GREENE COUNTY BOARD OF EDUCATION GREENSBORO, 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 GREENE 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 I 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 I SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL GENERAL FUND 25 SUPPLEMENTARY INFORMATION 2 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS 26 3 SCHEDULE OF STATE REVENUE 28 GREENE COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS - SECTION I FINANCIAL SCHEDULES SUPPLEMENTARY INFORMATION 4 SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS 29 5 ALLOTMENTS AND EXPENDITURES GENERAL FUND - QUALITY BASIC EDUCATION PROGRAMS (QBE) BY PROGRAM 31 SECTION II COMPLIANCE AND INTERNAL CONTROL REPORTS REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS REPORT ON COMPLIANCE WITH REQUIREMENTS APPLICABLE TO EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH 0MB CIRCULAR A-133 SECTION III AUDITEE'S RESPONSE TO PRIOR YEAR FINDINGS AND QUESTIONED COSTS SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS SECTION IV FINDINGS AND QUESTIONED COSTS SCHEDULE OF FINDINGS AND QUESTIONED COSTS GREENE 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 June 25, 2007 Honorable Sonny Perdue, Governor Members of the General Assembly Members ofthe State Board of Education and Superintendent and Members ofthe Greene County Board of Education INDEPENDENT AUDITOR'S COMBINED REPORT ON BASIC FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION- SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS Ladies and Gentlemen: We have audited the accompanying financial statements ofthe governmental activities, each major fund, and the aggregate remaining fund information (Exhibits A through H) of the Greene 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 Greene 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 Greene County Board of Education, 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 Greene County Board of Education 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 June 25, 2007, on our consideration ofthe Greene County Board ofEducation'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 ofour testing ofinternal control over financial reporting and compliance and the results ofthat testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit. The Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual, as presented on page 25, 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 Greene 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. tJ.~ Respectfully submitted, sell W. Hinton, CPA, CGFM State Auditor RWH:as 2006ARL-11 GREENE COUNTY BOARD OF EDUCATION GREENE COUNTY BOARD OF EDUCATION STATEMENT OF NET ASSETS JUNE 30, 2006 ASSETS Cash and Cash Equivalents Investments Accounts Receivable, Net Taxes State Government Federal Government Other Prepaid Items Inventories Capital Assets Land Construction in Progress Land Improvements Buildings Equipment Less: Accumulated Depreciation Total Assets LIABILITIES Accounts Payable Salaries Payable Retainages Payable Long-Term Liabilities Due Within One Year Due in More Than One Year Total Liabilities NET ASSETS Invested in Capital Assets, Net of Related Debt Restricted for Continuation of Federal Programs Debt Service Capital Projects Unrestricted Total Net Assets Total Liabilities and Net Assets EXHIBIT"A" GOVERNMENTAL ACTIVITIES $ 449,975 3,557,915 902,122 918,302 918,400 4,466 100 27,860 124,200 268,766 1,634,132 28,110,170 4,173,982 -9,668,139 $ ===3=1..,4..,.2.2,.2.5...,1= $ 346,718 2,511,083 181,661 1,727,205 2,458,235 $ 7,224,902 $ 20,582,410 210,310 55,685 3,189,801 159 143 $ 24,197,349 $ ===3=1..,4..,.2=2,.2.5...,1... The notes to the basic financial statements are an integral part of this statement. -1- GREENE 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 Sales Taxes Special Purpose Local Option Sales Tax For Capital Projects Intangible Recording Tax Grants and Contributions not Restricted to Specific Programs Investment Earnings Miscellaneous Special Items Gain on Sale of Building Total General Revenues and Special Items Changes in Net Assets Net Assets - Beginning of Year Net Assets - End of Year EXPENSES CHARGES FOR SERVICES $ 14,555,385 $ 1,004,861 1,385,903 508,460 650,031 1,283,542 370,498 1,422,413 1,266,971 22,226 328,249 195,590 1,139,341 219 449 $ 24,352,919 $ 80,489 37,377 52,856 170 722 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 $ 6,882,522 151,462 681,928 152,107 435,149 335,018 363,736 590,482 $ 23,091 78,210 1,068,270 $ 10 761 975 $ $ 67,023 67 023 $ -7,592,374 -853,399 -703,975 -356,353 -214,882 -948,524 -370,498 -1,058,677 -609,466 865 -250,039 -158,213 -18,215 -219 449 -13,353,199 $ 10,768,742 3,219,382 255,078 2,999 212,550 682,037 122 058 $ 15,262,846 $ 1,909,647 22,287,702 $ =====2=4=19=7=3=4=9 . 3. GREENE COUNTY BOARD OF EDUCATION BALANCE SHEET GOVERNMENTAL FUNDS JUNE 30, 2006 EXHIBIT"C" ASSETS Cash and Cash Equivalents Investments Accounts Receivable, Net Taxes State Government Federal Government Other Prepaid Items Inventories Total Assets LIABILITIES AND FUND BALANCES LIABILITIES Accounts Payable Salaries Payable Retainages Payable Total Liabilities FUND BALANCES Reserved for: Continuation of Federal Programs Debt Service Inventories Capital Projects Unreserved Undesignated Reported in: General Fund Total Fund Balances Total Liabilities and Fund Balances GENERAL FUND DISTRICTWIDE CAPITAL PROJECTS FUND DEBT SERVICE FUND TOTAL $ 378,275 $ 16,298 $ 55,402 $ 449,975 626,344 2,931,571 3,557,915 254,832 918,302 918,400 4,466 100 27,860 595,683 850,515 918,302 918,400 4,466 100 27,860 $ 3,128,579 $ 3,543,552 $ 55,402 $==6=,7=2=7=,5=33= $ 279,068 $ 2,511,083 $ 2,790,151 $ 67,650 181 661 249,311 $ 346,718 2,511,083 181,661 $ 3,039,462 $ 182,450 $ 182,450 $ 283 $ 55,402 55,685 27,860 27,860 3,293,958 3,293,958 128,118 128,118 $ 338,428 $ 3,294,241 $ 55,402 $ 3,688,071 $ 3,128,579 $ 3,543,552 $ 55,402 $ ==6...,,7=2=7,,..53=3= The notes to the basic financial statements are an integral part of this statement. -4- GREENE 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. Long-Term Liabilities, including Bonds Payable, are not due and payable in the current period and therefore are not reported as liabilities in the funds. Long-Term Liabilities at year-end consist of: Bonds Payable Capital Leases Total Long-Term Liabilities Net Assets of Governmental Activities (Exhibit "A") $ 3,688,071 $ 124,200 268,766 1,634,132 28,110,170 4,173,982 -9,668,139 24,643,111 51,607 $ -3,180,000 -1,005,440 -4 185 440 $ 24,197,349 The notes to the basic financial statements are an integral part of this statement. -5 - GREENE 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) Capital Leases Transfers In Transfers Out Total Other Financing Sources (Uses) SPECIAL ITEMS Proceeds from Sale of Buildings Net Change in Fund Balances Fund Balances - Beginning GENERAL FUND DISTRICTWIDE CAPITAL PROJECTS FUND DEBT SERVICE FUND TOTAL $ 10,987,034 255,078 $ 3,219,382 7,178,839 3,653,158 170,722 100,356 111,279 $ 682,037 $ 23,027,224 $ 3,330,661 $ $ 915 915 $ 10,987,034 3,474,460 7,178,839 3,653,158 170,722 212,550 682 037 26,358,800 $ 14,146,273 $ 1,004,861 1,385,903 472,727 637,254 1,256,242 370,496 $ 2 1,418,418 1,155,782 22,226 255,301 195,590 1,084,165 $ 291,740 200,541 61 734 1,495,000 157715 $ 23,667,513 $ 291 740 $ 1,652,717 $ $ -640,289 $ 3,038,921 $ -1,651,802 $ 14,146,273 1,004,861 1,385,903 472,727 637,254 1,256,242 370,498 1,418,418 1,155,782 22,226 255,301 195,590 1,084,165 291,740 1,695,541 219 449 25,611,970 746 830 $ 108,700 $ 108,700 $ 1,706,685 1,706,685 $ -1,706,685 -1 706 685 $ 108 700 $ -1,706,685 $ 1,706,685 $ 108 700 $ 159 621 $ -371,968 $ 1,332,236 $ 710 396 1,962,005 $ 54,883 $ 519 159 621 1,015,151 2,672,920 Fund Balances - Ending $ 338 428 $ 3,294,241 $ 55,402 $ =====3=,6=8=8,=07=1= The notes to the basic financial statements are an integral part of this statement. -6- GREENE 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. In the Statement of Activities, only the gain on the sale of the land and building is reported, whereas in the Governmental Funds, the entire proceeds from the sale increase financial resources. Thus, the change in net assets differs from the change in fund balances by the cost of the land and carrying value of the building sold. Some