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

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

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

33

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

36

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 GOVERNMENTAUDITING 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 -
SECTIONV MANAGEMENT'S RESPONSES SCHEDULE OF MANAGEMENT'S RESPONSES

SECTION I FINANCIAL

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

DEPARTMENT OF AUDITS AND ACCOUNTS
270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400
August 6, 2008

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, 2007, 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 Baconton Parents and Citizen's for Better Education, Inc., DBA Baconton Community Charter School which represents all assets, fund balances and revenues of the Special Revenue fund. 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 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 of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Mitchell County Board of Education's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in

2007ARL-12

the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit and the report of other auditors provides a reasonable basis for our opinions.
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, 2007, 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 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 August 6, 2008, on our consideration of the Mitchell 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 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 and the other auditors have applied certain limited procedures, which consisted principally ofinquiries ofmanagement regarding the methods ofmeasurement and presentation of the 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.
2007ARL-12

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,
~to:C~~~ State Auditor
RWH:gp 2007ARL-12

MITCHELL COUNTY BOARD OF EDUCATION

MITCHELL COUNTY BOARD OF EDUCATION STATEMENT OF NET ASSETS JUNE 30, 2007
ASSETS
Cash and Cash Equivalents Investments Accounts Receivable, Net
Taxes State Government Federal Government 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 and Benefits 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

$

661,088

8,545,317

730,973 1,851,020
717,335 25,278 24,007 57,617

4,622,039 1,238,277 26,046,731 4,062,133 -13,652,024
5,842

$ ======34='=93=5=,6=33=

$

908,752

1,970,546

393,567 9 135 779

$

12,408,644

$

15,390,991

14,490 212,974 1,924,359 2,361,182 2,622,993

$

22,526,989

$ ======34='=93=5=,6=33=

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

EXPENSES

CHARGES FOR SERVICES

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 Food Services Interest on Short-Term and Long-Term Debt

$

17,294,062 $

959,717 1,016,843
484,499 530,200 1,627,077 301,740 1,867,085 1,108,021 273,281 201,655

2,238 1,503,033
116 585

83,311 36,952
2,412 17,341
561
59,132 1,120
136,923

Total Governmental Activities

27,286,036 $

337 752

General Revenues Taxes Property Taxes For Maintenance and Operations Railroad Cars 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 Item Donated Building

Total General Revenues and Special Item

Change in Net Assets

Net Assets - Beginning of Year

Net Assets - End of Year

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

EXHIBIT"B"

PROGRAM REVENUES OPERATING GRANTS AND
CONTRIBUTIONS

CAPITAL GRANTS AND CONTRIBUTIONS

NET (EXPENSES) REVENUES
AND CHANGES IN NET ASSETS

$

12,601,535 $

267,502 612,656 283,785 434,648 678,366
8,206 715,076 640,131
8,235 33,031

1,258,217

$

17 541 388 $

110,000 $ 204,952 314 952 $

-4,499,216
-655,263 -404,187 -198,302 -95,552 -931,370 -293,534 -1,151,448 -262,938 -265,046 -109,492
-1,118 -107,893 -116 585
-9,091,944

$

5,435,819

19,247

1,239,994 228,048
1,937,314 35,351
234,771 274,862 141,656

40,094

$

9,587 156

$

495,212

22,031,777

$ ====2=2=,5=2=-6'=98=9=

-3-

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

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

$

327,797 $

1,588,559

390,530 1,851,020
717,335 24,062

57,617

329,573
1,216 24,007

Total Assets

$ 4,956,920 $ =====3=54===79=6=

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

$

894,768 $

1,970,546

$ 2,865,314 $

$

14,490

155,357

57,617

53,402
1,810,740 $
$ 2,091,606 $

13,984 13 984
340 812 340,812

Total Liabilities and Fund Balances

$ 4,956,920 $ =====3=5=4=79=6=

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

$

2,186 $

1,532 $

661,088

5,033,931

1,922,827

8,545,317

260,857

651,387 1,851,020
717,335 25,278 24,007 57,617

$

5,296,974 $

1,924,359 $ 12,533,049

$

908,752

1,970 546

$ _ ___,;;c2""',8-'-79.:;..,=29;;..;8;_

$

14,490

155,357

$

1,924,359

1,924,359

57,617

$

5,296,974

5,296,974

53,402

1,810,740 340 812

$

5,296,974 $

1,924,359 $

9,653,751

$

5,296,974 $

1,924,359 $ 12,533,049

-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, 2007

EXHIBIT"D"

Total Fund Balances - Governmental Funds (Exhibit "C")
Amounts reported for Governmental Activities in the Statement of Net Assets are different because:
Capital Assets used in Governmental Activities are not financial resources and therefore are not reported in the funds. These assets consist of:
Land Land Improvements Buildings 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

$

9,653,751

$

4,622,039

1,238,277

26,046,731

4,062,133

-13,652,024

22,317,156 5,842

79,586

$

-9,180,000

-349,346

-9,529,346

Net Assets of Governmental Activities (Exhibit "A")

