Mitchell County Board of Education, Camilla, Georgia, report on audit of the financial statements for the fiscal year ended June 30, 2006

MITCHELL COUNTY BOARD OF EDUCATION
CAMILLA, GEORGIA REPORT ON AUDIT
OF THE FINANCIAL STATEMENTS
FOR THE FISCAL YEAR ENDED JUNE 30, 2006
STATE OF GEORGIA
DEPARTMENT OF AUDITS AND ACCOUNTS
Russell W. Hinton State Auditor

MITCHELL COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS -

SECTION I

FINANCIAL

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

EXHIBITS

BASIC FINANCIAL STATEMENTS

DISTRICT-WIDE FINANCIAL STATEMENTS

A

STATEMENT OF NET ASSETS

1

B

STATEMENT OF ACTIVITIES

2

FUND FINANCIAL STATEMENTS

C

BALANCE SHEET

GOVERNMENTAL FUNDS

4

D

RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET

TO THE STATEMENT OF NET ASSETS

7

E

STATEMENT OF REVENUES, EXPENDITURES AND CHANGES

IN FUND BALANCES

GOVERNMENTAL FUNDS

8

F

RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT

OF REVENUES, EXPENDITURES AND CHANGES IN FUND

BALANCES TO THE STATEMENT OF ACTIVITIES

10

G

STATEMENT OF FIDUCIARY NET ASSETS

FIDUCIARY FUNDS

11

H

STATEMENT OF CHANGES IN FIDUCIARY NET ASSETS

FIDUCIARY FUNDS

12

I

NOTES TO THE BASIC FINANCIAL STATEMENTS

13

SCHEDULES

REQUIRED SUPPLEMENTARY INFORMATION

1 SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES

IN FUND BALANCES - BUDGET AND ACTUAL

GENERAL FUND

31

SUPPLEMENTARY INFORMATION

2 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS

32

3 SCHEDULE OF STATE REVENUE

34

MITCHELL COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS -

SECTION I

FINANCIAL

SCHEDULES

SUPPLEMENTARY INFORMATION

4 SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS

35

5 ALLOTMENTS AND EXPENDITURES

GENERAL FUND - QUALITY BASIC EDUCATION PROGRAMS (QBE)

BY PROGRAM

37

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

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

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

MITCHELL COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS -
SECTION V MANAGEMENT'S RESPONSES SCHEDULE OF MANAGEMENT'S RESPONSES

SECTION I FINANCIAL

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

DEPARTMENT OF AUDITS AND ACCOUNTS
270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400
July 2, 2007

Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the Mitchell County Board of Education
INDEPENDENT AUDITOR'S COMBINED REPORT ON BASIC FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION - SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
Ladies and Gentlemen:
We have audited the accompanying financial statements ofthe governmental activities, each major fund, and the aggregate remaining fund information (Exhibits A through I) of the Mitchell County Board of Education, as of and for the year ended June 30, 2006, which collectively comprise the Board's basic financial statements as listed in the table of contents. These financial statements are the responsibility ofthe Mitchell County Board ofEducation's management. Our responsibility is to express opinions on these financial statements based on our audit. We did not audit the financial statements of the Mitchell County Board of Education's blended component unit. Those financial statements were audited by other auditors whose report thereon has been furnished to us, and our opinion insofar as it relates to the amounts included for Baconton Parents and Citizens for Better Education, Inc., DBA Baconton Community Charter School is based on the report of the other auditors.
We conducted our audit in accordance with auditing standards generally accepted in the United States ofAmerica and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General ofthe United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free ofmaterial misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit and the report ofother auditors provides a reasonable basis for our opinions.

2006ARL-11X

In our opinion, based on our audit and the report ofother auditors, the financial statements referred to above present fairly, in all material respects, the respective financial position ofthe governmental activities, each major fund, and the aggregate remaining fund information of the Mitchell County Board ofEducation, as ofJune 30, 2006, and the respective changes in financial position, thereoffor the year then ended in conformity with accounting principles generally accepted in the United States of America.
The Mitchell County Board ofEducation has not presented Management's Discussion and Analysis that accounting principles generally accepted in the United States has determined is necessary to supplement, although not to be part of, the basic financial statements.
In accordance with Government Auditing Standards, we have also issued our report dated July 2, 2007, on our consideration of the Mitchell County Board of Education's internal control over financial reporting and our tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements and other matters. The purpose ofthat report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit.
The Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual, as presented on page 31, is not a required part of the basic financial statements but is supplementary information required by the accounting principles generally accepted in the United States of America. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods ofmeasurement and presentation ofthe required supplementary information. However, we did not audit the information and express no opinion on it.
Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Mitchell County Board of Education's basic financial statements. The accompanying supplementary information which consist of Schedules 2 through 5, which includes the Schedule of Expenditures of Federal Awards as required by U. S. Office of Management and Budget Circular A-133, Audits ofStates, Local Governments, and Non-Profit Organizations, are presented for purposes of additional analysis and are not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied by us and other auditors in the audit ofthe basic financial statements, and in our opinion, based on our audit and the report of other auditors, is fairly stated, in all material respects, in relation to the basic financial statements taken as a whole.
2006ARL-11X

A copy of this report has been filed as a permanent record in the office of the State Auditor and made available to the press of the State, as provided for by Official Code of Georgia Annotated section 50-6-24.

Respectfully submitted,



~~

ell W. Hinton, CPA, CGFM State Auditor

RWH:as 2006ARL-11 X

MITCHELL COUNTY BOARD OF EDUCATION

MITCHELL COUNTY BOARD OF EDUCATION STATEMENT OF NET ASSETS JUNE 30, 2006
ASSETS
Cash and Cash Equivalents Investments Accounts Receivable, Net
Taxes State Government Federal Government Other Prepaid Items Inventories Capital Assets Land Land Improvements Buildings Equipment Less: Accumulated Depreciation Intangible Assets - Net of Accumulated Amortization
Total Assets
LIABILITIES
Accounts Payable Salaries Payable Retainages Payable Long-Term Liabilities
Due Within One Year Due in More Than One Year
Total Liabilities
NET ASSETS
Invested in Capital Assets, Net of Related Debt Restricted for
Bus Replacement Continuation of Federal Programs Debt Service Capital Projects Unrestricted
Total Net Assets
Total Liabilities and Net Assets
The notes to the basic financial statements are an integral part of this statement. -1-

EXHIBIT"A"

GOVERNMENTAL ACTIVITIES

$

897,662

5,104,666

692,578 1,170,193
269,809 144,538
15,011 34,538

4,622,039 1,238,277 25,724,384 3,924,740 -12,917,100
6 570

$ ===3=0..,,9=2=7=,9=05=

$

191,947

1,917,003

4,081

359,730 6,423,367

$

8,896,128

$

16,087,572

80,684 225,315 1,006,486 2,317,662 2,314,058

$

22,031,777

$ ===3=0=,9=2=7,=9=05=

MITCHELL COUNTY BOARD OF EDUCATION STATEMENT OF ACTIVITIES
FOR THE YEAR ENDED JUNE 30, 2006

GOVERNMENTAL ACTIVITIES
Instruction Support Services
Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Operations of Non-Instructional Services Enterprise Operations Community Services Food Services Interest on Short-Term and Long-Term Debt
Total Governmental Activities
General Revenues Taxes Property Taxes For Maintenance and Operations Sales Taxes Special Purpose Local Option Sales Tax For Debt Services For Capital Projects Local Option Sales Tax Real Estate Grants and Contributions not Restricted to Specific Programs Investment Earnings Miscellaneous
Special Items Donated Equipment
Total General Revenues and Special Items
Change in Net Assets
Net Assets - Beginning of Year (Restated)
Net Assets - End of Year

EXPENSES

CHARGES FOR SERVICES

$

15,185,151 $

1,033,400 1,035,852
454,914 369,785 1,584,022 225,052 1,736,286 1,114,667 184,513 354,558

64,221 3,775
1,429,784 122,565

$

24,898,545 $

419,768
112,930 152,742 685,440

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

EXHIBIT"B"

PROGRAM REVENUES

OPERATING

CAPITAL

GRANTS AND

GRANTS AND

CONTRIBUTIONS CONTRIBUTIONS

NET (EXPENSES) REVENUES
AND CHANGES IN NET ASSETS

$

11,064,831

313,874 675,369 288,767 408,249 673,171
8,753 734,409 608,626 $
8,983 265,238

1,225,529

$

16,275,799 $

$ 90,675 901675 $

-3,700,552
-719,526 -360,483 -166,147
38,464 -910,851 -216,299 -1,001,877 -415,366 -175,530 -89,320
-64,221 109,155 -51,513 -122,565
-7,846,631

$

4,856,150

1,233,580 370,730
2,494,421 18,202
128,167 157,835 184,607

584 527

$

10,028,219

$

2,181,588

19,850,189

$ =====22=,0=3=1=7'..,77.,..

