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

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

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

8

H

NOTES TO THE BASIC FINANCIAL STATEMENTS

9

SCHEDULES

REQUIRED SUPPLEMENTARY INFORMATION

1 SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES

IN FUND BALANCES - BUDGET AND ACTUAL

GENERAL FUND

29

DOUGHERTY COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS -

SECTION I

FINANCIAL

SCHEDULES

SUPPLEMENTARY INFORMATION

2 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS

30

3 SCHEDULE OF STATE REVENUE

32

4 SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS

34

5 ALLOTMENTS AND EXPENDITURES

GENERAL FUND - QUALITY BASIC EDUCATION PROGRAMS (QBE)

BY PROGRAM

37

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) 656-2174

DEPARTMENT OF AUDITS AND ACCOUNTS
270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400
September 22, 2008

Honorable Sonny Perdue, Governor Members ofthe General Assembly Members ofthe State Board of Education
and Superintendent and Members of the 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 of Education, as of and for the year ended June 30, 2007, which collectively comprise the Board's basic financial statements as listed in the table 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 reports thereon have been furnished to us, and our opinion, insofar as it relates to the amounts included for Dougherty County Stadium Authority is based on the reports ofother 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 of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Dougherty County Board of Education's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit and the report of other auditors provides a reasonable basis for our opinions.
2007 ARL-12X

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, 2007, and the respective changes in financial position thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America.

In accordance with Government Auditing Standards, we have also issued our report dated September 22, 2008, on our consideration of the Dougherty County Board of Education's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements and other matters. The purpose of that report is to describe the scope ofour testing ofinternal 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 xv and page 29 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 the 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 ofSchedules 2 through 5, 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 the other auditors in the audit ofthe basic financial statements, and in our opinion, based on our audit and the report ofother auditors, are fairly stated, in all material respects, in relation to the basic financial statements taken as a whole.

A copy of this report has been filed as a permanent record in the office of the State Auditor and made available to the press of the State, as provided for by Official Code of Georgia Annotated section 50-6-24.

