Hancock County Board of Education, Sparta, Georgia, annual financial report for the fiscal year ended 2014 June 30 (including independent auditor's reports)

HANCOCK COUNTY BOARD OF EDUCATION
SPARTA, GEORGIA
ANNUAL FINANCIAL REPORT FOR THE FISCAL YEAR ENDED JUNE 30, 2014
(Including Independent Auditor's Reports)

HANCOCK COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS -

SECTION I

FINANCIAL

INDEPENDENT AUDITOR'S REPORT

EXHIBITS

BASIC FINANCIAL STATEMENTS

DISTRICT-WIDE FINANCIAL STATEMENTS

A

STATEMENT OF NET POSITION

B

STATEMENT OF ACTIVITIES

FUND FINANCIAL STATEMENTS

C

BALANCE SHEET

GOVERNMENTAL FUNDS

D

RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET

TO THE STATEMENT OF NET POSITION

E

STATEMENT OF REVENUES, EXPENDITURES AND CHANGES

IN FUND BALANCES

GOVERNMENTAL FUNDS

F

RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT

OF REVENUES, EXPENDITURES AND CHANGES IN FUND

BALANCES TO THE STATEMENT OF ACTIVITIES

G

STATEMENT OF FIDUCIARY NET POSITION

FIDUCIARY FUNDS

H

NOTES TO THE BASIC FINANCIAL STATEMENTS

SCHEDULES

REQUIRED SUPPLEMENTARY INFORMATION

1 SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL GENERAL FUND

SUPPLEMENTARY INFORMATION

2 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS 3 SCHEDULE OF STATE REVENUE 4 SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS 5 ALLOTMENTS AND EXPENDITURES
GENERAL FUND - QUALITY BASIC EDUCATION PROGRAMS (QBE) BY PROGRAM

Page
1 2 4 5 6 7 8 9
25 26 27 28 29

HANCOCK COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS -
SECTION II COMPLIANCE AND INTERNAL CONTROL REPORTS INDEPENDENT AUDITOR'S 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 INDEPENDENT AUDITOR'S REPORT ON COMPLIANCE FOR EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH OMB 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

SECTION I FINANCIAL

Greg S. Griffin
STATE AUDITOR
(404) 656-2174

DEPARTMENT OF AUDITS AND ACCOUNTS
270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400
July 27, 2015

Honorable Nathan Deal, 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 REPORT
Ladies and Gentlemen:
Report on the Financial Statements
We have audited the accompanying financial statements of the governmental activities, each major fund, and the aggregate remaining fund information (Exhibits A through H) of the Hancock County Board of Education, as of and for the year ended June 30, 2014, and the related notes to the financial statements, which collectively comprise the Board's basic financial statements as listed in the table of contents.
Management's Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.
Auditor's Responsibility
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 of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. Accordingly, we express no such opinion. An audit also
2014ARL-11

includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions.
Opinions
In our opinion, the basic 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 of the Hancock County Board of Education, as of June 30, 2014, and the respective changes in financial position thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America.
Emphasis of Matter
As discussed in Note 2 to the financial statements, in 2014, the Hancock County Board of Education restated the prior period financial statements to correct an omission. Our opinion is not modified with respect to this matter.
Other Matters
Required Supplementary Information
Management has omitted the Management's Discussion and Analysis that accounting principles generally accepted in the United States of America require to be presented to supplement the basic financial statements. Such missing information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. Our opinion on the basic financial statements is not affected by this missing information.
Accounting principles generally accepted in the United States of America require that the Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual, as presented on page 25, be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management regarding the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance.
Other Information
Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Hancock County Board of Education's basic financial statements. The accompanying supplementary information, consisting of Schedules 2 through 5, is presented for the purposes of additional analysis and is not a required part of the basic financial statements. The Schedule of Expenditures of Federal Awards is presented for purposes of additional analysis as required by U. S. Office of Management and Budget Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations, and is not a required part of the basic financial statements.
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The accompanying supplementary information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated in all material respects in relation to the basic financial statements as a whole.
Other Reporting Required by Governm ent Auditing Standards
In accordance with Government Auditing Standards, we have also issued our report dated July 27, 2015, on our consideration of the Hancock County Board of Education's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering Hancock County Board of Education's internal control over financial reporting and compliance.
A copy of this report has been filed as a permanent record in the office of the State Auditor and made available to the press of the State, as provided for by Official Code of Georgia Annotated section 50-6-24.
Respectfully submitted,

GSG:as 2014ARL-11

Greg S. Griffin State Auditor

HANCOCK COUNTY BOARD OF EDUCATION

HANCOCK COUNTY BOARD OF EDUCATION STATEMENT OF NET POSITION JUNE 30, 2014
ASSETS
Cash and Cash Equivalents Investments Receivables
Taxes Intergovernmental
State Federal Other Inventory Prepaid Items Capital assets (Non-Depreciable) Capital assets (net of accumulated depreciation)
Total Assets
LIABILITIES
Checks Issued in Excess of Bank Balance Accounts Payable Salaries and Benefits Payable Accrued Interest Payable Unearned Revenue Bonds Payable Due Within One Year Bonds Payable Due in More Than One Year Capital Leases Due Within One Year Capital Leases Due in More Than One Year
Total Liabilities
NET POSITION
Net Investment in Capital Assets Restricted for
Continuation of Federal Programs Debt Service Capital Projects Unrestricted
Total Net Position

EXHIBIT "A"

GOVERNMENTAL ACTIVITIES

$

341,219

304,575

2,096,859

490,955 429,993 515,960
17,490 115,055 162,777 8,590,959

13,065,842

609,387 221,214 1,185,946
11,316 23,877 215,000 220,000 250,672 278,160
3,015,572

8,021,687
17,490 5,873
412,913 1,592,307

$

10,050,270

The notes to the basic financial statements are an integral part of this statement. - 1 -

HANCOCK COUNTY BOARD OF EDUCATION STATEMENT OF ACTIVITIES
FOR THE YEAR ENDED JUNE 30, 2014

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 Food Services Interest on Long-Term Debt
Total Governmental Activities
General Revenues Taxes Property Taxes, Levied for Maintenance and Operations Sales Taxes, for Capital Projects Intangible Taxes Transfer Taxes Railroad Equipment Tax Unrestricted Investment Earnings Miscellaneous
Total General Revenues
Change in Net Position
Net Position, Beginning of Year, Restated
Net Position, End of Year

EXPENSES

CHARGES FOR SERVICES

$

7,056,531 $

692,404 714,358
79,460 295,341 798,355 518,925 1,611,674 1,491,373 444,310 213,111

1,015,483 47,093

$

14,978,418 $

158,642
54,037 212,679

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

EXHIBIT "B"

PROGRAM REVENUES OPERATING GRANTS AND
CONTRIBUTIONS

CAPITAL GRANTS AND CONTRIBUTIONS

NET (EXPENSES) REVENUES
AND CHANGES IN NET POSITION

$

4,608,647

528,980 463,588 122,641 587,269 605,728
31,469 475,070 590,861 $
4,895 135,211

824,518

$

8,978,877 $

$ 76,220 76,220

-2,289,242
-163,424 -250,770
43,181 291,928 -192,627 -487,456 -1,136,604 -824,292 -439,415 -77,900
-136,928 -47,093
-5,710,642

4,954,976 460,954 19,906 10,510 13,771 1,130 485,247
5,946,494
235,852
9,814,418

$

10,050,270

- 3 -

HANCOCK COUNTY BOARD OF EDUCATION BALANCE SHEET
GOVERNMENTAL FUNDS JUNE 30, 2014

EXHIBIT "C"

ASSETS
Cash and cash equivalents Investments Receivables
Taxes Intergovernmental
State Federal Other Due From Other Funds Prepaid Items Inventory
Total Assets

GENERAL FUND

DISTRICTWIDE
CAPITAL PROJECTS
FUND

DEBT SERVICE
FUND

TOTAL

$
$ 2,060,458
490,955 429,993 515,960 260,472 115,055
17,490

341,219 $ 304,575
36,401

0 $

341,219

304,575

2,096,859

490,955 429,993 515,960 260,472 115,055
17,490

$ 3,890,383 $

682,195 $

0 $

4,572,578

LIABILITIES, DEFERRED INFLOWS OF RESOURCES AND FUND BALANCES

LIABILITIES

Checks Issued in Excess of Bank Balance

$

Accounts Payable

Salaries and Benefits Payable

Due to Other Funds

Unearned Revenue

Total Liabilities

DEFERRED INFLOWS OF RESOURCES

Unavailable Revenue - Property Taxes

FUND BALANCES

Nonspendable Inventory Prepaid Items
Restricted Capital Projects Debt Service
Unassigned (Deficit)

Total Fund Balances (Deficit)

609,387 221,214 1,185,946
$ 23,877 2,040,424
1,875,094
17,490 115,055
-157,680 -25,135

$ 260,472 260,472
0
412,913 8,810
421,723

Total Liabilities, Deferred Inflows of Resources and Fund Balances

$ 3,890,383 $

682,195 $

0 $

609,387

221,214

1,185,946

260,472

23,877

0

2,300,896

0

1,875,094

0

17,490

115,055

412,913 8,810
-157,680

0

396,588

0 $

4,572,578

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

HANCOCK COUNTY BOARD OF EDUCATION RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET
TO THE STATEMENT OF NET POSITION JUNE 30, 2014

EXHIBIT "D"

Total Fund Balances - Governmental Funds (Exhibit "C")
Amounts reported for Governmental Activities in the Statement of Net Position are different because:
Capital Assets used in Governmental Activities are not financial resources and therefore are not reported as assets in the governmental funds. These assets consist of:
Land Land Improvements Buildings Equipment Accumulated Depreciation
Total Capital Assets
Other Long-Term Assets are not available to pay for current-period expenditures and are reported as Deferred Inflows in the funds.
Property Taxes
Long-Term Liabilities, are not due and payable in the current period and therefore are not reported in the funds.
Bonds Payable Accrued Interest Payable Capital Leases Payable
Total Long-Term Liabilities
Net Position of Governmental Activities (Exhibit "A")

$

396,588

$

162,777

308,896

15,331,483

3,449,898

-10,499,318

8,753,736

1,875,094

$

-435,000

-11,316

-528,832

-975,148

$ 10,050,270

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

HANCOCK COUNTY BOARD OF EDUCATION STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES
GOVERNMENTAL FUNDS YEAR ENDED JUNE 30, 2014

