BULLOCH COUNTY BOARD OF EDUCATION STATESBORO, GEORGIA REPORT ON AUDIT OF THE FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2008 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 8 H NOTES TO THE BASIC FINANCIAL STATEMENTS 9 SCHEDULES REQUIRED SUPPLEMENTARY INFORMATION I 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 26 3 SCHEDULE OF STATE REVENUE 28 4 SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS 30 5 ALLOTMENTS AND EXPENDITURES GENERAL FUND - QUALITY BASIC EDUCATION PROGRAMS (QBE) BY PROGRAM 31 SECTION II COMPLIANCE AND INTERNAL CONTROL REPORTS REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS REPORT ON COMPLIANCE WITH REQUIREMENTS APPLICABLE TO EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH 0MB CIRCULAR A-133 SECTION III AUDITEE'S RESPONSE TO PRIOR YEAR FINDINGS AND QUESTIONED COSTS SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS SECTION IV FINDINGS AND QUESTIONED COSTS SCHEDULE OF FINDINGS AND QUESTIONED COSTS 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 October 19, 2009 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) ofthe Bulloch County Board of Education, as of and for the year ended June 30, 2008, 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 GovernmentAuditing 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. 2008ARL-11 In our opinion, the financial statements referred to previously present fairly, in all material respects, the respective financial position ofthe governmental activities, each major fund, and the aggregate remaining fund information ofthe Bulloch County Board ofEducation, as ofJune 30, 2008, 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 October 19, 2009, on our consideration of the 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 ofthat report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit. 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, ~~-~~ Russell W. Hinton, CPA, CGFM State Auditor RWH:as 2008ARL-11 BULLOCH COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2008 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, 2008. 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 2008 are as follows: On the District-wide financial statements, the assets of the School District exceeded liabilities by $113.8 million. Of this amount, $17.9 million is unrestricted and is available for spending at the School District's discretion. The School District had $91.2 million in expenses relating to governmental activities; only $67.9 million of these expenses are offset by program specific charges for services, grants and contributions. General revenues (primarily property and sales taxes) of $44.5 million and fund balance were adequate to provide for these programs. As stated above, general revenues accounted for $44.5 million, or 39.6%, of all revenues totaling $112.4 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 and fundfinancial 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. BULLOCH COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2008 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 District's assets and liabilities and uses the accrual basis ofaccounting 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. ii BULLOCH COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2008 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 l, Statement of Net Assets, provides the perspective of the School District as a whole. Table 2 shows the Changes in Net Assets for the year. Table 1 Net Assets Governmental Activities Fiscal Fiscal Net Year 2008 Year 2007 Change Assets Current and Other Assets Capital Assets, Net $ 77,103,149 $ 44,756,714 $ 32,346,435 116,712,270 88,283,392 28,428,878 Total Assets $ 193,815,419 $ 133,040,106 $ 60,775,313 Liabilities Current and Other Liabilities Long-Term Liabilities $ 13,673,961 $ 11,849,583 $ 1,824,378 66,300,168 28,525,000 37,775.168 Total Liabilities $ 79,974,129 $ 40,374,583 $ 39,599.546 Net Assets Invested in Capital Assets, Net of Related Debt Restricted Unrestricted $ 77,659,634 $ 62,038,351 $ 15,621,283 18,317,471 13,566,847 4,750,624 17,864,185 17,060.326 803.859 Total Net Assets $ 113,841.290 $ 92,665.524 $ 21,175.766 iii BULLOCH COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2008 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 2008 Year 2007 Change $ 2,613,748 $ 1,758,534 $ 855,214 54,606,749 52,135,144 2,471,605 10,692,337 391,187 10,301,150 Total Program Revenues $ 67,912,834 $ 54,284,865 $ 13,627,969 General Revenues: Taxes Property Taxes For Maintenance and Operations $ 15,638,432 $ 12,915,277 For Debt Services 1,685,309 1,886,439 Railroad Cars 8,298 6,721 Other Taxes 424,225 677,106 Sales Taxes Local Option Sales Tax For Maintenance and Operations 10,810,613 10,355,984 Special Purpose Local Option Sales Tax For Debt Services 10,808,214 10,340,148 Grants and Contributions not Restricted to Specific Programs 2,595,047 2,189,499 Investment Earnings 1,541,355 1,678,615 Miscellaneous 944 914 2,156,490 $ 2,723,155 -201,130 1,577 -252,881 454,629 468,066 405,548 -137,260 -1,211,576 Total General Revenues $ 44,456,407 $ 42,206,279 $ 2,250,128 Total Revenues $ 112,369,241 $ 96,491,144 $ 15,878,097 Program Expenses Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation ofPlant 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 $ 54,999,604 $ 51,756,985 $ 3,242,619 3,685,991 2,369,915 1,590,110 719,605 5,009,234 677,489 8,156,911 4,620,874 1,082,748 869,756 3,017,742 1,578,740 1,420,950 700,215 4,733,749 471,414 5,445,608 3,861,888 789,579 570,738 668,249 791,175 169,160 19,390 275,485 206,075 2,711,303 758,986 293,169 299,018 561,191 5,126,465 1,723,582 400,933 4,517,784 1,176,384 160,258 608,681 547,198 Total Expenses $ 91,193,475 $ 80,442,709 $ 10,750,766 Increase in Net Assets $ 2111151166 $ l61Q48A35 $ 511271331 lV BULLOCH COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2008 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 2008 Net Cost of Services Fiscal Year 2008 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 $ 54,999,604 $ 6,984,964 3,685,991 2,369,915 1,590,110 719,605 5,009,234 677,489 8,156,911 4,620,874 1,082,748 869,756 3,095,005 1,680,513 120,585 -874,381 2,180,456 664,500 4,380,434 2,869,420 1,063,051 -173,815 561,191 5,126,465 1,723,582 -98,404 -335,269 1,723.582 Total Expenses $ 91 1193A75 $ 2312801641 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 and other financing sources of $161.6 million and total expenditures and other financing uses of $131.3 million. The excess of revenues over expenditures was mainly the result of a general obligation bond issuance in December, 2007, for capital outlay purposes. V BULLOCH COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2008 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. 