WHEELER COUNTY BOARD OF EDUCATION ALAMO# 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 WHEELER COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS - SECTION I FINANCIAL INDEPENDENT AUDITOR'S COMBINED REPORT ON BASIC FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION - SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS EXHIBITS BASIC FINANCIAL STATEMENTS DISTRICT-WIDE FINANCIAL STATEMENTS A STATEMENT OF NET ASSETS 1 B STATEMENT OF ACTIVITIES 2 FUND FINANCIAL STATEMENTS C BALANCE SHEET GOVERNMENTAL FUNDS 4 D RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO THE STATEMENT OF NET ASSETS 5 E STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS 6 F RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES TO THE STATEMENT OF ACTIVITIES 7 G STATEMENT OF FIDUCIARY NET ASSETS FIDUCIARY FUNDS 9 H NOTES TO THE BASIC FINANCIAL STATEMENTS 10 SCHEDULES REQUIRED SUPPLEMENTARY INFORMATION 1 SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL GENERAL FUND 21 SUPPLEMENTARY INFORMATION 2 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS 22 3 SCHEDULE OF STATE REVENUE 24 WHEELER COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS - SECTION I FINANCIAL SCHEDULES SUPPLEMENTARY INFORMATION 4 SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS 25 5 ALLOTMENTS AND EXPENDITURES GENERAL FUND - QUALITY BASIC EDUCATION PROGRAMS (QBE) BY PROGRAM 27 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 WHEELER 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 May 21, 2007 Honorable Sonny Perdue, Governor Members ofthe General Assembly Members ofthe State Board of Education and Superintendent and Members ofthe Wheeler County Board of Education INDEPENDENT AUDITOR'S COMBINED REPORT ON BASIC FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION - SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS Ladies and Gentlemen: We have audited the accompanying financial statements ofthe governmental activities, each major fund, and the aggregate remaining fund information (Exhibits A through H) ofthe Wheeler 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 ofcontents. These financial statements are the responsibility ofthe Wheeler 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 opinions. 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 Wheeler 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 Wheeler 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 May 21, 2007, on our consideration of the Wheeler 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 21, 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 Wheeler County Board of Education's basic financial statements. The accompanying supplementary information which consist ofSchedules 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, +;._..al lo.~~ iufaell W. Hinton, CPA, CGFM State Auditor RWH:as 2006ARL-11 WHEELER COUNTY BOARD OF EDUCATION WHEELER COUNTY BOARD OF EDUCATION STATEMENT OF NET ASSETS JUNE 30, 2006 ASSETS Cash and Cash Equivalents Accounts Receivable, Net Taxes State Government Federal Government Other Inventories Capital Assets Land Construction in Progress Land Improvements Buildings Equipment Less: Accumulated Depreciation Total Assets LIABILITIES Accounts Payable Salaries Payable Contracts Payable Total Liabilities NET ASSETS Invested in Capital Assets, Net of Related Debt Restricted for Bus Replacement Continuation of Federal Programs Capital Projects Unrestricted Total Net Assets Total Liabilities and Net Assets EXHIBIT"A" GOVERNMENTAL ACTIVITIES $ 591,338 309,037 631,484 188,958 16,235 3,297 105,520 1,510,133 175,282 6,127,640 1,265,111 -3,331,194 $ ===7=,5=9=2=,8=41= $ 203,435 905,358 142 465 $ 1,251,258 $ 5,852,492 57,309 25,913 178,641 227,228 $ 6,341,583 $ ===7=5=9=2=8=41= The notes to the basic financial statements are an integral part of this statement. -1- WHEELER 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 Other Support Services Operations of Non-Instructional Services Enterprise Operations Food Services Total Governmental Activities General Revenues Taxes Property Taxes For Maintenance and Operations Sales Taxes Special Purpose Local Option Sales Tax For Capital Projects Intangible Recording Tax Real Estate Grants and Contributions not Restricted to Specific Programs Investment Earnings Miscellaneous Total General Revenues Changes in Net Assets Net Assets - Beginning of Year Net Assets - End of Year EXPENSES CHARGES FOR SERVICES $ 6,225,560 $ 621,545 87,337 189,481 272,225 624,545 826,030 574,759 565,133 230,331 95,228 620,068 $ 10,932,242 $ 131,803 68,026 73161 272,990 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 $ 4,979,442 461,646 72,495 105,398 185,387 260,520 759,288 283,932 257,394 $ 216,011 507,590 $ 8,089,103 $ $ 39,487 39487 $ -1, 114,315 -159,899 -14,842 -84,083 -86,838 -364,025 -66,742 -290,827 -268,252 -14,320 -27,202 -39 317 -2,530,662 $ 1,199,964 111,608 13,646 11,685 588,426 8,651 424 878 $ 2,358,858 $ -171,804 6,513,387 $=-===i6=!,,34_1_.5.8...3... -3- WHEELER COUNTY BOARD OF EDUCATION BALANCE SHEET GOVERNMENTAL FUNDS JUNE 30, 2006 EXHIBIT"C" ASSETS Cash and Cash Equivalents Accounts Receivable, Net Taxes State Government Federal Government Other Inventories Total Assets LIABILITIES AND FUND BALANCES LIABILITIES Accounts Payable Salaries Payable Contracts Payable Total Liabilities FUND BALANCES Reserved for: Bus Replacement Continuation of Federal Programs Inventories Capital Projects Unreserved Undesignated Reported in: General Fund Total Fund Balances Total Liabilities and Fund Balances GENERAL FUND DISTRICTWIDE CAPITAL PROJECTS FUND TOTAL $ 341,489 $ 249,849 $ 32,381 631,484 188,958 16,235 3,297 71,565 591,338 103,946 631,484 188,958 16,235 3297 $ 1,213,844 $ 321,414 $ ===1...5.,.3.5..5,2,..5.8.. $ 203,127 $ 905,358 $ 1,108,485 $ 308 $ 142,465 142,773 $ 203,435 905,358 142465 1,251,258 $ 57,309 $ 22,616 3,297 $ 178,641 22,137 $ 105,359 $ 178 641 $ 57,309 22,616 3,297 178,641 22137 284,000 $ 1,213,844 $ 321 414 $ ===1=,5=3=5'=2=58= The notes to the basic financial statements are an integral part of this statement. -4- WHEELER COUNTY BOARD OF EDUCATION RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO THE STATEMENT OF NET ASSETS JUNE 30, 2006 EXHIBIT"D" Total Fund Balances - Governmental Funds (Exhibit "C") Amounts reported for Governmental Activities in the Statement of Net Assets are different because: Capital Assets used in Governmental Activities are not financial resources and therefore are not reported in the funds. These assets consist of: Land Construction in Progress Land Improvements Buildings Equipment Accumulated Depreciation Total Capital Assets Some of the School District's property tax revenues will be collected after year-end but are not available soon enough to pay for the current period's expenditures. Net Assets of Governmental Activities (Exhibit "A") $ 284,000 $ 105,520 1,510,133 175,282 6,127,640 1,265,111 -3,331,194 5,852,492 205,091 $ ====6,.3.4.