THOMAS COUNTY BOARD OF EDUCATION THOMASVILLE, GEORGIA REPORT ON AUDIT OF THE FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2008 STATE OF GEORGIA DEPARTMENT OF AUDITS AND ACCOUNTS Russell W. Hinton State Auditor THOMAS 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 REQUIRED SUPPLEMENTARY INFORMATION MANAGEMENT'S DISCUSSION AND ANALYSIS EXHIBITS BASIC FINANCIAL STATEMENTS DISTRICT-WIDE FINANCIAL STATEMENTS A STATEMENT OF NET ASSETS 1 B STATEMENT OF ACTIVITIES 2 FUND FINANCIAL STATEMENTS C BALANCE SHEET GOVERNMENTAL FUNDS 4 D RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO THE STATEMENT OF NET ASSETS 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 10 SCHEDULES REQUIRED SUPPLEMENTARY INFORMATION 1 SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL GENERAL FUND 29 THOMAS COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS - SECTION I FINANCIAL SCHEDULES SUPPLEMENTARY INFORMATION 2 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS 30 3 SCHEDULE OF STATE REVENUE 32 4 SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS 34 5 ALLOTMENTS AND EXPENDITURES GENERAL FUND - QUALITY BASIC EDUCATION PROGRAMS (QBE) BY PROGRAM 35 SECTION II COMPLIANCE AND INTERNAL CONTROL REPORTS REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS REPORT ON COMPLIANCE WITH REQUIREMENTS APPLICABLE TO EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH 0MB CIRCULAR A-133 SECTION III AUDITEE'S RESPONSE TO PRIOR YEAR FINDINGS AND QUESTIONED COSTS SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS SECTION IV FINDINGS AND QUESTIONED COSTS SCHEDULE OF FINDINGS AND QUESTIONED COSTS THOMAS 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) 658-2174 DEPARTMENT OF AUDITS AND ACCOUNTS 270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400 April 15, 2009 Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education and Superintendent and Members of the Thomas 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 Thomas County Board of Education, as of and for the year ended June 30, 2008, which collectively comprise the Board's basic financial statements as listed in the table of contents. These financial statements are the responsibility ofthe Thomas County Board ofEducation's management. Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States ofAmerica and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General ofthe United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Thomas 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. 2008ARL-11 In our opinion, the financial statements referred to previously present fairly, in all material respects, the respective financial position ofthe governmental activities, each major fund, and the aggregate remaining fund information ofthe Thomas County Board ofEducation, as ofJune 30, 2008, 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. In accordance with Government Auditing Standards, we have also issued our report dated April 15, 2009, on our consideration of the Thomas 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. Management's Discussion and Analysis and the Schedule ofRevenues, Expenditures and Changes in Fund Balances - Budget and Actual, as presented on pages i through x and page 29, respectively, are not a required part ofthe basic financial statements but are 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 Thomas 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, lb~ ell W. Hinton, CPA, CGFM State Auditor RWH:gp 2008ARL-ll THOMAS COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2008 The discussion and analysis ofThomas County Board ofEducation's financial performance provides an overall review ofthe Board's financial activities for the fiscal year ended June 30, 2008. The intent of this discussion and analysis is to look at the Board's financial performance as a whole. Readers should also review the financial statements and the notes to the basic financial statements to enhance their understanding ofthe Board's financial performance. FINANCIAL HIGHLIGHTS Key financial highlights for 2008 are as follows: On the District-wide financial statements, the assets ofthe Board exceeded liabilities by $50.5 million, an increase of$4.3 million over fiscal year 2007. Ofthe $50.5 million, $2.9 million is unrestricted and is available for spending at the Board's discretion. The Board had $55.9 million in expenses relating to governmental activities; only $38.6 million ofthese expenses are offset by program specific charges for services, grants and contnbutions. General revenues (primarily property and sales taxes) of$21.5 million were adequate to provide for these programs. As stated above, general revenues accounted for $21.5 million or 35.8% ofall revenues totaling $60.1 million. Program specific revenues in the form of charges for services, grants and contnbutions accounted for $38.6 million, or 64.2% oftotal revenues. Among major funds, the General Fund had $53.6 million in revenues and $53.9 million in expenditures, plus $0.26 million in other uses. The General Fund's balance decreased to $4.6 million from $5.3 million. USING THE BASIC FINANCIAL STATEMENTS This annual report consists of a series of financial statements and notes to those statements. These statements are organized so the reader can understand the Thomas County Board ofEducation as a financial whole, or as an entire operating entity. The Statement ofNet Assets and Statement ofActivities provide information about the activities of the whole Board, presenting both an aggregate view ofthe Board's finances and a longer-term view of those finances. Fund financial statements provide the next level of detail. For governmental funds, these statements tell how services were financed in the short-term as well as what remains for future spending. The fund financial statements also look at the Board's most significant funds. In the case ofthe Thomas County Board ofEducation, the General Fund is by far the most significant fund. i THOMAS COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2008 REPORTING THE BOARD AS A WHOLE Statement ofNet Assets and the Statement ofActivities While this document contains the large number offunds used by the Board to provide programs and activities for the schools, the view ofthe Board as a whole looks at all financial transactions and asks the question, "How did we do financially during fiscal year 2008?" The Statement ofNet Assets and the Statement ofActivities answers this question. These statements include all assets and liabilities using the economic resources focus and accrual basis ofaccounting similar to the accounting used by most private-sector companies. This basis ofaccounting takes into account all ofthe current year's revenues and expenses regardless ofwhen the cash is received or paid. These two statements report the Board's net assets and changes in those assets. This change in net assets is important because it tells the reader that, for the Board as a whole, the.financialposition of the Board has improved or diminished. The causes ofthis change may be the result ofmany factors, some financial, some not. Nonfinancial factors include the Board's property tax base, facility conditions, required educational programs and other factors. In the Statement ofNet Assets and the Statement of Activities, the Board has one distinct type of activity: Governmental Activities - All ofthe Board's programs and services are reported here including instruction, support services, operation and maintenance of plant, pupil transportation, food service, student activity accounts and various others. REPORTING THE BOARD'S MOST SIGNIFICANT FUNDS Fund Financial Statements Fund financial reports provide detailed information about the Board's major funds. The Board uses many funds to account for a multitude of financial transactions. However, these fund financial statements focus on the Board's most significant funds. The Board's major governmental funds are the General Fund, Capital Projects Fund, and the Debt Service Fund. Governmental Funds: Most of the Board's activities are reported in governmental funds, which focus on how money flows into and out ofthose funds and the balances left at year-end available for spending in future periods. These funds are reported using the current financial resources measurement focus and the modified accrual accounting method, which measures cash and all other financial assets that can readily be converted to cash. The governmental fund statements provide a detailed short-term view of the Board's general government operations and the basic services it provides. Governmental fund information helps determine whether there are adequate financial resources that can be spent in the near future to finance educational programs. The relationship (or differences) between governmental activities (reported in the Statement of Net Assets and the Statement ofActivities) and governmentalfunds is reconciled in the financial statements. ii THOMAS COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2008 Fiduciary Funds: The Board is the trustee, orfiduciary, for assets that belong to others, such as school clubs and organizations within the principals' accounts. The Board is responsible for ensuring that the assets reported in these funds are used only for their intended purposes and by those to whom the assets belong. The Board excludes these activities from the District-wide financial statements because it cannot use these assets to finance its operations. THE BOARD AS A WHOLE The perspective of the statement of net assets is of the Board as a whole. Table 1 provides a summary ofthe Board's net assets for fiscal year 2008, and the comparative amounts for fiscal year 2007. Table 1 Net Assets Governmental Activities Fiscal Fiscal Year 2008 Year 2007 Assets Current and Other Assets Capital Assets, Net $ 22,997,203 $ 15,691,252 53,643,960 52,411.317 Total Assets $ 76,641,163 $ 68,102,569 Liabilities Current and Other Liabilities Long-Term Liabilities $ 7,382,812 $ 7,173,349 18,702,039 14,642,715 Total Liabilities $ 26.084.851 $ 21,816.064 Net Assets Invested in Capital Assets, Net of Related Debt Restricted Unrestricted $ 42,582,939 $ 38,537,724 4,982,619 4,510,275 2,990.754 3,238.506 Total Net Assets $ 50,556,312 $ 46,286,505 Total net assets increased by $4.3 million in fiscal year 2008. Current assets increased by$7.3 million and capital assets increased by $1.2 million in fiscal year 2008, primarily due to the completion of small capital projects and the issuance of$8.0 million in SPLOST