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

STEWART COUNTY BOARD OF EDUCATION
LUMPKIN, GEORGIA REPORT ON AUDIT OF THE FINANCIAL STATEMENTS
FOR THE FISCAL YEAR ENDED JUNE 30, 2007
STATE OF GEORGIA
DEPARTMENT OF AUDITS AND ACCOUNTS
Russell W. Hinton State Auditor

STEWART 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

STATEMENTOFNETASSETS

B

STATEMENT OF ACTIVITIES

FUND FINANCIAL STATEMENTS

C

BALANCE SHEET

GOVERNMENTAL FUNDS

D

RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET

TO THE STATEMENT OF NET ASSETS

E

STATEMENT OF REVENUES, EXPENDITURES AND CHANGES

IN FUND BALANCES

GOVERNMENTAL FUNDS

F

RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT

OF REVENUES, EXPENDITURES AND CHANGES IN FUND

BALANCES TO THE STATEMENT OF ACTIVITIES

G

STATEMENT OF FIDUCIARY NET ASSETS

FIDUCIARY FUNDS

H

NOTES TO THE BASIC FINANCIAL STATEMENTS

SCHEDULES

REQUIRED SUPPLEMENTARY INFORMATION

1 SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL GENERAL FUND

SUPPLEMENTARY INFORMATION

2 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS 3 SCHEDULE OF STATE REVENUE

Page
1 2 4 5 6 7 8 9
23 24
26

,

STEWART COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS -

SECTION I

FINANCIAL

SCHEDULES

SUPPLEMENTARY INFORMATION

4 SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS

27

5 ALLOTMENTS AND EXPENDITURES

GENERAL FUND - QUALITY BASIC EDUCATION PROGRAMS (QBE)

BY PROGRAM

29

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

STEWART 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
September 29, 2008

Honorable Sonny Perdue, Governor Members of the General Assembly Members ofthe State Board of Education
and Superintendent and Members of the Stewart 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 Stewart County Board of Education, as of and for the year ended June 30, 2007, which collectively comprise the Board's basic financial statements as listed in the table of contents. These financial statements are the responsibility ofthe Stewart 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 Stewart 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.

2007ARL-11

In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, each major fund, and the aggregate remaining fund information ofthe Stewart County Board ofEducation, as ofJune 30, 2007, 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 Stewart 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.
In accordance with Government Auditing Standards, we have also issued our report dated September 29, 2008, on our consideration of the Stewart 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 of that report is to describe the scope ofour testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit.
The Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual, as presented on page 23, is not a required part of the basic financial statements but is supplementary information required by the accounting principles generally accepted in the United States of America. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods ofmeasurement and presentation ofthe required supplementary information. However, we did not audit the information and express no opinion on it.
Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Stewart 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,
--:s~to~, ~ State Auditor
RWH:as 2007ARL-11

STEWART COUNTY BOARD OF EDUCATION

STEWART COUNTY BOARD OF EDUCATION STATEMENT OF NET ASSETS JUNE 30, 2007
ASSETS
Cash and Cash Equivalents Investments Accounts Receivable, Net
Interest Taxes State Government Federal Government Other Inventories Capital Assets Land Land Improvements Buildings Equipment Less: Accumulated Depreciation
Total Assets
LIABILITIES
Accounts Payable Salaries and Benefits Payable Payroll Withholdings Payable Long-Term Liabilities
Due Within One Year Due in More Than One Year
Total Liabilities
NET ASSETS
Invested in Capital Assets, Net of Related Debt Restricted for
Bus Replacement Continuation of Federal Programs Debt Service Capital Projects Unrestricted
Total Net Assets
Total Liabilities and Net Assets

EXHIBIT"A"

GOVERNMENTAL ACTIVITIES

$

803,222.50

663,447.69

2,996.19 194,333.83 456,257.64 249,309.78
18,321.40 15,786.78

63,916.09 522,479.95 11,252,731.86 1,577,235.73 -5,979,974.06

$ ===9=,8=40=,0=6=5=.3..,.8

$

247,465.09

799,810.45

119,144.32

230,000.00 235,000.00

$

1,631,419.86

$

6,971,389.57

58,200.00 55,883.60 295,700.68 504,192.51 323,279.16

$

8,208,645.52

$ ===9,!=;8=40.,,,0=6..,5..,.3=8

The notes to the basic financial statements are an integral part of this statement. -1-

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

GOVERNMENTAL ACTIVITIES
Instruction Support Services
Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Operations of Non-Instructional Services Food Services Interest on Short-Term and Long-Term Debt
Total Governmental Activities
General Revenues Taxes Property Taxes For Maintenance and Operations 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
Net Assets - End of Year

EXPENSES

CHARGES FOR SERVICES

$

4,787,805.87 $

242,125.44 270,028.21 164,565.43 455,889.10 553,234.03 116,166.81 463,983.74 512,088.79
17,829.26 32,766.93

525,828.67 17 135.00

$

8,159,447.28 $

213,696.00 23,683.96 15,742.93
43,079.05 296,201.94

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

EXHIBIT"B"

PROGRAM REVENUES

OPERATING

CAPITAL

GRANTS AND

GRANTS AND

CONTRIBUTIONS CONTRIBUTIONS

NET (EXPENSES} REVENUES
AND CHANGES IN NET ASSETS

$

3,854,270.38

130,771.19 180,823.73 71,124.41 435,683.59 291,432.36
3,024.95 170,910.64 255,118.65 $

16,092.05

432,931.51

$

5,842, 183.46 $

$ 79,075.00 79 075.00 $

-719,839.49
-87,670.29 -89,204.48 -93,441.02 -20,205.51 -246,058.74 -113,141.86 -293,073.10 -177,895.14 -17,829.26 -16,674.88
-49,818.11 -17 135.00
-1,941,986.88

$

1,710,999.04

395,158.93 37,006.67 11,264.00 38,521.42 41 730.86

$

2,234,680.92

$

292,694.04

7,915,951.48

$ =====8'=20=8=,6=4=5=.5=2

-3-

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

EXHIBIT"C"

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

GENERAL FUND

DISTRICTWIDE
CAPITAL PROJECTS
FUND

DEBT SERVICE
FUND

TOTAL

$ 413,882.60 $ 326,126.63 $

63,213.27 $

303,365.75

127,594.53

232,487.41

2,996.19 71,182.55 456,257.64 249,309.78
9,891.89 15 786.78

58,981.18 8,429.51

803,222.50 663,447.69
2,996.19 130,163.73 456,257.64 249,309.78
18,321.40 15 786.78

Total Assets

$ 1,522,673.18 $ 521,131.85 $ 295,700.68 $ ===2,=33=9=,5=0=5.=7=1

LIABILITIES AND FUND BALANCES

LIABILITIES

Accounts Payable Salaries and Benefits Payable Payroll Withholdings Payable

$ 230,525.75 $ 799,810.45 119144.32

Total Liabilities

$ 1,149,480.52 $

FUND BALANCES

Reserved for: Bus Replacement Continuation of Federal Programs Debt Service Inventories Capital Projects
Unreserved Designated for Student Activities Undesignated Reported in: General Fund