=1-,5=83= The notes to the basic financial statements are an integral part of this statement. -5- WHEELER 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 Other Support Services Enterprise Operations Food Services Operation Capital Outlay Total Expenditures Net Change in Fund Balances Fund Balances - Beginning Fund Balances - Ending GENERAL FUND DISTRICTWIDE CAPITAL PROJECTS FUND TOTAL $ 1,079,722 25,331 $ 5,940,470 2,776,546 272,990 6,536 430,188 $ 10,531,783 $ $ 111,608 2,115 113,723 $ 1,079,722 136,939 5,940,470 2,776,546 272,990 8,651 430 188 10,645,506 $ 6,036,516 621,545 71,294 189,481 271,434 619,356 826,030 573,460 515,497 230,331 95,228 600,372 $ $ 10,650,544 $ $ -118,761 $ 224,120 $ 189,883 189,883 $ -76,160 $ 254,801 6,036,516 621,545 71,294 189,481 271,434 619,356 826,030 573,460 515,497 230,331 95,228 600,372 189,883 10,840,427 -194,921 478 921 $ 105,359 $ 178 641 $ ===2=8.;.4,==00=0= The notes to the basic financial statements are an integral part of this statement. -6- WHEELER COUNTY BOARD OF EDUCATION RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES TO THE STATEMENT OF ACTIVITIES JUNE 30, 2006 EXHIBIT"F" Total Net Change in Fund Balances - Governmental Funds (Exhibit "E") Amounts reported for Governmental Activities in the Statement of Activities are different because: Capital Outlays are reported as expenditures in Governmental Funds. However, in the Statement of Activities, the cost of Capital Assets is allocated over their estimated useful lives as depreciation expense. In the current period, these amounts are: Capital Outlay Depreciation Expense Excess of Capital Outlay over Depreciation Expense Because some property taxes will not be collected for several months after the School District's fiscal year ends, they are not considered "available" revenues. In the Statement of Activities, only the loss on the sales of the building and equipment is reported, whereas in the Governmental Funds, the entire proceeds from the sales increase financial resources. Thus, the change in net assets differs from the change in fund balances by the carrying value of the building and equipment sold. $ -194,921 $ 102,586 -194,401 -91,815 120,242 -5 310 Change in Net Assets of Governmental Activities (Exhibit "B") $ ===1..,71=8=04= The notes to the basic financial statements are an integral part of this statement. -7- (This page left intentionally blank) WHEELER COUNTY BOARD OF EDUCATION STATEMENT OF FIDUCIARY NET ASSETS FIDUCIARY FUNDS JUNE 30, 2006 ASSETS Accounts Receivable, Net Other LIABILITIES Cash Overdraft Accounts Payable Funds Held for Others Total Liabilities EXHIBIT"G" AGENCY FUNDS $ ===64='=06=2= $ 34,719 15,974 13,369 $ ===64='=06=2= The notes to the basic financial statements are an integral part of this statement. -9- WHEELER COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2006 EXHIBIT"H" Note 1: DESCRIPTION OF SCHOOL DISTRICT AND REPORTING ENTITY REPORTING ENTITY The Wheeler County Board of Education (School District) was established under the laws of the State of Georgia and operates under the guidance of a school board elected by the voters and a Superintendent appointed by the Board. The Board is organized as a separate legal entity and has the power to levy taxes and issue bonds. Its budget is not subject to approval by any other entity. Accordingly, the School District is a primary government and consists of all the organizations that compose its legal entity. Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BASIS OF PRESENTATION The School District's basic financial statements are collectively comprised of the District-wide financial statements, fund financial statements and notes to the basic financial statements of the Wheeler County Board of Education. District-wide Statements: The Statement ofNet Assets and the Statement ofActivities display information about the financial activities ofthe overall School District, except for fiduciary activities. Eliminations have been made to minimize the double counting of internal activities. Governmental activities generally are financed through taxes, intergovernmental revenues, and other nonexchange transactions. The Statement ofActivities presents a comparison between direct expenses and program revenues for each function of the School District's governmental activities. Direct expenses are those that are specifically associated with a program or function and, therefore, are clearly identifiable to a particular function. Indirect expenses (expenses of the School District related to the administration and support ofthe School District's programs, such as office and maintenance personnel and accounting) are not allocated to programs: Program revenues include (a) charges paid by the recipients ofgoods or services offered by the programs and (b) grants and contributions that are restricted to meeting the operational or capital requirements of a particular program. Revenues that are not classified as program revenues, including all taxes, are presented as general revenues. Fund Financial Statements: The fund financial statements provide information about the School District's funds, including fiduciary funds. Eliminations have been made to minimize the double counting ofinternal activities. Separate statements for each category (governmental and fiduciary) are presented. The emphasis of fund financial statements is on major governmental funds, each displayed in a separate column. - 10 - WHEELER COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2006 EXHIBIT"H" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The School District reports the following major governmental funds: General Fund is the School District's primary operating fund. It accounts for all financial resources ofthe School District, except those resources required to be accounted for in another fund. District-wide Capital Projects Fund accounts for financial resources including Special Purpose Local Option Sales Tax (SPLOST) and grants from U. S. Department of Education to be used for the acquisition, construction or renovation of major capital facilities. The School District reports the following fiduciary fund type: Agency funds account for assets held by the School District as an agent for various funds, governments or individuals. BASIS OF ACCOUNTING The basis ofaccounting determines when transactions are reported on the financial statements. The District-wide governmental and fiduciary fund financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded at the time liabilities are incurred, regardless ofwhen the related cash flows take place. Nonexchange transactions, in which the School District gives (or receives) value without directly receiving (or giving) equal value in exchange, include property taxes, sales taxes, grants and donations. On an accrual basis, revenue from property taxes is recognized in the fiscal year for which the taxes are levied. Revenue from sales taxes is recognized in the fiscal year in which the underlying transaction (sale) takes place. Revenue from grants and donations is recognized in the fiscal year in which all eligibility requirements have been satisfied. The School District uses funds to report on its financial position and the results of its operations. Fund accounting is designed to demonstrate legal compliance and to aid financial management by segregating transactions related to certain governmental functions or activities. A fund is a separate accounting entity with a self-balancing set of accounts. Governmental funds are reported using the current financial resources measurement focus and the modified accrual basis ofaccounting. Under this method, revenues are recognized when measurable and