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

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

DOUGHERTY 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

31

DOUGHERTY COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS -

SECTION I

FINANCIAL

SCHEDULES

SUPPLEMENTARY INFORMATION

2 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS

32

3 SCHEDULE OF STATE REVENUE

34

4 SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS

36

5 ALLOTMENTS AND EXPENDITURES

GENERAL FUND - QUALITY BASIC EDUCATION PROGRAMS (QBE)

BY PROGRAM

39

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

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

SECTION I FINANCIAL

Russell W. Hinton
STATE AUDITOR
(404) 858-2174

DEPARTMENT OF AUDITS AND ACCOUNTS
270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400
May 14, 2007

Honorable Sonny Perdue, Governor Members of the General Assembly Members ofthe State Board of Education
and Superintendent and Members ofthe Dougherty 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 of the governmental activities, the discretely presented component unit, each major fund, and the aggregate remaining fund information (Exhibits A through H) ofthe Dougherty County Board ofEducation, as of and for the year ended June 30, 2006, which collectively comprise the Board's basic financial statements as listed in the table ofcontents. These financial statements are the responsibility ofthe Dougherty County Board ofEducation's management. Our responsibility is to express opinions on these financial statements based on our audit. We did not audit the financial statements of the Dougherty County Board of Education's discretely presented component unit. Those financial statements were audited by other auditors whose report thereon has been furnished to us, and our opinion insofar as it relates to the amounts included for Dougherty County Stadium Authority is based on the report of the other auditors.
We conducted our audit in accordance with auditing standards generally accepted in the United States ofAmerica and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General ofthe United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free ofmaterial misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit and the report ofother auditors provide a reasonable basis for our opinions.

2006ARL-11X

In our opinion, based on our audit and the report ofother auditors, the financial statements referred to above present fairly, in all material respects, the respective financial position ofthe governmental activities, the discretely presented component unit, each major fund, and the aggregate remaining fund information of the Dougherty County Board of Education, as of June 30, 2006, and the respective changes in financial position thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America.
As discussed in Note 2 to the basic financial statements, during the fiscal year 2006, the Dougherty County Stadium Authority properly recorded certain capital assets and associated depreciation expense.
In accordance with Government Auditing Standards, we have also issued our report dated May 14, 2007, on our consideration of the Dougherty County Board of Education's internal control over financial reporting and our tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements and other matters. The purpose ofthat report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit.
Management's Discussion and Analysis and the Schedule ofRevenues, Expenditures and Changes in Fund Balances - Budget and Actual, as presented on pages i through xii and page 31 respectively, are not a required part ofthe basic financial statements but are supplementary information required by the accounting principles generally accepted in the United States of America. We and other auditors 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 Dougherty 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 by us and other auditors in the audit ofthe basic financial statements, and in our opinion based on our audit and the report of other auditors, is fairly stated, in all material respects, in relation to the basic financial statements taken as a whole.
2006ARL-11X

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:gp 2006ARL-11X

~W-~ Russell W. Hinton, CPA, CGFM State Auditor

DOUGHERTY COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2006
Management's discussion and analysis of the Dougherty County School District's financial performance provides an overall review of the School District's financial activities for the fiscal year ended June 30, 2006. The intent of this discussion and analysis is to present the School District's overall financial performance. Readers should also review the financial statements and notes to the financial statements to further enhance their understanding of the School District's financial performance.
Financial Highlights
Financial highlights for fiscal year 2006, are as follows:
Total net assets increased by $17.3 million. This represents a 9.53 percent increase from fiscal year 2005. This increase was due entirely to governmental activities since the School District has no business-type activities.
Net capital assets increased by $31.1 million. This was due to the construction of new schools, renovations of facilities for instructional improvement, the purchases of new equipment, and upgrades for technology and security. These capital improvements were primarily funded by a 1.0 percent special purpose local sales tax approved by the voters of Dougherty County.
Total revenues were $173.0 million. General revenues, which include revenues from the General Fund, Capital Project Fund, and the Debt Service Fund, accounted for $66.9 million, or 38.7 percent of this total. Program revenues, in the form of Charges for Services, Operating Grants and Contributions, and Capital Grants and Contributions accounted for $106.1 million or 61.3 percent of the total.
The School District incurred $155.7 million in expenses related to governmental activities; however, $106.1 million of these expenses were offset by revenues from program specific Charges for Services, Operating Grants and Contributions, and Capital Grants and Contributions as referenced above. General revenues (primarily taxes) of $66.9 million funded the balance of the remaining $49.6 million of expenses, and the increase in net assets of $17.3 million referenced above.
Among major funds, the General Fund reported a $0.05 million increase in fund balance which is a reversal of the decrease in fund balance reported for the General Fund in fiscal year 2005.
Long-Term Debt was reduced by $8.6 million. $8.0 million of this reduction was due to the retirement of debt for General Obligation Bonds, and $0.4 million was due to the retirement of debt for Capital Leases.
Using the Basic Financial Statements
The annual report consists primarily of a series of financial statements and notes to those statements. These statements are organized and presented in a manner intended to assist the reader in understanding the Dougherty County School District as a complete operating entity.

DOUGHERTY COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2006
These financial statements generally present the School District's most significant funds both separately and with all funds combined. For the Dougherty County School District, the General Fund is by far the most significant fund. A brief discussion of these statements is presented below.
District-wide Statements
The Statement of Net Assets and Statement of Activities provide information about the School District as a whole using accounting methods similar to industry. The increases and decreases in the School District's net assets are an indicator of whether the School District's financial position is improving or deteriorating. There are many factors that can affect the overall financial condition of the School District such as the School District's property tax base, State and Federal funding, and the condition of buildings and equipment.
All of the School District's programs and activities included in the District-wide Statements are reported as Governmental Activities. These include instruction, support services, staff development, operation and maintenance of facilities, pupil transportation, food service, after school programs, school administration, and various others functions.
These statements report all assets and liabilities using the accrual basis of accounting. The basis of accounting determines when transactions are reported on the financial statements. The accrual basis of accounting records revenues when they are earned regardless of when payment (cash) is received. Expenses are recorded at the time the liability is incurred regardless of when the actual payment is made.
The Statement of Activities reflects the governmental activities of the School District by programs and services and distinguishes the revenue sources for these activities. The statement also helps identify how much local revenue is required to support the School District's activities.
Fund Financial Statements
Fund financial reports provide detail information about the School District's major funds. Funds are accounting devices the School District uses to keep track of general operations, Federal and State grants, building programs, debt payments, worker's compensation claims, and student activity funds claims.
Major Fund Types
Governmental Funds: Most of the School District's financial activities are reported in governmental funds. These funds record how money flows into and out of these funds in the current period, and the balances remaining at year-end available for spending in future periods. The governmental fund statements provide a detailed short-term view of the School District's general governmental operations and the basic services they provide. This governmental fund information can be used to identify financial resources available for financing educational
11

DOUGHERTY COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2006
programs. The differences between governmental activities (reported in the Statement of Net Assets and the Statement of Activities) and governmental funds are reconciled in the financial statements. The School District's governmental funds are the General Fund, Capital Projects Fund, and Debt Service Fund. General operations, the child nutrition program, other Federal and State grant programs, the general operating portion of principal accounts, and workers compensation claims are included in the General Fund. Fiduciary Funds: The School District is the trustee, or fiduciary, for assets that belong to others. An example is funds belonging to school clubs and organizations whose records are maintained at the individual schools. These funds are generally referred to as "Activity Funds". The School District is responsible for ensuring that the assets recorded in these funds are used only for their intended purposes and only by those to whom the assets belong. The School District excludes these fund activities from the District-wide financial statements because these fund assets cannot be used to finance operations. Presentation of Financial Data The next section of this discussion will provide more specific information as reported on the financial statements discussed above. For comparison purposes, this information will be presented for both fiscal year 2005 and fiscal year 2006. Statement of Net Assets As previously mentioned, the Statement ofNet Assets presents consolidated financial data for the School District as a whole. Table 1 provides a summary of the School District's net assets for fiscal year 2005 and fiscal year 2006.
lll

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

Table 1 Net Assets (in Thousands)

Governmental Activities

Fiscal

Fiscal

Year2006

Year2005

Increase/ Decrease

Assets Current and Other Assets Capital Assets, Net

$ 38,328 193.936

$ 59,896 $ -21,568

161.183

32.753

Total Assets

$ 232.264

$ 221.079 $ 11.185

Liabilities Current and Other Liabilities Long-Term Liabilities

$ 21,558 11.853

$ 19,114 $ 2,444

20.412

-8.559

Total Liabilities

$ 33.411

$ 39.526 $ -6.115

Net Assets Invested in Capital Assets, Net of Related Debt Restricted Unrestricted (Deficit)

$ 183,772 17,725 -2.644

$ 152,692 32,229 -3.368

$ 31,080 -14,504 724

Total Net Assets

$ 198.853

$ 181.553 $ 17.300

Total Assets for fiscal year 2006 increased by $11.2 million. The decrease in current and other assets of $21.6 million was offset by an increase in Capital Assets of $32.8 million. This increase in capital assets is the result of an ongoing capital improvements program which includes renovations for instructional improvement at numerous facilities, as well as new construction projects. Also included are capital expenditures for upgrades in technology, security, and access School Districts to improve safety for schools and other facilities.

Current Liabilities increased $2.4 million. Included is the increase in Retainages Payable for capital projects of $1.7 million, Accounts Payable of $0.5 million, and Salaries Payable of $0.3 million. Bond debt payments and capital leases payments made during the year reduced LongTerm Liabilities $8.5 million.

Total Net Assets increased $17.3 million in fiscal year 2006, as shown in Table 1. Capital Assets, Net of Related Debt, increased by $31.1 million.

Restricted assets decreased by $14.5 million. Restricted assets are assets that must be used for a specific purpose. The total restricted assets of $17.7 million include: funds restricted for bus replacement: $0.4 million; funds restricted for the continuation of Federal programs: $0.1 million; funds restricted for debt service: $16.5 million; and funds restricted for capital projects: $0. 7 million.

lV

DOUGHERTY COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2006 The deficit reported in fiscal year 2005, for Unrestricted Net Assets - Governmental Activities was reduced $0.7 million in fiscal year 2006. Statement of Activities Table 2 shows the changes in net assets for fiscal year 2005 and fiscal year 2006, as reported on the Statement ofActivities.
V

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

Table 2 Change in Net Assets
(In Thousands)

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

Governmental Activities

Fiscal

Fiscal

Year 2006

Year 2005

Increase/ Decrease

$ 1,679 98,068 6.338

$ 1,691 $ -12

91,981

6,087

260

6.078

Total Program Revenues

$ 106.085

$ 93.932 $ 12.153

General Revenues:

Taxes

Property Taxes

For Maintenance and Operations

$ 35,051

Railroad Cars

Sales Taxes

Special Purpose Local Option Sales Tax

For Debt Services

7,590

For Capital Projects

9,899

Intangible Recording Tax

405

Real Estate

141

Grants and Contributions not Restricted

to Specific Programs

9,406

Investment Earnings

1,650

Miscellaneous

2,754

Special Items

Loss on Sale of Building

Loss on Sale of Land

$ 34,183 $ 868

41

-41

16,355
368 120
7,391 1,329 2,776
-127 -74

-8,765 9,899
37 21
2,015 321 -22
127 74

Total General Revenues and Special Items

$ 66.896

$ 62.362 $ 4.534

Total Revenues

$ 172.981

$ 156.294 $ 16.687

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

$ 97,090
4,920 5,805 3,212 10,541 1,944 12,099 5,920 3,803
515 545 8,862 425

$ 91,719 $
4,543 5,316 3,125 10,083 2,040 11,361 5,842 3,098
238 978 9,349 ---=60=6

5,371
377 489
87 458 -96 738
78 705
277 -433 -487 -181

Total Expenses

$ 155.681

$ 148.298 $ 7.383

Increase in Net Assets

$ 17.300

$ 7.996 $ 9.304

VI

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

Revenues from additional Grants and Contributions increased in fiscal year 2006. Grants received from Federal and State sources were used to fund various instructional programs and staff development costs. State capital grants were used to partially fund the renovation of an elementary and a high school and to build a new building for a middle school. Approximately 84.4 percent of the increase in total program expenditures is attributed to expenditures for instruction, pupil services, and improvement of instructional services activities.

