LONG COUNTY BOARD OF EDUCATION LUDOWICI, GEORGIA REPORT ON AUDIT OF THE FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2006 STATE OF GEORGIA DEPARTMENT OF AUDITS AND ACCOUNTS Russell W. Hinton State Auditor LONG 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 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 ASSETS 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 ASSETS 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 Page 1 2 4 5 6 7 8 9 23 24 26 LONG COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS - SECTION I FINANCIAL SCHEDULES SUPPLEMENTARY INFORMATION 4 SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS 27 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 LONG COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS - SECTION V 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 March 5, 2007 Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education and Superintendent and Members of the Long 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 Long County Board of Education, as of and for the year ended June 30, 2006, which collectively comprise the Board's basic financial statements as listed in the table of contents. These financial statements are the responsibility of the Long 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 ofmaterial misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinions. In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, each major fund, and the aggregate remaining fund information of the Long County Board of Education, as of June 30, 2006, and the respective changes in financial position thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America. 2006ARL-11 The Long County Board ofEducation has not presented Management's Discussion and Analysis that accounting principles generally accepted in the United States has determined is necessary to supplement, although not to be part of, the basic financial statements. In accordance with Government Auditing Standards, we have also issued our report dated March 5, 2007, on our consideration of the Long County Board of Education's internal control over financial reporting and our tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements and other matters. The purpose ofthat report is to describe the scope ofour testing 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 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 23, 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 Long 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 of States, 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, ~~.4:l~ sell W. Hinton, CPA, CGFM State Auditor RWH:as 2006ARL-l l LONG COUNTY BOARD OF EDUCATION LONG COUNTY BOARD OF EDUCATION STATEMENT OF NET ASSETS JUNE 30, 2006 ASSETS Cash and Cash Equivalents Investments Accounts Receivable, Net Taxes State Government Other Inventories Capital Assets Land Land Improvements Buildings Equipment Less: Accumulated Depreciation Total Assets LIABILITIES Accounts Payable Salaries Payable Deposits and Deferred Revenues 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 $ 8,235,033 2,288,177 261,333 1,059,592 10,272 17,303 161,440 1,126,429 14,704,286 1,941,889 -5,857,580 $ ===2=3=9=4=8=17=4= $ 359,623 1,587,395 306,294 335,000 4,835,000 $ 7 423 312 $ 7,050,400 103,014 1,424,923 143,936 7,802,589 $ 16,524,862 $ ===2=3=9=4=8=17=4= The notes to the basic financial statements are an integral part of this statement. -1- LONG COUNTY BOARD OF EDUCATION STATEMENT OF ACTIVITIES FOR THE YEAR ENDED JUNE 30, 2006 GOVERNMENTAL ACTIVITIES Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Operations of Non-Instructional Services Enterprise Operations Community Services 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 Intangible Recording Tax Grants and Contributions not Restricted to Specific Programs Investment Earnings Miscellaneous Total General Revenues Change in Net Assets Net Assets - Beginning of Year Net Assets - End of Year EXPENSES CHARGES FOR SERVICES $ 9,926,894 $ 485,501 828,228 198,889 358,763 687,359 98,943 852,680 841,962 7,399 214,511 5,764 69,106 1,053,836 166 971 $ 15,796,806 $ 4,500 110,483 173,117 288100 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 $ 7,870,899 122,624 605,148 193,320 439,586 412,635 571,790 353,713 $ 14,684 34,699 834,495 $ 11,453,593 $ $ 57,669 57 669 $ -2,051,495 -362,877 -223,080 -5,569 80,823 -274,724 -98,943 -280,890 -430,580 -7,399 -199,827 104,719 -34,407 -46,224 -166 971 -3,997,444 $ 1,914,566 298,854 460,986 73,901 1,650,141 209,817 184 875 $ 4 793 140 $ 795,696 15,729,166 $ ===1=6=,5=24='=86=2= - 3- LONG COUNTY BOARD OF EDUCATION BALANCE SHEET GOVERNMENTAL FUNDS JUNE 30, 2006 EXHIBIT"C" ASSETS Cash and Cash Equivalents Investments Accounts Receivable, Net Taxes State Government Other Inventories GENERAL FUND DISTRICTWIDE CAPITAL PROJECTS FUND DEBT SERVICE FUND TOTAL $ 2,849,434 $ 4,089,205 $ 1,296,394 $ 37,820 2,233,187 17,170 130,122 1,059,592 10,272 17 303 105,281 8,235,033 2,288,177 235,403 1,059,592 10,272 17 303 Total Assets $ 4104543 $ 6,322,392 $ 1 418 845 $ ===1=1=8=4=5=78=0= LIABILITIES AND FUND BALANCES LIABILITIES Accounts Payable Salaries Payable Deposits and Deferred Revenue Total Liabilities FUND BALANCES Reserved for: Continuation of Federal Programs Debt Service Inventories Capital Projects Unreserved Undesignated Reported in: General Fund Capital Projects Fund Total Fund Balances $ 359,623 1,587,395 306,294 $ 2,253,312 $ 85,711 17,303 1,748,217 $ $ 1 851 231 $ $ 143,936 6,178,456 6,322,392 $ $ $ $ 1,418,845 1 418 845 $ 359,623 1,587,395 306 294 2,253,312 85,711 1,418,845 17,303 143,936 1,748,217 6178 456 9,592,468 Total Liabilities and Fund Balances $ 4104543 $ 6,322,392 $ 1 418 845 $ ===1=1=8=45====78=0= The notes to the basic financial statements are an integral part of this statement. -4- LONG COUNTY BOARD OF EDUCATION RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO THE STATEMENT OF NET ASSETS JUNE 30, 2006 EXHIBIT"D" Total Fund Balances - Governmental Funds (Exhibit "C") Amounts reported for Governmental Activities in the Statement of Net Assets are different because: Capital Assets used in Governmental Activities are not financial resources and therefore are not reported in the funds. These assets consist of: Land 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. Bonds Payable, which are Long-Term Liabilities are not due and payable in the current period and therefore are not reported as liabilities in the funds. $ 9,592,468 $ 161,440 1,126,429 14,704,286 1,941,889 -5,857,580 12,076,464 25,930 -5,170,000 Net Assets of Governmental Activities (Exhibit "A") $ 16,524,862 The notes to the basic financial statements are an integral part of this statement. -5- LONG COUNTY BOARD OF EDUCATION STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS YEAR ENDED JUNE 30, 2006 EXHIBIT"E" REVENUES Property Taxes Sales Taxes State Funds Federal Funds Charges for Services Investment Earnings Miscellaneous Total Revenues EXPENDITURES Current Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Enterprise Operations Community Services Food Services Operation Debt Services Principal Interest Total Expenditures Excess of Revenues over (under) Expenditures OTHER FINANCING SOURCES (USES) 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 $ 1,902,123 $ 63,545 10,575,250 2,699,610 288,100 203,787 182,248 $ 15,914,663 $ 0 $ 0 $ 312,958 $ 471,342 6,030 2 627 792,957 $ 2,215,081 534,887 10,575,250 2,699,610 288,100 209,817 184 875 16,707,620 $ 9,719,673 $ 474,426 828,228 198,889 356,447 676,381 94,821 841,806 912,925 7,399 139,474 5,764 69,106 1,024,863 $ 15,350,202 $ $ 564 461 $ 0 $ 0 $ 0 $ $ 1,226 350,000 166 971 518 197 $ 274 760 $ 9,719,673 474,426 828,228 198,889 356,447 676,381 96,047 841,806 912,925 7,399 139,474 5,764 69,106 1,024,863 350,000 166 971 15,868,399 839,221 $ 6,178,456 $ $ -6, 178,456 $ -6,178,456 $ 6,178,456 $ $ -5,613,995 $ 6,178,456 $ 274,760 $ 7,465,226 143,936 1,144,085 6,178,456 -6 178 456 0 839,221 8,753,247 $ 1,851,231 $ 6,322,392 $ 1 418 845 $ ====9,=59=2=,4=68= The notes to the basic financial statements are an integral part of this statement. -6 - LONG COUNTY BOARD OF EDUCATION RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES TO THE STATEMENT OF ACTIVITIES JUNE 30, 2006 EXHIBIT"F" Total Net Change in Fund Balances - Governmental Funds (Exhibit "E") $ Amounts reported for Governmental Activities in the Statement of Activities are different because: Capital Outlays are reported as expenditures in Governmental Funds. However, in the Statement of Activities, the cost of Capital Assets is allocated over their estimated useful lives as depreciation expense. In the current period, these amounts are: Capital Outlay Depreciation Expense Excess of Capital Outlay over Depreciation Expense $ 165,584 -443 991 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. 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, this amount consists of Bond Principal Retirements. 