RANDOLPH COUNTY BOARD OF EDUCATION CUTHBERT, GEORGIA REPORT ON AUDIT OF THE FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2005 STATE OF GEORGIA DEPARTMENT OF AUDITS AND ACCOUNTS Russell W. Hinton State Auditor RANDOLPH 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 21 RANDOLPH COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS - SECTION I FINANCIAL SCHEDULES SUPPLEMENTARY INFORMATION 2 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS 22 3 SCHEDULE OF STATE REVENUE 24 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 RANDOLPH COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS - SECTION IV FINDINGS AND QUESTIONED COSTS SCHEDULE OF FINDINGS AND QUESTIONED COSTS 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 July 14, 2006 Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education and Superintendent and Members of the Randolph 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 Randolph County Board of Education, as of and for the year ended June 30, 2005, which collectively comprise the Board's basic financial statements as listed in the table of contents. These financial statements are the responsibility of the Randolph County Board of Education's management. Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States ofAmerica and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General ofthe United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free ofmaterial misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our 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 of the Randolph County Board of Education, as of June 30, 2005, 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. 2005ARL-11 The Randolph 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 July 14, 2006, on our consideration of the Randolph 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 read in conjunction with this report in considering the results of our audit. The Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual, as presented on page 21, 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 Randolph 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, ~.. OQ.~-~ R sell W. Hinton State Auditor RWH:as 2005ARL-11 RANDOLPH COUNTY BOARD OF EDUCATION RANDOLPH COUNTY BOARD OF EDUCATION STATEMENT OF NET ASSETS JUNE 30, 2005 Cash and Cash Equivalents Accounts Receivable, Net Taxes State Government Federal Government Other Inventories Capital Assets Land Buildings Equipment Less: Accumulated Depreciation Total Assets LIABILITIES Accounts Payable Salaries Payable Total Liabilities NET ASSETS Invested in Capital Assets, Net of Related Debt Restricted for Bus Replacement Continuation of Federal Programs Capital Projects Unrestricted Total Net Assets Total Liabilities and Net Assets EXHIBIT"A" GOVERNMENTAL ACTIVITIES $ 1,265,488 57,941 812,423 307,040 13,993 6,926 72,035 6,798,439 2,106,068 -4 161 081 $===7=,2=7=9=,2=72= $ 366,524 1084031 $ 1,450,555 $ 4,815,461 57,309 332,494 20,979 602,474 $ 5 828 717 $ ===7=,2=7=9=,2=72= The notes to the basic financial statements are an integral part of this statement. -1- RANDOLPH COUNTY BOARD OF EDUCATION STATEMENT OF ACTIVITIES FOR THE YEAR ENDED JUNE 30, 2005 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 Community Services Food Services Total Governmental Activities General Revenues Taxes Property Taxes For Maintenance and Operations Railroad Cars Sales Taxes Special Purpose Local Option Sales Tax For Capital Projects Real Estate Grants and Contributions not Restricted to Specific Programs Investment Earnings Miscellaneous Total General Revenues Change in Net Assets Net Assets - Beginning of Year EXPENSES CHARGES FOR SERVICES $ 8,417,260 $ 506,132 1,022,118 206,043 553,305 907,022 152,528 1,011,932 871,023 77,517 280,551 16,238 1,123,309 $ 15,144,978 $ 279,410 11,042 86 902 377 354 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 GRANTS AND CONTRIBUTIONS CAPITAL GRANTS AND CONTRIBUTIONS NET (EXPENSES) REVENUES AND CHANGES IN NET ASSETS $ 6,530,680 $ 278,545 838,206 150,046 656,755 404,821 29,609 467,539 408,417 12,989 212,941 3,068 1,221,275 $ 11,214,891 $ 17,904 $ 223 758 772 42,075 3,916 1,002 66,650 $ -1,589,266 -227,364 -183,912 -55,997 104,208 -502,201 -122,919 -543,621 -420,531 -64,528 -63,694 -2, 128 185 870 -3,486,083 $ 2,317,229 11,530 13,746 13,271 946,440 3,828 421 609 $ 3,727,653 $ 241,570 5 587147 $ ====5=,8=2=8=,7=17= -3- RANDOLPH COUNTY BOARD OF EDUCATION BALANCE SHEET GOVERNMENTAL FUNDS JUNE 30, 2005 EXHIBIT"C" ASSETS Cash and Cash Equivalents Accounts Receivable, Net Taxes State Government Federal Government Other Inventories Total Assets LIABILITIES AND FUND BALANCES LIABILITIES Accounts Payable Salaries Payable Total Liabilities FUND BALANCES Reserved for: Bus Replacement Continuation of Federal Programs Inventories Capital Projects Unreserved Designated for Self-Insurance Undesignated Reported in: General Fund Total Fund Balances Total Liabilities and Fund Balances GENERAL FUND DISTRICTWIDE CAPITAL PROJECTS FUND TOTAL $ 1,246,119 $ 83,811 812,423 307,040 13,993 6,926 19,369 $ 1,610 1,265,488 85,421 812,423 307,040 13,993 6,926 $ 2,470,312 $ 20,979 $ ===:=!2=49:=1,2=9=1 $ 366,524 1,084 031 $ 1 450,555 $ 366,524 1,084 031 $ 1,450,555 $ 57,309 325,568 6,926 $ 53,664 576,290 $ 1,019 757 $ $ 20,979 20,979 $ 57,309 325,568 6,926 20,979 53,664 576,290 1,040,736 $ 2,470,312 $ 20,979 $ ====-2,=49=1,.;,2=9=1 The notes to the basic financial statements are an integral part of this statement. -4 - RANDOLPH COUNTY BOARD OF EDUCATION RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO THE STATEMENT OF NET ASSETS JUNE 30, 2005 EXHIBIT" " 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 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. $ $ 72,035 6,798,439 2,106,068 -4 161,081 1,040,736 4,815,461 -27 480 Net Assets of Governmental Activities (Exhibit "A") $ ====5.,,.,8=28"",7=1=7 The notes to the basic financial statements are an integral part of this statement. -5- RANDOLPH COUNTY BOARD OF EDUCATION STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS YEAR ENDED JUNE 30, 2005 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 Community Services Food Services Operation Capital Outlay Total Expenditures Net Change in Fund Balances Fund Balances - Beginning Fund Balances - Ending GENERAL FUND DISTRICTWIDE CAPITAL PROJECTS FUND TOTAL $ 2,349,974 13,271 $ 7,636,121 4,567,285 377,354 3,446 346,203 $ 15,293,654 $ $ 13,746 24,575 382 38 703 $ 2,349,974 27,017 7,660,696 4,567,285 377,354 3,828 346,203 15,332,357 $ 8,273,417 503,077 1,022,118 206,043 542,937 907,022 152,528 1,001,364 769,778 77,517 226,941 16,238 1,109,593 $ $ 14,808,573 $ $ 485,081 $ 534,676 $ 126,210 126,210 $ -87,507 $ 108,486 8,273,417 503,077 1,022,118 206,043 542,937 907,022 152,528 1,001,364 769,778 77,517 226,941 16,238 1,109,593 126,210 14,934,783 397,574 643,162 $ 1,019,757 $ 20,979 $ ====1,=04=0"'=,7=36= The notes to the basic financial statements are an integral part of this statement. -6- RANDOLPH 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, 2005 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 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 equipment sold. $ 187,836 -294,025 397,574 -106,189 -21,215 -28,600 Change in Net Assets of Governmental Activities (Exhibit "B") $ ===24=1=5=7=0 The notes to the basic financial statements are an integral part of this statement. -7- RANDOLPH COUNTY BOARD OF EDUCATION STATEMENT OF FIDUCIARY NET ASSETS FIDUCIARY FUNDS JUNE 30, 2005 ASSETS Accounts Receivable, Net Other LIABILITIES Cash Overdraft Accounts Payable Funds Held for Others Total Liabilities EXHIBIT"G" AGENCY FUNDS $ ===1=1,=2=94= $ 8,459 666 2,169 $ ===1=1,=29=4= The notes to the basic financial statements are an integral part of this statement. -8- RANDOLPH COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2005 EXHIBIT"H" Note 1: DESCRIPTION OF SCHOOL DISTRICT AND REPORTING ENTITY REPORTING ENTITY The Randolph 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 Randolph 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- RANDOLPH COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2005 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) and grants from Georgia State Financing and Investment Commission to be used for the acquisition, construction or renovation ofmajor capital facilities. 