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

RABUN COUNTY BOARD OF EDUCATION CLAYTON, 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

RABUN 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

STATEMENT OF CHANGES IN FIDUCIARY NET ASSETS

FIDUCIARY FUNDS

9

I

NOTES TO THE BASIC FINANCIAL STATEMENTS

10

SCHEDULES

REQUIRED SUPPLEMENTARY INFORMATION

1 SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES

IN FUND BALANCES - BUDGET AND ACTUAL

GENERAL FUND

25

SUPPLEMENTARY INFORMATION

2 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS

26

3 SCHEDULE OF STATE REVENUE

27

RABUN COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS -

SECTION I

FINANCIAL

SCHEDULES

SUPPLEMENTARY INFORMATION

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 CIRCULARA-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

RABUN 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
April 8, 2008

Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the Rabun 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 I) of the Rabun 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 Rabun County Board of Education's management. Our responsibility is to express opinions on these financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United States ofAmerica and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General ofthe United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Rabun 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.
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 Rabun County Board of Education, as of June 30, 2007, and the
2007ARL-11

respective changes in financial position thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America.
The Rabun County Board of Education has not presented Management's Discussion and Analysis that accounting principles generally accepted in the United States of America has determined is necessary to supplement, although not to be part of, the basic financial statements.
In accordance with Government Auditing Standards, we have also issued our report dated April 8, 2008, on our consideration ofthe Rabun County Board ofEducation'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 ofinternal control over financial reporting and compliance and the results ofthat testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit.
The Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual, as presented on page 25, is not a required part of the basic financial statements but is supplementary information required by the accounting principles generally accepted in the United States of America. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods ofmeasurement and presentation ofthe required supplementary information. However, we did not audit the information and express no opinion on it.
Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Rabun 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,
J.4::
Ru ell W. Hinton, CPA, CGFM State Auditor
RWH:gp 2007ARL-11

RABUN COUNTY BOARD OF EDUCATION

RABUN COUNTY BOARD OF EDUCATION STATEMENT OF NET ASSETS JUNE 30, 2007
ASSETS Cash and Cash Equivalents Accounts Receivable, Net
Taxes State Government Federal Government Other Inventories Capital Assets Land Construction in Progress Land Improvements Buildings Equipment Less: Accumulated Depreciation
Total Assets
LIABILITIES
Salaries and Benefits 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
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
$ 12,481,152.45
1,733,922.20 955,447.31 403,683.70 23,248.55 9,360.47
649,528.00 8,242,565.22 3,545,332.98 37,824,642.95 2,482,937.18 -10, 155,484.27
$ =====5=8,6,,1=96=",3=3=6=7.=4

$

2,573,179.95

484,229.47

943,130.73 4,114,910.71

$

8,115,450.86

$ 37,595,030.62
246,509.56 992,749.60 4,103,172.70 7,143,423.40
$ 50,080,885.88

$ =====5=86,1,,=96=",3=3=6=7.=4

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

GOVERNMENTAL ACTIVITIES
Instruction Support Services
Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services other Support Services Operations of Non-Instructional Services Enterprise Operations Food Services
Total Governmental Activities
General Revenues Taxes Property Taxes For Maintenance and Operations For Debt Services Sales Taxes Special Purpose Local Option Sales Tax For Debt Services For Capital Projects Local Option Sales Tax Intangible Recording Tax Real Estate Investment Earnings Miscellaneous
Total General Revenues
Change in Net Assets
Net Assets - Beginning of Year
Net Assets - End of Year

EXPENSES

CHARGES FOR SERVICES

$ 18,053,946.34
741,196.51 407,648.72 489,026.86 333,838.15 1,549,659.99 300,642.26 1,949,886.92 817,417.76
49,972.34 222,019.59
106,597.16 $ 1,233,306.78
$ 26,255,159.38 $

130,778.90 421 915.71
552,694.61

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

$

6,955,300.29

149,865.58 264,243.61 315,197.54 522,914.99 830,739.37
4,664.35 765,050.55 444,598.43 $
775.30 4,734.64

783,975.66 $ 11,042,060.31 $

$ 144,069.00 144 069.00 $

-11,098,646.05
-591,330.93 -143,405.11 -173,829.32 189,076.84 -718,920.62 -295,977.91 -1, 184,836.37 -228, 750.33
-49,197.04 -217,284.95
24,181.74 -27 415.41
-14,516,335.46

$

10,700,972.88

14.67

158,031.14 3,288,196.55 3,440,612.62
124,780.49 10,262.38
249,094.99 271,348.62

$

18,243,314.34

$

3,726,978.88

46,353,907.00

$ ===50=,0=8=0.,.,8=8=5.=8=8

-3-

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

EXHIBIT "C"

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

GENERAL FUND

DISTRICTWIDE
CAPITAL PROJECTS
FUND

DEBT SERVICE
FUND

TOTAL

$ 4,649,948.65 $ 7,779,148.20 $

736,529.08 955,447.31 403,683.70
23,248.55 9 360.47

646,494.97

52,055.60 $ 12,481,152.45
1,383,024.05 955,447.31 403,683.70 23,248.55 9 360.47

$ 6778217.76 $ 8,425,64317 $

52 055.60 $ 15,255,916.53

$ 2,573,179.95 $
$ 2,573,179.95 $

484 229.47 484 229.47

$ 2,573,179.95 484 229.47
$ 3 057 409.42

$ 237,149.09 $ 940,694.00 $
9,360.47 4,103,172.70

53,219.89

3,905,308.36

2,897,547.00

$ 4,205,037.81 $ 7 941 413.70 $

$ 52,055.60

237,149.09 992,749.60
9,360.47 4,103,172.70

53,219.89

3,905,308.36 2,897,547.00

52 055.60 $ 12,198,507.11

$ 6,778,217 76 $ 8,425,643.17 $

52,055.60 $ 15,255,916.53

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

RABUN 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")

$ 12,198,507.11

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

$

649,528.00

8,242,565.22

3,545,332.98

37,824,642.95

2,482,937.18

-10,155,484.27

42,589,522.06

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.