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 Food Services Operation
Debt Service: Principal Retirement Interest and Fees
Total Expenditures
Excess (Deficiency) of Revenues over (under) Expenditures
OTHER FINANCING SOURCES (USES)
Capital Leases Transfers In Transfers Out
Total Other Financing Sources (Uses)
Net Change in Fund Balances
Fund Balances - Beginning
Fund Balances - Ending

GENERAL FUND

DISTRICTWIDE
CAPITAL PROJECTS
FUND

DEBT SERVICE
FUND

TOTAL

$

5,055,177

44,187 $

4,484,624

4,570,473

212,679

775

485,247

14,853,162

$ 460,954
355 461,309

0 $

5,055,177

505,141

4,484,624

4,570,473

212,679

1,130

485,247

0

15,314,471

6,750,785
690,065 714,358
79,460 295,341 798,355 518,925 1,615,657 1,344,736 439,584 213,111 1,010,086
29,002 4,346
14,503,811
349,351

213,742 20,407
234,149
227,160

210,000 25,915
235,915
-235,915

6,750,785
690,065 714,358
79,460 295,341 798,355 518,925 1,615,657 1,344,736 439,584 213,111 1,010,086
452,744 50,668
14,973,875
340,596

65,001
65,001 414,352 -439,487

-235,915 -235,915
-8,755 430,478

235,915
235,915 0 0

65,001 235,915 -235,915
65,001
405,597
-9,009

$

-25,135 $

421,723 $

0 $

396,588

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

HANCOCK 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, 2014

EXHIBIT "F"

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
Revenues reported in the Statement of Activities that do not provide current financial resources are not reported as revenues in the funds.
Property Taxes
Issuance of long-term liabilities provides current financial resources to governmental funds, while repayment of the principal of long-term liability consume the current financial resources of governmental funds. Neither transaction, however, has any effect on net position. This amount is the net effect of these differences in the treatment of long-term liabilities and related.
Bond Principal Payments Capital Lease Payments Issuance of Capital Leases
Some items reported in the Statement of Activities do not require the use of current financial resources and therefore are not reported as expenditures in Governmental Funds. These activities consist of:
Change in Accrued Interest
Change in Net Position of Governmental Activities (Exhibit "B")

$

405,597

$

65,000

-525,862

-460,862

-100,201

$

210,000

242,744

-65,001

387,743

3,575

$

235,852

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

HANCOCK COUNTY BOARD OF EDUCATION STATEMENT OF FIDUCIARY NET POSITION
FIDUCIARY FUNDS JUNE 30, 2014
ASSETS Cash and Cash Equivalents
LIABILITIES Funds Held for Others

EXHIBIT "G"

AGENCY FUNDS

$

19,504

$

19,504

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

HANCOCK COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2014

EXHIBIT "H"

NOTE 1: DESCRIPTION OF SCHOOL DISTRICT AND REPORTING ENTITY
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 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 Hancock County Board of Education.
District-wide Statements:
The Statement of Net Position and the Statement of Activities display information about the financial activities of the overall School District, except for fiduciary activities. Eliminations have been made to minimize the double counting of internal activities. Governmental activities generally are financed through taxes, intergovernmental revenues, and other nonexchange transactions.
The Statement of Activities presents a comparison between direct expenses and program revenues for each function of the School District's governmental activities.
Direct expenses are those that are specifically associated with a program or function and, therefore, are clearly identifiable to a particular function. Indirect expenses (expenses of the School District related to the administration and support of the School District's programs, such as office and maintenance personnel and accounting) are not allocated to programs.
Program revenues include (a) charges paid by the recipients of goods 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 of internal activities. Separate statements for each category (governmental and fiduciary) are presented. The emphasis of fund financial statements is on major governmental funds, each displayed in a separate column.
The School District reports the following major governmental funds:
General Fund is the School District's primary operating fund. It accounts for and reports all financial resources not accounted for and reported in another fund.
District-wide Capital Projects Fund accounts for and reports financial resources including Special Purpose Local Option Sales Tax (SPLOST) that are restricted, committed or assigned to the expenditure for capital outlays, including the acquisition or construction of capital facilities and other capital assets.
Debt Service Fund accounts for and reports financial resources that are restricted, committed, or assigned including taxes (sales) legally restricted for the payment of general long-term principal and interest.

- 9 -

HANCOCK COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2014

EXHIBIT "H"

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 of accounting determines when transactions are reported on the financial statements. The District-wide governmental and fiduciary financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded at the time liabilities are incurred, regardless of when the related cash flows take place. Nonexchange transactions, in which the School District gives (or receives) value without directly receiving (or giving) equal value in exchange, include property taxes, sales taxes, and grants. 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 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 of accounting. 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. The School District considers all intergovernmental revenues to be available if they are collected within 120 days after year-end. Property taxes, sales taxes and interest are considered to be susceptible to accrual. Expenditures are recorded when the related fund liability is incurred, except for principal and interest on general longterm debt which are recognized as expenditures to the extent they have matured. Capital asset acquisitions are reported as expenditures in governmental funds. Proceeds of general long-term liabilities and acquisitions under capital leases are reported as other financing sources.

The School District funds certain programs by a combination of specific cost-reimbursement grants, categorical grants, and general revenues. Thus, when program costs are incurred, both restricted and unrestricted resources are 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.

RESTATEMENT OF PRIOR YEAR NET POSITION/FUND BALANCE
For fiscal year 2014, the School District made a variety of prior period adjustment due to the omission of capital leases, which require the restatement of the June 30, 2013, net position in Governmental Activities. The result is a decrease in Net Position at July 1, 2013, of $333,441. This change is in accordance with generally accepted accounting principles.

Net position, July 1, 2013 as previously reported

$

10,147,859

Capital Leases payable

-333,441

Net position, July 1, 2013, as restated

$

9,814,418

- 10 -

HANCOCK COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2014

EXHIBIT "H"

FUTURE ACCOUNTING PRONOUNCEMENTS
In fiscal year 2015, the School District will adopt Governmental Accounting Standards Board (GASB) Statement No. 68, Accounting and Financial Reporting for Pensions. The provisions of this Statement establish accounting and financial reporting standards for pensions that are provided to the employees of state and local governmental employers through pension plans that are administered through trusts. Implementation of this statement will require the School District to record a liability for its proportionate share of the Net Pension Liability of pension plans in which it participates. Actuarial estimates are currently being made to determine the School District's liability, the effects of which are believed to be material.
CASH AND CASH EQUIVALENTS
Composition of Deposits
Cash and cash equivalents consist of cash on hand, demand deposits and short-term investments with original maturities of three months or less from the date of acquisition in authorized financial institutions. Official Code of Georgia Annotated Section 45-8-14 authorizes the School District to deposit its funds in one or more solvent banks, insured Federal savings and loan associations or insured chartered building and loan associations.
INVESTMENTS
Composition of Investments
Investments made by the School District in nonparticipating interest-earning contracts (such as certificates of deposit) and repurchase agreements are reported at cost. Participating interest-earning contracts and money market investments with a maturity at purchase of one 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 and equity investments are reported at fair value. The Official Code of Georgia 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 of return 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,
6. The local government investment pool (Georgia Fund 1) administered by the State of Georgia, Office of the State Treasurer,
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 quality risks, custodial credit risks, or interest rate 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.

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HANCOCK COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2014

EXHIBIT "H"

PROPERTY TAXES
The Hancock County Board of Commissioners adopted the property tax levy for the 2013 tax digest year (calendar year) on September 11, 2013 (levy date) based on property values as of January 1, 2013. Taxes were due on November 20, 2013 (lien date). Taxes collected within the current fiscal year or within 60 days after year-end on the 2013 tax digest are reported as revenue in the governmental funds for fiscal year 2014. The Hancock County Tax Commissioner bills and collects the property taxes for the School District, withholds 2.5% of taxes collected as a fee for tax collection and remits the balance of taxes collected to the School District. Property tax revenues, at the fund reporting level, during the fiscal year ended June 30, 2014, for maintenance and operations amounted to $4,945,843.

The tax millage rate levied for the 2013 tax year (calendar year) for the Hancock County Board of Education was as follows (a mill equals $1 per thousand dollars of assessed value):

School Operations

14.193 mills

Additionally, Title Ad Valorem Tax revenues, at the fund reporting level, amounted to $109,334 during fiscal year ended June 30, 2014.
SALES TAXES
Education Special Purpose Local Option Sales Tax, at the fund reporting level, during the year amounted to $460,954 and is to be used for capital outlay for educational purposes or debt service. This sales tax was authorized by local referendum and the sales tax must be re-authorized at least every five years.
INVENTORIES
Food Inventories
On the basic financial statements, inventories of donated food commodities used in the preparation of meals 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, 2014, 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 of assets 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. During the fiscal year under review, no events or changes in circumstances affecting a capital asset that may indicate impairment were known to the School District.

- 12 -

HANCOCK COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2014

EXHIBIT "H"

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

Capitalization Policy

Estimated Useful Life

Land Construction In Progress Land Improvements Buildings and Improvements Machinery and Equipment Intangible Assets

All

N/A

$

5,000

N/A

$

5,000

50 years

$

5,000 15 to 80 years

$

5,000

3 to 20 years

$

300,000

3 to 20 years

Depreciation is used to allocate the actual or estimated historical cost of all capital assets over estimated useful lives, with the exception of intangible assets which are amortized.
Amortization of intangible assets such as water, timber, and mineral rights, easements, patents, trademarks, copyrights and internally generated software is computed using the straight-line method over the estimated useful lives of the assets.
DEFERRED OUTFLOWS/INFLOWS OF RESOURCES
In addition to assets, the statement of net position and/or the balance sheet will sometimes report a separate section for deferred outflows of resources. This separate financial statement element represents a consumption of resources that applies to a future period(s) and therefore will not be recognized as an outflow of resources (expense/expenditure) until then. The School District did not have any items that qualified for reporting in this category for the year ended June 30, 2014.
In addition to liabilities, the statement of net position and/or the balance sheet will sometimes report a separate section for deferred inflows of resources. This separate financial statement element represents an acquisition of resources that applies to a future period(s) and therefore will not be recognized as an inflow of resources (revenue) until that time. The School District has only one type of item, which arises only under a modified accrual basis of accounting that qualifies for reporting in this category. Accordingly, the item, unavailable revenue, is reporting only in the governmental funds balance sheet. The governmental funds report unavailable revenues from property taxes and grants. These amounts are deferred and will be recognized as an inflow of resources in the period in which the amounts become available.
GENERAL OBLIGATION BONDS
The School District issues general obligation bonds to provide funds for the acquisition and construction of major capital facilities. In the District-wide financial statements, bond premiums and discounts are deferred and amortized over the life of the bonds using the straight-line method.
In the fund financial statements, the School District recognizes bond premiums and discounts, as well as bond issuance costs during the fiscal year bonds are issued. Premiums received on debt issuances are reported as other financing sources while discounts on debt issuances are reported as other financing uses. Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as debt service expenditures. 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 Position.

