CITY OF JEFFERSON BOARD OF EDUCATION
JACKSON COUNTY, GEORGIA REPORT ON AUDIT
OF THE FINANCIAL STATEMENTS
FOR THE FISCAL YEAR ENDED JUNE 30, 2007
STATE OF GEORGIA
DEPARTMENT OF AUDITS AND ACCOUNTS
Russell W. Hinton State Auditor

CITY OF JEFFERSON 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

8

H

NOTES TO THE BASIC FINANCIAL STATEMENTS

9

SCHEDULES

REQUIRED SUPPLEMENTARY INFORMATION

1 SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES

IN FUND BALANCES - BUDGET AND ACTUAL

GENERAL FUND

25

SUPPLEMENTARY INFORMATION

2 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS

27

3 SCHEDULE OF STATE REVENUE

28

CITY OF JEFFERSON 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 GOVERNMENTAUDITING 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 JEFFERSON 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
March 3, 2008

Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the City of Jefferson Board of Education
INDEPENDENT AUDITOR'S COMBINED REPORT ON BASIC FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION - SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
Ladies and Gentlemen:
We have audited the accompanying financial statements ofthe governmental activities, each major fund, and the aggregate remaining fund information (Exhibits A through H) ofthe City ofJefferson Board of Education, as of and for the year ended June 30, 2007, which collectively comprise the Board's basic financial statements as listed in the table of contents. These financial statements are the responsibility ofthe City ofJefferson Board ofEducation's management. Our responsibility is to express opinions on these financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United States ofAmerica and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General ofthe United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the City of Jefferson Board of Education's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinions.

2007ARL-11

In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, each major fund, and the aggregate remaining fund information ofthe City ofJefferson Board ofEducation, as ofJune 30, 2007, and the respective changes in financial position thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America.
The City ofJefferson Board ofEducation has not presented Management's Discussion and Analysis that accounting principles generally accepted in the United States of America has determined is necessary to supplement, although not to be part of, the basic financial statements.
In accordance with Government Auditing Standards, we have also issued our report dated March 3, 2008, on our consideration of the City of Jefferson Board of Education's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements and other matters. The purpose ofthat report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit.
The Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual, as presented on page 25, is not a required part of the basic financial statements but is supplementary information required by the accounting principles generally accepted in the United States of America. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods ofmeasurement and presentation ofthe required supplementary information. However, we did not audit the information and express no opinion on it.
Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City of Jefferson 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,
0.~
Russ 11 W. Hinton, CPA, CGFM Sta Auditor
RWH:gp 2007ARL-11

CITY OF JEFFERSON BOARD OF EDUCATION - JACKSON COUNTY

CITY OF JEFFERSON BOARD OF EDUCATION - JACKSON COUNTY STATEMENT OF NET ASSETS JUNE 30, 2007

EXHIBIT "A"

ASSETS
Cash and Cash Equivalents Investments Accounts Receivable, Net
Taxes State Government Federal Government Other Inventories Capital Assets Land Construction in Progress Land Improvements Buildings Equipment Less: Accumulated Depreciation
Total Assets
LIABILITIES
Accounts Payable Salaries and Benefits Payable Payroll Withholdings Payable Contracts 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
The notes to the basic financial statements are an integral part of this statement. -1-

GOVERNMENTAL ACTIVITIES

$

3,616,628.15

3,595,203.67

727,862.16 1,792,874.31
263,750.97 138,422.56
11,971.75

734,796.00 2,638,702.00 1,447,808.00 31,214,528.00 1,345,960.00 -3,373,812.00

$ =====44~15=4=!:.6=9=5.=57=

$

320,887.68

2,033,014.36

303,514.27

564,686.90

837,292.26

103.77

1,104,017.35 24,473,808.28

$

29,637,324.87

$

9,084,353.60

256,004.10 489,023.13 2,639,786.41 2,048,203.46

$

14,517,370.70

$ ======4,,;,4.;,15=4;.,;6=9=5.=5=7



CITY OF JEFFERSON BOARD OF EDUCATION - JACKSON COUNTY STATEMENT OF ACTIVITIES

FOR THE YEAR ENDED JUNE 30, 2007

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

EXPENSES

CHARGES FOR SERVICES

$ 11,332,605.01 $
513,855.36 482,650.34 233,751.71 676,746.54 866,065.30
97,509.71 991,217.97 302,888.42
68,464.12 86,923.11
1, 118,566.57 76,697.20
634,902.63 1,053,180.25
$ 18,536,024.24 $

337,104.22
847,229.00 76,693.51
369,872.57 1,630,899.30

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

$

9,393,059.83 $

156,036.85 200,023.93 266,689.61 467,927.08 486,414.25

656,131.37 82,771.79

387,551.23

$

12,096,605.94 $

1,532,714.40 $
94,063.20 48,385.24 13,231.67 325,728.79 37,308.05
110,699.66 2 162 131.01 $

-69,726.56
-357,818.51 -282,626.41 127,001.10 -208,819.46 -331,265.81
-97,509.71 -321,854.93 105,612.16
-31, 156.07 -86,923.11
-271,337.57 -3.69
233,220.83 -1,053, 180.25
-2,646,387.99

$

4,951,489.84

1,160,724.55

789,717.91 1,159,303.19
52,331.41 341,514.00 457,796.94
90,520.19

21 313.00

$

9 024 711.03

$

6,378,323.04

8 139,047.66

$

14517370.70

-3-

CITY OF JEFFERSON BOARD OF EDUCATION - JACKSON COUNTY BALANCE SHEET
GOVERNMENTAL FUNDS JUNE 30, 2007

EXHIBIT"C"

ASSETS
Cash and Cash Equivalents Investments Accounts Receivable, Net
Taxes State Government Federal Government Other Inventories

GENERAL FUND

DISTRICTWIDE
CAPITAL PROJECTS
FUND

DEBT SERVICE
FUND

TOTAL

$ 3,265,492.20 $ 288,224.27 $ 214,491.05 3,380,712.62

127,003.74 1,459,225.01
263,750.97 138,422.56
11 971.75

381,857.22 333,649.30

62,911.68 $ 3,616,628.15 3,595,203.67

29,668.45

538,529.41 1,792,874.31
263,750.97 138,422.56 11 971.75

Total Assets

$ 5,480,357.28 $ 4,384,443.41 $ 92,580.13 $ 9,957,380.82

LIABILITIES AND FUND BALANCES
LIABILITIES
Accounts Payable Salaries and Benefits Payable Payroll Withholdings Payable Contracts Payable Retainages Payable Deposits and Deferred Revenue
Total Liabilities
FUND BALANCES
Reserved for: Continuation of Federal Programs Debt Service Inventories Capital Projects
Unreserved Designated for Student Activities Undesignated Reported in: General Fund
Total Fund Balances
Total Liabilities and Fund Balances

