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

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

FLOYD 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

9

H

NOTES TO THE BASIC FINANCIAL STATEMENTS

10

SCHEDULES

REQUIRED SUPPLEMENTARY INFORMATION

1 SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES

IN FUND BALANCES - BUDGET AND ACTUAL

GENERAL FUND

27

SUPPLEMENTARY INFORMATION

2 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS

28

3 SCHEDULE OF STATE REVENUE

30

FLOYD COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS -

SECTION I

FINANCIAL

SCHEDULES

SUPPLEMENTARY INFORMATION

4 SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS

31

5 ALLOTMENTS AND EXPENDITURES

GENERAL FUND - QUALITY BASIC EDUCATION PROGRAMS (QBE)

BY PROGRAM

33

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

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

SECTION I FINANCIAL

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

DEPARTMENT OF AUDITS AND ACCOUNTS
270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400
February 27, 2007

Honorable Sonny Perdue, Governor Members ofthe General Assembly Members ofthe State Board of Education
and Superintendent and Members ofthe Floyd 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 Floyd County Board of Education, as of and for the year ended June 30, 2006, which collectively comprise the Board's basic financial statements as listed in the table of contents. These financial statements are the responsibility of the Floyd 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 ofmaterial misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our op1mons.
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 of the Floyd County Board of Education, as of June 30, 2006, and the respective changes in financial position thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America.
2006ARL-11

The Floyd County Board ofEducation has not presented Management's Discussion and Analysis that accounting principles generally accepted in the United States 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 February 27, 2007, on our consideration ofthe Floyd County Board ofEducation's internal control over financial reporting and our tests of its compliance with certain provisions oflaws, regulations, contracts and grant agreements and other matters. The purpose ofthat report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit.
The Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual, as presented on page 27, 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 Floyd 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,
~ uJ. .:fJ~
Russell W. Hinton, CPA, CGFM State Auditor
RWH:gp 2006ARL-11

FLOYD COUNTY BOARD OF EDUCATION

FLOYD COUNTY BOARD OF EDUCATION STATEMENT OF NET ASSETS JUNE 30, 2006
ASSETS
Investments Accounts Receivable, Net
Taxes State Government Federal Government Other Inventories Capital Assets Land Construction in Progress Land Improvements Buildings Equipment Less: Accumulated Depreciation
Total Assets
LIABILITIES
Cash Overdraft Accounts Payable Salaries 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
Bus Replacement Continuation of Federal Programs Debt Service Capital Projects Unrestricted
Total Net Assets
Total Liabilities and Net Assets
The notes to the basic financial statements are an integral part of this statement. -1-

EXHIBIT"A"

GOVERNMENTAL ACTIVITIES

$

32,718,525

2,871,215 6,225,527
894,019 36,560
175,732

2,410,814 25,661,586
3,549,949 89,542,165 12,505,136 -30,269,353

$ ====14=6=,3=2=1'=8=75=

$

479,799

165,557

10,156,033

987,969

1,027,550

8,208,959 39,127,570

$

60,153,437

$

65,734,635

853,633 697,295 14,181,818 967,080 3 733 977

$

86,168,438

$ ===14=6=,3=2=1='8=75=

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

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 Community Services Food Services Interest on Short-Term and Long-Term Debt
Total Governmental Activities
General Revenues Taxes Property Taxes For Maintenance and Operations Sales Taxes Special Purpose Local Option Sales Tax For Debt Services Intangible Recording Tax Real Estate Grants and Contributions not Restricted to Specific Programs Investment Earnings Miscellaneous
Total General Revenues
Change in Net Assets
Net Assets - Beginning of Year (Restated)

EXPENSES

CHARGES FOR SERVICES

$

57,353,613 $

3,111,029 1,739,761 1,995,218 1,602,933 7,478,346
599,876 7,165,931 2,835,206
622,781 297,848

315,104 5,585,478 1,321,254

92,024,378 $

719,750 744,052
79,458 610,049
76,684 117,816 251,521
2,054,131
4,653,461

Net Assets - End of Year

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

EXHIBIT"B"

PROGRAM REVENUES

OPERATING

CAPITAL

GRANTS AND

GRANTS AND

CONTRIBUTIONS CONTRIBUTIONS

NET (EXPENSES) REVENUES
AND CHANGES IN NET ASSETS

$

40,983,793 $

874,998 569,131 988,870 1,897,574 2,349,880

2,642,326 1,510,689
1,299 77,145

36,592 2,909,492

$

54,841,789 $

17,713 $ 221 81
254,555
1,913 274483 $

-15,632,357
-1,491,979 -1,170,630 -1,006, 127
374,180 -4,518,417
-599,876 -4,446,921
-952, 146 -621,482
30,818
-278,512 -619,942 -1,321,254
-32,254,645

$

28,918,288

10,789,257 496,566 125,250
3,148,554 1,468,884 1 199 834

$

46,146,633

$

13,891,988

72,276,450

$ ======86='1=6=8=,4=38=

-3-

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

EXHIBIT"C"

ASSETS
Cash and Cash Equivalents Investments Accounts Receivable, Net
Taxes State Government Federal Government Other Inventories
Total Assets
LIABILITIES AND FUND BALANCES
LIABILITIES
Cash Overdraft Accounts Payable Salaries Payable Contracts Payable Retainages Payable
Total Liabilities
FUND BALANCES
Reserved for: Bus Replacement Continuation of Federal Programs Debt Service Inventories Capital Projects
Unreserved Designated for Self-Insurance Undesignated Reported in: General Fund
Total Fund Balances
Total Liabilities and Fund Balances

