Hancock County Board of Education, Sparta, Georgia, report on audit of the financial statements for the fiscal year ended June 30, 2001

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HANCOCK COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS -

SECTION I

FINANCIAL

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

EXHIBITS

GENERAL-PURPOSE FINANCIAL STATEMENTS

COMBINED STATEMENTS - OVERVIEW

A

COMBINED BALANCE SHEET

ALL FUND TYPES AND ACCOUNT GROUP

2

B

COMBINED STATEMENT OF REVENUES, EXPENDITURES AND

CHANGES IN FUND BALANCES

ALL GOVERNMENTAL FUND TYPES

4

C

COMBINED STATEMENT OF REVENUES, EXPENDITURES AND

CHANGES IN FUND BALANCES - BUDGET AND ACTUAL

(NON-GAAP BASIS)

GENERAL AND SPECIAL REVENUE FUNDS

7

D NOTES TO THE GENERAL-PURPOSE FINANCIAL STATEMENTS

8

ADDmONAL FINANCIAL INFORMATION

COMBINING STATEMENTS

SPECIAL REVENUE FUND

E

COMBINING BALANCE SHEET

18

F

COMBINING STATEMENT OF REVENUES, EXPENDITURES

AND CHANGES IN FUND BALANCES

20

SCHEDULES

I SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS

22

2 SCHEDULE OF STATE REVENUE

25

ALLOTMENTS AND EXPENDITURES

GENERAL FUND - QUALITY BASIC EDUCATION PROGRAMS (QBE)

3

BY PROGRAM

26

4

BY SITE

27

HANCOCK COUNTY BOARD OF EDUCATION
- TABLE OF CONTENTS -
SECTIONil COMPLIANCE AND INTERNAL CONTROL REPORTS REPORT ON COMPLIANCE AND ON INTERNAL CONTROL OVER FINANCIAL REPORTING BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS REPORT ON COMPLIANCE WITII REQUIREMENTS APPLICABLE TO EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH 0MB CIRCULAR A-133
SECTION ill 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

SECTION I FINANCIAL

Russi,;u. \\'. HtNTON
STATE AUDITOR (404) 656-2174

DEPARTMENT OF AUDITS AND ACCOUNTS
254 Washington Street, S W., Suite 214 Atlanta, Georgia 30334-8400
July 12, 2002

Honorable Roy E. Barnes, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the Hancock County Board of Education
INDEPENDENT AUDITOR'S COMBINED REPORT ON GENERAL-PURPOSE FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
Ladies and Gentlemen:
We have audited the accompanying general-purpose financial statements of the Hancock County Board of Education, as of and for the year ended June 30, 2001, as listed in the table of contents. These general-purpose financial statements are the responsibility of the Hancock County Board of Education's management. Our responsibility is to express an opinion on these general-purpose 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 op1mon.
As described in the notes to the general-purpose financial statements, the Board of Education's financial statements have been prepared using certain accounting practices and policies which, in our opinion, vary in some respects from generally accepted accounting principles. These variances are described as follows:

2001ARL-13

The general-purpose financial statements of the Board of Education did not contain a General Fixed Assets Account Group to account for property and equipment owned by the Board of Education which should be included to conform to generally accepted accounting principles.
* School activity accounts maintained at the individual schools are not included in the
general-purpose financial statements. To conform to generally accepted accounting principles, these accounts should be included in the general-purpose financial statements.
The Board of Education did not recognize as expenditures, in the year ended June 30, 2001, a portion of salaries and the corresponding employer's cost of related benefits earned for contractual services completed prior to June 30, 2001. Also funds received, subsequent to June 30, 2001, from the Georgia Department of Education for the State's share of these unrecorded salaries and related benefits were not recorded as revenue in the year under review. Conversely, the similar expenditures and related revenues for contractual services completed prior to June 30, 2000, were improperly recorded in the year ended June 30, 2001. To conform to generally accepted accounting principles, revenues should be recorded when available and measurable and expenditures should be recorded when incurred, rather than when funds are received or disbursed.
The aggregate effects on the general-purpose financial statements of these variances or omissions have not been determined, but are believed to be material.
In our opinion, except for the effects on the general-purpose financial statements of the matters referred to in the preceding paragraph, the general-purpose financial statements referred to above present fairly, in all material respects, the financial position of the Hancock County Board of Education as ofJune 30, 2001, and the results ofits operations for the year then ended, in conformity with accounting principles generally accepted in the United States of America.
In accordance with Government Auditing Standards, we have also issued our report dated July 12, 2002, on our consideration of the Hancock County Board of Education's internal control over financial reporting and our tests of its compliance with certain provisions of laws, regulations, contracts and grants. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be read in conjunction with this report in considering the results of our audit.
Our audit was performed for the purpose of forming an opinion on the general-purpose financial statements of the Hancock County Board of Education taken as a whole. The accompanying combining statements (Exhibits E and F) and the financial schedules (Schedules 1 through 4), which includes the Schedule ofExpenditures ofFederal Awards as required by U. S. Office ofManagement 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 general-purpose financial statements. Such information has been subjected to the auditing procedures applied in the
2001ARL-13

audit of the general-purpose financial statements and in our opinion, except for the effects of the matters referred to in the third paragraph, such information is fairly stated, in all material respects, in relation to the general-purpose financial statements taken as a whole.

A copy ofthis report has been filed as a permanent record in the office ofthe State Auditor and made available to the press ofthe State, as provided for by Official Code ofGeorgia Annotated Section 506-24.

Respectfully submitted,

-

w~~

RWH:gp 2001ARL-13

State Auditor

HANCOCK COUNTY BOARD OF EDUCATION

HANCOCK COUNTY BOARD OF EDUCATION COMBINED BALANCE SHEET
ALL FUND TYPES AND ACCOUNT GROUP JUNE 30. 2001

ASSETS
Cash and Cash Equivalents
Accounts Receivable
Due from Other Funds
lnventones Food Donated Commodities Purchased Food
Amount Available in Debt Service Fund
Amount to be Provided in Future Years For Payment of Bond Debt Capital Lease Agreements

GOVERNMENTAL FUND

SPECIAL

GENERAL

REVENUE

FUND

FUND

$ 1,148,650 75

133,004.47 $

786,147.93

16,596.13 4,989.84

Total Assets

$ 1,281,655.22 $

807,733.90

LIABILITIES ANQ FUND EQUITY
LIABILITIES
Cash Overdraft Accounts Payable Salanes Payable Expired Grant Balances Payable Due to Other Funds Caprtal Lease Agreements General Obhgabon Bonds Payable
Total Liabilities
FUND EQUITY
Fund Balances Reserved For Bus Replacement Funds For Debt Service For Expired Grant Balances/Questioned Costs For lnventones . Food Donated Commod1t1es Purchased Food Unreserved Undes1gnated
Total Fund Equity

$

108,582.TT

$

47,650 68

77,160.83

294,57047

6,203 63

9,529 45

735.99

$

54,590 30 s

489,843.52

$

43,48041

$

8,345 49

1,183,584 51 $ 1,227,064.92 $

16,596 13 4,989.84
287,958 92
317,890 38

Total L1abilrtJes and Fund Equity

s $ 11281,655.22

807,733.90

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

EXHIBIT"A"

TYPES DEBT
SERVICE FUND

$

786,011.04

14,956.07

735.99

ACCOUNT GROUP GENERAL
LONG-TERM DEBT

TOTALS

(Memorandum Only)

JUNE 30, 2001

JUNE 301 2000

$ 1,934,661.79 $ 1,748,343.26

934,108 47

880,632.19

735.99

2,278.02

$

525,000.00

16,596.13 4,989 84
525,000.00

34,415.00 4,392.04
698,178 49

114 058.91

114 058.91

71,821 51 219,418.89

$

801,703 10 $

639,058 91 $ 3,530,151.13 $ 3,659,479 40

$

1oa.sa2.n $

123,103.80

124,811 51

98,073.24

294,570.47

243,226.11

15,733.08

522 64

735.99

2,278 02

$

114,058.91

114,058.91

219,418.89

525,000.00

525,000 00

no,00000

$

639,058.91 $ 1,183,492 73 $ 1,456,622.70

$

547,816.25

253,886 85

$

801,70310

$

43,48041

547,816 25 $

698,178.49

8,34549

8,045.78

16,596.13 4,989.84

34,415 00 4,392.04

1,725,430.28

1,457,825 39

$ 2,346,658.40 $ 2,202,856.70

$

801,703 10 $

639,058.91 $ 3,530,151.13 $ 3,659,479 40

-3-

HANCOCK COUNTY BOARD OF EDUCATION COMBINED STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES
ALL GOVERNMENTAL FUND TYPES YEAR ENDED JUNE 30, 2001