available. The School District considers all revenues reported in the governmental funds to be available if they are collected within sixty days after year-end. Property taxes, sales taxes and interest are considered to be susceptible to accrual. Expenditures are recorded when the related fund liability is incurred. Capital asset acquisitions are reported as expenditures in governmental funds. - 11 - WHEELER COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2006 EXHIBIT"H" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The School District funds certain programs by a combination ofspecific cost-reimbursement grants, categorical grants, and general revenues. Thus, when program costs are incurred, there are both restricted and unrestricted net assets available to finance the program. It is the School District's policy to first apply grant resources to such programs, followed by cost-reimbursement grants, then general revenues. CASH AND CASH EQUIVALENTS COMPOSITION OF DEPOSITS Cash and cash equivalents consist ofcash on hand, demand deposits and short-term investments with original maturities of three months or less from the date of acquisition in authorized financial institutions. Georgia Laws OCGA 45-8-14 authorize the School District to deposit its funds in one or more solvent banks or insured Federal savings and loan associations. 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 Wheeler County Board of Commissioners fixed the property tax levy for the 2005 tax digest year (calendar year) on October 11, 2005 (levy date). Taxes were due on January 3, 2006 (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 Wheeler County Tax Commissioner bills and collects the property taxes for the School District, withholds 2.5% oftaxes collected as a fee for tax collection and remits the balance oftaxes collected to the School District. Property tax revenues, at the fund reporting level, during the fiscal year ended June 30, 2006, for maintenance and operations amounted to $1,079,722. The tax millage rate levied for the 2005 tax year (calendar year) for the Wheeler County Board of Education was as follows (a mill equals $1 per thousand dollars of assessed value): School Operations 12.5 mills - 12 - WHEELER COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2006 EXHIBIT"H" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES SALES TAXES Special Purpose Local Option Sales Tax, at the fund reporting level, during the year amounted to $111,608 and is to be used for capital outlay for educational purposes or debt service. This sales tax was authorized by local referendum and the sales tax must be re-authorized at least every five years. INVENTORIES FOOD INVENTORIES On the basic financial statements, inventories ofdonated food commodities used in the preparation ofmeals are reported at their Federally assigned value and purchased foods inventories are reported at cost (first-in, first-out). The School District uses the consumption method to account for inventories whereby donated food commodities are recorded as an asset and as revenue when received, and expenses/expenditures are recorded as the inventory items are used. Purchased foods are recorded as an asset when purchased and expenses/expenditures are recorded as the inventory items are used. CAPITAL ASSETS Capital assets purchased, including capital outlay costs, are recorded as expenditures in the fund financial statements at the time ofpurchase. 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 ofthe 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 Estimated Policy Useful Life Land Land Improvements Buildings and Improvements Equipment Any Amount $5,000 or more $5,000 or more $5,000 or more NIA 20 to 80 years 10 to 80 years 3 to 20 years Depreciation is used to allocate the actual or estimated historical cost of all capital assets over estimated useful lives. - 13 - WHEELER COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2006 EXHIBIT"H" Note 3: DEPOSITS COLLATERALIZATION OF DEPOSITS Official-Code of Georgia Annotated (OCGA) Section 45-8-12 provides that there shall not be on deposit at any time in any depository for a time longer than ten days a sum of money which has not been secured by surety bond, by guarantee 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, (6) Industrial revenue bonds and bonds ofdevelopment authorities created by the laws ofthe State of Georgia, and (7) Bonds, bills, notes, certificates of indebtedness, or other obligations of a subsidiary corporation of the United States government, which are fully guaranteed by the United States government both as to principal and interest or debt obligations issued by the Federal Land Bank, the Federal Home Loan Bank, the Federal Intermediate Credit Bank, the Central Bank for Cooperatives, the Farm Credit Banks, the Federal Home Loan Mortgage Association, and the Federal National Mortgage Association. CATEGORIZATION OF DEPOSITS At June 30, 2006, the bank balances were $1,003,589. The amounts of the total bank balances are classified into four categories of custodial credit risk: - 14 - WHEELER COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2006 EXHIBIT"H" Note 3: DEPOSITS 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 $ 102,213 2 901,376 3 0 4 0 Total $ 1,003.589 Note 4: NON-MONETARY TRANSACTIONS The School District receives food commodities from the United States Department ofAgriculture (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: - 15 - WHEELER COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2006 EXHIBIT"H" Note 5: CAPITAL ASSETS Balances July 1, 2005 Increases Balances Decreases June 30, 2006 Governmental Activities Capital Assets, Not Being Depreciated: Land $ 105,520 $ 0 $ 0 $ 105,520 Construction in Progress 1,510,133 1,510,133 Total Capital Assets Not Being Depreciated $ 1,615.653 $ 0 $ 0 $ 1,615.653 Capital Assets Being Depreciated Buildings and Improvements Equipment Land Improvements $ 6,140,644 1,193,363 $ 175,282 $ 102,586 13,004 $ 30,838 6,127,640 1,265,111 175,282 Less Accumulated Depreciation for: Buildings and Improvements Equipment Land Improvements 2,242,332 829,953 103.040 106,448 81,682 6 271 7,694 30,838 2,341,086 880,797 109.311 Total Capital Assets, Being Depreciated, Net $ 4.333.964 $ -91 815 $ 5 310 $ 4,236.839 Governmental Activity Capital Assets - Net $ 5,9~2,611 $ -21,815 $ 5,3Hl $ 5,852,422 Current year depreciation expense by function is as follows: Instruction Support Services Improvements of Instructional Services General Administration School Administration Maintenance and Operation of Plant Student Transportation Services Food Services $ 95,633 $ 8,116 400 2,625 657 77,006 88,804 9 964 Note 6: RESTRICTED ASSETS Special Purpose Local Option Sales Tax (SPLOST) and Federal funds are reported as restricted assets in the Statement ofNet Assets because their use is limited by applicable statutory provisions. Restricted assets at June 30, 2006, were as follows: - 16 - WHEELER COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2006 EXHIBIT"H" Note 6: RESTRICTED ASSETS District-wide Capital Projects SPLOST Federal Restricted Cash and Cash Equivalents: Capital Acquisitions $ 107,384 $ 142,465 Note 7: RISK MANAGEMENT The School District is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors or omissions; job