-3-

MITCHELL COUNTY BOARD OF EDUCATION BALANCE SHEET
GOVERNMENTAL FUNDS JUNE 30, 2006

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

GENERAL FUND

SPECIAL REVENUE FUND
BACONTON COMMUNITY
CHARTER SCHOOL

$

716,166 $

2,030,794

398,682 1,170,193
269,809 143,152

34,538

174,313
1,386 15,011

Total Assets

$ 4,763,334 $ ====1=9=0..,7.1..0...

LIABILITIES AND FUND BALANCES
LIABILITIES
Accounts Payable Salaries Payable Retainages Payable
Total Liabilities
FUND BALANCES
Reserved for: Bus Replacement Continuation of Federal Programs Debt Service Inventories Capital Projects
Unreserved Undesignated Reported in: General Fund Special Revenue Fund
Total Fund Balances

$

183,948 $

1,917,003

$ 2,100,951 $

$

80,684

190,777

34,538

2,356,384 $
$ 2,662,383 $

6,573 6573
184137 184137

Total Liabilities and Fund Balances

$ 4,763,334 $ =====19.,.0,..1.1..0..,,.

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

EXHIBIT"C"

DISTRICTWIDE
CAPITAL PROJECTS
FUND

DEBT SERVICE
FUND

TOTAL

$

5,647 $

1,536 $

2,068,922

1,004,950

248,600

897,662 5,104,666
647,282 1,170,193
269,809 144,538 15,011 34 538

$ 2,323,169 $ 1,006,486 $ ===8=,2=8=31=6..,99=

$

1,426

4 081

$

5 507

$

191,947

1,917,003

4 081

$ ------'2=,1"'-'1'-"3=,0-=-31.:....

$ $ 1,006,486 $ 2,317,662
$ 2,317,662 $ 1,006,486 $

80,684 190,777 1,006,486 34,538 2,317,662
2,356,384 184 137
6,170,668

$ 2,323,169 $ 1,006,486 $=====8=,2=8=3=,6=99=

-5 -

(This page left intentionally blank)

MITCHELL COUNTY BOARD OF EDUCATION RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET
TO THE STATEMENT OF NET ASSETS JUNE 30, 2006

EXHIBIT"D"

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

$ 6,170,668

$ 4,622,039 1,238,277
25,724,384 3,924,740
-12,917.100

22,592,340 6,570

45,296

$ -6,465,000 -318 097

-6,783,097

$ 22,031,777

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

MITCHELL COUNTY BOARD OF EDUCATION STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES
GOVERNMENTAL FUNDS YEAR ENDED JUNE 30, 2006

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

GENERAL FUND

SPECIAL REVENUE FUND
BACONTON COMMUNITY
CHARTER SCHOOL

$ 4,178,126 $ 2,200,343
10,311,682 4,326,653
685,440 76,045
253,476
$ 22,031,765 $

728,655 312,280 1,839,265
17,041
35177
2,932,418

$ 12,493,235 $

932,847 1,024,400
433,058 338,851 1,218,706 218,281 1,534,072 1,036,927 182,695 354,558 64,221
3,775 1,337,701
6,000

73,902 23,508

$ 21,276,737 $

$

755,028 $

111,506

$

866,534 $

1,795,849

2,266,104 91,645 8,668 11,578 353,312 4,295 187,434
2,923,036 9,382
9,382 174 755

Fund Balances - Ending

$ 2,662,383 $====,:,,;18=4,=ai1,;;,37=

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

EXHIBIT"E"

DISTRICTWIDE
CAPITAL PROJECTS
FUND

DEBT SERVICE
FUND

TOTAL

$ 4,906,781

$ 370,730 $ 1,233,580

4,116,933

12,150,947

4,343,694

685,440

75,550

6,240

157,835

288,653

$ 446,280 $ 1,239,820 $ 26,650,283

$ 14,759,339

$ $ 466,342

1,024,492

1,033,068

433,058

350,429

1,572,018

539

223,115

1,721,506

1,036,927

182,695

354,558

64,221

3,775

1,337,701

472,342

270,000 99,057

343,902 122,565

$ 466,342 $ 369,596 $ 25,035,711

$ -20,062 $ 870,224 $ 1,614,572

$ -20,062 $ 2,337,724

111,506

870,224 $ 1,726,078

136,262

4,444,590

$ 2,317,662 $ 1,006,486 $ 6,170,668

-9-

MITCHELL COUNTY BOARD OF EDUCATION RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT OF
REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES TO THE STATEMENT OF ACTIVITIES JUNE 30, 2006

EXHIBIT"F"

Total Net Change in Fund Balances - Governmental Funds (Exhibit "E")

$

1,726,078

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

$

767,957

-980,999

-213,042

Legal fees incurred in setting up the Baconton Community Charter School were reported as expenditures in the Governmental Funds. However, in the Statement of Activities, the cost of Intangible Assets is amortized over fifteen years as amortization expense. In the current period, the amount is:

-730

Because some property taxes will not be collected for several months after the School District's fiscal year ends, they are not considered "available" revenues.

-50,631

In the Statement of Activities, only the gain on the sale of equipment is reported, whereas in the Governmental Funds, the entire proceeds from the sale increase financial resources. Thus, the change in net assets differs from the change in fund balances by the cost of the carrying value of the equipment sold.

-103,316

Donated Capital Assets are not reported in Governmental Funds. However, in the Statement of Activities, the donated value is shown as a Special Item.

Donated Equipment

584,527

Some of the Capital Assets acquired this year were financed with capital leases. In Governmental Funds, a capital lease arrangement is considered a source of financing, but in the Statement of Net Assets, the lease obligation is reported as a Long-Term Liability.

-111,506

Repayment of Long-Term Debt is reported as an expenditure in Governmental Funds, but the repayment reduces Long-Term Liabilities in the Statement of Net Assets. In the current year, these amounts consist of:

Bond Principal Retirements Capital Lease Payments Trade-in on Capital Lease
Total Long-Term Debt Repayments

$

270,000

73,902

6 306

350,208

Change in Net Assets of Governmental Activities (Exhibit "B")

$ ==2=1'=81=,5=8=8

The notes to the basic financial statements are an integral part of this statement. - 10 -

ASSETS
Cash and Cash Equivalents Investments
Certificate of Deposit Accounts Receivable, Net
Other

MITCHELL COUNTY BOARD OF EDUCATION STATEMENT OF FIDUCIARY NET ASSETS FIDUCIARY FUNDS JUNE 30, 2006

EXHIBIT"G"

PRIVATE PURPOSE TRUSTS

AGENCY FUNDS

$

6,477 $

7,137

10,000

16,355

Total Assets

$

16 477 $=====2=3=.49=2=

LIABILITIES Accounts Payable Funds Held for Others
Total Liabilities NET ASSETS Held in Trust for Private Purposes

$

22

23,470

$

23,492

$ _ _1;.;a6'--'4.;..;77'-

Total Liabilities and Net Assets

$

16 477 $ =====2=3=,4=9=2=

The notes to the basic financial statements are an integral part of this statement. -11 -

MITCHELL COUNTY BOARD OF EDUCATION STATEMENT OF CHANGES IN FIDUCIARY NET ASSETS
FIDUCIARY FUNDS YEAR ENDED JUNE 30, 2006

EXHIBIT"H"