350,898.15

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

$' -5,000,000.00 -58,041.44

-5,058 041.44

Net Assets of Governmental Activities (Exhibit "A")

$ 50,080,885.88

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

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

EXHIBIT"E"

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

GENERAL FUND

DISTRICTWIDE
CAPITAL PROJECTS
FUND

DEBT SERVICE
FUND

TOTAL

$ 10,960,396.73 3,575,655.49 $ 8,377,221.40 2,808,907.91 552,694.61 201,386.18 271 347.05

$ 3,288,196.55
47,545.57

$ 26,747,609.37 $ 3,335,742.12 $

14.67 $ 158,031.14
163.24

10,960,411.40 7,021,883.18 8,377,221.40 2,808,907.91 552,694.61 249,094.99 271 347.05

158,209.05 $ 30,241,560.54

$ 16,692,908.84 $ 2,348,093.02

741,196.51 409,988.72 491,316.86 333,838.15 1,549,659.99 300,642.26 1,904,641.94 1,166,135.03
57,800.80 222,019.59 106,597.16 1,245,899.27 125,756.56

5,378,591.18

40,828.58

4 416.40

$

$ 25,393,646.66 $ 7,726,684.20 $

$ 1,353,962.71 $ -4,390,942.08 $

$ 19,041,001.86

741,196.51 409,988.72 491,316.86 333,838.15 1,549,659.99 300,642.26 1,904,641.94 1,166,135.03
57,800.80 222,019.59 106,597.16 1,245,899.27 5,504,347.74

158 031.14

40,828.58 162 447.54

158 031.14 $ 33,278,362.00

177.91 $ -3,036,801.46

$ 1,623,766.23 $ -1,623,766.23
$ -1,623,766.23 $ 1,623,766.23
$ -269,803.52 $ -2,767, 175.85 $
4 474 841.33 1o, 708,589.55

$ 1,623,766.23 -1,623,766.23

$

0.00

177.91 $ -3,036,801.46

51 877.69 15,235,308.57

Fund Balances - Ending

$ 4,205,037.81 $ 7941413.70 $

52 055.60 $ 12,198,507.11

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

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

EXHIBIT "F"

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

$ -3,036,801.46

$ 8,122,073.33 -1, 139,699.27

6,982,374.06

-259,422.30

40,828.58

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

$ 3,726,978.88

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

RABUN COUNTY BOARD OF EDUCATION STATEMENT OF FIDUCIARY NET ASSETS
FIDUCIARY FUNDS JUNE 30, 2007

EXHIBIT"G"

ASSETS Cash and Cash Equivalents Investments
Certificate of Deposit Accounts Receivable, Net
Other
Total Assets
LIABILITIES Accounts Payable Funds Held for Others
Total Liabilities NET ASSETS Held in Trust for Private Purposes
Total Liabilities and Net Assets

PRIVATE PURPOSE TRUSTS

AGENCY FUNDS

$ 12,529.42 $ 144,968.53
146,402.16 8,552.87

$ 158,931.58 $ 153,521.40

$ 18,102.22 135,419.18
$ 153,521.40
$ 158,931.58
$ 158,931.58 $ 153,521.40

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

RABUN COUNTY BOARD OF EDUCATION STATEMENT OF CHANGES IN FIDUCIARY NET ASSETS
FIDUCIARY FUNDS YEAR ENDED JUNE 30, 2007
ADDITIONS Contributions Donors
DEDUCTIONS Scholarships Change in Net Assets
Net Assets - Beginning
Net Assets - Ending

EXHIBIT"H"

PRIVATE PURPOSE TRUSTS

$

7 840.17

$

1,400.00

$

6,440.17

152,491.41

$ 158,931.58

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

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

EXHIBIT "I"

Note 1: DESCRIPTION OF SCHOOL DISTRICT AND REPORTING ENTITY
REPORTING ENTITY
The Rabun County Board ofEducation (School District) was established under the laws ofthe State of Georgia and operates under the guidance of a school board elected by the voters and a Superintendent appointed by the Board. The Board is organized as a separate legal entity and has the power to levy taxes and issue bonds. Its budget is not subject to approval by any other entity. Accordingly, the School District is a primary government and consists of all the organizations that compose its legal entity.
Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The School District's basic financial statements are collectively comprised of the District-wide financial statements, fund financial statements and notes to the basic financial statements of the Rabun County Board of Education.
District-wide Statements: The Statement ofNet Assets and the Statement of Activities 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.

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

EXHIBIT "I"

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) and Bond Proceeds to be used for the acquisition, construction or renovation of major capital facilities.
Debt Service Fund accounts for taxes (sales) legally restricted for the payment of general longterm principal, interest and paying agent's fees.
The School District reports the following fiduciary fund types:
The Private Purpose Trust fund reports trust arrangements under which principal is to be invested and preserved intact with the resultant income to be used to provide awards or scholarships.
Agency funds account for assets held by the School District as an agent for various scholarship funds and principal's accounts.
BASIS OF ACCOUNTING
The basis ofaccounting determines when transactions are reported on the financial statements. The District-wide governmental and fiduciary fund financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded at the time liabilities are incurred, regardless of when the related cash flows take place. Nonexchange transactions, in which the School District gives (or receives) value without directly receiving (or giving) equal value in exchange, include property taxes, sales taxes, grants and donations. On an accrual basis, revenue from property taxes is recognized in the fiscal year for which the taxes are levied. Revenue from sales taxes is recognized in the fiscal year in which the underlying transaction (sale) takes place. Revenue from grants and donations is recognized in the fiscal year in which all eligibility requirements have been satisfied.
The School District uses funds to report on its financial position and the results of its operations. Fund accounting is designed to demonstrate legal compliance and to aid financial management by segregating transactions related to certain governmental functions or activities. A fund is a separate accounting entity with a self-balancing set of accounts.
Governmental funds are reported using the current financial resources measurement focus and the modified accrual basis ofaccounting. Under this method, revenues are recognized when measurable and available. The School District considers all revenues reported in the governmental funds to be
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RABUN COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2007