$

58,200.00

40,096.82

15,786.78 $

6,191.87

252,917.19

Total Fund Balances

$ 373,192.66 $

16,939.34 16 939.34
$ 504,192.51
504,192.51 $

$ $ $ 295,700.68
295,700.68 $

247,465.09 799,810.45 119144.32
1,166,419.86
58,200.00 40,096.82 295,700.68 15,786.78 504,192.51
6,191.87
252,917.19
1,173,085.85

Total Liabilities and Fund Balances

$ 1,522,673.18 $ 521131.85 $ 295,700.68 $ ===2==,3=39=,5=0=5=7.=1

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

STEWART COUNTY BOARD OF EDUCATION RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET
TO THE STATEMENT OF NET ASSETS
JUNE 30, 2007

EXHIBIT"D"

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

$ 1,173,085.85

$

63,916.09

522,479.95

11,252,731.86

1,577,235.73

-5,979,974.06

7,436,389.57

64,170.10

-465,000.00

Net Assets of Governmental Activities (Exhibit "A")

$ 8,208,645.52

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

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

EXHIBIT"E"

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

GENERAL FUND

DISTRICTWIDE
CAPITAL PROJECTS
FUND

DEBT SERVICE
FUND

TOTAL

$ 1,722,074.91 37,006.67 $
4,422,329.43
1,510,193.03 296,201.94 7,956.90 35,134.35

395,158.93
19,773.92 $ 8,429.51

$ 8,030,897.23 $ 423,362.36 $

$ 10,790.60

1,722,074.91 432,165.60
4,422,329.43
1,510,193.03
296,201.94 38,521.42 43,563.86

10,790.60 $ 8,465,050.19

$ 4,432,685.39

$ 4,432,685.39

242,125.44
270,028.21 158,722.93 430,502.51 536,901.78 $ 116,166.81
443,688.12
554,411.03
32,766.93 505,706.66

9,000.00 12,264.33 80,463.01 5,250.00
272,090.78

242,125.44
270,028.21 158,722.93 430,502.51 545,901.78 116,166.81
455,952.45 634,874.04
5,250.00
32,766.93
505,706.66
272,090.78

$ 220,000.00 17,135.00

220,000.00 17,135.00

$ 7,723,705.81 $ 379,068.12 $ 237,135.00 $ 8,339,908.93

$ 307,191.42 $ 44,294.24 $ -226,344.40 $ 125,141.26

$

548.69

$

-548.69

$

548.69

-548.69

$

-548.69 $

548.69

$

0.00

$ 306,642.73 $ 44,842.93 $ -226,344.40 $

125,141.26

66,549.93 459,349.58

522,045.08

1,047,944.59

$ 373,192.66 $ 504,192.51 $ 295,700.68 $ 1,173,085.85

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

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

EXHIBIT"F"

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

$ 125,141.26

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

$ 479,359.33 -404,512.31

74,847.02

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.

-11,075.87

In the Statement of Activities, only the loss on the disposal of the land improvement, buildings, and equipment is reported, whereas in the Governmental Funds, the entire proceeds from the sale decrease financial resources. Thus, the change in net assets differs from the change in fund balances by the carrying value of the land improvement, buildings and equipment sold.

-116,218.37

Repayment of Long-Term Debt is reported as an expenditure in Governmental Funds, but the repayment reduces Long-Term Liabilities in the Statement of Net Assets. In the current year, these amounts consist of:

Bond Principal Retirements

220,000.00

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

$ 292,694.04

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

STEWART COUNTY BOARD OF EDUCATION STATEMENT OF FIDUCIARY NET ASSETS FIDUCIARY FUNDS JUNE 30, 2007
ASSETS Accounts Receivable, Net
Other
LIABILITIES Cash Overdraft Accounts Payable Other Liabilities Funds Held for Others
Total Liabilities

EXHIBIT"G"
AGENCY FUNDS
$ 16,753.94
$ 11,370.70 2,999.80 6.80 2,376.64
$ 16,753.94

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

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

EXHIBIT "H"

Note 1: DESCRIPTION OF SCHOOL DISTRICT AND REPORTING ENTITY
REPORTING ENTITY
The Stewart County Board ofEducation (School District) was established under the laws ofthe State of Georgia and operates under the guidance of a school board elected by the voters and a Superintendent appointed by the Board. The Board is organized as a separate legal entity and has the power to levy taxes and issue bonds. Its budget is not subject to approval by any other entity. Accordingly, the School District is a primary government and consists of all the organizations that compose its legal entity.
Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The School District's basic financial statements are collectively comprised of the District-wide financial statements, fund financial statements and notes to the basic financial statements of the Stewart County Board of Education.
District-wide Statements: The Statement ofNet Assets and the Statement ofActivities display information about the financial activities ofthe overall School District, except for fiduciary activities. Eliminations have been made to minimize the double counting of internal activities. Governmental activities generally are financed through taxes, intergovernmental revenues, and other nonexchange transactions.
The Statement 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 ofthe School District's programs, such as office and maintenance personnel and accounting) are not allocated to programs.
Program revenues include (a) charges paid by the recipients 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 ofinternal activities. Separate statements for each category (governmental and fiduciary) are presented. The emphasis of fund financial statements is on major governmental funds, each displayed in a separate column.
The School District reports the following major governmental funds:
-9-

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

EXHIBIT "H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
General Fund is the School District's primary operating fund. It accounts for all financial resources ofthe School District, except those resources required to be accounted for in another fund.
District-wide Capital Projects Fund accounts for financial resources including Special Purpose Local Option Sales Tax (SPLOST) and Bond Proceeds to be used for the acquisition, construction or renovation of major capital facilities.
Debt Service Fund accounts for taxes (sales) legally restricted for the payment of general longterm principal, interest and paying agent's fees.
The School District reports the following fiduciary fund type:
Agency funds account for assets held by the School District as an agent for various funds, governments or individuals.
BASIS OF ACCOUNTING
The basis ofaccounting determines when transactions are reported on the financial statements. The District-wide governmental and fiduciary fund financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded at the time liabilities are incurred, regardless of when the related cash flows take place. Nonexchange transactions, in which the School District gives (or receives) value without directly receiving (or giving) equal value in exchange, include property taxes, sales taxes, grants and donations. On an accrual basis, revenue from property taxes is recognized in the fiscal year for which the taxes are levied. Revenue from sales taxes is recognized in the fiscal year in which the underlying transaction (sale) takes place. Revenue from grants and donations is recognized in the fiscal year in which all eligibility requirements have been satisfied.
The School District uses funds to report on its financial position and the results of its operations. Fund accounting is designed to demonstrate legal compliance and to aid financial management by segregating transactions related to certain governmental functions or activities. A fund is a separate accounting entity with a self-balancing set of accounts.
Governmental funds are reported using the current financial resources measurement focus and the modified accrual basis ofaccounting. Under this method, revenues are recognized when measurable and available. The School District considers all revenues reported in the governmental funds to be available if they are collected within sixty days after year-end. Property taxes, sales taxes and interest are considered to be susceptible to accrual. Expenditures are recorded when the related fund liability is incurred, except for principal and interest on general long-term debt, which are recognized as expenditures to the extent they have matured. Capital asset acquisitions are reported as expenditures in governmental funds. Proceeds of general long-term liabilities are reported as other financing sources.
- 10 -

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

EXHIBIT "H"

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

- 11 -

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

EXHIBIT"H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

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

RECEIVABLES

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

PROPERTY TAXES

The Stewart County Board ofCommissioners fixed the property tax levy for the 2006 tax digest year (calendar year) on October 15, 2006 (levy date). Taxes were due on December 20, 2006 (lien date). Taxes collected within the current fiscal year or within 60 days after year-end on the 2006 tax digest are reported as revenue in the governmental funds for fiscal year 2007. The Stewart County Tax Commissioner bills and collects the property taxes for the School District, withholds 2.5% oftaxes collected as a fee for tax collection and remits the balance of taxes collected to the School District. Property tax revenues, at the fund reporting level, during the fiscal year ended June 30, 2007, for maintenance and operations amounted to $1,722,074.91.

