Talbot County Board of Education, Talbotton, Georgia, annual financial report for the fiscal year ended June 30, 2010 (including independent auditor's reports)

TALBOT COUNTY BOARD OF EDUCATION
TALBOTTON, GEORGIA
ANNUAL FINANCIAL REPORT FOR THE FISCAL YEAR ENDED
JUNE 30,2010
(Including Independent Auditor's Reports)

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

EXHlBlTS

BASIC FINANCIAL STATEMENTS

DISTRICT-WIDE FINANCIAL STATEMENTS

A

STATEMENT OF NET ASSETS

B

STATEMENT OF ACTIVITIES

FUND FINANCIAL STATEMENTS

C

BALANCE SHEET

GOVERNMENTAL FUNDS

D

RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET

TO THE STATEMENT OF NET ASSETS

E

STATEMENT OF REVENUES, EXPENDITURESAND CHANGES

IN FUND BALANCES

GOVERNMENTAL FUNDS

F

RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT

OF REVENUES, EXPENDITURES AND CHANGES IN FUND

BALANCES TO THE STATEMENT OF ACTIVITIES

G

STATEMENT OF FIDUCIARY NET ASSETS

FIDUCIARY FUNDS

H

STATEMENT OF CHANGES IN FIDUCIARY NET ASSETS

FIDUCIARY FUNDS

I

NOTES TO THE BASIC FINANCIAL STATEMENTS

SCHEDULES

REQUIRED SUPPLEMENTARY INFORMATION

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

SUPPLEMENTARY INFORMATION

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

TALBOT COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS -
SECTION I FINANCIAL SCHEDULES SUPPLEMENTARY INFORMATION 4 SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS 5 ALLOTMENTS AND EXPENDITURES GENERAL FUND - QUALITY BASIC EDUCATION PROGRAMS (QBE) BY PROGRAM
SECTION II COMPLIANCE AND INTERNAL CONTROL REPORTS INDEPENDENT AUDITOR'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MAlTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WlTH GOVERNMENTAUDITING STANDARDS l NDEPENDENT AUDITOR'S REPORT ON COMPLIANCE WlTH REQUIREMENTS THAT COULD HAVE A DIRECT AND MATERIAL EFFECT ON EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WlTH OMB CIRCULAR A-133
SECTION Ill 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 -
SECTION V MANAGEMENT'S RESPONSES SCHEDULE OF MANAGEMENT'S RESPONSES

SECTION I FINANCIAL

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

DEPARTMENOTF AUDITSAND ACCOUNTS
270 Washington Street, S.W., Suite 1-1 56 Atlanta, Georgia 30334-8400
August 23,2011

Honorable Nathan Deal, Governor Members of the 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 STATEMENTSAND SUPPLEMENTARY INFORMATION - SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
Ladies and Gentlemen:
We have audited the accompanying financial statements of the governmental activities, each major fund, and the aggregate remaining fund information (ExhibitsA through I) of the Talbot County Board of Education, as of and for the year ended June 30, 2010, which collectively comprise the Board's basic financial statements as listed in the table of contents. These financial statements are the responsibility of the 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 of America and the standards applicable to financial audits contained in GovernmentAuditing Standards, issued by the Comptroller General of the 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 examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and the significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinions.
In our opinion, the financial statements referred to previously present fairly, in all material respects, the respective financial position of the governmental activities, each major fund, and the aggregate remaining fund information of the Talbot County Board of Education, as of June 30, 2010, 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 23, 2011, on our consideration of the Talbot County Board of Education's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessingthe results of our audit.
Accounting principles generally accepted in the United States of America require that the Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual, as presented on page 25, be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures, to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during the audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance.
Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Talbot County Board of Education's financial statements as a whole. The accompanying supplementary information consists 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, Auditrs of States, Local Governments, and Non-Profit Organizations, are presented for purposes of additional analysis and are not a required part of the financial statements. Such information is the responsibility of management and was derived from and relate directly to the underlying accounting and other records used to prepare the financial statements. The information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated, in all material respects, in relation to the financial statements as a whole.
*d& 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,
CPA, CGFM

TALBOT COUNTY BOARD OF EDUCATION

TALBOT COUNTY BOARD OF EDUCATION STATEMENT OF NET ASSETS JUNE 30.2010
Cash and Cash Equivalents Investments Accounts Receivable, Net
Taxes State Government Federal Government Inventories Prepaid Items Capital Assets, Non-Depreciable Capital Assets. Depreciable (Net of Accumulated Deprec~atlon)
Total Assets
LIABILITIES Accounts Payable Salaries and Benefits Payable Payroll Withholdings Payable Short-Term Debt Interest Payable Deferred Revenue Long-Term Liabilities
Due Within One Year Due in More Than One Year
Total Liabilities NET ASSETS Invested in Capital Assets, Net of Related Debt Restricted for Bus Replacement Continuation of Federal Programs Debt Sewlce Capital Projects Unrestricted (Deficit) Total Net Assets
Total Liabilities and Net Assets
The notes to the basic financial statements are an integral part of this statement. -1-

EXHIBIT "A"
GOVERNMENTAL ACTIVITIES

TALBOT COUNTY BOARD OF EDUCATION STATEMENT OF ACTIVITIES
FOR THE YEAR ENDED JUNE 30.2010

GOVERNMENTAL ACTIVITIES
InStruCt~On Support Services
Pup11Services Improvement of Instructional Services Educational Media Sewlces General Administratlon School Administration Business Administratlon 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 Sewices Sales Taxes Special Purpose Local Opt~onSales Tax For Cap~taPl rojects Other Sales Tax Investment Earnings Miscellaneous
Total General Revenues
Changes In Net Assets
Net Assets - Beginningof Year
Net Assets - End of Year

EXPENSES

PROGRAM REVENUES

OPERATING

CHARGES FOR

GRANTS AND

SERVICES

CONTRIBUTIONS

NET (EXPENSES) REVENUES
AND CHANGES IN NET ASSETS

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

TALBOT COUNN BOARD OF EDUCATION BALANCE SHEET
GOVERNMENTAL FUNDS JUNE 30,2010

GENERAL FUND

DISTRICTWIDE
CAPITAL PROJECTS
FUND

DEBT SERVICE
FUND

Cash and Cash Equivalents Investments Accounts Receivable. Net
Taxes State Government Federal Government Inventories P r e ~ a i dItems
Total Assets

LIABILITIESAND FUND BALANCES
LIABILITIES
Accounts Payable Salaries and Benefits Payable Payroll Withholdings Payable Short-Term Debt Deferred Revenue
Total Liabilities
FUND BALANCES
Resewed for: Bus Replacement Continuation of Federal Programs Debt Service Capital Projects
Unreserved Designated for Banquet Account Designated for Student Act~vities Undesignated Reported in: General Fund (Deficit) Capital Projects Fund
Total Fund Balances
Total Liabilities and Fund Balances

EXHIBIT " C
TOTAL

The notes to the basic financial statements are an integral part of this statement. -3-

TALBOT COUNTY BOARD OF EDUCATION RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET
TO THE STATEMENT OF NET ASSETS JUNE 30.2010
Total Fund Balances - Governmental Funds (Exhib~"tC")
Amounts reported for GovernmentalActiv~t~einsthe Statement of Net Assets are different because:
Capital Assets used in Governmental Activitres are not f~nanciarlesources and therefore are not reported in the funds. These assets consist of:
Land Land Improvements Build~ngs Equipment Accumulated Depreciation
Total Capital Assets
Taxes that are not ava~lableto pay for current period expenditures are deferred in the funds.
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 L~abilitiesat year-end consist of:
Bonds Payable Interest Payable
Total Long-Term Liabilities
Net Assets of Governmental Activities (Exhibrt "A")

EXHIBIT "D"

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

TALBOT COUNTY BOARD OF EDUCATION STATEMENT OF REVENUES, EXPENDITURESAND CHANGES IN FUND BALANCES
GOVERNMENTAL FUNDS YEAR ENDED JUNE 30.2010

REVENUES
Property Taxes Sales Taxes State Funds Federal Funds Charges for Services Investment Earnlngs Miscellaneous
Total Revenues
EXPENDITURES
Current Instruction Support Servlces 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 Commun~tyServices Food Services Operation
Capital Outlay Debt Services
Principal Interest
Total Expenditures
Net Change in Fund Balances
Fund Balances - Beginning
Fund Balances - Ending