Governmental Activities

Table 3 shows, for governmental activities, the total cost of services and the net cost of services for both fiscal year 2005 and fiscal year 2006. This information is presented on the Statement of Activities.

For fiscal year 2006, Instructional activities comprised 62.36 percent of the total governmental program cost of services. Support Services comprised 30.98 percent, Non-Instructional services comprised 6.38 percent, and Interest Expense comprised 0.28 percent.

Table 3 Governmental Activities
(in Thousands)

Total Cost of Services

Fiscal

Fiscal

Year 2006 Year 2005

Net Cost of Services

Fiscal

Fiscal

Year 2006 Year 2005

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

$ 97,090 $ 91,719 $ 22,918 $ 23,552

4,920 5,805 3,212 1,753 8,788 1,944 12,099 5,920 3,094
709

4,543 5,316 3,125 1,751 8,332 2,040 11,361 5,842 2,435
663

2,880 1,908 1,202 -589 4,962 1,731 7,190 3,656 2,807
573

3,053 2,338 1,582 -422 4,973 2,040 6,921 3,821 2,436
532

515 545 8,862 425

238 978 9,349 606

477 545 -1,088 425

238 978 1,719 606

Total Expenses

$ 155.681 $ 148.298 $ 49,597 $ 54,367

Although program revenues make up a majority of the revenues, the School District is still dependent upon tax revenues for governmental activities. Over 23.6 percent of instructional activities are supported through taxes and other general revenues. For all governmental activities, general revenue support is 31.9 percent.

Vll

DOUGHERTY COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2006
Instruction includes activities relating to the teaching of pupils and the interaction between teacher and pupil.
Pupil Services are activities designed to assess and improve the well being of students and to supplement the teaching process.
Improvement of Instructional Services are activities which are designed primarily for assisting instructional staff in planning, developing, and evaluating the process of providing challenging learning experiences for students.
Educational Media Services are activities that direct, manage and operate educational media centers.
General Administration establishes and administers policy for operating the local School District.
School Administration includes the activities of principals, assistant principals, and clerical staff in administering school operations.
Business Administration includes the financial and warehouse operations of the School District.
Maintenance and Operation ofPlant Activities involve keeping the schools grounds, buildings, and equipment in an effective working condition.
Student Transportation includes activities associated with the transporting of students to and from school, as well as to and from school activities, as provided by State law.
Central and Other Support Services include all other support services including personnel services, management information services, and public relations services.
Enterprise Operations are activities that are operated in a manner similar to business enterprises where the intent is to recover costs through user charges. This would include athletic events and child nutrition catering activities.
Community Services are activities concerned with providing community services to staff or students such as after school programs and student activity accounts.
The School District's Funds
As reported on the Statement of Revenues, Expenditures, and Changes in Fund Balances, total governmental funds recorded revenues and other financing sources of $173.7 million, and expenditures and other financing uses of $197.8 million. This total excess of expenditures over revenues resulted in a decrease for all of the major funds of $24.1 million.
viii

DOUGHERTY COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2006
The General Fund's fund balance increased $46,992 in fiscal year 2006. This is favorable to the decrease in fund balance reported for fiscal year 2005. This increase can be attributed, in part, to revenues in excess of expenditures of more than $1.0 million reported by the Child Nutrition Program. This is reflective of the operational changes implemented to eliminate the deficit balance reported for the Child Nutrition Program at the end of fiscal year 2004.
General Fund Budgeting Highlights
The School District's budget is prepared according to Georgia law and in compliance with Georgia Department of Education requirements. During fiscal year 2006, the School District amended its general fund budget as needed. The School District uses site-based budgeting. The budgeting process is designed to control site budgeted expenditures while providing spending flexibility to site administration.
For the General Fund, the final budgeted revenues and other financing sources of $147.5 million exceeded the original budgeted amount of $140.7 million by $6.8 million. This difference was primarily due to an increase in budgeted Federal revenues of $4.6 million, an increase in budgeted state revenues of $1.9 million, and an increase in miscellaneous revenues of $0.3 million. Actual revenues of $148.7 million were $1.2 million greater than the final budgeted amount.
The final budgeted expenditures and other financing uses of$147.5 million exceeded the original budgeted amount of $140.7 million by $6.8 million. This difference was primarily due to an increase in budgeted Instructional expenditures of $5.0 million, an increase in budgeted Support Services expenditures of $1.4 million, and an increase in Food Service Operations of $0.4 million. The increases in budgeted Instructional and Support Services expenditures were funded primarily by the $6.5 million in additional State and Federal revenues referenced above.
Actual expenditures and other financing uses of $148.6 million were $1.1 million greater than the final budgeted expenditures. This is due to the difference in the accounting for teacher salaries and benefits. Teachers' contracted pay includes the twelve month period from September, 2005, through August, 2006. Budgeted teacher salaries and benefits were based on the twelve month period from July, 2005, through June, 2006. Actual expenditures include teachers' salaries and benefits paid during the period September 2005, through June 2006, and an estimate of what will be paid in July and August 2006. Teachers' salaries for July and August 2006, are greater than their July and August 2005, salaries because of raises and cost of living increases. Also, actual expenditures include the increase in State Health benefits that became effective July, 2006.
CAPITAL ASSETS AND DEBT ADMINISTRATION
Capital Assets At the end of fiscal year 2006, the School District had $193 .9 million invested in capital assets. All of these assets were in governmental activities. Table 4 shows fiscal year 2005 and fiscal year 2006 balances.
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DOUGHERTY COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2006

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

Governmental Activities

Fiscal

Fiscal

Year 2006

Year 2005

Increase/ Decrease

Land Construction in Progress Buildings and Building Improvements Equipment

$ 9,020 52,669 127,708 4,539

$ 9,274 28,540 118,378 4,992

$ -254 24,129 9,330 -453

Total Assets

$ 123,936

$ Hil,184 $ 32,752

Capital Assets increased by $32.8 million versus fiscal year 2005, as shown in Table 4. The increase in Construction in Progress and Buildings and Building Improvements for fiscal year 2006 accounts for the costs associated with the construction of three new elementary schools, one new middle school, and a "Center of Excellence" at one of the high schools. All of these new facilities were opened in August 2006 for the fiscal year 2007 school year. The School District will also open a new elementary school in August, 2007. In addition to the projects listed above, there was also significant spending for renovations at other facilities, and upgrades in technology, security, and access School Districts, which have improved safety and security for schools and other facilities. Virtually all of the funding for these projects was provided by a 1.0 percent sales tax approved by the voters of Dougherty County {STEP - "Sales Tax for Educational Progress").

Debt

Table 5 summarizes the long-term debt outstanding at June 30 for fiscal year 2005, and fiscal year 2006.

Table S Debt at June 30 (In Thousands)

Governmental Activities

Fiscal

Fiscal

Year 2006

Year 2005

Increase/ Decrease

General Obligation Bonds Unamortized Bond Premium Compensated Absences Capital Leases Claims Payable - Workers' Compensation

$ 9,355 368
1,148 700 282

$ 17,310 $ -7,955

590

-222

1,263

-115

1,082

-382

167

115

Total

$ 11,853

$ 20,412 $ -8,552

X

DOUGHERTY COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2006
The General Obligation Bonds debt shown in Table 5 reflects a balance due of $9.3 million for a 2004 General Obligation Bond issuance, plus $0.4 million in unamortized bond premiums.
The $1.1 million debt for Compensated Absences is the School District's estimated financial obligation for future payments to employees for vacation leave.
The $0.7 million for Capital Leases shown above is primarily due to the lease purchase of 23 buses to upgrade the school bus fleet.
The Dougherty County School District is self insured for Workers' Compensation claims. The Claims Payable for Workers' Compensation of $0.3 million shown above represents estimated liability for existing claims at June 30, 2006.
Current Issues
In March, 2007, the voters of Dougherty County approved a continuation of the 1.0 percent sales tax (Sales Tax for Educational Progress), and the issuance of general obligation bonds in the maximum principal amount of $40.0 million. These sales tax revenues could provide up to $95.0 million over the next five years to be used for capital improvements and equipment. The bulk of these funds will be used for renovations for instructional improvement. Projects include: a "Center of Excellence" at all high schools as well as renovations and additions at several other schools.
Funding is also provided for "Technology in the Classroom" which includes a five year rotation for all District-wide computers, conversion of existing modified model classrooms to model classrooms, and the addition of three model classrooms per school. Funds are also included for a continuation of safety and access control School Districts at fifteen schools and various other facilities, and replacement of carpeting and gym flooring. Also included are funding for vehicle replacement (including buses and departmental vehicles) and musical instruments and other academic/instruction related equipment.
The Dougherty County Tax Department recently completed a revaluation of all real property in Dougherty County. It is anticipated this revaluation will provide a substantial increase in the tax digest and thus potentially provide additional funding for school operations. For the past several years, there has been virtually no growth in the local digest, and, in fact, the 2006 digest was
1.87 percent lower than the 2002 digest. This lack of growth in the tax digest, as well as
reductions in the State allotment has put a strain on the Dougherty County School District's operating budget. The fiscal year 2006 state QBE allotment included an "austerity reduction" of $3.74 million. Since fiscal year 2003, the Dougherty County School District has lost a cumulative total of $14.0 million in State funding due to "austerity reductions". The State did; however, provide some funding relief for fiscal year 2007. The "austerity reduction" was reduced from $3.74 million in fiscal year 2006, to $1.77 million in fiscal year 2007, a reduction (increase in funding) of $1.97 million.
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DOUGHERTY COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2006

Contacting the School District's Financial Management

This management's discussion and analysis report is designed to provide our citizens, taxpayers,

investors, and creditors with a general overview of the School District's finances, and to

document the School District's accountability for the money it receives. If you have questions

about this report or need additional financial information, contact Robert Lloyd, Executive

Director of Business and Operations, at the Dougherty County School District, 200 Pine Avenue,

Albany, Georgia 31702.

You may also email your questions to

robert.lloyd@dougherty.kl2.ga.us.

