FANNIN COUNTY BOARD OF EDUCATION
BLUE RIDGE, GEORGIA REPORT ON AUDIT
OF THE FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2008
STATE OF GEORGIA
DEPARTMENT OF AUDITS AND ACCOUNTS
Russell W. Hinton State Auditor

FANNIN 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

EXHIBITS

BASIC FINANCIAL STATEMENTS

DISTRICT-WIDE FINANCIAL STATEMENTS

A

STATEMENT OF NET ASSETS

1

B

STATEMENT OF ACTIVITIES

2

FUND FINANCIAL STATEMENTS

C

BALANCE SHEET

GOVERNMENTAL FUNDS

4

D

RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET

TO THE STATEMENT OF NET ASSETS

5

E

STATEMENT OF REVENUES, EXPENDITURES AND CHANGES

IN FUND BALANCES

GOVERNMENTAL FUNDS

6

F

RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT

OF REVENUES, EXPENDITURES AND CHANGES IN FUND

BALANCES TO THE STATEMENT OF ACTIVITIES

7

G

STATEMENT OF FIDUCIARY NET ASSETS

FIDUCIARY FUNDS

8

H

NOTES TO THE BASIC FINANCIAL STATEMENTS

9

SCHEDULES

REQUIRED SUPPLEMENTARY INFORMATION

1 SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES

IN FUND BALANCES - BUDGET AND ACTUAL

GENERAL FUND

25

SUPPLEMENTARY INFORMATION

2 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS

26

3 SCHEDULE OF STATE REVENUE

27

FANNIN COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS -

SECTION I

FINANCIAL

SCHEDULES

SUPPLEMENTARY INFORMATION

4 SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS

28

5 ALLOTMENTS AND EXPENDITURES

GENERAL FUND - QUALITY BASIC EDUCATION PROGRAMS (QBE)

BY PROGRAM

29

SECTION II
COMPLIANCE AND INTERNAL CONTROL REPORTS
REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS
REPORT ON COMPLIANCE WITH REQUIREMENTS APPLICABLE TO EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH 0MB CIRCULAR A-133

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

SECTION IV FINDINGS .AND QUESTIONED COSTS SCHEDULE OF FINDINGS AND QUESTIONED COSTS

SECTION I FINANCIAL

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

DEPARTMENT OF AUDITS AND ACCOUNTS
270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400
June 16, 2009

Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the Fannin County Board of Education
INDEPENDENT AUDITOR'S COMBINED REPORT ON BASIC FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION - SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
Ladies and Gentlemen:
We have audited the accompanying financial statements ofthe governmental activities, each major fund, and the aggregate remaining fund information (Exhibits A through H) of the Fannin County Board of Education, as of and for the year ended June 30, 2008, which collectively comprise the Board's basic financial statements as listed in the table of contents. These financial statements are the responsibility of the Fannin County Board of Education's management. Our responsibility is to express opinions on these financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United States ofAmerica and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General ofthe United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fannin County Board of Education's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinions.

2008ARL-11

In our opinion, the financial statements referred to previously present fairly, in all material respects, the respective financial position of the governmental activities, each major fund, and the aggregate remaining fund information ofthe Fannin County Board of Education, as of June 30, 2008, and the respective changes in financial position thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America.
The Fannin County Board of Education has not presented Management's Discussion and Analysis that accounting principles generally accepted in the United States of America has determined is necessary to supplement, although not to be part of, the basic financial statements.
In accordance with Government Auditing Standards, we have also issued our report dated June 16, 2009, on our consideration ofthe Fannin County Board ofEducation'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 ofthat testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit.
The Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual, as presented on page 25, is not a required part of the basic financial statements but is supplementary information required by the accounting principles generally accepted in the United States of America. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods ofmeasurement and presentation ofthe required supplementary information. However, we did not audit the information and express no opinion on it.
Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Fannin County Board of Education's basic financial statements. The accompanying supplementary information which consist of Schedules 2 through 5, which includes the Schedule of Expenditures of Federal Awards as required by U.S. Office of Management and Budget Circular A-133, Audits ofStates, Local Governments, and Non-Profit Organizations, are presented for purposes of additional analysis and are not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements, and in our opinion, is fairly stated, in all material respects, in relation to the basic financial statements taken as a whole.
A copy of this report has been filed as a permanent record in the office of the State Auditor and made available to the press of the State, as provided for by Official Code of Georgia Annotated section 50-6-24.
Respectfully submitted,
-=R> . S Q _ ~ ~ Russell W. Hinton, CPA, CGFM State Auditor
RWH:as 2008ARL-11

FANNIN COUNTY BOARD OF EDUCATION

FANNIN COUNTY BOARD OF EDUCATION STATEMENT OF NET ASSETS JUNE 30, 2008
ASSETS
Cash and Cash Equivalents Investments Accounts Receivable, Net
Taxes State Government Federal Government Other Inventories Capital Assets, Non-Depreciable Capital Assets, Depreciable (Net of Accumulated Depreciation)
Total Assets
LIABILITIES
Accounts Payable Salaries and Benefits Payable Contracts Payable Retainages Payable Long-Term Liabilities
Due Within One Year Due in More Than One Year
Total Liabilities
NET ASSETS
Invested in Capital Assets, Net of Related Debt Restricted for
Continuation of Federal Programs Debt Service Capital Projects Unrestricted
Total Net Assets
Total Liabilities and Net Assets

EXHIBIT"A"

GOVERNMENTAL ACTIVITIES

$

14,731,798.01

2,086,861.81

1,204,144.55 2,092,449.57
283,412.79 19,167.97 31,645.47
4,955,941.12 31.414,821.73

$ =====5=6,=82;;,;0;;,i;,2;,.4~3;,;;.0~2

$

562,672.79

3,950,354.62

151,201.93

65,129.10

2,079,066.67 6,896,736.96

$

13,705,162.07

$

29,195,598.75

419,698.11 2,149,155.61 6,732,830.17 4,617,798.31

$

43,115,080.95

$ ====5,..6,=8=20=,2=4=3=.0=2

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

FANNIN COUNTY BOARD OF EDUCATION STATEMENT OF ACTIVITIES
FOR THE YEAR ENDED JUNE 30, 2008

GOVERNMENTAL ACTIVITIES
Instruction Support Services
Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Operations of Non-Instructional Services Enterprise Operations Food Services Interest on Short-Term and Long-Term Debt
Total Governmental Activities
General Revenues Taxes Property Taxes For Maintenance and Operations Other Taxes Sales Taxes Special Purpose Local Option Sales Tax For Capital Projects Other Sales Tax Investment Earnings Miscellaneous
Total General Revenues
Change in Net Assets
Net Assets - Beginning of Year
Net Assets - End of Year

EXPENSES

CHARGES FOR SERVICES

$ 20,975,872.42 $
1,107,470.65 936,655.81 616,463.73 554,334.70
2,528,035.76 232,497.18
2,556,646.34 1,549,061.58
22,508.24 13,746.94
333.75 1,729,136.28
303,627.48
$ 33,126,390.86 $

198,880.78
1.00 432,750.97 631,632.75

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

EXHIBIT"B"