GENERAL FUND

DISTRICTWIDE
CAPITAL PROJECTS
FUND

DEBT SERVICE
FUND

TOTAL

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

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 30,2010
Total Net Change in Fund Balances- Governmental Funds (Exh~b"~Et") Amounts reported for GovernmentalActivities in the Statement of Activlt~esare different because:
Capital Outlays are reported as expenditures in Governmental Funds. However, in the Statement of Activities, the cost of CapitalAssets is allocated over their estimated useful llves as depreciat~onexpense. In the current period, these amounts are: Capital Outlay Depreciation Expense Excess of Capital Outlay over Depreciation Expense
Taxes reported in the Statement of Activities that do not provide current financial resources are not reported as revenue in the funds.
Repayment of Long-TermDebt IS reported as an expenditure In Governmental Funds, but the repayment reduces Long-Term L~ablllt~eInsthe Statement of Net Assets. In the current year, these amounts conslst of: Bond Principal Retirements
Some items reported in the Statement of Activities do not require the use of current financial resources and therefore are not reported as expenditures in Governmental Funds. These activities consist of: Net Increase in Accrued Interest
Change in Net Assets of GovernmentalActivities (Exhibit"B")
The notes to the basic financial statements are an integral part of this statement.
- 6 -

TALBOT COUNTY BOARD OF EDUCATION STATEMENT OF FIDUCIARY NET ASSETS
FIDUCIARY FUNDS JUNE 30,2010
ASSETS Cash and Cash Equivalents
LIABILITIES Funds Held for Others
Total Liabilities NET ASSETS Held in Trust for Private Purposes
Total Liabilities and Net Assets

EXHIBIT "G"

PRIVATE PURPOSE TRUSTS

AGENCY FUNDS

The notes t o the basic financial statements are a n integral part of this statement. -7-

(This page left intentionally blank)

TALBOT COUNTY BOARD OF EDUCATION STATEMENT OF CHANGES IN FIDUCIARY NET ASSETS
FIDUCIARY FUNDS YEAR ENDED JUNE 30.2010
ADDITIONS Other Additions
DEDUCTIONS None Reported Change in Net Assets
Net Assets - Beginning
Net Assets - Ending

EXHIBIT "H"
PRIVATE PURPOSE TRUSTS

The notes t o the basic financial statements are an integral part of this statement. - 9 -

TALBOT COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30,2010

EXHIBIT "I"

NOTE 1: DESCRIPTION OF SCHOOL DISTRICT AND REPORTING ENTITY
REPORTING ENTITY
The Talbot County Board of Education (School District) was established under the laws of the State of Georgia and operates under the guidance of a school board elected by the voters and a Superintendent appointed by the Board. The Board is organized as a separate legal entity and has the power to levy taxes and issue bonds. Its budget is not subject to approval by any other entity. Accordingly, the School District is a primary government and consists of all the organizations that compose its legal entity.
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The School District's basic financial statements are collectively comprised of the District-wide financial statements, fund financial statements and notes to the basic financial statements of the Talbot County Board of Education.
Distrct- wide Statements: The Statement of Net Assets and the Statement of Activities display information about the financial activities of the overall School District, except for fiduciary activities. Eliminations have been made to minimize the double counting of internal activities. Governmental activities generally are financed through taxes, intergovernmental revenues, and other nonexchange transactions.
The Statement of Activities presents a comparison between direct expenses and program revenues for each function of the School District's governmental activities.
Direct expenses are those that are specifically associated with a program or function and, therefore, are clearly identifiable to a particular function. Indirect expenses (expenses of the School District related to the administration and support of the School District's programs, such as office and maintenance personnel and accounting) are not allocated to programs.
Program revenues include (a) charges paid by the recipients of goods or services offered by the programs and (b) grants and contributions that are restricted to meeting the operational or capital requirements of a particular program. Revenuesthat are not classified as program revenues, including all taxes, are presented as general revenues.
Fund Financial Statements The fund financial statements provide information about the School District's funds, including fiduciary funds. Eliminations have been made to minimize the double counting of internal activities. Separate statements for each category (governmental and fiduciary) are presented. The emphasis of fund financial statements is on major governmental funds, each displayed in a separate column.
The School District reports the following major governmental funds:
General Fund is the School District's primary operating fund. It accounts for all financial resources of the School District, except those resources required to be accounted for in another fund.

TALBOT COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30,2010

EXHIBIT "I"

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) 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 acredited 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 of accounting determines when transactions are reported on the financial statements. The District-wide governmental and fiduciary fund financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded at the time liabilities are incurred, regardless of when the related cash flows take place. Nonexchange transactions, in which the School District gives (or receives) value without directly receiving (or giving) equal value in exchange, include property taxes, sales taxes, grants and donations. On an accrual basis, revenue from property taxes is recognized in the fiscal year for which the taxes are levied. Revenue from sales taxes is recognized in the fiscal year in which the underlying transaction (sale) takes place. Revenue from grants and donations is recognized in the fiscal year in which all eligibility requirements have been satisfied.
The School District uses funds to report on its financial position and the results of its operations. Fund accounting is designed to demonstrate legal compliance and to aid financial management by segregating transactions related to certain governmental functions or activities. A fund is a separate accounting entity with a self-balancing set of accounts.
Governmental funds are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Under this method, revenues are recognized when measurable and available. The School District considers all revenues reported in the governmental funds to be available if they are collected within sixty days after year-end. Property taxes, sales taxes and interest are considered to be susceptible to accrual. Expenditures are recorded when the related fund liability is incurred, except for principal and interest on general long-term debt and claims and judgments, which are recognized as expenditures to the extent they have matured. Capital asset acquisitions are reported as expenditures in governmental funds. Proceeds of general long-term liabilities are reported as other financing sources.
The School District funds certain programs by a combination of specific cost-reimbursement grants, categorical grants, and general revenues. Thus, when program costs are incurred, there are both restricted and unrestricted net assets available to finance the program. It is the School District's policy to first apply grant resources to such programs, followed by cost-reimbursement grants, then general revenues.

TALBOT COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30,2010

EXHIBIT "I"

The State of Georgia reimburses the School District for teachers' salaries and operating costs through the Quality Basic Education Formula Earnings program (QBE). Generally teachers are contracted for the school year (July 1-June 30) and paid over a twelve month contract period, generally September 1through August 31. In accordance with respective rules and regulations of the QBE program, the State of Georgia reimburses the School District over the same twelve month period in which teachers are paid. At June 30, the amount of teachers' salaries incurred but not paid until July and August of the subsequent year are accrued. Since the State of Georgia recognizes its QBE liability for the July and August salaries at June 30, the School District recognizes the Same QBE as a receivable and revenue, consistent with symmetrical recognition.
NEW ACCOUNTING PRONOUNCEMENTS
In fiscal year 2010, the School District adopted the Governmental Accounting and Standards Board (GASB) Statement No. 51, Accounting and Reporting for Intangible Assets. The provisions of this Statement generally require retroactive reportingfor intangible assets acquired after June 30, 1980, with the exception of those intangible assets that have indefinite useful lives and those that are considered internally generated.
In addition, the School District adopted GASB Statement No. 53, Accounting and Financial Reporthg for Derivative Instruments. The provisions of this Statement impacts disclosure regarding derivative instruments entered into by the state and local governments. Derivative disclosures, if any, will be identified in Note 3.
CASH AND CASH EQUIVALENTS
Composition of Deposits Cash and cash equivalents consist of cash on hand, demand deposits and short-term investments with original maturities of three months or less from the date of acquisition in authorized financial institutions. Official Code of Georgia Annotated Section 45-8-14 authorizes the School District to deposit its funds in one or more solvent banks, insured Federal savings and loan associations or insured chartered building and loan associations.
INVESTMENTS
Composition of lnvestments lnvestments made by the School District in nonparticipating interest-earning contracts (such as certificates of deposit) and repurchase agreements are reported at cost. Participating interestearning contracts and money market investments with a maturity at purchase of one year or less are reported at amortized cost. Both participating interest-earning contracts and money market investments with a maturity at purchase greater than one year are reported at fair value. The Official Code of Georgia 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 of return 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,

TALBOT COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30,2010

EXHIBIT "I"

4. Obligations of any corporation of the United States government,
5. Prime banker's acceptances,
6. The Georgia Fund 1administered 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 of Commissioners fixed the property tax levy for the 2009 tax digest year (calendar year) on October 20,2009 (levy date). Taxes were due on December 20, 2009 (lien date). Taxes collected within the current fiscal year or within 60 days after year-end on the 2009 tax digest are reported as revenue in the governmental funds for fiscal year 2010. The Talbot County Tax Commissioner bills and collects the property taxes for the School District, withholds 2.50% of taxes collected as a fee for tax collection and remits the balance of taxes collected to the School District. Property tax revenues, at the fund reporting level, during the fiscal year ended June 30, 2010, for maintenance and operations amounted to $2,818,111.45 and for school bonds amounted to $128,496.63.