GENERAL FUND

DISTRICTWIDE
CAPITAL PROJECTS
FUND

DEBT SERVICE
FUND

TOTAL

$ $ 13,942,327
903,912 6,225,527
894,019 36,560 175 732

7,076

$

7,076

6,430,277 $ 12,345,921

32,718,525

1,835,897

2,739,809 6,225,527
894,019 36,560 175,732

$ 22,178,077 $ 6,437,353 $ 14,181,818 $ 42,797,248

$

486,875

12,681 $

10,156,033

$ 10,655,589 $

152,876
987,969 1,027,550
2,168,395

$

486,875

165,557

10,156,033

987,969

1,027,550

$ 12,823,984

$

853,633

521,563

175,732 $

125,032

9,846,528

$ 11,522,488 $

$ 4,268,958

$ 14,181,818

853,633 521,563 14,181,818 175,732 4,268,958

125,032

9,846,528

4,268,958 $ 14,181,818 $ 29,973,264

$ 22,178,077 $ 6,437,353 $ 14,181,818 $ 42,797,248

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

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

EXHIBIT"D"

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

$ 29,973,264

$

2,410,814

25,661,586

3,549,949

89,542,165

12,505,136

-30,269,353

103,400,297

131,406

$ -32,745,000 -7,580,669 -6,281,873 -728,987

-47,336,529

Net Assets of Governmental Activities (Exhibit "A")

$ 86,168,438

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

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

EXHIBIT"E"

REVENUES
Property Taxes Sales Taxes State Funds Federal Funds Charges for Services Investment Earnings Miscellaneous
Total Revenues
EXPENDITURES
Current Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Community Services Food Services Operation
Capital Outlay Debt Services
Principal Interest
Total Expenditures
Excess of Revenues over (under) Expenditures
OTHER FINANCING SOURCES (USES)
Sale of Equipment 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

$ 29,504,582 621,816
49,791,139 $ 8,453,759 4,653,461 537,574 1,120,582
$ 94,682,913 $

$ 19,928
671,992

$ 10,789,257
259,318

29,504,582 11,411,073 49,811,067 8,453,759 4,653,461
1,468,884 1,120,582

691,920 $ 11,048,575 $ 106,423,408

$ 55,772,467 $

130,658

3,111,029 1,739,761 1,982,645 1,598,306 7,478,346
599,876 7,165,931 2,911,759
622,781 297,848 315,104 5,476,488 184,198

10,623
1,043,930 1,068,218
26,561
23,175,068

435,556 $ 406,561

$ 89,256,539 $ 26,297,175 $

$ 5,426,374 $ -25,605,255 $

$ 55,903,125

3,111,029 1,739,761 1,982,645 1,608,929 7,478,346
599,876 8,209,861 3,979,977
649,342 297,848 315,104 5,476,488 23,359,266

7,395,000 1,144,899

7,830,556 1,551,460

8,539,899 $ 124,093,613

2,508,676 $ -17,670,205

$

79,252

$

-859,999

859,999

$

79,252

859,999

-859,999

$ -780 747 $

859,999

$

79,252

$ 4,645,627 $ -24,745,256 $ 2,508,676 $ -17,590,953

6,876,861

29,014,214

11,673,142

47,564,217

Fund Balances - Ending

$ 11,522,488 $ 4,268,958 $ 14,181,818 $ 29,973,264

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

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

EXHIBIT"F"

Total Net Change in Fund Balances - Governmental Funds (Exhibit "E")
Amounts reported for Governmental Activities in the Statement of Activities are different because:
Capital Outlays are reported as expenditures in Governmental Funds. However, in the Statement of Activities, the cost of Capital Assets is allocated over their estimated useful lives as depreciation expense. In the current period, these amounts are:
Capital Outlay Depreciation Expense
Excess of Capital Outlay over Depreciation Expense
Because some property taxes will not be collected for several months after the School District's fiscal year ends, they are not considered "available" revenues.
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 Amortization of Bond Premium
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. This activity consists of:
Increase in Compensated Absences
Change in Net Assets of Governmental Activities (Exhibit "B")

$ -17,590,953

$ 27,329,241 -2,748,553

24,580,688 -586,294

$

7,395,000

435,556

230,206

8,060,762

-572,215 $ 13,891,988

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

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FLOYD COUNTY BOARD OF EDUCATION STATEMENT OF FIDUCIARY NET ASSETS
FIDUCIARY FUNDS JUNE 30, 2006
ASSETS Cash and Cash Equivalents Investments
Certificate of Deposit
Total Assets
LIABILITIES Funds Held for Others

EXHIBIT"G"

AGENCY FUNDS

$

176,187

19,679

$ ==19=5=,8=66=

$ ==1=9=5,=86=6=

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

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

EXHIBIT"H"

Note 1: DESCRIPTION OF SCHOOL DISTRICT AND REPORTING ENTITY
REPORTING ENTITY
The Floyd 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 Floyd County Board of Education.
District-wide Statements: The Statement ofNet Assets and the Statement ofActivities display information about the financial activities ofthe overall School District, except for fiduciary activities. Eliminations have been made to minimize the double counting of internal activities. Governmental activities generally are financed through taxes, intergovernmental revenues, and other nonexchange transactions.
The Statement ofActivities presents a comparison between direct expenses and program revenues for each function of the School District's governmental activities.
Direct expenses are those that are specifically associated with a program or function and, therefore, are clearly identifiable to a particular function. Indirect expenses (expenses of the School District related to the administration and support ofthe School District's programs, such as office and maintenance personnel and accounting) are not allocated to programs.
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.

