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

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

GORDON 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

STATEMENT OF CHANGES IN FIDUCIARY NET ASSETS

FIDUCIARY FUNDS

9

I

NOTES TO THE BASIC FINANCIAL STATEMENTS

10

SCHEDULES

REQUIRED SUPPLEMENTARY INFORMATION

1 SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES

IN FUND BALANCES - BUDGET AND ACTUAL

GENERAL FUND

27

GORDON COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS -

SECTION I

FINANCIAL

SCHEDULES

SUPPLEMENTARY INFORMATION

2 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS

28

3 SCHEDULE OF STATE REVENUE

30

4 SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS

32

5 ALLOTMENTS AND EXPENDITURES

GENERAL FUND - QUALITY BASIC EDUCATION PROGRAMS (QBE)

BY PROGRAM

33

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

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

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

GORDON 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
December 14, 2006

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

In accordance with Government Auditing Standards, we have also issued our report dated December 14, 2006, on our consideration of the Gordon County Board of Education's internal control over financial reporting and 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 27 respectively, are not a required part ofthe basic financial statements but are supplementary information required by the accounting principles generally accepted in the United States of America. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods ofmeasurement and presentation ofthe required supplementary information. However, we did not audit the information and express no opinion on it.
Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Gordon 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,
~w~~
Russell W. Hinton, CPA, CGFM State Auditor
RWH:as 2006ARL-11

GORDON COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2006
INTRODUCTION
Our discussion and analysis of the Gordon County School District's financial performance provides an overview of the School District's financial activities for the fiscal year ended June 30, 2006. The intent of this discussion and analysis is to look at the School District's financial performance as a whole. Readers should also review the notes to the basic financial statements to enhance their understanding of the School District's financial performance.
The reporting model is a combination of both government-wide financial statements and fund financial statements. The basic financial statements contain three components:
1) District-wide financial statements including the Statement of Net Assets and the Statement of Activities, which provide both short-term and long-term overviews of the School District's finances.
2) Fund financial statements including the balance sheets that provide a greater level of detail and focus on how well the School District has performed in the short-term in the most significant or major funds.
3) Notes to the Basic Financial Statements.
FINANCIAL HIGHLIGHTS
Key financial highlights for fiscal year 2006 are as follows:
On the District-wide financial statements:
Total assets of the School District exceeded liabilities by $58.8 million. This represented an increase of $2.0 million in net assets when compared to the prior year as restated.
The School District had $60.1 million in expenses relating to governmental activities; only $37.7 million of these expenses were offset by program specific charges for services, grants and contributions. However, general revenues (primarily property and sales taxes) of $24.5 million were adequate to provide for these programs.
As stated above, general revenues accounted for $24.5 million or about 39% of all revenues totaling almost $62.2 million. Program specific revenues in the form of charges for services, grants, and contributions accounted for the balance of these revenues.
On the fund financial statements:
Among major funds, the General Fund had almost $55.0 million in revenues and $55.4 million in expenditures. The General Fund balance of $5.2 million at July 1, 2005, was available to provide for this one year shortfall.
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GORDON COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2006
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 Gordon County School District, the General Fund, Capital Projects Funds, and Debt Service Funds are all considered to be major funds. The 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 Gordon County School District has no operations that have been classified as "Business Activities", the District-wide financial statements are basically a consolidation of all of the 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 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.
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GORDON COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2006
The 'Statement of Net Assets' and the 'Statement of Activities' reflects 100% of the School District's governmental 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 the School District's significant or major funds. As discussed previously, the School District has no nonmajor Funds as defined by generally accepted accounting principles.
Governmental Funds - Most of the School District's activities are reported in governmental funds, which focus on how money flows into and out of those funds and the balances left at yearend available for spending in future periods. These funds are reported using the modified accrual method of accounting which measures cash and all other financial assets that can be readily be converted to cash. The governmental fund statements provide a detailed short-term view of the School District's general government operations and the basic services it provides. Governmental fund information helps determine whether there are more or fewer financial resources that can be spent in the near future to finance educational programs. The differences between government activities (reported in the Statement of Net Assets and the Statement of Activities) and governmental funds are reconciled in the financial statements.
Fiduciary Funds - The School District is the trustee, or fiduciary, for assets that belong to clubs, organizations and others within the principals' accounts. The School District is responsible for ensuring that the assets reported in these funds are used only for their intended purposes and by those to whom the assets belong. The School District excludes these activities from the Districtwide financial statements because it cannot use these assets to finance its operations.
FINANCIAL ANALYSIS OF THE SCHOOL DISTRICT AS A WHOLE
As discussed previously, the Statement of Net Assets provides a financial snapshot 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 Gordon County School District, assets exceeded liabilities by $58.8 million at June 30, 2006.
To better understand the School District's actual financial position and ability to deliver services in future periods, it is necessary to review the various components of the net asset category. For example, of the $58.8 million of net assets, about $5.1 million was restricted for continuation of federal programs and debt service. Accordingly, these funds were not available to meet the School District's ongoing obligations to citizens and creditors.
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GORDON COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2006

In addition, the School District also had $46.6 million (net of related debt) invested in capital assets (e.g., land, buildings, and equipment). The District uses these capital assets to provide educational services to students within geographic boundaries served by the School District. Because of the very nature and on-going use of the assets being reported in this component of net assets, it must be recognized that this portion of the net assets is not available for future spending.

The remaining balance of unrestricted net assets of almost $7.1 million may be used to meet the School District's ongoing obligations to citizens and creditors.

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

Table 1 Net Assets

Governmental Activities

Fiscal

Fiscal

Year 2005

Year 2006

{Restated)

Assets Current and Other Assets Capital Assets, Net

$ 20,139,228 $ 20,610,971

55,851,904

53,115,903

Total Assets

$ 75,991,132 $ 73,726,874

Liabilities Current and Other Liabilities Long-Term Liabilities

$ 7,191,611 $ 6,532,818

9,957,255

10,368,519

Total Liabilities

$ 17,148,866 $ 16,901,337

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

$ 46,623,586 5,159,597 7,059,083

$ 47,620,142 1,277,232 7,928,163

Total Net Assets

$ 58!842!266 $ 56!825!537

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

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GORDON COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2006

Table 2 Change in Net Assets

Revenues
Prdram Revenues: harges for Services and Sales
Operatic; Grants and Contributions Capital rants and Contributions

Governmental Activities

Fiscal

Fiscal

Year 2006

Year 2005

$ 2,095,840 34,624,992
959,639

$ 1,183,293 32,306,247 236,323

Total Program Revenues

$ 37,680,471 $ 33,725,863

General Revenues:

Taxes

Property Taxes

For Maintenance and Operations

$ 12,610,961

For Debt Service

2,080

Railroad Cars

22,024

Sales Taxes

Special Purpose Local Option Sales Tax

For Debt Service

6,322,644

Intan~ible Recording Tax

489,572

Real state

165,822

Grants and Contributions not Restricted to

Specific Programs

3,816,747

Investment Earnings

155,450

Miscellaneous

893,043

Special Items

Proceeds from the Sale of Building

$ 11,982,364 307
20,303
5,532,161 371,749 111,018
3,305,049 445,846
1,895,602
136,013

Total General Revenues and Special Items

$ 24,478,343 $ 23,800,412

Total Revenues

$ 62,158,814 $ 57,526,275

Program Expenses Instruction
Support Services upil Services
Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and OJ?eration of Plant Student Transportation Services Central Support Services Other Sup2ort Services Operations of Non-Instructional Services Community Services Food Services Interest on Short-Term and Long-Term Debt

