Audit report, Schley County Board of Education, Ellaville, Georgia, year ended June 30, 1998

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AUDIT REPORT SCHLEY COUNTY BOARD OF EDUCATION
ELLAVILLE, GEORGIA YEAR ENDED JUNE 30, 1998
- - --_._--~---------------
STATE OF GEORGIA DEPARTMENT OF AUDITS AND ACCOUNTS
254 WASHINGTON STREET
ATLANTA, GEORGIA 30334-8400

SCHLEY COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS -

SECTION I

FINANCIAL

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

EXHIBITS

GENERAL PURPOSE FINANCIAL STATEMENTS

COMBINED STATEMENTS - OVERVIEW

A

COMBINED BALANCE SHEET

ALL FUND TYPES AND ACCOUNT GROUP

2

B

COMBINED STATEMENT OF REVENUES, EXPENDITURES AND

CHANGES IN FUND BALANCES

ALL GOVERNMENTAL FUND TYPES

4

C

COMBINED STATEMENT OF REVENUES, EXPENDITURES AND

CHANGES IN FUND BALANCES - BUDGET AND ACTUAL

(NON-GAAP BASIS)

GENERAL AND SPECIAL REVENUE FUNDS

5

D NOTES TO THE GENERAL PURPOSE FINANCIAL STATEMENTS

6

ADDITIONAL FINANCIAL INFORMATION

COMBINING STATEMENTS

SPECIAL REVENUE FUND

E

COMBINING BALANCE SHEET

16

F

COMBINING STATEMENT OF REVENUES, EXPENDITURES

AND CHANGES IN FUND BALANCES

17

DEBT SERVICE FUND

G

COMBINING BALANCE SHEET

.

18

H

COMBINING STATEMENT OF REVENUES, EXPENDITURES

AND CHANGES IN FUND BALANCES

19

SCHEDULES

1 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS

20

2 SCHEDULE OF STATE REVENUE

21

3 SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS

22

4 SCHEDULE OF EXPENDITURES

LOTTERY PROGRAMS

23

SCHLEY COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS -

SECTION I

FINANCIAL

ADDITIONAL FINANCIAL INFORMATION

SCHEDULES

ANALYSIS OF MINIMUM EXPENDITURE REQUIREMENTS

GENERAL FUND - QUALITY BASIC EDUCATION PROGRAMS

5

OVERALL

25

6

BY PROGRAM

26

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

SECTIONm 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

SECTION I FINANCIAL

CLAUDE L. VICKERS
STATE AUDITOR .
(404) 656-2174

DEPARTMENT OF AUDITS AND ACCOUNTS
254 Washington Street, S.W., Suite 214 Atlanta, Georgia 30334-8400
February 19? 1999

Honorable Roy E. Barnes, Governor Members ofthe General Assembly Members ofthe State Board ofEducation
and Superintendent and Members ofthe Schley County Board ofEducation
INDEPENDENT AUDITOR'S COMBINED REPORT ON GENERAL PURPOSE FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
Ladies and Gentlemen:
We have audited the accompanying general purpose financial statements of the Schley County Board of Education, as of and for the year ended June 30, 1998, as listed in the table of contents. These general purpose financial statements are the responsibility ofthe Schley County Board of Education's management. Our responsibility is to express an opinion on these general purpose financial statements based on our audit.
Except as discussed in the following paragraph, we conducted our audit in accordance with generally accepted auditing standards 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 perfonn the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
Governmental Accounting Standards Board Technical Bulletin 98-1, Disclosures About Year 2000 Issues,
requires disclosure of certain matters regarding the year 2000 issue. Schley County Board of Education has included such disclosures in the significant commitments section ofthe Notes to the Financial Statements. Because ofthe unprecedented nature ofthe year 2000 issue, its effects and the success ofrelated remediation efforts will not be fully detenninable until year 2000 and thereafter. Accordingly, insufficient audit evidence exists to support Schley County Board of Education's disclosures with respect to the year 2000 issue made in the Notes to the Financial Statements. Further, we do not provide assurance that Schley County Board of

98ARL-13A

Education is or will be year 2000 ready, that Schley County Board of Education's year 2000 remediation efforts will be successful in whole or in part, or that parties with which Schley County Board of Education does business will be year 2000 ready.

As described in the notes to the general purpose fmancial statements, the Boaxd's financial statements have been prepared using certain accounting practices and policies which, in our opinion, vary in some respects from generally accepted accounting principles. These variances are described as follows:
* The general purpose financial statements of the Board did not contain a General Fixed Assets
Account Group to account for property and equipment owned by the Board which should be included to conform to generally accepted accounting principles.
* School activity accounts maintained at the individual schools are not included in the general purpose
financial statements. To conform to generally accepted accounting principles, these accounts should be included in the general purpose financial statements.

The aggregate effects on the general purpose financial statements of these variances or omissions have not been determined, but are believed to be material.

In our opinion, except for the effects of such adjustments, if any, as might have been determined to be necessary had we been able to examine sufficient evidence regarding year 2000 disclosures as described in the third paragraph, and except for the effects on the general purpose financial statements of the matters referred to in the preceding paragraph, the general purpose financial statements referred to above present fairly, in all material respects, the financial position of the Schley County Board of Education as of June 30, 1998, and the results of its operations for the year then ended, in conformity with generally accepted accounting principles.

In accordance with Government Auditing Standards, we have also issued our report dated February 19, 1999, on our consideration ofthe Schley County Board ofEducation's internal control over financial reporting and our tests of its compliance with certain provisions of laws, regulations, contracts and grants.

Our audit was performed for the purpose of forming an opinion on the general purpose financial statements

of the Schley County Board of Education taken as a whole. The accompanying combining statements

(Exhibits E through H) and the financial schedules (Schedules 1 through 6), which includes the Schedule of

Expenditures of Federal Awards as required by U.S. Office of Management and Budget Circular A-133,

Audits olStates, Local Governments, and Non-Profit Organizations, are presented for purposes ofadditional

analysis and are not a required part ofthe general purpose financial statements. Such information has been

subjected to the auditing procedures applied in the audit ofthe general purpose financial statements and in

our opinion, except for the effects of such adjustments, ifany, as might have been determined to be necessary

had we been able to examine sufficient evidence regarding year 2000 disclosures as described in the third

paragraph, and except for the effects of the matters referred to in the fourth paragraph, such information is

fairly presented in all material respects in relation to the general purpose financial statements taken as a

whole.

.

