COWETA COUNTY BOARD OF EDUCATION NEWNAN, GEORGIA REPORT ON AUDIT OF THE FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2008 STATE OF GEORGIA DEPARTMENT OF AUDITS AND ACCOUNTS Russell W. Hinton State Auditor 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 9 H NOTES TO THE BASIC FINANCIAL STATEMENTS 10 SCHEDULES REQUIRED SUPPLEMENTARY INFORMATION 1 SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL GENERAL FUND 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 SECTION I FINANCIAL Russell W. Hinton STATE AUDITOR (404) 656-2174 DEPARTMENT OF AUDITS AND ACCOUNTS 270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400 March 31, 2009 Honorable Sonny Perdue, Governor Members of the General Assembly Members ofthe 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, 2008, 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 of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Coweta County Board of Education's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinions. 2008ARL-11 In our opinion, the financial statements referred to previously present fairly, in all material respects, the respective financial position ofthe governmental activities, each major fund, and the aggregate remaining fund information ofthe Coweta County Board ofEducation, as ofJune 30, 2008, and the respective changes in financial position thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America. In accordance with Government Auditing Standards, we have also issued our report dated March 31, 2009, on our consideration of the Coweta County Board of Education's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements and other matters. The purpose ofthat report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit. Management's Discussion and Analysis and the Schedule ofRevenues, Expenditures and Changes in Fund Balances - Budget and Actual, as presented on pages i through ix and page 27 respectively, are not a required part of the basic financial statements but are supplementary information required by the accounting principles generally accepted in the United States of America. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods ofmeasurement and presentation ofthe required supplementary information. However, we did not audit the information and express no opinion on it. Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Coweta County Board of Education's basic financial statements. The accompanying supplementary information which consist of Schedules 2 through 5, which includes the Schedule of Expenditures of Federal Awards as required by U. S. Office of Management and Budget Circular A-133, Audits ofStates, Local Governments, and Non-Profit Organizations, are presented for purposes of additional analysis and are not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements, and in our opinion, is fairly stated, in all material respects, in relation to the basic financial statements taken as a whole. A copy of this report has been filed as a permanent record in the office of the State Auditor and made available to the press of the State, as provided for by Official Code of Georgia Annotated section 50-6-24. Respectfully submitted, RWH:as 2008ARL-11 Russell W. Hinton, CPA, CGFM State Auditor COWETA COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2008 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, 2008. 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 2008 are as follows: In total, net assets increased $15.2 million which represents a 6.3 percent increase from 2007. This total increase was due to governmental activities since the Board has no business-type activities. General revenues accounted for $98.1 million in revenue or 46 percent of all revenues. Program specific revenues in the form of charges for services and sales, grants and contributions accounted for $115 .4 million or 54 percent of total revenues of $213 .5 million. The Board had $198.2 million in expenses related to governmental activities; only $115.4 million of these expenses were offset by program specific charges for services, grants or contributions. General revenues (primarily taxes) of$98.1 million were adequate to provide for these programs. D Among major funds, the general fund had $189.7 million in revenues, $185.6 million in expenditures and $3.0 million in other financing uses. The general fund's fund balance increased to $23.1 million from $22.1 million. D Due to the financial condition of the State of Georgia, the State again reduced the Board's funding. The current reduction is $1.8 million which follows a $2.1 million reduction for 2007, a $3.9 million reduction for 2006, 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 $4.8 million for 2009. USING THE BASIC FINANCIAL STATEMENTS This annual report consists of a series of financial statements and notes to those statements. These statements are organized so the reader can understand the Coweta County Board ofEducation 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. Fund financial 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 future spending. In the case ofthe Coweta County Board ofEducation, the general fund is by far the most significant fund. -I- COWETA COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2008 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 2008?" 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 of accounting 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 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. - ll - COWETA COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2008 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 2008 compared to fiscal year 2007. Table 1 Net Assets (in Thousands) Governmental Activities Fiscal Fiscal Year 2008 Year 2007 Assets Current and Other Assets Capital Assets, Net $ 115,253 228,918 $ 135,057 228,907 Total Assets $ 344,171 $ 363,964 Liabilities Current and Other Liabilities Long-Term Liabilities $ 23,105 62,495 $ 22,684 97,943 Total Liabilities $ 85,600 $ 120,627 Net Assets Invested in Capital Assets, Net of Related Debt Restricted Unrestricted $ 184,209 37,537 36,825 $ 153,888 53,955 35,494 Total Net Assets $ 258,571 $ 243.337 Total net assets increased $15.2 million in fiscal year 2008. Table 2 shows the changes in net assets for fiscal year 2008 compared to the changes in net assets for fiscal year 2007. - Ill - COWETA COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2008 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 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 Loss on Sale of Capital Assets Total General Revenues 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 Governmental Activities Fiscal Fiscal Year 2008 Year 2007 $ 7,244 106,599 1.537 $ 115,380 $ 6,966 101,428 12.738 $ 121,132 $ 67,418 45 194 20,858 1,557 427 1,985 3,510 2,113 -5 $ 98,102 $ 213.482 $ 125,655 8,156 3,078 3,263 857 12,943 1,278 16,083 9,964 1,378 1,421 882 1,444 8,506 3,340 $ 198,248 $ 15,234 $ 65,168 92 17,262 3,336 2,024 677 3,347 5,674 2,354 -48 $ 99,886 $ 221.018 $ 120,564 4,235 2,699 3,336 909 11,790 1,050 14,901 7,911 1,274 886 716 1,498 7,597 4,033 $ 183,399 $ 37,612 - IV - COWETA COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2008 GOVERNMENTAL ACTIVITIES Governmental program expenses are comprised ofthe following: Instruction 63.4 percent, Support Services 29.5 percent, Operations ofNoninstructional Services 5.4 percent and Interest on ShortTerm and Long-Term Debt 1.7 percent. Interest expense was attributable to capital leases 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 2008 with fiscal year 2007. 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 2008 Year 2007 Net Cost of Services Fiscal Fiscal Year 2008 Year 2007 Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Operations ofNon-Instructional Services Enterprise Operations Community Services Food Services Interest on Short-Term and Long-Term Debt $ 125,655 $ 120,564 $ 41,665 $ 34,189 8,156 3,078 3,263 857 12,943 1,278 16,083 9,964 1,378 1,421 4,235 2,699 3,336 909 11,790 1,050 14,901 7,911 1,274 886 6,893 1,688 1,094 -1,426 8,449 1,204 10,359 6,940 1,347 915 2,975 1,321 1,054 -1,400 7,521 863 6,491 4,611 1,203 408 882 1,444 8,506 3,340 716 1,498 7,597 4,033 282 134 -16 3,340 45 -216 -831 4,033 Total Expenses $ 198,248 $ 183,322 $ 82,868 $ 62,26.7 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 33.2 percent of instructional activities; for all governmental activities general revenue support is 41.8 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$217.4 million and expenditures and other financing uses of$236.3 million. There was an increase of$17.8 million - V- COWETA COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2008 in the capital projects fund due to an increase in the sales tax revenue and investment earnings for capital projects. The general fund had an increase of $1.1 million and debt service funds had a decrease of$37.8 million. The increase in the general fund for the year reflects the continuation of the spending restrictions implemented by the administration. The decrease in debt service funds is due to the retirement of the General Obligation Bonds Series 1998 and Series 2002 - Refunding. 