TALBOT COUNTY BOARD OF EDUCATION
TALBOTTON, GEORGIA
ANNUAL FINANCIAL REPORT FOR THE FISCAL YEAR ENDED JUNE 30, 2013
(Including Independent Auditor's Reports)

TALBOT COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS -

SECTION I

FINANCIAL

INDEPENDENT AUDITOR'S REPORT

EXHIBITS

BASIC FINANCIAL STATEMENTS

DISTRICT-WIDE FINANCIAL STATEMENTS

A

STATEMENT OF NET POSITION

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 POSITION

E

STATEMENT OF REVENUES, EXPENDITURES AND CHANGES

IN FUND BALANCES

GOVERNMENTAL FUNDS

F

RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT

OF REVENUES, EXPENDITURES AND CHANGES IN FUND

BALANCES TO THE STATEMENT OF ACTIVITIES

G

STATEMENT OF FIDUCIARY NET POSITION

FIDUCIARY FUNDS

H

STATEMENT OF CHANGES IN FIDUCIARY NET POSITION

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 4 SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS 5 ALLOTMENTS AND EXPENDITURES
GENERAL FUND - QUALITY BASIC EDUCATION PROGRAMS (QBE) BY PROGRAM

Page
1 2 3 4 5 6 7 8 9
25 26 28 29 31

TALBOT COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS -
SECTION II COMPLIANCE AND INTERNAL CONTROL REPORTS INDEPENDENT AUDITOR'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS INDEPENDENT AUDITOR'S REPORT ON COMPLIANCE FOR EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH OMB CIRCULAR A-133
SECTION III AUDITEE'S RESPONSE TO PRIOR YEAR FINDINGS AND QUESTIONED COSTS SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS
SECTION IV FINDINGS AND QUESTIONED COSTS SCHEDULE OF FINDINGS AND QUESTIONED COSTS

SECTION I FINANCIAL

Greg S. Griffin
STATE AUDITOR
(404) 656-2174

DEPARTMENT OF AUDITS AND ACCOUNTS
270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400
July 25, 2014

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
Ladies and Gentlemen:
Report on the Financial Statements
We have audited the accompanying financial statements of the governmental activities, each major fund, and the aggregate remaining fund information (Exhibits A through I) of the Talbot County Board of Education, as of and for the year ended June 30, 2013, and the related notes to the financial statements, which collectively comprise the Board's basic financial statements as listed in the table of contents.
Management's Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.
Auditor's Responsibility
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 Government Auditing 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 involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. Accordingly, we express
2013ARL-11

no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions.
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, 2013, and the respective changes in financial position thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America.
Emphasis of Matter
As described in Note 2 to the financial statements, in 2013, the Talbot County Board of Education adopted new accounting guidance, Governmental Accounting Standards Board (GASB) Statement No. 63, Financial Reporting of Deferred Outflows of Resources, Deferred Inflows of Resources, and Net Position. Our opinion is not modified with respect to this matter.
Other Matters
Required Supplementary Information
Management has omitted the Management's Discussion and Analysis that accounting principles generally accepted in the United States of America require to be presented to supplement the basic financial statements. Such missing 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. Our opinion on the basic financial statements is not affected by this missing information. 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 regarding 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 our 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.
Other Information
Our audit was conducted as required by section 50-6-6(a) of the Official Code of Georgia Annotated. We provided basic accounting assistance limited to services such as preparing draft financial statements that were based on the School District's chart of accounts and general ledgers including any adjusting, correcting, and closing entries that have been approved by the School District's management; prepared draft notes to the financial statements based on information determined and approved by the School District's management; and prepared trial balances based on the School District's chart of accounts.
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Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Talbot County Board of Education's basic financial statements. The accompanying supplementary information, consisting of Schedules 2 through 5, is presented for the purposes of additional analysis and is not a required part of the basic financial statements. The Schedule of Expenditures of Federal Awards is presented for purposes of additional analysis as required by U. S. Office of Management and Budget Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations, and is not a required part of the basic financial statements.
The accompanying supplementary information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic 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 basic financial statements as a whole.
Other Reporting Required by Governm ent Auditing Standards
In accordance with Government Auditing Standards, we have also issued our report dated July 25, 2014, 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 in considering Talbot County Board of Education's internal control over financial reporting and compliance.
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,

GSG:as 2013ARL-11

Greg S. Griffin State Auditor

TALBOT COUNTY BOARD OF EDUCATION

TALBOT COUNTY BOARD OF EDUCATION STATEMENT OF NET POSITION JUNE 30, 2013
ASSETS
Cash and Cash Equivalents Investments Accounts Receivable, Net
Taxes State Government Federal Government Other Inventories Capital Assets, Non-Depreciable Capital Assets, Depreciable (Net of Accumulated Depreciation)
Total Assets
LIABILITIES
Accounts Payable Salaries and Benefits Payable Payroll Withholdings Payable Interest Payable Contracts Payable Retainages Payable Deferred Revenues Long-Term Liabilities
Due Within One Year Due in More Than One Year
Total Liabilities
NET POSITION
Investment in Capital Assets Restricted for
Bus Replacement Continuation of Federal Programs Debt Service Capital Projects Unrestricted
Total Net Position

EXHIBIT "A"

GOVERNMENTAL ACTIVITIES

$ 6,485,162.95 163,831.03
289,700.04 223,806.89
89,707.30 3,793.24
12,489.97 1,576,728.60 2,299,577.56
$ 11,144,797.58

$

47,545.50

580,359.86

68,979.76

34,675.00

732,665.45

75,483.20

200,785.35

325,000.00 1,865,000.00

$ 3,930,494.12

$ 3,876,306.16
39,451.00 85,069.74 331,935.00 4,518,517.97 -1,636,976.41

$ 7,214,303.46

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

TALBOT COUNTY BOARD OF EDUCATION STATEMENT OF ACTIVITIES
FOR THE YEAR ENDED JUNE 30, 2013

EXHIBIT "B"

GOVERNMENTAL ACTIVITIES
Instruction Support Services
Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Other Support Services Operations of Non-Instructional Services Food Services Interest on Short-Term and Long-Term Debt
Total Governmental Activities
General Revenues Taxes Property Taxes For Maintenance and Operations Railroad Cars Sales Taxes Special Purpose Local Option Sales Tax For Capital Projects Other Sales Tax Investment Earnings Miscellaneous
Total General Revenues
Change in Net Position
Net Position - Beginning of Year

EXPENSES

PROGRAM REVENUES

OPERATING

CHARGES FOR

GRANTS AND

SERVICES

CONTRIBUTIONS

NET (EXPENSES) REVENUES
AND CHANGES IN NET POSITION

$ 3,583,491.13 $
286,479.13 265,196.02 136,467.87 329,962.46 387,633.34
75,372.33 431,708.40 518,439.29
26,607.50
470,270.95 84,201.67
$ 6,595,830.09 $

47,829.64 $ 1,778,907.10 $

66,385.06 185,992.77
79,929.98 394,086.56 226,641.26
5,107.26 162,762.12 253,463.02
4,459.57

29,529.68

391,401.47

77,359.32 $ 3,549,136.17 $

-1,756,754.39
-220,094.07 -79,203.25 -56,537.89 64,124.10
-160,992.08 -70,265.07
-268,946.28 -264,976.27
-22,147.93
-49,339.80 -84,201.67
-2,969,334.60

$ 3,105,945.43 23,924.74

471,254.94 11,230.53 6,868.84
153,716.95

$ 3,772,941.43

$

803,606.83

6,410,696.63

Net Position - End of Year

$ 7,214,303.46

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

TALBOT COUNTY BOARD OF EDUCATION BALANCE SHEET
GOVERNMENTAL FUNDS JUNE 30, 2013

EXHIBIT "C"

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

GENERAL FUND

DISTRICTWIDE
CAPITAL PROJECTS
FUND

DEBT SERVICE
FUND

TOTAL

$ 778,783.98 $ 5,360,820.49 $ 345,558.48 $ 6,485,162.95

79,046.49

84,784.54

163,831.03

249,780.77 223,806.89
89,707.30 3,793.24
12,489.97

39,919.27

289,700.04 223,806.89
89,707.30 3,793.24
12,489.97

$ 1,437,408.64 $ 5,485,524.30 $ 345,558.48 $ 7,268,491.42

LIABILITIES AND FUND BALANCES
LIABILITIES
Accounts Payable Salaries and Benefits Payable Payroll Withholdings Payable Contracts Payable Retainages Payable Deposits and Deferred Revenue
Total Liabilities
FUND BALANCES
Nonspendable Restricted Assigned Unassigned
Total Fund Balances
Total Liabilities and Fund Balances

