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

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

CATOOSA 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

1

B

STATEMENT OF ACTIVITIES

2

FUND FINANCIAL STATEMENTS

C

BALANCE SHEET

GOVERNMENTAL FUNDS

4

D

RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET

TO THE STATEMENT OF NET ASSETS

5

E

STATEMENT OF REVENUES, EXPENDITURES AND CHANGES

IN FUND BALANCES

GOVERNMENTAL FUNDS

6

F

RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT

OF REVENUES, EXPENDITURES AND CHANGES IN FUND

BALANCES TO THE STATEMENT OF ACTIVITIES

7

G

STATEMENT OF FIDUCIARY NET ASSETS

FIDUCIARY FUNDS

9

H

NOTES TO THE BASIC FINANCIAL STATEMENTS

10

SCHEDULES

REQUIRED SUPPLEMENTARY INFORMATION

1 SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES

IN FUND BALANCES - BUDGET AND ACTUAL

GENERAL FUND

25

CATOOSA 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

29

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

CATOOSA 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
June 9, 2008

Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the Catoosa 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 Catoosa County Board of Education, as of and for the year ended June 30, 2007, which collectively comprise the Board's basic financial statements as listed in the table of contents. These financial statements are the responsibility ofthe Catoosa County Board ofEducation's management. Our responsibility is to express opinions on these financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United States ofAmerica and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General ofthe United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Catoosa County Board of Education's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinions.

2007ARL-11

In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, each major fund, and the aggregate remaining fund information ofthe Catoosa County Board ofEducation, as ofJune 30, 2007, and the respective changes in financial position thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America.
In accordance with Government Auditing Standards, we have also issued our report dated June 9, 2008, on our consideration of the Catoosa 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 x and page 25 respectively, are not a required part of the 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 Catoosa 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,
~nt~~~~ State Auditor
RWH:gp 2007ARL-11

CATOOSA COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2007
INTRODUCTION
Our discussion and analysis ofthe Catoosa County School District's financial performance provides an overview ofthe School District's financial activities for the fiscal year ended June 30, 2007. The intent of this discussion and analysis is to look at the School District's financial performance as a whole; readers should also review the basic financial statements and the notes to the financial statements to enhance their understanding of the School District's financial performance.
The basic financial statements contain three components:
1) District-wide financial statements, including the Statement ofNet Assets and the Statement of Activities, which provide a broad, long-term overview of the School District's overall financial status,
2) Fund financial statements, including the Balance Sheet and the Statement of Revenues, Expenditures and Changes in Fund Balances, which provide a greater level of detail of the School District's operations. Fund financial statements reflect the School District's significant funds. The Governmental Funds statements disclose how basic services are financed in the short-term and what remains for future spending. The Fiduciary Funds statements provide information about the financial relationships in which the School District acts solely as a trustee or agent for the benefit of others, and
3) Notes to the basic financial statements.
This report presents the financial highlights for the last year and contains other supplementary information.
OVERALL ANALYSIS
The School District currently serves approximately 10,000 students with a general fund budget of approximately $90 million. In general, the financial operations ofthe School District have remained strong in spite of experiencing rapid growth as well as continuing state revenue reductions.
FINANCIAL HIGHLIGHTS
Key financial highlights for 2007 are as follows:
On the District-wide financial statements:
Total net assets ofthe School District increased from $112,918,590 at June 30, 2006, to $124,986,817 at June 30, 2007, an increase of $12,068,227 or 10.68%.
Total revenues increased from $94,916,721 in fiscal year 2006, to $111,970,002 in fiscal year 2007, an increase of $17,053,281 or 17.96%.

CATOOSA COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2007
Total expenses increased from $89,288,533 in fiscal year 2006, to $99,901,775 in fiscal year 2007, an increase of $10,613,242 or 11.88%.
On the fund financial statements:
Ending fund balances of the School District increased from $21,646,181 at June 30, 2006, to $51,168,613 at June 30, 2007, an increase of$29,522,432, or 136.38%.
In the General Fund, unreserved fund balance decreased from $9,479,837 at June 30, 2006, to $7,802,191 at June 30, 2007, a decrease of $948,166, or 10.83%.
Total General Fund actual revenues were $8,176,026, or 9.46%, more than final budgeted revenues.
Total General Fund actual expenditures were $5,712,888, or 6.36%, more than final budgeted expenditures.
OVERVIEW OF DISTRICT-WIDE FINANCIAL STATEMENTS
The District-wide financial statements are designed to provide readers with a broad overview ofthe School District's finances in a manner similar to a private sector business. The Statement of Net Assets and the Statement of Activities provide information about the School District as a whole, presenting both an aggregate and long-term view ofthe finances. These statements include all assets and liabilities using the actual basis of accounting. This basis of accounting includes all of the current year's revenues and expenses regardless when the cash is received or paid.
The Statement ofNet Assets presents information on all ofthe School District's assets and liabilities, with the difference between the two reported as net assets. Over time, increases or decreases in net assets may serve as a useful indicator of whether the financial position of the School District is improving or diminishing. Causes of the change in net assets are the results of many factors including those not under the control of the School District, such as property tax base, facility conditions, required educational programs, student-teacher ratios and other factors.
The Statement ofActivities presents information showing how the School District's net assets changed during the most recent fiscal year. All changes in net assets are reported as soon as the underlying event giving rise to the change occurs, regardless ofthe timing ofrelated cash flows. Thus, revenues and expenses are reported in this.statement for some items that will only result in cash flows in future fiscal periods (e.g., uncollected taxes).
The District-wide financial statements outline functions of the School District that are principally supported by property taxes and intergovernmental revenues. The governmental activities of the School District include instruction, support services, community services, food services and interest on long-term debt.
ii

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

FINANCIAL ANALYSIS OF THE SCHOOL DISTRICT AS A WHOLE

All ofthe School District's services are reported in the District-wide financial statements, including instruction, pupil services, improvement of instructional services, educational media services, general administration, business administration, school administration, pupil transportation, maintenance and operations, central support services, other support services, food services and interest on long-term debt. Property taxes and operating grants and contributions finance most of these activities. Additionally, all capital and debt financing activities are reported here.

Table 1 Net Assets

Fiscal Year2007

Governmental Activities Fiscal
Year2006 Change

% Change

Assets Current and Other Assets Capital Assets, Net

$ 67,927,439 $ 33,660,004 $34,267,435 114,344,997 91,194,210 23,150,787

101.80% 25.38%

Total Assets

$182,272,436 $124,854,214 $57,418,222

45.98%

Liabilities Current and Other Liabilities Long-Term Liabilities

$ 16,723,562 $ 11,935,624 $ 4,787,938

40,562,057

40,562,057

40.11%

Total Liabilities

$ 57,285,619 $ 11,935,624 $45,349,995 379.95%

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

$ 93,100,724 $ 91,194,210 $ 1,906,514 22,661,413 10,972,360 11,689,053 9,224,680 10,752,020 -1,527,340

