Emanuel County Board of Education, Swainsboro, Georgia, report on audit for the financial statements for the fiscal year ended June 30, 2006

EMANUEL COUNTY BOARD OF EDUCATION
SWAINSBORO, GEORGIA REPORT ON AUDIT
OF THE FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2006
STATE OF GEORGIA
DEPARTMENT OF AUDITS AND ACCOUNTS
Russell W. Hinton State Auditor

EMANUEL COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS -

SECTION I

FINANCIAL

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

EXHIBITS

BASIC FINANCIAL STATEMENTS

DISTRICT-WIDE FINANCIAL STATEMENTS

A

STATEMENT OF NET ASSETS

1

B

STATEMENT OF ACTIVITIES

2

FUND FINANCIAL STATEMENTS

C

BALANCE SHEET

GOVERNMENTAL FUNDS

4

D

RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET

TO THE STATEMENT OF NET ASSETS

5

E

STATEMENT OF REVENUES, EXPENDITURES AND CHANGES

IN FUND BALANCES

GOVERNMENTAL FUNDS

6

F

RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT

OF REVENUES, EXPENDITURES AND CHANGES IN FUND

BALANCES TO THE STATEMENT OF ACTIVITIES

7

G

STATEMENT OF FIDUCIARY NET ASSETS

FIDUCIARY FUNDS

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

23

SUPPLEMENTARY INFORMATION

2 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS

24

3 SCHEDULE OF STATE REVENUE

26

EMANUEL COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS -

SECTION I

FINANCIAL

SCHEDULES

SUPPLEMENTARY INFORMATION

4 SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS

27

5 ALLOTMENTS AND EXPENDITURES

GENERAL FUND - QUALITY BASIC EDUCATION PROGRAMS (QBE)

BY PROGRAM

29

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

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

SECTION I FINANCIAL

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

DEPARTMENT OF AUDITS AND ACCOUNTS
270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400
May 15, 2007

Honorable Sonny Perdue, Governor Members ofthe General Assembly Members ofthe State Board of Education
and Superintendent and Members ofthe Emanuel 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) ofthe Emanuel County Board of Education, as of and for the year ended June 30, 2006, which collectively comprise the Board's basic financial statements as listed in the table of contents. These financial statements are the responsibility ofthe Emanuel County Board ofEducation's management. Our responsibility is to express opinions on these financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United States ofAmerica and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General ofthe United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free ofmaterial misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinions.
In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, each major fund, and the aggregate remaining fund information ofthe Emanuel County Board ofEducation, as ofJune 30, 2006, 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.
2006ARL-11

The Emanuel County Board ofEducation has not presented Management's Discussion and Analysis that accounting principles generally accepted in the United States has determined is necessary to supplement, although not to be part of, the basic financial statements.
In accordance with Government Auditing Standards, we have also issued our report dated May 15,
2007, on our consideration of the Emanuel County Board of Education's internal control over financial reporting and our tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements and other matters. The purpose ofthat report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit.
The Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual, as presented on page 23, 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 Emanuel 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,
':1: ~~ ~inion, CPA, CGFM State Auditor
RWH:gp 2006ARL-11

EMANUEL COUNTY BOARD OF EDUCATION

EMANUEL COUNTY BOARD OF EDUCATION STATEMENT OF NET ASSETS JUNE 30, 2006
ASSETS
Cash and Cash Equivalents Investments Accounts Receivable, Net
Taxes State Government Federal Government Other Inventories Capital Assets Land Construction in Progress Land Improvements Buildings Equipment Less: Accumulated Depreciation
Total Assets
LIABILITIES
Accounts Payable Salaries 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
Bus Replacement Continuation of Federal Programs Debt Service Capital Projects Unrestricted
Total Net Assets
Total Liabilities and Net Assets
The notes to the basic financial statements are an integral part of this statement.
-1-

EXHIBIT"A"

GOVERNMENTAL ACTIVITIES

$

5,349,422

1,305,336

727,717 2,647,270
891,396 46,065 64,642

910,546 603,413 172,461 44,512,704 5,462,139 -9 111 678

$ ===5=3'=58..1.._.4=33....

$

291,853

4,000,592

315,000 3,085,000

$

7,692,445

$

39,149,585

216,065 685,957
51,680 3,916,953 1868748

$

45,888,988

$ ===5=3'=58=1=,4=33=

EMANUEL COUNTY BOARD OF EDUCATION STATEMENT OF ACTIVITIES
FOR THE YEAR ENDED JUNE 30, 2006

GOVERNMENTAL ACTIVITIES
Instruction Support Services
Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Operations of Non-Instructional Services Enterprise Operations Food Services Interest on Short-Term and Long-Term Debt
Total Governmental Activities
General Revenues Taxes Property Taxes For Maintenance and Operations For Debt Services Sales Taxes Special Purpose Local Option Sales Tax For Capital Projects 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

EXPENSES

CHARGES FOR SERVICES

$

24,316,168 $

1,302,960 803,825 500,201 446,951
2,034,910 107,176
1,914,919 1,640,795
156,567 90,308

717,348 2,423,470
97 067

36,552,665 $

431,470
434,107 865 577

Net Assets - End of Year

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

EXHIBIT "B"

PROGRAM REVENUES

OPERATING

CAPITAL

GRANTS AND

GRANTS AND

CONTRIBUTIONS CONTRIBUTIONS

NET (EXPENSES) REVENUES
AND CHANGES IN NET ASSETS

$

20,540,954

723,882 388,916 428,653 678,471 1,100,595

1,200,324
918,729 $

73,485

1,906,461

$

27,960,470 $

$
99,446
99446 $

-3,343,744
-579,078 -414,909
-71,548 231,520 -934,315 -107, 176 -714,595 -622,620 -156,567 -16,823
-717,348 -82,902 -97 067
-7,627,172

$

4,381,972

80

2,711,792 23,768
1,670,911 165,990 598 213

$

9,552,726

$

1,925,554

43 963 434

$ =======45=,8=8==8=9'=88=

-3-

EMANUEL COUNTY BOARD OF EDUCATION BALANCE SHEET
GOVERNMENTAL FUNDS JUNE 30, 2006

EXHIBIT"C"

