G-A A~bO ,Rl EJ6 F6 ,QQ1-Qg AUDIT REPORT FLOYD COUNTY BOARD OF EDUCATION ROME, GEORGIA YEAR ENDED JUNE 30, 1998 -----------------_/ STATE OF GEORGIA DEPARTMENT OF AUDITS AND ACCOUNTS 254 WASHINGTON STREET ATLANTA, GEORGIA 30334-8400 FLOYD COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS - SECTION I FINANCIAL INDEPENDENT AUDITOR'S COMBINED REPORT ON GENERAL PURPOSE FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS EXlllBITS GENERAL PURPOSE FINANCIAL STATEMENTS COMBINED STATEMENTS - OVERVIEW A COMBINED BALANCE SHEET ALL FUND TYPES B COMBINED STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES ALL GOVERNMENTAL FUND TYPES C COMBINED STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL (NON-GAAP BASIS) GENERAL AND SPECIAL REVENUE FUNDS D NOTES TO THE GENERAL PURPOSE FINANCIAL STATEMENTS ADDmONAL FINANCIAL INFORMATION COMBINING STATEMENTS SPECIAL REVENUE FUND E COMBINING BALANCE SHEET F COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES CAPITAL PROJECTS FUND -G COMBINING BALANCE SHEET H COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES SCHEDULES 1 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS 2 SCHEDULE OF STATE REVENUE 3 SCHEDULE OF EXPENDITURES LOTTERY PROGRAMS ANALYSIS OF MINIMUM EXPENDITURE REQUIREMENTS GENERAL FUND - QUALITY BASIC EDUCAnON PROGRAMS 4 OVERALL 5 BY PROGRAM Page 2 4 7 8 18 19 20 21 22 24 25 27 28 ~ FLOYD COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS - SECTION II COMPLIANCE AND INTERNAL CONTROL REPORTS REPORT ON COMPLIANCE AND ON INTERNAL CONTROL OVER FINANCIAL REPORTING 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 INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH OMB CIRCULAR A-133 SECTION ill AUDITEE'S RESPONSE TO PRIOR YEAR FINDINGS AND QUESTIONED COSTS SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COS.TS SECTION IV FINDINGS AND QUESTIONED COSTS SCHEDULE OF FINDINGS AND QUESTIONED COSTS SECTION I FINANCIAL RUSSELL W. HINTON STATE AUDITOR (404) 656-2174 DEPARTMENT OF AUDITS AND ACCOUNTS 254 Washington Street, S.W., Suite 214 Atlanta, Georgia 30334-8400 April 28, 1999 Honorable Roy E. Barnes, Governor Members ofthe General Assembly Members ofthe State Board ofEducation and Superintendent and Members of the Floyd County Board of Education INDEPENDENT AUDITOR'S COMBINED REPORT ON GENERAL PURPOSE FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS Ladies and Gentlemen: We have audited the accompanying general purpose financial statements of the Floyd County Board of Education, as of and for the year ended June 30, 1998, as listed in the table of contents. These general purpose financial statements are the responsibility ofthe Floyd County Board ofEducation's management. Our responsibility is to express an opinion on these general purpose financial statements based on our audit. Except as discussed in the following paragraph, we conducted our audit in accordance with generally accepted auditing standards 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 fmancial statements are free of material 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 opinion. We did not observe the taking of either the Federal donated commodities inventory or purchased foods inventory at June 30, ~998, nor could we satisfy ourselves as to the accuracy of the amounts stated as inventories through alternative procedures. As described in the notes to the general purpose financial statements, the Board's financial statements have been prepared using certain accounting practices and policies which, in our opinion, vary in some respects from generally accepted accounting principles. These variances are described as follows: . 98ARL-13B The general purpose financial statements of the Board did not contain a General Fixed Assets Account Group to account for property and equipment owned by the Board which should be included to conform to generally accepted accounting principles. The Board did not report compensated absences within the general purpose financial statements as required by generally accepted accounting principles. School activity accounts maintained at the individual schools are not included in the general purpose financial statements. To conform to generally accepted accounting principles, these accounts should be included in the general purpose financial statements. The Board did not recognize as expenditures, in the year ended June 30, 1998, a portion of salaries and the corresponding employer's cost ofrelated benefits earned for contractual services completed prior to June 30, 1998. Also funds received, subsequent to June 30, 1998, from the Georgia Department ofEducation for the State's share ofthese unrecorded salaries and related benefits were .. not recorded as revenue in the year under review. Conversely, the similar expenditures and related revenues for contractual services completed prior to June 30, 1997, were improperly recorded in the year ended June 30, 1998. To conform to generally accepted accounting principles, revenues should be recorded when available and measurable and expenditures should be recorded when incurred, rather than when funds are received or disbursed. The aggregate effects on the general purpose financial statements of these variances or omissions have not been determined, but are believed to be material. In our opinion, except for the effects ofsuch adjustments, ifany, on the Special Revenue Fund, as might have been determined to be necessary had we been able to satisfy ourselves as to the accuracy ofthe food service inventories as discussed in the third paragraph and except for the effects (m the general purpose financial statements of the matters referred to in the preceding paragraph, the general purpose financial statements referred to above present fairly, in all material respects, the financial position of the Floyd County Board of Education as of June 30, 1998, and the results