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

FRANKLIN COUNTY BOARD OF EDUCATION CARNESVILLE, 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

FRANKLIN 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

8

H

NOTES TO THE BASIC FINANCIAL STATEMENTS

9

SCHEDULES

REQUIRED SUPPLEMENTARY INFORMATION

1 SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES

IN FUND BALANCES - BUDGET AND ACTUAL

GENERAL FUND

25

FRANKLIN COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS -

SECTION I

FINANCIAL

SCHEDULES

SUPPLEMENTARY INFORMATION

2 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS

26

3 SCHEDULE OF STATE REVENUE

27

4 SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS

28

5 ALLOTMENTS AND EXPENDITURES

GENERAL FUND - QUALITY BASIC EDUCATION PROGRAMS (QBE)

BY PROGRAM

31

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

FRANKLIN 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
May 23, 2008

Honorable Sonny Perdue, Governor Members ofthe General Assembly Members ofthe State Board of Education
and Superintendent and Members of the Franklin 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) ofthe Franklin 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 ofthe Franklin County Board ofEducation'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 Franklin 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 ofthe Franklin County Board ofEducation, as ofJune 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 May 23, 2008, on our consideration of the Franklin 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 ofthat report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit.
Management's Discussion and Analysis and the Schedule ofRevenues, Expenditures and Changes in Fund Balances - Budget and Actual, as presented on pages i through ix and page 25 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 Franklin 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,
-=s~in~~i~ State Auditor
RWH:as 2007ARL-11

FRANKLIN COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2007
INTRODUCTION
Our discussion and analysis of the Franklin County School District's financial performance provides an overview of the School District's financial activities for the fiscal year ended June 30, 2007. The intent of this discussion and analysis is to look at the School District's financial performance as a whole. We encourage our readers to also review the notes to the basic financial statements and financial statements to enhance their understanding of the School District's financial performance.
FINANCIAL HIGHLIGHTS
Key financial highlights for fiscal year 2007 are as follows
On the District-wide financial statements, the assets of the School District exceeded liabilities by $44.0 million.
The School District had slightly more than $36.4 million in expenses relating to governmental activities; only $23.7 million of these expenses are offset by program specific charges for services, grants and contributions. General revenues (primarily property and sales taxes) of $15.1 million were adequate to provide the remaining funding for these programs.
As stated above, general revenues accounted for $15.1 million or 39% of all revenues totaling $38.8 million. Program specific revenues in the form of charges for services, grants and contributions accounted for the rest.
OVERVIEW OF THE FINANCIAL STATEMENTS
This annual report consists of three parts; management's discussion and analysis (this section), the basic 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

FRANKLIN COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2007
Franklin 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 Franklin County School District has no operations that have been classified as "BusinessType Activities", the District-wide financial statements are basically a consolidation of all of the 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 the 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.
The Statement of Net Assets and the Statement of Activities reflects 100% of the School District's financial activities.
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 only the School District's significant or major funds. As discussed previously, the School District has no nonmajor Funds as defined by GASB Statement 34.
Governmental Funds: Most of the School District's activities are reported in the 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 accrual method of accounting which measures cash and all other financial assets that can be readily 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.
11

FRANKLIN COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2007
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 school clubs and other organizations 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 District-wide financial statements because it cannot use these assets to finance its operations.
FINANCIAL ANALYSIS OF THE SCHOOL DISTRICT AS A WHOLE
Recall that the Statement of Net Assets provides the perspective of the School District as a whole. The reader can think of the School District's net assets as the difference between its assets (i.e., what the School District owns) and its liabilities (i.e., what the School District owes) at the end of a fiscal year. This balance represents one way to measure the School District's financial health or its financial position. In the case of the Franklin County School District, net assets exceeded liabilities by $44.0 million at June 30, 2007.
To better understand the School District's actual financial position and ability to deliver services in future periods, the reader will need to review the various components of the net asset category. For example, of the $44.0 million of net assets, approximately $2.2 million was restricted for continuation of Federal programs, debt service, and completion of certain ongoing capital projects. 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 $43.4 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.
Table I provides a summary of the School District's net assets for fiscal year 2007 compared to fiscal year 2006.
1ll

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

Table 1 Net Assets

Governmental Activities

Fiscal

Fiscal

Year 2007

Year 2006

Assets Current and Other Assets Capital Assets, Net

$15,551,745.82 $17,313,943.00 53. 150.807.53 45. 152,580.00

Total Assets

$68,702,553.35 $62.466,523.00

Liabilities Current and Other Liabilities Long-Term Liabilities

$ 6,428,761.43 $ 4,685,471.00 18.243.631.20 16,121,866.00

Total Liabilities

$24.672.392.63 $20.807.337.00

Net Assets Invested in Capital Assets, Net of Related Debt Restricted Unrestricted (Deficit)

$43,374,706.98 2,185,055.00 -1.529.601.26

$37,948,832.00 3,598,312.00 112,042.00

Total Net Assets

$44,030,160.72 $41,659,186.00

Table 2 shows the Changes in Net Assets for fiscal year 2007 as compared to fiscal year 2006.

iv

FRANKLIN 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 Operating Grants and Contributions Capital Grants and Contributions

Governmental Activities

Fiscal

Fiscal

Year 2007

Year 2006

$ 784,247.45 21,896,644.83 982,960.70

$ 731,669.00 19,701,178.00 6,219,371.00

Total Program Revenues

$23,663,852.98 $26.652.218.00

General Revenues:

Taxes

Property Taxes

For Maintenance and Operations

$ 8,450,091.78

Railroad Car Taxes

13,055.39

Sales Taxes

Special Purpose Local Option Sales Tax

For Debt Service

1,873,789.51

For Capital Projects

1,765,825.37

Intangible Recording Tax

185,941.19

Real Estate

70,400.58

Grants and Contributions not Restricted to

Specific Programs

1,000,395.01

Investment Earnings

710,264.98

Miscellaneous

1,064.953 .30

$ 7,586,363.00 3,488.00
2,634,193.00 1,183,243.00
219,709.00 55,689.00
1,157,683.00 362,433.00 974,260.00

Total General Revenues
Total Revenues
Program Expenses Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation ofPlant Student Transportation Services Central Support Services Other Support Services Operations ofNon-Instructional Services Enterprise Operations Food Services Interest on Short-Term and Long-Term Debt
Total Expenses
Increase in Net Assets

$15,134.717.11
$38. 798,570.09
$23,133,573.80
1,114,902.34 1,215,252.39
706,930.75 371,122.52 2,004,585.31 243,318.83 2,263,255.97 2,419,437.60
93,757.64 193,799.50
440,882.06 1,710,276.05
516.500.61
$36A27.595.37
:rz0 $ 21 19'.H.12

$14,177,061.00
$40,829,279.00
$20,604,582.00
854,644.00 1,093,771.00
620,243.00 361,283.00 1,956,048.00 396,519.00 1,912,980.00 1,376,931.00 117,328.00 133,665.00
433,343.00 1,496,286.00
298,698.00
$31,656,321.00
$ 2.172.258,QQ

V

FRANKLIN 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 and compares fiscal year 2007 with fiscal year 2006. 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.