PROGRAM REVENUES

OPERATING

CAPITAL

GRANTS AND

GRANTS AND

CONTRIBUTIONS CONTRIBUTIONS

NET (EXPENSES) REVENUES
AND CHANGES IN NET ASSETS

$ 13,480,129.04 $
233,981.92 251,897.00 440,371.38 646,435.86 999,711.05
9,657.84 1,001,377.12
565,180.62 167.82
9,430.27
333.75 1,069,114.06
$ 18,707,787.73 $

673,939.98 $
1,530.12
3,833.35 104,416.00
3,202.00
6,163.72 793,085.17 $

-6,622,922.62
-873,488.73 -684,758.81 -174,562.23
92,101.16 -1,528,324.71
-222,839.34 -1,551,434.87
-879,464.96 -19, 138.42 -4,316.67
0.00 -221,107.53 -303,627.48
-12,993,885.21

$

11,957,112.30

725,980.15

3,715,296.48 672,393.38 774,029.20 850,840.35

$

18,695,651.86

$

5,701,766.65

37,413,314.30

$ ===43='1=1=5,=08=0=.9=5

-3-

FANNIN COUNTY BOARD OF EDUCATION BALANCE SHEET
GOVERNMENTAL FUNDS JUNE 30, 2008

EXHIBIT"C"

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

GENERAL FUND

DISTRICTWIDE
CAPITAL PROJECTS
FUND

DEBT SERVICE
FUND

TOTAL

$ 7,085,676.75 $ 5,496,965.65 $ 2,149,155.61 $ 2,086,861.81

486,516.14 2,092,449.57
283,412.79 19,167.97 31 645.47

625,514.59

14,731,798.01 2,086,861.81
1,112,030.73 2,092,449.57
283,412.79 19,167.97 31 645.47

Total Assets

$ 9,998,868.69 $ 8,209,342.05 $ 2,149,155.61 $====2=0,!.=3=57:!.,3=6=6=.3=5

LIABILITIES AND FUND BALANCES
LIABILITIES
Accounts Payable Salaries and Benefits Payable Contracts Payable Retainages Payable
Total Liabilities
FUND BALANCES
Reserved for: Continuation of Federal Programs Debt Service Inventories Capital Projects
Unreserved Designated for Capital Outlay Designated for Student Activities Undesignated Reported in: General Fund
Total Fund Balances

$ 542,824.79 $

19,848.00

$

3,950,354.62

151,201.93

65,129.10

$ 4,493,179.41 $ 236,179.03

$

$ 388,052.64

$

$ 2,149,155.61

31,645.47

$ 7,973,163.02

767,129.82 212,514.71

4,106,346.64

$ 5,505,689.28 $ 7,973,163.02 $ 2,149,155.61 $

562,672.79 3,950,354.62
151,201.93 65 129.10
4,729,358.44
388,052.64 2,149,155.61
31,645.47 7,973,163.02
767,129.82 212,514.71
4 106 346.64
15,628,007.91

Total Liabilities and Fund Balances

$ 9,998,868.69 $ 8,209,342.05 $ 2,149,155.61 $==2=0=,3=57..,,3=6=6=.3=5

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

FANNIN COUNTY BOARD OF EDUCATION RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET
TO THE STATEMENT OF NET ASSETS JUNE 30, 2008

EXHIBIT"D"

Total Fund Balances - Governmental Funds (Exhibit "C")
Amounts reported for Governmental Activities in the Statement of Net Assets are different because:
Capital Assets used in Governmental Activities are not financial resources and therefore are not reported in the funds. These assets consist of:
Land Construction in Progress Land Improvements Buildings Equipment Accumulated Depreciation
Total Capital Assets
Some of the School District's property tax revenues will be collected after year-end but are not available soon enough to pay for the current period's expenditures.
Long-Term Liabilities, including Bonds Payable, are not due and payable in the current period and therefore are not reported as liabilities in the funds. Long-Term Liabilities at year-end consist of:
Bonds Payable Capital Leases Payable Compensated Absences
Total Long-Term Liabilities
Net Assets of Governmental Activities (Exhibit "A")

$ 15,628,007.91

$ 3,278,324.61 1,677,616.51 1,109,163.52
41,136,459.31 4,002,395.98
-14,833,197.08

36,370,762.85

92,113.82

$ -8,040,000.00 -375,496.95 -560,306.68

-8.975.803.63

$ 43.115,080.95

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

FANNIN COUNTY BOARD OF EDUCATION STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES
GOVERNMENTAL FUNDS YEAR ENDED JUNE 30, 2008

EXHIBIT"E"

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

GENERAL FUND

DISTRICTWIDE
CAPITAL PROJECTS
FUND

DEBT SERVICE
FUND

TOTAL

$ 12,517,623.61 672,393.38 $
16,194,166.90 2,618,036.82 631,632.75 445,730.92 850,840.35

3,715,296.48 688,669.18
321,038.93 $

$ 33,930,424.73 $ 4,725,004.59 $

$ 7,259.35

12,517,623.61 4,387,689.86
16,882,836.08 2,618,036.82 631,632.75 774,029.20 850,840.35

7,259.35 $ 38,662,688.67

$ 20,565,515.32

$ 20,565,515.32

1,107,470.65 936,655.81 615,366.05 553,984.70 $
2,528,035.76 232,497.18
2,567,896.37 1,504,282.69
20,211.19 13,746.94
333.75 1,741,117.55
150.00

350.00 4,900,088.85

1,107,470.65 936,655.81 615,366.05 554,334.70
2,528,035.76 232,497.18
2,567,896.37 1,504,282.69
20,211.19 13,746.94
333.75 1,741,117.55 4,900,238.85

179,709.65 23,917.48

$ 1,860,000.00 279,710.00

2,039,709.65 303,627.48

$ 32,590,891.09 $ 4,900,438.85 $ 2,139,710.00 $ 39,631,039.94

$ 1,339,533.64 $ -175,434.26 $ -2, 132,450.65 $ -968,351.27

$ 2,301,378.34 $ 4,280,133.75 $ 6,581,512.09

$ -2,301,378.34 -4,280, 133.75

-6,581,512.09

$ -2,301,378.34 $ -1,978,755.41 $ 4,280,133.75 $

0.00

$ -961,844.70 $ -2, 154,189.67 $ 2,147,683.10 $ -968,351.27

o, 6,467,533.98 1 127,352.69

1 472.51

16,596,359.18

Fund Balances - Ending

$ 5,505,689.28 $ 7,973,163.02 $ 2,149,155.61 $ 15,628,007.91

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

FANNIN COUNTY BOARD OF EDUCATION RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT OF
REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES TO THE STATEMENT OF ACTIVITIES JUNE 30, 2008

EXHIBIT "F"

