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

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

HARALSON COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS -

SECTION I

FINANCIAL

INDEPENDENT AUDITOR'S COMBINED REPORT ON BASIC FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION - SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS

REQUIRED SUPPLEMENTARY INFORMATION

MANAGEMENT'S DISCUSSION AND ANALYSIS

EXHIBITS

BASIC FINANCIAL STATEMENTS

DISTRICT-WIDE FINANCIAL STATEMENTS

A

STATEMENT OF NET ASSETS

1

B

STATEMENT OF ACTIVITIES

2

FUND FINANCIAL STATEMENTS

C

BALANCE SHEET

GOVERNMENTAL FUNDS

4

D

RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET

TO THE STATEMENT OF NET ASSETS

5

E

STATEMENT OF REVENUES, EXPENDITURES AND CHANGES

IN FUND BALANCES

GOVERNMENTAL FUNDS

6

F

RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT

OF REVENUES, EXPENDITURES AND CHANGES IN FUND

BALANCES TO THE STATEMENT OF ACTIVITIES

7

G

STATEMENT OF FIDUCIARY NET ASSETS

FIDUCIARY FUNDS

8

H

NOTES TO THE BASIC FINANCIAL STATEMENTS

9

SCHEDULES

REQUIRED SUPPLEMENTARY INFORMATION

1 SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES

IN FUND BALANCES - BUDGET AND ACTUAL

GENERAL FUND

25

HARALSON COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS -

SECTION I

FINANCIAL

SCHEDULES

SUPPLEMENTARY INFORMATION

2 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS

26

3 SCHEDULE OF STATE REVENUE

28

4 SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS

29

5 ALLOTMENTS AND EXPENDITURES

GENERAL FUND - QUALITY BASIC EDUCATION PROGRAMS (QBE)

BY PROGRAM

31

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

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

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

SECTION I FINANCIAL

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

DEPARTMENT OF AUDITS AND ACCOUNTS
270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400
February 20, 2008

Honorable Sonny Perdue, Governor Members ofthe General Assembly Members ofthe State Board of Education
and Superintendent and Members ofthe Haralson County Board of Education
INDEPENDENT AUDITOR'S COMBINED REPORT ON BASIC FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION - SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
Ladies and Gentlemen:
We have audited the accompanying financial statements ofthe governmental activities, each major fund, and the aggregate remaining fund information (Exhibits A through H) ofthe Haralson County Board of Education, as of and for the year ended June 30, 2007, which collectively comprise the Board's basic financial statements as listed in the table of contents. These financial statements are the responsibility ofthe Haralson County Board ofEducation's management. Our responsibility is to express opinions on these financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United States ofAmerica and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General ofthe United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Haralson County Board of Education's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinions.

2007ARL-11

In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, each major fund, and the aggregate remaining fund information ofthe Haralson County Board ofEducation, as ofJune 30, 2007, and the respective changes in financial position thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America.
In accordance with Government Auditing Standards, we have also issued our report dated February 20, 2008, on our consideration of the Haralson County Board of Education's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements and other matters. The purpose of that report is to describe the scope ofour testing ofinternal control over financial reporting and compliance and the results ofthat testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit.
Management's Discussion and Analysis and the Schedule ofRevenues, Expenditures and Changes in Fund Balances - Budget and Actual, as presented on pages i through viii and page 25 respectively, are not a required part ofthe basic financial statements but are supplementary information required by the accounting principles generally accepted in the United States ofAmerica. 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 Haralson 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,
4<.._..rn LlY~
~u};~ton, CPA, CGFM State Auditor
RWH:gp 2007ARL-ll

HARALSON COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2007
The discussion and analysis of the Haralson County Board of Education's financial performance provides an overall review of the Board's financial activities for the fiscal year ended June 30, 2007. The intent of this discussion and analysis is to look at the Board's financial performance as a whole; readers should also review the financial statements and the notes to the basic financial statements to enhance their understanding of the Board's financial performance.
Financial Highlights
Key financial highlights for fiscal year 2007 are as follows:
In total, net assets increased $653,783.62 which represents a 2.3 percent increase from fiscal year 2006. This total increase was due to governmental activities since the Board has no business-type activities.
General revenues accounted for $13.6 million in revenue or 35.7 percent of all revenues. Program specific revenues in the form of charges for services and sales, grants and contributions accounted for $24.4 million or 64.3 percent of total revenues. Total revenues were $38.0 million.
Among major funds, the general fund had $34,482,140.83 in revenues and $35,367,231.84 in expenditures. Fund balance within the general fund decreased by $885,091.01.
Using the Basic Financial Statements
This annual report consists of a series of financial statements and notes to those statements. These statements are organized so the reader can understand the Haralson County Board of Education as a financial whole, or as an entire operating entity.
The Statement ofNet Assets and Statement ofActivities provide information about the activities of the whole Board, presenting both an aggregate view of the Board's finances and a longer-term view of those finances. The fund financial statements provide the next level of detail. For governmental funds, these statements tell how services were financed in the short-term as well as what remains for future spending. In the case of the Haralson County Board of Education, the general fund is by far the most significant fund.
Reporting the Board as a Whole
Statement ofNet Assets and Statement ofActivities
While these documents contain the large number of funds used by the Board to provide programs and activities, the view of the Board as a whole looks at all financial transactions and asks the question, "How did we do financially during fiscal year 2007?" The Statement ofNet Assets and the Statement of Activities answer this question. These statements include all assets and all liabilities using the accrual basis ofaccounting similar to the accounting used by most private-

HARALSON COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2007
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 Board's net assets and changes in those assets. This change in net assets is important because it tells the reader whether, for the Board as a whole, the financial position of the Board has improved or diminished. The causes of this change may be the result of many factors, some financial, some not. Nonfinancial factors include the Board's property tax base, facility conditions, required educational programs and other factors.
In the Statement of Net Assets and the Statement of Activities, the Board has one distinct type of activity:
Governmental Activities - All of the Board's programs and services are reported here including instruction, support services, operation and maintenance of plant, pupil transportation, food service, after school program, school activity accounts and various others.
Reporting the Board's Most Significant Funds
Fund Financial Statements
Fund financial reports provide detailed information about the Board's major funds. The Board uses many funds to account for a multitude of financial transactions. However, these fund financial statements focus on the Board's most significant funds. The Board's major governmental funds are the general fund, the Special Purpose Local Option Sales Tax capital projects fund, and the debt service fund.
Governmental Funds: Most of the Board's activities are reported in governmental funds, which focus on how money flows into and out of those funds and the balances left at year-end available for spending in future periods. These funds are reported using an accounting method called modified accrual accounting, which measures cash and all other financial assets that can readily be converted to cash. The governmental fund statements provide a detailed short-term view of the Board's general government operations and the basic services it provides. Governmental fund information helps you determine whether there are more or fewer financial resources that can be spent in the near future to finance educational programs. The relationship (or differences) between governmental activities (reported in the Statement of Net Assets and the Statement of Activities) and governmental/unds is reconciled in the financial statements.
Fiduciary Funds: The Board is the trustee, or fiduciary, for assets that belong to others, such as school clubs and organizations within the school activity accounts. The Board 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 Board excludes these activities from the District-wide financial statements because it cannot use these assets to finance its operations.
11

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

The Board as a Whole

The perspective of the Statement of Net Assets is of the Board as a whole. Table 1 provides a summary of the Board's net assets for fiscal year 2007.