Table3 Governmental Activities

Total Cost of Services

Fiscal

Fiscal

Year 2007

Year 2006

Net Cost of Services

Fiscal

Fiscal

Year 2007 Year 2006

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 ofNon-Instructional Services Enterprise Operations Food Services Interest on Short-Term and Long-Term Debt

$23,133,573.80 $20,604,582.00 $ 6,483,669.16 $ 435,040.00

1,114,902.34 1,215,252.39
706,930.75 371,122.52 2,004,585.31 243,318.83 2,263,255.97 2,419,437.60 93,757.64 193,799.50

854,644.00 1,093,771.00
620,243.00 361,283.00 1,956,048.00 396,519.00 1,912,980.00 1,376,931.00 117,328.00 133,665.00

745,629.04 571,502.58 216,456.87 -286,535.13 1,071,216.26 252,668.94 1,219,597.31 1,463,518.44 43,211.78 159,715.42

575,369.00 502,872.00 181,326.00 -188,448.00 1,112,812.00 396,519.00 920,990.00 601,289.00 48,617.00 131,979.00

440,882.06 1,710,276.05
516,500.61

433,343.00 1,496,286.00
298,698.00

222,692.34 83,898.77
516,500.61

256,455.00 -269,415.00 298,698.00

Total Expenses

$36,421,525 31 $31,656,321 00 $12163,14232 $5,004,103 00

FINANCIAL ANALYSIS OF THE SCHOOL DISTRICT'S FUNDS

The School District's governmental funds are accounted for using the modified accrual basis of accounting. The governmental funds had total revenues of $38.7 million and total expenditures of$47.5 million during fiscal year 2007. Included in the $47.5 million of expenditures were $9.7 million of Capital Outlay expenditures and $3.6 million in Debt Service. These expenditures were funded primarily through General Obligation Bonds issued in 2006 and 2007 and SPLOST receipts.

GENERAL FUND BUDGETING HIGHLIGHTS

The School District's budget is prepared according to Georgia Law. The most significant budgeted fund of the School District is the General Fund. However under the GASB 34 reporting model the General Fund includes more than the general fund described in the Department of Education's Accounting Manual. No changes were made to the General Fund

VI

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

budget as described in the GADOE Accounting Manual, but amendments were made to other funds included in the broader GASB 34 definition. These amendments were the result of carry over funds and/or changes in tentative allocations.

For the General Fund, the final actual revenues of $33.7 million exceeded the final budgeted amounts of $30.4 million by $3.3 million. This difference (final actual vs. final budget) was due primarily to an increase in property taxes collected, Federal and State funds including capital project grants, investment earnings, charges for services and miscellaneous revenues. Miscellaneous revenue includes school activity accounts, which were not included in the School District budget for revenue or expenditures. On-behalf revenues were booked to the School District statements, but were not included in the budget. Federal grant revenue also exceeded budgeted levels.

The final actual expenditures of $34.3 million exceeded the final budgeted amount of $32.3 million by $2.0 million. Major differences (final actual vs. final budget) include on-behalf expenses and school activity expenses, neither of which was included in the original budget. Federal grants also exceeded budgeted levels.

CAPITAL ASSETS AND DEBT ADMINISTRATION

Capital Assets

At fiscal year ended June 30, 2007, the School District had $53.2 million invested in capital assets, all in governmental activities. Table 4 reflects a summary of these balances net of accumulated depreciation and compares fiscal year 2007 with fiscal year 2006.

Table 4 Capital Assets (Net of Depreciation)

Governmental Activities

Fiscal

Fiscal

Year 2007

Year 2006

Land Construction in Progress Land Improvements Buildings Equipment

$ 1,338,157.00 6,611,794.63 1,042,134.50
41,725,491.02 2,433,230.38

$ 1,360,657.00 18,344,448.00 702,046.00 22,258,536.00 2,486,893.00

Total

$53.150.807.53 $45.152.580,00

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

vu

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

The $18.3 million in construction in progress in 2006 was substantially completed as the new middle and elementary schools on the Turkey Creek property were occupied at the beginning of the school year. Building and equipment increases are the result of these funds' subsequent reclassification to fixed assets. The $6.6 million in 2007 construction in progress is a combination of several projects including athletic fields on two campuses and structural repair/upgrade projects on three other campuses.

Debt

At fiscal year ended June 30, 2007, the School District had $18,155,000.00 in bonds outstanding, and $88,631.20 in other Long-Term Debt. Table 5 summarizes the School District's debt for general obligation bonds and capital leases and compares fiscal year 2007 with fiscal year 2006.

Table 5 Debt at June 30

Governmental Activities

Fiscal

Fiscal

Year 2007

Year 2006

Capital Leases Bonds Payable

$ 88,631.20 $ 246,866.00 18,155,000.00 15,875,000.00

Total

$18,243,631.20 $16,121,866.00

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

CURRENT ISSUES

Currently known facts, decisions or conditions that are expected to have a significant effect on financial positions or results of operations in future years are as follows:

State QBE Revenue Reductions - During the current fiscal year the State of Georgia again implemented statewide austerity reductions to all school districts. Franklin County's funding was reduced by $429,496.00. A similar reduction will in all probability be repeated in fiscal year 2009. Additionally, class size reductions were mandated by the State, but not fully funded. This shifting of financial responsibility to the local property taxpayer puts a burden on local leadership as it tries to communicate these changes to its electorate. Despite these challenges, the Franklin County School District is strong financially, and we remain optimistic about the ability of the School District to maximize all of the financial resources to provide a quality education to our students.

vm

FRANKLIN COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2007 Capital Improvements - The School District plans capital improvements as future capital needs arise due to increased student population and facility repair and maintenance needs. Specific capital expenditure plans are formalized in conjunction with individual general obligation bond issues and anticipated annual receipts of capital outlay funds from the State of Georgia Department of Education. The School District regularly monitors anticipated capital outlay needs, and prioritizes those needs so as to best utilize available funding. CONTACTING THE SCHOOL DISTRICT'S FINANCIAL MANAGEMENT This financial report is designed to provide our citizens, 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. Terry Duke, Comptroller for Franklin County School District, 580 Busha Road, Carnesville, Georgia 30521. You may also email your questions to Mr. Duke at tduke@franklin.kl2.ga.us.
IX

FRANKLIN COUNTY BOARD OF EDUCATION

FRANKLIN 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 Land Improvements Buildings Equipment Less: Accumulated Depreciation
Total Assets
LIABILITIES
Accounts Payable Salaries and Benefits Payable Contracts Payable Retainages Payable Long-Term Liabilities
Due Within One Year Due in More Than One Year
Total Liabilities
NET ASSETS
Invested in Capital Assets, Net of Related Debt Restricted for
Continuation of Federal Programs Debt Service Unrestricted (Deficit)
Total Net Assets
Total Liabilities and Net Assets

EXHIBIT"A"

GOVERNMENTAL ACTIVITIES

$

2,309,802.99

8,978,007.81

1,015,617.76 2,391,263.00
826,342.96 13,154.30 17,557.00

1,338,157.00 6,611,794.63 1,313,509.00 46,736,414.00 4,865,039.00 -7,714,106.10

$

1,183,500.23

2,834,094.03

1,949,117.77

462,049.40

3,243,631.20 15,000,000.00

$ 24,672,392.63

$ 43,374,706.98
222,538.13 1,962,516.87 -1,529,601.26
$ 44,030,160.72

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

FRANKLIN 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 Enterprise Operations Food Services Interest on Short-Term and Long-Term Debi
Total Governmental Activities
General Revenues Taxes Property Taxes For Maintenance and Operations Railroad Car Taxes Sales Taxes Special Purpose Local Option Sales Tax For Debt Services For Capital Projects Intangible Recording Tax Real Estate Grants and Contributions not Restricted to Specific Programs Investment Earnings Miscellaneous
Total General Revenues
Change in Net Assets
Net Assets - Beginning of Year
Net Assets - End of Year

