PEACH COUNTY BOARD OF EDUCATION FORT VALLEY, GEORGIA REPORT ON AUDIT OF THE FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2006 STATE OF GEORGIA DEPARTMENT OF AUDITS AND ACCOUNTS Russell W. Hinton State Auditor PEACH COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS - SECTION I FINANCIAL INDEPENDENT AUDITOR'S COMBINED REPORT ON BASIC FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION - SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS EXHIBITS BASIC FINANCIAL STATEMENTS DISTRICT-WIDE FINANCIAL STATEMENTS A STATEMENT OF NET ASSETS 1 B STATEMENT OF ACTIVITIES 2 FUND FINANCIAL STATEMENTS C BALANCE SHEET GOVERNMENTAL FUNDS 4 D RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO THE STATEMENT OF NET ASSETS 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 8 H NOTES TO THE BASIC FINANCIAL STATEMENTS 9 SCHEDULES REQUIRED SUPPLEMENTARY INFORMATION 1 SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL GENERAL FUND 25 SUPPLEMENTARY INFORMATION 2 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS 26 3 SCHEDULE OF STATE REVENUE 28 PEACH COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS - SECTION I FINANCIAL SCHEDULES SUPPLEMENTARY INFORMATION 4 SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS 29 5 ALLOTMENTS AND EXPENDITURES GENERAL FUND - QUALITY BASIC EDUCATION PROGRAMS (QBE) BY PROGRAM 31 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 PEACH 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 May 9, 2007 Honorable Sonny Perdue, Governor Members of the General Assembly Members ofthe State Board of Education and Superintendent and Members ofthe Peach 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 Peach County Board of Education, as of and for the year ended June 30, 2006, which collectively comprise the Board's basic financial statements as listed in the table of contents. These financial statements are the responsibility ofthe Peach 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 ofmaterial misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our op1mons. In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, each major fund, and the aggregate remaining fund information of the Peach County Board of Education, as of June 30, 2006, 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. 2006ARL-11 The Peach County Board of Education has not presented Management's Discussion and Analysis that accounting principles generally accepted in the United States has determined is necessary to supplement, although not to be part of, the basic financial statements. In accordance with Government Auditing Standards, we have also issued our report dated May 9, 2007, on our consideration ofthe Peach County Board ofEducation's internal control over financial reporting and our tests of its compliance with certain provisions oflaws, regulations, contracts and grant agreements and other matters. The purpose ofthat report is to describe the scope ofour testing ofinternal control over financial reporting and compliance and the results ofthat 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 25, 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 Peach County Board of Education's basic financial statements. The accompanying supplementary information which consist of Schedules 2 through 5, which includes the Schedule of Expenditures of Federal Awards as required by U.S. Office of Management and Budget Circular A-133, Audits ofStates, Local Governments, and Non-Profit Organizations, are presented for purposes of additional analysis and are not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied 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, ~ . CQw~ Russell W. Hinton, CPA, CGFM State Auditor RWH:gp 2006ARL-11 PEACH COUNTY BOARD OF EDUCATION PEACH COUNTY BOARD OF EDUCATION STATEMENT OF NET ASSETS JUNE 30, 2006 ASSETS Cash and Cash Equivalents Investments Accounts Receivable, Net Taxes State Government Federal Government Other Inventories Capital Assets Land Construction in Progress Land Improvements Buildings Equipment Less: Accumulated Depreciation Total Assets LIABILITIES Accounts Payable Salaries Payable Short-Term Debt 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 Debt Service Capital Projects Unrestricted Total Net Assets Total Liabilities and Net Assets The notes to the basic financial statements are an integral part of this statement. -1- EXHIBIT"A" GOVERNMENTAL ACTIVITIES $ 4,579,236 4,796,932 1,090,984 2,386,579 1,464,349 19,670 42,985 714,159 155,204 376,119 23,830,212 5,947,496 -16,516,502 $ ===2=8..8.8.=7=,4=23= $ 1,615,419 2,948,002 487,396 6,463 767,858 9,820,977 $ 15,646,115 $ 3,917,853 280,897 3,705,550 1,026,624 4,310,384 $ 13,241,308 $ ===2=8,=88=7=,4=2===3 PEACH COUNTY BOARD OF EDUCATION STATEMENT OF ACTIVITIES FOR THE YEAR ENDED JUNE 30, 2006 GOVERNMENTAL ACTIVITIES Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Operations of Non-Instructional Services Enterprise Operations Food Services Interest on Short-Term and Long-Term Debt Total Governmental Activities General Revenues Taxes Property Taxes For Maintenance and Operations For Debt Services Sales Taxes Special Purpose Local Option Sales Tax For Debt Services For Capital Projects Intangible Recording Tax Real Estate Grants and Contributions not Restricted to Specific Programs Investment Earnings Miscellaneous Total General Revenues Change in Net Assets Net Assets - Beginning of Year EXPENSES CHARGES FOR SERVICES $ 21,422,831 $ 1,061,335 942,887 664,379 619,832 2,166,265 229,250 2,387,853 1,671,700 164,992 85,048 341,981 1,979,819 571 324 $====34=,3=09=,4=96= $ 87,235 31,101 140,403 381,361 448,075 1,088,175 Net Assets - End of Year The notes to the basic financial statements are an integral part of this statement. -2- EXHIBIT"B" PROGRAM REVENUES OPERATING CAPITAL GRANTS AND GRANTS AND CONTRIBUTIONS CONTRIBUTIONS NET (EXPENSES) REVENUES AND CHANGES IN NET ASSETS $ 15,580,731 508,024 627,508 393,776 792,523 914,646 3,916 1,117,465 754,705 $ 583 159,992 1,616,859 $ 22,470,728 $ $ 97,719 97 719 $ -5,754,865 -553,311 -315,379 -239,502 172,691 -1,111,216 -225,334 -1,270,388 -819,276 -164,409 74,944 39,380 85,115 -571 324 -10,652,874 $ 6,481,119 40 25,906 1,661,487 174,172 86,449 2,430,883 315,542 138,653 $ 11,314,251 $ 661,377 12,579,931 $ =====13_,2=4=1,=30=8= -3- PEACH COUNTY BOARD OF EDUCATION BALANCE SHEET GOVERNMENTAL FUNDS JUNE 30, 2006 EXHIBIT"C" ASSETS. Cash and Cash Equivalents Investments Accounts Receivable, Net Taxes State Government Federal Government Other Inventories Total Assets LIABILITIES AND FUNO BALANCES LIABILITIES Cash Overdraft Accounts Payable Salaries Payable Short-Term Debt Deposits and Deferred Revenue Total Liabilities FUND BALANCES Reserved for: Continuation of Federal Programs Debt Service Inventories Capital Projects Unreserved Undesignated Reported in: General Fund Capital Projects Total Fund Balances Total Liabilities and Fund Balances GENERAL FUND DISTRICTWIDE CAPITAL PROJECTS FUND DEBT SERVICE FUND TOTAL $ 4,624,408 156,294 $ 416,878 2,386,579 1,464,349 19,670 42,985 $ 938,117 630,607 2,995 $ 3,702,521 34 4,627,403 4,796,932 1,047,519 2,386,579 1,464,349 19,670 42,985 $ 9,111,163 $ 1,568,724 $ 3,705,550 $ 14,385,437 $ $ 1,615,419 2,948,002 6463 $ 4,569,884 $ 48,167 487,396 535,563 $ 48,167 1,615,419 2,948,002 487,396 6463 $ 5,105,447 $ 237,912 $ 237,912 $ 3,705,550 3,705,550 42,985 42,985 $ 1,026,624 1,026,624 4,260,382 6 537 4,260,382 6 537 $ 4,541,279 $ 1,033,161 $ 3,705,550 $ 9,279,990 $ 9,111,163 $ 1,568,724 $ 3,705,550 $ 14,385,437 The notes to the basic financial statements are an integral part of this statement. -4- PEACH COUNTY BOARD OF EDUCATION RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO THE STATEMENT OF NET ASSETS JUNE 30, 2006 EXHIBIT"D" Total Fund Balances - Governmental Funds (Exhibit "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 Construction in Progress 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. Long-Term Liabilities, including Bonds Payable, are not due and payable in the current period and therefore are not reported as liabilities in the