Dougherty County Board of Education, Albany, Georgia, annual financial report for the fiscal year ended June 30, 2009 (including independent auditor's reports)

DOUGHERTY COUNTY
BOARD OF EDUCATION
ALBANY, GEORGIA
ANNUAL FINANCIAL REPORT
FOR THE FISCAL YEAR ENDED
JUNE 30,2009
(Including Independent Auditor's Reports)

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

B

STATEMENT OF ACTIVITIES

FUND FINANCIAL STATEMENTS

C

BALANCE SHEET

GOVERNMENTAL FUNDS

D

RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET

TO THE STATEMENT OF NET ASSETS

E

STATEMENT OF REVENUES, EXPENDITURES AND CHANGES

IN FUND BALANCES

GOVERNMENTAL FUNDS

F

RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT

OF REVENUES, EXPENDITURES AND CHANGES IN FUND

BALANCES TO THE STATEMENT OF ACTIVITIES

G

STATEMENT OF FIDUCIARY NET ASSETS

FIDUCIARY FUNDS

H

NOTES TO THE BASIC FINANCIAL STATEMENTS

SCHEDULES

REQUIRED SUPPLEMENTARYINFORMATION

1 SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES
IN FUND BALANCES - BUDGET AND ACTUAL
GENERAL FUND

DOUGHERTY COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS -

SECTION I

FINANCIAL

SCHEDULES

SUPPLEMENTARY INFORMATION

2 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS

32

3 SCHEDULE OF STATE REVENUE

34

4 SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS

3 6

5 ALLOTMENTS AND EXPENDITURES
GENERAL FUND - QUALITY BASIC EDUCATION PROGRAMS (QBE)

BY PROGRAM

3 9

SECTION I1
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 GOVERNMENTAUDITING STANDARDS
REPORT ON COMPLIANCE WITH REQUIREMENTS APPLICABLE TO EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH OMB CIRCULAR A- 133

SECTION I11 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 FlNDINGS AND QUESTIONED COSTS

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

SECTION I FINANCIAL

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

DEPARTMENOTF AUDITSAND ACCOUNTS
270 Washington Street, S.W., Suite 1-1 56 Atlanta, Georgia 30334-8400
August 23,2010

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
INDEPENDENT AUDITOR'S COMBINED REPORT ON BASIC FINANCIAL
STATEMENTS AND SUPPLEMENTARYINFORMATION - 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) of the Dougherty County Board of Education, as of and for the year ended June 30, 2009, which collectively comprise the Board's basic financial statements as listed in the table of contents. These financial statements are the responsibility of the Dougherty County Board of Education's management. Our responsibility is to express opinions on these financial statements based on our audit. We did not audit the financial statements of the Dougherty County Board of Education's discretely presented component unit. Those financial statements were audited by other auditors whose report thereon has been furnished to us, and our opinion, insofar as it relates to the amounts included for the Dougherty County Stadium Authority is based on the report of other auditors.
We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. 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 provide a reasonable basis for our opinions.

In our opinion, based on our audit and the report of other auditors, the financial statements referred to previously present fairly, in all material respects, the respective financial position of the 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, 2009, 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 August 23, 2010, 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 of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit.

Management's Discussion and Analysis and the Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual, as presented on pages i through xiv and page 3 1, respectively, are not a required part of the basic financial statements but are supplementary information required by the accounting principles generally accepted in the United States of America. We and the other auditors have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods of measurement and presentation of the required supplementary information. However, we did not audit the information and express no opinion on it.

Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Dougherty County Board of Education's basic financial statements. The accompanying supplementary information which consist of Schedules 2 through 5, which includes the Schedule of Expenditures of Federal Awards as required by U. S. Office of Management and Budget Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations, are presented for purposes of additional analysis and are not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied by us and the other auditors in the audit of the basic financial statements, and in our opinion, based on our audit and the report of other auditors, is fairly stated, in all material respects, in relation to the basic financial statements taken as a whole.

