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

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

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

REQUIRED SUPPLEMENTARY INFORMATION

MANAGEMENT'S DISCUSSION AND ANALYSIS

EXHIBITS

BASIC FINANCIAL STATEMENTS

DISTRICT-WIDE FINANCIAL STATEMENTS

A

STATEMENT OF NET ASSETS

1

B

STATEMENT OF ACTIVITIES

2

FUND FINANCIAL STATEMENTS

C

BALANCE SHEET

GOVERNMENTAL FUNDS

4

D

RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET

TO THE STATEMENT OF NET ASSETS

5

E

STATEMENT OF REVENUES, EXPENDITURES AND CHANGES

IN FUND BALANCES

GOVERNMENTAL FUNDS

6

F

RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT

OF REVENUES, EXPENDITURES AND CHANGES IN FUND

BALANCES TO THE STATEMENT OF ACTIVITIES

7

G

STATEMENT OF FIDUCIARY NET ASSETS

FIDUCIARY FUNDS

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

FLOYD COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS -

SECTION I

FINANCIAL

SCHEDULES

SUPPLEMENTARY INFORMATION

2 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS

28

3 SCHEDULE OF STATE REVENUE

30

4 SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS

32

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 26, 2008

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
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, 2007, 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 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 Floyd 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.

2007ARL-11

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, 2007, and the respective changes in financial position thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America.
In accordance with Government Auditing Standards, we have also issued our report dated February 26, 2008, on our consideration ofthe Floyd County Board of Education's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements and other matters. The purpose of that report is to describe the scope ofour testing 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.
Management's Discussion and Analysis and the Schedule ofRevenues, Expenditures and Changes in Fund Balances - Budget and Actual, as presented on pages i through x and page 27 respectively, are not a required part ofthe basic financial statements but are supplementary information required by the accounting principles generally accepted in the United States of America. We 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,

RWH:gp 2007ARL-11

LU~
Ru sell W. Hinton, CPA, CGFM
State Auditor

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

INTRODUCTION
The School District's financial statements for the fiscal year ended June 30, 2007, includes a series of basic financial statements that report financial information for the School District as a whole, its funds, and its fiduciary responsibilities. The Statement of Net Assets and the Statement of Activities provide financial information about all of the School District's activities and present both a short-term and long-term view of the School District's finances on a global basis. The fund financial statements provide information about all of the School District's funds. Information about these funds, such as the School District's General Fund, is important in its own right, but will also give insight into the School District's overall soundness as reported in the Statement of Net Assets and the Statement of Activities.
FINANCIAL HIGHLIGHTS
Key financial highlights for fiscal year 2007 are as follows:
On the District-wide financial statements:
District-wide net assets at June 30, 2007 were $96,484,442. Net assets reflect the difference between all assets of the School District (including capital assets, net of depreciation) and all liabilities, both short-term and long-term. The net assets at June 30, 2007, of $96,484,442 represented an increase of $11,160,137 in net assets when compared to the prior year as restated.
The School District had $106.8 million in expenses relating to governmental activities; only $68.5 million of these expenses were offset by program specific charges for services, grants and contributions. However, general revenues (primarily property and sales taxes) of $49.4 million were adequate to provide for these programs.
As stated above, general revenues accounted for $49.4 million or about 42% of all revenues totaling $117.9 million. Program specific revenues in the form of charges for services, grants, and contributions accounted for the balance of these revenues.

Source of Revenues

General Revenue Property Truces 26.7%
General Revenue Sales Taxes 9.6%

5.6%

FLOYD COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2007
The School District decreased its outstanding bond debt $7.5 million through the payment of general obligation bond principal. The remaining bond debt of $25.2 million will be retired by a Special Purpose Local Option Sales Tax and interest earned thereon that was approved by the citizenry in conjunction with the Bond Sale.
On the fund financial statements:
Among major funds, the General Fund had almost $106.8 million in revenues and almost $104.3 million in expenditures. The General Fund balance of $11.9 million at June 30, 2007, increased almost $1.3 million from the prior year fund balance as restated.
OVERVIEW OF THE FINANCIAL STATEMENTS
These financial statements consists of three parts; management's discussion and analysis (this section), the basic financial statements including notes to the financial statements and required supplementary information. The basic financial statements include two levels of statements that present different views of the School District. These include the District-wide and fund financial statements.
The District-wide financial statements include the 'Statement of Net Assets' and 'Statement of Activities'. These statements provide information about the activities of the School District presenting both short-term and long-term information about the School District's overall financial status.
The fund financial statements focus on individual parts of the School District, reporting the School District's operation in more detail. The 'Governmental Funds' statements disclose how basic services are financed in the short-term as well as what remains for future spending. The 'Fiduciary Funds' statements provide information about the financial relationships in which the School District acts solely as a trustee or agent for the benefit of others. In the case of the Floyd County School District, the General Fund, Capital Projects Funds, and Debt Service Funds are all considered to be major funds. The School District has no nonmajor funds as defined by GASB Statement 34 for the purposes of this report.
The financial statements also include notes that explain some of the information in the statements and provide more detailed data. The statements are followed by a section of required supplementary information that further explains and supports the financial statements. Additionally, other supplementary information (not required) is also presented that further supplements understanding of the financial statements.
DISTRICT-WIDE STATEMENTS
Since Floyd County School District has no operations that have been classified as "Business Activities", the District-wide financial statements are basically a consolidation of all of the
11

FLOYD COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2007
School District's operating funds into one column called governmental activities. In reviewing the District-wide financial statements, a reader might ask the question, are we in a better financial position now than last year? The 'Statement of Net Assets' and the 'Statement of Activities' provides the basis for answering this question. These financial statements include all School District's assets and liabilities and uses the accrual basis of accounting similar to the accounting used by most private-sector companies. This basis of accounting takes into account all of the current year's revenues and expenses regardless of when cash is received or paid.
These two statements report the School District's net assets and any changes in those assets. The change in net assets is important because it tells the reader that, for the School District as a whole, the financial position of the School District has improved or diminished. The causes of this change may be the results of many factors, including those not under the School District's control, such as the property tax base, facility conditions, required educational programs, student-teacher ratios, and other factors.
When analyzing District-wide financial statements, it is important to remember these statements are prepared using an economic resources measurement focus (accrual accounting) and involve the following steps to format the Statement of Net Assets:
Capitalize current outlays for capital assets Depreciate capital assets Report long-term debt as a liability Calculate revenue and expense using the economic resources measurement focus and the
accrual basis of accounting Allocate net assets as follows:
o Net Assets invested in capital assets, net ofrelated debt o Restricted net assets are those with constraints placed on the use by external
sources such as creditors, grantors, contributors or laws and regulations. o Unrestricted net assets are net assets that do not meet any of the above
restrictions.
FUND FINANCIAL STATEMENTS
The School District uses many funds or sub-funds to account for a multitude of financial transactions during the fiscal year. The fund financial statements presented in this report provide detail information about the School District's significant or major funds. As discussed previously, the School District has no nonmajor funds as defined by generally accepted accounting principles.
The School District has two kinds of funds as discussed below:
Governmental Funds: Most of the School District's activities are reported in governmental funds, which focus on how money flows into and out of those funds and the balances left at yearend available for spending in future periods. These funds are reported using the modified
iii