ADDITIONS Contributions Donors Investment Earnings Interest Total Additions
DEDUCTIONS Scholarships Administrative Expenses Total Deductions Change in Net Assets
Net Assets - Beginning
Net Assets - Ending

PRIVATE PURPOSE TRUSTS

$

1,500

191

$

1 691

$

1,500

127

$

1,627

$

64

16,413

$ ===16====47=7=

The notes to the basic financial statements are an integral part of this statement. - 12 -

MITCHELL COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2006

EXHIBIT "I"

Note 1: DESCRIPTION OF SCHOOL DISTRICT AND REPORTING ENTITY
REPORTING ENTITY
The Mitchell 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.
BLENDED COMPONENT UNIT
The non-profit organization, Baconton Parents and Citizens for Better Education, Inc., operates a charter school, Baconton Community Charter School. The Baconton Community Charter School (Charter School) is a legally separate tax-exempt component unit of Mitchell County Board of Education (School District). The Charter School was created through a contract between the School District and the Charter School whereby all State funding associated with the students attending the Charter School and certain specified local funds are turned over to the Charter School to cover the costs of its operations.
Although the Charter School is legally separate from the School District, it is reported as a Special Revenue Fund ofthe School District because it is located in Mitchell County and almost exclusively provides benefits to the School District in that it is responsible for the public education of the students attending its school. Complete financial statements for the Charter School can be obtained from the Baconton Community Charter School, 260 East Walton Street, Baconton, Georgia 31716.
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 Mitchell County Board of Education.
District-wide Statements: The Statement ofNet Assets and the Statement ofActivities display information about the financial activities ofthe overall School District, except for fiduciary activities. Eliminations have been made to minimize the double counting of internal activities. Governmental activities generally are financed through taxes, intergovernmental revenues, and other nonexchange transactions.
The Statement of Activities presents a comparison between direct expenses and program revenues for each function of the School District's governmental activities.

- 13 -

MITCHELL COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2006

EXHIBIT "I"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Direct expenses are those that are specifically associated with a program or function and, therefore, are clearly identifiable to a particular function. Indirect expenses (expenses of the School District related to the administration and support ofthe School District's programs, such as office and maintenance personnel and accounting) are not allocated to programs.
Program revenues include (a) charges paid by the recipients ofgoods or services offered by the programs and (b) grants and contributions that are restricted to meeting the operational or capital requirements of a particular program. Revenues that are not classified as program revenues, including all taxes, are presented as general revenues.
Fund Financial Statements: The fund financial statements provide information about the School District's funds, including fiduciary funds. Eliminations have been made to minimize the double counting ofinternal activities. Separate statements for each category (governmental and fiduciary) are presented. The emphasis of fund financial statements is on major governmental funds, each displayed in a separate column.
The School District reports the following major governmental funds:
General Fund is the School District's primary operating fund. It accounts for all financial resources ofthe School District, except those resources required to be accounted for in another fund.
Special Revenue Fund - Baconton Community Charter School accounts for revenue sources legally restricted to expenditures for the Charter School.
District-wide Capital Projects Fund accounts for financial resources including Special Purpose Local Option Sales Tax (SPLOST) and Bond Proceeds to be used for the acquisition, construction or renovation of major capital facilities.
Debt Service Fund accounts for taxes (sales) legally restricted for the payment ofgeneral longterm principal, interest and paying agent's fees.
The School District reports the following fiduciary fund types:
Private Purpose Trust fund reports trust arrangements under which principal and income may be expended to provide scholarships for selected students.
Agency funds account for assets held by the School District as an agent for various funds, governments or individuals.

- 14 -

MITCHELL COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2006

EXHIBIT "I"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF ACCOUNTING
The basis ofaccounting determines when transactions are reported on the financial statements. The District-wide governmental and fiduciary fund financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded at the time liabilities are incurred, regardless of when the related cash flows take place. Nonexchange transactions, in which the School District gives (or receives) value without directly receiving (or giving) equal value in exchange, include property taxes, sales taxes, grants and donations. On an accrual basis, revenue from property taxes is recognized in the fiscal year for which the taxes are levied. Revenue from sales taxes is recognized in the fiscal year in which the underlying transaction (sale) takes place. Revenue from grants and donations is recognized in the fiscal year in which all eligibility requirements have been satisfied.
The School District uses funds to report on its financial position and the results of its operations. Fund accounting is designed to demonstrate legal compliance and to aid financial management by segregating transactions related to certain governmental functions or activities. A fund is a separate accounting entity with a self-balancing set of accounts.
Governmental funds are reported using the current financial resources measurement focus and the modified accrual basis ofaccounting. Under this method, revenues are recognized when measurable and available. The School District considers all revenues reported in the governmental funds to be available if they are collected within sixty days after year-end. Property taxes, sales taxes and interest are considered to be susceptible to accrual. Expenditures are recorded when the related fund liability is incurred, except for principal and interest on general long-term debt, which are recognized as expenditures to the extent they have matured. Capital asset acquisitions are reported as expenditures in governmental funds. Proceeds ofgeneral long-term liabilities and acquisitions under capital leases are reported as other financing sources.
The School District funds certain programs by a combination ofspecific cost-reimbursement grants, categorical grants, and general revenues. Thus, when program costs are incurred, there are both restricted and unrestricted net assets available to finance the program. It is the School District's policy to first apply grant resources to such programs, followed by cost-reimbursement grants, then general revenues.
RESTATEMENT OF PRIOR YEAR NET ASSETS
For fiscal year 2006, the School District changed the method ofreporting its component unit from discretely presented to blended. The net effect of the change was reflected as an adjustment to beginning fund balance of $174,755 and beginning net assets of $626,763. This change is in accordance with generally accepted accounting principles.

- 15 -

MITCHELL COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2006

EXHIBIT "I"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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. Georgia Laws OCGA 45-8-14 authorize the School District to deposit its funds in one or more solvent banks or insured Federal savings and loan associations.
INVESTMENTS
COMPOSITION OF INVESTMENTS Investments made by the School District in nonparticipating interest-earning contracts (such as certificates ofdeposit) and repurchase agreements are reported at cost. Participating interest-earning contracts and money market investments with a maturity at purchase ofone year or less are reported at amortized cost. Both participating interest-earning contracts and money market investments with a maturity at purchase greater than one year are reported at fair value. The Official Code ofGeorgia Annotated Section 36-83-4 authorizes the School District to invest its funds. In selecting among options for investment or among institutional bids for deposits, the highest rate ofreturn shall be the objective, given equivalent conditions of safety and liquidity. Funds may be invested in the following:
(1) Obligations issued by the State of Georgia or by other states,
(2) Obligations issued by the United States government,
(3) Obligations fully insured or guaranteed by the United States government or a United States government agency,
(4) Obligations of any corporation of the United States government,
(5) Prime banker's acceptances,
(6) The Local Government Investment Pool administered by the State of Georgia, Office of Treasury and Fiscal Services,
(7) Repurchase agreements, and
(8) Obligations of other political subdivisions of the State of Georgia.
The School District does not have a formal policy regarding investment policies that address credit risks, custodial credit risks, concentration ofcredit risks, interest rate risks or foreign currency risks.

- 16 -

MITCHELL COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2006

EXHIBIT "I"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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 Mitchell County Board of Commissioners fixed the property tax levy for the 2005 tax digest year (calendar year) on August 9, 2005 (levy date). Taxes were due on December 20, 2005 (lien date). Taxes collected within the current fiscal year or within 60 days after year-end on the 2005 tax digest are reported as revenue in the governmental funds for fiscal year 2006. The Mitchell 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, 2006, for maintenance and operations amounted to $4,906,781.

The tax millage rate levied for the 2005 tax year (calendar year) for the Mitchell County Board of Education was as follows (a mill equals $1 per thousand dollars of assessed value):

School Operations

13.4 mills

SALES TAXES

Local Option Sales Tax revenue, at the fund reporting level, during the fiscal year amounted to $2,494,421 and was recorded in the General Fund. Local Option Sales Tax is to be used for the maintenance and operation of the School District.