Bonds. Table 2 shows the changes in net assets for fiscal year 2008 compared to changes in net assets for fiscal year 2007. iii THOMAS COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2008 Table 2 Change in Net Assets Revenues Program Revenues: Charges for Services and Sales Operating Grants and Contnbutions Capital Grants and Contnbutions Governmental Activities Fiscal Fiscal Year 2008 Year 2007 $ 967,488 $ 1,154,270 37,530,283 36,545,435 127,362 462,731 Total Program Revenues $ 38,625,133 $ 38,162,436 General Revenues: Taxes Property Taxes For Maintenance and Operations $ Sales Taxes Special Purpose Local Option Sales Tax For Debt Service and Capital Projects Other Sales Tax Grants and Contnbutions not Restricted to Specific Programs Investment Earnings Miscellaneous Special Item Gain on Sale of Land and Buildings 9,058,614 $ 5,123,235 217,296 4,062,360 560,439 1,395,094 1,148,920 8,622,557 4,895,325 245,365 3,928,140 570,030 1,753,560 Total General Revenues and Special Item $ 21,565,958 $ 20,014,977 Total Revenues $ 60,191,091 $ 58,177,413 Program Expenses Instruction $ 35,412,459 $ 34,083,296 Support Services Pupil Services 3,234,348 2,892,747 Improvement of Instructional Services 2,648,810 2,512,416 Educational Media Services 843,537 780,936 General Administration 625,416 669,484 School Administration 2,849,796 2,739,074 Business Administration 335,115 315,674 Maintenance and Operation of Plant 3,436,904 3,449,781 Student Transportation Services 2,130,917 1,841,190 Central Support Services 354,023 285,435 Other Support Services 224,899 230,337 Operations ofNon-Instructional Services Enterprise Operations 429,562 473,380 Food Services 2,936,343 3,014,820 Interest on Short-Term and Long-Term Debt 459,155 600,755 Total Expenses $ 55,921,284 $ 53,889,325 Increase in Net Assets $ 4,269.807 $ 4,288.088 iv THOMAS COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2008 Operating grants and Contributions increased by $1. 0 million due to the normal state funding formula increasing for the annual increase in teacher salaries. Figure A shows the funding sources for the governmental fund revenues. State grants comprise 60.0% of the Board's revenues. Property Taxes make up 15.0% of the total funding, while an additional 10.0% is received from Federal sources. Figure A Sources of Revenue for Fiscal Year 2008 Sales Taxes 9% Other 4% Charges for Services 2% Federal Funds 10% Property Taxes 15% State Funds 60% As shown in Figure B, Instruction comprised 63.3% ofgovernmental program expenses, while eight other areas comprise the other 36. 7% ofexpenditures for fiscal year 2008. Administration and Other Services (4.4%) consist ofthe central office, business and warehouse, athletics and other operations of the School District. Student Transportation, 3.8% Pupil Services, 5.8% Improvement of Instruction, 4.7% School Administration, 5.1% Food Services, 5.3% Figure B Functional Expenses for Fiscal Year 2008 Adm inistration and Other Services, 4 .4% Educational Media, 1.5% Instruction, 63.3% Maintenance and Operation, 6.1% V THOMAS COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2008 GOVERNMENTAL ACTMTIES The Statement of Activities shows the cost of program services and the charges for services and grants offsetting those services. Table 3 shows, for governmental activities, the total cost ofservices and the net cost ofservices. In other words, it identifies the cost ofthese services supported by tax revenue and unrestricted State entitlements. Table3 Governmental Activities Total Cost ofServices Fiscal Fiscal Year 2008 Year 2007 Net Cost ofServices Fiscal Fiscal Year 2008 Year 2007 Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation ofPlant Student Transportation Services Central Support Services Other Support Services Operations ofNon-Instructional Services Enterprise Operations Food Services Interest on Short-Term and Long-Term Debt $ 35,412,459 $ 34,083,296 $ 8,548,026 $ 7,796,085 3,234,348 2,648,810 843,537 625,416 2,849,796 335,115 3,436,904 2,130,917 354,023 224,899 2,892,747 2,512,416 780,936 669,484 2,739,074 315,674 3,449,781 1,841,190 285,435 230,337 1,595,709 1,798,347 178,090 -536,896 1,415,555 324,917 1,769,473 1,086,901 344,234 217,080 1,443,870 1,796,763 134,864 -461,548 1,288,888 306,455 1,715,038 475,975 274,712 221,965 429,562 2,936,343 459,155 473,380 3,014,820 600,755 103,378 -7,814 459,155 28,049 105,019 600,755 Total Expenses $ 55.921,284 $ 53.889.325 $ 17,296.155 $ 15,726.890 Althoughprogram revenues make up a majority ofthe funding, the Board is still dependent upon tax revenues for governmental activities. Over 32.1 % ofinstruction and support activities are supported through taxes and other general revenues, and for non-instructional activities and interest expense the general revenue support is 14.5%. THE BOARD'S FUNDS The Board's governmental funds are accounted for using the modified accrual basis of accounting. Total governmental funds had revenues and other :financing sources of$68.1 million and expenditures and other :financing uses of$62.4 million. There was an increase in the fund balance totaling $6.9 million for the governmental funds as a whole, which was attnbuted to the 2007 bond issuance of $8.0 million. The General Fund had a decrease of$0.6 million, the Capital Projects Fund had an increase of$7.4 million due to the bond issuance above, and the Debt Service Fund had an increase of $0.1 million. The significant amount offund balance in the general fund, excluding the effect ofnew long-term debt, reflects that the Board was able to adequately meet current costs and will be in a good position in the near future. vi THOMAS COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2008 GENERAL FUND BUDGETING HIGHLIGHTS The Board's budget is prepared in accordance with Georgia law. The most significant budgeted fund is the General Fund. During the course of fiscal year 2008, the Board amended its General Fund budget as needed. The Board uses site-based budgeting. The budgeting systems are designed to tightly control total site budgets but provide flexibility for site management. For the General Fund, the final budgeted revenues and otherfinancing sources of$50.9 million was lower than the original budgeted amount of$51.0 million by $0.1 million. The actual revenues and other financing sources of$53.6 million exceeded the amended budgeted amount by $2.7 million. The final budgeted expenditures and otherfinancing uses of$51. 7 million was lower than the original budgeted amount of$5 l .9 by $0.2 million. The actual expenditures and other financing uses of$54.2 million was $2.5 million more than the amended budget. General Fund expenditures and other financing uses exceeded revenues and other financing sources by $0.7 million. This was part ofa strategic plan by the board to use part ofthe fund balance to cover expenditures in fiscal year 2008. CAPITAL ASSETS AND DEBT ADMINISTRATION Capital Assets At the end of fiscal year 2008, the Board had $53.6 million invested in capital assets, net of depreciation, all in governmental activities. Table 4 shows fiscal year 2008 balances and comparative 2007 amounts. Table 4 Capital Assets (Net of Depreciation) Governmental Activities Fiscal Fiscal Year 2008 Year 2007 Land Construction in Progress Buildings and Building Improvements Equipment Land Improvements $ 1,338,754 $ 1,340,624 2,004,544 885,649 44,135,243 44,357,911 3,638,497 3,499,862 2,526,922 2,327,271 Total $ 53,643.960 $ 52,411,317 V11 THOMAS COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2008 The construction in progress balance at June 30, 2008, consists ofa renovation project at Garrison Pilcher Elementary School, and a media addition, cafeteria renovation, and roofrenovation at Thomas County Central High School. Debt At June 30, 2008, the Board had $8.0millionin bonds outstandingwith$1.4 million ofprincipal due within one year, and $10.5 million in capital leases outstanding with $0.7 million of principal due within one year. The capital leases are intergovernmental contracts with the South Georgia Governmental Services Authority. Long-Term Debt increased by $4.1 million overthe prior fiscal year, due to the $8.0 million bond issuance for SPLOST II. Table 5 summarizes the Long-Term Debt outstanding at June 30, 2008, with comparative amounts for fiscal year 2007. Table 5 Debt at June 30 Governmental Activities Fiscal Fiscal Year 2008 Year 2007 General Obligation Bonds Capital Leases Compensated Absences $ 8,000,000 $ 3,235,000 10,475,000 11,155,000 227,039 252,715 Total $ 181102.039 $ 1416421:ZlS At June 30, 2008, the Board's overall legal bonding authority was $76.6 million based on the assessed value oftaxable property as ofJanuary 1, 2008, with bonds and capital leases outstanding of$18.5 million. The Board has a legal debt margin of$58.1 million at June 30, 2008. The Board's bonds have assigned ratings of "AA" by Standards and Poor's based on the Boards participation in the Georgia state intercept program. Standard and Poor's assigned an underlying rating of"A" for the School Districts Bonds. CURRENT ISSUES The Thomas County School System consists of6 campuses located in Thomas County, which had an estimated population of 45,237 in 2007, compared to 42,737 in 2000. The University of Georgia estimates the County's population to grow to 48,111 in 2015, an increase of only 6.0%. This indicates that the County has a stable population growth, much lower than the state as a whole. Historically, the County grew 12.2% during the 20 year period from 1980 to 2000, compared to 49.9% for the state of Georgia during the same 20 year period. The County's 2007 population V111 THOMAS COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2008 ranked 44th out of 159 counties in the state. Current student enrollment in the system is approximately 5,597 students in grades PreK-12. Among Georgia's 179 school systems that levy ad valorem taxes, Thomas County's 2008 millage rate has the 29th lowest millage rate. The School Board's Second Education Local Option Sales Tax (ELOST) began January 1, 2008. For calendar year 2008, the average monthly tax collection was $410,380, a decrease of2.4% over the average for calendar year 2007 of $420,514. This indicates that the current recession we are experiencing began in early 2008. Thomas County's largest employer is Archbold Memorial Hospital, with 1,600 employees. The Thomas County Board of Education is the second largest employer with approximately 850 employees. The largest private employer is Flowers Foods, with employment