Heard County Board of Education, Franklin, Georgia, report on audit of the financial statements for the fiscal year ended June 30, 2008

HEARD COUNTY BOARD OF EDUCATION
FRANKLIN# GEORGIA REPORT ON AUDIT
OF THE FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30# 2008
STATE OF GEORGIA
DEPARTMENT OF AUDITS AND ACCOUNTS
Russell W. Hinton State _Auditor

HEARD 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

GENERALFUND

25

HEARD COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS -

SECTION I

FINANCIAL

SCHEDULES

SUPPLEMENTARY INFORMATION

2 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS

26

3 SCHEDULE OF STATE REVENUE

27

4 SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS

28

5 ALLOTMENTS AND EXPENDITURES

GENERAL FUND - QUALITY BASIC EDUCATION PROGRAMS (QBE)

BY PROGRAM

29

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
July 2, 2009

Honorable Sonny Perdue, Governor Members of the General Assembly Members ofthe State Board of Education
and Superintendent and Members of the Heard County Board of Education
INDEPENDENT AUDITOR'S COMBINED REPORT ON BASIC FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION - SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
Ladies and Gentlemen:
We have audited the accompanying financial statements ofthe governmental activities, each major fund, and the aggregate remaining fund information (Exhibits A through H) of the Heard County Board of Education, as of and for the year ended June 30, 2008, which collectively comprise the Board's basic financial statements as listed in the table of contents. These financial statements are the responsibility of the Heard County Board of Education's management. Our responsibility is to express opinions on these financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United States ofAmerica and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General ofthe United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Heard 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.

2008ARL-l 1

In our opinion, the financial statements referred to previously present fairly, in all material respects, the respective financial position of the governmental activities, each major fund, and the aggregate remaining fund information of the Heard County Board of Education, as of June 30, 2008, 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 July 2, 2009, on our consideration ofthe Heard 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 of our 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 vii and page 25 respectively, are not a required part ofthe basic financial statements but are supplementary information required by the accounting principles generally accepted in the United States of America. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods ofmeasurement and presentation ofthe required supplementary information. However, we did not audit the information and express no opinion on it.
Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Heard County Board of Education's basic financial statements. The accompanying supplementary information which consist of Schedules 2 through 5, which includes the Schedule of Expenditures of Federal Awards as required by U.S. Office of Management and Budget Circular A-133, Audits ofStates, Local Governments, and Non-Profit Organizations, are presented for purposes of additional analysis and are not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements, and in our opinion, is fairly stated, in all material respects, in relation to the basic financial statements taken as a whole.
A copy of this report has been filed as a permanent record in the office of the State Auditor and made available to the press of the State, as provided for by Official Code of Georgia Annotated section 50-6-24.
Respectfully submitted,

RWH:as 2008ARL-11

~"' ..QQ~-~~ ~u/sell W. Hinton, CPA, CGFM State Auditor

HEARD COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2008
The discussion and analysis of the Heard County Board of Education's financial performance provides an overall review of the Board's financial activities for the fiscal year ended June 30, 2008. 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 2008 are as follows:
In total, net assets increased nearly $6.0 million which represents a 19 percent increase from fiscal year 2007. This total increase was due to governmental activities since the Board has no business-type activities.
General revenues accounted for $14.7 million in revenue or 52 percent of all revenues. Program specific revenues in the form of charges for services and sales, grants and contributions accounted for $ 13 .4 million or 48 percent of total revenues. Total revenues were $28.1 million.
The Board had $22.1 million in expenses related to governmental activities; only $13.4 million of these expenses were offset by program specific charges for services, grants or contributions. General revenues, primarily taxes, of $14.7 million were adequate to provide for these programs.
Among major funds, the general fund had nearly $21.0 million in revenues and $20.0 million in expenditures. Fund balance within the general fund increased over $886 thousand.
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 Heard 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 Heard County Board of Education, the general fund is by far the most significant fund.

HEARD COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2008
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 2008?" The Statement ofNet Assets and the Statement of Activities answer this question. These statements include all assets and all liabilities using the accrual basis of accounting similar to the accounting used by most privatesector 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, 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 District-wide 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 funds is reconciled in the financial statements.
ii

HEARD COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2008

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.

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 2008.

Table 1 Net Assets (in Thousands)

Governmental Activities

Fiscal

Fiscal

Year 2008 Year 2007

Assets Current and Other Assets Capital Assets, Net

$ 21,149 50,879

$ 10,828 30,271

Total Assets

$ 72,028 $ 41,099

Liabilities Current and Other Liabilities Long-Term Liabilities

$ 4,094 29,907

$ 2,430 6,605

Total Liabilities

$ 34,001 $ 9,035

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

$ 27,082 6,842 4,103

$ 23,892 5,299 2,873

Total Net Assets

$ 38,027 $ 32,064

Total net assets increased $5.9 million in fiscal year 2008.

Table 2 shows the changes in net assets for fiscal year 2008.

111

HEARD COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2008

Table 2 Change in Net Assets
(in Thousands)
Revenues Program Revenues: Charges for Services Operating Grants and Contributions Capital Grants and Contributions
Total Program Revenues
General Revenues: Taxes Property Taxes For Maintenance and Operations Sales Taxes Special Purpose Local Option Sales Tax For Debt Service For Capital Projects Intangible Recording Tax Other Sales Tax Grants and Contributions not Restricted to Specific Programs Investment Earnings Miscellaneous
Special Item Donation of Land
Total General Revenues and Special Item
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 of Non-Instructional Services Food Services Interest on Short-Term and Long-Term Debt
Total Expenses
Increase in Net Assets

Governmental Activities

Fiscal

Fiscal

Year 2008

Year 2007

$ 348 12,936 86
$ 13,370

$ 332 11,719 198
$ 12,249

$ 6,422
6,434
102
547 754 482
$ 14 741
$ 28,111
$ 14,458
823 138 482 520 1,295 91 1,432 903 22
2
1,203 780
$ 22,149
$ 5,962

$ 5,811
3,859 1,668
86
312 224 530
155
$ 12,645
$ 24,894
$ 13,857
542 136 485 449 1,166 151 1,301 871 24 10
1,243 205
$ 20,440
$ 4,454

lV

HEARD COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2008

GOVERNMENTAL ACTIVITIES

Instruction comprises 65 percent of governmental program expenses. Support Services expense comprises 26 percent, food service expenses 5 percent, and interest expense 4 percent of governmental expenses.

