TOOMBS COUNTY BOARD OF EDUCATION LYONS, GEORGIA REPORT ON AUDIT OF THE FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2006 STATE OF GEORGIA DEPARTMENT OF AUDITS AND ACCOUNTS Russell W. Hinton State Auditor TOOMBS 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 NOTES TO THE BASIC FINANCIAL STATEMENTS 9 SCHEDULES REQUIRED SUPPLEMENTARY INFORMATION 1 SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL GENERAL FUND 21 TOOMBS COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS - SECTION I FINANCIAL SCHEDULES SUPPLEMENTARY INFORMATION 2 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS 22 3 SCHEDULE OF STATE REVENUE 23 4 SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS 24 5 ALLOTMENTS AND EXPENDITURES GENERAL FUND - QUALITY BASIC EDUCATION PROGRAMS (QBE) BY PROGRAM 25 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 TOOMBS COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS - SECTIONV MANAGEMENT'S RESPONSES SCHEDULE OF MANAGEMENT'S RESPONSES SECTION I FINANCIAL Russell W. Hinton STATE AUDITOR (404) 656-2174 DEPARTMENT OF AUDITS AND ACCOUNTS 270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400 February 5, 2007 Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education and Superintendent and Members of the Toombs 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 H) of the Toombs County Board of Education, as of and for the year ended June 30, 2006, which collectively comprise the Board's basic financial statements as listed in the table of contents. These financial statements are the responsibility ofthe Toombs 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 of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free ofmaterial misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes 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 opm10ns. In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, each major fund, and the aggregate remaining fund information ofthe Toombs County Board of Education, as ofJune 30, 2006, 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. 2006ARL-11 In accordance with Government Auditing Standards, we have also issued our report dated February 5, 2007, on our consideration ofthe Toombs County Board ofEducation's internal control over financial reporting and our tests of its compliance with certain provisions oflaws, 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 ix and page 21 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 Toombs 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, RWH:gp 2006ARL-11 Russell W. Hinton, CPA, CGFM State Auditor TOOMBS COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2006 The discussion and analysis of Toombs County Board of Education's financial performance provides an overall review of the Board's financial activities for the fiscal year ended June 30, 2006. The intent of this discussion and analysis is to review the Board's financial position as a whole; readers should also review the notes to the basic financial statements to enhance their understanding of the Board's financial performance. Financial Highlights Key financial highlights for 2006, are as follows: In total, net assets increased in excess of $2.5 million, which is a significant increase and improvement from the $226,053 decrease in net assets in 2005. This total increase was due to governmental activities since the Board has no business type activities. General revenues accounted for $7.93 million in revenue or 30.1 percent of all revenues. Program specific revenues in the form of charges for services, grants, and contributions accounted for $18.42 million or 69.9 percent of total revenues of $26.35 million. The Board had $23.79 million in expenses related to governmental activities; only $18.42 million of these expenses were offset by program specific charges for services, grants or contributions. General revenues (primarily taxes) of $7.93 million were adequate to provide for these programs. Among major funds the general fund has $24.1 million in revenues, $23.7 million in expenditures and $98,260 in other financing uses. The general fund's fund balance increased to $3.5 million from $3.2 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 that the reader can understand the Toombs County Board of Education as a financial whole, or as an entire operating entity. The Statement of Net Assets and Statement ofActivities provide information about the activities of the entire Board, presenting both an aggregate view of the 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. In the case of the Toombs County Board of Education, the general fund is by far the most significant fund. 1 TOOMBS COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2006 Reporting the Board as a Whole Statement ofNet Assets and the Statement ofActivities While this document contains a large number of funds used by the Board to provide programs and activities, the view of the Board as a whole looks at all financial transactions and asks the question, "How did we do financially during fiscal year 2006?" The Statement of Net Assets and the Statement of Activities answers this question. These statements include all assets and liabilities using the accrual basis ofaccounting, similar to the accounting method used by most private-sector companies. The accrual basis of accounting takes into account all of the current year's revenues and expenses regardless of when cash is received or paid. These two statements report the Board's net assets and changes in those assets. The change in net assets is important because it tells the reader that, for the Board as a whole, the financial position of the Board has improved or diminished. The causes of this change may be the result of many factors - some financial, some not. Nonfinancial factors include the Board's property tax base, facility conditions, required educational programs, and other additional factors. In the Statement of Net Assets and the Statement of Activities, the Board has one distinct type of activity: Governmental Activities - All of the Board's programs and services are reported here including instruction, support services, operation and maintenance of plant, pupil transportation, food services, principal's 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 and the capital projects fund. Governmental Funds: Most of the Board's activities are reported in governmental funds, which focus on how money flows into and out of those funds and the balances that are left at year-end and therefore available for spending in future periods. These funds are reported using an accounting method called modified accrual accounting, which measures cash and all other financial assets that can be readily 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 you determine whether there are more or fewer financial resources that can be spent in the near future to provide educational programs. The relationship (or differences) between governmental activities (reported in the Statement of Net Assets and Statement of Activities) and governmental funds is reconciled in the financial statements. 11 TOOMBS COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2006 Fiduciary Funds: The Board is the trustee, or fiduciary, for assets that belong to others, such as the 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 these assets can not be used to finance its operations. The Board as Whole The perspective of the Statement of Net Assets is of the Board as a whole. Table 1 provides a summary of the Board's net assets for fiscal year 2006 compared to fiscal year 2005. Table 1 Net Assets Governmental Activities Fiscal Fiscal Year 2006 Year 2005 Assets Current and Other Assets Capital Assets, Net $ 10,159,117 $ 8,492,923 23,976,375 22,924,213 Total Assets $ 34,135,492 $ 31,417,136 Liabilities Current and Other Liabilities Long-Term Liabilities $ 2,777,020 $ 2,621,225 0 0 Total Liabilities $ 2,777,020 $ 2,621,225 Net Assets Invested in Capital Assets, Net of Related Debt Restricted Unrestricted $ 23,976,375 2,582,804 4,799,293 $ 22,924,213 1,469,646 4,402,052 Total Net Assets $ 31,358,472 $ 28,795,911 Total net assets increased in excess of $2.5 million in fiscal year 2006. 111 TOOMBS COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2006 Table 2 Change in Net Assets Revenues Program Revenues: Charges for Services and Sales Operating Grants and Contributions Capital Grants and Contributions Governmental Activities Fiscal Fiscal Year 2006 Year 2005 $ 609,704 17,659,788 150,247 $ 656,981 16,353,005 82,658 Total Program Revenues $ 18,419,739 $ 17,092,644 General Revenues: Taxes Property Taxes For Maintenance and Operations $ 3,096,765 $ 2,920,694 Railroad Cars 5,029 4,512 Sales Taxes Special Purpose Local Option Sales Tax For Capital Projects 2,215,733 621,799 Real Estate 24,921 24,111 Grants and Contributions not Restricted to Specific Programs 2,037,792 1,592,801 Investment Earnings 76,848 65,165 Miscellaneous 477 809 241,077 Total General Revenues $ 7,934,897 $ 5,470,159 Total Revenues $ 26,354,636 $ 22,562,803 Program Expenses 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 $ 15,535,273 900,979 725,729 435,467 245,865 1,299,336 246,836 1,438,863 1,064,420 6,623 38,648 161,345 1,692,691 $ 14,748,408 777,507 566,552 523,492 219,435 1,256,466 178,726 1,492,648 1,217,791 5,246 39,819 270,987 1,491,779 Total Expenses $ 23,792,075 $ 22,788,856 Increase (Decrease) in Net Assets $ 2!562!561 $ -226!053 IV TOOMBS COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2006 Table 2 shows the changes in net assets for fiscal year 2006 compared to the changes in net assets associated with fiscal year 2005. Figure A illustrates the funding sources of total revenues. 