the Capital Assets during the fiscal year: - 18 - ELBERT COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2008 EXHIBIT "I" Note 5: CAPITAL ASSETS 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 I, 2007 Increases Decreases Balances June 30, 2008 $ 1,060,647.00 $ 3,182.76 $ 117,531.33 $ 1,063,829.76 $ 117,531.33 $ 0.00 $ 1,060,647.00 120,714.09 0.00 $ 1,181,361.09 $26,318,550.17 $ 5,288,799.06 2,236,419.00 5,620.48 494,023.63 $ 57,903.95 $ 26,324,170.65 234,990.00 5,547,832.69 2,294,322.95 8,344,295.20 3,036,495.92 2,144,419.57 637,035.72 329,903.51 6,939.72 234,990.00 8,981,330.92 3,131,409.43 2,151,359.29 $20,318,557.54 $ -416,330.89 $ 0.00 $19,902,226.65 $ 21 382.387,30 $ -298 799 56 $ 0,00 $ 21.083.587,74 Capital assets being acquired under capital leases as of June 30, 2008, are as follows: Governmental Funds Buildings and Improvements Equipment Less: Accumulated Depreciation $ 1,589,410.01 1,361,137.83 1,054,679.86 $ 1,895,867.98 Current year depreciation expense by function is as follows: Instruction Support Services Pupil Services School Administration Maintenance and Operation ofPlant Student Transportation Services Food Services $ 714,069.71 $ 2,225.03 85,132.57 557.94 156,701.28 244,616.82 15,192.42 $ 973,878.95 - 19 - ELBERT COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2008 EXHIBIT "I" Note 6: RESTRICTED ASSETS Special Purpose Local Option Sales Tax (SPLOST) funds and proceeds from an installment sales agreement are restricted assets in the Statement of Net Assets because their use is limited by statutory provisions. Restricted assets at June 30, 2008, were as follows: General Fund Installment Sales Agreement District-wide Capital Projects SPLOST Restricted Cash and Cash Equivalents: Capital Acquisitions Restricted Investments: Capital Acquisitions $ 1,520,585.93 $ 100,008.10 Note 7: INTERFUND TRANSFERS Interfund transfers for the year ended June 30, 2008, consisted of the following: Transfer to Transfers From Debt Service Fund District-wide Capital Projects $ 662,834.11 Transfers are used to move excess Special Purpose Local Option Sales Tax (SPLOST) proceeds collected by the Debt Service Fund to the District-wide Capital Projects Fund as required for funding capital construction projects. Note 8: RISK MANAGEMENT The School District is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors or omissions; job related illness or injuries to employees; acts of God and unemployment compensation. The School District has obtained commercial insurance for risk ofloss associated with torts, assets and errors or omissions. The School District has neither significantly reduced coverage for these risks nor incurred losses (settlements) which exceeded the School District's insurance coverage in any of the past three years. The School District has elected to self-insure for all losses related to acts of God. The School District has not experienced any losses related to this risk in the past three years. - 20- ELBERT COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2008 EXHIBIT "I" Note 8: RISK MANAGEMENT The School District is self-insured with regard to unemployment compensation claims. The School District accounts for claims within the same fund that the employee's salary and benefits were paid, with expenses/expenditures and liability being reported when it is probable that a loss has occurred, and the amount of that loss can be reasonably estimated. Changes in the unemployment compensation claims liability during the last two fiscal years are as follows: Beginning of Year Liability Claims and Changes in Estimates Claims Paid End of Year Liability 2007 2008 $ 0.00 $ 2,529.05 $ 2,529.05 $ 0.00 $ 0.00 $ 7,893.83 $ 7,893.83 $ 0.00 The School District participates in the Georgia Education Workers' Compensation Trust, a public entity risk pool organized on December 1, 1991, to develop, implement and administer a program of workers' compensation self-insurance for its member organizations. The School District pays an annual premium to the Trust for its general insurance coverage. Additional insurance