Audit report, City of Commerce Board of Education, a component unit of the City of Commerce, Georgia, year ended June 30, 1998

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AUDIT REPORT CITY OF COMMERCE BOARD OF EDUCATION
A COMPONENT UNIT OF THE CITY OF COMMERCE, GEORGIA
YEAR ENDED JUNE 30, 1998
STATE OF GEORGIA DEPARTMENT OF AUDITS AND ACCOUNTS
254 WASHINGTON STREET ATLANTA, GEORGIA 30334-8400

CITY OF CO;MMERCE BOARD OF EDUCATION- JACKSON COUNTY -TABLEOFCONJENTS-

SECTION I

FINANCIAL

INDEPENDENT AUDITOR'S COMBINED REPORT ON GENERAL PURPOSE FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATIONSCHEDULE OF EXPENDITURES OF FEDERAL AWARDS

EXHIBITS

GENERAL PURPOSE FINANCIAL STATEMENTS

COMBINED STATEMENTS- OVERVIEW

A

COMBINED BALANCE SHEET

ALL FUND TYPES AND ACCOUNT GROUP

2

B

COMBINED STATEMENT OF REVENUES, EXPENDITURES AND

CHANGES IN FUND BALANCES

ALL GOVERNMENTAL FUND TYPES

4

C

COMBINED STATEMENT OF REVENUES, EXPENDITURES AND

CHANGES IN FUND BALANCES -BUDGET AND ACTUAL

(NON-GAAP BASIS)

GENERAL AND SPECIAL REVENUE FUNDS

5

D NOTES TO THE GENERAL PURPOSE FINANCIAL STATEMENTS

7

ADDmONAL FINANCIAL INFORMATION

COMBINING STATEMENTS

SPECIAL REVENUE FUND

E

COMBINING BALANCE SHEET

18

F

COMBINING STATEMENT OF REVENUES, EXPENDITURES

AND CHANGES IN FUND BALANCES

20

CAPITAL PROJECTS FUND

G

COMBINING BALANCE SHEET

22

H

COMBINING STATEMENT OF REVENUES, EXPENDITURES

AND CHANGES IN FUND BALANCES

23

SCHEDULES

1 SCHEDULE OF REQUIRED SUPPLEMENTARY INFORMATION

24

2 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS

25

3 SCHEDULE OF STATE REVENUE

27

4 SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS

28

5 SCHEDULE OF EXPENDITURES

LOTTERY PROGRAMS

29

CITY OF COMMERCE BOARD OF EDUCATION- JACKSON COUNTY -TABLE OF CQNTENTS -

SECTION I

FINANCIAL

ADDffiONAL FINANCIAL INFORMATION

SCHEDULES

ANALYSIS OF MINIMUM EXPENDITIJRE REQUIREMENTS

GENERAL FUND- QUALTIY BASIC EDUCATION PROGRAMS

6

OVERALL

31

7

BYPROGRAM

32

SECTION IT
COMPLIANCE AND INTERNAL CONTROL REPORTS
REPORT ON COMPLIANCE AND ON INTERNAL CONTROL OVER FINANCIAL REPORTING BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH
GO\TERNMENT AUDITING STANDARDS
REPORT ON COMPLIANCE WITH REQUIREMENTS APPLICABLE TO EACH MAJOR PROGRAM AND INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH OMB CIRCULAR A-133

SECTION ill 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

SECTION I FINANCIAL

RussELL W. HINTON
STATE AUDITOR
(404) 6562174

DEPARTMENT OF AUDITS AND AccouNTS
254 Washington Street, S.W., Suite 214 Atlanta, Georgia 30334-8400
July 1, 1999

Honorable Roy E. Barnes, Governor Members ofthe General Assembly Members ofthe State Board of Education
and Superintendent and Members of the City of Commerce Board of Education
INDEPENDENT AUDITOR'S COMBINED REPORT ON GENERAL PURPOSE
FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMAIION-
SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
Ladies and Gentlemen:
We have audited the accompanying general pwpose financial statements of the City of Commerce Board of Education, a component unit ofthe City of Commerce, Georgia, as of and for the year ended June 30, 1998, as listed in the table of contents. These general pwpose financial statements are the responsibility of the City ofCommerce Board ofEducation's management. Our responsibility is to express an opinion on these general purpose financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards and the standards applicable
to financial audits contained in Government Auditin~ Standards, issued by the Comptroller General of the
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 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 opinion.
As described in the notes to the general purpose financial statements, the Board's financial statements have been prepared using certain accounting practices and policies which, in our opinion, vary in some respects from generally accepted accounting principles. These variances are described as follows:
* The general purpose financial statements of the Board did not contain a General Fixed Assets
Account Group to account for property and equipment owned by the Board which should be included to conform to generally accepted accounting principles.
98ARL-13B

* School activity accounts maintained at the individual schools are not included in the general purpose
financial statements. To conform to generally accepted accounting principles, these accounts should be included in the general purpose financial statements.
* The Board did not recognize as expenditures, in the year ended June 30, 1998, a portion of salaries
and the corresponding employer's cost ofrelated benefits earned for contractual services completed prior to June 30, 1998. Also funds received, subsequent to June 30, 1998, from the Georgia Department of Education for the State's share ofthese unrecorded salaries and related benefits were not recorded as revenue in the year under review. Conversely, the similar expenditures and related revenues for contractual services completed prior to June 30, 1997, were improperly recorded in the year ended June 30, 1998. To conform to generally accepted accounting principles, revenues should be recorded when available and measurable and expenditures should be recorded when incurred, rather than when funds are received or disbursed.
The aggregate effects on the general purpose financial statements of these variances or omissions have not been determined, but are believed to be material.
In our opinion, except for the effects on the general purpose financial statements of the matters referred to in the preceding paragraph, the general purpose financial statements referred to above present fairly, in all material respects, the financial position ofthe City of Commerce Board ofEducation as ofJune 30, 1998, and the results of its operations for the year then ended, in conformity with generally accepted accounting principles.
In accordance with Government Auditin~ Standards, we have also issued our report dated July 1, 1999, on our consideration of the City ofCommerce Board of Education's internal control over financial reporting and our tests ofits compliance with certain provisions of laws, regulations, contracts and grants.
The year 2000 supplementary information on Schedule "1" is not a required part of the basic financial statements but is supplementary information required by the Governmental Accounting Standards Board. We have applied certain limited procedures, which consisted principally of inquiries ofmanagement regarding the methods ofmeasurement and presentation ofthe supplementary information. However we did not audit the information and do not express an opinion on it. In addition, we do not provide assurance that City of Commerce Board ofEducation is or will become year 2000 compliant, that the Board's year 2000 remediation efforts will be successful in whole or in part, or that parties with which City ofCommerce Board ofEducation does business are or will become year 2000 compliant.
Our audit was performed for the purpose of forming an opinion on the general purpose financial statements of the City of Commerce Board of Education taken as a whole. The accompanying combining statements (Exhibits E through H) and the financial schedules (Schedules 2 through 7), 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 general purpose financial statements. Such information has been subjected to the auditing procedures applied in the audit ofthe general purpose financial statements and in our opinion, except for the effects ofthe matters referred to in the third paragraph, such information is fairly presented in all material respects in relation to the general purpose financial statements taken as a whole.
98ARL-13B

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,
~~.lW..HJinLton w.-4J~ State Auditor
RWH:jb 98ARL-13B

CITY OF COMMERCE BQARD OF EDUCATION- JACKSON COUNTY

CITY OF COMMERCE BOARD OF EDUCATION- JACKSON COUNTY COMBINED BALANCE SHEEI
ALL FUND TYPES AND ACCOUNT GROUP JUNE 30. 1998

ASSETS
Cash and Cash Equivalents
Investments
Accounts Receivable
Prepaid Items
Inventories Food Donated Commodities Purchased Food
Amount to be Provided in Future Years For Payment of Capital Lease Agreements

GOVERNMENTAL FUND TYPES

SPECIAL

CAPITAL

GENERAL

REVENUE

PROJECTS

FUND

FUND

FUND

$

64,638.65 $

83,574.48 $ 3,053,010.77

407,427.01

418,212.73

353,027.37

62,988.63

125,548.76

8,701.81 3,213.46

Total Assets

$

825,093.03 $

158,478.38 $ 3,596.772.26

LIABILITIES 8ND F!.!ND ~Q!.IITY
LIABILITIES
Cash Overdraft Accounts Payable Salaries Payable Expired Grant Balances Payable Contracts Payable Retainages Payable Capital Lease Agreements
Total Uabilities
FUNPEQ!.!ITY
Fund Balances Reserved For Bus Replacement Funds For Continuation of Federal Programs For Continuation of Other Programs For Expired Grant Balances/Questioned Costs For Inventories Food Donated Commodities Purchased Food For Purpose of Bond Issue For SPLOST Projects For State Capital Outlay Projects Unreserved Undesignated
Total Fund Equity

$

4,025.64 $

14,904.68

42,288.18

1,863.70

4,261.39

$

90,913.00

20,423.00

$

5,889.34 $

61,454.25 $

111,336.00

$

20,204.00

201.64 $

13,302.43

8,701.81 3,213.46
$

2,874,537.25 602,299.41 8,599.60

798,798.05

71,806.43

0.00

$

819,203.69 $

97,024.13 $ 3,485,436.26

Total Uabilities and Fund Equity

$

825,093.03 $

158,478.38 $ 3,596,772.26

The notes to the general purpose financial statements are an Integral part of this statement -2-

EXHIBIT"A"

ACCOUNT GROUP GENERAL
LONG-TERM DEBT

TOTALS
(Memorandum Only)
JUNE 30, 1998 JUNE 30, 1997

$ 3,201,223.90 $

285,527.83

825,639.74

541,564.76

281,258.68

10,440.08

$ _ _......,:.1.;:.:45~,60=.:..1:...:.10:::..