EXHIBIT "I"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
available if they are collected within sixty days after year-end. Property taxes, sales taxes and interest are considered to be susceptible to accrual. Expenditures are recorded when the related fund liability is incurred, except for principal and interest on general long-term debt, which are recognized as expenditures to the extent they have matured. Capital asset acquisitions are reported as expenditures in governmental funds. Proceeds ofgeneral long-term liabilities and acquisitions under capital leases are reported as other financing sources.
The School District funds certain programs by a combination ofspecific cost-reimbursement grants, categorical grants, and general revenues. Thus, when program costs are incurred, there are both restricted and unrestricted net assets available to finance the program. It is the School District's policy to first apply grant resources to such programs, followed by cost-reimbursement grants, then general revenues.
CASH AND CASH EQUIVALENTS
COMPOSITION OF DEPOSITS Cash and cash equivalents consist ofcash on hand, demand deposits and short-term investments with original maturities of three months or less from the date of acquisition in authorized financial institutions. Official Code of Georgia Annotated Section 45-8-14 authorize the School District to deposit its funds in one or more solvent banks or insured Federal savings and loan associations.
INVESTMENTS
COMPOSITION OF INVESTMENTS Investments made by the School District in nonparticipating interest-earning contracts (such as certificates ofdeposit) and repurchase agreements are reported at cost. Participating interest-earning contracts and money market investments with a maturity at purchase of one 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,

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

EXHIBIT "I"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(5) Prime banker's acceptances,

(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 Rabun County Board ofCommissioners fixed the property tax levy for the 2006 tax digest year (calendar year) on October 2, 2006 (levy date). Taxes were due on December 20, 2006 (lien date). Taxes collected within the current fiscal year or within 60 days after year-end on the 2006 tax digest are reported as revenue in the governmental funds for fiscal year 2007. The Rabun County Tax Commissioner bills and collects the property taxes for the School District and remits 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 $10,960,396.73 and for school bonds amounted to $14.67.

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

School Operations

8.0979 mills

SALES TAXES

Local Option Sales Tax revenue, at the fund reporting level, during the fiscal year amounted to $3,440,612.62 and was recorded in the General Fund. Local Option Sales Tax is to be used for the maintenance and operation of the School District.

- 13 -

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

EXHIBIT "I"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Special Purpose Local Option Sales Tax, at the fund reporting level, during the year amounted to $3,446,227.69 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 ofart. During the fiscal year under review, no events or changes in circumstances affecting a capital asset that may indicate impairment were known to the School District.

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

Capitalization Policy

Estimated Useful Life

Land Land Improvements Buildings and Improvements Equipment

All

NIA

$ 10,000.00 20 to 80 years

$ 10,000.00 10 to 80 years

$ 10,000.00 3 to 14 years

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

- 14 -

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

EXHIBIT "I"

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. General obligation bonds are direct obligations and pledge the full faith and credit of the government. The outstanding amount of these bonds is recorded in the Statement of Net Assets.
NET ASSETS
The School District's net assets in the District-wide Statements are classified as follows:
Invested in capital assets, net of related debt - This represents the School District's total investment in capital assets, net ofoutstanding debt obligations related to those capital assets. To the extent debt has been incurred but not yet expended for capital assets, such amounts are not included as a component of invested in capital assets, net of related debt.
Restricted net assets - These represent resources for which the School District is legally or contractually obligated to spend resources for bus replacement, continuation of Federal programs, debt service and capital projects in accordance with restrictions imposed by external third parties.
Unrestricted net assets - Unrestricted net assets represent resources derived from property taxes, sales taxes, grants and contributions not restricted to specific programs, charges for services, and miscellaneous revenues. These resources are used for transactions relating to the educational and general operations of the School District, and may be used at the discretion of the Board to meet current expenses for those purposes.
Note 3: DEPOSITS
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,
- 15 -

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

EXHIBIT "I"

Note 3: DEPOSITS

(2) Insurance on accounts provided by the Federal Deposit Insurance Corporation,

(3) Bonds, bills, notes, certificates of indebtedness or other direct obligations of the United States or of the State of Georgia,

(4) Bonds, bills, notes, certificates of indebtedness or other obligations of the counties or municipalities of the State of Georgia,

(5) Bonds of any public authority created by the laws of the State of Georgia, providing that the statute that created the authority authorized the use of the bonds for this purpose,

(6) Industrial revenue bonds and bonds of development authorities created by the laws of the State of Georgia, and

(7) Bonds, bills, notes, certificates of indebtedness, or other obligations of a subsidiary corporation of the United States government, which are fully guaranteed by the United States government both as to principal and interest or debt obligations issued by 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 AtJune 30, 2007, the bank balances were $14,423,033.71. 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
by its trust department or agent in the School District's name, 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

I

$

0.00

2

9,296,578.75

3

4,903,613.34

Total

$14,200,192.09

- 16 -

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

EXHIBIT "I"

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, 2006

Increases

Balances Decreases June 30, 2007

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

$ 649,528.00

$ 649,528.00

570,036.00 $7,750,381.20 $ 77,851.98 8,242,565.22

Total Capital Assets Not Being Depreciated $ 1,219,564.00 $7,750,381.20 $ 77,851.98 $ 8,892,093.22

Capital Assets Being Depreciated Buildings and Improvements Equipment Land Improvements

