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

MONROE COUNTY BOARD OF EDUCATION
FORSYTH, GEORGIA
ANNUAL FINANCIAL REPORT FOR THE FISCAL YEAR ENDED
JUNE 30,2010
(Including Independent Auditor's Reports)

MONROE COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS -

SECTION I

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

EXHIBITS

BASIC FINANCIAL STATEMENTS

DISTRICT-WIDE FINANCIAL STATEMENTS

A

STATEMENT OF NET ASSETS

B

STATEMENT OF ACTIVITIES

FUND FINANCIAL STATEMENTS

C

BALANCE SHEET

GOVERNMENTAL FUNDS

D

RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET

TO THE STATEMENT OF NET ASSETS

E

STATEMENT OF REVENUES, EXPENDITURESAND CHANGES

IN FUND BALANCES

GOVERNMENTAL FUNDS

F

RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT

OF REVENUES, EXPENDITURES AND CHANGES IN FUND

BALANCES TO THE STATEMENT OF ACTIVITIES

G

STATEMENT OF FIDUCIARY NET ASSETS

FIDUCIARY FUNDS

H

STATEMENT OF CHANGES IN FIDUCIARY NET ASSETS

FIDUCIARY FUNDS

I

NOTES TO THE BASIC FINANCIAL STATEMENTS

SCHEDULES

REQUIRED SUPPLEMENTARY INFORMATION

1 SCHEDULE OF REVENUES, EXPENDITURESAND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL GENERAL FUND

SUPPLEMENTARY INFORMATION

2 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS 3 SCHEDULE OF STATE REVENUE

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

MONROE 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

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

Honorable Nathan Deal, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the Monroe County Board of Education
INDEPENDENT AUDITOR'S COMBINED REPORT ON BASIC FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION - SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
Ladies and Gentlemen:
We have audited the accompanying financial statements of the governmental activities, each major fund, and the aggregate remaining fund information (Exhibits A through I) of the Monroe County Board of Education, as of and for the year ended June 30, 2010, which collectively comprise the Board's basic financial statements as listed in the table of contents. These financial statements are the responsibility of the Monroe County Board of Education's management. Our responsibility is to express opinions on these financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and the significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinions.
In our opinion, the financial statements referred to previously present fairly, in all material respects, the respective financial position of the governmental activities, each major fund, and the aggregate remaining fund information of the Monroe County Board of Education, as of June 30, 2010, and the respective changes in financial position thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America.
The Monroe County Board of Education has not presented Management's Discussion and Analysis that accounting principles generally accepted in the United States of America has determined is necessary to supplement, although not to be part of, the basic financial statements.

In accordance with Government Auditing Standards, we have also issued our report dated September 2, 2011, on our consideration of the Monroe County Board of Education's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standardsand should be considered in assessingthe results of our audit.
Accounting principles generally accepted in the United States of America require that the Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual, as presented on page 29, be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures, to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during the audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance.
Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Monroe County Board of Education's financial statements as a whole. The accompanying supplementary information consists of Schedules 2 through 5, which includes the Schedule of Expenditures of Federal Awards as required by U. S. Office of Management and Budget Circular A-133, Audits o f States, Local Governmen&, and Non-Proft Organizations, are presented for purposes of additional analysis and are not a required part of the financial statements. Such information is the responsibility of management and was derived from and relate directly to the underlying accounting and other records used to prepare the financial statements. The information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated, in all material respects, in relation to the financial statements as a whole.
A copy of this report has been filed as a permanent record in the office of the State Auditor and made available to the press of the State, as provided for by Official Code of Georgia Annotated section 50-6-24.
Respectfully submitted, .
sell W. Hinton, CPA, CGFM
State Auditor

MONROE COUNTY BOARD OF EDUCATION

MONROE COUNTY BOARD OF EDUCATION STATEMENT OF NET ASSETS JUNE 30,2010
ASSETS
Cash and Cash Equivalents l nvestments Accounts Recelvable. Net
Taxes State Government Federal Government Other Inventories Capital Assets, Non-Depreciable Capital Assets, Depreciable(Net of Accumulated Depreciation)
Total Assets
LIABILITIES
Accounts Payable Salaries and Benefits Payable Accrued Interest Payable Contracts 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
BUSReplacement Continuation of Federal Programs Debt Service Capital Projects Permanent Funds Unrestricted
Total Net Assets
Total Liabilities and Net Assets

EXHIBIT "A"
GOVERNMENTAL ACTIVITIES

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

(This page left intentionally blank)

MONROE COUNTY BOARD OF EDUCATION STATEMENT OF ACTIVITIES
FOR THE YEAR ENDEDJUNE 30,2010

EXPENSES
GOVERNMENTAL ACTIVITIES
Instruction Support Services
Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Busmess Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Operations of Non-Instructional Services Enterprise Operations Food Servlces Interest on Short-Term and Long-TermDebt
Total Governmental Activities
General Revenues Taxes Property Taxes For Maintenance and Operations For Debt Services Sales Taxes Special Purpose Local Option Sales Tax For Capital Projects Other Sales Tax Investment Earnings Miscellaneous
Total General Revenues
Change in Net Assets
Net Assets - Beginningof Year

PROGRAM REVENUES

OPERATING

CHARGES FOR

GRANTS AND

SERVICES

CONTRIBUTIONS

NET (EXPENSES) REVENUES
AND CHANGES IN NET ASSETS

Net Assets - End of Year

The notes to the basicfinanc~asl tatements are an integral part of this statement. -3-

MONROE COUNTY BOARD OF EDUCATION BALANCE SHEET
GOVERNMENTAL FUNDS JUNE 30.2010

ASSETS
Cash and Cash Equ~valents Investments Accounts Rece~vableN, et
Taxes State Government Federal Government Other l nventories
Total Assets
LIABILITIESAND FUND BALANCES
Accounts Payable Salaries and Benefits Payable Contracts Payable Deposits and Deferred Revenue
Total Liabilities
FUND BALANCES
Reserved for: Bus Replacement Continuation of Federal Programs Debt Service Capital Projects Permanent Funds
Unreserved Designated for Self-Insurance Undesignated Reported in: General Fund
Total Fund Balances
Total Liabilities and Fund Balances

GENERAL FUND

DISTRICTWIDE
CAPITAL PROJECTS
FUND

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

EXHIBIT "C"

DEBT SERVICE
FUND

NONMAJOR GOVERNMENTAL
FUND

TOTAL

(This page left intentionally blank)

MONROE COUNTY BOARD OF EDUCATION RECONCllATlON OF THE GOVERNMENTAL FUNDS BALANCE SHEET
TO THE STATEMENT OF NET ASSETS JUNE 30.2010
Total Fund Balances - Governmental Funds (Exhibit"C")
Amounts reported for Governmental Activ~tiesin the Statement of Net Assets are different because: Capital Assets used in GovernmentalActivities are not financial resources and therefore are not reported in the funds. These assets consist of: Land Land Improvements Buildings Equipment Accumulated Depreciation Total Ca~itaAl ssets Interest on Long-Term Debt is not accrued in the funds but rather is recognized as an ex~endlturewhen due. Accrued lnterest Payable Taxes that are not ava~lableto pay for current period expenditures are deferred in the funds. Long-TermLiabilities, 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 Installment Agreement Capital Leases Total LongTerm Liabilities
Net Assets of GovernmentalActivities (Exhlbit" A )
The notes to the basic financial statements are an integral part of this statement -7-

MONROE COUNN BOARD OF EDUCATION STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES
GOVERNMENTAL FUNDS YEAR ENDED JUNE 30.2010