839,221 -278,407 -115,118 350,000 Change in Net Assets of Governmental Activities (Exhibit "B") $ ===79=5=6=9=6 The notes to the basic financial statements are an integral part of this statement. -7- LONG COUNTY BOARD OF EDUCATION STATEMENT OF FIDUCIARY NET ASSETS FIDUCIARY FUNDS JUNE 30, 2006 ASSETS Cash and Cash Equivalents LIABILITIES Funds Held for Others EXHIBIT"G" AGENCY FUNDS $ ===15='=04=3= $ =====15==04=3= The notes to the basic financial statements are an integral part of this statement. -8- LONG COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2006 EXHIBIT "H" Note 1: DESCRIPTION OF SCHOOL DISTRICT AND REPORTING ENTITY REPORTING ENTITY The Long 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 ofthe Long 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 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 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 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. -9- LONG COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2006 EXHIBIT "H" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The School District reports the following major governmental funds: General Fund is the School District's primary operating fund. It accounts for all financial resources ofthe School District, except those resources required to be accounted for in another fund. District-wide Capital Projects Fund accounts for financial resources including Bond Proceeds and local funds 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 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, grants and donations. On an accrual basis, revenue from property taxes is recognized in the fiscal year for which the taxes are levied. Revenue from sales taxes is recognized in the fiscal year in which the underlying transaction (sale) takes place. Revenue from grants and donations is recognized in the fiscal year in which all eligibility requirements have been satisfied. The School District uses funds to report on its financial position and the results of its operations. Fund accounting is designed to demonstrate legal compliance and to aid financial management by segregating transactions related to certain governmental functions or activities. A fund is a separate accounting entity with a self-balancing set of accounts. Governmental funds are reported using the current financial resources measurement focus and the modified accrual basis ofaccounting. Under this method, revenues are recognized when measurable and available. The School District considers all revenues reported in the governmental funds to be available if they are collected within sixty days after year-end. Property taxes, sales taxes and interest are considered to be susceptible to accrual. Expenditures are recorded when the related fund - 10 - LONG COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2006 EXHIBIT "H" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES liability is incurred, except for principal and interest on general long-term debt, which are recognized as expenditures to the extent they have matured. Capital asset acquisitions are reported as expenditures in governmental funds. Proceeds of general long-term liabilities are reported as other financing sources. The School District funds certain programs by a combination ofspecific cost-reimbursement grants, categorical grants, and general revenues. Thus, when program costs are incurred, there are both restricted and unrestricted net assets available to finance the program. It is the School District's policy to first apply grant resources to such programs, followed by cost-reimbursement grants, then general revenues. CASH AND CASH EQUIVALENTS COMPOSITION OF DEPOSITS Cash and cash equivalents consist ofcash on hand, demand deposits and short-term investments with original maturities of three months or less from the date of acquisition in authorized financial institutions. Georgia Laws OCGA 45-8-14 authorize the School District to deposit its funds in one or more solvent banks or insured Federal savings and loan associations. INVESTMENTS COMPOSITION OF INVESTMENTS Investments made by the School District in nonparticipating interest-earning contracts (such as certificates ofdeposit) and repurchase agreements are reported at cost. Participating interest-earning contracts and money market investments with a maturity at purchase 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 are reported at fair value. The Official Code ofGeorgia Annotated Section 36-83-4 authorizes the School District to invest its funds. In selecting among options for investment or among institutional bids for deposits, the highest rate ofreturn shall be the objective, given equivalent conditions of safety and liquidity. Funds may be invested in the following: (1) Obligations issued by the State of Georgia or by other states, (2) Obligations issued by the United States government, (3) Obligations fully insured or guaranteed by the United States government or a United States government agency, (4) Obligations of any corporation of the United States government, (5) Prime banker's acceptances, - 11 - LONG COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2006 EXHIBIT "H" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (6) The Local Government Investment Pool administered by the State of Georgia, Office of Treasury and Fiscal Services, (7) Repurchase agreements, and (8) Obligations of other political subdivisions of the State of Georgia. The School District does not have a formal policy regarding investment policies that address credit risks, custodial credit risks, concentration of credit 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 Long County Board of Commissioners fixed the property tax levy for the 2005 tax digest year (calendar year) on December 1, 2005 (levy date). Taxes were due on February 1, 2006 (lien date). Taxes collected within the current fiscal year or within 60 days after year-end on the 2005 tax digest are reported as revenue in the governmental funds for fiscal year 2006. The Long County Tax Commissioner bills and collects the property taxes for the School District and remits the taxes collected to the School District. Property tax revenues, at the fund reporting level, during the fiscal year ended June 30, 2006, for maintenance and operations amounted to $1,902,123 and for school bonds amounted to $312,958. Tax millage rates levied for the 2005 tax year (calendar year) for the Long County Board of Education were as follows (a mill equals $1 per thousand dollars of assessed value): School Operations School Bonds 13.5 mills 2.2 mills 15.7 mills SALES TAXES Special Purpose Local Option Sales Tax, at the fund reporting level, during the year amounted to $460,986 and is to be used for capital outlay for educational purposes or debt service. This sales tax was authorized by local referendum and the sales tax must be re-authorized at least every five years. - 12 - LONG COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2006 EXHIBIT "H" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES INVENTORIES FOOD INVENTORIES On the basic financial statements, inventories 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 of art. Capitalization thresholds and estimated useful lives of capital assets reported in the District-wide statements are as follows: Capitalization Policy Estimated Useful Life Land Land Improvements Buildings and Improvements Equipment Any Amount $ 5,000 $ 5,000 $ 5,000 NIA 15 to 60 years 25 to 60 years 10 to 50 years 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. In addition, general obligation bonds have been - 13 - LONG COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2006 EXHIBIT "H" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES issued to refund existing general obligation bonds. 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. 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 of money 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. If a 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. 