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

School Operations

13.142 mills

SALES TAXES

Special Purpose Local Option Sales Tax, at the fund reporting level, during the year amounted to $395,158.93 and is to be used for capital outlay for educational purposes or debt service. This sales tax was authorized by local referendum and the sales tax must be re-authorized at least every five years.

INVENTORIES

FOOD INVENTORIES On the basic financial statements, inventories of donated food commodities used in the preparation ofmeals are reported at their Federally assigned value and purchased foods inventories are reported

- 12 -

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

EXHIBIT"H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

at cost (first-in, first-out). The School District uses the consumption method to account for inventories whereby donated food commodities are recorded as an asset and as revenue when received, and expenses/expenditures are recorded as the inventory items are used. Purchased foods are recorded as an asset when purchased and expenses/expenditures are recorded as the inventory items are used.

CAPITAL ASSETS

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

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

Capitalization Policy

Estimated Useful Life

Land Land Improvements Buildings and Improvements Equipment

All

NIA

$ 5,000.00 15 to 80 years

$ 5,000.00 25 to 80 years

$ 5,000.00 5 to 30 years

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

GENERAL OBLIGATION BONDS

The School District issues general obligation bonds to provide funds for the acquisition and construction of major capital facilities. Bond issuance costs are recognized in the financial statements during the fiscal year bonds are issued. General obligation bonds are direct obligations and pledge the full faith and credit of the government. The outstanding amount of these bonds is recorded in the Statement of Net Assets.

- 13 -

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

EXHIBIT"H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NET ASSETS
The School District's net assets in the District-wide Statements are classified as follows:
Invested in capital assets, net of related debt - This represents the School District's total investment in capital assets, net ofoutstanding debt obligations related to those capital assets. To the extent debt has been incurred but not yet expended for capital assets, such amounts are not included as a component of invested in capital assets, net of related debt.
Restricted net assets - These represent resources for which the School District is legally or contractually obligated to spend resources for bus replacement, continuation of Federal programs, debt service and capital projects in accordance with restrictions imposed by external third parties.
Unrestricted net assets - Unrestricted net assets represent resources derived from property taxes, sales taxes, grants and contributions not restricted to specific programs, charges for services, and miscellaneous revenues. These resources are used for transactions relating to the educational and general operations of the School District, and may be used at the discretion of the Board to meet current expenses for those purposes.
Note 3: DEPOSITS
COLLATERALIZATION OF DEPOSITS Official Code of Georgia Annotated (OCGA) Section 45-8-12 provides that there shall not be on deposit at any time in any depository for a time longer than ten days a sum of money which has not been secured by surety bond, by guarantee of insurance, or by collateral. The aggregate ofthe face value of such surety bond and the market value of securities pledged shall be equal to not less than 110 percent ofthe public funds being secured after the deduction ofthe amount ofdeposit insurance. Ifa depository elects the pooled method (OCGA 45-8-13.1) the aggregate ofthe market value ofthe securities pledged to secure a pool ofpublic funds shall be not less than 110 percent ofthe daily pool balance.
Acceptable security for deposits consists of any one of or any combination of the following:
(1) Surety bond signed by a surety company duly qualified and authorized to transact business within the State of Georgia,
(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,
- 14 -

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

EXHIBIT"H"

Note 3: DEPOSITS

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

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

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

CATEGORIZATION OF DEPOSITS At June 30, 2007, the bank balances were $1,606,699.66. The amounts ofthe total uninsured bank balances are classified into three categories of custodial credit risk:

Category 1 - Uncollateralized, Category 2 - Cash collateralized with securities held by the pledging financial institution, or Category 3 - Cash collateralized with securities held by the pledging financial institution's
trust department or agent but not in the School District's name.

The School District's uninsured deposits are classified by custodial credit risk category at June 30, 2007, as follows:

Custodial Credit Risk Category

Bank Balance

1

$

0.00

2

1,404,181.18

3

0.00

Total

$ 1,404,181.18

Note 4: NON-MONETARY TRANSACTIONS

The School District 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 2 - Inventories

- 15 -

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

EXHIBIT "H"

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
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 July 1, 2006

Increases

Decreases

Balances June 30, 2007

$ 63,916.09 $

0.00 $

0.00 $ 63,916.09

$ 11,354,005.72 $ 1,403,120.73 388,277.13

13,111.51 $ 327,045.00 139,202.82

114,385.37 $ 11,252,731.86

152,930.00 1,577,235.73

5,000.00

522,479.95

4,514,391.38 973,364.00 243,803.37

144,407.29 128,572.04 131,532.98

152,930.00 3,167.00

4,658,798.67 949,006.04 372,169.35

$ 7,413,844.83 $ 74,847.02 $ 116,218.37 $ 7,372,473.48

$ 1,411160.22 $ 14,841.02 $ 116,218.31 $ 1,436,382 51

Current year depreciation expense by function is as follows:

Instruction Support Services
Educational Media Services General Administration School Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Food Services

$ 228,024.14

$ 12,797.59 16,088.70 4,646.80 10,432.00 85,918.34 18,389.00

148,272.43 28,215.74

$ 404,512.31

Note 6: RESTRICTED ASSETS

Special Purpose Local Option Sales Tax (SPLOST) are restricted assets in the Statement of Net Assets because their use is limited by applicable bond covenants or statutory provisions. Restricted assets at June 30, 2007, were as follows:

- 16 -

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

EXHIBIT "H"

Note 6: RESTRICTED ASSETS

District-wide Capital Projects SPLOST

Debt Service Funds

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

$ 63,213.27 $ 326,126.63
$ 232,487.41 $ 127,594.53

Note 7: INTERFUND TRANSFERS

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

Transfer to

Transfers From General Fund

District-wide Capital Projects

$====!!=54==!8=!:.6-9

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

Note 8: RISK MANAGEMENT

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

The School District participates in the Georgia School Boards Association Risk and Insurance Management System, a public entity risk pool organized on July 1, 1994, to develop and administer a plan to reduce risk of loss on account of general liability, motor vehicle liability, or property damage, including safety engineering and other loss prevention and control techniques, and to administer one or more groups of self-insurance funds, including the processing and defense of claims brought against members of the system. The School District pays an annual premium to the system for its general insurance coverage. Additional coverage is provided through agreements by the system with other companies according to their specialty for property, boiler and machinery

- 17 -

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

EXHIBIT"H"

Note 8: RISK MANAGEMENT

(including coverage for flood and earthquake), general liability (including coverage for sexual harassment, molestation and abuse), errors and omissions, crime and automobile risks. Payment of excess insurance for the system varies by line of coverage.