98ARL-13A

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 ofthe State, as provided for by Official Code of Georgia Annotated Section 50-6-24.
CLV:gp 98ARL-13A

SCHLEY COUNTY BOARD OF EDUCAnON

ASSETS
Cash and Cash Equivalents
Accounts Receivable
Inventories Food Donated Commodities Purchased Food
Amount Available in Debt Service Fund
Amount to be Provided in Future Years For Payment of: Bond Debt Capital Lease Agreements
Total Assets

SCHLEY COUNTY BOARD OF EDUCATION COMBINED BALANCE SHEET
ALL FUND TYPES AND ACCOUNT GROUP JUNE 30,1998

GOVERNMENTAL FUND

SPECIAL

GENERAL

REVENUE

FUND

FUND

$

46,427.77 $ 115,509.27

267,762.16

70,676.90

2,909.05 743,55

$

314,189,93 $ _ ...18.~9~,8~38::,;_,,7_7

EXHIBIT "A"

TYPES DEBT
SERVICE FUND

$

110,643.20

59,996.37

ACCOUNT GROUP GENERAL
LONG-TERM DEBT

TOTALS (Memorandum Only) JUNE 30,1998 JUNE 30,1997

$

272,580.24 $

177,174.63

398,435.43

249,006.02

$

170,639.57

2,909.05 743.55
170,639.57

4,627.11 854.82
61,648.19

1,609,360.43 701,876.76

1,609,360.43 701,876.76

1,778,351.81 768,295.73

.$

170,639.57 $

2.481,876.76 $ 3,156,545.03 $ 3.039,958.31

$

1,172.51

$

216,355.18

273,621.82

266,193.30

235,123.66

16,412.60

3,324.71

4,453.80

$

701,876.76

701,876.76

768,295.73

1,780,000.00

1,780,000.00

1,840,000.00

$

2,481,876.76 $ 2,980,837.84 $ 3,125.992.23

$

170,639.57

0.00

$

170,639.57

$

39,647.00

4,967.92

30,095.45 $

18,038.11

2,909.05 743.55
170,639.57

4,627.11 854.82
61,648.19

-121,782.73 48,487.38

-213,143.85 41,941.70

$

175,707.19 $

-86,033.92

$

170,639.57 $

2.481,876.76 $ 3,156,545.03 $ 3,039,958.31

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SCHLEY COUNTY BOARD OF EDUCATION

COMBINED STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES

ALL GOVERNMENTAL FUND TYPES

.

YEAR ENDED JUNE 30, 1998

EXHIBIT"B"

FUND BALANCE JUNE 30

$ -52,040.28 $ 57,107,90 $ 170,639.57 $ 175,707,19 $ -86.033.92

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

SCHLEY COUNTY BOARD OF EDUCATION COMBINED STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES
BUDGET AND ACTUAL - (NON-GAAP BASIS) GENERAL AND SPECIAL REVENUE FUNDS
YEAR ENDED JUNE 30, 1998

EXHIBIT"C"

FUND BALANCE JUNE 30, 1998

$

86.941,61 $ _ _-.5.2;0,;,.04_._0,.2.8..

$

23.798,62 $_....;5;;,;,7..1o:.1~07.:.:,,;;,;90;.

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

SCHLEY COUNTY BOARD OF EDUCATION

EXHIBIT "D"

NOTES TO THE GENERAL PURPOSE FINANCIAL STATEMENTS

JUNE 30. 1998

Note 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
REPORTING ENTITY
The Schley County Board ofEducati~n (Board) 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 Board is a primary government and consists of all the organizations that compose its legal entity.
FUND ACCOUNTING
The Board uses funds and an account group to report on its financial position and the results ofits 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. An account group is a fmancial reporting device designed to provide accountability for certain assets and liabilities that are not recorded in the funds because they do not directly affect expendable available financial resources.
General Fixed Assets are recorded as expenditures in the various funds at the time of purchase. A General Fixed Assets Account Group is not presently maintained by the Board. To conform to generally accepted accounting principles, a General Fixed Assets Account Group should be maintained for reporting the cost of assets acquired by governmental fund types.
Although "school activity accounts" are maintained at the individual schools, neither the assets, liabilities and fund equity, nor the revenues, expenditures and changes in fund balances of these accounts are reflected in these fmancial statements. To conform to generally accepted accounting principles, these accounts should be recorded in the general purpose financial statements.
The general purpose financial statements account for all State, Federal, Taxes and Other funds under control ofthe Board, in compliance with generally accepted accounting principles applicable to governmental units, unless otherwise disclosed in these notes. Funds and the account group presented in this report are as follows:
GOVERNMENTAL FUND TYPES - are used to account for all or most ofa Board's educational activities. Governmental Fund Types include:
GENERAL FUND - the fund used to account for all financial resources ofthe Board except those required to be accounted for in another fund. These transactions relate to resources obtained and used for services provided by a board of education.
SPECIAL REVENUE FUND - the fund used to account for the proceeds of specific revenue sources that are legally restricted to expenditures for specified purposes. These funds are received primarily from the Georgia Department ofEducation and from the Federal government to accomplish specific educational objectives.
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SCHLEY COUNTY BOARD OF EDUCATION

EXHIBIT "D"

NOTES TO THE GENERAL PURPOSE FINANCIAL STATEMENTS

JUNE 30, 1998

Note 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DEBT SERVICE FUND - the fund used to accoUnt for the accumulation ofresources for, and the payment of, general long-term principal, interest and paying agent fees.
ACCOUNT GROUP
GENERAL LONG-TERM DEBT ACCOUNT GROUP - A financial reporting device used to account for general obligation debt outstanding and material capital lease obligations.
BASIS OF ACCOUNTING
The accounting and financial reporting treatment applied to a fund is determined by its measurement focus. All governmental funds are accounted for using a current financial resources measurement focus. With this measurement focus, only current assets and current liabilities generally are included on the balance sheet. Operating statements of these funds present increases (i.e., revenues and other fmancing sources) and decreases (i.e., expenditures and other financing uses) in net current assets. Their reported fund balance is considered a measure of available spendable resources.
Liabilities which are expected to be fmanced from available spendable resources are reported as liabilities in the governmental funds. Other liabilities, which are not expected to be financed from available spendable resources, are reported in the General Long-Term Debt Account Group.
Governmental funds are accounted for using the modified accrual basis of accounting under which:
Revenues are recognized when susceptible to accrual (i.e., when they become both measurable and available). "Measurable" means the amount ofthe transaction can be determined and "available" means collectible within the current period or soon enough thereafter to be used to pay liabilities ofthe current period. Those revenues considered susceptible to accrual are property taxes, local option sales taxes, intergovernmental grants and investment income.
Expenditures are generally recognized when the related fund liability is incurred. .
A substantial number of personnel of the Board were employed for a one hundred and ninety day period beginning in late August of 1997 and ending in early June 1998. Employment contracts for these employment periods typically specify that compensation be paid in twelve equal monthly payments beginning in September 1997 and ending in August 1998. State grants to fund the State's share of these contracts are disbursed to the Board in the same twelve month period. In accordance with generally accepted accounting principles, salary and fringe benefit expenditures and the related revenue from the State to fund these contracts are recorded in the fiscal period covered by these financial statements.