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. - 14 - LONG COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2006 EXHIBIT "H" Note 3: DEPOSITS AND INVESTMENTS CATEGORIZATION OF DEPOSITS At June 30, 2006, the bank balances were $8,995,820. The amounts of the total bank balances are classified into four categories of custodial credit risk: Category 1 - Cash that is insured (e.g., Federal Deposit Insurance) or collateralized with securities held by the School District or by the School District's agent in the School District's name. Category 2 - Cash collateralized with securities held by the pledging financial institution's trust department or agent in the School District's name. Category 3 - Cash collateralized with securities held by the pledging financial institution, or by its trust department or agent but not in the School District's name. Category 4 - Uncollateralized. The School District's deposits are classified by custodial credit risk category at June 30, 2006, as follows: Custodial Credit Risk Category Bank Balance 1 $ 1,454,389 2 7,541,431 3 0 4 0 Total $ 8!9952820 CATEGORIZATION OF INVESTMENTS At June 30, 2006, the carrying value ofthe School District's total investments was $2,288,177 which is materially the same as fair value. This investment consisted entirely offunds invested in the Local Government Investment Pool administered by the State of Georgia, Office of Treasury and Fiscal Services which are not required to be categorized since the School District did not own any specific identifiable securities in the pool. The investment policy ofthe State of Georgia, Office ofTreasury and Fiscal Services for the Local Government Investment Pool (Primary Liquidity Portfolio) does not provide for investment in derivatives or similar investments. A description of the Primary Liquidity Portfolio is as follows: The Primary Liquidity Portfolio consists of Georgia Fund 1, which is a combination local and state government investment pool. Georgia Fund 1 is a stable net asset value investment pool which follows Standard and Poor's criteria for AAAm rated money market funds. The pool is not registered with the SEC as an investment company but does operate Georgia Fund 1 in a manner consistent with Rule 2a-7 of the Investment Company Act of 1940. The pool's primary objectives - 15 - LONG COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2006 EXHIBIT "H" Note 3: DEPOSITS AND INVESTMENTS are safety of capital, investment income, liquidity and diversification while maintaining principal ($1.00 per share value). Net asset value is calculated daily and reported to the rating agency weekly to ensure stability. The pool distributes earnings (net of management fees) on a monthly basis and values participant's shares sold and redeemed at the pool's share price, $1.00 per share. Pooled cash and cash equivalents and investments are reported at cost. The pool does not issue any legally binding guarantees to support the value of the shares. Participation in the pool is voluntary and deposits consist of funds from local governments; operating and trust funds of Georgia's state agencies, colleges and universities; and current operating funds of the State of Georgia's General Fund. Investments in Georgia Fund 1 are directed toward short-term instruments such as U. S. Treasury obligations, securities issued or guaranteed as to principal and interest by the U.S. Government or any of its agencies or instrumentalities, banker's acceptances and repurchase agreements. The weighted average maturity of Georgia Fund 1 may not exceed 60 days. The weighted average maturity for Georgia Fund 1 on June 30, 2006, was 28 days. Note 4: NON-MONETARY TRANSACTIONS The School District receives food commodities from the United States Department of Agriculture (USDA) for school breakfast and lunch programs. These commodities are recorded at their Federally assigned value. See Note 2 - Inventories Note 5: CAPITAL ASSETS The following is a summary of changes in the Capital Assets during the fiscal year: Balances July 1, 2005 Increases Decreases Balances June 30, 2006 Governmental Activities Capital Assets, Not Being Depreciated: Land $ 161 440 $ 0 $ 0 $ 161 440 Capital Assets Being Depreciated Buildings and Improvements Equipment Land Improvements $ 14,704,286 1,776,305 $ 1,126,429 $ 165,584 0 $ 14,704,286 1,941,889 1,126,429 Less Accumulated Depreciation for: Buildings and Improvements Equipment Land Improvements 3,839,246 1,203,666 370 677 256,336 115,685 71 970 4,095,582 1,319,351 442 647 Total Capital Assets, Being Depreciated, Net $ 12,193,431 $ -278,407 $ 0 $ l 1,915,024 Governmental Activity Capital Assets - Net $ 12,354.871 $ -278.407 $ 0 $ 12,076.464 - 16 - LONG COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2006 EXHIBIT "H" Note 5: CAPITAL ASSETS Current year depreciation expense by function is as follows: Instruction Support Services Pupil Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Other Support Services Food Services $ 207,221 $ 11,075 2,316 10,978 2,896 10,874 88,247 75 037 201,423 35,347 $ 443,991 Note 6: RESTRICTED ASSETS Special Purpose Local Option Sales Tax (SPLOST) and property tax levied specifically for retirement of outstanding bond principal, interest and paying agent's fees (Debt Service Funds) are reported as restricted assets in the Statement ofNet Assets because their use is limited by applicable bond covenants or statutory provisions. Restricted assets at June 30, 2006, were as follows: District-wide Capital Projects Bond Proceeds Debt Service Funds Restricted Cash and Cash Equivalents: Debt Services Capital Acquisitions Restricted Investments: Debt Services $ 1,296,394 $ 143,936 $ 17,170 - 17 - LONG COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2006 EXHIBIT "H" Note 7: INTERFUND TRANSFERS Interfund transfers for the year ended June 30, 2006, consisted of the following: Transfer to Transfers From General Fund District-wide Capital Projects $ 6,178,456 Transfers are used to move property tax revenues collected by the General Fund to the District-wide Capital Projects Fund for future capital construction projects. Note 8: RISK MANAGEMENT The School District is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors or omissions; job related illness or injuries to employees; acts of God and unemployment compensation. The School District has obtained commercial insurance for risk of loss associated with torts, assets and errors or omissions. However, the errors or omissions policy excludes coverage for sexual harassment and discrimination. 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 has elected to self-insure for all losses related to acts of God. The School District has not experienced any losses related to this risk in 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 2005 2006 $ 0 $ 4 550 $ 4 550 $ 0 $ 0 $ 0 $ 0 $ 0 - 18 - LONG COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2006 EXHIBIT "H" Note 8: RISK MANAGEMENT The School District participates in the Georgia Education Workers' Compensation Trust, a public entity risk pool organized on December 1, 1991, to develop, implement and administer a program of workers' compensation self-insurance for its member organizations. The School District pays an annual premium to the Trust for its general insurance coverage. Additional insurance coverage is provided through an agreement by the Trust with the Midwest Employers Casualty Company to provide coverage for potential losses sustained by the Trust in excess of $500,000 loss per occurrence, up to $2,000,000. The School District has purchased surety bonds to provide additional insurance coverage as follows: Position Covered Amount Superintendent All Employees $ 20,000 $ 20,000 Note 9: LONG-TERM DEBT GENERAL OBLIGATION DEBT OUTSTANDING General Obligation Bonds currently outstanding are as follows: Purpose Interest Rates Amount General Government - Series 1997 General Government - Refunding - Series 2004 General Government - Refunding - Series 2005 4.60% - 4. 75% 3.01 % 3.70% $ 290,000 1,540,000 3,340,000 $ 5,170,000 The changes in Long-Term Debt during the fiscal year ended June 30, 2006, were as follows: - 19 - LONG COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2006 EXHIBIT "H" Note 9: LONG-TERM DEBT Governmental Funds General Obligation Bonds Balance July 1, 2005 $ 5,520,000 Deductions Debt Retired 350,000 Balance June 30, 2006 $ 5,170,000 Portion of Long-Term Debt Due within One Year $ 335,000 At June 30, 2006, payments due by fiscal year which includes principal and interest for these items are as follows: Fiscal Year Ended June 30 General Obligation Debt Principal Interest 2007 2008 2009 2010 2011 2012 - 2016 2017 - 2018 $ 335,000 $ 350,000 365,000 375,000 390,000 2,270,000 1,085,000 183,569 171,017 157,700 145,437 132,872 454,038 60,680 Total Principal and Interest $ 5,170,000 $ 1,305,313 Note 10: PRIOR YEAR DEFEASEMENT OF DEBT In fiscal year 2005, the School District defeased certain general obligation bonds by placing the proceeds ofnew bonds in an irrevocable trust to provide for all future debt service payments on the old bonds. Accordingly, the trust account assets and the liability for the defeased bonds are not included in the School District's basic financial statements. At June 30, 2006, $3,105,000 of bonds are outstanding and are considered defeased. - 20 - LONG COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2006 EXHIBIT "H" Note 11: SIGNIFICANT CONTINGENT LIABILITIES Amounts received or receivable principally from the Federal government are subject to audit and review by grantor agencies. This could result in requests for reimbursement to the grantor agency for any costs which are disallowed under grant terms. The School District believes that such disallowances, if any, will be immaterial to its overall financial position. The School District is a defendant in various legal proceedings pertaining to matters incidental to the performance ofroutine School District operations. The ultimate disposition ofthese proceedings is not presently determinable, but is not believed to be material to the basic financial statements. Note 12: RETIREMENT PLANS TEACHERS RETIREMENT SYSTEM OF GEORGIA (TRS) TRS PLAN DESCRIPTION Substantially all teachers, administrative and clerical personnel employed by local school systems are covered by the Teachers Retirement System of Georgia (TRS), which is a cost-sharing multiple employer defined benefit pension plan. TRS provides service retirement, disability retirement and survivors benefits for its members in accordance with State statute. The Teachers Retirement System of Georgia issues a separate stand alone financial audit report and a copy can be obtained from the Georgia Department of Audits and Accounts. TRS CONTRIBUTIONS REQUIRED AND MADE Employees ofthe School District who are covered by TRS are required by State statute to contribute 5% of their gross earnings to TRS. The School District makes monthly employer contributions to TRS at rates adopted by the TRS Board of Trustees in accordance with State statute and as advised by their independent actuary. The required employer contribution rate is 9.24% and employer contributions for the current fiscal year and the preceding two fiscal years are as follows: Fiscal Year Percentage Contributed Required Contribution 2006 2005 2004 100% 100% 100% $ 734,342 $ 666,929 $ 619,679 - 21 - (This page left intentionally blank) LONG COUNTY BOARD OF EDUCATION GENERAL FUND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL YEAR ENDED JUNE 30, 2006 SCHEDULE "1" REVENUES Property Taxes Sales Taxes State Funds Federal Funds Charges for Services Investment Earnings Miscellaneous Total Revenues EXPENDITURES Current Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Enterprise Operations Community Services Food Services Operation Total Expenditures Excess of Revenues over (under) Expenditures OTHER FINANCING SOURCES {USES} Other Sources Other Uses Total Other Financing Sources (Uses) Net Change in Fund Balances Fund Balances - Beginning NONAPPROPRIATED BUDGETS ORIGINAL(1) FINAL {1) ACTUAL AMOUNTS $ 1,728,000 $ 1,728,000 $ 1,902,123 63,545 10,285,110 10,285,110 10,575,250 2,840,478 2,840,478 2,699,610 199,607 199,607 288,100 98,396 98,396 203,787 38 000 38 000 182 248 $ 15189 591 $ 15 189 591 $ 15 914 663 $ 9,299,049 $ 9,299,049 $ 9,719,673 336,069 949,610 208,905 319,089 746,374 93,352 1,107,378 1,108,065 12,710 127,059 72,938 1083788 336,069 949,610 208,905 319,089 746,374 93,352 1,107,378 1,108,065 12,710 127,059 72,938 1 083 788 474,426 828,228 198,889 356,447 676,381 94,821 841,806 912,925 7,399 139,474 5,764 69,106 1,024,863 $ 15,464,386 $ 15 464 386 $ 15,350,202 $ -274 795 $ -274 795 $ 564 461 $ 20,000 $ 20,000 -520 000 -520 000 $ -6 178 456 $ -500 000 $ -500 000 $ -6 178 456 $ -774,795 $ -774,795 $ -5,613,995 1 325 552 1325552 7,465,226 Fund Balances - Ending $ 550 757 $ 550 757 $ 1 851 231 Notes to the Schedule of Revenues, Expenditures and Changes in Fund Balances Budget and Actual (1) Original and Final Budget amounts do not include budgeted revenues or expenditures of the various principal accounts. The accompanying schedule of revenues, expenditures and changes in fund balances budget and actual is presented on the modified accrual basis of accounting which is the basis of accounting used in the presentation of the fund financial statements. See notes to the basic financial statements. - 23 - LONG COUNTY BOARD OF EDUCATION SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS YEAR ENDED JUNE 30, 2006 SCHEDULE "2" FUNDING AGENCY PROGRAM/GRANT Agriculture, U. S. Department of Child Nutrition Cluster Pass-Through From Georgia Department of Education Food Services School Breakfast Program National School Lunch Program Total Child Nutrition Cluster Other Programs Pass-Through From Georgia Department of Education Food Donation (1) Total U.S. Department of Agriculture Education, U. S. Department of Special Education Cluster Pass-Through From Georgia Department of Education Special Education Grants to States Preschool Grants Total Special Education Cluster Other Programs Direct Impact Aid Pass-Through From Georgia Department of Education English Language Acquisition Grants Enhancing Education Through Technology Program Improving Teacher Quality State Grants Hurricane Education Recovery Migrant Education Rural Education State Grants for Innovative Programs Title I Grants to Local Educational Agencies Vocational Education - Basic Grants to States Total U.S. Department of Education Total Federal Financial Assistance NIA = Not Available CFDA NUMBER PASSTHROUGH ENTITY ID NUMBER EXPENDITURES IN PERIOD * 10.553 * 10.555 N/A N/A $ $ (2) 951 018 951,018 10.550 NIA $ 8 028 959 046 84.027 84.173 N/A $ N/A $ 242,882 9 045 251,927 84.041 84.365 84.318 84.367 84.938 84.011 84.358 84.298 * 84.010 84.048 N/A N/A N/A N/A N/A N/A N/A N/A N/A $ (3) 23,477 189,701 81,530 (4) 79,443 66,708 9,052 1,056,683 35 884 1 794 405 $ =====2=75=3="4=5=1 - 24 - LONG COUNTY BOARD OF EDUCATION SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS YEAR ENDED JUNE 30, 2006 SCHEDULE "2" Notes to the Schedule of Expenditures of Federal Awards (1) The amount shown for the Food Donation Program represents the Federally assigned value of nonmonetary assistance for donated commodities received and/or consumed by the School District during the current fiscal year. (2) Expenditures for the funds earned on the School Breakfast Program ($243,425) were not maintained separately and are included in the 2006 National School Lunch Program. (3) Funds earned on the Impact Aid Program, in the amount of $113,457, do not require reporting of expenditures. (4) Funds earned on the Hurricane Education Recovery program, in the amount of $11,934, do not require reporting of expenditures. 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 Long 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. - 25 - LONG COUNTY BOARD OF EDUCATION SCHEDULE OF STATE REVENUE YEAR ENDED JUNE 30, 2006 AGENCY/FUNDING GRANTS Bright From the Start: Georgia Department of Early Care and Learning Pre-Kindergarten Program Education, Georgia Department of Quality Basic Education Direct Instructional Cost Kindergarten Program Kindergarten Program - Early Intervention Program Primary Grades (1-3) Program Primary Grades - Early Intervention (1-3) Program Upper Elementary Grades (4-5) Program Upper Elementary Grades - Early Intervention (4-5) Program Middle School (6-8) Program High School General Education (9-12) Program Vocational Laboratory (9-12) Program Students with Disabilities Category I Category II Category Ill Category IV CategoryV 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 Migrant Education Mid-term Adjustment Hold-Harmless Education Equalization Funding Grant Food Services Vocational Education Austerity Reduction Other State Programs K-8 Statewide Reading and Math Program Preschool Handicapped Program Special Education Low Incidence Grant Virtual Schools State Grant See notes to the basic financial statements. - 26 - SCHEDULE "3" GOVERNMENTAL FUND TYPE GENERAL FUND $ 504,100 701,236 80,572 1,348,265 57,915 488,123 245,592 1,175,758 876,551 273,861 70,953 84,404 405,817 13,069 125,016 116,419 34,153 89,225 52,498 179,628 57,562 39,377 331,904 379,733 564,084 298,437 57,669 35,802 54,468 6,845 4,546 19,458 101,552 1,966,713 53,564 250 -390,796 40,422 24,238 6,067 200 $ ===1=0=,5=7=5'=2=50= LONG COUNTY BOARD OF EDUCATION SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS YEAR ENDED JUNE 30, 2006 SCHEDULE "4" PROJECT To pay principal of and interest coming due on the Series 1997 Bonds from September 1, 2003 through September 1, 2008. ORIGINAL ESTIMATED COST (1) CURRENT ESTIMATED COSTS (2) AMOUNT EXPENDED IN CURRENT YEAR (3) (4) AMOUNT EXPENDED IN PRIOR YEARS (3) (4) PROJECT STATUS $ 1,629,394 $ 1,629,394 $ 306 497 $ 602,888 Ongoing (1) The School District's original cost estimate as specified in the resolution calling for the imposition of the Local Option Sales Tax. (2) The School District's current estimate of total cost for the project. Includes all cost from project inception to completion. (3) The voters of Long County approved the imposition of a 1% sales tax to fund the above project. (4) Portions of the Series 1997 Bonds were retired through the sale of Series 2005 Refunding Bond Issue. The School District will utilize the SPLOST proceeds budgeted for this project, plus any excess SPLOST proceeds to retire Series 2005 Refunding Bond Issue. See notes to the basic financial statements. - 27 - (This page left intentionally blank) LONG COUNTY BOARD OF EDUCATION GENERAL FUND- QUALITY BASIC EDUCATION PROGRAM (QBE) ALLOTMENTS AND EXPENDITURES BY PROGRAM YEAR ENDED JUNE 30, 2006 SCHEDULE "5" DESCRIPTION ALLOTMENTS FROM GEORGIA DEPARTMENT OF EDUCATION (1) (2) ELIGIBLE QBE PROGRAM COSTS SALARIES OPERATIONS TOTAL Direct Instructional Programs Kindergarten Program $ Kindergarten Program-Early Intervention Program Primary Grades (1-3) Program Primary Grades-Early Intervention (1-3) Program Upper Elementary Grades (4-5) Program Upper Elementary Grades-Early Intervention (4-5) Program Middle School (6-8) Program High School General Education (9-12) Program Vocational Laboratory (9-12) Program Students with Disabilities Category I Category II Category Ill Category IV CategoryV Gifted Student - Category VI Remedial Education Program Alternative Education Program English Speakers of Other Languages (ESOL) 746,508 $ 91,013 1,441,650 81,574 530,612 267,845 1,271,878 940,083 297,729 748,354 125,910 36,741 95,980 56470 750,526 $ 110,334 1,248,015 231,123 588,346 214,297 1,437,271 818,941 294,395 47,834 182,991 641,375 23,790 35,694 131,167 125,900 45,191 54 325 25,741 $ 42,274 46,128 71,330 83,891 41,032 586 308 3,757 370 1,048 776,267 110,334 1,290,289 231,123 634,474 214,297 1,508,601 902,832 335,427 48,420 183,299 645,132 24,160 35,694 132,215 125,900 45,191 54 325 TOTAL DIRECT INSTRUCTIONAL PROGRAMS $ 6,732,347 $ 6,981,515 $ 316,465 $ 7,297,980 Media Center Program Staff and Professional Development 193,795 42 603 169,004 14 292 16,498 32 089 185,502 46 381 TOTAL QBE FORMULA FUNDS $ 6 968 745 $ 7164811 $ 365 052 $===7,=52=9=,8=6===3 (1) Comprised of State Funds plus Local Five Mill Share. (2) Allotments do not include the impact of the State budget austerity reduction. See notes to the basic financial statements. - 29 - 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 March 5, 2007 Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education and Superintendent and Members of the Long 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 Long County Board of Education as of and for the year ended June 30, 2006, which collectively comprise Long County Board ofEducation's basic financial statements and have issued our report thereon dated March 5, 2007. 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 Long County Board of Education's internal control over financial reporting in order to determine our auditing procedures for the purpose of expressing our opinions on the financial statements and not to provide an opinion on the internal control over financial reporting. However, we noted certain matters involving the internal control over financial reporting and its operation that we consider to be reportable conditions. Reportable conditions involve matters coming to our attention relating to significant deficiencies in the design or operation of the internal control over financial reporting that, in our judgment, could adversely affect Long County Board of Education's ability to record, process, summarize and report financial data consistent with assertions ofmanagement in the financial statements. Reportable conditions are described in the accompanying Schedule ofFindings and Questioned Costs as items FS-6911-06-01, FS-6911-06-02, FS-6911-06-03, FS-6911-06-04 and FS-6911-06-05. 2006YB-30 A material weakness is a reportable condition in which the design or operation ofone or more ofthe internal control components does not reduce to a relatively low level the risk that misstatements caused by error or fraud in amounts that would be material in relation to the financial statements being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. Our consideration of the internal control over financial reporting would not necessarily disclose all matters in the internal control that might be reportable conditions and, accordingly, would not necessarily disclose all reportable conditions that are also considered to be material weaknesses. However, we believe none of the reportable conditions described above are material weaknesses. Compliance and Other Matters As part of obtaining reasonable assurance about whether Long County Board of Education's financial statements are free of material misstatement, we performed tests of its compliance with certain provisions oflaws, regulations, contracts and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. This report is intended solely for the information and use of the management and members of the Long County Board of Education and is not intended to be and should not be used by anyone other than these specified parties. Respectfully submitted, ~ - oo_ Jl. ~~ Russell W. Hinton, CPA, CGFM State Auditor RWH:as 2006YB-30 Russell W. Hinton STATE AUDITOR (404) 656-2174 DEPARTMENT OF AUDITS AND ACCOUNTS 270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400 March 5, 2007 Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education and Superintendent and Members of the Long 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 Long 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 of its major Federal programs for the year ended June 30, 2006. Long 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 Long County Board of Education's management. Our responsibility is to express an opinion on Long County Board of Education's compliance based on our audit. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States ofAmerica; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and 0MB Circular A133, Audits of States, Local Governments, and Non-Profit 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 Long County Board of Education's compliance with 2006SA-40 those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Our audit does not provide a legal determination on Long County Board ofEducation's compliance with those requirements. In our opinion, the Long 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, 2006. The results of our auditing procedures disclosed nonmaterial instances of noncompliance with those requirements which are described in the accompanying Schedule of Findings and Questioned Costs as items FA-6911-06-02 and FA-6911-06-03. Internal Control Over Compliance The management of Long 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 Long 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 and to test and report on internal control over compliance in accordance with 0MB Circular A-133. We noted a certain matter involving the internal control over compliance and its operation that we consider to be a reportable condition. Reportable conditions involve matters coming to our attention relating to significant deficiencies in the design or operation ofthe internal control over compliance that, in our judgment, could adversely affect the Long County Board of Education's ability to administer a major Federal program in accordance with applicable requirements oflaws, regulations, contracts and grants. The reportable condition is described in the accompanying Schedule of Findings and Questioned Costs as item FA-6911-06-01. A material weakness is a reportable condition in which the design or operation ofone or more ofthe internal control components does not reduce to a relatively low level ofrisk that noncompliance with the applicable requirements oflaws, regulations, contracts and grants caused by error or fraud that would be material in relation to a major Federal program being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. Our consideration ofthe internal control over compliance would not necessarily disclose all matters in the internal control that might be reportable conditions and, accordingly, would not necessarily disclose all reportable conditions that are also considered to be material weaknesses. However, we believe the reportable condition described above is not a material weakness. 2006SA-40 This report is intended solely for the information and use ofthe management, members ofthe Long 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, ~~.~ Russell W. Hinton, CPA, CGFM State Auditor RWH:as 2006SA-40 SECTION III AUDITEE'S RESPONSE TO PRIOR YEAR FINDINGS AND QUESTIONED COSTS LONG COUNTY BOARD OF EDUCATION AUDITEE'S RESPONSE SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2006 PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS FINDING CONTROL NUMBER AND STATUS FS-6911-04-01 FS-6911-05-01 FS-6911-05-02 FS-6911-05-03 FS-6911-05-04 FS-6911-05-05 Further Action Not Warranted Unresolved - See Corrective Action/Reponses Partially Resolved - See Corrective Action/Responses Partially Resolved - See Corrective Action/Responses Partially Resolved - See Corrective Action/Responses Previously Reported Corrective Action Implemented CORRECTIVE ACTION/RESPONSES CASH AND CASH EQUIVALENTS Inadequate Internal Control Procedures Finding Control Number: FS-6911-05-01 Beginning in fiscal year 2007, the School District has changed the procedures in reconciliation ofCentral Office banks statements. All Central Office bank statements will be reconciled to the financial books and variances will be corrected prior to the month's financial records being finalized. The Superintendent or his designee will review and initial all bank statement reconciliations. CASH AND CASH EQUIVALENTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Control Procedures Finding Control Number: FS-6911-05-02 The School District hired additional personnel to employ a school bookkeeper for each school. A School Internal Accounting Handbook was developed and implemented during the school year and appropriate training was provided for the school bookkeepers. Due to limited administrative staff, management continues to review and implement new procedures to provide compensating controls to address the lack of segregation of duties concern. - 1- LONG COUNTY BOARD OF EDUCATION AUDITEE'S RESPONSE SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2006 PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS EXPENDITURES/LIABILITIES/DISBURSEMENTS GENERAL LEDGER CAPITAL ASSETS Inadequate Accounting Procedures Finding Control Number: FS-6911-05-03 The School District will ensure all capital expenditures are properly recorded in the system's financial records. EMPLOYEE COMPENSATION Inadequate Internal Control Procedures/Salary Overpayments Finding Control Number: FS-6911-05-04 Our School District is studying the concern of double pay related to employees working during school hours and driving bus routes. Due to limited bus drivers substitute availability, this issue will require further study and we plan to resolve this finding during the fiscal year 2007 school year. PRIOR YEAR FEDERAL AWARD FINDINGS AND QUESTIONED COSTS No matters were reported. -2- SECTION IV FINDINGS AND QUESTIONED COSTS LONG COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2006 I SUMMARY OF AUDITOR'S RESULTS 1. Type of Report Issued on the Financial Statements The auditor's opinion on the Long County Board of Education's financial statements was unqualified. 