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 offiscal 2008, 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 $198.7 million exceeded the original budgeted amount of$181.1 million by $17.6 million. This difference was due to an increase in miscellaneous revenues of $7.0 million, an increase in property taxes of $2.0 million, an increase in state revenues of$6.7 million ($3.2 million ofthis increase was for on-behalf payments), an increase in Federal revenues of$1.8 million, and an increase of $0.1 million in other sources. 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 increased grants and growth in mid-term funding, the Federal revenues increased due to an increase in the Federal grants, and the other sources increased due to an increase in transfers. The final budgeted revenues and other financing sources of $198.7 million exceeded the actual revenues and other financing sources by $9 million. The final budgeted expenditures and other financing uses of $204.7 million exceeded the original budgeted amount of$184.9 million by $19.8 million. The majority ofthis difference was due to an increase in instruction of$12.6 million ($2.4 million ofthis increase was for on-behalfpayments and $7.0 million was due to the inclusion of the principals' accounts) and an increase in enterprise activities of$1.5 million due to the inclusion ofthe principals' accounts in our financial statements. The budget for other uses increased $4.2 million and the budgeted ending fund balance decreased $2.2 million. The actual expenditures and other financing uses of$188.5 million was $16.1 million less than budgeted. General Fund revenues and other financing sources exceeded expenditures and other financing uses by $1.0 million. CAPITAL ASSETS AND DEBT ADMINISTRATION Capital Assets At the end offiscal 2008 the Board had $228.9 million invested in capital assets, all in governmental activities. Table 4 shows fiscal year 2008 balances compared with fiscal year 2007 balances. - VI - COWETA COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2008 Table 4 Capital Assets at June 30 (Net of Depreciation, in Thousands) Governmental Activities Fiscal Fiscal Year 2008 Year 2007 Land Construction in Progress Buildings and Building Improvements Equipment Land Improvements $ 9,140 3,125 189,570 13,150 13,933 $ 8,284 30,311 166,684 12,388 11,239 Total $ 228,918 $ 228.906 The primary increases occurred in buildings and building improvements due to completed construction and in construction in progress due to the construction program associated with the bonds issued in fiscal year 2006. Debt At June 30, 2008 the Board had $58.0 million in bonds outstanding with $9.3 million due within one year and $1.3 million in capital leases outstanding with $0.4 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 2008 balances compared with fiscal year 2007 balances. Table 5 Debt at June 30 (in Thousands) Governmental Activities Fiscal Fiscal Year2008 Year2007 General Obligation Bonds Capital Leases Compensated Absences Unamortized Bond Premium $ 58,000 1,330 1,080 2,085 $ 88,890 5,414 1,100 2,539 Total $ 62A95 $ 97,943 At June 30, 2008, the Board's overall legal bonding authority was $386,171,412. The Board maintains an AA3 bond rating. - Vll - COWETA COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2008 CURRENT ISSUES Although trends of high population growth and growth in retail and residential development in Coweta County continued through the summer of 2008, there were signs that those trends were cooling significantly for the first time in several years. Trends in school system enrollment and in the local tax digest growth clearly showed that Coweta County was being affected by a tum-down in the national economy in the form of slower growth rates. U.S. Census estimate placed Coweta County's population at 118,936 in June, 2007, up from 115,291 in June 2006 and 109,903 in June, 2005. The estimated 2007 population ofthe county represented a 33.3% increase from the 2000 Census count of 89,215 residents, and projected the county's population to grow to 153,449 residents by 2015, assuming growth trends continued. While 2008 census estimates were not available, Coweta County School System enrollment numbers indicated a significant slowdown in the residential growth ofthe county. From spring 2005 to spring 2006, system enrollment increased by about 1,000 students to approximately 20,500 at the end of 2006. The average rate of enrollment for the school system in the period 2001-2006 was approximately 4.6%. In fact, system growth has averaged well over 4% or higher annually for any 5-year period since 1991, and enrollment increases of 500 to 1,200 students each year were consistently experienced by Coweta County. Enrollment grew from 20,500 students to 21,255 students from spring to fall of 2006, but then shrank slightly to 21,282 by the fall of 2007. Enrollment increased by the start ofthe next school year, in fall of2007, to 21,713, and to 21,717 by the spring of 2008. Given a continued decline in new housing starts by the summer of 2008, enrollment growth was expected to slow to as little as 300 to 400 students by the start of the new school year in fall, 2008. Unemployment figures for the county and region show a similar trend. The unemployment rate in Coweta County had declined to 4.1% in June, 2007, down from 4.6% in June, 2006 and 5.1% in June, 2005. This compared to similar rates of 5.6% (2006), 5.3% (2006) and 5.7% (2005) for Carroll County, Georgia, and 3.9% (2006) 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. A preliminary estimate of Coweta County's Civilian Labor Force as of June, 2008 was 60,367 workers. The total civilian labor force in Coweta County for June, 2007 was 59,250. Preliminary unemployment numbers by the summer of2008 suggested that Coweta County's unemployment rate had risen to 4.6% by January, 2008, and 5.4% in June, 2008. The June unemployment rate was reported as 6.5% for Carroll County; 4.7% for Fayette County; 5.6% for the state ofGeorgia overall, and 6.2% nationally. Unemployment had risen in Coweta County, even as it was doing relatively better than the nation, state and its neighboring counties. In Coweta County, continued growth in the retail and services sector is promising, as Coweta County continues to develop as a regional retail destination. Retail growth has shown signs of slowing significantly throughout Coweta County, with the Thomas Enterprises development ofthe - Vlll - COWETA COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2008 Ashley Park retail center being the notable exception. Several "big box" retailers have located at the Ashley Park shopping district in just the last year - including JC Penney, Dillard's Department Store, Barnes and Noble Booksellers and several smaller brand-name outlets - and several more announced that they would begin construction in 2008, including Belk's Department Store. In addition to an apparent slowdown in housing construction, the county continued to see little new industrial development or existing industrial expansion, and employment growth continues in service and other nonindustrial and nonagricultural 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 800-plus acre industrial park at the Georgia Highway 154/exit 51 area on the 1-85 corridor. Notable exceptions to these trends are the expectation that Piedmont Healthcare of Atlanta will begin construction ofa new $200 million healthcare facility on Poplar Road near Newnan within the next year, following its 2006 acquisition ofNewnan Hospital, and consideration of Coweta County as a site for a proposed southeastern regional location for Cancer Treatment Centers of America. Sales tax revenues grew from annual collections of$20,597,817 in fiscal year 2007 to $21,052,259 in fiscal year 2008 (revenues received July, 2007 to June, 2008). The rise represented a 2.21 % increase period-to-period. This increase is lower than the 12.5% increase ofthe previous year. The school system estimated a 5.75% increase in the local tax digest for its 2008-09 school year budget, with actual increases in the tax digest coming in at approximately 6.1 %. This compares to previous year tax digest increases of 10% to 20% or higher in previous years. Much ofthe tax digest increase came from retail growth and some, significantly smaller, new home construction in the county. While not experiencing flat or even negative trends that had affected other Georgia counties' school enrollment counts, tax collections, and tax digests by the summer of2008, a slowing economy was clearly demonstrated in Coweta County's experience. 