Tax millage rates levied for the 2009 tax year (calendar year) for the Talbot County Board of Education were as follows (a mill equals $1per thousand dollars of assessed value):

School Operations School Bonds

13.08 mills 0.60 mills

SALESTAXES

13.68 mills

Special Purpose Local Option Sales Tax, at the fund reporting level, during the year amounted to $526,550.01 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.

TALBOT COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30,2010

EXHIBIT "I"

INVENTORIES
Food Inventories On the basic financial statements, inventories of donated food commodities used in the preparation of meals are reported at their Federally assigned value and purchased foods inventories are reported at cost (first in, first out). The School District uses the consumption method to account for inventories whereby donated food commodities are recorded as an asset and as revenue when received, and expenses/expenditures are recorded as the inventory items are used. Purchased foods are recorded as an asset when purchased and expenses/expenditures are recorded as the inventory items are used.
PREPAID ITEMS
Payments made to vendors for services that will benefit periods subsequent to June 30, 2010, are recorded as prepaid items.
CAPITAL ASSETS
Capital assets purchased, including capital outlay costs, are recorded as expenditures in the fund financial statements at the time of purchase (including ancillary charges). On the District-wide financial statements, all purchased capital assets are valued at cost where historical records are available and at estimated historical cost based on appraisals or deflated current replacement cost where no historical records exist. Donated capital assets are recorded at estimated fair market value on the date donated. Disposals are deleted at depreciated recorded cost. The cost of normal maintenance and repairs that do not add to the value of assets or materially extend the useful lives of the assets is not capitalized. Depreciation is computed using the straight-line method. The School District does not capitalize book collections or works of art. During the fiscal year under review, no events or changes in circumstances affecting a capital asset that may indicate impairment were known to the School District.
Capitalization thresholds and estimated useful lives of capital assets reported in the District-wide statements and proprietary funds are as follows:

Capitalization Policy

Estimated Useful Life

Land Land Improvements Buildings and Improvements Equipment

All $ 10,000.00 $ 20,000.00 $ 5,000.00

N/A 2 0 t o 50 years up t o 5 0 years
5 t o 5 0 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. In the District-wide and fund financial statements, the School District recognizes bond premiums and discounts, as well as bond issuance costs during the fiscal

TALBOT COUNW BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30,2010

EXHIBIT "I"

year bonds are issued. Premiums received on debt issuances are reported as other financing sources while discounts on debt issuances are reported as other financing uses. Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as debt service expenditures. To conform to generally accepted accounting principles, bond premiums and discounts, as well as bond issuance costs should be amortized over the life of the bonds on the District-wide statements. The effect of this deviation is deemed to be immaterial to the fair presentation of the basic financial statements. General obligation bonds are direct obligations and pledge the full faith and credit of the government. The outstanding amount of these bonds is recorded in the Statement of Net Assets.

NET ASSETS
The School District's net assets in the District-wideStatements are classified as follows:
Invested in capital assets, net of related debt -This represents the School District's total investment in capital assets, net of outstanding debt obligations related to those capital assets. To the extent debt has been incurred but not yet expended for capital assets, such amounts are not included as a component of invested in capital assets, net of related debt.
Restricted net assets-These represent resources for which the School District is legally or contractually obligated to spend resources for bus replacement, continuation of Federal Programs, debt service, and capital projects in accordance with restrictions imposed by external third parties.
Unrestricted net assets - Unrestricted net assets represent resources derived from property taxes, sales taxes, grants and contributions not restricted to specific programs, charges for services, and miscellaneous revenues. These resources are used for transactions relating to the educational and general operations of the School District, and may be used at the discretion of the Board to meet current expenses for those purposes.
FUND BALANCES

Reserved Reserves represent those portions of fund balance equity that are legally segregated for a specific future use.
Unreserved - Designated Designatedfund balances represent tentative plans for future use of financial resources.
Banquet Account - $4,495.54 - Represents the remaining fund balance in the School District's banquet account.
Student Activities - $28,730.95 - Represents the remaining fund balance in the Principal's accounts.

DEFICIT FUND BALANCES

The fund reporting a deficit fund balance at June 30, 2010, is as follows:

Fund Type/Fund Name General Fund

Deficit Balance $ 510,244.83

The School District plans to eliminate the deficit through a reduction in spending and an increase in millage rate.

TALBOT COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30,2010

EXHIBIT "I"

USE OF ESTIMATES
The preparation of the financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results may differ from those estimates.
NOTE 3: DEPOSITS AND INVESTMENTS
COLLATERALIZATION OF DEPOSITS
Official Code of Georgia Annotated (O.C.G.A.) Section 45-8-12 provides that there shall not be on deposit at any time in any depository for a time longer than ten days a sum of money which has not been secured by surety bond, by guarantee of insurance, or by collateral. The aggregate of the face value of such surety bond and the market value of securities pledged shall be equal to not less than 110 percent of the public funds being secured after the deduction of the amount of deposit insurance. If a depository elects the pooled method (O.C.G.A. Section 45-8-13.1) the aggregate of the market value of the securities pledged to secure a pool of public funds shall be not less than 110 percent of the daily pool balance.
Acceptable security for deposits consists of any one of or any combination of the following:
1. Surety bond signed by a surety company duly qualified and authorized to transact business within the State of Georgia,
2. lnsurance on accounts provided by the Federal Deposit lnsurance Corporation,
3. Bonds, bills, notes, certificates of indebtedness or other direct obligations of the United States or of the State of Georgia,
4. Bonds, bills, notes, certificates of indebtedness or other obligations of the counties or municipalities of the State of Georgia,
5. Bonds of any public authority created by the laws of the State of Georgia, providing that the statute that created the authority authorized the use of the bonds for this purpose,
6. Industrial revenue bonds and bonds of development authorities created by the laws of the State of Georgia, and
7. Bonds, bills, notes, certificates of indebtedness, or other obligations of a subsidiary corporation of the United States government, which are fully guaranteed by the United States government both as to principal and interest or debt obligations issued by or securities guaranteed by the Federal Land Bank, the Federal 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 MortgageAssociation.
CATEGORIZATION OF DEPOSITS
Custodial credit risk is the risk that in the event of a bank failure, the School District's deposits may not be returned to it. The School District does not have a deposit policy for custodial credit risk. At June 30, 2010, the bank balances were $7,142,608.33. The amounts exposed to custodial credit risk are classified into three categories as follows:

TALBOT COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30,2010

EXHIBIT "I"

Category 1Category 2 -
Category 3 -

Uncollateralized, Cash collateralized with securities held by the pledging financial institution, or 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 deposits by custodial risk category at June 30, 2010, are as follows:

Custodial Credit Risk Category

Bank Balance

Total
CATEGORIZATION OF INVESTMENTS

$ 3,413,876.68

At June 30, 2010, the carrying value of the School District's total investments was $98,382.56, which is materially the same as fair value. This investment consisted entirely of funds invested in the Georgia Fund 1,formerly referred to as LGIP, 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 of the State of Georgia, Office of Treasury and Fiscal Services for the Georgia Fund 1(Primary Liquidity Portfolio) does not provide for investment in derivatives or similar investments. Additional information on the Georgia Fund 1is disclosed in the State o f Georgiacomprehensive Annual Financial Report. This audit can be obtained from the Georgia Department of Audits and Accounts at
htt~://www.audits.gaaov/SGD/cafr.html.

The Primary Liquidity Portfolio consists of Georgia Fund 1which 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 1may not exceed 60 days. The weighted average maturity for Georgia Fund 1on June 30,2010, was 46 days.

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

TALBOT COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30,2010

EXHIBIT "I"

NOTE 5: CAPITAL ASSETS The following is a summary of changes in the Capital Assets during the fiscal year:

Governmental Activities Capital Assets, Not Being Depreciated:
Land

Balances July 1.2009

Increases

Decreases

Balances June 30,2010

$

354,857.93 $

0.00 $

0.00 $

354,857.93

Capltal Assets, Being Depreciated: Buildings and Improvements Equipment Land Improvements

$

3,411,016.28

1,734,881.98 $

558,998.55

$ 77,212.80

0.00 $

3,411,016.28 1,812,094.78
558,998.55

Less: Accumulated Depreciation: Buildings and Improvements Equipment Land Improvements

1,564,429.65 1,126,131.42
324,614.26

61,928.81 133,551.99
17,954.00

1,626,358.46 1,259,683.41
342,568.26

Total Capital Assets, Being Depreciated, Net $

Governmental Activity Capital Assets - Net

$

2,689,721.48 $ 3,044,579.41 $

-136,222.00 $ -136,222.00 $

0.00 $ 0.00 $

2,553,499.48 2,908,357.41

Current year depreciation expense by function is as follows:
Instruction Support Services
Business Administration Maintenance and Operation of Plant Student Transportation Services Food Services

NOTE 6: RISK MANAGEMENT
The School District is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors or omissions; job related illness or injuries to employees; acts of God and unemployment compensation.
The School District has obtained commercial insurance for risk of loss associated with torts, assets, and errors or omissions. The School District has neither significantly reduced coverage for these risks nor incurred losses (settlements) which exceeded the School District's insurance coverage in any of the past three years.
The School District has elected to self-insure for all losses related to acts of God. The School District has not experienced any losses related to this risk in the past three years.