related illness or injuries to employees; acts of God and unemployment compensation. The School District has obtained commercial insurance for risk of loss associated with torts, assets, and errors or omissions. The School District has neither significantly reduced coverage for these risks nor incurred losses (settlements) which exceeded the School District's insurance coverage in any ofthe past three years. The School District has elected to self-insure for all losses related to acts of God. The School District has not experienced any losses related to this risk in the past three years. The School District is self-insured with regard to unemployment compensation claims. The School District accounts for claims within the General Fund with expenses/expenditures and liability being reported when it is probable that a loss has occurred, and the amount of that loss can be reasonably estimated. Changes in the unemployment compensation claims liability during the last two fiscal years are as follows: 2005 2006 Beginning of Year Liability Claims and Changes in Estimates Claims Paid EndofYear Liability $ 0 $ 12,225 $ 11 481 $ 744 $ 744 $ 1 688 $ 2,432 $ 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. - 17 - WHEELER COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2006 EXHIBIT"H" Note 7: RISK MANAGEMENT The School District has purchased surety bonds to provide additional insurance coverage as follows: Position Covered Amount Superintendent All Employees Principals $ 100,000 $ 100,000 $ 10,000 Note 8: SHORT-TERM DEBT The School District issues tax anticipation notes in advance ofproperty 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: Tax Anticipation Notes Beginning Balance Issued Redeemed Ending Balance $.===o $ 350.000 $ Jso,ooo $===o Note 9: 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. - 18 - WHEELER COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2006 EXHIBIT "H" Note 10: 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% $ 533,135 $ 517,143 $ 504,641 - 19 - (This page left intentionally blank) WHEELER 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 Other Support Services Enterprise Operations Food Services Operation Total Expenditures Excess of Revenues over (under) Expenditures OTHEB FINANCING SOURCE {USES} Other Sources Other Uses Total Other Financing Sources (Uses) Net Change in Fund Balances Fund Balances - Beginning Adjustments NONAPPROPRIATED BUDGETS ORIGINAL {1 l FINAL {1l ACTUAL AMOUNTS $ 1,037,712 $ 1,037,712 $ 1,079,722 25,000 25,000 25,331 5,958,490 6,037,846 5,940,470 1,640,787 1,647,705 2,776,546 69,130 69,130 272,990 14,100 14,100 6,536 575,092 575,092 430188 $ 9,320,311 $ 9,406,585 $ 10,531.783 $ 5,268,632 $ 5,287,169 $ 6,036,516 424,771 73,146 174,875 232,162 741,981 281,409 505,082 452,655 14,800 591,573 424,770 73,541 174,875 232,162 741,981 282,152 505,082 459,275 14,800 591,573 621,545 71,294 189,481 271,434 619,356 826,030 573,460 515,497 230,331 95,228 600,372 $ 8.761,086 $ 8.787,380 $ 10,650,544 $ 559,225 $ 619,205 $ -118 761 $ 100,000 $ 123,958 -23,958 $ 100,000 $ 100,000 $ 659,225 $ 719,205 $ -118,761 428,272 428,272 224,120 -160 447 -160 447 Fund Balances - Ending $ 927,050 $ 987,030 s===1=o=s,..,35.,.9= Notes to the Schedule of Revenues, Expenditures and Changes in Fund Balances Budget and Actual (1) Original and Final Budget amounts do not include budgeted revenues or expenditures of the various principal accounts. The accompanying schedule of revenues, expenditures and changes in fund balances budget and actual is presented on the modified accrual basis of accounting which is the basis of accounting used in the presentation of the fund financial statements. See notes to the basic financial statements. - 21 - WHEELER 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 Direct Safe and Drug-Free Schools and Communities - National Programs Pass-Through From Georgia Department of Education Enhancing Education Through Technology Program Hurricane Education Recovery Improving Teacher Quality State Grants Migrant Education Reading First State Grants Rural Education State Grants for Innovative Programs Title I Grants to Local Educational Agencies Vocational Education - Basic Grants to States Pass-Through From Georgia Department of Human Resources Safe and Drug Free Schools and Communities - State Grants Total U. S. Department of Education Health and Human Services, U.S. Department of Direct Adolescent Family Life Demonstration Projects Pass-Through From Children and Youth Coordinating Council Abstinence Education Program Pass-Through From Georgia Department of Human Resources Block Grants for Prevention and Treatment of Substance Abuse Total U.S. Department of Health and Human Services CFDA NUMBER PASSTHROUGH ENTITY ID NUMBER EXPENDITURES IN PERIOD . 10.553 . 10.555 N/A N/A $ $ (2) 544 818 544,818 10.550 NIA $ 20,931 565 749 84.027 84.173 . 84.184 84.318 84.938 84.367 84.011 84.357 84.358 . 84.298 84.010 84.048 84.186 N/A $ N/A $ 220,454 9155 229,609 NIA NIA N/A N/A N/A N/A NIA NIA N/A N/A $ 681,915 (5) 101,173 (3) 85,019 6,175 292,073 34,420 4,122 430,273 22,999 26134 1,913,912 93.995 93.235 $ NIA 278,121 (4) 75,469 93.959 N/A $ 10000 363,590 Total Federal Financial Assistance N/A = Not Available -22 - $===2..,.,84..,3.,.,2..,.5...,1 WHEELER COUNTY BOARD OF EDUCATION SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS YEAR ENDED JUNE 30, 2006 SCHEDULE "2" Notes to the Schedule of Expenditures of Federal Awards (1) The amount shown for the Food Donation Program represents the Federally assigned value of nonmonetary assistance for donated commodities received and/or consumed by the School District during the current fiscal year. (2) Expenditures for the funds earned on the School Breakfast Program ($148,526) were not maintained separately and are included in the 2006 National School Lunch Program. (3) Funds earned on this program, in the amount of $1,489, do not require reporting of expenditures. (4) Includes Federal Assistance of $147,622, provided to subrecipients. (5) Includes Federal Assistance of $478,335, provided to subrecipients. Major Programs are identified by an asterisk (*) in front of the CFDA number. The accompanying schedule of expenditures of Federal awards includes the Federal grant activity of the Wheeler 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. -23- WHEELER COUNTY BOARD OF EDUCATION SCHEDULE OF STATE REVENUE YEAR ENDED JUNE 30, 2006 AGENCY/FUNDING GRANTS Bright From the Start: Georgia Department of Early Care and Leaming 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 Remedial Education Program 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 Vocational Supervisors Mid-term Adjustment Hold-Harmless Education Equalization Funding Grant Food Services Austerity Reduction Other State Programs K-8 Statewide Reading Program National Teacher Certification Preschool Handicapped Program Virtual Schools See notes to the basic financial statements. -24- SCHEDULE "3" GOVERNMENTAL FUND TYPE GENERAL FUND $ 341,834 363,049 28,517 726,110 101,049 357,956 102,591 699,073 566,351 189,027 6,016 130,052 244,663 97,330 16,980 43,430 56,382 105,398 35,413 19,309 308,861 256,653 276,959 216,826 39,487 27,802 37,184 3,402 12,511 128,498 588,426 34,452 -269,088 25,000 14,712 8,080 175 $ ====-==....;;,i5,~94~0,4.:..;70= WHEELER