coverage is provided through an agreement by the Trust with the Midwest Employers Casualty Company to provide coverage for potential losses sustained by the Trust in excess of $500,000.00 loss per occurrence, up to $2,000,000.00. The School District has purchased surety bonds to provide additional insurance coverage as follows: Position Covered Amount Superintendent All Employees $ 100,000.00 $ 100,000.00 Note 9: SHORT-TERM DEBT The School District obtains temporary loans in advance of property tax collections, depositing the proceeds in its General Fund. This short-term debt is to provide cash for operations until property tax collections are received by the School District. Article IX, Section V, Paragraph V of the Constitution of the State of Georgia limits the aggregate amount of short-term debt to 75 percent of the total gross income from taxes collected in the preceding year and requires all short-term debt to be repaid no later than December 31 of the calendar year in which the debt was incurred. Short-term debt activity for the fiscal year is as follows: - 21 - ELBERT COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2008 EXHIBIT "I" Note 9: SHORT-TERM DEBT Beginning Balance Issued Ending Redeemed Balance Temporary Loans $===o'==.o==o $ 600,000.00 $ 600,000.00 $===0~.0-0 Note 10: LONG-TERM DEBT CAPITAL LEASES The Elbert County Board ofEducation has entered into various lease agreements as lessee for capital outlay, energy management, buses and various equipment. These lease agreements qualify as capital leases for accounting purposes and, therefore, have been recorded at the present value ofthe future minimum lease payments as of the date of their inception. INSTALLMENT SALES AGREEMENT The Elbert County Board of Education entered into an agreement dated June 1, 2006, with the Northeast Georgia Regional Educational Service Agency for the construction and subsequent lease of the Rutland Center. Under the terms of the agreement, the School District will make annual payments through July 15, 2020. The changes in Long-Term Debt during the fiscal year ended June 30, 2008, were as follows: Balance July 1. 2007 Governmental Funds Additions Deductions Balance June 30. 2008 Due Within One Year G.O.Bonds $ 1,850,000.00 $ Capital Leases 1,469,645.69 Installment Sales Agreement 166.059.64 0.00 $ 1,850,000.00 $ 0.00 269,904.98 1,199,740.71 $ 9.966.65 156.092.99 286,134.22 10,273.31 $ 3 485105 33 $ 0 00 $ 2,122,811.63 $ 1,355 833 10 $ 226 40153 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 2009 2010 2011 2012 2013 2014 - 2018 2019 - 2021 Total Principal and Interest Ca12ital Leases Princi12al Interest Installment Sales Agreement Princi12al Interest $ 286,134.22 $ 280,815.91 182,860.70 192,805.95 171,967.59 85,156.34 58,096.67 $ 43,269.42 30,315.46 20,370.21 10,006.56 3,211.58 10,273.31 $ 10,733.31 11,193.31 11,653.31 12,113.31 68,539.86 31,586.58 6,493.47 6,066.10 5,619.59 5,153.95 4,669.17 15,359.80 1,983.76 $ 1.199.740.71 $ 165,269.90 $ 156,092.99 $ 45,345.84 -22 - ELBERT COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2008 EXHIBIT "I" Note 11: ON-BEHALF PAYMENTS The School District has recognized revenues and costs in the amount of $922,818.07 for health insurance and retirement contributions paid on the School District's behalf by the following State Agencies. Georgia Department of Education Paid to the Georgia Department of Community Health For Health Insurance of Non-Certified Personnel In the amount of $897,663.83 Paid to the Teachers Retirement System of Georgia For Teachers Retirement System (TRS) Employer's Cost In the amount of $21,194.24 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 $3,960.00 Note 12: SIGNIFICANT CONTINGENT LIABILITIES Amounts received or receivable principally from the Federal government are subject to audit and review by grantor agencies. This could result in requests for reimbursement to the grantor agency for any costs which are disallowed under grant terms. The School District believes that such disallowances, if any, will be immaterial to its overall financial position. The