TATTNALL COUNTY BOARD OF EDUCATION REIDSVILLE, GEORGIA REPORT ON AUDIT OF THE FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2007 STATE OF GEORGIA DEPARTMENT OF AUDITS AND ACCOUNTS Russell W. Hinton State Auditor TATTNALL COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS - SECTION I FINANCIAL INDEPENDENT AUDITOR'S COMBINED REPORT ON BASIC FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION - SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS EXHIBITS BASIC FINANCIAL STATEMENTS DISTRICT-WIDE FINANCIAL STATEMENTS A STATEMENT OF NET ASSETS I B STATEMENT OF ACTIVITIES 2 FUND FINANCIAL STATEMENTS C BALANCE SHEET GOVERNMENTAL FUNDS 4 D RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO THE STATEMENT OF NET ASSETS 5 E STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS 6 F RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES TO THE STATEMENT OF ACTIVITIES 7 G STATEMENT OF FIDUCIARY NET ASSETS FIDUCIARY FUNDS 8 H STATEMENT OF CHANGES IN FIDUCIARY NET ASSETS FIDUCIARY FUNDS 9 I NOTES TO THE BASIC FINANCIAL STATEMENTS II SCHEDULES REQUIRED SUPPLEMENTARY INFORMATION I SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL GENERAL FUND 27 SUPPLEMENTARY INFORMATION 2 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS 28 3 SCHEDULE OF STATE REVENUE 29 TATTNALL COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS - SECTION I FINANCIAL SCHEDULES SUPPLEMENTARY INFORMATION 4 SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS 30 5 ALLOTMENTS AND EXPENDITURES GENERAL FUND - QUALITY BASIC EDUCATION PROGRAMS (QBE) BY PROGRAM 31 SECTION II COMPLIANCE AND INTERNAL CONTROL REPORTS REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS REPORT ON COMPLIANCE WITH REQUIREMENTS APPLICABLE TO EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH 0MB CIRCULAR A-133 SECTION III AUDITEE'S RESPONSE TO PRIOR YEAR FINDINGS AND QUESTIONED COSTS SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS SECTION IV FINDINGS AND QUESTIONED COSTS SCHEDULE OF FINDINGS AND QUESTIONED COSTS TATTNALL COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS - SECTIONV MANAGEMENT'S RESPONSES SCHEDULE OF MANAGEMENT'S RESPONSES SECTION I FINANCIAL Russell W. Hinton STATE AUDITOR (404) 656-2174 DEPARTMENT OF AUDITS AND ACCOUNTS 270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400 July 14, 2008 Honorable Sonny Perdue, Governor Members ofthe General Assembly Members ofthe State Board of Education and Superintendent and Members of the Tattnall County Board of Education INDEPENDENT AUDITOR'S COMBINED REPORT ON BASIC FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION - SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS Ladies and Gentlemen: We have audited the accompanying financial statements ofthe governmental activities, each major fund, and the aggregate remaining fund information (Exhibits A through I) of the Tattnall County Board of Education, as of and for the year ended June 30, 2007, which collectively comprise the Board's basic financial statements as listed in the table ofcontents. These financial statements are the responsibility ofthe Tattnall County Board ofEducation's management. Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States ofAmerica and the standards applicable to financial audits contained in GovernmentAuditing Standards, issued by the Comptroller General ofthe United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Tattnall County Board of Education's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinions. 2007ARL-11 In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, each major fund, and the aggregate remaining fund information ofthe Tattnall County Board ofEducation, as ofJune 30, 2007, and the respective changes in financial position thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America. The Tattnall County Board of Education has not presented Management's Discussion and Analysis that accounting principles generally accepted in the United States of America has determined is necessary to supplement, although not to be part of, the basic financial statements. In accordance with Government Auditing Standards, we have also issued our report dated July 14, 2008, on our consideration of the Tattnall 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 ofthat report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit. The Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual, as presented on page 27, is not a required part of the basic financial statements but is supplementary information required by the accounting principles generally accepted in the United States of America. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods ofmeasurement and presentation ofthe required supplementary information. However, we did not audit the information and express no opinion on it. Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Tattnall County Board of Education's basic financial statements. The accompanying supplementary information which consist of Schedules 2 through 5, which includes the Schedule of Expenditures of Federal Awards as required by U. S. Office of Management and Budget Circular A-133, Audits ofStates, Local Governments, and Non-Profit Organizations, are presented for purposes of additional analysis and are not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements, and in our opinion, is fairly stated, in all material respects, in relation to the basic financial statements taken as a whole. A copy of this report has been filed as a permanent record in the office of the State Auditor and made available to the press of the State, as provided for by Official Code of Georgia Annotated section 50-6-24. Respectfully submitted, 4 ~~0~~1~ State Auditor RWH:gp 2007ARL-11 TATTNALL COUNTY BOARD OF EDUCATION TATTNALL COUNTY BOARD OF EDUCATION STATEMENT OF NET ASSETS JUNE 30, 2007 ASSETS Cash and Cash Equivalents Investments Accounts Receivable, Net Taxes State Government Federal Government Other Inventories Capital Assets Land Land Improvements Buildings Equipment Less: Accumulated Depreciation Total Assets LIABILITIES Accounts Payable Salaries and Benefits Payable Long-Term Liabilities Due Within One Year Due in More Than One Year Total Liabilities NET ASSETS Invested in Capital Assets, Net of Related Debt Restricted for Bus Replacement Continuation of Federal Programs Debt Service Capital Projects Unrestricted Total Net Assets Total Liabilities and Net Assets EXHIBIT"A" GOVERNMENTAL ACTIVITIES $ 1,717,691 6,351,000 650,459 2,932,017 917,164 919 33,681 169,006 2,706,592 30,234,286 4,455,706 -13,073,882 $ ===3=7=,0=94='=63=9= $ 20,251 2,995,656 842,073 7 690 000 $ 11547980 $ 20,278,154 99,330 473,483 2,902,711 674,941 1118 040 $ 25,546,659 $ ===3=7=,0=94='=63=9= The notes to the basic financial statements are an integral part of this statement. -1- TATTNALL COUNTY BOARD OF EDUCATION STATEMENT OF ACTIVITIES FOR THE YEAR ENDED JUNE 30, 2007 GOVERNMENTAL ACTIVITIES Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Operations of Non-Instructional Services Enterprise Operations Community Services Food Services Interest on Short-Term and Long-Term Debt Total Governmental Activities General Revenues Taxes Property Taxes For Maintenance and Operations For Debt Services Railroad Cars Sales Taxes Special Purpose Local Option Sales Tax For Debt Services For Capital Projects Intangible Recording Tax Real Estate Grants and Contributions not Restricted to Specific Programs Investment Earnings Miscellaneous Total General Revenues Change in Net Assets Net Assets - Beginning of Year Net Assets - End of Year EXPENSES CHARGES FOR SERVICES $ 19,812,819 $ 1,327,257 668,249 526,818 1,082,674 1,574,940 272,724 1,993,643 1,386,815 18,392 19,701 252,953 98,238 1,936,561 92,615 $ 31,064,399 $ 654,216 99,038 111,854 379,104 1,244,212 The notes to the basic financial statements are an integral part of this statement. -2- EXHIBIT "B" PROGRAM REVENUES OPERATING CAPITAL GRANTS AND GRANTS AND CONTRIBUTIONS CONTRIBUTIONS NET {EXPENSES) REVENUES AND CHANGES IN NET ASSETS $ 15,454,848 $ 349,306 561,311 353,353 631,207 907,776 908,895 673,655 22,322 1,478,362 $ 21,341,035 $ 542,298 $ 18,843 975 18,210 51,347 308,337 61,787 1 001 797 $ -3, 161,457 -977,951 -106,938 -154,622 -450,492 -648,954 -272,724 -1,033,401 -404,823 -18,392 2,621 -153,915 13,616 -17,308 -92 615 -7,477,355 $ 3,767,492 241,230 10,590 588,937 1,179,567 37,292 35,010 2,094,093 247,244 209,060 $ 8 410 515 $ 933,160 24,613,499 $ =====25.,.,5=4=6=,6=59== -3- TATTNALL COUNTY BOARD OF EDUCATION BALANCE SHEET GOVERNMENTAL FUNDS JUNE 30, 2007 EXHIBIT"C" ASSETS Cash and Cash Equivalents Investments Accounts Receivable, Net Taxes State Government Federal Government Other Inventories GENERAL FUND DISTRICTWIDE CAPITAL PROJECTS FUND DEBT SERVICE FUND TOTAL $ 1,262,518 $ 540,319 $ 27,455 $ 4,297,725 2,025,820 85,714 2,238,557 917,164 919 33 681 693,460 317,435 1,802,837 6,351,000 403,149 2,932,017 917,164 919 33 681 Total Assets $ 4,566,008 $ 4991185 $ 2,883,574 $ ===1~2;;;4;,;;4,;;;.0~76~7= LIABILITIES AND FUND BALANCES LIABILITIES Cash Overdraft $ 85,146 $ Accounts Payable $ 20,251 Salaries and Benefits Payable 2,995,656 Total Liabilities $ 3,015,907 $ 85146 $ FUND BALANCES Reserved for: Bus Replacement Continuation of Federal Programs Debt Service Inventories Capital Projects Unreserved Designated for School Activities Undesignated Reported in: General Fund $ 99,330 $ 439,802 $ 2,883,574 33,681 $ 4,906,039 237,029 740 259 Total Fund Balances $ 1 550 101 $ 4,906,039 $ 2,883,574 $ 85,146 20,251 2 995 656 3 101 053 99,330 439,802 2,883,574 33,681 4,906,039 237,029 740 259 9 339 714 Total Liabilities and Fund Balances $ 4,566,008 $ 4991185 $ 2,883,574 $ ==~1:a:a2.,,:4::;,4,;;;0~76;;;,;7;,.. The notes to the basic financial statements are an integral part of this statement. -4 - TATTNALL COUNTY BOARD OF EDUCATION RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO THE STATEMENT OF NET ASSETS JUNE 30, 2007 EXHIBIT"D" Total Fund Balances - Governmental Funds (Exhibit "C") Amounts reported for Governmental Activities in the Statement of Net Assets are different because: Capital Assets used in Governmental Activities are not financial resources and therefore are not reported in the funds. These assets consist of: Land Land Improvements Buildings Equipment Accumulated Depreciation Total Capital Assets Some of the School District's property tax revenues will be collected after year-end but are not available soon enough to pay for the current period's expenditures. Long-Term Liabilities, including Bonds Payable, are not due and payable in the current period and therefore are not reported as liabilities in the funds. Long-Term Liabilities at year-end consist of: Bonds Payable Capital Leases Total Long-Term Liabilities $ 9,339,714 $ 169,006 2,706,592 30,234,286 4,455,706 -13,073,882 24,491,708 247,310 $ -8,515,000 -17 073 -8,532,073 Net Assets of Governmental Activities (Exhibit "A") $ 25,546,659 The notes to the basic financial statements