- 13 -

HANCOCK COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2014

EXHIBIT "H"

NET POSITION
The School District's net position in the District-wide Statements is classified as follows:

Net investment in capital assets - This represents the School District's total investment in capital assets, net of outstanding debt obligations related to those capital assets. To the extent debt has been incurred but not yet expended for capital assets, such amounts are not included as a component of net investment in capital assets.

Restricted net position - This represents resources for which the School District is legally or contractually obligated to spend resources for continuation of Federal Programs, debt service and capital projects in accordance with restrictions imposed by external third parties.

Unrestricted net position - Unrestricted net position represents resources derived from property taxes, sales taxes, grants and contributions not restricted to specific programs, charges for services, and miscellaneous revenues. These resources are used for transactions relating to the educational and general operations of the School District, and may be used at the discretion of the Board to meet current expenses for those purposes.

FUND BALANCES
The School District's fund balances are classified as follows:

Nonspendable Amounts that cannot be spent either because they are in a nonspendable form or because they are legally or contractually required to be maintained intact.

Restricted Constraints are placed on the use of resources are either (1) externally imposed conditions by creditors, grantors, contributors, or laws and regulations of other governments or (2) imposed by law through constitutional provisions or enabling legislation.

Committed Amounts that can be used only for specific purposes pursuant to constraints imposed by formal action of the Board of Education. The Board of Education is the School District's highest level of decision-making authority, and the formal action that is required to be taken to establish, modify, or rescind a fund balance commitment is a resolution approved by the Board. Committed fund balance also should incorporate contractual obligations to the extent that existing resources in the fund have been specifically committed for use in satisfying those contractual requirements.

Assigned Amounts that are constrained by the School District's intent to be used for specific purposes, but are neither restricted nor committed. The intent should be expressed by (1) the Board of Education or (2) the budget or finance committee, or the Superintendent, or designee, to assign amounts to be used for specific purposes.

Unassigned The residual classification for the General Fund. This classification represents fund balances that has not been assigned to other funds and that has not been restricted, committed, or assigned to specific purposes within the General Fund.

When multiple categories of fund balance are available for expenditure, the School District will start with the most restricted category and spend those funds first before moving down to the next category with available funds.

DEFICIT FUND BALANCES
The fund reporting a deficit fund balance at June 30, 2014, is as follows:

Fund Type/Fund Name

Deficit Balance

Governmental Fund Type General Fund

$

157,680

The School District plans to eradicate the deficit through a reduction in spending.

- 14 -

HANCOCK COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2014

EXHIBIT "H"

USE OF ESTIMATES
The preparation of the financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results may differ from those estimates.
NOTE 3: BUDGETARY DATA
The budget is a complete financial plan for the School District's fiscal year, and is based upon careful estimates of expenditures together with probable funding sources. The budget is legally adopted each year for the general, debt service, and capital projects funds. There is no statutory prohibition regarding over expenditure of the budget at any level. The budget for all governmental funds, except for various school activity (principal) accounts, is prepared and adopted by fund. The legal level of budgetary control was established by the Board at the aggregate fund level. The budget for the General Fund was prepared in accordance with accounting principles generally accepted in the United States of America.
The budgetary process begins with the School District's administration presenting an initial budget for the Board's review. The administration makes revisions as necessary based on the Board's guidelines and a tentative budget is approved. After approval of this tentative budget by the Board, such budget is advertised at least once in a newspaper of general circulation in the locality, as well as the School District's website. At the next regularly scheduled meeting of the Board after advertisement, the Board receives comments on the tentative budget, makes revisions as necessary and adopts a final budget. The approved budget is then submitted, in accordance with provisions of Official Code of Georgia Annotated 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.
If expenditure of funds in any fund is anticipated to be more than the budgeted amount, the Superintendent shall request Board approval for the budget amendment. Any position or expenditure not previously approved in the annual budget that exceeds $5,000 shall require Board approval unless the Superintendent deems the position or purchase an emergency. In such case, the expenditure shall be reported to the Board at its regularly scheduled meeting. Under no circumstances is the Superintendent or other staff person authorized to spend funds that exceed the total budget without approval by the Board.
See Schedule 1 General Fund Schedule of Revenues, Expenditures and Changes in Fund Balances Budget to Actual for a detail of any over/under expenditures during the fiscal year under review.
NOTE 4: DEPOSITS AND INVESTMENTS
COLLATERALIZATION OF DEPOSITS
Official Code of Georgia Annotated (O.C.G.A.) Section 45-8-12 provides that there shall not be on deposit at any time in any depository for a time longer than ten days a sum of money which has not been secured by surety bond, by guarantee of insurance, or by collateral. The aggregate of the face value of such surety bond and the market value of securities pledged shall be equal to not less than 110 percent of the public funds being secured after the deduction of the amount of deposit insurance. If a depository elects the pooled method (O.C.G.A. Section 45-8-13.1) the aggregate of the market value of the securities pledged to secure a pool of public funds shall be not less than 110 percent of the daily pool balance.
Acceptable security for deposits consists of any one of or any combination of the following:
1. Surety bond signed by a surety company duly qualified and authorized to transact business within the State of Georgia,

- 15 -

HANCOCK COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2014

EXHIBIT "H"

2. Insurance on accounts provided by the Federal Deposit Insurance Corporation,

3. Bonds, bills, notes, certificates of indebtedness or other direct obligations of the United States or of the State of Georgia,

4. Bonds, bills, notes, certificates of indebtedness or other obligations of the counties or municipalities of the State of Georgia,

5. Bonds of any public authority created by the laws of the State of Georgia, providing that the statute that created the authority authorized the use of the bonds for this purpose,

6. Industrial revenue bonds and bonds of development authorities created by the laws of the State of Georgia, and

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

CATEGORIZATION OF DEPOSITS
Custodial credit risk is the risk that in the event of a bank failure, the School District's deposits may not be returned to it. The School District does not have a deposit policy for custodial credit risk. At June 30, 2014, the bank balances were $591,748. The bank balances were entirely covered by Federal Depository Insurance or collateralized with securities held by the pledging financial institution's agent in the School District's name.

CATEGORIZATION OF INVESTMENTS
At June 30, 2014, the carrying value of the School District's total investment was $304,575. The School District's investments as of June 30, 2014, are presented below. All investments are presented by investment type and debt securities are presented by maturity.

Investment Type

Maturities

Rating*

Fair Value

Georgia Fund 1 Fidelity Institutional Treasury
(Money Market Mutual Fund)

62 day weighted average 35 day weighted average

AAAf $ AAAm

267,303 37,272

Total Investments * Ratings as per Standard and Poor's

$

304,575

Interest Rate Risk
Interest rate risk is the risk that changes in interest rates of debt investment will adversely affect the fair value of an investment. The School District does not have a formal policy for managing interest rate risk.
Custodial Credit Risk
Custodial credit risk for investments is the risk that, in the event of the failure of the counterparty to a transaction, the School District will not be able to recover the value of the investment or collateral securities that are in the possession of an outside party. The School District does not have a formal policy for managing custodial credit risk for investments.
At June 30, 2014, $37,272 of the School District's applicable investments were uninsured, and are held by either the counterparty or the counterparty's trust department or agent in the School District's name.
- 16 -

HANCOCK COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2014

EXHIBIT "H"

Credit Quality Risk
Credit quality risk is the risk that an issuer or other counterparty to an investment will not fulfill its obligations. The School District does not have a formal policy for managing custodial credit risk.

NOTE 5: 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 6: CAPITAL ASSETS
The following is a summary of changes in the Capital Assets during the fiscal year:

Governmental Activities Capital Assets, Not Being Depreciated:
Land

Balances July 1, 2013

Increases

Decreases

Balances June 30, 2014

$

162,777 $

0$

0$

162,777

Capital Assets, Being Depreciated: Buildings and Improvements Equipment Land Improvements

15,331,483 3,401,998 308,896

65,000

17,100

15,331,483 3,449,898 308,896

Less: Accumulated Depreciation: Buildings and Improvements Equipment Land Improvements

7,524,860 2,372,339
93,357

320,313 184,956
20,593

17,100

7,845,173 2,540,195
113,950

Total Capital Assets, Being Depreciated, Net

9,051,821

-460,862

0

8,590,959

Governmental Activity Capital Assets - Net $

9,214,598 $

-460,862 $

0$

8,753,736

Capital assets being acquired under capital leases as of June 30, 2014, are as follows:
Governmental Activities

Equipment Less: Accumulated Depreciation

$

733,962

243,887

$

490,075

Current year depreciation expense by function is as follows:

Instruction

Support Services

Pupil Services

$

Maintenance and Operation of Plant

Student Transportation Services

Central Support Services

Food Services

$
2,339 61,017 146,637
4,726

$

305,746
214,719 5,397
525,862

- 17 -

HANCOCK COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2014

EXHIBIT "H"

NOTE 7: INTERFUND ASSETS AND LIABILITIES
Due to and due from other funds are recorded for interfund receivables and payables which arise from interfund transactions. Interfund balances at June 30, 2014, consisted of the following:

Due To

Due From District-wide
Capital Projects Fund

General Fund

$

260,472

Interfund balances were incurred to repay the General Fund for capital construction project expenditures with future SPLOST receipts.

NOTE 8: INTERFUND TRANSFERS
Interfund transfers for the year ended June 30, 2014, consisted of the following:

Transfers to

Transfers From
District-wide Capital
Projects Fund

Debt Service Fund

$

235,915

Transfers from the District-wide Capital Projects Fund were used to move SPLOST revenue to the Debt Service Fund for the payment of bonds.

NOTE 9: 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, job related illness or injuries to employees, and acts of God. 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 expenses/expenditures and liability being reported when it is probable that a loss has occurred, and the amount of that loss can be reasonably estimated.

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

Beginning of Year Liability

Claims and Changes in Estimates

Claims Paid

End of Year Liability

2013 $

0$

31,824 $

31,824 $

0

2014 $

0$

7,608 $

7,608 $

0

- 18 -

HANCOCK COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2014

EXHIBIT "H"

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

Position Covered

Amount

Superintendent Finance Director

$

100,000

$

100,000

NOTE 10: 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 were received by the School District. Article IX, Section V, Paragraph V of the Constitution of the State of Georgia limits the aggregate amount of short-term debt to 75 percent of the total gross income from taxes collected in the preceding year and requires all short-term debt to be repaid no later than December 31 of the calendar year in which the debt was incurred.