8,701.81 3,213.46
145,601.10

6,403.50 3,141.45
69,100.70

$

145,601.10 $

4.725.944.77 $ _.....,;65~5,~87;,:;2;;:;.2:;:;,.4

$

2,433.40

$

18,930.32

24,583.29

42,288.18

37,672.73

6,125.09

5,573.92

90,913.00

20,423.00

$

145,601.10

145,601.10

69,100.70

$

145,601.10 $

324,280.69 $

139,364.04

$

20,204.00

$

13,504.07

8,701.81 3,213.46 2,874,537.25 602,299.41 8,599.60
870,604.48
$ 4,401,664.08 $

1,328.75 1,493.57
6,403.50 3,141.45
8,599.60 495,541.33 516,508.20

$

145.601.10 $ 4?25.944.77 $

655.872.24

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CITY OF COMMERCE BOARD OF EDUCATION. JACKSON COUNTY COMBINED STATEMENT OF REVENUES EXPENDITURES AND CHANGES IN FUNP BALANCES
ALL GOVERNMENTAL FUNP !YPES YEAR ENPEP JUNE 3Q. 1998

EXHIBIT"B"

REVENUES

GENERAL FUND

SPECIAL REVENUE
FUND

CAPITAL PROJECTS
FUND

TOTALS {Memorandum Onll}
YEAR ENDED JUNE 30, 1998 JUNE 30, 1997

State Funds Federal Funds Taxes Other Funds
Total Revenues
EXPENDITURES

s 4,510,670.11 $
1,442,250.00 202,997.94
s 6,155,918.05 s

158,311.82 454,051.76
s 172,740.29
785,103.87 $

s
638,010.60 129,396.38
767,406.98 s

4,668,981 .93 $ 454,051.76
2,080,260.60 505,134.61
7,708,428.90 $

4,315,507.86 373,956.83
1,399,982.50 364,676.44
6,454,123.63

Current Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Food Services Operation Enterprise Operations Community Services Operations
Capital Outlay Debt Service
Principal Interest

s 3,752,864.86 s
245,623.80 247,206.38 183,408.40 181,078.48 382,433.96 81,604.97 496,409.54 136,836.82
96,428.85
15,659.92

Total Expenditures

s 5,819,555.98 s

Excess of Revenues over (under) Expenditures QI!:IE;B El!!l6t:l~l!!lG ~Q!.!R~E~ {!.!~!:;~}

s 336,362.07 s

Capital Leases Operating Transfers In Operating Transfers Out

s

46,193.77

s

16,990.59

Total Other Financing Sources (Uses)

s

29,203.18 s

Excess of Revenues and Other Financing Sources over (under) Expenditures and Other Financing Uses s

365,565.25 s

E!.!ND BALANCE JULY 1

453,638.44

Food Inventory Net Change in Period Donated Commodities Purchased Food

310,059.40 17,247.93 19,927.25 9,070.37 s 4,836.52 10,705.56 7,000.00
382,394.90 468.88
761,710.81 s 23,393.06 s

$
65,475.48
405,780.91 147,002.60
6,133.49 624,392.48 s 143,014.50 s

4,062,924.26 s
262,871.73 267,133.63 183,408.40 190,148.65 382,433.96 147,080.45 496,409.54 141,673.34 107,134.41
7,000.00 382,394.90
468.88 421,440.83
147,002.60 6,133.49
7,205,659.27 s
502,769.63 s

3,551,850.45
328,039.05 232,974.17 166,126.67 182,023.08 407,537.09 68,178.02 464,988.90 135,487.43 68,885.03 127,857.00 367,660.89
302.30 383,870.43
29,545.75 3,113.79
6,518,440.05
-64,316.42

$ 16,990.59

177,309.23 s 3,209,980.64
53,467~71

16,990.59 s 3,333,822.16 s

223,503.00 s 3,226,971 .23
70,458.30
3,380,015.93 s

51,677.00 122,220.40 122,220.40
51,677.00

40,383.65 s 3,476,836.68 s

54,270.16

8,599.60

3,882,785.56 s 516,508.20

12,639.42 528,871.25

2,298.31 72.01

2,298.31 72.01

373.88 97.51

E!.!ND 8ALAt:!CE J!.!NE 30

s 819,203.69 s

97.024.13 s 3.465.436.26 s 4.401,664.08 s _ _..5.1.~6.~=:50:;:;8;;:.2;;;;.o

The notes to the general purpose financial statements are an Integral part of this statement. -4-

CITY OF COMMERCE BOARD OF EDUCATION JACKSON COUNTY COMBINED STATEMENT OF REVENUES. EXPENDITURES AND CHANGES IN FUND BALANCES
BUDGET AND ACTUAL- <NON-GAAP BASIS> GENERAL AND SPECIAL REVENUE FUNDS
YEAR ENDED JUNE 30.1998

EXHIBIT"C"

GENERAL FUND

ACTUAL

(BUDGET

BUDGET

BASIS}

REVENUES
State Funds Federal Funds Taxes Other Funds

s $ 4,on,458.00

4,51 0,670.11

1,442,250.00 114,117.00

1,442,250.00 2021997.94

Total Revenues

$ 5,633,825.00 $ 61155,918.05

EXPENDITURES

Current Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Food Services Operation Community Services Operations
Capital Ouuay

$ 3,652,1n.13 s 3,752,864.86

281,917.02 178,172.64 183,782.42 179,689.00 373,871.92
92,901.36 500,590.21 91,280.97 106,295.00

245,623.80 247,206.38 183,408.40 181,078.48 382,433.96
81,604.97 496,409.54 136,836.82
96,428.85

331000.00

151659.92

Total Expenditures Excess of Revenues over (under) Expenditures

$ 5167316n.67 s 518191555.98

$

-391852.67 $

3361362.07

OTHER FINANCING SOURCES <USES>

Other Sources Other Uses
Total Other Financing Sources (Uses)

$

46,193.n

-161990.59

$

291203.18

Excess of Revenues and Other Financing Sources over (under) Expenditures and Other Financing Uses $
E!.!NQ BALAN~E; ~!.!LY l, l~7
Adjustments Food Inventory- Net Change In Period
Donated Commodities Purchased Food

-39,852.67 $ 334,533.93 -21,817.56

365,565.25 453,638.44

E!.!NQ BALANCE J!.!NE 3Q. l998

$ 272,863.70 $ 819,203.69

SPECIAL REVENUE FUND

ACTUAL

(BUDGET

BUDGET

BASIS}

$

160,151.48 $

158,311.82

380,152.00

454,051.76

1461810.00

172,740.29

$

687,113.48 $

785,103.87

$

304,994.85 $

310,059.40

13,800.00 21,275.00

17,247.93 19,927.25

7,440.00

9,070.37

4,500.00 12,100.00 7,000.00 353,745.00 2,000.00

4,836.52 10,705.56 7,000.00 382,394.90
468.88

$

726,854.85 $

761,710.81

$

-39,741.37 $

231393.06

$

$

$

39,741.37 $

46,476.43

12,875.14

16,990.59 16,990.59 40,383.65 54,270.16
2,298.31 72.01

$

19,610.20 $ _ .....9...,.7,,_02_4_.1_3

The notes to the general purpose financial statements are an integral part of this statement -5-

CITY OF COMMERCE BOARD OF EDUCATION- JACKSON COUNTY
NQIES TO THE GENERAL PURPOSE FINANCIAL STATEMENTS
JUNE 30. 1998

EXHIDIT "D"

Note 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
REPORTING ENTITY
The City of Commerce Board ofEducation (Board) 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 not organized as a separate legal entity and does not have the power to levy taxes or issue bonds. Its budget is subject to approval by the City of Commerce, Georgia. Accordingly, the City of Commerce Board of Education is determined to be a component unit of the City of Commerce, Georgia, which is the primary government.
FUND ACCOUNTING
The Board uses funds and an account group 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. An account group is a financial reporting device designed to provide accountability for certain assets and liabilities that are not recorded in the funds because they do not directly affect expendable available financial resources.
General Fixed Assets are recorded as expenditures in the various funds at the time ofpurchase. A General Fixed Assets Account Group is not presently maintained by the Board. To conform to generally accepted accounting principles, a General Fixed Assets Account Group should be maintained for reporting the cost of assets acquired by governmental fund types.
Although "school activity accounts" are maintained at the individual schools, neither the assets, liabilities and fund equity, nor the revenues, expenditures and changes in fund balances of these accounts are reflected in these financial statements. To conform to generally accepted accounting principles, these accounts should be recorded in the general purpose financial statements.
The general purpose financial statements account for all State, Federal, Taxes and Other funds under control ofthe Board, in compliance with generally accepted accounting principles applicable to governmental units, unless otherwise disclosed in these notes. Funds and the account group presented in this report are as follows:
GOVERNMENTAL FUND TYPES -are used to account for all or most ofa Board's educational activities. Governmental Fund Types include:
GENERAL FUND- the fund used to account for all financial resources ofthe Board except those required to be accounted for in another fund. These transactions relate to resources obtained and used for services provided by a board of education.