EXPENSES

CHARGES FOR SERVICES

$ 23,133,573.80 $
1,114,902.34 1,215,252.39
706,930.75 371,122.52 2,004,585.31 243,318.83 2,263,255.97 2,419,437.60
93,757.64 193,799.50
440,882.06 1,710,276.05
516,500.61
$ 36,427,595.37 $

19,832.00
218,189.72 546,225.73 784,247.45

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

$ 15,936,872.34 $
369,273.30 643,749.81 476,010.70 657,657.65 922,226.08
-9,350.11 1,040,308.93
730,710.16 50,545.86 34,084.08
1,044,556.03
$ 21,896,644.83 $

693,200.30 $
14,463.18 11,142.97
3,349.73 225,209.00
35,595.52 982,960.70 $

-6,483,669.16
-745,629.04 -571,502.58 -216,456.87 286,535.13 -1,071,216.26 -252,668.94 -1,219,597.31 -1,463,518.44
-43,211.78 -159,715.42
-222,692.34 -83,898.77
-516,500.61
-12,763,742.39

$

8,450,091.78

13,055.39

1,873,789.51 1,765,825.37
185,941.19 70,400.58 1,000,395.01 710,264.98 1,064,953.30

$

15,134,717.11

$

2,370,974.72

41,659,186.00

$==4=4.,0..,30...,.,..,16..,0..7..2=

-3-

FRANKLIN 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

GENERAL FUND

DISTRICTWIDE
CAPITAL PROJECTS
FUND

DEBT SERVICE
FUND

TOTAL

$ 2,231,435.92 $

78,367.07

$

7,628,955.94 $ 1,349,051.87

242,805.00 2,391,263.00
826,342.96 13,154.30 17,557.00

613,465.00

2,309,802.99 8,978,007.81
856,270.00 2,391,263.00
826,342.96 13,154.30 17 557.00

Total Assets

$ 5,722,558.18 $ 7,707,323.01 $ 1,962,516.87 $=====1=5,..,39..,2=,3=9=8=.0=6

LIABILITIES AND FUND BALANCES

LIABILITIES

Accounts Payable

$ 1,017,293.80 $ 166,206.43

$

Salaries and Benefits Payable

2,834,094.03

Contracts Payable

1,949,117.77

Retainages Payable

462,049.40

Total Liabilities

$ 3,851,387.83 $ 2,577,373.60

$

FUND BALANCES

Reserved for: Continuation of Federal Programs Debt Service Capital Projects
Unreserved Designated for Student Activities Undesignated Reported in: General Fund

$

222,538.13

$

$ 1,962,516.87

$ 5,129,949.41

293,240.28

1,355,391.94

Total Fund Balances

$ 1,871,170.35 $ 5,129,949.41 $ 1,962,516.87 $

1,183,500.23 2,834,094.03 1,949,117.77
462,049.40 6,428,761.43
222,538.13 1,962,516.87 5,129,949.41
293,240.28 1,355,391.94 8,963,636.63

Total Liabilities and Fund Balances

$ 5,722,558.18 $ 7,707,323.01 $ 1,962,516.87 $=====1=5,..,39..,2=,3=9=8=.0=6

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

FRANKLIN COUNTY BOARD OF EDUCATION RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET
TO THE STATEMENT OF NET ASSETS JUNE 30, 2007

EXHIBIT" "

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

$ 8,963,636.63

$ 1,338,157.00 6,611,794.63 1,313,509.00
46,736,414.00 4,865,039.00 -7,714,106.10

53,150,807.53

159,347.76

$ -18,155,000.00 -88,631.20

-18,243,631.20

$ 44,030,160.72

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

FRANKLIN 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 Enterprise Operations Food Services Operation
Capital Outlay Debt Services
Principal Interest
Total Expenditures
Excess of Revenues over (under) Expenditures
OTHER FINANCING SOURCES (USES)
Proceeds of Long-Term Capital Related Debt Transfers In Transfers Out
Total Other Financing Sources (Uses)
Net Change in Fund Balances
Fund Balances - Beginning

GENERAL FUND

DISTRICTWIDE
CAPITAL PROJECTS
FUND

DEBT SERVICE
FUND

TOTAL

$ 8,349,414.41 256,341.77 $
19,385,233.29 3,737,015.54 784,247.45 138,933.44 1,064,953.29

1,765,825.37 $ 757,751.70
417,761.78

$ 1,873,789.51
153,569.76

8,349,414.41 3,895,956.65 20,142,984.99 3,737,015.54
784,247.45 710,264.98 1,064,953.29

$ 33,716,139.19 $ 2,941,338.85 $ 2,027,359.27 $ 38,684,837.31

$ 22,084,925.98

$ 22,084,925.98

1,114,902.34 1,221,711.87
711,226.26 371,122.52 2,114,804.24 207,533.96 $ 2,257,674.07 1,616,005.99
93,757.64 193,799.50 440,882.06 1,673,501.86

35,784.87 50,739.00
9,680,181.23

1,114,902.34 1,221,711.87
711,226.26 371,122.52 2,114,804.24 243,318.83 2,257,674.07 1,666,744.99
93,757.64 193,799.50 440,882.06 1,673,501.86 9,680,181.23

158,236.03 10,535.65

$ 2,920,000.00 546,732.61

3,078,236.03 557,268.26

$ 34,270,619.97 $ 9,766,705.10 $ 3,466,732.61 $ 47,504,057.68

$ -554,480.78 $ -6,825,366.25 $ -1,439,373.34 $ -8,819,220.37

$ 5,103,396.79 $ $ 265,282.13
-265,282.13

96,603.21 $

5,200,000.00 265,282.13 -265,282.13

$ 265,282.13 $ 4,838,114.66 $

96,603.21 $ 5,200,000.00

$ -289, 198.65 $ -1,987,251.59 $ -1,342,770.13 $ -3,619,220.37

2,160,369.00

7,117,201.00

3,305,287.00 12,582,857.00

Fund Balances - Ending

$ 1,871,170.35 $ 5,129,949.41 $ 1,962,516.87 $ 8,963,636.63

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

FRANKLIN 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 on the sale of the land/building/equipment is reported, whereas in the Governmental Funds, the entire proceeds from the sale increase financial resources. Thus, the change in net assets differs from the change in fund balances by the cost of the land/carrying value of the building/equipment sold.
Bond proceeds provide current financial resources to Governmental Funds; however, issuing debt increases Long-Term Liabilities in the Statement of Net Assets. In the current period, proceeds were received from:
General Obligation Bonds Issued
Repayment of Long-Term Debt is reported as an expenditure in Governmental Funds, but the repayment reduces Long-Term Liabilities in the Statement of Net Assets. In the current year, these amounts consist of:
Bond Principal Retirements Capital Lease Payments
Total Long-Term Debi Repayments

$ -3,619,220.37

$ 9,487,131.63
-1,350, 131.00

8,137,000.63

113,731.53

-138,773.10

-5,200,000.00

$ 2,920,000.00
158,236.03

3,078,236.03

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

$ 2,370,974.72

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

FRANKLIN 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
$ 86,291.45
$ 86,291.45

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

FRANKLIN 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 Franklin County Board of Education (School District) was established under the laws of the State of Georgia and operates under the guidance of a school board elected by the voters and a Superintendent appointed by the Board. The Board is organized as a separate legal entity and has the power to levy taxes and issue bonds. Its budget is not subject to approval by any other entity. Accordingly, the School District is a primary government and consists of all the organizations that compose its legal entity.
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 Franklin 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.

