CITY OF VIDALIA BOARD OF EDUCATION TOOMBS 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 VIDALIA BOARD OF EDUCATION - TOOMBS 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 STATEMENT OF CHANGES IN FIDUCIARY NET ASSETS FIDUCIARY FUNDS 9 I NOTES TO THE BASIC FINANCIAL STATEMENTS 11 SCHEDULES REQUIRED SUPPLEMENTARY INFORMATION 1 SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL GENERAL FUND 25 SUPPLEMENTARY INFORMATION 2 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS 26 3 SCHEDULE OF STATE REVENUE 27 CITY OF VIDALIA BOARD OF EDUCATION - TOOMBS COUNTY - TABLE OF CONTENTS - SECTION I FINANCIAL SCHEDULES SUPPLEMENTARY INFORMATION 4 SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS 28 5 ALLOTMENTS AND EXPENDITURES GENERAL FUND - QUALITY BASIC EDUCATION PROGRAMS (QBE) BY PROGRAM 29 SECTION II COMPLIANCE AND INTERNAL CONTROL REPORTS REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS REPORT ON COMPLIANCE WITH REQUIREMENTS APPLICABLE TO EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH 0MB CIRCULAR A-133 SECTION III AUDITEE'S RESPONSE TO PRIOR YEAR FINDINGS AND QUESTIONED COSTS SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS SECTION IV FINDINGS AND QUESTIONED COSTS SCHEDULE OF FINDINGS AND QUESTIONED COSTS CITY OF VIDALIA BOARD OF EDUCATION - TOOMBS 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 January 22, 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 Vidalia 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 of the governmental activities, each major fund, and the aggregate remaining fund information (Exhibits A through I) of the City of Vidalia 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 of the City ofVidalia Board of Education'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 examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opm1ons. In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, each major fund, and the aggregate remaining fund information of the City of Vidalia Board of Education, 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 Vidalia 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 January 22, 2007, on our consideration ofthe City ofVidalia Board of Education's internal control over financial reporting and our tests of its compliance with certain provisions oflaws, 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 Vidalia 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, '":tuw~~to~~' ~~ State Auditor RWH:gp 2006ARL-11 CITY OF VIDALIA BOARD OF EDUCATION - TOOMBS COUNTY CITY OF VIDALIA BOARD OF EDUCATION -TOOMBS 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 Construction in Progress Land Improvements Buildings Equipment Less: Accumulated Depreciation Total Assets LIABILITIES Accounts Payable Salaries Payable Retainages Payable Long-Term Liabilities Due Within One Year Due in More Than One Year Total Liabilities NET ASSETS Invested in Capital Assets, Net of Related Debt Restricted for Continuation of Federal Programs Debt Service Capital Projects Unrestricted 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 $ 3,502,447 1,422,895 1,365,196 1,403,356 205,286 11,702 27,241 722,804 2,212,551 2,587,808 16,094,072 1,390,032 -5,382,160 $ ===2=5=,5=6=3,=23=0= $ 709 1,946,023 106,133 385,000 1,335,000 $ 3,772,865 $ 15,905,107 389,624 1,946,151 129,939 3,419 544 $ 21,790,365 $ ===2=5=,5=6=3,=23=0= CITY OF VIDALIA BOARD OF EDUCATION -TOOMBS 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 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 Sales Taxes Special Purpose Local Option Sales Tax For Capital Projects Grants and Contributions not Restricted to Specific Programs Investment Earnings Miscellaneous Total General Revenues Change in Net Assets Net Assets - Beginning of Year EXPENSES CHARGES FOR SERVICES $ 12,320,434 $ 869,198 590,230 482,113 400,535 1,180,173 177,449 1,208,693 517,620 99,292 345,287 228,467 1,128,131 115 730 $====1=9,=66=3=,3=52= $ 298,033 237,669 168,871 280,243 984 816 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 $ 9,630,631 173,870 226,546 276,232 460,710 577,953 1,705 667,585 245,151 $ 43,888 14,560 867,590 $ 13 186 421 $ $ 23,581 23 581 $ -2,391,770 -695,328 -363,684 -205,881 60,175 -602,220 -175,744 -541, 108 -248,888 -55,404 -107,618 -45,036 19,702 -115 730 -5,468,534 $ 3,770,010 2,045,293 1,203,701 117,905 269 285 $ 7,406 194 $ 1,937,660 19,852,705 $ ===21=7=9=0=,3=65= -3- CITY OF VIDALIA BOARD OF EDUCATION -TOOMBS 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 GENERAL FUND DISTRICTWIDE CAPITAL PROJECTS FUND DEBT SERVICE FUND TOTAL $ 1,717,777 1,422,895 884,365 $ 1,403,356 205,286 11,702 27 241 $ 1,946,151 $ 3,663,928 1,422,895 397,553 1,281,918 1,403,356 205,286 11,702 27 241 Total Assets $ 5,672,622 $ 397,553 $ 1,946,151 $ 8,016,326 LIABILITIES AND FUND BALANCES LIABILITIES Cash Overdraft Accounts Payable Salaries Payable Retainages Payable Total Liabilities FUND BALANCES Reserved for: Continuation of Federal Programs Debt Service Inventories Capital Projects Unreserved Undesignated Reported in: General Fund Total Fund Balances $ $ 709 1,946,023 $ 1,946,732 $ 161,481 106,133 267 614 $ 161,481 709 1,946,023 106 133 $ 2,214,346 $ 362,383 $ 362,383 $ 1,946,151 1,946,151 27,241 27,241 $ 129,939 129,939 3,336,266 $ 3,725,890 $ 3,336,266 129,939 $ 1,946 151 $ 5,801,980 Total Liabilities and Fund Balances $ 5,672,622 $ 397 553 $ 1 946 151 $ 8,016,326 The notes to the basic financial statements are an integral part of this statement. -4- CITY OF VIDALIA BOARD OF EDUCATION - TOOMBS 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 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. Bonds Payable, which are Long-Term Liabilities, are not due and payable in the current period and therefore are not reported as liabilities in the funds. $ 5,801,980 $ 722,804 2,212,551 2,587,808 16,094,072 1,390,032 -5,382, 160 17,625,107 83,278 -1,720000 Net Assets of Governmental Activities (Exhibit "A") $ 21,790365 The notes to the basic financial statements are an integral part of this statement. -5- CITY OF VIDALIA BOARD OF EDUCATION - TOOMBS 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 