REVENUES
Propem 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 Servlces Educational Media Services General Admin~stration School Administration Business Administration Maintenance and Operatlon of Plant Student Transportation Services Central Support Services Other Support Services Enterprise Operations Food Services Operatlon
Capital Outlay Debt Services
Principal Interest
Total Expenditures
Excess of Revenues over (under) Expenditures
OTHER FINANCING SOURCES (USES)
Proceeds of Installment Sales Agreement Transfers In Transfers Out
Total Other Financing Sources (Uses)
Net Change in Fund Balances
Fund Balances- Beginning
Fund Balances- Ending

GENERAL FUND

DISTRICTWIDE
CAPITAL PROJECTS
FUND

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

EXHIBIT "E"

DEBT SERVICE
FUND

NONMNOR GOVERNMENTAL
FUND

TOTAL

MONROE COUNTY BOARD OF EDUCATION RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT OF
REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES TO THE STATEMENT OF ACTIVITIES JUNE 30,2010
Total Net Change in Fund Balances - Governmental Funds (Exhibit "EM) Amounts reported for Governmental Activities in the Statement of Activities are different because:
Capital Outlays are reported as expenditures in Governmental Funds. However, in the Statement of Activities, the cost of Capital Assets is allocated over their estimated useful lives as depreciationexpense. In the current period, these amounts are: Cap~taOl utlay Depreciation Expense Excess of Capital Outlay over Depreciation Expense
Taxes reported in the Statement of Activities that do not providecurrent financial resourcesare not reported as revenues in the funds.
The net effect of various miscellaneous transactions involving capital assets (i.e., sales, trade-ins, donations, and disposals)is to decrease net assets.
Bond proceeds provide current financial resources to Governmental Funds; however, issuingdebt increases Long-Term Liabilitiesin the Statement of Net Assets. In the current period, proceeds were receivedfrom: Installment Sales Agreement
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 Paymentsto InstallmentSales Agreement Total Long-Term Debt Repayments
Some Items reported in the Statement of Activities do not requirethe use of current financial resources and therefore are not reported as expenditures In Governmental Funds. These activities consist of: Net Decrease In Accrued Interest
Change in Net Assets of Governmental Activ~ties(Exhlblt "B")
The notes to the basic financial statements are an integral part of this statement. -10-

MONROE COUNTY BOARD OF EDUCATION STATEMENT OF FIDUCIARY NET ASSETS
FIDUCIARY FUNDS JUNE 3 0 , 2 0 1 0

EXHIBIT "G"

ASSETS Cash and Cash Equivalents

PRIVATE PURPOSE TRUSTS

AGENCY FUNDS

LIABILITIES Funds Held for Others
NET ASSETS Held in Trust for Private Purposes
Total Liabilities and Net Assets

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

MONROE COUNTY BOARD OF EDUCATION STATEMENT OF CHANGES IN FIDUCIARY NET ASSETS
FIDUCIARY FUNDS YEAR ENDED JUNE 30,2010
ADDITIONS Investment Earnings Interest
DEDUCTIONS Adrnin~strativeExpenses Change in Net Assets
Net Assets - Beginn~ng
Net Assets - Ending

EXHIBIT " H "
PRIVATE PURPOSE TRUSTS

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

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

EXHIBIT "I"

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

MONROE COUNN BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30,2010

EXHIBIT "I"

District-wide Capital Projects Fund accounts for financial resources including Special Purpose Local Option Sales Tax (SPLOST), Bond Proceeds and proceeds from an installment sales agreement to be used for the acquisition, construction or renovation of major capital facilities.
Debt Service Fund accounts for taxes (property) legally restricted for the payment of general long-term 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 extended to provide scholarships for students who attend Mary Persons High School.
Agency funds account for assets held by the School District as an agent for various funds, governments or individuals.
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 of accounting. Under this method, revenues are recognized when measurable and available. The School District considers all revenues reported in the governmental funds to be available if they are collected within sixty days after year-end. Property taxes, sales taxes and interest are considered to be susceptible to accrual. Expenditures are recorded when the related fund liability is incurred, except for principal and interest on general long-term debt, which are recognized as expenditures to the extent they have matured. Capital asset acquisitions are reported as expenditures in governmental funds. Proceeds of general long-term liabilities and acquisitions under capital leases are reported as other financing sources.
The School District funds certain programs by a combination of specific cost-reimbursement grants, categorical grants, and general revenues. Thus, when program costs are incurred, there are both restricted and unrestricted net assets available to finance the program. It is the School District's policy to first apply grant resources to such programs, followed by cost-reimbursement grants, then general revenues.

MONROE COUNN BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30,2010

EXHIBIT "I"

The State of Georgia reimburses the School District for teachers' salaries and operating costs through the Quality Basic Education Formula Earnings program (QBE). Generally teachers are contracted for the school year (July 1- June 30) and paid over a twelve month contract period, generally September 1through August 31. In accordance with the respective rules and regulations of the QBE program, the State of Georgia reimburses the School District over the same twelve month period in which teachers are paid. At June 30, the amount of teachers' salaries incurred but not paid until July and August of the subsequent year are accrued. Since the State of Georgia recognizes its QBE liability for the July and August salaries at June 30, the School District recognizes the same QBE as a receivable and revenue, consistent with symmetrical recognition.
NEW ACCOUNTING PRONOUNCEMENTS
In fiscal year 2010, the School District adopted the Governmental Accounting and Standards Board (GASB) Statement No. 5 1, Accounting and Reporting for Intangible Assets. The provisions of this Statement generally require retroactive reportingfor intangible assets acquired after June 30, 1980, with the exception of those intangible assets that have indefinite useful lives and those that are considered internally generated.
In addition, the School District adopted GASB Statement No. 53, Accounting and Financial Reporting for Derivative Instruments. The provisions of this Statement impacts disclosure regarding derivative instruments entered into by the state and local governments. Derivative disclosures, if any, will be identified in Note 3.
CASH AND CASH EQUIVALENTS
Composition of Deposits Cash and cash equivalents consist of cash on hand, demand deposits and short-term investments with original maturities of three months or less from the date of acquisition in authorized financial institutions. Official Code of Georgia Annotated Section 45-8-14 authorizes the School District to deposit its funds in one or more solvent banks, insured Federal savings and loan associations or insured chartered building and loan associations.
l NVESTM ENTS
Composition of Investments lnvestments made by the School District in nonparticipating interest-earning contracts (such as certificates of deposit) and repurchase agreements are reported at cost. Participating interestearning contracts and money market investments with a maturity at purchase of one year or less are reported at amortized cost. Both participating interest-earning contracts and money market investments with a maturity at purchase greater than one year are reported at fair value. The Official Code of Georgia Annotated Section 36-83-4 authorizes the School District to invest its funds. In selecting among options for investment or among institutional bids for deposits, the highest rate of return shall be the objective, given equivalent conditions of safety and liquidity. Funds may be invested in the following:
(1) Obligations issued by the State of Georgia or by other states,
( 2 ) Obligations issued by the United States government,
(3) Obligations fully insured or guaranteed by the United States government or a United States government agency,

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

EXHIBIT "I"

(4) Obligations of any corporation of the United States government, (5) Prime banker's acceptances,

(6) The Georgia Fund 1administered by the State of Georgia, Office of Treasury and Fiscal Services,

(7) Repurchase agreements, and

(8) Obligations of other political subdivisions of the State of Georgia.
The School District does not have a formal policy regarding investment policies that address credit risks, custodial credit risks, concentration of credit risks, interest rate risks or foreign currency risks.

RECEIVABLES

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

PROPERTY TAXES

The Monroe County Board of Commissioners fixed the property tax levy for the 2009 tax digest year (calendar year) on September 25, 2009 (levy date). Taxes were due on December 28, 2009 (lien date). Taxes collected within the current fiscal year or within 6 0 days after year-end on the 2009 tax digest are reported as revenue in the governmental funds for fiscal year 2010. The Monroe County Tax Commissioner bills and collects the property taxes for the School District, withholds 2.5% of taxes collected as a fee for tax collection and remits the balance of taxes collected to the School District. Property tax revenues, at the fund reporting level, during the fiscal year ended June 30, 2010, for maintenance and operations amounted to $18,798,565.98 and for school bonds amounted to $31.00.