Short-term debt activity for the fiscal year is as follows:

Beginning Balance

Issued

Redeemed

Ending Balance

Tax Anticipation Notes

$

0$

1,175,000 $

1,175,000 $

0

NOTE 11: LONG-TERM LIABILITIES

CAPITAL LEASES
The Hancock County Board of Education entered into various lease agreements as lessee for buses and various equipment. 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 2005

3.15% - 4.10% $

435,000

The changes in Long-Term Liabilities during the fiscal year ended June 30, 2014, were as follows:

Balance July 1, 2013 (Restated)

Governmental Activities

Additions

Deductions

Balance June 30, 2014

Due Within One Year

G. O. Bonds Capital Leases

$

645,000

$

210,000 $

435,000 $

215,000

706,575 $

65,001

242,744

528,832

250,672

$

1,351,575 $

65,001 $

452,744 $

963,832 $

465,672

- 19 -

HANCOCK COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2014

EXHIBIT "H"

At June 30, 2014, payments due by fiscal year which includes principal and interest for these items are as follows:

Fiscal Year Ended June 30:

Capital Leases

Principal

Interest

2015 2016 2017 2018

$

250,672 $

255,775

11,001

11,384

16,819 8,626 777 395

Total Principal and Interest Fiscal Year Ended June 30:

$

528,832 $

26,617

General Obligation Debt

Principal

Interest

2015 2016

$

215,000 $

220,000

17,620 9,020

Total Principal and Interest

$

435,000 $

26,640

NOTE 12: ON-BEHALF PAYMENTS
The School District has recognized revenues and costs in the amount of $631,484 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 Certificated Personnel In the amount of $591,348
Office of the State Treasurer Paid to the Public School Employees' Retirement System For Public School Employees' Retirement (PSERS) Employer's Cost In the amount of $40,136
Funds paid to the Georgia Department of Community Health by the Georgia Department of Education on behalf of the School District are reported as part of the Quality Basic Education revenue allotments on Schedule 3 Schedule of State Revenue.
NOTE 13: 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 of routine School District operations. The ultimate disposition of these proceedings is not presently determinable, but is not believed to be material to the basic financial statements.

- 20 -

HANCOCK COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2014

EXHIBIT "H"

NOTE 14: POST-EMPLOYMENT BENEFITS
GEORGIA SCHOOL PERSONNEL POST-EMPLOYMENT HEALTH BENEFIT FUND
Plan Description. The Georgia School Personnel Post-employment Health Benefit Fund (School OPEB Fund) is a cost-sharing multiple-employer defined benefit post-employment healthcare plan that covers eligible former employees of public school systems, libraries and regional educational service agencies. The School OPEB Fund provides health insurance benefits to eligible former employees and their qualified beneficiaries through the State Employees Health Benefit Plan administered by the Department of Community Health. The Official Code of Georgia Annotated (O.C.G.A.) assigns the authority to establish and amend the benefit provisions of the group health plans, including benefits for retirees, to the Board of Community Health (Board). The Department of Community Health, which includes the School OPEB Fund, issues a separate stand alone financial audit report and a copy can be obtained from the Georgia Department of Audits and Accounts.
Funding Policy. The contribution requirements of plan members and participating employers are established by the Board in accordance with the current Appropriations Act and may be amended by the Board. Contributions of plan members or beneficiaries receiving benefits vary based on plan election, dependent coverage, and Medicare eligibility and election. For members with fewer than five years of service as of January 1, 2012, contributions also vary based on years of service. On average, members with five years or more of service as of January 1, 2012, pay approximately 25 percent of the cost of the health insurance coverage. In accordance with the Board resolution dated December 8, 2011, for members with fewer than five years of service as of January 1, 2012, the State provides a premium subsidy in retirement that ranges from 0% for fewer than 10 years of service to 75% (but no greater than the subsidy percentage offered to active employees) for 30 or more years of service. The subsidy for eligible dependents ranges from 0% to 55% (but no greater than the subsidy percentage offered to dependents of active employees minus 20%). No subsidy is available to Medicare eligible members not enrolled in a Medicare Advantage Option. The Board of Community Health sets all member premiums by resolution and in accordance with the law and applicable revenue and expense projections. Any subsidy policy adopted by the Board may be changed at any time by Board resolution and does not constitute a contract or promise of any amount of subsidy.
Participating employers are statutorily required to contribute in accordance with the employer contribution rates established by the Board. The contribution rates are established to fund all benefits due under the health insurance plans for both active and retired employees based on projected "payas-you-go" financing requirements. Contributions are not based on the actuarially calculated annual required contribution (ARC) which represents a level of funding that, if paid on an ongoing basis, is projected to cover normal cost each year and amortize any unfunded actuarial liabilities (or funding excess) over a period not to exceed thirty years.
The combined active and retiree contribution rates established by the Board for employers participating in the School OPEB Fund were as follows for the fiscal year ended June 30, 2014:
For certificated teachers, librarians and regional educational service agencies and certain other eligible participants:
July 1, 2013 - June 30, 2014 $945.00 per member per month
For non-certificated school personnel:
July 1, 2013 - June 30, 2014 $596.20 per member per month
No additional contribution was required by the Board for fiscal year 2014 nor contributed to the School OPEB Fund to prefund retiree benefits. Such additional contribution amounts are determined annually by the Board in accordance with the School plan for other post-employment benefits and are subject to appropriation.
- 21 -

HANCOCK COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2014

EXHIBIT "H"

Currently, the state is requiring that local Boards of Education pay only on active employees. The School District's contribution to the health insurance plans for the fiscal years ended June 30, 2014, 2013 and 2012 was $1,476,738, $1,340,967 and $1,006,666, respectively, which equaled the required contribution. Currently, the State of Georgia has been making the remaining contributions to fund the pay as you go financing on behalf of all local Boards of Education (see Note 12 for discussion of on-behalf payments).

NOTE 15: RETIREMENT PLANS

TEACHERS' RETIREMENT SYSTEM OF GEORGIA (TRS)
Plan Description. The TRS is a cost-sharing multiple-employer defined benefit plan created in 1943 by an act of the Georgia General Assembly to provide retirement benefits for qualifying employees in educational service. A Board of Trustees comprised of active and retired members and ex-officio State employees is ultimately responsible for the administration of TRS. 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.

On October 25, 1996, the Board created the Supplemental Retirement Benefits Plan of the Georgia Teachers' Retirement System (SRBP-TRS). SRBP-TRS was established as a qualified excess benefit plan in accordance with Section 415 of the Internal Revenue Code (IRC) as a portion of TRS. The purpose of SRBP-TRS is to provide retirement benefits to employees covered by TRS whose benefits are otherwise limited by IRC Section 415. Beginning July 1, 1997, all members and retired former members in TRS are eligible to participate in the SRBP-TRS whenever their benefits under TRS exceed the IRC Section 415 imposed limitation on benefits.

TRS provides service retirement, disability retirement, and survivor's benefits. The benefit structure of TRS is defined and may be amended by State statute. A member is eligible for normal service retirement after 30 years of creditable service, regardless of age, or after 10 years of service and attainment of age 60. A member is eligible for early retirement after 25 years of creditable service.

Normal retirement (pension) benefits paid to members are equal to 2% of the average of the member's two highest paid consecutive years of service, multiplied by the number of years of creditable service up to 40 years. Early retirement benefits are reduced by the lesser of one-twelfth of 7% for each month the member is below age 60 or by 7% for each year or fraction thereof by which the member has less than 30 years of service. It is also assumed that certain cost-of-living adjustments, based on the Consumer Price Index, will be made in future years. Retirement benefits are payable monthly for life. A member may elect to receive a partial lump-sum distribution in addition to a reduced monthly retirement benefit. Death, disability and spousal benefits are also available.

Funding Policy. TRS is funded by member and employer contributions as adopted and amended by the Board of Trustees. Members become fully vested after 10 years of service. If a member terminates with less than 10 years of service, no vesting of employer contributions occurs, but the member's contributions may be refunded with interest. Member contributions are limited by State law to not less than 5% or more than 6% of a member's earnable compensation. Member contributions as adopted by the Board of Trustees for the fiscal year ended June 30, 2014, were 6.00% of annual salary. Employer contributions required for fiscal year 2014 were 12.28% of annual salary as required by the June 30, 2011, actuarial valuation.

Employer contributions for the current fiscal year and the preceding two fiscal years are as follows:

Fiscal Year

Percentage Contributed

Required Contribution

2014 2013 2012

100% 100% 100%

$

809,518

$

826,253

$

718,507

- 22 -

HANCOCK COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2014

EXHIBIT "H"

PUBLIC SCHOOL EMPLOYEES' RETIREMENT SYSTEM (PSERS)
Bus drivers, lunchroom personnel, and maintenance and custodial personnel are members of the Public School Employees' Retirement System of Georgia. The System is funded by contributions by the employees and by the State of Georgia. The School District makes no contribution to this plan. See Note 12: On-behalf payments for information on the contributions made by the State of Georgia on behalf of the School District's employees.
NOTE 16: SUBSEQUENT EVENT
On July 7, 2014, the Hancock County Board of Education issued a $1,175,500 temporary loan in advance of property tax collections. Proceeds from this short-term loan were used to provide cash for operations until property tax collections were received by the School District. The maturity date of the loan was December 31, 2014. Three draws totaling $1,175,500 were required to meet the cash flow needs of the School District. The note was repaid on December 5, 2014.