of the Capital Assets acquired this year were financed with capital leases. In Governmental Funds, a capital lease arrangement is considered a source of financing, but in the Statement of Net Assets, the lease obligation is reported as a Long-Term Liability. Repayment of Long-Term Debt is reported as an expenditure in Governmental Funds, but the repayment reduces Long-Term Liabilities in the Statement of Net Assets. In the current year, these amounts consist of: Bond Principal Retirements Capital Lease Payments Total Long-Term Debt Repayments Change in Net Assets of Governmental Activities (Exhibit "B") $ 1,015,151 $ 447,351 -883,841 -436,490 -218,292 -37,563 -108,700 $ 1,495,000 200,541 1,695,541 $ ====1=9,..09=,6=4==7 The notes to the basic financial statements are an integral part of this statement. -7- GREENE 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 $ ===25====77=1= $ ====25=7=71= The notes to the basic financial statements are an integral part of this statement. -8- GREENE 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 Greene County Board ofEducation (School District) was established under the laws ofthe State of Georgia and operates under the guidance of a school board elected by the voters and a Superintendent appointed by the Board. The Board is organized as a separate legal entity and has the power to levy taxes and issue bonds. Its budget is not subject to 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 Greene 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 ofActivities 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- GREENE 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) and Bond Proceeds to be used for the acquisition, construction or renovation of major capital facilities. Debt Service Fund accounts for taxes (sales) legally restricted for the payment ofgeneral longterm principal, interest and paying agent's fees. The School District reports the following fiduciary fund type: Agency funds account for assets held by the School District as an agent for various funds, governments or individuals. BASIS OF ACCOUNTING The basis ofaccounting determines when transactions are reported on the financial statements. The District-wide governmental and fiduciary fund financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded at the time liabilities are incurred, regardless ofwhen the related cash flows take place. Nonexchange transactions, in which the School District gives (or receives) value without directly receiving (or giving) equal value in exchange, include property taxes, sales taxes, grants and donations. On an accrual basis, revenue from property taxes is recognized in the fiscal year for which the taxes are levied. Revenue from sales taxes is recognized in the fiscal year in which the underlying transaction (sale) takes place. Revenue from grants and donations is recognized in the fiscal year in which all eligibility requirements have been satisfied. The School District uses funds to report on its financial position and the results of its operations. Fund accounting is designed to demonstrate legal compliance and to aid financial management by segregating transactions related to certain governmental functions or activities. A fund is a separate accounting entity with a self-balancing set of accounts. Governmental funds are reported using the current financial resources measurement focus and the modified accrual basis ofaccounting. Under this method, revenues are recognized when measurable and available. The School District considers all revenues reported in the governmental funds to be available if they are collected within sixty days after year-end. Property taxes, sales taxes and interest are considered to be susceptible to accrual. Expenditures are recorded when the related fund - 10 - GREENE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2006 EXHIBIT "H" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES liability is incurred, except for principal and interest on general long-term debt, which are recognized as expenditures to the extent they have matured. Capital asset acquisitions are reported as expenditures in governmental funds. Proceeds ofgeneral long-term liabilities and acquisitions under capital leases are reported as other financing sources. 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 - GREENE 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 Greene County Board ofCommissioners fixed the property tax levy for the 2005 tax digest year (calendar year) on July 29, 2005 (levy date). Taxes were due on November 15, 2005 (lien date). Taxes collected within the current fiscal year or within 60 days after year-end on the 2005 tax digest are reported as revenue in the governmental funds for fiscal year 2006. The Greene County Tax Commissioner bills and collects the property taxes for the School District, withholds 2.5% oftaxes collected as a fee for tax collection and remits the balance oftaxes 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 $10,987,034. The tax millage rate levied for the 2005 tax year (calendar year) for the Greene County Board of Education was as follows (a mill equals $1 per thousand dollars of assessed value): School Operations 11.00 mills SALES TAXES Special Purpose Local Option Sales Tax, at the fund reporting level, during the year amounted to $3,219,382 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 - GREENE 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. PREPAID ITEMS Payments made to vendors for services that will benefit periods subsequent to June 30, 2006, are recorded as prepaid items. CAPITAL ASSETS Capital assets purchased, including capital outlay costs, are recorded as expenditures in the fund financial statements at the time of purchase (including ancillary charges). On the District-wide financial statements, all purchased capital assets are valued at cost where historical records are available and at estimated historical cost based on appraisals or deflated current replacement cost 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 All NIA $ 5,000 20 to 80 years $ 5,000 25 to 80 years $ 5,000 5 to 20 years Depreciation is used to allocate the actual or estimated historical cost of all capital assets over estimated useful lives. - 13 - GREENE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2006 EXHIBIT "H" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES GENERAL OBLIGATION BONDS The School District issues general obligation bonds to provide funds for the acquisition and construction of major capital facilities. Bond issuance costs are recognized in the financial statements during the fiscal year bonds are issued. 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. DEFICIT FUND BALANCES The fund reporting a deficit fund balance at June 30, 2006, is as follows: Fund Type/Fund Name Deficit Balance Governmental Fund General Fund - Regular $ 10,619 The Greene County Board of Education plans to decrease spending to liquidate this deficit. Note 3: DEPOSITS AND INVESTMENTS COLLATERALIZATION OF DEPOSITS Official Code of Georgia Annotated (OCGA) Section 45-8-12 provides that there shall not be on deposit at any time in any depository for a time longer than ten days a sum ofmoney 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 ofsecurities pledged shall be equal to not less than 110 percent ofthe public funds being secured after the deduction ofthe amount ofdeposit insurance. Ifa depository elects the pooled method (OCGA 45-8-13 .1) the aggregate ofthe market value ofthe securities pledged to secure a pool ofpublic funds shall be not less than 110 percent ofthe daily pool balance. At June 30, $52,422 ofdeposits were not secured by surety bond, insurance or collateral as specified above. The School District is working with the affected financial institutions to ensure appropriate levels of collateral are maintained for all of the School District's deposits. 