RANDOLPH COUNTY BOARD OF EDUCATION CUTHBERT, GEORGIA REPORT ON AUDIT OF THE FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2008 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 9 H 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 28 RANDOLPH COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS - SECTION I FINANCIAL SCHEDULES SUPPLEMENTARY INFORMATION 4 SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS 29 5 ALLOTMENTS AND EXPENDITURES GENERAL FUND - QUALITY BASIC EDUCATION PROGRAMS (QBE) BY PROGRAM 31 SECTION II COMPLIANCE AND INTERNAL CONTROL REPORTS REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENTAUDITING STANDARDS REPORT ON COMPLIANCE WITH REQUIREMENTS APPLICABLE TO EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH 0MB CIRCULAR A-133 SECTION III AUDITEE'S RESPONSE TO PRIOR YEAR FINDINGS AND QUESTIONED COSTS SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS SECTION IV FINDINGS AND QUESTIONED COSTS SCHEDULE OF FINDINGS AND QUESTIONED COSTS RANDOLPH 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 November 30, 2009 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, 2008, which collectively comprise the Board's basic financial statements as listed in the table of contents. These financial statements are the responsibility ofthe Randolph County Board ofEducation's management. Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States ofAmerica and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General ofthe United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free 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 Randolph 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. 2008ARL-19X In fiscal year 2007, the School District entered into a capital lease for equipment. The capital lease liability has been recorded in the governmental activities. However, the School District has excluded from capital assets certain leased equipment items including the related accumulated depreciation and current year depreciation expense that, in our opinion, should be included to conform with accounting principles generally accepted in the United States ofAmerica. The amount by which this omission would affect the assets, net assets and expenses of the governmental activities is not reasonably determinable. In our opinion, except for the effects of not properly recognizing capital assets and depreciation expense in the governmental activities as described in the preceding paragraph, the financial statements referred to above present fairly, in all material respects, the financial position of the governmental activities of the Randolph County Board of Education, as of June 30, 2008, and the changes in financial position thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statements referred to previously present fairly, in all material respects, the respective financial position of each major fund and the aggregate remaining fund information of the Randolph County Board of Education, as of June 30, 2008, 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. The Randolph County Board ofEducation 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. As discussed in Note 14 in the Notes to the Basic Financial Statements, subsequent to fiscal year ended June 30, 2008, members of the Randolph County Board of Education, including the former School Superintendent, engaged each other in a lawsuit over governance issues of the School System. In accordance with Government Auditing Standards, we have also issued our report dated November 30, 2009, on our consideration of the Randolph County Board of Education's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements and other matters. The purpose ofthat report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit. The Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual, as presented on page 25 is not a required part of the basic financial statements but is supplementary information required by the accounting principles generally accepted in the United States of America. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods ofmeasurement and presentation ofthe required supplementary information. However, we did not audit the information and express no opinion on it. 2008ARL- l 9X 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, . ~~.Q2__ uj~~ Russell W. Hinton, CPA, CGFM State Auditor RWH:as 2008ARL-19X RANDOLPH COUNTY BOARD OF EDUCATION RANDOLPH COUNTY BOARD OF EDUCATION STATEMENT OF NET ASSETS JUNE 30, 2008 ASSETS Cash and Cash Equivalents Accounts Receivable, Net Interest Taxes State Government Federal Government Other Inventories Capital Assets Land Construction in Progress Land Improvements Buildings Equipment Less: Accumulated Depreciation Total Assets LIABILITIES Accounts Payable Salaries and Benefits Payable Payroll Withholdings Payable Retainages Payable Deposits and Deferred Revenues Long-Term Liabilities Due Within One Year Due in More Than One Year Total Liabilities NET ASSETS Invested in Capital Assets, Net of Related Debt Restricted for Bus Replacement Continuation of Federal Programs Capital Projects Unrestricted (Deficit) 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 $ 175,682.36 237,671.47 882,275.51 572,098.89 200,562.38 13,435.30 72,035.00 896,862.15 685,174.00 6,267,462.00 2,288,192.00 -4,837,273.00 $ ===7=,4=54====1' =7=8.=06= $ 206,036.14 1,593,294.02 704.68 55,384.00 37,023.00 170,165.09 1,849,503.92 $ 3,912,110.85 $ 5,372,452.15 89,608.87 380,858.51 84,160.96 -2,385,013.28 $ 3,542,067.21 $ ===7=,4=5=4=,1=7=8.=06.,. RANDOLPH COUNTY BOARD OF EDUCATION STATEMENT OF ACTIVITIES FOR THE YEAR ENDED JUNE 30, 2008 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 Interest on Short-Term and Long-Term Debt 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 (Restated) EXPENSES CHARGES FOR SERVICES $ 9,907,503.84 $ 691,697.72 921,344.46 250,777.85 546,378.11 1,061,531.09 186,917.08 1,090,858.73 1,198,508.98 125,751.30 231,067.43 12,038.88 1,157,267.60 82,675.78 $ 17,464,318.85 $ 412,004.33 6,450.25 86,730.39 505,184.97 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 $ 7,000,047.93 326,218.68 482,231.58 169,897.47 666,331.87 532,745.83 40,029.67 455,328.46 435,591.89 $ 20,682.65 153,409.84 1,206.47 1,158,699.57 $ 11,442,421.91 $ $ 43,694.00 43 694.00 $ -2,495,451.58 -365,479.04 -439, 112.88 -80,880.38 119,953.76 -528,785.26 -146,887.41 -635,530.27 -719,223.09 -105,068.65 -77,657.59 -4,382.16 88,162.36 -82 675.78 -5,473,017.97 $ 3,008,722.83 16,577.11 929,568.14 19,846.67 1,390,267.00 5,300.43 137 176.88 $ 5,507,459.06 $ 34,441.09 3,507,626.12 $ ===3='=54=2=,0=6=7.=2=1 -3- RANDOLPH COUNTY BOARD OF EDUCATION BALANCE SHEET GOVERNMENTAL FUNDS JUNE 30, 2008 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 and Benefits Payable Payroll Withholdings Payable Retainages Payable Deposits and Deferred Revenue Total Liabilities FUND BALANCES Reserved for: Bus Replacement Continuation of Federal Programs Capital Projects Unreserved Designated for Student Activities Designated for Self-Insurance Undesignated Reported in: General Fund (Deficit) Total Fund Balances Total Liabilities and Fund Balances GENERAL FUND DISTRICTWIDE CAPITAL PROJECTS FUND TOTAL $ 44,522.07 $ 131,160.29 $ 34,341.94 882,275.51 572,098.89 200,562.38 13 435.30 154,336.82 175,682.36 188,678.76 882,275.51 572,098.89 200,562.38 13 435.30 $ 1,747,236.09 $ 285,497.11 $===2=,0=32='=73=3=.2=0 $ 60,083.99 $ 1,593,294.02 704.68 37,023.00 $ 1,691,105.69 $ 145,952.15 $ 55,384.00 201,336.15 $ 206,036.14 1,593,294.02 704.68 55,384.00 37 023.00 1,892,441.84 $ 89,608.87 380,858.51 $ 14,434.98 40,613.94 -469,385.90 $ 56 130.40 $ $ 84,160.96 84 160.96 $ 89,608.87 380,858.51 84,160.96 14,434.98 40,613.94 -469 385.90 140 291.36 $ 1,747,236.09 $ 285,497.11 $===2=,0=32='=73=3=.2=0 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, 2008 EXHIBIT"D" Total Fund Balances - Governmental Funds (Exhibit "C") Amounts reported for Governmental Activities in the Statement of Net Assets are different because: Capital Assets used in Governmental Activities are not financial resources and therefore are not reported in the funds. These assets consist of: Land Construction in Progress Land Improvements Buildings Equipment Accumulated Depreciation Total Capital Assets Some of the School District's property tax revenues will be collected after year-end but are not available soon enough to pay for the current period's expenditures. Long-Term Liabilities 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: Capital Leases $ 140,291.36 $ 72,035.00 896,862.15 685,174.00 6,267,462.00 2,288,192.00 -4,837,273.00 5,372,452.15 48,992.71 -2,019,669.01 Net Assets of Governmental Activities (Exhibit "A") $ 3,542,067.21 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, 2008 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 Debt Services Principal Interest Total Expenditures Net Change in Fund Balances Fund Balances - Beginning Fund Balances - Ending GENERAL FUND DISTRICTWIDE CAPITAL PROJECTS FUND TOTAL $ 2,904,221.24 $ 2,904,221.24 19,846.67 $ 929,568.14 949,414.81 8,884,681.72 8,884,681.72 3,991,701.19 3,991,701.19 505,184.97 505,184.97 4,470.26 830.17 5,300.43 137 176.88 137 176.88 $ 16,447,282.93 $ 930,398.31 $ 17,377,681.24 $ 9,897,573.93 $ 9,897,573.93 687,033.00 921,344.46 250,777.85 532,340.27 1,061,531.09 186,917.08 1,083,318.30 966,605.35 125,751.30 169,487.87 12,038.88 1,164,772.54 $ 1,069,026.31 687,033.00 921,344.46 250,777.85 532,340.27 1,061,531.09 186,917.08 1,083,318.30 966,605.35 125,751.30 169,487.87 12,038.88 1,164,772.54 1,069,026.31 163,636.22 82,675.78 163,636.22 82 675.78 $ 17,305,803.92 $ 1,069,026.31 $ 18,374,830.23 $ -858,520.99 $ -138,628.00 $ -997,148.99 914,651.39 222,788.96 1,137,440.35 $ 56,130.40 $ 84,160.96 $ ======1=40=-'=29=1=.3=6 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, 2008 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 loss on the disposal of buildings and equipment is reported whereas in the Governmental Funds, the assets were expensed in the year of purchase. Thus, the change in net assets differs from the change in fund balances by the carrying value of the buildings and equipment disposed of. 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 $ -997,148.99 $ 1,129,594.16 -320,437.00 809,157.16 121,078.70 -62,282.00 163,636.22 Change in Net Assets of Governmental Activities (Exhibit "B") $ ==3=4:!:,4=4=1.