are an integral part of this statement. -5- TATTNALL COUNTY BOARD OF EDUCATION STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS YEAR ENDED JUNE 30, 2007 EXHIBIT"E" REVENUES Property Taxes Sales Taxes State Funds Federal Funds Charges for Services Investment Earnings Miscellaneous Total Revenues EXPENDITURES Current Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Enterprise Operations Community Services Food Services Operation Capital Outlay Debt Services Principal Interest Total Expenditures Excess of Revenues over (under) Expenditures OTHER FINANCING SOURCES Proceeds of Long-Term Capital Related Debt Net Change in Fund Balances Fund Balances - Beginning GENERAL FUND DISTRICTWIDE CAPITAL PROJECTS FUND DEBT SERVICE FUND TOTAL $ 3,749,249 $ 67,876 $ 1,179,567 19,591,827 693,460 4,151,638 1,244,212 65,698 72,375 205,133 4 916 $ 29,075,633 $ 1,950,318 $ 249,934 $ 593,363 109,171 2 810 955,278 $ 3,999,183 1,840,806 20,285,287 4,151,638 1,244,212 247,244 212,859 31,981,229 $ 18,799,305 1,327,257 668,249 491,601 1,080,851 1,540,908 190,696 $ 1,897,679 1,466,030 18,392 19,701 252,953 98,238 1,821,086 80,421 $ 68,065 1,367,529 80,307 6178 $ 29,672,946 $ 1,602,500 $ $ -597,313 $ 347,818 $ $ 18,799,305 1,607 1,327,257 668,249 491,601 1,080,851 1,540,908 272,724 1,897,679 1,534,095 18,392 19,701 252,953 98,238 1,821,086 1,367,529 795,000 86437 875,307 92615 883,044 $ 32,158,490 72,234 $ -177,261 4,318,519 181,481 $ -597,313 $ 4,666,337 $ 253,715 $ 2 147 414 239.702 2,629,859 4,500,000 4,322,739 5,016,975 Fund Balances - Ending $ 1,550,101 $ 4,906,039 $ 2,883,574 $====9'=33=9=,7=14= The notes to the basic financial statements are an integral part of this statement. -6- TATTNALL COUNTY BOARD OF EDUCATION RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES TO THE STATEMENT OF ACTIVITIES JUNE 30, 2007 EXHIBIT"F" Total Net Change in Fund Balances - Governmental Funds (Exhibit "E") $ 4,322,739 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 $ 1,339,221 -1, 120,437 218,784 Because some property taxes will not be collected for several months after the School District's fiscal year ends, they are not considered "available" revenues. 20,129 In the Statement of Activities, only the gain on the sale of the equipment is reported, whereas in the Governmental Funds, the entire proceeds from the sale increase financial resources. Thus, the change in net assets differs from the change in fund balances by the cost of carrying value of the equipment sold. -3,799 Bond proceeds provide current financial resources to Governmental Funds; however, issuing debt increases Long-Term Liabilities in the Statement of Net Assets. In the current period, proceeds were received from General Obligation Bonds issued. -4,500,000 Repayment of Long-Term Debt is reported as an expenditure in Governmental Funds, but the repayment reduces Long-Term Liabilities in the Statement of Net Assets. In the current year, these amounts consist of: Bond Principal Retirements Capital Lease Payments Total Long-Term Debt Repayments $ 795,000 80 307 875,307 Change in Net Assets of Governmental Activities (Exhibit "B") $ ===9=3=3'=1=60= The notes to the basic financial statements are an integral part of this statement. -7- TATTNALL COUNTY BOARD OF EDUCATION STATEMENT OF FIDUCIARY NET ASSETS FIDUCIARY FUNDS JUNE 30, 2007 EXHIBIT"G" ASSETS Cash and Cash Equivalents Investments Deferred Compensation Plan Total Assets LIABILITIES Funds Held for Others Deferred Compensation Plan Total Liabilities PRIVATE PURPOSE TRUSTS AGENCY FUNDS $ $ _ _3_8~6,~85_0_ 30,598 $ 386,850 $ ===30..,,=59=8= $ $ _____3;..:;8_.6,=8=50:;... 30,598 $ 386,850 $ ===30='=59=8= The notes to the basic financial statements are an integral part of this statement. -8- TATTNALL COUNTY BOARD OF EDUCATION STATEMENT OF CHANGES IN FIDUCIARY NET ASSETS FIDUCIARY FUNDS YEAR ENDED JUNE 30, 2007 EXHIBIT"H" ADDITIONS Contributions Donors Investment Earnings Net Increase (Decrease) in Fair Value of Investments Total Additions DEDUCTIONS Refunds of Contributions Change in Net Assets Net Assets - Beginning Net Assets - Ending PRIVATE PURPOSE TRUSTS $ 17,900 32,034 $ 49,934 $ 37,125 $ 12,809 374,041 $ ======38=6=,8=50== The notes to the basic financial statements are an integral part of this statement. -9- (This page left intentionally blank) TATTNALL COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007 EXHIBIT "I" Note 1: DESCRIPTION OF SCHOOL DISTRICT AND REPORTING ENTITY REPORTING ENTITY The Tattnall County Board ofEducation (School District) was established under the laws ofthe State of Georgia and operates under the guidance of a school board elected by the voters and a Superintendent appointed by the Board. The Board is organized as a separate legal entity and has the power to levy taxes and issue bonds. Its budget is not subject to approval by any other entity. Accordingly, the School District is a primary government and consists of all the organizations that compose its legal entity. Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BASIS OF PRESENTATION The School District's basic financial statements are collectively comprised of the District-wide financial statements, fund financial statements and notes to the basic financial statements of the Tattnall County Board of Education. District-wide Statements: The Statement ofNet Assets and the Statement ofActivities display information about the financial activities ofthe overall School District, except for fiduciary activities. Eliminations have been made to minimize the double counting of internal activities. Governmental activities generally are financed through taxes, intergovernmental revenues, and other nonexchange transactions. The Statement of Activities presents a comparison between direct expenses and program revenues for each function of the School District's governmental activities. Direct expenses are those that are specifically associated with a program or function and, therefore, are clearly identifiable to a particular function. Indirect expenses (expenses of the School District related to the administration and support ofthe School District's programs, such as office and maintenance personnel and accounting) are not allocated to programs. Program revenues include (a) charges paid by the recipients ofgoods or services offered by the programs and (b) grants and contributions that are restricted to meeting the operational or capital requirements of a particular program. Revenues that are not classified as program revenues, including all taxes, are presented as general revenues. Fund Financial Statements: The fund financial statements provide information about the School District's funds, including fiduciary funds. Eliminations have been made to minimize the double counting ofinternal activities. Separate statements for each category (governmental and fiduciary) are presented. The emphasis of fund financial statements is on major governmental funds, each displayed in a separate column. - 11 - TATTNALL COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007 EXHIBIT "I" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The School District reports the following major governmental funds: General Fund is the School District's primary operating fund. It accounts for all financial resources ofthe School District, except those resources required to be accounted for in another fund. District-wide Capital Projects Fund accounts for financial resources including Special Purpose Local Option Sales Tax (SPLOST), Bond Proceeds and grants from Georgia State Financing and Investment Commission to be used for the acquisition, construction or renovation ofmajor capital facilities. Debt Service Fund accounts for taxes (property and sales) and bond proceeds (capitalized interest) legally restricted for the payment of general long-term principal, interest and paying agent's fees. The School District reports the following fiduciary fund types: Private Purpose Trust fund reports a trust arrangement under which principal and income may be expended for deferred compensation of employees of the School District. Agency funds account for assets held by the School District as an agent for various funds, governments or individuals. BASIS OF ACCOUNTING The basis ofaccounting determines when transactions are reported on the financial statements. The District-wide governmental and fiduciary fund financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded at the time liabilities are incurred, regardless ofwhen the related cash flows take place. Nonexchange transactions, in which the School District gives (or receives) value without directly receiving (or giving) equal value in exchange, include property taxes, sales taxes, grants and donations. On an accrual basis, revenue from property taxes is recognized in the fiscal year for which the taxes are levied. Revenue from sales taxes is recognized in the fiscal year in which the underlying transaction (sale) takes place. Revenue from grants and donations is recognized in the fiscal year in which all eligibility requirements have been satisfied. 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. - 12 - TATTNALL COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007 EXHIBIT "I" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Governmental funds are reported using the current financial resources measurement focus and the modified accrual basis ofaccounting. Under this method, revenues are recognized when measurable and available. The School District considers all revenues reported in the governmental funds to be available if they are collected within sixty days after year-end. Property taxes, sales taxes and interest are considered to be susceptible to accrual. Expenditures are recorded when the related fund liability is incurred, except for principal and interest on general long-term debt, which are recognized as expenditures to the extent they have matured. Capital asset acquisitions are reported as expenditures in governmental funds. Proceeds ofgeneral long-term liabilities and acquisitions under capital leases are reported as other financing sources. The School District funds certain programs by a combination ofspecific cost-reimbursement grants, categorical grants, and general revenues. Thus, when program costs are incurred, there are both restricted and unrestricted net assets available to finance the program. It is the School District's policy to first apply grant resources to such programs, followed by cost-reimbursement grants, then general revenues. CASH AND CASH EQUIVALENTS COMPOSITION OF DEPOSITS Cash and cash equivalents consist ofcash on hand, demand deposits and short-term investments with original maturities of three months or less from the date of acquisition in authorized financial institutions. Official Code of Georgia Annotated Section 45-8-14 authorize the School District to deposit its funds in one or more solvent banks or insured Federal savings and loan associations. INVESTMENTS COMPOSITION OF