Wilkes County Board of Education, Washington, Georgia, report on audit of the financial statements for the fiscal year ended June 30, 2007

WILKES COUNTY BOARD OF EDUCATION
WASHINGTON, 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

WILKES 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 TH,E STATEMENT OF ACTIVITIES

7

G

STATEMENT OF FIDUCIARY NET ASSETS

FIDUCIARY FUNDS

8

H

STATEMENT OF CHANGES IN FIDUCIARY NET ASSETS

FIDUCIARY FUNDS

9

I

NOTES TO THE BASIC FINANCIAL STATEMENTS

11

SCHEDULES

REQUIRED SUPPLEMENTARY INFORMATION

1 SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES

IN FUND BALANCES - BUDGET AND ACTUAL

GENERALFUND

25

SUPPLEMENTARY INFORMATION

2 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS

26

3 SCHEDULE OF STATE REVENUE

27

WILKES COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS -

SECTION I

FINANCIAL

SCHEDULES

SUPPLEMENTARY INFORMATION

4 SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS

28

5 ALLOTMENTS AND EXPENDITURES

GENERAL FUND - QUALITY BASIC EDUCATION PROGRAMS (QBE)

BY PROGRAM

29

SECTION II
COMPLIANCE AND INTERNAL CONTROL REPORTS
REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS
REPORT ON COMPLIANCE WITH REQUIREMENTS APPLICABLE TO EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH 0MB CIRCULAR A-133

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

SECTION IV FINDINGS AND QUESTIONED COSTS SCHEDULE OF FINDINGS AND QUESTIONED COSTS

WILKES 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
June 13, 2008

Honorable Sonny Perdue, Governor Members ofthe General Assembly Members ofthe State Board of Education
and Superintendent and Members ofthe Wilkes County Board of Education
INDEPENDENT AUDITOR'S COMBINED REPORT ON BASIC FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION - SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
Ladies and Gentlemen:
We have audited the accompanying financial statements ofthe governmental activities, each major fund, and the aggregate remaining fund information (Exhibits A through I) of the Wilkes 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 Wilkes County Board ofEducation's management. Our responsibility is to express opinions on these financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United States ofAmerica and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General ofthe United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free 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 Wilkes County Board of Education's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinions.

2007ARL-11

In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, each major fund, and the aggregate remaining fund information ofthe Wilkes County Board ofEducation, as ofJune 30, 2007, and the respective changes in financial position thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America.
The Wilkes 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 June 13, 2008, on our consideration ofthe Wilkes County Board ofEducation's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements and other matters. The purpose of that report is to describe the scope of our testing ofinternal control over financial reporting and compliance and the results ofthat testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit.
The Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual, as presented on page 25, is not a required part of the basic financial statements but is supplementary information required by the accounting principles generally accepted in the United States of America. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods ofmeasurement and presentation ofthe required supplementary information. However, we did not audit the information and express no opinion on it.
Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Wilkes 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-Pro.fit Organizations, are presented for purposes of additional analysis and are not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements, and in our opinion, is fairly stated, in all material respects, in relation to the basic financial statements taken as a whole.
A copy of this report has been filed as a permanent record in the office of the State Auditor and made available to the press of the State, as provided for by Official Code of Georgia Annotated section 50-6-24.
Respectfully submitted,
~n~..; } ~ State Auditor
RWH:gp 2007ARL-11

WILKES COUNTY BOARD OF EDUCATION

WILKES COUNTY BOARD OF EDUCATION STATEMENT OF NET ASSETS JUNE 30, 2007
ASSETS
Cash and Cash Equivalents Accounts Receivable, Net
Taxes State Government Federal Government Inventories Capital Assets Land Construction in Progress Land Improvements Buildings Equipment Less: Accumulated Depreciation
Total Assets
LIABILITIES
Accounts Payable Salaries and Benefits Payable Long-Term Liabilities
Due Within One Year Due in More Than One Year
Total Liabilities
NET ASSETS
Invested in Capital Assets, Net of Related Debt Restricted for
Bus Replacement Continuation of Federal Programs Debt Service Capital Projects Unrestricted
Total Net Assets
Total Liabilities and Net Assets

EXHIBIT"A"

GOVERNMENTAL ACTIVITIES

$

12,405,433

287,604 957,887
5,749 43,021

450,083 495,783 166,383 6,685,209 2,672,378 -2,766, 115

$ ===2=1==,4=0=3,..,41=5=

$

904

1,891,064

310,000 10,045,000

$

12,246,968

$

6,246,180

11,760 181,221 224,749 1,430,540 1 061 997

$

9156447

$ ===2=1=,4==0=3'=41=5=

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

WILKES COUNTY BOARD OF EDUCATION STATEMENT OF ACTIVITIES
FOR THE YEAR ENDED JUNE 30, 2007

GOVERNMENTAL ACTIVITIES
Instruction Support Services
Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Other Support Services Operations of Non-Instructional Services Enterprise Operations Food Services Interest on Short-Term and Long-Term Debt
Total Governmental Activities
General Revenues Taxes Property Taxes For Maintenance and Operations Railroad Cars Sales Taxes Special Purpose Local Option Sales Tax For Debt Services For Capital Projects Grants and Contributions not Restricted to Specific Programs Investment Earnings Miscellaneous
Total General Revenues
Change in Net Assets
Net Assets - Beginning of Year
Net Assets - End of Year

EXPENSES

CHARGES FOR SERVICES

$

9,884,209 $

643,663 619,156 355,742 393,065 999,355 179,887 1,176,588 1,048,063
49,059

203,812 974,166 457123

$

16,983,888 $

166,925
200,152 242,838 609,915

The notes to the basic financial statements are an integral part of this statement. -2-

EXHIBIT"B"

PROGRAM REVENUES

OPERATING

CAPITAL

GRANTS AND

GRANTS AND

CONTRIBUTIONS CONTRIBUTIONS

NET (EXPENSES) REVENUES
AND CHANGES IN NET ASSETS

$

7,323,089

104,374 262,154 159,721 379,720 447,409

422,538 450,166 $

703,295

$

10,252,466 $

$ 143,098 143 098 $

-2,394,195
-539,289 -357,002 -196,021 -13,345 -551,946 -179,887 -754,050 -454,799 -49,059
-3,660 -28,033 -457 123
-5,978,409