2.09% 106.53% -14.20%

Total Net Assets

$12412861811 $112,218,520 $12,0681221

10.68%

111

CATOOSA COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2007
NET ASSETS - JUNE 30, 2007
Invested In Capital Assets, Net Of Related Debt 75%
Current Assets increased, primarily due to a significant increase in the area ofrestricted cash and investments attributable to a current year bond issuance. Capital Assets, net of depreciation, increased as a result of significant capital projects, including the ongoing construction of a new high school reported as construction-in-progress. Current Liabilities increased as a result ofincreases in salaries and benefits payable due to current year rate increases in both salaries and benefits. Contractual obligations, contracts and retainages payable, increased in conjunction with the increase of ongoing capital projects. Long-Term Liabilities, not applicable in the prior year, are attributable to the debt associated with a current year bond issuance.
IV

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

Table 2 Change in Net Assets

Fiscal Year 2007

Governmental Activities

Fiscal

Year 2006

Change

% Change

Revenues:

Program Revenues:

Charges for Services

$ 2,111,927

Operating Grants and

Contributions

58,210,807

Capital Grants and

Contributions

5,901,944

General Revenues:

Property Taxes

22,231,601

Special Purpose Sales Tax

for Capital Projects

9,369,107

Other Taxes

1,123,493

Grants and Contributions not

Restricted to Specific Programs 5,544,679

Unrestricted Investment Earnings 2,968,897

Miscellaneous

4,507.547

$ 2,365,411
50,943,158
497,675
20,003,892
9,213,981 1,218,581
5,080,142 975,722
4,618,159

$ -253,484
7,267,649
5,404,269
2,227,709
155,126 -95,088
464,537 1,993,175 -110.612

-10.71%
14.26%
1,085.90%
11.13%
1.68% -7.80%
9.15% 204.27%
-2.40%

Total Revenues

$111,970.002 $ 94,916.721 $17,053,281

17.96%

Program Expenses:

Instruction

$ 66,524,424

Support Services

27,052,354

Community Services

496,798

Food Services

4,973,446

Interest and Fees on Long-Term

Debt

854.753

$ 58,678,165 $ 7,846,259

25,493,069 1,559,285

480,310

16,488

4,636,989

336,457

854.753

13.37% 6.11% 3.43% 7.25%

Total Expenses

$ 99,901,775 $ 89,288.533 $10,613,242

11.88%

Change in Net Assets

$ 12,068,227 $ 5,628,188 $ 6,440,039 114.42%

Net Assets - Beginning

112,918.590 107.290.402 5,628.188

5.24%

Net Assets - Ending

$124.986.817 $112,918.590 $12,068.227

10.68%

OVERVIEW OF FUND FINANCIAL STATEMENTS

A fund is a grouping of related accounts used to maintain control over resources that have been separated for specific activities or objectives. The School District uses fund accounting to ensure and demonstrate compliance with finance related legal requirements. All funds of the School District can be divided into two categories: governmental funds and fiduciary funds.

V

CATOOSA COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2007
Governmental Funds: are used to account for essentially the same functions reported as governmental activities in the District-wide financial statements. However, unlike the District-wide statements, governmental fund financial statements focus on near-term inflows of spendable resources, as well as on balances ofspendable resources available at the end ofthe fiscal year. Such information may be useful in evaluating the School District's near-term financing requirements.
Because the focus of governmental funds is narrower than that of the District-wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the District-wide financial statements. By doing so, readers may better understand the long-term impact of the School District's near-term financing decisions. The governmental funds Balance Sheet and the Statement of Revenues, Expenditures and Changes in Fund Balance provide a reconciliation to facilitate this comparison between governmental funds and governmental activities.
The School District's fund financial statements provide detailed information about the most significant funds - not the School District as a whole. The majority ofthe School District's services are reported in governmental funds. Governmental fund reporting focuses on showing how money flows into and out of funds and the balances left at year-end that are available for spending. They are reported using modified accrual accounting, which measures cash and all other financial assets that can readily be converted to cash. The governmental funds financial statements provide a detailed short-term view of the School District's operations and the services it provides.
In accordance with generally accepted accounting principles, the School District maintains many individual governmental funds. Information is presented separately in the governmental funds Balance Sheet and the Statement ofRevenues, Expenditures and Changes in Fund Balances for the General Fund, Capital Projects Fund and the Debt Service Fund, each ofwhich is considered to be a significant or major fund. The School District has no nonmajor funds as described by generally accepted accounting principles
Fiduciary Funds: are used to account for those assets belonging to clubs, organizations and others. The School District acts as a trustee, or fiduciary, and as such is responsible for ensuring the assets reported in these funds are used only for their intended purposes and by those to whom the assets belong. Fiduciary fund activity is excluded from the District-wide financial statements as these assets cannot be used to finance its operations.
REVENUES AND OTHER FINANCING SOURCES- FUND FINANCIAL STATEMENTS
The following schedule presents a summary ofthe governmental funds revenues and other financing sources for the period ended June 30, 2007, as compared to June 30, 2006. It depicts both the absolute value and percentage changes in relation to the prior year.
vi

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

Property Tax.es Sales Tax.es State Funds Federal Funds Other Other Financing Sources
Total

FY2007
$ 22,274,536 10,492,600 61,773,397 7,222,985 10,134,926 40,676,550
$152,574,994

% of Total
14.60% 6.87% 40.49% 4.73% 6.64% 26.67%
100.00%

FY2006

$ Change

$20,062,353 10,432,562 48,444,184 7,448,167 8,587,916

$ 2,212,183 60,038
13,329,213 -225,182 1,547,010
40,676,550

$ 94.975,182 $ 57,599,812

%Change
11.02% 0.57% 27.51% -3.02% 18.01%
60.64%

EXPENDITURES AND OTHER FINANCING USES - FUND FINANCIAL STATEMENTS

The following schedule presents a summary of the governmental funds expenditures and other financing uses for the period ended June 30, 2007, as compared to June 30, 2006. It depicts both the absolute value and percentage changes in relation to the prior year.

FY2007

Current Instruction Support Services Pupil Services Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operations Student Transportation Service Central Support Services Other Support Services Community Services Operations Food Services Operations
Capital Outlay Debt Services

$ 64,286,049
2,811,098 3,669,540 1,759,394 1,078,799 6,543,363
681,643 6,166,022 3,435,601
381,777 594,158 496,798 4,910,676 25,382,891 854,753

Total

$123,052.562

% of Total
52.25%
2.29% 2.98% 1.43% 0.87% 5.32% 0.56% 5.01% 2.79% 0.31% 0.48% 0.40% 3.99% 20.63% 0.69%
100.00%

FY2006

$ Change

$ 56,621,559 $ 7,664,490

2,506,678 3,116,517 1,920,098 1,293,009 6,081,957
625,279 6,120,993 3,735,058
379,545 960,459 480,310 4,573,746 7,714,576

304,420 553,023 -160,704 -214,210 461,406
56,364 45,029 -299,457 2,232 -366,301 16,488 336,930 17,668,315 854,753

$96,129.784 $ 26.922,778

%Change
13.54%
12.14% 17.74% -8.37% -16.57% 7.59% 9.01% 0.74% -8.01% 0.59% -38.14% 3.43% 7.37% 229.03%
28.01%

GENERAL FUND BUDGETARY HIGHLIGHTS

The School District's annual budget is prepared on a basis consistent with generally accepted accounting principals. The most significant budgeted fund is the General Fund. During the course of the fiscal year, the School District amends its General Fund budget as needed.