INVESTMENTS Investments made by the School District in nonparticipating interest-earning contracts (such as certificates ofdeposit) and repurchase agreements are reported at cost. Participating interest-earning contracts and money market investments with a maturity at purchase ofone year or less are reported at amortized cost. Both participating interest-earning contracts and money market investments with a maturity at purchase greater than one year 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, - 13 - TATTNALL COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007 EXHIBIT "I" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (4) Obligations of any corporation of the United States government, (5) Prime banker's acceptances, (6) The Local Government Investment Pool administered by the State of Georgia, Office of Treasury and Fiscal Services, (7) Repurchase agreements, and (8) Obligations of other political subdivisions of the State of Georgia. The School District does not have a formal policy regarding investment policies that address credit risks, custodial credit risks, concentration ofcredit risks, interest rate risks or foreign currency risks. RECEIVABLES Receivables consist of amounts due from property and sales taxes, grant reimbursements due on Federal, State or other grants for expenditures made but not reimbursed and other receivables disclosed from information available. Receivables are recorded when either the asset or revenue recognition criteria has been met. Receivables recorded on the basic financial statements do not include any amounts which would necessitate the need for an allowance for uncollectible receivables. PROPERTY TAXES The Tattnall County Board ofCommissioners fixed the property tax levy for the 2006 tax digest year (calendar year) on September 11, 2006 (levy date). Taxes were due on December 20, 2006 (lien date). Taxes collected within the current fiscal year or within 60 days after year-end on the 2006 tax digest are reported as revenue in the governmental funds for fiscal year 2007. The Tattnall County Tax Commissioner 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, 2007, for maintenance and operations amounted to $3,738,659 and for school bonds amounted to $249,934. Tax millage rates levied for the 2006 tax year (calendar year) for the Tattnall County Board of Education were as follows (a mill equals $1 per thousand dollars of assessed value): School Operations School Bonds 12.269 mills .800 mills 13.069 mills - 14 - TATTNALL COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007 EXHIBIT "I" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES SALES TAXES Special Purpose Local Option Sales Tax, at the fund reporting level, during the year amounted to $1,768,504 and is to be used for capital outlay for educational purposes or debt service. This sales tax was authorized by local referendum and the sales tax must be re-authorized at least every five years. INVENTORIES FOOD INVENTORIES On the basic financial statements, inventories of donated food commodities used in the preparation ofmeals are reported at their Federally assigned value and purchased foods inventories are reported 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 ofart. During the fiscal year under review, no events or changes in circumstances affecting a capital asset that may indicate impairment were known to the School District. Capitalization thresholds and estimated useful lives of capital assets reported in the District-wide statements are as follows: Capitalization Policy Estimated Useful Life Land Land Improvements Buildings and Improvements Equipment Any Amount $ 5,000 $ 5,000 $ 5,000 NIA 15 years 10 to 50 years 5 to 15 years - 15 - TATTNALL COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007 EXHIBIT "I" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Depreciation is used to allocate the actual or estimated historical cost of all capital assets over estimated useful lives. GENERAL OBLIGATION BONDS The School District issues general obligation bonds to provide funds for the acquisition and construction of major capital facilities. Bond issuance costs are recognized in the financial statements during the fiscal year bonds are issued. In addition, general obligation bonds have been issued to refund existing general obligation bonds. General obligation bonds are direct obligations and pledge the full faith and credit of the government. The outstanding amount of these bonds is recorded in the Statement of Net Assets. NET ASSETS The School District's net assets in the District-wide Statements are classified as follows: Invested in capital assets, net of related debt - This represents the School District's total investment in capital assets, net ofoutstanding debt obligations related to those capital assets. To the extent debt has been incurred but not yet expended for capital assets, such amounts are not included as a component of invested in capital assets, net of related debt. Restricted net assets - These represent resources for which the School District is legally or contractually obligated to spend resources for bus replacement, continuation of Federal programs, debt service and capital projects in accordance with restrictions imposed by external third parties. Unrestricted net assets - Unrestricted net assets represent resources derived from property taxes, sales taxes, grants and contributions not restricted to specific programs, charges for services, and miscellaneous revenues. These resources are used for transactions relating to the educational and general operations of the School District, and may be used at the discretion of the Board to meet current expenses for those purposes. Note 3: DEPOSITS AND INVESTMENTS COLLATERALIZATION OF DEPOSITS Official Code of Georgia Annotated (OCGA) Section 45-8-12 provides that there shall not be on deposit at any time in any depository for a time longer than ten days a sum of money which has not been secured by surety bond, by guarantee of insurance, or by collateral. The aggregate ofthe face value of such surety bond and the market value of securities pledged shall be equal to not less than 110 percent ofthe public funds being secured after the deduction ofthe amount ofdeposit insurance. Ifa depository elects the pooled method (OCGA 45-8-13.1) the aggregate ofthe market value ofthe securities pledged to secure a pool ofpublic funds shall be not less than 110 percent ofthe daily pool balance. At June 30, $45,623 ofdeposits were not secured by surety bond, insurance or collateral as - 16 - TATTNALL COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007 EXHIBIT "I" Note 3: DEPOSITS AND INVESTMENTS 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 (7) Bonds, bills, notes, certificates of indebtedness, or other obligations of a subsidiary corporation of the United States government, which are fully guaranteed by the United States government both as to principal and interest or debt obligations issued by the Federal Land Bank, the Federal Home Loan Bank, the Federal Intermediate Credit Bank, the Central Bank for Cooperatives, the Farm Credit Banks, the Federal Home Loan Mortgage Association, and the Federal National Mortgage Association. CATEGORIZATION OF DEPOSITS At June 30, 2007, the bank balances were $3,211,376. The amounts of the total uninsured bank balances are classified into three categories of custodial credit risk: Category 1 - Uncollateralized, Category 2 - Cash collateralized with securities held by the pledging financial institution, or Category 3 - Cash collateralized with securities held by the pledging financial institution's trust department or agent but not in the School District's name. The School District's uninsured deposits are classified by custodial credit risk category at June 30, 2007, as follows: - 17 - TATTNALL COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007 EXHIBIT "I" Note 3: DEPOSITS AND INVESTMENTS Custodial Credit Risk Category Bank Balance 1 $ 45,623 2 2,422,142 3 0 Total $ 2,467.765 CATEGORIZATION OF INVESTMENTS The School District's investments as of June 30, 2007, are presented below. All investments are presented by investment type and debt securities are presented by maturity. Investment Type Fair Value Investment Maturity Less Than 1 Year Debt Securities Federal National Mortgage Association Discount Notes $ 1,095,149 $ 1,095,149 Investment Pools Office of Treasury and Fiscal Services Georgia Fund 1 5,228,406 Unclassified Deferred Compensation Plan Pooled Investments 386,850 Total Investments $ 6,710.405 The Local Government Investment Pool administered by the State of Georgia, Office of Treasury and Fiscal Services is not required to be categorized since the School District did not own any specific identifiable securities in the pool. The investment policy ofthe State of Georgia, Office of Treasury and Fiscal Services for the Local Government Investment Pool (Primary Liquidity Portfolio) does not provide for investment in derivatives or similar investments. Additional information on the Local Government Investment Pool is disclosed in the State of Georgia Comprehensive Annual Financial Report. This audit can be obtained from the Georgia Department of Audits and Accounts at http://www.audits.state.ga.us/internet/searchRpts.html. - 18 - TATTNALL COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007 EXHIBIT "I" Note 3: DEPOSITS AND INVESTMENTS The Primary Liquidity Portfolio consists of Georgia Fund 1 which is not registered with the SEC as an investment company but does operate in a manner consistent with the SEC's Rule 2a-7 of the Investment Company Act of 1940. The investment is valued at the pool's share price, $1.00 per share. The pool is an AAAm rated investment pool by Standard and Poor's. The weighted average maturity of Georgia Fund 1 may not exceed 60 days. The weighted average maturity for Georgia Fund 1 on June 30, 2007, was 15 days. Interest Rate Risk Interest rate risk is the risk that changes in interest rates of debt investment will adversely affect the fair value ofan investment. The School District does not have a formal policy for managing interest rate risk. Custodial Credit Risk Custodial credit risk for investments is the risk that, in the event ofthe failure ofthe counterparty to a transaction, the School District will not be able to recover the value ofthe investment or collateral securities that are in the possession ofan outside party. The School District does not have a formal policy for managing custodial credit risk. At June 30, 2007, $1,095,149 ofthe School District's applicable investments were uninsured, are not registered in the name of the School District and are held by either the counterparty or the counterparty's trust department or agent, but not in the School District's name. Credit Quality Risk Credit quality risk is the risk that an issuer or other counterparty to an investment will not fulfill its obligations. The School District does not have a formal