67 percent of the Board's revenues are derived from program specific operating and capital grants. Property taxes make up 12 percent of the total funding, while an additional 9 percent is earned from the county's sales taxes. Figure A Fiscal Year 2006 Sources of Revenues Other 9% Charges for Services 2% Property Taxes 12% Capital Grants & Contributions 1% Operating Grants & Contributions 66% Governmental Activities As shown in Figure B, Governmental program expenses are comprised of the following: Instruction 65.30 percent, Support Services 26.91 percent, and Operations of Non-Instructional Services 7.79 percent. A more detailed account of these expenditures is provided in the illustration below. V TOOMBS COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2006 Figure B Fiscal Year 2006 Govermental Activities Expenditures Enterprise Operations Other Support Services 0.68% 0.16% Central Support Services 0.03% Food Services 7.11% Maintenance and Operation of Plant 6.05% Business Administration 1.04% School Administration 5.46% General Admi 1.03/4 Educational Media Services 1.83% Improvement of Instructional Services 3.05% Instruction 65.30% The Statement of Activities shows the cost of the program services and the charges for services and grants offsetting those services. Table 3 shows, for governmental activities, the total cost of services and the net cost of services comparing fiscal year 2006 with fiscal year 2005. That is, it identifies the cost of these services supported by tax revenue and unrestricted State entitlements. VI TOOMBS COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2006 Table 3 Governmental Activities Total Cost of Services Fiscal Fiscal Year 2006 Year 2005 Net Cost of Services Fiscal Fiscal Year 2006 Year 2005 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 $ 15,535,273 $ 14,748,408 $ 2,459,272$ 2,933,724 900,979 725,729 435,467 245,865 1,299,336 246~836 1,438,863 1,064,420 6,623 38,648 777,507 566,552 523,492 219,435 1,256,466 178,726 1,492,648 1,217,791 5,246 39,819 585,832 233,392 146,149 -197,126 648,787 246,182 679,727 306,905 6,623 4,626 379,998 279,314 173,515 -205,520 650,120 178,726 733,948 585,739 5,246 12,972 161,345 270,987 1,692,691 1,491,779 157,646 94,321 21,344 -52,914 Total Expenses $ 23,792,075 $ 22,788.856 $ 5,372,336$ 5,696,212 Although program revenues make up a majority of the revenues, the Board is still dependent upon tax revenues for governmental activities. Over 15 percent of instruction activities are supported through taxes and other general revenues; for all governmental activities, general revenue support is 22.58 percent. 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 $26.5 million and expenditures and other financing uses of $25.0 million. The overall increase of $1.5 million reflects the Board was able to meet its overall current costs. General Fund Budgeting Highlights The Board's budget is prepared according to Georgia law. The most significant budgeted fund is the General Fund. During the course of fiscal year 2006, 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. Vll TOOMBS COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2006 For the General Fund, the final budgeted revenues of $22,518,647 exceeded the original budgeted amount of $22,515,784 by only $2,863. The actual revenues of $24,109,858 exceeded the final budgeted amount by $1,591,211. The additional revenues were primarily the result of the Board obtaining additional state grants, conservative budgeting for property taxes and unpredictable miscellaneous revenues, and the inclusion of individual school and principal accounts that were not included in the final budget. The final budgeted expenditures of $23,718,575 exceeded the original budgeted amount of $22,966,906 by $751,669. The actual expenditures and other financing uses of $23,806,374 was $87,799 more than budgeted. Capital Assets and Debt Administration Capital Assets At the end of fiscal year 2006, the Board had $23,976,375 invested in capital assets, all in governmental activities. Table 4 shows fiscal year 2006, balances compared with fiscal year 2005, balances. Table 4 Capital Assets (Net of Depreciation) Governmental Activities Fiscal Fiscal Year 2006 Year 2005 Land Construction in Progress Buildings and Building Improvements Equipment Land Improvements $ 596,807 901,456 20,795,880 1,204,260 477 972 $ 596,807 16,768 20,849,888 1,031,531 429,219 Total $ 23!976)75 $ 22!924!213 The primary increase occurred in the category of Construction in Progress. This increase occurred because construction began on the new Lyons Upper Elementary School in fiscal year 2006. Debt At June 30, 2006, the Toombs County Board of Education had no outstanding long-term liabilities. Vlll TOOMBS COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2006 Current Issues Despite various funding issues, the Toombs County School District is strong financially. Furthermore, the Toombs County School District remains optimistic about its ability to maximize all financial resources to provide a quality education to its students. The Toombs County School System consists of five school locations: Lyons Primary School, Lyons Upper Elementary School, Toombs Central Elementary School, the newly constructed Toombs County Middle School, and Toombs County High School. In fiscal year 2006, construction began on the new Lyons Upper Elementary School, which is expected to near completion in December 2007. The Toombs County School District benefits from the proceeds of a Special Purpose Local Option Sales Tax (SPLOST). As the first SPLOST resolution was nearing expiration, the citizens of Toombs County voted to continue this educational special purpose local option sales tax. The second SPLOST resolution took effect on July 1, 2005, and shall continue until June 30,2010. Toombs County's agribusiness economy results in high migrant populations, and the Toombs County School System receives the second largest migrant education allotment in the state. These funds are used to ensure migrant children fully benefit from the same free public education provided to other children. Expansion of the migrant education program began in fiscal year 2006 and is continuing at the present time. It has been broadened to include supplemental after school instruction and transportation for the migrant education after school program, tutoring for out of school youth to bridge English skills for GED preparation, a parent advisory committee for parental input and suggestions, migrant education summer school, and migrant workers at each school site to assist with academic tutoring. This expansion in the migrant education program is expected to carry forward into fiscal year 2007, and beyond. Contacting the Board's Financial Management This report is designed to provide our citizens and taxpayers 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 require additional information, contact Crystal Crews, at the Toombs County Board of Education, 117 E. Wesley Avenue, Lyons, Georgia 30436. You may also email your questions to Crystal Crews at crewsc@toombs.k12.ga.us. IX TOOMBS COUNTY BOARD OF EDUCATION TOOMBS COUNTY BOARD OF EDUCATION STATEMENT OF NET ASSETS JUNE 30, 2006 ASSETS Cash and Cash Equivalents Investments Accounts Receivable, Net Taxes State Government Federal Government Other Capital Assets Land Construction in Progress Land Improvements Buildings Equipment Less: Accumulated Depreciation Total Assets LIABILITIES Accounts Payable Salaries Payable Total Liabilities NET ASSETS Invested in Capital Assets, Net of Related Debt Restricted for Continuation of Federal Programs Capital Projects Unrestricted Total Net Assets Total Liabilities and Net Assets EXHIBIT"A" GOVERNMENTAL ACTIVITIES $ 6,373,045 16,686 621,412 1,881,363 1,265,891 720 596,807 901,456 1,011,472 23,526,796 2,917,372 -4,977,528 $ ===3=4=,1=3=5,=49=2= $ 84,072 2,692,948 $ 2,777,020 $ 23,976,375 497,895 2,084,909 4,799,293 $ 31,358,472 $ ===3=4=,1=3=5=,4=92,... The notes to the basic financial statements are an integral part of this statement. -1- TOOMBS COUNTY BOARD OF EDUCATION STATEMENT OF ACTIVITIES FOR THE YEAR ENDED JUNE 30, 2006 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 Total Governmental Activities General Revenues Taxes Property Taxes For Maintenance and Operations Railroad Cars Sales Taxes Special Purpose Local Option Sales Tax For Capital Projects Real Estate Grants and Contributions not Restricted to Specific Programs Investment Earnings Miscellaneous Total General Revenues Change in Net Assets Net Assets - Beginning of Year EXPENSES CHARGES FOR SERVICES $ 15,535,273 $ 900,979 725,729 435,467 245,865 1,299,336 246,836 1,438,863 1,064,420 6,623 38,648 161,345 1,692,691 23,792,075 $ 286,565 323139 609 704 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 CAPITAL GRANTS AND