funds. Long-Term Liabilities at year-end consist of: Bonds Payable Capital Leases Total Long-Term Liabilities $ 9,279,990 $ 714,159 155,204 376,119 23,830,212 5,947,496 -16,516,502 14,506,688 43,465 $ -10,325,000 -263,835 -10,588,835 Net Assets of Governmental Activities (Exhibit "A") $ 13,241,308 The notes to the basic financial statements are an integral part of this statement. -5- PEACH COUNTY BOARD OF EDUCATION STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS YEAR ENDED JUNE 30, 2006 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 Central Support 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 DEBT SERVICE FUND TOTAL $ 7,416,652 260,621 $ 19,610,823 5,388,507 1,088,175 135,599 138,653 $ 34,039,030 $ $ 1,661,487 7,499 1,668,986 $ 40 $ 25,906 172,444 7,416,692 1,948,014 19,610,823 5,388,507 1,088,175 315,542 138,653 198,390 $ 35,906,406 $ 20,406,685 1,061,335 942,887 664,379 619,832 2,148,070 265,675 $ 2,350,438 1,680,355 164,992 97,333 341,981 1,961,020 151,808 18,322 $ 32,875,112 $ $ 1,163,918 $ 3,377,361 $ 20,406,685 2,595 $ 639,505 6,567 1,061,335 942,887 664,379 619,832 2,148,070 274,837 2,350,438 1,680,355 164,992 97,333 341,981 1,961,020 639,505 640,000 553,002 791,808 571,324 642,100 $ 1,199,569 $ 34,716,781 1,026,886 $ -1,001, 179 $ 1,189,625 6,275 4,706,729 8,090,365 $ 4,541,279 $ 1,033,161 $ 3,705,550 $ 9,279,990 The notes to the basic financial statements are an integral part of this statement. -6- PEACH COUNTY BOARD OF EDUCATION RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES TO THE STATEMENT OF ACTIVITIES JUNE 30, 2006 EXHIBIT"F" Total Net Change in Fund Balances - Governmental Funds (Exhibit "E") 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: Bond Principal Retirements Capital Lease Payments Total Long-Term Debt Repayments $ 1,189,625 $ 985,603 -1,370,126 -384,523 -935,533 $ 640,000 151,808 791,808 Change in Net Assets of Governmental Activities (Exhibit "B") $ ===66,...1=3=7=7 The notes to the basic financial statements are an integral part of this statement. -7- PEACH COUNTY BOARD OF EDUCATION STATEMENT OF FIDUCIARY NET ASSETS FIDUCIARY FUNDS JUNE 30, 2006 ASSETS Cash and Cash Equivalents Accounts Receivable, Net Other Total Assets LIABILITIES Funds Held for Others EXHIBIT"G" AGENCY FUNDS $ 120,584 24,862 $ ===1=4=5 !4=46= $ ===1=4=5 4!=46= The notes to the basic financial statements are an integral part of this statement. -8- PEACH COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2006 EXHIBIT"H" Note 1: DESCRIPTION OF SCHOOL DISTRICT AND REPORTING ENTITY REPORTING ENTITY The Peach County Board ofEducation (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 Peach 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. -9- PEACH COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2006 EXHIBIT"H" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The School District reports the following major governmental funds: General Fund is the School District's primary operating fund. It accounts for all financial resources ofthe School District, except those resources required to be accounted for in another fund. District-wide Capital Projects Fund accounts for financial resources including Special Purpose Local Option Sales Tax (SPLOST) to be used for the acquisition, construction or renovation of major capital facilities. Debt Service Fund accounts for taxes (property and sales) legally restricted for the payment of general long-term principal, interest and paying agent's fees. The School District reports the following fiduciary fund type: Agency funds account for assets held by the School District as an agent for various funds, governments or individuals. BASIS OF ACCOUNTING The basis ofaccounting determines when transactions are reported on the financial statements. The District-wide governmental and fiduciary fund financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded at the time liabilities are incurred, regardless of when the related cash flows take place. Nonexchange transactions, in which the School District gives (or receives) value without directly receiving (or giving) equal value in exchange, include property taxes, sales taxes and grants. 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 - 10 - PEACH COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2006 EXHIBIT "H" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES liability is incurred, except for principal and interest on general long-term debt, which are recognized as expenditures to the extent they have matured. Capital asset acquisitions are reported as expenditures in governmental funds. Proceeds ofgeneral long-term liabilities and acquisitions under capital leases are reported as other financing sources. The School District funds certain programs by a combination ofspecific cost-reimbursement grants, categorical grants, and general revenues. Thus, when program costs are incurred, there are both restricted and unrestricted net assets available to finance the program. It is the School District's policy to first apply grant resources to such programs, followed by cost-reimbursement grants, then general revenues. CASH AND CASH EQUIVALENTS COMPOSITION OF DEPOSITS Cash and cash equivalents consist ofcash on hand, demand deposits and short-term investments with original maturities of three months or less from the date of acquisition in authorized financial institutions. Georgia Laws OCGA 45-8-14 authorize the School District to deposit its funds in one or more solvent banks or insured Federal savings and loan associations. INVESTMENTS COMPOSITION OF INVESTMENTS Investments made by the School District in nonparticipating interest-earning contracts (such as certificates ofdeposit) and repurchase agreements are reported at cost. Participating interest-earning contracts and money market investments with a maturity at purchase ofone year or less are reported at amortized cost. Both participating interest-earning contracts and money market investments with a maturity at purchase greater than one year are reported at fair value. The Official Code ofGeorgia Annotated Section 36-83-4 authorizes the School District to invest its funds. In selecting among options for investment or among institutional bids for deposits, the highest rate ofreturn shall be the objective, given equivalent conditions of safety and liquidity. Funds may be invested in the following: (1) Obligations issued by the State of Georgia or by other states, (2) Obligations issued by the United States government, (3) Obligations fully insured or guaranteed by the United States government or a United States government agency, (4) Obligations of any corporation of the United States government, (5) Prime banker's acceptances, - 11 - PEACH COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2006 EXHIBIT"H" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (6) The Local Government Investment Pool administered by the State of Georgia, Office of Treasury and Fiscal Services, (7) Repurchase agreements, and (8) Obligations of other political subdivisions of the State of Georgia. The School District does not have a formal policy regarding investment policies that address credit risks, custodial credit risks, concentration ofcredit risks, interest rate risks or foreign currency risks. 