TALBOT COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30,2010

EXHIBIT "I"

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.

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

follows:

Claims and

Beginningof Year

Changes in

Claims

End of Year

Liability

Estimates

Paid

Liability

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 $700,000.00 loss per occurrence, up to the statutory limit. Employers' Liability insurance coverage is also provided by Midwest Employers Casualty Company to provide coverage for potential losses sustained by the Fund in excess of $700,000.00 loss per occurrence, up to $1,000,000.00, with an aggregate limit of $2,000,000.00.
The School District has purchased surety bonds to provide additional insurance coverage as follows:

Position Covered
Superintendent
Bookkeeper Payroll Clerk School Food Director Each Employee

Amount

$

30,000.00

$

10,000.00

$

10,000.00

NOTE 7 : OPERATING LEASES
Talbot County Board of Education has entered into various leases as lessee for copiers and a postage meter. These leases are considered for accounting purposes to be operating leases. Lease expenditures for the year ended June 30, 2010, for governmental funds amounted to $11,847.13.
NOTE 8: 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 of the 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 3 1of the calendar year in which the debt was incurred.

TALBOT COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30,2010

EXHIBIT "I"

Short-term debt activity for the fiscal year is as follows:

Beginning Balance

Issued

Temporary Loans

$

500,000.00 $

2,130,000.00 $

Redeemed 1,780,000.00 $

Ending Balance
850.000.00

NOTE 9: LONG-TERM DEBT

GENERAL OBLIGATION DEBT OUTSTANDING

General Obligation Bonds currently outstanding are as follows:

Purpose

Interest Rate

General Government - Series 2003

Amount

The changes in Long-Term Debt during the fiscal year ended June 30,2010, were as follows:

Balance July 1,2009

Additions

Governmental Funds Deductions

Balance June 30,2010

Due Within One Year

G. 0. Bonds

At June 30, 2010, 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

Total Principal and Interest

$

3,070,000.00 $

561.830.00

NOTE 10: ON-BEHALF PAYMENTS

The School District has recognized revenues and costs in the amount of $16,001.25 for health insurance and retirement contributions paid on the School District's behalf by the following State Agencies.

TALBOT COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30,2010

EXHIBIT "I"

Georgia Department of Education Paid to the Georgia Department of Community Health For Health lnsurance of Non-Certified Personnel In the amount of $12,142.94
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 $3,858.31
NOTE 11: SIGNIFICANT CONTINGENT LIABILITIES
Amounts received or receivable principally from the Federal government are subject to audit and review by grantor agencies. This could result in requests for reimbursement to the grantor agency for any costs which are disallowed under grant terms. The School District believes that such disallowances, if any, will be immaterial to its overall financial position.
The School District is a defendant in various legal proceedings pertaining to matters incidental to the performance of routine School District operations. The ultimate disposition of these proceedings is not presently determinable, but is not believed to be material to the basic financial statements.
NOTE 12: RELATED PARTY TRANSACTIONS
The School District receives local tax receipts from the Talbot County Tax Commissioner's office. The Tax Commissioner is the spouse of the Interim Superintendent.
NOTE 13: POST-EMPLOYMENT BENEFITS
GEORGIASCHOOL PERSONNEL EMPLOYEES POST-EMPLOYMENT HEALTH BENEFIT FUND
Plan Description. The Georgia School Personnel Post-Employment Health Benefit Fund (School OPEB Fund) is a cost-sharing multiple-employer defined benefit post-employment healthcare plan that covers eligible former employees of public school systems, libraries and regional educational service agencies. The School OPEB Fund provides health insurance benefits to eligible former employees and their qualified beneficiaries through the State Employees Health lnsurance Plan administered by the Department of Community Health. The Official Code of Georgia Annotated (OCGA) assigns the authority to establish and amend the benefit provisions of the group health plans, including benefits for retirees, to the Board of Community Health (Board).
Funding Policy. The contribution requirements of plan members and participating employers are established by the Board in accordance with the current Appropriations Act and may be amended by the Board. Contributions of plan members or beneficiaries receiving benefits vary based on plan election, dependent coverage, and Medicare eligibility and election. On average, plan members pay approximately 25 percent of the cost of the health insurance coverage.
Participating employers are statutorily required to contribute in accordance with the employer contribution rates established by the Board. The contribution rates are established to fund all benefits due under the health insurance plans for both active and retired employees based on projected "pay-as-you-go" financing requirements. Contributions are not based on the actuarially calculated annual required contribution (ARC) which represents a level of funding that, if paid on an ongoing basis, is projected to cover normal cost each year and amortize any unfunded actuarial liabilities (or funding excess) over a period not to exceed thirty years.

TALBOT COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30,2010

EXHIBIT "I"

The combined active and retiree contribution rates established by the Board for employers participating in the School OPEB Fund were as follows for the fiscal year ended June 30, 2010:
For certificated teachers, librarians and regional educational service agencies:

July 2009 August 2009 -October 2009 November 2009 -June 2010

18.534%of covered payroll for August Coverage 14.492%of covered payroll for September - November Coverage 18.534%of covered payroll for December- July Coverage

For non-certificated school personnel:

July 2009 -June 2010

$162.72 per member per month plus Departmentof Education contribution of $22,838,311.00

No additional contribution was required by the Board for fiscal year 2010 nor contributed to the State OPEB Fund to prefund retiree benefits. Such additional contribution amounts are determined annually by the Board in accordance with the State plan for other post-employment benefits and are subject to appropriation.

The School District's combined active and retiree contributions to the health insurance plans, which

equaled the required contribution, for the current fiscal year and the preceding two fiscal years were

as follows:

Percentage

Required

Fiscal Year

Contributed

Contribution

NOTE 14: RETIREMENT PLANS
TEACHERS RETIREMENTSYSTEM OF GEORGIA (TRS)
Plan Description. The TRS is a cost-sharing multiple-employer defined benefit plan created in 1943 by an act of the Georgia General Assembly to provide retirement benefits for qualifying employees in educational service. A Board of Trustees comprised of active and retired members and ex-officio State employees is ultimately responsible for the administration of TRS. 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.
On October 25, 1996, the Board created the Supplemental Retirement Benefits Plan of the Georgia Teachers Retirement System (SRBP-TRS). SRBP-TRS was established as a qualified excess benefit plan in accordance with Section 415 of the Internal Revenue Code (IRC) as a portion of TRS. The purpose of SRBP-TRS is to provide retirement benefits to employees covered by TRS whose benefits are otherwise limited by IRC Section 415. Beginning July 1, 1997, all members and retired former members in TRS are eligible to participate in the SRBP-TRS whenever their benefits under TRS exceed the IRC Section 415 imposed limitation on benefits.
TRS provides service retirement, disability retirement, and survivor's benefits. The benefit structure of TRS is defined and may be amended by State statute. A member is eligible for normal service retirement after 30 years of creditable service, regardless of age, or after 1 0 years of service and attainment of age 60. A member is eligible for early retirement after 2 5 years of creditable service.

TALBOT COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30,2010

EXHIBIT "I"

Normal retirement (pension) benefits paid to members are equal to 2% of the average of the member's two highest paid consecutive years of service, multiplied by the number of years of creditable service up to 4 0 years. Early retirement benefits are reduced by the lesser of one-twelfth of 7% for each month the member is below age 6 0 or by 7% for each year or fraction thereof by which the member has less than 3 0 years of service. It is also assumed that certain cost-of-living adjustments, based on the Consumer Price Index, will be made in future years. Retirement benefits are payable monthly for life. A member may elect to receive a partial lump-sum distribution in addition to a reduced monthly retirement benefit. Death, disability and spousal benefits are also available.

Funding Policy. TRS is funded by member and employer contributions as adopted and amended by the Board of Trustees. Members become fully vested after 1 0 years of service. If a member terminates with less than 1 0 years of service, no vesting of employer contributions occurs, but the member's contributions may be refunded with interest. Member contributions are limited by State law to not less than 5% or more than 6% of a member's earnable compensation. Member contributions as adopted by the Board of Trustees for the fiscal year ended June 30, 2010, were 5.25% of annual salary. The member contribution rate will increase to 5.53% effective July 1,2010. Employer contributions required for fiscal year 2010 were 9.74%of annual salary as required by the June 30, 2007, actuarial valuation. The employer contribution rate will increase to 10.28% effective July 1,2010.

