WHEELER COUNTY BOARD OF EDUCATION ALAMO, GEORGIA REPORT ON AUDIT OF THE FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2007 STATE OF GEORGIA DEPARTMENT OF AUDITS AND ACCOUNTS Russell W. Hinton State Auditor 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 8 H NOTES TO THE BASIC FINANCIAL STATEMENTS 9 SCHEDULES REQUIRED SUPPLEMENTARY INFORMATION 1 SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL GENERAL FUND 21 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 September 8, 2008 Honorable Sonny Perdue, Governor Members of the 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, 2007, which collectively comprise the Board's basic financial statements as listed in the table of contents. 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 GovernmentAuditing Standards, issued by the Comptroller General ofthe United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Wheeler County Board of Education's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinions. 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, 2007, and the 2007ARL-11 respective changes in financial position thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America. The Wheeler County Board ofEducation has not presented Management's Discussion and Analysis that accounting principles generally accepted in the United States of America has determined is necessary to supplement, although not to be part of, the basic financial statements. In accordance with Government Auditing Standards, we have also issued our report dated September 8, 2008, on our consideration of the Wheeler County Board of Education's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements and other matters. The purpose of that report is to describe the scope ofour testing ofinternal control over financial reporting and compliance and the results ofthat testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part ofan 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 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 ofthis report has been filed as a permanent record in the office ofthe State Auditor and made available to the press ofthe State, as provided for by Official Code of Georgia Annotated section 506-24. Respectfully submitted, RWH:as 2007ARL-11 Rus 11 W. Hinton, CPA, CGFM State Auditor WHEELER COUNTY BOARD OF EDUCATION WHEELER COUNTY BOARD OF EDUCATION STATEMENT OF NET ASSETS JUNE 30, 2007 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 and Benefits Payable Payroll Withholdings Payable Short-Term Debt Total Liabilities NET ASSETS Invested in Capital Assets Restricted for Bus Replacement Continuation of Federal Programs Capital Projects Unrestricted (Deficit) Total Net Assets Total Liabilities and Net Assets EXHIBIT"A" GOVERNMENTAL ACTIVITIES $ 421,452.84 358,267.62 660,876.60 347,663.91 163,962.15 8,933.33 105,520.00 1,614,740.00 175,282.00 6,234,044.00 1,997,548.00 -3,473,600.00 $ ====18,=61=4='=,6=9=0=.4=5 $ 390,909.46 998,124.18 67,128.37 450,000.00 $ 1,906,162.01 $ 6,653,534.00 32,373.00 22,319.10 180,752.06 -180 449.72 $ 6,708,528.44 $ ===8=,6=14=!'=69=0=.4=5 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, 2007 GOVERNMENTAL ACTIVITIES lns.truction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Operations of Non-Instructional Services Enterprise Operations Food Services Total Governmental Activities General Revenues Taxes Property Taxes For Maintenance and Operations Sales Taxes Special Purpose Local Option Sales Tax For Capital Projects Real Estate Grants and Contributions not Restricted to Specific Programs Investment Earnings Miscellaneous Total General Revenues Change in Net Assets Net Assets - Beginning of Year EXPENSES CHARGES FOR SERVICES $ 6,123,209.48 $ 736,438.28 226,792.14 183,452.54 335,849.47 766,043.33 935,682.61 955,151.65 442,282.89 14,528.00 166,546.80 53,914.55 566,354.92 $ 11,506,246.66 $ 142,855.58 58,349.46 73 341.37 274,546.41 Net Assets - End of Year The notes to the basic financial statements are an integral part of this statement. -2- EXHIBIT"B" PROGRAM REVENUES OPERATING GRANTS AND CONTRIBUTIONS CAPITAL GRANTS AND CONTRIBUTIONS NET (EXPENSES) REVENUES AND CHANGES IN NET ASSETS $ 4,823,192.54 $ 537,046.03 233,474.48 121,383.06 245,571.25 296,660.49 803,874.52 323,377.90 284,801.02 138,145.00 512 104.93 $ 8,319,631.22 $ 480,127.46 $ 25,736.26 224,531.00 78,455.28 808,850.00 $ -677,033.90 -199,392.25 6,682.34 -62,069.48 -90,278.22 -469,382.84 -106,071.83 -631,773.75 67,049.13 63,927.28 -28,401.80 4,434.91 19,091.38 -2, 103,219.03 $ 1,284,703.82 363,215.62 31,212.60 351,347.66 6,941.73 432 742.17 $ 2 470,163.60 $ 366,944.57 6,341,583.87 $ 6,708,528.44 -3- WHEELER COUNTY BOARD OF EDUCATION BALANCE SHEET GOVERNMENTAL FUNDS JUNE 30, 2007 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 and Benefits Payable Payroll Withholdings Payable Short-Term Debt Total Liabilities FUND BALANCES Reserved for: Bus Replacement Continuation of Federal Programs Inventories Capital Projects Unreserved Designated for Student Activities Undesignated Reported in: General Fund Total Fund Balances Total Liabilities and Fund Balances GENERAL FUND DISTRICTWIDE CAPITAL PROJECTS FUND TOTAL $ 268,505.82 $ 152,947.02 $ 119,739.22 660,876.60 347,663.91 163,962.15 8,933.33 68,519.99 421,452.84 188,259.21 660,876.60 347,663.91 163,962.15 8,933.33 $ 1,569,681.03 $ 221,467.01 $ ====-1_;,,79;;;;1;,.,,1=4;,;;;8;,;;;.0.;,,4 $ 350,194.51 $ 998,124.18 67,128.37 450,000.00 $ 1,865,447.06 $ 40,714.95 $ 40,714.95 $ 390,909.46 998,124.18 67,128.37 450,000.00 1,906,162.01 $ 32,373.00 13,385.77 8,933.33 $ 75,428.19 -425,886.32 $ -295,766.03 $ $ 180,752.06 180,752.06 $ 32,373.00 13,385.77 8,933.33 180,752.06 75,428.19 -425,886.32 -115,013.97 $ 1,569,681.03 $ 221,467.01 $ ====='16=,79=1=ea1, =4=8=.0=4 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, 2007 EXHIBIT"D" Total Fund Balances - Governmental Funds (Exhibit "C") Amounts reported for Governmental Activities in the Statement of Net Assets are different because: Capital Assets used in Governmental Activities are not financial resources and therefore are not reported in the funds. These assets consist of: Land Construction in Progress Land Improvements Buildings Equipment Accumulated Depreciation Total Capital Assets Some of the School District's property tax revenues will be collected after year-end but are not available soon enough to pay for the current period's expenditures. Net Assets of Governmental Activities (Exhibit "A") $ -115,013.97 $ 105,520.00 1,614,740.00 175,282.00 6,234,044.00 1,997,548.00 -3.473,600.00 6,653,534.00 170,008.41 $ 6,708,528.44 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, 2007 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 $ 1,319,787.31 $ 1,319,787.31 31,212.60 $ 363,215.62 394,428.22 6,198,670.25 6,198,670.25 2,696,839.63 2,696,839.63 274,546.41 274,546.41 5,525.54 1,416.19 6,941.73 432,742.17 432,742.17 $ 10,959,323.91 $ 364,631.81 $ 11,323,955.72 $ 6,082,930.54 $ 6,082,930.54 736,438.28 226,792.14 182,896.69 335,822.07 765,863.55 930,916.61 625,073.90 $ 686,118.70 166,546.80 53,914.55 565,672.51 1,462.60 337,090.67 25,430.05 736,438.28 226,792.14 182,896.69 335,822.07 765,863.55 930,916.61 962,164.57 686,118.70 166,546.80 53,914.55 565,672.51 26,892.65 $ 11,360,448.94 $ 362,520.72 $ 11,722,969.66 $ -401,125.03 $ 2,111.09 $ -399,013.94 105,359.00 178,640.97 283,999.97 $ -295,766.03 $ 180,752.06 $ -115 013.97 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, 2007 EXHIBIT"F" Total Net Change in Fund Balances - Governmental Funds (Exhibit "E") $ Amounts reported for Governmental Activities in the Statement of Activities are different because: Capital Outlays are reported as expenditures in Governmental Funds. However, in the Statement of Activities, the cost of Capital Assets is allocated over their estimated useful lives as depreciation expense. In the current period, these amounts are: Capital Outlay Depreciation Expense Excess of Capital Outlay over Depreciation Expense $ 525,433.00 -308, 710.00 Capital Assets purchased with Universal Service Fund (e-rate) proceeds are not reported in Governmental Funds. However, in the Statement of Activities, the e-rate proceeds are shown as Capital Grants and Contributions. 