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 2008 Year 2007

Net Cost of Services

Fiscal

Fiscal

Year2008 Year 2007

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 Food Services Interest on Short-Term and Long-Term Debt

$ 14,458 $ 13,857 $

823 138 482 520 1,295 91 1,432 903 22
2

542 136 485 449 1,166 151 1,301 871 24 10

1,203 780

1,243 205

4,928 $
577 43 206 112 721 89 843 442 22
16 780

5,356
338 53
283 29
618 152 768 245 24
120 205

Total Expenses

$ 22,149 $ 2Q,44Q $ 8,712 $ 8,121

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 $55.5 million and expenditures and other uses of $47.0 million. The general fund had an increase of $886 thousand. The capital projects fund had an increase of $5.4 million and the debt service fund had an increase of $2.1 million resulting in an overall increase in Fund Balance of $8.4 million.

V

HEARD COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2008

GENERAL FUND AND BUDGETING HIGHLIGHTS

The Board's budget is prepared according to Georgia law. The most significant budgeted fund is the General Fund.

For the General Fund, the actual revenues of $21.0 million exceeded the final budgeted amount by $2.0 million. State and local funds not originally budgeted contributed to the variance in actual revenues exceeding budgeted revenues.

The actual expenditures of $20.0 million were less than the final budgeted amount by $275 thousand. This was primarily due to less than anticipated cost in support services.

For the General Fund, actual fund expenditures of $20.0 million were less than actual fund revenues of $21.0 million by $1.0 million, resulting in an ending Fund Balance of $4.1 million in the general fund.

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 2008, the Board had $50.9 million invested in capital assets, all in governmental activities. Table 4 indicates balances at June 30, 2008.

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

Governmental Activities

Fiscal

Fiscal

Year 2008 Year 2007

Land Construction in Progress Buildings and Improvements Equipment Land Improvements

$ 2,760 12,509 33,650 937 1,023

$ 1,912 739
25,964 835 821

Total

$ 50,819 $ 3Q,271

VI

HEARD COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2008

Debt

At June 30, 2008, the Board had $29.9 million in debt outstanding with $5.6 million due within one year.

Table 5 Debt at June 30 (in Thousands)

Governmental Activities

Fiscal

Fiscal

Year 2008 Year 2007

Bonds Payable Unamortized Bond Premium Compensated Absences

$ 29,345 535 27

$ 6,605

Total

$ 29,907 $ 6,605

CURRENT ISSUES

Heard County, and the Heard County School System, have suffered economic setbacks due to the declining economic condition throughout the State and nation. Due to the rural nature of the community, this decline could result in a greater economic hardship than that experienced in more populous areas of the state. Capital projects initially planned in the SPLOST resolution have been significantly completed. However, SPLOST revenue must remain at the current level for the remainder of the collection period in order for the system to meet debt service requirements as planned.

The net tax digest increased 36 percent between 2003 and 2008, including growth, reassessment and reappraisals. System enrollment is declining at a slow 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 Cheryl Browning, Bookkeeper, at Heard County Board of Education, 131 East Court Square, Franklin, Georgia 30217. You may also email your questions to cherbrow@heard.kl2.ga.us.

vii

HEARD COUNTY BOARD OF EDUCATION

HEARD COUNTY BOARD OF EDUCATION STATEMENT OF NET ASSETS JUNE 30, 2008
ASSETS
Cash and Cash Equivalents Investments Accounts Receivable, Net
Interest Taxes State Government Other Inventories Deferred Charges Capital Assets, Non-Depreciable Capital Assets, Depreciable (Net of Accumulated Depreciation)
Total Assets
LIABILITIES
Accounts Payable Salaries and Benefits Payable Contracts Payable Retainages Payable Deferred Revenue Long-Term Liabilities
Due Within One Year Due in More Than One Year
Total Liabilities
NET ASSETS
Invested in Capital Assets, Net of Related Debt Restricted for
Bus Replacement Continuation of Federal Programs Debt Service Capital Projects Unrestricted
Total Net Assets
Total Liabilities and Net Assets

EXHIBIT"A"

GOVERNMENTAL ACTIVITIES

$

15,521,582.95

2,448,650.00

10,934.26 1,635,666.51 1,384,524.68
1,850.05 78,978.37 66,968.31 15,269,252.78 35,610,154.00

$ ===72='=02=8=,5=6=1=9=1

$

112,286.58

2,326,662.40

1,209,532.45

421,828.75

24,296.00

5,678,921.02 24,228,018.78

$

34,001,545.98

$

27,082,255.20

11,427.00 254,310.83 6,110,146.31 465,701.04 4,103,175.55

$

38,027,015.93

$ ===72=,0=2::!8,=56=1=.9==1

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

HEARD COUNTY BOARD OF EDUCATION STATEMENT OF ACTIVITIES
FOR THE YEAR ENDED JUNE 30, 2008

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 Food Services Interest on Short-Term and Long-Term Debt
Total Governmental Activities
General Revenues Taxes Property Taxes For Maintenance and Operations Sales Taxes Special Purpose Local Option Sales Tax For Debt Services Other Sales Tax Grants and Contributions not Restricted to Specific Programs Investment Earnings Miscellaneous
Total General Revenues
Changes in Net Assets
Net Assets - Beginning of Year

EXPENSES

CHARGES FOR SERVICES

$

14,458,070.68

822,527.01 137,801.13 481,527.15 520,421.36 1,295,221.01
91,321.82 1,432,470.45
902,593.20 21,532.00 1,574.50

1,203,844.02 $ 780,277.51

$

22,149,181.84 $

348,198.21 348,198.21

Net Assets - End of Year

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

EXHIBIT"B"

PROGRAM REVENUES

OPERATING

CAPITAL

GRANTS AND

GRANTS AND

CONTRIBUTIONS CONTRIBUTIONS

NET (EXPENSES) REVENUES
AND CHANGES IN NET ASSETS

$

9,530,676.78

245,453.93 94,763.34
275,187.88 408,063.00 574,699.00
2,360.20 589,463.00 374,152.00 $