ofapproximately 500. The population growth ofThomas County is somewhat limited by the existence ofmany plantations in the county. Much ofthe land in the southern part ofThomas County, which borders Florida and is in close proximity to Tallahassee, is undeveloped timber land. In fact, five ofthe County's ten largest taxpayers are plantation owners. In 2007, 58.8% of all land in Thomas County was classified as forest land, according to the University ofGeorgia, compared to 53.0% in 1997. Thomas County has one large municipality and six small communities. The county seat is Thomasville, which had an estimated population of 19,000 in 2007. The county also includes the communities ofBarwick, Boston, Coolidge, Meigs, Ochlocknee, and Pavo, with populations ranging from 326 to 1,436. Unincorporated Thomas County represented 48.0% of the County's total estimated population in 2005. The median household income as of2005 was $33,563 per year. As of2004, the per capita income was $29,306, ranking 26th out of 159 counties in Georgia. A major reason for this high per capita income is due to the large medical community in Thomasville. According to the University of Georgia, as of2006, Thomas County had 148 physicians, which ranks 6th in Georgia in physicians rate per county resident. In the past, unemployment for Thomas County was relatively low. For 2007, Thomas Countyhad an unemployment rate of4.0%, compared to 4.4% for Georgia as a whole. These numbers are certainly much higher in this current recession that we are experiencing. Currently, the School System is attempting to manage the worst economic recession this State has seen for decades. The greatest challenge is maintaining the educational programs ofthe systemwhile receiving significantly less funding from the State, and, at the same time, not placing a larger burden on local taxpayers. THOMAS COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2008 CONTACTING THE BOARD'S FINANCIAL MANAGEMENT This financial report is designed to provide our citizens, taxpayers, investors and creditors with a general overview of the Board's finances and to show the Board's accountability for the money it receives. If you have questions about this report or need additional financial information, contact Joey N. Holland, CPA, Finance Director at the Thomas County Board of Education, 200 North Pinetree Boulevard, Thomasville, Georgia 31 792. You may also email your questions to hollandj@rose.net. X THOMAS COUNTY BOARD OF EDUCATION THOMAS COUNTY BOARD OF EDUCATION STATEMENT OF NET ASSETS JUNE 30, 2008 ASSETS Cash and Cash Equivalents Investments Accounts Receivable, Net Interest Taxes State Government Federal Government Local Other Inventories Capitalized Bond and Other Debt Issuance Costs Capital Assets, Non-Depreciable Capital Assets, Depreciable (Net of Accumulated Depreciation) Total Assets LIABILITIES Accounts Payable Salaries and Benefits Payable Contracts Payable Retainages Payable Deposits and Deferred Revenues 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 Charter School Unrestricted Total Net Assets Total Liabilities and Net Assets The notes to the basic financial statements are an integral part of this statement. -1- EXHIBIT"A" GOVERNMENTAL ACTIVITIES $ 10,367,632.33 6,121,114.33 53,738.00 1,034,521.98 3,734,444.00 1,300,647.41 62,925.40 6,250.00 226,220.45 89,708.40 3,343,298.31 50,300,662.09 $ ===76='=64=1=,1=6=2.=7=0 $ 515,062.25 5,928,173.71 643,986.68 174,000.00 121,589.00 2,237,765.03 16,464,274.43 $ 26,084,851.10 $ 42,582,938.52 51,504.58 892,512.22 3,030,161.84 980,179.67 28,260.46 2,990,754.31 $ 50,556,311.60 $ ===76='=64=1=,1=6=2=7.=0 THOMAS COUNTY BOARD OF EDUCATION STATEMENT OF ACTIVITIES FOR THE YEAR ENDED JUNE 30, 2008 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 Food Services Interest on Short-Term and Long-Term Debt Total Governmental Activities General Revenues Taxes Property Taxes For Maintenance and Operations Railroad Cars Sales Taxes Special Purpose Local Option Sales Tax For Debt Services For Capital Projects Other Sales Tax Grants and Contributions not Restricted to Specific Programs Investment Earnings Miscellaneous Special Items Gain on Sale of Land and Buildings Total General Revenues and Special Items Change in Net Assets Net Assets - Beginning of Year EXPENSES CHARGES FOR SERVICES $ 35,412,459.27 $ 3,234,348.44 2,648,809.60 843,536.89 625,415.69 2,849,796.04 335,115.40 3,436,904.39 2,130,917.27 354,023.39 224,898.83 429,561.97 2,936,342.71 459,155.00 $ 55,921,284.89 $ 60,045.89 326,184.33 581,257.66 967,487.88 Net Assets - End of Year The notes to the basic financial statements are an integral part of this statement. -2- EXHIBIT"B" PROGRAM REVENUES OPERATING GRANTS AND CONTRIBUTIONS CAPITAL GRANTS AND CONTRIBUTIONS NET (EXPENSES) REVENUES AND CHANGES IN NET ASSETS $ 26,804,387.83 1,638,639.32 850,463.05 665,447.27 1,162,311.25 1,434,241.48 10,198.66 1,667,431.55 916,654.36 $ 9,789.81 7,819.10 2,362,898.94 $ 37,530,282.62 $ $ 127,362.00 127,362.00 $ -8,548,025.55 -1,595,709.12 -1, 798,346.55 -178,089.62 536,895.56 -1,415,554.56 -324,916.74 -1,769,472.84 -1,086,900.91 -344,233.58 -217,079.73 -103,377.64 7,813.89 -459 155.00 -17,296,152.39 $ 9,033,575.36 25,039.05 3,252,371.09 1,870,863.93 217,296.79 4,062,360.00 560,439.34 1,395,093.58 1,148,920.00 $ 21,565,959.14 $ 4,269,806.75 46,286,504.85 $ ===5=0=,5=56='=31=1=.6=0 -3 - THOMAS COUNTY BOARD OF EDUCATION BALANCE SHEET GOVERNMENTAL FUNDS JUNE 30, 2008 EXHIBIT"C" ASSETS Cash and Cash Equivalents Investments Accounts Receivable, Net Interest Taxes State Government Federal Government Local Other Inventories GENERAL FUND DISTRICTWIDE CAPITAL PROJECTS FUND DEBT SERVICE FUND TOTAL $ 1,035,540.01 $ 7,686,113.17 $ 1,645,979.15 $ 4,423,678.64 1,200,000.00 497,435.69 53,738.00 313,837.38 3,734,444.00 1,300,647.41 62,925.40 6,250.00 226,220.45 886,747.00 10,367,632.33 6,121,114.33 53,738.00 1,200,584.38 3,734,444.00 1,300,647.41 62,925.40 6,250.00 226,220.45 Total Assets $ 11,157,281.29 $ 8,886,113.17 $ 3,030,161.84 $ ====23=,0=73=,5=56=.3=0 LIABILITIES AND FUND BALANCES LIABILITIES Accounts Payable $ 479,685.55 $ 35,376.70 $ Salaries and Benefits Payable 5,928,173.71 Contracts Payable 643,986.68 Retainages Payable 174,000.00 Deposits and Deferred Revenue 121,589.00 Total Liabilities $ 6,529,448.26 $ 853,363.38 $ FUND BALANCES Reserved for: Bus Replacement Continuation of Federal Programs Debt Service Inventories Capital Projects Charter School Unreserved Designated for Student Activities Designated for Self-Insurance Undesignated Reported in: General Fund $ 51,504.58 $ 822,239.29 $ 3,030,161.84 226,220.45 $ 8,032,749.79 28,260.46 248,722.47 391,578.81 2,859,306.97 Total Fund Balances $ 4,627,833.03 $ 8,032,749.79 $ 3,030,161.84 $ 515,062.25 5,928,173.71 643,986.68 174,000.00 121 589.00 7 382 811.64 51,504.58 822,239.29 3,030,161.84 226,220.45 8,032,749.79 28,260.46 248,722.47 391,578.81 2,859,306.97 15,690,744.66 Total Liabilities and Fund Balances $ 11,157,281.29 $ 8,886,113.17 $ 3,030,161.84 $===2=3=,0=7=3=,5=56==30= The notes to the basic financial statements are an integral part of this statement. -4 - THOMAS COUNTY BOARD OF EDUCATION RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO THE STATEMENT OF NET ASSETS JUNE 30, 2008 EXHIBIT"D" Total Fund Balances - Governmental Funds (Exhibit "C") $ 15,690,744.66 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 Construction in Progress Land Improvements Buildings Equipment Accumulated Depreciation Total Capital Assets $ 1,338,753.91 2,004,544.40 4,335,400.46 55,762,764.02 7,098,584.61 -16,896,087.00 53,643,960.40 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. -166,062.40 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 Payable Compensated Absences Capitalized Bond and Other Debt Issuance Costs Total Long-Term Liabilities $ -8,000,000.00 -10,475,000.00 -227,039.46 89,708.40 -18,612,331.06 Net Assets of Governmental Activities (Exhibit "A") $ 50,556,311.60 The notes to the basic financial statements are an integral part of this statement. -5- THOMAS COUNTY BOARD OF EDUCATION STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS YEAR ENDED JUNE 30, 2008 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 Food Services Operation Capital Outlay Debt Services Principal Interest Total Expenditures Excess of Revenues over (under) Expenditures OTHER FINANCING SOURCES (USES) Proceeds of Long-Term Capital Related Debt Transfers In Transfers Out Total Other Financing Sources (Uses) SPECIAL ITEMS Proceeds from Sale of Land and Buildings Net Change in Fund Balances Fund Balances - Beginning GENERAL FUND DISTRICTWIDE CAPITAL PROJECTS FUND DEBT SERVICE FUND TOTAL $ 8,955,469.03 $ 8,955,469.03 217,296.79 $ 1,870,863.93 $ 3,252,371.09 5,340,531.81 35,819,523.98 35,819,523.98 5,900,480.64 5,900,480.64 967,487.88 967,487.88 308,426.65 129,124.56 122,888.13 560,439.34 1,395,093.58 1,395,093.58 $ 53,563,778.55 $ 1,999,988.49 $ 3,375,259.22 $ 58,939,026.26 $ 34,400,730.45 $ 34,400,730.45 3,139,116.63 2,671,448.46 778,241.48 606,292.38 2,805,923.06 330,528.95 $ 3,366,668.09 2,011,535.34 270,575.93 224,898.83 429,561.97 2,911,558.46 232,047.70 273,656.20 2,424,503.39 3,139,116.63 2,671,448.46 778,241.48 606,292.38 2,805,923.06 562,576.65 3,640,324.29 2,011,535.34 270,575.93 224,898.83 429,561.97 2,911,558.46 2,424,503.39 $ 3,915,000.00 459,155.00 3,915,000.00 459,155.00 $ 53,947,080.03 $ 2,930,207.29 $ 4,374,155.00 $ 61,251,442.32 $ -383,301.48 $ -930,218.80 $ -998,895. 78 $ -2,312,416.06 $ 8,000,000.00 $ 8,000,000.00 $ 1,113,845.27 1, 113,845.27 $ -264,506.92 -849,338.35 -1,113,845.27 $ -264,506.92 $ 7,150,661.65 $ 1,113,845.27 $ 8,000,000.00 $ 1,216,050.00 $ 1,216,050.00 $ -647,808.40 7,436,492.85 $ 114,949.49 $ 6,903,633.94 5,275,641.43 596,256.94 2,915,212.35 8,787,110.72 Fund Balances - Ending $ 4,627,833.03 $ 8,032,749.79 $ 3,030,161.84 $ 15,690,744.66 The notes to the basic financial statements are an integral part of this statement. -6- THOMAS 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, 2008 EXHIBIT"F" Total Net Change in Fund Balances - Governmental Funds {Exhibit "E") Amounts reported for Governmental Activities in the Statement of Activities are different because: Capital Outlays are reported as expenditures in Governmental Funds. However, in the Statement of Activities, the cost of Capital Assets is allocated over their estimated useful lives as depreciation expense. In the current period, these amounts are: Capital Outlay Depreciation Expense Excess of Capital Outlay over Depreciation Expense Because some property taxes will not be collected for several months after the School District's fiscal year ends, they are not considered "available" revenues. In the Statement of Activities, only the gain on the sale of the land/building/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 the land/carrying value of the building/equipment sold. 