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 $88.5 million were over the final budgeted amount of $84.3 million by $4.2 million. This difference (actual vs. final budget) was mainly due to state funding formula collections and service charge 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 $87.5 million were more than the final budgeted amount of $84.0 million by $3 .5 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 statements but not in the budget. General Fund revenues exceeded expenditures by $0.9 million. CAPITAL ASSETS AND DEBT ADMINISTRATION Capital Assets At fiscal year ended June 30, 2008, the School District had $116.7 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 implemented a facilities plan that involves the construction and improvement of three high schools and three elementary schools, as well as necessary additions and improvements to facilities, including technology infrastructure. These capital expenditures are being funded by combined Educational 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 Educational 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. General Obligation Bonds in the amount of $44.3 million were issued against this tax in December, 2007. vi BULLOCH COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2008 Table 4 Capital Assets (Net of Depreciation) Land Construction in Progress Land Improvements Buildings and Improvements Equipment Governmental Activities Fiscal Fiscal Net Year 2008 Year 2007 Change $ 2,705,133 50,107,661 248,054 60,444,093 3,207,329 $ 2,705,133 36,864,885 289,512 45,700,972 2,722,890 $ 0 13,242,776 -41,458 14,743,121 484,439 Total $116,712,270 $ 88,283.392 $ 28,428.878 Debt In September, 2003, voters approved a 1% Education Special Purpose Local Option Sales Tax (ESPLOST) in conjunction with a $38.0 million General Obligation Bond issuance, for the purpose of building new schools. The ESPLOST, collected between January 1, 2005 and December 31, 2008, was 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 and these bonds, totaling $44.3 million were issued in December, 2007. In January, 2005, the Bulloch County Board of Education issued $12.8 million in General Obligation Refunding Bonds to advance refund $12.3 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, 2008, the School District had $63.9 million in bonds outstanding, but no other long-term debt. Table 5 Debt at June 30 Governmental Activities Fiscal Fiscal Net Year 2008 Year 2007 Change Bonds/Notes Payable $ 63,860.000 $ 28,525.000 $ 35,335.000 At June 30, 2008, 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. vu BULLOCH COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2008 Economic Recession - The nation is currently experiencing an economic recession and the State of Georgia and Bulloch County are not insulated from this event. In fiscal year 2009, State funding for education was reduced in mid-year by approximately $1 million. Additional cuts were imposed but were offset by American Recovery and Reinvestment Act of 2009 (ARRA) Stabilization Funding. State funding cuts continued into fiscal year 2010 but were also offset by ARRA Stabilization Funding. Federal Stabilization Funding is not expected to remain beyond fiscal year 2011. Due to the School District's sound fiscal practices, the General Fund fund balance was accumulated to the maximum amount allowed by the State of Georgia. This has given the School District the flexibility of responding to the current economic crisis in a planned and methodical manner, maintaining critical services to students to ensure academic success, while implementing a two-year plan to reduce expenditures. However, due to the State of Georgia's failure to adequately accumulate a General Fund Balance at the state level, the state may have to further reduce funding in mid-year fiscal year 2010, which will force the School District to modify its cost-reduction plan to a three to four year period, which will further reduce the School District's General Fund Balance. These cost reductions will mainly occur through natural attrition of teaching staff positions, which will increase the pupil: teacher ratio throughout the School District, but other non-personnel areas will also be affected. The School District is committed to maintaining a healthy General Fund fund balance, student academic achievement and sustainable operations. Therefore, the School District's strategic financial plan also includes the possibility of increasing revenues through increased property taxes. Currently, approximately 4.5 mills of property tax are available to be levied for operations. In March, 2009, (fiscal year 2009), voters approved early re-imposition of the ESPLOST, to be collected between January 1, 2014 and December 31, 2018, for the purpose of providing the necessary funding to implement the school system's facilities plan. In the Fall, 2009, the School District intends to issue approximately $25 million in General Obligation Bonds against this ESPLOST to continue funding for its 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.kl2.ga.us. Vlll BULLOCH COUNTY BOARD OF EDUCATION BULLOCH COUNTY BOARD OF EDUCATION STATEMENT OF NET ASSETS JUNE 30, 2008 ASSETS Cash and Cash Equivalents Investments Accounts Receivable, Net Taxes State Government Federal Government Inventories Deferred Charges Capital Assets, Non-Depreciable Capital Assets, Depreciable (Net of Accumulated Depreciation) Total Assets LIABILITIES Salaries and Benefits Payable Contracts Payable Retainages Payable Deposits and Deferred Revenues Long-Term Liabilities Due Within One Year Due in More Than One Year Total Liabilities NET ASSETS Invested in Capital Assets, Net of Related Debt Restricted for Continuation of Federal Programs Debt Service Capital Projects Unrestricted Total Net Assets Total Liabilities and Net Assets EXHIBIT"A" GOVERNMENTAL ACTIVITIES $ 31,768,270.20 33,350,057.52 5,055,801.23 5,923,078.24 696,795.66 209,733.86 99,411.81 52,812,793.85 63,899,476.62 $ 193,815,418.99 $ 9,095,410.12 2,411,757.75 2,056,693.50 110,100.00 9,588,666.94 56,711,501.13 $ 79 974 129.44 $ 77,659,634.17 652,425.43 14,709,507.29 2,955,537.66 17,864,185.00 $ 113,841,289.55 $ 193,815,418.99 The notes to the basic financial statements are an integral part of this statement. -1- BULLOCH COUNTY BOARD OF EDUCATION STATEMENT OF ACTIVITIES FOR THE YEAR ENDED JUNE 30, 2008 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 Other Taxes Sales Taxes Local Option Sales Tax For Maintenance and Operations Special Purpose Local Option Sales Tax For Debi Services 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 $ 54,999,604.44 $ 3,685,991.10 2,369,915.01 1,590,110.07 719,604.82 5,009,233.73 677,489.08 8,156,911.17 4,620,874.38 1,082,748.49 869,755.86 561,190.79 5,126,465.01 1,723,581.53 $ 91,193,475.48 $ 794,464.92 659,594.76 1,159,688.37 2,613,748.05 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 $ 40,076,858.29 $ 7,143,316.81 $ -6,984,964.42 590,986.08 689,402.02 1,146,268.65 1,459,698.96 2,607,474.03 12,989.35 2,775,942.32 1,508,418.56 19,697.39 411,904.57 323,256.13 134,286.83 221,304.07 1,000,534.72 243,036.00 631,665.81 -3,095,005.02 -1,680,512.99 -120,585.29 874,380.97 -2, 180,455.63 -664,499.73 -4,380,434.13 -2,869,419.82 -1,063,051.10 173,814.52 3,307,109.08 994,936.63 98,403.97 335,269.07 -1,723,581.53 $ 54,606,749.30 $ 10,692,337.00 $ -23,280,641.13 $ 15,638,431.81 1,685,308.76 8,298.13 424,224.45 10,810,612.99 10,808,213.91 2,595,047.00 