Coweta County Board of Education, Newnan, Georgia, report on audit of the financial statements for the fiscal year ended June 30, 2006

COWETA COUNTY BOARD OF EDUCATION
NEWNAN, GEORGIA REPORT ON AUDIT
OF THE FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2006
STATE OF GEORGIA
DEPARTMENT OF AUDITS AND ACCOUNTS
Russell W. Hinton State Auditor

COWETA 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

8

H

NOTES TO THE BASIC FINANCIAL STATEMENTS

9

SCHEDULES

REQUIRED SUPPLEMENTARY INFORMATION

1 SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES

IN FUND BALANCES - BUDGET AND ACTUAL

GENERALFUND

27

COWETA COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS -

SECTION I

FINANCIAL

SCHEDULES

SUPPLEMENTARY INFORMATION

2 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS

28

3 SCHEDULE OF STATE REVENUE

30

4 SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS

32

5 ALLOTMENTS AND EXPENDITURES

GENERAL FUND - QUALITY BASIC EDUCATION PROGRAMS (QBE)

BY PROGRAM

35

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

COWETA 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) 858-2174

DEPARTMENT OF AUDITS AND ACCOUNTS
270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400
May 2, 2007

Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the Coweta 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 Coweta County Board of Education, as of and for the year ended June 30, 2006, which collectively comprise the Board's basic financial statements as listed in the table of contents. These financial statements are the responsibility ofthe Coweta 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 ofmaterial misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinions.
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 Coweta County Board ofEducation, as ofJune 30, 2006, and the respective changes in financial position thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America.
2006ARL-11

In accordance with Government Auditing Standards, we have also issued our report dated May 2, 2007, on our consideration of the Coweta County Board of Education's internal control over financial reporting and 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 27 respectively, are not a required part ofthe basic financial statements but are supplementary information required by the accounting principles generally accepted in the United States of America. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods ofmeasurement and presentation ofthe required supplementary information. However, we did not audit the information and express no opinion on it.
Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Coweta County Board of Education's basic financial statements. The accompanying supplementary information which consist ofSchedules 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,
-~~lV.~_h
sell W. Hinton, CPA, CGFM State Auditor
RWH:as 2006ARL-11

COWETA COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2006
The discussion and analysis ofCoweta County Board ofEducation's financial performance provides an overall review of the Board's financial activities for the fiscal year ended June 30, 2006. The intent of this discussion and analysis is to look at the Board's financial performance as a whole; readers should also review the notes to the basic financial statements and the financial statements to enhance their understanding of the Board's financial performance.
Financial Highlights
Key financial highlights for 2006 are as follows:
In total, net assets increased $26.2 million which represents a 14.6 percent increase from 2005. This total increase was due to governmental activities since the Board has no business-type activities.
General revenues accounted for $90.4 million in revenue or 47.5 percent of all revenues. Program specific revenues in the form of charges for services and sales, grants and contributions accounted for $96.9 million or 50.9 percent of total revenues of$190.4 million. Special Items, Gain on Sale of Capital Assets, accounted for $3 .1 million in revenue or 1.6 percent of all revenues.
The Board had $164.2 million in expenses related to governmental activities; only $96.9 million ofthese expenses were offset by program specific charges for services, grants or contributions. General revenues (primarily taxes) of $90.4 million were adequate to provide for these programs.
Among major funds, the general fund had $164.6 million in revenues, $158.6 million in expenditures and $2.4 in other financing sources (uses). The general fund's fund balance increased to $16.6 million from $13.0 million.
Due to the financial condition of the State of Georgia, the State again reduced the Board's funding. The current reduction is $3.9 million which follows a $3.9 million reduction for 2005, a $3.3 million reduction for 2004, and a $1.6 million reduction for 2003. The reduction will be $2.1 million for 2007.
Using the Basic Financial Statements
This annual report consists ofa series of financial statements and notes to those statements. These statements are organized so the reader can understand the Coweta County Board of Education as a financial whole, or as an entire operating entity.
The Statement ofNet Assets and Statement ofActivities provide information about the activities of the whole Board, presenting both an aggregate view ofthe Board's finances and a longer-term view of those finances. Fundfinancial statements provide the next level of detail. For governmental funds, these statements tell how services were financed in the short-term as well as what remains for
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COWETA COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2006
future spending. In the case ofthe Coweta County Board ofEducation, the general fund is by far the most significant fund.
Reporting the Board as a Whole
Statement ofNet Assets and the Statement ofActivities
While this document contains the large number offunds used by the Board to provide programs and activities, the view ofthe Board as a whole looks at all financial transactions and asks the question, "How did we do financially during 2006?" The Statement of Net Assets and the Statement of Activities answers this question. These statements include all assets and liabilities using the accrual basis ofaccounting similar to the accounting used by most private-sector companies. The accrual basis ofaccounting takes into account all ofthe current year's revenues and expenses regardless of when cash is received or paid.
These two statements report the Board's net assets and changes in those assets. This change in net assets is important because it tells the reader that, for the Board as a whole, thefinancial position of the Board has improved or diminished. The causes ofthis change may be the result ofmany factors, some financial, some not. Nonfinancial factors include the Board's property tax base, facility conditions, required educational programs and other factors.
In the Statement of Net Assets and the Statement of Activities, the Board has one distinct type of activity:
Governmental Activities -All ofthe Board's programs and services are reported here including instruction, support services, operation and maintenance of plant, pupil transportation, food service, after school program, principal's accounts and various others.
Reporting the Board's Most Significant Funds
Fund Financial Statements
Fund financial reports provide detailed information about the Board's major funds. The Board uses many funds to account for a multitude of financial transactions. However, these fund financial statements focus on the Board's most significant funds. The Board's major governmental funds are the general fund, the capital projects fund and the debt service fund.
Governmental Funds Most of the Board's activities are reported in governmental funds, which focus on how money flows into and out ofthose funds and the balances left at year-end available for spending in future periods. These funds are reported using an accounting method called modified accrual accounting, which measures cash and all otherfinancial assets that can readily be converted to cash. The governmental fund statements provide a detailed short-term view ofthe Board's general government operations and the basic services it provides. Governmental fund information helps you determine whether there are more or fewer financial resources that can be spent in the near future to
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COWETA COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2006

finance educational programs. The relationship (or differences) between governmental activities (reported in the Statement ofNet Assets and the Statement ofActivities) and governmentalfunds is reconciled in the financial statements.

Fiduciary Funds The Board is the trustee, orfiduciary, for assets that belong to others, such as the dependent care spending account fund, the medical spending account fund and school clubs and organizations within the principals' accounts. The Board is responsible for ensuring that the assets reported in these funds are used only for their intended purposes and by those to whom the assets belong. The Board excludes these activities from the district-wide financial statements because it cannot use these assets to finance its operations.

The Board as a Whole
The perspective of the statement of net assets is of the Board as a whole. Table 1 provides a summary of the Board's net assets for fiscal year 2006 compared to fiscal year 2005.

Table 1 Net Assets (in Thousands)

Governmental Activities

Fiscal

Fiscal

Year 2006 Year 2005

Assets Current and Other Assets Capital Assets, Net

$ 136,887 200,348

$ 75,353 174,943

Total Assets

$ 337,235 $ 250,296

Liabilities Current and Other Liabilities Long-Term Liabilities

$ 21,304 110,214

$ 17,492 53,265

Total Liabilities

$ 131,518 $ 70,757

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

$ 144,594 35,150 25,973

$ 126,901 33,944 18,694

Total Net Assets

$ 2052717 $ 119,539

Total net assets increased $26.2 million in fiscal year 2006.

Table 2 shows the changes in net assets for fiscal year 2006 compared to the changes in net assets for fiscal year 2005.

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COWETA COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2006

Table 2 Change in Net Assets
(in Thousands)
Revenues Program Revenues: Charges for Services and Sales Operating Grants and Contributions Capital Grants and Contributions
Total Program Revenues
General Revenues: Taxes Property Taxes For Maintenance and Operations For Debt Service Railroad Cars Sales Taxes Special Purpose Local Option Sales Tax For Debt Service For Capital Projects Intangible Recording Tax Real Estate Grants and Contributions not Restricted to Specific Programs Investment Earnings Miscellaneous
Special Items Gain on Sale of Capital Assets
Total General Revenues and Special Items
Total Revenues
Program Expenses Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Operations of Non-Instructional Services Enterprise Operations Community Services Food Services Interest on Short-Term and Long-Term Debt
Total Expenses
Increase in Net Assets
- IV -

Governmental Activities

Fiscal

Fiscal

Year 2006

Year 2005

$ 6,078 90,292 591
$ 96.961

$ 5,683 80,556 8.457
$ 94.696

$ 59,509 91
8,801 10,250 2,103
669
2,778 3,924 2,226
3.093
$ 93.444
$ 190.405

$ 52,068 85
15,765 2,506
2,822 1,228 2,949
$ 77.423 $ 172.119

$ 107,455
3,901 2,612 2,768
997 11,082
1,717 13,041 7,541
1,147 939
630 1,421 6,976 2.000
$ 164.227
$ 26,178

$ 95,982
3,648 2,681 2,649 1,341 10,217 1,119 12,304 6,618 1,372 1,045
608 1,352 6,865 2,124
$ 149.925
$ 22,194

COWETA COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2006

Governmental Activities

Governmental program expenses are comprised ofthe following: Instruction 65.4 percent, Support Service 27.9 percent, Operations of Non-Instructional Services 5.5 percent and Interest on ShortTerm and Long-Term Debt 1.2 percent. Interest expense was attributable to capital leases, shortterm borrowings to meet cash flow needs and the outstanding bonds for capital projects.