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 liability is incurred. Capital asset acquisitions are reported as expenditures in governmental funds. - 10 - RANDOLPH COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2005 EXHIBIT "H" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 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. 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 Randolph County Board of Commissioners fixed the property tax levy for the 2004 tax digest year (calendar year) on July 29, 2004 (levy date). Taxes were due on December 20, 2004 (lien date). Taxes collected within the current fiscal year or within 60 days after year-end on the 2004 tax digest are reported as revenue in the governmental funds for fiscal year 2005. The Randolph County Tax Commissioner bills and collects the property taxes for the School District, withholds 2.5% oftaxes collected as a fee for tax collection and remits the balance of taxes collected to the School District. Property tax revenues, at the fund reporting level, during the fiscal year ended June 30, 2005, for maintenance and operations amounted to $2,338,444. The tax millage rate levied for the 2004 tax year (calendar year) for the Randolph County Board of Education was as follows (a mill equals $1 per thousand dollars of assessed value): School Operations 17.76 mills - 11 - RANDOLPH COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2005 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 $13,746 and is to be used for capital outlay for educational purposes or debt service. This sales tax was authorized by local referendum and the sales tax must be re-authorized at least every five years. INVENTORIES FOOD INVENTORIES On the basic financial statements, inventories ofdonated food commodities used in the preparation ofmeals are reported at their Federally assigned value and purchased foods inventories are reported at cost (first-in, first-out). The School District uses the consumption method to account for inventories whereby donated food commodities are recorded as an asset and as revenue when received, and expenses/expenditures are recorded as the inventory items are used. Purchased foods are recorded as an asset when purchased and expenses/expenditures are recorded as the inventory items are used. CAPITAL ASSETS Capital assets purchased, including capital outlay costs, are recorded as expenditures in the fund financial statements at the time of purchase (including ancillary charges). On the District-wide financial statements, all purchased capital assets are valued at cost where historical records are available and at estimated historical cost based on appraisals or deflated current replacement cost where no historical records exist. Donated capital assets are recorded at estimated fair market value on the date donated. Disposals are deleted at depreciated recorded cost. The cost of normal maintenance and repairs that do not add to the value ofassets or materially extend the useful lives of the assets is not capitalized. Depreciation is computed using the straight-line method. The School District does not capitalize book collections or works 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 Buildings and Improvements Equipment All NIA All 10 to 60 years $ 5,000 5 to 12 years Depreciation is used to allocate the actual or estimated historical cost of all capital assets over estimated useful lives. - 12 - RANDOLPH COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2005 EXHIBIT "H" 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. At June 30, $253,929 of deposits were not secured by surety bond, insurance or collateral as specified above. The School District is working with the affected financial institutions to ensure appropriate levels of collateral are maintained for all of the School District's deposits. Acceptable security for deposits consists of any one of or any combination of the following: (1) Surety bond signed by a surety company duly qualified and authorized to transact business within the State of Georgia, (2) Insurance on accounts provided by the Federal Deposit Insurance Corporation, (3) Bonds, bills, notes, certificates of indebtedness or other direct obligations of the United States or of the State of Georgia, (4) Bonds, bills, notes, certificates of indebtedness or other obligations of the counties or municipalities of the State of Georgia, (5) Bonds of any public authority created by the laws of the State of Georgia, providing that the statute that created the authority authorized the use of the bonds for this purpose, (6) Industrial revenue bonds and bonds of development authorities created by the laws ofthe State of Georgia, and (7) Bonds, bills, notes, certificates of indebtedness, or other obligations of a subsidiary corporation of the United States government, which are fully guaranteed by the United States government both as to principal and interest or debt obligations issued by the Federal Land Bank, the Federal Home Loan Bank, the Federal Intermediate Credit Bank, the Central Bank for Cooperatives, the Farm Credit Banks, the Federal Home Loan Mortgage Association, and the Federal National Mortgage Association. CATEGORIZATION OF DEPOSITS At June 30, 2005, the bank balances were $1,995,290. The amounts of the total bank balances are classified into four categories of custodial credit risk: - 13 - RANDOLPH COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2005 EXHIBIT "H" Note 3: DEPOSITS 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, 2005, as follows: Custodial Credit . Risk Category Bank Balance 1 $ 108,466 2 1,632,895 3 0 4 253,929 Total $ 1,995.290 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: - 14 - RANDOLPH COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2005 EXHIBIT "H" Note 5: CAPITAL ASSETS Balances July 1, 2004 Increases Balances Decreases June 30, 2005 Governmental Activities Capital Assets, Not Being Depreciated: Land $ 72,035 $ 0 $ 0 $ 72,035 Capital Assets Being Depreciated Buildings and Improvements Equipment $ 6,798,439 2,038,169 $ 187,836 $ $ 6,798,439 119,937 2,106,068 Less Accumulated Depreciation for: Buildings and Improvements Equipment 2,659,919 1,298,474 131,789 162,236 91 337 2,791,708 1,369,373 Total Capital Assets, Being Depreciated, Net $ 4,878,215 $ -106,189 $ 28,600 $ 4,743,426 Governmental Activity Capital Assets - Net $ 4,250,250 $ -106,182 $ 28,600 $ 4,815,461 Current year depreciation expense by function is as follows: Instruction Support Services Pupil Services General Administration Maintenance and Operation of Plant Student Transportation Services Other Support Services Food Services $ 125,722 $ 2,670 9,062 9,237 88,490 46,856 156,315 11.988 Note 6: RESTRICTED ASSETS $==2-94-,0==2"=5 Special Purpose Local Option Sales Tax (SPLOST) is reported as a restricted asset in the Statement ofNet Assets because its use is limited by statutory provisions. Restricted assets at June 30, 2005, were as follows: District-wide Capital Projects SPLOST Restricted Cash and Cash Equivalents: Capital Acquisitions $ 193,915 - 15 - RANDOLPH COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2005 EXHIBIT "H" 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. 