Special Purpose Local Option Sales Tax, at the fund reporting level, during the year amounted to $1,604,310 and is to be used for capital outlay for educational purposes or debt service. This sales tax was authorized by local referendum and the sales tax must be re-authorized at least every five years.

INVENTORIES

FOOD INVENTORIES On the basic financial statements, inventories of donated food commodities used in the preparation ofmeals are reported at their Federally assigned value and purchased foods inventories are reported at cost (first-in, first-out). The School District uses the consumption method to account for

- 17 -

MITCHELL COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2006

EXHIBIT "I"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

inventories whereby donated food commodities are recorded as an asset and as revenue when received, and expenses/expenditures are recorded as the inventory items are used. Purchased foods are recorded as an asset when purchased and expenses/expenditures are recorded as the inventory items are used.

CAPITAL ASSETS

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

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

Capitalization Policy

Estimated Useful Life

Land Land Improvements Buildings and Improvements Equipment

$

5,000

NIA

$

5,000

15 years

$

5,000 15 to 40 years

$

5,000 4 to 12 years

Depreciation is used to allocate the actual or estimated historical cost of all capital assets over estimated useful lives.

INTANGIBLE ASSETS

Intangible Assets consist oflegal fees incurred in setting up Baconton Parents and Citizens for Better Education, Inc. and obtaining the Baconton Community Charter School charter. These costs are amortized over a fifteen year life utilizing a straight line method.

GENERAL OBLIGATION BONDS

The School District issues general obligation bonds to provide funds for the acquisition and construction of major capital facilities. Bond issuance costs are recognized in the financial statements during the fiscal year bonds are issued. In addition, general obligation bonds have been issued to refund existing general obligation bonds. General obligation bonds are direct obligations and pledge the full faith and credit of the government. The outstanding amount of these bonds is recorded in the Statement of Net Assets.

- 18 -

MITCHELL COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2006

EXHIBIT "I"

Note 3: DEPOSITS AND INVESTMENTS
COLLATERALIZATION OF DEPOSITS Official Code of Georgia Annotated (OCGA) Section 45-8-12 provides that there shall not be on deposit at any time in any depository for a time longer than ten days a sum ofmoney which has not been secured by surety bond, by guarantee of insurance, or by collateral. The aggregate ofthe face value of such surety bond and the market value of securities pledged shall be equal to not less than 110 percent ofthe public funds being secured after the deduction ofthe amount ofdeposit insurance. Ifa depository elects the pooled method (OCGA 45-8-13 .1) the aggregate ofthe market value ofthe securities pledged to secure a pool ofpublic funds shall be not less than 110 percent ofthe daily pool balance. At June 30, $308,039 ofdeposits were not secured by surety bond, insurance or collateral as specified above. The School District is working with the affected financial institutions to ensure appropriate levels of collateral are maintained for all of the School Districts deposits.
Acceptable security for deposits consists of any one of or any combination of the following:
(1) Surety bond signed by a surety company duly qualified and authorized to transact business within the State of Georgia,
(2) Insurance on accounts provided by the Federal Deposit Insurance Corporation,
(3) Bonds, bills, notes, certificates of indebtedness or other direct obligations of the United States or of the State of Georgia,
(4) Bonds, bills, notes, certificates of indebtedness or other obligations of the counties or municipalities of the State of Georgia,
(5) Bonds of any public authority created by the laws of the State of Georgia, providing that the statute that created the authority authorized the use ofthe bonds for this purpose,
(6) Industrial revenue bonds and bonds of development authorities created by the laws ofthe State of Georgia, and
(7) Bonds, bills, notes, certificates of indebtedness, or other obligations of a subsidiary corporation of the United States government, which are fully guaranteed by the United States government both as to principal and interest or debt obligations issued by the Federal Land Bank, the Federal Home Loan Bank, the Federal Intermediate Credit Bank, the Central Bank for Cooperatives, the Farm Credit Banks, the Federal Home Loan Mortgage Association, and the Federal National Mortgage Association.
CATEGORIZATION OF DEPOSITS At June 30, 2006, the bank balances were $2,687,645. The amounts ofthe total bank balances are classified into four categories of custodial credit risk:

- 19 -

MITCHELL COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2006

EXHIBIT "I"

Note 3: DEPOSITS AND INVESTMENTS

Category 1 - Cash that is insured (e.g., Federal Deposit Insurance) or collateralized with securities held by the School District or by the School District's agent in the School District's name.
Category 2 - Cash collateralized with securities held by the pledging financial institution's trust department or agent in the School District's name.
Category 3 - Cash collateralized with securities held by the pledging financial institution, or by its trust department or agent but not in the School District's name.
Category 4 - Uncollateralized.

The School District's deposits are classified by custodial credit risk category at June 30, 2006, as follows:

Custodial Credit Risk Category

Bank Balance

1

$ 303,371

2

1,378,091

3

698,144

4

308,039

Total

$ 2,687.645

CATEGORIZATION OF INVESTMENTS Custodial Credit Risk Custodial credit risk for investments is the risk that, in the event of a failure ofthe counterparty to a transaction, the School District will not be able to recover the value of the investment or collateral securities that are in the possession of an outside party. The School District does not have a formal policy for managing custodial credit risk.

Investments are classified as to custodial credit risk by the categories described below:

Category 1 - Insured or registered, or securities held by the School District or the School District's agent in the School District's name.
Category 2 - Uninsured or unregistered, with securities held by the counterparty's trust department or agent in the School District's name.
Category 3 - Uninsured or unregistered, with securities held by the counterparty's trust department or agent, but not in the School District's name.

Funds invested in an investment pool managed by another government are not required to be categorized unless the investing entity owns specific, identifiable investment securities in the pool.

- 20 -

MITCHELL COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2006

EXHIBIT"!"

Note 3: DEPOSITS AND INVESTMENTS

At June 30, 2006, the carrying value ofthe School District's total investments was $5,096,945 which is materially the same as fair value. These investments included funds in the amount of$4,231,958 invested in the Local Government Investment Pool administered by the State ofGeorgia, Office of Treasury and Fiscal Services which are not required to be categorized since the School District did not own any specific identifiable securities in the pool. The investment policy of the State of Georgia, Office ofTreasury and Fiscal Services for the Local Government Investment Pool (Primary Liquidity Portfolio) does not provide for investment in derivatives or similar investments. A description of the Primary Liquidity Portfolio is as follows:

The Primary Liquidity Portfolio consists ofGeorgia Fund 1, which is a combination local and state government investment pool. Georgia Fund 1 is a stable net asset value investment pool which follows Standard and Poor's criteria for AAAm rated money market funds. The pool is not registered with the SEC as an investment company but does operate Georgia Fund 1 in a manner consistent with Rule 2a-7 of the Investment Company Act of 1940. The pool's primary objectives are safety of capital, investment income, liquidity and diversification while maintaining principal ($1.00 per share value). Net asset value is calculated daily and reported to the rating agency weekly to ensure stability. The pool distributes earnings (net of management fees) on a monthly basis and values participant's shares sold and redeemed at the pool's share price, $1.00 per share. Pooled cash and cash equivalents and investments are reported at cost. The pool does not issue any legally binding guarantees to support the value of the shares. Participation in the pool is voluntary and deposits consist of funds from local governments; operating and trust funds of Georgia's state agencies, colleges and universities; and current operating funds of the State of Georgia's General Fund.

Investments in Georgia Fund 1 are directed toward short-term instruments such as U.S. Treasury obligations, securities issued or guaranteed as to principal and interest by the U. S. Government or any of its agencies or instrumentalities, banker's acceptances and repurchase agreements. The weighted average maturity of Georgia Fund 1 may not exceed 60 days. The weighted average maturity for Georgia Fund 1 on June 30, 2006, was 28 days.

The investments are classified as to custodial credit risk categories as follows:

T}'.l!e oflnvestment

Debt Securities

U. S. Agencies

$

Risk Categories

2

3

Carrying Amount

Fair Value

$

$ 864281 $ 864 281 $ 864 281

Interest Rate Risk Interest rate risk is the risk that changes in interest rates ofdebt investment will adversely affect the fair value ofan investment. The School District does not have a formal policy for managing interest rate risk.