The Statement of Activities shows the cost of program services and the charges for services and grants offsetting those services. Table 3 shows, for governmental activities, the total cost ofservices and the net cost of services comparing fiscal year 2006 with fiscal year 2005. That is, it identifies the cost of these services supported by tax revenue and unrestricted State entitlements.

Table 3 Governmental Activities
(in Thousands)

Total Cost of Services

Fiscal

Fiscal

Year 2006 Year 2005

Net Cost of Services

Fiscal

Fiscal

Year 2006 Year 2005

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

$ 107,455
3,901 2,612 2,768
997 11,082
1,717 13,041 7,541
1,147 939
630 1,421 6,976 2,000

$ 95,982
3,648 2,681 2,649 1,341 10,217 1,119 12,304 6,618 1,372 1,045
608 1,352 6,865 2,124

$ 37,522
2,619 1,220
997 -1,127 7,305 1,695 7,865 4,797 1,125
516
91 278 363 2,000

$ 29,169
2,653 1,339
789 -794 6,898 1,047 5,594 4,126 1,364 686
143 -20 111 2,124

Total Expenses

$ 16~h221 $ 142,225 $ 67,266 $ 55,222

Although program revenues make up a majority of the revenues, the Board is still dependent upon tax revenues for governmental activities. Taxes and other general revenues support 34.9 percent of instructional activities; for all governmental activities general revenue support is 41.0 percent.

The Board's Funds

The Board's governmental funds are accounted for using the modified accrual basis of accounting. Total governmental funds had revenues, other financing sources and special items of$263.6 million and expenditures and other financing uses of$206.3 million. There was an increase of$52.5 million

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COWETA COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2006
in the capital projects fund due to issuance of $58 million in general obligation debt for facility renovation and repair projects. The general fund had an increase of $3.6 million and debt service funds had an increase of $1.2 million. The increase in the general fund for the year reflects the spending cuts implemented by the administration. The increase in debt service funds is due to the accumulation of sales tax collections for future debt service payments.
General Fund Budgeting Highlights
The Board's budget is prepared according to Georgia law. The most significant budgeted fund is the General Fund.
During the course of fiscal 2006, the Board amended its general fund budget as needed. The Board uses site-based budgeting. The budgeting systems are designed to tightly control total site budgets but provide flexibility for site management.
For the General Fund, the final budgeted revenues and other financing sources of $161.6 million exceeded the original budgeted amount of$148.6 million by $13.0 million. This difference was due to an increase in miscellaneous revenues of $7.0 million, an increase in property taxes of $4.8 million, an increase in state revenues of $0.8 million, and an increase in Federal revenues of$0.4 million. The miscellaneous revenues budgeted increased due to the inclusion of the principals' accounts in our financial statements, the property taxes increased due to the growth in the tax digest, the state revenues increased due to growth in mid-term funding, and the Federal revenues increased due to an increase in the Federal grants. The actual revenues and other financing sources of$166.7 million exceeded the budgeted amount by $5 .1 million. The actual revenues included $3.1 million ofon-behalfrevenues and Employee Retirement System payments, which were not budgeted by the Board.
The final budgeted expenditures and other financing uses of $162.2 million exceeded the original budgeted amount of$152.2 million by $10.0 million. The majority ofthis difference was due to an increase in instruction of$5.5 million and an increase in enterprise activities of$1.5 million due to the inclusion of the principals' accounts in our financial statements. The budget for other uses increased $3.0 million and the budgeted ending fund balance increased $3.0 million. The actual expenditures and other financing uses of$163.1 million was $0.9 million more than budgeted. The actual expenditures included $3.1 million of on-behalf expenditures for health insurance and Employee Retirement System payments which were not budgeted by the Board.
General Fund revenues and other financing sources exceeded expenditures and other financing uses by $3.6 million. State funds were reduced by $3.9 million dollars due to the financial condition of the State of Georgia.
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COWETA COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2006

Capital Assets and Debt Administration

Capital Assets

At the end offiscal 2006 the Board had $200.3 million invested in capital assets, all in governmental activities. Table 4 shows fiscal year 2006 balances compared with fiscal year 2005 balances.

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

Governmental Activities

Fiscal

Fiscal

Year 2006 Year 2005

Land Construction in Progress Buildings and Building Improvements Equipment Land Improvements

$ 6,550 18,956
153,903 12,211 8,728

$ 6,224 11,028
139,638 10,573 7,480

Total

$ 200,348 $ 174.943

The primary increase occurred in buildings and building improvements due to completed construction.

Debt

At June 30, 2006 the Board had $99.3 million in bonds outstanding with $10.4 million due within one year and $6.7 million in capital leases outstanding with $1.1 million due within one year. Table 5 summarizes general operations bonds, capital leases, compensated absences outstanding and unamortized bond premium. Table 5 shows fiscal year 2006 balances compared with fiscal year 2005 balances.

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COWETA COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2006

Table 5 Debt at June 30 (in Thousands)

Governmental Activities

Fiscal

Fiscal

Year 2006 Year2005

General Obligation Bonds Capital Leases Compensated Absences Unamortized Bond Premium

$ 99,285 6,688 1,038 3,203

$ 51,065 1,131 609 460

Total

$ 110.214 $ 53.265

At June 30, 2006, the Board's overall legal bonding authority was $330,843,225. The Board maintains an AA3 bond rating.

Current Issues

Trends of population growth and growth in retail and residential development in Coweta County continued through the summer of 2006. Those trends were mirrored by similar growth in school system enrollment and in the local tax digest.

The unemployment rate in Coweta County had declined to 4.6% in June, 2006, from 5.1 % in June, 2005. This compared to similar rates of5.3% (2006) and 5.7% (2005) for Carroll County, Georgia, and 4.6% (2006) and 4.4% (2005) for Fayette County, Georgia. Carroll and Fayette are adjacent to Coweta County, and are similar to Coweta in population and labor force.

The total civilian labor force in Coweta County for February, 2006 was 58,761. The average weekly wage for Coweta County in 2006 was $591. This would be equivalent to $14. 78 per hour or $30,732 per year, assuming a 40-hour week worked the year around. The total number ofemployees located in Coweta County in 2006 was 31,169. The largest major industry sector was manufacturing, with 15% ofthe employment, followed by retail trade with 14%, and accommodation and food services with 11%.

52.7% ofCoweta County's active workforce was employed outside of the county in 2001, a figure that rose from 46% in 1996. That figure has likely continued to rise in subsequent years, with large percentages ofthe labor force working in Fulton County (20.4%) and Fayette County (12.7%) and other surrounding counties, tying Coweta County's employment rates to the Atlanta region's economic performance.

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COWETA COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2006
In Coweta County, continued growth in the retail and services sector is promising, as Coweta County continues to develop as a regional retail destination, particularly in the Newnan Crossing area surrounding Interstate 85 exit 47 in Coweta County which is being developed rapidly by Thomas Enterprises. Several "big box" retailers have located at the Newnan Crossing West shopping district (west ofexit 47), and several more announced that they would begin construction in late 2006/early 2007, including Dick's sporting goods, JC Penney, Dillards and Barnes and Noble, among others. Retail development also appears to be increasing in other areas ofthe county. Local developers announced plans in 2006 to build the county's second Wal-Mart super center in North Coweta County, just west oflnterstate 85 exit 51.
The county continued to see little new industrial development or existing industrial expansion, and employment growth continues in service and other non-industrial and non-agricultural sectors. The Coweta Development Authority has reported an increase in industrial development inquires to their office, and future employment manufacturing development is promising as the Atlanta-based Patillo Corporation was awarded sewer access by Coweta County that will allow construction ofa new 800plus acre industrial park at the Georgia Highway 154/exit 51 area on the 1-85 corridor. The company announced plans to build two new spec industrial buildings in 2006-07.
Sales tax revenues grew from annual collections of $15,623,853 in fiscal year 2005 (revenues received July, 2004-June 2005) to $18,405,575 in fiscal year 2006. The rise represented a 17.8% increase period-to-period. It also represents the second period of significant annual sales tax revenue growth following much lower growth figures 2002-2004. The school system's M&O tax digest for 2006 also increased significantly, by 13.97%, reflecting new residential and commercial development in the county.
The U.S. Census estimates Coweta County's current population at 115,291 in June 2006, up from 109,903 in the June, 2005 and 105,376 in June, 2004. The estimated 2006 population ofthe county represents a 53.8% increase from 1996. Overall, the county's estimated population had risen significantly from the census 2000 estimate of89,250. School enrollment increased by about 1,000 students to approximately 20,500 at the end of2006, and the school system's enrollment growth is expected to increase again in the coming year (the average enrollment growth rate for the previous 5 years is approximately 4.6%). New housing starts continue to remain high, particularly in the eastern corridor ofthe city ofNewnan, following a trend ofnew housing into the city ofNewnan. Development and population growth has similarly accelerated in smaller cities such as Grantville and Senoia, and the county's overall growth rates have remained as high as they have been since the early 1990's. Using historical growth rates as reported by census data, the county's population by 2010 is projected to be 126,639 residents.
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COWETA COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2006 Contacting the Board's Financial Management This financial report is designed to provide our citizens, taxpayers, investors and creditors with a general overview of the Board's finances and to show the Board's accountability for the money it receives. Ifyou have questions about this report or need additional financial information, you may contact W. Keith Chapman, CPA, Comptroller at the Coweta County Board of Education, 237 Jackson Street, Newnan, Georgia 30263. You may also email your questions to keith.chapman@cowetaschools.net.
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COWETA COUNTY BOARD OF EDUCATION

