WARE COUNTY BOARD OF EDUCATION WAYCROSS# GEORGIA REPORT ON AUDIT OF THE FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30# 2007 STATE OF GEORGIA DEPARTMENT OF AUDITS AND ACCOUNTS Russell W. Hinton State Auditor WARE COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS - SECTION I FINANCIAL INDEPENDENT AUDITOR'S COMBINED REPORT ON BASIC FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION - SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS EXHIBITS BASIC FINANCIAL STATEMENTS DISTRICT-WIDE FINANCIAL STATEMENTS A STATEMENT OF NET ASSETS 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 7 E STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS 8 F RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES TO THE STATEMENT OF ACTIVITIES 10 G STATEMENT OF FIDUCIARY NET ASSETS FIDUCIARY FUNDS 11 H NOTES TO THE BASIC FINANCIAL STATEMENTS 12 SCHEDULES REQUIRED SUPPLEMENTARY INFORMATION 1 SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL GENERAL FUND 27 SUPPLEMENTARY INFORMATION 2 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS 28 3 SCHEDULE OF STATE REVENUE 31 WARE COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS - SECTION I FINANCIAL SCHEDULES SUPPLEMENTARY INFORMATION 4 SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS 32 5 ALLOTMENTS AND EXPENDITURES GENERAL FUND - QUALITY BASIC EDUCATION PROGRAMS (QBE) BY PROGRAM 35 SECTION II COMPLIANCE AND INTERNAL CONTROL REPORTS REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS REPORT ON COMPLIANCE WITH REQUIREMENTS APPLICABLE TO EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH 0MB CIRCULAR A-133 SECTION III AUDITEE'S RESPONSE TO PRIOR YEAR FINDINGS AND QUESTIONED COSTS SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS SECTION IV FINDINGS AND QUESTIONED COSTS SCHEDULE OF FINDINGS AND QUESTIONED COSTS WARE COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS - SECTIONV MANAGEMENT'S RESPONSES SCHEDULE OF MANAGEMENT'S RESPONSES SECTION I FINANCIAL Russell W. Hinton STATE AUDITOR (404) 656-2174 DEPARTMENT OF AUDITS AND ACCOUNTS 270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400 July 29, 2008 Honorable Sonny Perdue, Governor Members ofthe General Assembly Members ofthe State Board of Education and Superintendent and Members of the Ware 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 Ware County Board of Education, as of and for the year ended June 30, 2007, which collectively comprise the Board's basic financial statements as listed in the table of contents. These financial statements are the responsibility of the Ware County Board of Education's management. Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States ofAmerica and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General ofthe United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Ware County Board of Education's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinions. 2007ARL-11 In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, each major fund, and the aggregate remaining fund information of the Ware County Board of Education, as of June 30, 2007, and the respective changes in financial position thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America. The Ware County Board ofEducation has not presented Management's Discussion and Analysis that accounting principles generally accepted in the United States of America has determined is necessary to supplement, although not to be part of, the basic financial statements. In accordance with Government Auditing Standards, we have also issued our report dated July 29, 2008, on our consideration ofthe Ware County Board ofEducation's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements and other matters. The purpose of that report is to describe the scope of our testing ofinternal control over financial reporting and compliance and the results ofthat testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit. The Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual, as presented on page 27, is not a required part of the basic financial statements but is supplementary information required by the accounting principles generally accepted in the United States of America. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods ofmeasurement and presentation ofthe required supplementary information. However, we did not audit the information and express no opinion on it. Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Ware 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, ~ 0.~ ell W. Hinton, CPA, CGFM State Auditor RWH:gp 2007ARL-11 WARE COUNTY BOARD OF EDUCATION WARE COUNTY BOARD OF EDUCATION STATEMENT OF NET ASSETS JUNE 30, 2007 ASSETS Cash and Cash Equivalents Investments Accounts Receivable, Net Taxes State Government Federal Government Other Inventories Capital Assets Land Construction in Progress Land Improvements Buildings Equipment Less: Accumulated Depreciation Total Assets LIABILITIES Accounts Payable Salaries and Benefits Payable Contracts Payable Retainages Payable Long-Term Liabilities Due Within One Year Total Liabilities NET ASSETS Invested in Capital Assets, Net of Related Debt Restricted for Bus Replacement Continuation of Federal Programs Debt Service Capital Projects Permanent Fund Unrestricted Total Net Assets Total Liabilities and Net Assets The notes to the basic financial statements are an integral part of this statement. - 1- EXHIBIT"A" GOVERNMENTAL ACTIVITIES $ 4,027,715 14,102,678 1,247,015 4,930,104 1,246,816 76,440 94,397 806,950 2,160,325 4,643,811 63,505,211 6,448,999 -25,246,909 $ ===7=8=,0=4=3=,5=52= $ 741,675 6,981,176 207,945 54,046 2,785,000 $ 10,769,842 $ 49,560,620 364,008 799,424 55,663 10,773,400 3,000 5 717 595 $ 67,273,710 $ ===7=8=,0=4=3=,5=52== WARE COUNTY BOARD OF EDUCATION STATEMENT OF ACTIVITIES FOR THE YEAR ENDED JUNE 30, 2007 GOVERNMENTAL ACTIVITIES Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Operations of Non-Instructional Services Enterprise Operations Food Services Interest on Short-Term and Long-Term Debt Total Governmental Activities General Revenues Taxes Property Taxes For Maintenance and Operations Sales Taxes Special Purpose Local Option Sales Tax For Capital Projects Intangible Recording Tax 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 $ 38,990,960 $ 3,083,254 2,499,171 1,130,203 566,625 3,017,480 343,237 4,020,482 2,419,094 466,199 722,646 31,268 3,080,276 198,063 $ 60,568,958 $ 809,379 22,157 678,027 1,509,563 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 $ 30,650,048 817,637 1,213,220 684,805 1,237,762 1,585,532 11,864 1,720,640 983,598 $ 5,039 30,086 2,189,881 $ 41,130,112 $ $ 366,501 366 501 $ -7,531,533 -2,265,617 -1,285,951 -445,398 671,137 -1,431,948 -331,373 -2,277,685 -1,068,995 -461,160 -692,560 -31,268 -212,368 -198,063 -17,562,782 $ 9,221,886 6,755,064 265,413 6,741,436 842,135 1,710,130 $ 25,536,064 $ 7,973,282 59,300,428 $ =========67=,2=7=3=1,.1..o.... -3- WARE COUNTY BOARD OF EDUCATION BALANCE SHEET GOVERNMENTAL FUNDS JUNE 30, 2007 ASSETS Cash and Cash Equivalents Investments Accounts Receivable, Net Taxes State Government Federal Government Other Inventories GENERAL FUND DISTRICTWIDE CAPITAL PROJECTS FUND $ 3,619,995 $ 400,833 4,401,365 9,644,590 4,930,104 1,246,816 76,440 94397 1,145,502 Total Assets $ 14,369,117 $ =====11=,1=9=0,=92=5= LIABILITIES AND FUND BALANCES LIABILITIES Accounts Payable Salaries and Benefits Payable Contracts Payable Retainages Payable Total Liabilities FUND BALANCES Reserved for: Bus Replacement Continuation of Federal Programs Debt Service Inventories Capital Projects Permanent Fund Unreserved Designated for Self-Insurance Designated for Student Activities Undesignated Reported in: General Fund Permanent Fund Total Fund Balances $ 582,966 $ 6,981,176 $ 7,564,142 $ 155,534 207,945 54046 417 525 $ 364,008 705,027 94,397 $ 10,773,400 35,157 499,837 5,106,549 $ 6,804,975 $ 10,773,400 Total Liabilities and Fund Balances $ 14 369 117 $ =====11=,1=9=0'=92=5= The notes to the basic financial statements are an integral part of this statement. -4- EXHIBIT "C" DEBT SERVICE FUND NONMAJOR GOVERNMENTAL FUNDS TOTAL $ 5,348 $ 53,490 1,539 $ 3,233 4,027,715 14,102,678 1,145,502 4,930,104 1,246,816 76,440 94 397 $ 58 838 $ 4 772 $ ====25=,6=2=3'=65=2= $ 3,175 $ 3175 $ 55,663 $ $ 55663 $ $ 58 838 $ $ 741,675 6,981,176 207,945 54 046 $ 7 984 842 $ 3,000 1 772 4 772 $ 364,008 705,027 55,663 94,397 10,773,400 3,000 35,157 499,837 5,106,549 1 772 17,638,810 4 772 $ ====25=,6=2=3'=65=2= -5- (This page left intentionally blank) WARE COUNTY BOARD OF EDUCATION RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO THE STATEMENT OF NET ASSETS JUNE 30, 2007 EXHIBIT"D" Total Fund Balances - Governmental Funds (Exhibit "C") Amounts reported for Governmental Activities in the Statement of Net Assets are different because: Capital Assets used in Governmental Activities are not financial resources and therefore are not reported in the funds. These assets consist of: Land 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. Bonds Payable, which are Long-Term Liabilities, are not due and payable in the current period and therefore are not reported as liabilities in the funds. $ 17,638,810 $ 806,950 2,160,325 4,643,811 63,505,211 6,448,999 -25,246,909 52,318,387 101,513 -2,785,000 Net Assets of Governmental Activities (Exhibit "A") $ 67,273,710 The notes to the basic financial statements are an integral part of this statement. -7- WARE COUNTY BOARD OF EDUCATION STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS YEAR ENDED JUNE 30, 2007 REVENUES Property Taxes Sales Taxes State Funds Federal Funds Charges for Services Investment Earnings Miscellaneous Total Revenues EXPENDITURES Current Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Enterprise Operations Food Services Operation Capital Outlay Debt Services Principal Interest Total Expenditures Excess of Revenues over (under) Expenditures OTHER FINANCING SOURCES (USES) Transfers In Transfers Out Total Other Financing Sources (Uses) Net Change in Fund Balances Fund Balances - Beginning GENERAL FUND DISTRICTWIDE CAPITAL PROJECTS FUND $ 9,595.445 265,413 $ 41,077,909 7,160,140 1,509,563 319,387 1,740,257 $ 61,668,114 $ 6,755,064 298,169 7,053,233 $ 38,375,682 3,062,500 2,447,228 1,130,203 548,605 3,017,480 336,874 4,002,293 2,760,871 463,036 722,646 31,268 3,012,453 $ 2,872,055 $ 59,911,139 $ $ 1,756,975 $ 2,872,055 4,181,178 $ 795,786 $ -3,499,875 $ 795 786 $ -3,499,875 $ 2,552,761 $ 681,303 4,252,214 10,092,097 Fund Balances - Ending $ The notes to the basic financial statements are an integral part of this statement. -8- 6,804,975 $ ====1o=,1...,1..,.3,...,40=0= EXHIBIT"E" DEBT SERVICE FUND NONMAJOR GOVERNMENTAL FUNDS TOTAL $ 224,416 $ $ 224,416 $ $ 163 163 $ 9,595,445 7,020,477 41,077,909 7,160,140 1,509,563 842,135 1,740,257 68,945,926 $ $ 6,363 2,675,000 198,063 $ 2,879,426 $ $ -2,655,010 $ $ 2,704,089 $ 2,704,089 $ 49,079 $ 6584 $ 55,663 $ 0 $ 0 $ 163 $ 38,375,682 3,062,500 2,447,228 1,130,203 548,605 3,017,480 343,237 4,002,293 2,760,871 463,036 722,646 31,268 3,012,453 2,872,055 2,675,000 198,063 65,662,620 3,283,306 $ $ 163 $ 4609 3,499,875 -3,499,875 0 3,283,306 14,355,504 4 772 $ 17,638,810 -9- WARE COUNTY BOARD OF EDUCATION RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES TO THE STATEMENT OF ACTIVITIES JUNE 30, 2007 EXHIBIT"F" Total Net Change in Fund Balances - Governmental Funds (Exhibit "E") $ 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 $ 3,710,017 -1,291,355 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 or loss on the sale and/or disposal of buildings and 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 buildings and equipment sold and/or disposed. Repayment of Long-Term Debt is reported as an expenditure in Governmental Funds, but the repayment reduces Long-Term Liabilities in the Statement of Net Assets. In the current year, these amounts consist of: Bond Principal Retirements 3,283,306 2,418,662 -373,559 -30, 127 2,675,000 Change in Net Assets of Governmental Activities (Exhibit "B") $=.....,7,.9.7.=3='=,2=8=-2 The notes to the basic financial statements are an integral part of this statement. - 10 - WARE COUNTY BOARD OF EDUCATION STATEMENT OF FIDUCIARY NET ASSETS FIDUCIARY FUNDS JUNE 30, 2007 ASSETS Cash and Cash Equivalents Accounts Receivable, Net Other Total Assets LIABILITIES Accounts Payable Funds Held for Others Total Liabilities EXHIBIT"G" AGENCY FUNDS $ 98,063 4 214 $ ==1=0=2..2..7. =7= $ 2,500 99777 $ =====10=2=,2=77= The notes to the basic financial statements are an integral part of this statement. - 11 - WARE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007 EXHIBIT "H" Note 1: DESCRIPTION OF SCHOOL DISTRICT AND REPORTING ENTITY REPORTING ENTITY The Ware County Board ofEducation (School District) was established under the laws ofthe State of Georgia and operates under the guidance of a school board elected by the voters and a Superintendent appointed by the Board. The Board is organized as a separate legal entity and has the power to levy taxes and issue bonds. Its budget is not subject to approval by any other entity. Accordingly, the School District is a primary government and consists of all the organizations that compose its legal entity. Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BASIS OF PRESENTATION The School District's basic financial statements are collectively comprised of the District-wide financial statements, fund financial statements and notes to the basic financial statements of the Ware 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 ofActivities presents a comparison between direct expenses and program revenues for each function of the School District's governmental activities. Direct expenses are those that are specifically associated with a program or function and, therefore, are clearly identifiable to a particular function. Indirect expenses (expenses of the School District related to the administration and support ofthe School District's programs, such as office and maintenance personnel and accounting) are not allocated to programs. Program revenues include (a) charges paid by the recipients ofgoods or services offered by the programs and (b) grants and contributions that are restricted to meeting the operational or capital requirements of a particular program. Revenues that are not classified as program revenues, including all taxes, are presented as general revenues. Fund Financial Statements: The fund financial statements provide information about the School District's funds, including fiduciary funds. Eliminations have been made to minimize the double counting ofinternal activities. Separate statements for each category (governmental and fiduciary) are presented. The emphasis of fund financial statements is on major governmental funds, each displayed in a separate column. All remaining governmental funds are aggregated and reported as nonmajor funds. - 12 - WARE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007 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) to be used for the acquisition, construction or renovation of major capital facilities. Debt Service Fund accounts for taxes (sales) legally restricted for the payment ofgeneral longterm principal, interest and paying agent's fees. The School District reports the following fiduciary fund type: Agency funds account for assets held by the School District as an agent for various clubs, organizations or individuals. BASIS OF ACCOUNTING The basis ofaccounting determines when transactions are reported on the financial statements. The District-wide governmental and fiduciary fund financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded at the time liabilities are incurred, regardless ofwhen the related cash flows take place. Nonexchange transactions, in which the School District gives (or receives) value without directly receiving (or giving) equal value in exchange, include property taxes, sales taxes, grants and donations. On an accrual basis, revenue from property taxes is recognized in the fiscal year for which the taxes are levied. Revenue from sales taxes is recognized in the fiscal year in which the underlying transaction (sale) takes place. Revenue from grants and donations is recognized in the fiscal year in which all eligibility requirements have been satisfied. The School District uses funds to report on its financial position and the results of its operations. Fund accounting is designed to demonstrate legal compliance and to aid financial management by segregating transactions related to certain governmental functions or activities. A fund is a separate accounting entity with a self-balancing set of accounts. Governmental funds are reported using the current financial resources measurement focus and the modified accrual basis ofaccounting. Under this method, revenues are recognized when measurable and available. The School District considers all revenues reported in the governmental funds to be available if they are collected within sixty days after year-end. Property taxes, sales taxes and interest are considered to be susceptible to accrual. Expenditures are recorded when the related fund liability is incurred, except for principal and interest on general long-term debt, which are recognized - 13 - WARE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007 EXHIBIT "H" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES as expenditures to the extent they have matured. Capital asset acquisitions are reported as expenditures in governmental funds. Proceeds of general long-term liabilities are reported as other financing sources. The School District funds certain programs by a combination ofspecific cost-reimbursement grants, categorical grants, and general revenues. Thus, when program costs are incurred, there are both restricted and unrestricted net assets available to finance the program. It is the School District's policy to first apply grant resources to such programs, followed by cost-reimbursement grants, then general revenues. CASH AND CASH EQUIVALENTS COMPOSITION OF DEPOSITS Cash and cash equivalents consist ofcash on hand, demand deposits and short-term investments with original maturities of three months or less from the date of acquisition in authorized financial institutions. Official Code of Georgia Annotated Section 45-8-14 authorize the School District to deposit its funds in one or more solvent banks or insured Federal savings and loan associations. INVESTMENTS COMPOSITION OF INVESTMENTS Investments made by the School District in nonparticipating interest-earning contracts (such as certificates ofdeposit) and repurchase agreements are reported at cost. Participating interest-earning contracts and money market investments with a maturity at purchase of one year or less are reported at amortized cost. Both participating interest-earning contracts and money market investments with a maturity at purchase greater than one year are reported at fair value. The Official Code 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, - 14 - WARE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007 EXHIBIT"H" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (6) The Local Government Investment Pool administered by the State of Georgia, Office of Treasury and Fiscal Services, (7) Repurchase agreements, and (8) Obligations of other political subdivisions of the State of Georgia. The School District does not have a formal policy regarding investment policies that address credit risks, custodial credit risks, concentration ofcredit risks, interest rate risks or foreign currency risks. RECEIVABLES Receivables consist of amounts due from property and sales taxes, grant reimbursements due on Federal, State or other grants for expenditures made but not reimbursed and other receivables disclosed from information available. Receivables are recorded when either the asset or revenue recognition criteria has been met. Receivables recorded on the basic financial statements do not include any amounts which would necessitate the need for an allowance for uncollectible receivables. PROPERTY TAXES The Ware County Board of Commissioners fixed the property tax levy for the 2006 tax digest year (calendar year) on September 15, 2006 (levy date). Taxes were due on November 15, 2006 (lien date). Taxes collected within the current fiscal year or within 60 days after year-end on the 2006 tax digest are reported as revenue in the governmental funds for fiscal year 2007. The Ware County Tax Commissioner bills and collects the property taxes for the School District, withholds 2.5% oftaxes collected as a fee for tax collection and remits the balance of taxes collected to the School District. Property tax revenues, at the fund reporting level, during the fiscal year ended June 30, 2007, for maintenance and operations amounted to $9,595,445. The tax millage rate levied for the 2006 tax year (calendar year) for the Ware County Board of Education was as follows (a mill equals $1 per thousand dollars of assessed value): School Operations 15.261 mills SALES TAXES Special Purpose Local Option Sales Tax, at the fund reporting level, during the year amounted to $6,755,064 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. - 15 - WARE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007 EXHIBIT "H" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES INVENTORIES FOOD INVENTORIES On the basic financial statements, inventories ofdonated food commodities used in the preparation ofmeals are reported at their Federally assigned value and purchased foods inventories are reported at cost (first-in, first-out). The School District uses the consumption method to account for inventories whereby donated food commodities are recorded as an asset and as revenue when received, and expenses/expenditures are recorded as the inventory items are used. Purchased foods are recorded as an asset when purchased and expenses/expenditures are recorded as the inventory items are used. CAPITAL ASSETS Capital assets purchased, including capital outlay costs, are recorded as expenditures in the fund financial statements at the time of purchase (including ancillary charges). On the District-wide financial statements, all purchased capital assets are valued at cost where historical records are available and at estimated historical cost based on appraisals or deflated current replacement cost where no historical records exist. Donated capital assets are recorded at estimated fair market value on the date donated. Disposals are deleted at depreciated recorded cost. The cost of normal maintenance and repairs that do not add to the value of assets or materially extend the useful lives of the assets is not capitalized. Depreciation is computed using the straight-line method. The School District does not capitalize book collections or works ofart. During the fiscal year under review, no events or changes in circumstances affecting a capital asset that may indicate impairment were known to the School District. Capitalization thresholds and estimated useful lives of capital assets reported in the District-wide statements are as follows: Capitalization Policy Estimated Useful Life Land Land Improvements Buildings and Improvements Equipment Any Amount $ 5,000 $ 5,000 $ 5,000 NIA 15 years 10 to 80 years 5 to 15 years Depreciation is used to allocate the actual or estimated historical cost of all capital assets over estimated useful lives. GENERAL OBLIGATION BONDS The School District issues general obligation bonds to provide funds for the acquisition and construction of major capital facilities. Bond issuance costs are recognized in the financial - 16 - WARE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007 EXHIBIT "H" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES statements during the fiscal year bonds are issued. General obligation bonds are direct obligations and pledge the full faith and credit of the government. The outstanding amount of these bonds is recorded in the Statement ofNet Assets. NET ASSETS The School District's net assets in the District-wide Statements are classified as follows: Invested in capital assets, net of related debt - This represents the School District's total investment in capital assets, net ofoutstanding debt obligations related to those capital assets. To the extent debt has been incurred but not yet expended for capital assets, such amounts are not included as a component of invested in capital assets, net of related debt. Restricted net assets - These represent resources for which the School District is legally or contractually obligated to spend resources for bus replacement, continuation ofFederal programs, debt service, capital projects and permanent fund corpus in accordance with restrictions imposed by external third parties. Unrestricted net assets - Unrestricted net assets represent resources derived from property taxes, sales taxes, grants and contributions not restricted to specific programs, charges for services, and miscellaneous revenues. These resources are used for transactions relating to the educational and general operations of the School District, and may be used at the discretion of the Board to meet current expenses for those purposes. Note 3: DEPOSITS AND INVESTMENTS COLLATERALIZATION OF DEPOSITS Official Code of Georgia Annotated (OCGA) Section 45-8-12 provides that there shall not be on deposit at any time in any depository for a time longer than ten days a sum ofmoney which has not been secured by surety bond, by guarantee ofinsurance, 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. 