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) 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 $ 3,738,958 $ 11,866,613 2,547,090 984,816 76,135 291,562 2,045,293 7,957 $ $ 19,505,174 $ 2,053,250 $ $ 3,738,958 2,045,293 11,866,613 2,547,090 984,816 33,813 117,905 291,562 33,813 $ 21,592,237 $ 11,989,467 863,629 590,230 467,777 394,239 1,171,901 175,774 1,191,783 503,552 99,292 230,816 228,467 1,101,403 10,325 $ $ 3,140,934 $ 19,018,655 $ 3,140,934 $ $ 486,519 $ -1,087,684 $ $ 11,989,467 863,629 590,230 467,777 394,239 1,171,901 795 176,569 1,191,783 503,552 99,292 230,816 228,467 1,101,403 3,151,259 360,000 115,730 360,000 115,730 476,525 $ 22,636,114 -442,712 $ -1,043,877 $ $ -745187 $ -745187 $ $ -258,668 $ 3,984,558 745,187 $ 745,187 -745 187 745 187 $ 0 -342,497 $ -442,712 $ -1,043,877 472,436 2,388,863 6,845,857 Fund Balances - Ending $ 3,725,890 $ 129,939 $ 1,946,151 $ 5,801,980 The notes to the basic financial statements are an integral part of this statement. -6- CITY OF VIDALIA BOARD OF EDUCATION - TOOMBS 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") $ -1,043,877 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 $ 3,031,499 -418,737 2,612,762 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. 31,052 In the Statement of Activities, only the loss on the sale of the building is reported, whereas in the Governmental Funds, the entire proceeds from the sale increase financial resources. Thus, the change in net assets differs from the change in fund balances by the carrying value of the building sold. -22,277 Repayment of Long-Term Debt is reported as an expenditure in Governmental Funds, but the repayment reduces Long-Term Liabilities in the Statement of Net Assets. In the current year, this amount consists of Bond Principal Retirements. 360 000 Change in Net Assets of Governmental Activities (Exhibit "B") $ ==1=,9=3=7=,6=60= The notes to the basic financial statements are an integral part of this statement. -7- CITY OF VIDALIA BOARD OF EDUCATION -TOOMBS COUNTY STATEMENT OF FIDUCIARY NET ASSETS FIDUCIARY FUNDS JUNE 30, 2006 EXHIBIT "G" ASSETS Cash and Cash Equivalents Investments Common Stock Total Assets LIABILITIES Funds Held for Others NET ASSETS Held in Trust for Private Purposes Total Liabilities and Net Assets PRIVATE PURPOSE TRUSTS AGENCY FUNDS $ 907 $ 33,150 617 $ 1,524 $ ===33====15=0= $ 33,150 $ -------'1'--'--52.c;..4~ $ 1,524 $ ===3=3,=15=0= The notes to the basic financial statements are an integral part of this statement. -8- CITY OF VIDALIA BOARD OF EDUCATION -TOOMBS COUNTY STATEMENT OF CHANGES IN FIDUCIARY NET ASSETS FIDUCIARY FUNDS YEAR ENDED JUNE 30, 2006 EXHIBIT"H" ADDITIONS Investment Earnings Net Increase (Decrease) in Fair Value of Investments Dividends Total Additions DEDUCTIONS None Reported Change in Net Assets Net Assets - Beginning Net Assets - Ending PRIVATE PURPOSE TRUSTS $ 214 71 $ 285 0 $ 285 1 239 $ ======1,=52=4= The notes to the basic financial statements are an integral part of this statement. -9 - (This page left intentionally blank) CITY OF VIDALIA BOARD OF EDUCATION - TOOMBS COUNTY EXHIBIT "I" NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2006 Note 1: DESCRIPTION OF SCHOOL DISTRICT AND REPORTING ENTITY REPORTING ENTITY The City ofVidalia Board ofEducation (School District) was established under the laws ofthe State of Georgia and operates under the guidance of a school board elected by the voters and a Superintendent appointed by the Board. The Board is organized as a separate legal entity and has the power to levy taxes and issue bonds. Its budget is not subject to approval by any other entity. Accordingly, the School District is a primary government and consists of all the organizations that compose its legal entity. Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BASIS OF PRESENTATION The School District's basic financial statements are collectively comprised of the District-wide financial statements, fund financial statements and notes to the basic financial statements ofthe City of Vidalia Board of Education. District-wide Statements: The Statement ofNet Assets and the Statement ofActivities display information about the financial activities ofthe overall School District, except for fiduciary activities. Eliminations have been made to minimize the double counting of internal activities. Governmental activities generally are financed through taxes, intergovernmental revenues, and other nonexchange transactions. The Statement of Activities presents a comparison between direct expenses and program revenues for each function of the School District's governmental activities. Direct expenses are those that are specifically associated with a program or function and, therefore, are clearly identifiable to a particular function. Indirect expenses (expenses of the School District related to the administration and support ofthe School District's programs, such as office and maintenance personnel and accounting) are not allocated to programs. Program revenues include (a) charges paid by the recipients ofgoods or services offered by the programs and (b) grants and contributions that are restricted to meeting the operational or capital requirements of a particular program. Revenues that are not classified as program revenues, including all taxes, are presented as general revenues. Fund Financial Statements: The fund financial statements provide information about the School District's funds, including fiduciary funds. Eliminations have been made to minimize the double counting ofinternal activities. Separate statements for each category (governmental and fiduciary) are presented. The emphasis of fund financial statements is on major governmental funds, each displayed in a separate column. - 11 - CITY OF VIDALIA BOARD OF EDUCATION - TOOMBS COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2006 EXHIBIT "I" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The School District reports the following major governmental funds: General Fund is the School District's primary operating fund. It accounts for all financial resources ofthe School District, except those resources required to be accounted for in another