$ 47,545.50

$

580,359.86

68,979.76

$ 732,665.45

75,483.20

401,199.99

$ 1,098,085.11 $ 808,148.65 $

0.00 $

47,545.50 580,359.86
68,979.76 732,665.45
75,483.20 401,199.99

0.00 $ 1,906,233.76

$ 12,489.97

$ 12,489.97

112,030.77 $ 4,539,569.49 $ 345,558.48 4,997,158.74

21,361.26

137,806.16

159,167.42

193,441.53

193,441.53

$ 339,323.53 $ 4,677,375.65 $ 345,558.48 $ 5,362,257.66

$ 1,437,408.64 $ 5,485,524.30 $ 345,558.48 $ 7,268,491.42

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 POSITION JUNE 30, 2013

EXHIBIT "D"

Total Fund Balances - Governmental Funds (Exhibit "C")
Amounts reported for Governmental Activities in the Statement of Net Position are different because:
Capital Assets used in Governmental Activities are not financial resources and therefore are not reported in the funds. These assets consist of:
Land Construction in Progress Land Improvements Buildings Equipment Accumulated Depreciation
Total Capital Assets
Taxes that are not available to pay for current period expenditures are deferred in the funds.
Property Taxes
Long-Term Liabilities, including Bonds Payable, are not due and payable in the current period and therefore are not reported as liabilities in the funds. Long-Term Liabilities at year-end consist of:
Bonds Payable Accrued Interest
Total Long-Term Liabilities
Net Position of Governmental Activities (Exhibit "A")

$ 5,362,257.66

$ 354,857.93 1,221,870.67 558,998.55 3,507,218.42 1,732,400.23 -3,499,039.64

3,876,306.16

200,414.64

$ -2,190,000.00 -34,675.00

-2,224,675.00

$ 7,214,303.46

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

TALBOT COUNTY BOARD OF EDUCATION STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES
GOVERNMENTAL FUNDS YEAR ENDED JUNE 30, 2013

EXHIBIT "E"

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

GENERAL FUND

DISTRICTWIDE
CAPITAL PROJECTS
FUND

DEBT SERVICE
FUND

TOTAL

$ 3,034,882.70 11,230.53 $
2,340,684.18 1,208,451.99
77,359.32 1,042.37
153,716.95

471,254.94 5,534.39 $

$ 6,827,368.04 $ 476,789.33 $

292.08

$ 3,034,882.70 482,485.47
2,340,684.18 1,208,451.99
77,359.32 6,868.84
153,716.95

292.08 $ 7,304,449.45

$ 3,486,410.77

$ 3,486,410.77

286,479.13

265,196.02

136,467.87

328,271.46 $

123.10

387,633.34

75,372.33

420,380.42

9,876.92

411,454.88

26,607.50

456,827.46

1,221,870.67

286,479.13 265,196.02 136,467.87 328,394.56 387,633.34
75,372.33 430,257.34 411,454.88
26,607.50 456,827.46 1,221,870.67

$ 310,000.00 89,110.00

310,000.00 89,110.00

$ 6,281,101.18 $ 1,231,870.69 $ 399,110.00 $ 7,912,081.87

$ 546,266.86 $ -755,081.36 $ -398,817.92 $ -607,632.42

$

0.00

$ 399,110.00 $ 399,110.00

$ -399,110.00

-399,110.00

$

0.00 $ -399,110.00 $ 399,110.00 $

0.00

$ 546,266.86 $ -1,154,191.36 $

292.08 $ -607,632.42

-206,943.33

5,831,567.01

345,266.40 5,969,890.08

$ 339,323.53 $ 4,677,375.65 $ 345,558.48 $ 5,362,257.66

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, 2013

EXHIBIT "F"

Total Net Change in Fund Balances - Governmental Funds (Exhibit "E")
Amounts reported for Governmental Activities in the Statement of Activities are different because:
Capital Outlays are reported as expenditures in Governmental Funds. However, in the Statement of Activities, the cost of Capital Assets is allocated over their estimated useful lives as depreciation expense. In the current period, these amounts are:
Capital Outlay Depreciation Expense
Excess of Capital Outlay over Depreciation Expense
Taxes reported in the Statement of Activities that do not provide current financial resources are not reported as revenues in the funds.
Repayment of Long-Term Debt is reported as an expenditure in Governmental Funds, but the repayment reduces Long-Term Liabilities in the Statement of Net Position. In the current year, these amounts consist 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 Decrease in Accrued Interest

$

-607,632.42

$ 1,221,870.67 -220,527.22

1,001,343.45

94,987.47

310,000.00

4,908.33

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

$

803,606.83

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

TALBOT COUNTY BOARD OF EDUCATION STATEMENT OF FIDUCIARY NET POSITION
FIDUCIARY FUNDS JUNE 30, 2013

EXHIBIT "G"

ASSETS Cash and Cash Equivalents

PRIVATE PURPOSE TRUSTS

AGENCY FUNDS

$

2,780.12 $

0.00

LIABILITIES Cash Overdraft Accounts Payable Funds Held for Others
Total Liabilities

$

523.80

3,793.24

-4,317.04

$

0.00

NET POSITION Held in Trust for Private Purposes

$

2,780.12

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

TALBOT COUNTY BOARD OF EDUCATION STATEMENT OF CHANGES IN FIDUCIARY NET POSITION
FIDUCIARY FUNDS YEAR ENDED JUNE 30, 2013
ADDITIONS Investment Earnings Interest
DEDUCTIONS None Reported Change in Net Position
Net Position - Beginning
Net Position - Ending

EXHIBIT "H"

PRIVATE PURPOSE TRUSTS

$

17.11

0.00

$

17.11

2,763.01

$

2,780.12

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

TALBOT COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2013

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.
District-wide Statements:
The Statement of Net Position and the Statement of Activities display information about the financial activities of the overall School District, except for fiduciary activities. Eliminations have been made to minimize the double counting of internal activities. Governmental activities generally are financed through taxes, intergovernmental revenues, and other nonexchange transactions.
The Statement of Activities presents a comparison between direct expenses and program revenues for each function of the School District's governmental activities.
Direct expenses are those that are specifically associated with a program or function and, therefore, are clearly identifiable to a particular function. Indirect expenses (expenses of the School District related to the administration and support of the School District's programs, such as office and maintenance personnel and accounting) are not allocated to programs.
Program revenues include (a) charges paid by the recipients of goods or services offered by the programs and (b) grants and contributions that are restricted to meeting the operational or capital requirements of a particular program. Revenues that are not classified as program revenues, including all taxes, are presented as general revenues.
Fund Financial Statements:
The fund financial statements provide information about the School District's funds. 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. The School District reports the following major governmental funds:
General Fund is the School District's primary operating fund. It accounts for and reports all financial resources not accounted for and reported in another fund.
District-wide Capital Projects Fund accounts for and reports financial resources including Education Special Purpose Local Option Sales Tax (ESPLOST) and Bond Proceeds that are restricted, committed or assigned to the expenditure for capital outlays, including the acquisition or construction of capital facilities and other capital assets.
Debt Service Fund accounts for and reports financial resources that are restricted, committed, or assigned including taxes (property) legally restricted for the payment of general long-term principal and interest.

- 9 -

TALBOT COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2013

EXHIBIT "I"

The School District reports the following fiduciary fund types:
Private Purpose Trust fund reports trust arrangements under which principal and income benefit are used to provide scholarships to business administration and business education students with junior standing at an accredited college or university.
Agency funds account for assets held by the School District as an agent for various funds, governments, and individuals.
BASIS OF ACCOUNTING
The basis of accounting determines when transactions are reported on the financial statements. The District-wide governmental and fiduciary 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, and grants. 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 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, except for reimbursable grants. 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, both restricted and unrestricted resources are 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.
NEW ACCOUNTING PRONOUNCEMENTS
In fiscal year 2013, the School District adopted the Governmental Accounting Standards Board (GASB) Statement No. 60, Accounting and Financial Reporting for Service Concession Arrangements. The provisions of this Statement establish accounting and financial reporting standards for governments who enter into Service Concession Arrangements (SCA) with other governmental or nongovernmental entities. As of June 30, 2013, the School District has not entered into any arrangements that meet the qualifications to be reported as a SCA in accordance with this standard.
In fiscal year 2013, the School District adopted the Governmental Accounting Standards Board (GASB) Statement No. 62, Codification of Accounting and Financial Reporting Guidance Contained in Pre-November 30, 1989 FASB and AICPA Pronouncements. The provisions of this Statement incorporate certain accounting and financial reporting guidance into authoritative GASB literature.

