CITY OF COMMERCE BOARD OF EDUCATION
JACKSON COUNTY, 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

CITY OF COMMERCE BOARD OF EDUCATION - JACKSON COUNTY - 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

GENERALFUND

27

SUPPLEMENTARY INFORMATION

2 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS

28

3 SCHEDULE OF STATE REVENUE

29

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

SECTION I

FINANCIAL

SCHEDULES

SUPPLEMENTARY INFORMATION

4 SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS

30

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 CIRCULAR A-133

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

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

CITY OF COMMERCE BOARD OF EDUCATION - JACKSON COUNTY - 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
April 12, 2007

Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members ofthe City of Commerce 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) of the City of Commerce 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 City ofCommerce Board ofEducation's management. Our responsibility is to express opinions on these financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United States ofAmerica and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General ofthe United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free ofmaterial misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinions.
In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, each major fund, and the aggregate remaining fund information ofthe City of Commerce Board ofEducation, as of June 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 City of Commerce 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 April 12, 2007, on our consideration of the City of Commerce 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 27, 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 City of Commerce 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,
=;~in:~~ State Auditor
RWH:gp 2006ARL-11

CITY OF COMMERCE BOARD OF EDUCATION - JACKSON COUNTY

CITY OF COMMERCE BOARD OF EDUCATION - JACKSON COUNTY STATEMENT OF NET ASSETS JUNE 30, 2006

EXHIBIT"A"

ASSETS
Cash and Cash Equivalents Investments Accounts Receivable, Net
Taxes State Government Federal Government Other Inventories Capital Assets Land Land Improvements Buildings Equipment Less: Accumulated Depreciation
Total Assets
LIABILITIES
Accounts Payable Salaries Payable Retainages Payable Deposits and Deferred Revenues 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
Total Net Assets
Total Liabilities and Net Assets

GOVERNMENTAL ACTIVITIES

$

1,175,245

2,353,439

254,911 1,145,068
270,694 5,378
19,501

503,375 752,547 11,856,295 673,751 -3,073,059

$ ===1=5=,9==3=7=1,=4.5...

$

309,330

1,020,727

33,000

16,388

1,261,175 1,286,686

$

3,927,306

$

8,165,048

53,798 1,291,669
477,964 2,021,360

$

12,009,839

$ ===1=5=,9=3=7'=1=45=

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

CITY OF COMMERCE BOARD OF EDUCATION - JACKSON COUNTY 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 Central Support Services Other Support Services Operations of Non-Instructional Services Enterprise Operations Food Services Interest on Short-Term and Long-Term Debt
Total Governmental Activities
General Revenues Taxes Property Taxes For Maintenance and Operations Sales Taxes Special Purpose Local Option Sales Tax For Debt Services For Capital Projects Intangible Recording Tax Real Estate Grants and Contributions not Restricted to Specific Programs Investment Earnings Miscellaneous
Total General Revenues
Change in Net Assets
Net Assets - Beginning of Year - Restated

EXPENSES

CHARGES FOR SERVICES

$

7,298,202

325,331 274,819 283,600 367,007 814,771 154,724 984,881 169,000 104,356
46,600

240,775 $ 679,960 104 140

161,920 238,999

$

11,848,166 $ ===4=0=0=9=19...

Net Assets - End of Year

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

EXHIBIT"B"

PROGRAM REVENUES

OPERATING

CAPITAL

GRANTS AND

GRANTS AND

CONTRIBUTIONS CONTRIBUTIONS

NET (EXPENSES) REVENUES
AND CHANGES IN NET ASSETS

$

4,396,947 $

69,950 90,897 136,343 1,552,767 341,862

393,867 110,485

20,066

421,362

$

7 534 546 $

58,903 $ 131 354
13,556
868 73 812 $

-2,842,352
-255,381 -183,922 -147,126 1,185,760 -472,909 -154,724 -590,660
-44,959 -104,356 -26,534
-78,855 -18,731 -104 140
-3,838,889

$

2,470,140

1,252,025 140,759 27,539 13,706
1,306,851 92,141 545 935

$

5 849 096

$

2,010,207

9,999,632

$ ===1=2=,0=09.,.,=83=9=

-3-

CITY OF COMMERCE BOARD OF EDUCATION - JACKSON COUNTY BALANCE SHEET
GOVERNMENTAL FUNDS JUNE 30, 2006

EXHIBIT"C"

ASSETS
Cash and Cash Equivalents Investments Accounts Receivable, Net
Taxes State Government Federal Government Other Inventories
Total Assets
LIABILITIES AND FUND BALANCES
LIABILITIES
Accounts Payable Salaries Payable Retainages Payable Deposits and Deferred Revenue
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

$ 1,175,245

$

960,282 $ 1,393,157

73,078 871,667 270,694
5,378 19 501

136,075 273,401

0 $ 1,175,245 2,353,439
209,153 1,145,068
270,694 5,378 19 501

$ 3,375,845 $ 1,802,633 $

0 $ 5,178,478

$

309,330

1,020,727

$

16,388

$ 1,346,445 $

33,000 33,000

$

34,297

$ 1,291,669 $

19,501

477,964

1,975,602 $ 2,029,400 $ 1,769,633 $

$ 3,375,845 $ 1,802,633 $

$

309,330

1,020,727

33,000

16,388

$ 1,379,445

$

34,297

0

1,291,669

19,501

477,964

1,975,602 0 $ 3,799,033

0 $ 5,178,478

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

CITY OF COMMERCE BOARD OF EDUCATION - JACKSON COUNTY 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 Capital Leases
Total Long-Term Liabilities

$ 3,799,033

$

503,375

752,547

11,856,295

673,751

-3,073,059

10,712,909

45,758

$ -2,525,000 -22,861

-2,547,861

Net Assets of Governmental Activities (Exhibit "A")

$ 12,009,839

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

CITY OF COMMERCE BOARD OF EDUCATION -JACKSON COUNTY 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 Central Support Services Other Support Services Enterprise Operations Food Services Operation
Capital Outlay Debt Services
Principal Interest
Total Expenditures
Net Change in Fund Balances
Fund Balances - Beginning