$ 38,255,940
2,227,307 2,216,454 1,253,476
700,958 2,869,190
385,496 4,617,820 2,977,765
308,155 70,043
749,477 3,281,489
228,515

$ 32,420,798
2,012,989 2,215,347 1,223,467
883,137 2,692,136
374,531 3,400,132 2,678,162
25,362 82,238
613,622 3,031,006
232,412

Total Expenses

$ 60,14~,085 $ 51,885,339

Increase in Net Assets

$ 2,016.729 $ 5,640,936

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GORDON COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2006

Cost of Providing Services

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

Table 3 Governmental Activities

Total Cost of Services

Fiscal

Fiscal

Year 2006 Year 2005

Net Cost of Services

Fiscal

Fiscal

Year 2006 Year 2005

Instruction

$ 38,255,940 $ 32,420,798 $ 10,768,866 $

Support Services

Pupil Services

2,227,307 2,012,989 1,703,190

Improvement of Instructional Services

2,216,454 2,215,347 1,360,266

Educational Media Services

1,253,476 1,223,467

622,895

General Administration

700,958

883,137 -126,248

School Administration

2,869,190 2,692,136 1,573,297

Business Administration

385,496

374,531

378,963

Maintenance and Operation of Plant

4,617,820 3,400,132 2,930,471

Student Transportation Services

2,977,765 2,678,162 1,638,884

Central Support Services

308,155

25,362

308,155

Other Support Services

70,043

82,238

40,693

Operations ofNon-Instructional Services

Community Services

749,477

613,622

749,477

Food Services

3,281,489 3,031,006

284,190

Interest on Short-Term and Long-Term Debt

228,515

232,412

228,515

8,463,713
1,571,699 1,335,250
644,801 142,013 1,536,927 372,416 1,748,352 1,467,809
25,362 43,126
417,968 157,628 232,412

Total Expenses

$ 60,142.085 $ 51,885.339 $ 22,461.614$ 18,159.476

The table above shows that while the total cost of services for providing services increased 16% from the prior year, the net cost to the local taxpayers increased almost 24% from the year. In other words, as compared to the proceeding fiscal year, a larger percentage of the cost of providing services is falling to the taxpayers of Gordon County. This condition is occurring because increased costs for such items as salaries, benefits, maintenance, fuel etc. is occurring at a higher rate than is being funded from program revenues (State, Federal, and revenues for services and sales).

FINANCIAL ANALYSIS OF THE SCHOOL DISTRICT'S FUNDS

Information about the School District's governmental funds is presented starting on Exhibit "C" of this report. Governmental funds are accounted for using the modified accrual basis of accounting. The governmental funds had total revenues of $62.1 million and total expenditures

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GORDON COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2006
of $63.6 million in fiscal year 2006. Total governmental fund balances of almost $11.6 million at June 30, 2006, decreased almost $1.5 million from the prior year. This decrease in fund balance occurred primarily because expenditures were made in the current fiscal year for capital outlay purposes from reserves that were accumulated in prior years.
General Fund Budget Highlights
The School District's budget is prepared according to Georgia Law. The most significant budgeted fund is the General Fund. During the course of fiscal year 2006, the School District amended its general fund budget as needed.
The School District budget is adopted at the aggregate level and maintained at the program, function, object, and site levels to facilitate budgetary control. The budgeting systems are designed to control the total budget, but provide flexibility to meet the ongoing programmatic needs. The budgeting systems are also designed to control total site budgets but provide flexibility for site management as well.
For the General Fund, the final actual revenues of $55.0 million were over the final budgeted amount of almost $46.1 million by $8.9 million. This difference (final actual vs. final budget) was primarily attributable to revenues for property taxes over final budget of $710,000, revenues for sales taxes over final budget of $615,000, revenues for State Funds over final budget of $1.9 million, revenues for Federal Funds over final budget of $3.9 million, revenues for charges for services over final budget of $1.1 million, and miscellaneous revenues over final budget of $757,000. The School District traditionally estimates revenue on a conservative basis to avoid shortfalls in actual revenues. Additionally, the School District did not include revenues for school activity accounts (included in miscellaneous revenues) in the final budget.
The General Fund's final actual expenditures of $55.4 million exceeded the final budget amount of $47.9 million by almost $7.5 million. This difference (final actual vs. final budget) was primarily attributable to actual expenditures for instruction exceeding the final budget of $3 .3 million, expenditures for pupil services exceeding the final budget by almost $900,000, expenditures for improvement of instructional services exceeding the final budget by $770,000, and expenditures for food services exceeding final budget of $585,000. Additionally, actual expenditures for community services of $749,000 and expenditures of almost $284,000 for debt service were not included in the School District's final budget.
CAPITAL ASSETS AND DEBT ADMINISTRATION
Capital Assets
At fiscal year ended June 30, 2006, the School District had almost $55.9 million invested in capital assets, all in governmental activities. Table 4 reflects a summary of these balances net of accumulated depreciation as compared to the prior fiscal year as restated.
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GORDON COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2006

Table 4 Capital Assets (Net of Depreciation)

Governmental Activities

Fiscal

Fiscal

Year 2005

Year 2006

(Restated)

Land Construction in Progress Land Improvements Buildings and Improvements Equipment

$ 1,665,555
3,741,627 47,557,220
2,887,502

$ 1,326,144 14,521,723 738,916 33,924,729 2,604,391

Total

$ 551851,904 $ 53) 151903

During fiscal year 2006, Sonoraville High School was completed and placed into service.

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

Debt

At June 30, 2006, the School District had over $9.9 million in total debt outstanding which consisted of $9.3 million in bond debt, $433,000 in capital lease debt and $224,618 in compensated absences debt. Table 5 summarizes the School District's debt as compared to the prior fiscal year.

Table 5 Debt at June 30

Governmental Activities

Fiscal

Fiscal

Year 2006

Year 2005

Bonds Payable Capital Leases Compensated Absences

$ 9,300,000 432,637 224,618

$ 9,800,000 383,586 184,933

Total

$ 9,957,255 $ 10,368,519

At June 30, 2006, the School District's assigned bond rating was "AA+" as determined by Standard and Poor's.

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GORDON COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2006
Additional information about the School District's debt can be found in the Notes to the Basic Financial Statements. FACTORS BEARING ON THE SCHOOL DISTRICT'S FUTURE Currently known circumstances that are expected to have a significant effect on financial position or results of operations in future years are as follows:
The School District will continue to face challenges from the implementation of the A+ Education Reform Act, which mandates lower teacher to student ratios. The School District will also continue to be impacted by the remedial actions required for under performing schools under the No Child Left Behind Act. In the midst of these challenges, the School District remains confident in the ability to maximize resources to provide the best possible educational experience for all of our students.
Capital Improvements - The School District plans capital improvements as future capital needs arise due to increased student population and facility repair and maintenance needs. To that end, subsequent to June 30, 2006, the citizens of Gordon County approved a special purpose local option sales tax in conjunction with a $25 million issuance of general obligation bonds that provides for new capital projects that include construction a new elementary school, a new middle school and major renovations at Gordon Central High School. The School District remains steadfast in its commitment to deliver quality education to the students of Gordon County.
CONTACTING THE SCHOOL DISTRICT'S FINANCIAL MANAGEMENT This financial report is designed to provide our citizen's taxpayers, investors and creditors with a general overview of the School District's finances and to show the School District's accountability for the money it receives. If you have questions about this report or need additional financial information, contact Mrs. Gail Farriba, Finance Director, Gordon County School District, P.O. Box 12001, Calhoun, Georgia 30703. You may also email your questions to Mrs. Farriba at gfarriba@gcbe.org.
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GORDON COUNTY BOARD OF EDUCATION