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,

.

ush hell W. Hinton, CPA, CGFM
State Auditor

DOUGHERTY COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30,2009
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, 2009. 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
Key financial highlights for fiscal year 2009 are as follows:
The School District's financial status continued to improve in fiscal year 2009.
Total Net Assets increased more than $13.1 million in fiscal year 2009.
The Unrestricted Net Assets at June 30,2009 was a positive $4.1 million.
Fund balance for the Governmental Funds - General Fund increased $2.6 million
in fiscal year 2009.
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 financial position of the School District has improved or diminished. 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.
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.

DOUGHERTY COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30,2009
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 funds - 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" hnds - not the School District as a whole. Governmental funds record how money flows in and out within the current period, and reports the balances remaining at year-end available for spending in future periods. The governmental fund statements provide a short-term view of the School District's general governmental operations and the basic services they provide. This governmental fund information can be used to identify financial resources available for financing educational programs. The differences between governmental activities (reported in the Statement of Net Assets and the Statement of Activities) and governmental funds are reconciled in the financial statements.
The School District's governmental fbnds are the General Fund, Capital Projects Fund, and Debt Service Fund. General operations, 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, orfiduciary, for assets that belong to others. An example is funds belonging to school clubs and organizationswhose records are maintained at the individual schools. These funds are generally referred to as "Activity Funds". The School District is responsible for ensuring that the assets recorded in these funds are used only for their intended purposes and only by those to whom the assets belong. The School District excludes these fund activities from the System-wide financial statements because these fund assets cannot be used to finance its 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 2008 and fiscal yea..r 2009. 11

DOUGHERTY COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30,2009

Statement of Net Assets (Analysis of the School District as a Whole)
As previously stated above, the Statement of Net 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 2009 and the comparative amount for fiscal year 2008.

Table 1 Net Assets (In Thousands)

Governmental Activities

Fiscal

Fiscal

Increase1

Year 2009

Year 2008

Decrease

Assets Current and Other Assets Capital Assets, Net

$

57,981 $

230,984

56,335 $ 21 3,475

1,646 17,509

Total Assets

$ 288,965 $

269,810 $

19,155

Liabilities Current and Other Liabilities Long-Term Liabilities

$

24,955 $

37,362 $ -12,407

20,483

2,029

18,454

Total Liabilities $

45,438 $

39,391 $

6,047

Net Assets

Invested in Capital Assets, Net of

Related Debt

$

Restricted

Unrestricted

218,204 $ 21,165 4,158

212,559 $ 15,040 2,820

5,645 6,125 1,338

Total Net Assets $ 243,527 $

230,419 $

13,108

The $19.2 million increase in Total Assets is the net result of an increase in Capital Assets. The increase reported in Capital Assets is mainly due to Construction in Progress of $15.2 million. A reroofing project, renovation of two high schools, and the renovation of two elementary schools primarily account for the increase of Capital Assets. These capital projects were funded by a 1 percent special purpose sales tax approved by the voters of Dougherty County. All capital projects were part of a long range facilities plan to upgrade all of the School District's schools and facilities. See Table 5 for an analysis of the increase in Capital Assets.

DOUGHERTY COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30,2009
General Obligation Bonds issued December 2008 for $18.0 million is a liability to the School District. The Bonds have a maturity date of March 1,2012, and is reported as a Current Liability and Long-Term Debt. The Note will be paid from the 1 percent special purpose sales tax proceeds received between January 2009 and March 2012. The remaining Current Liabilities include, in part, balances due to Contractors and Architects for major capital projects. See Table 6 for complete analysis of the increase on Long-Term Debt at June 30.
Restricted or designated assets are assets that must be used for a specific purpose. Assets were restricted for payment of current bond debt. Restricted assets increased $6.1 million and include funds restricted for bus replacement, $0.01 million; funds restricted for fbture debt service, $11.4 million; and funds restricted for capital projects, $9.7 million.
Unrestricted Net Assets for Governmental Activities increased from $2.8 million balance at the end of fiscal year 2008 to a $4.1 million balance at the end of fiscal year 2009. This can be primarily attributed to the increase in fund balances for both the General Fund and the Districtwide Capital Project Funds. See The School Districts Funds below.
Statement of Activities Table 2 shows the changes in net assets for fiscal year 2008 and fiscal year 2009 as reported on the Statement of Activities.