GRANTS AND CONTRIBUTIONS CONTRIBUTIONS NET (EXPENSES) REVENUES AND CHANGES IN NET ASSETS $ 12,741,633 $ 314,391 491,872 286,893 442,663 648,075 251 757,328 673,645 33,210 1269827 $ 17,659,788 $ 47,803 $ 756 465 2,425 328 2,474 403 1,808 83,870 812 3,699 5404 150 247 $ -2,459,272 -585,832 -233,392 -146, 149 197,126 -648,787 -246,182 -679,727 -306,905 -6,623 -4,626 -157,646 -94 321 -5,372,336 $ 3,096,765 5,029 2,215,733 24,921 2,037,792 76,848 477 809 $ 7 934,897 $ 2,562,561 28 795 911 $ 31358472 -3- TOOMBS COUNTY BOARD OF EDUCATION BALANCE SHEET GOVERNMENTAL FUNDS JUNE 30, 2006 EXHIBIT"C" ASSETS Cash and Cash Equivalents Investments Accounts Receivable, Net Taxes State Government Federal Government Other Total Assets LIABILITIES AND FUND BALANCES LIABILITIES Accounts Payable Salaries Payable Total Liabilities FUND BALANCES Reserved for: Continuation of Federal Programs Capital Projects Unreserved Undesignated Reported in: General Fund Capital Projects Total Fund Balances Total Liabilities and Fund Balances GENERAL FUND DISTRICTWIDE CAPITAL PROJECTS FUND TOTAL $ 3,001,647 $ 3,371,398 $ 6,373,045 16,686 16,686 147,469 1,881,363 1,265,891 720 430,682 578,151 1,881,363 1,265,891 720 $ 6,313,776 $ 3,802,080 $ 10,115,856 $ 82,880 $ 2,692,948 $ 2,775,828 $ 1,192 $ 1 192 $ 84,072 2,692,948 2,777,020 $ 497,895 $ 497,895 $ 2,084,909 2,084,909 3,040,053 1715979 3,040,053 1 715 979 $ 3,537,948 $ 3,800,888 $ 7,338,836 $ 6,313,776 $ 3,802,080 $ 10,115,856 The notes to the basic financial statements are an integral part of this statement. -4- TOOMBS COUNTY BOARD OF EDUCATION RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO THE STATEMENT OF NET ASSETS JUNE 30, 2006 EXHIBIT"D" Total Fund Balances - Governmental Funds (Exhibit "C") Amounts reported for Governmental Activities in the Statement of Net Assets are different because: Capital Assets used in Governmental Activities are not financial resources and therefore are not reported in the funds. These assets consist of: Land Construction in Progress Land Improvements Buildings Equipment Accumulated Depreciation Total Capital Assets Some of the School District's property tax revenues will be collected after year end but are not available soon enough to pay for the current period's expenditures. $ 7,338,836 $ 596,807 901,456 1,011,472 23,526,796 2,917,372 -4,977,528 23,976,375 43 261 Net Assets of Governmental Activities (Exhibit "A") $ 31,358,472 The notes to the basic financial statements are an integral part of this statement. -5- TOOMBS COUNTY BOARD OF EDUCATION STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS YEAR ENDED JUNE 30, 2006 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 Total Expenditures Excess of Revenues over (under) Expenditures OTHER FINANCING SOURCES (USES) Transfers In Transfers Out Total Other Financing Sources (Uses) Net Change in Fund Balances Fund Balances - Beginning GENERAL FUND DISTRICTWIDE CAPITAL PROJECTS FUND TOTAL $ 3,061,506 $ 24,921 $ 2,215,733 15,822,180 4,025,647 609,704 40,299 36,549 525,601 $ 24,109,858 $ 2,252,282 $ 3,061,506 2,240,654 15,822,180 4,025,647 609,704 76,848 525,601 26,362,140 $ 15,274,870 $ 896,565 732,805 421,306 243,953 1,284,891 244,485 1,641,532 $ 1,080,829 6,623 33,904 157,092 1,661,134 28 125 299,887 884,028 $ 23,708,114 $ 1.183,915 $ $ 401 744 $ 1,068,367 $ 15,274,870 896,565 732,805 421,306 243,953 1,284,891 244,485 1,941,419 1,080,829 6,623 33,904 157,092 1,661,134 912 153 24,892,029 1470111 $ 98,260 $ $ -98,260 $ -98,260 $ 98 260 $ $ 303,484 $ 1,166,627 $ 3,234,464 2,634,261 98,260 -98,260 0 1,470,111 5,868,725 Fund Balances - Ending $ 3,537,948 $ 3,800,888 $ ===7,=33=8,8=36= The notes to the basic financial statements are an integral part of this statement. -6 - TOOMBS 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, 2006 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 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 carrying value of the building/equipment sold. $ 1,645,400 -545 446 1,470,111 1,099,954 40,288 -47 792 Change in Net Assets of Governmental Activities (Exhibit "B") $ ==2=,5=6=2=,5=61= The notes to the basic financial statements are an integral part of this statement. -7- TOOMBS COUNTY BOARD OF EDUCATION STATEMENT OF FIDUCIARY NET ASSETS FIDUCIARY FUNDS JUNE 30, 2006 ASSETS Cash and Cash Equivalents LIABILITIES Funds Held for Others EXHIBIT "G" AGENCY FUNDS $ ===64-49=4= $ ===64===49=4= The notes to the basic financial statements are an integral part of this statement. -8- TOOMBS COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2006 EXHIBIT "H" Note 1: DESCRIPTION OF SCHOOL DISTRICT AND REPORTING ENTITY REPORTING ENTITY The Toombs County Board of Education (School District) was established under the laws of the State of Georgia and operates under the guidance of a school board elected by the voters and a Superintendent appointed by the Board. The Board is organized as a separate legal entity and has the power to levy taxes and issue bonds. Its budget is not subject to approval by any other entity. Accordingly, the School District is a primary government and consists of all the organizations that compose its legal entity. Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BASIS OF PRESENTATION The School District's basic financial statements are collectively comprised of the District-wide financial statements, fund financial statements and notes to the basic financial statements of the Toombs County Board of Education. District-wide Statements: The Statement ofNet Assets and the Statement ofActivities display information about the financial activities ofthe overall School District, except for fiduciary activities. Eliminations have been made to minimize the double counting of internal activities. Governmental activities generally are financed through taxes, intergovernmental revenues, and other nonexchange transactions. The Statement of Activities presents a comparison between direct expenses and program revenues for each function of the School District's governmental activities. Direct expenses are those that are specifically associated with a program or function and, therefore, are clearly identifiable to a particular function. Indirect expenses (expenses of the School District related to the administration and support ofthe School District's programs, such as office and maintenance personnel and accounting) are not allocated to programs. Program revenues include (a) charges paid by the recipients ofgoods or services offered by the programs and (b) grants and contributions that are restricted to meeting the operational or capital requirements of a particular program. Revenues that are not classified as program revenues, including all taxes, are presented as general revenues. Fund Financial Statements: The fund financial statements provide information about the School District's funds, including fiduciary funds. Eliminations have been made to minimize the double counting of internal activities. Separate statements for each category (governmental and fiduciary) are presented. The emphasis of fund financial statements is on major governmental funds, each displayed in a separate column. -9- TOOMBS COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2006 EXHIBIT"H" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The School District reports the following major governmental funds: General Fund is the School District's primary operating fund. It accounts for all financial resources ofthe School District, except those resources required to be accounted for in another fund. District-wide Capital Projects Fund accounts for financial resources including Special Purpose Local Option Sales Tax (SPLOST) proceeds to be used for the acquisition, construction or renovation of major capital facilities. The School District reports the following fiduciary fund type: Agency funds account for assets held by the School District as an agent for various funds, governments or individuals. BASIS OF ACCOUNTING The basis ofaccounting determines when transactions are reported on the financial statements. The District-wide governmental and fiduciary fund financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded at the time liabilities are incurred, regardless of when the related cash flows take place. Nonexchange transactions, in which the School District gives (or receives) value without directly receiving (or giving) equal value in exchange, include property taxes, sales taxes, grants and donations. On an accrual basis, revenue from property taxes is recognized in the fiscal year for which the taxes are levied. Revenue from sales taxes is recognized in the fiscal year in which the underlying transaction (sale) takes place. Revenue from grants and donations is recognized in the fiscal year in which all eligibility requirements have been satisfied. The School District uses funds to report on its financial position and the results of its operations. Fund accounting is designed to demonstrate legal compliance and to aid financial management by segregating transactions related to certain governmental functions or activities. A fund is a separate accounting entity with a self-balancing set of accounts. Governmental funds are reported using the current financial resources measurement focus and the modified accrual basis 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. 