Hart County Board of Education, Hartwell, Georgia, report on audit of the financial statements for the fiscal year ended June 30, 2007

HART COUNTY BOARD OF EDUCATION HARTWELL, GEORGIA REPORT ON AUDIT
OF THE FINANCIAL STATEMENTS
FOR THE FISCAL YEAR ENDED JUNE 30, 2007
STATE OF GEORGIA
DEPARTMENT OF AUDITS AND ACCOUNTS
Russell W. Hinton State Auditor

HART COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS -

SECTION I

FINANCIAL

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

EXHIBITS

BASIC FINANCIAL STATEMENTS

DISTRICT-WIDE FINANCIAL STATEMENTS

A

STATEMENT OF NET ASSETS

1

B

STATEMENT OF ACTIVITIES

2

FUND FINANCIAL STATEMENTS

C

BALANCE SHEET

GOVERNMENTAL FUNDS

4

D

RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET

TO THE STATEMENT OF NET ASSETS

5

E

STATEMENT OF REVENUES, EXPENDITURES AND CHANGES

IN FUND BALANCES

GOVERNMENTAL FUNDS

6

F

RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT

OF REVENUES, EXPENDITURES AND CHANGES IN FUND

BALANCES TO THE STATEMENT OF ACTIVITIES

7

G

STATEMENT OF FIDUCIARY NET ASSETS

FIDUCIARY FUNDS

8

H

NOTES TO THE BASIC FINANCIAL STATEMENTS

9

SCHEDULES

REQUIRED SUPPLEMENTARY INFORMATION

I SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES

IN FUND BALANCES - BUDGET AND ACTUAL

GENERAL FUND

25

SUPPLEMENTARY INFORMATION

2 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS

26

3 SCHEDULE OF STATE REVENUE

27

HART COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS -

SECTION I

FINANCIAL

SCHEDULES

SUPPLEMENTARY INFORMATION

4 SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS

28

5 ALLOTMENTS AND EXPENDITURES

GENERAL FUND - QUALITY BASIC EDUCATION PROGRAMS (QBE)

BY PROGRAM

29

SECTION II
COMPLIANCE AND INTERNAL CONTROL REPORTS
REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS
REPORT ON COMPLIANCE WITH REQUIREMENTS APPLICABLE TO EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH 0MB CIRCULAR A-133

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

SECTION IV FINDINGS AND QUESTIONED COSTS SCHEDULE OF FINDINGS AND QUESTIONED COSTS

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

SECTION I FINANCIAL

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

DEPARTMENT OF AUDITS AND ACCOUNTS
270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400
June 9, 2008

Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the Hart County Board of Education
INDEPENDENT AUDITOR'S COMBINED REPORT ON BASIC FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION - SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
Ladies and Gentlemen:
We have audited the accompanying financial statements ofthe governmental activities, each major fund, and the aggregate remaining fund information (Exhibits A through H) of the Hart County Board of Education, as of and for the year ended June 30, 2007, which collectively comprise the Board's basic financial statements as listed in the table of contents. These financial statements are the responsibility of the Hart County Board of Education's management. Our responsibility is to express opinions on these financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United States ofAmerica and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General ofthe United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Hart County Board of Education's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinions.

2007ARL-1 l

In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, each major fund, and the aggregate remaining fund information of the Hart County Board of Education, as of June 30, 2007, and the respective changes in financial position thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America.
The Hart County Board of Education has not presented Management's Discussion and Analysis that accounting principles generally accepted in the United States of America has determined is necessary to supplement, although not to be part of, the basic financial statements.
In accordance with Government Auditing Standards, we have also issued our report dated June 9, 2008, on our consideration of the Hart 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 ofinternal control over financial reporting and compliance and the results ofthat testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit.
The Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual, as presented on page 25, is not a required part of the basic financial statements but is supplementary information required by the accounting principles generally accepted in the United States of America. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods ofmeasurement and presentation ofthe required supplementary information. However, we did not audit the information and express no opinion on it.
Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Hart County Board of Education's basic financial statements. The accompanying supplementary information which consist of Schedules 2 through 5, which includes the Schedule of Expenditures of Federal Awards as required by U. S. Office of Management and Budget Circular A-133, Audits ofStates, Local Governments, and Non-Profit Organizations, are presented for purposes of additional analysis and are not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements, and in our opinion, is fairly stated, in all material respects, in relation to the basic financial statements taken as a whole.
A copy of this report has been filed as a permanent record in the office of the State Auditor and made available to the press of the State, as provided for by Official Code of Georgia Annotated section 50-6-24.
Respectfully submitted,
~ ~~"
Russell W. Hinton, CPA, CGFM State Auditor
RWH:as 2007ARL-11

HART COUNTY BOARD OF EDUCATION

HART COUNTY BOARD OF EDUCATION STATEMENT OF NET ASSETS JUNE 30, 2007
ASSETS
Cash and Cash Equivalents Investments Accounts Receivable, Net
Taxes State Government Federal Government Inventories Capital Assets Land Construction in Progress Land Improvements Buildings Equipment Less: Accumulated Depreciation
Total Assets
LIABILITIES
Salaries and Benefits Payable Retainages Payable Long-Term Liabilities
Due Within One Year Due in More Than One Year
Total Liabilities
NET ASSETS
Invested in Capital Assets, Net of Related Debt Restricted for
Continuation of Federal Programs Debt Service Capital Projects Unrestricted
Total Net Assets
Total Liabilities and Net Assets

EXHIBIT"A"

GOVERNMENTAL ACTIVITIES

$

3,293,571.73

6,616,398.84

840,625.23 3,079,899.54
447,530.95 58,813.12

1,971,003.00 3,323,215.00
990,157.00 44,011,047.00
3,925,922.00 -5,631,549.00

$ =====6=2,=9=26=,6=3==4=.4=1

$

3,720,606.23

294,915.17

1,925,227.66 16,235,532.74

$

22,176,281.80

$ 33,775,042.60

551,399.75 4,492,587.34
923,460.59 1,007,862.33

$

40,750,352.61

$ ==6=2,=9=26=,6=3=4=.4=1

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

HART COUNTY BOARD OF EDUCATION STATEMENT OF ACTIVITIES
FOR THE YEAR ENDED JUNE 30, 2007

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 Other Support Services Operations of Non-Instructional Services Enterprise Operations Food Services Interest on Short-Term and Long-Term Debt
Total Governmental Activities
General Revenues Taxes Property Taxes For Maintenance and Operations For Debt Services Sales Taxes Special Purpose Local Option Sales Tax For Debt Services Investment Earnings Miscellaneous
Special Items Loss on Sale of Capital Assets
Total General Revenues and Special Items
Change in Net Assets
Net Assets - Beginning of Year
Net Assets - End of Year

EXPENSES

CHARGES FOR SERVICES

$ 21,897,249.21 $
760,784.05 781,637.16 496,439.37 371,315.77 1,908,552.98 230,302.60 2,467,105.58 2,438,288.36 144,895.28
216,398.47 1,764,318.29
790,332.57
$ 34,267,619.69 $

1,609.00
209,353.76 466,812.76 677,775.52

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

EXHIBIT"B"

PROGRAM REVENUES

OPERATING

CAPITAL

GRANTS AND

GRANTS AND

CONTRIBUTIONS CONTRIBUTIONS

NET (EXPENSES) REVENUES
AND CHANGES IN NET ASSETS

$ 13,442,796.35
202,401.05 265,158.84 402,592.20 607,047.75 791,593.21
1,028, 194.17 620,557.89 $ 112,381.64
1,213,199.34
$ 18,685,922.44 $

$ 165,716.00 165,716.00 $

-8,452,843.86
-558,383.00 -516,478.32
-93,847.17 235,731.98 -1,116,959.77 -230,302.60 -1,438,911.41 -1,652,014.47 -32,513.64
-7,044.71 -84,306.19 -790,332.57
-14,738,205.73