During fiscal year 2007, the General Fund had actual revenues totaling $94.6 million, which exceeded the original budgeted amounts of $83.9 million by $10.7 million. The difference was primarily due to an increase in State and Federal revenues over the original budget by $4.5 million and miscellaneous revenues from various sources, primarily school activity (principal) accounts, over original budget by $5.0 million.

vu

CATOOSA COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2007
General Fund actual expenditures for fiscal year 2007 exceeded original budgeted amounts by $8.1 million. The difference was primarily due to the increase in instructional costs and expenditures of various school activity (principal) accounts totaling $3.5 million. The original budget adopted by the School District included the use of$3.4 million offund balance. During the year the budget was amended several times to provide for additional State and Federal revenue, including a mid-term adjustment to state allotments not included in the original budget. As actual revenues exceeded budgeted revenues $10.7 million and actual expenditures exceeded budgeted expenditures $8.1 million, the fund balance was decreased by approximately $900,000 rather than the anticipated $3.4 million. SUBSEQUENT YEAR BUDGET AND RATES
The School District adopted a General Fund budget for fiscal year 2008 reflecting total resources, including appropriations, of$93. l million and total expenditures of$96.9 million with the anticipated use of $3.8 million of fund balance.
The fiscal year 2007 budget was based on a tax rate for maintenance and operations of schools (M&O) of 15.578 mills. In fiscal year 2008, the School District increased the tax rate for M&O to 16.828 mills.
CAPITAL ASSETS AND DEBT ADMINISTRATION Capital Assets At fiscal year ended June 30, 2007, the School District had $114,344,997 invested in capital assets, net of accumulated depreciation, all in governmental activities. This amount represents a net increase (including additions, deletions and depreciation) of $23,150,787, or 25.38%, from fiscal year 2006. The assets are made up of a broad range of items including buildings, land, land improvements, equipment (transportation, maintenance and food service) and construction-inprogress. The following schedule reflects a summary of these balances as compared to the prior year.
vm

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

Capital Assets (Net of Depreciation)

Governmental Activities

Fiscal

Fiscal

Year 2007

Year 2006

Land Construction in Progress Land Improvements Buildings and Improvements Equipment

$ 4,757,420 22,739,685 1,923,073 81,366,353 3,558,466

$ 4,429,049 17,129,242 1,806,637 64,684,160 3,145,122

Total

$ 114,344,297 $ 21,194,210

Due to the increasingly rapid growth in Catoosa County, the School District has significant ongoing construction projects, including a new high school as well as additions and renovations to existing buildings. Additional information related to the Schools District's capital assets can be found in the Notes to the Basic Financial Statements.

Long-Term Debt

In fiscal year 2007, the School District issued general obligation bonds totaling $40.0 million. The School District's assigned bond rating was "AAA" as assessed by Standard and Poor's Ratings Services.

The following schedule summarizes the School District's debt for general obligation bonds:

Debt at June 30, 2007

Bonds Payable (including unamortized Bond Premium)

$ 40,562,057

CURRENT ISSUES

Currently known facts, decisions or conditions that are expected to have a significant effect on financial positions or results of operations:

ix

CATOOSA COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2007
Economic Slowdown - Increases in total State funding for education have been minimal and, as a result, more pressure is placed on the local school districts to prioritize its educational programs and provide additional local funding. The School District continues to provide an increasing amount of local monies to meet various mandated educational requirements. Additional costs to the School District will be required with the continued implementation of House Bill 1187, which mandates lower teacher to student ratios, requiring additional teachers and additional classrooms. Despite these challenges, the Catoosa County Board ofEducation remains optimistic about the ability of the School District to maximize all of its financial resources to provide a quality education to all of its students.
Capital Improvements - The School District plans capital improvements as future capital needs arise due to increased student population and facility repair and maintenance needs. Specific capital expenditure plans are formalized in conjunction with the general obligation bond issue and anticipated annual receipts of capital outlay funds from the State of Georgia Department of Education. The School District regularly monitors anticipated capital outlay needs.
CONTACTING THE SCHOOL DISTRICT'S FINANCIAL MANAGEMENT This financial report is designed to provide the citizens, taxpayers, parents, students, investors and creditors with a general overview ofthe School District's finances. The report also demonstrates the School District's accountability for the funds it receives. Additional information can be requested by mail at the following address: Catoosa County Board of Education 307 Cleveland Street Ringgold, Georgia 30736
X

CATOOSA COUNTY BOARD OF EDUCATION

CATOOSA COUNTY BOARD OF EDUCATION STATEMENT OF NET ASSETS JUNE 30, 2007
ASSETS
Cash and Cash Equivalents Investments Accounts Receivable, Net
Taxes State Government Federal Funds Other Inventories Prepaid Expenditures Capital Assets Land Construction in Progress Land Improvements Buildings Equipment Less: Accumulated Depreciation
Total Assets
LIABILITIES
Accounts Payable Salaries Payable Contracts Payable Retainages Payable Deferred Revenue 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 Services Capital Projects Unrestricted
Total Net Assets
Total Liabilities and Net Assets
The notes to the basic financial statements are an integral part of this statement.
-1-

EXHIBIT"A"

GOVERNMENTAL ACTIVITIES

$

27,042,743

28,852,138

2,377,702 8,550,225
817,761 124,851 161,359
660

4,757,420 22,739,685
2,769,584 101,800,400
7,139,085 -24,861,177

$ ====1=82='=27=2=-,4=3==6

$

2,817,663

8,335,951

3,559,075

2,008,478

2,395

124,902 40,437,155

$

57,285,619

$

93,100,724

1,021,764 2,472,101 19,167,548 9,224,680

$

124,986,817

$ ===1=8=2,=27=2=,4=36=

CATOOSA COUNTY BOARD OF EDUCATION STATEMENT OF ACTIVITIES
FOR THE YEAR ENDED JUNE 30, 2007

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

EXPENSES

CHARGES FOR SERVICES

$

66,524,424 $

2,811,098 3,669,540 1,759,394 1,078,799 6,543,363
681,643 6,161,725 3,370,857
381,777 594,158

4,973,446 496,798 854 753

$

99,901,775 $

65,348 154
2,124 12,112
3,896
2,014,464 13,829
2 111 927

Net Assets - End of Year

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

EXHIBIT"B"

PROGRAM REVENUES OPERATING GRANTS AND
CONTRIBUTIONS

CAPITAL GRANTS AND CONTRIBUTIONS

NET (EXPENSES) REVENUES
AND CHANGES IN NET ASSETS

$

44,192,985 $

966,626 1,059,021 1,116,820 1,486,165 2,401,280
11,457 2,782,431 1,234,457
8,199 170,969

2,780,397

$

58,210,807 $

5,328,763 $
55,804 399,150 118,227 5,901,944 $

-16,937,328
-1,844,318 -2,610,519
-640,450 407,366 -4,129,971 -670,186 -3,319,594 -1,737,250 -373,578 -423,189
-60,358 -482,969 -854 753
-33,677,097

$

22,231,601

9,369,107 889,180 234,313
5,544,679 2,968,897 4 507 547

$

45,745,324

$

12,068,227

112,918,590

$ ====--===1=2.,.4,=98=6=,8=1=7

-3-

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

EXHIBIT"C"