of its operations for the year then ended, in conformity with generally accepted accounting principles. In accordance with Government Auditing Standards, we have also issued our report dated April 28, 1999, on our consideration ofthe Floyd County Board ofEducation's internal control over financial reporting and our tests ofits compliance with certain provisions oflaws, regulations, contracts and grants. The Board has not presented the disclosures required by Governmental Accounting Standards Board (GASB) Technical Bulletin 98-1, Disclosures About Year 2000 Issues, as amended by Technical Bulletin 99-1, that the GASB has determined are necessary to supplement, although not be a part of, the basic financial statements. In addition, we do not provide assurance that Floyd County Board ofEducation is orwill become year 2000 compliant, that Floyd County Board ofEducation's year 2000 remediation efforts will be successful in whole or in part, or that parties with which the Board does business are' or will become year 2000 compliant. Our audit was performed for the purpose of forming an opinion on the general purpose financial statements of the Floyd County Board of Education taken as a whole. The accompanying combining statements 98ARL-13B (Exhibits E through H) and the financial schedules (Schedules 1 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 olStates, Local Governments, and Non-Profit Organizations, are presented for purposes ofadditional analysis and are not a required part of the general purpose financial statements. Such information has been subjected to the auditing procedures applied in the audit ofthe general purpose fmancial statements and in our opinion, except for the effect of adjustments, if any, on the Special Revenue Fund, as might have been determined to be necessary had we been able to satisfy ourselves as to the accuracy of the food service inventories as discussed in the third paragraph and except for the effects ofthe matters referred to in the fourth paragraph, such information is fairly presented in all material respects in relation to the general purpose financial statements taken as a whole. A copy of this report has been filed as a permanent record in the office of the State Auditor and made available to the press of the State, as provided for by Official Code of Georgia Annotated Section 50-6-24. Respectfully submitted, RWH:jb 98ARL-13B R sell W. Hinton State Auditor FLOYD COUNTY BOARD OF EDUCATION FLOYD COUNTY BOARD OF EDUCATION COMBINED BALANCE SHEET ALL FUND TYPES JUNE 30, 1998 ASSETS Cash and Cash Equivalents Accounts Receivable Inventories Food Donated Commodities Purchased Food Amount Available in Debt Service Fund GENERAL FUND GOVERNMENTAL SPECIAL REVENUE FUND $ 7,102,166.02 $ 724,238.59 595,617.44 370,737.36 66,523.58 34,957.94 Total Assets $ 7,697,783.46 $ 1,196.457.47 Total Liabilities and Fund Equity $ 7,697,783.46 $ The notes to the general purpose financial statements are an integral part of this statement. -2- 1.196.457.47 EXHIBIT "A" FUND TYPES CAPITAL PROJECTS FUND $ 1,820,874.65 $ DEBT SERVICE FUND TOTALS (Memorandum Only) JUNE 30,1998 JUNE 30, 1997 0.00 $ 9,647,279.26 $ 10,797,356.01 966,354.80 541,608.73 66,523.58 34,957.94 42,846.73 37,112.20 210,000.00 $ 1,820,874.65 $=====0=.0=0 $ 10,715,115.58 $ 11,628,923.67 $ 317,874.42 278,334.00 $ 596,208.42 $ 150,846.76 $ 387,929.53 101,652.86 317,874.42 278,334.00 $ 1,236,637.57 $ 111,863.41 344,743.52 114,232.76 133,268.65 210,000.00 914,108.34 $ 1,221,308.59 3,357.64 $ $ 1,224,666.23 $ $ 210,000.00 $ 0.00 0.00 $ 66,523.58 34,957.94 1,221,308.59 471,664.53 7,684.023.37 9,478.478.01 $ 42,846.73 37,112.20 2,378,888.11 439,601.13 7,606,367.16 10,714,815.33 $ 1,820,874.65 $=====0:=.0=0 $ 10,715,115.58 $ 11,628,923.67 - 3- FLOYD COUNTY BOARD OF EDUCATION COMBINED STATEMENTOF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES ALL GOVERNMENTAL FUND TYPES YEAR ENDED JUNE 30,1998 REVENUES State Funds Federal Funds Taxes Other Funds Total Revenues EXPENDITURES Current Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Food Services Operation Community Services Operations Capital Outlay Debt Service Principal Interest Paying Agent Fees Total ExPenditures Excess of Revenues over (under) Expenditures OTHER FINANCING SOURCES (USES) Operating Transfers In Operating Transfers Out Total Other Financing Sources (Uses) Excess of Revenues and Other Financing Sources over (under) Expenditures and Other Financing Uses FUND BALANCE JULY 1 Food Inventory - Net Change in Period Donated Commodities Purchased Food Residual Equity Transfer GENERAL FUND SPECIAL REVENUE FUND $ 32,700,138,74 $ 2,325,24 19,793,990,26 1,338,675,87 $ 53,835,130,11 $ 1,412,806.96 3,178,020.98 1,523,395,65 6,114,223,59 $ 32,355,490.48 $ 2,054,796,36 1,386,067,54 1,374,990,53 764,254,84 4,410,684,64 415,623.72 5,124,612,79 2,421,595.26 550,738.23 136,035,55 47,195,92 218,681,37 366,013,66 2,390,045.75 144,616.88 221,264.42 5,316,00 15,586,08 22,536,24 65,953,94 18,414,82 3,351,385,89 $ 51,626,780.89 $ $ 2,208,349.22 $ 6,235,120.02 -120,896.43 $ $ -1,942,200.93 $ -1,942,200.93 $ $ 266,148.29 $ 7,142,630.65 254,858.27 89,413.78 89,413.78 -31,482.65 600,134,63 23,676,85 -2,154,26 FUND BALANCE JUNE 30 $ The notes to the general purpose financial statements are an integral part of this statement. -4- 7,663,637.21 $ 5.9.0-.,.1.7..4.,;,;;,5.7.. EXHIBIT"B" CAPITAL PROJECTS FUND DEBT . SERVICE FUND TOTALS (Memorandum Only) YEAR ENDED JUNE 30,1998 JUNE 30,1997 $ 2,758,927.64 $ 62,233.88 $ 2,821,161.52 $ $ 18,364.68 17,377.78 35,742.46 $ 36,871,873.34 $ 3,180,346.22 19,812,354.94 2,941,683.18 62,806,257.68 $ 32,703,983.04 2,484,142.71 19,932,329.53 2,871,909.71 57,992,364.99 $ 5,981,940.72 $ $ 5,981,940.72 $ $ -3,160,779.20 $ $ 210,000.00 9,345.00 930.96 220,275.96 $ -184,533.50 $ 34,745,536.23 $ 2,199,413.24 1,607,331.96 1,380,306.53 779,840.92 4,410,684.64 415,623.72 