DOUGHERTY COUNTY BOARD OF EDUCATION ALBANY, GEORGIA ANNUAL FINANCIAL REPORT FOR THE FISCAL YEAR ENDED JUNE 30,2010 (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, EXPENDITURESAND 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 SUPPLEMENTARY INFORMATION 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 FINANClAL SCHEDULES SUPPLEMENTARY INFORMATION 2 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS 3 SCHEDULE OF STATE REVENUE 4 SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS 5 ALLOTMENTS AND EXPENDITURES GENERAL FUND - QUALITY BASIC EDUCATION PROGRAMS (QBE) BY PROGRAM SECTION II COMPLIANCE AND INTERNAL CONTROL REPORTS INDEPENDENT AUDITOR'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER M A l l E R S BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WlTH GOVERNMENTAUDITING STANDARDS INDEPENDENT AUDITOR'S REPORT ON COMPLIANCE WlTH REQUIREMENTS THAT COULD HAVE A DIRECT AND MATERIAL EFFECT ON EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WlTH OMB CIRCULAR A-133 SECTION Ill 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 - 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- 156 Atlanta, Georgia 30334-8400 September 8 , 2 0 1 1 Honorable Nathan Deal, 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 SUPPLEMENTARY INFORMATION - SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS Ladies and Gentlemen: We have audited the accompanying financial statements of the governmental activities, 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, 2010, which collectively comprise the Board's basic financial statements of the Board's primary government 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. Except as discussed in the following paragraph, 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 GovernmentAuditing 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 provides a reasonable basis for our opinions. The financial statements of Dougherty County Stadium Authority (Authority) have not been audited, and we were not engaged to audit the Authority's financial statements as a part of our audit of the School District's basic financial statements. The Authority's financial activities are included in the School District's basic financial statements as a discretely presented component unit. Because the Authority's financial statements have not been audited, the scope of our work was not sufficient to enable us to express, and we do not express, an opinion on the financial statements of the Authority as of and for the year ended June 30, 2010. In addition, in our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, each major fund, and the aggregate remaining fund information for the Dougherty County Board of Education, as of June 30, 2010, 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 GovernmentAuditlng Standards, we have also issued our report dated September 8, 2011, 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 Auditng Standardsand should be considered in assessingthe results of our audit. Management's Discussion and Analysis and the Schedule of Revenues, Expendituresand Changes in Fund Balances - Budget and Actual, as presented on pages i through xi and page 29 respectively, are not a required part of the basic financial statements but are supplementary information required by the accounting principles generally accepted in the United States of America. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods 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 financial statements. The accompanying supplementary information consists 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 o f States, I!ocal Governments, and Nun-Profit Organizations, are presented for purposes of additional analysis and are not a required part of the financial statements. Such information has been subjected to the auditing procedures applied in the audit of the financial statements, and in our opinion, except for the matters discussed in the third paragraph on which we express no opinion, such information, is fairly stated, in all material respects, in relation to the financial statements 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, I r ~ u d s e lWl . Hinton, CPA, CGFM State Auditor DOUGHERTY COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCALYEAR ENDED JUNE 30,2010 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, 2010. 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 2010 are as follows: The School District's financial status continued to improve in fiscal year 2010. Total Net Assets increased more than $10.4 million in fiscal year 2010. The Unrestricted Net Assets at June 30, 2010, was a positive $10.5 million. Fund balance for the Governmental Funds - General Fund increased $4.6 million in fiscal year 2010. Usingthe 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 understandingthe 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 Federalfunding, 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. 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. DOUGHERTY COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCALYEAR ENDED JUNE 30,2010 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. 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 gmernmental 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 funds 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, or fiduciaw, for assets that belong to others. An example is funds belonging to school clubs and organizations whose records are maintained at the individual schools. These funds are generally referred to as "Activity Funds". The School District is responsible for ensuring that the assets recorded in these funds are used only for their intended purposes and only by those to whom the assets belong. The School District excludes these fund activities from the 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 2009 and fiscal year 2010. 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 1provides a summary of the School District's net assets for fiscal year 2010 and the comparative amount for fiscal year 2009. DOUGHERTY COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30,2010 Table 1 Net Assets (In Thousands) Fiscal Year 2010 Governmental Activities Fiscal Year 2009 Increase/ Decrease Assets Current and Other Assets Capital Assets, Net Total Assets $ 288,921 $ 288,965 $ -44 Liabilities Current and Other Liabilities Long-Term Liabilities Total Liabilities $ 34,979 $ 45,438 $ -10,459 Net Assets Invested in Capital Assets, Net of Related Debt Restricted Unrestricted Totai Net Assets $ 231,811 $ 218,204 $ 11,634 21,165 10,497 4,158 $ 253,942 $ 243,527 $ 13,607 -9,531 6,339 10,415 The $10.4 million increase in Total Net Assets is the net result of a decrease in Total Liabilities. The decrease reported in Total Liabilities is mainly due to a reduction of Long-Term Liabilities. See Table 5 for an analysis of the increase in Capital Assets. 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 LongTerm Debt. The Note will be paid from the 1percent 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 decreased $9.5 million and include funds restricted for future debt service, $10.7 million; and funds restricted for capital projects, $0.94 million. Unrestricted Net Assets for Governmental Activities increased from $4.2 million balance at the end of fiscal year 2009 to a $10.5 million balance at the end of fiscal year 2010. This can be primarily attributed to the increase in fund balances for both the General Fund and the District-wide Capital Project Funds. See The School Distriict'sFunds below. Statement of Activities Table2shows the changes in net assets for fiscal year 2009 and fiscal year 2010 as reported on the Statement ofActivities. ... 111 DOUGHERTY COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30,2010 Table 2 Change in Net Assets (In Thousands) Revenues Program Revenues: Charges for Services and Sales Operating Grants and Contributions Capital Grants and Contributions Total Program Revenues General Revenues: Taxes Property Taxes For Maintenance and Operations Other Taxes Sales Taxes Special Purpose Local Option Sales Tax For Debt Service For Capital Projects Other Sales Taxes Grants and Contributions not Restricted to Specific Programs Investment Earnings Miscellaneous Special ltems Loss on Disposal of Building Total General Revenues and Special ltems Total Revenues 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 of Non-Instructional Services Enterprise Operations Community Services Food Services Interest on Long-Term Debt Total Expenses Increase (Decrease) in Net Assets Fiscal Year 2010 Governmental Activities Fiscal Year 2009 Increase/ Decrease DOUGHERTY COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30,2010 Revenues received from Federal and State grants and allotments comprise the major portion of the decrease in Capital Grants and Contributions. Revenue for Capital Grants and Contributions decreased by $3.3 million due to reductions in overall education funds because of revenue losses on the State level. While Total Program Revenues decreased $3.9 million, the increase in one percent Special Purpose Local Option Sales Tax revenue of $0.10 million can be attributed to an increase in collections due the slowly recovering economy. 