ASSETS
Cash and Cash Equivalents Investments Accounts Receivable, Net
Taxes State Government Federal Government Other Inventories Prepaid Expenditures
Total Assets
LIABILITIES AND FUND BALANCES
LIABILITIES
Accounts Payable Salaries Payable Contracts Payable Retainages Payable Deferred Revenue
Total Liabilities
FUND BALANCES
Reserved for: Continuation of Federal Programs Inventories Debt Service Capital Projects
Unreserved Designated for Student Activities Undesignated Reported in: General Fund Capital Projects
Total Fund Balances
Total Liabilities and Fund Balances

GENERAL FUND

DISTRICTWIDE
CAPITAL PROJECTS
FUND

DEBT SERVICE
FUND

TOTAL

$ 12,044,188 $ 12,536,432 $

21,500

28,830,638

734,139 6,929,141
817,761 107,547 161,359
660

1,608,299 1,621,084
7,326

2,462,123 $ 9,978

27,042,743 28,852,138
2,342,438 8,550,225
817,761 124,851 161,359
660

$ 20,816,295 $ 44,603,779 $

2,472,101 $ ==6=7'=89=2=1' =7=5

$ 2,806,449 $ 8,335,951
2 395 $ 11 144 795 $

11,214 3,559,075 2,008,478
5,578,767

$

2,817,663

8,335,951

3,559,075

2,008,478

2 395

$

16,723,562

$

860,405

$

860,405

161,359

161,359

$

2,472,101

2,472,101

$ 38,162,149

38,162,149

847,545

847,545

7,802,191

862,863

7,802,191 862,863

$ 9,671,500 $ 39,025,012 $

2,472,101 $

51,168,613

$ 20,816,295 $ 44,603,779 $

2,472,101 $ ====6=7'=89=2=,1=7=5

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

CATOOSA COUNTY BOARD OF EDUCATION RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET
TO THE STATEMENT OF NET ASSETS JUNE 30, 2007

EXHIBIT"D"

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

$ 51,168,613

$

4,757,420

22,739,685

2,769,584

101,800,400

7,139,085

-24,861, 177

114,344,997

35,264

$ 40,000,000 562,057

-40,562,057

Net Assets of Governmental Activities (Exhibit "A")

$ 124,986,817

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

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

EXHIBIT"E"

REVENUES
Property Taxes Sales Taxes State Funds Federal Funds Charges for Services Investment Earnings Miscellaneous
Total Revenues
EXPENDITURES
Current Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Food Services Operation Community Services
Capital Outlay Debt Services
Interest Paying Agent Fees
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

$ 22,274,536

$

22,274,536

1,123,493 $

9,369,107

10,492,600

56,270,603

5,502,794

61,773,397

7,222,985

7,222,985

2,111,927

2,111,927

506,975

809,515 $

1,652,407

2,968,897

5,054,102

5,054,102

$ 94,564,621 $ 15,681,416 $

1,652,407 $ 111,898,444

$ 64,286,049

2,752,620 $ 3,269,593 1,759,394
700,934 6,543,363
681,643 5,869,278 3,235,601
381,777 594,158 4,910,676 496,798

58,478 399,947 377,865
296,744 200,000
25,382,891

$

$ 95,481,884 $ 26,715,925 $

$

-917 263 $ -11,034,509 $

$
854,153 600
854 753 $ 797 654 $

64,286,049
2,811,098 3,669,540 1,759,394 1,078,799 6,543,363
681,643 6,166,022 3,435,601
381,777 594,158 4,910,676 496,798 25,382,891
854,153 600
123,052,562
-11154118

$ 40,000,000 676,550
$ -1674447

$ 1,674,447

40,000,000 676,550
1,674,447 -1674447

$ 39,002,103 $

1674447 $

40,676,550

$

-917,263 $ 27,967,594 $

2,472,101 $

29,522,432

10,588,763

11,057,418

0

21,646,181

Fund Balances - Ending

$

9,671,500 $ 39,025,012 $

2,472,101 $

51,168,613

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

CATOOSA COUNTY BOARD OF EDUCATION RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT OF
REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES TO THE STATEMENT OF ACTIVITIES JUNE 30, 2007

EXHIBIT"F"

Total Net Change in Fund Balances - Governmental Funds (Exhibit "E")
Amounts reported for Governmental Activities in the Statement of Activities are different because:
Capital Outlays are reported as expenditures in Governmental Funds. However, in the Statement of Activities, the cost of Capital Assets is allocated over their estimated useful lives as depreciation expense. In the current period, these amounts are:
Capital Outlay Depreciation Expense
Excess of Capital Outlay over Depreciation Expense
Because some property taxes will not be collected for several months after the School District's fiscal year ends, they are not considered "available" revenues.
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 Obligation Bonds Issued, including a premium of $676,550
Repayment of Long-Term Debt is reported as an expenditure in Governmental Funds, but the repayment reduces Long-Term Liabilities in the Statement of Net Assets. In the current year, these amounts consist of:
Unamortized Bond Premiums

$ 29,522,432

$ 24,862,458 -1,711,671

23,150,787 -42,935

-40,676,550

114,493

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

$ ======12='=06..,8..,,2..2..7...

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

(This page left intentionally blank)

CATOOSA COUNTY BOARD OF EDUCATION STATEMENT OF FIDUCIARY NET ASSETS FIDUCIARY FUNDS JUNE 30, 2007
ASSETS Cash and Cash Equivalents Accounts Receivable, Net
Other
Total Assets
LIABILITIES Accounts Payable Salaries Payable Funds Held for Others
Total Liabilities

EXHIBIT"G"

AGENCY FUNDS

$

265,006

16,000

$===2=81=,0=0=6

$

705

2,969

277,332

$ ===2a...1._,o=o=s

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

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

EXHIBIT "H"

Note 1: DESCRIPTION OF SCHOOL DISTRICT AND REPORTING ENTITY
REPORTING ENTITY
The Catoosa 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 Catoosa 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.

- 10 -

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

EXHIBIT"H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The School District reports the following major governmental funds:
General Fund is the School District's primary operating fund. It accounts for all financial resources ofthe School District, except those resources required to be accounted for in another fund.
District-wide Capital Projects Fund accounts for financial resources including Special Purpose Local Option Sales Tax (SPLOST), Bond Proceeds and grants from Georgia State Financing and Investment Commission to be used for the acquisition, construction or renovation ofmajor capital facilities.
Debt Service Fund accounts for taxes (sales) legally restricted for the payment ofgeneral longterm principal, interest and paying agent's fees.
The School District reports the following fiduciary fund type:
Agency funds account for assets held by the School District as an agent for various 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
- 11 -

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

EXHIBIT "H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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.
The School District funds certain programs by a combination ofspecific cost-reimbursement grants, categorical grants, and general revenues. Thus, when program costs are incurred, there are both restricted and unrestricted net assets available to finance the program. It is the School District's policy to first apply grant resources to such programs, followed by cost-reimbursement grants, then general revenues.
CASH AND CASH EQUIVALENTS
COMPOSITION OF DEPOSITS Cash and cash equivalents consist ofcash on hand, demand deposits and short-term investments with original maturities of three months or less from the date of acquisition in authorized financial institutions. Official Code of Georgia Annotated Section 45-8-14 authorize the School District to deposit its funds in one or more solvent banks or insured Federal savings and loan associations.
INV_ESTMENTS
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,

- 12 -

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

EXHIBIT "H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

(7) Repurchase agreements, and

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

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

RECEIVABLES

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

PROPERTY TAXES

The Catoosa County Board of Commissioners fixed the property tax levy for the 2006 tax digest year (calendar year) on July 27, 2006 (levy date). Taxes were due on December 20, 2006 (lien date). Taxes collected within the current fiscal year or within 60 days after year-end on the 2006 tax digest are reported as revenue in the governmental funds for fiscal year 2007. The Catoosa County Tax Commissioner bills and collects the property taxes for the School District, withholds 2.5% oftaxes collected as a fee for tax collection and remits the balance oftaxes collected to the School District. Property tax revenues, at the fund reporting level, during the fiscal year ended June 30, 2007, for maintenance and operations amounted to $22,274,536.