$ ==22=,5=2=6=,9=89=

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, 2007

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 Food Services Operation
Capital Outlay Debt Services
Principal Interest
Total Expenditures
Excess of Revenues over (under) Expenditures
OTHER FINANCING SOURCES (USES)
Proceeds of Long-Term Capital Related Debt Capital Leases
Total Other Financing Sources (Uses)
Net Change in Fund Balances
Fund Balances - Beginning

GENERAL FUND

SPECIAL REVENUE FUND
BACONTON COMMUNITY
CHARTER SCHOOL

$ 4,483,688 $ 1,632,409
11,740,160 4,197,429
337,752 101,137
212,229
$ 22,704,804 $

937,088 340,256
2,124,988 28,534
3,937
-33 841
3,400,962

$ 14,312,112 $
891,715 1,009,935
404,218 467,522 1,386,690 221,607 1,510,951 1,212,859 271,324 201,502
2,238
1,416,064

77,858 22,966

$ 23,409,561 $

$

-704 757 $

2,597,643 59,217
4,443
55,301 38,048 184,322 12,076 290,089
3148 3,244,287
156 675

$

133,980

$

133,980

$

-570,777 $

2,662,383

156,675 184 137

Fund Balances - Ending

$

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

2,091,606 $ ====~34;;,,;;0;,i,;;8;.;,1~2

EXHIBIT"E"

DISTRICTWIDE
CAPITAL PROJECTS
FUND

DEBT SERVICE
FUND

TOTAL

$

5,420,776

$

228,048 $

1,239,994

3,440,707

13,865,148

4,225,963

337,752

115,889

53,899

274,862

178,388

$

343,937 $

1,293,893 $ 27,743,596

$ 16,909,755

$

64,234 $

300,391

950,932

1,014,378

459,519

505,570

1,571,012

549

298,466

1,801,040

1,212,859

271,324

201,502

2,238

1,416,064

300,391

285,000 90,471

362,858 116 585

$

364,625 $

376,020 $ 27,394,493

$

-20 688 $

917,873 $

349,103

$

3,000,000

$

3,000,000

133,980

$

3,000,000

$

3,133,980

$

2,979,312 $

917,873 $

3,483,083

2,317,662

1,006,486

6,170,668

$

5,296,974 $

1,924,359 $ ==9=,6=5=3,=75=1=

-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, 2007

EXHIBIT "F"

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

$

3,483,083

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

$

734,544

-1 013,090

-278,546

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:

-728

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.

34,290

In the Statement of Activities, only the gain or loss on the sale of the 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.

-36,732

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 Building

40,094

Bond proceeds provide current financial resources to Governmental Funds; however, issuing debt increases Long-Term Liabilities in the Statement of Net Assets. In the current period, proceeds were received from:

General Obligation Bonds Issued

-3,000,000

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.

-133,980

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 Capital Lease Trade-Ins
Total Long-Term Debt Repayments

$

285,000

77,859

24 872

387,731

Change in Net Assets of Governmental Activities (Exhibit "B")
The notes to the basic financial statements are an integral part of this statement. - 10 -

$ ======49=5=i,2=1=2

MITCHELL COUNTY BOARD OF EDUCATION STATEMENT OF FIDUCIARY NET ASSETS FIDUCIARY FUNDS JUNE 30, 2007

EXHIBIT"G"

ASSETS Cash and Cash Equivalents Investments
Certificate of Deposit Accounts Receivable, Net
Other
Total Assets
LIABILITIES Accounts Payable Funds Held for Others
Total Liabilities NET ASSETS Held in Trust for Private Purposes
Total Liabilities and Net Assets

PRIVATE PURPOSE TRUSTS

AGENCY FUNDS

$

7,900 $

6,974

10,000

151981

$

17,900 $ ===2=2.1.9.=55=

$

1,180

21,775

$

22,955

$ _ _ _1_7_19_00_

$

17,900 $===2=2.,.9.=55=

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, 2007

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

463

$

1 963

$

500

40

$

540

$

1,423

16,477

$ =====1=7 =90=0=

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, 2007

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 ofActivities 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, 2007

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, 2007

EXHIBIT "I"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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 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.
CASH AND CASH EQUIVALENTS
COMPOSITION OF DEPOSITS Cash and cash equivalents consist ofcash on hand, demand deposits and short-term investments with original maturities of three months or less from the date of acquisition in authorized financial institutions. Official Code of Georgia Annotated Section 45-8-14 authorize the School District to deposit its funds in one or more solvent banks or insured Federal savings and loan associations.

- 15 -

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

EXHIBIT "I"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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 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.

- 16 -

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

EXHIBIT "I"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PROPERTY TAXES

The Mitchell County Board of Commissioners fixed the property tax levy for the 2006 tax digest year (calendar year) on August 4, 2006 (levy date). Taxes were due on December 20, 2006 (lien date). Taxes collected within the current fiscal year or within 60 days after year-end on the 2006 tax digest are reported as revenue in the governmental funds for fiscal year 2007. The 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, 2007, for maintenance and operations amounted to $5,401,529.

