McDuffie County Board of Education, Thomson, Georgia, annual financial report for the fiscal year ended June 30, 2010 (including independent auditor's reports)

1MCDUFFIE COUNTY BOARD OF EDUCATION
ITHOMSON, GEORGIA
IANNUAL FINANCIAL REPORT FOR THE FISCAL YEAR ENDED JUNE 30,2010 (Including Independent Auditor's Reports)

MCDUFFIE COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS -

SECTION I

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

MCDUFFIE COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS -
SECTION I FINANCIAL SCHEDULES SUPPLEMENTARY INFORMATION 4 SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS 5 ALLOTMENTS AND EXPENDITURES
GENERAL FUND - QUALITY BASIC EDUCATION PROGRAMS (QBE)
BY PROGRAM
SECTION II COMPLIANCE AND INTERNAL CONTROL REPORTS INDEPENDENT AUDITOR'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MAllERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WlTH GOVERNMENT AUDITING STANDARDS INDEPENDENT AUDITOR'S REPORT ON COMPLIANCE WlTH REQUIREMENTSTHAT COULD HAVE A DIRECT AND MATERIAL EFFECT ON EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WlTH OMB CIRCULAR A-133
SECTION Ill AUDITEE'S RESPONSE TO PRIOR YEAR FINDINGS AND QUESTIONED COSTS SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS
SECTION IV FINDINGS AND QUESTIONED COSTS SCHEDULE OF FINDINGS AND QUESTIONED COSTS

MCDUFFIE 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)6563174

DEPARTMENOFTAUDITSAND ACCOUNTS
270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400
June 2 8 , 2 0 1 1

Honorable Nathan Deal, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the McDuffie 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 of the governmental activities, each major fund, and the aggregate remaining fund information (Exhibits A through H) of the McDuffie County Board of Education, as of and for the year ended June 30, 2010, which collectively comprise the Board's basic financial statements as listed in the table of contents. These financial statements are the responsibility of the McDuffie 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 of America and the standards applicable to financial audits contained in GovernmentAuditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and the 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 previously 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 McDuffie County Board of Education, as of June 30, 2010, and the respective changes in financial position thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America.
The McDuffie County Board of Education has not presented Management's Discussion and Analysis that accounting principles generally accepted in the United States of America has determined is necessary to supplement, although not to be part of, the basic financial statements.

In accordance with Government Auditing Standards, we have also issued our report dated June 28, 2011, on our consideration of the McDuffie County Board of Education's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Audting Standardsand should be considered in assessingthe results of our audit.
Accounting principles generally accepted in the United States of America require that the Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual, as presented on page 25, be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures, to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during the audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance.
Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the McDuffie County Board of Education's financial statements as a whole. The accompanying supplementary information consists 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, Audi6 o f States, local Governmentc, and Non-Profit Organirations, are presented for purposes of additional analysis and are not a required part of the financial statements. Such information is the responsibility of management and was derived from and relate directly to the underlying accounting and other records used to prepare the financial statements. The information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated, in all material respects, in relation to the financial statements 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.
~ u d s e lWl . Hinton, CPA, CGFM State Auditor

MCDUFFIE COUNTY BOARD OF EDUCATION

MCDUFFIE COUNTY BOARD OF EDUCATION STATEMENT OF NET ASSETS JUNE 30.2010
ASSETS
Cash and Cash Equivalents Accounts Receivable. Net
Taxes State Government Federal Government Local Other Capitalized Bond and Other Debt Issuance Costs Capital Assets, Non-Depreciable Capital Assets, Depreciable (Net of Accumulated Depreciation)
Total Assets
LIABILITIES
Accounts Payable Salaries and Benefits Payable Interest Payable Contracts Payable Long-Term Liabilities
Due Within One Year Due in MoreThan One Year
Total Liabilities
NET ASSETS
Invested in Capital Assets, Net of Related Debt Restricted for
Bus Replacement Continuation of Federal Programs Debt Service Capital Projects Unrestricted
Total Net Assets
Total Liabilities and Net Assets

EXHIBIT "A"
GOVERNMENTAL ACTIVITIES

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

MCDUFFIE COUNTY BOARD OF EDUCATION STATEMENT OF ACTIVITIES
FOR THE YEAR ENDEDJUNE 30.2010

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 Sales Taxes Special Purpose Local Option Sales Tax For Capital Projects Other Sales Tax Grants and Contributions not Restrictedto Specific Programs Investment Earnings Miscellaneous
Total General Revenues
Change in NetAssets
Net Assets - Beginningof Year (Restated)
Net Assets - End of Year

EXPENSES

CHARGES FOR SERVICES

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

EXHIBIT " 0

PROGRAM REVENUES OPERATING GRANTS AND
CONTRIBUTIONS

CAPITAL GRANTS AND CONTRIBUTIONS

NET (EXPENSES) REVENUES
AND CHANGES IN NET ASSETS

MCDUFFIE COUNTY BOARD OF EDUCATION BALANCE SHEET
GOVERNMENTAL FUNDS JUNE 30,2010

GENERAL FUND

DISTRICTWIDE
CAPITAL PROJECTS
FUND

DEBT SERVICE
FUND

Cash and Cash Equivalents Accounts Receivable, Net
Taxes State Government Federal Government Local Other
Total &sets

LIABILITIESAND FUND BALANCES
LIABILITIES
Accounts Payable Salaries and Benefits Payable Contracts Payable
Total Liabilities
FUND BALANCES
Resewed for: Bus Replacement Continuation of Federal Programs Debt Service Capital Projects
Unreserved Designatedfor Student Activities UndesignatedReported in: General Fund
Total Fund Balances
Total Liabilities and Fund Balances

EXHIBIT "C" TOTAL

The notes to the basicfinancial statements are an integral part of this statement
- 4 -

MCDUFFIE COUNTY BOARD OF EDUCATION RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET
TO THE STATEMENT OF NET ASSETS JUNE 30.2010
Total Fund Balances - Governmental Funds (Exhibit "C")
Amounts reported for GovernmentalActivities in the Statement of Net Assets are different because:
Capital Assets used in GovernmentalActivities are not financial resources and therefore are not remrted in the funds. These assets consist of:
Land Construction in Progress Land Improvements Buildings Equipment Accumulated Depreciation
Total Capital Assets
Other Long-Term Assets are not available to pay for current period expenditures and therefore, are deferred on the Statement of Net Assets.
Deferred Charges- Bond IssuanceCosts
Long-Term Liabilities, including Bonds Payable, are not due and payable in the current period and therefore are not reported as liabilities in the funds. Long-Term Liabilities at year-end consist of:
Bonds Payable Accrued Interest Compensated Absences Payable
Total Long-Term Liabilities
Net Assets of GovernmentalActivities (Exhibit"A")

EXHIBIT "D"

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

MCDUFFIE COUNTY BOARD OF EDUCATION STATEMENT OF REVENUES, EXPENDITURESAND CHANGES IN FUND BALANCES
GOVERNMENTAL FUNDS YEAR ENDEDJUNE 30,2010

REVENUES
Property Taxes Sales Taxes State Funds Federal Funds Charges for Services Investment Earnings Miscellaneous
Total Revenues
EXPENDITURES
Current Instruction Support Services Pupil Services Improvementof Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenanceand Operation of Plant Student TransportationServices Central Support Services Other Support Services Enterprise Operations Community Services Food Services Operation
Capital Outlay Debt Services
Principal Dues and Fees Interest
Total Expenditures
Excess of Revenues over (under) Expenditures
OTHER FINANCING SOURCES (USES)
Transfers In Transfers Out
Total Other FinancingSources (Uses)
Net Change in Fund Balances
Fund Balances - Beginning
Fund Balances - Ending

GENERAL FUND

DISTRICTWIDE
CAPITAL PROJECTS
FUND

DEBT SERVICE
FUND

EXHIBIT "E" TOTAL

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

MCDUFFIE COUNTY BOARD OF EDUCATION RECONCILIATIONOF THE GOVERNMENTALFUNDSSTATEMENT OF
REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES TO THE STATEMENT OF ACTIVITIES JUNE 30.2010
Total Net Change in Fund Balances- Governmental Funds (Exhibit"EM)
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
Taxes reported in the Statement of Activitiesthat do not provide current financial resourcesare not reDOrted as revenues in the funds.
The net effect of various miscellaneous transactions involving capital assets (i.e., sales, trade-ins, donations, and disposals) is to decrease net assets.
Bond issuance costs are reported as expenditures in Governmental Funds while the asset is allocated over the life of the bonds in the Statement of Activities. The details of this difference in the current period are as follows:
Amortization of Bond IssuanceCosts
Repaymentof Long-Term Debt is reported as an expenditure in Governmental Funds, but the repayment reduces Long-Term Liabilities in the Statement of Net Assets. In the current year, these amounts consist of:
Bond Principal Retirements
Some items reported in the Statement of Activities do not require the use of current financial resources and therefore are not reported as expenditures in Governmental Funds. These activities consist of:
Net Decrease in Accrued Interest Decrease in Compensated Absences
Total Additional Expenditures
Change in Net Assets of GovernmentalActivities (Exhibit "B")