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HANCOCK COUNTY BOARD OF EDUCATION GENERAL FUND
SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL
YEAR ENDED JUNE 30, 2014

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 Food Services Operation
Debt Service
Total Expenditures
Excess of Revenues over (under) Expenditures
OTHER FINANCING SOURCES (USES)
Capital Leases Other Sources
Total Other Financing Sources (Uses)
Net Change in Fund Balances
Fund Balances - Beginning
Fund Balances - Ending

NONAPPROPRIATED BUDGETS

ORIGINAL (1)

FINAL (1)

ACTUAL AMOUNTS

VARIANCE OVER/UNDER

$ 5,083,676 $ 5,083,676 $ 5,055,177 $

13,280

13,280

44,187

4,146,736

5,364,984

4,484,624

2,202,116

3,883,749

4,570,473

212,679

2,000

7,000

775

185,000

937,529

485,247

11,632,808

15,290,218

14,853,162

-28,499 30,907 -880,360 686,724 212,679 -6,225 -452,282
-437,056

6,017,241
576,640 325,404 165,400 498,877 796,538 340,669 1,517,870 1,214,405 463,050 107,147
88,591
12,111,832
-479,024

7,340,295
805,211 795,556 170,400 494,924 829,369 371,505 1,596,816 1,305,272 332,150 253,223 1,298,254
15,592,975
-302,757

6,750,785
690,065 714,358
79,460 295,341 798,355 518,925 1,615,657 1,344,736 439,584 213,111 1,010,086
33,348
14,503,811
349,351

589,510
115,146 81,198 90,940
199,583 31,014
-147,420 -18,841 -39,464
-107,434 40,112
288,168 -33,348
1,089,164
652,108

3,000 3,000 -476,024 -439,487

3,000 3,000 -299,757 -439,487

65,001
65,001 414,352 -439,487

65,001 -3,000 62,001 714,109
0

$

-915,511 $

-739,244 $

-25,135 $

714,109

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 actual revenues and expenditures of the various principal accounts are $158,642 and $129,808, respectively.
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 -

HANCOCK COUNTY BOARD OF EDUCATION SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
YEAR ENDED JUNE 30, 2014

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 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 Pass-Through From Georgia Department of Education ARRA - Race-to-the-Top Incentive Grants Career and Technical Education - Basic Grants to States Improving Teacher Quality State Grants Rural Education Title I - Grants to Local Education Agencies Twenty-First Century Community Learning Centers
Total Other Programs
Total U. S. Department of Education
Health and Human Services, U. S. Department of Direct Head Start
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) 919,880 (1)
919,880

84.027

N/A

84.173

N/A

84.395

N/A

84.048

N/A

84.367

N/A

84.358

N/A

84.010

N/A

84.287

N/A

* 93.600

280,826 6,269
287,095
739 12,148 110,584 44,107 813,329 536,498 1,517,405 1,804,500
1,985,889
45,683

Total Expenditures of Federal Awards

$

4,755,952

N/A = Not Available

Notes to the Schedule of Expenditures of Federal Awards

(1) Includes the Federally assigned value of donated commodities for the Food Donation Program in the amount of $48,188.
(2) Expenditures for the funds earned on the School Breakfast Program ($222,427) were not maintained separately and are included in the 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 Hancock 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.

- 26 -

HANCOCK COUNTY BOARD OF EDUCATION SCHEDULE OF STATE REVENUE YEAR ENDED JUNE 30, 2014

AGENCY/FUNDING
GRANTS Bright From the Start: Georgia Department of Early Care and Learning Pre-Kindergarten Program
Education, Georgia Department of Quality Basic Education (1) 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 Gifted Student - Category VI Remedial Education Program Alternative Education Program Media Center Program 20 Days Additional Instruction Staff and Professional Development Indirect Cost Central Administration School Administration Facility Maintenance and Operations Vocational Supervisors Mid-term Adjustment Hold-Harmless Principal Staff and Professional Development Technology to Support Digital Learning Bonds Amended Formula Adjustment Categorical Grants Pupil Transportation Regular Nursing Services Other State Programs Food Services Math and Science Supplements Preschool Handicapped Program Pupil Transportation - State Bonds Vocational Education
Office of the State Treasurer Public School Employees' Retirement

(1) Payments to the Georgia Department of Community Health by the Georgia Department of Education on behalf of the School District in the amount of $591,348 are included as part of the Quality Basic Education revenue allotments above.

See notes to the basic financial statements.

- 27 -

SCHEDULE "3"

GOVERNMENTAL FUND TYPE GENERAL FUND

$

187,000

226,405 23,964
565,512 124,717 227,805
37,364 494,890 444,320 170,670 797,734
50,106 94,166 32,129 85,536 26,793 16,539
273,976 272,186 196,592
6,683 199,982
701 11,070 -594,630
321,910 19,448
21,303 8,489
14,995 76,220
9,913
40,136

$

4,484,624

HANCOCK COUNTY BOARD OF EDUCATION SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS
YEAR ENDED JUNE 30, 2014

SCHEDULE "4"

PROJECT
Acquiring, constructing and equipping new school buildings and other buildings and facilities useful or desirable in connection therewith, including a new auditorium/performing arts center, (ii) acquiring, constructing and equipping administrative offices, auxiliary education programs, and miscellaneous office space, (iii) acquiring communication equipment, technology, including computers, and other equipment, including buses and transportation equipment, (iv) adding to, renovating, repairing, improving and equipping existing school buildings and grounds, agricultural facilities and athletic facilities, and other buildings and facilities useful or desirable in connection therewith, including but not limited to M.E. Lewis Elementary School and Hancock Central Middle/High School, (v) acquiring land useful or desirable for the purpose of future expansion and associated costs, and (vi) completing any capital outlay projects authorized in connection with the sales and use tax currently in effect
Project #1 M.E. Lewis Elementary School renovation/New Athletic facilities
Project #2 Debt Service paid on prior Bonds
Project #3 Purchase of school buses
Project #4 Purchase of Technology
Other Various Projects

ORIGINAL ESTIMATED
COST (1)

CURRENT ESTIMATED COSTS (2)

AMOUNT EXPENDED IN CURRENT YEAR (3)

AMOUNT EXPENDED IN PRIOR YEARS (3)

TOTAL COMPLETION
COST

EXCESS PROCEEDS NOT
EXPENDED

ESTIMATED COMPLETION
DATE

$ 195,000 $ 253,818

$ 253,818 $

0$

1,167,100 1,657,149 $

235,915 1,421,234

800,000

800,000

134,302

134,302

600,000 987,900

600,000

99,847

0 June 30, 2016 June 30, 2016 June 30, 2016 June 30, 2016 June 30, 2016

$ 3,750,000 $ 3,310,967 $

470,064 $ 1,809,354 $

0 $

0

(1) The School District's original cost estimate as specified in the resolution calling for the imposition of the Local Option Sales Tax.
(2) The School District's current estimate of total cost for the projects. Includes all cost from project inception to completion.
(3) The voters of Hancock County approved the imposition of a 1% sales tax to fund the above projects and retire associated debt. Amounts expended for these projects may include sales tax proceeds, state, local property taxes and/or other funds over the life of the projects.

See notes to the basic financial statements.

- 28 -

HANCOCK COUNTY BOARD OF EDUCATION GENERAL FUND - QUALITY BASIC EDUCATION PROGRAMS (QBE)
ALLOTMENTS AND EXPENDITURES - BY PROGRAM YEAR ENDED JUNE 30, 2014

SCHEDULE "5"

DESCRIPTION
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 III Gifted Student - Category VI Remedial Education Program Alternative Education Program
TOTAL DIRECT INSTRUCTIONAL PROGRAMS
Media Center Program Staff and Professional Development
TOTAL QBE FORMULA FUNDS

ALLOTMENTS FROM GEORGIA DEPARTMENT OF EDUCATION (1) (2)

ELIGIBLE QBE PROGRAM COSTS

SALARIES

OPERATIONS

TOTAL

$

326,912 $ 228,000

36,609

73,461

803,894

227,882

184,255

363,665

333,583

293,707

$

228,000

73,461

227,882

363,665

293,707

68,088 709,698 667,260 233,222 1,158,352
71,487 118,877
49,219

144,776 831,517 1,014,787 $ 192,190
47,468
75,009

7,023 8,504

144,776 831,517 1,021,810 200,694
47,468
75,009

4,761,456

3,492,462

15,527

3,507,989

123,481 23,642

77,126

2,334

79,460 30,062

$

4,908,579 $ 3,569,588 $

17,861 $

3,617,511

(1) Comprised of State Funds plus Local Five Mill Share. (2) Allotments do not include the impact of the State amended formula adjustment.

See notes to the basic financial statements.

- 29 -

SECTION II COMPLIANCE AND INTERNAL CONTROL REPORTS

Greg S. Griffin
STATE AUDITOR
(404) 656-2174

DEPARTMENT OF AUDITS AND ACCOUNTS
270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400
July 27, 2015

Honorable Nathan Deal, 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 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, 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, the financial statements of the governmental activities, each major fund, and the aggregate remaining fund information of Hancock County Board of Education as of and for the year ended June 30, 2014, and the related notes to the financial statements, which collectively comprise Hancock County Board of Education's basic financial statements and have issued our report thereon dated July 27, 2015.
Internal Control Over Financial Reporting
In planning and performing our audit of the financial statements, we considered Hancock County Board of Education's internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the Hancock County Board of Education's internal control. Accordingly, we do not express an opinion on the effectiveness of the Hancock County Board of Education's internal control.
Our consideration of internal control was for the limited purpose described in the preceding paragraph and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies and therefore, material weaknesses or significant deficiencies may exist that were not identified. However, as described in the accompanying Schedule of Findings and Questioned Costs, we identified certain deficiencies in internal control over financial reporting that we consider to be material weaknesses and significant deficiencies.

2014YB-60

A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect and correct misstatements on a timely basis. A material weakness is a deficiency, or combination of deficiencies, in internal control such that there is a reasonable possibility that a material misstatement of the entity's financial statements will not be prevented, or detected and corrected on a timely basis. We consider the deficiencies described in the accompanying Schedule of Findings and Questioned Costs as items FS 2014-01, FS 2014-004, and FS 2014-005 to be material weaknesses.
A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. We consider the deficiencies described in the accompanying Schedule of Findings and Questioned Costs as items FS 2014-002, FS 2014-003, FS 2014-006, FS 2014-007 and FS 2014008 to be significant deficiencies.
Compliance and Other Matters
As part of obtaining reasonable assurance about whether Hancock County Board of Education's financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, 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 an instance of noncompliance or other matters that are required to be reported under Government Auditing Standards and which is described in the accompanying Schedule of Findings and Questioned Costs as item FS 2014-004.
We also noted certain matters that we have reported to management of Hancock County Board of Education in a separate letter dated July 27, 2015.
Hancock County Board of Education's Response to Findings
Hancock County Board of Education's response to the findings identified in our audit is described in the accompanying Schedule of Findings and Questioned Costs. Hancock County Board of Education's response was not subjected to the auditing procedures applied in the audit of the financial statements and, accordingly, we express no opinion on it.
Purpose of this Report
The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the entity's internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the entity's internal control and compliance. Accordingly, this communication is not suitable for any other purpose.
Respectfully submitted,

GSG:as 2014YB-60

Greg S. Griffin State Auditor

Greg S. Griffin
STATE AUDITOR
(404) 656-2174

DEPARTMENT OF AUDITS AND ACCOUNTS
270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400
July 27, 2015