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, Assistant Superintendent for Financial Services at the Coweta County Board ofEducation, 237 Jackson Street, Newnan, Georgia 30263. You may also email your questions to keith.chapman@cowetaschools.net. - IX - COWETA COUNTY BOARD OF EDUCATION COWETA COUNTY BOARD OF EDUCATION STATEMENT OF NET ASSETS JUNE 30, 2008 ASSETS Cash and Cash Equivalents Investments Accounts Receivable, Net Taxes State Government Federal Government Other Inventories Capital Assets Land Construction in Progress Land Improvements Buildings Equipment Less: Accumulated Depreciation Total Assets LIABILITIES Accounts Payable Salaries and Benefits Payable Claims Incurred But Not Reported Contracts Payable Retainages Payable Deferred Revenue Long-Term Liabilities Due Within One Year Due in More Than One Year Total Liabilities NET ASSETS Invested in Capital Assets, Net of Related Debt Restricted for Continuation of Federal Programs Debt 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 $ 25,043,359 69,558,864 6,880,317 12,407,307 955,930 121,574 285,921 9,139,880 3,125,488 17,614,247 223,065,427 20,305,768 -44,332,298 $ ===34=4=1=7=1=7=84== $ 5,018,440 16,315,835 458,972 1,024,234 155,853 132,068 11,213,833 51,281,132 $ 85,600,367 $ 184,209,466 989,191 2,037,568 34,509,758 36,825,434 $ 258 571 417 $ ===34=4"=1=7=!1=78=4= COWETA COUNTY BOARD OF EDUCATION STATEMENT OF ACTIVITIES FOR THE YEAR ENDED JUNE 30, 2008 GOVERNMENTAL ACTIVITIES Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Operations of Non-Instructional Services Enterprise Operations 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 Railroad Cars 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 Loss 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 $ 125,654,504 $ 8,156,390 3,077,815 3,263,328 857,173 12,943,159 1,277,843 16,083,471 9,963,983 1,378,174 1,420,880 881,790 1,444,230 8,505,524 3,339,528 $ 198,247,792 $ 1,695,724 598,706 1,243,659 3,705,576 7,243,665 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 $ 81,564,881 $ 1,263,044 1,388,176 2,143,830 2,281,483 4,483,831 55,955 5,415,815 2,672,190 30,667 506,042 31,862 4,761,363 $ 106,599,139 $ 728,721 $ 1,306 25,411 2,030 10,334 18,318 308,736 351,364 840 1,418 34,803 53,805 1537086 $ -41,665,178 -6,893,346 -1,688,333 -1,094,087 1,426,340 -8,448,994 -1,203,570 -10,358,920 -6,940,429 -1,346,667 -914,838 -281,666 -133,906 15,220 -3,339,528 -82,867,902 $ 67,417,482 257 45,217 194,198 20,858,061 1,557,286 427,122 1,985,154 3,510,199 2,112,796 -5 064 $ 98,102,708 $ 15,234,806 243,336,611 $ ===2=58=,5=7=1=,4=17= -3- COWETA COUNTY BOARD OF EDUCATION BALANCE SHEET GOVERNMENTAL FUNDS JUNE 30, 2008 EXHIBIT"C" ASSETS Cash and Cash Equivalents Investments Accounts Receivable, Net Taxes State Government Federal Government Other Inventories GENERAL FUND DISTRICTWIDE CAPITAL PROJECTS FUND DEBT SERVICE FUND TOTAL $ 14,381,313 $ 10,658,913 $ 3,133 $ 14,564,829 52,955,925 2,038,110 1,937,388 12,354,678 955,930 121,574 285,921 3,621,218 52,629 25,043,359 69,558,864 5,558,606 12,407,307 955,930 121,574 285,921 Total Assets $ 44,601,633 $ 67,288,685 $ 2,041,243 $ ==1=1=3,!=93=1=,5=6==1 LIABILITIES AND FUND BALANCES LIABILITIES Accounts Payable Salaries and Benefits Payable Contracts Payable Retainages Payable Deferred Revenue Total Liabilities FUND BALANCES Reserved for: Continuation of Federal Programs Debt Service Capital Projects Unreserved Undesignated Reported in: General Fund Capital Projects Total Fund Balances $ 4,968,289 $ 46,476 $ 16,315,835 1,024,234 155,853 132,068 $ 21,416,192 $ 1,226,563 $ 3,675 $ 3675 $ $ 989,191 $ $ 2,037,568 $ 50,225,217 22,196,250 15,836,905 $ 23,185,441 $ 66,062,122 $ 2,037,568 $ 5,018,440 16,315,835 1,024,234 155,853 132 068 22,646,430 989,191 2,037,568 50,225,217 22,196,250 15,836,905 91,285,131 Total Liabilities and Fund Balances $ 44,601,633 $ 67,288,685 $ 2,041,243 $===1=13..,,9=3=1=,5=61= 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, 2008 EXHIBIT"D" Total Fund Balances - Governmental Funds (Exhibit "C"} Amounts reported for Governmental Activities in the Statement of Net Assets are different because: Capital Assets used in Governmental Activities are not financial resources and therefore are not reported in the funds. These assets consist of: Land Construction in Progress Land Improvements Buildings Equipment Accumulated Depreciation Total Capital Assets Some of the School District's property tax revenues will be collected after year-end but are not available soon enough to pay for the current period's expenditures. 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 Claims Payable Total Long-Term Liabilities Net Assets of Governmental Activities (Exhibit "A"} $ 91,285,131 $ 9,139,880 3,125,488 17,614,247 223,065,427 20,305,768 -44,332,298 228,918,512 1,321,711 $ -58,000,000 -1,330,419 -1,079,884 -2,084,662 -458,972 -62,953,937 $ 258,571A17 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, 2008 EXHIBIT"E" REVENUES Property Taxes Sales Taxes State Funds Federal Funds Charges for Services Investment Earnings Miscellaneous Total Revenues EXPENDITURES Current Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Enterprise Operations Community Services Food Services Operation Capital Outlay Debt Services Principal Interest Total Expenditures Excess of Revenues over (under) Expenditures OTHER FINANCING SOURCES (USES) Transfers In Transfers Out Total Other Financing Sources (Uses) SPECIAL ITEMS Proceeds from Sale of Land Net Change in Fund Balances Fund Balances - Beginning GENERAL FUND DISTRICTWIDE CAPITAL PROJECTS FUND DEBT SERVICE FUND TOTAL $ 68,347,699 $ 1,984,408 $ 20,858,061 96,697,469 1,185,722 12,238,188 7,243,665 1,155,141 2,132,941 1 991 127 120 721 $ 189,657,697 $ 24,297,445 $ 257 $ 194,198 222,117 948 68,347,956 23,036,667 97,883,191 12,238,188 7,243,665 3,510,199 2,112,796 417 520 $ 214,372,662 $ 120,539,587 $ 958,472 $ 121,498,059 8,147,625 3,044,890 3,121,582 842,831 12,871,641 1,140,173 14,394,580 8,256,099 1,370,909 962,006 873,523 1,246,254 8,192,486 148 $ 760,790 7,800,775 27,045 8,147,625 3,044,890 3,121,582 842,831 12,871,641 1,167,366 14,394,580 9,016,889 1,370,909 962,006 873,523 1,246,254 8,192,486 7,800,775 504,881 63 118 34,468,201 3,731,245 34,973,082 3 794 363 $ 185,572,185 $ 9,520,185 $ 38,226,491 $ 233,318,861 $ 4,085,512 $ 14,777,260 $ -37,808,971 $ -18 946 199 $ 3,005,754 $ -3,005/54 $ -3,005,754 $ 3,005,754 $ 3,005,754 -3,005,754 $ 0 $ 64 945 $ 64 945 $ 1,079,758 $ 17,847,959 $ -37,808,971 $ -18,881,254 22,105,683 48 214 163 39,846,539 110,166,385 Fund Balances - Ending $ 23,185,441 $ 66,062,122 $ 2,037,568 $==9=1,=28=5=,1=31= 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, 2008 EXHIBIT"F" Total Net Change in Fund Balances - Governmental Funds (Exhibit "E") $ -18,881,254 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 $ 4,755,040 -4,673,058 81,982 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. -885,000 In the Statement of Activities, only the loss on the sale of building and 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 carrying value of the building and equipment sold. -70,009 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 $ 30,890,000 4,083,082 454,835 35,427,917 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: Decrease in Compensated Absences Increase in Claims Total Additional Expenditures $ 20,142 -458,972 -438,830 Change in Net Assets of Governmental Activities (Exhibit "B") $ 15,234,806 The notes to the basic financial statements are an integral part of this statement. -7- (This page left intentionally blank) COWETA COUNTY BOARD OF EDUCATION STATEMENT OF FIDUCIARY NET ASSETS FIDUCIARY FUNDS JUNE 30, 2008 ASSETS Cash and Cash Equivalents Investments Certificate of Deposit Total Assets LIABILITIES Funds Held for Others EXHIBIT "G" AGENCY FUNDS $ 419,792 216,139 $ ==6=35='=93=1= $==6=35='=93=1= The notes to the basic financial statements are an integral part of this statement. -9- COWETA COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2008 EXHIBIT "H" Note 1: DESCRIPTION OF SCHOOL DISTRICT AND REPORTING ENTITY REPORTING ENTITY The 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 Education Center (Charter School) is responsible for the public education ofall 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 ofits 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 of Activities presents a comparison between direct expenses and program revenues for each function of the School District's governmental activities. Direct expenses are those that are specifically associated with a program or function and, therefore, are clearly identifiable to a particular function. Indirect expenses (expenses of the School District related to the administration and support