GENERAL FUND

DISTRICTWIDE
CAPITAL PROJECTS
FUND

DEBT SERVICE
FUND

TOTAL

$ 2,460,340 41,245 $
7,729,138 1,125,815
400,919 51,262
545,935
$ 12,354,654 $

140,759 $ 60,256
40,879
241,894 $

$ 1,252,025

2,460,340 1,434,029 7,789,394 1,125,815
400,919 92,141
545,935

1,252,025 $ 13,848,573

$ 7,327,180

325,331 274,819 283,656 367,007 814,771 154,724 991,623 170,831 104,356 46,600 240,775 680,330
$

22,251 2 115

$ 11,806,369 $

$

548,285 $

1481115

60,255 $
60,255 $ 181,639 $ 1,587,994

$ 7,327,180

325,331 274,819 283,656 367,007 814,771 154,724 991,623 170,831 104,356 46,600 240,775 680,330 60,255

1,150,000 102,025

1,172,251 104 140

1,252,025 $ 13,118,649

0 $

729,924

0

3,069,109

Fund Balances - Ending

$ 2,029,400 $ 1,769,633 $

0 $ 3,799,033

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

CITY OF COMMERCE BOARD OF EDUCATION - JACKSON COUNTY 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.
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 Capital Lease Payments
Total Long-Term Debt Repayments

$

729,924

$

490,185

-391,953

98,232 9,800

$

1,150,000

22,251

1,172,251

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

$ ====21=0.1..o=,2=0=1

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

(This page left intentionally blank)

CITY OF COMMERCE BOARD OF EDUCATION -JACKSON COUNTY STATEMENT OF FIDUCIARY NET ASSETS FIDUCIARY FUNDS JUNE 30, 2006

EXHIBIT"G"

ASSETS Cash and Cash Equivalents
LIABILITIES Funds Held for Others

AGENCY FUNDS
$ ===2=5,=60=2=
$ ===2=5,=60=2=

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

CITY OF COMMERCE BOARD OF EDUCATION - JACKSON COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2006

EXHIBIT"H"

Note 1: DESCRIPTION OF SCHOOL DISTRICT AND REPORTING ENTITY
REPORTING ENTITY
The City of Commerce 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.
During the 2005 Legislative Session Senate Bill (SB) No. 173 amended an Act providing a new charter for the City of Commerce, Georgia, so as to authorize the Board of Education to set the millage rate for the School District's property tax. In addition, the Board of Education shall possess all such other powers as granted to Boards of Education under general law. In previous years, the School District was reported as a component unit of the City of Commerce, Georgia. However, beginning with the fiscal year ended June 30, 2006, the School District is reported as its own primary government. Consequently, general obligation bonds outstanding at July 1, 2005, in the amount of $3,675,000 have been restated to include the School District's financial statements. This change is in accordance with generally accepted accounting principles.
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 ofthe City of Commerce Board of Education.
District-wide Statements: The Statement ofNet Assets and the Statement ofActivities display information about the financial activities ofthe overall School District, except for fiduciary activities. Eliminations have been made to minimize the double counting of internal activities. Governmental activities generally are financed through taxes, intergovernmental revenues, and other nonexchange transactions.
The Statement ofActivities presents a comparison between direct expenses and program revenues for each function of the School District's governmental activities.
Direct expenses are those that are specifically associated with a program or function and, therefore, are clearly identifiable to a particular function. Indirect expenses (expenses of the School District related to the administration and support ofthe School District's programs, such as office and maintenance personnel and accounting) are not allocated to programs.

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CITY OF COMMERCE BOARD OF EDUCATION - JACKSON COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2006

EXHIBIT"H"

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

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CITY OF COMMERCE BOARD OF EDUCATION - JACKSON COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2006

EXHIBIT"H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The School District uses funds to report on its financial position and the results of its operations. Fund accounting is designed to demonstrate legal compliance and to aid financial management by segregating transactions related to certain governmental functions or activities. A fund is a separate accounting entity with a self-balancing set of accounts.
Governmental funds are reported using the current financial resources measurement focus and the modified accrual basis ofaccounting. Under this method, revenues are recognized when measurable and available. The School District considers all revenues reported in the governmental funds to be available if they are collected within sixty days after year-end. Property taxes, sales taxes and interest are considered to be susceptible to accrual. Expenditures are recorded when the related fund liability is incurred, 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. Proceeds ofgeneral long-term liabilities and acquisitions under capital leases are reported as other financing sources.
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.
RESTATEMENT OF PRIOR YEAR NET ASSETS
For fiscal year 2006, the School District restated Long-Term Liabilities due to the School District being reported as a component unit of the City of Commerce, Georgia, in previous years. The School District increased Bonds Payable by $3,675,000, the balance outstanding as ofJuly 1, 2005. The result is a decrease in Net Assets at July 1, 2005, of $3,675,000. This change is in accordance with generally accepted accounting principles.
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 ofone year or less are reported at amortized cost. Both participating interest-earning contracts and money market investments with
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CITY OF COMMERCE BOARD OF EDUCATION - JACKSON COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2006

EXHIBIT"H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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,
(6) The Local Government Investment Pool administered by the State ofGeorgia, 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 City of Commerce fixed the property tax levy for the 2005 tax digest year (calendar year) on October 21, 2005 (levy date). Taxes were due on December 30, 2005 (lien date). Taxes collected within the current fiscal year or within 60 days after year-end on the 2005 tax digest are reported as revenue in the governmental funds for fiscal year 2006. The City ofCommerce City Clerk bills the property taxes for the School District, then the Jackson County Tax Commissioner collects the
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CITY OF COMMERCE BOARD OF EDUCATION - JACKSON COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2006

EXHIBIT"H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

property taxes for the School District and remits the balance oftaxes collected to the School District. Property tax revenues, at the fund reporting level, during the fiscal year ended June 30, 2006, for maintenance and operations amounted to $2,460,340.

The tax millage rate levied for the 2005 tax year (calendar year) for the City ofCommerce Board of Education was as follows (a mill equals $1 per thousand dollars of assessed value):

School Operations

17.75 mills

SALES TAXES

Special Purpose Local Option Sales Tax, at the fund reporting level, during the year amounted to $1,392,784 and is to be used for capital outlay for educational purposes or debt service. This sales tax was authorized by local referendum and the sales tax must be re-authorized at least every five years.