Honorable Nathan Deal, 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 REPORT ON COMPLIANCE FOR EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE REQUIRED BY OMB CIRCULAR A-133
Ladies and Gentlemen:
Report on Compliance for Each Major Federal Program
We have audited Hancock County Board of Education's compliance with the types of compliance requirements described in the OMB Circular A-133 Compliance Supplement that could have a direct and material effect on each of its major federal programs for the year ended June 30, 2014. Hancock 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.
Management's Responsibility
Management is responsible for compliance with the requirements of laws, regulations, contracts, and grants applicable to its federal programs.
Auditor's Responsibility
Our responsibility is to express an opinion on compliance for each of Hancock County Board of Education's major federal programs based on our audit of the types of compliance requirements referred to above. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and OMB Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations. Those standards and OMB 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 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 on compliance for each major federal program. However, our audit does not provide a legal determination of Hancock County Board of Education's compliance.
2014SA-10

Opinion on Each Major Federal Program
In our opinion, the Hancock County Board of Education complied, in all material respects, with the types of compliance requirements referred to above that could have a direct and material effect on each of its major federal programs for the year ended June 30, 2014.
Report on Internal Control over Compliance
Management of Hancock County Board of Education is responsible for establishing and maintaining effective internal control over compliance with the types of compliance requirements referred to above. In planning and performing our audit of compliance, we considered Hancock County Board of Education's internal control over compliance with the types of requirements that could have a direct and material effect on each major federal program to determine the auditing procedures that are appropriate in the circumstances for the purpose of expressing an opinion on compliance for each major federal program and to test and report on internal control over compliance in accordance with OMB Circular A-133, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of the Hancock County Board of Education's internal control over compliance.
A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a federal program on a timely basis. A material weakness in internal control over compliance is a deficiency, or combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a federal program will not be prevented, or detected and corrected, on a timely basis. A significant deficiency in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance with a type of compliance requirement of a federal program that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance.
Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over compliance that might be material weaknesses or significant deficiencies. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified.
The purpose of this report on internal control over compliance is solely to describe the scope of our testing of internal control over compliance and the results of that testing based on the requirements of OMB Circular A-133. Accordingly, this report is not suitable for any other purpose.
Respectfully submitted,

GSG:as 2014SA-10

Greg S. Griffin State Auditor

SECTION III 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, 2014

PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

FINDING CONTROL NUMBER

AUDITEE'S RESPONSE/STATUS

SEE AUDITOR'S COMMENTS

FS-6701-12-01

Further Action Not Warranted

(1)

FS-6701-12-02

Further Action Not Warranted

(1)

FS-6701-12-03

Further Action Not Warranted

(1)

FS-6701-12-04

Further Action Not Warranted

(1)

FS-6701-12-06

Further Action Not Warranted

(1)

FS-6701-12-07

Previously Reported Corrective Action Implemented

FS-6701-12-08

Further Action Not Warranted

(1)

FS-6701-12-09

Further Action Not Warranted

(1)

FS-6701-13-01

Unresolved - See Corrective Action/Responses

FS-6701-13-02

Unresolved - See Corrective Action/Responses

FS-6701-13-03

Partially Resolved - See Corrective Action/Responses

FS-6701-13-04

Unresolved - See Corrective Action/Responses

FS-6701-13-05

Unresolved - See Corrective Action/Responses

FS-6701-13-06

Previously Reported Corrective Action Implemented

FS-6701-13-07

Partially Resolved - See Corrective Action/Responses

FS-6701-13-08

Unresolved - See Corrective Action/Responses

AUDITOR'S COMMENTS

(1) Findings of this nature have been repeated in fiscal year 2013 and fiscal year 2014.

CORRECTIVE ACTION/RESPONSES

ACCOUNTING CONTROLS (OVERALL) Inadequate Access Controls Separation of Duties Finding Control Number: FS-6701-13-01

We concur with this finding. The School District will implement procedures to ensure that access control duties are segregated.

CASH AND CASH EQUIVALENTS Inadequate Internal Control Procedures Finding Control Number: FS-6701-13-02

We concur with this finding. The School District will establish procedures to ensure that all bank reconciliations are reviewed and all reconciled items are properly addressed in a timely manner.

- 1 -

HANCOCK COUNTY BOARD OF EDUCATION AUDITEE'S RESPONSE
SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2014
PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS
CORRECTIVE ACTION/RESPONSES
CASH AND CASH EQUIVALENTS EXPENDITURES/LIABILITIES/DISBURSEMENTS REVENUES/RECEIVABLES/RECEIPTS Inadequate Internal Controls over School Activity Accounts Questioned Cost: $3,999.05 Finding Control Number: FS-6701-13-03
We concur with this finding. The School District will implement procedures for designing and maintaining internal controls over Cash and Cash Equivalents. The School District will revise and monitor controls to provide reasonable assurance that transactions are processed according to established procedures and implement procedures to ensure that key accounting functions of custody, record keeping, and authorization are separated, utilize management oversight of these incompatible activities, and implement procedures to ensure that expenditures of school activity accounts are properly documented and approved prior to payment.
DEFICIT FUND BALANCE Budget Preparation/Execution Finding Control Number: FS-6701-13-04
We concur with this finding. The School District will establish policies and procedures to ensure that the School District eliminates the deficit fund balance as required.
EXPENDITURE/LIABILITIES/DISBURSEMENTS Inadequate Internal Controls over Expenditures Finding Control Number: FS-6701-13-05
We concur with this finding. The School District will ensure that adequate controls are in place to ensure that all required activity is included in the financial statement information presented for the audit.
GENERAL LEDGER Inadequate Accounting Procedures Finding Control Number: FS-6701-13-07
We concur with this finding. The School District will review current internal control procedures to ensure that journal entries are properly approved, documented, and posted in the accounting records.
- 2 -

HANCOCK COUNTY BOARD OF EDUCATION AUDITEE'S RESPONSE
SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2014

PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

CAPITAL ASSETS Failure to Adequately Maintain Capital Assets Finding Control Number: FS-6701-13-08

We concur with this finding. The School District will reassess internal control procedures related to capital assets to ensure that they are in place and operating effectively.

PRIOR YEAR FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

FINDING CONTROL NUMBER

AUDITEE'S RESPONSE/STATUS

FA-6701-10-02 FA-6701-11-03 FA-6701-12-02 FA-6701-12-03 FA-6701-12-04 FA-6701-13-01

Partially Resolved - See Corrective Action/Responses Unresolved - See Corrective Action/Responses Partially Resolved - See Corrective Action/Responses Unresolved - See Corrective Action/Responses Previously Reported Corrective Action Implemented Partially Resolved - See Corrective Action/Responses

CORRECTIVE ACTION/RESPONSES

ACTIVITIES ALLOWED/UNALLOWED ALLOWABLE COSTS/COST PRINCIPLES PROCUREMENT, SUSPENSION AND DEBARMENT Inadequate Internal Control Procedures U.S. Department of Agriculture Through Georgia Department of Education Child Nutrition Cluster (CFDA 10.553 and 10.555) Questioned Cost: $645.97 Finding Control Number: FA-6701-10-02

The School District has implemented procedures to ensure that all expenditures charged to Federal programs are allowable under OMB Circular A-87, approved by the program director and Superintendent or Designee and properly documented.

ACTIVITIES ALLOWED/UNALLOWED ALLOWABLE COSTS/COST PRINCIPLES Inadequate Internal Control Procedures U.S. Department of Health and Human Services Head Start Cluster (CFDA 93.600, 93.708 and 93.709) Questioned Cost: $1,020.02 Finding Control Number: FA-6701-11-03

The School District has implemented procedures to ensure that all expenditures charged to Federal programs are allowable under OMB Circular A-87, approved by the program director and Superintendent or Designee and properly documented. In addition, we are waiting on Head Start to determine whether a refund is due.

- 3 -

HANCOCK COUNTY BOARD OF EDUCATION AUDITEE'S RESPONSE
SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2014
PRIOR YEAR FEDERAL AWARD FINDINGS AND QUESTIONED COSTS
CORRECTIVE ACTION/RESPONSES
ACTIVITIES ALLOWED/UNALLOWED ALLOWABLE COSTS/COST PRINCIPLES Inadequate Internal Control Procedures U.S. Department of Agriculture Through Georgia Department of Education Child Nutrition Cluster (CFDA 10.553 and 10.555) Questioned Cost: $2,150.50 Finding Control Number: FA-6701-12-02
The School District has implemented internal controls for monitoring compliance with Federal guidelines. The School District has reviewed internal controls for Federal compliance procedures in place, designed procedures which will enhance monitoring compliance with Federal guidelines and implemented proper internal controls relative to the findings of School Breakfast Program (CFDA No. 10.533), and the Food Services - National School Lunch Program (CFDA No. 10.555).
ACTIVITIES ALLOWED/UNALLOWED ALLOWABLE COSTS/COST PRINCIPLES Inadequate Internal Control Procedures U.S. Department of Health and Human Services Head Start Cluster (CFDA 93.600) Questioned Cost: $10,076.73 Finding Control Number: FA-6701-12-03
The School District will implement procedures to ensure that all expenditures charged to Federal program are allowable under OMB Circular A-87, approved by the program director, and Superintendent or Designee and properly documented. In addition, we are waiting on Head Start to determine whether a refund is due.
ACTIVITIES ALLOWED/UNALLOWED ALLOWABLE COSTS/COST PRINCIPLE PERIOD OF AVAILABILITY Inadequate Internal Control Procedures U.S. Department of Health and Human Services Head Start (CFDA: 93.600) Questioned Cost: $3,569.58 Finding Control Number: FA-6701-13-01
We concur with this finding. The School District will implement procedures to ensure that all expenditures charged to Federal programs are allowable under OMB Circular A-87, approved by the program director, and Superintendent or Designee and properly documented.
- 4 -

SECTION IV FINDINGS AND QUESTIONED COSTS

HANCOCK COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2014

I SUMMARY OF AUDITOR'S RESULTS

Financial Statements

Type of auditor's report issue: Governmental Activities; General Fund; Capital Projects Fund; Debt Service Fund; Aggregate Remaining Fund Information

Unmodified

Internal control over financial reporting:

Material weakness identified?

Yes

Significant deficiencies identified?

Yes

Noncompliance material to financial statements noted:

Yes

Federal Awards

Internal Control over major programs: Material weakness identified? Significant deficiency identified?

No None Reported

Type of auditor's report issued on compliance for major programs: All major programs

Unmodified

Any audit findings disclosed that are required to be reported in

accordance with OMB Circular A-143, Section 510(a)?