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 Peach County Board ofCommissioners fixed the property tax levy for the 2005 tax digest year (calendar year) on October 7, 2005 (levy date). Taxes were due on December 20, 2005 (lien date). Taxes collected within the current fiscal year or within 60 days after year-end on the 2005 tax digest are reported as revenue in the governmental funds for fiscal year 2006. The Peach 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 of taxes collected to the School District. Property tax revenues, at the fund reporting level, during the fiscal year ended June 30, 2006, for maintenance and operations amounted to $7,416,652 and for school bonds amounted to $40. The tax millage rate levied for the 2005 tax year (calendar year) for the Peach County Board of Education was as follows (a mill equals $1 per thousand dollars of assessed value): School Operations 15 .463 mills SALES TAXES Special Purpose Local Option Sales Tax, at the fund reporting level, during the year amounted to $1,687,393 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. - 12 - PEACH COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2006 EXHIBIT "H" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES INVENTORIES FOOD INVENTORIES On the basic financial statements, inventories ofdonated food commodities used in the preparation ofmeals are reported at their Federally assigned value and purchased foods inventories are reported at cost (first-in, first-out). The School District uses the consumption method to account for inventories whereby donated food commodities are recorded as an asset and as revenue when received, and expenses/expenditures are recorded as the inventory items are used. Purchased foods are recorded as an asset when purchased and expenses/expenditures are recorded as the inventory items are used. CAPITAL ASSETS Capital assets purchased, including capital outlay costs, are recorded as expenditures in the fund financial statements at the time of purchase (including ancillary charges). On the District-wide financial statements, all purchased capital assets are valued at cost where historical records are available and at estimated historical cost based on appraisals or deflated current replacement cost where no historical records exist. Donated capital assets are recorded at estimated fair market value on the date donated. Disposals are deleted at depreciated recorded cost. The cost of normal maintenance and repairs that do not add to the value ofassets or materially extend the useful lives of the assets is not capitalized. Depreciation is computed using the straight-line method. The School District does not capitalize book collections or works of art. Capitalization thresholds and estimated useful lives of capital assets reported in the District-wide statements are as follows: Capitalization Policy Estimated Useful Life Land Land Improvements Buildings and Improvements Equipment Any Amount $ 5,000 $ 5,000 $ 5,000 NIA 20 to 80 years 10 to 80 years 3 to 20 years Depreciation is used to allocate the actual or estimated historical cost of all capital assets over estimated useful lives. GENERAL OBLIGATION BONDS The School District issues general obligation bonds to provide funds for the acquisition and construction of major capital facilities. Bond issuance costs are recognized in the financial statements during the fiscal year bonds are issued. In addition, general obligation bonds have been - 13 - PEACH COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2006 EXHIBIT "H" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES issued to refund existing general obligation bonds. General obligation bonds are direct obligations and pledge the full faith and credit of the government. The outstanding amount of these bonds is recorded in the Statement of Net Assets. Note 3: DEPOSITS AND INVESTMENTS COLLATERALIZATION OF DEPOSITS Official Code of Georgia Annotated (OCGA) Section 45-8-12 provides that there shall not be on deposit at any time in any depository for a time longer than ten days a sum of money which has not been secured by surety bond, by guarantee ofinsurance, or by collateral. The aggregate ofthe face value of such surety bond and the market value of securities pledged shall be equal to not less than 110 percent ofthe public funds being secured after the deduction ofthe amount ofdeposit insurance. Ifa depository elects the pooled method (OCGA 45-8-13.1) the aggregate ofthe market value ofthe securities pledged to secure a pool ofpublic funds shall be not less than 110 percent ofthe daily pool balance. Acceptable security for deposits consists of any one of or any combination of the following: (1) Surety bond signed by a surety company duly qualified and authorized to transact business within the State of Georgia, (2) Insurance on accounts provided by the Federal Deposit Insurance Corporation, (3) Bonds, bills, notes, certificates of indebtedness or other direct obligations of the United States or of the State of Georgia, (4) Bonds, bills, notes, certificates of indebtedness or other obligations of the counties or municipalities ofthe 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 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. - 14 - PEACH COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2006 EXHIBIT "H" Note 3: DEPOSITS AND INVESTMENTS CATEGORIZATION OF DEPOSITS At June 30, 2006, the bank balances were $5,669,285. The amounts of the total bank balances are classified into four categories of custodial credit risk: Category 1 - Cash that is insured (e.g., Federal Deposit Insurance) or collateralized with securities held by the School District or by the School District's agent in the School District's name. Category 2 - Cash collateralized with securities held by the pledging financial institution's trust department or agent in the School District's name. Category 3 - Cash collateralized with securities held by the pledging financial institution, or by its trust department or agent but not in the School District's name. Category 4 - Uncollateralized. The School District's deposits are classified by custodial credit risk category at June 30, 2006, as follows: Custodial Credit Risk Category Bank Balance 1 $ 227,191 2 5,442,094 3 0 4 0 Total $ 5,669.285 CATEGORIZATION OF INVESTMENTS Custodial Credit Risk Custodial credit risk for investments is the risk that, in the event of a failure ofthe counterparty to a transaction, the School District will not be able to recover the value of the investment or collateral securities that are in the possession ofan outside party. The School District does not have a formal policy for managing custodial credit risk. Investments are classified as to custodial credit risk by the categories described below: Category 1 - Insured or registered, or securities held by the School District or the School District's agent in the School District's name. Category 2 - Uninsured or unregistered, with securities held by the counterparty's trust department or agent in the School District's name. Category 3 - Uninsured or unregistered, with securities held by the counterparty's trust department or agent, but not in the School District's name. - 15 - PEACH COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2006 EXHIBIT"H" Note 3: DEPOSITS AND INVESTMENTS Funds invested in an investment pool managed by another government are not required to be categorized unless the investing entity owns specific, identifiable investment securities in the pool. At June 30, 2006, the carrying value ofthe School District's total investments was $4,772,638 which is materially the same as fair value. These investments included funds in the amount of$4,753,295 invested in the Local Government Investment Pool administered by the State ofGeorgia, Office of Treasury and Fiscal Services which are not required to be categorized since the School District did not own any specific identifiable securities in the pool. The investment policy of the State of Georgia, Office ofTreasury and Fiscal Services for the Local Government Investment Pool (Primary Liquidity Portfolio) does not provide for investment in derivatives or similar investments. A description of the Primary Liquidity Portfolio is as follows: The Primary Liquidity Portfolio consists of Georgia Fund 1, which is a combination local and state government investment pool. Georgia Fund 1 is a stable net asset value investment pool which follows Standard and Poor's criteria for AAAm rated money market funds. The pool is not registered with the SEC as an investment company but does operate Georgia Fund 1 in a manner consistent with Rule 2a-7 of the Investment Company Act of 1940. The pool's primary objectives are safety of capital, investment income, liquidity and diversification while maintaining principal ($1.00 per share value). Net asset value is