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CITY OF COMMERCE BOARD OF EDUCATION- JACKSON COUNTY
NOTES TO THE GENERAL PURPOSE FINANCIAL STATEMENTS JUNE 30. 1998

EXHffiiT "D"

Note 1: SUMMARY OF SIGNJFICANI ACCOUNTING POLICIES
SPECIAL REVENUE FUND -the fund used to account for the proceeds ofspecific revenue sources (other than for major capital projects) that are legally restricted to expenditures for specified purposes. These funds are received primarily from the Georgia Department ofEducation and from the Federal government to accomplish specific educational objectives.
CAPITAL PROJECTS FUND - the fund used to account for financial resources to be used for the acquisition or construction of major capital facilities.
ACCOUNT GROUP
GENERAL LONG-TERM DEBT ACCOUNT GROUP- A financial reporting device used to account for material capital lease obligations.
BASIS OF ACCOUNTING
The accounting and financial reporting treatment applied to a fund is determined by its measurement focus. All governmental funds are accounted for using a current financial resources measurement focus. With this measurement focus, only current assets and current liabilities generally are included on the balance sheet. Operating statements of these funds present increases (i.e., revenues and other financing sources) and decreases (i.e., expenditures and other financing uses) in net current assets. Their reported fund balance is considered a measure of available spendable resources.
Liabilities which are expected to be financed from available spendable resources are reported as liabilities in the governmental funds. Other liabilities, which are not expected to be financed from available spendable resources, are reported in the General Long-Term Debt Account Group.
Governmental funds are accounted for using the modified accrual basis of accounting under which:
Revenues are recognized when susceptible to accrual (i.e., when they become both measurable and available). "Measurable" means the amount ofthe transaction can be determined and "available" means collectible within the current period or soon enough thereafter to be used to pay liabilities ofthe current period. Those revenues considered susceptible to accrual are property taxes, local option sales taxes, intergovernmental grants and investment income.
Expenditures are generally recognized when the related fund liability is incurred.
A departure from the above definitions is the accounting treatment afforded the final two payments on General Fund teachers' and bus drivers' contracts, and the resources available from the Georgia Department of Education for the State's share of these contracts. During fiscal year 1998, a substantial number of personnel ofthe Board were employed for a one hundred and ninety day period beginning in late August 1997 and ending in early June 1998. Personnel contracts for this employment period specify that compensation be paid in twelve equal monthly payments beginning in September 1997 and ending in August 1998. State
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CITY OF COMMERCE BOARD OF EDUCATION- JACKSON COUNfY
NOTES TO TilE GENERAL PURPOSE FINANCIAL STATEMENTS JUNE 30. 1998

EXHffiiT "D"

Note 1: SUMMARY OF SIGNifiCANT ACCOUNTING POLICIES
grants to fund the State's share of these contracts were disbursed from the Georgia Department of Education to the Board in the same twelve months. As of June 30, 1998, compensation under these employment contracts had been earned, but two of the twelve monthly payments, due for July and August 1998, had not been made. Payments for these two months were made and recorded as expenditures by the Board subsequent to June 30, 1998. Also, the State's portion of the compensation paid in July and August 1998 was received and recorded as revenue in the fiscal year subsequent to June 30, 1998. Conversely, the similar expenditures and related revenues for contractual services completed prior to June 30, 1997, were recorded in the year ended June 30, 1998. Generally accepted accounting principles require that revenues be recorded when available and measurable and that expenditures be recorded when incurred, rather than when funds are received or disbursed.
BUDGET
The City of Commerce Board of Education's budget is a complete financial plan for the Board's fiscal year and is based upon estimates of expenditures together with probable funding sources. There is no statutory prohibition regarding overexpenditure of the budget at any level. The budget for all governmental funds is prepared by fund, function and object. The legal level ofbudget control was established by the Board at the aggregate level. The budget for governmental funds was prepared on a basis other than generally accepted accounting principles.
The budget process begins when the Board's administration prepares a tentative budget for the Board's approval. After approval of this tentative budget by the Board, such budget is advertised at least once in a newspaper ofgeneral circulation in the locality. At the next regular meeting ofthe Board after advertisement, the Board receives comments on the tentative budget, makes revisions as necessary and adopts a final school budget. This final budget is then submitted, in accordance with provisions of the Quality Basic Education Act, OCGA Section 20-2-167, to the Georgia Department ofEducation. The Board may increase or decrease the budget at any time during the year. All unexpended budget authority lapses at fiscal year-end.
CASH AND CASH EQUIVALENTS
COMPOSffiON OF DEPOSITS Cash and cash equivalents consist of deposits in authorized financial institutions. Georgia Laws authorize the Board to deposit its funds in one or more solvent banks, insured Federal savings and loan associations, or insured State chartered building and loan associations.
INVESTMENTS
COMPOSffiON OF INVESTMENTS Investments made by the Board in nonparticipating interest-earning contracts (such as certificates of deposit) 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
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CITY OF COMMERCE BOARD OF EDUCATION- JACKSON COUNTY
NOTES TO TilE GENERAL PURPOSE FINANCIAL STATEMENTS JUNE 30. 1998

EXHIBIT "D"

Note 1: SUMMARY OF SIGNIFICANT ACCQUNTING POLICIES
are reported at fair value. The Official Code of Georgia Annotated Section 36-83-4 authorizes the Board 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,
(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 ofthe State of Georgia.
RECEIVABLES
Receivables consist ofgrant 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 general purpose financial statements do not include any amounts which would necessitate the need for an allowance for uncollectible receivables.
PROPERTY TAXES
The City of Commerce fixed the property tax levy for the 1997 tax year (calendar year) on October 13, 1997 (levy date). Taxes were due on January 8, 1998. The lien date for property taxes was Janu.ary 1, 1997. Taxes collected within the current fiscal year or within 60 days after year-end are reported as revenue in fiscal year 1998. The City of Commerce City Clerk bills and collects the property taxes for the Board of Education and remits taxes collected to the Board.

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CITY OF COMMERCE BOARD OF EDUCATION- JACKSON COUNTY
NOTES TO THE GENERAL PURPOSE FINANCIAL STATEMENTS
JUNE 30. 1998

EXHIBIT "D"

Note 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The tax millage rate levied for the 1997 tax year (calendar year) for the City of Commerce Board ofEducation was as follows (a mill equals $1 per thousand dollars of assessed value):

School Operations

18.88 mills

SALES TAXES

Special Purpose Local Option Sales Tax is to be used for capital outlay for educational purposes and debt service. Special Purpose Local Option Sales Tax revenue during the fiscal year amounted to $638,010.60 and was recorded in the Capital Projects Fund. The State will terminate collection of this tax once an additional $3,269,489.40 has been collected or on June 30, 2002 whichever occurs first.

INVENTORIES

FOOD INVENTORIES Inventories of donated food commodities used in the preparation of meals are reported on the Combined Balance Sheet at their Federally assigned value. Purchased foods inventories are reported on the Combined Balance Sheet at cost (first-in, first-out). Donated food commodities are recorded as revenues and expenditures at the time commodity items are received. Purchased foods inventories are recorded as expenditures at the time of purchase. The inventories reported on the balance sheet for donated food commodities and for purchased foods are equally offset by reservations of fund balance which indicates that these amounts do not constitute "available spendable resources" even though they are a component of net current assets.

INTERFUND TRANSACTIONS

The Board has the following types ofinterfund transactions:

Reimbursements of expenditures initially made from a fund that are properly applicable to another fund, are recorded as expenditures in the reimbursing fund and as reductions of expenditures in the fund that is reimbursed.

Operating transfers are recorded for all interfund transactions other than reimbursements.

MEMORANDUM ONLY- TOTAL COLUMNS

Total columns on the general purpose financial statements are captioned "Memorandum Only'' to indicate that they are presented only to facilitate financial analysis. Data in these columns do not present financial position or results of operations in conformity with generally accepted accounting principles. Neither are such data comparable to a consolidation. Interfund eliminations have not been made in the aggregation ofthis data.

-11-

CITY OF COMMERCE BOARD OF EDUCATION- JACKSON COUNTY
NOTES TO THE GENERAL PURPOSE FINANCIAL STATEMENTS JUNE 30. 1998

EXHIBIT "D"

Note 2: DEPOSITS AND INVESTMENTS
COLLATERALIZATION OF DEPOSITS Official Code ofGeorgia 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 of the face value of such surety bond and the market value ofsecurities pledged shall be equal to not less than 110 percent ofthe public funds being secured after the deduction ofthe amount of deposit insurance. OCGA Section 45-8-11 provides an officer holding public funds may, in his discretion, waive the requirement for security in the case of operating funds placed in demand deposit checking accounts.
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 ofthe counties or municipalities ofthe State of Georgia,
(5) Bonds ofany public authority created by the laws ofthe State of Georgia, providing that the statute that created the authority authorized the use of the bonds for this purpose,
(6) Industrial revenue bonds and bonds ofdevelopment authorities created by the laws ofthe State of Georgia, and
(7) Bonds, bills, notes, certificates ofindebtedness, or other obligations ofa subsidiary corporation of the United States government, which are fully guaranteed by the United States government both as to principal and interest and 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, 1998, the bank balances were $3,897,535.38. The amounts of the total bank balances are classified into three categories of credit risk:
Category 1- Cash that is insured (e.g., Federal depository insurance) or collateralized with securities held by the Board or by the Board's agent in the Board's name.
- 12-

CITY OF COMMERCE BOARD OF EDUCATION- JACKSON COUNTY
NOTES TO THE GENERAL PURPOSE FINANCIAL STAIEMENTS
JUNE 30. 1998

EXHIBIT "D"

Note 2: DEPOSITS AND INVESTMENTS

Category 2 - Cash collateralized with securities held by the pledging financial institution's trust department or agent in the Board's name.
Category 3 - Uncollateralized deposits. {This includes any bank balance that is collateralized with securities held by the pledging financial institution, or by its trust department or agent but not in the Board's name.)