ofthe School District's programs, such as office and maintenance personnel and accounting) are not allocated to programs. Program revenues include (a) charges paid by the recipients ofgoods or services offered by the programs and (b) grants and contributions that are restricted to meeting the operational or capital requirements of a particular program. Revenues that are not classified as program revenues, including all taxes, are presented as general revenues. - 10 - COWETA COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2008 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. - 11 - COWETA COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2008 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. Official Code of Georgia Annotated Section 45-8-14 authorizes the School District to deposit its funds in one or more solvent banks, insured Federal savings and loan associations or insured chartered building and loan associations. INVESTMENTS COMPOSITION OF INVESTMENTS Investments made by the School District in nonparticipating interest-earning contracts (such as certificates ofdeposit) and repurchase agreements are reported at cost. Participating interest-earning contracts and money market investments with a maturity at purchase ofone year or less are reported at amortized cost. Both participating interest-earning contracts and money market investments with a maturity at purchase greater than one year are reported at fair value. The Official Code ofGeorgia Annotated Section 36-83-4 authorizes the School District to invest its funds. In selecting among options for investment or among institutional bids for deposits, the highest rate ofreturn shall be the objective, given equivalent conditions of safety and liquidity. Funds may be invested in the following: (1) Obligations issued by the State of Georgia or by other states, (2) Obligations issued by the United States government, - 12 - COWETA COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2008 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. The School District does not have a formal policy regarding investment policies that address credit risks, custodial credit risks, concentration ofcredit risks, interest rate risks or foreign currency risks. RECEIVABLES Receivables consist of amounts due from property and sales taxes, grant reimbursements due on Federal, State or other grants for expenditures made but not reimbursed and other receivables disclosed from information available. Receivables are recorded when either the asset or revenue recognition criteria has been met. Receivables recorded on the basic financial statements do not include any amounts which would necessitate the need for an allowance for uncollectible receivables. PROPERTY TAXES The Coweta County Board ofCommissioners fixed the property tax levy for the 2007 tax digest year (calendar year) on July 27, 2007 (levy date). Taxes were due on December 3, 2007 (lien date). Taxes collected within the current fiscal year or within 60 days after year-end on the 2007 tax digest are reported as revenue in the governmental funds for fiscal year 2008. The Coweta County Tax Commissioner bills and collects the property taxes for the School District, withholds 2.5% oftaxes collected as a fee for tax collection and remits the balance of taxes collected to the School District. Property tax revenues, at the fund reporting level, during the fiscal year ended June 30, 2008, for maintenance and operations amounted to $68,302,482 and for school bonds amounted to $257. The tax millage rate levied for the 2007 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 - 13 - COWETA COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2008 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 $21,052,259 and is to be used for capital outlay for educational purposes or debt service. This sales tax was authorized by local referendum and the sales tax must be re-authorized at least every five years. INVENTORIES FOOD INVENTORIES On the basic financial statements, inventories of donated food commodities used in the preparation ofmeals are reported at their Federally assigned value and purchased foods inventories are reported at cost (first-in, first-out). The School District uses the consumption method to account for inventories whereby donated food commodities are recorded as an asset and as revenue when received, and expenses/expenditures are recorded as the inventory items are used. Purchased foods are recorded as an asset when purchased and expenses/expenditures are recorded as the inventory items are used. CAPITAL ASSETS Capital assets purchased, including capital outlay costs, are recorded as expenditures in the fund financial statements at the time of purchase (including ancillary charges). On the District-wide financial statements, all purchased capital assets are valued at cost where historical records are available and at estimated historical cost based on appraisals or deflated current replacement cost where no historical records exist. Donated capital assets are recorded at estimated fair market value on the date donated. Disposals are deleted at depreciated recorded cost. The cost of normal maintenance and repairs that do not add to the value ofassets or materially extend the useful lives of the assets is not capitalized. Depreciation is computed using the straight-line method. The School District does not capitalize book collections or works ofart. During the fiscal year under review, no events or changes in circumstances affecting a capital asset that may indicate impairment were known to the School District. Capitalization thresholds and estimated useful lives of capital assets reported in the District-wide statements are as follows: Capitalization Policy Estimated Useful Life Land Land Improvements Buildings and Improvements Equipment All NIA $ 10,000 20 to 80 years $ 10,000 25 to 80 years $ 10,000 10 to 50 years - 14 - COWETA COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2008 EXHIBIT "H" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Depreciation is used to allocate the actual or estimated historical cost of all capital assets over estimated useful lives. GENERAL OBLIGATION BONDS The School District issues general obligation bonds to provide funds for the acquisition and construction ofmajor capital facilities. In the District-wide financial statements, bond premiums and discounts are deferred and amortized over the life of the bonds using the straight-line method. In the fund financial statements, the School District recognizes bond premiums and discounts, as well as bond issuance costs during the fiscal year bonds are issued. Premiums received on debt issuances are reported as other financing sources while discounts on debt issuances are reported as other financing uses. Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as debt service expenditures. General obligation bonds are direct obligations and pledge the full faith and credit of the government. The outstanding amount of these bonds is recorded in the Statement of Net Assets. NET ASSETS The School District's net assets in the District-wide Statements are classified as follows: Invested in capital assets, net of related debt - This represents the School District's total investment in capital assets, net ofoutstanding debt obligations related to those capital assets. To the extent debt has been incurred but not yet expended for capital assets, such amounts are not included as a component of invested in capital assets, net of related debt. Restricted net assets - These represent resources for which the School District is legally or contractually obligated to spend resources for bus replacement, continuation of Federal programs, debt service and capital projects in accordance with restrictions imposed by external third parties. Unrestricted net assets - Unrestricted net assets represent resources derived from property taxes, sales taxes, grants and contributions not restricted to specific programs, charges for services, and miscellaneous revenues. These resources are used for transactions relating to the educational and general operations of the School District, and may be used at the discretion of the Board to meet current expenses for those purposes. COMPENSATED ABSENCES Members ofthe Teachers Retirement System ofGeorgia (TRS) may apply unused sick leave toward early retirement. The liability for early retirement will be borne by TRS rather than by the individual school districts. Otherwise, sick leave does not vest with the employee, and no liability is reported in the School District's financial statements. - 15 - COWETA COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2008 EXHIBIT "H" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES At June 30, 2008, the School District's compensated absences liability is composed of an