calculated daily and reported to the rating agency weekly to ensure stability. The pool distributes earnings (net of management fees) on a monthly basis and values participant's shares sold and redeemed at the pool's share price, $1.00 per share. Pooled cash and cash equivalents and investments are reported at cost. The pool does not issue any legally binding guarantees to support the value of the shares. Participation in the pool is voluntary and deposits consist of funds from local governments; operating and trust funds of Georgia's state agencies, colleges and universities; and current operating funds of the State of Georgia's General Fund. Investments in Georgia Fund 1 are directed toward short-term instruments such as U.S. Treasury obligations, securities issued or guaranteed as to principal and interest by the U. S. Government or any of its agencies or instrumentalities, banker's acceptances and repurchase agreements. The weighted average maturity of Georgia Fund 1 may not exceed 60 days. The weighted average maturity for Georgia Fund 1 on June 30, 2006, was 28 days. At June 30, 2006, the carrying value of the School District's investments was $4,772,638 which is materially the same as fair value. Fair value is based on quoted market prices, unless otherwise noted. The investments are classified as to custodial credit risk categories as follows: - 16 - PEACH COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2006 EXHIBIT "H" Note 3: DEPOSITS AND INVESTMENTS Type oflnvestment Debt Securities U. S. Treasuries $ Investment Pools Office ofTreasury and Fiscal Services Georgia Fund I Total Investments Risk Categories 2 3 Carrying Amount Fair Value )9343 $====- $.====-0 $ 19,343 $ 19,343 4,753,295 4,753,295 $ 4 772 638 $ 4 772 638 Interest Rate Risk Interest rate risk is the risk that changes in interest rates ofdebt investment will adversely affect the fair value ofan investment. The School District does not have a formal policy for managing interest rate risk. At June 30, 2006, the School District's investment consisted of $19,343 which had an investment maturity of 1 - 5 years. 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: - 17 - PEACH COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2006 EXHIBIT"H" Note 5: CAPITAL ASSETS Balances July 1. 2005 Increases Balances Decreases June 30, 2006 Governmental Activities Capital Assets, Not Being Depreciated: Land Construction in Progress $ 229,858 $ 484,301 $ 0 155.204 0 $ 714,159 155,204 Total Capital Assets Not Being Depreciated $ 229,858 $ 639,505 $ 0 $ 869,363 Capital Assets Being Depreciated Buildings and Improvements Equipment Land Improvements $ 23,824,412 $ 5,706,460 369,264 5,800 333,443 $ 6,855 $ 23,830,212 92,407 5,947,496 376,119 Less Accumulated Depreciation for: Buildings and Improvements Equipment Land Improvements 11,585,682 3,323,094 330.007 957,869 403,361 8,896 92,407 12,543,551 3,634,048 338,903 Total Capital Assets, Being Depreciated, Net $ 14.661.353 $ -1.024.028 $ Governmental Activity Capital Assets - Net $ 14,891.211 $ -384.523 $ 0 $ 13,637.325 0 $ 14.506.688 Capital assets being acquired under capital leases as of June 30, 2006, are as follows: Governmental Funds Equipment Less: Accumulated Depreciation $ 306,160 127,737 Current year depreciation expense by function is as follows: Instruction Support Services School Administration $ Business Administration Maintenance and Operation ofPlant Student Transportation Services Other Support Services Food Services $ 1,107,306 18,195 9,118 50,070 165,273 1,365 244,021 18,799 $ 1,3'.Z0,126 - 18 - PEACH COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2006 EXHIBIT "H" Note 6: RESTRICTED ASSETS Special Purpose Local Option Sales Tax (SPLOST) and property tax levied specifically for retirement of outstanding bond principal, interest and paying agent's fees (Debt Service Funds) are reported as restricted assets in the Statement ofNet Assets because their use is limited by applicable bond covenants or statutory provisions. Restricted assets at June 30, 2006, were as follows: District-wide Capital Projects SPLOST Debt Service Funds Restricted Cash and Cash Equivalents: Debt Services Restricted Investments: Debt Services Capital Acquisitions $ 2,995 $ 3,702,521 $ 931,580 Note7: RISKMANAGEMENT The School District is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors or omissions; job related illness or injuries to employees; acts of God and unemployment compensation. The School District has obtained commercial insurance for risk of loss associated with torts, assets and errors or omissions. The School District has neither significantly reduced coverage for these risks nor incurred losses (settlements) which exceeded the School District's insurance coverage in any of the past three years. The School District has elected to self-insure for all losses related to acts of God. The School District has not experienced any losses related to this risk in the past three years. The School District is self-insured with regard to unemployment compensation claims. The School District accounts for claims within the General Fund with expenses/expenditures and liability being reported when it is probable that a loss has occurred, and the amount of that loss can be reasonably estimated. Changes in the unemployment compensation claims liability during the last two fiscal years are as follows: - 19 - PEACH COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2006 EXHIBIT"H" Note 7: RISK MANAGEMENT 2005 2006 Beginning of Year Liability Claims and Changes in Estimates Claims Paid End of Year Liability $ 0 $ 18,553 $ 18,553 $ 0 $ 0 $ 7,052 $ 7,052 $ 0 The School District participates in the Georgia Education Workers' Compensation Trust, a public entity risk pool organized on December 1, 1991, to develop, implement and administer a program of workers' compensation self-insurance for its member organizations. The School District pays an annual premium to the Trust for its general insurance coverage. Additional insurance coverage is provided through an agreement by the Trust with the Midwest Employers Casualty Company to provide coverage for potential losses sustained by the Trust in excess of $500,000 loss per occurrence, up to $2,000,000. The School District has purchased surety bonds to provide additional insurance coverage as follows: Position Covered Amount Superintendent Finance Director All Employees $ 50,000 $ 50,000 $ 25,000 Note 8: SHORT-TERM DEBT The School District issues tax anticipation notes in advance ofproperty tax collections, depositing the proceeds in its General Fund. This short-term debt is to provide cash for operations until property tax collections are received by the School District. Article IX, Section V, Paragraph V of the Constitution ofthe State ofGeorgia limits the aggregate amount ofshort-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 Tax Anticipation Notes $==~0 $ 956.497 $ 469.101 $ 487,396 - 20- PEACH COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2006 EXHIBIT "H" Note 9: LONG-TERM DEBT CAPITAL LEASES The Peach County Board ofEducation has entered into various lease agreements as lessee for buses and retrofit lighting. These lease agreements qualify as capital leases for accounting purposes and, therefore, have been recorded at the present value of the future minimum lease payments as of the date of their inception. GENERAL OBLIGATION DEBT OUTSTANDING General Obligation Bonds currently outstanding are as follows: Purpose Interest Rates Amount General Government - Series 1994 5.10% - 6.50% General Government - Refunding - Series 1998 3.70% - 4.80% $ 1,740,000 8,585,000 $ 10,325.000 Voters have authorized $15,000,000 in general obligation debt for various capital outlay projects. The changes in Long-Term Debt during the fiscal year ended June 30, 2006, were as follows: Governmental Funds General Capital Obligation Leases Bonds Total Balance July 1, 2005 $ 415,643 $ 10,965,000 $ 11,380,643 Deductions Debt Retired 151,808 640,000 791,808 Balance June 30, 2006 $ 263,835 $ 10,325,000 $ 10,588.835 Portion of Long-Term