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. -399,013.94 216,723.00 584,319.00 -35,083.49 Change in Net Assets of Governmental Activities (Exhibit "B") $ ==36=6=9=4=4=.5=7 The notes to the basic financial statements are an integral part of this statement. - 7- WHEELER COUNTY BOARD OF EDUCATION STATEMENT OF FIDUCIARY NET ASSETS FIDUCIARY FUNDS JUNE 30, 2007 ASSETS Accounts Receivable, Net Other LIABILITIES Cash Overdraft Funds Held for Others Total Liabilities EXHIBIT"G" AGENCY FUNDS $ 123,055.64 $ 105,564.36 17,491.28 $ 123,055.64 The notes to the basic financial statements are an integral part of this statement. -8- WHEELER COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007 EXHIBIT "H" Note I: 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 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. -9- WHEELER COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007 EXHIBIT"H" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The School District reports the following major governmental funds: General Fund is the School District's primary operating fund. It accounts for all financial resources ofthe School District, except those resources required to be accounted for in another fund. District-wide Capital Projects Fund accounts for financial resources including Special Purpose Local Option Sales Tax (SPLOST) to be used for the acquisition, construction or renovation of major capital facilities. The School District reports the following fiduciary fund type: Agency funds account for assets held by the School District as an agent for various funds, governments or individuals. BASIS OF ACCOUNTING The basis ofaccounting determines when transactions are reported on the financial statements. The District-wide governmental and fiduciary fund financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded at the time liabilities are incurred, regardless of when the related cash flows take place. Nonexchange transactions, in which the School District gives (or receives) value without directly receiving (or giving) equal value in exchange, include property taxes, sales taxes, grants and donations. On an accrual basis, revenue from property taxes is recognized in the fiscal year for which the taxes are levied. Revenue from sales taxes is recognized in the fiscal year in which the underlying transaction (sale) takes place. Revenue from grants and donations is recognized in the fiscal year in which all eligibility requirements have been satisfied. The School District uses funds to report on its financial position and the results of its operations. Fund accounting is designed to demonstrate legal compliance and to aid financial management by segregating transactions related to certain governmental functions or activities. A fund is a separate accounting entity with a self-balancing set of accounts. Governmental funds are reported using the current financial resources measurement focus and the modified accrual basis ofaccounting. Under this method, revenues are recognized when measurable and available. The School District considers all revenues reported in the governmental funds to be available if they are collected within sixty days after year-end. Property taxes, sales taxes and interest are considered to be susceptible to accrual. Expenditures are recorded when the related fund liability is incurred. Capital asset acquisitions are reported as expenditures in governmental funds. 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 WHEELER COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007 EXHIBIT "H" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES policy to first apply grant resources to such programs, followed by cost-reimbursement grants, then general revenues. CASH AND CASH EQUIVALENTS COMPOSITION OF DEPOSITS Cash and cash equivalents consist ofcash on hand, demand deposits and short-term investments with original maturities of three months or less from the date of acquisition in authorized financial institutions. Official Code of Georgia Annotated Section 45-8-14 authorize the School District to deposit its funds in one or more solvent banks or insured Federal savings and loan associations. 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 2006 tax digest year (calendar year) on October 26, 2006 (levy date). Taxes were due on February 15, 2007 (lien date). Taxes collected within the current fiscal year or within 60 days after year-end on the 2006 tax digest are reported as revenue in the governmental funds for fiscal year 2007. The Wheeler County Tax Commissioner bills and collects the property taxes for the School District, withholds 2.5% of taxes collected as a fee for tax collection and remits the balance of taxes collected to the School District. Property tax revenues, at the fund reporting level, during the fiscal year ended June 30, 2007, for maintenance and operations amounted to $1,319,787.31. The tax millage rate levied for the 2006 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 SALES TAXES Special Purpose Local Option Sales Tax, at the fund reporting level, during the year amounted to $363,215.62 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. - 11 - WHEELER COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007 EXHIBIT "H" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES INVENTORIES FOOD INVENTORIES On the basic financial statements, inventories 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 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 of assets or materially extend the useful lives of the assets is not capitalized. Depreciation is computed using the straight-line method. The School District does not capitalize book collections or works of art. During the fiscal year under review, no events or changes in circumstances affecting a capital asset that may indicate impairment were known to the School District. Capitalization thresholds and estimated useful lives of capital assets reported in the District-wide statements are as follows: Capitalization Policy Estimated Useful Life Land Land Improvements Buildings and Improvements Equipment Construction in Progress Any Amount $5,000.00 or more $5,000.00 or more $5,000.00 or more $5,000.00 or more NIA 20 to 80 years 10 to 80 years 3 to 20 years NIA Depreciation is used to allocate the actual or estimated historical cost of all capital assets over estimated useful lives. NET ASSETS The School District's net assets in the District-wide Statements are classified as follows: - 12 - WHEELER COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007 EXHIBIT "H" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Invested in capital assets, net of related debt - This represents the School District's total investment in capital assets, net ofoutstanding debt obligations related to those capital assets. To the extent debt has been incurred but not yet expended for capital assets, such amounts are not included as a component of invested in capital assets, net of related debt. Restricted net assets - These represent resources for which the School District is legally or contractually obligated to spend resources for bus replacement, continuation of Federal programs, and capital projects in accordance with restrictions imposed by external third parties. Unrestricted net assets - Unrestricted net assets represent resources derived from property taxes, sales taxes, grants and contributions not restricted to specific programs, charges for services, and miscellaneous revenues. These resources are used for transactions relating to the educational and general operations of the School District, and may be used at the discretion of the Board to meet current expenses for those purposes. DEFICIT FUND BALANCES The fund reporting a deficit fund balance at June 30, 2007, is as follows: Fund Type/Fund Name Deficit Balance Governmental Funds General Fund $ 425,886.32 The School District's plan to eliminate this deficit is as follows: The Maintenance and Operations millage levies will be set as is necessary to provide enough local monies to ( 1) assure normal operations of the school system and (2) eliminate deficit financing as outlined in the plan below. Maximum Deficit Date Anticipated June 30, 2008 June 30, 2009 June 30, 2010 June 30, 2011 $ -384,794.00 $ -284,000.00 $ -100,000.00 $ 0.00 - 13 - WHEELER COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007 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 of insurance, or by collateral. The aggregate ofthe face value of such surety bond and the market value of securities pledged shall be equal to not less than 110 percent ofthe public funds being secured after the deduction ofthe amount ofdeposit insurance. Ifa depository elects the pooled method (OCGA 45-8-13 .1) the aggregate ofthe market value ofthe securities pledged to secure a pool ofpublic funds shall be not less than 110 percent ofthe daily pool balance. Acceptable security for deposits consists of any one of or any combination of the following: (I) Surety bond signed by a surety company duly qualified and authorized to transact business within the State of Georgia, (2) Insurance on accounts provided by the Federal Deposit Insurance Corporation, (3) Bonds, bills, notes, certificates of indebtedness or other direct obligations of the United States or of the State of Georgia, (4) Bonds, bills, notes, certificates of indebtedness or other obligations of the counties or municipalities of the State of Georgia, (5) Bonds of any public authority created by the laws of the State of Georgia, providing that the statute that created the authority authorized the use of the bonds for this purpose, (6) Industrial revenue bonds and bonds of development authorities created by the laws ofthe State of Georgia, and (7) Bonds, bills, notes, certificates of indebtedness, or other obligations of a subsidiary corporation of the United States government, which are fully guaranteed by the United States government both as to principal and interest or debt obligations issued by the Federal Land Bank, the Federal Home Loan Bank, the Federal Intermediate Credit Bank, the Central Bank for Cooperatives, the Farm Credit Banks, the Federal Home Loan Mortgage Association, and the Federal National Mortgage Association. CATEGORIZATION OF DEPOSITS