WILKINSON COUNTY BOARD OF EDUCATION IRWINTON, GEORGIA REPORT ON AUDIT OF THE FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2006 STATE OF GEORGIA DEPARTMENT OF AUDITS AND ACCOUNTS Russell W. Hinton State Auditor WILKINSON COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS - SECTION I FINANCIAL INDEPENDENT AUDITOR'S COMBINED REPORT ON BASIC FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION - SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS EXHIBITS BASIC FINANCIAL STATEMENTS DISTRICT-WIDE FINANCIAL STATEMENTS A STATEMENT OF NET ASSETS 1 B STATEMENT OF ACTIVITIES 2 FUND FINANCIAL STATEMENTS C BALANCE SHEET GOVERNMENTAL FUNDS 4 D RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO THE STATEMENT OF NET ASSETS 5 E STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS 6 F RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES TO THE STATEMENT OF ACTIVITIES 7 G STATEMENT OF FIDUCIARY NET ASSETS FIDUCIARY FUNDS 9 H NOTES TO THE BASIC FINANCIAL STATEMENTS 10 SCHEDULES REQUIRED SUPPLEMENTARY INFORMATION 1 SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL GENERAL FUND 25 SUPPLEMENTARY INFORMATION 2 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS 26 3 SCHEDULE OF STATE REVENUE 28 WILKINSON COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS - SECTION I FINANCIAL SCHEDULES SUPPLEMENTARY INFORMATION 4 SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS 29 5 ALLOTMENTS AND EXPENDITURES GENERAL FUND - QUALITY BASIC EDUCATION PROGRAMS (QBE) BY PROGRAM 31 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 CIRCULARA-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 WILKINSON 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 March 6, 2007 Honorable Sonny Perdue, Governor Members ofthe General Assembly Members ofthe State Board of Education and Superintendent and Members ofthe Wilkinson 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 Wilkinson County Board of Education, as of and for the year ended June 30, 2006, which collectively comprise the Board's basic financial statements as listed in the table of contents. These financial statements are the responsibility ofthe Wilkinson County Board ofEducation's management. Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States ofAmerica and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General ofthe United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free ofmaterial misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opm1ons. 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 Wilkinson County Board of Education, as ofJune 30, 2006, and the respective changes in financial position thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America. 2006ARL-11 The Wilkinson County Board of Education has not presented Management's Discussion and Analysis that accounting principles generally accepted in the United States has determined is necessary to supplement, although not to be part of, the basic financial statements. In accordance with Government Auditing Standards, we have also issued our report dated March 6, 2007, on our consideration of the Wilkinson County Board of Education's internal control over financial reporting and our tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements and other matters. The purpose ofthat report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit. The Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual, as presented on page 25, is not a required part of the basic financial statements but is supplementary information required by the accounting principles generally accepted in the United States of America. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods ofmeasurement and presentation ofthe required supplementary information. However, we did not audit the information and express no opinion on it. Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Wilkinson County Board of Education's basic financial statements. The accompanying supplementary information which consist of Schedules 2 through 5, which includes the Schedule of Expenditures of Federal Awards as required by U.S. Office of Management and Budget Circular A-133, Audits ofStates, Local Governments, and Non-Profit Organizations, are presented for purposes of additional analysis and are not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements, and in our opinion, is fairly stated, in all material respects, in relation to the basic financial statements taken as a whole. A copy of this report has been filed as a permanent record in the office of the State Auditor and made available to the press of the State, as provided for by Official Code of Georgia Annotated section 50-6-24. Respectfully submitted, . \A) Russ 11 W. Hinton, CPA, CGFM Stat Auditor RWH:as 2006ARL-11 WILKINSON COUNTY BOARD OF EDUCATION WILKINSON COUNTY BOARD OF EDUCATION STATEMENT OF NET ASSETS JUNE 30, 2006 ASSETS Cash and Cash Equivalents Investments Accounts Receivable, Net Taxes State Government Federal Government Inventories Capital Assets Land Land Improvements Buildings Equipment Less: Accumulated Depreciation Total Assets LIABILITIES Accounts Payable Salaries 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 Continuation of Federal Programs Debt Service Capital Projects Unrestricted (Deficit) Total Net Assets Total Liabilities and Net Assets EXHIBIT"A" GOVERNMENTAL ACTIVITIES $ 221,168 2,356,687 723,865 789,423 389,297 11,816 179,900 1,345,712 17,310,148 2,294,089 -4,936,514 $ ===2=0,=68=5=,5=91= $ 350,621 1,484,757 1,040,000 2,155,000 $ 5,030,378 $ 14,274,203 18,793 1,082,014 388,096 -107 893 $ 15,655,213 $ ===2=0=,6=8=5=,5=91= The notes to the basic financial statements are an integral part of this statement. - 1- WILKINSON COUNTY BOARD OF EDUCATION STATEMENT OF ACTIVITIES FOR THE YEAR ENDED JUNE 30, 2006 GOVERNMENTAL ACTIVITIES Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Other Support Services Operations of Non-Instructional Services 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 Intangible Recording Tax Grants and Contributions not Restricted to Specific Programs Investment Earnings Miscellaneous Total General Revenues Change in Net Assets Net Assets - Beginning of Year Net Assets - End of Year EXPENSES CHARGES FOR SERVICES $ 10,080,158 $ 640,805 730,624 228,506 240,872 773,181 76,747 1,228,458 897,237 70,726 819,022 96 931 $ 15,883,267 $ 9,172 30,795 3,841 163 111,511 155 482 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 $ 5,842,721 147,709 404,365 130,869 315,375 369,715 366,592 461,997 $ 38,449 679,334 $ 8 757 126 $ $ 68,577 68 577 $ -4,228,265 -462,301 -326,259 -97,637 74,503 -399,625 -76,747 -861,703 -366,663 -32,277 -28, 177 -96 931 -6,902,082 $ 5,229,793 26,287 1,111,758 967,641 45,948 24,444 115,555 300 020 $ 7 821 446 $ 919,364 14 735 849 $ ===15='=65=5=,2=13=== -3- WILKINSON COUNTY BOARD OF EDUCATION BALANCE SHEET GOVERNMENTAL FUNDS JUNE 30, 2006 EXHIBIT"C" ASSETS Cash and Cash Equivalents Investments Accounts Receivable, Net Taxes State Government Federal Government Inventories Total Assets LIABILITIES AND FUND BALANCES LIABILITIES Accounts Payable Salaries Payable Total Liabilities FUND BALANCES Reserved for: Continuation of Federal Programs Debt Service Inventories Capital Projects Unreserved Undesignated Reported in: General Fund Total Fund Balances Total Liabilities and Fund Balances GENERAL FUND DISTRICTWIDE CAPITAL PROJECTS FUND DEBT SERVICE FUND TOTAL $ 204,888 $ 16,280 $ 45,454 2,311,233 127,307 789,423 389,297 11 816 300,415 0 $ 221,168 2,356,687 427,722 789,423 389,297 11 816 $ 1,568,185 $ 2,627,928 $ 0 $ ===4=1=9=6=11=3= $ 350,621 1484757 $ 1,835,378 $ 350,621 1484757 $ 1,835,378 $ 6,977 $ 1,082,014 $ 11,816 1,545,914 -285,986 $ -267,193 $ 2,627,928 $ $ 1,568,185 $ 2,627,928 $ $ 6,977 0 1,082,014 11,816 1,545,914 -285,986 0 $ 2,360,735 0 $ ===4=1=9=6=1=13= The notes to the basic financial statements are an integral part of this statement. -4- WILKINSON COUNTY BOARD OF EDUCATION RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO THE STATEMENT OF NET ASSETS JUNE 30, 2006 EXHIBIT"D" Total Fund Balances - Governmental Funds (Exhibit "C") Amounts reported for Governmental Activities in the Statement of Net Assets are different because: Capital Assets used in Governmental Activities are not financial resources and therefore are not reported in the funds. These assets consist of: Land Land Improvements Buildings Equipment Accumulated Depreciation Total Capital Assets Some of the School District's property tax revenues will be collected after year-end but are not available soon enough to pay for the current period's expenditures. Long-Term Liabilities, including Bonds Payable, are not due and payable in the current period and therefore are not reported as liabilities in the funds. Long-Term Liabilities at year-end consist of: Bonds Payable Net Assets of Governmental Activities (Exhibit "A") $ 2,360,735 $ 179,900 1,345,712 17,310,148 2,294,089 -4 936 514 16,193,335 296,143 -3,195,000 $ 15,655,213 The notes to the basic financial statements are an integral part of this statement. -5- WILKINSON COUNTY BOARD OF EDUCATION STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS YEAR ENDED JUNE 30, 2006 EXHIBIT "E" REVENUES Property Taxes Sales Taxes State Funds Federal Funds Charges for Services Investment Earnings Miscellaneous Total Revenues EXPENDITURES Current Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Other Support Services 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 $ 5,229,188 45,948 $ 6,733,023 2,117,124 155,482 26,717 306 407 $ 967,641 $ 1,111,758 88,838 $ 14,613,889 $ 1,056,479 $ 1 111 758 $ 5,229,188 2,125,347 6,733,023 2,117,124 155,482 115,555 306 407 16,782,126 $ 9,517,324 $ 640,805 730,624 228,506 240,872 773,181 76,747 1,229,240 878,094 70,726 800,445 $ 2,599,525 $ 1,015,000 96 931 $ 15,186,564 $ 2,599,525 $ 1 111 931 $ $ -572,675 $ -1,543,046 $ -173 $ 305,482 4 170 974 173 9,517,324 640,805 730,624 228,506 240,872 773,181 76,747 1,229,240 878,094 70,726 800,445 2,599,525 1,015,000 96 931 18,898,020 -2,115,894 4,476,629 $ -267,193 $ 2,627,928 $ 0 $ ====2,=36=0=,7=35= The notes to the basic financial statements are an integral part of this statement. -6 - WILKINSON COUNTY BOARD OF EDUCATION RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES TO THE STATEMENT OF ACTIVITIES JUNE 30, 2006 EXHIBIT"F" Total Net Change in Fund Balances - Governmental Funds (Exhibit "E") Amounts reported for Governmental Activities in the Statement of Activities are different because: Capital Outlays are reported as expenditures in Governmental Funds. However, in the Statement of Activities, the cost of Capital Assets is allocated over their estimated useful lives as depreciation expense. In the current period, these amounts are: Capital Outlay Depreciation Expense Excess of Capital Outlay over Depreciation Expense Because some property taxes will not be collected for several months after the School District's fiscal year ends, they are not considered "available" revenues. In the Statement of Activities, only the gain on the sale of the land/equipment is reported, whereas in the Governmental Funds, the entire proceeds from the sale increase financial resources. Thus, the change in net assets differs from the change in fund balances by the cost of the land/carrying value of the equipment sold. Repayment of Long-Term Debt is reported as an expenditure in Governmental Funds, but the repayment reduces Long-Term Liabilities in the Statement of Net Assets. In the current year, these amounts consist of: Bond Principal Retirements $ -2,115,894 $ 2,485,401 -456 833 2,028,568 26,892 -35,202 1,015,000 Change in Net Assets of Governmental Activities (Exhibit "B") $ ===9=19=,3=6=4 The notes to the basic financial statements are an integral part of this statement. -7- (This page left intentionally blank) WILKINSON COUNTY BOARD OF EDUCATION STATEMENT OF FIDUCIARY NET ASSETS FIDUCIARY FUNDS JUNE 30, 2006 ASSETS Accounts Receivable, Net Other LIABILITIES Cash Overdraft EXHIBIT"G" AGENCY FUNDS $ =====4==88=5= $ ===4===88=5= The notes to the basic financial statements are an integral part of this statement. -9- WILKINSON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2006 EXHIBIT"H" Note 1: DESCRIPTION OF SCHOOL DISTRICT AND REPORTING ENTITY REPORTING ENTITY The Wilkinson County Board of Education (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 Wilkinson 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. - 10 - WILKINSON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2006 EXHIBIT"H" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The School District reports the following major governmental funds: General Fund is the School District's primary operating fund. It accounts for all financial resources ofthe School District, except those resources required to be accounted for in another fund. District-wide Capital Projects Fund accounts for financial resources including Special Purpose Local Option Sales Tax (SPLOST) and Bond Proceeds to be used for the acquisition, construction or renovation of major capital facilities. Debt Service Fund accounts for taxes (sales) legally restricted for the payment ofgeneral longterm principal, interest and paying agent's fees. The School District reports the following fiduciary fund type: Agency funds account for assets held by the School District as an agent for various funds, governments or individuals. BASIS OF ACCOUNTING The basis ofaccounting determines when transactions are reported on the financial statements. The District-wide governmental and fiduciary fund financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded at the time liabilities are incurred, regardless ofwhen the related cash flows take place. Nonexchange transactions, in which the School District gives (or receives) value without directly receiving (or giving) equal value in exchange, include property taxes, sales taxes, grants and donations. On an accrual basis, revenue from property taxes is recognized in the fiscal year for which the taxes are levied. Revenue from sales taxes is recognized in the fiscal year in which the underlying transaction (sale) takes place. Revenue from grants and donations is recognized in the fiscal year in which all eligibility requirements have been satisfied. The School District uses funds to report on its financial position and the results of its operations. Fund accounting is designed to demonstrate legal compliance and to aid financial management by segregating transactions related to certain governmental functions or activities. A fund is a separate accounting entity with a self-balancing set of accounts. Governmental funds are reported using the current financial resources measurement focus and the modified accrual basis ofaccounting. Under this method, revenues are recognized when measurable and available. The School District considers all revenues reported in the governmental funds to be available if they are collected within sixty days after year-end. Property taxes, sales taxes and interest are considered to be susceptible to accrual. Expenditures are recorded when the related fund - 11 - WILKINSON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2006 EXHIBIT "H" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES liability is incurred, except for principal and interest on general long-term debt, which are recognized as expenditures to the extent they have matured. Capital asset acquisitions are reported as expenditures in governmental funds. The School District funds certain programs by a combination ofspecific cost-reimbursement grants, categorical grants, and general revenues. Thus, when program costs are incurred, there are both restricted and unrestricted net assets available to finance the program. It is the School District's policy to first apply grant resources to such programs, followed by cost-reimbursement grants, then general revenues. CASH AND CASH EQUIVALENTS COMPOSITION OF DEPOSITS Cash and cash equivalents consist ofcash on hand, demand deposits and short-term investments with original maturities of three months or less from the date of acquisition in authorized financial institutions. Georgia Laws OCGA 45-8-14 authorize the School District to deposit