DOUGHERTY COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30,2009

Table 2 Change in Net Assets
(In Thousands)

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

Fiscal Year 2009

Governmental Activities Fiscal Year 2008

Net Change

$

2,319 $

1,662 $

657

98,645

105,284

-6,639

3,318

282

3,036

Total Program Revenues

General Revenues:

Taxes

Property Taxes

For Maintenance and Operations

$

Other Taxes

Sales Taxes

Special Purpose Local Option Sales Tax

For Debt Services

For Capital Projects

Other Sales Tax

Grants and Contributions not

Restricted to Specific Programs

Investment Earnings

Miscellaneous

Special Items

Loss on Disposal of Building

41,224 $ 43
10,758 5,294
340
1 1,206 433
1,796
0

40,108 $ 39
0 18,657
435
10,557 725
3,084
-2,892

1,116 4
10,758 -13,363
-95
649 -292 -1,288
2,892

Total General Revenues and Special Lems

$8

71,094 $

70,713 $

38 1

Total Revenues

Program Expenses : Instruction Support Services R p i l Services trQrovemnt of InstructionalServices Riucational Media Services General and School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central and Other Support Services Operations of Non-InstructionalServices Enterprise Operations C o m n i t y Services Food Services Interest on Short-Term and Long-Term Debt

Total Program Expenses

Increase in Net Assets

DOUGHERTY COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30,2009
Revenues received from Federal and State grants and allotments comprise the major portion of the decrease in Operating Grants and Contributions. Revenue for Operating Grants and Contributions decreased by $6.6 million due to reductions in overall education funds because of revenue losses on the State level. State Bus replacement funds received from the State are reported as Capital Grants and Contributions. In fiscal year 2008, the School District entered into a four year lease-purchase agreement for the purchase of 12 new buses. These bus replacement funds are used to pay the annual lease-purchase payments. Capital Outlay grants were received from the State in fiscal year 2009 which accounts for the $3.0 million increase in Capital Grants and Contributions. Total Program Revenues decreased by $2.9 million.
While Total Program Revenues decreased $2.9 million, Total General Revenues from taxes and other special items increased $0.381 million. A decline in the one percent special purpose local option sales tax revenue of $2.6 million can be attributed to reduced collections because of the slowdown in the economy. The recording of the loss on demolition of the middle school building in fiscal year 2008, helped offset the loss of General Revenue by $2.8 million. Although program revenues make up a majority of the revenues, the School District is still dependent upon tax revenues for the funding of governmental activities.
Total Program Expenses decreased $5.9 million for fiscal year 2009 compared to the previous fiscal year. The greatest decreases occurred in the categories of Instruction, Improvement of Instructional Services, and Maintenance and Operation.
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.

DOUGHERTY COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30,2009
Maintenance and Operation of Plant 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 fiom school, as well as to and from school activities, as provided by state law. Central amd 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 2008 and fiscal year 2009. 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.
vii

DOUGHERTY COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30,2009

Table 3 Governmental Activities
(In Thousands)

Total Cost of Senices

Fiscal

Fiscal

Year 2009 Year 2008

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

Total Expenses

Net Cost of Services

Fiscal

Fiscal

Year 2009

Year 2008

Total Expenses decreased $5.8 million and the portion of expenses funded from local taxes decreased $2.9 million. Food Service expenses were totally funded by sources other than local taxes.
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.