EXHIBIT "F"

The notes to the basicfinancial statements are an integral part of this statement -7-

MCDUFFIE COUNTY BOARD OF EDUCATION STATEMENT OF FIDUCIARY NET ASSETS FIDUCIARY FUNDS JUNE 3 0 , 2 0 1 0
ASSETS Cash and Cash Equivalents
LIABILITIES Funds Held for Others

EXHIBIT "G"
AGENCY FUNDS

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

MCDUFFIE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30,2010

EXHIBIT "H"

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

MCDUFFIE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30,2010

EXHIBIT "H"

District-wide Capital Projects Fund accounts for financial resources including Special Purpose Local Option Sales Tax (SPLOST) to be used for the acquisition, construction or renovation of major capital facilities.
Debt Service Fund accounts for taxes (sales) legally restricted for the payment 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 school clubs and class accounts.
BASIS OF ACCOUNTING
The basis of accounting 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 segregatingtransactions related to certain governmental functions or activities. A fund is a separate accounting entity with a self-balancing set of accounts.
Governmental funds are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Under this method, revenues are recognized when measurable and available. The School District considers all revenues reported in the governmental funds to be available if they are collected within sixty days after year-end. Property taxes, sales taxes and interest are considered to be susceptible to accrual. Expenditures are recorded when the related fund liability is incurred, except for principal and interest on general long-term debt and compensated absences, 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 of specific 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.
The State of Georgia reimburses the School District for teachers' salaries and operating costs through the Quality Basic Education Formula Earnings program (QBE). Generally teachers are contracted for the school year (July 1- June 30) and paid over a twelve month contract period,

MCDUFFIE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30,2010

EXHIBIT "H"

generally September 1through August 31. In accordance with the respective rules and regulations of the QBE program, the State of Georgia reimburses the School District over the same twelve month period in which teachers are paid. At June 30, the amount of teachers' salaries incurred but not paid until July and August of the subsequent year are accrued. Since the State of Georgia recognizes its QBE liability for the July and August salaries at June 30, the School District recognizes the same QBE as a receivable and revenue, consistent with symmetrical recognition.
NEW ACCOUNTING PRONOUNCEMENTS

In fiscal year 2010, the School District adopted the Governmental Accounting and Standards Board (GASB) Statement No. 51, Accounting and Reporting for Intangible AsseB. The provisions of this Statement generally require retroactive reportingfor intangible assets acquired after June 30, 1980, with the exception of those intangible assets that have indefinite useful lives and those that are considered internally generated.
In addition, the School District adopted GASB Statement No. 53, Accounting and Financial Reporting for Derivative Instrumenis. The provisions of this Statement impacts disclosure regarding derivative instruments entered into by the state and local governments. Derivative disclosures, if any, will be identified in Note 3.

RESTATEMENT OF PRIOR YEAR NET ASSETS

For fiscal year 2010, the School District restated various Capital Assets accounts due to errors and omissions. The School District decreased Construction Work in Progress by $1,727,781.59, and Building and lmprovements by $1,953.00. Additionally, the School District increased Accumulated Depreciation for Equipment and Building and lmprovements by $73,594.27. The result is a decrease in Net Assets at July 1,2009, of $1,803,328.86. This change is in accordance with generally accepted accounting principles.

Net Assets, July 1,2009, as previously reported

$

50,839,787.61

Capital Assets Adjustments

-1,803,328.86

Net Assets, July 1,2009, as restated
CASH AND CASH EQUIVALENTS
Composition of Deposits Cash and cash equivalents consist of cash on hand, demand deposits and short-term investments with original maturities of three months or less from the date of acquisition in authorized financial institutions. Official Code of Georgia Annotated Section 45-8-14 authorizes the School District to deposit its funds in one or more solvent banks, insured Federal savings and loan associations or insured chartered building and loan associations.
INVESTMENTS
Composition of Investments lnvestments made by the School District in nonparticipating interest-earning contracts (such as certificates of deposit) and repurchase agreements are reported at cost. Participating interestearning contracts and money market investments with a maturity at purchase of one year or less are

MCDUFFIE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30,2010

EXHIBIT "H"

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 of Georgia Annotated Section 36-83-4 authorizes the School District to invest its funds. In selecting among options for investment or among institutional bids for deposits, the highest rate of return shall be the objective, given equivalent conditions of safety and liquidity. Funds may be invested in the following:
1. Obligations issued by the State of Georgia or by other states,
2. Obligations issued by the United States government,
3. Obligations fully insured or guaranteed by the United States government or a United States government agency,
4. Obligations of any corporation of the United States government,
5 . Prime bankerfsacceptances,
6. The Georgia Fund 1administered by the State of Georgia, Office of Treasury and Fiscal Services,
7. Repurchaseagreements, 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 McDuffie County Board of Commissionersfixed the property tax levy for the 2009 tax digest year (calendar year) on November 20, 2009 (levy date). Taxes were due on February 2, 2010 (lien date). Taxes collected within the current fiscal year or within 6 0 days after year-end on the 2009 tax digest are reported as revenue in the governmental funds for fiscal year 2010. The McDuffie County Tax Commissioner bills and collects the property taxes for the School District, withholds 2.5% of taxes collected as a fee for tax collection and remits the balance of taxes collected to the School District. Property tax revenues, at the fund reporting level, during the fiscal year ended June 30, 2010, for maintenance and operations amounted to $9,711,342.82.
The tax millage rate levied for the 2009 tax year (calendar year) for the McDuffie County Board of Education was as follows (a mill equals $1per thousand dollars of assessed value):

School Operations

17.19 mills

MCDUFFIE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30.2010

EXHIBIT "H"

SALES TAXES

Special Purpose Local Option Sales Tax, at the fund reporting level, during the year amounted to $3,642,983.07 and is to be used for capital outlay for educational purposes or debt service. This sales tax was authorized by local referendum and the sales tax must be re-authorized at least every five years.

INVENTORIES

Food Inventories On the basic financial statements, inventories of donated food commodities used in the preparation of meals are reported at their Federally assigned value and purchased foods inventories are reported at cost (first-in, first-out). The School District uses the consumption method to account for inventories whereby donated food commodities are recorded as an asset and as revenue when received, and expenses/expenditures are recorded as the inventory items are used. Purchased foods are recorded as an asset when purchased and expenses/expenditures are recorded as the inventory items are used.

CAPITAL ASSETS

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

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 Intangible Assets

All

$

5,000.00

$

5,000.00

$

5,000.00

$ 50,000.00

N/A 2 0 to 90 years 5 0 to 90 years
5 to 9 0 years 5 to 50 years

Depreciation is used to allocate the actual or estimated historical cost of all capital assets over estimated useful lives, with the exception of intangible assets which are amortized.

Amortization of intangible assets such as water, timber, and mineral rights, easements, patents, trademarks, copyrights and internally generated software is computed using the straight-line method over the estimated useful lives of the assets, generally 1 0 to 2 0 years.

MCDUFFIE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30,2010

EXHIBIT "H"

COMPENSATED ABSENCES

Members of the Teachers Retirement System of Georgia (TRS) may apply unused sick leave toward early retirement. The liability for early retirement will be borne by TRS rather than by the individual school districts. Otherwise, sick leave does not vest with the employee, and no liability is reported in the School District's financial statements.

Vacation leave of ten days is awarded on a fiscal year basis to all full time personnel employed on a twelve month basis. No other employees are eligible to earn vacation leave. Vacation leave not utilized during the fiscal year may be carried over to the next fiscal year, providing such vacation leave does not exceed ten days.

