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

PIKE COUNTY BOARD OF EDUCATION
ZEBULON, 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

PIKE 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

REQUIRED SUPPLEMENTARY INFORMATION

MANAGEMENT'S DISCUSSION AND ANALYSIS

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

PIKE COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS -

SECTION I

FINANCIAL

SCHEDULES

SUPPLEMENTARY INFORMATION

2 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS

26

3 SCHEDULE OF STATE REVENUE

27

4 SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS

28

5 ALLOTMENTS AND EXPENDITURES

GENERAL FUND - QUALITY BASIC EDUCATION PROGRAMS (QBE)

BY PROGRAM

29

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

PIKE 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
September 16, 2008

Honorable Sonny Perdue, Governor Members of the General Assembly Members ofthe State Board of Education
and Superintendent and Members of the Pike County Board of Education
INDEPENDENT AUDITOR'S COMBINED REPORT ON BASIC FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION - SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
Ladies and Gentlemen:
We have audited the accompanying financial statements of the governmental activities, each major fund, and the aggregate remaining fund information (Exhibits A through H) of the Pike 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 Pike 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 GovernmentAuditing 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 Pike 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-11

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 Pike County Board of Education, as of June 30, 2007, 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.
In accordance with Government Auditing Standards, we have also issued our report dated September 16, 2008, on our consideration ofthe Pike County Board of Education's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results 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.
Management's Discussion and Analysis and the Schedule ofRevenues, Expenditures and Changes in Fund Balances - Budget and Actual, as presented on pages i through viii and page 25 respectively, are not a required part of the basic financial statements but are 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 Pike 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 ofthis report has been filed as a permanent record in the office ofthe State Auditor and made available to the press ofthe State, as provided for by Official Code of Georgia Annotated section 506-24.
Respectfully submitted,
~ uJ. 4)~
Russell W. Hinton, CPA, CGFM State Auditor
RWH:gp 2007ARL-11

PIKE COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2007
INTRODUCTION
The discussion and analysis of Pike County School District's financial performance provides an overall review of the School District's financial activities for the fiscal year ended June 30, 2007. The intent of this discussion and analysis is to look at the School District's financial performance as a whole; readers should also review the notes to the basic financial statements and financial statements to enhance their understanding of the School District's financial performance.
FINANCIAL HIGHLIGHTS
Key financial highlights for 2007 are as follows:
General revenues accounted for $11,553,682 in revenue or 35% of all revenues. Program specific revenues in the form of charges for services, grants and contributions accounted for $21,403,906 or 65% of total revenues of$32,957,588.
The School District had $25,544,850 in expenses relating to governmental activities.
Among major funds, the general fund had $25,404,482 in revenues and transfers in with $25,140,095 in expenditures. The general fund balance increased to $4,345,968 from $3,455,744.
OVERVIEW OF THE FINANCIAL STATEMENTS
This annual report consists of a series of financial statements and notes to those statements. These statements are organized so the reader can understand Pike County School District as a financial whole, or as an entire operating entity. The fiscal year ended June 30, 2007, is the fifth year of GASB 34 implementation.
DISTRICT-WIDE STATEMENTS
The Statement of Net Assets and Statement of Activities provide information about the School District as a whole using accounting methods similar to industry. The increases and decreases in the School District's net assets are an indicator of whether the school's financial position is improving or deteriorating. There are many factors that can affect the overall financial condition of the School District such as the School District's property tax base, State and Federal funding, and the condition of buildings and equipment.
FUND FINANCIAL STATEMENTS
Fund financial reports provide detailed information about the School District's major funds. Funds are accounting devices the School District uses to keep track of general operations, Federal and State grants, building programs and debt payments.

PIKE COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2007
GOVERNMENTAL FUNDS Most of the School District's activities are reported in governmental funds, which focus on how money flows into and out of those funds and balances left at year-end available for spending in the future periods. These funds are reported using modified accrual accounting, which measures cash and all other financial assets that can readily be converted to cash. The governmental fund statements provide a detailed short-term view of the School District's general government operations and the basic services it provides. Governmental fund information helps you determine whether there are more or fewer financial resources that can be spent in the near future to finance educational programs. The relationship (or differences) between governmental activities (reported in the Statement of Net Assets and the Statement of Activities) and governmental funds is reconciled in the financial statements. The School District's major governmental funds are the General Fund, Capital Projects Fund, and Debt Service Fund. FIDUCIARY FUNDS The School District is the trustee, or fiduciary, for assets that belong to others, such as the student activity funds. The student activity funds are local school accounts the principal uses to collect funds for field trips, school fundraisers, athletic events and school clubs. The school clubs and field trips are considered to be agency funds. The School District excludes these activities from the District-wide statements because it cannot use these assets to finance its operations. THE SCHOOL DISTRICT AS A WHOLE The perspective of the Statement of Net Assets is of the School District as a whole. Table I provides a summary of the School District's net assets for 2007 and 2006.
11

PIKE COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2007

Table 1 Net Assets

Governmental Activities

Fiscal

Fiscal

Year 2006

Year2007

(Restated)

Assets Current and Other Assets Capital Assets, Net

$ 23,223,641 25,985,638

$ 12,364,658 18,881,742

Total Assets

$ 49,209,279 $ 31,246,400

Liabilities Current and Other Liabilities Long-Term Liabilities

$ 5,145,063 $ 2,706,151

12,271,229

4,160,000

Total Liabilities

$ 17,416,292 $ 6,866,151

Net Assets Invested in Capital Assets, Net of Related Debt Restricted Unrestricted

$ 18,977,695 8,649,056 4,166,236

$ 14,721,742 3,989,206 5,669,301

Total Net Assets

$ 31.792.987 $ 24.3801242

Table 2 shows the changes in net assets for fiscal year 2007 and 2006. Total net assets increased $7,412,738 when compared to fiscal year 2006 total net assets (restated).

111

PIKE COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2007

Table 2 Change in Net Assets

Revenues Program Revenues: Charges for Services and Sales Operating Grants and Contributions Capital Grants and Contributions

Governmental Activities

Fiscal

Fiscal

Year 2006

Year2007

(Restated)

$ 398,739 15,510,919 5,494,248

$ 485,346 13,987,504 72,037

Total Program Revenues

$ 21,403,906 $ 14,544,887

General Revenues:

Taxes

Property Taxes

$

Sales Taxes

Grants and Contributions not Restricted to

Specific Programs

Investment Earnings

Miscellaneous

6,926,962 1,505,481
1,407,377 772,186 941,676

$ 6,297,132 1,330,150
1,062,052 302,968 746,337

Total General Revenues

$ 11,553,682 $ 9,738,639

Total Revenues

$ 32,957,588 $ 24,283,526

Program Expenses Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and OJ?eration of Plant Student Transportation Services Other Support Services Operations ofNon-Instructional Services Enterprise Operations Food Services Interest on Short-Term and Long-Term Debt

$ 15,634,221
1,047,306 976,417 386,858 958,444
1,397,357 271,943
2,159,101 920,229 107,114
132,347 1,096,875
456,638

$ 13,974,175
1,057,110 695,718 350,292 838,212
1,328,080 181,074
1,381,871 997,980 245,401
153,518 992,624 232,660

Total Expenses

$ 25,544,850 $ 22,428,715

Increase in Net Assets

$ 7,412.738 $ 1,854.811

GOVERNMENTAL ACTIVITIES

Instruction comprises 63% ofgovernmental program expenses.

IV

PIKE COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2007

The Statement of Activities shows the cost of program services and the charges for services and grants offsetting those services. Table 3 shows, for governmental activities, the total cost of services and the net cost of services. It identifies the cost of these services supported by tax revenue and unrestricted State entitlements.

Table 3 Governmental Activities

Total Cost of Services

Fiscal

Fiscal

Year 2007 Year 2006

Net Cost of Services

Fiscal

Fiscal

Year 2007 Year 2006

Instruction

$ 15,634,221 $ 13,974,175 $ -91,260 $ 3,758,882

Support Services

Pupil Services

1,047,306 1,057,110

792,265

821,086

Improvement of Instructional Services

976,417

695,718

701,163

446,550

Educational Media Services

386,858

350,292

25,519

73,332

General Administration

958,444

838,212

245,831

280,460

School Administration

1,397,357 1,328,080

687,042

744,643

Business Administration

271,943

181,074

266,746

176,440

Maintenance and Operation ofPlant

2,159,101 1,381,871 1,049,007

572,948

Student Transportation Services

920,229

997,980

222,339

472,770

Other Support Services

107,114

245,401

95,645

233,472

Operations of Non-Instructional Services

Enterprise Operations

132,347

153,518

132,347

-256

Food Services

1,096,875

992,624 -442,338

70,841

Interest on Short-Term and Long-Term Debt

456,638

232,660

456,638

232,660

Total Expenses

$ 25.544,850 $ 22,428,715 $ 4,140.944 $ 7,883.828

Instructional expenses include activities directly dealing with the teaching of pupils and the interaction between teacher and pupil.

Pupil Services are activities designed to assess and improve the well-being of students and to supplement the teaching process.

Improvement of instruction are activities which are designed primarily for assisting instructional staff in planning, developing and evaluating the process of providing challenging learning experiences for students.

Educational media is directing, managing and operating educational media centers.

General administration establishes and administers policy for operating the local School District.

School administration includes principals, assistant principals, counselors and clerical staff who administer the school operations.

Business administration includes the financial and personnel operations of the School District.

V

PIKE COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2007
Maintenance and operation of plant activities involve keeping the school grounds, buildings and equipment in an effective working condition.
Student transportation includes activities involved with the conveyance of students to and from school, as well as to and from activities, as provided by State law.
Central support includes personnel services, strategic planning and public relations activities.
Other support services include all other support services.
Enterprise operations are activities that are financial and operate in a manner similar to private business enterprises where the intent is to recover costs through user charges.
Food services prepares and serves breakfast, lunch and snacks to the students of the School District.
Interest involves the transactions associated with the payment of interest related to the School District's outstanding bonds.
THE SCHOOL DISTRICT'S FUNDS
The School District's governmental funds are accounted for using the modified accrual basis of accounting. All governmental funds had total revenues and Bond Proceeds of $41,422,965 and expenditures of $32,963,353. The net change in fund balance for governmental funds was $8,459,612.
GENERAL FUND BUDGETING HIGHLIGHTS
The School District's budget is prepared according to Georgia Law. The most significant budgeted fund is the General Fund. The General Fund consists of the general operations, special revenue grants and school nutrition program.
The original revenue and expenditure budgets only reflect the anticipated funding for Federal and State grants and are amended to reflect the final award. The School District uses site-based budgeting and the budgeting systems are designed to tightly control total site budgets and to provide flexibility for site management.
The majority of the variances between final budget and actual expenditures in fiscal year 2007 are due to the fact that the School District did not budget for the student activity funds and other local funds.
CAPITAL ASSETS
At the end of the fiscal year 2007, the School District had $25,985,638 invested in land, construction in progress, buildings, equipment and buses.
Vl

PIKE COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2007

Table 4 Capital Assets (Net of Depreciation)

Governmental Activities

Fiscal

Fiscal

Year 2007

Year 2006

Land Construction in Progress Buildings and Building Improvements Equipment Land Improvements

$ 404,646 7,340,437 16,618,718 1,327,751 294,086

$ 404,646 644,358
16,307,872 1,228,866 296,000

Total

$ 25,985.638 $ 18,881,742

DEBT

At June 30, 2007, the School District had $11,675,000 in general obligation bonds outstanding and $596,229 of capital leases with $352,511 due within one year. The voters of Pike County approved the issuance of $6,220,000 of general obligation bonds on April 30, 1996. The bond proceeds were used to build one new high school. Additional bonds were approved in March 2006, with a value of $7,800,000 and issuance date of July 2006. The proceeds are to fund the completion of a new middle school and other approved projects as delineated within the bond ballot. An extension of the 2001 SPLOST tax is to be used to fund the new debt service over five years.

Table 5 Outstanding Debt at June 30

Governmental Activities

Fiscal

Fiscal

Year 2007

Year 2006

General Obligation Bonds Capital Lease

$ 11,675,000 $ 4,160,000

596,229

0

$ 12,271,229 $ 4,160.000

CURRENT FINANCIAL ISSUES AND CONCERNS

The Pike County School District is financially stable. The School District's current operating millage is 15.993 mills, which produces approximately $445,835 per mill. The tax digest has continued to grow during the last five years. The Pike County Tax Commissioner's Office collects taxes for the School District. The School District does not anticipate any significant changes in the local tax digest in the immediate future.

Vll

PIKE COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2007
The School District continues to grow at an average of 55 students per year. The School District is presently constructing a new middle school to replace the existing middle school. The School District plans to fund the capital outlay with the 2001 SPLOST, State capital outlay funds and the 2006 series bond issue. The Quality Basic Education Act was enacted into law by the 1985 session of the Georgia General Assembly. The act set out the provisions for funding for grades kindergarten through twelve in the State of Georgia. The funding is based on student counts with the expectation that local School Districts fund part of the cost with local tax monies. The School District receives approximately 67% of the required funds for general operations from the State. The School District will receive approximately $385,000 less in funding for fiscal year 2008 from the State. The reductions in State funding are due to the economic downturn in the State and it is unclear how long funding reductions will last. Currently, the School District has adequate reserves for fiscal years 2008 and 2009 to handle the reduction in funding from the State. CONTACTING THE SCHOOL DISTRICT'S FINANCIAL MANAGEMENT This financial report is designed to provide our citizens, taxpayers, investors and creditors with a general overview of the School District's finances and to show the School District's accountability for the money it receives. If you have any questions about this report or need additional financial information, contact Mr. Jeff Hattaway, Director of Finance, CFO, at Pike County Board of Education, 16 Jackson Street, P. 0. Box 386, Zebulon, Georgia, 30295 or email at hattawj@pike.kl2.ga.us.
Vlll

PIKE COUNTY BOARD OF EDUCATION

PIKE COUNTY BOARD OF EDUCATION STATEMENT OF NET ASSETS JUNE 30, 2007
ASSETS
Cash and Cash Equivalents Investments Accounts Receivable, Net
Interest 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 and Benefits Payable Contracts Payable Retainages Payable Long-Term Liabilities
Due Within One Year Due in More Than One Year
Total Liabilities
NET ASSETS
Invested in Capital Assets, Net of Related Debt Restricted for
Bus Replacement Continuation of Federal Programs Debt Service Capital Projects Unrestricted
Total Net Assets
Total Liabilities and Net Assets
The notes to the basic financial statements are an integral part of this statement. -1-

EXHIBIT"A"

GOVERNMENTAL ACTIVITIES

$

12,346,703.32

7,014,832.09

112,500.00 522,370.78 2,878,238.30 247,667.90
11,928.85 89,400.08

404,646.06 7,340,437.10
753,789.00 22,690,317.50
2,935,531.16 -8, 139,082.98

$ =====4=-9,=20=9=,2=7=9=16=

$

747,329.75

2,519,651.28

1,182,389.58

695,692.61

352,510.52 11,918,718.75

$

17,416,292.49

$

18,977,694.62

30,263.00 420,198.14 515,001.77 7,683,593.34 4, 166,235.80

$

31,792,986.67

$ ====49='=,2=0==9'=27=9=.1=6

PIKE 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 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 Capital Projects Intangible Recording Tax and 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 (Restated)
Net Assets - End of Year

EXPENSES

CHARGES FOR SERVICES

$ 15,634,220.53
1,047,306.04 976,417.29 386,857.96 958,444.27
1,397,356.49 271,942.96
2,159,101.24 920,228.70 107,113.41
132,347.13
1,096,875.22 $
456,638.55
$ 25,544,849.79 $

398,738.90 398,738.90

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

$ 11,096,195.85 $
255,040.75 275,253.86 361,338.67 655,893.68 710,314.03
5,196.73 957,470.47 450,827.19
11,468.85
731,919.04
$ 15,510,919.12 $

4,629,284.28 $
56,719.81 152,624.28 247,063.00
408,556.15 5,494,247.52 $

91,259.60
-792,265.29 -701, 163.43
-25,519.29 -245,830.78 -687,042.46 -266,746.23 -1,049,006.49 -222,338.51
-95,644.56
-132,347.13 442,338.87 -456,638.55
-4, 140,944.25

$

6,426,028.01

500,933.73

1,226,293.48 279,187.83
1,407,377.00 772,186.30 941,676.03

$

11,553,682.38

$

7,412,738.13

24,380,248.54

$

31.792,986.67

-3-

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

EXHIBIT"C"

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

GENERAL FUND

DISTRICTWIDE
CAPITAL PROJECTS
FUND

DEBT SERVICE
FUND

TOTAL

$ 4,532,802.86 $ 7,315,865.96 $

437,477.51

6,577,354.58

12,500.00 287,792.44 1,868,281.38 247,667.90
11,928.85 89 400.08

100,000.00 217,611.07 1,009,956.92

498,034.50 $ 16,967.27

12,346,703.32 7,014,832.09
112,500.00 522,370.78 2,878,238.30 247,667.90
11,928.85 89 400.08

Total Assets

$ 7,487,851.02 $ 15,220,788.53 $ 515 001. 77 $ ====2=3!,ia,2,;;;;23;;i,;,6=4~1=3~2

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

$ 622,232.12 $ 125,097.63 2,519,651.28 1,182,389.58 695,692.61
$ 3,141,883.40 $ 2,003,179.82

$

30,263.00

330,798.14

$

89,400.08

$ 11,004,707.29

120,041.67

3,775,464.73

2,212,901.42

$ 4,345,967.62 $ 13,217,608.71 $

$ $ $ 515,001.77
515,001.77 $

747,329.75 2,519,651.28 1,182,389.58
695,692.61
5,145,063.22
30,263.00 330,798.14 515,001.77
89,400.08 11,004,707.29
120,041.67
3,775,464.73 2,212,901.42
18,078,578.10

Total Liabilities and Fund Balances

$ 7,487,851.02 $ 15,220,788.53 $ 515 001.77 $=====2=3&,2=23=!'=64=1,;,:;.3=2

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

PIKE 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 Construction in Progress Land Improvements Buildings Equipment Accumulated Depreciation
Total Capital Assets
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

$ 18,078,578.10

$ 404,646.06 7,340,437.10 753,789.00
22,690,317.50 2,935,531.16 -8, 139,082.98

25,985,637.84

$ -11,675,000.00 -596,229.27

-12,271,229.27

Net Assets of Governmental Activities (Exhibit "A")

$ 31,792,986.67

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

PIKE 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 Other Support Services Enterprise Operations Food Services Operation
Capital Outlay Debt Services
Principal Dues and Fees Interest
Total Expenditures
Excess of Revenues over (under) Expenditures
OTHER FINANCING SOURCES (USES)
Capital Lease Proceeds of Long-Term Capital Related Debt Transfers In Transfers Out
Total Other Financing Sources (Uses)
Net Change in Fund Balances
Fund Balances - Beginning (Restated)
Fund Balances - Ending

GENERAL FUND

DISTRICTWIDE
CAPITAL PROJECTS
FUND

DEBT SERVICE
FUND

TOTAL

$ 6,465,568.01 259,445.70 $
15,402,367.93 1,762,991.18 398,738.90 143,505.95 941,676.02

$
1,226,293.48 5,247,184.52
626,531.43

500,933.73 $
19,742.13
2,148.92

6,966,501.74 1,505,481.31 20,849,552.45 1,762,991.18
398,738.90 772,186.30 941,676.02

$ 25,374,293.69 $ 7,100,009.43 $ 522,824.78 $ 32,997,127.90

$ 15,511,174.21

$ 15,511,174.21

1,060,602.65 $
987,715.29 386,857.96 963,776.64 1,403,234.49 190,427.96 2,155,044.48 1,101,854.66 107,113.41 132,347.13 1,086,015.79

2,724.54 77,863.01 7,021,702.91

1,063,327.19 987,715.29 386,857.96 963,776.64
1,403,234.49 268,290.97
2, 155,044.48 1,101,854.66
107,113.41 132,347.13 1,086,015.79 7,021,702.91

29,607.45 24,323.30

$ 285,000.00
3,652.00 432,315.25

314,607.45 3,652.00
456,638.55

$ 25,140,095.42 $ 7,102,290.46 $ 720,967.25 $ 32,963,353.13

$ 234,198.27 $

-2,281.03 $ -198, 142.47 $

33,774.77

$ 625,836.72

$ 625,836.72

$ 7,800,000.00

7,800,000.00

30,188.73

$ 212,979.00

243,167.73

-243, 167.73

-243, 167.73

$ 656,025.45 $ 7,556,832.27 $ 212,979.00 $ 8,425,836.72

$ 890,223.72 $ 7,554,551.24 $ 14,836.53 $ 8,459,611.49

3,455,743.90

5,663,057.47 500,165.24

9,618,966.61

$ 4,345,967.62 $ 131217,608.71 $ 515,001.77 $ 1810781578.10

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

PIKE 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.
Bond proceeds provide current financial resources to Governmental Funds; however, issuing debt increases Long-Term Liabilities in the Statement of Net Assets. In the current period, proceeds were received from:
General Obligation Bonds Issued
Some of the capital assets recorded this year were financed with capital leases. In Governmental Funds, a capital lease arrangement is considered a source of financing, but in the Statement of Net Assets, the lease obligation is reported as a Long-Term Liability.
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 Principal Payments
Total Long-Term Debt
Change in Net Assets of Governmental Activities (Exhibit "8")

$ 8,459,611.49

$ 7,714,766.89 -610,870.98

7,103,895.91

-39,540.00

-7,800,000.00 -625,836.72

$ 285,000.00 29,607.45

314,607.45

$ 7,412,738.13

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

PIKE 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
$ 21,184.97
$ 21,184.97

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

PIKE 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 Pike 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 ofthe Pike 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 ofintemal 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-

PIKE 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 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), Bond Proceeds 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 ofwhen 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
- 10 -

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

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.
RESTATEMENT OF PRIOR YEAR NET ASSETS
For the fiscal year 2007, the School District restated the Debt Service Fund due to prior year property taxes recorded in the current year. The School District increased the beginning Debt Service Fund balance and Net Assets by $10,382.24. This change is in accordance with generally accepted accounting principles.
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,

- 11 -

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

EXHIBIT "H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(3) Obligations fully insured or guaranteed by the United States government or a United States government agency,
(4) Obligations of any corporation of the United States government,
(5) Prime banker's acceptances,
(6) The Local Government Investment Pool administered by the State 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 Pike County Board of Commissioners fixed the property tax levy for the 2006 tax digest year (calendar year) on November 29, 2006 (levy date). Taxes were due on February 20, 2007 (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 Pike 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, 2007, for maintenance and operations amounted to $6,465,568.01 and for school bonds amounted to $500,933.73.
Tax millage rates levied for the 2006 tax year (calendar year) for the Pike County Board of Education were as follows (a mill equals $1 per thousand dollars of assessed value):

- 12 -

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

EXHIBIT"H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

School Operations School Bonds

14.873 mills 1.120 mills

15.993 mills

SALES TAXES

Special Purpose Local Option Sales Tax, at the fund reporting level, during the year amounted to $1,226,293.48 and is to be used for capital outlay for educational purposes or debt service. This sales tax was authorized by local referendum and the sales tax must be re-authorized at least every five years.

INVENTORIES

FOOD INVENTORIES On the basic financial statements, inventories 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:

- 13 -

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

EXHIBIT"H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Capitalization Policy

Estimated Useful Life

Land Land Improvements Buildings and Improvements Equipment Construction in Progress

All

NIA

$ 10,000.00

20 years

$ 10,000.00 20 to 60 years

$ 5,000.00 5 to 15 years

$ 10,000.00

NIA

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 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 ofNet 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.

- 14 -

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

EXHIBIT "H"

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 of insurance, or by collateral. The aggregate ofthe face value of such surety bond and the market value of securities pledged shall be equal to not less than 110 percent ofthe public funds being secured after the deduction ofthe amount ofdeposit insurance. Ifa depository elects the pooled method (OCGA 45-8-13.1) the aggregate ofthe market value ofthe securities pledged to secure a pool ofpublic funds shall be not less than 110 percent ofthe daily pool balance.
Acceptable security for deposits consists of any one of or any combination of the following:
(1) Surety bond signed by a surety company duly qualified and authorized to transact business within the State of Georgia,
(2) Insurance on accounts provided by the Federal Deposit Insurance Corporation,
(3) Bonds, bills, notes, certificates of indebtedness or other direct obligations of the United States or ofthe State of Georgia,
(4) Bonds, bills, notes, certificates of indebtedness or other obligations of the counties or municipalities of the State of Georgia,
(5) Bonds of any public authority created by the laws of the State of Georgia, providing that the statute that created the authority authorized the use of the bonds for this purpose,
(6) Industrial revenue bonds and bonds of development authorities created by the laws 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 $15,473,762.72. The amounts ofthe 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

- 15 -

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

EXHIBIT"H"

Note 3: DEPOSITS AND INVESTMENTS

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

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

Custodial Credit Risk Category

Bank Balance

1

$

0.00

2

0.00

3

14.782,477.73

Total

$14,782,477.73

CATEGORIZATION OF INVESTMENTS At June 30, 2007, the carrying value ofthe School District's total investments was $4,754,145.59, which is materially the same as fair value. This investment consisted entirely of funds invested in the Local Government Investment Pool administered by the State ofGeorgia, Office ofTreasury 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 of Georgia, Office of Treasury and Fiscal Services for the Local Government Investment Pool (Primary Liquidity Portfolio) does not provide for investment in derivatives or similar investments. Additional information on the Local Government Investment Pool is disclosed in the State of Georgia Comprehensive Annual Financial Report. This audit can be obtained from the Georgia Department of Audits and Accounts at http://www.audits.state.ga.us/internet/searchRpts.html.

The Primary Liquidity Portfolio consists 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

- 16 -

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

EXHIBIT"H"

Note 5: CAPITAL ASSETS

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

Balances
July 1. 2006

Increases

Balances Decreases June 30, 2007

Governmental Activities Capital Assets, Not Being Depreciated:
Land Construction in Progress

$ 404,646.06

$

644.358.56 $ 6,696,078.54

0.00 $ 404,646.06 7.340,437.10

Total Capital Assets Not Being Depreciated $ 1.049.004.62 $ 6,696,078.54 $

0.00 $ 7.745,083.16

Capital Assets Being Depreciated Buildings and Improvements Equipment Land Improvements

$21,966,238.47 $ 724,079.03 $

2,674,421.84 261,109.32

720,289.00

33,500.00

0.00 $22,690,317.50 2,935,531.16 753,789.00

Less Accumulated Depreciation for: Buildings and Improvements Equipment Land Improvements

5,658,366.14 1,445,556.63
424,289.23

413,233.02 162,223.86 35,414.10

6,071,599.16 1,607,780.49
459.703.33

Total Capital Assets, Being Depreciated, Net $17,832,737.31 $ 407.817.37 $

0.00 $18,240.554.68

Governmental Activity Capital Assets - Net $18,881,:Z~ll.23 $ :Z,103,825.21 $

0.00 $25,285,631.84

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

Governmental Funds

Buildings and Improvements Less: Accumulated Depreciation

$ 625,136.73 15.628.42

$ 609,508.31

Current year depreciation expense by function is as follows:

Instruction Support Services
General Administration Maintenance and Operation ofPlant Student Transportation Services Food Services

$ 430,391.86

$ 5,273.33 14,189.72
123.031.96

142,495.01 37.984.11

$ 610,870.98

- 17 -

PIKE 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), general obligation bond proceeds 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 applicable bond covenants or statutory provisions. Restricted assets at June 30, 2007, were as follows:

District-wide Capital Projects

Bond

SPLOST

Proceeds

Debt Service Funds

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

$ 498,034.50 $ 7,102,964.54
$ 4,577,354.58

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

General Fund Debt Service Fund

$ 30,188.73 212,979.00

Total

$ 243,167.73

Transfers are used to move Capitalized Interest collected in the District-wide Capital Projects Fund to the Debt Service Fund to pay interest on the Series 2006 Bond Issue. In addition, a transfer was made from the District-wide Capital Projects Fund to the General Fund for unused portions oflocal projects funded from the General Fund.

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 and unemployment compensation.

- 18 -

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

EXHIBIT"H"

Note 8: RISK MANAGEMENT

The School District has obtained commercial insurance for risk ofloss associated with torts, assets, errors or omissions and job related illness or injuries to employees. However, the errors or omissions policy excludes coverage for sexual harassment and discrimination. 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 ofthe past three years.

The School District has elected to self-insure for all losses related to acts of God. In addition, the School District has elected to self-insure for risks for sexual harassment and discrimination. The School District has not experienced any losses related to these risks 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:

Beginning ofYear Liability

Claims and Changes in Estimates

Claims Paid

EndofYear Liability

2006 2007

$

0.00 $

952.00 $

952.00 $

0.00

$

0.00 $ 4,636.00 $ 4,636.00 $

0.00

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

Position Covered

Amount

Superintendent Finance Director Principals

$ 50,000.00 $ 50,000.00 $ 1,250.00 - $ 10,000.00

Note 9: LONG-TERM DEBT

CAPITAL LEASES Pike County Board of Education entered into a lease agreement for building improvements. This lease agreement qualifies as a capital lease for accounting purposes, and, therefore, has been recorded at the present value ofthe future minimum lease payments as ofthe date of inception.

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

- 19 -

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

EXHIBIT"H"

Note 9: LONG-TERM DEBT

Purpose

Interest Rates

Amount

General Government- Refunding- Series 1996 3.75% - 5.70%

General Government- Series 2006

3.81%

$ 3,875,000.00 7,800,000.00

$11,675,000.00

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

Governmental Funds

General

Capital

Obligation

Leases

Bonds

Total

Balance July 1, 2006

$

0.00 $ 4,160,000.00 $ 4,160,000.00

Additions G.O. Bonds Capital Leases

7,800,000.00 7,800,000.00

625,836.72

625,836.72

Deductions Debt Retired

29,607.45

285,000.00

314,607.45

Balance June 30, 2007

$ 596,229.27 $11,675,000.00 $12,271,229.27

Portion of Long-Term Debt Due within One Year

$ 52,510.52 $ 300,000.00 $ 352,510.52

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

Capital Leases

Principal

Interest

2008 2009 2010 2011 2012 2013 - 2016

$ 52,510.52 $ 54,810.77 57,211.78 59,717.99 62,333.97 309,644.24

24,582.40 22,282.15 19,881.14 17,374.93 14,758.95 30,849.49

Total Principal and Interest

$ 596,229.27 $ 129,729.06

-20-

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

EXHIBIT "H"

Note 9: LONG-TERM DEBT

Fiscal Year Ended June 30

General Obligation

Debt

Principal

Interest

2008 2009 2010 2011 2012 2013 - 2016

$ 300,000.00 $ 1,770,000.00 1,840,000.00 1,905,000.00 1,980,000.00 3,880,000.00

502,180.00 459,114.50 386,093.75 311,815.75 232,257.50 347,878.50

Total Principal and Interest

$11,675,000.00 $ 2,239,340.00

Note 10: PRIOR YEAR DEFEASEMENT OF DEBT

In fiscal year 1996, the School District defeased certain general obligation bonds by placing the proceeds ofnew bonds in an irrevocable trust to provide for all future debt service payments on the old bonds. Accordingly, the trust account assets and the liability for the defeased bonds are not included in the School District's basic financial statements. At June 30, 2007, $3,485,000.00 of bonds are outstanding and are considered defeased.

Note 11: ON-BEHALF PAYMENTS

The School District has recognized revenues and costs in the amount of $467,931.87 for health insurance and retirement contributions paid on the School District's behalf by the following State Agencies.

Georgia Department of Education Paid to the Georgia Department of Community Health For Health Insurance of Non-Certified Personnel In the amount of $452,195.91

Paid to the Teachers Retirement System of Georgia For Teachers Retirement System (TRS) Employer's Cost In the amount of $12,224.96

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 $3,511.00

- 21 -

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

EXHIBIT"H"

Note 12: SIGNIFICANT COMMITMENTS

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

Project

Unearned Executed Contracts

Funding Available From State

07RA-714-016

$10,977,694.05 $ 2,193,660.20

The amounts described in this note are not reflected in the basic financial statements.

Note 13: SIGNIFICANT CONTINGENT LIABILITIES

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

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

Note 14: RETIREMENT PLANS

TEACHERS RETIREMENT SYSTEM OF GEORGIA (TRS)

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

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

-22 -

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

EXHIBIT "H"

Note 14: RETIREMENT PLANS
Fiscal Year
2007 2006 2005

Percentage Contributed
100% 100% 100%

Required Contribution
$1,172,519.35 $ 1,060,709.00 $ 988,114.00

- 23 -

(This page left intentionally blank)

PIKE 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 Other Support Services Food Services Operation Enterprise Operations 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

$ 6,814,325.00 $ 6,814,325.00 $ 6,465,568.01

259,445.70

14,005,346.29

14,120,903.29

15,402,367.93

1,103,312.00

1,104,807.00

1,762,991.18

398,738.90

143,505.95

941,676.02

$ 21,922,983.29 $ 22,040,035.29 $ 25,374,293.69

$ 14,188,983.56 $ 14,573,585.23 $ 15,511,174.21

614,237.46 1,016,272.72
387,588.57 824,578.87 1,221,060.91 176,346.61 1,466,155.78 1,040,034.21 290,900.00

619,275.46 1,040,697.72
387,588.57 855,972.22 1,239,919.91 176,346.61 1,464,800.43 1,040,034.21 304,174.00

1,060,602.65 987,715.29 386,857.96 963,776.64
1,403,234.49 190,427.96
2, 155,044.48 1,101,854.66
107,113.41 1,086,015.79
132,347.13 53,930.75

$ 21,226,158.69 $ 21,702,394.36 $ 25,140,095.42

$

696,824.60 $

337,640.93 $

234,198.27

656,025.45

$

696,824.60 $

337,640.93 $

890,223.72

3,415,560.17

3,415,560.17

3,455,743.90

-2,181.55

23,903.77

Fund Balances - Ending

$ 4,110,203.22 $ 3,777,104.87 $ 4,345,967.62

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-

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

SCHEDULE "2"

FUNDING AGENCY PROGRAM/GRANT
Agriculture, U.S. Department of Child Nutrition Cluster Pass-Through From Georgia Department of Education Food Services School Breakfast Program National School Lunch Program
Total Child Nutrition Cluster
Other Programs Pass-Through From Georgia Department of Education Food Donation (1)
Total U. S. Department of Agriculture
Education, U. S. Department of Special Education Cluster Pass-Through From Georgia Department of Education Special Education Grants to States Preschool Grants
Total Special Education Cluster
Other Programs Pass-Through From Georgia Department of Education Enhancing Education Through Technology Program Improving Teacher Quality State Grants Safe and Drug-Free Schools and Communities State Grants for Innovative Programs Title I Grants to Local Education Agencies Vocational Education - Basic Grants to States
Total U. S. Department of Education
Labor, U. S. Department of Pass-Through From Georgia Department of Education Workforce Investment Act Adult Program

CFDA NUMBER

PASSTHROUGH
ENTITY ID
NUMBER

EXPENDITURES IN PERIOD

10.553 10.555
10.550

N/A

N/A

$

$

(2) 885,522.79
885,522.79

N/A

135 083.00

$ 1,020,605.79

84.027 84.173
84.318 84.367 84.186 84.298 84.010 84.048
17.258

N/A $ N/A
$

453,725.15 13,091.00
466,816.15

N/A

20.00

N/A

108,807.00

NIA

10,235.02

N/A

4,166.00

N/A

458,070.21

NIA

32 444.00

$ 1,080,558.38

N/A $

7 500.00

Total Federal Financial Assistance
NIA = Not Available

$ ==2,.,,1=08..,.6=6=4=.1=7

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 ($11,881.57) 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 Pike 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.

- 26 -

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

SCHEDULE "3"

AGENCY/FUNDING
GRANTS Bright from the Start: Georgia Department of Early Care and Learning Pre-Kindergarten Program
Education, Georgia Department of Quality Basic Education Direct Instructional Cost Kindergarten Program Kindergarten Program - Early Intervention Program Primary Grades (1-3) Program Primary Grades - Early Intervention (1-3) Program Upper Elementary Grades (4-5) Program Upper Elementary Grades - Early Intervention (4-5) Program Middle School (6-8) Program High School General Education (9-12) Program Vocational Laboratory (9-12) Program Students with Disabilities Category I Category II Category Ill Category IV Category V Gifted Student - Category VI Remedial Education Program Alternative Education Program Special Education - Supplemental Speech Media Center Program Twenty Days Additional Instruction Staff and Professional Development Indirect Cost Central Administration School Administration Facility Maintenance and Operations Categorical Grants Pupil Transportation Regular Bus Replacement Sparsity Alternative Program Nursing Services Principal Supplements Vocational Supervisors Education Equalization Funding Grant Food Services Amended Formula Adjustment Vocational Education Other State Programs Graduation Coach 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
Georgia State Financing and Investment Commission Reimbursement on Construction Projects
Office of Treasury and Fiscal Services Public School Employees Retirement

See notes to the basic financial statements.

- 27 -

GOVERNMENTAL FUND TYPES

CAPITAL

GENERAL

PROJECTS

FUND

FUND

TOTAL

$

296,544.38

$ 296,544.38

930,932.00 44,468.00
2,251,071.00 94,464.00
1, 137,335.00 72,874.00
1,816,128.00 1,552,345.00
358,606.00
153,917.00 55,022.00
646,970.00 240,068.00 166,146.00 386,474.00 131,884.00 133,847.00
5,929.00 304,077.00
95,215.00 57,858.00
429,699.00 578,143.00 808,464.00
391,800.00 47,063.00 35,802.00 71,496.00 10,068.00 18,859.00
1,407,377.00 65,410.00
-273,358.00 70,876.27
40,075.00 452,195.91
1,530.00 14,460.00 44,199.12 200,000.00 40,298.29 12,224.96

930,932.00 44,468.00
2,251,071.00 94,464.00
1,137,335.00 72,874.00
1,816,128.00 1,552,345.00
358,606.00
153,917.00 55,022.00
646,970.00 240,068.00 166,146.00 386,474.00 131,884.00 133,847.00
5,929.00 304,077.00
95,215.00 57,858.00
429,699.00 578,143.00 808,464.00
391,800.00 47,063.00 35,802.00 71,496.00 10,068.00 18,859.00
1,407,377.00 65,410.00
-273,358.00 70,876.27
40,075.00 452,195.91
1,530.00 14,460.00 44,199.12 200,000.00 40,298.29 12,224.96

$ 5,247,184.52

5,247,184.52

3 511.00

3,511.00

$ 15,402,367.93 $ 51247.184.52 $ 20,649,552.45

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

SCHEDULE "4"

PROJECT

ORIGINAL ESTIMATED
COST (1)

CURRENT ESTIMATED COSTS (2)

AMOUNT EXPENDED IN CURRENT
YEAR (3)

AMOUNT EXPENDED
IN PRIOR YEARS (3)

PROJECT STATUS

Paying all or a portion of the debt service on the outstanding Series 1996 Refunding General Obligation Bonds previously issued by the Pike County School District.

$ 400,000.00 $

400,000.00

Ongoing

Acquiring, constructing, equipping and furnishing a new middle school; adding to, renovating, repairing, improving, equipping and furnishing existing school buildings or other buildings or facilities useful or desirable in connection therewith.

4,100,000.00

11,466,000.00

$ 863,489.00 Ongoing

Acquiring, constructing and equipping new schools and facilities including one new middle school, adding to, renovating, repairing, improving, and equipping existing schools buildings and school system facilities, acquiring miscellaneous new equipment, fixtures and furnishings for the school system, including instructional and administrative technology equipment and safety and security equipment, expanding and improving existing athletic facilities, and for the purpose of paying debt service on the general obligation debt of the Pike County School District.

7,800,000.00

7,800,000.00 $ 7,021,702.91

Ongoing

$ 12,300,000.00 $ 19,666,000.00 $ 7,021,702.91 $ 863,489.00

(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 Pike County approved the imposition of a 1% sales tax to fund the above projects and retire associated debt. Amounts expended for these projects may include sales tax proceeds, state, local property taxes and/or other funds over the life of the projects.

See notes to the basic financial statements.

- 28 -

PIKE 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 Ill Category IV CategoryV Gifted Student - Category VI Remedial Education Program Alternative Education Program
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

$

1,045,552.00 $ 1,114,856.00 $

58,354.00 $ 1,173,210.00

67,044.00

75,726.00

1,537.00

77,263.00

2,548,820.00

2,720,487.00

90,369.00

2,810,856.00

126,977.00

126,777.00

1,066.00

127,843.00

1,287,824.00

1,333,902.00

21,169.00

1,355,071.00

82,578.00 2,087,205.00 1,769,884.00
434,534.00 1,491,443.00
414,956.00 130,693.00 154 609.00

105,943.00 2,373,280.00 2,689,676.00
328,205.00
1,540,502.00
219,054.00 202,831.00
1,984.00 59,275.00

110.00 102,930.00 113,670.00 45,206.00
12,625.00 710.00 227.00
3,629.00
191,522.00

106,053.00 2,476,210.00 2,803,346.00
373,411.00
1,553,127.00 710.00
219,281.00 206,460.00
1,984.00 250,797.00

$

11,642,119.00 $ 12,892,498.00 $ 643,124.00 $ 13,535,622.00

347,114.00 66,986.00

339,663.00 21,454.00

35,041.00 43,337.00

374,704.00 64,791.00

TOTAL QBE FORMULA FUNDS

$

12,056,219.00 $ 13,253,615.00 $ 721,502.00 $ 13,975,117.00

(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.

-29-

SECTION II COMPLIANCE AND INTERNAL CONTROL REPORTS

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

DEPARTMENT OF AUDITS AND ACCOUNTS
270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400
September 16, 2008

Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the Pike 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 Pike County Board of Education as of and for the year ended June 30, 2007, which collectively comprise Pike County Board ofEducation's basic financial statements and have issued our report thereon dated September 16, 2008. 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 Pike 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 Pike County Board of Education's internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness ofthe Pike County Board of Education's internal control over financial reporting.
Our consideration of internal control over financial reporting was for the limited purpose described in the 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.
2007YB-40

A control deficiency exists when the design or operation ofa control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect misstatements on a timely basis. A significant deficiency is a control deficiency, or combination of control deficiencies, that adversely affect the Pike County Board of Education's ability to initiate, authorize, record, process, or report financial data reliably in accordance with generally accepted accounting principles such that there is more than a remote likelihood that a misstatement ofthe Pike County Board of Education's financial statements that is more than inconsequential will not be prevented or detected by the Pike County Board ofEducation's internal control. We consider items FS-7141-07-01, FS-7141-07-02, FS-7141-07-03, FS-7141-07-04 and FS-7141-07-05 in the accompanying Schedule ofFindings and Questioned Costs to be significant deficiencies in internal control over financial reporting.
A material weakness is a significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood that a material misstatement ofthe financial statements will not be prevented or detected by the Pike County Board of Education's internal control.
Our consideration of the internal control over financial reporting was for the limited purpose described in the first paragraph ofthis section and would not necessarily disclose all deficiencies in internal control that might be significant deficiencies and, accordingly, would not necessarily disclose all significant deficiencies that are also considered to be material weaknesses. However, of the significant deficiencies described above, we consider items FS-7141-07-01 and FS-7141-07-05 to be material weaknesses.
Compliance and Other Matters
As part ofobtaining reasonable assurance about whether Pike County Board ofEducation's financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards.
We noted certain matters that we have reported to management ofPike County Board of Education in a separate letter dated September 16, 2008.
Pike County Board of Education's response to the findings identified in our audit is described in the accompanying Schedule of Management's Responses. We did not audit Pike 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 Pike 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,
LO.~
ell W. Hinton, CPA, CGFM State Auditor
RWH:gp 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
September 16, 2008

Honorable Sonny Perdue, Governor Members ofthe General Assembly Members ofthe State Board of Education
and Superintendent and Members of the Pike County Board of Education
REPORT ON COMPLIANCE WITH REQUIREMENTS APPLICABLE TO EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH 0MB CIRCULAR A-133
Ladies and Gentlemen:
Compliance
We have audited the compliance of Pike County Board of Education with the types of compliance 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, 2007. Pike 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 Pike County Board of Education's management. Our responsibility is to express an opinion on Pike 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 ofcompliance 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 Pike County Board of Education's compliance with those requirements and performing such other procedures as we considered necessary in the

2007SA-15

circumstances. We believe that our audit provides a reasonable basis for our opinion. Our audit does not provide a legal determination on Pike County Board ofEducation's compliance with those requirements.
In our opinion, the Pike County Board of Education complied, in all material respects, with the requirements referred to above that are applicable to each of its major Federal programs for the year ended June 30, 2007. However, the results of our auditing procedures disclosed an instance of noncompliance with those requirements, which is described in the accompanying Schedule of Findings and Questioned Costs as item FA-7141-07-01.
Internal Control Over Compliance
The management ofPike County Board ofEducation 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 Pike 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 of expressing our opinion on compliance, but not for the purpose of expressing an opinion on the effectiveness ofinternal control over compliance. Accordingly, we do not express an opinion on the effectiveness of the Pike 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 of a Federal program will not be prevented or detected by the entity's internal control.
Our consideration of the 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.
Pike County Board ofEducation's response to the findings identified in our audit is described in the accompanying Schedule of Management's Responses. We did not audit Pike County Board of Education's response and, accordingly, we express no opinion on it.
2007SA-15

This report is intended solely for the information and use ofthe management, members of the Pike 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.

RWH:gp 2007SA-15

Respectfully submitted,
~Lk .:V. . no (.O.
~ ~ t o n , CPA, CGFM
State Auditor

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

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

PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

FINDING CONTROL NUMBER AND STATUS

FS-7141-05-01 FS-7141-05-02 FS-7141-05-04 FS-7141-06-01 FS-7141-06-02 FS-7141-06-03 FS-7141-06-04

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

CORRECTIVE ACTION/RESPONSES

CASH AND CASH EQUIVALENTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Controls over Expenditures Finding Control Number: FS-7141-06-01

Inadequate separation of duties is a recurring problem due to staff shortages that will remain an ongoing issue. Strategies are in place to formally develop means for separating the reconciliation procedures for all cash accounts that will ensure a greater level of internal control through the distribution of duties and tasks to those with greater independence from the day to day general ledger functions relative to the operating, school nutrition and bond sinking accounts.

CASH AND CASH EQUIVALENTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS GENERAL LEDGER Inadequate Internal Control over School Activity Accounts Finding Control Number: FS-7141-06-02

A formal procedures manual is now in place to lend guidance and direction to the issues surrounding the Principal Accounts. This will serve as the foundation for the establishment ofprocedures and administrative rules governing the methods and actions of all staff involved with the accounting functions of the Principal Accounts. Likewise, the issues noted in the finding are addressed in this manual. Specific procedures and reporting requirements will be implemented to ensure that compliance will be maintained. The separation of duties issues will be addressed through this manual as well.

- 1-

PIKE 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

CORRECTIVE ACTION/RESPONSES

ACCOUNTING CONTROLS (OVERALL) Inadequate Access Controls Finding Control Number: FS-7141-06-03

Management recognizes this weakness and corrective measures are being developed to prevent any future reoccurrences. Internal examination of control processes will be utilized to provide timely examinations ofthese issues in order to ensure compliance with properly maintaining internal control measures.

CAPITAL ASSETS Failure to Adequately Maintain Capital Assets Finding Control Number: FS-7141-06-04

We recognize this weakness and corrective measures are being developed to mitigate any potential future reoccurrence. An internal examination ofcontrols is underway in an effort to adapt procedures to address these concerns.

PRIOR YEAR FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

FINDING CONTROL NUMBER AND STATUS

FA-7141-05-02 FA-7141-06-01 FA-7141-06-02

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

CORRECTIVE ACTION/RESPONSES

CASH MANAGEMENT Excessive Cash Balances Amount: $2,222.00 Finding Control Number: FA-7141-06-01

Management will intensely monitor the cash requirements and only make subsequent draws from grants after the disbursements have occurred. Guidance will be sought from the State as the School District develops internal mechanisms to assure compliance with the Federal guidelines and accurately measure cash needs.

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SECTION IV FINDINGS AND QUESTIONED COSTS

PIKE 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 Pike County Board of Education's financial statements was unqualified.

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

Cash and Cash Equivalents Revenues/Receivables/Receipts Accounting Controls (Overall) Financial Reporting

Expenditures/Liabilities/Disbursements General Ledger Capital Assets

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

3. Noncompliance Material to the Financial Statements The audit of the Pike County Board of Education 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 Pike 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 Pike County Board of Education's report on compliance with requirements applicable to major programs was unqualified.

6. Audit Findings Required to be Reported by Section .510(a) ofOMB Circular A-133 The Pike County Board ofEducation's audit did not disclose an audit finding required to be reported by section .510(a) ofOMB Circular A-13 3; however, we noted a certain instance of noncompliance which 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 84.010 Title I Grants to Local Educational Agencies

8. Type "A" Program Dollar Threshold The dollar threshold for type "A" programs was $300,000.00.

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

I SUMMARY OF AUDITOR'S RESULTS

9. Low Risk Auditee The Pike County Board of Education did not qualify as a low risk auditee as defined by Section .530 of 0MB Circular A-133.

II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

CASH AND CASH EQUIVALENTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Control Procedures Material Weakness Finding Control Number: FS-7141-07-01

Condition:

This is a repeat finding (FS-7141-06-01 and FS-7141-05-01) from the years ended June 30, 2006, and June 30, 2005, respectively. The accounting procedures at the School District were insufficient to provide for adequate internal controls and separation of duties.

Criteria:

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

Questioned Cost: NIA

Information:

Cash and Cash Equivalents The reconciliations for the operating, construction, school nutrition and the bond sinking accounts were not performed by someone independent of the general ledger function.

Revenues/Receivables/Receipts In the previous fiscal year, the School District did not have procedures in place to accrue Debt Service property tax revenue. During the current fiscal year, an adjustment was necessary to restate beginning net assets in the amount of$10,383.24 due to the revenue being reported in the wrong period. This material adjustment was necessary in order to properly reflect the Debt Service activity during this fiscal year.

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

II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

CASH AND CASH EQUIVALENTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Control Procedures Material Weakness Finding Control Number: FS-7141-07-01

Expenditures/Liabilities/Disbursements
During the current fiscal year, the School District implemented procedures to accrue retainages payable in accordance with generally accepted accounting principles. However, the School District booked a portion ofretainages payable twice in error. A material adjustment was necessary to correct this error in order to properly reflect retainages payables at June 30, 2007.

Cause:

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

Effect:

Fraud, errors and/or irregularities may occur and remain undetected due to inadequate separation of duties. Additionally, failure to ensure that internal controls are established, implemented and functioning can lead to inaccurate internal and external reporting, as well as noncompliance with generally accepted accounting principles.

Recommendation:

Management should revise and monitor controls to provide reasonable assurance that transactions are processed according to established procedures.

CASH AND CASH EQUIVALENTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS GENERAL LEDGER Inadequate Internal Controls over School Activity Accounts Significant Deficiency Finding Control Number: FS-7141-07-02

Condition:

This is a repeat finding (FS-7141-06-02 and FS-7141-05-02) from the years ended June 30, 2006, and June 30, 2005, respectively. The accounting procedures of the School District were insufficient to provide for adequate internal controls and separation of duties over the school activity accounts.

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

II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

CASH AND CASH EQUIVALENTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS GENERAL LEDGER Inadequate Internal Controls over School Activity Accounts Significant Deficiency Finding Control Number: FS-7141-07-02

Criteria:

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

Questioned Cost: NIA

Information:

Cash and Cash Equivalents The bank reconciliation function was not separated from the record keeping and voucher payment functions. An unidentified balance of$2,973.90 was noted between the general ledger cash balance and the cash balance used for reconciliation purposes.

Revenues/Receivables/Receipts Deposit preparation was not separated from the record keeping and cash custody functions. Reconciliations were not performed between teacher cash collections and bookkeeper cash collections in order to ensure proper accounting of all cash receipts. Adequate documentation was not maintained to support cash receipts.

Expenditures/Liabilities/Disbursements The check writing function was not separated from the record keeping or processing of signed checks.

General Ledger The School District reported Pike County Elementary School's fiscal year 2006 activity on their fiscal year 2007 financial statements in error.

Cause:

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

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

II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

CASH AND CASH EQUIVALENTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS GENERAL LEDGER Inadequate Internal Controls over School Activity Accounts Significant Deficiency Finding Control Number: FS-7141-07-02

Effect:

Fraud, errors and/or irregularities may occur and remain undetected. Additionally, failure to ensure that internal controls are established, implemented and functioning can lead to inaccurate internal and external reporting, as well as noncompliance with generally accepted accounting principles.

Recommendation:

Management should revise and monitor controls to provide reasonable assurance that transactions are processed according to established procedures.

ACCOUNTING CONTROLS (OVERALL) Inadequate Access Controls Significant Deficiency Finding Control Number: FS-7141-07-03

Condition:

This is a repeat finding (FS-7141-06-03) from fiscal year ended June 30, 2006. The accounting procedures of the School District did not maintain adequate separation of duties in the Financial Accounting System.

Criteria:

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

Questioned Cost: NIA

Information:

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

Cause:

The School District's management has not limited the access rights ofusers of the Financial Accounting System so that only access is granted for functions that fall within the scope of the personnel's job description.

Effect:

Fraud, errors and/or irregularities may not be detected in a timely manner.

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

II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

ACCOUNTING CONTROLS (OVERALL) Inadequate Access Controls Significant Deficiency Finding Control Number: FS-7141-07-03

Recommendation:

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

CAPITAL ASSETS Inadequate Maintenance of Capital Assets Listing Significant Deficiency Finding Control Number: FS-7141-07-04

Condition:

This is a repeat finding (FS-7141-06-04) from the year ended June 30, 2006. The School District failed to adequately maintain a capital assets listing.

Criteria:

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

Questioned Cost: NIA

Information:

The School District's assets listing did not have adequate descriptions and/or inventory numbers assigned to numerous assets reviewed.

Cause:

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

Effect:

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

Recommendation:

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

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

II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

FINANCIAL REPORTING Inadequate Controls over Financial Reporting Material Weakness Finding Control Number: FS-7141-07-05

Condition:

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

Criteria:

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

Questioned Cost: NIA

Information:

During the audit, numerous correcting entries were proposed by the auditor and accepted by the client to properly present the entity's fund level and entity-wide level financial statements.

Cause:

The School District did not implement an adequate system of internal controls over the financial statement reporting process.

Effect:

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

Recommendation:

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

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

III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

CASH MANAGEMENT Excessive Cash Balances Nonmaterial Noncompliance U.S. Department of Education Through Georgia Department of Education Title I Grants to Local Educational Agencies (CFDA 84.010) Finding Control Number: FA-7141-07-01

Condition:

This is a repeat finding (FA-7141-06-01) from the year ending June 30, 2006. A review of cash management procedures for the Title I Grants to Local Educational Agencies program (CFDA 84.010) disclosed that cash draws were made in advance of immediate cash needs, resulting in the accumulation of excessive cash balances.

Criteria:

In accordance with 34 CFR 80.21 interest earned on advances by local government grantees is required to be submitted promptly to the Federal grantor agency. Up to $100 per year may be kept for administrative expenses.

Questioned Cost: $4,533.84

Information:

The School District had excessive cash eleven of the twelve months for the year ending June 30, 2007. These excessive cash balances earned interest in excess ofthe allowed $100.00 per year. The School District earned $4,533.84 on advances.

Cause:

Management failed to properly draw down funds on a cost reimbursement basis, and accurately forecast the cash needs of the program.

Effect:

The School District failed to accurately forecast the cash needs of the programs resulting in noncompliance with grant requirements.

Recommendation:

The School District should implement procedures to accurately forecast the cash needs ofthe program. In addition, procedures should be implemented to minimize the time elapsing between the transfer of funds from the Georgia Department of Education and disbursement of such funds by the School District. The Georgia Department ofEducation should review this matter to determine if a refund is necessary for the excess interest proceeds.

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SECTIONV MANAGEMENT'S RESPONSES

PIKE COUNTY BOARD OF EDUCATION SCHEDULE OF MANAGEMENT'S RESPONSES
YEAR ENDED JUNE 30, 2007
Finding Control Number: FS-7141-07-01
We concur with this finding. Inadequate separation of duties has been a recurring problem due to staff shortages. However, additional staff has been hired in the Finance department in an effort to mitigate this situation. Reconciliation duties, as well as other overlapping duties ofrisk have been separated within the department through redistribution oftasks and assignments. An increased level ofaggregate data record keeping procedures are being centralized and to strengthen internal controls.
Finding Control Number: FS-7141-07-02
We concur. A formal procedures manual is now in place to lend guidance and direction to the issues surrounding the Principal Accounts. This will serve as the foundation for the establishment of procedures and administrative rules governing the methods and actions ofall staffinvolved with the accounting functions of the Principal Accounts. Likewise, the issues noted in the finding is addressed in this manual. Specific procedures and reporting requirements will be implemented to ensure that compliance will be maintained. The separation ofduties issues will be addressed through implementation ofnew Principal Activity Accounting software, that will be uniform throughout the School District. Likewise, the accounts will now be managed from central office in the Finance Department. All bank statements will be sent to central office for reconciling by Finance department staff, and the g/1 reports from each account will be printed from the central office module of the software. The only duties to remain at the school level will be the entries to the internal g/1, the check issuance and deposit duties, all other will become central office procedures.
Finding Control Number: FS-7141-07-03
We concur with this finding. Management recognizes this weakness and corrective measures are being developed to prevent any future reoccurrence. Internal examinations ofcontrol processes will be utilized to provide timely examinations of these issues in order to ensure compliance with properly maintained internal control measures. As well as the addition of a fourth staffmember to the Finance department will enable the duties to be splayed in a more efficient and separated manner.
Finding Control Number: FS-7141-07-04
We recognize this weakness and corrective measures are being developed to mitigate any potential future reoccurrence. An internal control strengthening procedure is underway through the purchase of software for the purpose of bar-coding fixed assets and storing the data in a format that ensures proper policy compliance, and provides adequate information regarding general fixed asset criteria.
Finding Control Number: FS-7141-07-05
We recognize this weakness and corrective measures are being developed to mitigate any potential future reoccurrence.
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PIKE COUNTY BOARD OF EDUCATION SCHEDULE OF MANAGEMENT'S RESPONSES
YEAR ENDED JUNE 30, 2007 Finding Control Number: FA-7141-07-01 We concur with this finding. Increased communication between Grant Management and the Finance
department will increase assurance that draws are made in a proper and timely manner.
Contact Person: Jeffery H. Hattaway, CFO Phone: (770) 567-8489 Fax: (770) 567-8349 E-mail: hattawj@pike.kl2.ga.us
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