..*
Vlll

DOUGHERTY COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30,2009

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

General Fund

Capital Projects and
Debt Service

Revenues

Property Taxes Sales Taxes State Funds Federal Funds Charges for Services Investment Earnings Miscellaneous

Total Revenues

Expenditures

Current Instruction Supporl 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) Proceeds from Long-Term Debt Premiums on Bonds Transfers InIOut

Total Other Financing Sources (Uses)

Net Change in Fund Balance
Fund Balances - Beginning (Restated) Fund Balances - Ending

Totals

DOUGHERTY COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30,2009
Total revenues for all governmental funds totaled $171.4 million and total expenditures totaled $175.9 million. Total revenues were $4.5 million less than total expenditures. The fund balance for governmental funds increased from $18.7 million at the beginning of the fiscal year to $32.9 million at June 30,2009.
The fimd balance reported for the General Fund increased from $4.6 million at the beginning of the fiscal year to $7.0 million at June 30,2009.
The fund balance reported for the Capital Projects Fund and Debt Service Fund increased from $14.3 million at the beginning of the fiscal year to $25.9 million at June 30, 2009. Increase is attributed to Capital Projects that were funded by an approved special purpose local sales tax referendum which began construction in fiscal year 2009. In addition, the School District issued a General Obligation Bond in the amount of $18.0 million, which was received in December of fiscal year 2008.
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 of Revenues, Expenditures and Changes in Fund Balances - Budget to Actual Schedule "1."
During fiscal year 2009, the School District amended its general fund budget as needed. The Original Budget approved by the School District's Board in June, 2008, included revenues and expenditures for State and Federal Grants that were known at the time. Amendments are made to the budget to include grants awarded to the School District later in the fiscal year. The receipt of these additional grants requires an increase in revenues and expenditures. This is because grant f h d s are restricted for a specific purpose can only be used to fund additional programs. Also, Federal grants cannot be used to fund State mandated programs or replace local funds that previously funded the same activities.
Some of the budgeting challenges the School District faced in fiscal year 2009 included a reduction of the State educational formula allotment, a decline in the student enrollment (FTE), mandated salary raises and outstanding property tax appeals. In addition, the State has not provided inflationary adjustments to non-salary expenditure items since fiscal year 2002.
Capital Assets and Debt Administration
Capital Assets
Since fiscal year 2002, the School District has developed ongoing capital programs that have aggressively sought to upgrade its aging school facilities, many of which are 50 to 60 years old.

DOUGHERTY COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30,2009

In December, 2008, the School District began receiving the proceeds from a newly approved special purpose local option sales tax referendum. The approved referendum provides for the renovation of three of the School District's high schools. Most of the work on these projects was delayed until fiscal year 2009 when the School District received additional start up proceeds from the issuance of a General Obligation Bond. However, fiscal year 2008 capital project activities included some preparation work on these renovation projects.

At the end of fiscal year 2009, the School District had invested $231.0 million in capital assets. Table 5 compares fiscal year 2008 Capital Assets balances to fiscal year 2009 balances.

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

Governmental Activities

Fiscal

Fiscal

Increase1

Year 2009 Year 2008 Decrease

Land Construction in Progress Buildings and Building Improvements Equipment

$ 9,091 $ 9,091 $

20,687

5,432

196,139

194,466

5,067

4,486

0 15,255
1,673 581

Table 5 shows that Total Capital Assets increased $17.5 million in fiscal year 2009. The increase in Construction in Progress is for the renovation of two high schools, the renovation of two elementary schools and smaller projects at other schools.
The increase in equipment is primarily due to the purchase to replace fifty-three Dougherty County School District aging vehicles. All construction projects were funded by a 1 percent special purpose local option sales tax approved by the voters of Dougherty County.
Debt
Table 6 summarizes the long-tern debt outstanding at June 30 for fiscal year 2008 and fiscal year 2009.