its funds in one or more solvent banks or insured Federal savings and loan associations. INVESTMENTS COMPOSITION OF INVESTMENTS Investments made by the School District in nonparticipating interest-earning contracts (such as certificates ofdeposit) and repurchase agreements are reported at cost. Participating interest-earning contracts and money market investments with a maturity at purchase of one year or less are reported at amortized cost. Both participating interest-earning contracts and money market investments with a maturity at purchase greater than one year are reported at fair value. The Official Code ofGeorgia Annotated Section 36-83-4 authorizes the School District to invest its funds. In selecting among options for investment or among institutional bids for deposits, the highest rate ofreturn shall be the objective, given equivalent conditions of safety and liquidity. Funds may be invested in the following: (1) Obligations issued by the State of Georgia or by other states, (2) Obligations issued by the United States government, (3) Obligations fully insured or guaranteed by the United States government or a United States government agency, (4) Obligations of any corporation of the United States government, (5) Prime banker's acceptances, - 12 - WILKINSON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2006 EXHIBIT "H" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (6) The Local Government Investment Pool administered by the State of Georgia, Office of Treasury and Fiscal Services, (7) Repurchase agreements, and (8) Obligations of other political subdivisions of the State of Georgia. The School District does not have a formal policy regarding investment policies that address credit risks, custodial credit risks, concentration ofcredit risks, interest rate risks or foreign currency risks. RECEIVABLES Receivables consist of amounts due from property and sales taxes, grant reimbursements due on Federal, State or other grants for expenditures made but not reimbursed and other receivables disclosed from information available. Receivables are recorded when either the asset or revenue recognition criteria has been met. Receivables recorded on the basic financial statements do not include any amounts which would necessitate the need for an allowance for uncollectible receivables. PROPERTY TAXES The Wilkinson County Board ofCommissioners fixed the property tax levy for the 2005 tax digest year (calendar year) on October 13, 2005 (levy date). Taxes were due on December 20, 2005. Taxes collected within the current fiscal year or within 60 days after year-end on the 2005 tax digest are reported as revenue in the governmental funds for fiscal year 2006. The Wilkinson County Tax Commissioner bills and collects the property taxes for the School District, withholds 2.5% oftaxes collected as a fee for tax collection and remits the balance of taxes collected to the School District. Property tax revenues, at the fund reporting level, during the fiscal year ended June 30, 2006, for maintenance and operations amounted to $5,202,901. The tax millage rate levied for the 2005 tax year (calendar year) for the Wilkinson County Board of Education was as follows (a mill equals $1 per thousand dollars of assessed value): School Operations 16.338 mills SALES TAXES Special Purpose Local Option Sales Tax, at the fund reporting level, during the year amounted to $2,079,399 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. - 13 - WILKINSON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2006 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 of purchase (including ancillary charges). On the District-wide financial statements, all purchased capital assets are valued at cost where historical records are available and at estimated historical cost based on appraisals or deflated current replacement cost where no historical records exist. Donated capital assets are recorded at estimated fair market value on the date donated. Disposals are deleted at depreciated recorded cost. The cost of normal maintenance and repairs that do not add to the value of assets or materially extend the useful lives of the assets is not capitalized. Depreciation is computed using the straight-line method. The School District does not capitalize book collections or works of art. Capitalization thresholds and estimated useful lives of capital assets reported in the District-wide statements are as follows: Capitalization Policy Estimated Useful Life Land Land Improvements Buildings and Improvements Equipment Construction in Progress All NIA $ 5,000 20 to 80 years $ 5,000 10 to 80 years $ 5,000 3 to 20 years $ 5,000 NIA 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 - 14 - WILKINSON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2006 EXHIBIT"H" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES statements during the fiscal year bonds are issued. General obligation bonds are direct obligations and pledge the full faith and credit of the government. The outstanding amount of these bonds is recorded in the Statement of Net Assets. DEFICIT FUND BALANCES The fund reporting a deficit fund balance at June 30, 2006, is as follows: Fund Type/Fund Name Deficit Balance Governmental Funds General Fund Management has implemented a system of millage increases and expenditure reductions. Note 3: DEPOSITS AND INVESTMENTS COLLATERALIZATION OF DEPOSITS Official Code of Georgia Annotated (OCGA) Section 45-8-12 provides that there shall not be on deposit at any time in any depository for a time longer than ten days a sum of money which has not been secured by surety bond, by guarantee of insurance, or by collateral. The aggregate ofthe face value ofsuch surety bond and the market value of securities pledged shall be equal to not less than 110 percent ofthe public funds being secured after the deduction ofthe amount ofdeposit insurance. Ifa depository elects the pooled method (OCGA 45-8-13.1) the aggregate ofthe market value ofthe securities pledged to secure a pool ofpublic funds shall be not less than 110 percent ofthe daily pool balance. Acceptable security for deposits consists of any one of or any combination of the following: (1) Surety bond signed by a surety company duly qualified and authorized to transact business within the State of Georgia, (2) Insurance on accounts provided by the Federal Deposit Insurance Corporation, (3) Bonds, bills, notes, certificates of indebtedness or other direct obligations of the United States or of the State of Georgia, (4) Bonds, bills, notes, certificates of indebtedness or other obligations of the counties or municipalities of the State of Georgia, (5) Bonds of any public authority created by the laws of the State of Georgia, providing that the statute that created the authority authorized the use of the bonds for this purpose, - 15 - WILKINSON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2006 EXHIBIT "H" Note 3: DEPOSITS AND INVESTMENTS (6) Industrial revenue bonds and bonds of development authorities created by the laws of the State of Georgia, and (7) Bonds, bills, notes, certificates of indebtedness, or other obligations of a subsidiary corporation of the United States government, which are fully guaranteed by the United States government both as to principal and interest or debt obligations issued by the Federal Land Bank, the Federal Home Loan Bank, the Federal Intermediate Credit Bank, the Central Bank for Cooperatives, the Farm Credit Banks, the Federal Home Loan Mortgage Association, and the Federal National Mortgage Association. CATEGORIZATION OF DEPOSITS At June 30, 2006, the bank balances were $1,250,989. The amounts of the total bank balances are classified into four categories of custodial credit risk: Category 1 - Cash that is insured (e.g., Federal Deposit Insurance) or collateralized with securities held by the School District or by the School District's agent in the School District's name. Category 2 - Cash collateralized with securities held by the pledging financial institution's trust department or agent in the School District's name. Category 3 - Cash collateralized