- 10 -

TALBOT COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2013

EXHIBIT "I"

In fiscal year 2013, the School District adopted the Governmental Accounting Standards Board (GASB) Statement No. 63, Financial Reporting of Deferred Outflows of Resources, Deferred Inflows of Resources and Net Position. The provisions of this Statement establish financial reporting standards for the presentation of deferred outflows of resources and deferred inflows of resources and their effects on a government's net position. The School District changed its presentation of net assets to net position for fiscal year 2013. There were no other applicable reporting changes for the School District.
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 Investments
Investments 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 and equity investments 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,
4. Obligations of any corporation of the United States government,
5. Prime banker's acceptances,
6. The Georgia Fund 1 administered by the State of Georgia, Office of the State Treasurer,
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 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.

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TALBOT COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2013

EXHIBIT "I"

PROPERTY TAXES
The Talbot County Board of Commissioners adopted the property tax levy for the 2012 tax digest year (calendar year) on August 1, 2012 (levy date) based on property values as of January 1, 2012. Taxes were due on December 20, 2012 (lien date). Taxes collected within the current fiscal year or within 60 days after year-end on the 2012 tax digest are reported as revenue in the governmental funds for fiscal year 2013. The Talbot County Board of Commissioners bills and collects the property taxes for the School District, withholds 2.5% of taxes collected as a fee for tax collection and remits the balance of taxes collected to the School District. Property tax revenues, at the fund reporting level, during the fiscal year ended June 30, 2013, for maintenance and operations amounted to $2,973,988.74.
The tax millage rate levied for the 2012 tax year (calendar year) for the Talbot County Board of Education were as follows (a mill equals $1 per thousand dollars of assessed value):

School Operations

14.11 mills

Additionally, Title Ad Valorem Tax revenues, at the fund reporting level, amounted to $36,969.22 during fiscal year ended June 30, 2013.
SALES TAXES
Education Special Purpose Local Option Sales Tax, at the fund reporting level, during the year amounted to $471,254.94 and is to be used for capital outlay for educational purposes or debt service. This sales tax was authorized by local referendum and the sales tax must be re-authorized at least every five years.
INVENTORIES
Food Inventories
On the basic financial statements, inventories of donated food commodities used in the preparation of meals are reported at their Federally assigned value and purchased foods inventories are reported at cost (first-in, first-out). The School District uses the consumption method to account for inventories whereby donated food commodities are recorded as an asset and as revenue when received, and expenses/expenditures are recorded as the inventory items are used. Purchased foods are recorded as an asset when purchased and expenses/expenditures are recorded as the inventory items are used.
CAPITAL ASSETS
Capital assets purchased, including capital outlay costs, are recorded as expenditures in the fund financial statements at the time of purchase (including ancillary charges). On the District-wide financial statements, all purchased capital assets are valued at cost where historical records are available and at estimated historical cost based on appraisals or deflated current replacement cost where no historical records exist. Donated capital assets are recorded at estimated fair market value on the date donated. Disposals are deleted at depreciated recorded cost. The cost of normal maintenance and repairs that do not add to the value of assets or materially extend the useful lives of the assets is not capitalized. Depreciation is computed using the straight-line method. The School District does not capitalize book collections or works of art. During the fiscal year under review, no events or changes in circumstances affecting a capital asset that may indicate impairment were known to the School District.

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TALBOT COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2013

EXHIBIT "I"

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

Capitalization Policy

Estimated Useful Life

Land

Land Improvements

$

Buildings and Improvements $

Equipment

$

Intangible Assets

$

All 10,000.00 10,000.00
5,000.00 100,000.00

N/A 20 to 70 years up to 70 years
5 to 25 years 15 to 50 years

Depreciation is used to allocate the actual or estimated historical cost of all capital assets over estimated useful lives, with the exception of intangible assets which are amortized.
Amortization of intangible assets such as water, timber, and mineral rights, easements, patents, trademarks, copyrights and internally generated software is computed using the straight-line method over the estimated useful lives of the assets, generally 105 to 250 years.
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 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 Position.
NET POSITION
The School District's net position in the District-wide Statements is classified as follows:
Investment in capital assets - This represents the School District's total investment in capital assets.
Restricted net position - This represents 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 position - Unrestricted net position represents 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
The School District's fund balances are classified as follows:
Nonspendable - Amounts that cannot be spent either because they are in a nonspendable form or because they are legally or contractually required to be maintained intact.

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TALBOT COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2013

EXHIBIT "I"

Restricted - Constraints are placed on the use of resources are either (1) externally imposed conditions by creditors, grantors, contributors, or laws and regulations of other governments or (2) imposed by law through constitutional provisions or enabling legislation.
Committed - Amounts that can be used only for specific purposes pursuant to constraints imposed by formal action of the Board of Education. The Board of Education is the School District's highest level of decision-making authority, and the formal action that is required to be taken to establish, modify, or rescind a fund balance commitment is a resolution approved by the Board. Committed fund balance also should incorporate contractual obligations to the extent that existing resources in the fund have been specifically committed for use in satisfying those contractual requirements.
Assigned - Amounts that are constrained by the School District's intent to be used for specific purposes, but are neither restricted nor committed. The intent should be expressed by (1) the Board of Education or (2) the budget or finance committee, or the Superintendent, or designee, to assign amounts to be used for specific purposes.
Unassigned - The residual classification for the General Fund. This classification represents fund balances that has not been assigned to other funds and that has not been restricted, committed, or assigned to specific purposes within the General Fund.
Fund Balances of the Governmental Funds at June 30, 2013, are as follows:

Nonspendable Inventories
Restricted Bus Replacement Continuation of Federal Programs Capital Projects Debt Service
Assigned School Activity Accounts Banquet Account Local Capital Outlay Projects
Unassigned

$

12,489.97

$

39,451.00

72,579.77

4,518,517.97

366,610.00

4,997,158.74

$

16,397.00

4,964.26

137,806.16

159,167.42 193,441.53

Fund Balance, June 30, 2012

$ 5,362,257.66

When multiple categories of fund balance are available for expenditure, the School District will start with the most restricted category and spend those funds first before moving down to the next category with available funds.
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: BUDGETARY DATA
The budget is a complete financial plan for the School District's fiscal year, and is based upon careful estimates of expenditures together with probable funding sources. The budget is legally adopted each year for the general, debt service, and capital projects funds. There is no statutory prohibition regarding over expenditure of the budget at any level. The budget for all governmental funds, except the various school activity (principal) accounts, is prepared and adopted by fund, function, and object. The legal level of budgetary control was established by the Board at the aggregate level. The budget for the General Fund was prepared in accordance with accounting principles generally accepted in the United States of America.

- 14 -

TALBOT COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2013

EXHIBIT "I"

The budgetary process begins with the School District's administration presenting an initial budget for the Board's review. The administration makes revisions as necessary based on the Board's guidelines and a tentative budget is approved. After approval of this tentative budget by the Board, such budget is advertised at least once in a newspaper of general circulation in the locality, as well as the School District's website. At the next regularly scheduled meeting of the Board after advertisement, the Board receives comments on the tentative budget, makes revisions as necessary and adopts a final budget. The approved budget is then submitted, in accordance with provisions of Official Code of Georgia Annotated section 20-2-167(c), to the Georgia Department of Education. The Board may increase or decrease the budget at any time during the year. All unexpended budget authority lapses at fiscal year-end.
The Superintendent is authorized by the Board to approve adjustments of no more than five percent of the amount budgeted for expenditures in any budget function for any fund. The Superintendent shall report any such adjustments to the Board. If expenditure of funds in any budget function for any fund is anticipated to be more than five percent of the budgeted amount, the Superintendent shall request Board approval for the budget amendment. Under no circumstance is the Superintendent or other staff person authorized to spend funds that exceed the total budget without approval by the Board.
See Schedule 1 - General Fund Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget to Actual for a detail of any over/under expenditures during the fiscal year under review.
NOTE 4: 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.
At June 30, 2013, $225,306.86 of deposits were not secured by surety bond, insurance or collateral as specified above. The School District is working with the affected financial institutions to ensure appropriate levels of collateral are maintained for all of the School District's deposits.
Acceptable security for deposits consists of any one of or any combination of the following:
1. Surety bond signed by a surety company duly qualified and authorized to transact business within the State of Georgia,
2. Insurance on accounts provided by the Federal Deposit Insurance Corporation,
3. Bonds, bills, notes, certificates of indebtedness or other direct obligations of the United States or of the State of Georgia,
4. Bonds, bills, notes, certificates of indebtedness or other obligations of the counties or municipalities of the State of Georgia,
5. Bonds of any public authority created by the laws of the State of Georgia, providing that the statute that created the authority authorized the use of the bonds for this purpose,
6. Industrial revenue bonds and bonds of development authorities created by the laws of the State of Georgia, and

- 15 -

TALBOT COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2013

EXHIBIT "I"

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 Mortgage Association.