Respectfully submitted,

-

~~~

Ru ell W. Hinton, CPA, CGFM State Auditor

RWH:as 2007 ARL-12X

DOUGHERTY COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2007
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, 2007. 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 2007, are as follows:
The School District's financial status continued to improve in fiscal year 2007. Total net assets increased $21.7 million over the course of the year. This increase is
due, entirely, to governmental activities. The increase in net assets was $4.4 million greater than the prior year. Net capital assets increased $20.0 million. The various capital improvements projects
completed during fiscal year 2007 were part of a long-range Facilities Plan to upgrade all of the School District's schools and facilities. These capital improvements were primarily funded by a 1% special purpose local sales tax approved by the voters of Dougherty County. The unrestricted (deficit) for Governmental Activities was reduced by $2.3 million. Fund balance for the Governmental Funds - General Fund increased $2.5 million in fiscal year 2007.
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.
System-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 those used by 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 System-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.
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DOUGHERTY COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2007
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. Expenditures 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 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'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.
The Dougherty County School District has two major fund types - Governmental Funds and Fiduciary Funds.
Governmental Funds
Most of the School District's financial activities are reported in governmental funds. The fund statements provide more detailed information about the School District's funds, focusing on its most significant "major" funds - not the School District as a whole. These funds record how money flows in and out within the current period, and the reports the balances remaining at yearend available for spending in future periods. The governmental fund statements provide a shortterm 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 programs. The differences between governmental activities (reported in the Statement ofNet Assets and the Statement ofActivities) 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 school food services, other Federal and State grant programs, the general operating portion of principal accounts, and workers compensation claims are consolidated 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
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DOUGHERTY COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2007

purposes and only by those to whom the assets belong. The School District excludes these fund activities from the System-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 2006 and fiscal year 2007.

Statement of Net Assets (Analysis of the School District as a Whole)

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 2006 and fiscal year 2007.

Table 1 Net Assets (in Thousands)

Governmental Activities

Fiscal

Fiscal

Increase/

Year 2007 Year 2006

Decrease

Assets Current and Other Assets Capital Assets, Net

$ 29,392 $ 38,328 $ -8,936

213,985

193,936

20,049

Total Assets

$ 243,377 $ 232,264 $ 11,113

Liabilities Current and Other Liabilities Long-Term Liabilities

$ 19,519 $ 21,558 $ -2,039

3,331

11,853

-8,522

Total Liabilities

$ 22,850 $ 33,411 $ -10,561

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

$ 212,440 $ 183,772

8,192

17,725

-105

-2,644

$ 28,668 -9,533 2,539

Total Net Assets

$ 220,527 $ 198,853 $ 21,674

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DOUGHERTY COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2007
Total Assets for Governmental Activities increased $11.1 million in fiscal year 2007 compared to fiscal year 2006. The $8.9 million decrease in Current and Other Assets was offset by an increase in Net Capital Assets of $20.0 million. The increase in Net Capital Assets was the result of major capital improvement projects implemented throughout the fiscal year, including the construction and equipping of a new school and the renovation of several existing school buildings. These projects were part of a long-rage facilities plan to upgrade all of the School District's schools and facilities. Other capital improvements projects included the upgrade of classroom technology, the addition of security and access systems and the replacement ofheating and cooling systems in several of the schools' gymnasiums. Virtually all of these projects were funded by a 1% sales tax approved by the voters of Dougherty County (STEP - "Sales Tax for Educational Progress"). See Table 5 for an analysis of the increase in Capital Assets.
Current Liabilities decreased $2.0 million and Long-Term Liabilities decreased $8.5 million. Current Liabilities includes, in part, the balance due to Contractors and Architects for major capital projects. The decrease in Long-Term Liabilities was primarily due to the payments made on bond debt and capital leases. See Table 6 for complete analysis of the reduction on LongTerm Debt at June 30.
Restricted or designated assets are assets that must be used for a specific purpose. The $9.5 million decrease in Restricted Assets was primarily due to the decrease in funds restricted for Debt Service. By the end of the fiscal year, the outstanding bond debt was reduced to $1.1 million.
Restricted assets of $8.2 million includes: funds restricted for bus replacement: $0.1 million; funds restricted for the continuation of Federal programs: $0.2 million; funds restricted for debt service: $1.9 million; and funds restricted for capital projects: $6.0 million.
The $2.6 million unrestricted deficit reported for fiscal year 2006 was reduced to $0.1 million in fiscal year 2007. This can be attributed, part, to the $2.5 million increase in fund balance for the General Fund. See The School District's Funds below.
Statement of Activities
Table 2 shows the changes in net assets for fiscal year 2006 and fiscal year 2007 as reported on the Statement ofActivities.
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DOUGHERTY COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2007

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

Increase/

Year2007

Year2006 Decrease

$ 1,797 102,567 5,961

$ 1,679 98,068 6,338

$ 118 4,499 -377

Total Program Revenues

$ 110,325

$106,085 $ 4,240

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
Special Item Loss on Demolition of Building

$ 34,880
17,417 386 143
10,298 1,187 2,965
-813

$ 35,051 $ -171

7,590 9,899
405 141
9,406 1,650 2,754

-7,590 7,518
-19 2
892 -463 211
-813

Total General Revenues and Special Item

$ 66,463

$ 66,896 $ -433

Total Revenues

$ 176,788

$172,981 $ 3,807

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

$ 97,862
4,612 5,475 3,202 10,770 2,079 12,472 5,712 3,646
468 547 8,159 110

$ 97,090 $ 772

4,920

-308

5,805

-330

3,212

-10

10,541

229

1,944

135

12,099

373

5,920

-208

3,803

-157

515

-47

545

2

8,862

-703

425

-315

Total Program Expenses

$155,114

$155,681 $ -567

Increase in Net Assets

$ 211674

$ 171300 $ 4,314

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DOUGHERTY COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2007
The most significant increase in revenues in fiscal year 2007 was in Program Revenues, mainly, restricted Operating Grants and Contributions. Operating 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 school and a high school and the construction of a new middle school building. Revenues from restricted Operating Grants and Contributions increased $4.5 million in fiscal year 2007. Total Program Revenues increased $4.2 million.
While Program Revenues increased, General Revenues from taxes and other special items decreased $0.4 million. Although program revenues make up a majority of the revenues, the School District is still dependent upon tax revenues for governmental activities. This dependence on tax revenues has grown even greater in recent years due to ongoing significant reductions in State funding combined with mandated increases in expenditures. This will be discussed further in the Current Financial Issues section that follows.
Total Program Expenses for fiscal year 2007 decreased $0.6 million compared to Program Expenses for fiscal year 2006. Increases occurred in the categories of Instruction, General and School Administration, Business Administration and Maintenance and Operation. The combined total of these increases was $1.5 million. The greatest increase was in the category of Instruction. The remaining categories of Pupil Services, Improvement of Instructional Services, Educational Media Services, Student Transportation Services, Central and Other Support Services, Enterprise Operations, Food Services, and Interest on Long-Term Debt decreased a combined total of $2.1 million.
Descriptions of Expense Categories
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.
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DOUGHERTY COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2007
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. Food Services are activities associated with the preparation and serving of meals for students. The school food service program is funded by Federal and State grants and revenues from the sale of meals to students and teachers. The cost of meals for students and teachers is determined by the School District. Governmental Activities Table 3 shows, for governmental activities, the total cost of services and the net cost of services for fiscal year 2006 and fiscal year 2007. This information is presented on the Statement of Activities. The Net Cost of Services reflects the balance of costs that were funded by taxes and other General Revenues.
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DOUGHERTY COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2007

Table 3 Governmental Activities
(in Thousands)

Total Cost of Services

Fiscal

Fiscal

Year 2007 Year 2006

Net Cost of Services

Fiscal

Fiscal

Year 2007 Year 2006

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

$ 97,862 $ 97,090 $ 20,728 $ 22,918

4,612 5,475 3,202 1,719 9,051 2,079 12,472 5,712 2,957
689

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

2,840 2,116
961 -947 4,554 1,879 6,969 2,969 2,892 521

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

468 547 8,159 110

515 545 8,862 425

441 547 -1,791 110

477 545 -1,088 425

Total Expenses

$ 155.114 $ 155.681 $ 44,789 $ 49.597

As previously noted above, Total Expenses, or Total Cost of Services, decreased from $155.7 million in fiscal year 2006 to $155.1 million in fiscal year 2007. Net Cost of Services to the taxpayer decreased from $49.6 million in fiscal year 2006 to $44.8 million in fiscal year 2007, a decrease of$4.8 million. This means that in fiscal year 2007, not only did Total Cost of Services decrease, but a greater portion of the total costs was funded by sources other than taxes, specifically Operating Grants and Contributions.

The School District's Funds

Table 4 shows the change in fund balance for Governmental Funds as reported on the Statement of Revenues, Expenditures and Changes in Fund Balances. Capital Projects and Debt Service Funds are combined for presentation purposes.

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