The School District participates in the Georgia School Boards Association Workers' Compensation Fund, a public entity risk pool organized on July 1, 1992, to develop, implement, and administer a program ofworkers' compensation self-insurance for its member organizations. The School District pays an annual premium to the Fund for its general insurance coverage. Additional insurance coverage is provided through an agreement by the Fund with the Safety National Casualty Corporation to provide coverage for potential losses sustained by the Fund in excess of$400,000.00 loss per occurrence, up to $1,000,000.00.

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

Position Covered

Amount

Superintendent Board Chairperson Each Principal All Employees

$ 50,000.00 $ 50,000.00 $ 10,000.00 $ 100,000.00

Note 9: OPERATING LEASES

Stewart County Board of Education has entered into various leases as lessee for office equipment. These leases are considered for accounting purposes to be operating leases. Lease expenditures for the year ended June 30, 2007, for governmental funds amounted to $3,670.00. Future minimum lease payments for these leases are as follows:

Year Ending

Governmental Funds

2008 2009

$ 3,670.00 3,160.00

Total

$

6,830.00

- 18 -

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

EXHIBIT"H"

Note 10: SHORT-TERM DEBT

The School District obtains temporary loans 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 ofthe State of Georgia limits the aggregate amount of short-term 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

Temporary Loans

$======'0~.0=0 $ 600,075.00 $ 600,075.00 $====0..,,,.0==0

Note 11: LONG-TERM DEBT

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

Purpose

Interest Rate

Amount

General Government - Series 2002

2.98%

$ 465,000.00

Voters have authorized $1,200,000.00 in general obligation debt for capital outlay which was not issued as of June 30, 2007.

The changes in Long-Term Debt during the fiscal year ended June 30, 2007, were as follows:

Governmental Funds
General Obligation
Bonds

Balance July 1, 2006

$ 685,000.00

Deductions Debt Retired

220.000.00

Balance June 30, 2007

$ 465,000.00

Portion of Long-Term Debt Due within One Year

$ 230.000.00

- 19 -

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

EXHIBIT "H"

Note 11: LONG-TERM DEBT

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

Fiscal Year Ended June 30

General Obligation

Debt

Principal

Interest

2008 2009

$ 230,000.00 $ 235,000.00

10,430.00 3,501.50

Total Principal and Interest

$ 465,000.00 $ 13,931.50

Note 12: ON-BEHALF PAYMENTS

The School District has recognized revenues and costs in the amount of $139,900.21 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 $134,696.65

Paid to the Teachers Retirement System of Georgia For Teachers Retirement System (TRS) Employer's Cost In the amount of $3,991.56

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 $1,212.00

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.

-20-

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

EXHIBIT"H"

Note 14: RETIREMENT PLANS

TEACHERS RETIREMENT SYSTEM OF GEORGIA (TRS)

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

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

Fiscal Year

Percentage Contributed

Required Contribution

2007 2006 2005

100% 100% 100%

$ 383,524.61 $ 384,677.00 $ 358,114.00

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

SCHEDULE "1"

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

NONAPPROPRIATED BUDGETS

ORIGINAL (1)

FINAL (1)

ACTUAL AMOUNTS

$

1,723,285.00 $

1,723,285.00 $

1,722,074.91

37,006.67

3,967,076.00

4,379,453.18

4,422,329.43

191,759.00

1,452,307.00

1,510,193.03

170,000.00

210,700.00

296,201.94

221,426.00

7,956.90

105,426.00

35 134.35

$

6,157,546.00 $

7987171.18 $

8,030,897.23

$

4,115,328.00 $

4,648,507.00 $

4,432,685.39

180,407.00 206,618.07 161,218.00 495,129.00 512,988.00 110,445.00 361,133.00 514,073.00
4,675.00 65,406.00

257,005.00 249,543.00 161,400.00 492,607.00 522,417.00 110,445.00 361,148.00 540,911.00
4,675.00 67,406.00 434 415.00

242,125.44 270,028.21 158,722.93 430,502.51 536,901.78 116,166.81 443,688.12 554,411.03
32,766.93 505,706.66

$

6,727,420.07 $

7,850,479.00 $

7,723,705.81

$

-569,874.07 $

136,692.18 $

307,191.42

$

-569,874.07 $

74,378.63

-16 521.53

136,692.18 $ 74,378.63 239,384.20

-548.69 306,642.73
66,549.93

Fund Balances - Ending

$

-512,016.97 $

450,455.01 $ ===37=3='1=9=2=.66=

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

See notes to the basic financial statements.

- 23 -

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

SCHEDULE "2"

FUNDING AGENCY PROGRAM/GRANT
Agriculture, U. S. Department of Child Nutrition Cluster Pass-Through From Georgia Department of Education Food Services School Breakfast Program National School Lunch Program
Total Child Nutrition Cluster
Other Programs Pass-Through From Georgia Department of Education Food Donation (1)
Total U.S. Department of Agriculture
Corporation for National and Community Service Pass-Through From Georgia Department of Education Learn and Serve America School and Community Based Programs
Education, U. S. Department of Special Education Cluster Pass-Through From Georgia Department of Education Special Education Grants to States Preschool Grants
Total Special Education Cluster
Other Programs Pass-Through From Georgia Department of Education Enhancing Education Through Technology Program Hurricane Education Recovery Act 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 Vocational Education - Basic Grants to States Pass-Through From Morehouse School of Medicine Twenty-First Century Community Learning Centers
Total U. S. Department of Education
Total Federal Financial Assistance
NIA = Not Available

CFDA NUMBER

PASSTHROUGH
ENTITY ID
NUMBER

EXPENDITURES IN PERIOD

. 10.553
. 10.555

N/A NIA $
$

(2) 419,869.16
419,869.16

10.550

N/A $

27 449.94 447,319.10

94.004

N/A $

8,994.21

84.027 84.173

N/A

$

N/A

$

149,143.78 8,677.00
157,820.78

84.318 84.938 84.367 84.357 84.358 84.186
. 84.298 84.010 84.048
84.287

N/A

15.00

NIA

(3)

N/A

81,536.68

N/A

191,457.88

NIA

20,043.56

N/A

5,407.36

NIA

1,623.00

N/A

503,417.22

NIA

22,612.92

N/A

96,905.34

$ 1,080,839.74

$ =~1'='5=37;:1,,,;,,;15~3~.0~5

- 24 -

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

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 ($130,996.38) were not maintained separately and are included in the 2007 National School Lunch Program.
(3) Funds earned and expended in the prior period on Hurricane Education Recovery Act, in the amount of $2,430.00, do not require reporting of expenditures.
Major Programs are identified by an asterisk (*) in front of the CFDA number.
The School District did not provide Federal Assistance to any Subrecipient.
The accompanying schedule of expenditures of Federal awards includes the Federal grant activity of the Stewart 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.