overtime compensation liability of $180,001 and a vacation leave liability of$899,883. The overtime compensation liability is calculated in accordance with the Fair Labor Standards Act and applies to all non-exempt employees of the School District as defined in the Fair Labor Standards Act. Applicable employees may accrue up to no more than 240 hours of compensatory leave. Twelve month employees earn vacation leave. Twelve month hourly employees earn 10 days of vacation leave for the first year ofservice, with an additional vacation day for each additional year of service completed through the 10th year. Twelve month hourly employees earn a maximum of20 days of vacation leave at 10 years of service, and any unused vacation leave days must be used within a 24 month period to avoid forfeiture. Twelve month salaried employees earn 2 days ofvacation leave for each year of service completed with the School District, up to a maximum of 10 days ofvacation leave earned after completing the 5th year of service. Twelve month salaried employees are allowed to accumulate up to 20 days of vacation leave without forfeiture. Note 3: DEPOSITS AND INVESTMENTS COLLATERALIZATION OF DEPOSITS Official Code of Georgia Annotated (OCGA) Section 45-8-12 provides that there shall not be on deposit at any time in any depository for a time longer than ten days a sum of money which has not been secured by surety bond, by guarantee of insurance, or by collateral. The aggregate ofthe face value of such surety bond and the market value of securities pledged shall be equal to not less than 110 percent ofthe public funds being secured after the deduction ofthe amount ofdeposit insurance. Ifa depository elects the pooled method (OCGA 45-8-13 .1) the aggregate ofthe market value ofthe securities pledged to secure a pool ofpublic funds shall be not less than 110 percent ofthe daily pool balance. 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, - 16 - COWETA COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2008 EXHIBIT "H" Note 3: DEPOSITS AND INVESTMENTS (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 ofthe bonds for this purpose, (6) Industrial revenue bonds and bonds of development authorities created by the laws ofthe State of Georgia, and (7) Bonds, bills, notes, certificates of indebtedness, notes, or other obligations ofa subsidiary corporation of the United States government, which are fully guaranteed by the United States government both as to principal and interest or debt obligations issued by or securities guaranteed by the Federal Land Bank, the Federal Home Loan Bank, the Federal Intermediate Credit Bank, the Central Bank for Cooperatives, the Farm Credit Banks, the Federal Home Loan Mortgage Association, and the Federal National Mortgage Association. CATEGORIZATION OF DEPOSITS At June 30, 2008, the bank balances were $34,886,711. The amounts of the total uninsured bank balances are classified into three categories of custodial credit risk: Category 1 - Uncollateralized, Category 2 - Cash collateralized with securities held by the pledging financial institution, or Category 3 - Cash collateralized with securities held by the pledging financial institution's trust department or agent but not in the School District's name. The School District's uninsured deposits are classified by custodial credit risk category at June 30, 2008, as follows: Custodial Credit Risk Category Bank Balance 1 $ 0 2 3,420,624 3 30,480.895 Total $ 33,901,519 CATEGORIZATION OF INVESTMENTS At June 30, 2008, the carrying value of the School District's total investments was $69,558,864, which is materially the same as fair value. This investment consisted entirely of funds invested in the Georgia Fund 1, formerly referred to as LGIP, administered by the State of Georgia, Office of Treasury and Fiscal Services which are not required to be categorized since the School District did not own any specific identifiable securities in the pool. The investment policy of the State of Georgia, Office ofTreasury and Fiscal Services for the Georgia Fund 1 (Primary Liquidity Portfolio) - 17 - COWETA COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2008 EXHIBIT "H" Note 3: DEPOSITS AND INVESTMENTS does not provide for investment in derivatives or similar investments. Additional information on the Georgia Fund 1 is disclosed in the State ofGeorgia Comprehensive Annual Financial Report. This audit can be obtained from the Georgia Department of Audits and Accounts at http://www.audits.state.ga.us/intemet/searchRpts.html. The Primary Liquidity Portfolio consists of Georgia Fund 1 which is not registered with the SEC as an investment company but does operate in a manner consistent with the SEC's Rule 2a-7 of the Investment Company Act of 1940. The investment is valued at the pool's share price, $1.00 per share. The pool is an AAAm rated investment pool by Standard and Poor's. The weighted average maturity of Georgia Fund 1 may not exceed 60 days. The weighted average maturity for Georgia Fund 1 on June 30, 2008, was 40 days. Note 4: NON-MONETARY TRANSACTIONS The School District receives food commodities from the United States Department of Agriculture (USDA) for school breakfast and lunch programs. These commodities are recorded at their Federally assigned value. See Note 2 - Inventories Note 5: CAPITAL ASSETS The following is a summary of changes in the Capital Assets during the fiscal year: Balances July 1, 2007 Increases Decreases Balances June 30, 2008 Governmental Activities Capital Assets, Not Being Depreciated: Land Construction in Progress $ 8,284,418 $ 862,762 $ 7,300 $ 9,139,880 30,310,584 4,525,691 31,710,787 3,125,488 Total Capital Assets Not Being Depreciated $ 38,595,002 $ 5,388,453 $ 31,718,087 $ 12,265,368 Capital Assets Being Depreciated Buildings and Improvements Equipment Land Improvements $ 196,886,916 $ 26,265,142 $ 18,793,804 1,591,194 14,393,209 3,221,038 86,631 $ 223,065,427 79,230 20,305,768 17,614,247 Less Accumulated Depreciation for: Buildings and Improvements Equipment Land Improvements 30,202,438 6,406,110 3,153,844 3,338,730 806,742 527,586 45,922 57,230 33,495,246 7,155,622 3,681,430 Total Capital Assets, Being Depreciated, Net $ 190,311,537 $ 26,404,316 $ 62,709 $ 216,653,144 Governmental Activity Capital Assets - Net $ 228,206,532 $ 31,722,16.2 $ 31,180,126. $ 228,218,512 COWETA COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2008 EXHIBIT"H" Note 5: CAPITAL ASSETS Capital assets being acquired under capital leases as of June 30, 2008, are as follows: Governmental Funds Equipment Less: Accumulated Depreciation $ 2,147,840 214,790 $ 1,933.050 Current year depreciation expense by function is as follows: Instruction Support Services Improvements of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Enterprises Operations Community Services Food Services $ 2,523,285 $ 4,523 87,987 7,028 35,781 63,428 1,069,037 567,352 2,910 4,909 120,510 1,963,465 186,308 $ 4,673.058 Note 6: RESTRICTED ASSETS Special Purpose Local Option Sales Tax (SPLOST), general obligation bond proceeds and property tax levied specifically for retirement of outstanding bond principal, interest and paying agent's fees (Debt Service Funds) are restricted assets in the Statement ofNet Assets because their use is limited by applicable bond covenants or statutory provisions. Restricted assets at June 30, 2008, were as follows: - 19 - COWETA COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2008 EXHIBIT "H" Note 6: RESTRICTED ASSETS Restricted Cash and Cash Equivalents: Debt Services Capital Acquisitions Restricted Investments: Debt Services Capital Acquisitions District-wide Capital Projects Bond SPLOST Proceeds Debt Service Funds $ $ 414,525 3,133 $ 2,038,110 $ 17,428,088 $ 29,925,865 Note 7: INTERFUND TRANSFERS Interfund transfers for the year ended June 30, 2008, consisted of the following: Transfer to Transfers From General Fund District-wide Capital Projects $ 3,005.754 Transfers are used to move property tax revenues collected by the General Fund to the District-wide Capital Projects Fund as supplemental funding source for capital construction projects. Note 8: RISK MANAGEMENT The School District is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors or omissions; job related illness or injuries to employees; acts of God and unemployment compensation. The School District has obtained commercial insurance for risk ofloss associated with torts, assets, errors or omissions and acts ofGod. The School District has neither significantly reduced coverage for these risks nor incurred losses (settlements) which exceeded the School District's insurance coverage in any of the past three years. 