$

4,494,244

7,276

762,123 393,975 618,946 305,116 141 556

$

6,723,236

$

744,827

8,411,620

$ =====9=1=5=6=44=7=

-3-

WILKES 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 Inventories

GENERAL FUND

DISTRICTWIDE
CAPITAL PROJECTS
FUND

DEBT SERVICE
FUND

TOTAL

$ 2,703,543 $ 9,701,890 $

125,291 957,887
5,749 43 021

191,071

0 $ 12,405,433
316,362 957,887
5,749 43 021

Total Assets

$ 3,835,491 $ 9,892,961 $====0= $ 13,728,452

LIABILITIES AND FUND BALANCES
LIABILITIES
Accounts Payable Salaries and Benefits Payable
Total Liabilities
FUND BALANCES
Reserved for: Bus Replacement Continuation of Federal Programs Debt Service Inventories Capital Projects
Unreserved Designated for Student Activities Undesignated Reported in: General Fund
Total Fund Balances

$

904

1 891 064

$ 1 891 968

$

11,760

138,200

$

224,749 $

43,021

9,668,212

115,655

1634887

$ 1,943,523 $ 9,892,961 $

$

904

1 891 064

$ 1,891,968

$

11,760

138,200

0

224,749

43,021

9,668,212

115,655

1 634 887

0 $ 11,836,484

Total Liabilities and Fund Balances

$ 3,835,491 $ 9,892,961 $====0= $ 13,728,452

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

WILKES 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.
Long-Term Liabilities, including Bonds Payable, are not due and payable in the current period and therefore are not reported as liabilities in the funds.
Net Assets of Governmental Activities (Exhibit "A")

$ 11,836,484

$ 450,083 495,783 166,383
6,685,209 2,672,378 -2,766,115

7,703,721

-28,758 -10,355,000

$ ====9=15=6=4=4=7

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

WILKES 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 Debt Services
Principal Interest
Total Expenditures
Net Change in Fund Balances
Fund Balances - Beginning
Fund Balances - Ending

GENERAL FUND

DISTRICTWIDE
CAPITAL PROJECTS
FUND

DEBT SERVICE
FUND

TOTAL

$ 4,544,703 $
8,954,203 2,060,307
609,915 30,198 141 556
$ 16,340,882 $

393,975 $ 274,918 668,893 $

$ 762,123
762,123 $

4,544,703 1,156,098 8,954,203 2,060,307
609,915 305,116 141 556
17,771,898

$ 9,893,207
643,663 619,156 351,613 393,065 996,387 179,887 1,160,222 901,940 49,059 203,812 954,130 245,001 $

380,714 $

$ 16,591,142 $ 380 714 $

$ -250,260 $ 288,179 $

2,193,783

9,604,782

$
305,000 457,123 762,123 $
0 $ 0

9,893,207
643,663 619,156 351,613 393,065 996,387 179,887 1,160,222 901,940 49,059 203,812 954,130 625,715
305,000 457123
17 733 979
37,919
11,798,565

$ 1,943,523 $ 9,892,961 $

0 $ 11,836,484

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

WILKES 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

$ 681,937 -236,846

Because some property taxes will not be collected for several months after the School District's fiscal year ends, they are not considered "available" revenues.

Repayment of Long-Term Debt is reported as an expenditure in Governmental Funds, but the repayment reduces Long-Term Liabilities in the Statement of Net Assets. In the current year, this amount consists of Bond Principal Retirements.

37,919
445,091 -43,183 305,000

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

$ ===7=4=4=8=27=

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

WILKES COUNTY BOARD OF EDUCATION STATEMENT OF FIDUCIARY NET ASSETS
FIDUCIARY FUNDS JUNE 30, 2007

EXHIBIT"G"

ASSETS
Cash and Cash Equivalents Investments
Certificate of Deposit

PRIVATE PURPOSE TRUSTS

AGENCY FUNDS

$

36,308 $

18,566

15,563

Total Assets
LIABILITIES Funds Held for Others
NET ASSETS Held in Trust for Private Purposes

$

51 871 $ ======1=8,=5=6=6=

$

18,566

$ _ _..:;.5.;.J1..:;.87.;...1;_

Total Liabilities and Net Assets

$

51 871 $===1=8'=56=6=

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

WILKES COUNTY BOARD OF EDUCATION STATEMENT OF CHANGES IN FIDUCIARY NET ASSETS
FIDUCIARY FUNDS YEAR ENDED JUNE 30, 2007
ADDITIONS Investment Earnings Interest
DEDUCTIONS Scholarships Change in Net Assets
Net Assets - Beginning
Net Assets - Ending

EXHIBIT"H"

PRIVATE PURPOSE TRUSTS

$

1469

$

200

$

1,269

501602

$ ===5=11=87=1=

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

(This page left intentionally blank)

WILKES COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2007

EXHIBIT "I"

Note 1: DESCRIPTION OF SCHOOL DISTRICT AND REPORTING ENTITY
REPORTING ENTITY
The Wilkes County Board ofEducation (School District) was established under the laws ofthe State of Georgia and operates under the guidance of a school board elected by the voters and a Superintendent appointed by the Board. The Board is organized as a separate legal entity and has the power to levy taxes and issue bonds. Its budget is not subject to approval by any other entity. Accordingly, the School District is a primary government and consists of all the organizations that compose its legal entity.
Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The School District's basic financial statements are collectively comprised of the District-wide financial statements, fund financial statements and notes to the basic financial statements of the Wilkes County Board of Education.
District-wide Statements: The Statement ofNet Assets and the Statement ofActivities display information about the financial activities ofthe overall School District, except for fiduciary activities. Eliminations have been made to minimize the double counting of internal activities. Governmental activities generally are financed through taxes, intergovernmental revenues, and other nonexchange transactions.
The Statement ofActivities presents a comparison between direct expenses and program revenues for each function of the School District's governmental activities.
Direct expenses are those that are specifically associated with a program or function and, therefore, are clearly identifiable to a particular function. Indirect expenses (expenses of the School District related to the administration and support ofthe School District's programs, such as office and maintenance personnel and accounting) are not allocated to programs.
Program revenues include (a) charges paid by the recipients ofgoods or services offered by the programs and (b) grants and contributions that are restricted to meeting the operational or capital requirements of a particular program. Revenues that are not classified as program revenues, including all taxes, are presented as general revenues.
Fund Financial Statements: The fund financial statements provide information about the School District's funds, including fiduciary funds. Eliminations have been made to minimize the double counting ofinternal activities. Separate statements for each category (governmental and fiduciary) are presented. The emphasis of fund financial statements is on major governmental funds, each displayed in a separate column.