Total Net Change in Fund Balances - Governmental Funds (Exhibit "E")
Amounts reported for Governmental Activities in the Statement of Activities are different because:
Capital Outlays are reported as expenditures in Governmental Funds. However, in the Statement of Activities, the cost of Capital Assets is allocated over their estimated useful lives as depreciation expense. In the current period, these amounts are:
Capital Outlay Depreciation Expense
Excess of Capital Outlay over Depreciation Expense
Because some property taxes will not be collected for several months after the School District's fiscal year ends, they are not considered "available" revenues.
In the Statement of Activities, only the gain on the disposal of the building is reported, whereas in the Governmental Funds, the entire proceeds from disposal increase financial resources. Thus, the change in net assets differs from the change in fund balances by the carrying value of the building disposed of.
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
Total Long-Term Debt Repayments
Some items reported in the Statement of Activities do not require the use of current financial resources and therefore are not reported as expenditures in Governmental Funds. These activities consist of:
Increase in Compensated Absences

$ -968,351.27

$ 5,790,483.49 -1,290.448.51

4,500,034.98

165,468.84

-17,521.42

$ 1,860,000.00 179,709.65

2,039,709.65

-17 574.13

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

$ 5,701,766.65

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

FANNIN COUNTY BOARD OF EDUCATION STATEMENT OF FIDUCIARY NET ASSETS
FIDUCIARY FUNDS JUNE 30, 2008
ASSETS Cash and Cash Equivalents
LIABILITIES Funds Held for Others

EXHIBIT"G"
AGENCY FUNDS
$ 27,428.98
$ 27,428.98

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

FANNIN COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2008

EXHIBIT "H"

Note 1: DESCRIPTION OF SCHOOL DISTRICT AND REPORTING ENTITY
REPORTING ENTITY
The Fannin County Board ofEducation (School District) was established under the laws ofthe State of Georgia and operates under the guidance of a school board elected by the voters and a Superintendent appointed by the Board. The Board is organized as a separate legal entity and has the power to levy taxes and issue bonds. Its budget is not subject to approval by any other entity. Accordingly, the School District is a primary government and consists of all the organizations that compose its legal entity.
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 Fannin County Board of Education.
District-wide Statements: The Statement ofNet Asset$ and the Statement ofActivities display information about the financial activities ofthe overall School District, except for fiduciary activities. Eliminations have been made to minimize the double counting of internal activities. Governmental activities generally are financed through taxes, intergovernmental revenues, and other nonexchange transactions.
The Statement of Activities presents a comparison between direct expenses and program revenues for each function of the School District's governmental activities.
Direct expenses are those that are specifically associated with a program or function and, therefore, are clearly identifiable to a particular function. Indirect expenses (expenses of the School District related to the administration and support ofthe School District's programs, such as office and maintenance personnel and accounting) are not allocated to programs.
Program revenues include (a) charges paid by the recipients ofgoods or services offered by the programs and (b) grants and contributions that are restricted to meeting the operational or capital requirements of a particular program. Revenues that are not classified as program revenues, including all taxes, are presented as general revenues.
Fund Financial Statements: The fund financial statements provide information about the School District's funds, including fiduciary funds. Eliminations have been made to minimize the double counting ofinternal activities. Separate statements for each category (governmental and fiduciary) are presented. The emphasis of fund financial statements is on major governmental funds, each displayed in a separate column.

-9-

FANNIN COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2008

EXHIBIT "H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The School District reports the following major governmental funds:
General Fund is the School District's primary operating fund. It accounts for all financial resources ofthe School District, except those resources required to be accounted for in another fund.
District-wide Capital Projects Fund accounts for financial resources including Special Purpose Local Option Sales Tax (SPLOST), Bond Proceeds and grants from Georgia State Financing and Investment Commission to be used for the acquisition, construction or renovation ofmajor capital facilities.
Debt Service Fund accounts for taxes (sales) legally restricted for the payment ofgeneral longterm principal, interest and paying agent's fees.
The School District reports the following fiduciary fund type:
Agency funds account for assets held by the School District as an agent for various funds, governments or individuals.
BASIS OF ACCOUNTING
The basis ofaccounting determines when transactions are reported on the financial statements. The District-wide governmental and fiduciary fund financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded at the time liabilities are incurred, regardless ofwhen the related cash flows take place. Nonexchange transactions, in which the School District gives (or receives) value without directly receiving (or giving) equal value in exchange, include property taxes, sales taxes, grants and donations. On an accrual basis, revenue from property taxes is recognized in the fiscal year for which the taxes are levied. Revenue from sales taxes is recognized in the fiscal year in which the underlying transaction (sale) takes place. Revenue from grants and donations is recognized in the fiscal year in which all eligibility requirements have been satisfied.
The School District uses funds to report on its financial position and the results of its operations. Fund accounting is designed to demonstrate legal compliance and to aid financial management by segregating transactions related to certain governmental functions or activities. A fund is a separate accounting entity with a self-balancing set of accounts.
Governmental funds are reported using the current financial resources measurement focus and the modified accrual basis ofaccounting. Under this method, revenues are recognized when measurable and available. The School District considers all revenues reported in the governmental funds to be available if they are collected within sixty days after year-end. Property taxes, sales taxes and interest are considered to be susceptible to accrual. Expenditures are recorded when the related fund
- 10 -

FANNIN COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2008

EXHIBIT"H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
liability is incurred, except for principal and interest on general long-term debt and compensated absences, which are recognized as expenditures to the extent they have matured. Capital asset acquisitions are reported as expenditures in governmental funds. Proceeds of general long-term liabilities and acquisitions under capital leases are reported as other financing sources.
The School District funds certain programs by a combination ofspecific cost-reimbursement grants, categorical grants, and general revenues. Thus, when program costs are incurred, there are both restricted and unrestricted net assets available to finance the program. It is the School District's policy to first apply grant resources to such programs, followed by cost-reimbursement grants, then general revenues.
CASH AND CASH EQUIVALENTS
COMPOSITION OF DEPOSITS Cash and cash equivalents consist ofcash on hand, demand deposits and short-term investments with original maturities of three months or less from the date of acquisition in authorized financial institutions. Official Code of Georgia Annotated Section 45-8-14 authorize the School District to deposit its funds in one or more solvent banks, insured Federal savings and loan associations or insured chartered building and loan associations.
INVESTMENTS
COMPOSITION OF INVESTMENTS Investments made by the School District in nonparticipating interest-earning contracts (such as certificates ofdeposit) and repurchase agreements are reported at cost. Participating interest-earning contracts and money market investments with a maturity at purchase ofone year or less are reported at amortized cost. Both participating interest-earning contracts and money market investments with a maturity at purchase greater than one year are reported at fair value. The Official Code ofGeorgia Annotated Section 36-83-4 authorizes the School District to invest its funds. In selecting among options for investment or among institutional bids for deposits, the highest rate ofreturn shall be the objective, given equivalent conditions of safety and liquidity. Funds may be invested in the following:
(1) Obligations issued by the State of Georgia or by other states,
(2) Obligations issued by the United States government,
(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,
- 11 -

FANNIN COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2008

EXHIBIT"H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(6) The Local Government Investment Pool administered by the State of Georgia, Office of Treasury and Fiscal Services,

(7) Repurchase agreements, and

(8) Obligations of other political subdivisions of the State of Georgia.

The School District does not have a formal policy regarding investment policies that address credit risks, custodial credit risks, concentration ofcredit risks, interest rate risks or foreign currency risks.