GORDON COUNTY BOARD OF EDUCATION STATEMENT OF NET ASSETS JUNE 30, 2006
ASSETS
Cash and Cash Equivalents Investments Accounts Receivable, Net
Taxes State Government Federal Government Other Inventories Capital Assets Land Land Improvements Buildings Equipment Less: Accumulated Depreciation
Total Assets
LIABILITIES
Accounts Payable Salaries Payable Contracts Payable Retainages Payable Funds Held For Others 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
Total Net Assets
Total Liabilities and Net Assets

EXHIBIT "A"

GOVERNMENTAL ACTIVITIES

$

8,346,912

47,141

3,189,635 5,738,665 2,674,051
84,911 57,913

1,665,555 5,305,732 61,772,037 7,348,805 -20,240,225

$ ===7~5~9~9~1a:,:13~2=

$

1,959,145

4,673,653

133,285

403,349

22,179

4,765,624 5 191 631

$

17 148 866

$

46,623,586

285,248 4,874,349 7 059 083

$

58,842,266

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

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

GOVERNMENTAL ACTIVITIES
Instruction Support Services
Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Operations of Non-Instructional Services Community Services Food Services Interest on Short-Term and Long-Term Debt
Total Governmental Activities
General Revenues Taxes Property Taxes For Maintenance and Operations For Debt Services Railroad Cars Sales Taxes Special Purpose Local Option Sales Tax For Debt Services Intangible Recording Tax Real Estate Grants and Contributions not Restricted to Specific Programs Investment Earnings Miscellaneous
Total General Revenues
Change in Net Assets
Net Assets - Beginning of Year (Restated)
Net Assets - End of Year

EXPENSES

CHARGES FOR SERVICES

$

38,255,940 $

2,227,307 2,216,454 1,253,476
700,958 2,869,190
385,496 4,617,820 2,977,765
308,155 70,043

749,477 3,281,489
228 515

$

60,142,085 $

1,091,394
1,004,446 2,095,840

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

$

25,665,203 $

524,117 856,188 630,581 813,104 1,295,893
6,533 1,687,349 1,160,909

29,350

1,955,765

$

34,624,992 $

730,477 $ 14,102 177,972 37,088 959 639 $

-10,768,866
-1,703,190 -1,360,266
-622,895 126,248 -1,573,297 -378,963 -2,930,471 -1,638,884 -308, 155 -40,693
-749,477 -284,190 -228 515
-22,461,614

$

12,610,961

2,080

22,024

6,322,644 489,572 165,822
3,816,747 155,450 893 043

$

24 478 343

$

2,016,729

56,825,537

$ ===58=,8=4=2=,2=66=

-3-

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

EXHIBIT"C"

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

GENERAL FUND

DISTRICTWIDE
CAPITAL PROJECTS
FUND

DEBT SERVICE
FUND

TOTAL

$ 4,091,866 $ 47,141

475,764 $

3,779,282 $ 8,346,912 47,141

731,074 3,954,516 2,674,051
84,911 57 913

1,784,149

1,098,847

1,829,921 5,738,665 2,674,051
84,911 57 913

$ 11641472 $ 2,259,913 $ 4,878,129 $ 18,779,514

$ 1,831,510 $ 4,673,653
22179 $ 6,527,342 $

127,635 133,285 403,349
664,269

$ 1,959,145 4,673,653 133,285 403,349 22,179
$ 7,191,611

$

227,335

$ 227,335

$ 4,878,129

4,878,129

57,913

57,913

$

504,319

504,319

206,258

206,258

4,622,624

1,091,325

4,622,624 1,091,325

$ 5114130 $ 1595644 $ 4,878,129 $ 11,587,903

$ 11641472 $ 2,259,913 $ 4,878,129 $ 18,779,514

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

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

EXHIBIT"D"

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

$ 11,587,903

$

1,665,555

5,305,732

61,772,037

7,348,805

-20,240,225

55,851,904

1,359,714

$ -9,300,000 -432,637 -224,618

-9,957,255

$ 58,842,266

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

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

EXHIBIT"E"

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

GENERAL FUND

DISTRICTWIDE
CAPITAL PROJECTS
FUND

DEBT SERVICE
FUND

TOTAL

$ 12,611,410 655,394
32,906,402 $ 5,713,309 2,095,840 85,912 902,606
$ 54,970,873 $

$ 781,667

3,433 $ 6,322,644

24,623

44,915

12,614,843 6,978,038 33,688,069 5,713,309 2,095,840
155,450 902,606

806,290 $ 6,370,992 $ 62,148,155

$ 34,338,786 $ 1,862,529

$ 36,201,315

2,211,190 2,216,454 1,231,367
634,167 2,839,768
385,496 4,407,933 2,570,674
308,155 70,043
749,477 3,136,865

16,117 22,109
6,604 2,500 202,322
5,407,393

2,227,307 2,216,454 1,253,476
640,771 2,842,268
385,496 4,610,255 2,570,674
308,155 70,043
749,477 3,136,865 5,407,393

269,344 14 265

$ 500,000 214,250

769,344 228,515

$ 55,383,984 $ 7,519,574 $ 714 250 $ 63,617,808

$ -413111 $ -6713284 $ 5,656,742 $ -1,469,653

$

500

$

500

318,395

318,395

$ 1,879,176

1,879,176

-18 267

$ -1,860,909

-1 879 176

$

300,628 $ 1 879 176 $ -1,860,909 $

318,895

$ -112,483 $ -4,834,108 $ 3,795,833 $ -1,150,758

5,226,613

6,429,752

1,082,296

12,738,661

Fund Balances - Ending

$ 5114130 $ 1,595,644 $ 4,878,129 $ 11,587,903

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

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

EXHIBIT"F"

Total Net Change in Fund Balances - Governmental Funds (Exhibit "E")
Amounts reported for Governmental Activities in the Statement of Activities are different because:
Capital Outlays are reported as expenditures in Governmental Funds. However, in the Statement of Activities, the cost of Capital Assets is allocated over their estimated useful lives as depreciation expense. In the current period, these amounts are:
Capital Outlay Depreciation Expense
Excess of Capital Outlay over Depreciation Expense
Because some property taxes will not be collected for several months after the School District's fiscal year ends, they are not considered "available" revenues.
In the Statement of Activities, only the gain on the sale of the building 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 carrying value of the building sold.
Some of the Capital Assets acquired this year were financed with capital leases. In Governmental Funds, a capital lease arrangement is considered a source of financing, but in the Statement of Net Assets, the lease obligation is reported as a Long-Term Liability.
Repayment of Long-Term Debt is reported as an expenditure in Governmental Funds, but the repayment reduces Long-Term Liabilities in the Statement of Net Assets. In the current year, these amounts consist of:
Bond Principal Retirements Capital Lease Payments
Total Long-Term Debt Repayments
Some items reported in the Statement of Activities do not require the use of current financial resources and therefore are not reported as expenditures in Governmental Funds. These activities consist of:
Increase in Compensated Absences

$ -1,150,758

$ 4,694,477 -1,948,413

2,746,064 20,222

-10,063

-318,395

$ 500,000 269,344

769,344

-39,685

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

$ =====2,=0=16=7, =2=9

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

GORDON COUNTY BOARD OF EDUCATION STATEMENT OF FIDUCIARY NET ASSETS
FIDUCIARY FUNDS JUNE 30, 2006

EXHIBIT"G"

ASSETS Cash and Cash Equivalents
LIABILITIES Funds Held for Others
NET ASSETS Held in Trust for Private Purposes
Total Liabilities and Net Assets