-9-

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

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

EXHIBIT "H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
liability is incurred, except for principal and interest on general long-term debt, 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.
The School District funds certain programs by a combination ofspecific cost-reimbursement grants, categorical grants, and general revenues. Thus, when program costs are incurred, there are both restricted and unrestricted net assets available to finance the program. It is the School District's policy to first apply grant resources to such programs, followed by cost-reimbursement grants, then general revenues.
CASH AND CASH EQUIVALENTS
COMPOSITION OF DEPOSITS Cash and cash equivalents consist ofcash on hand, demand deposits and short-term investments with original maturities of three months or less from the date of acquisition in authorized financial institutions. Official Code of Georgia Annotated Section 45-8-14 authorize the School District to deposit its funds in one or more solvent banks 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 District to invest its funds. In selecting among options for investment or among institutional bids for deposits, the highest rate ofreturn shall be the objective, given equivalent conditions of safety and liquidity. Funds may be invested in the following:
(1) Obligations issued by the State of Georgia or by other states,
(2) Obligations issued by the United States government,
(3) Obligations fully insured or guaranteed by the United States government or a United States government agency,
(4) Obligations of any corporation of the United States government,
(5) Prime banker's acceptances,

- 11 -

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

EXHIBIT "H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(6) The Local Government Investment Pool administered by the State ofGeorgia, 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 Franklin County Board of Commissioners fixed the property tax levy for the 2006 tax digest year (calendar year) on September 11, 2006 (levy date). Taxes were due on December 20, 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 Franklin 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 $8,336,358.72.

The tax millage rate levied for the 2006 tax year (calendar year) for the Franklin County Board of Education was as follows (a mill equals $1 per thousand dollars of assessed value):

School Operations

12.62 mills

SALES TAXES

Special Purpose Local Option Sales Tax, at the fund reporting level, during the year amounted to $3,639,614.88 and is to be used for capital outlay for educational purposes or debt service. This sales tax was authorized by local referendum and the sales tax must be re-authorized at least every five years.

- 12 -

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

EXHIBIT "H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

INVENTORIES

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

CAPITAL ASSETS

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

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

Land Land Improvements Buildings and Improvements Equipment

Capitalization Policy

Estimated Useful Life

All

NIA

$ 10,000.00 20 to 80 years

$ 20,000.00 25 to 80 years

$ 5,000.00 5 to 50 years

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

GENERAL OBLIGATION BONDS

The School District issues general obligation bonds to provide funds for the acquisition and construction of major capital facilities. Bond issuance costs are recognized in the financial statements during the fiscal year bonds are issued. General obligation bonds are direct obligations

- 13 -

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

EXHIBIT "H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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 of money which has not been secured by surety bond, by guarantee ofinsurance, or by collateral. The aggregate ofthe face value of such surety bond and the market value of securities pledged shall be equal to not less than 110 percent ofthe public funds being secured after the deduction ofthe amount ofdeposit insurance. Ifa depository elects the pooled method (OCGA 45-8-13.1) the aggregate ofthe market value ofthe securities pledged to secure a pool ofpublic funds shall be not less than 110 percent ofthe daily pool balance.
Acceptable security for deposits consists of any one of or any combination of the following:
(1) Surety bond signed by a surety company duly qualified and authorized to transact business within the State of Georgia,
(2) Insurance on accounts provided by the Federal Deposit Insurance Corporation,
(3) Bonds, bills, notes, certificates of indebtedness or other direct obligations of the United States or ofthe State of Georgia,
- 14 -

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

EXHIBIT "H"

Note 3: DEPOSITS AND INVESTMENTS

(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 ofthe State of Georgia, and

(7) Bonds, bills, notes, certificates of indebtedness, or other obligations of a subsidiary corporation of the United States government, which are fully guaranteed by the United States government both as to principal and interest or debt obligations issued by the Federal Land Bank, the Federal Home Loan Bank, the Federal Intermediate Credit Bank, the Central Bank for Cooperatives, the Farm Credit Banks, the Federal Home Loan Mortgage Association, and the Federal National Mortgage Association.

CATEGORIZATION OF DEPOSITS At June 30, 2007, the bank balances were $3,591,991.06. 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:

Custodial Credit Risk Category

Bank Balance

1

$

0.00

2

251,935.80

3

3,102,949.16

Total

$ 3,354,884.96

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.

- 15 -

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

EXHIBIT "H"

Note 3: DEPOSITS AND INVESTMENTS

Investment Type

Fair Value

Other Investments Money Market Mutual Funds

$ 2,646.08

Investment Pools Office of Treasury and Fiscal Services Georgia Fund 1

8,976,053.23

Total Investments

$ 8,978,699.31

The Local Government Investment Pool administered by the State of Georgia, Office of Treasury and Fiscal Services is not required to be categorized since the School District did not own any specific identifiable securities in the pool. The investment policy ofthe State of Georgia, Office of Treasury and Fiscal Services for the Local Government Investment Pool (Primary Liquidity Portfolio) does not provide for investment in derivatives or similar investments. Additional information on the Local Government Investment Pool is disclosed in the State of Georgia Comprehensive Annual Financial Report. This audit can be obtained from the Georgia Department of Audits and Accounts at http://www.audits.state.ga.us/internet/searchRpts.html.

The Primary Liquidity Portfolio consists ofGeorgia Fund 1 which is not registered with the SEC as an investment company but does operate in a manner consistent with the SEC's Rule 2a-7 of the Investment Company Act of 1940. The investment is valued at the pool's share price, $1.00 per share. The pool is an AAAm rated investment pool by Standard and Poor's. The weighted average maturity of Georgia Fund 1 may not exceed 60 days. The weighted average maturity for Georgia Fund 1 on June 30, 2007, was 15 days.

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

The Money Market Mutual Funds are invested in treasury obligations managed by First American Treasury Investments and Goldman Sachs Investments. Both of these funds are rated AAAm by Standard and Poor's.