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. - 10 - TOOMBS COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2006 EXHIBIT "H" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 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. Georgia Laws OCGA 45-8-14 authorize the School District to deposit its funds in one or more solvent banks or insured Federal savings and loan associations. INVESTMENTS COMPOSITION OF INVESTMENTS Investments made by the School District in nonparticipating interest-earning contracts (such as certificates ofdeposit) and repurchase agreements are reported at cost. Participating interest-earning contracts and money market investments with a maturity at purchase ofone year or less are reported at amortized cost. Both participating interest-earning contracts and money market investments with a maturity at purchase greater than one year are reported at fair value. The Official Code ofGeorgia Annotated Section 36-83-4 authorizes the School District to invest its funds. In selecting among options for investment or among institutional bids for deposits, the highest rate ofreturn shall be the objective, given equivalent conditions of safety and liquidity. Funds may be invested in the following: (1) Obligations issued by the State of Georgia or by other states, (2) Obligations issued by the United States government, (3) Obligations fully insured or guaranteed by the United States government or a United States government agency, (4) Obligations of any corporation of the United States government, (5) Prime banker's acceptances, (6) The Local Government Investment Pool administered by the State of Georgia, Office of Treasury and Fiscal Services, (7) Repurchase agreements, and - 11 - TOOMBS COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2006 EXHIBIT "H" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (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 Toombs County Board of Commissioners fixed the property tax levy for the 2005 tax digest year (calendar year) on June 30, 2005 (levy date). Taxes were due on December 30, 2005 (lien date). Taxes collected within the current fiscal year or within 60 days after year-end on the 2005 tax digest are reported as revenue in the governmental funds for fiscal year 2006. The Toombs County Tax Commissioner bills and collects the property taxes for the School District, withholds 2.5% of taxes collected as a fee for tax collection and remits the balance of taxes collected to the School District. Property tax revenues, at the fund reporting level, during the fiscal year ended June 30, 2006, for maintenance and operations amounted to $3,056,477. The tax millage rate levied for the 2005 tax year (calendar year) for the Toombs County Board of Education was as follows (a mill equals $1 per thousand dollars of assessed value): School Operations 13.0 mills SALES TAXES Special Purpose Local Option Sales Tax, at the fund reporting level, during the year amounted to $2,215,733 and is to be used for capital outlay for educational purposes or debt service. This sales tax was authorized by local referendum and the sales tax must be re-authorized at least every five years. INVENTORIES FOOD INVENTORIES Inventories of purchased foods and donated food commodities used in the preparation of meals are not reported on the Financial Statements. To conform to generally accepted accounting principles, - 12 - TOOMBS COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2006 EXHIBIT "H" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES these amounts should be recorded in the basic financial statements. The effect of this deviation is deemed to be immaterial to the fair presentation of the basic financial statements. 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 of art. Capitalization thresholds and estimated useful lives of capital assets reported in the District-wide statements are as follows: Capitalization Policy Estimated Useful Life Land Land Improvements Buildings and Improvements Equipment Any Amount $ 5,000 $ 5,000 $ 5,000 NIA 20 to 80 years 80 years 5 to 25 years Depreciation is used to allocate the actual or estimated historical cost of all capital assets over estimated useful lives. Note 3: DEPOSITS COLLATERALIZATION OF DEPOSITS Official Code of Georgia Annotated (OCGA) Section 45-8-12 provides that there shall not be on deposit at any time in any depository for a time longer than ten days a sum of money which has not been secured by surety bond, by guarantee of insurance, or by collateral. The aggregate ofthe face value of such surety bond and the market value of securities pledged shall be equal to not less than 110 percent ofthe public funds being secured after the deduction ofthe amount ofdeposit insurance. Ifa depository elects the pooled method (OCGA 45-8-13.1) the aggregate ofthe market value ofthe securities pledged to secure a pool ofpublic funds shall be not less than 110 percent ofthe daily pool balance. - 13 - TOOMBS COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2006 EXHIBIT "H" Note 3: DEPOSITS Acceptable security for deposits consists of any one of or any combination of the following: (1) Surety bond signed by a surety company duly qualified and authorized to transact business within the State of Georgia, (2) Insurance on accounts provided by the Federal Deposit Insurance Corporation, (3) Bonds, bills, notes, certificates of indebtedness or other direct obligations of the United States or of the State of Georgia, (4) Bonds, bills, notes, certificates of indebtedness or other obligations of the counties or municipalities of the State of Georgia, (5) Bonds of any public authority created by the laws of the State of Georgia, providing that the statute that created the authority authorized the use of the bonds for this purpose, (6) Industrial revenue bonds and bonds of development authorities created by the laws of the State of Georgia, and (7) Bonds, bills, notes, certificates of indebtedness, or other obligations of a subsidiary corporation of the United States government, which are fully guaranteed by the United States government both as to principal and interest or debt obligations issued by the Federal Land Bank, the Federal Home Loan Bank, the Federal Intermediate Credit Bank, the Central Bank for Cooperatives, the Farm Credit Banks, the Federal Home Loan Mortgage Association, and the Federal National Mortgage Association. CATEGORIZATION OF DEPOSITS At June 30, 2006, the bank balances were $7,954,670. The amounts of the total bank balances are classified into four categories of custodial credit risk: Category 1 - Cash that is insured (e.g., Federal Deposit Insurance) or collateralized with securities held by the School District or by the School District's agent in the School District's name. Category 2 - Cash collateralized with securities held by the pledging financial institution's trust department or agent in the School District's name. Category 3 - Cash collateralized with securities held by the pledging financial institution, or by its trust department or agent but not in the School District's name. Category 4 - Uncollateralized. The School District's deposits are classified by custodial credit risk category at June 30, 2006, as follows: - 14 - TOOMBS COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2006 EXHIBIT "H" Note 3: DEPOSITS Custodial Credit Risk Category Bank Balance I $ 216,686 2 7,737,984 3 0 4 0 Total $ 7,954,670 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 I, 2005 Increases Balances Decreases June 30, 2006 Governmental Activities Capital Assets, Not Being Depreciated: Land Construction in Progress $ 596,807 16 768 $ 901 456 $ $ 16 768 596,807 901 456 Total Capital Assets Not Being Depreciated $ 613 575 $ 901 456 $ 16 768 $ 1,498,263 Capital Assets Being Depreciated Buildings and Building Improvements Equipment Land Improvements $ 23,289,555 $ 2,701,864 926,465 280,189 $ 395,516 85,007 42,948 $ 23,526,796 180,008 2,917,372 1,011,472 Less Accumulated Depreciation for: Buildings and Building Improvements Equipment Land Improvements 2,439,667 1,670,333 497 246 300,834 208,358 36 254 9,585 165,579 2,730,916 1,713,112 533,500 Total Capital Assets, Being Depreciated, Net $ 22,310,638 $ 215,266 $ 47 792 $ 22,478,112 Governmental Activity Capital Assets - Net $ 22.924.213 $ 1.116.722 $ 64 560 $ 23.976.375 Current year depreciation expense by function is as follows: - 15 - TOOMBS COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2006 EXHIBIT "H" 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 of Plant Student Transportation Services Other Support Services Enterprise Operations Food Services $ 277,461 $ 4,387 2,702 14,075 1,901 14,358 2,337 10,495 160,180 4 715 215,150 21,469 31,366 $ 545,446 Note 6: RESTRICTED ASSETS Special Purpose Local Option Sales Tax (SPLOST) is reported as restricted assets in the Statement ofNet Assets because its use is limited by applicable statutory provisions. Restricted assets at June 30, 2006, were as follows: District-wide Capital Projects SPLOST Restricted Cash and Cash Equivalents: Capital Acquisitions $ 1,655,419 Note 7: INTERFUND TRANSFERS Interfund transfers for the year ended June 30, 2006, consisted of the