- 21 -

MITCHELL COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2006

EXHIBIT "I"

Note 3: DEPOSITS AND INVESTMENTS

Investments are classified as to investment maturity as follows:

Investment Type

Investment Maturity Less than 1 Year

Debt Securities U.S. Agencies

$=="'8""=64""',9==8==7

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

Investments are classified as to quality ratings as follows:

Rated Debt Investments

Quality Ratings Unrated

U.S. Agencies

$===8=64-,9==8==7

Note 4: NON-MONETARY TRANSACTIONS

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

Note 5: CAPITAL ASSETS

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

-22 -

MITCHELL COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2006

EXHIBIT "I"

Note 5: CAPITAL ASSETS

Balances July I, 2005 (Restated)

Increases

Decreases

Balances June 30, 2006

Governmental Activities

Capital Assets, Not Being Depreciated:

Land

$ 4,622,039 $

0 $

0 $ 4,622,039

Capital Assets Being Depreciated Buildings and Improvements Equipment Land Improvements

$ 24,707,380 $ 4,090,298 1,238,277

1,017,004 335,480 $

$ 25,724,384

501,038

3,924,740

1,238,277

Less Accumulated Depreciation for: Buildings and Improvements Equipment Land Improvements

8,587,015 2,842,826
903,982

605,219 334,706
41,074

397,722

9,192,234 2,779,810
945,056

Total Capital Assets, Being Depreciated, Net $ 17,702,132 $ 371,485 $ 103.316 $ 17,970,301

Governmental Activity Capital Assets - Net $ 22,324,121 $ 32),485 $ 10313Hi $ 22,522,340

Capital assets being acquired under capital leases as of June 30, 2006, are as follows:

Governmental Funds

Buildings and Improvements Equipment Less: Accumulated Depreciation

$ 358,601 186,131 91,274

Current year depreciation expense by function is as follows:

$====4=53!=1,.4=!,,!5~8

- 23 -

MITCHELL COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2006

EXHIBIT "I"

Note 5: CAPITAL ASSETS

Instruction Support Services
Pupil Services Improvements of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Food Services

$ 613,541

$

8,594

2,686

21,087

18,675

24,212

1,869

47,615

152,125

1 754

278,617 88,841

Note 6: RESTRICTED ASSETS

$=====9-80-,9~9=9

Special Purpose Local Option Sales Tax (SPLOST), general obligation bond proceeds and Qualified Zone Academy Bonds (QZAB) escrow account (Debt Service Funds) are reported as restricted assets in the Statement ofNet Assets because their use is limited by applicable bond covenants or statutory provisions. Restricted assets at June 30, 2006, were as follows:

District-wide Canital Projects

Bond

SPLOST

Proceeds

Debt Service Funds

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

$

5,647

$ 2,033,104 $

$

1,536

$ 1,004,950 35,818

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.

-24-

MITCHELL COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2006

EXHIBIT "I"

Note 7: RISK MANAGEMENT

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

The School District has elected to self-insure for all losses related to acts of God. The School District has not experienced any losses related to this risk in the past three years.

The School District is self-insured with regard to unemployment compensation claims. The School District accounts for claims within the General Fund with expenses/expenditures and liability being reported when it is probable that a loss has occurred, and the amount ofthat loss can be reasonably estimated.

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

Beginning of Year Liability

Claims and Changes in Estimates

Claims Paid

End of Year Liability

2005 2006

$

0 $

11.783 $

11.783 $

0

$

0 $

1 481 $

1 481 $

0

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

Position Covered

Amount

Superintendent Assistant Superintendent Controller Each Principal Each Bookkeeper Each Secretary Each Food Service Worker

$

30,000

$

5,000

$

5,000

$

5,000

$

5,000

$

5,000

$

5,000

Note 8: SHORT-TERM DEBT

The School District obtains temporary loans in advance ofproperty tax collections, depositing the proceeds in its General Fund. This short-term debt is to provide cash for operations until property tax collections are received by the School District. Article IX, Section V, Paragraph V of the Constitution ofthe State of Georgia limits the aggregate amount ofshort-term debt to 75 percent of the total gross income from taxes collected in the preceding year and requires all short-term debt to be repaid no later than December 31 of the calendar year in which the debt was incurred.

- 25 -

MITCHELL COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2006

EXHIBIT "I"

Note 8: SHORT-TERM DEBT

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

Beginning Balance

Issued

Redeemed

Ending Balance

Temporary Loans Note 9: LONG-TERM DEBT

$====0 $ 500.150 $ 500,150 $=====0

CAPITAL LEASES The Mitchell County Board of Education has entered into various lease agreements as lessee for building improvements and copiers. These lease agreements qualify as capital leases for accounting purposes and, therefore, have been recorded at the present value of the future minimum lease payments as of the date' of their inception.

GENERAL OBLIGATION DEBT OUTSTANDING General Obligation Bonds currently outstanding are as follows:

Purpose

Interest Rates

Amount

General Government - QZAB Series 2001 General Government - Refunding - Series 2003

0% 3.18%

$ 3,620,000 2,845,000

$ 6,465.000

The changes in Long-Term Debt during the fiscal year ended June 30, 2006, were as follows:

Governmental Funds

General

Capital

Obligation

Leases

Bonds

Total

Balance July 1, 2005

$ 286,799 $ 6,735,000 $ 7,021,799

Additions Capital Leases

111,506

111,506

Deductions Debt Retired Trade-Ins

73,902 6,306

270,000

343,902 6,306

Balance June 30, 2006

$ 318,097 $ 6,465.000 $ 6,783.097

Portion of Long-Term Debt Due within One Year

$

74,730 $ 285,000 $ 359,730

-26-

MITCHELL COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2006

EXHIBIT "I"

Note 9: LONG-TERM DEBT

At June 30, 2006, payments due by fiscal year which includes principal and interest for these items are as follows:

Fiscal Year Ended June 30

Canital Leases

Princinal

Interest

2007 2008 2009 2010 2011

$

74,730 $

20,550

80,357

14,923

74,574

9,031

60,090

4,353

28.346

569

Total Principal and Interest

$ 318.097 $

49,426

Fiscal Year Ended June 30

General Obligation

Debt

Princinal

Interest

2007 2008 2009 2010 2011 2012 - 2014

$ 285,000 $ 305,000 320,000 345,000 365,000
4,845,000

90,471 81,408 71,709 61,533 50,562 79,500

Total Principal and Interest

$ 6,465.000 $ 435,183

Note 10: ON-BEHALF PAYMENTS

The School District has recognized revenues and costs in the amount of $574,500 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 ofNon-Certified Personnel In the amount of $571,825

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 $2,675

- 27 -

MITCHELL COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2006

EXHIBIT "I"

Note 11: SPECIAL ITEM
In fiscal year 2006, the Mitchell County Board of Education received donations ofequipment from the Universal Service Fund. The assets are recorded at estimated fair market value at the date donated. The donations are reported as special items on the Statement of Activities.
Note 12: SIGNIFICANT CONTINGENT LIABILITIES
Amounts received or receivable principally from the Federal government are subject to audit and review by grantor agencies. This could result in requests for reimbursement to the grantor agency for any costs which are disallowed under grant terms. The School District believes that such disallowances, if any, will be immaterial to its overall financial position.
The School District is a defendant in various legal proceedings pertaining to matters incidental to the performance ofroutine School District operations. The ultimate disposition ofthese proceedings is not presently determinable, but is not believed to be material to the basic financial statements.
Note 13: SUBSEQUENT EVENTS
On September 19, 2006, the voters of Mitchell County voted in favor of a Special Purpose Local Option Sales Tax of one percent to be imposed an all sales in Mitchell County for a period of time not to exceed 20 calendar quarters, beginning upon termination ofthe current such sales and use tax, to raise not more than $14,000,000. A portion of the proceeds from the tax are to be used for the benefit ofthe Mitchell County Board ofEducation as stated in part on the Official Ballot ofMitchell County as follows:
"Shall the Mitchell County School District issue general obligation bonds in the aggregate principal amount not to exceed $9,785,000 to pay the costs of (i) acquiring, constructing and equipping a new elementary school; (ii) rehabilitating, repairing, renovating, extending and improving existing schools and related facilities useful or desirable in connection therewith, including without limitation, additional classrooms, roofreplacements and repairs, mechanical system repairs and replacements, wiring and infrastructure modifications, renovations and improvements to physical education and athletic facilities; (iii) acquiring and installing system-wide instructional and administrative technology, safety and security equipment; (iv) acquiring vocational, fine arts, physical education and athletic equipment; (v) acquisition of school buses and maintenance and transportation facilities and equipment; (vi) acquiring any necessary property, both real and personal and acquiring any necessary or desirable rights in connection therewith, (vii) payment of capitalized interest through September 1, 2007; and (viii) paying costs incident to accomplishing the foregoing; and, in order to raise not more than $14,000,000 to pay a portion ofthe debt service on such bonds, to pay a portion ofthe costs of acquiring, constructing and equipping the Mitchell Projects, and to fund the payment of principal and interest on the Series 2003 Bonds commencing on September 1, 2008 through March 1, 2013, shall a one percent sales and use tax for educational purposes be reimposed in Mitchell County for a period of time not to exceed 20 consecutive calendar quarters?"

