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

TALBOT COUNTY BOARD OF EDUCATION
TALBOTTON, 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

TALBOT COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS -

SECTION I

FINANCIAL

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

EXHIBITS

BASIC FINANCIAL STATEMENTS

DISTRICT-WIDE FINANCIAL STATEMENTS

A

STATEMENT OF NET ASSETS

1

B

STATEMENT OF ACTIVITIES

2

FUND FINANCIAL STATEMENTS

C

BALANCE SHEET

GOVERNMENTAL FUNDS

4

D

RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET

TO THE STATEMENT OF NET ASSETS

7

E

STATEMENT OF REVENUES, EXPENDITURES AND CHANGES

IN FUND BALANCES

GOVERNMENTAL FUNDS

8

F

RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT

OF REVENUES, EXPENDITURES AND CHANGES IN FUND

BALANCES TO THE STATEMENT OF ACTIVITIES

10

G

STATEMENT OF FIDUCIARY NET ASSETS

FIDUCIARY FUNDS

11

H

STATEMENT OF CHANGES IN FIDUCIARY NET ASSETS

FIDUCIARY FUNDS

13

I

NOTES TO THE BASIC FINANCIAL STATEMENTS

14

SCHEDULES

REQUIRED SUPPLEMENTARY INFORMATION

1 SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES

IN FUND BALANCES - BUDGET AND ACTUAL

GENERAL FUND

29

SUPPLEMENTARY INFORMATION

2 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS

30

3 SCHEDULE OF STATE REVENUE

32

TALBOT COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS -

SECTION I

FINANCIAL

SCHEDULES

SUPPLEMENTARY INFORMATION

4 SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS

34

5 ALLOTMENTS AND EXPENDITURES

GENERAL FUND - QUALITY BASIC EDUCATION PROGRAMS (QBE)

BY PROGRAM

35

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

TALBOT 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
August 4, 2008

Honorable Sonny Perdue, Governor Members ofthe General Assembly Members of the State Board of Education
and Superintendent and Members of the Talbot County Board of Education
INDEPENDENT AUDITOR'S COMBINED REPORT ON BASIC FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION - SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
Ladies and Gentlemen:
We have audited the accompanying financial statements ofthe governmental activities, each major fund, and the aggregate remaining fund information (Exhibits A through I) of the Talbot 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 Talbot County Board of Education's management. Our responsibility is to express opinions on these financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United States ofAmerica and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General ofthe United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Talbot 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 Talbot County Board of Education, as of June 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 Talbot County Board of Education has not presented Management's Discussion and Analysis that accounting principles generally accepted in the United States of America has determined is necessary to supplement, although not to be part of, the basic financial statements.
In accordance with Government Auditing Standards, we have also issued our report dated August 4, 2008, on our consideration ofthe Talbot County Board ofEducation's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements and other matters. The purpose of that report is to describe the scope of our testing ofinternal control over financial reporting and compliance and the results ofthat testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit.
The Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual, as presented on page 29, 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 Talbot 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,
~~o~~~' ~ State Auditor
RWH:as 2007ARL-11

TALBOT COUNTY BOARD OF EDUCATION

TALBOT COUNTY BOARD OF EDUCATION STATEMENT OF NET ASSETS JUNE 30, 2007
ASSETS
Cash and Cash Equivalents Investments Accounts Receivable, Net
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 Long-Term Liabilities
Due Within One Year Due in More Than One Year
Total Liabilities
NET ASSETS
Invested in Capital Assets, Net of Related Debt Restricted for
Continuation of Federal Programs Debt Service Capital Projects Unrestricted
Total Net Assets
Total Liabilities and Net Assets
The notes to the basic financial statements are an integral part of this statement. - 1-

EXHIBIT"A"

GOVERNMENTAL ACTIVITIES

$

3,317,264

3,461,946

151,607 473,313 590,771
1,003 28,337

42,051 379,726 3,359,806 1,519,650 -2,595,893

$ ===1o..,.7=2=9=,5=81=

$

431,651

750,728

350,000 3,820,000

$

5,352,379

$

2,684,283

215,720 1,475,437
494,767 506 995

$

5,377,202

$ ===1=0==,7=2=9=,5=81=

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

GOVERNMENTAL ACTIVITIES
Instruction Support Services
Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Operations of Non-Instructional Services Enterprise Operations Community Services Food Services Interest on Short-Term and Long-Term Debt
Total Governmental Activities
General Revenues Taxes Property Taxes For Maintenance and Operations For Debt Services Railroad Cars Sales Taxes Special Purpose Local Option Sales Tax For Debt Services 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

$

5,520,032 $

609,696 462,124 146,911 754,109 559,072
59,627 726,235 534,385
30,339 8,479

39,608 12,547 584,971 167 115

$

10,215,250 $

46,243
32,647 45,930 124 820

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

EXHIBIT "B"

PROGRAM REVENUES OPERATING GRANTS AND
CONTRIBUTIONS

CAPITAL GRANTS AND CONTRIBUTIONS

NET (EXPENSES) REVENUES
AND CHANGES IN NET ASSETS

$

3,891,983

225,189 443,021
67,485 505,072 259,139
1,583 173,361 269,148 $

8,306

14,558 557,400

$

6 416 245 $

$ 78,562 78 562 $

-1,581,806
-384,507 -19,103 -79,426
-249,037 -299,933
-58,044 -552,874 -186,675
-30,339 -173
-6,961 2,011 18,359 -167 115
-3,595,623

$

2,870,712

155,263

44,018

658,273 12,548 33,221
156,460 26 523

$

3 957 018

$

361,395

5 015 807

$

5 377 202

-3-

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

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

GENERAL FUND

DISTRICTWIDE
CAPITAL PROJECTS
FUND

$

716,935 $ 1,230,511

78,223

3,383,723

22,923 473,313 590,771
1,003 28 337

Total Assets
LIABILITIES AND FUND BALANCES
LIABILITIES
Accounts Payable Salaries and Benefits Payable
Total Liabilities
FUND BALANCES
Reserved for: Continuation of Federal Programs Debt Service Inventories Capital Projects
Unreserved Designated for Student Activities Undesignated Reported in: General Fund Deficit Nonmajor Governmental Funds
Total Fund Balances

$

1 911 505 $ ====4,=6=14=,2=3=4=

$

336,400 $

745 897

$ 1,082,297 $

90,037 90 037

$

187,383

28,337 $

4,524,197

36,654

576,834

$

829,208 $ 4 524 197

Total Liabilities and Fund Balances

$ 1,911,505 $ ==4=,6=14='=23=4=

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

EXHIBIT "C"

DEBT SERVICE
FUND

NONMAJOR GOVERNMENTAL
FUNDS

TOTAL

$ 1,369,818 $ 98,386

0 $

3,317,264

3,461,946

121,309 473,313 590,771
1,003 28 337

$ 1,468,204 $ ======o=== $ ======7=9=9=3=94=3=

$

5,214 $

431,651

4 831

750 728

$

10045 $ _ ____;1~1~8=2~37~9~

$ 1,468,204
$ $ 1,468,204 $ $ 1,468,204 $

$
-10 045 -10 045 $

187,383 1,468,204
28,337 4,524,197
36,654
576,834
-10 045
6811564

0 $ ===7=9=9=3=94=3=

-5-

(This page left intentionally blank)