The tax millage rate levied for the 2006 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

12.484 mills

SALES TAXES

Local Option Sales Tax revenue, at the fund reporting level, during the fiscal year amounted to $1,937,314 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 $1,468,042 and is to be used for capital outlay for educational purposes or debt service. This sales tax was authorized by local referendum and the sales tax must be re-authorized at least every five years.

INVENTORIES

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

CAPITAL ASSETS

Capital assets purchased, including capital outlay costs, are recorded as expenditures in the fund financial statements at the time of purchase (including ancillary charges). On the District-wide financial statements, all purchased capital assets are valued at cost where historical records are

- 17 -

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

EXHIBIT "I"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

available and at estimated historical cost based on appraisals or deflated current replacement cost where no historical records exist. Donated capital assets are recorded at estimated fair market value on the date donated. Disposals are deleted at depreciated recorded cost. The cost of normal maintenance and repairs that do not add to the value ofassets or materially extend the useful lives of the assets is not capitalized. Depreciation is computed using the straight-line method. The School District does not capitalize book collections or works ofart. During the fiscal year under review, no events or changes in circumstances affecting a capital asset that may indicate impairment were known to the School District.

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

Capitalization Policy

Estimated Useful Life

Land Land Improvements Buildings and Improvements Equipment

$

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.

NET ASSETS

The School District's net assets in the District-wide Statements are classified as follows:

- 18 -

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

EXHIBIT "I"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Invested in capital assets, net of related debt - This represents the School District's total investment in capital assets, net ofoutstanding debt obligations related to those capital assets. To the extent debt has been incurred but not yet expended for capital assets, such amounts are not included as a component of invested in capital assets, net of related debt.
Restricted net assets - These represent resources for which the School District is legally or contractually obligated to spend resources for bus replacement, continuation of Federal programs, debt service and capital projects in accordance with restrictions imposed by external third parties.
Unrestricted net assets - Unrestricted net assets represent resources derived from property taxes, sales taxes, grants and contributions not restricted to specific programs, charges for services, and miscellaneous revenues. These resources are used for transactions relating to the educational and general operations of the School District, and may be used at the discretion of the Board to meet current expenses for those purposes.
Note 3: DEPOSITS AND INVESTMENTS
COLLATERALIZATION OF DEPOSITS Official Code of Georgia Annotated (OCGA) Section 45-8-12 provides that there shall not be on deposit at any time in any depository for a time longer than ten days a sum of money which has not been secured by surety bond, by guarantee ofinsurance, 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, $244,101 of deposits 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 ofthe School District's 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 ofthe State of Georgia,
(4) Bonds, bills, notes, certificates of indebtedness or other obligations of the counties or municipalities of the State of Georgia,

- 19 -

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

EXHIBIT "I"

Note 3: DEPOSITS AND INVESTMENTS

(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 of the State of Georgia, and

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

CATEGORIZATION OF DEPOSITS At June 30, 2007, the bank balances were $2,356,203. The amounts of the total uninsured bank balances are classified into three categories of custodial credit risk:

Category 1 - Uncollateralized, Category 2 - Cash collateralized with securities held by the pledging financial institution, or Category 3 - Cash collateralized with securities held by the pledging financial institution's
trust department or agent but not in the School District's name.

The School District's uninsured deposits are classified by custodial credit risk category at June 30, 2007, as follows:

Custodial Credit Risk Category

Bank Balance

1

$ 244,101

2

1,058,943

3

751,628

Total

$ 2,054.672

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

-20-

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

EXHIBIT "I"

Note 3: DEPOSITS AND INVESTMENTS

Investment Type

Fair Value

Investment Maturity

Less Than

6 - 10

1 Year

Years

Debt Securities U.S. Treasuries

$ 1,748,267 $

864.411 $=====8=83-,8=5==6

Other Investments Money Market Funds

27,795

Investment Pools Office of Treasury and Fiscal Services Georgia Fund 1

6,769,255

Total Investments

$ 8.545.317

The Local Government Investment Pool administered by the State of Georgia, Office of Treasury and Fiscal Services is not required to be categorized since the School District did not own any specific identifiable securities in the pool. The investment policy ofthe State ofGeorgia, Office of Treasury and Fiscal Services for the Local Government Investment Pool (Primary Liquidity Portfolio) does not provide for investment in derivatives or similar investments. Additional information on the Local Government Investment Pool is disclosed in the State of Georgia Comprehensive Annual Financial Report. This audit can be obtained from the Georgia Department of Audits and Accounts at http://www.audits.state.ga.us/internet/searchRpts.html.

The Primary Liquidity Portfolio consists ofGeorgia Fund 1 which is not registered with the SEC as an investment company but does operate in a manner consistent with the SEC's Rule 2a-7 of the Investment Company Act of 1940. The investment is valued at the pool's share price, $1.00 per share. The pool is an AAAm rated investment pool by Standard and Poor's. The weighted average maturity of Georgia Fund 1 may not exceed 60 days. The weighted average maturity for Georgia Fund 1 on June 30, 2007, was 15 days.