ASSETS
Cash and Cash Equivalents Investments Accounts Receivable, Net
Taxes State Government Federal Government Other Inventories
Total Assets
LIABILITIES AND FUND BALANCES
LIABILITIES
Accounts Payable Salaries Payable
Total Liabilities
FUND BALANCES
Reserved for: Bus Replacement Continuation of Federal Programs Debt Service Inventories Capital Projects
Unreserved Designated for Self-Insurance Undesignated Reported in: General Fund Capital Projects
Total Fund Balances
Total Liabilities and Fund Balances

GENERAL FUND

DISTRICTWIDE
CAPITAL PROJECTS
FUND

DEBT SERVICE
FUND

TOTAL

$ 1,701,854 $ 3,635,337 $ 1,305,336

93,980 2,647,270
891,396 46,065 64,642

472,223

12,231 $

5,349,422 1,305,336
566,203 2,647,270
891,396 46,065 64642

$ 6,750,543 $ 4,107,560 $

12,231 $ 10,870,334

$

283,560 $

4,000,592

$ 4,284,152 $

8,293 8,293

$

291,853

4,000,592

$ 4,292,445

$

216,065

621,315

$

39,449 $

64,642

3,916,953

53,938

1,510,431

142,865

$ 2,466,391 $ 4,099,267 $

$ 12,231
12,231 $

216,065 621,315
51,680 64,642 3,916,953
53,938
1,510,431 142,865
6,577,889

$ 6,750,543 $ 4,107,560 $

12,231 $ 10,870,334

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

EMANUEL COUNTY BOARD OF EDUCATION RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET
TO THE STATEMENT OF NET ASSETS JUNE 30, 2006

EXHIBIT"D"

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

$

6,577,889

$

910,546

603,413

172,461

44,512,704

5,462,139

-9, 111,678

42,549,585

161,514 -3,400,000

$ 45,888,988

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

EMANUEL COUNTY BOARD OF EDUCATION STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES
GOVERNMENTAL FUNDS YEAR ENDED JUNE 30, 2006

EXHIBIT"E"

REVENUES
Property Taxes Sales Taxes State Funds Federal Funds Charges for Services Investment Earnings Miscellaneous
Total Revenues
EXPENDITURES
Current Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Enterprise Operations Food Services Operation
Capital Outlay Debt Services
Principal Interest
Total Expenditures
Excess of Revenues over (under) Expenditures
OTHER FINANCING SOURCES (USES}
Transfers In Transfers Out
Total Other Financing Sources (Uses)
Net Change in Fund Balances
Fund Balances - Beginning

GENERAL FUND

DISTRICTWIDE
CAPITAL PROJECTS
FUND

DEBT SERVICE
FUND

TOTAL

$ 4,223,396 23,768 $
22,732,415 6,998,412
865,577 83,730 598,213
$ 35,525,511 $

$ 2,711,792
82,201 2,793,993 $

75 $ 59

4,223,471 2,735,560 22,732,415 6,998,412
865,577 165,990 598,213

134 $ 38,319,638

$ 23,586,017
1,292,960 $ 812,942 469,367 445,391
2,018,617 107,176
1,873,338 1,450,051
155,671 90,308 723,017 2,336,855 25,095

10,000 4,956 1,560
14,539 1,130 896
1,251,394 $

$ 35,386,805 $

$

138,706 $

1,284,475 $ 1,509,518 $

$ 23,586,017

1,302,960 812,942 474,323 446,951
2,018,617 107,176
1,887,877 1,451,181
156,567 90,308 723,017 2,336,855 1,276,489

320,000 97 067

320,000 97 067

417 067 $ 37,088,347

-416,933 $ 1,231,291

$ $ -417 067

$ -417 067 $

$

138,706 $ 1,092,451 $

2,327,685

3,006,816

417,067 $
417 067 $ 134 $
12 097

417,067 -417 067
0 1,231,291 5,346,598

Fund Balances - Ending

$ 2,466,391 $ 4,099,267 $

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

12,231 $ 6,577,889

EMANUEL COUNTY BOARD OF EDUCATION RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT OF
REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES TO THE STATEMENT OF ACTIVITIES JUNE 30, 2006

EXHIBIT "F"

Total Net Change in Fund Balances - Governmental Funds (Exhibit "E")

Amounts reported for Governmental Activities in the Statement of Activities are different because:

Capital Outlays are reported as expenditures in Governmental Funds. However, in the Statement of Activities, the cost of Capital Assets is allocated over their estimated useful lives as depreciation expense. In the current period, these amounts are:

Capital Outlay

$

Depreciation Expense

Excess of Capital Outlay over Depreciation Expense

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.

Bond Principal Retirements, which are Long-Term debt repayments, are reported as expenditures in Governmental Funds, but the repayment reduces Long-Term Liabilities in the Statement of Net Assets.

$
1,196,863 -981 181

1,231,291
215,682 158,581 320,000

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

$ ====1,=92=5=,5=5=4

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

EMANUEL COUNTY BOARD OF EDUCATION STATEMENT OF FIDUCIARY NET ASSETS FIDUCIARY FUNDS JUNE 30, 2006
ASSETS Cash and Cash Equivalents
LIABILITIES Funds Held for Others

EXHIBIT"G"
AGENCY FUNDS
$==1=64...,,=57=8=
$ =====1=6=4'=57=8=

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

EMANUEL COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2006

EXHIBIT "H"

Note 1: DESCRIPTION OF SCHOOL DISTRICT AND REPORTING ENTITY
REPORTING ENTITY
The Emanuel 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 Emanuel 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.

-9-

EMANUEL COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2006

EXHIBIT "H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The School District reports the following major governmental funds:
General Fund is the School District's primary operating fund. It accounts for all financial
resources ofthe School District, except those resources required to be accounted for in another fund.
District-wide Capital Projects Fund accounts for financial resources including Special Purpose Local Option Sales Tax (SPLOST) to be used for the acquisition, construction or renovation of major 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 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.
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
- 10 -