- 11 -

WILKES COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2007

EXHIBIT "I"

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

- 12 -

WILKES COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2007

EXHIBIT"!"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Governmental funds are reported using the current financial resources measurement focus and the modified accrual basis ofaccounting. Under this method, revenues are recognized when measurable and available. The School District considers all revenues reported in the governmental funds to be available if they are collected within sixty days after year-end. Property taxes, sales taxes and interest are considered to be susceptible to accrual. Expenditures are recorded when the related fund liability is incurred, except for principal and interest on general long-term debt, which are recognized as expenditures to the extent they have matured. Capital asset acquisitions are reported as expenditures in governmental funds.
The School District funds certain programs by a combination ofspecific cost-reimbursement grants, categorical grants, and general revenues. Thus, when program costs are incurred, there are both restricted and unrestricted net assets available to finance the program. It is the School District's policy to first apply grant resources to such programs, followed by cost-reimbursement grants, then general revenues.
CASH AND CASH EQUIVALENTS
COMPOSITION OF DEPOSITS Cash and cash equivalents consist ofcash on hand, demand deposits and short-term investments with original maturities of three months or less from the date of acquisition in authorized financial institutions. Official Code of Georgia Annotated Section 45-8-14 authorize the School District to deposit its funds in one or more solvent banks or insured Federal savings and loan associations.
INVESTMENTS
COMPOSITION OF INVESTMENTS Investments made by the School District in nonparticipating interest-earning contracts (such as certificates ofdeposit) and repurchase agreements are reported at cost. Participating interest-earning contracts and money market investments with a maturity at purchase ofone year or less are reported at amortized cost. Both participating interest-earning contracts and money market investments with a maturity at purchase greater than one year are reported at fair value. The Official Code ofGeorgia Annotated Section 36-83-4 authorizes the School District to invest its funds. In selecting among options for investment or among institutional bids for deposits, the highest rate ofreturn shall be the objective, given equivalent conditions of safety and liquidity. Funds may be invested in the following:
(1) Obligations issued by the State of Georgia or by other states,
(2) Obligations issued by the United States government,
(3) Obligations fully insured or guaranteed by the United States government or a United States government agency,

- 13 -

WILKES COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2007

EXHIBIT "I"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(4) Obligations of any corporation of the United States government,

(5) Prime banker's acceptances,

(6) The Local Government Investment Pool administered by the State of Georgia, Office of Treasury and Fiscal Services,

(7) Repurchase agreements, and

(8) Obligations of other political subdivisions of the State of Georgia.

The School District does not have a formal policy regarding investment policies that address credit risks, custodial credit risks, concentration ofcredit risks, interest rate risks or foreign currency risks.

RECEIVABLES

Receivables consist of amounts due from property and sales taxes, grant reimbursements due on Federal, State or other grants for expenditures made but not reimbursed and other receivables disclosed from information available. Receivables are recorded when either the asset or revenue recognition criteria has been met. Receivables recorded on the basic financial statements do not include any amounts which would necessitate the need for an allowance for uncollectible receivables.

PROPERTY TAXES

The Wilkes County Board ofCommissioners fixed the property tax levy for the 2006 tax digest year (calendar year) on August 3, 2006 (levy date). Taxes were due on December 20, 2006 (lien date). Taxes collected within the current fiscal year or within 60 days after year-end on the 2006 tax digest are reported as revenue in the governmental funds for fiscal year 2007. The Wilkes County Tax Commissioner bills and collects the property taxes for the School District, withholds 2.5% oftaxes collected as a fee for tax collection and remits the balance oftaxes collected to the School District. Property tax revenues, at the fund reporting level, during the fiscal year ended June 30, 2007, for maintenance and operations amounted to $4,460,656.

The tax millage rate levied for the 2006 tax year (calendar year) for the Wilkes County Board of Education was as follows (a mill equals $1 per thousand dollars of assessed value):

School Operations

14.69 mills

- 14 -

WILKES COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2007

EXHIBIT "I"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

SALES TAXES

Special Purpose Local Option Sales Tax, at the fund reporting level, during the year amounted to $1,156,098 and is to be used for capital outlay for educational purposes or debt service. This sales tax was authorized by local referendum and the sales tax must be re-authorized at least every five years.

INVENTORIES

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

CAPITAL ASSETS

Capital assets purchased, including capital outlay costs, are recorded as expenditures in the fund financial statements at the time of purchase (including ancillary charges). On the District-wide financial statements, all purchased capital assets are valued at cost where historical records are available and at estimated historical cost based on appraisals or deflated current replacement cost where no historical records exist. Donated capital assets are recorded at estimated fair market value on the date donated. Disposals are deleted at depreciated recorded cost. The cost of normal maintenance and repairs that do not add to the value ofassets or materially extend the useful lives of the assets is not capitalized. Depreciation is computed using the straight-line method. The School District does not capitalize book collections or works ofart. During the fiscal year under review, no events or changes in circumstances affecting a capital asset that may indicate impairment were known to the School District.

Capitalization thresholds and estimated useful lives of capital assets reported in the District-wide statements are as follows:

Capitalization Policy

Estimated Useful Life

Land Land Improvements Buildings and Improvements Equipment

Any Amount

$

5,000

$

5,000

$

5,000

NIA 10 to 90 years 10 to 90 years 5 to 50 years

- 15 -

WILKES COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2007

EXHIBIT "I"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Depreciation is used to allocate the actual or estimated historical cost of all capital assets over estimated useful lives.
GENERAL OBLIGATION BONDS
The School District issues general obligation bonds to provide funds for the acquisition and construction of major capital facilities. Bond issuance costs are recognized in the financial statements during the fiscal year bonds are issued. General obligation bonds are direct obligations and pledge the full faith and credit of the government. The outstanding amount of these bonds is recorded in the Statement ofNet Assets.
NET ASSETS
The School District's net assets in the District-wide Statements are classified as follows:
Invested in capital assets, net of related debt - This represents the School District's total investment in capital assets, net ofoutstanding debt obligations related to those capital assets. To the extent debt has been incurred but not yet expended for capital assets, such amounts are not included as a component of invested in capital assets, net of related debt.
Restricted net assets - These represent resources for which the School District is legally or contractually obligated to spend resources for bus replacement, continuation ofFederal programs, debt service 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.
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 ofmoney which has not been secured by surety bond, by guarantee ofinsurance, or by collateral. The aggregate ofthe face value of such surety bond and the market value of securities pledged shall be equal to not less than 110 percent ofthe public funds being secured after the deduction ofthe amount ofdeposit insurance. Ifa depository elects the pooled method (OCGA 45-8-13.1) the aggregate ofthe market value ofthe securities pledged to secure a pool ofpublic funds shall be not less than 110 percent ofthe daily pool balance.

