NEWTON COUNTY BOARD OF EDUCATION COVINGTON, 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 NEWTON 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 EXHIBITS BASIC FINANCIAL STATEMENTS DISTRICT-WIDE FINANCIAL STATEMENTS A STATEMENT OF NET ASSETS B STATEMENT OF ACTIVITIES FUND FINANCIAL STATEMENTS C BALANCE SHEET GOVERNMENTAL FUNDS D RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO THE STATEMENT OF NET ASSETS E STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS F RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES TO THE STATEMENT OF ACTIVITIES G STATEMENT OF FIDUCIARY NET ASSETS FIDUCIARY FUNDS H STATEMENT OF CHANGES IN FIDUCIARY NET ASSETS FIDUCIARY FUNDS I NOTES TO THE BASIC FINANCIAL STATEMENTS SCHEDULES REQUIRED SUPPLEMENTARY INFORMATION 1 SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL GENERAL FUND SUPPLEMENTARY INFORMATION 2 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS 3 SCHEDULE OF STATE REVENUE Page 1 2 4 5 6 7 8 9 10 27 28 30 NEWTON COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS - SECTION I FINANCIAL SCHEDULES SUPPLEMENTARY INFORMATION 4 SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS 32 5 ALLOTMENTS AND EXPENDITURES GENERAL FUND - QUALITY BASIC EDUCATION PROGRAMS (QBE) BY PROGRAM 33 SECTION II COMPLIANCE AND INTERNAL CONTROL REPORTS REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS REPORT ON COMPLIANCE WITH REQUIREMENTS APPLICABLE TO EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH 0MB CIRCULAR A-133 SECTION III AUDITEE'S RESPONSE TO PRIOR YEAR FINDINGS AND QUESTIONED COSTS SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS SECTION IV FINDINGS AND QUESTIONED COSTS SCHEDULE OF FINDINGS AND QUESTIONED COSTS NEWTON COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS - SECTIONV MANAGEMENT'S RESPONSES SCHEDULE OF MANAGEMENT'S RESPONSES SECTION I FINANCIAL Russell W. Hinton STATE AUDITOR (404) 656-2174 DEPARTMENT OF AUDITS AND ACCOUNTS 270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400 January 29, 2008 Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education and Superintendent and Members of the Newton County Board of Education INDEPENDENT AUDITOR'S COMBINED REPORT ON BASIC FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION - SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS Ladies and Gentlemen: We have audited the accompanying financial statements ofthe governmental activities, each major fund, and the aggregate remaining fund information (Exhibits A through I) of the Newton 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 Newton 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 Newton 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. 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 Newton County Board ofEducation, as ofJune 30, 2007, and the 2007ARL-11 respective changes in financial position thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America. The Newton County Board ofEducation has not presented Management's Discussion and Analysis that accounting principles generally accepted in the United States of America has determined is necessary to supplement, although not to be part of, the basic financial statements. In accordance with Government Auditing Standards, we have also issued our report dated January 29, 2008, on our consideration ofthe Newton County Board ofEducation'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. The Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual, as presented on page 27, is not a required part of the basic financial statements but is 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 Newton County Board of Education's basic financial statements. The accompanying supplementary information which consist of Schedules 2 through 5, which includes the Schedule of Expenditures of Federal Awards as required by U.S. Office of Management and Budget Circular A-133, Audits ofStates, Local Governments, and Non-Profit Organizations, are presented for purposes of additional analysis and are not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements, and in our opinion, is fairly stated, in all material respects, in relation to the basic financial statements taken as a whole. A copy of this report has been filed as a permanent record in the office of the State Auditor and made available to the press of the State, as provided for by Official Code of Georgia Annotated section 50-6-24. Respectfully submitted, . --- ~~ RWH:gp 2007ARL-11 ell W. Hinton, CPA, CGFM State Auditor NEWTON COUNTY BOARD OF EDUCATION NEWTON COUNTY BOARD OF EDUCATION STATEMENT OF NET ASSETS JUNE 30, 2007 ASSETS Cash and Cash Equivalents Investments Accounts Receivable, Net Taxes State Government Federal Government Other Inventories