EMANUEL COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2006

EXHIBIT"H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
as expenditures to the extent they have matured. Capital asset acquisitions are reported as expenditures in governmental funds. Proceeds ofgeneral long-term liabilities are reported as other financing sources.
The School District funds certain programs by a combination ofspecific cost-reimbursement grants, categorical grants, and general revenues. Thus, when program costs are incurred, there are both restricted and unrestricted net assets available to finance the program. It is the School District's policy to first apply grant resources to such programs, followed by cost-reimbursement grants, then general revenues.
CASH AND CASH EQUIVALENTS
COMPOSITION OF DEPOSITS Cash and cash equivalents consist ofcash on hand, demand deposits and short-term investments with original maturities of three months or less from the date of acquisition in authorized financial institutions. Georgia Laws OCGA 45-8-14 authorize the School District to deposit its funds in one or more solvent banks or insured Federal savings and loan associations.
INVESTMENTS
COMPOSITION OF INVESTMENTS Investments made by the School District in nonparticipating interest-earning contracts (such as certificates ofdeposit) and repurchase agreements are reported at cost. Participating interest-earning contracts and money market investments with a maturity at purchase ofone year or less are reported at amortized cost. Both participating interest-earning contracts and money market investments with a maturity at purchase greater than one year are reported at fair value. The Official Code ofGeorgia Annotated Section 36-83-4 authorizes the School District to invest its funds. In selecting among options for investment or among institutional bids for deposits, the highest rate ofreturn shall be the objective, given equivalent conditions of safety and liquidity. Funds may be invested in the following:
(1) Obligations issued by the State of Georgia or by other states,
(2) Obligations issued by the United States government,
(3) Obligations fully insured or guaranteed by the United States government or a United States government agency,
(4) Obligations of any corporation of the United States government,
(5) Prime banker's acceptances,

- 11 -

EMANUEL COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2006

EXHIBIT"H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(6) The Local Government Investment Pool administered by the State of Georgia, Office of Treasury and Fiscal Services,

(7) Repurchase agreements, and

(8) Obligations of other political subdivisions of the State of Georgia.

The School District does not have a formal policy regarding investment policies that address credit risks, custodial credit risks, concentration 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 Emanuel County Board of Commissioners fixed the property tax levy for the 2005 tax digest year (calendar year) on October 13, 2005 (levy date). Taxes were due on December 31, 2005 (lien date). Taxes collected within the current fiscal year or within 60 days after year-end on the 2005 tax digest are reported as revenue in the governmental funds for fiscal year 2006. The Emanuel County Tax Commissioner bills and collects the property taxes for the School District, withholds 2.5% of taxes collected as a fee for tax collection and remits the balance of taxes collected to the School District. Property tax revenues, at the fund reporting level, during the fiscal year ended June 30, 2006, for maintenance and operations amounted to $4,223,396 and for school bonds amounted to $75.

The tax millage rate levied for the 2005 tax year (calendar year) for the Emanuel County Board of Education was as follows (a mill equals $1 per thousand dollars of assessed value):

School Operations

10.9 mills

SALES TAXES

Special Purpose Local Option Sales Tax, at the fund reporting level, during the year amounted to $2,711,792 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.

- 12 -

EMANUEL COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2006

EXHIBIT "H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

INVENTORIES

FOOD INVENTORIES On the basic financial statements, inventories ofdonated 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 of art.

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

Capitalization Policy

Estimated Useful Life

Land Land Improvements Buildings and Improvements Equipment

Any Amount

Any Amount

Any Amount

$

5,000

NIA 10 to 90 years 20 to 90 years 5 to 16 years

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

GENERAL OBLIGATION BONDS

The School District issues general obligation bonds to provide funds for the acquisition and construction of major capital facilities. Bond issuance costs are recognized in the financial statements during the fiscal year bonds are issued. In addition, general obligation bonds have been

- 13 -

EMANUEL COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2006

EXHIBIT"H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
issued to refund existing general obligation bonds. General obligation bonds are direct obligations and pledge the full faith and credit of the government. The outstanding amount of these bonds is recorded in the Statement of Net Assets.
Note 3: DEPOSITS
COLLATERALIZATION OF DEPOSITS Official Code of Georgia Annotated (OCGA) Section 45-8-12 provides that there shall not be on deposit at any time in any depository for a time longer than ten days a sum of money which has not been secured by surety bond, by guarantee of insurance, or by collateral. The aggregate ofthe face value of such surety bond and the market value of securities pledged shall be equal to not less than 110 percent ofthe public funds being secured after the deduction ofthe amount ofdeposit insurance. Ifa depository elects the pooled method (OCGA 45-8-13.1) the aggregate ofthe market value ofthe securities pledged to secure a pool ofpublic funds shall be not less than 110 percent ofthe daily pool balance.
Acceptable security for deposits consists of any one of or any combination of the following:
(1) Surety bond signed by a surety company duly qualified and authorized to transact business within the State of Georgia,
(2) Insurance on accounts provided by the Federal Deposit Insurance Corporation,
(3) Bonds, bills, notes, certificates of indebtedness or other direct obligations of the United States or of the State of Georgia,
(4) Bonds, bills, notes, certificates of indebtedness or other obligations of the counties or municipalities ofthe State of Georgia,
(5) Bonds of any public authority created by the laws of the State of Georgia, providing that the statute that created the authority authorized the use of the bonds for this purpose,
(6) Industrial revenue bonds and bonds of development authorities created by the laws of the State of Georgia, and
(7) Bonds, bills, notes, certificates of indebtedness, or other obligations of a subsidiary corporation of the United States government, which are fully guaranteed by the United States government both as to principal and interest or debt obligations issued by the Federal Land Bank, the Federal Home Loan Bank, the Federal Intermediate Credit Bank, the Central Bank for Cooperatives, the Farm Credit Banks, the Federal Home Loan Mortgage Association, and the Federal National Mortgage Association.

- 14 -

EMANUEL COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2006

EXHIBIT"H"

Note 3: DEPOSITS

CATEGORIZATION OF DEPOSITS At June 30, 2006, the bank balances were $8,459,615. The amounts ofthe total bank balances are classified into four categories of custodial credit risk:

Category 1 - Cash that is insured (e.g., Federal Deposit Insurance) or collateralized with securities held by the School District or by the School District's agent in the School District's name.
Category 2 - Cash collateralized with securities held by the pledging financial institution's trust department or agent in the School District's name.
Category 3 - Cash collateralized with securities held by the pledging financial institution, or by its trust department or agent but not in the School District's name.
Category 4 - Uncollateralized.