PRIVATE PURPOSE TRUSTS

AGENCY FUNDS

$

9,273 $

157,855

$

157,855

$

9 273

$

9,273 $ ====1=5=7=,8=5=5=

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

GORDON COUNTY BOARD OF EDUCATION STATEMENT OF CHANGES IN FIDUCIARY NET ASSETS
FIDUCIARY FUNDS YEAR ENDED JUNE 30, 2006

EXHIBIT "H"

ADDITIONS Contributions Donors Investment Earnings Interest Total Additions
DEDUCTIONS Administrative Expenses Change in Net Assets
Net Assets - Beginning
Net Assets - Ending

PRIVATE PURPOSE TRUSTS

$

12,470

17

$

12,487

11 774

$

713

81560

$ ===9=2=7=3=

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

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

EXHIBIT "I"

Note 1: DESCRIPTION OF SCHOOL DISTRICT AND REPORTING ENTITY
REPORTING ENTITY
The Gordon County Board ofEducation (School District) was established under the laws ofthe State of Georgia and operates under the guidance of a school board elected by the voters and a Superintendent appointed by the Board. The Board is organized as a separate legal entity and has the power to levy taxes and issue bonds. Its budget is not subject to approval by any other entity. Accordingly, the School District is a primary government and consists of all the organizations that compose its legal entity.
Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The School District's basic financial statements are collectively comprised of the District-wide financial statements, fund financial statements and notes to the basic financial statements of the Gordon 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.

- 10 -

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

EXHIBIT "I"

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 (property and sales) legally restricted for the payment of general long-term principal, interest and paying agent's fees.
The School District reports the following fiduciary fund types:
Private Purpose Trust fund reports a trust arrangement under which principal and income may be expended to provide scholarships for selected students.
Agency funds account for assets held by the School District as an agent for various school activity accounts.
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
- 11 -

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

EXHIBIT "I"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
and available. The School District considers all revenues reported in the governmental funds to be available if they are collected within sixty days after year-end. Property taxes, sales taxes and interest are considered to be susceptible to accrual. Expenditures are recorded when the related fund liability is incurred, except for principal and interest on general long-term debt and compensated absences, which are recognized as expenditures to the extent they have matured. Capital asset acquisitions are reported as expenditures in governmental funds. Proceeds of general long-term liabilities and acquisitions under capital leases are reported as other financing sources.
The School District funds certain programs by a combination of specific cost-reimbursement grants, categorical grants, and general revenues. Thus, when program costs are incurred, there are both restricted and unrestricted net assets available to finance the program. It is the School District's policy to first apply grant resources to such programs, followed by cost-reimbursement grants, then general revenues.
RESTATEMENT OF PRIOR YEAR NET ASSETS
For fiscal year 2006, the School District restated the Capital Projects Fund due to a correction in the investment value reported in the previous fiscal year. The School District decreased the investments by $217,981, resulting in a decrease of Net Assets at July 1, 2005, of $217,981. This change is in accordance with generally accepted accounting principles.
The School District also restated various Capital Assets due to a change in the assigned estimated useful lives and prior year omissions. The School District decreased, net of accumulated depreciation, buildings and improvements by $1,790,671. Additionally, the School District increased, net of accumulated depreciation, equipment and land improvements, $15,958 and $78,162, respectively. The result is a decrease in Net Assets at July 1, 2005, of $1,696,551. This change is in accordance with generally accepted accounting principles.
CASH AND CASH EQUIVALENTS
COMPOSITION OF DEPOSITS Cash and cash equivalents consist ofcash on hand, demand deposits and short-term investments with original maturities of three months or less from the date of acquisition in authorized financial institutions. Georgia Laws OCGA 45-8-14 authorize the School District to deposit its funds in one or more solvent banks or insured Federal savings and loan associations.
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

- 12 -

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

EXHIBIT "I"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
at amortized cost. Both participating interest-earning contracts and money market investments with a maturity at purchase greater than one year are reported at fair value. The Official Code ofGeorgia Annotated Section 36-83-4 authorizes the School District to invest its funds. In selecting among options for investment or among institutional bids for deposits, the highest rate ofreturn shall be the objective, given equivalent conditions of safety and liquidity. Funds may be invested in the following:
(1) Obligations issued by the State of Georgia or by other states,
(2) Obligations issued by the United States government,
(3) Obligations fully insured or guaranteed by the United States government or a United States government agency,
(4) Obligations of any corporation of the United States government,
(5) Prime banker's acceptances,
(6) The Local Government Investment Pool administered by the State of Georgia, Office of Treasury and Fiscal Services,
(7) Repurchase agreements, and
(8) Obligations of other political subdivisions of the State of Georgia.
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 Gordon County Board ofCommissioners fixed the property tax levy for the 2005 tax digest year (calendar year) on November 15, 2005 (levy date). Taxes were due on January 31, 2006 (lien date). Taxes collected within the current fiscal year or within 60 days after year-end on the 2005 tax digest are reported as revenue in the governmental funds for fiscal year 2006. The Gordon County Tax Commissioner bills and collects the property taxes for the School District, withholds 2.5% of taxes

- 13 -

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

EXHIBIT "I"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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, 2005, for maintenance and operations amounted to $12,589,386 and for school bonds amounted to $3,433.

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

School Operations

16.584 mills

SALES TAXES

Special Purpose Local Option Sales Tax, at the fund reporting level, during the year amounted to $6,322,644 and is to be used for capital outlay for educational purposes or debt service. This sales tax was authorized by local referendum and the sales tax must be re-authorized at least every five years.

INVENTORIES

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

CAPITAL ASSETS

Capital assets purchased, including capital outlay costs, are recorded as expenditures in the fund financial statements at the time of purchase (including ancillary charges). On the District-wide financial statements, all purchased capital assets are valued at cost where historical records are available and at estimated historical cost based on appraisals or deflated current replacement cost where no historical records exist. Donated capital assets are recorded at estimated fair market value on the date donated. Disposals are deleted at depreciated recorded cost. The cost of normal 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 of art.

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

- 14 -

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

EXHIBIT "I"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Capitalization Policy

Estimated Useful Life

Land Land Improvements Buildings and Improvements Machinery and Equipment Computer Applications

All

NIA

$

25,000 20 to 80 years

$

25,000 10 to 60 years

$

5,000 3 to 20 years

$

5,000

5 years

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

GENERAL OBLIGATION BONDS

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

Note 3: DEPOSITS AND INVESTMENTS

COLLATERALIZATION OF DEPOSITS Official Code of Georgia Annotated (OCGA) Section 45-8-12 provides that there shall not be on deposit at any time in any depository for a time longer than ten days a sum of money which has not been secured by surety bond, by guarantee of insurance, or by collateral. The aggregate ofthe face value of such surety bond and the market value of securities pledged shall be equal to not less than 110 percent ofthe public funds being secured after the deduction ofthe amount ofdeposit insurance. Ifa depository elects the pooled method (OCGA 45-8-13.1) the aggregate ofthe market value ofthe securities pledged to secure a pool ofpublic funds shall be not less than 110 percent ofthe daily pool balance.

Acceptable security for deposits consists of any one of or any combination of the following:

(1) Surety bond signed by a surety company duly qualified and authorized to transact business within the State of Georgia,

(2) Insurance on accounts provided by the Federal Deposit Insurance Corporation,

(3) Bonds, bills, notes, certificates of indebtedness or other direct obligations of the United States or of the State of Georgia,

- 15 -

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

EXHIBIT "I"

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 of the State of Georgia, and

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

CATEGORIZATION OF DEPOSITS At June 30, 2006, the bank balances were $10,089,923. The amounts ofthe total bank balances are classified into four categories of custodial credit risk:

Category 1 - Cash that is insured (e.g., Federal Deposit Insurance) or collateralized with securities held by the School District or by the School District's agent in the School District's name.
Category 2 - Cash collateralized with securities held by the pledging financial institution's trust department or agent in the School District's name.
Category 3 - Cash collateralized with securities held by the pledging financial institution, or by its trust department or agent but not in the School District's name.
Category 4 - Uncollateralized.