$37,770,263.00 $ 54,379.95

$37,824,642.95

2,364,533.00 264,862.18 $ 146,458.00 2,482,937.18

3,415,031.00 130,301.98

3,545,332.98

Less Accumulated Depreciation for: Buildings and Improvements Equipment Land Improvements

7,224,911.00 1,245,556.00
691,776.00

772,751.86 180,482.82 186,464.59

146,458.00

7,997,662.86 1,279,580.82
878,240.59

Total Capital Assets, Being Depreciated, Net $34,387,584.00 $ -690,155.16 $

0.00 $33,697,428.84

Governmental Activity Capital Assets - Net $35,607, 148,QO $ 7,060,226.04 $ 77,851,98 $42,589,522,06

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

Governmental Funds

Buildings and Improvements Less: Accumulated Depreciation

$ 341,902.00 88,894.04

$ 253,007.96

Current year depreciation expense by function is as follows:

- 17 -

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

EXHIBIT "I"

Note 5: CAPITAL ASSETS

Instruction Support Services
Student Transportation Services Food Services

$ 1,003,754.22
129,458.55 6,486.50

$ 1,139,699.27

Note 6: RESTRICTED ASSETS

Special Purpose Local Option Sales Tax (SPLOST) are reported as restricted assets in the Statement ofNet Assets because its use is limited by statutory provisions. Restricted assets at June 30, 2007, were as follows:

District-wide Capital Projects SPLOST

Debt Service Funds

Restricted Cash and Cash Equivalents: Debt Services Capital Acquisitions

$ 940,694.00 $ 52,055.60 $ 3,940,907.20

Note 7: INTERFUND TRANSFERS

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

Transfer to

Transfers From General Fund

District-wide Capital Projects

$ 1,623,766.23

Transfers are used to move property tax revenues collected by the General Fund to the District-wide Capital Projects Fund as required match or supplemental funding source for capital construction projects.

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 -

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

EXHIBIT "I"

Note 8: RISK MANAGEMENT

The School District has obtained commercial insurance for risk ofloss associated with motor vehicle liability. The School District has neither significantly reduced coverage for this risk nor incurred losses (settlements) which exceeded the School District's insurance coverage in the past year.

The School District participates in the Georgia School Boards Association Risk and Insurance Management System, a public entity risk pool organized on July 1, 1994, to develop and administer a plan to reduce risk of loss on account of general liability or property damage, including safety engineering and other loss prevention and control techniques, and to administer one or more groups ofself-insurance funds, including the processing and defense ofclaims brought against members of the system. The School District pays an annual premium to the system for its general insurance coverage. Additional coverage is provided through agreements by the system with other companies according to their specialty for property, boiler and machinery (including coverage for flood and earthquake), general liability (including coverage for sexual harassment, molestation and abuse), errors and omissions and crime. Payment of excess insurance for the system varies by line of coverage.

The School District is self-insured with regard to unemployment compensation claims. The School District accounts for claims within the same fund that the employee's salary and benefits were paid. Claims are accounted for with expenditure 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

2006 2007

$

0.00 $

737.00 $

737.00 $

0.00

$

0.00 $

0.00 $

0.00 $

0.00

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 $500,000.00 loss per occurrence, up to $2,000,000.00.

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

- 19 -

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

EXHIBIT "I"

Note 8: RISK MANAGEMENT

Position Covered

Amount

Superintendent All Employees

$ 100,000.00 $ 150,000.00

Note 9: LONG-TERM DEBT

CAPITAL LEASES The Rabun County Board of Education has entered into a lease agreement for energy saving equipment. This lease agreement qualifies as a capital lease for accounting purposes, and, therefore, has been recorded at the present value of the future minimum lease payments as of the date of its inception.

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

Purpose

Interest Rate

Amount

General Government - Series 2006

3.71%

$ 5,000,000.00

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

$ 98,870.00 $ 5,000,000.00 $ 5,098,870.00

Deductions Debt Retired

40,828.56

40,828.56

Balance June 30, 2007

$ 58,041.44 $ 5,000,000.00 $ 5,058,041.44

Portion of Long-Term Debt Due within One Year

$ 43,130.73 $ 900,000.00 $ 943,130.73

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

- 20 -

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

EXHIBIT "I"

Note 9: LONG-TERM DEBT

Fiscal Year Ended June 30

Capital Leases

Principal

Interest

2008 2009

$ 43,130.73 $ 14,910.71

2,115.00 171.00

Total Principal and Interest

$ 58,041.44 $ 2,286.00

Fiscal Year Ended June 30

General Obligation

Debt

Principal

Interest

2008 2009 2010 2011 2012

$ 900,000.00 $ 168,805.00

975,000.00

134,024.00

1,005,000.00

97,295.00

1,040,000.00

59,360.00

1,080,000.00

20,034.00

Total Principal and Interest

$ 5,000,000.00 $ 479,518.00

Note 10: ON-BEHALF PAYMENTS

The School District has recognized revenues and costs in the amount of $626,899.96 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 $593,306.69

Paid to the Teachers Retirement System of Georgia For Teachers Retirement System (TRS) Employer's Cost In the amount of $30,458.27

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 $3,135.00

- 21 -

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

EXHIBIT "I"

Note 11: SIGNIFICANT COMMITMENTS

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

Project

Unearned Executed Contracts

High School Physical Education Facility High School Gymnasium High School - New Auditorium

$ 49,780.61 5,477,894.43 11,491,954.00

$17,019,629.04

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

Note 12: SIGNIFICANT CONTINGENT LIABILITIES

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

Note 13: RETIREMENT PLANS

TEACHERS RETIREMENT SYSTEM OF GEORGIA (TRS)

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

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

- 22 -

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

EXHIBIT "I"