The School District's deposits are classified by custodial credit risk category at June 30, 2006, as follows:

Custodial Credit Risk Category

Bank Balance

1

$ 704,258

2

794,569

3

6,960,788

4

0

Total

$ 8,459.615

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:

- 15 -

EMANUEL COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2006

EXHIBIT "H"

Note 5: CAPITAL ASSETS

Balances July 1, 2005

Increases

Decreases

Balances June 30. 2006

Governmental Activities Capital Assets, Not Being Depreciated:
Land Construction in Progress

$ 910,546

$ 910,546

826,450 $ 602,346 $ 825,383

603,413

Total Capital Assets Not Being Depreciated $ 1,736,996 $ 602,346 $ 825,383 $ 1,513,959

Capital Assets Being Depreciated Buildings and Improvements Equipment Land Improvements

$ 43,176,096 $ 5,429,896 133,242

1,336,608 44,073 $ 39,219

$ 44,512,704

11,830

5,462,139

172,461

Less Accumulated Depreciation for: Buildings and Improvements Equipment Land Improvements

5,261,203 2,871,180
9 944

599,356 358,198
23,627

11,830

5,860,559 3,217,548
33 571

Total Capital Assets, Being Depreciated, Net $ 40,596.907 $ 438 719 $

0 $ 41,035.626

Governmental Activity Capital Assets - Net $ 42,333.903 $ 1,041.065 $ 825,383 $ 42,549.585

Current year depreciation expense by function is as follows:

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

$ 649,812

$

23,031

14,500

27,582

168,751

233,864 97,505

Note 6: RESTRICTED ASSETS

$.===9-81=,-18-1

Special Purpose Local Option Sales Tax (SPLOST) and Debt Service Funds are reported as restricted assets in the Statement ofNet Assets because their use is limited by statutory provisions. Restricted assets at June 30, 2006, were as follows:

- 16 -

EMANUEL COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2006

EXHIBIT"H"

Note 6: RESTRICTED ASSETS

District-wide Capital Projects SPLOST

Debt Service Funds

Restricted Cash and Cash Equivalents: Debt Services Capital Acquisitions

$

39,449 $

$ 3,453,023

12,231

Note 7: INTERFUND TRANSFERS

Interfund transfers for the year ended June 30, 2006, consisted of the following:

Transfer to

Transfers From District-wide
Capital Projects

Debt Service Fund

$=====4==17-,0==6==7

Transfers are used to move SPLOST tax revenues collected by the District-wide Capital Projects Fund to the Debt Service Fund to service bond debt.

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 participates in the Georgia School Boards Association Risk and Insurance Management System, a public entity risk pool organized on July 1, 1994, to develop and administer a plan to reduce risk of loss on account of general liability, motor vehicle liability, or property damage, including safety engineering and other loss prevention and control techniques, and to administer one or more groups of self-insurance funds, including the processing and defense of claims brought against members ofthe system. The School District pays an annual premium to the system for its general insurance coverage. Additional coverage is provided through agreements by the system with other companies according to their specialty for property, boiler and machinery (including coverage for flood and earthquake), general liability (including coverage for sexual harassment, molestation and abuse), errors and omissions, crime and automobile risks. Payment of excess insurance for the system varies by line of coverage.

- 17 -

EMANUEL COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2006

EXHIBIT "H"

Note 8: RISK MANAGEMENT

The School District is self-insured with regard to unemployment compensation claims. A premium is charged when needed by the General Fund to each user program on the basis ofthe percentage of that fund's payroll to total payroll in order to cover estimated claims budgeted by management based on known claims and prior experience. The School District accounts for claims with expenses/expenditures and liability being reported when it is probable that a loss has occurred, and the amount of that loss can be reasonably estimated.

Changes in the unemployment compensation claims liability during the last two fiscal years are as follows:

2005 2006

Beginning of Year Liability

Claims and Changes in Estimates

Claims Paid

EndofYear Liability

$

3,234 $

369 $

3,234 $

369

$

369 $

9153 $

9,522 $

0

The School District participates in the Georgia School Boards Association Workers' Compensation Fund, a public entity risk pool organized on July 1, 1992, to develop, implement, and administer a program ofworkers' compensation self-insurance for its member organizations. The School District pays an annual premium to the Fund for its general insurance coverage. Additional insurance coverage is provided through an agreement by the Fund with the Safety National Casualty Corporation to provide coverage for potential losses sustained by the Fund in excess of $400,000 loss per occurrence, up to $1,000,000.

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

Position Covered

Amount

Superintendent All Other Employees

$ 100,000 $ 100,000

Note 9: LONG-TERM DEBT

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

Purpose

Interest Rate

Amount

General Government - Refunding - Series 2005

3.04%

$ 3,400.000

The changes in Long-Term Debt during the fiscal year ended June 30, 2006, were as follows:

- 18 -

EMANUEL COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2006

EXHIBIT"H"

Note 9: LONG-TERM DEBT

Governmental Funds General
Obligation Bonds

Balance July 1, 2005

$ 3,720,000

Deductions Debt Retired

320.000

Balance June 30, 2006

$ 3,400,000

Portion of Long-Term Debt Due within One Year

$ 315,000

At June 30, 2006, payments due by fiscal year which includes principal and interest for these items are as follows:

Fiscal Year Ended June 30

General Obligation

Debt

Principal

Interest

2007 2008 2009 2010 2011 2012 - 2015

$ 315,000 $ 335,000 345,000 360,000 380,000
1,665,000

103,360 93,784 83,600 73,112 62,168 129,352

Total Principal and Interest

$ 3,400.000 $ 545.376

Note 10: 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.

- 19 -

EMANUEL COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2006

EXHIBIT"H"

