Montgomery County Board of Education, Mount Vernon, Georgia, report on audit of the financial statements for the fiscal year ended June 30, 2008

MONTGOMERY COUNTY BOARD OF EDUCATION MOUNT VERNON, GEORGIA REPORT ON AUDIT
OF THE FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2008
STATE OF GEORGIA
DEPARTMENT OF AUDITS AND ACCOUNTS
Russell W. Hinton State Auditor

MONTGOMERY COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS -

SECTION I

FINANCIAL

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

EXHIBITS

BASIC FINANCIAL STATEMENTS

DISTRICT-WIDE FINANCIAL STATEMENTS

A

STATEMENTOFNETASSETS

1

B

STATEMENT OF ACTIVITIES

2

FUND FINANCIAL STATEMENTS

C

BALANCE SHEET

GOVERNMENTAL FUNDS

4

D

RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET

TO THE STATEMENT OF NET ASSETS

5

E

STATEMENT OF REVENUES, EXPENDITURES AND CHANGES

IN FUND BALANCES

GOVERNMENTAL FUNDS

6

F

RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT

OF REVENUES, EXPENDITURES AND CHANGES IN FUND

BALANCES TO THE STATEMENT OF ACTIVITIES

7

G

STATEMENT OF FIDUCIARY NET ASSETS

FIDUCIARY FUNDS

9

H

NOTES TO THE BASIC FINANCIAL STATEMENTS

10

SCHEDULES

REQUIRED SUPPLEMENTARY INFORMATION

1 SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES

IN FUND BALANCES - BUDGET AND ACTUAL

GENERAL FUND

23

SUPPLEMENTARY INFORMATION

2 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS

24

3 SCHEDULE OF STATE REVENUE

25

MONTGOMERY COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS -

SECTION I

FINANCIAL

SCHEDULES

SUPPLEMENTARY INFORMATION

4 SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS

26

5 ALLOTMENTS AND EXPENDITURES

GENERAL FUND - QUALITY BASIC EDUCATION PROGRAMS (QBE)

BY PROGRAM

27

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

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

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

MONTGOMERY COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS -
SECTIONV MANAGEMENT'S RESPONSES SCHEDULE OF MANAGEMENT'S RESPONSES

SECTION I FINANCIAL

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

DEPARTMENT OF AUDITS AND ACCOUNTS
270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400
August 5, 2009

Honorable Sonny Perdue, Governor Members ofthe General Assembly Members ofthe State Board of Education
and Superintendent and Members ofthe Montgomery County Board of Education
INDEPENDENT AUDITOR'S COMBINED REPORT ON BASIC FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION - SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
Ladies and Gentlemen:
We have audited the accompanying financial statements ofthe governmental activities, each major fund, and the aggregate remaining fund information (Exhibits A through H) of the Montgomery County Board ofEducation, as ofand for the year ended June 30, 2008, which collectively comprise the Board's basic financial statements as listed in the table of contents. These financial statements are the responsibility of the Montgomery County Board of Education's management. Our responsibility is to express opinions on these financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United States ofAmerica and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General ofthe United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness ofthe Montgomery County Board of Education's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinions.

2008ARL-11

In our opinion, the financial statements referred to previously present fairly, in all material respects, the respective financial position ofthe governmental activities, each major fund, and the aggregate remaining fund information of the Montgomery County Board of Education, as of June 30, 2008, 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 Montgomery 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 August 5, 2009, on our consideration of the Montgomery County Board of Education's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements and other matters. The purpose ofthat report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit.

The Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual, as presented on page 23, is not a required part of the basic financial statements but is supplementary information required by the accounting principles generally accepted in the United States of America. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods ofmeasurement and presentation ofthe required supplementary information. However, we did not audit the information and express no opinion on it.

Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Montgomery County Board ofEducation's basic financial statements. The accompanying supplementary information which consist of Schedules 2 through 5, which includes the Schedule of Expenditures of Federal Awards as required by U.S. Office of Management and Budget Circular A-133, Audits ofStates, Local Governments, and Non-Profit Organizations, are presented for purposes of additional analysis and are not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements, and in our opinion, is fairly stated, in all material respects, in relation to the basic financial statements taken as a whole.