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: 2004 2005 Beginning of Year Liability Claims and Changes in Estimates Claims Paid End of Year Liability $ 0 $ 6 865 $ 6,865 $ 0 $ 0 $ 600 $ 600 $ 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 $450,000 loss per occurrence, up to $2,000,000. The School District has purchased surety bonds to provide additional insurance coverage as follows: - 16 - RANDOLPH COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2005 EXHIBIT"H" Note 7: RISK MANAGEMENT Position Covered Amount Superintendent Each Principal High School Bookkeeper Elementary School Bookkeeper Payroll Clerk Finance Director Head Start Director Head Start Bookkeeper Bank Depositor Food Service Bookkeeper Head Start Secretary Each School Food Service Manager Each Athletic Gate Keeper Each School System Employee $ 50,000 $ 10,000 $ 10,000 $ 10,000 $ 10,000 $ 10,000 $ 10,000 $ 10,000 $ 10,000 $ 10,000 $ 5,000 $ 5,000 $ 5,000 $ 1,000 Note 8: OPERATING LEASES Randolph County Board of Education has entered into various leases as lessee for copiers. These leases are considered for accounting purposes to be operating leases. Lease expenditures for the year ended June 30, 2005, for governmental funds amounted to $99,900. Future minimum lease payments for these leases are as follows: Year Ending Governmental Funds 2006 2007 2008 2009 $ 77,050 60,525 18,000 16.425 Total Note 9: ON-BEHALF PAYMENTS The School District has recognized revenues and costs in the amount of $174,974 for health insurance and retirement contributions paid on the School District's behalf by the following State Agencies. - 17 - RANDOLPH COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2005 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 $169,615 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 $5,359 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 21, 2006, the voters ofRandolph County voted in favor ofa Special Purpose Local Option Sales Tax Referendum for education purposes. The imposition ofthe tax approved by the voters, as stated in part on the Official Ballot of Randolph County, is as follows: "Shall a one percent sales and use tax for educational purposes be imposed in the Randolph County School District for a period oftime not to exceed twenty (20) consecutive calendar quarters (five years) commencing April 1, 2006, and for the raising of an estimated amount of$3,800,000 to pay the costs of (i) renovating, repairing and equipping Randolph County Elementary School and related facilities, including necessary furnishings, fixtures, equipment and paving; (ii) renovating, repairing and equipping Randolph County Middle School and related facilities, including necessary furnishings, fixtures and equipment; (iii) renovating, repairing and equipping, Randolph County High School and related facilities, including necessary furnishings, fixtures and equipment; (iv) renovating and repairing athletic facilities, including necessary furnishings, fixtures and equipment; (v) acquiring, constructing and equipping a new field house; (vi) acquiring, constructing and equipping all purpose buildings; (vii) renovating, extending, repairing and equipping existing School District schools to include paving parking lots, roofrepairs, floor repairs and installation of Heating, Ventilation and Air Conditioning (HVAC) units; (viii) acquiring and installing system-wide instructional and administrative technology equipment; (ix) acquisition of school buses and transportation equipment; (x) renovating, repairing and equipping Randolph Clay Leaming Center and Randolph County Board ofEducation office, including necessary furnishings, fixtures and equipment, (xi) acquiring any necessary property therefore, both real and personal; and (xii) paying expenses incident to accomplishing the foregoing (the "Projects")?" - 18 - RANDOLPH COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2005 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% 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 9.24% and employer contributions for the current fiscal year and the preceding two fiscal years are as follows: Fiscal Year Percentage Contributed Required Contribution 2005 2004 2003 100% 100% 100% $ 732,814 $ 737,654 $ 746,350 - 19 - (This page left intentionally blank) RANDOLPH COUNTY BOARD OF EDUCATION GENERAL FUND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL YEAR ENDED JUNE 30, 2005 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 Community Services Food Services Operation Capital Outlay 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 $ 2,400,470 $ 2,400,470 $ 2,349,974 13,271 7,369,347 7,428,425 7,636,121 4,735,388 5,317,619 4,567,285 343,083 343,083 377,354 25,307 25,307 3,446 22 217 22 217 346,203 $ 14,895,812 $ 15,537,121 $ 15,293,654 $ 8,176,993 $ 8,508,934 $ 8,273,417 700,809 1,039,645 208,297 612,101 897,907 158,214 1,019,031 639,889 54,756 209,298 1,051,621 13 898 716,117 1,087,069 208,297 626,080 900,474 153,694 1,029,162 735,636 55,683 263,153 1,760 1,243,107 13 898 503,077 1,022,118 206,043 542,937 907,022 152,528 1,001,364 769,778 77,517 226,941 16,238 1,109,593 $ 14 782 459 $ 15,543,064 $ 14,808,573 $ 113 353 $ -5 943 $ 485 081 $ 75,011 $ 75,011 -74 548 -74 548 $ 463 $ 463 $ 113,816 $ -5,480 $ 485,081 131,177 131,177 534,676 -806 013 -806 013 Fund Balances - Ending $ -561 020 $ -680 316 $ 1 019 757 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. - 21 - RANDOLPH COUNTY BOARD OF EDUCATION SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS YEAR ENDED JUNE 30, 2005 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 Pass-Through From Bright From the Start: Georgia Department of Early Care and Learning Summer Food Service Program for Children Total Child Nutrition Cluster Other Programs Pass-Through From Georgia Department of Education Food Donation (1) Pass-Through From Bright From the Start: Georgia Department of Early Care and Learning Child and Adult Care Food Program Total U. S. Department of Agriculture Education, U. S. Department of Special Education Cluster Pass-Through From Georgia Department of Education Special Education Grants to States Preschool Grants Total Special Education Cluster Other Programs Pass-Through From Georgia Department of Education Comprehensive School Reform Demonstration Education for Homeless Children and Youth Enhancing Education Through Technology Program Even Start Improving Teacher Quality State Grants Reading First State Grants Rural Education Safe and Drug-Free Schools and Communities State Grants for Innovative Programs Title 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 10.559 N/A N/A $ N/A $ (2) 804,667 216 036 1,020,703 10.550 10.558 N/A N/A $ 51,694 24143 1,096,540 . 