Note 11: SUBSEQUENT EVENTS
On September 19, 2006, the voters of Emanuel County voted in favor of a Special Purpose Local Option Sales Tax referendum for educational purposes. The imposition ofthe tax approved by the voters, as stated on the Official Ballot of Emanuel County is as follows:
"Shall a one percent sales and use tax for educational purposes be imposed in the Emanuel County School District for a period of time not to exceed 20 consecutive calendar quarters in order to raise not more than $19,000,000 for the purposes of (a) adding to, remodeling, renovating, improving, and equipping existing educational buildings, properties, and facilities of the School District, including, but not limited to, improvements to buildings at Emanuel County Institute, improvements to athletic facilities, including tennis courts and completion of the gymnasium at Swainsboro High School, construction of Pre-K classrooms, system-wide site (including roadwork and paving) and safety and security upgrades, and acquiring any necessary real and personal property and equipment relating thereto, including but not limited to school buses, textbooks, band uniforms, and related equipment, computers and related technology, system-wide technology upgrades, copiers, energy management systems, heating and air conditioning systems, lighting, and similar equipment, and (b) retiring previously incurred general obligation debt of the school system in a maximum amount of $2,570,148?
If imposition of the tax is approved by the voters, such vote also shall constitute approval of the issuance of general obligation debt of the Emanuel County School District in a principal amount not to exceed $7,500,000 for the above purposes."
Note 12: RETIREMENT PLANS
TEACHERS RETIREMENT SYSTEM OF GEORGIA (TRS)
TRS PLAN DESCRIPTION Substantially all teachers, administrative and clerical personnel employed by local school systems are covered by the Teachers Retirement System of Georgia (TRS), which is a cost-sharing multiple employer defined benefit pension plan. TRS provides service retirement, disability retirement and survivors benefits for its members in accordance with State statute. The Teachers Retirement System of Georgia issues a separate stand alone financial audit report and a copy can be obtained from the Georgia Department of Audits and Accounts.
TRS CONTRIBUTIONS REQUIRED AND MADE Employees ofthe School District who are covered by TRS are required by State statute to contribute 5% of their gross earnings to TRS. The School District makes monthly employer contributions to TRS at rates adopted by the TRS Board of Trustees in accordance with State statute and as advised by their independent actuary. The required employer contribution rate is 9.24% and employer contributions for the current fiscal year and the preceding two fiscal years are as follows:

- 20 -

EMANUEL COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2006

EXHIBIT "H"

Note 12: RETIREMENT PLANS
Fiscal Year 2006 2005 2004

Percentage Contributed
100% 100% 100%

Required Contribution
$ 1,849,812 $ 1,753,110 $ 1,750,580

- 21 -

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EMANUEL COUNTY BOARD OF EDUCATION GENERAL FUND
SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL
YEAR ENDED JUNE 30, 2006

SCHEDULE "1"

REVENUES
Property Taxes Sales Taxes State Funds Federal Funds Charges for Services Investment Earnings Miscellaneous
Total Revenues
EXPENDITURES
Current Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Enterprise Operations Food Services Operation
Capital Outlay
Total Expenditures
Net Change in Fund Balances
Fund Balances - Beginning
Adjustments

NONAPPROPRIATED BUDGETS

ORIGINAL (1)

FINAL (1)

ACTUAL AMOUNTS

$

4,100,000 $

4,100,000 $

4,223,396

20,000

20,000

23,768

21,037,306

21,180,440

22,732,415

5,911,076

7,059,909

6,998,412

452,800

452,800

865,577

40,500

40,500

83,730

76 500

76500

598,213

$

31,638,182 $

32,930,149 $

35,525,511

$

21,261,481 $

21,922,548 $

23,586,017

1,204,563 794,146 611,678 512,450
1,946,868 95,225
1,928,407 1,465,427
159,670 95,910
2,378,850

1,283,003 984,616 524,557 517,970
1,946,868 95,225
1,928,407 1,347,106
159,670 97,910
2,395,850

1,292,960 812,942 469,367 445,391
2,018,617 107,176
1,873,338 1,450,051
155,671 90,308 723,017 2,336,855 25,095

$

32,454,675 $

33,203,730 $

35,386,805

$

-816,493 $

-273,581 $

138,706

2,289,664

2,289,664

2,327,685

-13 976

-13 976

Fund Balances - Ending

$

1459195 $

2,002,107 $ ===2=,4=6=6,=39=1=

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.

- 23 -

EMANUEL COUNTY BOARD OF EDUCATION SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
YEAR ENDED JUNE 30, 2006

SCHEDULE "2"

FUNDING AGENCY
PROGRAM/GRANT
Agriculture, U. S. Department of Child Nutrition Cluster Pass-Through From Georgia Department of Education Food Services School Breakfast Program National School Lunch Program
Total Child Nutrition Cluster
Other Programs Pass-Through From Georgia Department of Education Food Donation (1)
Total U. S. Department of Agriculture
Corporation for National and Community Service Pass-Through From Georgia Department of Education Learn and Serve America School and Community Based Grant
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 Advanced Placement Program Education for Homeless Children and Youth 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 for Innovative Programs Title I Grants to Local Educational Agencies Vocational Education - Basic Grants to States
Total U. S. Department of Education
Defense, U. S. Department of Direct Department of the Army R.O.T.C. Program

CFDA NUMBER

PASS-
THROUGH ENTITY ID NUMBER

EXPENDITURES IN PERIOD

10.553 10.555

N/A N/A $
$

(2) 2,105,890
2,105,890

10.550

NIA $

94937 2,200,827

94.004

N/A $

20000

84.027 84.173

N/A $ N/A
$

1,166,154 36 395
1,202,549

84.330 84.196 84.365 84.318 84.367 84.011 84.358 84.186 84.298 * 84.010 84.048

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

82 15,000 11,932 110,523 396,354 72,523 153,102 42,614 19,728 2,205,343 81 032
4,310,782

$

96637

-24-

EMANUEL COUNTY BOARD OF EDUCATION SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
YEAR ENDED JUNE 30, 2006

SCHEDULE "2"

FUNDING AGENCY PROGRAM/GRANT
Health and Human Services, U. S. Department of Direct Head Start

CFDA NUMBER

PASSTHROUGH
ENTITY ID
NUMBER

EXPENDITURES IN PERIOD

* 93.600

$ _ _ _...c,80"-0'-'-5C...6'----1

Total Federal Financial Assistance N/A = Not Available

$ =====7,.4..2=8=,8=0==7

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 funds earned on the School Breakfast Program ($443,990) were not maintained separately and are included in the 2006 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 Emanuel 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.

- 25-

EMANUEL COUNTY BOARD OF EDUCATION SCHEDULE OF STATE REVENUE YEAR ENDED JUNE 30, 2006

AGENCY/FUNDING
GRANTS Bright from the Start: Georgia Department of Early Care and Learning Pre-Kindergarten Program
Education, Georgia Department of Quality Basic Education Direct Instructional Cost Kindergarten Program Kindergarten Program - Early Intervention Program Primary Grades (1-3) Program Primary Grades - Early Intervention (1-3) Program Upper Elementary Grades (4-5) Program Upper Elementary Grades - Early Intervention (4-5) Program Middle Grades (6-8) Program Middle School (6-8) Program High School General Education (9-12) Program Vocational Laboratory (9-12) Program Students with Disabilities Gifted Student - Category VI Remedial Education Program Alternative Education Program English Speakers of Other Languages (ESOL) Media Center Program 20 Days Additional Instruction Staff and Professional Development Indirect Cost Central Administration School Administration Facility Maintenance and Operations Categorical Grants Pupil Transportation Regular Bus Replacement Sparsity Nursing Services Principal Supplements Vocational Supervisors Migrant Education Education Equalization Funding Grant Food Services Vocational Education Austerity Reduction Other State Programs Apprenticeship Program K-8 Statewide Reading and Mathematics Program National Teacher Certification Preschool Handicapped Program Virtual Schools Grant
CONTRACTS Human Resources, Georgia Department of Family Advocate Program Family Connection

See notes to the basic financial statements.