The tax millage rate levied for the 2009 tax year (calendar year) for the Monroe County Board of Education was as follows (a mill equals $1per thousand dollars of assessed value):

School Operations SALES TAXES

13.95 mills

Special Purpose Local Option Sales Tax, at the fund reporting level, during the year amounted to $5,078,928.08 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.

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

EXHIBIT "I"

INVENTORIES

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

CAPITAL ASSETS

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

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

Capitalization Policy

Estimated Useful Life

Land Land Improvements Buildings and Improvements Equipment, Excluding Vehicles
and Kitchen Equipment Vehicles Kitchen Equipment

All All All
$ 10,000.00 All
$ 5,000.00

N/A
15 years 20 to 40 years
5 to 15 years 5 to 14years 4 to 12 years

Depreciation is used to allocate the actual or estimated historical cost of all capital assets over estimated useful lives.
GENERAL OBLIGATION BONDS
The School District issues general obligation bonds to provide funds for the acquisition and construction of major capital facilities. In the District-wide and fund financial statements, the School District recognizes bond premiums and discounts, as well as bond issuance costs during the fiscal year bonds are issued. Premiums received on debt issuances are reported as other financing

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

EXHIBIT "I"

sources while discounts on debt issuances are reported as other financing uses. Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as debt service expenditures. To conform to generally accepted accounting principles, bond premiums and discounts, as well as bond issuance costs should be amortized over the life of the bonds on the District-wide statements. The effect of this deviation is deemed to be immaterial to the fair presentation of the basic financial statements. General obligation bonds are direct obligations and pledge the full faith and credit of the government. The outstanding amount of these bonds is recorded in the Statement of Net Assets.
NET ASSETS
The School District's net assets in the District-wide Statements are classified as follows:
Invested in capital assets, net of related debt - This represents the School District's total investment in capital assets, net of outstanding debt obligations related to those capital assets. To the extent debt has been incurred but not yet expended for capital assets, such amounts are not included as a component of invested in capital assets, net of related debt.
Restricted net assets-These represent resources for which the School District is legally or contractually obligated to spend resources for bus replacement, continuation of Federal programs, debt service and capital projects in accordance with restrictions imposed by external third parties.
Unrestricted net assets - Unrestricted net assets represent resources derived from property taxes, sales taxes, 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.
FUND BALANCES
Reserved Reserves represent those portions of fund balance equity that are legally segregated for a specific future use.
Unreserved - Designated Designatedfund balances represent tentative plans for future use of financial resources.
Note 3: DEPOSITSAND INVESTMENTS
COLLATERALIZATION OF DEPOSITS
Official Code of Georgia Annotated (O.C.G.A.) Section 45-8-12 provides that there shall not be on deposit at any time in any depository for a time longer than ten days a sum of money which has not been secured by surety bond, by guarantee of insurance, or by collateral. The aggregate of the face value of such surety bond and the market value of securities pledged shall be equal to not less than 110 percent of the public funds being secured after the deduction of the amount of deposit insurance. If a depository elects the pooled method (O.C.G.A. Section 45-8-13.1) the aggregate of the market value of the securities pledged to secure a pool of public funds shall be not less than 110 percent of the daily pool balance.

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

EXHIBIT "I"

Acceptable security for deposits consists of any one of or any combination of the following:

(1) Surety bond signed by a surety company duly qualified and authorized to transact business within the State of Georgia,

(2) lnsurance on accounts provided by the Federal Deposit lnsurance Corporation,
(3) Bonds, bills, notes, certificates of indebtedness or other direct obligations of the United States or of the State of Georgia,

(4) Bonds, bills, notes, certificates of indebtedness or other obligations of the counties or municipalities of the State of Georgia,

( 5 ) Bonds of any public authority created by the laws of the State of Georgia, providing that the statute that created the authority authorized the use of the bonds for this purpose,

(6) Industrial revenue bonds and bonds of development authorities created by the laws of the State of Georgia, and

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

CATEGORIZATION OF DEPOSITS

Custodial credit risk is the risk that in the event of a bank failure, the School District's deposits may not be returned to it. The School District does not have a deposit policy for custodial credit risk. At June 30, 2010, the bank balances were $2,618,136.26. The amounts exposed to custodial credit risk are classified into three categories as follows:

Category 1Category 2 -
Category 3 -

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

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

Custodial Credit Risk Category

Bank Balance

Total

$ 1,875,306.15

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

EXHIBIT "I"

CATEGORIZATION OF INVESTMENTS
At June 30, 2010, the carrying value of the School District's total investments was $7,955,785.79, which is materially the same as fair value. This investment consisted entirely of funds invested in the Georgia Fund 1,formerly referred to as LGIP, administered by the State of Georgia, Office of Treasury and Fiscal Services which are not required to be categorized since the School District did not own any specific identifiable securities in the pool. The investment policy of the State of Georgia, Office of Treasury and Fiscal Services for the Georgia Fund 1(Primary Liquidity Portfolio) does not provide for investment in derivatives or similar investments. Additional information on the Georgia
Fund 1is disclosed in the State of Gemya Comprehensive Annual Financial Report. This audit can
be obtained from the Georgia Department of Audits and Accounts at htt~://www.audits.aa.aov/SGD/cafr.html.
The Primary Liquidity Portfolio consists of Georgia Fund 1which 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 1may not exceed 6 0 days. The weighted average maturity for Georgia Fund 1on June 30,2010, was 46 days.
Note 4: NON-MONETARYTRANSACTIONS
The School District receives food commodities from the United States Department of Agriculture (USDA)for school breakfast and lunch programs. These commodities are recorded at their Federally
assigned value. See Note 2 - Inventories
Note 5: CAPITAL ASSETS
The following is a summary of changes in the Capital Assets during the fiscal year:

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

Balances July 1, 2009

Increases

Decreases

Balances June 30,2010

$

1.802.474.00 $

12,970,278.00

516.888.00 $

$ 12,970,278.00

2,319,362.00 0.00

Total Capital Assets. Not B e ~ n gDepreciated $ 14,772,752.00 $

516,888.00 $ 12,970,278.00 $

2,319,362.00

Capital Assets, Being Depreciated: Bulldings and Improvements Machinery and Equipment Land Improvements

$ 45,488,349.06 $ 17,182,653.44 $

7,367,368.33

892,616.26

3,534,349.93

234,920.00 $

62,436,082.50 8,259,984.59 3,534,349.93

Less: Accumulated Depreciation: Buildings and Improvements Machinery and Equipment Land lmprovements

Total Capital Assets, Being Depreciated, Net $
Governmental Activity Capital Assets - Net $

36,301,583.37 $ 51,074,335.37 $

15,873,323.65 $ 16,390,211.65 $

102,780.76 $ 13,073,058.76 $

52,072,126.26 54,391,488.26

MONROE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30,2010
Current year depreciation expense by function is as follows:
Instruction Support Services
Student Transportation Services Food Services

EXHIBIT "I"

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

Transfer to

Transfers From

District-w ide

General

Capital

Fund

Proiects

Debt Service Fund

Transfers are used to move property tax revenues collected by the General Fund and Special Purpose Local Option Sales Tax (SPLOST) revenue collected by the District-wide Capital Projects Fund to the Debt Service Fund as needed for repayment of bond principal and interest.
Note 7: RISK MANAGEMENT
The School District is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors or omissions; job related illness or injuries to employees; acts of God and unemployment compensation.
The School District has obtained commercial insurance for risk of loss associated with assets. The School District has neither significantly reduced coverage for this risk nor incurred losses (settlements) which exceeded the School District's insurance coverage in any of the past three years.
The School District participates in the Georgia School Boards Association Risk and Insurance Management System, a public entity risk pool organized on July 1,1994, to develop and administer a plan to reduce risk of loss on account of general liability, motor vehicle liability, or property damage, including safety engineering and other loss prevention and control techniques, and to administer one or more groups of self-insurance funds, including the processing and defense of claims brought against members of the system. The School District pays an annual premium to the system for its general insurance coverage. Additional coverage is provided through agreements by the system with other companies according to their specialty for property, boiler and machinery (including coverage for flood and earthquake), general liability (including coverage for sexual harassment, molestation and abuse), errors and omissions, crime and automobile risks. Payment of excess insurance for the system varies by line of coverage.
The School District is self-insured with regard to unemployment compensation claims. The School District accounts for claims within the General Fund with expenses/expenditures and liability being reported when it is probable that a loss has occurred, and the amount of that loss can be reasonably estimated.