with securities held by the pledging financial institution, or by its trust department or agent but not in the School District's name. Category 4 - Uncollateralized. The School District's deposits are classified by custodial credit risk category at June 30, 2006, as follows: Custodial Credit Risk Category Bank Balance 1 $ 200,000 2 1,050,989 3 0 4 0 Total $ 1,250,989 CATEGORIZATION OF INVESTMENTS At June 30, 2006, the carrying value ofthe School District's total investments was $2,356,687 which is materially the same as fair value. This investment consisted entirely offunds invested in the Local Government Investment Pool administered by the State of Georgia, Office of Treasury and Fiscal Services which are not required to be categorized since the School District did not own any specific identifiable securities in the pool. The investment policy ofthe State of Georgia, Office ofTreasury - 16 - WILKINSON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2006 EXHIBIT"H" Note 3: DEPOSITS AND INVESTMENTS and Fiscal Services for the Local Government Investment Pool (Primary Liquidity Portfolio) does not provide for investment in derivatives or similar investments. A description of the Primary Liquidity Portfolio is as follows: The Primary Liquidity Portfolio consists of Georgia Fund 1, which is a combination local and state government investment pool. Georgia Fund 1 is a stable net asset value investment pool which follows Standard and Poor's criteria for AAAm rated money market funds. The pool is not registered with the SEC as an investment company but does operate Georgia Fund 1 in a manner consistent with Rule 2a-7 of the Investment Company Act of 1940. The pool's primary objectives are safety of capital, investment income, liquidity and diversification while maintaining principal ($1.00 per share value). Net asset value is calculated daily and reported to the rating agency weekly to ensure stability. The pool distributes earnings (net of management fees) on a monthly basis and values participant's shares sold and redeemed at the pool's share price, $1.00 per share. Pooled cash and cash equivalents and investments are reported at cost. The pool does not issue any legally binding guarantees to support the value of the shares. Participation in the pool is voluntary and deposits consist of funds from local governments; operating and trust funds of Georgia's state agencies, colleges and universities; and current operating funds of the State of Georgia's General Fund. Investments in Georgia Fund 1 are directed toward short-term instruments such as U.S. Treasury obligations, securities issued or guaranteed as to principal and interest by the U.S. Government or any of its agencies or instrumentalities, banker's acceptances and repurchase agreements. The weighted average maturity of Georgia Fund 1 may not exceed 60 days. The weighted average maturity for Georgia Fund 1 on June 30, 2006, was 28 days. Note 4: NON-MONETARY TRANSACTIONS The School District receives food commodities from the United States Department of Agriculture (USDA) for school breakfast and lunch programs. These commodities are recorded at their Federally assigned value. See Note 2 - Inventories Note 5: CAPITAL ASSETS The following is a summary of changes in the Capital Assets during the fiscal year: - 17 - WILKINSON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2006 EXHIBIT"H" Note 5: CAPITAL ASSETS Balances July 1. 2005 Increases Balances Decreases June 30, 2006 Governmental Activities Capital Assets, Not Being Depreciated: Land Construction in Progress $ 208,715 $ 28,815 $ 4,836,450 $ 2,298.177 7,134.627 179,900 0 Total Capital Assets Not Being Depreciated $ 5,045.165 $ 2,298.177 $ 7,163,442 $ 179.900 Capital Assets Being Depreciated Buildings and Improvements Equipment Land Improvements $ 10,713,637 $ 2,217,051 778,781 6,596,511 158,409 $ 566,931 $ 17,310,148 81,371 2,294,089 1,345,712 Less Accumulated Depreciation for: Buildings and Improvements Equipment Land Improvements 2,646,129 1,428,381 480.155 242,452 155,865 58.516 74,984 2,888,581 1,509,262 538.671 Total Capital Assets, Being Depreciated, Net $ 9,154.804 $ 6,865.018 $ 6 387 $ 16.013,435 Governmental Activity Capital Assets - Net $ 14,199.969 $ 9.163.195 $ 7.169.829 $ 16,193.335 Current year depreciation expense by function is as follows: Instruction Support Services Maintenance and Operation of Plant Student Transportation Services Food Services $ 284,916 $ 14,616 1472897 162,513 9404 $ 456.833 Note 6: RESTRICTED ASSETS Special Purpose Local Option Sales Tax (SPLOST) and general obligation bond proceeds are reported as restricted assets in the Statement ofNet Assets because their use is limited by applicable bond covenants or statutory provisions. Restricted assets at June 30, 2006, were as follows: - 18 - WILKINSON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2006 EXHIBIT "H" Note 6: RESTRICTED ASSETS District-wide Capital Projects Bond SPLOST Proceeds Restricted Cash and Cash Equivalents: Debt Services Restricted Investments: Debt Services Capital Acquisitions $ 16,280 $ 1,065,734 $ 50,141 $ 1,195,358 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. However, the errors or omissions policy excludes coverage for sexual harassment and discrimination. 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 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: Beginning of Year Liability Claims and Changes in Estimates Claims Paid End of Year Liability 2005 2006 $ 0 $ 5 146 $ 5 146 $ 0 $ 0 $ 0 $ 0 $ 0 The School District participates in the Georgia Education Workers' Compensation Trust, a public entity risk pool organized on December 1, 1991, to develop, implement and administer a program of - 19 - WILKINSON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2006 EXHIBIT "H" Note 7: RISK MANAGEMENT workers' compensation self-insurance for its member organizations. The School District pays an annual premium to the Trust for its general insurance coverage. Additional insurance coverage is provided through an agreement by the Trust with the Midwest Employers Casualty Company to provide coverage for potential losses sustained by the Trust in excess of $500,000 loss per occurrence, up to $2,000,000. The School District has purchased a surety bond to provide additional insurance coverage as follows: Position Covered Amount All Employees $ 100,000 Note 8: OPERATING LEASES Wilkinson County Board of Education has entered into various leases as lessee for copiers. These leases are considered for accounting purposes to be operating leases. Lease expenditures for the year ended June 30, 2006, for governmental funds amounted to $40,597. Future minimum lease payments for these leases are as follows: Year Ending Governmental Funds 2007 Note 9: SHORT-TERM DEBT $===4-,5=-8=3 The School District obtains temporary loans 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 of the total gross income from taxes collected in the preceding year and requires all short-term debt to be repaid no later than December 31 of the calendar year in which the debt was incurred. Short-term debt activity for the fiscal year is as follows: Beginning Balance Issued Redeemed Ending Balance Temporary Loans $=======0 $ 500.000 $ 500,000 $======0 -20- WILKINSON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2006 EXHIBIT "H" Note 10: LONG-TERM DEBT GENERAL OBLIGATION DEBT OUTSTANDING General Obligation Bonds currently outstanding are as follows: Purpose Interest Rate Amount General Government - Series 2002 2.63% $ 3,195,000 The changes in Long-Term Debt during the fiscal year ended June 30, 2006, were as follows: Governmental Funds General Obligation Bonds Balance July 1, 2005 $ 4,210,000 Deductions Debt Retired 1,015.000 Balance June 30, 2006 $ 3,195.000 Portion of Long-Term Debt Due within One Year $ 1.040.000 At June 30, 2006, payments due by fiscal year which includes principal and interest for these items are as follows: Fiscal Year Ended June 30 General Obligation Debt Principal Interest 2007 2008 2009 $ 1,040,000 $ 1,065,000 1.090.000 70,352 42,672 14.333 Total Principal and Interest $ 3,195.000 $ 121,351 - 21 - WILKINSON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2006 EXHIBIT "H" 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: RELATED PARTY TRANSACTIONS The School District employed the services of James S. Price Construction Company for various small construction, renovation, and/or maintenance projects. This company is owned and operated by James S. Price, the stepfather of Kathy Jackson, who is currently the Bookkeeper for the Wilkinson County Board ofEducation. These jobs did not reach a monetary level that required them to be bid out. Current year expenditures to James S. Price Construction Company totaled $6,425. Also, Jackson Landscaping was employed for various grassing and shrubbery work for the maintenance department. This company is owned and operated by Johnny Jackson, the husband of Kathy Jackson, the Bookkeeper for the Wilkinson County Board of Education. Individually, these jobs did not reach a monetary level that required them to be bid out. Current year expenditures to Jackson Landscaping were $14,450. 