- 26-

SCHEDULE "3"

GOVERNMENTAL FUND TYPE GENERAL FUND

$

1,047,628

1,513,480 12,376
3,066,515 107,010
1,561,500 82,236
175,331 2,375,707 2,079,698
849,420 3,412,043
114,477 40,914
206,478 51,998
420,728 134,798
85,948
552,396 929,527 1,169,498
721,470 99,446 20,000 92,589 15,030 9,092 2,163
1,856,950 135,316 505,805
-1,054,895
33,250 77,390 41,357 82,721
875
54,150 50 000
$ ===2=2=7'=32='=41=5=

EMANUEL COUNTY BOARD OF EDUCATION SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS
YEAR ENDED JUNE 30, 2006

SCHEDULE "4"

PROJECT
Acquiring, constructing and equipping the following capital outlay projects at a total maximum cost of $8,852,000: (i) New classrooms at Twin City Elementary; (ii) Renovation of the existing gymnasium and classrooms at Adrian School of Performing Arts; (iii) A new gymnasium, paving and parking lot and building additions at Emanuel County Institute; (iv) A new gymnasium, paving, auditorium renovations, parking lot renovations, building additions and heating and cooling systems replacement at Swainsboro High School; (v) technology and equipment upgrades throughout the Emanuel County School System; (vi) Connecting roads and bus ramps at Swainsboro School facilities; (vii) Physical education and sport facilities at all schools including resurfacing Swainsboro High School Track; (viii) Swainsboro Middle School flooring renovations; (ix) The acquisition, construction and equipping of new maintenance and transportation facilities; (x) Remodeling, renovating and improving all existing School District facilities, purchase of any necessary real property, acquiring furnishings, equipment and fixtures and paying expenses incident thereto.
The retirement of previously incurred general obligation debt of the school system in the maximum amount of $2,180,000.

ORIGINAL ESTIMATED
COSTS (1)

CURRENT ESTIMATED COSTS (2)

AMOUNT EXPENDED IN CURRENT YEAR (3)

AMOUNT EXPENDED
IN PRIOR YEARS (3)

PROJECT STATUS

$ 8,852,000 $ 8,852,000 $ 1,284,475 $ 3,009,712 Ongoing

2,180,000

2,180,000

417 067

879,325 Ongoing

$ 11,032,000 $ 11,032,000 $ 1,701,542 $ 3,889,037

(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 Emanuel County approved the imposition of a 1% sales tax to fund the above projects. 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.

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EMANUEL COUNTY BOARD OF EDUCATION GENERAL FUND- QUALITY BASIC EDUCATION PROGRAM (QBE)
ALLOTMENTS AND EXPENDITURES - BY PROGRAM YEAR ENDED JUNE 30, 2006

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)

1,621,771 $ 30,250
3,359,838 126,875
1,697,785
93,515 184,992 2,608,534 2,276,918 921,468 3,688,845
120,533 42,249 225,104 56 868

1,360,506 162,928
2,496,540 $ 614,011
1,503,037
162,166 171,755 2,940,733 3,484,370 665,781
42,958 1,547,949
977,713 260,969 194,819
77,930
125,174 68,732

$ 4,128
883
514 5,223 58,746 2,370
114
517

1,360,506 162,928
2,500,668 614,011
1,503,920
162,166 172,269 2,945,956 3,543,116 668,151
42,958 1,547,949
977,827 260,969 194,819
77,930
125,691 68 732

TOTAL DIRECT INSTRUCTIONAL PROGRAMS

$

17,055,545 $ 16,858,071 $

72,495 $

16,930,566

Media Center Program Staff and Professional Development

459,361 94457

416,407 20 771

39,276 75 378

455,683 96149

TOTAL QBE FORMULA FUNDS

$

17,609,363 $ 17,295,249 $

187 149 $=====1=7,=48=2=,3=9=8

(1) Comprised of State Funds plus Local Five Mill Share. (2) Allotments do not include the impact of the State budget austerity reduction.

See notes to the basic financial statements.

- 29-

SECTION II COMPLIANCE AND INTERNAL CONTROL REPORTS

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

DEPARTMENT OF AUDITS AND ACCOUNTS
270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400
May 15, 2007

Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members ofthe Emanuel 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 ofEmanuel County Board ofEducation as ofand for the year ended June 30, 2006, which collectively comprise Emanuel County Board of Education's basic financial statements and have issued our report thereon dated May 15, 2007. We conducted our audit in accordance with auditing standards generally accepted in the United States ofAmerica and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States.
Internal Control Over Financial Reporting
In planning and performing our audit, we considered Emanuel County Board ofEducation's internal control over financial reporting in order to determine our auditing procedures for the purpose of expressing our opinions on the financial statements and not to provide an opinion on the internal control over financial reporting. However, we noted certain matters involving the internal control over financial reporting and its operation that we consider to be reportable conditions. Reportable conditions involve matters coming to our attention relating to significant deficiencies in the design or operation of the internal control over financial reporting that, in our judgment, could adversely affect Emanuel County Board of Education's ability to record, process, summarize and report financial data consistent with assertions of management in the financial statements. Reportable conditions are described in the accompanying Schedule ofFindings and Questioned Costs as items FS-6531-06-01, FS-6531-06-02 and FS-6531-06-03.
2006YB-30

A material weakness is a reportable condition in which the design or operation ofone or more ofthe internal control components does not reduce to a relatively low level the risk that misstatements caused by error or fraud in amounts that would be material in relation to the financial statements being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. Our consideration of the internal control over financial reporting would not necessarily disclose all matters in the internal control that might be reportable conditions and, accordingly, would not necessarily disclose all reportable conditions that are also considered to be material weaknesses. However, we believe none of the reportable conditions described above are material weaknesses.
Compliance and Other Matters
As part of obtaining reasonable assurance about whether Emanuel County Board of Education's financial statements are free of material misstatement, we performed tests of its compliance with certain provisions oflaws, regulations, contracts and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards.
This report is intended solely for the information and use of the management and members of the Emanuel County Board of Education and is not intended to be and should not be used by anyone other than these specified parties.
Respectfully submitted,
~ID~~ ~ State Auditor
RWH:gp 2006YB-30

