Warren County Board of Education, Warrenton, Georgia, report on audit of the financial statements for the fiscal year ended June 30, 2006

WARREN COUNTY BOARD OF EDUCATION
WARRENTON, 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

WARREN 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

B

STATEMENT OF ACTIVITIES

FUND FINANCIAL STATEMENTS

C

BALANCE SHEET

GOVERNMENTAL FUNDS

D

RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET

TO THE STATEMENT OF NET ASSETS

E

STATEMENT OF REVENUES, EXPENDITURES AND CHANGES

IN FUND BALANCES

GOVERNMENTAL FUNDS

F

RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT

OF REVENUES, EXPENDITURES AND CHANGES IN FUND

BALANCES TO THE STATEMENT OF ACTIVITIES

G

STATEMENT OF FIDUCIARY NET ASSETS

FIDUCIARY FUNDS

H

STATEMENT OF CHANGES IN FIDUCIARY NET ASSETS

FIDUCIARY FUNDS

I

NOTES TO THE BASIC FINANCIAL STATEMENTS

SCHEDULES

REQUIRED SUPPLEMENTARY INFORMATION

I SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL GENERAL FUND

SUPPLEMENTARY INFORMATION

2 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS 3 SCHEDULE OF STATE REVENUE

Page
I 2 4 5 6 7 8 9 IO
25
26
27

WARREN COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS -

SECTION I

FINANCIAL

SCHEDULES

SUPPLEMENTARY INFORMATION

4 SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS

28

5 ALLOTMENTS AND EXPENDITURES

GENERAL FUND - QUALITY BASIC EDUCATION PROGRAMS (QBE)

BY PROGRAM

29

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

WARREN 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
April 16, 2007

Honorable Sonny Perdue, Governor Members ofthe General Assembly Members ofthe State Board of Education
and Superintendent and Members ofthe Warren County Board of Education
INDEPENDENT AUDITOR'S COMBINED REPORT ON BASIC FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION - SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
Ladies and Gentlemen:
We have audited the accompanying financial statements ofthe governmental activities, each major fund, and the aggregate remaining fund information (Exhibits A through I) of the Warren 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 Warren County Board ofEducation's management. Our responsibility is to express opinions on these financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United States ofAmerica and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General ofthe United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free 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 op1mons.
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 Warren County Board ofEducation, 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

The Warren County Board ofEducation has not presented Management's Discussion and Analysis that accounting principles generally accepted in the United States 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 April 16, 2007, on our consideration of the Warren County Board of Education's internal control over financial reporting and our tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements and other matters. The purpose ofthat report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit.
The Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual, as presented on page 25, 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 Warren 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:as 2006ARL-11

~r.ell ~ ~ . 0 9 . ~ . ~ W. Hinton, CPA, CGFM State Auditor

WARREN COUNTY BOARD OF EDUCATION

WARREN 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 Inventories Capital Assets Land Land Improvements Buildings Equipment Less: Accumulated Depreciation
Total Assets
LIABILITIES
Accounts Payable Salaries Payable Deposits and Deferred Revenues Long-Term Liabilities
Due Within One Year Due in More Than One Year
Total Liabilities
NET ASSETS
Invested in Capital Assets, Net of Related Debt Restricted for
Bus Replacement Continuation of Federal Programs Debt Service Unrestricted (Deficit)
Total Net Assets
Total Liabilities and Net Assets

EXHIBIT"A"

GOVERNMENTAL ACTIVITIES

$

315,739

146,969

210,498 413,880 227,162
34,284 4,517

70,070 64,600 11,393,126 1,682,234 -1,414,895

$ ===1=3=1=4=8=1=84=

$

419,642

500,462

13,984

475,000 7,335,000

$

8,744,088

$

3,985,135

19,111 23,082 715,326 -338,558

$

4,404,096

$ ===1=-3'=14=8=1'=84..,.

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

WARREN 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 Community Services Food Services Interest on Short-Term and Long-Term Debt
Total Governmental Activities
General Revenues Taxes Property Taxes For Maintenance and Operations For Debt Services Railroad Cars Sales Taxes Special Purpose Local Option Sales Tax For Debt Services Intangible Recording Tax Real Estate Grants and Contributions not Restricted to Specific Programs Investment Earnings Miscellaneous
Total General Revenues
Change in Net Assets
Net Assets - Beginning of Year
Net Assets - End of Year

EXPENSES

CHARGES FOR SERVICES

$

4,227,683

178,390 548,955 213,197 366,597 682,579 $ 210,953 730,585 324,374
41,517 9,172

65,217 18,532 576,117 262,333

$

8,456,201 $

63,497
68,894 36,114 168,505

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

$

3,554,004 $

109,080 50,191 69,290 293,219 400,584

176,815 147,383

449,252

$

5,249,818 $

56,524 $
2,459 1,118 2,627 23,489
10,681 96,898 $

-617,155
-69,310 -498,764 -141,448 -72,260 -218,498 -210,953 -551, 143 -153,502 -41,517
-9,172
3,677 -18,532 -80,070 -262,333
-2,940,980

$

2,179,640

423,435

31,708

536,861 33,441 14,879
257,555 17,515
169 945

$

3,664,979

$

723,999

3,680,097

$===4=,4=0=4=,0=96=

-3-

WARREN 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 Due From Other Funds Inventories

GENERAL FUND

DISTRICTWIDE
CAPITAL PROJECTS
FUND

DEBT SERVICE
FUND

TOTAL

$

53,487 $

100,711 413,880 227,162
34,284
4 517

0 $

262,252 $

146,969

87,870

202,666

315,739 146,969
188,581 413,880 227,162
34,284 202,666
4517

Total Assets

$

834 041 $====0= $

699 757 $===1=,5=3=3,1:,79...8.,.

LIABILITIES AND FUND BALANCES

LIABILITIES

Accounts Payable Salaries Payable Due To Other Funds Deposits and Deferred Revenue

$

419,642

500,462

202,666

13 984

Total Liabilities

$ 1,136,754

FUND BALANCES

Reserved for: Bus Replacement Continuation of Federal Programs Debt Service Inventories
Unreserved Undesignated Reported in: General Fund (Deficit)

$

19,111

18,565

4,517

-344 906 $

Total Fund Balances

$

-302,713 $

$

419,642

500,462

202,666

13 984

$

1 136 754

$

$

699,757

0 0 $

699,757 $

19,111 18,565 699,757 4,517
-344 906
397 044

Total Liabilities and Fund Balances

$

834.041 $=======0= $

699.757 $===1=,5=3=3=.7=98..,

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

WARREN 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 Land Improvements Buildings Equipment Accumulated Depreciation
Total Capital Assets
Some of the School District's property tax revenues will be collected after year-end but are not available soon enough to pay for the current period's expenditures.
Long-Term Liabilities, including Bonds Payable, are not due and payable in the current period and therefore are not reported as liabilities in the funds. Long-Term Liabilities at year-end consist of:
Bonds Payable
Net Assets of Governmental Activities (Exhibit "A")

$

397,044

$

70,070

64,600

11,393,126

1,682,234

-1 414 895

11,795,135

21,917

-7,810,000 $ =====4=,4=04=,0=9=6

The notes to the basic financial statements are an integral part of this statement. -5 -