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.

Custodial Credit Risk Custodial credit risk for investments is the risk that, in the event ofthe failure ofthe counterparty to a transaction, the School District will not be able to recover the value ofthe 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.

At June 30, 2007, $1,748,267 ofthe School District's investments are uninsured, are not registered in the name of the School District, and are held by the counterparty's trust department or agent in the School District's name.

- 21 -

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

EXHIBIT "I"

Note 3: DEPOSITS AND INVESTMENTS

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.

The investments subject to credit quality risk are reflected below:

Rated Debt Investments

Fair Value

Quality Ratings AAA

Debt Securities Money Market Funds

$

27,795 $=="=27='=7'='S9;;5

Concentration of Credit Risk Concentration of credit risk is the risk of loss attributed to the magnitude of a government's investment in a single issuer. The School District does not have a formal policy for managing concentration of credit risk. More than 5% of the School District's investments are in U. S. Treasuries. This investment is 20% of the School District's total investments.

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:

Governmental Activities Capital Assets, Not Being Depreciated:
Land
Capital Assets Being Depreciated Buildings and Improvements Equipment Land Improvements
Less Accumulated Depreciation for: Buildings and Improvements Equipment Land Improvements
Total Capital Assets, Being Depreciated, Net
Governmental Activity Capital Assets - Net

Balances July 1, 2006

Increases

Balances Decreases June 30, 2007

$ 4,622,039 $

0 $

0 $ 4,622,039

$ 25,724,384 $ 3,924,740 1,238,277

322,347 452,291 $

$ 26,046,731

314,898

4,062,133

1,238,277

9,192,234 2,779,810
945 056
$ 17,970,301 $
$ 22,592.340 $

631,844 337,002
44 244
-238,452 $
-238.452 $

278,166

9,824,078 2,838,646
989,300

36,732 $ 17,695,117

36.732 $ 22,317,156

- 22 -

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

EXHIBIT "I"

Note 5: CAPITAL ASSETS

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

Governmental Funds

Buildings and Improvements Equipment Less: Accumulated Depreciation

$ 358,601 257,539 113,979

Current year depreciation expense by function is as follows:

$==5=02,,,.,,,1=='6='=1

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 Other Support Services Food Services

$ 573,906

$

8,594

2,411

24,437

24,094

54,117

3,203

64,609

170,578

1,914

150

354,107 85,077

Note 6: RESTRICTED ASSETS

$ 1,013.090

Special Purpose Local Option Sales Tax (SPLOST), general obligation bond proceeds and Qualified Zone Academy Bonds (QZAB) escrow account are restricted assets in the Statement ofNet Assets because their use is limited by applicable bond covenants or statutory provisions. Restricted assets at June 30, 2007, were as follows:

- 23 -

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

EXHIBIT "I"

Note 6: RESTRICTED ASSETS

District-wide Ca:gital Projects

Bond

SPLOST

Proceeds

Debt Service Funds

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

$

2,186

$

1,532

$ 1,922,827 $ 2,078,096 $ 2,955,835

Note 7: RISK MANAGEMENT

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

The School District has obtained commercial insurance for risk ofloss associated with torts, assets, errors or omissions and job related illness or injuries to employees. 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:

2006 2007

Beginning ofYear Liability

Claims and Changes in Estimates

$

0 $

1 481 $

$

0 $

4278 $

Claims Paid

EndofYear Liability

1 481 $

0

4,278 $

0

- 24-

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

EXHIBIT "I"

Note 7: RISK MANAGEMENT

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

Baconton Community Charter School obtains temporary loans in advance of property tax collections, depositing the proceeds in its General Fund. This short-term debt is to provide cash for operations until property tax collections are received from the School District. Article IX, Section V, Paragraph V ofthe Constitution ofthe State ofGeorgia 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 ofthe calendar year in which the debt was incurred.

The Baconton Community Charter School short-term debt activity for the fiscal year is as follows:

Beginning Balance

Issued

Redeemed

Ending Balance

Temporary Loans

$==~0 $ 240,000 $ 240.000 $===-0

Note 9: LONG-TERM DEBT

CAPITAL LEASES The Mitchell County Board of Education has entered into various lease agreements 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:

- 25 -

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

EXHIBIT "I"

Note 9: LONG-TERM DEBT

Purpose

Interest Rates

Amount

General Government - QZAB - Series 2001

0%

General Government - Refunding - Series 2003

3.18%

General Government - Series 2007

3.55% - 3.625%

$ 3,620,000 2,560,000 3,000,000

$ 9,180.000

Voters have authorized $6,785,000 in general obligation debt for the purpose of financing the cost of the Mitchell Projects which was not issued as of June 30, 2007.