- 25 -

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

AGENCY/FUNDING
GRANTS Bright From the Start: Georgia Department of Early Care and Learning Pre-Kindergarten Program
Education, Georgia Department of Quality Basic Education Direct Instructional Cost Kindergarten Program Kindergarten Program - Early Intervention Program Primary Grades (1-3) Program Primary Grades - Early Intervention (1-3) Program Upper Elementary Grades (4-5) Program Upper Elementary Grades - Early Intervention (4-5) Program Middle School (6-8) Program High School General Education (9-12) Program Vocational Laboratory (9-12) Program Students with Disabilities - Categories I - 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 Nursing Services Principal Supplements Mid-term Adjustment Hold-Harmless Education Equalization Funding Grant Food Services Vocational Education Amended Formula Adjustment Other State Programs Graduation Coaches Health Insurance Middle School Remediation and Intervention Grant National Teacher Certification Preschool Handicapped Program Pupil Transportation - State Bonds Statewide K-8 Reading and Mathematics Program Teachers' Retirement
Office of Treasury and Fiscal Services Public School Employees Retirement

See notes to the basic financial statements.

- 26 -

SCHEDULE "3"

GOVERNMENTAL FUND TYPE GENERAL FUND

$

266,935.18

104,834.00 78,333.00
378,367.00 141,213.00 195,048.00
99,937.00 427,494.00 420,554.00 180,184.00 467,269.00
13,563.00 4,341.00
34,820.00 67,722.00 22,505.00 12,584.00
279,541.00 277,171.00 165,385.00
238,387.00 29,075.00
183,486.00 30,837.00
2,229.00 61,069.00 11,264.00 21,770.00
9,825.00 -75,244.00
40,075.00 134,696.65
736.00 5,739.00 14,573.00 50,000.00 20,808.04 3,991.56
1,212.00
$ ===4.4..2.=2=,3=2=9.=43=

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

SCHEDULE "4"

PROJECT
Construction and acquisition of projects to include repair and replacement of roofs, replacement of energy management system, air-condition auditorium at Elementary School, renovate shop for construction of two computer labs, construction of two Middle Schools science labs and work room, extend the bleachers on the football field, renovation of cafeteria at Elementary School, replace bleachers in gymnasium, construct canopy from front hall to auditorium, construct walkway from front hall to auditorium, refinish gymnasium floor, repair locker room floor in gymnasium, paving the drive at the Elementary School, replace locks and hardware on doors at Stewart-Quitman Middle/High School, build restrooms for baseball field, replace carpet at StewartQuitman Middle/High School, paint metal on school building and paint field/press house at football field, purchase furniture, purchase and install four sets of portable bleachers, purchase four school buses, replace damaged ceiling tiles and install lights, poles, wiring and fixtures at baseball field
Rehabilitating, adding to, repairing, renovating, extending and improving Stewart County Elementary School and Stewart-Quitman Middle/High School and related facilities useful or desirable in connection therewith, to include improvements to physical education, athletic and playground facilities, replacement or repair of portable classrooms, parking improvements, and ceiling, wall covering and flooring repairs and replacements, acquisition and construction of a maintenance storage building, installation of a sprinkler system for the front campus, school district offices, football and baseball fields, purchase of school buses, system-wide technology additions and improvements, and acquisition of any necessary property therefore, both real and personal

ORIGINAL ESTIMATED
COST (1)

CURRENT ESTIMATED COSTS (2)

AMOUNT EXPENDED IN CURRENT
YEAR (3)

AMOUNT EXPENDED
IN PRIOR YEARS (3)

PROJECT STATUS

$ 1,487,631.00 $ 1,487,631.00

$ 1,239,552.00 Completed

1,600,000.00 $ 1,600,000.00 $ 396,203.12 $ 970,561.00 Ongoing

$ 3,087,631.00 $ 3,087,631.00 $ 396,203.12 $ 2,210,113.00

(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 Stewart County approved the imposition of a 1% sales tax to fund the above projects and retire associated debt. Amounts expended for these projects may include sales tax proceeds, state, local property taxes and/or other funds over the life of the projects.

See notes to the basic financial statements.

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STEWART COUNTY BOARD OF EDUCATION GENERAL FUND- QUALITY BASIC EDUCATION PROGRAM (QBE)
ALLOTMENTS AND EXPENDITURES BY PROGRAM YEAR ENDED JUNE 30, 2007

SCHEDULE "5"

DESCRIPTION
Direct Instructional Programs Kindergarten Program 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

$

122,926.00 $ 142,859.87

$

142,859.87

96,907.00

144,151.37

144,151.37

437,131.00

417,109.93 $

188.44

417,298.37

178,449.00

236,579.97

236,579.97

229,018.00

230,131.61

188.44

230,320.05

120,797.00 497,703.00 494,241.00 208,283.00 551,945.00
16,700.00 4,438.00
40 798.00

129,468.53 496,416.89 577,700.68 124,234.27
42,885.61 167,953.56 182,535.74
53,380.56 107.69
52,642.33
48 745.31

4,779.15 28,762.49 10,403.38
9,555.00
537.62

129,468.53 501,196.04 606,463.17 134,637.65
42,885.61 177,508.56 182,535.74
53,380.56 107.69
53,179.95
48 745.31

$

2,999,336.00 $ 3,046,903.92 $

54,414.52 $ 3,101,318.44

79,702.00 14 988.00

143,861.93

7,677.67 15,088.30

151,539.60 15,088.30

TOTAL QBE FORMULA FUNDS

$

3,094,026.00 $ 3,190,765.85 $

77,180.49 $ 3,267,946.34

(1) Comprised of State Funds plus Local Five Mill Share. (2) Allotments do not include the impact of the State amended formula adjustment.

See notes to the basic financial statements.

- 29 -

SECTION II COMPLIANCE AND INTERNAL CONTROL REPORTS

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

DEPARTMENT OF AUDITS AND ACCOUNTS
270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400
September 29, 2008

Honorable Sonny Perdue, Governor Members of the General Assembly Members ofthe State Board of Education
and Superintendent and Members ofthe Stewart County Board of Education
REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS
Ladies and Gentlemen:
We have audited the financial statements of the governmental activities, each major fund, and the aggregate remaining fund information of Stewart County Board ofEducation as of and for the year ended June 30, 2007, which collectively comprise Stewart County Board of Education's basic financial statements and have issued our report thereon dated September 29, 2008. 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 GovernmentAuditing Standards, issued by the Comptroller General of the United States.
Internal Control Over Financial Reporting
In planning and performing our audit, we considered Stewart 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 Stewart County Board of Education's internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness of the Stewart County Board of Education's internal control over financial reporting.
Our consideration of internal control over financial reporting was for the limited purpose described in the preceding paragraph and would not necessarily identify all deficiencies in internal control over financial reporting that might be significant deficiencies or material weaknesses. However, as discussed below, we identified certain deficiencies in internal control over financial reporting that we consider to be significant deficiencies.
2007YB-40