The tax millage rate levied for the 2006 tax year (calendar year) for the Catoosa county Board of Education was as follows (a mill equals $1 per thousand dollars of assessed value):

School Operations

15.578 mills

SALES TAXES

Special Purpose Local Option Sales Tax, at the fund reporting level, during the year amounted to $9,369,107 and is to be used for capital outlay for educational purposes or debt service. This sales tax was authorized by local referendum and the sales tax must be re-authorized at least every five years.

- 13 -

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

EXHIBIT"H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

INVENTORIES

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

CAPITAL ASSETS

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

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

Capitalization Policy

Estimated Useful Life

Land Land Improvements Buildings and Improvements Equipment

All

NIA

$

10,000 20 to 80 years

$

10,000 20 to 80 years

$

10,000 5 to 15 years

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

GENERAL OBLIGATION BONDS

The School District issues general obligation bonds to provide funds for the acquisition and construction of major capital facilities. Bond issuance costs are recognized in the financial

- 14-

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

EXHIBIT"H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
statements during the fiscal year bonds are issued. General obligation bonds are direct obligations and pledge the full faith and credit of the government. The outstanding amount of these bonds is recorded in the Statement ofNet 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 ofmoney which has not been secured by surety bond, by guarantee ofinsurance, or by collateral. The aggregate ofthe face value ofsuch 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,

- 15 -

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

EXHIBIT"H"

Note 3: DEPOSITS AND INVESTMENTS

(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 ofthe State of Georgia, and

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

CATEGORIZATION OF DEPOSITS At June 30, 2007, the bank balances were $30,478,935. The amounts of the total uninsured bank balances are classified into three categories of custodial credit risk:

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

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

Custodial Credit Risk Category

Bank Balance

1

$

0

2

1,619,639

3

27,553,533

Total

$ 22.1'.23.l'.22

- 16 -

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

EXHIBIT "H"

Note 3: DEPOSITS AND INVESTMENTS
CATEGORIZATION OF INVESTMENTS At June 30, 2007, the carrying value of the School District's total investments was $28,830,638, which is materially the same as fair value. This investment consisted entirely of funds invested in the Local Government Investment Pool administered by the State ofGeorgia, Office ofTreasury and Fiscal Services which are not required to be categorized since the School District did not own any specific identifiable securities in the pool. The investment policy ofthe State ofGeorgia, Office of Treasury and Fiscal Services for the Local Government Investment Pool (Primary Liquidity Portfolio) does not provide for investment in derivatives or similar investments. Additional information on the Local Government Investment Pool is disclosed in the State of Georgia Comprehensive Annual Financial Report. This audit can be obtained from the Georgia Department of Audits and Accounts at http://www.audits.state.ga.us/internet/searchRpts.html.
The Primary Liquidity Portfolio consists ofGeorgia Fund 1 which is not registered with the SEC as an investment company but does operate in a manner consistent with the SEC's Rule 2a-7 of the Investment Company Act of 1940. The investment is valued at the pool's share price, $1.00 per share. The pool is an AAAm rated investment pool by Standard and Poor's. The weighted average maturity of Georgia Fund 1 may not exceed 60 days. The weighted average maturity for Georgia Fund 1 on June 30, 2007, was 15 days.
Note 4: NON-MONETARY TRANSACTIONS
The School District receives food commodities from the United States Department of Agriculture (USDA) for school breakfast and lunch programs. These commodities are recorded at their Federally assigned value. See Note 2 - Inventories
Note 5: CAPITAL ASSETS
The following is a summary of changes in the Capital Assets during the fiscal year:

- 17 -

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

EXHIBIT "H"

Note 5: CAPITAL ASSETS

Balances July 1, 2006

Increases

Balances Decreases June 30, 2007

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

$ 4,429,049 $ 328,371

$ 4,757,420

17,129,242 23,602,462 $ 17,992,019 22,739,685

Total Capital Assets Not Being Depreciated $ 21,558,291 $ 23,930,833 $ 17,992,019 $ 27,497,105

Capital Assets Being Depreciated Buildings and Improvements Equipment Land Improvements

$ 83,844,662 $ 17,955,738

6,981,146

793,738 $

2,595,416

174,168

$ l 0 1,800,400

635,799

7,139,085

2,769,584

Less Accumulated Depreciation for: Buildings and Improvements Equipment Land Improvements

19,160,502 3,836,024
788 779

1,273,545 380,394 57,732

635,799

20,434,047 3,580,619 846,511

Total Capital Assets, Being Depreciated, Net $ 69,635,919 $ 17,211,973 $

0 $ 86,847,892

Governmental Activity Capital Assets - Net $ 91,194.210 $ 41,142.806 $ 17,992.019 $ 114,344.997

Current year depreciation expense by function is as follows:

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

$ 1,311,402

$

17,358

346,136

363,494 36,775

$ 1,711.671

Note 6: RESTRICTED ASSETS

Special Purpose Local Option Sales Tax (SPLOST) and general obligation bond proceeds are restricted assets in the Statement of Net Assets because their use is limited by applicable bond covenants or statutory provisions. Restricted assets at June 30, 2007, were as follows:

- 18 -

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

EXHIBIT"H"

Note 6: RESTRICTED ASSETS

District-wide Capital Projects



Bond

SPLOST

Proceeds

Debt Service Funds

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

$ 2,462,123 $ 3,431,314 $ 8,242,256
$ 17,210,344 $ 11,620,294

Note 7: INTERFUND TRANSFERS

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

Transfer to

Transfers From District-wide
Capital Projects

Debt Service Fund

$ 1,674.447

Transfers are used to move capitalized interest from the District-wide Capital Projects Fund to pay interest payments due February 1, 2007, and August 1, 2007, for the Series 2006 General Obligation Bonds.

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 job related illness or injuries to employees. The School District has neither significantly reduced coverage for these risks nor incurred losses (settlements) which exceeded the School District's insurance coverage in any of the past three years.

The School District has elected to self-insure for all losses related to acts of God. The School District has not experienced any losses related to this risk in the past three years.

- 19 -

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

EXHIBIT"H"

Note 8: RISK MANAGEMENT

The School District has established a limited risk management program for workers' compensation claims. The School District accounts for claims within the General Fund with expenses/expenditures and liability being reported when it is probable that a loss has occurred, and the amount ofthat loss can be reasonably estimated. An excess coverage insurance policy covers individual claims in excess of $300,000 loss per occurrence, up to the statutory limit.