Note 13: RETIREMENT PLANS
Fiscal Year 2007 2006 2005

Percentage Contributed
100% 100% 100%

Required Contribution
$ 1,229,604.59 $ 1,152,877.00 $ 1,060,020.00

- 23 -

(This page left intentionally blank)

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

SCHEDULE "1"

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

NONAPPROPRIATED BUDGETS

ORIGINAL (1)

FINAL (1)

ACTUAL AMOUNTS

$ 10,241,174.00 $ 10,241,174.00 $ 10,960,396.73

3,000,000.00

3,000,000.00

3,575,655.49

7,520,116.37

7,661,588.54

8,377,221.40

2,989,246.00

3,097,705.00

2,808,907.91

415,650.00

415,650.00

552,694.61

110,900.00

110,900.00

201,386.18

49,652.00

49,652.00

271 347.05

$ 24,326,738.37 $ 24,576,669.54 $ 26,747,609.37

$ 16,531,836.37 $ 16,728,745.37 $ 16,692,908.84

885,412.00 613,616.00 455,256.00 399,488.00 1,385,876.00 287,095.00 1,660,311.00 1,252,533.00
26,800.00 175,000.00
1,294,332.00 80,000.00

888,985.00 609,642.00 458,106.00 411,648.00 1,386,876.00 287,095.00 1,660,311.00 1,252,533.00
26,800.00 175,176.00
1,294,332.00 80,000.00

741,196.51 409,988.72 491,316.86 333,838.15 1,549,659.99 300,642.26 1,904,641.94 1,166,135.03
57,800.80 222,019.59 106,597.16 1,245,899.27 125,756.56
45 244.98

$ 25,047,555.37 $ 25,260,249.37 $ 25,393,646.66

$

-720,817.00 $

-683,579.83 $

1,353,962.71

$

5,000.00 $

5,000.00

$ -1,623,766.23

$

5,000.00 $

5,000.00 $ -1,623, 766.23

$

-715,817.00 $

-678,579.83 $

-269,803.52

3,886,844.33

3,886,844.33

4,474,841.33

13 236.73

182,305.45

Fund Balances - Ending

$

3,184,264.06 $

3,390,569.95 $

4,205,037.81

Notes to the Schedule of Revenues, Exi;1enditures 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-

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

SCHEDULE "2"

FUNDING AGENCY PROGRAM/GRANT
Agriculture, U. S. Department of Child Nutrition Cluster Pass-Through From Georgia Department of Education Food Services School Breakfast Program National School Lunch Program
Total Child Nutrition Cluster
Other Programs Pass-Through From Georgia Department of Education Food Donation (1) Pass-Through From Office of Treasury and Fiscal Services National Forest Reserve Funds
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 English Language Acquisition Grants Enhancing Education Through Technology Program Hurricane Education Recovery Improving Teacher Quality State Grants State Grants for Innovative Programs Tille I Grants to Local Educational Agencies Twenty-First Century Community Learning Centers Vocational Education - Basic Grants to States
Total U. S. Department of Education

CFDA NUMBER

PASSTHROUGH
ENTITY ID
NUMBER

EXPENDITURES IN PERIOD

10.553 10.555
10.550 10.665

N/A

(2)

NIA

$

1 129 730.35

$

1,129,730.35

N/A

54,466.92

N/A

(3)

$

1184197.27

84.027 84.173
84.365 84.318 84.938 84.367 84.298 84.010 84.287 84.048

N/A

$

N/A

$

389,515.32 21,259.29
410,774.61

N/A

18,379.78

N/A

123,972.00

NIA

(4)

NIA

106,824.31

NIA

13,525.97

N/A

583,273.02

N/A

709,570.70

N/A

31 457.00

$

1 997 777.39

Total Federal Financial Assistance

$

3 181 974.66

N/A = Not Available

Notes to the Schedule of Expenditures of Federal Awards

(1) The amount shown for the Food Donation Program represents the Federally assigned value of nonmonetary assistance for donated commodities received and/or consumed by the School District during the current fiscal year.
(2) Expenditures for the funds earned on the School Breakfast Program ($157,199.00) were not maintained separately and are included in the 2007 National School Lunch Program.
(3) Funds earned on this program in the amount of $74,196.00 do not require reporting of expenditures. (4) Funds earned and expended in the prior period on the Hurricane Education Recovery Act, in the amount of $20,112.00 do not
require reporting of expenditures.

Major Programs are identified by an asterisk (*) in front of the CFDA number.

The School District did not provide Federal Assistance to any Subrecipient.

The accompanying schedule of expenditures of Federal awards includes the Federal grant activity of the Rabun 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 -

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

AGENCY/FUNDING
GRANTS Education, Georgia Department of Quality Basic Education Direct Instructional Cost Kindergarten 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 Middle School (6-8) Program High School General Education (9-12) Program Vocational Laboratory (9-12) Program Students with Disabilities Category I Category II Category Ill Category IV CategoryV Gifted Student - Category VI Remedial Education Program Alternative Education Program English Speakers of Other Languages (ESOL) Media Center Program 20 Days Additional Instruction Staff and Professional Development Indirect Cost Central Administration School Administration Facility Maintenance and Operations Categorical Grants Pupil Transportation Regular Bus Replacement State Bonds Sparsity Nursing Services Principal Supplements Mid-term Adjustment Hold-Harmless Food Services Vocational Education Amended Formula Adjustment Other State Programs Health Insurance National Teacher Certification Preschool Handicapped Program Special Education Low Incidence Grant Statewide K-8 Reading and Mathematics Program Teachers' Retirement High School Graduation Coach (CAPS) Middle School Remediation and Intervention Grant Virtual Schools State Grant
Office of Treasury and Fiscal Services Public School Employees Retirement

See notes to the basic financial statements.