DOUGHERTY COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30,2009

General Obligation Bonds Unamortized Bond Premium Compensated Absences Capital Leases
Total

Table 6 Debt at June 30 (in Thousands)

Governmental Activities

Fiscal

Fiscal

Increase1

Year 2009 Year 2008 Decrease

$ 18,000 663
1,138 $ 682

$
1,113 916

18,000 663 25 -2 34

As shown in Table 6, an issue of General Obligation Bonds was incurred in fiscal year 2009.
The $1.1 million debt for Compensated Absences is the School District's estimated financial obligation for future payments to employees for accumulated unused vacation leave.
The $0.68 million in Capital Lease debt shown for fiscal year 2009 is the balance due to be paid for the buses acquired in fiscal year 2008, in future years.
Current Financial Issues
Like most School Districts in Georgia, the Dougherty County School District has faced several financial challenges in the recent years. Such challenges include the rising costs in employee benefits, state mandated teacher salary increases, utilities and the continued state formula allotment reductions. Other challenges include a slow decline in student enrollment (FTE) over the years and a stagnant local tax digest.
For several years prior to fiscal year 2004 (2003 tax digest) the School District's millage rate remained unchanged at a rate of 17.70 mills. In fiscal year 2003, the rate was rolled back to 17.55. When faced with mid-year state allotment reductions in both fiscal year 2003 and fiscal year 2004 the School Board voted to increase the millage rate to 19 mills. However, the financial statements for the General Fund reported a negative fund balance for fiscal years 2005 and 2006. During this time, the School District also began implementing cost savings measures and spending reductions in all areas of support operations including Student Transportation, Maintenance, General Administration, School Food Service, Business Services, and Central Support Services. As a result, the School District recovered from the negative fund balances by fiscal year 2007 and reported a positive $4.4 million fund balance by the end of fiscal year 2008.

DOUGHERTY COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30,2009

Twice, since increasing the millage rate to 19 mills in fiscal year 2004, the School Board voted to roll the millage rate back, once in fiscal year 2007 (2006 digest) and again in fiscal year 2008 (2007 digest). The millage rate for fiscal year 2008 (2007 digest) was 18.45 mills. The millage rate for fiscal year 2009 (2008 digest) was 18.445 mills.

In 2007, the Dougherty County Tax Department undertook a revaluation of the 2007 tax digest. This revaluation was comprehensive and resulted in a larger than average number of appeals and lawsuits against the Dougherty County Tax Department. As of June 14, 2010, and after most of the appeals have been resolved, the 2009 Net M & 0 digest (fiscal year 2010) remains virtually unchanged in value with 133 parcels representing an assessed value of $18.3 million still outstanding under various stages of appeal. The value of the outstanding parcels in appeal represents approximately 0.82% of the 2009 digest.

Student enrollment is a factor in the State's education funding formula. According to the State's hnding formula, student enrollment is converted to a "Full Time Equivalent (FTE)" count. As student enrollment, or FTE, decreases, so does State funding. The FTE count for fiscal year 2009 and the four years prior is as follows:

Fiscal Year 2005 Fiscal Year 2006 Fiscal Year 2007 Fiscal Year 2008 Fiscal Year 2009

16,522 16,73 1 16,376 16,208 16,134

In August 2008, the School District was notified of the decline in State revenues and the resulting additional reduction in educational funding for fiscal year 2009. In total, State funding for fiscal year 2009 was reduced $5.2 million. Expenditure reduction measures were taken in all areas with the purpose of preserving the fiscal year 2009 fund balance. Management has continued to monitor expenditures and identify additional costs savings and reductions on a monthly basis.

In March of fiscal year 2007, the voters of Dougherty County approved the continuation of the one percent sales tax (Sales Tax for Educational Progress). 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, and the purchase of musical instruments and other academic/instruction related equipment. In the fall of fiscal year 2009, the School District issued General Obligation Bonds in the amount of $18.0 million.

At the end of fiscal year 2005, Child Nutrition Services (food services operations) reported a deficit balance of $3.9 million. Operational cost controls implemented by program management, since that time, were successful in significantly reducing the deficit balance to $0.06 million by the end of fiscal year 2008. In October of fiscal year 2008, the Child Nutrition Program began reporting a positive fund balance.