At June 30, 2007, the bank balances were $90 I,731.20. The amounts of the total uninsured bank balances are classified into three categories of custodial credit risk: Category 1 - Uncollateralized, Category 2 - Cash collateralized with securities held by the pledging financial institution, or - 14 - WHEELER COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007 EXHIBIT"H" Note 3: DEPOSITS Category 3 - Cash collateralized with securities held by the pledging financial institution's trust department or agent but not in the School District's name. The School District's uninsured deposits are classified by custodial credit risk category at June 30, 2007, as follows: Custodial Credit Risk Category 1 2 3 Total Bank Balance $ 0.00 0.00 799,518.70 $ 799,518.70 Note 4: NON-MONETARY TRANSACTIONS The School District receives food commodities from the United States Department of Agriculture (USDA) for school breakfast and lunch programs. These commodities are recorded at their Federally assigned value. See Note 2 - Inventories Note 5: CAPITAL ASSETS The following is a summary of changes in the Capital Assets during the fiscal year: Balances July 1, 2006 Increases Decreases Balances June 30, 2007 Governmental Activities Capital Assets, Not Being Depreciated: Land Construction in Progress $ 105,520.00 $ 1,510,133.00 $ 104,607.00 0.00 $ 105,520.00 1,614,740.00 Total Capital Assets Not Being Depreciated $ 1,615,653.00 $ 104,607.00 $ 0.00 $ 1,720,260.00 Capital Assets Being Depreciated Buildings and Improvements Equipment Land Improvements $6,127,640.00 $ 106,404.00 $ 6,234,044.00 1,265,111.00 898,741.00 $ 166,304.00 1,997,548.00 175,282.00 175,282.00 Less Accumulated Depreciation for: Buildings and Improvements Equipment Land Improvements 2,341,086.00 880,797.00 109,311.00 107,334.00 195,105.00 6,271.00 166,304.00 2,448,420.00 909,598.00 115,582.00 Total Capital Assets, Being Depreciated, Net $ 4,236,839.00 $ 696,435.00 $ 0.00 $ 4,933,274.00 Governmental Activity Capital Assets - Net $ 5.852.492.00 $ 801.042.00 $ 0.00 $ 6.653.534.00 - 15 - WHEELER COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007 EXHIBIT"H" Note 5: CAPITAL ASSETS Current year depreciation expense by function is as follows: Instruction Support Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Food Services $ 185,432.00 $ 8,116.00 400.00 2,625.00 4,766.00 657.00 82,222.00 14,528.00 113,314.00 9,964.00 $ 308,710.00 Note 6: RESTRICTED ASSETS Special Purpose Local Option Sales Tax (SPLOST) are restricted assets in the Statement of Net Assets because its use is limited by applicable statutory provisions. Restricted assets at June 30, 2007, were as follows: District-wide Capital Projects SPLOST Restricted Cash and Cash Equivalents: Capital Acquisitions $ 152,947.02 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 ofloss associated with torts, assets and errors or omissions. The School District has neither significantly reduced coverage for these risks nor incurred losses (settlements) which exceeded the School District's insurance coverage in any of the past three years. - 16 - WHEELER COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007 EXHIBIT"H" Note 7: RISK MANAGEMENT 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: 2006 2007 Beginning of Year Liability Claims and Changes in Estimates Claims Paid End of Year Liability $ 744.00 $ 1,688.00 $ 2,432.00 $ 0.00 $ 0.00 $ 4,836.32 $ 4,836.32 $ 0.00 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 $500,000.00 loss per occurrence, up to $2,000,000.00. The School District has purchased a surety bond to provide additional insurance coverage as follows: Position Covered Amount All Employees $ 100,000.00 Note 8: 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 of short-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: - 17 - WHEELER COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007 EXHIBIT "H" Note 8: SHORT-TERM DEBT Beginning Balance Issued Redeemed Ending Balance Tax Anticipation Notes $===o==.o==o $900,000.00 $ 450,000.00 $ 4so,ooo.oo Note 9: ON-BEHALF PAYMENTS The School District has recognized revenues and costs in the amount of $206,590.04 for health insurance and retirement contributions paid on the School District's behalf by the following State Agencies. Georgia Department of Education Paid to the Georgia Department of Community Health For Health Insurance of Non-Certified Personnel In the amount of $205,252.04 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 $1,338.00 Note 10: SIGNIFICANT CONTINGENT LIABILITIES Amounts received or receivable principally from the Federal government are subject to audit and review by grantor agencies. This could result in requests for reimbursement to the grantor agency for any costs which are disallowed under grant terms. The School District believes that such disallowances, if any, will be immaterial to its overall financial position. The School District is a defendant in various legal proceedings pertaining to matters incidental to the performance ofroutine School District operations. The ultimate disposition ofthese proceedings is not presently determinable, but is not believed to be material to the basic financial statements. Note 11: RETIREMENT PLANS TEACHERS RETIREMENT SYSTEM OF GEORGIA (TRS) TRS PLAN DESCRIPTION Substantially all teachers, administrative and clerical personnel employed by local school systems are covered by the Teachers Retirement System of Georgia (TRS), which is a cost-sharing multiple employer defined benefit pension plan. TRS provides service retirement, disability retirement and 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. - 18 - WHEELER COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007 EXHIBIT "H" Note 11: RETIREMENT PLANS TRS CONTRIBUTIONS REQUIRED AND MADE Employees ofthe School District who are covered by TRS are required by State statute to contribute 5% of their gross earnings to TRS. The School District makes monthly employer contributions to TRS at rates adopted by the TRS Board of Trustees in accordance with State statute and as advised by their independent actuary. The required employer contribution rate is 9.28% and employer contributions for the current fiscal year and the preceding two fiscal years are as follows: Fiscal Year Percentage Contributed Required Contribution 2007 2006 2005 100% 100% 100% $ 539,582.30 $ 533,135.00 $ 517,143.00 - 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, 2007 SCHEDULE "1" REVENUES Property Taxes Sales Taxes State Funds Federal Funds Charges for Services Investment Earnings Miscellaneous Total Revenues EXPENDITURES Current Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Other Support Services Enterprise Operations Food Services Operation Capital Outlay Total Expenditures Excess of Revenues over (under) Expenditures OTHER FINANCING SOURCES (USES) Other Sources Other Uses Total Other Financing Sources (Uses) Net Change in Fund Balances Fund Balances - Beginning Adjustments NONAPPROPRIATED BUDGETS ORIGINAL (1) FINAL (1) ACTUAL AMOUNTS $ 1,601,000.00 $ 1,601,000.00 $ 1,319,787.31 31,000.00 31,000.00 31,212.60 6,200,626.00 6,252,249.00 6,198,670.25 2,072,489.00 2,072,489.00 2,696,839.63 73,304.00 73,304.00 274,546.41 6,793.00 6,793.00 5,525.54 272,152.00 272,152.00 432 742.17 $ 10,257,364.00 $ 10,308,987.00 $ 10,959,323.91 $ 5,892,512.00 $ 5,941,509.04 $ 6,082,930.54 346,161.00 211,986.00 201,876.00 293,715.00 667,467.00 842,914.00 474,951.00 704,157.00 290,401.00 592,233.00 346,161.00 212,368.00 201,876.00 293,685.96 667,467.00 842,914.00 474,951.00 704,157.00 290,401.00 592,233.00 736,438.28 226,792.14 182,896.69 335,822.07 765,863.55 930,916.61 625,073.90 686,118.70 166,546.80 53,914.55 565,672.51 1 462.60 $ 10,518,373.00 $ 10,567,723.00 $ 11 360 448.94 $ -261 009.00 $ -258,736.00 $ -401, 125.03 $ 220,000.00 $ 242,761.00 -220,000.00 -220,000.00 $ 0.00 $ 22 761.00 $ -261,009.00 $ -235,975.00 $ -401, 125.03 71,854.23 71,854.23 105,359.00 10 582.19 17 054.78 Fund Balances - Ending $ -178 572.58 $ -147 065.99 $===2=9=5=,7=6=6=.0=3 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, 2007 SCHEDULE "2" FUNDING AGENCY PROGRAM/GRANT Agriculture, U. S. Department of Child Nutrition Cluster Pass-Through From Georgia Department of Education Food Services School Breakfast Program National School Lunch Program Total Child Nutrition Cluster Other Programs Pass-Through From Georgia Department of Education Food Donation (1) 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 Schools/Healthy Students Initiative Pass-Through From Georgia Department of Education Enhancing Education Through Technology Program Improving Teacher Quality State Grants Migrant Education Reading First State Grants Rural Education State Grants for Innovative Programs Tille I Grants to Local Educational Agencies Twenty-First Century Community Learning Centers 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 Total Federal Financial Assistance NIA = Not Available CFDA NUMBER PASSTHROUGH ENTITY ID NUMBER EXPENDITURES IN PERIOD 10.553 10.555 NIA NIA $ $ (2) 514 512.00 514,512.00 10.550 NIA $ 23,881.00 538,393.00 84.027 84.173 NIA $ NIA $ 184,915.79 8166.36 193,082.15 84.184 84.318 84.367 84.011 84.357 84.358 84.298 . 