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 $6.6 million for fiscal year 2010 compared to the previous fiscal year. The greatest decreases occurred in the categories of Instruction, Maintenance and Operation and BusinessAdministration. Descriptions of Expense Categories Instruction includes activities relating to the teaching of pupils and the interaction between teacher and pupil. Pupil %ices are activities designed to assess and improve the well being of students and to supplement the teaching process. Improvement of Instructional Servces 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. GeneralAdministrationestablishes 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 Adminktration includes the financial and warehouse operations of the School District. 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 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 SeMces are activities concerned with providing community services to staff or students such as after school programs and student activity accounts. DOUGHERTY COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30,2010 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 Table3shows, for governmental activities, the total cost of services and the net cost of services for fiscal year 2009 and fiscal year 2010. This information is presented on the Statement ofActivities. The Net Cost of Services reflects the balance of costs that were funded by taxes and other General Revenues. Table 3 Governmental Activities (In Thousands) Total Cost of Services F~scal Flscal Year 2010 Year 2009 Net Cost of Services F~scal Fiscal Year 2010 Year 2009 Instruction Support Services: Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Admin~strat~on Maintenance and Operation of Plant StudentTransportation Services Central Support Services Other Support Services Operatrons of Non-Instructional Services: Enterprise Operations Community Services Food Services Interest on Short-Term and Long-Term Debt Total Expenses Total Expenses decreased $6.6 million. Food Service expenses were totally funded by sources other than local taxes. The School District's Funds Table 4shows 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 cornbined for presentation purposes. DOUGHERTY COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30,2010 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 Services Operation Capital Outlay Debt Services Principal Interest Table 4 Governmental Funds Net Change in Fund Balance (In Thousands) General Fund Capital Projects and Debt Service Total Expenditures Excess of Revenues over (under) Expenditures OTHER FINANCING SOURCES (USES) Transfers In/Out Net Change in Fund Balances Fund Balances - Beginning Fund Balances - Ending Totals DOUGHERTY COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCALYEAR ENDED JUNE 30,2010 Total Revenues for all governmental funds totaled $168.9 million and total expenditures totaled $178.4 million. Total Revenues were $9.5 million less than total expenditures. The fund balance for governmental funds decreased from $32.9 million at the beginning of the fiscal year to $23.4 million at June 30,2010. The fund balance reported for the General Fund increased from $7.0 million at the beginning of the fiscal year to $11.6 million at June 30, 2010. The fund balance reported for the Capital Projects Fund and Debt Service Fund decreased from $25.9 million at the beginning of the fiscal year to $11.8 million at June 30, 2010. 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 '7'". Duringfiscal year 2010, the School District amended its general fund budget as needed. The Original Budget approved by the School District's Board in June, 2009, 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 funds 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 2010 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 5 0 to 6 0 years old. In December, 2008, the School District began receivingthe 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. DOUGHERTY COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCALYEAR ENDED JUNE 30,2010 At the end of fiscal year 2010, the School District had invested $243.0 million in capital assets. Table5compares fiscal year 2010 Capital Asset balances to fiscal year 2009 balances. Table 5 Capital Assets at June 30 (Net of Depreciation, in Thousands) Governmental Activities Fiscal Year Fiscal Year Increase/ 2010 2009 Decrease Land Construction in Progress Buildings and Building Improvements Equipment $ 9,096 $ 9,091 $ 30,403 20,687 201,515 196,139 2,376 5,067 5 9,716 5,376 -2,691 Total Table 5shows that Total Capital Assets increased $12.4 million in fiscal year 2010. All construction projects were funded by a one percent special purpose local option sales tax approved by the voters of Dougherty County. Debt Table 6summarizes the long-term debt outstanding at June 3 0 for fiscal year 2009 and fiscal year 2010. Table 6 Debt a t June 30 (in Thousands) Governmental Activities Fiscal Year Fiscal Year Increase/ 2010 2009 Decrease General Obligation Bonds Accrued Interest Unamortized Bond Premium Compensated Absences Capital Leases $ 10,710 $ 18,000 $ 179 0 429 663 1,115 1,138 441 682 -7,290 179 -234 -23 -241 Total As shown in Table 6, an issue of General Obligation Bonds was incurred in fiscal year 2010. The $1.1million debt for Compensated Absences is the School District's estimated financial obligation for future payments to employees for accumulated unused vacation leave. DOUGHERTY COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30,2010 The $0.44 million in Capital Lease debt shown for fiscal year 2010 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 1 9 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. Twice, since increasing the millage rate to 1 9 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. 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 funding 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 2010 and the four years prior is as follows: Fiscal Year 2 0 0 6 Fiscal Year 2 0 0 7 Fiscal Year 2 0 0 8 Fiscal Year 2 0 0 9 Fiscal Year 2 0 1 0 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, which has contributed to an increase in the general fund balance of over $4.6 million for fiscal year 2010. DOUGHERTY COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCALYEAR ENDED JUNE 30,2010 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 2010, the outstanding balance on those bonds was $10.7 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 2009, the Child Nutrition Program began reporting a positive fund balance and finished fiscal year 2010 with an annual change in net asset of nearly $1.0 million. The School District is financially challenged by the State's continued reduction of State revenue to local School Districts. Further reduction to State funding are budgeted for fiscal year 2011. The Governor's final budget for fiscal year 2010 included 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 Operational Services, Dougherty County School System, 200 Pine Avenue, Albany, Georgia 31702. You may also email your questions to robert.llovd@douRherty.kl2.~a.u~. DOUGHERPI COUNTY BOARD OF EDUCATION DOUGHERN COUNTY BOARD OF EDUCATION STATEMENT OF NET ASSETS JUNE 30,2010 ASSETS Cash and Cash Equivalents Investments Accounts Receivable, Net Taxes State Government Federal Government Local Other Inventories Cap~raAl ssets, Non-Depreciable Capital Assets, Depreciable (Net of Accumulated Deprec~ation) Total Assets PRIMARY GOVERNMEhT GOVERlMEhTAl ACTIVITIES COMPOluCNT UhlT DOUGHFRTY COUhN STADIUM AUTHORITY LIABILITIES Accounts Payable Salaries and Benefits Payable Claims Incurred but not Reported (IBNR) Payroll Withholdings Payable Interest 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 Debt Service Capital Projects Unrestricted Governmental Activities Dougherty County Stadium Authority Total Net Assets Total Liabilities and Net Assets The notes to the basic financial statements are an integral part of this statement. -1- DOUGHERNCOUNN BOARD OF EDUCATION STATEMENT OF ACTlVlTiES FOR THEYEAR ENDED JUNE 30.2010 GOVERNMENTAL ACTIVITIES Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Admlnlstratlon Maintenance and Operation of Plant student Transportation Services Central Support Services Other Support Servlces Operations of Non-InstructionalServices 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 Contribut~onsnot Restrictedto Specific Programs Investment Earnings Miscellaneous Speclal ltems Loss on Sale of Building Total General Revenues and Special ltems Change in Net Assets NetAssets - Beginn~ngof Year Net Assets - End of Year The notes to the basic financial statements are an integral part of this statement. -2- EXPENSES PROGRAM CHARGES FOR SERVICES REVENUES OPERATING GRANTS AND CONTRIBUTIONS NET (EXPENSES) REVENUES AND CHANGES IN NET ASSETS PRIMARY GOVERNMENT COMPONENT UNIT p p GOVERNMENTAL DOUGHERTY COUNTY ACTIVITIES STADIUM AUTHORITY DOUGHERNCOUNN BOARD OF EDUCATION BALANCE SHEET GOVERNMENTAL FUNDS JUNE 30.2010 ASSETS Cash and Cash Equivalents Investments Accounts Receivable, Net Taxes State Government Federal Government Local Other Inventories Total Assets GENERAL FUND DISTRICTWIDE CAPITAL PROJECTS FUND DEBT SERVICE FUND LIABILITIES AND FUND BALANCES LIABILITIES Cash Overdraft Accounts Payable Salaries and Benefits Payable Payroll Withholding Payable Contracts Payable Retainages Payable Deposits and Deferred Revenue Total Liabilities FUND BALANCES Reserved for: Debt Service Capital Projects Unreserved Designated for Student Activities Designated for Self-Insurance Undesignated Reported in: General Fund Total Fund Balances Total Liabilities and Fund Balances EXHIBIT "C" TOTAL The notes to the basic financial statements are an integral part of thts statement. - 4 - DOUGHERTY