Beginningof Year Liability

Increases

Decreases

End of Year Liability

GENERAL OBLIGATION BONDS
The School District issues general obligation bonds to provide funds for the acquisition and construction of major capital facilities. In the District-wide financial statements, bond premiums and discounts, as well as issuance costs, are deferred and amortized over the life of the bonds using the straight-line method. Bond issuance costs are reported as deferred charges and amortized over the term of the debt.
In the fund financial statements, the School District recognizes bond premiums and discounts, as well as bond issuance costs during the fiscal year bonds are issued. Premiums received on debt issuances are reported as other financing sources while discounts on debt issuances are reported as other financing uses. Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as debt service expenditures. General obligation bonds are direct obligations and pledge the full faith and credit of the government. The outstanding amount of these bonds is recorded in the Statement of Net Assets.
NET ASSETS
The School District's net assets in the District-wideStatements are classified as follows:
Invested in capital assets, net of related debt - This represents the School District's total investment in capital assets, net of outstanding debt obligations related to those capital assets. To the extent debt has been incurred but not yet expended for capital assets, such amounts are not included as a component of invested in capital assets, net of related debt.
Restricted net assets-These represent resources for which the School District is legally or contractually obligated to spend resources for bus replacement, continuation of Federal Programs, debt service, and capital projects in accordance with restrictions imposed by external third parties.
Unrestricted net assets - Unrestricted net assets represent resources derived from property taxes, sales taxes, grants and contributions not restricted to specific programs, charges for services, and miscellaneous revenues. These resources are used for transactions relating to the educational and general operations of the School District, and may be used at the discretion of the Board to meet current expenses for those purposes.

MCDUFFIE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30,2010

EXHIBIT "H"

FUND BALANCES
Reserved Reserves represent those portions of fund balance equity that are legally segregated for a specific future use.
Unreserved - Designated Designated fund balances represent tentative plans for future use of financial resources.
USE OF ESTIMATES
The preparation of the financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results may differ from those estimates.
NOTE 3: DEPOSITS
COLLATERALIZATION OF DEPOSITS
Official Code of Georgia Annotated (O.C.G.A.) Section 45-8-12 provides that there shall not be on deposit at any time in any depository for a time longer than ten days a sum of money which has not been secured by surety bond, by guarantee of insurance, or by collateral. The aggregate of the face value of such surety bond and the market value of securities pledged shall be equal to not less than 1 1 0 percent of the public funds being secured after the deduction of the amount of deposit insurance. If a depository elects the pooled method (O.C.G.A. Section 45-8-13.1) the aggregate of the market value of the securities pledged to secure a pool of public funds shall be not less than 1 1 0 percent of the daily pool balance.
Acceptable security for deposits consists of any one of or any combination of the following:
1. Surety bond signed by a surety company duly qualified and authorized to transact business within the State of Georgia,
2. lnsurance on accounts provided by the Federal Deposit lnsurance Corporation,
3. Bonds, bills, notes, certificates of indebtedness or other direct obligations of the United States or of the State of Georgia,
4. Bonds, bills, notes, certificates of indebtedness or other obligations of the counties or municipalities of the State of Georgia,
5 . Bonds of any public authority created by the laws of the State of Georgia, providing that the statute that created the authority authorized the use of the bonds for this purpose,
6. Industrial revenue bonds and bonds of development authorities created by the laws of the State of Georgia, and
7. Bonds, bills, notes, certificates of indebtedness, or other obligations of a subsidiary corporation of the United States government, which are fully guaranteed by the United States government both as to principal and interest or debt obligations issued by or securities guaranteed by the Federal Land Bank, the Federal Home Loan Bank, the Federal Intermediate Credit Bank, the Central Bank for Cooperatives, the Farm Credit Banks, the Federal Home Loan MortgageAssociation, and the Federal National Mortgage Association.

MCDUFFIE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30,2010

EXHIBIT "H"

CATEGORIZATION OF DEPOSITS

Custodial credit risk is the risk that in the event of a bank failure, the School District's deposits may not be returned to it. At June 30, 2010, the bank balances were $7,092,645.86. The amounts exposed to custodial credit risk are classified into three categories as follows:

Category 1-
Category 2 Category 3 -

Uncollateralized, Cash collateralized with securities held by the pledging financial institution, or Cash collateralized with securities held by the pledging financial institution's trust department or agent but not in the School District's name.

The School District's deposits by custodial risk category at June 30, 2010, are as follows:

Custodial Credit Risk CateEorv

Bank Balance

Total

$ 6,532,199.11

NOTE 4: NON-MONETARYTRANSACTIONS
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

MCDUFFIE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30,2010

EXHIBIT "H"

NOTE 5: CAPITAL ASSETS

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

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

Balances July 1,2009 (Restated)

Increases

Decreases

Balances June 30,2010

$ 746,941.00 $ 23,447,213.03

0.00

$

$ 23,422,413.03

746,941.00 24,800.00

Total Capital Assets, Not Being Depreciated $ 24,194,154.03$

0.00 $ 23,422,413.03$ 771,741.00

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

$ 26,290,856.16$ 23,331,312.13 6,228,934.12 322,797.05$ 1,437.165.48

$ 49,622,168.29 22,500.00 6,529,231.17
1,437.165.48

Less: Accumulated Depreciation: Buildings and Improvements Equipment Land Improvements

4,858,360.02 3,016.108.53
229,223.46

367,558.15 461,555.72
60,666.81

21,948.23

5,225.918.17 3,455,716.02
289,890.27

Total CapitalAssets, Being Depreciated, Net $ 25,853,263.75$ 22,764,328.50$

551.77 $ 48,617,040.48

GovernmentalActivity Capital Assets - Net $ 50,047,417.78$ 22,764,328.50$ 23,422,964.80$ 49,388,781.48

Current year depreciation expense by function is a s follows:
Instruction Support Services
Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Enterprise Operations Food Services

MCDUFFIE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30,2010

EXHIBIT "H"

NOTE 6: INTERFUND TRANSFERS Interfund transfers for the year ended June 30,2010, consisted of the following:

Transfer to

Transfers From District-wide Capital Projects

General Fund Debt Service Fund

Total

Transfers are used to move (1) SPLOST revenue to the Debt Service Fund for the payment of bonds and (2)SPLOST revenue to General Fund for purchase card reimbursements for Capital Outlay.

NOTE 7 : RISK MANAGEMENT

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

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

The School District is self-insured with regard to unemployment compensation claims. A premium is charged when needed by the General Fund to each user program on the basis of the percentage of that fund's payroll to total payroll in order to cover estimated claims budgeted by management based on known claims and prior experience. The School District accounts for claims 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:

Claims and

Beginning of Year

Changes in

Claims

End of Year

Liability

Estimates

Paid

Liability

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

MCDUFFIE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30,2010

EXHIBIT "H"

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 $700,000.00 loss per occurrence, up to the statutory limit. Employers' Liability insurance coverage is also provided by Midwest Employers Casualty Company to provide coverage for potential losses sustained by the Fund in excess of $700,000.00 loss per occurrence, up to $1,000,000.00, with an aggregate limit of $2,000,000.00.
The School District has purchasedsurety bonds to provide additional insurance coverage as follows:

Position Covered

Amount

Superintendent All Other Employees
NOTE 8: SHORT-TERM DEBT

The School District issues tax anticipation notes in advance of property tax collections, depositing the proceeds in its General Fund. This short-term debt was to provide cash for operations until property tax collections were received by the School District. Article IX, Section V, Paragraph V of the Constitution of the State of Georgia limits the aggregate amount of short-term debt to 75 percent of the total gross income from taxes collected in the preceding year and requires all short-term debt to be repaid no later than December 3 1of the calendar year in which the debt was incurred.

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

Beginning Balance

Issued

Redeemed

Ending Balance

Tax Anticipation Notes

$

0.00 $

3,000,000.00$

3,000,000.00 $

0.00

NOTE 9: LONG-TERM DEBT

COMPENSATED ABSENCES

Compensated absences represent obligations of the School District relating to employees' rights to receive compensation for future absences based upon service already rendered. This obligation relates only to vesting accumulating leave in which payment is probable and can be reasonably estimated. Typically, the General Fund is the fund used to liquidate this long-term debt. The School District uses the vesting method to compute compensated absences.
GENERAL OBLIGATION DEBT OUTSTANDING

General Obligation Bonds currently outstanding are as follows:

Purpose

Interest Rate

Amount

General Government-Series 2007

3.81%

MCDUFFIE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30,2010

EXHIBIT "H"

Voters have authorized $4,000,000.00 in general obligation debt for capital outlay purposes which was not issued as of June 30,2010.