$

12,403,204.23

24,038.57

3,140,525.30 652,871.33 573,010.91

-217,860.00

$

16,575,790.34

$

1,837,584.61

38,912,768.00

$ ==4=0=7'=50=,3=5=2.=6==1

-3-

HART COUNTY BOARD OF EDUCATION BALANCE SHEET
GOVERNMENTAL FUNDS JUNE 30, 2007

EXHIBIT"C"

ASSETS
Cash and Cash Equivalents Investments Accounts Receivable, Net
Taxes State Government Federal Government Inventories

GENERAL FUND

DISTRICTWIDE
CAPITAL PROJECTS
FUND

DEBT SERVICE
FUND

TOTAL

$ 2,831,425.10 $

6,749.18 $ 455,397.45 $

231,676.37 2,936,840.06 3,447,882.41

251,317.75 2,076,776.95
447,530.95 58,813.12

589,307.48

3,293,571.73 6,616,398.84
840,625.23 2,076,776.95
447,530.95 58,813.12

Total Assets

$ 5,897,540.24 $ 2,943,589.24 $ 4,492,587.34 $======13='=33=3=,7=16==82=

LIABILITIES AND FUND BALANCES
LIABILITIES
Salaries and Benefits Payable Retainages Payable
Total Liabilities
FUND BALANCES
Reserved for: Continuation of Federal Programs Debt Service Capital Projects
Unreserved Designated for Student Activities Undesignated Reported in: General Fund
Total Fund Balances

$ 3,720,606.23

$

$ 294,915.17

$ 3,720,606.23 $ 294,915.17

$

$ 551,399.75

$

$ 4,492,587.34

$ 2,648,674.07

164,536.18

1,460,998.08

$ 2,176,934.01 $ 2,648,674.07 $ 4,492,587.34 $

3,720,606.23 294,915.17
4,015,521.40
551,399.75 4,492,587.34 2,648,674.07
164,536.18 1,460,998.08 9,318,195.42

Total Liabilities and Fund Balances

$ 5,897,540.24 $ 2,943,589.24 $ 4,492,587.34 $==13..,.3=3=3=,7=16=.8=2=

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

HART COUNTY BOARD OF EDUCATION RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET
TO THE STATEMENT OF NET ASSETS JUNE 30, 2007

EXHIBIT"D"

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

$ 9,318,195.42

$ 1,971,003.00 3,323,215.00 990,157.00
44,011,047.00 3,925,922.00 -5,631,549.00

48,589,795.00

1,003,122.59

$ -15,680,000.00 -2,480,760.40

-18,160,760.40

$ 40,750,352.61

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

HART COUNTY BOARD OF EDUCATION STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES
GOVERNMENTAL FUNDS YEAR ENDED JUNE 30, 2007

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 Other Support Services Enterprise Operations Food Services Operation
Capital Outlay Debt Services
Principal Due and Fees Interest
Total Expenditures
Excess of Revenues over (under) Expenditures
OTHER FINANCING SOURCES
Capital Leases
SPECIAL ITEMS
Proceeds from Sale of Buildings
Net Change in Fund Balances
Fund Balances - Beginning (Restated)

GENERAL FUND

DISTRICTWIDE
CAPITAL PROJECTS
FUND

DEBT SERVICE
FUND

TOTAL

$ 11,873,404.08
15,836,834.55 3,014,803.89 677,775.52 119,527.20 $ 573,009.79
$ 32,095,355.03 $

$ 313,072.35

26,535.00 $ 3,140,525.30
220,271.36

11,899,939.08 3,140,525.30 15,836,834.55 3,014,803.89
677,775.52 652,870.91 573,009.79

313,072.35 $ 3,387,331.66 $ 35,795,759.04

$ 21,298,317.43

$ 21,298,317.43

760,784.05 781,637.16 496,439.37 342,049.02 1,908,552.98 230,302.60 2,462,682.10 2,202,736.46 144,895.28 216,398.47 1,672,265.92
$

6,059,904.28

760,784.05 781,637.16 496,439.37 342,049.02 1,908,552.98 230,302.60 2,462,682.10 2,202,736.46 144,895.28 216,398.47 1,672,265.92 6,059,904.28

135,913.29 13,610.89

$ 2,181,035.00 9,980.50
766,741.18

2,316,948.29 9,980.50
780,352.07

$ 32,666,585.02 $ 6,059,904.28 $ 2,957,756.68 $ 41,684,245.98

$ -571,229.99 $ -5,746,831.93 $ 429,574.98 $ -5,888,486. 94

$ 517,354.00

$ 517,354.00

$ 109,578.00

$ 109,578.00

$

55,702.01 $ -5,746,831.93 $ 429,574.98 $ -5,261,554.94

2,121,232.00

8,395,506.00 4,063,012.36

14,579,750.36

Fund Balances - Ending

$ 2,176,934.01 $ 2,648,674.07 $ 4,492,587.34 $ 9,318,195.42

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

HART 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, 2007

EXHIBIT "F"

Total Net Change in Fund Balances - Governmental Funds (Exhibit "E")
Amounts reported for Governmental Activities in the Statement of Activities are different because:
Capital Outlays are reported as expenditures in Governmental Funds. However, in the Statement of Activities, the cost of Capital Assets is allocated over their estimated useful lifes as depreciation expense. In the current period, these amounts are:
Capital Outlay Depreciation Expense
Excess of Capital Outlay over Depreciation Expense
Because some property taxes will not be collected for several months after the School District's fiscal year ends, they are not considered "available" revenues.
In the Statement of Activities, only the gain on the sale of the land/building/equipment is reported, whereas in the Governmental Funds, the entire proceeds from the sale increase financial resources. Thus, the change in net assets differs from the change in fund balances by the cost of the land/carrying value of the building/equipment sold.
Some of the Capital Assets acquired this year were financed with capital leases. In Governmental Funds, a capital lease arrangement is considered a source of financing, but in the Statement of Net Assets, the lease obligation is reported as a Long-Term Liability.
Repayment of Long-Term Debt is reported as an expenditure in Governmental Funds, but the repayment reduces Long-Term Liabilities in the Statement of Net Assets. In the current year, these amounts consist of:
Bond Principal Retirements Capital Lease Payments
Total Long-Term Debt Repayments
Change in Net Assets of Governmental Activities (Exhibit "B")

$ -5,261,554.94

$ 5,873,061.00 -773,382.00

5,099,679.00

527,303.26

-327,437.00

-517,354.00

$ 2,020,000.00 296,948.29

2,316,948.29

$ 1,837,584.61

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

HART COUNTY BOARD OF EDUCATION STATEMENT OF FIDUCIARY NET ASSETS
FIDUCIARY FUNDS JUNE 30, 2007
ASSETS Cash and Cash Equivalents
LIABILITIES Funds Held for Others

EXHIBIT"G"
AGENCY FUNDS
$ ===6=5=.4.6..6.===
$ ====6=5,..,46..6...,

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

HART COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2007

EXHIBIT "H"

Note 1: DESCRIPTION OF SCHOOL DISTRICT AND REPORTING ENTITY
REPORTING ENTITY
The Hart County Board ofEducation (School District) was established under the laws ofthe State of Georgia and operates under the guidance of a school board elected by the voters and a Superintendent appointed by the Board. The Board is organized as a separate legal entity and has the power to levy taxes and issue bonds. Its budget is not subject to approval by any other entity. Accordingly, the School District is a primary government and consists of all the organizations that compose its legal entity.
Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The School District's basic financial statements are collectively comprised of the District-wide financial statements, fund financial statements and notes to the basic financial statements ofthe Hart County Board of Education.
District-wide Statements: The Statement ofNet Assets and the Statement ofActivities display information about the financial activities ofthe overall School District, except for fiduciary activities. Eliminations have been made to minimize the double counting of internal activities. Governmental activities generally are financed through taxes, intergovernmental revenues, and other nonexchange transactions.
The Statement ofActivities presents a comparison between direct expenses and program revenues for each function of the School District's governmental activities.
Direct expenses are those that are specifically associated with a program or function and, therefore, are clearly identifiable to a particular function. Indirect expenses (expenses of the School District related to the administration and support ofthe School District's programs, such as office and maintenance personnel and accounting) are not allocated to programs.
Program revenues include (a) charges paid by the recipients ofgoods or services offered by the programs and (b) grants and contributions that are restricted to meeting the operational or capital requirements of a particular program. Revenues that are not classified as program revenues, including all taxes, are presented as general revenues.
Fund Financial Statements: The fund financial statements provide information about the School District's funds, including fiduciary funds. Eliminations have been made to minimize the double counting ofinternal activities. Separate statements for each category (governmental and fiduciary) are presented. The emphasis of fund financial statements is on major governmental funds, each displayed in a separate column.