2. Reportable Conditions in Internal Control Disclosed by the Audit of the Financial Statements The audit report for the Long County Board of Education disclosed financial statement reportable conditions related to the following control categories. Cash and Cash Equivalents Employee Compensation Capital Assets Expenditures/Liabilities/Disbursements Revenues/Receivables/Receipts Accounting Controls (Overall) None ofthe reportable conditions described above are considered to be material weaknesses. 3. Noncompliance Material to the Financial Statements The audit ofthe Long County Board ofEducation disclosed no instances ofnoncompliance that were deemed to be material to the financial statements. 4. Reportable Conditions in Internal Control Over Major Programs The audit report for the Long County Board ofEducation disclosed a reportable condition in internal control over major programs for the following compliance requirement. Program Income The reportable condition described above is not considered to be a material weakness. 5. Type of Report Issued on Compliance for Major Programs The auditor's opinion on the Long 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 .51 0(a) of 0MB Circular A-133 The Long County Board of Education's audit disclosed an audit finding required to be reported by section .510(a) of 0MB Circular A-133. This audit finding is included in section IV of this report. 7. Major Programs Federal awards audited as major programs are as follows: 10.553 Food Services - School Breakfast Program 10.555 Food Services - National School Lunch Program 84.010 Title I Grants to Local Educational Agencies - 1- LONG COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2006 I SUMMARY OF AUDITOR'S RESULTS 8. Type "A" Program Dollar Threshold The dollar threshold for type "A" programs was $300,000. 9. Low Risk Auditee The Long County Board of Education did not qualify as a low risk auditee as defined by Section .530 of 0MB Circular A-133. II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS CASH AND CASH EQUIVALENTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Controls over School Activity Accounts Reportable Condition Finding Control Number: FS-6911-06-01 Condition: This is a repeat finding (FS-6981-05-02 and FS-6981-04-01) from the years ended June 30, 2005 and 2004, respectively. The accounting procedures for the School District were insufficient to provide for adequate internal controls over the school activity accounts. Criteria: The School District's management is responsible for designing and maintaining internal controls that provide reasonable assurance that transactions are processed according to established procedures. Questioned Cost: NIA Information: Cash and Cash Equivalents The bank reconciliation function was not separated from the record keeping and cash custody functions. Bank statements were only reconciled every three months and reconciling items were not resolved in a timely manner. Cash was not properly reconciled from the bank statement to the general ledger. The bank reconciliation was not reviewed by an administrator not directly connected with cash operations. Revenues/Receivables/Receipts The cash receipting and deposit preparation functions were not separated from the record keeping and cash custody functions. Although requested by auditors, no general ledger detail was provided for receipts deposited in July and August 2005. -2- LONG COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2006 II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS CASH AND CASH EQUIVALENTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Controls over School Activity Accounts Reportable Condition Finding Control Number: FS-6911-06-01 Based on a review of twenty-five items, the following deficiencies were noted: 1) Adequate receipt documentation was not maintained to support cash collections for seventeen of the items tested. 2) Receipt documentation for one item was made up of three deposit slips that totaled to an amount less than the actual deposit. Expenditures/Liabilities/Disbursements The check writing function was not separated from the record keeping and purchasing functions. Although requested by auditors, no general ledger detail was provided for expenditures incurred in July and August 2005. Based on a review of twenty-five items, the following deficiencies were noted: 1) None of the expenditures tested included evidence of approval that was prior to the purchase. 2) Eight vouchers lacked adequate supporting documentation. 3) One voucher was paid from faxed copies of fiscal year 2004 invoices. With no additional documentation to support these invoices, it could not be determined ifthey were paid previously. Cause: These deficiencies were a result of management's decision to limit the number of administrative staff made responsible for accounting functions applicable to the various principal's accounts and management's failure to ensure that internal controls were established, implemented and functioning at all principal's account sites. Effect: Errors and/or irregularities may not be detected in a timely manner. -3 - LONG COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2006 II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS CASH AND CASH EQUIVALENTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Controls over School Activity Accounts Reportable Condition Finding Control Number: FS-6911-06-01 Recommendation: The School District should implement procedures to ensure that the key accounting functions of custody, record keeping and authorization are separated. In addition, management should monitor controls to provide reasonable assurance that transactions are processed according to established policies and implement those procedures deemed necessary to strengthen internal controls over these accounting functions. Proper documentation for cash receipts and disbursements should be maintained. Cash should be properly reconciled each month. CASH AND CASH EQUIVALENTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Control Procedures at the Central Office Reportable Condition Finding Control Number: FS-6911-06-02 Condition: This is a repeat finding (FS-6911-05-01) from the year ended June 30, 2005. The accounting procedures ofthe School District were insufficient to provide for adequate internal controls at the Central Office. 