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

Governmental Funds

General

Capital

Obligation

Leases

Bonds

Total

Balance July 1, 2006

$ 318,097 $ 6,465,000 $ 6,783,097

Additions Capital Leases G.O. Bonds

133,980

3,000,000

133,980 3,000,000

Deductions Debt Retired Trade-Ins

77,859 24,872

285,000

362,859 24,872

Balance June 30, 2007

$ 349 346 $ 9.180.000 $ 9,529.346

Portion of Long-Term Debt Due within One Year

$_~8~8,~56~7 $ 305,000 $ 393,567

At June 30, 2007, payments due by fiscal year which includes principal and interest for these items are as follows:

- 26 -

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

EXHIBIT "I"

Note 9: LONG-TERM DEBT

Fiscal Year Ended June 30

Capital Leases

Principal

Interest

2008 2009 2010 2011 2012

$

88,567 $

23,387

94,316

17,284

85,723

10,146

56,739

4,042

24,001

884

Total Principal and Interest

$ 349,346 $

55,743

Fiscal Year Ended June 30

General Obligation

Debt

Principal

Interest

2008 2009 2010 2011 2012 2013 -2014

$ 305,000 $ 830,000 860,000 895,000 930,000
5,360,000

166,822 179,224 150,943 121,587 91,006 85,355

Total Principal and Interest

$ 9,180,Q0Q $ 724,237

Note 10: ON-BEHALF PAYMENTS

The School District has recognized revenues and costs in the amount of $538,598 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 $519,544

Paid to the Teachers Retirement System of Georgia For Teachers Retirement System (TRS) Employer's Cost In the amount of $16,379

-27 -

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

EXHIBIT "I"

Note 10: ON-BEHALF PAYMENTS
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
Note 11: SPECIAL ITEM
In fiscal year 2007, the Mitchell County Board of Education received donations of building improvements 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 ofActivities.
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: 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 ofGeorgia (TRS), which is a cost-sharing multiple employer defined benefit pension plan. TRS provides service retirement, disability retirement and survivors benefits for its members in accordance with State statute. The Teachers Retirement System of Georgia issues a separate stand alone financial audit report and a copy can be obtained from the Georgia Department of Audits and Accounts.
TRS CONTRIBUTIONS REQUIRED AND MADE Employees ofthe School District who are covered by TRS are required by State statute to contribute 5% of their gross earnings to TRS. The School District makes monthly employer contributions to TRS at rates adopted by the TRS Board of Trustees in accordance with State statute and as advised by their independent actuary. The required employer contribution rate is 9.28% and employer contributions for the current fiscal year and the preceding two fiscal years are as follows:

- 28 -

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

EXHIBIT "I"

Note 13: RETIREMENT PLANS
Fiscal Year
2007 2006 2005

Percentage Contributed
100% 100% 100%

Required Contribution
$ 1,123,258 $ 1,055,237 $ 1,020,077

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

SCHEDULE "1"

REVENUES
Property Taxes 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 Food Services Operation
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

NONAPPROPRIATED BUDGETS

ORIGINAL (1)

FINAL (1)

ACTUAL AMOUNTS

$

5,319,000 $

5,319,000 $

4,483,688

1,727,000

1,727,000

1,632,409

12,434,951

12,896,739

11,740,160

3,174,417

4,716,398

4,197,429

150,000

300,000

337,752

30,000

32,100

101,137

17 679

17 679

212 229

$

22,853,047 $

25,008,916 $

22,704,804

$

16,584,586 $

17,426,800 $

14,312,112

888,308 1,042,060
386,114 373,319 1,232,519 217,170 1,628,583 1,314,090 264,216
47,071
1,524,817

843,869 1,074,364
393,972 407,020 1,235,629 217,170 1,628,583 1,248,375 263,917
48,202
1,524,817

891,715 1,009,935
404,218 467,522 1,386,690 221,607 1,510,951 1,212,859 271,324 201,502
2,238 1,416,064
100 824

$

25,502,853 $

26,312,718 $

23,409,561

$

-2,649,806 $

-1,303,802 $

-704 757

$

-65,000 $

133,980

65 000

$

0 $

133 980

$

-2,649,806 $

-1,303,802 $

-570,777

2,261,601

2,261,601

2,662,383

16 370

16 370

Fund Balances - Ending

$

-371 835 $

974 169 $

2,091,606

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 -

(This page left intentionally blank)

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

SCHEDULE "2"

FUNDING AGENCY PROGRAM/GRANT
Agriculture, U.S. Department of Child Nutrition Cluster Pass-Through From Georgia Department of Education Food Services School Breakfast Program National School Lunch Program
Total Child Nutrition Cluster
Other Programs Pass-Through From Georgia Department of Education Food Donation (1)
Total U.S. Department of Agriculture
Education, U. S. Department of Special Education Cluster Pass-Through From Georgia Department of Education Special Education Grants to States Preschool Grants
Total Special Education Cluster
Other Programs Pass-Through From Georgia Department of Education 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

CFDA NUMBER

PASSTHROUGH
ENTITY ID
NUMBER

EXPENDITURES IN PERIOD

10.553 10.555
10.550

NIA

(2)