84.027 84.173 NIA $ N/A $ 275,303 (3) 26883 (4) 302,186 84.332 84.196 84.318 84.213 . 84.367 84.357 84.358 84.186 . 84.298 84.010 84.287 84.048 NIA N/A N/A NIA NIA NIA N/A N/A N/A N/A N/A NIA $ 240,145 19,261 53,272 171,330 177,666 362,608 50,722 19,614 10,982 774,192 274,635 28,290 2,484,903 -22 - RANDOLPH COUNTY BOARD OF EDUCATION SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS YEAR ENDED JUNE 30, 2005 SCHEDULE "2" FUNDING AGENCY PROGRAM/GRANT Health and Human Services, U.S. Department of Direct Head Start Pass-Through From Department of Human Resources Block Grants for Prevention and Treatment of Substance Abuse Pass-Through From Office of Planning and Budget Abstinence Education Total U. S. Department of Health and Human Services Labor, U.S. Department of Pass-Through From Columbus, Georgia Consolidated Government Workforce Investment Act Defense, U. S. Department of Direct Department of the Army R.O.T.C. Program CFDA NUMBER PASSTHROUGH ENTITY ID NUMBER EXPENDITURES IN PERIOD 93.600 93.959 93.235 $ N/A N/A $ 689,121 18,857 11 749 719 727 17.259 N/A $ 4 250 $ 61 642 Total Federal Financial Assistance N/A = Not Available $===4='=36=7=,0=6=2 Notes to the Schedule of Expenditures of Federal Awards (1) The amount shown for the Food Donation Program represents the Federally assigned value of nonmonetary assistance for donated commodities received and/or consumed by the School District during the current fiscal year. (2) Expenditures for the funds earned on the School Breakfast Program ($368,367) were not maintained separately and are included in the 2005 National School Lunch Program. (3) Includes Federal Assistance of $37,397 provided to subrecipients. (4) Includes Federal Assistance of $6,609 provided to subrecipients. Major Programs are identified by an asterisk (*) in front of the CFDA number. The accompanying schedule of expenditures of Federal awards includes the Federal grant activity of the Randolph 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. - 23- RANDOLPH COUNTY BOARD OF EDUCATION SCHEDULE OF STATE REVENUE YEAR ENDED JUNE 30, 2005 SCHEDULE "3" AGENCY/FUNDING GRANTS Bright From the Start: Georgia Department of Early Care and Learning Pre-Kindergarten Program Education, Georgia Department of Quality Basic Education Direct Instructional Cost Kindergarten Program Kindergarten Program - Early Intervention Program Primary Grades (1-3) Program Primary Grades - Early Intervention (1-3) Program Upper Elementary Grades (4-5) Program Upper Elementary Grades - Early Intervention (4-5) Program Middle School (6-8) Program High School General Education (9-12) Program Vocational Laboratory (9-12) Program Students with Disabilities Category II Category Ill Category IV CategoryV Special Education Supplemental Speech Gifted Student - Category VI Remedial Education Program 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 Student Achievement Education Equalization Funding Grant Food Services Vocational Education Austerity Reduction Other State Programs 4-8 Statewide After School Program Health Insurance K-3 Statewide Reading Program Mentor Teachers Preschool Handicapped Program School Improvement - CRCT Remediation Special Education Low Incidence Grant Georgia State Financing and Investment Commission Reimbursement on Construction Projects GOVERNMENTAL FUND TYPES CAPITAL GENERAL PROJECTS FUND FUND $ 229,033 $ 354,047 90,221 838,690 120,943 307,013 43,301 857,660 942,448 330,637 270,412 305,959 70,972 25,563 1,132 20,713 36,907 82,918 127,409 44,463 25,872 309,151 346,757 384,556 293,023 42,075 34,907 44,685 4,853 90,887 7,155 946,440 49,570 69,047 -358,068 12,000 169,615 16,902 3,811 49,464 2,142 2,188 $ 24,575 TOTAL 229,033 354,047 90,221 838,690 120,943 307,013 43,301 857,660 942,448 330,637 270,412 305,959 70,972 25,563 1,132 20,713 36,907 82,918 127,409 44,463 25,872 309,151 346,757 384,556 293,023 42,075 34,907 44,685 4,853 90,887 7,155 946,440 49,570 69,047 -358,068 12,000 169,615 16,902 3,811 49,464 2,142 2,188 24,575 - 24- RANDOLPH COUNTY BOARD OF EDUCATION SCHEDULE OF STATE REVENUE YEAR ENDED JUNE 30, 2005 SCHEDULE "3" AGENCY/FUNDING GRANTS Office of Treasury and Fiscal Services Public School Employees Retirement CONTRACTS Human Resources, Georgia Department of Teen Plus Tobacco Use Prevention GOVERNMENTAL FUND TYPES CAPITAL GENERAL PROJECTS FUND FUND TOTAL $ 5,359 $ 5,359 -18,211 1 500 -18,211 1 500 $ 7,636,121 $ 24 575 $ ===7=,6=6=0,=69=6= See notes to the basic financial statements. - 25- RANDOLPH COUNTY BOARD OF EDUCATION SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS YEAR ENDED JUNE 30, 2005 SCHEDULE "4" PROJECT Providing funds to pay the cost of constructing certain new facilities; acquiring instructional and administrative technology improvements for existing schools; adding to, renovating, repairing, improving, and equipping existing school buildings and other buildings and facilities useful or desirable in connection therewith; and acquiring any necessary property therefor, both real and personal, all at the maximum cost of $3,300,000. ORIGINAL ESTIMATED COST (1) CURRENT ESTIMATED COSTS (2) AMOUNT EXPENDED IN CURRENT YEAR (3) AMOUNT EXPENDED IN PRIOR YEARS(3) PROJECT STATUS $ 3,300,000 $ 5,613,273 $ 126,210 $ 5,113,132 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 Randolph County approved the imposition of a 1% sales tax to fund the above project. Amounts expended for this project 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. - 26- RANDOLPH COUNTY BOARD OF EDUCATION GENERAL FUND QUALITY BASIC EDUCATION PROGRAM (QBE) ALLOTMENTS AND EXPENDITURES BY PROGRAM YEAR ENDED JUNE 30, 2005 SCHEDULE "5" DESCRIPTION ALLOTMENTS FROM GEORGIA DEPARTMENT OF EDUCATION (1) (2) ELIGIBLE QBE PROGRAM COSTS SALARIES OPERATIONS TOTAL Direct Instructional Programs Kindergarten Program $ Kindergarten Program-Early Intervention Program Primary Grades (1-3) Program Primary Grades-Early Intervention (1-3) Program Upper Elementary Grades (4-5) Program Upper Elementary Grades-Early Intervention (4-5) Program Middle School (6-8) Program High School General Education (9-12) Program Vocational Laboratory (9-12) Program Students with Disabilities Category I Category II Category Ill Category IV CategoryV Gifted Student - Category VI Remedial Education Program Alternative Education Program 403,643 $ 94,772 910,452 140,675 355,890 59,346 954,481 1,032,645 361,452 746,543 23,647 37,672 90 911 310,254 $ 136,610 768,664 306,906 486,754 197,842 734,243 1,376,238 247,641 292,760 354,895 51,603 60,474 60,776 183,436 8,545 $ 590 17,290 2,536 11,644 1,295 19,952 37,820 45,474 235 4,033 5,405 1,212 2,016 493 1 353 318,799 137,200 785,954 309,442 498,398 199,137 754,195 1,414,058 293,115 235 296,793 360,300 52,815 2,016 60,967 60,776 184 789 TOTAL DIRECT INSTRUCTIONAL PROGRAMS $ 5,212,129 $ 5,569,096 $ 159,893 $ 5,728,989 Media Center Program Staff and Professional Development 141,965 28690 180,637 11 667 18,747 17188 199,384 28 855 TOTAL QBE FORMULA FUNDS $ 5,382,784 $ 5,761,400 $ 195,828 $ =====5=,9=5=7=,2=28= (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 July 14, 2006 Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education and Superintendent and Members of the Randolph 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 ofRandolph County Board ofEducation as ofand for the year ended June 30, 2005, which collectively comprise Randolph County Board of Education's basic financial statements and have issued our report thereon dated July 14, 2006. 