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

Respectfully submitted,

.

~~~~

Russell W. Hinton, CPA, CGFM

State Auditor

RWH:as 2008ARL-11

MONTGOMERY COUNTY BOARD OF EDUCATION

MONTGOMERY COUNTY BOARD OF EDUCATION STATEMENT OF NET ASSETS JUNE 30, 2008
ASSETS Cash and Cash Equivalents Accounts Receivable, 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 Deposits and Deferred Revenues Long-Term Liabilities
Due Within One Year Due in More Than One Year
Total Liabilities
NET ASSETS Invested in Capital Assets, Net of Related Debt Restricted for
Continuation of Federal Programs Capital Projects Un restricted
Total Net Assets
Total Liabilities and Net Assets

EXHIBIT "A"

GOVERNMENTAL ACTIVITIES

$

922,271

172,183 1,437,715
535,695 10,854 15,947
159,074 10 949 162

$ ======14===20=2=9=0=1

$

81,029

1,175,320

68,677

65,007 202 789

$

1 592 822

$

10,840,440

127,719 1,027,214
614 706

$

12610079

$ ======1=4=20=2=9=0===1

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

MONTGOMERY COUNTY BOARD OF EDUCATION STATEMENT OF ACTIVITIES
FOR THE YEAR ENDED JUNE 30, 2008

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

EXPENSES

CHARGES FOR SERVICES

$

8,925,334 $

386,947 208,992 213,576 834,305 1,054,584 220,977 736,108 540,846 143,422

146,587 811,473
14 435

$

14,237,586 $

6,250
161,034 117,002 284,286

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

EXHIBIT"B"

PROGRAM REVENUES

OPERATING

CAPITAL

GRANTS AND

GRANTS AND

CONTRIBUTIONS CONTRIBUTIONS

NET (EXPENSES) REVENUES
AND CHANGES IN NET ASSETS

$

7,339,672

174,267 92,049 161,450 518,532 474,091
5,234 427,604 321,623 $
22,027

551,509

$

10,088,058 $

$ 59,514 59 514 $

-1,579,412
-212,680 -116,943
-52,126 -315,773 -580,493 -215,743 -308,504 -159,709 -121,395
14,447 -142,962
-14 435
-3,805,728

$

2,178,685

10,815

666,809 43,892 1,176,069 26,989 247 319

$

4 350 578

$

544,850

12,065,229

$ ===1=2'=61=0=,0=7=9

-3-

MONTGOMERY COUNTY BOARD OF EDUCATION BALANCE SHEET
GOVERNMENTAL FUNDS JUNE 30, 2008

EXHIBIT"C"

ASSETS
Cash and Cash Equivalents Accounts Receivable, Net
Taxes State Government Federal Government Other Inventories
Total Assets
LIABILITIES AND FUND BALANCES
LIABILITIES
Cash Overdraft Accounts Payable Salaries and Benefits Payable Deposits and Deferred Revenue
Total Liabilities
FUND BALANCES
Reserved for: Continuation of Federal Programs Inventories Capital Projects
Unreserved Designated for Student Activities Undesignated Reported in: General Fund
Total Fund Balances
Total Liabilities and Fund Balances

GENERAL FUND

DISTRICTWIDE
CAPITAL PROJECTS
FUND

TOTAL

$

$

86,674

1,437,715

535,695

10,854

15 947

933,455 $ 109,684

933,455
196,358 1,437,715
535,695 10,854 15 947

$

2,086,885 $

1,043,139 $ ====3'=13=0=,0=2=4

$

11,184

65,104 $

1,175,320

68 677

$

1,320,285 $

$ 15,925
15 925 $

11,184 81,029 1,175,320 68 677
1 336 210

$

111,772

$

15,947

$

1,027,214

30,363

608 518

$

766,600 $

1,027,214 $

111,772 15,947
1,027,214
30,363
608 518
1 793 814

$

2,086,885 $

1,043,139 $ ===3i=!'==i13=0"=,0=2=4

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

MONTGOMERY COUNTY BOARD OF EDUCATION RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET
TO THE STATEMENT OF NET ASSETS JUNE 30, 2008

EXHIBIT"D"

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

$

1,793,814

$

159,074

582,993

12,871,971

1,888,175

-4,393,977

11,108,236

-24, 175 -267,796

$ 12,610,079

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

MONTGOMERY COUNTY BOARD OF EDUCATION STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES
GOVERNMENTAL FUNDS YEAR ENDED JUNE 30, 2008

EXHIBIT "E"

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

GENERAL FUND

DISTRICTWIDE
CAPITAL PROJECTS
FUND

TOTAL

$ 2,271,475 43,892 $
9,119,391 2,204,250
284,286 10,638
247 319
$ 14 181 251 $

$ 666,809
16,351 683 160 $

2,271,475 710,701
9,119,391 2,204,250
284,286 26,989 247 319
14 864 411

$ 8,593,481

386,947 203,255 212,253 833,002 1,051,442 220,977 759,199 486,137 143,422 146,587 703,660 40,891 $

25,534 14 345

$ 13,821,132 $

$

360,119 $

406 481

$
113,144 36,379
149 523 $ 533,637 $ 493 577

8,593,481
386,947 203,255 212,253 833,002 1,051,442 220,977 759,199 486,137 143,422 146,587 703,660 154,035
61,913 14 345
13,970,655
893,756
900 058

$

766 600 $ 1,027,214 $==1='=79=3,;,;8=1=4

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

MONTGOMERY 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, 2008

EXHIBIT"F"

Total Net Change in Fund Balances - Governmental Funds (Exhibit "E")
Amounts reported for Governmental Activities in the Statement of Activities are different because:
Capital Outlays are reported as expenditures in Governmental Funds. However, in the Statement of Activities, the cost of Capital Assets is allocated over their estimated useful lives as depreciation expense. In the current period, these amounts are:
Capital Outlay Depreciation Expense
Excess of Capital Outlay over Depreciation Expense
Because some property taxes will not be collected for several months after the School District's fiscal year ends, they are not considered "available" revenues.
Repayment of Long-Term Debt is reported as an expenditure in Governmental Funds, but the repayment reduces Long-Term Liabilities in the Statement of Net Assets. In the current year, these amounts consist of Capital Lease Payments.

$

$

71,895

-406,964

893,756
-335,069 -81,975 68138

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

$ ===54=4=8=5=0

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

(This page left intentionally blank)

MONTGOMERY COUNTY BOARD OF EDUCATION STATEMENT OF FIDUCIARY NET ASSETS FIDUCIARY FUNDS JUNE 30, 2008
ASSETS Cash and Cash Equivalents
LIABILITIES Funds Held for Others

EXHIBIT"G"
AGENCY FUNDS
$ =====6 6=6=9
$ =====6,6=6=9

The notes to the basic financial statements are an integral part of this statement. -9-

MONTGOMERY COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2008

EXHIBIT "H"

Note 1: DESCRIPTION OF SCHOOL DISTRICT AND REPORTING ENTITY
REPORTING ENTITY
The Montgomery County Board of Education (School District) was established under the laws ofthe 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 Montgomery County Board of Education.
District-wide Statements: The Statement ofNet Assets and the Statement ofActivities display information about the financial activities ofthe overall School District, except for fiduciary activities. Eliminations have been made to minimize the double counting of internal activities. Governmental activities generally are financed through taxes, intergovernmental revenues, and other nonexchange transactions.
The Statement of Activities presents a comparison between direct expenses and program revenues for each function of the School District's governmental activities.
Direct expenses are those that are specifically associated with a program or function and, therefore, are clearly identifiable to a particular function. Indirect expenses (expenses of the School District related to the administration and support ofthe School District's programs, such as office and maintenance personnel and accounting) are not allocated to programs.
Program revenues include (a) charges paid by the recipients ofgoods or services offered by the programs and (b) grants and contributions that are restricted to meeting the operational or capital requirements of a particular program. Revenues that are not classified as program revenues, including all taxes, are presented as general revenues.
Fund Financial Statements: The fund financial statements provide information about the School District's funds, including fiduciary funds. Eliminations have been made to minimize the double counting ofinternal activities. Separate statements for each category (governmental and fiduciary) are presented. The emphasis of fund financial statements is on major governmental funds, each displayed in a separate column.
The School District reports the following major governmental funds:
- 10 -

MONTGOMERY COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2008

EXHIBIT"H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
General Fund is the School District's primary operating fund. It accounts for all financial resources ofthe School District, except those resources required to be accounted for in another fund.
District-wide Capital Projects Fund accounts for financial resources including Special Purpose Local Option Sales Tax (SPLOST) to be used for the acquisition, construction or renovation of major capital facilities.
The School District reports the following fiduciary fund type:
Agency funds account for assets held by the School District as an agent for various funds, governments or individuals.
BASIS OF ACCOUNTING
The basis of accounting determines when transactions are reported on the financial statements. The District-wide governmental and fiduciary fund financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded at the time liabilities are incurred, regardless of when the related cash flows take place. Nonexchange transactions, in which the School District gives (or receives) value without directly receiving (or giving) equal value in exchange, include property taxes, sales taxes, grants and donations. On an accrual basis, revenue from property taxes is recognized in the fiscal year for which the taxes are levied. Revenue from sales taxes is recognized in the fiscal year in which the underlying transaction (sale) takes place. Revenue from grants and donations is recognized in the fiscal year in which all eligibility requirements have been satisfied.
The School District uses funds to report on its financial position and the results of its operations. Fund accounting is designed to demonstrate legal compliance and to aid financial management by segregating transactions related to certain governmental functions or activities. A fund is a separate accounting entity with a self-balancing set of accounts.
Governmental funds are reported using the current financial resources measurement focus and the modified accrual basis ofaccounting. Under this method, revenues are recognized when measurable and available. The School District considers all revenues reported in the governmental funds to be available if they are collected within sixty days after year-end. Property taxes, sales taxes and interest are considered to be susceptible to accrual. Expenditures are recorded when the related fund liability is incurred, except for principal and interest on general long-term debt, which are recognized as expenditures to the extent they have matured. Capital asset acquisitions are reported as expenditures in governmental funds. Proceeds ofgeneral long-term liabilities and acquisitions under capital leases are reported as other financing sources.

MONTGOMERY COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2008

EXHIBIT "H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The School District funds certain programs by a combination ofspecific cost-reimbursement grants, categorical grants, and general revenues. Thus, when program costs are incurred, there are both restricted and unrestricted net assets available to finance the program. It is the School District's policy to first apply grant resources to such programs, followed by cost-reimbursement grants, then general revenues.

CASH AND CASH EQUIVALENTS

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

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 Montgomery County Board of Commissioners fixed the property tax levy for the 2007 tax digest year (calendar year) on October 4, 2007 (levy date). Taxes were due on December 31, 2007 (lien date). Taxes collected within the current fiscal year or within 60 days after year-end on the 2007 tax digest are reported as revenue in the governmental funds for fiscal year 2008. The Montgomery County Tax Commissioner bills and collects the property taxes for the School District, withholds 2.5% oftaxes collected as a fee for tax collection and remits the balance oftaxes collected to the School District. Property tax revenues, at the fund reporting level, during the fiscal year ended June 30, 2008, for maintenance and operations amounted to $2,260,660.

The tax millage rate levied for the 2007 tax year (calendar year) for the Montgomery County Board of Education was as follows (a mill equals $ 1 per thousand dollars of assessed value):

School Operations

12.1 mills

- 12 -

MONTGOMERY COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2008

EXHIBIT"H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

SALES TAXES

Special Purpose Local Option Sales Tax, at the fund reporting level, during the year amounted to $666,809 and is to be used for capital outlay for educational purposes or debt service. This sales tax was authorized by local referendum and the sales tax must be re-authorized at least every five years.