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

EXHIBIT "I"

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

Claims and

Beginning of Year

Changes in

Claims

End of Year

Liability

Estimates

Paid

Liability

The School District participates in the Georgia Education Workers' Compensation Trust, a public entity risk pool organized on December 1,1991, to develop, implement and administer a program of workers' compensation self-insurance for its member organizations. The School District pays an annual premium to the Trust for its general insurance coverage. Additional insurance coverage is provided through an agreement by the Trust with the Midwest Employers Casualty Company to provide coverage for potential losses sustained by the Trust in excess of $700,000.00 loss per occurrence, up to the statutory limit. Employers' Liability insurance coverage is also provided by Midwest Employers Casualty Company to provide coverage for potential losses sustained by the Fund in excess of $700,000.00 loss per occurrence, up to $1,000,000.00, with an aggregate limit of $2,000,000.00.

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

Position Covered

Amount

Superintendent All Employees

Note 8: SHORT-TERM DEBT

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

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

Tax Anticipation Notes

Beginning Balance

$

0.00 $

Issued
4,000,000.00 $

Redeemed
4.000.000.00 $

End~ng Balance
0.00

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

EXHIBIT "I"

Note 9: LONG-TERM DEBT

CAPITAL LEASES

The Monroe County Board of Education entered into a lease agreement for purchase of computer equipment. This lease agreement qualifies as a capital lease for accounting purposes, and, therefore, has been recorded at the present value of the future minimum lease payments as of the date of its inception.

INSTALLMENT SALES AGREEMENT

The Monroe County Board of Education entered into an agreement dated October 27, 2009, with the Georgia School Boards Association, Inc. for the acquisition of certain land, school buildings, and facilities of Monroe Academy, Inc. Under the terms of the agreement, the School District will make monthly payments through October 27, 2013.

GENERAL OBLIGATION DEBT OUTSTANDING

General Obligation Bonds currently outstanding are as follows:

Purpose

Interest Rates

Amount

General Government - Series 2007 General Government - Series 2008

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

Balance July 1, 2009

Additions

Governmental Funds

Balance

Deductions

June 30,2010

Due Within One Year

G. 0. Bonds Capital Leases Installment Sales Agreement

$ 16,700,000.00 820,145.75 0.00 $

2,470,000.00

471,013.47

1,998,986.53

586,172.27

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

EXHIBIT "I"

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

Capital Leases

Installment Sales Agreement

Principal

Interest

Principal

Interest

Fiscal Year Ended June 30:

Total Principal and Interest Fiscal Year Ended June 30:

$

615.901.90 $

59,098.10 $

1,998,986.53$

98,029.03

General Obligation Debt

Principal

Interest

Total Principal and lnterest
Note 10: ON-BEHALF PAYMENTS
The School District has recognized revenues and costs in the amount of $102,774.53 for health insurance and retirement contributions paid on the School District's behalf by the following State Agencies.
Georgia Department of Education Paid to the Georgia Department of Community Health For Health Insurance of Non-Certified Personnel In the amount of $65,571.86
Paid to the Teachers Retirement System of Georgia For Teachers Retirement System (TRS) Employer's Cost In the amount of $19,149.66
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 $18,053.01

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

EXHIBIT "I"

Note 11: SIGNIFICANT CONTlNGENT LIABILITIES

Amounts received or receivable principally from the Federal government are subject to audit and review by grantor agencies. This could result in requests for reimbursement to the grantor agency for any costs which are disallowed under grant terms. The School District believes that such disallowances, if any, will be immaterial to its overall financial position.

The School District is a defendant in various legal proceedings pertaining to matters incidental to the performance of routine School District operations. The ultimate disposition of these proceedings is not presently determinable, but is not believed to be material to the basic financial statements.

Note 12: POST-EMPLOYMENT BENEFITS

GEORGIA SCHOOL PERSONNEL EMPLOYEES POST-EMPLOYMENT HEALTH BENEFIT FUND

Plan Description. The Georgia School Personnel Post-Employment Health Benefit Fund (School OPEB Fund) is a cost-sharing multiple-employer defined benefit post-employment healthcare plan that covers eligible former employees of public school systems, libraries and regional educational service agencies. The School OPEB Fund provides health insurance benefits to eligible former employees and their qualified beneficiaries through the State Employees Health Insurance Plan administered by the Department of Community Health. The Official Code of Georgia Annotated (OCGA) assigns the authority to establish and amend the benefit provisions of the group health plans, including benefits for retirees, to the Board of Community Health (Board).

Funding Policy. The contribution requirements of plan members and participating employers are established by the Board in accordance with the current Appropriations Act and may be amended by the Board. Contributions of plan members or beneficiaries receiving benefits vary based on plan election, dependent coverage, and Medicare eligibility and election. On average, plan members pay approximately 25 percent of the cost of the health insurance coverage.

Participating employers are statutorily required to contribute in accordance with the employer contribution rates established by the Board. The contribution rates are established to fund all benefits due under the health insurance plans for both active and retired employees based on projected "pay-as-you-go" financing requirements. Contributions are not based on the actuarially calculated annual required contribution (ARC) which represents a level of funding that, if paid on an ongoing basis, is projected to cover normal cost each year and amortize any unfunded actuarial liabilities (or funding excess) over a period not to exceed thirty years.

The combined active and retiree contribution rates established by the Board for employers participating in the School OPEB Fund were as follows for the fiscal year ended June 30, 2010:
For certificated teachers, librarians and regional educational service agencies:

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

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

For non-certificated school personnel:

July 2009 -June 2010

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

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

EXHIBIT "I"

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

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

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

as follows:

Percentage

Required

Fiscal Year

Contributed

Contribution

Note 13: RETIREMENT PLANS
TEACHERS RETlREMENT SYSTEM OF GEORGIA (TRS)
Plan Description. The TRS is a cost-sharing multiple-employer defined benefit plan created in 1943 by an act of the Georgia General Assembly to provide retirement benefits for qualifying employees in educational service. A Board of Trustees comprised of active and retired members and ex-officio State employees is ultimately responsible for the administration of TRS. The Teachers Retirement System of Georgia issues a separate stand alone financial audit report and a copy can be obtained from the Georgia Department of Audits and Accounts.
On October 25, 1996, the Board created the Supplemental Retirement Benefits Plan of the Georgia Teachers Retirement System (SRBP-TRS). SRBP-TRS was established as a qualified excess benefit plan in accordance with Section 415 of the Internal Revenue Code (IRC) as a portion of TRS. The purpose of SRBP-TRS is to provide retirement benefits to employees covered by TRS whose benefits are otherwise limited by IRC Section 415. Beginning July 1,1997, all members and retired former members in TRS are eligible to participate in the SRBP-TRS whenever their benefits under TRS exceed the IRC Section 415 imposed limitation on benefits.
TRS provides service retirement, disability retirement, and survivor's benefits. The benefit structure of TRS is defined and may be amended by State statute. A member is eligible for normal service retirement after 3 0 years of creditable service, regardless of age, or after 1 0 years of service and attainment of age 60. A member is eligible for early retirement after 2 5 years of creditable service.
Normal retirement (pension) benefits paid to members are equal to 2% of the average of the member's two highest paid consecutive years of service, multiplied by the number of years of creditable service up to 4 0 years. Early retirement benefits are reduced by the lesser of one-twelfth of 7% for each month the member is below age 60 or by 7% for each year or fraction thereof by which the member has less than 3 0 years of service. It is also assumed that certain cost-of-living adjustments, based on the Consumer Price Index, will be made in future years. Retirement benefits are payable monthly for life. A member may elect to receive a partial lump-sum distribution in addition to a reduced monthly retirement benefit. Death, disability and spousal benefits are also available.