5,124,612.79 2,444,131.50 616,692.17 154,450.37 3,398,581.81 218,681.37 6,347,954.38 210,000.00 9,345.00 930.96 64,064,117.59 $ -1,257,859.91 $ 33,337,188.91 2,045,036.58 1,117,623.12 1,431,866.21 924,897.51 3,900,187.14 279,223.50 4,987,100.92 2,296,736.01 648,409.02 188,453.31 3,330,896.34 207,958.65 2,609,287.63 600,000.00 35,145.00 2,231.60 57,942,241.45 50,123.54 $ 1,852,787.15 $ 1,852,787.15 $ -1,307,992.05 $ 2,532,658.28 $ 1,942,200.93 $ 1,712,683.00 -1,942,200.93 -1,712,683.00 $ 0.00 $ 0.00 -184,533.50 $ 439,391.77 -1,257,859.91 $ 10,714,815.33 50,123.54 10,691,183.78 -254,858.27 23,676.85 -2,154.26 0.00 -16,887.79 -9,604.20 $ 1.224,666.23 $ 0.00 $ 9,478,478.01 $ 10,714,815.33 -5- FLOYD COUNTY BOARD OF EDUCATION COMBINED STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL - (NON-GAAP BASIS) GENERAL AND SPECIAL REVENUE FUNDS YEAR ENDED JUNE 3D. 1998 EXHIBIT"C" The notes to the general purpose financial statements are an integral part of this statement. -7- FLOYD COUNTY BOARD OF EDUCATION EXlllBIT "D" NOTES TO THE GENERAL PURPOSE FINANCIAL STATEMENTS JUNE 3D. 1998 Note 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES REPORTING ENTITY The Floyd County Board of Education (Board) 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 Board is a primary government and consists of all the organizations that compose its legal entity. FUND ACCOUNTING The Board 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. General Fixed Assets are recorded as expenditures in the various funds at the time ofpurchase. A General Fixed Assets Account Group is not presently maintained by the Board. To conform to generally accepted accounting principles, a General Fixed Assets Account Group should be maintained for reporting the cost of assets acquired by governmental fund types. Although "school activity accounts" are maintained at the individual schools, neither the assets, liabilities and fund equity, nor the revenues, expenditures and changes in fund balances ofthese accounts are reflected in these financial statements. To conform to generally accepted accounting principles, these accounts shod be recorded in the general purpose financial statements. The general purpose financial statements account for all State, Federal, TaXes and Other funds under control ofthe Board, in compliance with generally accepted accounting principles applicable to governmental units, unless otherwise disclosed in these notes. Funds presented in this report are as follows: GOVERNMENTAL FUND TYPES - are used to account for all or most ofa Board's educational activities. Governmental Fund Types include: GENERAL FUND - the fund used to account for all financial resources ofthe Board except those required to be accounted for in another fund. These transactions relate to resources obtained and used for services provided by a board of education. SPECIAL REVENUE FUND - the fund used to account for the proceeds ofspecific revenue sources (other than for major capital projects) that are legally restricted to expenditures for specified purposes. These funds are received primarily from the Georgia Department ofEducation and from the Federal governrilent to accomplish specific educational objectives. -8- FLOYD COUNTY BOARD OF EDUCATION EXHIBIT "D" NOTES TO THE GENERAL PURPOSE FINANCIAL STATEMENTS JUNE 30, 1998 Note 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CAPITAL PROJECTS FUND - the fund used to account for financial resources to be used for the acquisition or construction of major capital facilities. DEBT SERVICE FUND - the fund used to account for the accumulation ofresources for, and the payment of, general long-term principal, interest and paying agent fees. BASIS OF ACCOUNTING The accounting and financial reporting treatment applied to a fund is determined by its measurement focus. All governmental funds are accounted for using a current financial resources measurement focus. With this measurement focus, only current assets and current liabilities generally are included on the balance sheet. Operating statements of these funds present increases (i.e., revenues and other fInancing sources) and decreases (i.e., expenditures and other financing uses) in net current assets. Their reported fund balance is considered a measure of available spendable resources. Liabilities which are expected to be financed from available spendable resources are reported as liabilities in the governmental funds. Governmental funds are accounted for using the modifIed accrual basis qf accounting under which: Revenues are recognized when susceptible to accrual (Le., when they become both measurable and available). "Measurable" means the amount ofthe transaction can be determined and "available" means collectible within the current period or soon enough thereafter to be used to pay liabilities ofthe current period. Those revenues considered susceptible to accrual are property taxes, intergovernmental grants and investment income. Expenditures are generally recognized when the related fund liability is incurred. A departure from the above defInitions is the accounting treatment afforded the final two payments on General Fund teachers' and bus drivers' contracts, and the resources avauable from the Georgia Department of Education for the State's share of these contracts. During fIscal year 1998, a substantial number of personnel ofthe Board were employed for a one huildred and ninety day period beginning in late August 1997 and ending in early June 1998. Personnel contracts for this employment period specify that compensation be paid in twelve equal monthly payments beginning in September 1997 and ending in August 1998. State grants to fund the State's share ofthese contracts were disbursed from the Georgia Department of Education to the Board in the same twelve months. As of June 30, 1998, compensation under these employment contracts had