1,624.08

839,424.68

$

12,935,867.89 $

$ 86,086.00 86,086.00 $

-4,927,393.90
-577,073.08 -43,037.79
-206,339.27 -112,358.36 -720,522.01
-88,961.62 -843,007.45 -442,355.20
-21,532.00 49.58
-16,221.13 -780 277.51
-8,779,029.74

$

6,422,287.06

6,434,161.83 101,874.66 547,415.00 754,102.42 481 983.70

$

14 741 824.67

$

5,962,794.93

32,064,221.00

$ ===3=8=,0=27=,0=1=5=.9=3

-3-

HEARD COUNTY BOARD OF EDUCATION BALANCE SHEET
GOVERNMENTAL FUNDS JUNE 30, 2008

EXHIBIT"C"

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

GENERAL FUND

DISTRICTWIDE
CAPITAL PROJECTS
FUND

DEBT SERVICE
FUND

TOTAL

$ 2,935,105.90 $ 8,106,070.99 $ 4,480,406.06 $

2,000,000.00

448,650.00

2,916.63 178,028.65 1,384,524.68
1,850.05 78,978.37

6,894.84

1,122.79 1,179,967.46

15,521,582.95 2,448,650.00
10,934.26 1,357,996.11 1,384,524.68
1,850.05 78 978.37

o, $ 6,581,404.28 $ 8,112,965.83 $ 6, 11 146.31 $==2=0=,8=04=,5=1=6=.42=

LIABILITIES AND FUND BALANCES

LIABILITIES

Accounts Payable

$ 112,286.58

$

Salaries and Benefits Payable

2,326,662.40

Contracts Payable

$ 1,209,532.45

Retainages Payable

421,828.75

Deferred Revenue

24,296.00

Total Liabilities

$ 2,463,244.98 $ 1,631,361.20

$

FUND BALANCES

Reserved for: Bus Replacement Continuation of Federal Programs Debt Service Capital Projects
Unreserved Designated for Self-Insurance Designated for Student Activities Designated for Textbooks Undesignated Reported in: General Fund

$

11,427.00

$

254,310.83

$ 6,110,146.31

$ 6,481,604.63

37,504.90 74,927.76 1,472,000.00

2,267,988.81

Total Fund Balances

$ 4,118,159.30 $ 6,481,604.63 $ 6,110,146.31 $

112,286.58 2,326,662.40 1,209,532.45
421,828.75 24,296.00
4,094,606.18
11,427.00 254,310.83 6,110,146.31 6,481,604.63
37,504.90 74,927.76 1,472,000.00
2,267,988.81
16,709,910.24

Total Liabilities and Fund Balances

$ 6,581,404.28 $ 8,112,965.83 $ 6,110,146.31 $==2=0..,,8=04='=51=6=.4=2

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

HEARD COUNTY BOARD OF EDUCATION RECONCILIATION OF GOVERNMENTAL FUNDS BALANCE SHEET
TO THE STATEMENT OF NET ASSETS JUNE 30, 2008

EXHIBIT"D"

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

$ 16,709,910.24

$ 2,760,528.00 12,508,724.78 2,156,075.00 40,703,467.00 2,020,468.00 -9,269,856.00

50,879,406.78

277,670.40

$ -29,345,000.00 -26,916.32
-535,023.48 66,968.31

-29,839,971.49

Net Assets of Governmental Activities (Exhibit "A")

$ 38,027,015.93

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

HEARD COUNTY BOARD OF EDUCATION STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES
GOVERNMENTAL FUNDS YEAR ENDED JUNE 30, 2008

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

GENERAL FUND

DISTRICTWIDE
CAPITAL PROJECTS
FUND

DEBT SERVICE
FUND

TOTAL

$ 6,247,710.67
101,874.66 11,523,923.03
2,045,445.86 348,198.21
203,954.39 $
481,983.70
$ 20,953,090.52 $

$
465,701.04

$
6,434,161.83
84,446.99

6,247,710.67 6,536,036.49 11,523,923.03 2,045,445.86
348,198.21 754,102.42 481,983.70

465,701.04 $ 6,518,608.82 $ 27,937,400.38

$ 13,592,136.97 $

237,025.44

$ 13,829,162.41

563,408.62 137,801.13 440,617.02 523,124.28 1,295,221.01
91,321.82 1,428,784.96
796,593.57 21,532.00 1,573.50
1,174,064.34

1,710.00 66,968.31 27,567.00 164,249.00
21,453,260.14

563,408.62 137,801.13 440,617.02 524,834.28 1,295,221.01 158,290.13 1,456,351.96 960,842.57 21,532.00
1,573.50 1,174,064.34 21,453,260.14

$ 2,260,000.00

630,190.00

150,087.51

2,260,000.00 780,277.51

$ 20,066,179.22 $ 22,580,969.89 $ 2,410,087.51 $ 45,057,236.62

$

886,911.30 $ -22, 115,268.85 $ 4,108,521.31 $ -17,119,836.24

$ 25,000,000.00

$ 25,000,000.00

535,023.48

535,023.48

2,000,000.00

2,000,000.00

$ -2,000,000.00

-2,000,000.00

$ 27,535,023.48 $ -2,000,000.00 $ 25,535,023.48

$

886,911.30 $ 5,419,754.63 $ 2,108,521.31 $ 8,415,187.24

3,231,248.00

1,061,850.00

4,001,625.00

8,294,723.00

Fund Balances - Ending

$ 4,118,159.30 $ 6,481,604.63 $ 6,110,146.31 $ 16,709,910.24

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

HEARD 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, 2008

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 buildings, land improvement and equipment is reported, whereas in the Governmental Funds, the entire proceeds from the sale decrease financial resources. Thus, the change in net assets differs from the change in fund balance by the carrying value of the buildings, land improvement and equipment sold.
Bond proceeds provide current financial resources to Governmental Funds; however, issuing debt increases Long-Term Liabilities in the Statement of Net Assets. In the current period, proceeds were received from:
General Obligation Bonds Issued, Including a Premium of $535,023.48
Bond issuance costs, deferred gains on refundings and similar items when debt is first issued are reported as an expenditure in Governmental Funds, but are reported as deferred charges on the Statement of Net Assets and amortized over the term of the debt, using the straight-line method. The details of this difference in the current period are as follows:
Deferral of Bond Issuance Costs
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:
Increase in Compensated Absences