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 9.24% and employer contributions for the current fiscal year and the preceding two fiscal years are as follows: - 22 - WILKINSON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2006 EXHIBIT"H" Note 13: RETIREMENT PLANS Fiscal Year 2006 2005 2004 Percentage Contributed 100% 100% 100% Required Contribution $ 760,077 $ 727,739 $ 736,885 - 23 - (This page left intentionally blank) WILKINSON COUNTY BOARD OF EDUCATION GENERAL FUND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL YEAR ENDED JUNE 30, 2006 SCHEDULE "1" REVENUES Property Taxes Sales Taxes State Funds Federal Funds Charges for Services Investment Earnings Miscellaneous Total Revenues EXPENDITURES Current Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Other Support Services Food Services Operation Total Expenditures Net Change in Fund Balances Fund Balances - Beginning Inventory - Net Change in Period NONAPPROPRIATED BUDGETS ORIGINAL (1) FINAL (1) ACTUAL AMOUNTS $ 4,962,939 $ 4,962,939 $ 5,229,188 45,948 5,974,560 5,974,560 6,733,023 327,314 327,314 2,117,124 155,482 22,000 22,000 26,717 306 407 $ 11,286,813 $ 11,286,813 $ 14,613,889 $ 7,856,989 $ 8,309,540 $ 9,517,324 359,072 411,953 246,820 277,261 878,448 77,290 1,152,696 941,803 8,500 359,072 434,154 246,820 278,011 878,448 77,290 1,152,696 941,803 35,682 640,805 730,624 228,506 240,872 773,181 76,747 1,229,240 878,094 70,726 800 445 $ 12,210,832 $ 12,713,516 $ 15,186,564 $ -924,019 $ -1,426,703 $ -572,675 1,102,958 1,102,958 305,482 2 726 2 726 Fund Balances - Ending $ 181 665 $ -321 019 $===-2=6=7=19=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- WILKINSON COUNTY BOARD OF EDUCATION SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS YEAR ENDED JUNE 30, 2006 SCHEDULE "2" FUNDING AGENCY PROGRAM/GRANT Agriculture, U. S. Department of Child Nutrition Cluster Pass-Through From Georgia Department of Education Food Services School Breakfast Program National School Lunch Program Total Child Nutrition Cluster Other Programs Pass-Through From Georgia Department of Education Food Donation (1) Total U. S. Department of Agriculture Education, U. S. Department of Special Education Cluster Pass-Through From Georgia Department of Education Special Education Grants to States Preschool Grants Total Special Education Cluster Other Programs Pass-Through From Georgia Department of Education Enhancing Education Through Technology Program Even Start Hurricane Education Recovery Improving Teacher Quality State Grants Mathematics and Science Partnerships Reading First State Grants Rural Education Safe and Drug-Free Schools and Communities State Grants for Innovative Programs Title I Grants to Local Educational Agencies Vocational Education - Basic Grants to States Total U.S. Department of Education Total Federal Financial Assistance NIA = Not Available CFDA NUMBER PASSTHROUGH ENTITY ID NUMBER EXPENDITURES IN PERIOD 10.553 10.555 N/A N/A $ $ (2) 732 260 732,260 10.550 NIA $ 36152 768412 * 84.027 * 84.173 N/A $ N/A $ 318,529 18 712 337,241 84.318 84.213 84.938 84.367 84.366 84.357 84.358 84.186 84.298 * 84.010 84.048 N/A N/A N/A N/A NIA N/A NIA N/A N/A N/A N/A $ 151,873 175,000 (3) 156,196 42,518 60,410 12,770 9,641 5,780 498,274 29410 1479113 $ ===2,=24=7=,5=2=5 - 26 - WILKINSON COUNTY BOARD OF EDUCATION SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS YEAR ENDED JUNE 30, 2006 SCHEDULE "2" Notes to the Schedule of Expenditures of Federal Awards (1) The amount shown for the Food Donation Program represents the Federally assigned value of nonmonetary assistance for donated commodities received and/or consumed by the School District during the current fiscal year. (2) Expenditures for the funds earned on the School Breakfast Program ($155,442) were not maintained separately and are included in the 2006 National School Lunch Program. (3) Funds earned on the Hurricane Education Recovery program, in the amount of $4,347, do not require reporting of expenditures. Major Programs are identified by an asterisk (*) in front of the CFDA number. The School District did not provide Federal Assistance to any Subrecipient. The accompanying schedule of expenditures of Federal awards includes the Federal grant activity of the Wilkinson 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. - 27 - WILKINSON COUNTY BOARD OF EDUCATION SCHEDULE OF STATE REVENUE YEAR ENDED JUNE 30, 2006 AGENCY/FUNDING GRANTS Bright From the Start: Georgia Department of Early Care and Learning Pre-Kindergarten Program Education, Georgia Department of Quality Basic Education Direct Instructional Cost Kindergarten Program Kindergarten Program - Early Intervention Program Primary Grades (1-3) Program Primary Grades - Early Intervention (1-3) Program Upper Elementary Grades (4-5) Program Upper Elementary Grades - Early Intervention (4-5) Program Middle Grades (6-8) Program High School General Education (9-12) Program Vocational Laboratory (9-12) Program Students with Disabilities Gifted Student - Category VI Remedial Education Program Alternative Education Program English Speakers of Other Languages (ESOL) Media Center Program 20 Days Additional Instruction Staff and Professional Development Indirect Cost Central Administration School Administration Facility Maintenance and Operations Categorical Grants Pupil Transportation Regular Bus Replacement Sparsity Nursing Services Principal Supplements Food Services Vocational Education Austerity Reduction Other State Programs K-3 Statewide Reading Program National Teacher Certification Preschool Handicapped Program Virtual Schools State Grant Human Resources, Georgia Department of High School-Based Summer Learning Program See notes to the basic financial statements. - 28- SCHEDULE "3" GOVERNMENTAL FUND TYPE GENERAL FUND $ 495,498 556,316 4,719 963,805 31,512 470,824 52,159 782,082 722,030 178,878 809,801 38,198 -913 61,930 14,763 131,298 42,393 25,952 289,042 364,781 366,460 454,609 68,577 20,000 46,424 5,306 45,670 16,616 -407,475 28,471 3,903 37,437 50 11 907 $ ===6=,7=3=3.,0..