XU

DOUGHERTY COUNTY BOARD OF EDUCATION

DOUGHERTY COUNTY BOARD OF EDUCATION STATEMENT OF NET ASSETS JUNE 30, 2006

EXHIBIT"A"

ASSETS
Cash and Cash Equivalents Investments Accounts Receivable, Net
Taxes State Government Federal Government Other Prepaid Items Inventories Capital Assets Land Construction in Progress Buildings Equipment Stadium Improvements Less: Accumulated Depreciation

PRIMARY GOVERNMENT GOVERNMENTAL
ACTIVITIES

COMPONENT UNIT DOUGHERTY COUNTY STADIUM AUTHORITY

$

$

20,560,261

4,341,847 10,056,792 2,472,284
379,603 142,345 374,804

9,020,229 52,668,506 210,220,138 14,670,814

-92,643,911

193,825
25,000
410,000 308,976 234,936 2,586,683 -242 986

Total Assets

$

232,263,712 $ -===-===-=======3-51..6.=4=3===4

LIABILITIES
Cash Overdraft Accounts Payable Salaries Payable Contracts Payable Retainages Payable Deposits and Deferred Revenues Long-Term Liabilities
Due Within One Year Due in More Than One Year
Total Liabilities
NET ASSETS
Invested in Capital Assets, Net of Related Debt Restricted for
Bus Replacement Continuation of Federal Programs Debt Service Capital Projects Unrestricted Governmental Activities (Deficit) Dougherty County Stadium Authority
Total Net Assets

$

2,208,693

3,763,486 $

11,563,835

581,712

3,433,792

6,219

9,030,832 2,822,089

$

33,410,658 $

$

183,772,191 $

444,326 128,295 16,509,103 843,682

-2,644,543

$

198,853,054 $

39,395
39395 3,297,609
179430 3477 039

Total Liabilities and Net Assets

$

232,263,712 $ -======-=-=3=5=16====43=4=

The notes to the basic financial statements are an integral part of this statement. -1-

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

PRIMARY GOVERNMENT
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 - Primary Government
COMPONENT UNIT
Dougherty County Stadium Authority
General Revenues Taxes Property Taxes For Maintenance and Operations 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
Total General Revenues
Change in Net Assets
Net Assets - Beginning of Year (Restated)

EXPENSES

CHARGES FOR SERVICES

$

97,090,391 $

4,920,171 5,804,936 3,211,729 1,752,959 8,787,733 1,943,788 12,098,900 5,920,573 3,094,506
709,036

514,606 545,257 8,861,714 424 769
$ _ _ 1_55_,68_1,068 $

495,206
1,183,481 1,678,687

$

221,s22 $ _____1_0.0..,._o__o__o_

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

EXHIBIT"B"

PROGRAM REVENUES

OPERATING

CAPITAL

GRANTS AND

GRANTS AND

CONTRIBUTIONS CONTRIBUTIONS

NET(EXPENSES)REVENUES

AND CHANGES IN NET ASSETS

PRIMARY

GOVERNMENT

COMPONENT UNIT

GOVERNMENTAL DOUGHERTY COUNTY

ACTIVITIES

STADIUM AUTHORITY

$

69,327,706 $

2,029,529 3,838,215 1,771,565 2,341,748 3,612,999
39,289 4,706,651 1,989,498
244,106 136,237

8,029,726

$

98,067,269 $

4,349,597 $
10,249 58,990 238,157
212,494 173,552 202,113 275,273 43,465
37,850
736,541
6,338,281 $

-22,917,882
-2,880,393 -1,907,731 -1,202,007
588,789 -4,962,240 -1,730,947 -7,190,136 -3,655,802 -2,806,935
-572,799
-476,756 -545,257 1,088,034 -424 769
-49,596,831

$ _ _ _ _ _-_12_1.._8_22_

$

35,051,391

7,589,917 9,898,756
405,198 141,133 9,405,727 1,650,286 $ 2,753,866

$

66,896,274 $

$

17,299,443 $

181,553,611

5,348 4634 9,982
-111,840
3,588,879

$

198,853,054 $ ========3=,4=77===03=9=

-3-

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

EXHIBIT"C"

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

GENERAL FUND

DISTRICTWIDE
CAPITAL PROJECTS
FUND

DEBT SERVICE
FUND

TOTAL

$ $ 2,543,507

13,894 $

1,511 $

15,405

628,231

17,388,523

20,560,261

842,611 10,056,792 2,472,284
378,045 142,345
374 804

1,558 4,015,503

3,134,572

3,977,183 10,056,792 2,472,284
379,603 142,345 4,015,503 374 804

$ 16,810,388 $ 4,659, 18.6 $ 20,524,606 $ 41,994,180

LIABILITIES AND FUND BALANCES
LIABILITIES
Cash Overdraft Accounts Payable Salaries Payable Claims Payable Contracts Payable Retainages Payable Due To Other Funds Deposits and Deferred Revenue
Total Liabilities
FUND BALANCES
Reserved for: Bus Replacement Debt Service Inventories Capital Projects
Unreserved Designated for Self-Insurance Undesignated Reported in: General Fund (Deficit)
Total Fund Balances
Total Liabilities and Fund Balances

$ 2,224,098 3,763,486
11,563,835 282,293 $
6 219
$ 17 839 931 $

581,712 3,433,792
$
4,015,504 $

$ 4,015,503

2,224,098 3,763,486 11,563,835
282,293 581,712 3,433,792 4,015,503
6 219

4,015,503 $ 25,870,938

$

444,326

374,804 $

1,353,679

-3,202,352

$ -1,029,543 $

$ 643,682

$ 16,509,103

444,326 16,509,103
374,804 643,682

1,353,679

-3,202,352

643 682 $ 16,509,103 $ 16,123,242

$ 16,810,388 $ 4,659,186 $ 20,524,606 $ 41,994,180

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

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

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

$ 16,123,242

$

9,020,229

52,668,506

210,220,138

14,670,814

-92,643,911

193,935,776

364,664

$

-9,355,000

-699,584

-1, 147,970

-368 074

-11,570,628

$ 198,853,054

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

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

EXHIBIT"E"

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

GENERAL FUND

DISTRICTWIDE
CAPITAL PROJECTS
FUND

DEBT SERVICE
FUND

TOTAL

$ 34,961,227 546,331 $
82,099,236 25,804,384
1,678,687 449,263
3137010
$ 148,676,138 $

9,898,756 $ 6,063,008
440,179
16 401 943 $

$ 7,589,917
760,844

34,961,227 18,035,004 88,162,244 25,804,384
1,678,687 1,650,286 3,137,010

8,350,761 $ 173,428,842

$ 92,927,823

4,925,011 5,768,433 2,970,039 1,759,381 8,614,454 1,755,658 $ 11,640,868 4,644,055 3,073,756
709,036 472,362 547,009 8,120,493

38,914 259,343
40,280,568

382,668

$

22,588

$ 148,333,634 $ 40,578,825 $

$

342 504 $ -24, 176,882 $

$ 92,927,823

4,925,011 5,768,433 2,970,039 1,759,381 8,614,454 1,794,572 11,900,211 4,644,055 3,073,756
709,036 472,362 547,009 8,120,493 40,280,568

7,955,000 623 025

8,337,668 645 613

8,578,025 $ 197 490 484

-227 264 $ -24,061,642

$

$

-295,512

295,512

$

295,512

-295,512

$

-295,512 $

295,512

$

0

$

46,992 $ -23,881,370 $

-227,264 $ -24,061,642

-1 076 535

24,525,052

16,736,367

40,184,884

Fund Balances - Ending

$ -1,029,543 $

643 682 $ 16,509,103 $ ==1=6=,1=2=3,=24=2=

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

DOUGHERTY COUNTY BOARD OF EDUCATION RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT OF
REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES TO THE STATEMENT OF ACTIVITIES JUNE 30, 2006

EXHIBIT"F"

Total Net Change in Fund Balances - Governmental Funds (Exhibit "E")
Amounts reported for Governmental Activities in the Statement of Activities are different because:
Capital Outlays are reported as expenditures in Governmental Funds. However, in the Statement of Activities, the cost of Capital Assets is allocated over their estimated useful lives as depreciation expense. In the current period, these amounts are:
Capital Outlay Depreciation Expense
Excess of Capital Outlay over Depreciation Expense
Because some property taxes will not be collected for several months after the School District's fiscal year ends, they are not considered "available" revenues.
In the Statement of Activities, only the gain on the sale of the land 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 land or carrying value of the equipment sold.
Repayment of Long-Term Debt is reported as an expenditure in Governmental Funds, but the repayment reduces Long-Term Liabilities in the Statement of Net Assets. In the current year, these amounts consist of:
Amortized Bond Premium Bond Principal Retirements Capital Lease Payments
Total Long-Term Debt Repayments
Some items reported in the Statement of Activities do not require the use of current financial resources and therefore are not reported as expenditures in Governmental Funds. These activities consist of:
Decrease in Compensated Absences

$ -24,061,642

$ 37,142,193 -4,006,750

33,135,443 -65, 187

-383,144

$

220,844

7,955,000

382,668

8,558,512

115 461

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

$ 17,299.443

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

(This page left intentionally blank)

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

EXHIBIT"G"

AGENCY FUNDS

$

14,225

39,395

$==5=3=,6=20=

$===5=3===,6=20=

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

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

EXHIBIT"H"

Note 1: DESCRIPTION OF SCHOOL DISTRICT AND REPORTING ENTITY
REPORTING ENTITY
The Dougherty 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.
DISCRETELY PRESENTED COMPONENT UNIT
The non-profit organization, Dougherty County Stadium Authority, operates the Hugh Mills Memorial Stadium. The School District has a contract with the Dougherty County Stadium Authority relative to the use, maintenance, and control of the Stadium.
The Stadium Authority's financial data (Statement of Net Assets and Statement of Activities) is included within the School District's basic financial statements as a discretely presented component unit. See Note 17 for additional component unit disclosures.
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 Dougherty County Board of Education.
District-wide Statements: The Statement ofNet Assets and the Statement ofActivities display information about the financial activities ofthe overall School District, except for fiduciary activities. Eliminations have been made to minimize the double counting of internal activities. Governmental activities generally are financed through taxes, intergovernmental revenues, and other nonexchange transactions.
The Statement ofActivities presents a comparison between direct expenses and program revenues for each function of the School District's governmental activities.
Direct expenses are those that are specifically associated with a program or function and, therefore, are clearly identifiable to a particular function. Indirect expenses (expenses of the School District related to the administration and support ofthe School District's programs, such as office and maintenance personnel and accounting) are not allocated to programs.