COWETA COUNTY BOARD OF EDUCATION STATEMENT OF NET ASSETS JUNE 30, 2006
ASSETS
Cash and Cash Equivalents Investments Accounts Receivable, Net
Taxes State Government Federal Government Other Inventories Capital Assets Land Construction in Progress Land Improvements Buildings Equipment Less: Accumulated Depreciation
Total Assets
LIABILITIES
Accounts Payable Salaries Payable Contracts Payable Retainages Payable Long-Term Liabilities
Due Within One Year Due in More Than One Year
Total Liabilities
NET ASSETS
Invested in Capital Assets, Net of Related Debt Restricted for
Continuation of Federal Programs Debt Service Capital Projects Unrestricted
Total Net Assets
Total Liabilities and Net Assets
The notes to the basic financial statements are an integral part of this statement. - 1-

EXHIBIT"A"

GOVERNMENTAL ACTIVITIES

$

6,818,614

111,109,171

6,550,860 10,265,999
1,768,791 261,928 111,453

6,550,219 18,956,637 11,456,524 181,057,832 17,908,999 -35,582,434

$ ===33=7=,2=3=4,=59=3=

$

4,124,601

13,632,882

2,486,446

1,059,350

13,205,094 97,009,057

$

131,517,430

$

144,594,428

111,453 34,531,408
506,761 25,973,113

$

205,717,163

$ ===33=7'"=,2=34='==59=3=

COWETA COUNTY BOARD OF EDUCATION STATEMENT OF ACTIVITIES
FOR THE YEAR ENDED JUNE 30, 2006

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

EXPENSES

CHARGES FOR SERVICES

$

107,455,425 $

3,901,124 2,611,954 2,768,428
996,831 11,082,037
1,716,429 13,040,660
7,540,852 1,147,263
939,178

629,539 1,421,160 6,976,377 1,999,621

$

164,226,878 $

1,624,656
538,446 1,107,296 2,807,540 6,077,938

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

EXHIBIT"B"

PROGRAM REVENUES

OPERATING

CAPITAL

GRANTS AND

GRANTS AND

CONTRIBUTIONS CONTRIBUTIONS

NET (EXPENSES) REVENUES
AND CHANGES IN NET ASSETS

$

68,120,759 $

1,282,062 1,391,609 1,763,119 2,122,676 3,774,080
19,181 5,102,222 2,455,407
21,907 423,040

24,581 3,791,305

$

90,2911948 $

188,461 $
406 8,025
677 2,838 2,763 73,516 288,159
261
441 10,818 14,197
590,562 $

-37,521,549
-2,619,062 -1,219,939
-997,284 1,126,522 -7,305,119 -1,694,485 -7,864,922 -4,797,286 -1,125,095 -516,138
-90,652 -278,465 -363,335 -1,999,621
-67,266,430

$

59,509,459

90,695

8,801,462 10,249,999 2,102,939
668,588 2,778,301 3,923,567 2,226,196

3,093,062

$

93,444,268

$

26,177,838

179,539,325

s= = = 2.0.5.=,7=1=1=1,.6..3=

-3-

COWETA COUNTY BOARD OF EDUCATION BALANCE SHEET
GOVERNMENTAL FUNDS JUNE 30, 2006

EXHIBIT"C"

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

GENERAL FUND

DISTRICTWIDE
CAPITAL PROJECTS
FUND

DEBT SERVICE
FUND

TOTAL

$ 4,373,340 $ 2,419,274 $

26,000 $

16,238,941

63,926,335

30,943,895

1,593,482 10,265,999 1,768,791
188,796
111 453

73,132 207,901

3,480,372

6,818,614 111,109,171
5,073,854 10,265,999 1,768,791
261,928 207,901 111 453

Total Assets

$ 34,540,802 $ 66,626,642 $ 34.450,267 $=-==13..,5,..,6..,1.,.7..,71._1=

LIABILITIES AND FUND BALANCES
LIABILITIES
Accounts Payable Salaries Payable Contracts Payable Retainages Payable Due To Other Funds
Total Liabilities
FUND BALANCES
Reserved for: Debt Service Inventories Capital Projects
Unreserved Undesignated Reported in: General Fund Capital Projects
Total Fund Balances

$ 4,089,539 $ 13,632,882
207,901 $ 17,930,322 $

35,062 2,486,446 1,059,350
3,580,858

$

4,124,601

13,632,882

2,486,446

1,059,350

207 901

$

21,511,180

$ 34,450,267 $

$

111,453

$ 53,189,751

34,450,267 111,453
53,189,751

16,499,027

9,856,033

$ 16,610,480 $ 63,045,784 $ 34,450,267 $

16,499,027 9,856,033
114,106,531

Total Liabilities and Fund Balances

$ 34,540,802 $ 66,626,642 $ 34.450,267 $===13=5=,6_1_7..,71..,1=

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

COWETA COUNTY BOARD OF EDUCATION RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET
TO THE STATEMENT OF NET ASSETS JUNE 30, 2006

EXHIBIT" "

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

$ 114,106,531

$ 6,550,219 18,956,637 11,456,524
181,057,832 17,908,999 -35,582.434

200,347,777

1,477,006

$ -99,285,000 -6,687,965 -1,037,699 -3,203.487

-110,214, 151

$ 205,717,163

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

COWETA COUNTY BOARD OF EDUCATION STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES
GOVERNMENTAL FUNDS YEAR ENDED JUNE 30, 2006

EXHIBIT"E"

REVENUES
Property Taxes Sales Taxes State Funds Federal Funds Charges for Services Investment Earnings Miscellaneous
Total Revenues
EXPENDITURES
Current Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Enterprise Operations Community Services Food Services Operation
Capital Outlay Debt Services
Principal Interest
Total Expenditures
Excess of Revenues over (under) Expenditures
OTHER FINANCING SOURCES (USES)
Accrued Interest on Bonds Sold Proceeds of Long-Term Capital-Related Debt Premiums on Bonds Sold Sale of Equipment Capital Leases Transfers In Transfers Out
Total Other Financing Sources (Uses)
SPECIAL ITEMS
Proceeds from Sale of Buildings
Net Change in Fund Balances
Fund Balances - Beginning

GENERAL FUND

DISTRICTWIDE
CAPITAL PROJECTS
FUND

DEBT SERVICE
FUND

TOTAL

$ 59,192,025

$

9,554 $

2,771,527 $ 10,249,999

8,801,462

81,726,789

302,403

11,631,619

6,077,938

926,634

275,238

2,721,695

2,226,197

59,201,579 21,822,988 82,029,192 11,631,619 6,077,938
3,923,567 2,226,197

$ 164,552,729 $ 10,827,640 $ 11,532,711 $ 186,913,080

$ 104,026,353

$ 104,026,353

3,878,804 2,590,016 2,617,551
979,608 10,925,835
971,797 $ 11,859,474 9,014,052 1,124,280
938,708 621,826 1,220,551 6,938,897

673,376 $ 29,914,380

16,296

3,878,804 2,590,016 2,617,551
979,608 10,925,835
1,661,469 11,859,474 9,014,052 1,124,280
938,708 621,826 1,220,551 6,938,897 29,914,380

791,181 58,568

9,780,000 2,784,228

10,571,181 2,842,796

$ 158,557,501 $ 30,587,756 $ 12,580,524 $ 201,725,781

$ 5,995,228 $ -19,760,116 $ -1,047,813 $ -14,812,701

$ 288,965 $

$ 56,013,006

1,986,994

3,297,556

$

2,536

2,147,840

4,200,000

4,550,768

$

-4,550,768

$ -2,400,392 $ 68,061,330 $ 2,275,959 $

288,965 58,000,000
3,297,556 2,536
6,347,840 4,550,768 -4,550,768
67,936,897

$ 4,200,000

$

$ 3,594,836 $ 52,501,214 $ 1,228,146 $

13,015,644

10,544,570 33,222,121

4,200,000 57,324,196 56,782,335

Fund Balances - Ending

$ 16,610,480 $ 63,045,784 $ 34,450,267 $ 114,106,531

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

COWETA 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, 2006

EXHIBIT"F"

Total Net Change in Fund Balances - Governmental Funds (Exhibit "E")
Amounts reported for Governmental Activities in the Statement of Activities are different because:
Capital Outlays are reported as expenditures in Governmental Funds. However, in the Statement of Activities, the cost of Capital Assets is allocated over their estimated useful lives as depreciation expense. In the current period, these amounts are:
Capital Outlay Depreciation Expense
Excess of Capital Outlay over Depreciation Expense
Because some property taxes will not be collected for several months after the School District's fiscal year ends, they are not considered "available" revenues.
In the Statement of Activities, only the gain on the sale of the land/building/equipment is reported, whereas in the Governmental Funds, the entire proceeds from the sale increase financial resources. Thus, the change in net assets differs from the change in fund balances by the cost of the land/carrying value of the building/equipment sold.
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 $3,297,556
Some of the Capital Assets acquired this year were financed with capital leases. In Governmental Funds, a capital lease arrangement is considered a source of financing, but in the Statement of Net Assets, the lease obligation is reported as a Long-Term Liability.
Repayment of Long-Term Debt is reported as an expenditure in Governmental Funds, but the repayment reduces Long-Term Liabilities in the Statement of Net Assets. In the current year, these amounts consist of:
Bond Principal Retirements Capital Lease Payments Amortized Bond Premium
Total Long-Term Debt Repayments
Some items reported in the Statement of Activities do not require the use of current financial resources and therefore are not reported as expenditures in Governmental Funds. These activities consist of:
Increase in Compensated Absences