policy for managing credit quality risk. The investments subject to credit quality risk are reflected below: Fair Value Quality Ratings Unrated Debt Securities Federal National Mortgage Association Discount Notes $ 1,095,149 $ 1,095,149 Concentration of Credit Risk Concentration of credit risk is the risk of loss attributed to the magnitude of a government's investment in a single issuer. The School District does not have a formal policy for managing concentration of credit risk. More than 5% of the School District's investments are in Discount Notes. This investment is 16.32% of the School District's total investments. - 19 - TATTNALL COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007 EXHIBIT "I" Note 4: NON-MONETARY TRANSACTIONS The School District receives food commodities from the United States Department of Agriculture (USDA) for school breakfast and lunch programs. These commodities are recorded at their Federally assigned value. See Note 2 - Inventories Note 5: CAPITAL ASSETS The following is a summary of changes in the Capital Assets during the fiscal year: Balances July 1, 2006 Increases Balances Decreases June 30, 2007 Governmental Activities Capital Assets, Not Being Depreciated: Land Construction in Progress $ 169,006 594,500 $ $ 169,006 0 $ 594,500 0 Total Capital Assets Not Being Depreciated $ 763,506 $ 0 $ 594,500 $ 169,006 Capital Assets Being Depreciated Buildings and Building Improvements Equipment Land Improvements $ 29,028,947 $ 4,125,115 2,316,400 1,205,339 338,190 $ 390,192 $ 30,234,286 7,599 4,455,706 2,706,592 Less Accumulated Depreciation for: Buildings and Building Improvements Equipment Land Improvements 7,493,895 2,728,362 1,734.988 654,854 324,376 141,207 3,800 8,148,749 3,048,938 1,876,195 Total Capital Assets, Being Depreciated, Net $ 23,513,217 $ 813,284 $ 3 799 $ 24,322,702 Governmental Activity Capital Assets - Net $ 2~,276,123 $ 813,28~ $ 528,222 $ 24,421,708 Capital assets being acquired under capital leases as of June 30, 2007, are as follows: Governmental Funds Equipment Less: Accumulated Depreciation $ 259,380 129,690 Current year depreciation expense by function is as follows: - 20- TATTNALL COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007 EXHIBIT "I" Note 5: CAPITAL ASSETS Instruction Support Services Educational Media Services General Administration School Administration Maintenance and Operation ofPlant Student Transportation Services Food Services $ 742,644 $ 25,805 1,336 24,937 70,317 170,785 293,180 84,613 $ 1,120.437 Note 6: RESTRICTED ASSETS Special Purpose Local Option Sales Tax (SPLOST), general obligation bond proceeds, Qualified Zone Academy Bonds (QZAB) escrow account, Debt Service Fund and property tax levied specifically for retirement of outstanding bond principal, interest and paying agent's fees (Debt Service Funds) are restricted assets in the Statement of Net Assets because their use is limited by applicable bond covenants or statutory provisions. Restricted assets at June 30, 2007, were as follows: District-wide Capital Projects Bond Proceeds Debt Service Funds Restricted Cash and Cash Equivalents: Debt Services Capital Acquisitions Restricted Investments: Debt Services Capital Acquisitions $ 540,319 $ 1,186 $ 2,025,820 $ 4,297,725 Note 7: RISK MANAGEMENT The School District is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors or omissions; job related illness or injuries to employees; acts of God and unemployment compensation. The School District has obtained commercial insurance for risk ofloss associated with automobiles. The School District has neither significantly reduced coverage for this risk nor incurred losses (settlements) which exceeded the School District's insurance coverage in any ofthe past three years. - 21 - TATTNALL COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007 EXHIBIT "I" Note7: RISKMANAGEMENT The School District participates in the Georgia School Boards Association Risk and Insurance Management System, a public entity risk pool organized on July I, 1994, to develop and administer a plan to reduce risk of loss on account of general liability, motor vehicle liability, or property damage, including safety engineering and other loss prevention and control techniques, and to administer one or more groups of self-insurance funds, including the processing and defense of claims brought against members ofthe system. The School District pays an annual premium to the system for its general insurance coverage. Additional coverage is provided through agreements by the system with other companies according to their specialty for property, boiler and machinery (including coverage for flood and earthquake), general liability (including coverage for sexual harassment, molestation and abuse), errors and omissions and crime. Payment ofexcess insurance for the system varies by line of coverage. 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. The School District has not incurred any liabilities for unemployment compensation during the past fiscal years. The School District participates in the Georgia School Boards Association Workers' Compensation Fund, a public entity risk pool organized on July 1, 1992, to develop, implement, and administer a program ofworkers' compensation self-insurance for its member organizations. The School District pays an annual premium to the Fund for its general insurance coverage. Additional insurance coverage is provided through an agreement by the Fund with the Safety National Casualty Corporation to provide coverage for potential losses sustained by the Fund in excess of $400,000 loss per occurrence, up to $1,000,000. The School District has purchased surety bonds to provide additional insurance coverage as follows: Position Covered Amount Superintendent All Employees $ 50,000 $ 100,000 Note 8: LONG-TERM DEBT CAPITAL LEASES The Tattnall County Board of Education has entered into various lease agreements for equipment. These lease agreements qualify as capital leases for accounting purposes, and, therefore, have been recorded at the present value ofthe future minimum lease payments as ofthe date oftheir inception. -22 - TATTNALL COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007 EXHIBIT "I" Note 8: LONG-TERM DEBT GENERAL OBLIGATION DEBT OUTSTANDING General Obligation Bonds currently outstanding are as follows: Purpose Interest Rates Amount General Government - Refunding - Series 1999 General Government - Series 2002A General Government - QZAB - Series 2002B General Government - Series 2007 3.10% - 4.00% 2.79% 0.00% 3.65% $ 970,000 1,045,000 2,000,000 4,500,000 $ 8,515.000 The changes in Long-Term Debt during the fiscal year ended June 30, 2007, were as follows: Governmental Funds General Capital Obligation Leases Bonds Total Balance July 1, 2006 $ 97,380 $ 4,810,000 $ 4,907,380 Additions G.O. Bonds 4,500,000 4,500,000 Deductions Debt Retired 80,307 795,000 875,307 Balance June 30, 2007 $ 17,073 $ 8,515.000 $ 8,532,073 Portion of Long-Term Debt Due within One Year $ 17,073 $ 825,000 $ 842,073 At June 30, 2007, payments due by fiscal year which includes principal and interest for these items are as follows: Fiscal Year Ended June 30 Capital Leases Principal Interest 2008 $ 17.073 $====1-,0=8==3 -23 - TATTNALL COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007 EXHIBIT "I" Note 8: LONG-TERM DEBT Fiscal Year Ended June 30 General Obligation Debt Principal Interest 2008 2009 2010 2011 2012 2013 - 2017 $ 825,000 $ 855,000 1,170,000 870,000 900,000 3,895,000 246,921 198,044 162,411 117,895 85,593 69,806 Total Principal and Interest $ 8,515,000 $ 880,670 Note 9: ON-BEHALF PAYMENTS The School District has recognized revenues and costs in the amount of $536,677 for health insurance and retirement contributions paid on the School District's behalf by the following State Agencies. Georgia Department of Education Paid to the Georgia Department of Community Health For Health Insurance of Non-Certified Personnel In the amount of $532,372 Office of Treasury and Fiscal Services Paid to the Public School Employees Retirement System For Public School Employees Retirement (PSERS) Employer's Cost In the amount of $4,305 Note 10: SIGNIFICANT CONTINGENT LIABILITIES Amounts received or receivable principally from the Federal government are subject to audit and review by grantor agencies. This could result in requests for reimbursement to the grantor agency for any costs which are disallowed under grant terms. The School District believes that such disallowances, if any, will be immaterial to its overall financial position. The School District is a defendant in various legal proceedings pertaining to matters incidental to the performance ofroutine School District operations. The ultimate disposition ofthese proceedings is not presently determinable, but is not believed to be material to the basic financial statements. - 24- TATTNALL COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007 EXHIBIT "I" Note 11: RETIREMENT PLANS TEACHERS RETIREMENT SYSTEM OF GEORGIA (TRS) TRS PLAN DESCRIPTION Substantially all teachers, administrative and clerical personnel employed by local school systems are covered by the Teachers Retirement System of Georgia (TRS), which is a cost-sharing multiple employer defined benefit pension plan. TRS provides service retirement, disability retirement and survivors benefits for its members in accordance with State statute. The Teachers Retirement System of Georgia issues a separate stand alone financial audit report and a copy can be obtained from the Georgia Department of Audits and Accounts. TRS CONTRIBUTIONS REQUIRED AND MADE Employees ofthe School District who are covered by TRS are required by State statute to contribute 5% of their gross earnings to TRS. The School District makes monthly employer contributions to TRS at rates adopted by the TRS Board of Trustees in accordance with State statute and as advised by their independent actuary. The required employer contribution rate is 9.28% and employer contributions for the current fiscal year and the preceding two fiscal years are as follows: Fiscal Year Percentage Contributed Required Contribution 2007 2006 2005 100% 100% 100% $ 1,484,202 $ 1,362,255 $ 1,310,792 - 25 - (This page left intentionally blank) TATTNALL COUNTY BOARD OF EDUCATION GENERAL FUND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL YEAR ENDED JUNE 30, 2007 SCHEDULE "1" REVENUES Property Taxes Sales Taxes State Funds Federal Funds Charges for Services Investment Earnings Miscellaneous Total Revenues EXPENDITURES Current Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Enterprise Operations Community Services Food Services Operation Total Expenditures Excess of Revenues over (under) Expenditures OTHER FINANCING SOURCES {USES} Other Sources Other Uses Total Other Financing Sources (Uses) Net Change in Fund Balances Fund Balances - Beginning Adjustments NONAPPROPRIATED BUDGETS ORIGINAL{1} FINAL{1l ACTUAL AMOUNTS $ 3,704,888 $ 3,704,888 $ 3,749,249 70,000 