COUNTY BOARD OF EDUCATION RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO THE STATEMENT OF NET ASSETS JUNE 30.2010 Total Fund Balances - Governmental Funds (Exh~b"~Ct") Amounts reported for Governmental Activities in the Statement of Net Assets are different because: Capital Assets used in GovernmentalActivities 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 Liabilit~esat year-end consist of: Bonds Payable Accrued Interest Capital Leases Payable Compensated Absences Unamortized Bond Premiums Claims and Judgments Total Long-Term Liabilities Net Assets of Governmental Activities (Exhibit" A ) The notes to the basic financial statements are an integral part of this statement. -5- DOUGHERW COUNTY BOARD OF EDUCATION STATEMENT OF REVENUES, EXPENDITURESAND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS YEAR ENDEDJUNE 30.2010 REVENUES Property Taxes Sales Taxes State Funds Federal Funds Chargesfor 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 Serv~ces Principal Interest Total Expend~tures Excessof 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 Fund Balances - Ending GENERAL FUND DISTRICTWIDE CAPITAL PROJECTS FUND DEBT SERVICE FUND TOTAL 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 30,2010 Total Net Change in Fund Balances - GovernmentalFunds (Exhibit " E ) Amounts reported for GovernmentalActivities 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 per~od, these amounts are: Capital Outlay Depreciation Expense Excess of Capital Outlay over Depreciation Expense Taxes reported in the Statement of Activities that do not provide current financial resourcesare not reported as revenues in the funds. The net effect of various miscellaneous transactions involving capital assets (i.e., revaluation, sales, trade-ins, donations, and disposals) is to decrease net assets. Repayment of Long-Term Debt is reported as an expenditure in Governmental Funds, but the repayment reduces Long-Term Liabilities in the Statement of Net Assets. In the current year, these amounts consist of: Bond Principal Retirements Capital Lease Payments Amortized Bond Premium Total Long-Term Debt Repayments Some items reported in the Statement of Activities do not require the use of current financial resourcesand therefore are not reported as expenditures in GovernmentalFunds. These activities consist of: Net lncrease in Accrued Interest Decrease in CompensatedAbsences lncrease in Claims and Judgments Total Additional Expenditures Change in Net Assets of GovernmentalActivities (Exhibit "6") EXHIBIT "F" The notes to the basic financial statements are an integral part of this statement. -7- (This page left intentionally blank) DOUGHERTY COUNTY BOARD OF EDUCATION STATEMENT OF FIDUCIARY NE lASSETS FIDUCIARY FUNDS JUNE 3 0 , 2 0 1 0 Cash and Cash Equivalents Accounts Receivable, Net 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 - 9- DOUGHERTY COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30,2010 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 of the 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 1 7 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 of Net Assets and the Statement of Activities display information about the financial activities of the 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 of the School District's programs, such as office and maintenance personnel and accounting) are not allocated to programs. a Program revenues include (a) charges paid by the recipients of goods 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 Slatemenk The fund financial statements provide information about the School District's funds, including fiduciary funds. Eliminations have been made to minimize the double counting of internal activities. DOUGHERNCOUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30,2010 EXHIBIT "H" 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 of the 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)and Bond Proceeds to be used for the acquisition, construction or renovation of major capital facilities. Debt Service Fund accounts for taxes (sales) legally restricted for the payment of general longterm principal, interest and payingagent'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 of accounting determines when transactions are reported on the financial statements. The District-wide governmental and fiduciary fund financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded at the time liabilities are incurred, regardless of when the related cash flows take place. Nonexchange transactions, in which the School District gives (or receives) value without directly receiving (or giving) equal value in exchange, include property taxes, sales taxes, grants and donations. On an accrual basis, revenue from property taxes is recognized in the fiscal year for which the taxes are levied. Revenue from sales taxes is recognized in the fiscal year in which the underlying transaction (sale) takes place. Revenue from grants and donations is recognized in the fiscal year in which all eligibility requirements have been satisfied. 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-balancingset of accounts. Governmental funds are reported using the current financial resources measurement focus and the modified accrual basis of accounting. 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. DOUGHERlY COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30,2010 EXHIBIT "H" The School District funds certain programs by a combination of specific 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. The State of Georgia reimburses the School District for teachers' salaries and operating costs through the Quality Basic Education Formula Earnings program (QBE). Generally teachers are contracted for the school year (July 1- June 30) and paid over a twelve month contract period, generally September 1through August 31. In accordance with the respective rules and regulations of the QBE program, the State of Georgia reimburses the School District over the same twelve month period in which teachers are paid. At June 30, the amount of teachers' salaries incurred but not paid until July and August of the subsequent year are accrued. Since the State of Georgia recognizes its QBE liability for the July and August salaries at June 30, the School District recognizes the same QBE as a receivable and revenue, consistent with symmetrical recognition. NEW ACCOUNTING PRONOUNCEMENTS In fiscal year 2010, the School District adopted the Governmental Accounting and Standards Board (GASB) Statement No. 51, Accounting and Repofling for Intangible Assets. The provisions of this Statement generally require retroactive reporting for intangible assets acquired after June 30, 1980, with the exception of those intangible assets that have indefinite useful lives and those that are considered internally generated. In addition, the School District adopted GASB Statement No. 53, Accounting and Financial Repoding for Derivative Instruments. The provisions of this Statement impacts disclosure regarding derivative instruments entered into by the state and local governments. Derivative disclosures, if any, will be identified in Note 3. 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 authorizes the School District to deposit its funds in one or more solvent banks, insured Federal savings and loan associations or insured chartered building and loan associations. INVESTMENTS Composition of Investments lnvestments made by the School District in nonparticipating interest-earning contracts (such as certificates of deposit) and repurchase agreements are reported at cost. Participating interestearning 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 of return shall be the objective, given equivalent conditions of safety and liquidity. Funds may be invested in the following: DOUGHERTY COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30,2010 EXHIBIT "H" (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 Georgia Fund 1administered 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 of credit 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 2009 tax digest year (calendar year) on July 20, 2009 (levy date). Taxes were due on December 20, 2009 (lien date). Taxes collected within the current fiscal year or within 60 days after year-end on the 2009 tax digest are reported as revenue in the governmental funds for fiscal year 2010. 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, 2010, for maintenance and operations amounted to $39,510,201.84. The tax millage rate levied for the 2009 tax year (calendar year) for the Dougherty County Board of Education was as follows (a mill equals $1per thousand dollars of assessed value): School Operations SALES TAXES 18.445 mills Special Purpose Local Option Sales Tax, at the fund reporting level, during the year amounted to $16,590,571.11 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. DOUGHERTY COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30,2010 EXHIBIT "H" INVENTORIES Food Inventories On the basic financial statements, inventories of donated food commodities used in the preparation of meals 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 as asset is recorded when supplies are purchased and expenses are recorded at the time the supplies are consumed. 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 the assets is not capitalized. Depreciation is computed using the straight-line method. The School District does not capitalize book collections or works of art. 