WARREN 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 Community Services Food Services Operation
Debt Services Principal Interest
Total Expenditures
Excess of Revenues over (under) Expenditures
OTHER FINANCING SOURCES {USES)
Transfers In Transfers Out
Total Other Financing Sources (Uses)
Net Change in Fund Balances
Fund Balances - Beginning
Fund Balances - Ending

GENERAL FUND

DISTRICTWIDE
CAPITAL PROJECTS
FUND

DEBT SERVICE
FUND

TOTAL

$ 2,177,599 39,163
4,070,937 $ 1,459,925
168,505 6,183
169,945
$ 8,092,257 $

$ 73,409
73,409 $

404,860 $ 546,018
11,332 962,210 $

2,582,459 585,181
4,144,346 1,459,925
168,505 17,515
169,945
9,127,876

$ 4,094,931 $
178,390 548,955 207,421 363,970 682,579 209,468 735,773 490,962 41,517
9,172 65,217 18,532 551,032
2 451
$ 8,200,370 $
$ -108 113 $

0 $
0 $ 73409 $

$
1,485
505,000 259,882 766,367 $ 195,843 $

4,094,931
178,390 548,955 207,421 363,970 682,579 210,953 735,773 490,962 41,517
9,172 65,217 18,532 551,032
505,000 262,333
8,966,737
161,139

$

73,409

$

$

73409 $

$

-34,704 $

-268,009

-73,409 -73,409
0 $ 0

$
$ 195,843 $ 503,914

73,409 -73 409
0 161,139 235,905

$ -302,713 $====0= $ 699,757 $===39=7=,044===

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

WARREN 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.
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

$
$ 235,269 -229,733

161,139
5,536 52,324 505,000

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

$ ===72=3=,9=9===9

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

WARREN COUNTY BOARD OF EDUCATION STATEMENT OF FIDUCIARY NET ASSETS
FIDUCIARY FUNDS JUNE 30, 2006

EXHIBIT"G"

ASSETS Cash and Cash Equivalents Investments
Certificate of Deposit
Total Assets
LIABILITIES Accounts Payable Funds Held for Others
Total Liabilities NET ASSETS Held in Trust for Private Purposes
Total Liabilities and Net Assets

PRIVATE PURPOSE TRUSTS

AGENCY FUNDS

$

146 $

38,887

20,000

$

20146 $==;38==88=7=

$

1,848

37 039

$

38,887

$ _ _2_0~1_46_

$

20 146 $ ===38='=88=7=

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

WARREN COUNTY BOARD OF EDUCATION STATEMENT OF CHANGES IN FIDUCIARY NET ASSETS
FIDUCIARY FUNDS YEAR ENDED JUNE 30, 2006
ADDITIONS Investment Earnings Interest
DEDUCTIONS Scholarships Change in Net Assets
Net Asset$ - Beginning
Net Assets - Ending

EXHIBIT"H"

PRIVATE PURPOSE TRUSTS

$

446

$

0

$

446

19.700

$ ===20='=14=6=

The notes to the basic financial statements are an integral part of this statement. -9-

WARREN COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2006

EXHIBIT "I"

Note 1: DESCRIPTION OF SCHOOL DISTRICT AND REPORTING ENTITY
REPORTING ENTITY
The Warren 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 Warren County Board of Education.
District-wide Statements: The Statement ofNet Assets and the Statement ofActivities display information about the financial activities ofthe overall School District, except for fiduciary activities. Eliminations have been made to minimize the double counting of internal activities. Governmental activities generally are financed through taxes, intergovernmental revenues, and other nonexchange transactions.
The Statement of Activities presents a comparison between direct expenses and program revenues for each function of the School District's governmental activities.
Direct expenses are those that are specifically associated with a program or function and, therefore, are clearly identifiable to a particular function. Indirect expenses (expenses of the School District related to the administration and support ofthe School District's programs, such as office and maintenance personnel and accounting) are not allocated to programs.
Program revenues include (a) charges paid by the recipients ofgoods or services offered by the programs and (b) grants and contributions that are restricted to meeting the operational or capital requirements of a particular program. Revenues that are not classified as program revenues, including all taxes, are presented as general revenues.
Fund Financial Statements: The fund financial statements provide information about the School District's funds, including fiduciary funds. Eliminations have been made to minimize the double counting ofinternal activities. Separate statements for each category (governmental and fiduciary) are presented. The emphasis of fund financial statements is on major governmental funds, each displayed in a separate column.

WARREN COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2006

EXHIBIT "I"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The School District reports the following major governmental funds:
General Fund is the School District's primary operating fund. It accounts for all financial resources ofthe School District, except those resources required to be accounted for in another fund.
District-wide Capital Projects Fund accounts for financial resources including grants from Georgia State Financing and Investment Commission to be used for the acquisition, construction or renovation of major capital facilities.
Debt Service Fund accounts for taxes (property and sales) legally restricted for the payment of general long-term principal, interest and paying agent's fees.
The School District reports the following fiduciary fund types:
The Private Purpose Trust fund reports a trust arrangement, the Otis E. Williams Memorial Scholarship, under which principal and income benefit an eligible student in Warren County.
Agency funds account for assets held by the School District as an agent for various funds, governments or individuals.
BASIS OF ACCOUNTING
The basis ofaccounting determines when transactions are reported on the financial statements. The District-wide governmental and fiduciary fund financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded at the time liabilities are incurred, regardless ofwhen the related cash flows take place. Nonexchange transactions, in which the School District gives (or receives) value without directly receiving (or giving) equal value in exchange, include property taxes, sales taxes, grants and donations. On an accrual basis, revenue from property taxes is recognized in the fiscal year for which the taxes are levied. Revenue from sales taxes is recognized in the fiscal year in which the underlying transaction (sale) takes place. Revenue from grants and donations is recognized in the fiscal year in which all eligibility requirements have been satisfied.
The School District uses funds to report on its financial position and the results of its operations. Fund accounting is designed to demonstrate legal compliance and to aid financial management by segregating transactions related to certain governmental functions or activities. A fund is a separate accounting entity with a self-balancing set of accounts.
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
- 11 -

WARREN COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2006

EXHIBIT "I"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
available if they are collected within sixty days after year-end. Property taxes, sales taxes and interest are considered to be susceptible to accrual. Expenditures are recorded when the related fund liability is incurred, except for principal and interest on general long-term debt, which are recognized as expenditures to the extent they have matured. Capital asset acquisitions are reported as expenditures in governmental funds.
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,
- 12 -

WARREN COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2006

EXHIBIT "I"

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 Warren County Board of Commissioners fixed the property tax levy for the 2005 tax digest year (calendar year) on August 29, 2005 (levy date). Taxes were due on December 20, 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 Warren 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, 2006, for maintenance and operations amounted to $2,145,891 and for school bonds amounted to $404,860.

Tax millage rates levied for the 2005 tax year (calendar year) for the Warren County Board of Education were as follows (a mill equals $1 per thousand dollars of assessed value):

School Operations School Bonds

16.98 mills 3.25 mills

20.23 mills

SALES TAXES

Special Purpose Local Option Sales Tax, at the fund reporting level, during the year amounted to $536,861 and is to be used for debt service. This sales tax was authorized by local referendum and the sales tax must be re-authorized at least every five years.