REVENUES
State Funds Federal Funds Taxes Other Funds
Total Revenues
EXPENDITURES
Current Instruction Support Services Pupil Services Improvement of lnstrud1onal Services Educational Media Services General Administration School Adm1mstration Business Administration Maintenance and Operation of Plant Student Transportation Services Other Support Services Food Services Operation
Capital Outlay Debt Service
Pnncipal Interest Paying Agent Fees
Total Expenditures
Excess of Revenues over (under) Expenditures
OTHER FINANCING SOURCES {USES)
Operating Transfers In Operating Transfers Out
Total Other Financing Sources (Uses)
Excess of Revenues and Other Financing Sources over (under) Expenditures and Other Financing Uses
FUND BALANCE JULY l
AdJustments Food Inventory - Net Change In Penod
Donated Commodities Purchased Food

GENERAL FUND

SPECIAL REVENUE
FUND

$ 7,933,205.67 $
2,332,223.70 90,504 78
$ 10,355,934.15 $

154,837.80 2,829,861.14
174,588 10
3,159,287 04

$ 6,276,150 57 $ 1,292,159 06

171,890.79 235,285 88 253,143.66 696,386.87 744,991.89 158,364.29 812,391 91 621,178.12
19,086 48 2,576 60

213,051 83 21,459 02
325,506.46
51,244 64 61,369.64 70,816 68 133,629.50 1,165,999.81

105,359 98 18,116.14

$ 10,114,92318 $

$

241,010 97 $

3,335,236 64 -175,949 60

$

$

-96,009.87

$

-96,009 87 $

96,009.87 96,009.87

$

145,001.10 $

1,112,259 81

-30,195 99

-79,939.73 392,418 40
22,632 78
-17,818.87 597.80

FUND BALANCE JUNE 30

$ 1,227,064 92 $ -===3=1=7=,8=90-==38=

The notes to the general-purpose financial statements are an integral part of this statement -4-

EXHIBIT"B"

DEBT SERVICE
FUND

TOTALS

(Memorandum Only)

YEAR ENDED

JUNE 30 1 2001

JUNE 30 1 2000

$ 8,088,043 47 $ 7,446,861 84

2,829,861 14

2,668,331 42

$

376,124.61

2,708,348.31

2,984,133 23

265,092 88

208,254 09

$

376,124 61 $ 13,891,345 80 $ 13,307,580.58

$ 7,568,309.63 $ 6,832,037.67

384,942.62 256,744.90 253,143 66 1,021,893.33 744,991.89 209,608.93 873,761 55 691,994.80 152,715 98 1, 168,576.41

573,384 61 181,984.94 281,259.07 789,073.70 754,793 25 141,676 20 781,423.25 787,130.45 100,436 30 1,042,847.27 160,823.96

$

245,000.00

27,600.00

350,359.98 45,716 14

337,324 46 63,394.16
674 71

$

272,600.00 $ 13,722,759.82 $ ~ 2,828,264.00

$

103,524.61 $

168,585 98 $

479 316 58

$

96,009.87

-96,009.87

$

0.00

$

103,524.61 $

168,585.98 $

479,316.58

698,178.49

2,202,856.70

1,709,794 19

-7,563.21

-17,818.87 597 80

14,450 09 -704 16

$

801,703 10 $ 2,346,658 40 $ 2,202,856 70

-5-

HANCOCK COUNTY BOARD OF EDUCATION COMBINED STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES
BUDGET AND ACTUAL - /NON-GAAP BASIS) GENERAL AND SPECIAL REVENUE FUNDS
YEAR ENDED JUNE 30, 2001

EXHIBIT "C"

GENERAL FUND

ACTUAL

(BUDGET

BUDGET

BASIS)

REVENUES

State Funds Federal Funds Taxes other Funds

$ 7,498,990.00 $ 7,933,205.67

2,445,000.00

2,332,223 70 90,504 78

Total Revenues EXPENDITURES

$ 9,943,990 00 $ 10,355,934.15

Current Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Admlnrstrallon School Admlnrstratlon Business Adminrstrallon Maintenance and Operation of Plant Student Transportation Services other Support Services Food Services Operallon
Capltal Outlay Debt Service

$ 6,033,087.00 $ 6,276.150.57

219,170 00 203,943 00 294,472 00 433,450 00 770,915.00 178,086.00 694,010.00 630,570.00
37,328.00
164,000.00 123,500.00

171,890.79 235,285.88 253,143 66 696,386.87 744,991.89 158,364 29 812,391.91 ?21,17812
19,086 48 2,576 60
123,476 12

Total Expenditures

$ 9,782,531 00 $ 10,114,923.18

Excess of Revenues over (under) Expendrtures $ 161,459.00 $ 241,010 97

OTHER FINANCING SOURCES !USES)

Other Sources Other Uses

$ -60,000 00 $ -96,009 87

Total Other Financing Sources (Uses) $ -60,000 00 $

-96,009.87

Excess of Revenues and Other Financing Sources

over (under) Expenditures and other Financing

Uses

$

101,459 00 $

145,001.10

FUND BALANCE JULY 1. 2000

1,147,995.98

1,112,259.81

AdJustments

-30,195 99

FUND BALANCE JUNE 30, 2001

$ 1,249,454 98 $ 1,221,054 92

SPECIAL REVENUE FUND

ACTUAL

(BUDGET

BUDGET

BASIS)

$ 154,837.80 $ 90,000 00 2,829,861.14
174,58810
$ 90,000 00 $ 3,159,287.04

$ 1,351,947.47 $ 1,292,159 06

204,145 07 34,113 00

213,051 83 21,459.02

205,355.33

325,506 46

35,234.97 55,570 22 69,677 64 75,119.00 145,261 00

51,244.64 61,369.64 70,816.68 133,629 50 1.165,999 81

$ 2,176,423 70 $ 3,335,236 64 $ -2,086,423 70 $ -175,949 60

$ 60,000 00 $ 96,009.87 $ 60,000 00 $ 96,009 87

$ -2,026,423 70 $ -79,939 73

-18,089.27

353,611 36

6,160 00

22,632 78

$ -2,038,352 97 $ 296,304 41

The notes to the general-purpose financial statements are an Integral part of this statement -7 -

HANCOCK COUNTY BOARD OF EDUCATION

EXHIBIT "D"

NOTES TO THE GENERAL-PURPOSE FINANCIAL STATEMENTS

JUNE 30. 2001

Note 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
REPORTING ENTITY
The Hancock County Board of Education (School District) was established under the laws of the State of Georgia and operates under the guidance of a school board elected by the voters and a Superintendent appointed by the Board. The School District 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.
FUND ACCOUNTING
The School District uses funds and an account group to report on its financial position and the results ofits 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. An account group is a financial reporting device designed to provide accountability for certain assets and liabilities that are not recorded in the funds because they do not directly affect expendable available financial resources.
General Fixed Assets are recorded as expenditures in the various funds at the time of purchase. A General Fixed Assets Account Group is not presently maintained by the School District. To conform to generally accepted accounting principles, a General Fixed Assets Account Group should be maintained for reporting the cost of assets acquired by governmental fund types.
Although "school activity accounts'' are maintained at the individual schools, neither the assets, liabilities and fund equity, nor the revenues, expenditures and changes in fund balances of these accounts are reflected in these financial statements. To conform to generally accepted accounting principles, these accounts should be recorded in the general-purpose financial statements.
The general-purpose financial statements account for all State, Federal, Taxes and Other funds under control of the School District, in compliance with generally accepted accounting principles applicable to governmental units, unless otherwise disclosed in these notes. Funds and the account group presented in this report are as follows:
GOVERNMENTAL FUND TYPES - are used to account for all or most of a School District's educational activities. Governmental Fund Types include:
GENERAL FUND - the fund used to account for all financial resources of the School District except those required to be accounted for in another fund. These transactions relate to resources obtained and used for services provided by a board of education.

- 8-

HANCOCK COUNTY BOARD OF EDUCATION

EXHIBIT "D"

NOTES TO THE GENERAL-PURPOSE FINANCIAL STATEMENTS

JUNE 30. 2001

Note 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
SPECIAL REVENUE FUND - the fund used to account for the proceeds of specific revenue sources that are legally restricted to expenditures for specified purposes. These funds are received primarily from the Georgia Department ofEducation and from the Federal government to accomplish specific educational objectives.
DEBT SERVICE FUND - the fund used to account for the accumulation ofresources for, and the payment of, general long-term principal, interest and paying agent fees.
ACCOUNT GROUP
GENERAL LONG-TERM DEBT ACCOUNT GROUP - A financial reporting device used to account for general obligation debt outstanding and capital lease obligations.
BASIS OF ACCOUNTING
The accounting and financial reporting treatment applied to a fund is determined by its measurement focus. All governmental funds are accounted for using a current financial resources measurement focus. With this measurement focus, only current assets and current liabilities generally are included on the balance sheet. Operating statements ofthese funds present increases (i.e., revenues and other financing sources) and decreases (i.e., expenditures and other financing uses) in net current assets. Their reported fund balance is considered a measure of available spendable resources.
Liabilities which are expected to be financed from available spendable resources are reported as liabilities in the governmental funds. Other liabilities, which are not expected to be financed from available spendable resources, are reported in the General Long-Term Debt Account Group.
Governmental funds are accounted for using the modified accrual basis ofaccounting under which:
Revenues are recognized when susceptible to accrual (i.e., when they become both measurable and available). "Measurable" means the amount of the transaction can be determined and "available" means collectible within the current period or soon enough thereafter to be used to pay liabilities of the current period. The School District considers receivables collected within sixty days after yearend to be available and therefore susceptible to accrual. Nonexchange transactions, in which the School District gives (or receives) value without directly receiving (or giving) equal value in exchange, include property taxes, intergovernmental grants and donations. Revenue for property taxes is recognized in the fiscal year for which the taxes are levied. Revenue from grants and donations is recognized in the fiscal year in which all eligibility requirements have been satisfied.
Expenditures are generally recognized when the related fund liability is incurred.