1,541,355.13 944 914.44 $ 44,456,406.62 $ 21,175,765.49 92,665,524.06 $ 113,841,289.55 -3- BULLOCH COUNTY BOARD OF EDUCATION BALANCE SHEET GOVERNMENTAL FUNDS JUNE 30, 2008 EXHIBIT"C" ASSETS Cash and Cash Equivalents Investments Accounts Receivable, Net Taxes State Government Federal Government Inventories GENERAL FUND DISTRICTWIDE CAPITAL PROJECTS FUND DEBT SERVICE FUND TOTAL $ 8,729,856.77 $ 14,879,368.00 $ 8,159,045.43 $ 4,444,553.46 25,000,000.00 3,905,504.06 2,313,466.04 5,923,078.24 696,795.66 209,733.86 2,618,075.73 31,768,270.20 33,350,057.52 4,931,541.77 5,923,078.24 696,795.66 209,733.86 Total Assets $ 22,317,484.03 $ 39,879,368.00 $ 14,682,625.22 $=====7=6=,8=79=,4=7=7=.2=5 LIABILITIES AND FUND BALANCES LIABILITIES Salaries and Benefits Payable $ 9,095,410.12 $ Contracts Payable $ 2,411,757.75 Retainages Payable 2,056,693.50 Deposits and Deferred Revenue 110,100.00 Total Liabilities $ 9,205,510.12 $ 4,468,451.25 $ FUND BALANCES Reserved for: Continuation of Federal Programs Debt Service Inventories Capital Projects Unreserved Designated for Student Activities Undesignated Reported in: General Fund Capital Projects $ 442,691.57 $ $ 14,682,625.22 209,733.86 $ 29,896,382.56 435,079.46 12,024,469.02 5,514,534.19 Total Fund Balances $ 13,111,973.91 $ 35,410,916.75 $ 14,682,625.22 $ 9,095,410.12 2,411,757.75 2,056,693.50 110 100.00 13,673,961.37 442,691.57 14,682,625.22 209,733.86 29,896,382.56 435,079.46 12,024,469.02 5,514,534.19 63,205,515.88 Total Liabilities and Fund Balances $ 22,317,484.03 $ 39,879,368.00 $ 14,682,625.22 $=====7=6=,8=79=,4=7=7=.2=5 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, 2008 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. Deferred charges are recorded as expenditures in governmental funds. The Statement of Net Assets includes this amount as other assets. Deferred Charges - Bond Issuance Costs Long-Term Liabilities, including Bonds Payable, are not due and payable in the current period and therefore are not reported as liabilities in the funds. Long-Term Liabilities at year-end consist of: General Obligation Bonds Payable Unamortized Bond Premiums Total Long-Term Liabilities Net Assets of Governmental Activities (Exhibit "A") $ 63,205,515.88 $ 2,705,132.94 50,107,660.91 1,034,456.64 76,438,466.86 11,742,168.09 -25,315,614.97 116,712,270.47 124,259.46 99,411.81 $ -63,860,000.00 -2,440, 168.07 -66,300, 168.07 $ 113,841,289.55 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, 2008 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) Proceeds of Long-Term Capital Related Debt Premiums on Bonds Sold Transfers In Transfers Out Total Other Financing Sources (Uses) Net Change in Fund Balances Fund Balances - Beginning GENERAL FUND DISTRICTWIDE CAPITAL PROJECTS FUND DEBT SERVICE FUND TOTAL $ 15,895,527.96 10,810,612.99 48,575,782.00 $ 8,869,050.30 2,613,748.05 757,620.14 944 914.44 $ 1,691,314.48 $ 10,808,213.91 10,449,301.00 452,717.40 331,017.59 17,586,842.44 21,618,826.90 59,025,083.00 8,869,050.30 2,613,748.05 1,541,355.13 944 914.44 $ 88,467,255.88 $ 10,902,018.40 $ 12,830,545.98 $ 112,199,820.26 $ 55,812,357.40 $ 55,812,357.40 3,695,917.87 2,371,272.97 1,470,815.25 657,567.43 4,931,797.47 761,270.44 $ 5,758,780.79 4,891,316.06 1,101,984.46 679,565.34 561,190.79 4,849,527.24 243,079.12 $ 60,035.58 236,541.00 30,133,477.95 3,520.00 3,695,917.87 2,371,272.97 1,470,815.25 657,567.43 4,931,797.47 1,007,869.56 5,818,816.37 5,127,857.06 1,101,984.46 679,565.34 561,190.79 4,849,527.24 30,133,477.95 8,930,000.00 1,723,581.53 8,930,000.00 1,723,581.53 $ 87,543,363.51 $ 30,673,133.65 $ 10,657,101.53 $ 128,873,598.69 $ 923,892.37 $ -19,771,115.25 $ 2,173,444.45 $ -16,673,778.43 $ 44,265,000.00 $ 44,265,000.00 2,662,001.55 2,662,001.55 621,649.90 $ 1,831,645.58 2,453,295.48 $ -621,649.90 -1,831,645.58 -2,453,295.48 $ -621,649.90 $ 45,717,005.87 $ 1,831,645.58 $ 46,927,001.55 $ 302,242.47 $ 25,945,890.62 $ 4,005,090.03 $ 30,253,223.12 12,809,731.44 9,465,026.13 10,677,535.19 32,952,292.76 Fund Balances - Ending $ 13,111,973.91 $ 35,410,916.75 $ 14,682,625.22 $ 63,205,515.88 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, 2008 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/disposition of buildings, equipment and land improvements is reported, whereas in the Governmental Funds, the entire proceeds from the sale increase financial resources. Thus, the change in net assets differs from the change in fund balances by the carrying value of the buildings, equipment and land improvements sold/disposed. Bond proceeds provide current financial resources to Governmental Funds; however, issuing debt increases Long-Term Liabilities in the Statement of Net Assets. In the current period, proceeds were received from: General Obligations Bonds Issued, Including a Premium of $2,662,001.55 When debt is first issued, bond issuance costs are reported as an expenditure in Governmental Funds, but are reported as deferred charges on the Statement of Net Assets and amortized over the term of the debt, using the straight-line method. 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. The amortization of the bond premium is reported in the Statement of Activities and does not require the use of current financial resources and therefore is not reported as an expenditure in Governmental Funds. $ 30,253,223.12 $ 30,717,676.05 -1,904, 114.06 28,813,561.99 169,420.71 -384,684.07 -46,927,001.55 99,411.81 8,930,000.00 221,833.48 Change in Net Assets of Governmental Activities (Exhibit "B") $ 21,175,765.49 The notes to the basic financial statements are an integral part of this statement. -7- BULLOCH COUNTY BOARD OF EDUCATION STATEMENT OF FIDUCIARY NET ASSETS FIDUCIARY FUNDS JUNE 30, 2008 ASSETS Cash and Cash Equivalents LIABILITIES Funds Held for Others EXHIBIT"G" AGENCY FUNDS $ 226,510.76 $ 226,510.76 The notes to the basic financial statements are an integral part of this statement. -8- BULLOCH COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2008 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 ofActivities presents a comparison between direct expenses and program revenues for each function of the School District's governmental activities. Direct expenses are those that are specifically associated with a program or function and, therefore, are clearly identifiable to a particular function. Indirect expenses (expenses of the School District related to the administration and support ofthe School District's programs, such as office and maintenance personnel and accounting) are not allocated to programs. Program revenues include (a) charges paid by the recipients ofgoods or services offered by the programs and (b) grants and contributions that are restricted to meeting the operational or capital requirements of a particular program. Revenues that are not classified as program revenues, including all taxes, are presented as general revenues. Fund Financial Statements: The fund financial statements provide information about the School District's funds, including fiduciary funds. Eliminations have been made to minimize the double counting ofinternal activities. Separate statements for each category (governmental and fiduciary) are presented. The emphasis of fund financial statements is on major governmental funds, each displayed in a separate column. The School District reports the following major governmental funds: -9- BULLOCH COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2008 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 and grants from Georgia State Financing and Investment Commission 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. - 10 - BULLOCH COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2008 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 ofGeorgia Annotated Section 45-8-14 authorizes the School District to deposit its funds in one or more solvent banks, insured Federal savings and loan associations or insured chartered building 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 - 11 - BULLOCH COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2008 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 receivabIes. PROPERTY TAXES The Bulloch County Board ofCommissioners fixed the property tax levy for the 2007 tax digest year (calendar year) on July 31, 2007 (levy date). Taxes were due on December 20, 2007 (lien date). Taxes collected within the current fiscal year or within 60 days after year-end on the 2007 tax digest are reported as revenue in the governmental funds for fiscal year 2008. 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 of taxes collected to the School District. Property tax revenues, at the fund reporting level, during the fiscal year ended June 30, 2008, for maintenance and operations amounted to $15,495,893.17 and for school bonds amounted to $1,658,426.69. Tax millage rates levied for the 2007 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 0.50 mills 2....2.5. mills SALES TAXES Local Option Sales Tax revenue, at the fund reporting level, during the fiscal year amounted to $10,810,612.99 and was recorded in the General Fund. Local Option Sales Tax is to be used for the maintenance and operation of the School District. - 12 - BULLOCH COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2008 EXHIBIT "H" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Special Purpose Local Option Sales Tax, at the fund reporting level, during the year amounted to $10,808,213.91 and is to be used for capital outlay for educational purposes or debt service. This sales tax was authorized by local referendum and the sales tax must be re-authorized at least every five years. INVENTORIES FOOD INVENTORIES On the basic financial statements, inventories of donated food commodities used in the preparation ofmeals are reported at their Federally assigned value and purchased foods inventories are reported at cost (first-in, first-out). The School District uses the consumption method to account for inventories whereby donated food commodities are recorded as an asset and as revenue when received, and expenses/expenditures are recorded as the inventory items are used. Purchased foods are recorded as an asset when purchased and expenses/expenditures are recorded as the inventory items are used. CAPITAL ASSETS Capital assets purchased, including capital outlay costs, are recorded as expenditures in the fund financial statements at the time of purchase (including ancillary charges). On the District-wide financial statements, all purchased capital assets are valued at cost where historical records are available and at estimated historical cost based on appraisals or deflated current replacement cost where no historical records exist. Donated capital assets are recorded at estimated fair market value on the date donated. Disposals are deleted at depreciated recorded cost. The cost of normal maintenance and repairs that do not add to the value 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 10 to 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. - 13 - BULLOCH COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2008 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 ofmajor capital facilities. In the District-wide financial statements, bond premiums and discounts, as well as issuance costs, are deferred and amortized over the life ofthe bonds using the straight line method. Bond issuance costs are reported as deferred charges and amortized over the term of the debt. In the fund financial statements, the School District recognized bond premiums and discounts, as well as bond issuance costs during the fiscal year bonds are issued. Premiums received on debt issuances are reported as other financing sources while discounts on debt issuances are reported as other financing uses. Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as debt service expenditures. 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 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 - 14 - BULLOCH COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2008 EXHIBIT "H" Note 3: DEPOSITS AND INVESTMENTS value of such surety bond and the market value of securities pledged shall be equal to not less than 110 percent ofthe public funds being secured after the deduction ofthe amount ofdeposit insurance. Ifa depository elects the pooled method (OCGA 45-8-13.1) the aggregate ofthe market value ofthe securities pledged to secure a pool ofpublic funds shall be not less than 110 percent ofthe daily pool balance. Acceptable security for deposits consists of any one of or any combination of the following: (1) Surety bond signed by a surety company duly qualified and authorized to transact business within the State of Georgia, (2) Insurance on accounts provided by the Federal Deposit Insurance Corporation, (3) Bonds, bills, notes, certificates of indebtedness or other direct obligations of the United States or of the State of Georgia, (4) Bonds, bills, notes, certificates of indebtedness or other obligations of the counties or municipalities of the State of Georgia, (5) Bonds of any public authority created by the laws of the State of Georgia, providing that the statute that created the authority authorized the use of the bonds for this purpose, (6) Industrial revenue bonds and bonds of development authorities created by the laws of the State of Georgia, and (7) Bonds, bills, notes, certificates of indebtedness, notes, or other obligations ofa subsidiary corporation of the United States government, which are fully guaranteed by the United States government both as to principal and interest or debt obligations issued by or securities guaranteed 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, 2008, the bank balances were $61,609,685.62. The amounts ofthe total uninsured bank balances are classified into three categories of custodial credit risk: Category I - 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. - 15 - BULLOCH COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2008 EXHIBIT "H" Note 3: DEPOSITS AND INVESTMENTS The School District's uninsured deposits are classified by custodial credit risk category at June 30, 2008, as follows: Custodial Credit Risk Category Bank Balance 1 $ 0.00 2 350,153.84 3 59,677,609.19 Total $ 60,027,763.03 CATEGORIZATION OF INVESTMENTS At June 30, 2008, the carrying value of the School District's total investments was $8,299,532.13, which is materially the same as fair value. This investment consisted entirely of funds invested in the Georgia Fund 1, formerly referred to as LGIP, 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 of the State of Georgia, Office ofTreasury and Fiscal Services for the Georgia Fund 1 (Primary Liquidity Portfolio) does not provide for investment in derivatives or similar investments. Additional information on the Georgia Fund 1 is disclosed in the State ofGeorgia Comprehensive Annual Financial Report. This audit can be obtained from the Georgia Department of Audits and Accounts at http://www.audits.state.ga.us/internet/searchRpts.html. The Primary Liquidity Portfolio consists 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, 2008, was 40 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: - 16 - BULLOCH COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2008 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. 