INVENTORIES

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

CAPITAL ASSETS

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

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

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CITY OF COMMERCE BOARD OF EDUCATION - JACKSON COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2006

EXHIBIT"H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Capitalization Policy

Estimated Useful Life

Land Land Improvements Buildings and Improvements Equipment

Any Amount

$

10,000

$

10,000

$

10,000

NIA 20 to 50 years 25 to 50 years
5 to 20 years

Depreciation is used to allocate the actual or estimated historical cost of all capital assets over estimated useful lives.

GENERAL OBLIGATION BONDS

The City of Commerce issues general obligation bonds to provide funds for the acquisition and construction of major capital facilities. Bond issuance costs are recognized in the financial statements during the fiscal year bonds are issued. General obligation bonds are direct obligations and pledge the full faith and credit of the government. The outstanding amount of these bonds is recorded in the Statement of Net Assets.

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 of such surety bond and the market value of securities pledged shall be equal to not less than 110 percent ofthe public funds being secured after the deduction ofthe amount ofdeposit insurance. Ifa depository elects the pooled method (OCGA 45-8-13 .1) the aggregate ofthe market value ofthe securities pledged to secure a pool ofpublic funds shall be not less than 110 percent ofthe daily pool balance. At June 30, $49,632 ofdeposits were not secured by surety bond, insurance or collateral as specified above. The School District is working with the affected financial institutions to ensure appropriate levels of collateral are maintained for all of the School District's deposits.

Acceptable security for deposits consists of any one of or any combination of the following:

(1) Surety bond signed by a surety company duly qualified and authorized to transact business within the State of Georgia,

(2) Insurance on accounts provided by the Federal Deposit Insurance Corporation,

(3) Bonds, bills, notes, certificates of indebtedness or other direct obligations of the United States or of the State of Georgia,

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CITY OF COMMERCE BOARD OF EDUCATION - JACKSON COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2006

EXHIBIT"H"

Note 3: DEPOSITS AND INVESTMENTS

(4) Bonds, bills, notes, certificates of indebtedness or other obligations of the counties or municipalities of the State of Georgia,

(5) Bonds of any public authority created by the laws of the State of Georgia, providing that the statute that created the authority authorized the use of the bonds for this purpose,

(6) Industrial revenue bonds and bonds of development authorities created by the laws of the State of Georgia, and

(7) Bonds, bills, notes, certificates of indebtedness, or other obligations of a subsidiary corporation of the United States government, which are fully guaranteed by the United States government both as to principal and interest or debt obligations issued by the Federal Land Bank, the Federal Home Loan Bank, the Federal Intermediate Credit Bank, the Central Bank for Cooperatives, the Farm Credit Banks, the Federal Home Loan Mortgage Association, and the Federal National Mortgage Association.

CATEGORIZATION OF DEPOSITS At June 30, 2006, the bank balances were $1,854,886. 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

$ 211,449

2

0

3

1,593,805

4

49,632

Total

$ 118541886

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CITY OF COMMERCE BOARD OF EDUCATION - JACKSON COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2006

EXHIBIT"H"

Note 3: DEPOSITS AND INVESTMENTS
CATEGORIZATION OF INVESTMENTS
Custodial Credit Risk Custodial credit risk for investments is the risk that, in the event ofa failure ofthe counterparty to a transaction, the School District will not be able to recover the value ofthe investment or collateral securities that are in the possession ofan outside party. The School District does not have a formal policy for managing custodial credit risk.
Investments are classified as to custodial credit risk by the categories described below:
Category 1 - Insured or registered, or securities held by the School District or the School District's agent in the School District's name.
Category 2 - Uninsured or unregistered, with securities held by the counterparty's trust department or agent in the School District's name.
Category 3 - Uninsured or unregistered, with securities held by the counterparty's trust department or agent, but not in the School District's name.
Funds invested in an investment pool managed by another government are not required to be categorized unless the investing entity owns specific, identifiable investment securities in the pool.
At June 30, 2006, the carrying value ofthe School District's total investments was $2,353,439 which is materially the same as fair value. These investments included funds in the amount of$2,353,41 l invested in the Local Government Investment Pool administered by the State ofGeorgia, 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 of the State of Georgia, Office ofTreasury 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 ofthe 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 ofmanagement 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.
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CITY OF COMMERCE BOARD OF EDUCATION - JACKSON COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2006

EXHIBIT"H"

Note 3: DEPOSITS AND INVESTMENTS
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.
Funds invested in U.S. Treasury Money Market Mutual Funds (open-end mutual funds) in the amount of $28 are not required to be classified by categories of custodial credit risk.
Interest Rate Risk Interest rate risk is the risk that changes in interest rates ofdebt investment will adversely affect the fair value ofan investment. The School District does not have a formal policy for managing interest rate risk.
At June 30, 2006, the School District's investment consisted of U. S. Treasury Money Market Mutual Funds (Open-End) which had an investment maturity of less than one year.
Credit Quality Risk Credit quality risk is the risk that an issuer or other counterparty to an investment will not fulfill its obligations. The School District does not have a formal policy for managing credit quality risk.
The Money Market Mutual Fund has a credit quality rating of AAA by Standard and Poor's.
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:

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CITY OF COMMERCE BOARD OF EDUCATION - JACKSON COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2006

EXHIBIT"H"

Note 5: CAPITAL ASSETS

Balances July 1, 2005

Increases

Decreases

Balances June 30, 2006

Governmental Activities

Capital Assets, Not Being Depreciated:

Land

$ 503.375 $

0 $

0 $ 503,375

Capital Assets Being Depreciated Buildings and Improvements Equipment Land Improvements

$ 11,389,701 $ 667,160 735,547

466,594 $ 6,591 17,000

0 $ 11,856,295 673,751 752,547

Less Accumulated Depreciation for: Buildings and Improvements Equipment Land Improvements