School District is a defendant in various legal proceedings 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 13: RELATED PARTY TRANSACTION Mr. Phil Pitts, Chief Financial Officer for the Elbert County School District, also serves on the Board of Directors for the Elberton Federal Savings and Loan. During fiscal year 2008, Elberton Federal Savings and Loan was one of the institutions that were sent a "Request for Proposal" for a line of credit to benefit the Elbert County School District. The Elberton Federal Savings and Loan institution did not loan funds or provide a line ofcredit to the School District during fiscal year 2008. - 23 - ELBERT COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2008 EXHIBIT "I" 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 $3,374,957.15, which equaled the required contribution. 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 of Georgia (TRS), which is a cost-sharing multiple employer defined benefit pension plan. TRS provides service retirement, disability retirement and survivors benefits for its members in accordance with State statute. The Teachers Retirement System of Georgia issues a separate stand alone financial audit report and a copy can be obtained from the Georgia Department of Audits and Accounts. - 24 - ELBERT COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2008 EXHIBIT "I" Note 15: RETIREMENT PLANS TRS CONTRIBUTIONS REQUIRED AND MADE Employees ofthe School District who are covered by TRS are required by State statute to contribute 5% of their gross earnings to TRS. The School District makes monthly employer contributions to TRS at rates adopted by the TRS Board of Trustees in accordance with State statute and as advised by their independent actuary. The required employer contribution rate is 9.28% and employer contributions of 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% $ 1,806,646.12 $ 1,718,998.72 $ 1,607,185.00 - 25 - (This page left intentionally blank) ELBERT 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 Central Support Services Other Support Services Enterprise Operations Food Services Operation Capital Outlay Debt Service Total Expenditures Net Change in Fund Balances Fund Balances - Beginning Adjustments NONAPPROPRIATED BUDGETS ORIGINAL {1) FINAL (1) ACTUAL AMOUNTS $ 8,345,231.00 $ 8,345,231.00 $ 8,367,365.55 203,966.07 20,978,660.00 21,964,838.97 22,978,204.33 1,385,200.00 3,904,674.00 3,713,236.74 700,300.00 700,300.00 722,444.60 11,500.00 11,500.00 49,540.75 436,700.00 436,700.00 1,182,594.73 $ 31,857,591.00 $ 35,363,243.97 $ 37,217,352.77 $ 21,221,014.00 $ 23,491,887.46 $ 23,534,187.49 933,160.00 759,331.00 827,269.00 334,970.00 2,070,860.00 269,770.00 2,085,020.00 1,282,687.00 56,490.00 82,180.00 1,884,380.00 50,460.00 1,222,393.00 1,305,654.87 829,978.00 448,211.00 2,113,600.15 269,770.00 2,088,020.00 1,336,816.49 56,490.00 94,903.00 1,884,380.00 50,460.00 1,218,939.66 1,367,720.00 819,879.67 413,832.97 2,083,304.97 275,681.57 2,074,393.09 1,391,589.01 61,918.44 87,130.60 316,905.23 2,204,073.99 79,789.31 90 314.34 $ 31,857,591.00 $ 35,192,563.97 $ 36,019,660.34 $ 0.00 $ 170,680.00 $ 1,197,692.43 0.00 681,864.82 928,101.20 6 012.21 Fund Balances - Ending $ 0.00 $ 858,557.03 $ 2,125,793.63 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. - 27 - ELBERT 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 Pass-Through From Georgia Department of Education Career and Technical Education - Basic Grants to States English Language Acquisition Grants Enhancing Education Through Technology Program Improving Teacher Quality State Grants Migrant Education Rural Education Safe and Drug-Free Schools and Communities - State Grants State Grants for Innovative Programs Title I Grants to Local Educational Agencies Total U. S. Department of Education Defense, U. S. Department of Direct Department of the Army R.O.T.C. Program CFDA NUMBER PASSTHROUGH ENTITY ID NUMBER EXPENDITURES IN PERIOD 10.553 10.555 N/A (2) N/A $ 1,893,866.01 $ 1,893,866.01 10.550 N/A 180 157.04 $ 2,074,023.05 * 84.027 * 84.173 84.048 84.365 84.318 84.367 84.011 84.358 