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 Randolph County Board ofEducation's internal control over financial reporting in order to determine our auditing procedures for the purpose of expressing our opinion on the financial statements and not to provide an opinion on the internal control over financial reporting. However, we noted certain matters involving the internal control over financial reporting and its operation that we consider to be reportable conditions. Reportable conditions involve matters coming to our attention relating to significant deficiencies in the design or operation of the internal control over financial reporting that, in our judgment, could adversely affect Randolph County Board of Education's ability to record, process, summarize and report financial data consistent with assertions of management in the financial statements. Reportable conditions are described in the accompanying Schedule of Findings and Questioned Costs as items FS-7201-05-01, FS-7201-05-02, FS-7201-05-03 and FS-7201-05-04. 2005YB-40 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, of the reportable conditions described above, we consider item FS-7201-05-01 to be a material weakness. Compliance and Other Matters As part of obtaining reasonable assurance about whether Randolph 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 Randolph County Board of Education and is not intended to be and should not be used by anyone other than these specified parties. Respectfully submitted, RWH:as 2005YB-40 State Auditor 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 July 14, 2006 Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education and Superintendent and Members of the Randolph 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 Randolph 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, 2005. Randolph 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 ofRandolph County Board of Education's management. Our responsibility is to express an opinion on Randolph 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 Randolph County Board of Education's compliance 2005SA-35 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 Randolph County Board of Education's compliance with those requirements. In our opinion, the Randolph County Board ofEducation 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, 2005. Internal Control Over Compliance The management of Randolph 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 Randolph 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 of expressing 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 Randolph 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-7201-05-01. 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. 2005SA-35 This report is intended solely for the information and use of the management, members of the Randolph County Board of Education, 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, ~l~~-'Bto~4 State Auditor RWH:as 2005SA-35 SECTION III AUDITEE'S RESPONSE TO PRIOR YEAR FINDINGS AND QUESTIONED COSTS RANDOLPH COUNTY BOARD OF EDUCATION AUDITEE'S RESPONSE SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2005 PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS FINDING CONTROL NUMBER AUDITEE'S RESPONSE/STATUS SEE AUDITOR'S COMMENTS FS-7201-02-04 Further Action Not Warranted (1) FS-7201-02-05 Further Action Not Warranted (1) FS-7201-02-06 Unresolved - See Corrective Action/Responses FS-7201-02-07 Further Action Not Warranted (1) FS-7201-02-08 Further Action Not Warranted (2) FS-7201-03-03 Further Action Not Warranted (1) FS-7201-03-04 Further Action Not Warranted (1) FS-7201-03-05 Further Action Not Warranted (1) FS-7201-03-06 Further Action Not Warranted (1) FS-7201-03-08 Unresolved - See Corrective Action/Responses FS-7201-03-10 Previously Reported Corrective Action Implemented (1) FS-7201-03-12 Unresolved - See Corrective Action/Responses FS-7201-04-01 Unresolved - See Corrective Action/Responses FS-7201-04-02 Partially Resolved - See Corrective Action/Responses FS-7201-04-03 Partially Resolved - See Corrective Action/Responses FS-7201-04-04 Unresolved - See Corrective Action/Responses FS-7201-04-05 Previously Reported Corrective Action Implemented (2) FS-7201-04-06 Previously Reported Corrective Action Implemented (1) FS-7201-04-07 Unresolved - See Corrective Action/Responses AUDITOR'S COMMENTS (1) While these findings will not be reported or require auditor follow-up in subsequent years, management still has responsibility for the resolution ofthese findings. (2) After consideration of management's responses to prior year findings, we have determined that two findings related to salary overpayments have not been adequately resolved by management and will require additional auditor followup and reporting ofmanagement's corrective action in the subsequent reporting period. - 1- RANDOLPH COUNTY BOARD OF EDUCATION AUDITEE'S RESPONSE SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2005 PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS AUDITEE CORRECTIVE ACTION/RESPONSES EXPENDITURES/LIABILITIES/DISBURSEMENTS Duplicate Payment for Services Amount: $35,103.37 Finding Control Number: FS-7201-02-06 Background: Due to the Contract Manager's (CM) failure to prosecute the work as required by the Contract Documents it became necessary for the Board of Education to administratively take charge of the project in a manner that would not invalidate the Construction Agreement or prejudice the Board of Education rights. Because of this crisis and since the Architect was familiar with the project, the Board of Education engaged the Architect, on an emergency basis, to bring the project to a successful completion on an expedited schedule. The Architect agreed and provided the required services to get the project back on track by working directly with the CM's Subcontractors, Subcontractors and Materials Suppliers. The firm evaluated and made recommendations to resolve all outstanding Subcontractor, Subcontractor and Materials Suppliers claims ofnon-payment and similar issues and disputes. The Architect was also asked to participate in the final negotiations with the CM. Negotiations and Settlement: In order to successfully close out the project, the Board of Education, Architect and CM participated in negotiations to reach a final resolution ofthe Contract Sum to be paid to the CM. The job was stalled and the CM was demanding an amount in excess of$2,776,886.69 be paid to him by the Board ofEducation. In order not to stall the negotiation process, it was agreed not to attempt to negotiate each ofthe one hundred