NIA

$ _ _ _~1,=26"-1'-'-,6C..C5~0

$

1,261,650

NIA

79584

84.027 84.173
84.318 84.938 84.367 84.011 84.358 84.298 84.010 84.048

NIA $ NIA
$
NIA NIA NIA NIA NIA NIA NIA NIA
$

782,118 31467
813,585
111,747 (3)
374,928 46,335 86,170 7,316
1,475,402 (4) 51 964
2 967 447

$ _ _ _ _5;:;..;0:.,..4.;.::2=-2

Total Federal Financial Assistance
NIA = Not Available

$ ====4,.,35=9=1=0=3

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 ($311,497) were not maintained separately and are included in the 2007 National School Lunch Program.
(3) Funds earned and expended in the prior period on the Hurricane Education Recovery Act, in the amount of $405, do not require reporting of expenditures.
(4) Includes Federal Assistance of $169,116 provided to subrecipients.

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, 2007

SCHEDULE "3"

AGENCY/FUNDING

GOVERNMENTAL FUND TYPES

SPECIAL REVENUE

FUND

BACONTON

COMMUNITY

GENERAL

CHARTER

FUND

SCHOOL

GRANTS Bright from the Start: Georgia Department of Early Care and Learning Pre-Kindergarten Program

$

429,188 $

199,183 $

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 - Alternative Nursing Services Principal Supplements Vocational Supervisors Migrant Education Mid-term Adjustment Hold-Harmless Education Equalization Funding Grant Food Services Vocational Education Amended Formula Adjustment

687,619 77,871
1,471,415 232,990 646,930 258,602 92,675
1,204,332 976,177 373,433
6,896 373,006 482,844 129,400
35,479 46,936 130,829 118,581 72,959 211,347 67,640 37,780
353,650 482,870 508,299
547,799 54,952 35,802 63,430 8,603 9,429 9,901
286,413 234,772
73,854 77,656 -244,655

184,380 461,001 241,593
284,228
237,536
5,382 12,945 92,780 28,220
14,095
52,853 16,520 10,176 27,103 104,566 152,427

TOTAL
628,371
871,999 77,871
1,932,416 232,990 888,523 258,602 376,903
1,204,332 1,213,713
373,433
12,278 385,951 575,624 157,620
35,479 46,936 144,924 118,581 72,959 264,200 84,160 47,956
380,753 587,436 660,726
547,799 54,952 35,802 63,430 8,603 9,429 9,901
286,413 234,772
73,854 77,656 -244,655

- 34-

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

SCHEDULE "3"

AGENCY/FUNDING
GRANTS Education, Georgia Department of Other State Programs Agriculture Construction Related Equipment Apprenticeship Program Graduation Coaches Health Insurance K-8 Statewide Reading and Mathematics Program Middle School Summer Remedial Program Preschool Handicapped Program Pupil Transportation - State Bonds Teachers' Retirement Virtual Schools Grant Vocational Construction Related Equipment
Office of Treasury and Fiscal Services Public School Employees Retirement

GOVERNMENTAL FUND TYPES

SPECIAL REVENUE

FUND

BACONTON

COMMUNITY

GENERAL

CHARTER

FUND

SCHOOL

TOTAL

$

130,926

9,825

46,511

519,544

34,168

3,561

48,342

150,000

16,379

525

110,000

2 675

$

11,740160 $

$

130,926

9,825

46,511

519,544

34,168

3,561

48,342

150,000

16,379

525

110,000

2 675

2 124,988 $ ==1=3,..,8=6=5,=14=8=

See notes to the basic financial statements.

- 35-

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

SCHEDULE "4"

PROJECT
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
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

ORIGINAL ESTIMATED
COST (1)

CURRENT ESTIMATED COSTS (2)

AMOUNT EXPENDED IN CURRENT YEAR (3) (4)

AMOUNT EXPENDED
IN PRIOR YEAR (3) (4)

PROJECT STATUS

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

364,625 $ 1,804,697 Ongoing

1,825,000

1,825,000

375 471

950 331 Ongoing

$ 7710000 $ 7,710,000 $

740 096 $ 2,755,028

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

See notes to the basic financial statements.

- 36-

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

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)

994,564 $ 94,827
2,203,096 281,974
1,013,895
286,954 394,620 1,441,322 1,452,827 441,083 1,346,782
65,370 148,260 142,742 84 776

671,314 $ 154,942 1,582,531 435,448 731,991
302,751
1,495,436 1,557,538
528,003
442,467 692,914 125,724
60,364 144,547 206,596
86108

9,204 $ 2,114 25,842 3,905 18,850
610
29,340 91,836 53,764
43,934
6,281
8,538 662

680,518 157,056 1,608,373 439,353 750,841
303,361
1,524,776 1,649,374
581,767
442,467 736,848 125,724
66,645 144,547 215,134
86770

TOTAL DIRECT INSTRUCTIONAL PROGRAMS

$

10,393,092 $

9,218,674 $

294,880 $

9,513,554

Media Center Program Staff and Professional Development

305,872 57295

327,871 6993

28,182 40656

356,053 47649

TOTAL QBE FORMULA FUNDS

$

10,756,259 $

9,553,538 $

363 718 $===9..,,..,91,..7..,2...,5==6

(1) Comprised of State Funds plus Local Five Mill Share.
(2) Allotments do not include the impact of the State amended formula adjustment.
(3) Eligible QBE program costs does not include $1,950,836 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
August 6, 2008

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 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, 2007, which collectively comprise Mitchell County Board of Education's basic financial statements and have issued our report thereon dated August 6, 2008. 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 of the United States. 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.
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 as a basis for designing our auditing procedures for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the Mitchell County Board of Education's internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness of the Mitchell County Board of Education's internal control over financial reporting.