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SCHLEY COUNTY BOAlID OF EDUCATION

EXHIBIT "D"

NOTES TO THE GENERAL PURPOSE FINANCIAL STATEMENTS

JUNE 30. 1998

Note 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BUDGET
The Schley County Board of Education's budget is a complete financial plan for the Board's fiscal year and is based upon estimates of expenditures together with probable funding sources. There is no statutory prohibition regarding overexpenditure of the budget at any level. The budget for all governmental funds is prepared by fund, function and object. The legal level ofbudget control was established by the Board at the aggregate level. The budget for governmental funds was prepared on a basis other than generally accepted accounting principles.
The budget process begins when the Board's administration prepares a tentative budget for the Board's approval. After approval of this tentative budget by the Board, such budget is advertised at least once in a newspaper ofgeneral circulation in the locality. At the next regular meeting ofthe Board after advertisement, the Board receives comments on the tentative budget, makes revisions as necessary and adopts a final school budget. This final budget is then submitted, in accordance with provisions of the Quality Basic Education Act, OCGA Section 20-2-167, to the Georgia Department ofEducation. The Board may increase or decrease the budget at any time during the year. All unexpended budget authority lapses at fiscal year-end.
CASH AND CASH EQUIVALENTS
COMPOSmON OF DEPOSITS Cash and cash equivalents consist of deposits in authorized financial institutions. Georgia Laws authorize the Board to deposit its funds in one or more solvent banks, insured Federal savings and loan associations, or insured State chartered building and loan associations.
RECEIVABLES
Receivables consist of 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 general purpose financial statements do not include any amounts which would necessitate the need for an allowance for uncollectible receivables.
PROPERTY TAXES
The Schley County Board ofCommissioners fixed the property tax levy for the 1997 tax year (calendar year) on October 1, 1997 (levy date). Taxes were due on December 20, 1997. The lien date for property taxes was January 1, 1997. Taxes collected within the current fiscal year or within 60 days after year-end are reported as revenue in fiscal year 1998. The Schley County Tax Commissioner bills and collects the property taxes for the Board of Education, withholds 2.5% of taxes collected as a fee for tax collection and remits the balance of taxes collected to the Board.

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SCHLEY COUNTY BOARD OF EDUCATION

EXHIBIT "D"

NOTES TO THE GENERAL PURPOSE FINANCIAL STATEMENTS

JUNE 30, 1998

Note 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The tax millage rate levied for the 1997 tax year (calendar year) for the Schley County Board of Education was as follows (a mill equals $1 per thousand dollars of assessed value):

School Operations

~mills

SALES TAXES

Special Purpose Local Option Sales Tax is to be used for debt service. Special Purpose Local Option Sales Tax collected by the State and remitted to the Board during the fiscal year amounted to $248,911.76 and was recorded in the Debt Service Fund. The State will terminate collection of this tax once an additional $1,401,088.24 has been collected or on June 30, 2002 whichever occurs first.

INVENTORIES

FOOD INVENTORIES Inventories of donated food commodities used in the preparation of meals are reported on the Combined Balance Sheet at their Federally assigned value. Purchased foods inventories are reported on the Combined Balance Sheet at cost (first-in, first-out). Donated food commodities are recorded as revenues and expenditures at the time commodity items are received. Purchased foods inventories are recorded as expenditures at the time of purchase. The inventories reported on the balance sheet for donated food commodities and for purchased foods are equally offset by reservations of fund balance which indicates that these amounts do not constitute "available spendable resources" even though they are a component of net current assets.

GENERAL OBLIGATION BONDS

The Board issues general obligation bonds to provide funds for the acquisition and construction of major capital facilities. Bond premiums and discounts, as well as issuance costs, are recognized in the financial statements during the year bonds are issued. General obligation bonds are direct obligations and pledge the full faith and credit of the government. The outstanding amount of these bonds is recorded in the General Long-Term Debt Account Group.

INTERFUND TRANSACTIONS

The Board has the following types of interfund transactions:

Reimbursements of expenditures initially made from a fund that are properly applicable to another fund, are recorded as expenditures in the reimbursing fund and as reductions of expenditures in the fund that is reimbursed.

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SCHLEY COUNTY BOARD OF EDUCATION r

EXHIBIT "D"

NOTES TO THE GENERAL PURPOSE FINANCIAL STATEMENTS

JUNE 30, 1998

Note 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Operating transfers are recorded for all interfund transactions other than reimbursements.

MEMORANDUM ONLY - TOTAL COLUMNS

Total columns on the general purpose financial statements are captioned "Memorandum Only" to indicate that they are presented only to facilitate financial analysis. Data in these columns do not present financial position or results of operations in confonnity with generally accepted accounting principles. Neither are such data comparable to a consolidation. Interfund eliminations have not been made in the aggregation of this data.

DEFICIT FUND BALANCES

Funds reporting a deficit fund balance position at June 30, 1998, are as follows:

Fund Type/Fund Name

Deficit Balances

Governmental Fund Type General Fund

$ 121.782.73

No action was taken in the subsequent period by the Board to fund this deficit.,

Note 2: DEPOSITS

COLLATERALIZATION OF DEPOSITS Official Code of Georgia Annotated (OCGA) Section 45-8-12 provides that there shall not be on deposit at any time in any depository for a time longer than ten days a sum of money which has not been secured by surety bond, by guarantee of insurance, or by collateral. The aggregate ofthe face value.of such surety bond and the market value ofsecurities pledged shall be equal to not less than 110 percent ofthe public funds being secured after the deduction ofthe amount of deposit insurance. OCGA Section 45-8-11 provides an officer holding public funds may, in his discretion, waive the requirement for security in the case of operating funds placed in demand deposit checking accounts.

Acceptable security for deposits consists ofanyone of or any combination of the following:

(l) 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 ofindebtedness or other direct obligations ofthe United States or of the State of Georgia,

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SCHLEY COUNTY BOARD OF EDUCATION

EXHIBIT "D"

NOTES TO THE GENERAL PURPOSE FINANCIAL STATEMENTS

JUNE 30. 1998

Note 2: DEPOSITS

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

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

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

(7) Bonds, bills, notes, certificates of indebtedness, or other obligations of a subsidiary corporation of the United States government, which are fully guaranteed by the United States government both as to principal and interest and debt obligations issued by the Federal Land Bank, the Federal Home Loan Bank, the Federal Intermediate Credit Bank, the Central Bank for Cooperatives, the Farm Credit Banks, the Federal Home Loan Mortgage Association, and the Federal National Mortgage Association.

CATEGORIZATION OF DEPOSITS At June 30, 1998, the bank balances were $370,086.41. The amounts ofthe total bank balances are classified into three categories of credit risk:

Category 1 - Cash that is insured (e.g., Federal depository insurance) or collateralized with securities held by the Board or by the Board's agent in the Board's name.
Category 2 - Cash collateralized with securities held by the pledging fmancial institution's trust department or agent in the Board's name.
Category 3 - Uncollateralized deposits. (This includes any bank balance that is collateralized with securities held by the pledging financial institution, or by its trust department or agent but not in the Board's name.)

The Board's deposits are classified by risk category at June 30, 1998, as follows:

Risk Category

Bank Balance

1

$ 100,000.00

2

270,086.41

3

0.00

Total

$ 370.086.41

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SCHLEY COUNTY BOARD OF EDUCATION

EXHIBIT "D"

NOTES TO THE GENERAL PURPOSE FINANCIAL STATEMENTS

JUNE 30, 1998

Note 3: NON-MONETARY TRANSACTIONS

The Board receives food commodities from the United States Department ofAgriculture (USDA) for school breakfast and lunch programs. These commodities are recorded at their Federally assigned value. See Note 1 - Inventories

Note 4: RISK MANAGEMENT

The Board 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 and natural disaster.

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

The Board has elected to self-insure for natural disaster. The Board has not experienced any losses related to this risk in the past three years.

The Board 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 Board 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 United States Fidelity and Guaranty Company to provide coverage for potential losses sustained by.the Trust in excess of $250,000.00 loss per occurrence, up to $2,000,000.00.