Table 4 Governmental Funds Net Change in Fund Balance
(in Thousands)

Revenues
Property Taxes Sales Taxes State Funds Federal Funds Charges for Services Investment Earnings Miscellaneous
Total Revenues
Expenditures
Current Instruction Support Services Enterprise Operations Community Services Food Service Operations
Capital Outlay Debt Services
Principal Interest
Total Expenditures
Excess of Revenues over (under) Expenditures
Other Financing Sources (Uses) Transfers In/Out
Net Change in Fund Balance
Fund Balances - Beginning
Fund Balances - Ending

General Fund
$ 35,324 529
89,720 23,718
1,797 459
2,965 $ 154,512
$ 95,638 47,014 448 547 7,786
392 13
$ 151,838
$ 2.674
$ -172
$ 2,502 -1,029
$ 1,473

Capital Projects
and Debt Service

Totals

$ 17,417 5,388
728
$ 23,533

$ 35,324 17,946 95,108 23,718 1,797 1,187 2,965
$ 178.045

$ 356
24,035 8,265
- -3-17 $ 32,973

$ 95,638 47J70 448 547 7,786 24,035
8,657 330
$ 184.811

$ -9.440 $ -6.766

$ 172
$ -9,268 17,152
$ 7,884

$

0

$ -6,766

16,123

$ 9,357

Revenues for all governmental funds totaled $178.0 million and expenditures totaled $184.8 million. Revenues were $6.8 million less than expenditures. The fund balance for governmental funds decreased from $16.1 million at the beginning of the fo;cd year to $9.4 million at June 30, 2007.

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DOUGHERTY COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2007
The decrease in fund balance occurred in Capital Projects and Debt Service when $9.3 million in sales tax receipts received in prior years were expended in fiscal year 2007 for capital projects and payment of bond debt.
The fund balance reported for the Governmental Funds - General Fund increased $2.5 million in fiscal year 2007. This was a substantial increase in fund balance and the deficit fund balance reported at the beginning of the fiscal year was converted to an excess fund balance by the end of the fiscal year. Food service operations provided $1.4 million of the increase in fund balance. All other general operations provided the additional $1.1 million increase in fund balance.
General Fund Budgeting Highlights
The School District's budget is prepared according to Georgia law and in compliance with Georgia Department of Education requirements. The School District uses site-based budgeting. The budgeting process is designed to control site budgeted expenditures while providing spending flexibility to site administration. General Fund Budget compared to Actual is presented in the Schedule ofRevenues, Expenditures and Changes in Fund Balances - Budget to Actual Schedule "1. "
During fiscal year 2007, the School District amended its general fund budget as needed. The Original Budget approved by the School District's Board in June, 2007, included revenues and expenditures for State and Federal Grants that were known at the time. An additional $3.9 million in Federal grants were later added to the budget when notice of those additional grants was received. The receipt of the additional grants not only required an increase in revenues but also an increase in expenditures. This is because Federal grants can only be used to fund additional programs and cannot take the place of State mandated funds or local funds that previously funded the same programs.
Some of the budgeting challenges the School District faced in fiscal year 2007 included a $1.8 million "austerity reduction" of the State educational allotment, a State mandated 4% cost of living increase for teachers, bus drivers and child nutrition workers, and a $1.4 million increase in state health insurance costs due to a 17.7% increase in premiums. In addition, fuel costs increased for the third year in a row while State transportation funding decreased. The full staffing of a newly formed police force for the entire year created additional expenditures for Maintenance and Operation Services. Increased energy costs and maintenance services associated with the opening of three new schools also created additional expenditures for Maintenance and Operations. Floor space in the new school buildings was substantially greater than the floor space of the buildings they replaced. The additional floor space required more energy to heat and cool and additional maintenance personnel.
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DOUGHERTY COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2007

Capital Assets and Debt Administration

Capital Assets

Since fiscal year 2002, the School District developed ongoing capital programs that have aggressively sought to upgrade its aging school facilities, many of which are 50 to 60 years old. In addition, it has updated the technology in schools for student's use and replaced some of its aging fleet of vehicles. The School District has been able to achieve this by the use of the 1% Sales Tax.

At the end of fiscal year 2007 the School District, $214.0 million was invested in capital assets. Table 5 compares fiscal year 2006 balances to fiscal year 2007 balances.

Table 5 Capital Assets at June 30 (Net of Depreciation, in Thousands)

Governmental Activities

Fiscal

Fiscal

Increase/

Year 2007 Year 2006 Decrease

Land Construction in Progress Buildings and Building Improvements Equipment

$ 9,057 21,047 179,683 4,198

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

$

37

-31,622

51,975

-341

Total

$ 213!985 $ 1931936 $ 20!049

Capital Assets increased by $20.0 million in fiscal year 2007 as shown in Table 5. The decrease in Construction in Progress is offset by an increase in Buildings and Building Improvements. This represents the completion of construction and the opening 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 opened in August, 2006 for the 2007 school year. The construction of a new elementary school was near completion by the end of the fiscal year. The new school is expected to open in August, 2007. The replacement of heating and cooling systems in several of the School District's gymnasiums was accomplished during the year as well as the addition of security and access systems in several of the schools. The addition of security and access systems is planned for all of the School District's schools and facilities, and will greatly improve the safety and security of its students and staff. Virtually all of the funding for these projects was provided by a 1% sales tax approved by the voters of Dougherty County (STEP - "Sales Tax for Educational Progress").

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

Debt

Table 6 summarizes the Long-Term Debt outstanding at June 30 for fiscal year 2006 and fiscal year 2007.

Table 6 Debt at June 30 (in Thousands)

Governmental Activities

Fiscal

Fiscal

Increase/

Year 2007 Year 2006 Decrease

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

$ 1,237 1,191 308 595

$ 9,723 1,148 700 282

$ -8,486 43
-392 313

Total

$ 3,331 $ 11,853 $ -8,522

The General Obligation Bonds debt shown in Table 6 reflects a balance payable of $1.1 million for a 2004 General Obligation Bond issuance, plus $0.1 million in unamortized bond premiums.

The $1.2 million debt for Compensated Absences is the School District's estimated financial obligation for future payments to employees for vacation leave.

The $0.3 million for Capital Leases shown above is final payment due on the lease purchase of 23 buses added to the school bus fleet in fiscal year 2003.

The Dougherty County School District is self insured for Workers' Compensation claims. The Claims Payable for Workers' Compensation of $0.6 million shown above represents estimated liability for existing claims at June 30, 2007.

Current Financial Issues

The School District has faced several financial challenges in the recent years. Such challenges include the following: rising costs in employee benefits, state mandated teacher salary increases, rising costs in fuel and textbooks, declining student enrollment (FTE), and a stagnant tax digest.

In fiscal year 2002, the State of Georgia mandated a 4% salary raise for all certified staff, bus drivers and child nutrition workers. In fiscal year 2003, the state introduced "austerity reductions" which served to reduce the State's educational funding which had been calculated according to the State funding formula. State mandated salary raises were continued, however, for fiscal year 2003. In fiscal year 2004, the State applied more reductions to the State allotment at the beginning of the year and then increased the reduction mid-year. Every fiscal year

- Xll -

DOUGHERTY COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2007
thereafter, with the exception of fiscal year 2004, certified salary raises were mandated by the state. State austerity reductions were also applied every year thereafter. As of fiscal year 2007, the effect of the mandated raises is a cumulative 15.25% certified salary increase that cost the School District approximately $20.0 million. State austerity reductions have resulted in a cumulative reduction in State funding of$14.0 million.
In addition, although the cost of items such as fuel, textbooks, educational supplies and health benefits have also increased during this period, no inflationary adjustment was made to the formula to provide additional State funding for these rising costs.
State funding falls far short of the additional cost of salaries and benefits and the rising costs of other educational expenditures. Over time, these State funding reductions have significantly increased the School District's dependence on local funding. However, for the past several years, there has been virtually no growth in the local tax digest. In fiscal year 2004, when faced with austerity reductions in mid-year fiscal year 2003 and again in fiscal year 2004, the Board raised the millage rate to 19 mills. At the same time, the School District began successfully implementing cost savings and spending reductions in all areas of support operations including Student Transportation, Maintenance, General Administration, School Food Service, Business Administration, and Central Support Services. The School District has continued to identify savings and reduce spending in these areas every year since the austerity reductions were introduced.
For the digest year 2006, the Board took advantage of the opportunity to roll back the millage rate. The millage rate for fiscal year 2007 was set at 18.984 mills. In fiscal year 2008, real property reassessments planned by the Dougherty County Tax Department for the 2007 Digest was expected to relieve the strain to some degree. As a result of the reassessments, school tax revenues increased approximately $5.7 million. To ease the burden of the taxpayer as much as possible, the Board rolled the millage rate back to 18.45. State funding was reduced another $1.4 million and a 3% certified salary increase was mandated by the State.
The public's response to the reassessments resulted in numerous property tax appeals and a lawsuit against the Dougherty County Commissioners. The lawsuit was filed by a group of Dougherty County residents on the basis that the reassessments were not consistently applied throughout the County and it has continued to move forward in the legal process. Since there is no court precedent by which to predict the outcome of this lawsuit, the School District must consider and plan for the worst outcome. If the lawsuit is successful and the 2007 Tax Digest is rejected, the Dougherty County School District could be required to refund the additional $5.7 million received in fiscal year 2008. The $5.7 million is the difference between actual tax proceeds received based on the 2007 Digest and the tax proceeds the School District would have received using the 2006 Digest. Local ad valorem tax revenues comprise approximately 32% of the total fiscal year 2009 general operating budgeted revenues. The loss of these revenues could significantly impact direct instructional programs since these areas comprise 68% of the general operating budgeted expenditures.