following: Transfer to Transfers From General Fund District-wide Capital Projects $==~98~,2~6~0 Transfers were used to move property tax revenues collected by the General Fund to the Districtwide Capital Projects Fund as supplemental funding source for capital construction projects. - 16 - TOOMBS COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2006 EXHIBIT "H" Note 8: RISK MANAGEMENT The School District is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors or omissions; job related illness or injuries to employees; acts of God and unemployment compensation. The School District has obtained commercial insurance for risk of loss associated with torts, assets and errors or omissions. The School District has neither significantly reduced coverage for these risks nor incurred losses (settlements) which exceeded the School District's insurance coverage in any of the past three years. The School District has elected to self-insure for all losses related to acts of God. The School District has not experienced any losses related to this risk in the past three years. The School District is self-insured with regard to unemployment compensation claims. The School District accounts for claims within the same fund that the employee's salary and benefits were paid. Claims are accounted for with expenditures and liability being reported when it is probable that a loss has occurred, and the amount of that loss can be reasonably estimated. Changes in the unemployment compensation claims liability during the last two fiscal years are as follows: Beginning of Year Liability Claims and Changes in Estimates Claims Paid End of Year Liability 2005 2006 $ 930 $ 0 $ 930 $ 0 $ 0 $ 0 $ 0 $ 0 The School District participates in the Georgia Education Workers' Compensation Trust, a public entity risk pool organized on December 1, 1991, to develop, implement and administer a program of workers' compensation self-insurance for its member organizations. The School District pays an annual premium to the Trust for its general insurance coverage. Additional insurance coverage is provided through an agreement by the Trust with the Midwest Employers Casualty Company to provide coverage for potential losses sustained by the Trust in excess of $500,000 loss per occurrence, up to $2,000,000. The School District has purchased surety bonds to provide additional insurance coverage as follows: - 17 - TOOMBS COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2006 EXHIBIT "H" Note 8: RISK MANAGEMENT Position Covered Amount Superintendent Each Principal Each School Secretary School Food Service Director School Food Service Secretary Each School Food Service Cashier Each Bookkeeper Drivers Education Teacher $ 30,000 $ 10,000 $ 10,000 $ 10,000 $ 10,000 $ 10,000 $ 10,000 $ 2,500 Note 9: SIGNIFICANT COMMITMENTS The following is an analysis ofsignificant outstanding construction or renovation contracts executed by the School District as of June 30, 2006: Project Unearned Executed Contracts Lyons Upper Elementary $ 8,086,187 The amount described in this note is not reflected in the basic financial statements. Note 10: SIGNIFICANT CONTINGENT LIABILITIES Amounts received or receivable principally from the Federal government are subject to audit and review by grantor agencies. This could result in requests for reimbursement to the grantor agency for any costs which are disallowed under grant terms. The School District believes that such disallowances, if any, will be immaterial to its overall financial position. The School District is a defendant in various legal proceedings pertaining to matters incidental to the performance ofroutine School District operations. The ultimate disposition ofthese proceedings is not presently determinable, but is not believed to be material to the basic financial statements. Note 11: RETIREMENT PLANS TEACHERS RETIREMENT SYSTEM OF GEORGIA (TRS) TRS PLAN DESCRIPTION Substantially all teachers, administrative and clerical personnel employed by local school systems are covered by the Teachers Retirement System of Georgia (TRS), which is a cost-sharing multiple employer defined benefit pension plan. TRS provides service retirement, disability retirement and - 18 - TOOMBS COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2006 EXHIBIT "H" Note 11: RETIREMENT PLANS survivors benefits for its members in accordance with State statute. The Teachers Retirement System of Georgia issues a separate stand alone financial audit report and a copy can be obtained from the Georgia Department of Audits and Accounts. TRS CONTRIBUTIONS REQUIRED AND MADE Employees ofthe School District who are covered by TRS are required by State statute to contribute 5% of their gross earnings to TRS. The School District makes monthly employer contributions to TRS at rates adopted by the TRS Board of Trustees in accordance with State statute and as advised by their independent actuary. The required employer contribution rate is 9.24% and employer contributions for the current fiscal year and the preceding two fiscal years are as follows: Fiscal Year Percentage Contributed Required Contribution 2006 2005 2004 100% 100% 100% $ 1,172,811 $ 1,093,983 $ 1,028,769 - 19 - (This page left intentionally blank) TOOMBS COUNTY BOARD OF EDUCATION GENERAL FUND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL YEAR ENDED JUNE 30, 2006 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 Capital Outlay Total Expenditures Excess of Revenues over (under) Expenditures OTHER FINANCING USES Other Uses Net Change in Fund Balances Fund Balances - Beginning NONAPPROPRIATED BUDGETS ORIGINAL (1) FINAL (1) ACTUAL AMOUNTS $ 2,483,429 $ 2,483,429 $ 3,061,506 268,525 268,525 24,921 15,170,937 15,170,937 15,822,180 4,154,243 4,157,106 4,025,647 323,000 323,000 609,704 35,076 35,076 40,299 80 574 80 574 525 601 $ 22,515,784 $ 22,518,647 $ 24,109,858 $ 15,148,925 $ 15,659,624 $ 15,274,870 689,727 666,423 510,007 335,376 1,245,481 243,487 1,355,561 1,093,822 899 34,391 1,642,807 770,160 902,189 429,623 301,126 1,246,000 243,487 1,360,360 1,118,343 899 38,101 1,648,663 896,565 732,805 421,306 243,953 1,284,891 244,485 1,641,532 1,080,829 6,623 33,904 157,092 1,661,134 28 125 $ 22,966,906 $ 23,718,575 $ 23,708,114 $ -451, 122 $ -1, 199,928 $ 401,744 -98 260 $ -451, 122 $ -1, 199,928 $ 303,484 3 048 170 3 048 170 3 234 464 Fund Balances - Ending $ 2 597 048 $ 1 848 242 $ ===3'"'5=3=7=9=48= 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. 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. - 21 - TOOMBS COUNTY BOARD OF EDUCATION SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS YEAR ENDED JUNE 30, 2006 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) Pass-Through From Bright from the Start: Georgia Department of Early Care and Learning Child and Adult Care Food Program Total U.S. Department of Agriculture Education, U. S. Department of Special Education Cluster Pass-Through From Georgia Department of Education Special Education Grants to States Preschool Grants Total Special Education Cluster Other Programs Pass-Through From Georgia Department of Education English Language Acquisition Grants Enhancing Education Through Technology Program Improving Teacher Quality State Grants Migrant Education Rural Education State Grants for Innovative Programs Title I Grants to Local Educational Agencies Vocational Education - Basic Grants to States Total U.S. Department of Education CFDA NUMBER PASSTHROUGH ENTITY ID NUMBER EXPENDITURES IN PERIOD 10.553 10.555 N/A (2) N/A $ ----'1-'--'5'--'1-"-6'-=3-"-02=- $ 1,516,302 10.550 10.558 N/A 57,619 N/A (2) $ _ _ _1~5_7_3~9_2_1 84.027 84.173 NIA $ N/A $ 690,515 31 801 722,316 84.365 84.318 84.367 84.011 84.358 84.298 * 84.010 84.048 NIA N/A N/A N/A N/A N/A N/A NIA $ 57,224 35,538 253,844 120,072 86,232 27,462 1,491,430 41 009 2 835 127 Total Federal Financial Assistance NIA= Not Available $ ===44=0=9=0=4=8 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 Child and Adult Care Food Program ($13,049) and the School Breakfast Program ($278,186) were not maintained separately and are included in the 2006 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 Toombs 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. - 22 - TOOMBS COUNTY BOARD OF EDUCATION SCHEDULE OF STATE REVENUE YEAR ENDED JUNE 30, 2006 AGENCY/FUNDING GRANTS Bright from the Start: Georgia Department of Early Care and Learning Pre-Kindergarten Program Education, Georgia Department of Quality Basic Education Direct Instructional Cost Kindergarten Program Kindergarten Program - Early Intervention Program Primary Grades (1-3) Program Primary Grades - Early Intervention (1-3) Program Upper Elementary Grades (4-5) Program Upper Elementary Grades - Early Intervention (4-5) Program Middle School (6-8) Program High School General Education (9-12) Program Vocational Laboratory (9-12) Program Students with Disabilities Gifted Student - Category VI Remedial Education Program Alternative Education Program English Speakers of Other Languages (ESOL) Media Center Program 20 Days Additional Instruction Staff and Professional Development Indirect Cost Central Administration School Administration Facility Maintenance and Operations Categorical Grants Pupil Transportation Regular Bus Replacement Sparsity Nursing Services