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

EXHIBIT "H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The School District 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 Bond Proceeds and grants from Georgia State Financing and Investment Commission 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 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 liability is incurred, except for principal and interest on general long-term debt, unamortized
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FLOYD COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2006

EXHIBIT"H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
premium on general obligation bond 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.
RESTATEMENT OF PRIOR YEAR NET ASSETS
For fiscal year 2006, the School District restated various Capital Assets due to errors and omissions. The School District increased, net of accumulated depreciation, Equipment by $160,360 and decreased, net of accumulated depreciation, Land Improvements by $31,471. Accumulated Depreciation for Buildings was decreased $72,604. The result is an increase in Net Assets, July 1, 2005, of $201,493.
For fiscal year 2006, the School District restated the Capital Lease liability by $1,814,394. The increase is due to the prior year completion of the construction and renovation obligation of the lessor.
For fiscal year 2006, the School District restated the Compensated Absences balance by $222,299. The increase is due to the prior year inclusion of benefits for severance pay liability for ineligible employees. The School District is not liable for payment of benefits if the severance liability is in excess of $2,000 per employee.
CASH AND CASH EQUIVALENTS
COMPOSITION OF DEPOSITS Cash and cash equivalents consist ofcash on hand, demand deposits and short-term investments with original maturities of three months or less from the date of acquisition in authorized financial institutions. Georgia Laws OCGA 45-8-14 authorize the School District to deposit its funds in one or more solvent banks or insured Federal savings and loan associations.

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

EXHIBIT"H"

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

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

EXHIBIT "H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PROPERTY TAXES

The Floyd County Board of Commissioners fixed the property tax levy for the 2005 tax digest year (calendar year) on August 26, 2005 (levy date). Taxes were due on November 15, 2005 (lien date). Taxes collected within the current fiscal year or within 60 days after year-end on the 2005 tax digest are reported as revenue in the governmental funds for fiscal year 2006. The Floyd 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, 2006, for maintenance and operations amounted to $29,504,582.

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

School Operations

18.996 mills

SALES TAXES

Special Purpose Local Option Sales Tax, at the fund reporting level, during the year amounted to $10,789,257 and is to be used for capital outlay for educational purposes or debt service. This sales tax was authorized by local referendum and the sales tax must be re-authorized at least every five years.

INVENTORIES

FOOD INVENTORIES On the basic financial statements, inventories of donated 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

- 14 -

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

EXHIBIT"H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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, half-year convention. The School District does not capitalize book collections or works of art.

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

Capitalization Policy

Estimated Useful Life

Land Land Improvements Buildings and Improvements Equipment

All

NIA

$

5,000 20 to 80 years

$

5,000 10 to 80 years

$

5,000 3 to 20 years

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

GENERAL OBLIGATION BONDS

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

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,

- 15 -

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

EXHIBIT "H"

Note 3: DEPOSITS AND INVESTMENTS
(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 the Federal Land Bank, the Federal Home Loan Bank, the Federal Intermediate Credit Bank, the Central Bank for Cooperatives, the Farm Credit Banks, the Federal Home Loan Mortgage Association, and the Federal National Mortgage Association.
CATEGORIZATION OF DEPOSITS At June 30, 2006, the bank balances were $1,798,984. The amounts of the total bank balances are classified into four categories of custodial credit risk:
Category 1 - Cash that is insured (e.g., Federal Deposit Insurance) or collateralized with securities held by the School District or by the School District's agent in the School District's name.
Category 2 - Cash collateralized with securities held by the pledging financial institution's trust department or agent in the School District's name.
Category 3 - Cash collateralized with securities held by the pledging financial institution, or by its trust department or agent but not in the School District's name.
Category 4 - Uncollateralized.
The School District's deposits are classified by custodial credit risk category at June 30, 2006, as follows:

- 16 -

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

EXHIBIT "H"

Note 3: DEPOSITS AND INVESTMENTS

Custodial Credit Risk Category

Bank Balance

1

$ 611,675

2

1,187,309

3

0

4

0

Total

$ 1,798.984

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

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

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

At June 30, 2006, the carrying value ofthe School District's investments was $32,405,171 which is materially the same as fair value. Fair value is based on quoted market prices, unless otherwise noted. The investments are classified as to custodial credit risk categories as follows:

Tx12e oflnvestment

Debt Securities

U. S. Treasuries

$

Repurchase Agreements

Total Investments

$

Risk Categories

2

3

Carrying Amount

Fair Value

0 $ $

0 $ 273,928 $

273,928

32,131,243

32,131,243

$ 3240:i 111 $ 3240:i l:Zl

$ 273,928 32,131,243
$ 32 !IQ:i 111

Interest Rate Risk Interest rate risk is the risk that changes in interest rates of debt investment will adversely affect the fair value ofan investment. The School District does not have a formal policy for managing interest rate risk.

- 17 -

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

EXHIBIT"H"

Note 3: DEPOSITS AND INVESTMENTS

Investments are classified as to investment maturity as follows:

Investment Type

Investment Maturity Less Than 1 Year

Debt Securities U. S. Treasuries Repurchase Agreements

$ 273,928 32,131,243

Totals by Maturity

$ 32,405.171

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

The U. S. Agency Securities underlying repurchase agreements have a credit quality rating ofAAA by Moody's.

Concentration of Credit Risk Concentration of credit risk is the risk of loss attributed to the magnitude of a government's investment in a single issuer. The School District does not have a formal policy for managing concentration of credit risk.