84.010 84.287 84.048 84.186 NIA NIA NIA NIA NIA NIA NIA NIA NIA NIA $ 698,129.50 (3) 34,342.00 83,019.00 30,457.00 117,597.00 31,932.00 1,913.00 351,822.31 413,130.06 (4) 20,098.00 23,956.23 1,999,478.25 93.995 $ 225,000.00 (5) $ ====2=,7=6=2=,8=7=1.=25= - 22- WHEELER COUNTY BOARD OF EDUCATION SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS YEAR ENDED JUNE 30, 2007 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 ($143,142.00) were not maintained separately and are included in the 2007 National School Lunch Program. (3) Includes Federal Assistance of $530,713.49 provided to subgrantees. (4) Includes Federal Assistance of $247,506.01 provided to subrecipients. (5) Includes Federal Assistance of $103,669.87 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, 2007 AGENCY/FUNDING GRANTS Bright From the Start: Georgia Department of Early Care and Learning Pre-Kindergarten Program Education, Georgia Department of Quality Basic Education Direct Instructional Cost Kindergarten Program Kindergarten Program - Early Intervention Program Primary Grades (1-3) Program Primary Grades - Early Intervention (1-3) Program Upper Elementary Grades (4-5) Program Upper Elementary Grades - Early Intervention (4-5) Program Middle 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 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 Education Vocational Supervisors Education Equalization Funding Grant Food Services Amended Formula Adjustment Other State Programs Alternative Program Graduation Coaches Health Insurance K-8 Statewide Reading and Mathematics Program National Teacher Certification Pupil Transportation - State Bonds Preschool Handicapped Program Remedial Summer School Virtual Schools Office of Treasury and Fiscal Services Public School Employees Retirement See notes to the basic financial statements. -24- SCHEDULE "3" GOVERNMENTAL FUND TYPE GENERAL FUND $ 306,548.21 276,869.00 28,614.00 727,284.00 82,496.00 283,912.00 161,613.00 613,001.00 552,509.00 184,000.00 634,084.00 -4,896.00 13,275.00 8,619.00 4,492.00 128,767.00 103,580.00 33,535.00 20,316.00 299,361.00 248,220.00 270,615.00 231,255.00 24,531.00 27,802.00 36,624.00 3,384.00 18,103.00 9,429.00 365,890.00 32,584.00 -93,854.00 49,328.00 40,075.00 205,252.04 22,500.00 15,306.00 200,000.00 30,511.00 1,648.00 150.00 1 338.00 $ ===6:1:,1=9:!8,=67=0=.2;,;,5 WHEELER COUNTY BOARD OF EDUCATION SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS YEAR ENDED JUNE 30, 2007 SCHEDULE "4" PROJECT 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 $ 1,950,000.00 $ 1,950,000.00 $ 362,520.72 $ 45,157.00 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 Wheeler County approved the imposition of a 1% sales tax to fund the above project. Amounts expended for this project may include sales tax proceeds, state, local property taxes and/or other funds over the life of the project. See notes to the basic financial statements. - 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, 2007 SCHEDULE "5" DESCRIPTION Direct Instructional Programs Kindergarten Program Kindergarten Program-Early Intervention Program Primary Grades (1-3) Program Primary Grades-Early Intervention (1-3) Program Upper Elementary Grades (4-5) Program Upper Elementary Grades-Early Intervention (4-5) Program Middle 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 TOTAL DIRECT INSTRUCTIONALPROGRAMS Media Center Program Staff and Professional Development ALLOTMENTS FROM GEORGIA DEPARTMENT OF EDUCATION (1) (2) ELIGIBLE QBE PROGRAM COSTS SALARIES OPERATIONS TOTAL $ 322,947.00 $ 321,716.56 $ 4,698.53 $ 326,415.09 32,075.00 54,996.00 54,996.00 810,829.00 825,678.31 7,090.56 832,768.87 93,609.00 78,343.53 78,343.53 330,544.00 395,571.53 7,196.64 402,768.17 169,217.00 699,021.00 619,557.00 206,433.00 709,339.00 130,367.00 56176.00 135,267.11 822,052.98 890,858.37 188,525.90 5,610.59 152,962.33 310,928.08 101,524.61 16,906.77 35,086.02 179,936.08 1,297.98 13,798.36 9,978.34 8,489.63 32,826.00 505.00 136,565.09 835,851.34 900,836.71 197,015.53 5,610.59 185,788.33 310,928.08 101,524.61 16,906.77 35,591.02 179,936.08 $ 4,180,114.00 $ 4,515,964.77 $ 85,881.04 $ 4,601,845.81 116,407.00 22,685.00 168,741.69 $ 8,729.94 $ 177,471.63 22,415.11 TOTAL QBE FORMULA FUNDS $ 4,319,206.00 $ 4,684,706.46 $ 94,610.98 $ 4,801,732.55 (1) Comprised of State Funds plus Local Five Mill Share. (2) Allotments do not include the impact of the State amended formula adjustment. See notes to the basic financial statements. - 27 - SECTION II COMPLIANCE AND INTERNAL CONTROL REPORTS Russell W. Hinton STATE AUDITOR (404) 656-2174 DEPARTMENT OF AUDITS AND ACCOUNTS 270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400 September 8, 2008 Honorable Sonny Perdue, Governor Members ofthe General Assembly Members ofthe 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 of Wheeler County Board ofEducation as ofand for the year ended June 30, 2007, which collectively comprise Wheeler County Board of Education's basic financial statements and have issued our report thereon dated September 8, 2008. 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 as a basis for designing our auditing procedures for the purpose of expressing our opinions on the financial statements, but not for the purpose ofexpressing an opinion on the effectiveness of the Wheeler County Board of Education's internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness of the Wheeler County Board of Education's internal control over financial reporting. Our consideration ofinternal control over financial reporting was for the limited purpose described in the preceding paragraph and would not necessarily identify all deficiencies in internal control over financial reporting that might be significant deficiencies or material weaknesses. However, as discussed below, we identified certain deficiencies in internal control over financial reporting that we consider to be significant deficiencies. 2007YB-60 A control deficiency exists when the design or operation ofa control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect misstatements on a timely basis. A significant deficiency is a control deficiency, or combination of control deficiencies, that adversely affect the Wheeler County Board of Education's ability to initiate, authorize, record, process, or report financial data reliably in accordance with generally accepted accounting principles such that there is more than a remote likelihood that a misstatement ofthe Wheeler County Board ofEducation's financial statements that is more than inconsequential will not be prevented or detected by the Wheeler County Board ofEducation's internal control. We consider items FS-7531-07-02 and FS-7531-07-03 in the accompanying Schedule ofFindings and Questioned Costs to be significant deficiencies in internal control over financial reporting. A material weakness is a significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood that a material misstatement ofthe financial statements will not be prevented or detected by the Wheeler County Board of Education's internal control. Our consideration of the internal control over financial reporting was for the limited purpose described in the first paragraph ofthis section and would not necessarily disclose all deficiencies in internal control that might be significant deficiencies and, accordingly, would not necessarily disclose all significant deficiencies that are also considered to be material weaknesses. However, of the significant deficiencies described above, we consideritems FS-7531-07-02 and FS-7531-07-03 to be 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 of laws, 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 an instance ofnoncompliance or other matter that is required to be reported under Government Auditing Standards and which is described in the accompanying Schedule ofFindings and Questioned Costs as item FS-7531-07-01. We also noted certain matters that we have reported to management of Wheeler County Board of Education in a separate letter dated September 8, 2008. Wheeler County Board ofEducation's response to the findings identified in our audit is described in the accompanying Schedule of Management's Responses. We did not audit Wheeler County Board of Education's response and, accordingly, we express no opinion on it. 2007YB-60 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, ::g=n.i:!l' ~ State Auditor RWH:as 2007YB-60 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 September 8, 2008 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, 2007. 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 ofcompliance 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. 2007SA-55 We believe that our audit provides a reasonable basis for our opinion. Our audit does not provide a legal determination on Wheeler County Board ofEducation's compliance with those requirements. As described in items FA-7531-07-01, FA-7531-07-02, FA-7531-07-03, FA-7531-07-04 and FA7531-07-05 in the accompanying Schedule of Findings and Questioned Costs, Wheeler County Board ofEducation did not comply with requirements regarding Activities Allowed or Unallowed, Allowable Costs/Cost Principles, and Procurement and Suspension and Debarment that are applicable to its Safe Schools/Healthy Students Initiative and Twenty-First Century Community Leaming Centers programs. Compliance with such requirements is necessary, in our opinion, for Wheeler County Board of Education to comply with requirements applicable to those programs. 