=09= The notes to the basic financial statements are an integral part of this statement. -7- (This page left intentionally blank) RANDOLPH COUNTY BOARD OF EDUCATION STATEMENT OF FIDUCIARY NET ASSETS FIDUCIARY FUNDS JUNE 30, 2008 ASSETS Accounts Receivable, Net Other LIABILITIES Cash Overdraft Accounts Payable Salaries and Benefits Payable Funds Held for Others Total Liabilities EXHIBIT"G" AGENCY FUNDS $ =====1=5,.4.2....,9.,..0.8.. $ 8,077.72 156.00 4,562.08 2,633.28 $==1==5,=42=9=.0=8 The notes to the basic financial statements are an integral part of this statement. -9- RANDOLPH COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2008 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 of Net Assets and the Statement of Activities display information about the financial activities of the overall School District, except for fiduciary activities. Eliminations have been made to minimize the double counting of internal activities. Governmental activities generally are financed through taxes, intergovernmental revenues, and other nonexchange transactions. The Statement of Activities presents a comparison between direct expenses and program revenues for each function of the School District's governmental activities. Direct expenses are those that are specifically associated with a program or function and, therefore, are clearly identifiable to a particular function. Indirect expenses (expenses of the School District related to the administration and support of the 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 of goods 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 of internal 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. - 10 - RANDOLPH COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2008 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 of the 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) to be used for the acquisition, construction or renovation of major 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 of accounting 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 of accounting. Under this method, revenues are recognized when measurable and available. The School District considers all revenues reported in the governmental funds to be available if they are collected within sixty days after year-end. Property taxes, sales taxes and interest are considered to be susceptible to accrual. Expenditures are recorded when the related fund liability is incurred, except for principal and interest on general long-term debt. Capital asset acquisitions are reported as expenditures in governmental funds. Acquisitions under capital leases are reported as other financing sources. - 11 - RANDOLPH COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2008 EXHIBIT "H" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The School District funds certain programs by a combination of specific cost-reimbursement grants, categorical grants, and general revenues. Thus, when program costs are incurred, there are both restricted and unrestricted net assets available to finance the program. It is the School District's policy to first apply grant resources to such programs, followed by cost-reimbursement grants, then general revenues. RESTATEMENT OF PRIOR YEAR NET ASSETS For fiscal year 2008, the School District recorded a capital lease that was entered into in the prior fiscal year. The School District increased the Long-Term Liability $2,019,669.01 and decreased Beginning Net Assets by $2,183,305.23. This prior period adjustment was done to correct the Long-Term Liability. This change is in accordance with generally accepted accounting principles. CASH AND CASH EQUIVALENTS COMPOSITION OF DEPOSITS Cash and cash equivalents consist of cash 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, insured Federal savings and loan associations or insured chartered building 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 2007 tax digest year (calendar year) on July 19, 2007 (levy date). Taxes were due on December 20, 2007 (lien date). Taxes collected within the current fiscal year or within 60 days after year-end on the 2007 tax digest are reported as revenue in the governmental funds for fiscal year 2008. The Randolph County Tax Commissioner bills and collects the property taxes for the School District, withholds 2.5% of taxes collected as a fee for tax collection and remits the balance of taxes collected to the School District. Property tax revenues, at the fund reporting level, during the fiscal year ended June 30, 2008, for maintenance and operations amounted to $2,887,644.13. - 12 - RANDOLPH COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2008 EXHIBIT "H" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The tax millage rate levied for the 2007 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 16.10 mills SALES TAXES Special Purpose Local Option Sales Tax, at the fund reporting level, during the year amounted to $929,568.14 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 of meals 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 of assets 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. During the fiscal year under review, no events or changes in circumstances affecting a capital asset that may indicate impairment were known to the School District. Capitalization thresholds and estimated useful lives of capital assets reported in the District-wide statements are as follows: - 13 - RANDOLPH COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2008 EXHIBIT "H" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Land Land Improvements Buildings and Improvements Equipment Capitalization Policy All $ 5,000.00 $ 5,000.00 $ 5,000.00 Estimated Usefi.tl Life NIA 0 to 80 years 0 to 80 years 5 to 50 years Depreciation is used to allocate the actual or estimated historical cost of all capital assets over estimated useful lives. 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 of outstanding 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. DEFICIT FUND BALANCES The fund reporting a deficit fund balance at June 30, 2008, is as follows: Fund Type/Fund Name Deficit Balance Governmental Fund General Fund $ 469,385.90 The Board has taken the following corrective actions to reduce the deficit: Freeze hiring of new personnel; evaluate staffing needs; reduce staff by attrition and elimination of unneeded positions; eliminate purchase of unneeded purchases and equipment; issue Tax Anticipation Notes for immediate cash flow needs and examine millage rate in 2010. - 14 - RANDOLPH COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2008 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 of the face value of such surety bond and the market value of securities pledged shall be equal to not less than 110 percent of the public funds being secured after the deduction of the amount of deposit insurance. If a depository elects the pooled method (OCGA 45-8-13.1) the aggregate of the market value of the securities pledged to secure a pool of public funds shall be not less than 110 percent of the daily pool balance. Acceptable security for deposits consists of any one of or any combination of the following: (1) Surety bond signed by a surety company duly qualified and authorized to transact business within the State of Georgia, (2) Insurance on accounts provided by the Federal Deposit Insurance Corporation, (3) Bonds, bills, notes, certificates of indebtedness or other direct obligations of the United States or 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 or securities guaranteed by the Federal Land Bank, the Federal Horne Loan Bank, the Federal Intermediate Credit Bank, the Central Bank for Cooperatives, the Farm Credit Banks, the Federal Horne Loan Mortgage Association, and the Federal National Mortgage Association. CATEGORIZATION OF DEPOSITS At June 30, 2008, the bank balances were $1,295,873.50. Bank balances are subject to custodial credit risk if the deposits are: - 15 - RANDOLPH COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2008 EXHIBIT "H" Note 3: DEPOSITS Category 1 - Uncollateralized, Category 2 - Collateralized with securities held by the pledging financial institution, or Category 3 - 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 deposits exposed to custodial credit risk category at June 30, 2008, are as follows: Custodial Credit Risk Category Bank Balance 1 $ 0.00 2 1,195,873.50 3 0.00 Total Note 4: NON-MONETARY TRANSACTIONS $ 111951873.SQ 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: Governmental Activities Capital Assets, Not Being Depreciated: Land Construction in Progress Total Capital Assets Not Being Depreciated Capital Assets Being Depreciated Buildings and Improvements Equipment Land Improvements Less Accumulated Depreciation for: Buildings and Improvements Equipment Land Improvements Total Capital Assets, Being Depreciated, Net Governmental Activity Capital Assets - Net Balances Jul)'. 1, 2007 Increases Decreases Balances June 30, 2008 $ 72,035.00 $ 67,229.99 $ 829,632.16 $ 139,264.99 $ 829,632.16 $ 0.00 $ 0.00 $ 72,035.00 896,862.15 968,897.15 $ 6,267,462.00 2,253,789.00 $ 530,976.00 99,962.00 $ 200,000.00 $ 6,267,462.00 65,559.00 2,288,192.00 45,802.00 685,174.00 2,534,580.00 1,520,600.00 510,735.00 $ 4,486,312.00 $ $ 4,625,576.22 $ 124,545.00 180,188.00 15,704.00 -20,475.00 $ 802,157.16 $ 3,277.00 45,802.00 2,659,125.00 1,697,511.00 480,637.00 62,282.00 $ 4,403,555.00 62 282.QQ $ 5,372 452 15 - 16 - RANDOLPH COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2008 EXHIBIT "H" Note 5: CAPITAL ASSETS 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 $ 120,160.00 $ 2,670.00 8,035.00 4,316.00 140,591.00 35,247.00 190,859.00 9,418.00 $ 320,437.00 Note 6: RESTRICTED ASSETS Special Purpose Local Option Sales Tax (SPLOST) is a restricted asset in the Statement of Net Assets because its use is limited by statutory provisions. Restricted assets at June 30, 2008, were as follows: District-wide Capital Projects SPLOST Restricted Cash and Cash Equivalents: Capital Acquisitions $ 131,160.29 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 of loss associated with torts, assets and errors or omissions. The School District has neither significantly reduced coverage for these risks nor incurred losses (settlements) which exceeded the School District's insurance coverage in any of the past three years. 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. - 17 - RANDOLPH COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2008 EXHIBIT"H" Note 7: RISK MANAGEMENT The School District is self-insured with regard to unemployment compensation claims. In connection with this program, a self-insurance reserve has been established within the General Fund by the School District. The School District accounts for claims within the General Fund with expenses/expenditures and liability being reported when it is probable that a loss has occurred, and the amount of that loss can be reasonably estimated. Changes in the unemployment compensation claims liability during the last two fiscal years are as follows: Beginning of Year Liability Claims and Changes in Estimates Claims Paid EndofYear Liability 2007 2008 $ 0.00 $ 10,817.37 $ 10,817.37 $ 0.00 $ 0.00 $ 2,240.00 $ 2,240.00 $ 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: Position Covered Amount Superintendent Each Principal High School Bookkeeper Elementary School Bookkeeper Payroll Clerk Finance Director Head Start Director Bank Depositor Food Service Bookkeeper Head Start Bookkeeper Head Start Secretary Each School Food Service Manager Each Athletic Gate Keeper Each School System Employee $ 50,000.00 $ 10,000.00 $ 10,000.00 $ 10,000.00 $ 10,000.00 $ 10,000.00 $ 10,000.00 $ 10,000.00 $ 10,000.00 $ 10,000.00 $ 5,000.00 $ 5,000.00 $ 5,000.00 $ 1,000.00 - 18 - RANDOLPH COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2008 EXHIBIT "H" 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, 2008, for governmental funds amounted to $128,134.35. Future minimum lease payments for these leases are as follows: Year Ending Governmental Funds 2009 2010 2011 2012 $ 104,877.35 87,307.50 71,407.35 65,800.00 Total $ 329,392.20 Note 9: SHORT-TERM DEBT The School District issues tax anticipation notes in advance of property tax collections, depositing the proceeds in its General