$ 297,749.01 $ 2,033,014.36 303,514.27
103.77

23,138.67
564,686.90 837,292.26

$ 2,634,381.41 $ 1,425,117.83

$ 320,887.68 2,033,014.36 303,514.27 564,686.90 837,292.26 103.77
$ 4,059,499.24

$ 244,032.35 $ 396,443.00 $
11,971.75 213,251.53 2,562,882.58
151,009.33
2,225,710.91
$ 2,845,975.87 $ 2,959,325.58 $

$ 244,032.35

92,580.13

489,023.13

11,971.75

2,776,134.11

151,009.33

2,225,710.91

92,580.13 $ 5,897,881.58

$ 5,480,357.28 $ 4,384,443.41 $ 92,580.13 $ 9,957,380.82

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

CITY OF JEFFERSON BOARD OF EDUCATION - JACKSON COUNTY RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET
TO THE STATEMENT OF NET ASSETS JUNE 30, 2007

EXHIBIT"D"

Total Fund Balances - Governmental Funds (Exhibit "C")
Amounts reported for Governmental Activities in the Statement of Net Assets are different because:
Capital Assets used in Governmental Activities are not financial resources and therefore are not reported in the funds. These assets consist of:
Land Construction in Progress Land Improvements Buildings Equipment Accumulated Depreciation
Total Capital Assets
Some of the School District's property tax revenues will be collected after year-end but are not available soon enough to pay for the current period's expenditures.
Long-Term Liabilities, including Bonds Payable, are not due and payable in the current period and therefore are not reported as liabilities in the funds. Long-Term Liabilities at year-end consist of:
Bonds Payable Capital Leases Installment Sales Agreement Unamortized Bond Premiums
Total Long-Term Liabilities

$ 5,897,881.58

$

734,796.00

2,638,702.00

1,447,808.00

31,214,528.00

1,345,960.00

-3,373,812.00

34,007,982.00

189,332.75

$ -24,600,000.00 -110,016.98 -205,286.99 -662,521.66

-25,577,825.63

Net Assets of Governmental Activities (Exhibit "A")

$ 14,517,370.70

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

CITY OF JEFFERSON BOARD OF EDUCATION - JACKSON COUNTY STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES
GOVERNMENTAL FUNDS YEAR ENDED JUNE 30, 2007

EXHIBIT"E"

REVENUES
Property Taxes Sales Taxes State Funds Federal Funds Charges for Services Investment Earnings Miscellaneous
Total Revenues
EXPENDITURES
Current Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Enterprise Operations Community Services Food Services Operation
Capital Outlay Debt Services
Principal Interest
Total Expenditures
Excess of Revenues over (under) Expenditures
OTHER FINANCING SOURCES (USES)
Installment Sales Agreement Capital Leases Capital Contributions Transfers In Transfers Out
Total Other Financing Sources (Uses)
Net Change in Fund Balances
Fund Balances - Beginning

GENERAL FUND

DISTRICTWIDE
CAPITAL PROJECTS
FUND

DEBT SERVICE
FUND

TOTAL

$ 4,949,176.05 42,349.00 $
11,301,778.79 1,293,592.16 1,630,899.30 14,572.83 90,520.68

$ 1,159,303.19 2,004,880.00
443,224.11

1,124,605.59 $ 799,699.83

6,073,781.64 2,001,352.02 13,306,658.79 1,293,592.16 1,630,899.30
457,796.94 90,520.68

$ 19,322,888.81 $ 3 607 407.30 $ 1,924,305.42 $ 24,854,601.53

$ 12,296,331.95

$ 12,296,331.95

513,855.36 494,927.34 304,337.21 676,746.54 902,373.84
97,509.71 1,021,167.46
472,293.94 $ 96,460.28 86,923.11
1,118,566.57 76,697.20
717,972.21 25,174.05

45,395.23 14,061,488.39

513,855.36 494,927.34 304,337.21 676,746.54 902,373.84
97,509.71 1,021,167.46
517,689.17 96,460.28 86,923.11
1,118,566.57 76,697.20
717,972.21 14,086,662.44

121,774.00 $ 959,381.03

18 146.46

1,053,180.25

1,081,155.03 1,071,326.71

$ 18,901,336.77 $ 14,246,804.08 $ 2,012,561.28 $ 35,160,702.13

$ 421,552.04 $ -10,639,396.78 $

-88 255.86 $ -10,306,100.60

$ 214,667.00 $
21,313.00
-351 128.67

222,410.97 351,128.67

$ -115148.67 $ 573,539.64

$ 306,403.37 $ -10,065,857.14 $

2,539,572.50 13,025,182.72

$ 214,667.00 222,410.97 21,313.00 351,128.67 -351 128.67
$ 458,390.97
-88,255.86 $ -9,847, 709.63
180,835.99 15,745,591.21

Fund Balances - Ending

$ 2,845,975.87 $ 2,959,325.58 $

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

92 580.13 $ 5,897,881.58

CITY OF JEFFERSON 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, 2007

EXHIBIT"F"

Total Net Change in Fund Balances - Governmental Funds (Exhibit "E")
Amounts reported for Governmental Activities in the Statement of Activities are different because:
Capital Outlays are reported as expenditures in Governmental Funds. However, in the Statement of Activities, the cost of Capital Assets is allocated over their estimated useful lives as depreciation expense. In the current period, these amounts are:
Capital Outlay Depreciation Expense
Excess of Capital Outlay over Depreciation Expense
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.
Some of the Capital Assets acquired this year were financed with capital leases and an installment sales agreement. In Governmental Funds, these are considered sources of financing, but in the Statement of Net Assets, the obligations are reported as Long-Term Liabilities.
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 Amortization of Bond Premium Capital Lease Payments Installment Sales Agreement
Total Long-Term Debt Repayments

$ -9,847, 709.63

$ 15,903,271.50 -388,046.00

15,515,225.50

38,432.60

-437,077.97

$ 950,000.00 37,678.54
112,393.99 9,380.01

1,109,452.54

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

$ 6,378,323.04

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

CITY OF JEFFERSON BOARD OF EDUCATION -JACKSON COUNTY STATEMENT OF FIDUCIARY NET ASSETS FIDUCIARY FUNDS JUNE 30, 2007

EXHIBIT "G"

ASSETS Cash and Cash Equivalents
LIABILITIES Funds Held for Others

AGENCY FUNDS
$ 23,489.44
$ 23,489.44

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

CITY OF JEFFERSON BOARD OF EDUCATION - JACKSON COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007

EXHIBIT "H"

