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

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

PIERCE 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

PIERCE COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS -

SECTION I

FINANCIAL

SCHEDULES

SUPPLEMENTARY INFORMATION

4 SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS

30

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

PIERCE 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
February 21, 2008

Honorable Sonny Perdue, Governor Members ofthe General Assembly Members of the State Board of Education
and Superintendent and Members ofthe Pierce 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 Pierce County Board of Education, as of and for the year ended June 30, 2007, which collectively comprise the Board's basic financial statements as listed in the table of contents. These financial statements are the responsibility of the Pierce 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 of the Pierce 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.

2007ARL-23

As more fully discussed in Note 2 to the basic financial statements, the District-wide Capital Projects Fund, a major governmental fund, reported $496,789 as earned grant revenues which were not available to the School District. Accounting principles generally accepted in the United States of America require that revenues recognized for governmental funds reporting under the modified accrual basis of accounting be both measurable and available.
In our opinion, except for the effects ofnot properly recognizing revenues within the District-wide Capital Projects Fund as described in the previous paragraph, the financial statements referred to above present fairly, in all material respects, the financial position of the District-wide Capital Projects Fund of the Pierce County Board of Education, as of June 30, 2007, and the changes in financial position thereoffor the year then ended in conformity with accounting principles generally accepted in the United States of America.
In addition, in our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position ofthe governmental activities, the General Fund, the Debt Service Fund, and the aggregate remaining fund information of the Pierce County Board of Education, as ofJune 30, 2007, and the respective changes in financial position thereoffor the year then ended in conformity with accounting principles generally accepted in the United States of America.
The Pierce 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 February 21, 2008, on our consideration of the Pierce 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 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.
2007ARL-23

Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Pierce 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,
~,.uJl2l()~
~iJs~ll W. Hinton, CPA, CGFM State Auditor
RWH:as 2007ARL-23

PIERCE COUNTY BOARD OF EDUCATION

PIERCE COUNTY BOARD OF EDUCATION STATEMENT OF NET ASSETS JUNE 30, 2007
ASSETS
Cash and Cash Equivalents Investments Accounts Receivable, Net
Taxes State Government Federal Government Other Inventories Capital Assets Land Land Improvements Buildings Equipment Less: Accumulated Depreciation
Total Assets
LIABILITIES
Accounts Payable Salaries and Benefits Payable Long-Term Liabilities
Due Within One Year Due in More Than One Year
Total Liabilities
NET ASSETS
Invested in Capital Assets, Net of Related Debt Restricted for
Bus Replacement Continuation of Federal Programs Debt Service Capital Projects Unrestricted
Total Net Assets
Total Liabilities and Net Assets

EXHIBIT"A"

GOVERNMENTAL ACTIVITIES

$

2,022,868

3,193,553

1,081,994 2,651,655
336,332 2,335
66,458

580,001 645,331 26,233,052 3,371,714 -8,976,695

$ ===3=1=,2=0=8'=59=8=

$

139,310

3,211,374

360,456 1,986,232

$

5,697,372

$

19,765,634

35,758 319,514 257,262 1,353,437 3,779,621

$

25,511,226

$ ===3=1=,2=0=8'=59=8=

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

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

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 Govemmental Activities
General Revenues Taxes Property Taxes For Maintenance and Operations For Debt Services Sales Taxes Special Purpose Local Option Sales Tax For Capital Projects 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
Net Assets - End of Year

EXPENSES

CHARGES FOR SERVICES

$

20,735,685 $

962,374 481,299 424,574 867,745 1,735,935 375,832 2,397,619 1,162,264
70,831 118,047

502,244 1,549,129
82,556

$

31,466,134 $

105,940
352,303 393,158 851 401

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

$

14,675,983 $

240,637 149,161 364,123 678,395 722,649
2,872 919,944 501,340
1,099 118,089

1,083,626

$

19,457,918 $

367,191 $
11,300 1,890 8,017 345
61,005 302,387
47,041
799176 $

-5,586,571
-721,737 -332, 138
-49,151 -187,460 -1,005,269 -372,615 -1,416,670 -358,537
-69,732 42
-149,941 -25,304 -82 556
-10,357,639

$

5,664,062

117

1,926,836 58,642
3,685,677 212,302 606 493

$

12 154 129

$

1,796,490

23z714z736

$ =====2=5=,5=1:!1,=22=6=

.3.

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

EXHIBIT"C"

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

GENERAL FUND

DISTRICTWIDE
CAPITAL PROJECTS
FUND

DEBT SERVICE
FUND

TOTAL

$ 1,862,251 $ 2,566,434
2,154,866 336,332 2,335 66458

146,350 $ 627,119
318,890 496,789

14,267 $

2,022,868 3,193,553
318,890 2,651,655
336,332 2,335
66 458

Total Assets

$ 6,988,676 $ 1 589 148 $

14 267 $======8=.5=9=2=,0=91=

LIABILITIES AND FUND BALANCES

LIABILITIES

Accounts Payable Salaries and Benefits Payable

$

136,715 $

3,211,374

2,595

Total Liabilities

$ 3,348,089 $

2 595

FUND BALANCES

Reserved for: Bus Replacement Continuation of Federal Programs Debt Service Inventories Capital Projects
Unreserved Designated for Student Activities Designated for Self-Insurance Undesignated Reported in: General Fund

$

35,758

253,056

$

233,116 $

66,458

1,353,437

196,537 42,723

3,046,055

Total Fund Balances

$ 3,640,587 $ 1,586,553 $

$ $ $ 14,267
14 267 $

139,310 3211374
3,350,684
35,758 253,056 247,383
66,458 1,353,437
196,537 42,723
3,046,055
5 241 407

Total Liabilities and Fund Balances

$ 6,988,676 $ 1,589,148 $

14 267 $===8=,5=9=2=,0=91=

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

PIERCE COUNTY BOARD OF EDUCATION RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET
TO THE STATEMENT OF NET ASSETS JUNE 30, 2007

EXHIBIT"D"

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

$

5,241,407

$

580,001

645,331

26,233,052

3,371,714

-8,976,695

21,853,403

763,104

$ -1,970,000 -117,769 -258,919

-2,346,688

Net Assets of Governmental Activities (Exhibit "A")

$ 25,511,226

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

PIERCE COUNTY BOARD OF EDUCATION STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES
GOVERNMENTAL FUNDS YEAR ENDED JUNE 30, 2007

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
. Excess of Revenues over (under) Expenditures
OTHER FINANCING SOURCES (USES)
Transfers In Transfers Out
Total Other Financing Sources (Uses)
Net Change in Fund Balances
Fund Balances - Beginning
Fund Balances - Ending

GENERAL FUND

DISTRICTWIDE
CAPITAL PROJECTS
FUND

DEBT SERVICE
FUND

TOTAL

$ 5,495,032

$

58,642 $ 1,926,836

20,503,058

496,789

2,942,924

851,401

179,819

32,296

606,493

$ 30,637,369 $ 2,455,921 $

266 $ 187

5,495,298 1,985,478 20,999,847 2,942,924
851,401 212,302 606,493

453 $ 33,093,743

$ 20,181,567 $ 103,258

962,708 481,299 409,887 831,244 1,725,514 375,384 2,479,684 1,327,382
70,831 118,047 502,244 1,526,900

34,045 11,874
1,472,752

149,998

$

24,802

$ 31,167,491 $ 1,621,929 $

$ -530,122 $ 833,992 $

$
215,000 57754 272,754 $ -272,301 $

20,284,825
962,708 481,299 409,887 865,289 1,725,514 375,384 2,491,558 1,327,382
70,831 118,047 502,244 1,526,900 1,472,752
364,998 82,556
33,062,174
31 569

$ $ -272,754

$ -272,754 $

$ -530, 122 $ 561,238 $

4,170,709

1,025,315

272,754 $
272,754 $ 453 $
13 814

272,754 -272,754
0 31,569 5,209,838

$ 3,640,587 $ 1,586,553 $

14,267 $=====5=,2=4=1'=4=07=

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

PIERCE COUNTY BOARD OF EDUCATION RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT OF
REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES TO THE STATEMENT OF ACTIVITIES JUNE 30, 2007

EXHIBIT"F"

Total Net Change in Fund Balances - Governmental Funds (Exhibit "E")
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 Intergovernmental Contract
Total Long-Term Debt Repayments
Change in Net Assets of Governmental Activities (Exhibit "B")

$

31,569

$ 1,921,941 -690,899

1,231,042 168,881

$ 215,000 128,450 21,548

364,998

$ =====1,=7=96=,4=9=0

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

PIERCE COUNTY BOARD OF EDUCATION STATEMENT OF FIDUCIARY NET ASSETS
FIDUCIARY FUNDS JUNE 30, 2007
ASSETS Cash and Cash Equivalents
LIABILITIES Funds Held for Others

EXHIBIT"G"
AGENCY FUNDS $ ===1=4=2,=50=8=
$ ===1=42='=50=8=

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

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

EXHIBIT "H"

Note 1: DESCRIPTION OF SCHOOL DISTRICT AND REPORTING ENTITY
REPORTING ENTITY
The Pierce 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 Pierce 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:
-9-

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

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) and grants from Georgia State Financing and Investment Commission to be used for the acquisition, construction or renovation ofmajor 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, 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.
- 10 -

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

EXHIBIT "H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The School District, in its Capital Projects Fund, improperly reported $496,789 as earned grant revenues, which were not available to the School District due to its failure to comply with Georgia Department of Education's Guidelines for Receiving State Capital Outlay Funds. To conform to generally accepted accounting principles, revenue from grants should be recognized in the fiscal year in which all eligibility requirements have been satisfied.
The School District funds certain programs by a combination ofspecific cost-reimbursement grants, categorical grants, and general revenues. Thus, when program costs are incurred, there are both restricted and unrestricted net assets available to finance the program. It is the School District's policy to first apply grant resources to such programs, followed by cost-reimbursement grants, then general revenues.
CASH AND CASH EQUIVALENTS
COMPOSITION OF DEPOSITS Cash and cash equivalents consist ofcash on hand, demand deposits and short-term investments with original maturities of three months or less from the date of acquisition in authorized financial institutions. Official Code of Georgia Annotated Section 45-8-14 authorize the School District to deposit its funds in one or more solvent banks or insured Federal savings and loan associations.
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 -

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

EXHIBIT "H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(6) The Local Government Investment Pool administered by the State ofGeorgia, 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 Pierce County Board ofCommissioners fixed the property tax levy for the 2006 tax digest year (calendar year) on October 5, 2006 (levy date). Taxes were due on December 20, 2006 (lien date). Taxes collected within the current fiscal year or within 60 days after year-end on the 2006 tax digest are reported as revenue in the governmental funds for fiscal year 2007. The Pierce 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, 2007, for maintenance and operations amounted to $5,495,032 and for school bonds amounted to $266.

The tax millage rate levied for the 2006 tax year (calendar year) for the Pierce County Board of Education was as follows (a mill equals $1 per thousand dollars of assessed value):

School Operations

.l.5...81mills

SALES TAXES

Special Purpose Local Option Sales Tax, at the fund reporting level, during the year amounted to $1,926,836 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 -

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

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 ofart. During the fiscal year under review, no events or changes in circumstances affecting a capital asset that may indicate impairment were known to the School District.

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

Capitalization Policy

Estimated Useful Life

Land Land Improvements Buildings and Improvements Equipment

Any Amount

$

50,000

$

50,000

$

5,000

NIA 15 years 50 to 60 years 5 to 25 years

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

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

EXHIBIT"H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
GENERAL OBLIGATION BONDS
The School District issues general obligation bonds to provide funds for the acquisition and construction of major capital facilities. Bond issuance costs are recognized in the financial statements during the fiscal year bonds are issued. In addition, general obligation bonds have been issued to refund existing general obligation bonds. General obligation bonds are direct obligations and pledge the full faith and credit of the government. The outstanding amount of these bonds is recorded in the Statement of Net Assets.
NET ASSETS
The School District's net assets in the District-wide Statements are classified as follows:
Invested in capital assets, net of related debt - This represents the School District's total investment in capital assets, net ofoutstanding debt obligations related to those capital assets. To the extent debt has been incurred but not yet expended for capital assets, such amounts are not included as a component of invested in capital assets, net of related debt.
Restricted net assets - These represent resources for which the School District is legally or contractually obligated to spend resources for bus replacement, continuation of Federal programs, debt service and capital projects in accordance with restrictions imposed by external third parties.
Unrestricted net assets - Unrestricted net assets represent resources derived from property taxes, sales taxes, grants and contributions not restricted to specific programs, charges for services, and miscellaneous revenues. These resources are used for transactions relating to the educational and general operations of the School District, and may be used at the discretion of the Board to meet current expenses for those purposes.
Note 3: DEPOSITS AND INVESTMENTS
COLLATERALIZATION OF DEPOSITS Official Code of Georgia Annotated (OCGA) Section 45-8-12 provides that there shall not be on .deposit at any time in any depository for a time longer than ten days a sum ofmoney which has not been secured by surety bond, by guarantee of insurance, or by collateral. The aggregate ofthe face value of such surety bond and the market value of securities pledged shall be equal to not less than 110 percent ofthe public funds being secured after the deduction ofthe amount ofdeposit insurance. Ifa depository elects the pooled method (OCGA 45-8-13.1) the aggregate ofthe market value ofthe securities pledged to secure a pool ofpublic funds shall be not less than 110 percent ofthe daily pool balance. At June 30, $773,697 ofdeposits were not secured by surety bond, insurance or collateral as specified above. The School District is working with the affected financial institutions to ensure appropriate levels of collateral are maintained for all of the School District's deposits.

- 14 -

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

EXHIBIT"H"

Note 3: DEPOSITS AND INVESTMENTS
Acceptable security for deposits consists of any one of or any combination of the following:
(1) Surety bond signed by a surety company duly qualified and authorized to transact business within the State of Georgia,
(2) Insurance on accounts provided by the Federal Deposit Insurance Corporation,
(3) Bonds, bills, notes, certificates of indebtedness or other direct obligations of the United States or ofthe State of Georgia,
(4) Bonds, bills, notes, certificates of indebtedness or other obligations of the counties or municipalities 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 ofthe State of Georgia, and
(7) Bonds, bills, notes, certificates of indebtedness, or other obligations of a subsidiary corporation of the United States government, which are fully guaranteed by the United States government both as to principal and interest or debt obligations issued by the Federal Land Bank, the Federal Home Loan Bank, the Federal Intermediate Credit Bank, the Central Bank for Cooperatives, the Farm Credit Banks, the Federal Home Loan Mortgage Association, and the Federal National Mortgage Association.
CATEGORIZATION OF DEPOSITS At June 30, 2007, the bank balances were $3,931,507. The amounts of the total uninsured bank balances are classified into three categories of custodial credit risk:
Category 1 - Uncollateralized, Category 2 - Cash collateralized with securities held by the pledging financial institution, or Category 3 - Cash collateralized with securities held by the pledging financial institution's
trust department or agent but not in the School District's name.
The School District's uninsured deposits are classified by custodial credit risk category at June 30, 2007, as follows:

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

EXHIBIT"H"

Note 3: DEPOSITS AND INVESTMENTS

Custodial Credit Risk Category

Bank Balance

1

$ 773,697

2

2,871,604

3

0

Total

$ 3,645.301

CATEGORIZATION OF INVESTMENTS AtJune 30, 2007, the carrying value ofthe School District's total investments was $3,193,553, which is materially the same as fair value. This investment consisted entirely offunds invested in the Local Government Investment Pool administered by the State of Georgia, Office of Treasury and Fiscal Services which are not required to be categorized since the School District did not own any specific identifiable securities in the pool. The investment policy ofthe State ofGeorgia, Office ofTreasury and Fiscal Services for the Local Government Investment Pool (Primary Liquidity Portfolio) does not provide for investment in derivatives or similar investments. Additional information on the Local Government Investment Pool is disclosed in the State of Georgia Comprehensive Annual Financial Report. This audit can be obtained from the Georgia Department ofAudits and Accounts at http://www.audits.state.ga.us/internet/searchRpts.html.

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

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:

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

EXHIBIT "H"

Note 5: CAPITAL ASSETS

Governmental Activities Capital Assets, Not Being Depreciated:
Land Construction in Progress
Total Capital Assets Not Being Depreciated
Capital Assets Being Depreciated Buildings and Improvements Equipment Land Improvements

Balances July 1, 2006

Increases

Balances Decreases June 30, 2007

$ 356,001 $ 1,272,980
$ 1,628,981 $

224,000

$

$ 1,272,980

224,000 $ 1,272,980 $

580,001 0
580,001

$ 23,747,844 $ 2,927,623 603,709

2,485,208 $ 444,091 41,622

0 $ 26,233,052 3,371,714 645,331

Less Accumulated Depreciation for: Buildings and Improvements Equipment Land Improvements
Total Capital Assets, Being Depreciated, Net

5,988,671 1,782,832
514,293
$ 18,993,380 $

457,483 220,445
12 971
2,280,022 $

6,446,154 2,003,277
527,264
0 $ 21,273,402

Governmental Activity Capital Assets - Net $ 20,622,361 $ 2,5Q4,Q22 $ 1,272,98Q $ 21,853,403

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

Governmental Funds

Equipment Less: Accumulated Depreciation

$ 472,833 192,285

Current year depreciation expense by function is as follows:

$=====2==80-,5==4==8

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

$ 389,623

$

11,990

2,005

8,507

366

64,732

163,761

251,361 49 915

$ 620,829

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

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 restricted assets in the Statement ofNet Assets because their use is limited by statutory provisions. Restricted assets at June 30, 2007, were as follows:

District-wide Capital Projects SPLOST

Debt Service Funds

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

$
$ 643,139
$ 394,003 $ 233,116

14,267

Note 7: INTERFUND TRANSFERS

Interfund transfers for the year ended June 30, 2007, consisted of the following:

Transfer to

Transfers From District-wide Capital Projects

Debt Service Fund

$==2==72==,7'==5==4

Transfers are used to move Special Purpose Local Option Sales Tax (SPLOST) revenues collected by the District-wide Capital Projects Fund to the Debt Service Fund for payment of debt service.

Note 8: 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; unemployment compensation and dental coverage.

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.

- 18 -

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

EXHIBIT"H"

Note 8: RISK MANAGEMENT

During the 2007 fiscal year, a workers compensation claim was settled by payment of$30,997 from the School District's general fund after the School District's insurance carrier, Managed Care Mutual Captive Insurance Company, was placed in Rehabilitation via Voluntary Consent Order entered by the Superior Court ofFulton County in June 20, 2006. Settled claims have not exceeded commercial insurance for the two years preceding fiscal year 2007.

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

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

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

2006 2007

Beginning of Year Liability

Claims and Changes in Estimates

Claims Paid

End of Year Liability

$

1 736 $

65 $

1.801 $

0

$

0 $

1.309 $

1.309 $

0

The School District has established a limited risk management program for dental coverage of its employees and their dependents. Estimated claims are budgeted by management based on known claims and prior experience. The employees contribute a premium to the fund and the School District funds any deficits. In connection with this program, a self-insurance reserve has been established within the General Fund by the School District.

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

2006 2007

Beginning of Year Liability

Claims and Changes in Estimates

$

0 $

238,447 $

$

0 $

257.257 $

Claims Paid

EndofYear Liability

238.447 $

0

257.257 $

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

- 19 -

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

EXHIBIT "H"

Note 8: RISK MANAGEMENT

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 Each Employee

$

50,000

$ 100,000

Note 9: LONG-TERM DEBT

CAPITAL LEASES The Pierce County Board of Education has entered into various lease agreements as lessee for equipment and school buses. 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.

INTERGOVERNMENTAL CONTRACT The Pierce County Board of Education entered into an intergovernmental contract with the City of Blackshear to construct water and sewer facilities for educational sites. The principal amount of $441,429 and interest at the annual rate of 5.16 percent will be paid over a twenty year period.

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

Purpose

Interest Rate

Amount

General Government - Refunding - Series 2003

2.78%

$ 1,970,000

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

- 20 -

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

EXHIBIT "H"

Note 9: LONG-TERM DEBT

Balance July I, 2006
Deductions Debt Retired
Balance June 30, 2007
Portion of Long-Term Debt Due within One Year

Capital Leases

Governmental Funds
Intergovernmental Contract

General Obligation
Bonds

$

246,219 $

280,467 $ 2,185,000 $

Total 2,711,686

128,450

21,548

215,000

364,998

$ 117.769 $ 258.9) 9 $ 1.970.000 $ 2.346.688

$ 117 769 $

22,687 $

220,000 $

360,456

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

Fiscal Year Ended June 30
2008 2009 2010 2011 2012 2013 - 2017
Total Principal and Interest

Capital Leases

Principal

Interest

$ 117,769 $

5,243

Intergovernmental Contract

Principal

Interest

$

22,687 $

23,886

25,148

26,476

27,875

132,847

12,829 11,630 10,368 9,039 7,640 15,070

$ 117,769 $

5.243 $ 258.919 $

66.576

Fiscal Year Ended June 30
2008 2009 2010 2011 2012 2013 - 2017
Total Principal and Interest

General Obligation

Debt

Principal

Interest

$ 220,000 $ 225,000 235,000 245,000 250,000 795,000

51,708 45,522 39,129 32,456 25,576 33,708

$ 1,970.000 $ 228.099

Note 10: ON-BEHALF PAYMENTS

The School District has recognized revenues and costs in the amount of $460,933 for health insurance and retirement contributions paid on the School District's behalf by the following State Agencies.

- 21 -

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

EXHIBIT"H"

Note 10: ON-BEHALF PAYMENTS

Georgia Department of Education Paid to the Georgia Department ofCommunity Health For Health Insurance of Non-Certified Personnel In the amount of$429,746

Paid to the Teachers Retirement System of Georgia For Teachers Retirement System (TRS) Employer's Cost In the amount of$27,759

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 $3,428

Note 11: SIGNIFICANT COMMITMENTS

The following is an analysis ofsignificant outstanding construction or renovation contracts executed by the School District as of June 30, 2007:

Project

Unearned Executed Contracts

Pierce County High School Stadium Additions Pierce County High School Auditorium
Audio and Lighting Renovation

$ 124,200 86,482

$=====2==10-,6===8==2
The amounts described in this note are not reflected in the basic financial statements.
Note 12: SIGNIFICANT CONTINGENT LIABILITIES
Amounts received or receivable principally from the Federal government are subject to audit and review by grantor agencies. This could result in requests for reimbursement to the grantor agency for any costs which are disallowed under grant terms. The School District believes that such disallowances, if any, will be immaterial to its overall financial position.
The School District is a defendant in various legal proceedings pertaining to matters incidental to the performance ofroutine School District operations. The ultimate disposition ofthese proceedings is not presently determinable, but is not believed to be material to the basic financial statements.

-22 -

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

EXHIBIT "H"

Note 13: RETIREMENT PLANS

TEACHERS RETIREMENT SYSTEM OF GEORGIA (TRS)

TRS PLAN DESCRIPTION Substantially all teachers, administrative and clerical personnel employed by local school systems are covered by the Teachers Retirement System 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

2007 2006 2005

100% 100% 100%

$ 1,511,298 $ 1,351,277 $ 1,258,968

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

SCHEDULE "1"

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

NONAPPROPRIATED BUDGETS

ORIGINAL {1)

FINAL {1)

ACTUAL AMOUNTS

$

5,140,991 $

5,140,991 $

5,495,032

38,037

38,037

58,642

18,638,318

19,422,528

20,503,058

2,018,379

2,942,924

7,000

7,000

851,401

100,000

100,000

179,819

146,038

146 038

606,493

$

24,070,384 $

26,872,973 $

30,637,369

$

17,380,508 $

18,938,979 $

20,181,567

638,508 299,960 471,065 671,769 1,817,171 136,839 1,905,630 1,009,556 80,647
3,792
723,500

764,116 319,385 471,065 771,870 1,817,171 136,839 1,905,630 1,263,056 80,647
30,634

962,708 481,299 409,887 831,244 1,725,514 375,384 2,479,684 1,327,382
70,831 118,047 502,244 1,526,900
174 800

$

25,138,945 $

26,499,392 $

31,167,491

$

-1,068,561 $

373,581 $

-530,122

113 702

113 702

$

-954,859 $

487,283 $

-530,122

4,340,227

4,340,227

4,170,709

-192,251

-192,251

Fund Balances - Ending

$

3,193,117 $

4,635,259 $

3,640,587

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-

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

SCHEDULE "2"

FUNDING AGENCY PROGRAM/GRANT
Agriculture, U. S. Department of Child Nutrition Cluster Pass-Through From Georgia Department of Education Food Services School Breakfast Program National School Lunch Program
Total Child Nutrition Cluster
Other Programs Pass-Through From Georgia Department of Education Food Donation (1)
Total U. S. Department of Agriculture
Education, U. S. Department of Special Education Cluster Pass-Through From Georgia Department of Education Special Education Grants to States Preschool Grants
Total Special Education Cluster
Other Programs Pass-Through From Georgia Department of Education Comprehensive School Reform Demonstration English Language Acquisition Grants Enhancing Education Through Technology Program Improving Teacher Quality State Grants Migrant Education Rural Education State Grants for Innovative Programs Title I Grants to Local Educational Agencies Vocational Education - Basic Grants to States Pass-Through From Okefenokee Regional Educational Service Agency Safe and Drug-Free Schools and Communities - State Grants
Total U. S. Department of Education

CFDA NUMBER

PASSTHROUGH
ENTITY ID
NUMBER

EXPENDITURES IN PERIOD

10.553 10.555

N/A N/A $
$

(2) 1,356,696
1,356,696

10.550

N/A $

65443 1,422,139

* 84.027 * 84.173

N/A $ N/A
$

514,478 14,149
528,627

84.332 84.365
84.318 84.367 84.011 84.358 84.298 * 84.010 84.048
84.186

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

50,750 19,384
829 200,984
46,680 86,840
5,979 959,074 43,979
15 327
1,958,453

Total Federal Financial Assistance N/A = Not Available

$ ======3'=38=0:!:,5=9=2

-26-

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

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 ($226,160) were not maintained separately and are included in the 2007 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 Pierce 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-

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

SCHEDULE "3"

AGENCY/FUNDING

GOVERNMENTAL FUND TYPES

CAPITAL

GENERAL

PROJECTS

FUND

FUND

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

$

672,908

$

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 Category II Category Ill Category IV CategoryV Gifted Student - Category VI Remedial Education Program Alternative Education Program English Speakers of Other Languages (ESOL) Media Center Program 20 Days Additional Instruction Staff and Professional Development Indirect Cost Central Administration School Administration Facility Maintenance and Operations Categorical Grants Pupil Transportation Regular Bus Replacement Sparsity Nursing Services Principal Supplements Vocational Supervisors Migrant Education Education Equalization Funding Grant Food Services Vocational Education Amended Formula Adjustment Other State Programs Health Insurance Middle School Remediation and Intervention Grant National Teacher Certification Preschool Handicapped Program Pupil Transportation - State Bonds Statewide K-8 Reading and Mathematics Program Teachers' Retirement

787,921 403,692 2,394,471 290,259 1,136,078 118,663 2,007,209 1,580,812 707,796
81,185 184,297 942,067 386,682 136,859 503,429 203,656 158,521 152,341 355,917 110,622 67,600
494,281 659,643 904,393
480,383 52,387 20,000 74,627 11,109 17,505 30,234
3,689,173 92,578 74,982
-310, 155
429,746 1,677
32,047 36,713 250,000 47,563 27,759

TOTAL
672,908
787,921 403,692 2,394,471 290,259 1,136,078 118,663 2,007,209 1,580,812 707,796
81,185 184,297 942,067 386,682 136,859 503,429 203,656 158,521 152,341 355,917 110,622 67,600
494,281 659,643 904,393
480,383 52,387 20,000 74,627 11,109 17,505 30,234
3,689,173 92,578 74,982
-310, 155
429,746 1,677
32,047 36,713 250,000 47,563 27,759

-28-

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

SCHEDULE "3"

AGENCY/FUNDING
GRANTS Georgia State Financing and Investment Commission Reimbursement on Construction Projects
Office of Treasury and Fiscal Services Public School Employees Retirement

GOVERNMENTAL FUND TYPES

CAPITAL

GENERAL

PROJECTS

FUND

FUND

TOTAL

$

496,789 $

$ _ _ _3:..,..:;42::.:8c....

496,789 3428

$ 20,503,058 $

496,789 $ =~20~,9~9~9-=,8~47=

See notes to the basic financial statements.

- 29 -

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

SCHEDULE "4"

PROJECT
Reduction of principal and interest amounts on Pierce County School District General Obligation Bonds Series 1993.
Additions, renovations and improvements at existing school system facilities; systemwide technology improvements; acquiring, constructing and equipping a new Board of Education Office.

ORIGINAL ESTIMATED
COST (1)

CURRENT ESTIMATED COSTS (2)

AMOUNT EXPENDED IN CURRENT YEAR (3) (4)

AMOUNT EXPENDED IN PRIOR YEARS (3) (4)

PROJECT STATUS

$ 1,384,063 $ 1,384,063 $

272,754 $

609,421 Ongoing

6,615,937

7,378,972

1,621,929

5,757,043 Ongoing

$ 8,000,000 $ 8,763,035 $ 1,894,683 $ 6,366,464

(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 Pierce 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 projects.
(4) During fiscal year 2004, the Pierce County Board of Education issued General Obligation Refunding Bond Issue 2004 to refund portions of the 1993 Bond Issue. The amount expended in the Current Year includes debt service on the replacement refunding issues.

See notes to the basic financial statements.

- 30-

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

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

$

1,006,868 $

838,465 $

24,830 $

863,295

414,097

803,192

1,111

804,303

2,839,368

2,762,411

174,760

2,937,171

342,494

1,105,322

2,663

1,107,985

1,219,514

1,052,371

188,908

1,241,279

156,317 2,187,512 1,715,229
760,751 1,860,972
542,732 202,110 171,863 162498

327,046 2,158,529 2,162,678
911,286
409 249,887 1,619,427 345,356 514,965
154,866 117 191

1,647 176,520 232,674 144,675
4,819 5,676 13,133 2,679 7,779
487 7,564
656

328,693 2,335,049 2,395,352 1,055,961
5,228 255,563 1,632,560 348,035 522,744
487 162,430 117 847

$

13,582,325 $ 15,123,401 $

990,581 $

16,113,982

385,304 74 218

347,747

46,435

394,182 93 914

TOTAL QBE FORMULA FUNDS

$

14 041 847 $ 15,471,148 $

1,037,016 $==1,..6,,..60==2==,0=7=8

(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.

- 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
February 21, 2008

Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the Pierce 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 Pierce County Board of Education as of and for the year ended June 30, 2007, which collectively comprise Pierce County Board of Education's basic financial statements and have issued our report thereon dated February 21, 2008. This report was qualified for a departure from generally accepted accounting principles, as identified in the auditor's report on the basic financial statements. 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 Pierce County Board of Education's internal control over financial reporting as a basis for designing our auditing procedures for the purpose of expressing our opinions on the financial statements, but not for the purpose ofexpressing an opinion on the effectiveness of the Pierce County Board of Education's internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness of the Pierce County Board of Education's internal control over financial reporting.

2007YB-40

Our consideration of internal control over financial reporting was for the limited purpose described in the preceding paragraph and would not necessarily identify all deficiencies in internal control over financial reporting that might be significant deficiencies or material weaknesses. However, as discussed below, we identified certain deficiencies in internal control over financial reporting that we consider to be significant deficiencies.
A control deficiency exists when the design or operation ofa control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect misstatements on a timely basis. A significant deficiency is a control deficiency, or combination of control deficiencies, that adversely affect the Pierce 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 Pierce County Board of Education's financial statements that is more than inconsequential will not be prevented or detected by the Pierce County Board of Education's internal control. We consider items FS-7131-07-01, FS-7131-07-02 and FS-7131-07-03 in the accompanying Schedule of Findings and Questioned Costs to be significant deficiencies in internal control over financial reporting.
A material weakness is a significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood that a material misstatement ofthe financial statements will not be prevented or detected by the Pierce County Board of Education's internal control.
Our consideration of the internal control over financial reporting was for the limited purpose described in the first paragraph ofthis section and would not necessarily disclose all deficiencies in internal control that might be significant deficiencies and, accordingly, would not necessarily disclose all significant deficiencies that are also considered to be material weaknesses. However, of the significant deficiencies described above, we consider item FS-7131-07-01 to be a material weakness.
Compliance and Other Matters
As part of obtaining reasonable assurance about whether Pierce County Board of Education's financial statements are free of material misstatement, we performed tests of its compliance with certain provisions oflaws, regulations, contracts and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards.
We noted certain matters that we have reported to management ofPierce County Board ofEducation in a separate letter dated February 21, 2008.
Pierce County Board of Education's response to the findings identified in our audit is described in the accompanying Schedule ofManagement's Responses. We did not audit Pierce County Board of Education's response and, accordingly, we express no opinion on it.
2007YB-40

This report is intended solely for the information and use ofthe management members ofthe Pierce 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,
'=+?.,__Q.Q. wa)~
Russell W. Hinton, CPA, CGFM State Auditor
RWH:as 2007YB-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
February 21, 2008

Honorable Sonny Perdue, Governor Members ofthe General Assembly Members of the State Board of Education
and Superintendent and Members of the Pierce 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 ofPierce 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 of its major Federal programs for the year ended June 30, 2007. Pierce County Board of Education's major Federal programs are identified in the Summary of Auditor's Results Section of the accompanying Schedule of Findings and Questioned Costs. Compliance with the requirements of laws, regulations, contracts and grants applicable to each of its major Federal programs is the responsibility of Pierce County Board of Education's management. Our responsibility is to express an opinion on Pierce County Board of Education's compliance based on our audit.
We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States ofAmerica; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General ofthe United States; and 0MB Circular A133, Audits ofStates, Local Governments, and Non-Profit Organizations. Those standards and 0MB Circular A-133 require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major Federal program occurred. An audit includes examining, on a test basis, evidence about the Pierce County Board ofEducation's compliance with

2007SA-10

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 Pierce County Board ofEducation's compliance with those requirements.
In our opinion, the Pierce 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, 2007.
Internal Control Over Compliance
The management of Pierce 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 Pierce 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, but not for the purpose ofexpressing an opinion on the effectiveness ofinternal control over compliance. Accordingly, we do not express an opinion on the effectiveness of the Pierce County Board of Education's internal control over compliance.
A control deficiency in an entity's internal control over compliance exists when the design or operation ofa control does not allow management or employees, in the normal course ofperforming their assigned functions, to prevent or detect noncompliance with a type ofcompliance requirement of a Federal program on a timely basis. A significant deficiency is a control deficiency, or combination ofcontrol deficiencies, that adversely affects the entity's ability to administer a Federal program such that there is more than a remote likelihood that noncompliance with a type of compliance requirement of a Federal program that is more than inconsequential will not be prevented or detected by the entity's internal control.
A material weakness is a significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood that material noncompliance with a type of compliance requirement ofa Federal program will not be prevented or detected by the entity's internal control.
Our consideration ofthe internal control over compliance was for the limited purpose described in the first paragraph of this section and would not necessarily identify all deficiencies in internal control that might be significant deficiencies or material weaknesses. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses, as defined above.
2007SA-10

This report is intended solely for the information and use ofthe management, members ofthe Pierce 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,
~&-il-~
Ru sell W. Hinton, CPA, CGFM State Auditor
RWH:as 2007SA-10

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

PIERCE COUNTY BOARD OF EDUCATION AUDITEE'S RESPONSE
SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2007

PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

FINDING CONTROL NUMBER

AUDITEE'S RESPONSE/STATUS

SEE AUDITOR'S COMMENTS

FS-7131-05-01 FS-7131-05-02 FS-7131-06-01

Further Action Not Warranted

Partially Resolved - See Corrective Action/Responses (1)

Further Action Not Warranted

(2)

CORRECTIVE ACTION/RESPONSES

EXPENDITURES/LIABILITIES/DISBURSEMENTS EMPLOYEE COMPENSATION Inadequate Internal Control Procedures Finding Control Number: FS-7131-05-02

This finding is still in litigation.

AUDITOR'S COMMENTS

(1) The resolution of this finding rests with Department of Community Health.

(2) Findings/internal control deficiencies ofthis nature, that are not deemed significant deficiencies or material weaknesses and do not require reporting in the audit report in accordance with Statements on Auditing Standards (SAS) 112 or Governmental Auditing Standards (Yellow Book), will be communicated in a management letter in subsequent periods.

PRIOR YEAR FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

No matters were reported.

SECTION IV FINDINGS AND QUESTIONED COSTS

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

I SUMMARY OF AUDITOR'S RESULTS

1. Type of Report Issued on the Financial Statements The auditor's opinion on the Pierce County Board of Education's financial statements was qualified for a departure from generally accepted accounting principles.

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

Revenues/Receivables/Receipts Capital Assets

General Ledger

Of the significant deficiencies described above, Revenues/Receivables/Receipts 1s considered to be a material weakness.

3. Noncompliance Material to the Financial Statements The audit ofthe Pierce County Board ofEducation disclosed no instances ofnoncompliance that were deemed to be material to the financial statements.

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

5. Type of Report Issued on Compliance for Major Programs The auditor's opinion on the Pierce 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 Pierce County Board ofEducation's audit did not disclose audit findings required to be reported by section .510(a) ofOMB Circular A-133.

7. Major Programs Federal awards audited as major programs are as follows: 84.010 Title I Grants to Local Educational Agencies 84.027 Special Education - Grants to States 84.173 Special Education - Preschool Grants

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

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

- 1-

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

II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

REVENUES/RECEIVABLES/RECEIPTS Unearned Revenues Material Weakness Finding Control Number: FS-7131-07-01

Condition:

The School District reported $496,789 as earned revenues/receivables in the District-wide Capital Projects fund from the Georgia State Financing and Investment Commission (GSFIC) on a construction project for which certain eligibility criteria had not been met.

Criteria:

Accounting principles generally accepted in the United States of America require that revenues recognized for governmental funds reporting under the modified accrual basis of accounting must be both measurable and available.

Questioned Cost: NIA

Information:

The School District entered into a contractual agreement for a construction project without properly advertising the project for bid in accordance with Georgia Department of Education's (GDOE) Guidelines for Receiving State Capital Outlay Funds. Those guidelines require that projects for bid must be advertised at least two times in the local legal organ, with the first advertisement occurring four weeks prior to the opening of sealed bids, and the second advertisement following no earlier than two weeks after the first advertisement. By not following GDOE's guidelines, the School District does not appear to be eligible to receive GSFIC construction funds on this project, therefore, the accounts receivable and associated revenue of $496,789 are considered overstatements on the financial statements.

Cause:

The School District's management failed to properly maintain its accounting records in accordance with accounting principles generally accepted in the United States of America.

Effect:

The School District's financial statements are materially misstated.

Recommendation:

When recording revenue and receivable activity on the fund level statements utilizing the modified accrual basis of accounting, the School District should ensure that the proper revenue recognition criteria is applied. That is, the revenues should be measurable and available in the current period or soon enough thereafter to liquidate liabilities of the current period.

-2-

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

II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

GENERAL LEDGER Inadequate Accounting Procedures Significant Deficiency Finding Control Number: FS-7131-07-02

Condition:

The School District failed to implement internal control procedures adequate to ensure that transactions are processed according to established procedures and that general ledger account balances are properly reconciled to the subsidiary records.

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 and that general ledger account balances are properly reconciled to the subsidiary records.

Questioned Cost: NIA

Information:

Our examination ofthe accounting records revealed that when the receipt of certain prior period accounts receivable were recorded on the current year general ledger, the School District correctly debited cash and credited accounts receivable through the subsidiary module. However, with an additional journal entry, the School District debited revenue and credited accounts receivable, which resulted in the general ledger being misstated by $419,833 as well as creating a variance between the general ledger and the subsidiary records.

Cause:

Management failed to implement internal control procedures sufficient to ensure that transactions are processed according to established procedures and that general ledger account balances are properly reconciled to the subsidiary records.

Effect:

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

Recommendation:

The School District should implement internal control procedures adequate to ensure that transactions are processed according to established procedures and that general ledger account balances are properly reconciled to the subsidiary records.

-3-

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

II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

CAPITAL ASSETS Failure to Adequately Maintain Capital Assets Significant Deficiency Finding Control Number: FS-7131-07-03

Condition:

The accounting procedures ofthe School District were insufficient to provide adequate internal controls over Capital Assets.

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:

The School District did not have adequate procedures in place to ensure that Capital Assets were being properly maintained. Deficiencies noted during our testing are as follows:

The half-year convention was not used to calculate depreciation for several current year additions per the School District's capital assets policy.
Certain current year additions to Buildings were undercapitalized per examination of construction contracts.
Subsidiary capital asset records provided for audit examination did not tie to the School District's general ledger. Auditors determined that the subsidiary records provided were materially correct and adjusting entries were proposed to correct the general ledger.

Cause:

The deficiencies noted above were a result of management's failure to implement adequate internal controls over Capital Assets.

Effect:

Without satisfactory accounting controls and procedures in place, the School District could place itself in a position where potential misappropriation of assets could occur. In addition, the lack of controls could impact reporting of the School District's financial position and results of operations.

Recommendation:

The School District's management should implement adequate internal controls that provide reasonable assurance that Capital Asset transactions are processed according to established policies and procedures.

-4 -

PIERCE COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2007 III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS No matters were reported.
-5-

SECTIONV MANAGEMENT'S RESPONSES

PIERCE COUNTY BOARD OF EDUCATION SCHEDULE OF MANAGEMENT'S RESPONSES
YEAR ENDED JUNE 30, 2007
Finding Control Number: FS-7131-07-01
We concur with this finding. It was not discovered until the audit process that the GDOE felt that our system had not complied with the State guidelines. The bid advertisement was not handled as the GDOE felt it should have been. We will continue to pursue this matter through our attorneys to hopefully collect the funds at a later time.
Finding Control Number: FS-7131-07-02
We concur with this finding. The system will ensure that future accounts receivables open from prior year are only received through the system. In the event that a receivable must be handled with a journal entry, the system will confirm that any open receivables are cancelled and noted on the j oumal entry.
Finding Control Number: FS-7131-07-03
We concur with this finding. All future depreciation will be handled with the half-year convention method.
Contact Person: Cleve Tyre, Assistant Superintendent Phone: (912) 449-2044 Fax: (912) 449-2046 E-mail Address: ctyre@pierce.k12.ga.us