-9-

HANCOCK COUNTY BOARD OF EDUCATION

EXHIBIT "D"

NOTES TO THE GENERAL-PURPOSE FINANCIAL STATEMENTS

JUNE 30. 2001

Note 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A departure from the above definitions is the accounting treatment afforded the final two payments on General Fund teachers' and bus drivers' contracts, and the resources available from the Georgia Department of Education for the State's share of these contracts. During fiscal year 2001, a substantial number ofpersonnel ofthe School District were employed for a one hundred and ninety day period beginning in August 2000 and ending in early June 2001. Personnel contracts for this employment period specify that compensation be paid in twelve equal monthly payments beginning in September 2000 and ending in August 2001. State grants to fund the State's share of these contracts were disbursed from the Georgia Department of Education to the School District in the same twelve months. As of June 30, 2001, compensation under these employment contracts had been earned, but two of the twelve monthly payments, due for July and August 2001, had not been made. Payments for these two months were made and recorded as expenditures by the School District subsequent to June 30, 2001. Also, the State's portion ofthe compensation paid in July and August 2001 was received and recorded as revenue in the fiscal year subsequent to June 30, 2001. Conversely, the similar expenditures and related revenues for contractual services completed prior to June 30, 2000, were recorded in the year ended June 30, 2001. Generally accepted accounting principles require that revenues be recorded when available and measurable and that expenditures be recorded when incurred, rather than when funds are received or disbursed.
BUDGET
The Hancock County Board of Education's budget is a complete financial plan for the School District's fiscal year and is based upon estimates of expenditures together with probable funding sources. There is no statutory prohibition regarding overexpenditure ofthe budget at any level. The budget for all governmental funds is prepared by fund, function and object. The legal level of budget control was established by the Board at the aggregate level. The budget for governmental funds was prepared on a basis other than generally accepted accounting principles.
The budget process begins when the School District's administration prepares a tentative budget for the Board's approval. After approval ofthis tentative budget by the Board, such budget is advertised at least once in a newspaper ofgeneral circulation in the locality. At the next regular meeting ofthe Board after advertisement, the Board receives comments on the tentative budget, makes revisions as necessary and adopts a final school budget. This final budget is then submitted, in accordance with provisions of the Quality Basic Education Act, OCGA Section 20-2-167(c), to the Georgia Department of Education. The Board may increase or decrease the budget at any time during the year. All unexpended budget authority lapses at fiscal year-end.
The Statement of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual presents actual and budgeted data for the Special Revenue Fund. To facilitate comparison with the budget, the following adjustments have been made to fund balance as reflected on Exhibit "B" ofthis report:

- 10 -

HANCOCK COUNTY BOARD OF EDUCATION

EXHIBIT "D"

NOTES TO THE GENERAL-PURPOSE FINANCIAL STATEMENTS

JUNE 30. 2001

Note 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Special Revenue
Fund

FUND BALANCE JULY I, 2000

$ 392,418.40

Adjustments Inventories - July 1, 2000 Food Donated Commodities Purchased Foods

-34,415.00 -4.392.04

Fund Balance July 1, 2000 (Budget Basis)

$ 353,611.36

Excess of Revenues and Other Financing Sources over (under) Expenditures and Other Financing Uses

-79,939.73

Adjustments

22,632.78

FUND BALANCE JUNE 30, 2001 (Budget Basis)

$ 296,304.41

CASH AND CASH EQUIVALENTS

COMPOSITION OF DEPOSITS Cash and cash equivalents consist of deposits 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.

RECEIVABLES

Receivables consist ofgrant reimbursements due on Federal, State or other grants for expenditures made but not reimbursed and other receivables disclosed from information available. Receivables are recorded when either the asset or revenue recognition criteria has been met. Receivables recorded on the general-purpose financial statements do not include any amounts which would necessitate the need for an allowance for uncollectible receivables.

PROPERTY TAXES

The Hancock County Board of Commissioners fixed the property tax levy for the 2000 tax year (calendar year) on September 19, 2000 (levy date). Taxes were due on November 20, 2000 (lien date). Taxes collected within the current fiscal year or within 60 days after year-end are reported as

- 11 -

HANCOCK COUNTY BOARD OF EDUCATION

EXHIBIT "D"

NOTES TO THE GENERAL-PURPOSE FINANCIAL STATEMENTS

JUNE 30. 2001

Note I: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

revenue in fiscal year 2001. The Hancock County Tax Commissioner bills and collects the property taxes for the School District, withholds 2.5% oftaxes collected as a fee for tax collection and remits the balance of taxe~ collected to the School District. Property tax revenues during the fiscal year ended June 30, 2001 for maintenance and operations amounted to $2,312,492.96 and for school bonds amounted to $376,124.61.

Tax millage rates levied for the 2000 tax year (calendar year) for the Hancock County Board of Education were as follows (a mill equals $1 per thousand dollars of assessed value):

School Operations School Bonds

13.69 mills 2.21 mills

1.5....2.Q mills

INVENTORIES

FOOD INVENTORIES Inventories of donated food commodities used in the preparation of meals are reported on the Combined Balance Sheet at their Federally assigned value. Purchased foods inventories are reported on the Combined Balance Sheet at cost (first-in, first-out). Donated food commodities are recorded as revenues and expenditures at the time commodity items are received. Purchased foods inventories are recorded as expenditures at the time ofpurchase. The inventories reported on the balance sheet for donated food commodities and for purchased foods are equally offset by reservations of fund balance which indicates that these amounts do not constitute "available spendable resources" even though they are a component of net current assets.

GENERAL OBLIGATION BONDS

The School District issues general obligation bonds to provide funds for the acquisition and construction ofmajor capital facilities. Bond premiums and discounts, as well as issuance costs, are recognized in the financial statements during the year bonds are issued. In addition, general obligation bonds have been issued to refund existing general obligation bonds. General obligation bonds are direct obligations and pledge the full faith and credit ofthe government. The outstanding amount of these bonds is recorded in the General Long-Term Debt Account Group.

INTERFUND TRANSACTIONS

The School District has the following types of interfund transactions:

Reimbursements of expenditures initially made from a fund that are properly applicable to another fund are recorded as expenditures in the reimbursing fund and as reductions of expenditures in the fund that is reimbursed.

- 12 -

HANCOCK COUNTY BOARD OF EDUCATION

EXHIBIT "D"

NOTES TO THE GENERAL-PURPOSE FINANCIAL STATEMENTS

JUNE 30. 2001

Note 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Operating transfers are recorded for all interfund transactions other than reimbursements.
MEMORANDUM ONLY - TOTAL COLUMNS
Total columns on the general-purpose financial statements are captioned "Memorandum Only" to indicate that they are presented only to facilitate financial analysis. Data in these columns do not present financial position or results ofoperations in conformity with generally accepted accounting principles. Neither are such data comparable to a consolidation. Interfund eliminations have not been made in the aggregation of this data.
Note 2: DEPOSITS
COLLATERALIZATION OF DEPOSITS Official Code of Georgia Annotated (OCGA) Section 45-8-12 provides that there shall not be on deposit at any time in any depository for a time longer than ten days a sum ofmoney which has not been secured by surety bond, by guarantee ofinsurance, or by collateral. The aggregate ofthe face value of such surety bond and the market value of securities pledged shall be equal to not less than 110 percent ofthe public funds being secured after the deduction ofthe amount ofdeposit insurance. Ifa depository elects the pooled method (OCGA 45-8-13.1) the aggregate ofthe market value ofthe securities pledged to secure a pool ofpublic funds shall be not less than 110 percent ofthe daily pool balance. OCGA Section 45-8-11 (b) provides an officer holding public funds may, in his discretion, waive the requirement for security in the case ofoperating funds placed in demand deposit checking accounts.
Acceptable security for deposits consists of any one of or any combination of the following:
(1) Surety bond signed by a surety company duly qualified and authorized to transact business within the State of Georgia,
(2) Insurance on accounts provided by the Federal Deposit Insurance Corporation,
(3) Bonds, bills, notes, certificates of indebtedness or other direct obligations of the United States or of the State of Georgia,
(4) Bonds, bills, notes, certificates of indebtedness or other obligations of the counties or municipalities of the State of Georgia,
(5) Bonds of any public authority created by the laws of the State of Georgia, providing that the statute that created the authority authorized the use of the bonds for this purpose,
(6) Industrial revenue bonds and bonds of development authorities created by the laws of the State of Georgia, and
- 13 -

HANCOCK COUNTY BOARD OF EDUCATION

EXHIBIT "D"

NOTES TO THE GENERAL-PURPOSE FINANCIAL STATEMENTS

JUNE 30, 2001

Note 2: DEPOSITS

(7) Bonds, bills, notes, certificates of indebtedness, or other obligations of a subsidiary corporation of the United States government, which are fully guaranteed by the United States government both as to principal and interest or debt obligations issued by the Federal Land Bank, the Federal Home Loan Bank, the Federal Intermediate Credit Bank, the Central Bank for Cooperatives, the Farm Credit Banks, the Federal Home Loan Mortgage Association, and the Federal National Mortgage Association.

