Bulloch County Board of Education, Statesboro, Georgia, report on audit of the financial statements for the fiscal year ended June 30, 2007

BULLOCH COUNTY BOARD OF EDUCATION STATESBORO, 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

BULLOCH COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS -

SECTION I

FINANCIAL

INDEPENDENT AUDITOR'S COMBINED REPORT ON BASIC FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION - SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS

REQUIRED SUPPLEMENTARY INFORMATION

MANAGEMENT'S DISCUSSION AND ANALYSIS

EXHIBITS

BASIC FINANCIAL STATEMENTS

DISTRICT-WIDE FINANCIAL STATEMENTS

A

STATEMENT OF NET ASSETS

I

B

STATEMENT OF ACTIVITIES

2

FUND FINANCIAL STATEMENTS

C

BALANCE SHEET

GOVERNMENTAL FUNDS

4

D

RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET

TO THE STATEMENT OF NET ASSETS

5

E

STATEMENT OF REVENUES, EXPENDITURES AND CHANGES

IN FUND BALANCES

GOVERNMENTAL FUNDS

6

F

RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT

OF REVENUES, EXPENDITURES AND CHANGES IN FUND

BALANCES TO THE STATEMENT OF ACTIVITIES

7

G

STATEMENT OF FIDUCIARY NET ASSETS

FIDUCIARY FUNDS

9

H

NOTES TO THE BASIC FINANCIAL STATEMENTS

IO

SCHEDULES

REQUIRED SUPPLEMENTARY INFORMATION

1 SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES

IN FUND BALANCES - BUDGET AND ACTUAL

GENERAL FUND

25

BULLOCH COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS -

SECTION I

FINANCIAL

SCHEDULES

SUPPLEMENTARY INFORMATION

2 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS 3 SCHEDULE OF STATE REVENUE 4 SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS 5 ALLOTMENTS AND EXPENDITURES
GENERAL FUND - QUALITY BASIC EDUCATION PROGRAMS (QBE) BY PROGRAM

Page
26 28 30 31

SECTION II
COMPLIANCE AND INTERNAL CONTROL REPORTS
REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS
REPORT ON COMPLIANCE WITH REQUIREMENTS APPLICABLE TO EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH 0MB CIRCULAR A-133

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

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

BULLOCH COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS -
SECTIONV MANAGEMENT'S RESPONSES SCHEDULE OF MANAGEMENT'S RESPONSES

SECTION I FINANCIAL

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

DEPARTMENT OF AUDITS AND ACCOUNTS
270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400
August 29, 2008

Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the Bulloch County Board of Education
INDEPENDENT AUDITOR'S COMBINED REPORT ON BASIC FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION - SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
Ladies and Gentlemen:
We have audited the accompanying financial statements ofthe governmental activities, each major fund, and the aggregate remaining fund information (Exhibits A through H) of the Bulloch County 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 Bulloch County Board ofEducation's management. Our responsibility is to express opinions on these financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United States ofAmerica and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General ofthe United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free 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 Bulloch County 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-l 1

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 Bulloch County 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.
In accordance with Government Auditing Standards, we have also issued our report dated August 29, 2008, on our consideration ofthe Bulloch County 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 of that 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.
Management's Discussion and Analysis and the Schedule ofRevenues, Expenditures and Changes in Fund Balances - Budget and Actual, as presented on pages i through viii and page 25 respectively, are not a required part ofthe basic financial statements but are 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 Bulloch County Board of Education's basic financial statements. The accompanying supplementary information which consist of Schedules 2 through 5, which includes the Schedule of Expenditures of Federal Awards as required by U.S. Office of Management and Budget Circular A-133, Audits ofStates, Local Governments, and Non-Profit Organizations, are presented for purposes of additional analysis and are not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements, and in our opinion, is fairly stated, in all material respects, in relation to the basic financial statements taken as a whole.
A copy of this report has been filed as a permanent record in the office of the State Auditor and made available to the press of the State, as provided for by Official Code of Georgia Annotated section 50-6-24.
Respectfully submitted,

RWH:as 2007ARL-11

Ru ell W. Hinton, CPA, CGFM State Auditor

BULLOCH COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2007
INTRODUCTION
Our discussion and analysis of the Bulloch County School District's financial performance provides an overview of the School District's financial activities for the fiscal year ended June 30, 2007. The intent of this discussion and analysis is to look at the School District's financial performance as a whole; readers should also review the notes to the basic financial statements and financial statements to enhance their understanding of the School District's financial performance.
FINANCIAL HIGHLIGHTS
Key financial highlights for 2007 are as follows:
On the District-wide financial statements, the assets of the School District exceeded liabilities by $92.7 million. Of this amount, $17.1 million is unrestricted and is available for spending at the School District's discretion.
The School District had $80.4 million in expenses relating to governmental activities; only $54.3 million of these expenses are offset by program specific charges for services, grants and contributions. General revenues (primarily property and sales taxes) of $42.2 million and fund balance were adequate to provide for these programs.
As stated above, general revenues accounted for $42.2 million, or 44%, of all revenues totaling $96.5 million. Program specific revenues in the form of charges for services, grants and contributions accounted for the rest.
OVERVIEW OF THE FINANCIAL STATEMENTS
This report consists of several parts including management's discussion and analysis, the basic financial statements and required supplementary information. The basic financial statements include two levels of statements that present different views of the School District. These include the District-wide andfundfinancial statements.
The District-wide financial statements include the Statement of Net Assets and Statement of Activities. These statements provide information about the activities of the School District presenting both short-term and long-term information about the School District's overall financial status.
The fund financial statements focus on individual parts of the School District, reporting the School District's operation in more detail. The Governmental Funds statements disclose how basic services are financed in the short-term as well as what remains for future spending. The Fiduciary Funds statement provides information about the financial relationships in which the School District acts solely as a trustee or agent for the benefit of others. The fund financial statements reflect the School District's most significant funds. In the case of the Bulloch County School District, the General Fund, District-wide Capital Projects Funds, and Debt Service Funds are the most significant funds.
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BULLOCH COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2007
The financial statements also include notes that explain some of the information in the statements and provide more detailed data. The statements are followed by a section of required supplementary information that further explains and supports the financial statements. Additionally, other supplementary information (not required) is also presented that further supplements understanding of the financial statements.
District-wide Statements
The District-wide financial statements are basically a consolidation of all of the School District's operating funds into one column called governmental activities. In reviewing the District-wide financial statements, a reader might ask the question about whether the School District is in a better financial position than last year? The Statement of Net Assets and the Statement of Activities provides the basis for answering this question. These financial statements include all School District's assets and liabilities and uses the accrual basis of accounting similar to the accounting used by most private-sector companies. This basis of accounting takes into account all of the current year's revenues and expenses regardless of when cash is received or paid.
These two statements report the School District's net assets and any changes in those assets. The change in net assets is important because it tells the reader that, for the School District as a whole, the financial position of the School District has improved or diminished. The causes of this change may be the results of many factors, including those not under the School District's control, such as the property tax base, facility conditions, required educational programs and other factors.
The Statement of Net Assets and the Statement of Activities reflects the School District's governmental activities.
Fund Financial Statements
The School District uses many funds to account for a multitude of financial transactions during the fiscal year. However, the fund financial statements presented in this report provide detail information about only the School District's significant or major funds.
Governmental Funds
Most of the School District's activities are reported in governmental funds, which focus on how money flows into and out of those funds and the balances left at year-end available for spending in future periods. These funds are reported using the modified accrual method of accounting which measures cash and all other financial assets that can readily be converted to cash. The governmental fund statements provide a detailed short-term view of the School District's general government operations and the basic services it provides. Governmental fund information helps determine whether there are more or fewer financial resources that can be spent in the near future to finance educational programs. The differences between governmental activities (reported in the Statement of Net Assets and the Statement of Activities) and governmental funds are reconciled within the financial statements.
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BULLOCH COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2007

Fiduciary Funds

The School District is the trustee, or fiduciary, for assets that belong to others, such as school clubs and organizations within the principals' accounts. The School District is responsible for ensuring that the assets reported in these funds are used only for their intended purposes and by those to whom the assets belong. The School District excludes these activities from the Districtwide financial statements because it cannot use these assets to finance its operations.