COUNTY BOARD OF EDUCATION SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS YEAR ENDED JUNE 30, 2006 SCHEDULE "4" PROJECT Financing, remodeling, renovating, improving, furnishing and equipping existing School District facilities, including classrooms, instructional areas, support space, physical education and athletic facilities, and grounds, purchase or construction of a storage facility, acquiring any necessary personal property, including computers and other technology, purchase of school buses, and paying expenses incident thereto. Remodeling, renovating, improving, furnishing and equipping existing School District facilities, including classrooms, instructional areas, support space, physical education and athletic facilities and grounds, purchase or construction of a storage facility, acquiring any necessary personal property, including computers and other technology, purchase of school buses and paying expenses incident thereto. ORIGINAL ESTIMATED COST (1) CURRENT ESTIMATED COSTS (2) AMOUNT EXPENDED IN CURRENT YEAR (3) AMOUNT EXPENDED IN PRIOR YEARS (3) PROJECT STATUS $ 1,950,000 $ 1,959,795 $ 118,341 $ 1,841,454 Completed 1,950,000 1,950,000 45157 Ongoing $ 3,900,000 $ 3,909,795 $ 163,498 $ 1,841,454 (1) The School District's original cost estimate as specified in the resolution calling for the imposition of the Local Option Sales Tax. (2) The School District's current estimate of total cost for the projects. Includes all cost from project inception to completion. (3) The voters of Wheeler County approved the imposition of a 1% sales tax to fund the above projects. Amounts expended for these projects may include sales tax proceeds, state, local property taxes and/or other funds over the life of the projects. See notes to the basic financial statements. - 25- {This page left intentionally blank) WHEELER 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 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 Remedial Education Program Alternative Education Program 399,350 $ 32,303 791,124 100,972 405,700 100,709 774,432 625,834 209,329 563,398 49,633 61 783 335,092 $ 57,960 597,067 220,149 469,025 54,734 767,253 821,451 184,424 6,817 189,113 367,796 74,975 5,409 70,240 206,973 4,367 $ 6,899 448 5,785 448 6,936 8,844 6,672 9,211 14,629 2,216 339,459 57,960 603,966 220,597 474,810 55,182 774,189 830,295 191,096 6,817 198,324 367,796 74,975 20,038 72,456 206,973 TOTAL DIRECT INSTRUCTIONAL PROGRAMS $ 4,114,567 $ 4,428,478 $ 66,455 $ 4,494,933 Media Center Program Staff and Professional Development 116,163 21 212 163,766 457 25,714 17 650 189,480 18 107 TOTAL QBE FORMULA FUNDS $ 4 251 942 $ 4,592,701 $ 109 819 $===4,=70=2=,5=2=0 (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. - 27 - SECTION II COMPLIANCE AND INTERNAL CONTROL REPORTS Russell W. Hinton STATE AUDITOR (404) 658-2174 DEPARTMENT OF AUDITS AND ACCOUNTS 270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400 May 21, 2007 Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education and Superintendent and Members ofthe Wheeler 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 ofWheeler County Board ofEducation as ofand for the year ended June 30, 2006, which collectively comprise Wheeler County Board of Education's basic financial statements and have issued our report thereon dated May 21, 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 Wheeler 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 Wheeler County Board of Education's ability to record, process, summarize and report financial data consistent with assertions of management in the financial statements. Reportable conditions are described in the accompanying Schedule ofFindings and Questioned Costs as items FS-7531-06-01, FS-7531-06-02 and FS-7531-06-03. 2006YB-30 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, we believe none of the reportable conditions described above are material weaknesses. Compliance and Other Matters As part of obtaining reasonable assurance about whether Wheeler 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 Wheeler County Board of Education and is not intended to be and should not be used by anyone other than these specified parties. Respectfully submitted, RWH:as 2006YB-30 Rus 11 W. Hinton, CPA, CGFM Sta e Auditor 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 May 21, 2007 Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education and Superintendent and Members ofthe Wheeler County Board of Education REPORT ON COMPLIANCE WITH REQUIREMENTS APPLICABLE TO EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH 0MB CIRCULAR A-133 Ladies and Gentlemen: Compliance We have audited the compliance of Wheeler County Board of Education with the types of compliance requirements described in the U.S. Office ofManagement and Budget (0MB) Circular A-133 Compliance Supplement that are applicable to each ofits major Federal programs for the year ended June 30, 2006. Wheeler County Board ofEducation's major Federal programs are identified in the Summary of Auditor's Results Section of the accompanying Schedule of Findings and Questioned Costs. Compliance with the requirements of laws, regulations, contracts and grants applicable to each of its major Federal programs is the responsibility of Wheeler County Board of Education's management. Our responsibility is to express an opinion on Wheeler 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 ofStates, 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 Wheeler County Board of Education's compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Our audit does not provide a legal determination on Wheeler County Board of Education's compliance with those requirements. 2006SA-55 As described in item FA-7531-06-01 in the accompanying Schedule of Findings and Questioned Costs, Wheeler County Board of Education did not comply with requirements regarding Subrecipient Monitoring that is applicable to its Safe and Drug-Free Schools and Communities National Programs (CFDA 84.184). Compliance with such requirements is necessary, in our opinion, for Wheeler County Board of Education to comply with requirements applicable to that program. In our opinion, except for the noncompliance described in the preceding paragraph, the Wheeler County Board of Education complied, in all material respects, with the requirements referred to above that are applicable to each of its major Federal programs for the year ended June 30, 2006. The results ofour auditing procedures also disclosed an instance ofnonmaterial noncompliance with those requirements which are described in the accompanying Schedule ofFindings and Questioned Costs as item FA-7531-06-02. Internal Control Over Compliance The management of Wheeler 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 Wheeler County Board of Education's internal control over compliance with requirements that could have a direct and material effect on a major Federal program in order to determine our auditing procedures for the purpose of expressing our opinion on compliance and to test and report on internal control over compliance in accordance with 0MB Circular A-133. We noted a certain matter involving the internal control over compliance and its operation that we consider to be a reportable condition. Reportable conditions involve matters coming to our attention relating to significant deficiencies in the design or operation ofthe internal control over compliance that, in our judgment, could adversely affect the Wheeler County Board of Education's ability to administer a major Federal program in accordance with applicable requirements oflaws, regulations, contracts and grants. The reportable condition is described in the accompanying Schedule of Findings and Questioned Costs as item FA-7531-06-01. 