=23= WILKINSON COUNTY BOARD OF EDUCATION SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS YEAR ENDED JUNE 30, 2006 SCHEDULE "4" PROJECT ORIGINAL ESTIMATED COST (1) CURRENT ESTIMATED COSTS (2) AMOUNT EXPENDED IN CURRENT YEAR (3) AMOUNT EXPENDED IN PRIOR YEARS (3) PROJECT STATUS Acquisition, construction and equipping of facility renovations for expanded vocational offerings at Wilkinson County High School, multipurpose gymnasium facility at Wilkinson County High School, an Athletic complex at the High School/Middle School campus to include upgrading existing baseball, softball soccer, track, tennis and football facilities, (4) classrooms at Primary/Elementary School, modifications to and improvement of parking facilities at all campuses, the installation of technology and security improvements at all campuses, administrative offices, and renovating, repairing, improving and equipping instructional and support facilities, existing school buildings and other buildings and facilities useful or desirable in connection therewith, and acquiring any necessary property therefor, both real and personal $ 5,200,000 $ 8,774,715 $ 21696.456 $ 6,078,259 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 Wilkinson 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. -29- (This page left intentionally blank) WILKINSON COUNTY BOARD OF EDUCATION GENERAL FUND QUALITY BASIC EDUCATION PROGRAM (QBE) ALLOTMENTS AND EXPENDITURES BY PROGRAM YEAR ENDED JUNE 30, 2006 SCHEDULE "5" DESCRIPTION ALLOTMENTS FROM GEORGIA DEPARTMENT OF EDUCATION (1) (2) ELIGIBLE QBE PROGRAM COSTS SALARIES OPERATIONS TOTAL Direct Instructional Programs Kindergarten Program $ Kindergarten Program-Early Intervention Program Primary Grades (1-3) Program Primary Grades-Early Intervention (1-3) Program Upper Elementary Grades (4-5) Program Upper Elementary Grades-Early Intervention (4-5) Program Middle School (6-8) Program High School General Education (9-12) Program Vocational Laboratory (9-12) Program Students with Disabilities Category I Category II Category Ill Category IV Gifted Student - Category VI Remedial Education Program Alternative Education Program English Speakers of Other Languages (ESOL) 694,978 $ 6,Q18 1,236,565 38,391 591,806 65,628 1,005,278 921,398 224,203 1,019,194 47,936 7,637 78,989 16 154 564,019 $ 13,829 1,195,921 132,518 619,520 71,159 1,442,220 1,480,854 256,234 48,058 463,772 449,448 52,601 1,515 268,866 22 645 16,425 $ 48,976 127 40,917 50,102 77,372 34,522 20,188 5,361 54 533 580,444 13,829 1,244,897 132,645 660,437 71,159 1,492,322 1,558,226 290,756 48,058 483,960 454,809 52,655 533 1,515 268,866 22 645 TOTAL DIRECT INSTRUCTIONAL PROGRAMS $ 5,954,175 $ 7,083,179 $ 294,577 $ 7,377,756 Media Center Program Staff and Professional Development 167,080 33 133 205,144 28,635 17,985 20 568 223,129 49 203 TOTAL QBE FORMULA FUNDS $ 6 154 388 $ 7,316,958 $ 333,130 $ ===='7,=65=0=,0=8=8 (1) Comprised of State Funds plus Local Five Mill Share. (2) Allotments do not include the impact of the State budget austerity reduction. See notes to the basic financial statements. - 31 - 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 March 6, 2007 Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education and Superintendent and Members of the Wilkinson 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 Wilkinson County Board of Education as of and for the year ended June 30, 2006, which collectively comprise Wilkinson County Board of Education's basic financial statements and have issued our report thereon dated March 6, 2007. We conducted our audit in accordance with auditing standards generally accepted in the United States ofAmerica and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Internal Control Over Financial Reporting In planning and performing our audit, we considered Wilkinson County Board of Education's internal control over financial reporting in order to determine our auditing procedures for the purpose ofexpressing our opinions on the financial statements and not to provide an opinion on the internal control over financial reporting. However, we noted certain matters involving the internal control over financial reporting and its operation that we consider to be reportable conditions. Reportable conditions involve matters coming to our attention relating to significant deficiencies in the design or operation of the internal control over financial reporting that, in our judgment, could adversely affect Wilkinson County Board of Education's ability to record, process, summarize and report financial data consistent with assertions of management in the financial statements. Reportable conditions are described in the accompanying Schedule of Findings and Questioned Costs as items FS-7581-06-01, FS-7581-06-02, FS-7581-06-03 and FS-7581-06-04. 2006YB-30 A material weakness is a reportable condition in which the design or operation ofone or more ofthe internal control components does not reduce to a relatively low level the risk that misstatements caused by error or fraud in amounts that would be material in relation to the financial statements being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. Our consideration of the internal control over financial reporting would not necessarily disclose all matters in the internal control that might be reportable conditions and, accordingly, would not necessarily disclose all reportable conditions that are also considered to be material weaknesses. However, we believe none of the reportable conditions described above are material weaknesses. Compliance and Other Matters As part of obtaining reasonable assurance about whether Wilkinson County Board of Education's financial statements are free of material misstatement, we performed tests of its compliance with certain provisions oflaws, regulations, contracts and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. This report is intended solely for the information and use of the management and members of the Wilkinson County Board of Education and is not intended to be and should not be used by anyone other than these specified parties. Respectfully submitted, RWH:as 2006YB-30 sell W. Hinton, CPA, CGFM State Auditor Russell W. Hinton STATE AUDITOR (404) 656-2174 DEPARTMENT OF AUDITS AND ACCOUNTS 270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400 March 6, 2007 Honorable Sonny Perdue, Governor Members of the General Assembly Members ofthe State Board of Education and Superintendent and Members of the Wilkinson 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 Wilkinson County Board of Education with the types of compliance requirements described in the U.S. Office ofManagement and Budget (0MB) Circular A-133 Compliance Supplement that are applicable to each ofits major Federal programs for the year ended June 30, 2006. Wilkinson 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 ofWilkinson County Board of Education's management. Our responsibility is to express an opinion on Wilkinson County Board of Education's compliance based on our audit. We conducted our audit of compliance 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 of the United States; and 0MB Circular A133, Audits of States, Local Governments, and Non-Profit Organizations. Those standards and 0MB Circular A-133 require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major Federal program occurred. An audit includes examining, on a test basis, evidence about the Wilkinson County Board of Education's compliance 2006SA-15 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 Wilkinson County Board ofEducation's compliance with those requirements. In our opinion, the Wilkinson County Board ofEducation complied, in all material respects, with the requirements referred to above that are applicable to each of its major Federal programs for the year ended June 30, 2006. However, the results of our auditing procedures disclosed an instance of nonmaterial noncompliance with those requirements which is described in the accompanying Schedule of Findings and Questioned Costs as item FA-7581-06-01. Internal Control Over Compliance The management of Wilkinson 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 Wilkinson County Board of Education's internal control over compliance with requirements that could have a direct and material effect on a major Federal program in order to determine our auditing procedures for the purpose of expressing our opinion on compliance and to test and report on internal control over compliance in accordance with 0MB Circular A-133. Our consideration ofthe internal control over compliance would not necessarily disclose all matters in the internal control that might be material weaknesses. A material weakness is a reportable condition in which the design or operation of one or more of the internal control components does not reduce to a relatively low level ofrisk that noncompliance with applicable requirements oflaws, regulations, contracts and grants caused by error or fraud that would be material in relation to a major Federal program being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. We