CATEGORIZATION OF DEPOSITS At June 30, 200 l, the bank balances were $2,997,361.34. The amounts ofthe total bank balances are classified into three categories of credit risk:

Category 1 - Cash that is insured (e.g., Federal depository insurance) or collateralized with securities held by the 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 - Uncollateralized deposits. (This includes any bank balance that is collateralized with securiti~s held by the pledging financial institution, or by its trust department or agent but not in the School District's name.)

The School District's deposits are classified by risk category at June 30, 2001, as follows:

Risk Category

Bank Balance

1

$ 1,089,546.58

2

1,900,887.30

3

6,927.46

Total

$ 2,997,361.34

Note 3: 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 1 - Inventories

Note 4: RISK MANAGEMENT

The School District is exposed to various risks of loss related to torts; theft of, damage to, and destruction ofassets; errors or omissions; job related illness or injuries to employees; natural disaster and unemployment compensation.

- 14 -

HANCOCK COUNTY BOARD OF EDUCATION

EXHIBIT "D"

NOTES TO THE GENERAL-PURPOSE FINANCIAL STATEMENTS

JUNE 30. 2001

Note 4: RISK MANAGEMENT

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

The School District is self-insured with regard to unemployment compensation claims. The School District accounts for claims within the General Fund with expenditure and liability being reported when it is probable that a loss has occurred, and the amount ofthat loss can be reasonably estimated. The School District has not incurred any liabilities for unemployment compensation during the past two fiscal years.

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

Position Covered

Amount

Superintendent All Other Employees

$ 100,000.00 $ 50,000.00

Note 5: GENERAL LONG-TERM DEBT

CAPITAL LEASES The Hancock County Board of Education has entered into various lease agreements as lessee for equipment purchases. 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:

PUl])ose

Interest Rates

Amount

General Government - Refunding - Series 1994 2.60% - 4.35% $ 525,000.00

The changes in General Long-Term Debt during the fiscal year ended June 30, 2001, were as follows:

- 15 -

HANCOCK COUNTY BOARD OF EDUCATION

EXHIBIT "D"

NOTES TO THE GENERAL-PURPOSE FINANCIAL STATEMENTS

JUNE 30. 2001

Note 5: GENERAL LONG-TERM DEBT

Capital Leases

General Obligation
Bonds

Total

Balance July l, 2000

$ 219,418.89 $ 770,000.00 $ 989,418.89

Deductions Debt Retired

105,359.98

245,000.00

350,359.98

Balance June 30, 2001

$ 114,058.91 $ 525,000.00 $ 639,058.91

At June 30, 200 l, payments due by fiscal year which includes principal and interest for these items are as follows:

Fiscal Year Ended June 30

Capital Leases

General Obligation
Bonds

Total Debt

2002 2003

$ 123,476.12 $ 277,052.50 $ 400,528.62

270,763.75

270,763.75

Total Principal and Interest $ 123,476.12 $ 547.816,25 $ 671,292.37

Deduct: Imputed Interest

9,417.21

Net Present Value of Future Minimum Lease Payments $ 114,058.91

Note 6: ON-BEHALF PAYMENTS

The School District has recognized revenues and expenditures in the amount of $233,641.97 for health insurance and retirement contributions paid on the School District's behalf by the following State Agencies.

Georgia Department of Education Paid to the Georgia Department of Community Health For Health Insurance of Non-Certified Personnel In the amount of $199,856.97

Office of Treasury and Fiscal Services Paid to the Public School Employees Retirement System For Public School Employees Retirement (PSERS) Employer's Cost In the amount of $33,785.00

- 16 -

HANCOCK COUNTY BOARD OF EDUCATION

EXHIBIT "D"

NOTES TO THE GENERAL-PURPOSE FINANCIAL STATEMENTS

JUNE 30, 2001

Note 7: CONTINGENT LIABILITIES

Amounts received or receivable principally from the Federal government are subject to audit and review by grantor agencies. This could result in requests for reimbursement to the grantor agency for any expenditures which are disallowed under grant terms. The 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 general-purpose financial statements.

Note 8: RETIREMENT PLANS

TEACHERS RETIREMENT SYSTEM OF GEORGIA (TRS)

TRS PLAN DESCRIPTION Substantially all teachers, administrative and clerical personnel employed by local school districts 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 11.29% and employer contributions for the current fiscal year and the preceding two fiscal years are as follows:

Fiscal Year

Percentage Contributed

Required Contribution

2001 2000 1999

100% 100% 100%

$ 782,197.54 $ 762,004.48 $ 747,584.34

Note 9: SUBSEQUENT EVENT

Subsequent to the date ofthis report, the Federal Bureau of Investigation initiated an investigation in certain allegations concerning financial improprieties involving the Board's fiscal year 2002 accounting records. The results of this investigation will be reported as part of the Board's fiscal year 2002 financial statement audit.

- 17 -

HANCOCK COUNTY BOARD OF EDUCATION COMBINING BALANCE SHEET SPECIAL REVENCJE FUND JUNE 30, 2001

ASSETS
Cash and Cash Equivalents
Accounts Receivable
Inventories Food Donated Commodities Purchased Food

SCHOOL FOOD
SERVICES FUND

LOTTERY PROGRAMS

$

374,281.48 $

2,453.20

2,682.63

7,855.00

16,596.13 41989.84

Total Assets

$

398,550.08 $ ===10=13:::iii0iic8.=20_,,

LIABILITIES AND FUND EQUITY
LIABILITIES
Cash Overdraft Accounts Payable Salaries Payable Expired Grant Balances Payable
Total Liabilities
FUND EQUITY
Fund Balances Reserved For Expired Grant Balances/Questioned Costs For Inventories Food Donated Commodities Purchased Food Unreserved Undesignated
Total Fund Equity
Total Liabilities and Fund Equity

$

10,731.51 $

78,273.68

$

891005.19 $

1,589.52 5,810.98
1i400.so

$

$

16,596 13

4,989.84

2871958.92

$

3091544.89 $

2,907.70
0.00 21907.70

$

3981550.08 $ ===1=0=13;;0=8.=20_,

See notes to the general-purpose financial statements. - 18 -

EXHIBIT"E"

FEDERAL PROGRAMS

TOTALS

JUNE 30, 2001

JUNE 301 2000

$

376,734.68 $

348,576.89

$

775,610.30

786,147.93

782,546.71

16,596.13 4,989.84

34,415.00 4,392.04

$

775,610.30 $ 1,184,468.58 $ 1,169,930.64

$

485,317.45 $

485,317.45 $

471,680.69

64,839.80

77,160.83

62,082.80

210,485.81

294,570.47

243,226.11

9,529.45

9,529.45

522.64

$

770,172.51 $

866,578.20 $

777,512.24

$

5,437.79 $

8,345.49

16,59613 $ 4,989.84

34,415.00 4,392.04

0.00

287,958.92

353,611.36

$

5437.79 $

317,890.38 $

392,418.40

$

775,610.30 $ 1,184,468.58 $ 1,169,930.64

- 19 -

HANCOCK COUNTY BOARD OF EDUCATION COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES
SPECIAL REVENUE FUND YEAR ENDED JUNE 30, 2001

REVENUES
State Funds Federal Funds Other Funds
Total Revenues
EXPENDITURES
Current Instruction Support Services Pupil Services Improvement of Instructional Services General Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Other Support Services Food Services Operation
Total Expenditures
Excess of Revenues over (under) Expenditures
OTHER FINANCING SOURCES
Operating Transfers In
Excess of Revenues and Other Financing Sources over (under) Expenditures
FUND BALANCE JULY 1
Adjustments Food Inventory - Net Change m Period
Donated Commodities Purchased Food
FUND BALANCE JUNE 30