$ 8,415,187.24

$ 21,678,414.78 -1, 142,860.00

20,535,554.78

174,576.40

72,448.00

-25,535,023.48

66,968.31 2,260,000.00
-26,916.32

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

$ 5,962,794.93

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

HEARD COUNTY BOARD OF EDUCATION STATEMENT OF FIDUCIARY NET ASSETS
FIDUCIARY FUNDS JUNE 30, 2008
ASSETS Cash and Cash Equivalents
LIABILITIES Funds Held for Others

EXHIBIT"G"
AGENCY FUNDS
$==6=2.,.9.=0=1.4=1=
$ ==6=2=,9=0=1.4=1=

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

HEARD COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2008

EXHIBIT "H"

Note 1: DESCRIPTION OF SCHOOL DISTRICT AND REPORTING ENTITY
REPORTING ENTITY
The Heard 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 Heard County Board of Education.
District-wide Statements: The Statement ofNet Assets and the Statement ofActivities display information about the financial activities ofthe overall School District, except for fiduciary activities. Eliminations have been made to minimize the double counting of internal activities. Governmental activities generally are financed through taxes, intergovernmental revenues, and other nonexchange transactions.
. The Statement ofActivities presents a comparison between direct expenses and program revenues for each function of the School District's governmental activities.
Direct expenses are those that are specifically associated with a program or function and, therefore, are clearly identifiable to a particular function. Indirect expenses (expenses of the School District related to the administration and support ofthe School District's programs, such as office and maintenance personnel and accounting) are not allocated to programs.
Program revenues include (a) charges paid by the recipients ofgoods or services offered by the programs and (b) grants and contributions that are restricted to meeting the operational or capital requirements of a particular program. Revenues that are not classified as program revenues, including all taxes, are presented as general revenues.
Fund Financial Statements: The fund financial statements provide information about the School District's funds, including fiduciary funds. Eliminations have been made to minimize the double counting ofinternal activities. Separate statements for each category (governmental and fiduciary) are presented. The emphasis of fund financial statements is on major governmental funds, each displayed in a separate column.

-9-

HEARD COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2008

EXHIBIT"H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The School District reports the following major governmental funds:
General Fund is the School District's primary operating fund. It accounts for all financial resources ofthe School District, except those resources required to be accounted for in another fund.
District-wide Capital Projects Fund accounts for financial resources including Bond Proceeds 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 and grants. On an accrual basis, revenue from property taxes is recognized in the fiscal year for which the taxes are levied. Revenue from sales taxes is recognized in the fiscal year in which the underlying transaction (sale) takes place. Revenue from grants and donations is recognized in the fiscal year in which all eligibility requirements have been satisfied.
The School District uses funds to report on its financial position and the results of its operations. Fund accounting is designed to demonstrate legal compliance and to aid financial management by segregating transactions related to certain governmental functions or activities. A fund is a separate accounting entity with a self-balancing set of accounts.
Governmental funds are reported using the current financial resources measurement focus and the modified accrual basis ofaccounting. Under this method, revenues are recognized when measurable and available. The S<;:hool 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
- 10 -

HEARD COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2008

EXHIBIT "H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
acquisitions are reported as expenditures in governmental funds. Proceeds of general long-term liabilities are reported as other financing sources.
The School District funds certain programs by a combination ofspecific cost-reimbursement grants, categorical grants, and general revenues. Thus, when program costs are incurred, there are both restricted and unrestricted net assets available to finance the program. It is the School District's policy to first apply grant resources to such programs, followed by cost-reimbursement grants, then general revenues.
CASH AND CASH EQUIVALENTS
COMPOSITION OF DEPOSITS Cash and cash equivalents consist ofcash on hand, demand deposits and short-term investments with original maturities of three months or less from the date of acquisition in authorized financial institutions. Official Code of Georgia Annotated Section 45-8-14 authorize the School District to deposit its funds in one or more solvent banks, insured Federal savings and loan associations or insured chartered building and loan associations.
INVESTMENTS
COMPOSITION OF INVESTMENTS Investments made by the School District in nonparticipating interest-earning contracts (such as certificates ofdeposit) and repurchase agreements are reported at cost. Participating interest-earning contracts and money market investments with a maturity at purchase ofone year or less are reported at amortized cost. Both participating interest-earning contracts and money market investments with a maturity at purchase greater than one year are reported at fair value. The Official Code ofGeorgia Annotated Section 36-83-4 authorizes the School District to invest its funds. In selecting among options for investment or among institutional bids for deposits, the highest rate ofreturn shall be the objective, given equivalent conditions of safety and liquidity. Funds may be invested in the following:
(1) Obligations issued by the State of Georgia or by other states,
(2) Obligations issued by the United States government,
(3) Obligations fully insured or guaranteed by the United States government or a United States government agency,
(4) Obligations of any corporation of the United States government,
(5) Prime banker's acceptances,

- 11 -

HEARD COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2008

EXHIBIT "H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(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 Heard County Board of Commissioners fixed the property tax levy for the 2007 tax digest year (calendar year) on July 26, 2007 (levy date). Taxes were due on December 1, 2007 (lien date). Taxes collected within the current fiscal year or within 60 days after year-end on the 2007 tax digest are reported as revenue in the governmental funds for fiscal year 2008. The Heard County Tax Commissioner bills and collects the property taxes for the School District, withholds 2.5% oftaxes collected as a fee for tax collection and remits the balance of taxes collected to the School District. Property tax revenues, at the fund reporting level, during the fiscal year ended June 30, 2008, for maintenance and operations amounted to $6,247,710.67.

The tax millage rate levied for the 2007 tax year (calendar year) for the Heard County Board of Education was as follows (a mill equals $1 per thousand dollars of assessed value):

School Operations

15.339 mills

SALES TAXES

Special Purpose Local Option Sales Tax, at the fund reporting level, during the year amounted to $6,434,161.83 and is to be used for capital outlay for educational purposes or debt service. This sales tax was authorized by local referendum and the sales tax must be re-authorized at least every five years.