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

DEPARTMENT OF AUDITS AND ACCOUNTS
270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400
May 15, 2007

Honorable Sonny Perdue, Governor Members ofthe General Assembly Members of the State Board of Education
and Superintendent and Members ofthe Emanuel County Board of Education
REPORT ON COMPLIANCE WITH REQUIREMENTS APPLICABLE TO EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH 0MB CIRCULAR A-133
Ladies and Gentlemen:
Compliance
We have audited the compliance of Emanuel 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, 2006. Emanuel 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 of its major Federal programs is the responsibility of Emanuel County Board of Education's management. Our responsibility is to express an opinion on Emanuel County Board of Education's compliance based on our audit.
We conducted our audit ofcompliance in accordance with auditing standards generally accepted in the United States ofAmerica; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General ofthe United States; and 0MB Circular A133, Audits of States, Local Governments, and Non-Profit Organizations. Those standards and 0MB Circular A-133 require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major Federal program occurred. An audit includes examining, on a test basis, evidence about the Emanuel County Board of Education's compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Our audit does not provide a legal determination on Emanuel County Board of Education's compliance with those requirements.
2006SA-30

In our opinion, the Emanuel County Board ofEducation complied, in all material respects, with the requirements referred to above that are applicable to each ofits major Federal programs for the year ended June 30, 2006.
Internal Control Over Compliance
The management of Emanuel 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 Emanuel County Board of Education's internal control over compliance with requirements that could have a direct and material effect on a major Federal program in order to determine our auditing procedures for the purpose of expressing our opinion on compliance and to test and report on internal control over compliance in accordance with 0MB Circular A-133.
We noted a certain matter involving the internal control over compliance and its operation that we consider to be a reportable condition. Reportable conditions involve matters coming to our attention relating to significant deficiencies in the design or operation ofthe internal control over compliance that, in our judgment, could adversely affect the Emanuel County Board of Education's ability to administer a major Federal program in accordance with applicable requirements oflaws, regulations, contracts and grants. The reportable condition is described in the accompanying Schedule of Findings and Questioned Costs as item FA-6531-06-01.
A material weakness is a reportable condition in which the design or operation ofone or more ofthe internal control components does not reduce to a relatively low level ofrisk that noncompliance with the applicable requirements oflaws, regulations, contracts and grants caused by error or fraud that would be material in relation to a major Federal program being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. Our consideration ofthe internal control over compliance would not necessarily disclose all matters in the internal control that might be reportable conditions and, accordingly, would not necessarily disclose all reportable conditions that are also considered to be material weaknesses. However, we believe the reportable condition described above is not a material weakness.
This report is intended solely for the information and use of the management, members of the Emanuel 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,

RWH:gp
2006SA-30

~~l,C)-~~
~Jsell W. Hinton, CPA, CGFM State Auditor

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

EMANUEL COUNTY BOARD OF EDUCATION AUDITEE'S RESPONSE
SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2006

PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

FINDING CONTROL NUMBER AND STATUS

FS-6531-04-01 FS-6531-05-01

Further Action Not Warranted Partially Resolved - See Corrective Action/Responses

CORRECTIVE ACTION/RESPONSES

CASH AND CASH EQUIVALENTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Control Procedures Finding Control Number: FS-6531-05-01

The Board of Education is working to strengthen the internal control procedures over the school activity accounts. The first step in the process has been the production and use of an Internal School Accounting Bookkeepers Manual. Periodic meetings are being held with the bookkeepers to review progress and to go over any known internal control weaknesses. The Board of Education will be able to further strengthen internal controls over the school activity accounts through the implementation ofnew software. The school bookkeepers will be fully trained on the use of the software during August 2007.

PRIOR YEAR FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

No matters were reported.

SECTION IV FINDINGS AND QUESTIONED COSTS

EMANUEL COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2006

I SUMMARY OF AUDITOR'S RESULTS

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

2. Reportable Conditions in Internal Control Disclosed by the Audit of the Financial Statements The audit report for the Emanuel County Board of Education disclosed financial statement reportable conditions related to the following control categories.

Revenues/Receivables/Receipts Accounting Controls (Overall)

Expenditures/Liabilities/Disbursements

None ofthe reportable conditions described above are considered to be material weaknesses.

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

4. Reportable Conditions in Internal Control Over Major Programs The audit report for the Emanuel County Board of Education disclosed a reportable condition in internal control over major programs for the following compliance requirements.

Activities Allowed or Unallowed

Allowable Costs/Cost Principles

The reportable condition described above is not considered to be a material weakness.

5. Type of Report Issued on Compliance for Major Programs The auditor's opinion on the Emanuel County Board of Education's report on compliance with requirements applicable to major programs was unqualified.

6. Audit Findings Reguired to be Reported by Section .51 0(a) of 0MB Circular A-133 The Emanuel County Board of Education's audit disclosed an audit finding required to be reported by section .510(a) of 0MB Circular A-133. This audit finding is included in section IV of this report.

7. Major Programs Federal awards audited as major programs are as follows: 84.010 Title I Grants to Local Educational Agencies 93.600 Head Start

8. Type "A" Program Dollar Threshold The dollar threshold for type "A" programs was $300,000.

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EMANUEL COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2006

I SUMMARY OF AUDITOR'S RESULTS

9. Low Risk Auditee The Emanuel County Board of Education qualified as a low risk auditee as defined by Section .530 ofOMB Circular A-133.

II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Control Procedures over School Activity Accounts Reportable Condition Finding Control Number: FS-6531-06-01

Condition:

This is a repeat finding (FS-6531-05-01 and FS-6531-04-01) from the years ended June 30, 2005, and June 30, 2004, respectively. The accounting procedures of the School District were insufficient to provide for adequate internal controls over the school activity accounts.

Criteria:

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

Questioned Cost: NIA

Information:

Revenues/Receivables/Receipts Based on a review oftwenty items, nine receipts were not supported by adequate documentation.

Expenditures/Liabilities/Disbursements Based upon a review of twenty vouchers, three vouchers failed to include proper evidence ofreceipt.