$ 57,324,196

$ 30,407,923 -3,894,056

26,513,867 398,575

-1,109,474

-61,297,556 -6,347,840

$ 9,780,000 791,181 554,210

11,125,391

-429,321

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

$ 26,177,838

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

COWETA COUNTY BOARD OF EDUCATION STATEMENT OF FIDUCIARY NET ASSETS
FIDUCIARY FUNDS JUNE 30, 2006
ASSETS Cash and Cash Equivalents Investments
Certificate of Deposit Accounts Receivable, Net
Other
Total Assets
LIABILITIES Funds Held for Others

EXHIBIT"G"
AGENCY FUNDS
$ 414,314 220,008 18 857
$ =====65=3=.1=79=
$==65=3=.1=79=

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

COWETA COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2006

EXHIBIT"H"

Note 1: DESCRIPTION OF SCHOOL DISTRICT AND REPORTING ENTITY
REPORTING ENTITY
The Coweta County Board ofEducation (School District) was established under the laws ofthe State of Georgia and operates under the guidance of a school board elected by the voters and a Superintendent appointed by the Board. The Board is organized as a separate legal entity and has the power to levy taxes and issue bonds. Its budget is not subject to approval by any other entity. Accordingly, the School District is a primary government and consists of all the organizations that compose its legal entity.
Blended Component Unit The Central Educational Center (Charter School) is responsible for the public education of all students attending its school. The Charter School was created through a contract between the School District and the Charter School whereby all State funding associated with the students attending the Charter School and certain specified local funds are turned over to the Charter School to cover the cost of its operations. The financial statements of the Charter School have been blended with the School District's general fund.
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 Coweta 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.
-9-

COWETA COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2006

EXHIBIT"H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Fund Financial Statements: The fund financial statements provide information about the School District's funds, including fiduciary funds. Eliminations have been made to minimize the double counting ofinternal activities. Separate statements for each category (governmental and fiduciary) are presented. The emphasis of fund financial statements is on major governmental funds, each displayed in a separate column.
The School District reports the following major governmental funds:
General Fund is the School District's primary operating fund. It accounts for all financial resources ofthe School District, except those resources required to be accounted for in another fund.
District-wide Capital Projects Fund accounts for financial resources including Special Purpose Local Option Sales Tax (SPLOST), Bond Proceeds and grants from Georgia State Financing and Investment Commission to be used for the acquisition, construction or renovation ofmajor capital facilities.
Debt Service Fund accounts for taxes (property and sales) legally restricted for the payment of general long-term principal, interest and paying agent's fees.
The School District reports the following fiduciary fund type:
Agency funds account for assets held by the School District as an agent for various funds, governments or individuals.
BASIS OF ACCOUNTING
The basis ofaccounting determines when transactions are reported on the financial statements. The District-wide governmental and fiduciary fund financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded at the time liabilities are incurred, regardless 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.
- 10 -

COWETA COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2006

EXHIBIT "H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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, claims and judgments, and compensated absences, which are recognized as expenditures to the extent they have matured. Capital asset acquisitions are reported as expenditures in governmental funds. Proceeds of general long-term liabilities and acquisitions under capital leases are reported as other financing sources.
The School District funds certain programs by a combination ofspecific cost-reimbursement grants, categorical grants, and general revenues. Thus, when program costs are incurred, there are both restricted and unrestricted net assets available to finance the program. It is the School District's policy to first apply grant resources to such programs, followed by cost-reimbursement grants, then general revenues.
CASH AND CASH EQUIVALENTS
COMPOSITION OF DEPOSITS Cash and cash equivalents consist 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. Georgia Laws OCGA 45-8-14 authorize the School District to deposit its funds in one or more solvent banks or insured Federal savings and loan associations.
INVESTMENTS
COMPOSITION OF INVESTMENTS Investments made by the School District in nonparticipating interest-earning contracts (such as certificates ofdeposit) and repurchase agreements are reported at cost. Participating interest-earning contracts and money market investments with a maturity at purchase 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,

- 11 -

COWETA COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2006

EXHIBIT"H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(3) Obligations fully insured or guaranteed by the United States government or a United States government agency,

(4) Obligations of any corporation of the United States government,

(5) Prime banker's acceptances,

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

(7) Repurchase agreements, and

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

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 Coweta County Board ofCommissioners fixed the property tax levy for the 2005 tax digest year (calendar year) on September 20, 2005 (levy date). Taxes were due on December 1, 2005 (lien date). Taxes collected within the current fiscal year or within 60 days after year-end on the 2005 tax digest are reported as revenue in the governmental funds for fiscal year 2006. The Coweta County Tax Commissioner bills and collects the property taxes for the School District, withholds 2.5% of taxes collected as a fee for tax collection and remits the balance of taxes collected to the School District. Property tax revenues, at the fund reporting level, during the fiscal year ended June 30, 2006, for maintenance and operations amounted to $59,192,025 and for school bonds amounted to $9,554.

The tax millage rate levied for the 2005 tax year (calendar year) for the Coweta County Board of Education was as follows (a mill equals $1 per thousand dollars of assessed value):

School Operations

18.59 mills

- 12 -

COWETA COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2006

EXHIBIT "H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

SALES TAXES

Special Purpose Local Option Sales Tax, at the fund reporting level, during the year amounted to $19,051,461 and is to be used for capital outlay for educational purposes or debt service. This sales tax was authorized by local referendum and the sales tax must be re-authorized at least every five years.

INVENTORIES

FOOD INVENTORIES On the basic financial statements, inventories 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 of art.

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

Capitalization Policy

Estimated Useful Life

Land Land Improvements Buildings and Improvements Equipment

All

NIA

$

10,000 20 to 80 years

$

10,000 25 to 80 years

$

10,000 10 to 50 years

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

- 13 -

COWETA COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2006

EXHIBIT"H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
GENERAL OBLIGATION BONDS
The School District issues general obligation bonds to provide funds for the acquisition and construction of major capital facilities. Bond issuance costs are recognized in the financial statements during the fiscal year bonds are issued. In addition, general obligation bonds have been issued to refund existing general obligation bonds. General obligation bonds are direct obligations and pledge the full faith and credit of the government. The outstanding amount of these bonds is recorded in the Statement of Net Assets.
Note 3: DEPOSITS AND INVESTMENTS
COLLATERALIZATION OF DEPOSITS Official Code of Georgia Annotated (OCGA) Section 45-8-12 provides that there shall not be on deposit at any time in any depository for a time longer than ten days a sum of money which has not been secured by surety bond, by guarantee of insurance, or by collateral. The aggregate ofthe face value ofsuch surety bond and the market value ofsecurities pledged shall be equal to not less than 110 percent ofthe public funds being secured after the deduction ofthe amount ofdeposit insurance. Ifa depository elects the pooled method (OCGA 45-8-13 .1) the aggregate ofthe market value ofthe securities pledged to secure a pool ofpublic funds shall be not less than 110 percent ofthe daily pool balance.
Acceptable security for deposits consists of any one of or any combination of the following:
(1) Surety bond signed by a surety company duly qualified and authorized to transact business within the State of Georgia,
(2) Insurance on accounts provided by the Federal Deposit Insurance Corporation,
(3) Bonds, bills, notes, certificates of indebtedness or other direct obligations of the United States or of the State of Georgia,
(4) Bonds, bills, notes, certificates of indebtedness or other obligations of the counties or municipalities of the State of Georgia,
(5) Bonds of any public authority created by the laws of the State of Georgia, providing that the statute that created the authority authorized the use of the bonds for this purpose,
(6) Industrial revenue bonds and bonds of development authorities created by the laws ofthe State of Georgia, and

- 14 -

COWETA COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2006

EXHIBIT "H"

Note 3: DEPOSITS AND INVESTMENTS

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

CATEGORIZATION OF DEPOSITS At June 30, 2006, the bank balances were $17,560,337. The amounts ofthe total bank balances are classified into four categories of custodial credit risk:

Category 1 - Cash that is insured (e.g., Federal Deposit Insurance) or collateralized with securities held by the School District or by the School District's agent in the School District's name.
Category 2 - Cash collateralized with securities held by the pledging financial institution's trust department or agent in the School District's name.
Category 3 - Cash collateralized with securities held by the pledging financial institution, or by its trust department or agent but not in the School District's name.
Category 4 - Uncollateralized.