FINANCIAL ANALYSIS OF THE SCHOOL DISTRICT AS A WHOLE

Table 1, Statement of Net Assets, provides the perspective of the School District as whole. Table 2 shows the Changes in Net Assets for the year.

Table 1 Net Assets

Governmental Activities

Fiscal

Fiscal

Net

Year 2007 Year 2006

Change

Assets Current and Other Assets Capital Assets, Net

$ 44,756,714 $ 59,062,774 $ -14,306,060 88,283,393 63,378,627 24,904,766

Total Assets

$133,040,107 $122,441,401 $ 10,598,706

Liabilities Current and Other Liabilities Long-Term Liabilities
Total Liabilities

$ 11,849,583 $ 8,569,312 $ 3,280,271 28,525,000 37,255,000 -8,730,000
$ 40,374,583 $ 45,824,312 $ -5,449,729

Net Assets Invested in Capital Assets, Net of Related Debt Restricted Unrestricted
Total Net Assets

$ 62,038,351 $ 54,545,559 $ 7,492,792

13,566,847 10,337,788

3,229,059

17,060,326 11,733,742

5,326,584

$ 92,665,524 $ 76,617,082 $ 16,048,435

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BULLOCH COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2007

Table 2 Change in Net Assets

Revenues Program Revenues: Charges for Services and Sales Operating Grants and Contributions Capital Grants and Contributions

Governmental Activities

Fiscal

Fiscal

Net

Year 2007

Year 2006

Change

$ 1,758,534 $ 1,359,881 $ 398,653

52,135,144 49,061,129 3,074,015

391,187

1,762,683 -1,371,496

Total Program Revenues

$ 54,284.865 $ 52,183,693 $2,101,172

General Revenues:

Taxes

Property Taxes

For Maintenance and Operations

$ 12,915,277

For Debt Services

1,886,439

Railroad Cars

6,721

Sales Taxes

Special Purpose Local Option Sales Tax

For Maintenance and Operations

10,355,984

For Debt Services

10,340,148

Intangible Recording Tax

Real Estate

Other Taxes

677,106

Grants and Contributions not Restricted

to Specific Programs

2,189,499

Investment Earnings

1,678,615

Miscellaneous

2,156,490

$ 12,280,927 $ 634,350

1,769,937 116,502

5,695

1,026

9,948,677 9,946,307
379,158 146,446
1,697,984 1,338,010 1,314.251

407,307 393,841 -379,158 -146,446 677,106
491,515 340,605 842,239

Total General Revenues

$ 42,206,279 $ 38,827.392 $3,378.887

Total Revenues

$ 96,491,144 $ 91,011,085 $5,480.059

Program Expenses Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Operations of Non-Instructional Services Enterprise Operations Food Services
Interest on Short-Term and Long-Term Debt

$ 51,756,985
3,017,742 1,578,740 1,420,950
700,215 4,733,749
471,414 5,445,608 3,861,888
789,579 570,738
400,933 4,517,784 1,176.384

$ 48,408,203 $ 3,348,782

2,891,724 1,203,867 1,389,791
745,579 4,331,849
336,031 5,322,827 3,730,828
719,418 562,625

126,018 374,873
31,159 -45,364 401,900 135,383 122,781 131,060 70,161
8,113

0 4,257,170 1,417,019

400,933 260,614 -240,635

Total Expenses

$ 80,442.709 $ 75.316,931 $5,125.778

Increase in Net Assets

$ 16,048,435 $ 15,624,154 $ 354,281

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BULLOCH COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2007

Governmental Activities

The Statement of Activities shows the cost of program services and the charges for services and grants offsetting these services. Table 3 shows, for governmental activities, the total cost of services and the net cost of services. It identifies the cost of these services supported by tax revenue and unrestricted State entitlements.

Table 3 Governmental Activities

Total Cost of Services Fiscal Year 2007

Net Cost of Services Fiscal Year 2007

Instruction Support Services
Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Operations of Non-Instructional Services Enterprise Operations Food Services Interest on Short-Term and Long-Term Debt

$51,756,985 $13,745,287

3,017,742 1,578,740 1,420,950
700,215 4,733,749
471,414 5,445,608 3,861,888
789,579 570,738

2,084,356 1,130,032
350,538 -710,823 2,220,438 463,398 2,699,651 1,968,674 777,307 300,952

400,933 4,517,784 1,176,384

-101,740 53,390
1,176,384

Total Expenses

$80A42,709 $26,157,844

FINANCIAL ANALYSIS OF THE SCHOOL DISTRICT'S FUNDS

The School District's governmental funds are accounted for using the modified accrual basis of accounting. The governmental funds had total revenues of $96.8 million and total expenditures of $114.1 million. The excess of expenditures over revenues was the result of capital outlay expenditures which were offset by fund balance. These revenues were collected in fiscal year 2004 from the sale of the 2004 Series General Obligation Bonds.

General Fund Budgeting Highlights

The School District's budget is prepared according to Georgia Law. The most significant budgeted fund is the General Fund, which includes local, state and Federal funds collected and disbursed for the purpose of operating the school system.

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BULLOCH COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2007

The School District's budget is based on its strategic plan and incorporates site-based budgeting into the budget process to control total site budgets but provide flexibility for site management.

For the General Fund, the actual revenues of $83.6 million were over the final budgeted amount of $77.3 million by $6.3 million. This difference (actual vs. final budget) was due to property and sales tax collections, state funding formula collections, service charge collections, and interest income collections in excess of budgeted amounts, the occurrence of pass-through grants and stipends, as well as the inclusion of the principals' accounts in the financial statements but not in the budget.

The actual expenditures of $78.0 million were more than the final budgeted amount of $77.2 million by $0.8 million. This difference was due primarily to the occurrence of pass-through grants and stipends, which had not been budgeted, and the inclusion of the principal's accounts in the financial statement but not in the budget.

General Fund revenues exceeded expenditures by $5.6 million.

CAPITAL ASSETS AND DEBT ADMINISTRATION

Capital Assets

At fiscal year ended June 30, 2007, the School District had $88.3 million invested in capital assets, all in governmental activities. Table 4 reflects a summary of these balances net of accumulated depreciation. The School District has developed a facilities plan to construct and improve three high schools and three elementary schools, as well as necessary additions and improvements to facilities, including technology infrastructure. These capital expenditures will be funded by combined Education Special Purpose Local Option Sales Tax (ESPLOST) revenues, General Obligation Bond proceeds, and state capital outlay funding. In September, 2005, the voters of Bulloch County approved early re-imposition of the Education Special Purpose Local Option Sales Tax, to be collected between January 1, 2009 and December 31, 2013, to provide additional resources to complete this facilities plan.

Land Construction in Progress Land Improvements Buildings and Improvements Equipment
Total

Table 4 Capital Assets at June 30
(Net of Depreciation)

Governmental Activities

Fiscal

Fiscal

Net

Year 2007

Year 2006

Change

$ 2,705,133 36,864,886
289,512 45,700,972
2,722,890

$ 2,571,985 $ 133,148

11,078,010 25,786,876

320,883

-31,371

46,858,805 -1,157,833

2,548,944

173,946

$88,283.393 $63.378.627 $24,904,766

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BULLOCH COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2007

Debt

In September, 2003, voters approved a 1% Education Special Purpose Local Option Sales Tax (ESPLOST) in conjunction with a $38 million General Obligation Bond issuance, for the purpose of building new schools. The ESPLOST, collected between January 1, 2005 and December 31, 2008, will be used to retire the bonds. In addition, in September, 2005, the voters approved an early re-imposition of the ESPLOST, to be collected between January 1, 2009, and December 31, 2013. General Obligation Bonds were approved in conjunction with the second ESPLOST but these bonds have not been issued. In January, 2005, the Bulloch County Board of Education issued $12.835 million in General Obligation Refunding Bonds to advance refund $12.295 million of outstanding General Obligation Bonds, resulting in the present value economic gain of over one-half million dollars due to interest cost reduction. At fiscal year ended June 30, 2007, the School District had $28.525 million in bonds outstanding, but no other long-term debt.