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 liabilities 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$350,000 loss per occurrence, up to the statutory limit. - 20 - COWETA COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2008 EXHIBIT"H" Note 8: RISK MANAGEMENT For purposes of estimating the claims incurred but not reported (IBNR) liability as ofJune 30, 2008, the School District computed the liability based on the estimated cost ofeach outstanding claim from claims experience of similar claims. Changes in the workers' compensation claims liability during the last two fiscal years are as follows: 2007 2008 Beginning of Year Liability Claims and Changes in Estimates Claims Paid End of Year Liability $ 0 $ 248,973 $ 248,973 $ 0 $ 0 $ 698,898 $ 239,926 $ 458,972 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 liabilities 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: 2007 2008 Beginning of Year Liability Claims and Changes in Estimates Claims Paid End of Year Liability $ 0 $ 9 703 $ 9 703 $ 0 $ 0 $ 12 549 $ 12 549 $ 0 The School District has purchased surety bonds to provide additional insurance coverage as follows: Position Covered Amount Superintendent Assistant Superintendent for Financial Services Board Treasurer All Employees $ 20,000 $ 10,000 $ 10,000 $ 250,000 Note 9: LONG-TERM DEBT CAPITAL LEASES The Coweta County Board of Education entered into a lease agreement for buses. This lease agreement qualifies as capital lease for accounting purposes, and, therefore, has been recorded at the present value of the future minimum lease payments as of the date of inception. - 21 - COWETA COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2008 EXHIBIT "H" Note 9: LONG-TERM DEBT COMPENSATED ABSENCES Compensated absences represent obligations of the 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. Changes in the compensated absences liability for the last three fiscal years are as follows: Beginning of Year Liability Additions Deductions End of Year Liability 2006 2007 2008 $ 608,378 $ 890,186 $ 460,865 $ 1,037,699 $ 1,037,699 $ 888,604 $ 826,277 $ 1,100,026 $ 1,100,026 $ 1,044,136 $ 1,064,278 $ 1,079,884 GENERAL OBLIGATION DEBT OUTSTANDING The General Obligation Bond currently outstanding is as follows: Purpose Interest Rates Amount General Government - Series 2005 3.50% -5.00% $ 58,000,000 The changes in Long-Term Debt during the fiscal year ended June 30, 2008, were as follows: CaQital Leases Georgia School Board Association Other Governmental Funds Compensated Absences General Obligation Bonds Unamortized Bond Premium Total Balance July 1, 2007 $ 3,578,201 $ 1,835,300 $ 1,100,026 $ 88,890,000 $ 2,539,497 $ 97,943,024 Additions Annual Leave Earned 1,044,136 1,044,136 Deductions Annual Leave Utilized Debt Retired Bond Premiums Amortized 3,578,201 504,881 1,064,278 30,890,000 454,835 1,064,278 34,973,082 454,835 Balance June 30, 2008 $ $ 1.330.419 $ I 079 884 $ 58.000.000 $ 2.084.662 $ 62,494.965 Portion of Long-Term Debt Due within One Year $ 0 $ 429,114 $ 1,079,884 $ 9,250,000 $ 454,835 $ 11,213,833 - 22 - COWETA COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2008 EXHIBIT "H" Note 9: LONG-TERM DEBT During the fiscal year, the School District called the Series 1998 and 2002 - Refunding Series Bonds. In addition, the School District paid off the Georgia School Board Association capital lease. At June 30, 2008, payments due by fiscal year which includes principal and interest for these items are as follows: Fiscal Year Ended June 30 2009 2010 2011 2012 2013 Total Principal and Interest Canital Leases Princinal Interest General Obligation Debt Princinal Interest Unamortized Bond Premium $ 429,114 $ 443,316 457,989 44,037 $ 9,250,000 $ 29,833 11,750,000 15,159 11,925,000 8,475,000 16,600,000 2,811,556 $ 2,369,681 1,798,306 1,241,431 825,500 454,835 454,835 454,835 454,835 265,322 $ J,330.419 $ 89.029 $ 58 000 000 $ 9 046.474 $ 2 084 662 Note 10: ON-BEHALF PAYMENTS The School District has recognized revenues and costs in the amount of $4,016,112 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 $3,991,824 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 $24,288 Note 11: SPECIAL ITEMS In fiscal year 2008, the Coweta County Board ofEducation disposed ofcertain capital assets with a carrying value of $70,009. The assets were properly removed from the capital asset records by the School District. The net loss of$5,064 resulting from the disposal ofthe capital assets is reported as a special item on the Statement of Activities. Note 12: SIGNIFICANT COMMITMENTS The following is an analysis ofsignificant outstanding construction or renovation contracts executed by the School District as of June 30, 2008, together with funding available: - 23 - COWETA COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2008 EXHIBIT "H" Note 12: SIGNIFICANT COMMITMENTS Project Unearned Executed Contracts Funding Available From State Moreland Elementary Renovation East Coweta Middle School Renovation Brooks Elementary School $ 471,934 $ 227,292 29,613 1,107,745 16,028,286 $ 16.529.833 $ 1,335,037 The amounts described in this note are not reflected in the basic financial statements. Note 13: SIGNIFICANT CONTINGENT LIABILITIES Amounts received or receivable principally from the Federal government are subject to audit and review by grantor agencies. This could result in requests for reimbursement to the grantor agency for any costs which are disallowed under grant terms. The School District believes that such disallowances, if any, will be immaterial to its overall financial position. The School District is a defendant in various legal proceedings pertaining to matters incidental to the performance ofroutine School District operations. The ultimate disposition ofthese proceedings is not presently determinable, but is not believed to be material to the basic financial statements. Note 14: POSTEMPLOYMENT BENEFITS Georgia Retiree Health Benefit Fund Plan Description. The School District contributes to the Georgia Retiree Health Benefit Fund ("GRHBF"), a cost-sharing multiple-employer defined benefit postemployment healthcare plan administered by the Department ofCommunity Health. GRHBF provides health insurance benefits to eligible retirees and their qualified beneficiaries. Pursuant to Title 45, Chapter 18 ofthe Official Code of Georgia Annotated, the authority to establish and amend the benefit provisions ofthe plan assigned to the Board of Community Health. The Department of Community Health issues a publicly available financial report that includes financial statements and required supplementary information for GRHBF. That report may be obtained from the Department ofCommunity Health at 2 Peachtree Street, Atlanta, Georgia 30303. Funding Policy. The contribution requirements of plan members and participating employers are established and may be amended by the Board of Community Health. Contributions of plan members or beneficiaries receiving benefits vary based on plan election, dependent coverage, and Medicare eligibility and election. On average, plan members pay approximately twenty-five percent (25%) ofthe cost of health insurance coverage. -24- COWETA COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2008 EXHIBIT "H" Note 14: POSTEMPLOYMENT BENEFITS Participating employers are statutorily required to contribute in accordance with the employer contribution rate established by the Board of Community Health. This contribution rate is established to fund both the active and retired employee health insurance plans based on projected pay-as-you-go financing requirements. The employer contribution rates for the combined active and retiree plans for the fiscal year ended June 30, 2008, were as follows: Teachers Non-Certificated Employees 18.534% of state-based salaries $162.72 per month The School District's contribution to the health insurance plans for the fiscal year ended June 30, 2008, was $13,725,322, which equaled the required contribution. Note 15: RETIREMENT PLANS TEACHERS RETIREMENT SYSTEM OF GEORGIA (TRS) TRS PLAN DESCRIPTION Substantially all teachers, administrative and clerical personnel employed by local school systems are covered by the Teachers Retirement System of Georgia (TRS), which is a cost-sharing multiple employer defined benefit pension plan. TRS provides service retirement, disability retirement and survivors benefits for its members in accordance with State statute. The Teachers Retirement System of Georgia issues a separate stand alone financial audit report and a copy can be obtained from the Georgia Department of Audits and Accounts. TRS CONTRIBUTIONS REQUIRED AND MADE Employees ofthe School District who are covered by TRS are required by State statute to contribute 5% of their gross earnings to TRS. The School District makes monthly employer contributions to TRS at rates adopted by the TRS Board of Trustees in accordance with State statute and as advised by their independent actuary. The required employer contribution rate is 9.28% and employer contributions for the