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, - 14 - GREENE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2006 EXHIBIT"H" Note 3: DEPOSITS AND INVESTMENTS (4) Bonds, bills, notes, certificates of indebtedness or other obligations of the counties or municipalities of the State of Georgia, (5) Bonds of any public authority created by the laws of the State of Georgia, providing that the statute that created the authority authorized the use of the bonds for this purpose, (6) Industrial revenue bonds and bonds of development authorities created by the laws of the State of Georgia, and (7) Bonds, bills, notes, certificates of indebtedness, or other obligations of a subsidiary corporation of the United States government, which are fully guaranteed by the United States government both as to principal and interest or debt obligations issued by the Federal Land Bank, the Federal Home Loan Banlc, the Federal Intermediate Credit Banlc, the Central Banlc for Cooperatives, the Farm Credit Banlcs, the Federal Home Loan Mortgage Association, and the Federal National Mortgage Association. CATEGORIZATION OF DEPOSITS At June 30, 2006, the banlc balances were $1,241,498. The amounts of the total banlc 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 Banlc Balance 1 $ 215,795 2 973,281 3 0 4 52,422 Total $ 1,241,498 - 15 - GREENE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2006 EXHIBIT"H" Note 3: DEPOSITS AND INVESTMENTS CATEGORIZATION OF INVESTMENTS At June 30, 2006, the carrying value ofthe School District's total investments was $3,557,915 which is materially the same as fair value. This investment consisted entirely offunds invested in the Local Government Investment Pool administered by the State of Georgia, Office of Treasury and Fiscal Services which are not required to be categorized since the School District did not own any specific identifiable securities in the pool. The investment policy ofthe State ofGeorgia, Office ofTreasury and Fiscal Services for the Local Government Investment Pool (Primary Liquidity Portfolio) does not provide for investment in derivatives or similar investments. A description of the Primary Liquidity Portfolio is as follows: The Primary Liquidity Portfolio consists of Georgia Fund I, which is a combination local and state government investment pool. Georgia Fund 1 is a stable net asset value investment pool which follows Standard and Poor's criteria for AAAm rated money market funds. The pool is not registered with the SEC as an investment company but does operate Georgia Fund 1 in a manner consistent with Rule 2a-7 of the Investment Company Act of 1940. The pool's primary objectives are safety of capital, investment income, liquidity and diversification while maintaining principal ($1.00 per share value). Net asset value is calculated daily and reported to the rating agency weekly to ensure stability. The pool distributes earnings (net of management fees) on a monthly basis and values participant's shares sold and redeemed at the pool's share price, $1.00 per share. Pooled cash and cash equivalents and investments are reported at cost. The pool does not issue any legally binding guarantees to support the value of the shares. Participation in the pool is voluntary and deposits consist of funds from local governments; operating and trust funds of Georgia's state agencies, colleges and universities; and current operating funds of the State of Georgia's General Fund. Investments in Georgia Fund 1 are directed toward short-term instruments such as U.S. Treasury obligations, securities issued or guaranteed as to principal and interest by the U.S. Government or any of its agencies or instrumentalities, banker's acceptances and repurchase agreements. The weighted average maturity of Georgia Fund 1 may not exceed 60 days. The weighted average maturity for Georgia Fund 1 on June 30, 2006, was 28 days. 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: - 16 - GREENE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2006 EXHIBIT "H" Note 5: CAPITAL ASSETS Balances July 1, 2005 Increases Balances Decreases June 30, 2006 Governmental Activities Capital Assets, Not Being Depreciated: Land Construction in Progress $ 125,392 3,519,707 $ $ 1,192 $ 268,766 3,519,707 124,200 268,766 Total Capital Assets Not Being Depreciated $ 3,645,099 $ 268,766 $ 3,520.899 $ 392.966 Capital Assets Being Depreciated Buildings and Improvements Equipment Land Improvements $ 24,780,221 $ 4,034,882 1,634,132 3,519,707 $ 178,585 189,758 $ 28,110,170 39,485 4,173,982 1,634,132 Less Accumulated Depreciation for: Buildings and Improvements Equipment Land Improvements 5,837,406 2,201,461 938.303 438,879 373,936 71.026 153,387 39,485 6,122,898 2,535,912 1,009.329 Total Capital Assets, Being Depreciated, Net $ 21,472,065 $ 2,814.451 $ 36,371 $ 24,250,145 Governmental Activity Capital Assets - Net $ 25,117.164 $ 3.083.217 $ 3,557,270 $ 24.643.111 Capital assets being acquired under capital leases as of June 30, 2006, are as follows: Equipment Less: Accumulated Depreciation Governmental Funds $ 309,120 74.518 Current year depreciation expense by function is as follows: $==2-34-,6=0==2 Instruction Support Services Educational Media Services General Administration School Administration Maintenance and Operation of Plant Student Transportation Services Other Support Services Food Services $ 536,385 $ 34,828 12,453 26,608 3,894 144,795 71.100 293,678 53.778 - 17 - GREENE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2006 EXHIBIT "H" Note 6: RESTRICTED ASSETS Special Purpose Local Option Sales Tax (SPLOST) and general obligation bond proceeds are reported as restricted assets in the Statement ofNet Assets because their use is limited by applicable bond covenants or statutory provisions. Restricted assets at June 30, 2006, were as follows: District-wide Capital Projects Bond SPLOST Proceeds Debt Service Funds Restricted Cash and Cash Equivalents: Debt Services Capital Acquisitions Restricted Investments: Debt Services Capital Acquisitions $ $ 283 $ 2,931,288 $ 16,298 55,402 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 $ 1,706.685 Transfers are used to move Special Purpose Local Option Sales Tax revenue (SPLOST) collected by the District-wide Capital Projects Fund to the Debt Service Fund as needed for payment of bond principal and interest. Note 8: RISK MANAGEMENT The School District is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors or omissions; job related illness or injuries to employees; acts of God and unemployment compensation. The School District has obtained commercial insurance for risk of loss associated with torts, assets, errors or omissions and acts ofGod. The School District has neither significantly reduced coverage for these risks nor incurred losses (settlements) which exceeded the School District's insurance coverage in any of the past three years. - 18 - GREENE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2006 EXHIBIT"H" Note 8: RISK MANAGEMENT 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. The School District is self-insured with regard to unemployment compensation claims. The School District accounts for claims within the General Fund with expenses/expenditures and liability being reported when it is probable that a loss has occurred, and the amount ofthat loss can be reasonably estimated. Changes in the unemployment compensation claims liability during the last two fiscal years are as follows: Beginning of Year Liability Claims and Changes in Estimates Claims Paid End of Year Liability 2005 $ 0 $ 897 $ 897 $ 0 2006 $ 0 $ 3,100 $ 3,100 $ 0 The School District participates in the Georgia Education Workers' Compensation Trust, a public entity risk pool organized on December 1, 1991, to develop, implement and administer a program of workers' compensation self-insurance for its member organizations. The School District pays an annual premium to the Trust for its general insurance coverage. Additional insurance coverage is provided through an agreement by the Trust with the Midwest Employers Casualty Company to provide coverage for potential losses sustained by the Trust in excess of $500,000 loss per occurrence, up to $2,000,000. 