Capital Assets Land Construction in Progress Land Improvements Buildings Equipment Less: Accumulated Depreciation Total Assets LIABILITIES Accounts Payable Salaries and Benefits Payable Payroll Withholdings Payable Contracts Payable Retainages Payable Long-Term Liabilities Due Within One Year Due in More Than One Year Total Liabilities NET ASSETS Invested in Capital Assets, Net of Related Debt Restricted for Continuation of Federal Programs Debt Service Unrestricted Total Net Assets Total Liabilities and Net Assets The notes to the basic financial statements are an integral part of this statement. -1- EXHIBIT"A" GOVERNMENTAL ACTIVITIES $ 27,684,209 6,972,824 4,832,921 12,351,415 2,810,569 279,686 117,696 5,719,320 4,420,511 7,955,360 143,516,589 14,083,822 -40 749 876 $ ===1=89=9=9=5==,0=4=6 $ 2,991,741 13,096,591 7,857,813 554,590 1,048,899 8,954,784 35,687,307 $ 70,191 725 $ 90,303,635 2,279,171 8,672,391 18,548,124 $ 119,803,321 $ ===1=89='=99=5==,0=4=6 NEWTON 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 Food Services Interest on Short-Term and Long-Term Debt Total Governmental Activities General Revenues Taxes Property Taxes For Maintenance and Operations For Debt Services Railroad Cars Sales Taxes Special Purpose Local Option Sales Tax for Debt Services Intangible Recording Tax Real Estate Grants and Contributions not Restricted to Specific Programs Investment Earnings Miscellaneous Total General Revenues Change in Net Assets Net Assets - Beginning of Year EXPENSES CHARGES FOR SERVICES $ 104,894,247 $ 4,143,987 4,281,830 2,795,000 893,865 7,408,413 676,967 12,362,886 8,657,182 1,985,464 2,471,904 8,676,889 1950649 $ =====1=61=,1=9=9=,2=83= $ 14,260 2,539,254 2,553,514 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 GRANTS AND CONTRIBUTIONS CAPITAL GRANTS AND CONTRIBUTIONS NET (EXPENSES) REVENUES AND CHANGES IN NET ASSETS $ 70,379,354 $ 1,917,815 1,410,609 1,793,455 1,805,954 3,363,552 29,375 5,212,460 1,992,323 128,941 157,003 5,513,767 $ 93,704 608 $ 1,462,008 $ 6,269 10,342 71,436 15,669 36,001 8,218 33,893 809,755 26,486 137,790 2,617,867 $ -33,038,625 -2,219,903 -2,860,879 -930, 109 927,758 -4,008,860 -639,374 -7,116,533 -5,855,104 -1,830,037 -2,177,111 -623,868 -1 950 649 -62,323,294 $ 47,308,165 2,734,449 19,648 11,001,839 1,363,326 426,216 7,694,953 1,683,662 3 704 353 $ 75 936 611 $ 13,613,317 106,190,004 $ ===1=1=9'=,8=03=,3=2==1 -3- NEWTON COUNTY BOARD OF EDUCATION BALANCE SHEET GOVERNMENTAL FUNDS JUNE 30, 2007 EXHIBIT"C" ASSETS Cash and Cash Equivalents Investments Accounts Receivable, Net Taxes State Government Federal Government Other Inventories GENERAL FUND DISTRICTWIDE CAPITAL PROJECTS FUND DEBT SERVICE FUND TOTAL $ 19,865,911 $ 100,141 2,805,588 11,036,544 2,810,569 277,957 117 696 6,827,590 $ 1,185,000 1,314,871 1,729 990,708 $ 5,687,683 2,027,333 27,684,209 6,972,824 4,832,921 12,351,415 2,810,569 279,686 117696 Total Assets $ 37.014,406 $ 9,329,190 $ 8,705,724 $====55=,04==9=,3=20= LIABILITIES AND FUND BALANCES LIABILITIES Accounts Payable $ Salaries and Benefits Payable Payroll Withholdings Payable Contracts Payable Retainages Payable Total Liabilities $ FUND BALANCES Reserved for: Continuation of Federal Programs $ Debt Service Inventories Unreserved Designated for Self-Insurance Undesignated Reported in: General Fund Capital Projects Total Fund Balances $ 2,826,257 $ 13,096,591 7,857,813 23,780,661 $ 2,161,475 117,696 205,337 10,749,237 $ 13,233,745 $ 132,150 $ 554,590 1,048,899 1,735,639 $ $ 7,593,551 7,593,551 $ 33,333 $ 33 333 $ $ 8,672,391 8,672,391 $ 2,991,740 13,096,591 7,857,813 554,590 1048899 25,549,633 2,161,475 8,672,391 117,696 205,337 10,749,237 7,593,551 29,499,687 Total Liabilities and Fund Balances $ 37,014,406 $ 9,329,190 $ 8,705,724 $===--55_._04_9_,3_2=0 The notes to the basic financial statements are an integral part of this statement. -4- NEWTON COUNTY BOARD OF EDUCATION RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO THE STATEMENT OF NET ASSETS JUNE 30, 2007 EXHIBIT"D" Total Fund Balances - Governmental Funds (Exhibit "C") Amounts reported for Governmental Activities in the Statement of Net Assets are different because: Capital Assets used in Governmental Activities are not financial resources and therefore are not reported in the funds. These assets consist of: Land Construction in Progress Land Improvements Buildings Machinery and Equipment Accumulated Depreciation Total Capital Assets Long-Term Liabilities, including Bonds Payable, are not due and payable in the current period and therefore are not reported as liabilities in the funds. Long-Term Liabilities at year-end consist of: Bonds Payable Capital Leases Total Long-Term Liabilities Net Assets of Governmental Activities (Exhibit "A") $ 29,499,687 $ 