Table 5 Debt at June 30

Governmental Activities

Fiscal

Fiscal

Net

Year 2007

Year 2006

Change

Bonds Payable

$28,525.000 $37,255.000 $ -8.730.000

At June 30, 2007, the School District's assigned bond rating was "AA+" as determined by Standard and Poors.

CURRENT ISSUES

Following is a list of currently known facts, decisions or conditions that are expected to have a significant effect on financial positions or results of operations.

Economic Recovery - State funding for education decreased between fiscal year 2001 and fiscal year 2004. However, beginning in fiscal year 2005, signs of economic recovery surfaced at the state and local levels, resulting in the proposed increases in funding from the state to local school districts. Actual allocations for fiscal year 2008 included a continued incremental restoration of the state's "Austerity Reduction" in conjunction with the full implementation of class size guidelines outlined in HB 1187. Additional adjustments to the state funding formula are not expected in fiscal year 2009, but the Bulloch County School System does expect funding increases associated with increased student enrollment. Current economic conditions at the national and state level warrant concern for special program funding but Bulloch County's local economy has remained strong, resulting in stable sales tax and property tax collections.

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BULLOCH COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2007
In December, 2007, the School District issued $44.245 million in General Obligation Bonds, associated with the September, 2005 Education Special Purpose Local Option Sales Tax (ESPLOST) approval. In September, 2005 (fiscal year 2006), voters approved early re-imposition of the ESPLOST, to be collected between January 1, 2009 and December 31, 2013, for the purpose of providing the necessary funding to implement the school system's facilities plan.
CONTACTING THE SCHOOL DISTRICT'S FINANCIAL MANAGEMENT This financial report is designed to provide our citizens, taxpayers, investors and creditors with a general overview of the School District's finances and to show the School District's accountability for the money it receives. If you have questions about this report or need additional financial information contact Mr. Charles Wilson, Assistant Superintendent for Business and Finance for the Bulloch County School System, 150 Williams Road, Suite A, Statesboro, Georgia 30458. You may also email your questions to Mr. Wilson at cwilson@bulloch.k12.ga. us.
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BULLOCH COUNTY BOARD OF EDUCATION

BULLOCH COUNTY BOARD OF EDUCATION STATEMENT OF NET ASSETS JUNE 30, 2007
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 Contracts 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-

EXHIBIT"A"

GOVERNMENTAL ACTIVITIES

$

34,502,406.33

104,313.63

3,969,065.47 5,670,229.57
253,582.16 25,000.00
232,116.87

2,705,132.92 36,864,885.93
1,070,451.00 60,811,774.00 11,069,640.44 -24,238,491.74

$ 133,040,106.58

$

902.86

8,494,312.69

1,699,144.74

1,655,222.23

8,930,000.00 19,595,000.00

$

40,374,582.52

$

62,038,350.66

891,005.31 10,680,235.35
1,995,607.15 17,060,325.59

$

92,665,524.06

$ 133,040,106.58

BULLOCH COUNTY BOARD OF EDUCATION 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 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 Railroad Cars Sales Taxes Local Option Sales Tax For Maintenance and Operations Special Purpose Local Option Sales Tax For Debt Services Other Taxes Grants and Contributions not Restricted to Specific Programs Investment Earnings Miscellaneous
Total General Revenues
Change in Net Assets
Net Assets - Beginning of Year
Net Assets - End of Year

EXPENSES

CHARGES FOR SERVICES

$ 51,756,985.48 $

7,294.25

3,017,741.85 1,578,740.02 1,420,949.82
700,214.75 4,733,748.88
471,413.53 5,445,607.93 3,861,887.94
789,579.37 570,738.40

400,933.47 4,517,783.76 1,176,383.76

502,674.04 1,248,565.88

$ 80,442,708.96 $ 1 758 534.17

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

$ 38,004,404.62
933,385.42 448,707.64 1,070,412.22 1,411,038.11 2,513,310.58
8,015.24 2,745,956.90 1,502,026.94 $
12,272.23 269,786.03
3,215,827.98
$ 52,135,143.91 $

$ 391,187.00 391 187.00 $

-13,745,286.61
-2,084,356.43 -1,130,032.38
-350,537.60 710,823.36 -2,220,438.30 -463,398.29 -2,699,651.03 -1,968,674.00 -777,307.14 -300,952.37
101,740.57 -53,389.90 -1 176 383.76
-26, 157,843.88

$

12,915,276.52

1,886,439.10

6,721.40

10,355,984.12

10,340,147.48 677,106.44
2,189,499.00 1,678,614.88 2,156,489.55

$

42,206,278.49

$

16,048,434.61

76 617 089.45

$ ====9=2=,6=65='==52==4==.0===6

-3-

BULLOCH COUNTY BOARD OF EDUCATION BALANCE SHEET
GOVERNMENTAL FUNDS JUNE 30, 2007

EXHIBIT "C"

GENERAL FUND

DISTRICTWIDE
CAPITAL PROJECTS
FUND

DEBT SERVICE
FUND

TOTAL

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

$ 12,778,683.50 $ 12,819,393.10 $ 8,904,329.73 $

102,946.89

1,366.74

2,242,388.00 5,670,229.57
253,582.16 25,000.00
232,116.87

1,771,838.72

34,502,406.33 104,313.63
4,014,226.72 5,670,229.57
253,582.16 25,000.00
232,116.87

Total Assets

$ 21,304,946.99 $ 12,819,393.10 $ 10,677,535.19 $====4~4,!,;;;8~01;,.;,8;;,;,7~5,;::28~

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

$

902.86

$

8,494,312.69

$ 1,699,144.74

1,655,222.23

$ 8,495,215.55 $ 3,354,366.97

$

$

658,888.44

$

$ 10,677,535.19

232,116.87

$ 4,275,565.26

517,623.51

11,401,102.62

5,189,460.87

$ 12,809,731.44 $ 9,465,026.13 $ 10,677,535.19 $

902.86 8,494,312.69 1,699,144.74 1,655,222.23
11,849,582.52
658,888.44 10,677,535.19
232,116.87 4,275,565.26
517,623.51
11,401,102.62 5,189,460.87
32,952,292.76

Total Liabilities and Fund Balances

$ 21,304,946.99 $ 12,819,393.10 $ 10,677,535.19 $==4;,,,;,4;,8~01~,8;;;7=5,;,;;,2~8

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

BULLOCH COUNTY BOARD OF EDUCATION 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.
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.
Net Assets of Governmental Activities (Exhibit "A")

$ 32,952,292.76

$ 2,705,132.92 36,864,885.93 1,070,451.00 60,811,774.00 11,069,640.44 -24,238,491.74

88,283,392.55

-45,161.25 -28,525,000.00

$ 92,665,524.06

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

BULLOCH COUNTY BOARD OF EDUCATION 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 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
Fund Balances - Ending

GENERAL FUND

DISTRICTWIDE
CAPITAL PROJECTS
FUND

DEBT SERVICE
FUND

TOTAL

$ 13,160,079.32 10,978,458.87 45,595,139.77 9,120,690.14 1,758,534.17 819,850.49 $ 2,176,373.12
$ 83,609,125.88 $

$ 1,934,060.22 $ 10,394,779.17

404,793.15

453,971.24

15,094,139.54 21,373,238.04 45,595,139.77
9,120,690.14 1,758,534.17 1,678,614.88 2,176,373.12

404,793.15 $ 12,782,810.63 $ 96,796,729.66

$ 50,532,263.17

$ 50,532,263.17

3,017,741.85 1,585,030.02 1,353,238.19
736,646.04 4,691,047.75
485,509.88 5,465,953.15 $ 4,113,683.36
816,499.06 492,369.34 400,933.47 4,351,408.27

$ 200.00
26,141,773.61

6,677.16

3,017,741.85 1,585,030.02 1,353,238.19
736,646.04 4,691,047.75
492,187.04 5,466,153.15 4,113,683.36
816,499.06 492,369.34 400,933.47 4,351,408.27 26,141,773.61