- Xlll -

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

Other items affecting the financial status of the School District is the slow decline in student enrollment (FTE) and the State's most recent announcements of additional reductions in state funding.

Student enrollment is a factor in the State's education funding formula. According to the State's funding formula, student enrollment is converted to a "Full Time Equivalent (FTE)" count. As student enrollment, or FTE, decreases, so does State funding. Since fiscal year 1995, after a major flood destroyed several of the School District's schools, student enrollment has slowly declined. The FTE count for the school year immediately following the flood showed a decline of 920 FTE's. From fiscal year 1997 to fiscal year 2002 the FTE continued to lose another 982 FTE's. The FTE count for the period fiscal year 2002 to fiscal year 2008 is as follows:

fiscal year 2002 fiscal year 2003 fiscal year 2004 fiscal year 2005 fiscal year 2006 fiscal year 2007 fiscal year 2008

16,613 16,448 16,362 16,522 16,731 16,376 16,208

The drop in the FTE count for fiscal year 2008 resulted m decrease m State funding of approximately $1.4 million.

In August, 2008, the School District was notified by the State that funding for fiscal year 2009 would be reduced an additional 2% due to the State's recent decline in State revenues for the 2008 calendar year and that 3% reductions were planned for fiscal year 2010. The State also warned that these reductions could increase if the trend in the State's revenues worsens over the next few months. These reductions will be in addition to the $1.0 million in austerity reductions already budgeted for fiscal year 2009. The School District's management is currently in the process of reviewing all programs for possible reductions. In addition, School District management plans to implement a hiring freeze by the end of August, 2008. Expenditures will be closely monitored and reviewed for the remainder of the year to ensure adherence to the expenditure restrictions and to identify additional cost savings and reductions.

In March, of fiscal year 2007, the voters of Dougherty County approved a continuation of the 1% 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 will be used to complete the renovation of schools outlined by the long-range facilities plan. Other sales tax projects include the installation of safety and access controls at fifteen schools and various other facilities, replacement of carpeting and gym flooring, and the purchase of musical instruments and other academic/instruction related equipment. State bus replacement funds will be used to lease purchase 12 buses within the next fiscal year. The School District plans to issue General Obligation bonds in the amount of $25.0 million in the fall of fiscal year 2009.

- xiv -

DOUGHERTY COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2007 At the end of fiscal year 2005, the Child Nutrition Program (food services operations) reported a deficit of $3.9 million. Operational cost controls implemented by program management since fiscal year 2005 have resulted in a deficit reduction of $2.5 million. The fiscal year 2007 deficit balance is projected to be fully eliminated by the fall of 2008 (fiscal year 2009). The Dougherty County School District recognizes its responsibilities as a steward of taxpayer dollars and State and Federal funds and strives to emphasize student achievement while maintaining sound fiscal management of those funds. 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 Board'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.
- xv -

DOUGHERTY COUNTY BOARD OF EDUCATION

DOUGHERTY COUNTY BOARD OF EDUCATION STATEMENT OF NET ASSETS
FOR THE YEAR ENDED JUNE 30, 2007

EXHIBIT"A"

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

PRIMARY GOVERNMENT GOVERNMENTAL
ACTIVITIES

COMPONENT UNIT DOUGHERTY COUNTY STADIUM AUTHORITY

$

292,149.10 $

9,172,770.24

4,131,080.68 11,907,843.81
3,079,369.63 265,935.99 416,437.14 127,002.38

9,057,267.66 21,046,659.31 263,661,231.31 15,414,509.44

-95, 194,976.79

182,799.00
25,000.00
410,000.00 308,976.00 239,886.00 2,586,683.00 -342 954.00

Total Assets

$

243,377,279.90 $ =====3=4=10=3=9=0=.o=o

LIABILITIES
Accounts Payable Salaries and Benefits Payable Payroll Withholdings 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

$

681,783.97 $

16,182,210.53

1,418,020.83

177,543.58

1,017,399.45

41,899.63

1,822,606.91 1,508,596.65

$

22,850,061.55 $

$

212,439,763.77 $

153,193.52 154,405.67 1,888,371.46 5,996,059.01

-104,575.08

$

220,527,218.35 $

47,171.00
47171.00 3,202,591.00
160 628.00 3,363,219.00

Total Liabilities and Net Assets

$

243,377,279.90 $ =====3=,4=1=0.,.,3=90==00=

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, 2007

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

EXPENSES

CHARGES FOR SERVICES

$

97,862,068.44 $

4,612,444.18 5,475,246.02 3,201,741.91 1,718,803.17 9,050,838.68 2,078,838.77 12,472,295.29 5,711,961.04 2,957,223.23
689,274.20

468,109.98 546,572.68 8,158,881.99 109 849.51

$ 155,114,149.09 $

720,914.78
1,076,559.57 1,797 474.35

$

233,704.00 $ _ _--'-10"--o""',o'""'o""'o.-'-oo"'"

Net Assets - End of Year

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

EXHIBIT"B"

PROGRAM REVENUES OPERATING GRANTS AND
CONTRIBUTIONS

CAPITAL GRANTS AND CONTRIBUTIONS

NET(EXPENSES)REVENUES

AND CHANGES IN NET ASSETS

PRIMARY

GOVERNMENT

COMPONENT UNIT

GOVERNMENTAL

DOUGHERTY COUNTY

ACTIVITIES

STADIUM AUTHORITY

$

72,288,036.01 $

1,765,147.29 3,317,447.00 2,069,564.12 2,665,570.68 4,343,959.93
50,685.36 5,365,600.65 2,171,195.33
31,543.75 167,816.27

8,330,553.63 $ 102,567,120.02 $

4,124,924.79 $
7,227.32 41,671.27 171,199.13
153,097.81 149,001.96 137,512.66 572,169.00 33,824.43
26,688.80
543,191.33
5,960,508.50 $

-20,728,192.86
-2,840,069.57 -2,116,127.75
-960,978.66 946,767.51 -4,553,780.94 -1,879, 151.45 -6,969, 181.98 -2,968,596.71 -2,891,855.05 -521,457 .93
-441,421.18 -546,572.68 1,791,422.54 -109 849.51
-44,789,046.22

$

34,880,041.53

17,416,655.26 385,964.88 143,416.58
10,298,499.00 1,187,184.34 $ 2,964,984.77

-813,539.09

$

66,463,207.27 $

$

21,674,161.05 $

198,853,057.30

7,030.00 12,854.00
19 884.00 -113,820.00 3 477 039.00

$

220,527,218.35 $ =====3=,3=6=3=,2=1=9.=0=0

-3-

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

EXHIBIT"C"

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

GENERAL FUND

DISTRICTWIDE
CAPITAL PROJECTS
FUND

DEBT SERVICE
FUND

TOTAL

$

276,914.75 $

13,705.30 $

1,529.05 $

3,626,812.49

1,961,291.71

3,584,666.04

1,334,408.41 10,762,709.11
3,079,369.63 265,935.99 416,437.14 127,002.38

2,875,927.30 1,145,134.70
1,697,823.63

292,149.10 9,172,770.24
4,210,335.71 11,907,843.81
3,079,369.63 265,935.99 416,437.14 127,002.38
1,697,823.63

Total Assets

$ 19,889,589.90 $ 7,693,882.64 $ 3,586,195.09 $===3=1,.,,16=9=,6=6=7=.6=3

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

$

178,903.37 $

16,182,210.53

1,418,020.83

595,288.44

41,899.63

502,880.60
177,543.58 1,017,399.45
$

$ 1,697,823.63

$ 18,416,322.80 $ 1,697,823.63 $ 1,697,823.63 $

681,783.97 16,182,210.53
1,418,020.83 595,288.44 177,543.58
1,017,399.45 41,899.63
1,697,823.63
21,811,970.06

$

153,193.52

$

$ 1,888,371.46

416,437.14

$ 5,996,059.01

1,064,342.49

-160,706.05

$ 1,473,267.10 $ 5,996,059.01 $ 1,888,371.46 $

153,193.52 1,888,371.46
416,437.14 5,996,059.01
1,064,342.49
-160,706.05
9,357,697.57

Total Liabilities and Fund Balances

$ 19,889,589.90 $ 7,693,882.64 $ 3,586,195.09 $===31=,1=6=9'==66=7=.6=3

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, 2007

EXHIBIT"D"

Total Fund Balances - Governmental Funds (Exhibit "C")
Amounts reported for Governmental Activities in the Statement of Net Assets are different because:
Capital Assets used in Governmental Activities are not financial resources and therefore are not reported in the funds. These assets consist of:
Land Construction in Progress 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

$ 9,357,697.57

$ 9,057,267.66 21,046,659.31
263,661,231.31 15,414,509.44 -95,194,976.79

213,984,690.93

-79,255.03

$ -1,090,000.00 -307,737.16
-1,190,987.96 -147, 190.00

-2,735,915.12

Net Assets of Governmental Activities (Exhibit "A")

$ 220,527,218.35

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, 2007

EXHIBIT"E"

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

$ 35,323,960.56

529,381.46 $ 17,416,655.26

89,719,554.79

5,388,339.50

23,718,233.23

1,797,474.35

459,087.26

62,034.12 $

2 964 984.77

$ 154,512,676.42 $ 22,867,028.88 $

$ 666,062.96

35,323,960.56 17,946,036.72 95,107,894.29 23,718,233.23
1,797,474.35 1,187,184.34 2,964,984.77

666,062.96 $ 178,045,768.26

$ 95,638,204.12

$ 95,638,204.12

4,611,020.40 5,519,360.17 3,095,074.09 1,718,803.17 8,937,105.10 1,913,185.20 $ 12,086,133.90 5,453,232.61 2,990,490.87
689,274.20 448,292.99 546,572.68 7,786,071.73

32,634.48 322,904.04
24,035,375.18

4,611,020.40 5,519,360.17 3,095,074.09 1,718,803.17 8,937,105.10 1,945,819.68 12,409,037.94 5,453,232.61 2,990,490.87
689,274.20 448,292.99 546,572.68 7,786,071.73 24,035,375.18

391,846.84 13 408.51

$ 8,265,000.00 317 325.00

8,656,846.84 330 733.51

$ 151,838,076.58 $ 24,390,913.70 $ 8,582,325.00 $ 184,811,315.28

$

2,674,599.84 $ -1,523,884.82 $ -7,916,262.04 $ -6,765,547.02

$ 6,876,261.06

$

6,876,261.06

$

-171 791.88

$ -6 704 469.18

-6,876,261.06

$

-171 791.88 $ 6,876,261.06 $ -6704469.18 $

0.00

$

2,502,807.96 $ 5,352,376.24 $ -14,620,731.22 $ -6,765,547.02

-1,029,540.86

643,682.77

16,509,102.68

16,123,244.59

Fund Balances - Ending

$

1 473 267.10 $ 5,996,059.01 $ 1,888,371.46 $ ====9'=35=7==,6=9=7.=57=

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, 2007

EXHIBIT"F"

Total Net Change in Fund Balances - Governmental Funds (Exhibit "E")

$ -6,765,547.02

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

$ 25,059,262.43 -4173 211.16

20,886,051.27

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.

-443,919.03

In the Statement of Activities, only the gain or loss on the sale/disposal of the building and equipment is reported, whereas in the Governmental Funds, the entire proceeds from the sale increase financial resources. Thus, the change in net assets differs from the change in fund balances by the carrying value of the building and equipment sold/disposed.

-837,137.20

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

$

220,884.00

8,265,000.00

391,846.84

8,877,730.84

Some items reported in the Statement of Activities do not require the use of current financial resources and therefore are not reported as expenditures in Governmental Funds. These activities consist of:

Increase in Compensated Absences

-43 017.81

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

$ 21,674,161.05

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

DOUGHERTY COUNTY BOARD OF EDUCATION STATEMENT OF FIDUCIARY NET ASSETS FIDUCIARY FUNDS JUNE 30, 2007
ASSETS Accounts Receivable, Net
Federal Government Other
Total Assets
LIABILITIES Cash Overdraft Funds Held for Others
Total Liabilities

EXHIBIT "G"

AGENCY FUNDS

$

4,319.50

50,930.15

$ ==55='=24=9=.6=5

$

11,055.36

44,194.29

$ ====55='=24=9=.6===5

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