2007 Increases Decreases Balances June 30. 2008 $ 2,705,132.92 $ 0.02 $ 2,705,132.94 36.864.885.93 21,057.110.00 $ 7.814.335.02 50,107.660.91 $ 39.570.018.85 $ 21.057.110.02 $ 7,814,335.02 $ 52.812.793.85 $60,811,774.00 $ 16,297,447.05 $ 670,754.19 $ 76,438,466.86 11,069,640.44 1,177,454.00 504,926.35 11,742,168.09 1,070,451.00 35,994.36 1,034,456.64 15,110,802.15 8,346,750.76 780.938.83 1,225,153.14 673,497.17 5,463.75 341,581.36 485,409.47 15,994,373.93 8,534,838.46 786,402.58 $ 48.713.373.70 $ 15.570.786.99 $ 384.684.07 $ 63,899,476.62 $ 88 283 322 55 $ 36 621821 QI $ 8,122,Ql2.Q2 $116112 210 ~1 Current year depreciation expense by function is as follows: Instruction Support Services Educational Media Services General Administration School Administration Maintenance and Operation of Plant Student Transportation Services Other Support Services Food Services $ 1,038,978.01 $ 47,016.82 19,531.69 32,188.14 145,525.34 384,288.70 91,874.25 720,424.94 144,711.11 $ 1,904,114.06 Note 6: RESTRICTED ASSETS Special Purpose Local Option Sales Tax (SPLOST), general obligation bond proceeds and property tax levied specifically for retirement of outstanding bond principal, interest and paying agent's fees (Debt Service Funds) are restricted assets in the Statement ofNet Assets because their use is limited by applicable bond covenants or statutory provisions. Restricted assets at June 30, 2008, were as follows: - 17 - BULLOCH COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2008 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 Capital Acquisitions $ 8,159,045.43 $ 9,364,833.81 $ 3,905,504.06 $ 25,000,000.00 Note 7 : INTERFUND TRANSFERS Interfund transfers for the year ended June 30, 2008, consisted of the following: Transfer to Transfers From District-wide General Capital Fund Projects District-wide Capital Projects Debt Service Fund $ 621,649.90 $ 1,831,645.58 Total $ 621,649.90 $ 1,831,645.58 Transfers are used to ( 1) move property tax revenues collected by the General Fund to the Districtwide Capital Projects Fund for various local capital outlay projects, and (2) move capitalized interest from the District-wide Capital Projects Fund to the Debt Service Fund. 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 torts, assets, errors or omissions and acts ofGod. The School District has neither significantly reduced coverage for these risks nor incurred losses (settlements) which exceeded the School District's insurance coverage in any of the past three years. - 18 - BULLOCH COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2008 EXHIBIT "H" Note 8: RISK MANAGEMENT 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 workers' compensation claims liability during the last two fiscal years are as follows: 2007 2008 of Year Liability Changes in Estimates $ 6,284.36 $ 4,185.00 $ $ 4,185.00 $ 24,624.34 $ Claims Paid EndofYear Liability 6,284.36 $ 27,666.63 $ 4,185.00 1,142.71 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 $ 100,000.00 $ 200,000.00 Note 9: LONG-TERM DEBT GENERAL OBLIGATION DEBT OUTSTANDING General Obligation Bonds currently outstanding are as follows: Purpose Interest Rates Amount General Government - Series 2004 General Government - Refunding - Series 2005 General Government - Series 2007 2.00% - 4.00% 2.50% - 4.50% 5.00% $ 8,050,000.00 11,545,000.00 44,265,000.00 $ 63,860,000.00 The changes in Long-Term Debt during the fiscal year ended June 30, 2008, were as follows: - 19 - BULLOCH COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2008 EXHIBIT "H" Note 9: LONG-TERM DEBT G.O. Bonds Bond Premiums Unamortized Balance July 1. 2007 Governmental Funds Additions Deductions Balance June 30, 2008 Due Within One Year $28,525,000.00 $44,265,000.00 $ 8,930,000.00 $63,860,000.00 $ 9,145,000.00 _ _ _o=.o=o 2,662,001.ss 221,833.48 2,440,168.07 443,666.94 $28.525.000.00 $46.927.001.55 $ 9.)51.833.48$6630016807 $ 9.588.66694 At June 30, 2008, 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 Unamortized Bond Premium 2009 2010 2011 2012 2013 2014 - 2017 $ 9,145,000.00 $ 2,803,062.50 $ 9,910,000.00 2,580,137.50 10,260,000.00 2,111,737.50 10,615,000.00 1,619,925.00 11,000,000.00 1,119,875.00 12,930,000.00 1,003,780.00 443,666.94 443,666.94 443,666.94 443,666.94 443,666.94 221,833.37 Total Principal and Interest $ 63,860,000.00 $ 11,238,517.50 $ 2,440,168.07 Note 10: ON-BEHALF PAYMENTS The School District has recognized revenues and costs in the amount of $1,881,513.59 for health insurance and retirement contributions paid on the School District's behalf by the following State Agencies. Georgia Department of Education Paid to the Georgia Department of Community Health For Health Insurance of Non-Certified Personnel In the amount of$1,831,075.33 Paid to the Teachers' Retirement System For Teachers' Retirement System (TRS) Employer's Cost In the amount of $38,968.26 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 $11,470.00 - 20- BULLOCH COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2008 EXHIBIT"H" Note 11: SIGNIFICANT COMMITMENTS The following is an analysis ofsignificant outstanding construction or renovation contracts executed by the School District as of June 30, 2008, together with funding available: Project Unearned Executed Contracts Funding Available From State Statesboro High School Stadium Renovations 08RA-616-004 (Statesboro High School) Brooklet Elementary School Addition Langston Chapel Elementary School Addition Southeast Bulloch Middle School Addition $ 311,110.41 11,823,500.25 342,695.01 897,235.86 425,566.54 $ 2,384,286.10 $ 13,800,108.07 $ 2,384,286.10 The amounts described in this note are not reflected in the basic financial statements. Note 12: 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 13: SUBSEQUENT EVENTS On December 11, 2008, the voters of Bulloch County voted in favor of a Special Purpose Local Option Sales Tax referendum for educational purposes, to begin on January 1, 2014. The imposition of the tax approved by the voters, as stated on the Official ballot of Bulloch County is as follows: "Shall a one percent sales and use tax for educational purposes be imposed