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:

- 18 -

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

EXHIBIT "H"

Note 5: CAPITAL ASSETS

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

Balances July 1, 2005 (Restated)

Increases

Decreases

Balances June 30, 2006

$ 2,410,814

$

7,120,182 $ 18,541,404

$ 9,530,996 $ 18,541,404 $

0 $ 2,410,814 25,661,586
0 $ 28,072,400

Capital Assets Being Depreciated Buildings and Improvements Equipment Land Improvements

$ 82,658,862 $ 11,434,564 3,439,443

6,883,303 1,794,028 $
110,506

$ 89,542,165 723,456 12,505,136
3,549,949

Less Accumulated Depreciation for: Buildings and Improvements Equipment Land Improvements

18,219,572 7,434,425 2,590,259

1,801,260 874,857 72,436

723,456

20,020,832 7,585,826 2,662,695

Total Capital Assets, Being Depreciated, Net $ 69,288,613 $ 6,039,284 $

0 $ 75,327,897

Governmental Activity Capital Assets - Net $ 78,819,609 $ 24,580.688 $

0 $ 103,400.297

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

Governmental Funds

Buildings and Improvements Less: Accumulated Depreciation

$ 3,048,396 589,587

$ 2,458.809

Current year depreciation expense by function is as follows:

Instruction Support Services
Educational Media Services General Administration Student Transportation Services Food Services

$ 1,985,201

$

24,739

9,105

515,057

548,901 214,451

$ 2,748,553

- 19 -

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

EXHIBIT"H"

Note 6: RESTRICTED ASSETS

Special Purpose Local Option Sales Tax (SPLOST), general obligation bond proceeds and Qualified Zone Academy Bonds (QZAB) escrow account are reported as restricted assets in the Statement of Net Assets because their use is limited by statutory provisions. Restricted assets at June 30, 2006, were as follows:

District-wide Capital Projects Bond Proceeds

Debt Service Funds

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

$

7,076

$ 12,345,921 $ 6,430,277

Note 7: INTERFUND TRANSFERS

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

Transfer to

Transfers From General Fund

District-wide Capital Projects

$====!!,8,!::59="'.9'=="9='=9

Transfers are used to move other local revenues collected by the General Fund to the District-wide Capital Projects Fund to fund local capital projects.

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

- 20-

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

EXHIBIT"H"

Note 8: RISK MANAGEMENT

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.

The School District has established a limited risk management program for workers' compensation claims. A premium is charged when needed by the General Fund to each user program on the basis of the percentage of that program's payroll to total payroll in order to cover estimated claims budgeted by management based on known claims and prior experience. The School District accounts for claims with expenses/expenditures and liability being reported when it is probable that a loss has occurred, and the amount of that loss can be reasonably estimated. An excess coverage insurance policy covers individual claims in excess of $250,000 loss per occurrence, up to the statutory limit.

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

Beginning of Year Liability

Claims and Changes in Estimates

Claims Paid

End ofYear Liability

2005 2006

$

0 $

538,741 $

538,741 $

0

$

0 $

290,935 $

290,935 $

0

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

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

Beginning of Year Liability

Claims and Changes in Estimates

Claims Paid

End of Year Liability

2005 2006

$

0 $

7 730 $

7 730 $

0

$

0 $

12,605 $

12,605 $

0

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

Position Covered

Amount

Superintendent Blanket Employee

$ 100,000 $ 100,000

- 21 -

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

EXHIBIT "H"

Note 9: LONG-TERM DEBT

CAPITAL LEASES The Floyd County Board ofEducation has entered into a lease agreement as lessee for construction and energy management systems. 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 ofthe School District relating to employees' rights to receive compensation for future absences based upon service already rendered. This obligation relates only to vesting accumulating leave in which payment is probable and can be reasonably estimated. Typically, the General Fund is the fund used to liquidate this long-term debt. The School District uses the vesting method to compute compensated absences.

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

Purpose

Interest Rates

Amount

General Government - Series 2003 General Government - Series 2004 - QZAB General Government - Series 2004

2.49% 0.00% 2.00% - 4.50%

$ 4,030,000 2,000,000
26,715,000

$ 32,745.000

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

-22-

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

EXHIBIT "H"

Note 9: LONG-TERM DEBT

Capital Leases

Governmental Funds

General

Compensated Obligation

Absences (1)

Bonds

Unamortized Bond
Premium

Total

Balance July 1, 2005

$ 6,201,831 $ 5,931,957 $ 40,140,000 $

959,193 $ 53,232,981

Retroactive Restatement of Prior Year Balances

1,814,394

-222,299

1,592,095

Balance July 1, 2005 Restated

$ 8,016,225 $ 5,709,658 $ 40,140,000 $

959,193 $ 54,825,076

Additions Annual Leave Earned

2,653,896

2,653,896

Deductions Annual Leave Utilized Debt Retired Bond Premiums Amortized

435,556

2,081,681

7,395,000

230,206

2,081,681 7,830,556
230,206

Balance June 30, 2006

$ 7,580,662 $ 6,281,873 $ 32,745,000 $

728,287 $ :1-7,336,522

Portion of Long-Term Debt

Due within One Year

$

458 753 $

0 $ 7,520,000 $

230,206 $ 8,208,959

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

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

Fiscal Year Ended June 30

Capital Leases

Principal

Interest

2007 2008 2009 2010 2011 2012 - 2016 2017 - 2019

$ 458,753 $ 483,185 508,918 536,022 564,569
3,307,190 1,722,032

383,364 358,932 333,198 306,095 277,548 903,393 102,553

Total Principal and Interest

$ 7,580.669 $ 2,665,083

- 23 -

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

EXHIBIT "H"

Note 9: LONG-TERM DEBT

Fiscal Year Ended June 30

General Obligation

Debt

Principal

Interest

Unamortized Bond
Premium

2007 2008 2009 2010 2018

$

7,520,000 $

943,596 $ 230,206

7,685,000

717,422

230,206

7,890,000

437,624

230,206

7,650,000

142,200

38,369

2,000,000

Total Principal and Interest $ 32,745.000 $ Note 10: SIGNIFICANT COMMITMENTS

2,240.842 $

728.987

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

Project

Unearned Executed Contracts

Funding Available From State

06-657-021 and 06G-657-012 Model Elementary Renovation McHenry Primary Addition Pepperell High Addition

$ 618,744 $ 43,636
470,348 2,083,116

621,477

$ 3,215,844 $====!,6-21!!=1=,4==7===7 The amounts described in this note are not reflected in the basic financial statements.