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 Estimated Policy Useful Life Land Buildings and Improvements Equipment Intangible Assets Any Amount $ 100,000.00 $ 50,000.00 $ 1,000,000.00 N/A 2 0 to 80 years 4 to 12 years 4 to 8 years Depreciation is used to allocate the actual or estimated historical cost of all capital assets over estimated useful lives, with the exception of intangible assets which are amortized. Amortization of intangible assets such as water, timber, mineral rights, easements, patents, trademarks, copyrights and internally generated software is computed using the straight-line method over the estimated useful lives of the assets, generally 4 to 8 years. DOUGHERTY COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30,2010 EXHIBIT "H" COMPENSATED ABSENCES Members of the Teachers Retirement System of Georgia (TRS) may apply unused sick leave toward early retirement. The liability for early retirement will be borne by TRS rather than by the individual school districts. Otherwise, sick leave does not vest with the employee, and no liability is reported in the School District's financial statements. A maximum of 18 days of vacation leave is awarded on a fiscal year basis to all full time personnel employed on a twelve month basis. No other employees are eligible to earn vacation leave. Vacation leave not utilized during the fiscal year may be carried over to the next fiscal year, providing such vacation leave does not exceed 30 days. Beginning of Year Liability Increase Decrease End of Year Liability GENERAL OBLIGATION BONDS The School District issues general obligation bonds to provide funds for the acquisition and construction of major capital facilities. In the District-wide financial statements, bond premiums and discounts, are deferred and amortized over the life of the bonds usingthe straight-line method. In the fund financial statements, the School District recognizes bond premiums and discounts, during the fiscal year bonds are issued. Premiums received on debt issuances are reported as other financingsources while discounts on debt issuances are reported as other financing uses. In the District-wide and fund financial statements, the School District recognizes bond issuance costs during the fiscal year bonds are issued. Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as debt service expenditures. To conform to generally accepted accounting principles, bond issuance costs should be amortized over the life of the bonds on the District-wide statements. The effect of this deviation is deemed to be immaterial to the fair presentation of the basic financial statements. 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. N ET 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 of outstanding 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 debt service and capital projects in accordance with restrictions imposed by external third parties. DOUGHERN COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30,2010 EXHIBIT "H" 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. USE OF ESTIMATES The preparation of the financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results may differ from those estimates. Note 3: DEPOSITS AND INVESTMENTS COLLATERALIZATION OF DEPOSITS Official Code of Georgia Annotated (O.C.G.A.) Section 45-8-12 provides that there shall not be on deposit at any time in any depository for a time longer than ten days a sum of money which has not been secured by surety bond, by guarantee of insurance, or by collateral. The aggregate of the face value of such surety bond and the market value of securities pledged shall be equal to not less than 1 1 0 percent of the public funds being secured after the deduction of the amount of deposit insurance. If a depository elects the pooled method (O.C.G.A. Section 45-8-13.1) the aggregate of the market value of the securities pledged to secure a pool of public funds shall be not less than 110 percent of the daily pool balance. Acceptable security for deposits consists of any one of or any combination of the following: (1) Surety bond signed by a surety company duly qualified and authorized to transact business within the State of Georgia, (2) lnsurance on accounts provided by the Federal Deposit lnsurance Corporation, (3) Bonds, bills, notes, certificates of indebtedness or other direct obligations of the United States or of the State of Georgia, (4) Bonds, bills, notes, certificates of indebtedness or other obligations of the counties or municipalities of the State of Georgia, (5) Bonds of any public authority created by the laws of the State of Georgia, providing that the statute that created the authority authorized the use of the bonds for this purpose, (6) Industrial revenue bonds and bonds of development authorities created by the laws 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 or securities guaranteed by the Federal Land Bank, the Federal Home Loan Bank, the Federal Intermediate Credit Bank, the Central Bank for Cooperatives, the Farm Credit Banks, the Federal Home Loan Mortgage Association, and the Federal National Mortgage Association. DOUGHERW COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30,2010 EXHIBIT "H" CATEGORIZATION OF DEPOSITS PRIMARY GOVERNMENT Custodial credit risk is the risk that in the event of a bank failure, the School District's deposits may not be returned to it. The School District does not have a deposit policy for custodial credit risk. At June 30, 2010, the bank balances were $12,696,605.23. The amounts exposed to custodial credit risk are classified into three categories as follows: Category 1Category 2 - Category 3 - Uncollateralized, Cash collateralized with securities held by the pledging financial institution, or Cash collateralized with securities held by the pledging financial institution's trust department or agent but not in the School District's name. The School District's deposits by custodial credit risk category at June 30, 2010, are as follows: Custodial Credit Risk Catefiow Bank Balance Total COMPONENT UNIT At June 30, 2010, Dougherty County Stadium Authority's bank balances of $246,712.65 were insured through Federal Depository Insurance Corporation (FDIC) and the National Credit Union Administration (NCUA). CATEGORIZATION OF INVESTMENTS The School District's investments as of June 30, 2010, are presented below. All investments are presented by investment type and debt securities are presented by maturity. lnvestrnent Tvpe Fair Value Other lnvestments U. S. Treasury Money Market Funds Investment Pools Office of Treasury and Fiscal Services Georgia Fund 1 Total lnvestments DOUGHERlY COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30,2010 EXHIBIT "H" The Georgia Fund 1,formerly referred to as LGIP, 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 of the State of Georgia, Office of Treasury and Fiscal Services for the Georgia Fund 1(Primary Liquidity Portfolio) does not provide for investment in derivatives or similar investments. Additional information on the Georgia Fund 1is disclosed in the State o f GeorgiaComprehensive Annual Financial Report. This audit can be obtained from the Georgia Department of Audits and Accounts at htt~://www.audits.qa.~ov/SGD/cafr.htmI. The Primary Liquidity Portfolio consists of Georgia Fund 1which 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 1may not exceed 6 0 days. The weighted average maturity for Georgia Fund 1on June 30,2010, was 4 6 days. lnterest Rate Risk lnterest rate risk is the risk that changes in interest rates of debt investment will adversely affect the fair value of an investment. The School District does not have a formal policy for managing interest rate risk. 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 investments subject to credit quality risk are reflected below: Rated Debt Investments Fair Value Quality Ratings AAA Other Investments U. S. Treasury Money Market Funds $ 1,372,537.86$ 1,372,537.86 Note 4: NON-MONETARYTRANSACTIONS 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: DOUGHERTY COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30,2010 EXHIBIT "H" PRIMARY GOVERNMENT Governmental Activities Capital Assets, Not Being Depreciated: Land Construction Work In Progress Balances July 1,2009 Increases Decreases Balances June 30,2010 $ 9,091,354.08$ 4,200.00 Total Capital Assets, Not B e ~ n gDepreciated $ 29,778,299.45$ 18,109,907.81$ 8,389,917.03$ 39,498,290.23 Capital Assets, Being Depreciated: B u i l d ~ n g s a n dImprovements Equipment $ 284,801,302.51$ 10,714,431.34$ 3,410,145.17$ 292,105.588.68 16,113,506.98 80.963.64 9,501.895.05 6,692,575.57 Less: Accumulated Depreciation: Buildings and Improvements Equipment Total Capital Assets, Being Depreciated, Net $ 201,205,831.33$ 6,011,795.91$ 3,325,314.67$ 203,892,312.57 Governmental Activiv Capital Assets - Net $ 230,984,130.78$ 24,121,703.72$ 11,715,231.70$ 243,390,602.80 Capital assets being acquired under capital leases as of June 30, 2010, are as follows: Governmental Funds Equipment Less: Accumulated Depreciation Current year depreciation expense by function is as follows: Instruction Support Services Pupil Services $ Improvementsof InstructionalServices Educational Media Services School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Food Services DOUGHERTY COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30,2010 EXHIBIT "H" COMPONENT UNIT Governmental Activities Cap~taAl ssets, Not Being De~reciated: Land Balances July 1,2009 Increases Decreases Balances June 30,2010 Capital Assets, Being