Table 1 Net Assets (in Thousands)

Governmental Activities

Fiscal

Fiscal

Year 2007 Year 2006

Assets Current and Other Assets Capital Assets, Net

$ 14,567 32,693

$ 9,812 27,531

Total Assets

$ 47,260 $ 37,343

Liabilities Current and Other Liabilities Long-Term Liabilities

$ 4,218 13,574

$ 3,544 4,984

Total Liabilities

$ 17,792 $ 8,528

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

$ 22,888 5,654 926

$ 22,583 4,526 1,706

Total Net Assets

$ 29,468 $ 28,815

Total net assets increased $653 thousand in fiscal year 2007.

Table 2 shows the changes in net assets for fiscal year 2007.

111

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

Table 2 Change in Net Assets
(in Thousands)
Revenues Program Revenues: Charges for Services and Sales Operating Grants and Contributions Capital Grants and Contributions
Total Program Revenues
General Revenues: Taxes Property Taxes For Maintenance and Operations Railroad Cars Sales Taxes Special Purpose Local Option Sales Tax For Debt Service For Capital Projects Real Estate Grants and Contributions not Restricted to Specific Programs Investment Earnings Miscellaneous
Total General Revenues
Total Revenues
Program Expenses Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Operations ofNon-Instructional Services Enterprise Operations Food Services Interest on Short-Term and Long-Term Debt
Total Expenses
Increase in Net Assets

Governmental Activities

Fiscal

Fiscal

Year 2007

Year 2006

$ 591 23,550 271
$ 24,412

$ 561 20,392 106
$ 21,059

$ 6,647 74
2,232 682
2,116 682
1,138
$ 13,571
$ 37,983
$ 25,086
1,392 699 618 634
1,609 271
2,096 1,656
170 279
733 1,758
329
$ 37,330
$ 653

$ 6,529
2,121 690 42
1,722 180 997
$ 12,281
$ 33,340
$ 21,946
906 558 692 488 1,492 76 2,075 1,452 21 283
688 1,545
126
$ 32,348
$ 292

lV

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

Governmental Activities

Instruction comprises 67.2 percent of governmental program expenses. General and Business expense comprises 2.4 percent of governmental program expenses. Interest expense was attributable to the outstanding bonds for capital projects.

The Statement of Activities shows the cost of program services and the charges for services and grants offsetting those services. Table 3 shows, for governmental activities, the total cost of services and the net cost of services. That is, it identifies the cost of these services supported by tax revenue and unrestricted State entitlements.

Table 3 Governmental Activities
(in Thousands)

Total Cost of Services

Fiscal

Fiscal

Year 2007 Year2006

Net Cost of Services

Fiscal

Fiscal

Year 2007 Year 2006

Instruction Support Services
Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation ofPlant Student Transportation Services Central Support Services Other Support Services Operations of Non-Instructional Services Enterprise Operations Food Services Interest on Short-Term and Long-Term Debt

$ 25,086 $ 21,946 $

1,392 699 618 634
1,609 271
2,096 1,656
170 279

906 558 692 488 1,492
76 2,075 1,452
21 283

733 1,758
329

688 1,545
126

8,047 $
698 298 176 -226 598 266 895 684 117 279
653 104 329

7,005
390 248 238 -158 712
76 1,071
686 21
262
614 -2
126

Total Expenses

$ JZ,330 $ 32,348 $ 12,218 $ 11,289

Although program revenues make up a majority of the revenues, the Board is still dependent upon tax revenues for governmental activities.

The Board's Funds

The Board's governmental funds are accounted for using the modified accrual basis of accounting. Total governmental funds had revenues and other financing sources of $48.0 million and expenditures of $43.9 million. The general fund had a decrease of $0.9 million. The capital projects had an increase of $4.06 million and the debt service fund had an increase of $0.9 million resulting in an overall increase in Fund Balance of $4.07 million. The negative change in the fund balance of the general fund for the year indicates that the Board was not able to meet current costs from current revenues.

V

HARALSON COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2007
General Fund and Budgeting Highlights
The Board's budget is prepared according to Georgia law. The most significant budgeted fund is the General Fund.
During the course of fiscal year 2007, the Board amended its general fund budget as needed. The Board uses site-based budgeting. The budgeting systems are designed to tightly control total site budgets but provide flexibility for site management.
For the General Fund, the final budgeted revenues of $32.9 million exceeded the original budgeted amount of $32.2 million by $0.7 million. This difference was due to an increase in State fund revenues budgeted. The actual revenues of $34.5 million exceeded the final budgeted amount by $1.6 million. State funds and revenue from other local LUA's (local units of administration) not originally budgeted contributed to the variance in actual revenues exceeding budgeted revenues.
The final budgeted expenditures of $34.2 million exceeded the original budgeted amount of $33.1 million by $1.1 million. This difference was primarily due to a budgeted increase in instruction, instructional services and general administration of $1.4 million, offset by a budgeted decrease in enterprise operations of $0.7 million. The actual expenditures of $35.4 million were greater than the final budgeted amount by $1.2 million. This was primarily due to greater than anticipated cost in pupil services, maintenance and plant operations, offset by a decrease in costs for improvement in instructional services.
For the General Fund, actual fund expenditures of $35.4 million exceeded actual fund revenues of $34.5 million by $0.8 million, resulting in an ending Fund Balance of $1.6 million in the general fund. In fiscal year 2007, the Board planned extensively to improve the graduation rate and raise the bar on student achievement. Additional teaching and staffing positions were added throughout the system.
Although these efforts resulted in additional costs, the Board was determined to remain conscientious of the taxpayer concerns and chose to use existing funds to meet these expenditures rather than increasing the millage rate. The Board recognizes the need to balance the community support for funding of education of our students without unnecessary increases in tax rates while at the same time being conscious of maintaining a viable Fund Balance in anticipation of future needs, and this result is evidence of their work.
Capital Assets and Debt Administration
Capital Assets
At the end of fiscal year 2007, the Board had $32.7 million invested in capital assets, all in governmental activities. Table 4 indicates balances at June 30, 2007.
VI

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

Table 4 Capital Assets at June 30 (Net of Depreciation, in Thousands)

Governmental Activities

Fiscal

Fiscal

Year 2007 Year 2006

Land Construction in Progress Buildings and Improvements Equipment Land Improvements

$ 391 5,733
23,859 1,908 802

$ 391
24,659 1,817 664

Total Assets

$ 32.693 $ 27,531

Debt

At June 30, 2007, the Board had $13.6 million in bonds outstanding with $1.55 million due within one year.