SCHOOL FOOD
SERVICES FUND

LOTTERY PROGRAMS

$

64,950.00 $

811,145.41

168,119.84

$ 1,044,215.25 $

89,887.80 89,887.80

$

86,980.10

$ 1,127,222.31

$ 1,127,222.31 $

$

-83,007.06 $

86,980.10 2,907.70

$

-83,007 06 $

392,418.40

17,354.62

-17,818.87 597.80

2,907.70 0.00

$

309,544.89 $ ==-=====2==,9=0=7=70=

See notes to the general-purpose financial statements. - 20 -

EXHIBIT"F"

FEDERAL
PROGRAMS

TOTALS

YEAR ENDED

JUNE 301 2001

JUNE 301 2000

$

154,837.80 $

193,553.38

$ 2,018,715.73

2,829,861.14

2,643,331.42

6,468.26

174,588.10

115,191.89

$ 2,025,183.99 $ 3,159,287.04 $ 2,952,076.69

$ 1,205,178.96 $ 1,292,159.06 $ 1,275,809.90

213,051.83 21,459.02
325,506.46 51,244.64 61,369.64 70,816.68
133,629.50 38,7TT.50

213,051.83 21,459.02
325,506.46 51,244.64 61,369.64 70,816.68 133,629.50
1,165,999.81

214,780.88 19,282.01
281,829.45 333.10
52,543.69 62,633.33 84,258.78 1,037,537.73

$ 2,121,034.23 $ 3,335,236.64 $ 3,029,008.87

$

-95,850.24 $ -175,949.60 $

-76,932.18

96,009.87

96,009.87

$

159.63 $

-79,939.73 $

-76,932.18

0.00

392,418.40

455,604.65

5,278.16

22,632.78

-17,818.87 597.80

14,450.09 -704.16

$

5437.79 $

317,890.38 $==-=3=9=2=,4=18=.4=-0=

- 21 -

HANCOCK COUNTY BOARD OF EDUCATION
SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
YEAR ENDED JUNE 30, 2001

SCHEDULE "1

FUNDING AGENCY PROGRAM/GRANT
Agnculture, U.S. Department of Child Nutrition Cluster Pass-Through From Georgia Department of Education Food and Nutn1Ion Program Food Services School Breakfast Program National School Lunch Program Pass-Through From Office of School Readiness Food and Nutnbon Program Summer Food Service Program for Children
Total Child Nutrition Cluster
Other Programs Pass-Through From Georgia Department of Educabon Food and Nutrition Program Food Dlstnbutlon Program (1) Fresh Produce Program (1)
Total U. S Department of Agnculture
Education, U. S. Department of Special Educabon Cluster Pass-Through From Georgia Department of Education Individuals with Disabilities Education Act Part B - Special Educabon Flow Through Preschool
Total Special Education Cluster
Other Programs Pass-Through From Georgia Department of Education Elementary and Secondary Education Act T1tlel Grants to Local Educallonal Agencies Title II Eisenhower Professional Development TIiie VI lnnovalTve Education Program Strategies Class Size Reduction Safe and Drug-Free Schools and Communities Vocational Educabon - Basic Grants to States High School Program Basic Grant
Total U. S Department of Educabon
Health and Human Services, U. S. Department of Direct Head Start Pass-Through From Georgia Department of Human Resources Child Care and Development Block Grant
Total U. S Department of Health and Human Services

CFDA NUMBER

PASSTHROUGH
ENTITY ID
NUMBER

FEDERAL REVENUE IN PERIOD

EXPENDITURES IN PERIOD

. 10.553 . 10.555 . 10 559

N/A

$ 213,628.67

(2)

NIA

543,109.18 $

1,091,864.70 (3)

NIA

19,049.95

(2l

$ n5,787.80 $

1,091,864.70

10 550 10.550

NIA

28,898.61

28,898.61

NIA

6,459 00

6,459.00

$ 811,14541 $

1,127,222.31

84 027 84173

NIA

$ 172,99442 $

NIA

9,765 00

s 182,759 42 $

174,086.82 (3) 16,470.74 (3)
190,557.56

84.010 84.281 84.298 84.340 84186
84.048
. 93600
93.575

NIA

570,091 44

629,635.79 (3)

NIA

13,126.69

13,308.76 (3)

NIA

18,513.00

18,678.61 (3)

NIA

76,688.00

78,522.73 (3)

NIA

9,652 49

15,829 16 (3)

NIA

40,740.00

61,048.30 (3)

$ 911,571 04 $

1,007,580 91

$ 969,197.55 $

975,355.81 (3)

NIA

137,947 14

138,097.51 (3)

$ 1,107,144 69 $

1,113,453.32

Total Federal Financial Assistance NIA c Not Available

- 22

$ 21829,861 14 $

3,248,256.54

HANCOCK COUNTY BOARD OF EDUCATION SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
YEAR ENDED JUNE 30, 2001

SCHEDULE "1

Notes to the Schedule of Expenditures of Federal Awards
(1) The amounts shown for the Food D1stribut1on and Fresh Produce Programs represent the Federally assigned value of nonmonetary assistance for donated commodities received and/or consumed by the system dunng the current fiscal year.
(2) Expenditures for the Summer Food Service Program for Children and the School Breakfast Program were not maintained separately and are induded in the 2001 National School Lunch Program
(3) Expenditures for this program indude State, and/or Other Funds. Expenditures are not maintained by fund source
MaJor Programs are identified by an astensk (*) in front of the CFDA number.
The School District did not provide Federal Assistance to any Subreapient.
The accompanying schedule of expenditures of Federal awards includes the Federal grant activity of the Hancock County Board of Education and is presented on the modified accrual basis of accounting which 1s the basis of accounting used in the presentation of the general-purpose financial statements

See notes to the general-purpose finanaal statements

- 23-

HANCOCK COUNTY BOARD OF EDUCATION SCHEDULE OF STATE REVENUE
YEAR ENDED JUNE 30. 2001

SCHEDULE "2"

AGENCY/FUNDING
GRANTS Community Affairs, Georgia Department of Governor's Emergency Funds (1) Local Assistance Grants
Education, Georgia Department of Quality Basic Education Direct Instructional Cost Kindergarten Program Pnmery Grades (1-3) Program Upper Elementary Grades (4-5) Program Middle School (6-8) Program High School General Educa\Jon (9-12) Program Vocabonal Laboratory (9-12) Program Students with D1sabIhtres Category I Category II Category Ill
Category rv
Gifted Student - Category VI Remedial Education Program Alternative Educabon Program Media Center Program Staff and Professional Development Indirect Cost Categoncal Grants Pupil Transporta\Jon Regular Bus Replacement Nursing Services Pnnapal Supplements Vocational Supervisors Mid-term Ad1ustment Hold-Harmless Education Equal1%8hon Funding Grant Food Services Vocational Education Other State Programs At-Risk Summer School Program Charter Schools Health Insurance Innovative Programs Mentonng Program Mentor Teachers Preschool Handicapped Program Remedial Summer School Computers in tne Classroom
Office of School Readiness Pre-Kindergarten Program
Office of Treasury and Fiscal Services Public School Employees Retirement
CONTRACTS Education, Georgia Department of Georgia's Reading Challenge Reading First Program Student Achtevement NCEE Contract

GOVERNMENTAL FUND TYPES

SPECIAL

GENERAL

REVENUE

FUND

FUND

TOTAL

$

5,000 00

13,500 00

$

5,000 00

13,500.00

4'56,472 00 1,07,?. ~-:1200
44,_, 17 00 952,.H6 00 681,9J7 00 256,113 00
17,030 00 381,332 00 461,004 00
30,108 00 26,442 00 71,746 00 69,069 00 154,361.00 42,256 00 1,039,617 00
320,145 00 95,439 00 51,014 00 7,072.00 10,276 00
152,415 00 729,404 00
$ 12,817 00
1,864 20 2,250 00 199,856 97 2,048 37 4,000 00 5,053.00 19,471 00 5,490 13
33,78500

64,950 00
36,425 00 53,462 80

456,472 00 1,072,532 00
447,417 00 952,316 00 681,907 00 256,113 00
17,030 00 381,332 00 461,004 00
30,108 00 26,442 00 71,746 00 69,069 00 154,361 00 42,256 00 1,039,617 00
320,145 00 95,439.00 51,014 00 7,072 00 10,276 00
152,415 00 729,404.00
64,950 00 12,817 00
1,864 20 2,250 00 199,856 97 2,048 37 4,000 00 5,053 00 19,471 00 5,490 13 36,425 00
53,462 80
33,785 00

40,220 00 37,363.00 25,000 00

40.220 00 37,363 00 25,000 00

$

719331205 67 $

154,837 80 $

8,088,043 47

(1) The purpose of the funds Is for the beautmca\Jon of the high school grounds by plantrng trees through the Hancock County Extension Service

See notes to the general-purpose financial statements

25 -

HANCOCK COUN;D' BOARD OF EQUC::ATION GENERAL FUND- QUALIJ-Y\BAS!C EDl;ICA'TION PROGRAM (QBE}
ALLOTMENTS AN0 EXPENDITURES - BY PROGRAM YEAR ENDED JUNE 30. 2001