Employer contributions for the current fiscal year and the preceding two fiscal years are as follows:

Fiscal Year

Percentage Contributed

Required Contribution

(This page left intentionally blank)

TALBOT COUNN BOARD OF EDUCATION GENERAL FUND
SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL
YEAR ENDED JUNE 30.2010

REVENUES
Property Taxes Sales Taxes State Funds Federal Funds Charges for Servlces Investment Earnings Miscellaneous
Total Revenues
EXPENDITURFS
Current Instruction Support Servlces Pup11S e ~ ~ c e s Improvement of lnstructlonal Servlces Educat~onaMl ed~aServlces General Admlnlstratlon School Administration Busmess Administration Maintenance and Operation of Plant Student Transportat~onServlces Central Support S e ~ l c e s Other Support Servlces Enterprise Operat~ons Community Sewlces Food Services Operat~on
Total Expenditures
Net Change In Fund Balances
Fund Balances - Beglnnlng
Adjustments

NONAPPROPRIATED BUDGETS

ORIGINAL (1)

FINAL (1)

ACTUAL AMOUNTS

Fund Balances - Ending
Notes to the Schedule of Revenues. Exoendltures and Chanzes in Fund Balances Budget and Actual (1) Origlnal and Final Budget amounts do not Include budgeted revenues or expendltures of the various principal accounts The accompanying schedule of revenues, expenditures and changes In fund balances budget and actual 1s presented on the mod~f~eadccrual bass of accountlngwh~chIS the basls of accounting used In the presentatlon of the fund flnanclal statements.

See notes to the basic financial statements.

TALBOT COUNTY BOARD OF EDUCATION SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
YEAR ENDEDJUNE 30.2010

SCHEDULE "2"

FUNDING AGENCY PROGRAM/GRANT
Agr~culture,U. S. Department of Child Nutrition Cluster PassThroum From Georgia Department of Education Food Services School Breakfast Program National School Lunch Program
Total Ch~ldNutrltlon Cluster
Other Programs PassThrough From Bright From the Start: Georgia Department of Early Care and Learnlng Child and Adult Care Food Program Pass-ThroughFrom Georg~aDepartment of Educat~on Food Services Fresh Fruit and Vegetable Program
Total Other Programs
Total U. S. Department of Agr~culture
Educatlon, U. S. Department of Educatlon Technolo& State Grants Cluster pass-~hrdughFrom Georgia Department of Education Education Technology State Grants
School Improvement Grants Cluster Pass-Through From Georg~aDepartment of Education School lmorovement Grants
Special Education Cluster Pass-Through From Georg~aDepartment of Education Special Education ARRA Grants to States ARRA - Preschool Grants Grants to States Preschool Grants
Total Speclal Educat~onCluster
State Fiscal Stabilizat~onFund Cluster Pass-ThroughFrom Georg~aDepartment of Education
ARRA - Educatlon State Grants
Title I, Part A Cluster Pass-Through From Georg~aDepartment of Educat~on
ARRA - T~tleI Grants to Local Educational Agenc~es
Title I Grants to Local Educat~onaAl genc~es
Total T~tleI. PanA Cluster
Other Programs D~rect Early Reading F~rst

CFDA NUMBER

PASSTHROUGH
ENTITY ID
NUMBER

EXPENDITURES IN PERIOD

TALBOT COUNTY BOARD OF EDUCATION SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
YEAR ENDEDJUNE 30,2010

SCHEDULE "2"

FUNDING AGENCY PROGRAM/GRANT
Education, U S Department of Other Programs pass Through From Georgia Department of Education Career and Technical Education Basic Grants to States Even Start - State Educational Agencies lmprov~nTgeacher Qual~tyState Grants Reading First State Grants Rural Education Safe and Drug-Free Schools and Communities State Grants Twenty-First Century Commun~tyLearning Centers
Total Other Programs
Total U. S. Department of Education
Health and Human Services. U. S. Department of Child Care and Development Fund Cluster Pass-ThroughFrom Georgia Department of Human Services Child Care and Development Block Grant Child Care Mandatory and Matching Funds of the Chlld Care and Development Fund Pass-ThroughFrom Bright From the Start: Georgia Department of Early Care and Learning ARRA- Ch~ldCare and Development Block Grant
Total U. S. Department of Health and Human Services
Defense, U. S. Department of D~rect Department of the Army R.O.T.C. Program

CFD A NUMBER

PASSTHROUGH
ENTITY ID
NUMBER

EXPENDITURES IN PERIOD

Total Federal Financial Assistance
-N/A Not Available
No& U, the Schedule of Emenditures of Federal Awards
(1) Includes the Federally assigned value of donated commodit~esfor the Food Donation Program in the amount of $65.203 59
(2) Expenditures for the funds earned on the School Breakfast Program ($125,386.26) were not maintained separately and are Included in the 2010 National School Lunch Program.
Major Programsare identified by an asterisk (*) in front of the CFDA number.
The School District did not provide Federal Assistance to any Subreciplent.
The accompanyingschedule 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.

TALBOT COUNTY BOARD OF EDUCATION SCHEDULE OF STATE REVENUE YEAR ENDED JUNE 30,2010
GRANTS Bright From the Start: Georgia Department of Early Care and Learnlng Pre-KindergartenProgram
Education, Georg~aDepartment of Quality Basic Educat~on Direct Instructional Cost Kindergarten Program
Kindergarten Program - Early lnterventlon Program
Primary Grades (1-3) Program
Primary Grades - Early lntervention (1-3) Program
Upper Elementary Grades (4-5) Program
Upper Elementary Grades - Early Intervention (4-5) Program
M~ddleSchool (6-8) Program High School General Education (9-12) Program Vocational Laboratoty(9-12) Program Students with Disabilities Remedial Education Program Alternative Education Program Media Center Program 2 0 Days Additional Instruction Staff and Professional Development Indirect Cost Central Administrat~on School Administration Facility Maintenance and Operations Categorical Grants Pupil Transportation Regular Spars~ty Spars~tyAlternative Program Nursing Services Vocational Supervisors Mid-term Adj~StmentHold-Harmless Food Services Vocational Education Amended Formula Adjustment Other State Programs Health Insurance Preschool Handicapped Program Middle School Support Grant
Off~ceof Treasury and Fiscal Services Publ~cSchool EmployeesRetirement
CONTRACT Human Resources. Georgia Department of Family Connection
See notes to the bas~cfinancial statements.

SCHEDULE "3"
GOVERNMENTAL FUND TYPE GENERAL FUND

TALBOT COUNTY BOARD OF EDUCATION SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS
YEAR ENDED JUNE 30.2010

SCHEDULE "4"

PROJECT

ORIGINAL ESTIMATED
COST (1)

CURRENT ESTIMATED COSTS (2)

AMOUNT EXPENDED IN CURRENT YEAR (3)

AMOUNT EXPENDED IN PRIOR YEARS (3)

Acqulrlng, constructing and equipping one new

elementary school; adding to, renovating,

repairing. improving, and equipping existing

school buildingsand other buildings and

facil~tiesuseful or desirable in connection

therewith; payment of capitalized interest on

the bonds through and including August 1,

2003; and the costs of issuingthe bonds.

$ 2,500,ooo.oo $ 2,690,643.73 $

157,367.03 $ 2,533,276.70

PROJECT STATUS
Ongoing

(1) The School District's original cost estimate as specified in the resolutioncalling for the imposition of the Local Option Sales Tax.
( 2 ) The School District's current estimate of total cost for the project. Includesall cost from project inceptionto completion.
(3) The voters of Talbot County approved the impositionof 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 notesto the basic financial statements.

(This page left intentionally blank)

TALBOT COUNTY BOARD OF EDUCATION
GENERAL FUND - QUALITY BASIC EDUCATION PROGRAM (QBE) ALLOTMENTS AND EXPENDITURES - BY PROGRAM
YEAR ENDED JUNE 30,2010

SCHEDULE "5"

DESCRIPTION
D~recItnstruct~onaPl rograms K~ndergartenProgram Kindergarten Program-Early lnterventlon Program Pr~matyGrades ( 13) Program Pnmary Grades-Early lntervent~on(1-3) Program Upper Elementary Grades (4-5) Program Upper Elementary Grades Early lntervent~on(4 5) Program M~ddleSchool (6-8) Program High School General Educat~on(9 12) Program Vocat~onalLaboratory (9-12) Program Students wlth Dlsabllltles Remedlal Educat~onProgram Alternat~veEducat~onProgram
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

TOTAL QBE FORMULA FUNDS

(1) Comprised of State Funds plus Local F~veM ~ lSl hare. (2) Allotments do not Include the impact of the State amended formula adjustment

See notes to the bas~cfinanc~asl tatements.