DOUGHERTY COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30,2009
The School District is financially challenged by the State's continued reduction of State revenue to local School Districts. Further reduction to State finding are budgeted for fiscal year 2010. The Governor's final budget for fiscal year 2010 includes six recommended furlough days. Even with these reductions in State resources, the School District has maintained the current millage of 18.445 mills for fiscal year 2009 and fiscal year 2010.
In spite of the current challenges, the Dougherty County School District recognizes its responsibility as a steward of taxpayer dollars and State and Federal funds. The School District strives to emphasize student achievement while maintaining sound fiscal management.
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, Dougherty County School System, 200 Pine Avenue, Albany, Georgia 31702. You may also email your questions to robert.lloyd@dougherty.kl2.ga.us.

DOUGHERTY COUNTY BOARD OF EDUCATION

DOUGHERTY COUNTY BOARD OF EDUCATION STATEMENTOFNETASSETS JUNE 30,2009

EXHIBIT "A"

ASSETS
Cash and Cash Equivalents Investments Accounts Receivable, Net
Taxes State Government Federal Government Local Other Inventories CapitalAssets, Non-Depreciable CapitalAssets, Depreciable (Net of Accumulated Depreciation)
Total Assets
LIABILITIES
Accounts Payable Salaries and Benefits Payable Claims Incurred but not Reported (IBNR) 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 Debt Setvice Capital Projects Unrestricted Governmental Activities Dougherty County Stadium Authority
Total Net Assets
Total Liabilities and Net Assets

PRIMARY GOVERNMENT GOVERNMENTAL
ACTIVITIES

COMPONENT UNIT DOUGHERTY COUNTY STADIUM AUTHORITY

The notes to the basic financial statements are an ~ntegrapl art of this statement.
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DOUGHERTY COUNTY BOARD OF EDUCATION STATEMENT OF ACTIVITIES
FOR THE YEAR ENDED JUNE 30,2009

GOVERNMENTAL ACTIVITIES
Instruction Support Services
Pupil Services Improvementof InstructionalServices Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student TransportationServices 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 GovernmentalActivities
COMPONENT UNIT
Dougherty County Stadium Authority
General Revenues Taxes Property Taxes For Maintenance and Operations Other Taxes Sales Taxes Special Purpose Local Option Sales Tax For Debt Services For Capital Projects Other Sales Tax Grants and Contributions not Restricted to Specific Programs Investment Earnings Miscellaneous
Total General Revenues
Change in Net Assets
Net Assets - Beginning of Year (Restated)
Net Assets - End of Year

EXPENSES

CHARGES FOR SERVICES

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

EXHIBIT" B

PROGRAM REVENUES

OPERATING

CAPITAL

GRANTS AND

GRANTS AND

CONTRIBUTIONS CONTRIBUTIONS

NET (EXPENSES)

REVENUES

AND CHANGES IN

NET ASSETS

PRIMARY

GOVERNMENT

COMPONENT UNIT

GOVERNMENTAL DOUGHERTY COUNTY

ACTIVITIES

STADIUM AUTHORITY

DOUGHERTY COUNTY BOARD OF EDUCATION BALANCE SHEET
GOVERNMENTAL FUNDS JUNE 30.2009

EXHIBIT "C"

ASSETS
Cash and Cash Equivalents Investments Accounts Receivable, Net
Taxes State Government Federal Government Local Other Inventories

GENERAL FUND

DISTRICTWIDE
CAPITAL PROJECTS
FUND

DEBT SERVICE
FUND

TOTAL

Total Assets

LIABILITIES AND FUND BALANCES
LIABILITIES
Cash Overdraft Accounts Payable Salaries and Benefits Payable Payroll Withholdings Payable Contracts Payable Retainages Payable Depositsand DeferredRevenue
Total Liabilities
FUND BALANCES
Reserved for: Bus Replacement Debt Service Capital Projects
Unreserved Designated for Student Activities Designated for Self-Insurance Undesignated Reported in: General Fund
Total Fund Balances