1,909,215 481,068 290.823

322,783 31,968 37.202

2,231,998 513,036 328,025

Total Capital Assets, Being Depreciated, Net $ 10,111.302 $

98.232 $

0 $ 10.209,534

Governmental Activity Capital Assets - Net $ 10.614.677 $

98.232 $

0 $ 10,712.909

Capital assets being acquired under capital leases as of June 30, 2006, are as follows:

Equipment Less: Accumulated Depreciation

Governmental Funds

$

55,985

13,996

Current year depreciation expense by function is as follows:

$==='=41-,9="8'==9

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

$ 363,165

$

668

1,805

21.893

24,366 4.422

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CITY OF COMMERCE BOARD OF EDUCATION - JACKSON COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2006

EXHIBIT "H"

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:

District-wide Capital Projects

Bond

SPLOST

Proceeds

Restricted Investments: Debt Service Capital Acquisitions

$
$ 1,091,599

159,221

Note 7: RISK MANAGEMENT

The School District is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors or omissions; job related illness or injuries to employees; acts of God and unemployment compensation.

The School District has obtained commercial insurance for risk ofloss associated with torts, assets and errors or omissions. The School District has neither significantly reduced coverage for these risks nor incurred losses (settlements) which exceeded the School District's insurance coverage in any of the past three years.

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. The School District has not incurred any liabilities for unemployment compensation during the past two fiscal years.

The School District participates in the Georgia Education Workers' Compensation Trust, a public entity risk pool organized on December 1, 1991, to develop, implement and administer a program of workers' compensation self-insurance for its member organizations. The School District pays an annual premium to the Trust for its general insurance coverage. Additional insurance coverage is provided through an agreement by the Trust with the Midwest Employers Casualty Company to provide coverage for potential losses sustained by the Trust in excess of $500,000 loss per occurrence, up to $2,000,000.

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CITY OF COMMERCE BOARD OF EDUCATION - JACKSON COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2006

EXHIBIT"H"

Note 7: RISK MANAGEMENT

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

Position Covered

Amount

Superintendent

$ 100,000

Note8: SHORT-TERMDEBT

The School District issues tax anticipation notes in advance of property tax collections, depositing the proceeds in its General Fund. This short-term debt is to provide cash for operations until property tax collections are received by the School District. Article IX, Section V, Paragraph V of the Constitution ofthe State ofGeorgia limits the aggregate amount ofshort-term debt to 75 percent ofthe total gross income from taxes collected in the preceding year and requires all short-term debt to be repaid no later than December 31 of the calendar year in which the debt was incurred.

Short-term debt activity for the fiscal year is as follows:

Beginning Balance

Issued

Redeemed

Ending Balance

Tax Anticipation Notes Note 9: LONG-TERM DEBT

$==~0 $ 725,000 $ 725.000 $=====0

CAPITAL LEASES The City of Commerce Board of Education has entered into various lease agreements as lessee for buses. 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.

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

Purpose

Interest Rates

Amount

City of Commerce (Georgia) General Government - Series 2001

2.20% - 3.35% $ 2,525.000

Voters have authorized $500,000 in general obligation debt for the funding ofcapital outlay projects which was not issued as of June 30, 2006.

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CITY OF COMMERCE BOARD OF EDUCATION - JACKSON COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2006

EXHIBIT"H"

Note 9: LONG-TERM DEBT

The changes in Long-Term Debt during the fiscal year ended June 30, 2006, were as follows:

Governmental Funds

General

Capital

Obligation

Leases

Bonds

Total

Balance July 1, 2005

$

45,112 $

0 $

45,112

Retroactive Restatement of Prior Year Balances

3,675,000

3,675,000

Balance July 1, 2005 Restated

$

45,112 $ 3,675,000 $ 3,720,112

Deductions Debt Retired

22.251

1,150.000

1,172,251

Balance June 30, 2006

$

22,861 $ 2,525.000 $ 2,547.861

Portion of Long-Term Debt Due within One Year

$

11.175 $ 1,250.000 $ 1,261.175

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

Ca12ital Leases

Principal

Interest

2007 2008

$

11,175 $

11.686

1,047 535

Total Principal and Interest

$

22,861 $

1,582

-22 -

CITY OF COMMERCE BOARD OF EDUCATION - JACKSON COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2006

EXHIBIT"H"

Note 9: LONG-TERM DEBT

Fiscal Year Ended June 30

General Obligation

Debt

Principal

Interest

2007 2008

$ 1,250,000 $ 1,275,000

63,025 21,356

Total Principal and Interest

$ 2,525,000 $

84,381

Note 10: ON-BEHALF PAYMENTS

The School District has recognized revenues and costs in the amount of $229,984 for health insurance and retirement contributions paid on the School District's behalf by the following State Agencies.

Georgia Department of Education Paid to the Georgia Department of Community Health For Health Insurance of Non-Certified Personnel In the amount of $228,730

Office of Treasury and Fiscal Services Paid to the Public School Employees Retirement System For Public School Employees Retirement (PSERS) Employer's Cost In the amount of $1,254

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.

The School District is a defendant in various legal proceedings pertaining to matters incidental to the performance ofroutine School District operations. The ultimate disposition ofthese proceedings is not presently determinable, but is not believed to be material to the basic financial statements.

Note 12: SUBSEQUENT EVENTS

On September 19, 2006, the voters of City ofCommerce School District voted in favor of a Special Purpose Local Option Sales Tax referendum for educational purposes. The imposition of the tax approved by the voters, as stated on the Official Ballot of City of Commerce, is as follows:

- 23 -

CITY OF COMMERCE BOARD OF EDUCATION - JACKSON COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2006

EXHIBIT"H"