- 13 -

WARREN COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2006

EXHIBIT "I"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

INVENTORIES

FOOD INVENTORIES On the basic financial statements, inventories of donated food commodities used in the preparation ofmeals are reported at their Federally assigned value and purchased foods inventories are reported at cost (first-in, first-out). The School District uses the consumption method to account for inventories whereby donated food commodities are recorded as an asset and as revenue when received, and expenses/expenditures are recorded as the inventory items are used. Purchased foods are recorded as an asset when purchased and expenses/expenditures are recorded as the inventory items are used.

CAPITAL ASSETS

Capital assets purchased, including capital outlay costs, are recorded as expenditures in the fund financial statements at the time of purchase (including ancillary charges). On the District-wide financial statements, all purchased capital assets are valued at cost where historical records are available and at estimated historical cost based on appraisals or deflated current replacement cost where no historical records exist. Donated capital assets are recorded at estimated fair market value on the date donated. Disposals are deleted at depreciated recorded cost. The cost of normal maintenance and repairs that do not add to the value 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

All

NIA

$

5,000 20 to 90 years

$

5,000 50 to 90 years

$

5,000 5 to 50 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 statements during the fiscal year bonds are issued. In addition, general obligation bonds have been

- 14 -

WARREN COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2006

EXHIBIT "I"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

issued to refund existing general obligation bonds. General obligation bonds are direct obligations and pledge the full faith and credit of the government. The outstanding amount of these bonds is recorded in the Statement of Net Assets.

DEFICIT FUND BALANCES

The fund reporting a deficit fund balance and deficit net assets at June 30, 2006, is as follows:

Fund Type/Fund Name

Deficit Balance

General Fund

$ 344,906

The School District intends to fund the deficit by reducing expenditures and through an increase in Ad Valorem taxes resulting from a property re-evaluation in Warren County.

Note 3: DEPOSITS AND INVESTMENTS

COLLATERALIZATION OF DEPOSITS Official Code of Georgia Annotated (OCGA) Section 45-8-12 provides that there shall not be on deposit at any time in any depository for a time longer than ten days a sum of money which has not been secured by surety bond, by guarantee ofinsurance, or by collateral. The aggregate ofthe face value 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,

(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,

- 15 -

WARREN COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2006

EXHIBIT "I"

Note 3: DEPOSITS AND INVESTMENTS

(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 $849,793. 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:

Custodial Credit Risk Category

Bank Balance

1

$ 348,752

2

501,041

3

0

4

0

Total

$======8==49-,7===9=3

CATEGORIZATION OF INVESTMENTS At June 30, 2006, the carrying value ofthe School District's total investments was $146,969 which is materially the same as fair value. This investment consisted entirely of funds invested in the Local Government Investment Pool administered by the State of Georgia, Office of Treasury 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 ofGeorgia, Office ofTreasury

- 16 -

WARREN COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2006

EXHIBIT "I"

Note 3: DEPOSITS AND INVESTMENTS
and Fiscal Services for the Local Government Investment Pool (Primary Liquidity Portfolio) does not provide for investment in derivatives or similar investments. A description of the Primary Liquidity Portfolio is as follows:
The Primary Liquidity Portfolio consists ofGeorgia Fund 1, which is a combination local and state government investment pool. Georgia Fund 1 is a stable net asset value investment pool which follows Standard and Poor's criteria for AAAm rated money market funds. The pool is not registered with the SEC as an investment company but does operate Georgia Fund 1 in a manner consistent with Rule 2a-7 ofthe Investment Company Act of 1940. The pool's primary objectives are safety of capital, investment income, liquidity and diversification while maintaining principal ($1.00 per share value). Net asset value is calculated daily and reported to the rating agency weekly to ensure stability. The pool distributes earnings (net of management fees) on a monthly basis and values participant's shares sold and redeemed at the pool's share price, $1.00 per share. Pooled cash and cash equivalents and investments are reported at cost. The pool does not issue any legally binding guarantees to support the value of the shares. Participation in the pool is voluntary and deposits consist of funds from local governments; operating and trust funds of Georgia's state agencies, colleges and universities; and current operating funds of the State of Georgia's General Fund.
Investments in Georgia Fund 1 are directed toward short-term instruments such as U.S. Treasury obligations, securities issued or guaranteed as to principal and interest by the U.S. Government or any of its agencies or instrumentalities, banker's acceptances and repurchase agreements. The weighted average maturity of Georgia Fund 1 may not exceed 60 days. The weighted average maturity for Georgia Fund 1 on June 30, 2006, was 28 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:

- 17 -

WARREN COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2006

EXHIBIT "I"

Note 5: CAPITAL ASSETS

Balances July 1. 2005

Increases

Balances Decreases June 30, 2006

Governmental Activities

Capital Assets, Not Being Depreciated:

Land

$

70,070 $

0 $

0 $

70,070

Capital Assets Being Depreciated Buildings and Improvements Equipment Land Improvements

$ 11,393,126 1,446,965 $ 64,600

$ 235,269

0 $ 11,393,126 1,682,234 64,600

Less Accumulated Depreciation for: Buildings and Improvements Equipment Land Improvements

378,450 804,558
2,154

126,590 102,425
718

505,040 906,983
2,872

Total Capital Assets, Being Depreciated, Net $ 11,719,529 $

5,536 $

0 $ 11,725,065

Governmental Activity Capital Assets - Net $ 11,182,522 $

5,536 $

0 $ 11,125,135

Current year depreciation expense by function is as follows:

Instruction Support Services
Educational Media Services General Administration Maintenance and Operation of Plant Student Transportation Services Food Services

$ 132,752

$

5,776

2,627

6,169

57,324

71,896 25,085

Note 6: RESTRICTED ASSETS

$==2=29-,7,.,,3==3

Special Purpose Local Option Sales Tax (SPLOST) and property tax levied specifically for retirement of outstanding bond principal, interest and paying agent's fees (Debt Service Funds) are reported as restricted assets in the Statement ofNet Assets because their use is limited by applicable bond covenants or statutory provisions. Restricted assets at June 30, 2006, were as follows:

- 18 -

WARREN COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2006

EXHIBIT "I"

Note 6: RESTRICTED ASSETS

Debt Service Funds

Restricted Cash and Cash Equivalents: Debt Services
Restricted Investments Debt Services

$ 262,252 $ 146,969

Note 7: INTERFUND ASSETS AND LIABILITIES

Due to and due from other funds are recorded for interfund receivables and payables which arise from interfund transactions. Interfund balances at June 30, 2006, consisted of the following:

Due From Other Funds

Due To Other Funds

General Fund Debt Service Fund

$ 202,666 $ 202.666

$ 202if:i66 $ 202iC:i66

The balance due to the Debt Service Fund resulted from a loan to pay General Fund expenditures.

Note 8: INTERFUND TRANSFERS

Interfund transfers for the year ended June 30, 2006, consisted of the following:

Transfer to

Transfers From District-wide Capital Projects

General Fund

$===!!73=1:.4c!:!0==9

Transfers are used to move GSFIC funds to the General Fund for reimbursement ofprior year local expenditures.

Note 9: 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.

- 19 -

WARREN COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2006

EXHIBIT "I"

Note 9: RISK MANAGEMENT

The School District has obtained commercial insurance for risk of loss associated with torts and assets. 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 ofthe past three years.