The changes in Long-Term Debt during the fiscal year ended June 30,2010, were as follows:

Balance July 1, 2009

Additions

Governmental Funds

Balance

Deductions

June 30,2010

Due Within One Year

G. 0. Bonds Compensated Absences (1)

$ 5,770,000.00 60,708.39 $

$ 2,310,000.00 $ 3,460,000.00 $ 2,395,000.00

78.930.22

82,993.48

56,645.13

(1) The portion of CompensatedAbsences due within one year has been determined to be immaterial to the basic financial statements.

At June 30, 2010, payments due by fiscal year which includes principal and interest for these items are as follows:

General Obligation Debt

Principal

Interest

Fiscal Year Ended June 30:

Total Principal and Interest

$

3,460,000.00 $

172,583.50

During the fiscal year 2010, the School District failed to create a Construction Fund for the remaining net bond proceeds in accordance with the Series 2007 Bond Covenant.
NOTE 10: ON-BEHALF PAYMENTS
The School District has recognized revenues and costs in the amount of $106,207.98 for health insurance and retirement contributions paid on the School District's behalf by the following State Agencies.
Georgia Department of Education Paid to the Georgia Department of Community Health For Health Insurance of Non-Certified Personnel In the amount of $71,643.33
Paid to the Teachers Retirement System of Georgia For Teachers Retirement System (TRS) Employer's Cost In the amount of $18,303.10
Office of Treasury and Fiscal Services Paid to the Public School Employees Retirement System For Public School Employees Retirement (PSERS) Employer's Cost In the amount of $16,261.55

MCDUFFIE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30,2010

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 of routine School District operations. The ultimate disposition of these proceedings is not presently determinable, but is not believed to be material to the basic financial statements.
NOTE 12: POST-EMPLOYMENT BENEFITS
GEORGIA SCHOOL PERSONNEL EMPLOYEES POST-EMPLOYMENT HEALTH BENEFIT FUND
Plan Description. The Georgia School Personnel Post-employment Health Benefit Fund (School OPEB Fund) is a cost-sharing multiple-employer defined benefit post-employment healthcare plan that covers eligible former employees of public school systems, libraries and regional educational service agencies. The School OPEB Fun provides health insurance benefits to eligible former employees and their qualified beneficiaries through the State Employees Health Insurance Plan administered by the Department of Community Health. The Official Code of Georgia Annotated (OCGA) assigns the authority to establish and amend the benefit provisions of the group health plans, including benefits for retirees, to the Board of Community Health (Board).
Funding Policy. The contribution requirements of plan members and participating employers are established by the Board in accordance with the current Appropriations Act and may be amended by the Board. Contributions of plan members or beneficiaries receiving benefits vary based on plan election, dependent coverage, and Medicare eligibility and election. On average, plan members pay approximately 25 of the cost of health insurance coverage.
Participating employers are statutorily required to contribute in accordance with the employer contribution rates established by the Board. The contribution rates are established to fund all benefits due under the health insurance plans for both active and retired employees based on projected "pay-as-you-go" financing requirements. Contributions are not based on the actuarially calculated annual required contribution (ARC) which represents a level of funding that, if paid on an ongoing basis, is projected to cover normal cost each year and amortize any unfunded actuarial liabilities (or funding excess) over a period not to exceed thirty years.
The combined active and retiree contribution rates established by the Board for employers participating in the School OPEB Fund were as follows for the fiscal year ended June 30, 2010:
For certificated teachers, librarians and regional educational service agencies:

July 2009 August 2009 -October 2009 November 2009 -June 2010

18.534% of covered payroll for August Coverage
14.492% of covered payrollfor September - November Coverage
18.534% of covered payroll for December - July Coverage

For non-certificated school personnel:

July 2009 -June 2010

$162.72 per member per month plus Department of Education contribution of $22,838,311.00

MCDUFFIE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30,2010

No additional contribution was required by the Board for fiscal year 2010 nor contributed to the State OPEB Fund to prefund retiree benefits. Such additional contribution amounts are determined annually by the Board in accordance with the State plan for other post-employment benefits and are subject to appropriation.

The School District's combined active and retiree contributions to the health insurance plans, which

equaled the required contribution, for the current fiscal year and the preceding two fiscal years were

as follows:

Percentage

Required

Fiscal Year

Contributed

Contribution

NOTE 13: RITIREMENT PLANS
TEACHERS RETIREMENT SYSTEM OF GEORGIA (TRS)
Plan Description. The TRS is a cost-sharing multiple-employer defined benefit plan created in 1943 by an act of the Georgia General Assembly to provide retirement benefits for qualifying employees in educational service. A Board of Trustees comprised of active and retired members and ex-officio State employees is ultimately responsible for the administration of TRS. The Teachers Retirement System of Georgia issues a separate stand alone financial audit report and a copy can be obtained from the Georgia Department of Audits and Accounts.
On October 25, 1996, the Board created the Supplemental Retirement Benefits Plan of the Georgia Teachers Retirement System (SRBP-TRS). SRBP-TRS was established as a qualified excess benefit plan in accordance with Section 415 of the Internal Revenue Code (IRC) as a portion of TRS. The purpose of SRBP-TRS is to provide retirement benefits to employees covered by TRS whose benefits are otherwise limited by IRC Section 415. Beginning July 1,1997, all members and retired former members in TRS are eligible to participate in the SRBP-TRS whenever their benefits under TRS exceed the IRC Section 415 imposed limitation on benefits.
TRS provides service retirement, disability retirement, and survivor's benefits. The benefit structure of TRS is defined and may be amended by State statute. A member is eligible for normal service retirement after 3 0 years of creditable service, regardless of age, or after 1 0 years of service and attainment of age 60. A member is eligible for early retirement after 25 years of creditable service.
Normal retirement (pension) benefits paid to members are equal to 2% of the average of the member's two highest paid consecutive years of service, multiplied by the number of years of creditable service up to 4 0 years. Early retirement benefits are reduced by the lesser of one-twelfth of 7% for each month the member is below age 6 0 or by 7% for each year or fraction thereof by which the member has less than 3 0 years of service. It is also assumed that certain cost-of-living adjustments, based on the Consumer Price Index, will be made in future years. Retirement benefits are payable monthly for life. A member may elect to receive a partial lump-sum distribution in addition to a reduced monthly retirement benefit. Death, disability and spousal benefits are also available.

MCDUFFIE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30,2010

EXHIBIT "H"

Funding Policy. TRS is funded by member and employer contributions as adopted and amended by the Board of Trustees. Members become fully vested after 1 0 years of service. If a member terminates with less than 1 0 years of service, no vesting of employer contributions occurs, but the member's contributions may be refunded with interest. Member contributions are limited by State law to not less than 5% or more than 6% of a member's earnable compensation. Member contributions as adopted by the Board of Trustees for the fiscal year ended June 30, 2010, were 5.25% of annual salary. The member contribution rate will increase to 5.53% effective July 1,2010. Employer contributions required for fiscal year 2010 were 9.74%of annual salary as required by the June 30, 2007, actuarial valuation. The employer contribution rate will increase to 10.28% effective July 1,2010.
Employer contributions for the current fiscal year and the preceding two fiscal years are as follows:

Fiscal Year

Percentage Contributed

Required Contribution

(This page left intentionally blank)

MCDUFFIE COUNTY BOARD OF EDUCATION GENERAL FUND
SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL
YEAR ENDEDJUNE 30.2010

REVENUES
Propem Taxes Sales Tax State Funds Federal Funds Charges for Services Investment Earnings Miscellaneous
Total Revenues
EXPENDITURES
Current Instruction Support Services Pupil Services Improvementof Instructional Services EducationalMedia Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Service Central Support Services Other SupportServices Food Services Operation Enterprise Operations Community Services
Capital Outlay
Total Expenditures
Excess of Revenues over (under) Expenditures
OTHER FINANCING SOURCES
OperatingTransfers From Other Funds
Net Change in Fund Balances
- Fund Balances Beginning

NONAPPROPRIATED BUDGETS

ORIGINAL (1)

FINAL (1)

Fund Balances - Ending

SCHEDULE "1"
ACTUAL AMOUNTS

Notesto the Schedule of Revenues. ExDenditures. and Changes in Fund BalancesBudget and Actual (1) Original and Final Budgetamounts do not include budgetedrevenues or expendituresof the various principal accounts. The accompanyingscheduleof revenues, expenditures, and changes in fund balances budget and actual is presentedon the modified accrual basis of accountingwhich is the basis of accounting used in the presentation of the fund financial statements.
See notes to the basic financial statements.