FLOYD COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2007
accrual method of accounting which measures cash and all other financial assets that can be readily be converted to cash. The governmental fund statements provide a detailed short-term view of the School District's general government operations and the basic services it provides. Governmental fund information helps determine whether there are more or fewer financial resources that can be spent in the near future to finance educational programs. The differences between government activities (reported in the Statement of Net Assets and the Statement of Activities) and governmental funds are reconciled in the financial statements.
Fiduciary Funds: The School District is the trustee, or fiduciary, for assets that belong to clubs, organizations and others within the principals' accounts. The School District is responsible for ensuring that the assets reported in these funds are used only for their intended purposes and by those to whom the assets belong. The School District excludes these activities from the Districtwide financial statements because it cannot use these assets to finance its operations.
FINANCIAL ANALYSIS OF THE SCHOOL DISTRICT AS A WHOLE
Net assets, which is the difference between total assets and total liabilities, is one indicator of the financial condition of the School District. When revenues exceed expenses, the result is an increase in net assets. When expenses exceed revenues, the result is a decrease in net assets. The relationship between revenues and expenses can be thought of as the School District's operating results. The School District's net assets, as measured in the Statement of Net Assets, can be one way to measure the School District's financial health, or financial position. Over time, increases or decreases in the School District's net assets, as measured in the Statement of Activities, are one indicator of whether its financial health is improving or deteriorating. However, the School District's goal and mission is to provide success for each child's education, not to generate profits as private corporations do. For this reason, many other nonfinancial factors should be considered in assessing the overall health of the School District.
In the case of the Floyd County School District, assets exceeded liabilities by $96.5 million at June 30, 2007. To better understand the School District's actual financial position and ability to deliver services in future periods, it is necessary to review the various components of the net asset category. For example, of the $96.5 million of net assets, almost $15.8 million was restricted for continuation of Federal programs, debt service, capital projects, and bus replacement. Accordingly, these funds were not available to meet the School District's ongoing obligations to citizens and creditors.
In addition, the School District also had $76.1 million (net of related debt) invested in capital assets (e.g., land, buildings, and equipment). The School District uses these capital assets to provide educational services to students within geographic boundaries served by the School District. Because of the very nature and on-going use of the assets being reported in this component of net assets, it must be recognized that this portion of the net assets is not available for future spending.
The remaining balance of unrestricted net assets of almost $4.6 million may be used to meet the School District's ongoing obligations to citizens and creditors.
IV

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

Table 1 provides a summary of the School District's net assets for this fiscal year as compared to the prior fiscal year.

Table 1 Net Assets

Governmental Activities

Fiscal

Fiscal

Year 2007

Year 2006

Assets Current and Other Assets Capital Assets, Net

$ 41,640,998 $ 42,921,578

108,885.013

103,400,297

Total Assets

$ 150,526,011 $ 146,321,875

Liabilities Current and Other Liabilities Long-Term Liabilities

$ 14,405,771 $ 12,816,908

39,635,798

47,336,529

Total Liabilities

$ 54,041,569 $ 60,153,437

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

$ 76,126,432 15,760,451 4,597,559

$ 65,734,635 16,699,826 3,733,977

Total Net Assets

$ 96,484,442 $ 86,168,438

Table 2 shows the Changes in Net Assets for this fiscal year as compared to the prior fiscal year.

V

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

Table 2 Change in Net Assets

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

Governmental Activities

Fiscal

Fiscal

Year 2007

Year 2006

$ 3,026,768 64,474,151 1,045,305

$ 4,653,461 54,841,789 274 483

Total Program Revenues

$ 68,546,224 $ 59,769,733

General Revenues:

Taxes

Property Taxes

For Maintenance and Operations

$

Sales Taxes

Special Purpose Local Option Sales Tax

For Debt Service

For Capital Projects

Intangible Recording Tax

Real Estate

Grants and Contributions not Restricted to

Specific Programs

Investment Earnings

Miscellaneous

Special Item

Gain or Loss on Disposal of Assets

31,463,216
5,421,482 5,206,953
538,560 149,121
4,507,471 1,589,488 2,669,684
-2,106,017

$ 28,918,288
10,789,257
496,566 125,250
3,148,554 1,468,884 1,199,834

Total General Revenues and Special Item

$ 49,439,958 $ 46,146,633

Total Revenues

$ 117,986,182 $ 105,916,366

Program Expenses 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

$ 67,558,894
3,406,191 1,897,013 2,226,344 2,433,042 8,020,930
684,640 8,594,302 4,121,449
708,305 559,016
29,028 5,490,137 1,096,754

$ 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

Total Expenses

$ 106,826,045 $ 92,024,378

Increase in Net Assets

$ 11,160,137 $ 13,891,988

VI

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

GOVERNMENTAL ACTIVITIES

The Statement of Activities shows the cost of program services and the charges for services and grants offsetting these services. Table 3 shows, for governmental activities, the total cost of services and the net cost of services. Net cost of services can be defined as the total cost less fees generated by the activities and intergovernmental revenue provided for specific programs. The net cost reflects the financial burden on the School District's taxpayers by each activity as compared to the prior fiscal year.

Table 3 Governmental Activities

Total Cost of Services

Fiscal

Fiscal

Year 2007 Year 2006

Net Cost of Services

Fiscal

Fiscal

Year 2007 Year 2006

Instruction

$ 67,558,894 $ 57,353,613 $ 18,538,713 $ 15,632,357

Support Services

Pupil Services

3,406,191 3,111,029 1,991,684 1,491,979

Improvement of Instructional Services

1,897,013 1,739,761 1,159,552 1,170,630

Educational Media Services

2,226,344 1,995,218

923,403 1,006,127

General Administration

2,433,042 1,602,933

-80,395 -374,180

School Administration

8,020,930 7,478,346 4,943,295 4,518,417

Business Administration

684,640

599,876

684,640

599,876

Maintenance and Operation of Plant

8,594,302 7,165,931 4,414,774 4,446,921

Student Transportation Services

4,121,449 2,835,206 3,527,411

952,146

Central Support Services

708,305

622,781

479,555

621,482

Other Support Services

559,016

297,848

475,202

-30,818

Operations of Non-Instructional Services

Community Services

29,028

315,104

28,283

278,512

Food Services

5,490,137 5,585,478

96,949

619,942

Interest on Short-Term and Long-Term Debt 1,096,754 1,321,254 1,096,754 1,321,254

Total Expenses

$106.826.045 $ 92,024.378 $ 38,279,820 $ 32,254.645

The table above shows that while the total cost of services for providing services increased 16% from the prior year, the net cost to the local taxpayers increased almost 19% from the prior year. In other words, as compared to the proceeding fiscal year, a larger percentage of the cost of providing services in fiscal year 2007 fell to the taxpayers of Floyd County. This condition is occurring because increased costs for such items as salaries, benefits, maintenance, fuel, etc. is occurring at a higher rate than is being funded from program revenues (State, Federal, and revenues for services and sales).