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

-9-

CITY OF JEFFERSON BOARD OF EDUCATION - JACKSON COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007

EXHIBIT"H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The School District reports the following major governmental funds:
General Fund is the School District's primary operating fund. It accounts for all financial resources ofthe School District, except those resources required to be accounted for in another fund.
District-wide Capital Projects Fund accounts for financial resources including Special Purpose Local Option Sales Tax (SPLOST), 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 (property and sales) legally restricted for the payment of general long-term principal, interest and paying agent's fees.
The School District reports the following fiduciary fund type:
Agency funds account for assets held by the School District as an agent for various funds, governments or individuals.
BASIS OF ACCOUNTING
The basis ofaccounting determines when transactions are reported on the financial statements. The District-wide governmental and fiduciary fund financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded at the time liabilities are incurred, regardless of when the related cash flows take place. Nonexchange transactions, in which the School District gives (or receives) value without directly receiving (or giving) equal value in exchange, include property taxes, sales taxes, grants and donations. On an accrual basis, revenue from property taxes is recognized in the fiscal year for which the taxes are levied. Revenue from sales taxes is recognized in the fiscal year in which the underlying transaction (sale) takes place. Revenue from grants and donations is recognized in the fiscal year in which all eligibility requirements have been satisfied.
The School District uses funds to report on its financial position and the results of its operations. Fund accounting is designed to demonstrate legal compliance and to aid financial management by segregating transactions related to certain governmental functions or activities. A fund is a separate accounting entity with a self-balancing set of accounts.
Governmental funds are reported using the current financial resources measurement focus and the modified accrual basis ofaccounting. Under this method, revenues are recognized when measurable and available. The School District considers all revenues reported in the governmental funds to be available if they are collected within sixty days after year-end. Property taxes, sales taxes and interest are considered to be susceptible to accrual. Expenditures are recorded when the related fund

- 10 -

CITY OF JEFFERSON BOARD OF EDUCATION - JACKSON COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007

EXHIBIT "H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
liability is incurred, except for principal and interest on general long-term debt, which are recognized as expenditures to the extent they have matured. Capital asset acquisitions are reported as expenditures in governmental funds. Proceeds of general long-term liabilities, acquisitions under capital leases and acquisitions under an installment sales agreement 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.
CASH AND CASH EQUIVALENTS
COMPOSITION OF DEPOSITS Cash and cash equivalents consist ofcash on hand, demand deposits and short-term investments with original maturities of three months or less from the date of acquisition in authorized financial institutions. Official Code of Georgia Annotated Section 45-8-14 authorize the School District to deposit its funds in one or more solvent banks or insured Federal savings and loan associations.
INVESTMENTS
COMPOSITION OF INVESTMENTS Investments made by the School District in nonparticipating interest-earning contracts (such as certificates ofdeposit) and repurchase agreements are reported at cost. Participating interest-earning contracts and money market investments with a maturity at purchase ofone year or less are reported at amortized cost. Both participating interest-earning contracts and money market investments with a maturity at purchase greater than one year are reported at fair value. The Official Code ofGeorgia Annotated Section 36-83-4 authorizes the School District to invest its funds. In selecting among options for investment or among institutional bids for deposits, the highest rate ofreturn shall be the objective, given equivalent conditions of safety and liquidity. Funds may be invested in the following:
(1) Obligations issued by the State of Georgia or by other states,
(2) Obligations issued by the United States government,
(3) Obligations fully insured or guaranteed by the United States government or a United States government agency,
(4) Obligations of any corporation of the United States government,
(5) Prime banker's acceptances,
- 11 -

CITY OF JEFFERSON BOARD OF EDUCATION - JACKSON COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007

EXHIBIT "H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

(7) Repurchase agreements, and

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

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

RECEIVABLES

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

PROPERTY TAXES

The City of Jefferson Board of Education certified to the mayor and city council the property tax levy for the 2006 tax digest year (calendar year) on October 20, 2006 (levy date). Taxes were due on December 20, 2006 (lien date). Taxes collected within the current fiscal year or within 60 days after year-end on the 2006 tax digest are reported as revenue in the governmental funds for fiscal year 2007. The City of Jefferson City Clerk bills and collects the property taxes for the School District and remits the taxes collected to the School District. Property tax revenues, at the fund reporting level, during the fiscal year ended June 30, 2007, for maintenance and operations amounted to $4,949,176.05 and for school bonds amounted to $1,124,605.59.

Tax millage rates levied for the 2006 tax year (calendar year) for the City of Jefferson Board of Education were as follows (a mill equals $1 per thousand dollars of assessed value):

School Operations School Bonds

14.0 mills __]_J_ mills

17.3 mills

SALES TAXES

Special Purpose Local Option Sales Tax, at the fund reporting level, during the year amounted to $1,949,021.10 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.

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CITY OF JEFFERSON BOARD OF EDUCATION - JACKSON COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007

EXHIBIT "H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

INVENTORIES

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

CAPITAL ASSETS

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

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

Capitalization Policy

Estimated Useful Life

Land Land Improvements Buildings and Improvements Equipment

All

NIA

$ 5,000.00 20 to 80 years

$ 5,000.00 10 to 80 years

$ 5,000.00 5 to 30 years

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

GENERAL OBLIGATION BONDS

The School District issues general obligation bonds to provide funds for the acquisition and construction of major capital facilities. Bond issuance costs are recognized in the financial statements during the fiscal year bonds are issued. In addition, general obligation bonds have been

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CITY OF JEFFERSON BOARD OF EDUCATION - JACKSON COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007

EXHIBIT "H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
issued to refund existing general obligation bonds. 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.
NET ASSETS
The School District's net assets in the District-wide Statements are classified as follows:
Invested in capital assets, net of related debt - This represents the School District's total investment in capital assets, net ofoutstanding debt obligations related to those capital assets. To the extent debt has been incurred but not yet expended for capital assets, such amounts are not included as a component of invested in capital assets, net of related debt.
Restricted net assets - These represent resources for which the School District is legally or contractually obligated to spend resources for bus replacement, continuation of Federal programs, debt service and capital projects in accordance with restrictions imposed by external third parties.
Unrestricted net assets - Unrestricted net assets represent resources derived from property taxes, sales taxes, grants and contributions not restricted to specific programs, charges for services, and miscellaneous revenues. These resources are used for transactions relating to the educational and general operations of the School District, and may be used at the discretion of the Board to meet current expenses for those purposes.
Note 3: DEPOSITS 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.
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 JEFFERSON BOARD OF EDUCATION - JACKSON COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007

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, 2007, the bank balances were $4,617,633.67. The amounts of the total uninsured bank balances are classified into three categories of custodial credit risk:

Category 1 - Uncollateralized, Category 2 - Cash collateralized with securities held by the pledging financial institution, or
by its trust department or agent in the School District's name, Category 3 - Cash collateralized with securities held by the pledging financial institution's
trust department or agent but not in the School District's name.