$ 86,247.72

$

$ 10,977,348.76

$ 14,909,116.29

312,067.40 1,102,325.19

5,474,162.39

$ 6,974,802.70 $ 14,909,116.29 $ 10,977,348.76 $

86,247.72 10,977,348.76 14,909,116.29
312,067.40 1,102,325.19
5,474,162.39
32,861,267.75

Total Liabilities and Fund Balances

$ 27,638,875.31 $ 19,737,286.29 $ 11,412.259.23 $

58,788,420.83

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

DOUGHERTY COUNTY BOARD OF EDUCATION RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET
TOTHESTATEMENTOFNETASSETS JUNE 30,2009
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
Taxes that are not available to pay for current period expenditures are deferred in the funds.
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 Liabilitiesat year-end consist of:
Bonds Payable Capital Leases Payable Compensated Absences Unamortized Bond Premiums Claims and Judgments
Total Long-Term Liabilities
Net Assets of GovernmentalActivities (Exhibit " A )

EXHIBIT "D"

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

DOUGHERTY COUNTY BOARD OF EDUCATION STATEMENT OF REVENUES, EXPENDITURESAND CHANGES IN FUND BALANCES
GOVERNMENTAL FUNDS YEAR ENDED JUNE 30,2009

EXHIBIT "E"

REVENUES
Property Taxes Sales Taxes State Funds Federal Funds Charges for Services Investment Earnings Miscellaneous
Total Revenues
EXPENDITURES
Current Instruction SupporI 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)
Proceeds of Long-Term Capital Related Debt Premiums on Bonds Sold Transfers In Transfers Out
Total Other Financing Sources (Uses)
Net Change in Fund Balances
Fund Balances - Beginning (Restated)

GENERAL FUND

DISTRICTWIDE
CAPITAL PROJECTS
FUND

DEBT SERVICE
FUND

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

TOTAL

DOUGHERTY COUNTY BOARD OF EDUCATION RECONCILIATIONOF THE GOVERNMENTAL FUNDS STATEMENT OF
REVENUES, EXPENDITURESAND CHANGES IN FUND BALANCES TO THE STATEMENT OF ACTIVITIES JUNE 30.2009
Total Net Change in Fund Balances - Governmental Funds (Exhibit "E")
Amounts reported for Governmental Activities in the Statement of Activities are different because:
Capital Outlays are reported as expenditures in Governmental Funds. However, in the Statement of Activities, the cost of Capital Assets is allocated over their estimated useful lives as depreciation expense. In the current period, these amounts are:
Capital Outlay Depreciation Expense
Excess of Capital Outlay over Depreciation Expense
Capital Assets purchased with Universal Service Fund (e-rate) proceeds are not reported in Governmental Funds. However, in the Statement of Activities, the e-rate proceeds are shown as Capital Grants and Contributions.
Taxes reported in the Statement of Activities that do not provide current financial resources are not reported as revenues in the funds.
In the Statement of Activities, only the gain on the sale of the 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 equipment sold.
Bond proceeds provide current financial resourcesto Governmental Funds; however, issuing debt increases Long-Term Liabilities in the Statement of Net Assets. In the current period, proceeds were received from:
General Obligation Bonds Issued, Including a Premium of $723,105.65
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 Capital Lease Payments
Total Long-Term Debt Repayments
Some items reported in the Statement of Activities do not require the use of current financial resources and therefore are not reported as expenditures in Governmental Funds. These activities consist of:
lncrease in CompensatedAbsences lncrease in Claims and Judgments
Total Additional Expenditures
Change in Net Assets of GovernmentalActivities (Exhibit " B )

EXHIBIT "F"

The notes to the basic financial statements are an integral part of this statement.
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DOUGHERTY COUNTY BOARD OF EDUCATION STATEMENT OF FIDUCIARY NET ASSETS FIDUCIARY FUNDS JUNE 30,2009
ASSETS Cash and Cash Equivalents Accounts Receivable, Net
State Federal Local Other
Total Assets
LIABILITIES Funds Held for Others

EXHIBIT "G"
AGENCY FUNDS

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