A control deficiency exists when the design or operation ofa control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect misstatements on a timely basis. A significant deficiency is a control deficiency, or combination of control deficiencies, that adversely affect the Stewart County Board of Education's ability to initiate, authorize, record, process, or report financial data reliably in accordance with generally accepted accounting principles such that there is more than a remote likelihood that a misstatement of the Stewart County Board ofEducation's financial statements that is more than inconsequential will not be prevented or detected by the Stewart County Board ofEducation's internal control. We consider items FS-7281-07-01, FS-7281-07-02, FS-7281-07-03, FS-7281-07-04 and FS-7281-07-05 in the accompanying Schedule ofFindings and Questioned Costs to be significant deficiencies in internal control over financial reporting.
A material weakness is a significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood that a material misstatement ofthe financial statements will not be prevented or detected by the Stewart 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-7281-07-03 and FS-7281-07-05 to be material weaknesses.
Compliance and Other Matters
As part of obtaining reasonable assurance about whether Stewart County Board of Education's financial statements are free of material misstatement, we performed tests of its compliance with certain provisions oflaws, regulations, contracts and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards.
We noted certain matters that we have reported to management of Stewart County Board of Education in a separate letter dated September 29, 2008.
Stewart County Board ofEducation's response to the findings identified in our audit is described in the accompanying Schedule of Management's Responses. We did not audit Stewart County Board of Education's response and, accordingly, we express no opinion on it.
2007YB-40

This report is intended solely for the information and use of the management, members of the Stewart County Board ofEducation, Federal awarding agencies and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties.
Respectfully submitted,
~~.~ ~!, ...
Russell W. Hinton, CPA, CGFM State Auditor
RWH:as 2007YB-40

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

DEPARTMENT OF AUDITS AND ACCOUNTS
270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400
September 29, 2008

Honorable Sonny Perdue, Governor Members ofthe General Assembly Members ofthe State Board of Education
and Superintendent and Members of the Stewart 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 Stewart 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, 2007. Stewart County Board ofEducation's major Federal programs are identified in the Summary of Auditor's Results Section of the accompanying Schedule of Findings and Questioned Costs. Compliance with the requirements of laws, regulations, contracts and grants applicable to each of its major Federal programs is the responsibility of Stewart County Board of Education's management. Our responsibility is to express an opinion on Stewart County Board of Education's compliance based on our audit.
We conducted our audit of compliance 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 Stewart County Board ofEducation's compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Our audit does not provide a legal determination on Stewart County Board of Education's compliance with those requirements.
2007SA-30

In our opinion, the Stewart County Board of Education complied, in all material respects, with the requirements referred to above that are applicable to each ofits major Federal programs for the year ended June 30, 2007.
Internal Control Over Compliance
The management of Stewart 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 Stewart County Board ofEducation's internal control over compliance with requirements that could have a direct and material effect on a major Federal program in order to determine our auditing procedures for the purpose ofexpressing our opinion on compliance, but not for the purpose ofexpressing an opinion on the effectiveness ofinternal control over compliance. Accordingly, we do not express an opinion on the effectiveness of the Stewart County Board of Education's internal control over compliance.
Our consideration ofthe 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.
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 deficiency in internal control over compliance described in the accompanying Schedule ofFindings and Questioned Costs as item FA-7281-07-01 to be a significant deficiency.
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. We do not consider the deficiency described in the accompanying Schedule of Findings and Questioned Costs to be a material weakness.
Stewart County Board ofEducation's response to the findings identified in our audit is described in the accompanying Schedule ofManagement's Responses. We did not audit Stewart County Board of Education's response and, accordingly, we express no opinion on it.
2007SA-30

This report is intended solely for the information and use of the management, members of the Stewart County Board ofEducation, Federal awarding agencies and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties.
. Respectfully submitted,
~,, CQ, ~~
Russell W. Hinton, CPA, CGFM State Auditor
RWH:as 2007SA-30

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

STEWART COUNTY BOARD OF EDUCATION AUDITEE'S RESPONSE
SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2007

PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

FINDING CONTROL NUMBER AND STATUS

FS-7281-00-03 FS-7281-03-04 FS-7281-04-03 FS-7281-05-01 FS-7281-05-02 FS-7281-05-03 FS-7281-05-04 FS-7281-06-01 FS-7281-06-02 FS-7281-06-03 FS-7281-06-04 FS-7281-06-05 FS-7281-06-06

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

CORRECTIVE ACTION/RESPONSES

EXPENDITURES/LIABILITIES/DISBURSEMENTS Failure to Meet Expenditure Requirements Amount: $15,528.61 Finding Control Number: FS-7281-00-03

Superintendent will contact Georgia Department of Education to determine actions necessary to resolve this finding.

EMPLOYEE COMPENSATION Underpayment of Employee Benefits Amount: $72,894.90 Finding Control Number: FS-7281-03-04

The Superintendent will contact Georgia Department ofCommunity Health to determine actions necessary to resolve this finding.

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STEWART COUNTY BOARD OF EDUCATION AUDITEE'S RESPONSE
SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2007
PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS
CORRECTIVE ACTION/RESPONSES
EXPENDITURES/LIABILITIES/DISBURSEMENTS Improper Expenditure Amount: $17,546.00 Finding Control Number: FS-7281-04-03
Superintendent is in the process of seeking reimbursement of these funds from the High School Activity account. The Superintendent follows all Federal, State, and local guidelines in the disbursement of funds that follow the customary scope ofthe expenditure for educational purposes only and not extra-curricular activities that fall outside of the educational purpose of the program for which the appropriate funds are to support.
EXPENDITURES/LIABILITIES/DISBURSEMENTS Improper Expenditure Amount: $11,053.00 Finding Control Number: FS-7281-05-03
Superintendent is in the process of seeking reimbursement of these funds from the High School Activity account. The Superintendent follows all Federal, State, and local guidelines in the disbursement of funds that follow the customary scope ofthe expenditure for educational purposes only and not extra-curricular activities that fall outside of the educational purpose of the program for which the appropriate funds are to support.
CASH AND CASH EQUIVALENTS EMPLOYEE COMPENSATION GENERAL LEDGER ACCOUNTING CONTROLS (OVERALL) Inadequate Accounting Procedures Finding Control Number: FS-7281-06-03
Procedures are in place to resolve issues with leave reports. However, we continue to monitor timely compliance by all employees. Also, procedures will be implemented to prevent users from accessing accounting functions that are outside of their area of responsibility.
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STEWART COUNTY BOARD OF EDUCATION AUDITEE'S RESPONSE
SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2007

PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

CORRECTIVE ACTION/RESPONSES

CASH AND CASH EQUIVALENTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Controls over School Activity Accounts Finding Control Number: FS-7281-06-04

The Superintendent has established procedures to resolve this finding. However, we will continue to monitor personnel and data to ensure proper implementation.

CAPITAL ASSETS Failure to Adequately Maintain Capital Assets Finding Control Number: FS-7281-06-06

The Board will begin the process by having the Superintendent to develop a plan to update and review its capital assets records and make appropriate adjustments to ensure that the capital assets conform to the School District's approved capital asset policy and generally accepted accounting procedures. The Board has already had the capital assets corrected and brought up-to-date with Board policy.