MCDUFFIE COUNTY BOARD OF EDUCATION SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
YEAR ENDED JUNE 30.2010

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 Summer Food Service Program For Children
Total Child Nutrition Cluster
Other Programs Pass-Through From Georgia Department of Education Food Services
ARRA - Child Nutrition Discretionary Grants Limited Availability
Total U. S. Department of Agriculture
Education, U.S. Department of EducationTechnology State Grants Cluster Pass-Through From Georgia Department of Education Education Technology State Grants
Special Education Cluster Pass-Through From Georgia Department of Education Special Education
ARRA - Grants to States
- ARRA Preschool Grants
Grants to States Preschool Grants
Total Special Education Cluster
State Fiscal Stabilization Fund Cluster Pass-Through From Georgia Department of Education
- ARRA Education State Grants
Title I, Part A Cluster Pass-Through From Georgia Department of Education
ARRA - Title IGrants to Local Educational Agencies
Title I Grants to Local EducationalAgencies
Total Title I, Part A Cluster
Other Programs Pass-Through From Georgia Department of Education
Career and Technical Education- Basic Grants to States
ImprovingTeacher QualityState Grants
Safe and Drug-FreeSchools and Communities- State Grants
Twenty-First Century Community Learning Centers Pass-Through From Office of Planning and Budget
Transition to TeachingGrant
Total Other Programs
Total U. S. Department of Education

CFDA NUMBER

PASS THROUGH
ENTITY ID
NUMBER

EXPENDITURES IN PERIOD

MCDUFFIE COUNTY BOARD OF EDUCATION SCHEDULE OF EXPENDITURESOF FEDERAL AWARDS
YEAR ENDED JUNE 30,2010

SCHEDULE "2"

FUNDING AGENCY PROGRAM/GRANT
Healthand Human Services, U. S. Departmentof Child Care and Development Fund Cluster Pass-Through From Bright From the Start: Georgia Department of Early Care and Learning
- ARRA Child Care and DevelopmentBlock Grant
Other Programs Pass-Through From Georgia Department of Human Resources Temporary Assistance for Needy Families
Total U. S. Department of Health and Human Services
Defense, U. S. Department of Direct Departmentof the Navy R.O.T.C. Program

CFDA NUMBER

PASS THROUGH
ENTITY ID
NUMBER

EXPENDITURES IN PERIOD

Total Federal FinancialAssistance
N/A = Not Available
Notes to the Scheduleof Ex~endituresof Federal Awards
(1) Includesthe Federally assigned value of donated commoditiesfor the Food Donation Program in the amount of $98.704.47.
(2) Expendituresfor the funds earned on the School Breakfast Program ($504,080.12) and the Summer Food Service Programfor Children ($25,082.88) were not maintained separatelyand are included in the 2010 National School Lunch Program.
Major Programsare identified by an asterisk (*) in front of the CFDA number.
The School District did not provide FederalAssistance to any Subrecipient.
The accompanyingscheduleof expendituresof Federal awards includes the Federalgrant activity of the McDuffie County Board of Education and is presentedon the modified accrual basis of accountingwhich is the basis of accounting used in the presentation of the fund financial statements.

See notes to the basic financial statements.

MCDUFFiE COUNTY BOARD OF EDUCATION SCHEDULE OF STATE REVENUE YEAR ENDEDJUNE 30,2010

GRANTS Bright From the Start: Georgia Department of Eariy Care and Learning Pre-Kindergarten Program
Education. Georgia Department of Quality Basic Education Direct Instructional Cost Kindergarten Program
Kindergarten Program - Early lntervention Program
Primary Grades (1-3) Program
- PrimaryGrades Early lntervention (1-3) Program
Upper Elementary Grades (4-5) Program
- Upper Elementary Grades Eariy lntervention (4-5) Program
Middle Grades (6-8) Program Middle School (6-8) Program High School General Education (9-12) Program Vocational Laboratory (9-12) Program Students with Disabilities
Category l Category II Category Ill Category IV Category V Supplemental Speech
Gifted Student - Category VI
Remedial Education Program Alternative Education Program EnglishSpeakers of Other Languages (ESOL) Media Center Program 2 0 Days Additional Instruction Staff and Professional Development Indirect Cost Central Administration School Administration Facility Maintenance and Operations Categorical Grants Pup11Transportation Regular Sparsity Nursing Services Mid-term Adjustment Hold-Harmless Education Equalization Funding Grant Food Services Vocational Education Amended FormulaAdjustment Other State Programs Apprenticesh~pProgram Dual Enrollment Funding Georgia Special Needs Scholarship Fund Health Insurance National Teacher Certification Preschool Handicapped Program Teachers' Retirement
Georgia State Financingand Investment Commission Reimbursementon Construction Projects
Oftice of Treasury and FiscalServices Public School Employees Retirement

GOVERNMENTAL FUND TYPES

CAPITAL

GENERAL

PROJECTS

FUND

FUND

SCHEDULE "8 TOTAL

See notes to the basic financial statements.

MCDUFFIE COUNTY BOARD OF EDUCATION SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS
YEAR ENDEDJUNE 30,2010

SCHEDULE "4"

Acquiring, constructing, and equippinga new elementaryschool and the completion of the new 8-9 grade school. includingnecessary furnishings, fixtures and equipment: renovating, extending,repairing, and equippingexisting School Districtfacilities to includestadtum renovationand improvement and roof repairs; acquiringand installing systemwide instructionaland administrativetechnology, safety, and security equipment: acquisition of school buses and transpoltation equipment: acquisition of music, vocational, and physical educat!on/athlet~cequipment, acquiringany necessary property therefore, both real and personal for the School District.

Project #

Description

Original Estimated Cost (1)

Current Estimated
Cost (2)

Amount Expended in CurrentYear (3)

Amount Expended in Prior Years (3)

Total Amount Expended

Project Status

1

New Elementary School-Norris

$ 7.000.000.00 $ 7,000.000.00

$

3.800.00 $

3,800.00 Ongoing

2

New &9 Grade School

4.000.000.00

W.687.125.31 $ 252,395.90

13,434,729.41 W.687,125.31 Completed

3

Pitched Roofs

2.000.000.00

2.000.000.00

Ongoing

4

Stadium lmprovements

1.500.000.00

1.500.000.00

37.764.00

37,764.00 Ongolng

5

S C ~ O O IBuses

500,000.00

5D0.000.00

384,045.00

384.045.00 Ongoing

6

Work Vehicles

100,000.00

100,000.00

Ongoing

7

Technology

2.000.000.00

2.000.000.00

209.268.78

629,656.00

838,924.78 Ongoing

8

Student Furniture

300.000.00

300.000.00

4.456.00

40.757.00

45,213.00 Ongoing

9

General Repairs

1,000.000.00

1,000,000.00

51.369.00

676.527.00

927.896.00 Ongoing

10

Other various Projects

4,600.000.00

4.600.000.00

587.673.19

763.162.00

1.350.835.19 Ongoing

(1)

m e School District's original cost estimate as specifledin the resolutioncallingfor me impositionof the Local Option

Sales Tax.

(2)

The School District%current estimate of total cost for Me projects. Includesall cost from project inception to completion.

(3)

The votes of McDufie County approved the impositionof a 1%sales tax to fund the above projects and retire

associated debt. Amounts expended for these projects may include sales tax proceeds, state, local property

taxes and/or other funds over the life of the projects.

See notes to the basic financial statements.

(This page left intentionally blank)

MCDUFFIE COUNTY BOARD OF EDUCATION
GENERAL FUND - QUALITY BASIC EDUCATION PROGRAM (QBE) ALLOTMENTSAND EXPENDITURES- BY PROGRAM
YEAR ENDEDJUNE 30,2010

SCHEDULE "5"

DESCRIPTION
Direct Instructional Programs Kindergarten Program Kindergarten Program-Early lntervention Program Primary Grades (1-3) Program Primary Grades-Early Intervention (1-3) Program Upper Elementary Grades (4-5) Program Upper ElementaryGrades-EarlyIntervention (4-5) Program Middle Grades (6-8)Program Middle School (6-8)Program High School General Education (9-12) Program Vocational Laboratory (912) Program Students with Disabilities Category II Category Ill Category IV
Gifted Student - Category VI
Remedial EducaQon Program Alternative Education Program English Speakers of Other Languages (ESOL)
TOTAL DIRECT INSTRUCTIONAL PROGRAMS
Media Center Program Staff and Professional Development

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

ELIGIBLE QBE PROGRAM COSTS

SALARIES

OPERATIONS

TOTAL

TOTAL QBE FORMULA FUNDS

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

See notes to the basic financial statements.