FINANCIAL ANALYSIS OF THE SCHOOL DISTRICT'S FUNDS

Information about the School District's governmental funds is presented starting on Exhibit "C" of this report. Governmental funds are accounted for using the modified accrual basis of accounting. The governmental funds had total revenues of $119.7 million and total expenditures of $122.1 million in fiscal year 2007. Total governmental fund balances of $26.7 million at

Vll

FLOYD COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2007
June 30, 2007, decreased almost $2.4 million from the prior year. This decrease in fund balance occurred primarily because expenditures for debt service exceeded current year revenues dedicated to debt service.
GENERAL FUND BUDGET HIGHLIGHTS
The School District's budget is prepared according to Georgia Law. The most significant budgeted fund is the General Fund. During the course of fiscal year 2007, the School District amended its general fund budget as needed.
The School District budget is adopted at the aggregate level and maintained at the program, function, object, and site levels to facilitate budgetary control. The budgeting systems are designed to control the total budget, but provide flexibility to meet the ongoing programmatic needs. The budgeting systems are also designed to control total site budgets but provide flexibility for site management as well.
For the General Fund, the final actual revenues of $106.8 million were over the final budgeted amount of almost $98.7 million by almost $8.1 million. This difference (final actual vs. final budget) was primarily attributable to revenues for sales taxes over final budget of $0.6 million, revenues for State Funds over final budget of $2.9 million, revenues for charges for services over final budget of $1.0 million, and miscellaneous revenues over final budget of $2.4 million The School District traditionally estimates revenue on a conservative basis to avoid shortfalls in actual revenues. Additionally, the School District did not include revenues for school activity accounts (included in miscellaneous revenues) in the final budget.
The General Fund's final actual expenditures of $104.3 million exceeded the final budget amount of $97.6 million by $6.7 million. This difference (final actual vs. final budget) was primarily attributable to actual expenditures for instruction exceeding the final budget of $3.4 million, expenditures for pupil services exceeding the final budget of over $800,000, expenditures for school administration exceeding the final budget of over $900,000, and expenditures for food services exceeding final budget of over $800,000.
CAPITAL ASSETS AND DEBT ADMINISTRATION
Capital Assets
At fiscal year ended June 30, 2007, the School District had almost $108.9 million invested in capital assets, net of accumulated depreciation, all in governmental activities. These assets are made up of a broad range of items including buildings; land; land improvements; and food service, transportation and maintenance equipment. This year's major additions totaled $41.5 million and included:
Construction in progress costs, classroom additions and school renovations, and capital equipment purchases totaling $17.0 million.
Completion of the New Pepperell High School totaling $24.5 million.
Vlll

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

Table 4 reflects a summary of these balances, net of accumulated depreciation, as compared to the prior fiscal year.

Table 4 Capital Assets (Net of Depreciation)

Governmental Activities

Fiscal

Fiscal

Year 2007

Year 2006

Land Construction in Progress Land Improvements Buildings and Improvements Equipment

$ 2,546,400 3,871,985 959,506
95,821,831 5,685,291

$ 2,410,814 25,661,586 887,254 69,521,333 4,919,310

Total

$ 108!885!013 $ 103i4001297

Additional information about the School District's Capital Assets can be found in the Notes to the Basic Financial Statements.

Debt

At June 30, 2007, the School District had over $39.6 million in total debt outstanding which consisted of $25.2 million in bond debt, $7.1 million in capital lease debt, $6.8 million in compensated absences debt, and $498,000 in unamortized bond premium. Table 5 summarizes the School District's debt as compared to the prior fiscal year.

Table 5 Debt at June 30

Governmental Activities

Fiscal

Fiscal

Year 2007

Year 2006

Bonds Payable Unamortized Premiums on Bonds Sold Capital Leases Compensated Absences

$ 25,225,000 498,781
7,121,916 6,790,101

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

Total

$ 39!635)98 $ 47!336!529

Additional information about the School District's debt can be found in the Notes to the Basic Financial Statements.

IX

FLOYD COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2007
FACTORS BEARING ON THE SCHOOL DISTRICT'S FUTURE Currently known circumstances that are expected to have a significant effect on financial position or results of operations in future years are as follows:
The School District is financially stable. The School District's current operating millage is 18.996, which produces approximately $1,601,010 per mill net of fees. The School District continues to grow with an average of 100 students per year over the last three years. The School District plans to construct additional schools in the next several years to accommodate the growth and reduce portable classrooms at various schools. The School District plans to fund additional capital outlays with the one percent local sales tax revenue, general obligation bonds and state capital outlay grants.
The School District will continue to face challenges from the implementation of the A+ Education Reform Act, which mandates lower teacher to student ratios. The School District will also continue to be impacted by the remedial actions required for under performing schools under the No Child Left Behind Act. In the midst of these challenges, the School District remains confident in the ability to maximize resources to provide the best possible educational experience for all of our students.
CONTACTING THE SCHOOL DISTRICT'S FINANCIAL MANAGEMENT This financial report is designed to provide our citizen's taxpayers, investors and creditors with a general overview of the School District's finances and to show the School District's accountability for the money it receives. If you have questions about this report or need additional financial information, contact Mr. Chris Toles, Executive Director of Financial Services, Floyd County School District, 600 Riverside Parkway, NE, Rome, GA. You may also email your questions to Mr. Toles at ctoles@floydboe.net.
X

FLOYD COUNTY BOARD OF EDUCATION

FLOYD COUNTY BOARD OF EDUCATION STATEMENT OF NET ASSETS JUNE 30, 2007
ASSETS
Cash and Cash Equivalents Investments Accounts Receivable, Net
Taxes State Government Federal Government Other Inventories Capital Assets Land Construction in Progress Buildings Equipment Land Improvements Less: Accumulated Depreciation
Total Assets
LIABILITIES
Accounts Payable Salaries and Benefits Payable Claims Payable Contracts Payable Retainages Payable Deferred Revenue 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 Services 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

$

16,076,116.73

13,849,983.05

3,193,817.22 7,501,290.01
826,680.30 12,846.32
180,264.08

2,546,400.00 3,871,985.00 116,631,913.00 14,079,803.00 3,649,357.00 -31,894,445.00

$ 150,526,010.71

$

89,291.86

13,341,750.84

583,585.05

229,713.90

153,429.30

8,000.00

8,398,391.00 31,237 406.96

$

54,041,568.91

$ 76,126,432.00
569,771.00 582,098.27 11,492,937.12 3,115,644.38 4 597 559.03
$ 96,484,441.80

$ 150,526,010.71

FLOYD COUNTY BOARD OF EDUCATION STATEMENT OF ACTIVITIES
FOR THE YEAR ENDED JUNE 30, 2007

GOVERNMENTAL ACTIVITIES
Instruction Support Services
Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Operations of Non-Instructional Services 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 For Capital Projects Real Estate Transfer Tax Intangible Recording Tax Grants and Contributions not Restricted to Specific Programs Investment Earnings Miscellaneous
Special Item Loss of Sale and Disposals of Assets
Total General Revenues and Special Item
Change in Net Assets
Net Assets - Beginning of Year (Restated)

EXPENSES

CHARGES FOR SERVICES

$ 67,558,894.01 $
3,406,191.30 1,897,013.21 2,226,343.76 2,433,042.20 8,020,929.68
684,639.70 8,594,301.88 4,121,448.44
708,304.65 559,016.39
29,028.09 5,490,137.17 1,096,754.06
$ 106,826,044.54 $

408,577.33 506,114.54
2,112,075.89 3,026,767.76

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

$ 48,148,059.78 $
908,392.38 737,461.76 1,297,242.40 2,511,728.96 3,077,634.54
4,179,527.62 60,520.84
228,749.26 83,814.21
745.12 3,240,274.45
$ 64,474,151.32 $

463,544.04 $ 5,697.88 1,708.01
533,517.00
40,837.94 1,045,304.87 $

-18,538, 712.86
-1,991,684.38 -1, 159,551.45
-923,403.48 80,394.77
-4,943,295.14 -684,639.70
-4,414,774.26 -3,527,410.60
-479,555.39 -475,202.18
-28,282.97 -96,948.89 -1,096,754.06
-38,279,820.59