RECEIVABLES

Receivables consist of amounts due from property and sales taxes, grant reimbursements due on Federal, State or other grants for expenditures made but not reimbursed and other receivables disclosed from information available. Receivables are recorded when either the asset or revenue recognition criteria has been met. Receivables recorded on the basic financial statements do not include any amounts which would necessitate the need for an allowance for uncollectible receivables.

PROPERTY TAXES

The Fannin County Board ofCommissioners fixed the property tax levy for the 2007 tax digest year (calendar year) on August 2, 2007 (levy date). Taxes were due on December 20, 2007 (lien date). Taxes collected within the current fiscal year or within 60 days after year-end on the 2007 tax digest are reported as revenue in the governmental funds for fiscal year 2008. The Fannin County Tax Commissioner bills and collects the property taxes for the School District, withholds 2.5% oftaxes collected as a fee for tax collection and remits the balance of taxes collected to the School District. Property tax revenues, at the fund reporting level, during the fiscal year ended June 30, 2008, for maintenance and operations amounted to $11,791,643.46.

The tax millage rate levied for the 2007 tax year (calendar year) for the Fannin County Board of Education was as follows (a mill equals $1 per thousand dollars of assessed value):

School Operations

11.95 mills

SALES TAXES

Special Purpose Local Option Sales Tax, at the fund reporting level, during the year amounted to $3,715,296.48 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.

- 12 -

FANNIN COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2008

EXHIBIT "H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

INVENTORIES

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

CAPITAL ASSETS

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

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

Capitalization Policy

Estimated Useful Life

Land Land Improvements Buildings and Improvements Equipment

All

NIA

$ 20,000.00 20 to 80 years

$ 50,000.00 20 to 80 years

$ 5,000.00 3 to 20 years

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

COMPENSATED ABSENCES

Members ofthe Teachers Retirement System ofGeorgia (TRS) may apply unused sick leave toward early retirement. The liability for early retirement will be borne by TRS rather than by the individual

- 13 -

FANNIN COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2008

EXHIBIT"H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

School Districts. Otherwise, sick leave does not vest with the employee, and no liability is reported in the School District's financial statements.

Upon retirement from the Fannin County School System, employees may choose to be paid for all days of unused, accumulated sick leave (accumulated in the Fannin County School System) at the rate of one-half the amount paid to substitutes or apply sick leave toward retirement according to HB: 308.

2005 2006 2007

Beginning of Year Liability

Increase

Decrease

End of Year Liability

$ 513,937.00 $ 169,578.00 $ 173,278.00 $ 510,237.00 $ 510,237.00 $ 172,627.40 $ 163,739.00 $ 519,125.40 $ 519,125.40 $ 185,009.22 $ 161,402.07 $ 542,732.55

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 and fund financial statements, the School District recognizes bond premiums and discounts, as well as bond issuance costs during the fiscal year bonds are issued. Premiums received on debt issuances are reported as other financing sources while discounts on debt issuances are reported as other financing uses. Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as debt service expenditures. General obligation bonds are direct obligations and pledge the full faith and credit ofthe government. The outstanding amount ofthese bonds is recorded in the Statement ofNet Assets.

NET ASSETS

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

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

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

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FANNIN COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2008

EXHIBIT "H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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.
Note 3: DEPOSITS AND INVESTMENTS
COLLATERALIZATION OF DEPOSITS Official Code of Georgia Annotated (OCGA) Section 45-8-12 provides that there shall not be on deposit at any time in any depository for a time longer than ten days a sum of money which has not been secured by surety bond, by guarantee ofinsurance, or by collateral. The aggregate ofthe face value of such surety bond and the market value of securities pledged shall be equal to not less than 110 percent ofthe public funds being secured after the deduction ofthe amount ofdeposit insurance. Ifa depository elects the pooled method (OCGA 45-8-13.1) the aggregate ofthe market value ofthe securities pledged to secure a pool ofpublic funds shall be not less than 110 percent ofthe daily pool balance.
Acceptable security for deposits consists of any one of or any combination of the following:
(1) Surety bond signed by a surety company duly qualified and authorized to transact business within the State of Georgia,
(2) Insurance on accounts provided by the Federal Deposit Insurance Corporation,
(3) Bonds, bills, notes, certificates of indebtedness or other direct obligations of the United States or of the State of Georgia,
(4) Bonds, bills, notes, certificates of indebtedness or other obligations of the counties or municipalities of the State of Georgia,
(5) Bonds of any public authority created by the laws of the State of Georgia, providing that the statute that created the authority authorized the use of the bonds for this purpose,
(6) Industrial revenue bonds and bonds of development authorities created by the laws 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.
- 15 -

FANNIN COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2008

EXHIBIT "H"

Note 3: DEPOSITS AND INVESTMENTS

CATEGORIZATION OF DEPOSITS At June 30, 2008, the bank balances were$ 15,135,029.13. The amounts ofthe total uninsured bank balances are classified into three categories of custodial credit risk:

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

The School District's uninsured deposits are classified by custodial credit risk category at June 30, 2008, as follows:

Custodial Credit Risk Category

Bank Balance

1

$

0.00

2

0.00

3

12,852,088.40

Total

$12,852,088.40

CATEGORIZATION OF INVESTMENTS At June 30, 2008, the carrying value ofthe School District's total investments was $2,086,861.81, which is materially the same as fair value. This investment consisted entirely of funds invested in the Georgia Fund 1, formerly referred to as LGIP, administered by the State of Georgia, Office of Treasury and Fiscal Services which are not required to be categorized since the School District did not own any specific identifiable securities in the pool. The investment policy of the State of Georgia, Office ofTreasury and Fiscal Services for the Georgia Fund 1 (Primary Liquidity Portfolio) does not provide for investment in derivatives or similar investments. Additional information on the Georgia Fund 1 is disclosed in the State ofGeorgia Comprehensive Annual Financial Report. This audit can be obtained from the Georgia Department of Audits and Accounts at http://www.audits. state.ga. us/intemet/searchRpts.html.

The Primary Liquidity Portfolio consists ofGeorgia Fund 1 which is not registered with the SEC as an investment company but does operate in a manner consistent with the SEC's Rule 2a-7 of the Investment Company Act of 1940. The investment is valued at the pool's share price, $1.00 per share. The pool is an AAAm rated investment pool by Standard and Poor's. The weighted average maturity of Georgia Fund 1 may not exceed 60 days. The weighted average maturity for Georgia Fund 1 on June 30, 2008, was 40 days.