noted no matters involving the internal control over compliance and its operation that we consider to be material weaknesses. This report is intended solely for the information and use of the management, members of the Wilkinson 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~~ State Auditor RWH:as 2006SA-15 SECTION III AUDITEE'S RESPONSE TO PRIOR YEAR FINDINGS AND QUESTIONED COSTS WILKINSON COUNTY BOARD OF EDUCATION AUDITEE'S RESPONSE SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2006 PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS FINDING CONTROL NUMBER AND STATUS FS-7581-04-01 FS-7581-05-01 Further Action Not Warranted Unresolved - See Corrective Action/Reponses CORRECTIVE ACTION/RESPONSES CASH AND CASH EQUIVALENTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Controls Finding Control Number: FS-7581-05-01 Several meetings were held with school principals and school bookkeepers to come up with a plan to separate duties and correct the above mentioned findings. Each principal is to sign offon financial reports monthly and submit a copy to the Board office. Procedures were put into place to separate the duties within each office. We also held in house workshops on properly documenting receipts and expenditures and implemented the use of purchase orders at the school level for school activity accounts. In addition, we employed a person to check in all goods when they are delivered. All items are delivered to the transportation department. There they are opened, counted, the shipping receipt is signed and a copy sent to the board office. The clerk at the bus shop also keeps a copy and sends a copy along with the goods to the appropriate school. It is then checked again by the person who placed the order. We believe we have proper procedures in order for fiscal year 2006 to sufficiently take care of this finding. - 1- WILKINSON COUNTY BOARD OF EDUCATION AUDITEE'S RESPONSE SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2006 PRIOR YEAR FEDERAL AWARD FINDINGS AND QUESTIONED COSTS FINDING CONTROL NUMBER AND STATUS FS-7581-05-01 Unresolved - See Corrective Action/Reponses CORRECTIVE ACTION/RESPONSES ALLOWABLE COSTS/COST PRINCIPLES SPECIAL TESTS AND PROVISIONS Fiscal Requirements of Schoolwide Program Not Fully Implemented Finding Control Number: FA-7581-05-01 Wilkinson County Board ofEducation staffmembers had discussions with Department of Education personnel to determine what steps should be taken to correct this finding. This included people from the state Title I program as well as Financial Review. We were told that we could consolidate any amount into Fund 400 along with Title I funds. We consolidated $2,000 from Title II A funds in an effort to rectify this finding. All expenditures were then moved to Fund 400. Also, the teachers that were questioned during the fiscal year 2005 audit are no longer being charged to the schoolwide program. We believe we made every possible attempt to correct this finding using the guidelines that were given to us by the Georgia Department of Education. We believe we have proper procedures in order for fiscal year 2007 to sufficiently take care of this finding. -2- SECTION IV FINDINGS AND QUESTIONED COSTS WILKINSON COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2006 I SUMMARY OF AUDITOR'S RESULTS 1. Type of Report Issued on the Financial Statements The auditor's opinion on the Wilkinson County Board of Education's financial statements was unqualified. 2. Reportable Conditions in Internal Control Disclosed by the Audit of the Financial Statements The audit report for the Wilkinson County Board ofEducation disclosed financial statement reportable conditions related to the following control categories. Cash and Cash Equivalents Employee Compensation General Ledger Expenditures/Liabilities/Disbursements Revenues/Receivables/Receipts Budget Preparation/Execution None ofthe reportable conditions described above are considered to be material weaknesses. 3. Noncompliance Material to the Financial Statements The audit of the Wilkinson County Board of Education disclosed no instances of noncompliance that were deemed to be material to the financial statements. 4. Reportable Conditions in Internal Control Over Major Programs The audit report for the Wilkinson County Board of Education did not disclose any reportable conditions in internal control over major programs. 5. Type of Report Issued on Compliance for Major Programs The auditor's opinion on the Wilkinson County Board of Education's report on compliance with requirements applicable to major programs was unqualified. 6. Audit Findings Required to be Reported by Section .510(a) ofOMB Circular A-133 The Wilkinson County Board ofEducation's audit did not disclose audit findings required to be reported by section .510(a) ofOMB Circular A-133; however, we noted an instance of nonmaterial noncompliance which is included in section IV of this report. 7. Major Programs Federal awards audited as major programs are as follows: 84.010 Title I Grants to Local Educational Agencies 84.027 Special Education - Grants to States 84.173 Special Education - Preschool Grants 8. Type "A" Program Dollar Threshold The dollar threshold for type "A" programs was $300,000. - 1- WILKINSON COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2006 I SUMMARY OF AUDITOR'S RESULTS 9. Low Risk Auditee The Wilkinson County Board of Education qualified as a low risk auditee as defined by Section .530 ofOMB Circular A-133. II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS BUDGET PREPARATION/EXECUTION Deficit Fund Balance Reportable Condition Finding Control Number: FS-7581-06-01 Condition: Deficit Fund Balance Criteria: Chapter 25 Reportingfor LUAs with General Fund Deficit Balances of the Financial Management for Local Units ofAdministration states in part: "The seriousness of fund balance deficits cannot be overstated. The Georgia Department of Education requires those LUAs with deficit balances to meet certain reporting requirements." Questioned Cost: NIA Information: The School District's General Fund reported a deficit fund balance in the amount of $285,986. 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 - WILKINSON COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2006 II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS EXPENDITURES/LIABILITIES/DISBURSEMENTS EMPLOYEE COMPENSATION Inadequate Internal Controls - Central Office Reportable Condition Finding Control Number: FS-7581-06-02 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 that provide reasonable assurance that transactions are processed according to established procedures. Questioned Cost: NIA Information: Expenditures/Liabilities/Disbursements Based upon a review of 51 vouchers, the following deficiencies were noted: 1) Seven had no purchase orders or approval, four purchase orders were approved blank, and four purchase orders were approved/issued on or after the invoice date. A total of 30% of tested invoices did not have properly completed and approved purchase orders. 2) Eighteen vouchers were missing proper verification ofthe receipt of the goods. Employee Compensation Based on a review of20 employees, the following deficiencies were noted: 1) Three employees tested did not have documented, approved pay rates. 