INVENTORIES

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

CAPITAL ASSETS

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

Any Amount

$

10,000

$

10,000

$

5,000

$

10,000

NIA 15 to 80 years 50 to 80 years 5 to 30 years
NIA

- 13 -

MONTGOMERY COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2008

EXHIBIT "H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Depreciation is used to allocate the actual or estimated historical cost of all capital assets over estimated useful lives.
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 ofoutstanding debt obligations related to those capital assets. To the extent debt has been incurred but not yet expended for capital assets, such amounts are not included as a component of invested in capital assets, net of related debt.
Restricted net assets - These represent resources for which the School District is legally or contractually obligated to spend resources for continuation ofFederal programs and capital projects in accordance with restrictions imposed by external third parties.
Unrestricted net assets - Unrestricted net assets represent resources derived from property taxes, sales taxes, grants and contributions not restricted to specific programs, charges for services, and miscellaneous revenues. These resources are used for transactions relating to the educational and general operations of the School District, and may be used at the discretion of the Board to meet current expenses for those purposes.
Note 3: DEPOSITS
COLLATERALIZATION OF DEPOSITS Official Code of Georgia Annotated (OCGA) Section 45-8-12 provides that there shall not be on deposit at any time in any depository for a time longer than ten days a sum of money which has not been secured by surety bond, by guarantee of insurance, or by collateral. The aggregate ofthe face value of such surety bond and the market value of securities pledged shall be equal to not less than 110 percent ofthe public funds being secured after the deduction ofthe amount ofdeposit insurance. Ifa depository elects the pooled method (OCGA 45-8-13.1) the aggregate ofthe market value ofthe securities pledged to secure a pool ofpublic funds shall be not less than 110 percent ofthe daily pool balance.
Acceptable security for deposits consists of any one of or any combination of the following:
( 1) Surety bond signed by a surety company duly qualified and authorized to transact business within the State of Georgia,
(2) Insurance on accounts provided by the Federal Deposit Insurance Corporation,
(3) Bonds, bills, notes, certificates of indebtedness or other direct obligations of the United States or of the State of Georgia,
- 14 -

MONTGOMERY COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2008

EXHIBIT "H"

Note 3: DEPOSITS

(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 Mortgage Association, and the Federal National Mortgage Association.

CATEGORIZATION OF DEPOSITS At June 30, 2008, the bank balances were $1,981,369. The amounts of the total uninsured bank balances are classified into three categories of custodial credit risk:

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

The School District's uninsured deposits are classified by custodial credit risk category at June 30, 2008, as follows:

Custodial Credit Risk Category

Bank Balance

1

$

0

2

1,003,905

3

677 464

Total

$ 1,681,369

- 15 -

MONTGOMERY COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2008

EXHIBIT "H"

Note 4: NON-MONETARY TRANSACTIONS

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

Note 5: CAPITAL ASSETS

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

Balances July I, 2007

Increases

Balances Decreases June 30, 2008

Governmental Activities

Capital Assets, Not Being Depreciated:

Land

$ 159,074 $

0 $

0 $ 159 074

Capital Assets Being Depreciated Buildings and Improvements Equipment Land Improvements

$ 12,871,971 1,816,280 $ 582,993

$ 71,895

0 $ 12,871,971 1,888,175 582,993

Less Accumulated Depreciation for: Buildings and Improvements Equipment Land Improvements

2,776,147 1,039,613
171,253

259,358 111,451 36,155

3,035,505 1,151,064
207,408

Total Capital Assets, Being Depreciated, Net $ 11,284,231 $ -335,069 $

0 $ 10,949,162

Governmental Activity Capital Assets - Net $ 11,443,305 $ -335,062 $

Q $ ll,1Q8,236

Capital assets being acquired under capital leases as of June 30, 2008, are as follows:

Governmental Funds

Land Improvements Equipment Less: Accumulated Depreciation

$ 265,262 190,849 93,653

Current year depreciation expense by function is as follows:

$====3==62='=,4==5==8

- 16 -

MONTGOMERY COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2008

EXHIBIT "H"

Note 5: CAPITAL ASSETS

Instruction Support Services
Improvements of Instructional Services Educational Media Services General Administration School Administration Maintenance and Operation ofPlant Student Transportation Services Food Services

$ 280,176

$

4,237

977

4,357

2,320

3,817

93,505

109,213 17 575

Note 6: RESTRICTED ASSETS

$=====4==06,,,,.,.9==6==4

Special Purpose Local Option Sales Tax (SPLOST) funds are restricted assets in the Statement of Net Assets because its use is limited by applicable bond covenants or statutory provisions. Restricted assets at June 30, 2008, were as follows:

District-wide Capital Projects SPLOST

Restricted Cash and Cash Equivalents: Capital Acquisitions

$ 933,455

Note 7: RISK MANAGEMENT

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

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

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

- 17 -

MONTGOMERY COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2008

EXHIBIT"H"

Note 7: RISK MANAGEMENT

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

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

2007 2008

Beginning of Year Liability

Claims and Changes in Estimates

Claims Paid

EndofYear Liability

$

2,742 $

0 $

2,742 $

0

$

0 $

5 412 $

4 716 $

696

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

Position Covered

Amount

Superintendent Each Principal Each Assistant Principal Finance Director Payroll Clerk Each Bookkeeper School Food Service Director All Employees

$

25,000

$

10,000

$

10,000

$

10,000

$

10,000

$

10,000

$

10,000

$ 100,000

Note 8: SHORT-TERM DEBT

The School District obtained a temporary loan to provide cash for the construction ofa new football field. 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 ofthe total gross income from taxes collected in the preceding year and requires all short-term debt to be repaid no later than December 31 of the calendar year in which the debt was incurred.

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

Beginning Balance

Issued

Redeemed

Ending Balance

Temporary Loans

$ 38,891 $==~0 $ 38.891 $======0

- 18 -

MONTGOMERY COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2008

EXHIBIT"H"

Note 9: LONG-TERM DEBT

CAPITAL LEASES The Montgomery County Board ofEducation has entered into various lease agreements as lessee for lighting upgrades and equipment. These lease agreements qualify as capital leases for accounting purposes, and, therefore, have been recorded at the present value of the future minimum lease payments as of the date of their inception.

The changes in Long-Term Debt during the fiscal year ended June 30, 2008, were as follows:

Capital Leases

Balance July I, 2007

Governmental Funds

Additions

Deductions

Balance June 30, 2008

Due Within One Year

$ 335 234 $

Q $ 68,138 $ 261126 $ 65,001

At June 30, 2008, payments due by fiscal year which includes principal and interest for these items are as follows:

Fiscal Year Ended June 30

Capital Leases

Principal

Interest

2009 2010 2011 2012 2013 2014

$

65,007 $ 11,252

68,256

8,003

64,407

4,606

30,320

2,457

31,670

1,108

8,136

59

Total Principal and Interest Note 10: ON-BEHALF PAYMENTS

$ 267,796 $

27,485

The School District has recognized revenues and costs in the amount of $258,750 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 $254,206

Paid to the Teachers Retirement System of Georgia For Teachers Retirement System (TRS) Employer's Cost In the amount of $3,197

- 19 -

MONTGOMERY COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2008

EXHIBIT "H"

Note 10: ON-BEHALF PAYMENTS
Office of Treasury and Fiscal Services Paid to the Public School Employees Retirement System For Public School Employees Retirement (PSERS) Employer's Cost In the amount of $1,347
Note 11: SIGNIFICANT CONTINGENT LIABILITIES
Amounts received or receivable principally from the Federal government are subject to audit and review by grantor agencies. This could result in requests for reimbursement to the grantor agency for any costs which are disallowed under grant terms. The School District believes that such disallowances, if any, will be immaterial to its overall financial position.
The School District is a defendant in various legal proceedings pertaining to matters incidental to the performance ofroutine School District operations. The ultimate disposition ofthese proceedings is not presently determinable, but is not believed to be material to the basic financial statements.
Note 12: SUBSEQUENT EVENTS
During the subsequent period, the School District approved a memo ofunderstanding by and among the Technical College System, Southeastern Technical College, Montgomery County School System, Toombs County School System, Treutlen County School System and the Vidalia City School System regarding the design, construction and operation of Southeastern Early College and Career Academy (a Charter School).
Note 13: POSTEMPLOYMENTBENEFITS
Georgia Retiree Health Benefit Fund
Plan Description. The School District contributes to the Georgia Retiree Health Benefit Fund ("GRHBF"), a cost-sharing multiple-employer defined benefit postemployment healthcare plan administered by the Department ofCommunity Health. GRHBF provides health insurance benefits to eligible retirees and their qualified beneficiaries. Pursuant to Title 45, Chapter 18 ofthe Official Code ofGeorgia Annotated, the authority to establish and amend the benefit provisions ofthe plan is assigned to the Board of Community Health. The Department of Community Health issues a publicly available financial report that includes financial statements and required supplementary information for GRHBF. That report may be obtained from the Department ofCommunity Health at 2 Peachtree Street, Atlanta, Georgia 30303.
Funding Policy. The contribution requirements of plan members and participating employers are established and may be amended by the Board of Community Health. 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 twenty-five percent (25%) of the cost of health insurance coverage.
- 20-

MONTGOMERY COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2008

EXHIBIT "H"

Note 13: POSTEMPLOYMENT BENEFITS

Participating employers are statutorily required to contribute in accordance with the employer contribution rate established by the Board of Community Health. This contribution rate is established to fund both the active and retired employee health insurance plans based on projected pay-as-you-go financing requirements. The employer contribution rates for the combined active and retiree plans for the fiscal year ended June 30, 2008, were as follows:

Teachers Non-Certificated Employees

18.534% of state-based salaries $162. 72 per month

The School District's contribution to the health insurance plans for the fiscal year ended June 30, 2008, was $1,144,257, which equaled the required contribution.

Note 14: RETIREMENT PLANS

TEACHERS RETIREMENT SYSTEM OF GEORGIA (TRS)

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

TRS CONTRIBUTIONS REQUIRED AND MADE Employees ofthe School District who are covered by TRS are required by State statute to contribute 5% of their gross earnings to TRS. The School District makes monthly employer contributions to TRS at rates adopted by the TRS Board of Trustees in accordance with State statute and as advised by their independent actuary. The required employer contribution rate is 9.28% and employer contributions for the current fiscal year and the preceding two fiscal years are as follows:

Fiscal Year

Percentage Contributed

Required Contribution

2008 2007 2006

100% 100% 100%

$ 663,830 $ 640,689 $ 581,306

- 21 -

(This page left intentionally blank)

MONTGOMERY COUNTY BOARD OF EDUCATION GENERAL FUND
SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL
YEAR ENDED JUNE 30, 2008

SCHEDULE "1"

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

NONAPPROPRIATED BUDGETS

ORIGINAL (1)

FINAL (1)

ACTUAL AMOUNTS

$

2,237,971 $

2,295,355 $

2,271,475

44,400

44,400

43,892

8,259,118

8,319,819

9,119,391

2,189,303

1,528,984

2,204,250