in the Bulloch County School District for a period oftime not to exceed five years and for the raising ofnot more than $80,000,000.00 for the purpose of acquiring, constructing and equipping (i) new facilities for Julia Bryant, Sallie Zetterower, and Mattie Lively Elementary Schools, (ii) new classrooms facilities for Langston Chapel Elementary, Mill Creek Elementary, Portal Elementary, and William James Middle Schools, (iii) new athletic facilities for Statesboro High School, Southeast Bulloch High School, William James Middle School, Southeast Bulloch Middle School and Langston Chapel Middle School, (iv) a new gymnasium, athletic - 21 - BULLOCH COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2008 EXHIBIT "H" Note 13: SUBSEQUENT EVENTS facilities, and other improvements for Portal Middle and High Schools, and (v) real and personal property, site improvements, renovations and improvements to facilities, and technology upgrades throughout the Bulloch County School System. If imposition ofthe tax is approved by the voters, such votes shall also constitute approval of the issuance ofgeneral obligation debt ofthe Bulloch County School District in the principal amount of $53,590,000.00 for the above capital outlay purposes and for the payment of capitalized interest." The Bulloch County Board of Education intends to issue these bonds, as necessary, over the next three years to fund construction projects identified in the school system's facilities plan. Note 14: POSTEMPLOYMENT BENEFITS Georgia Retiree Health Benefit Fund Plan Description. The School District contributes to the Georgia Retiree Health Benefit Fund ("GRHBF"), a cost-sharing multiple-employer defined benefit postemployment healthcare plan administered by the Department ofCommunity Health. GRHBF provides health insurance benefits to eligible retirees and their qualified beneficiaries. Pursuant to Title 45, Chapter 18 ofthe Official Code ofGeorgia Annotated, the authority to establish and amend the benefit provisions ofthe plan is assigned to the Board of Community Health. The Department of Community Health issues a publicly available financial report that includes financial statements and required supplementary information for GRHBF. That report may be obtained from the Department ofCommunity Health at 2 Peachtree Street, Atlanta, Georgia 30303. Funding Policy. The contribution requirements of plan members and participating employers are established and may be amended by the Board of Community Health. Contributions of plan members or beneficiaries receiving benefits vary based on plan election, dependent coverage, and Medicare eligibility and election. On average, plan members pay approximately twenty-five percent (25%) of the cost of health insurance coverage. Participating employers are statutorily required to contribute in accordance with the employer contribution rate established by the Board of Community Health. This contribution rate is established to fund both the active and retired employee health insurance plans based on projected pay-as-you-go financing requirements. The employer contribution rates for the combined active and retiree plans for the fiscal year ended June 30, 2008, were as follows: Teachers Non-Certificated Employees 18.534% of state-based salaries $162.72 per month The School District's contribution to the health insurance plans for the fiscal year ended June 30, 2008, was $7,600,123.29, which equaled the required contribution. - 22 - BULLOCH COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2008 EXHIBIT "H" Note 15: RETIREMENT PLANS TEACHERS RETIREMENT SYSTEM OF GEORGIA (TRS) TRS PLAN DESCRIPTION Substantially all teachers, administrative and clerical personnel employed by local school systems are covered by the Teachers Retirement System of Georgia (TRS), which is a cost-sharing multiple employer defined benefit pension plan. TRS provides service retirement, disability retirement and survivors benefits for its members in accordance with State statute. The Teachers Retirement System of Georgia issues a separate stand alone financial audit report and a copy can be obtained from the Georgia Department of Audits and Accounts. TRS CONTRIBUTIONS REQUIRED AND MADE Employees ofthe School District who are covered by TRS are required by State statute to contribute 5% of their gross earnings to TRS. The School District makes monthly employer contributions to TRS at rates adopted by the TRS Board ofTrustees 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 2008 2007 2006 100% 100% 100% $4,316,136.92 $ 4,049,323.54 $3,816,231.15 -23 - (This page left intentionally blank) BULLOCH COUNTY BOARD OF EDUCATION GENERAL FUND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE BUDGET AND ACTUAL YEAR ENDED JUNE 30, 2008 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 Adjustments NONAPPROPRIATED BUDGETS ORIGINAL {1) FINAL {1) ACTUAL AMOUNTS $ 15,312,316.00 $ 15,312,316.00 $ 15,895,527.96 11,088,006.00 11,478,777.00 10,810,612.99 45,218,961.00 45,835,864.00 48,575,782.00 8,646,475.45 9,503,084.50 8,869,050.30 1,273,661.00 1,399,274.00 2,613,748.05 650,374.00 650,374.00 757,620.14 115,545.00 120 161.00 944 914.44 $ 82,305,338.45 $ 84,299,850.50 $ 88,467,255.88 $ 52,888,471.11 $ 53,978,948.91 $ 55,812,357.40 3,454,868.25 1,562,099.53 1,421,750.19 769,428.49 4,956,624.75 549,736.83 5,766,892.12 4,641,900.40 1,027,265.72 830,386.25 4,436,384.38 3,555,875.62 2,113,645.16 1,440,117.51 719,594.42 4,971,408.25 587,826.36 5,778,829.26 4,707,129.73 1,048,753.34 453,477.37 4,683,064.38 3,695,917.87 2,371,272.97 1,470,815.25 657,567.43 4,931,797.47 761,270.44 5,758,780.79 4,891,316.06 1,101,984.46 679,565.34 561,190.79 4,849,527.24 $ 82,305,808.02 $ 84,038,670.31 $ 87,543,363.51 $ -469.57 $ 261,180.19 $ 923,892.37 $ 468,993.00 $ 468,993.00 -468,468.00 -468,468.00 $ -621,649.90 $ 525.00 $ 525.00 $ -621,649.90 $ 55.43 $ 261,705.19 $ 302,242.47 12,708,474.06 12,708,474.06 12,809,731.44 -22,383.01 -22,383.01 Fund Balances - Ending $ 12,686,146.48 $ 12,947,796.24 $ 13,111,973.91 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, 2008 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) Pass-Through From Bright From the Start: Georgia Department of Early Care and Learning Child and Adult Care Food Program Total U. S. Department of Agriculture Education, U. S. Department of Special Education Cluster Pass-Through From Georgia Department of Education Special Education Grants to States Preschool Grants Total Special Education Cluster Other Programs Pass-Through From Georgia Department of Education Career and Technical Education - Basic Grants to States English Language Acquisition Grants 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 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 $ 4,327,988.26 $ 4,327,988.26 10.550 10.558 N/A 283,183.97 N/A {2} $ 4,611,172.23 84.027 84.173 N/A $ 1,375,808.39 N/A 51 414.00 $ 1,427,222.39 84.048 84.365 84.367 84.011 84.358 84.298 84.010 84.287 N/A 102,866.00 NIA 22,437.03 N/A 497,178.00 N/A 53,313.00 NIA 264,014.46 N/A 22,352.68 N/A 2,469,131.07 N/A 737 918.16 $ 5,596,432.79 16.729 $ 36,616.83 $ 144,863.60 $ - 26- BULLOCH COUNTY BOARD OF EDUCATION SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS YEAR ENDED JUNE 30, 2008 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 Child and Adult Care Food Program ($35,000.00) and the School Breakfast Program ($827,143.28) were not maintained separately and are included in the 2008 National School Lunch Program. 