2007YB-40X

Our consideration of internal control over financial reporting was for the limited purpose described in the preceding paragraph and would not necessarily identify all deficiencies in internal control over financial reporting that might be significant deficiencies or material weaknesses. However, as discussed below, we identified certain deficiencies in internal control over financial reporting that we consider to be significant deficiencies.
A control deficiency exists when the design or operation ofa control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect misstatements on a timely basis. A significant deficiency is a control deficiency, or combination of control deficiencies, that adversely affect the Mitchell County Board of Education's ability to initiate, authorize, record, process, or report financial data reliably in accordance with generally accepted accounting principles such that there is more than a remote likelihood that a misstatement ofthe Mitchell County Board of Education's financial statements that is more than inconsequential will not be prevented or detected by the Mitchell County Board ofEducation's internal control. We consider items FS-7011-07-01, FS-7011-07-02 and FS-7011-07-03 in the accompanying Schedule of Findings and Questioned Costs to be significant deficiencies in internal control over financial reporting.
A material weakness is a significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood that a material misstatement ofthe financial statements will not be prevented or detected by the Mitchell County Board of Education's internal control.
Our consideration of the internal control over financial reporting was for the limited purpose described in the first paragraph ofthis section and would not necessarily disclose all deficiencies in internal control that might be significant deficiencies and, accordingly, would not necessarily disclose all significant deficiencies that are also considered to be material weaknesses. However, of the significant deficiencies described above, we consider item FS-7011-07-03 to be a material weakness.
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 performed tests of its compliance with certain provisions oflaws, regulations, contracts and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards.
We noted certain matters that we have reported to management of Mitchell County Board of Education in a separate letter dated August 6, 2008.
Mitchell County Board ofEducation's response to the findings identified in our audit is described in the accompanying Schedule ofManagement's Responses. We did not audit Mitchell County Board of Education's response and, accordingly, we express no opinion on it.
2007YB-40X

This report is intended solely for the information and use of the budget committee, management, members ofthe Mitchell County Board ofEducation, Federal awarding agencies and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties.
Respectfully submitted,
~l~~~,'c~ State Auditor
RWH:gp 2007YB-40X

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
August 6, 2008

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 CIRCULARA-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, 2007. 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 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.
2007SA-10

In our opinion, the Mitchell County Board ofEducation 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, 2007.
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 ofexpressing our opinion on compliance, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of the Mitchell County Board of Education's internal control over compliance.
A control deficiency in an entity's internal control over compliance exists when the design or operation ofa control does not allow management or employees, in the normal course ofperforming their assigned functions, to prevent or detect noncompliance with a type ofcompliance requirement of a Federal program on a timely basis. A significant deficiency is a control deficiency, or combination ofcontrol deficiencies, that adversely affects the entity's ability to administer a Federal program such that there is more than a remote likelihood that noncompliance with a type of compliance requirement of a Federal program that is more than inconsequential will not be prevented or detected by the entity's internal control.
A material weakness is a significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood that material noncompliance with a type of compliance requirement ofa Federal program will not be prevented or detected by the entity's internal control.
Our consideration ofthe internal control over compliance was for the limited purpose described in the first paragraph of this section and would not necessarily identify all deficiencies in internal control that might be significant deficiencies or material weaknesses. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses, as defined above.
This report is intended solely for the information and use of the budget committee, management, members ofthe Mitchell County Board ofEducation, Federal awarding agencies and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties.
Respectfully submitted,
bt~~~~ State Auditor
RWH:gp 2007SA-10

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, 2007

PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

FINDING CONTROL NUMBER AND STATUS

FS-7011-04-02 FS-7011-05-01 FS-7011-06-01 FS-7011-06-02

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

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

Beginning in fiscal year 2008, School Bookkeepers and Principals use a form for documenting receipts and approval ofpayments. Money is deposited 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, 2007

I SUMMARY OF AUDITOR'S RESULTS

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

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

Revenues/Receivables/Receipts Employee Compensation

Expenditures/Liabilities/Disbursements Financial Reporting

Of the significant deficiencies described above, Financial Reporting is considered to be a material weakness.

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

5. Type of Report Issued on Compliance for Major Programs The auditor's opinion on the 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 .5 IO(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: 84.027 Special Education - Grants to States 84.173 Special Education - Preschool Grants 84.367 Improving Teacher Quality State Grants

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

9. Low Risk Auditee The Mitchell County Board of Education qualified as a low risk auditee as defined by Section .530 ofOMB Circular A-133.