SCHEDULE "3"

DESCRIPTION
Drrect Instructional Programs Kindergarten Program Pnmary Grades (1-3) Program Upper Elementary Grades (4-5) Program Middle Grades (6-8) Program Middle School (6-8) Program Hrgh School General Education (9-12) Program Vocallonal Laboratory (9-12) Program Students with Dlsabllllles Category II Category Ill Grfted Student - Category VI Remedial Education Program Altemallve Education Program
TOTAL DIRECT INSTRUCTIONAL PROGRAMS
Medra Center Program Staff and Professional Development

ALLOTMENTS FROM GEORGIA DEPARTMENT OF EDUCATION (1)

ELIGIBLE QBE PROGRAM COSTS

SALARIES

OPERATIONS

TOTAL

$

511,671.00 $ 557,839.83 $

4,866.91 $

562,706 74

1,202,229.00 1,028,264 70

73,873.23

1,102,137.93

501,522.00

611,747.61

16,420 82

628,168.43

63465

634.65

1,067,476 00 1,024,086.f5

28,96619

1,053,052 64

764,367.00

802,859.90

67,540.63

870,400 53

287,084.00

193,848.33

10,741.73

204,590.06

997,034 00

478,519.92

93,083.78

571,603.70

240,277 95

24,381.35

264,659.30

29,640.00

27,612.56

27,612.56

80,422 00

87,028.86

1,462.35

88,491.21

77,421 00

162,518 20

957.32

163,475.52

$

5,518,866 00 $ 5,215,238 96 $ 322,294 31 $ 5,537,533.27

173,028.00 47,366.00

228,061.21 37,333 12

88,688.53 17,140 92

316,749 74 54,474.04

TOTAL QBE FORMULA FUNDS

$

5,739,260 00 $ 5,480,633.29 $ 428,123 76 $ 5,908,757 05

(1) Compnsed of State Funds plus Local Five Mill Share.

See notes to the general-purpose financial statements

-26-

HANCOCK COUNTY BOARD OF EDUCATION GENERAL FUND - QUALITY BASIC EDUCATION PROGRAM {QBE)
ALLOTMENTS AND EXPENDITURES - BY SITE YEAR ENDED JUNE 30, 2001

SCHEDULE "4"

SITE Lewis Elementary School Hancock Central High School Southwest Elementary School Hancock County CrossRoads Program Central Office (Alternative Education Program}
TOTAL
(1) Comprised of State Funds plus Local Five Mill Share.

ALLOTMENTS FROM GEORGIA DEPARTMENT OF EDUCATION (1)

ELIGIBLE QBE PROGRAM COSTS

$

2,287,164.00 $ 2,330,415.11

2,575,600.00

2,527,380.62

578,681.00

551,049.10

117,286.98

77,421.00

11,401.46

$

5,518,866.00 $ -===-==5=,5=37=,5=3=3=.2-=7

See notes to the general-purpose financial statements. - 27 -

SECTIONil COMPLIANCE AND INTERNAL CONTROL REPORTS

RUSSELL W. HINTON
STATE AUDITOR
(404) 656-2174

DEPARTMENT OF AUDITS AND ACCOUNTS
254 Wa!>hmg1on Streel, S.W., Suite 214 Atlanta, Georgia 30334-8400
July 12, 2002

Honorable Roy E. Barnes, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the Hancock County Board of Education
REPORT ON COMPLIANCE AND ON INTERNAL CONTROL OVER FINANCIAL REPORTING BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCEWITHGOVERNMENTAUDITINGSTANDARDS
Ladies and Gentlemen:
We have audited the financial statements of Hancock County Board of Education as of and for the year ended June 30, 2001, and have issued our report thereon dated July 12, 2002. This report was qualified for various departures from generally accepted accounting principles, as identified in the auditor's report on the general-purpose financial statements. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States.
Compliance
As part of obtaining reasonable assurance about whether Hancock 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 grants, 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 ofour tests disclosed no instances ofnoncompliance that are required to be reported under Government Auditing Standards.
Internal Control Over Financial Reporting
In planning and performing our audit, we considered Hancock County Board ofEducation's internal control over financial reporting in order to determine our auditing procedures for the purpose of expressing our opinion on the financial statements and not to provide assurance on the internal
2001YB-40

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 ofthe internal control over financia~ reporting that, in ourjudgment, could adversely affect Hancock County Board ofEducation's ability to record, process, summarize and report financial data consistent with assertions of management in the financial statements. Reportable conditions are described in the accompanying Schedule ofFindings and Questioned Costs as items FS-6701-01-01, FS-6701-01-02, FS-6701-01-04, FS-6701-01-05, FS-6701-01-07, FS-6701-01-08 and FS-6701-0109.
A material weakness is a condition in which the design or operation of one or more of the internal control components does not reduce to a relatively low level the risk that misstatements in amounts that would be material in relation to the 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. Of the reportable conditions described above, we consider items FS-6701-00-01, FS6701-00-04, FS-6701-00-05 and FS-6701-00-09 to be material weaknesses.
This report is intended solely for the information and use of the management, members of the Hancock 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,
lh.~-
RWH:gp 2001YB-40

tussELL W. H1NTON
STATE AUDITOR
(404) 656-2174

DEPARTMENT OF AUDITS AND ACCOUNTS
254 Washington Street. S.W., Suite 214 Atlanta, Georgia 30334-8400
July 12, 2002

Honorable Roy E. Barnes, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the Hancock County Board of Education
REPORT ON COMPLIANCE WITH REQUIREMENTS APPLICABLE TO EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH 0MB CIRCULAR A-133
Ladies and Gentlemen:
Compliance
We have audited the compliance of Hancock County Board of Education with the types of compliance requirements described in the U.S. Office ofManagement and Budget (0MB) Circular A-133 Compliance Supplement that are applicable to each ofits major Federal programs for the year ended June 30, 200 l. Hancock County Board ofEducation's major Federal programs are identified in the Summary of Auditor's Results Section of the accompanying Schedule of Findings and Questioned Costs. Compliance with the requirements of laws, regulations, contracts and grants applicable to each of its major Federal programs is the responsibility of Hancock County Board of Education's management. Our responsibility is to express an opinion on Hancock 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 of the United States; and 0MB Circular A133, Audits of States, Local Governments, and Non-Profit Orgamzatzons. 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 ofcompliance 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 Hancock County Board of Education's compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Our audit does not provide a legal determination on Hancock County Board of Education's compliance with those requirements.
2001SA-30

In our opinion, the Hancock County Board ofEducation complied, in all material respects, with the requirements referred to above that are applicable to each ofits major Federal programs for the year ended June 30, 2001.
Internal Control Over Compliance
The management of Hancock 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 Hancock County Board of Education's internal control over compliance with requirements that could have a direct and material effect on a major Federal program in order to determine our auditing procedures for the pwpose of expressing our opinion on compliance and to test and report on internal control over compliance in accordance with 0MB Circular A-133.
We noted certain matters involving the internal control over compliance 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 ofthe internal control over compliance that, in our judgment, could adversely affect the Hancock County Board of Education's ability to administer a major Federal program in accordance with applicable requirements oflaws, regulations, contracts and grants. Reportable conditions are described in the accompanying Schedule ofFindings and Questioned Costs as items FA-6701-01-01, FA-6701-01-02 and FA-6701-01-03.
A material weakness is a condition in which the design or operation of one or more of the internal control components does not reduce to a relatively low level of risk that noncompliance with the applicable requirements oflaws, regulations, contracts and grants that would be material in relation to a major Federal program being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. Our consideration of the internal control over compliance would not necessarily disclose all matters in the internal control that might be reportable conditions and, accordingly, would not necessarily disclose all reportable conditions that are also considered to be material weaknesses. However, we believe none of the reportable conditions described above is a material weakness.
This report is intended solely for the information and use of the management, members of the Hancock 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.

RWH:gp 2001SA-30

State Auditor

SECTIONm AUDITEE'S RESPONSE TO PRIOR YEAR FINDINGS AND QUESTIONED COSTS

HANCOCK COUNTY BOARD OF EDUCATION AUDITEE'S RESPONSE
SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30. 2001

PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

FINDING CONTROL NUMBER AND STATUS

FS-6701-99-02 FS-6701-99-03 FS-6701-00-01 FS-6701-00-02 FS-6701-00-03 FS-6701-00-04 FS-6701-00-05 FS-6701-00-06

Unresolved - See Corrective Action/Responses Further Action Not Warranted Partially Resolved - See Corrective Action/Responses Partially Resolved - See Corrective Action/Responses Unresolved - See Corrective Action/Responses Partially Resolved - See Corrective Action/Responses Previously Reported Corrective Action Implemented Unresolved - See Corrective Action/Responses

CORRECTIVE ACTION/RESPONSES

EXPENDITURES/LIABILITIES/DISBURSEMENTS Improper Expenditures/Inadequate DocumentationNoucher Sample Exceptions Amount: $5,010.15 Finding Control Number: FS-6701-99-02

A new voucher package has been designed to eliminate this finding, which includes package slips, purchase orders, invoices and getting approval from the Finance Department prior to signing off on purchase orders.