Note 12: SUBSEQUENT EVENTS
"Shall a special one percent sales and use tax be imposed in City ofCommerce (such tax to be a continuation ofthe existing 1% sales and use tax and not an additional sales and use tax) for a period of time not to exceed five years (20 calendar quarters) commencing upon the expiration of the existing one percent sales and use tax previously imposed for the raising of not more than $14,683,000 for the purposes of the City of Commerce School District: (i) paying a portion of the debt service on the outstanding series 2001 General Obligation Bonds previously issued by the City of Commerce (the "Outstanding Commerce Debt"), the maximum amount of debt service to be paid with sales tax proceeds will be $1,350,000 and (ii) acquiring, constructing and equipping new school buildings and other buildings or facilities useful or desirable in connection therewith, including but not limited to a new physical educational/athletic facility and an educational/administrative complex; (iii) adding to, renovating, repairing, improving and equipping existing school buildings or other buildings or facilities useful or desirable in connection therewith, (iv) acquiring part ofa psychoeducational facility; (v) acquiring school buses, school vehicles and transportation equipment; (vi) acquiring textbooks system-wide; (vii) acquiring new technology and safety and security equipment system-wide; (viii) acquiring land; (ix) acquiring any property necessary or desirable therefore, both real and personal (the "Commerce School Projects"), the maximum amount of the Commerce School Projects to be paid with sales tax proceeds will be $14,683,000 less the amount ofCommerce City School District's share ofsuch proceeds used to pay the Outstanding Commerce Debt. If the imposition and continuance of the tax is approved by the voters within City ofCommerce School District, such vote will also constitute approval ofthe issuance ofgeneral obligation debt ofthe City ofCommerce School District in the principal amount of $20,000,000 for the purpose of funding portions of the Commerce School Projects."
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:
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CITY OF COMMERCE BOARD OF EDUCATION - JACKSON COUNTY 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
$ 559,659 $ 526,420 $ 517,100

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CITY OF COMMERCE BOARD OF EDUCATION - JACKSON COUNTY 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 Central Support Services Other Support Services Enterprise Operations Food Services Operation
Debt Service
Total Expenditures
Net Change in Fund Balances
Fund Balances - Beginning
Adjustments

NONAPPROPRIATED BUDGETS

ORIGINAL {1}

FINAL {1}

ACTUAL AMOUNTS

$

2,164,200 $

2,164,200 $

2,460,340

10,800

10,800

41,245

7,005,925

6,932,668

7,729,138

1,091,907

1,201,494

1,125,815

150,556

166,079

400,919

35,600

35,600

51,262

297 194

297 194

545 935

$

10,756,182 $

10,808,035 $

12,354,654

$

6,893,356 $

6,994,574 $

7,327,180

232,716 290,051 280,483 295,415 733,782 145,141 933,756 160,611 116,146
19,500
674,500

235,167 313,092 280,483 320,744 733,782 145,141 933,756 172,756 116,146 49,309
674,500

325,331 274,819 283,656 367,007 814,771 154,724 991,623 170,831 104,356
46,600 240,775 680,330 24 366

$

10,775,457 $

10,969,450 $

11,806,369

$

-19,275 $

-161,415 $

548,285

1,720,522

1,720,522

1,481,115

9 560

-346 621

Fund Balances - Ending

$

1710807 $

1,212,486 $ ===2=,0=2=9'=40=0=

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.

- 27 -

CITY OF COMMERCE BOARD OF EDUCATION - JACKSON COUNTY 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
Other Programs Pass-Through From Georgia Department of Education English Language Acquisition Grants Enhancing Education Through Technology Program Hurricane Education Recovery Improving Teacher Quality State Grants 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
Labor, U. S. Department of Pass-Through From Lanier Technical College School to Work Opportunities Grant

CFDA NUMBER

PASSTHROUGH
ENTITY ID
NUMBER

EXPENDITURES IN PERIOD

* 10.553 * 10.555
10.550

NIA

(2)

NIA $ _ _ _6~1_2-,9-29~

$

612,929

NIA

29,509

$ _ _ _6.::.4=2"'-',4'-=-38.::.

84.027
84.365 84.318 84.938 84.367 84.186 84.298 84.010 84.048
17.258

N/A

$

270,683

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

9,127 126,832 (3) 56,475
6,217 3,087 228,998 9102
710 521

N/A $ _ _ _ _:.2L.;.4.;;.;65=-

Total Federal Financial Assistance
N/A = Not Available

$===1=.3=5=5=,4=24=

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 ($93,212) 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 $22,401, 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 City of Commerce 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.

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CITY OF COMMERCE BOARD OF EDUCATION - JACKSON COUNTY SCHEDULE OF STATE REVENUE YEAR ENDED JUNE 30, 2006

SCHEDULE "3"

AGENCY/FUNDING
GRANTS Bright from the Start: Georgia Department of Early Care and Learning Pre-Kindergarten Program
Education, Georgia Department of Quality Basic Education Direct Instructional Cost Kindergarten Program Kindergarten Program - Early Intervention Program Primary Grades (1-3) Program Primary Grades - Early Intervention (1-3) Program Upper Elementary Grades (4-5) Program Upper Elementary Grades - Early Intervention (4-5) Program Middle School (6-8) Program High School General Education (9-12) Program Vocational Laboratory (9-12) Program Students with Disabilities Category I Category II Category Ill Category IV CategoryV Gifted Student - Category VI Remedial Education Program Alternative Education Program 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 Alternative Program Nursing Services Principal Supplements Education Equalization Funding Grant Food Services Vocational Education Austerity Reduction Other State Programs Health Insurance National Teacher Certification Preschool Handicapped Program Statewide K-8 Reading and Mathematics Program Virtual Schools State Grant
Georgia State Financing and Investment Commission Reimbursement on Construction Projects
Office of Treasury and Fiscal Services Public School Employees Retirement

GOVERNMENTAL FUND TYPES

CAPITAL

GENERAL

PROJECTS

FUND

FUND

TOTAL

$

111,560

$

111,560

488,781 63,935
1,022,559 29,473
375,541 92,780
837,471 660,757 247,291
89,667 124,515 613,158 110,778 123,293
53,593 -1,628 65,451 72,482 136,343 42,813 29,005
321,973 336,732 393,867
86,213 13,556 35,802 44,690
5,130 1,076,867
37,892 12,111 -320,347
228,730 19,761 20,189 25,000 100

488,781 63,935
1,022,559 29,473
375,541 92,780
837,471 660,757 247,291
89,667 124,515 613,158 110,778 123,293
53,593 -1,628 65,451 72,482 136,343 42,813 29,005
321,973 336,732 393,867
86,213 13,556 35,802 44,690
5,130 1,076,867
37,892 12,111 -320,347
228,730 19,761 20,189 25,000 100

$ 1 254

60,256

60,256 1 254

See notes to the basic financial statements.