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

EXHIBIT "H"

Note 1: DESCRIPTION OF SCHOOL DISTRICT AND REPORTING ENTITY
REPORTING ENTITY
The Dougherty County Board of Education (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 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 18 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 of Activities presents a comparison between direct expenses and program revenues for each function of the School District's governmental activities.
Direct expenses are those that are specifically associated with a program or function and, therefore, are clearly identifiable to a particular function. Indirect expenses (expenses of the School District related to the administration and support ofthe School District's programs, such as office and maintenance personnel and accounting) are not allocated to programs.

-9-

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

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 ofinternal activities. Separate statements for each category (governmental and fiduciary) are presented. The emphasis of fund financial statements is on major governmental funds, each displayed in a separate column.
The School District reports the following major governmental funds:
General Fund is the School District's primary operating fund. It accounts for all financial resources ofthe School District, except those resources required to be accounted for in another fund.
District-wide Capital Projects Fund accounts for financial resources including Special Purpose Local Option Sales Tax (SPLOST), Bond Proceeds and grants from Georgia State Financing and Investment Commission to be used for the acquisition, construction or renovation ofmajor capital facilities.
Debt Service Fund accounts for taxes (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 ofwhen the related cash flows take place. Nonexchange transactions, in which the School District gives (or receives) value without directly receiving (or giving) equal value in exchange, include property taxes, sales taxes, grants and donations. On an accrual basis, revenue from property taxes is recognized in the fiscal year for which the taxes are levied. Revenue from sales taxes is recognized in the fiscal year in which the underlying transaction (sale) takes place. Revenue from grants and donations is recognized in the fiscal year in which all eligibility requirements have been satisfied.
- 10 -

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

EXHIBIT"H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The School District 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.
CASH AND CASH EQUIVALENTS
COMPOSITION OF DEPOSITS Cash and cash equivalents consist of cash on hand, demand deposits and short-term investments with original maturities of three months or less from the date of acquisition in authorized financial institutions. Official Code of Georgia Annotated Section 45-8-14 authorize the School District to deposit its funds in one or more solvent banks or insured Federal savings and loan associations.
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 of one 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 of Georgia 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 ofretum shall be the objective, given equivalent conditions of safety and liquidity. Funds may be invested in the following:

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

EXHIBIT"H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(1) Obligations issued by the State of Georgia or by other states,
(2) Obligations issued by the United States government,
(3) Obligations fully insured or guaranteed by the United States government or a United States government agency,
(4) Obligations of any corporation of the United States government,
(5) Prime banker's acceptances,
(6) The Local Government Investment Pool administered by the State of Georgia, Office of Treasury and Fiscal Services,
(7) Repurchase agreements, and
(8) Obligations of other political subdivisions of the State of Georgia.
The School District does not have a formal policy regarding investment policies that address credit risks, custodial credit risks, concentration ofcredit risks, interest rate risks or foreign currency risks.
RECEIVABLES
Receivables consist of amounts due from property and sales taxes, grant reimbursements due on Federal, State or other grants for expenditures made but not reimbursed and other receivables disclosed from information available. Receivables are recorded when either the asset or revenue recognition criteria has been met. Receivables recorded on the basic financial statements do not include any amounts which would necessitate the need for an allowance for uncollectible receivables.
PROPERTY TAXES
The Dougherty County Board of Commissioners fixed the property tax levy for the 2006 tax digest year (calendar year) on July 10, 2006 (levy date). Taxes were due on December 20, 2006 (lien date). Taxes collected within the current fiscal year or within 60 days after year-end on the 2006 tax digest are reported as revenue in the governmental funds for fiscal year 2007. The 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, 2007, for maintenance and operations amounted to $35,323,960.56.

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

EXHIBIT"H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The tax millage rate levied for the 2006 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

18.984 mills

SALES TAXES

Special Purpose Local Option Sales Tax, at the fund reporting level, during the year amounted to $17,416,655.26 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 consumable supplies inventory whereby an asset is recorded when supplies are purchased and expenses are recorded at the time the supplies are consumed.

PREPAID ITEMS

Payments made to vendors for services that will benefit periods subsequent to June 30, 2007, 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 of assets or materially extend the useful lives of

- 13 -

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

EXHIBIT"H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

the assets is not capitalized. Depreciation is computed using the straight-line method. The School District does not capitalize book collections or works ofart. During the fiscal year under review, no events or changes in circumstances affecting a capital asset that may indicate impairment were known to the School District.

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

Capitalization Policy

Estimated Useful Life

Land Buildings and Improvements Equipment

Any Amount $ 5,000.00 $ 5,000.00

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 of Net Assets.

NET ASSETS

The School District's net assets in the District-wide Statements are classified as follows:

Invested in capital assets, net of related debt - This represents the School District's total investment in capital assets, net ofoutstanding debt obligations related to those capital assets. To the extent debt has been incurred but not yet expended for capital assets, such amounts are not included as a component of invested in capital assets, net of related debt.

Restricted net assets - These represent resources for which the School District is legally or contractually obligated to spend resources for bus replacement, continuation of Federal programs, debt service and capital projects in accordance with restrictions imposed by external third parties.

Unrestricted net assets - Unrestricted net assets represent resources derived from property taxes, sales taxes, grants and contributions not restricted to specific programs, charges for services, and miscellaneous revenues. These resources are used for transactions relating to the educational and general operations of the School District, and may be used at the discretion of the Board to meet current expenses for those purposes.

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

EXHIBIT"H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

DEFICIT FUND BALANCES

The fund reporting a deficit fund balance at June 30, 2007, is as follows:

Fund Type/Fund Name

Deficit Balance

Governmental Fund Type School Food Service Fund

$ 1,506,668.78

Operational cost controls implemented in fiscal year 2006 and fiscal year 2007 resulted in reducing the deficit by more than $2 million. By continuing to implement these cost controls, management expects the Child Nutrition Program deficit to be fully eliminated by the fall of fiscal year 2009.

Note 3: DEPOSITS AND INVESTMENTS

COLLATERALIZATION OF DEPOSITS Official Code of Georgia Annotated (OCGA) Section 45-8-12 provides that there shall not be on deposit at any time in any depository for a time longer than ten days a sum ofmoney which has not been secured by surety bond, by guarantee ofinsurance, or by collateral. The aggregate ofthe face value of such surety bond and the market value of securities pledged shall be equal to not less than 110 percent ofthe public funds being secured after the deduction ofthe amount ofdeposit insurance. Ifa depository elects the pooled method (OCGA 45-8-13 .1) the aggregate ofthe market value ofthe securities pledged to secure a pool ofpublic funds shall be not less than 110 percent ofthe daily pool balance. At June 30, $5,162.44 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,

- 15 -

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

EXHIBIT "H"

Note 3: DEPOSITS AND INVESTMENTS

(6) Industrial revenue bonds and bonds of development authorities created by the laws of the State of Georgia, and

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

CATEGORIZATION OF DEPOSITS At June 30, 2007, the bank balances were $5,256,597.16. The amounts of the total uninsured bank balances are classified into three categories of custodial credit risk:

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

PRIMARY GOVERNMENT

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

Custodial Credit Risk Category

Bank Balance

1

$ 5,162.44

2

0.00

3

4,721,413.36

Total

$4,726,575.80

COMPONENT UNIT

At June 30, 2007, Dougherty County Stadium Authority's bank balances of $182,799.00 were classified by custodial credit risk category as follows:

- 16 -

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

EXHIBIT"H"

Note 3: DEPOSITS AND INVESTMENTS

Custodial Credit Risk Category

Bank Balance

1

$

0.00

2

0.00

3

6,301.00

Total

$ 6,301.00

CATEGORIZATION OF INVESTMENTS The School District's investments as of June 30, 2007, are presented below. All investments are presented by investment type and debt securities are presented by maturity.

Investment Type

Fair Value

Other Investments U. S. Treasury Money Market Mutual Funds

$ 407,608.58

Investment Pools Office of Treasury and Fiscal Services Georgia Fund 1

8.765,161.66

Total Investments

$ 9,172.770.24

The Local Government Investment Pool administered by the State of Georgia, Office of Treasury and Fiscal Services is not required to be categorized since the School District did not own any specific identifiable securities in the pool. The investment policy ofthe State ofGeorgia, Office of Treasury and Fiscal Services for the Local Government Investment Pool (Primary Liquidity Portfolio) does not provide for investment in derivatives or similar investments. Additional information on the Local Government Investment Pool is disclosed in the State of Georgia Comprehensive Annual Financial Report. This audit can be obtained from the Georgia Department of Audits and Accounts at http://www.audits.state.ga.us/intemet/searchRpts.html.