$

31,463,215.70

5,421,481.80 5,206,952.98
149,121.00 538,560.00 4,507,471.00 1,589,487.95 2,669,684.73

-2, 106,017.37

$

49,439,957.79

$

11,160,137.20

85,324,304.60

$ ===9..,6,..,.4=84...,,4=4=1=8=0

-3-

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

EXHIBIT"C"

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

GENERAL FUND

DISTRICTWIDE
CAPITAL PROJECTS
FUND

DEBT SERVICE
FUND

TOTAL

$ 16,238,921.67

$ 16,238,921.67

356,386.94 $ 2,000,658.99 $ 11,492,937.12 13,849,983.05

937,041.90 7,412,149.51
826,680.30 12,846.32
180,264.08

1,758,712.32 89,140.50

2,695,754.22 7,501,290.01
826,680.30 12,846.32
180,264.08

$ 25,964,290.72 $ 3,848,511.81 $ 11,492,937.12 $ 41,305,739.65

$

$

89,291.86

13,341,750.84

583,585.05

8,000.00 $ 14,022,627.75 $

162,804.94
229,713.90 153,429.30 545,948.14

$ 162,804.94 89,291.86
13,341,750.84 583,585.05 229,713.90 153,429.30 8,000.00
$ 14,568,575.89

$ 569,771.00

$ 569,771.00

582,098.27

582,098.27

$ 11,492,937.12 11,492,937.12

180,264.00

180,264.00

$ 3,115,644.38

3,115,644.38

1,579,728.73 127,825.55

1,579,728.73 127,825.55

8,901,975.42

186,919.29

8,901,975.42 186,919.29

$ 11,941,662.97 $ 3,302,563.67 $ 11,492,937.12 $ 26,737,163.76

$ 25,964,290.72 $ 3,848,511.81 $ 11,492,937.12 $ 41,305,739.65

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, 2007

EXHIBIT"D"

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

$ 26,737,163.76

$ 2,546,400.00 3,871,985.00 3,649,357.00
116,631,913.00 14,079,803.00 -31,894,445.00

108,885,013.00

498,063.00

$ -25,225,000.00 -498,781.00
-7,121,916.00 -6,790, 100.96

-39,635,797.96

$ 96,484,441.80

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, 2007

EXHIBIT "E"

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

GENERAL FUND

DISTRICTWIDE
CAPITAL PROJECTS
FUND

DEBT SERVICE
FUND

TOTAL

$ 31,096,558.70

$ 31,096,558.70

687,681.00 $ 5,206,952.98 $ 5,421,481.80

11,316,115.78

59,400,022.09

721,476.88

60,121,498.97

9,015,948.22

889,480.00

9,905,428.22

3,026,767.76

3,026,767.76

880,547.44

355,706.29

353,234.22

1,589,487.95

2,643,684.73

26,000.00

2,669,684.73

$ 106,751,209.94 $ 7199616.15 $ 5,774,716.02 $ 119,725,542.11

$ 66,853,533.32 $

27,108.00

$ 66,880,641.32

3,386,309.70 1,888,424.91 2,188,715.74 2,379,160.58 7,962,964.78
695,446.70 8,134,887.07 4,031,780.02
710,876.76 562,710.25
16,933.45 5,482,162.72

4,493.08 1,696,170.00
200,000.00
6,601,109.40

3,386,309.70 1,888,424.91 2,188,715.74 2,383,653.66 7,962,964.78
695,446.70 9,831,057.07 4,231,780.02
710,876.76 562,710.25
16,933.45 5,482,162.72 6,601,109.40

458,753.00 $ 7,520,000.00

383,363.62

943,596.50

7,978,753.00 1,326,960.12

$ 104,293,906.00 $ 9,370,997.10 $ 8,463,596.50 $ 122,128,499.60

$ 2,457,303.94 $ -2, 171,380.95 $ -2,688,880.48 $ -2,402,957.49

$

10,990.63

$ 1,204,986.40

-1,204,986.40

$

10,990.63

1,204,986.40

-1,204,986.40

$ -1 193 995. 77 $ 1,204,986.40

$

10,990.63

$ 1,263,308.17 $ -966,394.55 $ -2,688,880.48 $ -2,391,966.86

10,678,354.80

4,268,958.22 14 181 817.60

29,129,130.62

Fund Balances - Ending

$ 11,941,662.97 $ 3,302,563.67 $ 11,492,937.12 $ 26,737,163.76

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, 2007

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 or loss on the sale or disposal of the capital assets are reported, whereas in the Governmental Funds, the entire proceeds from the sale increase financial resources. Thus, the change in net assets differs from the change in fund balances by the carrying value of the buildings/equipment sold or disposed of.
Some items in the Statement of Activities do not require the use of current financial resources and therefore are not reported as expenditures in the Governmental Funds. This activity consists of:
Increase in Compensated Absences
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 Debi Repayments
Change in Net Assets of Governmental Activities (Exhibit "B")

$ -2,391,966.86

$ 10,600,418.00 -2,998,694.00

7,601,724.00

366,657.02

-2, 117,008.00

-508,227.96

$ 7,520,000.00 458,753.00 230,206.00

8,208,959.00

$ 11,160,137.20

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

(This page left intentionally blank)

FLOYD COUNTY BOARD OF EDUCATION STATEMENT OF FIDUCIARY NET ASSETS
FIDUCIARY FUNDS JUNE 30, 2007
ASSETS Cash and Cash Equivalents
LIABILITIES Funds Held for Others

EXHIBIT"G"
AGENCY FUNDS
$ 175,269.90
$ 175,269.90

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, 2007

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 ofall 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 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.
The School District reports the following major governmental funds:
- 10-

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

EXHIBIT"H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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 liability is incurred, except for principal and interest on general long-term debt, unamortized bond premium 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 are reported as other financing sources.
- 11 -

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

EXHIBIT "H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The School District 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/FUND BALANCE
In prior years, the employer's matching portion ofhealth insurance costs for certified employees was improperly calculated due to programming errors resulting in an understatement of liabilities of $844,132.00. While this amount is clearly immaterial to the financial statements, management has decided to reflect this correction as a restatement for comparability purposes. Therefore, on the District-wide financial statements, the net assets of the School District at July 1, 2006, have been reduced by $844,132.00 to record liabilities for employers' portion ofhealth insurance attributable to prior years. Also, on the Fund Financial Statements, a similar adjustment has been made to the General Fund Balance at July 1, 2006.
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 or insured Federal savings and loan associations.
INVESTMENTS
COMPOSITION OF INVESTMENTS Investments made by the School District in nonparticipating interest-earning contracts (such as certificates ofdeposit) and repurchase agreements are reported at cost. Participating interest-earning contracts and money market investments with a maturity at purchase 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 'nistrict 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,

- 12 -

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

EXHIBIT "H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(3) Obligations fully insured or guaranteed by the United States government or a United States government agency,

(4) Obligations of any corporation of the United States government,

(5) Prime banker's acceptances,

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

(7) Repurchase agreements, and

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

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

RECEIVABLES

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

PROPERTY TAXES

The Floyd County Board of Commissioners fixed the property tax levy for the 2006 tax digest year (calendar year) on July 25, 2006 (levy date). Taxes were due on November 15, 2006 (lien date). Taxes collected within the current fiscal year or within 60 days after year-end on the 2006 tax digest are reported as revenue in the governmental funds for fiscal year 2007. The Floyd County Tax Commissioner bills and collects the property taxes for the School District, withholds 2.5% of taxes collected as a fee for tax collection and remits the balance of taxes collected to the School District. Property tax revenues, at the fund reporting level, during the fiscal year ended June 30, 2007, for maintenance and operations amounted to $31,096,558.70.