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, - 17 - WARE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007 EXHIBIT"H" Note 3: DEPOSITS AND INVESTMENTS (3) Bonds, bills, notes, certificates of indebtedness or other direct obligations of the United States or ofthe 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 ofthe State of Georgia, and (7) Bonds, bills, notes, certificates of indebtedness, or other obligations of a subsidiary corporation of the United States government, which are fully guaranteed by the United States government both as to principal and interest or debt obligations issued by the Federal Land Bank, the Federal Home Loan Bank, the Federal Intermediate Credit Bank, the Central Bank for Cooperatives, the Farm Credit Banks, the Federal Home Loan Mortgage Association, and the Federal National Mortgage Association. CATEGORIZATION OF DEPOSITS At June 30, 2007, the bank balances were $5,646,194. The amounts of the total uninsured bank balances are classified into three categories of custodial credit risk: Category 1 - Uncollateralized, Category 2 - Cash collateralized with securities held by the pledging financial institution, or Category 3 - Cash collateralized with securities held by the pledging financial institution's trust department or agent but not in the School District's name. The School District's uninsured deposits are classified by custodial credit risk category at June 30, 2007, as follows: Custodial Credit Risk Category Bank Balance 1 $ 0 2 0 3 5,522,500 Total $ 5,522,500 CATEGORIZATION OF INVESTMENTS At June 30, 2007, the carrying value of the School District's total investments was $14,099,445, which is materially the same as fair value. This investment consisted entirely of funds invested in - 18 - WARE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007 EXHIBIT"H" Note 3: DEPOSITS AND INVESTMENTS the Local Government Investment Pool administered by the State ofGeorgia, Office ofTreasury and Fiscal Services which are not required to be categorized since the School District did not own any specific identifiable securities in the pool. The investment policy ofthe State of Georgia, Office of Treasury and Fiscal Services for the Local Government Investment Pool (Primary Liquidity Portfolio) does not provide for investment in derivatives or similar investments. Additional information on the Local Government Investment Pool is disclosed in the State of Georgia Comprehensive Annual Financial Report. This audit can be obtained from the Georgia Department of Audits and Accounts at http://www.audits.state.ga.us/internet/searchRpts.html. The Primary Liquidity Portfolio consists ofGeorgia Fund 1 which is not registered with the SEC as an investment company but does operate in a manner consistent with the SEC's Rule 2a-7 of the Investment Company Act of 1940. The investment is valued at the pool's share price, $1.00 per share. The pool is an AAAm rated investment pool by Standard and Poor's. The weighted average maturity of Georgia Fund 1 may not exceed 60 days. The weighted average maturity for Georgia Fund 1 on June 30, 2007, was 15 days. 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: - 19 - WARE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007 EXHIBIT "H" Note 5: CAPITAL ASSETS Balances July 1, 2006 Increases Balances Decreases June 30, 2007 Governmental Activities Capital Assets, Not Being Depreciated: Land Construction in Progress $ 806,950 $ 806,950 764 689 $ 2,116,972 $ 721,336 2,160,325 Total Capital Assets Not Being Depreciated $ 1,571,639 $ 2,116,972 $ 721,336 $ 2,967,275 Capital Assets Being Depreciated Buildings and Improvements Equipment Land Improvements $ 62,928,118 $ 5,678,339 4,091,246 610,693 $ 1,151,123 552,565 33,600 $ 63,505,211 380,463 6,448,999 4,643,811 Less Accumulated Depreciation for: Buildings and Improvements Equipment Land Improvements 17,750,560 4,189,061 2,399,869 677,427 389,811 224,117 16,942 366,994 18,411,045 4,211,878 2,623,986 Total Capital Assets, Being Depreciated, Net $ 48,358,213 $ 1,023,026 $ 30 127 $ 49,351,112 Governmental Activity Capital Assets - Net $ 49,929.852 $ 3,139.998 $ 751.463 $ 52,318.387 Current year depreciation expense by function is as follows: Instruction Support Services Pupil Services Improvements of Instructional Services General Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Food Services $ 921,190 $ 17,284 43,258 21,499 15,148 213,859 2,634 313,682 56,483 Note 6: RESTRICTED ASSETS $ 1.291.355 Special Purpose Local Option Sales Tax (SPLOST) and corpus of the Gilchrist Trust Fund are restricted assets in the Statement ofNet Assets because their use is limited by statutory provisions. Restricted assets at June 30, 2007, were as follows: - 20 - WARE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007 EXHIBIT "H" Note 6: RESTRICTED ASSETS District-wide Capital Projects SPLOST Debt Service Funds Permanent Fund Restricted Cash and Cash Equivalents: Debt Services Capital Acquisitions Restricted Investments: Debt Services Capital Acquisitions Permanent Fund $ $ 400,833 $ $ 9,644,590 5,348 53,490 $ 3,000 Note 7: INTERFUND TRANSFERS Interfund transfers for the year ended June 30, 2007, consisted of the following: Transfer to Transfers From District-wide Capital Projects General Fund Debt Service Fund $ 795,786 2,704.089 Total $ 3,499.875 Transfers are used to move Special Purpose Local Option Sales Tax revenues collected by the District-wide Capital Projects Fund to the General Fund as reimbursement for capital outlay expenditures approved in the Special Purpose Local Option Sales Tax referendum and to the Debt Service Fund to pay principal and interest payments. 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; unemployment compensation and dental claims. The School District has obtained commercial insurance for risk ofloss 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. - 21 - WARE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007 EXHIBIT"H" Note 8: RISK MANAGEMENT The School District has elected to self-insure for all losses related to flood. 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. In connection with this program, a self-insurance reserve has been established within the General Fund by the School District. The School District accounts for claims within the General Fund with expenses/expenditures and liability being reported when it is probable that a loss has occurred, and the amount of that loss can be reasonably estimated. Changes in the unemployment compensation claims liability during the last two fiscal years are as follows: Beginning of Year Liability Claims and Changes in Estimates Claims Paid End of Year Liability 2006 2007 $ 1 567 $ 4,206 $ 5 773 $ 0 $ 0 $ 726 $ 645 $ 81 The School District is self-insured with regard to employee and dependent dental claims. The School District accounts for claims within the General Fund 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. This program is funded through a combination ofemployer and employee contributions. In connection with this program, a self-insurance reserve has been established within the General Fund by the School District. Changes in the dental claims liability during the past two fiscal years are as follows: 2006 2007 Beginning of Year Liability Claims and Changes in Estimates Claims Paid EndofYear Liability $ 0 $ 651,627 $ 651,627 $ 0 $ 0 $ 662,080 $ 662,080 $ 0 The School District participates in the Georgia School Boards Association Workers' Compensation Fund, a public entity risk pool organized on July I, 1992, to develop, implement, and administer a program ofworkers' compensation self-insurance for its member organizations. The School District pays an annual premium to the Fund for its general insurance coverage. Additional insurance coverage is provided through an agreement by the Fund with the Safety National Casualty Corporation to provide coverage for potential losses sustained by the Fund in excess of $400,000 loss per occurrence, up to $1,000,000. - 22 - WARE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007 EXHIBIT"H" Note 8: RISK MANAGEMENT The School District has purchased surety bonds to provide additional insurance coverage as follows: Position Covered Amount Superintendent Each Employee $ 100,000 $ 100,000 Note 9: LONG-TERM DEBT GENERAL OBLIGATION DEBT OUTSTANDING General Obligation Bonds currently outstanding are as follows: Purpose Interest Rates Amount General Government - Series 2002 3.00% - 4.00% $ 2,785,000 Voters have authorized $20,000,000 in general obligation debt for capital outlay projects which was not issued as of June 30, 2007. The changes in Long-Term Debt during the fiscal year ended June 30, 2007, were as follows: Governmental Funds General Obligation Bonds Balance July 1, 2006 $ 5,460,000 Deductions Debt Retired 2,675,000 Balance June 30, 2007 $ 2,785.000 Portion of Long-Term Debt Due within One Year $ 2,785,000 At June 30, 2007, payments due by fiscal year which includes principal and interest for these items are as follows: -23 - WARE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007 EXHIBIT "H" Note 9: LONG-TERM DEBT Fiscal Year Ended