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

EXHIBIT "I"

Funding Policy. TRS is funded by member and employer contributions as adopted and amended by the Board of Trustees. Members become fully vested after 1 0 years of service. If a member terminates with less than 10 years of service, no vesting of employer contributions occurs, but the member's contributions may be refunded with interest. Member contributions are limited by State law to not less than 5% or more than 6% of a member's earnable compensation. Member contributions as adopted by the Board of Trustees for the fiscal year ended June 30, 2010, were 5.25% of annual salary. The member contribution rate will increase to 5.53% effective July 1,2010. Employer contributions required for fiscal year 2010 were 9.74%of annual salary as required by the June 30, 2007, actuarial valuation. The employer contribution rate will increase to 10.28% effective July 1,2010.

Employer contributions for the current fiscal year and the preceding two fiscal years are as follows:

Fiscal Year

Percentage Contributed

Required Contribution

(This page left intentionally blank)

MONROE COUNTY BOARD OF EDUCATION GENERAL FUND
SCHEDULE OF REVENUES. EXPENDITURES AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL
YEAR ENDED JUNE 30,2010

REVENUES
Property Taxes Sales Taxes State Funds Federal Funds Charges for Servlces Investment Earnings M~scellaneous
Total Revenues
EXPENDITURES
Current lnstruct~on support services Pup11Serv~ces Improvement of lnstruct~onaSl ervlces Educat~onaMl ed~aServlces General Admlnlstratlon School Admlnlstratlon Business Adm~n~strat~on Ma~ntenanceand Operatlon of Plant Student Transportabon Serv~ces Central Support Servlces Other Support Services Food Serv~cesOperatlon Enterpr~seOperat~ons
Cap~taOl utlay
Total Expenditures
Excess of Revenuesover (under) Expenditures
OTHER FINANCING SOURCES (USES)
Other Sources Other Uses
Total Other Financ~ngSources (Uses)
Net Change in Fund Balances
Fund Balances - Beginning
Adjustments

NONAPPROPRIATED BUDGETS

ORIGINAL (1)

FINAL (1)

Fund Balances - Endlng
Notes to the Schedule of Revenues. Ex~endlturesand Changes in Fund Balances Budget and A c W l (1) Original and Final Budget amounts do not include budgeted revenues or expenditures of the varlous prlnc~paal ccounts 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 bas~cflnanclal statements.

ACTUAL AMOUNTS

MONROE COUNTY BOARD OF EDUCATION SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
YEAR ENDED JUNE 30,2010

SCHEDULE "2"

FUNDING AGENCY PROGRAM/GRANT
Agriculture, U. S. Department of Child Nutrition Cluster Pass-Through From Georgia Department of Education Food Services School Breakfast Program National School Lunch Program
Total Child Nutrition Cluster
Other Programs Pass-Through From Georg~aDepartment of Education Food Sewices ARRA - Child Nutrition Discret~onaryGrants Limited Availability
Total U. S. Department of Agriculture
Education, U. S. Department of Education Technology State Grants Cluster Pass-Through From Georgia Department of Education Education Technology State Grants
Special Education Cluster Pass-ThroughFrom Georgia Department of Education Special Education
- ARRA Grants t o States
ARRA - Preschool Grants Grants to States Preschool Grants
Total Special Education Cluster
State Fiscal Stabil~zationFund Cluster Pass-ThroughFrom Georgia Department of Educatron ARRA Education State Grants
Title I, PanA Cluster Pass-ThroughFrom Georgia Department of Education ARRA- Title I Grants to Local Educational Agencies Title I Grants to Local Educational Agencies
Total Title I, PanA Cluster
Other Programs Pass-ThroughFrom Georgia Department of Education Career and Technical Education - Basic Grants to States ImprovingTeacher Quality State Grants Twenty-F~rstCentury Community Learning Centers
Total Other Programs
Total U. S. Department of Education
Total Federal Financial Assistance
N/A = Not Available

CFDA NUMBER

PASSTHROUGH
ENTITY ID
NUMBER

EXPENDITURES IN PERIOD

MONROE COUNTY BOARD OF EDUCATION SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
YEAR ENDED JUNE 30,2010

SCHEDULE "2"

Notesto the Schedule of Ex~endituresof Federal Awards
(1) Includesthe Federally assigned value of donated commodities for the Food Donation Program in the amount of $92.258.90.
(2) Expenditures for the funds earned on the School Breakfast Program ($321.509.76) were not maintained separately and are included in the 2 0 1 0 National School Lunch Program.
Major Programs are identified by an asterisk (*) in front of the CFDA number.
The School District did not provide Federal Assistance to any Subrecipient.
The accompanyingschedule of expenditures of Federal awards includes the Federal grant activity of the Monroe County Board of Education and is presented on the modified accrual bass of accounting wh~chis the basis of accounting used in the presentation of the fund financial statements.

See notes to the basic financial stZmnentS.

MONROE COUNTY BOARD OF EDUCATION SCHEDULE OF STATE REVENUE YEAR ENDED JUNE 30,2010
GRANTS Bright From the Start: Georgia Department of Early Care and Learning Pre-Kindergarten Program
Education, Georg~aDepartment of Quality Baslc Education Direct Instructional Cost Kindergarten Program Kindergarten Program - Early Intervention Program Primary Grades (1-3) Program Primary Grades - Early Intervention (1-3) Program Upper Elementary Grades (4-5) Program
Upper Elementary Grades - Early Intervention (4-5) Program
Middle School (6-8) Program High School General Education (9-12) Program Vocational Laboratory (9-12) Program Students with Disabilities
Gifted Student - Category VI
Remedial 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 Sparsity Nurs~ngServices Vocational Supervisors Food Services Vocational Education Amended Formula Adjustment Other State Programs Alternative Program Georgia Special Needs Scholarship Fund Health Insurance High School Graduation Coach National Teacher Certification Preschool Handicapped Program Teachers' Retirement Virtual Schools Grant
Human Resources, Georgia Department of Family Connection
Off~ceof Treasury and Fiscal Services Public School Employees Retirement
See notes to the basic financial statements.

SCHEDULE "3"
GOVERNMENTAL FUND TYPE GENERAL FUND

MONROE COUNTY BOARD OF EDUCATION SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS
YEAR ENDEDJUNE 30.2010

SCHEDULE "4"

PROJECT

ORIGINAL ESTIMATED
COST (1)

CURRENT ESTIMATED COSTS (2)

AMOUNT EXPENDED IN CURRENT YEAR (3)

AMOUNT EXPENDED IN PRIOR YEARS (3)

PROJECT STATUS

Adding to, renovating. improving and equipping

existing school buildings, grounds and facilities,

includingathletic, band and fine arts facil~ties:

acquiringand installing certain safety, technology

and transportation equipment and improvements,

includingschool buses and other vehicles;

purchasing band instruments, textbooks and library

books: acquiring land for and constructingfuture

schools, and acquiring any property necessary or

desirable therefore, both real and personal.