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 ofrisk that noncompliance with the applicable requirements of laws, 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. Our consideration ofthe internal control over compliance 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, the reportable condition noted above is also considered to be a material weakness. 2006SA-55 This report is intended solely for the information and use of the management, members of the Wheeler County Board ofEducation, Federal awarding agencies and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties. Respectfully submitted, RWH:as 2006SA-55 Rus 11 W. Hinton, CPA, CGFM State Auditor SECTION III AUDITEE'S RESPONSE TO PRIOR YEAR FINDINGS AND QUESTIONED COSTS WHEELER COUNTY BOARD OF EDUCATION AUDITEE'S RESPONSE SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2006 PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS FINDING CONTROL NUMBER AND STATUS FS-7531-05-01 FS-7531-05-02 Partially Resolved - See Corrective Action/Responses Partially Resolved - See Corrective Action/Responses CORRECTIVE ACTION/RESPONSES CASH AND CASH EQUIVALENTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Control Procedures Finding Control Number: FS-7531-05-01 This finding has been only partially resolved. Options are being carefully studied to record the Certificate of Deposit. The duties are being shared by the staff at each school. We are using pre-numbered receipts and purchase orders for record keeping. This finding should be resolved fiscal year ending June 30, 2007. EXPENDITURES/LIABILITIES/DISBURSEMENTS EMPLOYEE COMPENSATION Inadequate Internal Control Procedures Finding Control Number: FS-7531-05-02 In the future, contracts will be closely monitored by the payroll personnel and then double checked by the principal or supervisor in charge of the program before the September payroll is run. Any excessive leave on both certified and classified employees will be deducted in the month that the excessive leave occurred. Once the payroll officer calculates such leave, it will then be given to the principal or supervisor for final approval before being deducted. In the future, all account numbers and payments will be checked thoroughly by the payroll personnel and the person in charge ofsuch program for accuracy before the final payroll is run for that month. All of the above findings will be resolved in the next audit ending June 30, 2007. - 1- WHEELER COUNTY BOARD OF EDUCATION AUDITEE'S RESPONSE SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2006 PRIOR YEAR FEDERAL AWARD FINDINGS AND QUESTIONED COSTS FINDING CONTROL NUMBER AND STATUS FA-7531-04-01 FA-7531-04-02 FA-7531-04-03 FA-7531-05-01 FA-7531-05-02 Previously Reported Corrective Action Plan Implemented Further Action Not Warranted Previously Reported Corrective Action Plan Implemented Previously Reported Corrective Action Plan Implemented Further Action Not Warranted -2- SECTION IV FINDINGS AND QUESTIONED COSTS WHEELER 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 Wheeler 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 Wheeler County Board of Education disclosed financial statement reportable conditions related to the following control categories. Cash and Cash Equivalents Employee Compensation Accounting Controls (Overall) Expenditures/Liabilities/Disbursements Revenues/Receivables/Receipts None ofthe reportable conditions described above are considered to be material weaknesses. 3. Noncompliance Material to the Financial Statements The audit of the Wheeler 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 Wheeler County Board of Education disclosed a reportable condition in internal control over major programs for the following compliance requirement. Subrecipient Monitoring The reportable condition described above is considered to be a material weakness. 5. Type of Report Issued on Compliance for Major Programs The auditor's opinion on the Wheeler County Board of Education's report on compliance with requirements applicable to major programs was unqualified except for Safe and DrugFree Schools and Communities - National Programs (CFDA 84.184) which was qualified. 6. Audit Findings Required to be Reported by Section .51 0(a) of 0MB Circular A-133 The Wheeler County Board of Education's audit disclosed an audit finding required to be reported by section .510(a) of 0MB Circular A-133. This audit finding 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 84.184 Safe and Drug-Free Schools and Communities - National Programs - 1- WHEELER COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2006 I SUMMARY OF AUDITOR'S RESULTS 8. Type "A" Program Dollar Threshold The dollar threshold for type "A" programs was $300,000. 9. Low Risk Auditee The Wheeler County Board ofEducation 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 CASH AND CASH EQUIVALENTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Controls over School Activity Accounts Reportable Condition Finding Control Number: FS-7531-06-01 Condition: This is a repeat finding (FS-7531-05-01) from the year ended June 30, 2005. The accounting procedures ofthe School District were insufficient to provide for adequate internal controls over the school activity accounts. Criteria: The School District's management is responsible for designing and maintaining internal controls that provide reasonable assurance that transactions are processed according to established procedures. Questioned Cost: NIA Information: Cash and Cash Equivalents The bank reconciliation function was not separated from the record keeping function. The School District failed to record a $2,180 Certificate of Deposit on the financial records. Activity for one school was recorded on the ledger incorrectly. Revenues/Receivables/Receipts The cash receipts and deposit preparation functions were not separated from the record keeping and cash custody functions. Pre-numbered receipts were not utilized at one ofthe schools tested. Based on a review of twenty items, nine receipts did not contain adequate supporting documentation and six receipts were not deposited in a timely manner. -2 - WHEELER 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-7531-06-01 Expenditures/Liabilities/Disbursements The check writing function was not separated from the record keeping, purchasing and bank reconciliation functions. Based on a review oftwenty items, purchase orders were not properly utilized for two vouchers and two vouchers did not contain adequate supporting documentation. Cause: These deficiencies were the result of management's decision to limit the number ofadministrative staffmade responsible for the accounting functions and management's failure to ensure that adequate internal controls were established, implemented and functioning at the school level. Effect: Errors and/or irregularities may not be detected