The School District's uninsured deposits are classified by custodial credit risk category at June 30, 2007, as follows:

Custodial Credit Risk Category

Bank Balance

1

$

0.00

2

0.00

3

4,369,451.20

Total

$ 4,369,451.20

CATEGORIZATION OF INVESTMENTS The School District's investments as of June 30, 2007, are presented below. All investments are presented by investment type and debt securities are presented by maturity.

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CITY OF JEFFERSON BOARD OF EDUCATION - JACKSON COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007

EXHIBIT"H"

Note 3: DEPOSITS AND INVESTMENTS

Investment Type
Other Investments U. S. Treasury Money Market Funds
Investment Pools Office of Treasury and Fiscal Services Georgia Fund 1
Total Investments

$ 213,251.53
3,381,952.14 $ 3,595,203.67

The Local Government Investment Pool administered by the State of Georgia, Office of Treasury and Fiscal Services is not required to be categorized since the School District did not own any specific identifiable securities in the pool. The investment policy ofthe State ofGeorgia, 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. Additional information on the Local Government Investment Pool is disclosed in the State of Georgia Comprehensive Annual Financial Report. This audit can be obtained from the Georgia Department of Audits and Accounts at http://www.audits.state.ga.us/internet/searchRpts.html.

The Primary Liquidity Portfolio consists ofGeorgia Fund 1 which is not registered with the SEC as an investment company but does operate in a manner consistent with the SEC's Rule 2a-7 of the Investment Company Act of 1940. The investment is valued at the pool's share price, $1.00 per share. The pool is an AAAm rated investment pool by Standard and Poor's. The weighted average maturity of Georgia Fund 1 may not exceed 60 days. The weighted average maturity for Georgia Fund 1 on June 30, 2007, was 15 days.

The U. S. Treasury Money Market funds are in a Treasury Portfolio Fund managed by Fidelity Investments. The Treasury Portfolio Fund is rated AAAm by Standard and Poor's and Aaa by Moody's. The weighted average maturity of the fund is approxin:iately 13 days.

Interest Rate Risk Interest rate risk is the risk that changes in interest rates of debt investment will adversely affect the fair value ofan investment. The School District does not have a formal policy for managing interest rate risk.

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 JEFFERSON BOARD OF EDUCATION - JACKSON COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007

EXHIBIT"H"

Note 5: CAPITAL ASSETS

Balances July 1, 2006

Increases

Decreases

Balances June 30, 2007

Governmental Activities Capital Assets, Not Being Depreciated:
Land Construction in Progress

$ 713,483.00 $ 21,313.00

$ 734,796.00

5,637,874.00 15,350,410.00 $18,349,582.00 2,638,702.00

Total Capital Assets Not Being Depreciated $ 6,351,357.00 $15,371,723.00 $18,349,582.00 $ 3,373,498.00

Capital Assets Being Depreciated Buildings and Improvements Equipment Land Improvements

$12,776,808.00 $18,437,720.00 $

1,116,015.00 229,945.00

1,401,898.00

45,910.00

0.00 $31,214,528.00 1,345,960.00 1,447,808.00

Less Accumulated Depreciation for: Buildings and Improvements Equipment Land Improvements

2,053,648.00 413,292.00 686,382.00

274,946.00 66,109.00 46,991.00

120,793.00 35,005.00 11,758.00

2,207,801.00 444,396.00 721,615.00

Total Capital Assets, Being Depreciated, Net $12,141,399.00 $18,325,529.00 $ -167,556.00 $30,634,484.00

Governmental Activity Capital Assets - Net $18,492,756.00 $33.697.252.00 $18.182.026.00 $34.007.982.00

Capital assets being acquired under capital leases and installment sales agreement as of June 30, 2007, are as follows:

Governmental Funds

Construction in Progress Equipment Less: Accumulated Depreciation

$ 3,861.05 129,012.00 12,035.00

$ 120,838.05

Current year depreciation expense by function is as follows:

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

$ 296,658.00

$ 18,206.00 9,365.00 2,561.00
32,609.00 7,221.00

69,962.00 21,426.00

$ 388,046.00

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CITY OF JEFFERSON BOARD OF EDUCATION - JACKSON COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007

EXHIBIT "H"

Note 6: RESTRICTED ASSETS

Special Purpose Local Option Sales Tax (SPLOST), general obligation bond proceeds, intergovernmental installment sales agreement proceeds and property tax levied specifically for retirement of outstanding bond principal, interest and paying agent's fees (Debt Service Funds) are restricted assets in the Statement of Net Assets because their use is limited by applicable bond covenants or statutory provisions. Restricted assets at June 30, 2007, were as follows:

Restricted Cash and Cash Equivalents: Debt Services Capital Acquisitions
Restricted Investments: Debt Services Capital Acquisitions

General Fund

District-wide Capital Projects

Bond

SPLOST

Proceeds

Debt Service Funds

$ $ 288,224.27
$ 396,443.00 $ 213,251.53 $ 2,074,063.13 $ 910,206.49

62,911.68

Note 7: INTERFUND TRANSFERS

Interfund transfers for the year ended June 30, 2007, consisted of the following:

Transfer to

Transfers From General Fund

District-wide Capital Projects

$ 351,128.67

Transfers are used to move property tax revenues collected by the General Fund to the District-wide Capital Projects Fund as a supplemental funding source for capital construction projects.

Note 8: 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 participates in the Georgia School Boards Association Risk and Insurance Management System, a public entity risk pool organized on July 1, 1994, to develop and administer a plan to reduce risk of loss on account of general liability, motor vehicle liability, or property damage, including safety engineering and other loss prevention and control techniques, and to administer one or more groups of self-insurance funds, including the processing and defense of claims brought against members ofthe system. The School District pays an annual premium to the system for its general insurance coverage. Additional coverage is provided through agreements by the system with other companies according to their specialty for property, boiler and machinery

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CITY OF JEFFERSON BOARD OF EDUCATION - JACKSON COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007

EXHIBIT "H"

Note 8: RISK MANAGEMENT

(including coverage for flood and earthquake), general liability (including coverage for sexual harassment, molestation and abuse), errors and omissions, crime and automobile risks. Payment of excess insurance for the system varies by line of coverage.

The School District is self-insured with regard to unemployment compensation claims. The School District accounts for claims within the General Fund with expenses/expenditures and liability being reported when it is probable that a loss has occurred, and the amount of that loss can be reasonably estimated.