$

23,334,000.00 $

23,334.000.00 $

1,745,171.39 $

21,220,452.06

Ongoing

Constructing and equipping new schools and facilities, including one new elementary school, constructingand equipping new fine arts and athlet~cfacilities ~ncludinganew performingarts center, adding to, renovating, repairing. improving, and equipping existingschool buildings and school system facilities, acquiring miscellaneous new equipment, fixtures and furnishings for the school system, including technology equipment and safety and security equipment, acquiring school buses, vehicles, and transportation and maintenance equipment, acquiring band instruments and equ~pmentt,extbooks and library books for the school system, acqulrlng land for future schools and facilities, payingany general obligation debt of the School District issued in conjunction with the continuation of such sales and use tax, and paying expenses incident to accomplishing the foregoing.

27,800,000.00

27,800,000.00

3.711.323.82

13,389,332.77 Ongoing

(1)The School District's original cost estimate as specified ln the resolution callingfor the imposition of the Local Optlon 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 Monroe County approved the imposition of a 1%sales tax to fund the above projects and retlre associated debt Amounts expended for these projects may include sales tax proceeds, state, local property taxes and/or other funds over the life of the projects.

See notes to the basic financial statements.

(This page left intentionally blank)

MONROE COUNTY BOARD OF EDUCATION GENERAL FUND - QUALIW BASIC EDUCATION PROGRAM (QBE)
ALLOTMENTS AND EXPENDITURES - BY PROGRAM YEAR ENDED JUNE30.2010

SCHEDULE " 5

DESCRIPTION
D~recltnstructlonal Programs Kindergarten Program Kindergarten Program-Early lntervention Program Prlmary Grades (1-3) Program Primary Grades-Early Intetvention (1-3) Program Upper Elementary Grades (4-5) Program Upper Elementary Grades-Early lntervention (4-5) Program Mlddle School (6-8) Program Hi@ School General Educabon ( 9 1 2 ) Program Vocational Laboratory (9-12) Program Students wlth Dlsab~lities Category II Gifted Student - Category VI Remedlal Education Program Alternative Educat~onProgram Engllsh Speakers of Other Languages (ESOL)
TOTAL DIRECT INSTRUCTIONALPROGRAMS
Medla Center Program Staff and Professional Development

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

ELIGIBLE QBE PROGRAM COSTS

SALARIES

OPERATIONS

TOTAL

TOTAL QBE FORMULA FUNDS

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

See notes to the basic financial statements.

SECTION II COMPLIANCE AND INTERNAL CONTROL REPORTS

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

DEPARTMENOTF AUDITSAND ACCOUNTS
270 Washington Street, S.W., Suite 1-1 56 Atlanta, Georgia 30334-8400
September 2 , 2 0 1 1

Honorable Nathan Deal, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the Monroe County Board of Education
INDEPENDENT AUDITOR'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENTAUDITING STANDARDS
Ladies and Gentlemen:
We have audited the financial statements of the governmental activities, each major fund, and the aggregate remaining fund information of Monroe County Board of Education as of and for the year ended June 30, 2010, which collectively comprise Monroe County Board of Education's basic financial statements and have issued our report thereon dated September 2, 2011. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in GovernmentAuditing Standards, issued by the Comptroller General of the United States.
Internal Control Over Financial Re~orting
In planning and performing our audit, we considered Monroe County Board of Education's internal control over financial reporting as a basis for designing our auditing procedures for the purpose of expressingour opinions on the financial statements, but not for the purpose of expressingan opinion on the effectiveness of the Monroe County Board of Education's internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness of the Monroe County Board of Education's internal control over financial reporting.
Our consideration of internal control over financial reporting was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over financial reporting that might be deficiencies, significant deficiencies, or material weaknesses and therefore, there can be no assurances that all deficiencies, significant deficiencies or material weaknesses have been identified. However, as described in the accompanying Schedule of Findings and Questioned Costs, we identified certain deficiencies in internal control over financial reporting that we consider to be material weaknesses and other deficiencies that we consider to be significant deficiencies.
A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect and correct misstatements on a timely basis. A material weakness is a deficiency, or

combination of deficiencies, in internal control such that there is a reasonable possibility that a material misstatement of the entity's financial statements will not be prevented, or detected and corrected on a timely basis. We consider item FS-7021-10-02 to be a material weakness.

A s@nifiwntdeficiencyis a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. We consider items FS-7021-10-01, FS-7021-10-03, FS-7021-10-04, FS-7021-10-05 and FS-7021-10-06 in the accompanying Schedule of Findings and Questioned Costs to be significant deficiencies in internal control over financial reporting.

Complianceand Other Matters

As part of obtaining reasonable assurance about whether Monroe County Board of Education's
financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards.

We noted certain matters that we have reported to management of Monroe County Board of Education in a separate letter dated September 2, 2011.

Monroe County Board of Education's response to the findings identified in our audit is described in the accompanying Schedule of Management's Responses. We did not audit Monroe County Board of Education's response and, accordingly, we express no opinion on it.

This report is intended solely for the information and use of management, members of the Monroe County Board of Education, others within the entity, Federal awarding agencies and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties.

Respectfully submitted,

.

~ u s $ e lWl . Hinton, CPA, CGFM State Auditor

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

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

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

We have audited Monroe County Board of Education's compliance with the types of compliance requirements described in the OMB Circular A-133 Compliance Supplement that could have a direct and material effect on each of its major Federal programs for the year ended June 30, 2010. Monroe County Board of Education's major Federal programs are identified in the Summary of Auditor's Results section of the accompanying Schedule of Findings and Questioned Costs. Compliance with the requirements of laws, regulations, contracts, and grants applicable to each of its major Federal programs is the responsibility of Monroe County Board of Education's management. Our responsibility is to express an opinion on Monroe County Board of Education's compliance based on our audit.
We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditng Standards, issued by the Comptroller General of the United States; and OMB Circular A-133, Audits o f States, Local Governments, and Nun-Profit Organizations. Those standards and OMB Circular A-133 require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major Federal program occurred. An audit includes examining, on a test basis, evidence about the Monroe County Board of Education's compliance with those requirements and petforming 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 Monroe County Board of Education's compliance with those requirements.
In our opinion, the Monroe County Board of Education complied, in all material respects, with the compliance requirements referred to above that could have a direct and material effect on each of its major Federal programs for the year ended June 30, 2010.

Internal Control Over Compliance
Management of Monroe County Board of Education is responsible for establishing and maintaining effective internal control over compliance with the requirements of laws, regulations, contracts, and grants applicable to Federal programs. In planning and performing our audit, we considered Monroe County Board of Education's internal control over compliance with the requirements that could have a direct and material effect on a major Federal program to determine the auditing procedures for the purpose of expressing our opinion on compliance and to test and report on internal control over compliance in accordance with OMB Circular A-133, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of the Monroe County Board of Education's internal control over compliance.
A deficienncy in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a Federal program on a timely basis. A material weakness in internal control over compliance is a deficiency, or combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a Federal program will not be prevented, or detected and corrected, on a timely basis.
Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over compliance that might be deficiencies, 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 management, members of the Monroe County Board of Education, others within the entity, Federal awarding agencies and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties.
Respectfully submitted,
~ u % e l lW. Hinton, CPA, CGFM State Auditor

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

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

PRIOR YEAR FINANCIALSTATEMENT FINDINGS AND OUESTIONED COSTS

FINDING CONTROL NUMBER AND STATUS

FS-7021-08-01 FS-7021-08-02 FS-7021-08-03 FS-7021-09-01 FS-7021-09-02 FS-7021-09-03

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

CORRECTIVE ACTION/RESPONSES

CASH AND CASH EQUIVALENTS lnadequate Separation of Duties Finding Control Number: FS-7021-09-01

Monroe County Board of Education has instituted controls to insure that bank reconciliations are reviewed and approved by someone independent of the general ledger function. Additionally, Monroe County Board of Education has created a new accounting handbook to be fully implemented in fiscal year 2012. These accounting handbooks were distributed to all of the school bookkeepers and principals at the beginning of fiscal year 2 0 1 1for review and time to request clarification/changes/additions to the handbook.