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, 2013, the bank balances were $6,820,279.20. Only $6,594,972.20 of the bank balances were collateralized with securities held by the pledging financial institution in the School District's name. The amounts exposed to custodial credit risk are classified into three categories as follows:

Category 1 Category 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, 2013, are as follows:

Custodial Credit Risk Category

Bank Balance

1

$

225,306.86

2

0.00

3

0.00

Total

$

225,306.86

CATEGORIZATION OF INVESTMENTS
At June 30, 2013, the carrying value of the School District's total investments was $98,831.03, 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 the State Treasurer which is 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 the State Treasurer for the Georgia Fund 1 (Primary Liquidity Portfolio) does not provide for investment in derivatives or similar investments. Additional information on the Georgia Fund 1 is disclosed in the State of Georgia Comprehensive Annual Financial Report. This audit can be obtained from the Georgia Department of Audits and Accounts at http://www.audits.ga.gov/SGD/cafr.html.
The Primary Liquidity Portfolio consists of Georgia Fund 1 which is not registered with the SEC as an investment company but does operate in a manner consistent with the SEC's Rule 2a-7 of the Investment Company Act of 1940. The investment is valued at the pool's share price, $1.00 per share. The pool is an AAAf rated investment pool by Standard and Poor's. The weighted average maturity of Georgia Fund 1 may not exceed 60 days. The weighted average maturity for Georgia Fund 1 on June 30, 2013, was 43 days.
NOTE 5: 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

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TALBOT COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2013

EXHIBIT "I"

NOTE 6: CAPITAL ASSETS
The following is a summary of changes in the Capital Assets during the fiscal year:

Balances July 1, 2012

Increases

Decreases

Balances June 30, 2013

Governmental Activities Capital Assets, Not Being Depreciated:
Land Construction in Progress

$

354,857.93

0.00 $ 1,221,870.67 $

$ 0.00

354,857.93 1,221,870.67

Total Capital Assets Not Being Depreciated

$

354,857.93 $ 1,221,870.67 $

0.00 $ 1,576,728.60

Capital Assets Being Depreciated Buildings and Improvements Equipment Land Improvements

$ 3,507,218.42 1,732,400.23 558,998.55

$

0.00 $ 3,507,218.42

1,732,400.23

558,998.55

Less Accumulated Depreciation for: Buildings and Improvements Equipment Land Improvements

1,741,779.23 $ 1,158,256.93
378,476.26

68,342.28 134,230.94
17,954.00

1,810,121.51 1,292,487.87
396,430.26

Total Capital Assets, Being Depreciated, Net $ 2,520,104.78 $ -220,527.22 $

0.00 $ 2,299,577.56

Governmental Activity Capital Assets - Net $ 2,874,962.71 $ 1,001,343.45 $

0.00 $ 3,876,306.16

Current year depreciation expense by function is as follows:

Instruction

Support Services

General Administration

$

Maintenance and Operation of Plant

Student Transportation Services

Food Services

$
1,567.90 1,451.06 106,984.41

$

97,080.36
110,003.37 13,443.49
220,527.22

NOTE 7: INTERFUND TRANSFERS
Interfund transfers for the year ended June 30, 2013, consisted of the following:

Transfer to

Transfers From District-wide Capital Projects

Debt Service Fund

$

399,110.00

Transfers are used to move sales tax revenue collected by the Capital Projects Fund to the Debt Service Fund to pay debt service according to the approved SPLOST referendum.

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TALBOT COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2013

EXHIBIT "I"

NOTE 8: RISK MANAGEMENT
The School District is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors or omissions; job related illness or injuries to employees; acts of God and unemployment compensation.

The School District has obtained commercial insurance for risk 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.

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:

Beginning of Year Liability

Claims and Changes in Estimates

Claims Paid

End of Year Liability

2012 $ 2013 $

0.00 $ 0.00 $

23,907.97 $ 30,764.00 $

23,907.97 $ 30,764.00 $

0.00 0.00

The School District participates in the Georgia Education Workers' Compensation Trust, a public entity risk pool organized on December 1, 1991, to develop, implement and administer a program of workers' compensation self-insurance for its member organizations. The School District pays an annual premium to the Trust for its general worker's compensation insurance coverage. Specific excess of loss insurance coverage is provided through an agreement by the Trust with the Safety National Casualty Company to provide coverage for potential losses sustained by the Trust in excess of $1 million loss per occurrence, up to the statutory limit. Employers' Liability insurance coverage is also provided with limits of $2 million. The Trust covers the first $1 million of each Employers liability claim with Safety National providing additional Employers Liability limits up to a $2 million per occurrence maximum. Safety National Casualty Company also provides $2 million in aggregate coverage to the Trust, attaching at 110% of the loss fund and based on the Fund's annual normal premium.
The School District has purchased surety bonds to provide additional insurance coverage as follows:

Position Covered

Amount

Superintendent Bookkeeper Payroll Clerk School Food Director All Employees

$

30,000.00

$

10,000.00

$

10,000.00

$

10,000.00

$

100,000.00

- 18 -

TALBOT COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2013

EXHIBIT "I"

NOTE 9: 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, 2013, for governmental funds amounted to $8,968.49.

NOTE 10: SHORT-TERM DEBT
The School District issues tax anticipation notes in advance of property tax collections, depositing the proceeds in its General Fund. This short-term debt is to provide cash 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 31 of the calendar year in which the debt was incurred.

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

Beginning Balance

Issued

Redeemed

Ending Balance

Tax Anticipation Notes $

0.00 $ 900,000.00 $ 900,000.00 $

0.00

NOTE 11: LONG-TERM DEBT

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

Purpose

Interest Rate

General Government - Series 2003

3.80%

Amount $ 2,190,000.00

The changes in Long-Term Debt during the fiscal year ended June 30, 2013, were as follows:

Balance July 1, 2012

Additions

Governmental Activities

Balance

Deductions

June 30, 2013

Due Within One Year

G. O. Bonds

$ 2,500,000.00 $

0.00 $ 310,000.00 $ 2,190,000.00 $ 325,000.00

At June 30, 2013, 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

2014 2015 2016 2017 2018 2019

$

325,000.00 $

340,000.00

355,000.00

370,000.00

390,000.00

410,000.00

77,045.00 64,410.00 51,205.00 37,430.00 22,990.00
7,790.00

Total Principal and Interest

$ 2,190,000.00 $

260,870.00

- 19 -

TALBOT COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2013

EXHIBIT "I"

NOTE 12: ON-BEHALF PAYMENTS
The School District has recognized revenues and costs in the amount of $400,630.00 for health insurance and retirement contributions paid on the School District's behalf by the following State Agencies.
Georgia Department of Education Paid to the Georgia Department of Community Health For Health Insurance of Certificated Personnel In the amount of $386,340.00
Office of the State Treasurer Paid to the Public School Employees' Retirement System For Public School Employees' Retirement (PSERS) Employer's Cost In the amount of $14,290.00
Funds paid to the Georgia Department of Community Health by the Georgia Department of Education on behalf of the School District are reported as part of the Quality Basic Education revenue allotments on Schedule 3 - Schedule of State Revenue.

NOTE 13: SIGNIFICANT COMMITMENTS
The following is an analysis of significant outstanding construction or renovation contracts executed by the School District as of June 30, 2013, together with funding available:

Project

Unearned Executed Contracts

Funding Available From State

Central Elementary/High Facility

$

1,863,312.31 $

5,215,520.00

The amounts described in this note are not reflected in the basic financial statements.
NOTE 14: 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 15: POST-EMPLOYMENT BENEFITS
GEORGIA SCHOOL PERSONNEL 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 Benefit Plan administered by the Department of Community Health. The Official Code of Georgia Annotated (O.C.G.A.) 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). The Department of Community Health, which includes the School OPEB Fund, issues a separate stand alone financial audit report and a copy can be obtained from the Georgia Department of Audits and Accounts.