5,719,320 4,420,511 7,955,360 143,516,589 14,083,822 -40,749,876 134,945,726 $ -42,615,000 -2,027,092 -44,642,092 $ 119,803,321 The notes to the basic financial statements are an integral part of this statement. -5- NEWTON 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 Food Services Operation Capital Outlay Debt Services Principal Dues and Fees Interest Total Expenditures Excess of Revenues over (under) Expenditures OTHER FINANCING SOURCES (USES) 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 $ 46,381,577 1,696,409 88,399,576 $ 13,155,270 2,553,514 859,146 3,540,642 $ 156,586, 134 $ $ 2,462,582 2,624,678 $ 11,094,972 285,683 163 714 538,833 2,911,979 $ 14,258,483 $ 49,006,255 12,791,381 90,862,158 13,155,270 2,553,514 1,683,662 3,704,356 173,756,596 $ 102,221,131 4,133,497 4,264,525 2,675,467 864,022 7,348,173 663,215 12,411,089 7,562,065 2,331,891 2,471,904 8,426,345 $ 9,258,116 500,418 $ 53,558 $ 155,927,300 $ 9,258,116 $ $ 658,834 $ -6,346,137 $ $ 7,930,000 5,109 1,891,982 9,827,091 $ 4,431,392 $ 102,221,131 4,133,497 4,264,525 2,675,467 864,022 7,348,173 663,215 12,411,089 7,562,065 2,331,891 2,471,904 8,426,345 9,258,116 8,430,418 5,109 1,945,540 175,012,507 -1,255,911 $ 6,685,000 $ $ -1,500,000 $ -5,185,000 $ -1,500,000 $ 6,685,000 $ -5,185,000 $ $ -841,166 $ 338,863 $ -753,608 $ 14,074,911 7,254,688 9,425,999 6,685,000 -6,685,000 0 -1,255,911 30,755,598 Fund Balances - Ending $ 13,233,745 $ 7,593,551 $ The notes to the basic financial statements are an integral part of this statement. -6- 8,672,391 $ =====2=19,=49=9=,6=87= NEWTON 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. Repayment of Long-Term Debt is reported as an expenditure in Governmental Funds, but the repayment reduces Long-Term Liabilities in the Statement of Net Assets. In the current year, these amounts consist of: Bond Principal Retirements Capital Lease Payments Change in Net Assets of Governmental Activities (Exhibit "B") $ -1,255,911 $ 9,503,414 -4, 120,610 5,382,804 1,056,006 $ 7,930,000 500,418 8,430,418 $ ==1=3=,6=1=3=,3=17= The notes to the basic financial statements are an integral part of this statement. -7- NEWTON COUNTY BOARD OF EDUCATION STATEMENT OF FIDUCIARY NET ASSETS FIDUCIARY FUNDS JUNE 30, 2007 EXHIBIT"G" ASSETS Cash and Cash Equivalents PRIVATE PURPOSE TRUSTS AGENCY FUNDS $ 12 797 $====2=70=,9=5=2 LIABILITIES Accounts Payable Funds Held for Others Total Liabilities NET ASSETS Held in Trust for Private Purposes $ 176,973 93,979 $ _ _--'2""-7-'-0""-,9-'-52~ $ _ ___,;1""2"""7..;;;.9"-7 Total Liabilities and Net Assets $ 12 797 $===27=0"=,9=52= The notes to the basic financial statements are an integral part of this statement. -8- NEWTON COUNTY BOARD OF EDUCATION STATEMENT OF CHANGES IN FIDUCIARY NET ASSETS FIDUCIARY FUNDS YEAR ENDED JUNE 30, 2007 EXHIBIT"H" ADDITIONS Contributions Donors DEDUCTIONS Administrative Expenses Change in Net Assets Net Assets - Beginning Net Assets - Ending PRIVATE PURPOSE TRUSTS $ 906 $ 2 709 $ -1,803 14,600 $===12=,7=9=7 The notes to the basic financial statements are an integral part of this statement. -9- NEWTON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007 EXHIBIT "I" Note 1: DESCRIPTION OF SCHOOL DISTRICT AND REPORTING ENTITY REPORTING ENTITY The Newton County Board of Education (School District) was established under the laws of the State of Georgia and operates under the guidance of a school board elected by the voters and a Superintendent appointed by the Board. The Board is organized as a separate legal entity and has the power to levy taxes and issue bonds. Its budget is not subject to approval by any other entity. Accordingly, the School District is a primary government and consists of all the organizations that compose its legal entity. Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BASIS OF PRESENTATION The School District's basic financial statements are collectively comprised of the District-wide financial statements, fund financial statements and notes to the basic financial statements of the Newton County Board of Education. District-wide Statements: The Statement ofNet Assets and the Statement ofActivities display information about the financial activities ofthe overall School District, except for fiduciary activities. Eliminations have been made to minimize the double counting of internal activities. Governmental activities generally are financed through taxes, intergovernmental revenues, and other nonexchange transactions. The Statement of Activities presents a comparison between direct expenses and program revenues for each function of the School District's governmental activities. Direct expenses are those that are specifically associated with a program or function and, therefore, are clearly identifiable