- 16 -

FANNIN COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2008

EXHIBIT "H"

Note 4: NON-MONETARY TRANSACTIONS

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

Note 5: CAPITAL ASSETS

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

Balances July 1. 2007

Increases

Balances Decreases June 30, 2008

Governmental Activities Capital Assets, Not Being Depreciated:
Land Construction in Progress

$ 1,641,534.95 $ 1,636,789.66

$ 3,278,324.61

5,112,849.77 3,965,675.66 $7,400,908.92 1,677,616.51

Total Capital Assets Not Being Depreciated $ 6,754,384.72 $ 5,602,465.32 $7,400,908.92 $ 4,955,941.12

Capital Assets Being Depreciated Buildings and Improvements Equipment Land Improvements

$34,043,413.24 $ 7,328,842.27 $ 235,796.20 $41,136,459.31

3,925,352.16

89,043.82

12,000.00 4,002,395.98

1,051,248.00 171,041.00 113,125.48 1,109,163.52

Less Accumulated Depreciation for: Buildings and Improvements Equipment Land Improvements

10,804,937.00 2,106,511.83
974,700.00

957,565.66 315,283.66
17,599.19

218,274.78 11,544,227.88 12,000.00 2,409,795.49 113,125.48 879,173.71

Total Capital Assets, Being Depreciated, Net $25.133.864.57 $ 6,298,478.58 $ 17,521.42 $31,414.821.73

Governmental Activity Capital Assets - Net $31.888.249.29 $11.900.943.90 $7,418,430.34 $36.370.762.85

Capital assets being acquired under capital leases as of June 30, 2008, are as follows:

Governmental Funds

Equipment Less: Accumulated Depreciation

$ 903,408.00 206,731.00

$ 696,677.00

Current year depreciation expense by function is as follows:

- 17 -

FANNIN COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2008

EXHIBIT"H"

Note 5: CAPITAL ASSETS

Instruction Support Services
Educational Media Services Maintenance and Operation of Plant Student Transportation Services Central Support Services Food Services

$ 1,071,870.60

$ 2,867.19 7,183.05
190,977.92 6,000.00

207,028.16 11,549.75

$ 1,290,448.51

Note 6: RESTRICTED ASSETS

Special Purpose Local Option Sales Tax (SPLOST) and general obligation bond proceeds are restricted assets in the Statement of Net Assets because their use is limited by applicable bond covenants or statutory provisions. Restricted assets at June 30, 2008, were as follows:

District-wide Capital Projects

Bond

SPLOST

Proceeds

Debt Service Funds

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

$2,149,155.61 $4,606,477.19 $ 890,488.46
$ 2,086,861.81

Note 7: INTERFUND TRANSFERS

Interfund transfers for the year ended June 30, 2008, consisted of the following:

Transfer to

Transfers From

District-wide

General

Capital

Fund

Projects

District-wide Capital Projects Debt Service Fund

$ 2,301,378.34 $ 4,280,133.75

Total

$ 2,301,378.34 $ 4,280,133.75

- 18 -

FANNIN COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2008

EXHIBIT "H"

Note 7: INTERFUND TRANSFERS

Transfers are used (1) to move property tax revenues collected by the General Fund to the Districtwide Capital Projects Fund as supplemental funding source for capital construction projects, and (2) to move SPLOST collections to the Debt Service Fund to pay current year Bond Principal and Interest.

Note 8: RISK MANAGEMENT

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

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

The School District is self-insured with regard to unemployment compensation claims. The School District accounts for claims within the General Fund with expenses/expenditures and liability being reported when it is probable that a loss has occurred, and the amount of that loss can be reasonably estimated. The School District has not incurred any liabilities for unemployment compensation during the past two fiscal years.

The School District participates in the Georgia School Boards Association Workers' Compensation Fund, a public entity risk pool organized on July 1, 1992, to develop, implement, and administer a program ofworkers' compensation self-insurance for its member organizations. The School District pays an annual premium to the Fund for its general insurance coverage. Additional insurance coverage is provided through an agreement by the Fund with the Safety National Casualty Corporation to provide coverage for potential losses sustained by the Fund in excess of$400,000.00 loss per occurrence, up to $1,000,000.00.

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

Position Covered

Amount

Superintendent All Other Employees

$ I00,000.00 $ I 00,000.00

- 19 -

FANNIN COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2008

EXHIBIT"H"

Note 9: LONG-TERM DEBT

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

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

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

Purpose

Interest Rates

Amount

General Government - Series 2005

2.8%- 3.35% $ 8,040,000.00

The changes in Long-Term Debt during the fiscal year ended June 30, 2008, were as follows:

Capital Leases

Governmental Funds

General

Compensated Obligation

Absences (1)

Bonds

Total

Balance July 1, 2007

$ 555,206.60 $ 542,732.55 $ 9,900,000.00 $10,997,939.15

Additions

167,712.64

167,712.64

Deletions

179,709.65

150,138.51 1,860,000.00 2,189,848.16

Balance June 30, 2008

$ 375 496,95 $ 560 306 68 $ 8.040.000.00 $ 8.975.803,63

Portion of Long-Term Debt Due within One Year

$ 164,066.67 $

0.00 $ 1,915,000.00 $ 2,079,066.67

(1) The portion ofCompensated Absences due within one year has been determined to be immaterial to the basic financial statements.

At June 30, 2008, payments due by fiscal year which includes principal and interest for these items are as follows:

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FANNIN COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2008

EXHIBIT "H"

Note 9: LONG-TERM DEBT

Fiscal Year Ended June 30

Capital Leases

Principal

Interest

2009 2010 2011

$ 164,066.67 $ 103,611.82 107,818.46

15,971.57 8,584.07 4,377.43

Total Principal and Interest

$ 375,496.95 $ 28,933.07

Fiscal Year Ended June 30

General Obligation

Debt

Principal

Interest

2009 2010 2011 2012

$ 1,915,000.00 $ 225,423.75

1,980,000.00

166,487.50

2,040,000.00

103,157.50

2. 105,000.00

35,258.75

Total Principal and Interest

$8,040,000.00 $ 530,327.50

Note 10: ON-BEHALF PAYMENTS

The School District has recognized revenues and costs in the amount of $869,433.92 for health insurance and retirement contributions paid on the School District's behalf by the following State Agencies.

Georgia Department of Education Paid to the Georgia Department of Community Health For Health Insurance ofNon-Certified Personnel In the amount of $834,112.40

Paid to the Teachers Retirement System of Georgia For Teachers Retirement System (TRS) Employer's Cost In the amount of $31,280.52

Office of Treasury and Fiscal Services Paid to the Public School Employees Retirement System For Public School Employees Retirement (PSERS) Employer's Cost In the amount of $4,041.00

- 21 -

FANNIN COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2008

EXHIBIT"H"

Note 11: SIGNIFICANT COMMITMENTS

The following is an analysis ofsignificant outstanding construction or renovation contracts executed by the School District as of June 30, 2008:

Project

Unearned Executed Contracts

Fannin High School Athletic Complex Site Prep

$ 53,850.00

The amount described in this note is not reflected in the basic financial statements.

Note 12: SIGNIFICANT CONTINGENT LIABILITIES

Amounts received or receivable principally from the Federal government are subject to audit and review by grantor agencies. This could result in requests for reimbursement to the grantor agency for any costs which are disallowed under grant terms. The School District believes that such disallowances, if any, will be immaterial to its overall financial position.

The School District is a defendant in various legal proceedings pertaining to matters incidental to the performance ofroutine School District operations. The ultimate disposition ofthese proceedings is not presently determinable, but is not believed to be material to the basic financial statements.