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 - 19 - GREENE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2006 EXHIBIT "H" Note 9: SHORT-TERM DEBT The School District issues tax anticipation notes in advance of property tax collections, depositing the proceeds in its General Fund. This short-term debt is to provide cash for operations until property tax collections are received by the School District. Article IX, Section V, Paragraph V of the Constitution ofthe State ofGeorgia limits the aggregate amount ofshort-term debt to 75 percent ofthe total gross income from taxes collected in the preceding year and requires all short-term debt to be repaid no later than December 31 of the calendar year in which the debt was incurred. Short-term debt activity for the fiscal year is as follows: Beginning Balance Issued Redeemed Ending Balance Tax Anticipation Notes $===0 $ 2,100.000 $ 2,100.000 $======0 Note 10: LONG-TERM DEBT CAPITAL LEASES The Greene County Board of Education has entered into various lease agreements as lessee for buses. These lease agreements qualify as capital leases for accounting purposes and, therefore, have been recorded at the present value of the future minimum lease payments as of the date of their inception. GENERAL OBLIGATION DEBT OUTSTANDING General Obligation Bonds currently outstanding are as follows: Purpose Interest Rates Amount General Government - Series 2002 2.50% - 3.60% $ 3,180.000 The changes in Long-Term Debt during the fiscal year ended June 30, 2006, were as follows: - 20 - GREENE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2006 EXHIBIT "H" Note 10: LONG-TERM DEBT Governmental Funds General Capital Obligation Leases Bonds Total Balance July 1, 2005 $ 1,097,281 $ 4,675,000 $ 5,772,281 Additions Capital Leases 108,700 108,700 Deductions Debt Retired 200.541 1,495.000 1,695.541 Balance June 30, 2006 $ 1,005.440 $ 3,180.000 $ 4,185.440 Portion of Long-Term Debt Due within One Year $ 172.205 $ 1,555.000 $ 1,727.205 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 CaQital Leases PrinciQal Interest 2007 2008 2009 2010 2011 2012 - 2015 $ 172,205 $ 180,673 145,457 152,681 136,511 217.913 46,720 38,251 29,365 22,141 14,557 8,689 Total Principal and Interest $ 1,005.440 $ 159.723 Fiscal Year Ended June 30 General Obligation Debt PrinciQal Interest 2007 2008 $ 1,555,000 $ 1,625.000 111,370 59,500 Total Principal and Interest $ 3,180.000 $ 1:Z0,8:Z0 - 21 - GREENE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2006 EXHIBIT "H" Note 11: SPECIAL ITEM On December 29, 2005, the School District sold Open Gate Alternative School at 140 Dolvin Avenue for $159,621. The gain on the sale of this property was $122,058. Note 12: SIGNIFICANT CONTINGENT LIABILITIES Amounts received or receivable principally from the Federal government are subject to audit and review by grantor agencies. This could result in requests for reimbursement to the grantor agency for any costs which are disallowed under grant terms. The School District believes that such disallowances, if any, will be immaterial to its overall financial position. The School District is a defendant in various legal proceedings pertaining to matters incidental to the performance ofroutine School District operations. The ultimate disposition ofthese proceedings is not presently determinable, but is not believed to be material to the basic financial statements. Note 13: SUBSEQUENT EVENTS On July 18, 2006, the voters of Greene County voted in favor of a Special Purpose Local Option Sales Tax referendum for educational purposes. The imposition of the tax approved by voters, as stated on the Official Ballot of Greene County is as follows: "Shall a one percent sales and use tax for educational purposes be continued in Greene County for a period not to exceed twenty (20) calendar quarters upon expiration of the sales and use tax for educational purposes presently in effect, and for the purpose of raising not more than $19,000,000 of net proceeds by said tax, which net proceeds shall go to the Greene County School District for the purpose of(i) adding to, constructing, renovating, repairing, improving and equipping school system buildings and facilities, including but not limited to a school bus depot, athletic and fine arts facilities and security improvements and equipment, (ii) acquiring various new equipment, fixtures and furnishings for existing facilities system-wide, including computer technology equipment and software, (iii) acquiring heating, air conditioning and energy efficiency equipment, (iv) acquiring textbooks and other instructional materials, (v) acquiring school buses and transportation equipment, (vi) equipping existing classrooms and instructional and support space, (vii) acquiring part of a psycho-educational facility, (viii) paying any general obligation debt ofthe School District in conjunction with the imposition of such sales and use tax, and (ix) paying the expenses incident to accomplishing the foregoing? If imposition of the tax is approved by the voters, such vote shall also constitute approval of the issuance of general obligation debt of the Greene County School District in a principal amount of $9,000,000 for the purposes of the Greene County School District described in items (i) - (vii) and (ix) above and for the purpose of payment of a portion of the interest on such debt." -22 - GREENE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2006 EXHIBIT "H" Note 14: RETIREMENT PLANS TEACHERS RETIREMENT SYSTEM OF GEORGIA (TRS) TRS PLAN DESCRIPTION Substantially all teachers, administrative and clerical personnel employed by local school systems are covered by the Teachers Retirement System of Georgia (TRS), which is a cost-sharing multiple employer defined benefit pension plan. TRS provides service retirement, disability retirement and survivors benefits for its members in accordance with State statute. The Teachers Retirement System of Georgia issues a separate stand alone financial audit report and a copy can be obtained from the Georgia Department of Audits and Accounts. TRS CONTRIBUTIONS REQUIRED AND MADE Employees ofthe School District who are covered by TRS are required by State statute to contribute 5% of their gross earnings to TRS. The School District makes monthly employer contributions to TRS at rates adopted by the TRS Board of Trustees in accordance with State statute and as advised by their independent actuary. The required employer contribution rate is 9.24% and employer contributions for the current fiscal year and the preceding two fiscal years are as follows: Fiscal Year Percentage Contributed Required Contribution 2006 2005 2004 100% 100% 100% $ 1,194,457 $ 1,168,476 $ 1,141,146 - 23 - (This page left intentionally blank) GREENE 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 Debt Service Total Expenditures Excess of Revenues over (under) Expenditures OTHER FINANCING SOURCES (USES) Other Sources Other Uses Total Other Financing Sources (Uses) SPECIAL ITEMS Proceeds from Sale of Buildings Net Change in Fund Balances Fund Balances - Beginning Fund Balances - Ending NONAPPROPRIATED BUDGETS ORIGINAL (1) FINAL (1) ACTUAL AMOUNTS $ 10,691,747 $ 10,691,747 $ 10,987,034 105,000 105,000 255,078 7,339,737 7,395,540 7,178,839 3,810,709 4,134,588 3,653,158 60,389 60,389 170,722 23,922 23,922 100,356 183 291 183 291 682 037 $ 22,214,795 $ 22 594477 $ 23,027,224 $ 13,522,859 $ 13,744,757 $ 14,146,273 1,002,189 1,315,284 522,527 664,434 1,174,813 346,009 1,491,950 1,105,224 30,182 236,190 1,057,709 1,043,505 1,448,777 522,527 689,508 1,174,624 346,011 1,491,950 1,124,313 30,181 237,443 1,057,709 1,004,861 1,385,903 472,727 637,254 1,256,242 370,496 1,418,418 1,155,782 22,226 255,301 195,590 1,084,165 262,275 $ 22,469,370 $ 22,911,305 $ 23,667,513 $ -254 575 $ -316 828 $ -640,289 $ 239,287 $ 239,287 $ 108,700 -123 132 -123 132 $ 116 155 $ 116 155 $ 108 700 $ 159 621 $ -138,420 $ -200,673 $ -371,968 581 973 581 973 710 396 $ 443 553 $ 381 300 $ 338428 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. - 25- GREENE COUNTY BOARD OF EDUCATION SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS YEAR ENDED JUNE 30, 2006 SCHEDULE "2" FUNDING AGENCY PROGRAM/GRANT Agriculture, U. S. Department of Child Nutrition Cluster Pass-Through From Georgia Department of Education Food Services School Breakfast Program National School Lunch Program Total Child Nutrition Cluster Other Programs Pass-Through From Georgia Department of Education Food Donation (1) Total U. S. Department of Agriculture Education, U.S. Department of Special Education Cluster Pass-Through From Georgia Department of Education Special Education Grants to States Preschool Grants Total Special Education Cluster Other Programs Direct Safe and Drug-Free Schools and Communities - National Programs Pass-Through From Georgia Department of Education Enhancing Education Through Technology Program Improving Teacher Quality State Grants Rural Education Safe and Drug-Free Schools and Communities - State Grants State Grants for Innovative Programs Title I Grants to Local Educational Agencies Twenty-First Century Community Learning Centers Vocational Education - Basic Grants to States Total U.S. Department of Education Defense, U. S. Department of Direct Department of the Air Force R.O.T.C. Program CFDA NUMBER PASSTHROUGH ENTITY ID NUMBER EXPENDITURES IN PERIOD . 