The School District has elected to self-insure for all losses related to acts of God. In addition, the School District has elected to self-insure for errors or omissions, which includes, among other risks, risks for sexual harassment and discrimination. The School District has not experienced any losses related to these risks in the past three years.

The School District is self-insured with regard to unemployment compensation claims. The School District accounts for claims within the General Fund with expenses/expenditures and liability being reported when it is probable that a loss has occurred, and the amount ofthat 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

$

7 874 $

12,214 $

20,088 $

0

$

0 $

8,321 $

8,321 $

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:

Position Covered

Amount

Superintendent Each Principal Each Employee

$ 100,000

$

10,000

$ 100,000

- 20-

WARREN COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2006

EXHIBIT "I"

Note 10: SHORT-TERM DEBT

The School District issues tax anticipation notes in advance of property tax collections, depositing the proceeds in its General Fund. This short-term debt is to provide cash for operations until property tax collections are received by the School District. Article IX, Section V, Paragraph V of the Constitution ofthe State ofGeorgia limits the aggregate amount ofshort-term debt to 75 percent ofthe total gross income from taxes collected in the preceding year and requires all short-term debt to be repaid no later than December 31 of the calendar year in which the debt was incurred.

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

Beginning Balance

Issued

Redeemed

Ending Balance

Tax Anticipation Notes

$=====0 $ 300.100 $ 300.100 $======0

Note 11: LONG-TERM DEBT

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

Pw:pose

Interest Rates

Amount

General Government - Series 1999

4.35% - 5.55%

General Government - Refunding - Series 2005

3.47%

$ 1,310,000 6,500,000

$ 7,810.000

The changes in Long-Term Debt during the fiscal year ended June 30, 2006, were as follows:

Governmental Funds General
Obligation Bonds

Balance July 1, 2005

$ 8,315,000

Deductions Debt Retired

505,000

Balance June 30, 2006

$ 7,810.000

Portion of Long-Term Debt Due within One Year

$ 475,000

- 21 -

WARREN COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2006

EXHIBIT "I"

Note 11: LONG-TERM DEBT

At June 30, 2006, payments due by fiscal year which includes principal and interest for these items are as follows:

Fiscal Year Ended June 30

General Obligation

Debt

Principal

Interest

2007 2008 2009 2010 2011 2012 - 2016 2017-2019

$ 475,000 $ 500,000 525,000 550,000 570,000
3,225,000 1,965,000

289,108 267,105 243,753 218,957 199,872 685,325 128,216

Total Principal and Interest

$ 7,810.000 $ 2,032.336

Note 12: PRIOR YEAR DEFEASEMENT OF DEBT

In fiscal year 2005, the School District defeased certain general obligation bonds by placing the proceeds ofnew bonds in an irrevocable trust to provide for all future debt service payments on the old bonds. Accordingly, the trust account assets and the liability for the defeased bonds are not included in the School District's basic financial statements. At June 30, 2006, $6,005,000 ofbonds are outstanding and are considered defeased.

Note 13: ON-BEHALF PAYMENTS

The School District has recognized revenues and costs in the amount of $122,430 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 $121,092

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 $1,338

-22 -

WARREN COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2006

EXHIBIT "I"

Note 14: SIGNIFICANT CONTINGENT LIABILITIES

Amounts received or receivable principally from the Federal government are subject to audit and review by grantor agencies. This could result in requests for reimbursement to the grantor agency for any costs which are disallowed under grant terms. The School District believes that such disallowances, if any, will be immaterial to its overall financial position.

The School District is a defendant in various legal proceedings pertaining to matters incidental to the performance 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 15: RETIREMENT PLANS

TEACHERS RETIREMENT SYSTEM OF GEORGIA (TRS)

TRS PLAN DESCRIPTION Substantially all teachers, administrative and clerical personnel employed by local school systems are covered by the Teachers Retirement System ofGeorgia (TRS), which is a cost-sharing multiple employer defined benefit pension plan. TRS provides service retirement, disability retirement and survivors benefits for its members in accordance with State statute. The Teachers Retirement System of Georgia issues a separate stand alone financial audit report and a copy can be obtained from the Georgia Department of Audits and Accounts.

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%

$ 307,910 $ 332,795 $ 356,761

- 23 -

(This page left intentionally blank)

WARREN 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 Community Services Food Services Operation
Debt Service
Total Expenditures
Excess of Revenues over (under) Expenditures
OTHER FINANCING SOURCES
Other Sources
Net Change in Fund Balances
Fund Balances - Beginning
Adjustments

NONAPPROPRIATED BUDGETS

ORIGINAL(1)

FINAL (1)

ACTUAL AMOUNTS

$

2,185,037 $

2,185,037 $

2,177,599

60,000

60,000

39,163

3,962,796

3,951,630

4,070,937

1,400,472

1,346,638

1,459,925

11,166

168,505

6,183

95 868

169 945

$

7 715 339 $

7 543 305 $

8,092,257

$

4,108,909 $

4,826,821 $

4,094,931

144,896 279,894 215,160 488,543 654,156 188,393 673,204 503,151
14,033 445,000

158,352 398,251 205,504 394,595 883,689 188,393 668,133 503,151
33,755
19,033 445,000

178,390 548,955 207,421 363,970 682,579 209,468 735,773 490,962
41,517 9,172
65,217 18,532 551,032
2 451

$

7 715 339 $

8 724 677 $

8,200,370

$

0 $

-1,181,372 $

-108,113

73409

$

0 $

-1,181,372 $

-34,704

413,135

413,135

-268,009

-365,022

-365 022

Fund Balances - Ending

$

48113 $

-1, 133,259 $

-302 713

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.

- 25 -

WARREN 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)
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 Enhancing Education Through Technology Program Improving Teacher Quality State Grants Rural Education Safe and Drug-Free Schools and Communities 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 NIA $
$

(2) 524,519
524,519

10.550

NIA
$

2 897 527 416

84.027 84.173

N/A $ NIA
$

280,187 18468
298,655

84.318 84.367 84.358 84.186 84.298 * 84.010 84.048

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

159,371 96,658 26,400 3,365 4,116
423,637 22,499
1 034 701

Total Federal Financial Assistance
N/A = Not Available

$ =====1,=56=2='1=1=7

Notes to the Schedule of Expenditures of Federal Awards

(1) The amount shown for the Food Donation Program represents the Federally assigned value of nonmonetary assistance for donated commodities received and/or consumed by the School District during the current fiscal year.
(2) Expenditures for the funds earned on the School Breakfast Program ($136,932) 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 Warren 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.