84.186 84.298 * 84.010 N/A $ N/A $ 665,106.36 28,167.00 693,273.36 N/A 39,762.00 NIA 10,039.99 N/A 158,662.62 N/A 241,920.96 N/A 9,337.14 N/A 68,315.39 NIA 14,334.74 N/A 5,321.52 N/A 830,562.79 $ 2,071,530.51 Total Federal Financial Assistance $ ====4=,2=2=5..,,8,..62,...,..91.. N/A = Not Available Notes to the Schedule of Expenditures of Federal Awards (1) The amount shown for the Food Donation Program represents the Federally assigned value of nonmonetary assistance for donated commodities received and/or consumed by the School District during the current fiscal year. (2) Expenditures for the funds earned on the School Breakfast Program ($366,138.71) 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 Elbert 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. -28- ELBERT COUNTY BOARD OF EDUCATION SCHEDULE OF STATE REVENUE YEAR ENDED JUNE 30, 2008 AGENCY/FUNDING GRANTS Bright From the Start: Georgia Department of Early Care and Learning Pre-Kindergarten Program Education, Georgia Department of Quality Basic Education Direct Instructional Cost Kindergarten Program Kindergarten Program - Early Intervention Program Primary Grades (1-3) Program Primary Grades - Early Intervention (1-3) Program Upper Elementary Grades (4-5) Program Upper Elementary Grades - Early Intervention (4-5) Program Middle School (6-8) Program High School General Education (9-12) Program Vocational Laboratory (9-12) Program Students with Disabilities Category I Category II Category Ill Category IV Category V Gifted Student - Category VI Remedial Education Program Alternative Education Program English Speakers of Other Languages (ESOL) Media Center Program 20 Days Additional Instruction Staff and Professional Development Indirect Cost Central Administration School Administration Facility Maintenance and Operations Categorical Grants Pupil Transportation Regular Bus Replacement Sparsity Nursing Services Mid-term Adjustment Hold-Harmless Education Equalization Funding Grant Food Services Vocational Education Amended Formula Adjustment Other State Programs Dropout Recovery and Prevention Graduation Coaches Health Insurance Middle School Summer Remedial Program National Teacher Certification Preschool Handicapped Program Teachers' Retirement Tuition for the Multi-Handicapped Governor's Office of Highway Safety Driver's Education Improvement Project Office of Treasury and Fiscal Services Public School Employees Retirement See notes to the basic financial statements. - 29 - SCHEDULE "3" GOVERNMENTAL FUND TYPE GENERAL FUND $ 683,313.07 1,038,644.00 345,444.00 2,554,459.00 460,080.00 1,216,737.00 300,867.00 2,145,076.00 1,834,141.00 957,804.00 57,671.00 243,134.00 952,454.00 410,356.00 471,632.00 540,183.00 200,263.00 182,815.00 105,839.00 388,749.00 122,180.00 69,268.00 546,155.00 936,117.00 892,430.00 623,429.00 121,711.00 20,000.00 74,795.00 324,247.00 2,999,526.00 105,434.00 71,819.00 -329, 150.00 26,412.00 84,192.00 897,663.83 3,487.00 18,654.00 62,686.00 21,194.24 94,205.00 98,128.19 3 960.00 $ ==22.,..,=97=8=,2=0=4.=33= ELBERT COUNTY BOARD OF EDUCATION SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS YEAR ENDED JUNE 30, 2008 SCHEDULE "4" PROJECT Adding to, renovating, repairing, improving, equipping and furnishing existing school buildings and other facilities including, but not limited to, athletic/physical education facilities, transportation and maintenance facilities, additional classrooms and parking areas; purchasing HVAC mechanical systems and roofing; acquiring system-wide technology and safety equipment; purchasing textbooks; acquiring school buses and other school vehicles and the acquiring of any property desirable therefore, both real and personal. ORIGINAL ESTIMATED COST (1) CURRENT ESTIMATED COSTS (2) AMOUNT EXPENDED IN CURRENT YEAR AMOUNT EXPENDED IN PRIOR YEARS PROJECT STATUS $ 15,000,000.00 $ 15,662,834.11 $ 1,246,325.82 $ 0.00 Ongoing (1) The School District's original cost estimate as specified in the resolution calling for the imposition of the Local Option Sales Tax. (2) The School District's current estimate of total cost