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

- 16 -

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

EXHIBIT "H"

Note 5: CAPITAL ASSETS

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

Balances July 1, 2006

Increases

Balances Decreases June 30, 2007

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

$ 1,360,657.00

$ 22,500.00 $ 1,338,157.00

18,344,448.00 $ 6,611. 794.63 18,344,448.00 6,611,794.63

Total Capital Assets Not Being Depreciated $19,705,105.00 $ 6,611,794.63 $18,366,948.00 $ 7,949,951.63

Capital Assets Being Depreciated Buildings and Improvements Equipment Land Improvements

$26,797,334.00 $20,136,874.00 $ 197,794.00 $46,736,414.00

4,862,668.00 719,973.00 717,602.00 4,865,039.00

965,287.00 362,938.00

14,716.00 1,313,509.00

Less Accumulated Depreciation for: Buildings and Improvements Equipment Land Improvements

4,538,798.00 2,375,775.00
263,241.00

608,048.00 716,688.00
25,395.00

135,923.02 660,654.38
17,261.50

5,010,922.98 2,431,808.62
271,374.50

Total Capital Assets, Being Depreciated, Net $25,447,475.00 $19.869.654.00 $ 116,273.10 $45,200,855.90

Governmental Activity Capital Assets - Net $45.152.580.00 $26.481.448,63 $18,483.221. 10 $53.150.807,53

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

Governmental Funds

Equipment Less: Accumulated Depreciation

$ 220,756.00 41,369.05

$ 179,386.95

Current year depreciation expense by function is as follows:

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

$ 619,174.00

$ 20,506.00 22,224.00 4,442.00
637,666.00

684,838.00 46,119.00

$ 1,350,131.00

- 17 -

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

EXHIBIT"H"

Note 6: RESTRICTED ASSETS

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

$ 1,397.96 $ 76,969.11
$ 1,349,051.87 $ 7,628,955.94

Note 7: INTERFUND TRANSFERS

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

Transfer to

Transfers From District-wide
Capital Projects

General Fund

$ 265,282.13

Transfers are used to move Special Purpose Local Option Sales Tax (SPLOST) revenues collected by the District-wide Capital Projects Fund to the General Fund as reimbursement for the purchase of land.

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 and errors or omissions. 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 ofthe past three years.

- 18 -

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

EXHIBIT"H"

Note 8: RISK MANAGEMENT

The School District has elected to self-insure for all losses related to acts of God. The School District has not experienced any losses related to this risk in the past three years.

The School District is self-insured with regard to unemployment compensation claims. The School District accounts for claims within the General Fund with expenses/expenditures and liability being reported when it is probable that a loss has occurred, and the amount ofthat 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 $

1,500.00 $

1,500.00 $

0.00

$

0.00 $

0.00 $

0.00 $

0.00

The School District participates in the Georgia Education Workers' Compensation Trust, a public entity risk pool organized on December 1, 1991, to develop, implement and administer a program of workers' compensation self-insurance for its member organizations. The School District pays an annual premium to the Trust for its general insurance coverage. Additional insurance coverage is provided through an agreement by the Trust with the Midwest Employers Casualty Company to provide coverage for potential losses sustained by the Trust in excess of $500,000.00 loss per occurrence, up to $2,000,000.00.

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

Position Covered

Amount

Superintendent All Employees

$ 100,000.00 $ 100,000.00

Note 9: LONG-TERM DEBT

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

- 19 -

FRANKLIN 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 2001 General Government - Series 2003 General Government - Series 2006 General Government - Series 2007

3.1% - 3.9% 2.21% 3.73% 3.46%

$ 2,155,000.00 1,000,000.00 9,800,000.00 5,200,000.00

$18.155,000.00

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

Governmental Funds

General

Capital

Obligation

Leases

Bonds

Total

Balance July 1, 2006

$ 246,867.23 $15,875,000.00 $16,121,867.23

Additions G.O. Bonds

5,200,000.00 5,200,000.00

Deductions Debt Retired

158,236.03 2,920,000.00 3,078,236.03

Balance June 30, 2007

$ 88,631.20 $18.155.000.00 $18.243.631.20

Portion of Long-Term Debt Due within One Year

$ 88,631.20 $ 3.155.000.00 $ 3.243.631.20

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

Fiscal Year Ended June 30

Capital Leases

Principal

Interest

2008

$ 88,631.20 $ 4,139.08

-20-

FRANKLIN 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

General Obligation

Debt

Principal

Interest

2008 2009 2010 2011 2012 2013 - 2017

$ 3,155,000.00 $ 1,240,000.00 1,585,000.00 2,970,000.00 4,255,000.00 4,950,000.00

660,101.00 545,460.00 449,883.00 441,910.00 333,356.50 178,965.00

Total Principal and Interest

$18,155,000.00 $ 2,609,675.50

Note 10: ON-BEHALF PAYMENTS

The School District has recognized revenues and costs in the amount of $639,343.97 for health insurance and retirement contributions paid on the School District's behalf by the following State Agencies.

Georgia Department of Education Paid to the Georgia Department of Community Health For Health Insurance of Non-Certified Personnel In the amount of $618,963.19

Paid to the Teachers Retirement System of Georgia For Teachers Retirement System (TRS) Employer's Cost In the amount of $16,325.78

Office of Treasury and Fiscal Services Paid to the Public School Employees Retirement System For Public School Employees Retirement (PSERS) Employer's Cost In the amount of $4,055.00

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:

- 21 -

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

EXHIBIT"H"

Note 11: SIGNIFICANT COMMITMENTS

Project

Unearned Executed Contracts

Franklin County High School Stadium Franklin County Middle School Sports Complex Carnesville Elementary Renovation Royston Elementary Renovation Central Office Renovations

$ 1,678,031.42 57,471.27
261,997.35 428,784.16 251,346.70

$ 2,677,630.90

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.

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

Note 13: 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 ofGeorgia (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% oftheir gross earnings to TRS. The School District makes monthly employer contributions to TRS at rates adopted by the TRS Board ofTrustees 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:

-22 -

FRANKLIN 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
$ 1,651,092.55 $ 1,502,402.00 $1,431,181.00

- 23 -

(This page left intentionally blank)

FRANKLIN 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 Enterprise Operations Food Services Operation
Debt Service
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
Adjustments

NONAPPROPRIATED BUDGETS

ORIGINAL(1}

FINAL {1}

ACTUAL AMOUNTS

$ 7,692,073.00 $ 7,692,073.00 $ 8,349,414.41

273,571.00

273,571.00

256,341.77

18,169,435.00

18,169,435.00

19,385,233.29

850,926.00

3,602,422.56

3,737,015.54

552,000.00

552,000.00

784;247.45

56,400.00

56,400.00

138,933.44

51,566.00

51,566.00

1,064,953.29

$ 27,645,971.00 $ 30,397,467.56 $ 33,716,139.19

$ 19,003,488.00 $ 20,916,153.69 $ 22,084,925.98

1,703,647.00 964,095.00 651,517.00 269,915.00
2,054,006.00 219,893.00
2,149,005.00 1,712,069.00
74,000.00 154,921.00
1,597,531.00

1,149,365.87 1,195,517.00
651,517.00 334,895.00 2,063,372.00 219,893.00 2,149,005.00 1,712,060.00 114,324.00 221,921.00
1,597,531.00

1,114,902.34 1,221,711.87
711,226.26 371,122.52 2,114,804.24 207,533.96 2,257,674.07 1,616,005.99
93,757.64 193,799.50 440,882.06 1,673,501.86 168,771.68

$ 30,554,087.00 $ 32,325,554.56 $ 34,270,619.97

$ -2,908, 116.00 $ -1,928,087.00 $

-554,480.78

$

$

-56,000.00 $

-56,000.00

$

-56,000.00 $

-56,000.00 $

$ -2,964,116.00 $ -1,984,087.00 $

2,068,904.97

2,068,904.97

343,883.12

265,282.13
265,282.13 -289, 198.65 2, 160,369.00

Fund Balances - Ending

$

-895,211.03 $

428,701.09 $

1.871. 170.35

Notes to the Schedule of Revenues, Ex11enditures 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.
-25-