Table 5 Debt at June 30 (in Thousands)

Governmental Activities

Fiscal

Fiscal

Year 2007 Year 2006

Bonds Payable Compensated Absences

$ 13,550 24

$ 4,955 29

Total

$ 13.574 $ 4,984

Current Issues

Haralson County, and the Haralson County School System, has suffered economic setbacks more than that experienced in populous areas of the state. Sales tax revenue growth has not increased comparably with some surrounding areas. This is probably related to the growth of nearby counties due to their proximity to Atlanta and the urban sprawl that is increasing in West Georgia, but has not yet reached rural Haralson County. Capital projects initially planned in the SPLOST resolution have been significantly completed with the exception of a new transportation facility.

vu

HARALSON COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2007 The net tax digest increased 26 percent between 2002 and 2007, including growth, reassessment and reappraisals. Population growth is continuing at a slow but steady rate. Contacting the Board's Financial Management This financial report is designed to provide our citizens, taxpayers, investors, and creditors with a general overview of the Board's finances and to show the Board's accountability for the money it receives. If you have questions about this report or need additional information, contact Vince Fulghum, Director of Business and Finance at the Haralson County Board of Education, 10 South Van Wert Street, Buchanan, Georgia 30113. You may also email your questions to vince.fulghum@haralson.kl2.ga.us.
viii

HARALSON COUNTY BOARD OF EDUCATION

HARALSON COUNTY BOARD OF EDUCATION STATEMENT OF NET ASSETS JUNE 30, 2007
ASSETS
Cash and Cash Equivalents Investments Accounts Receivable, Net
Taxes State Government Federal Government Inventories Capital Assets Land Construction in Progress Land Improvements Buildings Equipment Less: Accumulated Depreciation
Total Assets
LIABILITIES
Accounts Payable Salaries and Benefits Payable Retainages Payable Long-Term Liabilities
Due Within One Year Due in More Than One Year
Total Liabilities
NET ASSETS
Invested in Capital Assets, Net of Related Debt Restricted for
Continuation of Federal Programs Debt Service Capital Projects Unrestricted
Total Net Assets
Total Liabilities and Net Assets

EXHIBIT"A"

GOVERNMENTAL ACTIVITIES

$

7,724,865.13

2,578,619.90

604,982.93 2,462,963.62 1, 150,637.41
45,244.57

390,751.00 5,733,138.00 1,470,346.00 32,830,199.00 4,859,312.00 -12,590,562.00

$ ====4.;,.7,!=26~0~.4;,;;:9=7._;;;,56;;.

$

291.32

3,884,853.69

332,942.15

1,555,000.00 12,019,322.78

$ 17,792,409.94

$ 22,888,040.44
551,071.92 4,681,004.91
422,150.32 925,820.03
$ 29,468,087.62

$ =====4=7'!:2.6..0==,4=9=7=.5=6

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

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

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

EXPENSES

CHARGES FOR SERVICES

$ 25,085,357.85 $
1,391,842.00 698,923.44 618,309.85 634,398.04
1,608,735.68 271,225.13
2,095,675.35 1,656,079.64
169,970.35 279,237.66
733,119.42 1,758,409.87
328,620.70
$ 37,329,904.98 $

4,998.42
79,778.77 506,642.60 591,419.79

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

$

17,035,044.49

693,620.83 401,117.57 441,985.54 860,335.57 1,010,736.85
5,245.19 1,200,530.26
700,863.22 $ 52,912.34
316.75

1,147,281.99

$

23,549,990.60 $

$ 270,826.00 270,826.00 $

-8,045,314.94
-698,221.17 -297,805.87 -176,324.31 225,937.53 -597,998.83 -265,979.94 -895, 145.09 -684,390.42 -117,058.01 -278,920.91
-653,340.65 -104,485.28 -328,620.70
-12,917,668.59

$

6,647,413.69

74,472.96

2,231,605.36 682,517.50
2,115,767.00 681,913.94
1137761.76

$

13,571,452.21

$

653,783.62

28,814,304.00

$ =====2=9=,4=68.,.,0.,.8=7=.6=2

-3-

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

EXHIBIT"C"

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

GENERAL FUND

DISTRICTWIDE
CAPITAL PROJECTS
FUND

DEBT SERVICE
FUND

TOTAL

$ 1,753,723.48 $ 4,405,415.65 $ 1,565,726.00 $ 7,724,865.13

2,578,619.90

2,578,619.90

68,323.92 2,462,963.62 1,150,637.41
45 244.57

536,659.01

604,982.93 2,462,963.62 1,150,637.41
45 244.57

$ 5,480,893.00 $ 4,405,415.65 $ 4,681,004.91 $ 14,567,313.56

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

$

291.32

3,884,853.69

$

$ 3,885,145.01 $

332,942.15 332,942.15

$

291.32

3,884,853.69

332,942.15

$ 4,218,087.16

$ 505,827.35

$ 505,827.35

$ 4,681,004.91

4,681,004.91

45,244.57

45,244.57

$ 4,072,473.50

4,072,473.50

219,762.00 30,452.00

219,762.00 30,452.00

794,462.07

794,462.07

$ 1,595,747.99 $ 4,072,473.50 $ 4,681,004.91 $ 10,349,226.40

Total Liabilities and Fund Balances

$ 5,480,893.00 $ 4,405,415.65 $ 4,681,004.91 $ 14,567,313.56

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

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

EXHIBIT"D"

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

$ 10,349,226.40

$ 390,751.00 5,733,138.00 1,470,346.00
32,830,199.00 4,859,312.00 -12.590.562.00

32,693,184.00

$ -13,550,000.00 -24.322.78

-13.574.322.78

$ 29.468.087.62

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

HARALSON COUNTY BOARD OF EDUCATION STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES
GOVERNMENTAL FUNDS YEAR ENDED JUNE 30, 2007

EXHIBIT"E"

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

GENERAL FUND

DISTRICTWIDE
CAPITAL PROJECTS
FUND

DEBT SERVICE
FUND

TOTAL

$ 6,708,267.65 $
21,332,592.57 4,603,991.03 591,419.79 108,108.03 1,137,761.76

$ 682,517.50 $ 2,231,605.36

422,150.32

151,655.38

6,708,267.65 2,914,122.86 21,332,592.57 4,603,991.03
591,419.79 681,913.73 1,137,761.76

$ 34,482,140.83 $ 1,104,667.82 $ 2,383,260.74 $ 37,970,069.39

$ 23,286,907.47

$ 23,286,907.47

1,391,842.00 698,923.44 618,309.85 634,356.04
1,608,735.68 271,225.13
2,129,393.35 1,688,493.18
169,970.35 279,237.66 733,119.42 1,856,718.27
$

$ 6,707,099.19

42.00

1,391,842.00 698,923.44 618,309.85 634,356.04
1,608,735.68 271,267.13
2,129,393.35 1,688,493.18
169,970.35 279,237.66 733,119.42 1,856,718.27 6,707,099.19

94,533.26

1,405,000.00 328,620.70

1,405,000.00 328,620.70 94,533.26

$ 35,367,231.84 $ 6,801,632.45 $ 1,733,662.70 $ 43,902,526.99

$ -885,091.01 $ -5,696,964.63 $ 649,598.04 $ -5,932,457.60

9,756,717.13

243,282.87 10,000,000.00

$ -885,091.01 $ 4,059,752.50 $ 892,880.91 $ 4,067,542.40

2,480,839.00

12,721.00 3,788,124.00

6,281,684.00

$ 1,595,747.99 $ 4,072,473.50 $ 4,681,004.91 $ 10,349,226.40

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

HARALSON COUNTY BOARD OF EDUCATION RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT OF
REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES TO THE STATEMENT OF ACTIVITIES JUNE 30, 2007

EXHIBIT"F"