SECTION II COMPLIANCE AND INTERNAL CONTROL REPORTS

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

DEPARTMENOTF AUDITSAND ACCOUNTS
270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400
August 23,2011

Honorable Nathan Deal, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the Talbot County Board of Education
INDEPENDENT AUDITOR'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MAl7ERS 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, 2010, which collectively comprise Talbot County Board of Education's basic financial statements and have issued our report thereon dated August 23, 2011. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States.
Internal Control Over Financial Re~ortine,
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 of expressing 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 first paragraph of this section and was not designed to identify all deficiencies in internal control over financial reporting that might be deficiencies, significant deficiencies, or material weaknesses. However, as described in the accompanying Schedule of Findings and Questioned Costs, we identified certain deficiencies in internal control over financial reporting that we consider to be material weaknesses and other deficiencies that we consider to be significant deficiencies.
A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect and correct misstatements on a timely basis. A material weakness is a deficiency, or

combination of deficiencies, in internal control such that there is a reasonable possibility that a material misstatement of the entity's financial statements will not be prevented, or detected and corrected on a timely basis. We consider items FS-7301-10-01and FS-7301-10-04 to be material weaknesses.
A signficant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. We consider items FS-7301-10-02, FS-7301-10-03 and FS-7301-10-05 in the accompanying Schedule of Findings and Questioned Costs to be significant deficiencies in internal control over financial reporting.
Com~lianceand 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 of laws, 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 23, 2011.
Talbot County Board of Education's response to the findings identified in our audit is described in the accompanying Schedule of Management's Responses. We did not audit 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 of management, members of the Talbot County Board of Education, others within the entity, Federal awarding agencies and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties.
Respectfully submitted,
CPA, CGFM

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

DEPARTMENOTF AUDITSAND ACCOUNTS
270 Washington Street, S.W., Suite 1- 156 Atlanta, Georgia 30334-8400
August 23,2011

Honorable Nathan Deal, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the Talbot County Board of Education
INDEPENDENT AUDITOR'S REPORT ON COMPLIANCE WlTH REOUIREMENTS THAT COULD HAVE A DIRECT AND MATERIAL EFFECT ON EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WlTH OMB CIRCULAR A-133
Ladies and Gentlemen:
Compliance
We have audited Talbot County Board of Education's compliance with the types of compliance requirements described in the OMB Circular A-133 Compliance Supplement that could have a direct and material effect on each of its major Federal programs for the year ended June 30, 2010. Talbot County Board of Education's major Federal programs are identified in the Summary of Auditor's Results section of the accompanying Schedule of Findings and Questioned Costs. Compliance with the requirements of laws, regulations, contracts, and grants applicable to each of its major Federal programs is the responsibility of 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 of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and OMB Circular A-133, Audits of States, L x a l 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 of Education's compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Our audit does not provide a legal determination on Talbot County Board of Education's compliance with those requirements.
As described in items FA-7301-10-01and FA-7301-10-02 in the accompanying Schedule of Findings and Questioned Costs, Talbot County Board of Education did not comply with requirements regarding Allowable Costs/Cost Principles that are applicable to its Early Reading First Program and Title I, Part A Cluster. Compliance with such requirements is necessary, in our opinion, for Talbot County Board of Educationto comply with requirements applicable to those programs.

In our opinion, except for the noncompliance described in the preceding paragraph, Talbot County Board of Education complied, in all material respects, with the compliance requirements referred to above that could have a direct and material effect on each of its major Federal programs for the year ended June 30,2010.
Internal Control Over Com~liance
Management of Talbot County Board of Education is responsible for establishing and maintaining effective internal control over compliance with the requirements of laws, regulations, contracts, and grants applicable to Federal programs. In planning and performing our audit, we considered Talbot County Board of Education's internal control over compliance with the requirements that could have a direct and material effect on a major Federal program to determine the auditing procedures for the purpose of expressing our opinion on compliance and to test and report on internal control over compliance in accordance with OMB Circular A-133, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of the Talbot County Board of Education's internal control over compliance.
Our consideration of internal control over compliance was for the limited purpose described in the preceding paragraph and was not designed to identify all deficiencies in internal control over compliance that might be significant deficiencies or material weaknesses and therefore, there can be no assurance that all deficiencies, significant deficiencies, or material weaknesses have been identified. However, as discussed below, we identified certain deficiencies in internal control over compliance that we consider to be material weaknesses and other deficiencies that we consider to be significant deficiencies.
A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a Federal program on a timely basis. A material weakness in internal control over compliance is a deficiency, or combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a Federal program will not be prevented, or detected and corrected, on a timely basis. We consider the deficiencies in internal control over compliance described in the accompanying Schedule of Findings and Questioned Costs as items FA-7301-10-01 and FA-730110-02 to be material weaknesses.
A significant deficiency in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance with a type of compliance requirement of a Federal program that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance. We consider the deficiency in internal control over compliance described in the accompanying Schedule of Findings and Questioned Costs as item FA-7301-10-03to be a significant deficiency.
Talbot County Board of Education's responses to the findings identified in our audit are described in the accompanying Schedule of Management's Responses. We did not audit Talbot County Board of Education's responses and, accordingly, we express no opinion on the responses.

This report is intended solely for the information and use of management, members of the Talbot County Board of Education, others within the entity, Federal awarding agencies and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties.
Respectfully submitted,
usd dell W. Hinton, CPA, CGFM
State Auditor

SECTION Ill 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 30,2010
PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS
FINDING CONTROL NUMBER AND STATUS
Previously Reported Corrective Action lmplemented Previously Reported Corrective Action lmplemented Further Action Not Warranted Previously Reported Corrective Action lmplemented Unresolved - See Corrective Action/Responses Unresolved - See Corrective Action/Responses Previously Reported Corrective Action lmplemented Unresolved - See Corrective Action/Responses Unresolved - See Corrective Action/Responses Previously Reported Corrective Action lmplemented Previously Reported Corrective Action lmplemented Unresolved - See Corrective Action/Responses Previously Reported Corrective Action lmplemented Previously Reported Corrective Action lmplemented Previously Reported Corrective Action lmplemented
CORRECTIVE ACTION/RESPONSES
BUDGET PREPARATION/EXECUTION Deficit Fund Balance Finding Control Number: FS-7301-09-01
The Board will establish policies and procedures designed to ensure that a balanced budget will be adopted and adhered to in order to maintain a fund balance.
CASH AND CASH EQUIVALENTS lnadequate Internal Control Procedures Finding Control Number: FS-730149-02
The Board will implement controls over cash to ensure that cash is properly reconciled to the general ledger and cash activity is maintained in the proper funds. Additional staff will be assigned the duty of monthly bank reconciliations and these reconciliations will be reviewed and signed by the Financial Director.
REVENUES/RECEIVABLES/RECEIPTS ACCOUNTING CONTROLS (OVERALL) FINANCIAL REPORTING lnadequate Internal Controls over School Activity Accounts Finding Control Number: FS-7301-09-04
The Board will use existing staff not involved with bank reconciliations and general ledger functions to prepare and deposit revenues. The Board will petform an internal audit of school activity accounts.

TALBOT COUNTY BOARD OF EDUCATION AUDITEE'S RESPONSE
SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30,2010
PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND OUESTIONED COSTS
CORRECTIVE ACTION/RESPONSES
REVENUES/RECEIVABLES/RECEIPTS GENERAL LEDGER lnadequate Internal Controls over Grants and Contracts Finding Control Number: FS-7301-09-05
The Board will revise and implement internal controls to ensure that all state and Federal programs are properly closed out at year end. Additional controls will be implemented to ensure that state and Federal program funds are closely monitored so that deficit fund balances will not occur.
EMPLOYEE COMPENSATION lnadequate Internal Controls over Employee Compensation Process Finding Control Number: FS-7301-09-08
The Board will implement procedures to ensure that all compensation paid to employees flows through payroll and is properly documented.
PRIOR YEAR FEDERAL AWARD FINDINGS AND OUESTIONED COSTS
FINDING CONTROL NUMBER AND STATUS
Previously Reported Corrected Action lmplemented Previously Reported Corrected Action lmplemented Previously Reported Corrected Action lmplemented Previously Reported Corrected Action lmplemented Previously Reported Corrected Action lmplemented Previously Reported Corrected Action lmplemented Previously Reported Corrected Action lmplemented Previously Reported Corrected Action lmplemented Previously Reported Corrected Action lmplemented Previously Reported Corrected Action lmplemented Previously Reported Corrected Action lmplemented Previously Reported Corrected Action lmplemented Previously Reported Corrected Action lmplemented

SECTION IV FINDINGS AND QUESTIONED COSTS

TALBOT COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONEDCOSTS
YEAR ENDED JUNE 30,2010

I SUMMARY OF AUDITOR'S RESULTS

Financial Statements

Type of auditor's report issue: Governmental Activities; General Fund; Capital Projects Fund; Debt Service Fund; Aggregate Remaining Fund Information

Unqualified

Internal control over financial reporting:

Material weaknesses identified?