Yes

Identification of major programs:

CFDA Numbers

Name of Federal Program or Cluster

10.553, 10.555 93.600

Child Nutrition Cluster Head Start

Dollar threshold used to distinguish between Type A and Type B programs:

$300,000

Auditee qualified as low-risk auditee?

No

- 1 -

HANCOCK COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2014

II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

FS 2014-001 Inadequate Access Controls Separation of Duties

Control Category:

Accounting Controls (Overall)

Internal Control Impact:

Material Weakness

Compliance Impact:

N/A

Description: This is a repeat finding (FS-6701-13-01, FS-6701-12-01, and FS-6701-11-01) from fiscal years ended June 30, 2013, June 30, 2012, and June 30, 2011, respectively. The policies and procedures of the School District were insufficient to provide adequate controls over logical access to the School District's financial system.

Criteria: The School District's management is responsible for providing policies and procedures that allow for the granting of proper access to the School District's financial systems. Access should be reasonable for the user's job duties and no user should be able to perform conflicting duties within the logical environment in the absence of compensating controls outside of the financial system. In addition, finance personnel should not have administrator roles within the financial system.

Condition: A review of access to the School District's financial system revealed several users were granted access that allowed the user to perform conflicting significant duties. A test of compensating controls outside of the financial system revealed those controls were not effective, and therefore, the access that allowed for conflicting duties could have an effect on data that is used in the preparation of the financial statements. In addition, finance personnel were granted administrator roles which allows for addition, modification, and deletion of user access in the financial system. Additionally, physical access to the server room was not limited to technology personnel only.

Cause: In discussing this deficiency with the School District, they stated that the cause was a direct result of the lack of personnel at the School District. Properly separating conflicting significant duties for personnel would negatively impact the School District in day-to-day operations.

Effect or Potential Effect: The lack of adequate controls over the logical access to the School District's financial system may result in errors and/or irregularities not being detected in a timely manner.

Recommendation: Application access controls in the accounting information system should complement the system of internal control by limiting an employee's access to only the accounting functions necessary for the performance of that employee's duties. In the case when management determines separation of duties is not cost beneficial, management should implement compensating controls that assist in assuring that financial transactions are properly processed and reported.

- 2 -

HANCOCK COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2014

II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

Views of Responsible Officials and Corrective Action Plans: We concur with this finding. The School District will implement controls to make sure that employee's only have access to the accounting functions that are necessary for the performance of the employee's job duties.

Contact Person: Title: Telephone: Fax: E-mail:

Dr. Charles Culver Interim Superintendent 706/444-5775 ext. 236 706/444-7026 cculver@hancock.k12.ga.us

Contact Person: Title: Telephone: Fax: E-mail:

Matthias Jones HR/Finance Director 706/444-5775 ext. 125 706/444-7026 mjones@hancock.k12.ga.us

FS 2014-002 Inadequate Internal Control Procedures

Control Categories:

Cash and Cash Equivalents

Investments

Internal Control Impact:

Material Weakness

Compliance Impact:

N/A

Description: This is a repeat finding (FS-6701-13-02, FS-6701-12-02, and FS-6701-11-02) from fiscal years ended June 30, 2013, June 30, 2012, and June 30, 2011, respectively. The accounting procedures of the School District were insufficient to provide adequate internal control procedures over the Cash and Cash Equivalents and Investments functions.

Criteria: The School District's management is responsible for designing and maintaining an adequate system of internal controls that ensure that all cash and investment accounts are supported by and reconciled to either cash on hand or bank accounts held at authorized financial institutions.

Condition: A review of four random months of bank reconciliations for all bank accounts revealed the following deficiencies:
No administrative review was performed on several bank reconciliations for the Head Start, Payroll, SPLOST, General Operating, LGIP and Treasury Fund accounts.
Several bank reconciliations for the Head Start, Payroll, SPLOST, Nutrition, General, LGIP and Treasury Fund accounts were not reconciled in a timely manner.
The Payroll and General Operating accounts contained outstanding checklists with handwritten amounts for which no documentation could be provided.

Cause: In discussing this deficiency with the School District, they stated that the cause was a direct result of the lack of resources to ensuring that internal controls were effective.

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HANCOCK COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2014

II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

Effect or Potential Effect: The lack of adequate control over cash increases the risk for theft, fraud, or misuse of School District resources which may result in errors and/or irregularities not being detected in a timely manner.

Recommendation: The School District should establish procedures to ensure all bank reconciliations are reviewed in a timely manner, all reconciling items are properly addressed in a timely manner, and that outstanding check lists are properly documented.

Views of Responsible Officials and Corrective Action Plans: We concur with this finding. The School District will make sure that all bank reconciliations are completed, and reviewed in a timely manner, and all outstanding checks are documented.

Contact Person: Title: Telephone: Fax: E-mail:

Dr. Charles Culver Interim Superintendent 706/444-5775 ext. 236 706/444-7026 cculver@hancock.k12.ga.us

Contact Person: Title: Telephone: Fax: E-mail:

Matthias Jones HR/Finance Director 706/444-5775 ext. 125 706/444-7026 mjones@hancock.k12.ga.us

FS 2014-003 Inadequate Internal Controls Over School Activity Accounts

Control Category:

Cash and Cash Equivalents

Expenditures/Liabilities/Disbursements

Revenues/Receivables/Receipts

Internal Control Impact:

Significant Deficiency

Compliance Impact:

N/A

Description: This is a repeat finding (FS-6701-13-03, FS-6701-12-03, and FS-6701-11-03) from fiscal years ended June 30, 2013, June 30, 2012, and June 30, 2011, respectively. The accounting procedures of the School District were insufficient to provide adequate internal controls over school activity accounts.

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

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HANCOCK COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2014
II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS
Condition: Expenditures/Liabilities/Disbursements A review of twenty-nine vouchers revealed the following deficiencies:
Seventeen expenditures tested had no evidence of an invoice, a purchase order, or other supporting documentation.
Eighteen expenditures were recorded under an incorrect object code. One expenditure in the amount of $300 was made for unallowable expenses. Seven expenditures tested were not properly preapproved. An expenditure tested was recorded in the incorrect period.
Revenues/Receivables/Receipts A review of forty-six receipts revealed the following deficiencies:
Twenty-six receipts tested were not supported by adequate documentation. Sixteen receipts selected for testing were not provided for review. Five receipts tested were recorded in the incorrect account based on documentation provided. Twenty-seven receipt packages tested were not signed by the Principal of the respective school
signifying its accuracy and that the amount of the deposit has been posted to the ledger per School District policy.
Cash and Cash Equivalents A review of four months of bank reconciliations revealed the following deficiencies:
No evidence of administrative review was performed M. E. Lewis Elementary School accounts. Several of the school accounts were not reconciled in a timely manner. An adequate outstanding checklist was not provided for Hancock County High School for one
month. The Hancock County Middle School bank account was not properly reconciled for one month.
Cause: In discussing this deficiency with the School District, they stated that the cause was a direct result of the lack of time and resources to train Board personnel responsible for school activity account functions.
Effect or Potential Effect: The lack of adequate controls increases the risk of theft, fraud, or misuse of School District resources that may result in errors and/or irregularities not being detected in a timely manner.
Recommendation: The School District should implement procedures to ensure that disbursements and receipts of funds within the school activity accounts are adequately documented and recorded in the financial records. The School District should also establish a monitoring process to provide reasonable assurance that transactions are processed according to established procedures and that cash accounts are properly reconciled.
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HANCOCK COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2014

II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

Views of Responsible Officials and Corrective Action Plans: We concur with this finding. The School District will make sure that established and approved internal controls are followed and enforced thereby making sure that transactions are processed accurately and in a timely manner.

Contact Person: Title: Telephone: Fax: E-mail:

Dr. Charles Culver Interim Superintendent 706/444-5775 ext. 236 706/444-7026 cculver@hancock.k12.ga.us

Contact Person: Title: Telephone: Fax: E-mail:

Matthias Jones HR/Finance Director 706/444-5775 ext. 125 706/444-7026 mjones@hancock.k12.ga.us

FS 2014-004 Deficit Fund Balance

Control Category:

Budget Preparation/Execution

Internal Control Impact:

Material Weakness

Compliance Impact:

Material Noncompliance

Description: This is a repeat finding (FS-6701-13-04, FS-6701-12-04, and FS-6701-11-04) from fiscal years ended June 30, 2013, June 30, 2012, and June 30, 2011, respectively. At June 30, 2014, the General Fund of the School District reported a deficit fund balance. In addition the School District failed to adopt a balanced budget for the General Fund.

Criteria: Chapter 25, Reporting for LUAs with Governmental Fund Deficit Balances of the Financial Management for Georgia Local Units of Administration states in part: "The seriousness of the fund balances deficits cannot be overstated. The Georgia Department of Education requires those LUAs with deficit governmental fund balances to meet certain reporting requirements".

Chapter 32, Preparing Operating Budgets, of the Financial Management for Georgia Local Units of Administration states in part: "The budget must be balanced for all budgeted funds. Total anticipated revenues should equal total estimated expenditures. In the event anticipated revenues are insufficient to fund anticipated essential expenditures, a portion of unreserved fund balance from previous years must be used to fund the shortfall. In the event there is insufficient unreserved fund balance from previous years to fund anticipated expenditures, then such expenditures must be reduced to equal anticipated revenues plus available unreserved fund balance".

The Department of Audits and Accounts is required to report all instances of budget deficits in accordance with the Official Code of Georgia Annotated 20-2-67(a) which states: "When an audit by the Department of Audits and Accounts finds and reports irregularities or budget deficits in the fund accounting information regarding a local school system or a school within the local school system, the Department of Audits and Accounts shall report the findings of irregularities or budget deficits to the State Board of Education and the local board of education."

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HANCOCK COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2014

II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

Condition: The School District's General Fund reported a deficit unassigned fund balance in the amount of $157,680 at June 30, 2014. In addition, the School District's original and final budget for the General Fund budgeted deficit fund balances in the amount of $915,511 and $739,244, respectively.

Additionally, the School District did not present monthly reports containing all anticipated expenditures, publish actual financial operations, and submit actual financial operations to appropriate authorities as required by O.C.G.A. 20-2-67.

Cause: The Hancock County Board of Education adopted an unbalanced budget for the General Fund.

Effect or Potential Effect: The unassigned fund balance of the General Fund is not sufficient to meet the fund's obligations at June 30, 2014. This is a financial statement irregularity required to be reported in accordance with the Official Code of Georgia Annotated 20-2-67.