Total Net Change in Fund Balances - Governmental Funds (Exhibit "E")
Amounts reported for Governmental Activities in the Statement of Activities are different because:
Capital Outlays are reported as expenditures in Governmental Funds. However, in the Statement of Activities, the cost of Capital Assets is allocated over their estimated useful lives as depreciation expense. In the current period, these amounts are:
Capital Outlay Depreciation Expense
Excess of Capital Outlay over Depreciation Expense
Because some property taxes will not be collected for several months after the School District's fiscal year ends, they are not considered "available" revenues.
Bond proceeds provide current financial resources to Governmental Funds; however, issuing debt increases Long-Term Liabilities in the Statement of Net Assets. In the current period, proceeds were received from:
General Obligation Bonds Issued
Repayment of Long-Term Debt is reported as an expenditure in Governmental Funds, but the repayment reduces Long-Term Liabilities in the Statement of Net Assets. In the current year, these amounts consist of:
Bond Principal Retirements
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:
Decrease in Compensated Absences
Change in Net Assets of Governmental Activities (Exhibit "B")

$ 4,067,542.40

$ 6,702,729.00 -1,540, 182.00

5,162,547.00

13,619.00

-10,000,000.00

1,405,000.00

5,075.22 $=.....,65==3..,,7.,.8...,3=.6=2

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

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

EXHIBIT"G"
AGENCY FUNDS $ 70,180.88
$ 70,180.88

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

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

EXHIBIT "H"

Note 1: DESCRIPTION OF SCHOOL DISTRICT AND REPORTING ENTITY
REPORTING ENTITY
The Haralson County Board of Education (School District) was established under the laws of the State of Georgia and operates under the guidance of a school board elected by the voters and a Superintendent appointed by the Board. The Board is organized as a separate legal entity and has the power to levy taxes and issue bonds. Its budget is not subject to approval by any other entity. Accordingly, the School District is a primary government and consists of all the organizations that compose its legal entity.
Blended Component Unit The Haralson County School Building Authority was created by House Bill 1676 during the 2004 session of the Georgia General Assembly. The purpose of the Authority is to acquire, construct, hold, operate, maintain, lease and dispose of real and personal property for the benefit of the Haralson County Board ofEducation. The Authority consists ofthree members who are appointed by the Haralson County School District.
The Haralson County School Building Authority is a component unit ofthe Haralson County Board of Education and as such the Authority's financial activity has been blended with the Haralson County Board of Education's basic financial statements.
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 Haralson County Board of Education.
District-wide Statements: The Statement ofNet Assets and the Statement ofActivities display information about the financial activities ofthe overall School District, except for fiduciary activities. Eliminations have been made to minimize the double counting of internal activities. Governmental activities generally are financed through taxes, intergovernmental revenues, and other nonexchange transactions.
The Statement ofActivities presents a comparison between direct expenses and program revenues for each function of the School District's governmental activities.
Direct expenses are those that are specifically associated with a program or function and, therefore, are clearly identifiable to a particular function. Indirect expenses (expenses of the School District related to the administration and support ofthe School District's programs, such as office and maintenance personnel and accounting) are not allocated to programs.

-9-

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

EXHIBIT "H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Program revenues include (a) charges paid by the recipients ofgoods or services offered by the programs and (b) grants and contributions that are restricted to meeting the operational or capital requirements of a particular program. Revenues that are not classified as program revenues, including all taxes, are presented as general revenues.
Fund Financial Statements: The fund financial statements provide information about the School District's funds, including fiduciary funds. Eliminations have been made to minimize the double counting ofinternal activities. Separate statements for each category (governmental and fiduciary) are presented. The emphasis of fund financial statements is on major governmental funds, each displayed in a separate column.
The School District reports the following major governmental funds:
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) and Bond Proceeds to be used for the acquisition, construction or renovation of major capital facilities.
Debt Service Fund accounts for taxes (sales) legally restricted for the payment ofgeneral longterm principal, interest and paying agent's fees.
The School District reports the following fiduciary fund type:
Agency funds account for assets held by the School District as an agent for various funds, governments or individuals.
BASIS OF ACCOUNTING
The basis ofaccounting determines when transactions are reported on the financial statements. The District-wide governmental and fiduciary fund financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded at the time liabilities are incurred, regardless ofwhen the related cash flows take place. Nonexchange transactions, in which the School District gives (or receives) value without directly receiving (or giving) equal value in exchange, include property taxes, sales taxes, grants and donations. On an accrual basis, revenue from property taxes is recognized in the fiscal year for which the taxes are levied. Revenue from sales taxes is recognized in the fiscal year in which the underlying transaction (sale) takes place. Revenue from grants and donations is recognized in the fiscal year in which all eligibility requirements have been satisfied.

- 10-

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

EXHIBIT "H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The School District uses funds to report on its financial position and the results of its operations. Fund accounting is designed to demonstrate legal compliance and to aid financial management by segregating transactions related to certain governmental functions or activities. A fund is a separate accounting entity with a self-balancing set of accounts.
Governmental funds are reported using the current financial resources measurement focus and the modified accrual basis ofaccounting. Under this method, revenues are recognized when measurable and available. The School District considers all revenues reported in the governmental funds to be available if they are collected within sixty days after year-end. Property taxes, sales taxes and interest are considered to be susceptible to accrual. Expenditures are recorded when the related fund liability is incurred, except for principal and interest on general long-term debt and compensated absences, which are recognized as expenditures to the extent they have matured. Capital asset acquisitions are reported as expenditures in governmental funds. Proceeds of general long-term liabilities and acquisitions under capital leases are reported as other financing sources.
The School District funds certain programs by a combination ofspecific cost-reimbursement grants, categorical grants, and general revenues. Thus, when program costs are incurred, there are both restricted and unrestricted net assets available to finance the program. It is the School District's policy to first apply grant resources to such programs, followed by cost-reimbursement grants, then general revenues.
CASH AND CASH EQUIVALENTS
COMPOSITION OF DEPOSITS Cash and cash equivalents consist ofcash on hand, demand deposits and short-term investments with original maturities of three months or less from the date of acquisition in authorized financial institutions. Official Code of Georgia Annotated Section 45-8-14 authorize the School District to deposit its funds in one or more solvent banks or insured Federal savings and loan associations.
INVESTMENTS
COMPOSITION OF INVESTMENTS Investments made by the School District in nonparticipating interest-earning contracts (such as certificates ofdeposit) and repurchase agreements are reported at cost. Participating interest-earning contracts and money market investments with a maturity at purchase ofone year or less are reported at amortized cost. Both participating interest-earning contracts and money market investments with a maturity at purchase greater than one year are reported at fair value. The Official Code ofGeorgia Annotated Section 36-83-4 authorizes the School District to invest its funds. In selecting among options for investment or among institutional bids for deposits, the highest rate ofreturn shall be the objective, given equivalent conditions of safety and liquidity. Funds may be invested in the following:
(1) Obligations issued by the State of Georgia or by other states,
- 11 -

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

EXHIBIT"H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(2) Obligations issued by the United States government,

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

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

(5) Prime banker's acceptances_,

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

(7) Repurchase agreements, and

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

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

RECEIVABLES

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

PROPERTY TAXES

The Haralson County Board of Commissioners fixed the property tax levy for the 2006 tax digest year (calendar year) on August 24, 2006 (levy date). Taxes were due on December 20, 2006 (lien date). Taxes collected within the current fiscal year or within 60 days after year-end on the 2006 tax digest are reported as revenue in the governmental funds for fiscal year 2007. The Haralson County Tax Commissioner bills and collects the property taxes for the School District, withholds .25% of taxes collected as a fee for tax collection and remits the balance of taxes collected to the School District. Property tax revenues, at the fund reporting level, during the fiscal year ended June 30, 2007, for maintenance and operations amounted to $6,633,794.69.