8,730,000.00 1,176,383.76

8,730,000.00 1,176,383.76

$ 78,042,323.55 $ 26,141,973.61 $ 9,913,060.92 $ 114,097,358.08

$ 5,566,802.33 $ -25, 737,180.46 $ 2,869,749.71 $ -17,300,628.42

$ 5,189,460.87 $ -5, 189,460.87

$ 5,189,460.87 -5, 189,460.87

$ -5, 189,460.87 $ 5,189,460.87

$

0.00

$ 377,341.46 $ -20,547,719.59 $ 2,869,749.71 $ -17,300,628.42

12,432,389.98

30,012,745.72

7,807,785.48

50,252,921.18

$ 12,809,731.44 $ 9,465,026.13 $ 10,677,535.19 $ 32,952,292.76

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

BULLOCH COUNTY BOARD OF EDUCATION RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT OF
REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES TO THE STATEMENT OF ACTIVITIES JUNE 30, 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.
In the Statement of Activities, only the gain on the sale of the equipment and land is reported, whereas in the Governmental Funds, the entire proceeds from the sale increase financial resources. Thus, the change in net assets differs from the change in fund balances by the cost of the land and the carrying value of the equipment sold.
Repayment of Long-Term Debt is reported as an expenditure in Governmental Funds, but the repayment reduces Long-Term Liabilities in the Statement of Net Assets. In the current year, this amount consists of Bond Principal Retirements.
Change in Net Assets of Governmental Activities {Exhibit "B")

$ -17,300,628.42

$ 26,699,175.29 -1,774,526.17

24,924,649.12

-285,702.52

-19,883.57 8,730,000.00 $ 16,048,434.61

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

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BULLOCH COUNTY BOARD OF EDUCATION STATEMENT OF FIDUCIARY NET ASSETS FIDUCIARY FUNDS JUNE 30, 2007
ASSETS Cash and Cash Equivalents Accounts Receivable
Total Assets
LIABILITIES Funds Held for Others

EXHIBIT "G"
AGENCY FUNDS
$ 307,442.03 748.85
$ 308,190.88
$ 308,190.88

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

BULLOCH COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2007

EXHIBIT"H"

Note 1: DESCRIPTION OF SCHOOL DISTRICT AND REPORTING ENTITY
REPORTING ENTITY
The Bulloch County 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. Its budget is not subject to approval by any other entity. Accordingly, the School District is a primary government and consists of all the organizations that compose its legal entity.
Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The School District's basic financial statements are collectively comprised of the District-wide financial statements, fund financial statements and notes to the basic financial statements of the Bulloch County Board of Education.
District-wide Statements: The Statement ofNet Assets and the Statement ofActivities display information about the financial activities ofthe overall School District, except for fiduciary activities. Eliminations have been made to minimize the double counting of internal activities. Governmental activities generally are financed through taxes, intergovernmental revenues, and other nonexchange transactions.
The Statement of Activities presents a comparison between direct expenses and program revenues for each function of the School District's governmental activities.
Direct expenses are those that are specifically associated with a program or function and, therefore, are clearly identifiable to a particular function. Indirect expenses (expenses of the School District related to the administration and support ofthe School District's programs, such as office and maintenance personnel and accounting) are not allocated to programs.
Program revenues include (a) charges paid by the recipients ofgoods or services offered by the programs and (b) grants and contributions that are restricted to meeting the operational or capital requirements of a particular program. Revenues that are not classified as program revenues, including all taxes, are presented as general revenues.
Fund Financial Statements: The fund financial statements provide information about the School District's funds, including fiduciary funds. Eliminations have been made to minimize the double counting ofinternal activities. Separate statements for each category (governmental and fiduciary) are presented. The emphasis of fund financial statements is on major governmental funds, each displayed in a separate column.
The School District reports the following major governmental funds:
- 10 -

BULLOCH COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2007

EXHIBIT "H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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 Bond Proceeds to be used for the acquisition, construction or renovation of major 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 ofwhen the related cash flows take place. Nonexchange transactions, in which the School District gives (or receives) value without directly receiving (or giving) equal value in exchange, include property taxes, sales taxes, grants and donations. On an accrual basis, revenue from property taxes is recognized in the fiscal year for which the taxes are levied. Revenue from sales taxes is recognized in the fiscal year in which the underlying transaction (sale) takes place. Revenue from grants and donations is recognized in the fiscal year in which all eligibility requirements have been satisfied.
The School District uses funds to report on its financial position and the results of its operations. Fund accounting is designed to demonstrate legal compliance and to aid financial management by segregating transactions related to certain governmental functions or activities. A fund is a separate accounting entity with a self-balancing set of accounts.
Governmental funds are reported using the current financial resources measurement focus and the modified accrual basis ofaccounting. Under this method, revenues are recognized when measurable and available. The School District considers all revenues reported in the governmental funds to be available if they are collected within sixty days after year-end. Property taxes, sales taxes and interest are considered to be susceptible to accrual. Expenditures are recorded when the related fund liability is incurred, except for principal and interest on general long-term debt, which are recognized as expenditures to the extent they have matured. Capital asset acquisitions are reported as expenditures in governmental funds. Proceeds ofgeneral long-term liabilities are reported as other financing sources.
- 11 -

BULLOCH COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2007

EXHIBIT "H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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,
(6) The Local Government Investment Pool administered by the State of Georgia, Office of Treasury and Fiscal Services,
(7) Repurchase agreements, and

- 12 -

BULLOCH COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2007

EXHIBIT"H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(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 Bulloch County Board ofCommissioners fixed the property tax levy for the 2006 tax digest year (calendar year) on August l, 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 Bulloch County Tax Commissioner bills and collects the property taxes for the School District, withholds 2.5% oftaxes collected as a fee for tax collection and remits the balance oftaxes 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 $13,153,357.92 and for school bonds amounted to $1,934,060.22.

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

School Operations School Bonds

9.45 mills 0.84 mills
10.29 mills

SALES TAXES

Local Option Sales Tax revenue, at the fund reporting level, during the fiscal year amounted to $10,355,984.12 and was recorded in the General Fund. Local Option Sales Tax is to be used for the maintenance and operation of the School District.

Special Purpose Local Option Sales Tax, at the fund reporting level, during the year amounted to $10,340,147.48 and is to be used for capital outlay for educational purposes or debt service. This sales tax was authorized by local referendum and the sales tax must be re-authorized at least every five years.
- 13 -

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

CAPITAL ASSETS

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

Any Amount $ 5,000.00 $ 5,000.00 $ 5,000.00

NIA 60 years 60 years 5 to 12 years

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

- 14 -

BULLOCH COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2007

EXHIBIT "H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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 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. At June 30, $36,063.73 ofdeposits were not secured by surety bond, insurance or collateral as specified above. The School District is working with the affected financial institutions to ensure appropriate levels of collateral are maintained for all of the School District's deposits.
Acceptable security for deposits consists of any one of or any combination of the following:
- 15 -

BULLOCH COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2007

EXHIBIT "H"

Note 3: DEPOSITS AND INVESTMENTS

(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, 2007, the bank balances were $40,356,660.62. The amounts ofthe 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 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

$ 36,063.73

2

606,300.05

3

39,302,833.34

Total

$39,945,197.12

- 16 -

BULLOCH COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2007

EXHIBIT "H"

Note 3: DEPOSITS AND INVESTMENTS
CATEGORIZATION OF INVESTMENTS At June 30, 2007, the carrying value ofthe School District's total investments was $2,846.04, which is materially the same as fair value. This investment consisted entirely of funds invested in the Local Government Investment Pool administered by the State of Georgia, Office of Treasury and Fiscal Services which are not required to be categorized since the School District did not own any specific identifiable securities in the pool. The investment policy ofthe State of Georgia, Office ofTreasury 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 ofAudits and Accounts at http://www.audits.state. ga.us/internet/searchRpts.html.
The Primary Liquidity Portfolio consists of Georgia 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.
Note 4: NON-MONETARY TRANSACTIONS
The School District receives food commodities from the United States Department of Agriculture (USDA) for school breakfast and lunch programs. These commodities are recorded at their Federally assigned value. See Note 2 - Inventories
Note 5: CAPITAL ASSETS
The following is a summary of changes in the Capital Assets during the fiscal year:

- 17 -

BULLOCH COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2007

EXHIBIT "H"