The tax millage rate levied for the 2006 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

- 13 -

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

EXHIBIT"H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

SALES TAXES

Special Purpose Local Option Sales Tax, at the fund reporting level, during the year amounted to $10,628,434.78 and is to be used for capital outlay for educational purposes or debt service. This sales tax was authorized by local referendum and the sales tax must be re-authorized at least every five years.

INVENTORIES

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

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

$ 5,000.00 20 to 80 years

$ 5,000.00 10 to 80 years

$ 5,000.00 3 to 20 years

- 14 -

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

EXHIBIT"H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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. In addition, general obligation bonds have been issued to refund existing general obligation bonds. General obligation bonds are direct obligations and pledge the full faith and credit of the government. The outstanding amount of these bonds is recorded in the Statement of Net Assets.
NET ASSETS
The School District's net assets in the District-wide Statements are classified as follows:
Invested in capital assets, net of related debt - This represents the School District's total investment in capital assets, net ofoutstanding debt obligations related to those capital assets. To the extent debt has been incurred but not yet expended for capital assets, such amounts are not included as a component of invested in capital assets, net of related debt.
Restricted net assets - These represent resources for which the School District is legally or contractually obligated to spend resources for bus replacement, continuation of Federal programs, debt service and capital projects in accordance with restrictions imposed by external third parties.
Unrestricted net assets - Unrestricted net assets represent resources derived from property taxes, sales taxes, grants and contributions not restricted to specific programs, charges for services, and miscellaneous revenues. These resources are used for transactions relating to the educational and general operations of the School District, and may be used at the discretion of the Board to meet current expenses for those purposes.
Note 3: DEPOSITS AND INVESTMENTS
COLLATERALIZATION OF DEPOSITS Official Code of Georgia Annotated (OCGA) Section 45-8-12 provides that there shall not be on deposit at any time in any depository for a time longer than ten days a sum ofmoney which has not been secured by surety bond, by guarantee of insurance, 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.

- 15 -

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

EXHIBIT "H"

Note 3: DEPOSITS AND INVESTMENTS
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 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 Horne Loan Mortgage Association, and the Federal National Mortgage Association.
CATEGORIZATION OF DEPOSITS At June 30, 2007, the bank balances were $21,656,109.61. 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
by its trust department or agent in the School District's name, 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, 2007, as follows:

- 16 -

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

EXHIBIT "H"

Note 3: DEPOSITS AND INVESTMENTS

Custodial Credit Risk Category

Bank Balance

1

$

0.00

2

19,689,477.22

3

1,285,724.23

Total

$20,975,201.45

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

Investment Type

Fair Value

Investment Maturity

Less than

1- 5

1 Year

Years

Debt Securities U.S. Treasuries Repurchase Agreements

$ 558,310.74 $ 558,310.74 12,935,285.06 - - - - $ 12,935,285.06

Total Investments

$ 13,493,595.80 $ 558,310.74 $ 12,935,285.06

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.

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

AtJune 30, 2007, $13,493,595.80 ofthe School District's applicable investments were uninsured, are not registered in the name of the School District and are held by either the counterparty or the counterparty's trust department or agent, but not in the School District's name.

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.

- 17 -

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

EXHIBIT "H"

Note 3: DEPOSITS AND INVESTMENTS

The investments subject to credit quality risk are reflected below:

Rated Debt Investments

Fair Value

Quality Ratings AAA

Debt Securities Repurchase Agreements

$ 12,935,285.06 $ 12,935,285.06

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. More than 5% of the School District's investments are in Implicitly Guaranteed U. S. Agency Repurchase Agreements. These investments are 96% of the School District's total investments.

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:

Governmental Activities Capital Assets, Not Being Depreciated:
Land Construction in Progress
Total Capital Assets Not Being Depreciated
Capital Assets Being Depreciated Buildings and Improvements Equipment Land Improvements
Less Accumulated Depreciation for: Buildings and Improvements Equipment Land Improvements
Total Capital Assets, Being Depreciated, Net
Governmental Activity Capital Assets - Net

Balances July 1, 2006

Increases

Decreases

Balances June 30, 2007

$ 2,410,814.00 $ 135,586.00

$ 2,546,400.00

25,661,586.00 9,132,832.00 $ 30,922,433.00 3,871,985.00

$ 28,072,400.00 $ 9,268,418.00 $ 30,922,433.00 $ 6,418,385.00

$ 89,542,165.00 $ 30,349,549.00 $ 3,259,801.00 $116,631,913.00

12,505,136.00 1,805,476.00

230,809.00 14,079,803.00

3,549,949.00

99,408.00

3,649,357.00

20,020,832.00 7,585,826.00 2,662,695.00

1,959,030.00 1,012,508.00
27,156.00

1,169,780.00 203,822.00

20,810,082.00 8,394,512.00 2,689,851.00

$ 75,327,897.00 $ 29,255,739.00 $ 2,117,008.00 $102,466,628.00

$ I03.400.297,00 $ 38.524.157,00 $ 33.039.441.00 $108.885.013,00

- 18 -

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

EXHIBIT "H"

Note 5: CAPITAL ASSETS

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

Governmental Funds

Buildings and Improvements Less: Accumulated Depreciation

$ 3,048,396.00 763,056.00

$ 2,285,340.00

Current year depreciation expense by function is as follows:

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

$ 2,156,793.00

$ 30,374.00 9,105.00
584,725.00

624,204.00 217,697.00

$ 2,998,694.00

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 applicable bond covenants or statutory provisions. Restricted assets at June 30, 2007, were as follows:

District-wide Capital Projects

Bond

SPLOST

Proceeds

Debt Service Funds

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

$
$ 2,000,658.99

104.52 $ 11,492,937.12

- 19 -

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

EXHIBIT "H"

Note 7: INTERFUND TRANSFERS

Interfund transfers for the year ended June 30, 2007, consisted of the following:

Transfer to

Transfers From General Fund

District-wide Capital Projects

$ 1,204,986.40

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 has obtained commercial insurance for risk ofloss associated with torts, assets, errors or omissions, and acts ofGod. The School District has neither significantly reduced coverage for these risks nor incurred losses (settlements) which exceeded the School District's insurance coverage in any of the past three years.

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 $250,000.00 loss per occurrence, up to the statutory limit.

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

2006 2007

Beginning of Year Liability

Claims and Changes in Estimates

Claims Paid

End of Year Liability

$

0.00 $ 290,935.00 $ 290,935.00 $

0.00

$

0.00 $ 959,376.05 $ 375,791.00 $ 583,585.05

- 20 -

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

EXHIBIT "H"

Note 8: RISK MANAGEMENT

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:

2006 2007

Beginning of Year Liability

Claims and Changes in Estimates

Claims Paid

End of Year Liability

$

0.00 $ 12,605.00 $ 12,605.00 $

0.00

$

0.00 $

4,530.00 $

4,530.00 $

0.00

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

Position Covered

Amount

Superintendent Blanket Employee

$ 100,000.00 $ 100,000.00

Note 9: LONG-TERM DEBT

CAPITAL LEASES The Floyd County Board of Education entered into a lease agreement as lessee for construction and energy management systems. This lease agreement qualifies as a capital lease for accounting purposes, and, therefore, has been recorded at the present value of the future minimum lease payments as of the date of its inception.