fund. District-wide Capital Projects Fund accounts for financial resources including Special Purpose Local Option Sales Tax (SPLOST) to be used for the acquisition, construction or renovation of major capital facilities. Debt Service Fund accounts for taxes (sales) legally restricted for the payment of general longterm principal, interest and paying agent's fees. The School District reports the following fiduciary fund types: Private Purpose Trust fund reports a trust arrangement under which income may be expended to provide college scholarships to Vidalia City High School seniors. Agency funds account for assets held by the School District as an agent for various funds, governments or individuals. BASIS OF ACCOUNTING The basis of accounting 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 - 12 - CITY OF VIDALIA BOARD OF EDUCATION - TOOMBS COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2006 EXHIBIT "I" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 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 of general 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. CASH AND CASH EQUIVALENTS COMPOSITION OF DEPOSITS Cash and cash equivalents consist of cash on hand, demand deposits and short-term investments with original maturities of three months or less from the date of acquisition in authorized financial institutions. Georgia Laws OCGA 45-8-14 authorize the School District to deposit its funds in one or more solvent banks or insured Federal savings and loan associations. INVESTMENTS COMPOSITION OF INVESTMENTS Investments made by the School District in nonparticipating interest-earning contracts (such as certificates ofdeposit) and repurchase agreements are reported at cost. Participating interest-earning contracts and money market investments with a maturity at purchase of one year or less are reported at amortized cost. Both participating interest-earning contracts and money market investments with a maturity at purchase greater than one year and equity investments are reported at fair value. The Official Code of Georgia 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 of return 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, - 13 - CITY OF VIDALIA BOARD OF EDUCATION - TOOMBS COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2006 EXHIBIT "I" 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 Vidalia fixed the property tax levy for the 2005 tax digest year (calendar year) on October 28, 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 Vidalia City Clerk bills and collects the 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 $3,738,958. The tax millage rate levied for the 2005 tax year (calendar year) for the City of Vidalia Board of Education was as follows (a mill equals $1 per thousand dollars of assessed value): School Operations 14.936 mills SALES TAXES Special Purpose Local Option Sales Tax, at the fund reporting level, during the year amounted to $2,045,293 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. - 14 - CITY OF VIDALIA BOARD OF EDUCATION - TOOMBS COUNTY EXHIBIT "I" NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2006 Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES INVENTORIES FOOD INVENTORIES On the basic financial statements, inventories of donated food commodities used in the preparation of meals are reported at their Federally assigned value and purchased foods inventories are reported at cost (first-in, first-out). The School District uses the consumption method to account for inventories whereby donated food commodities are recorded as an asset and as revenue when received, and expenses/expenditures are recorded as the inventory items are used. Purchased foods are recorded as an asset when purchased and expenses/expenditures are recorded as the inventory items are used. CAPITAL ASSETS Capital assets purchased, including capital outlay costs, are recorded as expenditures in the fund financial statements at the time of purchase (including ancillary charges). On the District-wide financial statements, all purchased capital assets are valued at cost where historical records are available and at estimated historical cost based on appraisals or deflated current replacement cost where no historical records exist. Donated capital assets are recorded at estimated fair market value on the date donated. Disposals are deleted at depreciated recorded cost. The cost of normal maintenance and repairs that do not add to the value of assets or materially extend the useful lives of the assets is not capitalized. Depreciation is computed using the straight-line method. The School District does not capitalize book collections or works of art. Capitalization thresholds and estimated useful lives of capital assets reported in the District-wide statements are as follows: Capitalization Policy Estimated Useful Life Land Land Improvements Buildings and Improvements Equipment $ 10,000 NIA $ 10,000 60 years $ 10,000 25 to 60 years $ 10,000 10 to 15 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. 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. - 15 - CITY OF VIDALIA BOARD OF EDUCATION - TOOMBS COUNTY EXHIBIT "I" NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2006 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 ofmoney 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, (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 $6,467,136. 