been earned, but two of the twelve monthly payments, due for July and August 1998, had not been made. Payments for these two months were made and recorded as expenditures by the Board subsequent to June 30, 1998. Also, the State's portion of the compensation paid in July and August 1998 was received and recorded as revenue in the fIscal year subsequent to June 30, 1998. Conversely, the similar expenditures and related revenues for contractual services completed prior to June 30, 1997, were recorded in the year -9- FLOYD COUNTY BOARD OF EDUCATION EXlllBIT "D" NOTES TO THE GENERAL PURPOSE FINANCIAL STATEMENTS JUNE 30, 1998 Note 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ended June 30, 1998. Generally accepted accounting principles require that revenues be recorded when available and measurable and that expenditures be recorded when incurred, rather than when funds are received or disbursed. .. BUDGET The Floyd County Board of Education's budget is a complete financial plan for the Board's fiscal year and is based upon estimates of expenditures together with probable funding sources. There is no statutory prohibition regarding overexpenditure ofthe budget at any level. The budget for all governmental funds is prepared by fund, function and object. The legal level ofbudget control was established by the Board at the aggregate level. The budget for governmental funds was prepared on a basis other than generally accepted accounting principles. The budget process begins when the Board's administration prepares a tentative budget for the Board's approval. After approval of this tentative budget by the Board, such budget is advertised at least once in a newspaper of general circulation in the locality. At the next regular meeting ofthe Board after advertisement, the Board receives comments on the tentative budget, makes revisions as necessary and adopts a final school budget. This final budget is then submitted, in accordance with provisions ofthe Quality Basic Education Act, OCGA Section 20-2-167, to the Georgia Department ofEducation. The Board may increase or decrease the budget at any time during the year. All unexpended budget authority lapses at fiscal year-end. The Statement ofRevenues, Expenditures and Changes in Fund Balances - Budget and Actual presents actual and budgeted data for the General Fund and Special Revenue Fund. To facilitate comparison with the budget, the following adjustments have been made to fund balance as reflected on Exhibit "B" of this report: FUND BALANCE JULY 1, 1997 Adjustments Inventories - July 1, 1997 Food Donated Commodities Purchased Foods Fund Balance July 1, 1997 (Budget Basis) Excess of Revenues and Other Financing Sources over (under) Expenditures and Other Financing Uses Special Revenue Fund $ 600,134.63 42,846.73 -37,112.20 $ 520,175.70 -31.482.65 FUND BALANCE JUNE 30, 1998 (Budget Basis) - 10- $ 488.693.05 FLOYD COUNTY BOARD OF EDUCATION EXHIBIT "D" NOTES TO THE GENERAL PURPOSE FINANCIAL STATEMENTS JUNE 30. 1998 Note 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CASH AND CASH EQUIVALENTS COMPOSmON OF DEPOSITS Cash and cash equivalents consist of deposits in authorized financial institutions. Georgia Laws authorize the Board to deposit its funds in one or more solvent banks, insured Federal savings and loan associations, or insured State chartered building and loan associations. RECEIVABLES Receivables consist of 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 general purpose financial statements do not include any amounts which would necessitate the need for an allowance for uncollectible receivables. PROPERrt TAXES The Floyd County Board of Commissioners fixed the property tax levy for the 1997 tax year (calendar year) on August 26, 1997 (levy date). Taxes were due on November 15, 1997. The lien date for property taxes was January 1, 1997. Taxes collected within the current fiscal year or within 60 days after year-end are reported as revenue in fiscal year 1998. The Floyd County Tax Commissioner bills and collects the property taxes for the Board ofEducation, withholds 2.5% oftaxes collected as a fee for tax collection and remits the balance oftaxes collected to the Board. The tax millage rate levied for the 1997 tax year (calendar year) for the Floyd County Board ofEducation was as follows (a mill equals $1 per thousand dollars of assessed value): School Operations ~mills INVENTORIES FOOO INVENTORIES Inventories of donated food commodities used in the preparation of meals are reported on the Combined Balance Sheet at their Federally assigned value. Purchased foods inventories are reported on the Combined Balance Sheet at cost (first-in, first-out). Donated food commodities are recorded as revenues and expenditures at the time commodity items are received. Purchased foods ipventories are recorded as expenditures at the time of purchase. The inventories reported on the balance sheet for donated food commodities and for purchased foods are equally offset by reservations of fund balance which indicates that these amounts do not constitute "available spendable resources" even though they are a component or'net current assets. - 11 - FLOYD COUNTY BOARD OF. EDUCATION EXHIBIT "D" NOTES TO THE GENERAL PURPOSE FINANCIAL STATEMENTS JUNE 30, 1998 Note 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES COMPENSATED ABSENCES Compensated absences represent obligations of the Board relating to employees' rights to receive compensation for future absences based upon service already rendered. This obligation relates only to vesting accumulating leave in which payment is probable and can be reasonably estimated. No liability has been recorded in the individual funds for the current portion ofthis obligation as this amount is deemed immaterial to the general purpose financial statements. However, the dollar value of accumulated compensated absences at June 