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. Questioned Cost: NIA Information: Cash and Cash Equivalents The bank reconciliation function was not separated from the record keeping and voucher payment functions for the school food service account. Reconciling items were not resolved in a timely manner for the operating account. -4 - LONG COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2006 II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS CASH AND CASH EQUIVALENTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Control Procedures at the Central Office Reportable Condition Finding Control Number: FS-6911-06-02 Revenues/Receivables/Receipts Cash receipting and deposit preparation functions were not separated from the record keeping and cash custody functions for school food service funds. Expenditures/Liabilities/Disbursements The check writing function was not separated from the record keeping and purchasing functions for school food service funds. Based on a review of48 items, one voucher could not be located and one expenditure voucher did not contain evidence of receipt. Cause: 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. In addition, management failed to ensure that internal controls were established, implemented and functioning at the Central Office. Effect: Errors and/or irregularities may not be detected in a timely manner. Recommendation: The School District should implement procedures to ensure that the key accounting functions of custody, record keeping and authorization are separated and/or utilize management oversight of these incompatible activities. In addition, management should review the accounting procedures in place relative to the above control categories and implement procedures to strengthen the internal controls at the Central Office. EMPLOYEE COMPENSATION Salary Underpayments/Overpayments Reportable Condition Finding Control Number: FS-6911-06-03 Condition: This is a repeat finding (FS-6911-05-04) from the year ended June 30, 2005. Salary overpayments totaling $315 .13 and a salary underpayment in the amount of $276.53 were noted during the review of employees' payroll records. - 5- LONG COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2006 II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS EMPLOYEE COMPENSATION Salary Underpayments/Overpayments Reportable Condition Finding Control Number: FS-6911-06-03 Criteria: The School District's management is responsible for designing and maintaining internal controls that ensure employee compensation is calculated properly. Questioned Cost: NIA Information: Based on a review of twenty-seven employees, the following deficiencies were noted: One employee, with dual positions, was paid in excess of actual hours worked because work times for each position overlapped. Three employees were overpaid due to errors identified in the recalculation of an employee's salary for a change in certification, errors in a pay calculation of a teacher's daily rate and an error in calculating a local supplement. One employee was underpaid due to an error in calculation for excessive leave. Cause: These deficiencies were a result of management's failure to implement adequate controls to ensure employee compensation is calculated properly. Effect: Errors and/or irregularities may not be detected in a timely manner. Recommendation: The School District should establish and implement appropriate procedures to strengthen internal controls over processing employee compensation. Additionally, the School District should implement procedures to ensure that all payroll disbursements are based on approved contracts, salary scales and time worked. Also, the School District should also review this matter to determine if a recovery or payment of funds is necessary. CAPITAL ASSETS Failure to Adequately Maintain Capital Assets Reportable Condition Finding Control Number: FS-6911-06-04 Condition: This is a repeat finding (FS-6911-05-03) from the year ended June 30, 2005. The School District failed to adequately maintain capital assets listing. -6 - LONG COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2006 II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS CAPITAL ASSETS Failure to Adequately Maintain Capital Assets Reportable Condition Finding Control Number: FS-6911-06-04 Criteria: Chapter 37 Fixed Assets of the Financial Management for 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 inventory records. Questioned Cost: NIA Information: Equipment purchases totaling $253,588, which met the $5,000 capitalization threshold, were omitted from the capital assets listing. Equipment with a value less than the $5,000 capitalization threshold was recorded within the capital assets records. Cause: The School District failed to properly maintain its capital assets records in accordance with the School District's approved capital assets policy. Effect: The failure ofthe School District to maintain a complete and accurate capital assets listing can lead to inaccurate internal and external reporting, as well as noncompliance with generally accepted accounting principles. Recommendation: The School District should review its capital assets records and make appropriate adjustments to ensure that the capital assets records conform to the School District's approved capital assets policy and generally accepted accounting principles. ACCOUNTING CONTROLS (OVERALL) Inadequate Access Controls Reportable Condition Finding Control Number: FS-6911-06-05 Condition: The accounting procedures of the School District did not maintain adequate separation of duties in the Financial Accounting System. Criteria: Separation of duties involving key accounting functions, both manual and automated, is the basis for achieving an adequate system of internal control. Questioned Cost: NIA -7 - LONG COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2006 II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS ACCOUNTING CONTROLS (OVERALL) Inadequate Access Controls Reportable Condition Finding Control Number: FS-6911-06-05 Information: Access controls in the Financial Accounting System do not prevent users from accessing accounting functions that are outside of their area of responsibility. Cause: The School District's management is responsible for designing and maintaining internal controls that restrict access to programs or data. Management has not limited the access rights of users of the Financial Accounting System. Effect: Errors and/or irregularities may not be detected in a timely manner. Recommendation: Management should ensure that the access controls in the accounting information system should complement the system of internal control by limiting an employee's access to only the accounting functions necessary for the performance of the employee's duties. III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS PROGRAM INCOME Inadequate Controls over Meal Sales Reportable Condition U. S. Department of Agriculture Through Georgia Department of Education Child Nutrition Cluster (CFDA 10.553 and 10.555) Finding Control Number: FA-6911-06-01 Condition: A review of the School District's internal control policies and procedures noted deficiencies in providing adequate internal control over the collection of cash from meal sales for the Child Nutrition Cluster (CFDA 10.553 and 10.555) programs. 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. Questioned Cost: NIA -8- LONG COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2006 III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS PROGRAM INCOME Inadequate Controls over Meal Sales Reportable Condition U.S. Department of Agriculture Through Georgia Department of Education Child Nutrition Cluster (CFDA 10.553 and 10.555) Finding Control Number: FA-6911-06-01 Information: A review of two weeks of cash collection deposits for Smiley Elementary School and Walker Middle School noted the following deficiencies: School Food Service personnel removed income from the register for emergency purchases and failed to record the expenditures on the general ledger, which resulted in daily cash collections not agreeing with amounts actually deposited into the School Food Service bank account. Shortages and overages were not adequately explained. Cause: Management failed to implement adequate internal controls over meal sales. Effect: Failure to reconcile the cash collected and deposited to the actual number of paid meals served and deposit all program income received could result in errors in financial reporting and increases the risk ofmaterial misstatement in the financial statements, including misstatements due to fraud. Recommendation: Cash collection procedures should be implemented and/or enhanced to ensure all cash is properly accounted for, recorded and reconciled to the number of meals served. SPECIAL TESTS AND PROVISIONS Fiscal Requirement of Schoolwide Program Not Fully Implemented Nonmaterial Noncompliance U.S. Department of Education Through Georgia Department of Education Title I Grants to Local Education Agencies (CFDA 84.010) Finding Control Number: FA-6911-06-02 Condition: The School District identified three schools that participated in a schoolwide program funded with Title I Grants to Local Educational Agencies; however, the School District did not consolidate the different Federal funds for each of those schools that participated in a schoolwide program. - 9- LONG COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2006 III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS SPECIAL TESTS AND PROVISIONS Fiscal Requirement of Schoolwide Program Not Fully Implemented Nonmaterial Noncompliance U.S. Department of Education Through Georgia Department of Education Title I Grants to Local Education Agencies (CFDA 84.010) Finding Control Number: FA-6911-06-02 Criteria: In accordance with provisions ofU. S. Department ofEducation Instructions and 0MB Circular A-133, Compliance Supplement provisions, eligible schools are able to use their Title I, Part A funds, in combination with other Federal, State and local funds, in order to upgrade the entire educational program of the school and to raise academic achievements for all students. By combining funds from Title I and other eligible U. S. Department of Education funded programs in support of a schoolwide program, U. S. Department of Education Instructions provide that specific