Note 5: CAPITAL ASSETS
Governmental Activities Capital Assets, Not Being Depreciated:
Land Construction in Progress
Total Capital Assets Not Being Depreciated
Capital Assets Being Depreciated Buildings and Improvements Equipment Land Improvements
Less Accumulated Depreciation for: Buildings and Improvements Equipment Land Improvements
Total Capital Assets, Being Depreciated, Net
Governmental Activity Capital Assets - Net

Balances July 1, 2006

Increases

Decreases

Balances June 30, 2007

$ 2,571,985.00 $ 141,147.92 $ 11,078,010.00 25,786,875.93
$ 13,649,995.00 $ 25,928,023.85 $

8,000.00 $ 2,705,132.92 36,864,885.93
8,000.00 $39,570,018.85

$60,811,774.00 10,353,511.00 $ 1,070,451.00

771,151.44 $

$60,811,774.00 55,022.00 11,069,640.44
1,070,451.00

13,952,969.00 7,804,567.00
749,568.00

1,157,833.15 585,322.19 31,370.83

$49,728,632.00 $ -1,003,374.73 $

$ 63,378,621.QQ $24,224,642.12 $

43,138.43

15,110,802.15 8,346,750.76
780,938.83

11,883.57 $48,713,373.70

12,883.51 $ 88,283,322.55

Current year depreciation expense by function is as follows:

Instruction Support 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

$ 1,007,873.11

$ 57,649.29 18,536.05 38,934.01 705.00
104,921.25 342,084.21
1,871.61 67.270.42

631,971.84 134.681.22

$ 1,774,526.17

Note 6: RESTRICTED ASSETS

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

- 18 -

BULLOCH COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2007

EXHIBIT"H"

Note 6: RESTRICTED ASSETS

District-wide Capital Projects Bond Proceeds

Debt Service Funds

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

$ 8,904,329.73 $ 7,629,932.23

$

1,366.74

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

$ 5,189,460.87

Transfers are used to move property tax revenues collected by the General Fund to the District-wide Capital Projects Fund for various local capital outlay 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 ofloss associated with automobiles. The School District has neither significantly reduced coverage for this risk nor incurred losses (settlements) which exceeded the School District's insurance coverage in any ofthe past three years.

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 or property damage, including safety engineering and other loss prevention and control techniques, and to administer one or more groups ofself-insurance funds, including the processing and defense ofclaims brought against members of

- 19 -

BULLOCH COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2007

EXHIBIT"H"

Note 8: RISK MANAGEMENT

the 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 (including coverage for flood and earthquake), general liability (including coverage for sexual harassment, molestation and abuse), errors and omissions and crime. 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 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.

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

2006 2007

Beginning of Year Liability

Claims and Changes in Estimates

Claims Paid

End of Year Liability

$

8,569.00 $ 13,243.30 $ 15,527.94 $

6,284.36

$

6,284.36 $ 4,185.00 $

6,284.36 $

4,185.00

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 $500,000.00 loss per occurrence, up to $2,000,000.00.

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

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

-20-

BULLOCH COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2007

EXHIBIT"H"

Note 9: LONG-TERM DEBT

Purpose

Interest Rates

Amount

General Government - Series 2004

2.00% - 4.00% $ 15,920,000.00

General Government - Refunding - Series 2005 2.50% - 4.50%

12.605.000.00

$ 28,525,000.00

Voters have authorized $44,265,000.00 in general obligation debt for various construction projects which was not issued as of June 30, 2007.

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

Governmental Funds General
Obligation Bonds

Balance July 1, 2006

$ 37,255,000.00

Deductions Debt Retired

8. 730,000.00

Balance June 30, 2007

$ 28,525,000.00

Portion of Long-Term Debt Due within One Year

$ 8,930,000.00

At June 30, 2007, 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

2008 2009 2010 2011 2012 2013 - 2017

$ 8,930,000.00 $ 9,145,000.00 1,130,000.00 1,170,000.00 1,205,000.00 6,945,000.00

935,543.76 637,462.50 414,537.50 380,637.50 343,325.00 940,905.00

Total Principal and Interest

$ 28,525,000.00 $ 3,652,411.26

- 21 -

BULLOCH COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2007

EXHIBIT "H"

Note 10: PRIOR YEAR DEFEASEMENT OF DEBT

In fiscal year 2005, 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, none ofthese bonds are outstanding or considered defeased.

Note 11: ON-BEHALF PAYMENTS

The School District has recognized revenues and costs in the amount of $1,513,439.42 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 ofNon-Certified Personnel In the amount of $1,465,627.87

Paid to the Teachers Retirement System of Georgia For Teachers Retirement System (TRS) Employer's Cost In the amount of $36,191.55

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 l,620.00

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

SA0IS-616-302 Nevils Elementary School Statesboro High School Stadium Renovations Statesboro High School

$ 1,842,945.88 $ 854,211.63 131,182.90
36,109,649.90

299,447.40

$ 38!9371990.31 $ 299A47.40

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

- 22 -

BULLOCH COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2007

EXHIBIT "H"

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.

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 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.

TRS CONTRIBUTIONS REQUIRED AND MADE Employees ofthe School District who are covered by TRS are required by State statute to contribute 5% oftheir 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%

$ 4,049,323.54 $ 3,816,231.15 $ 3,617,467.00

- 23 -

(This page left intentionally blank)

BULLOCH COUNTY BOARD OF EDUCATION 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 Enterprise Operations Food Services Operation
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

NONAPPROPRIATED BUDGETS

ORIGINAL (1)

FINAL (1)

ACTUAL AMOUNTS

$ 12,606,843.00 $ 12,606,843.00 $ 13,160,079.32

10,078,886.00

10,078,886.00

10,978,458.87

42,927,357.63

43,091,892.60

45,595,139.77

8,348,274.15

9,430,815.31

9,120,690.14

1,242,604.00

1,242,604.00

1,758,534.17

425,365.00

425,365.00

819,850.49

343,607.25

383,754.25

2,176,373.12

$ 75,972,937.03 $ 77,260,160.16 $ 83,609,125.88

$ 49,364,546.97 $ 50,250,852.78 $ 50,532,263.17

3,335,274.59 954,862.47
1,394,752.14 724,181.59
4,464,548.64 448,337.52
5,550,588.43 4,002,052.77
697,261.62 441,038.52
4,323,201.76

3,352,729.93 1,340,570.13 1,384,646.14
715,672.55 4,483,821.09
448,337.52 5,624,310.44 4,125,877.61
721,798.26 475,949.24
4,323,201.76

3,017,741.85 1,585,030.02 1,353,238.19
736,646.04 4,691,047.75
485,509.88 5,465,953.15 4,113,683.36
816,499.06 492,369.34 400,933.47 4,351,408.27

$ 75,700,647.02 $ 77,247,767.45 $ 78,042,323.55

$

272,290.01 $

12,392.71 $ 5,566,802.33

$

459,912.00 $

459,912.00

-459,400.00

-459,400.00 $ -5, 189,460.87

$

512.00 $

512.00 $ -5, 189,460.87

$

272,802.01 $

12,904.71 $

377,341.46

10,648,923.26

10,648,923.26

12,432,389.98

Fund Balances - Ending

$ 10,921,725.27 $ 10,661,827.97 $ 12,809,731.44

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-

BULLOCH COUNTY BOARD OF EDUCATION 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 Direct Fund for the Improvement of Education Pass-Through From Georgia Department of Education English Language Acquisition Grants Enhancing Education Through Technology Program Hurricane Education Recovery Act Improving Teacher Quality State Grants Migrant Education Rural Education State Grants for Innovative Programs Title I Grants to Local Educational Agencies Twenty-First Century Community Learning Centers Vocational Education - Basic Grants to States
Total U.S. Department of Education
Justice, U. S. Department of Direct Drug-Free Communities Support Program Grants
Defense, U. S. Department of Direct Department of the Army R.O.T.C. Program
Total Federal Financial Assistance
N/A = Not Available

CFDA NUMBER

PASSTHROUGH
ENTITY ID
NUMBER

EXPENDITURES IN PERIOD

10.553 10.555

N/A

(2)

N/A $ 3,894,606.16

$ 3,894,606.16

10.550

NIA

294,356.72

$ 4,188,962.88

84.027 84.173

N/A $ 1,713,228.00

NIA

46,763.55

$ 1,759,991.55

84.215
84.365 84.318 84.938 84.367 84.011 84.358 84.298
. 84.010
. 84.287
84.048

43,501.84

N/A

20,286.11

N/A

24,215.97

N/A

(3)

N/A

497,556.50

N/A

51,899.00

N/A

249,450.63

N/A

4,713.58

N/A

2,404,045.33

N/A

743,882.52

N/A

114 624.00

$ 5,914,167.03

16.729

$

46,367.96

$

147,258.70

$ 10,296,756.57

- 26-

BULLOCH COUNTY BOARD OF EDUCATION SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
YEAR ENDED JUNE 30, 2007

SCHEDULE "2"

Notes to the Schedule of Expenditures of Federal Awards
(1) The amount shown for the Food Donation Program represents the Federally assigned value of nonmonetary assistance for donated commodities received and/or consumed by the School District during the current fiscal year.
(2) Expenditures for the funds earned on the School Breakfast Program ($779,888.76) 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 $3,493.00, 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 Bulloch County Board of Education and is presented on the modified accrual basis of accounting which is the basis of accounting used in the presentation of the fund financial statements.