Note 11: 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.

-24-

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

EXHIBIT "H"

Note 12: 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 9.24% and employer contributions for the current fiscal year and the preceding two fiscal years are as follows:

Fiscal Year

Percentage Contributed

Required Contribution

2006 2005 2004

100% 100% 100%

$ 4,858,118 $ 4,627,881 $ 4,014,947

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

SCHEDULE "1"

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

NONAPPROPRIATED BUDGETS

ORIGINAL (1}

FINAL (1}

ACTUAL AMOUNTS

$

28,504,134 $

28,726,749 $

29,504,582

95,000

95,000

621,816

47,955,119

48,324,762

49,791,139

7,786,567

8,779,281

8,453,759

2,037,000

2,037,000

4,653,461

213,000

263,000

537,574

270 000

270 000

1,120,582

$

86,860,820 $

88,495,792 $

94 682 913

$

56,316,987 $

56,946,169 $

55,772,467

2,266,180 1,553,722 2,027,166 2,115,055 6,758,744
638,282 6,885,399 2,740,511
663,812 225,134
56,321 4,639,607

2,278,647 1,780,463 2,020,616 2,035,433 6,797,674
637,782 7,124,006 3,014,345
669,162 230,633
56,321 4,639,607

3,111,029 1,739,761 1,982,645 1,598,306 7,478,346
599,876 7,165,931 2,911,759
622,781 297,848 315,104 5,476,488 184 198

$

86,886,920 $

88,230,858 $

89,256,539

$

-26 100 $

264 934 $

5 426 374

$

15,000 $

15,000 $

79,252

-860 000

-860 000

-859 999

$

-845,000 $

-845 000 $

-780 747

$

-871, 100 $

-580,066 $

4,645,627

6 754 973

6,582,778

6,876,861

Fund Balances - Ending

$

5,883,873 $

6002712 $

11,522,488

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

See notes to the basic financial statements.

- 27 -

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

SCHEDULE "2"

FUNDING AGENCY PROGRAM/GRANT
Agriculture, U. S. Department of Child Nutrition Cluster Pass-Through From Georgia Department of Education Food Services School Breakfast Program National School Lunch Program
Total Child Nutrition Cluster
Other Programs Pass-Through From Georgia Department of Education Food Donation (1) 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 Comprehensive School Reform Demonstration Education for Homeless Children and Youth English Language Acquisition Grants Enhancing Education Through Technology Program Even Start Hurricane Education Recovery Improving Teacher Quality State Grants Safe and Drug-Free Schools and Communities - National Programs State Grants for Innovative Programs Title I Grants to Local Educational Agencies Twenty-First Century Community Learning Centers Vocational Education - Basic Grants to States Pass-Through From Northwest Georgia Regional Educational Service Agency Safe and Drug-Free Schools and Communities - State Programs
Total U. S. Department of Education
Labor, U.S. Department of Pass-Through From Coosa Valley Regional Development Center Workforce Investment Act Youth Activities

CFDA NUMBER

PASSTHROUGH
ENTITY ID
NUMBER

EXPENDITURES IN PERIOD

. 10.553 . 10.555

NIA

N/A

$

$

(2) 4 517 567
4,517,567

10.550 10.665

N/A N/A
$

210,137 (3) 4 727 704

84.027 84.173

NIA

$

NIA

$

2,075,535 103 423
2,178,958

84.332 84.196 84.365 84.318 84.213
. 84.938 84.367 84.184 84.298
. 84.010 . 84.287
84.048
84.186

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

150,240 76,068 73,027 25,141
369,560 (4)
336,878 51,720 31,880
1,736,489 612,710 112,795
15 000
5 770 466

17.259

N/A

$

5 000

Total Federal Financial Assistance
NIA = Not Available

$ ===10='=50=3=1, =7=0

- 28 -

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

SCHEDULE "2"

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 ($593,721) were not maintained separately and are included in the 2006 National School Lunch Program.
(3) Funds earned on this program in the amount of $3,266 do not require reporting of expenditures. (4) Funds earned on the Hurricane Education Recovery Program, in the amount of $45,293 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 Floyd 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.