Note 13: POSTEMPLOYMENT BENEFITS

Georgia Retiree Health Benefit Fund

Plan Description. The School District contributes to the Georgia Retiree Health Benefit Fund ("GRHBF"), a cost-sharing multiple-employer defined benefit postemployrnent healthcare plan administered by the Department ofCommunity Health. GRHBF provides health insurance benefits to eligible retirees and their qualified beneficiaries. Pursuant to Title 45, Chapter 18 ofthe Official Code ofGeorgia Annotated, the authority to establish and amend the benefit provisions ofthe plan is assigned to the Board of Community Health. The Department of Community Health issues a publicly available financial report that includes financial statements and required supplementary information for GRHBF. That report may be obtained from the Department ofCommunity Health at 2 Peachtree Street, Atlanta, Georgia 30303.

Funding Policy. The contribution requirements of plan members and participating employers are established and may be amended by the Board of Community Health. Contributions of plan members or beneficiaries receiving benefits vary based on plan election, dependent coverage, and Medicare eligibility and election. On average, plan members pay approximately twenty-five percent (25%) of the cost of health insurance coverage.

- 22 -

FANNIN COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2008

EXHIBIT "H"

Note 13: POSTEMPLOYMENT BENEFITS

Participating employers are statutorily required to contribute in accordance with the employer contribution rate established by the Board of Community Health. This contribution rate is established to fund both the active and retired employee health insurance plans based on projected pay-as-you-go financing requirements. The employer contribution rates for the combined active and retiree plans for the fiscal year ended June 30, 2008, were as follows:

Teachers Non-Certificated Employees

18.534% of state-based salaries $162.72 per month

The School District's contribution to the health insurance plans for the fiscal year ended June 30, 2008, was $3,307,236.47, which equaled the required contribution.

Note 14: RETIREMENT PLANS

TEACHERS RETIREMENT SYSTEM OF GEORGIA (TRS)

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

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

Fiscal Year

Percentage Contributed

Required Contribution

2008 2007 2006

100% 100% 100%

$ 1,588,879.67 $ 1,503,592.64 $ 1,407,752.00

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(This page left intentionally blank)

FANNIN COUNTY BOARD OF EDUCATION GENERAL FUND
SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL
YEAR ENDED JUNE 30, 2008

SCHEDULE "1"

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

NONAPPROPRIATED BUDGETS

ORIGINAL

FINAL

ACTUAL AMOUNTS

$ 12,362,590.00 $ 12,362,590.00 $ 12,517,623.61

672,393.38

15,038,169.00

15,038,169.00

16,194, 166.90

3,472,091.00

3,472,091.00

2,618,036.82

430,000.00

430,000.00

631,632.75

303,897.00

303,897.00

445,730.92

100,000.00

100,000.00

850,840.35

$ 31,706,747.00 $ 31,706,747.00 $ 33,930,424.73

$ 21,191,545.09 $ 21,191,545.09 $ 20,565,515.32

1,132,462.00 593,474.00 594,108.00 658,783.91
2,008,682.00 255,075.00
2,833,167.00 1,756,473.00
75,000.00 7,390.00
1,761,711.09

1, 132,462.00 593,474.00 594,108.00 658,783.91
2,008,682.00 255,075.00
2,833,167.00 1,756,473.00
75,000.00 7,390.00
1,761,711.09

1,107,470.65 936,655.81 615,366.05 553,984.70
2,528,035.76 232,497.18
2,567,896.37 1,504,282.69
20,211.19 13,746.94 1,741,117.55
333.75 150.00 203,627.13

$ 32,867,871.09 $ 32,867,871.09 $ 32,590,891.09

$ -1,161,124.09 $ -1, 161,124.09 $ 1,339,533.64

$

435,000.00 $

435,000.00

-3,907,445.00

-3,907,445.00 $ -2,301,378.34

$ -3,472,445.00 $ -3,472,445.00 $ -2,301,378.34

$ -4,633,569.09 $ -4,633,569.09 $

-961,844. 70

6,467,533.98

6,467,533.98

6,467,533.98

20,061.66

-12,858.40

Fund Balances - Ending

$ 1,854,026.55 $ 1,821,106.49 $ 5,505,689.28

Notes to the Schedule of Revenues, Exeenditures and Changes in Fund Balances Budget and Actual
The accompanying schedule of revenues, expenditures and changes in fund balances budget and actual is presented on the modified accrual basis of accounting which is the basis of accounting used in the presentation of the fund financial statements.

See notes to the basic financial statements.

-25-

FANNIN COUNTY BOARD OF EDUCATION SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
YEAR ENDED JUNE 30, 2008

SCHEDULE "2"

FUNDING AGENCY PROGRAM/GRANT
Agriculture, U. S. Department of Child Nutrition Cluster Pass-Through From Georgia Department of Education Food Services School Breakfast Program National School Lunch Program
Total Child Nutrition Cluster
Other Programs Pass-Through From Georgia Department of Education Food Donation (1) Pass-Through From Office of Treasury and Fiscal Services National Forest Reserve Funds
Total U.S. Department of Agriculture
Education, U. S. Department of Special Education Cluster Pass-Through From Georgia Department of Education Special Education Grants to States Preschool Grants
Total Special Education Cluster
Other Programs Pass-Through From Georgia Department of Education Career and Technical Education - Basic Grants to States English Language Acquisition Grants Enhancing Education Through Technology Program Improving Teacher Quality State Grants Safe and Drug-Free Schools and Communities - State Grants State Grants for Innovative Programs Title I Grants to Local Educational Agencies
Total U. S. Department of Education

CFDA NUMBER

PASS-
THROUGH ENTITY ID NUMBER

EXPENDITURES IN PERIOD

. 10.553
10.555

N/A

(2)

N/A

$

1,316,027.20

$

1,316,027.20

10.550 10.665

NIA

73,123.91

N/A

{3)

$

1,389,151.11

84.027 84.173

N/A $ NIA
$

445,088.11 36,093.00
481,181.11

84.048 84.365 84.318 84.367 84.186 84.298 84.010

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

31,382.71 144.76
86,717.79 158,404.50
16,296.22 4,262.42 789,361.07
1,567,750.58

Total Federal Financial Assistance
N/A = Not Available

$ ==2,=95=6==,9=0=1.=69=

Notes to the Schedule of Expenditures of Federal Awards

(1) The amount shown for the Food Donation Program represents the Federally assigned value of nonmonetary assistance for donated commodities received and/or consumed by the School District during the current fiscal year.
(2) Expenditures for the funds earned on the School Breakfast Program ($337,002.19) were not maintained separately and are included in the 2008 National School Lunch Program.
(3) Funds earned on this program, in the amount of $52,942.42, do not require reporting of expenditures.

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

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

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

See notes to the basic financial statements.