Fund. This short-term debt is to provide cash for operations until property tax collections are received by the School District. Article IX, Section V, Paragraph V of the Constitution of the State of Georgia limits the aggregate amount of shortterm debt to 75 percent of the total gross income from taxes collected in the preceding year and requires all short-term debt to be repaid no later than December 31 of the calendar year in which the debt was incurred. Short-term debt activity for the fiscal year is as follows: Beginning Balance Issued Redeemed Ending Balance Tax Anticipation Notes $===='0-.0-0 $ 525,000.00 $ 525,000.00 $===='0-.0-0 Note I0: LONG-TERM DEBT CAPITAL LEASES The Randolph County Board of Education entered into various lease agreements for acquiring, constructing and equipping certain educational facilities in the School District. These lease agreements qualify as capital leases for accounting purposes, and, therefore, have been recorded at the present value of the future minimum lease payments as of the date of their inception. The changes in Long-Term Debt during the fiscal year ended June 30, 2008, were as follows: - 19 - RANDOLPH COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2008 EXHIBIT "H" Note 10: LONG-TERM DEBT Capital Leases Balance July 1, 2007 (Restated) Governmental Funds Additions Deductions Balance June 30, 2008 Due Within One Year $ 2 183 3QS 23 $ Q,QQ $ 163,636.22 $2,012 662 QI $ l:ZQ,165.02 At June 30, 2008, payments due by fiscal year which includes principal and interest for these items are as follows: Fiscal Year Ended June 30 Capital Leases Principal Interest 2009 2010 2011 2012 2013 2014 - 2018 $ 170,165.09 $ 193,387.17 201,819.59 210,619.71 219,803.55 1,023,873.90 83,396.94 75,316.83 66,884.41 58,084.29 48,900.45 95,726.01 Total Principal and Interest Note 11: ON-BEHALF PAYMENTS $ 2,019,669.01 $ 428,308.93 The School District has recognized revenues and costs in the amount of $441,426.26 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 $432,944.06 Paid to the Teachers Retirement System of Georgia For Teachers Retirement System (TRS) Employer's Cost In the amount of $6,237.20 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 $2,245.00 -20 - RANDOLPH COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2008 EXHIBIT "H" Note 12: SIGNIFICANT COMMITMENTS The following is an analysis of significant outstanding construction or renovation contracts executed by the School District as of June 30, 2008: Project Unearned Executed Contracts Randolph County Elementary School Playground/ Parking Lot/Canopy $ 81,689.00 The amount described in this note is not reflected in the basic financial statements. Note 13: SIGNIFICANT CONTINGENT LIABILITIES Amounts received or receivable principally from the Federal government are subject to audit and review by grantor agencies. This could result in requests for reimbursement to the grantor agency for any costs which are disallowed under grant terms. The School District believes that such disallowances, if any, will be immaterial to its overall financial position. The School District is a defendant in various legal proceedings pertaining to matters incidental to the performance of routine School District operations. The ultimate disposition of these proceedings is not presently determinable, but is not believed to be material to the basic financial statements. Note 14: SIGNIFICANT SUBSEQUENT EVENT On April 13, 2009, the former Chairman and former Superintendent entered into a lawsuit against the majority of the Board. The Board had attempted to terminate the contract of the Superintendent and implement a 2009 Act of the General Assembly requiring an election for Chairman of the Board. The Court has allowed the termination of the Superintendent and the election of a new Chairman. Rulings of the Court have been applied. Additional lawsuits have been filed. The final outcome of the lawsuit will fundamentally affect the governance of the System and will consequently have an impact on the financial activities of the System. Note 15: POSTEMPLOYMENT BENEFITS Georgia Retiree Health Benefit Fund Plan Description. The School District contributes to the Georgia Retiree Health Benefit Fund ("GRHBF"), a cost-sharing multiple-employer defined benefit postemployment healthcare plan administered by the Department of Community Health. GRHBF provides health insurance benefits to eligible retirees and their qualified beneficiaries. Pursuant to Title 45, Chapter 18 of - 21 - RANDOLPH COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2008 EXHIBIT "H" Note 15: POSTEMPLOYMENT BENEFITS the Official Code of Georgia Annotated, the authority to establish and amend the benefit provisions of the plan is assigned to the Board of Community Health. The Department of Community Health issues a publicly available financial report that includes financial statements and required supplementary information for GRHBF. That report may be obtained from the Department of Community Health at 2 Peachtree Street, Atlanta, Georgia 30303. Funding Policy. The contribution requirements of plan members and participating employers are established and may be amended by the Board of Community Health. Contributions of plan members or beneficiaries receiving benefits vary based on plan election, dependent coverage, and Medicare eligibility and election. On average, plan members pay approximately twenty-five percent (25%) of the cost of health insurance coverage. Participating employers are statutorily required to contribute in accordance with the employer contribution rate established by the Board of Community Health. This contribution rate is established to fund both the active and retired employee health insurance plans based on projected pay-as-you-go financing requirements. The employer contribution rates for the combined active and retiree plans for the fiscal year ended June 30, 2008, were as follows: Teachers Non-Certificated Employees 18.534% of state-based salaries $162.72 per month The School District's contribution to the health insurance plans for the fiscal year ended June 30, 2008, was $1,430,878.01, which equaled the required contribution. Note 16: 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 costsharing 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 of the 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 - RANDOLPH COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2008 EXHIBIT "H" Note 16: RETIREMENT PLANS Fiscal Year 2008 2007 2006 Percentage Contributed 100% 100% 100% Required Contribution $ 796,356.39 $ 739,263.10 $ 749,788.00 - 23 - {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, 2008 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 Debt Service Total Expenditures Excess of Revenues over (under) Expenditures OTHER FINANCING SOURCES Other Sources Net Change in Fund Balances Fund Balances - Beginning Adjustments NONAPPROPRIATED BUDGETS ORIGINAL (1) FINAL (1) ACTUAL AMOUNTS $ 2,884,470.00 $ 7,966,315.00 3,897,452.00 361,797.00 27,500.00 124 445.00 $ 15,261,979.00 $ 2,884,470.00 $ 8,164,510.31 4,898,351.00 382,893.00 27,500.00 189,004.00 16,546,728.31 $ 2,904,221.24 19,846.67 8,884,681.72 3,991,701.19 505,184.97 4,470.26 137 176.88 16,447,282.93 $ 8,421,310.29 $ 725,233.53 917,861.80 236,338.00 453,770.00 1,271,855.17 194,003.00 1,095,409.26 805,658.14 134,007.00 144,662.00 892.85 1,111,256.00 5,137.00 8,746,265.29 $ 804,073.53 991,743.80 245,722.00 454,116.00 1,265,744.17 194,003.00 1,096,859.26 842,560.37 148,050.00 189,607.53 892.85 1,197,193.76 5,137.00 $ 15,517,394.04 $ $ -255,415.04 $ 16,181,968.56 $ 364,759.75 $ 9,897,573.93 687,033.00 921,344.46 250,777.85 532,340.27 1,061,531.09 186,917.08 1,083,318.30 966,605.35 125,751.30 169,487.87 12,038.88 1,164,772.54 246 312.00 17,305,803.92 -858,520.99 6 500.00 $ -248,915.04 $ 1,134,878.87 6 500.00 371,259.75 $ 1,134,878.87 -232 I731.42 -858,520.99 914,651.39 Fund Balances - Ending $ 885,963.83 $ 1,273,407.20 $ ===5=6=1=3=0.=40= Notes to the Schedule of Revenues, Expenditures and Changes in Fund Balances Budget and Actual (1) Original and Final Budget amounts do not include budgeted revenues or expenditures of the various principal accounts. The accompanying schedule of revenues, expenditures and changes in fund balances budget and actual is presented on the modified accrual basis of accounting which is the basis of accounting used in the presentation of the fund financial statements. See notes to the basic financial statements. - 25 - RANDOLPH COUNTY BOARD OF EDUCATION SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS YEAR ENDED JUNE 30, 2008 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 Direct Fund for the Improvement of Education Pass-Through From Georgia Department of Education Career and Technical Education - Basic Grants to States Education for Homeless Children and Youth Enhancing Education Through Technology Program Improving Teacher Quality State Grants Reading First State Grants Rural Education Safe and Drug-Free Schools and Communities - State Grants State Grants for Innovative Programs Title I Grants to Local Educational Agencies Twenty-First Century Community Learning Centers Total U. S. Department of Education Health and Human Services, U. S. Department of Direct Head Start Defense, U.S. Department of Direct Department of the Army R.O.T.C. Program Total Federal Financial Assistance N/A = Not Available - 26- CFDA NUMBER PASSTHROUGH ENTITY ID NUMBER EXPENDITURES IN PERIOD 10.553 10.555 10.559 10.550 10.558 N/A (2) N/A $ 1,016,052.10 N/A 140 397.69 $ 1,156,449.79 N/A 58,133.49 N/A 32 404.40 $ 1,246,987.68 84.027 84.173 84.215 84.048 84.196 84.318 84.367 84.357 84.358 84.186 84.298 84.010 84.287 93.600 N/A $ NIA $ 494,695.00 (3) 24,953.00 (4) 519,648.00 88.37 N/A 23,524.62 N/A 14,207.16 N/A 31,191.46 N/A 172,751.74 N/A 220,220.24 NIA 47,744.35 N/A 6,378.17 NIA 3,039.34 N/A 731,381.35 N/A 235,021.90 $ 2,005,196.70 $ 776 327.88 $ 40 652.95 $ 4,069,165.21 RANDOLPH COUNTY BOARD OF EDUCATION SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS YEAR ENDED JUNE 30, 2008 SCHEDULE "2" Notes to the Schedule of Expenditures of Federal Awards (1) The amount shown for the Food Donation Program represents the Federally assigned value of nonmonetary assistance for donated commodities received and/or consumed by the School District during the current fiscal year. (2) Expenditures for the funds earned on the School Breakfast Program ($323,874.28) were not maintained separately and are included in the 2008 National School Lunch Program. (3) Includes Federal Assistance of $47,018.67 provided to subrecipients. (4) Includes Federal Assistance of $9,299.00 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. - 27- RANDOLPH COUNTY BOARD OF EDUCATION SCHEDULE OF STATE REVENUE YEAR ENDED JUNE 30, 2008 AGENCY/FUNDING GRANTS Bright From the Start: Georgia Department of Early Care and Learning Pre-Kindergarten Program Education, Georgia Department of Quality Basic Education Direct Instructional Cost Kindergarten Program Kindergarten Program - Early Intervention Program Primary Grades (1-3) Program Primary Grades - Early Intervention (1-3) Program Upper Elementary Grades (4-5) Program Upper Elementary Grades - Early Intervention (4-5) Program Middle Grades (6-8) Program High School General Education (9-12) Program Vocational Laboratory (9-12) Program Students with Disabilities Category I Category II Category Ill Category IV Category V Gifted Student - Category VI Remedial Education Program Alternative Education Program 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 - Alternative Nursing Services Mid-term Adjustment Hold-Harmless Education Equalization Funding Grant Food Services Vocational Education Amended Formula Adjustment Other State Programs Graduation Coaches Health Insurance K-8 Statewide Reading and Math Program Middle School Remediation Grant Preschool Handicapped Program Special Education Low Incidence Grant Teachers' Retirement Virtual Schools Grant Office of Treasury and Fiscal Services Public School Employees Retirement CONTRACT Human Resources, Georgia Department of After School Services (SNAP) See notes to the basic financial statements. - 28 - SCHEDULE "3" GOVERNMENTAL FUND TYPE GENERAL FUND $ 77,085.70 374,552.00 70,142.00 752,191.00 235,963.00 465,537.00 79,320.00 525,255.00 1,043,154.00 295,210.00 42,783.00 161,594.00 430,643.00 71,159.00 199,612.00 2,555.00 155,934.00 71,104.00 136,150.00 45,087.00 26,358.00 339,221.00 367,902.00 347,226.00 305,553.00 43,694.00 35,802.00 41,052.00 77,063.00 1,390,267.00 49,542.00 28,133.75 -118,580.00 98,711.00 432,944.06 -643.99 1,112.00 60,136.00 4,648.00 6,237.20 1,450.00 2,245.00 109 578.00 $ 8884681.72 RANDOLPH COUNTY BOARD OF EDUCATION SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS YEAR ENDED JUNE 30, 2008 SCHEDULE "4" PROJECT Providing funds to pay the cost of renovating, repairing and equipping Randolph County Elementary School and related facilities, including necessary furnishings, fixtures, equipment and paving; renovating, repairing and equipping Randolph Clay Middle School and related facilities, including necessary furnishings, fixtures and equipment; renovating, repairing and equipping Randolph Clay High School and related facilities, including necessary furnishings, fixtures and equipment; renovating and repairing athletic facilities, including necessary furnishings, fixtures and equipment; acquiring, constructing and equipping a new field house; acquiring, constructing and equipping all purpose buildings; renovating, extending, repairing and equipping existing School District schools to include paving parking lots, roof repairs, floor repairs and installation of heating, ventilation and air conditioning (HVAC) units; acquiring and installing system-wide instructional and administrative technology equipment; acquisition of school buses and transportation equipment; renovating, repairing and equipping Randolph Clay Learning Center and Randolph County Board of Education office, including necessary furnishings, fixtures, and equipment; acquiring any necessary property therefore, both real and personal; and paying expenses incident to accomplishing the foregoing (the Projects). 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 therefore, both real and personal, all at the maximum cost of $3,300,000.00. ORIGINAL ESTIMATED COST (1) CURRENT ESTIMATED COSTS(2) AMOUNT EXPENDED IN CURRENT YEAR (3) AMOUNT EXPENDED IN PRIOR YEARS (3) PROJECT STATUS $ 3,800,000.00 $ 3,800,000.00 $ 1,069,026.31 $ 534,632.18 Ongoing 3,300,000.00 5,613,273.00 5,309,813.88 Completed $ 7,100,000.00 $ 9,413,273.00 $ 1,069,026.31 $ 5,844,446.06 (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 Randolph County approved the imposition of a 1% sales tax to fund the above projects. Amounts expended for these projects may include sales tax proceeds, state, local property taxes and/or other funds over the life of the projects. See notes to the basic financial statements. - 29- (This page left intentionally blank) RANDOLPH COUNTY BOARD OF EDUCATION GENERAL FUND- QUALITY BASIC EDUCATION PROGRAM (QBE) ALLOTMENTS AND EXPENDITURES - BY PROGRAM YEAR ENDED JUNE 30, 2008 SCHEDULE "5" DESCRIPTION Direct Instructional Programs Kindergarten Program Kindergarten Program-Early Intervention Program Primary Grades (1-3) Program Primary Grades-Early Intervention (1-3) Program Upper Elementary Grades (4-5) Program Upper Elementary Grades-Early Intervention (4-5) Program Middle School (6-8) Program High School General Education (9-12) Program Vocational Laboratory (9-12) Program Students with Disabilities Category I Category II Category Ill Category IV CategoryV Gifted Student - Category VI Remedial Education Program Alternative Education Program TOTAL DIRECT INSTRUCTIONAL PROGRAMS Media Center Program Staff and Professional Development ALLOTMENTS FROM GEORGIA DEPARTMENT OF EDUCATION (1) (2) ELIGIBLE QBE PROGRAM COSTS SALARIES OPERATIONS TOTAL $ 412,000.00 $ 428,709.95 $ 7,945.04 $ 436,654.99 80,826.00 150,423.31 487.53 150,910.84 859,723.00 1,189,504.47 13,252.96 1,202,757.43 239,672.00 447,172.67 330.97 447,503.64 511,186.00 658,026.18 8,469.16 666,495.34 85,819.00 603,519.00 1,142,230.00 329,530.00 1,003,302.00 5,369.00 171,186.00 78 680.00 182,149.74 776,315.27 1,982,931.25 307,211.92 18,110.25 242,414.24 440,974.74 191,583.80 143.76 26.84 119,158.65 684.47 30,105.34 33,497.09 30,178.15 3,965.53 2,998.61 1,855.91 2,687.68 1,378.23 145.65 274.19 523.75 182,834.21 806,420.61 2,016,428.34 337,390.07 22,075.78 245,412.85 442,830.65 194,271.48 1,521.99 145.65 301.03 119,682.40 $ 5,523,042.00 $ 7,134,857.04 $ 138,780.26 $ 7,273,637.30 151,438.00 29,385.00 207,048.95 25,021.30 29,816.85 232,070.25 29,816.85 TOTAL QBE FORMULA FUNDS $ 5,703,865.00 $ 7,341,905.99 $ 193,618.41 $ 7,535,524.40 (1) Comprised of State Funds plus Local Five Mill Share. (2) Allotments do not include the impact of the State amended formula adjustment. See notes to the basic financial statements. - 31 - SECTION II COMPLIANCE AND INTERNAL CONTROL REPORTS Russell W. Hinton STATE AUDITOR (404) 656-2174 DEPARTMENT OF AUDITS AND ACCOUNTS 270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400 November 30, 2009 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, 2008, which collectively comprise Randolph County Board of Education's basic financial statements and have issued our report thereon dated November 30, 2009. The report on governmental activities was qualified for certain leased equipment items being excluded from Capital Assets. Except for the qualification previously identified, 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 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 Randolph County Board of Education's internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness ofthe Randolph County Board of Education's internal control over financial reporting. 2008YB-60X Our consideration of internal control over financial reporting was for the limited purpose described in the preceding paragraph and would not necessarily identify all deficiencies in internal control over financial reporting that might be significant deficiencies or material weaknesses. However, as discussed below, we identified certain deficiencies in internal control over financial reporting that we consider to be significant deficiencies. A control deficiency exists when the design or operation of a 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 affects the Randolph County Board of Education's ability to initiate, authorize, record, process, or report financial data reliably in accordance with generally accepted accounting principles such that there is more than a remote likelihood that a misstatement ofthe Randolph County Board ofEducation's financial statements that is more than inconsequential will not be prevented or detected by the Randolph County Board of Education's internal control. We consider items FS-7201-08-01, FS-7201-08-02, FS-7201-08-03, FS-7201-08-04, FS-7201-08-05, FS-7201-08-06, and FS-7201-08-07 in the accompanying Schedule of Findings and Questioned Costs to be significant deficiencies in internal control over financial reporting. A material weakness is a significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood that a material misstatement ofthe financial statements will not be prevented or detected by the Randolph County Board of Education's internal control. Our consideration of the internal control over financial reporting was for the limited purpose described in the first paragraph ofthis section and would not necessarily disclose all deficiencies in internal control that might be significant deficiencies and, accordingly, would not necessarily disclose all significant deficiencies that are also considered to be material weaknesses. However, of the significant deficiencies described above, we consider items FS-7201-08-01, FS-7201-08-04 and FS-7201-08-06 to be material weaknesses. 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 an instance of noncompliance or other matters that is required to be reported under Government Auditing Standards and which is described in the accompanying Schedule of Findings and Questioned Costs as item FS-7201-08-04. We also noted certain matters that we have reported to management of Randolph County Board of Education in a separate letter dated November 30, 2009. Randolph County Board of Education's response to the findings identified in our audit is described in the accompanying Schedule of Management's Responses. We did not audit Randolph County Board of Education's response and, accordingly, we express no opinion on it. 2008YB-60X This report is intended solely for the information and use ofmanagement, members ofthe Randolph County Board of Education, others within the entity, Federal awarding agencies and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties. Respectfully submitted, RWH: as 2008YB-60X Rus 11 W. Hinton, CPA, CGFM 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 November 30, 2009 Honorable Sonny Perdue, Governor Members ofthe 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, 2008. 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 ofStates, Local Governments, and Non-Profit Organizations. Those standards and 0MB Circular A-133 require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major Federal program occurred. An audit includes examining, on a test basis, evidence about the Randolph County Board of Education's compliance with those requirements and performing such other procedures as we considered necessary in the 2008SA-55 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. As described in items FA-7201-08-02 and FA-7201-08-03 in the accompanying Schedule of Findings and Questioned Costs, Randolph County Board of Education did not comply with requirements regarding Allowable Costs/Cost Principles that are applicable to its Title I Grants to Local Educational Agencies (CFDA 84.010) and Child Nutrition Cluster (CFDA 10.553 and 10.555), respectively. Compliance with such requirements is necessary, in our opinion, for Randolph County Board of Education to comply with requirements applicable to those programs. In our opinion, except for the noncompliance described in the preceding paragraph, the Randolph 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, 2008. 