- 28 -

MITCHELL COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2006

EXHIBIT "I"

Note 14: RETIREMENT PLANS

TEACHERS RETIREMENT SYSTEM OF GEORGIA (TRS)

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

TRS CONTRIBUTIONS REQUIRED AND MADE Employees ofthe School District who are covered by TRS are required by State statute to contribute 5% of their gross earnings to TRS. The School District makes monthly employer contributions to TRS at rates adopted by the TRS Board of Trustees in accordance with State statute and as advised by their independent actuary. The required employer contribution rate is 9.24% and employer contributions for the current fiscal year and the preceding two fiscal years are as follows:

Fiscal Year

Percentage Contributed

Required Contribution

2006 2005 2004

100% 100% 100%

$ 1,055,237 $ 1,020,077 $ 1,101,175

- 29 -

(This page left intentionally blank)

MITCHELL COUNTY BOARD OF EDUCATION GENERAL FUND
SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL
YEAR ENDED JUNE 30, 2006

SCHEDULE "1"

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

NONAPPROPRIATED BUDGETS

ORIGINAL (1)

FINAL (1)

ACTUAL AMOUNTS

$

5,369,000 $

5,369,000 $

4,178,126

1,550,000

1,550,000

2,200,343

11,344,643

11,336,746

10,311,682

2,194,794

5,013,221

4,326,653

443,000

443,000

685,440

12,100

12,100

76,045

35 813

35 813

253 476

$

20,949,350 $

23,759,880 $

22,031,765

$

14,732,709 $

15,365,331 $

12,493,235

907,613 960,665 383,027 371,312 1,153,170 221,346 1,597,209 1,070,918 199,749
50,696
1,394,649

928,132 1,223,107
406,179 372,300 1,160,256 222,846 1,601,209 1,111,199 251,262
51,230
1,397,149

932,847 1,024,400
433,058 338,851 1,218,706 218,281 1,534,072 1,036,927 182,695 354,558
64,221 3,775
1,337,701 6,000
97 410

$

23,043,063 $

24,090,200 $

21,276,737

$

-2,093,713 $

-330,320 $

755 028

$

118,228 $

-323 646

$

-205 418 $

$

-2,299, 131 $

1,431,572

-13 385

118,228 $
-346 062
-227 834 $ -558,154 $
1,431,572 -13 385

111,506
111 506 866,534 1,795,849

$

-880 944 $

860033 $

2,662,383

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

See notes to the basic financial statements.

- 31 -

MITCHELL COUNTY BOARD OF EDUCATION
SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
YEAR ENDED JUNE 30, 2006

SCHEDULE "2"

FUNDING AGENCY PROGRAM/GRANT
Agriculture, U. S. Department of Child Nutrition Cluster Pass-Through From Georgia Department of Education Food Services School Breakfast Program National School Lunch Program
Total Child Nutrition Cluster
Other Programs Pass-Through From Georgia Department of Education Food Donation (1)
Total U.S. Department of Agriculture
Education, U. S. Department of Special Education Cluster Pass-Through From Georgia Department of Education Special Education Grants to States Preschool Grants
Total Special Education Cluster
Other Programs Pass-Through From Georgia Department of Education Enhancing Education Through Technology Program Hurricane Education Recovery Improving Teacher Quality State Grants Migrant Education Rural Education State Grants for Innovative Programs Title I Grants to Local Educational Agencies Vocational Education - Basic Grants to States
Total U. S. Department of Education
Defense, U. S. Department of Direct Department of the Air Force R.O.T.C. Program
Total Federal Financial Assistance
N/A = Not Available

CFDA NUMBER

PASS-
THROUGH ENTITY ID NUMBER

EXPENDITURES IN PERIOD

10.553 10.555

N/A NIA $
$

(2) 1,205,616
1,205,616

10.550

NIA $

52 739 1,258,355

84.027 84.173

NIA $ N/A
$

528,628 18,312
546,940

84.318 84.938 84.367 84.011 84.358
. 84.298 84.010 84.048

NIA NIA NIA NIA NIA NIA NIA NIA
$

198,426 (4)
391,833 66,325 93,846 19,495
1,769,205 (3) 56,052
3,142,122

$

48864

$ ===4-4.,.4=9=34=1=

- 32 -

MITCHELL COUNTY BOARD OF EDUCATION SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
YEAR ENDED JUNE 30, 2006

SCHEDULE "2"

Notes to the Schedule of Expenditures of Federal Awards
(1} The amount shown for the Food Donation Program represents the Federally assigned value of nonmonetary assistance for donated commodities received and/or consumed by the School District during the current fiscal year.
(2) Expenditures for the funds earned on the School Breakfast Program ($300,000} were not maintained separately and are included in the 2006 National School Lunch Program.
(3) Includes Federal Assistance of $227,834 provided to subrecipients. (4) Funds earned on the Hurricane Education Recovery program, in the amount of $6,504, do not require reporting
of expenditures.
Major Programs are identified by an asterisk (*} in front of the CFDA number.
The accompanying schedule of expenditures of Federal awards includes the Federal grant activity of the Mitchell County Board of Education and is presented on the modified accrual basis of accounting which is the basis of accounting used in the presentation of the fund financial statements.

See notes to the basic financial statements.

- 33-

MITCHELL COUNTY BOARD OF EDUCATION SCHEDULE OF STATE REVENUE YEAR ENDED JUNE 30, 2006

SCHEDULE "3"

AGENCY/FUNDING
GRANTS Bright From the Start: Georgia Department of Early Care and Learning Pre-Kindergarten Program
Education, Georgia Department of Quality Basic Education Direct Instructional Cost Kindergarten Program Kindergarten Program - Early Intervention Program Primary Grades (1-3) Program Primary Grades - Early Intervention (1-3) Program Upper Elementary Grades (4-5) Program Upper Elementary Grades - Early Intervention (4-5) Program Middle Grades (6-8) Program Middle School (6-8) Program High School General Education (9-12) Program Vocational Laboratory (9-12) Program Students with Disabilities Category I Category II Category Ill Category IV CategoryV Gifted Student - Category VI Remedial Education Program Alternative Education Program English Speakers of Other Languages (ESOL) Media Center Program 20 Days Additional Instruction Staff and Professional Development Indirect Cost Central Administration School Administration Facility Maintenance and Operations Categorical Grants Pupil Transportation Regular Bus Replacement Sparsity Nursing Services Principal Supplements Vocational Supervisors Migrant Education Education Equalization Funding Grant Food Services Vocational Education Austerity Reduction Other State Programs Health Insurance Preschool Handicapped Program Statewide K-8 Statewide Reading and Mathematics Program Virtual Schools State Grant
Office of Treasury and Fiscal Services Public School Employees Retirement

GOVERNMENTAL FUND TYPES

SPECIAL REVENUE

FUND

BACONTON

COMMUNITY

GENERAL

CHARTER

FUND

SCHOOL

TOTAL

$ 464,228 $

186,782 $

651,010

603,777 91,055
1,311,386 266,799 607,050 143,960 47,960
1,219,923 1,253,921
324,474
15,508 297,358 457,141
95,386 18,858 80,108 21,744 125,803 62,576 196,963 66,034 38,478
368,363 472,586 551,830
519,773 90,675 35,802 67,041 9,188 9,092 8,650
128,169 77,340 119,111 -641,090
571,825 58,239 51,898 25
2,675

188,406 412,193 189,594
7,342 241,874 189,103
5,887 84,433 26,055
44,158 13,999 9,235 92,924 141,965
5,315

792,183 91,055
1,723,579 266,799 796,644 151,302 289,834
1,219,923 1,443,024
324,474
15,508 303,245 541,574 121,441
18,858 80,108 21,744 125,803 62,576 241,121 80,033 47,713
368,363 565,510 693,795
519,773 90,675 35,802 67,041 9,188 9,092 8,650
128,169 77,340 124,426 -641,090
571,825 58,239 51,898 25
2675

See notes to the basic financial statements.