June 30 General Obligation Debt Principal Interest 2008 $ 2,785.000 $=~1-04,!,1:.4=!!!3==7 Note 10: ON-BEHALF PAYMENTS The School District has recognized revenues and costs in the amount of $934,342 for health insurance and retirement contributions paid on the School District's behalf by the following State Agencies. Georgia Department of Education Paid to the Georgia Department of Community Health For Health Insurance ofNon-Certified Personnel In the amount of $888,357 Paid to the Teachers Retirement System of Georgia For Teachers Retirement System (TRS) Employer's Cost In the amount of $38,503 Office of Treasury and Fiscal Services Paid to the Public School Employees Retirement System For Public School Employees Retirement (PSERS) Employer's Cost In the amount of $7,482 Note 11: SIGNIFICANT COMMITMENTS The following is an analysis ofsignificant outstanding construction or renovation contracts executed by the School District as of June 30, 2007 Project Unearned Executed Contracts Classroom Additions to Memorial Drive, Wacona and Waresboro Elementary Schools Ware County Integrate Controls Migration New Transportation Facility $ 1,594,079 377,082 526,475 $ 2,497.636 The amounts described in this note are not reflected in the basic financial statements. - 24- WARE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007 EXHIBIT"H" Note 12: 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. Note 13: RETIREMENT PLANS TEACHERS RETIREMENT SYSTEM OF GEORGIA (TRS) TRS PLAN DESCRIPTION Substantially all teachers, administrative and clerical personnel employed by local school systems are covered by the Teachers Retirement System of Georgia (TRS), which is a cost-sharing multiple employer defined benefit pension plan. TRS provides service retirement, disability retirement and survivors benefits for its members in accordance with State statute. The Teachers Retirement System of Georgia issues a separate stand alone financial audit report and a copy can be obtained from the Georgia Department of Audits and Accounts. TRS CONTRIBUTIONS REQUIRED AND MADE Employees ofthe School District who are covered by TRS are required by State statute to contribute 5% of their gross earnings to TRS. The School District makes monthly employer contributions to TRS at rates adopted by the TRS Board of Trustees in accordance with State statute and as advised by their independent actuary. The required employer contribution rate is 9.28% and employer contributions for the current fiscal year and the preceding two fiscal years are as follows: Fiscal Year Percentage Contributed Required Contribution 2007 2006 2005 100% 100% 100% $ 3,097,451 $ 2,983,088 $ 2,864,159 - 25 - (This page left intentionally blank) WARE COUNTY BOARD OF EDUCATION GENERAL FUND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL YEAR ENDED JUNE 30, 2007 SCHEDULE "1" REVENUES Property Taxes Sales Taxes State Funds Federal Funds Charges for Services Investment Earnings Miscellaneous Total Revenues EXPENDITURES Current Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Enterprise Operations Food Services Operation Total Expenditures Excess of Revenues over (under) Expenditures OTHER FINANCING SOURCES (USES) Other Sources Other Uses Total Other Financing Sources (Uses) Net Change in Fund Balances Fund Balances - Beginning Adjustments NONAPPROPRIATED BUDGETS ORIGINAL FINAL ACTUAL AMOUNTS $ 9,500,000 $ 9,500,000 $ 9,595,445 360,000 360,000 265,413 39,192,279 39,649,406 41,077,909 6,558,614 7,866,482 7,160,140 1,655,795 1,649,795 1,509,563 227,780 227,780 319,387 837 425 846 405 1740257 $ 58,331,893 $ 60,099,868 $ 61 668114 $ 39,297,482 $ 39,779,318 $ 38,375,682 2,849,754 1,607,697 1,116,466 574,115 3,061,678 331,748 3,920,587 2,357,927 449,805 40,536 2,930,043 3,054,488 2,282,450 1,116,466 616,332 3,085,905 336,748 3,961,001 2,675,784 449,805 47,751 2,930,043 3,062,500 2,447,228 1,130,203 548,605 3,017,480 336,874 4,002,293 2,760,871 463,036 722,646 31,268 3,012,453 $ 58 537 838 $ 60,336,091 $ 59,911,139 $ -205 945 $ -236,223 $ 1 756 975 $ 143,900 $ 721,001 $ 795,786 -146 000 -146 000 $ -2 100 $ 575 001 $ 795 786 $ -208,045 $ 338,778 $ 2,552,761 4,147,253 4,147,253 4,252,214 411 709 411 709 Fund Balances - Ending $ 4 350 917 $ 4 897 740 $ ===6='=,8=0=4!=,9=75= Notes to the Schedule of Revenues, Expenditures and Changes in Fund Balances Budget and Actual The accompanying schedule of revenues, expenditures and changes in fund balances budget and actual is presented on the modified accrual basis of accounting which is the basis of accounting used in the presentation of the fund financial statements. See notes to the basic financial statements. - 27 - WARE COUNTY BOARD OF EDUCATION SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS YEAR ENDED JUNE 30, 2007 SCHEDULE "2" FUNDING AGENCY PROGRAM/GRANT Agriculture, U. S. Department of Child Nutrition Cluster Pass-Through From Georgia Department of Education Food Services School Breakfast Program National School Lunch Program Total Child Nutrition Cluster Other Programs Pass-Through From Georgia Department of Education Food Donation (1) 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 Corporation for National and Community Service Pass-Through From Okefenokee Regional Educational Service Agency Learn and Serve America School and Community Based Programs 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 Coffee County Board of Education Fund for the Improvement of Education Pass-Through From Georgia Department of Education English Language Acquisition Grants Enhancing Education Through Technology Program Hurricane Education Recovery 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 Pass-Through From Okefenokee Regional Educational Service Agency Safe and Drug-Free Schools and Communities - State Programs Pass-Through From Southwest Georgia Regional Educational Service Agency English Language Acquisition Grants Total U.S. Department of Education CFDA NUMBER PASSTHROUGH ENTITY ID NUMBER EXPENDITURES IN PERIOD . 10.553 10.555 10.550 10.558 NIA N/A $ $ (2) 2,693,253 2,693,253 NIA NIA $ 140,288 (2) 2,833,541 94.004 NIA $ 1 545 84.027 84.173 N/A $ NIA $ 1,640,180 92 238 1,732,418 84.215 84.365 84.318 84.938 84.367 84.011 84.358 84.298 84.010 84.048 84.186 84.365 NIA NIA NIA NIA NIA NIA NIA NIA NIA NIA NIA NIA $ 76,520 584 86,597 (4) 409,597 61,742 192,186 10,373 2,253,908 86,929 28,851 2 460 4 942 165 - 28 - WARE COUNTY BOARD OF EDUCATION SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS YEAR ENDED JUNE 30, 2007 SCHEDULE "2" FUNDING AGENCY PROGRAM/GRANT Interior, U.S. Department of Pass-Through From Ware County Commissioners Revenue Sharing, Public Lands and Resources Defense, U. S. Department of Direct Department of the Army R.O.T.C. Program CFDA NUMBER PASSTHROUGH ENTITY ID NUMBER EXPENDITURES IN PERIOD 15.227 NIA (3) $ _ _ _--'-7=2=9~85~ Total Federal Financial Assistance $ =====7,=85=0=,2=3=6 NIA= Not Available Notes to the Schedule of Expenditures of Federal Awards (1) The amount shown for the Food Donation Program represents the Federally assigned value of nonmonetary assistance for donated commodities received and/or consumed by the School District during the current fiscal year. (2) Expenditures for the funds earned on Child and Adult Care Food Program ($112) and the School Breakfast Program ($490,125) were not maintained separately and are included in the 2007 National School Lunch Program. (3) Funds earned on this program in the amount of $101,637 do not require reporting of expenditures. (4) Funds earned and expended in the prior period on the Hurricane Education Recovery Act, in the amount of $15,488, do not require reporting of expenditures. 