- 12 -

HEARD COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2008

EXHIBIT "H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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 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

$ 10,000.00

15 years

$ 10,000.00 10 to 40 years

$ 10,000.00 5 to 15 years

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

COMPENSATED ABSENCES

Members ofthe Teachers Retirement System ofGeorgia (TRS) may apply unused sick leave toward early retirement. The liability for early retirement will be borne by TRS rather than by the individual

- 13 -

HEARD COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2008

EXHIBIT "H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
school districts. Otherwise, sick leave does not vest with the employee, and no liability is reported in the School District's financial statements.
Vacation leave often days is awarded on a fiscal year basis to all full time personnel employed on a twelve month basis. No other employees are eligible to earn vacation leave. Upon exit from employment with the School District, an employee may be paid for up to ten days ofunused annual leave.
GENERAL OBLIGATION BONDS
The School District issues general obligation bonds to provide funds for the acquisition and construction ofmajor capital facilities. In the District-wide financial statements, bond premiums and discounts, as well as issuance costs, are deferred and amortized over the life of the bonds using the straight-line method. Bond issuance costs are reported as deferred charges and amortized over the term of the debt.
In the fund financial statements, the School District recognizes bond premiums and discounts, as well as bond issuance costs during the fiscal year bonds are issued. Premiums received on debt issuances are reported as other financing sources while discounts on debt issuances are reported as other financing uses. Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as Capital Projects expenditures. General obligation bonds are direct obligations and pledge the full faith and credit ofthe government. The outstanding amount ofthese 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.

- 14 -

HEARD COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2008

EXHIBIT "H"

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.
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 or securities guaranteed 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, 2008, the bank balances were $18,629,468.19. The amounts ofthe total uninsured bank balances are classified into three categories of custodial credit risk:

- 15 -

HEARD COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2008

EXHIBIT"H"

Note 3: DEPOSITS AND INVESTMENTS

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, 2008, as follows:

Custodial Credit Risk Category

Bank Balance

1

$

0.00

2

0.00

3

11,049,048.70

Total

$11,049,048.70

CATEGORIZATION OF INVESTMENTS At June 30, 2008, the School District's investments of $448,650.00 consisted of implicitly guaranteed U.S. Agency Securities which have investment maturities of 1 - 5 years.

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

Custodial Credit Risk Custodial credit risk for investments is the risk that, in the event ofthe failure of the 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, 2008, $448,650.00 ofthe School District's applicable investments were uninsured or not registered in the School District's name and were held by the counterparty, or by its trust department or agent, but not in the School District's name.

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

The U.S. Agency Securities were not rated by Moody's and Standard and Poor's.

- 16 -

HEARD COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2008

EXHIBIT "H"

Note 3: DEPOSITS AND INVESTMENTS

Concentration of Credit Risk Concentration of credit risk is the risk of loss attributed to the magnitude of a government's investment in a single issuer. The School District does not have a formal policy for managing concentration of credit risk. More than 5% of the School District's investments are in U. S. Agencies. This investment is 100% of the School District's total investments.

Note 4: NON-MONETARY TRANSACTIONS

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

Note 5: CAPITAL ASSETS

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

Balances
July 1. 2007

Increases

Balances Decreases June 30, 2008

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

$ 1,911,947.00 $ 848,581.00

$ 2,760,528.00

739,445.00 20.210,181.77 $ 8,440,901.99 12,508.724.78

Total Capital Assets Not Being Depreciated $ 2.651,392.00 $21,058.762.77 $ 8,440,901.99 $15,269,252.78

Capital Assets Being Depreciated Buildings and Improvements Equipment Land Improvements

$32,189,321.00 $ 8,514,146.00

$40,703,467.00

1,932,445.00 266,232.00 $ 178,209.00 2,020,468.00

1,875,899.00 280,176.00

2,156,075.00

Less Accumulated Depreciation for: Buildings and Improvements Equipment Land Improvements

6,224,998.00 1,097,900.00 1,054,755.00

902,035.00 162,396.00 78,429.00

73,427.00 177,016.00
214.00

7,053,606.00 1,083,280.00 1,132,970.00

Total Capital Assets, Being Depreciated, Net $27,620,012.00 $ 7,917,694.00 $ -72,448.00 $35,610,154.00

Governmental Activity Capital Assets - Net $30.271.404.00 $28.976.456.77 $ 8.368.453.99 $50.879.406,78

Current year depreciation expense by function is as follows:

- 17 -

HEARD COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2008

EXHIBIT "H"

Note 5: CAPITAL ASSETS

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

$ 625,369.00

$ 256,128.00 40,438.00 2,063.00 4,068.00 185,358.00

488,055.00 29,436.00

$ 1,142,860.00

Note 6: RESTRICTED ASSETS

Special Purpose Local Option Sales Tax (SPLOST) and Qualified Zone Academy Bonds (QZAB) escrow account are restricted assets in the Statement of Net Assets because their use is limited by applicable bond covenants or statutory provisions. Restricted assets at June 30, 2008, were as follows:

District-wide Capital Projects SPLOST

Debt Service Funds

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

$ 4,480,406.06 $ 8,106,070.99
$ 448,650.00

Note 7: INTERFUND TRANSFERS

Interfund transfers for the year ended June 30, 2008, consisted of the following:

Transfer to

Transfers From Debt Service Fund

District-wide Capital Projects

$ 2,000,000.00

Transfers are used to move excess SPLOST receipts collected by the Debt Service Fund in order to fund construction on approved SPLOST Projects.

- 18 -

HEARD COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2008

EXHIBIT "H"

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 dental claims.

The School District participates in the Georgia School Boards Association Risk and Insurance Management System, a public entity risk pool organized on July 1, 1994, to develop and administer a plan to reduce risk of loss on account of general liability, motor vehicle liability, or property damage, including safety engineering and other loss prevention and control techniques, and to administer one or more groups of self-insurance funds, including the processing and defense of claims brought against members of the system. The School District pays an annual premium to the system for its general insurance coverage. Additional coverage is provided through agreements by the system with other companies according to their specialty for property, boiler and machinery (including coverage for flood and earthquake), general liability (including coverage for sexual harassment, molestation and abuse), errors and omissions, crime and automobile risks. Payment of excess insurance for the system varies by line of coverage.