The Board's deposits are classified by risk category at June 30, 1998, as follows:

Risk Cate~m:y

Bank Balance

1

$ 300,000.00

2

3,576,462.31

3

21.073.07

Total

$ 3.897.535.38

CATEGORIZATION OF INVESTMENTS At June 30, 1998, the carrying value ofthe Board's total investments was $825,639.74. The investments are classified as follows:

l}!pe ofInvestment

Carrying Amount

Fair
value

Local Government Investment Pools
Money Market Mutual Funds

$ 407,427.01 418.212.73

$ 407,427.01 418.212.73

Total Investments

$ 825.639.74 $ 825.639.74

The carrying amounts shown above includes amounts maintained in an investment pool by the State of Georgia, Office of Treasury and Fiscal Services in which the Board owns no identifiable securities. The investment policy ofthe State of Georgia, Office of Treasury 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, and Fund 6. Georgia Fund 1 is a stable net asset value investment pool which follows Standard and Poor's criteria for AAAm rated money market funds. However, Georgia Fund 1 operates in a manner consistent with Rule 2a-7 ofthe Investment Company Act of 1940 and is considered to

-13-

CITY OF COMMERCE BOARD OF EDUCATION- JACKSON COUNTY
NOTES TO THE GENERAL PURPOSE FINANCIAL STATEMENTS
JUNE 30. 1998

EXHIBIT "D"

Note 2: DEPOSITS AND INVESTMENTS
be a 2a-7 like pool. The pool is not registered with the SEC as an investment company. The pool's primary objectives are safety ofcapital, investment income, liquidity and diversification while maintaining principal ($1 .00 per share value). Net asset value is calculated weekly to ensure stability. The pool distributes earnings (net of management fees) on a monthly basis and determines participant's shares sold and redeemed based on $1.00 per share. Pooled cash and cash equivalents and investments are reported at cost which approximates fair value. The pool does not issue any legally binding guarantees to support the value ofthe shares. Participation in the pool is voluntary and deposits consist offunds from local governments; operating and trust funds of Georgia's state agencies, colleges and universities; and current operating funds ofthe State ofGeorgia's General Fund.
Investments in Georgia Fund 1 and Fund 6 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. Fund 6 maintains a duration of approximately one year. The weighted average maturity for Georgia Fund 1 on June 30, 1998 was 29 days. The average investment duration for Fund 6 on June 30, 1998 was .96 years.
Note 3: NON-MONETARY TRANSACTIONS
The Board receives food commodities fiom the United States Department ofAgriculture (USDA) for school breakfast and lunch programs. These commodities are recorded at their Federally assigned value. See Note 1 - Inventories
Note 4: RISK MANAGEMENT
The Board 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; natural disaster and unemployment compensation.
The Board has obtained commercial insurance for risk ofloss associated with torts, assets, errors or omissions and job related illness or injuries to employees. The Board has neither significantly reduced coverage for these risks nor incurred losses (settlements) which exceeded the Board's insurance coverage in any ofthe past three years.
The Board has elected to self-insure for all losses related to natural disaster. The Board has not experienced any losses related to this risk in the past three years.
The Board is self-insured with regard to unemployment compensation claims. The Board accounts for claims within the General Fund with expenditure and liability being reported when it is probable that a loss has occurred, and the amount ofthat loss can be reasonably estimated. The Board has not incurred any liabilities for unemployment compensation during the last two fiscal years.
-14-

CITY OF COMMERCE BOARD OF EDUCATION- JACKSON COUNTY
NQTES TO THE GENERAL PURPOSE FINANCIAL STATEMENTS JUNE 30. 1998

EXHIBIT "D"

Note 4: RISK MANAGEMENT

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

Position Covered
Superintendent All Employees
Note 5: GENERAL LONG-TERM DEBT

Amount
$ 100,000.00 $ 10,000.00

CAPITAL LEASES The City of Commerce Board ofEducation has entered into various lease agreements as lessee for buses and bleachers. These lease agreements qualify as capital leases for accounting purposes and, therefore, have been recorded at the present value of the future minimum lease payments as of the date of their inception.

The changes in General Long-Term Debt during the fiscal year ended June 30, 1998, were as follows:

Capital
Lei!:~S

Balance July 1, 1997

$ 69,100.70

Additions

223,503.00

Deductions Payments

147.002.60

Balance June 30, 1998

$ 145.601.10

At June 30, 1998, payments due by fiscal year which includes principal and interest for these items are as follows:

Fiscal Year
Ended June 30
1999 2000 2001 2002
Total Principal and Interest
Deduct: Imputed Interest
Net Present Value ofFuture Minimum Lease Payments

Capital Leases
$ 40,560.10 59,955.29 51,999.85 13.209.23
$ 165,724.47
20.123.37
$ 14~.~~1.10

-15-

CITY OF COMMERCE BOARD OF EDUCATION- JACKSON COUNTY
NOTES TO THE GENERAL PURPOSE FINANCIAL STATEMENTS JUNE 30. 1998

EXHIBIT "D"

Note 6: ON-BEHALF PAYMENTS

The Board has recognized revenues and expenditures in the amount of$81,650.81 for health insurance and retirement contributions paid on the Board's behalfbythe following State Agencies.

Georgia Department of Education Paid to the State Merit System ofPersonnel Administration For Health Insurance ofNon-Certified Personnel In the amount of$57,450.49

Paid to the Teachers Retirement System of Georgia For Teachers Retirement System (TRS) Employer's Cost In the amount of$8,691.32

Office ofTreasury and Fiscal Services Paid to the Public School Employees Retirement System For Public School Employees Retirement (PSERS) Employer's Cost In the amount of$15,509.00

Note 7: SIGNIFICANT COMMITMENTS

The following is an analysis of significant outstanding construction or renovation contracts executed by the Board as of June 30, 1998:

Project

Unearned Executed Contracts

Commerce Elementary School Commerce Middle School

$ 733,933.00 388.490.00

$ 1.122.423.00

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

Note 8: CONTINGENT LIABD..IIIES

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 expenditures which are disallowed under grant terms. The Board believes that such disallowances, if any, will be immaterial to its overall financial position.

- 16-

CITY OF COMMERCE BOARD OF EDUCATION- JACKSON COUNTY
NOTES TO THE GENERAL PURPOSE FINANCIAL STATEMENTS
JUNE 30. 1998

EXHIBIT "D"

Note 9: RETIREMENT PLANS

TEACHERS RETIREMENT SYSTEM OF GEORGIA (TRS)

IRS PLAN DESCRIPTION Substantially all teachers, administrative and clerical personnel employed by local school systems are covered by the Teachers Retirement System of Georgia (IRS), which is a cost-sharing multiple employer defined benefit pension plan. IRS 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.

IRS CONTRIBUTIONS REQUIRED AND MADE Employees ofthe Board who are covered by IRS are required by State statute to contribute 5% oftheir gross earnings to IRS. The Board makes monthly employer contributions to IRS at rates adopted by the IRS Board of Trustees in accordance with State statute and as advised by their independent actuary. The required employer contribution rate is 11.81% and employer contributions for the current fiscal year and the preceding two fiscal years are as follows:

Fiscal Year
1998 1997 1996

Percentage Contributed
100% 100% 100%

Required Contribution
$ 445,316.54 $ 409,951.62 $ 379,025.70

-17-

CITY OF COMMERCE BOARD OF EDUCATION- JACKSON COUNTY COMBINING BALANCE SHEET SPECIAL REVENUE FUND JUNE 30. 1998

ASSETS
Cash and Cash Equivalents
Accounts Receivable
Inventories Food Donated Commodities Purchased Food
Total Assets
LIABILITIES AND FUND EQUITY
LIABILITIES
Cash Overdraft Accounts Payable Salaries Payable Expired Grant Balances Payable
Total Liabilities
FUND EQUITY
Fund Balances Reserved For Continuation of Federal Programs For Continuation of Other Programs For Expired Grant Balances/Questioned Costs For Inventories Food Donated Commodities Purchased Food Unreserved Undesignated
Total Fund Equity
Total Liabilities and Fund Equity
See notes to the general purpose financial statements.
-18-

SCHOOL FOOD
SERVICES FUND

LOTTERY PROGRAMS

$

93,431.41 $

11,983.50

2,313.00

4,956.00

8,701.81 3,213.46

$

s_ _ _ 107,659.68

16-.,.9..3._9..5...o..

$

3,441.94 $

20,496.04

2,985.46 7,242.84

$

23,937.98 $

10,228.30

$

$

8,701.81

3,213.46

71,806.43

$

83,721.70 $

6,711.20
0.00 6,711.20

$

s_ _... 107,659.68

16iii.l.,9iiiiii3-9-.5-.o

EXHIBIT"E"

FEDERAL
PROGRAMS

OTHER
PROGRAMS

TOTALS JUNE 30, 1998 JUNE 30, 1997

$ 105,414.91 $

86,451.68

$

54,052.00 $

1,667.63

62,988.63

27,483.45

8,701.81 3,213.46

6,403.50 3,141.45

$

54,052.00 $

1,667.63 $ 180,318.81 $ 123,480.08

$

20,172.80 $

8,477.28

14,549.30

4,261.39

$

47,460.77 $

1,667.63 $ 1,667.63 $

21,840.43 $ . 14,904.68
42,288.18 4,261.39
83,294.68 $

17,133.96 8,829.31 37,672.73 5,573.92
69,209.92

$

6,591.23

0.00 $

$

6!591.23 $

$
0.00 0.00 $

$ 13,302.43
8,701.81 3,213.46 71,806.43 97,024.13 $

1,328.75 1,493.57
6,403.50 3,141.45 41,902.89 54,270.16

$

54,052.00 $

1,667.63 $ 180,318.81 $ 123,480.08

-19-

CITY OF COMMERCE BOARD OF EDUCATION -JACKSON COUNTY COMBINING STATEMENT OF REVENUES. EXPENDITURES AND CHANGES IN FUND BALANCES
SPECIAL REVENUE FUND YEAR ENDED JUNE 30. 1998