$

7 729 138 $

60 256 $

7 789 394

- 29-

CITY OF COMMERCE BOARD OF EDUCATION - JACKSON COUNTY SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS
YEAR ENDED JUNE 30, 2006

SCHEDULE "4"

PROJECT
Acquiring, constructing and equipping new school buildings or facilities useful or desirable in connection therewith; acquiring new school equipment; adding to, renovating, repairing, improving and equipping existing school buildings or other buildings or facilities useful or desirable in connection therewith; and acquiring any property necessary or desirable therefor, both real and personal

ORIGINAL ESTIMATED
COST (1)

CURRENT ESTIMATED COSTS (2)

AMOUNT EXPENDED IN CURRENT YEAR (3)

AMOUNT EXPENDED
IN PRIOR YEARS (3)

PROJECT STATUS

$ 7,099,300 $ 9,136,360 $

162,280 $ 8,686,122 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 City of Commerce 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.

- 30 -

CITY OF COMMERCE BOARD OF EDUCATION - JACKSON COUNTY GENERAL FUND - QUALITY BASIC EDUCATION PROGRAM (QBE) ALLOTMENTS AND EXPENDITURES - BY PROGRAM YEAR ENDED JUNE 30, 2006

SCHEDULE "5"

DESCRIPTION
Direct Instructional Programs Kindergarten Program Kindergarten Program-Early Intervention Program Primary Grades (1-3) Program Primary Grades-Early Intervention (1-3) Program Upper Elementary Grades (4-5) Program Upper Elementary Grades-Early Intervention (4-5) Program Middle School (6-8) Program High School General Education (9-12) Program Vocational Laboratory (9-12) Program Students with Disabilities Category I Category II Category Ill Category IV Category V Gifted Student - Category VI Remedial Education Program Alternative Education Program English Speakers of Other Languages (ESOL)
TOTAL DIRECT INSTRUCTIONAL PROGRAMS
Media Center Program Staff and Professional Development

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

ELIGIBLE QBE PROGRAM COSTS

SALARIES OPERATIONS

TOTAL

$

536,878 $

694,600 $

6,203 $

700,803

69,760

590

590

1,114,499

871,292

18,442

889,734

36,906

68,915

981

69,896

504,032

653,245

22,433

675,678

21,028 936,272 721,833 270,313 1,143,595
64,527 71,715 77 621

59,480 1,158,892 1,002,529
231,354
49,174 218,652 524,468 154,702
16,074 81,435 13,922 33,815 69 166

339 36,919 41,233 24,701
1,369 2,405 28,576 1,763
897 1,948
126

59,819 1,195,811 1,043,762
256,055
50,543 221,057 553,044 156,465
16,971 83,383 14,048 33,815 69166

$

5,568,979 $ 5,901,715 $

188,925 $

6,090,640

150,319 32 194

262,537 6 503

13,873 11 283

276,410 17 786

TOTAL QBE FORMULA FUNDS

$

5 751 492 $ 6 170 755 $

214 081 $===6,=38=4=,8=3=6

(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
April 12, 2007

Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the City of Commerce 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 City of Commerce Board of Education as of and for the year ended June 30, 2006, which collectively comprise City of Commerce Board of Education's basic financial statements and have issued our report thereon dated April 12, 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 City of Commerce 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 City ofCommerce 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-7711-06-01, FS-7711-06-02, FS-7711-06-04 and FS-7711-06-05.
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 City of Commerce 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 City of Commerce Board of Education and is not intended to be and should not be used by anyone other than these specified parties.
Respectfully submitted,
~ &.~~to~~:i~ State Auditor
RWH:gp 2006YB-30

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
April 12, 2007

Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the City of Commerce 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 City of Commerce 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. City ofCommerce 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 ofCity ofCommerce Board of Education's management. Our responsibility is to express an opinion on City ofCommerce 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 ofthe 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 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 ofCommerce Board ofEducation's compliance with those requirements.
2006SA-15

In our opinion, the City ofCommerce Board ofEducation complied, in all material respects, with the requirements referred to above that are applicable to each ofits major Federal programs for the year ended June 30, 2006. However, the results of our auditing procedures disclosed a nonmaterial instance of noncompliance with those requirements which is described in the accompanying Schedule of Findings and Questioned Costs as item FA-7711-06-01.
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 of Education's internal control over compliance with requirements that could have a direct and material effect on a major Federal program in order to determine our auditing procedures for the purpose ofexpressing our opinion on compliance 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 ofthe management, members ofthe City of Commerce Board of Education, 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,
!<l.aj~
R ssell W. Hinton, CPA, CGFM State Auditor
RWH:gp 2006SA-15

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

CITY OF COMMERCE BOARD OF EDUCATION - JACKSON COUNTY 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-7711-04-01 FS-7711-05-01 FS-7711-05-02

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

CORRECTIVE ACTION/RESPONSES

CASH AND CASH EQUIVALENTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS EMPLOYEE COMPENSATION GENERAL LEDGER Inadequate Internal Control Procedures Finding Control Number: FS-7711-05-01

We accept this finding. We will begin implementing procedures to ensure that the key accounting functions of custody, record keeping and authorization are separated.

CAPITAL ASSETS Failure to Adequately Maintain Capital Assets Finding Control Number: FS-7711-05-02

We accept this finding. We will discuss this finding with the outside vendor that prepares and maintains this information. We will reassess our internal control procedures and administration will implement procedures to ensure the accuracy ofour inventory records.

PRIOR YEAR FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

No matters were reported.

SECTION IV FINDINGS AND QUESTIONED COSTS

CITY OF COMMERCE BOARD OF EDUCATION - JACKSON COUNTY 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 City of Commerce 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 City of Commerce Board ofEducation disclosed financial statement reportable conditions related to the following control categories.

Cash and Cash Equivalents Revenues/Receivables/Receipts General Ledger

Expenditures/Liabilities/Disbursements Employee Compensation

None ofthe reportable conditions described above are considered to be material weaknesses.