current fiscal year and the preceding two fiscal years are as follows: Fiscal Year Percentage Contributed Required Contribution 2008 2007 2006 100% 100% 100% $ 9,731,112 $ 9,022,845 $ 8,070,080 - 25 - (This page left intentionally blank) COWETA COUNTY BOARD OF EDUCATION GENERAL FUND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL YEAR ENDED JUNE 30, 2008 SCHEDULE "1" REVENUES Property Taxes Sales Taxes State Funds Federal Funds Charges for Services Investment Earnings Miscellaneous Total Revenues EXPENDITURES Current Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Enterprise Operations 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 NONAPPROPRIATED BUDGETS ORIGINAL (1) FINAL ACTUAL AMOUNTS $ 67,008,231 $ 69,008,231 $ 68,347,699 2,750,000 2,750,000 1,984,408 93,266,495 99,930,788 96,697,469 11,367,990 13,155,970 12,238,188 5,178,779 5,178,779 7,243,665 804,800 804,800 1,155,141 322 271 7315101 1 991 127 $ 180,698,566 $ 198143669 $ 189,657,697 $ 123,148,164 $ 135,716,259 $ 120,539,587 4,350,341 4,417,008 3,152,127 1,000,713 12,549,536 1,140,106 13,901,354 7,841,829 1,406,514 293,511 1,678,779 7,808,754 4,532,924 4,437,197 3,215,250 1,169,470 12,794,331 1,161,545 13,947,412 8,230,382 1,553,001 527,530 1,500,000 1,706,254 7,808,754 8,147,625 3,044,890 3,121,582 842,831 12,871,641 1,140,173 14,394,580 8,256,099 1,370,909 962,006 873,523 1,246,254 8,192,486 567 999 $ 182,688,736 $ 198,300,309 $ 185,572, 185 $ -1990170 $ -156 640 $ 4,085,512 $ 450,000 $ 600,000 -2,251,000 -6 401 000 $ -3,005,754 $ -1 801 000 $ -5,801,000 $ -3 005 754 $ -3,791,170 $ -5,957,640 $ 1,079,758 20,595,811 20,595,811 22,105,683 Fund Balances - Ending $ 16 804 641 $ 14 638 171 $ 23,185,441 Notes to the Schedule of Revenues, Expenditures and Changes in Fund Balances Budget and Actual (1) Original Budget amounts do not include budgeted revenues or expenditures of the various principal accounts or 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, 2008 SCHEDULE "2" FUNDING AGENCY PROGRAM/GRANT Agriculture, U. S. Department of Child Nutrition Cluster Pass-Through From Georgia Department of Education Food Services School Breakfast Program National School Lunch Program Total Child Nutrition Cluster Other Programs Pass-Through From Georgia Department of Education Food Donation (1) Total U.S. Department of Agriculture Education, U.S. Department of Special Education Cluster Pass-Through From Georgia Department of Education Special Education Grants to States Preschool Grants Total Special Education Cluster Other Programs Pass-Through From Georgia Department of Education Career and Technical Education - Basic Grants to States English Language Acquisition Grants Improving Teacher Quality State Grants Safe and Drug-Free Schools and Communities State Grants for Innovative Programs Title I Grants to Local Educational Agencies 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 N/A = Not Available CFDA NUMBER PASSTHROUGH ENTITY ID NUMBER EXPENDITURES IN PERIOD 10.553 10.555 NIA N/A $ $ (2) 7,150,851 7,150,851 10.550 N/A $ 576,086 7,726,937 . 84.027 . 84.173 NIA $ N/A $ 3,838,082 132 144 3,970,226 84.048 84.365 84.367 84.186 84.298 84.010 N/A N/A N/A N/A N/A N/A $ 150,117 52,093 703,559 66,447 27,059 2,798,839 7,768,340 $ 107,835 59,058 $ 166,893 $ ===15~=66;;:2;i,;1, =7=0 - 28- COWETA COUNTY BOARD OF EDUCATION SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS YEAR ENDED JUNE 30, 2008 SCHEDULE "2" Notes to the Schedule of Expenditures of Federal Awards (1) The amount shown for the Food Donation Program represents the Federally assigned value of nonmonetary assistance for donated commodities received and/or consumed by the School District during the current fiscal year. (2) Expenditures for the funds earned on the School Breakfast Program {$738,767) were not maintained separately and are included in the 2008 National School Lunch Program. Major Programs are identified by an asterisk {*) in front of the CFDA number. The School District did not provide Federal Assistance to any Subrecipient. The accompanying schedule of expenditures of Federal awards includes the Federal grant activity of the 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 basic financial statements. See notes to the basic financial statements. - 29 - COWETA COUNTY BOARD OF EDUCATION SCHEDULE OF STATE REVENUE YEAR ENDED JUNE 30, 2008 SCHEDULE "3" AGENCY/FUNDING GOVERNMENTAL FUND TYPES CAPITAL GENERAL PROJECTS FUND FUND GRANTS Bright From the Start Georgia Department of Early Care and Learning Pre-Kindergarten Program $ 2,387,815 $ Education, Georgia Department of Quality Basic Education Direct Instructional Cost Kindergarten Program Kindergarten Program - Early Intervention Program Primary Grades (1-3) Program Primary Grades - Early Intervention (1-3) Program Upper Elementary Grades (4-5) Program Upper Elementary Grades - Early Intervention (4-5) Program Middle School (6-8) Program High School General Education (9-12) Program Vocational Laboratory (9-12) Program Students with Disabilities Gifted Student - Category VI Remedial Education Program Alternative Education Program English Speakers of Other Languages (ESOL) Media Center Program 20 Days Additional Instruction Staff and Professional Development Indirect Cost Central Administration School Administration Facility Maintenance and Operations Categorical Grants Pupil Transportation Regular Bus Replacement Nursing Services Education Equalization Funding Grant Food Services Amended Formula Adjustment Other State Programs Apprenticeship Career Related Education Grant Communities in Schools - Dropout Recovery and Prevention Extended Day - Agriculture Extended Day - Technology/Career Extended Year - Agriculture Health Insurance High School Graduation Coach Middle School Graduation Coach Middle School Math Remediation and Intervention Grant National Teacher Certification Preschool Handicapped Program Supervision 6,067,704 288,045 14,136,300 906,682 7,125,971 549,708 11,967,540 11,009,727 2,113,760 13,083,992 2,836,549 168,139 931,527 454,820 2,038,013 619,308 401,469 2,076,076 4,004,059 5,201,126 1,838,723 351,364 364,051 1,985,154 458,408 -1,773,933 42,592 10,000 26,412 7,163 31,228 2,929 3,991,824 147,100 252,576 16,503 140,794 377,309 34,654 Georgia State Financing and Investment Commission Reimbursement on Construction Projects $ 1,185,722 TOTAL 2,387,815 6,067,704 288,045 14,136,300 906,682 7,125,971 549,708 11,967,540 11,009,727 2,113,760 13,083,992 2,836,549 168,139 931,527 454,820 2,038,013 619,308 401,469 2,076,076 4,004,059 5,201,126 1,838,723 351,364 364,051 1,985,154 458,408 -1,773,933 42,592 10,000 26,412 7,163 31,228 2,929 3,991,824 147,100 252,576 16,503 140,794 377,309 34,654 1,185,722 - 30 - COWETA COUNTY BOARD OF EDUCATION SCHEDULE OF STATE REVENUE YEAR ENDED JUNE 30, 2008 SCHEDULE "3" AGENCY/FUNDING GRANTS Office of Treasury and Fiscal Services Public School Employees Retirement GOVERNMENTAL FUND TYPES CAPITAL GENERAL PROJECTS FUND FUND TOTAL $ _ _ _2_4~,2_88_ - - - - - $ _ _ _ _2_4~2_88_ $ 96,697,469 $ 1,185,722 $ ==9=7=,8=8=3=1,=91= 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, 2008 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) (5) 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 $ 39,630,408 $ 22,002,489 $ 17,627,919 Completed 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, Cannongate Elementary School, Central Education Center, East Coweta High School, East Coweta Middle School, Eastside Elementary School, Elm Street Elementary School, O.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 2,586,432 56,910,961 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 11,115,290 41 711166 Ongoing $ 227,983,261 $ 230,639,408 $ 35,704,211 $=....,11=6=,2==5=0,=04=6= -32- COWETA COUNTY BOARD OF EDUCATION SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS YEAR ENDED JUNE 30, 2008 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 $ 4,842,750 Current Year Total 212,500 s====s,..,o.s..s..,.2=s=o (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- (This page left intentionally blank) COWETA COUNTY BOARD OF EDUCATION GENERAL FUND- QUALITY BASIC EDUCATION PROGRAM (QBE) ALLOTMENTS AND EXPENDITURES - BY PROGRAM YEAR ENDED JUNE 30, 2008 SCHEDULE "5" DESCRIPTION Direct Instructional Programs Kindergarten Program Kindergarten Program-Early Intervention Program Primary Grades (1-3) Program Primary Grades-Early Intervention (1-3) Program Upper Elementary Grades (4-5) Program Upper Elementary Grades-Early Intervention (4-5) Program Middle School (6-8) Program High School General Education (9-12) Program Vocational Laboratory (9-12) Program Students with Disabilities Category I Category II Category Ill Category IV CategoryV Gifted Student - Category VI Remedial Education Program Alternative Education Program English Speakers of Other Languages (ESOL) TOTAL DIRECT INSTRUCTIONAL PROGRAMS Media Center