See notes to the basic financial statements.

- 27 -

BULLOCH COUNTY BOARD OF EDUCATION SCHEDULE OF STATE REVENUE YEAR ENDED JUNE 30, 2007
AGENCY/FUNDING
GRANTS Bright From the Start: Georgia Department of Early Care and Learning Pre-Kindergarten Program
Education, Georgia Department of Quality Basic Education Direct Instructional Cost Kindergarten Program Kindergarten Program - Early Intervention Program Primary Grades (1-3) Program Primary Grades - Early Intervention (1-3) Program Upper Elementary Grades (4-5) Program Upper Elementary Grades - Early Intervention (4-5) Program Middle Grades (6-8) Program Middle School (6-8) Program High School General Education (9-12) Program Vocational Laboratory (9-12) Program Students with Disabilities Gifted Student - Category VI 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 Nursing Services Principal Supplements Migrant Education Vocational Supervisors Education Equalization Funding Grant Food Services Vocational Education Amended Formula Adjustment Other State Programs Comprehensive Academic Performance System Health Insurance High Performing Principals Middle School Remediation and Intervention Grant National Teacher Certification Preschool Handicapped Program Pupil Transportation - State Bonds Statewide K-8 Reading and Mathematics Program Teachers' Retirement Virtual Schools Grant Vocational Construction Related Equipment - State Bonds
Office of Treasury and Fiscal Services Public School Employees Retirement
- 28-

SCHEDULE "3"

GOVERNMENTAL FUND TYPE GENERAL FUND

$

979,513.90

2,907,630.00 432,085.00
5,941,524.00 1,204,115.00 2,548,121.00 1,026,833.00
472,430.00 4,661,574.00 4,601,436.00 1,750,895.00 5,306,916.00
549,389.00 427,670.00 311,679.00 883,967.00 281,475.00 168,575.00
985,085.00 1,944,299.00 2,219,462.00
1,365,458.00 141,187.00 163,421.00 29,610.00 2,519.00 37,717.00
2,189,499.00 215,232.00 132,523.19 -831,295.00
186,891.00 1,465,627.87
15,000.00 1,506.02
168,577.00 160,423.00 250,000.00 120,562.68
36,191.55 100.00
80,094.40
11,620.00

BULLOCH COUNTY BOARD OF EDUCATION SCHEDULE OF STATE REVENUE YEAR ENDED JUNE 30, 2007
AGENCY/FUNDING CONTRACT Human Resources, Georgia Department of Family Connection

SCHEDULE "3"

GOVERNMENTAL FUND TYPE GENERAL FUND

$ _ _ _4_8~0~0_1_.1_6

$

45 595 139.77

See notes to the basic financial statements.

- 29 -

BULLOCH COUNTY BOARD OF EDUCATION SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS
YEAR ENDED JUNE 30, 2007

SCHEDULE "4"

PROJECT
For the purpose of acquiring, constructing, and equipping new facilities for Portal High School and Middle School, Southeast Bulloch High School, Statesboro High School, and Nevils Elementary School; relocation of William James Middle School to the existing Statesboro High School and the renovation and equipping of the facilities for use as a middle school; a new central auditorium on the campus of the new Statesboro High School to be used by all Bulloch County students; and site improvements, improvements to facilities, and technology upgrades throughout the Bulloch County School System.

ORIGINAL ESTIMATED
COST (1)

CURRENT ESTIMATED COSTS (2)

AMOUNT EXPENDED IN CURRENT
YEAR (3)

AMOUNT EXPENDED
IN PRIOR YEARS (3)

PROJECT STATUS

$ 49,800,000.00 $ 69,788,031.29 $ 22,613,690.67 $ 14,237,949.00 Ongoing

(1) The School District's original cost estimate as specified in the resolution calling for the imposition of the Local Option Sales Tax.
(2) The School District's current estimate of total cost for the project. Includes all cost from project inception to completion.
(3) The voters of Bulloch County approved the imposition of a 1% sales tax to fund the above project and retire associated debt. Amounts expended for this project may include sales tax proceeds, state, local property taxes and/or other funds over the life of the project.

See notes to the basic financial statements.

- 30 -

BULLOCH COUNTY BOARD OF EDUCATION 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 Grades (6-8) 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 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

$

3,335,641.00 $ 2,321,527.83 $

99,282.96 $ 2,420,810.79

535,481.00

614,913.34

11,294.52

626,207.86

6,826,477.00

7,981,664.72

241,974.35

8,223,639.07

1,444,605.00

1,346,144.22

32,562.88

1,378,707.10

2,949,133.00

3,839,709.93

100,005.57

3,939,715.50

1,208,653.00 545,676.00
5,458,447.00 5,356,118.00 2,006,756.00 6,178,864.00
631,049.00 496,763.00 351 862.00

693,053.73
6,460,296.10 6,930,789.00 1,626,408.55
173,415.21 809,519.17 3,419,702.55 643,610.12 237,867.27 746,913.48 253,206.12 263 557.43

22,118.22
434,105.16 362,961.67 123,258.00
841.42 35,204.51
28,651.36 340,622.69
35,598.23

715,171.95
6,894,401.26 7,293,750.67 1,749,666.55
173,415.21 810,360.59 3,454,907.06 643,610.12 237,867.27 775,564.84 593,828.81 299,155.66

$

37,325,525.00 $ 38,362,298.77 $ 1,868,481.54 $ 40,230,780.31

1,026,738.00 198 003.00

1,163,626.67 46 088.42

151,114.96 115,205.64

1,314,741.63 161,294.06

TOTAL QBE FORMULA FUNDS

$

38,550,266.00 $ 39,572,013.86 $ 2,134,802.14 $ 41,706,816.00

(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
August 29, 2008

Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members ofthe Bulloch County Board of Education
REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS
Ladies and Gentlemen:
We have audited the financial statements of the governmental activities, each major fund, and the aggregate remaining fund information of Bulloch County Board of Education as of and for the year ended June 30, 2007, which collectively comprise Bulloch County Board of Education's basic financial statements and have issued our report thereon dated August 29, 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 Bulloch County 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 Bulloch County Board of Education's internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness of the Bulloch County 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 certain deficiencies in internal control over financial reporting that we consider to be significant deficiencies.
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 Bulloch County 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 of the Bulloch County Board of Education's financial statements that is more than inconsequential will not be prevented or detected by the Bulloch County Board of Education's internal control. We consider items FS-6161-07-01, FS-6161-07-03 and FS-6161-07-04 in the accompanying Schedule of Findings and Questioned Costs to be significant deficiencies 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 Bulloch County 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 of this 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 none of the significant deficiencies described above are material weaknesses.
Compliance and Other Matters
As part of obtaining reasonable assurance about whether Bulloch County Board of Education's financial statements are free of material misstatement, we performed tests of its compliance with certain provisions oflaws, regulations, contracts and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards.
We noted certain matters that we have reported to management of Bulloch County Board of Education in a separate letter dated August 29, 2008.
Bulloch County Board of Education's response to the findings identified in our audit is described in the accompanying Schedule of Management's Responses. We did not audit Bulloch County 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 of the management, members of the Bulloch County Board ofEducation, Federal awarding agencies and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties.
Respectfully submitted,
RWH:as 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
August 29, 2008

Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the Bulloch County Board of Education
REPORT ON COMPLIANCE WITH REQUIREMENTS APPLICABLE TO EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH 0MB CIRCULAR A-133
Ladies and Gentlemen:
Compliance
We have audited the compliance of Bulloch County Board of Education with the types of compliance requirements described in the U.S. Office ofManagement and Budget (0MB) Circular A-133 Compliance Supplement that are applicable to each ofits major Federal programs for the year ended June 30, 2007. Bulloch County Board ofEducation's major Federal programs are identified in the Summary of Auditor's Results Section of the accompanying Schedule of Findings and Questioned Costs. Compliance with the requirements of laws, regulations, contracts and grants applicable to each of its major Federal programs is the responsibility of Bulloch County Board of Education's management. Our responsibility is to express an opinion on Bulloch County Board of Education's compliance based on our audit.
We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States ofAmerica; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General 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 Bulloch County Board ofEducation's compliance with those requirements and performing such other procedures as we considered necessary in the

2007SA-10

circumstances. We believe that our audit provides a reasonable basis for our opinion. Our audit does not provide a legal determination on Bulloch County Board of Education's compliance with those requirements.
In our opinion, the Bulloch County Board of Education 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 Bulloch County Board of Education is responsible for establishing and maintaining effective internal control over compliance with requirements of laws, regulations, contracts and grants applicable to Federal programs. In planning and performing our audit, we considered Bulloch County 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 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 ofthe Bulloch County 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 of compliance 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 of the 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.
2007SA-10

This report is intended solely for the information and use of the management, members of the Bulloch County Board ofEducation, Federal awarding agencies and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties.
Respectfully submitted,
~~
Ru ell W. Hinton, CPA, CGFM State Auditor
RWH:as 2007SA-10

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

BULLOCH COUNTY BOARD OF EDUCATION 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-6161-04-02 FS-6161-05-01 FS-6161-05-02 FS-6161-06-01 FS-6161-06-02 FS-6161-06-03 FS-6161-06-04

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

CORRECTIVE ACTION/RESPONSES

EXPENDITURES/LIABILITIES/DISBURSEMENTS EMPLOYEE COMPENSATION Inadequate Internal Control Procedures Finding Control Number: FS-6161-04-02

The School District has attempted to clear this finding with the Georgia Department of Community Health; however, the Department ofCommunity Health has not provided any direction on this issue or billed the School District for any adjustment in health insurance billing related to this finding.

CASH AND CASH EQUIVALENTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Controls over School Activity Accounts Finding Control Number: FS-6161-06-01

Separation ofduties among school personnel, pertaining to school principal's accounts, is being addressed. This will require involving more existing personnel in the cash custody, record keeping and review functions but can be accomplished with adequate support from the central office and school principal. Strict accountability at the school level and additional review at the system level will increase controls over the collection, disbursement and recording of funds, as well as timely and accurate review, ofthe school principal's accounts.

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BULLOCH COUNTY BOARD OF EDUCATION 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
CORRECTIVE ACTION/RESPONSES
EXPENDITURES/LIABILITIES/DISBURSEMENTS Improper Use of SPLOST Proceeds Finding Control Number: FS-6161-06-03
We do not concur with this finding. Under advisement from both general legal counsel and bond legal counsel, the Bulloch County Board of Education did not include terminology, relating to the specifics of each project, in its SPLOST referendum. In addition, the details of this finding reference the State of Georgia's Attorney General Office Opinion 97-7, which specifically refers to O.C.G.A. 48-8-121 and O.C.G.A. 202-260(b). We do not believe that 48-8-121, which states that "proceeds received from the tax authorized by this part shall be used... exclusively for the purpose or purposes specified in the resolution or ordinance calling for imposition of the tax", applies in this instance since the essence of this finding relates to the lack of specifics, in the Bulloch County Board ofEducation's SPLOST terminology. Furthermore, O.C.G.A. 20-2-260 is included under Title 20 (Education), Article 6 (Quality Basic Education), Part 10 (Capital Outlay Funding), specifically referring to the use of State Department of Education funding for capital outlay purposes. Because the Bulloch County Board of Education followed the advice of legal counsel related to SPLOST referendum terminology, and because the use of SPLOST funds by the Bulloch County School System was in accordance with the community's school facilities needs, we do not believe that SPLOST proceeds have been used improperly. In addition, in its letter dated June 19, 2008, the Georgia Department ofEducation's Financial Review Section has determined this finding to be closed.
AUDITOR'S COMMENTS
The Georgia Constitution, Article VIII (the "educational purposes sales tax amendment") authorizes the boards of education of county school districts and independent school districts to impose, levy and collect a one percent sales and use tax for certain educational purposes. Paragraph IV (b) (1) of the amendment provides that the proceeds of the tax may be expended for "capital outlay projects for educational purposes." The term "capital outlay projects for educational purposes" is not defined in the amendment. The Attorney General's Official Opinion 97-7 makes reference to O.C.G.A. 48-8-121 and O.C.G.A. 20-2-260 (b) (5). O.C.G.A. 48-8-121 states, "The proceeds received from the tax authorized by this part shall be used.. .exclusively for the purpose or purposes specified in the resolution or ordinance calling for imposition of the tax." O.C.G.A. 20-2-260 (b)(5) states, "The definition of educational facilities specifically excludes swimming
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BULLOCH COUNTY BOARD OF EDUCATION 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

CORRECTIVE ACTION/RESPONSES

EXPENDITURES/LIABILITIES/DISBURSEMENTS Improper Use of SPLOST Proceeds Finding Control Number: FS-6161-06-03

pools, tracks, stadiums, and other facilities or portions of facilities used primarily for athletic competition." Since the Statesboro High School stadium and the Portal High School stadium are "athletic facility improvements" which are not specifically denoted in the School District's SPLOST referendum as approved by the voters of Bulloch County, the $1,307,730 in expenditures for these projects does not appear to be allowable expenditures of the SPLOST proceeds.

CAPITAL ASSETS Failure to Adequately Maintain Capital Assets Finding Control Number: FS-6161-06-04

Procedures were revised in November 2007 to ensure accurate and timely recording of capital assets calculation of depreciation expense. In addition, the School District plans to implement a financial accounting system that will allow the inclusion of capital assets in the perpetual accounting records, as well as more efficient tracking and depreciation of current assets. Revised internal controls, in addition to an improved accounting system, will lead to effective capital assets recording procedures.

PRIOR YEAR FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

FINDING CONTROL NUMBER AND STATUS

F A-6161-06-01

Previously Reported Corrective Action Implemented

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SECTION IV FINDINGS AND QUESTIONED COSTS

BULLOCH COUNTY BOARD OF EDUCATION 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 Bulloch County 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 Bulloch County Board of Education disclosed financial statement significant deficiencies related to the following control categories.

Cash and Cash Equivalents Revenues/Receivables/Receipts Financial Reporting

Expenditures/Liabilities/Disbursements Capital Assets

None of the significant deficiencies described above are considered to be material weaknesses.

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

6. Audit Findings Required to be Reported by Section .51 0(a) of 0MB Circular A-133 The Bulloch County Board ofEducation's audit did not disclose an audit finding required to be reported by section .510(a) ofOMB Circular A-133.

7. Major Programs Federal awards audited as major programs are as follows: 84.010 Title I Grants to Local Educational Agencies 84.287 Twenty-First Century Community Leaming Centers

8. Type "A" Program Dollar Threshold The dollar threshold for type "A" programs was $309,007.49.

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

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BULLOCH COUNTY BOARD OF EDUCATION 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 Controls over School Activity Accounts Significant Deficiency Finding Control Number: FS-6161-07-01

Condition:

This is a repeat finding (FS-6161-06-01 and FS-6161-05-01) 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 over the school activity accounts.

Criteria:

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

Questioned Cost: NIA

Information:

Cash and Cash Equivalents The bank reconciliation function was not separated from the record keeping and voucher payment functions. The bank reconciliation was not reviewed by an administrator not directly connected with cash operations.