FRANKLIN 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)
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 English Language Acquisition Grants Enhancing Education Through Technology Program Improving Teacher Quality State Grants Migrant Education Reading First State Grants Rural Education State Grants for Innovative Programs Title I Grants to Local Educational Agencies Vocational Education - Basic Grants to States
Total U.S. Department of Education

CFDA NUMBER

PASSTHROUGH
ENTITY ID
NUMBER

EXPENDITURES IN PERIOD

10.553 10.555

N/A

(2)

N/A

$

1,512,512.72

$

1,512,512.72

10.550

N/A

66,309.14

$

1,578,821.86

. 84.027 . 84.173

N/A $ N/A
$

834,320.79 42 037.74
876,358.53

84.365 84.318 84.367 84.011 84.357 84.358
. 84.298 84.010 84.048

N/A

14,394.00

NIA

53,630.06

N/A

140,260.42

N/A

5,102.70

N/A

589,876.00

NIA

112,588.00

N/A

6,095.00

N/A

945,506.81

N/A

43,328.00

$

2,787,139.52

Total Federal Financial Assistance
N/A = Not Available

$ ====4,.3..6,..5=,9=6=1=.3=8

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 ($187,897.93) were not maintained separately and are included in the 2007 National School Lunch Program.

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 Franklin County Board of Education and is presented on the modified accrual basis of accounting which is the basis of accounting used in the presentation of the fund financial statements.

See notes to the basic financial statements.

- 26-

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

SCHEDULE "3"

AGENCY/FUNDING
GRANTS 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 Grades (6-8) Program High School General Education (9-12) Program Vocational Laboratory (9-12) Program Students with Disabilities Category I Category II Category Ill Category IV CategoryV Gifted Student - Category VI Remedial Education Program Alternative Education Program English Speakers of Other Languages (ESOL) Media Center Program 20 Days Additional Instruction Staff and Professional Development Indirect Cost Central Administration School Administration Facility Maintenance and Operations Categorical Grants Pupil Transportation Regular Bus Replacement Sparsity Nursing Services Principal Supplements Vocational Supervisors Education Equalization Funding Grant Food Services Vocational Education Amended Formula Adjustment Other State Programs Graduation Coaches Health Insurance K-8 Statewide Reading and Math Program National Teacher Certification Preschool Handicapped Program Pupil Transportation - State Bond Remedial Summer School Teachers' Retirement
Georgia State Financing and Investment Commission Reimbursement on Construction Projects
Office of Treasury and Fiscal Services Public School Employees Retirement

GOVERNMENTAL FUND TYPES

CAPITAL

GENERAL

PROJECTS

FUND

FUND

TOTAL

$ 1,226,899.00
77,361.00 2,830, 184.00
154,991.00 1,234, 171.00
103,200.00 2,373,320.00 2,156,302.00
629,466.00
52,852.78 255,251.11 934,888.53 486,066.45 344,358.13 407,803.00 130,581.00 189,609.00 115,469.00 389,307.00 123,982.00
72,364.00
509,411.00 821,420.00 984,441.00
655,896.00 75,209.00 35,802.00 83,644.00 12,752.00 18,859.00
1,000,395.00 94,680.00
171,888.42 -361,572.00
40,075.00 618,963.19
54,792.90 63,925.00 41,784.00 150,000.00
4,061.00 16,325.78

$

1,226,899.00

77,361.00

2,830,184.00

154,991.00

1,234,171.00

103,200.00

2,373,320.00

2, 156,302.00

629,466.00

52,852.78 255,251.11 934,888.53 486,066.45 344,358.13 407,803.00 130,581.00 189,609.00 115,469.00 389,307.00 123,982.00
72,364.00

509,411.00 821,420.00 984,441.00

655,896.00 75,209.00 35,802.00 83,644.00 12,752.00 18,859.00
1,000,395.00 94,680.00 171,888.42
-361,572.00
40,075.00 618,963.19
54,792.90 63,925.00 41,784.00 150,000.00
4,061.00 16,325.78

$

757,751.70

4,055.00

757,751.70 4,055.00

See notes to the basic financial statements.

$ 19,3851233.29 $

757?51.70 $ 20,142,984.99

-27-

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

SCHEDULE "4"

PROJECT
Acquiring, constructing and equipping new school buildings and other buildings and facilities useful or desirable in connection therewith, renovating, repairing, improving and equipping the Old Franklin County Middle School for administrative offices, auxiliary education programs, and miscellaneous office space, acquiring communication equipment and other equipment, including buses and transportation equipment, adding to, renovating, repairing, improving and equipping existing school buildings and grounds, agricultural facilities and athletic facilities, and other buildings and facilities useful or desirable in connection therewith, including, but not limited to, Royston Elementary, Lavonia Elementary, Carnesville Elementary, Franklin County Middle School, Franklin County High School, Central Franklin County Elementary, acquiring land useful or desirable for the purpose of renovation, or future expansion, and completing any capital outlay projects authorized in connection with the sales and use tax currently in effect.
Acquiring, constructing and equipping new school buildings and other buildings and facilities useful or desirable in connection therewith, including, but not limited to, a fine arts auditorium at Franklin County High School and the Franklin County Board of Education Administration Building; acquiring new school equipment; adding to, renovating, repairing, improving and equipping existing school buildings and other buildings and facilities useful or desirable in connection therewith, including, but not limited to, Royston Elementary School, Lavonia Elementary School, Carnesville Elementary School, Franklin County Middle School and Franklin County High School; the construction and equipping of a new elementary school or middle school; certain renovations and additions to the Bus Shop; acquisition of new technology; construction and equipping of a new field house; and certain improvements to the athletic facility; acquiring any property necessary or desirable therefore, both real and personal.

ORIGINAL ESTIMATED
COST (1)

CURRENT ESTIMATED COSTS (2)

AMOUNT EXPENDED IN CURRENT
YEAR (3)

AMOUNT EXPENDED
IN PRIOR YEARS (3)

PROJECT STATUS

$ 20,000,000.00 $ 20,000,000.00 $ 8,412,741.16 $ 1,265,059.00 Ongoing

18,000,000.00

26,225,465.00

1,863,678.12 24,221,751.00 Ongoing

$ 38,000,000.00 $ 46,225,465.00 $ 10,276,419.28 $ 25,486,810.00

- 28-

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

SCHEDULE "4"

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

See notes to the basic financial statements.

- 29-

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FRANKLIN 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 Grades (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)
TOTAL DIRECT INSTRUCTIONAL PROGRAMS
Media Center Program Staff and Professional Development

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

ELIGIBLE QBE PROGRAM COSTS

SALARIES

OPERATIONS

TOTAL

$

1,410,711.00 $ 1,413,571.53 $

19,249.06 $ 1,432,820.59

104,144.00

53,003.28

1,038.53

54,041.81

3,244,765.00

3,763,547.38

62,798.44

3,826,345.82

190,322.00

210,520.31

1,060.72

211,581.03

1,441,705.00

1,898,068.50

25,276.74

1,923,345.24

124,574.00 2,746,592.00 2,480,164.00
735,334.00 2,481,398.00
478,055.00 140,816.00 218,916.00 131 462.00

96,233.56 3,154,354.89 2,966,508.76
769,394.27
42,060.16 316,492.59 1,616,220.39 311,787.96 121,656.21 595,801.90
36,090.84 55,624.34 217 017.48

170.96 48,602.68 86,587.38 135,773.97
2,200.69 4,860.90 159,293.00 3,100.62 7,729.67 5,530.38
115.00 246,564.55

96,404.52 3,202,957.57 3,053,096.14
905,168.24
44,260.85 321,353.49 1,775,513.39 314,888.58 129,385.88 601,332.28
36,205.84 302,188.89 217 017.48

$

15,928,958.00 $ 17,637,954.35 $ 809,953.29 $ 18,447,907.64

451,440.00 85 036.00

553,355.27 42,279.97

48,196.55 39 317.17

601,551.82 81 597.14

TOTAL QBE FORMULA FUNDS

$

16 465 434.00 $ 18,233,589.59 $ 897 467.01 $ 19,131,056.60

(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.