The School District's deposits are classified by custodial credit risk category at June 30, 2006, as follows:

Custodial Credit Risk Category

Bank Balance

1

$ 4,708,855

2

0

3

5,381,068

4

0

Total

$ 10!089!923

- 16 -

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

EXHIBIT "I"

Note 3: DEPOSITS AND INVESTMENTS
CATEGORIZATION OF INVESTMENTS At June 30, 2006, the carrying value ofthe School District's total investments was $47,141 which is materially the same as fair value. This investment consisted entirely of funds invested in the Local Government Investment Pool administered by the State of Georgia, Office of Treasury and Fiscal Services which are not required to be categorized since the School District did not own any specific identifiable securities in the pool. The investment policy ofthe State ofGeorgia, Office ofTreasury and Fiscal Services for the Local Government Investment Pool (Primary Liquidity Portfolio) does not provide for investment in derivatives or similar investments. A description of the Primary Liquidity Portfolio is as follows:
The Primary Liquidity Portfolio consists of Georgia Fund 1, which is a combination local and state government investment pool. Georgia Fund 1 is a stable net asset value investment pool which follows Standard and Poor's criteria for AAAm rated money market funds. The pool is not registered with the SEC as an investment company but does operate Georgia Fund 1 in a manner consistent with Rule 2a-7 of the Investment Company Act of 1940. The pool's primary objectives are safety of capital, investment income, liquidity and diversification while maintaining principal ($1.00 per share value). Net asset value is calculated daily and reported to the rating agency weekly to ensure stability. The pool distributes earnings (net of management fees) on a monthly basis and values participant's shares sold and redeemed at the pool's share price, $1.00 per share. Pooled cash and cash equivalents and investments are reported at cost. The pool does not issue any legally binding guarantees to support the value of the shares. Participation in the pool is voluntary and deposits consist of funds from local governments; operating and trust funds of Georgia's state agencies, colleges and universities; and current operating funds of the State of Georgia's General Fund.
Investments in Georgia Fund 1 are directed toward short-term instruments such as U.S. Treasury obligations, securities issued or guaranteed as to principal and interest by the U.S. Government or any of its agencies or instrumentalities, banker's acceptances and repurchase agreements. The weighted average maturity of Georgia Fund 1 may not exceed 60 days. The weighted average maturity for Georgia Fund 1 on June 30, 2006, was 28 days.
Note 4: NON-MONETARY TRANSACTIONS
The School District receives food commodities from the United States Department of Agriculture (USDA) for school breakfast and lunch programs. These commodities are recorded at their Federally assigned value. See Note 2 - Inventories
Note 5: CAPITAL ASSETS
The following is a summary of changes in the Capital Assets during the fiscal year:

- 17 -

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

EXHIBIT "I"

Note 5: CAPITAL ASSETS

Balances July 1, 2005 (Restated)

Increases

Decreases

Balances June 30, 2006

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

$ 1,326,144 $ 339,411

$ 1,665,555

14,521,723

3.913.189 $ 18,434,912

0

$ 15,847.867 $ 4,252,600 $ 18,434,912 $ 1,665,555

$ 46,865,534 $ 14,938,280 $

6,584,234

791,566

2,158,789

3,146,943

31,777 26,995

$ 61,772,037 7,348,805 5,305,732

12,940,805 3,979,843 1,419,873

1,295,726 508,455 144,232

21,714 26,995

14,214,817 4,461,303 1,564.105

$ 37,268.036 $ 16,928,376 $ 10,063 $ 54,186,349

$ 53,115.903 $ 21.180.976 $ 18,444.975 $ 55.851.904

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

Governmental Funds

Equipment Less: Accumulated Depreciation

$ 971,972 155,317

Current year depreciation expense by function is as follows:

Instruction

Support Services

General Administration

$

Student Transportation Services

Food Services

$===="8==16"""'.6"""5==5

$ 1,404,725

35,150 416,091

451,241 92,447

$ 1,948.413

- 18 -

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

EXHIBIT "I"

Note 6: RESTRICTED ASSETS

Special Purpose Local Option Sales Tax (SPLOST) and general obligation bond proceeds are reported as restricted assets in the Statement ofNet Assets because their use is limited by applicable bond covenants or statutory provisions. Restricted assets at June 30, 2006, were as follows:

District-wide Capital Projects Bond Proceeds

Debt Service Funds

Restricted Cash and Cash Equivalents: Debt Services Capital Acquisitions

$ 3,779,282

$

35,000

Note 7: INTERFUND TRANSFERS

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

Transfer to

Transfers From

General

Debt Service

Fund

Fund

District-wide Capital Projects

$===18=2=6==7 $ 1,860.909

Transfers are used to move property tax revenues collected by the General Fund to the District-wide Capital Projects Fund as required match or supplemental funding source for capital construction projects, and to move SPLOST collections as needed to the Capital Projects Fund.

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; unemployment compensation and a dental plan.

The School District has obtained commercial insurance for risk of loss 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 of the past three years.

- 19 -

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

EXHIBIT "I"

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. A premium is charged when needed by the General Fund to each user program on the basis ofthe percentage of that fund's payroll to total payroll in order to cover estimated claims budgeted by management based on known claims and prior experience. The School District accounts for claims with expenditures and liability being reported when it is probable that a loss has occurred, and the amount of that loss can be reasonably estimated.

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

Beginning of Year Liability

Claims and Changes in Estimates

Claims Paid

End ofYear Liability

2005 2006

$

0 $

3 698 $

3 698 $

0

$

0 $

7 075 $

7 075 $

0

The School District is self-insured with regard to dental claims. The School District accounts for claims within the General Fund with expenditures and liability being reported when it is probable that a loss has occurred, and the amount of that loss can be reasonably estimated.

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

Beginning of Year Liability

Claims and Changes in Estimates

Claims Paid

End of Year Liability

2005 2006

$

0 $

369,245 $

369,245 $

0

$

0 $

374 378 $

374 378 $

0

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 loss per occurrence, up to $2,000,000.

- 20 -

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

EXHIBIT "I"

Note 8: RISK MANAGEMENT

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

Position Covered

Amount

Superintendent Each Associate Superintendent School Nutrition Director Finance Director Each Principal

$

30,000

$

5,000

$

5,000

$

5,000

$

5,000

Note 9: LONG-TERM DEBT

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

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

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

Purpose

Interest Rates

Amount

General Government - Series 2003

2.00% - 2.25% $ 9,300.000

Voters have authorized $25,000,000 in general obligation debt for Special Purpose Local Option Sales Tax Projects which was not issued as of June 30, 2006.

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

- 21 -

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

EXHIBIT "I"

Note 9: LONG-TERM DEBT

Capital Leases

Governmental Funds

General

Compensated Obligation

Absences (I}

Bonds

Total

Balance July 1, 2005

$ 383,586 $ 184,933 $ 9,800,000 $ 10,368,519

Additions Capital Leases Annual Leave Earned

318,395

160,623

318,395 160,623

Deductions Annual Leave Utilized Debt Retired

269,344

120,938

500,000

120,938 769 344

Balance June 30, 2006

$ 432 637 $ 224 618 $ 9.300.000 $ 9,957.255

Portion of Long-Term Debt Due within One Year

$ 265,624 $

0 $ 4,500,000 $ 4,765,624

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

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

Fiscal Year Ended June 30

CaQital Leases

Princi12al

Interest

2007 2008

$ 265,624 $ 167,013

17,984 7 030

Total Principal and Interest

$ 432,637 $

25,014

Fiscal Year Ended June 30

General Obligation

Debt

Princi12al

Interest

2007 2008

$ 4,500,000 $ 4,800,000

158,625 54 000

Total Principal and Interest

$ 9,300,000 $ 212,625

Note 10: ON-BEHALF PAYMENTS

The School District has recognized revenues and costs in the amount of $951,882 for health insurance and retirement contributions paid on the School District's behalf by the following State Agencies.