- 26-

FANNIN COUNTY BOARD OF EDUCATION SCHEDULE OF STATE REVENUE YEAR ENDED JUNE 30, 2008

SCHEDULE "3"

AGENCY/FUNDING

GOVERNMENTAL FUND TYPES

CAPITAL

GENERAL

PROJECTS

FUND

FUND

GRANTS

Education, Georgia Department of

Quality Basic Education

Direct Instructional Cost

Kindergarten Program

$

883,676.00

$

Kindergarten Program - Early Intervention Program

321,178.00

Primary Grades (1-3) Program

2,182,775.00

Primary Grades - Early Intervention (1-3) Program

458,153.00

Upper Elementary Grades (4-5) Program

1,124,230.00

Upper Elementary Grades - Early Intervention (4-5) Program

100,869.00

Middle School (6-8) Program

2,079,720.00

High School General Education (9-12) Program

1,668,216.00

Vocational Laboratory (9-12) Program

773,887.00

Students with Disabilities

1,943,029.00

Gifted Student - Category VI

138,413.00

Remedial Education Program

47,497.00

Alternative Education Program

168,444.00

English Speakers of Other Languages (ESOL)

-1,268.00

Media Center Program

333,687.00

20 Days Additional Instruction

107,720.00

Staff and Professional Development

57,468.00

Indirect Cost

Central Administration

466,517.00

School Administration

703,210.00

Facility Maintenance and Operations

751,344.00

Categorical Grants

Pupil Transportation

Regular

522,443.00

Bus Replacement

104,416.00

Sparsity

35,802.00

Nursing Services

71,505.00

Vocational Supervisors

17,327.00

Mid-term Adjustment Hold-Harmless

160,547.00

Food Services

79,108.00

Vocational Education

56,568.29

Amended Formula Adjustment

-308, 101.00

Other State Programs

Graduation Coaches- High School

72,720.00

Graduation Coaches- Middle School

42,096.00

Health Insurance

834,112.40

Middle School Math and Remediation and Intervention Grant

2,465.00

National Teacher Certification

45,879.00

Preschool Handicapped Program

94,262.69

Special Education Low Incidence Grant

18,755.00

Teachers' Retirement

31,280.52

Virtual Schools Grant

175.00

Georgia State Financing and Investment Commission Reimbursement on Construction Projects

$

688,669.18

Office of Treasury and Fiscal Services Public School Employees Retirement

4 041.00

TOTAL
883,676.00 321,178.00 2,182,775.00 458,153.00 1,124,230.00 100,869.00 2,079,720.00 1,668,216.00 773,887.00 1,943,029.00 138,413.00 47,497.00 168,444.00
-1,268.00 333,687.00 107,720.00
57,468.00
466,517.00 703,210.00 751,344.00
522,443.00 104,416.00 35,802.00 71,505.00 17,327.00 160,547.00 79,108.00 56,568.29 -308, 101.00
72,720.00 42,096.00 834,112.40
2,465.00 45,879.00 94,262.69 18,755.00 31,280.52
175.00
688,669.18
4041.00

$ 16,194,166.90 $

688,669.18 $ 16,882,836.08

See notes to the basic financial statements.

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FANNIN COUNTY BOARD OF EDUCATION SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS
YEAR ENDED JUNE 30, 2008

SCHEDULE "4"

PROJECT

ORIGINAL ESTIMATED
COST (1)

CURRENT ESTIMATED COSTS (2)

AMOUNT EXPENDED IN CURRENT YEAR (3) (4)

AMOUNT EXPENDED
IN PRIOR YEARS (3) (4)

PROJECT STATUS

Acquisition of land and the construction and equipping thereon of a new auditorium and multi-purpose facility complex and the construction of additional classrooms and the adding to, remodeling, renovation, improving and equipping of classrooms, physical education, instructional and support space and grounds of Blue Ridge Elementary School, West Fannin Elementary School, East Fannin Elementary School, Fannin County Middle School and Fannin County High School, including lunchrooms, equipment, fixtures for such schools and other existing facilities within the School District, and the purchase of copiers, energy management systems, heating and air conditioning systems, lighting and similar equipment and computers and other technology, and the remodeling and retrofitting of existing facilities to accommodate computers and other technology.

$ 16,950,000.00 $ 22,449,187.10

$ 22,449,187.10 Completed

Acquiring, constructing, and equipping a student information system technology hub to provide system-wide computer and networking services: adding to, remodeling, renovating, improving, and equipping existing educational buildings, properties, and facilities of the School District, and acquiring any necessary real and personal property and equipment, including computers and related technology, copiers, energy management, including computers and related technology, copiers, energy management systems, heating and air conditioning systems, lighting, and similar equipment.

20,000,000.00 20,000,000.00 $ 3,263,649.19

1,251,712.70 Ongoing

$ 3619501000.00 $ 42,449,187.10 $ 31263,649.19 $ 23,700,899.80

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

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

(3) The voters of Fannin County approved the imposition of a 1% sales tax to fund the above projects and retire associated debt. Amounts expended for these projects may include sales tax proceeds, state, local property taxes and/or other funds over the life of the projects.

(4) In addition to the expenditures shown above, the School District has incurred interest to provide advance funding for the above projects as follows:

Prior Years

$ 2,445,811.00

Current Year

279,710.00

Total

$ 2,725,521.00

See notes to the basic financial statements.

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FANNIN COUNTY BOARD OF EDUCATION GENERAL FUND - QUALITY BASIC EDUCATION PROGRAM (QBE)
ALLOTMENTS AND EXPENDITURES - BY PROGRAM YEAR ENDED JUNE 30, 2008

SCHEDULE "5"

DESCRIPTION
Direct Instructional Programs Kindergarten Program Kindergarten Program-Early Intervention Program Primary Grades (1-3) Program Primary Grades-Early Intervention (1-3) Program Upper Elementary Grades (4-5) Program Upper Elementary Grades-Early Intervention (4-5) Program Middle School (6-8) Program High School General Education (9-12) Program Vocational Laboratory (9-12) Program Students with Disabilities Category II Category Ill Category IV Category V Gifted Student - Category VI Remedial Education Program Alternative Education Program English Speakers of Other Languages (ESOL)
TOTAL DIRECT INSTRUCTIONAL PROGRAMS
Media Center Program Staff and Professional Development

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

ELIGIBLE QBE PROGRAM COSTS

SALARIES

OPERATIONS

TOTAL

$

1,084,857.00 $ 1,182,588.83 $

5,129.14 $ 1,187,717.97

431,990.00

259,256.46

2,668.54

261,925.00

2,713,447.00

3,224,929.18

28,295.76

3,253,224.94

600,741.00

428,405.27

4,708.09

433,113.36

1,409,833.00

1,729,853.34

10,187.60

1,740,040.94

134,689.00 2,604,036.00 2,088,126.00
970,698.00 2,432,986.00
176,819.00 56,416.00
210,653.00

238,202.24 3,014,063.01 2,852,182.01
813,910.60
348,771.55 695,289.65
54,929.17 1,217,148.82
247,127.85 49,835.39
104,618.23 23,556.52

773.61 26,514.77 66,716.79 75,197.88
18,239.65
4,071.09 491.87
132,808.22

238,975.85 3,040,577.78 2,918,898.80
889,108.48
348,771.55 713,529.30
54,929.17 1,217,148.82
251,198.94 50,327.26
237,426.45 23,556.52

$

14,915,291.00 $ 16,484,668.12 $ 375,803.01 $ 16,860,471.13

418,384.00 72436.00

551,992.14 33 482.14

44,100.53 40 375.59

596,092.67 73 857.73

TOTAL QBE FORMULA FUNDS

$

15 406111.00 $ 17,070,142.40 $ 460,279.13 $ 17,530,421.53

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

See notes to the basic financial statements.