REVENUES
State Funds Federal Funds Other Funds
Total Revenues
EXPENDITURES
Current Instruction Support Services Pupil Services Improvement of Instructional Services General Administration Student Transportation Services Central Support Services Other Support Services Food Services Operation Community Services Operations
Total Expenditures
Excess of Revenues over (under) Expenditures
OTHER FINANCING SOURCES
Operating Transfers In
Excess of Revenues and Other Financing Sources
over (under) Expenditures
FUND BALANCE JULY 1
Food Inventory- Net Change in Period Donated Commodities Purchased Food

SCHOOL FOOD
SERVICES FUND

LOTTERY PROGRAMS

$

27,240.00 $

131,071.82

222,492.15

152,566.29

$

402,298.44 $

131,071.82

$

125,003.60

415.64

$

382,394.90

$

382,394.90 $

125,419.24

$

19,903.54 $

5,652.58

10,000.00

$

29,903.54 $

51,447.84

2,298.31 72.01

1,058.62
6,711.20 0.00

FUND BALANCE JUNE 30 See notes to the general purpose financial statements.
-20-

$

83,721.70 $ _ _ _6.....7...,1=1=.2=0

EXHIBIT "F"

FEDERAL PROGRAMS

OTHER PROGRAMS

TOTALS YEAR ENDED JUNE 30, 1998 JUNE 30, 1997

$
$ 231,559.61 __________ $ _____20~,1_7_4_.0_0

$ 231,559.61 $

20,174.00 $

158,311.82 $ 454,051.76 172,740.29
785,103.87 $

265,330.77 373,956.83 147,057.27
786,344.87

$

168,870.53 $

9,320.59 19,927.25 9,070.37 4,420.88 10,705.56 7,000.00

468.88

$ 229,784.06 $

$

1,775.55 $

16,185.27 $ 7,927.34
24,112.61 $ -3,938.61 $

310,059.40 $
17,247.93 19,927.25 9,070.37 4,836.52 10,705.56 7,000.00 382,394.90
468.88
761,710.81 $
23,393.06 $

195,257.89
61,656.45 15,038.13 17,487.16 7,149.00
44.00 127,857.00 367,660.89
302.30
792,452.82
-6,107.95

3,486.93

2,445.04

16,990.59

5,967.39

$

5,262.48 $

-1,493.57 $

40,383.65 $

-140.56

1,328.75

1,493.57

54,270.16

54,134.35

2,298.31 _ _ _7;..;;2=.0..;.1

373.88 -97.51

$

6,591.23 $

0.00 $

s_ _ 97,024.13

54_,...,2.7.o....1...6....

-21-

CITY OF COMMERCE BOARD OF EDUCATION JACKSON COUNTY COMBINING BALANCE SHEET CAPITAL PROJECTS FUND JUNE 30. 1998

EXHIBIT"G"

~ Cash and Cash Equivalents Investments Accounts Receivable
Total Assets

BOND PROCEEDS

GEORGIA STATE FINANCING AND
INVESTMENT COMMISSION

SPECIAL PURPOSE LOCAL OPTION SALES TAX

TOTALS

JUNE 30, 1998

JUNE 30, 1997

s s 2,985,873.25

s 8,599.60

s 58,537.92

3,053,01 0.77

418,212.73

418,212.73

125,548.76

125,548.76 $

11,033.00

s s 2,985,873.25

s 8,599.60

602,299.41 $ 3,596,772.26 s___1_10.3.-3..-o.o.

LIA81LII!ES ANP FUND EQUITY

LIABILITIES

Cash Overdraft

Contracts Payable

$

Retainages Payable

Total Liabilities

s

FUND EQUITY

Fund Balances

Reserved

For Purposes of Bond Issue

$

For SPLOST Projects

For State Capital Outlay Projects

Unreserved

Undesignated

Total Fund Equity

s

90,913.00 20,423.00 111,336.00
2,874,537.25
s
0.00 2,874,537.25 $

Total Liabilities and Fund Equity

s 2,985,873.25 $

s

s

90,913.00

20,423.00

s

s 111,336.00

2,433.40 2,433.40

s
8,599.60
0.00
8,599.60 $

s
602,299.41
0.00 602,299.41 $

2,874,537.25 602,299.41 8,599.60 $
0.00
s 3,485,436.26

8,599.60 0.00
8,599.60

s 8,599.60

s 602,299.41

s 3,596,772.26 --....:.11:..;,0~3-3~.0~0

See notes to the general purpose financial statements.

-22-

CITY OF COMMERCE BOARD OF EDUCATION- JACKSON COUNTY COMBINING STATEMENT OF REVENUES. EXPENDITURES AND CHANGES IN FUND BALANCES
CAPITAL PROJECTS FUND YEAR ENDED JUNE 30. 1998

EXHIBIT"H"

BOND PROCEEDS

GEORGIA STATE FINANCING AND
INVESTMENT COMMISSION

SPECIAL PURPOSE LOCAL OPTION SALES TAX

TOTALS YEAR ENDED JUNE 30, 1998 JUNE 30, 1997

REVENUES

State Funds Taxes Other Funds

$ $ 121,620.50

0.00 $

638,010.60 $ 7,775.88

$ 638,010.60 129,396.38

110,425.00 53,490.00

Total Revenues

$ 121,620.50 $

0.00

645,786.48 $

767,406.98 $

163,915.00

EXPENDITURES

Current Business Administration
Capital OuUay Building and Building Improvements Equipment
Debt Service Principal Interest

$

65,475.48

228,471.68 $ 177,309.23

147,002.60 6,133.49

0.00 $

$ 0.00

65,475.48
228,471.68 $ 177,309.23
147,002.60 6,133.49

318,847.14

Total Expenditures Excess of Revenues over (under) Expenditures

$ 624,392.48 $
s -502,771.98 $

0.00 $ 0.00 $

0.00 $ 645,786.48 $

624,392.48 $
s 143,014.50

318,847.14 -154,932.14

OTHER FINANCING SOURCES CUSESl
Capital Leases Operating Transfers In Operating Transfers Out

s 177,309.23
3,200,000.00

s

177,309.23

s

9,980.64

3,209,980.64 $

116,253.01

-53,467.71

-53 467.71

Total Other Financing Sources (Uses)

$ 3,377,309.23

$

-43,487.07 $ 3,333,822.16 $

116,253.01

Excess of Revenues and Other Financing Sources

s s over (under) Expenditures and Other Financing Uses

2,874,537.25

s 0.00

s s 602,299.41

3,476,836.66

-38,679.13

FUND BALANCE JULY 1

0.00

8,599.60

0.00

8,599.60

47,278.73

FUND 8ALANCE JUNE 30

s $ 218741537.25

81599.60 $

6021299.41 $ 314851436.26 $

81599.60

See notes to the general purpose financial statements.

-23-

CTIY OF COMMERCE BOARD OF EDUCATION- JACKSON COUNTY SCHEDULE "1" SCHEDULE OF REOUlRED SUPPLEMENTARY INFORMADON
YEAR 2000 DISCLOSURES YEAR ENDED JUNE 30. 1998
At June 30, 1998, the City of Commerce Board of Education had no outstanding contractual commitments for the purpose of making computer systems and other electronic equipment year 2000 compliant. The year 2000 issue is the result of shortcomings in many electronic data processing systems and other equipment that make operations beyond year 1999 troublesome. The year 2000 issue is of primary concern for the Board's financial accounting system. The following stages have been identified as necessary to implement a year 2000 compliant systems.
Awareness Stage- Encompasses establishing a budget and project plan for dealing with the year 2000
ISSUe.
Assessment Stage - The actual process of identifying all of its systems and individual components of the systems to check for compliance. Remediation Stage - When changes are made to systems and equipment.
Validation!Testing Stage - The process of ensuring that the changes made to systems and equipment will produce a year 2000 compliant system. It will be necessary for the Board to progres~ through all four of these stages for each computer and/or electronic system, not already year 2000 compliant, in order to assure that these systems will not be adversely affected. As of June 30, 1998, the financial accounting system was determined to be at the Awareness Stage. The Board's financial accounting software (GENESIS) and hardware (Wang VS) are owned by the State (Georgia Department of Education). These systems have been determined to be critical to the Board's ability to successfully conduct operations. As ofJune 30, 1998, the State had not contracted for the remediation of either the Wang VS operating system or the GENESIS accounting software. In the subsequent period, the Georgia Department of Education remediated the Wang VS operating system and the updated operating system was installed at all GENESIS sites as ofDecember 9, 1998. The Georgia Department of Education has remediated the GENESIS software and conducted tests at nine pilot sites. The remediated GENESIS software has been provided to all boards of education currently utilizing the GENESIS accounting software.
See notes to the general purpose financial statements.
-24-

CITY OF COMMERCE BOARD OF EDUCATION- JACKSON COUNTY SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS YEAR ENDED JUNE 30. 1998

SCHEDULE "2"

FUNDING AGENCY PROGRAM/GRANT

CFDA NUMBER

PASSTHROUGH ENTITYID NUMBER

FEDERAL REVENUE IN PERIOD

EXPENDITURES IN PERIOD

Agriculture, U.S. Department of Pass-Through From Georgia Department of Education Food and Nutrition Program Child and Adult Care Food Program 1998 Contract Food Services School Breakfast Program 1998 Grant National School Lunch Program 1998 Grant Food Distribution Program (1)