Principal Supplements Vocational Supervisors Migrant Education Education Equalization Funding Grant Food Services Vocational Education Austerity Reduction Other State Programs K-8 Statewide Reading and Mathematics Program National Teacher Certification Preschool Handicapped Program Special Education Low Incidence Grant Georgia State Financing and Investment Commission Reimbursement on Construction Projects See notes to the basic financial statements. - 23- SCHEDULE "3" GOVERNMENTAL FUND TYPE GENERAL FUND $ 856,290 837,841 265,548 1,811,887 396,684 803,859 214,345 1,685,079 1,328,337 352,591 1,849,776 104,121 67,359 123,296 304,304 268,026 84,617 56,587 424,548 617,802 752,858 496,069 83,870 20,000 66,283 9,754 4,546 23,788 2,213,084 80,642 66,141 -639,192 50,271 3,400 58,799 12,593 66377 $ ==1=5=,8=2=2=1,=80= TOOMBS COUNTY BOARD OF EDUCATION SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS YEAR ENDED JUNE 30, 2006 SCHEDULE "4" PROJECT ORIGINAL ESTIMATED COST (1) CURRENT ESTIMATED COSTS (2) AMOUNT EXPENDED IN CURRENT YEAR(3) AMOUNT EXPENDED IN PRIOR YEAR (3) PROJECT STATUS Acquisition, construction and equipping of new middle school and renovation of Toombs County High School. $ 6,878,000 $ 14,014,262 $ 69,579 $ 13,944,683 Completed (i) Develop, construct and furnish a new Lyons Upper Elementary School (3rd-5th grades) to accommodate approximately 600 students; (ii) Modification/ renovation of Lyons Primary School; (iii) Repair and/or replacement of the Toombs Central roof; (iv) Purchase of additional buses for the school system; and modification/renovation of HVAC system of Toombs County High School gymnasium. 10,504,000 10,504,000 1,107,675 Ongoing $ 17,382,000 $ 24,518,262 $ 1 177 254 $ 13,944,683 (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 Toombs County approved the imposition of a 1% sales tax to fund the above projects. 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. - 24 - TOOMBS COUNTY BOARD OF EDUCATION GENERAL FUND- QUALITY BASIC EDUCATION PROGRAM (QBE) ALLOTMENTS AND EXPENDITURES - BY PROGRAM YEAR ENDED JUNE 30, 2006 SCHEDULE "5" DESCRIPTION Direct Instructional Programs Kindergarten Program Kindergarten Program-Early Intervention Program Primary Grades (1-3) Program Primary Grades-Early Intervention (1-3) Program Upper Elementary Grades (4-5) Program Upper Elementary Grades-Early Intervention (4-5) Program Middle Grades (6-8) Program High School General Education (9-12) Program Vocational Laboratory (9-12) Program Students with Disabilities Category I Category II Category Ill Category IV CategoryV Gifted Student - Category VI Remedial Education Program Alternative Education Program English Speakers of Other Languages (ESOL) TOTAL DIRECT INSTRUCTIONAL PROGRAMS Media Center Program Staff and Professional Development ALLOTMENTS FROM GEORGIA DEPARTMENT OF EDUCATION (1) (2) ELIGIBLE QBE PROGRAM COSTS SALARIES OPERATIONS TOTAL $ 897,200 $ 734,414 $ 8,573 $ 742,987 267,025 298,988 1,089 300,077 1,976,060 1,765,802 36,997 1,802,799 399,349 417,675 2,580 420,255 1,826,534 1,911,163 58,605 1,969,768 215,243 865,258 1,442,074 376,843 1,977,417 113,212 75,146 133,858 333 751 270,727 1,145,543 1,931,647 353,108 15,086 343,738 1,178,449 105,943 1,033 163,486 77,106 133,411 378 175 1,457 15,895 86,389 70,369 2,089 5,011 18,823 6,071 2,021 1,597 2 323 272,184 1,161,438 2,018,036 423,477 17,175 348,749 1,197,272 112,014 1,033 165,507 77,106 135,008 380 498 $ 10,898,970 $ 11,225,494 $ 319,889 $ 11,545,383 288,773 61 596 378,424 12,029 24,014 43 509 402,438 55 538 TOTAL QBE FORMULA FUNDS $ 11,249,339 $ 11,615,947 $ 387 412 $==1=2,=00=3=,3=5=9 (1) Comprised of State Funds plus Local Five Mill Share. (2) Allotments do not include the impact of the State budget austerity reduction. See notes to the basic financial statements. - 25- 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 February 5, 2007 Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education and Superintendent and Members of the Toombs County Board of Education REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS Ladies and Gentlemen: We have audited the financial statements of the governmental activities, each major fund, and the aggregate remaining fund information of Toombs County Board of Education as of and for the year ended June 30, 2006, which collectively comprise Toombs County Board of Education's basic financial statements and have issued our report thereon dated February 5, 2007. 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 Toombs County Board ofEducation's internal control over financial reporting in order to determine our auditing procedures for the purpose of expressing our opinions on the financial statements and not to provide an opinion on the internal control over financial reporting. However, we noted certain matters involving the internal control over financial reporting and its operation that we consider to be reportable conditions. Reportable conditions involve matters coming to our attention relating to significant deficiencies in the design or operation of the internal control over financial reporting that, in our judgment, could adversely affect Toombs County Board of Education's ability to record, process, summarize and report financial data consistent with assertions of management in the financial statements. Reportable conditions are described in the accompanying Schedule of Findings and Questioned Costs as items FS-7381-06-01, FS-7381-06-02 and FS-7381-06-03. 2006YB-30 A material weakness is a reportable condition in which the design or operation of one or more ofthe internal control components does not reduce to a relatively low level the risk that misstatements caused by error or fraud in amounts that would be material in relation to the financial statements being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. Our consideration of the internal control over financial reporting would not necessarily disclose all matters in the internal control that might be reportable conditions and, accordingly, would not necessarily disclose all reportable conditions that are also considered to be material weaknesses. However, we believe none of the reportable conditions described above are material weaknesses. Compliance and Other Matters As part of obtaining reasonable assurance about whether Toombs 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. This report is intended solely for the information and use of the management and members of the Toombs County Board of Education and is not intended to be and should not be used by anyone other than these specified parties. Respectfully submitted, ~~~-~ Russell W. Hinton, CPA, CGFM State Auditor RWH:gp 2006YB-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 February 5, 2007 Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education and Superintendent and Members of the Toombs County Board of Education REPORT ON COMPLIANCE WITH REQUIREMENTS APPLICABLE TO EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH 0MB CIRCULAR A-133 Ladies and Gentlemen: Compliance We have audited the compliance of Toombs 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 its major Federal program for the year ended June 30, 2006. Toombs County Board of Education's major Federal program is identified in the Summary of Auditor's Results Section of the accompanying Schedule of Findings and Questioned Costs. Compliance with the requirements oflaws, regulations, contracts and grants applicable to its major Federal program is the responsibility of Toombs County Board of Education's management. Our responsibility is to express an opinion on Toombs 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 ofthe United States; and 0MB Circular A133, Audits of States, Local Governments, and Non-Profit Organizations. Those standards and 0MB Circular A-133 require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major Federal program occurred. An audit includes examining, on a test basis, evidence about the Toombs County Board of Education's compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Our audit does not provide a legal determination on Toombs County Board of Education's compliance with those requirements. 