122,559

122,559

284,286

13,646

6,846

10,638

220 698

601 630

247 319

$

13,087,695 $

12,919,593 $

14 181 251

$

7,236,205 $

7,672,033 $

8,593,481

377,965 205,094 254,498 670,605 900,374 232,565 825,901 687,801
8,424
730,413 45,696

361,584 278,232 255,568 616,963 900,374 232,565 825,901 690,626
8,424 28,935
730,413 75,650

386,947 203,255 212,253 833,002 1,051,442 220,977 759,199 486,137
143,422 146,587 703,660
40,891 39879

$

12 175 541 $

12,677,268 $

13,821,132

$

912,154 $

242,325 $

360,119

-6 195

$

912,154 $

236,130 $

360,119

763,266

445,930

406,481

-56 696

Fund Balances - Ending

$

1675420 $

625 364 $ ====76=6=6=0=0

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

See notes to the basic financial statements.

- 23 -

MONTGOMERY COUNTY BOARD OF EDUCATION SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
YEAR ENDED JUNE 30, 2008

SCHEDULE "2"

FUNDING AGENCY PROGRAM/GRANT
Agriculture, U. S. Department of Child Nutrition Cluster Pass-Through From Georgia Department of Education Food Services School Breakfast Program National School Lunch Program
Total Child Nutrition Cluster
Other Programs Pass-Through From Georgia Department of Education Food Donation (1) Pass-Through From Bright From the Start: Georgia Department of Early Care and Learning Child and Adult Care Food Program
Total U. S. Department of Agriculture
Education, U.S. Department of Special Education Cluster Pass-Through From Georgia Department of Education Special Education Grants to States Preschool Grants
Total Special Education Cluster
Other Programs Pass-Through From Georgia Department of Education Career and Technical Education - Basic Grants to States Enhancing Education Through Technology Program Improving Teacher Quality State Grants Migrant Education Reading First State Grants Rural Education Safe and Drug-Free Schools and Communities - State Grants State Grants for Innovative Programs Title I Grants to Local Educational Agencies Pass-Through From Wheeler County Board of Education Safe Schools/Healthy Students Initiative Twenty-First Century Community Learning Centers
Total U.S. Department of Education

CFDA NUMBER

PASSTHROUGH
ENTITY ID
NUMBER

EXPENDITURES IN PERIOD

* 10.553 * 10.555

N/A

N/A

$

$

(2) 601 188
601,188

10.550 10.558

N/A
NIA $

49,373
(2) 650 561

* 84.027 * 84.173

N/A

$

N/A

$

232,490 7 648
240,138

84.048 84.318 84.367 84.011 * 84.357 84.358 84.186 84.298 * 84.010
84.184 84.287

N/A NIA N/A N/A N/A NIA N/A NIA NIA
N/A N/A
$

18,235 6,565
101,177 36,624
312,745 61,140 10,168 2,464
459,257
275,062 127130
1 650 705

Total Federal Financial Assistance

$

NIA = Not Available

Notes to the Schedule of Expenditures of Federal Awards

(1) The amount shown for the Food Donation Program represents the Federally assigned value of nonmonetary assistance for donated commodities received and/or consumed by the School District during the current fiscal year.
(2) Expenditures for the funds earned on Child and Adult Care Food Program ($4,134) and the School Breakfast Program ($124,548) were not maintained separately and are included in the 2008 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 accompanying schedule of expenditures of Federal awards includes the Federal grant activity of the Montgomery County Board of Education and is presented on the modified accrual basis of accounting which is the basis of accounting used in the presentation of the fund financial statements.

See notes to the basic financial statements.

24-

2,301,266

MONTGOMERY COUNTY BOARD OF EDUCATION SCHEDULE OF STATE REVENUE YEAR ENDED JUNE 30, 2008

AGENCY/FUNDING
GRANTS Bright From the Start: Georgia Department of Early Care and Learning Pre-Kindergarten Program
Education, Georgia Department of Quality Basic Education Direct Instructional Cost Kindergarten Program Kindergarten Program - Early Intervention Program Primary Grades (1-3) Program Primary Grades - Early Intervention (1-3) Program Upper Elementary Grades (4-5) Program Upper Elementary Grades - Early Intervention (4-5) Program Middle School (6-8) Program High School General Education (9-12) Program Vocational Laboratory (9-12) Program Students with Disabilities Category I Gifted Student - Category VI Remedial Education Program Alternative Education Program English Speakers of Other Languages (ESOL) Media Center Program 20 Days Additional Instruction Staff and Professional Development Indirect Cost Central Administration School Administration Facility Maintenance and Operations Categorical Grants Pupil Transportation Regular Bus Replacement Sparsity Nursing Services Migrant Mid-Term Mid-Term Adjustment Hold Harmless Vocational Supervisors Education Equalization Funding Grant Food Services Vocational Education Amended Formula Adjustment Other State Programs Communities in Schools - Dropout Prevention and Recovery Health Insurance High School Graduation Coach Middle School Graduation Coach Middle School Remediation and Intervention Grant Preschool Handicapped Program Teachers' Retirement
Human Resources, Georgia Department of Family Connection
Office of Treasury and Fiscal Services Public School Employees Retirement

See notes to the basic financial statements.

-25-

SCHEDULE "3"

GOVERNMENTAL FUND TYPE GENERAL FUND

$

297,882

262,389 128,234 656,905 401,073 389,061 159,258 725,801 648,123 206,910
675,459 155,307 180,758
57,040 32,803 130,481 40,312 23,402
388,236 401,624 345,772
300,502 59,514 32,444 44,182 4,896
377,122 8,663
1,176,069 34,390 61,651
-110,806
286,828 254,206
60,926 42,096
1,263 20,904
3,197
153,167
1 347
$ ======9,..1..,19.,.3.,.9==1

MONTGOMERY COUNTY BOARD OF EDUCATION SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS
YEAR ENDED JUNE 30, 2008

SCHEDULE "4"

PROJECT
Improvements and repairs to school system facilities and equipment purchases for use by students and school system staff.

ORIGINAL ESTIMATED
COST (1)

CURRENT ESTIMATED COSTS (2)

AMOUNT EXPENDED IN CURRENT
YEAR (3)

AMOUNT EXPENDED
IN PRIOR YEARS (3)

PROJECT STATUS

$ 3,500,000 $ 3,500,000 $

149,523 $ 272,672 Ongoing

(1) The School District's original cost estimate as specified in the resolution calling for the imposition of the Local Option Sales Tax.
(2) The School District's current estimate of total cost for the project. Includes all cost from project inception to completion.
(3) The voters of Montgomery County approved the imposition of a 1% sales tax to fund the above project. Amounts expended for this project may include sales tax proceeds, state, local property taxes and/or other funds over the life of the project.

See notes to the basic financial statements.

- 26 -

MONTGOMERY COUNTY BOARD OF EDUCATION GENERAL FUND - QUALITY BASIC EDUCATION PROGRAM (QBE)
ALLOTMENTS AND EXPENDITURES - BY PROGRAM YEAR ENDED JUNE 30, 2008

SCHEDULE "5"

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

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

ELIGIBLE QBE PROGRAM COSTS

SALARIES OPERATIONS

TOTAL

$

289,884 $

334,968 $

14,018 $

348,986

155,721

195,085

3,477

198,562

720,979

768,828

42,809

811,637

435,416

440,306

4,769

445,075

426,980

401,090

29,269

430,359

175,048 787,328 709,147 231,372 736,226
170,266 190,097 62,404 38 328

170,410 1,022,464
851,255 268,660
125,015 242,338 291,325
284,253 192,226
2,475 47 804

5,028 44,647 45,215 16,034
4,050 18,502 10,037
646 2,989
65,520 799

175,438 1,067,111
896,470 284,694
129,065 260,840 301,362
646 287,242 192,226
67,995 48603

$

5,129,196 $ 5,638,502 $

307,809 $

5,946,311

140,615 25 911

184,222 9 898

10,182 19 050

194,404 28 948

TOTAL QBE FORMULA FUNDS

$====5=,2=95=,7=2=2 $ 5,832,622 $

337041 $===6=1=69=6=6==3

(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.

- 27 -

SECTION II COMPLIANCE AND INTERNAL CONTROL REPORTS

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

DEPARTMENT OF AUDITS AND ACCOUNTS
270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400
August 5, 2009

Honorable Sonny Perdue, Governor Members ofthe General Assembly Members ofthe State Board of Education
and Superintendent and Members ofthe Montgomery County Board of Education
REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS
Ladies and Gentlemen:
We have audited the financial statements of the governmental activities, each major fund, and the aggregate remaining fund information ofMontgomery County Board ofEducation as ofand for the year ended June 30, 2008, which collectively comprise Montgomery County Board of Education's basic financial statements and have issued our report thereon dated August 5, 2009. We conducted our audit in accordance with auditing standards generally accepted in the United States ofAmerica and the standards applicable to financial audits contained in GovernmentAuditing Standards, issued by the Comptroller General of the United States.
Internal Control Over Financial Reporting
In planning and performing our audit, we considered Montgomery County Board of Education's internal control over financial reporting as a basis for designing our auditing procedures for the purpose ofexpressing our opinions on the financial statements, but not for the purpose ofexpressing an opinion on the effectiveness of the Montgomery County Board of Education's internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness of the Montgomery County Board of Education's internal control over financial reporting.
Our consideration ofinternal control over financial reporting was for the limited purpose described in the preceding paragraph and would not necessarily identify all deficiencies in internal control over financial reporting that might be significant deficiencies or material weaknesses. However, as discussed below, we identified certain deficiencies in internal control over financial reporting that we consider to be significant deficiencies.
2008YB-40

A control deficiency exists when the design or operation ofa control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect misstatements on a timely basis. A significant deficiency is a control deficiency, or combination of control deficiencies, that adversely affects the Montgomery County Board of Education's ability to initiate, authorize, record, process, or report financial data reliably in accordance with generally accepted accounting principles such that there is more than a remote likelihood that a misstatement of the Montgomery County Board of Education's financial statements that is more than inconsequential will not be prevented or detected by the Montgomery County Board ofEducation's internal control. We consider items FS-7031-08-01, FS-7031-08-02, FS-7031-08-03, FS-7031-0804, FS-7031-08-05 and FS-7031-08-06 in the accompanying Schedule ofFindings and Questioned Costs to be significant deficiencies in internal control over financial reporting.
A material weakness is a significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood that a material misstatement ofthe financial statements will not be prevented or detected by the Montgomery County Board of Education's internal control.
Our consideration of the internal control over financial reporting was for the limited purpose described in the first paragraph ofthis section and would not necessarily disclose all deficiencies in internal control that might be significant deficiencies and, accordingly, would not necessarily disclose all significant deficiencies that are also considered to be material weaknesses. However, of the significant deficiencies described above, we consider items FS-7031-08-02 and FS-7031-08-06 to be material weaknesses.
Compliance and Other Matters
As part ofobtaining reasonable assurance about whether Montgomery County Board ofEducation's financial statements are free of material misstatement, we performed tests of its compliance with certain provisions oflaws, regulations, contracts and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards.
We noted certain matters that we have reported to management of Montgomery County Board of Education in a separate letter dated August 5, 2009.
Montgomery 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 Montgomery County Board of Education's response and, accordingly, we express no opinion on it.
2008YB-40

This report is intended solely for the information and use of management, members of the Montgomery 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,
~=on~~~~ State Auditor
RWH:as 2008YB-40

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

DEPARTMENT OF AUDITS AND ACCOUNTS
270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400
August 5, 2009

Honorable Sonny Perdue, Governor Members ofthe General Assembly Members ofthe State Board of Education
and Superintendent and Members of the Montgomery County Board of Education
REPORT ON COMPLIANCE WITH REQUIREMENTS APPLICABLE TO EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH 0MB CIRCULAR A-133