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 Ware 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. - 29 - {This page left intentionally blank) WARE COUNTY BOARD OF EDUCATION SCHEDULE OF STATE REVENUE YEAR ENDED JUNE 30, 2007 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 Grades (6-8) Program Middle School (6-8) Program High School General Education (9-12) Program Vocational Laboratory (9-12) Program Students with Disabilities Category I Category II Category Ill Category IV Category V Gifted Student - Category VI Remedial Education Program Alternative Education Program English Speakers of Other Languages (ESOL) Media Center Program 20 Days Additional Instruction Staff and Professional Development Indirect Cost Central Administration School Administration Facility Maintenance and Operations Categorical Grants Pupil Transportation Regular Bus Replacement Sparsity Nursing Services Principal Supplements Education Equalization Funding Grant Food Services Vocational Education Amended Formula Adjustment Other State Programs Apprenticeship Program Comprehensive Academic Performance System Health Insurance Middle School Remediation and Intervention Grant National Teacher Certification Preschool Handicapped Program Pupil Transportation - State Bonds Special Education Low Incidence Grant Statewide K-8 Reading and Mathematics Program Teachers' Retirement Virtual Schools State Grant Office of Treasury and Fiscal Services Public School Employees Retirement See notes to the basic financial statements. - 31 - SCHEDULE "3" GOVERNMENTAL FUND TYPE GENERAL FUND $ 1,290,548 1,798,967 599,315 4,286,576 605,396 1,771,955 610,366 372,435 3,086,947 3,098,804 1,045,119 353,847 434,688 2,936,136 1,167,173 642,608 2,101,322 300,128 287,187 33,223 662,923 193,511 132,052 1,001,530 1,434,474 1,644,407 817,975 66,501 20,000 118,647 21,321 6,741,286 170,870 153,569 -618,031 19,649 146,816 888,357 6,503 28,757 136,365 300,000 26,797 94,755 38,503 150 7482 $ 41077909 WARE COUNTY BOARD OF EDUCATION SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS YEAR ENDED JUNE 30, 2007 SCHEDULE "4" PROJECT Acquiring, constructing and equipping the following Capital Outlay Projects: renovations and improvements at Memorial Stadium; acquisition, construction, renovation and equipping of fine arts facilities, including the construction of a new performing arts center and choral lab at Ware County High School; renovations at the Waycross Middle School auditorium; renovations to the Ware County Middle School auditorium and enlargements and renovations to the band room at Ware County High School; site improvements including purchase of equipment, providing fencing, demolition, paving, construction of sidewalks and covered areas at various schools; construction of soccer fields and improvements to the softball, football fields tennis courts, physical education and/or any other athletic field, providing lighting, bleachers, fencing and equipment at Ware County High School; improvements to the softball, baseball field, soccer field, football field, physical education and/or any other athletic field, fencing, paving, reworking the bus loading area and providing lighting and bleachers at Waycross Middle School; improvements to the softball, baseball, soccer, football, physical education and/or any other athletic field, fencing, paving and providing lighting and bleachers at Ware County Middle School; providing lighting and installing bleachers at the softball and baseball fields at Ware County Magnet School; construction of classrooms at Ruskin, Memorial Drive, Waresboro and Wacona Elementary schools; construction of a JROTC building at Ware County High School; acquisition of furnishings and equipment at Ware Middle, Waycross Middle, Memorial Drive, Wacona, Waresboro and Ware Magnet schools; making interior improvements to various schools including replacement of flooring at Ware County High School, Williams Heights, Center and Ruskin Elementary Schools, and the renovation of the cafeteria and restrooms at Memorial Drive; making exterior improvements including painting and repairs to all schools; acquisition of new technology, copiers, materials and equipment; purchase and installation of HVAC, electrical and energy controls at Waresboro, Wacona, Memorial Drive Elementary schools, Ware County and Waycross Middle schools, Ware Magnet ORIGINAL ESTIMATED COST (1) CURRENT ESTIMATED COSTS (2) AMOUNT EXPENDED IN CURRENT YEAR (3) AMOUNT EXPENDED IN PRIOR YEARS (3) PROJECT STATUS - 32 - WARE COUNTY BOARD OF EDUCATION SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS YEAR ENDED JUNE 30, 2007 SCHEDULE "4" PROJECT and Ware County High School; acquisition of new school buses and renovations and improvements to the bus shop; and payment of contingencies, surveys, geotechnical services, architectural and engineering fees, testing services and fees, together with capitalized interest and legal administrative costs related to issuance of the bonds. ORIGINAL ESTIMATED COST (1) CURRENT ESTIMATED COSTS (2) AMOUNT EXPENDED IN CURRENT YEAR (3) AMOUNT EXPENDED IN PRIOR YEARS (3) PROJECT STATUS $ 25,515,000 $ 25,515,000 $ 3,872,267 $ 11,946,644 Ongoing (1) The School District's original cost estimate as specified in the resolution calling for the imposition of the Local Option Sales Tax. (2) The School District's current estimate of total cost for the project. Includes all cost from project inception to completion. (3) The voters of Ware County approved the imposition of a 1% sales tax to fund the above project and retire associated debt. Amounts expended for this project may include sales tax proceeds, state, local property taxes and/or other funds over the life of the project. See notes to the basic financial statements. - 33 - (This page left intentionally blank) WARE COUNTY BOARD OF EDUCATION GENERAL FUND - QUALITY BASIC EDUCATION PROGRAM (QBE) ALLOTMENTS AND EXPENDITURES - BY PROGRAM YEAR ENDED JUNE 30, 2007 SCHEDULE "5" DESCRIPTION Direct Instructional Programs Kindergarten Program Kindergarten Program-Early Intervention Program Primary Grades (1-3) Program Primary Grades-Early Intervention (1-3) Program Upper Elementary Grades (4-5) Program Upper Elementary Grades-Early Intervention (4-5) Program Middle Grades (6-8) Program Middle School (6-8) Program High School General Education (9-12) Program Vocational Laboratory (9-12) Program Students with Disabilities Category I Category II Category Ill Category IV Category V Gifted Student - Category VI Remedial Education Program Alternative Education Program English Speakers of other Languages (ESOL) TOTAL DIRECT INSTRUCTIONAL PROGRAMS Media Center Program Staff and Professional Development ALLOTMENTS FROM GEORGIA DEPARTMENT OF EDUCATION (1) (2) ELIGIBLE QBE PROGRAM COSTS SALARIES OPERATIONS TOTAL $ 1,994,007 $ 2,007,111 $ 29,726 $ 2,036,837 578,121 320,516 431 320,947 4,614,756 4,541.452 42,819 4,584,271 663,570 1,298,199 2,234 1,300,433 1,947,517 2,268,686 22,525 2,291,211 649,737 401,862 3,387,972 3,380,146 1,107,039 5,910,991 2,270,870 296,763 311,763 35 889 771,572 479,092 3,915,592 3,873,795 1,189,986 387,465 524,231 2,911,540 931,638 365,890 2,200,540 316,692 368,875 37 790 1,579 42,523 84,952 258,010 79,638 838 14,265 3,593 905 688 43,405 253 103 773,151 521,615 4,000,544 4,131,805 1,269,624 388,303 538,496 2,915,133 932,543 366,578 2,243,945 316,945 368,875 37 893 $ 27,551,003 $ 28,710,662 $ 628,487 $ 29,339,149 718,205 143 990 992,799 101,577 1,094,376 145 352 TOTAL QBE FORMULA FUNDS $ 28 413 198 $ 29,703A61 $ 730 064 $ ====3=0,=5=78..,.8=7=7 (1) Comprised of State Funds plus Local Five Mill Share. (2) Allotments do not include the impact of the State amended formula adjustment. See notes to the basic financial statements. - 35 - SECTION II COMPLIANCE AND INTERNAL CONTROL REPORTS Russell W. Hinton STATE AUDITOR (404) 656-2174 DEPARTMENT OF AUDITS AND ACCOUNTS 270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400 July 29, 2008 Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education and Superintendent and Members ofthe Ware 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 Ware County Board of Education as of and for the year ended June 30, 2007, which collectively comprise Ware County Board ofEducation's basic financial statements and have issued our report thereon dated July 29, 2008. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Internal Control Over Financial Reporting In planning and performing our audit, we considered Ware County Board of Education's internal control over financial reporting as a basis for designing our auditing procedures for the purpose of expressing our opinions on the financial statements, but not for the purpose ofexpressing an opinion on the effectiveness of the Ware County Board of Education's internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness of the Ware County Board of Education's internal control over financial reporting. Our consideration of internal control over financial reporting was for the limited purpose described in the preceding paragraph and would not necessarily identify all deficiencies in internal control over financial reporting that might be significant deficiencies or material weaknesses. However, as discussed below, we identified certain deficiencies in internal control over financial reporting that we consider to be significant deficiencies. 