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

Position Covered

Amount

Superintendent All Employees

$ 8,000.00 $ 50,000.00

Note 5: GENERAL LONG-TERM DEBT

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

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

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SCHLEY COUNTY BOARD OF EDUCATION

EXlllBIT "D"

NOTES TO THE GENERAL PURPOSE FINANCIAL STATEMENTS

JUNE 30, 1998

Note 5: GENERAL LONG-TERM DEBT

Purpose

Interest Rates

Amount

General Government - Series 1993

3.70% - 5.50% $ 1,780,000.00

Capital Leases

General Obligation
Bonds

Total

Balance July 1, 1997

$ 768,295.73 $1,840,000.00 $ 2,608,295.73

Deductions Payments

66.418.97

60,000.00

126.418.97

Balance June 30, 1998

$ 701.876.76 $ 1.780,000.00 $ 2.481.876.76

At June 30, 1998, payments due by fiscal year which includes principal and interest for these items are as follows:

Fiscal Year Ended June 30

Capital Leases

General Obligation
Bonds

Total Debt

1999 2000 2001 2002 2003 2004 - 2008 2009 - 2013 2014

$ 112,099.44 112,099.44 112,099.44 112,099.44 112,099.44 336,298.32

$ 155,007.50 $ 267,106.94

157,472.50

269,571.94

159,602.50

271,701.94

161,415.00

273,514.44

162,895.00

274,994.44

846,927.50 1,183,225.82

878,262.50 179.350.00 ..

878,262.50 179.350.00

Total Principal and Interest

$ 896,795.52 $ 2,700,932.50 $ 3,597.728.02

Deduct: Imputed Interest

194,918.76

Net Present Value ofFuture Minimum Lease Payments

$ 701.876.76

Note 6: ON-BEHALF PAYMENTS

The Board has recognized revenues and expenditures in the amount of $61 ,250.16 for health insurance and retirement contributions paid on the Board's behalf by the following State Agencies.

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SCHLEY COUNTY BOARD OF EDUCATION

EXIDBIT "D"

NOTES TO THE GENERAL PURPOSE FINANCIAL STATEMENTS

JUNE 30, 1998

Note 6: ON-BEHALF PAYMENTS
Georgia Department ofEducation Paid to the State Merit System ofPersonnel Administration For Health Insurance ofNon-Certified Personnel In the amount of $52,526.16
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 $8,724.00
Note 7: SIGNIFICANT COMMITMENTS
At June 30, 1998, the Board had no outstanding contractual commitments for the purpose ofmaking computer systems and other electronic equipment year 2000 compliant. The year 2000 issue is the result of shortcomings in many electronic data processing systems and other equipment that make operations beyond year 1999 troublesome. The year 2000 issue is of primary concern for the Board's financial accounting system. The following stages have been identified as necessary to implement a year 2000 compliant systems.
Awareness Stage - Encompasses establishing a budget and project plan for dealing with the year 2000 Issue.
Assessment Stage - The actual process of identifying all of its systems and individual components of the systems to check for compliance.
Remediation Stage - When changes are made to systems and equipment.
Validationffesting Stage - The process of ensuring that the changes made to systems and equipment will produce a year 2000 compliant system.
It will be necessary for the Board to progress through all four of these stages for each cpmputer and/or electronic system, not already year 2000 compliant, in order to assure that these systems will not be adversely affected.
The Board's financial accounting software (GENESIS) and hardware (Wang VS) is owned by the State (Georgia Department of Education). As ofJune 30, 1998, the State had not contracted for the remediation ofeither the Wang VS operating system or the GENESIS accounting software. In the subsequent period, the Georgia Department ofEducation has remediated the Wang VS operating system and the updated system was installed at all GENESIS sites as of December 9, 1998. The Georgia Department of Education is implementing a plan for remediating the GENESIS software and four ofthe five GENESIS software modules were remediated as of January 14, 1999 with the final module scheduled to be remediated by the end of January. The validation and testing phases for all five modules are scheduled to be completed by March 1, 1999.
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SCHLEY COUNTY BOARD OF EDUCATION

EXHIBIT "D"

NOTES TO THE GENERAL PURPOSE FINANCIAL STATEMENTS

JUNE 30, 1998

.Note 8: 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 expenditures which are disallowed under grant terms. The Board believes that such disallowances, if any, will be immaterial to its overall financial position.

Note 9: SUBSEQUENT EVENTS

In the subsequent fiscal year, voters authorized the Board to issue general obligation bonds in the amount of $3,780,000.00. The proceeds from these bonds will be used for the purpose of providing funds to payor to be applied toward the cost of acquiring, constructing and equipping a new high school.

Note 10: RETIREMENT PLANS

TEACHERS RETIREMENT SYSTEM OF GEORGIA (TRS)

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

TRS CONTRIBUTIONS REQUIRED AND MADE Employees ofthe Board who are covered by TRS are required by State statute to contribute 5% oftheir gross earnings to TRS. The Board makes monthly employer contributions to TRS at rates adopted by the TRS Board ofTrustees in accordance with State statute and as advised by their independent actuary. The required employer contribution rate is 11.81% and employer contributions for the current fiscal year and the preceding two fiscal years are as follows:

Fiscal Year

Percentage Contributed

Required Contribution

1998 1997 1996

100% 100% 100%

$ 196,249.20 $ 180,945.38 $ 168,810.45

- 15 -

SCHLEY COUNTY BOARD OF EDUCATION COMBINING BALANCE SHEET SPECIAL REVENUE FUND JUNE 30,1998

EXHIBIT"E"

ASSETS
Cash and Cash Equivalents
Accounts Receivable
Inventories Food Donated Commodities Purchased Food

SCHOOL FOOD
SERVICES FUND

LOTIERY PROGRAMS

FEDERAL PROGRAMS

TOTALS JUNE 30,1998 JUNE 30,1997

$ 64,362.04 $ 38,202.46 $ 12,944.n $ 115,509.27 $ 78,133.08

2,569.00

10,188.27

57,919.63

70,676.90

23,318,00

2,909.05 743.55

2,909.05 743.55

4,627,11 854.82

Total Assets

$ 70,583,64 $ 48,390.73 $ 70,864.40 $ 189,838.n $ 106,933.01

LIABILITIES AND FUND EQUITY
LIABILITIES
Accounts Payable Salaries Payable Expired Grant Balances Payable
Total Liabilities
FUND EQUITY
Fund Balances Reserved For Continuation of Federal.Programs For Inventories Food Donated Commodities Purchased Food Unreserved Undesignated
Total Fund Equity

$ 6,913.62 $ 17,095.09 $ 48,817.88 $

11,530.04

15,884.40

16,On.24

15,411.24

1,001.36

$ 18,443.66 $ 48,390.73 $ 65,896.48 $

72,826,59 $ 43,491.68 16,412,60
132,730.87 $

17,605,83 38,578.84
3,324.71
59,509.38

$ 2,909.05 743.55
48,487.38 $
$ 52,139.98 $

$ 4,967,92 $

4,967.92

0.00 0.00 $

0.00 4,967.92 $

2,909.05 $ 743.55
48,487.38
57,107.90 $

4,627.11 854.82
41,941.70
47,423.63

Total Liabilities and Fund Equity

$ 70,583.64 $ 48,390.73 $ 70,864.40 $ 189,838,n $ 106,933.01

See notes to the general purpose financial statements,

-16 -

SCHLEY COUNTY BOARD OF EDUCATION COMBINING STATEMENT OF REVENUES. EXPENDITURES AND CHANGES IN FUND BALANCES
SPECIAL REVENUE FUND YEAR ENDED JUNE 30. 1998

EXHIBIT "F"

FUND BALANCE JUNE 30

$ 52,139.98 $_ _.::.0;.:::.00::., $ 4,967.92 $ 57,107.90 $_""",,",47...4_2-.3.-.6.3..