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

- 21 -

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

EXHIBIT "H"

Note 9: LONG-TERM DEBT

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%

$ 3,040,000.00 2,000,000.00
20,185,000.00

$ 25,225,000.00

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

Capital Leases

Governmental Funds

Unamortized

Compensated

Bond

Absences (1)

Premium

General Obligation
Bonds

Total

Balance July 1, 2006

$ 7,580,669.00 $6,281,873.00 $ 728,987.00 $32,745,000.00 $47,336,529.00

Additions Annual Leave Earned

2,883,959.07

2,883,959.07

Deductions Annual Leave Utilized Debt Retired Bond Premiums Amortized

458,753.00

2,375,731.11

230,206.00

7,520,000.00

2,375,731.11 7,978,753.00
230,206.00

Balance June 30, 2007

oo $ 7.12191600 $ 6,790, I 96 $ 498 78! .00 $25.225.000.00 $39.635.797.96

Portion of Long-Term Debt

Due within One Year

$ 483,185.00 $

0.00 $ 230,206.00 $ 7,685,000.00 $ 8,398,391.00

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

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

- 22 -

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

EXHIBIT "H"

Note 9: LONG-TERM DEBT

Fiscal Year Ended June 30

Ca12ital Leases

Principal

Interest

2008 2009 2010 2011 2012 2013 - 2017 2018 - 2019

$ 483,185.00 $ 508,918.00 536,022.00 564,569.00 594,636.00
3,483,322.00 951,264.00

358,932.00 333,198.00 306,095.00 277,548.00 247,480.00 727,261.00
31,206.00

Total Principal and Interest

$ 7,121,916.00 $ 2,281.720.00

Fiscal Year Ended June 30

General Obligation

Debt

Principal

Interest

Unamortized Bond
Premium

2008 2009 2010 2018

$ 7,685,000.00 $ 7,890,000.00 7,650,000.00 2,000,000.00

717,422.00 $ 437,624.00 142,200.00

230,206.00 230,206.00
38,369.00

Total Principal and Interest

$ 25,225,000.00 $ 1,297,246.00 $ 498,781.00

Note 10: ON-BEHALF PAYMENTS

The School District has recognized revenues and costs in the amount of $1,710,059.87 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 $1,654,844.59

Paid to the Teachers Retirement System of Georgia For Teachers Retirement System (TRS) Employer's Cost In the amount of $45,685.28

- 23 -

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

EXHIBIT "H"

Note 10: ON-BEHALF PAYMENTS

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 $9,530.00

Note 11: SIGNIFICANT COMMITMENTS

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

Project

Unearned Executed Contracts

Funding Available From State

08-657-023

$ 2,316,943.54 $ 1,172,809.00

The amounts described in this note are 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.

Note 13: 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:

- 24 -

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

EXHIBIT "H"

Note 13: RETIREMENT PLANS
Fiscal Year 2007 2006 2005

Percentage Contributed
100% 100% 100%

Required Contribution
$ 5,266,884.59 $ 4,858,118.00 $ 4,627,881.00

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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, 2007

SCHEDULE "1"

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

NONAPPROPRIATED BUDGETS

ORIGINAL (1)

FINAL (1)

ACTUAL AMOUNTS

$ 30,409,899.00 $ 30,409,899.00 $ 31,096,558.70

95,000.00

95,000.00

687,681.00

55,308,670.70

56,564,927.65

59,400,022.09

7,817,692.88

8,607,295.00

9,015,948.22

2,037,000.00

2,037,000.00

3,026,767.76

488,000.00

713,000.00

880,547.44

270,000.00

270,000.00

2,643,684.73

$ 96,426,262.58 $ 98,697,121.65 $ 106,751,209.94

$ 62,364,686.56 $ 63,425,071.01 $ 66,853,533.32

2,521,052.05 1,827,336.40 2,165,895.78 2,144,595.84 7,023,833.28
706,060.00 7,548,380.75 3,452,436.98
712,714.62 227,752.00
18,954.00 4,644,647.00

2,557,984.87 1,969,765.53 2,122,196.30 2,500,960.60 7,048,545.91
703,060.00 7,792,971.30 3,871,237.98
698,864.00 233,609.00
18,954.00 4,644,683.91

3,386,309.70 1,888,424.91 2,188,715.74 2,379,160.58 7,962,964.78
695,446.70 8,134,887.07 4,031,780.02
710,876.76 562,710.25
16,933.45 5,482,162.72

$ 95,358,345.26 $ 97,587,904.41 $ 104,293,906.00

$

1,067,917.32 $

1,109,217.24 $

2,457,303.94

$

15,000.00 $

1,915,000.00 $

10,990.63

-1,330,000.00

-3,230,000.00

-1,204,986.40

$ -1,315,000.00 $ -1,315,000.00 $ -1,193,995.77

$

-247,082.68 $

-205,782.76 $

1,263,308.17

9,550,449.05

9,550,449.05

10,678,354.80

Fund Balances - Ending

$

9,303,366.37 $

9,344,666.29 $ 11,941,662.97

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, 2007

SCHEDULE "2"

FUNDING AGENCY PROGRAM/GRANT
Agriculture, U. S. Department of Child Nutrition Cluster Pass-Through From Georgia Department of Education Food Services School Breakfast Program National School Lunch Program
Total Child Nutrition Cluster
Other Programs Pass-Through From Georgia Department of Education Food Donation (1) 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 Act Improving Teacher Quality State Grants 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 Florida State University Comprehensive School Reform Demonstration
Total U. S. Department of Education
Total Federal Financial Assistance
NIA= Not Available

CFDA NUMBER

PASSTHROUGH
ENTITY ID
NUMBER

EXPENDITURES IN PERIOD

10.553 10.555

NIA

(2)

N/A

$

4769716.16

$ 4,769,716.16

10.550 10.665

N/A

287,359.71

N/A

(3)

$

5 057 075.87

. 84.027 . 84.173

N/A

$

2,218,678.79

N/A

83 068.89

$

2,301,747.68

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

NIA

103,888.19

N/A

62,992.81

N/A

42,914.86

N/A

6,245.65

N/A

347,988.00

NIA

(4)

NIA

443,788.70

N/A

15,535.00

N/A

1,878,594.78

NIA

628.126.41

NIA

113,630.00

NIA

55 550.00

$

6,001,002.08

$ 11,058,077.95

- 28 -

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

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 ($670,747.13) were not maintained separately and are included in the 2007 National School Lunch Program.
(3) Funds earned on this program in the amount of $3,298.80 do not require reporting of expenditures. (4) Funds earned and expended in the prior period on the Hurricane Education Recovery Act, in the amount of $35,956.00, 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, 2007

SCHEDULE "3"

AGENCY/FUNDING

GOVERNMENTAL FUND TYPES

CAPITAL

GENERAL

PROJECTS

FUND

FUND

TOTAL

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

$ 1,433,260.37

$ 1,433,260.37

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 Category V Gifted Student - Category VI Remedial Education Program Alternative Education Program English Speakers of Other Languages (ESOL) Media Center Program 20 Days Additional Instruction Staff and Professional Development Indirect Cost Central Administration School Administration Facility Maintenance and Operations Categorical Grants Pupil Transportation Regular Bus Replacement Bus Replacement - State Bonds Nursing Services Principal Supplements Vocational Supervisors Migrant Education Education Equalization Funding Grant Food Services Vocational Education Amended Formula Adjustment Other State Programs Charter Schools Graduation Coaches Health Insurance K-8 Statewide Reading and Math Grants Middle School Remediation Grant National Teacher Certification Preschool Handicapped Program Special Education Low Incidence Grant Teachers' Retirement Virtual Schools