2007YB-30 A control deficiency exists when the design or operation ofa control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect misstatements on a timely basis. A significant deficiency is a control deficiency, or combination of control deficiencies, that adversely affect the Ware County Board of Education's ability to initiate, authorize, record, process, or report financial data reliably in accordance with generally accepted accounting principles such that there is more than a remote likelihood that a misstatement of the Ware County Board ofEducation's financial statements that is more than inconsequential will not be prevented or detected by the Ware County Board ofEducation's internal control. We consider items FS-7481-07-01 and FS-7481-07-02 in the accompanying Schedule ofFindings and Questioned Costs to be significant deficiencies in internal control over financial reporting. A material weakness is a significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood that a material misstatement ofthe financial statements will not be prevented or detected by the Ware County Board of Education's internal control. Our consideration of the internal control over financial reporting was for the limited purpose described in the first paragraph ofthis section and would not necessarily disclose all deficiencies in internal control that might be significant deficiencies and, accordingly, would not necessarily disclose all significant deficiencies that are also considered to be material weaknesses. However, we believe that none of the significant deficiencies described above are material weaknesses. Compliance and Other Matters As part of obtaining reasonable assurance about whether Ware County Board of Education's financial statements are free of material misstatement, we performed tests of its compliance with certain provisions oflaws, regulations, contracts and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. We noted certain matters that we have reported to management ofWare County Board ofEducation in a separate letter dated July 29, 2008. Ware County Board ofEducation's response to the findings identified in our audit is described in the accompanying Schedule of Management's Responses. We did not audit Ware County Board of Education's response and, accordingly, we express no opinion on it. 2007YB-30 This report is intended solely for the information and use ofthe management, members ofthe Ware 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, '=B~~-~k Russell W. Hinton, CPA, CGFM State Auditor RWH:gp 2007YB-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 July 29, 2008 Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education and Superintendent and Members of the Ware 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 Ware County Board of Education with the types of compliance requirements described in the U.S. Office of Management and Budget (0MB) Circular A-133 Compliance Supplement that are applicable to each of its major Federal programs for the year ended June 30, 2007. Ware County Board of Education's major Federal programs are identified in the Summary of Auditor's Results Section of the accompanying Schedule of Findings and Questioned Costs. Compliance with the requirements of laws, regulations, contracts and grants applicable to each of its major Federal programs is the responsibility of Ware County Board of Education's management. Our responsibility is to express an opinion on Ware County Board of Education's compliance based on our audit. We conducted our audit ofcompliance in accordance with auditing standards generally accepted in the United States ofAmerica; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General ofthe United States; and 0MB Circular A133, Audits of States, Local Governments, and Non-Profit Organizations. Those standards and 0MB Circular A-133 require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major Federal program occurred. An audit includes examining, on a test basis, evidence about the Ware 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 Ware County Board ofEducation's compliance with those requirements. 2007SA-10 In our opinion, the Ware County Board of Education complied, in all material respects, with the requirements referred to above that are applicable to each of its major Federal programs for the year ended June 30, 2007. Internal Control Over Compliance The management of Ware 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 Ware County Board of Education's internal control over compliance with requirements that could have a direct and material effect on a major Federal program in order to determine our auditing procedures for the purpose ofexpressing our opinion on compliance, but not for the purpose ofexpressing an opinion on the effectiveness ofinternal control over compliance. Accordingly, we do not express an opinion on the effectiveness of the Ware County Board of Education's internal control over compliance. A control deficiency in an entity's internal control over compliance exists when the design or operation of a control does not allow management or employees, in the normal course ofperforming their assigned functions, to prevent or detect noncompliance with a type ofcompliance requirement of a Federal program on a timely basis. A significant deficiency is a control deficiency, or combination ofcontrol deficiencies, that adversely affects the entity's ability to administer a Federal program such that there is more than a remote likelihood that noncompliance with a type of compliance requirement of a Federal program that is more than inconsequential will not be prevented or detected by the entity's internal control. A material weakness is a significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood that material noncompliance with a type of compliance requirement of a Federal program will not be prevented or detected by the entity's internal control. Our consideration ofthe internal control over compliance was for the limited purpose described in the first paragraph of this section and would not necessarily identify all deficiencies in internal control that might be significant deficiencies or material weaknesses. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses, as defined above. This report is intended solely for the information and use ofthe management, members ofthe Ware 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, -~~-~ Russell W. Hinton, CPA, CGFM State Auditor RWH:gp 2007SA-10 SECTION III AUDITEE'S RESPONSE TO PRIOR YEAR FINDINGS AND QUESTIONED COSTS WARE COUNTY BOARD OF EDUCATION AUDITEE'S RESPONSE SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2007 PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS FINDING CONTROL NUMBER AND STATUS FS-7481-04-02 FS-7481-06-01 Partially Resolved - See Corrective Action/Responses Unresolved - See Corrective Action/Responses CORRECTIVE ACTION/RESPONSES EMPLOYEE COMPENSATION EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Control Procedures Finding Control Number: FS-7481-04-02 The Board has retained legal counsel in the above-referenced dispute with Department of Community Health. Ware County School System does not agree with the findings of DCH. The classification of employees was appropriate under the existing guidance received from the DCH at the time this change was implemented by the Board. In fiscal year 2005, the School District reclassified the employees in question in accordance with DCH's revised definitions. The Board is aware that there is litigation regarding this issue with Live Oak Consulting and Department of Community Health. The Board is anticipating a resolution to this matter before additional action is taken on its part. CASH AND CASH EQUIVALENTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Controls over School Activity Accounts Finding Control Number: FS-7481-06-01 The Ware County School District has established policies and procedures for School Activities Accounts in a Procedures Handbook. Issues such as proper documentation for all receipts and disbursements are addressed in the Handbook. Also, it is a required procedure in the Handbook to make deposits daily. Management will emphasize to school principals the importance of following these procedures to be in compliance with the School Activities Handbook. Other internal controls include Ware County Board of Education Finance Department staff (1) review school activities bank statements online through the online banking software, (2) quarterly reviews of school's bookkeeping transactions and (3) random reviews ofbank reconciliations. These internal controls are in place for fiscal year 2007. PRIOR YEAR FEDERAL AWARD FINDINGS AND QUESTIONED COSTS No matters were reported. SECTION IV FINDINGS AND QUESTIONED COSTS WARE COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2007 I SUMMARY OF AUDITOR'S RESULTS 1. Type of Report Issued on the Financial Statements The auditor's opinion on the Ware County Board of Education's financial statements was unqualified. 