Depreciated: Buildings Equipment Stadium Improvements $ 308,976.00 $ 239,886.00 2,586,683.00 0.00 $ 0.00 $ 308,976.00 239,886.00 2,586,683.00 Less: Accumulated Depreciation: Buildings Equipment Stadium Improvements 42,483.00 138,620.00 362,378.00 7,724.00 25,836.00 66,504.00 50,207.00 164,456.00 428,882.00 Total Capital Assets, Being Depreciated, Net $ 2,592,064.00 $ -100,064.00 $ 0.00 $ 2,492,000.00 Governmental Activity Capital Assets - Net $ Note 6: INTERFUNDTRANSFERS 3,002,064.00 $ -100,064.00 $ Interfund transfers for the year ended June 30, 2010, consisted of the following: Transfer to Transfers From General Fund District-wide Capital Projects $ 125,661.33 P 0.00 $ 2,902,000.00 Transfers are used to move property tax revenues collected by the General Fund to the District-wide Capital Projects Fund to cover a portion of employee's salaries not funded as a part of the Special Purpose Local Option Sales Tax (SPLOST) projects. Note 7: 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 DOUGHERTY COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30,2010 EXHIBIT "H" 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 Internal Service 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: Beginning of Year Liability Claims and Changes in Estimates Claims Pa id End of Year Liability The School District is self-insured with regard to unemployment compensation claims. A premium is charged when needed by the General Fund to each user program on the basis of the percentage of that fund'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. Changes in the unemployment compensation claims liability during the last two fiscal years are as follows: Claims and Beginning of Year Changes in Claims End of Year Liability Estimates Paid Liability The School District has purchased surety bonds to provide additional insurance coverage as follows: Position Covered Superintendent All Other Employees Amount DOUGHERTY COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30,2010 EXHIBIT "H" Note 8: OPERATING LEASES Dougherty County Board of Education has entered into various leases as lessee for copiers and fax machines. These leases are considered for accounting purposes to be operating leases. Lease expenditures for the year ended June 30, 2010, for governmental funds amounted to $357,390.84. Future minimum lease payments for these leases are as follows: Year Ending Governmental Funds Total Note 9: 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 was to provide cash for operations until property tax collections were received by the School District. Article IX, Section V, Paragraph V of the Constitution of the State of Georgia limits the aggregate amount of short-term debt to 75 percent of the total gross income from taxes collected in the preceding year and requires all short-term debt to be repaid no later than December 3 1of the calendar year in which the debt was incurred. Short-term debt activity for the fiscal year is as follows: Beginning Balance Issued Redeemed Ending Balance Tax Anticipation Notes $ 0.00 $ 14,000,000.00$ 14,000,000.00 $ 0.00 Note 10: LONG-TERM DEBT CAPITAL LEASES The Dougherty County Board of Education entered into a lease agreement for buses. This lease agreement qualifies as a capital lease for accounting purposes, and, therefore, has been recorded at the present value of the future minimum lease payments as of the date of its 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. DOUGHERTY COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30,2010 EXHIBIT "H" GENERAL OBLIGATION DEBT OUTSTANDING General Obligation Bonds currently outstanding are as follows: Puraose Interest Rate Amount General Government -Series 2008 5.0% $ 10,710,000.00 Voters have authorized $22,000,000.00 in general obligation debt for the purpose of funding (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 of technology, (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 30,2010. The changes in Long-Term Debt during the fiscal year ended June 30, 2010, were as follows: Balance July 1,2009 Additions Governmental Funds Deductions Balance June 30.2010 Due Within One Year G. 0. Bonds Capital Leases Compensated Absences Bond Premiums Amortized $ 18,000,000.00 682,184.49 1.137.997.35 $ 662.846.80 $ 961,768.21 7,290,000.00 $ 10,710,000.00 $ 7,585,000.00 241,264.98 440,919.51 248,977.31 984,358.24 1,115,407.32 81,981.40 233,945.96 428,900.84 233,945.95 At June 30, 2010, payments due by fiscal year which includes principal and interest for these items are as follows: Capital Leases Principal Interest Fiscal Year Ended June 30: Total Principal and lnterest Fiscal Year Ended June 30: General Obligation Debt Principal Interest Unamortized Bond Premium Total Principal and lnterest DOUGHERTY COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30,2010 EXHIBIT "H" Note 11: ON-BEHALF PAYMENTS The School District has recognized revenues and costs in the amount of $373,432.85 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 $255,305.26 Paid to the Teachers Retirement System of Georgia For Teachers Retirement System (TRS) Employer's Cost In the amount of $48,396.95 Office of Treasury and Fiscal Services Paid to the Public School Employees Retirement System For Public School Employees Retirement (PSERS) Employer'sCost In the amount of $69,730.64 Note 12: SPECIAL ITEMS During fiscal year 2010, the School District changed the capitalization threshold of building and building improvements from $5,000.00 to $100,000.00, resulting in a loss of $781,045.00. In addition, on August 10, 2009, the School District sold the Harambee building for $75,000.00, resulting in a loss of $217,037.77. The carrying value of the buildings of $998,082.77 was properly removed from the capital asset records by the School District. The sale and removal of assets are reported as a Special Item on the Statement of Activities. Note 13: SIGNIFICANT COMMITMENTS The following is an analysis of significant outstanding construction or renovation contracts executed by the School District as of June 30, 2010: Unearned Executed Project Contracts Westover High School Albany High School Security Access Control System, Phase II The amounts described in this note are not reflected in the basic financial statements. DOUGHERTY COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30,2010 EXHIBIT "H" Note 14: SlGNlFlCANT 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 of routine School District operations. The ultimate disposition of these proceedings is not presently determinable, but is not believed to be material to the basic financial statements. Note 15: POST-EMPLOYMENT BENEFITS GEORGIA SCHOOL PERSONNEL EMPLOYEES POST-EMPLOYMENT HEALTH BENEFIT FUND Plan Description. The Georgia School Personnel Post-Employment Health Benefit Fund (School OPEB Fund) is a cost-sharing multiple-employer defined benefit post-employment healthcare plan that covers eligible former employees of public school systems, libraries and regional educational service agencies. The School OPEB Fund provides health insurance benefits to eligible former employees and their qualified beneficiaries through the State Employees Health Insurance Plan administered by the Department of Community Health. The Official Code of Georgia Annotated (OCGA) assigns the authority to establish and amend the benefit provisions of the group health plans, including benefits for retirees, to the Board of Community Health (Board). Funding Policy. The contribution requirements of plan members and participating employers are established by the Board in accordance with the current Appropriations Act and may be amended by the Board. Contributions of plan members or beneficiaries receiving benefits vary based on plan election, dependent coverage, and Medicare eligibility and election. On average, plan members pay approximately 25 percent of the cost of the health insurance coverage. Participating employers are statutorily required to contribute in accordance with the employer contribution rates established by the Board. The contribution rates are established to fund all benefits due under the health insurance plans for both active and retired employees based on projected "pay-as-you-go"financing requirements. Contributions are not based on the actuarially calculated annual required contribution (ARC) which represents a level of funding that, if paid on an ongoing basis, is projected to cover normal cost each year and amortize any unfunded actuarial liabilities (or funding excess) over a period not to exceed thirty years. The combined active and retiree contribution rates established by the Board for employers participating in the School OPEB Fund were as follows for the fiscal year ended June 30,2010: For certificated teachers, librarians and regional educational service agencies: July 2009 August 2009 - October 2009 November 2009 -June 2010 18.534% of covered payroll for August Coverage 14.492% of covered payroll for September - November Coverage 18.534% of covered payroll for December - July Coverage For non-certificated school personnel: July 2009 -June 2010 $162.72 per member per month plus Department of Education contribution of $22,838,311.00 DOUGHERTY COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30.2010 EXHIBIT "H" No additional contribution was required by the Board for fiscal year 2010 nor contributed to the State OPEB Fund to prefund retiree benefits. Such additional contribution amounts are determined annually by the Board in accordance with the State plan for other post-employment benefits and are subject to appropriation. The School District's combined active and retiree contributions to the health insurance plans, which equaled the required contribution, for the current fiscal year and the preceding two fiscal years were as follows: Percentage Required Fiscal Year Contributed Contribution Note 16: RETIREMENT PLANS TEACHERS RETIREMENT SYSTEM OF GEORGIA (TRS) Plan Description. The TRS is a cost-sharing multiple-employer defined benefit plan created in 1943 by an act of the Georgia General Assembly to provide retirement benefits for qualifying employees in educational service. A Board of Trustees comprised of active and retired members and ex-officio State employees is ultimately responsible for the administration of TRS. 