See notes to the general purpose financial statements.

-17 -

SCHLEY COUNTY BOARD OF EDUCATION COMBINING BALANCE SHEET DEBT SERVICE FUND JUNE 30,1998

EXHIBIT"G"

ASSETS Cash and Cash Equivalents Accounts Receivable

PROPERTY TAXES FOR
BOND DEBT

SPECIAL PURPOSE LOCAL OPTION SALES TAX

TOTALS JUNE 30,1998 JUNE 30,1997

$

110,732.27 $ 110,732.27 $

56,658.03

$

89.07

59,907.30

59,996.37

4,990.16

Total Assets

$

89.07 $

170,639.57 $ 170,728,64 $ _ ......6. _1.,64.,.8..1..9...

LIABILITIES AND FUND EQUITY

LIABILITIES

Cash Overdraft

$

FUND EQUITY

Fund Balances

Reserved

For SPLOST Projects

Unreserved

UndesignateCf

$

Total Fund Equity

$

89.07 $

0.00 $

89.07 $

0.00

$ 0.00 0.00 $

170,639.57 $ 0.00
170,639.57 $

170,639.57 $ 0.00
170,639.57 $

61,648.19 0.00
61,648.19

Total Liabilities and Fund Equity $

89,07 $

170,639,57 $ 170,728.64 $ _-06.1.,6.4.8-.1..9...

#
See notes to the general purpose financial statements.

-18 -

SCHLEY COUNTY BOARD OF EDUCATION COMBINING STATEMENT OF REVENUES. EXPENDITURES AND CHANGES IN FUND BALANCES
DEBT SERVICE FUND YEAR ENDED JUNE 30.1998

EXHIBIT "H"

FUND BALANCE JUNE 30

$

0.00 $

170,639.57 $ 170,639.57 $

61,648.19

See notes to the general purpose financial statements.

-19 -

SCHLEY COUNTY BOARD OF EDUCATION SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
YEAR ENDED JUNE 30, 1998

SCHEDULE "1"

FUNDING AGENCY PROGRAM/GRANT
Agriculture, U. S. Department of Pass-Through Georgia Forestry Commission Urban and Community Forestry Assistance Program UrbanlRural Forest Interface Project #96-43
. Pass-Through Georgia Department of Education Food and Nutrition Program Food Services School Breakfast Program 1998 Grant National School Lunch Program 1998 Grant Food Distribution Program (1)
Total U. S. Department of Agriculture
Education, U, S. Department of Pass-Through Georgia Department of Education Elementary and Secondary Education Act Title I Grants to Local Educational Agencies 1998 Grant Title II Eisenhower Professional Development 1998 Grant Title VI Innovative Education Program Strategies 1998 Grant Goals 2000 State and Local Education Systemic Improvement Grants 1998 Grant Individuals with Disabilities Education Act Part B - Special Education Flow Through 1998 Grant
Total U. S. Department of Education

CFDA NUMBER

PASSTHROUGH
ENTITY 10
NUMBER

FEDERAL REVENUE IN PERIOD

EXPENDITURES IN PERIOD

10.664

N/A $

310.91 $

679.21 (3)

o 10.553
o 10.555 10,550

N/A
NlA NlA
$

62,412.n

(2)

127,602,75 12,060.62

248,193.33 (3) 12,060.62

202.387.05 $ _ _=:26""0"",9:=;3..,3....,16:..

84,010 84.281 84.298 84.276 84.027

N/A $ NlA NlA

145,635.08 $ 17,500.00 3,648,00

140,667.16 17,686.96 (3) 3,652.11 (3)

NlA

68,094.44

68,094.44

NlA $

24,939.19 259,816.71 $

24,939.19 255,039.86

Total Federal Financial Assistance

$

462,203.76 $ _ _~51:.;;5ii:.!97.~3.~02:o.

N/A = Not Available

Notes to the Schedule of Expenditures of Federal Awards

(1) The amounts shown for the Food Distribution Program represents the Federally assigned value of nonmonetary assistance for donated commodities received and/or consumed by the system during the current fiscal year,
(2) Expenditures for the School Breakfast Program were not maintained separately and are included in the 1998 National School Lunch Program,
(3) Expenditures for this program include State, and/or Other Funds. Expenditures are not maintained by fund source.

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

The Board did not provide Federal Assistance to any Subrecipient

The accompanying schedule of expenditures of Federal awards includes the Federal grant activity of the Schley County Board of Education and is presented on the modified accrual basis of accounting which is the same basis of accounting used in the presentation of the general purpose financial statements.

See notes to the general purpose financial statements.

-20-

SCHLEY COUNTY BOARD OF EDUCATION SCHEDULE OF STATE REVENUE YEAR ENDED JUNE 30,1998

SCHEDULE "2"

AGENCYIFUNDING
GRANTS Education, Georgia Department of Quality Basic Education General and Career Education Programs Special Education Programs Remedial Education Program Media Center Programs Staff Development Programs Indirect Cost Pupil Transportation Regular Bus Replacement Sparsity Grant Mid-term Adjustment Migrant Mid-term Adjustment Counselors Grades 4 and 5 Technology Training Local Fair Share Deferred Summer Salaries (Prior Year) Deferred Summer Salaries (Current Year) Educational Equalization Funding Grant Food Services Other State Programs Ad Valorem Tax Adjustment Health Insurance Lottery Program Instructional Technology
Office of School Readiness Pre-Kindergarten Program
Office of Treasury and Fiscal Services Public School Employees Retirement

GOVERNMENTAL FUND TYPES

SPECIAL

GENERAL

REVENUE

FUND

FUND

TOTAL

$ 1,029,763.00 124,875.00 27,417.00 46,640,00 12,851.00 317,744.00
172,355.00 39,647.00 51,608.00 141,364.00 1,109.00 6,274.00 28,842.00
-220,777.00 -189,906.00 230,109.00 110,390.00
$
15,770.00 52,526.16

$
14,594.00 52,888.52

1,029,763.00 124,875,00 27,417.00 46,640.00 12,851.00 317,744.00
172,355.00 39,647,00 51,608.00 141,364,00
1,109.00 6,274.00 28,842,00 -220,777.00 -189,906.00 230,109.00 110,390.00 14,594.00
15,770.00 52,526.16
52,888.52

144,242.99

144,242.99

8,724.00

8,724.00

$ 2.007.325.16 $

211.725.51 $ 2.219,050.67

See notes to the general purpose financial statements.

- 21 -

SCHLEY COUNTY BOARD OF EDUCATION SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS
YEAR ENDED JUNE 30, 1998

SCHEDULE "3"

PROJECT Existing Debt

ORIGINAL ESTIMATED
COST (1)

CURRENT ESTIMATED
COST (2)

AMOUNT EXPENDED IN CURRENT
YEAR (3)

AMOUNT EXPENDED
IN PRIOR YEARS

$ 1,650,000.00 $ 1,650,000,00 $

78,272.19 $

0.00

(1) The Board's original cost estimate as specified in the resolution calling for the imposition of the Local Option Sales Tax. (2) The Board's current estimate of total cost for the project. Includes all cost from project inception to completion. (3) The voters of Schley County approved the imposition of a 1% sales tax to fund the above project.