- 1-

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

II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Controls over School Activity Accounts Significant Deficiency Finding Control Number: FS-7011-07-01

Condition:

This is a repeat finding (FS-7011-06-01, FS-7011-05-01 and FS-7011-04-01) from the years ended June 30, 2006, 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 of twenty-five items, the following deficiencies were noted: 1) Ten receipts were not supported by adequate documentation, 2) seven receipts were not deposited in a timely manner, 3) two deposit slips were missing and timeliness could not be determined, and 4) one gate receipt was not approved and was not supported by adequate documentation.

Expenditures/Liabilities/Disbursements
Based upon a review of sixteen vouchers, the following deficiencies were noted: 1) Two vouchers were not supported by adequate documentation, 2) two vouchers did not contain supervisory approval, 3) two vouchers did not contain original invoices, 4) two vouchers contained travel payments in the amount of$305.41 that were not reported as employee travel on the CS-I, and 5) one voucher could not be located.

Cause:

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

-2 -

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

II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Controls over School Activity Accounts Significant Deficiency Finding Control Number: FS-7011-07-01

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.

EMPLOYEE COMPENSATION Inadequate Accounting Procedures Significant Deficiency Finding Control Number: FS-7011-07-02

Condition:

The School District did not have adequate controls in place to verify the accuracy of salary payments and to ensure that appropriate documentation was available that supported payments to employees.

Criteria:

The School District's management is responsible for designing and maintaining internal controls that ensure employee compensation payments are properly calculated, disbursed and documented.

Questioned Costs: NIA

Information:

Based on a review of twenty-eight employees' payroll records the following deficiencies were noted:
Two employees were underpaid $394 because the incorrect state pay rate was used during intercession.
Two employees were overpaid $4 as a result of not properly accounting for excess leave taken.
One employee was underpaid $279 because the Board did not correctly calculate overtime pay.
One employee was overpaid $8 as a result ofnot properly calculating field trip pay.
One employee was underpaid $250 for incorrect calculation of paraprofessional portion of salary.

-3-

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

II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

EMPLOYEE COMPENSATION Inadequate Accounting Procedures Significant Deficiency Finding Control Number: FS-7011-07-02

Cause:

These deficiencies were a result of management's failure to ensure that internal controls over the employee compensation process were properly established, implemented and functioning.

Effect:

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

Recommendation:

The School District should implement appropriate procedures to strengthen internal controls over processing employee compensation. Additionally, the School District should ensure that all payroll disbursements are based on approved contracts, salary scales and time worked. The School District should review this matter to determine if recovery or repayment of funds is needed.

FINANCIAL REPORTING Inadequate Controls over Financial Reporting Material Weakness Finding Control Number: FS-7011-07-03

Condition:

The School District did not have adequate controls in place over the financial statement reporting process.

Criteria:

Management is responsible for having adequate controls over the financial reporting process, which not only includes proper recording oftransactions to the general ledger, but extends to accurate preparation and presentation ofthe financial statements, including note disclosures.

Questioned Cost: NIA

Information:

The Governmental Accounting Standards Board (GASB) Statement 34 reporting model requires the presentation ofboth fund level and entity-wide level statements in the School District's financial statements. During the audit, several correcting entries were proposed by the auditor and accepted by the client to properly present the entity's financial statements.

-4 -

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

II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

FINANCIAL REPORTING Inadequate Controls over Financial Reporting Material Weakness Finding Control Number: FS-7011-07-03

Cause:

The School District did not implement an adequate system ofintemal control over the entity-wide financial statement reporting process.

Effect:

The School District does not have adequate controls in place to ensure that the financial statements were properly prepared in accordance with generally accepted accounting principles.

Recommendation:

The School District should develop and implement internal controls over the financial statement reporting process to ensure that activity is properly recorded in the general ledger; to verify that financial statements (including note disclosures) properly reflect activity reported in the general ledger; and to include a monitoring process to evaluate the accuracy of the financials presented for audit.

III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

No matters were reported.

-5-

SECTIONV MANAGEMENT'S RESPONSES

MITCHELL COUNTY BOARD OF EDUCATION SCHEDULE OF MANAGEMENT'S RESPONSES
YEAR ENDED JUNE 30, 2007
Finding Control Number: FS-7011-07-01
We concur with this finding. The Board will establish and monitor procedures at the school level to assure 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-7011-07-02
We concur with this finding. The Business Office will establish appropriate procedures to strengthen internal controls over processing employee compensation. All errors have been reviewed and corrected.
Finding Control Number: FS-7011-07-03
We concur with this finding. Business Office personnel are working with Georgia Department of Education Financial Review Staff and are receiving training in the preparation of the reports in the new format and the addition of PCGenesis functionalities to create governmental financial statements.
Contact Person: Luci Conine, Director of Business and Finance Phone: (229) 336-2100 E-mail: luci_conine@mitchell.k12.ga.us