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 Bond issuance costs, deferred gains on refundings and similar items when debt is first issued are reported as an expenditure in Governmental Funds, but are reported as deferred charges on the Statement of Net Assets and amortized over the term of the debt, using the straight-line method. The details of this difference in the current period are as follows: Deferral of Bond Issuance Costs Amortization of Bond Issuance Costs Total Bond Issuance Costs 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 Some items reported in the Statement of Activities do not require the use of current financial resources and therefore are not reported as expenditures in Governmental Funds. These activities consist of: Decrease in Compensated Absences $ 6,903,633.94 $ 3,079,709.49 -1,734,244.00 1,345,465.49 103,145.38 -112,822.09 -8,000,000.00 $ 99,676.00 -9,967.60 89,708.40 $ 3,235,000.00 680,000.00 3,915,000.00 25,675.63 Change in Net Assets of Governmental Activities {Exhibit "B") $ 4,269,806.75 The notes to the basic financial statements are an integral part of this statement. -7- THOMAS COUNTY BOARD OF EDUCATION STATEMENT OF FIDUCIARY NET ASSETS FIDUCIARY FUNDS JUNE 30, 2008 EXHIBIT"G" ASSETS Cash and Cash Equivalents Investments Accounts Receivable, Net Interest Total Assets LIABILITIES Funds Held for Others NET ASSETS Held in Trust for Private Purposes Total Liabilities and Net Assets PRIVATE PURPOSE TRUSTS AGENCY FUNDS $ 845.49 $ 27,177.23 85,712.76 3,556.00 $ 90, 114.25 $ ==27='=17=7=.2=3 $ 27,177.23 $ _----'-90'--'-,1_1_4_.2_5 $ 90,114.25 $ 27,177.23 The notes to the basic financial statements are an integral part of this statement. -8- THOMAS COUNTY BOARD OF EDUCATION STATEMENT OF CHANGES IN FIDUCIARY NET ASSETS FIDUCIARY FUNDS YEAR ENDED JUNE 30, 2008 EXHIBIT"H" ADDITIONS Investment Earnings Interest DEDUCTIONS Scholarships Change in Net Assets Net Assets - Beginning Net Assets - Ending PRIVATE PURPOSE TRUSTS $ 4,462.94 $ 3,225.00 $ 1,237.94 88,876.31 $ ==9=0,=11=4=.2=5 The notes to the basic financial statements are an integral part of this statement. -9- THOMAS COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2008 EXHIBIT "I" Note 1: DESCRIPTION OF SCHOOL DISTRICT AND REPORTING ENTITY REPORTING ENTITY The Thomas County Board of Education (School District) was established under the laws of the State of Georgia and operates under the guidance of a school board elected by the voters and a Superintendent appointed by the Board. The Board is organized as a separate legal entity and has the power to levy taxes and issue bonds. Its budget is not subject to approval by any other entity. Accordingly, the School District is a primary government and consists of all the organizations that compose its legal entity. Blended Component Unit The Bishop Hall Charter School, Incorporated, (Charter School) is responsible for the public education of all students attending its school. The Charter School was created through a contract between the School District and the Charter School whereby all State funding associated with the students attending the Charter School and certain specified local funds are turned over to the Charter School to cover the cost ofits operations. The financial statements ofthe Charter School have been blended with the School District's general fund. Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BASIS OF PRESENTATION The School District's basic financial statements are collectively comprised of the District-wide financial statements, fund financial statements and notes to the basic financial statements of the Thomas 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. - 10- THOMAS COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2008 EXHIBIT "I" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Fund Financial Statements: The fund financial statements provide information about the School District's funds, including fiduciary funds. Eliminations have been made to minimize the double counting ofinternal activities. Separate statements for each category (governmental and fiduciary) are presented. The emphasis of fund financial statements is on major governmental funds, each displayed in a separate column. The School District reports the following major governmental funds: General Fund is the School District's primary operating fund. It accounts for all financial resources ofthe School District, except those resources required to be accounted for in another fund. District-wide Capital Projects Fund accounts for financial resources including Special Purpose Local Option Sales Tax (SPLOST) and Bond Proceeds to be used for the acquisition, construction or renovation of major capital facilities. Debt Service Fund accounts for taxes (sales) legally restricted for the payment ofgeneral longterm principal, interest and paying agent's fees. The School District reports the following fiduciary fund types: Private Purpose Trust fund reports trust arrangements under which principal and income is to be used to provide scholarship aid to defray college educational expenses. Agency funds account for assets held by the School District as an agent for various funds 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. - 11 - THOMAS COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2008 EXHIBIT "I" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The School District uses funds to report on its financial position and the results of its operations. Fund accounting is designed to demonstrate legal compliance and to aid financial management by segregating transactions related to certain governmental functions or activities. A fund is a separate accounting entity with a self-balancing set of accounts. Governmental funds are reported using the current financial resources measurement focus and the modified accrual basis ofaccounting. Under this method, revenues are recognized when measurable and available. The School District considers all revenues reported in the governmental funds to be available if they are collected within sixty days after year-end. Property taxes, sales taxes and interest are considered to be susceptible to accrual. Expenditures are recorded when the related fund liability is incurred, except for principal and interest on general long-term debt and compensated absences, which are recognized as expenditures to the extent they have matured. Capital asset acquisitions are reported as expenditures in governmental funds. Proceeds of general long-term liabilities 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 authorizes the School District to deposit its funds in one or more solvent banks, insured Federal savings and loan associations or insured chartered building and loan associations. INVESTMENTS COMPOSITION OF INVESTMENTS Investments made by the School District in nonparticipating interest-earning contracts (such as certificates 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: - 12 - THOMAS COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2008 EXHIBIT "I" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (1) Obligations issued by the State of Georgia or by other states, (2) Obligations issued by the United States government, (3) Obligations fully insured or guaranteed by the United States government or a United States government agency, (4) Obligations of any corporation ofthe United States government, (5) Prime banker's acceptances, (6) The Local Government Investment Pool administered by the State ofGeorgia, 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 Thomas County Board of Commissioners fixed the property tax levy for the 2007 tax digest year (calendar year) on July 16, 2007 (levy date). Taxes were due on November 15, 2007 (due date). Taxes collected within the current fiscal year or within 60 days after year-end on the 2007 tax digest are reported as revenue in the governmental funds for fiscal year 2008. The Thomas County Tax Commissioner bills and collects the property taxes for the School District, withholds 2.5% oftaxes collected as a fee for tax collection and remits the balance oftaxes collected to the School District. Property tax revenues, at the fund reporting level, during the fiscal year ended June 30, 2008, for maintenance and operations amounted to $8,930,429.98. - 13 - THOMAS COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2008 EXHIBIT "I" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The tax millage rate levied for the 2007 tax year (calendar year) for the Thomas County Board of Education was as follows (a mill equals $1 per thousand dollars of assessed value): School Operations 13.96 mills SALES TAXES Special Purpose Local Option Sales Tax, at the fund reporting level, during the year amounted to $5,123,235.02 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 SUPPLIES INVENTORIES Inventories of consumable supplies are reported on the Combined Balance Sheet at average cost. The School District uses the consumption method to account for the inventories. The consumable supplies inventories are recorded as an asset when purchased and expenditures are recorded as the inventory items are used. 