-9-

HART COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2007

EXHIBIT "H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The School District reports the following major governmental funds:
General Fund is the School District's primary operating fund. It accounts for all financial resources ofthe School District, except those resources required to be accounted for in another fund.
District-wide Capital Projects Fund accounts for financial resources including Special Purpose Local Option Sales Tax (SPLOST) and Bond Proceeds _to be used for the acquisition, construction or renovation of major capital facilities.
Debt Service Fund accounts for taxes (property and sales) legally restricted for the payment of general long-term principal, interest and paying agent's fees.
The School District reports the following fiduciary fund type:
Agency funds account for assets held by the School District as an agent for various funds, governments or individuals.
BASIS OF ACCOUNTING
The basis ofaccounting determines when transactions are reported on the financial statements. The District-wide governmental and fiduciary fund financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded at the time liabilities are incurred, regardless ofwhen the related cash flows take place. Nonexchange transactions, in which the School District gives (or receives) value without directly receiving (or giving) equal value in exchange, include property taxes, sales taxes, grants and donations. On an accrual basis, revenue from property taxes is recognized in the fiscal year for which the taxes are levied. Revenue from sales taxes is recognized in the fiscal year in which the underlying transaction (sale) takes place. Revenue from grants and donations is recognized in the fiscal year in which all eligibility requirements have been satisfied.
The School District uses funds to report on its financial position and the results of its operations. Fund accounting is designed to demonstrate legal compliance and to aid financial management by segregating transactions related to certain governmental functions or activities. A fund is a separate accounting entity with a self-balancing set of accounts.
Governmental funds are reported using the current financial resources measurement focus and the modified accrual basis ofaccounting. Under this method, revenues are recognized when measurable and available. The School District considers all revenues reported in the governmental funds to be available if they are collected within sixty days after year-end. Property taxes, sales taxes and interest are considered to be susceptible to accrual. Expenditures are recorded when the related fund liability is incurred, except for principal and interest on general long-term debt, which are recognized
- 10 -

HART COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2007

EXHIBIT "H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
as expenditures to the extent they have matured. Capital asset acquisitions are reported as expenditures in governmental funds. Proceeds ofgeneral long-term liabilities and acquisitions under capital leases are reported as other financing sources.
The School District funds certain programs by a combination ofspecific cost-reimbursement grants, categorical grants, and general revenues. Thus, when program costs are incurred, there are both restricted and unrestricted net assets available to finance the program. It is the School District's policy to first apply grant resources to such programs, followed by cost-reimbursement grants, then general revenues.
RESTATEMENT OF PRIOR YEAR DEBT SERVICE FUND BALANCE
For fiscal year 2007, the School District made an adjustment of $282,903.87 to reduce the fund balance ofthe Debt Service Fund at July 1, 2006, as shown in the prior year report, to $4,063,012.36. This adjustment was necessary because ad valorem taxes receivable at June 30, 2006, were overstated due to an error in a tax conformation prepared by the tax commissioner ofHart County. This change is in accordance with generally accepted accounting principles.
CASH AND CASH EQUIVALENTS
COMPOSITION OF DEPOSITS Cash and cash equivalents consist ofcash on hand, demand deposits and short-term investments with original maturities of three months or less from the date of acquisition in authorized financial institutions. Official Code of Georgia Annotated Section 45-8-14 authorize the School District to deposit its funds in one or more solvent banks or insured Federal savings and loan associations.
INVESTMENTS
COMPOSITION OF INVESTMENTS Investments made by the School District in nonparticipating interest-earning contracts (such as certificates ofdeposit) and repurchase agreements are reported at cost. Participating interest-earning contracts and money market investments with a maturity at purchase ofone year or less are reported at amortized cost. Both participating interest-earning contracts and money market investments with a maturity at purchase greater than one year are reported at fair value. The Official Code ofGeorgia Annotated Section 36-83-4 authorizes the School District to invest its funds. In selecting among options for investment or among institutional bids for deposits, the highest rate ofreturn shall be the objective, given equivalent conditions of safety and liquidity. Funds may be invested in the following:
(1) Obligations issued by the State of Georgia or by other states,
(2) Obligations issued by the United States government,

- 11 -

HART COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2007

EXHIBIT "H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(3) Obligations fully insured or guaranteed by the United States government or a United States government agency,

(4) Obligations of any corporation ofthe United States government,

(5) Prime banker's acceptances,

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

(7) Repurchase agreements, and

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

The School District does not have a formal policy regarding investment policies that address credit risks, custodial credit risks, concentration ofcredit risks, interest rate risks or foreign currency risks.

RECEIVABLES

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

PROPERTY TAXES

The Hart County Board of Commissioners fixed the property tax levy for the 2006 tax digest year (calendar year) on October 12, 2006 (levy date). Taxes were due on December 20, 2006 (lien date). Taxes collected within the current fiscal year or within 60 days after year-end on the 2006 tax digest are reported as revenue in the governmental funds for fiscal year 2007. The Hart County Tax Commissioner bills and collects the property taxes for the School District, withholds 2.5% oftaxes collected as a fee for tax collection and remits the balance oftaxes collected to the School District. Property tax revenues, at the fund reporting level, during the fiscal year ended June 30, 2007, for maintenance and operations amounted to $11,744,381.43 and for school bonds amounted to $26,535.00.

The tax millage rate levied for the 2006 tax year (calendar year) for the Hart County Board of Education was as follows (a mill equals $1 per thousand dollars of assessed value):

School Operations

12.732 mills

- 12 -

HART COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2007

EXHIBIT "H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

SALES TAXES

Special Purpose Local Option Sales Tax, at the fund reporting level, during the year amounted to $3,140,525.30 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 ofmeals are reported at their Federally assigned value and purchased foods inventories are reported at cost (first-in, first-out). The School District uses the consumption method to account for inventories whereby donated food commodities are recorded as an asset and as revenue when received, and expenses/expenditures are recorded as the inventory items are used. Purchased foods are recorded as an asset when purchased and expenses/expenditures are recorded as the inventory items are used.

CAPITAL ASSETS

Capital assets purchased, including capital outlay costs, are recorded as expenditures in the fund financial statements at the time of purchase (including ancillary charges). On the District-wide financial statements, all purchased capital assets are valued at cost where historical records are available and at estimated historical cost based on appraisals or deflated current replacement cost where no historical records exist. Donated capital assets are recorded at estimated fair market value on the date donated. Disposals are deleted at depreciated recorded cost. The cost of normal maintenance and repairs that do not add to the value ofassets or materially extend the useful lives of the assets is not capitalized. Depreciation is computed using the straight-line method. The School District does not capitalize book collections or works ofart. 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.