10.558
10.553 10.555
10.550

N/A

$

7,025.93

N/A

47,955.41

N/A

146,603.63 $

N/A

20,907.18

(2)
(2) 361,487.72 (3)
20,907.18

Total U. S. Department of Agriculture

$ 222,492.15 $

382,394.90

Education, U. S. Department of Pass-Through From Georgia Department of Education Safe and Drug-Free Schools 1998 Grant Elementary and Secondary Education Act Title I
Grants to Local Educational Agencies
1998 Grant Title II
Eisenhower Professional Development 1998 Grant
Title VI Innovative Education Program Strategies 1998 Grant
Individuals with Disabilities Education Act Part B - Special Education Flow Through 1998 Grant Preschool 1998 Grant
Pass-Through From Northeast Georgia Regional Educational Service Agency
Vocational Education - Basic Grants to States
High School Program Basic Grant 1998 Grant
Total U. S. Department of Education

84.186 84.010 84.281 84.298 84.027 84.173
84.048

N/A

$

5,142.00 $

N/A

102,973.00

N/A

17,500.00

N/A

5,102.00

N/A

80,504.33

N/A

12,900.28

N/A

7,438.00

$ 231,559.61 $

5,173.60 (3) 103,737.81 (3)
17,547.35 (3) 7,390.45 (3) 73,963.10 12,850.28
7,518.87 (3) 228,181.46

OTHER FEDERAL ASSISTANCE

Health and Human Resources, U.S. Department of

Pass-Through From Northeast Georgia Regional Board

Conflict Resolution Project 1997 Grant

N/A

$

11602.60 (3)

Total Federal Financial Assistance
= N/A Not Available

-25-

$

s_ _ 454,051.76

6~1~2,r.:.17:.:;8:,;.::.96~

CITY OF COMMERCE BOARD OF EDUCATION -JACKSON COUNTY SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS YEAR ENDED JUNE 30. 1998

SCHEDULE "2"

Notes to the Schedule of Expenditures of Federal Awards
(1) The amounts shown for the Food Distribution Program represents the Federally assigned value of nonmonetary assistance for donated commodities received and/or consumed by the system during the current fiscal year.
(2) Expenditures for the Child and Adult Care Food Program and the School Breakfast Program were not maintained separately and are induded in the 1998 National School Lunch Program.
(3) Expenditures for this program indude State, and/or Other Funds. Expenditures are not maintained by fund source.
Major Programs are identified by an asterisk (*) in front of the CFDA number.
The Board did not provide Federal Assistance to any Subrecipient.
The accompanying schedule of expenditures of Federal awards indudes the Federal grant activity of the City of Commerce Board of Education and is presented on the modified accrual basis of accounting which is the same basis of accounting used in the presentation of the general purpose financial statements.

See notes to the general purpose financial statements.

-26-

CITY OF COMMERCE BOARD OF EDUCATION- JACKSON COUNTY SCHEDULE OF STATE REVENUE YEAR ENDED JUNE 30.1998

SCHEDULE "3"

AGENCY/FUNDING
GRANTS Education, Georgia Department of Quality Basic Education General and Career Education Programs Special Education Programs Remedial Education Program Media Center Programs Staff Development Programs Indirect Cost Pupil Transportation Regular Bus Replacement Middle School Incentive Program Special Instructional Assistance In-School Suspension Mid-term Adjustment Counselors Grades 4 and 5 Technology Training Local Fair Share Educational Equalization Funding Grant Food Services Vocational Education Other State Programs Ad Valorem Tax Adjustment Govemor's Emergency Funds (1) Health Insurance Mentor Teacher Program Preschool Handicapped Program Teachers' Retirement Lottery Programs Instructional Technology Assistive Technology Classroom Technology
Office of School Readiness Pre-Kindergarten Program
Office of Treasury and Fiscal Services Public School Employees Retirement

GOVERNMENTAL FUND TYPES

SPECIAL

GENERAL

REVENUE

FUND

FUND

TOTAL

$ 2,238,309.00
684,946.00 49,624.00 94,192.00 30,194.00
647,146.00
74,361.00 20,204.00 80,836.00 53,251.00 86,475.00 332,446.00
8,754.00 28,842.00 -343,567.00 301,416.00
$
1,316.30
17,383.00 2,000.00
57,450.49 3,384.00
17,507.00 8,691.32
15,509.00

$
27,240.00

2,238,309.00 684,946.00 49,624.00 94,192.00 30,194.00 647,146.00
74,361.00 20,204.00 80,836.00 53,251.00 86,475.00 332,446.00
8,754.00 28,842.00 -343,567.00 301,416.00 27,240.00
1,316.30
17,383.00 2,000.00
57,450.49 3,384.00
17,507.00 8,691.32

4,956.00 53,000.00

4,956.00 53,000.00

73,115.82

73,115.82

15,509.00

$ 4,510,670.11 $

(1) The purpose of the funds are for 1997 Georgia School of Excellence

See notes to the general purpose financial statements.

-27-

158,311.82 $ 4,668,981.93

CITY OF COMMERCE BOARD OF EDUCATION- JACKSON COUNTY SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS
YEAR ENDED JUNE 30. 1998

SCHEDULE "4"

PROJECT

ESTIMATED COST (1)

CURRENT ESTIMATED
COST (2)

AMOUNT EXPENDED IN CURRENT YEAR (3)(4)

AMOUNT EXPENDED IN PRIOR
YEARS

Remodeling and renovating existing class-

rooms, instructional and support space,

providing equipment, fixtures and furnishings

for such areas, and providing new stadium

bleachers, all at Commerce High School

$ 3,101,900.00 $ 3,101,900.00 $

240,846.06 $

0.00

Constructing additional classrooms, remodeling and renovating existing classrooms, instructional and support space, and providing equipment, fixtures and furnishings, all at Commerce Elementary School

1,119,380.00

1,119,380.00

139,253.76

Constructing additional classrooms, remodeling and renovating existing classrooms, instructional and support space, and providing equipment, fixtures and furnishings for such areas, all at Commerce Middle School

628,920.00

628,920.00

89,217.92

Purchasing school buses

781200.00

781200.00

761390.03

$ 4,928,400.00 $ 4,928,400.00 $

545,707.77 $---~0;,;:;.0.;;;.,0

(1) The Board's original cost estimate as specified in the resolution calling for the imposition of the Local Option Sales Tax.
(2) The Board's current estimate of total cost for each project. Includes all costs from project inception to completion.
(3) The voters of the City of Commerce- Jackson County approved the imposition of a 1% sales tax to fund the above projects and associated debt. Amounts expended for these projects may include sales tax proceeds, state, local property taxes and/or other funds over the life of the project.
(4) In addition to the expenditures shown above, the City of Commerce incurred current year interest expenditures of $53,467.71 to provide advance funding for the above projects.

See notes to the general purpose financial statements.

-28-

CITY OF COMMERCE BOARD OF EDUCATION -JACKSON COUNTY SCHEDULE OF EXPENDITURES LOTTERY PROGRAMS YEAR ENDED JUNE 30. 1998

EXPENDITURES
Current Instruction Support Services Student Transportation Services

INSTRUCTIONAL TECHNOLOGY

ASSISTIVE

CLASSROOM

TECHNOLOGY TECHNOLOGY

PRE-KINDERGARTEN PROGRAM

TOTAL

$

4,980.44 $

53,034.17 $

66,988.99 $ 125,003.60

_ _ _ _ _....:..41.:..:5::..:.64~

415.64

Total Expenditures

$

4,980.44 $

s_ _ _ _ s 53,034.17

..;6,;,j7,o.;,;404~.6~3

125,419.24

RECAP: Salaries and Benefrts Pre-Kindergarten Program Other Expenditures Instructional Technology Assistive Technology Classroom Technology Pre-Kindergarten Program

$

56,901.45

4,980.44 53,034.17 10,503.18

$

125,419.24

See notes to the general purpose financial statemerrts.

-29-

CITY OF COMMERCE BOARD OF EDUCATION JACKSON COUNTY ANALYSIS OF MINIMUM EXPENDITURE REQUIREMENTS OVERALL
GENERAL FUND QUALITY BASIC EDUCATION PROGRAMS
YEAR ENDED JUNE 30. 1998

SCHEDULE "6"

Minimum Expenditure Requirements (Total Allotment) Expenditures on Combined Program Basis
Salaries Operations
Less: Expenditures for Media Center Programs in Excess of Total Media Allotment
Expenditures per Audit
Amount of Underexpenditure for Total Allotment

FOURTEEN WEIGHTED AND MEDIA CENTER
PROGRAMS

100% TEST FOR
OPERATIONS PORTION OF FOURTEEN WEIGHTED PROGRAMS

$

3,398,364.00 $

80,691.00

$

3,469,520.55

223,363.12 $ _ _ _2:..:0:...:4~,54:...:..:..:7;!_7..:.,_1

$

3,692,883.67

-77,962.20 $ _ _..:::;3z.::::,6..:..;14~,9::.:2:..:.1:.;.:.4.:,_7

$

0.00 $====..;;0~.0;,;;;.0

See notes to the general purpose financial statements.
31

CITY OF COMMERCE BOARD OF EDUCATION JACKSON COUNTY ANALYSIS OF MINIMUM EXPENDITURE REQUIREMENTS- BY PROGRAM
GENERAL FUND QUALITY BASIC EDUCATION PROGRAMS YEAR ENDED JUNE 30. 1998

GENERAL AND ~AREER ED!JQATION PROGRAMS Kindergarten (*) Grades 1 - 3 (*) Sub-Total K-3 Grades 4 - 5 (*) Grades 6 - 8 (*) Grades 9- 12 (*) High School Laboratories (*) Vocational Education Laboratories (*) Total General and Career Education Programs
SPECIAL EDUCATION PROGRAMS Regular Programs eategory1r> Category II (*) Category Ill (*) Category IV (*) Sub-Total Regular Category VI (Gifted) r> Total Special Education Programs
REMEDIAL EDUCATION PROGRAM Cl Total Fourteen Weighted Programs
MEDIA CENTER PROGRAMS Salaries Operations Total Media Center Programs
Total Fourteen Weighted and Media Center Programs

ALLOTMENTS FROM DEPARTMENT OF EDUCATION

REQUIRED

ORIGINAL ...!2....