70,000 67,876 17,563,600 17,880,935 19,591,827 1,266,050 4,617,227 4,151,638 368,300 368,300 1,244,212 49,000 49,000 65,698 237,000 237,000 205,133 $ 23,258,838 $ 26,927,350 $ 29,075,633 $ 14,457,154 $ 16,761,048 $ 18,799,305 1,023,744 591,956 479,711 672,272 1,503,515 233,238 1,856,080 1,438,138 17,500 82,331 1,686,092 1,185,313 1,075,723 479,711 835,935 1,522,374 233,238 1,856,080 1,768,942 17,500 21,280 82,331 2,115,600 1,327,257 668,249 491,601 1,080,851 1,540,908 190,696 1,897,679 1,466,030 18,392 19,701 252,953 98,238 1,821,086 $ 24,041,731 $ 27,955,075 $ 29,672,946 $ -782,893 $ -1,027,725 $ -597 313 $ 154,250 $ 154,250 -154 250 -154,250 $ 0 $ 0 $ -782,893 $ -1,027,725 $ -597,313 2,067,786 2,067,786 2,147,414 -27 820 -27,820 Fund Balances - Ending $ 1,257,073 $ 1,012,241 $ 1,550,101 Notes to the Schedule of Revenues, ExQenditures and Changes in Fund Balances Budget and Actual (1) Original and Final Budget amounts do not include budgeted revenues or expenditures of the various principal accounts. The accompanying schedule of revenues, expenditures and changes in fund balances budget and actual is presented on the modified accrual basis of accounting which is the basis of accounting used in the presentation of the fund financial statements. See notes to the basic financial statements. -27- TATTNALL COUNTY BOARD OF EDUCATION SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS YEAR ENDED JUNE 30, 2007 SCHEDULE "2" FUNDING AGENCY PROGRAM/GRANT Agriculture, U. S. Department of Child Nutrition Cluster Pass-Through From Georgia Department of Education Food Services School Breakfast Program National School Lunch Program Total Child Nutrition Cluster Other Programs Pass-Through From Georgia Department of Education Food Donation (1) Total U. S. Department of Agriculture Education, U. S. Department of Special Education Cluster Pass-Through From Georgia Department of Education Special Education Grants to States Preschool Grants Total Special Education Cluster Other Programs Pass-Through From Georgia Department of Education English Language Acquisition Grants Enhancing Education Through Technology Program Improving Teacher Quality State Grants Migrant Education Rural Education State Grants for Innovative Programs TiUe I Grants to Local Educational Agencies Vocational Education - Basic Grants to States Total U.S. Department of Education Health and Human Services, U. S. Department of Pass-Through From Wheeler County Board of Education Adolescent Family Life - Demonstration Projects CFDA NUMBER PASSTHROUGH ENTITY ID NUMBER EXPENDITURES IN PERIOD . 10.553 . 10.555 N/A N/A $ $ (2) 1,599,552 1,599,552 10.550 N/A $ 127 007 1,726,559 84.027 84.173 N/A $ N/A $ 664,429 25,282 689,711 64.365 64.318 64.367 64.011 64.358 84.298 64.010 84.048 NIA N/A N/A NIA N/A N/A NIA N/A $ 19,497 38,778 199,003 168,344 89,049 8,774 1,478,259 48400 2,739,815 93.995 N/A $ 27447 Total Federal Financial Assistance NIA = Not Available Notes to the Schedule of Expenditures of Federal Awards (1) The amount shown for the Food Donation Program represents the Federally assigned value of nonmonetary assistance for donated commodities received and/or consumed by the School District during the current fiscal year. (2) Expenditures for the funds earned on the School Breakfast Program ($371,898) were not maintained separately and are included in the 2007 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 Tattnall 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. -28- $=~-4=,4=-9iii3=,8_2,.,1 TATTNALL COUNTY BOARD OF EDUCATION SCHEDULE OF STATE REVENUE YEAR ENDED JUNE 30, 2007 SCHEDULE "3" AGENCY/FUNDING GRANTS Bright From the Start: Georgia Department of Early Care and Learning Pre-Kindergarten Program Education, Georgia Department of Quality Basic Education Direct Instructional Cost Kindergarten Program Kindergarten Program - Early Intervention Program Primary Grades (1-3) Program Primary Grades - Early Intervention (1-3) Program Upper Elementary Grades (4-5) Program Upper Elementary Grades - Early Intervention (4-5) Program Middle School (6-8) Program High School General Education (9-12) Program Vocational Laboratory (9-12) Program Students with Disabilities Gifted Student - Category VI Remedial Education Program Alternative Education Program English Speakers of Other Languages (ESOL) Media Center Program 20 Days Additional Instruction Staff and Professional Development Indirect Cost Central Administration School Administration Facility Maintenance and Operations Categorical Grants Pupil Transportation Regular Bus Replacement Sparsity - Alternative Program Nursing Services Principal Supplements Migrant Education Education Equalization Funding Grant Food Services Vocational Education Amended Formula Adjustment Other State Programs Health Insurance High School Graduation Coach Middle School Remediation and Intervention National Teacher Certification Preschool Handicapped Program Pupil Transportation - State Bonds Special Education Low Incidence Grant Statewide K-8 Reading and Mathematics Program Technology/Career Education Supervision Virtual Schools State Grant Georgia State Financing and Investment Commission Reimbursement on Construction Projects Office of Treasury and Fiscal Services Public School Employees Retirement CONTRACT Human Resources, Georgia Department of Family Connection See notes to the basic financial statements. -29- GOVERNMENTAL FUND TYPES CAPITAL GENERAL PROJECTS FUND FUND TOTAL $ 902,604 $ 902,604 1,153,030 98,108 2,386,282 485,944 1,136,636 160,563 1,973,167 1,587,669 693,856 1,742,848 338,467 83,831 154,984 142,073 343,852 107,986 64,080 482,291 847,587 860,137 581,227 58,337 20,000 72,119 10,580 10,078 2,094,093 93,986 115,981 -304,802 532,372 40,075 3,119 49,457 75,673 250,000 19,001 51,944 18,859 -450 1,153,030 98,108 2,386,282 485,944 1,136,636 160,563 1,973,167 1,587,669 693,856 1,742,848 338,467 83,831 154,984 142,073 343,852 107,986 64,080 482,291 847,587 860,137 581,227 58,337 20,000 72,119 10,580 10,078 2,094,093 93,986 115,981 -304,802 532,372 40,075 3,119 49,457 75,673 250,000 19,001 51,944 18,859 -450 $ 693,460 4,305 693,460 4,305 49878 49878 $ 19,5911827 $ 693,460 $ 2012851287 TATTNALL COUNTY BOARD OF EDUCATION SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS YEAR ENDED JUNE 30, 2007 SCHEDULE "4" PROJECT Retiring previously incurred general obligation debt of the School District in a maximum amount of $500,000 and thereby reduce ad valorem property taxes by such amount. Funding of an Escrow Account to pay a portion of previously incurred general obligation debt and acquiring, constructing, repairing, improving, retrofitting, upgrading and equipping buildings and facilities in the Tattnall County School District, useful or desirable in connection therewith including acquiring any necessary property therefore, both real and personal, specifically, all schools in the Tattnall County School District, including the Tattnall County High School, Glennville Middle School, Collins Middle School, Reidsville Middle School, Collins Elementary School, Reidsville Elementary School and Glennville Elementary School, such improvements and renovations to include paving, additional classrooms, new roofs and covered walkways, updated electrical wiring, new kitchen and cafeteria, new air conditioning units, new floor coverings, renovation of physical education facilities and purchase of new technology equipment and school buses at a maximum cost of $6,500,000. ORIGINAL ESTIMATED COST (1) CURRENT ESTIMATED COSTS (2) AMOUNT EXPENDED IN CURRENT YEAR (3) AMOUNT EXPENDED IN PRIOR YEARS (3) PROJECT STATUS $ 500,000 $ 500,000 Ongoing 6,500,000 9,000,000 $ 1,551,210 $ 6,289,300 Ongoing $ 7,000,000 $ 9,500,000 $ 1,551,210 $ 6,289,300 (1) The School District's original cost estimate as specified in the resolution calling for the imposition of the Local Option Sales Tax. (2) The School District's current estimate of total cost for the projects. Includes all cost from project inception to completion. (3) The voters of Tattnall County approved the imposition of a 1% sales tax to fund the above projects and retire associated debt. Amounts expended for these projects may include sales tax proceeds, state, local property taxes and/or other funds over the life of the projects. See notes to the basic financial statements. - 30- TATTNALL COUNTY BOARD OF EDUCATION GENERAL FUND - QUALITY BASIC EDUCATION PROGRAM (QBE) ALLOTMENTS AND EXPENDITURES - BY PROGRAM YEAR ENDED JUNE 30, 2007 SCHEDULE "5" DESCRIPTION Direct Instructional Programs Kindergarten Program Kindergarten Program-Early Intervention Program Primary Grades (1-3) Program Primary Grades-Early Intervention (1-3) Program Upper Elementary Grades (4-5) Program Upper Elementary Grades-Early Intervention (4-5) Program Middle School (6-8) Program High School General Education (9-12) Program Vocational Laboratory (9-12) Program Students with Disabilities Category I Category II Category Ill Category IV CategoryV Gifted Student - Category VI Remedial Education Program Alternative Education Program English Speakers of Other Languages (ESOL) TOTAL DIRECT INSTRUCTIONAL PROGRAMS Media Center Program Staff and Professional Development ALLOTMENTS FROM GEORGIA DEPARTMENT OF EDUCATION (1) (2) ELIGIBLE QBE PROGRAM COSTS SALARIES OPERATIONS TOTAL $ 1,247,254 $ 1,290,425 $ 13,204 $ 1,303,629 116,945 129,502 1,049 130,551 2,575,215 2,640,431 48,870 2,689,301 528,221 461,719 1,208 462,927 1,228,376 1,534,369 16,908 1,551,277 177,587 2,181,766 1,738,123 751,635 1,893,137 362,977 86,791 170,965 157 420 88,750 2,705,387 2,113,901 623,764 176,211 220,381 683,181 74,119 443,077 331,729 75 188,380 182,330 33,592 66,689 93,272 2,326 13,554 14,073 477 88,750 2,738,979 2,180,590 717,036 176,211 220,381 685,507 74,119 443,077 345,283 75 202,453 182,807 $ 13,216,412 $ 13,887,731 $ 305,222 $ 14,192,953 374,523 70577 425,184 16,808 47,858 63,720 473,042 80,528 TOTAL QBE FORMULA FUNDS $ 13,661,512 $ 14,329,723 $ 416,800 $ 14,746,523 (1) Comprised of State Funds plus Local Five Mill Share. (2) Allotments do not include the impact of the State amended formula adjustment. See notes to the basic financial statements. - 31 - SECTION II COMPLIANCE AND INTERNAL CONTROL REPORTS Russell W. Hinton STATE AUDITOR (404) 656-2174 DEPARTMENT OF AUDITS AND ACCOUNTS 270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400 July 14, 2008 Honorable Sonny Perdue, Governor Members ofthe General Assembly Members of the State Board of Education and Superintendent and Members of the Tattnall County Board of Education REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS Ladies and Gentlemen: We have audited the financial statements of the governmental activities, each major fund, and the aggregate remaining fund information ofTattnall County Board ofEducation as ofand for the year ended June 30, 2007, which collectively comprise Tattnall County Board of Education's basic financial statements and have issued our report thereon dated July 14, 2008. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Internal Control Over Financial Reporting In planning and performing our audit, we considered Tattnall County Board ofEducation's internal control over financial reporting as a basis for designing our auditing procedures for the purpose of expressing our opinions on the financial statements, but not for the purpose ofexpressing an opinion on the effectiveness of the Tattnall County Board of Education's internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness of the Tattnall County Board of Education's internal control over financial reporting. Our consideration ofinternal control over financial reporting was for the limited purpose described in the preceding paragraph and would not necessarily identify all deficiencies in internal control over financial reporting that might be significant deficiencies or material weaknesses. However, as discussed below, we identified certain deficiencies in internal control over financial reporting that we consider to be significant deficiencies. 2007YB-40 A control deficiency exists when the design or operation ofa control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect misstatements on a timely basis. A significant deficiency is a control deficiency, or combination of control deficiencies, that adversely affect the Tattnall County Board of Education's ability to initiate, authorize, record, process, or report financial data reliably in accordance with generally accepted accounting principles such that there is more than a remote likelihood that a misstatement of the Tattnall County Board of Education's financial statements that is more than inconsequential will not be prevented or detected by the Tattnall County Board ofEducation's internal control. We consider items FS-7321-07-01, FS-7321-07-02, FS-7321-07-03, FS-7321-07-04, FS-7321-07-05 and FS-7321-07-06 in the accompanying Schedule ofFindings and Questioned Costs to be significant deficiencies in internal control over financial reporting. A material weakness is a significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood that a material misstatement ofthe financial statements will not be prevented or detected by the Tattnall County Board of Education's internal control. Our consideration of the internal control over financial reporting was for the limited purpose described in the first paragraph ofthis section and would not necessarily disclose all deficiencies in internal control that might be significant deficiencies and, accordingly, would not necessarily disclose all significant deficiencies that are also considered to be material weaknesses. However, of the significant deficiencies described above, we consider item FS-7321-07-06 to be a material weakness. Compliance and Other Matters As part of obtaining reasonable assurance about whether Tattnall County Board of Education's financial statements are free of material misstatement, we performed tests of its compliance with certain provisions oflaws, regulations, contracts and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. We noted certain matters that we have reported to management of Tattnall County Board of Education in a separate letter dated July 14, 2008. Tattnall County Board ofEducation's response to the findings identified in our audit is described in the accompanying Schedule ofManagement's Responses. We did not audit Tattnall County Board of Education's response and, accordingly, we express no opinion on it. 2007YB-40 This report is intended solely for the information and use of the management, members of the Tattnall County Board ofEducation, Federal awarding agencies and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties. Respectfully submitted, ~t~~-:-2~ State Auditor RWH:gp 2007YB-40 Russell W. Hinton STATE AUDITOR (404) 656-2174 DEPARTMENT OF AUDITS AND ACCOUNTS 270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400 July 14, 2008 Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education and Superintendent and Members of the Tattnall County Board of Education REPORT ON COMPLIANCE WITH REQUIREMENTS APPLICABLE TO EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH 0MB CIRCULAR A-133 Ladies and Gentlemen: Compliance We have audited the compliance of Tattnall County Board of Education with the types of compliance requirements described in the U.S. Office ofManagement and Budget (0MB) Circular A-133 Compliance Supplement that are applicable to each ofits major Federal programs for the year ended June 30, 2007. Tattnall County Board ofEducation's major Federal programs are identified in the Summary of Auditor's Results Section of the accompanying Schedule of Findings and Questioned Costs. Compliance with the requirements of laws, regulations, contracts and grants applicable to each of its major Federal programs is the responsibility of Tattnall County Board of Education's management. Our responsibility is to express an opinion on Tattnall County Board of Education's compliance based on our audit. We conducted our audit ofcompliance in accordance with auditing standards generally accepted in the United States ofAmerica; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General ofthe United States; and 0MB Circular A133, Audits of States, Local Governments, and Non-Profit Organizations. Those standards and 0MB Circular A-133 require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major Federal program occurred. An audit includes examining, on a test basis, evidence about the Tattnall County Board ofEducation's compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Our audit does not provide a legal determination on Tattnall County Board of Education's compliance with those requirements. 2007SA-10 In our opinion, the Tattnall County Board of Education complied, in all material respects, with the requirements referred to above that are applicable to each ofits major Federal programs for the year ended June 30, 2007. Internal Control Over Compliance The management of Tattnall County Board of Education is responsible for establishing and maintaining effective internal control over compliance with requirements of laws, regulations, contracts and grants applicable to Federal programs. In planning and performing our audit, we considered Tattnall County Board ofEducation's internal control over compliance with requirements that could have a direct and material effect on a major Federal program in order to determine our auditing procedures for the purpose ofexpressing our opinion on compliance, but not for the purpose ofexpressing an opinion on the effectiveness ofinternal control over compliance. Accordingly, we do not express an opinion on the effectiveness ofthe Tattnall County Board of Education's internal control over compliance. A control deficiency in an entity's internal control over compliance exists when the design or operation of a control does not allow management or employees, in the normal course ofperforming their assigned functions, to prevent or detect noncompliance with a type ofcompliance requirement of a Federal program on a timely basis. A significant deficiency is a control deficiency, or combination ofcontrol deficiencies, that adversely affects the entity's ability to administer a Federal program such that there is more than a remote likelihood that noncompliance with a type of compliance requirement of a Federal program that is more than inconsequential will not be prevented or detected by the entity's internal control. A material weakness is a significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood that material noncompliance with a type of compliance requirement of a Federal program will not be prevented or detected by the entity's internal control. Our consideration ofthe internal control over compliance was for the limited purpose described in the first paragraph of this section and would not necessarily identify all deficiencies in internal control that might be significant deficiencies or material weaknesses. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses, as defined above. This report is intended solely for the information and use of the management, members of the Tattnall County Board ofEducation, Federal awarding agencies and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties. Respectfully submitted, RWH:gp 2007SA-10 sell W. Hinton, CPA, CGFM State Auditor SECTION III AUDITEE'S RESPONSE TO PRIOR YEAR FINDINGS AND QUESTIONED COSTS TATTNALL COUNTY BOARD OF EDUCATION AUDITEE'S RESPONSE SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2007 PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS FINDING CONTROL NUMBER AUDITEE'S RESPONSE/STATUS SEE AUDITOR'S COMMENTS FS-7321-05-01 Further Action Not Warranted FS-7321-05-02 Further Action Not Warranted FS-7321-06-01 Further Action Not Warranted (1) FS-7321-06-02 Partially Resolved - See Corrective Action/Responses FS-7321-06-03 Unresolved - See Corrective Action/Responses FS-7321-06-04 Unresolved - See Corrective Action/Responses FS-7321-06-05 Unresolved - See Corrective Action/Responses FS-7321-06-06 Unresolved - See Corrective Action/Responses CORRECTIVE ACTION/RESPONSES CASH AND CASH EQUIVALENTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Controls over School Activity Accounts Finding Control Number: FS-7321-06-02 We concur with this finding. On June 30, 2006, new policies and procedures for the student activity funds were put into process that addressed the current findings. Within that time there have been several position changes including two different financial officers. Beginning July, 2007, the policies that were made on June 30, 2006 will be reinforced. Along with the new financial officer, the central office bookkeepers and the school bookkeepers will have a meeting to ensure that proper procedures will be carried out. However, due to current budget constraints the School District is unable to have additional administrative staff to address the concern of separation of duties. CASH AND CASH EQUIVALENTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS GENERAL LEDGER Inadequate Internal Controls over Central Office Accounts Finding Control Number: FS-7321-06-03 We concur with this finding. The School District will define protocol to ensure the proper management of financial transactions at the central office level. Proper separation of responsibilities will be clearly delineated amongst staff members. Procedures will be implemented immediately to ensure that all payments are made from original invoices. - 1- TATTNALL COUNTY BOARD OF EDUCATION AUDITEE'S RESPONSE SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2007 PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS CORRECTIVE ACTION/RESPONSES CASH AND CASH EQUIVALENTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS GENERAL LEDGER Inadequate Internal Controls over Central Office Accounts Finding Control Number: FS-7321-06-03 Any payments process from copies will be indicated by the accounts payable staff. We will