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 ofexpressing our opinion on compliance, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of the Randolph 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 ofcontrol deficiencies, that adversely affects the entity's ability to administer a Federal program such that there is more than a remote likelihood that noncompliance with a type of compliance requirement of a Federal program that is more than inconsequential will not be prevented or detected by the entity's internal control. We consider the deficiencies in internal control over compliance described in the accompanying Schedule ofFindings and Questioned Costs as items FA-7201-08-01, FA-7201-08-02, FA-7201-08-03, FA-7201-08-04 and FA-7201-08-05 to be significant deficiencies. 2008SA-55 A material weakness is a significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood that material noncompliance with a type of compliance requirement ofa Federal program will not be prevented or detected by the entity's internal control. Of the significant deficiencies in internal control over compliance described in the accompanying Schedule ofFindings and Questioned Costs, we consider items FA-7201-08-02 and FA-7201-08-03 to be material weaknesses. Randolph County Board of Education's response to the findings identified in our audit is described in the accompanying Schedule of Management's Responses. We did not audit Randolph County Board of Education's response and, accordingly, we express no opinion on it. This report is intended solely for the information and use ofmanagement, members ofthe Randolph County Board of Education, others within the entity, 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, ~JQ._ w.--B~ : ell W. Hinton, CPA, CGFM State Auditor RWH:as 2008SA-55 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, 2008 PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS FINDING CONTROL NUMBER AUDITEE'S RESPONSE/STATUS SEE AUDITOR'S COMMENTS FS-7201-03-12 Further Action Not Warranted (1) FS-7201-04-07 Further Action Not Warranted (1) FS-7201-06-02 Further Action Not Warranted FS-7201-06-03 Further Action Not Warranted FS-7201-06-07 Further Action Not Warranted FS-7201-07-01 Partially Resolved - See Corrective Action/Responses FS-7201-07-02 Unresolved - See Corrective Action/Responses FS-7201-07-03 Unresolved - See Corrective Action/Responses FS-7201-07-04 Previously Reported Corrective Action Implemented CORRECTIVE ACTION/RESPONSES CASH AND CASH EQUIVALENTS EXPENDITURES/LIABILITIES/DISBURSEMENTS EMPLOYEE COMPENSATION GENERAL LEDGER CAPITAL ASSETS ACCOUNTING CONTROLS (OVERALL) Inadequate Accounting Procedures Finding Control Number: FS-7201-07-01 The School District is working to have adequate controls in place in fiscal year 2009 for proper approval and documentation ofbank reconciliations, purchase orders, expenditures, and journal entries. The School District is diligently working to ensure continuous improvement. CASH AND CASH EQUIVALENTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Control Procedures over School Activity Accounts Finding Control Number: FS-7201-07-02 Additional training will be provided for school level staffmembers annually or as often as needed. - 1- RANDOLPH COUNTY BOARD OF EDUCATION AUDITEE'S RESPONSE SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2008 PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS CORRECTIVE ACTION/RESPONSES GENERAL LEDGER Inadequate Control over General Ledger Finding Control Number: FS-7201-07-03 This School District is continuously working to clear inactive funds on the general ledger. There have been some funds cleared but not all. The School District will continue to take the proper steps to resolve this finding. AUDITOR'S COMMENTS (1) The final resolution of this finding rests with the Georgia Department of Community Health. PRIOR YEAR FEDERAL AWARD FINDINGS AND QUESTIONED COSTS FINDING CONTROL NUMBER AUDITEE'S RESPONSE/STATUS SEE AUDITOR'S COMMENTS FA-7201-05-01 Further Action Not Warranted (1) FA-7201-06-01 Unresolved - See Corrective Action/Responses FA-7201-06-02 Further Action Not Warranted (1) FA-7201-06-03 Previously Reported Corrective Action Implemented FA-7201-06-05 Previously Reported Corrective Action Implemented FA-7201-06-07 Unresolved - See Corrective Action/Responses FA-7201-06-08 Unresolved - See Corrective Action/Responses FA-7201-07-01 Previously Reported Corrective Action Implemented FA-7201-07-02 Partially Resolved - See Corrective Action/Responses FA-7201-07-03 Previously Reported Corrective Action Implemented FA-7201-07-04 Previously Reported Corrective Action Implemented FA-7201-07-05 Unresolved - See Corrective Action/Responses AUDITOR'S COMMENTS (1) While these findings will not be reported or require follow-up in subsequent years, management still has responsibility for the resolution of these findings. -2- RANDOLPH COUNTY BOARD OF EDUCATION AUDITEE'S RESPONSE SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2008 PRIOR YEAR FEDERAL AWARD FINDINGS AND QUESTIONED COSTS CORRECTIVE ACTION/RESPONSES ACTIVITIES ALLOWED OR UNALLOWED Inadequate Internal Controls U.S. Department of Agriculture Through Bright From the Start: Georgia Department of Early Care and Leaming Amount: $4, 196 Finding Control Number: FA-7201-06-01 Procedures are in place to ensure that payment of invoices is made from original invoices to avoid duplicate payments. REPORTING Inadequate Documentation U.S. Department of Agriculture Through Bright From the Start: Georgia Department of Early Care and Leaming Finding Control Number: FA-7201-06-07 The School District restructured the Summer Food Service Program for Children to ensure proper operation. Additional staff and proper training was provided to ensure documentation for claims; meals served and delivered are accurate. The School District no longer operates the Summer Food Service Program for Children. SUBRECIPIENT MONITORING Inadequate Documentation U.S. Department of Education Through Georgia Department of Education Amount: $36,941 Finding Control Number: FA-7201-06-08 The School District will have procedures in place to ensure that subrecipients receive required documentation. The School District no longer has a 21st Century Program at Andrew College. ALLOWABLE COSTS/COST PRINCIPLES Improper Application of Indirect Cost Rate U.S. Department of Agriculture Through Georgia Department of Education Child Nutrition Cluster (CFDA 10.553 and 10.555) Finding Control Number: FA-7201-07-02 Procedures will be implemented to correct calculation of indirect cost. -3- RANDOLPH COUNTY BOARD OF EDUCATION AUDITEE'S RESPONSE SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2008 PRIOR YEAR FEDERAL AWARD FINDINGS AND QUESTIONED COSTS CORRECTIVE ACTION/RESPONSES REPORTING Inadequate Documentation U.S. Department of Agriculture Through Bright From the Start: Georgia Department of Early Care and Leaming Summer Food Service Program for Children (CFDA 10.559) Finding Control Number: FA-7201-07-05 The School District restructured the Summer Food Service Program for Children to ensure proper operation. Additional staff and proper training was provided to ensure documentation for claims; meals served and delivered are accurate. The School District no longer operates the Summer Food Service Program for Children. -4 - SECTION IV FINDINGS AND QUESTIONED COSTS RANDOLPH COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2008 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 qualified for a departure from generally accepted accounting principles. 2. Significant Deficiencies in Internal Control Disclosed by the Audit ofthe Financial Statements The audit report for the Randolph County Board of Education disclosed financial statement significant deficiencies related to the following control categories. Cash and Cash Equivalents Employee Compensation Revenues/Receivables/Receipts Procurement Accounting Controls (Overall) Expenditures/Liabilities/Disbursements General Ledger Capital Assets Financial Reporting Of the significant deficiencies described above, Cash and Cash Equivalents, Procurement, Accounting Controls (Overall), Expenditures/Liabilities/Disbursements, Employee Compensation, Capital Assets and Financial Reporting are considered to be material weaknesses. 3. Noncompliance Material to the Financial Statements The audit of the Randolph County Board of Education disclosed one instance of noncompliance deemed to be material to the financial statements. This noncompliance involved the Board's improper use of Special Purpose Local Option Sales Tax proceeds. 4. Significant Deficiencies in Internal Control Over Major Programs The audit report for the Randolph County Board of Education disclosed significant deficiencies in internal control over major programs for the following compliance requirements. Activities Allowed or Unallowed Eligibility Allowable Costs/Cost Principles Reporting Of the significant deficiencies described above, Allowable Costs/Cost Principles 1s 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, except for Child Nutrition Cluster (CFDA 10.553 and 10.555) and Title I Grants to Local Educational Agencies (CFDA 84.010), which were qualified. - 1- RANDOLPH COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2008 I SUMMARY OF AUDITOR'S RESULTS 6. Audit Findings Required to be Reported by Section .510(a) ofOMB Circular A-133 The Randolph 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: 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 84.287 Twenty-First Century Community Leaming Centers 93.600 Head Start 8. Type "A" Program Dollar Threshold The dollar threshold for type "A" programs was $300,000.00. 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 EXPENDITURES/LIABILITIES/DISBURSEMENTS EMPLOYEE COMPENSATION CAPITAL ASSETS ACCOUNTING CONTROLS (OVERALL) Inadequate Accounting Procedures Material Weakness Finding Control Number: FS-7201-08-01 Condition: This is a repeat finding (FS-7201-07-01, FS-7201-06-02, FS-7201-05-01, FS7201-04-03, FS-7201-03-05 and FS-7201-02-05) from fiscal years ended June 30, 2002 through June 30, 2007. The accounting procedures of the School District were insufficient to provide adequate internal controls over numerous control categories. -2 - RANDOLPH COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2008 II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS CASH AND CASH EQUIVALENTS PROCUREMENT EXPENDITURES/LIABILITIES/DISBURSEMENTS EMPLOYEE COMPENSATION CAPITAL ASSETS ACCOUNTING CONTROLS (OVERALL) Inadequate Accounting Procedures Material Weakness Finding Control Number: FS-7201-08-01 Criteria: The School District's management is responsible for designing and maintaining internal controls that provide reasonable assurance that transactions are processed according to established procedures. Such internal controls would limit any one individual's access to both physical assets and the related accounting records. Questioned Cost: $372.43 Information: Cash and Cash Equivalents The School District did not have adequate procedures in place to make sure that all bank reconciliations were adequately prepared and approved. The following deficiencies were noted: 1. The bank reconciliations included accounts receivable as deposits in transit. 2. There was a variance between bank reconciliations and outstanding wire transfers. 3. The bank reconciliations had numerous reconciling items that have been carried forward for excessive amounts of time. 4. The bank reconciliations were not completed in a timely manner. Procurement The School District did not have adequate procedures in place to ensure that the procurement process was implemented properly. The following deficiencies were noted: 1. Purchase orders were issued after expenditures were incurred. 