The Primary Liquidity Portfolio consists of Georgia Fund 1 which is not registered with the SEC as an investment company but does operate in a manner consistent with the SEC's Rule 2a-7 of the Investment Company Act of 1940. The investment is valued at the pool's share price, $1.00 per share. The pool is an AAAm rated investment pool by Standard and Poor's. The weighted average maturity of Georgia Fund 1 may not exceed 60 days. The weighted average maturity for Georgia Fund 1 on June 30, 2007, was 15 days.

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

EXHIBIT "H"

Note 3: DEPOSITS AND INVESTMENTS

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, 2007, the School District's investment consisted of U. S. Treasury Money Market Mutual Funds (open-end mutual funds) which had an investment maturity ofless than one year.

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 are invested in treasury obligations managed by First American Treasury Investments. The funds are rated AAAm by Standard and Poor's.

Note 4: NON-MONETARY TRANSACTIONS

The School District receives food commodities from the United States Department of Agriculture (USDA) for school breakfast and lunch programs. These commodities are recorded at their Federally assigned value. See Note 2 - Inventories

Note 5: CAPITAL ASSETS

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

PRIMARY GOVERNMENT

Governmental Activities Capital Assets, Not Being Depreciated:
Land Construction in Progress
Total Capital Assets Not Being Depreciated
Capital Assets Being Depreciated Building 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. 2006

Increases

Decreases

Balances June 30. 2007

$ 9,020,228.33 $ 37,039.33

$ 9,057,267.66

52.668.506.16 16.839. 180.53 $48,461,027.38 21.046.659.31

$ 61,688.734.49 $16.876.219.86 $48,461,027.38 $ 30.103.926.97

$210,220,137.80 $55,762,942.15 $ 2,321,848.64 $263,661,231.31

14,670,814.54

881,127.80

137,432.90 15,414,509.44

82,512,324.97 10.131.585.00

2,974,368.04 1.198.843.12

1,508,309.55 113,834.79

83,978,383.46 11.216.593.33

$132.247.042.37 $52.470.858.79 $ 837,137.20 $183,880.763.96

$193 935.776.86 $69 347.078.65 $49.298.164.58 $213.984.690.93

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

EXHIBIT "H"

Note 5: CAPITAL ASSETS

Capital assets being acquired under capital leases as of June 30, 2007, are as follows:

Equipment Less: Accumulated Depreciation

Governmental Funds
$ 1,621,021.28 477,081.70

$ 1,143,939.58

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

$ 2,522,073.40

$ 5,597.48 32,273.96 132,591.88 118,572.63 115,400.42 106,502.09
672,636.58 26,196.66

1,209,771.70 20,670.19
420,695.87

$4,173,211.16

COMPONENT UNIT

Balances July 1, 2006

Increases

Decreases

Balances June 30, 2007

Governmental Activities Capital Assets, Not Being Depreciated:
Land

$ 410,000.00 $

0.00 $

0.00 $ 410,000.00

Capital Assets Being Depreciated Building Equipment Stadium Improvements

$ 308,976.00 234,936.00 $
2,586,683.00

$ 4,950.00

0.00 $ 308,976.00 239,886.00
2,586,683.00

Less Accumulated Depreciation for: Building Equipment Stadium Improvements

19,311.00 60,809.00 162,866.00

7,724.00 25,740.00 66,504.00

27,035.00 86,549.00 229,370.00

Total Capital Assets, Being Depreciated, Net $2,887,609.00 $ -95,018.00 $

0.00 $2,792,591.00

Governmental Activity Capital Assets - Net $ 3.297.609.00 $ -95,018.00 $

0.00 $3,202,591.00

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

EXHIBIT "H"

Note 6: RESTRICTED ASSETS

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

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

District-wide Capital Projects

Bond

SPLOST

Proceeds

Debt Service Funds

$ $ 16,222.62

1,529.05

$ 3,584,666.04 $ 1,301,061.17 $ 660,230.54

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, 2007, consisted of the following:

Due From Other Funds

Due To Other Funds

District-wide Capital Projects Fund Debt Service Fund

$ 1,697,823.63 $ 1,697,823.63

$ 1,697,823.63 $ 1,697,823.63

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, 2007, consisted of the following:

Transfer to

Transfers From

General

Debt Service

Fund

Fund

District-wide Capital Projects

$ 171,971.88 $6,704,469.18

- 20 -

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

EXHIBIT "H"

Note 8: INTERFUND TRANSFERS

Transfers are used to (1) move property tax revenues collected by the General Fund to cover a portion of employee's salaries not funded as a part of the Special Purpose Local Option Sales Tax (SPLOST) projects and (2) move excess SPLOST revenues collected by Debt Service Fund in prior years to the District-Wide Capital Projects fund to fund Capital Project Acquisitions.

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 of the 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 $350,000.00 loss per occurrence, up to the statutory limit.

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

2006 2007

Beginning of Year Liability

Claims and Changes in Estimates

Claims Paid

End of Year Liability

$ 167,424.00 $ 797,835.00 $ 682,966.00 $ 282,293.00 $ 282,293.00 $ 1,156,102.32 $ 843,106.88 $ 595,288.44

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

EXHIBIT "H"

Note 9: RISK MANAGEMENT

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:

Beginning of Year Liability

Claims and Changes in Estimates

Claims Paid

End of Year Liability

2006 2007

$

0.00 $ 35,176.00 $ 35,176.00 $

0.00

$

0.00 $ 28,470.00 $ 28,470.00 $

0.00

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

Position Covered

Amount

Superintendent All Other Employees

$ 50,000.00 $ 250,000.00

Note 10: OPERATING LEASES

Dougherty County Board of Education has entered into various leases as lessee for copiers, fax machines and mailing machines. These leases are considered for accounting purposes to be operating leases. Lease expenditures for the year ended June 30, 2007, for governmental funds amounted to $351,401.72. Future minimum lease payments for these leases are as follows:

Year Ending

Governmental Funds

2008

$ 358,584.00

Note 11: SHORT-TERM DEBT

The School District issues tax anticipation notes in advance of property tax collections, depositing the proceeds in its General Fund. This short-term debt is to provide cash for operations until property tax collections are received by the School District. Article IX, Section V, Paragraph V of the Constitution ofthe State of Georgia 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.

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

EXHIBIT"H"

Note 11: SHORT-TERM DEBT

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

Beginning Balance

Issued

Redeemed

Ending Balance

Tax Anticipation Notes $======0..,..0==0 $14,000,000.00 $14.000.000.00 $====0..,..0==0

Note 12: LONG-TERM DEBT

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

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

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

Purpose

Interest Rates

Amount

General Government - Series 2004

2.0%-4.0% $ 1,090,000.00

Voters have authorized $40,000,000.00 in general obligation debt for the purpose offunding (1) the school renovations and improvements, land acquisition for future expansion, certain capital repairs and modifications, (2) additional classroom technology, system-wide replacement of computers, upgrading oftechnology, (3) additional safety and security equipment, (4) vehicle and equipment replacement and (5) related financing, project management and elections costs, which was not issued as of June 30, 2007.

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

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

EXHIBIT "H"

Note 12: LONG-TERM DEBT

Capital Leases

Governmental Funds

General

Compensated

Claims

Obligation

Absences

Paxable

Bonds

Unamortized Bond
Premium

Total

Balance July 1, 2006

$ 699,584.00 $1,147,970.15 $ 282,293.00 $ 9,355,000.00 $ 368,074.00 $11,852,921.15

Additions Annual Leave Earned Claims and Changes In Estimates

1,033,577.72

1,156,102.32

1,033,577.72 1,156,102.32

Deductions Annual Leave Utilized Debt Retired Claims Paid Bond Premiums Amortized

391,846.84

990,559.91

8,265,000.00 843,106.88

220,884.00

990,559.91 8,656,846.84
843,106.88
220,884.00

Balance June 30, 2007 $ 301137.16 $ 1,120,287.26 $ 525,288.44 $ 1,Q9Q,QQQ,QQ $ 147,120.QQ $ 3,331,203 56

Portion of Long-Term Debt Due within One Year $ 307,737.16 $ 118,812.66 $ 158,867.09 $ 1,090,000.00 $ 147 190.00 $ 1,822,606.91

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

Fiscal Year Ended June 30

Capital Leases

Principal

Interest

2008

$ 307,737.16 $ 4,008.69

Fiscal Year Ended June 30

General Obligation

Debt

Principal

Interest

Unamortized Bond
Premium

2008

$ 1,090,000.00 $ 24,525.00 $ 147,190.00

Note 13: ON-BEHALF PAYMENTS

The School District has recognized revenues and costs in the amount of $2,719,488.63 for health insurance and retirement contributions paid on the School District's behalf by the following State Agencies.

Georgia Department of Education Paid to the Georgia Department of Community Health For Health Insurance of Non-Certified Personnel In the amount of $2,626,584.73

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

EXHIBIT"H"

Note 13: ON-BEHALF PAYMENTS

Office of Treasury and Fiscal Services Paid to the Teachers Retirement System For Teachers Retirement (TRS) Employer's Cost In the amount of $69,871.90

Paid to the Public School Employees Retirement System For Public School Employees Retirement (PSERS) Employer's Cost In the amount of $23,032.00

Note 14: SPECIAL ITEMS

In fiscal year 2007, the Dougherty County Board of Education demolished the Jackson Heights Elementary School. The loss associated with demolition is reported as a special item on the Statement ofActivities.

Note 15: SIGNIFICANT COMMITMENTS

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

Project

Unearned Executed Contracts

07RA-647-008 Monroe Track and Field Renovations to Old Lincoln Elementary Newton Road Transportation Shop Paving Improvements Sherwood Elementary Civil/Landscaping Improvements Jackson Heights Civil/Landscaping Improvements Demolition of Old Radium Springs Middle Radium Springs Middle Asbestos Abatement Administration HVAC Upgrade Lake Park Gym/Classroom HVAC Update

$ 664,146.71 600,611.83 50,665.00 245,850.00 54,080.00 49,500.00 177,998.45 80,200.00 32,032.00 223,346.00

$ 2,178,429.99

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

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

EXHIBIT "H"

Note 16: 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 17: RETIREMENT PLANS

TEACHERS RETIREMENT SYSTEM OF GEORGIA (TRS)

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

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

Fiscal Year

Percentage Contributed

Required Contribution

2007 2006 2005

100% 100% 100%

$ 7,725,403.24 $ 7,389,992.00 $ 7,271,599.00

Note 18: 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.

- 26 -

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

EXHIBIT"H"

Note 18: COMPONENT UNIT
The Authority utilizes the modified accrual method ofaccounting. The Authority has implemented the financial reporting requirements of GASB Statement Nos. 33 and 34. The Authority's fiscal year is July 1 through June 30.

-27 -

(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, 2007

SCHEDULE "1"

REVENUES
Property Taxes Sales Taxes State Funds Federal Funds Charges for Services Investment Earnings Miscellaneous
Total Revenues
EXPENDITURES
Current Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Food Services Operation Enterprise Operations Community Services Operations