Changes in the unemployment compensation claims liability during the last two fiscal years are as follows:

Beginning of Year Liability

Claims and Changes in Estimates

Claims Paid

End of Year Liability

2006 2007

$

0.00 $

4,998.00 $

4,998.00 $

0.00

$

0.00 $

1,632.00 $

1,632.00 $

0.00

The School District participates in the Georgia School Boards Association Workers' Compensation Fund, a public entity risk pool organized on July 1, 1992, to develop, implement, and administer a program ofworkers' compensation self-insurance for its member organizations. The School District pays an annual premium to the Fund for its general insurance coverage. Additional insurance coverage is provided through an agreement by the Fund with the Safety National Casualty Corporation to provide coverage for potential losses sustained by the Fund in excess of$400,000.00 loss per occurrence, up to $1,000,000.00.

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

Position Covered

Amount

Superintendent All Employees

$ 50,000.00 $ 200,000.00

Note 9: LONG-TERM DEBT

CAPITAL LEASES The City ofJefferson Board ofEducation entered into various lease agreements for equipment. This lease agreement qualifies as a capital lease for accounting purposes, and, therefore, has been recorded at the present value of the future minimum lease payments as of the date of its inception.

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CITY OF JEFFERSON BOARD OF EDUCATION - JACKSON COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007

EXHIBIT"H"

Note 9: LONG-TERM DEBT

INSTALLMENT SALES AGREEMENT The City of Jefferson Board of Education entered into an agreement dated June 1, 2006, with the Northeast Georgia Regional Educational Service Agency for the construction and subsequent lease of the Rutland Center. Under the terms of the agreement, the School District will make annual payments through July 15, 2020.

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

Purpose

Interest Rates

Amount

General Government - Series 2000

5.20% - 5.65%

General Government - Refunding - Series 2004 3.58%

General Government - Series 2005A

3.00% - 5.00%

General Government - Refunding - Series 2005B 3.00% - 4.00%

$ 595,000.00 9,400,000.00 13,605,000.00 1,000,000.00

$24,600,000.00

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

Capital Leases

Governmental Funds

Installment

General

Sales

Obligation

Agreement

Bonds

Unamortized Bond
Premium

Total

Balance July I, 2006

$

0.00 $

0.00 $ 25,550,000.00 $ 700,200.20 $ 26,250,200.20

Additions Capital Leases

222,410.97 214,667.00

437,077.97

Deductions Debt Retired Unamortized Bond Premium

112,393.99

9,380.01

950,000.00

37,678.54

1,071,774.00 37,678.54

Balance June 30, 2007

$ 1IQ,Q16.28 $ 2QS,286 29 $ 24,@0 QQQ 0Q $ 662 521 66 $ 25,517,825.63

Portion ofLong-Term Debt Due within One Year $

73,212.69 $

3,125.66 $ 990,000.00 $ 37,679.00 $ 1,104,017.35

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

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CITY OF JEFFERSON BOARD OF EDUCATION - JACKSON COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007

EXHIBIT "H"

Note 9: LONG-TERM DEBT

Fiscal Year Ended June 30
2008 2009 2010 2011 2012 2013 - 2017 2018-2022
Total Principal and Interest
Fiscal Year Ended June 30
2008 2009 2010 2011 2012 2013-2017 2018 - 2022 2023 - 2027
Total Principal and Interest

Installment Sales Agreement

Princi1:1al

Interest

CaQital Leases

Princi1:1al

Interest

$

3,125.66 $

1,965.88 $ 73,212.69 $

12,133.35

8,409.87

24,232.88

12,506.69

7,905.12

12,571.41

13,066.69

7,384.85

13,626.69

6,841.27

76,906.79

25,229.60

73,921.12

7 843.00

5,831.14 1,569.80
554.45

$ 205,286.99 $ 65,579.59 $ 110,016.98 $

7 955.39

General Obligation

Debt

Principal

Interest

Unamortized Bond
Premium

$ 990,000.00 $ 1,012,310.00 $

1,020,000.00

978,234.00

1,055,000.00

942,598.00

1,095,000.00

903,151.00

1,135,000.00

864,529.50

6,335,000.00

3,649,790.50

7,620,000.00

2,195,924.00

5,350,000.00

475,442.00

37,679.00 37,678.95 37,678.95 37,678.95 37,678.95 188,394.75 188,394.75 97 337.36

$ 24,600,000.00 $ 11,021.979.00 $ 662,521.66

Note 10: PRIOR YEAR DEFEASEMENT OF DEBT

In fiscal year 2004, the School District defeased certain general obligation bonds by placing the proceeds ofnew bonds in an irrevocable trust to provide for all future debt service payments on the old bonds. Accordingly, the trust account assets and the liability for the defeased bonds are not included in the School District's basic financial statements. At June 30, 2007, $8,210,000.00 of bonds are outstanding and are considered defeased.

Note 11: ON-BEHALF PAYMENTS

The School District has recognized revenues and costs in the amount of $290,239.36 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 $282,221.56

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CITY OF JEFFERSON BOARD OF EDUCATION - JACKSON COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007

EXHIBIT "H"

Note 11: ON-BEHALF PAYMENTS

Paid to the Teachers Retirement System of Georgia For Teachers Retirement System (TRS) Employer's Cost In the amount of $6,178.80

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 $1,839.00

Note 12: SIGNIFICANT COMMITMENTS

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

Project

Unearned Executed Contracts

Funding Available From State

07G-779-049 07RA-779-019 High School Performing Arts Center

$ 2,584.00 349,214.00
1,788,477.00

$ 44,881.00 288,768.00

$2,140,275.00 $ 333,649.00

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

Note 13: SIGNIFICANT CONTINGENT LIABILITIES

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

Note 14: 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.

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CITY OF JEFFERSON BOARD OF EDUCATION - JACKSON COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007

EXHIBIT "H"

Note 14: RETIREMENT PLANS

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

Fiscal Year

Percentage Contributed

Required Contribution

2007 2006 2005

100% 100% 100%

$ 953,192.00 $ 783,789.00 $ 701,723.00

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CITY OF JEFFERSON BOARD OF EDUCATION - JACKSON COUNTY GENERAL FUND
SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL
YEAR ENDED JUNE 30, 2007

SCHEDULE "1"

REVENUES
Property Taxes Sales Taxes State Funds Federal Funds Charges for Services Investment Earnings Miscellaneous
Total Revenues
EXPENDITURES
Current Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Food Services Operation Community Services Enterprise Operations
Capital Outlay
Total Expenditures
Excess of Revenues over (under) Expenditures
OTHER FINANCING SOURCES {USES}
Operating Transfers to Other Funds Other Long-Term Debt Proceeds Capital Contributions
Total Other Financing Sources (Uses)
Net Change in Fund Balances
Fund Balances - Beginning
Adjustments