3. Noncompliance Material to the Financial Statements The audit of the City of Commerce 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 City of Commerce 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 City of Commerce Board of Education's report on compliance with requirements applicable to major programs was unqualified.

6. Audit Findings Required to be Reported by Section .51 0(a) of 0MB Circular A-133 The City ofCommerce Board ofEducation's audit did not disclose audit findings required to be reported by section .5 lO(a) of 0MB 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: 10.553 Food Services - School Breakfast Program 10.555 Food Services - National School Lunch Program

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

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

- 1-

CITY OF COMMERCE BOARD OF EDUCATION - JACKSON COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2006

II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

CASH AND CASH EQUIVALENTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Control Procedures Reportable Condition Finding Control Number: FS-7711-06-01

Condition:

This is a repeat finding (FS-7711-05-01 and FS-7711-04-01) from the years ended June 30, 2005, and 2004, respectively. The accounting procedures of the School District were insufficient to provide for adequate internal controls over the school activity accounts.

Criteria:

The School District's management is responsible for designing and maintaining internal controls that provide reasonable assurance that transactions are processed according to established procedures.

Questioned Cost: NIA

Information:

Cash and Cash Equivalents The bank reconciliation function was not separated from the record keeping and cash custody function.

Revenues/Receivables/Receipts Deposit preparation was not separated from the record keeping and cash custody functions. Based on a review of20 items, three receipts were not supported by adequate documentation.

Expenditures/Liabilities/Disbursements The check writing function was not separated from record keeping or processing signed checks. Based on a review of20 items, the following deficiencies were noted: 1. Four vouchers did not have a purchase order attached, 2. Seven vouchers were not approved by appropriate personnel, 3. Three vouchers did not have adequate supporting documentation, and 4. Two vouchers lacked evidence ofreceipt of items purchased.

Cause:

These deficiencies were a result of management's decision to limit the number ofadministrative staffmade responsible for accounting functions and management's failure to ensure that internal controls were established, implemented and functioning at the school levels.

-2 -

CITY OF COMMERCE BOARD OF EDUCATION - JACKSON COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2006

II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

CASH AND CASH EQUIVALENTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Control Procedures Reportable Condition Finding Control Number: PS-7711-06-01

Effect:

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

Recommendation:

The School District should implement procedures to ensure that the key accounting functions of custody, record keeping and authorization are separated and/or utilize oversight for these incompatible activities. In addition, management should monitor controls to provide reasonable assurance that transactions are processed according to established procedures and implement those procedures deemed necessary to strengthen internal controls over the accounting functions.

EMPLOYEE COMPENSATION Salary Overpayments Reportable Condition Finding Control Number: PS-7711-06-02

Condition:

The School District's internal controls over employee compensation were insufficient to provide adequate separation of duties over accounting functions and failed to adequately monitor payroll activity to ensure that payments made to employees were based on an approved rate ofpay that was adequately documented in the employee's personnel file.

Criteria:

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

Chapter 11 Payroll and Benefit Accounting and Chapter 29 Payroll Administration of the Financial Management for Georgia Local Units of Administration identify the importance ofproper controls and administration over the payroll function.

Questioned Cost: $11,248

-3-

CITY OF COMMERCE BOARD OF EDUCATION - JACKSON COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2006

II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

EMPLOYEE COMPENSATION Salary Overpayments Reportable Condition Finding Control Number: FS-7711-06-02

Information:

The School District failed to adequately separate the personnel and payroll functions. The same individual maintains personnel records; enters employee information, salary and accounting information into the payroll system; has access to process payroll transactions; posts information to the general ledger and reconciles salary expense at fiscal year-end.

A review of twenty-two employees' payroll records revealed the following deficiencies:
One employee's administrative supplement was not supported by Board approved supplement schedules creating an overpayment of $4,050.
One employee was not paid according to the signed contract. The contract period was for a ten month period. The School District paid the employee for eleven months creating an overpayment of$3,545.
One employee was paid for performing two separate administrative duties during the same time period creating an overpayment of $3,653.
One employee moved from a non-certified position to a certified position mid-year. The School District could not provide a contract to support the increase in pay.

A review ofthe CPI report noted a variance between the years of service per the CPI report and contract for three employees tested. In all three instances, the employee years of service did not correspond to the step at which the employee was being paid. For one of these employees, the contract salary reported on the CPI report also did not agree to the salary on the employee's contract.

Cause:

The School District has not assigned responsibilities to achieve appropriate separation of duties nor utilized management oversight ofthe incompatible activities to properly safeguard assets. Additionally, management failed to implement adequate controls to ensure employee compensation expenditures are calculated properly and based on an approved rate of pay that is adequately documented in the employees' personnel files.

-4-

CITY OF COMMERCE BOARD OF EDUCATION - JACKSON COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2006

II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

EMPLOYEE COMPENSATION Salary Overpayments Reportable Condition Finding Control Number: FS-7711-06-02

Effect:

Failure to monitor payments to employees and ensure employees are paid in accordance with approved salary scales can result in over/under payment of employees.

Recommendation:

The School District should implement procedures to ensure that the key accounting functions of custody, record keeping and authorization are separated and/or utilize management oversight of these incompatible activities. Additionally, the School District should implement procedures to ensure that all payroll disbursements are based on approved contracts, salary scales and time worked.

GENERAL LEDGER Detail Listing of Travel Not Reconciled to General Ledger Nonmaterial Noncompliance Finding Control Number: FS-7711-06-03

Condition:

The detailed listing oftravel made to employees as submitted to the Georgia Department ofAudits and Accounts was not reconciled to the general ledger as presented for audit.

Criteria:

O.C.G.A. 50-6-27 states in part: "Each ... local board of education is required and directed to submit to the state auditor, in a format prescribed by the state auditor, a listing ofall personnel ofsuch ... local board ofeducation showing name, title or functional area, salary, and travel expense for each individual".

Questioned Cost: NIA

Information:

An unidentifiable variance of$1,525 for travel remained between the detailed listing and the general ledger.

Cause:

Management did not ensure that amounts submitted to the Georgia Department of Audits and Accounts were reconciled to the School District's general ledger.