to a particular function. Indirect expenses (expenses of the School District related to the administration and support ofthe School District's programs, such as office and maintenance personnel and accounting) are not allocated to programs. Program revenues include (a) charges paid by the recipients ofgoods or services offered by the programs and (b) grants and contributions that are restricted to meeting the operational or capital requirements of a particular program. Revenues that are not classified as program revenues, including all taxes, are presented as general revenues. Fund Financial Statements: The fund financial statements provide information about the School District's funds, including fiduciary funds. Eliminations have been made to minimize the double counting ofinternal activities. Separate statements for each category (governmental and fiduciary) are presented. The emphasis of fund financial statements is on major governmental funds, each displayed in a separate column. - 10 - NEWTON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007 EXHIBIT "I" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The School District reports the following major governmental funds: General Fund is the School District's primary operating fund. It accounts for all financial resources ofthe School District, except those resources required to be accounted for in another fund. District-wide Capital Projects Fund accounts for financial resources including Special Purpose Local Option Sales Tax (SPLOST) and grants from Georgia State Financing and Investment Commission to be used for the acquisition, construction or renovation ofmajor capital facilities. Debt Service Fund accounts for taxes (property and sales) legally restricted for the payment of general long-term principal, interest and paying agent's fees. The School District reports the following fiduciary fund types: Private Purpose Trust fund reports a trust arrangement under which principal and income may be expended for employee recognition awards. Agency funds account for assets held by the School District as an agent for various funds, governments, or individuals. BASIS OF ACCOUNTING The basis ofaccounting determines when transactions are reported on the financial statements. The District-wide governmental and fiduciary fund financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded at the time liabilities are incurred, regardless ofwhen the related cash flows take place. Nonexchange transactions, in which the School District gives (or receives) value without directly receiving (or giving) equal value in exchange, include property taxes, sales taxes, grants and donations. On an accrual basis, revenue from property taxes is recognized in the fiscal year for which the taxes are levied. Revenue from sales taxes is recognized in the fiscal year in which the underlying transaction (sale) takes place. Revenue from grants and donations is recognized in the fiscal year in which all eligibility requirements have been satisfied. The School District uses funds to report on its financial position and the results of its operations. Fund accounting is designed to demonstrate legal compliance and to aid financial management by segregating transactions related to certain governmental functions or activities. A fund is a separate accounting entity with a self-balancing set of accounts. Governmental funds are reported using the current financial resources measurement focus and the modified accrual basis ofaccounting. Under this method, revenues are recognized when measurable and available. The School District considers all revenues reported in the governmental funds to be - 11 - NEWTON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007 EXHIBIT "I" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 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, which are recognized as expenditures to the extent they have matured. Capital asset acquisitions are reported as expenditures in governmental funds. Proceeds ofgeneral 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 ofretum 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, - 12 - NEWTON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007 EXHIBIT "I" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (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 Newton County Board ofCommissioners fixed the property tax levy for the 2006 tax digest year (calendar year) on June 20, 2006 (levy date). Taxes were due on December 21, 2006 (lien date) and could be paid in two installments on September 20, 2006 and December 20, 2006 (due dates). 