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TALBOT COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2013

EXHIBIT "I"

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. For members with fewer than five years of service as of January 1, 2013, contributions also vary based on years of service. On average, members with five years or more of service as of January 1, 2013, pay approximately 25 percent of the cost of the health insurance coverage. In accordance with the Board resolution dated December 8, 2011, for members with fewer than five years of service as of January 1, 2013, the State provides a premium subsidy in retirement that ranges from 0% for fewer than 10 years of service to 75% (but no greater than the subsidy percentage offered to active employees) for 30 or more years of service. The subsidy for eligible dependents ranges from 0% to 55% (but no greater than the subsidy percentage offered to dependents of active employees minus 20%). No subsidy is available to Medicare eligible members not enrolled in a Medicare Advantage Option. The Board of Community Health sets all member premiums by resolution and in accordance with the law and applicable revenue and expense projections. Any subsidy policy adopted by the Board may be changed at any time by Board resolution and does not constitute a contract or promise of any amount of subsidy.
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.
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, 2013:
For certificated teachers, librarians and regional educational service agencies and certain other
eligible participants:

July 2012 - February 2013 March 2013 - June 2013

$912.34 per member per month $937.34 per member per month

For non-certificated school personnel:

July 2012 - June 2013

$446.20 per member per month

No additional contribution was required by the Board for fiscal year 2013 nor contributed to the School OPEB Fund to prefund retiree benefits. Such additional contribution amounts are determined annually by the Board in accordance with the School 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:

Fiscal Year

Percentage Contributed

Required Contribution

2013 2012 2011

100% 100% 100%

$

614,133.38

$

740,616.54

$

577,548.76

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TALBOT COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2013

EXHIBIT "I"

NOTE 16: RETIREMENT PLANS

TEACHERS' RETIREMENT SYSTEM 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 10 years of service and attainment of age 60. A member is eligible for early retirement after 25 years of creditable service.
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 40 years. Early retirement benefits are reduced by the lesser of one-twelfth of 7% for each month the member is below age 60 or by 7% for each year or fraction thereof by which the member has less than 30 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 10 years of service. If a member terminates with less than 10 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, 2013, were 6.00% of annual salary. Employer contributions required for fiscal year 2013 were 11.41% of annual salary as required by the June 30, 2010, actuarial valuation. The employer contribution rate will increase to 12.28% effective July 1, 2013.
Employer contributions for the current fiscal year and the preceding two fiscal years are as follows:

Fiscal Year

Percentage Contributed

Required Contribution

2013 2012 2011

100% 100% 100%

$

383,370.28

$

386,730.40

$

419,130.30

- 22 -

TALBOT COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2013

EXHIBIT "I"

PUBLIC SCHOOL EMPLOYEES' RETIREMENT SYSTEM (PSERS)
Bus drivers, lunchroom personnel, and maintenance and custodial personnel are members of the Public School Employees' Retirement System of Georgia. The System is funded by contributions by the employees and by the State of Georgia. The School District makes no contribution to this plan.

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TALBOT COUNTY BOARD OF EDUCATION GENERAL FUND
SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL
YEAR ENDED JUNE 30, 2013

SCHEDULE "1"

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

NONAPPROPRIATED BUDGETS

ORIGINAL (1)

FINAL (1)

ACTUAL AMOUNTS

VARIANCE OVER/UNDER

$ 2,949,785.57 $ 2,973,710.31 $ 3,034,882.70 $

1,600.00

3,600.00

11,230.53

3,019,664.12

3,138,745.01

2,340,684.18

1,260,800.00

1,342,934.00

1,208,451.99

60,000.00

60,000.00

77,359.32

2,200.00

2,200.00

1,042.37

61,000.00

101,000.00

153,716.95

61,172.39 7,630.53
-798,060.83 -134,482.01
17,359.32 -1,157.63 52,716.95

$ 7,355,049.69 $ 7,622,189.32 $ 6,827,368.04 $ -794,821.28

$ 3,899,214.98 $ 4,171,630.06 $ 3,486,410.77 $ 685,219.29

299,000.00 328,356.00 123,531.00 305,599.00 312,674.00
81,282.00 519,233.00 388,081.00
5,500.00 20,000.00 521,600.00

323,091.00 325,395.63 157,217.91 319,720.00 370,414.88
81,720.40 521,233.00 394,988.39
5,500.00 22,500.00 530,315.00

286,479.13 265,196.02 136,467.87 328,271.46 387,633.34
75,372.33 420,380.42 411,454.88
26,607.50 456,827.46

36,611.87 60,199.61 20,750.04 -8,551.46 -17,218.46
6,348.07 100,852.58 -16,466.49
5,500.00 -4,107.50 73,487.54

$ 6,804,070.98 $ 7,223,726.27 $ 6,281,101.18 $ 942,625.09

$ 550,978.71 $ 398,463.05 $ 546,266.86 $ 147,803.81

$ 145,000.00 $ 145,000.00 $

-145,000.00

-145,000.00

0.00 $ -145,000.00 145,000.00

$

0.00 $

0.00 $

0.00 $

0.00

$ 550,978.71 $ 398,463.05 $ 546,266.86 $ 147,803.81

286,857.96

277,105.80

-206,943.33

-484,049.13

Fund Balances - Ending

$ 837,836.67 $ 675,568.85 $ 339,323.53 $ -336,245.32

Notes to the Schedule of Revenues, Expenditures and Changes in Fund Balances Budget and Actual
(1) Original and Final Budget amounts do not include actual revenues ($66,446.17) or expenditures ($74,887.59) of the various principal accounts.
The accompanying schedule of revenues, expenditures and changes in fund balances budget and actual is presented on the modified accrual basis of accounting which is the basis of accounting used in the presentation of the fund financial statements.

See notes to the basic financial statements.

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TALBOT COUNTY BOARD OF EDUCATION SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
YEAR ENDED JUNE 30, 2013

SCHEDULE "2"

FUNDING AGENCY PROGRAM/GRANT
Agriculture, U. S. Department of Child Nutrition Cluster Pass-Through From Georgia Department of Education Food Services School Breakfast Program National School Lunch Program
Total Child Nutrition Cluster
Other Programs Pass-Through From Georgia Department of Education Food Services Fresh Fruit and Vegetable Program
Total U. S. Department of Agriculture
Education, U. S. Department of Special Education Cluster Pass-Through From Georgia Department of Education Special Education Grants to States Preschool Grants
Total Special Education Cluster
Title I, Part A Cluster Pass-Through From Georgia Department of Education Title I Grants to Local Educational Agencies
Other Programs Pass-Through From Georgia Department of Education Career and Technical Education - Basic Grants to States Education Jobs Fund Even Start - State Educational Agencies Improving Teacher Quality State Grants Safe and Drug-Free Schools and Communities - State Grants
Total Other Programs
Total U. S. Department of Education
Health and Human Services, U. S. Department of Child Care and Development Fund Cluster Pass-Through From Bright From the Start: Georgia Department of Early Care and Learning ARRA - Child Care and Development Block Grant
Justice, U. S. Department of Pass-Through From Children and Youth Coordinating Council Juvenile Justice and Delinquency Prevention
Defense, U. S. Department of Direct Department of the Army R.O.T.C. Program

Total Expenditures of Federal Awards N/A = Not Available

- 26 -

CFDA NUMBER

PASSTHROUGH
ENTITY ID
NUMBER

EXPENDITURES IN PERIOD

* 10.553 * 10.555

N/A

(2)

N/A $ 430,622.58 (1)

$ 430,622.58

10.582

N/A

15,852.88

$ 446,475.46

84.027 84.173

N/A $ 193,007.69

N/A

18,388.00

$ 211,395.69

* 84.010

N/A $ 386,521.76

84.048 84.410 84.213 84.367 84.186

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

11,391.00 265.00
18,023.11 86,548.42
978.79

$ 117,206.32

$ 715,123.77

93.575

N/A $

5,233.93

16.540

N/A

$

40,724.03

$

49,699.67

$ 1,257,256.86

TALBOT COUNTY BOARD OF EDUCATION SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
YEAR ENDED JUNE 30, 2013

SCHEDULE "2"

Notes to the Schedule of Expenditures of Federal Awards
(1) Includes the Federally assigned value of donated commodities for the Food Donation Program in the amount of $23,394.25.
(2) Expenditures for the funds earned on the School Breakfast Program ($122,787.19) were not maintained separately and are included in the 2013 National School Lunch Program.
Major Programs are identified by an asterisk (*) in front of the CFDA number.
The School District did not provide Federal Assistance to any Subrecipient.
The accompanying schedule of expenditures of Federal awards includes the Federal grant activity of the Talbot County Board of Education and is presented on the modified accrual basis of accounting which is the basis of accounting used in the presentation of the fund financial statements.

See notes to the basic financial statements.