CASH AND CASH EQUNALENTS Inadequate Cash Management Procedures Finding Control Number: FS-6701-00-01

Additional staff has been hired to eliminate this finding. With adequate staff the School District (Finance Office) will be able to avoid this finding in the near future.

EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate DocumentationNoucher Sample Exceptions Finding Control Number: FS-6701-00-02

A new voucher package has been designed to eliminate this finding, which includes package slips, purchase orders, invoices and getting approval from the Finance Department prior to signing off on purchase orders.

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HANCOCK COUNTY BOARD OF EDUCATION AUDITEE'S RESPONSE
SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2001

PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

CORRECTIVE ACTION/RESPONSES

EXPENDITURES/LIABILITIES/DISBURSEMENTS Improper Expenditures Amount: $4,020.10 Finding Control Number: FS-6701-00-03

Getting prior approval from the Finance Department before signing offon purchase orders should avoid this finding in the future.

EXPENDITURES/LIABILITIES/DISBURSEMENTS Overpayment of Board Member Per Diem Amount: $4,100.00 Finding Control Number: FS-6701-00-04

Several of the School District members have reimbursed the School District for the overpayments.

GENERAL FIXED ASSETS Failure to Maintain a General Fixed Assets Account Group Finding Control Number: FS-6701-00-06

At the present time, the Hancock County Board of Education is unable to afford to maintain a General Fixed Assets Account Group.

PRIOR YEAR FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

FINDING CONTROL NUMBER AND STATUS

FA-6701-00-01

Unresolved - See Corrective Action/Responses

CORRECTIVE ACTION/RESPONSES

ALLOWABLE COST/COST PRINCIPLES Failure to Maintain Adequate Documentation Finding Control Number: FA-6701-00-01

With the new voucher packages and the hiring of additional staff, this finding shall be resolved in the future.

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SECTION IV FINDINGS AND QUESTIONED COSTS

HANCOCK COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED ruNE 30. 2001

I SUMMARY OF AUDITOR'S RESULTS

1. Type of Report Issued on the Financial Statements The auditor's opinion on the Hancock County Board ofEducation's financial statements was qualified for various departures from generally accepted accounting principles.

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

Cash and Cash Equivalents Employee Compensation General Fixed Assets

Expenditures/Liabilities/Disbursements General Ledger

All of the reportable conditions described above, except for Expenditures/Liabilities/ Disbursements are considered to be material weaknesses.

3. Noncompliance Material to the Financial Statements The audit of the Hancock 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 Hancock County Board ofEducation disclosed reportable conditions in internal control over major programs for the following compliance requirements.

Allowable Costs/Cost Principles

Reporting

The reportable conditions described above are not considered to be material weaknesses.

5. Type of Report Issued on Compliance for Major Programs The auditor's opinion on the Hancock County Board of Education'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 Hancock County Board of Education's audit disclosed audit findings required to be reported by section .510(a) of 0MB Circular A-133. These audit findings are included in section N of this report.

7. Major Programs Federal awards audited as major programs are as follows: 10.553 Food and Nutrition Program - Food Services - School Breakfast Program I0.555 Food and Nutrition Program - Food Services - National School Lunch Program 10.559 Food and Nutrition Program - Summer Food Service Program for Children 93.600 Head Start

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HANCOCK COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30. 2001
I SUMMARY OF AUDITOR'S RESULTS 8. Type "A" Program Dollar Threshold
The dollar threshold for type "A" programs was $300,000.00. 9. Low Risk Auditee
The Hancock County Board ofEducation did not qualify as a low risk auditee as defined by Section .530 of 0MB Circular A-133. II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS CASH AND CASH EQUIVALENTS Inadequate Cash Management Procedures Reportable Condition - Material Weakness Repeated From Prior Year Finding Control Number: FS-6701-01-01 An examination of the internal control procedures revealed that the School District did not provide for adequate cash management procedures as follows: .. (I) Bank reconciliations were not prepared in a timely manner. (2) Deposits made were not recorded on the general ledger in a timely manner. (3) The bank statement for the Head Start Account was not reconciled to the general ledger
for the month of July 2000. (4) The bank reconciliations for the operating, school nutrition, head start and extended day
head start accounts reflected adjustments for unidentifiable variances. These conditions were a result ofmanagement's decision to limit the number ofadministrative staff made responsible for accounting functions. The School District should review the accounting procedures in place, design procedures that will enhance cash management procedures relative to the above control category and implement those procedures to strengthen the internal control over accounting functions.
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HANCOCK COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2001

II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

EXPENDITURES/LIABILITIES/DISBURSEMENTS Improper Expenditures/Inadequate Documentation Reportable Condition Nonmaterial Noncompliance Amount: $2,279.82 Repeated From Prior Year Finding Control Number: FS-6701-01-02

Audit procedures performed on 163 expenditure vouchers to test the validity and accuracy of the expenditure transactions revealed the following:

(I) Three vouchers did not contain an original invoice.

(2) Thirteen expenditure vouchers were for improper purposes as follows:

Flowers Tribute Plaques Entertainment

$ 767.99 1,050.00 461.83

$2,279.82

(3) Fourteen expenditure vouchers, including twelve to American Express, could not be located.

The Official Code of Georgia Annotated Section 20-2-411 provides, in part, as follows:

11 school funds shall be used for educational purposes and may be used to pay the salaries of personnel and to pay for the utilization of school facilities, including school buses; for extracurricular and interscholastic activities, including literary events, music, and athletic programs within individual schools and between schools in the same or different school systems when such activities are sponsored by local boards of education as an integral part of the total school program; and for no other purpose... 11

These conditions were a result of management's failure to adequately monitor and implement procedures to ensure that all school funds are expended for educational purposes and that adequate documentation ofthese expenditures is maintained. Internal controls should be implemented by the School District to assure that school funds are utilized only for educational purposes and that voucher packages are properly prepared, reviewed and retained.

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HANCOCK COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30. 2001
II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS
EXPENDITURES/LIABILITIES/DISBURSEMENTS Improper Expenditures/Inadequate Documentation Reportable C~mdition Nonrnaterial Noncompliance Amount: $2,279.82 Repeated From Prior Year Finding Control Number: FS-6701-01-02
Management's Response:
Management concurs with this finding. Internal accounting control procedures have been implemented to ensure that all expenditure vouchers contain the requisition request, purchase order, receiving reports and the original invoice. The original invoice will be matched to the receiving report to ensure that payment is only for items actually received.
Regarding item number 3, this administration has no knowledge ofthese items and has been unable to locate them.
EXPENDITURES/LIABILITIES/DISBURSEMENTS Overpayment of Board Member Per Diem Nonrnaterial Noncompliance Amount: $16,500.00 Repeated From Prior Year Finding Control Number: FS-6701-01-03
During the year under review, the Hancock County Board of Education members continued to be paid per diem in excess ofthat authorized by state law. Official Code ofGeorgia Annotated Section 20-2-SS(a) states in part:
"In any county for which no local Act is passed, members of the local board shall, when approved by the local board affected, receive a per diem of$50.00 for each day ofattendance at meetings of the board...".
The following Board Members received per diem payments in excess of amounts authorized:
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HANCOCK COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30. 2001

Il FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

EXPENDITURES/LIABil.JTIES/DISBURSEMENTS Overpayment ofBoard Member Per Diem Nonmaterial Noncompliance Amount: $16,500.00 Repeated From Prior Year Finding Control Number: FS-6701-01-03

Board Member

Excess Payment

Earnest Carswell Ruby C. Clayton Felicia T. Lowe Farrest Lester Mary E. Evans

$ 4,450.00 3,300.00 2,750.00 3,000.00 3,000.00

$ 16,500.00

These overpayments were the result ofthe School District's reliance on proposed legislation that was never enacted into law. Reimbursement of $16,500.00 for current year excess per diem payments and $4,100.00 for excess per diem payments occurring during the prior fiscal year (see Finding Control Number FS-6701-00-04) should be secured from the individuals receiving the excess payments and deposited to the School District's General Fund.

Management's Response:

Board members are in the process of establishing monthly pay-back plans.

EMPLOYEE COMPENSATION Payroll Sample Exceptions Reportable Condition - Material Weakness Finding Control Number: FS-6701-01-04

A sample of 33 employee payroll records and personnel files was performed to test the validity and accuracy of the payroll transactions. The following deficiencies were noted:

(1) One employee was overpaid by $1,030.00.

(2) One employee was underpaid by $570.45.

(3) Personnel files were not maintained for three employees.

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HANCOCK COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2001

II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

EMPLOYEE COMPENSATION Payroll Sample Exceptions Reportable Condition - Material Weakness Finding Control Number: FS-6701-01-04

(4) The personnel files for nine employees contained inadequate documentation to support the employee's rate of pay.