- 16 -

WILKES COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2007

EXHIBIT "I"

Note 3: DEPOSITS
Acceptable security for deposits consists of any one of or any combination of the following:
(1) Surety bond signed by a surety company duly qualified and authorized to transact business within the State of Georgia,
(2) Insurance on accounts provided by the Federal Deposit Insurance Corporation,
(3) Bonds, bills, notes, certificates of indebtedness or other direct obligations of the United States or of the State of Georgia,
(4) Bonds, bills, notes, certificates of indebtedness or other obligations of the counties or municipalities of the State of Georgia,
(5) Bonds of any public authority created by the laws of the State of Georgia, providing that the statute that created the authority authorized the use of the bonds for this purpose,
(6) Industrial revenue bonds and bonds of development authorities created by the laws of the State of Georgia, and
(7) Bonds, bills, notes, certificates of indebtedness, or other obligations of a subsidiary corporation of the United States government, which are fully guaranteed by the United States government both as to principal and interest or debt obligations issued by the Federal Land Bank, the Federal Home Loan Bank, the Federal Intermediate Credit Bank, the Central Bank for Cooperatives, the Farm Credit Banks, the Federal Home Loan Mortgage Association, and the Federal National Mortgage Association.
CATEGORIZATION OF DEPOSITS At June 30, 2007, the bank balances were $12,928,138. The amounts of the total uninsured bank balances are classified into three categories of custodial credit risk:
Category 1 - Uncollateralized, Category 2 - Cash collateralized with securities held by the pledging financial institution, or Category 3 - Cash collateralized with securities held by the pledging financial institution's
trust department or agent but not in the School District's name.
The School District's uninsured deposits are classified by custodial credit risk category at June 30, 2007, as follows:

- 17 -

WILKES COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2007

EXHIBIT "I"

Note 3: DEPOSITS

Custodial Credit Risk Category
1 2 3
Total

Bank Balance

$

0

12,782,598

0

$ 12,782,598

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

$ 450,083

$

126,875 $ 368,908

0 $ 450,083 495,783

Total Capital Assets Not Being Depreciated $ 576,958 $ 368,908 $

0 $ 945,866

Capital Assets Being Depreciated Buildings and Improvements Equipment Land Improvements

$ 6,562,505 $ 2,541,040 107,396

122,704 $ 131,338 58,987

0 $ 6,685,209 2,672,378 166,383

Less Accumulated Depreciation for: Buildings and Improvements Equipment Land Improvements

1,238,782 1,286,018
4469

83,656 147,644
5 546

1,322,438 1,433,662
10,015

Total Capital Assets, Being Depreciated, Net $ 6,681,672 $

76,183 $

0 $ 6,757,855

Governmental Activity Capital Assets - Net $ 1,258,630 $ 445,021 $

Q $ 1,103,121

- 18 -

WILKES COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2007

EXHIBIT "I"

Note 5: CAPITAL ASSETS

Current year depreciation expense by function is as follows:

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

$

82,855

$

1,981

1,424

7,852

133,121

144,378 9 613

Note 6: RESTRICTED ASSETS

$==23=6-,8'='4==6

Special Purpose Local Option Sales Tax (SPLOST) and general obligation bond proceeds are restricted assets in the Statement of Net Assets because their use is limited by applicable bond covenants or statutory provisions. Restricted assets at June 30, 2007, were as follows:

District-wide Capital Projects

Bond

SPLOST

Proceeds

Restricted Cash and Cash Equivalents: Debt Services Capital Acquisitions

$

224,749

$

544,083 $ 8,933,058

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 vehicles and job related illness or injuries to employees. The School District has neither significantly reduced coverage for these risks nor incurred losses (settlements) which exceeded the School District's insurance coverage in any of the past three years.

The School District participates in the Georgia School Boards Association Risk and Insurance Management System, a public entity risk pool organized on July 1, 1994, to develop and administer a plan to reduce risk of loss on account of general liability, or property damage, including safety engineering and other loss prevention and control techniques, and to administer one or more groups ofself-insurance funds, including the processing and defense ofclaims brought against members of

- 19 -

WILKES COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2007

EXHIBIT "I"

Note 7: RISK MANAGEMENT

the system. The School District pays an annual premium to the system for its general insurance coverage. Additional coverage is provided through agreements by the system with other companies according to their specialty for property, boiler and machinery (including coverage for flood and earthquake), general liability (including coverage for sexual harassment, molestation and abuse), errors and omissions and crime. Payment of excess insurance for the system varies by line of coverage.

The School District is self-insured with regard to unemployment compensation claims. The School District accounts for claims within the General Fund with expenses/expenditures and liability being reported when it is probable that a loss has occurred, and the amount ofthat loss can be reasonably estimated. The School District has not incurred any liabilities for unemployment compensation during the past two fiscal years.

The School District has purchased surety bonds to provide additional insurance coverage as follows:

Position Covered

Amount

Superintendent All Employees

$

50,000

$

50,000

Note 8: LONG-TERM DEBT

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

Purpose

Interest Rates

Amount

General Government - Series 2003

2.00%- 5.00% $ 10,355.000

The changes in Long-Term Debt during the fiscal year ended June 30, 2007, were as follows:

-20-

WILKES COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2007

EXHIBIT "I"

Note 8: LONG-TERM DEBT

Governmental Funds General
Obligation Bonds

Balance July 1, 2006

$ 10,660,000

Deductions Debt Retired

305,000

Balance June 30, 2007

$ 10,355,000

Portion of Long-Term Debt Due within One Year

$ 310,000

At June 30, 2007, payments due by fiscal year which includes principal and interest for this item are as follows:

Fiscal Year Ended June 30

General Obligation

Debt

Principal

Interest

2008 2009 2010 2011 2012 2013 - 2017 2018 - 2022 2023 -2027 2028 -2029

$ 310,000 $ 449,498

320,000

439,888

325,000

428,048

335,000

415,860

345,000

403,595

1,930,000

1,818,490

2,380,000

1,387,438

2,995,000

779,225

1,415,000

101,650

Total Principal and Interest

$ 10,355,000 $ 6,223,692

Note 9: ON-BEHALF PAYMENTS

The School District has recognized revenues and costs in the amount of $365,016 for health insurance and retirement contributions paid on the School District's behalf by the following State Agencies.