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TALBOT COUNTY BOARD OF EDUCATION SCHEDULE OF STATE REVENUE YEAR ENDED JUNE 30, 2013
AGENCY/FUNDING
GRANTS Bright From the Start: Georgia Department of Early Care and Learning Pre-Kindergarten Program
Education, Georgia Department of Quality Basic Education (1) Direct Instructional Cost Kindergarten Program Kindergarten Program - Early Intervention Program Primary Grades (1-3) Program Primary Grades - Early Intervention (1-3) Program Upper Elementary Grades (4-5) Program Upper Elementary Grades - Early Intervention (4-5) Program Middle School (6-8) Program High School General Education (9-12) Program Vocational Laboratory (9-12) Program Students with Disabilities Remedial Education Program Alternative Education Program Media Center Program 20 Days Additional Instruction Staff and Professional Development Indirect Cost Central Administration School Administration Facility Maintenance and Operations Categorical Grants Pupil Transportation Regular Sparsity Food Services Nursing Services Mid-term Adjustment Hold-Harmless Vocational Education Amended Formula Adjustment Other State Programs Math and Science Supplements Preschool Handicapped Program Vocational Supervisors
Office of the State Treasurer Public School Employees' Retirement
(1) Payments to the Georgia Department of Community Health by the Georgia Department of Education on behalf of the School District in the amount of $386,340.00 are included as part of the Quality Basic Education revenue allotments above.

See notes to the basic financial statements.

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SCHEDULE "3"

GOVERNMENTAL FUND TYPE GENERAL FUND

$

49,214.09

161,562.00 16,266.00
295,456.00 13,058.00
157,089.00 16,381.00
320,786.00 265,405.00
79,558.00 253,918.00
-2,570.00 26,539.00 45,533.00 15,147.00
7,589.00
233,526.00 111,258.00
98,495.00
215,891.00 121,368.00
10,352.00 45,000.00 47,694.00 24,107.00 -337,718.00
17,361.09 11,098.00
7,031.00
14,290.00
$ 2,340,684.18

TALBOT COUNTY BOARD OF EDUCATION SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS
YEAR ENDED JUNE 30, 2013

SCHEDULE "4"

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

ORIGINAL ESTIMATED
COST (1)

CURRENT ESTIMATED COSTS (2)

AMOUNT EXPENDED IN CURRENT YEAR (3)

AMOUNT EXPENDED IN PRIOR YEARS (3)

TOTAL COMPLETION
COST

EXCESS PROCEEDS NOT
EXPENDED

ESTIMATED COMPLETION
DATE

$ 2,500,000.00 $ 4,336,067.67 $ 1,310,980.69 $ 3,025,086.98 $

0.00 $

0.00 September 2014

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

See notes to the basic financial statements.

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TALBOT COUNTY BOARD OF EDUCATION GENERAL FUND - QUALITY BASIC EDUCATION PROGRAMS (QBE)
ALLOTMENTS AND EXPENDITURES BY PROGRAM YEAR ENDED JUNE 30, 2013

SCHEDULE "5"

DESCRIPTION
Direct Instructional Programs Kindergarten Program Kindergarten Program-Early Intervention Program Primary Grades (1-3) Program Primary Grades-Early Intervention (1-3) Program Upper Elementary Grades (4-5) Program Upper Elementary Grades-Early Intervention (4-5) Program Middle Grades (6-8) Program Middle School (6-8) Program High School General Education (9-12) Program Vocational Laboratory (9-12) Program Students with Disabilities Category II Category III Category IV Remedial Education Program Alternative Education Program
TOTAL DIRECT INSTRUCTIONAL PROGRAMS
Media Center Program Staff and Professional Development
TOTAL QBE FORMULA FUNDS

ALLOTMENTS FROM GEORGIA DEPARTMENT OF EDUCATION (1) (2) (3)

ELIGIBLE QBE PROGRAM COSTS

SALARIES

OPERATIONS

TOTAL

$

238,577.00 $ 226,436.19 $ 1,105.80 $ 227,541.99

23,815.00

10,591.25

10,591.25

459,193.00

353,347.08

1,459.01

354,806.09

29,392.00

46,297.77

46,297.77

245,002.00

254,275.79

6,385.73

260,661.52

29,330.00
501,841.00 409,037.00 125,406.00 397,403.00
5,118.00 41,161.00

50,999.00 322.80
337,335.24 562,178.09 274,478.99
95,157.87 173,552.54
7,873.63 20,995.41 32,153.24

2,220.02 2,052.29 5,046.31 2,191.68
121.20

50,999.00 2,542.82
339,387.53 567,224.40 276,670.67
95,279.07 173,552.54
7,873.63 20,995.41 32,153.24

$

2,505,275.00 $ 2,445,994.89 $ 20,582.04 $ 2,466,576.93

70,820.00 11,526.00

111,258.01

4,010.77

115,268.78

$

2,587,621.00 $ 2,557,252.90 $ 24,592.81 $ 2,581,845.71

(1) Comprised of State Funds plus Local Five Mill Share. (2) Allotments do not include the impact of the State amended formula adjustment. (3) Allotments do not include the State Health payments made by GDOE to the Department of Community Health for the certified employees.

See notes to the basic financial statements.

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SECTION II COMPLIANCE AND INTERNAL CONTROL REPORTS

Greg S. Griffin
STATE AUDITOR
(404) 656-2174

DEPARTMENT OF AUDITS AND ACCOUNTS
270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400
July 25, 2014

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 MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS
Ladies and Gentlemen:
We have audited, 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, 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, 2013, and the related notes to the financial statements, which collectively comprise Talbot County Board of Education's basic financial statements and have issued our report thereon dated July 25, 2014.
Internal Control Over Financial Reporting
In planning and performing our audit of the financial statements, we considered Talbot County Board of Education's internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances 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. Accordingly, we do not express an opinion on the effectiveness of the Talbot County Board of Education's internal control.
Our consideration of internal control was for the limited purpose described in the preceding paragraph and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies and therefore, material weaknesses or significant deficiencies may exist that were not identified. However, as described in the accompanying Schedule of Findings and Questioned Costs, we identified certain deficiencies in internal control that we consider to be material weaknesses and a significant deficiency.

2013YB-40

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 the deficiencies described in the accompanying Schedule of Findings and Questioned Costs as items FS-7301-13-01, FS-7301-13-03, FS-7301-13-04, and FS7301-13-06 to be material weaknesses.
A significant 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 the deficiencies described in the accompanying Schedule of Findings and Questioned Costs as items FS-7301-13-02 and FS-7301-13-05 to be significant deficiencies.
Compliance and Other Matters
As part of obtaining reasonable assurance about whether Talbot County Board of Education's financial statements are free from 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 July 25, 2014.
Talbot County Board of Education's Response to Findings
Talbot County Board of Education's response to the findings identified in our audit is described in the accompanying Schedule of Findings and Questioned Costs. Talbot County Board of Education's response was not subjected to the auditing procedures applied in the audit of the financial statements and, accordingly, we express no opinion on it.
Purpose of this Report
The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the entity's internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the entity's internal control and compliance. Accordingly, this communication is not suitable for any other purpose.
Respectfully submitted,

GSG:as 2013YB-40

Greg S. Griffin State Auditor

Greg S. Griffin
STATE AUDITOR
(404) 656-2174

DEPARTMENT OF AUDITS AND ACCOUNTS
270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400
July 25, 2014

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 FOR EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE REQUIRED BY OMB CIRCULAR A-133
Ladies and Gentlemen:
Report on Compliance for Each Major Federal Program
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, 2013. 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.
Management's Responsibility
Management is responsible for compliance with the requirements of laws, regulations, contracts, and grants applicable to its Federal programs.
Auditor's Responsibility
Our responsibility is to express an opinion on compliance for each of Talbot County Board of Education's major Federal programs based on our audit of the types of compliance requirements referred to above. 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, Local Governments, and Non-Profit Organizations. Those standards and OMB Circular A-133 require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major Federal program occurred. An audit includes examining, on a test basis, evidence about the 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 on compliance for each major Federal program. However, our audit does not provide a legal determination of Talbot County Board of Education's compliance.
2013SA-10

Opinion on Each Major Federal Program
In our opinion, the Talbot County Board of Education complied, in all material respects, with the types of 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, 2013.
Report on Internal Control over Compliance
Management of Talbot County Board of Education is responsible for establishing and maintaining effective internal control over compliance with the types of compliance requirements referred to above. In planning and performing our audit of compliance, we considered Talbot County Board of Education's internal control over compliance with the types of requirements that could have a direct and material effect on each major Federal program to determine the auditing procedures that are appropriate in the circumstances for the purpose of expressing an opinion on compliance for each major Federal program 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.
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. 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.
Our consideration of internal control over compliance 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 compliance that might be material weaknesses or significant deficiencies. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified.
The purpose of this report on internal control over compliance is solely to describe the scope of our testing of internal control over compliance and the results of that testing based on the requirements of OMB Circular A-133. Accordingly, this report is not suitable for any other purpose.
Respectfully submitted,

GSG:as 2013SA-10

Greg S. Griffin State Auditor

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

TALBOT COUNTY BOARD OF EDUCATION AUDITEE'S RESPONSE
SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2013

PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

FINDING CONTROL NUMBER

AUDITEE'S RESPONSE/STATUS

SEE AUDITOR'S COMMENTS

FS-7301-11-01 FS-7301-11-02 FS-7301-11-03 FS-7301-11-05 FS-7301-11-06 FS-7301-11-07 FS-7301-12-01 FS-7301-12-02 FS-7301-12-03 FS-7301-12-04 FS-7301-12-05 FS-7301-12-06

Further Action Not Warranted

(1)

Further Action Not Warranted

(1)

Further Action Not Warranted

(1)

Further Action Not Warranted

(1)

Further Action Not Warranted

(1)

Further Action Not Warranted

(1)

Partially Resolved - See Corrective Action/Responses

Unresolved - See Corrective Action/Responses

Unresolved - See Corrective Action/Responses

Unresolved - See Corrective Action/Responses

Unresolved - See Corrective Action/Responses

Unresolved - See Corrective Action/Responses

AUDITOR'S COMMENTS

(1) Finding of this nature has been repeated in both fiscal year 2012 and fiscal year 2013.