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

School Operations

13.317 mills

- 12 -

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

EXHIBIT"H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

SALES TAXES

Special Purpose Local Option Sales Tax, at the fund reporting level, during the year amounted to $2,914,122.86 and is to be used for capital outlay for educational purposes or debt service. This sales tax was authorized by local referendum and the sales tax must be re-authorized at least every five years.

INVENTORIES

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

CAPITAL ASSETS

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

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

Capitalization Policy

Estimated Useful Life

Land Land Improvements Buildings and Improvements Equipment

All

NIA

$ 5,000.00

15 years

$ 5,000.00 10 to 40 years

$ 5,000.00 5 to 15 years

- 13 -

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

EXHIBIT"H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Depreciation is used to allocate the actual or estimated historical cost of all capital assets over estimated useful lives.
GENERAL OBLIGATION BONDS
The School District issues general obligation bonds to provide funds for the acquisition and construction of major capital facilities. Bond issuance costs are recognized in the financial statements during the fiscal year bonds are issued. General obligation bonds are direct obligations and pledge the full faith and credit of the government. The outstanding amount of these bonds is recorded in the Statement of Net Assets.
NET ASSETS
The School District's net assets in the District-wide Statements are classified as follows:
Invested in capital assets, net of related debt - This represents the School District's total investment in capital assets, net ofoutstanding debt obligations related to those capital assets. To the extent debt has been incurred but not yet expended for capital assets, such amounts are not included as a component of invested in capital assets, net of related debt.
Restricted net assets - These represent resources for which the School District is legally or contractually obligated to spend resources for bus replacement, continuation of Federal programs, debt service and capital projects in accordance with restrictions imposed by external third parties.
Unrestricted net assets - Unrestricted net assets represent resources derived from property taxes, sales taxes, grants and contributions not restricted to specific programs, charges for services, and miscellaneous revenues. These resources are used for transactions relating to the educational and general operations of the School District, and may be used at the discretion of the Board to meet current expenses for those purposes.
Note 3: DEPOSITS AND INVESTMENTS
COLLATERALIZATION OF DEPOSITS Official Code of Georgia Annotated (OCGA) Section 45-8-12 provides that there shall not be on deposit at any time in any depository for a time longer than ten days a sum ofmoney which has not been secured by surety bond, by guarantee of insurance, or by collateral. The aggregate ofthe face value of such surety bond and the market value of securities pledged shall be equal to not less than 110 percent ofthe public funds being secured after the deduction ofthe amount ofdeposit insurance. Ifa depository elects the pooled method (OCGA 45-8-13.1) the aggregate ofthe market value ofthe securities pledged to secure a pool ofpublic funds shall be not less than 110 percent ofthe daily pool balance.

- 14 -

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

EXHIBIT "H"

Note 3: DEPOSITS AND INVESTMENTS
Acceptable security for deposits consists of any one of or any combination of the following:
(1) Surety bond signed by a surety company duly qualified and authorized to transact business within the State of Georgia,
(2) Insurance on accounts provided by the Federal Deposit Insurance Corporation,
(3) Bonds, bills, notes, certificates of indebtedness or other direct obligations of the United States or of the State of Georgia,
(4) Bonds, bills, notes, certificates of indebtedness or other obligations of the counties or municipalities of the State of Georgia,
(5) Bonds of any public authority created by the laws of the State of Georgia, providing that the statute that created the authority authorized the use of the bonds for this purpose,
(6) Industrial revenue bonds and bonds of development authorities created by the laws of the State of Georgia, and
(7) Bonds, bills, notes, certificates of indebtedness, or other obligations of a subsidiary corporation of the United States government, which are fully guaranteed by the United States government both as to principal and interest or debt obligations issued by the Federal Land Bank, the Federal Home Loan Bank, the Federal Intermediate Credit Bank, the Central Bank for Cooperatives, the Farm Credit Banks, the Federal Home Loan Mortgage Association, and the Federal National Mortgage Association.
CATEGORIZATION OF DEPOSITS At June 30, 2007, the bank balances were $10,696,516.62. The amounts ofthe total uninsured bank balances are classified into three categories of custodial credit risk:
Category 1 - Uncollateralized, Category 2 - Cash collateralized with securities held by the pledging financial institution, or Category 3 - Cash collateralized with securities held by the pledging financial institution's
trust department or agent but not in the School District's name.
The School District's uninsured deposits are classified by custodial credit risk category at June 30, 2007, as follows:

- 15 -

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

EXHIBIT "H"

Note 3: DEPOSITS AND INVESTMENTS

Custodial Credit Risk Category

Bank Balance

1

$

0.00

2

647,985.05

3

8,163,896.53

Total

$ 8,811,881.58

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

Investment Type

Fair Value

Investment Maturity Less Than 1 Year

Debt Securities U.S. Treasuries

$ 949,287.02 $ 949,287.02

Investment Pools Office of Treasury and Fiscal Services Georgia Fund 1

1,629,332.88

Total Investments

$2,578,619.90

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

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

- 16 -

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

EXHIBIT"H"

Note 3: DEPOSITS AND INVESTMENTS

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

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

At June 30, 2007, $949,287.02 ofthe School District's applicable investments were uninsured, are not registered in the name of the School District and are held by either the counterparty or the counterparty's trust department or agent, but not in the School District's name.

Note 4: NON-MONETARY TRANSACTIONS

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

Note 5: CAPITAL ASSETS

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

Balances July 1. 2006

Increases

Balances Decreases June 30. 2007

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

$ 390,751.00

$

0.00 $ 5.733,138.00

0.00 $ 390,751.00 5,733,138.00

Total Capital Assets Not Being Depreciated $ 390,751.00 $ 5,733,138.00 $

0.00 $ 6,123.889.00

Capital Assets Being Depreciated Buildings and Improvements Equipment Land Improvements

$32,497,712.00 $ 332,487.00 $ 4,444,364.00 414,948.00 1,248,190.00 222,156.00

0.00 $32,830,199.00 4,859,312.00 1,470,346.00

Less Accumulated Depreciation for: Buildings and Improvements Equipment Land Improvements

7,838,675.00 2,627,107.00
584.598.00

1,132,526.00 324,025.00 83,631.00

8,971,201.00 2,951,132.00
668.229.00

Total Capital Assets, Being Depreciated, Net $27,139,886.00 $ -570.591.00 $

0.00 $26.569.295.00

Governmental Activity Capital Assets - Net $27.530.637.00 $ 5.162.547.00 $

0.00 $32.693.184,00

- 17 -

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

EXHIBIT "H"

Note 5: CAPITAL ASSETS

Current year depreciation expense by function is as follows:

Instruction Support Services
Maintenance and Operation of Plant Student Transportation Services Food Services

$ 1,232,125.00

$ 2,179.00 223,826.00

226,005.00 82,052.00

$ 1,540,182.00

Note 6: RESTRICTED ASSETS

Special Purpose Local Option Sales Tax (SPLOST), general obligation bond proceeds and Qualified Zone Academy Bonds (QZAB) escrow account are reported as restricted assets in the Statement of Net Assets because their use is limited by applicable bond covenants or statutory provisions. Restricted assets at June 30, 2007, were as follows:

District-wide Capital Projects Bond Proceeds

Debt Service Funds

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

$ 1,565,726.00 $ 4,405,415.65
$ 2,578,619.90

Note 7: 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 dental claims.