- 31 -

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
May 23, 2008

Honorable Sonny Perdue, Governor Members ofthe General Assembly Members ofthe State Board of Education
and Superintendent and Members of the Franklin 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 ofFranklin County Board ofEducation as ofand for the year ended June 30, 2007, which collectively comprise Franklin County Board of Education's basic financial statements and have issued our report thereon dated May 23, 2008. We conducted our audit in accordance with auditing standards generally accepted in the United States ofAmerica and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States.
Internal Control Over Financial Reporting
In planning and performing our audit, we considered Franklin County Board ofEducation'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 Franklin County Board of Education's internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness ofthe Franklin County Board of Education's internal control over financial reporting.
Our consideration ofinternal 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 Franklin 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 ofthe Franklin County Board ofEducation's financial statements that is more than inconsequential will not be prevented or detected by the Franklin County Board ofEducation's internal control. We consider item FS-6591-07-01 in the accompanying Schedule ofFindings and Questioned Costs to be a significant deficiency 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 Franklin 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 the significant deficiency described above is not a material weakness.
Compliance and Other Matters
As part of obtaining reasonable assurance about whether Franklin 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 of Franklin County Board of Education in a separate letter dated May 23, 2008.
Franklin County Board ofEducation's response to the findings identified in our audit is described in the accompanying Schedule ofManagement's Responses. We did not audit Franklin 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 of the management, members of the Franklin 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,
~c.b~3-s,._
Russell W. Hinton, CPA, CGFM State Auditor
RWH:as 2007YB-30

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

DEPARTMENT OF AUDITS AND ACCOUNTS
270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400
[2]

Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the Franklin 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 of Franklin County Board of Education with the types of compliance requirements described in the U.S. Office ofManagement and Budget (0MB) Circular A-133 Compliance Supplement that are applicable to each ofits major Federal programs for the year ended June 30, 2007. Franklin County Board ofEducation's major Federal programs are identified in the Summary of Auditor's Results Section of the accompanying Schedule of Findings and Questioned Costs. Compliance with the requirements of laws, regulations, contracts and grants applicable to each of its major Federal programs is the responsibility of Franklin County Board of Education's management. Our responsibility is to express an opinion on Franklin County Board of Education's compliance based on our audit.
We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States 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 of States, Local Governments, and Non-Profit Organizations. Those standards and 0MB Circular A-133 require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major Federal program occurred. An audit includes examining, on a test basis, evidence about the Franklin County Board of Education's compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Our audit does not provide a legal determination on Franklin County Board of Education's compliance with those requirements.
2007SA-55

As described in item FA-6591-07-02 in the accompanying Schedule of Findings and Questioned Costs, Franklin County Board of Education did not comply with requirements regarding Activities Allowed or Unallowed and Allowable Costs/Cost Principles that are applicable to its Title I Grants to Local Educational Agencies. Compliance with such requirements is necessary, in our opinion, for Franklin County Board of Education to comply with requirements applicable to that program.
In our opinion, except for the noncompliance described in the preceding paragraph, the Franklin County Board of Education complied, in all material respects, with the requirements referred to above that are applicable to each of its major Federal programs for the year ended June 30, 2007. The results of our auditing procedures also disclosed instances of noncompliance with those requirements, which are required to be reported in accordance with 0MB Circular A-133 and which are described in the accompanying Schedule ofFindings and Questioned Costs as item FA-6591-0701.
Internal Control Over Compliance
The management of Franklin 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 Franklin County Board of Education'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 of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of the Franklin County Board of Education's internal control over compliance.
Our consideration ofthe internal control over compliance was for the limited purpose described in the preceding paragraph and would not necessarily identify all deficiencies in the Board's internal control that might be significant deficiencies or material weaknesses as defined below. However, as discussed below, we identified certain deficiencies in internal control over compliance that we consider to be significant deficiencies and others we consider to be material weaknesses.
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. We consider the deficiencies in internal control over compliance described in the accompanying Schedule ofFindings and Questioned Costs as items FA-6591-07-01 and FA-6591-07-02 to be significant deficiencies.
A material weakness is a significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood that material noncompliance with a type of compliance requirement of a Federal program will not be prevented or detected by the entity's internal control. Of the significant deficiencies in internal control over compliance described in the accompanying
2007SA-55

Schedule of Findings and Questioned Costs, we consider item FA-6591-07-02 to be a material weakness.
Franklin County Board ofEducation's response to the findings identified in our audit is described in the accompanying Schedule ofManagement's Responses. We did not audit Franklin County Board of Education's response and, accordingly, we express no opinion on it.
This report is intended solely for the information and use of the management, members of the Franklin 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:as 2007SA-55

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

FRANKLIN 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-6591-05-02 FS-6591-06-01 FS-6591-06-02

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

CORRECTIVE ACTION/RESPONSES

CASH AND CASH EQUIVALENTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Controls over School Activity Accounts Finding Control Number: FS-6591-06-01

We concur with this finding. Bank reconciliations are being approved by the principal or assistant principal at 3 of the 6 schools. The need for management approval of the bank reconciliation was apparently not clearly communicated to all facilities. We are recommunicating this requirement so that all facilities are in compliance.

Regarding purchase order and receipting issues, new financial software has been purchased by the School District. Corrective actions will be addressed as the new software is installed at each facility.

PRIOR YEAR FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

No matters were reported.

SECTION IV FINDINGS AND QUESTIONED COSTS

FRANKLIN 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 Franklin County Board ofEducation's financial statements was unqualified.

2. Significant Deficiencies in Internal Control Disclosed by the Audit ofthe Financial Statements The audit report for the Franklin County Board ofEducation disclosed a financial statement significant deficiency related to the following control categories.

Cash and Cash Equivalents Revenues/Receivables/Receipts

Expenditures/Liabilities/Disbursements

The significant deficiency described above is not considered to be a material weakness.

3. Noncompliance Material to the Financial Statements The audit of the Franklin County Board of Education disclosed no instances of noncompliance that were deemed to be material to the financial statements.

4. Significant Deficiencies in Internal Control Over Major Programs The audit report for the Franklin County Board of Education disclosed significant deficiencies in internal control over major programs for the following compliance requirements.

Activities Allowed or Unallowed

Allowable Costs/Cost Principles

The significant deficiencies described above related to the Title I Grants to Local Educational Agencies are considered to be material weaknesses.

5. Type of Report Issued on Compliance for Major Programs The auditor's opinion on the Franklin County Board of Education's report on compliance with requirements applicable to major programs was unqualified, except for Title I Grants to Local Educational Agencies which was qualified.