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

End of Year Liability

2007 2008

$

0.00 $

0.00 $

0.00 $

0.00

$

0.00 $

3 444.00 $

3 444.00 $

0.00

The School District is self-insured with regard to dental claims. The School District accounts for claims 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.

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

2007 2008

$

0.00 $ 73,333.00 $ 73,333.00 $

0.00

$

0.00 $ 75,132.84 $ 75,132.84 $

0.00

- 19 -

HEARD COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2008

EXHIBIT "H"

Note 8: RISK MANAGEMENT

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

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

Position Covered

Amount

Superintendent All Other Employees

$ 50,000.00 $ 5,000.00

Note 9: LONG-TERM DEBT

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.

The School District began recording compensated absences liability during the current fiscal year. Changes in the compensated absences liability for the current fiscal year are as follows:

Beginning of Year Liability

Additions

Deductions

End of Year Liability

2008

$

Q.QQ $ 52,614.43 $ 25,698.11 $ 26,916.32

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

Purpose

Interest Rates

Amount

General Government - Series 2003 General Government - QZAB Series 2004 General Government - Series 2007

2.00% - 3.75% 0.00%
4.00% - 5.00%

$ 2,345,000.00 2,000,000.00
25,000,000.00

$29,345,000.00

- 20 -

HEARD COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2008

EXHIBIT "H"

Note 9: LONG-TERM DEBT

The changes in Long-Term Debt during the fiscal year ended June 30, 2008, were as follows:

Balance Jul)'. I, 2007

Governmental Funds

Additions

Deductions

Balance June 30, 2008

Due Within One Year

G.O. Bonds

$ 6,605,000.00 $25,000,000.00 $ 2,260,000.00 $29,345,000.00 $ 5,545,000.00

Compensated Absences

0.00

52,614.43

25,698.11

26,916.32

26,916.32

Bond Premiums Amortized

0.00

535,023.48

535,023.48

107,004.70

$ 6,605,QQQ,QQ $25,587,637.21 $ 2,285,628.11 $22,206,232.80 $ 5,678,221.02

At June 30, 2008, 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

Unamortized Bond
Premium

2009 2010 2011 2012 2013 2018

$ 5,545,000.00 $ 1,200,037.50 $ 107,004.70

5,640,000.00

984,100.00

107,004.70

5,750,000.00

758,500.00

107,004.70

5,750,000.00

520,500.00

107,004.69

4,660,000.00

233,000.00

107,004.69

2.000,000.00

Total Principal and Interest $ 29,345,000,00 $ 3,696,137.50 $ 535,023.48

Note 10: ON-BEHALF PAYMENTS

The School District has recognized revenues and costs in the amount of $367,624.67 for health insurance and retirement contributions paid on the School District's behalf by the following State Agencies.

Georgia Department of Education Paid to the Georgia Department of Community Health For Health Insurance ofNon-Certified Personnel In the amount of $365,420.67

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 $2,204.00

- 21 -

HEARD COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2008

EXHIBIT "H"

Note 11: SIGNIFICANT COMMITMENTS

The following is an analysis ofsignificant outstanding construction or renovation contracts executed by the School District as of June 30, 2008:

Project

Unearned Executed Contracts

New Heard High School Sports Turf Southern Bleachers

$5,737,751.13 677,480.00 204,620.00

$6,619,851.13

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

Note 12: SIGNIFICANT CONTINGENT LIABILITIES

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

Note 13: POSTEMPLOYMENT BENEFITS

Georgia Retiree Health Benefit Fund

Plan Description. The School District contributes to the Georgia Retiree Health Benefit Fund ("GRHBF"), a cost-sharing multiple-employer defined benefit postemployment healthcare plan administered by the Department ofCommunity Health. GRHBF provides health insurance benefits to eligible retirees and their qualified beneficiaries. Pursuant to Title 45, Chapter 18 ofthe Official Code ofGeorgia Annotated, the authority to establish and amend the benefit provisions ofthe plan is assigned to the Board of Community Health. The Department of Community Health issues a publicly available financial report that includes financial statements and required supplementary information for GRHBF. That report may be obtained from the Department ofCommunity Health at 2 Peachtree Street, Atlanta, Georgia 30303.

Funding Policy. The contribution requirements of plan members and participating employers are established and may be amended by the Board of Community Health. Contributions of plan members or beneficiaries receiving benefits vary based on plan election, dependent coverage, and Medicare eligibility and election. On average, plan members pay approximately twenty-five percent (25%) of the cost of health insurance coverage.

- 22 -

HEARD COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2008

EXHIBIT "H"

Note 13: POSTEMPLOYMENT BENEFITS

Participating employers are statutorily required to contribute in accordance with the employer contribution rate established by the Board of Community Health. This contribution rate is established to fund both the active and retired employee health insurance plans based on projected pay-as-you-go financing requirements. The employer contribution rates for the combined active and retiree plans for the fiscal year ended June 30, 2008, were as follows:

Teachers Non-Certificated Employees

18.534% of state-based salaries $162.72 per month

The School District's contribution to the health insurance plans for the fiscal year ended June 30, 2008, was $365,420.67, which equaled the required contribution.

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% of their gross earnings to TRS. The School District makes monthly employer contributions to TRS at rates adopted by the TRS Board of Trustees in accordance with State statute and as advised by their independent actuary. The required employer contribution rate is 9.28% and employer contributions for the current fiscal year and the preceding two fiscal years are as follows:

Fiscal Year

Percentage Contributed

Required Contribution

2008 2007 2006

100% 100% 100%

$ 1,054,711.83 $ 981,419.00 $ 913,035.00

(This page left intentionally blank)

HEARD COUNTY BOARD OF EDUCATION GENERAL FUND
SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL
YEAR ENDED JUNE 30, 2008

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 Food Services Operation
Total Expenditures
Excess of Revenues over (under) Expenditures
OTHER FINANCING SOURCES {USES}
Operating Transfers from Other Funds Sale or Compensation for Loss of Fixed Assets Operating Transfers to Other Funds
Total Other Financing Sources (Uses)
Net Change in Fund Balances
Fund Balances - Beginning
Adjustments