10.553 . 10.555 N/A N/A $ $ (2) 974 638 974,638 10.550 N/A $ 37635 1 012 273 . 84.027 . 84.173 N/A $ N/A $ 425,388 40 175 465,563 84.184 84.318 84.367 84.358 84.186 . 84.298 84.010 84.287 84.048 N/A N/A NIA N/A N/A N/A N/A N/A $ 98,378 217,357 117,319 68,256 24,150 9,921 1,270,300 264,906 43 541 2,579,691 $ 99600 Total Federal Financial Assistance NIA = Not Available $ ===3:!'=69=1,5=64= - 26 - GREENE COUNTY BOARD OF EDUCATION SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS YEAR ENDED JUNE 30, 2006 SCHEDULE "2" Notes to the Schedule of Expenditures of Federal Awards (1) The amount shown for the Food Donation Program represents the Federally assigned value of nonmonetary assistance for donated commodities received and/or consumed by the School District during the current fiscal year. (2) Expenditures for the funds earned on the School Breakfast Program ($317,212) 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 Greene 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. - 27 - GREENE 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 School (6-8) Program High School General Education (9-12) Program Vocational Laboratory (9-12) Program Students with Disabilities Category I Gifted Student - Category VI Remedial Education Program Alternative Education Program English Speakers of Other Languages (ESOL) Media Center Program 20 Days Additional Instruction Staff and Professional Development Indirect Cost Central Administration School Administration Facility Maintenance and Operations Categorical Grants Pupil Transportation Regular Bus Replacement Sparsity Nursing Services Principal Supplements Student Achievement Mid-term Adjustment Hold-Harmless Food Services Vocational Education Austerity Reduction Other State Programs National Teacher Certification Preschool Handicapped Program See notes to the basic financial statements. - 28 - SCHEDULE "3" GOVERNMENTAL FUND TYPE GENERAL FUND $ 438,266 402,357 11,850 989,569 33,376 468,512 53,979 809,216 540,124 335,649 1,104,639 238,328 -807 59,980 33,961 135,043 41,135 27,227 274,215 327,585 363,736 374,366 67,023 20,000 54,334 7,209 42,345 243,190 68,754 102,463 -533,902 12,797 32 320 $ ===7=1=7=8=8=39= GREENE COUNTY BOARD OF EDUCATION SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS YEAR ENDED JUNE 30, 2006 SCHEDULE "4" PROJECT The renovation, improvement and equipping of existing school buildings and other facilities, the acquisition, construction and equipping of additional administrative, support and physical education facilities at existing school, and the acquisition of all property necessary or desirable therefore, both real and personal ORIGINAL ESTIMATED COST (1) CURRENT ESTIMATED COSTS (2) AMOUNT EXPENDED IN CURRENT YEAR (3) AMOUNT EXPENDED IN PRIOR YEARS (3) PROJECT STATUS $ 10,000,000 $ 10,239,781 $ 449,455 $ 9,790,326 Ongoing (1) The School District's original cost estimate as specified in the resolution calling for the imposition of the Local Option Sales Tax. (2) The School District's current estimate of total cost for the project. Includes all cost from project inception to completion. (3) The voters of Greene County approved the imposition of a 1% sales tax to fund the above project and retire associated debt. Amounts expended for this project may include sales tax proceeds, state, local property taxes and/or other funds over the life of the project. See notes to the basic financial statements. - 29- (This page left intentionally blank) GREENE 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 (1l (2l ELIGIBLE QBE PROGRAM COSTS SALARIES OPERATIONS TOTAL Direct Instructional Programs Kindergarten Program $ Kindergarten Program-Early Intervention Program Primary Grades (1-3) Program Primary Grades-Early Intervention (1-3) Program Upper Elementary Grades (4-5) Program Upper Elementary Grades-Early Intervention (4-5) Program Middle School (6-8) Program High School General Education (9-12) Program Vocational Laboratory (9-12) Program Students with Disabilities Category I Category II Category Ill Category IV Category V Gifted Student - Category VI Remedial Education Program Alternative Education Program English Speakers of Other Languages (ESOL) 674,838 $ 37,943 1,622,845 104,368 771,366 115,654 1,368,948 915,471 565,615 1,855,437 410,380 102,067 59 797 951,952 $ 144 1,965,426 139,637 716,380 121,919 1,499,821 1,573,834 722,599 113,077 262,655 1,435,563 22,117 366,503 197,925 8,369 140,541 62,366 41,098 $ 98,695 333 71,945 915 105,222 141,478 52,404 959 1,197 177,101 37,567 7,244 9,441 3,581 1 794 993,050 144 2,064,121 139,970 788,325 122,834 1,605,043 1,715,312 775,003 114,036 263,852 1,612,664 59,684 373,747 207,366 11,950 140,541 64160 TOTAL DIRECT INSTRUCTIONAL PROGRAMS $ 8,604,729 $ 10,300,828 $ 750,974 $ 11,051,802 Media Center Program Staff and Professional Development 227,518 45 505 327,344 23,405 83,578 22 544 410,922 45949 TOTALQBEFORMULAFUNDS $ 8 877752 $ 10.S51.577 $ 857 096 $ =====11..,,5.,.0=8=,6=73== (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. - 31 - SECTION II COMPLIANCE AND INTERNAL CONTROL REPORTS Russell W. Hinton STATE AUDITOR (404) 656-2174 DEPARTMENT OF AUDITS AND ACCOUNTS 270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400 June 25, 2007 Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education and Superintendent and Members ofthe Greene County Board of Education REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS Ladies and Gentlemen: We have audited the financial statements of the governmental activities, each major fund, and the aggregate remaining fund information of Greene County Board of Education as of and for the year ended June 30, 2006, which collectively comprise Greene County Board of Education's basic financial statements and have issued our report thereon dated June 25, 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 Greene 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 Greene County Board ofEducation's ability to record, process, summarize and report financial data consistent with assertions ofmanagement in the financial statements. Reportable conditions are described in the accompanying Schedule ofFindings and Questioned Costs as items FS-6661-06-01, FS-6661-06-02, FS-6661-06-03, FS-6661-06-04, FS-6661-06-05 and FS-6661-06-06. 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 Greene 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 Greene County Board ofEducation and is not intended to be and should not be used by anyone other than these specified parties. Respectfully submitted, ~ ~ i n t o n , CPA, CGFM State Auditor RWH:as 2006YB-30 Russell W. Hinton STATE AUDITOR (404) 656-2174 DEPARTMENT OF AUDITS AND ACCOUNTS 270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400 June 25, 2007 Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education and Superintendent and Members of the Greene County Board of Education REPORT ON COMPLIANCE WITH REQUIREMENTS APPLICABLE TO EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH 0MB CIRCULARA-133 Ladies and Gentlemen: Compliance We have audited the compliance ofGreene County Board ofEducation with the types ofcompliance requirements described in the U.S. Office of Management and Budget (0MB) Circular A-133 Compliance Supplement that are applicable to each of its major Federal programs for the year ended June 30, 2006. Greene County Board of Education's major Federal programs are identified in the Summary of Auditor's Results Section of the accompanying Schedule of Findings and Questioned Costs. Compliance with the requirements of laws, regulations, contracts and grants applicable to each of its major Federal programs is the responsibility of Greene County Board of Education's management. Our responsibility is to express an opinion on Greene County Board of Education's compliance based on our audit. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States ofAmerica; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General ofthe United States; and 0MB Circular A133, Audits ofStates, 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 Greene County Board ofEducation's compliance with 2006SA-15 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 Greene County Board of Education's compliance with those requirements. In our opinion, the Greene County Board of Education 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. However, the results of our auditing procedures disclosed instances of nonmaterial noncompliance with those requirements, which are described in the accompanying Schedule of Findings and Questioned Costs as items FA-6661-06-01 and FA-6661-06-02. Internal Control Over Compliance The management of Greene 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 Greene County Board ofEducation's internal control over compliance with requirements that could have a direct and material effect on a major Federal program in order to determine our auditing procedures for the purpose ofexpressing our opinion on compliance and to test and report on internal control over compliance in accordance with 0MB Circular A-133. Our consideration ofthe internal control over compliance would not necessarily disclose all matters in the internal control that might be material weaknesses. A material weakness is a reportable condition in which the design or operation of one or more of the internal control components does not reduce to a relatively low level ofrisk that noncompliance with 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. We noted no matters involving the internal control over compliance and its operation that we consider to be material weaknesses. This report is intended solely for the information and use of management, members of the Greene 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, ---=;>~ ~@ ~ ~:sell W. Hinton, CPA, CGFM State Auditor RWH:as 2006SA-15 SECTION III AUDITEE'S RESPONSE TO PRIOR YEAR FINDINGS AND QUESTIONED COSTS GREENE 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-6661-04-01 FS-6661-05-01 Further Action Not Warranted Unresolved - See Corrective Action/Responses CORRECTIVE ACTION/RESPONSES CASH AND CASH EQUIVALENTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Controls over Principal Accounts Finding Control Number: FS-6661-05-01 In an effort to address the inadequate separation of duties at the school level, the Greene County Board of Education has implemented an auditing practice that we hope will compensate for the lack of personnel needed. A staff member from the County Office Business Department will at random, audit one to two schools a month to ensure that proper procedures and practices are being followed. The audits will consist of sampling expenditures and reviewing of receipts. Issues of concern will be discussed with the principals with hopes of resolving concerns in a manner that is acceptable to all parties. PRIOR YEAR FEDERAL AWARD FINDINGS AND QUESTIONED COSTS FINDING CONTROL NUMBER AND STATUS FA-6661-04-01 Previously Reported Corrective Action Implemented SECTION IV FINDINGS AND QUESTIONED COSTS GREENE 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 Greene County Board of Education's financial statements was unqualified. 2. Reportable Conditions in Internal Control Disclosed by the Audit of the Financial Statements The audit report for the Greene County Board of Education disclosed financial statement reportable conditions related to the following control categories. Cash and Cash Equivalents Employee Compensation Revenues/ReceivabIes/Receipts Budget Preparation/Execution Expenditures/Liabilities/Disbursements General Ledger Accounting Controls (Overall) None ofthe reportable conditions described above are considered to be material weaknesses. 3. Noncompliance Material to the Financial Statements The audit of the Greene 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 Greene County Board of Education did not disclose any reportable conditions in internal control over major programs. 5. Type of Report Issued on Compliance for Major Programs The auditor's opinion on the Greene County Board ofEducation's report on compliance with requirements applicable to major programs was unqualified. 6. Audit Findings Required to be Reported by Section .510(a) ofOMB Circular A-133 The Greene County Board of Education's audit did not disclose an audit finding required to be reported by section .5 IO(a) ofOMB Circular A-133; however, we noted certain instances ofnonmaterial noncompliance which are included in section IV of this report. 7. Major Programs Federal awards audited as major programs are as follows: 10.553 Food Services - School Breakfast Program 10.555 Food Services - National School Lunch Program 84.010 Title I Grants to Local Educational Agencies 84.027 Special Education - Grants to States 84.173 Special Education - Preschool Grants 8. Type "A" Program Dollar Threshold The dollar threshold for type "A" programs was $300,000. - 1- GREENE 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 Greene County Board of Education did not qualify as a low risk auditee as defined by Section .530 ofOMB Circular A-133. II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS CASH AND CASH EQUIVALENTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Controls over School Activity Accounts Reportable Condition Finding Control Number: FS-6661-06-01 Condition: This is a repeat finding (FS-6661-05-01 and FS-6661-04-01) 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 to provide reasonable assurance that transactions are processed according to established procedures. Questioned Cost: NIA Information: Cash and Cash Equivalents The bank reconciliation function was not separated from the record keeping and voucher payment functions. Bank statement was not properly reconciled to the General Ledger as presented for audit. Revenues/Receivables/Receipts The cash receipts and deposit preparation functions were not separated from the record keeping and cash custody functions. Based on a review of twenty items, thirteen receipts did not contain adequate supporting documentation and two receipts were not deposited in a timely manner. -2- GREENE COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2006 II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS CASH AND CASH EQUIVALENTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Controls over School Activity Accounts Reportable Condition Finding Control Number: FS-6661-06-01 Expenditures/Liabilities/Disbursements The check writing function was not separated from the record keeping function. Based on a review oftwenty items, purchase orders were not utilized for two vouchers and ten vouchers did not contain adequate supporting documentation. Cause: These deficiencies were the result of management's decision to limit the number of administrative staffmade responsible for the accounting functions and management's failure to ensure that adequate 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: The School District should implement procedures to ensure that the key accounting functions of custody, record keeping and authorization are separated and/or utilize oversight for these incompatible activities. In addition, management should monitor controls to provide reasonable assurance that transactions are processed according to established policies and implement those procedures deemed necessary to strengthen internal controls over the accounting functions. -3- GREENE 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 Access Controls Reportable Condition Finding Control Number: FS-6661-06-02 Condition: The accounting procedures of the School District did not contain adequate separation of duties in the Financial Accounting System. Criteria: Separation of duties involving key accounting functions, both manual and automated, is the basis for achieving an adequate system of internal control. Questioned Cost: NIA Information: Access controls in the Financial Accounting System do not prevent users from accessing accounting functions that are outside of their area of