Debt Due within One Year $_ _"'-"92=,8=5-"'8 $ 675,000 $ 767,858 At June 30, 2006, payments due by fiscal year which includes principal and interest for these items are as follows: - 21 - PEACH COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2006 EXHIBIT "H" Note 9: LONG-TERM DEBT Fiscal Year Ended June 30 2007 2008 2009 2010 2011 2012 Total Principal and Interest Ca12ital Leases Princi12al Interest $ 92,858 $ 11,959 31,023 8,327 32,534 6,816 34,118 5,231 35,780 3,570 37,522 1,827 $ 263,835 $ 37 730 Fiscal Year Ended June 30 General Obligation Debt Princi12al Interest 2007 2008 2009 2010 2011 2012 - 2016 2017 - 2018 $ 675,000 $ 513,932 705,000 472,745 745,000 429,545 780,000 383,888 805,000 348,787 4,540,000 1,154,918 2,075.000 149.973 Total Principal and Interest $ 10,325,000 $ 3,453,788 Note 10: 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. Note 11: 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 - 22 - PEACH COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2006 EXHIBIT"H" Note 11: RETIREMENT PLANS 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% oftheir gross earnings to TRS. The School District makes monthly employer contributions to TRS at rates adopted by the TRS Board ofTrustees in accordance with State statute and as advised by their independent actuary. The required employer contribution rate is 9.24% and employer contributions for the current fiscal year and the preceding two fiscal years are as follows: Fiscal Year Percentage Contributed Required Contribution 2006 2005 2004 100% 100% 100% $ 1,729,531 $ 1,658,553 $ 1,644,635 - 23 - (This page left intentionally blank) PEACH COUNTY BOARD OF EDUCATION GENERAL FUND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL YEAR ENDED JUNE 30, 2006 SCHEDULE "1" REVENUES Property Taxes Sales Taxes State Funds Federal Funds Charges for Services Investment Earnings Miscellaneous Total Revenues EXPENDITURES Current Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Enterprise Operations Food Services Operation Debt Service Total Expenditures Net Change in Fund Balances Fund Balances - Beginning NONAPPROPRIATED BUDGETS ORIGINAL (1) FINAL (1) ACTUAL AMOUNTS $ 7,400,000 $ 7,400,000 $ 7,416,652 50,000 50,000 260,621 18,705,760 18,861,451 19,610,823 5,505,234 5,388,507 9,000 464,800 1,088,175 50,000 54,000 135,599 85000 85 870 138 653 $ 26,299,760 $ 32,421,355 $ 34,039,030 $ 17,770,529 $ 20,436,501 $ 20,406,685 697,973 288,149 659,957 401,875 2,202,408 304,729 2,280,219 1,731,553 147,555 78,262 11,482 39 500 1,132,538 893,413 659,957 708,687 2,267,116 304,729 2,280,551 1,891,641 147,555 165,835 1,895,322 39 500 1,061,335 942,887 664,379 619,832 2,148,070 265,675 2,350,438 1,680,355 164,992 97,333 341,981 1,961,020 170 130 $ 26,614,191 $ 32,823,345 $ 32,875,112 $ -314,431 $ -401,990 $ 1,163,918 3 343 814 3 343 814 3 377 361 Fund Balances - Ending $ 3,029,383 $ 2,941,824 $ ===4=5=4=1=27=9= 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. - 25 - PEACH COUNTY BOARD OF EDUCATION SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS YEAR ENDED JUNE 30, 2006 SCHEDULE "2" FUNDING AGENCY PROGRAM/GRANT Agriculture, U. S. Department of Child Nutrition Cluster Pass-Through From Georgia Department of Education Food Services School Breakfast Program National School Lunch Program Total Child Nutrition Cluster Other Programs Pass-Through From Georgia Department of Education Food Donation (1) Total U. S. Department of Agriculture Education, U. S. Department of Special Education Cluster Pass-Through From Georgia Department of Education Special Education Grants to States Preschool Grants Total Special Education Cluster Other Programs Pass-Through From Georgia Department of Education Comprehensive School Reform Demonstration English Language Acquisition Grants Enhancing Education Through Technology Program Even Start Hurricane Education Recovery Grant Improving Teacher Quality State Grants Migrant Education Reading First State Grants Rural Education State Grants for Innovative Programs Title I Grants to Local Educational Agencies Vocational Education - Basic Grants to States Pass-Through From Jones County Board of Education Fund for the Improvement of Education Total U. S. Department of Education Defense, U.S. Department of Direct Department of the Air Force R.O.T.C. Program Total Federal Financial Assistance N/A = Not Available -26- CFDA NUMBER PASSTHROUGH ENTITY ID NUMBER EXPENDITURES IN PERIOD . 10.553 10.555 N/A NIA $ $ (2) 1,766,410 1,766,410 10.550 N/A $ 64865 1,831,275 84.027 84.173 NIA $ N/A $ 710,077 18 906 728,983 84.332 84.365 84.318 84.213 84.938 84.367 84.011 84.357 84.358 84.298 84.010 84.048 84.215 N/A N/A NIA N/A N/A NIA N/A N/A N/A N/A N/A NIA N/A $ 147,378 21~912 30,492 204,813 (3) 325,644 90,238 324,888 192,321 16,411 1,572,734 54,597 97720 3,808,131 $ 56 573 $=====l5'==69=5='=,9=7=9 PEACH COUNTY BOARD OF EDUCATION SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS YEAR ENDED JUNE 30, 2006 SCHEDULE "2" Notes to the Schedule of Expenditures of Federal Awards (1) The amount shown for the Food Donation Program represents the Federally assigned value of nonmonetary assistance for donated commodities received and/or consumed by the School District during the current fiscal year. (2) Expenditures for the funds earned on the School Breakfast Program ($379,756) were not maintained separately and are included in the 2005 National School Lunch Program. (3) Funds earned on the Hurricane Education Recovery Program, in the amount of $38,825, do not require reporting of expenditures. 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 Peach 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. - 27 - PEACH COUNTY BOARD OF EDUCATION SCHEDULE OF STATE REVENUE YEAR ENDED JUNE 30, 2006 AGENCY/FUNDING GRANTS Education, Georgia Department of Quality Basic Education Direct Instructional Cost Kindergarten Program Kindergarten Program - Early Intervention Program Primary Grades (1-3) Program Primary Grades - Early Intervention (1-3) Program Upper Elementary Grades (4-5) Program Upper Elementary Grades - Early Intervention (4-5) Program Middle Grades (6-8) Program High School General Education (9-12) Program Vocational Laboratory (9-12) Program Students with Disabilities Gifted Student - Category VI Alternative Education Program English Speakers of Other Languages (ESOL) Media Center Program 20 Days Additional Instruction Staff and Professional Development Indirect Cost Central Administration School Administration Facility Maintenance and Operations Categorical Grants Pupil Transportation Regular Bus Replacement Sparsity Nursing Services Principal Supplements Migrant Education Education Equalization Funding Grant Food Services Vocational Education Austerity Reduction Other State Programs Limited School Choice Program National Teacher Certification Preschool Handicapped Program Virtual School Grant SCHEDULE "3" GOVERNMENTAL FUND TYPE GENERAL FUND $ 1,355,424 49,536 2,843,867 96,681 1,439,776 102,939 2,588,104 2,387,759 530,043 1,752,653 209,752 206,868 110,435 393,776 130,268 76,365 499,367 830,204 1,117,132 592,686 97,719 20,000 91,058 13,810 10,813 2,652,220 114,644 64,096 -902,965 75,732 11,513 48,498 50 $ ===1=9=,6=1=0,=8.2..3... See notes to the basic financial statements. -28- PEACH COUNTY BOARD OF EDUCATION SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS YEAR ENDED JUNE 30, 2006 SCHEDULE "4" PROJECT ORIGINAL ESTIMATED COST (1) CURRENT ESTIMATED COSTS (2) AMOUNT EXPENDED IN CURRENT YEAR (3) AMOUNT EXPENDED IN PRIOR YEAR (3) PROJECT STATUS Partially finance the retirement of the School District's General Obligation School Bonds, Series 1994. $ 13,740,500 $ 13,740,500 $ 1,199,569 $ 8,878,752 Ongoing To acquire, construct and equip two new elementary schools and related facilities, including necessary furnishings, fixtures and equipment; renovating, extending, repairing and equipping existing School District schools, facilities and properties useful or desirable in connection therewith; acquiring and installing system-wide instructional and administrative technology, safety and security equipment; acquisition of school buses and transportation equipment; acquisition of music, vocational and physical education/athletic equipment; acquiring any necessary property therefor, both real and personal; and paying expenses incident to accomplishing the foregoing. 