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

EXHIBIT" "

Total Fund Balances - Governmental Funds (Exhibit "C")
Amounts reported for Governmental Activities in the Statement of Net Assets are different because:
Capital Assets used in Governmental Activities are not financial resources and therefore are not reported in the funds. These assets consist of:
Land 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

$

6,811,564

$

42,051

379,726

3,359,806

1,519,650

-2,595,893

2,705,340

30,298

-4,170,000

Net Assets of Governmental Activities (Exhibit "A")

$ ====5'=37=7=,2=02=

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

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

REVENUES
Property Taxes Sales Taxes State Funds Federal Funds Charges for Services Investment Earnings Miscellaneous
Total Revenues
EXPENDITURES
Current Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Enterprise Operations Community 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 (Restated)

GENERAL FUND

DISTRICTWIDE
CAPITAL PROJECTS
FUND

$ 2,946,857 12,548
3,772,465 2,755,563
124,820 7,500 $
52,653
$ 9,672,406 $

143,963 143 963

$ 5,341,336
609,648 462,124 146,911 751,770 482,037
58,573 686,373 571,534
30,339 8,479
39,608 12,547 563,786
$

209,552

$ 9,765,065 $

$

-92,659 $

209,552 -65 589

$

-578 417

$

-578 417

$

-671,076 $

-65,589

1,500,284

4,589,786

Fund Balances - Ending

$

829,208 $ 4,524,197

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

EXHIBIT"E"

DEBT SERVICE
FUND

NONMAJOR GOVERNMENTAL
FUNDS

TOTAL

$ 157,976 $ 658,273
4,997 $ 821,246 $

0 $ 0 $

3,104,833 670,821
3,772,465 2,755,563
124,820 156,460 52,653
10,637,615

$

$

1,054

330,000 167 115 $ 498,169 $ $ 323,077 $
$
$ $ 323,077 $
1,145,127
$ 1,468,204 $

54,009 $ 48
77,035 24,317
2,126
157 535 $ -157 535 $

5,395,345
609,696 462,124 146,911 751,770 559,072
59,627 710,690 573,660
30,339 8,479
39,608 12,547 563,786 209,552
330,000 167 115
10,630,321
7 294

578,417 $

578,417 -578 417

578 417 $ -----"-0

420,882 $

7,294

-430 927

6,804,270

-10 045 $====6,,.,.81=1=,5=64=

-9-

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

EXHIBIT "F"

Total Net Change in Fund Balances - Governmental Funds (Exhibit "E")
Amounts reported for Governmental Activities in the Statement of Activities are different because:
Capital Outlays are reported as expenditures in Governmental Funds. However, in the Statement of Activities, the cost of Capital Assets is allocated over their estimated useful lives as depreciation expense. In the current period, these amounts are:
Capital Outlay Depreciation Expense
Excess of Capital Outlay over Depreciation Expense
Because some property taxes will not be collected for several months after the School District's fiscal year ends, they are not considered "available" revenues.
In the Statement of Activities, only the loss on the sale of the 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 equipment sold.
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

$

7,294

$ 245,047 -159 976

85,071 -34,840

-26, 130

330,000

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

$ ===3=6=1=3=95=

The notes to the basic financial statements are an integral part of this statement. - 10 -

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

EXHIBIT "G"

ASSETS Cash and Cash Equivalents
LIABILITIES Funds Held for Others
NET ASSETS Held in Trust for Private Purposes
Total Liabilities and Net Assets

PRIVATE PURPOSE TRUSTS

AGENCY FUNDS

$

2,556 $

23,062

$

23,062

$

2,556

$

2,556 $==2=3=,0=62=

The notes to the basic financial statements are an integral part of this statement. - 11 -

(This page left intentionally blank)

TALBOT COUNTY BOARD OF EDUCATION STATEMENT OF CHANGES IN FIDUCIARY NET ASSETS
FIDUCIARY FUNDS YEAR ENDED JUNE 30, 2007
ADDITIONS None Reported
DEDUCTIONS None Reported
Net Assets - Beginning
Net Assets - Ending

EXHIBIT"H"
PRIVATE PURPOSE TRUSTS $ _ _ _ _0---$ _ _ _ _0___
$ _ ____.2,_55_6_
$ =====2,=55=6=

The notes to the basic financial statements are an integral part of this statement.
- 13 -

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

EXHIBIT "I"

Note 1: DESCRIPTION OF SCHOOL DISTRICT AND REPORTING ENTITY
REPORTING ENTITY
The Talbot 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.
Blended Component Unit - Talbot County Alternative Academy The Talbot County Alternative Academy (Charter School) is responsible for the public education of all students attending its school. The Charter School was created through a contract between the School District and the Charter School whereby all State funding associated with the students attending the Charter School and certain specified local funds are turned over to the Charter School to cover the cost ofits operations. The financial statements ofthe Charter School have been reported as a special revenue fund.
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 Talbot 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 ofgoods or services offered by the programs and (b) grants and contributions that are restricted to meeting the operational or capital requirements of a particular program. Revenues that are not classified as program revenues, including all taxes, are presented as general revenues.
- 14 -

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

EXHIBIT "I"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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. All remaining governmental funds are aggregated and reported as nonmajor funds.
The School District reports the following major governmental funds:
General Fund is the School District's primary operating fund. It accounts for all financial resources ofthe School District, except those resources required to be accounted for in another fund.
District-wide Capital Projects Fund accounts for financial resources including Special Purpose Local Option Sales Tax (SPLOST) and Bond Proceeds to be used for the acquisition, construction or renovation of major capital facilities.
Debt Service Fund accounts for taxes (property and sales) legally restricted for the payment of general long-term principal, interest and paying agent's fees.
The School District reports the following fiduciary fund types:
Private Purpose Trust fund reports trust arrangements under which principal and income are used to provide scholarships to business administration and business education students with junior standing at an accredited college or university.
Agency funds account for assets held by the School District as an agent for various funds, governments or individuals.
BASIS OF ACCOUNTING
The basis ofaccounting determines when transactions are reported on the financial statements. The District-wide governmental and fiduciary fund financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded at the time liabilities are incurred, regardless ofwhen the related cash flows take place. Nonexchange transactions, in which the School District gives (or receives) value without directly receiving (or giving) equal value in exchange, include property taxes, sales taxes, grants and donations. On an accrual basis, revenue from property taxes is recognized in the fiscal year for which the taxes are levied. Revenue from sales taxes is recognized in the fiscal year in which the underlying transaction (sale) takes place. Revenue from grants and donations is recognized in the fiscal year in which all eligibility requirements have been satisfied.