NONAPPROPRIATED BUDGETS

ORIGINAL (1}

FINAL {1}

ACTUAL AMOUNTS

$ 4,869,438.00 $ 4,869,438.00 $ 4,949,176.05

42,349.00

9,895,211.00

10,867,227.00

11,301,778.79

724,931.00

841,314.00

1,293,592.16

329,859.00

329,859.00

1,630,899.30

6,700.00

6,700.00

14,572.83

215 300.00

215,300.00

90 520.68

$ 16,041,439.00 $ 17,129,838.00 $ 19,322,888.81

$ 11,817,876.09 $ 11,986,787.90 $ 12,296,331.95

642,127.12 451,919.00 292,960.00 641,815.00 994,691.00 103,155.00 939,713.00 431,718.00
94,900.00 65,000.00 667,052.00

645,150.12 412,999.00 292,960.00 641,815.00 994,691.00 103,155.00 939,713.00 431,718.00
94,900.00 65,000.00 667,052.00

513,855.36 494,927.34 304,337.21 676,746.54 902,373.84
97,509.71 1,021,167.46
472,293.94 96,460.28 86,923.11
717,972.21 76,697.20
1,118,566.57 25174.05

$ 17,142,926.21 $ 17,275,941.02 $ 18,901,336.77

$ -1 101 487.21 $

-146,103.02 $

421,552.04

$ -1, 101,487.21 $ 2,546,873.84 9 933.15

$
$ -146,103.02 $ 2,546,873.84 1,241,780.23

-351,128.67 214,667.00
21 313.00
-115148.67
306,403.37
2,539,572.50

Fund Balances - Ending

$

1,455,319.78 $

3,642,551.05 $

2,845,975.87

Notes to the Schedule of Revenues, Ex12enditures 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.

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CITY OF JEFFERSON BOARD OF EDUCATION - JACKSON COUNTY SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS YEAR ENDED JUNE 30, 2007

SCHEDULE "2"

FUNDING AGENCY PROGRAM/GRANT
Agriculture, U.S. Department of Child Nutrition Cluster Pass-Through From Georgia Department of Education Food Services School Breakfast Program National School Lunch Program
Total Child Nutrition Cluster
Other Programs Pass-Through From Georgia Department of Education Food Donation (1)
Total U.S. Department of Agriculture
Education, U. S. Department of Special Education Cluster Pass-Through From Georgia Department of Education Special Education Grants to States Preschool Grants
Total Special Education Cluster
Other Programs Pass-Through From Georgia Department of Education English Language Acquisition Grants Hurricane Education Recovery Improving Teacher Quality State Grants Mathematics and Science Partnerships Rural Education Safe and Drug-Free Schools and Communities - State Grants State Grants for Innovative Programs Title I Grants to Local Educational Agencies Vocational Education - Basic Grants to States
Total U.S. Department of Education
Defense, U. S. Department of Direct Department of the Air Force R.O.T.C. Program

CFDA NUMBER

PASSTHROUGH
ENTITY ID
NUMBER

EXPENDITURES IN PERIOD

10.553 10.555
10.550

N/A

(2)

N/A $ _ _~7~15~14~4.:.=.o~o

$

715,144.00

NIA

38,287.00

$ _ _~7-=-53"'",4""3'""'1"'"".o=-o

* 84.027 * 84.173
84.365 84.938 84.367 84.366 84.358 84.186 84.298 84.010 84.048

NIA $ N/A
$

316,533.00 11 475.00
328,008.00

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

1,882.00 (3) 57,393.00 112,500.00 64,164.00
4,532.00 2,683.00 287,221.00 13,888.00
872,271.00

$ _ _....a.1=32=,2=0=6=.0=--0

Total Federal Financial Assistance
N/A = Not Available

$ ==1=7,.,.57..,.9=0=8=.o=o

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 ($68,424.57) were not maintained separately and are included in the 2007 National School Lunch Program.
(3) Funds earned and expended in the prior period on the Hurricane Education Recovery Act, in the amount of $10,631.00, 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 Jefferson Board of Education and is presented on the modified accrual basis of accounting which is the basis of accounting used in the presentation of the fund financial statements.

See notes to the basic financial statements.

- 27-

CITY OF JEFFERSON BOARD OF EDUCATION - JACKSON COUNTY SCHEDULE OF STATE REVENUE YEAR ENDED JUNE 30, 2007

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 Category V Gifted Student - Category VI Remedial Education Program Alternative Education Program English Speakers of Other Languages (ESOL) Media Center Program 20 Days Additional Instruction Staff and Professional Development Indirect Cost Central Administration School Administration Facility Maintenance and Operations Categorical Grants Pupil Transportation Regular Bus Replacement Sparsity Nursing Services Principal Supplements Vocational Supervisors Education Equalization Funding Grant Food Services Vocational Education Amended Formula Adjustment Other State Programs Graduation Coaches Health Insurance Middle School Summer Remedial Program National Teacher Certification Preschool Handicapped Program Pupil Transportation - State Bonds Statewide K-8 Reading and Mathematics Program Teachers Retirement Virtual Schools State Grant

GOVERNMENTAL FUND TYPES

CAPITAL

GENERAL

PROJECTS

FUND

FUND

TOTAL

$ 284,865.49

$ 284,865.49

583,909.00 222,528.00 1,523,822.00 290,232.00 648,455.00 131,744.00 1,263,820.00 1,068,322.00 288,765.00
140,884.00 119,458.00 806,438.00 104,572.00 202,623.00 684,230.00
25,863.00 95,828.00 45,903.00 226,820.00 66,169.00 47,802.00
406,157.00 429,863.00 617,670.00
69,234.00 7,251.00
35,802.00 58,970.00
8,152.00 9,429.00 341,514.00 41,192.00 38,094.70 -213,673.00
40,075.00 282,221.56
795.00 5,717.00 65,518.00 150,000.00 26,076.24 6,178.80
650.00

583,909.00 222,528.00 1,523,822.00 290,232.00 648,455.00 131,744.00 1,263,820.00 1,068,322.00 288,765.00
140,884.00 119,458.00 806,438.00 104,572.00 202,623.00 684,230.00
25,863.00 95,828.00 45,903.00 226,820.00 66,169.00 47,802.00
406,157.00 429,863.00 617,670.00
69,234.00 7,251.00
35,802.00 58,970.00
8,152.00 9,429.00 341,514.00 41,192.00 38,094.70 -213,673.00
40,075.00 282,221.56
795.00 5,717.00 65,518.00 150,000.00 26,076.24 6,178.80
650.00

- 28 -

CITY OF JEFFERSON BOARD OF EDUCATION - JACKSON COUNTY SCHEDULE OF STATE REVENUE YEAR ENDED JUNE 30, 2007

SCHEDULE "3"

AGENCY/FUNDING
GRANTS 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

$ 2,004,880.00 $ 2,004,880.00

$ _ _-'1-'-'8'-"3-=-9.=0-"--0

1,839.00

$ 11,301,778.79 $ 2,004,880.00 $ 13,306,658.79

See notes to the basic financial statements.