responsibility. Cause: The School District's management is responsible for designing and maintaining internal controls that restrict access to programs or data. Management has not limited the access rights of users of the Financial Accounting System. Effect: Errors and/or irregularities may not be detected in a timely manner. Recommendation: Management should ensure that the access controls in the accounting information system complement the system ofinternal control by limiting an employee's access to only the accounting functions necessary for the performance of the employee's duties. -4- GREENE 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 Inadequate Internal Controls over Procurement Card Expenditures Reportable Condition Finding Control Number: FS-6661-06-03 Condition: The School District has not established a policy related to procurement cards. The School District did not ensure that purchases made with the Board's procurement cards had prior authorization and were for allowable expenditures. Criteria: The School District's management is responsible for designing and maintaining internal controls that provide reasonable assurance that expenditures are properly authorized, documented and allowable. Questioned Cost: NIA Information: Weaknesses in internal controls related to procurement card usage were noted as follows: The School District did not have a written policy regarding the use of procurement cards. There were no procedures in place to ensure that charges were allowable prior to the use of the procurement cards. A review of five procurement card payments revealed the following: (1) There were charges for thirty-two meals which exceeded the meal limits established in the Statewide Travel Regulations. (2) One charge was for gasoline purchased for an individual's personal vehicle. This is in violation of Statewide Travel Regulations. (3) One charge was for a gasoline purchase unrelated to School District duties. The School District was later reimbursed for this expenditure. Cause: Effect: These deficiencies were a result of management's failure to ensure that internal controls were established, implemented and functioning with regard to the procurement cards. a Errors and/or irregularities may not be detected in timely manner. Recommendation: The School District should establish written policies and procedures to ensure that procurement card expenditures are properly authorized, documented, allowable and utilized for educational purposes only. -5- GREENE COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2006 II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS EMPLOYEE COMPENSATION Inadequate Internal Controls Reportable Condition Finding Control Number: FS-6661-06-04 Condition: The School District failed to verify that employees' compensation disbursements were based on approved salary schedules. In addition, the School District failed to maintain leave records for all employees eligible for leave. Criteria: The School District's management is responsible for designing and maintaining internal controls to provide reasonable assurance that employees' salaries are paid according to approved salary schedules. The School District must ensure that leave records are maintained for all employees eligible for leave. Questioned Cost: NIA Information: Based on a review of twenty-four employees' payroll records, the following deficiencies were noted: Three employees received compensation based on the incorrect experience level which resulted in underpayments to the employees. One employee received compensation based on the incorrect experience level which resulted in overpayment to the employee. Nine employees' supplemental and extra pay were not properly approved or documented. One employee's pay changes were not documented or approved. One employee's contract was not available for review. One employee's leave records were not available for review. Cause: These deficiencies were the result of management's failure to implement proper internal control procedures over the employee compensation functions. Effect: Errors and/or irregularities may not be detected in a timely manner. Recommendation: Management should develop and implement policies and procedures to ensure that employees are accurately compensated for work performed. In addition, management should implement procedures to ensure that employee leave records are properly maintained and accurate. -6- GREENE COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2006 II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS GENERAL LEDGER Failure to Report Financial Statements in a Timely Manner Reportable Condition Finding Control Number: FS-6661-06-05 Condition: The School District failed to submit the DE046 financial report to the Georgia Department of Education in a timely manner. Criteria: Chapter 1 Introduction to LUA Accounting ofthe Financial Management for Georgia Local Units of Administration indicates that "accounting records must provide meaningful, reliable, accurate and timely information to the many persons and groups with legitimate interests in the financial affairs of an LUA." Questioned Cost: NIA Information: The School District's DE046 financial report was submitted to the Georgia Department of Education on November 10, 2006. Cause: Management failed to comply with the due date of September 30, 2006, as established by the Georgia Department of Education. Effect: The failure ofthe School District to prepare and submit the financial report in a timely manner prohibits legitimate users of the report from being able to have timely access to the financial information provided. Recommendation: The School District should implement policies and/or procedures which will ensure timely submission of the DE046 financial report as specified by the Georgia Department of Education. -7- GREENE COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2006 II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS BUDGET PREPARATION/EXECUTION Deficit Fund Balance Reportable Condition Finding Control Number: FS-6661-06-06 Condition: The School District had a deficit fund balance at the end of fiscal year 2006. Criteria: Chapter 25 Reportingfor LUAs with General Fund Deficit Balances of the Financial Management for Georgia Local Units of Administration states in part: "The seriousness of fund balance deficits cannot be overstated. The Georgia Department ofEducation requires those LUAs with deficit balances to meet certain reporting requirements." Questioned Cost: NIA Information: The School District's General Fund reported a deficit fund balance in the amount of $10,619. Cause: During the year under review, expenditures exceeded revenues in the School District's General Fund. Effect: A financial statement irregularity in accordance with O.C.G.A. 20-2-67. Recommendation: The School District should establish policies and procedures designed to ensure the School District does not report a deficit fund balance in future periods. In addition, the School District should ensure that procedures are in place to comply with the legal provisions specified in O.C.G.A. 20-2-67. - 8- GREENE COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2006 III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS SPECIAL TESTS AND PROVISIONS Fiscal Requirements of Schoolwide Program Not Fully Implemented Nonmaterial Noncompliance U.S. Department of Education Through Georgia Department of Education Title I Grants to Local Educational Agencies (CFDA 84.010) Finding Control Number: FA-6661-06-01 Condition: The School District failed to combine a sufficient amount of other eligible U. S. Department ofEducation programs with Title I, Part A funds to support its schoolwide program. Criteria: In accordance with provisions ofU. S. Department ofEducation Instructions and 0MB Circular A-133, Compliance Supplement provisions, eligible schools are able to use their Title I, Part A funds, in combination with other Federal, State and local funds, in order to upgrade the entire educational program ofthe school and to raise academic achievement for all students. By combining funds from Title I and other eligible U. S. Department of Education funded programs in support of a schoolwide program, U. S. Department of Education instructions provide that specific