The School District's deposits are classified by custodial credit risk category at June 30, 2006, as follows:

Custodial Credit Risk Category

Bank Balance

1

$ 845,139

2

0

3

16,715,198

4

0

Total

$ 1715601337

CATEGORIZATION OF INVESTMENTS At June 30, 2006, the carrying value of the School District's total investments was $111,109,171 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 of Georgia, 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. A description ofthe Primary Liquidity Portfolio is as follows:

- 15 -

COWETA COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2006

EXHIBIT"H"

Note 3: DEPOSITS AND INVESTMENTS
The Primary Liquidity Portfolio consists of Georgia Fund 1, which is a combination local and state government investment pool. Georgia Fund 1 is a stable net asset value investment pool which follows Standard and Poor's criteria for AAAm rated money market funds. The pool is not registered with the SEC as an investment company but does operate Georgia Fund 1 in a manner consistent with Rule 2a-7 ofthe Investment Company Act of 1940. The pool's primary objectives are safety of capital, investment income, liquidity and diversification while maintaining principal ($1.00 per share value). Net asset value is calculated daily and reported to the rating agency weekly to ensure stability. The pool distributes earnings (net of management fees) on a monthly basis and values participant's shares sold and redeemed at the pool's share price, $1.00 per share. Pooled cash and cash equivalents and investments are reported at cost. The pool does not issue any legally binding guarantees to support the value of the shares. Participation in the pool is voluntary and deposits consist of funds from local governments; operating and trust funds of Georgia's state agencies, colleges and universities; and current operating funds of the State of Georgia's General Fund.
Investments in Georgia Fund 1 are directed toward short-term instruments such as U.S. Treasury obligations, securities issued or guaranteed as to principal and interest by the U. S. Government or any of its agencies or instrumentalities, banker's acceptances and repurchase agreements. The weighted average maturity of Georgia Fund 1 may not exceed 60 days. The weighted average maturity for Georgia Fund 1 on June 30, 2006, was 28 days.
Note 4: NON-MONETARY TRANSACTIONS
The School District receives food commodities from the United States Department of Agriculture (USDA) for school breakfast and lunch programs. These commodities are recorded at their Federally assigned value. See Note 2 - Inventories
Note 5: CAPITAL ASSETS
The following is a summary of changes in the Capital Assets during the fiscal year:

- 16 -

COWETA COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2006

EXHIBIT"H"

Note 5: CAPITAL ASSETS

Balances July l, 2005

Increases

Balances Decreases June 30, 2006

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

$ 6,223,819 $ 335,100 $

8,700 $ 6,550,219

11,028,906 22,409,865 14,482,134 18,956.637

Total Capital Assets Not Being Depreciated $ 17,252.725 $ 22.744.965 $ 14,490,834 $ 25,506,856

Capital Assets Being Depreciated Buildings and Improvements Equipment Land Improvements

$ 164,504,685 $ 17,834,985 $

16,235,197

2,680,602

9,905,805

1,629,505

1,281,838 $ 181,057,832 1,006,800 17,908,999
78,786 11,456,524

Less Accumulated Depreciation for: Buildings and Improvements Equipment Land Improvements

24,866,887 5,662,197 2,425,944

2,828,380 715,899 349,777

540,078 679,738
46.834

27,155,189 5,698,358 2.728.887

Total Capital Assets, Being Depreciated, Net $ 157,690.659 $ 18.251.036 $ 1.100.774 $ 174,840.921

Governmental Activity Capital Assets - Net $ 114,243,384 $ 40,226,001 $ 15,521,608 $ 200,34:Z,:Z:Z:Z

Capital assets being acquired under capital leases as of June 30, 2006, are as follows:

Governmental Funds

Buildings and Improvements Equipment Less: Accumulated Depreciation

$ 4,200,000 2,147,840 69.207

$ 6,278,633

Current year depreciation expense by function is as follows:

- 17 -

COWETA COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2006

EXHIBIT"H"

Note 5: CAPITAL ASSETS

Instruction Support Services
Improvements of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation ofPlant Student Transportation Services Central Support Services Enterprise Operations Community Services Food Services

$ 2,116,213

$

4,523

89,394

7,543

31,614

30,777

818,933

508,579

2,910

4,909

120,510

1,619,692 158,151

$ 3,894.056

Note 6: RESTRICTED ASSETS

Special Purpose Local Option Sales Tax (SPLOST), general obligation bond proceeds and property tax levied specifically for retirement of outstanding bond principal, interest and paying agent's fees (Debt Service Funds) are reported as 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, 2006, were as follows:

District-wide Capital Projects

Bond

SPLOST

Proceeds

Debt Service Funds

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

$
$ 773,129 $ 754,012

26,000

$ 30,943,895 $ 55,170,336

- 18 -

COWETA COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2006

EXHIBIT"H"

Note 7: INTERFUND ASSETS AND LIABILITIES

Due to and due from other funds are recorded for interfund receivables and payables which arise from interfund transactions. Interfund balances at June 30, 2006, consisted of the following:

Due From Other Funds

Due To Other Funds

General Fund District-wide Capital Projects

$ 207,901 $ 207,901

$ 2021201 $ 202,201

Transfers are used to move property tax revenues to provide supplemental funding for capital construction projects.

Note 8: INTERFUND TRANSFERS

Interfund transfers for the year ended June 30, 2006, consisted of the following:

Transfer to

Transfers From General Fund

District-wide Capital Projects

$ 4,550,268

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

Note 9: 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 and errors or omissions. The School District has neither significantly reduced coverage for these risks nor incurred losses (settlements) which exceeded the School District's insurance coverage in any of the past three years.

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

- 19 -

COWETA COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2006

EXHIBIT"H"

Note 9: RISK MANAGEMENT

The School District has established a limited risk management program for workers' compensation claims. In connection with this program, a self-insurance reserve has been established within the General Fund by the School District. The School District accounts for claims within the General Fund with expenses/expenditures and liability being reported when it is probable that a loss has occurred, and the amount of that loss can be reasonably estimated. 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:

Beginning of Year Liability

Claims and Changes in Estimates

Claims Paid

End of Year Liability

2005 2006

$

0 $

520,643 $

520,643 $

0

$

0 $

365,411 $

365,411 $

0

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

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

2005 2006

Beginning of Year Liability

Claims and Changes in Estimates

Claims Paid

EndofYear Liability

$

0 $

12,061 $

12,061 $

0

$

0 $

6 037 $

6 037 $

0

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

Position Covered

Amount

Superintendent Comptroller Board Treasurer All Employees

$

20,000

$

10,000

$

10,000

$ 250,000

-20-

COWETA COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2006

EXHIBIT "H"

Note 10: SHORT-TERM DEBT

The School District issues tax anticipation notes in advance of property tax collections, depositing the proceeds in its General Fund. This short-term debt is to provide cash for operations until property tax collections are received by the School District. Article IX, Section V, Paragraph V of the Constitution ofthe State ofGeorgia limits the aggregate amount ofshort-term debt to 75 percent ofthe total gross income from taxes collected in the preceding year and requires all short-term debt to be repaid no later than December 31 of the calendar year in which the debt was incurred.

Short-term debt activity for the fiscal year is as follows:

Beginning Balance

Issued

Redeemed

Ending Balance

Tax Anticipation Notes

$=====0 $ 8,000.000 $ 8,000.000 $=====0

Note 11: LONG-TERM DEBT

CAPITAL LEASES The Coweta County Board ofEducation entered into an agreement August 1, 2005, with the Georgia School Board Association for the renovations and subsequent lease ofRuth Hill Elementary School. Under the terms of the agreement, the School District will make annual payments through February 1, 2012. The Coweta County Board of Education also entered into various lease agreements for buses and equipment. These lease agreements qualify as capital leases for accounting purposes, and, therefore, have been recorded at the present value ofthe future minimum lease payments as of the date of their inception.

COMPENSATED ABSENCES Compensated absences represent obligations ofthe School District relating to employees' rights to receive compensation for future absences based upon service already rendered. This obligation relates only to vesting accumulating leave in which payment is probable and can be reasonably estimated. Typically, the General Fund is the fund used to liquidate this long-term debt. The School District uses the vesting method to compute compensated absences.

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

Purpose

Interest Rates

Amount

General Government - Series 1998 General Government - Refunding - Series 2002 General Government - Refunding - Series 2002 General Government - Series 2005

3.95% - 4.85% 3.25% - 5.00% 1.80% - 4.00% 3.50% - 5.00%

$ 13,490,000 16,500,000 11,295,000 58,000,000

$ 99,285.000

- 21 -

COWETA COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2006

EXHIBIT"H"

Note 11: LONG-TERM DEBT

The changes in Long-Term Debt during the fiscal year ended June 30, 2006, were as follows:

CaJ;!ital Leases

Georgia

School Board

Association

Other

Governmental Funds

Compensated Absences

General Obligation
Bonds

Unamortized Bond
Premium

Total

Balance July l, 2005

$ 1,131,306 $ 608,378 $ 51,065,000 $ 460,141 $ 53,264,825

Additions

Capital Leases

$ 4,200,000

Annual Leave Earned

G.O. Bonds

Unamortized Bonds

2,147,840

890,186

58,000,000

3,297,556

6,347,840 890,186
58,000,000 3,297,556

Deductions Annual Leave Utilized Debt Retired Bond Premiums Amortized

791,181

460,865

9,780,000

554,210

460,865 10,571,181
554,210

Balance June 30, 2006 $ 4.200.000 $ 2,487.965 $ 1.037.699 $ 99.285.000 $ 3.203.487 $ 110.214.151

Portion ofLong-Term Debt Due Within One Year $

621,799 $

486,606 $ 1,037,699 $ 10,395,000 $

663,990 $ 13,205,094

At June 30, 2006, payments due by fiscal year which includes principal and interest for these items are as follows:

Fiscal Year Ended June 30
2007 2008 2009 2010 2011 2012
Total Principal and Interest