Yes

Significant deficiencies identified?

Yes

Noncompliance material to financial statements noted:

Federal Awards

Internal Control over major programs:

Material weaknesses identified?

Yes

Significant deficiency identified?

Yes

Type of auditor's report issued on compliance for major programs: Unqualified for all major programs, except for Early Reading First Program and Title I, Part A Cluster, which were qualified.

Any audit findings disclosed that are required to be reported in

accordance with OMB Circular A-133, Section 510(a)?

Yes

Identification of major programs:

CFDA Numbeds)

Name of Federal Program or Cluster

84.359

Child Nutrition Cluster Title I, Part A Cluster Special Education Cluster State Fiscal Stabilization Fund Cluster Early Reading First

Dollar threshold used to distinguish between Type A and Type B programs:

Auditee qualified as low-risk auditee?

TALBOT COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30,2010
II FINANCIAL STATEMENT FINDINGS AND QUESTIONEDCOSTS
BUDGET PREPARATION/EXECUTION Deficit Fund Balance Material Weakness Finding Control Number: FS-7301-10-01
Condition: This is a repeat finding (FS-7301-09-01) from the year ended June 30, 2009. The General Fund of the School District reported a deficit fund balance.
Criteria:
Chapter 25 Governmental Fund Deficits of the Financial Management for Georgia Local Units of
Administration states in part: "The seriousness of fund balance deficits cannot be overstated. The Georgia Department of Education requires those LUAs with deficit governmental fund balances to meet certain reporting requirements".
Questioned Cost: N/A
Information: The School District's General Fund reported a deficit fund balance in the amount of $510,244.83.
Cause: The School District's General Fund incurred expenditures in excess of revenues during the year under review. In addition, management failed to use effective budgeting techniques and continued charging expenditures to state and Federal programs after the award amounts had been depleted.
Effect: A financial statement irregularity in accordance with Official Code of Georgia Annotated (0.C.G.A) 20-2-67.
Recommendation: The School District should establish policies and procedures designed to ensure that in future periods the School District does not report a deficit fund balance.
CASH AND CASH EQUIVALENTS Inadequate Internal Control Procedures Significant Deficiency Finding Control Number: FS-7301-10-02
Condition: This is a repeat finding (FS-7301-09-02) from the year ended June 30, 2009. The accounting procedures of the School District were insufficient to provide adequate internal controls over the Cash and Cash Equivalents function.
Criteria: The School District's management is responsible for designing and maintaining internal controls over Cash and Cash Equivalents.

TALBOT COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30,2010
II FINANCIALSTATEMENT FINDINGSAND QUESTIONEDCOSTS
CASH AND CASH EQUIVALENTS Inadequate Internal Control Procedures Significant Deficiency Finding Control Number: FS-7301-10-02
Questioned Cost: N/A
Information: Weaknesses in internal controls relating to Cash and Cash Equivalents were noted as follows:
Bank accounts were not properly reconciled to the general ledger resulting in unidentified variances for the General Fund, Payroll Account and the CSS lnternal School Fund accounts. An administrative review of monthly bank reconciliations, to determine that bank reconciliations were correct and that all required adjustments had been made, was not performed. Processes were not in place to ensure that cash activity was maintained in the proper fund in the general ledger. A review of bank account activity by fund noted Private Purpose Trust Fund cash was recorded in the General Fund, Bond Sinking Fund cash was recorded in the General Fund and Capital Projects Fund, and Special Purpose Local Option Sales Tax cash was recorded in the General Fund. Bank reconciliations were not performed by someone independent of the general ledger function.
Cause: The School District did not design internal controls to properly reconcile and maintain cash activity on the general ledger.
Effect: Failure to maintain adequate internal controls over cash activity increases the risk that significant misstatements could occur in the financial statements due to error or fraud.
Recommendation: The School District should design and implement controls over cash to ensure that (1)cash is properly reconciled to the general ledger, (2) monthly bank reconciliations are adequately reviewed, (3) cash activity is maintained in the proper funds, and (4) bank reconciliations are performed by someone independent of the general ledger function.

TALBOT COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30,2010
II FINANCIALSTATEMENT FINDINGSAND QUESTIONED COSTS
REVENUES/RECEIVABLES/RECEIPTS ACCOUNTING CONTROLS (OVERALL) FINANCIAL REPORTING Inadequate Internal Controls over School Activity Accounts Significant Deficiency Finding Control Number: FS-7301-10-03
Condition: This is a repeat finding (FS-7301-09-04) from the year ended June 30, 2009. The accounting procedures of the School District were insufficient to provide adequate internal controls over school activity accounts.
Criteria: The School District's management is responsible for designing and maintaining internal controls that provide proper separation of duties and provide reasonable assurance that transactions are processed according to established procedures.
Questioned Cost: N/A
Information: Revenues/Receivables/Receipts
The deposit preparation function was not separated from the bank reconciliations and general ledger functions.
Accounting Controls (OveralI) An administrative review of the bank reconciliation process, cash receipt process, and cash disbursement process to determine if established accounting procedures were being followed was not performed.
Financial Reporting School activity account balances used for financial statement reporting did not agree with school activity general ledgers.
Cause: These deficiencies were a result of management's failure to ensure that internal controls were properly designed and functioning at the school level.
Effect: Failure to maintain adequate internal controls over school activity accounts increases the risk that misstatements could occur in the financial statements due to error or fraud.
Recommendation: The School District should revise and implement internal controls to ensure that proper separation of duties is established, accounting processes are adequately monitored, and financial statement amounts are reconciled to general ledger balances.

TALBOT COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30,2010
II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS
REVENUES/RECEIVABLES/RECEIPTS GENERAL LEDGER Inadequate Internal Controls over Grants and Contracts Material Weakness Finding Control Number: FS-7301-10-04
Condition: This is a repeat finding (FS-7301-09-05) from the year ended June 30, 2009. The accounting procedures of the School District were insufficient to provide adequate internal controls over state and Federal program funds.
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: N/A
Information: Several of the School District's state and Federal programs maintained deficit fund balances at year end related to current year and/or prior year grants. The following amounts were transferred from local funds to cover current year and prior year deficits in state and Federal programs.
Career, Technical, and Agriculture - $22.64 21st Century - $4,194.27 USDA-FFV - $2,116.04 Family Connection - $19,902.85 School Nutrition (Cafeteria)- $5,673.67
In addition, several state and Federal programs maintained excess fund balances at year end. The School District did not properly defer and/or refund the excess revenue for the following programs.
Title 1- $315,995.59 Special Education- $12,203.38 Rural and Low Income - $47.39 Drug Free - $6,756.34 Improving Teaching Quality - $5,154.57 Enhancing EducationThru Tech - $10,306.00 Early Reading First - $13,193.89 Child Care and Development
Block Grant - $87,047.21 Lottery - Pre-K - $16,459.96
Cause: This deficiency was a result of management's failure to ensure that state and Federal programs were properly closed out at year end.

TALBOT COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30,2010
II FINANCIALSTATEMENT FINDINGSAND QUESTIONED COSTS
REVENUES/RECEIVABLES/RECEIPTS GENERAL LEDGER lnadequate Internal Controls over Grants and Contracts Material Weakness Finding Control Number: FS-7301-10-04
Effect: Errors and/or irregularities may not be detected in a timely manner.
Recommendation: The School District should implement internal controls to ensure that all state and Federal programs are properly closed out at year end.
EMPLOYEE COMPENSATION lnadequate Internal Controls over Employee Compensation Process Significant Deficiency Finding Control Number: FS-7301-10-05
Condition: This is a repeat finding (FS-7301-08-03 and FS-7301-09-08) from the years ended June 30, 2008, and June 30, 2009, respectively. The accounting procedures of the School District were insufficient to provide for adequate internal controls over employee compensation.
Criteria: The School District's management is responsible for designing and maintaining internal controls that provide reasonable assurance that employees are paid according to approved salary schedules and that documentation is maintained to support the salary payments.
Questioned Cost: N/A
Information: A review of purchased professional and technical service expenditures revealed additional compensation paid to employees of the School District in the amount of $83,412.35 that did not flow through the normal business process for salaries as established by the School District.
In addition, a review of employee compensation revealed several instances where salaries were not properly approved, supported by signed contracts and/or Board approved salary schedules.
Cause: The School District's management failed to ensure that normal business procedures established for the payment of additional salaries were consistently followed.
Effect: Failure to follow established business procedures can create increased susceptibility to misappropriation of assets.