The School District has obtained commercial insurance for risk ofloss associated with torts, assets, errors or omissions,job related illness or injuries to employees and acts ofGod. However, the errors or omissions policy excludes coverage for discrimination. 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.

- 18 -

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

EXHIBIT "H"

Note 7: RISK MANAGEMENT

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

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

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

Beginning of Year Liability

Claims and Changes in Estimates

Claims Paid

EndofYear Liability

2006 2007

$

0.00 $

4,800.00 $

4,800.00 $

0.00

$

0.00 $

2,150.00 $

2,150.00 $

0.00

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

2006 2007

Beginning of Year Liability

Claims and Changes in Estimates

Claims Paid

End of Year Liability

$

0.00 $ 235,438.00 $ 235,438.00 $

0.00

$

0.00 $ 229,321.00 $ 229,321.00 $

0.00

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

Position Covered

Amount

Superintendent

$ 100,000.00

Note 8: LONG-TERM DEBT

COMPENSATED ABSENCES Compensated absences represent obligations ofthe School District relating to employees' rights to receive compensation for future absences based upon service already rendered. This obligation relates only to vesting accumulating leave in which payment is probable and can be reasonably

- 19 -

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

EXHIBIT "H"

Note 8: LONG-TERM DEBT

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 2002 General Government - QZAB - Series 2004 General Government - Series 2006

3.5% 0.0% 3.89%

$ 1,555,000.00 1,995,000.00
10,000,000.00

$13,550,000.00

Voters have authorized $2,000,000.00 in general obligation debt for facility renovation and repair projects which was not issued as of June 30, 2007.

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

Governmental Funds

General

Compensated Obligation

Absences ( 1)

Bonds

Total

Balance July 1, 2006

$ 29,398.00 $ 4,955,000.00 $ 4,984,398.00

Additions Annual Leave Earned G.O. Bonds

98,836.56

98,836.56

10,000,000.00 10,000,000.00

Deductions Annual Leave Utilized Debt Retired

103,911.78

1,405,000.00

103,911.78 1,405,000.00

Balance June 30, 2007

$ 24,322.78 $13,550,000.00 $13,574,322.78

Portion of Long-Term Debt

Due within One Year

$

0.00 $ 1,555,000.00 $ 1,555,000.00

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

- 20 -

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

EXHIBIT "H"

Note 8: LONG-TERM DEBT

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

Fiscal Year Ended June 30

General Obligation

Debt

Principal

Interest

2008 2009 2010 2011 2012 2013 - 2017 2020

$ 1,555,000.00 $ 416,212.50

1,850,000.00

353,017.50

1,925,000.00

279,593.75

1,995,000.00

203,349.75

2,075,000.00

124,188.25

2,155,000.00

41,914.75

1,995,000.00

Total Principal and Interest

$13.550,000.00 $ 1,418,276.50

Note 9: ON-BEHALF PAYMENTS

The School District has recognized revenues and costs in the amount of $624,267.71 for health insurance and retirement contributions paid on the School District's behalf by the following State Agencies.

Georgia Department of Education Paid to the Georgia Department of Community Health For Health Insurance of Non-Certified Personnel In the amount of $612,549.07

Paid to the Teachers Retirement System of Georgia For Teachers Retirement System (TRS) Employer's Cost In the amount of $7,454.64

Office of Treasury and Fiscal Services Paid to the Public School Employees Retirement System For Public School Employees Retirement (PSERS) Employer's Cost In the amount of $4,264.00

Note 10: SIGNIFICANT COMMITMENTS

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

- 21 -

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

EXHIBIT"H"

Note 10: SIGNIFICANT COMMITMENTS

Project

Unearned Executed Contracts

Haralson County High School Auxiliary Gym Haralson County High School Stadium
and Renovations Performing Arts Center

$ 2,398,229.00
1,057,124.00 2,060,868.00

$ 5,516,221.00

The amounts described in this note are not reflected in the basic financial statements.

Note 11: SIGNIFICANT CONTINGENT LIABILITIES

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

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

Note 12: SUBSEQUENT EVENTS

In the subsequent fiscal year, the School District issued general obligation bonds in the amount of $2,000,000.00. The proceeds from these bonds will be used for constructing, equipping, furnishing, and repairing new and existing schools.

Note 13: RETIREMENT PLANS

TEACHERS RETIREMENT SYSTEM OF GEORGIA (TRS)

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

-22 -

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

EXHIBIT "H"

Note 13: RETIREMENT PLANS

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

Fiscal Year

Percentage Contributed

Required Contribution

2007 2006 2005

100% 100% 100%

$ 1,702,869.39 $ 1,539,831.00 $ 1,451,857.00

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HARALSON COUNTY BOARD OF EDUCATION GENERAL FUND
SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL
YEAR ENDED JUNE 30, 2007

SCHEDULE "1"

REVENUES
Property Taxes State Funds Federal Funds Charges for Services Investment Earnings Miscellaneous
Total Revenues
EXPENDITURES
Current Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Enterprise Operations Food Services Operation
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
Inventory - Net Change in Period

NONAPPROPRIATED BUDGETS

ORIGINAL

FINAL

ACTUAL AMOUNTS

$ 6,629,082.00 $ 6,629,082.00 $ 6,708,267.65

18,974,700.73

20,104,804.25

21,332,592.57

5,132,889.00

5,179,085.70

4,603,991.03

484,992.00

484,437.00

511,641.02

71,466.00

70,477.00

108,108.03

930,688.00

469 814.00

1,217,540.53

$ 32,223,817.73 $ 32,937,699.95 $ 34,482,140.83

$ 21,607,019.03 $ 22,214,688.33 $ 23,286,907.47

1,097,292.64 882,066.28 739,309.93 591,945.42
1,774,854.83 250,097.51
1,936,506.94 1,695,516.20
164,003.92 9,622.50
723,372.00 1,658,922.50

1,188,643.54 1,488,766.43
616,220.93 794,042.29 1,792,501.44 261,141.34 2,020,667.94 1,678,919.20 192,706.92 328,830.50
9,694.00 1,658,922.50

1,391,842.00 698,923.44 618,309.85 634,356.04
1,608,735.68 271,225.13
2,129,393.35 1,688,493.18
169,970.35 279,237.66 733,119.42 1,856,718.27

$ 33,130,529.70 $ 34,245,745.36 $ 35,367,231.84

$

-906 711.97 $ -1,308,045.41 $

-885,091.01

$

117,985.00 $

-118,498.00

38,443.86 -38 443.86

$

-513.00 $

0.00

$

-907,224.97 $ -1,308,045.41 $

-885,091.01

2,331,510.44

2,310,174.65

2,480,839.00

193,006.31

Fund Balances - Ending

$ 1,424,285.47 $ 1I195I135.55 $ ===='1'=59=5=!:7I:4:=7=99=

Notes to the Schedule of Revenues. Expenditures and Changes in Fund Balances Budget and Actual

The accompanying schedule of revenues, expenditures and changes in fund balances budget and actual is presented on the modified accrual basis of accounting which is the basis of accounting used in the presentation of the fund financial statements.

See notes to the basic financial statements.