CAPITAL ASSETS Failure to Adequately Maintain Capital Assets Finding Control Number: FS-7021-09-02

Monroe County Board of Education has committed significant time and resources to this issue, including purchasing and implementing a computerized fixed assets inventory system which interfaces with our financial software. Much progress was made in fiscal year 2010 on this issue, and we believe this issue will resolve in fiscal year 2011. This finding is partially resolved for fiscal year 2010.

FINANCIAL REPORTING lnadequate Internal Controls over Financial Reporting Finding Control Number: FS-7021-09-03

Monroe County Board of Education has made significant progress in the preparation of its Financial Statements, including the training of the business and accounting staff, and the establishment of a contract with a consultant to assist with Financials. We believe this issue is resolved.

PRIOR YEAR FEDERAL AWARD FINDINGS AND OUESTIONED COSTS

No matters were reported.

SECTION IV FINDINGS AND QUESTIONED COSTS

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

I SUMMARY OF AUDITOR'S RESULTS

Financial Statements

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

Unqualified

lnternal control over financial reporting:

Material weakness identified?

Yes

Significant deficiencies identified?

Yes

Noncompliance material to financial statements noted:

Federal Awards

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

N 0 None Reported

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

Unqualified

Any audit findings disclosed that are required to be reported in accordance with OMB Circular A-133, Section 510(a)?

Identification of major programs:

CFDA Nu m ber(s1

Name of Federal Pr0Rram or Cluster

Title 1, Part A Cluster Special Education Cluster State Fiscal Stabilization Fund Cluster

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

$300,000.00

Auditee qualified as low-risk auditee?

N o

II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

CASH AND CASH EQUIVALENTS Inadequate lnternal Control Procedures Significant Deficiency Finding Control Number: FS-7021-10-01

Condition: This is a repeat finding (FS-7021-09-01, FS-7021-08-01 and FS-7021-07-01) from the years ended June 30, 2009, June 30, 2008, and June 30, 2007, respectively. The accounting procedures were insufficient to provide adequate internal control procedures over the Cash and Cash Equivalents function.

MONROE COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGSAND QUESTIONEDCOSTS
YEAR ENDED JUNE 30,2010
II FINANCIAL STATEMENT FINDINGS AND QUESTIONEDCOSTS
CASH AND CASH EQUIVALENTS Inadequate Internal Control Procedures Significant Deficiency Finding Control Number: FS-7021-10-01
Criteria: The School District's management is responsible for designing and maintaining an adequate system of internal controls that ensure that all cash accounts are supported by and reconciled to either cash on hand or bank accounts held at authorized financial institutions.
Questioned Cost: N/A
Information: Weaknesses in internal controls related to Cash and Cash Equivalentswere as follows:
One bank account was not properly recorded on the general ledger. There were four bank accounts confirmed by two different banks as being reported under the Schools District's Federal Identification Number but were not recorded on the School District's general ledger. Two accounts that were closed at June 30, 2010, were not removed from the School District's general ledger. An audit entry was proposed and accepted by the School District to correct an overstatement of cash by $201,624.91 caused by the posting of cash receipts from agency fund activity as miscellaneous revenue in the General Fund. Reclassifications were necessary for reporting of Investments in Georgia Fund 1that were incorrectly reported as Cash and Cash Equivalents.
Cause: These deficiencies were the result of management's failure to ensure that internal control policies and procedures were established, implemented and functioning as intended with regard to Cash and Cash Equivalents.
Effect: The lack of adequate control over cash increases the risk for theft, fraud, or misuse of School District resources that may result in errors and/or irregularities which would not be detected in a timely manner.
Recommendation: The School District should establish policies and procedures to ensure that bank reconciliations are completed in a timely manner, all bank accounts are recorded in the School District's accounting records, and administrative reviews are performed to determine that bank reconciliations were correct and that all required adjustments had been made.

MONROE COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30,2010
II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS
CAPITAL ASSETS Failure to Adequately Maintain Capital Assets Material Weakness Finding Control Number: FS-7021-10-02
Condition: This is a repeat finding (FS-7021-09-02 and FS-7021-08-02) from the years ended June 30, 2009, and June 30, 2008, respectively. The School District did not adequately record and report its capital assets.
Criteria: Chapter 3 7 Implementing a &pita1 Assets Management System of the Financial Management for Georgia Local Units of Administration (FMGULA) provides that School Districts must establish fixed asset policies, define system requirements, implement a fixed asset system and maintain fixed asset inventory records.
Questioned Cost: N/A
Information: A review of the School District's capital assets records revealed that the School District lacked proper internal controls to detect significant errors in a timely manner. An audit entry to increase capital assets by $1,131,090.61 in total was proposed and accepted by the School District for the following deficiencies noted:
Additions to Buildings and lmprovements with a net value of $142,515.49 were not recorded on the capital assets records. Additions to Equipment with a net value of $494,413.53 were not recorded on the capital assets records. Equipment items with a net value of $353,445.68 were noted by the School District's physical inventory and were added to the capital assets listing; however, these additions were not added to the financial statements. Audit procedures revealed Buildings and lmprovements with a net book value on the capital assets listing of $102,780.76 that no longer exist and were not removed from capital assets records. Depreciation expense totaling $243,496.67 was recorded for assets that had been fully depreciated in prior periods.
Cause: The School District did not ensure that adequate accounting procedures were in place to process, record and report capital assets and related activity.
Effect: The failure of the School District to maintain complete and accurate capital assets records can lead to inaccurate internal and external reporting, as well as noncompliance with generally accepted accounting principles.
Recommendation: The School District should review its capital assets records and make appropriate adjustments to ensure that the capital assets are properly maintained and correctly reported.

MONROE COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30,2010
II FINANCIALSTATEMENT FINDINGS AND QUESTIONEDCOSTS
FINANCIAL REPORTING lnadequate Internal Controls over Financial Reporting Significant Deficiency Finding Control Number: FS-7021-10-03
Condition: This is a repeat finding (FS-7021-09-03, FS-7021-08-03 and FS-7021-07-03) from the years ended June 30, 2009, June 30, 2008, and June 30, 2007, respectively. The School District did not have adequate controls over the financial statement reporting process.
Criteria: Chapter 22A Annual Financial Reporting of the Financial Management for Georgia Local Units of Administration provides that School Districts must prepare their financial statements in accordance with generally accepted accounting principles.
Questioned Cost: N/A
Information: Several correcting entries were proposed by the auditor and accepted by the client to present the School District's fund level and entity-wide level financial statements, including note disclosures.
Cause: The School District did not implement an adequate system of internal control over the financial reporting process.
Effect: The School District does not have adequate internal controls in place to ensure that the financial statements are properly prepared in accordance with generally accepted accounting principles.
Recommendation: The School District should implement controls over the financial statement reporting process to ensure the completeness and accuracy of all activity recorded in the financial statement information presented for audit.
EMPLOYEE COMPENSATION lnadequate Internal Controls Significant Deficiency Finding Control Number: FS-7021-10-04
Condition: A review of the School District's internal control policies and procedures noted deficiencies in employee payroll records.
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.