SECTION II COMPLIANCE AND INTERNAL CONTROL REPORTS

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

DEPARTMENOTF AUDITSAND ACCOUNTS
270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400
June 2 8 , 2 0 1 1

Honorable Nathan Deal, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the McDuffie County Board of Education
INDEPENDENT AUDITOR'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCEAND OTHER MATERS 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 McDuffie County Board of Education as of and for the year ended June 30, 2010, which collectively comprise McDuffie County Board of Education's basic financial statements and have issued our report thereon dated June 28, 2011. 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 Re~orting
In planning and performing our audit, we considered McDuffie County Board of Education's internal control over financial reporting as a basis for designing our auditing procedures for the purpose of expressingour opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the McDuffie County Board of Education's internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness of the McDuffie County Board of Education's internal control over financial reporting.
Our consideration of internal control over financial reporting was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over financial reporting that might be deficiencies, significant deficiencies, or material weaknesses and therefore, there can be no assurances that all deficiencies, significant deficiencies or material weaknesses have been identified. However, as described in the accompanying Schedule of Findings and Questioned Costs, we identified certain deficiencies in internal control over financial reporting that we consider to be material weaknesses and other deficiencies that we consider to be significant deficiencies.

A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect and correct misstatements on a timely basis. A material weakness is a deficiency, or combination of deficiencies, in internal control such that there is a reasonable possibility that a material misstatement of the entity's financial statements will not be prevented, or detected and corrected on a timely basis. We consider items FS-6971-10-01, FS-6971-10-03, FS-6971-10-04 and FS-6971-10-05 to be material weaknesses.
A significant deficiencyis a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. We consider item FS-6971-10-02 in the accompanying Schedule of Findings and Questioned Costs to be a significant deficiency in internal control over financial reporting.
Com~lianceand Other Matters
As part of obtaining reasonable assurance about whether McDuffie County Board of Education's financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards.
We noted certain matters that we have reported to management of McDuffie County Board of Education in a separate letter dated June 28,2011.
McDuffie County Board of Education's response to the findings identified in our audit is described in the accompanying Schedule of Management's Responses. We did not audit McDuffie County Board of Education's response and, accordingly, we express no opinion on it.
This report is intended solely for the information and use of management, members of the McDuffie County Board of Education, others within the entity, 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.
~ u s k e lWl . Hinton, CPA, CGFM State Auditor

Russell W. Hinton
STATE AUDITOR
(404)6563174

DEPARTMENOTF AUDITSAND ACCOUNTS
270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400
June 2 8 , 2 0 1 1

Honorable Nathan Deal, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the McDuffie County Board of Education
INDEPENDENT AUDITOR'S REPORT ON COMPLIANCE WlTH REQUIREMENTS THAT COULD HAVE A DIRECT AND MATERIAL EFFECT ON EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WlTH OMB CIRCULAR A-133
Ladies and Gentlemen:

We have audited McDuffie County Board of Education's compliance with the types of compliance requirements described in the OM6 Circular A-133 Compliance Supplement that could have a direct and material effect on each of its major Federal programs for the year ended June 30, 2010. McDuffie 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 McDuffie County Board of Education's management. Our responsibility is to express an opinion on McDuffie 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 of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and OMB Circular A-133, Audits of S.es, LocalGovernmen& andNon-Profit Organizations. Those standards and OMB Circular A-133 require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major Federal program occurred. An audit includes examining, on a test basis, evidence about the McDuffie County Board of Education's compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Our audit does not provide a legal determination on McDuffie County Board of Education's compliance with those requirements.

As described in item FA-6971-10-01 in the accompanying Schedule of Findings and Questioned Costs, McDuffie County Board of Education did not comply with requirements regarding Matching, Level of Effort, and Earmarking that are applicable to its Special Education Cluster (CFDA 84.027 and 84.391). Compliance with such requirements is necessary, in our opinion, for McDuffie County Board of Educationto comply with requirements applicable to those programs.
In our opinion, except for the noncompliance described in the preceding paragraph, McDuffie County Board of Education complied, in all material respects, with the compliance requirements referred to above that could have a direct and material effect on each of its major Federal programs for the year ended June 30,2010.
Internal Control Over Com~liance
Management of McDuffie County Board of Education is responsible for establishing and maintaining effective internal control over compliance with the requirements of laws, regulations, contracts, and grants applicable to Federal programs. In planning and performing our audit, we considered McDuffie County Board of Education's internal control over compliance with the requirements that could have a direct and material effect on a major Federal program to determine the auditing procedures for the purpose of expressing our opinion on compliance and to test and report on internal control over compliance in accordance with OMB Circular A-133, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of the McDuffie County Board of Education's internal control over compliance.
Our consideration of internal control over compliance was for the limited purpose described in the preceding paragraph and was not designed to identify all deficiencies in internal control over compliance that might be significant deficiencies or material weaknesses and therefore, there can be no assurance that all deficiencies, significant deficiencies, or material weaknesses have been identified. However, as discussed below, we identified a certain deficiency in internal control over compliance that we consider to be a material weakness.
A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a Federal program on a timely basis. A material weakness in internal control over compliance is a deficiency, or combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a Federal program will not be prevented, or detected and corrected, on a timely basis. We consider the deficiency in internal control over compliance described in the accompanying Schedule of Findings and Questioned Costs as item FA-6971-10-01to be a material weakness.
A signifiwnt deficiency in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance with a type of compliance requirement of a Federal program that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance.
McDuffie County Board of Education's response to the finding identified in our audit is described in the accompanyingSchedule of Management's Responses. We did not audit McDuffie County Board of Education's response and, accordingly, we express no opinion on the response.

This report is intended solely for the information and use of management, members of the McDuffie County Board of Education, others within the entity, 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.
Respectfullysubmitted, ,
~ u s k e lWl . Hinton, CPA, CGFM State Auditor

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

MCDUFFIE COUNTY BOARD OF EDUCATION AUDITEE'S RESPONSE
SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30,2010

PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

FINDING CONTROL NUMBER AND STATUS

FS-6971-08-01 FS-6971-08-03 FS-6971-09-01 FS-6971-09-02 FS-6971-09-03

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

CORRECTIVE ACTION/RESPONSES

CASH AND CASH EQUIVALENTS Inadequate Internal Control Procedures Finding Control Number: FS-6971-09-01

The School District has established procedures to ensure that all bank reconciliations are completed in a timely manner, all bank accounts are recorded in the School District's accounting records, an administrative review is performed to determine that bank reconciliations are correct, and all required adjustments have been made and documented. The School District has reassigned the duties of bank reconciliation to several employees within the department to ensure that bank accounts are reconciled timely. The system will conduct periodic reviews with the local banks to ensure that all bank accounts using the School District's FEI number are recorded in the accounting records and also that no bank accounts are opened with the School District's FEI number without written permission from the School District. The School District continues to tighten internal controls over bank reconciliations to ensure that all accounts are accounted for and reconciled.

CAPITAL ASSETS Failureto Adequately Maintain Capital Assets Finding Control Number: FS-6971-09-02

As noted in prior years, we have included all components of Capital Assets to be done internally. In this transition period, from one system to another, we incurred technical and data difficulties with our financial software and data entry. We did not anticipate any further problems. However, there were issues with capitalization dates, procedures and timing in a consistent manner between all years involved. During fiscal year 2010 and fiscal year 2011, we have corrected and still are correcting discrepancies between recording procedures from the various years in order to have a consistent process. All assets not meetingthe capitalization threshold were removed. The calculation process for depreciation was identified and corrected in our policies. Physical inventories were completed and are continuing in fiscal year 2011. We have identified discrepancies and correcting them when noted. However, timing has been an issue with the resolution and year end. Therefore, we are steadily resolving all issues and reviewing all assets and procedures to determine a consistent and correct process. Because we are already in fiscal year 2011, we believe all issues will be resolved in fiscal year 2011.