TALBOT COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30,2010
II FINANCIALSTATEMENT FINDINGS AND QUESTIONEDCOSTS
EMPLOYEE COMPENSATION Inadequate Internal Controls over Employee Compensation Process Significant Deficiency Finding Control Number: FS-7301-10-05
Recommendation: The School District should implement policies and procedures to ensure that normal business procedures are followed for all salaries, which includes ensuring that salaries are paid according to approved salary schedules and that adequate documentation is maintained to support the salary payments.
Ill FEDERALAWARD FINDINGSAND QUESTIONEDCOSTS
ALLOWABLE COSTS/COST PRINCIPLES Salaries Not Properly Supported Material Weakness Material Noncompliance U. S. Department of Education Early Reading First Program (CFDA 84.359) Through Georgia Department of Education Title I, Part A Cluster (CFDA 84.010 and 84.389) Special Education Cluster (CFDA 84.027,84.173,84.391 and 84.392) Finding Control Number: FA-7301-10-01
Condition: A review of Federal program salaries revealed employees were compensated without documentation to determine if salary was reasonable for services rendered and conforms to the established policy of the government unit.
Criteria: OMB Circular A-87 Cost PHnciples for State, Local and Indian Tribal Governments, describes in Attachment 0, Section 8a that salaries include:
"Compensation for personnel services includes all remuneration, paid currently or accrued, for services rendered during the period of performance under Federal awards, including but not necessarily limited to wages, salaries, and fringe benefits. The cost of such compensation is allowable to the extent that they satisfy the specific requirements of this Circular, and that the total compensation for individual employees:
1) Is reasonable for the services rendered and conforms to the established policy of the government unit consistently applied to both Federal and non-Federal activities;
2 ) Follows an appointment made in accordance with a governmental unit's laws and rules and meets merit system or other requirements required by Federal law, where applicable; and
3) Is determined and supported as provided in subsection h."

TALBOT COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGSAND QUESTIONEDCOSTS
YEAR ENDED JUNE 30.2010

Ill FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

ALLOWABLE COSTS/COST PRlNClPLES Salaries Not Properly Supported Material Weakness Material Noncompliance U. S. Department of Education Early Reading First Program (CFDA 84.359) Through Georgia Department of Education Title I, Part A Cluster (CFDA 84.010 and 84.389) Special Education Cluster (CFDA 84.027,84.173,84.391 and 84.392) Finding Control Number: FA-7301-10-01

Questioned Cost: $2,163.55 $36,290.87

Special Education Cluster (CFDA 84.027, 84.173, 84.391 and 84.392) Title I, Part A Cluster (CFDA 84.010 and 84.389)

Information: A review of employee compensation for Federal employees revealed several instances where salaries were not properly approved, supported by signed contracts and/or Board approved salary schedules.

Cause: Management failed to implement appropriate procedures to ensure compliance with Federal guidelines regarding salary amounts being supported by adequate documentation to determine if reasonable for the service rendered.

Effect: Noncompliance with applicable provisions of OMB Circular A-87.

Recommendation: The School District should implement policies and procedures to ensure that salaries and wages paid from Federal awards programs are allowable and properly documented in accordance with OMB Circular A-87. The Georgia Department of Education should review this matter to determine if a reclaim of funds is appropriate.

ALLOWABLE COSTS/COST PRlNClPLES Questioned Cost for Reasonableness Material Weakness Material Noncompliance U. S. Department of Education Early Reading First Program (CFDA 84.359) Finding Control Number: FA-7301-10-02

Condition: The School District had one travel expenditure for which the purpose of the expenditure appears to be allowable; however, the cost in relation to alternative options does not appear to be reasonable.

TALBOT COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30,2010
Ill FEDERALAWARD FINDINGS AND QUESTIONEDCOSTS
ALLOWABLE COSTS/COST PRINCIPLES Questioned Cost for Reasonableness Material Weakness Material Noncompliance U. S. Department of Education Early Reading First Program (CFDA 84.359) Finding Control Number: FA-7301-10-02
Criteria: OMB Circular A-87 Cost Principles for State, Local and Indian Tribal Governments,states that "A cost is reasonable if, in its nature and amount, it does not exceed that which would be incurred by a prudent person under the circumstances prevailing at the time the decision was made to incur the cost. The question of reasonableness is particularly important when governmental units or components are predominately Federally-funded."
Questioned Cost: $27,417.06
Information: During the review of expenditures, the auditors noted an expenditure to the Ritz Carlton Reynolds Plantation. According to board personnel, the travel expense was related to Early Reading First training that the School District conducted. The cost of this expenditure appears to be excessive related to the nature of the activity. In addition, the School District did not provide documentation to support that 7 of the 28 individuals that attended the training were related to the program.
Cause: Management failed to implement appropriate procedures to ensure compliance with Federal guidelines regarding determining whether or not costs are considered reasonable.
Effect: Noncompliance with applicable provisions of OMB Circular A-87.
Recommendation: The School District should implement policies and procedures to ensure that expenditures paid from Federal awards are considered reasonable in accordance with OMB Circular A-87. The U. S. Department of Educationshould review this matter to determine if a reclaim of funds is appropriate.
FINANCIAL REPORTING Inaccurate Financial Reporting Significant Deficiency U. S. Department of Education Early ReadingFirst Program (CFDA 84.359) Finding Control Number: FA-7301-10-03
Condition: The amount reported in the Financial Status Report (Form 269), covering the period May 1,2010, thru August 31, 2010, did not tie to the expenditures reported in the School District's general ledger for this time period. In addition, the expenditures reported by object code did not agree to expenditures by object code in the general ledger.

TALBOT COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30,2010
Ill FEDERALAWARD FINDINGS AND QUESTIONEDCOSTS
FINANCIAL REPORTING Inaccurate Financial Reporting Significant Deficiency U. S. Department of Education Early Reading First Program (CFDA 84.359) Finding Control Number: FA-7301-10-03
Criteria: As specified in 34 CFR 80.41, for those recipients of funds from the Early Reading First Program, a financial status report must be submitted to the U. S. Department of Education and such financial information should be supported by the Board's financial records including its general ledger.
Questioned Cost: N/A
Information: The amount reported in the Financial Status Report, covering the period May 1,2001, thru August 31, 2010, for total outlays is $4,066.47 less than the amount reported in the general ledger. In addition, the amounts reported in the Financial Status Report for outstanding obligations by object code did not agree with the general ledger amounts.
Cause: The School District and management failed to implement internal controls necessary to ensure that the financial information reported on the Financial Status Report agreed with the amount reported in the general ledger.
Effect: Failure to accurately report information on the Financial Status Report for the Early Reading First Program can result in material noncompliance with the Early Reading First Program.
Recommendation: The School District should implement policies and procedures to ensure that all information reported in the Financial Status Report is accurate and is supported by the School District's books.

SECTION V MANAGEMENT'S RESPONSES

TALBOT COUNTY BOARD OF EDUCATION SCHEDULE OF MANAGEMENT'S RESPONSES
YEAR ENDED JUNE 30,2010

Finding Control Number: FS-7301-10-01

We concur with this finding. The Board will establish policies and procedures designed to ensure that in the future the School District does not report a deficit fund balance.

Finding Control Number: FS-7301-10-02

We concur with this finding. The Board will implement controls over cash to ensure that cash is properly reconciled to the general ledger and cash activity is maintained in the proper funds. Additional staff will be assigned the duty of monthly bank reconciliations and will monitor as well as review with signatures from the Finance Director and Superintendent.

Finding Control Number: FS-7301-10-03

We concur with this finding. The Board will revise and implement internal controls to ensure that proper separation of duties is established. Accounting processes are accurately monitored and financial statement amounts are reconciled to the general ledger balances.

Finding Control Number: FS-7301-10-04

We concur with this finding. The Board will implement and revise internal controls to ensure that all state and Federal programs are properly closed out at the program year end. Additional controls will be implemented to ensure that State and Federal program funds will be closely monitored so that a deficit fund will not occur.

Finding Control Number: FS-7301-10-05

We concur with this finding. The Board has implemented procedures to ensure that all compensation paid to employees will flow through payroll. In addition, procedures will be implemented to ensure that additional compensation will be properly approved and documented.

Finding Control Number: FA-7301-10-01

We concur with this finding. The School District has implemented policies and procedures to ensure that normal business procedures are followed for all salaries, which includes ensuring that Federal Funded salaries are paid according to approved salary schedules.

Finding Control Number: FA-7301-10-02

We concur with this finding. The School District will implement procedures to ensure that all expenditures are reviewed and approved by the Program Director of allowability.

FindingControl Number: FA-7301-10-03

We concur with this finding. The Board will implement policies and procedures to ensure that all information reported in the Financial Status Report is accurate and is supported by the School District ledgers.

Contact Person: Telephone: Fax: Email:

Florence Reynolds, Assistant Superintendent Finance and Personnel (706) 665-8577 (706) 665-3620 freynolds@taIbot.kl2.ga.us