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, 2007. The results of our auditing procedures also disclosed an instance of noncompliance with those requirements, which is described in the accompanying Schedule ofFindings and Questioned Costs as item FA-7531-07-06. 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 ofexpressing our opinion on compliance, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of the Wheeler County Board of Education's internal control over compliance. Our consideration ofthe internal control over compliance was for the limited purpose described in the preceding paragraph and would not necessarily identify all deficiencies in the Board's internal control that might be significant deficiencies or material weaknesses as defined below. However, as discussed below, we identified certain deficiencies in internal control over compliance that we consider to be significant deficiencies and others we consider to be material weaknesses. A control deficiency in an entity's internal control over compliance exists when the design or operation ofa control does not allow management or employees, in the normal course ofperforming their assigned functions, to prevent or detect noncompliance with a type ofcompliance requirement of a Federal program on a timely basis. A significant deficiency is a control deficiency, or combination of control deficiencies, that adversely affects the entity's ability to administer a Federal program such that there is more than a remote likelihood that noncompliance with a type of compliance requirement of a Federal program that is more than inconsequential will not be prevented or detected by the entity's internal control. We consider the deficiencies in internal control over compliance described in the accompanying Schedule ofFindings and Questioned Costs as items FA-7531-07-01, FA-7531-07-02, FA-7531-07-03, FA-7531-07-04, FA-7531-07-05 and FA-7531-07-06 to be significant deficiencies. 2007SA-55 A material weakness is a significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood that material noncompliance with a type of compliance requirement of a Federal program will not be prevented or detected by the entity's internal control. Of the significant deficiencies in internal control over compliance described in the accompanying Schedule of Findings and Questioned Costs, we consider items FA-7531-07-01, FA-7531-07-02, FA-7531-07-03, FA-7531-07-04 and FA-7531-07-05 to be material weaknesses. Wheeler County Board ofEducation's response to the findings identified in our audit is described in the accompanying Schedule ofManagement's Responses. We did not audit Wheeler County Board of Education's response and, accordingly, we express no opinion on it. 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 2007SA-55 Ru 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, 2007 PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS FINDING CONTROL NUMBER AUDITEE'S RESPONSE/STATUS SEE AUDITOR'S COMMENTS FS-7531-05-01 Further Action Not Warranted FS-7531-05-02 Previously Reported Corrective Action Implemented FS-7531-06-01 Further Action Not Warranted (1) FS-7531-06-02 Further Action Not Warranted (1) FS-7531-06-03 Previously Reported Corrective Action Implemented AUDITOR'S COMMENTS (1) Findings/internal control deficiencies of this nature, that are not deemed significant deficiencies or material weaknesses and do not require reporting in the audit report in accordance with Statements on Auditing Standards (SAS) 112 or Governmental Auditing Standards (Yellow Book), will be communicated in a management letter in subsequent periods. PRIOR YEAR FEDERAL AWARD FINDINGS AND QUESTIONED COSTS FINDING CONTROL NUMBER AUDITEE'S RESPONSE/STATUS SEE AUDITOR'S COMMENTS FA-7531-06-01 Partially Resolved - See Corrective Action/Responses FA-7531-06-02 Further Action Not Warranted (1) CORRECTIVE ACTION/RESPONSES SUBRECIPIENT MONITORING Inadequate Monitoring of Subrecipients Finding Control Number: FA-7531-06-01 This finding has been partially resolved. This has been discussed in length with the Director of the programs. This finding should be resolved in fiscal year 2009. AUDITOR'S COMMENTS (1) Findings/internal control deficiencies of this nature, that are not deemed significant deficiencies or material weaknesses and do not require reporting in the audit report in accordance with Office ofManagement and Budget (0MB) Circular A-133, will be communicated in a management letter in subsequent periods. SECTION IV FINDINGS AND QUESTIONED COSTS WHEELER COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2007 I SUMMARY OF AUDITOR'S RESULTS I. Type of Report Issued on the Financial Statements The auditor's opinion on the Wheeler County Board ofEducation's financial statements was unqualified. 2. Significant Deficiencies in Internal Control Disclosed by the Audit ofthe Financial Statements The audit report for the Wheeler County Board of Education disclosed financial statement significant deficiencies related to the following control categories. Expenditures/Liabilities/Disbursements Financial Reporting All ofthe significant deficiencies 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 one instance of noncompliance deemed material to the financial statements. This noncompliance involved the Board's failure to ensure that incurred expenditures do not exceed revenues in the General Fund. 4. Significant Deficiencies in Internal Control Over Major Programs The audit report for the Wheeler County Board of Education disclosed significant deficiencies in internal control over major programs for the following compliance requirements. Activities Allowed or Unallowed Allowable Costs/Cost Principles Procurement and Suspension and Debarment Performance Reporting Ofthe significant deficiencies described above, Activities Allowed or Unallowed, Allowable Costs/Cost Principles and Procurement and Suspension and Debarment are considered to be material weaknesses. 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 the Safe Schools/Healthy Students Initiative and the Twenty-First Century Community Leaming Centers Grant, which were qualified. 6. Audit Findings Required to be Reported by Section .510(a) ofOMB Circular A-133 The Wheeler County Board of Education's audit disclosed audit findings required to be reported by section .510(a) ofOMB Circular A-133. These audit findings are included in section IV of this report. - 1- WHEELER COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2007 I SUMMARY OF AUDITOR'S RESULTS 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 84.184 Safe Schools/Healthy Students Initiative 84.287 Twenty-First Century Community Leaming Centers 8. Type "A" Program Dollar Threshold The dollar threshold for type "A" programs was $300,000.00. 9. Low Risk Auditee The Wheeler 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 BUDGET PREPARATION/EXECUTION Deficit Fund Balance Material Noncompliance Finding Control Number: FS-7531-07-01 Condition: Deficit Fund Balance Criteria: Chapter 25 Reporting/or LUAs with General Fund Deficit Balances of the Financial Management for Georgia Local Units of Administration states in part: "The seriousness of fund balance deficits cannot be overstated. The Georgia Department of Education requires those LUAs with deficit fund 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 $425,886.32. Cause: The School District incurred expenditures in excess of revenues during the year under review in the General Fund. 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. -2- WHEELER COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2007 II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS FINANCIAL REPORTING Inadequate Controls over Financial Reporting Material Weakness Finding Control Number: FS-7531-07-02 Condition: The School District did not have adequate controls in place over the financial statement reporting process. Criteria: Management is responsible for having adequate controls over the financial reporting process, which not only includes proper recording oftransactions to the general ledger, but extends to accurate preparation and presentation ofthe financial statements, including note disclosures. Questioned Cost: NIA Information: The Governmental Accounting Standards Board (GASB) Statement 34 reporting model requires the presentation of both fund level and entity-wide level statements in the School District's financial statements. During the audit, numerous correcting entries were proposed by the auditor and accepted by the client to properly present the entity's entity-wide level financial statements. In addition, several immaterial misstatements identified during the audit were not corrected on the financial statements. Cause: The School District did not implement an adequate system ofinternal control over the financial statement reporting process. Effect: The School District does not have adequate controls in place to ensure that the financial statements were properly prepared in accordance with generally accepted accounting