14,657,429 14,657.429 642,100 Ongoing $ 28,397,929 $ 28,397,929 $ 1,841,669 $ 8,878,752 (1) The School District's original cost estimate as specified in the resolution calling for the imposition of the Local Option Sales Tax. (2) The School District's current estimate of total cost for the projects. Includes all cost from project inception to completion. (3) The voters of Peach County approved the imposition of a 1% sales tax to fund the above projects. Amounts expended for these projects may include sales tax proceeds, state, local property taxes and/or other funds over the life of the project. See notes to the general purpose financial statements. - 29- (This page left intentionally blank) PEACH COUNTY BOARD OF EDUCATION GENERAL FUND- QUALITY BASIC EDUCATION PROGRAM (QBE) ALLOTMENTS AND EXPENDITURES - BY PROGRAM YEAR ENDED JUNE 30, 2006 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 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 $ 1,503,808 $ 1,290,721 $ 34,254 $ 1,324,975 53,549 74,410 74,410 3,158,916 2,541,313 57,727 2,599,040 108,261 267,949 267,949 1,607,816 2,205,215 76,592 2,281,807 118,749 2,902,111 2,637,831 579,879 1,940,700 231,844 229,553 127 535 66,842 3,174,244 3,028,976 701,290 317,171 120,962 721,587 312,221 283,654 381,758 157 475 343 143,913 221,834 73,570 6,539 627 88,647 3,834 1,505 450 67,185 3,318,157 3,250,810 774,860 317,171 127,501 722,214 400,868 287,488 383,263 157,925 $ 15,200,552 $ 15,645,788 $ 709,835 $ 16,355,623 438,500 86005 601,297 8 204 35,192 114 701 636,489 122,905 TOTAL QBE FORMULA FUNDS $ 15,725,057 $ 16,255,289 $ 859,728 $_==1=7'=11=5=,0=1=7 (1) Comprised of State Funds plus Local Five Mill Share. (2) Allotments do not include the impact of the State budget austerity reduction. See notes to the basic financial statements. - 31 - SECTION II COMPLIANCE AND INTERNAL CONTROL REPORTS Russell W. Hinton STATE AUDITOR (404) 858-2174 DEPARTMENT OF AUDITS AND ACCOUNTS 270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400 May 9, 2007 Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education and Superintendent and Members ofthe Peach 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 of Peach County Board of Education as of and for the year ended June 30, 2006, which collectively comprise Peach County Board of Education's basic financial statements and have issued our report thereon dated May 9, 2007. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Internal Control Over Financial Reporting In planning and performing our audit, we considered Peach County Board of Education's internal control over financial reporting in order to determine our auditing procedures for the purpose of expressing our opinions on the financial statements and not to provide an opinion on the internal control over financial reporting. However, we noted certain matters involving the internal control over financial reporting and its operation that we consider to be reportable conditions. Reportable conditions involve matters coming to our attention relating to significant deficiencies in the design or operation of the internal control over financial reporting that, in our judgment, could adversely affect Peach County Board ofEducation's ability to record, process, summarize and report financial data consistent with assertions ofmanagement in the financial statements. Reportable conditions are described in the accompanying Schedule ofFindings and Questioned Costs as items FS-7111-06-01, FS-7111-06-02 and FS-7111-06-03. 2006YB-30 A material weakness is a reportable condition in which the design or operation ofone or more ofthe internal control components does not reduce to a relatively low level the risk that misstatements caused by error or fraud in amounts that would be material in relation to the financial statements being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. Our consideration of the internal control over financial reporting would not necessarily disclose all matters in the internal control that might be reportable conditions and, accordingly, would not necessarily disclose all reportable conditions that are also considered to be material weaknesses. However, we believe none of the reportable conditions described above are material weaknesses. Compliance and Other Matters As part of obtaining reasonable assurance about whether Peach County Board of Education's financial statements are free of material misstatement, we performed tests of its compliance with certain provisions oflaws, regulations, contracts and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. This report is intended solely for the information and use of the management and members of the Peach County Board of Education and is not intended to be and should not be used by anyone other than these specified parties. Respectfully submitted, , ~w~ Russell W. Hinton, CPA, CGFM State Auditor RWH:gp 2006YB-30 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 May 9, 2007 Honorable Sonny Perdue, Governor Members ofthe General Assembly Members of the State Board of Education and Superintendent and Members of the Peach 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 ofPeach County Board ofEducation with the types ofcompliance requirements described in the U.S. Office of Management and Budget (0MB) Circular A-133 Compliance Supplement that are applicable to each ofits major Federal programs for the year ended June 30, 2006. Peach 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 of laws, regulations, contracts and grants applicable to each of its major Federal programs is the responsibility of Peach County Board of Education's management. Our responsibility is to express an opinion on Peach 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 Peach County Board ofEducation's compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Our audit does not provide a legal determination on Peach County Board ofEducation's compliance with those requirements. 2006SA-30 In our opinion, the Peach County Board of Education complied, in all material respects, with the requirements referred to above that are applicable to each ofits major Federal programs for the year ended June 30, 2006. Internal Control Over Compliance The management of Peach 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 Peach County Board ofEducation'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 and to test and report on internal control over compliance in accordance with 0MB Circular A-133. We noted a certain matter involving the internal control over compliance and its operation that we consider to be a reportable condition. Reportable conditions involve matters coming to our attention relating to significant deficiencies in the design or operation ofthe internal control over compliance that, in our judgment, could adversely affect the Peach County Board of Education's ability to administer a major Federal program in accordance with applicable requirements oflaws, regulations, contracts and grants. The reportable condition is described in the accompanying Schedule of Findings and Questioned Costs as item FA-7111-06-01. A material weakness is a reportable condition in which the design or operation ofone or more ofthe internal control components does not reduce to a relatively low level ofrisk that noncompliance with the applicable requirements oflaws, regulations, contracts and grants caused by error or fraud that would be material in relation to a major Federal program being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. Our consideration ofthe internal control over compliance would not necessarily disclose all matters in the internal control that might be reportable conditions and, accordingly, would not necessarily disclose all reportable conditions that are also considered to be material