- 29 -

CITY OF JEFFERSON BOARD OF EDUCATION - JACKSON COUNTY SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS
YEAR ENDED JUNE 30, 2007

SCHEDULE "4"

PROJECT

ORIGINAL ESTIMATED
COST (1)

CURRENT ESTIMATED COSTS (2)

AMOUNT EXPENDED IN CURRENT
YEAR (3)

AMOUNT EXPENDED
IN PRIOR YEARS (3)

PROJECT STATUS

Payment of principal and interest due on Series 1996 and 2000 Bonds.

$ 1,750,000.00 $ 1,403,360.78 $ 789,748.78 $ 613,612.00 Completed

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

6,385,600.00

9,021,305.00

9,021,305.00 Completed

Paying a portion of the debt service on the outstanding Series 2000 General Obligation Bonds previously issued by the City of Jefferson, Series 2004 General Obligation Bonds, Series 2005(A) and Series 2005(6) General Obligation Bonds previously issued by the City of Jefferson School District.

9,996,000.00

9,996,000.00

1,222,812.50

Ongoing

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 bus depot, acquiring new school equipment and school buses, school.vehicles and transportation equipment; acquiring land and any improvements thereon and modifying those improvements as desired; adding to, renovating, repairing, improving and equipping existing school buildings; acquiring any property necessary or desirable therefor, both real and personal; acquiring a portion of the psychoeducational facility; and acquiring textbooks system-wide.

12,306,000.00 26,370,000.00

14,056,661.51

Ongoing

$ 30,437,600.00 $ 46,790,665.78 $ 16,069,222.79 $ 9,634,917.00

(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 projects. Includes all cost from project inception to completion.
(3) The voters of Jackson County approved the imposition of a 1% sales tax to fund the above projects. Amounts expended for these projects may include sales tax proceeds, state, local property taxes and/or other funds over the life of the projects.

See notes to the basic financial statements.

- 30 -

CITY OF JEFFERSON BOARD OF EDUCATION - JACKSON COUNTY GENERAL FUND - QUALITY BASIC EDUCATION PROGRAM (QBE)
ALLOTMENTS AND EXPENDITURES - BY PROGRAM YEAR ENDED JUNE 30, 2007

SCHEDULE "5"

DESCRIPTION
Direct Instructional Programs Kindergarten Program Kindergarten Program-Early Intervention Program Primary Grades (1-3) Program Primary Grades-Early Intervention (1-3) Program Upper Elementary Grades (4-5) Program Upper Elementary Grades-Early Intervention (4-5) Program Middle School (6-8) Program High School General Education (9-12) Program Vocational Laboratory (9-12) Program Students with Disabilities Category I Category II Category Ill Category IV CategoryV 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

$

648,525.00 $ 727,510.24 $

17,634.52 $

745,144.76

254,461.00

105,240.85

1,405.41

106,646.26

1,685,245.00

1,685,018.91

80,288.26

1,765,307.17

320,279.00

345,490.43

4,305.51

349,795.94

729,733.00

979,122.30

54,642.68

1,033,764.98

143,708.00 1,414,135.00 1,191,195.00
321,633.00 1,557,050.00
783,914.00 22,298.00
106,779.00 47 156.00

90,897.13 1,586,850.94 1,603,613.41
314,221.76
124,683.08 113,758.52 1,144,464.40
7,959.28 58,847.82 1,072,625.05
0.11 85,788.55 43 501.07

1,361.79 50,258.47 82,972.05 32,525.01
163.58 163.58 14,214.71 163.56
2,835.84 3,523.73 2,147.44
370.37

92,258.92 1,637,109.41 1,686,585.46
346,746.77
124,846.66 113,922.10 1,158,679.11
8,122.84 58,847.82 1,075,460.89
3,523.84 87,935.99 43 871.44

$

9,226,111.00 $ 10,089,593.85 $ 348,976.51 $ 10,438,570.36

254,066.00 54 819.00

266,064.31

31,723.29

297,787.60 71 523.32

TOTAL QBE FORMULA FUNDS

$

9 534 996.00 $ 10,355,658.16 $ 380,699.80 $ 10,807,881.28

(1) Comprised of State Funds plus Local Five Mill Share. (2) Allotments do not include the impact of the State amended formula adjustment.

See notes to the basic financial statements.

- 31 -

SECTION II COMPLIANCE AND INTERNAL CONTROL REPORTS

Russell W. Hinton
STATE AUDITOR
(404) 656-2174

DEPARTMENT OF AUDITS AND ACCOUNTS
270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400
March 3, 2008

Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education
and
Superintendent and Members of the City of Jefferson 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 ofJefferson Board ofEducation as ofand for the year ended June 30, 2007, which collectively comprise City of Jefferson Board of Education's basic financial statements and have issued our report thereon dated March 3, 2008. We conducted our audit in accordance with auditing standards generally accepted in the United States ofAmerica and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States.
Internal Control Over Financial Reporting
In planning and performing our audit, we considered City ofJefferson Board ofEducation's internal control over financial reporting as a basis for designing our auditing procedures for the purpose of expressing our opinions on the financial statements, but not for the purpose ofexpressing an opinion on the effectiveness of the City of Jefferson Board of Education's internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness of the City of Jefferson Board of Education's internal control over financial reporting.
Our consideration of internal control over financial reporting was for the limited purpose described in the preceding paragraph and would not necessarily identify all deficiencies in internal control over financial reporting that might be significant deficiencies or material weaknesses. However, as discussed below, we identified a certain deficiency in internal control over financial reporting that we consider to be a significant deficiency.
2007YB-30

A control deficiency exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect misstatements on a timely basis. A significant deficiency is a control deficiency, or combination of control deficiencies, that adversely affect the City of Jefferson Board of Education's ability to initiate, authorize, record, process, or report financial data reliably in accordance with generally accepted accounting principles such that there is more than a remote likelihood that a misstatement ofthe City of Jefferson Board of Education's financial statements that is more than inconsequential will not be prevented or detected by the City of Jefferson Board of Education's internal control. We consider item FS-7791-07-01 in the accompanying Schedule ofFindings and Questioned Costs to be a significant deficiency in internal control over financial reporting.
A material weakness is a significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood that a material misstatement ofthe financial statements will not be prevented or detected by the City of Jefferson Board of Education's internal control.
Our consideration of the internal control over financial reporting was for the limited purpose described in the first paragraph ofthis section and would not necessarily disclose all deficiencies in internal control that might be significant deficiencies and, accordingly, would not necessarily disclose all significant deficiencies that are also considered to be material weaknesses. However, we believe that the significant deficiency described above is not a material weakness.
Compliance and Other Matters
As part of obtaining reasonable assurance about whether City of Jefferson Board of Education's financial statements are free of material misstatement, we performed tests of its compliance with certain provisions oflaws, regulations, contracts and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards.
We noted certain matters that we have reported to management of City of Jefferson Board of Education in a separate letter dated March 3, 2008.
City ofJefferson Board ofEducation's response to the findings identified in our audit is described in the accompanying Schedule ofManagement's Responses. We did not audit City ofJefferson Board of Education's response and, accordingly, we express no opinion on it.
2007YB-30