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

EXHIBIT "H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Program revenues include (a) charges paid by the recipients ofgoods or services offered by the programs and (b) grants and contributions that are restricted to meeting the operational or capital requirements of a particular program. Revenues that are not classified as program revenues, including all taxes, are presented as general revenues.
Fund Financial Statements: The fund financial statements provide information about the School District's funds, including fiduciary funds. Eliminations have been made to minimize the double counting of internal 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 (sales) legally restricted for the payment ofgeneral longterm principal, interest and paying agent's fees.
The School District reports the following fiduciary fund type:
Agency funds account for assets held by the School District as an agent for various funds 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 of when 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.
- 11 -

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

EXHIBIT "H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The School District uses funds to report on its financial position and the results of its operations. Fund accounting is designed to demonstrate legal compliance and to aid financial management by segregating transactions related to certain governmental functions or activities. A fund is a separate accounting entity with a self-balancing set of accounts.
Governmental funds are reported using the current financial resources measurement focus and the modified accrual basis ofaccounting. Under this method, revenues are recognized when measurable and available. The School District considers all revenues reported in the governmental funds to be available if they are collected within sixty days after year-end. Property taxes, sales taxes and interest are considered to be susceptible to accrual. Expenditures are recorded when the related fund liability is incurred, except for principal and interest on general long-term debt, 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.
RESTATEMENT OF PRIOR YEAR NET ASSETS
For fiscal year 2006, the Dougherty County Stadium Authority restated various capital assets due to errors and omissions made in prior years. In 2006, the Authority increased land by $410,000 and decreased stadium improvements by $400,000. Additionally, the Authority decreased accumulated depreciation of stadium improvements, equipment, and buildings, by $2,821,131, $176,374, and $297,389, respectively. The result is an increase in Net Assets at July 1, 2005 of$3,304,894. This change is in accordance with generally accepted accounting principles.
CASH AND CASH EQUIVALENTS
COMPOSITION OF DEPOSITS Cash and cash equivalents consist ofcash on hand, demand deposits and short-term investments with original maturities of three months or less from the date of acquisition in authorized financial institutions. Georgia Laws OCGA 45-8-14 authorize the School District to deposit its funds in one or more solvent banks or insured Federal savings and loan associations.

- 12 -

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

EXHIBIT"H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
INVESTMENTS
COMPOSITION OF INVESTMENTS Investments made by the School District in nonparticipating interest-earning contracts (such as certificates ofdeposit) and repurchase agreements are reported at cost. Participating interest-earning contracts and money market investments with a maturity at purchase ofone year or less are reported at amortized cost. Both participating interest-earning contracts and money market investments with a maturity at purchase greater than one year are reported at fair value. The Official Code ofGeorgia Annotated Section 36-83-4 authorizes the School District to invest its funds. In selecting among options for investment or among institutional bids for deposits, the highest rate ofreturn shall be the objective, given equivalent conditions of safety and liquidity. Funds may be invested in the following:
(1) Obligations issued by the State of Georgia or by other states,
(2) Obligations issued by the United States government,
(3) Obligations fully insured or guaranteed by the United States government or a United States government agency,
(4) Obligations of any corporation of the United States government,
(5) Prime banker's acceptances,
(6) The Local Government Investment Pool administered by the State 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.

- 13 -

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

EXHIBIT"H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PROPERTY TAXES

The Dougherty County Board ofCommissioners fixed the property tax levy for the 2005 tax digest year (calendar year) on August 15, 2005 (levy date). Taxes were due on December 20, 2005 (lien date). Taxes collected within the current fiscal year or within 60 days after year-end on the 2005 tax digest are reported as revenue in the governmental funds for fiscal year 2006. The Dougherty County Tax Commissioner bills and collects the property taxes for the School District, withholds 2.1 % of taxes collected as a fee for tax collection and remits the balance of taxes collected to the School District. Property tax revenues, at the fund reporting level, during the fiscal year ended June 30, 2006, for maintenance and operations amounted to $34,961,227.

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

School Operations

19.0 mills

SALES TAXES

Special Purpose Local Option Sales Tax, at the fund reporting level, during the year amounted to $17,488,673 and is to be used for capital outlay for educational purposes or debt service. This sales tax was authorized by local referendum and the sales tax must be re-authorized at least every five years.

INVENTORIES

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

CONSUMABLE SUPPLIES On the basic financial statements, consumable supplies are reported at cost (first-in, first-out). The School District uses the consumption method to account for the consumable supplies inventory whereby an asset is recorded when supplies are purchased and expenses are recorded at the time the supplies are consumed.

- 14 -

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

EXHIBIT"H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PREPAID ITEMS

Payments made to vendors for services that will benefit periods subsequent to June 30, 2006, are recorded as prepaid items.

CAPITAL ASSETS

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

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

Capitalization Policy

Estimated Useful Life

Land Buildings and Improvements Equipment

Any Amount

$

5,000

$

5,000

NIA 20 to 80 years
4 to 12 years

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

GENERAL OBLIGATION BONDS

The School District issues general obligation bonds to provide funds for the acquisition and construction of major capital facilities. Bond issuance costs are recognized in the financial statements during the fiscal year bonds are issued. General obligation bonds are direct obligations and pledge the full faith and credit of the government. The outstanding amount of these bonds is recorded in the Statement ofNet Assets.

DEFICIT FUND BALANCES

Funds reporting a deficit fund balance at June 30, 2006, are as follows:

- 15 -

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

EXHIBIT "H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Fund Type/Fund Name

Deficit Balances

Governmental Fund Type General Fund - Regular School Food Services Fund

$ 1,211,722 $ 2,892,209

As of the end of fiscal year 2007, the System expects to fully eliminate the deficit in the general operating fund. As of March 2007, the system projects revenues to exceed expenditures by approximately $590,000. This increase in fund balance will exceed the shortage in revenues created by the year-end accruals ofJuly and August salaries and benefits and related revenues. The system will continue to manage its operational expenditures with the goal of building a sufficient fund balance reserve.

In fiscal year 2005, the School System implemented a plan to eliminate the deficit in the Child Nutrition Program. With guidance from the Georgia Department ofEducation, the Board elected to discontinue the Federal free lunch program. The decision to add the free lunch program to the already existing free breakfast program in fiscal year 2004, resulted in revenue losses far greater than anticipated and proved to be fiscally prohibitive. Operational changes such as the closing of CNS central warehouse operations, realignment ofstaffbased on number ofmeals served, implementation of "per plate cost" controls and the updating of meal prices were also achieved in fiscal year 2005, and fiscal year 2006. In fiscal year 2006, meal participation increased with the implementation of a "breakfast in the classroom" program. This program was expanded to more schools in fiscal year 2007. Also, during fiscal year 2007, standardized menus were introduced and stafftraining on cost efficient meal preparation and inventory control procedures was provided. For fiscal year 2008, emphasis will continue to be placed on improving the quality of meals served while reducing production costs.

Operational changes implemented during fiscal year 2006, resulted in a deficit reduction of approximately $1.0 million. Another $1.0 million reduction is projected for fiscal year 2007. The projected deficit balance at June 30, 2007, is approximately $1.8 million. The System's goal is to fully eliminate the deficit no later than fiscal year 2011.

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

- 16 -

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

EXHIBIT"H"

Note 3: DEPOSITS AND INVESTMENTS
balance. At June 30, $12,687 ofdeposits were not secured by surety bond, insurance or collateral as specified above. The School District is working with the affected financial institutions to ensure appropriate levels of collateral are maintained for all of the School District's deposits.
Acceptable security for deposits consists of any one of or any combination of the following:
(1) Surety bond signed by a surety company duly qualified and authorized to transact business within the State of Georgia,
(2) Insurance on accounts provided by the Federal Deposit Insurance Corporation,
(3) Bonds, bills, notes, certificates of indebtedness or other direct obligations of the United States or of the State of Georgia,
(4) Bonds, bills, notes, certificates of indebtedness or other obligations of the counties or municipalities of the State of Georgia,
(5) Bonds of any public authority created by the laws of the State of Georgia, providing that the statute that created the authority authorized the use of the bonds for this purpose,
(6) Industrial revenue bonds and bonds of development authorities created by the laws ofthe State of Georgia, and
(7) Bonds, bills, notes, certificates of indebtedness, or other obligations of a subsidiary corporation of the United States government, which are fully guaranteed by the United States government both as to principal and interest or debt obligations issued by the Federal Land Bank, the Federal Home Loan Bank, the Federal Intermediate Credit Bank, the Central Bank for Cooperatives, the Farm Credit Banks, the Federal Home Loan Mortgage Association, and the Federal National Mortgage Association.
CATEGORIZATION OF DEPOSITS At June 30, 2006, the bank balances were $7,136,079. The amounts ofthe total bank balances are classified into four categories of custodial credit risk:
Category 1 - Cash that is insured (e.g., Federal Deposit Insurance) or collateralized with securities held by the School District or by the School District's agent in the School District's name.
Category 2 - Cash collateralized with securities held by the pledging financial institution's trust department or agent in the School District's name.
Category 3 - Cash collateralized with securities held by the pledging financial institution, or by its trust department or agent but not in the School District's name.
Category 4 - Uncollateralized.

- 17 -

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

EXHIBIT"H"

Note 3: DEPOSITS AND INVESTMENTS

PRIMARY GOVERNMENT

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

Custodial Credit Risk Category
1 2 3 4
Total

Bank Balance
$ 503,262 0
6,620,130 12,687
$ 7,136.079

COMPONENT UNIT

At June 30, 2006, Dougherty County Stadium Authority's bank balances of$193,825 were classified by custodial credit risk category as follows:

Custodial Credit Risk Category
1 2 3 4
Total

Bank Balance
$ 179,224 0
14,601 0

CATEGORIZATION OF INVESTMENTS Custodial Credit Risk Custodial credit risk for investments is the risk that, in the event ofa failure ofthe counterparty to a transaction, the School District will not be able to recover the value ofthe investment or collateral securities that are in the possession ofan outside party. The School District does not have a formal policy for managing custodial credit risk.

Investments are classified as to custodial credit risk by the categories described below:

Category 1 - Insured or registered, or securities held by the School District or the School District's agent in the School District's name.
Category 2 - Uninsured or unregistered, with securities held by the counterparty's trust department or agent in the School District's name.
Category 3 - Uninsured or unregistered, with securities held by the counterparty's trust department or agent, but not in the School District's name.

- 18 -

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

EXHIBIT "H"

Note 3: DEPOSITS AND INVESTMENTS
Funds invested in an investment pool managed by another government are not required to be categorized unless the investing entity owns specific, identifiable investment securities in the pool.
At June 30, 2006, the carrying value of the School District's total investments was $20,560,261 which is materially the same as fair value. These investments included funds in the amount of $13,901,626 invested in the Local Government Investment Pool administered by the State of Georgia, Office of Treasury and Fiscal Services which are not required to be categorized since the School District did not own any specific identifiable securities in the pool. The investment policy of the State of Georgia, Office of Treasury and Fiscal Services for the Local Government Investment Pool (Primary Liquidity Portfolio) does not provide for investment in derivatives or similar investments. A description of the Primary Liquidity Portfolio is as follows:
The Primary Liquidity Portfolio consists of Georgia Fund 1, which is a combination local and state government investment pool. Georgia Fund 1 is a stable net asset value investment pool which follows Standard and Poor's criteria for AAAm rated money market funds. The pool is not registered with the SEC as an investment company but does operate Georgia Fund 1 in a manner consistent with Rule 2a-7 of the Investment Company Act of 1940. The pool's primary objectives are safety of capital, investment income, liquidity and diversification while maintaining principal ($1.00 per share value). Net asset value is calculated daily and reported to the rating agency weekly to ensure stability. The pool distributes earnings (net of management fees) on a monthly basis and values participant's shares sold and redeemed at the pool's share price, $1.00 per share. Pooled cash and cash equivalents and investments are reported at cost. The pool does not issue any legally binding guarantees to support the value of the shares. Participation in the pool is voluntary and deposits consist of funds from local governments; operating and trust funds of Georgia's state agencies, colleges and universities; and current operating funds of the State of Georgia's General Fund.
Investments in Georgia Fund 1 are directed toward short-term instruments such as U.S. Treasury obligations, securities issued or guaranteed as to principal and interest by the U.S. Government or any of its agencies or instrumentalities, banker's acceptances and repurchase agreements. The weighted average maturity of Georgia Fund 1 may not exceed 60 days. The weighted average maturity for Georgia Fund 1 on June 30, 2006, was 28 days.
Funds invested in U.S. Treasury Money Market Mutual Funds in the amount of$6,658,635 (openend mutual funds) are not required to be classified by categories of custodial credit risk.
Interest Rate Risk Interest rate risk is the risk that changes in interest rates of debt investment will adversely affect the fair value ofan investment. The School District does not have a formal policy for managing interest rate risk.
At June 30, 2006, the School District's investment consisted of U. S. Treasury Money Market Mutual Funds (open-end mutual funds) which had an investment maturity of less than one year.
- 19 -

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

EXHIBIT"H"

Note 3: DEPOSITS AND INVESTMENTS

Credit Quality Risk Credit quality risk is the risk that an issuer or other counterparty to an investment will not fulfill its obligations. The School District does not have a formal policy for managing credit quality risk.