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

SCHEDULE "2"

FUNDING AGENCY PROGRAM/GRANT
Agriculture, U. S. Department of Child Nutrition Cluster Pass-Through From Georgia Department of Education Food Services School Breakfast Program National School Lunch Program
Total Child Nutrition Cluster
Other Programs Pass-Through From Georgia Department of Education Food Donation (1)
Total U. S. Department of Agriculture
Education, U. S. Department of Special Education Cluster Pass-Through From Georgia Department of Education Special Education Grants to States Preschool Grants
Total Special Education Cluster
Other Programs Pass-Through From Georgia Department of Education Comprehensive School Reform Demonstration Education for Homeless Children and Youth Enhancing Education Through Technology Program Improving Teacher Quality State Grants Migrant Education Reading First State Grants Rural Education State Grants for Innovative Programs TiUe I Grants to Local Educational Agencies Vocational Education - Basic Grants to States
Total U. S. Department of Education
Justice, U. S. Department of Pass-Through From Children and Youth Coordinating Council Truancy Prevention and Early Intervention
Defense, U.S. Department of Direct Department of the Army R.O.T.C. Program
Total Federal Financial Assistance
NIA = Not Available

CFDA NUMBER

PASSTHROUGH
ENTITY ID
NUMBER

EXPENDITURES IN PERIOD

10.553 10.555

NIA

(2)

NIA $ 1,677,342.69

$ 1,677,342.69

10.550

NIA

85,159.58

$ 1,762,502.27

84.027 84.173

NIA $
NIA
$

654,196.84 71 651.94
725,848.78

84.332 84.196 84.318 84.367 84.011 * 84.357 84.358 84.298 * 84.010 84.048

NIA

24,598.17

NIA

59,356.22

NIA

4,598.31

NIA

277,845.56

N/A

29,091.00

NIA

593,030.00

N/A

227,690.00

N/A

15,516.00

N/A

1,461,130.17

NIA

41 134.05

$ 3,459,838.26

16.540

NIA $

39,912.33

$

51 174.45

$====5'=3=13..,,4=2=7=3=1

- 26-

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

SCHEDULE "2"

Notes to the Schedule of Expenditures of Federal Awards
(1) The amount shown for the Food Donation Program represents the Federally assigned value of nonmonetary assistance for donated commodities received and/or consumed by the School District during the current fiscal year.
(2) Expenditures for the funds earned on the School Breakfast Program ($262,544) were not maintained separately and are included in the 2007 National School Lunch Program.
Major Programs are identified by an asterisk (*) in front of the CFDA number.
The School District did not provide Federal Assistance to any Subrecipient.
The accompanying schedule of expenditures of Federal awards includes the Federal grant activity of the Haralson 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.

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

AGENCY/FUNDING
GRANTS Bright From the Start: Georgia Department of Early Care and Learning Pre-Kindergarten Program
Education, Georgia Department of Quality Basic Education Direct Instructional Cost Kindergarten Program Kindergarten Program - Early Intervention Program Primary Grades (1-3) Program Primary Grades - Early Intervention (1-3) Program Upper Elementary Grades (4-5) Program Upper Elementary Grades - Early Intervention (4-5) Program Middle School (6-8) Program High School General Education (9-12) Program Vocational Laboratory (9-12) Program Students with Disabilities Category I Category II Category Ill Category IV CategoryV Gifted Student - Category VI Remedial Education Program Alternative Education Program English Speakers of Other Languages (ESOL) Media Center Program 20 Days Additional Instruction Staff and Professional Development Indirect Cost Central Administration School Administration Facility Maintenance and Operations Categorical Grants Pupil Transportation Regular Bus Replacement State Bonds Sparsity Nursing Services Principal Supplements Migrant Education Education Equalization Funding Grant Food Services Vocational Education Amended Formula Adjustment Other State Programs Comprehensive Academic Performance System GRLS Grant Health Insurance National Teacher Certification Preschool Handicapped Program Statewide K-8 Reading and Mathematics Program Teachers' Retirement
Office ofTreasury and Fiscal Services Public School Employees Retirement

See notes to the basic financial statements.

-28-

SCHEDULE "3"

GOVERNMENTAL FUND TYPE GENERAL FUND

$

958,564.00

1,137,458.00 109,920.00
2,536, 188.00 331,920.00
1,165,155.00 179,112.00
2,146,730.00 1,954,583.00
710,298.00
189,952.00 293,023.00 1,804,914.00 621,643.00 256,947.00
85,055.00 39,420.00 175,530.00 16,144.00 368,557.00 115,657.00 75,008.00
505,478.00 796,821.00 965,942.00
629,067.00 70,826.00
200,000.00 35,802.00 80,398.00 12,694.00 17,637.00
2,115,767.00 94,216.00 53,211.61
-344, 126.00
40,075.00 1,200.00
612,549.07 10,512.00 95,941.48 55,064.77 7,454.64
4264.00
$ 21,332,592.57

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

SCHEDULE "4"

PROJECT

ORIGINAL ESTIMATED
COST (1)

CURRENT ESTIMATED COSTS (2)

AMOUNT EXPENDED IN CURRENT
YEAR (3)

AMOUNT EXPENDED
IN PRIOR YEARS (3)

PROJECT STATUS

The acquisition, construction and equipping of school buildings, the addition to and the renovation, repair, improvement and equipping of, existing school buildings, the acquisition, construction, furnishing and equipping of a new Tallapoosa Primary school, the acquisition of system-wide technology improvements, the acquisition and construction of a bus garage and the acquisition of the necessary property for such schools, both real and personal and for future schools sites.

$ 12,200,000.00 $ 15,500,000.00 $ 2,378,025.49 $ 12,352,648.00

Ongoing

The acquisition, construction, equipping and furnishing of new school buildings and facilities, including, but not limited to, additional classrooms, a new fine arts center, new transportation and administrative facilities and new physical education/athletic facilities; the addition, renovation, repair and improvement to existing school buildings and facilities, including, but not limited to, all existing schools and existing physical education/athletic facilities; the acquisition and purchase of system-wide technology and safety equipment, including but not limited to, computer hardware and software and security and safety equipment; the acquisition and purchase of school vehicles, including, but not limited to, school buses and maintenance vehicles; the addition, renovation, repair, paving and improvement to driveways and parking facilities; the acquisition and purchase of any property necessary and desirable therefore, both real and personal; the purchase of land; capitalized interest on bonds through and including October 1, 2007; and issuing of Haralson bonds.

20,610,000.00 20,610,000.00 4,752,227.79

Ongoing

$ 32,810,000.00 $ 36,110,000.00 $ 7,130,253.28 $ 12,352,648.00

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

See notes to the basic financial statements.

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

SCHEDULE "5"

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

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

ELIGIBLE QBE PROGRAM COSTS

SALARIES

OPERATIONS

TOTAL

$

1,260,997.00 $ 1,248,276.40 $

61,640.13 $ 1,309,916.53

138,172.00

332,833.44

13,880.88

346,714.32

2,836,449.00

2,760,232.53

128,426.04

2,888,658.57

382,706.00

383,212.30

8,597.50

391,809.80

1,305,745.00

1,545,472.03

86,183.87

1,631,655.90

187,986.00 2,424,999.00 2,177,636.00
780,333.00 3,544,569.00
104,820.00 51,706.00
196,533.00 16 829.00

198,320.68 2,680,436.06 2,611,269.74
875,635.63
120,043.13 406,299.37 2,044,655.94 652,336.54 313,344.45 163,350.67
16,926.72 313,444.41
19 579.07

4,810.04 127,937.52 236,905.41
77,463.06
3,266.69 3,800.84 26,922.99 11,721.62 22,730.45 1,913.73
1,983.83

203,130.72 2,808,373.58 2,848,175.15
953,098.69
123,309.82 410,100.21 2,071,578.93 664,058.16 336,074.90 165,264.40
16,926.72 315,428.24
19 579.07

$

15,409,480.00 $ 16,685,669.11 $ 818,184.60 $ 17,503,853.71

413,666.00 85,250.00

547,257.20 14,135.82

43,292.28 60 753.94

590,549.48 74 889.76

TOTAL QBE FORMULA FUNDS

$

15,908,396.00 $ 17,247,062.13 $ 922,230.82 $ 18,169,292.95

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

See notes to the basic financial statements.