2006SA-15 In our opinion, the Toombs County Board of Education complied, in all material respects, with the requirements referred to above that are applicable to its major Federal program for the year ended June 30, 2006. However, the results of our auditing procedures disclosed nonmaterial instances of noncompliance with those requirements which are described in the accompanying Schedule of Findings and Questioned Costs as items FA-7381-06-01 and FA-7381-06-02. Internal Control Over Compliance The management of Toombs 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 Toombs 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 of expressing our opinion on compliance and to test and report on internal control over compliance in accordance with 0MB Circular A-133. Our consideration ofthe internal control over compliance would not necessarily disclose all matters in the internal control that might be material weaknesses. A material weakness is a reportable condition in which the design or operation of one or more of the internal control components does not reduce to a relatively low level ofrisk that noncompliance with applicable requirements oflaws, regulations, contracts and grants caused by error or fraud that would be material in relation to a major Federal program being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. We noted no matters involving the internal control over compliance and its operation that we consider to be material weaknesses. This report is intended solely for the information and use of the management, members of the Toombs 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, ~:!!o~;~ State Auditor RWH:gp 2006SA-15 SECTION III AUDITEE'S RESPONSE TO PRIOR YEAR FINDINGS AND QUESTIONED COSTS TOOMBS COUNTY BOARD OF EDUCATION AUDITEE'S RESPONSE SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2006 PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS FINDING CONTROL NUMBER AND STATUS FS-7381-04-01 FS-7381-05-01 Further Action Not Warranted Previously Reported Corrective Action Implemented PRIOR YEAR FEDERAL AWARD FINDINGS AND QUESTIONED COSTS No matters were reported. SECTION IV FINDINGS AND QUESTIONED COSTS TOOMBS COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2006 I SUMMARY OF AUDITOR'S RESULTS 1. Type of Report Issued on the Financial Statements The auditor's opinion on the Toombs County Board of Education's financial statements was unqualified. 2. Reportable Conditions in Internal Control Disclosed by the Audit of the Financial Statements The audit report for the Toombs County Board of Education disclosed financial statement reportable conditions related to the following control categories. Accounting Controls (Overall) Expenditures/Liabilities/Disbursements None ofthe reportable conditions described above are considered to be material weaknesses. 3. Noncompliance Material to the Financial Statements The audit of the Toombs County Board of Education disclosed no instances of noncompliance that were deemed to be material to the financial statements. 4. Reportable Conditions in Internal Control Over Major Programs The audit report for the Toombs County Board of Education did not disclose any reportable conditions in internal control over major programs. 5. Type of Report Issued on Compliance for Major Programs The auditor's opinion on the Toombs 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 .510(a) ofOMB Circular A-133 The Toombs County Board of Education's audit did not disclose audit findings required to be reported by section .5 I0(a) ofOMB Circular A-133; however, we noted certain instances of nonmaterial noncompliance which are included in section IV of this report. 7. Major Programs Federal award audited as a major program is as follows: 84.010 Title I Grants to Local Educational Agencies 8. Type "A" Program Dollar Threshold The dollar threshold for type "A" programs was $300,000. 9. Low Risk Auditee The Toombs County Board of Education qualified as a low risk auditee as defined by Section .530 of 0MB Circular A-133. - 1- TOOMBS COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2006 II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS ACCOUNTING CONTROLS (OVERALL) Inadequate Access Controls Reportable Condition Finding Control Number: FS-7381-06-01 Condition: The accounting procedures of the School District did not maintain adequate separation of duties in the Financial Accounting System. Criteria: Separation of duties involving key accounting functions, both manual and automated, is the basis for achieving an adequate system of internal control. Questioned Cost: NIA Information: Access controls in the Financial Accounting System do not prevent users from accessing accounting functions that are outside of their area of responsibility. Cause: The School District's management is responsible for designing and maintaining internal controls that restrict access to programs or data. Management has not limited the access rights of users of the Financial Accounting System. Effect: Errors and/or irregularities may not be detected in a timely manner. Recommendation: Management should ensure that the access controls in the accounting information system should complement the system of internal control by limiting an employee's access to only the accounting functions necessary for the performance of the employee's duties. ACCOUNTING CONTROLS (OVERALL) Inadequate General Controls Reportable Condition Finding Control Number: FS-7381-06-02 Condition: Criteria: Our examination ofthe School District included a review of general controls related to their financial information systems. We noted weaknesses in internal controls which we consider relevant to the School District's financial statements for the Fiscal Year Ended June 30, 2006. Policies and procedures should be in place to reasonably mitigate the risk of loss, manipulation, or corruption of data due to internal or external threats. -2 - TOOMBS COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2006 II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS ACCOUNTING CONTROLS (OVERALL) Inadequate General Controls Reportable Condition Finding Control Number: FS-7381-06-02 Questioned Cost: NIA Information: Weaknesses in internal control over financial information systems were identified at the School District. Cause: Management did not implement proper policies or controls over risk assessments and access to financial information systems. Effect: Without satisfactory controls in place, losses, changes or misuses of data could occur and possibly not be detected. Recommendation: Management should perform a complete risk assessment to identify internal and external threats that could cause loss, manipulation, or corruption of data maintained in the financial information system. Policies and procedures should be developed and implemented to address the weaknesses. EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Separation of Duties Reportable Condition Finding Control Number: FS-7381-06-03 Condition: The accounting procedures ofthe School District were insufficient to provide for adequate separation of duties over the expenditures/liabilities/ disbursements processed at the central office. Criteria: The School District's management is responsible for designing and maintaining internal controls that provide proper separation of duties. Such internal controls would limit one individual's access to both physical assets and the related accounting records. Questioned Cost: NIA Information: Expenditures/Liabilities/Disbursements The check writing function was not separated from record keeping and the processing of checks. -3- TOOMBS COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2006 II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Separation of Duties Reportable Condition Finding Control Number: FS-7381-06-03 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. Effect: Errors and/or irregularities may not be detected in a timely manner. Recommendation: The School District should implement procedures to ensure that key accounting functions be separated and/or utilize management oversight for these incompatible activities. III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS SPECIAL TESTS AND PROVISIONS Fiscal Requirements of Schoolwide Program Not Fully Implemented Nonmaterial Noncompliance U.S. Department of Education Through Georgia Department of Education Title I Grants to Local Educational Agencies (CFDA 84.010) Improving Teacher Quality State Grants (CFDA 84.367) Finding Control Number: FA-7381-06-01 Condition: The School District did not fully conform to Federal and State guidelines when it consolidated different Federal funds for each of those schools that participated in a schoolwide program. Criteria: In accordance with provisions ofU. S. Department ofEducation Instructions and 0MB Circular A-133, Compliance Supplement provisions, eligible schools are able to use their Title I, Part A funds, in combination with other Federal, State and local funds, in order to upgrade the entire educational program of the school and to raise academic achievements for all students. By combining funds from Title I and other eligible U. S. Department of Education funded programs in support of a schoolwide program, U.S. Department of Education Instructions provide that specific schoolwide program costs lose their identity but only in those circumstances when funds are combined in a schoolwide program. -4 - TOOMBS COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2006 III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS SPECIAL TESTS AND PROVISIONS Fiscal Requirements of Schoolwide Program Not Fully Implemented Nonmaterial Noncompliance U.S. Department of Education Through Georgia Department of Education Title I Grants to Local Educational Agencies (CFDA 84.010) Improving Teacher Quality State Grants (CFDA 84.367) Finding Control Number: FA-7381-06-01 In line with 0MB Circular A-87 requirements, schoolwide expenditures should be charged to those Federal funding sources supporting the schoolwide program in a reasonable manner. When more than one Federal program supports a schoolwide program, then schoolwide program expenditures may be allocated to specific Federal funds in proportion to the different Federal funds provided in support of the schoolwide program. To distribute such costs, provisions