The U. S. Treasury Money Market Mutual Funds have an unrated credit quality rating.

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

PRIMARY GOVERNMENT

The following is a summary of changes in the Capital Assets during the fiscal year:

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

Balances July 1, 2005

Increases

Balances Decreases June 30, 2006

$ 9,274,209 $

59,000 $ 312,980 $ 9,020,229

28,539,861 35,356,702 11,228,057 52,668,506

$ 37,814,070 $ 35,415,702 $ 11,541,037 $ 61,688,735

$ 198,024,323 $ 12,195,815

14,214,205

758,733 $

$ 210,220,138 302,124 14,670,814

79,647,417 9,221,704

2,864,908 1,141,842

231,960

82,512,325 10,131,586

$ 123,369,407 $ 8,947,798 $

70,164 $ 132,247,041

$ Hil 118314Z:Z $ 44.363,500 $ 11,611,201 $ 123,235/216

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

Equipment Less: Accumulated Depreciation

Governmental Funds
$ 1,621,022 331,591
$ 1,289,431

- 20-

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

EXHIBIT "H"

Note 5: CAPITAL ASSETS

Current year depreciation expense by function is as follows:

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

$ 2,375,355

$

5,597

32,215

130,060

116,045

94,778

110,376

695,686

23.737

1,208,494 20,670
402.231

$ 4,006,750

COMPONENT UNIT

Capital Assets, Not Being Depreciated: Land
Capital Assets Being Depreciated Building Equipment Stadium Improvements
Less Accumulated Depreciation for: Building Equipment Stadium Improvements
Total Capital Assets, Being Depreciated, Net
Component Unit Activity Capital Assets - Net
Note 6: RESTRICTED ASSETS

Balances July I, 2005 (Restated}

Increases

Decreases

Balances June 30, 2006

$

410 000 $

0 $

0 $

410,000

$

308,976

234,936

2,586,683

$

0 $

308,976

234,936

2,586,683

11,587 $ 35,563 96 362
$ 2,987,083 $
$ 3.397.083 $

7,724 25,246 66 504
-99 474 $
-99.474 $

0 $ $

I 9,311 60,809 162,866
2,887,609
3.297.609

Special Purpose Local Option Sales Tax (SPLOST) and general obligation bond proceeds are reported as restricted assets in the Statement ofNet Assets because their use is limited by applicable bond covenants or statutory provisions. Restricted assets at June 30, 2006, were as follows:

- 21 -

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

EXHIBIT "H"

Note 6: RESTRICTED ASSETS

District-wide Ca12ital Projects

Bond

SPLOST

Proceeds

Debt Service Funds

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

$

$

16,223

1,511

$ 17,388,523

$

4,159 $ 624,072

Note 7: INTERFUND ASSETS AND LIABILITIES

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

Due From Other Funds

Due To Other Funds

District-wide Capital Projects Debt Service Fund

$ 4,015,503 $ 4,015,503

$ 4,015,503 $ 4,015,503

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

Note 8: INTERFUND TRANSFERS

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

Transfer to

Transfers From General Fund

District-wide Capital Projects

$==2-95=",5"==1~2

Transfers are used to (1) move property tax revenues collected by the General Fund to the Districtwide Capital Projects Fund to fund the deficit in the Capital Projects Fund and (2) cover a portion of employee's salaries not funded as a part of the Special Purpose Local Option Sales Tax (SPLOST) projects.

- 22 -

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

EXHIBIT "H"

Note 9: RISK MANAGEMENT

The School District is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors or omissions; job related illness or injuries to employees; acts of God and unemployment compensation.

The School District participates in the Georgia School Boards Association Risk and Insurance Management System, a public entity risk pool organized on July 1, 1994, to develop and administer a plan to reduce risk of loss on account of general liability, motor vehicle liability, or property damage, including safety engineering and other loss prevention and control techniques, and to administer one or more groups of self-insurance funds, including the processing and defense of claims brought against members ofthe system. The School District pays an annual premium to the system for its general insurance coverage. Additional coverage is provided through agreements by the system with other companies according to their specialty for property, boiler and machinery (including coverage for flood and earthquake), general liability (including coverage for sexual harassment, molestation and abuse), errors and omissions, crime and automobile risks. Payment of excess insurance for the system varies by line of coverage.

The School District has established a limited risk management program for workers' compensation claims. A premium is charged when needed by the General Fund to each user program on the basis of the percentage of that program's payroll to total payroll in order to cover estimated claims budgeted by management based on known claims and prior experience. The School District accounts for claims with expenses/expenditures and liability being reported when it is probable that a loss has occurred, and the amount of that loss can be reasonably estimated. An excess coverage insurance policy covers individual claims in excess of $300,000 loss per occurrence, up to the statutory limit.

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

2005 2006

Beginning ofYear Liability

Claims and Changes in Estimates

$

200,751 $

759,531 $

$

167.424 $

797,835 $

Claims Paid

End of Year Liability

792,858 $ 682,966 $

167.424 282,293

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

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

- 23 -

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

EXHIBIT"H"

Note 9: RISK MANAGEMENT

2005 2006

Beginning of Year Liabili!Y

Claims and Changes in Estimates

$

0 $

50,195 $

$

0 $

35,176 $

Claims Paid

EndofYear Liabili!Y

50,195 $

0

35,176 $

0

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

Position Covered
Superintendent All Other Employees

Amount

$

50,000

$ 250,000

Note 10: SHORT-TERM DEBT

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

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

Tax Anticipation Notes

Beginning Balance

Issued

Redeemed

Ending Balance

$=======0 $13,000.000 $13,000.000 $=====0

Note 11: LONG-TERM DEBT

CAPITAL LEASES The Dougherty County Board of Education has entered into various lease agreements as lessee for buses and cars. These lease agreements qualify as capital leases for accounting purposes and, therefore, have been recorded at the present value of the future minimum lease payments as of the date oftheir inception.

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

- 24-

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

EXHIBIT"H"

Note 11: LONG-TERM DEBT

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

Purpose

Interest Rates

Amount

General Government - Series 2004

2.0%-4.0%

$ 9,355.000

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

Capital Leases

Governmental Funds

General

Compensated

Claims

Obligation

Absences

Payable

Bonds

Unamortized Bond
Premium

Total

Balance July l, 2005

$ 1,082,252 $ 1,263,431 $

167,424 $ 17,310,000 $

588,918 $ 20,412,025

Additions Annual Leave Earned Claims and Changes in Estimates

1,026,675

797,835

1,026,675 797,835

Deductions Annual Leave Utilized Debt Retired Claims Paid Bond Premiums Amortized

382,668

1,142,136

682,966

7,955,000

220.844

1,142,136 8,337,668
682,966
220.844

Balance June 30, 2006 $ 699.584 $ 1.147.970 $ 282.293 $ 9.355 000 $ 368.074 $ J1,852.92]

Portion of Long-Term Debt Due within One Year $

391 847 $

92.01 l $_ _~6=1,=13~0 $ 8,265.000 $

220,844 $ 9,030.832

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

Fiscal Year Ended June 30

Capital Leases

Principal

Interest

2007 2008

$ 391,847 $ 307.737

13,409 4,008

Total Principal and Interest

$ 699.584 $

17 417

- 25 -

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

EXHIBIT "H"

Note 11: LONG-TERM DEBT

Fiscal Year Ended June 30

General Obligation

Debt

Principal

Interest

Unamortized Bond
Premium

2007 2008

$ 8,265,000 $ 1,090,000

317,325 $ 24,525

220,844 147,230

Total Principal and Interest $ 9,355.000 $

341.850 $ 368,074

Note 12: ON-BEHALF PAYMENTS

The School District has recognized revenues and costs in the amount of $2,962,889 for health insurance and retirement contributions paid on the School District's behalf by the following State Agencies.

Georgia Department of Education Paid to the Georgia Department of Community Health For Health Insurance ofNon-Certified Personnel In the amount of $2,939,857

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 $23,032

Note 13: SIGNIFICANT COMMITMENTS

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

- 26 -

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

EXHIBIT "H"

Note 13: SIGNIFICANT COMMITMENTS

Project

Unearned Executed Contracts

Funding Available From State

04-647-026

$

83,488 $ 113,428

06-647-014

899,844

503,655

06-647-015

36,857

56,583

07RA-64 7-008

13,797,912

4,714,672

Jackson Heights Elementary

86,741

Lincoln Magnet Elementary

602,361

Security Access and Control System

55,999

Merry Acres Middle HVAC

124,510

Albany Middle HVAC

149,350

Morningside Elementary HVAC

97,995

Dougherty Middle HVAC

140,330

Martin Luther King, Jr. Elementary HVAC

60,797

Alice Coachman HVAC

59,660

International Studies Elementary Magnet HVAC

84,397

Lamar Reese Magnet HVAC

109,297

Westtown Elementary HVAC

72,309

$ 16,461.847 $ 5,388,338

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

Note 14: 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 15: SUBSEQUENT EVENTS

On March 20, 2007, the voters of Dougherty County voted in favor of a Special Purpose Local Option Sales Tax ofone percent to be imposed on all sales in Dougherty County for a period oftime not to exceed 20 calendar quarters, beginning upon termination ofthe current such sales and use tax, to raise not more than $95,000,000. The proceeds from the tax are to be used for the benefit ofthe Dougherty County Board of Education as stated in part on the Official Ballot of Dougherty County as follows:

- 27 -

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

EXHIBIT"H"

Note 15: SUBSEQUENT EVENTS
"Shall a special one percent sales and use tax be imposed in Dougherty County for a period of time not to exceed 20 calendar quarters for the raising of not more than $95,000,000 for the purpose of funding (i) the renovation and improvement of four high schools and five elementary schools, strategic land acquisition for future school expansion, certain other capital repairs and modifications in system-wide schools, buildings and offices (including carpet replacement, gym flooring and certain other capital repairs and modifications), (ii) the provision of additional classroom technology (including hardware, software and computer furniture), regular system-wide replacement of computers five years or older, installing six computers in all K-8th grade classrooms and three computers in all 9th - 12th grade classrooms, providing system-wide teacher laptop computers, system-wide "wireless-connectivity" in all classroom and other buildings, upgrading existing computer-aided instructional systems to "Model Classroom" standards and providing three additional "Model Classrooms" per school, providing system-wide upgraded or new servers and upgraded main data frame (MDF) rooms, installing "voice-over-internet-protocol" (VoIP) in various classrooms throughout the school system, (iii) the provision of safety and security equipment, including system-wide communication equipment and card-access systems at various system-wide buildings and the installation ofradio signal-boosters ("radio repeaters") for West Dougherty Tower, (iv) vehicle and equipment replacement, including school buses and departmental trucks, vans and sedans for system-wide use, major maintenance, supply and service equipment, musical instruments, playground equipment and other educational related equipment, and (v) funding certain financing, project management and election costs related thereto.
Ifthe reimposition ofthe tax is approved by the voters, such votes shall constitute approval of the issuance of general obligation debt of the Dougherty County School District in the principal amount of $40,000,000 for the purpose set forth in the above question, to pay capitalized interest thereto, and to pay expenses incident to accomplishing the foregoing."
Note 16: RETIREMENT PLANS
TEACHERS RETIREMENT SYSTEM OF GEORGIA (TRS)
TRS PLAN DESCRIPTION Substantially all teachers, administrative and clerical personnel employed by local school systems are covered by the Teachers Retirement System of Georgia (TRS), which is a cost-sharing multiple employer defined benefit pension plan. TRS provides service retirement, disability retirement and survivors benefits for its members in accordance with State statute. The Teachers Retirement System of Georgia issues a separate stand alone financial audit report and a copy can be obtained from the Georgia Department of Audits and Accounts.