principles. Recommendation: The School District should develop and implement internal controls over the financial statement reporting process to ensure that activity is properly recorded in the general ledger; to verify that financial statements (including note disclosures) properly reflect activity reported in the general ledger; and to include a monitoring process to evaluate the accuracy of the financials presented for audit. -3 - WHEELER COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2007 II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Controls Material Weakness Finding Control Number: FS-7531-07-03 Condition: The accounting procedures ofthe School District were insufficient to provide for adequate internal controls. Criteria: The School District's management is responsible for designing and maintaining internal controls to provide reasonable assurance that transactions are processed according to established procedures. Questioned Cost: NIA Information: A review ofthirty (30) expenditures revealed that twenty-one did not contain purchase orders approved with the Superintendent's signature. Additional testing of individually significant items and Federal program expenditures showed that unapproved expenditures were pervasive. Management stated that all expenditures are reviewed and approved; however, numerous unallowable, questionable, and unsupported expenditures were noted. See Finding Control Number: FA-7531-07-02. Cause: The School District failed to ensure that appropriate internal controls were established, implemented and functioning. Effect: Errors and/or irregularities may not be detected in a timely manner. Recommendation: The School District's management should develop and implement procedures sufficient to ensure that all expenditures are properly approved, adequately documented, follow State and local procurement policies, and are recorded in the proper accounting period. -4- WHEELER COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2007 III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS ACTIVITIES ALLOWED OR UNALLOWED ALLOWABLE COSTS/COST PRINCIPLES Unsupported Costs Material Weakness Material Noncompliance U. S. Department of Education Safe Schools/Healthy Students Initiative (CFDA 84.184) Finding Control Number: FA-7531-07-01 Condition: The School District did not require adequate documentation or properly review requests made for the reimbursement of Safe Schools/Healthy Students Initiative (84.184) funds during the 2006 funding year. As directed by the U.S. Department ofEducation, the fiscal year 2007 auditor reviewed the receipts and invoices related to prior year finding FA-7531-06-01. Criteria: Education Department General Administrative Regulations, 34 CFR Part 75, Subpart F, provides the administrative responsibilities of a grantee. Part 75.701 states, "A grantee shall directly administer or supervise the administration ofthe project." Part 75.702 states, "A grantee shall use fiscal control and fund accounting procedures that insure proper disbursement of and accounting for Federal funds." Part 75.730 states, "A grantee shall keep records that fully show: (a) The amount of funds under the grant; (b) How the grantee uses the funds; (c) The total cost of the project; (d) The share of that cost provided from other sources; and (e) Other records to facilitate an effective audit." Questioned Cost: $212,055.72 Information: Little, if any, documentation was provided to the fiscal year 2006 auditor in support ofnon-personnel service expenses included in the six reimbursement requests paid to the Montgomery and Treutlen County Boards ofEducation during the period from August 2005 through March 2006. The requests for these expenses totaled $212,055.72. The fiscal year 2007 auditor noted these deficiencies continue to exist. Also, additional documentation was requested, but not provided by the Director ofSafe Schools/Healthy Students Initiative. -5- WHEELER COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2007 III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS Finding Control Number: FA-7531-07-01 (continued) Cause: Management did not have established reimbursement request guidelines requiring the Montgomery and Treutlen County Boards of Education to provide expenditure documentation in support of reimbursement requests. Based on a recommendation of a Federal program review, management initiated measures during fiscal year 2006 that required the School Districts to provide documentation supporting reimbursement requests. However, management did not properly review the reimbursement requests to ensure that all documentation was, in fact, submitted and expenditures were allowable or within Federal/State guidelines. Effect: The Montgomery and Treutlen County Boards ofEducation were reimbursed $212,055.72 without adequately determining that they incurred allowable Federal program costs. Without proper review ofreimbursement requests and supporting documentation, errors or irregularities could occur without detection. Recommendation: Management should develop and implement procedures to ensure that 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 ofEducation should review this matter and determine the resolution of $212,055.72 in questioned costs. ACTIVITIES ALLOWED OR UNALLOWED ALLOWABLE COSTS/COST PRINCIPLES Inadequate Internal Control Procedures Material Weakness Material Noncompliance U.S. Department of Education Safe Schools/Healthy Students Initiative (CFDA 84.184) U.S. Department of Education Through Georgia Department of Education Twenty-First Century Community Leaming Centers (CFDA 84.287) Finding Control Number: FA-7531-07-02 Condition: A review of expenditures charged to various Federal programs revealed that costs were not adequately documented to ensure compliance with grant requirements. -6- WHEELER COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2007 III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS Finding Control Number: FA-7531-07-02 (continued) Criteria: Provisions of the 0MB Circular A-87, Cost Principles for Determining Allowable Costs, require that "to be allowable under Federal awards, costs must be .. . authorized or not prohibited under state or local laws or regulations and supported by underlying documentation." Questioned Cost: $81,330.58 Safe Schools/Healthy Students Initiative (CFDA 84.184) $44,953.45 Supplies - $40,442.73 Travel - $4,510.72 Twenty-First Century Community Leaming Centers (CFDA 84.287) $36,377.13 Supplies - $16,199.45 Travel - $2,437.68 Transportation - $17,740.00 Information: A review of thirty-two (32) direct program expenditures of Wheeler County Board of Education revealed the following deficiencies: 1) Six (6) lacked purchase orders approved by an appropriate supervisor. 2) Three (3) expenditures lacked evidence ofreceipt. 3) Four (4) travel vouchers were not approved by an appropriate supervisor. 4) Six (6) persons were paid without approved timesheets. 5) Two (2) persons were paid without approved contract or pay scale. 6) One ( 1) fuel charge lacked supporting documentation. Unallowable activities noted included commute travel charged, non-Federal activities charged, and expenditures not included in the approved budgets. A review oftwenty-seven (27) reimbursement payments to Montgomery and Treutlen counties revealed the following deficiencies: 1) Twenty-three (23) reimbursements were not approved by the Fiscal Agent (Superintendent). 2) Sixteen ( 16) reimbursements lacked supporting receipts, invoices and evidence of receipt. 3) Eleven (11) lacked timesheets supporting employee and contracted services pay. -7- WHEELER COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2007 III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS Finding Control Number: FA-7531-07-02 (continued) 4) Eight (8) included unallowable and/or unapproved travel. 5) All reimbursements were fully charged to purchased professional and technical services (object 300). 