Ladies and Gentlemen:
Compliance
We have audited the compliance of Montgomery County Board of Education with the types of compliance requirements described in the U.S. Office ofManagement and Budget (0MB) Circular A-133 Compliance Supplement that are applicable to each ofits major Federal programs for the year ended June 30, 2008. Montgomery County Board of Education's major Federal programs are identified in the Summary ofAuditor's Results Section ofthe accompanying Schedule ofFindings and Questioned Costs. Compliance with the requirements oflaws, regulations, contracts and grants applicable to each ofits major Federal programs is the responsibility ofMontgomery County Board of Education's management. Our responsibility is to express an opinion on Montgomery County Board of Education's compliance based on our audit.
We conducted our audit ofcompliance in accordance with auditing standards generally accepted in the United States ofAmerica; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General ofthe United States; and 0MB Circular A133, Audits ofStates, Local Governments, and Non-Profit Organizations. Those standards and 0MB Circular A-133 require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major Federal program occurred. An audit includes examining, on a test basis, evidence about the Montgomery County Board ofEducation's compliance with those requirements and performing such other procedures as we considered necessary in the

2008SA-65

circumstances. We believe that our audit provides a reasonable basis for our opinion. Our audit does not provide a legal determination on Montgomery County Board of Education's compliance with those requirements.
As described in items FA-7031-08-02, FA-7031-08-04 and FA-7031-08-05 in the accompanying Schedule of Findings and Questioned Costs, Montgomery County Board of Education did not comply with requirements regarding Activities Allowed or Unallowed, Allowable Costs/Cost Principles, Period ofAvailability ofFederal Funds and Procurement and Suspension and Debarment that are applicable to its Title 1 Grants to Local Educational Agencies (CFDA 84.010), Special Education Cluster (CFDA 84.027 and 84.173), and Reading First State Grants (CFDA 84.357) programs. Compliance with such requirements is necessary, in our opinion, for Montgomery County Board of Education to comply with requirements applicable to those programs.
In our opinion, except for the noncompliance described in the preceding paragraph, the Montgomery County Board of Education complied, in all material respects, with the requirements referred to above that are applicable to each of its major Federal programs for the year ended June 30, 2008.
Internal Control Over Compliance
The management of Montgomery County Board of Education is responsible for establishing and maintaining effective internal control over compliance with requirements of laws, regulations, contracts and grants applicable to Federal programs. In planning and performing our audit, we considered Montgomery County Board of Education's internal control over compliance with requirements that could have a direct and material effect on a major Federal program in order to determine our auditing procedures for the purpose ofexpressing our opinion on compliance, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness ofthe Montgomery County Board of Education's internal control over compliance.
Our consideration of the internal control over compliance was for the limited purpose described in the preceding paragraph and would not necessarily identify all deficiencies in the Board's internal control that might be significant deficiencies or material weaknesses as defined below. However, as discussed below, we identified certain deficiencies in internal control over compliance that we consider to be significant deficiencies and others we consider to be material weaknesses.
A control deficiency in an entity's internal control over compliance exists when the design or operation ofa control does not allow management or employees, in the normal course ofperforming their assigned functions, to prevent or detect noncompliance with a type ofcompliance requirement of a Federal program on a timely basis. A significant deficiency is a control deficiency, or combination ofcontrol deficiencies, that adversely affects the entity's ability to administer a Federal program such that there is more than a remote likelihood that noncompliance with a type of compliance requirement of a Federal program that is more than inconsequential will not be prevented or detected by the entity's internal control. We consider the deficiencies in internal control over compliance described in the accompanying Schedule ofFindings and Questioned Costs as items FA-7031-08-02, FA-7031-08-04 and FA-7031-08-05 to be significant deficiencies.
2008SA-65

A material weakness is a significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood that material noncompliance with a type of compliance requirement of a Federal program will not be prevented or detected by the entity's internal control. However, all of the significant deficiencies noted above are also considered to be material weaknesses.
Montgomery 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 Montgomery County Board ofEducation'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 Montgomery County Board of Education, Federal awarding agencies and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties.
Respectfully submitted,

RWH:as 2008SA-65

Rus ell W. Hinton, CPA, CGFM State Auditor

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

MONTGOMERY COUNTY BOARD OF EDUCATION AUDITEE'S RESPONSE
SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2008

PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

FINDING CONTROL NUMBER AND STATUS

FS-7031-06-01 FS-7031-06-02 FS-7031-06-03 FS-7031-06-04 FS-7031-06-05 FS-7031-06-07 FS-7031-07-01 FS-7031-07-02 FS-7031-07-03 FS-7031-07-04 FS-7031-07-05 FS-7031-07-06 FS-7031-07-07

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

CORRECTIVE ACTION/RESPONSES

CASH AND CASH EQUIVALENTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Controls over School Activity Accounts Finding Control Number: FS-7031-07-01

The Finance Director and other financial staff attend training on financial reporting and implement the rules learned at the training.

CASH AND CASH EQUIVALENTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Controls at the Central Office Finding Control Number: FS-7031-07-02

The school nutrition bank statement is reconciled to the general ledger each month. The system insures a voucher package is prepared that includes a pre-approved purchase order, an invoice indicating the receipt of goods, and a copy of the check for payment. The finance director reviews travel regulations yearly at a county-wide employee meeting. The schools do not issue checks for compensation. All employee compensation checks are issued through payroll at the central office. All non-employee compensation checks are issued through the financial check process at the central office and a 1099 is distributed if required. Non-tax (i.e., Coca Cola) money will be monitored and expended as approved by the Superintendent.

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MONTGOMERY COUNTY BOARD OF EDUCATION AUDITEE'S RESPONSE
SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2008
PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS CORRECTIVE ACTION/RESPONSES ACCOUNTING CONTROLS (OVERALL) Inadequate Access Controls Finding Control Number: FS-7031-07-04 Access to the system network is password protected. Additionally, access to the accounting system is password protected. Users only have access to the parts of the accounting system that we consider needed to complete the job duties assigned. EMPLOYEE COMPENSATION Inadequate Controls over Payroll Process Finding Control Number: FS-7031-07-05 Salary changes and calculations are documented. The documentation is reviewed by the Finance Director for accuracy. A copy of the documentation is kept at the central office and a copy is provided to the employee. CAPITAL ASSETS Failure to Adequately Maintain Capital Assets Finding Control Number: FS-7031-07-06 The Finance Director will ensure that all capital assets are booked appropriately. FINANCIAL REPORTING Inadequate Controls over Financial Reporting Finding Control Number: FS-7031-07-07 The Finance Director and other financial staff attend training on financial reporting and implement the rules learned at the training.
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MONTGOMERY COUNTY BOARD OF EDUCATION AUDITEE'S RESPONSE
SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2008

PRIOR YEAR FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

FINDING CONTROL NUMBER

AUDITEE'S RESPONSE/STATUS

SEE AUDITOR'S COMMENTS

FA-7031-06-01 FA-7031-07-01 F A-7031-07-02 FA-7031-07-03 FA-7031-07-04 FA-7031-07-05 FA-7031-07-06 FA-7031-07-07 FA-7031-07-08 FA-7031-07-09 FA-7031-07-10

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

(2) (2) (2) (2) (2)
(1) (2)

CORRECTIVE ACTION/RESPONSES

ACTIVITIES ALLOWED OR UNALLOWED ALLOWABLE COSTS/COST PRINCIPLES Inadequate Internal Control Procedures Finding Control Number: FA-7031-07-01

The program director insures that all costs are allowable under the grant. All invoices and time sheets are signed by the program director and/or the superintendent indicating that the expense is appropriate and allowable. Grant expenditures are monitored on a quarterly basis by the program director and the finance director to insure that the funds are expended and recorded accurately. Reimbursements are requested by the finance director based on the expenditures for the period.

ACTIVITIES ALLOWED OR UNALLOWED ALLOWABLE COSTS/COST PRINCIPLES Time and Attendance Records Not Utilized Finding Control Number: FA-7031-07-02

Semi-annual certifications are signed and filed on employees paid solely out of Federal funds. Monthly time documentation sheets are utilized for employees who are splitfunded.

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MONTGOMERY COUNTY BOARD OF EDUCATION AUDITEE'S RESPONSE
SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2008
PRIOR YEAR FEDERAL AWARD FINDINGS AND QUESTIONED COSTS
CORRECTIVE ACTION/RESPONSES
ALLOWABLE COSTS/COST PRINCIPLES Excessive Compensation Finding Control Number: FA-7031-07-03
Employees are paid from a salary schedule and a supplement schedule. The schedules are approved by the Board. Contracts are written according to the schedules and signed by the employee and the Superintendent. Salary changes and calculations are documented. The documentation is reviewed by the Finance Director for accuracy. A copy of the documentation is kept at the central office and a copy is provided to the employee.
PERIOD OF AVAILABILITY OF FEDERAL FUNDS Expenditures Outside of Grant Period Finding Control Number: FA-7031-07-04
Grants are monitored closely and expenditures will be expended during the appropriate grant period.
PROCUREMENT AND SUSPENSION AND DEBARMENT Failure to Implement Procurement Procedures Finding Control Number: FA-7031-07-05
The system insures a voucher package is prepared that includes a pre-approved purchase order, an invoice indicating the receipt ofgoods, and a copy ofthe check for payment. The finance director reviews travel regulations yearly at a county-wide employee meeting. A procurement policy has been established and is enforced.
REPORTING Failure to File Accurate Completion Report Finding Control Number: FA-7031-07-06
Accurate completion reports are filed according to the expenditures incurred for the period. All funds received but not expended are returned to the appropriate agency.
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MONTGOMERY COUNTY BOARD OF EDUCATION AUDITEE'S RESPONSE
SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2008
PRIOR YEAR FEDERAL AWARD FINDINGS AND QUESTIONED COSTS AUDITOR'S COMMENTS (1) Findings/internal control deficiencies of this nature, that are not deemed significant deficiencies or material weaknesses and do not require reporting in the audit report in accordance with Office of Management and Budget (0MB) Circular A-133, will be communicated in a management letter in subsequent periods. (2) This finding is pending review by the Georgia Department ofEducation to determine if a refund is appropriate.
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SECTION IV FINDINGS AND QUESTIONED COSTS

MONTGOMERY COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2008

I SUMMARY OF AUDITOR'S RESULTS

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

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

Cash and Cash Equivalents Employee Compensation Accounting Controls (Overall)

Expenditures/Liabilities/Disbursements Capital Assets Financial Reporting