ORIGINAL

MID-TERM

$

299,596.00

$

269,636.40 $

5991187.00

539,268.30

$

898,783.00 90 $

808,904.70 $

260,725.00 90

234,652.50

481,671.00 90

433,503.90

276,732.00 90

249,058.80

187,975.00 90

169,177.50

132,423.00 90

1191180.70

$ 21238,309.00

$ 2,0141478.10 $

56,534.01 87,081.99 143,616.00
61,350.99 16,623.00
2211589.99

$

677,588.00

$

609,829.20 $

66,438.00

$

677,588.00 90 $

609,829.20 $

7,358.00 90

61622.20

$

6841946.00

$

616,451.40 $

$

491624.00 90 $

44,661.60 $

$ 219721879.00

$ 2,675,591110 $

66,438.00 281050.00 941488.00 61542.01 322,620.00

$

77,261.00 90 $

69,534.90 $

161931.00 99

15,237.90

$

941192.00

$

841772.80 $

8,673.00 81673.00

$ 3,067,071.00

$ 2,760,363.90 $

331,293.00

STAfF DEVELOPMENT PROGRAMS Cost of Instruction Professional Development
Total Staff Development Programs r> Identifies Fourteen Weighted Programs.
See no1es to the general purpose financial statements.

$

8,744.00

2M50.00

$

8,744.00 $

21A50.00

$

30,194.00 100 $

30,194.00 $

1,153.00 0.00
1,153.00

- 32-

SCHEDULE "T'

TOTAL REQUIRED

ACTUAL EXPENDITURES

SALARIES

OPERATIONS

TOTAL

AMOUNT OF UNDEREXPENDITURE
FOR REQUIRED ALLOTMENT

$

326,170.41 $

319,268.36 $

6,279.86 $

325,548.22

6261350.29

616,318.20

13,290.16

629,608.36

$

952,520.70 $

935,586.56 $

19,570.02 $

955,156.58 $

0.00

234,652.50

342,3n.39

6,703.33

349,080.72

0.00

494,854.89

613,540.21

10,982.14

624,522.35

0.00

265,681.80

261,273.93

11,471.59

272,745.52

0.00

169,1n.50

338,269.74

13,416.51

351,686.25

0.00

1191180.70

1411566.58

10~13.n

151z180.35

0.00

$ 21236,068.09 $ 216321614.41 $

72,357.36 $ 2z1041971.n

$

676,267.20

$

52,251.65 $ 249,059.81 332,440.18

965.75 $ 2,408.99 75,948.72 11113.13

53,217.40 251,468.80 408,388.90
11113.13

$

676,267.20 $

633,751.64 $

80,436.59 $

714,188.23

0.00

341672.20

161048.65

211564.92

371613.57

0.00

$

7101939.40 $

6491800.29 $

1021001.51 $

7511801.80

$

511203.61 $

251094.06 $

301188.84 $

55~82.90

0.00

$

2.998~11.10 $

313071508.76 $

2041547.71 $ 315121056.47

$

78,207.90 $

162,011.79

$

162,011.79

0.00

15~37.90

$

181815.41

181815.41

0.00

$

93,445.80 $

162,011.79 $

181815.41 $

1801827.20

$ 31091,656.90 $ 314691520.55 $

2231363.12 $ 3,692,883.67 $

0.00

$

9,897.00

21,450.00

s_.....;3_1,..3.4.7-.oo-.

$

26,137.73 $

26,137.73

51007.63

51007.63

$

311145.36 $

s_ _ _ _ 311145.36

...-2o-1..6..4..

33.

SECTION IT COMPLIANCE AND INTERNAL CONTROL REPORTS

RussELL W. HINTON
STATE AUDITOR
(404) 656-2174

DEPARTMENT oF A uniTS AND AccouNTS
254 Washington Street, S.W., Suite 214 Atlanta, Georgia 30334-8400
July 1, 1999

Honorable Roy E. Barnes, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members ofthe City of Commerce Board of Education
REPORT ON COMrLJANCE AND ON INTERNAL CONTROL OVER FINANCIAL REPORTING BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH
GOVERNMENT AUDITING SIANDARPS
Ladies and Gentlemen:
We have audited the financial statements of City of Commerce Board of Education as of and for the year ended June 30, 1998, and have issued our report thereon dated July 1, 1999. This report was qualified for various departures from generally accepted accounting principles, as identified in the auditor's report on the general purpose financial statements. We conducted our audit in accordance with generally accepted auditing standards and the standards applicable to financial audits contained in Government Auditin~ Staruiards, issued by the Comptroller General of the United States.
Compliance
As part of obtaining reasonable assurance about whether City of Commerce Board ofEducation's financial statements are free ofmaterial misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts and grants, noncompliance with which could have a direct and material effect on the detennination_offinancial statement amounts. However, providing an opinion on compliance with those provisions was not an objective ofour audit and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance that are required to be reported under Government Auditin~ Standards.
Internal Control Over Financial Reportin~
In planning and performing our audit, we considered City of Commerce Board ofEducation's internal control over financial reporting in order to determine our auditing procedures for the purpose of expressing our opinion on the financial statements and not to provide assurance on the internal control over financial reporting. However, we noted certain matters involving the internal control over financial reporting and its
98YB-40

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 judgement, could adversely affect City of Commerce Board of Education's ability to record, process, summarize and report financial data consistent with assertions ofmanagement in the financial statements. Reportable conditions are described in the accompanying Schedule of Findings and Questioned Costs as items FS-7711-98-01, FS-7711-98-02, FS-7711-98-05 and FS-7711-98-06.
A material weakness is a condition in which the design or operation of one or more of the internal control components does not reduce to a relatively low level the risk that misstatements in amounts that would be material in relation to the financial statements being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. Our consideration of the internal control over financial reporting would not necessarily disclose all matters in the internal control that might be reportable conditions and accordingly, would not necessarily disclose all reportable conditions that are also considered to be material weaknesses. However, of the reportable conditions described above, we consider items FS-7711-98-01 and FS-7711-98-06 to be material weaknesses.
This report is intended for the information ofmanagement, the Federal cognizant agency, Federal awarding agencies and pass through entities. This restriction is not intended to limit the distribution ofthis report which is a matter ofpublic record.
Respectfully submitted,

RWH:jb 98YB-40

Russell W. Hinton State Auditor

RussELL W. HINTON
STATE AUDITOR
(404) 6562174

DEPARTMENT OF AUDITS AND AccouNTS
254 Washington Street, S.W., Suite 214 Atlanta, Georgia 30334-8400
July 1, 1999

Honorable Roy E. Barnes, Governor Members ofthe General Assembly Members ofthe State Board of Education
and Superintendent and Members ofthe City of Commerce Board ofEducation
REPORT ON COMPLIANCE WITH REQlJIREMENIS APPLICABLE TO BACH MAJOR PROGRAM AND INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH OMB CIRCULARA-133
Ladies and Gentlemen:
Compliance
We have audited the compliance of City of Commerce Board of Education with the types of compliance requirements described in the U.S. Office ofManagement and Budget (OMB) Circular A-133 Compliance Supplement that are applicable to each ofits major Federal programs for the year ended June 30, 1998. City of Commerce Board of Education's major Federal programs are identified in the accompanying Schedule of Findings and Questioned Costs. Compliance with the requirements of laws, regulations, contracts and grants applicable to each of its major Federal programs is the responsibility of City of Commerce Board of Education's management. Our responsibility is to express an opinion on City of Commerce Board of Education's compliance based on our audit.
We conducted our audit of compliance in accordance with generally accepted auditing standards; the standards applicable to financial audits contained in Goyemmeut Auditin~ Standards, issued by the Comptroller General of the United States; and OMB Circular A-133, Audits ofStates, Local Governments, and Non-Profit Organizations. Those standards and OMB 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 City of Commerce Board of Education's compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Our audit does not provide a legal determination on City of Commerce Board of Education's compliance with those requirements.

98SA-10

In our opinion, the City of Commerce Board of Education complied, in all material respects, with the requirements referred to above that are applicable to each of its major Federal programs for the year ended June 30, 1998.
Internal Control Over Compliance
The management of City of Commerce 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 City of Commerce 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 of expressing our opinion on compliance and to test and report on internal control over compliance in accordance with OMB Circular A-133.
Ourconsideration of the internal control over compliance would not necessarily disclose all matters in the internal control that might be material weaknesses. A material weakness is a condition in which the design or operation ofone or more ofthe internal control components does not reduce to a relatively low level ofrisk that noncompliance with applicable requirements of laws, regulations, contracts and grants 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 for the information ofmanagement, the Federal cognizant agency, Federal awarding agencies and pass through entities. This restriction is not intended to limit the distribution ofthis report which is a matter ofpublic record.
Respectfully submitted,
~w.4~ Russell W. Hinton State Auditor
RWH:jb 98SA-10

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

CITY OF COMMERCE BOARD OF EDUCATION- JACKSON COUNTY
AUPITEE'S RESPONSE
SUMMARY SCHEDULE OF PRIOR YEAR FINPINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30. 1998

PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

FINDING CONTROL NUMBER AND STATUS

7711-93-02 FS-7711-97 -01

Further Action Not Warranted Unresolved - See Corrective Action/Responses

CORRECTIVE ACTION/RESPONSES

GENERAL FIXED ASSETS Failure to Maintain General Fixed Assets Account Group Finding Control Number: FS-7711-97-01

Due to staffing limitations and budgetary considerations prohibiting the hiring of additional administrative staffthe Board has decided not to pursue the recording of general fixed assets on the financial statements.