- 29 -

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

SCHEDULE "3"

AGENCY/FUNDING
GRANTS Bright from the Start: Georgia Department of Early Care and Learning Pre-Kindergarten Program
Education, Georgia Department of Quality Basic Education Direct Instructional Cost Kindergarten Program Kindergarten Program - Early Intervention Program Primary Grades (1-3) Program Primary Grades - Early Intervention (1-3) Program Upper Elementary Grades (4-5) Program Upper Elementary Grades - Early Intervention (4-5) Program Middle School (6-8) Program High School General Education (9-12) Program Vocational Laboratory (9-12) Program Students with Disabilities Category I Category II Category Ill Category IV CategoryV Gifted Student - Category VI Remedial Education Program Alternative Education Program English Speakers of Other Languages (ESOL) Media Center Program 20 Days Additional Instruction Slaff and Professional Development Indirect Cost Central Administration School Administration Facility Maintenance and Operations Categorical Grants Pupil Transportation Regular Bus Replacement Nursing Services Principal Supplements Education Equalization Funding Grant Food Services Vocational Education Austerity Reduction Other State Programs K-8 Reading and Mathematics Program National Teacher Certification Preschool Handicapped Program Special Education Low Incidence Grant
Georgia State Financing and Investment Commission Reimbursement on Construction Projects
OTHER Georgia Department of Natural Resources Arrowhead Environmental Education Center

GOVERNMENTAL FUND TYPES

CAPITAL

GENERAL

PROJECTS

FUND

FUND

TOTAL

$

1,158,351

$

1,158,351

2,994,651 380,361
6,818,989 559,864
3,381,691 233,622
5,743,665 4,521,089 1,936,770
7,718,442 7,884
80,463 61,063
9,369 2,146,946
207,011 447,151 198,171 978,178 301,229 199,202
1,318,419 2,279,644 2,638,131
1,350,035 254,555 194,480 36,912
3,145,287 250,962 213,902
-2,418,582
159,283 96,346
150,267 18,958

2,994,651 380,361
6,818,989 559,864
3,381,691 233,622
5,743,665 4,521,089 1,936,770
7,718,442 7,884
80,463 61,063
9,369 2,146,946
207,011 447,151 198,171 978,178 301,229 199,202
1,318,419 2,279,644 2,638,131
1,350,035 254,555 194,480 36,912
3,145,287 250,962 213,902
-2,418,582
159,283 96,346
150,267 18,958

$

19,928

19,928

18 378

18 378

$ 49,791,139 $

19 928 $ 49,811,067

See notes to the basic financial statements.

- 30 -

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

SCHEDULE "4"

PROJECT
Construct, replace, add to, renovate, repair, modify, improve and equip existing school buildings and other buildings and facilities useful or desirable in connection therewith, including Alto Park Elementary, Armuchee Elementary, Armuchee Middle School, Armuchee High, Cave Spring Elementary, Coosa Middle, Coosa High, Floyd County Education Center, Floyd County Technical High School, Garden Lakes Elementary, Glenwood Elementary, Johnson Elementary, McHenry Elementary, Midway Elementary, Model Elementary, Model Middle, Model High, Pepperell High, Pepperell Middle, Pepperell Primary, Pepperell Elementary and the central office, acquire systemwide technology improvements, acquire school buses, acquire the necessary property therefor, both real and personal and to pay or reimburse the expenses of the Floyd County School District necessary to accomplish the foregoing and providing funds for the retirement of previously incurred general obligation indebtedness evidenced by the Floyd County School District General Obligation School Bonds, Series 1999

ORIGINAL ESTIMATED
COST {1}

CURRENT ESTIMATED COSTS {2}

AMOUNT EXPENDED IN CURRENT
YEAR {3)

AMOUNT EXPENDED
IN PRIOR YEARS {3)

PROJECT STATUS

$ 48,750,000 $ 48,871,596 $ 26,635,733 $ 11,236,021 Ongoing

(1) The School District's original cost estimate as specified in the resolution calling for the imposition of the Local Option Sales Tax.
(2) The School District's current estimate of total cost for the project. Includes all cost from project inception to completion.
(3) The voters of Floyd County approved the imposition of a 1% sales tax to fund the above project and retire associated debt. Amounts expended for this project may include sales tax proceeds, state, local property taxes and/or other funds over the life of the project.

See notes to the basic financial statements.

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

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 I Category Ill Category IV 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

$

3,439,513 $ 2,623,030 $

14,148 $

2,637,178

478,652

599,236

599,236

7,830,231

8,903,712

223,285

9,126,997

745,078

1,215,797

1,215,797

3,894,749

4,157,163

38,455

4,195,618

311,969 6,704,937 5,241,110 2,215,891 9,019,064
2,470,213 245,541 518,801 226 216

617,207 8,136,869 7,949,940 1,781,351
68,031 6,783,327
180,343 1,175,441
439,454 464,707 165,922

145,016 205,294 223,933
94,415 159,590
25,505

617,207 8,281,885 8,155,234 2,005,284
68,031 6,877,742
339,933 1,200,946
439,454 464,707 165 922

$

43,341,965 $ 45,261,530 $

1,129,641 $

46,391,171

1,133,877 233 274

1,758,536 81 053

81,817 146 886

1,840,353 227 939

TOTAL QBE FORMULA FUNDS

$

44 709116 $ 47101119 $

1,358,344 $ ====4=8,=45=9=,4=6=3

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

See notes to the basic financial statements.

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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
February 27, 2007

Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the Floyd 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 Floyd County Board of Education as of and for the year ended June 30, 2006, which collectively comprise Floyd County Board ofEducation's basic financial statements and have issued our report thereon dated February 27, 2007. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States.
Internal Control Over Financial Reporting
In planning and performing our audit, we considered Floyd County Board of Education's internal control over financial reporting in order to determine our auditing procedures for the purpose of expressing our opinions on the financial statements and not to provide an opinion on the internal control over financial reporting. However, we noted certain matters involving the internal control over financial reporting and its operation that we consider to be reportable conditions. Reportable conditions involve matters coming to our attention relating to significant deficiencies in the design or operation of the internal control over financial reporting that, in our judgment, could adversely affect Floyd County Board ofEducation's ability to record, process, summarize and report financial data consistent with assertions ofmanagement in the financial statements. Reportable conditions are described in the accompanying Schedule ofFindings and Questioned Costs as items FS-6571-06-01 and FS-6571-06-02.
2006YB-30