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 (weighted average). The School District uses the consumption method to account for inventories whereby donated food commodities are recorded as an asset and as revenue when received, and expenses/expenditures are recorded as the inventory items are used. Purchased foods are recorded as an asset when purchased and expenses/expenditures are recorded as the inventory items are used. CAPITAL ASSETS Capital assets purchased, including capital outlay costs, are recorded as expenditures in the fund financial statements at the time of purchase (including ancillary charges). On the District-wide financial statements, all purchased capital assets are valued at cost where historical records are available and at estimated historical cost based on appraisals or deflated current replacement cost where no historical records exist. Donated capital assets are recorded at estimated fair market value on the date donated. Disposals are deleted at depreciated recorded cost. The cost of normal maintenance and repairs that do not add to the value ofassets or materially extend the useful lives of the assets is not capitalized. Depreciation is computed using the straight-line method. The School District does not capitalize book collections or works ofart. During the fiscal year under review, no events or changes in circumstances affecting a capital asset that may indicate impairment were known to the School District. - 14 - THOMAS COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2008 EXHIBIT "I" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Capitalization thresholds and estimated useful lives of capital assets reported in the District-wide statements are as follows: Capitalization Policy Estimated Useful Life Land Land Improvements Buildings and Improvements Equipment All NIA All 15 to 30 years $ 5,000.00 20 to 80 years $ 5,000.00 5 to 40 years Depreciation is used to allocate the actual or estimated historical cost of all capital assets over estimated useful lives. COMPENSATED ABSENCES Members ofthe Teachers Retirement System ofGeorgia (TRS) may apply unused sick leave toward early retirement. The liability for early retirement will be borne by TRS rather than by the individual school districts. Otherwise, sick leave does not vest with the employee, and no liability is reported in the School District's financial statements. Vacation leave of 10 days is awarded on a fiscal year basis to all full time personnel employed on a twelve month basis. No other employees are eligible to earn vacation leave. Vacation leave not utilized during the fiscal year may be carried over to the next fiscal year, providing such vacation leave does not exceed 5 days. Three Year Comparison of Compensated Absences Liability Beginning Liability Current Year Increase Current Year Decrease Ending Liability Fiscal Year 2006 Fiscal Year 2007 Fiscal Year 2008 $ 185,462.00 $ 173,281.00 $ 136,185.00 $ 222,558.00 $ 222,558.00 $ 182,500.09 $ 152,343.00 $ 252,715.09 $ 252,715.09 $ 171,275.37 $ 196,951.00 $ 227,039.46 GENERAL OBLIGATION BONDS The School District issues general obligation bonds to provide funds for the acquisition and construction ofmajor capital facilities. In the District-wide financial statements, bond premiums and discounts, as well as issuance costs, are deferred and amortized over the life ofthe bonds using the straight-line method. Bond issuance costs are reported as deferred charges and amortized over the term of the debt. - 15 - THOMAS COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2008 EXHIBIT "I" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES In the fund financial statements, the School District recognizes bond premiums and discounts, as well as bond issuance costs during the fiscal year bonds are issued. Premiums received on debt issuances are reported as other financing sources while discounts on debt issuances are reported as other financing uses. Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as debt service expenditures. 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, Charter School, debt service and capital projects in accordance with restrictions imposed by external third parties. Unrestricted net assets - Unrestricted net assets represent resources derived from property taxes, sales taxes, grants and contributions not restricted to specific programs, charges for services, and miscellaneous revenues. These resources are used for transactions relating to the educational and general operations of the School District, and may be used at the discretion of the Board to meet current expenses for those purposes. FUND BALANCES RESERVED Reserves represent those portions of fund balance equity that are legally segregated for a specific future use. UNRESERVED-DESIGNATED Designated fund balances represent tentative plans for future use of financial resources. 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 ofinsurance, or by collateral. The aggregate ofthe face value ofsuch surety bond and the market value of securities pledged shall be equal to not less than - 16 - THOMAS COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2008 EXHIBIT "I" Note 3: DEPOSITS AND INVESTMENTS 110 percent ofthe public funds being secured after the deduction ofthe amount ofdeposit insurance. Ifa depository elects the pooled method (OCGA 45-8-13 .1) the aggregate ofthe market value ofthe securities pledged to secure a pool ofpublic funds shall be not less than 110 percent ofthe daily pool balance. Acceptable security for deposits consists of any one of or any combination of the following: ( 1) Surety bond signed by a surety company duly qualified and authorized to transact business within the State of Georgia, (2) Insurance on accounts provided by the Federal Deposit Insurance Corporation, (3) Bonds, bills, notes, certificates of indebtedness or other direct obligations of the United States or of the State of Georgia, (4) Bonds, bills, notes, certificates of indebtedness or other obligations of the counties or municipalities ofthe 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 ofindebtedness, notes, or other obligations ofa subsidiary corporation of the United States government, which are fully guaranteed by the United States government both as to principal and interest or debt obligations issued by or securities guaranteed by the Federal Land Bank, the Federal Home Loan Bank, the Federal Intermediate Credit Bank, the Central Bank for Cooperatives, the Farm Credit Banks, the Federal Home Loan Mortgage Association, and the Federal National Mortgage Association. CATEGORIZATION OF DEPOSITS At June 30, 2008, the bank balances were $17,672,218.90. The amounts ofthe total uninsured bank balances are classified into three categories of custodial credit risk: Category 1 - Uncollateralized, Category 2 - Cash collateralized with securities held by the pledging financial institution, or Category 3 - Cash collateralized with securities held by the pledging financial institution's trust department or agent but not in the School District's name. The School District's uninsured deposits are classified by custodial credit risk category at June 30, 2008, as follows: - 17 - THOMAS COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2008 EXHIBIT "I" Note 3: DEPOSITS AND INVESTMENTS Custodial Credit Risk Category Bank Balance 1 $ 0.00 2 9,405,242.03 3 6.217.949.36 Total $15,623,191.39 CATEGORIZATION OF INVESTMENTS The School District's investments as of June 30, 2008, 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 U. S. Treasuries U.S. Agencies Implicitly Guaranteed $ 1,640.06 $ 1,640.06 495,500.04 495,500.04 Investment Pools Office of Treasury and Fiscal Services Georgia Fund 1 295.59 295.59 Total Investments $ 497,435.69 $ 497,435.69 The Georgia Fund 1, formerly referred to as LGIP, 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 ofGeorgia, Office of Treasury and Fiscal Services for the Georgia Fund 1 (Primary Liquidity Portfolio) does not provide for investment in derivatives or similar investments. Additional information on the Georgia Fund 1 is disclosed in the State ofGeorgia Comprehensive Annual Financial Report. This audit can be obtained from the Georgia Department of Audits and Accounts at http://www.audits. state.ga. us/intemet/searchRpts.html. The Primary Liquidity Portfolio consists ofGeorgia 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 - 18 - THOMAS COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2008 EXHIBIT "I" Note 3: DEPOSITS AND INVESTMENTS 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, 2008, was 40 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, 2008, $497,140.10 of the School District's applicable investments were uninsured or unregistered, with securities held by the counterparty, or by its 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: Rated Debt Investments Fair Value Quali!Y Ratings AAA Unrated Debt Securities U.S. Treasuries U. S. Agencies Implicitly Guaranteed Totals by Quality Ratings $ 1,640.06 $ 495,500.04 $ 421,140.10 $ 1,640.06 $ 495,500.04 l1M0.06 $ 4951500.04 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 ofcredit risk. More than 5% ofthe School District's investments are in Federal Home Loan Bank debt securities. This investment is 99% of the School District's total investments. - 19 - THOMAS COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2008 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 l, 2007 Increases Balances Decreases June 30. 2008 Governmental Activities Capital Assets, Not Being Depreciated: Land Construction in Progress $ 1,340,624.00 $ 1,870.09 $ 1,338,753.91 885.649.00 $ 2.004.544.40 885,649.00 2,004,544.40 Total Capital Assets Not Being Depreciated $ 2.226.273.00 $ 2.004,544.40 $ 887,519.09 $ 3,343,298.31 Capital Assets Being Depreciated Buildings and Improvements Equipment Land Improvements $55,114,812.00 $ 1,055,303.02 $ 407,351.00 $55,762,764.02 6,913,471.00 525,003.61 339,890.00 7,098,584.61 3,954,893.00 380,507.46 4,335,400.46 Less Accumulated Depreciation for: Buildings and Improvements Equipment Land Improvements 10,756,901.00 3,413,609.00 l,627.622.00 1,168,139.00 385,249.00 180,856.00 297,519.00 11,627,521.00 338,770.00 3,460,088.00 1,808.478.00 Total Capital Assets, Being Depreciated, Net $50.185.044.00 $ 226,570.09 $ 110.952.00 $50.300.662.09 Governmental Activity Capital Assets - Net $52,411,311.00 $ 2,231 I 114,42 $ 998A11.09 $53,643,260.40 Capital assets being acquired under capital leases as of June 30, 2008, are as follows: Governmental Funds Buildings and Improvements Less: Accumulated Depreciation $12,197,463.00 -857,697.00 $11,339,766.00 Current year depreciation expense by function is as follows: - 20 - THOMAS COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2008 EXHIBIT "I" Note 5: CAPITAL ASSETS Instruction Support Services Pupil Services Improvements of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation ofPlant Student Transportation Services Central Support Services Food Services $ 1,062,362.00 $ 99,555.00 5,688.00 67,183.00 23,630.00 70,720.00 4,822.00 31,780.00 214,995.00 90,529.00 608,902.00 62,980.00 $ 1,734,244.00 Note 6: RESTRICTED ASSETS Special Purpose Local Option Sales Tax (SPLOST), general obligation bond proceeds, Qualified Zone Academy Bonds (QZAB) escrow account and 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, 2008, were as follows: District-wide Capital Projects Bond SPLOST Proceeds Debt Service Funds Restricted Cash and Cash Equivalents: Debt Services Capital Acquisitions Restricted Investments: Debt Services $1,645,979.15 $ 507,430.27 $ 7,162,632.90 $ 497,435.69 Note 7: INTERFUND TRANSFERS Interfund transfers for the year ended June 30, 2008, consisted of the following: Transfer to Transfers From District-wide General Capital Fund Projects Debt Service Fund $ 264,506.92 $ 849,338.35 - 21 - THOMAS COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2008 EXHIBIT "I" Note 7: INTERFUND TRANSFERS Transfers are used to move property tax revenues collected by the General Fund and bond proceeds from the Capital Projects Fund to cover capital lease payments in the Debt Service Fund. Transfers from the Capital Projects Fund to Debt Service Fund were repaid from the Debt Service Fund in fiscal year 2009. Note 8: RISK MANAGEMENT The School District is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors or omissions; job related illness or injuries to employees; acts of God and unemployment compensation. The School District has obtained commercial insurance for risk ofloss associated with torts, assets, errors or omissions,job related illness or injuries to employees and acts ofGod. The School District has neither significantly reduced coverage for these risks nor incurred losses (settlements) which exceeded the School District's insurance coverage in any of the past three years. The School District is self-insured with regard to unemployment compensation claims. The School District accounts for claims within the General Fund with expenses/expenditures and liabilities being reported when it is probable that a loss has occurred, and the amount ofthat loss can be reasonably estimated. Changes in the unemployment compensation claims liability during the last two fiscal years are as follows: 2007 2008 Beginning of Year Liability Claims and Changes in Estimates Claims Paid EndofYear Liability $ 0.00 $ 533.00 $ 533.00 $ 0.00 $ 0.00 $ 380.00 $ 380.00 $ 0.00 The School District has purchased surety bonds to provide additional insurance coverage as follows: Position Covered Amount Superintendent All Other Employees (Per Loss) $ 100,000.00 $ 100,000.00 Note 9: LONG-TERM DEBT CAPITAL LEASES The Thomas County Board ofEducation entered into various lease agreements including a Qualified Zone Academy Bond as lessee for the purpose of renovating, repairing and equipping several - 22 - THOMAS COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2008 EXHIBIT "I" Note 9: LONG-TERM DEBT schools and related facilities in the School District. These lease agreements qualify as capital leases for accounting purposes. COMPENSATED ABSENCES Compensated absences represent obligations ofthe School District relating to employees' rights to receive compensation for future absences based upon service already rendered. This obligation relates only to vesting accumulating leave in which payment is probable and can be reasonably estimated. Typically, the General Fund is the fund used to liquidate this long-term debt. The School District uses the vesting method to compute compensated absences. GENERAL OBLIGATION DEBT OUTSTANDING General Obligation Bonds currently outstanding are as follows: Purpose Interest Rate Amount General Government - Series 2007 2.964% $ 8.000.000.00 Voters have authorized $5,000,000.00 in general obligation debt for capital outlay which was not issued as of June 30, 2008. The changes in Long-Term Debt during the fiscal year ended June 30, 2008, were as follows: G.0. Bonds Capital Leases Compensated Absences Balance July 1, 2007 Governmental Funds Additions Deductions Balance June 30. 2008 Due Within One Year $ 3,235,000.00 $ 8,000,000.00 $ 3,235,000.00 $ 8,000,000.00 $ 1,445,000.00 11,155,000.00 680,000.00 10,475,000.00 700,000.00 252.715.09 171,275.37 196.951.00 227.039.46 92,765.03 $14,6~2,115 Q2 $ 8,111 215 31 $ ~.111 251 QQ $18,102 Q3H6 $ 2 231165.03 At June 30, 2008, payments due by fiscal year which includes principal and interest for these items are as follows: - 23 - THOMAS COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2008 EXHIBIT "I" Note 9: LONG-TERM DEBT Fiscal Year Ended June 30 Capital Leases Principal Interest 2009 2010 2011 2012 2013 2014 - 2018 2019 - 2022 $ 700,000.00 $ 311,785.50 725,000.00 286,853.00 755,000.00 261,031.50 775,000.00 234,140.50 800,000.00 206,536.50 6,190,000.00 582,841.50 530,000.00 18,656.00 Total Principal and Interest $10,475,000.00 $ 1,901,844.50 Fiscal Year Ended June 30 General Obligation Debt Principal Interest 2009 2010 2011 2012 2013 $ 1,445,000.00 $ 283,885.33 1,555,000.00 194,290.20 1,610,000.00 148,200.00 1,665,000.00 100,479.60 1,725,000.00 51,129.00 Total Principal and Interest $ 8,000,000.00 $ 777,984.13 Note 10: ON-BEHALF PAYMENTS The School District has recognized revenues and costs in the amount of $1,141,320.72 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 $1,108,177.91 Paid to the Teachers' Retirement System For Teachers' Retirement System (TRS) Employer's Cost In the amount of $28,529.81 - 24 - THOMAS COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2008 EXHIBIT "I" Note 10: ON-BEHALF PAYMENTS 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 $4,613.00 Note 11: SPECIAL ITEMS On August 22, 2007, the School District sold 2.322 acres that housed the School District's Administrative offices for $1,216,050.00, resulting in a gain of$1,148,920.00. The carrying value ofthe building and the cost ofthe related land of$67,130.00 was properly removed from the capital asset records by the School District. The sale is reported as a Special Item on the Statement of Activities. Note 12: SIGNIFICANT COMMITMENTS The following is an analysis ofsignificant outstanding construction or renovation contracts executed by the School District as of June 30, 2008, together with funding available: Project Unearned Executed Contracts Funding Available From State Garrison Pilcher Renovation Garrison Pilcher Gymnasium High School Media Center and Cafeteria Renovation High School Roof Project- 09RA-736-019 $ 520,079.97 25,458.60 960,618.63 1,425,824.48 $ 367,231.00 $ 2,931,981.68 $ 367,231.00 The amounts described in this note are not reflected in the basic financial statements. Note 13: SIGNIFICANT CONTINGENT LIABILITIES Amounts received or receivable principally from the Federal government are subject to audit and review by granter agencies. This could result in requests for reimbursement to the granter 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. - 25 - THOMAS COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2008 EXHIBIT "I" Note 14: POSTEMPLOYMENT BENEFITS Georgia Retiree Health Benefit Fund Plan Description. The School District contributes to the Georgia Retiree Health Benefit Fund ("GRHBF"), a cost-sharing multiple-employer defined benefit postemployment healthcare plan administered by the Department ofCommunity Health. GRHBF provides health insurance benefits to eligible retirees and their qualified beneficiaries. Pursuant to Title 45, Chapter 18 ofthe Official Code ofGeorgia Annotated, the authority to establish and amend the benefit provisions ofthe plan is assigned to the Board of Community Health. The Department of Community Health issues a publicly available financial report that includes financial statements and required supplementary information for GRHBF. That report may be obtained from the Department ofCommunity Health at 2 Peachtree Street, Atlanta, Georgia 30303. Funding Policy. The contribution requirements of plan members and participating employers are established and may be amended by the Board of Community Health. Contributions of plan members or beneficiaries receiving benefits vary based on plan election, dependent coverage, and Medicare eligibility and election. On average, plan members pay approximately twenty-five percent (25%) of the cost of health insurance coverage. Participating employers are statutorily required to contribute in accordance with the employer contribution rate established by the Board of Community Health. This contribution rate is established to fund both the active and retired employee health insurance plans based on projected pay-as-you-go financing requirements. The employer contribution rates for the combined active and retiree plans for the fiscal year ended June 30, 2008, were as follows: Teachers Non-Certificated Employees 18.534% of state-based salaries $162.72 per month The School District's contribution to the health insurance plans for the fiscal year ended June 30, 2008, was $5,097,775.00, which equaled the required contribution. Note 15: 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 ofGeorgia (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. -26 - THOMAS COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2008 EXHIBIT "I" Note 15: RETIREMENT PLANS 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 2008 2007 2006 100% 100% 100% $2,778,686.37 $2,663,307.42 $ 2,439,408.00 - 27 - (This page left intentionally blank) THOMAS COUNTY BOARD OF EDUCATION GENERAL FUND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL YEAR ENDED JUNE 30, 2008 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 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 NONAPPROPRIATED BUDGETS ORIGINAL (1) (2) FINAL (1) (2) ACTUAL AMOUNTS $ 9,106,250.00 $ 9,022,156.00 $ 8,955,469.03 217,296.79 34,564,674.00 34,810,521.00 35,819,523.98 5,955,895.00 5,808,379.00 5,900,480.64 664,000.00 663,000.00 967,487.88 340,000.00 255,000.00 308,426.65 273,500.00 328,151.00 1,395,093.58 $ 50,904,319.00 $ 50,887,207.00 $ 53,563,778.55 $ 33,262,210.25 $ 33,655,988.00 $ 34,400,730.45 2,703,551.00 2,942,555.00 712,450.00 631,972.00 2,552,395.00 314,000.00 3,207,680.00 1,738,002.00 276,050.00 224,653.00 3,015,500.00 2,761,958.00 2,600,871.00 718,101.00 617,632.00 2,716,105.00 305,928.00 3,266,270.00 1,868,878.00 257,040.00 216,320.00 2,500,000.00 3,139,116.63 2,671,448.46 778,241.48 606,292.38 2,805,923.06 330,528.95 3,366,668.09 2,011,535.34 270,575.93 224,898.83 429,561.97 2,911,558.46 $ 51,581,018.25 $ 51,485,091.00 $ 53,947,080.03 $ -676 699.25 $ -597 884.00 $ -383,301.48 $ 50,000.00 -311, 123.00 $ -261, 123.00 $ -264,506.92 $ -261, 123.00 $ -261, 123.00 $ -264,506.92 $ -937,822.25 $ -859,007.00 $ -647,808.40 5,275,641.43 5,275,641.43 5,275,641.43 Fund Balances - Ending $ 4,337,819.18 $ 4,416,634.43 $ 4,627,833.03 Notes to the Schedule of Revenues, Expenditures and Changes in Fund Balances Budget and Actual (1) Original and Final Budget amounts do not include budgeted revenues or expenditures of the various principal accounts. (2) Original and Final Budget amounts include Scholarship Funds which are not part of the General Fund. The accompanying schedule of revenues, expenditures and changes in fund balances budget and actual is presented on the modified accrual basis of accounting which is the basis of accounting used in the presentation of the fund financial statements. See notes to the basic financial statements. - 29 - THOMAS COUNTY BOARD OF EDUCATION SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS YEAR ENDED JUNE 30, 2008 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 Pass-Through From Georgia Department of Human Resources Special Education Grants to States Total Special Education Cluster Other Programs Pass-Through From Georgia Department of Education Career and Technical Education - Basic Grants to States Enhancing Education Through Technology Program Improving Teacher Quality State Grants Migrant Education Rural Education State Grants for Innovative Programs Title I Grants to Local Educational Agencies Total U.S. Department of Education Defense, U.S. Department of Direct Department of the Air Force R.O.T.C. Program Total Federal Financial Assistance N/A = Not Available CFDA NUMBER PASSTHROUGH ENTITY ID NUMBER EXPENDITURES IN PERIOD 10.553 10.555 N/A N/A $ $ (2) 2,550,528.63 2,550,528.63 10.550 NIA $ 211 421.36 2,761,949.99 . 