- 15 -

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

EXHIBIT "I"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The School District 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.
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.
RESTATEMENT OF PRIOR YEAR FUND BALANCE
For fiscal year 2007, the School District reclassified the activity related to the Talbot County Alternative Academy. This activity was included in the General Fund in the prior year. In the current year, it was reported as a Nonmajor Governmental Fund. The result is an increase in Net Assets in the General Fund at July 1, 2006, of $430,927. This change is in accordance with generally accepted accounting principles.
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
- 16 -

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

EXHIBIT "I"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a maturity at purchase greater than one year are reported at fair value. The Official Code ofGeorgia Annotated Section 36-83-4 authorizes the School District to invest its funds. In selecting among options for investment or among institutional bids for deposits, the highest rate ofreturn shall be the objective, given equivalent conditions of safety and liquidity. Funds may be invested in the following:
(1) Obligations issued by the State of Georgia or by other states,
(2) Obligations issued by the United States government,
(3) Obligations fully insured or guaranteed by the United States government or a United States government agency,
(4) Obligations of any corporation of the United States government,
(5) Prime banker's acceptances,
(6) The Local Government Investment Pool administered by the State of Georgia, Office of Treasury and Fiscal Services,
(7) Repurchase agreements, and
(8) Obligations of other political subdivisions of the State of Georgia.
The School District does not have a formal policy regarding investment policies that address credit risks, custodial credit risks, concentration of credit 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 Talbot County Board ofCommissioners fixed the property tax levy for the 2006 tax digest year (calendar year) on October 20, 2006 (levy date). Taxes were due on December 20, 2006 (due 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 Talbot County Tax Commissioner bills and collects the property taxes for the School District, withholds 2.5% oftaxes
- 17 -

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

EXHIBIT "I"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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 $2,902,839 and for school bonds amounted to $157,976.

Tax millage rates levied for the 2006 tax year (calendar year) for the Talbot County Board of Education were as follows (a mill equals $1 per thousand dollars of assessed value):

School Operations School Bonds

13.080 mills 0.699 mills

13.779 mills

SALES TAXES

Special Purpose Local Option Sales Tax, at the fund reporting level, during the year amounted to $658,273 and is to be used for capital outlay for educational purposes or debt service. This sales tax was authorized by local referendum and the sales tax must be re-authorized at least every five years.

INVENTORIES

FOOD INVENTORIES On the basic financial statements, inventories ofdonated food commodities used in the preparation ofmeals are reported at their Federally assigned value and purchased foods inventories are reported at cost (first-in, first-out). The School District uses the consumption method to account for inventories whereby donated food commodities are recorded as an asset and as revenue when received, and expenses/expenditures are recorded as the inventory items are used. Purchased foods are recorded as an asset when purchased and expenses/expenditures are recorded as the inventory items are used.

CAPITAL ASSETS

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

- 18 -

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

EXHIBIT "I"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

Capitalization Policy

Estimated Useful Life

Land Land Improvements Buildings and Improvements Equipment

All

NIA

$

10,000 20 to 50 years

$

20,000 up to 50 years

$

5,000 5 to 50 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. In addition, general obligation bonds have been issued to refund existing general obligation bonds. General obligation bonds are direct obligations and pledge the full faith and credit of the government. The outstanding amount of these bonds is re~orded in the Statement ofNet Assets.

DEFICIT FUND BALANCES

The individual nonmajor fund reporting a deficit fund balance at June 30, 2007, is as follows:

Fund Type/Fund Name

Deficit Balances

Special Revenue Fund Talbot County Alternative Academy

$

10,045

The School District will transfer funds to the Talbot County Alternative Academy to eliminate this deficit.

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.

- 19 -

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

EXHIBIT "I"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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 AND INVESTMENTS
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,
(5) Bonds of any public authority created by the laws of the State of Georgia, providing that the statute that created the authority authorized the use of the bonds for this purpose,
(6) Industrial revenue bonds and bonds of development authorities created by the laws of the State of Georgia, and
(7) Bonds, bills, notes, certificates of indebtedness, or other obligations of a subsidiary corporation of the United States government, which are fully guaranteed by the United States government both as to principal and interest or debt obligations issued by the Federal
- 20 -

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

EXHIBIT "I"

Note 3: DEPOSITS AND INVESTMENTS

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 $7,331,545. The amounts of the 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
1 2 3
Total

Bank Balance

$

0

1,150,800

4,442,144

$ 5,592.944

CATEGORIZATION OF INVESTMENTS At June 30, 2007, the carrying value ofthe School District's total investments was $93,035, which is materially the same as fair value. This investment consisted entirely of funds invested in the Local Government Investment Pool administered by the State of Georgia, Office of Treasury and Fiscal Services which are not required to be categorized since the School District did not own any specific identifiable securities in the pool. The investment policy ofthe State ofGeorgia, Office ofTreasury and Fiscal Services for the Local Government Investment Pool (Primary Liquidity Portfolio) does not provide for investment in derivatives or similar investments. Additional information on the Local Government Investment Pool is disclosed in the State of Georgia Comprehensive Annual Financial Report. This audit can be obtained from the Georgia Department ofAudits and Accounts at http://www.audits.state.ga.us/internet/searchRpts.html.

The Primary Liquidity Portfolio consists of Georgia Fund 1 which is not registered with the SEC as an investment company but does operate in a manner consistent with the SEC's Rule 2a-7 of the Investment Company Act of 1940. The investment is valued at the pool's share price, $1.00 per share. The pool is an AAAm rated investment pool by Standard and Poor's. The weighted average maturity of Georgia Fund 1 may not exceed 60 days. The weighted average maturity for Georgia Fund 1 on June 30, 2007, was 15 days.

- 21 -

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

EXHIBIT "I"

Note 4: NON-MONETARY TRANSACTIONS

The School District receives food commodities from the United States Department of Agriculture (USDA) for school breakfast and lunch programs. These commodities are recorded at their Federally assigned value. See Note 2 - Inventories

Note 5: CAPITAL ASSETS

The following is a summary of changes in the Capital Assets during the fiscal year:

Balances July 1. 2006

Increases

Balances Decreases June 30. 2007

Governmental Activities

Capital Assets, Not Being Depreciated:

Land

$

42.051 $

0 $

0 $

42,051

Capital Assets Being Depreciated Buildings and Improvements Equipment Land Improvements

$ 3,359,806 1,611,988 $ 289,689

155,010 $ 90,037

$ 247,348

3,359,806 1,519,650
379,726

Less Accumulated Depreciation for: Buildings and Improvements Equipment Land Improvements

1,383,964 983,483 289.688

58,515 101,461

221,218

1,442,479 863,726 289,688

Total Capital Assets, Being Depreciated, Net $ 2,604.348 $

85,071 $

26,130 $ 2,663,289

Governmental Activity Capital Assets - Net $ 2,646.399 $

85.071 $

26,130 $ 2,705.340

Current year depreciation expense by function is as follows:

Instruction Support Services
General Administration Maintenance and Operation of Plant Student Transportation Services Food Services

$

67,657

$

964

6,405

76.221

83,590 8,729

Note 6: RESTRICTED ASSETS
Special Purpose Local Option Sales Tax (SPLOST), general obligation bond proceeds and property tax levied specifically for retirement of outstanding bond principal, interest and paying agent's fees (Debt Service Funds) are restricted assets in the Statement ofNet Assets because their use is limited by applicable bond covenants or statutory provisions. Restricted assets at June 30, 2007, were as follows:
- 22 -

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

EXHIBIT "I"

Note 6: RESTRICTED ASSETS
Restricted Cash and Cash Equivalents: Debt Services Capital Acquisitions
Restricted Investments: Capital Acquisitions

District-wide Capital Projects Bond Proceeds

Debt Service Funds

$ 1,369,818 $ 1,230,511
$ 3,383,723

Note 7: INTERFUND TRANSFERS

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

Transfer to All Others

Transfers From General Fund

Transfers are used to move property tax revenues collected by the General Fund to the Talbot County Alternative Academy for operation costs.