30, which will be payable from future resources is material to the general purpose financial statements and has not been recorded in the General Long-Term Debt Account Group as required by generally accepted accounting principles. INTERFUND TRANSACTIONS The Board has the following types of interfund transactions: Reimbursements of expenditures initially made from a fund that are properly applicable to another fund, are recorded as expenditures in the reimbursing fund and as reductions of expenditures in the fund that is reimbursed. Residual equity transfers are recorded for nomecurring or nomoutine permanent transfers of equity. Operating transfers are recorded for all interfund transactions other than residual equity transfers. and .reimbursements. MEMORANDUM ONLY - TOTAL COLUMNS Total columns on the general purpose financial statements are captioned "Memorandum Only" to indicate that they are presented only to facilitate financial analysis. Data in these col~ do not present financial position . or results of operations in conformity with generally accepted accounting principles. Neither are such data comparable to a consolidation. Interfund eliminations have not been made in the aggregation ofthis data. Note 2: 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 of the face value of such 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. OCGA Section 45-8-11 provides an officer holding public funds may, in his discretion, waive the requirement for security in the case of operating funds placed in demand deposit checking accounts. - 12- FLOYD COUNTY BOARD OF EDUCATION EXIllBIT "D" : NOTES TO THE GENERAL PURPOSE FINANCIAL STATEMENTS ruNE 30. 1998 Note 2: DEPOSITS Acceptable security for deposits consists of anyone 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 ofthe counties or municipalities ofthe State of Georgia, (5) Bonds of any public authority created by the laws ofthe State of Georgia, providing that the statute that created the authority authorized the use of the bonds for this purpose, (6) Industrial revenue bonds and bonds of development authorities created by the laws ofthe State of Georgia, and (7) Bonds, bills, notes; certificates of indebtedness, or other obligations of a subsidiary corporation of the United States government, which are fully guaranteed by the United States government both as to principal and interest and debt obligations issued by the Federal Land Bank, the Federal Home Loan Bank, the Federal Intermediate Credit Bank, the Central Bank for Cooperatives, the Farm Credit Banks, the Federal Home Loan Mortgage Association, and the Federal National Mortgage Association. CATEGORIZATION OF DEPOSITS At June 30, 1998, the bank balances were $12,793,397.17. The amounts of the total bank balances are classified into three categories of credit risk: Category 1 - Cash that is insured (e.g., Federal depository insurance) or collateralized with securities held by the Board or by the Board's agent in the Board's name. Category 2 - Cash collateralized with securities held by the pledging financial institution's trust department or agent in the Board's name. Category 3 - Uncollateralized deposits. (This includes any bank balance that is collateralized with securities held by the pledging financial institution, or by its trust department or agent but not in the Board's name.) The Board's deposits are classified by risk category at June 30, 1998, as follows: - 13- FLOYD COUNTY BOARD OF EDUCATION EXlllBIT "D" NOTES TO THE GENERAL PURPOSE FINANCIAL STATEMENTS JUNE 30, 1998 Note 2: DEPOSITS Risk Category 1 2 3 Total Note 3: NON-MONETARY TRANSACTIONS Bank Balance $ 200,000.00 12,593,397.17 0.00 $12,793,397.17 The Board receives food commodities from the United States Department ofAgriculture (USDA) for school breakfast and lunch programs. These commodities are recorded at their Federally assigned value. See Note 1 - Inventories Note 4: RISK MANAGEMENT The Board is exposed to various risks of loss related to torts; theft of, damage to, and destruction ofassets; errors or omissions; job related illness or injuries to employees; natural disaster and unemployment compensation. The Board has obtained commercial insurance for risk of loss associated with torts, assets and errors or omissions. The Board has neither significantly reduced coverage for these risks nor incurred losses (settlements) which exceeded the Board's insurance coverage in any ofthe P.ast three years. The Board has elected to self-insure for all losses related to natural disaster. The Board has not experienced any losses related to this risk in the. past three years. The Board has established a limited risk management program for workers' compensation claims. A premium is charged when needed by the General Fund to each user fund on the basis ofthe percentage ofthat fund's payroll to total payroll in order to cover estimated claims budgeted by management based on known claims and prior experience. The Board accounts for claims with expenditure and liability being reported when it is probable that a loss has occurred, and the amount of that loss can be reasonably estimated. An excess coverage insurance policy covers individual claims in excess..of $250,000.00 loss per occurrence, up to the statutory limit. Changes in the workers' compensation claims liability during the last two fiscal years are as follows: 1997 1998 Beginning ofYear Liability Claims and Changes in Estimates $ 0.00 $ 126,156.44 $ $ 0.00 $ 131,282.22 $ Claims Paid End ofYear Liability 126,156.44 $ 0.00 131.282.22 $ 0.00 - 14- FLOYD COUNTY BOARD OF EDUCATION EXIllBIT "D" NOTES TO THE GENERAL PURPOSE FINANCIAL STATEMENTS JUNE 30, 1998 Note 4: RISK MANAGEMENT The Board is self-insured with regard to unemployment compensation claims. The Board accounts for claims within the General Fund with expenditure and liability being reported when it is probable that