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 Newton 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 oftaxes 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 $46,361,929 and for school bonds amounted to $2,624,678. Tax millage rates levied for the 2006 tax year (calendar year) for the Newton County Board of Education were as follows (a mill equals $1 per thousand dollars of assessed value): School Operations School Bonds 18.21 mills 1.00 mills 19.21 mills - 13 - NEWTON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007 EXHIBIT "I" 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 $11,001,839 and is to be used for capital outlay for educational purposes or debt service. This sales tax was authorized by local referendum and the sales tax must be re-authorized at least every five years. INVENTORIES FOOD INVENTORIES On the basic financial statements, inventories of donated food commodities used in the preparation ofmeals are reported at their Federally assigned value and purchased foods inventories are reported at cost (first-in, first-out). The School District uses the consumption method to account for inventories whereby donated food commodities are recorded as an asset and as revenue when received, and expenses/expenditures are recorded as the inventory items are used. Purchased foods are recorded as an asset when purchased and expenses/expenditures are recorded as the inventory items are used. CAPITAL ASSETS Capital assets purchased, including capital outlay costs, are recorded as expenditures in the fund financial statements at the time of purchase (including ancillary charges). On the District-wide financial statements, all purchased capital assets are valued at cost where historical records are available and at estimated historical cost based on appraisals or deflated current replacement cost where no historical records exist. Donated capital assets are recorded at estimated fair market value on the date donated. Disposals are deleted at depreciated recorded cost. The cost of normal maintenance and repairs that do not add to the value ofassets or materially extend the useful lives of the assets is not capitalized. Depreciation is computed using the straight-line method. The School District does not capitalize book collections or works 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 20 to 80 years $ 10,000 20 to 80 years $ 10,000 4 to 20 years - 14 - NEWTON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007 EXHIBIT "I" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Depreciation is used to allocate the actual or estimated historical cost of all capital assets over estimated useful lives. GENERAL OBLIGATION BONDS The School District issues general obligation bonds to provide funds for the acquisition and construction of major capital facilities. Bond issuance costs are recognized in the financial statements during the fiscal year bonds are issued. In addition, general obligation bonds have been issued to refund existing general obligation bonds. General obligation bonds are direct obligations and pledge the full faith and credit of the government. The outstanding amount of these bonds is recorded in the Statement of Net Assets. NET ASSETS The School District's net assets in the District-wide Statements are classified as follows: Invested in capital assets, net of related debt - This represents the School District's total investment in capital assets, net ofoutstanding debt obligations related to those capital assets. To the extent debt has been incurred but not yet expended for capital assets, such amounts are not included as a component of invested in capital assets, net of related debt. Restricted net assets - These represent resources for which the School District is legally or contractually obligated to spend resources for 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 ofinsurance, or by collateral. The aggregate ofthe face value ofsuch surety bond and the market value of securities pledged shall be equal to not less than 110 percent ofthe public funds being secured after the deduction ofthe amount ofdeposit insurance. Ifa depository elects the pooled method (OCGA 45-8-13 .1) the aggregate ofthe market value ofthe securities pledged to secure a pool ofpublic funds shall be not less than 110 percent ofthe daily pool balance. - 15 - NEWTON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007 EXHIBIT "I" 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 ofthe 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 ofthe State of Georgia, and (7) Bonds, bills, notes, certificates of indebtedness, or other obligations of a subsidiary corporation of the United States government, which are fully guaranteed by the United States government both as to principal and interest or debt obligations issued by the Federal Land Bank, the Federal Home Loan Bank, the Federal Intermediate