- 27 -

SCHEDULE "3"

GOVERNMENTAL FUND TYPE GENERAL FUND

$

529,413.00

1,278,019.00

28,498.00

612,849.00

-522.00

325,901.00

637,335.00

812,949.00

336,698.00

89,702.79 136,610.90 437,241.94
74,282.41 86,463.96 115,424.00 17,320.00 78,373.00 97,836.00 166,063.00 53,052.00 27,643.00

271,269.00 404,336.00 384,867.00

392,396.00 44,069.00
100,000.00 20,000.00 58,331.00 7,531.00 12,680.00 61,702.00 62,965.07
-238,727.00
593,306.69 68,814.00 39,548.00 45,584.00 32,186.37 30,458.27 40,075.00 1,442.00 100.00

3 135.00

$ ====8,=37=7==,2-=2=1=.4=0

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

SCHEDULE "4"

PROJECT
The acquisition, construction, equipping and furnishing for new school buildings and facilities, including, but not limited to, a performance arts center and a multi-purpose gym; the addition, renovation, repair, improvement and equipping of existing school buildings and facilities, including, but not limited to, additional classrooms and laboratories; and the acquisition and purchase of any property necessary and desirable therefore, both real and personal, including, but not limited to, administrative and instructional technology equipment computer hardware and software and security and safety equipment.
Acquisition, construction and equipping of a new elementary school, including necessary furnishings and equipment; the acquisition, construction and equipping of additional instructional, support and physical education facilities at existing schools, including the acquisition of necessary furnishings and equipment; and system-wide technology improvements.

ORIGINAL ESTIMATED
COST (1)

CURRENT ESTIMATED COSTS (2)

AMOUNT EXPENDED IN CURRENT
YEAR (3)

AMOUNT EXPENDED
IN PRIOR YEARS (3)

PROJECT STATUS

$ 19,800,000.00 $ 19,800,000.00 $ 5,238,355.79 $ 302,219.00 Ongoing

12,000,000.00

2,183,976.08 13,743,037.00 Complete

(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 Rabun 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 project.

See notes to the basic financial statements.

- 28 -

RABUN 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 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 Middle School (6-8) Program High School General Education (9-12) Program Vocational Laboratory (9-12) Program Students with Disabilities Category I Category II Category Ill Category IV CategoryV Gifted Student - Category VI Remedial Education Program Alternative Education Program English Speakers of Other Languages (ESOL)
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

$

940,648.00 $ 1,002,740.00 $

32,674.00 $ 1,035,414.00

2,288,567.00

2,992,560.00

181,656.00

3,174,216.00

51,668.00

45,900.00

969.00

46,869.00

1,087,391.00

1,179,158.00

38,391.00

1,217,549.00

570,423.00 1,138,465.00 1,438,373.00
598,098.00 1,494,616.00
197,419.00 31,486.00
139,536.00 171 402.00

304.00 689,235.00 1,416,972.00 2,219,048.00 620,896.00
65,206.00 426,687.00 1,201,452.00
13,937.00 304.00
146,998.00 130,477.00 169,199.00 189,057.00

24,403.00 101,545.00 200,440.00 130,342.00
725.00 2,552.00 83,947.00 1,380.00 4,865.00 3,479.00
60.00 1,000.00 1 176.00

304.00 713,638.00 1,518,517.00 2,419,488.00 751,238.00
65,931.00 429,239.00 1,285,399.00
15,317.00 5,169.00
150,477.00 130,537.00 170,199.00 190,233.00

$

10,148,092.00 $ 12,510,130.00 $ 809,604.00 $ 13,319,734.00

296,031.00 50 042.00

427,292.00 31,782.00

45,330.00 19,153.00

472,622.00 50,935.00

TOTAL QBE FORMULA FUNDS

$

10,494,165.00 $ 12,969,204.00 $ 874,087.00 $ 13,843,291.00

(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
April 8, 2008

Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the Rabun 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 Rabun County Board of Education as of and for the year ended June 30, 2007, which collectively comprise Rabun County Board of Education's basic financial statements and have issued our report thereon dated April 8, 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 Rabun 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 Rabun County Board of Education's internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness of the Rabun 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 Rabun County Board of Education's ability to initiate, authorize, record, process, or report financial data reliably in accordance with generally accepted accounting principles such that there is more than a remote likelihood that a misstatement of the Rabun County Board of Education's financial statements that is more than inconsequential will not be prevented or detected by the Rabun County Board of Education's internal control. We consider items FS-7191-07-01 and FS-7191-07-02 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 Rabun 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. We consider both items FS-7191-07-01 and FS-7191-07-02 to be material weaknesses.
Compliance and Other Matters
As part of obtaining reasonable assurance about whether Rabun County Board of Education's financial statements are free of material misstatement, we performed tests of its compliance with certain provisions oflaws, regulations, contracts and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards.
We noted certain matters that we have reported to management of Rabun County Board of Education in a separate letter dated April 8, 2008.
Rabun County Board of Education's response to the findings identified in our audit is described in the accompanying Schedule ofManagement's Responses. We did not audit Rabun 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 Rabun 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,
<3,~~dEto~
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
April 8, 2008

Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the Rabun 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 ofRabun County Board ofEducation with the types ofcompliance requirements described in the U.S. Office of Management and Budget (0MB) Circular A-133 Compliance Supplement that are applicable to each ofits major Federal programs for the year ended June 30, 2007. Rabun County Board of Education's major Federal programs are identified in the Summary ofAuditor'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 Rabun County Board of Education's management. Our responsibility is to express an opinion on Rabun 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 Rabun County Board ofEducation's compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Our audit does not provide a legal determination on Rabun County Board of Education's compliance with those requirements.
2007SA-65