Note 8: RISK MANAGEMENT

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

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

The School District has elected to self-insure for all losses related to acts of God. The School District has not experienced any losses related to this risk in the past three years.

The School District is self-insured with regard to unemployment compensation claims. The School District accounts for claims within the General Fund with expenses/expenditures and liability being reported when it is probable that a loss has occurred, and the amount of that loss can be reasonably estimated.

- 23 -

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

EXHIBIT "I"

Note 8: RISK MANAGEMENT

Changes in the unemployment compensation claims liability during the last two fiscal years are as follows:

2006 2007

Beginning of Year Liability

Claims and Changes in Estimates

Claims Paid

End of Year Liability

$

0 $

14 105 $

14 105 $

0

$

0 $

9 726 $

9 726 $

0

The School District participates in the Georgia Education Workers' Compensation Trust, a public entity risk pool organized on December 1, 1991, to develop, implement and administer a program of workers' compensation self-insurance for its member organizations. The School District pays an annual premium to the Trust for its general insurance coverage. Additional insurance coverage is provided through an agreement by the Trust with the Midwest Employers Casualty Company to provide coverage for potential losses sustained by the Trust in excess of $500,000 loss per occurrence, up to $2,000,000.

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

Position Covered

Amount

Superintendent Bookkeeper Payroll Clerk School Food Director Each Employee

$

30,000

$

10,000

$

10,000

$

10,000

$ 100,000

Note 9: 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 $ 500,000 $ 500,000 $=====0

- 24 -

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

EXHIBIT "I"

Note 10: LONG-TERM DEBT

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

Purpose

Interest Rates

Amount

General Government - Refunding - Series 1998 General Government - Series 2003

4.3%-4.5% 3.8%

$ 345,000 3,825,000

$ 4,170.000

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

$ 4,500,000

Deductions Debt Retired

330,000

Balance June 30, 2007
Portion of Long-Term Debt Due within One Year

$ 4,170.000 $ 350.000

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 2010 2011 2012 2013 - 2017 2018 - 2022
Total Principal and Interest

$ 350,000 $ 365,000 385,000 280,000 290,000
1,700,000 800.000
$ 4,170,000 $

153,728 139,439 124,395 111,340 100,510 319,200 30.780
979,392

- 25 -

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

EXHIBIT "I"

Note 11: ON-BEHALF PAYMENTS
The School District has recognized revenues and costs in the amount of $154,900 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 $153,939
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 $961
Note 12: SIGNIFICANT CONTINGENT LIABILITIES
Amounts received or receivable principally from the Federal government are subject to audit and review by grantor agencies. This could result in requests for reimbursement to the grantor agency for any costs which are disallowed under grant terms. The School District believes that such disallowances, if any, will be immaterial to its overall financial position.
The School District is a defendant in various legal proceedings pertaining to matters incidental to the performance ofroutine School District operations. The ultimate disposition ofthese proceedings is not presently determinable, but is not believed to be material to the basic financial statements.
Note 13: RETIREMENT PLANS
TEACHERS RETIREMENT SYSTEM OF GEORGIA (TRS)
TRS PLAN DESCRIPTION Substantially all teachers, administrative and clerical personnel employed by local school systems are covered by the Teachers Retirement System of Georgia (TRS), which is a cost-sharing multiple employer defined benefit pension plan. TRS provides service retirement, disability retirement and survivors benefits for its members in accordance with State statute. The Teachers Retirement System of Georgia issues a separate stand alone financial audit report and a copy can be obtained from the Georgia Department of Audits and Accounts.
TRS CONTRIBUTIONS REQUIRED AND MADE Employees ofthe School District who are covered by TRS are required by State statute to contribute 5% of their gross earnings to TRS. The School District makes monthly employer contributions to TRS at rates adopted by the TRS Board of Trustees in accordance with State statute and as advised by their independent actuary. The required employer contribution rate is 9.28% and employer contributions for the current fiscal year and the preceding two fiscal years are as follows:
- 26 -

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

EXHIBIT "I"

Note 13: RETIREMENT PLANS
Fiscal Year 2007 2006 2005

Percentage Contributed
100% 100% 100%

Required Contribution
$ 406,039 $ 398,990 $ 397,332

- 27 -

(This page left intentionally blank)

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

SCHEDULE "1"

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

NONAPPROPRIATED BUDGETS

ORIGINAL(1)

FINAL(1)

ACTUAL AMOUNTS

$

2,916,657 $

2,916,657 $

2,946,857

12,548

3,670,817

3,871,720

3,772,465

1,855,790

3,091,964

2,755,563

39,000

39,000

124,820

7,000

7,000

7,500

112 942

112 942

52 653

$

8,602,206 $

10,039,283 $

9,672,406

$

5,115,591 $

5,964,530 $

5,341,336

591,752 265,350 152,773 623,339 564,687
76,630 837,600 926,441
51,000 5,062
10,479 576 802

737,639 566,864 152,773 838,931 614,529
76,630 859,631 1,002,796
51,000 10,632
13,479 593 802

609,648 462,124 146,911 751,770 482,037
58,573 686,373 571,534
30,339 8,479
39,608 12,547 563 786

$

9,797,506 $

11,483,236 $

9,765,065

$

-1,195,300 $

-1 443 953 $

-92 659

$

165,000 $

165,000

-165 000

-165 000 $

-578 417

$

0 $

0 $

-578 417

$

-1, 195,300 $

-1,443,953 $

-671,076

1,069,812

1,069,812

1,500,284

Fund Balances - Ending

$

-125 488 $

-374141 $===8=2=9'=20=8=

Notes to the Schedule of Revenues, Expenditures and Changes in Fund Balances Budget and Actual
(1) Original and Final Budget amounts 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.

- 29-

TALBOT 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
Education, U.S. Department of Special Education Cluster Pass-Through From Georgia Department of Education Special Education Grants to States Preschool Grants
Total Special Education Cluster
Other Programs Direct Early Reading First Program Pass-Through From Georgia Department of Education Enhancing Education Through Technology Program Even Start 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 Twenty-First Century Community Learning Centers Vocational Education - Basic Grants to States
Total U. S. Department of Education
Defense, U.S. Department of Direct Department of the Army R.O.T.C. Program
Total Federal Financial Assistance
N/A = Not Available

CFDA NUMBER

PASSTHROUGH
ENTITY ID
NUMBER

EXPENDITURES IN PERIOD

10.553 10.555

N/A N/A $
$

(2) 450 979
450,979

10.550

N/A $

30627 481 606

84.027 84.173
. 84.359
84.318 84.213 84.938 84.367 84.357 84.358 84.186 84.298
. 84.010 84.287 84.048

N/A $ N/A
$

180,731 18 878
199,609

N/A N/A N/A
N/A
N/A
N/A N/A
N/A
N/A
NIA NIA
$

607,664
8,477 182,732 (3) 97,409 185,255 21,037
9,177 1,860 608,366 325,551 18 882
2,266,019

$

43 068

$ ===2='=79=0=,6=93=

- 30-

TALBOT 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 ($139,384) were not maintained separately and are included in the 2007 National School Lunch Program.
(3) Funds earned and expended in the prior year on this program, in the amount of $282, 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 Talbot 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.