2) Twelve employees received pay based on unsigned timesheets. Cause: These deficiencies were a result of management's failure to ensure that internal controls were established, implemented and functioning at the central office. Effect: Errors and/or irregularities may not be detected in a timely manner. Recommendation: Management should revise and monitor controls to provide reasonable assurance that transactions are processed according to established procedures. -3- WILKINSON COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2006 II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS CASH AND CASH EQUIVALENTS REVENUES/RECEIVABLES/RECEIPTS Inadequate Internal Controls over School Activity Accounts Reportable Condition Finding Control Number: FS-7581-06-03 Condition: This is a repeat finding (FS-7581-05-01) from the year ended June 30, 2005. The accounting procedures ofthe School District were insufficient to provide for adequate internal controls over school activity accounts. Criteria: The School District's management is responsible for designing and maintaining internal controls that provide reasonable assurance that transactions are processed according to established procedures. Questioned Cost: NIA Information: Cash and Cash Equivalents The bank reconciliations did not include evidence of approval by someone other than the person performing the bank reconciliation. Revenues/Receivables/Receipts Based on a review of25 items, the following deficiencies were noted: 1) Eight receipts were not supported by adequate documentation, including gate receipts. No adequate system ofreconciliation or verification for the collection of gate receipts had been implemented. Cause: These deficiencies were a result of management's failure to ensure that internal controls were established, implemented and functioning at the school levels. Effect: Errors and/or irregularities may not be detected in a timely manner. Recommendation: Management should revise and monitor controls to provide reasonable assurance that transactions are processed according to established procedures. -4- WILKINSON COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2006 II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS GENERAL LEDGER Incomplete General Ledger/Late and Incomplete DE046 Financial Report Reportable Condition Finding Control Number: FS-7581-06-04 Condition: The School District failed to include bond debt activity and accrued salaries and benefits payable in the DE046 financial report submitted to the Georgia Department of Education. Also, the DE046 financial report was submitted after the September 30th due date. Criteria: Chapter 22 Annual Financial Reporting of the Financial Management for Local Units of Administration indicates that School Districts must prepare their financial statements in accordance with generally accepted accounting principles. DE046 reports are due by September 30th. Questioned Cost: NIA Information: Long-term and short-term bond debt and salaries and benefits payable were not recorded in the School District's general ledger as required. An audit adjustment was necessary to record general obligation debt of $3,195,000 and payables of $1,574,220 in the School District's governmental activities. The DE046 was submitted on October 3rd after a deadline extension was granted by Georgia Department of Education. Cause: Management failed to comply with the requirements of the Georgia Department of Education regarding financial reporting. Effect: The failure ofthe School District to maintain a complete and accurate general ledger can lead to inaccurate internal and external reporting. This resulted in a general fund deficit that was not detected by the School District Board or Management. Recommendation: The School District should implement controls to ensure that Georgia Department of Education policies and procedures are followed and implement procedures to ensure that all financial data is properly recorded in the general ledger and reported in the DE046 by the required deadline. -5 - WILKINSON COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2006 III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS SPECIAL TESTS AND PROVISIONS Fiscal Requirements of Schoolwide Program Not Fully Implemented Nonmaterial Noncompliance U.S. Department of Education Through Georgia Department of Education Title I - Grants to Local Educational Agencies (84.010) Finding Control Number: FA-7581-06-01 Condition: The School District identified two schools that participated in a schoolwide program funded with Title I Grants to Local Educational Agencies (CFDA 84.010) and Improving Teacher Quality State Grants (CFDA 84.367) (ITQ) programs; however, the School District did not consolidate the different Federal funds for each of those schools that participated in a schoolwide program. After consultation with GDOE, the District combined a token amount of ITQ funds into the schoolwide fund. Furthermore, the School District failed to produce school-specific budgets supporting the schoolwide plans. Criteria: In accordance with provisions ofU. S. Department ofEducation Instructions and 0MB Circular A-133, Compliance Supplement provisions, eligible schools are able to use their Title I, Part A funds, in combination with other Federal, State and local funds, in order to upgrade the entire educational program of the school and to raise academic achievements for all students. By combining funds from Title I and other eligible U. S. Department of Education funded programs in support of a schoolwide program, U. S. Department of Education Instructions provide that specific schoolwide program costs lose their identity but only in those circumstances when funds are combined in a schoolwide program. Questioned Cost: NIA Information: In line with 0MB Circular A-87 requirements, schoolwide expenditures should be charged to those Federal funding sources supporting the schoolwide program in a reasonable manner. When more than one Federal program supports a schoolwide program, then schoolwide program expenditures may be allocated to specific Federal funds in proportion to the different Federal funds provided in support of the schoolwide program. To distribute such costs, provisions ofOMB Circular A-87, Attachment E, F.3 state that a cost allocation plan should be developed, documented, and maintained for audit. An integral part of the cost allocation plan and the comprehensive plan is a schoolwide budget specifically designed to meet the requirements ofthe Comprehensive Needs Assessment. -6 - WILKINSON COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2006 III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS SPECIAL TESTS AND PROVISIONS Fiscal Requirements of Schoolwide Program Not Fully Implemented Nonmaterial Noncompliance U.S. Department of Education Through Georgia Department of Education Title I - Grants to Local Educational Agencies (84.010) Finding Control Number: FA-7581-06-01 Cause: School District management was not fully aware ofthe U.S. Department of Education requirements. Effect: Failure to appropriately allocate costs can result in noncompliance with requirements ofthe Federal requirements. Recommendation: The School District should implement procedures to ( 1) combine such funds as prescribed by U. S. Department of Education and (2) in line with 0MB Circular A-87 provisions, allocate such schoolwide program costs to the respective Federal funds in a reasonable manner. School level schoolwide budgets should be included as part ofthe Comprehensive Plan and in support ofthe allocations. The School District should seek additional guidance from the Georgia Department of Education to implement procedures for combining and allocating schoolwide program expenditures. -7- SECTIONV MANAGEMENT'S RESPONSES WILKINSON COUNTY BOARD OF EDUCATION SCHEDULE OF MANAGEMENT'S RESPONSES YEAR ENDED JUNE 30, 2006 Finding Control Number: FS-7581-06-01 We have requested of management its views concerning this finding, its conclusions, its recommendations and the planned corrective actions. We have not received management's views as of the release of this audit report. Finding Control Number: FS-7581-06-02 We have requested of management its views concerning this finding, its conclusions, its recommendations and the planned corrective actions. We have not received management's views as of the release of this audit report. Finding Control Number: FS-7581-06-03 We have requested of management its views concerning this finding, its conclusions, its recommendations and the planned corrective actions. We have not received management's views as of the release of this audit report. Finding Control Number: FA-7581-06-01 We have requested of management its views concerning this finding, its conclusions, its recommendations and the planned corrective actions. We have not received management's views as of the release of this audit report.