schoolwide program costs lose their identity but only in those circumstances when funds are combined in a schoolwide program. Questioned Cost: NIA Information: The School District failed to combine any other Federal funds with Title I funds in support of the schoolwide program. The School District expended other Federal funds that could have been combined with Title I funds but no consolidated fund was established and funds were not allocated in accordance with Federal guidelines. Cause: School District personnel were not fully aware ofthese requirements and the School District did not consolidate into one account the different Federal funds for each of the schools that participated in the schoolwide program. The School District did not allocate Federal funds in proportion to the different Federal funds provided in support of the schoolwide program at each school. Effect: Failure to appropriately budget those Federal funds that support each school's schoolwide program can result in noncompliance with Federal requirements. - 10 - LONG COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2006 III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS SPECIAL TESTS AND PROVISIONS Fiscal Requirement of Schoolwide Program Not Fully Implemented Nonmaterial Noncompliance U. S. Department of Education Through Georgia Department of Education Title I Grants to Local Education Agencies (CFDA 84.010) Finding Control Number: FA-6911-06-02 Recommendation: The School District should follow the Georgia Department of Education's July 2004, accounting guidelines and implement procedures to combine Federal program funds and allocate schoolwide program expenditures in line with U. S. Department of Education and 0MB Circular A-87 provisions. The School District should seek additional guidance from the Georgia Department ofEducation to implement procedures for combining schoolwide program expenditures. SPECIAL TESTS AND PROVISIONS Deficiencies in Hiring "Highly Qualified" Personnel Nonmaterial Noncompliance U.S. Department of Education Through Georgia Department of Education Title I Grants to Local Education Agencies (CFDA 84.010) Finding Control Number: FA-6911-06-03 Condition: The School District did not have adequate procedures in place to ensure that teachers meet the requirements of "Highly Qualified" personnel for those individuals paid from Title I Grants to Local Education Agencies (CFDA 84.010) program. Criteria: "Highly Qualified" requirements are set forth in 34 CFR section 200.58, which states, in part as follows: "An LEA must ensure that each teacher who is hired by the LEA after the first day ofthe 2002-2003 school year to teach a core academic subject and who works in a program supported with Title I funds meets specific qualification requirements." Questioned Cost: NIA Information: The School District made an offer ofemployment, for two teaching positions, before verifying "highly qualified" status and, after identifying that the employees were not "highly qualified", continued to allow the employees to be paid from Title I funds. - 11 - LONG COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2006 III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS SPECIAL TESTS AND PROVISIONS Deficiencies in Hiring "Highly Qualified" Personnel Nonmaterial Noncompliance U.S. Department of Education Through Georgia Department of Education Title I Grants to Local Education Agencies (CFDA 84.010) Finding Control Number: FA-6911-06-03 Cause: The School District did not have adequate procedures in place to ensure that employees not meeting "highly qualified" status were not hired or offered positions requiring this status. Effect: The School District is not ensuring that those students in need ofinstruction from "highly qualified" are in the classrooms. Recommendation: The School District should implement procedures to ensure that only "highly qualified" employees are hired for positions requiring "Highly Qualified" status. The Georgia Department of Education should further review this matter to determine if a reclaim of funds is necessary. - 12 - SECTIONV MANAGEMENT'S RESPONSES LONG COUNTY BOARD OF EDUCATION SCHEDULE OF MANAGEMENT'S RESPONSES YEAR ENDED JUNE 30, 2006 Finding Control Number: FS-6911-06-01 We concur with this finding. In August 2005, the Board hired additional personnel to staff a school bookkeeper for each school. A School Internal Accounting Handbook was developed and implemented during the school year and appropriate training was provided for the school bookkeepers in January 2006. Due to limited administrative staff, management continues to review and implement new procedures to provide compensating controls to address the lack of segregation of duties concern. Contact Person: Bridget Welch, Financial Director Phone: (912) 545-2367 Fax Number: (912) 545-2380 E-mail Address: bwelch@long.kl2.ga.us Finding Control Number: FS-6911-06-02 We concur with this finding. Cash and Cash Equivalents Bank reconciliations are balanced to the general ledger monthly and all reconciling items are immediately addressed. All bank reconciliations are reviewed and approved by the Superintendent in a timely manner. Revenues/Receivables/Receipts and Expenditures/Liabilities/Disbursements During fiscal year 2007, compensating controls will be established to address the concern of cash receipting and check writing not being separated from record keeping for the School Food Service account. The voucher preparation and filing procedures for the General Fund were changed to ensure evidence of receipt of goods is filed with vouchers in an organized manner. Contact Person: Bridget Welch, Financial Director, Kathryn Griffin, School Food Service Director and Kathy Walter, Payroll Supervisor Phone: (912) 545-2367 Fax Number: (912) 545-2380 E-mail Address: bwelch@long.kl2.ga.us, kgriffin@long.kl2.ga.us and kwalter@long.k12.ga.us - 1- LONG COUNTY BOARD OF EDUCATION SCHEDULE OF MANAGEMENT'S RESPONSES YEAR ENDED JUNE 30, 2006 Finding Control Number: FS-6911-06-03 We concur with this finding. Employee Compensation The Board is aware of the situation with the employee working dual positions, but due to limited substitute bus drivers, this situation has not been resolved. Beginning in mid fiscal year 2007, payroll salary adjustments are calculated by the payroll clerk and verified by the Payroll Supervisor. Contact Person: Bridget Welch, Financial Director, Kathryn Griffin, School Food Service Director and Kathy Walter, Payroll Supervisor Phone: (912) 545-2367 Fax Number: (912) 545-2380 E-mail Address: bwelch@long.kl2.ga.us, kgriffin@long.kl2.ga.us and kwalter@long.kl2.ga.us Finding Control Number: FS-6911-06-04 We concur with this finding. Capital Assets The capital assets will be corrected in fiscal year 2007 to include $253,588 for security cameras purchased in fiscal year 2005. Contact Person: Bridget Welch, Financial Director, Kathryn Griffin, School Food Service Director and Kathy Walter, Payroll Supervisor Phone: (912) 545-2367 Fax Number: (912) 545-2380 E-mail Address: bwelch@long.kl2.ga.us, kgriffin@long.kl2.ga.us and kwalter@long.kl2.ga.us Finding Control Number: FS-6911-06-05 We concur with the finding. All PC Genesis users will be revised during the fiscal year 2007 year to determine if users have access to accounting functions outside their area of responsibility and appropriate adjustments will be made. Contact Person: Bridget Welch, Financial Director Phone: (912) 545-2367 Fax Number: (912) 545-2380 E-mail Address: bwelch@long.kl2.ga.us -2 - LONG COUNTY BOARD OF EDUCATION SCHEDULE OF MANAGEMENT'S RESPONSES YEAR ENDED JUNE 30, 2006 Finding Control Number: FA-6911-06-01 All school food service managers have received a memo from the director prohibiting cash removal from registers for food or supply purchases. Accounts have been established at local stores to allow purchase ofnecessary emergency food/supplies for daily school food operations. All cashiers have been instructed to document all overages and shortages daily. Contact Person: Kathryn Griffin, School Food Service Director Phone: (912) 545-2367 Fax Number: (912) 545-2380 E-mail Address: kgriffin@long.k12.ga.us Finding Control Number: FA-6911-06-02 The Title I Director and the Fiscal Officer will begin the process of fund consolidation for each of the schools with consolidation of $6,800 from Title VIB and $461,007 from Title I into the schoolwide account during the 2006-2007 fiscal year. The Title I Director and Fiscal Officer will implement procedures to assure full consolidation of applicable Federal funding in the 2007-2008 school year. Contact Person: Kathy Simmons, Curriculum/Title I Director Phone: (912) 545-2367 Fax Number: (912) 545-2380 E-mail Address: ksimmons@long.kl2.ga.us Finding Control Number: FA-6911-06-03 Procedures will be implemented during fiscal year 2007 to ensure employees not meeting "highly qualified" status are not rehired. Contact Person: Kathy Walter, Payroll Supervisor Phone: (912) 545-2367 Fax Number: (912) 545-2380 E-mail Address: kwa1ter@long.kl2.ga.us -3-