schoolwide program costs lose their identity but only in those circumstances when funds are combined in a schoolwide program. In line with 0MB Circular A-87 requirements, schoolwide expenditures should be charged to those Federal funding sources supporting the schoolwide program in a reasonable manner. When more than one Federal program supports a schoolwide program, then schoolwide program expenditures may be allocated to specific Federal funds in proportion to the different Federal funds provided in support of the schoolwide program. To distribute such costs, provisions ofOMB Circular A-87, Attachment E, F.3 state that a cost allocation plan should be developed, documented and maintained for audit. Questioned Cost: NIA -9- GREENE COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2006 III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS SPECIAL TESTS AND PROVISIONS Fiscal Requirements of Schoolwide Program Not Fully Implemented Nonmaterial Noncompliance U.S. Department of Education Through Georgia Department of Education Title I Grants to Local Educational Agencies (CFDA 84.010) Finding Control Number: FA-6661-06-01 Information: The School District identified three schools that participated in a schoolwide program funded with Title I Grants to Local Educational Agencies (CFDA 84.010) and Improving Teacher Quality State Grants (CFDA 84.367) programs; however, the School District did not properly consolidate the different Federal funds for each of those schools that participated in a schoolwide program. Furthermore, the amount of Improving Teacher Quality State Grants consolidated with Title I Grants to Local Educational Agencies in support of the schoolwide program was insignificant. Cause: School District personnel were not fully aware of these requirements and failed to consolidate sufficient amounts of different Federal funds utilized at the schools that participated in the schoolwide program. Effect: Failure to appropriately consolidate sufficient Federal funds utilized at the schoolwide schools can result in noncompliance with requirements of the Federal requirements. Recommendation: The School District should implement procedures (1) to combine Title I, Part A funds with sufficient amounts ofother Federal funds in order to adequately implement a schoolwide program and (2) in line with 0MB Circular A-87 provisions, allocate such schoolwide program costs to the respective Federal funds in a reasonable manner. The School District should seek additional guidance from the Georgia Department of Education to implement procedures for combining and allocating schoolwide program expenditures. - 10 - GREENE COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2006 III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS SPECIAL TESTS AND PROVISIONS Deficiencies in Hiring "Highly Qualified" Personnel Nonmaterial Noncompliance U.S. Department of Education Through Georgia Department of Education Title I Grants to Local Educational Agencies (CFDA 84.010) Finding Control Number: FA-6661-06-02 Condition: The School District failed to ensure the "highly qualified" requirements were met by those individuals employed at schoolwide program schools funded by the Title I Grants to Local Educational Agencies (CFDA 84.010) program. Criteria: "Highly Qualified" requirements are set forth in 34 CFR section 200.58, which states, in part, as follows: "An LEA must ensure that all teachers hired after the first day of the 2002 year who teach a core academic subject be highly qualified. Additionally, all teachers ofcore academic subjects must be highly qualified by the end of 2005-2006 school year. To be a highly qualified teacher, the individual must: (1) hold at least a bachelor's degree (2) be certified by the State, including alternative routes to certification (3) pass a rigorous State test on subject knowledge that the teacher teaches and on teaching skills." Questioned Cost: NIA Information: A schoolwide program was conducted at all three schools which received Title I funding. The School District allowed four employees to teach subjects at the schoolwide program schools they were not "highly qualified" to teach. Cause: The School District failed to ensure employees were providing instruction only for subjects for which they were qualified to teach. Effect: The School District is not ensuring that students' needs of instruction from "highly qualified" teachers are being met in the classrooms. Recommendation: The School District should implement procedures to ensure that only "highly qualified" employees are hired for positions requiring "Highly Qualified" status or adjust its employees' schedules so that students are taught by qualified individuals. - 11 - SECTIONV MANAGEMENT'S RESPONSES GREENE COUNTY BOARD OF EDUCATION SCHEDULE OF MANAGEMENT'S RESPONSES YEAR ENDED JUNE 30, 2006 Finding Control Number: FS-6661-06-01 We concur with this finding. Due to the restaffing of a number of key positions in the school's administration, the Board is reviewing steps and procedures that will address Inadequate Separation ofDuties. In cases where the financial cost will not allow for the hiring ofadditional employees, the Board is planning to implement compensating duties that will address the concerns. Finding Control Number: FS-6661-06-02 We concur with this finding. This matter is under review by the system's new administration and it is our intent to reset the access codes within Genesis that will restrict access to the actual areas needed for each employee to complete his/her assignments. Due to the limited number of staff members, it is anticipated that a number ofindividuals will have either full access to all programs, or to nearly all programs. With cross training being implemented the issue becomes more difficult to address. Finding Control Number: FS-6661-06-03 We concur with this finding. The Board is currently reviewing this matter and available options. Finding Control Number: FS-6661-06-04 We concur with this finding. Prior to June 2007, the Board maintained leave records on manual cards. In June 2007, the data was recorded/recreated in a Software program. The Board also approved the changing of the Leave Data policy so that all unused leave continues to build a balance, thereby making the tracking ofleave more accurate. The leave tracking component ofthe Genesis program is also being fully utilized to track all leave and not just sick leave. Finding Control Number: FS-6661-06-05 We concur with this finding. I am unable to explain why the report was not transmitted by the fiscal year 2006 due date, but the upcoming due dates will be met. Finding Control Number: FS-6661-06-06 We concur with this finding. The deficit was the result of a number of items. The largest contributing factors being the failure to book a number of M&O Tax Collections proceeds as receivables and being over staffed. In February 2007, the Board implemented a RIF thereby reducing the staff size by twenty-five positions. The RIF of employees saved more than $250,000 for fiscal year 2007. Also, Federal Programs were reviewed and it was determined that a number of positions were budgeted in the programs, but the salaries were being posted to General Fund. This was corrected. In the future, efforts will be made to ensure that all receivables are accounted for prior to year-end closing. Also, additional positions have been identified for fiscal year 2008, and those positions have also been eliminated. - 1- GREENE COUNTY BOARD OF EDUCATION SCHEDULE OF MANAGEMENT'S RESPONSES YEAR ENDED JUNE 30, 2006 Finding Control Number: FA-6661-06-01 We concur with this finding. This issue has been resolved in fiscal year 2007 with the co-mingling of Innovation funds with Title I. Greene County will be following the directions from Financial Review to combine additional Federal Programs with Title I funding. Finding Control Number: FA-6661-06-02 We concur with this finding. This matter has been addressed with School Administrators with the Board emphasizing the need to screen potential teachers prior to offering a contract. Those who did not obtain "High Quality" status were not renewed at the end of the school year. Contact Person: Dean Ware Phone: (706) 453-7688 Fax Number: (706) 453-9019 E-mail Address: dean.ware@greene.k12.ga.us -2 -