As described in item FA-7191-07-02 in the accompanying Schedule of Findings and Questioned Costs, Rabun County Board of Education did not comply with requirements regarding Matching, Level ofEffort and Earmarking that are applicable to its Twenty-First Century Community Leaming Centers Program. Compliance with such requirements is necessary, in our opinion, for Rabun County Board of Education to comply with requirements applicable to that program.
In our opinion, except for the noncompliance described in the preceding paragraph, the Rabun 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.
Internal Control Over Compliance
The management of Rabun 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 Rabun County Board ofEducation's internal control over compliance with requirements that could have a direct and material effect on a major Federal program in order to determine our auditing procedures for the purpose ofexpressing our opinion on compliance, but not for the purpose ofexpressing an opinion on the effectiveness ofinternal control over compliance. Accordingly, we do not express an opinion on the effectiveness of the Rabun County Board of Education's internal control over compliance.
Our consideration of the internal control over compliance was for the limited purpose described in the preceding paragraph and would not necessarily identify all deficiencies in the Board's internal control that might be significant deficiencies or material weaknesses as defined below. However, as discussed below, we identified certain deficiencies in internal control over compliance that we consider to be significant deficiencies and others we consider to be material weaknesses.
A control deficiency in an entity's internal control over compliance exists when the design or operation ofa control does not allow management or employees, in the normal course ofperforming their assigned functions, to prevent or detect noncompliance with a type ofcompliance requirement of a Federal program on a timely basis. A significant deficiency is a control deficiency, or combination of control deficiencies, that adversely affects the entity's ability to administer a Federal program such that there is more than a remote likelihood that noncompliance with a type of compliance requirement of a Federal program that is more than inconsequential will not be prevented or detected by the entity's internal control. We consider the deficiencies in internal control over compliance described in the accompanying Schedule ofFindings and Questioned Costs as items FA-7191-07-01 and FA-7191-07-02 to be significant deficiencies.
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. Of the significant deficiencies in internal control over compliance described in the accompanying Schedule of Findings and Questioned Costs, we consider item FA-7191-07-02 to be a material weakness.
2007SA-65