- 22 -

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

EXHIBIT "I"

Note 10: ON-BEHALF PAYMENTS

Georgia Department of Education Paid to the Georgia Department of Community Health For Health Insurance of Non-Certified Personnel In the amount of $945,194

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 $6,688

Note 11: SIGNIFICANT COMMITMENTS

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

Project

Unearned Executed Contracts

Funding Available From State

05-664-020; 050-664-011; 06-664-023 and 060-664-015

$ 938,217 $ 3,720,380

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: SUBSEQUENT EVENTS

On September 19, 2006, the voters of Gordon County voted in favor of a Special Purpose Local Option Sales Tax Referendum for education purposes. The imposition of the tax approved by the voters, as stated in part of the Official Ballot of Gordon County, is as follows:

- 23 -

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

EXHIBIT "I"

Note 13: SUBSEQUENT EVENTS
"Shall a one percent sales and use tax for educational purposes be imposed in Gordon County for a period of time not to exceed twenty calendar quarters and for the raising of not more than $59,500,500 (a) up to $39,686,500 of which shall be received by Gordon County School District for the purposes of acquiring, constructing, and equipping capital outlay projects including a new middle school and a new Sonoraville Elementary School, renovating, expanding, and improving Gordon Central High School, Ashworth Middle School, Sonoraville Middle School, and Belwood, Fairmount, Red Bud, Swain, and Tolbert Elementary Schools, including specifically but not limited to site work and infrastructure improvements at such facilities, acquiring, constructing, and equipping agricultural science/athletic buildings at Ashworth and Sonoraville Middle Schools, the acquiring of land for future building sites, acquiring and construction of new school facilities or additions and improvements to existing facilities, and the acquiring and installing of computers and new technology throughout the Gordon County School System?
If imposition ofthe tax is approved by the voters, such vote shall also constitute approval of (i) the issuance of general obligation debt of the Gordon County School District in a principal amount not to exceed $25,000,000, for capital outlay projects of the Gordon County School District described above."
Note 14: RETIREMENT PLANS
TEACHERS RETIREMENT SYSTEM OF GEORGIA (TRS)
TRS PLAN DESCRIPTION Substantially all teachers, administrative and clerical personnel employed by local school systems are covered by the Teachers Retirement System of Georgia (TRS), which is a cost-sharing multiple employer defined benefit pension plan. TRS provides service retirement, disability retirement and survivors benefits for its members in accordance with State statute. The Teachers Retirement System of Georgia issues a separate stand alone financial audit report and a copy can be obtained from the Georgia Department of Audits and Accounts.
TRS CONTRIBUTIONS REQUIRED AND MADE Employees ofthe School District who are covered by TRS are required by State statute to contribute 5% oftheir gross earnings to TRS. The School District makes monthly employer contributions to TRS at rates adopted by the TRS Board of Trustees in accordance with State statute and as advised by their independent actuary. The required employer contribution rate is 9.24% and employer contributions for the current fiscal year and the preceding two fiscal years are as follows:

- 24 -

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

EXHIBIT "I"

Note 14: RETIREMENT PLANS
Fiscal Year
2006 2005 2004

Percentage Contributed
100% 100% 100%

Required Contribution
$ 2,734,845 $ 2,511,497 $ 2,462,796

- 25 -

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

SCHEDULE "1"

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

NONAPPROPRIATED BUDGETS

ORIGINAL (1)

FINAL (1)

ACTUAL AMOUNTS

$

11,901,293 $

11,901,293 $

12,611,410

40,000

40,000

655,394

31,019,026

31,019,026

32,906,402

1,847,298

1,874,579

5,713,309

1,019,688

1,019,688

2,095,840

49,649

49,649

85,912

145 346

145 346

902,606

$

46,022,300 $

46 049 581 $

54,970,873

$

14,321,186 $

31,009,590 $

34,338,786

587,022 686,317 553,064 347,179 1,310,623 321,412 1,815,614 1,439,105 171,000
35,000
1,049,518

1,311,666 1,446,158 1,130,792
604,215 2,624,282
464,225 4,028,518 2,364,336
294,856 37,700
2,551,827

2,211,190 2,216,454 1,231,367
634,167 2,839,768
385,496 4,407,933 2,570,674
308,155 70,043
749,477 3,136,865
283,609

$

22,637,040 $

47,868,165 $

55,383,984

$

23,385,260 $

-1 818 584 $

-413111

$

48,500 $

-360 988

$

-312 488 $

$

23,072,772 $

4 657 547

48,500 $
-443 778
-395 278 $ -2,213,862 $
4 657 547

318,895 -18 267 300 628 -112,483 5,226,613

$

27,730,319 $

2,443,685 $

5114130

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

See notes to the basic financial statements.

- 27-

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

SCHEDULE "2"

FUNDING AGENCY PROGRAM/GRANT
Agriculture, U.S. Department of Child Nutrition Cluster Pass-Through From Georgia Department of Education Food Services School Breakfast Program National School Lunch Program
Total Child Nutrition Cluster
Other Programs Pass-Through From Georgia Department of Education Food Donation (1) Pass-Through From Office of Treasury and Fiscal Services National Forest Reserve Funds
Total U.S. Department of Agriculture
Education, U.S. Department of Special Education Cluster Pass-Through From Georgia Department of Education Special Education Grants to States Preschool Grants
Total Special Education Cluster
Other Programs Pass-Through From Georgia Department of Education Education for Homeless Children and Youth English Language Acquisition Grants Enhancing Education Through Technology Program Hurricane Education Recovery Act Improving Teacher Quality State Grants Reading First State Grants State Grants for Innovative Programs Title I Grants to Local Educational Agencies Vocational Education - Basic Grants to States
Total U.S. Department of Education
Total Federal Financial Assistance
N/A = Not Available

CFDA NUMBER

PASSTHROUGH
ENTITY ID
NUMBER

EXPENDITURES IN PERIOD

. 10.553 . 1().555

N/A N/A $
$

(2) 2,841,750
2,841,750

10.550 10.665

N/A
N/A $

85,314 {3) 2,927,064

84.027 84.173

N/A $ NIA
$

1,287,405 68 811
1,356,216

84.196 84.365 84.318 84.938 84.367 84.357 84.298 84.010 84.048

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

67,281 47,057 20,546 (4) 267,778 747,185 19,051 1,336,134 64 011
3,925,259

$ ===6=,8=5=2=,3=2=3

- 28-

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

SCHEDULE "2"

Notes to the Schedule of Expenditures of Federal Awards
(1) The amount shown for the Food Donation Program represents the Federally assigned value of nonmonetary assistance for donated commodities received and/or consumed by the School District during the current fiscal year.
(2) Expenditures for the funds earned on the School Breakfast Program ($495,262) were not maintained separately and are included in the 2006 National School Lunch Program.
(3) Funds earned on this program, in the amount of $4,016, do not require reporting of expenditures. (4) Funds earned on the Hurricane Education Recovery program, in the amount of $1,980, do not require reporting of expenditures.
Major Programs are identified by an asterisk (*) in front of the CFDA number.
The School District did not provide Federal Assistance to any Subrecipient.
The accompanying schedule of expenditures of Federal awards includes the Federal grant activity of the Gordon County Board of Education and is presented on the modified accrual basis of accounting which is the basis of accounting used in the presentation of the fund financial statements.