- 31 -

SECTION II COMPLIANCE AND INTERNAL CONTROL REPORTS

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

DEPARTMENT OF AUDITS AND ACCOUNTS
270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400
February 20, 2008

Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members ofthe Haralson 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 ofHaralson County Board ofEducation as ofand for the year ended June 30, 2007, which collectively comprise Haralson County Board of Education's basic financial statements and have issued our report thereon dated February 20, 2008. We conducted our audit in accordance with auditing standards generally accepted in the United States ofAmerica and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States.
Internal Control Over Financial Reporting
In planning and performing our audit, we considered Haralson County Board ofEducation's internal control over financial reporting as a basis for designing our auditing procedures for the purpose of expressing our opinions on the financial statements, but not for the purpose ofexpressing an opinion on the effectiveness of the Haralson County Board of Education's internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness ofthe Haralson County Board of Education's internal control over financial reporting.
A control deficiency exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect misstatements on a timely basis. A significant deficiency is a control deficiency, or combination of control deficiencies, that adversely affect the Haralson County Board of Education's ability to initiate, authorize, record, process, or report financial data reliably in accordance with generally
2007YB-10

accepted accounting principles such that there is more than a remote likelihood that a misstatement ofthe Haralson County Board ofEducation's financial statements that is more than inconsequential will not be prevented or detected by the Haralson County Board of Education's internal control.
A material weakness is a significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood that a material misstatement ofthe financial statements will not be prevented or detected by the Haralson County Board of Education's internal control.
Our consideration of the internal control over financial reporting was for the limited purpose described in the first paragraph ofthis section and would not necessarily disclose all deficiencies in internal control that might be significant deficiencies or material weaknesses. We did not identify any deficiencies in internal control over financial reporting that we consider to be material weaknesses, as defined above.
Compliance and Other Matters
As part of obtaining reasonable assurance about whether Haralson County Board of Education's financial statements are free of material misstatement, we performed tests of its compliance with certain provisions oflaws, regulations, contracts and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards.
We noted certain matters that we have reported to management of Haralson County Board of Education in a separate letter dated February 20, 2008.
This report is intended solely for the information and use of the management, members of the Haralson County Board ofEducation, Federal awarding agencies and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties.
Respectfully submitted,

RWH:gp 2007YB-10

Le)~~
sell W. Hinton, CPA, CGFM State Auditor

Russell W. Hinton
STATE AUDITOR
(404) 666-2174

DEPARTMENT OF AUDITS AND ACCOUNTS
270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400
February 20, 2008

Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members ofthe Haralson 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 Haralson County Board of Education with the types of compliance requirements described in the U.S. Office ofManagement and Budget (0MB) Circular A-133 Compliance Supplement that are applicable to each ofits major Federal programs for the year ended June 30, 2007. Haralson 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 ofits major Federal programs is the responsibility of Haralson County Board of Education's management. Our responsibility is to express an opinion on Haralson County Board of Education's compliance based on our audit.
We conducted our audit ofcompliance in accordance with auditing standards generally accepted in the United States ofAmerica; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General ofthe United States; and 0MB Circular A133, Audits ofStates, Local Governments, and Non-Profit Organizations. Those standards and 0MB Circular A-133 require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major Federal program occurred. An audit includes examining, on a test basis, evidence about the Haralson County Board of Education's compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Our audit does not provide a legal determination on Haralson County Board of Education's compliance with those requirements.
2007SA-10

In our opinion, the Haralson County Board ofEducation complied, in all material respects, with the requirements referred to above that are applicable to each of its major Federal programs for the year ended June 30, 2007.
Internal Control Over Compliance
The management of Haralson 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 Haralson County Board of Education's internal control over compliance with requirements that could have a direct and material effect on a major Federal program in order to determine our auditing procedures for the purpose ofexpressing our opinion on compliance, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of the Haralson County Board of Education's internal control over compliance.
A control deficiency in an entity's internal control over compliance exists when the design or operation ofa control does not allow management or employees, in the normal course ofperforming their assigned functions, to prevent or detect noncompliance with a type ofcompliance requirement of a Federal program on a timely basis. A significant deficiency is a control deficiency, or combination ofcontrol deficiencies, that adversely affects the entity's ability to administer a Federal program such that there is more than a remote likelihood that noncompliance with a type of compliance requirement of a Federal program that is more than inconsequential will not be prevented or detected by the entity's internal control.
A material weakness is a significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood that material noncompliance with a type of compliance requirement of a Federal program will not be prevented or detected by the entity's internal control.
Our consideration of the internal control over compliance was for the limited purpose described in the first paragraph of this section and would not necessarily identify all deficiencies in internal control that might be significant deficiencies or material weaknesses. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses, as defined above.
This report is intended solely for the information and use of the management, members of the Haralson County Board ofEducation, Federal awarding agencies and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties.
Respectfully submitted,

RWH:gp 2007SA-10

R ssell W. Hinton, CPA, CGFM State Auditor

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

HARALSON COUNTY BOARD OF EDUCATION AUDITEE'S RESPONSE
SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2007
PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS No matters were reported. PRIOR YEAR FEDERAL AWARD FINDINGS AND QUESTIONED COSTS No matters were reported.

SECTION IV FINDINGS AND QUESTIONED COSTS

HARALSON COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2007
I SUMMARY OF AUDITOR'S RESULTS
1. Type of Report Issued on the Financial Statements The auditor's opinion on the Haralson County Board ofEducation's financial statements was unqualified.
2. Significant Deficiencies in Internal Control Disclosed by the Audit ofthe Financial Statements The audit report for the Haralson County Board ofEducation did not disclose any significant deficiencies related to the financial statements.
3. Noncompliance Material to the Financial Statements The audit of the Haralson County Board of Education disclosed no instances of noncompliance that were deemed to be material to the financial statements.
4. Significant Deficiencies in Internal Control Over Major Programs The audit report for the Haralson County Board ofEducation did not disclose any significant deficiencies in internal control over major programs.
5. Type of Report Issued on Compliance for Major Programs The auditor's opinion on the Haralson County Board of Education's report on compliance with requirements applicable to major programs was unqualified.
6. Audit Findings Required to be Reported by Section .5 l0(a) of 0MB Circular A-133 The Haralson 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: 84.010 Title I Grants to Local Educational Agencies 84.357 Reading First State Grants
8. Type "A" Program Dollar Threshold The dollar threshold for type "A" programs was $300,000.
9. Low Risk Auditee The Haralson County Board of Education qualified as a low risk auditee as defined by Section .530 of 0MB Circular A-133.
II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS
No matters were reported.
- 1-

HARALSON COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2007 III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS No matters were reported.
-2 -