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. On October 25, 1996, the Board created the Supplemental Retirement Benefits Plan of the Georgia Teachers Retirement System (SRBP-TRS). SRBP-TRS was established as a qualified excess benefit plan in accordance with Section 415 of the Internal Revenue Code (IRC) as a portion of TRS. The purpose of SRBP-TRS is to provide retirement benefits to employees covered by TRS whose benefits are otherwise limited by IRC Section 415. Beginning July 1,1997, all members and retired former members in TRS are eligible to participate in the SRBP-TRS whenever their benefits under TRS exceed the IRC Section 415 imposed limitation on benefits. TRS provides service retirement, disability retirement, and survivor's benefits. The benefit structure of TRS is defined and may be amended by State statute. A member is eligible for normal service retirement after 3 0 years of creditable service, regardless of age, or after 1 0 years of service and attainment of age 60. A member is eligible for early retirement after 25 years of creditable service. Normal retirement (pension) benefits paid to members are equal to 2% of the average of the member's two highest paid consecutive years of service, multiplied by the number of years of creditable service up to 4 0 years. Early retirement benefits are reduced by the lesser of one-twelfth of 7% for each month the member is below age 6 0 or by 7% for each year or fraction thereof by which the member has less than 3 0 years of service. It is also assumed that certain cost-of-living adjustments, based on the Consumer Price Index, will be made in future years. Retirement benefits are payable monthly for life. A member may elect to receive a partial lump-sum distribution in addition to a reduced monthly retirement benefit. Death, disability and spousal benefits are also available. DOUGHERTY COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30,2010 EXHIBIT "H" Funding Policy. TRS is funded by member and employer contributions as adopted and amended by the Board of Trustees. Members become fully vested after 1 0 years of service. If a member terminates with less than 1 0 years of service, no vesting of employer contributions occurs, but the member's contributions may be refunded with interest. Member contributions are limited by State law to not less than 5% or more than 6% of a member's earnable compensation. Member contributions as adopted by the Board of Trustees for the fiscal year ended June 30, 2010, were 5.25% of annual salary. The member contribution rate will increase to 5.53%effective July 1,2010. Employer contributions required for fiscal year 2010 were 9.74% of annual salary as required by the June 30, 2007, actuarial valuation. The employer contribution rate will increase to 10.28% effective July 1,2010. Employer contributions for the current fiscal year and the preceding two fiscal years are as follows: Fiscal Year Percentage Contributed Required Contribution Note 17: COMPONENT UNIT The Dougherty County Stadium Authority (Authority) is a legally separate tax-exempt component unit of the Dougherty County Board of Education (School District). Because the Authority has a fiscal dependency on the School District, it is considered a component unit of the School District and is discretely presented in the School District's financial statements. The Authority utilizes the modified accrual method of accounting. The Authority has implemented the financial reporting requirements of GASB Statement Nos. 33 and 34. The Authority's fiscal year is July 1through June 30. (This page left intentionally blank) DOUGHERTY COUNTY BOARD OF EDUCATION GENERAL FUND SCHEDULE OF REVENUES, EXPENDITURESAND CHANGES IN FUND BALANCES BUDGET AND ACTUAL YEAR ENDED JUNE 30.2010 REVENUES Property Taxes Sales Taxes State Funds Federal Funds Charges for Services Investment Earnings Miscellaneous Total Revenues EXPENDITURES Current Instruction Support Services Pup11Services Improvementof Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operationof Plant Student Transportation Services Central Support Services Other Support Services Enterprise Operations Community Services Operations Food Services Operation Debt Service Total Exoenditures 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) Fund Balances - Ending Notesto the Schedule of Revenues, Exoendituresand Changes in Fund BalancesBudEet and Actual (1) Original and Final Budget amounts do not include budgeted revenues or expenditures of the varlous 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. SCHEDULE "1" ACTUAL AMOUNTS See notes to the basic financial statements DOUGHERTY COUNTY BOARD OF EDUCATION SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS YEAR ENDEDJUNE 30,2010 SCHEDULE " 2 " FUNDING AGENCY PROGRAM/GRANT Agriculture. U. S. Department of Child Nutrltlon Cluster Pass-Through From Georgia Department of Education Food Serv~ces School Breakfast Program Nat~onaSl chool Lunch Program Total Child Nutrltlon Cluste~ Other Programs Pass-Through From Georgja Department of Education Food Services ARRA Child Nutrition Discretionary Grants Llmited Avallab~llty Total U. S. Department of Agr~culture Education. U. S. Department of Educat~onTechnology State Grants Cluster Pass-ThroughFrom Georgla Department of Educatlon Educatlon Technology State Grants School lmprovement Grants Cluster Pass-ThroughFrom Georgla Department of Education School lmprovement Grants Speclal Educatlon Cluster Pass-Through From Georgia Depanment of Educatlon Spec~aEl ducat~on ARRA- Grants to States ARRA- Preschool Grants Grants to States Preschool Grants Total Special Educat~onCluster State Flscal Stabil~zabonFund Cluster Pass-Through From Georgia Department of Education ARRA - Education State Grants Title I. Part A Cluster Pass-Through From Georgia Department of Education ARRA - T~tleI Grants to Local Educat~onaAl genc~es Title I Grants to Local Educational Agencies Total Tltle I, Part A Cluster Other Programs D~rect Fundsfor lmprovement of Educat~on Pass-Through From Georgia Department of Educat~on Career and Techn~caEl ducation - Bas~cGrants to States Charter Schools Engllsh Language Acqu~sit~oGnrants lmprovlng Teacher Quallty State Grants Mathematics and Sc~encePartnersh~ps Mlgrant Educat~on-State Grant Program Read~ngFlrst State Grants Safe and Drug-Free Schools and Communities -State Grants specla1 Education State Personnel Development Twenty-FirstCentuly Commun~tyLearnlng Centers Total Other Programs Total U. S. Department of Education CFDA NUMBER PASSTHROUGH ENTlN ID NUMBER EXPENDITURES IN PERIOD DOUGHERTY COUNTY BOARD OF EDUCATION SCHEDULEOF EXPENDITURESOF FEDERAL AWARDS YEAR ENDED JUNE 30.2010 SCHEDULE "2" FUNDING AGENCY PROGRAM/SRANT Health and Human Services. U. S. Department of Ch~ldCare and Development Fund Cluster Pass-ThroughFrom Bright From the Start: Georgia Department of Early Care and Learning ARRA - Chlld Care and Development Block Grant Other Programs Pass-ThroughFrom Georgia Department of Human Resources Block Grants for Prevention and Treatment of Substance Abuse Total U. S. Department of Health and Human Services Labor. U. S. Department of Pass-ThroughFrom Southwest Georgia Regional Development Center ARRA - Workforce InvestmentAct Adult Program Defense, U. S. Department of Direct Department of the Air Force R.O.T.C. Program Department of the Marine Corp R.O.T.C. Program Total U.S. Department of Defense CFDA NUMBER PASSTHROUGH ENTITY ID NUMBER EXPENDITURES IN PERIOD Total Federal Financial Assistance N/A = Not Available Notes to the Schedule of ExDendituresof Federal Awards (1) Includes the Federally assigned value of donated commodities for the Food Donation Program in the amount of $469,715.52. (2) Expenditures for the funds earned on the School Breakfast Program ($2.525.328.84) were not maintained separately and are included in the 2010 National School Lunch Program. Major Programsare identified by an asterisk (*) in front of the CFDA number. The School District did not provide Federal Assistance to any Subrecipient. The accompanyingschedule of expenditures of Federal awards ~ncludesthe Federal grant activity of the Dougherty County Board of Education and e 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. (This page left intentionally blank) DOUGHERTY COUNTY BOARD OF EDUCATION SCHEDULE OF STATE REVENUE YEAR ENDED JUNE 30,2010 GRANTS Bright From the Start: Georgia Department of Early Care and Learning Pre-Kindergarten Program Educatlon. 