CORRECTIVE ACTION/RESPONSES

BUDGET PREPARATION/EXECUTION Deficit Fund Balance Finding Control Number: FS-7301-12-01

The Board is awaiting a review from Georgia Department of Education.

CASH AND CASH EQUIVALENTS Inadequate Internal Control Procedures Finding Control Number: FS-7301-12-02

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

CASH AND CASH EQUIVALENTS REVENUES/RECEIVABLES/RECEIPTS ACCOUNTING CONTROLS (OVERALL) FINANCIAL REPORTING Inadequate Internal Controls over School Activity Accounts Finding Control Number: FS-7301-12-03

The Board will revise and implement internal controls to ensure that proper separation of duties are established. Accounting procedures will be accurately monitored and financial statement amounts will be reconciled to the general ledger balances.

- 1 -

TALBOT COUNTY BOARD OF EDUCATION AUDITEE'S RESPONSE
SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2013
PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS CORRECTIVE ACTION/RESPONSES EMPLOYEE COMPENSATION Inadequate Internal Controls over Employee Compensation Process Finding Control Number: FS-7301-12-04 The Board will implement policies and procedures to ensure that business procedures are followed for all salaries, ensuring that salaries are paid according to approved salary schedules and adequate documentation will be maintained to support the salary payments. CAPITAL ASSETS Failure to Adequately Maintain Capital Assets Finding Control Number: FS-7301-12-05 The Board will implement procedures to ensure capital assets records conform to the approved capital assets policy. FINANCIAL REPORTING Inadequate Controls over Financial Reporting Finding Control Number: FS-7301-12-06 The Board will implement procedures to ensure that all required activity in the form of journal entries are in the financial statements. Management will ensure that the financial statements are in accordance with Chapter 22A Annual Financial Reporting of the Financial Management for Georgia Local Units of Administration. Additionally, financial statements will be prepared in accordance with generally accepted accounting principles.
- 2 -

TALBOT COUNTY BOARD OF EDUCATION AUDITEE'S RESPONSE
SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2013

PRIOR YEAR FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

FINDING CONTROL NUMBER

AUDITEE'S RESPONSE/STATUS

SEE AUDITOR'S COMMENTS

FA-7301-10-01 FA-7301-11-01 FA-7301-11-02 FA-7301-11-03 FA-7301-12-01 FA-7301-12-02

Partially Resolved See Corrective Action/Responses

Partially Resolved See Corrective Action/Responses

Further Action Not Warranted

(1)

Further Action Not Warranted

(1)

Partially Resolved - See Corrective Action/Responses

Partially Resolved - See Corrective Action/Responses

AUDITOR'S COMMENTS

(1) Finding has been closed with no further action required by the Georgia Department of Education (Grantor).

CORRECTIVE ACTION/RESPONSES

ALLOWABLE COSTS/COST PRINCIPLES Salaries Not Properly Supported U. S. Department of Education Through Georgia Department of Education Title 1, Part A Cluster (CFDA 84.010 and 84.389) Special Education Cluster (CFDA 84.027, 84.173, 84.391 and 84.392) Questioned Cost: $2,163.55 Special Education Cluster (CFDA 84.027, 84.173, 84.391 and 84.392) $36,290.87 Title 1, Part A Cluster (CFDA 84.010 and 84.389) Finding Control Number: FA-7301-10-01

The Board is awaiting a review from Georgia Department of Education.

ALLOWABLE COSTS/COST PRINCIPLES Non-Title I Personnel Paid with Title I Funds U. S. Department of Education Through Georgia Department of Education Title I, Part A Cluster (CFDA 84.010 and 84.389) Questioned Cost: $52,150.50 Finding Control Number: FA-7301-11-01

The Board is awaiting a review from Georgia Department of Education.

- 3 -

TALBOT COUNTY BOARD OF EDUCATION AUDITEE'S RESPONSE
SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2013
PRIOR YEAR FEDERAL AWARD FINDINGS AND QUESTIONED COSTS CORRECTIVE ACTION/RESPONSES CASH MANAGEMENT Excessive Cash Balances U. S. Department of Education Through Georgia Department of Education Title I, Part A Cluster (CFDA 84.010 and 84.389) Finding Control Number: FA-7301-12-01 The Board is awaiting a review from Georgia Department of Education. REPORTING Failure to File Accurate Completion Reports U. S. Department of Education Through Georgia Department of Education Title I, Part A Cluster (CFDA 84.010) Finding Control Number: FA-7301-12-02 The Board is awaiting a review from Georgia Department of Education.
- 4 -

SECTION IV FINDINGS AND QUESTIONED COSTS

TALBOT COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2013

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

Unmodified

Internal control over financial reporting:

Material weaknesses identified?

Yes

Significant deficiency identified?

Yes

Noncompliance material to financial statements noted:

No

Federal Awards

Internal Control over major programs: Material weakness identified? Significant deficiency identified?

No None Reported

Type of auditor's report issued on compliance for major programs: All major programs

Unmodified

Any audit findings disclosed that are required to be reported in

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

No

Identification of major programs:

CFDA Numbers

Name of Federal Program or Cluster

10.553, 10.555 84.010

Child Nutrition Cluster Title I, Part A Cluster

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

$300,000.00

Auditee qualified as low-risk auditee?

No

- 1 -

TALBOT COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2013

II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

Finding Control Number:
Control Category: Internal Control Impact:

FS-7301-13-01 Inadequate Internal Control Procedures Cash and Cash Equivalents Material Weakness

Description: This is a repeat finding (FS-7301-12-02, FS-7301-11-02, and FS-7301-10-02) from the years ended June 30, 2012, June 30, 2011, and June 30, 2010, respectively. 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.

Condition: Weaknesses in internal controls relating to Cash and Cash Equivalents were noted as follows:
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.
Cash activity was not 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 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.
At June 30, 2013, $225,307 of deposits were not secured by surety bond, by guarantee of insurance, or by collateral in accordance with Official Code of Georgia Annotated (O.C.G.A.) Section 45-8-12.

Cause: In discussing these deficiencies with the School District, they stated that the cause was a direct result of the lack of time and resources to fully separate duties and ensure an administrative review is completed.

Effect or Potential Effect: Failure to maintain adequate internal controls over cash activity increases the risk 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 (1) monthly bank reconciliations are adequately reviewed, (2) cash activity is maintained in the proper funds, and (3) bank reconciliations are performed by someone independent of the general ledger.

Views of Responsible Officials and Corrective Action Plans: We concur with this finding. The Board has implemented controls over cash to ensure that cash is properly reconciled to general ledger and cash activities. Bank reconciliations are monitored by someone independent of the general ledger.

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TALBOT COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2013

II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

Contact Person: Telephone: Fax: E-mail:

Dr. James Catrett, Superintendent (706) 665-8528 (706) 665-3620 jcatrett@talbot.k12.ga.us

Finding Control Number: Control Category:
Internal Control Impact:

FS-7301-13-02 Inadequate Internal Controls over School Activity Accounts Cash and Cash Equivalents Revenues/Receivables/Receipts Accounting Controls (Overall) Financial Reporting Significant Deficiency

Description: This is a repeat finding (FS-7301-12-03, FS-7301-11-03, and FS-7301-10-03) from the years ended June 30, 2012, June 30, 2011, and June 30, 2010, respectively. 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 transactions are processed according to established procedures.

Condition: Cash and Cash Equivalents
One school activity bank account was not reconciled to the general ledger resulting in an unidentified variance of $11,864.

Revenues/Receivables/Receipts The deposit preparation function was not separated from the bank reconciliation and general ledger functions. Gate receipts were not maintained in a secured location prior to depositing in the bank. Dues/Fees collected from students were not receipted by the teachers. The depositing of funds in the bank was not a standard process for all school activity accounts.