Ca11ital Leases

Georgia School Board

Association

Other

Princi11al

Interest

Princi11al

Interest

Total

Princi11al

Interest

$

621,799 $

199,169 $ 486,606 $

650,819

170,148

670,940

681,385

139,582

429,113

714,168

106,800

443,316

748,127

72,841

457,990

783.702

37,266

81,321 $ 69,809 44,037 29,833 15,159

1,108,405 $ 1,321,759 1,110,498 1,157,484 1,206,117
783.702

280,490 239,957 183,619 136,633 88,000 37.266

$ 4 200 000 $

Z25 806 $ 2 48Z 265 $

240152 $ 6 68Z 265 $ 265 265

- 22 -

COWETA COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2006

EXHIBIT"H"

Note 11: LONG-TERM DEBT

Fiscal Year Ended June 30

General Obligation

Debt

Principal

Interest

Unamortized Bond
Premium

2007 2008 2009 2010 2011 2012 - 2013

$ 10,395,000 $ 13,005,000 12,905,000 15,585,000 15,950,000 31,445,000

4,409,276 $ 3,907,464 3,550,304 2,951,069 2,208,425 2,367,651

663,990 454,835 454,835 454,835 454,835 720,157

Total Principal and Interest

$ 99,285,000 $ 19,394,189 $ 3,203,487

Note 12: ON-BEHALF PAYMENTS

The School District has recognized revenues and costs in the amount of $3,102,346 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 $3,077,768

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 $24,578

Note 13: SPECIAL ITEMS

In fiscal year 2006, the Coweta County Board of Education sold the Ruth Hill Elementary School Building (building and related land) to the Georgia School Board Association for $4,200,000. The carrying value ofthe building and related land was $1,106,938 and was properly removed from the capital asset records by the School District. A net gain of $3,093,062 from the sale is reported as a special item on the Statement of Activities.

Note 14: SIGNIFICANT COMMITMENTS

The following is an analysis ofsignificant outstanding construction or renovation contracts executed by the School District as of June 30, 2006, together with funding available:

- 23 -

COWETA COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2006

EXHIBIT"H"

Note 14: SIGNIFICANT COMMITMENTS

Project

Unearned Executed Contracts

Funding Available From State

Northgate 9th Grade Academy East Coweta High School 9th Grade Academy Newnan High School 9th Grade Academy Elm Street Elementary School Eastside Elementary School Welch Elementary School Ruth Hill Elementary School

$ 6,022,565 $ 1,933,001

7,375,343

2,045,819

6,400,959

2,400,204

319,046

2,285,827

215,329

317,415

5,583,610

26.571

$ 2217.47.1726 $ 121177.263

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

Note 15: 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 16: 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.

-24-

COWETA COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2006

EXHIBIT "H"

Note 16: RETIREMENT PLANS

TRS CONTRIBUTIONS REQUIRED AND MADE Employees ofthe School District who are covered by TRS are required by State statute to contribute 5% of their gross earnings to TRS. The School District makes monthly employer contributions to TRS at rates adopted by the TRS Board of Trustees in accordance with State statute and as advised by their independent actuary. The required employer contribution rate is 9.24% and employer contributions for the current fiscal year and the preceding two fiscal years are as follows:

Fiscal Year

Percentage Contributed

Required Contribution

2006 2005 2004

100% 100% 100%

$ 8,070,080 $ 7,656,670 $ 7,499,882

- 25 -

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COWETA COUNTY BOARD OF EDUCATION GENERAL FUND
SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL
YEAR ENDED JUNE 30, 2006

SCHEDULE "1"

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

NONAPPROPRIATED BUDGETS

ORIGINAL (1 l

FINAL (1}

ACTUAL AMOUNTS

$

54,422,218 $

59,222,218 $

59,192,025

1,900,000

1,900,000

2,771,527

76,819,272

77,619,272

81,726,789

10,033,022

10,433,022

11,631,619

2,800,000

2,800,000

6,077,938

134,000

134,000

926,634

2,125,948

9,125,948

2,226,197

$

148,234,460 $

161,234,460 $ 164,552,729

$

100,703,413 $

106,203,413 $ 104,026,353

3,699,200 2,502,943 2,730,412 1,184,297 10,510,209 1,256,344 11,476,985 6,356,721 1,040,714
448,025
1,541,371 6,404,944

3,699,200 2,502,943 2,730,412 1,184,297 10,510,209 1,256,344 11,476,985 6,356,721 1,040,714
448,025 1,500,000 1,541,371 6,404,944

3,878,804 2,590,016 2,617,551
979,608 10,925,835
971,797 11,859,474 9,014,052
1,124,280 938,708 621,826
1,220,551 6,938,897
849749

$

149,855,578 $

156,855,578 $ 158,557,501

$

-1,621,118 $

4,378,882 $

5,995,228

$

375,000 $

375,000 $

2,150,376

-2,383,170

-5,383,170

-4,550,768

$

-2,008,170 $

-5,008,170 $

-2,400,392

$

-3,629,288 $

-629,288 $

3,594,836

12,991,055

12,991,055

13,015,644

-73 686

-73 686

$

9,288.081 $

12,288,081 $

16.610,480

Notes to the Schedule of Revenues, Exe!nditures and Changes in Fund Balances Budget and Actual
(1) Original and Final Budget amounts do not include revenues or expenditures for health insurance and retirement contributions paid on the School District's behalf.
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.
-27-

COWETA COUNTY BOARD OF EDUCATION SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
YEAR ENDED JUNE 30, 2006

SCHEDULE "2"

FUNDING AGENCY PROGRAM/GRANT
Agriculture, U. S. Department of Child Nutrition Cluster Pass-Through From Georgia Department of Education Food Services School Breakfast Program National School Lunch Program
Total Child Nutrition Cluster
Other Programs Pass-Through From Georgia Department of Education Food Donation (1)
Total U.S. Department of Agriculture
Education, U. S. Department of Special Education Cluster Pass-Through From Georgia Department of Education Special Education Grants to States Preschool Grants
Total Special Education Cluster
Other Programs Pass-Through From Georgia Department of Education Charter Schools Comprehensive School Reform Demonstration English Language Acquisition Grants Enhancing Education Through Technology Program Hurricane Education Recovery Improving Teacher Quality State Grants Mathematics and Science Partnerships Safe and Drug-Free Schools and Communities State Grants for Innovative Programs Title I Grants to Local Educational Agencies Vocational Education - Basic Grants to States
Total U. S. Department of Education
Defense, U. S. Department of Direct Department of the Air Force R.O.T.C. Program Department of the Marine Corps R.O.T.C. Program
Total U. S. Department of Defense
Total Federal Financial Assistance
NIA= Not Available

CFDA NUMBER

PASSTHROUGH
ENTITY ID
NUMBER

EXPENDITURES IN PERIOD

10.553 10.555

N/A NIA $
$

(2) 6,270,436
6,270,436

10.550

N/A
$

168 379 6 438 815

84.027 84.173

N/A $ N/A
$

3,327,725 144 549
3,472,274

84.282 84.332 84.365 84.318
. 84.938 . 84.367
84.366
. 84.186 84.298 84.010 84.048

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

147,500 284,163
51,061 46,028 (3) 494,360 107,248 89,089 51,026 2,724,232 146 927
7,613,908

$

93,968

61 514

$

155 482

$ ===14..,,2=0=8=,2=0=5

- 28 -

COWETA COUNTY BOARD OF EDUCATION SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
YEAR ENDED JUNE 30, 2006

SCHEDULE "2"

Notes to the Schedule of Expenditures of Federal Awards
(1) The amount shown for the Food Donation Program represents the Federally assigned vi;ilue 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 ($617,311) were not maintained separately and are included in the 2006 National School Lunch Program.
(3) Funds earned on the Hurricane Education Recovery program, in the amount of $571,004, do not require reporting of expenditures.
Major Programs are identified by an asterisk (*) in front of the CFDA number.
The School District did not provide Federal Assistance to any Subrecipient.
The accompanying schedule of expenditures of Federal awards includes the Federal grant activity of the Coweta 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.

- 29-

COWETA COUNTY BOARD OF EDUCATION SCHEDULE OF STATE REVENUE YEAR ENDED JUNE 30, 2006

SCHEDULE "3"

AGENCY/FUNDING

GOVERNMENTAL FUND TYPES

CAPITAL

GENERAL

PROJECTS

FUND

FUND

TOTAL

GRANTS Bright From the Start: Georgia Department of Early Care and Leaming Pre-Kindergarten Program

$

2,197,314

$ 2,197,314

Education, Georgia Department of Quality Basic Education Direct Instructional Cost Kindergarten Program Kindergarten Program - Early Intervention Program Primary Grades (1-3) Program Primary Grades - Early Intervention (1-3) Program Upper Elementary Grades (4-5) Program Upper Elementary Grades - Early Intervention (4-5) Program Middle School (6-8) Program High School General Education (9-12) Program Vocational Laboratory (9-12) Program Students with Disabilities Category I Category II Category Ill Category IV CategoryV Gifted Student - Category VI Remedial Education Program Alternative Education Program English Speakers of Other Languages (ESOL) Media Center Program 20 Days Additional Instruction Staff and Professional Development Indirect Cost Central Administration School Administration Facility Maintenance and Operations Categorical Grants Pupil Transportation Regular Bus Replacement Nursing Services Principal Supplements Vocational Supervisors Education Equalization Funding Grant Food Services Austerity Reduction Other State Programs Agriculture - Extended Day Health Insurance Limited School Choice Program National Teacher Certification Preschool Handicapped Program Technology/Career Extended Day Technology/Career Youth Apprenticeship Virtual Schools State Grant