NONAPPROPRIATED BUDGETS

ORIGINAL {1}

FINAL {1}

ACTUAL AMOUNTS

$

5,617,547.00 $

5,617,547.00 $

6,247,710.67

101,874.66

10,956,280.00

10,956,280.00

11,523,923.03

1,857,298.00

1,857,298.00

2,045,445.86

344,372.00

344,372.00

348,198.21

80,000.00

80,000.00

203,954.39

48 841.00

190,841.00

481,983.70

$ 18,904,338.00 $ 19,046,338.00 $ 20,953,090.52

$ 13,453,031.00 $ 13,453,031.00 $ 13,592,136.97

625,727.00 106,000.00 437,656.00 532,637.00 1,379,937.00 91,600.00 1,483,000.00 956,140.00 24,000.00
1,109,453.00

625,727.00 106,000.00 437,656.00 532,637.00 1,379,937.00 233,600.00 1,483,000.00 956,140.00 24,000.00
1,109,453.00

563,408.62 137,801.13 440,617.02 523,124.28 1,295,221.01 91,321.82 1,428,784.96 796,593.57 21,532.00
1,573.50 1,174,064.34

$ 20,199,181.00 $ 20,341,181.00 $ 20,066,179.22

$ -1,294,843.00 $ -1,294,843.00 $

886,911.30

$

365,676.00 $

365,676.00

10,000.00

10,000.00

-8 676.00

-84,676.00

$

367,000.00 $

291,000.00

$

-927,843.00 $ -1,003,843.00 $

886,911.30

3,193,741.64

3,231,246.54

3,231,248.00

29,411.72

Fund Balances - Ending

$

2,265,898.64 $

2,256,815.26 $

4,118,159.30

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.

-25-

HEARD COUNTY BOARD OF EDUCATION SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
YEAR ENDED JUNE 30, 2008

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 Bright From the Start: Georgia Department of Early Care and Learning Child and Adult Care Food Program
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 Career and Technical Education - Basic Grants to States Enhancing Education Through Technology Program Improving Teacher Quality State Grants State Gtants for Innovative Programs Title I Grants to Local Educational Agencies
Total U.S. Department of Education

CFDA NUMBER

PASSTHROUGH
ENTITY ID
NUMBER

EXPENDITURES IN PERIOD

. 10.553 . 10.555

N/A NIA $
$

(2) 1,017,978.43
1,017,978.43

10.550 10.558

N/A

89,446.83

N/A $

7,633.08 1, 115,058.34

84.027 84.173

NIA $ N/A
$

379,225.00 36,742.37
415,967.37

84.048
. 84.318 84.367
. 84.298 84.010

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

23,078.00 50,039.00 117,074.29
3,420.00 504,834.21
1 114 412.87

Total Federal Financial Assistance N/A = Not Available

$==2=,2=2=9=,4=7=1.=2=1

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 ($179,313.78) were not maintained separately and are included in the 2008 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 Heard County Board of Education and is presented on the modified accru~I basis of accounting which is the basis of accounting used in the presentation of the fund financial statements.

See notes to the basic financial statements.

-26-

HEARD COUNTY BOARD OF EDUCATION SCHEDULE OF STATE REVENUE YEAR ENDED JUNE 30, 2008

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 Grades (6-8) Program High School General Education (9-12) Program Vocational Laboratory (9-12) Program Students with Disabilities Gifted Student - Category VI Remedial Education Program Alternative Education Program 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 Vocational Supervisors Education Equalization Funding Grant Food Services Vocational Education Amended Formula Adjustment Other State Programs Graduation Coaches Health Insurance National Teacher Certification Preschool Handicapped Program Remedial Summer Middle School Virtual Schools Grant
Office of Treasury and Fiscal Services Public School Employees Retirement

See notes to the basic financial statements.

- 27 -

SCHEDULE "3"

GOVERNMENTAL FUND TYPE GENERAL FUND

$

553,263.36

640,057.00 84,174.00
1,464,093.00 120,612.00 790,457.00 80,065.00
1,276,453.00 1,190,577.00
474,873.00 1,065,878.00
184,592.00 89,704.00 107,694.00 218,948.00 70,571.00 39,151.00
384,968.00 574,150.00 527,968.00
374,152.00 86,086.00 35,802.00 53,937.00 8,663.00
547,415.00 59,006.00 20,863.00
-186,522.00
110,921.00 365,420.67
41,682.00 63,902.00
1,293.00 850.00
2,204.00
$ ===1=1'=52=3=,9=2=3=.0=3

HEARD COUNTY BOARD OF EDUCATION SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS
YEAR ENDED JUNE 30, 2008

SCHEDULE "4"

PROJECT
Acquiring, constructing and equipping one new elementary school; acquisition of land for additional schools, acquiring computers and computer technology equipment for the school system; acquiring miscellaneous new equipment, fixtures, and furniture for the school system, including buses and other vehicles; adding to, repairing, renovating, improving and equipping existing school system buildings and facilities; paying any general obligation debt of the School District in conjunction with the imposition of such sales and use tax and paying the expenses incident to accomplish the foregoing projects.
Acquisition, construction, equipping and furnishing of a new high school and other new school buildings and facilities, including but not limited to, a new fine arts center, administration and maintenance facilities and athletic/physical education facilities; adding to, renovating, improving and equipping existing school buildings and facilities; acquiring technology equipment, safety, and security equipment and other school equipment; acquiring school buses and other school vehicles; acquiring textbooks and band instruments; acquiring real property; acquiring any capital property necessary or desirable for the foregoing purposes, both real and personal.

ORIGINAL ESTIMATED
COST(1l

CURRENT ESTIMATED COSTS(2l

AMOUNT EXPENDED IN CURRENT
YEAR(3l

AMOUNT EXPENDED
IN PRIOR YEARS(3l

PROJECT STATUS

$ 18,000,000.00 $ 22,291,354.81 $ 2,465,621.81 $ 19,825,733.00 Completed

25,000,000.00

25,000,000.00

20,265,435.59

Ongoing

$ 43,000,000.00 $ 47,291,354.81 $ 22,731,057.40 $ 19,825,733.00

(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 Heard 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.