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

Capitalization Policy

Estimated Useful Life

Land Land Improvements Buildings and Improvements Equipment

All $ 20,000.00 $ 100,000.00 $ 5,000.00

NIA 20 years 25 to 80 years 5 to 20 years

- 13 -

HART COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2007

EXHIBIT "H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Depreciation is used to allocate the actual or estimated historical cost of all capital assets over estimated useful lives.
GENERAL OBLIGATION BONDS
The School District issues general obligation bonds to provide funds for the acquisition and construction of major capital facilities. Bond issuance costs are recognized in the financial statements during the fiscal year bonds are issued. General obligation bonds are direct obligations and pledge the full faith and credit of the government. The outstanding amount of these bonds is recorded in the Statement of Net Assets.
NET ASSETS
The School District's net assets in the District-wide Statements are classified as follows:
Invested in capital assets, net of related debt - This represents the School District's total investment in capital assets, net ofoutstanding 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 invested in capital assets, net of related debt.
Restricted net assets - These represent resources for which the School District is legally or contractually obligated to spend resources for bus replacement, continuation of Federal programs, debt service and capital projects in accordance with restrictions imposed by external third parties.
Unrestricted net assets - Unrestricted net assets represent 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.
Note 3: DEPOSITS AND INVESTMENTS
COLLATERALIZATION OF DEPOSITS Official Code of Georgia Annotated (OCGA) Section 45-8-12 provides that there shall not be on deposit at any time in any depository for a time longer than ten days a sum ofmoney which has not been secured by surety bond, by guarantee of insurance, or by collateral. The aggregate ofthe face value of such surety bond and the market value of securities pledged shall be equal to not less than 110 percent ofthe public funds being secured after the deduction ofthe amount ofdeposit insurance. Ifa depository elects the pooled method (OCGA 45-8-13 .1) the aggregate ofthe market value ofthe securities pledged to secure a pool ofpublic funds shall be not less than 110 percent ofthe daily pool balance.

- 14 -

HART COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2007

EXHIBIT "H"

Note 3: DEPOSITS AND INVESTMENTS
Acceptable security for deposits consists of any one of or any combination of the following:
(1) Surety bond signed by a surety company duly qualified and authorized to transact business within the State of Georgia,
(2) Insurance on accounts provided by the Federal Deposit Insurance Corporation,
(3) Bonds, bills, notes, certificates of indebtedness or other direct obligations of the United States or of the State of Georgia,
(4) Bonds, bills, notes, certificates of indebtedness or other obligations of the counties or municipalities of the State of Georgia,
(5) Bonds of any public authority created by the laws of the State of Georgia, providing that the statute that created the authority authorized the use of the bonds for this purpose,
(6) Industrial revenue bonds and bonds of development authorities created by the laws of the State of Georgia, and
(7) Bonds, bills, notes, certificates of indebtedness, or other obligations of a subsidiary corporation of the United States government, which are fully guaranteed by the United States government both as to principal and interest or debt obligations issued by the Federal Land Bank, the Federal Home Loan Bank, the Federal Intermediate Credit Bank, the Central Bank for Cooperatives, the Farm Credit Banks, the Federal Home Loan Mortgage Association, and the Federal National Mortgage Association.
CATEGORIZATION OF DEPOSITS At June 30, 2007, the bank balances were $4,199,650.17. The amounts ofthe total uninsured bank balances are classified into three categories of custodial credit risk:
Category 1 - Uncollateralized, Category 2 - Cash collateralized with securities held by the pledging financial institution, or Category 3 - Cash collateralized with securities held by the pledging financial institution's
trust department or agent but not in the School District's name.
The School District's uninsured deposits are classified by custodial credit risk category at June 30, 2007, as follows:

- 15 -

HART COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2007

EXHIBIT "H"

Note 3: DEPOSITS AND INVESTMENTS

Custodial Credit Risk Category

Bank Balance

1

$

0.00

2

131,676.37

3

3,668,629.23

Total

$ 3,800,305.60

CATEGORIZATION OF INVESTMENTS The School District's investments as of June 30, 2007, are presented below. All investments are presented by investment type and debt securities are presented by maturity.

Investment Type

Fair Value

Other Investments Money Market Mutual Funds

$ 2,936,840.06

Investment Pools Office of Treasury and Fiscal Services Georgia Fund 1

3,447,882.41

Total Investments

$ 6,384,722.47

At June 30, 2007, the carrying value of the School District's total investments was $6,616,398.84, which is materially the same as fair value. Included in these investments was $231,676.37 in certificates ofdeposit with a local bank. This amount is not required to be categorized since they arc included in the School District's deposits which are subject to be collateralized as shown above. Also included in the School District's investments were $3,447,882.41 offunds invested in the Local Government Investment Pool administered by the State of Georgia, Office of Treasury and Fiscal Services which are not required to be categorized since the School District did not own any specific identifiable securities in the pool. The investment policy ofthe State ofGeorgia, Office ofTreasury and Fiscal Services for the Local Government Investment Pool (Primary Liquidity Portfolio) does not provide for investment in derivatives or similar investments. Additional information on the Local Government Investment Pool is disclosed in the State of Georgia Comprehensive Annual Financial Report. This audit can be obtained from the Georgia Department ofAudits and Accounts at http://www.audits.state.ga.us/internet/searchRpts.html.

The Primary Liquidity Portfolio consists of Georgia Fund 1 which is not registered with the SEC as an investment company but does operate in a manner consistent with the SEC's Rule 2a-7 of the Investment Company Act of 1940. The investment is valued at the pool's share price, $1.00 per

- 16 -

HART COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2007

EXHIBIT "H"

Note 3: DEPOSITS AND INVESTMENTS

share. The pool is an AAAm rated investment pool by Standard and Poor's. The weighted average maturity of Georgia Fund 1 may not exceed 60 days. The weighted average maturity for Georgia Fund 1 on June 30, 2007, was 15 days.

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 credit quality risk.

Funds in the amount of $2,936,840.06, invested in U.S. Treasury Money Market Mutual Funds (open-end mutual funds) are managed by Fidelity Investments. These funds are rated Aaa by Moody's and AAAm by Standards and Poor's.

Note 4: NON-MONETARY TRANSACTIONS

The School District receives food commodities from the United States Department of Agriculture (USDA) for school breakfast and lunch programs. These commodities are recorded at their Federally assigned value. See Note 2 - Inventories

Note 5: CAPITAL ASSETS

The following is a summary of changes in the Capital Assets during the fiscal year:

Balances
July 1. 2006

Increases

Balances Decreases June 30. 2007

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

$ 2,076,003.00

$ 105,000.00 $ 1,971,003.00

7,089.017.00 $ 4,880,740.00 8,646,542.00 3,323,215.00

Total Capital Assets Not Being Depreciated $ 9,165,020.00 $ 4,880,740.00 $8,751,542.00 $ 5,294,218.00

Capital Assets Being Depreciated Buildings and Improvements Equipment Land Improvements

$35,473,758.00 $ 8,646,542.00 $ 109,253.00 $44,011,047.00

3,644,333.00 932,646.00 651,057.00 3,925,922.00

930,482.00

59,675.00

990,157.00

Less Accumulated Depreciation for: Buildings and Improvements Equipment Land Improvements

3,457,208.00 1,577,896.00
360,936.00

471,940.00 263,205.00
38,237.00

55,786.00 482,087.00

3,873,362.00 1,359,014.00
399,173.00

Total Capital Assets, Being Depreciated, Net $34,652,533.00 $ 8,865,481.00 $ 222,437.00 $43,295,577.00

Governmental Activity Capital Assets - Net $43.817.553.00 $13.746.221.00 $ 8.973.979,00 $48.589.795.00

- 17 -

HART COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2007

EXHIBIT"H"

Note 5: CAPITAL ASSETS

Capital assets being acquired under capital leases as of June 30, 2007, are as follows:

Governmental Funds

Buildings and Improvements Land Improvements Equipment Less: Accumulated Depreciation

$ 3,141,597.00 195,394.00 517,354.00 238,770.00

$ 3,615,575.00

Current year depreciation expense by function is as follows:

Instruction Support Services
General Administration Maintenance and Operation of Plant Student Transportation Services Food Services

$ 482,397.00

$ 23,568.00 3,564.00
189,719.00

216,851.00 74,134.00

$ 773,382.00

Note 6: RESTRICTED ASSETS

Special Purpose Local Option Sales Tax (SPLOST), general obligation bond proceeds and property taxes levied specifically for retirement ofoutstanding bond principal, interest and paying agent's fees (Debt Service Funds) are restricted assets in the Statement ofNet Assets because their use is limited by applicable bond covenants or statutory provisions. Restricted assets at June 30, 2007, were as follows:

District-wide Capital Projects

Bond

SPLOST

Proceeds

Debt Service Funds

Restricted Cash and Cash Equivalents: Debt Services Capital Acquisitions
Restricted Investments: Debt Services Capital Acquisitions

$ 6,749.18

$ 455,387.04

$ 3,447,882.41 $ 2,936,840.06

- 18 -

HART COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2007

EXHIBIT "H"

Note 7: 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 ofloss associated with torts, assets, errors or omissions and acts ofGod. The School District has neither significantly reduced coverage for these risks nor incurred losses (settlements) which exceeded the School District's insurance coverage in any of the past three years.

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

2006 2007

$

0.00 $

5,431.00 $

5,431.00 $

0.00

$

0.00 $

338.00 $

338.00 $

0.00

The School District participates in the Georgia Education Workers' Compensation Trust, a public entity risk pool organized on December 1, 1991, to develop, implement and administer a program of workers' compensation self-insurance for its member organizations. The School District pays an annual premium to the Trust for its general insurance coverage. Additional insurance coverage is provided through an agreement by the Trust with the Midwest Employers Casualty Company to provide coverage for potential losses sustained by the Trust in excess of $500,000.00 loss per occurrence, up to $2,000,000.00.

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

Position Covered

Amount

All Employees

$ 100,000.00

Note 8: SHORT-TERM DEBT

The School District obtains temporary loans in advance ofproperty tax collections, depositing the proceeds in its General Fund. This short-term debt is to provide cash for operations until property tax collections are received by the School District. Article IX, Section V, Paragraph V of the

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HART COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2007

EXHIBIT "H"

Note 8: SHORT-TERM DEBT

Constitution ofthe 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

Temporary Loans

$=~0-.0-0 $2,000,000.00 $2,000,000.00 $====0==.0=0

Note 9: LONG-TERM DEBT

CAPITAL LEASES The Hart County Board of Education entered into an agreement dated December 1, 2001, with the Georgia School Board Association for the construction and subsequent lease of a new vocational building and athletic facilities. Under the terms of the agreement, the School District will make annual payments through December 1, 2016.

The Hart County Board of Education also entered into lease agreements as lessee for an energy management system and for acquisition of school buses. These lease agreements qualify as capital leases for accounting purposes, and, therefore, have been recorded at the present value ofthe 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 2004

3.00% - 4.25% $15,680,000.00

The changes in Long-Term Debt during the fiscal year ended June 30, 2007, were as follows:

- 20 -

HART COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2007

EXHIBIT "H"

Note 9: LONG-TERM DEBT

Governmental Funds

General

Capital

Obligation

Leases

Bonds

Total

Balance July 1, 2006

$2,260,354.69 $17,700,000.00 $19,960,354.69

Additions Capital Leases

517,354.00

517,354.00

Deductions Debt Retired

296,948.29 2,020,000.00 2,316,948.29

Balance June 30, 2007

$2,480,760.40 $15,680,000.00 $18,160,760.40

Portion of Long-Term Debt Due within One Year

$ 200,227.66 $ 1,725,000.00 $ 1,925,227.66

At June 30, 2007, 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

2008 2009 2010 2011 2012 2013 - 2017

$ 200,227.66 $ 85,668.75

279,105.92

96,764.33

282,470.31

84,892.71

294,775.99

72,587.05

307,619.92

59,743.11

1,116,560.60

142,777.42

Total Principal and Interest

$ 2,480,760.40 $ 542,433.37

- 21 -

HART COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2007

EXHIBIT"H"

Note 9: LONG-TERM DEBT

Fiscal Year Ended June 30

General Obligation

Debt

Principal

Interest

2008 2009 2010 2011 2012 2013 - 2017

$ 1,725,000.00 $ 601,825.00

1,780,000.00

550,075.00

1,840,000.00

487,775.00

1,905,000.00

418,775.00

1,980,000.00

342,575.00

6A502ooo.oo

5332950.00

Total Principal and Interest

$15,680,000.00 $ 2,934,975.00

Note 10: ON-BEHALF PAYMENTS

The School District has recognized revenues and costs in the amount of $644,432.91 for health insurance and retirement contributions paid on the School District's behalf by the following State Agencies.

Georgia Department ofEducation Paid to the Georgia Department of Community Health For Health Insurance ofNon-Certified Personnel In the amount of$618,963.19

Paid to the Teachers Retirement System of Georgia For Teachers Retirement System (TRS) Employer's Cost In the amount of $20,202.72

Office ofTreasury and Fiscal Services Paid to the Public School Employees Retirement System For Public School Employees Retirement (PSERS) Employer's Cost In the amount of$5,267.00

Note 11: SPECIAL ITEMS

In fiscal year 2007, the Hart County Board of Education sold Eagle Elementary School and 13.62 acres of land. The sale proceeds are reported as a special item on the Statement of Revenues, Expenditures and Changes in Fund Balances. The loss associated with this sale is reported as a special item on the Statement of Activities.

- 22 -

HART COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2007

EXHIBIT "H"

Note 12: SIGNIFICANT COMMITMENTS

The following is an analysis ofsignificant outstanding construction or renovation contracts executed by the School District as ofJune 30, 2007. This project is being funded by local and SPLOST funds.

Project

Unearned Executed Contracts

High School Addition

$2,723,637.00

The amount described in this note is not reflected in the basic financial statements.

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.

Note 14: RETIREMENT PLANS

TEACHERS RETIREMENT SYSTEM OF GEORGIA (TRS)

TRS PLAN DESCRIPTION Substantially all teachers, administrative and clerical personnel employed by local school systems are covered by the Teachers Retirement System of Georgia (TRS), which is a cost-sharing multiple employer defined benefit pension plan. TRS provides service retirement, disability retirement and survivors benefits for its members in accordance with State statute. The Teachers Retirement System of Georgia issues a separate stand alone financial audit report and a copy can be obtained from the Georgia Department of Audits and Accounts.