Of the significant deficiencies described above, Cash and Cash Equivalents, Expenditures/Liabilities/Disbursements and Financial Reporting are considered to be material weaknesses.

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

4. Significant Deficiencies in Internal Control Over Major Programs The audit report for the Montgomery County Board of Education disclosed significant deficiencies in internal control over major programs for the following compliance requirements.

Activities Allowed or Unallowed Allowable Costs/Cost Principles

Period of Availability of Federal Funds Procurement and Suspension and Debarment

All ofthe significant deficiencies described above are considered to be material weaknesses.

5. Type of Report Issued on Compliance for Major Programs

The auditor's opinion on the Montgomery County Board of Education's report on

compliance with requirements applicable to major programs was:

Unqualified: School Breakfast Program

(CFDA 10.553)

National School Lunch Program

(CFDA 10.555)

Qualified: Title I Grants to Local Educational Agencies (CFDA 84.010)

Special Education Grants to States

(CFDA 84.027)

Special Education Preschool Grants

(CFDA 84.173)

Reading First State Grants

(CFDA 84.357)

6. Audit Findings Required to be Reported by Section .510(a) of 0MB Circular A-133 The Montgomery County Board ofEducation's audit disclosed audit findings required to be reported by section .510(a) ofOMB Circular A-133. These audit findings are included in section IV of this report.

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MONTGOMERY COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2008

I SUMMARY OF AUDITOR'S RESULTS
7. Major Programs Federal awards audited as major programs are as follows: 10.553 Food Services - School Breakfast Program 10.555 Food Services - National School Lunch Program 84.010 Title I Grants to Local Educational Agencies 84.027 Special Education - Grants to States 84.173 Special Education - Preschool Grants 84.357 Reading First State Grants
8. Type "A" Program Dollar Threshold The dollar threshold for type "A" programs was $300,000.
9. Low Risk Auditee The Montgomery County Board ofEducation did not qualify as a low risk auditee as defined by Section .530 ofOMB Circular A-133.
II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

CASH AND CASH EQUIVALENTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Controls over School Activity Accounts Significant Deficiency Finding Control Number: FS-7031-08-01

Condition:

This is a repeat finding (FS-7031-07-01 and FS-7031-06-01) from the years ended June 30, 2007 and June 30, 2006, respectively. The accounting procedures of the School District were insufficient to provide for adequate internal controls over the school activity accounts.

Criteria:

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

Questioned Cost: NIA

Information:

Cash and Cash Equivalents The bank account for Montgomery County Elementary School was not properly reconciled to the books at June 30, 2008. The School District's Federal Employee Identification (FBI) number was used by an unauthorized organization for its bank account.

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MONTGOMERY COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2008

II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

Finding Control Number: FS-7031-08-01 (continued)

Expenditures/Liabilities/Disbursements A number of vouchers lacked proper approval for payment. Several vouchers did not contain an invoice or itemized receipt. It could not be determined if the correct amounts were paid due to the lack of documentation.

Cause:

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

Effect:

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

Recommendation:

The School District should monitor controls to provide reasonable assurance that transactions are processed according to established procedures and implement procedures deemed necessary to strengthen internal controls over the accounting functions.

CASH AND CASH EQUIVALENTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Controls at the Central Office Material Weakness Finding Control Number: FS-7031-08-02

Condition:

This is a repeat finding (FS-7031-07-02 and FS-7031-06-02) from the years ended June 30, 2007, and June 30, 2006, respectively. The accounting procedures of the School District were insufficient to provide for adequate internal controls at the Central Office.

Criteria:

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

Questioned Cost: $27,429

Information:

Cash and Cash Equivalents The bank reconciliation function was not separated from the record keeping and check preparation functions for School Food Services. The bank reconciliations for the Operating and School Food Services accounts were not reconciled to the general ledger at June 30, 2008.

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MONTGOMERY COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2008

II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

Finding Control Number: FS-7031-08-02 (continued)

Expenditures/Liabilities/Disbursements The check writing function was not separated from the purchasing and record keeping functions for School Food Services. Several vouchers did not contain purchase orders, had no evidence for the receipt ofgoods, were charged to the improper object and/or lacked proper approval for payment. Fiscal year 2009 vouchers, totaling $66,106, were erroneously charged to the 2008 fiscal year. Instances were noted where mileage reimbursements made to employees erroneously included commuting miles and other unallowable miles resulting in total travel overpayments of $11. Credit card transactions totaling $23,020 did not contain a hotel receipt, invoice or receipt documentation. Finance and/or late fee charges of $641 on credit card accounts were paid. A gasoline purchase for an individual's personal vehicle was made on the credit card in violation of the Statewide Travel Regulations. The School District receives donations from a private company that can be used at the discretion of the Superintendent. These donations are maintained as a separate fund on the School District's general ledger. At June 30, 2008, expenditures from this fund had exceeded donations received leaving a deficit fund balance of$3,757. The nature ofthese expenditures are such that they would not normally be considered allowable expenditures of general operating funds, so it would not be appropriate to fund this deficit from the Board's normal operations.

See Finding Control Number: FA-7031-08-01.

Cause:

These deficiencies were the result of management's decision to limit the number ofadministrative staffmade responsible for accounting functions and management's failure to ensure that internal controls were established, implemented and functioning at the Central Office.

Effect:

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

Recommendation:

The School District should implement procedures to ensure that the key accounting functions of custody, record keeping and authorization are separated and/or utilize management oversight for these incompatible activities. In addition, management should review the accounting procedures in place, design procedures which would enhance internal controls relative to the above control categories and implement those procedures to strengthen

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MONTGOMERY COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2008

II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

Finding Control Number: FS-7031-08-02 (continued)

the internal control over these accounting functions. Management should also establish accounting controls to ensure that purchases are for necessary, educational purposes or that discretionary funds are maintained separately and monitored to prevent overexpenditure.

ACCOUNTING CONTROLS (OVERALL) Inadequate Access Controls Significant Deficiency Finding Control Number: FS-7031-08-03

Condition:

This is a repeat finding (FS-7031-07-04 and FS-7031-06-04) from the years ended June 30, 2007 and June 30, 2006, respectively. The accounting procedures of the School District did not maintain adequate separation of duties in the Financial Accounting System.

Criteria:

Separation of duties involving key accounting functions, both manual and automated, is the basis for achieving an adequate system of internal control.

Questioned Cost: NIA

Information:

Access controls in the Financial Accounting System do not prevent users from accessing accounting functions that are outside of their area of responsibility.

Cause:

The School District's management is responsible for designing and maintaining internal controls that restrict access to programs or data. Management has not limited access rights of users of the Financial Accounting System.

Effect:

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

Recommendation:

Management should ensure that the access controls in the accounting information system should complement the system of internal control by limiting an employee's access to only the accounting functions necessary for the performance of the employee's duties.

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MONTGOMERY COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2008

II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

EMPLOYEE COMPENSATION Inadequate Controls over Payroll Process Significant Deficiency Finding Control Number: FS-7031-08-04

Condition:

This is a repeat finding (FS-7031-07-05) from the year ended June 30, 2007. The School District failed to implement procedures to ensure that salary payments were accurately calculated, documented, and posted to the accounting records. In addition, the School District failed to maintain complete personnel files for all employees.

Criteria:

The School District's management is responsible for designing and maintaining internal controls that provide reasonable assurance that employees are paid according to approved salary schedules and that personnel files are maintained with documentation to support the payments. Additionally, management should ensure that salaries are charged to the correct accounts in the financial records in line with employee duties.

Official Code of Georgia Annotated (O.C.G.A) 20-2-211 states in part: "Employment contracts of teachers, principals, and other certificated professional personnel shall be in writing, and such contracts shall be signed in duplicate by such personnel on their own behalf and by the executive office of the local unit of administration on behalf of its governing board".

Questioned Cost: NIA

Information:

Weaknesses in internal controls related to employee compensation were noted as follows:
1. Procedures were not in place to ensure that personnel files included adequate documentation to support salary payments.
2. Procedures were not in place to ensure that salary payments were properly calculated based on an approved rate of pay.
3. In some instances, contracts were signed with a stamped signature and/or financial personnel signed the contracts for the Superintendent.
4. An employee's salary was not properly pro-rated among funds in accordance with the duties assigned.
5. A number of instances were noted where there was insufficient documentation to support the employee compensation payments made.
6. Several instances were noted where employees were not paid according to the approved contracts or pay scales, resulting in salary overpayments and underpayments which are identified in findings FA7031-08-02 and FA-7031-08-03.

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MONTGOMERY COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2008

II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

Finding Control Number: FS-7031-08-04 (continued)

Cause:

Management failed to implement and adequately monitor procedures to ensure that payments made to employees were based on an approved rate of pay that was adequately documented in the employees' personnel files and properly posted to the accounting records in accordance with their assigned duties.

Effect:

Errors and/or irregularities may occur and not be detected in timely manner. In addition, the School District's employment contracts could be determined to be invalid, illegal and unenforceable.

Recommendation:

Management should develop and implement policies and procedures to ensure that payments made to employees are based on approved rates ofpay; that adequate documentation is maintained in the employees' personnel files; and that expenditures are properly charged to the appropriate program in the financial records. Additionally, the School District should establish policies and procedures designed to ensure that teacher contracts are valid and enforceable in accordance with the provisions of O.C.G.A. 20-2-211.