a loss'has occurred, and the amount ofthat loss can be reasonably estimated. Changes in the unemployment compensation claims liability during the last two fiscal years are as follows: 1997 1998 Beginning ofYear Liability Claims and Changes in Estimates $ 0.00 $ 3,140.69 $ $ 0.00 $ 2.526.00 $ Claims Paid End ofYear Liability 3,140.69 $ 0.00 2,526.00 $ 0.00 The Board has purchased a surety bond to provide additional insurance coverage as follows: Position Covered Amount Superintendent $ 100,000.00 Note 5: GENERAL LONG-TERM DEBT The changes in General Long-Term Debt during the fiscal year ended June 30, 1998, were as follows: Balance July 1, 1997 Deductions Payments Balance June 30, 1998 Note 6: ON-BEHALF FAYMENTS General Obligation Bonds $ 210,000.00 210,000.00 $ 0.00 The Board has recognized revenues and expenditures in the amount of$815,200.24 for health insurance and retirement contributions paid on the Board's behalf by the following State Agencies. Georgia Department of Education Paid to the State Merit System ofPersonnel Administration For Health Insurance ofNon-Certified Personnel. In the amount of $633,596.79 - 15 - FLOYD COUNTY BOARD OF EDUCATION EXIllBIT "D" NOTES TO THE GENERAL PURPOSE FINANCIAL STATEMENTS JUNE 30, 1998 Note6: ON-BEHALF PAYMENTS Paid to the Teachers Retirement System of Georgia For Teachers Retirement System (TRS) Employer's Cost In the amount of $62,863.45 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$118,740.00 Note 7: SIGNIFICANT COMMITMENTS The following is an analysi~ of significant outstanding construction or renovation contracts executed by the Board as of June 30, 1998, together with funding available: Project Unearned Executed Contracts Funding Available From State GSFIC 98/97S-657-075 Glenwood Elementary Renovations Johnson Elementary Renovations $ 406,984.92 19,025.00 6,721.84 $ 283,216.50 $ 432.731.76 $ 283.216.50 The amounts described in this note are not reflected in the general purpose financial statements. Note 8: 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 expenditures which are disallowed under grant terms. The Board believes that such disallowances, if any, will be immaterial to its overall financial position. Note 9: ACCUMULATED EMPLOYEES' LEAVE The Board's professional personnel earn one and one-quarter days ofsick and personal leave each month with a maximum accumulation of 60 days. Sick and personal leave vest with the employee after five years of continuous service and an amount based on unused sick and personal leave, up to the maximum accumulation, is paid to employees at their current rate ofpay upon retirement or termination ofemployment. - 16- FLOYD COUNTY BOARD OF EDUCATION EXfllBIT "D" NOTES TO THE GENERAL PURPOSE FINANCIAL STATEMENTS JUNE 30. 1998 Note 9: ACCUMULATED EMPLOYEES' LEAVE The Board's administrative staff and certain other full-time employees earn .833 days per month of annual leave. Annual leave may be accumulated to a maximum of 15 days, and an amount based on unused leave, up to the maximum accumulation, is paid to employees at their current rate of pay upon retirement or termination of employment. See Note 1 - Compensated Absences Note 10: 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 Board who are covered by TRS are required by State statute to contribute 5% oftheir gross earnings to TRS. The Board 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 actuaIy. The required employer contribution rate is 11.81% and employer contributions for the current fiscal year and the preceding two fiscal years are as follows: Fiscal Year Percentage Contributed Required Contribution 1998 1997 1996 100% 100% 100% $ 3,826,017.99 $ 3,565,996.29 $ 3,339,114.31 - 17 - See notes to the general purpose financial statements. - 18 FLOYD COUNTY BOARD OF EDUCATION COMBINING STATEMENT OF REVENUES. EXPENDITURES AND CHANGES IN FUND BALANCES SPECIAL REVENUE FUND YEAR ENDED JUNE 30. 1998 EXHIBIT"P SCHOOL FOOD SERVICES FUND LOTTERY PROGRAMS FEDERAL PROGRAMS TOTALS YEAR ENDED JUNE 30, 1998 JUNE 30, 1997 REVENUES State Funds Federal Funds Other Funds $ 241,824.00 $ 1,170,982.96 $ 1,412,806.96 $ 1,301,312.44 1,486,602.18 $ 1,691,418.80 3,178,020.98 2,474,756.03 1,523,395.65 1,523,395.65 1,551,957.21 Total Revenues $ 3,251,821.83 $ 1,170,982.96 $ 1,691,418.80 $ 6,114,223.59 $ 5,328,025.68 EXPENDITURES Current Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration Maintenance and Operation of Plant Student Transportation Services central Support Services Other Support Services Food Services Operation Capital Outlay $ 1,059,046.67 $ 1,330,999.08 $ 2,390,045.75 $ 1,764,681.23 $ 3,343,224.40 79,212.41 15,083.87 7,238.06 3,054.42 1,868.80 8,161.49 65,404.47 206,180.55 5,316.00 8,348.02 19,481.82 65,953.94 16,546.02 144,616.88 221,264.42 5,316.00 15,586.08 22,536.24 65,953.94 18,414.82 3,351,385.89 155,626.16 82,353.02 5;253.48 70,335.44 48,250.69 44,222.06 22,408.50 52,316.48 3,204;431.46 2,381.00 Total Expenditures $ 3,343,224.40 $ 1,173,665.72 $ 1,718,229.90 $ 6,235,120.02 $ 5,452.259.52 Excess of Revenues over (under) Expenditures $ -91,402.57 $ -2,682.76 $ -26,811.10 $ -120,896.43 $ -124,233.84 OTHER FINANCING SOURCES Operating Transfers In 59,919.92 2,682.76 26,811.10 89,413.78 78,873.69 Excess of Revenues and Other Financing Sources over (under) Expenditures $ -31,482.65 $ 0.00$ 0.00 $ -31,482.65 $ -45,360.15 FUND BALANCE JULY 1 600,134.63 0.00 0.00 600,134.63 671,986.n Food Inventory - Net Change in Period Donated Commodities Purchased Food 23,676.85 -2,154.26 23,676.85 -2,154.26 -16,887.79 -9,604.20 FUND BALANCE JUNE 30 $ ,590,174.57 $ 0.00 $ 0.00 $ 590,174.57 $ 600,134.63 See notes to the general purpose financial statements. -19- FLOYD COUNTY BOARD OF EDUCATION COMBINING BALANCE SHEET CAPITAL PROJECTS FUND JUNE 30, 1998 EXHIBIT"G" ASSETS cash and Cash Equivalents REGULAR GEORGIA STATE FINANCING AND INVESTMENT COMMISSION LOTTERY PROJECT TOTALS JUNE 30, 1998 JUNE 30,1997 $ 3,357,64 $ 1,169,899.01 $ 647,618.00 $ 1,820,874,65 $ 2,665,926,93 LIABILITIES AND FUND EQUITY LIABILITIES Contracts Payable Retainages Payable Total Liabilities FUND EqUITY Fund Balances Reserved For State Capital Outlay Projects Unreserved Undesignated $ Total Fund EqUity $ $ 290,874,42 $ 278,334.00 $ 569,208.42 $ 27,000.00 $ 27,000.00 $ 317,874.42 $ 278,334,00 596,208.42 $ 133,268.65 133,268,65 $ 3,357,64 3,357,64 $ 600,690.59 $ 0,00 600,690.59 $ 620,618,00 $ 0,00 620,618,00 $ 1,221,308,59 $ 3,357,64 1,224,666.23 $ 2,378,888,11 153,770.17 2,532,658.28 Total Liabilities and Fund Equity $ 3,357.64 $ 1.169,899.01 $ 647,618.00 $ 1,820,874.65 $ 2,665,926.93 See notes to the general purpose financial statements, - 20- See notes to the general purpose financial statements. 