-26 -

WARREN COUNTY BOARD OF EDUCATION SCHEDULE OF STATE REVENUE YEAR ENDED JUNE 30, 2006

SCHEDULE "3"

AGENCY/FUNDING
GRANTS Bright From the Start: Georgia Department of Early Care and Learning Pre-Kindergarten Program
Education, Georgia Department of Quality Basic Education Direct Instructional Cost Kindergarten Program Kindergarten Program - Early Intervention Program Primary Grades (1-3) Program Primary Grades - Early Intervention (1-3) Program Upper Elementary Grades (4-5) Program Upper Elementary Grades - Early Intervention (4-5) Program Middle School (6-8) Program High School General Education (9-12) Program Vocational Laboratory (9-12) Program Students with Disabilities Category I Category II Category Ill Category IV CategoryV Alternative Education Program Media Center Program 20 Days Additional Instruction Staff and Professional Development Indirect Cost Central Administration School Administration Facility Maintenance and Operations Categorical Grants Pupil Transportation Regular Bus Replacement Sparsity Nursing Services Principal Supplements Mid-term Adjustment Hold-Harmless Education Equalization Funding Grant Food Services Vocational Education Austerity Reduction Other State Programs Health Insurance Preschool Handicapped Program Statewide K-8 Reading and Mathematics Program
Georgia State Financing and Investment Commission Reimbursement on Construction Projects
Office of Treasury and Fiscal Services Public School Employees Retirement

See notes to the basic financial statements.

- 27 -

GOVERNMENTAL FUND TYPES

CAPITAL

GENERAL

PROJECTS

FUND

FUND

TOTAL

$

112,848

$

112,848

235,175 14,057
426,554 123,591 221,386 130,215 465,336 428,864 174,544
12,109 137,576
84,095 15,895 11,575 36,538 71,458 24,402 14,254
250,132 253,178 207,849
173,849 23,489
238,650 31,026 2,710 7,136
156,946 24,028 4,600
-198,957
121,092 14,585 19,014

235,175 14,057
426,554 123,591 221,386 130,215 465,336 428,864 174,544
12,109 137,576
84,095 15,895 11,575 36,538 71,458 24,402 14,254
250,132 253,178 207,649
173,849 23,489
238,650 31,026 2,710 7,136
156,946 24,028 4,600
-198,957
121,092 14,585 19,014

$
1 338

73,409

73,409 1 338

$ 4,070,937 $ ===7~3~4~09;;,,, $ 4,144,346

WARREN COUNTY BOARD OF EDUCATION SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS
YEAR ENDED JUNE 30, 2006

SCHEDULE "4"

PROJECT
Paying a portion of the outstanding principal and interest on the Warren County School District General Obligation School Bond, Series 1999, the maximum amount of principal and interest to be paid with sales and use tax proceeds will be $2,3000,000.

ORIGINAL ESTIMATED
COST (1)

CURRENT ESTIMATED COSTS (2)

AMOUNT EXPENDED IN CURRENT YEAR (3) (4)

AMOUNT EXPENDED
IN PRIOR YEARS (3) (4)

PROJECT STATUS

$ 2,300,000 $ 2,300,000 $

764 882 $

0 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 Warren 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.
(4) During fiscal year 2005, the Warren County Board of Education issued General Obligation Refunding Bond Issue 2005 to refund portions of the 1999 Bond Issue. The amount expended in the Current Year includes debt service on the replacement refunding issues.

See notes to the basic financial statements.

- 28 -

WARREN COUNTY BOARD OF EDUCATION GENERAL FUND- QUALITY BASIC EDUCATION PROGRAM (QBE)
ALLOTMENTS AND EXPENDITURES BY PROGRAM YEAR ENDED JUNE 30, 2006

SCHEDULE "5"

DESCRIPTION

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

ELIGIBLE QBE PROGRAM COSTS

SALARIES

OPERATIONS

TOTAL

Direct Instructional Programs

Kindergarten Program

$

Kindergarten Program-Early Intervention Program

Primary Grades (1-3) Program

Primary Grades-Early Intervention (1-3) Program

Upper Elementary Grades (4-5) Program

Upper Elementary Grades-Early Intervention (4-5)

Program

Middle 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

Alternative Education Program

268,497 $
23,466 491,251 154,477 265,550
148,715
538,761 499,278 199,029 308,710
42 621

200,408 $
39,126 454,317 151,542 274,124
149,171 547,764
513,404 185,754
13,855 137,747 109,230
18,120 21,212 29 534

3,353 $
22,725
21,173
71 46,339
103,702 1,309

203,761 39,126
477,042 151,542 295,297
149,242 594,103
617,106 187,063
13,855 137,747 109,230
18,120 21,212 29 534

TOTAL DIRECT INSTRUCTIONAL PROGRAMS

$

2,940,355 $ 2,845,308 $

198,672 $

3,043,980

Media Center Program Staff and Professional Development

83,523 16 856

192,135 8 546

11,356 44457

203,491 53003

TOTAL QBE FORMULA FUNDS

$

3 040 734 $ 3,045,989 $

254 485 $ ===3,=30=0==,4=7=4

(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.

- 29 -

SECTION II COMPLIANCE AND INTERNAL CONTROL REPORTS

Russell W. Hinton
STATE AUDITOR
(404) 858-2174

DEPARTMENT OF AUDITS AND ACCOUNTS
270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400
April 16, 2007

Honorable Sonny Perdue, Governor Members of the General Assembly Members ofthe State Board of Education
and Superintendent and Members of the Warren 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 Warren County Board ofEducation as of and for the year ended June 30, 2006, which collectively comprise Warren County Board of Education's basic financial statements and have issued our report thereon dated April 16, 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 Warren 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 Warren County Board ofEducation's ability to record, process, summarize and report financial data consistent with assertions ofmanagement in the financial statements. Reportable conditions are described in the accompanying Schedule ofFindings and Questioned Costs as items FS-7491-06-01, FS-7491-06-02, FS-7491-06-03, FS-7491-06-04, FS-7491-06-08 and FS-7491-06-09.
2006YB-40

A material weakness is a reportable condition in which the design or operation ofone 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, of the reportable conditions described above, we consider item FS-7491-06-02 to be a material weakness.
Compliance and Other Matters
As part of obtaining reasonable assurance about whether Warren 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 Warren County Board ofEducation and is not intended to be and should not be used by anyone other than these specified parties.
Respectfully submitted,
~lell ~~OOW.~ W. Hinton, CPA, CGFM State Auditor
RWH:as 2006YB-40

Russell W. Hinton
STATE AUDITOR
(404) 856-2174

DEPARTMENT OF AUDITS AND ACCOUNTS
270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400
April 16, 2007

Honorable Sonny Perdue, Governor Members ofthe General Assembly Members of the State Board of Education
and Superintendent and Members of the Warren 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 ofWarren County Board ofEducation with the types ofcompliance requirements described in the U.S. Office of Management and Budget (0MB) Circular A-133 Compliance Supplement that are applicable to each ofits major Federal programs for the year ended June 30, 2006. Warren County Board of Education's major Federal programs are identified in the Summary ofAuditor's Results Section ofthe accompanying Schedule ofFindings 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 Warren County Board of Education's management. Our responsibility is to express an opinion on Warren 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 Warren County Board ofEducation's compliance with

2006SA-15

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 Warren County Board of Education's compliance with those requirements.
In our opinion, the Warren County Board of Education complied, in all material respects, with the requirements referred to above that are applicable to each ofits major Federal programs for the year ended June 30, 2006. However, the results of our auditing procedures disclosed a nonmaterial instance of noncompliance with those requirements, which is described in the accompanying Schedule of Findings and Questioned Costs as item FA-7491-06-01.
Internal Control Over Compliance
The management of Warren 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 Warren County Board ofEducation's internal control over compliance with requirements that could have a direct and material effect on a major Federal program in order to determine our auditing procedures for the purpose ofexpressing our opinion on compliance 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 Warren 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,
~-~~
Rus ell W. Hinton, CPA, CGFM State Auditor
RWH:as 2006SA-15