These conditions were a result of management's failure to adequately monitor and implement procedures to ensure that payments made to employees are based on an approved rate ofpay that is adequately documented in the employee's personnel file. Internal controls should be implemented by the School District to assure that personnel files are properly maintained and all payments to employees are based on an approved rate of pay.

Management's Response:

The personnel is being re-structured and all deficiencies will be corrected.

GENERAL LEDGER Inadequate Accounting Procedures Reportable Condition - Material Weakness Finding Control Number: FS-6701-01-05

Adjustments to fund balance made by the School District in the General Fund and Special Revenue Fund as reflected by this report include unidentified variances as follows:

General Fund Special Revenue Fund
School Food Services Fund Federal Programs Fund
Head Start Fund Head Start Extended Day Fund

$ -30, 195.99
17,354.62
5,127.79 150.37

$ -7.563.21

This condition resulted from entries made to fund balance by the School District that appear to serve as "amounts needed to balance" due to unreconciled variances between the corrected book balances for cash and amounts appearing on the general ledger. Internal controls should be implemented by the School District to assure that all entries are properly documented and reviewed prior to recording to the general ledger.

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HANCOCK COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30. 2001
II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS
GENERAL LEDGER Inadequate Accounting Procedures Reportable Condition - Material Weakness Finding Control Number: FS-6701-01-05 Management's Response:
Management concurs with this finding. Internal control has been established to ensure that no journal entry adjusting fund balance is made without proper documentation and review prior to recording to the general ledger. This finding will be resolved in FY 2002.
GENERAL LEDGER Detail Listing of Salary and Travel Not Reconciled to the General Ledger Nonmaterial Noncompliance Finding Control Number: FS-6701-01-06 The detail listing of salary and travel payments made to employees as submitted to the Georgia Department ofAudits by the School District was not reconciled to the general ledger as presented for audit. Unidentifiable variances of $16,669.30 for salaries and $24,636.10 for travel were noted between the detail and the general ledger. These amounts are reflected in the Schedule of Salaries and Travel, which is issued under separate cover.
This condition occurred because management did not ensure that amounts submitted to the Georgia Department of Audits were reconciled to the School District's general ledger. Administrative procedures should be implemented to ensure that the detail listing ofsalaries and travel is reconciled to the School District's general ledger prior to submission to the Georgia Department of Audits. Management's Response: Management concurs with this finding. Accounting personnel have been retrained on the proper procedures for reconciling the CS-I reports to the general ledger. This finding will be resolved in FY 2002.
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HANCOCK COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2001
II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS
GENERAL LEDGER Failure to Maintain Separate Accountability Reportable Condition Nonmaterial Noncompliance Finding Control Number: FS-6701-01-07
An examination of the School District's compliance with regulations for the Lottery Program, Computers in the Classroom Program, revealed that the School District failed to maintain expenditures for the grant program in a Special Revenue Fund as required by the Georgia Department of Education.
This deficiency occurred because the School District misclassified expenditures for the program as General Fund expenditures. Extensive audit procedures were necessary to reclassify the expenditures into the correct fund. Internal controls should be implemented by the School District to assure that all expenditure voucher packages are reviewed for correctness of classification prior to payment and recording of expenditures in the financial statements.
Management's Response:
Management concurs with this finding. Management has implemented procedures that all requisition and purchase orders are classified to the correct fund and program before purchases are authorized.
GENERAL LEDGER Failure to Refund Unexpended Lottery Funds Reportable Condition Nonmaterial Noncompliance Amount: $2,907.70 Finding Control Number: FS-6701-01-08
An examination of the School District's compliance with regulations for the Lottery Program - PreKindergarten Program, revealed that the School District failed to return unearned Lottery funds. An unearned balance of $2,907.70 remained at June 30, 2001, per the School District's accounting records.
This deficiency occurred because personnel failed to accurately report expenditures on the completion report. Appropriate procedures should be implemented to ensure that completion reports are submitted with accurate data. The School District should submit corrected completion reports with documentation supporting expenditures and return any unearned Pre-Kindergarten Program funds to the Office of School Readiness.
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HANCOCK COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30. 2001
II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS
GENERAL LEDGER Failure to Refund Unexpended Lottery Funds Reportable Condition Nonmaterial Noncompliance Amount: $2,907.70 Finding Control Number: FS-6701-01-08
Management's Response:
Management concurs with this finding. A corrected project completion report, supported by the accounting records, will be submitted to the Office ofReadiness, along with a check for $2,907.70 to repay the unexpended lottery funds. This finding will be resolved in FY 2002.
GENERAL FIXED ASSETS Failure to Maintain General Fixed Assets Account Group Reportable Condition - Material Weakness Repeated From Prior Year Finding Control Number: FS-6701-01-09
The Hancock County Board of Education failed to maintain a system-wide General Fixed Assets Account Group within the formal accounting records as required by generally accepted accounting principles. This results in the general-purpose financial statements of the School District being incomplete and not in accordance with generally accepted accounting principles. Appropriate action should be taken by the School District to establish accounting controls and procedures to provide for maintenance of a General Fixed Assets Account Group. These subsidiary records should include an inventory of land, buildings and equipment owned by the School District and should include, but may not be limited to, date acquired, acquisition cost, estimated replacement cost, location and description. Detailed records should be maintained of all additions and deletions to the General Fixed Assets Account Group.
Management's Response:
Management concurs with this finding. Management will begin implementing the fixed Asset Accounting Software provided by the GADOE in fiscal year 2002 in order to be in compliance with GASB 34.
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HANCOCK COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2001
ill FEDERAL AWARD FINDINGS AND QUESTIONED COSTS
ALLOWABLE COSTS/COST PRINCIPLES Failure to Maintain Adequate Documentation Reportable Condition U.S. Department of Health and Human Services Finding Control Number: FA-6701-01-01
An examination of 34 expenditure vouchers was performed to test the allowability, validity and accuracy ofprogram expenditure transactions for the School District's Head Start Program (CFDA 93.600). The following deficiencies were noted:
(1) Three vouchers showed no indication of administrative approval prior to payment.
(2) Three vouchers did not have adequate documentation to support the expenditure.
(3) Seven vouchers did not contain an original invoice.
The United States Office of Management and Budget Circular A-87, Attachment A, paragraph C requires that costs charged to Federal awards be adequately documented to establish allowability of costs.
The deficiencies above were the result ofmanagement's failure to adequately monitor and implement procedures to ensure that all expenditure voucher packages are reviewed for accuracy, proper documentation and correctness of classification prior to payment and recording of expenditures in the financial records. Appropriate action should be taken by the School District to ensure adequate documentation of expenditures.
Management's Response:
Management concurs with this finding. Internal accounting control procedures are being implemented to ensure that all expenditure vouchers contain the requisition request, purchase order, receiving report and an original invoice before payments are disbursed.
REPORTING Claims for Reimbursements Not Supported by Accounting Records Reportable Condition U. S. Department of Agriculture Through Office of School Readiness Finding Control Number: FA-6701-01-02
The claim for reimbursement forms for the Summer Food Service Program for Children (CFDA 10.559) submitted by the School District to the Office of School Readiness for the 2001 project
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HANCOCK COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30. 2001
ID FEDERAL AWARD FINDINGS AND QUESTIONED COSTS
REPORTING Claims for Reimbursements Not Supported by Accounting Records Reportable Condition U. S. Department of Agriculture Through Office of School Readiness Finding Control Number: FA-6701-01-02
could not be reconciled to the School District's general ledger. Total expenditures submitted on the reimbursement forms exceeded the amounts recorded on the general ledger by $6,567.58.
This condition occurred because management failed to follow reimbursement provisions set forth in Federal Regulations 7 CFR 225.9(d) and because management failed to ensure that reimbursement requests could be verified to the accounting records. Internal controls should be developed by the School District to ensure that all claims for reimbursement are based on actual expenditures and are supported by the accounting records.
Management's Response:
These invoices were misclassified and did not reflect proper expenditures in the Summer Feeding Program. Expenses for Summer Feeding are now being expensed in a designated fund.
REPORTING Unexpended Grant Balance Reportable Condition U.S. Department of Health and Human Services Amount: $5,437.79 Finding Control Number: FA-6701-01-03
An examination of the School Districts accounting records for the Head Start Program (CFDA 93.600) revealed an unexpended grant balance of $5,437.79. This balance was the result of the School District's cancellation of prior year payables, which were determined to be invalid, for the 1996, 1998 and 1999 projects.
The School District should contact the U.S. Department of Health and Human Services to obtain instructions regarding the resolution of this unexpended grant balance.
Management's Response:
Management concurs with this finding. The U. S. Department ofHealth and Human Services will be contacted as to the disposition of the unexpended grant balance. It has been the policy of U.S.D.H.H.S. to reduce the current year allotment to resolve any unexpended grant funds. This finding should be resolved in FY 2003.
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