21 - FLOYD COUNTY BOARD OF EDUCATION SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS YEAR ENDED JUNE 30. 1998 SCHEDULE "1" Total Federal Financial Assistance N/A = Not Available - 22- $ 3,180,346.22 $ 5,061.454.30 FLOYD COUNTY BOARD OF EDUCATION SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS YEAR ENDED JUNE 3D. 1998 Notes to the Schedule of Expenditures of Federal Awards (1) The amounts shown for the Food Distribution Program represents the Federally assigned value of nonmonetary assistance for donated commodities received ancllor consumed by the system during the current fiscal year. (2) Expenditures for the School Breakfast Program were not maintained separately and are included in the 1998 National School Lunch Program. (3) Expenditures for this program include State, and/or Other Funds. Expenditures are not maintained by fund source. (4) Funds earned on this program do not require reporting of expenditures. Major Programs are identified by an asterisk (*) in front ofthe CFDA number. The Board did not provide Federal Assistance to any Subrecipient. The accompanying schedule of expenditures of Federal awards includes the Federal grant activity of the Floyd County Board of Education and is presented on the modified accrual basis of accounting which is the same basis of accounting used in the presentation of the general purpose financial statements. . SCHEDULE "1" See notes to the general purpose financial statements. -23 - FLOYD COUNTY BOARD OF EDUCATION SCHEDULE OF STATE REVENUE YEAR ENDED JUNE 30. 1998 SCHEDULE "2" AGENCYIFUNDING GRANTS Education, Georgia Department of Quarlty Basic Education General and career Education Programs Special Education Programs Remedial Education Program Media Center Programs Staff Development Programs Indired Cost Pupil Transportation Regular Bus Replacement Middle School Incentive Program Special Instructional Assistance In-School Suspension Counselors Grades 4 and 5 Technology Training Local Fair Share Educational Equalization Funding Grant Food Services Vocational. Education Other State Programs Ad Valorem Tax Adjustment Altemative Program Apprenticeship Program At-Risk Summer School Program Environmental Science Program Govemor's Emergency Funds (1) Health Insurance Innovative Programs Mentoring Program Mentor Teacher Program Pay for Performance Program Preschool Handicapped Program Special Education Low Incidence Grant Teachers' Retirement Lottery Programs A1temative School Program Exceptional Growth-Capital Outlay Instructional Technology Assistive Technology Classroom Technology Georgia Council for the Arts Arts Grant Georgia Environmental Facilities Authority Recyciing Grant Georgia State Financing and Investment Commission Reimbursement on Construction Projeds Office of School Readiness Pre-Kindergarten Program Office of Treasury and Fiscal Services Public School Employees Retirement GOVERNMENTAL FUND TYPES SPECIAL CAPITAL GENERAL REVENUE PROJECTS FUND FUND FUND TOTAL $ 21,695,881.00 '3,560,747.00 637,936.00 894,853.00 266,551.00 5,645,378.00 1,172,181.00 361,360.00 741,155.00 216,358.00 342,008.00 92,826.00 129,790.00 -5,540,435.00 896,973.00 $ 9,447.80 254,876.00 62,650.00 40,199.83 29,149.43 1,500.00 2,000.00 633,596.79 5,000.00 -7,500.00 25,944.00 114,000.00 103,950.00 32,729.00 62,863.45 23,150.00 74,280.44 241,824.00 2,066.00 $ 14,848.19 271,874.67 $ 209,979.14 21,695,881.00 3,560,747.00 637,936.00 894,853.00 266,551.00 5,645,378.00 1,172,181.00 361,360.00 741,155.00 216,358.00 342,008.00 92,826.00 129,790.00 -5,540,435.00 896,973.00 241,824.00 9,447.80 254,876.00 62,650.00 40,199.83 29,149.43 1,500.00 2,000.00 633,596.79 5,000.00 -7,500.00 25,944.00 114,000.00 103,950.00 32,729.00 62,863.45 2,066.00 209,979.14 14,848.19 271,874.67 23,150.00 74,280.44 118,740.00 882,194.10 2,548,948.50 2,548,948.50 882,194.10 118,740.00 $ 32,700,138.74 $ 1,412,806.96 $ (1) The purpose of the funds are for Coosa Middle School - 1997 Georgia School of Excellence. See notes to the general purpose financial statements. -24- 2,758,927.64 $ .36,871,873.34 FLOYD COUNTY BOARD OF EDUCATION SCHEDULE OF EXPENDITURES LOTTERY PROGRAMS YEAR ENDED JUNE 30,1998 SCHEDULE "3" EXPENDITURES Current Instruction Support Services Pupil Services Improvement of Instructional services General Administration Student Transportation Services other Support services Food Services Operation ALTERNATIVE SCHOOL PROGRAM INSTRUCTIONAL TECHNOLOGY ASSISTIVE CLASSROOM TECHNOLOGY TECHNOLOGY PRE-KINDERGARTEN PROGRAM TOTAL $ 2,066,00 $ 14,848,19 $ 271,874,67 $ nO,257,81 $ 1,059,046,67 79,212.41 15,083.87 7,238,06 3,054.42 1,868,80 8,161,49 79,212,41 15,083,87 7,238,06 3,054,42 1,868,80 8,161.49 Total Expenditures $ 2,066,00 $ 14,848,19 $ 271,874,67 $ ....;8;~8,;4;;;,,8,;7;;6;,.;8;;6;:. $ 1,173,665.72 RECAP: Salaries and Benefits Pre-Kindergarten Program other Expendnures Altemative School Program Instructional Technology Assistive Technology Classroom Technology Pre-Kindergarten Program $ 810,060,87 2,066,00 14,848.19 271,874,67 74,815,99 $ 1,173,665,72 See notes to the general purpose financial statements. -25 - FLOYD COUNTY BOARD OF EDUCATION ANALYSIS OF MINIMUM EXPENDITURE REQUIREMENTS - OVERALL GENERAL FUND - QUALITY BASIC EDUCATION PROGRAMS YEAR ENDED JUNE 30. 