CAPITAL ASSETS Failure to Adequately Maintain Capital Assets Significant Deficiency Finding Control Number: FS-7031-08-05

Condition:

This is a repeat finding (FS-7031-07-06 and FS-7031-06-07) from the years ended June 30, 2007 and June 30, 2006, respectively. The School District failed to adequately maintain capital asset records.

Criteria:

Chapter 37 Fixed Assets of the Financial Management for Georgia Local Units of Administration indicates that School Districts must establish fixed asset policies, define system requirements, implement a fixed asset system and maintain fixed asset inventory records.

Questioned Cost: NIA

Information:

A review ofthe School District's Capital Assets policies and procedures and the related Capital Assets records revealed the following deficiencies:
I. Capital Assets ending balances reported in the financial statements did not agree to the Capital Assets subsidiary records.

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MONTGOMERY COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2008

II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

Finding Control Number: FS-7031-08-05 (continued)

2. The Capital Assets listing and the School District's financial statements presented for audit failed to include current year additions for Equipment of $34,855. In addition, the related depreciation expense was also not recorded.
3. Depreciation expense was not recorded for all Capital Assets reported in the financial statements.
4. The School District failed to remove Equipment deletions in the amount of$28,917 from Capital Assets on the financial statements.
5. The School District inadvertently duplicated a prior year adjustment to Equipment of$84,0l 7 to the financial statements. An audit adjustment was proposed and made to correct this error.

Cause:

The School District failed to properly maintain its capital assets records in accordance with the School District's approved capital assets policy.

Effect:

The failure ofthe School District to maintain a complete and accurate capital assets listing can lead to inaccurate internal and external reporting, as well as noncompliance with generally accepted accounting principles.

Recommendation:

The School District should review its capital asset records and make appropriate adjustments to ensure that the capital assets records are accurate and conform to the School District's approved capital assets policy and generally accepted accounting principles.

FINANCIAL REPORTING Inadequate Controls over Financial Reporting Material Weakness Finding Control Number: FS-7031-08-06

Condition:

This is a repeat finding (FS-7031-07-07) from the year ended June 30, 2007. The School District did not have adequate controls in place over the financial statement reporting process.

Criteria:

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

Questioned Cost: NIA

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MONTGOMERY COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2008

II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

Finding Control Number: FS-7031-08-06 (continued)

Information:

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

Cause:

The School District did not implement an adequate system ofinternal control over the financial statement reporting process.

Effect:

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

Recommendation:

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

III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

ACTIVITIES ALLOWED OR UNALLOWED ALLOWABLE COSTS/COST PRINCIPLES Inadequate Internal Control Procedures Material Weakness Material Noncompliance U.S. Department of Education Through Georgia Department of Education Reading First State Grants (CFDA 84.357) Through Wheeler County Board of Education Safe Schools/Healthy Students Initiative (CDFA 84.184) Twenty-First Century Community Leaming Centers (CFDA.84.287) Finding Control Number: FA-7031-08-01

Condition:

This is a repeat finding (FA-7031-07-01) from the year ended June 30, 2007. A review ofexpenditures charged to various Federal programs revealed that costs were not adequately documented to ensure compliance with grant requirements.

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MONTGOMERY COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2008

III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

Finding Control Number: FA-7031-08-01 (continued)

Criteria:

Provisions of the 0MB Circular A-87, Cost Principles for Determining Allowable Costs, require that "to be allowable under Federal awards, costs must be ... authorized or not prohibited under state or local laws or regulations and supported by underlying documentation".

Questioned Cost:

$45,328 Reading First State Grants (CFDA 84.357) $158 Safe Schools/Healthy Students Initiative (CFDA 84.184) $44,638 Twenty-First Century Community Leaming Centers (CFDA 84.287) $532

Information:

A review of various Federal program vouchers revealed the following deficiencies:
1. A number ofvouchers did not contain purchase orders, lacked approval for payment, had no evidence ofreceipt of goods and were erroneously charged to the wrong fund and/or objects.
2. Several vouchers had amounts that differed from the amounts actually paid.
3. Vouchers in the amount of $43,951 did not contain adequate documentation.
4. Travel reimbursements totaling $578 included commuting miles and other unallowable miles.
5. Payments to employees for a total of $782, charged to Other Expenditures were not processed through the payroll system. W-2s were not issued for these payments and therefore income taxes were not withheld.
6. Vouchers exceeded the Statewide Travel Regulations' allowable meal allowance by $17.

See Finding Control Number: FS-7031-08-02.

Cause:

Management failed to adequately monitor compliance with Federal guidelines to ensure that expenditures for these Federal Programs were allowable, properly approved and adequately documented.

Effect:

Failure to ensure that program costs were allowable, approved and properly documented resulted in material noncompliance with Federal grant requirements.

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MONTGOMERY COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2008

III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

Finding Control Number: FA-7031-08-01 (continued)

Recommendation:

The School District should implement procedures to ensure that all costs are allowable under 0MB Circular A-87, approved by appropriate management, and properly documented. The School District should contact the Georgia Department of Education and the Wheeler County Board of Education to determine the amount of refund for these questioned expenditures.

ACTIVITIES ALLOWED OR UNALLOWED ALLOWABLE COSTS/COST PRINCIPLES Time and Attendance Records Not Utilized Material Weakness Material Noncompliance U.S. Department of Education Through Georgia Department of Education Special Education Cluster (CFDA 84.027 and 84.173) Title I Grants to Local Educational Agencies (CFDA 84.010) Through Wheeler County Board of Education Safe Schools/Healthy Students Initiative (CFDA 84.184) Finding Control Number: FA-7031-08-02

Condition:

This is a repeat finding (FA-7031-07-02) from the year ended June 30, 2007. Certifications and documentation based on time distribution records, as required by Federal guidelines, were not available for a number of School District employees whose salaries were paid from Federal programs.

Criteria:

Provisions of 0MB Circular A-87, Cost Principles for Determining Allowable Costs, require that salaries be documented as follows:
a) Personnel who work on one Federal award will be supported by a semiannual certification. The certifications will be signed by the employee and/or immediate supervisor.
b) For those personnel who work on multiple Federal activities or a Federal activity and non-Federal activity, a distribution oftheir salaries or wages to the Federal awards will be based on personnel-activityreports (PARs). The PARs shall reflect after-the-fact certification of time and effort of each employee on all activities. PARs are to be prepared monthly and signed by the employee.

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MONTGOMERY COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2008

III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

Finding Control Number: FA-7031-08-02 (continued)

Questioned Cost:

$143,429 Special Education Cluster (CFDA 84.027 and 84.173) $43,865 Title I Grants to Local Educational Agencies (CFDA 84.010) $26,064 Safe Schools/Healthy Students Initiative (CFDA 84.184) $73,500

Information:

Based on a review ofemployees' payroll records, the following deficiencies were noted:
a) Several employees whose salaries were charged solely to a Federal program were not supported with the required semi-annual certifications.
b) Selected employees whose salaries were paid from multiple Federal programs did not have the required personnel activity reports (PARs) supporting time and effort.

Cause:

Federal Program Directors and payroll personnel were unaware of the Federal requirements for documenting actual time and effort for Federal personnel and, as a result, the required certifications and PARs were not completed and used as basis for documenting salary charges to each of the Federal programs.

Effect:

Because ofthe School District's failure to maintain the required semi-annual certifications and PARs supporting time and effort, it could not be determined if the correct amounts of salaries for these employees were properly charged to the appropriate Federal grant awards.

Recommendation:

In accordance with Federal regulations, the School District should implement procedures to ensure that appropriate time and effort records are prepared and maintained for all personnel working on Federal programs. Management should ensure that all salaries charged to the Federal programs are commensurate with actual time devoted to those Federal programs. The affected grantors should review documentation to determine if refunds are appropriate.

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MONTGOMERY COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2008

III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

ALLOWABLE COSTS/COST PRINCIPLES Excessive Compensation Material Weakness Material Noncompliance U.S. Department of Education Through Wheeler County Board of Education Safe Schools/Healthy Students Initiative (CFDA 84.184) U.S. Department of Health and Human Services Finding Control Number: FA-7031-08-03

Condition:

This is a repeat finding (FA-7031-07-03) from the year ended June 30, 2007. Inappropriate reimbursements and compensation were paid to employees and charged to the Safe Schools/Healthy Students Initiative (CFDA 84.184) program.

Criteria:

Provisions of 0MB Circular A-87, Cost Principles for Determining Allowable Costs, require that costs charged to a Federal award are necessary and reasonable for proper and efficient performance and administration ofthe Federal program award. A cost should be allocable to the Federal award in accordance with the benefits received. Furthermore, consideration should be given as to whether (1) individuals acted with prudence in the circumstances considering their responsibilities to the government unit and the Federal government and (2) significant deviations from established practices would unjustifiably increase the cost of the Federal award.

Questioned Cost:

$9,751 Safe Schools/Healthy Students Initiative (CFDA 84.184) $9,751

Information:

We noted the following deficiencies relative to the compensation paid and charged to Federal programs:
1. The Safe Schools/Healthy Students Initiative fund was charged a total of $68,500 for the salary of the Project Director to carry out his full time duties on this program. This was in line with the Federal agency's approved budget for the July 2007 through June 2008 grant period. Although paid a monthly salary to conduct his full time duties for the 12 month grant period, we noted that the Project Director was

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MONTGOMERY COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2008

III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

Finding Control Number: FA-7031-08-03 (continued)