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, 2008 SCHEDULE "3" AGENCY/FUNDING GRANTS Bright From the Start: Georgia Department of Early Care and Learning Pre-Kindergarten Program Education, Georgia Department of Quality Basic Education Direct Instructional Cost Kindergarten Program Kindergarten Program - Early Intervention Program Primary Grades (1-3) Program Primary Grades - Early Intervention (1-3) Program Upper Elementary Grades (4-5) Program Upper Elementary Grades - Early Intervention (4-5) Program Middle 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 Remedial Education Program Alternative Education Program English Speakers of Other Languages (ESOL) Media Center Program 20 Days Additional Instruction Staff and Professional Development Indirect Cost Central Administration School Administration Facility Maintenance and Operations Categorical Grants Pupil Transportation Regular Bus Replacement Nursing Services Migrant Education Vocational Supervisors Education Equalization Funding Grant Food Services Vocational Education Amended Formula Adjustment Other State Programs Academic Coaches Apprenticeship Program Georgia Communities in Schools Dropout Prevention Health Insurance High Performing Principals High School Graduation Coach Middle School Graduation Coach Middle School Remediation and Intervention Grant National Teacher Certification Preschool Handicapped Program Teachers' Retirement Virtual Schools Grant Georgia State Financing and Investment Commission Reimbursement on Construction Projects Office of Treasury and Fiscal Services Public School Employees Retirement GOVERNMENTAL FUND TYPES CAPITAL GENERAL PROJECTS FUND FUND TOTAL $ 1,294,302.60 $ 1,294,302.60 2,965,401.00 598,054.00 6,471,519.00 1,282,963.00 2,896,201.00 716,007.00 519,964.00 4,884,971.00 4,660,577.00 1,862,670.00 5,912,139.00 508,600.00 13,026.00 447,627.00 252,787.00 941,860.00 297,236.00 175,271.00 1,036,973.00 2,032,282.00 2,235,647.00 1,319,368.00 243,036.00 168,544.40 4,896.00 34,654.00 2,595,047.00 215,972.00 71,918.85 -803,563.00 42,049.00 51,112.99 26,412.00 1,831,075.33 15,000.00 159,871.00 126,288.00 6,553.00 174,411.00 174,862.00 38,968.26 3,675.00 2,965,401.00 598,054.00 6,471,519.00 1,282,963.00 2,896,201.00 716,007.00 519,964.00 4,884,971.00 4,660,577.00 1,862,670.00 5,912,139.00 508,600.00 13,026.00 447,627.00 252,787.00 941,860.00 297,236.00 175,271.00 1,036,973.00 2,032,282.00 2,235,647.00 1,319,368.00 243,036.00 168,544.40 4,896.00 34,654.00 2,595,047.00 215,972.00 71,918.85 -803,563.00 42,049.00 51,112.99 26,412.00 1,831,075.33 15,000.00 159,871.00 126,288.00 6,553.00 174,411.00 174,862.00 38,968.26 3,675.00 $ 10,449,301.00 10,449,301.00 11,470.00 11,470.00 - 28- BULLOCH COUNTY BOARD OF EDUCATION SCHEDULE OF STATE REVENUE YEAR ENDED JUNE 30, 2008 SCHEDULE "3" AGENCY/FUNDING CONTRACTS Community Affairs, Georgia Department of Local Assistance Grant Human Resources, Georgia Department of Family Connection GOVERNMENTAL FUND TYPES CAPITAL GENERAL PROJECTS FUND FUND TOTAL $ 11,250.00 46,833.57 $ 11,250.00 46,833.57 $ 48,575,782.00 $ 10,449,301.00 $ 59,025,083.00 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, 2008 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 $ 31,983,378.71 $ 36,851,639.67 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, 2008 SCHEDULE "5" DESCRIPTION ALLOTMENTS FROM GEORGIA DEPARTMENT OF EDUCATION (1) (2) ELIGIBLE QBE PROGRAM COSTS SALARIES OPERATIONS TOTAL Direct Instructional Programs Kindergarten Program $ Kindergarten Program-Early Intervention Program Primary Grades (1-3) Program Primary Grades-Early Intervention (1-3) Program Upper Elementary Grades (4-5) Program Upper Elementary Grades-Early Intervention (4-5) Program Middle 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 CategoryV Gifted Student - Category VI Remedial Education Program Alternative Education Program English Speakers of Other Languages (ESOL) 3,469,225.00 $ 679,829.00 7,505,916.00 1,501,152.00 3,343,948.00 2,509,033.67 $ 835,468.98 8,569,879.14 1,439,344.11 3,818,931.30 154,952.03 $ 12,929.04 666,097.09 38,051.70 299,722.21 2,663,985.70 848,398.02 9,235,976.23 1,477,395.81 4,118,653.51 895,965.00 602,672.00 5,709,669.00 5,468,242.00 2,166,970.00 6,849,392.00 603,479.00 13,122.00 522,705.00 305 543.00 1,213,356.80 6,726,446.61 7,006,844.08 1,854,968.71 83,112.31 1,113,461.08 4,449,762.88 846,694.50 138,949.83 959,450.81 297,097.24 304,258.02 34,154.80 644,669.82 905,065.09 153,907.91 531.95 49,914.14 59,176.78 122,665.86 19 853.15 1,247,511.60 7,371,116.43 7,911,909.17 2,008,876.62 83,112.31 1,113,993.03 4,499,677.02 846,694.50 138,949.83 1,018,627.59 419,763.10 324111.17 TOTAL DIRECT INSTRUCTIONAL PROGRAMS $ 39,637,829.00 $ 42,167,060.07 $ 3,161,691.57 $ 45,328,751.64 Media Center Program Staff and Professional Development 1,098,567.00 206,246.00 1,252,776.18 65,240.14 177,764.68 122,256.43 1,430,540.86 187 496.57 TOTAL QBE FORMULA FUNDS $ 40,942,642.00 $ 43,485,076.39 $ 3,461,712.68 $ 46,946,789.07 (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 October 19, 2009 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 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 ofBulloch County Board ofEducation as of and for the year ended June 30, 2008, which collectively comprise Bulloch County Board of Education's basic financial statements and have issued our report thereon dated October 19, 2009. 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 a certain deficiency in internal control over financial reporting that we consider to be a significant deficiency. 2008YB-41 A control deficiency exists when the design or operation ofa 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 affects 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 item FS-6161-08-01 in the accompanying Schedule ofFindings and Questioned Costs to be a significant deficiency in internal control over financial reporting. A material weakness is a significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood that a material misstatement ofthe financial statements will not be prevented or detected by the 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 ofthis section and would not necessarily disclose all deficiencies in internal control that might be significant deficiencies and, accordingly, would not necessarily disclose all significant deficiencies that are also considered to be material weaknesses. However, we consider item FS-6161-08-01 to be a material weakness. 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 October 19, 2009. Bulloch County Board of Education's response to the findings identified in our audit is described in the accompanying Schedule ofManagement's Responses. We did not audit Bulloch County Board of Education's response and, accordingly, we express no opinion on it. 2008YB-41 This report is intended solely for the information and use of management, members ofthe Bulloch County Board of Education, others within the entity, 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. RWH:as 2008YB-41 Respectfully submitted, ~~-... W..l-0.