PRIOR YEAR FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

FINDING CONTROL NUMBER AND STATUS

FA-7281-04-02 FA-7281-05-02 FA-7281-06-01 FA-7281-06-02

Unresolved - See Corrective Action/Responses Further Action Not Warranted Unresolved - See Corrective Action/Responses Partially Resolved - See Corrective Action/Responses

CORRECTIVE ACTION/RESPONSES

SPECIAL TESTS AND PROVISIONS Inadequate Verification Process U.S. Department of Education Through Georgia Department of Education Child Nutrition Cluster (CFDA 10.553 and 10.555) Finding Control Number: FA-7281-04-02

The School District has directed the Superintendent to provide staff development and training for system personnel for the information and procedures that are found in USDA's

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STEWART COUNTY BOARD OF EDUCATION AUDITEE'S RESPONSE
SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2007
PRIOR YEAR FEDERAL AWARD FINDINGS AND QUESTIONED COSTS
CORRECTIVE ACTION/RESPONSES
SPECIAL TESTS AND PROVISIONS Inadequate Verification Process U.S. Department of Education Through Georgia Department of Education Child Nutrition Cluster (CFDA 10.553 and 10.555) Finding Control Number: FA-7281-04-02
Manual FNS-274 Part 7 and CFR 245.6a. The review and training will allow individuals responsible for this program to follow the rules and regulations and will keep the program in compliance. Furthermore, since the person responsible for this finding is no longer with the system, we will contact Georgia Department of Education School Food Nutrition consultants to determine appropriate action to have the finding resolved.
EQUIPMENT AND REAL PROPERTY MANAGEMENT Inadequate Inventory Records U. S. Department of Agriculture Through Georgia Department of Education Child Nutrition Cluster (CFDA 10.553 and 10.555) Finding Control Number: FA-7281-06-01
Inventory records in question have not been resolved. However, procedures have been put in place to comply with this finding for future reference including tagging, date of purchase, date put in service, serial number, and estimated or actual cost.
REPORTING Failure to File Accurate Completion Report U. S. Department of Education Through Georgia Department of Education Title I Grants to Local Educational Agencies (CFDA 84.010) Finding Control Number: FA-7281-06-02
The finding was accurate due to an error in the Fund 400 accounting procedure. We have prepared a check in the amount of $37,532.56. It will be sent to the Department of Education by July 31, 2008.
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SECTION IV FINDINGS AND QUESTIONED COSTS

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

I SUMMARY OF AUDITOR'S RESULTS

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

2. Significant Deficiencies in Internal Control Disclosed by the Audit ofthe Financial Statements The audit report for the Stewart County Board of Education disclosed financial statement significant deficiencies related to the following control categories.

Cash and Cash Equivalents Inventories Revenues/Receivables/Receipts Accounting Controls (Overall)

Expenditures/Liabilities/Disbursements Employee Compensation Capital Assets Financial Reporting

Of the significant deficiencies described above, Inventories, Employee Compensation, Accounting Controls (Overall) and Financial Reporting are considered to be material weaknesses.

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

4. Significant Deficiencies in Internal Control Over Major Programs The audit report for the Stewart County Board of Education disclosed a significant deficiency in internal control over major programs for the following compliance requirement.

Equipment and Real Property Management

The significant deficiency described above is not considered to be a material weakness.

5. Type of Report Issued on Compliance for Major Programs The auditor's opinion on the Stewart County Board ofEducation's report on compliance with requirements applicable to major programs was unqualified.

6. Audit Findings Required to be Reported by Section .510(a) of 0MB Circular A-133 The Stewart County Board of Education's audit disclosed an audit finding required to be reported by section .510(a) of 0MB Circular A-133. This audit finding is included in section IV ofthis report.

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

I SUMMARY OF AUDITOR'S RESULTS

7. Major Programs Federal awards audited as major programs are as follows: 10.553 Food Services - School Breakfast Program 10.555 Food Services - National School Lunch Program 84.010 Title I Grants to Local Educational Agencies

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

9. Low Risk Auditee The Stewart County Board of Education 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 REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Controls over School Activity Accounts Significant Deficiency Finding Control Number: FS-7281-07-01

Condition:

This is a repeat finding (FS-7281-06-04, FS-7281-05-02 and FS-7281-04-02) from the years ended June 30, 2006, June 30, 2005, and June 30, 2004, respectively. The accounting procedures of the 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 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: NIA

Information:

Cash and Cash Equivalents The bank reconciliation function was not separated from the record keeping and voucher payment functions. There was an unidentified variance of $1,144.77 between the high school's bank statement and the general ledger. No bank reconciliation was performed.

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

II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

CASH AND CASH EQUIVALENTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Controls over School Activity Accounts Significant Deficiency Finding Control Number: FS-7281-07-01

Revenues/Receivables/Receipts Deposit preparation was not separated from the record keeping and cash custody functions. No supporting receipt documentation was maintained for any receipts.

Expenditures/Liabilities/Disbursements The check writing function was not separated from the record keeping or processing of signed checks. Of ten vouchers tested, eight had no supporting documentation and one did not have any type of invoice or receipt documentation that supported the expenditure.

Cause:

The School District has not assigned responsibilities to achieve appropriate separation of duties nor utilized management oversight of the incompatible activities to properly safeguard assets. These deficiencies were also a result of management's failure to ensure that internal controls were established, implemented and functioning at the school level.

Effect:

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

Recommendation:

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

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

II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

EXPENDITURES/LIABILITIES/DISBURSEMENTS Improper Expenditure Significant Deficiency Finding Control Number: FS-7281-07-02

Condition:

This is a repeat finding (FS-7281-05-03 and FS-7281-04-03) from the years ended June 30, 2005, and June 30, 2004, respectively. The School District disregarded the specific limitations 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: $16,415.79

Information:

During the review of General Fund expenditures, four voucher packages were noted with the description "P.E. Equipment". After reviewing the invoices, it was determined that the expenditures were for extracurricular athletic team equipment and uniforms.

Cause:

Expenditures ofthis nature are considered to be beyond the customary scope of expenditures, for "educational purposes", as set forth in Georgia law.

Effect:

The School District is not in compliance with Georgia law.

Recommendation:

The School District should implement procedures to ensure that Georgia law is followed and appropriate action should be taken to ensure reimbursement of the $16,415.79 for deposit to the School District's General Fund.

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

II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

INVENTORIES EMPLOYEE COMPENSATION ACCOUNTING CONTROLS (OVERALL) Inadequate Accounting Procedures Material Weakness Finding Control Number: FS-7281-07-03

Condition:

This is a repeat finding (FS-7281-06-03, FS-7281-05-01 and FS-7351-04-01) from the years ended June 30, 2006, June 30, 2005, and June 30, 2004, respectively. The accounting procedures of the School District were insufficient to provide for adequate controls over the above control categories.

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.

Questioned Cost: NIA

Information:

Inventories Reconciliations ofthe School District's Purchased Food and Donated Commodities inventory listings to the general ledger were not performed. The listings did not agree to the general ledger by $259,589.29 at June 30, 2007. An audit adjustment was proposed and made to correct the financial statements.

Employee Compensation The School District did not have adequate procedures in place to ensure that employee leave records were properly maintained per approved leave policy, and to ensure that employee compensation expenditures were properly documented, calculated and approved before disbursement of funds. During testing of twenty employees, the following problems were noted: 1. Three employees used personal leave in excess of the three days allowed. The personal leave was deducted from the employees' sick leave balance resulting in an understatement of sick leave. 2. Two employees' sick leave was understated by a total 3.75 days. 3. One employee was overpaid by $990.70.

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

II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

INVENTORIES EMPLOYEE COMPENSATION ACCOUNTING CONTROLS (OVERALL) Inadequate Accounting Procedures Material Weakness Finding Control Number: FS-7281-07-03

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 School District's management failed to ensure that adequate internal controls were established, implemented and functioning.