TRS CONTRIBUTIONS REQUIRED AND MADE Employees ofthe School District who are covered by TRS are required by State statute to contribute 5% of their gross earnings to TRS. The School District makes monthly employer contributions to TRS at rates adopted by the TRS Board of Trustees in accordance with State statute and as advised by their independent actuary. The required employer contribution rate is 9.28% and employer contributions for the current fiscal year and the preceding two fiscal years are as follows:

Fiscal Year

Percentage Contributed

Required Contribution

2007 2006 2005

100% 100% 100%

$ 1,601,786.23 $ 1,509,807.00 $ 1,433,876.00

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HART COUNTY BOARD OF EDUCATION GENERAL FUND
SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL
YEAR ENDED JUNE 30, 2007

SCHEDULE "1"

REVENUES
Property Taxes State Funds Federal Funds Charges for Services Investment Earnings Miscellaneous
Total Revenues
EXPENDITURES
Current Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Enterprise Operations Community Services Food Services Operation
Capital Outlay Debt Service
Total Expenditures
Excess of Revenues over (under) Expenditures
OTHER FINANCING SOURCES
Other Sources
SPECIAL ITEMS
Proceeds from Sale of Buildings
Net Change in Fund Balances
Fund Balances - Beginning
Adjustments

NONAPPROPRIATED BUDGETS

ORIGINAL (1}

FINAL (1)

ACTUAL AMOUNTS

$ 12,238,740.00 $ 14,668,078.00 953,000.00 496,100.00 29,000.00 395,612.00
$ 28,780,530.00 $

12,228,896.00 $ 14,832,310.34 3,062,583.00
496,100.00 35,000.00
195,271.00

11,873,404.08 15,836,834.55
3,014,803.89 677,775.52 119,527.20 573,009.79

30,850,160.34 $ 32,095,355.03

$ 19,045,542.00 $
536,620.00 485,159.00 494,582.00 319,567.00 1,811,320.00 226,913.00 2,471,304.00 1,541,247.00
34,308.00

1,562,100.00 251,868.00

$ 28,780,530.00 $

$

0.00 $

20,601,825.34 $ 21,298,317.43

739,576.00 811,729.00 494,582.00 368,144.00 1,832,240.00 226,913.00 2,456,304.00 1,600,530.00

760,784.05 781,637.16 496,439.37 342,049.02 1,908,552.98 230,302.60 2,462,682.10 2,202,736.46

156,217.00

144,895.28 216,398.47

1,562,100.00 251,868.00

1,672,265.92 149,524.18

31,102,028.34 $ 32,666,585.02

-251,868.00 $

-571,229.99

$

251,868.00 $

517,354.00

$

0.00 $

1,828,904.78

35,995.94

$ 0.00 $ 1,828,904.78 21 767.66

109,578.00 55,702.01
2,121,232.00

Fund Balances - Ending

$

1,864,900.72 $

1,850,672.44 $ 2,176,934.01

Notes to the Schedule of Revenues, Ex11enditures and Changes in Fund Balances Budget and Actual
(1) Original and Final Budget amounts do not include budgeted revenues or expenditures of the various principal accounts.
The accompanying schedule of revenues, expenditures and changes in fund balances budget and actual is presented on the modified accrual basis of accounting which is the basis of accounting used in the presentation of the fund financial statements.

See notes to the basic financial statements.

- 25-

HART COUNTY BOARD OF EDUCATION SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
YEAR ENDED JUNE 30, 2007

SCHEDULE "2"

FUNDING AGENCY PROGRAM/GRANT
Agriculture, U. S. Department of Child Nutrition Cluster Pass-Through From Georgia Department of Education Food Services School Breakfast Program National School Lunch Program
Total Child Nutrition Cluster
Other Programs Pass-Through From Georgia Department of Education Food Donation (1)
Total U. S. Department of Agriculture
Education, U.S. Department of Special Education Cluster Pass-Through From Georgia Department of Education Special Education Grants to States Preschool Grants
Total Special Education Cluster
Other Programs Pass-Through From Georgia Department of Education Advanced Placement Testing Grant English Language Acquisition Grants Enhancing Education Through Technology Program Improving Teacher Quality State Grants State Grants for Innovative Programs Title I Grants to Local Educational Agencies Vocational Education - Basic Grants to States Pass-Through From Pioneer Regional Educational Service Agency Safe and Drug-Free Schools - National Program
Total U.S. Department of Education

CFDA NUMBER

PASSTHROUGH
ENTITY ID
NUMBER

EXPENDITURES IN PERIOD

10.553 10.555

N/A

(2)

NIA $ 1,455,637.20

$ 1,455,637.20

10.550

N/A

123 460.72

$ 1,579,097.92

* 84.027 * 84.173

N/A

$

N/A

$

567,144.51 26,258.00
593,402.51

84.330 84.365 84.318
. 84.367 . 84.298
84.010 84.048
84.186

N/A

328.00

NIA

2,679.00

N/A

66,569.11

N/A

205,660.72

N/A

8,506.00

NIA

961,039.61

N/A

49,758.00

854

6 829.60

$ 1,894,772.55

Total Federal Financial Assistance N/A = Not Available

$ ===3=4=73..8=7=0=.4=7

Notes to the Schedule of Expenditures of Federal Awards

(1) The amount shown for the Food Donation Program represents the Federally assigned value of nonmonetary assistance for donated commodities received and/or consumed by the School District during the current fiscal year.
(2) Expenditures for the funds earned on the School Breakfast Program ($272,884.80) were not maintained separately and are included in the 2007 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 Hart 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 -

HART COUNTY BOARD OF EDUCATION SCHEDULE OF STATE REVENUE YEAR ENDED JUNE 30, 2007

AGENCY/FUNDING
GRANTS Education, Georgia Department of Quality Basic Education Direct Instructional Cost Kindergarten Program Kindergarten Program - Early Intervention Program Primary Grades (1-3) Program Primary Grades - Early Intervention (1-3) Program Upper Elementary Grades (4-5) Program Upper Elementary Grades - Early Intervention (4-5) Program Middle Grades (6-8) Program Middle School (6-8) Program High School General Education (9-12) Program Vocational Laboratory (9-12) Program Students with Disabilities Category I Category II Category Ill Category IV Category V Gifted Student - Category VI Remedial Education Program Alternative Education Program English Speakers of Other Languages (ESOL) Media Center Program 20 Days Additional Instruction Staff and Professional Development Indirect Cost Central Administration School Administration Facility Maintenance and Operations Categorical Grants Pupil Transportation Regular Bus Replacement Sparsity Nursing Services Principal Supplements Vocational Supervisors Food Services Vocational Education Amended Formula Adjustment Other State Programs Comprehensive Academic Performance System (Caps) Graduation Coaches Health Insurance K-8 Reading and Math Grants National Teacher Certification Preschool Handicapped Program Pupil Transportation - State Bond Remedial Summer School Special Education Low Incidence Grant Teachers' Retirement Virtual Schools Grant
Office of Treasury and Fiscal Services Public School Employees Retirement

See notes to the basic financial statements.

- 27 -

SCHEDULE "3"

GOVERNMENTAL FUND TYPE GENERAL FUND

$

897,431.00

267,522.00

2,084,691.00

449,678.00

986,748.00

539,860.00

24,255.00

1,847,037.00

1,533,183.00

968,385.00

125,084.04 242,713.21 708,808.18 480,243.12 137,033.45 336,012.00
40,147.00 158,270.00
94,479.00 302,730.00
99,055.00 63,384.00

439,681.00 605,245.00 842,274.00

515,069.00 65,716.00 20,000.00 79,857.00 12,265.00 18,859.00 93,168.00 53,270.69
-304,701.00
58,992.29 40,075.00 618,963.19 44,908.66 25,170.00 79,521.00 100,000.00
3,767.00 12,390.00 20,202.72
125.00

5 267.00

$ ==15=,8=3=6=,8=34==55=

HART COUNTY BOARD OF EDUCATION SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS
YEAR ENDED JUNE 30, 2007

SCHEDULE "4"

PROJECT

ORIGINAL ESTIMATED
COST (1)

CURRENT ESTIMATED COSTS (2)

AMOUNT EXPENDED IN CURRENT
YEAR (3)

AMOUNT EXPENDED
IN PRIOR YEARS (3)

PROJECT STATUS

To fund the payment of a portion of the principal and interest on the 2004 Bonds, the maximum amount of debt service to be paid on the Bonds not to exceed $12,000,000.00.

$ 12,000,000.00 $

12,000,000.00 $ 2,332,225.00 $

2,344,517.00

Ongoing

Acquiring, constructing, furnishing and equipping new school buildings and facilities useful or desirable, including a fine arts building; acquiring real property; adding to, renovating, repairing, improving and equipping existing school buildings and other buildings and facilities, including classrooms and athletic facilities; purchasing band instruments and equipment; making certain safety and technology improvements; and acquiring any property necessary or desirable therefor, both real and personal.