MCDUFFIE COUNTY BOARD OF EDUCATION AUDITEE'S RESPONSE
SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30,2010
PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND OUESTIONED COSTS
CORRECTIVE ACTION/RESPONSES
FINANCIAL REPORTING Inadequate Controls over Financial Reporting Finding Control Number: FS-6971-09-03
The School District continues to implement and strengthen internal controls to ensure that all activity is included in the financial reporting process. We have reassigned duties, started having weekly meetings with all business department personnel, and hired personnel who have accounting expertise in dealing with our general ledger. Through these efforts, invalid payroll withholdings payables have been corrected, retainage payables have been corrected, and the amended formula adjustment receivable has been corrected. We continue to implement internal controls with the goal of correcting all financial reportingfindings.
PRIOR YEAR FEDERAL AWARD FINDINGS AND QUESTIONED COSTS
No matters were reported.

SECTION IV FINDINGS AND QUESTIONED COSTS

MCDUFFIE COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30,2010

I SUMMARY OF AUDITOR'S RESULTS

Financial Statements

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

Unqualified

Internal control over financial reporting:

Material weaknesses identified?

Yes

Significant deficiency identified?

Yes

Noncompliance material to financial statements noted:

Federal Awards

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

Yes None Reported

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

Unqualified for all major programs except for Special Education Cluster, which was qualified.

Any audit findings disclosed that are required to be reported in

accordance with OMB Circular A-133, Section 510(a)?

Yes

Identification of major programs:

CFDA Numbeds)

Name of Federal Program or Cluster

Title I, Part A Cluster Special Education Cluster State Fiscal Stabilization Fund Cluster

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

Auditee qualified as low-risk auditee?

MCDUFFIE COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30,2010
II FINANCIALSTATEMENT FINDINGSAND QUESTIONEDCOSTS
CASH AND CASH EQUIVALENTS Inadequate Internal Control Procedures Material Weakness Finding Control Number: FS-6971-10-01
Condition: This is a repeat finding (FS-6971-09-01, FS-6971-08-01 and FS-6971-07-01) from the years ended June 30, 2009, June 30,2008, and June 30, 2007, respectively. The accounting procedures of the School District were insufficient to provide adequate internal control procedures over the Cash and Cash Equivalentsfunction.
Criteria: The School District's management is responsible for designing and maintaining internal controls over Cash and Cash Equivalents.
Questioned Cost: N/A
Information: Weaknesses in internal controls relating to Cash and Cash Equivalents were noted as follows:
The reconciliations of the General Operating, Contribution Fund, Debt Service, School Nutrition, Catering, Central Office Fund, and Capital Projects Accounts were not performed in a timely manner.
Bank accounts were not properly reconciled to the general ledger resulting in unidentified variances for the General Operating, Catering, and School Nutrition accounts.
Reconciling Items for the General Operating, School Nutrition, and Catering Accounts were not properly addressed in a timely manner.
lnterfund Cash was not properly balanced. An audit adjustment in the amount of $306,433.38 was necessary to remove this invalid amount.
Cause: These deficiencies were a result of management's failure t o ensure that internal control policies and procedures were established, implemented and functioning as intended with regard to Cash and Cash Equivalents.
Effect: The lack of adequate control over cash increases the risk for theft, fraud, or misuse of School District resources that may result in errors and/or irregularities which would not be detected in a timely manner.
Recommendation: The School District should establish policies and procedures to ensure that all bank reconciliations are completed in a timely manner and that all required adjustments have been made and documented.

MCDUFFIE COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30,2010
II FINANCIALSTATEMENT FINDINGSAND QUESTIONEDCOSTS
CASH AND CASH EQUIVALENTS REVENUES/RECEIVABLES/RECEIPTS EXPENDlTURES/LIABILlTlES/DISBURSEMENTS GENERAL LEDGER Inadequate Internal Controls over School Activity Accounts Significant Deficiency Finding Control Number: FS-6971-10-02
Condition: The accounting procedures of the School District were insufficient to provide adequate internal controls over school activity accounts.
Criteria: The School District's management is responsible for designing and maintaining internal controls that provide reasonable assurance that transactions are processed according to established procedures.
Questioned Cost: N/A
Information: Cash and Cash Equivalents
The Band Trip Bank Account was not recorded on the School District's general ledger.
Revenues/Receivables/Receipts Several gate receipts were not properly documented, reconciled, or charged to the correct account.
Expenditures/Liabilities/Disbursements Several vouchers had no documentation indicating approval prior to purchase.
Several vouchers and purchase card transactions lacked evidence of receipt.
One school charged all expenditures to the same account.
General Ledger An instance was noted when an account was classified as a Governmental account instead of an Agency account.
Cause: The deficiencies were a result of management's failure to ensure that internal controls were established, implemented, and functioning at the school level.

MCDUFFIE COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30,2010
II FINANCIALSTATEMENT FINDINGSAND QUESTIONED COSTS
CASH AND CASH EQUIVALENTS REVENUES/RECEIVABLES/RECEIPTS EXPENDlTURES/LIABILlTlES/DISBURSEMENTS GENERAL LEDGER lnadequate Internal Controls over School Activity Accounts Significant Deficiency Finding Control Number: FS-6971-10-02
Effect: Errors and/or irregularities may not be detected in a timely manner.
Recommendation: The School District should revise and monitor controls to provide reasonable assurance that transactions are processed according to established procedures and implement procedures to ensure that expenditures of school activity accounts are properly documented, recorded in the correct account, and approved prior to payment.
GENERAL LEDGER lnadequate Accounting Procedures Material Weakness Finding Control Number: FS-6971-10-03
Condition: A review of internal control procedures revealed that the School District failed to implement controls to ensure that journal entries were properly documented and posted to the accounting records.
Criteria: The School District's management is responsible for designing and maintaining internal controls that provide reasonable assurance that transactions are properly approved, documented, processed, and reported in accordance with State law, procedures established by the Georgia Department of Education and School District policies and procedures.
Questioned Cost: N/A
Information: A review of journal entries revealed the following:
Numerousjournal entries were not made to the correct account and/or in the correct amount resulting in material errors to the financial statements.
All journal entries were not approved of someone independent of the general ledger journal entry function.
Some journal entries' supporting documentation were not properly maintained or filed with the correspondingjournal entries.

MCDUFFIE COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30,2010
II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS
GENERAL LEDGER Inadequate Accounting Procedures Material Weakness Finding Control Number: FS-6971-10-03
Cause: Management failed to adequately monitor and implement procedures to ensure that all journal entries are properly documented, approved, and posted in the accounting records.
Effect: The lack of adequate control over the journal entry process may result in material misstatements which would not be detected in a timely manner.
Recommendation: The School District should review current internal control proceduresto ensure that journal entries are properly approved, documented, and posted in the accounting records.
CAPITAL ASSETS Failure to Adequately Maintain Capital Assets Material Weakness Finding Control Number: FS-6971-10-04
Condition: This is a repeat finding (FS-6971-09-02, FS-6971-08-03 and FS-6971-07-02) from the years ended June 30, 2009, June 30, 2008, and June 30, 2007, respectively. The School District failed to adequately maintain the capital assets records.
Criteria: Chapter 3 7 Implementing a Bpital Asset3 Management System of the Financial Management for Georgia Local Units of Administration indicates that School Districts must establish fixed asset policies, define system requirements, implement a fixed asset system and maintain fixed asset inventory records.
Questioned Cost: N/A
Information: A review of the School District's capital assets records noted deficiencies as discussed below:
The School District lacked proper internal controls to detect significant errors in a timely manner.
A restatement of Capital Assets in the amount of $1,803,328.86 was required due to the School District including non-capitalizable items in Construction in Progress.
Physical inspections of inventory items revealed that some assets were (1) not located, (2) not properly tagged, (3) in the wrong location, and (4) physically located but were not included on the capital assets listing.

MCDUFFIE COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30,2010
II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS
CAPITAL ASSETS Failureto Adequately Maintain Capital Assets Material Weakness Finding Control Number: FS-6971-10-04
The capital assets listing as presented, while inaccurate, was also incomplete and failed to provide all elements of information as required by Chapter 37, Implementing a &pita/ Assets Management System of the Financial Management for Georgia Local Units of Administration, such as correct asset descriptions, and location identifiers.
Buildings and Improvements completed during the year under review were not properly removed from Construction in Progress and added to the capital assets listing. This omission resulted in audit adjustments of $3,212,088.83 to Building and Improvements.
Equipment for the New Middle School was recorded in Construction in Progress. An audit adjustment was necessary to remove $217,813.00 from Construction in Progress and record in equipment.
Several depreciable assets were noted that were incorrectly added or adjusted in the asset module resulting in variances in the depreciation reports.
Cause: The School District failed to ensure adequate accounting procedures were in place to process, record, and report capital assets and related activity.
Effect: The failure of the 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 reassess internal control procedures related to capital assets to ensure that they are in place and operating effectively. An administrative review should be performed to ensure the accuracy of capital assets records and make appropriate adjustments to ensure that capital assets records and procedures for maintaining capital assets conform to generally accepted accounting principles.
FINANCIAL REPORTING Inadequate Controls over Financial Reporting Material Weakness Finding Control Number: FS-6971-10-05
Condition: This is a repeat finding (FS-6971-09-03) from the year ended June 30, 2009. The School District did not have adequate controls in place to ensure that all required activity was included in the financial statement information presented for audit.