SECTIONN FINDINGS AND QUESTIONED COSTS

CITY OF COMMERCE BOARD OF EDUCATION- JACKSON COUNTY
SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED ruNE 30. 1998

I SUMMARY OF AUDITOR'S RESULTS

1. Txve ofRm>ort Issued on the Financial Statements The auditor's opinion on the City of Commerce Board of Education's financial statements was qualified for various departures from generally accepted accounting principles.

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

Cash and Cash Equivalents General Fixed Assets

General Ledger

Ofthe reportable conditions described above, Cash and Cash Equivalents and General Fixed Assets, are considered to be material weaknesses.

3. Noncompliance Material to the Financial Statements The audit ofthe City of Commerce Board ofEducation disclosed no instances ofnoncompliance that were deemed to be material to the financial statements.

4. Re.portable Conditions in Internal Control Over Major ProiWlffis The audit report for the City of Commerce Board of Education did not disclose any reportable conditions in internal control over major programs.

5. Type ofRe.port Issued on Compliance for Major Prowrns The auditor's opinion on the City of Commerce Board of Education's report on compliance with requirements applicable to major programs was unqualified.

6. Audit Findin~s Req,uired to be Re.ported by Section .510(a) ofOMB Circular A-133 The City of Commerce Board of Education's audit did not disclose audit findings required to be reported by section .510(a) ofOMB Circular A-133.

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

8. Type "A" Prowrn Dollar Threshold The dollar threshold for type "A" programs was $300,000.00.

9. Low Risk Auditee
The City of Commerce Board of Education was audited as a low risk auditee based on a waiver
granted by the U. S. Department of Education.

- 1-

CITY OF COMMERCE BOARD OF EDUCATION- JACKSON COUNTY
SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENPED JUNE 30. 1998
IT FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS
CASH AND CASH EQUIVALENTS Inadequate Accounting Procedures Reportable Condition - Material Weakness Finding Control Number: FS-7711-98-0 1
The City ofCommerce Board ofEducation's accounting procedures were insufficient to provide for adequate internal control over cash and cash equivalents of the Board. The following deficiencies existed during the year under review:
(1) The Board failed to perform bank reconciliations for the General Operating Account for October 1997 through June 1998.
(2) The Board failed to ensure that all deposits and checks were correctly posted to the general ledger.
(3) The Board was unable to provide an outstanding check list as of June 30, 1998 for the General Operating Account to assist in the reconciliation process.
These deficiencies were a result ofmanagement's failure to adequately manage cash and cash equivalents of the Board. The Board should establish internal controls to ensure that monthly bank statements are reconciled with the accounting records on a timely basis, receipts and disbursements are properly posted to the general ledger and done so in a timely manner, and that an outstanding check list is maintained to support each months' reconciliation.
Management's Response:
We concur with this finding. Appropriate internal controls are being established for the reconciliation of monthly bank statements and posting of receipts and disbursements in a timely manner.
CASH AND CASH EQUIVALENTS Uncollateralized Deposits Reportable Condition Nonmaterial Noncompliance Finding Control Number: FS-771-98-02
As of June 30, 1998, the City of Commerce Board of Education failed to have its bank balances fully collateralized as provided for by the Official Code ofGeorgia Annotated Section 45-8-12 which states, in part, as follows:
-2-

CITY OF COMMERCE BOARD OF EDUCATION- JACKSON COUNTY
SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENPED JUNE 30. 1998
TI FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS
CASH AND CASH EQUNALENTS Uncollateralized Deposits Reportable Condition Nonmaterial Noncompliance Finding Control Number: FS-771-98-02
"The collecting officer or officer holding public funds may not have on deposit at any time in any depository for a time longer than ten days a sum of money belonging to the public body when such depository has not given bond to the public body as set forth in this code section... The aggregate of the face value of such surety bond, and the market value of such securities pledged, shall be equal to not less than 110% (percent) of the public funds being secured after the deduction of the amount of deposit insurance".
This noncompliance occurred because ofmanagement's failure to adequately monitor the collateralization of balances at individual banks. The board should implement procedures to monitor the collateralization ofbank balances to ensure compliance at all times with State laws governing deposits and investments.
Management's Response:
We concur with this finding. We have contacted the financial institution involved and was told that they normally automatically take care of this and they apologized for it not taking place. They assl.Jred us that appropriate collateral for all Board deposits in the future will be provided.
EXPENDITURES/LIABILITIES/DISBURSEMENTS Failure to Meet Expenditure Requirements Financial Statements Nonmaterial Noncompliance Amount: $201.64 Finding Control Number: FS-7711-98-03
The City of Commerce Board of Education reported to the Georgia Depaijment of Education on DE form 0420 underexpenditures of Quality Basic Education (QBE) funds of $201.64 for the Staff Development Program. This underexpenditure occurred because the Board expended less than the minimum expenditure requirement for this QBE Program. These funds should be returned to the Georgia Department of Education through an increase in the Board's local fair share for the QBE programs in a subsequent fiscal period.
Management's Response:
We concur with this finding. This finding will be resolved by Georgia Department ofEducation through a future increase in Board's local share portion of QBE Allotments.
-3-

CITY OF COMMERCE BOARD OF EDUCATION- JACKSON CQUNTY
SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENPED JUNE 30, 1998

II FINANCIAL STATBMENT FINDINGS AND QUESTIONED COSTS

GENERAL LEDGER Failure to File Accurate Completion Reports Financial Statements Nonmaterial Noncompliance Amount: $13,302.43 Finding Control Number: FS-7711-98-04

An examination of the Board's compliance with regulations for the Lottery - Pre-K, Title VI, B - Flow Through, and the Title VI, B - Preschool Programs revealed that the Board failed to file an accurate completion report for these programs as required by guidelines established by the Georgia Department of Education. A review of the Board's accounting records revealed that the completion reports were not supported by the total expenditures recorded for these programs as indicated below:

Actual Program Expenditures

Expenditures Per Completion Report

Lottery Pre-K Title VI, B - Flow Through Title VI, B - Preschool

$ 66,404.62

$

$ 73,963.10

$

$ 12,850.28

$

75,787.82 80,504.33 12,900.28

These deficiencies occurred because management neglected the specific limitations imposed upon the Board by the Georgia Department of Education. The differences in actual expenditures and revenues for these programs have been reserved on the Balance Sheet as these funds should be refunded to the Georgia Department ofEducation. Appropriate procedures should be implemented by the Board to ensure that future completion reports are accurate and that all unearned Lottery- Pre - K, Title VI, B - Flow Through, and Title VI, B -Preschool funds are refunded to the Georgia Department of Education as required. Additionally, the Board should submit a corrected completion report for Lottery- Pre -K, Title VI, B - Flow Through, and Title VI, B -Preschool to the Georgia Department ofEducation.

Management's Response:

We concur with this finding. Management was unaware ofthe requirement to return funds which had been included in the next school year carry-over budget for the Lottery Pre-K, and Title VI, B - Flow Through and Preschool funds. Unearned funds will be sent back in the future and then requested when budgeted as carryover funds. The Board will be sending corrected completion reports for Lottery Pre-K, Title VI, B - Flow Through, and Title VI, B -Preschool to the Georgia Department of Education.

-4-

CITY OF COMMERCE BOARD OF EDUCATION- JACKSON COUNTY
SCHEDULE OF FINDINGS AND Q!JESTIQNED COSTS YEAR ENPED JUNE 30. 1998
II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS
GENERAL LEDGER Inadequate Accounting Procedures Reportable Condition Finding Control Number: FS-7711-98-05
The City of Commerce Board ofEducation's accounting procedures were insufficient to provide for adequate internal control over the journal entry process. The following deficiencies existed during the year under review:
(1) Journal entries were not supported by either adequate documentation or explanation.
(2) Journal entries were made to the accounting records without proper authorization.
These conditions were a result ofmanagement's failure to adequately monitor and document journal entries.
These deficiencies in accounting procedures were discussed with the Superintendent. In addition, the accounting personnel of the Board were given instructions in the proper accounting procedures for journal entries which include the necessity of all journal entries being properly approved and documented prior to entry into the accounting system.
Management's Response:
We concur with this finding. Appropriate internal controls will be implemented to ensure that all journal entries are properly approved and documented prior to entry into the accounting system.
GENERAL FIXED ASSETS Failure to Maintain General Fixed Assets Account Group Reportable Condition - Material Weakness Repeated From Prior Year Finding Control Number: FS-7711-98-06
The City of Commerce Board ofEducation did not maintain a system-wide General Fixed Assets Account Group within the formal accounting records as required by generally accepted accounting principles. This condition results in the general purpose financial statements of the Board being incomplete and not in accordance with generally accepted accounting principles. Appropriate action should be taken by the Board to establish accounting controls and procedures to provide for maintenance ofa General Fixed Assets Account Group. These subsidiary records should include an inventory of land, buildings and equipment owned by the Board and should include, but may not be limited to, date acquired, acquisition cost, estimated replacement cost, location and description. Detailed records should be maintained of all additions and deletions to the General Fixed Asset Account Group.
-5-

CITY OF COMMERCE BOARD OF EDUCATION- JACKSON COUNTY
SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30. 1998
IT FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS GENERAL FIXED ASSETS Failure to Maintain General Fixed Assets Account Group Reportable Condition - Material Weakness Repeated From Prior Year Finding Control Number: FS-7711-98-06 Management's Response: We concur with this finding. Due to current staffing limitations and budgetary considerations prohibiting the hiring of additional administrative staffthe Board has decided not to pursue the recording of general fixed assets on the financial statements.
ill FEDERAL AWARD FINDINGS AND QUESTIONED COSTS
No matters were reported.
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