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 Educatlon (9-12) Program Vocational Laboratory(9-12) Program Students with Disabilities Category VI Gifted Remedial Education Program Alternative Education Program EnglishSpeakers 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 Nursing Setvices Vocational Supervisors Mid-term Adjustment Hold-Harmless Education Equalization FundingGrant Food Services Vocational Education Amended Formula Adjustment Other State Programs Dual Enrollment Georgia Special Needs Scholarship Fund Health Insurance National Teacher Certification Other Special Revenues Preschool Handicapped Program Special Education Programs Teachers' Retirement Virtual Schools Grant Human Resources, Georgia Department of Georgia Learnlng Office of Treasury and Fiscal Services Public School Employees Retirement (on-behalf) See notes to the basic financial statements. SCHEDULE" 3 GOVERNMENTAL FUND TYPE GENERAL FUND DOUGHERTY COUNTY BOARD OF EDUCATION SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS YEAR ENDED JUNE 30.2010 SCHEDULE 4 PROJECT ORIGINAL ESTIMATED COST (1) CURRENT ESTIMATED COSTS (2) AMOUNT EXPENDED IN CURRENT YEAR (3) AMOUNT EXPENDED IN PRIOR YEARS (3) PROJECT STATUS The acquisition, construction and equipping of three elementary schools, renovationand improvementsof one middle school, renovation and improvementsof five elementary schools, provisionof gifted, special education, and alternative education sites, capital funding necessaryfor compliance with the lndivldualswith DisabilitiesAct (IDEA)for children with disabilities, renovationsof existingschool buildings. four Pre-K facilities in each of four quadrants in the DoughertyCounty School System additional technology(hardwareand software), including teacher and student classroom computers. peripheraldevices and wiring, mobile wireless computer labs, accessory support technologv. wireless connectivityfor portable classroomsand technology associates with distance and foreign language labs, safety equipment including, but not limited to. upgradinglocks on all school buildings, installation of cameras and other devlceson schools and school buses, and security/attendance card system, upgrade of school vehicles and maintenanceequipment. funding certain financingand project management cost for implementationof capital programsfunded through SPLOST II, the maximum cost of such projects not to exceed $95,000,000.00 $ 95,000.000.00 $ 94,769.916.26 $ 2.354.712.82 $ 92,415,203.44 Completed The renovationand improvementof four high schoolsand five elementaryschools, strategic land acquisitionfor future school expansion, certain other capital repairsand modificationsin systemwlde schools, buildings and office (including carpet replacement gym flooring and certain other capital repairsand modifications)(ii) the provisions of additional classroom technologv (including hardware, software and computer furniture) regular system-wide replacement of computersfive years or older, installingsix computers in all K-8th grade classrooms and three computers in all 9th - 12th grade classrooms. providingsystem-wide teacher laptop computers, system-wide "wireless-connectivity"in all classroom and other buildings, upgrading existingcomputeraided instructionalsystemsto "Model Classroom" standards and providingthree addlt~ona"lModel Classrooms"per school providingsystem-wide upgraded or new severs and upgraded main data frame(MDF) rooms, installing "voice-over-internetprotocol"(VOIP) in various classroomsthroughout the school system. (iil)the provision of safety and security equipment. including system-wide communication equipment and card access systems at various system-wide buildingand the installation of radio signal-boosters ("radio repeaters")for West Doughertytower. (IV)vehicle and equipment replacement, includ~ngschool buses and department trucks, vans and sedans for system-wideuse, major malntenance,supply DOUGHERTY COUNTY BOARD OF EDUCATION SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS YEAR ENDED JUNE 30.2010 SCHEDULE "4" PROJECT ORIGINAL ESTIMATED COST (1) CURRENT ESTIMATED COSTS (2) AMOUNT EXPENDED IN CURRENT YEAR (3) AMOUNT EXPENDED IN PRIOR YEARS (3) PROJECT STATUS and service equipment, muSlCal equipments playgroundequipment, and other educational related equipment, and (v) fund~ngcertain financing, project managementand election costs related thereto, the maxlmum cost of such projects not to exceed $95,000.000.00 $ 95.000.000.00 $ 95.000.000.00 $ 21,083,302.90 $ 30,152,250.05 Ongoing (1)The School Distr~ct'sorlglnal cost estlmate as speclfled In the resolution calllngfor the lmpositlon of the Local Opt10n Sales Tax (2) The School District's current estimate of total cost for the projects. Includes all cost from project lnceptlon to completion (3) The voters of Dougherty County approved the lmposltion of a 1%sales tax to fund the above projects and retire associateddebt Amounts expended for these projects may ~ncludesales tax proceeds, state, local property taxes and/or other funds over the l ~ f eof the projects. See notes to the basicflnanclal statements. (This page left intentionally blank) DOUGHERTY COUNTY BOARD OF EDUCATION GENERAL FUND - QUALITY BASIC EDUCATION PROGRAM (QBE) ALLOTMENTS AND EXPENDITURES - BY PROGRAM YEAR ENDED JUNE 3 0 . 2 0 1 0 SCHEDULE "5" DESCRIPTION Dlrect lnstruct~onaPl rograms K~ndergartenProgram Kindergarten Program-Early lnterventlon Program Primary Grades (1-3) Program Primary Grades Early lnterventlon (1-3) Program Upper Elementary Grades (4-5) Program Upper Elementary Grades-Early lntervent~on(4-5) Program Mlddle Grades 6 8 ) Program Mlddle School (6-8) Program Hlgh School General Educatlon ( 4 1 2 ) Program Vocational Laboratory (9-12) Program Students wlth Dlsabllltles Category I Category II category III Category IV Glfted Student - Category VI Remed~aEl ducatlon Program Alternative Educatlon Program English Speakers of Other Languages (ESOL) TOTAL DIRECT INSTRUCTIONAL PROGRAMS Medla Center Program Staff and Profess~onaDl evelopment ALLOTMENTS FROM GEORGIA DEPARTMENT OF EDUCATION (1)(2) ELIGIBLE QBE PROGRAM COSTS SALARIES OPERATIONS TOTAL TOTAL QBE FORMULA FUNDS (1) Comprised of State Funds plus Local F~veMill Share. (2) Allotments do not Include the Impact of the State amended formula adjustment. See notes to the basic financial statements. SECTION II COMPLIANCE AND INTERNAL CONTROL REPORTS Russell W. Hinton STATE AUDITOR (404) 656-2174 DEPARTMENOTF AUDITSAND ACCOUNTS 270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400 September 8, 2011 Honorable Nathan Deal, 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 REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS Ladies and Gentlemen: We have audited the financial statements of the governmental activities, each major fund, and the aggregate remaining fund information of Dougherty County Board of Education as of and for the year ended June 30, 2010, which collectively comprise Dougherty County Board of Education's basic financial statements and have issued our report thereon dated September 8, 2011. This report was qualified for a scope limitation, as identified in the auditor's report on the basic financial statements. Except as discussed in the following paragraph, 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 GovernmentAuditing Standards,issued by the Comptroller General of the United States. The financial statements of Dougherty County Stadium Authority (Authority) have not been audited, and we were not engaged to audit the Authority's financial statements as a part of our audit of the School District's basic financial statements. The Authority's financial activities are included in the School District's basic financial statements as a discretely presented component unit. We do not express an opinion for the discretely presented component unit. Internal Control Over Financial Reporting In planning and performing our audit, we considered Dougherty County Board of Education's internal control over financial reporting as a basis for designing our auditing procedures for the purpose of expressingour opinions on the financial statements, but not for the purpose of expressingan 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. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect and correct misstatements on a timely basis. A material weakness is a deficiency, or combination of deficiencies, in internal control such that there is a reasonable possibility that a material misstatement of the entity's financial statements will not be prevented, or detected and corrected on a timely basis. Our consideration of internal control over financial reporting was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over financial reporting that might be deficiencies, significant deficiencies, or material weaknesses. We did not identify any deficiencies in internal control over financial reportingthat we consider to be material weaknesses, as defined above. However, we consider item FS-6471-10-01, described in the accompanying Schedule of Findings and Questioned Costs to be a significant deficiency in internal control over financial reporting. A s@nificant deficiency is a deficiency, or combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. Com~lianceand 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 of laws, regulations, contracts and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. We noted certain matters that we have reported to management of Dougherty County Board of Education in a separate letter dated September 8, 2011. 