2. The authorizing signature on some purchase orders did not appear authentic. -3 - RANDOLPH COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2008 II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS CASH AND CASH EQUIVALENTS PROCUREMENT EXPENDITURES/LIABILITIES/DISBURSEMENTS EMPLOYEE COMPENSATION CAPITAL ASSETS ACCOUNTING CONTROLS (OVERALL) Inadequate Accounting Procedures Material Weakness Finding Control Number: FS-7201-08-01 Expenditures/Liabilities/Disbursements The School District did not have adequate procedures in place to ensure expenditures were adequately documented and approved. During a test of expenditures, the following problems were noted: 1. Several expenditures were not adequately documented. 2. Several voucher packages did not include evidence of receipt. During a test of credit card voucher packages, the following problems were noted: 1. Several expenditures were not adequately documented. 2. Several expenditures were in excess of purchase orders. 3. Several expenditures included sales tax. 4. Some expenditures included finance charges and late fees. 5. Some cards have outstanding charges which have not been recorded on the accounting records. 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 offunds. During a test of compensation, the following problems were noted: 1. One employee was underpaid due to incorrect calculation of the timesheet. 2. One employee's summer salary was not properly accrued. -4- RANDOLPH COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2008 II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS CASH AND CASH EQUIVALENTS PROCUREMENT EXPENDITURES/LIABILITIES/DISBURSEMENTS EMPLOYEE COMPENSATION CAPITAL ASSETS ACCOUNTING CONTROLS (OVERALL) Inadequate Accounting Procedures Material Weakness Finding Control Number: FS-7201-08-01 Capital Assets The School District did not have adequate procedures in place to ensure that Capital Assets were adequately maintained. The following deficiencies were noted: 1. Donated land was not capitalized, and the estimated fair market value on the date donated could not be provided. 2. Building expenditures in the amount of $38,497.00 were not capitalized. 3. Additions purchased through a capital lease were not capitalized as discussed further in finding FS-7201-08-06. 4. Additions for the current year were not tagged. 5. An asset was noted on listing which was below the School District's capitalization threshold. Accounting Controls (Overall) Access controls in the Financial System do not prevent users from accessing accounting functions that are outside of their area of responsibility. Cause: The deficiencies noted above occurred because of management's failure to implement adequate controls to ensure that (1) bank reconciliations are properly prepared and approved, (2) expenditures are adequately documented and approved, (3) all amounts paid to system employees are adequately documented and properly approved, (4) capital assets are properly recorded and maintained and (5) access controls in the accounting information system compliment the system ofinternal control by limiting an employee's access to only the accounting functions necessary for the performance of that employee's duties. -5- RANDOLPH COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2008 II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS CASH AND CASH EQUIVALENTS PROCUREMENT EXPENDITURES/LIABILITIES/DISBURSEMENTS EMPLOYEE COMPENSATION CAPITAL ASSETS ACCOUNTING CONTROLS (OVERALL) Inadequate Accounting Procedures Material Weakness Finding Control Number: FS-7201-08-01 Effect: Without satisfactory accounting controls and procedures in place, the School District could place itself in a position where potential misappropriation of assets could occur. In addition, the lack ofcontrols could impact reporting of its financial position and results of operation. Recommendation: The School District should review the accounting procedures in place and design and implement procedures relative to the above control categories to strengthen the internal controls over the accounting functions. CASH AND CASH EQUIVALENTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Control Procedures over School Activity Accounts Significant Deficiency Finding Control Number: FS-7201-08-02 Condition: This is a repeat finding (FS-7201-07-02, FS-7201-06-03, FS-7201-05-02 and FS-7201-04-01) from fiscal years ended June 30, 2004 through June 30, 2007. The accounting procedures ofthe School District were insufficient to provide for adequate internal controls over the school activity accounts. Criteria: The School District's management is responsible for designing and maintaining internal controls that provide proper separation of duties and reasonable assurance that transactions are processed according to established procedures. Questioned Cost: NIA Information: Cash and Cash Equivalents The School District did not have adequate internal controls in place to ensure that bank reconciliation function was separate of the record keeping function. -6- RANDOLPH COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2008 II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS CASH AND CASH EQUIVALENTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Control Procedures over School Activity Accounts Significant Deficiency Finding Control Number: FS-7201-08-02 Revenues/ Receivables/Receipts The School District did not have adequate internal controls in place to ensure proper separation ofduties and proper documentation ofreceipts as follows: 1. Deposit preparation was not separated from the record keeping and cash custody functions. 2. During a test of receipts, the following problems were noted: There was insufficient documentation to determine where the transactions were recorded on the general ledger. There was not enough documentation to determine if the receipts agreed to the deposit ticket or if they were ever deposited. Expenditures/Liabilities/Disbursements The School District did not have proper procedures in place to ensure expenditures were properly approved, adequately documented or that the policies of the School District were followed. During a test of expenditures, we noted that there was not adequate supporting documentation to determine where the transactions were recorded on the general ledger, or to identify if they were governmental or agency fund in nature. Cause: These deficiencies were a result of management's decision to limit the number ofadministrative staffmade responsible for the accounting functions at the various principal account sites and a failure to implement controls to properly account for all transactions involving student activity accounts. Effect: Errors and/or irregularities may not be detected in a timely manner. -7- RANDOLPH COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2008 II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS CASH AND CASH EQUIVALENTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Control Procedures over School Activity Accounts Significant Deficiency Finding Control Number: FS-7201-08-02 Recommendation: The School District should implement necessary procedures to ensure that the key accounting functions ofcustody and record keeping are separated. In addition, the School District should implement procedures to ensure that disbursements and receipts of funds within the school activity accounts are adequately documented and recorded in the financial records. The School District should also establish a monitoring process to provide reasonable assurance that transactions are processed according to established procedures. REVENUES/RECEIVABLES/RECEIPTS Improper Reporting of SPLOST Interest Significant Deficiency Finding Control Number: FS-7201-08-03 Condition: The School District did not maintain Special Purpose Local Option Sales Tax (SPLOST) funds in a separate bank account for its SPLOST capital projects funds. The funds were deposited in the general operating account and transferred to the capital projects account at a later date. In addition, interest earned on these funds was not transferred to the capital projects account. Criteria: According to Official Code of Georgia Annotated section 48-8-121(a), SPLOST proceeds shall be kept in a separate bank account from other funds of the entity. The Attorney General's Official Opinion 2001-3 states: "The requirement ofa separate account and the mandate that the proceeds place in the account not be commingled with other funds, as set forth in the second part ofthe statutory limitation, demonstrate a legislative intent that all money in the account, including any interest, is dedicated for the purposes specified in the involved resolution or ordinance, as required by the first part of the statutory limitation. This determination of legislative intent is consistent with the general rule that interest follows principal." Questioned Cost: NIA -8- RANDOLPH COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2008 II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS REVENUES/RECEIVABLES/RECEIPTS Improper Reporting of SPLOST Interest Significant Deficiency Finding Control Number: FS-7201-08-03 Information: During the year under review, it was noted that the SPLOST funds of the School District were being deposited in the general operating bank account, and then transferred to the capital projects bank account. For eleven months, there was an average of 53 days between deposit in the general operating account and transfer to the capital projects account. For one month, the auditor could not determine if/or when SPLOST receipts of$75,850.87 were transferred. It was noted that the interest earned on these funds in the general operating account was recorded in the general fund and has not been transferred to the SPLOST capital projects fund as required. Cause: The School District failed to ensure that SPLOST funds were transferred out ofthe general operating account in a timely manner. In addition, they did not track and transfer interest earned on the funds from the general fund to the SPLOST capital projects fund. Effect: Interest earned was misstated between the general fund and the SPLOST capital projects fund. Additionally, the School District did not comply with State law. Recommendation: The School District should ensure that all SPLOST funds are kept separately from all other funds of the entity. In addition, the School District should determine the total interest earned on these funds to date and transfer that amount to the SPLOST capital projects fund. EXPENDITURES/LIABILITIES/DISBURSEMENTS Improper use of SPLOST Proceeds Material Noncompliance Material Weakness Finding Control Number: FS-7201-08-04 Condition: Improper use of Special Purpose Local Option Sales Tax (SPLOST) proceeds. -9- RANDOLPH COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2008 II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Improper use of SPLOST Proceeds Material Noncompliance Material Weakness Finding Control Number: FS-7201-08-04 Criteria: According to Paragraph IV, Section VI, Article VIII of the Constitution of the State ofGeorgia, "the purpose or purposes for which the proceeds ofthe tax are to be used and may be expended