2,909,594.00 510,365.00
7,292,410.00 904,716.00
3,328,460.00 386,848.00
5,605,126.00 5,045,187.00 2,001,317.00
8,462,257.00 11,686.00 62,624.00 -51.00 13,538.00
2,823,599.00 461,318.00 466,881.00
1,070,943.00 362,856.00 318,248.00 210,382.00
1,440,861.00 2,429,939.00 2,658,518.00
1,479,697.00 173,828.00 250,000.00 189,980.00 36,231.00 37,717.00 5,039.00
4,507,471.00 258,844.00 884,232.57
-1,069,057.00
5,000.00 160,300.00 1,654,844.59 137,656.28
4,855.00 97,909.00 300,848.00 12,253.00 45,685.28
150.00

2,909,594.00 510,365.00
7,292,410.00 904,716.00
3,328,460.00 386,848.00
5,605,126.00 5,045,187.00 2,001,317.00
8,462,257.00 11,686.00 62,624.00 -51.00 13,538.00
2,823,599.00 461,318.00 466,881.00
1,070,943.00 362,856.00 318,248.00 210,382.00
1,440,861.00 2,429,939.00 2,658,518.00
1,479,697.00 173,828.00 250,000.00 189,980.00 36,231.00 37,717.00 5,039.00
4,507,471.00 258,844.00 884,232.57
-1,069,057.00
5,000.00 160,300.00 1,654,844.59 137,656.28
4,855.00 97,909.00 300,848.00 12,253.00 45,685.28
150.00

- 30 -

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

SCHEDULE "3"

AGENCY/FUNDING
GRANTS Georgia State Financing and Investment Commission Reimbursement on Construction Projects
Office of Treasury and Fiscal Services Public School Employees Retirement
OTHER Community Affairs, Georgia Department of Local Assistance Grant
Natural Resources, Georgia Department of Arrowhead Environmental Education Center

GOVERNMENTAL FUND TYPES

CAPITAL

GENERAL

PROJECTS

FUND

FUND

TOTAL

$ 621,476.88 $

621,476.88

$

9,530.00

9,530.00

100,000.00 6 126.00

100,000.00 6126.00

$ 59,400,022.09 $ 721,476.88 $ 60,121,498.97

See notes to the basic financial statements.

- 31 -

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

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

$ 48,750,000.00 $ 49,851,691.00 $ 9,462,119.00 $ 37,871,754.00 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.

- 32 -

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

SCHEDULE "5"

DESCRIPTION
Direct Instructional Programs Kindergarten Program Kindergarten Program-Early Intervention Program Primary Grades (1-3) Program Primary Grades-Early Intervention (1-3) Program Upper Elementary Grades (4-5) Program Upper Elementary Grades-Early Intervention (4-5) Program Middle 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

$

3,439,513.00 $ 2,623,030.00 $

14,148.00 $ 2,637,178.00

478,652.00

599,236.00

599,236.00

7,830,231.00

8,903,712.00

223,285.00

9,126,997.00

745,078.00

1,215,797.00

1,215,797.00

3,894,749.00

4,157,163.00

38,455.00

4,195,618.00

311,969.00 6,704,937.00 5,241,110.00 2,215,891.00 9,019,064.00
2,470,213.00 245,541.00 518,801.00 226,216.00

617,207.00 8,136,869.00 7,949,940.00 1,781,351.00
68,031.00 6,783,327.00
180,343.00 1,175,441.00
439,454.00 464,707.00 165,922.00

145,016.00 205,294.00 223,933.00
94,415.00 159,590.00
25,505.00

617,207.00 8,281,885.00 8,155,234.00 2,005,284.00
68,031.00 6,877,742.00
339,933.00 1,200,946.00
439,454.00 464,707.00 165,922.00

$

43,341,965.00 $ 45,261,530.00 $ 1,129,641.00 $ 46,391,171.00

1,133,877.00 233,274.00

1,758,536.00 81,053.00

81,817.00 146,886.00

1,840,353.00 227,939.00

TOTAL QBE FORMULA FUNDS

$

44 709116.00 $ 47101119.00 $ 1,358,344.00 $ 48,459,463.00

(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.

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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 26, 2008

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, 2007, which collectively comprise Floyd County Board ofEducation's basic financial statements and have issued our report thereon dated February 26, 2008. 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 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 Floyd County Board of Education's internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness of the Floyd County Board of Education's internal control over financial reporting.
Our consideration of internal control over financial reporting was for the limited purpose described in the preceding paragraph and would not necessarily identify all deficiencies in internal control over financial reporting that might be significant deficiencies or material weaknesses. However, as discussed below, we identified certain deficiencies in internal control over financial reporting that we consider to be significant deficiencies.
2007YB-30

A control deficiency exists when the design or operation ofa control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect misstatements on a timely basis. A significant deficiency is a control deficiency, or combination of control deficiencies, that adversely affect the Floyd County Board of Education's ability to initiate, authorize, record, process, or report financial data reliably in accordance with generally accepted accounting principles such that there is more than a remote likelihood that a misstatement of the Floyd County Board ofEducation's financial statements that is more than inconsequential will not be prevented or detected by the Floyd County Board ofEducation's internal control. We consider items FS-6571-07-01, FS-6571-07-02 and FS-6571-07-03 in the accompanying Schedule ofFindings and Questioned Costs to be significant deficiencies in internal control over financial reporting.
A material weakness is a significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood that a material misstatement ofthe financial statements will not be prevented or detected by the Floyd County Board of Education's internal control.
Our consideration of the internal control over financial reporting was for the limited purpose described in the first paragraph ofthis section and would not necessarily disclose all deficiencies in internal control that might be significant deficiencies and, accordingly, would not necessarily disclose all significant deficiencies that are also considered to be material weaknesses. However, we believe that none ofthe significant deficiencies 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.
We noted certain matters that we have reported to management ofFloyd County Board ofEducation in a separate letter dated February 26, 2008.
Floyd County Board ofEducation's response to the findings identified in our audit is described in the accompanying Schedule of Management's Responses. We did not audit Floyd County Board of Education's response and, accordingly, we express no opinion on it.
2007YB-30

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,

RWH:gp 2007YB-30

~W-~
Russell W. Hinton, CPA, CGFM State Auditor

Russell W. Hinton
STATE AUDITOR
(404) 856-2174

DEPARTMENT OF AUDITS AND ACCOUNTS
270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400
February 26, 2008

Honorable Sonny Perdue, Governor Members of the General Assembly Members of the 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, 2007. Floyd County Board of Education's major Federal programs are identified in the Summary ofAuditor's Results Section ofthe 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 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

2007SA-10

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.
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, 2007.
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 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 Floyd 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 ofa 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.
2007SA-10