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. - 16 - CITY OF VIDALIA BOARD OF EDUCATION - TOOMBS COUNTY EXHIBIT "I" NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2006 Note 3: DEPOSITS AND INVESTMENTS 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 $ 2,483,918 2 147,489 3 3,835,729 4 0 Total $ 6,467.136 CATEGORIZATION OF INVESTMENTS Custodial Credit Risk Custodial credit risk for investments is the risk that, in the event of a failure ofthe counterparty to a transaction, the School District will not be able to recover the value of the investment or collateral securities that are in the possession of an 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. At June 30, 2006, the fair value of the School District's total investments was $617 and this entire amount consisted ofcommon stock which was insured or registered, or securities held by the School District or the School District's agent in the School District's name. - 17 - CITY OF VIDALIA BOARD OF EDUCATION - TOOMBS COUNTY EXHIBIT "I" NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2006 Note 4: NON-MONETARY TRANSACTIONS The School District receives food commodities from the United States Department of Agriculture (USDA) for school breakfast and lunch programs. These commodities are recorded at their Federally assigned value. See Note 2 - Inventories Note 5: CAPITAL ASSETS The following is a summary of changes in the Capital Assets during the fiscal year: Balances July 1, 2005 Increases Balances Decreases June 30, 2006 Governmental Activities Capital Assets, Not Being Depreciated: Land Construction in Progress $ 468,425 $ 254,379 $ 722,804 1,362,253 2,212,551 $ 1,362,253 2,212,551 Total Capital Assets Not Being Depreciated $ 1,830,678 $ 2,466,930 $ 1,362,253 $ 2,935,355 Capital Assets Being Depreciated Buildings and Improvements Equipment Land Improvements $ 15,810,349 $ 1,259,439 1,113,711 322,132 $ 130,593 1,474,097 38,409 $ 16,094,072 1,390,032 2,587,808 Less Accumulated Depreciation for: Buildings and Improvements Equipment Land Improvements 4,092,178 690,476 196,901 280,600 107,805 30,332 16,132 4,356,646 798,281 227.233 Total Capital Assets, Being Depreciated, Net $ 13,203,944 $ 1,508,085 $ 22,277 $ 14,689,752 Governmental Activity Capital Assets - Net $ 15,034,622 $ 3,215,015 $ 1,384,530 $ 11,625,107 Current year depreciation expense by function is as follows: Instruction Support Services Pupil Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Enterprise Operations Food Services $ 207,129 $ 3,485 8,972 3,940 5,177 551 10,583 90,534 123,242 71,639 16,727 $======4==18-,7===3===7 - 18 - CITY OF VIDALIA BOARD OF EDUCATION - TOOMBS COUNTY EXHIBIT "I" NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2006 Note 6: RESTRICTED ASSETS Special Purpose Local Option Sales Tax (SPLOST) is reported as restricted assets in the Statement ofNet Assets because its use is limited by statutory provisions. Restricted assets at June 30, 2006, were as follows: Debt Service Funds Restricted Cash and Cash Equivalents: Debt Services $ 1,946,151 Note 7: INTERFUND TRANSFERS Interfund transfers for the year ended June 30, 2006, consisted of the following: Transfer to Transfers From General Fund District-wide Capital Projects $=="""7="45='=1"'=8="=7 Transfers are used to move property tax revenues collected by the General Fund to the District-wide Capital Projects Fund as 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 has obtained commercial insurance for risk of loss 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 same fund that the employee's salary and benefits were paid. Claims are accounted for with expenditure and liability being reported when it is probable that a loss has occurred, and the amount of that loss can be reasonably estimated. - 19 - CITY OF VIDALIA BOARD OF EDUCATION - TOOMBS COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2006 EXHIBIT "I" Note 8: RISK MANAGEMENT Changes in the unemployment compensation claims liability during the last two fiscal years are as follows: 2005 2006 Beginning of Year Liability Claims and Changes in Estimates Claims Paid End of Year Liability $ 560 $ 0 $ 560 $ 0 $ 0 $ 0 $ 0 $ 0 The School District participates in the Georgia Education Workers' Compensation Trust, a public entity risk pool organized on December 1, 1991, to develop, implement and administer a program of workers' compensation self-insurance for its member organizations. The School District pays an annual premium to the Trust for its general insurance coverage. Additional insurance coverage is provided through an agreement by the Trust with the Midwest Employers Casualty Company to provide coverage for potential losses sustained by the Trust in excess of $500,000 loss per occurrence, up to $2,000,000. The School District has purchased surety bonds to provide additional insurance coverage as follows: Position Covered Amount Superintendent Board Treasurer Board Vice-Treasurer All Employees $ 50,000 $ 50,000 $ 50,000 $ 100,000 Note 9: LONG-TERM DEBT GENERAL OBLIGATION DEBT OUTSTANDING General Obligation Bonds currently outstanding are as follows: Purpose Interest Rates Amount General Government - Series 1995 4.20% - 5.75% $ 1,720.000 - 20 - CITY OF VIDALIA BOARD OF EDUCATION - TOOMBS COUNTY EXHIBIT "I" NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2006 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 Obligation Bonds Balance July 1, 2005 $ 2,080,000 Deductions Debt Retired 360,000 Balance June 30, 2006 $ 1,720.000 Portion of Long-Term Debt Due within One Year $ 385,000 At June 30, 2006, payments due by fiscal year which includes principal and interest for these items are as follows: Fiscal Year Ended June 30 General Obligation Debt Principal Interest 2007 2008 2009 2010 $ 385,000 $ 415,000 445,000 475 000 96,470 75,488 52,455 27,313 Total Principal and Interest $ 1,720,000 $ 251,726 Note 10: SIGNIFICANT COMMITMENTS The following is an analysis ofsignificant outstanding construction or renovation contracts executed by the School District as of June 30, 2006: - 21 - CITY OF VIDALIA BOARD OF EDUCATION - TOOMBS COUNTY EXHIBIT "I" NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2006 Note 10: SIGNIFICANT COMMITMENTS Project Vidalia High School Science/Technology Lab Vidalia High School Football Stadium - Phase 2 Unearned Executed Contracts $ 30,423 669,174 $=====6-99=",5="9="'7 The amounts described in this note are not reflected in the basic financial statements. Note 11: SIGNIFICANT CONTINGENT LIABILITIES Amounts received or receivable principally from the Federal government are subject to audit and review by granter agencies. This could result in requests for reimbursement to the granter 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: RETIREMENT PLANS TEACHERS RETIREMENT SYSTEM OF GEORGIA (TRS) TRS PLAN DESCRIPTION Substantially all teachers, administrative and clerical personnel employed