$ 10,3111682 $ - 34-

1,839,265 $

12,150,947

MITCHELL COUNTY BOARD OF EDUCATION SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS
YEAR ENDED JUNE 30, 2006

SCHEDULE "4"

PROJECT

ORIGINAL ESTIMATED
COST (1)

CURRENT ESTIMATED COSTS (2)

AMOUNT EXPENDED IN CURRENT YEAR (3) (4)

AMOUNT EXPENDED
IN PRIOR YEAR (3) (4)

PROJECT STATUS

The renovation, repairing, improving, and

equipping of Mitchell County Elementary

School, Mitchell-Baker High School, and

other buildings and facilities useful or

desirable in connection therewith, and/or the

repayment of the principal of certain Mitchell

County School District, Georgia General

Obligation Qualified Zone Academy Bonds, if

issued, due in 2014 and bearing interest at

the rate of zero percent (0%) per annum, the

acquisition, construction and equipping of

further capital outlay projects consisting of

the construction and equipping of classroom

additions at Mitchell County Primary School,

the construction and equipping of a new

school bus barn/maintenance facility for the

Mitchell County School District, and for

renovations, additions, expansions,

improvements, modifications and equipping

of existing school facilities of the Mitchell

County School District, including the

acquisition of all necessary property, both real

and personal, necessary therefor, the

maximum cost of such projects, not to exceed

$5,885,000.

$

5,885,000 $ 5,885,000 $

466,342 $ 1,338,355 Ongoing

The repayment of the principal and interest on the outstanding Mitchell County School District General Obligation School Bonds, Series 1994, coming due on March 1, 2003, through and including September 1, 2007, the maximum amount of such repayment of principal and interest not to exceed $1,825,000.

1,825,000

1,825,000

369,057

581,274 Ongoing

$ 7,710,000 $ 7,710,000 $

835,399 $ 1,919,629

(1) The School District's original cost estimate as specified in the resolution calling for the imposition of the Local Option Sales Tax.
(2) The School District's current estimate of total cost for the project. Includes all cost from project inception to completion.
(3) The voters of Mitchell County approved the imposition of a 1% sales tax to fund the above project and retire associated debt. Amounts expended for this project may include sales tax proceeds, state, local property taxes and/or other funds over the life of the project.
(4) The Series 1994 Bonds were retired through the sale of Series 2003 Refunding Bond Issue. The School District will utilize the SPLOST proceeds budgeted for this project, plus any excess SPLOST proceeds to retire the Series 2003 Refunding Bond Issue.

See notes to the basic financial statements.

- 35-

(This page left intentionally blank)

MITCHELL COUNTY BOARD OF EDUCATION GENERAL FUND- QUALITY BASIC EDUCATION PROGRAM (QBE)
ALLOTMENTS AND EXPENDITURES BY PROGRAM YEAR ENDED JUNE 30, 2006

SCHEDULE "5"

DESCRIPTION

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

ELIGIBLE QBE PROGRAM COSTS

SALARIES {3) OPERATIONS {3)

TOTAL {3)

Direct Instructional Programs

Kindergarten Program

$

Kindergarten Program-Early Intervention Program

Primary Grades (1-3) Program

Primary Grades-Early Intervention (1-3) Program

Upper Elementary Grades (4-5) Program

Upper Elementary Grades-Early Intervention (4-5)

Program

Middle Grades (6-8) Program

Middle School (6-8) Program

High School General Education (9-12) Program

Vocational Laboratory (9-12) Program

Students with Disabilities

Category II

Category Ill

Category IV

Gifted Student - Category VI

Remedial Education Program

Alternative Education Program

English Speakers of Other Languages (ESOL)

943,646 $ 106,320 2,074,250 306,005 960,105
165,943 349,224 1,468,464 1,708,920 413,845 1,210,348
84,469 37,378 150,343 71143

564,874 $ 115,747 1,353,143 397,411 743,255
160,204
1,421,397 1,524,100
526,169
414,403 597,311 140,074
55,581 151,376 230,486
81 060

10,263 $ 4,304 27,228 2,550 23,487
759
36,319 98,379 69,353
18,386
9,967
4,973 932

575,137 120,051 1,380,371 399,961 766,742
160,963
1,457,716 1,622,479
595,522
414,403 615,697 140,074
65,548 151,376 235,459
81 992

TOTAL DIRECT INSTRUCTIONAL PROGRAMS

$

10,050,403 $ 8,476,591 $

306,900 $

8,783,491

Media Center Program Staff and Professional Development

288,993 57280

327,799 5164

34,650 44 775

362,449 49939

TOTAL QBE FORMULA FUNDS

$

10,396,676 $ 8,809,554 $

386,325 $

9,195,879

(1) Comprised of State Funds plus Local Five Mill Share.
(2) Allotments do not include the impact of the State budget austerity reduction.
(3) Eligible QBE program costs do not include $1,678,864 distributed to Baconton Community Charter School.

See notes to the basic financial statements.

- 37 -

SECTION II COMPLIANCE AND INTERNAL CONTROL REPORTS

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

DEPARTMENT OF AUDITS AND ACCOUNTS
270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400
July 2, 2007

Honorable Sonny Perdue, Governor Members ofthe General Assembly Members of the State Board of Education
and Superintendent and Members of the Mitchell County Board of Education
REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS
Ladies and Gentlemen:
We have audited the financial statements of the governmental activities, each major fund, and the aggregate remaining fund information ofMitchell County Board ofEducation as ofand for the year ended June 30, 2006, which collectively comprise Mitchell County Board of Education's basic financial statements and have issued our report thereon dated July 2, 2007. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General ofthe United States. We did not audit the financial statements ofthe Mitchell County Board ofEducation's blended component unit. Those financial statements were audited by the auditors whose report thereon has been furnished to us, and our opinion insofar as it relates to the amounts included for Baconton Parents and Citizens for Better Education, Inc., DBA Baconton Community Charter School is based on the report of the other auditors.
Internal Control Over Financial Reporting
In planning and performing our audit, we and other auditors considered Mitchell County Board of Education's internal control over financial reporting in order to determine our auditing procedures for the purpose of expressing our opinion on the financial statements and not to provide an opinion on the internal control over financial reporting. However, we noted certain matters involving the internal control over financial reporting and its operation that we consider to be reportable conditions. Reportable conditions involve matters coming to our attention relating to significant

2006YB-30X

deficiencies in the design or operation of the internal control over financial reporting that, in our judgment, could adversely affect Mitchell County Board of Education's ability to record, process, summarize and report financial data consistent with assertions of management in the financial statements. Reportable conditions are described in the accompanying Schedule of Findings and Questioned Costs as items FS-7011-06-01 and FS-7011-06-02.
A material weakness is a reportable condition in which the design or operation ofone or more ofthe internal control components does not reduce to a relatively low level the risk that misstatements caused by error or fraud in amounts that would be material in relation to the financial statements being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. Our consideration of the internal control over financial reporting would not necessarily disclose all matters in the internal control that might be reportable conditions and, accordingly, would not necessarily disclose all reportable conditions that are also considered to be material weaknesses. However, we believe none of the reportable conditions described above are material weaknesses.
Compliance and Other Matters
As part of obtaining reasonable assurance about whether Mitchell County Board of Education's financial statements are free of material misstatement, we and other auditors 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.
This report is intended solely for the information and use ofthe budget committee, management and members of the Mitchell County Board of Education and is not intended to be and should not be used by anyone other than these specified parties.
Respectfully submitted,
~nt~~~c~ State Auditor
RWH:as 2006YB-30X