Credit Bank, the Central Bank for Cooperatives, the Farm Credit Banks, the Federal Home Loan Mortgage Association, and the Federal National Mortgage Association. CATEGORIZATION OF DEPOSITS At June 30, 2007, the bank balances were $31,555,725. The amounts of the 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: - 16 - NEWTON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007 EXHIBIT "I" Note 3: DEPOSITS AND INVESTMENTS Custodial Credit Risk Category Bank Balance 1 $ 0 2 0 3 30,301.421 Total $ 30,301,421 CATEGORIZATION OF INVESTMENTS At June 30, 2007, the carrying value ofthe School District's total investments was $6,872,683 which is materially the same as fair value. This investment consisted entirely of funds invested in the Local Government Investment Pool administered by the State of Georgia, Office of Treasury and Fiscal Services which are not required to be categorized since the School District did not own any specific identifiable securities in the pool. The investment policy ofthe State ofGeorgia, Office ofTreasury and Fiscal Services for the Local Government Investment Pool (Primary Liquidity Portfolio) does not provide for investment in derivatives or similar investments. 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 ofAudits and Accounts at http://www.audits.state.ga.us/internet/searchRpts.html. The Primary Liquidity Portfolio consists of Georgia 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. Note 4: NON-MONETARY TRANSACTIONS The School District receives food commodities from the United States Department of Agriculture (USDA) for school breakfast and lunch programs. These commodities are recorded at their Federally assigned value. See Note 2 - Inventories Note 5: CAPITAL ASSETS The following is a summary of changes in the Capital Assets during the fiscal year: - 17 - NEWTON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007 EXHIBIT "I" Note 5: CAPITAL ASSETS Balances July l, 2006 Increases Balances Decreases June 30, 2007 Governmental Activities Capital Assets, Not Being Depreciated: Land Construction in Progress $ 4,200,510 $ 1,518,810 $ 5,719,320 32.470,036 4,086,380 $ 32,135,905 4.420,511 Total Capital Assets Not Being Depreciated $ 36,670,546 $ 5,605,190 $ 32,135,905 $ 10,139,831 Capital Assets Being Depreciated Buildings and Improvements Equipment Land Improvements $ 109,605,208 $ 33,911,381 $ 13,608,758 475,064 6,307,676 1,647,684 0 $ 143,516,589 14,083,822 7,955,360 Less Accumulated Depreciation for: Buildings and Improvements Equipment Land Improvements 25,303,588 7,524,680 3,800,998 2,707,215 1,155,147 258,248 28,010,803 8,679,827 4,059,246 Total Capital Assets, Being Depreciated, Net $ 92,892,376 $ 31,913,519 $ 0 $ 124,805,895 Governmental Activity Capital Assets - Net $ 129.562.922 $ 37.518.709 $ 32.135.905 $ 134,945.726 Capital assets being acquired under capital leases as of June 30, 2007, are as follows: Governmental Funds Equipment Less: Accumulated Depreciation $ 2,527,509 471,538 $ 2,055.971 Current year depreciation expense by function is as follows: - 18 - NEWTON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007 EXHIBIT "I" Note 5: CAPITAL ASSETS Instruction Support Services Pupil Services Improvements of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Food Services $ 2,446,360 $ 10,490 17,305 119,533 26,219 60,240 13,752 56,712 1,095,117 44,319 1,443,687 230,563 $ 4,120.610 Note 6: RESTRICTED ASSETS Special Purpose Local Option Sales Tax (SPLOST) and property tax levied specifically for retirement ofoutstanding bond principal, interest and paying agent's fees (Debt Service Funds) are reported as restricted assets in the Statement ofNet Assets because their use is limited by applicable statutory provisions. Restricted assets at June 30, 2007, were as follows: Debt Service Funds Restricted Cash and Cash Equivalents: Debt Services Restricted Investments: Debt Services $ 990,708 $ 5,687,683 Note 7: INTERFUND TRANSFERS Interfund transfers for the year ended June 30, 2007, consisted of the following: Transfer to Transfers From General Debt Service Fund Fund District-wide Capital Projects $ 1,500.000 $ 5,185.000 - 19 - NEWTON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007 EXHIBIT "I" Note 7: INTERFUND TRANSFERS Transfers are used to move property tax revenues collected by the General Fund to the District-wide Capital Projects Fund as required match or supplemental funding source for capital construction projects and to move sales tax revenues collected by the Debt Service Fund to the District-wide Capital Projects Fund for capital construction projects. Note 8: RISK MANAGEMENT The School District is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors or omissions; job related illness or injuries to