by local school systems are covered by the Teachers Retirement System of Georgia (TRS), which is a cost-sharing multiple employer defined benefit pension plan. TRS provides service retirement, disability retirement and survivors benefits for its members in accordance with State statute. The Teachers Retirement System of Georgia issues a separate stand alone financial audit report and a copy can be obtained from the Georgia Department of Audits and Accounts. TRS CONTRIBUTIONS REQUIRED AND MADE Employees ofthe School District who are covered by TRS are required by State statute to contribute 5% of their gross earnings to TRS. The School District makes monthly employer contributions to TRS at rates adopted by the TRS Board of Trustees in accordance with State statute and as advised by their independent actuary. The required employer contribution rate is 9.24% and employer contributions for the current fiscal year and the preceding two fiscal years are as follows: - 22 - CITY OF VIDALIA BOARD OF EDUCATION - TOOMBS COUNTY EXHIBIT "I" NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2006 Note 12: RETIREMENT PLANS Fiscal Year 2006 2005 2004 Percentage Contributed 100% 100% 100% Required Contribution $ 1,013,960 $ 945,764 $ 901,852 - 23 - (This page left intentionally blank) CITY OF VIDALIA BOARD OF EDUCATION-TOOMBS 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 State Funds Federal Funds Charges for Services Investment Earnings Miscellaneous Total Revenues EXPENDITURES Current Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Other Support Services Enterprise Operations Community Services Food Services Operation Capital Outlay Total Expenditures Excess of Revenues over (under) Expenditures OTHER FINANCING SOURCES (USES) Other Sources Other Uses Total Other Financing Sources (Uses) Net Change in Fund Balances Fund Balances - Beginning Adjustments NONAPPROPRIATED BUDGETS ORIGINAL !1) FINAL (1) ACTUAL AMOUNTS $ 3,164,233 $ 3,164,233 $ 3,738,958 11,576,692 11,576,692 11,866,613 2,368,646 2,368,646 2,547,090 299,800 299,800 984,816 83,500 83,500 76,135 288 275 288 275 291,562 $ 17 781 146 $ 17 781 146 $ 19505174 $ 12,127,149 $ 12,127,149 $ 11,989,467 632,798 349,556 445,365 476,890 1,086,916 195,712 1,251,701 517,059 72,398 160,000 1,138,469 632,798 349,556 445,365 476,890 1,086,916 195,712 1,251,701 517,059 72,398 160,000 1,138,469 863,629 590,230 467,777 394,239 1,171,901 175,774 1,191,783 503,552 99,292 230,816 228,467 1,101,403 10 325 $ 18454013 $ 18,454,013 $ 19,018,655 $ -672 867 $ -672 867 $ 486 519 $ 464,500 $ 464,500 -64 500 -64 500 $ -745 187 $ 400 000 $ 400 000 $ -745 187 $ -272,867 $ -272,867 $ -258,668 3,994,670 3,994,670 3,984,558 -12 824 -12 824 Fund Balances - Ending $ 3,708,979 $ 3,708,979 $ 3,725,890 Notes to the Schedule of Revenues. Expenditures and Changes in Fund Balances Budget and Actual (1) Original and Final Budget amounts do not include budgeted revenues or expenditures of the various principal accounts. The accompanying schedule of revenues, expenditures and changes in fund balances budget and actual is presented on the modified accrual basis of accounting which is the basis of accounting used in the presentation of the fund financial statements. See notes to the basic financial statements. - 25- CITY OF VIDALIA BOARD OF EDUCATION - TOOMBS 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 Preschool Grants Total Special Education Cluster Other Programs Pass-Through From Georgia Department of Education Enhancing Education Through Technology Program Hurricane Education Recovery Improving Teacher Quality State Grants Rural Education Safe and Drug-Free Schools and Communities State Grants for Innovative Programs Title I Grants to Local Educational Agencies Vocational Education - Basic Grants to States Total U. S. Department of Education CFDA NUMBER PASSTHROUGH ENTITY ID NUMBER EXPENDITURES IN PERIOD 10.553 10.555 N/A (2) N/A $ _ _ _.c;,;97'-'1"-'8:.-=9-=-6 $ 971,896 10.550 N/A 67 001 $ _ ___;.1'-=0-=-3"-'8=89"'7'- 84.027 84.173 NIA $ N/A $ 363,286 10 550 373,836 84.318 84.938 84.367 84.358 84.184 . 84.298 84.010 84.048 NIA NIA NIA N/A NIA NIA N/A N/A $ 14,443 (3) 208,281 72,909 14,817 10,098 992,079 36423 1722886 Total Federal Financial Assistance N/A = Not Available $ ===2=7=6=1=7==83= 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 ($170,092) 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 $19,553, 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 Vidalia Board of Education and is presented on the modified accrual basis of accounting which is the basis of accounting used in the presentation of the fund financial statements. See notes to the basic financial statements. - 26 - CITY OF VIDALIA BOARD OF EDUCATION - TOOMBS 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 Gifted Student - Category VI Remedial Education Program Alternative Program Media Center Program 20 Days Additional Instruction Staff and Professional Development Indirect Cost Central Administration School Administration Facility Maintenance and Operations Categorical Grants Pupil Transportation Regular Bus Replacement Sparsity Nursing Services Principal Supplements Education Equalization Funding Grant Food Services Vocational Education Austerity Reduction Other State Programs K-8 Statewide Reading and Mathematics Program National Teacher Certification Preschool Handicapped Program Virtual Schools Grant GOVERNMENTAL FUND TYPE GENERAL FUND $ 462,734 792,242 134,066 1,809,783 335,911 877,518 95,470 1,423,537 1,321,565 355,690 847,411 86,277 16,804 111,087 276,172 92,935 45,006 382,280 557,206 657,919 158,929 23,581 20,000 61,436 8,072 1,364,535 62,506 17,095 -621,590 42,415 6,587 41,359 75 $ ===1=1,..,8=6=6,!=6=13= See notes to the basic financial statements. - 27 - CITY OF VIDALIA BOARD OF EDUCATION -TOOMBS COUNTY SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS YEAR ENDED JUNE 30, 2006 SCHEDULE "4" PROJECT ORIGINAL ESTIMATED COST (1) CURRENT ESTIMATED COSTS (2) AMOUNT EXPENDED IN CURRENT YEAR (3) AMOUNT EXPENDED IN PRIOR YEARS (3) PROJECT STATUS Retirement of the School District's City of Vidalia General Obligation Bonds, Series 1995, in the maximum amount of $4,276,603. $ 4,276,603 $ 4,276,603 $ 476,525 $ 2,145,717 Ongoing Construction of science and technology laboratories at Vidalia High School in the maximum amount of $500,000. 