- 31 -

TALBOT 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 Grades (6-8) Program High School General Education (9-12) Program Vocational Laboratory (9-12) Program Students with Disabilities Category I 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 State Bonds Bus Replacement Sparsity Sparsity - Alternative Program Nursing Services Principal Supplements Vocational Supervisors Mid-term Adjustment Hold-Harmless Food Services Vocational Education Amended Formula Adjustment Other State Programs Apprenticeship Program Comprehensive Academic Performance System Grant Health Insurance Middle School Remediation and Intervention Grant Preschool Handicapped Program Statewide K-8 Reading and Mathematics Program
- 32 -

SCHEDULE "3"

GOVERNMENTAL FUND TYPE GENERAL FUND

$

184,288

140,063 2,698
412,121 28,505
174,856 55,381
408,059 330,821 156,753
292,539 6,210
33,910 58,228 19,571 10,301
240,146 126,792 144,249
233,438 50,000 28,562
169,575 12,000 30,739 2,092 9,429 85,478 26,028 4,633 -82,730
9,825 40,075 153,939
1,265 10,179 22,500

TALBOT COUNTY BOARD OF EDUCATION SCHEDULE OF STATE REVENUE
YEAR ENDED JUNE 30, 2007
AGENCY/FUNDING GRANTS Office of Treasury and Fiscal Services Public School Employees Retirement CONTRACTS Human Resources, Georgia Department of Georgia Childcare and Parent Services Family Connection

SCHEDULE "3"

GOVERNMENTAL FUND TYPE GENERAL FUND

$

961

12,240 126 746

$===3=,7=7=2=A.6..s. =

See notes to the basic financial statements.

- 33 -

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

SCHEDULE "4"

PROJECT
Acquiring, constructing, and equipping one new elementary school; adding to, renovating, repairing, improving and equipping existing school buildings and other buildings and facilities useful or desirable in connection therewith; payment of capitalized interest on the bonds through and including August 1, 2003; and the costs of issuing the bonds.

ORIGINAL ESTIMATED
COST (1)

CURRENT ESTIMATED COSTS (2)

AMOUNT EXPENDED IN CURRENT
YEAR (3)

AMOUNT EXPENDED
IN PRIOR YEARS (3)

PROJECT STATUS

$ 2,500,000 $ 2,500,000 $

374 426 $ 892,543 Ongoing

(1) The School District's original cost estimate as specified in the resolution calling for the imposition of the Local Option Sales Tax.
(2) The School District's current estimate of total cost for the project. Includes all cost from project inception to completion.
(3) The voters of Talbot County approved the imposition of a 1% sales tax to fund the above project and retire associated debt. Amounts expended for this project may include sales tax proceeds, state, local property taxes and/or other funds over the life of the project.

See notes to the basic financial statements.

- 34-

TALBOT 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 II Category Ill 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

$

196,855 $

267,597 $

4,937 $

272,534

6,890

25,453

25,453

554,202

455,530

28,629

484,159

44,377

73,434

4,139

77,573

244,089

357,610

20,158

377,768

69,564 564,254 441,577 207,263 383,768
13,245 45 655

32,979 630,861 668,394 261,327
206,455 198,609 43,437
44 917

44,432 24,762 83,343
1,072 6,273

32,979 675,293 693,156 344,670
207,527 204,882
43,437 44 917

$

2,771,739 $ 3,266,603 $

217,745 $

3,484,348

79,413 13 937

98,717

21,433 14 798

120,150 14 798

TOTAL QBE FORMULA FUNDS

$====2=1=,8=6=5!.=,0=89= $ 3,365,320 $

253976 $===3!::6=19...2=9=6

(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.

- 35 -

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
August 4, 2008

Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the Talbot 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 Talbot County Board of Education as of and for the year ended June 30, 2007, which collectively comprise Talbot County Board of Education's basic financial statements and have issued our report thereon dated August 4, 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 Government Auditing Standards, issued by the Comptroller General of the United States.
Internal Control Over Financial Reporting
In planning and performing our audit, we considered Talbot County Board of Education's internal control over financial reporting as a basis for designing our auditing procedures for the purpose of expressing our opinions on the financial statements, but not for the purpose ofexpressing an opinion on the effectiveness of the Talbot County Board of Education's internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness of the Talbot 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 Talbot 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 Talbot County Board of Education's financial statements that is more than inconsequential will not be prevented or detected by the Talbot County Board of Education's internal control. We consider items FS-7301-07-01 and FS-7301-07-02 in the accompanying Schedule ofFindings and Questioned Costs to be significant deficiencies in internal control over financial reporting.
A material weakness is a significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood that a material misstatement ofthe financial statements will not be prevented or detected by the Talbot 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 item FS-7301-07-01 to be a material weakness.
Compliance and Other Matters
As part of obtaining reasonable assurance about whether Talbot 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 Talbot County Board of Education in a separate letter dated August 4, 2008.
Talbot County Board of Education's response to the findings identified in our audit is described in the accompanying Schedule ofManagement's Responses. We did not audit Talbot County Board of Education's response and, accordingly, we express no opinion on it.
2007YB-40

This report is intended solely for the information and use ofthe management, members ofthe Talbot 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,
~
L() .. ~
ell 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
August 4, 2008

Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the Talbot County Board of Education
REPORT ON COMPLIANCE WITH REQUIREMENTS APPLICABLE TO EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH 0MB CIRCULARA-133
Ladies and Gentlemen:
Compliance
We have audited the compliance ofTalbot County Board ofEducation with the types ofcompliance requirements described in the U.S. Office of Management and Budget (0MB) Circular A-133 Compliance Supplement that are applicable to each ofits major Federal programs for the year ended June 30, 2007. Talbot County Board of Education's major Federal programs are identified in the Summary ofAuditor's Results Section ofthe accompanying Schedule ofFindings and Questioned Costs. Compliance with the requirements of laws, regulations, contracts and grants applicable to each of its major Federal programs is the responsibility of Talbot County Board of Education's management. Our responsibility is to express an opinion on Talbot County Board of Education's compliance based on our audit.
We conducted our audit ofcompliance in accordance with auditing standards generally accepted in the United States ofAmerica; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General ofthe United States; and 0MB Circular A133, Audits of States, Local Governments, and Non-Profit Organizations. Those standards and 0MB Circular A-133 require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major Federal program occurred. An audit includes examining, on a test basis, evidence about the Talbot County Board ofEducation's compliance with those requirements and performing such other procedures as we considered necessary in the