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

2006 2007

Beginning of Year Liability

Claims and Changes in Estimates

Claims Paid

EndofYear Liability

$

0 $

181,746 $

181,746 $

0

$

0 $

117 791 $

117,791 $

0

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

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

2006 2007

Beginning ofYear Liability

Claims and Changes in Estimates

Claims Paid

EndofYear Liability

$

0 $

2,051 $

2,051 $

0

$

0 $

15,012 $

15,012 $

0

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

Position Covered

Amount

Superintendent All Other Employees

$

25,000

$

35,000

Note 9: LONG-TERM DEBT

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

-20-

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

EXHIBIT"H"

Note 9: LONG-TERM DEBT

Purpose

Interest Rates

Amount

General Government - Series 2006

4.00% - 4.50% $ 40,000,000

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

Governmental Funds General
Obligation Bonds

Unamortized Bond
Premium

Total

Balance July 1, 2006

$

0 $

0 $

0

Additions G.O. Bonds Unamortized Bonds

40,000,000

676,550

40,000,000 676,550

Deductions Bond Premiums Amortized

114,493

114,493

Balance June 30, 2007

$ 40,000.000 $ 562,057 $ 40,562,057

Portion of Long-Term Debt Due within One Year

$_ _ _--"-0 $

124,902 $_ ______,:1=24.!.2.,9::..:0=2

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

Fiscal Year Ended June 30

General Obligation

Debt

Principal

Interest

Unamortized Bond
Premium

2008

$ 1,727,500 $ 124,902

2009

$ 6,000,000

1,600,000

124,902

2010

7,000,000

1,323,750

124,902

2011

8,000,000

1,014,500

124,902

2012

9,000,000

652,000

62,449

2013

10,000,000

225,000

Total Principal and Interest $ 40,000.000 $ 6,542,750 $ 562,057

- 21 -

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

EXHIBIT "H"

Note 10: ON-BEHALF PAYMENTS

The School District has recognized revenues and costs in the amount of $1,658,600 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 $1,635,602

Paid to the Teachers Retirement System of Georgia For Teachers Retirement System (TRS) Employer's Cost In the amount of $10,910

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 $12,088

Note 11: SIGNIFICANT COMMITMENTS

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

Project

Unearned Executed Contracts

Funding Available From State

O?RA-623-004 Ringgold High School - Fire Protection System Ringgold High School - Auxiliary Gym Ringgold Middle School - Auxiliary Gym and
Locker Room Renovations Lakeview Middle School - Auxiliary Gym
Renovations and Additions

$ 27,947,077 $ 74,024
2,817,867
70,224
105,988

611,421

$ 31,015.180 $====6==11,.,,.,,4==2==1 The amounts described in this note are not reflected in the basic financial statements.

- 22 -

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

EXHIBIT"H"

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: RETIREMENT PLANS

TEACHERS RETIREMENT SYSTEM OF GEORGIA (TRS)

TRS PLAN DESCRIPTION Substantially all teachers, administrative and clerical personnel employed by local school systems are covered by the Teachers Retirement System of Georgia (TRS), which is a cost-sharing multiple employer defined benefit pension plan. TRS provides service retirement, disability retirement and survivors benefits for its members in accordance with State statute. The Teachers Retirement System of Georgia issues a separate stand alone financial audit report and a copy can be obtained from the Georgia Department of Audits and Accounts.

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

Fiscal Year

Percentage Contributed

Required Contribution

2007 2006 2005

100% 100% 100%

$ 4,885,494 $ 4,405,945 $ 4,013,586

- 23 -

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

SCHEDULE "1"

REVENUES
Property Taxes Sales Taxes State Funds Federal Funds Charges for Services Investment Earnings Miscellaneous
Total Revenues
EXPENDITURES
Current Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Food Services Operation Community Services
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

$

21,129,493 $

21,129,493 $

22,274,536

1,200,000

1,200,000

1,123,493

52,322,199

53,651,900

56,270,603

6,650,854

7,753,903

7,222,985

2,129,259

2,129,259

2,111,927

450,000

450,000

506,975

74 039

5,054,102

$

83,881,805 $

86,388,594 $

94,564,621

$

60,009,449 $

61,356,579 $

64,286,049

2,218,192 2,858,912 1,735,235
775,924 5,950,031
511,222 5,630,175 2,633,536
266,334 284,316 4,460,759

2,426,032 3,175,233 1,720,963
772,671 5,955,655
511,522 5,630,175 2,997,098
263,807 498,502 4,460,759

2,752,620 3,269,593 1,759,394
700,934 6,543,363
681,643 5,869,278 3,235,601
381,777 594,158 4,910,676 496 798

$

87,334,085 $

89,768,996 $

95,481,884

$

-3,452,280 $

-3,380,402 $

-917 263

$

181,802 $

241,725

-210 970

-225,892

$

-29 168 $

15 833

$

-3,481,448 $

-3,364,569 $

-917,263

10,960,534

10,443,628

10,588,763

2,876,222

Fund Balances - Ending

$

10,355,308 $

7 079 059 $

9,671,500

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 -

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

SCHEDULE "2"

FUNDING AGENCY PROGRAM/GRANT
Agriculture, U. S. Department of Child Nutrition Cluster Pass-Through From Georgia Department of Education Food Services School Breakfast Program National School Lunch Program
Total Child Nutrition Cluster
Other Programs Pass-Through From Georgia Department of Education Food Donation (1)
Total U.S. Department of Agriculture
Education, U. S. Department of Special Education Cluster Pass-Through From Georgia Department of Education Special Education Grants to States Preschool Grants
Total Special Education Cluster
Other Programs Direct Fund for the Improvement of Education Pass-Through From Georgia Department of Education Comprehensive School Reform Demonstration Education for Homeless Children and Youth English Language Acquisition Grants Enhancing Education Through Technology Program Improving Teacher Quality State Grant Safe and Drug-Free Schools and Communities State Grants for Innovative Programs Title I Grants to Local Educational Agencies Twenty-First Century Community Learning Centers Vocational Education - Basic Grants to States
Total U.S. Department of Education
Health and Human Services, U. S. Department of Pass-Through From Georgia Department of Human Resources, Division of Mental Health, Developmental Disabilities and Addictive Diseases Block Grants for Prevention and Treatment of Substance Abuse Pass-Through From Children and Youth Coordinating Council Abstinence Education Program
Total U. S. Department of Health and Human Services

CFDA NUMBER

PASSTHROUGH
ENTITY ID
NUMBER

EXPENDITURES IN PERIOD

10.553 10.555

NIA NIA $
$

(2) 4 387 424
4,387,424

10.550

N/A $

257,492 4 644 916

. 84.027 . 84.173

N/A $ N/A
$

1,594,151 59 904
1,654,055

84.215
84.332 84.196 84.365 84.318 84.367 84.186 84.298
. 84.010 . 84.287
84.048

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

138,756
28,649 55,500
4,995 73
478,632 36,964 14,094
1,666,630 390,159 97 211
4,565,718

93.959 93.235

NIA $ N/A
$

13,982 19 896 33 878

- 26 -

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

SCHEDULE "2"

FUNDING AGENCY PROGRAM/GRANT
Defense, U.S. Department of Direct Department of the Army R.O.T.C. Program