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

DEPARTMENT OF AUDITS AND ACCOUNTS
270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400
July 2, 2007

Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the Mitchell County Board of Education
REPORT ON COMPLIANCE WITH REQUIREMENTS APPLICABLE TO EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH 0MB CIRCULAR A-133
Ladies and Gentlemen:
Compliance
We have audited the compliance of Mitchell County Board of Education with the types of compliance requirements described in the U.S. Office ofManagement and Budget (0MB) Circular A-133 Compliance Supplement that are applicable to each ofits major Federal programs for the year ended June 30, 2006. Mitchell County Board ofEducation's major Federal programs are identified in the Summary of Auditor's Results Section of the accompanying Schedule of Findings and Questioned Costs. Compliance with the requirements of laws, regulations, contracts and grants applicable to each of its major Federal programs is the responsibility of Mitchell County Board of Education's management. Our responsibility is to express an opinion on Mitchell County Board of Education's compliance based on our audit.
We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States ofAmerica; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General ofthe United States; and 0MB Circular A133, Audits ofStates, Local Governments, and Non-Profit Organizations. Those standards and 0MB Circular A-133 require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major Federal program occurred. An audit includes examining, on a test basis, evidence about the Mitchell County Board of Education's compliance with those requirements and performing such other procedures as we considered necessary in the

2006SA-10

circumstances. We believe that our audit provides a reasonable basis for our opinion. Our audit does not provide a legal determination on Mitchell County Board of Education's compliance with those requirements.
In our opinion, the Mitchell County Board of Education complied, in all material respects, with the requirements referred to above that are applicable to each ofits major Federal programs for the year ended June 30, 2006.
Internal Control Over Compliance
The management of Mitchell County Board of Education is responsible for establishing and maintaining effective internal control over compliance with requirements of laws, regulations, contracts and grants applicable to Federal programs. In planning and performing our audit, we considered Mitchell County Board of Education's internal control over compliance with requirements that could have a direct and material effect on a major Federal program in order to determine our auditing procedures for the purpose of expressing our opinion on compliance and to test and report on internal control over compliance in accordance with 0MB Circular A-133.
Our consideration ofthe internal control over compliance would not necessarily disclose all matters in the internal control that might be material weaknesses. A material weakness is a reportable condition in which the design or operation of one or more of the internal control components does not reduce to a relatively low level ofrisk that noncompliance with applicable requirements oflaws, regulations, contracts and grants caused by error or fraud that would be material in relation to a major Federal program being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. We noted no matters involving the internal control over compliance and its operation that we consider to be material weaknesses.
This report is intended solely for the information and use of the budget committee, management, members ofthe Mitchell County Board of Education, Federal awarding agencies and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties.
Respectfully submitted,

RWH:as 2006SA-10

R ssell W. Hinton, CPA, CGFM State Auditor

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

MITCHELL COUNTY BOARD OF EDUCATION AUDITEE'S RESPONSE
SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2006

PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

FINDING CONTROL NUMBER AND STATUS

FS-7011-04-01 FS-7011-04-02 FS-7011-05-01 FS-7011-05-02

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

CORRECTIVE ACTION/RESPONSES

EMPLOYEE COMPENSATION EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Control Procedures Finding Control Number: FS-7011-04-02

The School Board has been advised by legal counsel to hold payment to the Department of Community Health.

CASH AND CASH EQUIVALENTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Control Procedures Finding Control Number: FS-7011-05-01

The School Bookkeepers have been asked to keep details ofreceipts and deposit money in a timely manner.

PRIOR YEAR FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

No matters were reported.

SECTION IV FINDINGS AND QUESTIONED COSTS

MITCHELL COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2006

I SUMMARY OF AUDITOR'S RESULTS

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

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

Expenditures/Liabilities/Disbursements Revenues/Receivables/Receipts

General Ledger

None ofthe reportable conditions described above are considered to be material weaknesses.

3. Noncompliance Material to the Financial Statements The audit of the Mitchell County Board of Education disclosed no instances of noncompliance that were deemed to be material to the financial statements.

4. Reportable Conditions in Internal Control Over Major Programs The audit report for the Mitchell County Board ofEducation did not disclose any reportable conditions in internal control over major programs.

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

6. Audit Findings Required to be Reported by Section .51 0(a) of 0MB Circular A-133 The Mitchell County Board of Education's audit did not disclose audit findings required to be reported by section .510(a) ofOMB Circular A-133.

7. Major Programs Federal awards audited as major programs are as follows: 10.553 Food Services - School Breakfast Program 10.555 Food Services - National School Lunch Program 84.010 Title I Grants to Local Educational Agencies

8. Type "A" Program Dollar Threshold The dollar threshold for type "A" programs was $300,000.

9. Low Risk Auditee The Mitchell County Board of Education did not qualify as a low risk auditee as defined by Section .530 of 0MB Circular A-133.

- 1-

MITCHELL COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2006

II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Controls over School Activity Accounts Reportable Condition Finding Control Number: FS-7011-06-01

Condition:

This is a repeat finding (FS-7011-05-01 and FS-7011-04-01) from the years ended June 30, 2005, and June 30, 2004, respectively. The accounting procedures of the School District were insufficient to provide for adequate internal controls over the school activity accounts.

Criteria:

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

Questioned Cost: NIA

Information:

Revenues/Receivables/Receipts Based on a review of25 items, the following deficiencies were noted: 1) Seven receipts were not deposited in a timely manner, and 2) Two receipts were not supported by adequate documentation.

Expenditures/Liabilities/Disbursements Based upon a review of 25 vouchers, the following deficiency was noted: 1) Four vouchers were not supported by adequate documentation.

Cause:

These deficiencies were a result of management's failure to ensure that internal controls were established, implemented and functioning at the school level.

Effect:

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

Recommendation:

Management should revise and monitor controls to provide reasonable assurance that transactions are processed according to established procedures.

-2-

MITCHELL COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2006

II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

GENERAL LEDGER Failure to Report the Financial Statements in a Timely Manner Reportable Condition Finding Control Number: FS-7011-06-02

Condition:

The School District failed to submit the DE046 financial report to the Georgia Department of Education in a timely manner.

Criteria:

Chapter 1 Introduction to LUA Accounting ofthe Financial Management for Georgia Local Units of Administration indicates that "accounting records must provide meaningful, reliable, accurate and timely information to the many persons and groups with legitimate interests in the financial affairs of an LUA."

Questioned Cost: NIA

Information:

The School District's DE046 financial report was submitted to the Georgia Department of Education on October 18, 2006.

Cause:

Management failed to comply with the due date of September 30, 2006, as established by the Georgia Department of Education.

Effect:

The failure ofthe School District to prepare and submit the financial report in a timely manner prohibits legitimate users of the report from being able to have timely access to the financial information provided.

Recommendation:

The School District should implement controls to ensure that Georgia Department of Education's policies and procedures are followed and to ensure that the DE046 financial report is submitted in a timely manner.

III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

No matters were reported.

-3 -

SECTIONV MANAGEMENT'S RESPONSES

MITCHELL COUNTY BOARD OF EDUCATION SCHEDULE OF MANAGEMENT'S RESPONSES
YEAR ENDED JUNE 30, 2006
Finding Control Number: FS-7011-06-01
We concur with this finding. The Board will establish and monitor procedures at the school level to ensure that receipts are properly documented and deposited in a timely manner and that the invoices and request for payment forms are attached to all check copies.
Finding Control Number: FS-7011-06-02
We concur with this finding. The Business Office will work with the State Help Desk to ensure that the Financial Reports are submitted to the Georgia Department of Education by the September 30th deadline.
Contact Person: Luci Conine, Director of Business and Finance Phone: (229) 336-2100 Fax Number: (229) 336-1615 E-mail Address: luci_conine@mitchell.kl2.ga.us