and one (101) line items shown in the CM's Application for Payment individually. The Board of Education proposed a bottom line payment of $2,291,989.14 as recommended in the SPREADSHEET OF ADJUSTED GMP AMOUNTS, dated September 18, 2001 (Exhibit A). After extensive discussions the parties agreed to settle this dispute conditioned upon a bottom line settlement of$2,361,989.84. The Board ofEducation Attorney approved this settlement. Conclusion: The additional services of the Architect and this settlement resulted in a significant cost savings to the Board of Education of $516,244.09 over the original Guaranteed Maximum Price. It also avoided the possibility of protracted, expensive litigation and a work stoppage, which would have resulted in a less favorable outcome for the Board of Education. -2 - RANDOLPH COUNTY BOARD OF EDUCATION AUDITEE'S RESPONSE SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2005 PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS AUDITEE CORRECTIVE ACTION/RESPONSES EMPLOYEE COMPENSATION Salary Overpayment Amount: $11,250 Finding Control Number: FS-7201-03-08 Practice has been discontinued. Pay above annual salary is approved by the Board of Education. EMPLOYEE COMPENSATION EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Control Procedures Finding Control Number: FS-7201-03-12 All employees have been classified as per the Attorney General's latest ruling. The prior actions were taken based on printed information from Department of Community Health. We feel that no repayment is due Department of Community Health. CASH AND CASH EQUIVALENTS REVENUES/RECEIPTS/RECEIVABLES EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Control Procedures Finding Control Number: FS-7201-04-01 We concur with the finding. Additional training will be provided for school level bookkeepers to comply with the requirements of GASB 34. Separation of duties may not be practical due to the limited number of clerical staff at each school. REVENUES/RECEIPTS/RECEIVABLES EXPENDITURES/LIABILITIES/DISBURSEMENTS Improper Use of School District Vehicles Finding Control Number: FS-7201-04-02 We disagree with the finding. The School District may authorize the use ofbuses for any school sponsored or school related activity. Transporting student fans to games and adult fans to out oftown games are consistent with our efforts to increase parental involvement in school activities. A fee schedule has been established for reimbursement. -3- RANDOLPH COUNTY BOARD OF EDUCATION AUDITEE'S RESPONSE SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2005 PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS AUDITEE CORRECTIVE ACTION/RESPONSES PROCUREMENT EXPENDITURES/LIABILITIES/DISBURSEMENTS EMPLOYEE COMPENSATION Inadequate Accounting Procedures Finding Control Number: FS-7201-04-03 We concur with the finding. Appropriate procedures have been implemented. Some errors were caused by staff transition. Procurement practices and policies will be reviewed. EXPENDITURES/LIABILITIES/DISBURSEMENTS Excessive Payment for Services Finding Control Number: FS-7201-04-04 We disagree with the finding. Small districts lack sufficient staff to manage multiple ongoing projects. The fee paid to the architect was reasonable based on the services received. The School District is pleased with the services rendered for fees paid. EMPLOYEE COMPENSATION EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Control Procedures Finding Control Number: FS-7201-04-07 All employees have been classified as per the Attorney General's latest ruling. The prior actions were taken based on printed information from Department of Community Health. We feel that no repayment is due Department of Community Health. -4- RANDOLPH COUNTY BOARD OF EDUCATION AUDITEE'S RESPONSE SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2005 PRIOR YEAR FEDERAL AWARD FINDINGS AND QUESTIONED COSTS FINDING CONTROL NUMBER AUDITEE'S RESPONSE/STATUS FA-7201-02-03 FA-7201-03-01 FA-7201-03-02 FA-7201-03-03 FA-7201-03-04 FA-7201-03-06 FA-7201-04-01 FA-7201-04-02 FA-7201-04-03 FA-7201-04-04 Unresolved - See Corrective Action/Responses Partially Resolved - See Corrective Action/Responses Unresolved - See Corrective Action/Responses Unresolved - See Corrective Action/Responses Partially Resolved - See Corrective Action/Responses Previously Reported Corrective Action Implemented Partially Resolved - See Corrective Action/Responses Unresolved - See Corrective Action/Responses Unresolved - See Corrective Action/Responses Previously Reported Corrective Action Implemented AUDITEE CORRECTIVE ACTION/RESPONSES ALLOWABLE COSTS/COST PRINCIPLES Time and Attendance Records Not Utilized Properly Amount: $24,942.95 Finding Control Number: FA-7201-02-03 Time and attendance records are kept on all split funded staff. ACTIVITIES ALLOWED OR UNALLOWED Unallowable Activities Amount: $72,495 Finding Control Number: FA-7201-03-01 Records are maintained to justify services to Title I eligible students in our alternative program. ALLOWABLE COST/COST PRINCIPLES Time and Attendance Records Not Utilized Properly Finding Control Number: FA-7201-03-02 Time and attendance records are kept on all split funded staff. -5- RANDOLPH COUNTY BOARD OF EDUCATION AUDITEE'S RESPONSE SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2005 PRIOR YEAR FEDERAL AWARD FINDINGS AND QUESTIONED COSTS AUDITEE CORRECTIVE ACTION/RESPONSES MATCHING, LEVEL OF EFFORT AND EARMARKING Failure to Meet Matching Requirements Finding Control Number: FA-7201-03-03 Program adheres to stated guidelines. MATCHING, LEVEL OF EFFORT AND EARMARKING Failure to Meet Earmarking Requirements Finding Control Number: FA-7201-03-04 Program adheres to stated guidelines. ACTIVITIES ALLOWED OR UNALLOWED Unallowable Activities Amount: $57,151 Finding Control Number: FA-7201-04-01 Records are maintained to justify services to Title I eligible students in our alternative program. PERIOD OF AVAILABILITY Expenditures After Grant Period Finding Control Number: FA-7201-04-02 Procedures have been implemented to ensure compliance with program guidelines. REPORTING Inadequate Documentation Finding Control Number: FA-7201-04-03 Program changes have been implemented to resolve reporting issues. -6- SECTION IV FINDINGS AND QUESTIONED COSTS RANDOLPH COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2005 I SUMMARY OF AUDITOR'S RESULTS 1. Type of Report Issued on the Financial Statements The auditor's opinion on the Randolph 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 Randolph County Board ofEducation disclosed financial statement reportable conditions related to the following control categories. Cash and Cash Equivalents Employee Compensation Revenues/Receivables/Receipts Expenditures/Liabilities/Disbursements General Ledger Procurement Of the reportable conditions described above, Cash and Cash Equivalents, Procurement, Employee Compensation and General Ledger are considered to be material weaknesses. 3. Noncompliance Material to the Financial Statements The audit of the Randolph 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 Randolph County Board of Education disclosed a reportable condition in internal control over major programs for the following compliance requirement. Reporting 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 Randolph County Board of Education's report on compliance with requirements applicable to major programs was unqualified. 