- 28 -

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

EXHIBIT"H"

Note 16: RETIREMENT PLANS

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

Fiscal Year

Percentage Contributed

Required Contribution

2006 2005 2004

100% 100% 100%

$ 7,389,992 $ 7,271,599 $ 7,044,211

Note 17: COMPONENT UNIT

The Dougherty County Stadium Authority (Authority) is a legally separate tax-exempt component unit of the Dougherty County Board of Education (School District). Because the Authority has a fiscal dependency on the School District, it is considered a component unit ofthe School District and is discretely presented in the School District's financial statements.

The Authority utilizes the modified accrual method ofaccounting. The Authority has implemented the financial reporting requirements ofGASB Statement Nos. 33 and 34. The Authority's fiscal year is July 1 through June 30.

- 29-

(This page left intentionally blank)

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

SCHEDULE "1"

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

FINAL (1l

ACTUAL AMOUNTS

$

34,906,826 $

34,906,826 $

34,961,227

110,000

110,000

546,331

78,945,098

80,806,363

82,099,236

22,712,861

27,276,703

25,804,384

1,981,991

2,141,912

1,678,687

103,340

104,115

449,263

1,430,794

1,766,800

3,137,010

$

140,190,910 $

147,112,719 $ 148,676,138

$

84,677,114 $

89,676,797 $

92,927,823

4,975,421 6,710,793 3,084,973 2,054,743 7,715,622 1,788,114 11,300,957 4,951,756 1,914,282
981,721 336,300 598,776 9,005,758
1,000

5,246,896 7,475,385 3,073,360 2,051,955 7,766,648 1,772,692 11,443,635 4,965,042 2,166,464
890,160 449,513 588,971 9,409,522
1,000

4,925,011 5,768,433 2,970,039 1,759,381 8,614,454 1,755,658 11,640,868 4,644,055 3,073,756
709,036 472,362 547,009 8,120,493
405,256

$

140,097,330 $

146,978,040 $ 148,333,634

$

93,580 $

134,679 $

342,504

$

461,920 $

387,500

-555,500

-555,500 $

-295,512

$

-93 580 $

-168,000 $

-295,512

$

0 $

-33,321 $

46,992

-3,314,210

-3,314,210

-1,076,535

Fund Balances - Ending

$

-3,314,210 $

-3,347,531 $

-1,029,543

Notes to the Schedule of Revenues. Expenditures and Changes in Fund Balances Budget and Actual
(1) Original and Final Budget amounts do not include budgeted revenues or expenditures of the various principal accounts.
The accompanying schedule of revenues, expenditures and changes in fund balances budget and actual is presented on the modified accrual basis of accounting which is the basis of accounting used in the presentation of the fund financial statements.
See notes to the basic financial statements.
31

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

SCHEDULE "2"

FUNDING AGENCY PROGRAM/GRANT
Agriculture, U. S. Department of Child Nutrition Cluster Pass-Through From Georgia Department of Education Food Services School Breakfast Program National School Lunch Program
Total Child Nutrition Cluster
Other Programs Pass-Through From Georgia Department of Education Food Donation (1)
Total U. S. Department of Agriculture
Education, U. S. Department of Special Education Cluster Pass-Through From Georgia Department of Education Special Education Grants to States Preschool Grants
Total Special Education Cluster
Other Programs Direct Impact Aid Fund for the Improvement of Education Pass-Through From Georgia Department of Education Charter Schools Comprehensive School Reform Demonstration Education for Homeless Children and Youth English Language Acquisition Grants Enhancing Education Through Technology Program Even Start Hurricane Education Recovery Improving Teacher Quality State Grants Mathematics and Science Partnerships Reading First State Grants Safe and Drug-Free Schools and Communities - National Programs Safe and Drug-Free Schools and Communities - State Grants State Grants for Innovative Programs Title I Grants to Local Educational Agencies Vocational Education - Basic Grants to States Pass-Through From Georgia Department of Human Resources Safe and Drug-Free Schools and Communities
Total U. S. Department of Education
Health and Human Services, U. S. Department of Pass-Through From Georgia Department of Education Cooperative Agreements to Support Comprehensive School Health Programs to Prevent the Spread of HIV and Other Important Health Problems

CFDA NUMBER

PASSTHROUGH
ENTITY ID
NUMBER

EXPENDITURES IN PERIOD

. 10.553 . 10.555

N/A N/A $
$

(2) 7 456167
7,456,167

10.550

N/A $

322,226 7,778,393

84.027 84.173

NIA $ NIA
$

4,047,465 222,613
4,270,078

84.041 84.215
84.282 84.332 84.196 84.365 84.318 84.213
. 84.938 84.367 84.366 84.357 84.184 84.186
. 84.298 84.010 84.048
84.186

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

(3) 335,084
274,356 375,206 34,625
2,327 438,395 180,520 (4) 1,723,271 111,435 1,537,082
28,992 154,201 79,538 7,836,164 227,141
11 975
17,620,370

93.938

N/A $

2400

- 32-

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

SCHEDULE "2"

FUNDING AGENCY PROGRAM/GRANT
Labor, U. S. Department of Pass-Through From Southwest Georgia Regional Development Center Workforce Investment Act Youth Activities Youth Opportunity Grants
Total U. S. Department of Labor
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

CFDA NUMBER

PASSTHROUGH
ENTITY ID
NUMBER

EXPENDITURES IN PERIOD

17.259 17.263

N/A $ NIA

100,667 41603

$ _ _ __..;.14..:..:2::.,:2:..:.7~0

$

70,654

92707

$ _ _ __..;.16;:;..:3:.3;.;:6;..:..1

Total Federal Financial Assistance N/A = Not Available

$===2=5=,7=06=,7=94==

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 ($2,394,286) were not maintained separately and are included in the 2006 National School Lunch Program.
(3) Funds earned on the Impact Aid Program, in the amount of $155,351, do not require reporting of expenditures. (4) Funds earned on the Hurricane Education Recovery program, in the amount of $258,452, do not require reporting
of expenditures.

Major Programs are identified by an asterisk (*) in front of the CFDA number.

The School District did not provide Federal Assistance to any Subrecipient.

The accompanying schedule of expenditures of Federal awards includes the Federal grant activity of the Dougherty County Board of Education and is presented on the modified accrual basis of accounting which is the basis of accounting used in the presentation of the fund financial statements.

See notes to the basic financial statements.

- 33-

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

SCHEDULE "3"

AGENCY/FUNDING
GRANTS Bright From the Start: Georgia Department of Early Care and Learning Pre-Kindergarten Program
Education, Georgia Department of Quality Basic Education Direct Instructional Cost Kindergarten Program Kindergarten Program - Early Intervention Program Primary Grades (1-3) Program Primary Grades - Early Intervention (1-3) Program Upper Elementary Grades (4-5) Program Upper Elementary Grades - Early Intervention (4-5) Program Middle Grades (6-8) Program Middle School (6-8) Program High School General Education (9-12) Program Vocational Laboratory (9-12) Program Students with Disabilities Category I Category II Category Ill Category IV CategoryV Supplemental Speech Gifted Student - Category VI Remedial Education Program Alternative Education Program English Speakers of Other Languages (ESOL) Media Center Program 20 Days Additional Instruction Staff and Professional Development Indirect Cost Central Administration School Administration Facility Maintenance and Operations Categorical Grants Pupil Transportation Regular Bus Replacement Nursing Services Principal Supplements Migrant Education Mid-term Adjustment Hold-Harmless Education Equalization Funding Grant Food Services Vocational Education Austerity Reduction Other State Programs Agriculture Construction Related Equipment Health Insurance National Teacher Certification Preschool Handicapped Program Severely Emotionally Disturbed Statewide K-8 Reading and Math Virtual Schools State Grant Vocational Construction Related Equipment

GOVERNMENTAL FUND TYPES

CAPITAL

GENERAL

PROJECTS

FUND

FUND

$

992,430

$

5,264,223 462,444
12,209,110 893,216
5,658,475 471,827
1,541,909 7,967,581 7,398,902 1,899,785
311,186 2,368,945 3,263,990
809,033 520,683
18,052 1,087,509
210,635 701,889
59,028 1,544,666
494,868 294,460
1,570,509 3,245,274 4,237,040
1,697,029 275,273 295,613 54,343 4,325 889,722
9,413,301 478,890 146,676
-3,736,162
258,052 2,939,857
21,319 254,537 2,243,655 334,125
100 771,314

TOTAL
992,430
5,264,223 462,444
12,209,110 893,216
5,658,475 471,827
1,541,909 7,967,581 7,398,902 1,899,785
311,186 2,368,945 3,263,990
809,033 520,683
18,052 1,087,509
210,635 701,889
59,028 1,544,666
494,868 294,460
1,570,509 3,245,274 4,237,040
1,697,029 275,273 295,613 54,343 4,325 889,722
9,413,301 478,890 146,676
-3,736,162
258,052 2,939,857
21,319 254,537 2,243,655 334,125
100 771,314

- 34-

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

SCHEDULE "3"

AGENCY/FUNDING
GRANTS Georgia State Financing and Investment Commission Reimbursement on Construction Projects
Office of the Governor Georgia Challenge Program
Office of Treasury and Fiscal Services Public School Employees Retirement
CONTRACTS Education, Georgia Department of Foreign Language Model Program
Human Resources, Georgia Department of High School-Based Summer Learning Program

GOVERNMENTAL FUND TYPES

CAPITAL

GENERAL

PROJECTS

FUND

FUND

TOTAL

$ 6,063,008 $

6,063,008

$

30,000

30,000

23,032

23,032

166,566 40 000

166,566 40000

$ 82,099,236 $

6,063,008 $=...,...8=8'=16=2=,2..,44=

See notes to the basic financial statements.