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

WARREN 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

AUDITEE'S RESPONSE/STATUS

SEE AUDITOR'S COMMENTS

FS-7491-01-04 Further Action Not Warranted

(1)

FS-7491-03-04 Unresolved - See Corrective Action/Reponses

FS-7491-04-02 Further Action Not Warranted

FS-7491-04-03 Further Action Not Warranted

FS-7491-04-04 Previously Reported Corrective Action Implemented

FS-7491-04-05 Unresolved - See Corrective Action/Reponses

FS-7491-04-09 Further Action Not Warranted

FS-7491-05-01 Unresolved - See Corrective Action/Reponses

FS-7491-05-02 Unresolved - See Corrective Action/Reponses

FS-7491-05-03 Previously Reported Corrective Action Implemented

FS-7491-05-04 Unresolved - See Corrective Action/Reponses

FS-7491-05-05 Unresolved - See Corrective Action/Reponses

FS-7491-05-06 Previously Reported Corrective Action Implemented

AUDITOR'S COMMENT:

(1) Finding Control Number FS-7491-01-04 will not be reported or require auditor follow-up in subsequent years; however, management still has responsibility for the resolution of this finding.

CORRECTIVE ACTION/RESPONSES

EMPLOYEE COMPENSATION Payroll Reporting Amount: $6,148.21 Finding Control Number: FS-7491-03-04

We agree with this finding. All efforts are being made to prevent this type of error. This matter will be brought before the Board to determine if the Board will seek reimbursement.

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WARREN 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
CORRECTIVE ACTION/RESPONSES
EMPLOYEE COMPENSATION Payroll Sample Exceptions Amount: $6,369 Finding Control Number: FS-7491-04-05
We agree with this finding. For fiscal year 2007, Board members will be paid through the payroll system. The payroll sample exceptions will be brought before the Board to determine if the Board will seek reimbursement.
BUDGET PREPARATION/EXECUTION Deficit Fund Balance Finding Control Number: FS-7491-05-01
We agree with this finding. Every effort possible is being made to reduce expenditures and bring the system out ofthe deficit. Property in Warren County was re-evaluated and the values increased. This will increase the ad valorem taxes received and will help to reduce or eliminate the deficit.
CASH AND CASH EQUIVALENTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Control Procedures Finding Control Number: FS-7491-05-02
We agree with this finding. We are a small school system with very few employees at the central office. The Board has hired someone to help the Finance Officer. This should eliminate the separation of duties finding. The Superintendent signs off on all bank statements for the general operating account.
We have a small staff in each of our schools. We are trying to separate the duties to eliminate that finding. Each month the school bookkeepers submit the financial information to the finance officer to be entered into PC Genesis. Each month all expenditures are approved by the Board.
Auditor's Comment: Although the Superintendent signs off on all bank statements for the general operating account, the control is not effective since unreconciled variances were noted in the general operating account reconciliations.
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WARREN 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

CORRECTIVE ACTION/RESPONSES

EMPLOYEE COMPENSATION Payroll Sample Exceptions Amount: $1,460 Finding Control Number: FS-7491-05-04

We agree with this finding. All efforts are being made to prevent this type of error. This matter will be brought before the Board to determine if the Board will seek reimbursement.

GENERAL LEDGER Inadequate Accounting Procedures Finding Control Number: FS-7491-05-05

We agree with this finding. At year end, if a deficit exists, available grant funds will be requested and/or over expenditures will be transferred to the general fund.

PRIOR YEAR FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

FINDING CONTROL NUMBER AND STATUS

FA-7491-04-01 FA-7491-04-02 FA-7491-04-04 FA-7491-05-01 FA-7491-05-02

Unresolved - See Corrective Action/Responses Previously Reported Corrective Action Implemented Previously Reported Corrective Action Implemented Previously Reported Corrective Action Implemented Previously Reported Corrective Action Implemented

CORRECTIVE ACTION/RESPONSES

ALLOWABLE COSTS/COST PRINCIPLES Improper Expenditures Amount: $69,881 U.S. Department of Education Through Georgia Department of Education Finding Control Number: FA-7491-04-01

We agree with this finding. Georgia Department of Education will be contacted to determine the action necessary to resolve this finding.

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SECTION IV FINDINGS AND QUESTIONED COSTS

WARREN 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 Warren County Board ofEducation's financial statements was unqualified.

2. Reportable Conditions in Internal Control Disclosed by the Audit of the Financial Statements The audit report for the Warren County Board of Education disclosed financial statement reportable conditions related to the following control categories.

Cash and Cash Equivalents Employee Compensation Revenues/Receivables/Receipts Budget Preparation/Execution

Expenditures/Liabilities/Disbursements General Ledger Accounting Controls (Overall)

Of the reportable conditions described above, Cash and Cash Equivalents, Revenues/Receivables/Receipts, Expenditures/Liabilities/Disbursements and Employee Compensation are considered to be material weaknesses.

3. Noncompliance Material to the Financial Statements The audit of the Warren 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 Warren 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 Warren County Board ofEducation's report on compliance with requirements applicable to major programs was unqualified.

6. Audit Findings Required to be Reported by Section .5 l0(a) of 0MB Circular A-133 The Warren County Board of Education's audit did not disclose an audit finding required to be reported by section .5 IO(a) ofOMB Circular A-133; however, we noted a certain instance of nonmaterial noncompliance which is included in section IV of this report.

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 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.

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WARREN COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2006

I SUMMARY OF AUDITOR'S RESULTS

9. Low Risk Auditee The Warren County Board of Education did not qualify as a low risk auditee as defined by Section .530 of 0MB Circular A-133.

II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

ACCOUNTING CONTROLS (OVERALL) Inadequate Access Controls Reportable Condition Finding Control Number: FS-7491-06-01

Condition:

The accounting procedures ofthe 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.

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WARREN COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2006

II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

CASH AND CASH EQUIVALENTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS EMPLOYEE COMPENSATION Inadequate Internal Controls over Central Office Accounts Reportable Condition - Material Weakness Finding Control Number: FS-7491-06-02

Condition:

This is a repeat finding (FS-7491-05-02, FS-7491-04-03, and FS-7491-0302) from the years ended June 30, 2005, 2004, and 2003, respectively. The accounting procedures ofthe School District were insufficient to provide for adequate separation of duties and internal controls at the Central office.

Criteria:

The School District's management is responsible for designing and maintaining internal controls that provide reasonable assurance that transactions are processed according to established procedures and provide proper separation of duties. Such internal controls would limit any one individual's access to both physical assets and the related accounting records.

Questioned Cost: NIA

Information:

Cash and Cash Equivalents The bank reconciliation function was not separated from the record keeping and voucher payment functions. The bank reconciliation for the operating account included an unidentified reconciling amount of $2,218.

Revenues/Receivables/Receipts The deposit preparation was not separated from the record keeping and cash custody functions.

Expenditures/Liabilities/Disbursements The check writing function was not separated from the record keeping or processing of signed checks. A test of thirty operating expenditure vouchers revealed that five of the vouchers had no evidence of approval prior to purchase.

Employee Compensation The recording of new employees and changes in compensation was not separated from the preparation of payroll checks.