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 inventories, maintenance of annual and sick leave records, and documentation, calculation and approval ofemployee compensation expenditures. Additionally, management should ensure that the access controls in the accounting information system complement the system of internal control by limiting an employee's access to only the accounting functions necessary for the performance ofthat employee's duties.

CAPITAL ASSETS Failure to Adequately Maintain Capital Assets Significant Deficiency Finding Control Number: FS-7281-07-04

Condition:

This is a repeat finding (FS-7281-06-06, FS-7281-05-04 and FS-7281-04-05) from the years ended June 30, 2006, June 30, 2005, and June 30, 2004, respectively. The School District failed to adequately maintain capital assets records.

Criteria:

Chapter 37 Fixed Assets of the Financial Management for Georgia Local Units of Administration indicates that School Districts must establish fixed asset policies, define system requirements, implement a fixed asset system and maintain fixed asset inventory records.

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

II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

CAPITAL ASSETS Failure to Adequately Maintain Capital Assets Significant Deficiency Finding Control Number: FS-7281-07-04

Questioned Cost: NIA

Information:

A review of the School District's capital assets policies and procedures and the related capital asset records noted the following deficiencies:
Asset identification numbers were not placed on assets in order to properly trace assets to listing.
The subsidiary ledger did not agree to the General Ledger. School District asset policies were not adhered to as follows:
1. One land improvement asset valued at $24,817.45 was incorrectly recorded as an equipment asset.
2. One building improvement asset valued at $30,159.92 was added in error.
3. One building improvement asset valued at $8,429.51 was not added.
4. One land improvement asset valued at $5,000.00 was not deleted.
5. Three equipment assets totaling $83,233.00 were not deleted.
6. Current year depreciation of $6,367.31 was not recorded correctly.

Cause:

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

Effect:

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

Recommendation:

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

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

II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

FINANCIAL REPORTING Inadequate Controls over Financial Reporting Material Weakness Finding Control Number: FS-7281-07-05

Condition:

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

Criteria:

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

Questioned Cost: NIA

Information:

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

Cause:

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

Effect:

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

Recommendation:

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

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

III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

EQUIPMENT AND REAL PROPERTY MANAGEMENT Inadequate Inventory Records Significant Deficiency U. S. Department of Agriculture Through Georgia Department of Education Child Nutrition Cluster (CFDA 10.553 and 10.555) Finding Control Number: FA-7281-07-01

Condition:

This is a repeat finding (FA-7281-06-01 and FA-7281-05-02) from the years ended June 30, 2006, and June 30, 2005, respectively. The School District failed to adequately maintain property management records for the Child Nutrition Cluster (CFDA 10.553 and 10.555) programs.

Criteria:

Policies and procedures relative to the School District's management of Federally acquired property are included in Chapter 41 of the Financial Management for Georgia Local Units of Administration. In addition, the requirements for equipment procured with School Food Service funds are contained in the A-102 Common Rule (_.32) - U. S. Department of Agriculture regulations 7 CFR 3015 for equipment purchased prior to July 1, 2001, and 7 CFR 3016 for equipment purchased on or after July 1, 2001.

Questioned Cost: NIA

Information:

A review of the School District's equipment listing revealed the following deficiencies:
No asset identification number or serial number was included on the equipment records for each equipment item.
Dates the equipment was purchased and put into service were not listed.
Cost ofeach equipment item was not listed on the equipment records.

Cause:

The School District failed to properly maintain complete property management records as required for the Child Nutrition Cluster program and failed to ensure that physical inventory counts were performed and reconciled to property management records.

Effect:

The failure ofthe School District to maintain complete and accurate property management records can lead to inaccurate internal and external reporting, as well as noncompliance with Federal guidelines and policies.

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

III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

EQUIPMENT AND REAL PROPERTY MANAGEMENT Inadequate Inventory Records Significant Deficiency U. S. Department of Agriculture Through Georgia Department of Education Child Nutrition Cluster (CFDA 10.553 and 10.555) Finding Control Number: FA-7281-07-01

Recommendation:

The School District should establish procedures to ensure that equipment purchased with Child Nutrition Cluster program funds is properly documented and maintained in compliance with the requirements of the policies and procedures relative to the School District's management of Federally acquired property included in Chapter 41 of the Financial Management for Georgia Local Units of Administration.

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SECTIONV MANAGEMENT'S RESPONSES

STEWART COUNTY BOARD OF EDUCATION SCHEDULE OF MANAGEMENT'S RESPONSES
YEAR ENDED JUNE 30, 2007
Finding Control Number: FS-7281-07-01
We concur with this finding. Beginning in August of 2008, the Board bookkeeper established and distributed clear procedures for deposit preparation and receipt documentation. The Board has assigned responsibilities to achieve appropriate separation of duties. The Board bookkeeper will assist the high school bookkeeper and assess the accounting procedures on a monthly basis to ensure proper adequate internal controls. In addition, the Board bookkeeper will reconcile the high school's bank statement to the general ledger on a monthly basis. The Board anticipates beginning this process by October, 2008.
Finding Control Number: FS-7281-07-02
We concur with this finding. In March of2007, the Board replaced the principal responsible for the outstanding debt. Beginning in July of 2007, no expenditures of this nature have occurred. The Board has directed the current high school principal to submit a plan for reimbursement of the $16,415.79 in question for deposit to the School District's General Fund. It is anticipated that the reimbursement will begin in October of 2008.
Finding Control Number: FS-7281-07-03
We concur with this finding. The Board has established and implemented procedures beginning in August 2008, to strengthen internal controls over inventories, maintaining accurate annual and sick leave records, and to ensure that employee compensation expenditures are properly documented, calculated and approved before disbursement offunds. Management has made an audit adjustment to the financial statement to correct the improper commodity listing. The overpaid employee has agreed to reimburse management for overpaid amount. School secretaries, who collect and submit leave information to the Board, have been instructed not to submit personal leave in excess of 3 days.
Finding Control Number: FS-7281-07-04
We concur with this finding. The Board has reviewed the capital assets records and made appropriate adjustment to ensure that the capital assets records conform to the Board's approved capital assets policy and generally accepted accounting principals. The adjustments were made in August of 2008.
Finding Control Number: FS-7281-07-05
We concur with this finding. The Board will implement internal controls over the financial statement reporting process to ensure that activity is properly recorded in the general ledger: to verify that financial statements (including note disclosures) properly reflect activity reported in the general ledger; and to include a monitoring process to evaluate the accuracy of the financials presented for audit. It is anticipated that the Board will enter into an agreement with an outside agency to complete the tasks beginning in October of 2008.
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STEWART COUNTY BOARD OF EDUCATION SCHEDULE OF MANAGEMENT'S RESPONSES
YEAR ENDED JUNE 30, 2007 Finding Control Number: FA-7281-07-01 We concur with this finding. The Board will correct this finding by having the identification number of all equipment, purchase date of all equipment, and cost of all equipment listed on equipment records. The Board anticipates all corrections will be made by October 2008. Contact Person: Floyd P. Fort, Superintendent Phone: (229) 838-4329 Fax: (229) 838-6984 E-mail: ffort@stewart.k 12.ga.us
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