weaknesses. However, we believe the reportable condition described above is not a material weakness. This report is intended solely for the information and use ofthe management, members ofthe Peach County Board ofEducation, Federal awarding agencies and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties. Respectfully submitted, RWH:gp 2006SA-30 W-~ sell W. Hinton, CPA, CGFM State Auditor SECTION III AUDITEE'S RESPONSE TO PRIOR YEAR FINDINGS AND QUESTIONED COSTS PEACH COUNTY BOARD OF EDUCATION AUDITEE'S RESPONSE SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2006 PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS FINDING CONTROL NUMBER AND STATUS FS-7111-05-01 FS-7111-05-02 Unresolved - See Corrective Action/Responses Previously Reported Corrective Action Implemented CORRECTIVE ACTION/RESPONSES EMPLOYEE COMPENSATION GENERAL LEDGER Inadequate Separation of Duties Finding Control Number: FS-7111-05-01 Corrective action will be implemented in fiscal year 2007. The fiscal year 2005 audit occurred too late in fiscal year 2006 to implement. For fiscal year 2007, Human Resources Director calculated all employee salaries and Finance Director reviewed for accuracy. All discrepancies were resolved. All new employee salaries were calculated and entered by Human Resources Director and reviewed for accuracy by Finance Director. All discrepancies were reviewed with Human Resources Director and resolved. All new employee's demographics, CPI and deduction information was also entered by Human Resources Director. PRIOR YEAR FEDERAL AWARD FINDINGS AND QUESTIONED COSTS FINDING CONTROL NUMBER AND STATUS FA-7111-04-01 Unresolved - See Corrective Action/Responses CORRECTIVE ACTION/RESPONSES DAVIS-BACON ACT Failure to Monitor Labor Reports Finding Control Number: FA-7111-04-01 We attempted to resolve this finding by contacting Garrison Construction. However, we only received a letter from them stating that they complied with the Davis-Bacon Act. Since this project was completed in late 2004, we will not seek additional documentation to resolve this finding unless requested by the Auditor. SECTION IV FINDINGS AND QUESTIONED COSTS PEACH COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2006 I SUMMARY OF AUDITOR'S RESULTS 1. Type of Report Issued on the Financial Statements The auditor's opinion on the Peach County Board of Education's financial statements was unqualified. 2. Reportable Conditions in Internal Control Disclosed by the Audit of the Financial Statements The audit report for the Peach County Board of Education disclosed financial statement reportable conditions related to the following control categories. Cash and Cash Equivalents General Ledger Employee Compensation Capital Assets None ofthe reportable conditions described above are considered to be material weaknesses. 3. Noncompliance Material to the Financial Statements The audit ofthe Peach County Board ofEducation disclosed no instances ofnoncompliance that were deemed to be material to the financial statements. 4. Reportable Conditions in Internal Control Over Major Programs The audit report for the Peach County Board ofEducation disclosed a reportable condition in internal control over major programs for the following compliance requirement. Special Tests and Provisions The reportable condition described above is not considered to be a material weakness. 5. Type of Report Issued on Compliance for Major Programs The auditor's opinion on the Peach County Board ofEducation's report on compliance with requirements applicable to major programs was unqualified. 6. Audit Findings Required to be Reported by Section .510(a) ofOMB Circular A-133 The Peach County Board of Education's audit disclosed an audit finding required to be reported by section .510(a) of 0MB Circular A-133. This audit finding is included in section IV of this report. 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 8. Type "A" Program Dollar Threshold The dollar threshold for type "A" programs was $300,000. - 1- PEACH COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2006 I SUMMARY OF AUDITOR'S RESULTS 9. Low Risk Auditee The Peach County Board ofEducation qualified 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 Inadequate Internal Controls Reportable Condition Finding Control Number: FS-7111-06-01 Condition: The School District failed to perform bank reconciliations timely and accurately for several bank accounts. Criteria: Having an adequate system of internal controls dictates that bank reconciliations be performed at a minimum on a monthly basis and as appropriate, include the following: (1) reconciling items correctly identified by description and amount, (2) adjustments which are needed are identified and corrected in a timely manner, and (3) evidence of an effective supervisory review and approval function. Questioned Costs: NIA Information: For the month of June 2006, the bank reconciliations for the general operating account and the payroll account were not completed until March 2007, and January 2007, respectively. In addition, three bank account's reconciliations did not reconcile to the general ledger by a total of $86,149. Also, the general operating account reconciliation listed unidentified items in the amount of $14,109. Cause: Management failed to ensure that bank reconciliations were performed to manage and monitor the bank accounts. Effect: Failure to reconcile the bank statements timely and properly to the general ledger could result in errors in financial reporting and increases the risk of material misstatement in the financial statements including misstatements due to fraud. Recommendation: The School District should establish sufficient internal control procedures to ensure that bank reconciliations are performed monthly for the bank accounts. -2 - PEACH COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2006 II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS EMPLOYEE COMPENSATION GENERAL LEDGER Inadequate Internal Controls Reportable Condition Finding Control Number: FS-7111-06-02 Condition: This is a repeat finding (FS-7111-05-01) from fiscal year ended June 30, 2005. The School District did not provide for adequate separation of duties in the performance of accounting functions. Criteria: The School District's management is responsible for designing and maintaining internal controls that provide proper separation of duties. Such internal controls would limit any one individual's access to both physical assets and the related accounting records. Information: (1) Someone independent of the employee compensation process does not review new employees added to or deleted from the master payroll file. Someone independent of the employee compensation process does not review the monthly payroll checks. (2) A contract was not available for one of the employees tested. (3) Someone independent of the general ledger posting function does not review journal entries. Cause: Management failed to implement internal controls for adequate separation of various accounting functions and to ensure contracts were available for all certified employees. Effect: Failure to have adequate separation of duties could result in errors in financial reporting and increases the risk of material misstatement in the financial statements including misstatements due to fraud. Recommendation: The School District should periodically review staff assignments to determine ifemployee duties can be reassigned to achieve a higher degree of internal control with existing staff. In addition, records should be monitored to ensure contracts are readily available for all certified employees. -3- PEACH COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2006 II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS GENERAL LEDGER CAPITAL ASSETS Failure to Report the Financial Statements in a Complete and Timely Manner Reportable Condition Finding Control Number: FS-7111-06-03 Condition: The School District failed to submit the DE046 financial report to the Georgia Department ofEducation in a timely manner. In addition, the capital asset balances reported were not materially correct, as they did not include any fiscal year 2005, or fiscal year 2006, activity or any accumulated depreciation. Criteria: Chapter 1 Introduction to LUA Accounting ofthe Financial Management for Georgia Local Units of Administration indicates that "accounting records must provide meaningful, reliable, accurate and timely information to the many persons and groups with legitimate interests in the financial affairs of an LUA". Questioned Cost: NIA Information: The School District's DE046 financial report was submitted to the Georgia Department of Education on October 20, 2006. In addition, the capital asset balances reported did not include fiscal year 2005, or fiscal year 2006, additions, or any accumulated depreciation, resulting in account balances that were materially misstated. An entry was presented to the auditor to record these additions. Cause: Management failed to comply with the due date of September 30, 2006, as established by the Georgia Department of Education. Management also failed to ensure that accurate capital asset balances were reported. Effect: The failure ofthe School District to prepare and submit a materially correct financial report in a timely manner prohibits legitimate users of the report from being able to have timely access to accurate financial information. Recommendation: The School District should implement controls to ensure that Georgia Department of Education policies and procedures are followed and implement procedures to ensure that a materially correct DE046 financial report is submitted in a timely manner. -4 - PEACH COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2006 III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS SPECIAL TESTS AND PROVISIONS Failure to Transfer Funds Timely Reportable Condition U. S. Department of Agriculture Through Georgia Department of Education Food Services - School Breakfast Program (CFDA 10.553) Food Services - National School Lunch Program (CFDA 10.555) Finding Control Number: FA-7111-06-01 Condition: The School District failed to transfer School Breakfast Program (CFDA 10.553) and National School Lunch Program (CFDA 10.555) funds to the school food service account in a timely manner. Criteria: U.S. Department ofAgriculture policy 210.14-06 states that funds should be entered into the school food service account as soon as possible and that any interest on these funds must also be credited to the school food service account. Questioned Costs: $932 Information: Nine out of eleven receipts were not transferred to the school food service account in a timely manner. Cause: Management failed to implement appropriate procedures to ensure compliance in accordance with Federal guidelines. Effect: The interest earned on funds not transferred timely should be used in furtherance of the School Nutrition Program. Failure to ensure appropriate transfers can result in noncompliance with the requirements of the Federal grant. Recommendation: The School District should review the procedures in place, design procedures which would enhance monitoring compliance with Federal guidelines. In addition, the School District should transfer the questioned funds from their general operating bank account into their school food bank account. -5- SECTIONV MANAGEMENT'S RESPONSES PEACH COUNTY BOARD OF EDUCATION SCHEDULE OF MANAGEMENT'S RESPONSES YEAR ENDED JUNE 30, 2006 Finding Control Number: FS-7111-06-01 We concur with this finding. However, of the $86,149 shown as unreconciled items, the following amounts were identified, but not considered when writing this finding: The School Nutrition program's bank reconciliation did not agree to the general ledger by $75,283.74 that was listed as an outstanding payment on the School Nutrition program bank reconciliation when it was not. This was a transfer between the School Nutrition bank account and the General Operating bank account for repayment of June 2006 payroll which was not transferred until July. Hunt Elementary School's bank reconciliation did not agree to the general ledger by $8,362.69. This was caused by the School's failure to submit their financial data to the Finance Department timely. As a result, the amount reflected on the general ledger for Hunt Elementary School was as ofMay 31, 2006, the latest financial data the Finance Department had as of the DE046 transmission. The remaining unreconciled items were caused by software data conversion problems that resulted in accounts payable and payroll transactions postings to the incorrect general ledger account. This is the cause for the bank statements not to be reconciled timely. In order to reconcile the accounts payable and payroll accounts, each batch of transactions had to be traced from the bank statement back to the general ledger to determine that it was recorded to the correct general ledger cash account. This was a very lengthy process because we had to wait for the checks to clear the bank to determine whether or not the transaction was recorded to the correct general ledger account. The Board will implement procedures to have the Superintendent or his designee review and verify that all bank statements are reconciled to the general ledger each month. However, due to the timing of the fiscal year 2006 audit, these procedures will not be implemented until late fiscal year 2007. Finding Control Number: FS-7111-06-02 We concur with this finding. The Board implemented the following procedures in late fiscal year 2006 to address this deficiency: Human Resource department will enter all new employees in the master payroll file, this includes all salary information. Human Resource department will calculate and enter all employee salary information. The Finance Director will review calculation for accuracy, note any discrepancies and resolve with Human Resource Director. The Superintendent or his designee will review and approve all journal entries made to the accounting records. - 1- PEACH COUNTY BOARD OF EDUCATION SCHEDULE OF MANAGEMENT'S RESPONSES YEAR ENDED JUNE 30, 2006 Finding Control Number: FS-7111-06-03 We concur with this finding. Although the Finance Department maintains the Capital Assets manually, the financial statements had not been updated for this activity. However, the information was presented to the auditors and is reflected in the audited Financial Statements. The deficiency as it relates to failure to submit Financial Statements in a timely manner was due to several problems related to the new accounting software data conversion. Both the Department of Education and Department of Audits were aware of the significant problems we were having with our data conversion. We submitted and received a request for an extension to the Department ofEducation. The Department ofAudits did not consider this to be justification for the Financial Statements being transmitted late. The Board will verify that Capital Assets are updated for all prior and current year's activity and that they are included in the DE046 financial report submission to the Georgia Department of Education as required by GASB 34 on or before September 30 as required by Georgia law. Finding Control Number: FA-7111-06-01 We concur with this finding. The Board will implement the following procedures in late fiscal year 2007 to address this deficiency: The Department of Education web site will be checked every Thursday (the day funds are transferred) for School Nutrition payments. Funds will be transferred within one to two days of receipt. Also, the bank will send an e-mail to the Finance Department each time an ACH deposit is made. The Board will not transfer the interest related to this finding because General Operating funds were used for several months to cover School Nutrition payroll until funds were received from the Department of Education. As a result, an accurate calculation of interest cannot be determined. Contact Person: Teressa C Schultz, Director of Finance Phone: (478) 825-5933 Fax Number: (478) 825-9970 E-mail Address: tschultz@peachschools.org -2-