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 (1)

FINAL (1)

ACTUAL AMOUNTS

$ 35,253,449.00 $ 35,253,449.00 $ 35,323,960.56

529,381.46

85,900,742.00

85,853,998.63

89,719,554.79

23,197,542.78

27,180,437.42

23,718,233.23

1,829,803.25

2,088,986.71

1,797,474.35

335,200.00

335,254.26

459,087.26

1,298,285.02

1477906.88

2 964 984.77

$ 147,815,022.05 $ 152,190,032.90 $ 154,512,676.42

$ 92,734,703.15 $ 94,031,343.41 $ 95,638,204.12

4,411,075.54 5,547,742.55 3,024,199.61 2,002,329.12 7,955,382.46 1,776,423.23 12,215,513.31 5,601,620.79 1,613,467.95
830,804.87 9,540,949.47
532,310.00

4,698,076.26 6,980,880.02 3,074,366.29 2,107,035.45 8,002,648.26 1,790,771.18 12,546,624.38 5,748,723.68 1,778,579.56
892,908.52 9,968,703.77
656,310.00 3,240.00

4,611,020.40 5,519,360.17 3,095,074.09 1,718,803.17 8,937,105.10 1,913,185.20 12,086,133.90 5,453,232.61 2,990,490.87
689,274.20 7,786,071.73
448,292.99 546,572.68
405,255.35

$ 147,786,522.05 $ 152,280,210.78 $ 151,838,076.58

$

28 500.00 $

-90 177.88 $

2,674,599.84

$

419,000.00 $

555,343.28

-447 500.00

-447 500.00 $

-171 791.88

$

-28 500.00 $

107 843.28 $

-171,791.88

$

0.00 $

17,665.40 $

2,502,807.96

-3 577 437.31

-3,577,437.31

-1,029,540.86

Fund Balances - Ending

$

-3 577 437.31 $

-3,559, 771.91 $

1,473,267.10

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.
-29-

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

SCHEDULE "2"

FUNDING AGENCY PROGRAM/GRANT
Agriculture, U. S. Department of Child Nutrition Cluster Pass-Through From Georgia Department of Education Food Services School Breakfast Program National School Lunch Program
Total Child Nutrition Cluster
Other Programs Pass-Through From Georgia Department of Education Food Donation (1)
Total U. S. Department of Agriculture
Corporation for National and Community Service Pass-Through From Georgia Department of Education Learn and Serve America School and Community Based Programs
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 English Language Acquisition Grants Enhancing Education Through Technology Program Even Start Improving Teacher Quality State Grants Mathematics and Science Partnerships Migrant Education Reading First State Grants 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
Total U. S. Department of Education

CFDA NUMBER

PASSTHROUGH
ENTITY ID
NUMBER

EXPENDITURES IN PERIOD

10.553 10.555

N/A

(2)

N/A

$

7,179,096.60

$

7,179,096.60

10.550

N/A

383,628.95

$

7,562,725.55

94.004

N/A $

12 629.34

84.027 84.173

NIA

$

3,541,544.73

N/A

143 750.00

$

3,685,294.73

84.041 84.215
84.282 84.332 84.365 84.318 84.213 84.367 84.366 84.011 84.357 84.186 84.298 84.010 84.048

(3) 96,481.21

N/A

118,517.00

N/A

213,923.00

N/A

7,524.82

N/A

302,656.68

N/A

180,520.00

N/A

1,402,008.12

N/A

70,586.00

N/A

25,795.00

N/A

1,120,548.56

N/A

116,444.00

N/A

36,875.03

N/A

7,983,001.56

NIA

211 909.88

$ 15,572,085.59

- 30 -

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

SCHEDULE "2"

FUNDING AGENCY PROGRAM/GRANT

CFDA NUMBER

PASSTHROUGH
ENTITY ID
NUMBER

EXPENDITURES IN PERIOD

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 Pass-Through From Georgia Department of Human Resources Block Grants for Prevention and Treatment of Substance Abuse

93.938 93.959

N/A

$

N/A

3,515.33 17 921.03

Total U. S. Department of Health and Human Services

$ _ _ _2_1~4_36_.3_6_

Labor, U. S. Department of Pass-Through From Southwest Georgia Regional Development Center Workforce Investment Act Youth Activities

17.259

N/A

$ _ _ _6_8,~9_12_.3_2_

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

$

70,282.41

97 409.23

Total U.S. Department of Defense

$ _ _ _1~6_7~6~91_.6_4_

Total Federal Financial Assistance
NIA = Not Available

$ ==2=3-=,4=0=5,..,4=80=.8=0=

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 ($2,509,988.34) were not maintained separately and are included in the 2007 National School Lunch Program.
(3) Funds earned on the Impact Aid Program, in the amount of $226,597.17 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.

- 31 -

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

SCHEDULE "3"

AGENCY/FUNDING

GOVERNMENTAL FUND TYPES

CAPITAL

GENERAL

PROJECTS

FUND

FUND

TOTAL

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

$ 1,040,633.15

$ 1,040,633.15

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 Category V 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 Vocational Supervisors Mid-term Adjustment Hold-Harmless Education Equalization Funding Grant Food Services Vocational Education Amended Formula Adjustment Other State Programs Graduation Coaches Health Insurance National Teacher Certification Preschool Handicapped Program Pupil Transportation - State Bonds Remedial Summer School Severely Emotionally Disturbed Statewide K-8 Reading and Math Teachers' Retirement

5,827,912.00 391,825.00
12,981,576.00 988,917.00
6,198,171.00 726,620.00
1,896,460.00 8,651,745.00 7,900,844.00 1,950,601.00
264,701.00 2,312,483.00 3,582,698.00
753,014.00 588,707.00
20,813.00 1,278,537.00
289,595.00 754,826.00 113,358.00 1,688,099.00 571,169.00 303,946.00
1,736,757.00 3,457,015.00 4,226,396.00
1,799,461.00 172,169.00 285,742.00 52,178.00 37,717.00 304,059.00
10,298,499.00 482,452.00 96,018.35
-1,485,604.00
160,300.00 2,626,584.73
33,799.00 354,511.00 400,000.00
14,800.95 2,518,153.00
287,121.27 69,871.90

5,827,912.00 391,825.00
12,981,576.00 988,917.00
6,198,171.00 726,620.00
1,896,460.00 8,651,745.00 7,900,844.00 1,950,601.00
264,701.00 2,312,483.00 3,582,698.00
753,014.00 588,707.00
20,813.00 1,278,537.00
289,595.00 754,826.00 113,358.00 1,688,099.00 571,169.00 303,946.00
1,736,757.00 3,457,015.00 4,226,396.00
1,799,461.00 172,169.00 285,742.00 52,178.00 37,717.00 304,059.00
10,298,499.00 482,452.00 96,018.35
-1,485,604.00
160,300.00 2,626,584.73
33,799.00 354,511.00 400,000.00
14,800.95 2,518,153.00
287,121.27 69,871.90

- 32 -

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

SCHEDULE "3"

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

GOVERNMENTAL FUND TYPES

CAPITAL

GENERAL

PROJECTS

FUND

FUND

TOTAL

$ 5,388,339.50 $ 5,388,339.50

$

23,032.00

23,032.00

150,482.59 540,788.85

150,482.59 540,788.85

$ 89,719,554.79 $ 5,388,339.50 $ 95,107,894.29

See notes to the basic financial statements.

- 33-

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

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 at 48 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 $88,653,060.00.

$ 88,653,060.00 $ 113,707,711.69 $ 1,333,000.69 $ 112,374,711.00 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 11, the maximum cost of such projects not to exceed $95,000,000.00.

95,000,000.00

95,000,000.00

22,939,146.70

66,194,615.00 Ongoing

$ 183,653,060.00 $ 208,707,711.69 $ 24,272,147.39 $ 178,569,326.00

-34-

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

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

$ 5,882,921.00

Current Year Total

317,325.00
$ ==s..,2=0.0..2=4=6=.o.o..

See notes to the basic financial statements.

-35-

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

SCHEDULE "5"

DESCRIPTION
Direct Instructional Programs Kindergarten Program Kindergarten Program-Early Intervention Program Primary Grades (1-3) Program Primary Grades-Early Intervention (1-3) Program Upper Elementary Grades (4-5) Program Upper Elementary Grades-Early Intervention (4-5) Program Middle 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 Category V Gifted Student - Category VI Remedial Education Program Alternative Education Program English Speakers of Other Languages {ESOL)
TOTAL DIRECT INSTRUCTIONAL PROGRAMS
Media Center Program Staff and Professional Development

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

ELIGIBLE QBE PROGRAM COSTS

SALARIES

OPERATIONS

TOTAL

$

6,663,749.00 $ 6,655,269.74 $

50,527.52 $ 6,705,797.26

384,832.00

187,458.90

1,655.44

189,114.34

15,058,577.00

15,194,814.02

279,363.79

15,474,177.81

1,102,880.00

918,475.22

10,091.59

928,566.81

7,041,638.00

7,872,991.77

339,418.57

8,212,410.34

642,171.00 1,807,436.00 9,789,612.00 9,153,137.00 2,168,057.00 8,513,502.00
1,515,639.00 307,202.00 858,640.00 52 708.00

525,523.57 2,319,833.46 11,495,369.92 12,400,881.87 2,319,367.03
258,329.66 3,702,925.71 4,737,739.39
283,629.10 1,108,624.30
1,022,397.98 109,172.86

5,280.38 70,574.96 281,510.65 432,415.74 220,685.84
2,906.94 35,985.52 54,649.73 37,518.47 22,500.36

530,803.95 2,390,408.42 11,776,880.57 12,833,297.61 2,540,052.87
261,236.60 3,738,911.23 4,792,389.12
321,147.57 1,131,124.66

134,468.34 246.97

1,156,866.32 109 419.83

$

65,059,780.00 $ 71,112,804.50 $ 1,979,800.81 $ 73,092,605.31

1,946,433.00 346 786.00

2,559,752.20

226,367.48 359,773.06

2,786,119.68 359,773.06

TOTAL QBE FORMULA FUNDS

$

67,352,999.00 $ 73,672,556.70 $ 2,565,941.35 $ 76,238,498.05

(1) Comprised of State Funds plus Local Five Mill Share. (2) Allotments do not include the impact of the State amended formula adjustment.

See notes to the basic financial statements.

- 37 -

SECTION II COMPLIANCE AND INTERNAL CONTROL REPORTS

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

DEPARTMENT OF AUDITS AND ACCOUNTS
270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400
September 22, 2008

Honorable Sonny Perdue, Governor Members of the 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 of and for the year ended June 30, 2007, which collectively comprise Dougherty County Board of Education's basic financial statements and have issued our report thereon dated September 22, 2008. Our report was modified to include a reference to 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 of the United States. Other auditors audited the financial statements ofthe Dougherty County Board of Education's discretely presented component unit, as described in our report on the Dougherty County Board of Education's financial statements. This report does not include the results of other auditor's testing of internal controls over financial reporting or compliance and other matters that are reported on separately by those 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 as a basis for designing our auditing procedures for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the Dougherty County Board of Education's internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness of the Dougherty County Board of Education's internal control over financial reporting.
2007YB-30X

Our consideration of internal control over financial reporting was for the limited purpose described in the preceding paragraph and would not necessarily identify all deficiencies in internal control over financial reporting that might be significant deficiencies or material weaknesses. However, as discussed below, we identified a certain deficiency in internal control over financial reporting that we consider to be a significant deficiency.
A control deficiency exists when the design or operation ofa control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect misstatements on a timely basis. A significant deficiency is a control deficiency, or combination of control deficiencies, that adversely affect the Dougherty County Board of Education's ability to initiate, authorize, record, process, or report financial data reliably in accordance with generally accepted accounting principles such that there is more than a remote likelihood that a misstatement ofthe Dougherty County Board ofEducation's financial statements that is more than inconsequential will not be prevented or detected by the Dougherty County Board of Education's internal control. We consider item FS-6471-07-01 in the accompanying Schedule ofFindings and Questioned Costs to be a significant deficiency in internal control over financial reporting.