See notes to the general purpose financial statements.

-22-

SCHLEY COUNTY BOARD OF EDUCATION SCHEDULE OF EXPENDITURES LOTTERY PROGRAMS YEAR ENDED JUNE 30, 1998

SCHEDULE "4"

EXPENDITURES
Current Instruction Support Services Pupil Services General Administration Business Administration Capital Outlay

INSTRUCTIONAL PRE-KINDERGARTEN

TECHNOLOGY

PROGRAM

TOTAL

$

7,762,52 $

45,126.00

123,871,61 $
11,749,26 5,174.28 3,447,84

131,634,13
11,749,26 5,174,28 3,447,84 45,126,00

Total Expenditures

$

52,888.52 $

144,242.99 $ =====1=97,=!::,1=:3=1=.5=1

RECAP: Salaries and Benefits Pre-Kindergarten Program Other Expenditures Instructional Technology Pre-Kindergarten Program

$

139,981,65

52,888,52 4,261,34

$

197,131.51

See notes to the general purpose financial statements, - 23-

THIS PAGE LEFT BLANK

SCHLEY COUNTY BOARD OF EDUCATION ANALYSIS OF MINIMUM EXPENDITURE REQUIREMENTS - OVERALL
GENERAL FUND - QUALITY BASIC EDUCATION PROGRAMS YEAR ENDED JUNE 30, 1998

SCHEDULE "5"

Minimum Expenditure Requirements (Total Allotment)
Expenditures on Combined Program Basis Salaries (1) (2) Operations
Expenditures per Audit

FOURTEEN WEIGHTED AND MEDIA CENTER
PROGRAMS

100% TEST FOR OPERATIONS PORTION OF FOURTEEN WEIGHTED PROGRAMS

$ 1,370,059.00 $

48,303.00

$ 1,404,577.48 77,261.00 $
$ 1,481,838.48

75,571.42

Amount of Underexpenditure for Total Allotment

$

0,00 $=======0;::;;'0=0

Note: (1) Salary accruals (July and August 1998 Deferred Salaries) reported as expenditures in the General Purpose Financial Statements are not included on this analysis in order to comply with program guidelines.
(2) Salary accruals (July and August 1997 Deferred Salaries) reported as expenditures in the prior year General Purpose Financial Statements are included on this analysis as required by program guidelines.

See notes to the general purpose financial statements, - 25 -

SCHLEY COUNTY BOARD OF EDUCATION ANALYSIS OF MINIMUM EXPENDITURE REQUIREMENTS - BY PROGRAM
GENERAL FUND - QUALITY BASIC EDUCATION PROGRAMS YEAR ENDED JUNE 30, 1998

GENERAL AND CAREER EDUCATION PROGRAMS Kindergarten (*) Grades 1 3 (*) Sub-Total K-3 Grades 4 - 5 (*) Grades 6 - 8 (*) Total General and career Education Programs
SPECIAL EDUCATION PROGRAMS Regular Programs Category III (*) Sub-Total- Regular Category VI (Gifted) (*) Total Special Education Programs
REMEDIAL EDUCATION PROGRAM (*) Total Fourteen Weighted Programs
MEDIA CENTER PROGRAMS Salaries Operations Total Media center Programs
Total Fourteen Weighted and Media center Programs

ALLOTMENTS FROM DEPARTMENT OF EDUCATION

.REQUIRED

ORIGINAL --!-

ORIGINAL

MID-TERM

$

182,154.00

$

451,035.00

$

633,189.00 90 $

187,172,00 90

209,402.00 90

$ 1,029,763.00

$

163,938,60 405,931.50 $ 569,870.10 $ 168,454,80 188,461.80 926,786.70 $

25,682.00 25,682,00
115,682.00 141,364.00

$

124,875.00

$

112,387.50 $

0.00

$

124,875.00 90 $

112,387.50 $

90

$

124,875.00

$

112,387.50 $

$

27,417.00 90 $

24,675.30 $

$ 1,182,055.00

$ 1,063,849,50 $

0.00
0.00 0.00 141,364.00

$

38,972,00 90 $

35,074.80 $

0,00

7,668.00 90

6,901.20

$

46,640.00

$

41,976,00 $

0.00

$ 1,228,695.00

$ 1,105,825,50 $

141,364.00

STAFF DEVELOPMENT PROGRAMS Cost of Instruction Professional Development
Total Staff Development Programs (*) Identifies Fourteen Weighted Programs, (1) Salary accruals (July and August 1998 Deferred
Salaries) reported as expenditures in the General Purpose Financial Statements are not included on this analysis in order to comply with program gUidelines.
See notes to the general purpose financial statements.

$

3,732,00

$

3,732.00 $

0,00

9,119.00

9,119.00

0,00

$

12,851,00 100 $

12,851,00 $ ......_-=00..0.

(2) salary accruals (July and August 1997 Deferred salaries) reported as expenditures in the prior year General Purpose Financial Statements are included on this analysis as reqUired by program guidelines.

- 26 -

SCHEDULE "6"

TOTAL REQUIRED

ACTUAL EXPENDITURES

SALARIES (1)(2) OPERATIONS

TOTAL

AMOUNT OF UNDEREXPENDITURE
FOR REQUIRED ALLOTMENT

$

163,938.60 $

159,531.33 $

10,902.31 $

170,433.64

431.613.50

455.455.79

29,639.07

485,094.86

$

595,552.10 $

614,987.12 $

40.541.38 $

655,528.50 $

0.00

168,454.80

248,764.73

12.417.82

261,182.55

0.00

304.143.80

299,813.30

18,184.11

317.997.41

0.00

$ 1,068,150.70 $ 1,163,565.15 $

71,143.31 $ 1,234,708.46

$

35,074.80 $

6,901.20

$

41,976.00 $

16.352.78 $
16,352.78 $

$ 1....6"",8;.; ,9.;.; .5.8...

16,352.78 1,689.58

1,689.58 $ _ _.;.18;:,.:.04;;,.;,;;;2.;.;;.3.6...

18,722.02 5.211.62

$ 1,247.189.50 $ 1,404.577.48 $

77.261.00 $ 1,481.838.48 $ = _ _.....2...,3;,;;;.9=33;,;,;.64=

$

3,732.00

9,119.00

$ _.......1..28.5.1..0..0..

$

4,896.48 $

4,896.48

7.954.52

7.954.52

$

12.851.00 $

12,851.00 $

..0.0..0.