This report is intended solely for the information and use ofthe management, members ofthe City of Jefferson 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,
~on~~!~ State Auditor
RWH:gp 2007YB-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
March 3, 2008

Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the City of Jefferson 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 Jefferson Board of Education with the types of compliance requirements described in the U.S. Office ofManagement and Budget (0MB) Circular A-133 Compliance Supplement that are applicable to each ofits major Federal programs for the year ended June 30, 2007. City ofJefferson Board of Education's major Federal programs are identified in the Summary of Auditor's Results Section of the accompanying Schedule of Findings and Questioned Costs. Compliance with the requirements of laws, regulations, contracts and grants applicable to each of its major Federal programs is the responsibility of City of Jefferson Board of Education's management. Our responsibility is to express an opinion on City ofJefferson 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 Jefferson 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 Jefferson Board of Education's compliance with those requirements.
2007SA-10

In our opinion, the City ofJefferson 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, 2007.
Internal Control Over Compliance
The management of City of Jefferson 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 Jefferson Board of Education's internal control over compliance with requirements that could have a direct and material effect on a major Federal program in order to determine our auditing procedures for the purpose ofexpressing our opinion on compliance, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of the City of Jefferson Board of Education's internal control over compliance.
A control deficiency in an entity's internal control over compliance exists when the design or operation ofa control does not allow management or employees, in the normal course ofperforming their assigned functions, to prevent or detect noncompliance with a type ofcompliance requirement of a Federal program on a timely basis. A significant deficiency is a control deficiency, or combination ofcontrol deficiencies, that adversely affects the entity's ability to administer a Federal program such that there is more than a remote likelihood that noncompliance with a type of compliance requirement of a Federal program that is more than inconsequential will not be prevented or detected by the entity's internal control.
A material weakness is a significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood that material noncompliance with a type of compliance requirement of a Federal program will not be prevented or detected by the entity's internal control.
Our consideration ofthe internal control over compliance was for the limited purpose described in the first paragraph of this section and would not necessarily identify all deficiencies in internal control that might be significant deficiencies or material weaknesses. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses, as defined above.
This report is intended solely for the information and use ofthe management, members ofthe City of Jefferson 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,

RWH:gp 2007SA-10

:+?~int~~~~ ~i:tAuditor

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

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

PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

FINDING CONTROL NUMBER AND STATUS

FS-7791-05-01 FS-7791-06-01 FS-7791-06-02 FS-7791-06-03 FS-7791-06-04 FS-7791-06-05

Further Action Not Warranted Partially Resolved - See Corrective Action/Responses Previously Reported Corrective Action Implemented Previously Reported Corrective Action Implemented Previously Reported Corrective Action Implemented Previously Reported Corrective Action Implemented

CORRECTIVE ACTION/RESPONSES

CASH AND CASH EQUIVALENTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Control Procedures over School Activity Accounts Finding Control Number: FS-7791-06-01

To enhance the checks and balances, each school is reviewing and conducting the monthly bank reconciliations for another school each month. Management is addressing organization issues/concerns to support the backup validation and record keeping process. Monthly reviews will be conducted to enhance this situation.

PRIOR YEAR FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

FINDING CONTROL NUMBER AND STATUS

FA-7791-06-01

Previously Reported Corrective Action Implemented

SECTION IV FINDINGS AND QUESTIONED COSTS

CITY OF JEFFERSON BOARD OF EDUCATION - JACKSON COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2007

I SUMMARY OF AUDITOR'S RESULTS

1. Type of Report Issued on the Financial Statements The auditor's opinion on the City ofJefferson Board ofEducation's financial statements was unqualified.

2. Significant Deficiencies in Internal Control Disclosed by the Audit ofthe Financial Statements The audit report for the City ofJefferson Board of Education disclosed a financial statement significant deficiency related to the following control categories.

Cash and Cash Equivalents Revenues/Receivables/Receipts

Expenditures/Liabilities/Disbursements

The significant deficiency described above is not considered to be a material weakness.

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

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

5. Type of Report Issued on Compliance for Major Programs The auditor's opinion on the City of Jefferson 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 of Jefferson Board of Education's audit did not disclose audit findings required to be reported by section .510(a) ofOMB Circular A-133.

7. Major Programs Federal awards audited as major programs are as follows: 10.553 Food Services - School Breakfast Program 10.555 Food Services - National School Lunch Program 84.027 Special Education - Grants to States 84.173 Special Education - Preschool Grants

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

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

- 1-

CITY OF JEFFERSON BOARD OF EDUCATION - JACKSON COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2007

II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

CASH AND CASH EQUIVALENTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Control Procedures over School Activity Accounts Significant Deficiency Finding Control Number: FS-7791-07-01

Condition:

This is a repeat finding (FS-7791-06-01 and FS-7791-05-01) from the years ended June 30, 2006, and June 30, 2005, respectively. The accounting procedures of the School District were insufficient to provide for adequate internal controls and separation of duties 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 and provide assurance of proper separation of duties, which would limit any one individual's access to both physical assets and the related accounting records.

Questioned Cost: NIA

Information:

The accounting procedures manual developed for the school activity accounts by the School District was reviewed and tests were performed to determine if these controls were in place and operating effectively. Based on the limited staff responsible for these accounts, adequate separation of accounting functions was not achieved. Results of testing performed on the cash, receipts and expenditure activities indicated that procedures developed by the School District were not being followed by all of the schools.

Cause:

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

Effect:

Errors, irregularities, and misappropriation of assets may not be detected.

Recommendation:

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

-2 -

CITY OF JEFFERSON BOARD OF EDUCATION - JACKSON COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2007
III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS No matters were reported.
-3-

SECTIONV MANAGEMENT'S RESPONSES

CITY OF JEFFERSON BOARD OF EDUCATION - JACKSON COUNTY SCHEDULE OF MANAGEMENT'S RESPONSES YEAR ENDED JUNE 30, 2007
Finding Control Number: FS-7791-07-01
We concur with this finding. We have and will continue to make necessary adjustments to ensure that all financial transactions with the school activity accounts have proper internal controls. The school bookkeepers rotate each month to different schools to conduct the monthly bank reconciliations. This cross check provides a third party review. We will continue to review all processes to implement additional enhancements to ensure checks and balances.
Contact Person: Kimberly Navas Title: Financial Officer Phone: (706) 367-2782 Fax: (706) 367-2291 E-mail address: knavas@jeffcityschools.org