include: (1) Capital outlay projects for educational purposes; (2) the retirement of previously incurred general obligation debt with respect only to capital projects of the school system..." Official Code of Georgia Annotated (O.C.G.A.) 48-8-121 states, "The proceeds received from the tax authorized by this part shall be used ... exclusively for the purpose or purposes specified in the resolution or ordinance calling for imposition of the tax". The Attorney General's Official Opinion 97-7 for O.C.G.A. 20-2-260(b)(5), states, "capital outlay projects as used in the educational sales tax purposes amendment should be read as well to refer to major, permanent, or long-lived improvements or betterments, such as would be properly chargeable to a capital asset account and as distinguished from current expenditures and ordinary maintenance expenses". Since maintenance contracts, license renewal and software are not denoted in the School District's approved SPLOST referendum, these expenditures are not an allowable use of SPLOST proceeds. Questioned Cost: $74,802.85 Information: During the year under review, the School District spent $74,802.85 for maintenance contracts, license renewals, and software. Cause: The School District believed that these expenditures were covered by a general reference in the SPLOST referendum regarding "installing systemwide instructional and administrative technology equipment". However, the reference concerns the installation of equipment, not the maintenance of equipment. Effect: Expenditures ofSPLOST funds for maintenance contracts, license renewals, and software appear to be in conflict with State laws regarding imposition and use of SPLOST funds after considering that Paragraph IV, Section VI, Article VIII of the Constitution of the State of Georgia indicates SPLOST proceeds should be spent on "capital outlay projects for educational purposes" and the Attorney General has ruled that capital outlay projects refer to major, permanent, or long-lived improvements or betterments, such - 10 - RANDOLPH COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2008 II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Improper use of SPLOST Proceeds Material Noncompliance Material Weakness Finding Control Number: FS-7201-08-04 as would be properly chargeable to a capital asset account and as distinguished from current expenditures and ordinary maintenance expenses. Recommendation: The School District should research this issue, consult with legal counsel and verify if expenditures ofthis nature are an appropriate use of SPLOST funds in accordance with State law and the SPLOST referendum as approved by the voters of Randolph County. EXPENDITURES/LIABILITIES/DISBURSEMENTS Improper Expenditure Significant Deficiency Finding Control Number: FS-7201-08-05 Condition: The School District disregarded the specific limitation imposed upon it by Georgia laws. Criteria: The Official Code of Georgia Annotated Section 20-2-411 provides, in part, as follows, "...school funds shall be used for educational purposes and may be used to pay the salaries of personnel and to pay for the utilization of school facilities, including school buses; for extracurricular and interscholastic activities, including literary events, music, and athletic programs within individual schools and between schools in the same or different school systems when such activities are sponsored by local boards of education as an integral part of the total school program, and for no other purpose ... ". Questioned Cost: $500.00 Information: During the review of General Fund expenditures, it was noted that one expenditure was for a football scholarship which violates State law. Cause: Expenditures ofthis nature are considered to be beyond the customary scope of expenditures, for "educational purposes", set forth in Georgia law. Effect: The School District is not in compliance with Georgia law. - 11 - RANDOLPH COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2008 II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Improper Expenditure Significant Deficiency Finding Control Number: FS-7201-08-05 Recommendation: The School District should implement procedures to ensure that expenditures are in compliance with Georgia law. In addition, the School District should take immediate action to fund the scholarship from an appropriate source. EXPENDITURES/LIABILITIES/DISBURSEMENTS CAPITAL ASSETS FINANCIAL REPORTING Inadequate Internal Controls over Reporting of Capital Leases Material Weakness Finding Control Number: FS-7201-08-06 Condition: The School District did not have adequate controls in place to ensure that all required activity was included in the financial statement information presented for audit. During our examination of capital assets and capital leases, we noted weaknesses in internal controls which we consider relevant to the School District's financial statements for the fiscal year ended June 30, 2008. Criteria: Chapter 22A Annual Financial Reporting of the Financial Management for Georgia Local Units of Administration provides that School Districts must prepare their financial statements in accordance with generally accepted accounting principles. Controls should be in place to appropriately categorize and report lease activity on the financial statements. Generally accepted accounting principles require that a lease be capitalized if any one ofthe following four criteria pertaining to the lease transaction is met: 1) the lease transfers ownership ofthe property to the lessee by the end ofthe lease term, 2) the lease contains a bargain purchase option, 3) the lease term is equal to 75% or more of the estimated economic life of the leased property and 4) the present value of the minimum lease payments at the inception of the lease, excluding executor costs, equals at least 90% of the fair value of the leased property. Questioned Cost: NIA Information: Randolph County Board of Education entered into capital leases with Citi Mortage in the amounts of $2,183,305.23 and $164,000.00. Neither the capital lease liability nor the capital assets obtained through the leases were - 12 - RANDOLPH COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2008 II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS EXPENDITURES/LIABILITIES/DISBURSEMENTS CAPITAL ASSETS FINANCIAL REPORTING Inadequate Internal Controls over Reporting of Capital Leases Material Weakness Finding Control Number: FS-7201-08-06 recorded within the financial accounting records ofthe School District. The lease met the criteria of a capital lease and therefore, the liability and the associated assets would need to be reported in the financial statements. The amount of assets purchased through these leases which should be capitalized could not be reasonably determined. Therefore, the audit opinion of governmental activities has been appropriately qualified for activity related to capital assets. Correcting entries were proposed for the capital lease liability of $2,183,305.23 and accepted by the School District to properly reflect the material capital lease activity in the accompanying financial statements. Cause: Management of Randolph County Board of Education failed to implement adequate controls and procedures to ensure that all activity of the School District was recorded in accordance with generally accepted accounting principles. Effect: The lack of proper accounting policies and procedures materially impacted the School District's reporting of its financial position and results of operation. Recommendation: The School District should review the accounting procedures currently in place, identify weaknesses, and design and implement procedures to ensure that all capital lease activity is properly reflected on the financial statements. GENERAL LEDGER Inadequate Control over General Ledger Significant Deficiency Finding Control Number: FS-7201-08-07 Condition: This is a repeat finding (FS-7201-07-03 and FS-7201-06-07) from the fiscal years ended June 30, 2007 and June 30, 2006, respectively. The accounting procedures of the School District were insufficient to provide adequate general ledger controls over the funds. - 13 - RANDOLPH COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2008 II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS GENERAL LEDGER Inadequate Control over General Ledger Significant Deficiency Finding Control Number: FS-7201-08-07 Criteria: The National Council on Governmental Accounting (NCGA) Statement 1, paragraph 4 states "Governmental units should establish and maintain those funds required by law and sound financial administration. Only the minimum number of funds consistent with legal and operating requirements should be established, however, since unnecessary funds results in inflexibility, undue complexity, and inefficient financial administration...." Questioned Costs: NIA Information: The School District has twenty-one funds which did not report any current year activity. One fund classified as State had a fund balance of $30,062.50. Three funds classified as State had deficit fund balances totaling $100,601.93. Seven funds classified as Federal had total fund balances of $48,286.72. Fourteen funds classified as Federal had net deficit fund balances of $398,331.60. Cause: The School District failed to implement adequate controls over the general ledger. Effect: Failure to implement satisfactory accounting controls and procedures could cause information generated from the general ledger to be inaccurate and misleading. In addition, the School District could place itself in a position where potential misrepresentation of financial activities could occur. Recommendation: The School District should implement controls to ensure that only the minimum number of funds required by legal and operating requirements is established. Also, the School District should review the inactive funds to determine how to fund the deficits and determine the disposition ofthe funds on hand. - 14 - RANDOLPH COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2008 III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS ACTIVITIES ALLOWED OR UNALLOWED Inadequate Internal Control over Expenditure Process Significant Deficiency U.S. Department of Agriculture Through Georgia Department of Education Child Nutrition Cluster (CFDA 10.553 and 10.555) U.S. Department of Education Through Georgia Department of Education Title I Grants to Local Educational Agencies (CFDA 84.010) U.S. Department of Health and Human Services Head Start (CFDA 93.600) Finding Control Number: FA-7201-08-01 Condition: The accounting procedures ofthe School District were insufficient to provide adequate internal control over the expenditure process for various Federal programs. Criteria: The School District's management is responsible for designing and maintaining internal controls that provide reasonable assurance that transactions are processed according to established policies and procedures. Questioned Cost: NIA Information: A review of expenditures charged to the various Federal programs revealed that a number ofpayment vouchers did not include an invoice or evidence of approval and/or receipt of goods. Cause: These deficiencies are the result of management's failure to implement controls adequate to ensure that expenditures are adequately