2007SA-55

circumstances. We believe that our audit provides a reasonable basis for our opinion. Our audit does not provide a legal determination on Talbot County Board of Education's compliance with those requirements.
As described in items FA-7301-07-04 and FA-7301-07-05 in the accompanying Schedule of Findings and Questioned Costs, Talbot County Board of Education did not comply with requirements regarding Matching and Level ofEffort and Performance Reporting that are applicable to its Early Reading First Program. Compliance with such requirements is necessary, in our opinion, for Talbot County Board of Education to comply with requirements applicable to that program.
In our opinion, except for the noncompliance described in the preceding paragraph, the Talbot County Board of Education complied, in all material respects, with the requirements referred to above that are applicable to each of its major Federal programs for the year ended June 30, 2007. The results of our auditing procedures also disclosed instances of noncompliance with those requirements, which are required to be reported in accordance with 0MB Circular A-133 and which are described in the accompanying Schedule of Findings and Questioned Costs as items FA-730107-01 and FA-7301-07-03.
Internal Control Over Compliance
The management of Talbot 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 Talbot 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 Talbot County Board of Education's internal control over compliance.
Our consideration of the internal control over compliance was for the limited purpose described in the preceding paragraph and would not necessarily identify all deficiencies in the Board's internal control that might be significant deficiencies or material weaknesses as defined below. However, as discussed below, we identified certain deficiencies in internal control over compliance that we consider to be significant deficiencies and others we consider to be material weaknesses.
A control deficiency in an entity's internal control over compliance exists when the design or operation ofa control does not allow management or employees, in the normal course ofperforming their assigned functions, to prevent or detect noncompliance with a type ofcompliance requirement of a Federal program on a timely basis. A significant deficiency is a control deficiency, or combination ofcontrol deficiencies, that adversely affects the entity's ability to administer a Federal program such that there is more than a remote likelihood that noncompliance with a type of compliance requirement of a Federal program that is more than inconsequential will not be prevented or detected by the entity's internal control. We consider the deficiencies in internal
2007SA-55

control over compliance described in the accompanying Schedule ofFindings and Questioned Costs as items FA-7301-07-01, FA-7301-07-02, FA-7301-07-03, FA-7301-07-04 and FA-7301-07-05 to be significant deficiencies.
A material weakness is a significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood that material noncompliance with a type of compliance requirement of a Federal program will not be prevented or detected by the entity's internal control. Of the significant deficiencies in internal control over compliance described in the accompanying Schedule ofFindings and Questioned Costs, we consider items FA-7301-07-02, FA-7301-07-04 and FA-7301-07-05 to be material weaknesses.
Talbot County Board of Education's response to the findings identified in our audit is described in the accompanying Schedule ofManagement's Responses. We did not audit Talbot County Board of Education's response and, accordingly, we express no opinion on it.
This report is intended solely for the information and use ofthe management, members ofthe Talbot 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,

RWH:as 2007SA-55

ell W. Hinton, CPA, CGFM State Auditor

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

TALBOT 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

AUDITEE'S RESPONSE/STATUS

SEE AUDITOR'S COMMENTS

FS-7301-05-01 Further Action Not Warranted

FS-7301-05-02 Further Action Not Warranted

FS-7301-06-01 Further Action Not Warranted

(1)

FS-7301-06-02 Previously Reported Corrective Action Implemented

FS-7301-06-03 Further Action Not Warranted

(1)

AUDITOR'S COMMENTS

(1) Findings/internal control deficiencies of this nature, that are not deemed significant deficiencies or material weaknesses and do not require reporting in the audit report in accordance with Statements on Auditing Standards (SAS) 112 or Governmental Auditing Standards (Yellow Book), will be communicated in a management letter in subsequent periods.

PRIOR YEAR FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

No matters were reported.

SECTION IV FINDINGS AND QUESTIONED COSTS

TALBOT 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 Talbot County Board of Education's financial statements was unqualified.

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

Expenditures/Liabilities/Disbursements Financial Reporting

Of the significant deficiencies described above, the Financial Reporting significant deficiency is considered to be a material weakness.

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

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

Activities Allowed or Unallowed Matching and Level of Effort

Allowable Costs/Cost Principles Performance Reporting

Of the significant deficiencies described above, Matching and Level of Effort, Allowable Costs/Cost Principles and Performance Reporting are considered to be material weaknesses.

5. Type of Report Issued on Compliance for Major Programs The auditor's opinion on the Talbot County Board ofEducation's report on compliance with requirements applicable to major programs was unqualified, except for Early Reading First, which was qualified.

6. Audit Findings Required to be Reported by Section .510(a) ofOMB Circular A-133 The Talbot County Board of Education's audit disclosed audit findings required to be reported by section .510(a) of 0MB Circular A-133. These audit findings are included in section IV of this report.

7. Major Programs Federal awards audited as major programs are as follows: 84.287 Twenty-First Century Community Leaming Centers 84.359 Early Reading First Program

- 1-

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

I SUMMARY OF AUDITOR'S RESULTS

8. Type "A" Program Dollar Threshold The dollar threshold for type "A" programs was $300,000.

9. Low Risk Auditee The Talbot County Board ofEducation qualified as a low risk auditee as defined by Section .530 of 0MB Circular A-133.

II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

FINANCIAL REPORTING Inadequate Controls over Financial Reporting Material Weakness Finding Control Number: FS-7301-07-01

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, several correcting entries were proposed by the auditor and accepted by the client to properly present the entity's fund level and entity-wide level financial statements.

Cause:

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

Effect:

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

-2-

TALBOT 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-7301-07-01

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.

EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Controls over Central Office Disbursement Process Significant Deficiency Finding Control Number: FS-7301-07-02

Condition:

The accounting procedures ofthe School District were insufficient to provide for adequate internal controls.

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:

An examination of controls over the disbursement process and a review of 178 vouchers revealed the following deficiencies:

28 vouchers did not contain proper approval. Five vouchers did not indicate evidence of receipt of goods before
payment was made. Three vouchers included invoices that did not agree to the amount of
the check.

Cause:

These deficiencies were a result of management's failure to ensure that internal controls were established, implemented and functioning at the central office level.

Effect:

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

-3-

TALBOT 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 Inadequate Internal Controls over Central Office Disbursement Process Significant Deficiency Finding Control Number: FS-7301-07-02

Recommendation:

Management should revise and monitor controls to provide reasonable assurance that transactions are processed according to established procedures.

III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

ACTIVITIES ALLOWED/UNALLOWED ALLOWABLE COSTS/COST PRINCIPLES Unallowable Expenditures Significant Deficiency Nonmaterial Noncompliance U.S. Department of Education Through Georgia Department of Education Twenty-First Century Community Learning Centers (CFDA 84.287) Finding Control Number: FA-7301-07-01

Condition:

A review ofthe Twenty-First Century Community Learning Centers Program (CFDA 84.287) revealed unapproved, undocumented, and unsupported expenditures.

Criteria:

0MB Circular A-87 guidelines require that: "Governmental units assume responsibility for administering Federal funds in a manner consistent with underlying agreements, program objectives, and the terms and conditions of the Federal award. To be allowable under Federal awards, costs must meet the following general criteria: ... Be allocable to Federal awards under the provisions ofthis Circular.... Be adequately documented... Budget estimates or other distribution percentages determined before the services are performed do not qualify as support for charges to Federal awards ... Adequacy of the contractual agreement for the service (e.g., description of the service, estimate oftime required, rate ofcompensation, and termination provisions)."

Questioned Cost: NIA

Information:

The auditor tested thirty expenditure vouchers related to this Federal program. None of the vouchers tested showed evidence of approval or review by the Program Director.