- 35-

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

SCHEDULE "4"

PROJECT

ORIGINAL ESTIMATED
COST(1)

CURRENT ESTIMATED COSTS (2)

AMOUNT EXPENDED IN CURRENT YEAR (3) (4)

AMOUNT EXPENDED IN PRIOR YEARS (3) (4)

PROJECT STATUS

The acquisition, construction, and equipping of six new elementary physical education facilities, two new middle schools, supply services freezer, completion of expansion program at five schools, roof replacement on 24 buildings, technology power upgrade on 30 buildings, ceilings and lights in 27 buildings, HVAC upgrades on 24 buildings, four new high school field houses, three support facilities for new elementary schools, renovation of McIntosh Teacher Academy, renovation of five schools, Highland conversion, underslab plumbing replacement in 17 buildings, asbestos removal at48 sites, lawn revitalization at 30 sites, facilities department shops, tower, media service center, security lighting at 28 sites, sports field lighting at four sites and 41 new vehicles, including the acquisition of all necessary property, the maximum cost of such projects not to exceed $88,653,060.

$ 88,653,060 $ 112,374,711 $

1,879,814 $ 110,494,897 $ Ongoing

The acquisition, construction and equipping of three elementary schools, renovation and improvements of one middle school, renovation and improvements of four high schools, renovation and improvements of five elementary schools, provision of gifted, special education, and alternative education sites, capital funding necessary for compliance with Individuals with Disabilities Education Act (IDEA) for children with disabilities, renovation of existing school buildings, four Pre-K facilities in each of four quadrants in the Dougherty County School System, additional technology (hardware and software), including teacher and student classroom computers, peripheral devices and wiring, mobile wireless computer labs, accessory support technology, wireless connectivity for portable classrooms and technology associates with distance and foreign language labs, safety equipment including, but not limited to, upgrading locks on all school buildings, installation of cameras and other devices on schools and school buses, and security/attendance card system, upgrade of school vehicles and maintenance equipment, funding certain financing and project management cost for implementation of capital programs funded through SPLOST II, the maximum cost of such projects not to exceed $95,000,000.

95,000,000

95,000,000

38,608,047

27,586,568 Ongoing

$ 183,653,060 $ 207,374,711 $ 40,487,861 $ 138,081,465

- 36-

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

SCHEDULE "4"

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

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

(3) The voters of Dougherty 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

$ 5,259,896

Current Year

Total

$

See notes to the basic financial statements.

- 37-

(This page left intentionally blank)

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

SCHEDULE "5"

DESCRIPTION

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

ELIGIBLE QBE PROGRAM COSTS

SALARIES

OPERATIONS

TOTAL

Direct Instructional Programs

Kindergarten Program

$

Kindergarten Program-Early Intervention Program

Primary Grades (1-3) Program

Primary Grades-Early Intervention (1-3) Program

Upper Elementary Grades (4-5) Program

Upper Elementary Grades-Early Intervention (4-5)

Program

Middle Grades (6-8) Program

Middle School (6-8) Program

High School General Education (9-12) Program

Vocational Laboratory (9-12) Program

Students with Disabilities

Category I

Category II

Category Ill

Category IV

Gifted Student - Category VI

Remedial Education Program

Alternative Education Program

English Speakers of Other Languages (ESOL)

6,082,127 $ 520,978
14,061,163 1,027,534 6,531,332

6,069,051 $ 133,960
14,841,798 1,052,795 6,582,170

550,890 1,768,390 9,185,991 8,532,141 2,180,634 8,366,462
1,245,698 257,712 808,902 65089

562,220 2,071,662 10,375,993 11,571,922 2,329,694
294,701 2,780,567 4,822,363
402,012 916,844
1,180,953 120,232

35,215 $ 3,140
149,062 15,358 96,638
525 74,840 347,958 866,565 224,122
8,456 22,039 91,045 35,224 22,937
237,124 1 039

6,104,266 137,100
14,990,860 1,068,153 6,678,808
562,745 2,146,502 10,723,951 12,438,487 2,553,816
303,157 2,802,606 4,913,408
437,236 939,781
1,418,077 121 271

TOTAL DIRECT INSTRUCTIONAL PROGRAMS

$

61,185,043 $ 66,108,937 $

2,231,287 $

68,340,224

Media Center Program Staff and Professional Development

1,780,049 339147

2,309,619 112 719

202,176 184 382

2,511,795 297 101

TOTAL QBE FORMULA FUNDS

$

63,304,239 $ 68,531,275 $

2,617,845 $===7.,.1=14.,.9=1=2=0

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

See notes to the basic financial statements.

- 39-

SECTION II COMPLIANCE AND INTERNAL CONTROL REPORTS

Russell W. Hinton
STATE AUDITOR
(404) 858-2174

DEPARTMENT OF AUDITS AND ACCOUNTS
270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400
May 14, 2007

Honorable Sonny Perdue, Governor Members ofthe General Assembly Members of the State Board of Education
and Superintendent and Members of the Dougherty 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, the discretely presented component unit, each major fund, and the aggregate remaining fund information of Dougherty County Board ofEducation as ofand for the year ended June 30, 2006, which collectively comprise Dougherty County Board of Education's basic financial statements and have issued our report thereon dated May 14, 2007. 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. We did not audit the financial statements of the Dougherty County Board of Education's discretely presented component unit. Those financial statements were audited by other auditors whose report thereon has been furnished to us, and our opinion insofar as it relates to the amounts included for Dougherty County Stadium Authority is based on the report of the other auditors.
Internal Control Over Financial Reporting
In planning and performing our audit, we and other auditors considered Dougherty County Board of Education's internal control over financial reporting in order to determine our auditing procedures for the purpose ofexpressing our opinions on the financial statements and not to provide an opinion on the internal control over financial reporting. However, we noted certain matters involving the internal control over financial reporting and its operation that we consider to be reportable conditions. Reportable conditions involve matters coming to our attention relating to significant deficiencies in the design or operation of the internal control over financial reporting that, in our
2006YB-30X

judgment, could adversely affect Dougherty County Board ofEducation's ability to record, process, summarize and report financial data consistent with assertions of management in the financial statements. Reportable conditions are described in the accompanying Schedule of Findings and Questioned Costs as items FS-6471-06-01 and FS-6471-06-02.
A material weakness is a reportable condition in which the design or operation ofone or more ofthe internal control components does not reduce to a relatively low level the risk that misstatements caused by error or fraud in amounts that would be material in relation to the financial statements being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. Our consideration of the internal control over financial reporting would not necessarily disclose all matters in the internal control that might be reportable conditions and, accordingly, would not necessarily disclose all reportable conditions that are also considered to be material weaknesses. However, we believe none of the reportable conditions described above are material weaknesses.
Compliance and Other Matters
As part of obtaining reasonable assurance about whether Dougherty County Board of Education's financial statements are free ofmaterial misstatement, we, and other auditors, performed tests ofits compliance with certain provisions of laws, regulations, contracts and grant agreements, noncompliance with which could have a direct and material effect on the determination offinancial 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, and other auditors, tests disclosed no instances ofnoncompliance or other matters that are required to be reported under Government Auditing Standards.
This report is intended solely for the information and use ofthe audit committee, management and members ofthe Dougherty County Board of Education and is not intended to be and should not be used by anyone other than these specified parties.
. Respectfully submitted,
~,.... ,,OQ ~-~
~Jssell W. Hinton, CPA, CGFM State Auditor
RWH:gp
2006YB-30X

Russell W. Hinton
STATE AUDITOR
(404) 858-2174

DEPARTMENT OF AUDITS AND ACCOUNTS
270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400
May 14, 2007

Honorable Sonny Perdue, Governor Members ofthe General Assembly Members ofthe State Board of Education
and Superintendent and Members ofthe Dougherty 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 Dougherty County Board of Education with the types of compliance requirements described in the U.S. Office ofManagement and Budget (0MB) Circular A-133 Compliance Supplement that are applicable to each ofits major Federal programs for the year ended June 30, 2006. Dougherty County Board of Education's major Federal programs are identified in the Summary ofAuditor's Results Section ofthe accompanying Schedule ofFindings and Questioned Costs. Compliance with the requirements oflaws, regulations, contracts and grants applicable to each of its major Federal programs is the responsibility ofDougherty County Board of Education's management. Our responsibility is to express an opinion on Dougherty 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 Dougherty County Board ofEducation's compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Our audit
2006SA-30

does not provide a legal determination on Dougherty County Board ofEducation's compliance with those requirements.
In our opinion, the Dougherty 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, 2006.
Internal Control Over Compliance
The management of Dougherty 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 Dougherty County Board of Education's internal control over compliance with requirements that could have a direct and material effect on a major Federal program in order to determine our auditing procedures for the purpose ofexpressing our opinion on compliance and to test and report on internal control over compliance in accordance with 0MB Circular A-133.
We noted a certain matter involving the internal control over compliance and its operation that we consider to be a reportable condition. Reportable conditions involve matters coming to our attention relating to significant deficiencies in the design or operation ofthe internal control over compliance that, in our judgment, could adversely affect the Dougherty County Board ofEducation's ability to administer a major Federal program in accordance with applicable requirements oflaws, regulations, contracts and grants. The reportable condition is described in the accompanying Schedule of Findings and Questioned Costs as item FA-6471-06-01.
A material weakness is a reportable condition in which the design or operation ofone or more ofthe internal control components does not reduce to a relatively low level ofrisk that noncompliance with the applicable requirements of laws, regulations, contracts and grants caused by error or fraud that would be material in relation to a major Federal program being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. Our consideration ofthe internal control over compliance would not necessarily disclose all matters in the internal control that might be reportable conditions and, accordingly, would not necessarily disclose all reportable conditions that are also considered to be material weaknesses. However, we believe the reportable condition described above is not a material weakness.
This report is intended solely for the information and use of the audit committee, management, members ofthe Dougherty County Board ofEducation, Federal awarding agencies and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties.
Respectfully submitted,

RWH:gp 2006SA-30

:&;~!~~
State Auditor

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

DOUGHERTY COUNTY BOARD OF EDUCATION AUDITEE'S RESPONSE
SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2006

PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

FINDING CONTROL NUMBER AND STATUS

FS-6471-04-01 FS-64 71-04-02 FS-64 71-04-03 FS-6471-05-01 FS-6471-05-02 FS-64 71-05-03 FS-64 71-05-04

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

CORRECTIVE ACTION/RESPONSES

BUDGET PREPARATION/EXECUTION Deficit Fund Balance Finding Control Number: FS-6471-05-01

In fiscal year 2005, the School System implemented a plan to eliminate the deficit in the Child Nutrition Program. With guidance from the Georgia Department ofEducation, the Board elected to discontinue the Federal free lunch program. The decision to add the free lunch program to the already existing free breakfast program in fiscal year 2004 resulted in revenue losses far greater than anticipated and proved to be fiscally prohibitive. Operational changes such as the closing of CNS central warehouse operations, realignment ofstaffbased on number ofmeals served, implementation of "per plate cost" controls and the updating of meal prices was also achieved in fiscal year 2005 and fiscal year 2006. In fiscal year 2006, meal participation increased with the implementation ofa "breakfast in the classroom" program. This program was expanded to more schools in fiscal year 2007. Also, during fiscal year 2007, standardized menus were introduced and staff training on cost efficient meal preparation and inventory control procedures was provided. For fiscal year 2008, emphasis will continue to be placed on improving the quality of meals served while reducing production costs.

Operational changes implemented during fiscal year 2006 resulted in a deficit reduction of approximately $1.0 million. Another $1.0 million reduction is projected for fiscal year 2007. The projected deficit balance at June 30, 2007, is approximately $1.8 million. The School System's goal is to fully eliminate the deficit no later than fiscal year 2011.