Effect:

The failure ofthe School District to submit a reconciled listing oftravel leads to inaccurate external reporting.

-5-

CITY OF COMMERCE BOARD OF EDUCATION - JACKSON COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2006

II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

GENERAL LEDGER Detail Listing of Travel Not Reconciled to General Ledger Nonmaterial Noncompliance Finding Control Number: FS-7711-06-03

Recommendation:

Administrative procedures should be implemented to ensure that the detailed listing of travel is reconciled to the School District's general ledger prior to submission to the Georgia Department of Audits and Accounts.

GENERAL LEDGER Failure to Report the Financial Statements in a Timely Manner Reportable Condition Finding Control Number: FS-7711-06-04

Condition:

The School District failed to submit the DE046 financial report to the Georgia Department of Education in a timely manner.

Criteria:

Chapter 1 Introduction to LUA Accounting ofthe Financial Management for Georgia Local Units of Administration indicates that "accounting records must provide meaningful, reliable, accurate and timely information to the many persons and groups with legitimate interests in the financial affairs of an LUA".

Questioned Cost: NIA

Information:

The School District's DE046 financial report was submitted to the Georgia Department of Education on October 6, 2006.

Cause:

Management failed to comply with the due date of September 30, 2006, as established by the Georgia Department of Education.

Effect:

The failure ofthe School District to prepare and submit the financial report in a timely manner prohibits legitimate users of the report from being able to have timely access to the financial information provided.

Recommendation:

The School District should implement controls to ensure that Georgia Department of Education's policies and procedures are followed and to ensure that the DE046 financial report is submitted in a timely manner.

-6-

CITY OF COMMERCE BOARD OF EDUCATION - JACKSON COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2006

II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

GENERAL LEDGER Incomplete General Ledger/DE046 Financial Report Reportable Condition Finding Control Number: FS-7711-06-05

Condition:

The School District failed to properly include all financial data in the general ledger and in the DE046 financial report submitted to the Georgia Department of Education.

Criteria:

Chapter 22 Annual Financial Reporting of the Financial Management for Georgia Local Units ofAdministration indicates that School Districts must prepare their financial statements in accordance with generally accepted accounting principles.

Questioned Cost: NIA

Information:

All accounts receivable activity was not recorded in the School District's general ledger as required. An audit adjustment of$120,848 was necessary to record accounts receivable from the Georgia Department of Education.

A review of the School District's accounting records revealed that expenditures for the School to Work Opportunities Grant (CFDA 17.258) were not coded to the proper fund. Expenditures for this program were split between the General and Federal Programs funds. Audit analysis indicated that the expenditures were valid program expenses, but not coded to the proper fund.

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.

Recommendation:

The School District should implement controls to ensure that Georgia Department ofEducation's policies and procedures are followed and establish procedures to ensure that all financial data is properly recorded in the general ledger and reported in the DE046.

-7-

CITY OF COMMERCE BOARD OF EDUCATION - JACKSON COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2006

III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

REPORTING Failure to File Accurate Completion Report Nonmaterial Noncompliance U.S. Department of Education Through Georgia Department of Education Enhancing Education Through Technology Program (CFDA 84.318) Finding Control Number: FA-7711-06-01

Condition:

The School District failed to file an accurate completion report for the program listed above.

Criteria:

In accordance with provisions ofOMB Circular A-133, Subpart C, all School Districts that receive Federal funds are required to maintain internal control over Federal Programs that provides reasonable assurance that the School District is in compliance with laws, regulations, and grant agreements. Instructions provided by the Georgia Department ofEducation mandates that financial management systems provide for accurate, complete and current disclosure for the financial results of each grant program.

Questioned Cost: $6,958

Information:

A review of the School District's accounting records revealed that the completion report submitted to the Georgia Department ofEducation for the Enhancing Education Through Technology Program (CFDA 84.318) identified program expenditures of $133,790; however, the total expenditures, as reported on the School District's general ledger, were $126,832. This results in an excess of expenditures reported on the completion report totaling $6,958.

Cause:

Management neglected the specific requirements imposed by the Georgia Department of Education.

Effect:

Failure to accurately report expenditures may result in the School District being required to refund unexpended grant funds.

Recommendation:

The School District should implement appropriate procedures to ensure that accurate completion reports are submitted to the Georgia Department of Education. The Georgia Department ofEducation should review this matter and determine if a reclaim of grant funds is appropriate.

-8-

SECTIONV MANAGEMENT'S RESPONSES

CITY OF COMMERCE BOARD OF EDUCATION - JACKSON COUNTY SCHEDULE OF MANAGEMENT'S RESPONSES YEAR ENDED JUNE 30, 2006
Finding Control Number: FS-7711-06-01
We concur with this finding. The Board will begin the process of hiring one additional administrative staffmember to assure that there is a separation ofthose who perform monthly bank reconciliation and record keeping/voucher payment functions. The Board anticipates filling the administrative position by August 2007.
Finding Control Number: FS-7711-06-02
We concur with this finding. The hiring of one additional administrative staff member, as previously noted, whose duties will be to adequately monitor payroll activity will ensure payments made to employees are based on an approved rate of pay and will allow the separation ofpersonnel and payroll duties.
Finding Control Number: FS-7711-06-03
We concur with this finding. The administrative procedures shall be implemented to assure that the detail listing oftravel is reconciled to the School District's general ledger prior to submission to the Georgia Department of Audits and Accounts.
Finding Control Number: FS-7711-06-04
We concur with this finding. The School District will ensure that all Georgia Department of Education policies and procedures are followed. The DE046 financial report and all other mandated information will be submitted in a timely manner.
Finding Control Number: FS-7711-06-05
We concur with this finding. The School District will implement controls to ensure all policies and procedures established by the Georgia Department ofEducation are followed. All financial data will be included in the general ledger and reported on the DE046.
Finding Control Number: FA-7711-06-01
We concur with this finding. The School District will implement procedures to closely monitor fund requisition and expenditures for all grant programs.
Contact Person: Ann Stokey, Director of Finance Phone: (706) 335-5500 Fax Number: (706) 335-5214 E-mail Address: astokey@commerce-city.kl2.ga.us