also implement procedures to be sure that all vouchers contain purchase approvals. Procedures will be implemented beginning July, 2007. ACCOUNTING CONTROLS (OVERALL) Inadequate General Controls Finding Control Number: FS-7321-06-04 We concur with this finding. The School District will establish protocols to alleviate weaknesses in data control in the financial information system. Procedures will be established to ensure proper usage ofpassword controls. Procedures will be implemented beginning July, 2007. EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Controls over Procurement Card Transactions Finding Control Number: FS-7321-06-05 We concur with this finding. The School District will establish written policies and procedures to ensure proper usage ofprocurement cards. Protocol will be established to record the issuance/return of procurement cards, and to ensure that expenditures are properly authorized. These procedures will be invoked beginning in July, 2007. EXPENDITURES/LIABILITIES/DISBURSEMENTS Failure to Follow State Travel Regulations Finding Control Number: FS-7321-06-06 We concur with this finding. The School District revised the system travel regulations during 2006-2007 school years. These procedures will be reviewed in 2007 with the system personnel to ensure compliance. -2- TATTNALL COUNTY BOARD OF EDUCATION AUDITEE'S RESPONSE SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2007 PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS AUDITOR'S COMMENTS (1) Findings/internal control deficiencies ofthis nature, that are not deemed significant deficiencies or material weaknesses and do not require reporting in the audit report in accordance with Statements on Auditing Standards (SAS) 112 or Governmental Auditing Standards (Yellow Book), will be communicated in a management letter in subsequent periods. PRIOR YEAR FEDERAL AWARD FINDINGS AND QUESTIONED COSTS FINDING CONTROL NUMBER AUDITEE'S RESPONSE/STATUS SEE AUDITOR'S COMMENTS FA-7321-06-01 Further Action Not Warranted (1) AUDITOR'S COMMENTS (1) Findings/internal control deficiencies ofthis nature, that are not deemed significant deficiencies or material weaknesses and do not require reporting in the audit report in accordance with Office ofManagement and Budget (0MB) Circular A-133, will be communicated in a management letter in subsequent periods. -3- SECTION IV FINDINGS AND QUESTIONED COSTS TATTNALL COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2007 I SUMMARY OF AUDITOR'S RESULTS 1. Type of Report Issued on the Financial Statements The auditor's opinion on the Tattnall County Board ofEducation's financial statements was unqualified. 2. Significant Deficiencies in Internal Control Disclosed by the Audit ofthe Financial Statements The audit report for the Tattnall County Board of Education disclosed financial statement significant deficiencies related to the following control categories. Cash and Cash Equivalents Revenues/Receivables/Receipts Capital Assets Accounting Controls (Overall) Expenditures/Liabilities/Disbursements General Ledger Financial Reporting Of the significant deficiencies described above, Financial Reporting is considered to be a material weakness. 3. Noncompliance Material to the Financial Statements The audit of the Tattnall County Board of Education disclosed no instances of noncompliance that were deemed to be material to the financial statements. 4. Significant Deficiencies in Internal Control Over Major Programs The audit report for the Tattnall County Board ofEducation did not disclose any significant deficiencies in internal control over major programs. 5. Type of Report Issued on Compliance for Major Programs The auditor's opinion on the Tattnall County Board ofEducation's report on compliance with requirements applicable to major programs was unqualified. 6. Audit Findings Required to be Reported by Section .5 I0(a) of 0MB Circular A-133 The Tattnall County Board ofEducation's audit did not disclose audit findings required to be reported by section .510(a) of 0MB Circular A-133. 7. Major Programs Federal awards audited as major programs are as follows: 10.553 Food Services - School Breakfast Program 10.555 Food Services - National School Lunch Program 8. Type "A" Program Dollar Threshold The dollar threshold for type "A" programs was $300,000. - 1- TATTNALL COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2007 I SUMMARY OF AUDITOR'S RESULTS 9. Low Risk Auditee The Tattnall County Board of Education qualified as a low risk auditee as defined by Section .530 of 0MB Circular A-133. II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS CASH AND CASH EQUIVALENTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Controls over School Activity Accounts Significant Deficiency Finding Control Number: FS-7321-07-01 Condition: This is a repeat finding (FS-7321-06-02 and FS-7321-05-01) from the years ended June 30, 2006, and June 30, 2005, respectively. The accounting procedures of the School District were insufficient to provide for adequate internal controls over the school activity accounts. Criteria: The School District's management is responsible for designing and maintaining internal controls that provide reasonable assurance that transactions are processed according to established procedures. Questioned Cost: NIA Information: Cash and Cash Equivalents The bank account for Tattnall County High School was not properly reconciled to the general ledger at June 30, 2007. Revenues/Receivables/Receipts The cash receipts and deposit preparation functions were not separated from the record keeping and cash custody functions. Based on a review of fifteen items, all fifteen receipts lacked adequate supporting documentation and two of these receipts were not deposited in a timely manner. Expenditures/Liabilities/Disbursements Based on a review of twenty-five vouchers, two vouchers lacked complete purchase orders and nine vouchers failed to contain mvmces. -2- TATTNALL COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2007 II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS CASH AND CASH EQUIVALENTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Controls over School Activity Accounts Significant Deficiency Finding Control Number: FS-7321-07-01 Cause: These deficiencies were a result of management's decision to limit the number ofadministrative staffmade responsible for accounting functions and management's failure to ensure that internal controls were established, implemented and functioning at the school level. Effect: Errors and/or irregularities may not be detected in a timely manner. Recommendation: The School District should implement procedures to ensure that the key accounting functions of custody, record keeping and authorization are separated and/or utilize management oversight for these incompatible activities. In addition, management should monitor controls to provide reasonable assurance that transactions are processed according to established procedures and implement procedures deemed necessary to strengthen internal controls over the accounting functions. CASH AND CASH EQUIVALENTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS GENERAL LEDGER Inadequate Internal Controls at the Central Office Significant Deficiency Finding Control Number: FS-7321-07-02 Condition: This is a repeat finding (FS-7321-06-03) from the year ended June 30, 2006. The accounting procedures ofthe School District were insufficient to provide for adequate internal controls at the Central Office. Criteria: The School District's management is responsible for designing and maintaining internal controls that provide reasonable assurance that transactions are processed according to established procedures. Questioned Cost: NIA -3 - TATTNALL COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2007 II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS CASH AND CASH EQUIVALENTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS GENERAL LEDGER Inadequate Internal Controls at the Central Office Significant Deficiency Finding Control Number: FS-7321-07-02 Information: Cash and Cash Equivalents The bank reconciliations were not reviewed by an administrator not directly connected with cash operations. The bank reconciliation function was not separated from the record keeping and voucher payment functions for the Capital Projects and Debt Service Funds. The bank account for SPLOST II Capital Projects was not properly reconciled to the general ledger at June 30, 2007, resulting in a variance of $159,649.60 between the reconciled balance and the general ledger balance. This variance was caused by journal entry errors made by the Board. Audit adjustments were proposed and made to correct these errors. Revenues/Receivables/Receipts Deposit preparation was not separated from the record keeping and the cash custody functions. Expenditures/Liabilities/Disbursements The check signing function was not separated from the check preparation function. Based on a review of fifty-six vouchers, the following deficiencies were noted: 1. Three vouchers did not contain invoices. 2. Four vouchers did not include purchase orders. 3. One voucher had no evidence for the receipt of goods. 4. One voucher was charged to the wrong account. General Ledger Journal entries reviewed were not signed by the preparer or approved by someone other than the preparer. In addition, they failed to include supporting documentation. -4- TATTNALL COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2007 II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS CASH AND CASH EQUIVALENTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS GENERAL LEDGER Inadequate Internal Controls at the Central Office Significant Deficiency Finding Control Number: FS-7321-07-02 Cause: These deficiencies were a result of management's failure to ensure that internal controls were established, implemented and functioning at the Central Office. Effect: Errors and/or irregularities may not be detected in a timely manner. Recommendation: Management should review the accounting procedures in place, design procedures which would enhance internal controls relative to the above control categories and implement those procedures to strengthen the internal control over these accounting functions. ACCOUNTING CONTROLS (OVERALL) Inadequate Access Controls Significant Deficiency Finding Control Number: FS-7321-07-03 Condition: This is a repeat finding (FS-7321-06-04) from the year ended June 30, 2006. Our examination ofthe School District included a review ofgeneral controls related to their financial information systems. We noted weaknesses in internal controls which we consider relevant to the School District's financial statements. Criteria: Policies and procedures should be in place to reasonably mitigate the risk of loss, manipulation or corruption of data due to internal or external threats. Questioned Cost: NIA Information: Weaknesses in internal control over financial information systems were