-28-

HEARD COUNTY BOARD OF EDUCATION GENERAL FUND - QUALITY BASIC EDUCATION PROGRAM (QBE)
ALLOTMENTS AND EXPENDITURES - BY PROGRAM YEAR ENDED JUNE 30, 2008

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
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

$

740,484.00 $

835,276.10 $

37,434.86 $

872,710.96

102,527.00

150,234.98

561.55

150,796.53

1,727,031.00

2,024,736.11

80,341.85

2,105,077.96

143,709.00

171,553.66

653.35

172,207.01

920,673.00

1,385,966.21

48,776.57

1,434,742.78

93,491.00 1,481,900.00 1,383,235.00
550,279.00 1,236,270.00
234,681.00 100,081.00 124,995.00

131,383.10 1,675,193.51 1,505,929.41
490,999.44
34,484.33 179,421.40 792,575.04 253,660.49
70,365.85 225,827.79
50,607.33 64,420.91

742.20 119,148.94
93,826.40 20,913.54
161.94 615.67 71,503.40 946.10
2,420.17
3,000.00

132,125.30 1,794,342.45 1,599,755.81
511,912.98
34,646.27 180,037.07 864,078.44 254,606.59
70,365.85 228,247.96
50,607.33 67,420.91

$

8,839,356.00 $ 10,042,635.66 $

481,046.54 $ 10,523,682.20

255,996.00 46273.00

400,614.95 38,511.59

29,466.19 69,380.00

430,081.14 107,891.59

TOTAL QBE FORMULA FUNDS

$

9,141,625.00 $ 10,481,762.20 $

579,892.73 $ 11,061,654.93

(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.

-29-

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
July 2, 2009

Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the Heard 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 Heard County Board of Education as of and for the year ended June 30, 2008, which collectively comprise Heard County Board of Education's basic financial statements and have issued our report thereon dated July 2, 2009. 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 Heard County Board of Education's internal control over financial reporting as a basis for designing our auditing procedures for the purpose of expressing our opinions on the financial statements, but not for the purpose ofexpressing an opinion on the effectiveness of the Heard County Board of Education's internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness of the Heard 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 Heard County Board of Education's ability to initiate, authorize, record, process, or report financial data reliably in accordance with generally accepted
2008YB-10

accounting principles such that there is more than a remote likelihood that a misstatement of the Heard County Board of Education's financial statements that is more than inconsequential will not be prevented or detected by the Heard 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 Heard 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 Heard 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 ofHeard County Board ofEducation in a separate letter dated July 2, 2009.
This report is intended solely for the information and use of management, members of the Heard County Board of Education, others within the entity, 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:as 2008YB-10

Rus 11 W. Hinton, CPA, CGFM State Auditor

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
July 2, 2009

Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the Heard County Board of Education
REPORT ON COMPLIANCE WITH REQUIREMENTS APPLICABLE TO EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH 0MB CIRCULARA-133
Ladies and Gentlemen:
Compliance
We have audited the compliance ofHeard County Board ofEducation with the types of compliance requirements described in the U.S. Office of Management and Budget (0MB) Circular A-133 Compliance Supplement that are applicable to each ofits major Federal programs for the year ended June 30, 2008. Heard County Board of Education'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 Heard County Board of Education's management. Our responsibility is to express an opinion on Heard 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 of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the 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 Heard County Board ofEducation's compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Our audit does not provide a legal determination on Heard County Board ofEducation's compliance with those requirements.
2008SA-10

In our opinion, the Heard County Board of Education complied, in all material respects, with the requirements referred to above that are applicable to each ofits major Federal programs for the year ended June 30, 2008.
Internal Control Over Compliance
The management of Heard 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 Heard County Board ofEducation's internal control over compliance with requirements that could have a direct and material effect on a major Federal program in order to determine our auditing procedures for the purpose ofexpressing our opinion on compliance, but not for the purpose ofexpressing an opinion on the effectiveness ofinternal control over compliance. Accordingly, we do not express an opinion on the effectiveness of the Heard 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 requiremeht of a Federal program on a timely basis. A significant deficiency is a control deficiency, or combination of control 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 ofthe internal control over compliance was for the limited purpose described in the first paragraph of this section and would not necessarily identify all deficiencies in internal control that might be significant deficiencies or material weaknesses. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses, as defined above.
This report is intended solely for the information and use of management, members of the Heard County Board ofEducation, Federal awarding agencies and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties.
Respectfully submitted,
--::c>M,JQ \Ju.~
~Jen W. Hinton, CPA, CGFM State Auditor
RWH:as 2008SA-10

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

HEARD COUNTY BOARD OF EDUCATION AUDITEE'S RESPONSE
SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2008

PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

FINDING CONTROL NUMBER AND STATUS

FS-6741-07-01 FS-67 41-07-02

Previously Reported Corrective Action Implemented Previously Reported Corrective Action Implemented

PRIOR YEAR FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

FA-6741-06-01

Previously Reported Corrective Action Implemented

SECTION IV FINDINGS AND QUESTIONED COSTS

HEARD COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2008
I SUMMARY OF AUDITOR'S RESULTS
1. Type of Report Issued on the Financial Statements The auditor's opinion on the Heard County Board of Education's financial statements was unqualified.
2. Significant Deficiencies in Internal Control Disclosed by the Audit ofthe Financial Statements The audit report for the Heard County Board of Education did not disclose any significant deficiencies related to the financial statements.
3. Noncompliance Material to the Financial Statements The audit ofthe Heard County Board ofEducation disclosed no instances ofnoncompliance that were deemed to be material to the financial statements.
4. Significant Deficiencies in Internal Control Over Major Programs The audit report for the Heard County Board of Education did not disclose any significant deficiencies in internal control over major programs.
5. Type of Report Issued on Compliance for Major Programs The auditor's opinion on the Heard County Board ofEducation's report on compliance with requirements applicable to major programs was unqualified.
6. Audit Findings Required to be Reported by Section .510{a) ofOMB Circular A-133 The Heard 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 84.010 Title I Grants to Local Educational Agencies 84.367 Improving Teacher Quality State Grants
8. Type "A" Program Dollar Threshold The dollar threshold for type "A" programs was $300,000.00.
9. Low Risk Auditee The Heard County Board of Education did not qualify 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-

HEARD COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2008 III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS No matters were reported.
-2-