Recommendation: The School District should establish policies and procedures to ensure that expenditures do not exceed availability of resources, so that in future periods the School District does not report a deficit fund balance. In addition, appropriate procedures should be implemented to ensure that the adopted budget for each budgeted fund is balanced as required.

Views of Responsible Officials and Corrective Action Plans: We concur with this finding. The School District will adopt a balanced budget. The School District will also establish policies and procedures to ensure that expenditures do not exceed available resources, so that the School District does not report a deficit fund balance.

Contact Person: Title: Telephone: Fax: E-mail:

Dr. Charles Culver Interim Superintendent 706/444-5775 ext. 236 706/444-7026 cculver@hancock.k12.ga.us

Contact Person: Title: Telephone: Fax: E-mail:

Matthias Jones HR/Finance Director 706/444-5775 ext. 125 706/444-7026 mjones@hancock.k12.ga.us

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HANCOCK COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2014

II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

FS 2014-005 Inadequate Internal Controls over Financial Reporting

Control Category:

Financial Reporting

Internal Control Impact:

Material Weakness Deficiency

Compliance Impact:

N/A

Description: The School District did not have adequate internal controls in place to ensure that financial statement activity presented for audit was materially correct.

Criteria: The School District is required to maintain a system of controls over the preparation of financial statements in accordance with generally accepted accounting principles (GAAP). The School District's internal controls over GAAP financial reporting should include adequately trained personnel with the knowledge, skills and experience to prepare GAAP based financial statements and include all disclosures as required by the Governmental Accounting Standards Board (GASB).

GASB Statement No. 34, Basic Financial Statements - Management's Discussion and Analysis - for State and Local Governments (Statement), requires governments to present government-wide and fund financial statements as well as a summary reconciliation of the (a) total governmental funds balances to the net position of governmental activities in the Statement of Net Position, and (b) total change in governmental fund balances to the change in the net position of governmental activities in the Statement of Activities. In addition, the Statement requires information about the government's major and nonmajor funds in the aggregate, to be provided in the fund financial statements.

Chapter 22A, Annual Financial Reporting of the Financial Management for Georgia Local Units of Administration provides that School Districts must prepare their financial statements in accordance with generally accepted accounting principles.

Condition: A material audit adjustment totaling $333,441 was necessary to record two capital leases and restate beginning Net Position in Governmental Activities. In addition, a material reclassification of $99,847 was made to the District-wide Capital Projects Fund to correct the reporting of principal and interest related to capital leases.

Cause: In discussing this deficiency with the School District, they stated that the cause was a direct result of oversight and lack of training.

Effect or Potential Effect: A material misstatement and misclassification were included in the financial statements presented for audit. In addition, the lack of controls and monitoring could impact the reporting of the School District's financial position and results of operations.

Recommendation: As part of internal control over the preparation of financial statements, including disclosures, the School District should continue to implement comprehensive preparation and/or review procedures to ensure that the financial statements are complete and accurate. These procedures should be performed by a properly trained individual possessing a thorough understanding of the applicable GAAP, GASB pronouncements, and knowledge of the School District's activities and operations.

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HANCOCK COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2014

II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

Views of Responsible Officials and Corrective Action Plans: We concur with this finding. The School District will make sure that the financial statements are complete and accurate by reviewing them before submitting them to the Georgia Department of Audits and Accounts.

Contact Person: Title: Telephone: Fax: E-mail:

Dr. Charles Culver Interim Superintendent 706/444-5775 ext. 236 706/444-7026 cculver@hancock.k12.ga.us

Contact Person: Title: Telephone: Fax: E-mail:

Matthias Jones HR/Finance Director 706/444-5775 ext. 125 706/444-7026 mjones@hancock.k12.ga.us

FS 2014-006 Inadequate Internal Controls over Expenditures

Control Category:

Expenditures/Liabilities/Disbursements

Internal Control Impact:

Significant Deficiency

Compliance Impact:

N/A

Description: This is a repeat finding (FS-6701-13-05, FS-6701-12-06, and FS-6701-11-05) from the years ended June 30, 2013, June 30, 2012, and June 30, 2011, respectively. The School District did not have adequate controls over the expenditure process.

Criteria: The School District's management is responsible for maintaining internal controls that provide reasonable assurance that all transactions are properly approved, documented, processed and reported in accordance with State law, procedures established by the Georgia Department of Education and School District policies and procedures.

Condition: Based on a review of seventy-four vouchers, the following deficiencies were noted:

Three expenditures were not approved. Three expenditures did not have evidence of receipt. Three expenditures were recorded to the wrong function. Twenty-five expenditures were recorded in the wrong object code. One expenditure, in the amount of $6,572 was charged to the incorrect period.

Cause: In discussing this deficiency with the School District, they stated that they believe they have the proper procedures in place over the expenditure process, however, those procedures were not adequately monitored and implemented to ensure that were functioning as intended.

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HANCOCK COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2014

II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

Effect or Potential Effect: The lack of adequate controls over the expenditure process may result in misstatements which would not be detected and corrected by management.

Recommendation: The School District should review the controls and procedures currently in place, identify weaknesses, and design and implement procedures necessary to strengthen controls over the expenditure process.

Views of Responsible Officials and Corrective Action Plans: We concur with this finding. The School District will review the controls currently in place, and identify all weaknesses. The district will then implement procedures necessary to strengthen controls over the expenditure process.

Contact Person: Title: Telephone: Fax: E-mail:

Dr. Charles Culver Interim Superintendent 706/444-5775 ext. 236 706/444-7026 cculver@hancock.k12.ga.us

Contact Person: Title: Telephone: Fax: E-mail:

Matthias Jones HR/Finance Director 706/444-5775 ext. 125 706/444-7026 mjones@hancock.k12.ga.us

FS 2014-007 Inadequate Accounting Procedures

Control Category:

General Ledger

Internal Control Impact:

Significant Deficiency

Compliance Impact:

N/A

Description: This is a repeat finding (FS-6701-13-07, FS-6701-12-08, and FS-6701-11-06) from fiscal years ended June 30, 2013, June 30, 2012, and June 30, 2011, respectively. A review of internal control procedures revealed the School District did not ensure journal entries were properly documented and approved in a timely manner.

Criteria: The School District's management is responsible for designing and maintaining internal controls that provide reasonable assurance transactions are properly documented and approved in accordance with State law, procedures established by the Georgia Department of Education, and the School District's policies and procedures.

Condition: A review of twenty-six journal entries revealed the following:

Two journal entries did not have supporting documentation. Twenty-one journal entries were approved, but were not approved in a timely manner. One journal entry, in the amount of $6,000 was posted to travel expense but had no supporting
documentation.
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HANCOCK COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2014

II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

Cause: In discussing this deficiency with the School District, they stated that the cause was a result of management not adequately monitoring control procedures and lack of resources to create enhanced separation of duties.

Effect or Potential Effect: The lack of adequate control over the journal entry process may result in misstatements due to fraud or error which would not be detected in a timely manner.

Recommendation: The School District should review current internal control procedures to ensure journal entries are properly approved by someone independent of the general ledger function and properly documented.

Views of Responsible Officials and Corrective Action Plans: We concur with this finding. The School District will review and/or revise (if necessary) the internal control policies as it relates to journal entries.

Contact Person: Title: Telephone: Fax: E-mail:

Dr. Charles Culver Interim Superintendent 706/444-5775 ext. 236 706/444-7026 cculver@hancock.k12.ga.us

Contact Person: Title: Telephone: Fax: E-mail:

Matthias Jones HR/Finance Director 706/444-5775 ext. 125 706/444-7026 mjones@hancock.k12.ga.us

FS 2014-008 Inadequate Internal Controls over Capital Assets

Control Category:

Capital Assets

Internal Control Impact:

Significant Deficiency

Compliance Impact:

N/A

Description: This is a repeat finding (FS-6701-13-08, FS-6701-12-09, and FS-6701-11-07) from fiscal years ended June 30, 2013, June 30, 2012, and June 30, 2011, respectively. The School District did not adequately maintain the capital assets records.

Criteria: Chapter 37 Implementing a Capital Asset Management System of the Financial Management for Georgia Local Units of Administration indicates that School Districts must establish fixed asset policies, define system requirements, implement a fixed asset system, and maintain fixed asset records.

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HANCOCK COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2014
II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS
Condition: A review of the School District's capital asset records revealed deficiencies as discussed below:
The School District lacked proper internal controls to detect significant errors in a timely manner.
Additions in the amount of $176,733 were not added to the capital assets listing. The capital assets listing, as presented, did not provide elements of information as required
such as asset identifiers and location identifiers. Several assets on the capital assets listing were no longer owned by the School District. Assets had been removed from the capital assets listing that were still owned by the School
District. Assets were noted in prior years that had not been added to the capital assets listing and were
not corrected in the current year. Several assets appeared to be impaired in accordance with GASB 42. The School District did
not adhere to its capital asset policy in determining the status of assets. Depreciation expense was not calculated in accordance with the School District's capital asset
policy. A physical review of fifty-five capital assets revealed the following deficiencies:
o Four assets could not be located. o Three assets were not properly tagged. o Nine assets were in an incorrect location.
Cause: In discussing this deficiency with the School District, they stated that the cause was a direct result of the lack of time and resources to ensure adequate procedures are in place to process, record and report capital assets.
Effect or Potential Effect: The failure of the School District to maintain a complete and accurate capital assets listing can lead to inaccurate internal and external reporting, noncompliance with generally accepted accounting principles and potential misappropriation of assets.
Recommendation: The School District should reassess internal control procedures related to capital assets to ensure that they are in place and operating effectively. An administrative review should be performed to ensure the accuracy of capital asset records and to make appropriate adjustments to ensure capital assets records and procedures for maintaining capital assets conform to generally accepted accounting principles.
Views of Responsible Officials and Corrective Action Plans: The School District will reassess internal control procedures related to capital assets to ensure that they are in place and operating effectively. An administrative review will be conducted to make sure that the capital assets listing is accurate, and to make sure that the list conforms to generally accepted accounting principles.
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HANCOCK COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2014

II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

Contact Person: Title: Telephone: Fax: E-mail:

Dr. Charles Culver Interim Superintendent 706/444-5775 ext. 236 706/444-7026 cculver@hancock.k12.ga.us

Contact Person: Title: Telephone: Fax: E-mail:

Matthias Jones HR/Finance Director 706/444-5775 ext. 125 706/444-7026 mjones@hancock.k12.ga.us

III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

No matters were reported.

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