identified at the School District. Access controls in the Financial Accounting System do not prevent users from accessing accounting functions that are outside oftheir area of responsibility. -5- TATTNALL COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2007 II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS ACCOUNTING CONTROLS (OVERALL) Inadequate Access Controls Significant Deficiency Finding Control Number: FS-7321-07-03 Cause: The School District's management is responsible for designing and maintaining internal controls that restrict access to programs or data. Management did not implement proper policies and controls over access to financial information systems and separation of duties. Effect: Without satisfactory control in place, losses, changes or misuses of data could occur and possibly not be detected in a timely manner. Recommendation: Management should perform a complete risk assessment to identify internal and external threats that could cause loss, manipulation or corruption of data maintained in the financial information system. Policies and procedures should be developed and implemented to address the weaknesses. EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Controls over Credit and Procurement Card Transactions Significant Deficiency Finding Control Number: FS-7321-07-04 Condition: This is a repeat finding (FS-7321-06-05) and (FS-7321-06-06) from the year ended June 30, 2006. School District personnel did not ensure that purchases made with the School District's credit card and procurement cards were properly authorized and documented. Criteria: The School District's management is responsible for designing and maintaining internal controls that provide reasonable assurance that expenditures are allowable and transactions are processed according to established procedures. Questioned Cost: $2,801.93 -6 - TATTNALL COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2007 II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Controls over Credit and Procurement Card Transactions Significant Deficiency Finding Control Number: FS-7321-07-04 Information: Weaknesses in internal controls related to credit card and procurement card usage were noted as follows: The School District did not have a written policy regarding the use of the credit card or procurement cards. There were no procedures in place to ensure that charges were allowable prior to the use of the credit card or procurement cards. The School District did not maintain a log of when the credit card or the procurement cards were issued, returned or to whom the cards were issued. Based on a review of eight credit card statements, the following deficiencies were noted: 1. Three transactions included charges for sales tax. 2. One transaction included parking fees of $432.74 with no receipt to support the charges. 3. Transactions totaling $4,462.07 were incorrectly recorded as other expenditures rather than travel. 4. Gift cards in the amount of $400.00 were purchased and charged to the general fund. 5. Two group meal transactions for $342.97 and two other meal transactions for $83.33 were paid for without the appropriate travel reimbursement claim form. Based on a review of ten procurement card statements, two transactions for $1,542.89 failed to include invoices or itemized receipts and one transaction included charges for sales tax. Cause: These deficiencies were a result of management's failure to ensure that internal controls were established, implemented and functioning with regard to the credit card and procurement cards. Effect: Errors and/or irregularities may occur and not be detected in a timely manner. Recommendation: The School District should establish written policies and procedures to ensure that credit and procurement card expenditures are authorized, documented and utilized for the educational purposes only. In addition, the School District should establish appropriate controls over the issuance and usage of credit and procurement cards. The School District should also review the questioned costs and determine if a reclaim of funds is appropriate. -7- TATTNALL COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2007 II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS CAPITAL ASSETS Failure to Adequately Maintain Capital Assets Significant Deficiency Finding Control Number: FS-7321-07-05 Condition: The School District failed to adequately maintain capital assets records. Criteria: Chapter 37 Fixed Assets of the Financial Management for Georgia Local Units of Administration indicates that School Districts must establish fixed asset policies, define system requirements, implement a fixed assets system and maintain fixed asset inventory records. Questioned Cost: NIA Information: The Capital Assets listing did not agree to the general ledger. The School District's general ledger and financial statements presented for audit included equipment that was overstated by $7,045, equipment depreciation that was overstated by $499,397, land improvements depreciation that was understated by $141,207 and building depreciation that was understated by $311,042 for a net understatement of capital assets of $40,103. Audit adjustments were proposed and made to correct these errors. Cause: The School District failed to properly reconcile the general ledger to the capital assets subsidiary records at fiscal year end. Effect: The failure ofthe School District to adequately maintain and report complete and accurate capital assets can lead to inaccurate internal and external reporting, as well as noncompliance with generally accepted accounting principles. Recommendation: The School District should reconcile the capital assets records to the general ledger at fiscal year end and make appropriate adjustments necessary to ensure that the capital assets are accurately reported. In addition, the School District should ensure that the capital assets records conform to the School District's approved capital assets policy and generally accepted accounting principles. -8- TATINALL COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2007 II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS FINANCIAL REPORTING Inadequate Controls over Financial Reporting Material Weakness Finding Control Number: FS-7321-07-06 Condition: The School District did not have adequate controls in place over the financial statement reporting process. Criteria: Management is responsible for having adequate controls over the financial reporting process, which not only includes proper recording oftransactions to the general ledger, but extends to accurate preparation and presentation ofthe financial statements, including note disclosures. Questioned Cost: NIA Information: The Governmental Accounting Standards Board (GASB) Statement 34 reporting model requires the presentation ofboth fund level and entity-wide level statements in the School District's financial statements. During the audit, numerous correcting entries were proposed by the auditor and accepted by the client to properly present the entity's fund level and entity-wide level financial statements. Cause: The School District did not implement an adequate system ofinternal control over the financial statement reporting process. Effect: The School District did not have adequate controls in place to ensure that the financial statements were properly prepared in accordance with generally accepted accounting principles. Recommendation: The School District should develop and implement internal controls over the financial statement reporting process to ensure that activity is properly recorded in the general ledger; to verify that financial statements (including note disclosures) properly reflect activity reported in the general ledger; and to include a monitoring process to evaluate the accuracy of the financials presented for audit. III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS No matters were reported. -9- SECTIONV MANAGEMENT'S RESPONSES TATTNALL COUNTY BOARD OF EDUCATION SCHEDULE OF MANAGEMENT'S RESPONSES YEAR ENDED JUNE 30, 2007 Finding Control Number: FS-7321-07-01 We concur with this finding. On June 30, 2006, new policies and procedures for the student activity funds were put into process that addressed the current findings. Within that time there have been several position changes including two different financial officers. Beginning July 2007, the policies that were made on June 30, 2006 are being reinforced. Along with the new financial officer, the central office bookkeepers and the school bookkeepers will have a meeting to ensure that proper procedures will be carried out. However, due to current budget constraints the School District is unable to hire additional administrative staff to address the concern of separation of duties. Finding Control Number: FS-7321-07-02 We concur with this finding. The School District has defined protocol to ensure the proper management offinancial transactions at the central office level. Proper separation ofresponsibilities are clearly delineated amongst staffmembers. Procedures have been implemented to ensure that all payments are made from original invoices. Any payments processed from copies will be indicated by the accounts payable staff. We have also implemented procedures to be sure that all vouchers contain purchase approvals. Procedures were implemented beginning July, 2007. The Board will make a plan to have the new Assistant Superintendent, Dr. Gina Williams, review and approve all journal entries and bank reconciliations. Finding Control Number: FS-7321-07-03 We concur with this finding. The School District has established protocols to alleviate weaknesses in data control in the financial information system. Procedures will be established to ensure proper usage ofpassword controls. Procedures will be implemented beginning July, 2007. Finding Control Number: FS-7321-07-04 We concur with this finding. The School District has established written policies and procedures to ensure proper usage ofprocurement cards. Protocol was established to record the issuance/return of procurement cards, and to ensure that expenditures are properly authorized. These procedures were invoked beginning in July, 2007. Finding Control Number: FS-7321-07-05 We concur with this finding. The School District has begun to establish written policies and procedures to ensure proper recording of capital assets as well as of calculating and recording the depreciation ofsaid capital assets. This process may take more than one fiscal year to complete and finalize. - 1- TATTNALL COUNTY BOARD OF EDUCATION SCHEDULE OF MANAGEMENT'S RESPONSES YEAR ENDED JUNE 30, 2007 Finding Control Number: FS-7321-07-06 We concur with this finding. The School District will make sure that the system is in compliance with GASB 34 and Financial Statement preparation. Contact Person: Debbie B. Baker, Acting Financial Director Phone: (912) 557-4726 Fax: (912) 557-3036 E-mail Address: dbaker@tattnall.kl2.ga.us -2 -