27

SECTION II COMPLIANCE AND INTERNAL CONTROL REPORTS

CLAUDE L. VICKERS
STATE AUDITOR
(404) 656-2174

DEPARTMENT OF AUDITS AND ACCOUNTS
254 Washington Street, S.W., Suite 214 Atlanta, Georgia 30334-8400
February 19, 1999

Honorable Roy E. Barnes, Governor Members ofthe General Assembly Members ofthe State Board ofEducation
and Superintendent and Members ofthe Schley County Board ofEducation
REPORT ON COMPLIANCE AND ON INTERNAL CONTROL OVER FINANCIAL REPORTING BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS
Ladies and Gentlemen:
We have audited the financial statements of Schley County Board of Education as of and for the year ended June 30, 1998, and have issued our report thereon dated February 19, 1999. This report was qualified for a scope limitation and for various departures from generally accepted accounting principles, as identified in the auditor's report on the general purpose financial statements. Except as discussed in the following paragraph, we conducted our audit in accordance with generally accepted auditing standards and the standards applicable to fmancial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States.
We were unable to examine sufficient audit evidence regarding year 2000 disclosures as required by Governmental Accounting Standards Board Technical Bulletin 98-1, Disclosures About Year 2000 Issues. This bulletin requires disclosure of certain matters regarding the year 2000 issue in order for financial statements to be prepared in conformity with generally accepted accounting principles.
Compliance
As part of obtaining reasonable assurance about whether Schley County Board of Education's financial statements are free ofmaterial misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts and grants, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance that are required to be reported under Government Auditing Standards.
98YB-40

Internal Control Over Financial Reporting
In planning and perfonning our audit, we considered Schley County Board ofEducation's internal control over financial reporting in order to detennine our auditing procedures for the purpose of expressing our opinion on the financial statements and not to provide assurance on the internal control over financial reporting. However, we noted a certain matter involving the internal control over financial reporting and its operation that we consider to be a reportable condition. Reportable conditions involve matters coming to our attention relating to significant deficiencies in the design or operation ofthe internal control over financial reporting that, in our judgement, could adversely affect Schley County Board ofEducation's ability to record, process, summarize and report financial data consistent with assertions of management in the financial statements. The reportable condition is described in the accompanying Schedule of Findings and Questioned Costs as item FS-7231-98-05.
A material weakness is a condition in which the design or operation of one or more of the internal control components does not reduce to a relatively low level the risk that misstatements in amounts that would be material in relation to the fmancial statements being audited may occur and not be detected within a timely period by employees in the normal course ofperfonning their assigned functions. Our consideration of the internal control over financial reporting would not necessarily disclose all matters in the internal control that might be reportable conditions and accordingly, would not necessarily disclose all reportable conditions that are also considered to be material weaknesses. However, the reportable condition described above is considered to be a material weakness.
This report is intended for the information of management, the Federal cognizant agency, Federal awarding agencies and pass through entities. This restriction is not intended to limit the distribution ofthis report which is a matter ofpublic record.

CLV:gp 98YB-40

Claude L. Vickers State Auditor

CLAUDE L. VICKERS
STATE AUDITOR
(404) 656-2174

DEPARTMENT OF AUDITS AND ACCOUNTS
254 Washington Street, S.W., Suite 214 Atlanta, Georgia 30334-8400
February 19, 1999

Honorable Roy E. Barnes, Governor Members of the General Assembly Members ofthe State Board ofEducation
and Superintendent and Members ofthe Schley County Board ofEducation
REPORT ON COMPLIANCE WITH REOUIREMENTS APPLICABLE TO EACH MAJOR PROGRAM AND INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH OMB CIRCULARA-133
Ladies and Gentlemen:
Compliance
We have audited the compliance of Schley County Board of Education with the types of compliance
requirements described in the U.S. Office olManagement and Budget (OMB) Circular A-I33 Compliance Supplement that are applicable to each ofits major Federal programs for the year ended June 30, 1998. Schley
County Board ofEducation's major Federal programs are identified in the accompanying Schedule ofFindings and Questioned Costs. Compliance with the requirements of laws, regulations, contracts and grants applicable to each of its major Federal programs is the responsibility of Schley County Board of Education's management. Our responsibility is to express an opinion on Schley County Board of Education's compliance based on our audit.
We conducted our audit of compliance in accordance with generally accepted auditing standards; the standards applicable to fmancial audits contained in Government Auditing Standards, issued by the
Comptroller General ofthe United States; and OMB Circular A-133, Audits olStates, Local Governments, and Non-Profit Organizations. Those standards and OMB 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 Schley County Board of Education's compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that. our audit provides a reasonable basis for our opinion. Our audit does not provide a legal determination on Schley County Board of Education's compliance with those requirements.

98SA-I0

In our opinion, the Schley 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, 1998.
Internal Control Over Compliance
The management of Schley 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 Schley County Board ofEducation's internal control over compliance with requirements that could have a direct and material effect on a major Federal program in order to determine our auditing procedures for the purpose of expressing our opinion on compliance and to test and report on internal control over compliance in accordance with OMB Circular A-133.
Our consideration ofthe internal control over compliance would not necessarily disclose all matters in the internal control that might be material weaknesses. A material weakness is a condition in which the design or operation of one or more ofthe internal control components does not reduce to a relatively low level ofrisk that noncompliance with applicable requirements oflaws, regulations, contracts and grants that would be material in relation to a major Federal program being audited may occur and not be detected within a timely period by employees in the nonnal course of performing their assigned functions. We noted no matters involving the internal control over compliance and its operation that we consider to be material weaknesses.
This report is intended for the infonnation of management, the Federal cognizant agency, Federal awarding agencies and pass through entities. This restriction is not intended to limit the distribution ofthis report which is a matter of public record.
R~~

CLV:gp 98SA-I0

Claude L. Vickers State Auditor

SECTIONID AUDlTEE'S RESPONSE TO PRIOR YEAR FINDINGS AND QUESTIONED COSTS

SCHLEY COUNTY BOARD OF EDUCATION AUDITEE'S RESPONSE
SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 1998

PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

FINDING CONTROL NUMBER AND STATUS

7231-93-02 7231-95-02 7231-96-01 7231-96-02 7231-96-04 FS-7231-97-01 FS-7231-97-02 FS-7231-97-03 FS-7231-97-04

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

CORRECTIVE ACTIONIRESPONSES

EXPENDITURESILIABILITIESIDISBURSEMENTS Failure to Meet Expenditure Requirements Amount: $2,294.34 Finding Control Number: 7231-96-02

The underexpenditure of Quality Basic Education (QBE) funds of $744.45 for the Special Education - Gifted Program, $1,298.92 for the operations portion ofthe Media Center Program and $250.97 for the Staff Development Program will be returned to the Georgia Department of Education through an increase in the Board's local fair share for the QBE Programs in a subsequent fiscal period.

PROCUREMENT Failure to Meet Legal Requirements Finding Control Number: FS-7231-97-01

The Schley County Board ofEducation entered into this contract prior to the implementation ofthe new law.

Auditor's Note: lIB 1441 was enacted by the 1990 session ofthe Georgia General Assembly. This bill created O.C.G.A. 20-2-506 and in the laws original text it included the requirement for multiyear lease purchase agreements to terminate on December 31 of each year. Prior to the enactment oflIB 1441 school boards were not authorized to enter into multi-year lease purchase agreements.

- 1-

SCHLEY COUNTY BOARD OF EDUCATION AUDITEE'S RESPONSE
SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND OUESTIONED COSTS YEAR ENDED JUNE 30, 1998

PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

CORRECTIVE ACTIONIRESPONSES

EXPENDITURESILIABILITIESIDISBURSEMENTS Failure to Meet Expenditure Requirements Amount: $3,867.47 Finding Control Number: FS-7231-97-02

The underexpenditure ofthe Quality Basic Education (QBE) funds will be returned to the Georgia Department ofEducation through an increase in the Board's local fair share for the QBE programs in a subsequent fiscal period.