A material weakness is a reportable condition in which the design or operation ofone or more ofthe internal control components does not reduce to a relatively low level the risk that misstatements caused by error or fraud in amounts that would be material in relation to the financial statements being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. Our consideration of the internal control over financial reporting would not necessarily disclose all matters in the internal control that might be reportable conditions and, accordingly, would not necessarily disclose all reportable conditions that are also considered to be material weaknesses. However, we believe none of the reportable conditions described above are material weaknesses.
Compliance and Other Matters
As part of obtaining reasonable assurance about whether Floyd 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 the management and members of the Floyd County Board of Education and is not intended to be and should not be used by anyone other than these specified parties.
Respectfully submitted,
~w.ciJ~
Russell W. Hinton, CPA, CGFM State Auditor
RWH:gp 2006YB-30

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
February 27, 2007

Honorable Sonny Perdue, Governor Members ofthe General Assembly Members ofthe State Board of Education
and Superintendent and Members ofthe Floyd County Board of Education
REPORT ON COMPLIANCE WITH REQUIREMENTS APPLICABLE TO EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH 0MB CIRCULAR A-133
Ladies and Gentlemen:
Compliance
We have audited the compliance ofFloyd 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 ofits major Federal programs for the year ended June 30, 2006. Floyd County Board of Education's major Federal programs are identified in the Summary ofAuditor's Results Section ofthe accompanying Schedule ofFindings and Questioned Costs. Compliance with the requirements of laws, regulations, contracts and grants applicable to each of its major Federal programs is the responsibility of Floyd County Board of Education's management. Our responsibility is to express an opinion on Floyd County Board of Education's compliance based on our audit.
We conducted our audit ofcompliance in accordance with auditing standards generally accepted in the United States ofAmerica; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General ofthe United States; and 0MB Circular A133, Audits ofStates, Local Governments, and Non-Profit Organizations. Those standards and 0MB Circular A-133 require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major Federal program occurred. An audit includes examining, on a test basis, evidence about the Floyd County Board ofEducation's compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Our audit does not provide a legal determination on Floyd County Board ofEducation's compliance with those requirements.
2006SA-10

In our opinion, the Floyd 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, 2006.
Internal Control Over Compliance
The management of Floyd 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 Floyd 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 of expressing our opinion on compliance and to test and report on internal control over compliance in accordance with 0MB Circular A-133.
Our consideration ofthe internal control over compliance would not necessarily disclose all matters in the internal control that might be material weaknesses. A material weakness is a reportable condition in which the design or operation of one or more of the internal control components does not reduce to a relatively low level ofrisk that noncompliance with applicable requirements oflaws, regulations, contracts and grants caused by error or fraud that would be material in relation to a major Federal program being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. We noted no matters involving the internal control over compliance and its operation that we consider to be material weaknesses.
This report is intended solely for the information and use ofthe management, members ofthe Floyd 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.cfd~
Russell W. Hinton, CPA, CGFM State Auditor
RWH:gp 2006SA-10

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

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

PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

FINDING CONTROL NUMBER AND STATUS

FS-6571-04-01 FS-6571-04-02 FS-6571-05-01

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

CORRECTIVE ACTION/RESPONSES

EMPLOYEE COMPENSATION EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Control Procedures Finding Control Number: FS-6571-04-02

Pursuant to published Department of Community Health guidelines, the Floyd County Schools submitted one or more employees that held certificates under the category of classified employees. These submissions were for state health insurance purposes, and in 2002, conformed to the guidelines for such classification resulting from information from a DCH publication. Upon being notified by the Department of Community Health that they had received an opinion from the State Attorney General declaring this practice was not proper, Floyd County Schools immediately ceased this practice in December of2004. Subsequent payments to the Department of Community Health have been in compliance with newly published Department of Community Health guidelines.

REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Control Procedures Finding Control Number: FS-6571-05-01

We partially concur with this finding although we have made significant progress over the previous year's finding. Separation of duties is occurring but the required documentation was not always documented clearly. We have met over the past year with bookkeepers to familiarize them with required documentation procedures. Schools are visited and reviewed to the extent possible to insure conformity with acceptable accounting practices.

Several weaknesses in internal control in the area ofthe principals' local school accounts were ofconcern and brought to our attention during the audit for the two schools that were selected for audit. These concerns will be addressed with additional training and followup for our local school bookkeepers. Floyd County Schools have a School Based Accounting Manual which sets forth guidelines and procedures relative to the proper handling of cash, cash receipts, and cash disbursements and is currently under revision.

- 1-

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

PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

CORRECTIVE ACTION/RESPONSES

REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Control Procedures Finding Control Number: FS-6571-05-01

Specifically, the auditors pointed out that cash counting, handling, and receipt entry was being done solely by the bookkeeper. We will be working with principals and school bookkeepers to separate at least one ofthese cash functions from the responsibility ofthe bookkeeper. Because oflimited human resources at the school level, reasonable attempts will be made to separate cash handling functions. Also, periodic training and guidance through meetings or on-site visits in fiscal year 2007, will address the others concerns listed in this finding. We are committed to an ongoing training and strengthening of internal controls in all areas of school system operations.

PRIOR YEAR FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

FINDING CONTROL NUMBER AND STATUS

FA-6571-05-01

Previously Reported Corrective Action Implemented

-2-

SECTION IV FINDINGS AND QUESTIONED COSTS

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

I SUMMARY OF AUDITOR'S RESULTS

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

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

Revenues/Receivables/Receipts General Ledger

Expenditures/Liabilities/Disbursements

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

3. Noncompliance Material to the Financial Statements The audit ofthe Floyd County Board ofEducation disclosed no instances ofnoncompliance that were deemed to be material to the financial statements.