- 21 -

WILKES COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2007

EXHIBIT "I"

Note 9: ON-BEHALF PAYMENTS

Georgia Department of Education Paid to the Georgia Department of Community Health For Health Insurance of Non-Certified Personnel In the amount of $355,984

Paid to the Teachers Retirement System of Georgia For Teachers Retirement System (TRS) Employer's Cost In the amount of $6,064

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 $2,968

Note 10: SIGNIFICANT COMMITMENTS

The following is an analysis ofsignificant outstanding construction or renovation contracts executed by the School District as of June 30, 2007, together with funding available:

Project

Unearned Executed Contracts

Funding Available From State

05-757-055

$ 20,610,789 $ 6,632,190

The amounts described in this note are not reflected in the basic financial statements.

Note 11: SIGNIFICANT CONTINGENT LIABILITIES

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

Note 12: SUBSEQUENT EVENTS

On November 6, 2007, the voters of Wilkes County voted in favor of a Special Purpose Local Option Sales Tax referendum for educational purposes. The imposition ofthe tax approved by the voters, as stated on the Official Ballot of Wilkes County, is as follows:

-22 -

WILKES COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2007

EXHIBIT "I"

Note 12: SUBSEQUENT EVENTS

"Shall a special one percent sales and use tax be continued in Wilkes County for a period of time not to exceed 20 calendar quarters, commencing upon the expiration of the special one percent sales and use tax currently being levied in Wilkes County, and for the raising of not more than $7,500,000 for the purposes of providing funds to pay or to be applied toward the cost of (a) retiring previously incurred general obligation debt of the School District (b) (i) acquiring, construction and equipping new school buildings and other buildings or facilities useful or desirable in connection therewith, (ii) adding to, renovating, repairing, improving and equipping existing school buildings and other buildings and facilities useful or desirable in connection therewith, (iii) acquiring, installing and equipping system-wide technology improvements, and (iv) acquiring any property necessary or desirable therefore, both real and personal (the "Projects"), the maximum cost ofthe Projects to be funded from the proceeds ofsuch tax not to exceed the balance ofthe one percent sales and use tax proceeds? If the continuation ofthe tax is approved by the voters, such vote shall also constitute approval of the issuance of general obligation debt of Wilkes County School District in the principal amount of$5,000,000 for the above purposes."

Note 13: RETIREMENT PLANS

TEACHERS RETIREMENT SYSTEM OF GEORGIA (TRS)

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

TRS CONTRIBUTIONS REQUIRED AND MADE Employees ofthe School District who are covered by TRS are required by State statute to contribute 5% of their gross earnings to TRS. The School District makes monthly employer contributions to TRS at rates adopted by the TRS Board of Trustees in accordance with State statute and as advised by their independent actuary. The required employer contribution rate is 9.28% and employer contributions for the current fiscal year and the preceding two fiscal years are as follows:

Fiscal Year

Percentage Contributed

Required Contribution

2007 2006 2005

100% 100% 100%

$ 816,687 $ 780,040 $ 744,550

- 23 -

(This page left intentionally blank)

WILKES 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
Net Change in Fund Balances
Fund Balances - Beginning
Inventory - Net Change in Period

NONAPPROPRIATED BUDGETS

ORIGINAL (1)

FINAL (1)

ACTUAL AMOUNTS

$

4,611,149 $

4,617,149 $

4,544,703

6,000

8,452,467

8,506,084

8,954,203

1,961,902

2,185,263

2,060,307

203,246

203,246

609,915

29,595

29,595

30,198

10 000

10 000

141 556

$

15,274,359 $

15,551,337 $

16,340,882

$

9,377,247 $

9,546,557 $

9,893,207

688,825 497,672 349,154 369,343 973,032 205,287 1,132,190 1,116,202
72,708
871,645 400 000

695,783 642,748 350,339 362,339 973,032 205,287 1,132,190 1,117,704
78,821
871,645 400 000

643,663 619,156 351,613 393,065 996,387 179,887 1,160,222 901,940 49,059 203,812 954,130 245,001

$

16,053,305 $

16,376,445 $

16,591,142

$

-778,946 $

-825,108 $

-250,260

2,272,453

2,272,453

2,193,783

1 799

1 799

Fund Balances - Ending

$

1,495,306 $

1449144 $===1*,9=4='3,.5..2=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.

- 25 -

WILKES 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 Pass-Through From Georgia Department of Education Enhancing Education Through Technology Program Improving Teacher Quality State Grants Mathematics and Science Partnerships Reading First State Grants Rural Education Safe and Drug-Free Schools and Communities - State Grants State Grants for Innovative Programs Title I Grants to Local Educational Agencies Vocational Education - Basic Grants to States
Total U. S. Department of Education

CFDA NUMBER

PASSTHROUGH
ENTITY ID
NUMBER

EXPENDITURES IN PERIOD

.. 10.553 10.555

N/A NIA $
$

(2) 860 182
860,182

10.550

N/A
$

44164 904 346

84.027 84.173

NIA $ N/A
$

404,755 17 221
421,976

84.318 84.367 84.366 84.357 84.358 84.186 84.298 84.010 84.048

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

109,846 119,703 101,012 238,505
56,102 9,053 3,109
583,036 41 903
1,684,245

Total Federal Financial Assistance
N/A = Not Available

$===2..,,=58=8=,5==9=1

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 ($154,716) were not maintained separately and are included in the 2007 National School Lunch Program.

Major Programs are identified by an asterisk (*) in front of the CFDA number.

The School District did not provide Federal Assistance to any Subrecipient.

The accompanying schedule of expenditures of Federal awards includes the Federal grant activity of the Wilkes County Board of Education and is presented on the modified accrual basis of accounting which is the basis of accounting used in the presentation of the fund financial statements.

See notes to the basic financial statements.

- 26-

WILKES 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 Gifted Student - Category VI Remedial Education Program Alternative Education Program Media Center Program 20 Days Additional Instruction Staff and Professional Development Indirect Cost Central Administration School Administration Facility Maintenance and Operations Categorical Grants Pupil Transportation Regular Bus Replacement Sparsity Nursing Services Principal Supplements Vocational Supervisors Mid-term Adjustment Hold-Harmless Education Equalization Funding Grant Food Services Vocational Education Amended Formula Adjustment Other State Programs Health Insurance Middle School Remediation and Intervention Grant National Teacher Certification Preschool Handicapped Program Pupil Transportation - State Bonds Statewide K-8 Reading and Mathematics Program Teachers' Retirement
Office of Treasury and Fiscal Services Public School Employees Retirement

See notes to the basic financial statements.

-27-

SCHEDULE "3"

GOVERNMENTAL FUND TYPE GENERAL FUND

$

464,946

466,019 36,146
1,027,068 269,873 573,102 46,585 937,261 583,621 508,664
54,387 243,109 328,252
52,640 152,999 154,936
92,549 71,479 159,721 50,210 29,524
334,364 423,234 400,403
422,362 43,098 20,000 41,233 5,316 18,859
159,860 253,930
49,738 89,489 -158,738
355,984 1,324 6,654
48,543 100,000
26,427 6,064
2 968
$ _ _==-8=,9=54==,2=03.,,.