CFDA NUMBER

PASSTHROUGH
ENTITY ID
NUMBER

EXPENDITURES IN PERIOD

$ _ _ _ _10_5~,3_4_0

Total Federal Financial Assistance
NIA = Not Available

$===9,..,3=4=9=,8=5=2

Notes to the Schedule of Expenditures of Federal Awards

(1) The amount shown for the Food Donation Program represents the Federally assigned value of nonmonetary assistance for donated commodities received and/or consumed by the School District during the current fiscal year.
(2) Expenditures for the funds earned on the School Breakfast Program ($524,183) were not maintained separately and are included in the 2007 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 Catoosa 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 -

CATOOSA COUNTY BOARD OF EDUCATION SCHEDULE OF STATE REVENUE YEAR ENDED JUNE 30, 2007

SCHEDULE "3"

AGENCY/FUNDING
GRANTS Bright From the Start: Georgia Department of Early Care and Learning Pre-Kindergarten Program
Education, Georgia Department of Quality Basic Education Direct Instructional Cost Kindergarten Program Kindergarten Program - Early Intervention Program Primary Grades (1-3) Program Primary Grades - Early Intervention (1-3) Program Upper Elementary Grades (4-5) Program Upper Elementary Grades - Early Intervention (4-5) Program Middle School (6-8) Program High School General Education (9-12) Program Vocational Laboratory (9-12) Program Students with Disabilities 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 State Bonds Nursing Services Principal Supplements Vocational Supervisors Education Equalization Funding Grant Food Services Vocational Education Amended Formula Adjustment Other State Programs Health Insurance High School Graduation Coach K-8 Statewide Reading and Mathematics Grant Middle School Remediation and Intervention Grant National Teacher Certification Preschool Handicapped Program Residential and Reintegration State Grant Teachers' Retirement Virtual Schools State Grant
Georgia State Financing and Investment Commission Reimbursement on Construction Projects
Office ofTreasury and Fiscal Services Public School Employees Retirement
CONTRACT Education, Georgia Department of Foreign Language Model Program

GOVERNMENTAL FUND TYPES

CAPITAL

GENERAL

PROJECTS

FUND

FUND

TOTAL

$

843,678

$

843,678

3,059,247 633,680
7,368,265 825,704
3,490,971 370,280
6,319,926 5,284,370 2,267,430 7,277,178 1,739,422
125,405 506,840 68,999 1,080,239 334,485 205,795
1,361,544 2,197,178 2,714,435
958,930 99,150
300,000 190,997
35,195 37,717 4,883,631 265,780 162,467 -1,024,346
1,635,602 80,150 134,667 6,050 37,444 157,458 119,942 12,088 200

$ 10,910

5,502,794

91 500

3,059,247 633,680
7,368,265 825,704
3,490,971 370,280
6,319,926 5,284,370 2,267,430 7,277,178 1,739,422
125,405 506,840
68,999 1,080,239
334,485 205,795
1,361,544 2,197,178 2,714,435
958,930 99,150
300,000 190,997 35,195 37,717 4,883,631 265,780 162,467 -1,024,346
1,635,602 80,150
134,667 6,050 37,444
157,458 119,942
12,088 200
5,502,794
10,910
91 500

See notes to the basic financial statements.

$

56,270,603 $

5,502,794 $

61,773,397

-28-

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

SCHEDULE "4"

PROJECT
To build, equip and furnish new schools; to make additions, modifications and renovations to existing schools; to provide computers, computer technology equipment and personalty; to acquire land and pay for site preparation and paving at new and existing schools; to pay for construction, renovation, modifications, additions and repairs of areas and structures that will be jointly used by the School District for instructional, sporting and physical activities; and to pay for the expenses incident to accomplish the foregoing purposes.
To build, equip and furnish new schools, including but not limited to a new high school and a new elementary school; to make additions, modifications and renovations to existing schools; to provide computers, equipment and personalty (including school buses); to acquire land and pay for site preparation and paving at new and existing schools; to pay for construction, renovation, modifications, additions and repairs of areas and structures that will be jointly used for instructional, sports and physical education activities; and to pay for the expenses incident to accomplish the foregoing purposes.

ORIGINAL ESTIMATED
COSTC1)

CURRENT ESTIMATED COSTS (2)

AMOUNT EXPENDED IN CURRENT YEAR (3) (4)

AMOUNT EXPENDED
IN PRIOR YEARS (3)(4)

PROJECT STATUS

$ 46,500,000 $ 53,974,200 $

7,989,333 $ 37,833,464 Ongoing

59,000,000

59,000,000

18,726,597

Ongoing

$ 10s1soo1000 $ 11219741200 $ 26,715,930 $ 37,833.464

(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 Districfs current estimate of total cost for the projects. Includes all cost from project inception to completion.

(3) The voters of Catoosa County approved the imposition of a 1% sales tax to fund the above projects and retire associated debt. Amounts expended for these projects may include sales tax proceeds, state, local property taxes and/or other funds over the life of the projects.

(4) In addition to the expenditures shown above, the School District has incurred interest to provide advance funding for the above projects as follows:

Prior Years

$

0

Current Year Total

854,153
s_ _a_54..,,=1s=3=

See notes to the basic financial statements.

-29-

(This page left intentionally blank)

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

SCHEDULE "5"

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

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

ELIGIBLE QBE PROGRAM COSTS

SALARIES

OPERATIONS

TOTAL

$

3,462,557 $ 3,629,141 $

67,677 $

3,696,818

705,388

667,667

8,085

675,752

8,273,664

9,992,179

203,222

10,195,401

943,353

1,263,617

23,225

1,286,842

3,976,878

5,198,952

101,287

5,300,239

416,857 7,140,352 5,941,860 2,581,081 8,115,871
1,950,886 128,889 573,298 79184

654,630 8,460,038 6,982,354 2,154,188
1,317,817 778,777
6,028,854 1,071,906
225,073 2,198,320
46,061 1,045,424
197 947

10,774 199,613 292,420 297,293
107,546 4,911 1,419 1,847
27,934 8,915 1,397 6594

665,404 8,659,651 7,274,774 2,451,481
1,425,363 783,688
6,030,273 1,073,753
225,073 2,226,254
54,976 1,046,821
204,541

$

44,290,118 $ 51,912,945 $

1,364,159 $

53,277,104

1,219,827 235644

1,513,866

131,704 209,921

1,645,570 209,921

TOTAL QBE FORMULA FUNDS

$

45,745,589 $ 53,426.811 $

1,705,784 $ ==5=5..,1,3_2..,5.=95_

(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
June 9, 2008

Honorable Sonny Perdue, Governor Members ofthe General Assembly Members of the State Board of Education
and Superintendent and Members ofthe Catoosa 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 ofCatoosa County Board ofEducation as ofand for the year ended June 30, 2007, which collectively comprise Catoosa County Board of Education's basic financial statements and have issued our report thereon dated June 9, 2008. We conducted our audit in accordance with auditing standards generally accepted in the United States of America 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 Catoosa 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 Catoosa County Board of Education's internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness of the Catoosa County Board of Education's internal control over financial reporting.
Our consideration ofinternal 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 deficiency in internal control over financial reporting that we consider to be a significant deficiency.
2007YB-30