5,206,598 303,141
12,032,185 607,850
5,769,247 377,144
10,218,106 8,859,201 1,993,611
2,411,447 735,734
6,373,140 1,450,318 1,249,998 2,273,380
106,059 778,821 352,497 1,665,052 515,373 361,042
1,826,352 3,410,719 4,943,481
1,822,242 288,159 356,135 69,043 18,183
2,778,302 419,524
-3,923,061
5,396 3,077,768
299,155 121,190 262,712
39,628 50,000
25

5,206,598 303,141
12,032,185 607,850
5,769,247 377,144
10,218,106 8,859,201 1,993,611
2,411,447 735,734
6,373,140 1,450,318 1,249,998 2,273,380
106,059 778,821 352,497 1,665,052 515,373 361,042
1,826,352 3,410,719 4,943,481
1,822,242 288,159 356,135 69,043 18,183
2,778,302 419,524
-3,923,061
5,396 3,077,768
299,155 121,190 262,712
39,628 50,000
25

- 30-

COWETA COUNTY BOARD OF EDUCATION SCHEDULE OF STATE REVENUE YEAR ENDED JUNE 30, 2006

SCHEDULE "3"

AGENCY/FUNDING
GRANTS Georgia State Financing and Investment Commission Reimbursement on Construction Projects
Office of Treasury and Fiscal Services Public School Employees Retirement

GOVERNMENTAL FUND TYPES

CAPITAL

GENERAL

PROJECTS

FUND

FUND

TOTAL

$

302,403 $

302,403

$ _ _.....:;:2'-'-4,,_5-=--'78=-

24,578

$ 81,726,789 $

302,403 $ 82,029,192

See notes to the basic financial statements.

- 31 -

COWETA COUNTY BOARD OF EDUCATION SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS
YEAR ENDED JUNE 30, 2006

SCHEDULE "4"

PROJECT

ORIGINAL ESTIMATED
COST (1)

CURRENT ESTIMATED COSTS (2)

AMOUNT EXPENDED IN CURRENT YEAR (3) (4) (5)

AMOUNT EXPENDED
IN PRIOR YEARS (3) (4)

PROJECT STATUS

The payment of all of the principal and interest due on the School District's Series 1992 Bonds, Series 1993 Bonds, and Series 1998 Bonds with the result that no additional ad valorem taxes will need to be collected in order to pay principal and interest on such bonds.

$ 36,974,261 $ 36,974,261 $

4,395,839 $ 8,824,360 Ongoing

The construction and equipment of a new middle school and two new elementary schools; and renovation of, modification of, making of new additions to and equipping of the following schools or facilities: Arbor Springs Elementary School, Arnall Middle School, Arnco-Sargent Elementary School, Atkinson Elementary School, Canongate Elementary School, Central Education Center, East Coweta High School, East Coweta Middle School, Eastside Elementary School, Elm Street Elementary School, 0. P. Evans Middle School, Winston Dowdell Academy, Jefferson Parkway Elementary School, Madras Middle School, Maggie Brown Pre-K Moreland Elementary School, Newnan Crossing Elementary School, Newnan High School, Northgate High School, Northgate Elementary School, Poplar Road Elementary School, Ruth Hill Elementary School, Smokey Road Middle School, Thomas Crossroads Elementary School, Western Elementary School, Westside Burwell, White Oak Elementary School and school on Willis Road; the acquisition of land for the foregoing purpose, the furnishing and equipping of the Fine Arts Center; the acquisition of additional transportation facilities and school buses; the acquisition, construction and equipping of additions at facilities system wide; and the addition of new technology and modification to existing technology system-wide.

61,009,000

61,009,000

17,690,902

34,200,804 Ongoing

The payment of principal and interest on the School District's 2005 General Obligation Sales Tax Bonds in the aggregate principal amount of $58,000,000. Also, the acquiring, constructing and equipping of three ninth grade academies, one middle school and an addition to Eastside Elementary School; the retirement of any public purpose master lease executed for renovating, adding to and improving any existing school buildings and facilities; renovating, adding to and improving existing school buildings and facilities; providing additional technology; providing additional buses; acquisition, construction and equipping all facilities and additions thereto system-wide; and acquiring land for future school projects; and capitalizing interest on bonds through July 1, 2007.

130,000,000 130,000,000

8,190,589

Ongoing

$ 2271983,261 $ 227,983,261 $ 301277,330 $ 431025,164

- 32-

COWETA COUNTY BOARD OF EDUCATION SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS
YEAR ENDED JUNE 30, 2006

SCHEDULE "4"

(1) The School District's original cost estimate as specified in the resolution calling for the imposition of the Local Option Sales Tax.

(2) The School District's current estimate of total cost for the projects. Includes all cost from project inception to completion.

(3) The voters of Coweta 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

$ 3,379,250

Current Year

878,500

Total

$ 4,257,750

(5) The Series 1993 Bonds were retired through the sale of Series 2002 Refunding Bond Issue. The School District will utilize the SPLOST proceeds budgeted for this project, plus any excess SPLOST proceeds to retire the Series 2002 Refunding Bond Issue.

See notes to the basic financial statements.

-33-

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COWETA COUNTY BOARD OF EDUCATION GENERAL FUND- QUALITY BASIC EDUCATION PROGRAM (QBE)
ALLOTMENTS AND EXPENDITURES BY PROGRAM YEAR ENDED JUNE 30, 2006

SCHEDULE "5"

DESCRIPTION

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

ELIGIBLE QBE PROGRAM COSTS

SALARIES

OPERATIONS

TOTAL

Direct Instructional Programs

Kindergarten Program

$

Kindergarten Program-Early Intervention Program

Primary Grades (1-3) Program

Primary Grades-Early Intervention (1-3) Program

Upper Elementary Grades (4-5) Program

Upper Elementary Grades-Early Intervention (4-5)

Program

Middle School (6-8) Program

High School General Education (9-12) Program

Vocational Laboratory (9-12) Program

Students with Disabilities

Category I

Category II

Category Ill

Category IV

CategoryV

Gifted Student - Category VI

Remedial Education Program

Alternative Education Program

English Speakers of Other Languages (ESOL)

6,215,395 $ 340,183
14,301,500 784,005
6,880,661

6,354,702 $ 107,351
14,296,751 1,189,440 8,084,870

510,874 12,175,852 10,586,709 2,308,384 14,544,549
2,683,699 121,289 926,589 422,364

685,267 12,374,974 13,978,757
1,881,302
253,684 1,099,620 11,101,786
394,633 998,201 3,186,175 45,475 277,326 663,235

113,615 $ 2,405
450,541 4,159
290,842
4,358 535,485 1,219,762 133,687
3,359 18,369 193,465 22,007 14,951 21,371
13245

6,468,317 109,756
14,747,292 1,193,599 8,375,712
689,625 12,910,459 15,198,519 2,014,989
257,043 1,117,989 11,295,251
416,840 1,013,152 3,207,546
45,475 277,326 676480

TOTAL DIRECT INSTRUCTIONAL PROGRAMS

$

72,802,053 $ 76,973,549 $

3,041,621 $

80,015,170

Media Center Program Staff and Professional Development

1,985,620 434 673

2,328,956 191,849

230,396 159 119

2,559,352 350,968

TOTAL QBE FORMULA FUNDS

$

75,222,346 $ 79,494,354 $

3,431,136 s...,._8_2..,,0..,25.,..4.,.9..,.o

(1) Comprised of State Funds plus Local Five Mill Share. (2) Allotments do not include the impact of the State budget austerity reduction.

See notes to the basic financial statements.

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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
May 2, 2007

Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the Coweta 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 ofCoweta County Board of Education as ofand for the year ended June 30, 2006, which collectively comprise Coweta County Board of Education's basic financial statements and have issued our report thereon dated May 2, 2007. 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 Coweta County Board ofEducation's internal control over financial reporting in order to determine our auditing procedures for the purpose of expressing our opinions on the financial statements and not to provide an opinion on the internal control over financial reporting. However, we noted a certain matter involving the internal control over financial reporting and its operation that we consider to be a reportable condition. Reportable conditions involve matters coming to our attention relating to significant deficiencies in the design or operation of the internal control over financial reporting that, in our judgment, could adversely affect Coweta County Board of Education's ability to record, process, summarize and report financial data consistent with assertions of management in the financial statements. The reportable condition is described in the accompanying Schedule ofFindings and Questioned Costs as item FS-6381-06-01.
2006YB-30

A material weakness is a reportable condition in which the design or operation ofone or more ofthe internal control components does not reduce to a relatively low level the risk that misstatements caused by error or fraud in amounts that would be material in relation to the financial statements being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. Our consideration of the internal control over financial reporting would not necessarily disclose all matters in the internal control that might be reportable conditions and, accordingly, would not necessarily disclose all reportable conditions that are also considered to be material weaknesses. However, we believe the reportable condition described above is not a material weakness.
Compliance and Other Matters
As part of obtaining reasonable. assurance about whether Coweta 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.
This report is intended solely for the information and use of the management and members of the Coweta County Board of Education and is not intended to be and should not be used by anyone other than these specified parties.
Respectfully submitted,
~~-~~
Ru sell W. Hinton, CPA, CGFM State Auditor
RWH:as 2006YB-30

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

DEPARTMENT OF AUDITS AND ACCOUNTS
270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400
May 2, 2007

Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the Coweta County Board of Education
REPORT ON COMPLIANCE WITH REQUIREMENTS APPLICABLE TO EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH 0MB CIRCULARA-133
Ladies and Gentlemen:
Compliance
We have audited the compliance of Coweta 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, 2006. Coweta 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 Coweta County Board of Education's management. Our responsibility is to express an opinion on Coweta County Board of Education's compliance based on our audit.
We conducted our audit ofcompliance in accordance with auditing standards generally accepted in the United States ofAmerica; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General ofthe United States; and 0MB Circular A133, Audits of States, Local Governments, and Non-Profit Organizations. Those standards and 0MB Circular A-133 require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major Federal program occurred. An audit includes examining, on a test basis, evidence about the Coweta County Board ofEducation's compliance with those requirements and performing such other procedures as we considered necessary in the

2006SA-30

circumstances. We believe that our audit provides a reasonable basis for our opinion. Our audit does not provide a legal determination on Coweta County Board of Education's compliance with those requirements.
In our opinion, the Coweta 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, 2006.
Internal Control Over Compliance
The management of Coweta 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 Coweta 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 and to test and report on internal control over compliance in accordance with 0MB Circular A-133.
We noted a certain matter involving the internal control over compliance and its operation that we consider to be a reportable condition. Reportable conditions involve matters coming to our attention relating to significant deficiencies in the design or operation ofthe internal control over compliance that, in our judgment, could adversely affect the Coweta County Board of Education's ability to administer a major Federal program in accordance with applicable requirements oflaws, regulations, contracts and grants. The reportable condition is described in the accompanying Schedule of Findings and Questioned Costs as item FA-6381-06-01.
A material weakness is a reportable condition in which the design or operation ofone or more ofthe internal control components does not reduce to a relatively low level ofrisk that noncompliance with the applicable requirements of laws, regulations, contracts and grants caused by error or fraud that would be material in relation to a major Federal program being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. Our consideration ofthe internal control over compliance would not necessarily disclose all matters in the internal control that might be reportable conditions and, accordingly, would not necessarily disclose all reportable conditions that are also considered to be material weaknesses. However, we believe the reportable condition described above is not a material weakness.
2006SA-30

This report is intended solely for the information and use of the management, members of the Coweta 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,
~w~ Russell W. Hinton, CPA, CGFM State Auditor
RWH:as 2006SA-30

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

COWETA COUNTY BOARD OF EDUCATION AUDITEE'S RESPONSE
SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2006
PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS No matters were reported. PRIOR YEAR FEDERAL AWARD FINDINGS AND QUESTIONED COSTS No matters were reported.

SECTION IV FINDINGS AND QUESTIONED COSTS

COWETA COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2006
I SUMMARY OF AUDITOR'S RESULTS
1. Type of Report Issued on the Financial Statements The auditor's opinion on the Coweta County Board of Education's financial statements was unqualified.
2. Reportable Conditions in Internal Control Disclosed by the Audit of the Financial Statements The audit report for the Coweta County Board of Education disclosed a financial statement reportable condition related to the following control categories.
Expenditures/Liabilities/Disbursements Revenues/Receivables/Receipts
The reportable condition described above is not considered to be a material weakness.
3. Noncompliance Material to the Financial Statements The audit of the Coweta County Board of Education disclosed no instances of noncompliance that were deemed to be material to the financial statements.
4. Reportable Conditions in Internal Control Over Major Programs The audit report for the Coweta County Board ofEducation disclosed a reportable condition in internal control over major programs for the following compliance requirement.
Activities Allowed or Unallowed
The reportable condition described above is not considered to be a material weakness.
5. Type of Report Issued on Compliance for Major Programs The auditor's opinion on the Coweta County Board ofEducation's report on compliance with requirements applicable to major programs was unqualified.
6. Audit Findings Required to be Reported by Section .510(a) ofOMB Circular A-133 The Coweta County Board of Education's audit disclosed an audit finding required to be reported by section .510(a) of 0MB Circular A-133. This audit finding is included in section IV of this report.
7. Major Programs Federal awards audited as major programs are as follows: 84.010 Title I Grants to Local Educational Agencies 84.367 Improving Teacher Quality State Grants 84.938 Hurricane Education Recovery
8. Type "A" Program Dollar Threshold The dollar threshold for type "A" programs was $443,376.
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COWETA COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2006

I SUMMARY OF AUDITOR'S RESULTS

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

II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Monitoring of School Activity Accounts Reportable Condition Finding Control Number: FS-6381-06-01

Condition:

The school activity accounts selected for testing did not follow the School District's policies and procedures.

Criteria:

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

Questioned Cost: NIA

Information:

Revenues/Receivables/Receipts Based on a review of 50 items, 5 receipts were not deposited in a timely manner.

Expenditures/Liabilities/Disbursements Based on a review of 50 items, 14 expenditures had purchase orders issued after date of the invoices.

Cause:

These deficiencies were a result of management's failure to ensure that internal controls were functioning properly at the school level.

Effect:

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

Recommendation: Management should monitor controls to provide reasonable assurance that transactions are processed according to established procedures.

-2-

COWETA COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2006

III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

ACTIVITIES ALLOWED OR UNALLOWED Inadequate Internal Control Procedures Reportable Condition U.S. Department of Education Hurricane Education Recovery (CFDA No. 84.938) Through Georgia Department of Education Finding Control Number: FA-6381-06-01

Condition:

The School District did not have procedures in place to ensure that Hurricane Education Recovery Act (HERA) funds provided for displaced students reported as having disabilities were used for the excess costs of providing special education and related services to students with disabilities.

Criteria:

The following guidance applied to the management of Emergency Impact Aid for Displaced Students to include funds made available for displaced students:

1. Section 107(e)(4) of HERA, 2. Volumes "I" and "II" ofU. S. Department of Education (USED)
guidelines included in "Frequently Asked Questions, Emergency Impact Aid for Displaced Students", and 3. State of Georgia issued publication titled "Georgia Guidance on Federal Emergency Hurricane Act" (GDOE Guidelines).

Provisions of HERA, USED and GDOE Guidelines state that HERA funds for students with disabilities may only be used to pay for special education and related service consistent with the Individuals with Disabilities Act (IDEA). Both Volumes "I" and "II" of USED guidance state that the funds provide for students with disabilities must be recorded and tracked separately from those HERA funds provided for non-disabled students. This Federal requirement was not specifically included in GDOE Guidelines.

Provisions of HERA and GDOE guidelines state that these funds may become a part of a School District's special education budget to ensure that they are only used to pay for special education and related service consistent with IDEA. The guidelines further stated that since these funds are to be applied and used in a manner as funds made available under Part B ofIDEA, it was also advised to consult with State and local staffwho are cognizant of IDEA requirements.

-3 -

COWETA COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2006

III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

ACTIVITIES ALLOWED OR UNALLOWED Inadequate Internal Control Procedures Reportable Condition U.S. Department of Education Hurricane Education Recovery (CFDA No. 84.938) Through Georgia Department of Education Finding Control Number: FA-6381-06-01

Questioned Cost: $74,623

Information:

HERA funds received by the School District included $74,623 for students with disabilities. Although required by Federal guidelines, the receipt and expenditure of these funds were not maintained separately.

We further noted that the budget for special education was not modified for the increase in HERA funds designated for special education and related purposes.

Cause:

The School District relied solely on GDOE Guidelines which did not require that the School District provide separate accountability of HERA funds provided for students with disabilities. Consideration had not been given to consulting with local and State special education staff or revising its special education budget to ensure that these HERA funds were applied in line with IDEA.

Effect:

We were unable to determine if the $74,623 of HERA funds earmarked for students with disabilities were used for special education and related purposes.

Recommendation:

Management should ensure that procedures are in place to comply with Federal and State guidelines when administering HERA funds for special education purposes. GDOE should review this matter and determine ifthese funds were used properly or if a refund is appropriate.

-4 -

SECTIONV MANAGEMENT'S RESPONSES

COWETA COUNTY BOARD OF EDUCATION SCHEDULE OF MANAGEMENT'S RESPONSES
YEAR ENDED JUNE 30, 2006
Finding Control Number: FS-6381-06-01
We do not concur with this finding. The Board has implemented procedures for the operation ofthe school activity accounts. The activity accounts are monitored at least annually to ensure compliance with the Board's procedures. Ifnoncompliance is noted internally, additional guidance and training is provided to the necessary personnel.
Auditor's Comment: The School District does have appropriate controls in place; however, we believe the controls are not operating effectively as designed.
Finding Control Number: FA-6381-06-01
We do not concur with this finding. The Board followed Section III of the Hurricane Education Recovery Act guidelines obtained for the Georgia Department of Education. Section III states the School District should record the funds in the General Fund using revenue source 4821, program code 1799. The funds were to be accounted for within the General Fund and there were no requirements to record expenditures associated with these funds, except for the amounts received for the non-public schools (the Board did not make any disbursements to non-public schools). A corrective action is unnecessary since this was a fiscal year 2006 grant and all refunds have been made to the.Georgia Department of Education.
Auditor's Comment: The School District did follow guidelines provided by Georgia Department ofEducation (GDOE); however, GDOE did inform local School Districts of U. S. Department of Education's guidance contained in the publication titled, "Frequently Asked Questions" (FAQ). The FAQ publication was also available and accessible to the local School Districts on GDOE's website.
Contact Person; W. Keith Chapman, CPA, Assistant Superintendent for Financial Services Phone: (770) 254-2817 Fax Number: (770) 254-2807 E-mail Address: keith.chapman@cowetaschools.net