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WARREN COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2006

II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

CASH AND CASH EQUIVALENTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS EMPLOYEE COMPENSATION Inadequate Internal Controls over Central Office Accounts Reportable Condition - Material Weakness Finding Control Number: FS-7491-06-02

Cause:

The deficiencies were a result ofmanagement's failure to ensure that internal controls were established, implemented, and functioning and to assign responsibilities to achieve appropriate separation of duties and utilize 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 revise and monitor controls to provide reasonable assurance that transactions are processed according to established procedures and implement procedures to ensure that the key accounting functions of custody, record keeping and authorization are separated and/or utilize management oversight of these incompatible activities.

CASH AND CASH EQUIVALENTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Controls over School Activity Accounts Reportable Condition Finding Control Number: FS-7491-06-03

Condition:

This is a repeat finding (FS-7491-05-02 and FS-7491-04-03) from the years ended June 30, 2005, and 2004, respectively. The accounting procedures of the School District were insufficient to provide for adequate separation of duties and internal controls over 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 and provide proper separation of duties. Such internal controls would limit any one individual's access to both physical assets and the related accounting records.

Questioned Cost: NIA

-4-

WARREN COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2006

II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

CASH AND CASH EQUIVALENTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Controls over School Activity Accounts Reportable Condition Finding Control Number: FS-7491-06-03

Information:

Cash and Cash Equivalents The bank reconciliation function was not separated from the record keeping and voucher payment functions. The bank reconciliation for the Warren County High School included an unidentified reconciling amount of $726 at June 30, 2006.

Revenues/Receivables/Receipts The deposit preparation was not separated from the record keeping and cash custody functions. Based on a review of 15 receipts, the School District was unable to provide adequate documentation for six of the receipts.

Expenditures/Liabilities/Disbursements The check writing function was not separated from the record keeping or processing of signed checks. Based on a review of 15 items, five had no evidence ofapproval prior to purchase.

Cause:

The deficiencies were a result ofmanagement's failure to ensure that internal controls were established, implemented, and functioning and to assign responsibilities to achieve appropriate separation of duties and utilize 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 revise and monitor controls to provide reasonable assurance that transactions are processed according to established procedures and implement procedures to ensure that the key accounting functions of custody, record keeping and authorization are separated and/or utilize management oversight of these incompatible activities.

-5-

WARREN COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2006

II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

BUDGET PREPARATION/EXECUTION Deficit Fund Balance Reportable Condition Finding Control Number: FS-7491-06-04

Condition:

This is a repeat finding (FS-7491-05-01, FS-7491-04-02, and FS-7491-0301) from the years ended June 30, 2005, 2004, and 2003, respectively. At June 30, 2006, the General Fund of the Warren County Board of Education reported a deficit fund balance.

Criteria:

Chapter 25 Reporting for LUAs with General Fund Deficit Balances of the Financial Management for Local Units ofAdministration states in part: "The seriousness of fund balance deficits cannot be overstated. The Georgia Department ofEducation requires those LUAs with deficit balances to meet certain reporting requirements."

Questioned Cost: NIA

Information:

The School District's General Fund reported a deficit fund balance in the amount of $344,906.

Cause:

The School District incurred expenditures in excess of revenues and other financing sources and failed to adequately budget for the prior year deficit.

Effect:

A financial statement irregularity in accordance with O.C.G.A. 20-2-67.

Recommendation:

The School District should establish policies and procedures designed to ensure that in future periods the School District does not report a deficit fund balance.

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WARREN COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2006

II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

BUDGET PREPARATION/EXECUTION Failure to Adopt a Balanced Budget Nonmaterial Noncompliance Finding Control Number: FS-7491-06-05

Condition:

School District failed to adopt a balanced budget for the General Fund.

Criteria:

Chapter 32 Preparing Operating Budgets of the Financial Management for Local Units of Administration states in part: "The budget must be balanced for all budgeted funds. Total anticipated revenues should equal total estimated expenditures. In the event anticipated revenues are insufficient to fund anticipated expenditures, a portion of unreserved fund balance from previous years must be used to fund the shortfall. In the event there is insufficient unreserved fund balance from previous years to fund anticipated expenditures, then such expenditures must be reduced to equal anticipated revenues plus available fund balance."

Questioned Cost: NIA

Information:

The School District's General Fund budgeted a current year deficit fund balance in the amount of $1,181,372.

Cause:

The School District neglected the specific limitations imposed upon the School District by the Georgia Department of Education.

Effect:

Nonmaterial noncompliance with respect to Chapter 32 of the FMGLUA.

Recommendation: Appropriate procedures should be implemented by the School District to ensure that the adopted budget for all budgeted funds is balanced as required.

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WARREN COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2006

II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

BUDGET PREPARATION/EXECUTION Failure to Comply with Requirements of O.C.G.A. 20-2-67 Nonmaterial Noncompliance Finding Control Number: FS-7491-06-06

Condition:

School District did not comply with O.C.G.A. 20-2-67.

Criteria:

Official Code of Georgia Annotated (O.C.G.A.) 20-2-67 Local school system or school subject to corrective action plan for budget deficit; financial operationsform; publication; mailing to Department ofEducation and local governing body, states in part,

"(b) From the time such irregularity or budget deficit is discovered until the time it is eliminated, the local school superintendent shall present to each member of the local board of education for his or her review and written acknowledgment a monthly report containing all anticipated expenditures by budget function for such school or school system during the current month. The report shall be presented to local board members on or before the tenth business day of each month. Each monthly report shall be signed by each member ofthat local board and recorded and retained in the minutes of the meeting of the local board of education.

(c) Not later than September 30 of the year, each local board of education shall cause to be published in the official county organ wherein the local school system is located once a week for two weeks a statement of actual financial operations for such schools or school system identified by the Department of Audits and Accounts as having financial irregularities... Prior to publication, such form shall be executed by the local board ofeducation and signed by each member of said board and the local school superintendent.

(d) A copy ofthe actual financial operations form required to be published by subsection (c) of this Code section shall be mailed by each local board ofeducation to the Department ofEducation and the local county board of commissioners or local municipal governing authority. A current copy of said form shall be maintained on file in the central administrative office of the local school system for public inspection for a period of at least two years from the date of its publication. Copies of the statement shall be made available on request."

Questioned Cost: NIA

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WARREN COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2006

II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

BUDGET PREPARATION/EXECUTION Failure to Comply with Requirements of O.C.G.A. 20-2-67 Nonmaterial Noncompliance Finding Control Number: FS-7491-06-06

Information:

The School District did not ( 1) present a monthly report containing all anticipated expenditures; (2) publish actual financial operations; and (3) submit actual financial operations to appropriate authorities as required by O.C.G.A. 20-2-67.

Cause:

Management of the School District did not take appropriate action to meet the reporting requirements specified in O.C.G.A. 20-2-67.

Effect:

The School District did not comply with legal requirements specified in O.C.G.A. 20-2-67.

Recommendation: The School District should ensure that procedures are in place to comply with legal requirements specified in O.C.G.A. 20-2-67.

EMPLOYEE COMPENSATION Inaccurate Reporting of Board Member Compensation Nonmaterial Noncompliance Finding Control Number: FS-7491-06-07

Condition:

This is a repeat finding (FS-7491-05-04 and FS-7491-04-05) from the years ended June 30, 2005, and 2004, respectively. Our examination revealed that compensation paid to Board members was not reported as salary on the detail listing of salary and travel submitted to the Department of Audits and Accounts.