-4-

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

III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS
ACTIVITIES ALLOWED/UNALLOWED ALLOWABLE COSTS/COST PRINCIPLES Unallowable Expenditures Significant Deficiency Nonmaterial Noncompliance U.S. Department of Education Through Georgia Department of Education Twenty-First Century Community Learning Centers (CFDA 84.287) Finding Control Number: FA-7301-07-01
Expenditures did not conform to the budget and application materials approved by Georgia Department ofEducation (GDOE). The School District revised the fiscal year's Twenty-First Century Community Learning Centers Program budget, but failed to submit an amendment to GDOE. Line item budget items varied greatly from both the original and revised budgets. The School District overspent the original Twenty-First Century Community Learning Centers Program budget in the areas of Pupil Services, General Administration, Maintenance and Operation of Plant, and Food Service Operations.

Cause:

The School District and management failed to implement internal controls for monitoring compliance with Federal Grant requirements and School District policies.

Effect:

Failure to monitor expenditures for compliance can result in noncompliance with the requirements of the Federal grant.

Recommendation:

The School District should implement policies sufficient to ensure that only activities detailed and budgeted in the program application are funded. Controls should be established to ensure that budget amendments are submitted to GDOE for approval and that only the approved budget is followed. Expenditures should be compared to the budget line items and no expenditures should exceed those line items. Management should also revise and monitor controls to provide reasonable assurance that transactions are processed according to established procedures. All expenditures should be reviewed and approved by the Program Director for allowability and budget detail, and should be supported with adequate documentation. The Georgia Department of Education should review this matter to determine ifa reclaim of funds is appropriate.

-5-

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

III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

ALLOWABLE COSTS/COST PRINCIPLES Time and Attendance Records Not Utilized Material Weakness U.S. Department of Education Through Georgia Department of Education Twenty-First Century Community Leaming Centers Program (CFDA 84.287) Finding Control Number: FA-7301-07-02

Condition:

A review of salaries charged to the Twenty-First Century Community Leaming Centers Program (CFDA 84.287) revealed that employee time and attendance records were not being utilized as required by 0MB Circular A87.

Criteria:

Provisions of the 0MB Circular A-87, Cost Principles for Determining Allowable Costs, require that "Where employees work on multiple activities or cost objectives, a distribution of their salaries or wages will be supported by personnel activity reports or equivalent documentation that meets the following standards:
(a) They must reflect an after-the-fact distribution of the actual activity of each employee,
(b) they must account for the total activity for which the employee is compensated,
(c) they must be prepared at least monthly and must coincide with one or more pay periods, and
(d) they must be signed by the employee. Such documentary support will be required where employees work on:
(a) More than one Federal award, or (b) a Federal award and a non-Federal award".

Questioned Cost: $18,164

Information:

There was not sufficient documentation to support the wage amounts paid out of the Twenty-First Century Community Leaming Centers Program for several employees. Auditor obtained sign-in/sign out sheets for the program were found to be incomplete, lacking sign-out times on several days for two employees tested. Also, these sheets were neither signed by the employees nor approved by the Program Director. A summarization ofhours worked on the Twenty-First Century Community Leaming Centers Program by each employee for each week was also obtained, but this summarization was not signed or approved, and was not supported by the sign-in/sign-out sheets. Neither the summarization nor the sign-in sheets supported the monthly

-6-

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

III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

ALLOWABLE COSTS/COST PRINCIPLES Time and Attendance Records Not Utilized Material Weakness U.S. Department of Education Through Georgia Department of Education Twenty-First Century Community Leaming Centers (CFDA 84.287) Finding Control Number: FA-7301-07-02

amounts paid to the Twenty-First Century Community Leaming Centers Program employees tested. For one ofthe Twenty-First Century Community Leaming Centers Program employees tested, it was found that for 6 of the months that they were paid out of the Program, both the summarization and the sign-in sheets showed no hours worked. Another employee was also paid for two months for which documentation showed that no hours were worked.

Cause:

Management failed to require timesheets and/or time schedules for employees that were split-funded between Federal programs and other programs.

Effect:

Without proper documentation of actual time expended on the Twenty-First Century Community Leaming Centers Program by employee, we were unable to determine whether the amount of salaries charged to the TwentyFirst Century Community Leaming Centers Program for the employees in question were reasonable. Failure to require timesheets and/or time schedules for split-funded employees can result in noncompliance with the requirements of the Federal grant.

Recommendation:

The School District should establish procedures to ensure that adequate time records are maintained to support the basis for compensation for all split funded employees. The Georgia Department ofEducation should review this matter to determine if a refund is appropriate.

-7-

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

III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

ACTIVITIES ALLOWED/UNALLOWED ALLOWABLE COSTS/COST PRINCIPLES Unallowable Expenditures Significant Deficiency Nonmaterial Noncompliance U.S. Department of Education Early Reading First Program (CFDA 84.359) Finding Control Number: FA-7301-07-03

Condition:

A review of the Early Reading First Program (CFDA 84.359) revealed unapproved, undocumented, unallowable, and unsupported expenditures.

Criteria:

0MB Circular A-87 guidelines require that: "Governmental units assume responsibility for administering Federal funds in a manner consistent with underlying agreements, program objectives, and the terms and conditions of the Federal award. To be allowable under Federal awards, costs must meet the following general criteria: ... Be allocable to Federal awards under the provisions ofthis Circular.... Be adequately documented... Budget estimates or other distribution percentages determined before the services are performed do not qualify as support for charges to Federal awards ... Adequacy of the contractual agreement for the service (e.g., description of the service, estimate oftime required, rate ofcompensation, and termination provisions)."

Questioned Cost: $5,000

Information:

Thirty expenditures were tested. None of the vouchers tested showed evidence of approval or review by the Program Director. Seven of the vouchers tested lacked appropriate documentation. These vouchers were payments for purchased services provided to the School District (Pre-K screening/testing, PALS Pre-K testing, on-site evaluations, etc.). Invoices were obtained, but no documentation was provided to show that these services were actually performed (i.e. results from the Pre-K testing performed, copies of the evaluation reports, etc.). In addition, three of the expenditures tested did not have receipt documentation and five had no approval at all.

An unallowable expenditure was noted during testing. A $5,000 payment for an evaluation of the Twenty-First Century Community Learning Centers Program (CFDA 84.287) was charged to the Early Reading First Program (CFDA 84.359).

-8-

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

III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

ACTIVITIES ALLOWED/UNALLOWED ALLOWABLE COSTS/COST PRINCIPLES Unallowable Expenditures Significant Deficiency Nonmaterial Noncompliance U.S. Department of Education Early Reading First Program (CFDA 84.359) Finding Control Number: FA-7301-07-03

Expenditures did not conform to the budget and application materials approved by the U. S. Department ofEducation, and funds were expended in unapproved budget categories. The School District overspent the Early Reading First Program budget in the areas oftravel, equipment, supplies, and other expenditures.

Cause:

The School District's management failed to implement internal controls for monitoring compliance with Federal Grants requirements and School District policies.

Effect:

Failure to monitor expenditures for compliance can result in noncompliance with the requirements of the Federal grant. Also, as noted, incorrect costs were charged to this program.