WILKES COUNTY BOARD OF EDUCATION SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS
YEAR ENDED JUNE 30, 2007

SCHEDULE "4"

PROJECT
For acquiring, constructing and equipping new school buildings and other buildings or facilities useful or desirable in connection therewith, including, but not limited to, a new middle school and a new high school; adding to, renovating, repairing, improving and equipping existing school buildings and other buildings and facilities useful or desirable in connection therewith; acquiring, installing and equipping system-wide technology improvements, and; acquiring any property useful or desirable therefor, both real and personal

ORIGINAL ESTIMATED
COST (1)

CURRENT ESTIMATED COSTS (2)

AMOUNT EXPENDED IN CURRENT
YEAR (3)

AMOUNT EXPENDED
IN PRIOR YEARS (3)

PROJECT STATUS

$ 5,500,000 $ 11,351,079 $

837,838 $ 4,406,677 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 Wilkes County approved the imposition of a 1% sales tax to fund the above project and retire associated debt. Amounts expended for this project may include sales tax proceeds, state, local property taxes and/or other funds over the life of the project.

See notes to the basic financial statements.

- 28 -

WILKES 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 Gifted Student - Category VI Remedial Education Program Alternative Education Program
TOTAL DIRECT INSTRUCTIONAL PROGRAMS
Media Center Program Staff and Professional Development

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

ELIGIBLE QBE PROGRAM COSTS

SALARIES OPERATIONS

TOTAL

$

549,687 $

579,501 $

13,828 $

593,329

45,608

80,842

80,842

1,225,638

1,197,184

22,293

1,219,477

309,616

263,499

5,319

268,818

672,722

713,635

6,268

719,903

59,386 1,108,058
706,862 600,960 992,400
182,070 103,656
85 758

137,916 1,179,483 1,285,611
474,694
531,210 400,914
35,550 106,432 107,709 103,687

9,163 31,489 64,553 52,524
16,276
1,921 299
6696

147,079 1,210,972 1,350,164
527,218
16,276 531,210 400,914
35,550 108,353 108,008 110 383

$

6,642,421 $ 7,197,867 $

230,629 $

7,428,496

189,458 35 399

312,237

30,080

342,317 29656

TOTAL QBE FORMULA FUNDS

$====-6,=86=7-=,2=78= $ 7,510,104 $

260,709 $ ===7=-,8=0=0=,4=69=

(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.

- 29-

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
June 13, 2008

Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the Wilkes 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 Wilkes County Board of Education as of and for the year ended June 30, 2007, which collectively comprise Wilkes County Board of Education's basic financial statements and have issued our report thereon dated June 13, 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 Wilkes County Board of Education's internal control over financial reporting as a basis for designing our auditing procedures for the purpose of expressing our opinions on the financial statements, but not for the purpose ofexpressing an opinion on the effectiveness of the Wilkes County Board of Education's internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness of the Wilkes County Board of Education's internal control over financial reporting.
Our consideration of internal control over financial reporting was for the limited purpose described in the preceding paragraph and would not necessarily identify all deficiencies in internal control over financial reporting that might be significant deficiencies or material weaknesses. However, as discussed below, we identified certain deficiencies in internal control over financial reporting that we consider to be significant deficiencies.
2007YB-40

A control deficiency exists when the design or operation of a 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 Wilkes County Board of Education's ability to initiate, authorize, record, process, or report financial data reliably in accordance with generally accepted accounting principles such that there is more than a remote likelihood that a misstatement of the Wilkes County Board ofEducation's financial statements that is more than inconsequential will not be prevented or detected by the Wilkes County Board ofEducation's internal control. We consider items FS-7571-07-01, FS-7571-07-02, FS-7571-07-03 and FS-7571-07-04 in the accompanying Schedule of Findings 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 Wilkes 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 consider item FS-7571-07-04 to be a material weakness.
Compliance and Other Matters
As part of obtaining reasonable assurance about whether Wilkes County Board of Education's financial statements are free of material misstatement, we performed tests of its compliance with certain provisions oflaws, regulations, contracts and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards.
We noted certain matters that we have reported to management of Wilkes County Board of Education in a separate letter dated June 13, 2008.
Wilkes County Board of Education's response to the findings identified in our audit is described in the accompanying Schedule ofManagement's Responses. We did not audit Wilkes County Board of Education's response and, accordingly, we express no opinion on it.
2007YB-40

This report is intended solely for the information and use of the management, members of the Wilkes 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:gp 2007YB-40

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
June 13, 2008

Honorable Sonny Perdue, Governor Members ofthe General Assembly Members of the State Board of Education
and Superintendent and Members ofthe Wilkes County Board of Education
REPORT ON COMPLIANCE WITH REQUIREMENTS APPLICABLE TO EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH 0MB CIRCULARA-133
Ladies and Gentlemen:
Compliance
We have audited the compliance ofWilkes County Board ofEducation with the types ofcompliance requirements described in the U.S. Office of Management and Budget (0MB) Circular A-133 Compliance Supplement that are applicable to each ofits major Federal programs for the year ended June 30, 2007. Wilkes County Board of Education's major Federal programs are identified in the Summary of Auditor's Results Section ofthe accompanying Schedule ofFindings and Questioned Costs. Compliance with the requirements of laws, regulations, contracts and grants applicable to each of its major Federal programs is the responsibility of Wilkes County Board of Education's management. Our responsibility is to express an opinion on Wilkes County Board of Education's compliance based on our audit.
We conducted our audit ofcompliance in accordance with auditing standards generally accepted in the United States ofAmerica; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General ofthe United States; and 0MB Circular A133, Audits ofStates, Local Governments, and Non-Profit Organizations. Those standards and 0MB Circular A-133 require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major Federal program occurred. An audit includes examining, on a test basis, evidence about the Wilkes County Board ofEducation's compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Our audit does not provide a legal determination on Wilkes County Board of Education's compliance with those requirements.
2007SA-10