6) Overlapping charges and charges to the wrong Board of Education were noted. In many cases the absence of supporting documentation resulted in the auditors' inability to determine the nature and purpose of charges. Excessive, unallowable, and questionable travel was noted on many of the program Director's travel vouchers. These vouchers were approved and paid by Montgomery County Board of Education, and subsequently reimbursed by the Wheeler County Board ofEducation. In addition, the vouchers were not reviewed or approved by the Fiscal Agent (Superintendent) or an appropriate supervisor. Due to the unusually large number and amount of travel charges and the questionable nature ofsuch, all ofthe Director's travel tested was questioned. Salary and contracted services amounts are questioned at FA-7531-07-04 and FA-7531-07-05. Cause: Management failed to adequately monitor compliance with Federal guidelines to ensure that expenditures for these Federal programs were allowable, properly approved, and adequately documented. Effect: Failure to ensure that program costs were allowable, approved and properly documented resulted in material noncompliance with Federal grant requirements. Recommendation: The School District should implement procedures to ensure that all costs are allowable under 0MB Circular A-87, approved by appropriate management, and properly documented. The School District should contact the U. S. Department ofEducation and Georgia Department ofEducation to determine the amount of refund for these questioned expenditures. - 8- WHEELER COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2007 III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS ACTIVITIES ALLOWED OR UNALLOWED ALLOWABLE COSTS/COST PRINCIPLES Time and Attendance Records not Utilized Material Weakness Material Noncompliance U. S. Department of Education Safe Schools/Healthy Students Initiative (CFDA 84.184) U.S. Department of Education Through Georgia Department of Education Twenty-First Century Community Leaming Centers (CFDA 84.287) Finding Control Number: FA-7531-07-03 Condition: Certifications and documentation based on time distribution records, as required by Federal guidelines, were not available for all School District employees whose salaries were paid from Federal programs. Criteria: Provisions of the 0MB Circular A-87, Cost Principles for Determining Allowable Costs, require that salaries be documented as follows: (a) Personnel who work on one Federal award will be supported by a semi-annual certification. The certifications will be signed by the employee and/or immediate supervisor. (b) For those personnel who work on multiple Federal activities or a Federal activity and non-Federal activity, a distribution of their salaries or wages to the Federal awards will be based on personnelactivity-reports (PARs). The PARs shall reflect after-the-fact certification ofthe time and effort ofeach employee on all activities. PARs are to be prepared monthly and signed by the employee. Questioned Cost: $130,068.48 Safe Schools/Healthy Students Initiative (CFDA 84.184) $64,387.48 Twenty-First Century Community Leaming Centers (CFDA 84.287) $65,681.00 Information: Based on a review of seven (7) Federally compensated employees' payroll records, the following deficiencies were noted: (a) Five (5) employees salaries which were charged solely to a Federal program were not supported with the required semi-annual certifications. (b) One (I) employee who was paid from multiple Federal programs did not have the required personnel activity reports (PARs) supporting time and effort. -9- WHEELER COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2007 III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS Finding Control Number: FA-7531-07-03 (continued) Cause: The Safe Schools/Healthy Students Initiative Director located in Montgomery County failed to comply with Federal requirements for documenting actual time and effort for Federal personnel and, as a result, the required certifications and PARs were not completed and used as a basis for documenting salary charges to each of the Federal programs. Effect: Because ofthe School District's failure to maintain the required semi-annual certifications and PARs supporting time and effort, it could not be determined if the correct amounts of salaries for these employees were properly charged to the appropriate Federal grant awards. Recommendation: The School District should implement procedures to ensure that, in line with Federal regulations, appropriate time and effort records are prepared and maintained for all personnel working on Federal programs. Management should ensure that all salaries charged to the Federal programs are commensurate with actual time devoted to these Federal programs. The affected grantors should review documentation to determine if refunds are appropriate. ALLOWABLE COSTS/COST PRINCIPLES Unsupported Compensation Material Weakness Material Noncompliance U.S. Department of Education Safe Schools/Healthy Students Initiative (CFDA 84.184) U.S. Department of Education Through Georgia Department of Education Twenty-First Century Community Leaming Centers (CFDA 84.287) Finding Control Number: FA-7531-07-04 Condition: Unsupported reimbursements and compensation were paid to employees and vendors charged to the Safe Schools/Healthy Students Initiative (CFDA 84.184) and Twenty-First Century Community Leaming Centers program (CFDA 84.287). In addition, there were employees and contractors paid in excess of the approved program budget. - 10 - WHEELER COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2007 III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS Finding Control Number: FA-7531-07-04 (continued) Criteria: Provisions of 0MB Circular A-87, Cost Principles for Determining Allowable Costs, require that costs charged to a Federal award be program necessary and reasonable for proper and efficient performance and administration ofthe Federal award. A cost should be allocable to the Federal award in accordance with the benefits received. Furthermore, consideration should be given as to whether (1) individuals acted with prudence in the circumstances considering their responsibilities to the government unit and the Federal government and (2) significant deviations from established practices would unjustifiably increase the cost of the Federal award. Questioned Cost: $186,030.42 Safe Schools/Healthy Students Initiative (CFDA 84.184) $74,665.32 Bi-lingual instructor - pay exceeded approved budget by $7,000.00 Unsupported Montgomery and Treutlen payroll charges $67,665.32 Twenty-First Century Community Leaming Centers (CFDA 84.287) $111,365.10 Secretary - pay exceeded approved budget by $1,100.00 Contractor - No approved contract or supporting invoice $3,000.00 Unsupported Montgomery and Treutlen payroll charges $107,265.10 Information: Expenditure and reimbursement testing referenced at FA-7531-07-02 revealed unsupported, unapproved, and unallowable compensation to employees and contractors, as well as unsupported personnel reimbursements to Montgomery and Treutlen Counties. Issues noted included lack of approved contracts, lack of timesheets, unapproved timesheets and timesheets that do not reconcile to amounts paid. In addition, payments in excess of the approved budgets were noted. Also, the Program Director was paid without a contract or pay rate approved in writing by the Fiscal Agent. Required time and distribution records were not maintained for all employees and unallowable activities were noted. See FA-7531-07-03. Cause: Management did not have controls and procedures in place to assure that compensation charged to Federal programs and paid to personnel, employees or contractors were supported by approved contracts, pay scales and timesheets and were in line with approved Federal program budgets. - 11 - WHEELER COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2007 III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS Finding Control Number: FA-7531-07-04 (continued) Effect: Costs were charged to the Safe Schools/Healthy Students Initiative Project and Twenty-First Community Learning Centers Project in excess ofapproved budget amounts and without supporting contracts or pay scales. A substantial amount of costs charged for personnel were not supported by approved time records matching the amount of compensation. Recommendation: The School District should establish procedures to ensure that: 1) Salaries and pay scales are in line with approved budgets, 2) pay rates are supported in writing through the use of contracts or Board approved pay scales, and 3) all hourly workers are paid based on timesheets, approved in writing by their supervisor, and those approved timesheets and the approved pay scales reconcile to the amount paid. PROCUREMENT AND SUSPENSION AND DEBARMENT Failure to Implement Procurement Procedures Material Weakness Material Noncompliance U.S. Department of Education Safe Schools/Healthy Students Initiative (CFDA 84.184) U.S. Department of Education Through Georgia Department of Education Twenty-First Century Community Leaming Centers (CFDA 84.287) Finding Control Number: FA-7531-07-05 Condition: The School District did not have adequate control procedures in place over the procurement process for the Safe Schools/Healthy Students Initiative (CFDA 84.184) and Twenty-First Century Community Leaming Centers program (84.287). Criteria: The Uniform Administrative Requirements for Grants and Cooperative Agreements to State and Local Governments Subpart C - Post-Award Requirements _.36 Procurement establishes procurement standards for grantees and subgrantees. Specifically, "Grantees and subgrantees will use their own procurement procedures which reflect applicable State and local laws and regulations." Questioned Cost: NIA - 12 - WHEELER COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2007 III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS Finding Control Number: FA-7531-07-05 (continued) Information: Testing revealed that the School District was not following the State Procurement guidelines and there were numerous instances where voucher packages did not contain the required documentation. See FA-7531-07-02. Numerous purchases were made on the Program Director's personal credit cards and payments were made directly to the credit card companies by Montgomery County Board of Education, thereby, circumventing normal procurement procedures. No approval was obtained prior to these purchases