Accounting Controls (Overall)
An administrative review of the bank reconciliation process, cash receipt process, and cash disbursement process to determine if established procedures were being followed was not performed.
The School District did not have a formal process for documenting agency fund sponsors, purpose of accounts, allowable activities of accounts, source of funds, and final disposition of funds related to individual agency fund accounts.

General Ledger Agency Funds reported deficit balances of $4,317 in total. Governmental Funds were used to cover these deficits.

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TALBOT COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2013

II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

Financial Reporting School activity account balances used for financial statement reporting did not agree with school activity general ledgers. Several school activity accounts that were not fiduciary in nature were misclassified as agency funds instead of governmental activities.
Beginning fund balance reported on the consolidation worksheet used to record school activity accounts to the central office's general ledger did not agree to the prior year ending balance.

Cause: In discussing these deficiencies with the School District, they stated that the internal control deficiencies related to school activity accounts occurred due to a shortage of personnel at the school and a failure of those personnel to follow the established policies and procedures.

Effect or Potential 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 proper separation of duties is established, accounting processes are adequately monitored, school activity accounts are properly classified, financial statement amounts are reconciled to general ledger balances, standard procedures are implemented over the depositing of funds, amounts reported in consolidation spreadsheet for school activity accounts is accurate, and agency fund accounts are properly documented.

Views of Responsible Officials and Corrective Action Plans: We concur with this finding. Management has implemented controls to ensure that transactions are processed according to procedures and accurately monitored.

Contact Person: Telephone: Fax: E-mail:

Dr. James Catrett, Superintendent (706) 665-8528 (706) 665-3620 jcatrett@talbot.k12.ga.us

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TALBOT COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2013

II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

Finding Control Number: Control Category: Internal Control Impact:

FS-7301-13-03 Inadequate Controls over Grants and Contracts Revenues/Receivables/Receipts General Ledger Material Weakness

Description: Balances in Federal program funds were not properly monitored.

Criteria: The School District's management is responsible for designing and maintaining internal controls that provide reasonable assurance that transactions are processed according to generally accepted accounting principles.

Condition: Several 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 I - $174,334 Career and Technical Education - Basic Grants to States - $313 Improving Teacher Quality - $2,133 Early Reading First - $28,421 Child Care and Development Block Grant - $38,230 Juvenile Justice and Delinquency Prevention - $5,674

In addition, the Special Education Federal program maintained a deficit fund balance of $385.97.

Cause: In discussing this deficiency with the School District, they stated that the cause was a direct result of the lack of time and resources to investigate these balances.

Effect or Potential Effect: Federal Program revenue was not properly recognized in accordance with generally accepted accounting principles

Recommendation: The School District should implement internal controls to ensure all Federal programs are properly reconciled and closed at year end.

Views of Responsible Officials and Corrective Action Plans: We concur with this finding. The Board has implemented controls over grants to ensure that grants are properly reconciled to general ledger and cash activities according to generally accepted accounting principles.

Contact Person: Telephone: Fax: E-mail:

Dr. James Catrett, Superintendent (706) 665-8528 (706) 665-3620 jcatrett@talbot.k12.ga.us

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TALBOT COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2013

II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

Finding Control Number:
Control Category: Internal Control Impact:

FS-7301-13-04 Inadequate Controls over Financial Reporting Financial Reporting Material Weakness

Description: This is a repeat finding (FS-7301-12-06 and FS-7301-11-07) from the years ended June 30, 2012 and June 30, 2011, respectively. The School District did not have adequate internal controls in place over the financial statement reporting process.

Criteria: Chapter 22A Annual Financial Reporting of the Financial Management for Georgia Local Units of Administration provides that School Districts must prepare their financial statements in accordance with generally accepted accounting principles.

Condition: The Department of Audits and Accounts provided basic accounting assistance limited to services such as preparing draft financial statements that were based on the entity's chart of accounts and general ledgers including adjusting, correcting, and closing entries that have been approved by the entity's staff; prepared draft notes to the financial statements based on information determined and approved by management; and prepared trial balances based on the entity's chart of accounts.

Cause: In discussing this deficiency with the School District, they stated that the cause was a direct result of the lack of time and resources to train Board personnel to accomplish the preparation of financial statements and/or the lack of funding to secure outside services to prepare the financial statements.

Effect or Potential Effect: The School District did not comply with the requirements of the Department of Education regarding financial reporting. Adjustments were necessary in order for the School District's financial statements to be in conformity with generally accepted accounting principles.

Recommendation: The School District should establish and implement controls over the financial statement reporting process as required by the Financial Management for Georgia Local Units of Administration.

Views of Responsible Officials and Corrective Action Plans: We concur with this finding. Management will ensure the financial statements are properly prepared in accordance with generally accepted accounting principles.

Contact Person: Telephone: Fax: E-mail:

Dr. James Catrett, Superintendent (706) 665-8528 (706) 665-3620 jcatrett@talbot.k12.ga.us

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TALBOT COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2013

II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

Finding Control Number:
Control Category: Internal Control Impact:

FS-7301-13-05 Inadequate Internal Controls over Employee Compensation Process Employee Compensation Significant Deficiency

Description: This is a repeat finding (FS-7301-12-04, FS-7301-11-05, and FS-7301-10-05) from the years ended June 30, 2012, June 30, 2011, and June 30, 2010, 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 employees are paid according to approved salary schedules and documentation is maintained to support the salary payments.

Condition:
A review of employee compensation revealed several instances where salaries were not properly approved, supported by signed contracts and/or Board approved salary schedules.
A review of certificated employees revealed that one employee was not paid in accordance with their certificate level. The employee gained additional certification during the year without additional compensation.
A review of purchased professional and technical service expenditures revealed additional compensation paid to an employee of the School District in the amount of $862.50 that did not flow through the normal business process for salaries as established by the School District.

Cause: In discussing these deficiencies with the School District, they indicated that appropriate procedures to ensure salary amounts are supported by adequate documentation had not been implemented.

Effect or Potential Effect: The failure to maintain adequate internal controls over Employee Compensation increases the risk misstatements could occur in the financial statements due to error or fraud.

Recommendation: The School District should implement policies and procedures to ensure normal business procedures are followed for all salaries, which includes ensuring salaries are paid according to approved salary schedules and adequate documentation is maintained to support the salary payments.

Views of Responsible Officials and Corrective Action Plans: We concur with this finding. Management has implemented policies and procedures to ensure that business procedures are followed for all salaries, ensuring that salaries are paid according to approved salary schedules and adequate documentation will be maintained to support the salary payments.

Contact Person: Telephone: Fax: E-mail:

Dr. James Catrett, Superintendent (706) 665-8528 (706) 665-3620 jcatrett@talbot.k12.ga.us

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TALBOT COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2013

II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

Finding Control Number:
Control Category: Internal Control Impact:

FS-7301-13-06 Failure to Adequately Maintain Capital Assets Capital Assets Material Weakness

Description: This is a repeat finding (FS-7301-12-05 and FS-7301-11-06) from the years ended June 30, 2012 and June 30, 2011, respectively. The School District did not maintain an adequate capital assets listing.

Criteria: The School District's management is responsible for designing and maintaining internal controls that provide reasonable assurance that capital assets inventory reports are properly maintained. Chapter 37 Implementing a Capital Assets Management System of the Financial Management for Georgia Local Units of Administration provides that School Districts must establish capital asset policies, define system requirements, implement a capital asset system and maintain capital asset inventory reports.

Condition: A review of the School District's capital asset records revealed the following exceptions:

The capital asset listing does not have adequate descriptions and/or inventory numbers assigned to assets.
During our physical inspection of inventory items we noted that assets are not tagged. An analysis of construction projects was not maintained which resulted in material
unrecorded Construction-in-Progress in the amount of $808,148.65. The capital asset listing contained items that were identified as obsolete during the annual
physical inventory performed by the School District.

Cause: In discussing these deficiencies with the School District, they stated that the cause was a result of the lack of time and resources to fully monitor and implement procedures over Capital Assets which follow Board policy. Additionally, they stated the cause was a result of new construction in which staff has not been trained on how to complete a construction analysis and ensure proper accounting of construction activity for the year.

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

Recommendation: The School District's management should review the capital assets records and make appropriate adjustments to ensure that the capital assets records conform to the School District's approved capital asset policy.

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TALBOT COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2013

II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

Views of Responsible Officials and Corrective Action Plans: We concur with this finding. Management has implemented procedures to ensure capital assets records conform to the approved capital asset policy. Management will review capital assets and make appropriate adjustments.

Contact Person: Telephone: Fax: E-mail:

Dr. James Catrett, Superintendent (706) 665-8528 (706) 665-3620 jcatrett@talbot.k12.ga.us

III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

No matters were reported.

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