6. Audit Findings Required to be Reported by Section .510(a) ofOMB Circular A-133 The Randolph 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. - 1- RANDOLPH COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2005 I SUMMARY OF AUDITOR'S RESULTS 7. Major Programs Federal awards audited as major programs are as follows: 10.553 Food Services - School Breakfast Program 10.555 Food Services - National School Lunch Program 10.559 Summer Food Service Program for Children 84.010 Title I Grants to Local Educational Agencies 84.027 Special Education - Grants to States 84.173 Special Education - Preschool Grants 84.357 Reading First State Grants 8. Type "A" Program Dollar Threshold The dollar threshold for type "A" programs was $300,000. 9. Low Risk Auditee The Randolph County Board ofEducation did not qualify as a low risk auditee as defined by Section .530 of 0MB Circular A-133. II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS CASH AND CASH EQUIVALENTS PROCUREMENT EMPLOYEE COMPENSATION GENERAL LEDGER Inadequate Accounting Procedures Reportable Condition - Material Weakness Repeated from Prior Years Finding Control Number: FS-7201-05-01 This is a repeat finding (FS-7201-04-03, FS-7201-03-05 and FS-7201-02-05) from fiscal years 2002 through 2004. Accounting procedures ofthe Randolph County Board ofEducation were insufficient to provide adequate controls over the above control categories. The following deficiencies were noted: Cash and Cash Equivalents An examination of the School District bank reconciliations revealed: (1) Two bank reconciliations omitted four outstanding checks totaling $117,454. (2) One bank reconciliation contained three invalid outstanding checks totaling $5,313. (3) Four of the seven bank reconciliations were not properly approved. -2- RANDOLPH COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2005 II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS CASH AND CASH EQUIVALENTS PROCUREMENT EMPLOYEE COMPENSATION GENERAL LEDGER Inadequate Accounting Procedures Reportable Condition - Material Weakness Repeated from Prior Years Finding Control Number: FS-7201-05-01 Procurement The School District did not have adequate procedures in place to ensure that the procurement process was implemented properly. Our tests revealed numerous instances where purchase orders were issued after the expenditures were incurred. Employee Compensation The School District did not have adequate procedures in place to ensure employee compensation expenditures were properly documented, calculated and approved before disbursement of funds. Our tests of employee compensation records for twenty-five employees revealed six instances where disbursements were improperly made to employees. In addition, leave records were inadequate resulting in leave accruals at an inaccurate rate and failure to properly deduct leave used from leave balances. General Ledger An examination ofinternal accounting control procedures and a test oftwenty-five journal entries revealed that two journal entries had no evidence of independent administrative review and three journal entries did not include adequate supporting documentation. The deficiencies noted above occurred because of management's failure to implement controls adequate to ensure: bank statements are reconciled properly, the School District's procurement policies are followed, all amounts paid to system employees are adequately documented and properly approved, approved leave records are properly adjusted, and journal entries are adequately documented and approved before posting to the general ledger. The School District should establish and implement appropriate procedures to strengthen internal controls over: purchasing procedures for all expenditures, processing employee compensation, maintaining approved leave records, and posting journal entries to the general ledger. The School District should determine if reimbursement/payment for salary overpayments/underpayments is appropriate. -3- RANDOLPH COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2005 II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS CASH AND CASH EQUIVALENTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Control Procedures Reportable Condition Repeated from Prior Year Finding Control Number: FS-7201-05-02 This is a repeat finding (FS-7201-04-01) from the year ended June 30, 2004. Our examination of principal accounts disclosed weaknesses in internal control as discussed below: Cash and Cash Equivalents (1) The bank reconciliation function was not separated from the record keeping functions. Revenues/Receivables/Receipts (1) Deposit preparation was not separated from the record keeping and cash custody functions. (2) Receipts recorded in the Elementary School's accounting system could not easily be traced to receipt documentation maintained. Multiple receipt books were used to record funds received without regard to pre-numbered sequences. For numerous months, no receipt books were provided. As a result, there is no method oftracing deposits recorded in receipt books to the financial records. This lack ofproper accounting procedures increases the risk of theft or fraud as there are no controls in place to verify that all funds received were actually recorded in the financial records. Expenditures/Liabilities/Disbursements (1) Four of five vouchers tested were charged to the wrong function. The School District recorded all of the vouchers to the instruction function. (2) One of five vouchers tested was not approved. These deficiencies were a result ofmanagement's decision to limit the number ofadministrative staff made responsible, at the various principal account sites, for the accounting functions and failure to implement controls to properly account for all transactions involving student activity accounts. Management should implement additional procedures to ensure that the key accounting functions of custody and record keeping be segregated. In addition, controls should be revised to ensure disbursements and receipts of funds within the school activity accounts are adequately documented, approved, and recorded in the financial records. -4 - RANDOLPH COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2005 II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Excessive Payment for Services Reportable Condition Repeated from Prior Years Finding Control Number: FS-7201-05-03 This is a repeat finding (FS-7201-04-04 and FS-7201-03-06) from the years ended June 30, 2004 and 2003, respectively. A review ofamounts charged for architectural work performed during fiscal years 2003, 2004, and 2005 appeared to be excessive in relation to the type of services provided. Based on an amended architectural agreement, signed on September 10, 2002, the architect was to receive $34,000 for support and consultation services in connection with on site assessments of existing buildings and grounds owned by the School District. In addition, the architect was also scheduled to receive 20% or approximately $110,529 for contract administration services on contracts totaling $552,645. These contracts include $207,442 for furniture and accessories, $109,754 fora security system, $137,449 for an intercom system and $98,000 for various repairs and improvements. A review of expenditure documentation noted that the architect billed the School District a fee of $184,000, an increase of $39,471 over the amended architectural agreement. Explanation for the increase in fees of $39,471 was provided as follows: (a) administration fees of $10,817, representing 25% of purchase orders of $34,498 for stage curtains and $8,769 for miscellaneous repair and renovation projects and (b) architectural services of $28,654 for other miscellaneous projects. Contract administration fees of 20-25% for the above work appear to be excessive for the type of services provided. The School District should contact the architect and inquire about obtaining a reduced rate of these fees. EMPLOYEE COMPENSATION Inaccurate Reporting of Senior Management Compensation Reportable Condition Amount: $9,121 Finding Control Number: FS-7201-05-04 This is a repeat finding (FS-7201-03-07) from fiscal year ended June 30, 2003. The School District implemented corrective action for fiscal year 2004; however, our examination ofcompensation paid to senior management of the School District revealed a significant error in the amount reported as salary to the Department of Audits and Accounts during fiscal year 2005. The School District did not include payments of$9, 121 for retirement benefits and health, dental and life insurance benefits on the Superintendent's behalf. These payments were in accordance with the contract between the Superintendent and the School District. -5- RANDOLPH COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2005 II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS EMPLOYEE COMPENSATION Inaccurate Reporting of Senior Management Compensation Reportable Condition Amount: $9,121 Finding Control Number: FS-7201-05-04 The School District reported a salary of$101,235 for Superintendent Bobby Jenkins in its salary and travel report for the period ended June 30, 2005. The actual compensation for Mr. Jenkins totaled $110,356, which includes the $9,121 benefit payments referenced above. The School District should implement procedures to ensure that all employee compensation is included in the salary total reported to the Department of Audits and Accounts. GENERAL LEDGER Detailed Listing of Salaries and Travel Not Reconciled Nonmaterial Noncompliance Finding Control Number: FS-7201-05-05 This is a repeat finding (FS-7201-03-11) from fiscal year 2003. The School District implemented corrective action for fiscal year 2004; however, the detailed listing of travel payments made to employees as submitted by the School District to the Georgia Department of Audits and Accounts was not reconciled with the general ledger as presented for audit during fiscal year 2005. An unidentified variance totaling $23,119 could not be identified. This condition occurred because management did not reconcile amounts submitted to Georgia Department of Audits and Accounts to the School District's general ledger. Procedures should be established by the School District to ensure that the detailed listing of travel is reconciled to the accounting records prior to submission to the Georgia Department of Audits and Accounts. III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS REPORTING Inadequate Documentation Reportable Condition - Material Weakness U.S. Department of Agriculture Through Bright From the Start: Georgia Department of Early Care and Leaming Repeated From Prior Years Finding Control Number: FA-7201-05-01 This is a repeat finding (FA-7201-04-03, FA-7201-03-05 and FA-7201-02-02) from fiscal years 2002 through 2004. An examination of the Summer Food Service Program for Children (CFDA 10.559) revealed that the July, 2004 and June, 2005 claims for reimbursement were not supported by -6- RANDOLPH COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2005 III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS REPORTING Inadequate Documentation Reportable Condition - Material Weakness U. S. Department of Agriculture Through Bright From the Start: Georgia Department of Early Care and Learning Repeated From Prior Years Finding Control Number: FA-7201-05-01 accurate meal count documentation as required by 7 CFR 225 .15c. The following discrepancies were noted: (1) Five sites were tested for July, 2004 and June, 2005 and five duplicate daily meal count forms were noted. One site had one day with two daily meal count forms and each form had a different number of meals served. (2) Fifty-four sites were tested for two days in June, 2005 and four sites did not have the number of meals delivered listed and one site delivery ticket did not match the daily meal count form. (3) In July 2004, one of five sites tested had fifteen days where the number ofmeals served exceeded the approved maximum average daily attendance. In addition, in June 2005, two of five sites tested had a total of fourteen days where the number of meals served exceeded the approved maximum average daily attendance. (4) Actual expenditures claimed on the Reimbursement Requests for 2004 and 2005 grants submitted to the grantor agency did not agree to the general ledgers for the fiscal periods covered. These discrepancies were due to management's failure to ensure that the number of meals claimed were based on accurate counts and these counts were supported by accurate documentation to support that meals were delivered and served to participating children. The School District should implement procedures to ensure that all claims for reimbursement include an accurate and fully documented count of meals delivered and served. Bright From the Start: Georgia Department of Early Care of Learning should review this matter to determine if a reclaim of funds is appropriate. -7- SECTIONV MANAGEMENT'S RESPONSES RANDOLPH COUNTY BOARD OF EDUCATION SCHEDULE OF MANAGEMENT'S RESPONSES YEAR ENDED JUNE 30, 2005 Finding Control Number: FS-7201-05-01 We concur with the finding. Additional training will be provided for staff members. Finding Control Number: FS-7201-05-02 We concur with the finding. Appropriate procedures have been implemented along with replacing a staff member. Finding Control Number: FS-7201-05-03 We disagree with the finding. Small districts lack sufficient staff to manage multiple ongoing projects. The fee paid to the architect was reasonable based on the services received. The School District is pleased with the services rendered for fees paid. Finding Control Number: FS-7201-05-04 We concur with the finding. Appropriate procedures will be implemented to ensure correct reporting of employee compensation. Finding Control Number: FS-7201-05-05 We concur with this finding. The implementation of additional procedures along with replacement of a staff member should ensure proper reporting. Finding Control Number: FA-7201-05-01 We concur with the finding. Previous program changes have helped with the problem but have not fully corrected all issues. We will develop additional procedures and require additional training of staff members. Contact Person: Bobby Jenkins, Superintendent Phone: (229) 732-3601 Fax Number: (229) 732-3840 E-mail Address: jenkinsb@sowegakl2.org