and many of them were not supported with receipts, invoices or packing slips. Several cell phones and a post office box paid for by the programs were held in the Program Director's name instead ofbeing registered to the Board. Montgomery County Board of Education subsequently invoiced and was reimbursed by Wheeler County Board of Education for these expenditures. Cause: Management failed to establish and exercise adequate control procedures over the procurement process related to purchases and/or contracts procured with these Federal funds. Effect: Failure to ensure that proper procurement procedures were followed resulted in a material noncompliance with the requirements of these Federal grants. Recommendation: The School District should establish and implement adequate controls and procedures over the procurement process for Federal program purchases. PERFORMANCE REPORTING Inaccurate Performance Reporting Significant Deficiency Nonmaterial Noncompliance U.S. Department of Education Safe Schools/Healthy Students Initiative (CFDA 84.184) Finding Control Number: FA-7531-07-06 Condition: The School District inaccurately reported the Safe Schools/Healthy Students Initiative (CFDA 84.184) financial expenditure information on the semiannual grant performance report. - 13 - WHEELER COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2007 III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS Finding Control Number: FA-7531-07-06 (continued) Criteria: For those recipients of funds from the Safe Schools/Healthy Students Initiative, a semi-annual report must be submitted to the U.S. Department of Education, which provides the most current performance and financial expenditure information. Questioned Cost: NIA Information: We reviewed the semi-annual performance report completed by the Director of Safe Schools/Healthy Students Initiative, for the reporting period October 1, 2006, to March 31, 2007. We were unable to verify the amounts to the accounting records. A variance of$18,013.58 was noted between the report and the general ledger. Cause: The School District and management failed to implement internal controls for accurate reporting of financial information related to Safe Schools/Healthy Students Initiative on the Form ED 524B. Effect: Failure to accurately report financial information can result in a material noncompliance with requirements of Safe Schools/Healthy Students Initiative. Recommendation: The School District should implement policies and procedures sufficient to ensure that financial information reported to the U. S. Department of Education accurately represents the activity of the Safe Schools/Healthy Students Initiative. Such financial information should be properly supported by the financial records including the general ledger. A determination needs to be made as to whether the Board needs to submit a revised report that accurately reflects Safe Schools/Healthy Students Initiative financial information. - 14 - SECTIONV MANAGEMENT'S RESPONSES WHEELER COUNTY BOARD OF EDUCATION SCHEDULE OF MANAGEMENT'S RESPONSES YEAR ENDED JUNE 30, 2007 Finding Control Number: FS-7531-07-01 We concur that we were in deficit financing as of June 30, 2007. A Deficit Elimination Plan has been implemented to ensure that the Wheeler County Board of Education will be out of Deficit Financing by fiscal year 2011. During current audit year, the millage was raised from 12.5 mills to 14.5 mills. The total in Austerity Reductions has accumulated to the amount of approximately $993,242.00 and a total loss in Equalizations is approximately $54,478.00 for a total loss of $1,047,720.00. It has been hard to overcome these reductions, and the new Superintendent is working diligently to reduce expenses and achieve a balanced budget. The Tax Commissioner has not been getting a 100% collection ofcurrent taxes nor outstanding taxes owed for previous periods. We are at present doing all that we can to encourage 100% collections. Our budget for fiscal year 2009 shows us getting out of deficit. We are doing everything required for reporting and clearing this finding. Finding Control Number: FS-7531-07-02 We concur with this finding. This was our first year doing the Financial Statements and are building our knowledge on mistakes we made this year and will work to implement controls to verify that the financial statements properly reflect activity reported in the general ledger and monitor the process to evaluate the accuracy of the Financial Statements. We have received material from the Georgia Department ofAudits and Accounts to give us guidance in processing the Financial Statements. We are expecting this finding to be closed by June 30, 2008. Finding Control Number: FS-7531-07-03 We concur with this finding. Procedures have been implemented to ensure that all transactions are properly approved and recorded in a timely manner. These procedures should be implemented and functioning by the closing ofthe fiscal year 2009. The new School Superintendent has implemented an accounting manual which focuses on correcting this finding. Finding Control Number: FA-7531-07-01 This finding has been discussed at length with the Director and administrative support staff. We will implement procedures to ensure that documentations are reported to match the general ledger. This problem occurred as a result ofthe miscommunication between the Superintendent and Director of the Safe Schools/Healthy Students program. The Director of this program was housed at the Montgomery County Board of Education and got all authorization from the Superintendent of Montgomery County. In the future, we will ensure that the program director ofany Federal program in which Wheeler County is fiscal agent will be housed in Wheeler County and follow the accounting guidelines by which is required by the Wheeler County School Superintendent. Action has been taken to assure that this does not occur again. This finding should be cleared by June 2009. - 1- WHEELER COUNTY BOARD OF EDUCATION SCHEDULE OF MANAGEMENT'S RESPONSES YEAR ENDED JUNE 30, 2007 Finding Control Number: FA-7531-07-02 Starting in fiscal year 2009 there should not be a finding for any of these problems or weaknesses. We have implemented a new accounting manual instructing each director of any Federal or State program to follow guidelines for approval ofany purchase. These will be signed purchase orders by the Superintendent and the Director or person doing the purchasing. A time log shall be implemented to document time for each program for which a person works. Travel vouchers shall be reviewed by the proper authorities and the guidelines given by the Georgia Department ofEducation. Just to answer a few of these comments made in this finding: The supplies and travel mentioned were purchased or performed for the Montgomery County and Treutlen County schools. We had always assumed that these counties were responsible for their accounting ofexpenditures and have never questioned what they requested because their Superintendent should have approved these in advance. We were to reimburse the Counties in the 300 (Purchased Services) Account. This finding should be cleared in fiscal year 2009. Finding Control Number: FA-7531-07-03 Beginning fiscal year 2009, all employees should have their time documented according to the time worked in each program whether Federal, State or local if they are paid split-funded. Personnel activity reports (PARs) are being implemented to support time and effort for each job worked ensuring that salaries are properly charged to the appropriate program. This finding should be cleared in June 2009. Finding Control Number: FA-7531-07-04 The approved budgets will be monitored more closely to ensure that payments do not exceed budgeted amounts. All payments will have supporting documents approved by the Superintendent and Director of program. The required time and distribution records will be maintained for all employees and all employees will be contracted when required. This finding should be cleared by June 30, 2009. Finding Control Number: FA-7531-07-05 Procedures have been implemented to follow the procurement guidelines for State and Local Governments. The credit card payments were not issued by Wheeler County, but were made by Montgomery County to the Director's credit card. Wheeler County has never made payments to personal credit cards. Wheeler has never paid cell phone bills for any Federal program. The payment was approved and paid by Montgomery County Administration. Adequate controls will be implemented to control the procedures over procurements. This finding should clear by June 30, 2009. -2- WHEELER COUNTY BOARD OF EDUCATION SCHEDULE OF MANAGEMENT'S RESPONSES YEAR ENDED JUNE 30, 2007 Finding Control Number: FA-7531-07-06 The grant performance report for the year in question was not prepared by the financial department but by the Director ofthe program, therefore not matching the financial general ledger. In future the report shall be completed by the finance officer ensuring agreement with financial records. This finding should clear by June 30, 2009. Contact Person: Helen Nunn Title: Financial Officer Phone: (912) 568-7198 Fax: (912) 568-1985 E-mail: hnunn@wheeler.kl2.ga.us -3-