Rabun County Board of Education's response to the findings identified in our audit is described in the accompanying Schedule ofManagement's Responses. We did not audit Rabun County Board of Education's response and, accordingly, we express no opinion on it.
This report is intended solely for the information and use ofthe management, members ofthe Rabun 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,
~~~-~~ Russell W. Hinton, CPA, CGFM State Auditor
RWH:gp 2007SA-65

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

RABUN 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 No matters were reported. PRIOR YEAR FEDERAL AWARD FINDINGS AND QUESTIONED COSTS No matters were reported.

SECTION IV FINDINGS AND QUESTIONED COSTS

RABUN 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 Rabun 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 Rabun County Board of Education disclosed financial statement significant deficiencies related to the following control categories.

Capital Assets

Financial Reporting

Both of the significant deficiencies described above are considered to be material weaknesses.

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

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

Allowable Costs/Cost Principles

Matching, Level of Effort and Earmarking

Ofthe significant deficiencies described above, Matching, Level ofEffort and Earmarking is considered to be a material weakness.

5. Type of Report Issued on Compliance for Major Programs The auditor's opinion on the Rabun County Board of Education's report on compliance with requirements applicable to major programs was unqualified, except for Twenty-First Century Community Leaming Centers, which was qualified.

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

7. Major Programs Federal awards audited as major programs are as follows: 84.027 Special Education - Grants to States 84.173 Special Education - Preschool Grants 84.287 Twenty-First Century Community Leaming Centers

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

I SUMMARY OF AUDITOR'S RESULTS

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

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

II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

CAPITAL ASSETS Failure to Adequately Maintain Capital Assets Material Weakness Finding Control Number: FS-7191-07-01

Condition:

The School District failed to adequately maintain the 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 asset policies, define system requirements, implement a fixed asset system and maintain fixed asset inventory records.

Questioned Cost: NIA

Information:

The capital assets listing, as presented for audit, contained the following deficiencies:

No reconciliation was presented to tie the capital assets listing to the general ledger. A comparison ofthe general ledger and capital assets listing identified that the general ledger had not been updated since June 30, 2005.
Construction In Progress (CIP) did not include all outstanding projects and was understated by $1,681,231.61. A portion ofthis problem was attributable to the Board's failure to identify retainages payable on projects at year-end.
One equipment item was partially deleted resulting in the removal of the cost but not the depreciation.
Six items were noted on the capital asset records as having no cost and no depreciation.
One asset item was listed twice in error on the capital assets listing.
One asset item was identified as not being recorded at cost.

-2 -

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

II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

CAPITAL ASSETS Failure to Adequately Maintain Capital Assets Material Weakness Finding Control Number: FS-7191-07-01

Depreciation expense was not calculated in accordance with the School District's policy for current year additions and deletions. Depreciation expense for current year additions and deletions was calculated based on the month placed in service; however, the School District's depreciation policy states that depreciation expense will be calculated using the one-half year convention.
A review of the capital assets listing also identified several items with useful lives not in conformity with the Board's capital assets policy.

The above problems resulted in material misstatements that required auditor adjustment.

Cause:

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

Effect:

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

Recommendation:

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

FINANCIAL REPORTING Inadequate Controls over Financial Reporting Material Weakness Finding Control Number: FS-7191-07-02

Condition:

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

-3 -

RABUN 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-7191-07-02

Criteria:

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

Questioned Cost: NIA

Information:

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

Cause:

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

Effect:

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

Recommendation:

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

-4 -

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

III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

ALLOWABLE COSTS/COST PRINCIPLES Unreasonable Compensation Significant Deficiency U.S. Department of Education Through Georgia Department of Education Twenty-First Century Community Leaming Centers (CFDA 84.287) Finding Control Number: FA-7191-07-01

Condition:

The School District did not have adequate procedures in place to ensure that bus driver compensation was reasonable with work performed.

Criteria:

Provisions of the 0MB Circular A-87, Cost Principles for Determining Allowable Costs, state that "Compensation for employees engaged in work on Federal awards will be considered reasonable to the extent that it is consistent with that paid for similar work in other activities of the governmental unit".

Questioned Cost: $3,375

Information:

An examination ofsalaries charged to the Twenty-First Century Community Leaming Centers Program (CFDA 84.287) revealed that bus drivers were being paid $25.00 per day for after school routes. These routes typically are 1.25 to 1.5 hours in length, which equates to between $16.67 and $20.00 per hour. The individual tested was compensated $15.54 per hour for similar services in their regular position as bus driver and was compensated $7.50 per hour for fieldtrips.

Additionally, one bus driver was paid $50.00 per day instead of the normal $25.00 per day due to a payroll calculation error. This doubling of the daily pay rate resulted in an overpayment of $3,375.00.

Cause:

Management failed to establish a reasonable rate ofpay for work performed on Federal awards.

Effect:

An unreasonable amount of compensation was paid to one employee and all bus drivers were paid the questionable daily rate of $25.00 per day. These instances result in excessive charges to the Twenty-First Century Community Leaming Centers Program.

-5-

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

III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

ALLOWABLE COSTS/COST PRINCIPLES Unreasonable Compensation Significant Deficiency U.S. Department of Education Through Georgia Department of Education Twenty-First Century Community Leaming Centers (CFDA 84.287) Finding Control Number: FA-7191-07-01

Recommendation:

The School District should implement procedures to ensure that all employee compensation is in compliance with 0MB Circular A-87. Georgia Department ofEducation should recover the $1,950 overpayment charged to the Twenty-First Century Community Leaming Centers Program and review this matter to determine if any additional reclaim of funds is appropriate.

MATCHING, LEVEL OF EFFORT AND EARMARKING Inadequate Records of Matching Funds Material Weakness Material Noncompliance U.S. Department of Education Through Georgia Department of Education Twenty-First Century Community Leaming Centers (CFDA 84.287) Finding Control Number: FA-7191-07-02

Condition:

The School District failed to maintain supporting documentation to provide evidence that matching requirements ofits Twenty-First Century Community Leaming Centers grant award were met.

Criteria:

Matching requirements required of a Board in support of a Federal program are to meet provisions in 34 CFR 80.24. Accordingly, a Board may meet matching requirements by the payment ofa Federal program's expenses with Board funds or through cash donations. Value of in-kind contributions in support of a Federal program's activities can also be used for satisfying matching provisions.

Provisions ofthe 34 CFR 80.24 also states that "Costs and third party in-kind contributions counting toward satisfying a cost sharing or matching requirement must be verifiable from the records ofgrantees and sub grantees or cost-type contractors. These records must show how the value placed on third party in-kind contributions was derived".

Questioned Cost: $127,164.50

-6-

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

III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

MATCHING, LEVEL OF EFFORT AND EARMARKING Inadequate Records of Matching Funds Material Weakness Material Noncompliance U.S. Department of Education Through Georgia Department of Education Twenty-First Century Community Leaming Centers (CFDA 84.287) Finding Control Number: FA-7191-07-02

Information:

GDOE policy require Boards that receive Twenty-First Century Community Leaming Centers funding to provide matching of the Federal award in the fourth and fifth years of participation so as to demonstrate the Board's sustainability of the program. In line with GDOE policy and provisions of the Board's GDOE approved Twenty-First Century Community Leaming Centers grant award, the Board was required to provide a twenty-five percent (25%) match of the Federal grant. With a $508,658.00 grant award, the Board was compelled to provide $127,164.50 ($508,659.00 x 25%) in matching costs. However, the Board could not provide records to verify its required matching share.

Cause:

There were no procedures in place to document that the Board's required matching contribution was provided through Board paid expenses, cash donations or in-kind contributions.

Effect:

Due to lack of proper records, testing could not be performed to determine that the matching requirement for the Twenty-First Century Community Leaming Centers Program had been met.

Failure to maintain proper records can result in material noncompliance with the requirements of the Federal grant.

Recommendation:

The School District should implement procedures to ensure that all matching costs including those from in-kind contributions are properly identified and documented. Further, measures should be put in place to assure that all costs counted toward satisfying the matching requirements of the Twenty-First Century Community Leaming Centers Program are from allowable sources. Georgia Department ofEducation should review this matter to determine ifa reclaim of funds is appropriate.

-7-

SECTIONV MANAGEMENT'S RESPONSES

RABUN COUNTY BOARD OF EDUCATION SCHEDULE OF MANAGEMENT'S RESPONSES
YEAR ENDED JUNE 30, 2007
Finding Control Number: FS-7191-07-01
We concur with this finding. We will make corrections and get everything in balance by this year end. We have some questions on some of the remarks. We were audited for 2005 in June of 2006. Then we were audited for 2006 in September of 2006. That is one of the things we question based on remark made about 2005.
Finding Control Number: FS-7191-07-02
We concur with this finding. We are taking steps to correct this finding.
Finding Control Number: FA-7191-07-01
We concur with this finding. We will be seeking guidance from our local Board of Education and 21 st Century Grant as to how to solve these problems. Along with an explanation and documentation from 21 st Century Audit Report 2006-2007, reference question #21 Policies Controls for matching contributions and fees.
The purchase of diesel fuel for five buses to transport students home from After School as well as pick up and drop off for Summer School.
Cost of snacks in the summer school program. $103,000.00 was used from local LEA funds to pay teachers and paraprofessional salaries
during the 2006-2007 year.
Finding Control Number: FA-7191-07-02
We concur with this finding. We will be seeking guidance from our local Board of Education and 21 st Century Grant as to how to solve these problems.
Contact Person: Helen Wood Title: Finance Director Phone: (706) 746-5376 Fax: (706) 746-7560 E-mail: hwood@rabun.kl2.ga.us