Program Staff and Professional Development ALLOTMENTS FROM GEORGIA DEPARTMENT OF EDUCATION {1} {2} ELIGIBLE QBE PROGRAM COSTS SALARIES OPERATIONS TOTAL $ 7,356,867 $ 7,762,771 $ 130,374 $ 7,893,145 358,748 79,625 1,560 81,185 17,062,614 16,803,218 561,823 17,365,041 1,074,110 1,574,032 4,480 1,578,512 8,514,260 9,781,456 373,262 10,154,718 660,119 14,411,508 13,198,411 2,550,166 15,976,787 3,429,441 202,144 1,119,646 538 901 946,165 14,800,353 16,758,235 1,793,347 285,932 1,109,138 12,917,825 457,396 1,032,202 3,328,576 39,267 412,696 872,424 4,285 304,611 940,587 140,963 19,149 8,586 164,655 26,180 15,887 29,784 25,029 950,450 15,104,964 17,698,822 1,934,310 305,081 1,117,724 13,082,480 483,576 1,048,089 3,358,360 39,267 412,696 897 453 $ 86,453,722 $ 90,754,658 $ 2,751,215 $ 93,505,873 2,455,881 488 315 2,753,411 331,100 261,693 3,015,104 331 100 TOTAL QBE FORMULA FUNDS $ 89.397,918 $ 93.839,169 $ 3.012,908 $==9..,6..,,8=52..,,0=7=7 (1) Comprised of State Funds plus Local Five Mill Share. (2) Allotments do not include the impact of the State amended formula adjustment. See notes to the basic financial statements. - 35- 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 March 31, 2009 Honorable Sonny Perdue, Governor Members ofthe General Assembly Members ofthe State Board of Education and Superintendent and Members ofthe 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 of Coweta County Board ofEducation as of and for the year ended June 30, 2008, which collectively comprise Coweta County Board of Education's basic financial statements and have issued our report thereon dated March 31, 2009. We conducted our audit in accordance with auditing standards generally accepted in the United States ofAmerica and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Internal Control Over Financial Reporting In planning and performing our audit, we considered Coweta County Board ofEducation's internal control over financial reporting as a basis for designing our auditing procedures for the purpose of expressing our opinions on the financial statements, but not for the purpose ofexpressing an opinion on the effectiveness of the Coweta County Board of Education's internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness of the Coweta County Board of Education's internal control over financial reporting. A control deficiency exists when the design or operation ofa control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect misstatements on a timely basis. A significant deficiency is a control deficiency, or combination of control deficiencies, that adversely affect the Coweta County Board ofEducation's ability to initiate, authorize, record, process, or report financial data reliably in accordance with generally accepted 2008YB-10 accounting principles such that there is more than a remote likelihood that a misstatement of the Coweta County Board ofEducation's financial statements that is more than inconsequential will not be prevented or detected by the Coweta County Board of Education's internal control. A material weakness is a significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood that a material misstatement ofthe financial statements will not be prevented or detected by the Coweta County Board of Education's internal control. Our consideration of the internal control over financial reporting was for the limited purpose described in the first paragraph ofthis section and would not necessarily disclose all deficiencies in internal control that might be significant deficiencies or material weaknesses. We did not identify any deficiencies in internal control over financial reporting that we consider to be material weaknesses, as defined above. 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 management, members of the Coweta County Board of Education, others within the entity, Federal awarding agencies and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties. Respectfully submitted, r2J tJ . :t::1:1;,. Russell W. Hinton, CPA, CGFM State Auditor RWH:as 2008YB-10 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 March 31, 2009 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 CIRCULAR A-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, 2008. 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 ofStates, Local Governments, and Non-Profit Organizations. Those standards and 0MB Circular A-133 require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major Federal program occurred. An audit includes examining, on a test basis, evidence about the Coweta County Board ofEducation's compliance with those requirements and performing such other procedures as we considered necessary in the 2008SA-10 circumstances. We believe that our audit provides a reasonable basis for our opinion. Our audit does not provide a legal determination on 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 of its major Federal programs for the year ended June 30, 2008. 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, but not for the purpose ofexpressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of the Coweta County Board of Education's internal control over compliance. A control deficiency in an entity's internal control over compliance exists when the design or operation ofa control does not allow management or employees, in the normal course ofperforming their assigned functions, to prevent or detect noncompliance with a type ofcompliance requirement of a Federal program on a timely basis. A significant deficiency is a control deficiency, or combination ofcontrol deficiencies, that adversely affects the entity's ability to administer a Federal program such that there is more than a remote likelihood that noncompliance with a type of compliance requirement of a Federal program that is more than inconsequential will not be prevented or detected by the entity's internal control. A material weakness is a significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood that material noncompliance with a type of compliance requirement of a Federal program will not be prevented or detected by the entity's internal control. Our consideration of the internal control over compliance was for the limited purpose described in the first paragraph of this section and would not necessarily identify all deficiencies in internal control that might be significant deficiencies or material weaknesses. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses, as defined above. 2008SA-10 This report is intended solely for the information and use of management, members ofthe 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, RWH:as 2008SA-10 Russell W. Hinton, CPA, CGFM State Auditor 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, 2008 PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS No matters were reported. PRIOR YEAR FEDERAL AWARD FINDINGS AND QUESTIONED COSTS FINDING CONTROL NUMBER AUDITEE'S RESPONSE/STATUS SEE AUDITOR'S COMMENTS FA-6381-06-01 Unresolved (1) AUDITOR'S COMMENTS (1) Funding for the Hurricane Education Recovery program was a one year grant. Georgia Department of Education is reviewing this matter to determine if these funds were used properly or if a refund is appropriate. SECTION IV FINDINGS AND QUESTIONED COSTS COWETA COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2008 I SUMMARY OF AUDITOR'S RESULTS 1. Type of Report Issued on the Financial Statements The auditor's opinion on the Coweta County Board ofEducation's financial statements was unqualified. 2. Significant Deficiencies in Internal Control Disclosed by the Audit ofthe Financial Statements The audit report for the Coweta County Board of Education did not disclose any significant deficiencies related to the financial statements. 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. Significant Deficiencies in Internal Control Over Major Programs The audit report for the Coweta County Board ofEducation did not disclose any significant deficiencies in internal control over major programs. 5. Type of Report Issued on Compliance for Major Programs The auditor's opinion on the 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 .5 lO(a) of 0MB Circular A-133 The Coweta County Board ofEducation's audit did not disclose audit findings required to be reported by section .510(a) ofOMB Circular A-133. 7. Major Programs Federal awards audited as major programs are as follows: 84.027 Special Education - Grants to States 84.173 Special Education - Preschool Grants 8. Type "A" Program Dollar Threshold The dollar threshold for type "A" programs was $469,865. 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. - 1- COWETA COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2008 II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS No matters were reported. III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS No matters were reported. -2-