See notes to the basic financial statements.

- 29 -

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

SCHEDULE "3"

AGENCY/FUNDING

GOVERNMENTAL FUND TYPES

CAPITAL

GENERAL

PROJECTS

FUND

FUND

GRANTS

Bright From the Start:

Georgia Department of Early Care and Learning

Pre-Kindergarten Program

$ 1,578,104

$

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 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 Austerity Reduction Other State Programs Alternative Program Apprenticeship Program Georgia Learning Resources System Health Insurance K-3 Statewide Reading Program Preschool Handicapped Program

1,757,970 634,837
3,551,500 1,090,194 1,617,571
625,084 3,396,572 2,906,193
987,954
344,807 340,986 2,298,879 710,506 208,089 600,527 244,881 566,877 178,798 123,552
777,617 1,189,495 1,639,729
1,071,698 177,972 20,000 125,391 22,308 18,183
3,812,730 169,094 83,746
-1,402,734
268,593 33,250 4,000
945,194 105,761 73,806

TOTAL
1,578,104
1,757,970 634,837
3,551,500 1,090,194 1,617,571
625,084 3,396,572 2,906,193
987,954
344,807 340,986 2,298,879 710,506 208,089 600,527 244,881 566,877 178,798 123,552
777,617 1,189,495 1,639,729
1,071,698 177,972 20,000 125,391 22,308 18,183
3,812,730 169,094 83,746
-1,402,734
268,593 33,250 4,000
945,194 105,761 73,806

- 30-

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

SCHEDULE "3"

AGENCY/FUNDING
GRANTS Georgia State Financing and Investment Commission Reimbursement on Construction Projects
Office of Treasury and Fiscal Services Public School Employees Retirement

GOVERNMENTAL FUND TYPES

CAPITAL

GENERAL

PROJECTS

FUND

FUND

TOTAL

$

781,667 $

781,667 6688

$ 32,906,402 $

781 667 $====33='=,6=8=8''=06=9=

See notes to the basic financial statements.

- 31 -

GORDON COUNTY BOARD OF EDUCATION SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS
YEAR ENDED JUNE 30, 2005

SCHEDULE "4"

PROJECT
Acquisition, construction, and equipping of a new high school, the renovation, expansion, and improvement of Gordon Central High School and Belwood, Fairmount, and Tolbert Elementary Schools, including specifically but not limited to site work and infrastructure improvements at such facilities, the acquisition of land for a new elementary school, acquisition and construction of new school facilities or additions and improvements to existing facilities, additions to the existing facility or conversion of another facility for use as administrative offices and support services, and the acquisition and installation of new technology throughout the Gordon County School System.

ORIGINAL ESTIMATED
COST (1)

CURRENT ESTIMATED COSTS (2)

AMOUNT EXPENDED IN CURRENT
YEAR (3)

AMOUNT EXPENDED
IN PRIOR YEARS (3)

PROJECT STATUS

$ 35,205,000 $ 35,205,000 $ 6,470,271 $ 19,564,950 Ongoing

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

See notes to the basic financial statements.

- 32 -

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

SCHEDULE "5"

DESCRIPTION

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

ELIGIBLE QBE PROGRAM COSTS

SALARIES

OPERATIONS

TOTAL

Direct Instructional Programs

Kindergarten Program

$

Kindergarten Program-Early Intervention Program

Primary Grades (1-3) Program

Primary Grades-Early Intervention (1-3) Program

Upper Elementary Grades (4-5) Program

Upper Elementary Grades-Early Intervention (4-5)

Program

Middle School (6-8) Program

High School General Education (9-12) Program

Vocational Laboratory (9-12) Program

Students with Disabilities

Category I

Category II

Category Ill

Category IV

Category V

Gifted Student - Category VI

Alternative Education Program

English Speakers of Other Languages (ESOL)

1,955,445 $
721,605 3,979,926 1,261,568 1,823,143
731,564 3,873,845 3,280,771 1,098,330 4,399,802
659,872 304,088 279 765

2,065,318 $
532,194 3,614,673 1,041,572 2,494,515
372,779 4,299,050 4,714,517 1,034,526
139,769 407,108 1,775,661 522,169 1,181,794 754,209 247,549 341 687

22,256 $
6,210 100,842
17,405 76,504
7,681 127,251 235,341 140,574
4,862 3,768 37,990 19,472 11,175 8,585 2,900
786

2,087,574 538,404
3,715,515 1,058,977 2,571,019
380,460 4,426,301 4,949,858 1,175,100
144,631 410,876 1,813,651 541,641 1,192,969 762,794 250,449 342 473

TOTAL DIRECT INSTRUCTIONAL PROGRAMS $

24,369,724 $ 25,539,090 $

823,602 $

26,362,692

Media Center Program Staff and Professional Development

640,143 140 607

906,135 71 793

62,701 66 815

968,836 138 608

TOTAL QBE FORMULA FUNDS

$

25 150 474 $ 26,517,018 $

953 118 $ ==2=7,=47=0=,1=3=6

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

See notes to the basic financial statements.

- 33-

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
December 14, 2006

Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the Gordon County Board of Education
REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS
Ladies and Gentlemen:
We have audited the financial statements of the governmental activities, each major fund, and the aggregate remaining fund information of Gordon County Board of Education as of and for the year ended June 30, 2006, which collectively comprise Gordon County Board of Education's basic financial statements and have issued our report thereon dated December 14, 2006. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States.
Internal Control Over Financial Reporting
In planning and performing our audit, we considered Gordon County Board of Education's internal control over financial reporting in order to determine our auditing procedures for the purpose of expressing our opinions on the financial statements and not to provide an opinion on the internal control over financial reporting. However, we noted certain matters involving the internal control over financial reporting and its operation that we consider to be reportable conditions. Reportable conditions involve matters coming to our attention relating to significant deficiencies in the design or operation of the internal control over financial reporting that, in our judgment, could adversely affect Gordon County Board of Education's ability to record, process, summarize and report financial data consistent with assertions of management in the financial statements. Reportable conditions are described in the accompanying Schedule of Findings and Questioned Costs as items FS-6641-06-01, FS-6641-06-02 and FS-6641-06-03.
2006YB-30

A material weakness is a reportable condition in which the design or operation ofone or more ofthe internal control components does not reduce to a relatively low level the risk that misstatements caused by error or fraud in amounts that would be material in relation to the financial statements being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. Our consideration of the internal control over financial reporting would not necessarily disclose all matters in the internal control that might be reportable conditions and, accordingly, would not necessarily disclose all reportable conditions that are also considered to be material weaknesses. However, we believe none of the reportable conditions described above is a material weakness.
Compliance and Other Matters
As part of obtaining reasonable assurance about whether Gordon County Board of Education's financial statements are free of material misstatement, we performed tests of its compliance with certain provisions oflaws, regulations, contracts and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards.
This report is intended solely for the information and use of the management and members of the Gordon County Board of Education and is not intended to be and should not be used by anyone other than these specified parties.
Respectfully submitted,
~~.oow.4:lk
: se;W. Hinton, CPA, CGFM State Auditor
RWH:as 2006YB-30

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

DEPARTMENT OF AUDITS AND ACCOUNTS
270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400
December 14, 2006

Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the Gordon 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 Gordon 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, 2006. Gordon 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 Gordon County Board of Education's management. Our responsibility is to express an opinion on Gordon 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 Gordon County Board ofEducation's compliance with

2006SA-10

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 Gordon County Board of Education's compliance with those requirements.