Criteria:

O.C.G.A 50-6-27 states in part: "Each ... local board ofeducation is required and directed to submit to the state auditor, in a format prescribed by the state auditor, a listing of all personnel of such .. .local board ofeducation showing name, title or functional area, salary and travel expense for each individual."

Questioned Cost: NIA

Information:

Salary payments to Board Members in the amount of $7,775 were not included on the detail listing of salary and travel submitted to the Georgia Department of Audits and Accounts.

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WARREN COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2006

II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

EMPLOYEE COMPENSATION Inaccurate Reporting ofBoard Member Compensation Nonmaterial Noncompliance Finding Control Number: FS-7491-06-07

Cause:

Management failed to implement procedures to ensure that all employee compensation is reported as salary to the Department of Audits and Accounts.

Effect:

The failure of the School District to submit total compensation paid to employees leads to inaccurate external reporting.

Recommendation:

The School District should implement procedures to ensure that all employee compensation, including Board members' compensation is included in the salary total reported to the Department ofAudits and Accounts.

GENERAL LEDGER Failure to Report the Financial Statements in a Timely Manner Reportable Condition Finding Control Number: FS-7491-06-08

Condition:

The School District failed to submit the DE046 to the Georgia Department of Education in a timely manner.

Criteria:

Chapter I Introduction to LUA Accounting ofthe Financial Management for Georgia Local Units of Administration indicates that "accounting records must provide meaningful, reliable, accurate and timely information to the many persons and groups with legitimate interests in the financial affairs of an LUA."

Questioned Cost: NIA

Information:

The School District's DE046 financial report was submitted to the Georgia Department of Education on November 20, 2006.

Cause:

Management failed to comply with the due date of September 30, 2006, as established by the Georgia Department of Education.

Effect:

The failure ofthe School District to prepare and submit the financial report in a timely manner prohibits legitimate users of the report from being able to have timely access to the financial information provided.

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WARREN COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2006

II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

GENERAL LEDGER Failure to Report the Financial Statements in a Timely Manner Reportable Condition Finding Control Number: FS-7491-06-08

Recommendation:

The School District should implement controls to ensure that Georgia Department of Education policies and procedures are followed and implement procedures to ensure that the DE046 financial report is submitted in a timely manner.

GENERAL LEDGER Inadequate Accounting Procedures Reportable Condition Finding Control Number: FS-7491-06-09

Condition:

This is a repeat finding (FS-7491-05-05) from the year ended June 30, 2005. The School District's Federal programs had deficit fund balances at June 30, 2006.

Criteria:

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

Questioned Cost: NIA

Information:

Our examination ofthe accounting records revealed that the School District's Federal programs had deficit fund balances at June 30, 2006, totaling $1,266.

Cause:

This condition occurred because management failed to properly monitor Federal program expenditures and request available grant funds from Federal agencies.

Effect:

Failure to monitor Federal expenditures can result in inaccurate reporting and noncompliance with generally accepted accounting principles.

Recommendation:

The School District should implement procedures to ensure that Federal program expenditures are monitored and/or appropriate funds are requested from Federal agencies.

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WARR.EN COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2006

III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

OTHER- SINGLE AUDIT REPORTING PACKAGE Noncompliance with Audit Report Distribution and Corrective Action Plan Requirements Nonmaterial Noncompliance Finding Control Number: FA-7491-06-01

Condition:

The School District failed to comply with reporting requirements of 0MB Circular A-133, Audits of States, Local Governments and Non-Profit Organizations.

Criteria:

Provisions ofOMB Circular A-133 require that a reporting package, which includes a copy of the audit report and completed Data Collection Form, be provided to the Federal Audit Clearinghouse upon issuance of the School District's Single Audit Report.

Questioned Cost: NIA

Information:

The School District failed to provide documentation that a copy ofthe audit report and Data Collection Form was forwarded to the Federal Audit Clearinghouse.

Cause:

Management failed to monitor compliance with Federal guidelines to ensure that the audit reports and corrective action plans were properly distributed.

Effect:

Failure to comply with reporting directives can result in noncompliance with Federal requirements.

Recommendation:

The School District should implement procedures to ensure that all reporting requirements ofCircular A-133 are met. To fulfill the reporting requirements for the fiscal year 2005 audit, the School District should provide a copy of the audit report and Data Collection Form to the Federal Audit Clearinghouse.

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SECTIONV MANAGEMENT'S RESPONSES

WARREN COUNTY BOARD OF EDUCATION SCHEDULE OF MANAGEMENT'S RESPONSES
YEAR ENDED JUNE 30, 2006
Finding Control Number: FS-7491-06-01
We agree with this finding. The Board had employed an additional employee to help in the financial accounting area. We are in the process ofredistributing duties in order to avoid this finding in the future.
Finding Control Number: FS-7491-06-02
We agree with this finding. We are a small school system with very few employees at the central office. We are in the process of trying to separate duties even more. The General Operating Account, Debt Service, and Escrow bank statements are reviewed and initialed by the Superintendent. The Board had hired an additional employee to work in the accounting department. We are currently working to reassign duties to avoid these findings in the future.
Finding Control Number: FS-7491-06-03
We have a small staff in each of our schools. We are in the process of trying to separate duties in each of the schools. An additional staff member has been requested at the Warren County High School. The duties will be divided between these two employees. This should keep the system from getting this finding in the future.
Finding Control Number: FS-7491-06-04
We agree with this finding. The school system is doing everything possible to eliminate this finding. We have addressed expenditures and the mill rate. We anticipate eliminating this deficit by the end of the fiscal year 2008 school year.
Finding Control Number: FS-7491-06-05
We agree with this finding. The school system is making every effort to execute a balanced budget.
Finding Control Number: FS-7491-06-06
We agree with this finding. All efforts are being made to meet the requirements ofO.C.G.A. 20-267 in the following school year. The Budget Elimination Plan has been submitted to the Georgia Department of Education, the fiscal year 2006 Financial Statement will be advertised in the local newspaper and mailed to the County Commissioner, and the 0396 form will be presented to the Board at the monthly Board meeting.
Finding Control Number: FS-7491-06-07
We agree with this finding. The incorrect object code number was used when the Board members were listed in the payroll system. This prevented their salaries from showing up on the CS- I report. This error has been corrected.
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WARREN COUNTY BOARD OF EDUCATION SCHEDULE OF MANAGEMENT'S RESPONSES
YEAR ENDED JUNE 30, 2006 Finding Control Number: FS-7491-06-08 We agree with this finding. In the future the financial reports will be transmitted on time. Finding Control Number: FS-7491-06-09 We agree with this finding. All efforts are being made to monitor the Federal program expenditures to make sure that there is not a deficit balance. Finding Control Number: FA-7491-06-01 We agree with this finding. A copy of the 2005 audit report and the Federal Audit Clearinghouse Data Collection Form was mailed and never received. In the future, a return receipt will be requested when this information is mailed. Contact Person: Fran Hutcheson, Finance Officer Phone: (706) 465-3383 Ext. 303 Fax Number: (706) 465-9141 E-mail Address: fhutcheson@warren.kl2.ga.us
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