84.027 . 84.173 . 84.027 N/A $ N/A 1,543,143.86 47,958.00 NIA $ 101,674.94 1,692,776.80 84.048 . 84.318 84.367 84.011 84.358 84.298 84.010 N/A N/A N/A N/A N/A NIA N/A $ 51,566.00 96,250.00 330,718.00 57,458.58 198,312.11 8,369.00 1,211,567.00 3 647,017.49 $ 45,452.21 $ ===6!:,;,4=54,;,.,4=1=9=.6=9 - 30 - THOMAS COUNTY BOARD OF EDUCATION SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS YEAR ENDED JUNE 30, 2008 SCHEDULE "2" Notes to the Schedule of Expenditures of Federal Awards (1) The amount shown for the Food Donation Program represents the Federally assigned value of nonmonetary assistance for donated commodities received and/or consumed by the School District during the current fiscal year. (2) Expenditures for the funds earned on the School Breakfast Program ($721,054.84) were not maintained separately and are included in the 2008 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 Thomas County Board of Education and is presented on the modified accrual basis of accounting which is the basis of accounting used in the presentation of the fund financial statements. See notes to the basic financial statements. - 31 - THOMAS COUNTY BOARD OF EDUCATION SCHEDULE OF STATE REVENUE YEAR ENDED JUNE 30, 2008 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 Primary Grades (1-3) Program Primary Grades - Early Intervention (1-3) Program Upper Elementary Grades (4-5) Program Upper Elementary Grades - Early Intervention (4-5) Program Middle Grades (6-8) Program Middle School (6-8) Program High School General Education (9-12) Program Vocational Laboratory (9-12) Program Students with Disabilities, Categories I - V 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 Nursing Services Vocational Supervisors Migrant Education Mid-term Adjustment Hold-Harmless Education Equalization Funding Grant Food Services Vocational Education Amended Formula Adjustment Other State Programs Academic Coaches Apprenticeship Program Graduation Coaches - High School Graduation Coaches - Middle School Health Insurance National Teacher Certification Preschool Handicapped Program Remedial Summer School Severely Emotionally Disturbed Teachers' Retirement Virtual Schools - 32 - SCHEDULE "3" GOVERNMENTAL FUND TYPE GENERAL FUND $ 1,231,063.26 1,588,530.00 3,620,729.00 893,912.00 1,708,989.00 302,931.00 -88,563.00 3,592,075.00 3,045,325.00 1,170,961.00 4,180,743.00 505,043.00 265,847.00 287,957.00 48,097.00 576,886.00 180,311.00 113,932.00 826,610.00 1,067,135.00 1,449,247.00 827,914.00 127,362.00 20,000.00 108,245.00 17,327.00 12,241.00 220,931.00 4,062,360.00 154,888.00 29,278.00 -482,568.00 79,161.00 21,296.00 117,290.00 42,096.00 1,108,177.91 30,162.00 168,306.00 6,884.00 2,541,120.00 28,529.81 150.00 THOMAS COUNTY BOARD OF EDUCATION SCHEDULE OF STATE REVENUE YEAR ENDED JUNE 30, 2008 AGENCY/FUNDING GRANTS Office of Planning and Budget Georgia Teaching Force Program (GTEP) Office of Treasury and Fiscal Services Public School Employees Retirement SCHEDULE "3" GOVERNMENTAL FUND TYPE GENERAL FUND $ 6,000.00 4,613.00 $ ===35=1'=81=9=,5=2=3.=9=8 See notes to the basic financial statements. - 33 - THOMAS COUNTY BOARD OF EDUCATION SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS YEAR ENDED JUNE 30, 2008 SCHEDULE "4" PROJECT ORIGINAL ESTIMATED COST(1l CURRENT ESTIMATED COSTS(2l AMOUNT EXPENDED IN CURRENT YEAR(3l AMOUNT EXPENDED IN PRIOR YEARS(3l PROJECT STATUS SPLOSTI: To acquire land and construct and equip a new Pre-K/Kindergarten School, a new middle school, and a new 9th Grade Academy; renovations and improvements to Garrison-Pilcher Elementary School, including roof, flooring, and restrooms, to include handicap access; renovations and improvements to Cross Creek Elementary School, including restrooms and entrances; renovations and improvements to Central Middle School, including the installation of new HVAC systems, installing rubber tile at classroom building entrances, carpeting, auditorium and gymnasium improvements, and restroom facilities; renovations and improvements to Thomas County Central High School, including metal lockers, renovations to restrooms and athletic facilities; renovations and improvements to Chappelle School, including science labs, interior painting, restroom improvements, and the installation or replacement of HVAC systems; the acquisition and equipping of transportation and maintenance facilities, including the replacement of school buses and classroom furniture, additions to the maintenance shop and bus garage, resurfacing of parking areas and purchasing necessary related equipment; renovations and improvements to administrative offices; athletic facilities and equipment; and acquisition of classroom technology, including networking and administrative systems. $ 22,400,000.00 $ 39,798,635.07 $ 2,953,681.29 $ 36,844,953.78 Completed SPLOSTII: For renovations, new construction, improvements to and equipment for Garrison Pilcher Elementary, Cross Creek Elementary, Thomas County Middle, Thomas County Central High, and Hand-in-Hand Schools; renovations and improvements to the Board of Education Auditorium and Pathways Complex; acquisition and equipping of transportation, maintenance, and warehouse facilities, including school buses and vehicles; relocation and renovation of county school system offices; renovations and improvements to athletic facilities; system-wide technology including administrative systems and 21st Century Classrooms' purchase of textbooks; and retirement of previously incurred general obligations debt. 32,256,000.00 28,613,380.00 Ongoing $ 54,656,000.00 $ 68,412,015.07 $ 2,953,681.29 $ 36,844,953.78 (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 Thomas 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. - 34- THOMAS COUNTY BOARD OF EDUCATION GENERAL FUND - QUALITY BASIC EDUCATION PROGRAM (QBE) ALLOTMENTS AND EXPENDITURES - BY PROGRAM YEAR ENDED JUNE 30, 2008 SCHEDULE "5" DESCRIPTION ALLOTMENTS FROM GEORGIA DEPARTMENT OF EDUCATION (1l (2) ELIGIBLE QBE PROGRAM COSTS SALARIES OPERATIONS TOTAL 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 Gifted Student - Category VI Remedial Education Program Alternative Education Program English Speakers of Other Languages (ESOL) 1,798,493.00 $ 4,018,699.00 999,805.00 1,894,943.00 338,461.00 3,883,859.00 3,418,690.00 1,286,596.00 4,713,396.00 555,820.00 299,596.00 320,013.00 53,580.00 1,617,682.43 $ 262,788.77 4,015,252.82 898,338.37 1,955,936.39 609,308.95 3,906,434.10 4,875,128.00 941,714.33 241,776.78 317,909.05 4,404,435.69 301,118.34 576,120.79 339,629.94 422,048.11 32,135.70 128,867.74 $ 8,059.05 195,957.70 14,401.79 158,713.52 2,376.70 285,580.91 332,582.84 88,299.77 62.99 1,263.08 167,369.64 50.40 5,291.84 1,400.00 4,103.94 866.25 1,746,550.17 270,847.82 4,211,210.52 912,740.16 2, 114,649.91 611,685.65 4,192,015.01 5,207,710.84 1,030,014.10 241,839.77 319,172.13 4,571,805.33 301,168.74 581,412.63 341,029.94 426,152.05 33,001.95 TOTAL DIRECT INSTRUCTIONAL PROGRAMS $ 23,581,951.00 $ 25,717,758.56 $ 1,395,248.16 $ 27,113,006.72 Media Center Program Staff and Professional Development 643,363.00 127,561.00 604,360.99 76,195.65 107,330.02 94,375.07 711,691.01 170,570.72 TOTAL QBE FORMULA FUNDS $ 24,352,875.00 $ 26,398,315.20 $ 1,596,953.25 $ 27,995,268.45 (1) Comprised of State Funds plus Local Five Mill Share. (2) Allotments do not include the impact of the State amended formula adjustment. See notes to the basic financial statements. -35- SECTION II COMPLIANCE AND INTERNAL CONTROL REPORTS Russell W. Hinton STATE AUDITOR (404) 656-2174 DEPARTMENT OF AUDITS AND ACCOUNTS 270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400 April 15, 2009 Honorable Sonny Perdue, Governor Members of the General Assembly Members ofthe State Board of Education and Superintendent and Members ofthe Thomas 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 ofThomas County Board ofEducation as ofand for the year ended June 30, 2008, which collectively comprise Thomas County Board of Education's basic financial statements and have issued our report thereon dated April 15, 2009. We conducted our audit in accordance with auditing standards generally accepted in the United States ofAmerica and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Internal Control Over Financial Reporting In planning and performing our audit, we considered Thomas 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 Thomas County Board of Education's internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness of the Thomas 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 a certain deficiency in internal control over financial reporting that we consider to be a significant deficiency. 