In our opinion, the Wilkes County Board of Education complied, in all material respects, with the requirements referred to above that are applicable to each ofits major Federal programs for the year ended June 30, 2007.
Internal Control Over Compliance
The management of Wilkes 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 Wilkes County Board ofEducation's internal control over compliance with requirements that could have a direct and material effect on a major Federal program in order to determine our auditing procedures for the purpose ofexpressing our opinion on compliance, but not for the purpose ofexpressing an opinion on the effectiveness ofinternal control over compliance. Accordingly, we do not express an opinion on the effectiveness ofthe Wilkes County Board of Education's internal control over compliance.
A control deficiency in an entity's internal control over compliance exists when the design or operation 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 ofcontrol deficiencies, that adversely affects the entity's ability to administer a Federal program such that there is more than a remote likelihood that noncompliance with a type of compliance requirement of a Federal program that is more than inconsequential will not be prevented or detected by the entity's internal control.
A material weakness is a significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood that material noncompliance with a type of compliance requirement of a Federal program will not be prevented or detected by the entity's internal control.
Our consideration ofthe internal control over compliance was for the limited purpose described in the first paragraph of this section and would not necessarily identify all deficiencies in internal control that might be significant deficiencies or material weaknesses. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses, as defined above.
This report is intended solely for the information and use of the management, members of the Wilkes County Board ofEducation, Federal awarding agencies and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties.
Respectfully submitted,
~~o~C~G;~ State Auditor
RWH:gp 2007SA-10

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

WILKES COUNTY BOARD OF EDUCATION AUDITEE'S RESPONSE
SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2007

PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

FINDING CONTROL NUMBER AND STATUS

FS-7571-05-01 FS-7571-06-01 FS-7571-06-02 FS-7571-06-03

Further Action Not Warranted Unresolved- See Corrective Action/Responses Unresolved- See Corrective Action/Responses Partially Resolved - See Corrective Action/Responses

CORRECTIVE ACTION/RESPONSES

CASH AND CASH EQUIVALENTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Control over School Activity Accounts Finding Control Number: FS-7571-06-01

Although we have been taken measures to improve controls over the school activity accounts, some were not in place for fiscal year 2007 due to new personnel and the timing of the audit. The system has updated procedures and implemented more training with school bookkeepers as well as periodic reviews with them. This should produce significant improvements for fiscal year 2008.

CASH AND CASH EQUIVALENTS REVENUES/RECEIVABLES/RECEIPTS GENERAL LEDGER Inadequate Internal Control Procedures/Improper Expenditures Amount: $1,310 Finding Control Number: FS-7571-06-02

Due to new personnel and timing of the fiscal year 2006 audit, new procedures were in place but did not substantially affect fiscal year 2007. Procedures have been updated and measures taken to produce significant improvements for fiscal year 2008.

CAPITAL ASSETS Failure to Adequately Maintain Capital Assets Finding Control Number: FS-7571-06-03

As we continue to refine the capital asset procedures, the School District will implement a periodic physical inventory process and review its records to make sure the assets and amounts are accurately recorded in a timely manner. We expect this process to be implemented by June 30, 2008.

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WILKES COUNTY BOARD OF EDUCATION AUDITEE'S RESPONSE
SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2007
PRIOR YEAR FEDERAL AWARD FINDINGS AND QUESTIONED COSTS No matters were reported.
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SECTION IV FINDINGS AND QUESTIONED COSTS

WILKES COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2007

I SUMMARY OF AUDITOR'S RESULTS

1. Type of Report Issued on the Financial Statements The auditor's opinion on the Wilkes 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 Wilkes County Board of Education disclosed financial statement significant deficiencies related to the following control categories.

Cash and Cash Equivalents Revenues/Receivables/Receipts Capital Assets

Expenditures/Liabilities/Disbursements General Ledger Financial Reporting

Of the significant deficiencies described above, Financial Reporting is considered to be a material weakness.

3. Noncompliance Material to the Financial Statements The audit of the Wilkes County Board of Education disclosed no instances of noncompliance that were deemed to be material to the financial statements.

4. Significant Deficiencies in Internal Control Over Major Programs The audit report for the Wilkes County Board ofEducation did not disclose any significant deficiencies in internal control over major programs.

5. Type of Report Issued on Compliance for Major Programs The auditor's opinion on the Wilkes County Board ofEducation's report on compliance with requirements applicable to major programs was unqualified.

6. Audit Findings Required to be Reported by Section .5 lO(a) of 0MB Circular A-133 The Wilkes County Board ofEducation's audit did not disclose audit findings required to be reported by section .510(a) ofOMB Circular A-133.

7. Major Programs Federal awards audited as major programs are as follows: 10.553 Food Services - School Breakfast Program 10.555 Food Services - National School Lunch Program

8. Type "A" Program Dollar Threshold The dollar threshold for type "A" programs was $300,000.

9. Low Risk Auditee The Wilkes County Board ofEducation qualified as a low risk auditee as defined by Section .530 of 0MB Circular A-133.

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WILKES COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2007

II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS \
CASH AND CASH EQUIVALENTS EXPENDITURES/LIABILITIES/DISBURSEMENTS GENERAL LEDGER Inadequate Control Procedures/Improper Expenditures Significant Deficiency Finding Control Number: FS-7571-07-01

Condition:

This is a repeat finding (FS-7571-06-02) from fiscal year ended June 30, 2006. The accounting procedures ofthe School District were insufficient to provide adequate internal controls, to ensure that all financial data is recorded in the General Ledger and that all School District funds are expended for educational purposes.

Criteria:

The School District's management is responsible for designing and maintaining internal controls that provide reasonable assurance that transactions are properly approved, documented, processed, and reported in accordance with State law, procedures established by the Georgia Department of Education, and School District polices and procedures.

Questioned Cost: $184

Information:

Cash and Cash Equivalents Bank reconciliations for the General Operating and Banquet accounts were not properly reconciled. Bank reconciliations were not performed for the Wilkes County Bus Shop Account and Board Special Employee Account. No administrative review was performed to determine that the bank reconciliations for the Food Service and the Banquet accounts were correct and that all required adjustments had been made.

Expenditures/Liabilities/Disbursements Payments of $184, which include amounts expended for meals, do not appear to be for educational purposes. There was no independent review of bus shop expenditures to determine that expenditures were appropriate, accurate and properly documented prior to payment. Purchase orders were not included in the payment voucher package for bus shop expenditures to document expenditures.

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WILKES COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2007

II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

CASH AND CASH EQUIVALENTS EXPENDITURES/LIABILITIES/DISBURSEMENTS GENERAL LEDGER Inadequate Control Procedures/Improper Expenditures Significant Deficiency Finding Control Number: FS-7571-07-01

General Ledger The Board Employee Special Accounts was not included on the general ledger. The activity ofthe Bus Shop and Josh Scoggins Scholarship accounts were not recorded in the School District's general ledger.

Cause:

These deficiencies were a result of management's failure to ensure that internal controls were established, implemented and functioning at the School District level.