~ ~udell w. Hinton, CPA, CGFM State Auditor 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 October 19, 2009 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, 2008. 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 ofStates, 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 2008SA-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 of its major Federal programs for the year ended June 30, 2008. 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 ofinternal control over compliance. Accordingly, we do not express an opinion on the effectiveness of the 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. 2008SA-10 This report is intended solely for the information and use of management, members ofthe 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 2008SA-10 Rus 11 W. Hinton, CPA, CGFM State Auditor 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, 2008 PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS FINDING CONTROL NUMBER AUDITEE'S RESPONSE/STATUS SEE AUDITOR'S COMMENTS FS-6161-04-02 Further Action Not Warranted (1) FS-6161-06-01 Further Action Not Warranted FS-6161-06-03 Further Action Not Warranted FS-6161-06-04 Further Action Not Warranted FS-6161-07-01 Further Action Not Warranted (2) FS-6161-07-02 Further Action Not Warranted (2) FS-6161-07-03 Further Action Not Warranted (2) FS-6161-07-04 Unresolved - See Corrective Action/Responses CORRECTIVE ACTION/RESPONSES FINANCIAL REPORTING Inadequate Controls over Financial Reporting Finding Control Number: FS-6161-07-04 The School System's financial staffhas met with the auditors to ensure their understanding of necessary procedures for adequate financial reporting. Guidelines are being developed to ensure that the financial statements are prepared properly and timely by the School System's financial staff. AUDITOR'S COMMENTS (1) The final resolution ofthis finding rests with the Georgia Department of Community Health. (2) Findings/internal control deficiencies of this nature, that are not deemed significant deficiencies or material weaknesses and do not require reporting in the audit report in accordance with Statements on Auditing Standards (SAS) 112 or Governmental Auditing Standards (Yellow Book), will be communicated in a management letter. PRIOR YEAR FEDERAL AWARD FINDINGS AND QUESTIONED COSTS No matters were reported. SECTION IV FINDINGS AND QUESTIONED COSTS BULLOCH COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2008 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 ofEducation disclosed a financial statement significant deficiency related to the following control category. Financial Reporting The significant deficiency described above is considered to be a material weakness. 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 .510(a) ofOMB Circular A-133 The Bulloch County Board ofEducation's audit did not disclose audit findings required to be reported by section .5 lO(a) of 0MB Circular A-133. 7. Major Programs Federal awards audited as major programs are as follows: 10.553 Food Services - School Breakfast Program 10.555 Food Services - National School Lunch Program 8. Type "A" Program Dollar Threshold The dollar threshold for type "A" programs was $311,672.57. 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. - 1- BULLOCH COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2008 II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS FINANCIAL REPORTING Inadequate Controls over Financial Reporting Material Weakness Finding Control Number: FS-6161-08-01 Condition: This is a repeat finding (FS-6161-07-04) from the year ended June 30, 2007. The School District did not have adequate controls in place to ensure that all required activity was included in the financial statement information presented for audit. Criteria: Chapter 22 Annual Financial Reporting of the Financial Management for Georgia Local Units of Administration proposes that the School Districts must prepare their financial statements in accordance with generally accepted accounting principles. Questioned Cost: NIA Information: During the audit, the following correcting entries were proposed and accepted by the client to properly present the entity's financial statements: Capital Assets were not recorded at the appropriate amounts. Material audit adjustments of $3,313,659.44 (net) were necessary to correct the Districtwide statements. Contracts Payable were not recorded at the appropriate amount. A significant audit adjustment of $399,559.73 was necessary to correct the Capital Projects Fund and the District-wide statements. Retainages Payable were not recorded at the appropriate amount. A significant audit adjustment of $836,004.10 was necessary to correct the Capital Projects Fund and the District-wide statements. Other notable audit entries were made to correctly reflect the financial statements in accordance with Chapter 22 Annual Financial Reporting ofthe Financial Management for Georgia Local Units of Administration. Cause: The School District did not implement an adequate system ofinternal control over the financial statement reporting process. -2- BULLOCH COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2008 II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS FINANCIAL REPORTING Inadequate Controls over Financial Reporting Material Weakness Finding Control Number: FS-6161-08-01 Effect: The School District did not comply with the requirements of the Georgia Department of Education regarding financial reporting. Adjustments were necessary in order to present materially correct financial statements for the School District. Recommendation: The School District should implement controls over the financial statement reporting process to ensure that all required activity is included in the financial statement information presented for audit. III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS No matters were reported. -3- SECTIONV MANAGEMENT'S RESPONSES BULLOCH COUNTY BOARD OF EDUCATION SCHEDULE OF MANAGEMENT'S RESPONSES YEAR ENDED JUNE 30, 2008 Finding Control Number: FS-6161-08-01 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. As a result, the procedures for recording capital assets to the capital assets sub-ledger, reconciliation ofthe capital assets sub-ledger to the general ledger, and the preparation ofresulting financial statement records have been revised. These changes include the separation ofduties for completion, reconciliation and review ofnecessary procedures and clarification ofthe step-by-step actions to be accomplished. In addition, the necessary calculations for recording Retainage Payable and Contracts Payable, in relation to Construction-In-Progress, have been reviewed to ensure accuracy. Contact Person: Mr. Charles Wilson, Assistant Superintendent for Business and Finance Telephone: (912) 764-1603 Email: cwilson@bulloch.kl2.ga.us