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,
~~~-~ Russell W. Hinton, CPA, CGFM State Auditor
RWH:gp 2007SA-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, 2007

PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

FINDING CONTROL NUMBER AND STATUS

FS-6571-04-02 FS-6571-05-01 FS-6571-06-01 FS-6571-06-02

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

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 over School Activity Accounts Finding Control Number: FS-6571-06-01

Several weaknesses in internal control in the area of the principal's 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 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 of receipts and

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FLOYD COUNTY BOARD OF EDUCATION AUDITEE'S RESPONSE
SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2007
PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS CORRECTIVE ACTION/RESPONSES REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Control Procedures Finding Control Number: FS-6571-06-01 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 ofreceipt 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.
PRIOR YEAR FEDERAL AWARD FINDINGS AND QUESTIONED COSTS No matters were reported.
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SECTION IV FINDINGS AND QUESTIONED COSTS

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

I SUMMARY OF AUDITOR'S RESULTS

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

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

Expenditures/Liabilities/Disbursements General Ledger

Revenues/Receivables/Receipts Capital Assets

None of the significant deficiencies 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. Significant Deficiencies in Internal Control Over Major Programs The audit report for the Floyd County Board of Education did not disclose any significant deficiencies in internal control over major programs.

5. Type of Report Issued on Compliance for Major Programs The auditor's opinion on the 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 .51 0(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: 84.027 Special Education - Grants to States 84.173 Special Education - Preschool Grants 84.213 Even Start 84.287 Twenty-First Century Community Leaming Centers

8. Type "A" Program Dollar Threshold The dollar threshold for type "A" programs was $331,841.30.

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

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 of 0MB Circular A-133.

II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Control Procedures over School Activity Accounts Significant Deficiency Finding Control Number: FS-6571-07-01

Condition:

This is a repeat finding (FS-6571-06-01 and FS-6571-05-01) from the years ended June 30, 2006, and June 30, 2005, 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.

Questioned Cost: NIA

Information:

Revenues/Receivables/Receipts Based on a review of seventy items, the following deficiencies were noted: 1. Forty-six receipts did not include documentation to determine the receipts were deposited in a timely manner, and 2. Fifty receipts were not supported by adequate documentation to indicate origin of receipt or accuracy of deposit.

Expenditures/Liabilities/Disbursements Based on a review of seventy items, the following deficiencies were noted: 1. Two vouchers did not have any documentation on file, 2. seven vouchers did not include an approved purchase order or the invoice was dated prior to the purchase order, 3. three vouchers did not include an original invoice, and 4. five did not include documentation of receipt.

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

II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Control Procedures over School Activity Accounts Significant Deficiency Finding Control Number: FS-6571-07-01

Cause:

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

Effect:

Errors and/or 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.

CAPITAL ASSETS Failure to Adequately Maintain Capital Assets Significant Deficiency Finding Control Number: FS-6571-07-02

Condition:

The School District failed to adequately maintain a capital assets listing.

Criteria:

Chapter 37 Fixed Assets of the Financial Management for Local Units of Administration indicates that School Districts must establish fixed asset policies, define system requirements, implement a fixed asset system and maintain fixed asset inventory records.

Questioned Cost: NIA

Information:

The following errors were noted during the review of the detailed capital assets listing and were adjusted by the School District on the financial statements:

One Land Improvement totaling $170,338 was not included on the Asset Listing but was included on the Additions Listing. This item was added to the overall summary as a reconciling item by the School District.
Eight building improvements were included on the Asset Listing but the total cost did not agree to the total cost per the Additions Listing. The variance totaled $929,002.

-3 -

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

II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

CAPITAL ASSETS Failure to Adequately Maintain Capital Assets Significant Deficiency Finding Control Number: FS-6571-07-02

Eight building improvements totaling $2,494,388 were included on the Additions Listing but not on the Asset Listing.

The following errors were noted during the review of the detailed capital assets listing but were not corrected by the School District on the financial statements:

One Building Improvement totaling $167,157 was included on the Additions Listing; however, it was an addition during fiscal year 2006.
Two E-rate renovation projects were included as building improvements on the Additions Listing; however, this amount included equipment. The School District then recorded equipment related to the renovations separately on the Asset Listing.
A review of invoices for asset purchases indicated five equipment assets totaling $99,719.58 and one building improvement asset totaling $26,000 that were not added to the Asset Listing during the fiscal year.
One land purchase totaling $500 was not added to the Asset Listing during the fiscal year.
The Construction-In-Progress ending balance is overstated $18,022.51 at June 30, 2007, due to the inclusion ofuncapitalizable costs.

Cause:

The School District failed to properly maintain its capital assets records in accordance with the School District's approved capital asset policy.

Effect:

The failure ofthe School District to maintain a complete and accurate capital assets listing can lead to inaccurate internal and external reporting, as well as noncompliance with generally accepted accounting principles.

Recommendation:

The School District should review its capital assets records and make appropriate adjustments to ensure that the capital assets records conform to the School District's approved capital assets policy and generally accepted accounting principles.

-4 -

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

II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

GENERAL LEDGER Incomplete General Ledger/DE046 Financial Report Significant Deficiency Finding Control Number: FS-6571-07-03

Condition:

The School District failed to include employee contributions to charitable organizations activity in the DE046 financial report submitted to the Georgia Department of Education.

Criteria:

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

Questioned Cost: NIA

Information:

The activity for four agency fund accounts was not recorded on the School District's general ledger as required. An audit adjustment was proposed and posted by the School District to record beginning Funds Held for Others of $22,142.90, contributions of$26,238.45, and deductions of$27,248.22 in the School District's Agency Fund.

Cause:

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

Effect:

The failure ofthe 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's 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.

III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

No matters were reported.

-5-

SECTIONV MANAGEMENT'S RESPONSES

FLOYD COUNTY BOARD OF EDUCATION SCHEDULE OF MANAGEMENT'S RESPONSES
YEAR ENDED JUNE 30, 2007
Finding Control Number: FS-6571-07-01
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's goal is to provide clear documentation that the auditors can follow to verify adequate controls. The School District accounting staff continues to hold meetings regarding instructions for the handling of receipts and deposits. Bookkeepers and Principals 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 ofreceipt processes that can be easily tracked and for the proper documentation of expenditures. The resolution to this finding will be ongoing as we continue to train and keep bookkeepers apprised of continuing auditing requirements.
Finding Control Number: FS-6571-07-02
The School District partially concurs with this finding. The School District found a minor number of immaterial corrections to the asset listing after the final listing had been published by the appraisal firm contracted to complete the listing. Accordingly, the School District provides a reconciliation of these corrections to agree to the capital asset balances shown on the financial statements. The School District views this reconciliation as an extension ofits formal capital assets records. We believe based on the resources available to manage capital assets, the asset listing is essentially accurate based on the volume of transactions in this School District. One item labeled "Land Purchase" for $500 was earnest money for the purchase ofland and was not considered by the School District as a capital asset addition.
The School District will review its procedures in maintaining capital assets records and make improvements as necessary.
- 1-

FLOYD COUNTY BOARD OF EDUCATION SCHEDULE OF MANAGEMENT'S RESPONSES
YEAR ENDED JUNE 30, 2007 Finding Control Number: FS-6571-07-03 The School District concurs with this finding. During the course of the audit, four insignificant/ immaterial agency fund accounts were noted that were not on the School District's General Ledger. It had been determined previously these accounts were not a part of School Districts' accounts. Upon recommendation of the auditors the accounts were posted to the agency funds as required. The School District will post these balances on its General Ledger prior to the submission ofthe DE 0046 financial report to DOE. No further action will be required. Contact Person: Chris Toles, Executive Director of Financial Services Phone: (706) 234-1031 Fax: (706) 236-1816 E-mail Address: ctoles@floydboe.net
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