for the project. Includes all cost from project inception to completion. See notes to the basic financial statements. - 30- ELBERT 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 School (6-8) Program High School General Education (9-12) Program Vocational Laboratory (9-12) Program Students with Disabilities Category II Category Ill Category IV Category V Gifted Student - Category VI Remedial Education Program Alternative Education Program English Speakers of Other Languages (ESOL) 1,150,908.00 $ 415,516.00 2,834,403.00 533,567.00 1,345,617.00 1,324,224.23 $ 331,908.80 3,203,237.18 654,736.40 2,083,708.16 37,001.69 $ 2,808.81 135,422.13 4,935.88 78,407.42 1,361,225.92 334,717.61 3,338,659.31 659,672.28 2,162,115.58 341,732.00 2,420,497.00 2,081,045.00 1,054,345.00 2,404,379.00 598,261.00 215,628.00 205,575.00 116 561.00 487,084.94 3,072,872.46 2,532,593.73 1,032,973.25 338,807.33 1,679,125.66 514,222.97 197,644.91 675,298.69 276,247.38 200,754.26 199,104.63 4,464.82 77,509.11 84,652.60 69,478.37 9,240.02 1,529.26 1121.51 491,549.76 3,150,381.57 2,617,246.33 1,102,451.62 338,807.33 1,679,125.66 514,222.97 197,644.91 684,538.71 276,247.38 202,283.52 200,226.14 TOTAL DIRECT INSTRUCTIONAL PROGRAMS $ 15,718,034.00 $ 18,804,544.98 $ 506,571.62 $ 19,311,116.60 Media Center Program Staff and Professional Development 435,354.00 78 202.00 723,476.93 67,746.70 791,223.63 92,320.65 TOTAL QBE FORMULA FUNDS $ 16,231,590.00 $ 19,528,021.91 $ 574,318.32 $ 20,194,660.88 (1) Comprised of State Funds plus Local Five Mill Share. (2) Allotments do not include the impact of the State amended formula adjustment. See notes to the basic financial statements. - 31 - SECTION II COMPLIANCE AND INTERNAL CONTROL REPORTS Russell W. Hinton STATE AUDITOR (404) 656-2174 DEPARTMENT OF AUDITS AND ACCOUNTS 270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400 October 1, 2009 Honorable Sonny Perdue, Governor Members ofthe General Assembly Members ofthe State Board of Education and Superintendent and Members ofthe Elbert 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 Elbert County Board of Education as of and for the year ended June 30, 2008, which collectively comprise Elbert County Board of Education's basic financial statements and have issued our report thereon dated October 1, 2009. We conducted our audit in accordance with auditing standards generally accepted in the United States ofAmerica and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Internal Control Over Financial Reporting In planning and performing our audit, we considered Elbert County Board of Education's internal control over financial reporting as a basis for designing our auditing procedures for the purpose of expressing our opinions on the financial statements, but not for the purpose ofexpressing an opinion on the effectiveness of the Elbert County Board of Education's internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness of the Elbert 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 Elbert County Board of Education's ability to initiate, authorize, record, process, or report financial data reliably in accordance with generally accepted accounting principles such that there is more than a remote likelihood that a misstatement of the Elbert County Board of Education's financial statements that is more than inconsequential will not be prevented or detected by the Elbert County Board of Education's internal control. We consider item FS-6521-08-01 in the accompanying Schedule of Findings 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 Elbert 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 Elbert 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 ofElbert County Board ofEducation in a separate letter dated October 1, 2009. Elbert County Board of Education's response to the findings identified in our audit is described in the accompanying Schedule ofManagement's Responses. We did not audit Elbert 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 of management, members of the Elbert 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, ,. ~ w.-