Revenues/Receivables/Receipts The deposit preparation function was not separated from the record keeping and cash custody functions. Based on a review of twenty items, four receipts were not deposited in a timely manner and seven receipts lacked adequate supporting documentation.

Expenditures/Liabilities/Disbursements Based on a review of twenty vouchers, the following deficiencies were noted: 1. One voucher failed to include a purchase order. 2. Two purchase orders were dated after the original invoice dates. 3. Two vouchers were paid from faxed copies of invoices. 4. One other voucher did not contain an original invoice or receiving documentation.

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BULLOCH COUNTY BOARD OF EDUCATION 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 Controls over School Activity Accounts Significant Deficiency Finding Control Number: FS-6161-07-01

5. Two purchase orders did not grant approval for all items purchased.
6. Two other vouchers lacked proper approval for payment.

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.

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 policies and implement those procedures deemed necessary to strengthen internal controls over the accounting functions.

EXPENDITURES/LIABILITIES/DISBURSEMENTS Improper Use of SPLOST Proceeds Nonmaterial Noncompliance Finding Control Number: FS-6161-07-02

Condition:

This is a repeat finding (FS-6161-06-03) from the year ended June 30, 2006. Improper use of Special Purpose Local Option Sales Tax (SPLOST) proceeds.

Criteria:

O.C.G.A. 48-8-121 states, "The proceeds received from the tax authorized by this part shall be used ... exclusively for the purpose or purposes specified in the resolution or ordinance calling for imposition of the tax."

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BULLOCH COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2007

II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

EXPENDITURES/LIABILITIES/DISBURSEMENTS Improper Use ofSPLOST Proceeds Nonmaterial Noncompliance Finding Control Number: FS-6161-07-02

The Attorney General's Official Opinion 97-7 for O.C.G.A. 20-2-260 (b)(5) states, "The definition of educational facilities specifically excludes swimming pools, tracks, stadiums, and other facilities or portions offacilities used primarily for athletic competition." Since athletic facilities are not denoted in the School District's approved SPLOST referendum, these expenditures are not allowable with SPLOST proceeds.

Questioned Cost: NIA

Information:

During the year under review, the School District paid for the equipping and renovating of the Statesboro High School stadium and Portal High School stadium. Athletic facility improvements are not specifically denoted in the School District's SPLOST referendum as approved by the voters ofBulloch County.

Cause:

The School District believed this project was covered under their referendum that states the following: "constructing and equipping new facilities for Portal High School and...Statesboro High School."

Effect:

Improper use of Special Purpose Local Option Sales Tax (SPLOST) proceeds.

Recommendation:

The School District should denote "athletic facilities" or the name of any planned athletic facility project(s) in the terminology for any future SPLOST referendum to place the Bulloch County electorate on fair notice as to which projects the tax proceeds will be denoted.

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BULLOCH COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2007

II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

CAPITAL ASSETS Failure to Adequately Maintain Capital Assets Significant Deficiency Finding Control Number: FS-6161-07-03

Condition:

This is repeat finding (FS-6161-06-04) from the year ended June 30, 2006. The School District failed to adequately maintain capital asset records.

Criteria:

Chapter 37 Fixed Assets of the Financial Management for Georgia Local Units of Administration indicates that School Districts must establish fixed asset policies, define system requirements, implement a fixed asset system and maintain fixed asset inventory records.

Questioned Cost: NIA

Information:

A review of the School District's Capital Asset policies and procedures and the related Capital Asset records revealed that the estimated useful lives of forty-seven assets categorized as buildings and eleven assets categorized as land improvements were not assigned in accordance with the School District's capitalization policy. These assets were assigned estimated useful lives of twenty-five years and fifteen years, respectively. The School District's capitalization policy states the estimated useful lives of both buildings and land improvements should be sixty years.

Cause:

The School District failed to properly maintain its capital asset records in accordance with the School District's approved capital asset policy.

Effect:

The failure ofthe School District to maintain an accurate capital asset listing can lead to inaccurate internal and external reporting.

Recommendation:

The School District should review its capital asset records and make appropriate adjustments to ensure the capital asset records conform to the School District's approved capital assets policy. In addition, management should establish controls that will ensure capital asset records are properly maintained.

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BULLOCH COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2007

II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

FINANCIAL REPORTING Inadequate Controls over Financial Reporting Significant Deficiency Finding Control Number: FS-6161-07-04

Condition:

The School District did not have adequate controls in place over the financial statement reporting process.

Criteria:

Management is responsible for having adequate controls over the financial reporting process, which not only includes proper recording oftransactions to the general ledger, but extends to accurate preparation and presentation ofthe financial statements, including note disclosures.

Questioned Cost: NIA

Information:

The Governmental Accounting Standards Board (GASB) Statement 34 reporting model requires the presentation ofboth fund level and entity-wide level statements in the School District's financial statements. During the audit, several correcting and reclassification entries were proposed by the auditor and accepted by the client to properly present the entity's financial statements.

Cause:

The School District did not implement an adequate system ofinternal control over the financial statement reporting process.

Effect:

The School District did not have adequate controls in place to ensure that the financial statements were properly prepared in accordance with generally accepted accounting principles.

Recommendation:

The School District should develop and implement internal controls over the financial statement reporting process to ensure that activity is properly recorded in the general ledger; to verify that financial statements (including note disclosures) properly reflect activity reported in the general ledger; and to include a monitoring process to evaluate the accuracy of the financials presented for audit.

III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

No matters were reported.

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SECTIONV MANAGEMENT'S RESPONSES

BULLOCH COUNTY BOARD OF EDUCATION SCHEDULE OF MANAGEMENT'S RESPONSES
YEAR ENDED JUNE 30, 2007
Finding Control Number: FS-6161-07-01
We concur with this finding. Separation of duties among school personnel, pertaining to school principal's accounts, is being reviewed. Re-assignment of duties and compensating controls are being considered to develop a solution. In addition, school principal's accounts have been incorporated into the school system accounting software program to ensure proper recording of assets and review of school principal's accounts. Strict accountability at the school level and additional review at the system level will increase internal controls over the collection, disbursement and recording of funds, as well as timely and accurate review, of the school principal's accounts.
Finding Control Number: FS-6161-07-02
We do not concur with this finding. Under advisement from both general legal counsel and bond legal counsel, the Bulloch County Board of Education did not include terminology, relating to the specifics ofeach project, in its SPLOST referendum. In addition, the details ofthis finding reference the State of Georgia's Attorney General Official Opinion 97-7, which specifically refers to O.C.G.A. 48-8-121 and O.C.G.A. 20-2-260(b). We do not believe that 48-8-121, which states that "proceeds received from the tax authorized by this part shall be used ... exclusively for the purpose or purposes specified in the resolution or ordinance calling for imposition of the tax", applies in this instance since the essence of this finding relates to the lack of specifics in the Bulloch County Board of Education's SPLOST terminology. Furthermore, O.C.G.A. 20-2-260 is included under Title 20 (Education), Article 6 (Quality Basic Education), Part 10 (Capital Outlay Funding), specifically referring to the use of State Department of Education funding for capital outlay purposes. Because the Bulloch County Board of Education followed the advice of legal counsel related to SPLOST referendum terminology, and because the use of SPLOST funds by the Bulloch County School System was in accordance with the community's school facilities needs, we do not believe that SPLOST proceeds have been used improperly. In addition, the Georgia Department ofEducation's Financial Review Section has closed this finding.
Finding Control Number: FS-6161-07-03
We concur with this finding. The Capital Assets policy was changed in fiscal year 2008 to address this issue. Asset lives not complying with the policy are being changed to do so. Revised internal controls will also lead to effective capital assets recording procedures.
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BULLOCH COUNTY BOARD OF EDUCATION SCHEDULE OF MANAGEMENT'S RESPONSES
YEAR ENDED JUNE 30, 2007 Finding Control Number: FS-6161-07-04 We concur with this finding and the School System's financial staff has met with the auditors to ensure their understanding ofnecessary procedures for adequate financial reporting. Guidelines are being developed to ensure that that financial statements are prepared properly and timely by the School System's financial staff. Contact Person: Charles G. Wilson, Assistant Superintendent for Business and Finance Phone: (912) 764-1503 Fax: (912) 489-8878 E-mail Address:cwilson@bulloch.k12.ga.us
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