Recommendation:

The School District should implement policies sufficient to ensure that only activities detailed and budgeted in the program application are funded. Expenditures should be compared to the budget line items and no expenditures should exceed those line items. Management should also revise and monitor controls to provide reasonable assurance that transactions are processed according to established procedures. All expenditures should be reviewed and approved by the Program Director for allowability and budget detail, and should be supported with adequate documentation. The U. S. Department ofEducation should review this matter to determine ifa reclaim of funds is appropriate.

-9-

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

III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

MATCHING AND LEVEL OF EFFORT Failure to Meet Cost-Sharing Requirement Material Weakness Material Noncompliance U.S. Department of Education Early Reading First Program (CFDA 84.359) Finding Control Number: FA-7301-07-04

Condition:

The School District was unable to account for or adequately document Early Reading First Program costs supported with Non-Federal funds which is required to meet its cost-sharing obligation specified under the grant award agreement.

Criteria:

34 CFR 80.24 states: "...Matching or cost-sharing requirement may be satisfied by ...Allowable costs incurred by the grantee, subgrantee or a costtype contractor under the assistance agreement. This includes allowable costs borne by non-Federal grants... " Also, per review ofthe entity's Grant Award Notification, Block 7, the School District was to cost-share 16.86% of the total authorized funding over a total performance period from October 1, 2006 to September 30, 2009. This total cost-share amounted to $476,134 over that period.

34 CFR 75.730 states, in part, that a grantee shall keep records that fully show the total cost of the project and the share of that cost provided from other sources. This includes how the grantee uses the funds.

Questioned Cost: NIA

Information:

The Board's financial records (general ledger) did not provide for the accountability ofthose Early Reading First Program expenditures paid with Non-Federal funds. Furthermore, the Board was unable to properly document those specific Early Reading First Program expenditures supported with other-than Early Reading First Program funds. In line with Federal regulations, such costs paid from Non-Federal sources in support ofthe Early Reading First Program are to be documented in the same manner as those Early Reading First Program expenditures paid from Early Reading First Program funds.

- 10 -

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

III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

MATCHING AND LEVEL OF EFFORT Failure to Meet Cost-Sharing Requirement Material Weakness Material Noncompliance U.S. Department of Education Early Reading First Program (CFDA 84.359) Finding Control Number: FA-7301-07-04

While the Board has until September 30, 2009 to fully meet its cost-sharing obligation, we noted that the Board reported $152,282 in Non-Federal expenditures for this Federal program as ofNovember, 2007. However, the Board was unable to substantiate this amount from its general ledger or other acceptable documentation. (See Audit Finding Control Number FA-730107-05)

Cause:

The School District and management failed to establish accountability of Early Reading First Program costs paid from non-Federal sources on its financial records. Furthermore, no internal control procedures were implemented to ensure that Early Reading First Program expenditures paid from Non-Federal sources would be documented adequately.

Effect:

Failure to adequately account for and document Non-Federal funded Early Reading First Program expenditures can result in material noncompliance with the cost sharing requirements ofthe Early Reading First Program grant award.

Recommendation:

The School District should establish policies to ensure the School District's cost-sharing requirement under the Early Reading First Program is met. This includes implementing controls to ensure that expenditures supported with other than Early Reading First Program funds are recorded on the Board's financial records (general ledger) and there is adequate documentation of how those expenditures were used in support of the Early Reading First Program.

- 11 -

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

III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

PERFORMANCE REPORTING Inaccurate Performance Reporting Material Weakness Material Noncompliance U.S. Department of Education Early Reading First Program (CFDA 84.359) Finding Control Number: FA-7301-07-05

Condition:

The School District inaccurately reported Early Reading First Program financial expenditure information in the Annual Grant Performance Report (Form 524B).

Criteria:

As specified in 34 CFR 75.118, for those recipients of funds from the Early Reading First Program, an annual performance report must be submitted to the U.S. Department of Education, which provides the most current performance and financial expenditure information.

Questioned Cost: NIA

Information:

We reviewed the Annual Grant Performance Report (Form 524B) for the reporting period October 1, 2006, to November 30, 2007. We were unable to trace reported amounts to the accounting records. The amount of Federal Funds expended reported on the Form was $903,217. Per the Board's general ledger, the amount of Federal Funds expended for the reporting period was $955,143, resulting in a variance of$51,926. The reported amount ofNonFederal Funds expended on the Form was $152,282. This amount could not be traced to the Board's accounting records, and adequate documentation was not provided to prove the accuracy of the Non-Federal amount of expenditures reported on the Form.

Cause:

The School District and management failed to implement internal controls for accurate reporting of the financial information related to the Early Reading First Program on the Form 524B.

Effect:

Failure to accurately report Early Reading First Program financial information expenditures can result in material noncompliance with the requirements of the Early Reading First Program.

- 12 -

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

III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

PERFORMANCE REPORTING Inaccurate Performance Reporting Material Weakness Material Noncompliance U.S. Department of Education Early Reading First Program (CFDA 84.359) Finding Control Number: FA-7301-07-05

Recommendation:

The School District should implement policies and procedures sufficient to ensure that the financial information reported to the U. S. Department of Education accurately represents the activity of the Early Reading First Program. Such financial information should be supported to the Board's financial records including its general ledger. A determination needs to be made whether the Board needs to submit a revised Annual Report (Form 524B) that accurately reflects Early Reading First Program financial information.

- 13 -

SECTIONV MANAGEMENT'S RESPONSES

TALBOT COUNTY BOARD OF EDUCATION SCHEDULE OF MANAGEMENT'S RESPONSES
YEAR ENDED JUNE 30, 2007
Finding Control Number: FS-7301-07-01
Checks will be made to ensure: a) certificate of deposit earned interest is recorded, b) accrued SPLOST receipts are recorded and c) Capital Project funds are properly recorded.
Finding Control Number: FS-7301-07-02
Increased monitoring ofthe internal control procedures will be taken to ensure: a) proper approval, b) receipts are in hand before making payment and c) the check and invoice amount are reconciled before making payment.
Finding Control Number: FA-7301-07-01
Increased monitoring of the Twenty-First Century Program will be enforced in accordance with policy to ensure expenditures are approved, documented and supported. Employee worksheets will be properly and accurately recorded and sufficiently documented and approved to support each category of payment.
Finding Control Number: FA-7301-07-02
Increased monitoring of the Twenty-First Century Program will be enforced in accordance with policy to ensure expenditures are approved, documented and supported. Employee worksheets will be properly and accurately recorded and sufficiently documented and approved to support each category of payment.
Finding Control Number: FA-7301-07-03
Increased monitoring of the Early Reading First program expenditures will be enforced to obtain advance approval of subject purchases to ensure expenditures are kept within allowable limits and within budget.
Finding Control Number: FA-7301-07-04
Early Reading First assurances will be revisited and enforced. Documentation will be maintained and readily available for audit review in tracing the local matching funding portion of the grant.
Finding Control Number: FA-7301-07-05
The Annual Grant Performance Report (Form 524B) will be maintained in accordance with audit procedures. Supporting documentation will be gathered and variances will be reconciled.
Contact Person: Robert Patrick, Superintendent Phone: (706) 665-8528 E-mail:rwpatrick@hotmail.com