reimbursed $5,251 for time and effort on the program for July 2007. The reimbursement was approved by the Project Director and was based on time sheets reflecting number of hours he worked on this program. We found that while the Board had no written contract with the Project Director, the Project Director viewed his position to be carried out for a 190 day work year. Ifneeded, summer hours could be documented with approved time cards as long as it was within budget. He advised that he was given verbal approval from the Superintendents ofthe three participating Boards ofEducation to receive the additional compensation for hours worked during the summer months. However, two of the three Superintendents who were available during the prior year's audit advised that it was their understanding that his compensation would be in line with the budget approved for the Project Director's position for the twelve month grant period and there was no discussion or approval given the Project Director for any further compensation that would be charged to the grant. 2. The Mental Health Coordinator received a $4,500 increase in compensation that was charged to the Safe Schools/Healthy Students program without any documentation. The Project Director approved a 10% increase in compensation for the Mental Health Coordinator in September 2006 based upon the Coordinator verbally advising him that she acquired a Licensed Professional Counselor (LPC) license. Board files had no record of the Coordinator's license and upon request, neither the Project Director nor the Mental Health Coordinator could provide documentation that the Coordinator had actually received the license.

Cause:

Management did not have controls and procedures in place to assure that: 1. The amount of compensation and terms of employment for those personnel funded from the Federal program was established by the three Superintendents governing activity for this program, nor was this documented in Board records, 2. compensation paid to personnel or employees and charged to the Federal program was clerically accurate and in accordance with an approved contract or pay scale, and 3. those professionals who attained additional professional credentials or certifications were documented on Board files and any added compensation provided to such personnel was determined on a reasonable basis.

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MONTGOMERY COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2008

III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

Finding Control Number: FA-7031-08-03 (continued)

Effect:

Excessive costs were charged to the Safe Schools/Healthy Students Initiative Project for (1) inappropriate reimbursements for time and effort ofpersonnel and (2) an increase in compensation to one other professional without documentation that the increase was justified.

Recommendation:

The School District should establish procedures to ensure that: 1. Adequate records are on file that document the amount of compensation, responsibilities, etc., of those personnel who are engaged in administering or carrying out the Safe Schools/Healthy Students Initiative Project Federal program activities, 2. reimbursements paid to program personnel and charged to Federal programs are in accordance with approved contracts or pay scales, and 3. copies of professional credentials/certifications are acquired and maintained for those personnel who attain such and any added compensation provided to affected personnel are determined on a reasonable basis.

The grantor organizations should review the above matter and determine ifa reclaim of funds is appropriate.

PERIOD OF AVAILABILITY OF FEDERAL FUNDS Expenditures Outside of Grant Period Material Weakness Material Noncompliance U.S. Department of Education Through Georgia Department of Education Special Education Cluster (CFDA 84.027 and 84.173) Reading First State Grants (CFDA 84.357) Title I Grants to Local Educational Agencies (CFDA 84.010) Through Wheeler County Board of Education Twenty-First Century Community Learning Centers (CFDA 84.287) Finding Control Number: FA-7031-08-04

Condition:

This is a repeat finding (FA-7031-07-04) from the year ended June 30, 2007. An examination oftransactions charged to various Federal programs revealed that expenditures occurring outside the grant period were charged to these programs.

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MONTGOMERY COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2008

III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

Finding Control Number: FA-7031-08-04 (continued)

Criteria:

The Uniform Administrative Requirements for Grants and Cooperative Agreements to State andLocal Governments states, in part, "where a funding period is specified, a grantee may charge to the award only costs resulting from obligations of the funding period".

Questioned Cost:

$46,253 Special Education Cluster (CFDA 84.027 and 84.173) $784 Reading First State Grants (CFDA 84.357) $42,406 Title I Grants to Local Educational Agencies (CFDA 84.010) $1,800 Twenty-First Century Community Leaming Centers (CFDA 84.287) $1,263

Information:

A review of transactions revealed that expenditures were charged to a number ofFederal programs for costs incurred prior to the beginning and/or subsequent to the end of the grant period.

Cause:

Management failed to adequately monitor compliance with Federal guidelines to ensure that expenditures were charged during the approved grant period.

Effect:

Failure to ensure that expenditures were charged in the correct grant period resulted in material noncompliance with the requirements of the Federal grant.

Recommendation:

The School District should implement adequate procedures to ensure that expenditures are charged to the appropriate grant period. The Georgia Department ofEducation and the Wheeler County Board ofEducation should review this matter to determine if a reclaim of funds is appropriate.

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MONTGOMERY COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2008

III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

PROCUREMENT AND SUSPENSION AND DEBARMENT Failure to Implement Procurement Procedures Material Weakness Material Noncompliance U.S. Department of Education Through Georgia Department of Education Special Education Cluster (CFDA 84.027 and 84.173) Reading First State Grants (CFDA 84.357) Title I Grants to Local Educational Agencies (CFDA 84.010) Through Wheeler County Board of Education Safe Schools/Healthy Students Initiative (CFDA 84.184) Twenty-First Century Community Leaming Centers (CFDA 84.287) Finding Control Number: FA-7031-08-05

Condition:

This is a repeat finding (FA-7031-07-05) from the year ended June 30, 2007. The School District did not have adequate controls in place over the procurement process for Special Education Cluster (CFDA 84.027 and 84.173), Reading First State Grants (CFDA 84.357), Title I Grants to Local Educational Agencies (CFDA 84.010), Safe Schools/Healthy Students Initiative (CFDA 84.184) and Twenty-First Century Community Learning Centers programs (CFDA 84.287).

Criteria:

The Uniform Administrative Requirements for Grants and Cooperative Agreements to State and Local Governments Subpart C- Post-Award Requirements _.36 Procurement establishes procurement standards for subgrantees. Specifically," ... subgrantees will use their own procurement procedures which reflect applicable State and local laws and regulations".

Questioned Cost: NIA

Information:

Testing revealed that the School District was not following the State Procurement guidelines and there were a number ofinstances where voucher packages did not contain the required documentation.

See Finding Control Number: FS-7031-08-02.

Purchases were made on a Program Director's personal credit card and reimbursement was made directly to the credit card company, thereby, circumventing normal procurement procedures. Additionally, no approval was obtained prior to purchase and/or payment related to these charges.

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MONTGOMERY COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2008

III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

Finding Control Number: FA-7031-08-05 (continued)

Cause:

Management failed to establish and exercise adequate control procedures over the procurement process related to purchases and/or contracts paid for with these Federal funds.

Effect:

Failure to ensure that proper procurement procedures were followed resulted in material noncompliance with the requirements of these Federal grants.

Recommendation: The School District should establish and implement adequate controls and procedures over the procurement process for Federal program purchases.

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SECTIONV MANAGEMENT'S RESPONSES

MONTGOMERY COUNTY BOARD OF EDUCATION SCHEDULE OF MANAGEMENT'S RESPONSES YEAR ENDED JUNE 30, 2008
Finding Control Number: FS-7031-08-01
We concur with this finding. A handbook was developed and training has been provided for school accounting personnel. The bank statements will be reconciled each month and reviewed by the principal. All unauthorized bank accounts using the School District's Federal Employee Identification (PEI) number have been closed. The principal will insure that proper documentation is available for all vouchers prior to payment approval.
Finding Control Number: FS-7031-08-02
We concur with this finding. The School Nutrition Director will insure that the bank statement for School Nutrition is reconciled monthly. The School Nutrition Director will insure that proper documentation is available for all vouchers prior to payment approval. Travel forms will be reviewed to insure proper documentation is received for all charges. Credit cards are no longer used. All donated funds will be accounted for separately.
Finding Control Number: FS-7031-08-03
We concur with this finding. Access to the system network is password protected. Additionally, access to the accounting system is password protected. Users have access to the parts of the accounting system that are needed to complete the job duties assigned; however, when access is given for one task the user is automatically granted access to other areas ofthe system that may not be necessary. This is due to the way access is offered through the accounting system and is beyond our control.
Finding Control Number: FS-7031-08-04
We concur with this finding. Salary changes and calculations will be documented and reviewed by the Finance Director for accuracy. A copy ofthe documentation will be kept at the central office and a copy will be provided to the employee.
Finding Control Number: FS-7031-08-05
We concur with this finding. The Finance Director and the Facilities Director will review the capital assets list for accuracy and insure that assets and depreciation are reported correctly.
Finding Control Number: FS-7031-08-06
We concur with this finding. The Financial Director and other financial staffwill attend training on financial reporting and implement the rules learned at the training.
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MONTGOMERY COUNTY BOARD OF EDUCATION SCHEDULE OF MANAGEMENT'S RESPONSES YEAR ENDED JUNE 30, 2008
Finding Control Number: FA-7031-08-01
We concur with this finding. The program director will insure that all costs are allowable under the grant rules. The program director and/or the superintendent will sign all invoices and time sheets indicating that the expense is appropriate and allowable. Grant expenditures will be monitored on a quarterly basis by the program director and the finance director to insure that the funds are expended and recorded accurately. The finance director will request reimbursements based on the expenditures for the period.
Finding Control Number: FA-7031-08-02
We concur with this finding. Semi-annual certifications will be signed and filed on employees paid solely out of federal funds. Monthly time documentation sheets will be utilized for employees who are split-funded.
Finding Control Number: FA-7031-08-03
We concur with this finding. Employees will be paid from a salary schedule and a supplement schedule. The Board approves the schedules. Contracts will be written according to the schedules and signed by the employee and the superintendent. Salary changes and calculations will be documented. The Finance Director will review the documentation for accuracy. A copy of the documentation will be kept at the central office and a copy will be provided to the employee.
Finding Control Number: FA-7031-08-04
We concur with this finding. Grants will be monitored closely and expenditures will be expended during the appropriate grant period.
Finding Control Number: FA-7031-08-05
We concur with this finding. The Accounts Payable Clerk will insure that a voucher package is prepared that includes a pre-approved purchase order, an invoice indicating the receipt ofgoods, and a copy of the check for payment. A procurement policy has been established and is enforced.
Contact Person: Lynda Greene, Finance Director Telephone: (912) 583-2301, Fax: (912) 583-4822 E-mail: lgreene@montgomery.k12.ga.us
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