Cause:

These deficiencies were a result of management's failure to ensure that internal controls were established, implemented and functioning at the school level.

Effect:

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

Recommendation:

Management should revise and monitor controls to provide reasonable assurance that transactions are processed according to established policies and implement procedures deemed necessary to strengthen internal controls over the accounting functions.

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EMANUEL COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2006

II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

ACCOUNTING CONTROLS (OVERALL) Inadequate General Controls Reportable Condition Finding Control Number: FS-6531-06-02

Condition:

Our examination ofthe School District included a review ofgeneral controls related to their financial information systems. We noted weaknesses in internal controls which we consider relevant to the School District's financial statements for the fiscal year ended June 30, 2006.

Criteria:

Policies and procedures should be in place to reasonably mitigate the risk of loss, manipulation, or corruption of data due to internal or external threats.

Questioned Cost: NIA

Information:

Weaknesses in internal control over financial information systems were identified at the School District.

Cause:

Management did not implement proper policies or controls over risk assessments and access to financial information systems.

Effect:

Without satisfactory controls in place, losses, changes or misuses of data could occur and possibly not be detected.

Recommendation:

Management should perform a complete risk assessment to identify internal and external threats that could cause loss, manipulation, or corruption ofdata maintained in the financial information system. Policies and procedures should be developed and implemented to address the weaknesses.

EXPENDITURES/LIABILITIES/DISBURSEMENTS Falsifying Documents, Theft and Forgery Reportable Condition Finding Control Number: FS-6531-06-03

Condition:

Theft of funds.

Criteria:

Senior management personnel are required to uphold laws and regulations of programs of which they are assigned authority as well as to support and to enforce the School District's values and ethical standards of management.

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EMANUEL COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2006

II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

EXPENDITURES/LIABILITIES/DISBURSEMENTS Falsifying Documents, Theft and Forgery Reportable Condition Finding Control Number: FS-6531-06-03

Questioned Cost:

$77,567 ($59,092 - Federal Assistance - See FA-6531-06-01) Title I Grants to Local Educational Agencies $26,202 Schoolwide Program $5,500 Migrant Education $12,590 Safe and Drug-Free Schools and Communities $14,800 Family Connection $18,475

Information:

During February 2007, the School District's assistant superintendent for student services, resigned amid charges that he falsified claims for reimbursement to the Georgia Department of Education. The employee in question was indicted on one hundred and twenty-four felony theft by deception warrants dating back to July 1999, in which Federal and State funds were used to pay for questionable services. The grants affected include the Title I Grants to Local Educational Agencies (CFDA 84.010), Migrant Education (CFDA 84.011), Safe and Drug-Free Communities (CFDA 84.186) and a State contract with the Georgia Department of Human Resources for Family Connection programs.

The School District had procedures in place to monitor payments to vendors for services provided; however, the employee in question who was authorized to approve expenditures for payment had allegedly provided false documentation to support the services rendered. The expenditures in question were isolated to one vendor.

Cause:

A School District employee in a position of authority, and in charge of several grant award programs, has allegedly failed to perform his assigned job duties ethically.

Effect:

Federal and State funds were used to pay for services that apparently had not been rendered and provided to the School District.

Recommendation:

The School District should investigate payments to this vendor, and any other questionable vendors, to determine the extent ofthese questionable activities. The Georgia Department of Education and the Georgia Department of Human Resources should review this matter to determine ifreclaims ofgrant funds are appropriate.

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EMANUEL COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2006

III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

ACTIVITIES ALLOWED OR UNALLOWED ALLOWABLE COSTS/COST PRINCIPLES Falsifying Documents, Theft and Forgery Reportable Condition U.S. Department of Education Through Georgia Department of Education Title I Grants to Local Educational Agencies (CFDA 84.010) Migrant Education (CFDA 84.011) Safe and Drug-Free Schools and Communities (CFDA 84.186) Finding Control Number: FA-6531-06-01

Condition:

Theft of funds.

Criteria:

See Financial Statement Audit Finding FS-6531-06-03.

Questioned Cost:

$59,092 Title I Grants to Local Educational Agencies (CFDA 84.010) $26,202 Schoolwide Program (CFDA various) $5,500 Migrant Education (CFDA 84.011) $12,590 Safe and Drug-Free Schools and Communities (CFDA 84.186) $14,800

Information:

See Financial Statement Audit Finding FS-6531-06-03.

Cause:

See Financial Statement Audit Finding FS-6531-06-03.

Effect:

Federal funds were used to pay for services that apparently had not been rendered and provided to the School District.

Recommendation:

The School District should investigate payments to this vendor, and any other questionable vendors, to determine the extent ofthese questionable activities. The Georgia Department of Education and the Georgia Department of Human Resources should review this matter to determine ifreclaims ofgrant funds are appropriate.

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SECTIONV MANAGEMENT'S RESPONSES

EMANUEL COUNTY BOARD OF EDUCATION SCHEDULE OF MANAGEMENT'S RESPONSES
YEAR ENDED JUNE 30, 2006
Finding Control Number: FS-6531-06-01
We concur with this finding. The Board of Education is working to ensure implementation of compensating controls established in the Internal School Accounts Procedures Manual. The Director of Finance has had periodic meetings throughout the year with the school bookkeepers to discuss appropriate internal controls. The Director of Finance will be visiting each school during fiscal year 2007 to further address inadequacies in internal controls at each location and to provide additional training as needed.
Finding Control Number: FS-6531-06-02
We concur with this finding. The Emanuel County Board of Education is developing a comprehensive technology policy manual to be distributed to all staffmembers. This manual should be completed during August 2007. Controls will also be implemented during August 2007 to ensure that users ofthe financial information system have access rights that restrict users to their assigned duties.
Finding Control Number: FS-6531-06-03
We concur with this finding. The employee involved has resigned from the Emanuel County Board of Education. The Board of Education has investigated all other questionable vendors and concluded that this incident of fraud was isolated to one vendor.
Finding Control Number: FA-6531-06-01
We concur with this finding. The employee involved has resigned from the Emanuel County Board of Education. The Board of Education has investigated all other questionable vendors and concluded that this incident of fraud was isolated to one vendor.
Contact Person: Abby Walden, Director of Finance Phone: (478) 237-6674 Fax Number: (478) 237-3404 E-mail Address: abwalden@emanuel.k12.ga.us