- 1-

DOUGHERTY COUNTY BOARD OF EDUCATION AUDITEE'S RESPONSE
SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2006

PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

CORRECTIVE ACTION/RESPONSES

CASH AND CASH EQUIVALENTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Accounting Procedures over School Activity Accounts Finding Control Number: FS-6471-05-02

The number of staff available for assignment of accounting functions is limited in the schools. The School System's internal auditor will continue to work with the available staff in each school to develop compensating controls.

PRIOR YEAR FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

FINDING CONTROL NUMBER AND STATUS

FA-6471-03-01 FA-6471-03-02 FA-6471-04-01

Unresolved - See Corrective Action/Responses Unresolved - See Corrective Action/Responses Previously Reported Corrective Action Implemented

CORRECTIVE ACTION/RESPONSES

ACTIVITIES ALLOWED/UNALLOWED ALLOWABLE COSTS/COST PRINCIPLES Improper Expenditure Amount: $47,740 Finding Control Number: FA-6471-03-01

The questioned repair and maintenance expenditures were paid by a Federal, special education funding source and were determined to be improper due to insufficient documentation. These repairs were made to Dougherty County School System facilities which houses the main operational site for the Oaktree Psychoeducational Center and two other service sites. In addition to serving the students of Dougherty County, these sites also serve students from Lee, Terrell, Worth and Baker counties. The School System will adhere to the Georgia Department of Education's requirements for final resolution.

-2 -

DOUGHERTY COUNTY BOARD OF EDUCATION AUDITEE'S RESPONSE
SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2006
PRIOR YEAR FEDERAL AWARD FINDINGS AND QUESTIONED COSTS CORRECTIVE ACTION/RESPONSES ACTIVITIES ALLOWED/UNALLOWED ALLOWABLE COSTS/COST PRINCIPLES Inaccurate Indirect Cost Calculation Amount: $23,424 Finding Control Number: FA-6471-03-02 The questioned indirect costs were calculated on the basis of a State fund indirect cost regulation, but were erroneously posted to a Federal fund. Both funds were funding sources for the Oaktree Psychoeducational Program. The Oaktree Program has sites in Albany, Arlington and Blakely that serve students with special needs in eight counties, including Dougherty, Lee, Terrell, Worth, Baker, Miller, Early and Calhoun. The School System will adhere to the Georgia Department of Education requirements for final resolution.
-3-

SECTION IV FINDINGS AND QUESTIONED COSTS

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

I SUMMARY OF AUDITOR'S RESULTS

1. Type of Report Issued on the Financial Statements The auditor's opinion on the Dougherty County Board of Education's financial statements was unqualified.

2. Reportable Conditions in Internal Control Disclosed by the Audit of the Financial Statements The audit report for the Dougherty County Board ofEducation disclosed financial statement reportable conditions related to the following control categories.

Budget Preparation/Execution Cash and Cash Equivalents

Expenditures/Liabilities/Disbursements Revenues/Receivables/Receipts

None ofthe reportable conditions described above are considered to be material weaknesses.

3. Noncompliance Material to the Financial Statements The audit of the Dougherty County Board of Education disclosed no instances of noncompliance that were deemed to be material to the financial statements.

4. Reportable Conditions in Internal Control Over Major Programs The audit report for the Dougherty County Board of Education disclosed a reportable condition in internal control over major programs for the following compliance requirement.

Activities Allowed or Unallowed

The reportable condition described above is not considered to be a material weakness.

5. Type of Report Issued on Compliance for Major Programs The auditor's opinion on the Dougherty County Board ofEducation's report on compliance with requirements applicable to major programs was unqualified.

6. Audit Findings Required to be Reported by Section .510(a) ofOMB Circular A-133 The Dougherty County Board ofEducation's audit disclosed an audit finding required to be reported by section .510(a) of 0MB Circular A-133. This audit finding is included in section IV of this report.

7. Major Programs Federal awards audited as major programs are as follows: 10.553 Food Services - School Breakfast Program 10.555 Food Services - National School Lunch Program 84.010 Title I Grants to Local Educational Agencies 84.367 Improving Teacher Quality State Grants 84.938 Hurricane Education Recovery

- 1-

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

I SUMMARY OF AUDITOR'S RESULTS

8. Type "A" Program Dollar Thres~old The dollar threshold for type "A" programs was $783,618.

9. Low Risk Auditee The Dougherty County Board of Education did not qualify as a low risk auditee as defined by Section .530 of 0MB Circular A-133.

II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

BUDGET PREPARATION/EXECUTION Deficit Fund Balance Reportable Condition Finding Control Number: FS-6471-06-01

Condition:

This is a repeat finding (FS-6471-05-01, FS-6471-04-01, and FS-6471-0301) from the years ended June 30, 2005, 2004, and 2003, respectively. Deficit Fund Balances.

Criteria:

Chapter 25 Reporting/or LUAs with General Fund Deficit Balances of the Financial Management for Georgia Local Units of Administration states in part: "The seriousness of fund balance deficits cannot be overstated. The Georgia Department ofEducation requires those LUAs with deficit balances to meet certain reporting requirements".

Questioned Cost: NIA

Information:

The School District's General Fund - Regular reported a deficit fund balance in the amount of $1,211,722. The School District's School Food Service Fund reported a deficit fund balance in the amount of $2,892,209.

Cause:

The School District was unable to eliminate deficit fund balances from previous years in the General Fund - Regular.

Effect:

A financial statement irregularity in accordance with O.C.G.A. 20-2-67.

Recommendation:

The School District should establish policies and procedures designed to ensure that in future periods the School District does not report deficit fund balances.

-2-

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

II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

CASH AND CASH EQUIVALENTS REVENUESIRECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Accounting Procedures over School Activity Accounts Reportable Condition Finding Control Number: FS-6471-06-02

Condition:

This is a repeat finding (FS-6471-05-02, FS-6471-04-02, FS-6471-03-02, and FS-6471-02-02) from the years ended June 30, 2005, 2004, 2003, and 2002, respectively. The accounting procedures of the School District were insufficient to provide for adequate internal controls over the school activity accounts.

Criteria:

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

Questioned Cost: NIA

Information:

Cash and Cash Equivalents The bank reconciliation function was not separated from the record keeping and voucher payment functions.

Revenues and Receivables Deposit preparation was not separated from the record keeping and cash custody functions. Based on a review of thirty items, the following deficiencies were noted: 1) Twenty receipts were not adequately documented, 2) Deposit slips could not be located for eight receipts, 3) Four receipts were not deposited timely, and 4) Seven receipts did not have enough information to trace to recording on general ledger.

Expenditures/Liabilities/Disbursements The check writing function was not separated from the record keeping or processing of signed checks. Based on a review ofthirty items, the following deficiencies were noted:

-3-

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

II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

CASH AND CASH EQUIVALENTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Accounting Procedures over School Activity Accounts Reportable Condition Finding Control Number: FS-6471-06-02

1) Four expenditures were not adequately documented, 2) Ten expenditures did not have enough information to
trace to general ledger, 3) One expenditure was paid for the incorrect amount,
and 4) It was noted that one school had written checks out of
sequence.

Cause:

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

Effect:

Errors and /or fraud may be detected in a timely manner.

Recommendation:

The School District should implement procedures to ensure that the key accounting functions of custody, record keeping and authorization are separated and/or utilize management oversight of these incompatible activities. Additionally, management should revise and monitor controls to provide reasonable assurance that transactions are processed according to established procedures.

III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

ACTIVITIES ALLOWED OR UNALLOWED Inadequate Internal Control Procedures Reportable Condition U.S. Department of Education Through Georgia Department of Education Hurricane Education Recovery (CFDA No. 84.938) Finding Control Number: FA-6471-06-01

Condition:

There were no procedures in place to ensure that Hurricane Education Recovery Act (HERA) funds provided to the School District for displaced students reported as having disabilities were used for the excess costs of providing special education and related services to students with disabilities.

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

III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

ACTIVITIES ALLOWED OR UNALLOWED Inadequate Internal Control Procedures Reportable Condition U.S. Department of Education Through Georgia Department of Education Hurricane Education Recovery (CFDA No. 84.938) Finding Control Number: FA-6471-06-01

Criteria:

The following guidance applied to the management of Emergency Impact Aid for Displaced Students to include funds made available for displaced students:
1. Section 107(e)(4) of HERA, 2. Volumes "I" and "II" ofU. S. Department of Education (USED)
guidelines included in "Frequently Asked Questions, Emergency Impact Aid for Displaced Students" and 3. State of Georgia issued publication titled "Georgia Guidance on Federally Impact Aid" (GDOE Guidelines).

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

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

Questioned Cost: $22,396

Information:

HERA funds received by the School District included $22,396 for students with disabilities. Although required by Federal guidelines, the receipt and expenditure of these funds were not maintained separately.

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

III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

ACTIVITIES ALLOWED OR UNALLOWED Inadequate Internal Control Procedures Reportable Condition U.S. Department of Education Through Georgia Department of Education Hurricane Education Recovery (CFDA No. 84.938) Finding Control Number: FA-6471-06-01

We further noted that although advised by GDOE and Federal guidelines, the budget for special education was not modified for the increase in HERA funds designated for special education and related purposes. There was no evidence that State or local special education staff were consulted about the use of these funds in keeping with IDEA requirements.

Cause:

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

Effect:

Although the School District did overspend their State and Federal special education budgets, the School District did not specifically allocate the $22,396 of HERA funds earmarked for students with disabilities to cover these special education overexpenditures.

Recommendation:

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

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SECTIONV MANAGEMENT'S RESPONSES

DOUGHERTY COUNTY BOARD OF EDUCATION SCHEDULE OF MANAGEMENT'S RESPONSES YEAR ENDED JUNE 30, 2006
Finding Control Number: FS-6471-06-01
We concur with this finding. The $1,211,722 deficit reported for the General Fund - Regular reflects fund balance on the modified accrual basis. This is required for reporting purposes. Operations for the General Fund are budgeted on a cash basis. To provide sufficient fund balance for the accruals and required reserves for bus replacement and inventories, the System will increase fund balances each year by maintaining its expenditures below revenues.
Operational changes implemented in the Child Nutrition Program since fiscal year 2005 have resulted in a significant reduction of the deficit in the Child Nutrition Fund. As of the end of fiscal year 2007, it is projected that the deficit will have been reduced more than $2.3 million since fiscal year 2005. The System expects to have fully eliminated the deficit and have sufficient funds to meet the required reserves for inventories no later than fiscal year 2009.
Finding Control Number: FS-6471-06-02
We concur with this finding. The System's central office staffwill continue to work with the current school staff in developing compensating controls. Monitoring by the central office will be performed quarterly rather than annually beginning in fiscal year 2008. The System will also develop ongoing training for school bookkeepers and other school personnel responsible for management oversight.
Finding Control Number: FA-6471-06-01
We concur with this finding. The System expended more than $1.0 million in local funds for students with disabilities. Any of these expenditures could have been earmarked for the $22,396 HERA funds. The System will provide information to GDOE for their review.
Contact Person: Ellen Collins, Assistant Director of Finance Phone: (229) 431-1813 Fax Number: (229) 431-1239 E-mail Address: ellen.collins@docoschools.org