4. Reportable Conditions in Internal Control Over Major Programs The audit report for the Floyd County Board of Education did not disclose any reportable conditions in internal control over major programs.

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

6. Audit Findings Required to be Reported by Section .510(a) of 0MB Circular A-133 The Floyd County Board of Education's audit did not disclose audit findings required to be reported by section .510(a) ofOMB Circular A-133.

7. Major Programs Federal awards audited as major programs are as follows: 10.553 Food Services - School Breakfast Program 10.555 Food Services - National School Lunch Program 84.010 Title I Grants to Local Educational Agencies 84.287 Twenty-First Century Community Leaming Centers 84.367 Improving Teacher Quality State Grants

8. Type "A" Program Dollar Threshold The dollar threshold for type "A" programs was $316,551.

- 1-

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

I SUMMARY OF AUDITOR'S RESULTS

9. Low Risk Auditee The Floyd County Board of Education qualified as a low risk auditee as defined by Section .530 ofOMB Circular A-133.

II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Control Procedures over School Activity Accounts Reportable Condition Finding Control Number: FS-6571-06-01

Condition:

This is a repeat finding (FS-6571-05-01 and FS-6571-04-01) from the years ended June 30, 2005, and June 30, 2004, 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 reasonable assurance that transactions are processed according to established procedures.

Information:

Revenues/Receivables/Receipts
Based on a review of fifty items, the following deficiencies were noted: 1) Forty-three receipts did not include documentation to determine the receipts were deposited in a timely manner, and 2) Thirty-nine receipts were not supported by adequate documentation to indicate origin of the receipt.

Expenditures/Liabilities/Disbursements
Based on a review offifty vouchers, the following deficiencies were noted: 1) One voucher did not have any documentation on file, 2) Thirty-one vouchers did not include an approved purchase requisition, 3) Eight vouchers did not include an original invoice, and 4) Twelve did not have documentation of receipt.

Cause:

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

-2-

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

II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Control Procedures over School Activity Accounts Reportable Condition Finding Control Number: FS-6571-06-01

Effect:

Errors and/or irregularities may not be detected in a timely manner.

Recommendation:

Management should revise and monitor controls to provide reasonable assurance that transactions are processed according to established procedures.

GENERAL LEDGER Incomplete General Ledger/DE046 Financial Report Reportable Condition Finding Control Number: FS-6571-06-02

Condition:

The School District failed to include long-term debt activity in the DE046 financial report submitted to the Georgia Department of Education.

Criteria:

Chapter 22 Annual Financial Reporting of the Financial Management for Local Units of Administration indicates that School Districts must prepare their financial statements in accordance with generally accepted accounting principles.

Information:

Long-term debt, capital lease. activity, compensated absences activity and premium on general obligation debt activity was not recorded in the School District's general ledger as required. An audit adjustment was necessary to record general obligation debt of $32,745,000, capital lease debt of $7,580,669, compensated absences debt of $6,281,873 and premium on bonds liability of $728,987 in the School District's governmental activities.

Cause:

Management failed to comply with the requirements of the Georgia Department of Education regarding financial reporting.

Effect:

The failureofthe School District to maintain a complete and accurate general ledger can lead to inaccurate internal and external reporting.

Recommendation:

The School District should implement controls to ensure that Georgia Department of Education policies and procedures are followed and implement procedures to ensure that all financial data is properly recorded in the general ledger and reported in the DE046.

-3 -

FLOYD COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2006 III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS No matters were reported.
-4-

SECTIONV MANAGEMENT'S RESPONSES

FLOYD COUNTY BOARD OF EDUCATION SCHEDULE OF MANAGEMENT'S RESPONSES
YEAR ENDED JUNE 30, 2006
Finding Control Number: FS-6571-06-01
Several weaknesses in internal control in the area of the principals' local school accounts were of concern and brought to our attention during the audit for the two schools that were selected for audit. These concerns will be addressed with additional training and follow-up for our local school bookkeepers. Floyd County Schools has a School Based Accounting Manual which sets forth guidelines and procedures relative to the proper handling of cash, cash receipts, and cash disbursements and is currently under revision.
Specifically, the documentation of receipts from the originating source to the posting on the accounting records could not be readily followed. The School District accounting staff is continuing to hold meetings regarding instructions for the handling ofreceipts and deposits. Bookkeepers were invited to the audit exit conference to hear first hand the problems encountered with receipts and expenditure documentation. Along with the input from these bookkeepers, the School District will work with school principals and bookkeepers to determine a method for the documentation of receipt processes that can be easily tracked and for the proper documentation of expenditures.
We expect to have these issues resolved with bookkeepers prior to the beginning of the 2007-2008 school year. We will continue to train and keep bookkeepers apprised of continuing auditing requirements.
Finding Control Number: FS-6571-06-02
The School District failed to include in the DE046 long-term debt activity due to an oversight. For fiscal year 2007-2008, an end of year checklist is being compiled to reflect additional accounting requirements by GDOE and GDAA. The information for long-term debt for fiscal year 2006 was readily available for auditors to include in the audited financial statements but was not included in the submission ofthe DE046. The end ofyear checklist should minimize the chance ofrequired data not being reported in the DE046 annual financial submission to GDOE.
Contact Person: Chris Toles, Executive Director of Financial Services Phone: (706) 234-1031 Fax Number: (706) 236-1816 E-mail Address: ctoles@floydboe.net