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 DoughertyCounty Board of Education's response and, accordingly, we express no opinion on it. This report is intended solely for the information and use of the finance committee, management, members of the Dougherty County Board of Education, others within the entity, Federal awarding agencies and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties. - . Respectfully submitted, ~u'sselWl . Hinton, CPA, CGFM State Auditor Russell W. Hinton STATE AUDITOR (404) 656-2174 DEPARTMENOTF AUDITSAND ACCOUNTS 270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400 September 8, 2 0 1 1 Honorable Nathan Deal, Governor Members of the General Assembly Members of the State Board of Education and Superintendent and Members of the Dougherty County Board of Education INDEPENDENTAUDITOR'S REPORT ON COMPLIANCE WlTH REQUIREMENTSTHAT COULD HAVE A DIRECT AND MATERIAL EFFECT ON EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WlTH OMB CIRCULAR A-133 Ladies and Gentlemen: We have audited Dougherty County Board of Education's compliance with the types of compliance requirements described in the OMB Circular A-133 Compliance Supplement that could have a direct and material effect on each of its major Federal programs for the year ended June 30, 2010. Dougherty County Board of Education's major Federal programs are identified in the Summary of Auditor's Results section of the accompanying Schedule of Findings and Questioned Costs. Compliance with the requirements of laws, regulations, contracts, and grants applicable to each of its major Federal programs is the responsibility of Dougherty 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 of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and OMB Circular A-133, 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 of Education's compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Our audit 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 compliance requirements referred to above that could have a direct and material effect on each of its major Federal programs for the year ended June 30, 2010. Internal Control Over Compliance Management of Dougherty County Board of Education is responsible for establishing and maintaining effective internal control over compliance with the 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 the requirements that could have a direct and material effect on a major Federal program to determine the auditing procedures for the purpose of expressing our opinion on compliance and to test and report on internal control over compliance in accordance with OMB Circular A-133, 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 of the Dougherty County Board of Education's internal control over compliance. A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a Federal program on a timely basis. A material weakness in internal confro1 over compliance is a deficiency, or combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a Federal program will not be prevented, or detected and corrected, on a timely basis. Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over compliance that might be deficiencies, 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. This report is intended solely for the information and use of the finance committee, management, members of the Dougherty County Board of Education, others within the entity, Federal awarding agencies and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties. , Respectfully submitted, ~ u & e l lW. Hinton, CPA, CGFM State Auditor SECTION Ill AUDITEE'S RESPONSE TO PRIOR YEAR FINDINGS AND QUESTIONED COSTS DOUGHERW COUNTY BOARD OF EDUCATION AUDITEE'S RESPONSE SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30,2010 PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS FINDING CONTROL NUMBER AND STATUS FS-6471-08-01 FS-6471-09-01 Further Action Not Warranted Unresolved - See Corrective Action/Responses CORRECTIVE ACTION/RESPONSES CASH AND CASH EQUIVALENTS REVENUES/RECEIVABLES/RECEIPTS EXPENDlTURES/LIABILITIES/DISBURSEMENTS Inadequate Accounting Procedures over School Activity Accounts Finding Control Number: FS-6471-09-01 The number of staff available for assignment of accounting 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. PRIOR YEAR FEDERAL AWARD FINDINGS AND QUESTIONED COSTS FINDING CONTROL NUMBER AND STATUS FA-6471-08-01 FA-6471-08-02 FA-6471-09-01 Previously Reported Corrective Action Implemented Partially Resolved - See Corrective Action/Responses Previously Reported Corrective Action Implemented CORRECTIVE ACTION/RESPONSES PERIOD OF AVAILABILITY OF FEDERAL FUNDS Expenditures Outside of Grant Period U. S. Department of Education Through Georgia Department of Education ImprovingTeacher Quality State Grants (CFDA 84.367) Reading First State Grants (CFDA 84.357) Amount: $38,536.67 Finding Control Number: FA-6471-08-02 The grant has ceased. The School District is still awaiting a response from the Georgia Department of Education to determine the appropriate action needed to resolve this finding. SECTION IV FINDINGS AND QUESTIONED COSTS DOUGHERTY COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30,2010 I SUMMARY OF AUDITOR'S RESULTS Financial Statements Type of auditor's report issue: Governmental Activities; General Fund; Capital Projects Fund; Debt Service Fund; Aggregate Remaining Fund Information Discretely Presented Component Unit Internal control over financial reporting: Material weakness identified? Significant deficiency identified? Noncompliance material to financial statements noted: Federal Awards Internal Control over major programs: Material weakness identified? Significant deficiency identified? Type of auditor's report issued on compliance for major programs: All major programs Any audit findings disclosed that are required to be reported in accordance with OMB Circular A-133, Section 510(a)? Identification of major programs: CFDA Num ber(s) Name of Federal Program or Cluster Child Nutrition Cluster Title I, Part A Cluster Special Education Cluster State Fiscal Stabilization Fund Cluster Dollar threshold used to distinguish between Type A and Type B programs: Auditee qualified as low-risk auditee? Unqualified Disclaimer No Yes No None Reported Unqualified $1,050,983.56 No DOUGHERTY COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDEDJUNE 30,2010 II FINANCIALSTATEMENT FINDINGS AND QUESTIONEDCOSTS CASH AND CASH EQUIVALENTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILlTlES/DISBURSEMENTS Inadequate Accounting Procedures over School Activity Accounts Significant Deficiency Finding Control Number: FS-6471-10-01 Condition: This is a repeat finding (FS-6471-09-01, and FS-6471-08-01) from the years ended June 30, 2009, and June 30, 2008, respectively. The accounting procedures of the School District were insufficient to provide for adequate internal controls over the school activity accounts. Criteria: The School District's management is responsible for designing and maintaining internal controls that provide proper separation of duties and reasonable assurance that transactions are processed according to established procedures. Questioned Cost: N/A Information: Cash and Cash Equivalents The bank reconciliation function was not separated from the record keeping and voucher payment functions. Testing revealed bank reconciliations that were not approved by the appropriate personnel. Revenues and Receivables Deposit preparation was not separated from the record keeping and cash custody functions. The following deficiencies were noted during our test of transactions: 1. Receipts were not deposited in a timely manner. 2. Receipts did not have adequate supporting documentation in order to trace to recording on the general ledger. 3. Receipts did not have proper support. 4. Receipt documentation did not contain the signature of two employees as required by board policy. Expenditures/Liabilities/Disbursements The check writing function was not separated from the record keeping or processing of signed checks. The following deficiencies were noted during our test of transactions: 1. Several expenditures did not have invoices attached. 2. Several expenditures were not paid the correct amount per the invoice attached. 3. Expenditures lacked information to be able to trace to recording on the general ledger. 4. Several did not have evidence of receipt of goods. DOUGHERTY COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30,2010 II FINANCIALSTATEMENT FINDINGS AND QUESTIONEDCOSTS CASH AND CASH EQUIVALENTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LlABILlTlES/DlSBURSEM ENTS Inadequate Accounting Procedures over School Activity Accounts Significant Deficiency Finding Control Number: FS-6471-10-01 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 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 be 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. Ill FEDERALAWARD FINDINGS AND QUESTIONEDCOSTS No matters were reported. SECTION V MANAGEMENT'S RESPONSES DOUGHERTY COUNTY BOARD OF EDUCATION SCHEDULE OF MANAGEMENT'S RESPONSES YEAR ENDED JUNE 30,2010 Finding Control Number: FS-6471-10-01 We concur with this finding. The number of staff available for assignment of accounting functions is limited in the schools; however, the School District's internal a ud it o r w i l l continue to work with the available staff in each school to develop compensating controls and ensure proper separation of duties at the school level. In addition, during the 2012 fiscal year, the District will conduct training on the management of school activity accounts for principals and the appropriate school office staff. Contact Person: Phone: Fax: E-mail: Robert L. Lloyd, Executive Director of Finance and Operational Services (229) 431-1234 (229) 431-1239 robert.lloyd@docoschools.org