in a timely manner. Recommendation: The School District should implement procedures to ensure that the key accounting functions of custody, record keeping and authorization are separated and/or utilize oversight for these incompatible activities. In addition, management should monitor controls to provide reasonable assurance that transactions are processed according to established policies and implement those procedures deemed necessary to strengthen internal controls over the accounting functions. ACCOUNTING CONTROLS (OVERALL) Inadequate Access Controls Reportable Condition Finding Control Number: FS-7531-06-02 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 -3- WHEELER COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2006 II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS ACCOUNTING CONTROLS (OVERALL) Inadequate Access Controls Reportable Condition Finding Control Number: FS-7531-06-02 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. EMPLOYEE COMPENSATION Inadequate Internal Controls Reportable Condition Finding Control Number: FS-7531-06-03 Condition: This is a repeat finding (FS-7531-05-02) from the year ended June 30, 2005. The School District failed to verify that employees' compensation disbursements were based on approved salary amounts. In addition, the School District failed to properly deduct excess or disallowed leave from employees' compensation based on the leave records. Criteria: The School District's management is responsible for designing and maintaining internal controls to provide reasonable assurance that employees' salaries are paid according to approved salary schedules. The School District must ensure any excess or disallowed leave is deducted from an employee's salary in agreement with the employee's leave records and approved pay rate. Questioned Cost: NIA -4- WHEELER COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2006 II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS EMPLOYEE COMPENSATION Inadequate Internal Controls Reportable Condition Finding Control Number: FS-7531-06-03 Information: Based on a review of twenty-five employees' payroll records, the following deficiencies were noted: Three employees were not paid according to their contracts. One employee's earnings did not agree with the Salary and Travel data submitted to the Georgia Department of Audits and Accounts. One employee was overpaid due to the use of an incorrect pay rate when calculating excess or disallowed leave. Two employees were overpaid because excessive leave was not properly deducted from their pay. Three employees' leave records were not maintained properly. One employee's salary was not charged properly according to the State chart of accounts. Cause: These deficiencies were the result of management's failure to ensure that appropriate accounting control procedures were established, implemented and functioning for the employee compensation function. Effect: Errors and/or irregularities may not be detected in a timely manner. Recommendation: Management should develop and implement procedures to ensure that employees are accurately compensated for work performed, employee leave records are accurate and that deductions are properly calculated according to the leave records. In addition, management should monitor controls to ensure that transactions are processed according to established procedures. -5- WHEELER COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2006 III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS SUBRECIPIENT MONITORING Inadequate Monitoring of Subrecipients Reportable Condition - Material Weakness Material Noncompliance U.S. Department of Education Safe and Drug-Free Schools and Communities - National Programs (CFDA 84.184) Finding Control Number: FA-7531-06-01 Condition: The School District did not require adequate documentation or properly review requests made by subrecipients for the reimbursement of Safe and Drug-Free Schools and Communities - National Programs (CFDA 84.184) funds. Criteria: In accordance with 34 CFR 80.40, the School District was responsible for managing the day-to-day operations ofgrant and subgrant activities to assure compliance with applicable Federal requirements. Provisions of 34 CFR 80.22 states, in part, that (1) grant funds may be used only for allowable Federal program costs of the grantee and subgrantee and (2) in line with provisions of 0MB Circular A-87, "Costs Principles for State, Local and Indian Tribal Governments", an allowable cost must be adequately documented. Questioned Cost: $212,879.43 Information: We reviewed nine reimbursement payments made to one oftwo subrecipients and noted the following: (1) Little, if any, documentation was provided in support of non-personnel service expenses included in six reimbursement requests paid to the subrecipient during the August 2005 through March 2006 period. The requests for these expenses totaled $212,055.72. (2) Expenses included in requests paid in April, May and June 2006 disclosed the following deficiencies: a. Three monthly cell phone charges totaling $52.88 were for an individual not engaged in the program. b. A plane ticket charge of$216.10 was for an individual who had no involvement with the program. c. Supplies/materials totaling $103.08 were supported with three handwritten tickets rather than original vendor receipts. d. A duplicate reimbursement request was for an invoice of$335.00. -6- WHEELER COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2006 III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS SUBRECIPIENT MONITORING Inadequate Monitoring of Subrecipients Reportable Condition - Material Weakness Material Noncompliance U. S. Department of Education Safe and Drug-Free Schools and Communities - National Programs (CFDA 84.184) Finding Control Number: FA-7531-06-01 e. A meal receipt involved a dinner for four that exceeded the allowable amount per the Statewide Travel Regulations by $116.65. Cause: Management did not have established reimbursement request guidelines requiring subrecipients to provide expenditure documentation in support of reimbursement requests. Based on a recommendation ofa Federal program review, management initiated measures during the fiscal year that required subrecipients to provide documentation supporting reimbursement requests. However, management did not properly review the subrecipients' reimbursement requests to ensure that expenditures were allowable or within Federal/State guidelines. Effect: A subrecipient was reimbursed $212,055.72 without adequately determining that the subrecipient incurred allowable Federal program costs. Payments of $823.71 were made to a subrecipient based on reimbursement requests that included unallowable, unsupported or excessive expenditures. Without proper review of subrecipient reimbursement requests and supporting documentation, errors or irregularities could also occur without detection. Recommendation: Management should develop and implement procedures to ensure that subrecipient reimbursement requests and related supporting documentation are properly reviewed for allowable program expenditures before disbursements are made by the School District. The U. S. Department of Education should review this matter and determine the resolution of $212,879.43 in questioned costs. -7- WHEELER COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2006 III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS SPECIAL TESTS AND PROVISIONS Written Consent Not Obtained Nonmaterial Noncompliance U.S. Department of Education Safe and Drug-Free Schools and Communities - National Programs (CFDA 84.184) Finding Control Number: FA-7531-06-02 Condition: The School District did not obtain required written consent for those students participating in the Safe and Drug-Free Schools and Communities - National Program. Criteria: The approved management Safe and Drug-Free Schools and Communities National Program application included provisions that required the Board to obtain written consent for each student's program participation. According to the "Adequate Consent Procedures" section of the application, written consent will be obtained in an enrollment form in order to validate that the student, parent or legal guardian has read, understands and has given permission to participate in the program. Ifnecessary, the consent form will be read to individuals. They will subsequently be given a copy ofwhat they sign. Questioned Cost: NIA Information: Although management indicated in the program application that prior written permission would be obtained for students who were evaluated, the required written consent was not obtained. We noted that parents received notification in a student handbook about the mental health services that could be given to a child. Verbal permission as opposed to written consent was obtained for children who received those services. Cause: By referencing the program in the handbook and by obtaining verbal permission, program management believed the requirement for written consent was met. Effect: Failure to ensure appropriate written consent can result in nonconformity with the "Adequate Consent Procedures" that are contained in the Safe and Drug-Free Schools and Communities - National Program application. Furthermore, without written consent of the enrollment form or, if appropriate, the handbook, there is no documented evidence that the student, parent or legal guardian has read, understood and given permission to participate in the program. -8- WHEELER COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2006 III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS SPECIAL TESTS AND PROVISIONS Written Consent Not Obtained Nonmaterial Noncompliance U.S. Department of Education Safe and Drug-Free Schools and Communities - National Programs (CFDA 84.184) Finding Control Number: FA-7531-06-02 Recommendation: Management should establish procedures to ensure that, when required, written permission is obtained for children who receive mental health services funded by the Safe and Drug-Free Schools and Communities National Program. -9- SECTIONV MANAGEMENT'S RESPONSES WHEELER COUNTY BOARD OF EDUCATION SCHEDULE OF MANAGEMENT'S RESPONSES YEAR ENDED JUNE 30, 2006 Finding Control Number: FS-7531-06-01 We concur with this finding. These findings have been addressed with the office book.keepers at all schools and are expected to be in compliance fiscal year ending June 30, 2007. The school office, though lacking in personnel, understands that the duties have to be shared and that the principal should have a part in checking over all items including bank statements and deposits. The Certificate of Deposit will be recorded on the financial records in fiscal year 2007. We will make sure that the activity accounts are recorded correctly in the ledger. The receipts and deposits preparation functions will be separated from the record keeping and cash functions for fiscal year 2007. Adequate supporting documentations shall be kept for each receipt and deposited in a timely manner. This finding should be cleared for fiscal year 2007. Contact Person: Helen Nunn, Finance Officer Phone: (912) 568-7198 Fax Number: (912) 568-1985 E-mail Address: hnunn@wheeler.k12.ga.us Finding Control Number: FS-7531-06-02 We concur with this finding. The accounting procedures are being maintained as much as possible to delegate separation of duties with the personnel available so that we may achieve an adequate system of internal control. Our LT. person, Frank Palmer, has implemented the auto change password on our PC Genesis Server thus restricting access to programs or data by users. This finding should be cleared in fiscal year 2007. Contact Person: Helen Nunn, Finance Officer Phone: (912) 568-7198 Fax Number: (912) 568-1985 E-mail Address: hnunn@wheeler.k12.ga.us Finding Control Number: FS-7531-06-03 We concur with the above mentioned findings. After meeting with the auditor the following changes in the payroll procedures have been put in place to address various concerns: 1. Any certified employee hired will not be issued a contract until proper documentation has been received from the previous employer regarding certificate type and years of experience. After this information is received then it will be double checked by the principal or supervisor in charge of the program before the September payroll is run. All such paperwork will be maintained in the personnel file folder housed at the central office. 2. Any excessive leave on both certified and noncertified employees will be deducted in the month that the excessive leave occurred. Once the payroll officer calculates such leave, it will then be given to the principal or supervisor for final approval before being deducted. - 1- WHEELER COUNTY BOARD OF EDUCATION SCHEDULE OF MANAGEMENT'S RESPONSES YEAR ENDED JUNE 30, 2006 Finding Control Number: FS-7531-06-03 3. In the future all account numbers and payments will be checked thoroughly by the payroll personnel and the person in charge ofsuch program for accuracy before the final payroll is run for that month. Also, as of June 1, 2007, the payroll officer now has an office away from the front incoming traffic; therefore, interruptions will be greatly decreased. All ofthe above findings will be resolved in the next audit ending June 30, 2008. The above internal controls have been communicated to all parties concerned and will be followed in the future. Contact Person: Cynthia Edwards, Payroll Officer Phone: (912) 568-7198 Fax Number: (912) 568-1985 E-mail Address: edwardscynthia@wheeler.kl2.ga.us Finding Control Number: FA-7531-06-01 We concur with this finding. The cell phone charges have been reimbursed. The plane ticket has been reimbursed. We have insured that all invoices are received from the vendor and follows purchase order procedures. We are monitoring the programs more closely so that duplication is detected. The state regulations for travel including the daily meals during fiscal year 2007 are being properly followed. Contact Person: Helen Nunn, Finance Officer Phone: (912) 568-7198 Fax Number: (912) 568-1985 E-mail Address: hnunn@wheeler.k12.ga.us Finding Control Number: FA-7531-06-02 We concur with this finding. We are closely monitoring this program so that management will follow rules and regulations in the program application as to obtaining written permission for students who are evaluated. This finding should be cleared as of fiscal year 2008 period ending June 30, 2008. Contact Person: Helen Nunn, Finance Officer Phone: (912) 568-7198 Fax Number: (912) 568-1985 E-mail Address: hnunn@wheeler.kl2.ga.us -2-