A control deficiency exists when the design or operation 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 affect the Catoosa 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 Catoosa County Board of Education's financial statements that is more than inconsequential will not be prevented or detected by the Catoosa County Board of Education's internal control. We consider item FS-6231-07-0 l 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 Catoosa 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 believe that the significant deficiency described above is not a material weakness.
Compliance and Other Matters
As part of obtaining reasonable assurance about whether Catoosa 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 Catoosa County Board of Education in a separate letter dated June 9, 2008.
Catoosa 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 Catoosa County Board of Education's response and, accordingly, we express no opinion on it.
2007YB-30

This report is intended solely for the information and use of the management, members of the Catoosa 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,
~LC).cJ~
Russell W. Hinton, CPA, CGFM State Auditor
RWH:gp 2007YB-30

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

DEPARTMENT OF AUDITS AND ACCOUNTS
270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400
June 9, 2008

Honorable Sonny Perdue, Governor Members ofthe General Assembly Members of the State Board of Education
and Superintendent and Members of the Catoosa 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 Catoosa County Board of Education with the types of compliance requirements described in the U.S. Office ofManagement and Budget (0MB) Circular A-133 Compliance Supplement that are applicable to each ofits major Federal programs for the year ended June 30, 2007. Catoosa 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 Catoosa County Board of Education's management. Our responsibility is to express an opinion on Catoosa 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 Catoosa County Board of Education's compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Our audit does not provide a legal determination on Catoosa County Board of Education's compliance with those requirements.
2007SA-10

In our opinion, the Catoosa County Board of Education complied, in all material respects, with the requirements referred to above that are applicable to each ofits major Federal programs for the year ended June 30, 2007.
Internal Control Over Compliance
The management of Catoosa 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 Catoosa 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 ofexpressing an opinion on the effectiveness ofinternal control over compliance. Accordingly, we do not express an opinion on the effectiveness ofthe Catoosa County Board ofEducation's internal control over compliance.
A control deficiency in an entity's internal control over compliance exists when the design or operation ofa control does not allow management or employees, in the normal course ofperforming their assigned functions, to prevent or detect noncompliance with a type ofcompliance requirement of a Federal program on a timely basis. A significant deficiency is a control deficiency, or combination ofcontrol deficiencies, that adversely affects the entity's ability to administer a Federal program such that there is more than a remote likelihood that noncompliance with a type of compliance requirement of a Federal program that is more than inconsequential will not be prevented or detected by the entity's internal control.
A material weakness is a significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood that material noncompliance with a type of compliance requirement of a Federal program will not be prevented or detected by the entity's internal control.
Our consideration ofthe internal control over compliance was for the limited purpose described in the first paragraph of this section and would not necessarily identify all deficiencies in internal control that might be significant deficiencies or material weaknesses. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses, as defined above.
This report is intended solely for the information and use of the management, members of the Catoosa 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:gp 2007SA-10

R ssell W. Hinton, CPA, CGFM State Auditor

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

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

PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

FINDING CONTROL NUMBER

AUDITEE'S RESPONSE/STATUS

SEE AUDITOR'S COMMENTS

FS-6231-04-02 Partially Resolved - See Corrective Action/Responses

FS-6231-05-01 Further Action Not Warranted

FS-6231-06-01 Further Action Not Warranted

(1)

FS-6231-06-02 Previously Reported Corrective Action Implemented

CORRECTIVE ACTION/RESPONSES

EMPLOYEE COMPENSATION EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Control Procedures Finding Control Number: FS-6231-04-02

Catoosa County does not agree with the findings ofthe Department ofCommunity Health and has responded to those findings in a letter. The classification of employees was appropriate under the existing written guidance received from the Department of Community Health at the time the change was implemented by the School District. A direct quote from a document distributed by the Department ofCommunity Health states: "Even if an employee holds a teaching certificate, he or she must also be employed in a certifiedposition before you account for them as a certified employee for monthly billing purposes. If they are not in a certified position, then report them as a noncertified employee". The School District has reclassified the employees in question in accordance with DCH's revised written definitions received in a letter from John Hays. We are aware that there is litigation regarding this issue with Live Oak Consulting and the Department ofCommunity Health. We are anticipating a resolution before additional action is taken.

AUDITOR'S COMMENTS

(1) Findings/internal control deficiencies ofthis nati;re, 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 in subsequent periods.

PRIOR YEAR FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

No matters \Vere reported.

SECTION IV FINDINGS AND QUESTIONED COSTS

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

I SUMMARY OF AUDITOR'S RESULTS

1. Type of Report Issued on the Financial Statements The auditor's opinion on the Catoosa 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 Catoosa County Board ofEducation disclosed a financial statement significant deficiency related to the following control categories.

Cash and Cash Equivalents

Expenditures/Liabilities/Disbursements

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

3. Noncompliance Material to the Financial Statements The audit of the Catoosa 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 Catoosa 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 Catoosa 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 .5 IO{a) of 0MB Circular A-133 The Catoosa County Board ofEducation's audit did not disclose audit findings required to be reported by section .510(a) ofOMB Circular A-133.

7. Major Programs Federal awards audited as major programs are as follows: 84.010 Title I Grants to Local Educational Agencies 84.027 Special Education - Grants to States 84.173 Special Education - Preschool Grants 84.287 Twenty-First Century Community Learning Centers

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

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

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

II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

CASH AND CASH EQUIVALENTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Improper Credit Card Expenditures Significant Deficiency Finding Control Number: FS-6231-07-01

Condition:

School District personnel did not ensure that purchases made with credit cards were properly documented and/or authorized.

Criteria:

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

Questioned Cost: $1,729.87

Information:

Twenty-five (25) credit card transactions were tested and deficiencies identified were as follows:
One purchase order was not dated. One purchase order was dated after the invoice. For nine (9) transactions, proper log out procedures for the credit
cards were not followed. School District's policy requires that credit cards are logged out by authorized personnel prior to usage. These policies were not being consistently followed resulting in questioned costs of $1,729.87.

Cause:

These deficiencies were a result ofmanagement's failure to properly monitor credit card expenditures and their failure to ensure established controls were functioning as designed.

Effect:

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

Recommendation: The School District should establish policies and procedures to ensure that expenditures are made only for appropriate and approved purposes.

III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

No matters were reported.

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SECTIONV MANAGEMENT'S RESPONSES

CATOOSA COUNTY BOARD OF EDUCATION SCHEDULE OF MANAGEMENT'S RESPONSES
YEAR ENDED JUNE 30, 2007
Finding Control Number: FS-6231-07-01
The School District concurs with the finding as it relates to improperly documented and/or unauthorized expenditures.
The School District will increase the level ofmonitoring established procedures at all decentralized locations. This includes, but is not limited to, periodic internal audits of supporting expenditure documentation; on-site visits to document procedures are being followed as outlined in the Accounting Handbook; and continual training for both administration and supporting personnel.
Corrective action began before the completion of the audit in which the problems were identified and will continue throughout the year to provide reasonable assurance transactions are processed in accordance with established procedures.
Contact Person: Pearl Hogan Title: Finance Manager Telephone: (706) 965-2297 Fax Number: (706) 935-6790 E-mail Address: phogan@catoosa.k12.ga.us