documented and approved and include appropriate documentation of receipt of goods or services. Effect: Errors and/or irregularities may not be detected in a timely manner. Recommendation: The School District should establish and implement appropriate procedures to strengthen internal controls over the expenditure process. - 15 - RANDOLPH COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2008 III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS ALLOWABLE COSTS/COST PRINCIPLES Unsupported Costs Material Weakness Material Noncompliance U.S. Department of Education Through Georgia Department of Education Title I Grants to Local Educational Agencies (CFDA 84.010) Finding Control Number: FA-7201-08-02 Condition: A review of the School District's payroll accounting records indicated that the Human Resource Director's entire salary and benefits were paid out of Title I grant funds. No documentation could be provided showing that this was an allowable cost of the Title I program. Criteria: Provisions of the 0MB Circular A-87, Cost Principles for Determining Allowable Costs, require that "to be allowable under Federal Awards, costs must be ... adequately documented" and "charges to Federal awards for salaries and wages...will be based on payrolls documented in accordance with generally accepted practice ofthe governmental unit and approved by a responsible official of the government unit." Questioned Cost: $43,603.20 Information: A review of payroll expenses charged to the Title I central office revealed that the Human Resource Director's salary and benefits were charged 100% to the Title I program. No time sheets or supporting documentation could be provided to support that the amount charged was for the Title I program. Cause: Management failed to adequately monitor and implement procedures to ensure that all payroll records were updated each year so that employees were charged to the correct fund each year. Effect: Loss of Federal funds could occur due to improper use of those funds. Recommendation: The School District should review current payroll policies and procedures to ensure that employee salaries are charged to the proper fund. In addition, Georgia Department ofEducation should review this matter and determine if a refund is appropriate. - 16 - RANDOLPH COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2008 III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS ALLOWABLE COSTS/COST PRINCIPLES Improper Application of Indirect Cost Rate Material Weakness Material Noncompliance U.S. Department of Agriculture Through Georgia Department of Education Child Nutrition Cluster (CFDA 10.553 and 10.555) Finding Control Number: FA-7201-08-03 Condition: This is a repeat finding (FA-7201-07-02) from the fiscal year ended June 30, 2007. The School District did not have adequate internal controls and procedures in place to ensure indirect costs charged to the Child Nutrition Cluster (CFDA 10.553 and 10.555) were made according to provisions in the 0MB Circular A-87. Criteria: The School District's management is responsible for designing and maintaining internal controls that provide reasonable assurance that indirect costs transactions are processed according to provisions in 0MB Circular A87, Cost Principles for Determining Allowable Costs. Questioned Cost: $56,393.32 Information: During the year under review, the School District incorrectly charged $112,521.00 of indirect costs to the Child Nutrition Cluster program using budgeted expenditures, as well as, using equipment costs and food costs in the calculation. The total amount of indirect costs allowed to be charged to the Child Nutrition Cluster program using actual expenditures less equipment and food costs was $56,127.68. Cause: The School District failed to design and implement internal controls to ensure that indirect costs expenditures charged to the Child Nutrition Cluster were calculated correctly. Effect: The School District received indirect cost funds in excess ofthe amount due to them determined by provisions ofOMB Circular A-87, Cost Principlesfor Determining Allowable Costs. Recommendation: The School District should design and implement internal controls and procedures to ensure that the School District charges the correct amount of indirect costs. In addition, Georgia Department ofEducation should review the matter and determine if a refund is appropriate. - 17 - RANDOLPH COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2008 III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS ELIGIBILITY Failure to Maintain Student Eligibility Determination Significant Deficiency U.S. Department of Education Through Georgia Department of Education Title I Grants to Local Educational Agencies (CFDA 84.010) Finding Control Number: FA-7201-08-04 Condition: The School District did not maintain documentation to support that all students who participated in the Title I Targeted Assistance program were eligible to receive those services. Criteria: The School District's management is responsible for maintaining documentation to show that students who participate in the Title I Targeted Assistance program are eligible to receive those services. Questioned Cost: NIA Information: In a review of Targeted Assistance class rosters for Randolph-Clay High School, eligibility documentation could not be located for six ofthe students. Cause: The School District failed to maintain adequate supporting documentation showing that students in the Title I Target Assistance program are eligible to receive those services. Effect: Failure to maintain appropriate documentation could result in noncompliance with the requirements of the Federal grant. Recommendation: The School District should design and implement internal controls and procedures to ensure that supporting documentation is maintained for all students who participate in the Title I Targeted Assistance program. - 18 - RANDOLPH COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2008 III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS REPORTING Inadequate Documentation Significant Deficiency U.S. Department of Agriculture Through Bright From the Start Child Nutrition Cluster (CFDA 10.559) Finding Control Number: FA-7201-08-05 Condition: This is a repeat finding (FA-7201-07-05, FA-7201-06-07, FA-7201-05-01, FA-7201-04-03, FA-7201-03-05 and FA-7201-02-02) from fiscal years June 30, 2002 through June 30, 2007. The School District failed to support claims for reimbursement with accurate meal count documentation for the Summer Food Service Program for Children (CFDA 10.559). Criteria: 7 CFR 225.15c(l) states "Sponsors shall maintain accurate records which justify all costs and meals claimed. ... The sponsor's records shall be available at all times for inspection and audit... for a period of three years following the date ofsubmission ofthe final claim for reimbursement for the fiscal year." Questioned Cost: NIA Information: The School District failed to adequately document meal counts and reimbursement claims. Variances were noted between the "Weekly Count (Weekly Consolidated)" form and the "Monthly Consolidated" form. Variances were noted between the "Daily Meal Count Forms" and the "Weekly Count (Weekly Consolidated)" forms. Variances were noted between the "Daily Delivery Tickets" and the "Daily Meal Count Forms". Cause: These discrepancies were due to management's failure to ensure that the numbers 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. Effect: Inaccurate meal counts and expenditure reporting could result in the School District receiving incorrect reimbursement of Federal funds. - 19 - RANDOLPH COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2008 III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS REPORTING Inadequate Documentation Significant Deficiency U. S. Department of Agriculture Through Bright From the Start Child Nutrition Cluster (CFDA 10.559) Finding Control Number: FA-7201-08-05 Recommendation: 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 and Leaming should review this matter to determine if a reclaim of funds is appropriate. -20- SECTIONV MANAGEMENT'S RESPONSES RANDOLPH COUNTY BOARD OF EDUCATION SCHEDULE OF MANAGEMENT'S RESPONSES YEAR ENDED JUNE 30, 2008 Finding Control Number: FS-7201-08-01 The Board will continue to work on maintaining adequate controls in place for proper approval and documentation ofbank reconciliations, purchase orders, expenditures and journal entries. The Board is diligently working to ensure continuous improvement. However, currently the Board uses PC Genesis as the accounting information system. With this being so, the controls are not limited to all employee's access for the performance of the employee's duties. Finding Control Number: FS-7201-08-02 We concur with this finding. The Board will continue to provide additional training for school level staff members annually or as often as needed. Finding Control Number: FS-7201-08-03 We concur with this finding. The Board is currently working to ensure that SPLOST funds are transferred in a timely manner. However, there is documentation for the one month referenced in this finding which indicates that the amount of $75,850.87 was transferred on 12/04/07 (JE#6006). Finding Control Number: FS-7201-08-04 We concur with this finding. The Board will consult with legal counsel and verify how SPLOST should be used. Finding Control Number: FS-7201-08-05 We concur with this finding. The Board has discontinued this practice. Finding Control Number: FS-7201-08-06 We concur with this finding. The Board will review procedures to ensure that all capital lease activity is properly reflected on the financial statements. Finding Control Number: FS-7201-08-07 We concur with this finding. The Board is continuously working to clear inactive funds on the general ledger. There have been some funds cleared but not all. The Board will continue to take the proper steps to resolve this finding. Finding Control Number: FA-7201-08-01 We concur with this finding. The Board is currently working to strengthen internal controls over the expenditure process. - 1- RANDOLPH COUNTY BOARD OF EDUCATION SCHEDULE OF MANAGEMENT'S RESPONSES YEAR ENDED JUNE 30, 2008 Finding Control Number: FA-7201-08-02 We concur with this finding. The Board will ensure that employee salaries are charged to the proper fund with supporting documentation. Finding Control Number: FA-7201-08-03 We concur with this finding. Procedures are currently in place to ensure correct calculation of indirect cost. Finding Control Number: FA-7201-08-04 We concur with this finding. The Board has implemented internal controls and procedures to ensure that supporting documentation is maintained for all who participate in the Title I Targeted Assistance program. Since this occurrence, all schools are schoolwide under Title I. Finding Control Number: FA-7201-08-05 We concur with this finding. The Board restructured the Summer Food Service Program for Children to ensure proper operation. Additional staff and proper training was provided to ensure documentation for claims, meals served and delivered are accurate. The Board no longer operates the Summer Food Service Program for Children. Contact Person: Telephone: Fax: Email: Dianne Watkins, Superintendent of Schools (229) 732-3601 (229) 732-3840 watkinsd@sowegak 12.org -2 -