6. Audit Findings Reguired to be Reported by Section .5 IO{a) of 0MB Circular A-133 The Franklin County Board of Education's audit disclosed audit findings required to be reported by section .510(a) ofOMB Circular A-133. These audit findings are included in section IV of this report.

7. Major Programs Federal awards audited as major programs are as follows: 84.010 Title I Grants to Local Educational Agencies 84.027 Special Education - Grants to States 84.173 Special Education - Preschool Grants

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

I SUMMARY OF AUDITOR'S RESULTS

8. Type "A" Program Dollar Threshold The dollar threshold for type "A" programs was $300,000.00.

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

II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

CASH AND CASH EQUIVALENTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Controls over School Activity Accounts Significant Deficiency Finding Control Number: FS-6591-07-01

Condition:

This is a repeat finding (FS-6591-06-01, FS-6591-05-02, and FS-6591-0401) from the years ended June 30, 2006, June 30, 2005, and June 30, 2004, respectively. The accounting procedures of the School District were insufficient to provide 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:

Cash and Cash Equivalents The bank reconciliation was not reviewed or approved by the principal or assistant principal.

Revenues/Receivables/Receipts Based on a review of 12 transactions, the following deficiencies were noted: There were no procedures in place for the receipting of funds at the point of collection. Receipts were not deposited in a timely manner.

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

II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

CASH AND CASH EQUIVALENTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Controls over School Activity Accounts Significant Deficiency Finding Control Number: FS-6591-07-01

Expenditures/Liabilities/Disbursements Based on a review of 20 transactions from each of two schools, the following deficiencies were noted: Purchase orders were either not being utilized or were not properly approved. Procedures were not in place to properly document the receipt ofgoods prior to processing of payments.

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 establish adequate internal controls and accounting procedures at all schools to ensure that assets are adequately safeguarded. These controls should take into consideration collection procedures, separation of duties of critical accounting functions, and verification of goods/services received prior to vendor payment. Additionally, monitoring procedures should be implemented to provide reasonable assurance that transactions are processed according to established procedures.

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

III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

ALLOWABLE COSTS/COST PRINCIPLES Failure to Properly Document Expenditures Significant Deficiency Nonmaterial Noncompliance U.S. Department of Education Through Georgia Department of Education Special Education Cluster (CFDA 84.027 and CFDA 84.173) Finding Control Number: FA-6591-07-01

Condition:

A review ofexpenditures charged to the Special Education Cluster revealed that periodic certifications are not being utilized to document time performed on Federal activity and time and attendance records do not contain sufficient information to meet this compliance requirement.

Criteria:

0MB Circular A-87 requires that "Where employees work solely on a single Federal award, charges for their salaries should be supported by periodic certifications prepared at least semi-annually" and "Where employees work on multiple activities or cost objectives, a distribution of their salaries or wages must be supported by periodic certifications, which must be prepared at least monthly".

Questioned Cost: $11,957.04

Information:

An examination of expenditures charged to the Special Education Cluster grants revealed the following problems:

No periodic certifications were obtained for employees working on the Special Education program. For one split-funded employee, timesheets did not delineate between hours spent on Special Education programs and other School District functions.

Cause:

Management failed to implement procedures to ensure that expenses for personal services charged to Special Education Cluster grants are properly documented.

Effect:

Failure to properly document expenditures charged to this program can result in noncompliance with the requirements of the Federal grant.

Recommendation:

The School District should implement procedures necessary to ensure that expenditures charged to this program are properly documented in accordance with 0MB Circular A-87. Georgia Department ofEducation should review this matter to determine if a refund is appropriate.

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

III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

ACTIVITIES ALLOWED/UNALLOWED ALLOWABLE COSTS/COST PRINCIPLES Unallowable Expenditures Material Weakness Material Noncompliance U.S. Department of Education Through Georgia Department of Education Title I Grants to Local Educational Agencies (CFDA 84.010) Finding Control Number: FA-6591-07-02

Condition:

A review of expenditures charged to the Title I Grants to Local Educational Agencies program revealed that the School District paid for various goods that were not allowed under specific requirements of the Title I program.

Criteria:

0MB Circular A-87, Attachment A, paragraph C, requires that "to be allowable under Federal awards, costs must be...authorized or not prohibited under state or local laws or regulations; conform with the allowability of costs provisions of applicable cost principles, or limitation in the program agreement, program regulations, or program statute; and are applied uniformly to Federal and non-Federal activities".

Questioned Cost: $51,197.52

Information:

An examination of expenditures charged to the Title I Grants to Local Educational Agencies Program (Title I) identified the following problems:

Three items, totaling $6,025.06, were not allowable Title I expenditures. These expenditures included purchases for library books and goods/services that benefited the High School, which was not identified as an eligible attendance area for fiscal year 2007.
Two items, totaling $13,748.74, were for expenditures made to benefit Schoolwide Program schools. There was no documentation to support that these expenditures benefited only Title I eligible students.
One item, totaling $29,832.75, was for instructional software and was a split-funded payment with the General Fund (state/local funds). The School District could not provide an analysis of how the proration between the Title I and non-Federal funding was determined.
A journal entry, totaling $1,590.97, was made to transfer an expenditure from State Grants for Innovative Programs (CFDA 84.298) fund to Title I. This transfer should have been coded to the Schoolwide Program fund rather than the Title I fund. The original expenditure does not meet specific program requirements of the Title I program.

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

III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

ACTMTIES ALLOWED/UNALLOWED ALLOWABLE COSTS/COST PRINCIPLES Unallowable Expenditures Material Weakness Material Noncompliance U.S. Department of Education Through Georgia Department of Education Title I Grants to Local Educational Agencies (CFDA 84.010) Finding Control Number: FA-6591-07-02

Cause:

Management failed to ensure that expenditures charged to the Title I program were for allowable program purposes.

Effect:

Failure to monitor payments made from this program can result in material noncompliance with the requirements of the Federal grant.

Recommendation:

The School District should implement procedures necessary to ensure that expenditures charged to this program are allowable in accordance with Federal guidelines. In addition, the Georgia Department ofEducation should review this matter to determine if a reclaim of funds is appropriate.

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SECTIONV MANAGEMENT'S RESPONSES

FRANKLIN COUNTY BOARD OF EDUCATION SCHEDULE OF MANAGEMENT'S RESPONSES
YEAR ENDED JUNE 30, 2007
Finding Control Number: FS-6591-07-01
We concur with this finding. School District management recognizes the need to have formal written procedures in place for schools to follow. Sample school activity procedure manuals from other school districts are being reviewed and will serve as guidelines for written procedures in Franklin County. Corrective actions for each deficiency noted will be incorporated in the procedure manual.
Finding Control Number: FA-6591-07-01
We concur with this finding. Procedures have been put in place to ensure that periodic certification for an employee working on a Special Education program is obtained semi-annually. Any employee that is split funded will maintain a monthly time sheet that specifies hours spent on Special Education programs and other School District functions. These changes were implemented in January 2008.
Finding Control Number: FA-6591-07-02
We concur with this finding. School District management recognizes the need for further training regarding allowable charges to Tile I and schoolwide programs. Fiscal year 2008 expenditures have been reviewed and it is believed that Title I is free of expenditures of the nature described in this finding. The Title I director is exploring available training or mentoring opportunities.
Contact Person: Terry Duke Title: Comptroller Phone: (706) 384-4554 Fax: (706) 384-7472 E-mail Address: tduke@frank:lin.kl2.ga.us