MONROE COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30,2010
II FINANCIALSTATEMENT FINDINGSAND QUESTIONEDCOSTS
EMPLOYEE COMPENSATION lnadequate Internal Controls Significant Deficiency Finding Control Number: FS-7021-10-04
Questioned Cost: N/A
Information: A review of employee compensation revealed several instances where salaries were not properly calculated and/or paid according to Board approved salary schedules.
Cause: These deficiencies were the result of management's failure to implement adequate controls to ensure that internal controls were established, implemented and functioning.
Effect: This could result in errors in financial reporting and increases the risk of material misstatement in the financial statements including misstatements due to fraud.
Recommendation: The School District should implement appropriate procedures to strengthen controls over processing of employee compensation. The School District should review this matter to determine if the recovery or payment of funds is needed.
CASH AND CASH EQUIVALENTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LlABILlTlES/DISBURSEMENTS lnadequate Internal Controls over School Activity Accounts Significant Deficiency Finding Control Number: FS-7021-10-05
Condition: The accounting procedures of the School District were insufficient to provide adequate separation of duties and internal controls over school activity accounts.
Criteria: The School District's management is responsible for designing and maintaining internal controls that provide proper separation of duties and provide reasonable assurance that transactions are processed according to established procedures. Such internal controls would limit any one individual's access to both physical assets and the related accounting records.
Questioned Cost: N/A

MONROE COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGSAND QUESTIONEDCOSTS
YEAR ENDED JUNE 30,2010
II FINANCIALSTATEMENT FINDINGS AND QUESTIONEDCOSTS
CASH AND CASH EQUIVALENTS REVENUES/RECEIVABLES/RECEIPTS EXPENDlTURES/LlABlLITIES/DlSBURSEMENTS lnadequate Internal Controls over School Activity Accounts Significant Deficiency Finding Control Number: FS-7021-10-05
Information: In obtaining an understanding of internal controls over school activity accounts, it was noted that a policy and procedure manual was not placed in operation during fiscal year 2010. In addition, external reviews were not performed to monitor activity in these accounts. Based on a review of the school activity account records, the following deficiencies were noted:
Cash and Cash Equivalents lnadequate separation of duties existed over the bank reconciliation function.
Revenues/Receiva bles/Receipts Deposit preparation was not separated from the record keeping function. Numerous receipts were not supported by adequate documentation. Funds received that are custodial in nature were not separated between Agency Funds and Governmental Activities.
Expenditures/Liabilities/Disbursements Cash disbursements were not separated from the record keepingfunction. There was no documentation indicating approval prior to purchase of goods. Several vouchers packages contained no evidence of receipt of goods. Excessive travel expenditures were made with school activity accounts funds, without evidence of pre-approval from management. All travel should be pre-approved and paid from Central Office funds. Additionally, these expenditures were not reported by individual to Georgia Department of Audits and Accounts. Instances were noted in which travel expenditures paid with debit cards associated with the school activity accounts were submitted and reimbursement made to an individual from Central Office funds. Numerous expenditures were made with debit cards associated with school accounts that lacked proper approval, use of purchase orders, itemized receipts and/or other supporting documentation. Many of these purchases appear excessive and personal in nature, including the purchase of gifts and meals. The Central Office did not properly monitor usage of these school debit cards. In addition, there was no written policy implemented for the use of debit cards.
Cause: These deficiencies were the result of management's failure to ensure that internal control policies and procedures were established, implemented and functioning at the school level and assign responsibilities to achieve appropriate separation of duties and utilize management oversight of the incompatible activities to properly safeguard assets.

MONROE COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30,2010
II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS
CASH AND CASH EQUIVALENTS REVENUES/RECEIVABLES/RECEIPTS EXPENDlTURES/LIABILlTlES/DISBURSEMENTS lnadequate Internal Controls over School Activity Accounts Significant Deficiency Finding Control Number: FS-7021-10-05
Effect: The lack of adequate control over school activity accounts increases the risk for theft, fraud, or misuse of School District resources that may result in errors and/or irregularities which would not be detected in a timely manner.
Recommendation: The School District should implement procedures to ensure that key accounting functions of custody, record keeping and authorization are separated and/or utilize management oversight of these incompatible activities, and implement procedures to ensure that expenditures of school activity accounts are properly documented and approved prior to payment. Additionally, the School District should perform a review of expenditures made in fiscal year 2010 to determine whether all purchases were allowable and for the betterment of students. For purchases deemed unallowable and personal in nature, the School District should determine whether to seek recovery of funds from individuals and whether any possible violations of professional standards have occurred.
EXPENDlTURES/LIABILITIES/DISBURSEMENTS lnadequate Internal Controls Significant Deficiency Finding Control Number: FS-7021-10-06
Condition: The School District does not have controls and monitoring procedures in place to ensure that all Board purchasing policies are being followed.
Criteria: The School District's management is responsible for designing and maintaining internal controls to provide reasonable assurance that transactions are processed according to established procedures.
Questioned Cost: N/A
Information: During our review of expenditures, instances were noted in which established Board policies over purchasing were not followed.
Board Policy "Purchasing" (DJE) requires an authorized purchase order for all School District purchases. Several transactions reviewed lacked proper approval through a written purchase order as well as a lack of evidence of receipt of goods.

MONROE COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30,2010
II FINANCIALSTATEMENT FINDINGS AND QUESTIONEDCOSTS
EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Controls Significant Deficiency Finding Control Number: FS-7021-10-06
Board Policy "Purchasing Authority" (DJEA) establishes guidelines requiring competitive bidding for purchases which exceed $10,000.00. A review of bid documentation revealed purchases exceeding this threshold in which quotes were obtained; however, formal bids were not obtained as required by this policy.
Cause: These deficiencies were the result of management's failure to monitor and ensure that internal controls were implemented and functioning in compliance with established Board policies.
Effect: Errors and/or irregularities may not be detected in a timely manner
Recommendation: We recommend that management move quickly and decisively to address the deficiencies noted above because management's actions related to establishing good internal controls are the foundation of an effective internal control structure. Effective internal control/monitoring policies and procedures should be implemented to ensure that expenditures are properly authorized and documented.
Ill FEDERAL AWARD FINDINGS AND QUESTIONED COSTS
No matters were reported.

SECTION V MANAGEMENT'S RESPONSES

MONROE COUNW BOARD OF EDUCATION SCHEDULE OF MANAGEMENT'S RESPONSES
YEAR ENDED JUNE 30,2010

Finding Control Number: FS-7021-10-01

The School District's management agrees with this finding and will continue to work with auditor recommendations and an advisor on proper classification of cash accounts in financial records. Accounting procedures will be revised to increase internal control procedures over Cash and Cash Equivalentsto an adequate level.

Finding Control Number: FS-7021-10-02

The School District moved from a manual to an automated fixed assets inventory system in the past year, and the implementation will continue into FY 2011. This issue will be resolved during the 2 0 1 1 fiscal year.

Finding Control Number: FS-7021-10-03

The School District is making efforts to improve the financial reporting processes to comply further with GASB Statement 34. These efforts include additional training for staff and utilization of outside resourcesto accomplish the requirements.

Finding Control Number: FS-7021-10-04

Most of the errors noted in this finding occurred during the first year of furlough days which necessitated several recalculations of salaries during the school year. Control procedures to check and recheck calculations, with multiple people reviewing calculations, have been strengthened.

Finding Control Number: FS-7021-10-05

Management agrees with this finding and has taken immediate and stringent steps to correct where possible and to strengthen existing internal controls and to implement new controls where necessary. During July of 2011, all principals and school-level bookkeepers joined central office staff for a full day of in-depth and thorough training in the management of school activity accounts. All of these items are codified in a Financial Guidelines handbook which is utilized by all personnel and which is available in both written and electronic format for reference and updating. In addition, starting in September, 2011, the central office business staff will meet monthly with school bookkeepersto review issues, provide additional training, and to emphasize the need for adhering to all guidelines stated. This finding will not repeat in FY 2012.

Finding Control Number: FS-7021-10-06

Management agrees with this finding and is reviewing all Board policies concerning purchasing guidelines and practices, making revisions and amendments where necessary.

Contact Person: Telephone: Fax: E-mail:

Janet Howard, Manager of Accounting & Audits (478) 994-2031 (478) 994-3364 janet.howard@monroe.k12.~a.u~