2. Significant Deficiencies in Internal Control Disclosed by the Audit ofthe Financial Statements The audit report for the Ware County Board of Education disclosed financial statement significant deficiencies related to the following control categories. Cash and Cash Equivalents Revenues/Receivables/Receipts Expenditures/LiabilitieslDisbursements Capital Assets None of the significant deficiencies described above are considered to be material weaknesses. 3. Noncompliance Material to the Financial Statements The audit ofthe Ware County Board ofEducation disclosed no instances ofnoncompliance that were deemed to be material to the financial statements. 4. Significant Deficiencies in Internal Control Over Major Programs The audit report for the Ware County Board of Education did not disclose any significant deficiencies in internal control over major programs. 5. Type of Report Issued on Compliance for Major Programs The auditor's opinion on the Ware County Board of Education's report on compliance with requirements applicable to major programs was unqualified. 6. Audit Findings Required to be Reported by Section .5 lO(a) of 0MB Circular A-133 The Ware County Board of Education's audit did not disclose audit findings required to be reported by section .510(a) ofOMB Circular A-133. 7. Major Programs Federal awards audited as major programs are as follows: 10.553 Food Services - School Breakfast Program 10.555 Food Services - National School Lunch Program 8. Type "A" Program Dollar Threshold The dollar threshold for type "A" programs was $300,000. 9. Low Risk Auditee The Ware County Board of Education qualified as a low risk auditee as defined by Section .530 of 0MB Circular A-133. - 1- WARE COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2007 II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS CASH AND CASH EQUIVALENTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Controls over School Activity Accounts Significant Deficiency Finding Control Number: FS-7481-07-01 Condition: This is a repeat finding (FS-7481-06-01) from the year ended June 30, 2006. The accounting procedures ofthe School District were insufficient to provide for adequate internal controls over the school activity accounts. Criteria: The School District's management is responsible for designing and maintaining internal controls that provide reasonable assurance that transactions are processed according to established procedures. Questioned Cost: NIA Information: Cash and Cash Equivalents The bank reconciliation function was not separated from the record keeping and cash custody functions. Revenues/Receivables/Receipts The deposit preparation function was not separated from the record keeping and cash custody functions. Based on a review offorty-five items, eight items were not supported by adequate documentation. One of forty-five items tested was not deposited in a timely manner. Expenditures/Liabilities/Disbursements The check preparation function was not separated from the record keeping and claims processing functions. Cause: These deficiencies were a result of management's decision to limit the number ofadministrative staffmade responsible for accounting functions and management's failure to ensure that internal controls were established, implemented and functioning at the school level. Effect: Errors and/or irregularities may not be detected in a timely manner. -2- WARE COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2007 II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS CASH AND CASH EQUIVALENTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Controls over School Activity Accounts Significant Deficiency Finding Control Number: FS-7481-07-01 Recommendation: The School District should implement procedures to ensure that the key accounting functions of custody, record keeping and authorization are separated and/or utilize oversight for these incompatible activities. In addition, management should monitor controls to provide reasonable assurance that transactions are processed according to established polices and implement those procedures deemed necessary to strengthen internal controls over the accounting functions. CAPITAL ASSETS Failure to Adequately Maintain Capital Assets Significant Deficiency Finding Control Number: FS-7481-07-02 Condition: The School District failed to adequately maintain its capital assets listing. Criteria: Chapter 37, Fixed Assets, of the Financial Management for Georgia Local Units of Administration indicates that School Districts must establish fixed asset policies, define system requirements, implement a fixed asset system and maintain fixed asset inventory records. Questioned Cost: NIA Information: The School District sold real property during the year under review, and when updating the capital asset records to record this deletion, it was determined that the asset had never been properly capitalized. Also, the School District failed to properly capitalize site preparation costs for demolition projects on two parcels ofland, which should be capitalized as land improvements. Cause: The School District failed to properly maintain its capital assets records in accordance with the School District's approved capital assets policy and generally accepted accounting principles. -3- WARE COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2007 II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS CAPITAL ASSETS Failure to Adequately Maintain Capital Assets Significant Deficiency Finding Control Number: FS-7481-07-02 Effect: The failure ofthe School District to maintain a complete and accurate capital assets listing can lead to inaccurate internal and external reporting, as well as noncompliance with generally accepted accounting principles. Recommendation: The School District should review its capital assets records and make appropriate adjustments to ensure that the capital assets records conform to the School District's approved capital assets policy and generally accepted accounting principles. III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS No matters were reported. -4 - SECTIONV MANAGEMENT'S RESPONSES WARE COUNTY BOARD OF EDUCATION SCHEDULE OF MANAGEMENT'S RESPONSES YEAR ENDED JUNE 30, 2007 Finding Control Number: FS-7481-07-01 The Ware County Board of Education concurs with this finding and recommendation of auditor. The Ware County School District has established policies and procedures for School Activities Accounts in a Procedures Handbook. Issues such as proper documentation for all receipts and disbursements are addressed in the Handbook. Also, it is a required procedure in the Handbook to make deposits daily. Issues related to separation of duties are also addressed in the Handbook. Management will emphasize to school principals the importance of following these procedures to be in compliance with the School Activities Handbook. In regard to this finding as a continuation from fiscal year 2006, it can be attributed to employee turnover during the current fiscal year. The irregularities of accounting procedures and practices experienced in fiscal year 2007 were corrected in fiscal year 2008. Other internal controls include Ware County Board of Education Finance Department and internal audit staff: (1) review school activities bank statements online, (2) conduct quarterly reviews of school's bookkeeping transactions, (3) conduct random reviews of bank reconciliations, (4) provide additional training and assistance for bookkeeping staffofthe schools, especially for those who have difficulty complying with School Activities recommended procedures. These internal controls are in place for current fiscal year. Finding Control Number: FS-7481-07-02 The Ware County Board of Education concurs with this finding and recommendation of auditor. School District relied on data compiled by third party contractor to set up the original capital assets listing in fiscal year 2004. The real property that was not included in the original listing was a vacant lot of an old school site. This was an oversight by the contractor and the School District personnel. Also, the value ofthe land was immaterial to the financial statements ofthe Ware County Board of Education. In regard to the failure of management to properly capitalize the demolition costs of certain projects, management received guidance of auditors for inclusion in capital assets records. Management will amend capital assets policy to include language that addresses the treatment of demolition costs. Contact Person: Loretta Holmes, Finance Director Phone: (912) 283-8656 Ext. 113 Fax: (912) 287-2312 E-mail: lholmes@ware.kl2.ga.us