500,000 500,000 500,000 Completed Construction of Vidalia High School football stadium in the maximum amount of $1,000,000. 1,000,000 1,444,965 55,088 1,389,877 Completed (i) To purchase textbooks and additional instructional materials and equipment for all sites; (ii) To expand technology usage and improve communication and safety capabilities to include but not be limited to the upgrade of electrical capacity at JDDP, SOM, and VCHS, safety and security upgrades at all facilities, and technology upgrades system-wide; (iii) To acquire, improve and maintain facilities for VCS to include but not be limited to an athletic/physical education training facility at VCHS and JRT; kitchen expansions at VCHS, SOM, and JDDP, and maintain roofing warranties throughout the system; (iv) To expand and maintain student transportation to include but not be limited to purchase of additional student regular transportation and activity buses. 9,696,000 9,696,000 2,237,090 51 698 Ongoing $ 15,472,603 $ 15,917,568 $ 3,268,703 $ 3,587,292 (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 Toombs 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. - 28 - CITY OF VIDALIA BOARD OF EDUCATION - TOOMBS COUNTY GENERAL FUND- QUALITY BASIC EDUCATION PROGRAM (QBE) ALLOTMENTS AND EXPENDITURES BY PROGRAM YEAR ENDED JUNE 30, 2006 SCHEDULE "5" DESCRIPTION ALLOTMENTS FROM GEORGIA DEPARTMENT OF EDUCATION (1 l (2) ELIGIBLE QBE PROGRAM COSTS SALARIES OPERATIONS TOTAL Direct Instructional Programs Kindergarten Program $ Kindergarten Program-Early Intervention Program Primary Grades (1-3) Program Primary Grades-Early Intervention (1-3) Program Upper Elementary Grades (4-5) Program Upper Elementary Grades-Early Intervention (4-5) Program Middle School (6-8) Program High School General Education (9-12) Program Vocational Laboratory (9-12) Program Students with Disabilities Category I Category II Category Ill Category IV CategoryV Gifted Student - Category VI Remedial Education Program Alternative Education Program 863,589 $ 151,461 2,000,447 375,697 962,343 110,190 1,577,718 1,434,489 421,564 938,475 91,748 19,234 123 780 586,616 $ 172,087 1,361,480 470,533 704,835 198,058 1,879,394 1,942,335 514,413 482,382 361,165 228,236 1,246 131,079 78,944 131 886 16,777 $ 1,916 60,197 7,319 53,935 1,218 36,571 87,764 45,095 1,128 2,852 8,153 2,404 357 3,850 174 172 260 603,393 174,003 1,421,677 477,852 758,770 199,276 1,915,965 2,030,099 559,508 483,510 364,017 236,389 3,650 357 134,929 79,118 304146 TOTAL DIRECT INSTRUCTIONAL PROGRAMS $ 9,070,735 $ 9,244,689 $ 501,970 $ 9,746,659 Media Center Program Staff and Professional Development 265,265 50188 361,556 25 345 81,500 26 358 443,056 51 703 TOTAL QBE FORMULA FUNDS $ 9,386,188 $ 9,631.590 $ 609,828 $ =====1=0=2=41=!,4=1=8 (1) Comprised of State Funds plus Local Five Mill Share. (2) Allotments do not include the impact of the State budget austerity reduction. See notes to the basic financial statements. - 29- SECTION II COMPLIANCE AND INTERNAL CONTROL REPORTS Russell W. Hinton STATE AUDITOR (404) 656-2174 DEPARTMENT OF AUDITS AND ACCOUNTS 270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400 January 22, 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 Vidalia 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 Vidalia Board of Education as of and for the year ended June 30, 2006, which collectively comprise City of Vidalia Board of Education's basic financial statements and have issued our report thereon dated January 22, 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 Vidalia Board of Education's internal control over financial reporting in order to determine our auditing procedures for the purpose of expressing 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 ofVidalia Board ofEducation's ability to record, process, summarize and report financial data consistent with assertions ofmanagement in the financial statements. Reportable conditions are described in the accompanying Schedule ofFindings and Questioned Costs as items FS-7931-06-01, FS-7931-06-02 and FS-7931-06-03. 2006YB-30 A material weakness is a reportable condition in which the design or operation of one 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 Vidalia 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 ofVidalia Board ofEducation and is not intended to be and should not be used by anyone other than these specified parties. Respectfully submitted, ~~LJ.'4d~ Russell W. Hinton, CPA, CGFM 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 January 22, 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 Vidalia 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 ofCity ofVidalia Board ofEducation with the types ofcompliance requirements described in the U.S. Office of Management and Budget (0MB) Circular A-133 Compliance Supplement that are applicable to its major Federal program for the year ended June 30, 2006. City of Vidalia Board of Education's major Federal program is identified in the Summary of Auditor's Results Section of the accompanying Schedule of Findings and Questioned Costs. Compliance with the requirements oflaws, regulations, contracts and grants applicable to its major Federal program is the responsibility of City of Vidalia Board of Education's management. Our responsibility is to express an opinion on City ofVidalia Board ofEducation's compliance based on our audit. We conducted our audit ofcompliance in accordance with auditing standards generally accepted in the United States ofAmerica; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General ofthe United States; and 0MB Circular A133, Audits 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 ofVidalia Board ofEducation's compliance with 2006SA-10 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 Vidalia Board of Education's compliance with those requirements. In our opinion, the City of Vidalia Board of Education complied, in all material respects, with the requirements referred to above that are applicable to its major Federal program for the year ended June 30, 2006. Internal Control Over Compliance The management of City of Vidalia 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 ofVidalia Board ofEducation's internal control over compliance with requirements that could have a direct and material effect on a major Federal program in order to determine our auditing procedures for the purpose of expressing our opinion on compliance and to test and report on internal control over compliance in accordance with 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 Vidalia Board ofEducation, Federal awarding agencies and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties. Respectfully submitted, UJ.