GENERAL FIXED ASSETS Failure to Maintain General Fixed Assets Account Group Finding Control Number: FS-7231-97-04

D~e to current staffing limitations and budgetary considerations prohibiting the hiring ofadditional administrative staffthe Board has decided not to pursue the recording ofgeneral fixed assets on the financial statements.

PRIOR YEAR FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

FINDING CONTROL NUMBER AND STATUS

7231-95-04 7231-96-06

Previously Reported Corrective Action Implemented Previously Reported Corrective Action Implemented

-2-

SECTION IV FINDINGS AND QUESTIONED COSTS

SCHLEY COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30. 1998
I SUMMARY OF AUDITOR'S RESULTS
1. Type of Report Issued on the Financial Statements The auditor's opinion on the Schley County Board of Education's financial statements was qualified for a scope limitation and for various departures from generally accepted accounting principles.
2. Reportable Conditions in Internal Control Disclosed by the Audit ofthe Financial Statements The audit report for the Schley County Board ofEducation disclosed a financial statement reportable condition related to the following control category.
General Fixed Assets
The reportable condition described above is considered to be a material weakness.
3. Noncompliance Material to the Financial Statements The audit of the Schley County Board of Education disclosed no instances of noncompliance that were deemed to be material to the financial statements.
4. Reportable Conditions in Internal Control Over Major Programs The audit report for the Schley County Board of Education did not disclose any reportable conditions in internal control over major programs.
5. Type of Report Issued on Compliance for Major Programs The auditor's opinion on the Schley County Board of Education's report on compliance with requirements appliqable to major programs was unqualified.
6. Audit Findings Required to be Reported by Section .510(a) ofOMB Circular A-133 The Schley County Board of Education's audit did not disclose audit findings required to be reported by section .510(a) ofOMB Circular A-133.
7. Major Programs Federal awards audited as major programs are as follows: 10.553 Food and Nutrition Program - Food Services - School Breakfast Program 10.555 Food and Nutrition Program - Food Services - National School Lunch Program
8. Type "A" Program Dollar Threshold The dollar threshold for type "A" programs was $300,000.00.
9. Low Risk Auditee The Schley County Board of Education was audited as a low risk auditee based on a waiver granted by the U. S. Department of Education.
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SCHLEY COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND OUESTIONED COSTS
YEAR ENDED JUNE 30. 1998
IT FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS
PROCUREMENT Failure to Meet Legal Compliance Nonmaterial Noncompliance Repeated From Prior Year Finding Control Number: FS-7231-98-01
An examination ofthe Board's records revealed that a multi-year capital lease agreement for buildings and equipment, entered into in a prior fiscal year, did not contain the termination and renewal provisions which are required by the Official Code of Georgia Annotated Section 20-2-506 as follows:
"(a) Except as otherwise provided in this Code section, each county, independent, or area school system in this State shall be authorized to enter into multi year lease, purchase, or lease pUrchase contracts ofall kinds for the acquisition ofgoods, materials, real and personal property, services, and supplies, provided that any such contract shall contain provisions for the following:
(l) The contract shall terminate absolutely and without further obligation on the part of the school system at the close ofthe calendar year in which it was executed and at the close of each succeeding calendar year for which it may be renewed as provided in this Code section;"
The Board should contact the lessor and amend the contract to include the required termination and renewal provisions noted above.
Management's Response:
We concur with this finding; however, this capital lease agreement was entered into before the new law became effective.
EXPENDITURESILIABILITIESIDISBURSEMENTS Failure to Meet Expenditure Requirements Nonmaterial Noncompliance Amount: $ 23,933.64 Finding Control Number: FS-7231-98-02
"
The Schley County Board ofEducation reported to the Georgia Department ofEducation on DE form 0420 underexpenditures of Quality Basic Education (QBE) funds of $23,933.64 for the Media Center Program. The underexpenditure ofthe QBE Programs noted above occurred because the Board expended less than the minimum expenditure requirement for these QBE Programs. These funds should be returned to the Georgia Department of Education through an increase in the Board's local fair share for the QBE programs in a subsequent fiscal period.
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SCHLEY COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30. 1998
II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS
EXPENDITURESILIABILITIESIDISBURSEMENTS Failure to Meet Expenditure Requirements Nonmaterial Noncompliance Amount: $ 23,933.64 Finding Control Number: FS-7231-98-02
Management's Response:
We concur with this finding. This finding will be resolved by Georgia Department ofEducation through a future increase in the Board's local fair share portion of QBE allotments.
GENERAL LEDGER Deficit Fund Balance Nonmaterial Noncompliance Finding Control Number: FS-7231-98-03
The Schley County Board of Education had a deficit fund balance of$121,782.73 for the General Fund at June 30, 1998. The Financial Management for Georgia Local Units of Administration. Secti'on II, Chapter 25, provides that school systems with deficits meet special budgeting and financial requirements which includes a requirement to provide for a minimum of ~ mill of deficit reduction when budgeting for school operations.
The school system's continuing deficit problems stem from the Board's failure to prepare a balanced budget and to provide for deficit reduction as required. Appropriate action should be taken by the Board to fund this deficit.
Management's Response:
We do not concur with this finding; however, this finding will be resolved by an increase in the revenue from local tax dollars.
GENERAL LEDGER Outstanding Loan Nonmaterial Noncompliance Finding Control Number: FS-7231-98-04
On December 31, 1997, the General Fund had an unpaid loan outstanding in the amount of $250,000.00. Article IX, Section V, Paragraph V ofthe Constitution of the State of Georgia provides, in part, as follows:
"The governing authority of any county, municipality or other political subdivision of this state may incur debt by obtaining temporary loans in each year to pay expenses Such loans shall be payable on or before December 31 ofthe calendar in which such loan is made "
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SCHLEY COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND OUESTIONED COSTS
YEAR ENDED JUNE 3D. 1998
IT FINANCIAL STATEMENT FINDINGS AND OUESTIONED COSTS
GENERAL LEDGER Outstanding Loan Nonmaterial Noncompliance Fi?ding Control Number: FS-7231-98-04
This condition occurred because the Board did not have adequate cashavailable to make loan payments on December 31, 1997 as required. Repayment of loans should be made in conformity with constitutional limitations.
Management's Response:
We concur with this finding. The Board ofEducation will make every effort to repay loans made on or before December 31 ofthe calendar year in which they are made.
GENERAL FIXED ASSETS Failure to Maintain General Fixed Assets Account Group Reportable Condition - Material Weakness Repeated From Prior Year Finding Control Number: FS-7231-98-0S
The Schley County Board ofEducation did not maintain a system-wide General Fixed Assets Account Group within the formal accounting records as required by generally accepted accounting principles. This condition results in the general purpose financial statements ofthe Board being incomplete and not in accordance with generally accepted accounting principles. Appropriate action should be taken by the Board to establish accounting controls and procedures to provide for maintenance of a General Fixed Assets Account Group. These subsidiary records should include an inventory ofland, buildings and equipment owned by the Board and should include, but may not be limited to, date acquired, acquisition cost, estimated replacement cost, location and description. Detailed records should be maintained ofall additions and deletions to the General Fixed Assets Account Group.
Management's Response:
We concur with this recommendation. Due to current staffing limitations and budgetary considerations prohibiting the hiring ofadditional administrative staffthe Board has decided not to pursue the recording of General Fixed Assets on the financial statements.
ill FEDERAL AWARD FINDINGS AND OUESTIONED COSTS
No matters were reported.
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