In our opinion, the Gordon 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, 2006.

Internal Control Over Compliance

The management of Gordon 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 Gordon County Board ofEducation's internal control over compliance with requirements that could have a direct and material effect on a major Federal program in order to determine our auditing procedures for the purpose of expressing our opinion on compliance and to test and report on internal control over compliance in accordance with 0MB Circular A-133.

Our consideration ofthe internal control over compliance would not necessarily disclose all matters in the internal control that might be material weaknesses. A material weakness is a reportable condition in which the design or operation of one or more of the internal control components does not reduce to a relatively low level ofrisk that noncompliance with applicable requirements oflaws, regulations, contracts and grants caused by error or fraud that would be material in relation to a major Federal program being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. We noted no matters involving the internal control over compliance and its operation that we consider to be material weaknesses.

This report is intended solely for the information and use of the management, members of the Gordon 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,

...

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Russell W. Hinton, CPA, CGFM State Auditor

RWH:as 2006SA-10

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

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

PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

FINDING CONTROL NUMBER AND STATUS

FS-6641-04-01 FS-6641-04-02 FS-6641-05-01

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

CORRECTIVE ACTION/RESPONSES

EMPLOYEE COMPENSATION EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Control Procedures Finding Control Number: FS-6641-04-02

The Gordon County Board of Education established procedures to ensure that employer contributions for employee health insurance plans are paid in accordance with state laws. All employees previously moved to noncertified (PSE) plans were returned to certified (PST) plans on January 1, 2005.

REVENUE/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Control Procedures Repeated From Prior Year Finding Control Number: FS-6641-05-01

The Finance Director has stressed to school administrators and school activity bookkeepers the importance of making deposits in a timely manner. The importance of issuing receipts and receipt documents has also been stressed to school administrators and reviewed with school activity bookkeepers at meetings held throughout the year. The Finance Director recently, during school activity software conversion, reviewed account number components in order to assist with the correct coding of expenditures. Communication is ongoing between the Finance Director and school activity bookkeepers and school administrators.

PRIOR YEAR FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

No matters were reported.

SECTION IV FINDINGS AND QUESTIONED COSTS

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

I SUMMARY OF AUDITOR'S RESULTS

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

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

Expenditures/Liabilities/Disbursements General Ledger

Revenues/Receivables/Receipts Capital Assets

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

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

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

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

6. Audit Findings Required to be Reported by Section .5 lO(a) of 0MB Circular A-133 The Gordon County Board ofEducation's audit did not disclose audit findings required to be reported by section .510(a) ofOMB Circular A-133.

7. Major Programs Federal awards audited as major programs are as follows: 10.553 Food Services - School Breakfast Program 10.555 Food Services - National School Lunch Program

8. Type "A" Program Dollar Threshold The dollar threshold for type "A" programs was $300,000.

9. Low Risk Auditee The Gordon County Board ofEducation qualified as a low risk auditee as defined by Section .530 of 0MB Circular A-133.

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

II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Control Procedures over School Activity Accounts Reportable Condition Finding Control Number: FS-6641-06-01

Condition:

This is a repeat finding (FS-6641-05-01 and FS-6641-04-01) from the years ended June 30, 2005, and June 30, 2004, respectively. The accounting procedures of the School District were insufficient to provide for adequate internal controls over the school activity accounts.

Criteria:

The School District's management is responsible for designing and maintaining internal controls that provide reasonable assurance that transactions are processed according to established procedures.

Questioned Cost: NIA

Information:

Revenues/Receivables/Receipts Based on a review of 50 items, the following deficiencies were noted: 1) Seven receipts were not deposited in a timely manner, 2) Four receipts were not supported by adequate documentation.
Expenditures/Liabilities/Disbursements Based on a review of 50 vouchers, the following deficiencies were noted: 1) One voucher did not have any documentation on file, 2) Three vouchers did not include an approved purchase requisition, 3) Five vouchers did not include an original invoice, 4) Five vouchers did not have documentation of receipt.

Cause:

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

Effect:

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

Recommendation:

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

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

II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

CAPITAL ASSETS Failure to Adequately Maintain Capital Assets Reportable Condition Finding Control Number: FS-6641-06-02

Condition:

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

Criteria:

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

Questioned Cost: NIA

Information:

The School District failed to properly categorize one addition on the capital asset listing. The Buildings and Building Improvements were overstated $3,523,614, the Land and Land Improvements were understated $3,146,943 and the Equipment was understated $376,671. Due to the varying estimated useful lives by category as detailed in the School District's capitalization policy, depreciation expense was understated $6,279. These variances were reclassified and corrected for inclusion in the financial statements.

In addition, the School District did not properly identify sequentiallynumbered bar code decals for various capital asset additions.

Cause:

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

Effect:

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

Recommendation:

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

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

II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

GENERAL LEDGER Failure to Report the Financial Statements in a Timely Manner Reportable Condition Finding Control Number: FS-6641-06-03

Condition:

The School District failed to submit the DE046 financial report to the Georgia Department of Education in a timely manner.

Criteria:

Chapter 1 Introduction to LUA Accounting ofthe Financial Management for Local Units of Administration indicates that "accounting records must provide meaningful, reliable, accurate and timely information to the many persons and groups with legitimate interests in the financial affairs of the LUA."

Questioned Cost: NIA

Information:

The School District's DE046 financial report was submitted to the Georgia Department of Education on October 27, 2006.

Cause:

Management failed to comply with the due date of September 30, 2006, as established by the Georgia Department of Education.

Effect:

The failure ofthe School District to prepare and submit the financial report in a timely manner prohibits legitimate users of the report from being able to have timely access to the financial information provided.

Recommendation:

The School District should implement controls to ensure that Georgia Department of Education policies and procedures are followed and implement procedures to ensure that the DE046 financial report is submitted in a timely manner.

III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

No matters were reported.

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SECTIONV MANAGEMENT'S RESPONSES

GORDON COUNTY BOARD OF EDUCATION SCHEDULE OF MANAGEMENT'S RESPONSES
YEAR ENDED JUNE 30, 2006
Finding Control Number: FS-6641-06-01
The Gordon County Board of Education has implemented procedures to resolve the weakness in internal controls of school activity accounts to the extent possible without hiring of additional personnel. Due to budget constraints, the Board is not able to hire additional personnel to assist with receipt documentation. The finance director has stressed to school administrators and school activity bookkeepers the importance of making deposits in a timely manner. The importance of issuing receipts and receipt documents has also been stressed to school administrators and reviewed with school activity bookkeepers at meetings held throughout the year.
We concur with this finding. The Board will continue the process of ensuring established controls of accounting procedures are functioning as designed.
Finding Control Number: FS-6641-06-02
The Gordon County Board of Education has corrected and provided auditors properly categorized capital asset listing for the Sonoraville High School project. The total project was listed but not properly categorized. These variances have been reclassified and corrected for inclusion in the financial statements.
We concur with this finding. The Board will make appropriate adjustments in procedures to ensure that capital assets are reported correctly.
Finding Control Number: FS-6641-06-03
The Gordon County Board of Education failed to comply with the due date for submission of the School District's DE046 financial report. The report was ready for sign offby the deadline with the exception of capital assets. The Gordon County Board of Education contracts with a third party to conduct the annual inventory needed to properly value capital assets and did not receive that service until the month of September. As soon as the Board received the report, the DE046 financial report was submitted.
We concur with this finding and will implement procedures to ensure that the financial report is submitted in a timely manner.
Contact Person: Gail Farriba, Director of Finance Phone: (706) 629-7366 Fax Number: (706) 625-5671 E-mail Address: gfarriba@gcbe.org