A material weakness is a significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood that a material misstatement ofthe financial statements will not be prevented or detected by the Dougherty County Board of Education's internal control.
Our consideration of the internal control over financial reporting was for the limited purpose described in the first paragraph ofthis section and would not necessarily disclose all deficiencies in internal control that might be significant deficiencies and, accordingly, would not necessarily disclose all significant deficiencies that are also considered to be material weaknesses. However, we believe that the significant deficiency described above is not a material weakness.
Compliance and Other Matters
As part of obtaining reasonable assurance about whether Dougherty County Board of Education's financial statements are free of material misstatement, we performed tests of its compliance with certain provisions oflaws, regulations, contracts and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our and other auditor's tests disclosed no instances ofnoncompliance or other matters that are required to be reported under Government Auditing Standards.
We noted certain matters that we have reported to management of Dougherty County Board of Education in a separate letter dated September 22, 2008.
Dougherty County Board of Education's response to the finding identified in our audit is described in the accompanying Schedule of Management's Responses. We did not audit Dougherty County Board of Education's response and, accordingly, we express no opinion on it.
2007YB-30X

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,
~OJ,,~
Russell W. Hinton, CPA, CGFM State Auditor
RWH:as 2007YB-30X

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

DEPARTMENT OF AUDITS AND ACCOUNTS
270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400
September 22, 2008

Honorable Sonny Perdue, Governor Members of the General Assembly Members of the 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, 2007. Dougherty County Board of Education's major Federal programs are identified in the Summary of Auditor's Results Section ofthe accompanying Schedule ofFindings and Questioned Costs. Compliance with the requirements oflaws, regulations, contracts and grants applicable to each ofits 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 of compliance in accordance with auditing standards generally accepted in the United States ofAmerica; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and 0MB Circular A133, Audits of States, Local Governments, and Non-Profit Organizations. Those standards and 0MB Circular A-133 require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major Federal program occurred. An audit includes examining, on a test basis, evidence about the Dougherty County Board ofEducation's compliance with those requirements and performing such other procedures as we considered necessary in the

2007SA-10

circumstances. We believe that our audit provides a reasonable basis for our opinion. Our audit does not provide a legal determination on Dougherty County Board of Education'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, 2007.
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 of expressing our opinion on compliance, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness ofthe Dougherty County Board of Education's internal control over compliance.
A control deficiency in an entity's internal control over compliance exists when the design or operation of a control does not allow management or employees, in the normal course ofperforming their assigned functions, to prevent or detect noncompliance with a type of compliance requirement of a Federal program on a timely basis. A significant deficiency is a control deficiency, or combination of control deficiencies, that adversely affects the entity's ability to administer a Federal program such that there is more than a remote likelihood that noncompliance with a type of compliance requirement of a Federal program that is more than inconsequential will not be prevented or detected by the entity's internal control.
A material weakness is a significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood that material noncompliance with a type of compliance requirement of a Federal program will not be prevented or detected by the entity's internal control.
Our consideration of the internal control over compliance was for the limited purpose described in the first paragraph of this section and would not necessarily identify all deficiencies in internal control that might be significant deficiencies or material weaknesses. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses, as defined above.
2007SA-10

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,
~n~~~ State Auditor
RWH:as 2007SA-10

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, 2007

PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

FINDING CONTROL NUMBER

AUDITEE'S RESPONSE/STATUS

SEE AUDITOR'S COMMENTS

FS-6471-05-01 Further Action Not Warranted

FS-6471-05-02 Further Action Not Warranted

FS-6471-06-01 Further Action Not Warranted

(1)

FS-6471-06-02 Unresolved - See Corrective Action/Responses

CORRECTIVE ACTION/RESPONSES

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

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

AUDITOR'S COMMENTS

(1) Findings/internal control deficiencies of this nature, that are not deemed significant deficiencies or material weaknesses and do not require reporting in the audit report in accordance with Statements on Auditing Standards (SAS) 112 or Governmental Auditing Standards (Yellow Book), will be communicated in a management letter in subsequent periods.

PRIOR YEAR FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

FINDING CONTROL NUMBER AND STATUS

FA-6471-03-01 Previously Reported Corrective Action Implemented FA-6471-03-02 Previously Reported Corrective Action Implemented FA-6471-06-01 Unresolved - See Corrective Action/Responses

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DOUGHERTY COUNTY BOARD OF EDUCATION AUDITEE'S RESPONSE
SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2007
PRIOR YEAR FEDERAL AWARD FINDINGS AND QUESTIONED COSTS CORRECTIVE ACTION/RESPONSES ACTIVITIES ALLOWED OR UNALLOWED Inadequate Internal Control Procedures U.S. Department of Education Through Georgia Department of Education Amount: $22,396.00 Finding Control Number: FA-6471-06-01 The School District expended more than $1 million in local funds for students with disabilities. Any of these expenditures could have been earmarked for the $22,396.00 Hurricane Education Recovery Act funds. The School District will provide this information to Georgia Department of Education upon their request.
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SECTION IV FINDINGS AND QUESTIONED COSTS

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

I SUMMARY OF AUDITOR'S RESULTS

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

2. Significant Deficiencies in Internal Control Disclosed by the Audit ofthe Financial Statements The audit report for the Dougherty County Board of Education disclosed a financial statement significant deficiency related to the following control categories.

Cash and Cash Equivalents Revenues/Receivables/Receipts

Expenditures/Liabilities/Disbursements

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

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

4. Significant Deficiencies in Internal Control Over Major Programs The audit report for the Dougherty County Board of Education did not disclose any significant deficiencies in internal control over major programs.

5. Type of Report Issued on Compliance for Major Programs The auditor's opinion on the 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 .5 lO(a) of 0MB Circular A-133 The Dougherty County Board ofEducation's audit did not disclose audit findings required to be reported by section .510(a) ofOMB Circular A-133.

7. Major Programs Federal awards audited as major programs are as follows: 10.553 Food Services - School Breakfast Program 10.555 Food Services - National School Lunch Program 84.010 Title I Grants to Local Educational Agencies

8. Type "A" Program Dollar Threshold The dollar threshold for type "A" programs was $708,962.34.

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.

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

II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

CASH AND CASH EQUIVALENTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Accounting Procedures over School Activity Accounts Significant Deficiency Finding Control Number: FS-6471-07-01

Condition:

This is a repeat finding (FS-6471-06-02, FS-6471-05-02, FS-6471-04-02, FS6471-03-02, and FS-6471-02-02) from the years ended June 30, 2006, June 30, 2005, June 30, 2004, June 30, 2003, and June 30, 2002, respectively. The accounting procedures ofthe 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. Based on a review often monthly bank reconciliations, the following deficiencies were noted: 1) Three bank reconciliations had no evidence of supervisory approval, and 2) three bank reconciliations were not approved in a timely manner.

Revenues/Receivables/Receipts Deposit preparation was not separated from the record keeping and cash custody functions. Based on a review of fifty items, the following deficiencies were noted: 1) Thirteen receipts were not adequately documented, 2) one receipt was written out of order, 3) twenty-one receipts were not deposited timely, and 4) fourteen receipts did not have enough information to trace to recording on general ledger.

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

II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

CASH AND CASH EQUIVALENTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Accounting Procedures over School Activity Accounts Significant Deficiency Finding Control Number: FS-6471-07-01

Expenditures/Liabilities/Disbursements The check writing function was not separated from the record keeping or processing of signed checks. Based on a review of fifty items, the following deficiencies were noted: 1) Four expenditures were not adequately documented, 2) twenty expenditures did not have enough information to trace to general ledger, 3) three expenditures were charged to the incorrect expenditure function, 4) one expenditure was for travel, which should go through the School District's central office accounting records, and 5) twenty-one vouchers had no evidence of prior supervisory approval.

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 occur and not 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.

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DOUGHERTY COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2007 III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS No matters were reported.
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SECTIONV MANAGEMENT'S RESPONSES

DOUGHERTY COUNTY BOARD OF EDUCATION SCHEDULE OF MANAGEMENT'S RESPONSES YEAR ENDED JUNE 30, 2007
Finding Control Number: FS-6471-07-01
The number ofstaff available for assignment ofaccounting functions is limited in the schools. The School District's internal auditor will continue to work with the available staff in each school to develop compensating controls.
Contact Person: Robert Lloyd, Executive Director of Finance Phone: (229) 431-1234 Fax: (229) 438-3521 E-mail: robert.11oyd@dougherty.kl2.ga.us