- 29 -

SECTION II COMPLIANCE AND INTERNAL CONTROL REPORTS

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

DEPARTMENT OF AUDITS AND ACCOUNTS
270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400
June 16, 2009

Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the Fannin County Board of Education
REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS
Ladies and Gentlemen:
We have audited the financial statements of the governmental activities, each major fund, and the aggregate remaining fund information of Fannin County Board of Education as of and for the year ended June 30, 2008, which collectively comprise Fannin County Board of Education's basic financial statements and have issued our report thereon dated June 16, 2009. We conducted our audit in accordance with auditing standards generally accepted in the United States ofAmerica and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States.
Internal Control Over Financial Reporting
In planning and performing our audit, we considered Fannin County Board of Education's internal control over financial reporting as a basis for designing our auditing procedures for the purpose of expressing our opinions on the financial statements, but not for the purpose ofexpressing an opinion on the effectiveness of the Fannin County Board of Education's internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness of the Fannin County Board of Education's internal control over financial reporting.
A control deficiency 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 misstatements on a timely basis. A significant deficiency is a control deficiency, or combination of control deficiencies, that adversely affect the Fannin County Board ofEducation's ability to initiate, authorize, record, process, or report financial data reliably in accordance with generally accepted
2008YB-10

accounting principles such that there is more than a remote likelihood that a misstatement of the Fannin County Board ofEducation's financial statements that is more than inconsequential will not be prevented or detected by the Fannin County Board of Education's internal control.
A material weakness is a significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood that a material misstatement ofthe financial statements will not be prevented or detected by the Fannin County Board of Education's internal control.
Our consideration of the internal control over financial reporting was for the limited purpose described in the first paragraph ofthis section and would not necessarily disclose all deficiencies in internal control that might be significant deficiencies or material weaknesses. We did not identify any deficiencies in internal control over financial reporting that we consider to be material weaknesses, as defined above.
Compliance and Other Matters
As part of obtaining reasonable assurance about whether Fannin County Board of Education's financial statements are free of material misstatement, we performed tests of its compliance with certain provisions oflaws, regulations, contracts and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards.
This report is intended solely for the information and use of management, members of the Fannin 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,

RWH:as 2008YB-10

ell W. Hinton, CPA, CGFM State Auditor

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

DEPARTMENT OF AUDITS AND ACCOUNTS
270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400
June 16, 2009

Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the Fannin County Board of Education
REPORT ON COMPLIANCE WITH REQUIREMENTS APPLICABLE TO EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH 0MB CIRCULARA-133
Ladies and Gentlemen:
Compliance
We have audited the compliance ofFannin County Board ofEducation with the types ofcompliance requirements described in the U.S. Office of Management and Budget (0MB) Circular A-133 Compliance Supplement that are applicable to each of its major Federal programs for the year ended June 30, 2008. Fannin 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 Fannin County Board of Education's management. Our responsibility is to express an opinion on Fannin 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 ofthe United States; and 0MB Circular A133, Audits of States, Local Governments, and Non-Profit Organizations. Those standards and 0MB Circular A-133 require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major Federal program occurred. An audit includes examining, on a test basis, evidence about the Fannin County Board ofEducation's compliance with those requirements and performing such other procedures as we considered necessary in the

2008SA-10

circumstances. We believe that our audit provides a reasonable basis for our opinion. Our audit does not provide a legal determination on Fannin County Board of Education's compliance with those requirements.
In our opinion, the Fannin County Board of Education complied, in all material respects, with the requirements referred to above that are applicable to each ofits major Federal programs for the year ended June 30, 2008.
Internal Control Over Compliance
The management of Fannin County Board of Education is responsible for establishing and maintaining effective internal control over compliance with requirements of laws, regulations, contracts and grants applicable to Federal programs. In planning and performing our audit, we considered Fannin County Board ofEducation's internal control over compliance with requirements that could have a direct and material effect on a major Federal program in order to determine our auditing procedures for the purpose ofexpressing our opinion on compliance, but not for the purpose ofexpressing an opinion on the effectiveness ofinternal control over compliance. Accordingly, we do not express an opinion on the effectiveness of the Fannin County Board of Education's internal control over compliance.
A control deficiency in an entity's internal control over compliance exists when the design or operation ofa control does not allow management or employees, in the normal course ofperforming their assigned functions, to prevent or detect noncompliance with a type ofcompliance requirement of a Federal program on a timely basis. A significant deficiency is a control deficiency, or combination ofcontrol deficiencies, that adversely affects the entity's ability to administer a Federal program such that there is more than a remote likelihood that noncompliance with a type of compliance requirement of a Federal program that is more than inconsequential will not be prevented or detected by the entity's internal control.
A material weakness is a significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood that material noncompliance with a type of compliance requirement of a Federal program will not be prevented or detected by the entity's internal control.
Our consideration ofthe internal control over compliance was for the limited purpose described in the first paragraph of this section and would not necessarily identify all deficiencies in internal control that might be significant deficiencies or material weaknesses. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses, as defined above.
2008SA-10

This report is intended solely for the information and use of management, members ofthe Fannin County Board ofEducation, Federal awarding agencies and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties.
Respectfully submitted,
~ w.-1:\~--
Russen W. Hinton, CPA, CGFM State Auditor
RWH:as 2008SA-10

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

FANNIN COUNTY BOARD OF EDUCATION AUDITEE'S RESPONSE
SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2008
PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS No matters were reported. PRIOR YEAR FEDERAL AWARD FINDINGS AND QUESTIONED COSTS No matters were reported.

SECTION IV FINDINGS AND QUESTIONED COSTS

FANNIN COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2008
I SUMMARY OF AUDITOR'S RESULTS
1. Type of Report Issued on the Financial Statements The auditor's opinion on the Fannin County Board ofEducation's financial statements was unqualified.
2. Significant Deficiencies in Internal Control Disclosed by the Audit ofthe Financial Statements The audit report for the Fannin County Board ofEducation did not disclose any significant deficiencies related to the financial statements.
3. Noncompliance Material to the Financial Statements The audit ofthe Fannin County Board ofEducation disclosed no instances ofnoncompliance that were deemed to be material to the financial statements.
4. Significant Deficiencies in Internal Control Over Major Programs The audit report for the Fannin County Board ofEducation did not disclose any significant deficiencies in internal control over major programs.
5. Type of Report Issued on Compliance for Major Programs The auditor's opinion on the Fannin County Board ofEducation's report on compliance with requirements applicable to major programs was unqualified.
6. Audit Findings Required to be Reported by Section .5 lO(a) of 0MB Circular A-133 The Fannin County Board ofEducation's audit did not disclose audit findings required to be reported by section .510(a) ofOMB Circular A-133.
7. Major Programs Federal awards audited as major programs are as follows: 10.553 Food Services - School Breakfast Program 10.555 Food Services - National School Lunch Program
8. Type "A" Program Dollar Threshold The dollar threshold for type "A" programs was $300,000.00.
9. Low Risk Auditee The Fannin County Board ofEducation qualified as a low risk auditee as defined by Section .530 ofOMB Circular A-133.
- 1-

FANNIN COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2008 II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS No matters were reported. III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS No matters were reported.
-2-