MCDUFFIE COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30,2010
II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS
FINANCIAL REPORTING Inadequate Controls over Financial Reporting Material Weakness FindingControl Number: FS-6971-10-05
Criteria: Chapter 22A Annual Financial Reporting of the Financial Management for Georgia Local Units of Administration indicates that School Districts must prepare their financial statements in accordance with generally accepted accounting principles.
Questioned Cost: N/A
Information: During the audit, the following correcting entries were proposed and accepted by the client to properly present the entity's financial statements:
Invalid Prepaids were noted. An audit adjustment was necessary to remove the invalid Prepaids in the amount of $264,486.00 from Governmentalfunds and District-wide statements.
Beginning Fund Balance for the Capital Projects Fund was incorrectly tied to the prior audit report resulting in a misstatement of $335,017.47 to miscellaneous revenue. An audit adjustment was necessary to reclassify $335,017.47 to capital outlay expense.
The Debt Service interest payment was shown incorrectly in the Capital Projects Fund. An audit adjustment of $110,033.90 was necessary to move the interest payment to the Debt Service Fund.
The School Activities Account designation was not reflected in the General Fund. An audit adjustment was necessary to reclassify $699,742.41 from Unreserved General Fund to Unreserved - Designated for Student Activities.
The Continuation of Federal Programs Reserve was not properly reflected in the General Fund. An audit adjustment was necessary to reclassify $793,327.77 from Unreserved General Fund to Continuation of Federal Programs Reserve.
The Capital Projects Reserve was not properly reflected. An audit adjustment was necessary to reclassify $529,766.65 from Unreserved Capital Projectsto Capital Projects Reserve.
The Debt Service Reserve was not properly reflected. An audit adjustment was necessary to reclassify $82,573.63 from Unreserved Debt Service to Debt Service Reserve.
Other notable entries were made to correctly reflect the financial statements in accordance with Chapter 22A Annual Financial Reportingof the FMGLUA.
Cause: The School District did not implement an adequate system of internal control over the financial reporting process.

MCDUFFIE COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONEDCOSTS
YEAR ENDED JUNE 30,2010
II FINANCIALSTATEMENT FINDINGSAND QUESTIONEDCOSTS
FINANCIAL REPORTING Inadequate Controls over Financial Reporting Material Weakness Finding Control Number: FS-6971-10-05
Effect: The School District did not comply with the requirements of the Georgia Department of Education regarding financial reporting. Numerous adjustments were necessary in order for the School District's financial statements to be in conformity with generally accepted accounting principles.
Recommendation: The School District should implement controls over the financial statement reporting process to ensure that all required activity is included in the financial statement information.
Ill FEDERAL AWARD FINDINGS AND QUESTIONED COSTS
MATCHING, LEVEL OF EFFORT, EARMARKING Failure to Meet Maintenance of Effort Material Weakness Material Noncompliance U. S. Department of Education Through Georgia Department of Education Special Education Cluster (CFDA 84.027 and 84.173) Finding Control Number: FA-6971-10-01
Condition: The School District did not meet the maintenance of effort requirement.
Criteria: 3 4 CFR 300.203(a) and the Compliance Supplement, Part 4 (4-84.027, 111, G.2.1. IDEA, Part B) indicate that funds received by a Local Education Agency (LEA) cannot be used, except under certain limited circumstances, to reduce the level of expenditures for the education of children with disabilities made by the LEA from local funds below the level of those expenditures for the preceding fiscal year. To meet this requirement, an LEA must expend, in any particular fiscal year, an amount of local funds for the education of children with disabilities that is at least equal to the amount of local funds expended for this purposes by the LEA in the prior fiscal year.
Questioned Cost: $99,792.90

MCDUFFIE COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30,2010

Ill FEDERALAWARD FINDINGSAND QUESTIONEDCOSTS

MATCHING, LEVEL OF EFFORT, EARMARKING Failure to Meet Maintenance of Effort Material Weakness Material Noncompliance U. S. Department of Education Through Georgia Department of Education Special Education Cluster (CFDA 84.027 and 84.173) Finding Control Number: FA-6971-10-01

Information:

State and Local funds for the education of children with disabilities decreased both in the aggregate

and per pupil during the year under review.

Fiscal

Fiscal

Year 2010

Year 2009

State and Local Expenditures

$ 3,116,237.85 $ 3,216,030.75

Number of Students

538

536

State and Local Expenditures per Student

$

5,792.26 $

6,000.06

Cause: The School District did not properly manage its funds to meet the maintenance of effort requirement related to the education of children with disabilities.

Effect: Failure to monitor expenditures for compliance with maintenance of effort requirements can lead to a material noncompliance with the provisions of the Federal grant.

Recommendation: The School District should implement appropriate procedures to ensure that maintenance of effort is met regarding the education of children with disabilities. The Georgia Department of Education should review this matter to determine if a refund is appropriate.

SECTION V MANAGEMENT'S RESPONSES

MCDUFFIE COUNTY BOARD OF EDUCATION SCHEDULE OF MANAGEMENT'S RESPONSES
YEAR ENDED JUNE 30,2010
Finding Control Number: FS-6971-10-01
This finding has been resolved in FY 11except for the school nutrition bank accounts. The school nutrition bank accounts have been reconciled; however, there are reconciliation items on the reconciliation that have remained for over a month. The school nutrition bank reconciliation problem will remain a finding in FY 11,with its resolution effective in July, 2011. It was reported in our October 27,2010 board meeting that the cash finding was being resolved, but it would be difficult to completely remove it in FY 1 0 because of the timing of the exit conference on August 16, 2010 (47 days after the end of the FY 1 0 fiscal year). Judy Bullard is working on the school nutrition account with Craig Bruntz. Also, Mary Nan Pilcher from the state school nutrition department for the Georgia Department of Educationwas here on June 20th to help with this process.
Finding Control Number: FS-6971-10-02
The middle school is not reconciling gate receipts. They are issuing numbered tickets for athletic events but are not accounting for them in a summary reconciliation. The school has been made aware of this finding and is taking steps to account for the tickets on a tallied summarization sheet for each event. This will result in a better internal control to reduce the risk of theft.
Finding Control Number: FS-6971-10-03
Internal Controls will be established which provide reasonable assurance that transactions are properly approved, documented, processed, and reported.
Finding Control Number: FS-6971-10-04
Again, this would remain a finding in FY 1 0 even if it were resolved after the exit conference (August 16, 2010). However, this has become a problem which is bigger than we initially thought. The auditors said this is the biggest problem that we have. I tried to contact Ronald Mesimer, CPA, initially to get an hourly rate for him to assist Jay in resolving all issues with fixed assets. However, he has yet to return my call and e-mail. After unsuccessfully trying to contact Ronald, I called Ms. Sophvina Shipman-Etinge. Ms Etinge was employed by CSRA RESA for several years and assisted several systems with their fixed assets. She has extensive experience with the auditors in the Augusta Department of Audits Regional Office and I am confident in her ability to assist us in correcting the FixedAsset Finding.
Finding Control Number: FS-6971-10-05
The School System will implement controls over the financial statement reporting process t o ensure that all required activity is included in the financial statement information.

MCDUFFIE COUNTY BOARD OF EDUCATION SCHEDULE OF MANAGEMENT'S RESPONSES
YEAR ENDEDJUNE 30.2010

Finding Control Number: FA-6971-10-01

$99,792.90 has been identified as a shortfall in state and local funding of the special education program. Every year's state and local spending should exceed the previous years' total state and local spending in order to meet our maintenance of effort in the special education program. In PI10, we were $199,000 short of meeting this effort. Since being informed of this shortfall, we have reduced the amount by $99,207.10 by identifying allowable deductions from the state and local amount we have spent.

Contact Person: Telephone: Fax: Email:

Tom Smalley, Comptroller (706) 986-4000 (706) 986-4001 tom@mcduffie.kl2.ga.us