1,800,000.00

20,891,033.00

8,122,971.00 Ongoing

$ 13,800,000.00 $ 32,891,033.00 $ 8,391,729.28 $ 10,467,488.00

(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 Hart 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.

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HART COUNTY BOARD OF EDUCATION GENERAL FUND - QUALITY BASIC EDUCATION PROGRAM (QBE)
ALLOTMENTS AND EXPENDITURES BY PROGRAM YEAR ENDED JUNE 30, 2007

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 Grades (6-8) Program Middle School (6-8) Program High School General Education (9-12) Program Vocational Laboratory (9-12) Program Students with Disabilities Category I Category II Category Ill Category IV Category V Gifted Student - Category VI Remedial Education Program Alternative Education Program English Speakers of Other Languages (ESOL)
TOTAL DIRECT INSTRUCTIONAL PROGRAMS
Media Center Program Staff and Professional Development

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

ELIGIBLE QBE PROGRAM COSTS

SALARIES

OPERATIONS

TOTAL

$

1,152,295.00 $ 1,512,416.00 $

4,799.00 $ 1,517,215.00

347,852.00

281,087.00

9,798.00

290,885.00

2,657,439.00

3,131,925.00

13,438.00

3,145,363.00

581,937.00

437,414.00

85,765.00

523,179.00

1,261,957.00

1,748,179.00

4,240.00

1,752,419.00

662,481.00 32,840.00
2,363,523.00 1,963,224.00 1,212,356.00 2,163,441.00
436,550.00 53,212.00
202,250.00 112 594.00

496,104.00 41,434.00
2,453,398.00 2,787,539.00
983,403.00
60,934.00 161,970.00 1,815,006.00 123,160.00
477,888.00
196,934.00 57,867.00

12,714.00 7,190.00
45,570.00 49,456.00 201,921.00
2,225.00 3,026.00 10,527.00 8,414.00 4,452.00 4,580.00
300.00 7,319.00 8,050.00

508,818.00 48,624.00
2,498,968.00 2,836,995.00 1,185,324.00
63,159.00 164,996.00 1,825,533.00 131,574.00
4,452.00 482,468.00
300.00 204,253.00
65 917.00

$

15,203,951.00 $ 16,766,658.00 $ 483,784.00 $ 17,250,442.00

420,945.00 81 875.00

433,782.00 21,062.00

50,388.00 68,304.00

484,170.00 89 366.00

TOTAL QBE FORMULA FUNDS

$

15 706 771.00 $ 17,221,502.00 $ 602,476.00 $ 17,823,978.00

(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.

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SECTION II COMPLIANCE AND INTERNAL CONTROL REPORTS

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

DEPARTMENT OF AUDITS AND ACCOUNTS
270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400
June 9, 2008

Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the Hart County Board of Education
REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS
Ladies and Gentlemen:
We have audited the financial statements of the governmental activities, each major fund, and the aggregate remaining fund information of Hart County Board of Education as of and for the year ended June 30, 2007, which collectively comprise Hart County Board ofEducation's basic financial statements and have issued our report thereon dated June 9, 2008. 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.
Internal Control Over Financial Reporting
In planning and performing our audit, we considered Hart County Board of Education's internal control over financial reporting as a basis for designing our auditing procedures for the purpose of expressing our opinions on the financial statements, but not for the purpose ofexpressing an opinion on the effectiveness of the Hart County Board of Education's internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness ofthe Hart County Board of Education's internal control over financial reporting.
Our consideration of internal control over financial reporting was for the limited purpose described in the preceding paragraph and would not necessarily identify all deficiencies in internal control over financial reporting that might be significant deficiencies or material weaknesses. However, as discussed below, we identified a deficiency in internal control over financial reporting that we consider to be a significant deficiency.
2007YB-30

A control deficiency exists when the design or operation ofa control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect misstatements on a timely basis. A significant deficiency is a control deficiency, or combination of control deficiencies, that adversely affect the Hart County Board of Education's ability to initiate, authorize, record, process, or report financial data reliably in accordance with generally accepted accounting principles such that there is more than a remote likelihood that a misstatement ofthe Hart County Board of Education's financial statements that is more than inconsequential will not be prevented or detected by the Hart County Board of Education's internal control. We consider item FS-6731-07-01 in the accompanying Schedule ofFindings and Questioned Costs to be a significant deficiency in internal control over financial reporting.
A material weakness is a significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood that a material misstatement ofthe financial statements will not be prevented or detected by the Hart County Board of Education's internal control.
Our consideration of the internal control over financial reporting was for the limited purpose described in the first paragraph ofthis section and would not necessarily disclose all deficiencies in internal control that might be significant deficiencies and, accordingly, would not necessarily disclose all significant deficiencies that are also considered to be material weaknesses. However, we believe the significant deficiency described above is not a material weakness.
Compliance and Other Matters
As part ofobtaining reasonable assurance about whether Hart County Board ofEducation's financial statements are free of 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 no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards.
We noted certain matters that we have reported to management of Hart County Board of Education in a separate letter dated June 9, 2008.
Hart County Board of Education's response to the findings identified in our audit is described in the accompanying Schedule of Management's Responses. We did not audit Hart County Board of Education's response and, accordingly, we express no opinion on it.
2007YB-30

This report is intended solely for the information and use of the management, members of the Hart County Board ofEducation, Federal awarding agencies and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties.
Respectfully submitted,
~~in~~~CG~ State Auditor
RWH:as 2007YB-30

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

DEPARTMENT OF AUDITS AND ACCOUNTS
270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400
June 9, 2008

Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the Hart County Board of Education
REPORT ON COMPLIANCE WITH REQUIREMENTS APPLICABLE TO EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH 0MB CIRCULAR A-133
Ladies and Gentlemen:
Compliance
We have audited the compliance of Hart County Board of Education with the types of compliance requirements described in the U.S. Office of Management and Budget (0MB) Circular A-133 Compliance Supplement that are applicable to each ofits major Federal programs for the year ended June 30, 2007. Hart County Board of Education's major Federal programs are identified in the Summary of Auditor's Results Section of the accompanying Schedule of Findings and Questioned Costs. Compliance with the requirements of laws, regulations, contracts and grants applicable to each of its major Federal programs is the responsibility of Hart County Board of Education's management. Our responsibility is to express an opinion on Hart County Board of Education's compliance based on our audit.
We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States ofAmerica; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General ofthe United States; and 0MB Circular A133, Audits of States, Local Governments, and Non-Profit Organizations. Those standards and 0MB Circular A-133 require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major Federal program occurred. An audit includes examining, on a test basis, evidence about the Hart County Board of Education's compliance with those requirements and performing such other procedures as we considered necessary in the

2007SA-10

circumstances. We believe that our audit provides a reasonable basis for our opinion. Our audit does not provide a legal determination on Hart County Board of Education's compliance with those requirements.
In our opinion, the Hart County Board of Education complied, in all material respects, with the requirements referred to above that are applicable to each of its major Federal programs for the year ended June 30, 2007.
Internal Control Over Compliance
The management ofHart County Board of Education is responsible for establishing and maintaining effective internal control over compliance with requirements of laws, regulations, contracts and grants applicable to Federal programs. In planning and performing our audit, we considered Hart County Board of Education's internal control over compliance with requirements that could have a direct and material effect on a major Federal program in order to determine our auditing procedures for the purpose of expressing our opinion on compliance, 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 Hart County Board of Education's internal control over compliance.
A control deficiency in an entity's internal control over compliance exists when the design or operation of a control does not allow management or employees, in the normal course ofperforming their assigned functions, to prevent or detect noncompliance with a type ofcompliance requirement of a Federal program on a timely basis. A significant deficiency is a control deficiency, or combination of control deficiencies, that adversely affects the entity's ability to administer a Federal program such that there is more than a remote likelihood that noncompliance with a type of compliance requirement of a Federal program that is more than inconsequential will not be prevented or detected by the entity's internal control.
A material weakness is a significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood that material noncompliance with a type of compliance requirement of a Federal program will not be prevented or detected by the entity's internal control.
Our consideration of the internal control over compliance was for the limited purpose described in the first paragraph of this section and would not necessarily identify all deficiencies in internal control that might be significant deficiencies or material weaknesses. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses, as defined above.
2007SA-10