of 0MB Circular A-87, Attachment E, F.3 state that a cost allocation plan should be developed, documented and maintained for audit. In July 2004, Georgia Department of Education (GDOE) issued accounting guidelines to the School Districts so the Districts would properly administer schoolwide expenditures in line with Federal requirements. Questioned Cost: NIA Information: The School District identified three schools that participated in a schoolwide program and we noted that there were various Federal funds expended in support of each of the schools. While Federal and State guidelines require that the District consolidate the different Federal funds that support each schoolwide program, the District only consolidated funds from the Title I and Improving Teacher Quality programs. Furthermore, we noted that there was only an insignificant amount of Improving Teacher State Grant funds that was consolidated with the school's allocation of Title I Grant funds. Cause: School District personnel were not fully aware of Federal and GDOE requirements and failed to consolidate sufficient amounts ofdifferent Federal funds utilized at the schools that participated in the schoolwide program. Effect: Failure to appropriately consolidate sufficient Federal funds that support the schoolwide schools can result in noncompliance with Federal and State requirements. -5- TOOMBS COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2006 III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS SPECIAL TESTS AND PROVISIONS Fiscal Requirements of Schoolwide Program Not Fully Implemented Nonmaterial Noncompliance U.S. Department of Education Through Georgia Department of Education Title I Grants to Local Educational Agencies (CFDA 84.010) Improving Teacher Quality State Grants (CFDA 84.367) Finding Control Number: FA-7381-06-01 Recommendation: The School District should implement procedures to ( 1) combine Title I, Part A funds with sufficient amounts ofother Federal funds in order to adequately implement a schoolwide program and (2) in line with 0MB Circular A-87 provisions and GDOE guidelines, allocate such schoolwide program costs to the respective Federal funds in a reasonable manner. The School District should seek additional guidance from the GDOE to implement procedures for combining and allocating schoolwide program expenditures. SPECIAL TESTS AND PROVISIONS Lack of Internal Controls in Hiring "Highly Qualified" Personnel Nonmaterial Noncompliance U.S. Department of Education Through Georgia Department of Education Title I Grants to Local Educational Agencies (CFDA 84.010) Finding Control Number: FA-7381-06-02 Condition: The School District failed to ensure that teachers meet the requirements of "Highly Qualified" personnel for those individuals paid from the Title I Grants to Local Educational Agencies (CFDA 84.010) program. Criteria: "Highly Qualified" requirements are set forth in 34 CFR section 200.58, which states, in part, as follows: "An LEA must ensure that all teachers hired after the first day of the 2002 year who teach a core academic subject be highly qualified. Additionally, all teachers ofcore academic subjects must be highly qualified by the end of 2005-2006 school year. To be a highly qualified teacher, the individual must: (1) Hold at least a bachelor's degree (2) Be certified by the State, including alternative routes to certification (3) Pass a rigorous State test on subject knowledge that the teacher teaches and on teaching skills." Questioned Cost: NIA -6 - TOOMBS COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2006 III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS SPECIAL TESTS AND PROVISIONS Lack oflntemal Controls in Hiring "Highly Qualified" Personnel Nonmaterial Noncompliance U.S. Department of Education Through Georgia Department of Education Title I Grants to Local Educational Agencies (CFDA 84.010) Finding Control Number: FA-7381-06-02 Information: The School District made an offer of employment, for a teaching position, before verifying "highly qualified" status and, after identifying that the employee was not "highly qualified", continued to allow the employee to be paid from Title I funds. Cause: The School District failed to ensure that employees not meeting "highly qualified" status were not hired or offered positions requiring this status. Effect: The School District is not ensuring that students' needs of instruction from "highly qualified" teachers are being met in the classrooms. Recommendation: The School District should implement procedures to ensure that only "highly qualified" employees are hired for positions requiring "Highly Qualified" status. The Georgia Department of Education should further review this matter to determine if a reclaim of funds is necessary. -7- SECTIONV MANAGEMENT'S RESPONSES TOOMBS COUNTY BOARD OF EDUCATION SCHEDULE OF MANAGEMENT'S RESPONSES YEAR ENDED JUNE 30, 2006 Finding Control Number: FS-7381-06-01 We concur with this finding. The Board desires for its three primary central office accounting personnel to be cross-trained; in order to do so, it was necessary to grant additional access rights in the financial accounting system so that users could be properly trained in each area. The Board, however, also understands the importance of adequate separation of duties and limited access controls in the financial accounting system; as such, in the future, the Board will implement additional compensating controls in order to enhance management oversight and supervision during the cross-training process. Finding Control Number: FS-7381-06-02 We concur with this finding. The Board recognizes the imperative need for a solid, document set of Information Technology policies and procedures. The Board has assigned a committee comprised of the Technology Director, Assistant Technology Director, three county office accounting personnel, the Assistant Superintendent, and the Superintendent to facilitate this task. The committee will perform a complete risk assessment to identify internal, external, and inherent threats that could cause loss, manipulation, or corruption ofdata maintained in the financial information system. Upon completion, policies and procedures will be developed and implemented. In order to address this matter until the documented policies and procedures have been finalized, the Board has already implemented certain general protocols for access controls, including mandating that passwords be changed every 45 days and specifying that passwords for the financial accounting system be comprised of letters, numbers, and special characters. Finding Control Number: FS-7381-06-03 We concur with this finding. The Board immediately addressed this issue upon the auditor's recommendation. Following the January 26, 2007 post audit conference, procedures were implemented to ensure that key accounting functions were separated. A person independent ofthe check writing, expenditure record keeping, and check processing functions now reviews and approves all voucher packets before any signatures are affixed to checks. In addition, the Superintendent also independently reviews voucher packages and disbursements prior to affixing his signature on checks. Finding Control Number: FA-7381-06-01 We concur with this finding. School District personnel were not fully aware ofthese requirements, and in tum, did not consolidate sufficient amounts of different Federal funds utilized at the schools that participated in the schoolwide program. The Board was acting in accordance with guidance provided in workshops offered by the Financial Review department of the Georgia Department of Education. However, the Board now realizes that the information obtained in these workshops does not satisfy the requirements, and that it is necessary to combine more eligible Federal funds as part of its schoolwide program. These corrective procedures were implemented in fiscal year 2007. - 1- TOOMBS COUNTY BOARD OF EDUCATION SCHEDULE OF MANAGEMENT'S RESPONSES YEAR ENDED JUNE 30, 2006 Finding Control Number: FA-7381-06-02 We concur with this finding. We acknowledge that there was one teacher that did not meet highly qualified standards. This matter has already been addressed, as the Board has informed this teacher that highly qualified designation is mandatory and must be immediately obtained, otherwise, she will not be offered a position in the upcoming year. The Board will continue to monitor this situation and act accordingly to ensure that only highly qualified personnel are employed. It should be noted, however, that the Board was operating as per guidelines in the Title IIA Handbook; after further review and discussion on this matter, we were informed that there was a misprint in the Title IIA Handbook regarding the effective date of when all personnel must be highly qualified. We were informed that this misprint would be corrected for future reference and notice that the document is currently under revision. Contact Person: Kathy Milligan, Director of Accounting Services Phone: (912) 526-3141 Ext. 116 Fax Number: (912) 526-3291 E-mail Address: milligank@toombs.kl2.ga.us Contact Person: Crystal Crews, Accountant Phone: (912) 526-3141 Ext. 120 Fax Number: (912) 526-3291 E-mail Address: crewsc@toombs.kl2.ga.us -2-