Effect:

The failure ofthe School District to ensure that all financial data is recorded in the General ledger and that all funds are expended for educational purposes can lead to inaccurate internal and external reporting, as well as noncompliance with State law and generally accepted accounting principles.

Recommendation:

Management should revise and monitor controls to ensure that all bank account activity is properly recorded in the general ledger and that expenditures are utilized only for educational purposes. In addition, the School District should review the expenditures of$184 made from proceeds of bus shop fees to identify whether refunds should be secured for improper use of School District Funds.

CASH AND CASH EQUIVALENTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS GENERAL LEDGER Inadequate Internal Controls over School Activity Accounts Significant Deficiency Finding Control Number: FS-7571-07-02

Condition:

This is a repeat finding (FS-7571-06-01, FS-7571-05-01, FS-7571-04-01 and FS-7571-03-01) from the years ended June 30, 2006, June 30, 2005, June 30, 2004, and June 30, 2003, respectively. The accounting procedures of the School District were insufficient to provide adequate separation ofduties and internal controls over school activity accounts.

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WILKES COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2007

II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

CASH AND CASH EQUIVALENTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS GENERAL LEDGER Inadequate Internal Controls over School Activity Accounts Significant Deficiency Finding Control Number: FS-7571-07-02

Criteria:

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

Questioned Cost: NIA

Information:

Cash and Cash Equivalents The bank reconciliation function was not separated from the record keeping function. The bank reconciliation for the Elementary School was not properly reconciled. Bank reconciliations were not prepared for the Middle School account or FFA Chapter CD account. No administrative review was performed to determine that the bank reconciliations for the Primary School were correct and that all required adjustments had been made.

Revenues/Receivables/Receipts Deposit preparation function was not separated from the record keeping and cash custody functions. Based on a review of31 items, the following deficiencies were noted: 1) Seven receipts were not deposited in a timely manner, 2) five receipts were not supported by adequate documentation, and 3) six receipts contained no documentation.

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WILKES COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2007

II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

CASH AND CASH EQUIVALENTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS GENERAL LEDGER Inadequate Internal Controls over School Activity Accounts Significant Deficiency Finding Control Number: FS-7571-07-02

Expenditures/Liabilities/Disbursements The check writing function was not separated from the record keeping or check signing functions. Based on a review of 31 items, the following deficiencies were noted: 1) Three vouchers contained no mv01ce or supporting documentation, 2) one voucher was not provided for review, 3) twenty-three vouchers contained no evidence ofapproval prior to purchase, 4) ten vouchers had no purchase order, and 5) five of the ten voucher packages reviewed for WWMS had purchase orders that were approved by the secretary instead ofthe principal.

General Ledger The FFA Chapter CD account was not included on the general ledger.

Cause:

These deficiencies were a result of management's failure to ensure that internal controls were established, implemented and functioning at the school level and to assign responsibilities to achieve appropriate separation ofduties and utilize management oversight ofthe incompatible activities to properly safeguard assets.

Effect:

Errors and/or irregularities may not be detected in a timely manner.

Recommendation:

The School District should revise and monitor controls to provide reasonable assurance that transactions are processed according to established procedures and implement procedures to ensure that key accounting functions of custody, record keeping and authorization are separated and/or utilize management oversight ofthese incompatible activities.

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WILKES COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2007

II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

CAPITAL ASSETS Failure to Adequately Maintain Capital Assets Significant Deficiency Finding Control Number: FS-7571-07-03

Condition:

The School District failed to adequately maintain the capital assets records and properly record capital assets in the general ledger.

Criteria:

Chapter 37 Fixed Assets of the Financial Management for Georgia Local Units of Administration indicates that School Districts must establish fixed asset policies, define system requirements, implement a fixed asset system and maintain fixed asset inventory records.

Questioned Cost: NIA

Information:

A review ofthe School District's capital assets records noted deficiencies as discussed below:
The School District's Capital Assets listing included significant errors.
The listing as presented, while inaccurate, was also incomplete and failed to provide all elements of information as required by Chapter 37 Fixed Assets of the Financial Management for Georgia Local Units ofAdministration. such as descriptions and location identifiers.
A physical inspection of 49 inventory items revealed that 5 items were not properly tagged, 4 items were in the wrong location, 2 assets were not located, and 4 items were physically located but were not included on the capital assets listing.
Depreciation was not calculated according to the School District's policy.

Cause:

The School District failed to ensure adequate accounting procedures were in place to process, record and report capital assets and related activity.

Effect:

The School District's failure to maintain a complete and accurate capital assets listing can lead to inaccurate internal and external reporting. as well as noncompliance with generally accepted accounting principles.

Recommendation:

The School District should implement adequate internal controls to ensure the accuracy of capital assets records and make appropriate adjustments to ensure that capital assets records and procedures for maintaining capital assets conform to generally accepted accounting principles.

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WILKES 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-7571-07-04

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 ofboth fund level and entity-wide level statements in the School District's financial statements. The School District was unable to provide both fund level and entity-wide level statements for audit.

In addition, during the audit, audit adjustments were necessary because the School District failed to properly record transactions to the general ledger.

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.

III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

No matters were reported.

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SECTIONV MANAGEMENT'S RESPONSES

WILKES COUNTY BOARD OF EDUCATION SCHEDULE OF MANAGEMENT'S RESPONSES
YEAR ENDED JUNE 30, 2007
Finding Control Number: FS-7571-07-01
We concur with this finding. The School District has implemented changes that include periodic review by the central office staff to determine that expenditures are appropriate, properly documented, and recorded. We will continue to revise our procedures to ensure that all activity is accurately recorded. This revision will be implemented by June 2008.
Finding Control Number: FS-7571-07-02
We concur with this finding. The School District will review our procedures and begin modifications that will include increased guidance by the central office staff to determine that expenditures are appropriate, properly documented and recorded, and to ensure adherence to established procedures. This will be implemented by June 30, 2008.
Finding Control Number: FS-7571-07-03
We concur with this finding. The School District will review our capital assets procedures and will revise the process by assigning a yearly physical inventory with various departments to ensure that all assets are accurately and completely recorded. This will be implemented by June 30, 2008.
Finding Control Number: FS-7571-07-04
We concur with the finding. The School District will develop and implement a financial reporting process to ensure that all activity is properly recorded, to verify that financial statements properly reflect all activity, and to include a monitoring process to evaluate the accuracy ofthe financials for audit. This process will be implemented by June 30, 2008.
Contact Person: Elaine Wheatley, Director of Finance Phone: (706) 678-2718 Fax: (706) 678-3799 E-mail Address: wheatleye@wilkes.k12.ga.us