This report is intended solely for the information and use ofthe management, members ofthe Hart County Board ofEducation, Federal awarding agencies and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties.
Respectfully submitted,

RWH:as 2007SA-10

Russell W. Hinton, CPA, CGFM State Auditor

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

HART COUNTY BOARD OF EDUCATION AUDITEE'S RESPONSE
SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2007

PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

FINDING CONTROL NUMBER AND STATUS

FS-6731-05-01 FS-6731-05-02 FS-6731-06-01 FS-6731-06-02

Further Action Not Warranted Further Action Not Warranted Previously Reported Corrective Action Implemented Unresolved - No Corrective Action Implemented

CORRECTIVE ACTION/RESPONSES

CASH AND CASH EQUIVALENTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Finding Control Number: FS-6731-06-02

Internal controls ofschool activity accounts are being strengthened and corrected/revised as follows:

An assistant principal, who is not authorized to sign checks, will reconcile bank statements.
A school secretary will be assigned the duty of recording all funds presented to the office before such funds are presented to the school bookkeeper. Such proceeds will be recorded on a log sheet provided by the school system business office.
An assistant principal will scrutinize all checks for proper invoices and other supporting documentation, and ascertain that funds are expended as per proper accounts. This action will be completed prior to the principal's signature. Only the principal has the authority to sign school checks (written on the school where he/she is principal).

These controls were put in place as of March 1, 2007.

Additional controls/procedures to ensure that accounting functions are properly executed include the following:

All travel at the school and system levels for academic and/or athletic purposes will be documented by use of a system generated travel form. No expenses will be paid without the proper form submitted. The travel forms and payment information will be retained for documentation purposes by school and system bookkeepers.

- 1-

HART COUNTY BOARD OF EDUCATION AUDITEE'S RESPONSE
SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2007

PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

CORRECTIVE ACTION/RESPONSES

CASH AND CASH EQUIVALENTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Finding Control Number: FS-6731-06-02

All purchases at the school and system levels for academic and/or athletic purposes will be supported by a system approved purchase order. No expenditures will be reimbursed or paid without the purchase voucher describing the expense. At the school level, the purchase orders and payment information will be checked by the bookkeeper, an assistant principal, and the principal before a check for payment is signed. At the system level, the same procedure will be followed.

PRIOR YEAR FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

FINDING CONTROL NUMBER AND STATUS

FA-6731-06-01

Previously Reported Corrective Action Implemented

-2-

SECTION IV FINDINGS AND QUESTIONED COSTS

HART COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2007

I SUMMARY OF AUDITOR'S RESULTS

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

2. Significant Deficiencies in Internal Control Disclosed by the Audit ofthe Financial Statements The audit report for the Hart County Board of Education disclosed a financial statement significant deficiency related to the following control categories.

Cash and Cash Equivalents Revenues/Receivables/Receipts

Expenditures/Liabilities/Disbursements

The significant deficiency described above is not considered to be a material weakness.

3. Noncompliance Material to the Financial Statements The audit ofthe Hart County Board ofEducation disclosed no instances ofnoncompliance that were deemed to be material to the financial statements.

4. Significant Deficiencies in Internal Control Over Major Programs The audit report for the Hart County Board of Education did not disclose any significant deficiencies in internal control over major programs.

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

6. Audit Findings Required to be Reported by Section .510(a) ofOMB Circular A-133 The Hart County Board of Education's audit did not disclose audit findings required to be reported by section .510(a) ofOMB Circular A-133.

7. Major Programs Federal awards audited as major programs are as follows: 84.010 Title I Grants to Local Educational Agencies 84.027 Special Education - Grants to States 84.173 Special Education - Preschool Grants 84.367 Improving Teacher Quality State Grants

8. Type "A" Program Dollar Threshold The dollar threshold for type "A" programs was $300,000.00.

9. Low Risk Auditee The Hart County Board of Education did not qualify as a low risk auditee as defined by Section .530 ofOMB Circular A-133.

- 1-

HART COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2007

II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

CASH AND CASH EQUIVALENTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Control Procedures over School Activity Accounts Significant Deficiency Finding Control Number: FS-6731-07-01

Condition:

This is a repeat finding (FS-6731-06-02 and FS-6731-05-02) from the years ended June 30, 2006, and June 30, 2005, respectively. The accounting procedures of the School District were insufficient to provide for adequate internal controls and separation of duties over the school activity accounts.

Criteria:

The School District's management is responsible for designing and maintaining internal controls that provide reasonable assurance that transactions are processed according to established procedures and provide assurance of proper separation of duties, which would limit any one individual's access to both physical assets and the related accounting records.

Questioned Cost: NIA

Information:

Cash and Cash Equivalents The bank reconciliation process was not separated from record keeping and voucher payment functions. School Activity Accounts did not include all bank accounts that were held in the entity's name.

Revenues/Receivables/Receipts The cash receipt function was not separated from the deposit preparation and record keeping functions. Based on a review of twenty-four items, the following deficiencies were noted: 1) Eleven receipts were unable to be tested for a timely deposit due to improper documentation. 2) Six receipts were not deposited in a timely manner. 3) There was no evidence ofcash receipts given to students from school officials at the point of collection in twenty-three of twenty-four receipts.

-2-

HART COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2007

II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

CASH AND CASH EQUIVALENTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Control Procedures over School Activity Accounts Significant Deficiency Finding Control Number: FS-6731-07-01

Expenditures/Liabilities/Disbursements Based on a review of forty items, the following deficiencies were noted: 1) Three of the expenditures did not have an invoice or a receipt. 2) Two vouchers were for items that were not allowable and posted incorrectly. They were charges for gas reimbursement and mileage reimbursement. 3) Eleven voucher packages tested did not contain a purchase order when one should have been required. 4) Seven ofthe items tested had a purchase order, but the purchase order was completed after the invoice and purchase ofthe items.

Cause:

These deficiencies were a result of management's decision to limit the number ofadministrative staffmade responsible for the accounting functions and management's failure to ensure that internal controls were established, implemented, and functioning at the school level. The School District has not assigned responsibilities to achieve appropriate separation of duties nor utilized management oversight of the incompatible activities to properly safeguard assets.

Effect:

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

Recommendation:

The School District should review the accounting procedures in place and implement additional procedures to ensure that financial transactions are properly recorded, documented and approved.

III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

No matters were reported.

-3 -

SECTIONV MANAGEMENT'S RESPONSES

HART COUNTY BOARD OF EDUCATION SCHEDULE OF MANAGEMENT'S RESPONSES
YEAR ENDED JUNE 30, 2007
Finding Control Number: FS-6731-07-01
We concur with this finding. To ensure separation of duties, procedures were developed and implemented in August of 2008. All school administrators and teachers were provided with a copy ofthe procedures. Discussions took place as to the implementation ofthe guidelines as they relate to the proper management of local school funds. We also periodically monitor and evaluate implementation of these procedures to ensure compliance. These guidelines will increase the internal control structure and the separation of duties that relate to local school funds.
Contact Person: Jerry Bell, Director of Operations Phone: (706) 376-2437 Fax: (706) 376-7046 Email: jbell@hart.kl2.ga.us