1998 SCHEDULE "4" Minimum Expenditure Requirements (Total Allotment) Expenditures on Combined Program Basis Salaries Operations Less: Expenditures for Media Center Programs in Excess of Total Media Allotment Expenditures per Audit Amount of Underexpenditure for Total Allotment' FOURTEEN WEIGHTED AND MEDIA CENTER PROGRAMS 100% TEST FOR OPERATIONS PORTION OF FOURTEEN WEIGHTED PROGRAMS $ 26.789,417.00 $ _ _....;7....;4.:..l7.~904~.0;.;;..0 $ 29,504,168.37 1,665,428.20 $_--.;1;.L..,4.;..;;.8"'-l7,..;;;,.81.;..;;6..;..;.1-,-7 $ 31.169.596.57 -469,281.46 $ 30,700,315.11 $ 0.00 $=====O=.O:=:O See notes to the general purpose financial statements. - 27 - FLOYD COUNTY BOARD OF EDUCATION ANALYSIS OF MINIMUM EXPENDITURE REQUIREMENTS - BY PROGRAM GENERAL FUND - QUALITY BASIC EDUCATION PROGRAMS YEAR ENDED JUNE 3D. 1998 SCHEDULE -5- TOTAL REQUIRED ACTUAL EXPENDITURES SALARIES OPERATIONS TOTAL AMOUNT OF UNDEREXPENDITURE FOR REQUIRED ALLOTMENT $ 2,206,448.10 $ 2,247,757.86 $ 59,287.31 $ 2,307,045.17 5,675,980.50 6,695,443.94 356,347.23 7,051,791.17 $ 7,882,428.60 $ 8,943,201.80 $ 415,634.54 $ 9,358,836.34 $ 0.00 2,488,833.00 3,087,953.55 159,118.97 3,247,072.52 0.00 4,058,765.10 5,030,525.76 247,817.94 5,278,343.70 0.00 .2,220,107.40 3,168,265.55 129,863.12 3,298,128.67 0.00 1,594,542.60 1,611,396.20 127,416.23 1,738,812.43 0.00 1,281,616.20 1,650,271.09 204,865.87 1,855,136.96 0.00 $ 19,526,292.90 $ 23,491,613.95 $ 1,284,716.67 $ 24,776,330.62 $ 2,792,063.70 $ 121,778.12 48.44 3,306,298.52 $ 110,366.74 24,177.94 $ 84,702.88 109,105.00 121,778.12 48.44 3,391,001.40 219,471.74 24,177.94 $ 2,792,063.70 $ 3,562,669.76 $ 193,807.88 $ 3,756,477.64 0.00 412,608.60 628.451.24 7,723.42 636,174.66 0.00 $ 3,204,672.30 $ 4,191,121.00 $ 201,531.30 $ 4,392,652.30 $ 574,142.40 $ 634,910.99 $ 1,568.20 $ 636,479.19 0.00 $ 23,305,107.60 $ 28,317,645.94 $ 1,487,816.17 $ 29,805,462.11 $ 660,429.90 $ 1,186,522.43 $ 1,186,522.43 0.00 144,937.80 $ 177,612.03 177,612.03 0:00 $ 805,367.70 $ 1,186,522.43 $ 177,612.03 $ 1,364,134.46 $ 24,110.475.30 $ 29,504,168.37 $ 1,665,428.20 $ 31,169,596.57 $ 0.00 $ 77,350.00 189,201.00 $ =====2=66:1:':,;55..1.;,;;.0=0 $ '187,887.59 $ 84,640.22 187,887.59 84,640.22 $ 272,527.81 $ 272,527.81 $_-== .....0....0..0.. - 29 - SECTION II COMPLIANCE AND INTERNAL CONTROL REPORTS RUSSELL W. HINTON STATE AUDITOR (404) 656-2174 DEPARTMENT OF AUDITS AND ACCOUNTS 254 Washington Street, S.w., Suite 214 Atlanta, Georgia 30334-8400 April 28, 1999 Honorable Roy E. Barnes, Governor Members ofthe General Assembly Members of the State Board of Education and Superintendent and Members ofthe Floyd County Board of Education REPORT ON COMPLIANCE AND ON INTERNAL CONTROL OVER FINANCIAL REPORTING BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS Ladies and Gentlemen: We have audited the financial statements ofFloyd County Board of Education as of and for the year ended June 30, 1998, and have issued our report thereon dated April 28, 1999. This report was qualified for a scope limitation and for various departures from generally accepted accounting principles, as identified in the auditor's report on the general purpose financial statements. Except as discussed in the following paragraph, we conducted our audit in accordance with generally accepted auditing standards and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. We did not observe the taking of either the Federal donated commodities inventory or the purchased foods inventory at June 30, 1998, nor could we satisfy ourselves as to the accuracy of the amounts stated as inventories through alternative procedures. Compliance As part of obtaining reasonable assurance about whether Floyd County Board of Education's financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts and grants, noncompliance with which could have a direct and material effect on the determination offinancial 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 that are required to be reported under Government Auditing Standards. 98YB-40 Internal Control Over Financial Reporting In planning and performing our audit, we considered Floyd County Board ofEducation's internal control over financial reporting in order to determine our auditing procedures for the purpose of expressing our opinion on the fmancial statements and not to provide assurance on the internal control over financial reporting. However, we noted a certain matter involving the internal control over financial reporting and its operation that we consider to be a reportable condition. Reportable conditions involve matters coming to our attention relating to significant deficiencies in the design or operation ofthe internal control over fmancial reporting that, in our judgement, could adversely affect Floyd County Board of Education's ability to record, process, summarize and report financial data consistent with assertions ofmanagement in the financial statements. The reportable condition is described in the accompanying Schedule of Findings and Questioned Costs as item FS-6571-98-01. A material weakness is a condition in which the design or operation of one or more of the internal control components does not reduce to a relatively low level the risk that misstatements in amounts that would be material in relation to the fmancial 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, the reportable condition noted above is considered to be a material weakness. This report is intended for the information of management, the Federal cognizant agency, Federal awarding agencies and pass through entities. This restriction is not intended to limit the distribution ofthis report which is a matter of public record. Respectfully submitted, . ~ ......(lQ. 0.4: