Quitman County Board of Education, Georgetown, Georgia, report on audit of the financial statements for the fiscal year ended June 30, 2006

QUITMAN COUNTY BOARD OF EDUCATION GEORGETOWN, GEORGIA REPORT ON AUDIT
OF THE FINANCIAL STATEMENTS
FOR THE FISCAL YEAR ENDED JUNE 30, 2006
STATE OF GEORGIA
DEPARTMENT OF AUDITS AND ACCOUNTS
Russell W. Hinton State Auditor

QUITMAN COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS -

SECTION I

FINANCIAL

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

EXHIBITS

BASIC FINANCIAL STATEMENTS

DISTRICT-WIDE FINANCIAL STATEMENTS

A

STATEMENT OF NET ASSETS

1

B

STATEMENT OF ACTIVITIES

2

FUND FINANCIAL STATEMENTS

C

BALANCE SHEET

GOVERNMENTAL FUNDS

4

D

RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET

TO THE STATEMENT OF NET ASSETS

5

E

STATEMENT OF REVENUES, EXPENDITURES AND CHANGES

IN FUND BALANCES

GOVERNMENTAL FUNDS

6

F

RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT

OF REVENUES, EXPENDITURES AND CHANGES IN FUND

BALANCES TO THE STATEMENT OF ACTIVITIES

7

G

STATEMENT OF FIDUCIARY NET ASSETS

FIDUCIARY FUNDS

8

H

NOTES TO THE BASIC FINANCIAL STATEMENTS

9

SCHEDULES

REQUIRED SUPPLEMENTARY INFORMATION

1 SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES

IN FUND BALANCES - BUDGET AND ACTUAL

GENERAL FUND

23

SUPPLEMENTARY INFORMATION

2 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS

24

3 SCHEDULE OF STATE REVENUE

25

QUITMAN COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS -

SECTION I

FINANCIAL

SCHEDULES

SUPPLEMENTARY INFORMATION

4 SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS

26

5 ALLOTMENTS AND EXPENDITURES

GENERAL FUND - QUALITY BASIC EDUCATION PROGRAMS (QBE)

BY PROGRAM

27

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

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

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

QUITMAN 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
June 29, 2007

Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the Quitman County Board of Education
INDEPENDENT AUDITOR'S COMBINED REPORT ON BASIC FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION - SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
Ladies and Gentlemen:
We have audited the accompanying financial statements ofthe governmental activities, each major fund, and the aggregate remaining fund information (Exhibits A through H) ofthe Quitman County Board of Education, as of and for the year ended June 30, 2006, which collectively comprise the Board's basic financial statements as listed in the table of contents. These financial statements are the responsibility ofthe Quitman County Board ofEducation's management. Our responsibility is to express opinions on these financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United States ofAmerica and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General ofthe United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free ofmaterial misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinions.
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 ofthe Quitman County Board ofEducation, as ofJune 30, 2006, and the respective changes in financial position thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America.
2006ARL-11

The Quitman County Board ofEducation has not presented Management's Discussion and Analysis that accounting principles generally accepted in the United States has determined is necessary to supplement, although not to be part of, the basic financial statements.
In accordance with Government Auditing Standards, we have also issued our report dated June 29, 2007, on our consideration of the Quitman County Board of Education's internal control over financial reporting and our tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements and other matters. The purpose ofthat report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit.
The Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual, as presented on page 23, is not a required part of the basic financial statements but is supplementary information required by the accounting principles generally accepted in the United States of America. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods ofmeasurement and presentation ofthe required supplementary information. However, we did not audit the information and express no opinion on it.
Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Quitman County Board of Education's basic financial statements. The accompanying supplementary information which consist of Schedules 2 through 5, which includes the Schedule of Expenditures of Federal Awards as required by U. S. Office of Management and Budget Circular A-133, Audits ofStates, Local Governments, and Non-Profit Organizations, are presented for purposes of additional analysis and are not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements, and in our opinion, is fairly stated, in all material respects, in relation to the basic financial statements taken as a whole.
A copy of this report has been filed as a permanent record in the office of the State Auditor and made available to the press of the State, as provided for by Official Code of Georgia Annotated section 50-6-24.
Respectfully submitted,
~A, ... (Q l J ~ ~
~Jsell W. Hinton, CPA, CGFM State Auditor
RWH:gp 2006ARL-11

QUITMAN COUNTY BOARD OF EDUCATION

QUITMAN COUNTY BOARD OF EDUCATION STATEMENT OF NET ASSETS JUNE 30, 2006
ASSETS
Cash and Cash Equivalents Investments Accounts Receivable, Net
Taxes State Government Federal Government Other Inventories Capital Assets Land Land Improvements Buildings Equipment Less: Accumulated Depreciation
Total Assets
LIABILITIES
Accounts Payable Salaries Payable Contracts Payable Long-Term Liabilities
Due Within One Year Due in More Than One Year
Total Liabilities
NET ASSETS
Invested in Capital Assets, Net of Related Debt Restricted for
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

$

340,916

1,375,617

93,191 182,862 125,960
12,139 8,261

43,250 57,366 4,870,468 594,583 -1,324,924

$ ======6=,3=7=9=,6=89=

$

144,903

334,836

2,134

85,000 1,900,000

$

2,466,873

$

2,560,000

40,368 71,660 141,064 634,147 465 577

$

3,912,816

$ ===6=,3=7=9=,6=89=

QUITMAN COUNTY BOARD OF EDUCATION STATEMENT OF ACTIVITIES
FOR THE YEAR ENDED JUNE 30, 2006

GOVERNMENTAL ACTIVITIES
Instruction Support Services
Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Operations of Non-Instructional Services 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 Real Estate Grants and Contributions not Restricted to Specific Programs Investment Earnings Miscellaneous
Total General Revenues
Change in Net Assets
Net Assets - Beginning of Year

EXPENSES

CHARGES FOR SERVICES

$

2,454,050

138,434 53,413
136,521 508,556 248,976
56,747 196,287 251,104
540 70,321

249,182 $ 97200

$ ======4==4=61==3=3=1= $

2,997 2997

Net Assets - End of Year

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

EXHIBIT"B"

PROGRAM REVENUES

OPERATING

CAPITAL

GRANTS AND

GRANTS AND

CONTRIBUTIONS CONTRIBUTIONS

NET (EXPENSES) REVENUES
AND CHANGES IN NET ASSETS

$

1,696,730 $

144,382 9,633
116,698 499,465 171,893
2,641 95,020 126,265

39,232

214,916

$

3,116,875 $

82,335 $ 15,674 98009 $

-674,985
5,948 -43,780 -19,823
-9,091 -77,083 -54,106 -101,267 -109, 165
-540 -31,089
-31,269 -97 200
-1,243,450

$

773,650

75,324

273,297 10,003 1,953 24,583 33,591 54 758

$

1247159

$

3,709

3,909,107

$ ====3='=91=2=,8=1===6

-3-

QUITMAN COUNTY BOARD OF EDUCATION BALANCE SHEET
GOVERNMENTAL FUNDS JUNE 30, 2006

EXHIBIT"C"

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

GENERAL FUND

DISTRICTWIDE
CAPITAL PROJECTS
FUND

DEBT SERVICE
FUND

TOTAL

$

2,271 $

282,187 $

678,587

616,988

10,529 174,628 125,960 12,139
8 261

45,129 8,234

56,458 $ 80,042
948

340,916 1,375,617
56,606 182,862 125,960
12,139 8 261

Total Assets

$ 1,012,375 $

952,538 $

137,448 $ 2,102,361

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

$

132,903 $

334,836

$

467,739 $

12,000 2134 14134

$

144,903

334,836

2134

$

481,873

$

40,368

$

40,368

63,399

63,399

$

137,448

137,448

8,261

8,261

$

938,404

938,404

19,834

19,834

412,774

412 774

$

544,636 $

938,404 $

137 448 $ 1,620,488

Total Liabilities and Fund Balances

$ 1,012,375 $

952,538 $

137,448 $ 2,102,361

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

QUITMAN COUNTY BOARD OF EDUCATION RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET
TO THE STATEMENT OF NET ASSETS JUNE 30, 2006

EXHIBIT"D"

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

$

1,620,488

$

43,250

57,366

4,870,468

594,583

-1,324,924

4,240,743

36,585

-1,985,000

Net Assets of Governmental Activities (Exhibit "A")

$ ======3'=9=12....a...1..=s

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

QUITMAN COUNTY BOARD OF EDUCATION STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES
GOVERNMENTAL FUNDS YEAR ENDED JUNE 30, 2006

EXHIBIT"E"

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

GENERAL FUND

DISTRICTWIDE
CAPITAL PROJECTS
FUND

DEBT SERVICE
FUND

TOTAL

$

710,435

10,554 $

1,939,442

1,217,690

2,997

23,716

76,979

$ 3,981,813 $

$
273,297 82,335
5,945
361,577 $

68,206 $
1,402
3,930

778,641 285,253 2,021,777 1,217,690
2,997 33,591 76,979

73 538 $ 4,416,928

$ 2,386,217
138,434 53,413
136,521 505,101 248,976
55,634 189,267 226,712
540 70,321 238,681
$

$ 4,249,817 $

$

-268,004 $

812,640

$
320,706
320,706 $ 40,871 $
897,533

$ 2,386,217

1,113

138,434 53,413
136,521 505,101 248,976
56,747 189,267 226,712
540 70,321 238,681 320,706

75,000 97,200

75,000 97,200

173,313 $ 4,743,836

-99,775 $

-326,908

237,223

1,947,396

Fund Balances - Ending

$

544 636 $

938,404 $

137 448 $ 1,620,488

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

QUITMAN COUNTY BOARD OF EDUCATION RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT OF
REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES TO THE STATEMENT OF ACTIVITIES JUNE 30, 2006

EXHIBIT "F"

Total Net Change in Fund Balances - Governmental Funds (Exhibit "E")

Amounts reported for Governmental Activities in the Statement of Activities are different because:

Capital Outlays are reported as expenditures in Governmental Funds. However, in the Statement of Activities, the cost of Capital Assets is allocated over their estimated useful lives as depreciation expense. In the current period, these amounts are:

Capital Outlay

$

Depreciation Expense

Excess of Capital Outlay over Depreciation Expense

Because some property taxes will not be collected for several months after the School District's fiscal year ends, they are not considered "available" revenues.

In the Statement of Activities, only the gain on the sale of the building, improvements and equipment is reported, whereas in the Governmental Funds, the entire proceeds from the sale increase financial resources. Thus, the change in net assets differs from the change in fund balances by the carrying value of the building, improvements and equipment sold.

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

$
320,706 -113201

-326,908
207,505 70,333 -22,221 75 000

Change in Net Assets of Governmental Activities (Exhibit "8")

$ ====3=7=0=9

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

QUITMAN COUNTY BOARD OF EDUCATION STATEMENT OF FIDUCIARY NET ASSETS
FIDUCIARY FUNDS JUNE 30, 2006
ASSETS Accounts Receivable, Net
Other
LIABILITIES Cash Overdraft Accounts Payable Funds Held for Others
Total Liabilities

EXHIBIT"G"

AGENCY FUNDS
$ ===1=6=,8=51=

$

12,942

3,160

749

$ ===1=6=,8=51=

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

QUITMAN COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2006

EXHIBIT "H"

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

-9-

QUITMAN COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2006

EXHIBIT "H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The School District reports the following major governmental funds:
General Fund is the School District's primary operating fund. It accounts for all financial
resources ofthe School District, except those resources required to be accounted for in another fund.
District-wide Capital Projects Fund accounts for financial resources including Special Purpose Local Option Sales Tax (SPLOST), 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 -

QUITMAN COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2006

EXHIBIT "H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
liability is incurred, except for principal and interest on general long-term debt, which are recognized as expenditures to the extent they have matured. Capital asset acquisitions are reported as expenditures in governmental funds.
The School District funds certain programs by a combination ofspecific cost-reimbursement grants, categorical grants, and general revenues. Thus, when program costs are incurred, there are both restricted and unrestricted net assets available to finance the program. It is the School District's policy to first apply grant resources to such programs, followed by cost-reimbursement grants, then general revenues.
CASH AND CASH EQUIVALENTS
COMPOSITION OF DEPOSITS Cash and cash equivalents consist ofcash on hand, demand deposits and short-term investments with original maturities of three months or less from the date of acquisition in authorized financial institutions. Georgia Laws OCGA 45-8-14 authorize the School District to deposit its funds in one or more solvent banks or insured Federal savings and loan associations.
INVESTMENTS
COMPOSITION OF INVESTMENTS Investments made by the School District in nonparticipating interest-earning contracts (such as certificates ofdeposit) and repurchase agreements are reported at cost. Participating interest-earning contracts and money market investments with a maturity at purchase ofone year or less are reported at amortized cost. Both participating interest-earning contracts and money market investments with a maturity at purchase greater than one year are reported at fair value. The Official Code ofGeorgia Annotated Section 36-83-4 authorizes the School District to invest its funds. In selecting among options for investment or among institutional bids for deposits, the highest rate ofreturn shall be the objective, given equivalent conditions of safety and liquidity. Funds may be invested in the following:
(1) Obligations issued by the State of Georgia or by other states,
(2) Obligations issued by the United States government,
(3) Obligations fully insured or guaranteed by the United States government or a United States government agency,
(4) Obligations of any corporation of the United States government,
(5) Prime banker's acceptances,

- 11 -

QUITMAN COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2006

EXHIBIT"H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(6) The Local Government Investment Pool administered by the State of Georgia, Office of Treasury and Fiscal Services,

(7) Repurchase agreements, and

(8) Obligations of other political subdivisions of the State of Georgia.

The School District does not have a formal policy regarding investment policies that address credit risks, custodial credit risks, concentration ofcredit risks, interest rate risks or foreign currency risks.

RECEIVABLES

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

PROPERTY TAXES

The Quitman County Board of Commissioners fixed the property tax levy for the 2005 tax digest year (calendar year) on October 21, 2005 (levy date). Taxes were due on December 30, 2005 (lien date). Taxes collected within the current fiscal year or within 60 days after year-end on the 2005 tax digest are reported as revenue in the governmental funds for fiscal year 2006. The Quitman County Tax Commissioner bills and collects the property taxes for the School District, withholds 2.5% of taxes collected as a fee for tax collection and remits the balance of taxes collected to the School District. Property tax revenues, at the fund reporting level, during the fiscal year ended June 30, 2006, for maintenance and operations amounted to $710,435 and for school bonds amounted to $68,206.

Tax millage rates levied for the 2005 tax year (calendar year) for the Quitman County Board of Education were as follows (a mill equals $1 per thousand dollars of assessed value):

School Operations School Bonds

10.950 mills 1.073 mills

12.023 mills

- 12 -

QUITMAN COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2006

EXHIBIT "H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

SALES TAXES

Special Purpose Local Option Sales Tax, at the fund reporting level, during the year amounted to $273,297 and is to be used for capital outlay for educational purposes or debt service. This sales tax was authorized by local referendum and the sales tax must be re-authorized at least every five years.

INVENTORIES

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

CAPITAL ASSETS

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

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

Capitalization Policy

Estimated Useful Life

Land Land Improvements Buildings and Improvements Equipment

Any Amount

$

5,000

$

5,000

$

5,000

NIA 15 years 10 to 60 years 5 to 15 years

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

- 13 -

QUITMAN COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2006

EXHIBIT"H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
GENERAL OBLIGATION BONDS
The School District issues general obligation bonds to provide funds for the acquisition and construction of major capital facilities. Bond issuance costs are recognized in the financial statements during the fiscal year bonds are issued. In addition, general obligation bonds have been issued to refund existing general obligation bonds. General obligation bonds are direct obligations and pledge the full faith and credit of the government. The outstanding amount of these bonds is recorded in the Statement ofNet Assets.
Note 3: DEPOSITS AND INVESTMENTS
COLLATERALIZATION OF DEPOSITS Official Code of Georgia Annotated (OCGA) Section 45-8-12 provides that there shall not be on deposit at any time in any depository for a time longer than ten days a sum of money which has not been secured by surety bond, by guarantee 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 ofthe State of Georgia,
(5) Bonds of any public authority created by the laws of the State of Georgia, providing that the statute that created the authority authorized the use of the bonds for this purpose,
(6) Industrial revenue bonds and bonds ofdevelopment authorities created by the laws ofthe State of Georgia, and

- 14 -

QUITMAN COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2006

EXHIBIT "H"

Note 3: DEPOSITS AND INVESTMENTS

(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, 2006, the bank balances were $1,938,913. The amounts of the total bank balances are classified into four categories of custodial credit risk:

Category 1 - Cash that is insured (e.g., Federal Deposit Insurance) or collateralized with securities held by the School District or by the School District's agent in the School District's name.
Category 2 - Cash collateralized with securities held by the pledging financial institution's trust department or agent in the School District's name.
Category 3 - Cash collateralized with securities held by the pledging financial institution, or by its trust department or agent but not in the School District's name.
Category 4 - Uncollateralized.

The School District's deposits are classified by custodial credit risk category at June 30, 2006, as follows:

Custodial Credit Risk Category

Bank Balance

1

$ 102,833

2

1,836,080

3

0

4

0

Total

$ 1,938.913

CATEGORIZATION OF INVESTMENTS Custodial Credit Risk Custodial credit risk for investments is the risk that, in the event of a failure ofthe counterparty to a transaction, the School District will not be able to recover the value of the investment or collateral securities that are in the possession of an outside party. The School District does not have a formal policy for managing custodial credit risk.

At June 30, 2006, the fair value ofthe School District's total investments was $80,157 and this entire amount consisted of U. S. Treasuries which was insured or registered, or securities held by the School District or the School District's agent in the School District's name.

- 15 -

QUITMAN COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2006

EXHIBIT"H"

Note 3: DEPOSITS AND INVESTMENTS

Interest Rate Risk Interest rate risk is the risk that changes in interest rates of debt investment will adversely affect the fair value ofan investment. The School District does not have a formal policy for managing interest rate risk.

At June 30, 2006, the School District's investment consisted of U. S. Treasuries which had an investment maturity of 1 - 5 years.

Note 4: NON-MONETARY TRANSACTIONS

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

Note 5: CAPITAL ASSETS

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

Balances July 1. 2005

Increases

Decreases

Balances June 30. 2006

Governmental Activities

Capital Assets, Not Being Depreciated:

Land

$

43.250 $

0 $

0 $

43.250

Capital Assets Being Depreciated Buildings and Improvements Equipment Land Improvements

$ 4,553,095 $ 640,294 64,545

320,706 $

3,333 $ 45,711
7,179

4,870,468 594,583 57,366

Less Accumulated Depreciation for: Buildings and Improvements Equipment Land Improvements

721,869 485,268
38.588

76,697 33,331
3 173

2,066 26,140
5 796

796,500 492,459
35,965

Total Capital Assets, Being Depreciated, Net $ 4.012.209 $ 207.505 $

22.221 $ 4,197.493

Governmental Activity Capital Assets - Net $ 4,055,452 $ 201,505 $

22,221 $ ~h240.743

- 16 -

QUITMAN COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2006

EXHIBIT "H"

Note 5: CAPITAL ASSETS

Current year depreciation expense by function is as follows:

Instruction

Support Services

General Administration

$

Maintenance and Operation ofPlant

Student Transportation Services

Food Services

$
3,455 7,020 24.392

67,833
34,867 10,501

Note 6: RESTRICTED ASSETS

Special Purpose Local Option Sales Tax (SPLOST), general obligation bond proceeds and property tax levied specifically for retirement ofoutstanding bond principal, interest and paying agent's fees (Debt Service Funds) are reported as restricted assets in the Statement of Net Assets because their use is limited by applicable bond covenants or statutory provisions. Restricted assets at June 30, 2006, were as follows:

District-wide Capital Projects

Bond

SPLOST

Proceeds

Debt Service Funds

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

$ $ 304,149

$ 616,873 $

$
115

56,458 80,042

Note 7: RISK MANAGEMENT

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

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

- 17 -

QUITMAN COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2006

EXHIBIT "H"

Note 7: RISK MANAGEMENT
The School District has elected to self-insure for all losses related to acts of God. The School District has not experienced any losses related to this risk in the past three years.
The School District is self-insured with regard to unemployment compensation claims. In connection with this program, a self-insurance reserve has been established within the General Fund by the School District. 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 of Year Liability

Claims and Changes in Estimates

Claims Paid

End of Year Liability

2005 2006

$

0 $

965 $

965 $

0

$

0 $

0 $

0 $

0

The School District participates in the Georgia Education Workers' Compensation Trust, a public entity risk pool organized on December 1, 1991, to develop, implement and administer a program of workers' compensation self-insurance for its member organizations. The School District pays an annual premium to the Trust for its general insurance coverage. Additional insurance coverage is provided through an agreement by the Trust with the Midwest Employers Casualty Company to provide coverage for potential losses sustained by the Trust in excess of $500,000 loss per occurrence, up to $2,000,000.

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

Position Covered
Superintendent Principal Bookkeeper All Other Employees
Note 8: LONG-TERM DEBT

Amount

$

25,000

$

25,000

$

25,000

$ 100,000

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

Purpose

Interest Rates

General Government - Refunding - Series 1998 4.05% - 4.875%

Amount $ 1,985.000

- 18 -

QUITMAN COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2006

EXHIBIT "H"

Note 8: LONG-TERM DEBT

The changes in Long-Term Debt during the fiscal year ended June 30, 2006, were as follows:

Governmental Funds
General Obligation
Bonds

Balance July 1, 2005

$ 2,060,000

Deductions Debt Retired

75,000

Balance June 30, 2006

$ 1,985.000

Portion of Long-Term Debt Due within One Year

$

85,000

At June 30, 2006, payments due by fiscal year which includes principal and interest for these items are as follows:

Fiscal Year Ended June 30

General Obligation

Debt

Principal

Interest

2007 2008 2009 2010 2011 2012 - 2016 2017-2019

$

85,000 $

94,013

95,000

90,400

105,000

86,363

115,000

81,690

120,000

76,515

820,000

283,601

645,000

63,862

Total Principal and Interest

$ 1,985.000 $ 776 444

Note 9: ON-BEHALF PAYMENTS

The School District has recognized revenues and costs in the amount of$97,965 for health insurance and retirement contributions paid on the School District's behalf by the following State Agencies.

- 19 -

QUITMAN COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2006

EXHIBIT"H"

Note 9: ON-BEHALF PAYMENTS
Georgia Department of Education Paid to the Georgia Department of Community Health For Health Insurance of Non-Certified Personnel In the amount of$97,547
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 $418
Note 10: SIGNIFICANT CONTINGENT LIABILITIES
Amounts received or receivable principally from the Federal government are subject to audit and review by grantor agencies. This could result in requests for reimbursement to the grantor agency for any costs which are disallowed under grant terms. The School District believes that such disallowances, if any, will be immaterial to its overall financial position.
Note 11: SUBSEQUENT EVENTS
On March 20, 2007, the voters ofQuitman County voted in favor ofa Special Purpose Local Option Sales Tax of one percent to be imposed on all sales in Quitman County for a period of time not to exceed 20 calendar quarters, beginning upon termination of the current such sales and use tax, to raise not more than $2,000,000. The proceeds from the tax are to be used for the benefit of the Quitman County Board of Education as stated in part on the Official Ballot of Quitman County as follows:
"Shall the Quitman County School District issue general obligation bonds in principal amount not to exceed $3,500,000 to pay the costs of (i) acquiring, constructing and equipping a new high school and related facilities, including necessary furnishings, fixtures and equipment, (ii) renovating, extending, repairing and equipping Quitman County Elementary School, (iii) acquiring, constructing and equipping athletic facilities, (iv) acquiring and installing system-wide instructional and administrative technology, safety and security equipment; (v) acquisition of school buses and transportation equipment; (vi) acquisition of music, vocational, and physical education/athletic equipment; (vii) acquiring any necessary property therefore, both real and personal (the "Projects"); and (viii) paying expenses incident to accomplishing the foregoing; and, shall a one percent sales and use tax for educational purposes be re-imposed in the Quitman County School District for a period of time not to exceed 20 consecutive quarters in order to raise not more than $2,000,000 to pay a portion of the debt service on such bonds, to pay a portion ofthe costs ofacquiring, constructing and equipping the Projects, and to fund the payment ofprincipal and interest on the School District's Series 1998 Refunding Bonds commencing on August 1, 2008?"

- 20-

QUITMAN COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2006

EXHIBIT"H"

Note 12: 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% oftheir gross earnings to TRS. The School District makes monthly employer contributions to TRS at rates adopted by the TRS Board ofTrustees in accordance with State statute and as advised by their independent actuary. The required employer contribution rate is 9.24% and employer contributions for the current fiscal year and the preceding two fiscal years are as follows:

Fiscal Year

Percentage Contributed

Required Contribution

2006 2005 2004

100% 100% 100%

$ 195,489 $ 176,772 $ 161,657

- 21 -

(This page left intentionally blank)

QUITMAN COUNTY BOARD OF EDUCATION GENERAL FUND
SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL
YEAR ENDED JUNE 30, 2006

SCHEDULE "1"

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

NONAPPROPRIATED BUDGETS

ORIGINAL (1)

FINAL (1)

ACTUAL AMOUNTS

$

702,717 $

702,717 $

710,435

1,795,226

1,795,226

10,554

864,931

1,626,060

1,939,442

4,000

4,000

1,217,690

144

144

2,997

23,716

76 979

$

3 367 018 $

4 128 147 $

3,981,813

$

2,320,519 $

2,480,077 $

2,386,217

126,168 73,263
103,470 341,249 200,190
55,490 201,964 249,323
540 34,138 233 994

214,242 96,379
175,187 573,616 220,979
55,490 220,130 271,167
540 86,694 240 334

138,434 53,413
136,521 505,101 248,976
55,634 189,267 226,712
540 70,321 238 681

$

3,940,308 $

4 634 835 $

4 249 817

$

-573,290 $

-506,688 $

-268,004

-218 000

$

-791,290 $

-506,688 $

-268,004

790 678

790 678

812 640

Fund Balances - Ending

$

-612 $

283,990 $ ===5=4=4=,6=36==

Notes to the Schedule of Revenues, Expenditures and Changes in Fund Balances Budget and Actual
(1) Original and Final Budget amounts do not include budgeted revenues or expenditures of the various principal accounts.
The accompanying schedule of revenues, expenditures and changes in fund balances budget and actual is presented on the modified accrual basis of accounting which is the basis of accounting used in the presentation of the fund financial statements.
See notes to the basic financial statements.
- 23 -

QUITMAN COUNTY BOARD OF EDUCATION SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
YEAR ENDED JUNE 30, 2006

SCHEDULE "2"

FUNDING AGENCY PROGRAM/GRANT
Agriculture, U. S. Department of Child Nutrition Cluster Pass-Through From Georgia Department of Education Food Services School Breakfast Program National School Lunch Program
Total Child Nutrition Cluster
Other Programs Pass-Through From Georgia Department of Education Food Donation (1)
Total U.S. Department of Agriculture
Education, U.S. Department of Special Education Cluster Pass-Through From Georgia Department of Education Special Education Grants to States Preschool Grants
Total Special Education Cluster
Other Programs Direct Fund for the Improvement of Education Pass-Through From Georgia Department of Education Enhancing Education Through Technology Program Improving Teacher Quality State Grants Reading First State Grants Safe and Drug-Free Schools and Communities - State Grants State Grants for Innovative Programs Title I Grants to Local Educational Agencies Pass-Through From Morehouse School of Medicine Twenty-First Century Community Learning Centers
Total U. S. Department of Education

CFDA NUMBER

PASSTHROUGH
ENTITY ID
NUMBER

EXPENDITURES IN PERIOD

10.553 10.555
10.550

N/A

(2)

N/A

$ _ _ _-=20"-'8"-',3=2=-0

$

208,320

N/A

5 919

$ _ _ _-=21"--4.2::.;::3""-9

84.027 84.173
. 84.215 . 84.318
84.367 84.357
. 84.186 84.298 84.010
84.287

NIA $ NIA
$
NIA NIA NIA NIA NIA NIA NIA
$

67,172 14 123
81,295
440,769
63,820 52,233 150,960
5,063 1,574 223,530
56440
1 075 684

Total Federal Financial Assistance
NIA = Not Available

$====1,=28=9=,9=2=3

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 ($69,294) were not maintained separately and are included in the 2006 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 Quitman Board of Education and is presented on the modified accrual basis of accounting which is the basis of accounting used in the presentation of the fund financial statements.

See notes to the basic financial statements.

- 24-

QUITMAN COUNTY BOARD OF EDUCATION SCHEDULE OF STATE REVENUE YEAR ENDED JUNE 30, 2006

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 Grades (6-8) Program Students with Disabilities Category II Category Ill Category IV Alternative Education Program Media Center Program 20 Days Additional Instruction Staff and Professional Development Indirect Cost Central Administration School Administration Facility Maintenance and Operations Categorical Grants Pupil Transportation Regular Bus Replacement Sparsity Nursing Services Principal Supplements Mid-term Adjustment Hold-Harmless Education Equalization Funding Grant Food Services Austerity Reduction Other State Programs Health Insurance Preschool Handicapped Program Statewide K-8 Reading and Mathematics Program
Georgia State Financing and Investment Commission Reimbursement on Construction Projects
Office of Treasury and Fiscal Services Public School Employees Retirement

GOVERNMENTAL FUND TYPES

CAPITAL

GENERAL

PROJECTS

FUND

FUND

$

194,483

$

158,611 19,092
235,803 50,500
122,023 51,164
176,089
32,952 90,693 21,673
8,563 29,339
8,514 4,729
247,874 90,671 64,021
94,721 15,674 117,609 24,208
879 2,984 24,581 9,328 -86,701
97,547 8,080
23,320
$
418

82,335

TOTAL
194,483
158,611 19,092
235,803 50,500
122,023 51,164
176,089
32,952 90,693 21,673
8,563 29,339
8,514 4,729
247,874 90,671 64,021
94,721 15,674 117,609 24,208
879 2,984 24,581 9,328 -86,701
97,547 8,080
23,320
82,335
418

$

1939442 $

82 335 $ ===2=0=2=1.,.7=77=

See notes to the basic financial statements.

- 25-

QUITMAN COUNTY BOARD OF EDUCATION SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS
YEAR ENDED JUNE 30, 2006

SCHEDULE "4"

PROJECT
Payment of a portion of the principal and interest on the Quitman County School District General Obligation of School Bonds, Series 1994 and Series 1998 from August 1, 2003 through February 1, 2008, and thereafter to the extent that funds are available, the acquisition, construction and equipping of the elementary school additions, renovations and improvements at existing schools and facilities, equipping, renovating and improving the auditorium, purchasing school buses and acquisition of any necessary property there for, both real and personal and for paying the cost incident to accomplishing the foregoing.

ORIGINAL ESTIMATED
COST (1)

CURRENT ESTIMATED COSTS (2)

AMOUNT EXPENDED IN CURRENT YEAR (3) (4)

AMOUNT EXPENDED
IN PRIOR YEARS (3) (4)

PROJECT STATUS

$

1,200,000 $ 1,200,000 $

320,706 $

11 928 Ongoing

(1) The School District's original cost estimate as specified in the resolution calling for the imposition of the Local Option Sales Tax.
(2) The School District's current estimate of total cost for the project. Includes all cost from project inception to completion.
(3) The voters of Quitman County approved the imposition of a 1% sales tax to fund the above project and retire associated debt. Amounts expended for this project may include sales tax proceeds, state, local property taxes and/or other funds over the life of the project.
(4) A portion of the Series 1994 Bonds were retired through the sale of Series 1998 Refunding Bond Issue. The School District will utilize the SPLOST proceeds budgeted for this project, plus any excess SPLOST proceeds to retire the Series 1998 Refunding Bond Issue.

See notes to the basic financial statements.

- 26-

QUITMAN COUNTY BOARD OF EDUCATION GENERAL FUND- QUALITY BASIC EDUCATION PROGRAM (QBE)
ALLOTMENTS AND EXPENDITURES - BY PROGRAM YEAR ENDED JUNE 30, 2006

SCHEDULE "5"

DESCRIPTION
Direct Instructional Programs Kindergarten Program Kindergarten Program-Early Intervention Program Primary Grades (1-3) Program Primary Grades-Early Intervention (1-3) Program Upper Elementary Grades (4-5) Program Upper Elementary Grades-Early Intervention (4-5) Program Middle Grades (6-8) Program Students with Disabilities Category Ill 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

$

174,685 $

163,412 $

1,567 $

164,979

19,971

12,436

12,436

280,922

327,955

7,446

335,401

55,281

85,501

85,501

141,922

151,481

2,560

154,041

55,141 208,956 163,306
9830

135,767 341,295
149,571 11 189

517 4,481
1,341

136,284 345,776
150,912 11 189

$

1,110,014 $

1,378,607 $

17,912 $

1,396,519

33,957 5 503

43,093 1 977

2,940 3414

46,033 5 391

TOTAL QBE FORMULA FUNDS

$

1149474 $

1,423,677 $

24 266 $ =====1=44=7=9=4=3

(1) Comprised of State Funds plus Local Five Mill Share. (2) Allotments do not include the impact of the State budget austerity reduction.

See notes to the basic financial statements.

- 27 -

SECTION II COMPLIANCE AND INTERNAL CONTROL REPORTS

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

DEPARTMENT OF AUDITS AND ACCOUNTS
270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400
June 29, 2007

Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the Quitman 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 ofQuitman County Board ofEducation as ofand for the year ended June 30, 2006, which collectively comprise Quitman County Board of Education's basic financial statements and have issued our report thereon dated June 29, 2007. We conducted our audit in accordance with auditing standards generally accepted in the United States ofAmerica and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States.
Internal Control Over Financial Reporting
In planning and performing our audit, we considered Quitman County Board ofEducation's internal control over financial reporting in order to determine our auditing procedures for the purpose of expressing our opinions on the financial statements and not to provide an opinion on the internal control over financial reporting. However, we noted a certain matter involving the internal control over financial reporting and its operation that we consider to be a reportable condition. Reportable conditions involve matters coming to our attention relating to significant deficiencies in the design or operation of the internal control over financial reporting that, in our judgment, could adversely affect Quitman County Board of Education's ability to record, process, summarize and report financial data consistent with assertions ofmanagement in the financial statements. The reportable condition is described in the accompanying Schedule ofFindings and Questioned Costs as item FS7181-06-01.
2006YB-30

A material weakness is a reportable condition in which the design or operation ofone or more ofthe internal control components does not reduce to a relatively low level the risk that misstatements caused by error or fraud in amounts that would be material in relation to the financial statements being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. Our consideration of the internal control over financial reporting would not necessarily disclose all matters in the internal control that might be reportable conditions and, accordingly, would not necessarily disclose all reportable conditions that are also considered to be material weaknesses. However, we believe the reportable condition described above is not a material weakness.
Compliance and Other Matters
As part of obtaining reasonable assurance about whether Quitman County Board of Education's financial statements are free of material misstatement, we performed tests of its compliance with certain provisions oflaws, regulations, contracts and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards.
This report is intended solely for the information and use of the management and members of the Quitman County Board of Education and is not intended to be and should not be used by anyone other than these specified parties.
Respectfully submitted,

Qk...{512u).~
;uJen W. Hinton, CPA, CGFM State Auditor
RWH:gp 2006YB-30

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

DEPARTMENT OF AUDITS AND ACCOUNTS
270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400
June 29, 2007

Honorable Sonny Perdue, Governor Members of the General Assembly Members ofthe State Board of Education
and Superintendent and Members ofthe Quitman 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 Quitman County Board of Education with the types of compliance requirements described in the U.S. Office ofManagement and Budget (0MB) Circular A-133 Compliance Supplement that are applicable to each ofits major Federal programs for the year ended June 30, 2006. Quitman County Board ofEducation'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 Quitman County Board of Education's management. Our responsibility is to express an opinion on Quitman 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 of States, Local Governments, and Non-Profit Organizations. Those standards and 0MB Circular A-133 require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major Federal program occurred. An audit includes examining, on a test basis, evidence about the Quitman County Board of Education's compliance with those requirements and performing such other procedures as we considered necessary in the

2006SA-35

circumstances. We believe that our audit provides a reasonable basis for our opinion. Our audit does not provide a legal determination on Quitman County Board of Education's compliance with those requirements.
In our opinion, the Quitman County Board of Education complied, in all material respects, with the requirements referred to above that are applicable to each ofits major Federal programs for the year ended June 30, 2006.
Internal Control Over Compliance
The management of Quitman County Board of Education is responsible for establishing and maintaining effective internal control over compliance with requirements of laws, regulations, contracts and grants applicable to Federal programs. In planning and performing our audit, we considered Quitman County Board of Education's internal control over compliance with requirements that could have a direct and material effect on a major Federal program in order to determine our auditing procedures for the purpose ofexpressing our opinion on compliance and to test and report on internal control over compliance in accordance with 0MB Circular A-133.
We noted a certain matter involving the internal control over compliance and its operation that we consider to be a reportable condition. Reportable conditions involve matters coming to our attention relating to significant deficiencies in the design or operation ofthe internal control over compliance that, in our judgment, could adversely affect Quitman County Board of Education's ability to administer a major Federal program in accordance with applicable requirements oflaws, regulations, contracts and grants. The reportable condition is described in the accompanying Schedule of Findings and Questioned Costs as item FA-7181-06-01.
A material weakness is a reportable condition in which the design or operation ofone or more ofthe internal control components does not reduce to a relatively low level ofrisk that noncompliance with the applicable requirements oflaws, regulations, contracts and grants caused by error or fraud that would be material in relation to a major Federal program being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. Our consideration ofthe internal control over compliance would not necessarily disclose all matters in the internal control that might be reportable conditions and, accordingly, would not necessarily disclose all reportable conditions that are also considered to be material weaknesses. However, the reportable condition noted above is also considered to be a material weakness.
2006SA-35

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

RWH:gp 2006SA-35

Rusell W. Hinton, CPA, CGFM State Auditor

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

QUITMAN COUNTY BOARD OF EDUCATION AUDITEE'S RESPONSE
SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2006

PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

FINDING CONTROL NUMBER AND STATUS

FS-7181-04-01 FS-7181-04-02 FS-7181-05-01 FS-7181-05-02

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

CORRECTIVE ACTION/RESPONSES

CASH AND CASH EQUIVALENTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Separation of Duties Finding Control Number: FS-7181-05-01

Additional staff was hired; however, necessary procedures were not followed. Training will be provided to the staff to implement the necessary procedures.

PRIOR YEAR FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

FINDING CONTROL NUMBER AND STATUS

FA-7181-04-01

Unresolved - See Corrective Action/Responses

CORRECTIVE ACTION/RESPONSES

EARMARKING
Excessive Administrative Cost Charges Finding Control Number: FA-7181-04-01

Controls have been implemented to monitor Federal guidelines as it relates to administrative salaries being charged to Federal programs.

SECTION IV FINDINGS AND QUESTIONED COSTS

QUITMAN COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2006

I SUMMARY OF AUDITOR'S RESULTS

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

2. Reportable Conditions in Internal Control Disclosed by the Audit of the Financial Statements The audit report for the Quitman County Board of Education disclosed financial statement reportable conditions related to the following control categories.

Cash and Cash Equivalents Revenues/Receivables/Receipts

Expenditures/Liabilities/Disbursements

None ofthe reportable conditions described above are considered to be material weaknesses.

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

4. Reportable Conditions in Internal Control Over Major Programs The audit report for the Quitman County Board of Education disclosed a reportable condition in internal control over major programs for the following compliance requirement.

Allowable Costs/Cost Principles

The reportable condition described above is considered to be a material weakness.

5. Type of Report Issued on Compliance for Major Programs The auditor's opinion on the Quitman 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} of 0MB Circular A-133 The Quitman County Board of Education's audit disclosed an audit finding required to be reported by section .510(a) of 0MB Circular A-133. This audit finding is included in section IV of this report.

7. Major Programs Federal awards audited as major programs are as follows: 84.010 Title I Grants to Local Educational Agencies 84.215 Fund for the Improvement of Education 84.367 Improving Teacher Quality State Grants

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

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QUITMAN COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2006

I SUMMARY OF AUDITOR'S RESULTS

9. Low Risk Auditee The Quitman County Board ofEducation did not qualify as a low risk auditee as defined by Section .530 ofOMB Circular A-133.

II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

CASH AND CASH EQUIVALENTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Accounting Procedures over School Activity Accounts Reportable Condition Finding Control Number: FS-7181-06-01

Condition:

This is a repeat finding (FS-7181-04-01 and FS-7181-05-01) from the years ended June 30, 2004, and 2005, respectively. The accounting procedures were insufficient to provide for adequate internal controls over the school activity accounts.

Criteria:

The School District's management is responsible for designing and maintaining internal controls that provide proper separation of duties and 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.

Revenues/Receivables/Receipts Deposit preparation was not separated from the record keeping and cash custody functions. Based on a review of five items, the following deficiencies were noted: 1) Five receipts did not have supporting documentation. 2) Source of the receipts and proper accounts could not be determined.

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QUITMAN COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2006

II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

CASH AND CASH EQUIVALENTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Accounting Procedures over School Activity Accounts Reportable Condition Finding Control Number: FS-7181-06-01

Expenditures/Liabilities/Disbursements The check writing function was not separated from the record keeping or processing of signed checks. Based on a review of ten items, the following deficiencies were noted: 1) Five vouchers did not have adequate supporting documentation. It could not be determined if the proper amount was paid or if the payment was posted to correct account. 2) Four vouchers did not have evidence ofadministrative approval.

Cause:

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

Effect:

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

Recommendation:

The School District should implement procedures to ensure that the key accounting functions of custody, record keeping and authorization are separated and/or utilize management oversight of these incompatible activities. Additionally, management should revise and monitor controls to provide reasonable assurance that transactions are processed according to established procedures.

III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

ALLOWABLE COSTS/COST PRINCIPLES Time and Attendance Records Not Utilized Reportable Condition - Material Weakness U. S. Department of Education Fund for the Improvement of Education (CFDA 84.215) Finding Control Number: FA-7181-06-01

Condition:

A review of salaries charged to the Fund for the Improvement of Education Program (CFDA 84.215) revealed that employee time and attendance records were not being utilized as required by 0MB Circular A-87.

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QUITMAN COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2006

III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

ALLOWABLE COSTS/COST PRINCIPLES Time and Attendance Records Not Utilized Reportable Condition - Material Weakness U.S. Department of Education Fund for the Improvement of Education (CFDA 84.215) Finding Control Number: FA-7181-06-01

Criteria:

Provisions of the 0MB Circular A-87, Cost Principles for Determining Allowable Costs, require that "Where employees work on multiple activities or cost objectives, a distribution oftheir salaries or wages will be supported by personnel activity reports or equivalent documentation that meets the following standards:
(a) They must reflect an after-the-fact distribution of the actual activity of each employee,
(b) They must account for the total activity for which the employee is compensated,
(c) They must be prepared at least monthly and must coincide with one or more pay periods, and
(d) They must be signed by the employee.

Such documentary support will be required where employees work on: (a) More than one Federal award, or (b) A Federal award and a non-Federal award".

Questioned Cost: $31,328

Information:

The School District did not have adequate procedures in place to comply with these requirements and ensure that employee compensation payments were allowable. An employee whose salary was charged to the Fund for the Improvement ofEducation Program did not maintain time records to support the amount oftime worked on the two different grants under this program. It also was noted that the employee performed work on other programs; however, no salary was charged to those programs.

Cause:

Management failed to require timesheets and/or time schedules for employees that were split-funded between Federal programs and other programs.

Effect:

Failure to require timesheets and/or time schedules for split-funded employees can result in an improper distribution of salaries between programs and noncompliance with the requirements of the Federal grant.

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QUITMAN COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2006

III FEDERAL A WARD FINDINGS AND QUESTIONED COSTS

ALLOWABLE COSTS/COST PRINCIPLES Time and Attendance Records Not Utilized Reportable Condition - Material Weakness U.S. Department of Education Fund for the Improvement of Education (CFDA 84.215) Finding Control Number: FA-7181-06-01

Recommendation:

The School District should establish procedures to ensure that adequate time records are maintained that support the basis for compensation of all split funded employees. The U. S. Department ofEducation should determine ifa refund will be required for the undocumented salary payments.

ALLOWABLE COSTS/COST PRINCIPLES Time and Attendance Records Not Utilized Reportable Condition U. S. Department of Agriculture Through Georgia Department of Education School Breakfast Program (CFDA 10.553) National School Lunch Program (CFDA 10.555) Finding Control Number: FA-7181-06-02

Condition:

A review of salaries charged to the Child and Nutrition Cluster Programs (CFDA 10.553 and 10.555), noted that employee time and attendance records were not being utilized as required by 0MB Circular A-87.

Criteria:

Provisions of the 0MB Circular A-87, Cost Principles for Determining Allowable Costs, require that "Where employees work on multiple activities or cost objectives, a distribution of their salaries or wages will be supported by personnel activity reports or equivalent documentation that meets the following standards:
(a) They must reflect an after-the-fact distribution ofthe actual activity of each employee,
(b) They must account for the total activity for which the employee is compensated,
(c) They must be prepared at least monthly and must coincide with one or more pay periods, and
(d) They must be signed by the employee.

Such documentary support will be required where employees work on: (a) More than one Federal award, or (b) A Federal award and a non-Federal award".

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QUITMAN COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2006

III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

ALLOWABLE COSTS/COST PRINCIPLES Time and Attendance Records Not Utilized Reportable Condition U. S. Department of Agriculture Through Georgia Department of Education School Breakfast Program (CFDA 10.553) National School Lunch Program (CFDA 10.555) Finding Control Number: FA-7181-06-02

Questioned Cost: $8,894

Information:

The School District did not have adequate procedures in place to comply with these requirements and ensure that employee compensation payments were allowable. One employee was paid $8,894 from the School Food Service Program but did not have time records to support that work was performed for this program.

Cause:

Management failed to require timesheets and/or time schedules for employees that were split-funded between Federal programs and other programs.

Effect:

Failure to require timesheets and/or time schedules for split-funded employees can result in material noncompliance with the requirements of Federal grants.

Recommendation:

The School District should establish procedures to ensure that adequate time records are maintained that support the basis for compensation of all split funded employees. The Georgia Department ofEducation should determine if a refund will be required for the undocumented salary payments.

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SECTIONV MANAGEMENT'S RESPONSES

QUITMAN COUNTY BOARD OF EDUCATION SCHEDULE OF MANAGEMENT'S RESPONSES
YEAR ENDED JUNE 30, 2006
Finding Control Number: FS-7181-06-01
The School District will monitor the school activity account on a monthly basis to maintain internal controls that provide proper separation of duties and will check activities to see if transactions are processed according to established procedures.
Finding Control Number: FA-7181-06-01
The School District will maintain timesheets and or time schedules for employees that are split funded between Federal programs and other programs.
Finding Control Number: FA-7181-06-02
All School Nutrition recordkeeping and reports are kept, filed and processed by central office employees.
The School District will establish procedures to ensure that adequate time records are kept to support compensation for all split funded employees.
Contact Person: William Bums, Superintendent Phone: (229) 334-4189 Fax Number: (229) 334-2109 E-mail Address: bumsw@quitman.kl2.ga.us