~ Rus ell W. Hinton, CPA, CGFM State Auditor RWH:gp 2006SA-10 SECTION III AUDITEE'S RESPONSE TO PRIOR YEAR FINDINGS AND QUESTIONED COSTS CITY OF VIDALIA BOARD OF EDUCATION - TOOMBS 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-7931-04-01 FS-7931-05-01 FS-7931-05-02 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 Inadequate Separation of Duties Finding Control Number: FS-7931-05-01 At this time, the City of Vidalia Board of Education is unable to hire additional staff and will establish procedures requiring review of bank reconciliations by someone outside of the Accounting Department (most likely the Office Manager). Cash receipts will also be logged by someone outside of the Accounting Department. CASH AND CASH EQUIVALENTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Control Procedures Finding Control Number: FS-7931-05-02 The City of Vidalia Board of Education recognizes said inadequacies in internal control procedures and is in the process of establishing compensating controls. These compensating controls include procedures for review ofbank reconciliations by someone from the central office level; establishing deposit procedures requiring that two individuals take responsibility for all deposits; and having periodic reviews done by central office staff. All procedures have not been fully implemented due to time and staff limitations. PRIOR YEAR FEDERAL AWARD FINDINGS AND QUESTIONED COSTS No matters were reported. SECTION IV FINDINGS AND QUESTIONED COSTS CITY OF VIDALIA BOARD OF EDUCATION - TOOMBS 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 Vidalia 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 Vidalia Board of Education disclosed financial statement reportable conditions related to the following control categories. Cash and Cash Equivalents Revenues/Recei vab les/Recei pts Expenditures/Liabilities/Disbursements Accounting Controls (Overall) 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 Vidalia 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 Vidalia 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 Vidalia Board ofEducation's report on compliance with requirements applicable to its major program was unqualified. 6. Audit Findings Required to be Reported by Section .510(a) ofOMB Circular A-133 The City of Vidalia Board of Education's audit did not disclose audit findings required to be reported by section .5 lO(a) of 0MB Circular A-133. 7. Major Programs The Federal award audited as a major program is as follows: 84.010 Title I Grants to Local Educational Agencies 8. Type "A" Program Dollar Threshold The dollar threshold for type "A" programs was $300,000. 9. Low Risk Auditee The City of Vidalia Board of Education qualified as a low risk auditee as defined by Section .530 ofOMB Circular A-133. -I- CITY OF VIDALIA BOARD OF EDUCATION - TOOMBS 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 Inadequate Separation of Duties at the Central Office Reportable Condition Finding Control Number: FS-7931-06-01 Condition: This is a repeat finding (FS-7931-05-01) from the year ended June 30, 2005. The accounting procedures ofthe School District were insufficient to provide for adequate separation of duties at the Central Office. 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. Questioned Cost: NIA Information: Cash and Cash Equivalents The bank reconciliation and check signing functions were not separated from check preparation function. Revenues/Receivables/Receipts The bookkeeping function was not separated from the cash receipts function. Cause: The School District has not assigned responsibilities to achieve appropriate separation of duties nor utilized management oversight of the incompatible activities to properly safeguard assets. 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 compensating controls for these incompatible activities. -2 - CITY OF VIDALIA BOARD OF EDUCATION - TOOMBS 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 Controls over School Activity Accounts Reportable Condition Finding Control Number: FS-7931-06-02 Condition: This is a repeat finding (FS-7931-05-02 and FS-7931-04-01) from the years ended June 30, 2005 and June 30, 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 check writing function. The bank reconciliation was not reviewed by an administrator not directly connected with cash operations. Revenues/Receivables/Receipts The cash receipts function was not separated from the record keeping function. Based on a review of twenty receipts, seven were not deposited in a timely manner. Expenditures/Liabilities/Disbursements Based on a review of twenty vouchers, two did not include purchase orders. 