2008YB-30 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 affects the Thomas 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 Thomas County Board of Education's financial statements that is more than inconsequential will not be prevented or detected by the Thomas County Board of Education's internal control. We consider item FS-7361-08-01 in the accompanying Schedule ofFindings and Questioned Costs to be a significant deficiency 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 Thomas 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, we believe that the significant deficiency described above is not a material weakness. Compliance and Other Matters As part of obtaining reasonable assurance about whether Thomas 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 a certain matter that we have reported to management of Thomas County Board of Education in a separate letter dated April 15, 2009. Thomas County Board ofEducation's response to the findings identified in our audit is described in the accompanying Schedule of Management's Responses. We did not audit Thomas County Board of Education's response and, accordingly, we express no opinion on it. 2008YB-30 This report is intended solely for the information and use of management, members of the Thomas County Board of Education, others within the entity, Federal awarding agencies and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties. Respectfully submitted, ,.,....._.~'-C).4!~ Ru sell W. Hinton, CPA, CGFM State Auditor RWH:gp 2008YB-30 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 April 15, 2009 Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education and Superintendent and Members of the Thomas County Board of Education REPORT ON COMPLIANCE WITH REQUIREMENTS APPLICABLE TO EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH 0MB CIRCULARA-133 Ladies and Gentlemen: Compliance We have audited the compliance of Thomas 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, 2008. Thomas 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 Thomas County Board of Education's management. Our responsibility is to express an opinion on Thomas County Board of Education's compliance based on our audit. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States ofAmerica; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the 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 Thomas County Board of Education's compliance with those requirements and performing such other procedures as we considered necessary in the 2008SA-10 circumstances. We believe that our audit provides a reasonable basis for our opinion. Our audit does not provide a legal determination on Thomas County Board of Education's compliance with those requirements. In our opinion, the Thomas 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, 2008. Internal Control Over Compliance The management of Thomas 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 Thomas 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 of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness ofthe Thomas County Board ofEducation's internal control over compliance. A control deficiency in an entity's internal control over compliance exists when the design or operation ofa control does not allow management or employees, in the normal course ofperforming their assigned functions, to prevent or detect noncompliance with a type ofcompliance requirement of a Federal program on a timely basis. A significant deficiency is a control deficiency, or combination ofcontrol deficiencies, that adversely affects the entity's ability to administer a Federal program such that there is more than a remote likelihood that noncompliance with a type of compliance requirement of a Federal program that is more than inconsequential will not be prevented or detected by the entity's internal control. 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. 2008SA-10 This report is intended solely for the information and use of management, members ofthe Thomas 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, ~(Q_~~~ Russell W. Hinton, CPA, CGFM State Auditor RWH:gp 2008SA-10 SECTION III AUDITEE'S RESPONSE TO PRIOR YEAR FINDINGS AND QUESTIONED COSTS THOMAS COUNTY BOARD OF EDUCATION AUDITEE'S RESPONSE SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2008 PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS FINDING CONTROL NUMBER AND STATUS FS-7361-06-01 FS-7361-07-01 Further Action Not Warranted Unresolved - See Corrective Action/Responses CORRECTIVE ACTION/RESPONSES CASH AND CASH EQUIVALENTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Accounting Procedures over School Activity Accounts Finding Control Number: FS-7361-07-01 The Thomas County School's plan to mitigate internal control weakness over school accounts: 1.) Cash and Cash Equivalents - The principal will sign each monthly bank reconciliation indicating each month to indicate their review and approval. 2.) Revenues/Receivables/Receipts -A secretary other than the school bookkeeper will take all deposits to the bank, will count all deposits, and will verify the deposit agrees with receipt(s) issued by the bookkeeper. The secretary will sign a sheet to be attached to each validated bank deposit slip indicating these steps had been completed. 3.) Expenditures/Liabilities/Disbursements - Each expenditure/disbursement will be initiated by a signed requisition by an appropriate oversight person (examples club sponsor over club accounts, Athletic Director for athletic funds, Principal for principal accounts or other accounts.) PRIOR YEAR FEDERAL AWARD FINDINGS AND QUESTIONED COSTS No matters were reported. SECTION IV FINDINGS AND QUESTIONED COSTS THOMAS COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2008 I SUMMARY OF AUDITOR'S RESULTS 1. Type of Report Issued on the Financial Statements The auditor's opinion on the Thomas 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 Thomas County Board ofEducation disclosed a financial statement significant deficiency related to the following control categories. Cash and Cash Equivalents Revenues/Receivables/Receipts Expenditures/Liabilities/Disbursements The significant deficiency described above is not considered to be a material weakness. 3. Noncompliance Material to the Financial Statements The audit of the Thomas 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 Thomas 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 Thomas County Board of Education's report on compliance with requirements applicable to major programs was unqualified. 6. Audit Findings Required to be Reported by Section .5 IO(a) of 0MB Circular A-133 The Thomas County Board ofEducation's audit did not disclose audit findings required to be reported by section .510(a) ofOMB Circular A-133. 7. Major Programs Federal awards audited as major programs are as follows: 84.027 Special Education - Grants to States 84.173 Special Education - Preschool Grants 84.367 Improving Teacher Quality State Grants 8. Type "A" Program Dollar Threshold The dollar threshold for type "A" programs was $300,000.00. 9. Low Risk Auditee The Thomas County Board of Education qualified as a low risk auditee as defined by Section .530 ofOMB Circular A-133. - 1- THOMAS COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2008 II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS CASH AND CASH EQUIVALENTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Accounting Procedures over School Activity Accounts Significant Deficiency Finding Control Number: FS-7361-08-01 Condition: This is a repeat finding (FS-7361-04-01, FS-7361-05-01, FS-7361-06-01 and FS-7361-07-01) from the years ended June 30, 2004, 2005, 2006 and 2007, 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 proper separation of duties and reasonable assurance that transactions are processed according to established procedures. Questioned Cost: NIA Information: Cash and Cash Equivalents The bank reconciliation function was not separated from the record keeping and voucher payment functions. The bank reconciliation did not include evidence of approval by someone other than the person performing the bank reconciliation. Revenues/Receivables/Receipts Deposit preparation was not separated from the record keeping and cash custody functions. We identified receipts that were not deposited in a timely manner and several receipts did not contain adequate supporting documentation. Expenditures/Liabilities/Disbursements The check writing function was not separated from the record keeping or processing of signed checks. -2- THOMAS COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2008 II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS CASH AND CASH EQUNALENTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Accounting Procedures over School Activity Accounts Significant Deficiency Finding Control Number: FS-7361-08-0 I Cause: The School District has not assigned responsibilities to achieve appropriate separation of duties nor utilized management oversight of the incompatible activities to properly safeguard assets. These deficiencies were a result of management's failure to ensure that internal controls were established, implemented and functioning at the school level. Effect: Errors and/or irregularities may not be detected in a timely manner. Recommendation: The School District should implement procedures to ensure that the key accounting functions of custody, record keeping and authorization are separated and/or utilize management oversight of these incompatible activities. Additionally, management should revise and monitor controls to provide reasonable assurance that transactions are processed according to established procedures. III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS No matters were reported. -3- SECTIONV MANAGEMENT'S RESPONSES THOMAS COUNTY BOARD OF EDUCATION SCHEDULE OF MANAGEMENT'S RESPONSES YEAR ENDED JUNE 30, 2008 Finding Control Number: FS-7361-08-01 We concur with this finding. For the second consecutive year, we have instructed our schools to implement the following procedures to eliminate the internal control deficiencies: Thomas County Schools' plan to mitigate internal control weakness over school activity accounts: 1. Expenditure/Disbursements - each expenditure/disbursement will be initiated by a signed requisition by an appropriate oversight person (examples - club sponsor over club accounts, Athletic Director for athletic funds, Principal for principal account or other accounts). Expenditures will not be issued until approved by the Principal or appropriate Supervisor. 2. Revenues/Receipts - A secretary other than the school bookkeeper will take all deposits to the bank, will count all deposits, and will verify the deposit agrees with receipt(s) issued by the bookkeeper. The secretary will sign a sheet to be attached to each validated bank deposit slip indicating these steps had been completed. 3. Bank Reconciliation - The principal will sign the monthly bank reconciliation each month to indicate their review and approval. Contact Person: Joey N. Holland Title: Director of Finance Phone: (229) 225-4380 Ext. 112 Fax: (229) 225-5233 E-mail: hollandj@rose.net