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 level. Effect: Errors and/or irregularities may not be detected in a timely manner. -3- CITY OF VIDALIA BOARD OF EDUCATION - TOOMBS 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 Controls over School Activity Accounts Reportable Condition Finding Control Number: FS-7931-06-02 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 polices and implement those procedures deemed necessary to strengthen internal controls over the accounting functions. ACCOUNTING CONTROLS (OVERALL) Inadequate Access Controls Reportable Condition Finding Control Number: FS-7931-06-03 Condition: The accounting procedures ofthe School District did not maintain adequate separation of duties in the Financial Accounting System. Criteria: Separation of duties involving key accounting functions, both manual and automated, is the basis for achieving an adequate system of internal control. Questioned Cost: NIA Information: Access controls in the Financial Accounting System do not prevent users from accessing accounting functions that are outside of their area of responsibility. Cause: The School District's management is responsible for designing and maintaining internal controls that restrict access to programs or data. Management has not limited the access rights of users of the Financial Accounting System. Effect: Errors and/or irregularities may not be detected in a timely manner. -4 - CITY OF VIDALIA BOARD OF EDUCATION - TOOMBS COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2006 II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS ACCOUNTING CONTROLS (OVERALL) Inadequate Access Controls Reportable Condition Finding Control Number: FS-7931-06-03 Recommendation: Management should ensure that the access controls in the accounting information system complement the system ofinternal control by limiting an employee's access to only the accounting functions necessary for the performance of the employee's duties. GENERAL LEDGER Excessive Fund Balance Nonmaterial Noncompliance Finding Control Number: FS-7931-06-04 Condition: The School District did not comply with provisions ofO.C.G.A. 20-2-167 as defined by Chapter 32 of the Financial Management for Georgia Local Units of Administration (FMGLUA). "The purpose of this paragraph is to prohibit local school systems from accumulating surplus funds through taxation without accounting to the taxpayers for how such funds will be expended, and this paragraph shall be liberally construed to accomplish this purpose." The School District's General Fund had an excessive unreserved, undesignated fund balance at fiscal year end. Criteria: O.C.G.A. 20-2-167 states in part: "The budget of each local school system shall designate all of such anticipated revenues among the several funds or accounts of the system and shall not leave any anticipated revenues undesignated. Except as otherwise provided in this paragraph, all amounts allocated to each fund or account and any existing balance in each fund or account shall be intended for expenditure within the budget year for the purposes of that fund or account. There shall be no fund or account in the nature of a 'surplus' or 'unobligated surplus' fund or account. Each local school system may, however, establish a single reserve fund or reserve account intended to cover unanticipated deficiencies in revenue or unanticipated expenditures, provided that the budget for any year shall not allocate to such reserve fund or reserve account any amounts which, when combined with the existing balance in such fund or account, exceed 15 percent of that years total budget." -5- CITY OF VIDALIA BOARD OF EDUCATION - TOOMBS COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2006 II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS GENERAL LEDGER Excessive Fund Balance Nonmaterial Noncompliance Finding Control Number: FS-7931-06-04 Chapter 32 Preparing Operating Budgets of the Financial Management for Georgia Local Units of Administration (FMGLUA) states in part: "The O.C.G.A. 20-2-167 limits this part offund balance to 15 percent ofthe total budget. What this statute really means is that the general fund balance, after deducting all other reserves, may not exceed 15 percent of the next year's budgeted general fund expenditures." Questioned Cost: NIA Information: The School District's General Fund reported an unreserved, undesignated fund balance at fiscal year end that exceeded 15 percent of the 2007 fiscal year budgeted general fund expenditures. Cause: The School District neglected the specific limitations imposed upon the School District by the Georgia Department of Education. Effect: Nonmaterial noncompliance with respect to Chapter 32 of the FMGLUA. Recommendation: The School District should establish policies and procedures designed to ensure that in future periods the School District complies with the provisions of O.C.G.A. 20-2-167 as defined by Chapter 32 of the FMGLUA. III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS No matters were reported. -6 - SECTIONV MANAGEMENT'S RESPONSES CITY OF VIDALIA BOARD OF EDUCATION - TOOMBS COUNTY SCHEDULE OF MANAGEMENT'S RESPONSES YEAR ENDED JUNE 30, 2006 Finding Control Number: FS-7931-06-01 We concur with this finding. At this time the Board is unable to hire additional staff and will establish procedures requiring review ofbank reconciliations by someone outside ofthe Accounting Department (most likely the Office Manager). Cash receipts will also be logged by someone outside of the Accounting Department. We plan to implement these compensating controls in fiscal year 2007. Finding Control Number: FS-7931-06-02 We concur with this finding. The City ofVidalia Board ofEducation has established procedures for bank reconciliations to be reviewed by someone from the Central Office. The cash receipts function will now require that two individuals will be made responsible for all deposits at the school level both will sign off on the receipt and one will take deposits to the bank. Periodic reviews will be done at the schools by a central office employee to make sure that supporting documentation is being properly provided for all revenue and that purchase orders are produced for all expenditures in a timely manner. These procedures will be established by fiscal year 2007. Finding Control Number: FS-7931-06-03 We concur with this finding. The City of Vidalia Board of Education will implement controls for access into the Financial Accounting System. These controls will be implemented in fiscal year 2008. Finding Control Number: FS-7931-06-04 We concur with this finding. The City of Vidalia Board of Education will in future years properly designate fund balances to reserves for Capital Projects as should have been done in current year. Contact Person: Norma D. Croft, Finance Director Phone: (912) 537-3088 Fax Number (912) 538-0938 E-mail Address: ncroft@vidalia-city.kl2.ga.us