employees; acts of God; unemployment compensation and employee dental/optical expenses. The School District has established a limited risk management program for Dental/Optical coverage of its employees. The School District accounts for claims within the General Fund. In connection with this program a self-insurance reserve has been established within the General Fund by the School District. Estimated claims are budgeted by management based on known claims and prior experience. Changes in the Dental/Optical 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 $ 28,025 $ 283,884 $ 288,112 $ 23,797 2007 $ 23,797 $ 311,176 $ 308,810 $ 26,163 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 ofthe 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 has established a limited risk management program for workers' compensation claims. A premium is charged when needed by the General Fund to each user program on the basis of the percentage of that program's payroll to total payroll in order to cover estimated claims budgeted by management based on known claims and prior experience. The School District accounts for claims with expenses/expenditures and liability being reported when it is probable that a - 20- NEWTON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007 EXHIBIT "I" Note 8: RISK MANAGEMENT loss has occurred, and the amount of that loss can be reasonably estimated. An excess coverage insurance policy covers individual claims in excess of $350,000 loss per occurrence, up to the statutory limit. Changes in the workers' compensation claims liability during the last two fiscal years are as follows: 2006 2007 Beginning ofYear Liability Claims and Changes in Estimates Claims Paid EndofYear Liability $ 0 $ 324,948 $ 324,948 $ 0 $ 0 $ 346,547 $ 346,547 $ 0 The School District is self-insured with regard to unemployment compensation claims. The School District accounts for claims within the General Fund with expenses/expenditures and liability being reported when it is probable that a loss has occurred, and the amount ofthat loss can be reasonably estimated. Changes in the unemployment compensation claims liability during the last two fiscal years are as follows: 2006 2007 Beginning of Year Liability Claims and Changes in Estimates Claims Paid End of Year Liability $ 0 $ 952 $ 952 $ 0 $ 0 $ 12,827 $ 12,827 $ 0 The School District has purchased surety bonds to provide additional insurance coverage as follows: Position Covered Amount Superintendent All Other Employees $ 50,000 $ 50,000 Note 9: LONG-TERM DEBT CAPITAL LEASES The Newton County Board of Education has entered into a lease agreement for buses. This lease agreement qualifies as a capital lease for accounting purposes, and, therefore, has been recorded at the present value of the future minimum lease payments as of the date of its inception. - 21 - NEWTON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007 EXHIBIT "I" Note 9: LONG-TERM DEBT GENERAL OBLIGATION DEBT OUTSTANDING General Obligation Bonds currently outstanding are as follows: Purpose Interest Rates Amount General Government - Series 2003 General Government - Refunding - Series 1997 General Government - Refunding - Series 2003 2.00% - 4.50% 3.60% - 5.30% 1.05%-5.00% $ 20,585,000 5,460,000 16,570,000 $ 42,615,000 The changes in Long-Term Debt during the fiscal year ended June 30, 2007, were as follows: Governmental Funds General Capital Obligation Leases Bonds Total Balance July 1, 2006 $ 2,527,509 $ 50,545,000 $ 53,072,509 Deductions Debt Retired 500,418 7,930,000 8,430,418 Balance June 30, 2007 $ 2,027.091 $ 42,615.000 $ 44,642,091 Portion of Long-Term Debt Due within One Year $ 479,784 $ 8,475,000 $ 8,954,784 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 Ca12ital Leases Princi12al Interest 2008 2009 2010 2011 $ 479,784 $ 497,344 515,547 534,416 74,191 56,631 38,429 19,560 Total Principal and Interest $ 2,027,091 $ 188,811 -22 - NEWTON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007 EXHIBIT "I" Note 9: LONG-TERM DEBT Fiscal Year Ended June 30 General Obligation Debt Principal Interest 2008 2009 2010 2011 2012 2013 - 2016 $ 8,475,000 $ 9,155,000 9,385,000 2,310,000 2,410,000 10,880,000 1,709,993 1,462,872 1,103,873 715,492 611,933 1,264,420 Total Principal and Interest $ 42,615,000 $ 6,868,583 Note 10: ON-BEHALF PAYMENTS The School District has recognized revenues and costs in the amount of $3,106,125 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 $3,088,402 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 $17,723 Note 11: SIGNIFICANT COMMITMENTS The following is an analysis ofsignificant outstanding construction or renovation contracts executed by the School District as of June 30, 2007, together with funding available: - 23 - NEWTON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007 EXHIBIT "I" Note 11: SIGNIFICANT COMMITMENTS Project Unearned Executed Contracts Funding Available From State 07G-707-042 07G-707-040 08G-707-027/08-707-047 05-707-033/05G-707-021/07G-707-041 $ 11,308 $ 57,458 9,746 57,457 13,446,494 7,064,342 87.676 1,199,955 $ u.sss,22~ $ 8,379,212 The amounts described in this note are not reflected in the basic financial statements. Note 12: SIGNIFICANT CONTINGENT LIABILITIES Amounts received or receivable principally from the Federal government are subject to audit and review by grantor agencies. This could result in requests for reimbursement to the grantor agency for any costs which are disallowed under grant terms. The School District believes that such disallowances, if any, will be immaterial to its overall financial position. The School District is a defendant in various legal proceedings pertaining to matters incidental to the performance ofroutine School District operations. The ultimate disposition ofthese proceedings is not presently determinable, but is not believed to be material to the basic financial statements. Note 13: RELATED PARTY TRANSACTION The School District employed the services ofDobbs Environmental for environmental services. The company is owned and operated by Mr. Dobbs, the husband of Cathy Dobbs, Board Chairperson. The Board paid Mr. Dobbs a total of $72,697.50 for environmental services. The Superintendent and Board approved all payments to this vendor. Note 14: SUBSEQUENT EVENTS In the subsequent fiscal year, voters authorized the School District to issue general obligation bonds in the amount of $49,000,000. The proceeds from these bonds will be used for acquiring, constructing and equipping one new high school and completing one new middle school. Voters also authorized the School District to reimpose the sales and use tax and issue $62,~00,000 in aggregate general obligation debt in conjunction for additions and renovations to Alcovy High and existing stadium, completing a new high school, acquiring, constructing and equipping three new elementary schools, one new middle school, one new stadium, buses and technology. - 24- NEWTON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007 EXHIBIT "I" Note 15: 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 2007 2006 2005 100% 100% 100% $ 7,645,349 $ 6,638,334 $ 5,978,996 - 25 - (This page left intentionally blank) NEWTON COUNTY BOARD OF EDUCATION GENERAL FUND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL YEAR ENDED JUNE 30, 2007 SCHEDULE "1" REVENUES Property Taxes Sales Taxes State Funds Federal Funds Charges for Services Investment Earnings Miscellaneous Total Revenues EXPENDITURES Current Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Food Services Operation Debt Service Total Expenditures Excess of Revenues over (under) Expenditures OTHER FINANCING USES Other Uses Net Change in Fund Balances Fund Balances - Beginning NONAPPROPRIATED BUDGETS ORIGINAL (1) FINAL (1) ACTUAL AMOUNTS $ 46,478,266 $ 48,669,280 $ 46,381,577 1,696,409 78,336,061 88,552,351 88,399,576 12,814,816 13,043,490 13,155,270 2,541,658 2,541,658 2,553,514 671,800 671,800 859,146 852 850 852 850 3 540 642 $ 141 695 451 $ 154 331 429 $ 156 586 134 $ 98,065,776 $ 104,854,820 $ 102,221,131 4,251,450 4,322,305 2,621,713 900,324 7,055,709 543,987 10,500,329 7,599,724 1,340,390 814,932 7,330,500 4,288,946 4,433,789 2,716,812 919,201 7,348,989 662,427 12,410,426 7,583,374 2,376,502 179,932 7,330,500 553 976 4,133,497 4,264,525 2,675,467 864,022 7,348,173 663,215 12,411,089 7,562,065 2,331,891 2,471,904 8,426,345 553 976 $ 145 347 139 $ 155,659,694 $ 155,927,300 $ -3,651,688 $ -1,328,265 $ 658,834 -500 000 -1 500 000 -1 500 000 $ -4, 151,688 $ -2,828,265 $ -841,166 13,253,340 13,174057 14 074 911 Fund Balances - Ending $ 9 101 652 $ 10 345 792 $ ===1=3=2=3=3=7=45= Notes to the Schedule of Revenues. Expenditures and Changes in Fund Balances Budget and Actual (1) Original and Final Budget amounts do not include budgeted revenues or expenditures of the various principal accounts. The accompanying schedule of revenues, expenditures and changes in fund balances budget and actual is presented on the modified accrual basis of accounting which is the basis of accounting used in the presentation of the fund financial statements. See notes to the basic financial statements. - 27 - NEWTON COUNTY BOARD OF EDUCATION SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS YEAR ENDED JUNE 30, 2007 SCHEDULE "2" FUNDING AGENCY PROGRAM/GRANT Agriculture, U. S. Department of Child Nutrition Cluster Pass-Through From Georgia Department of Education Food Services School Breakfast Program National School Lunch Program Total Child Nutrition Cluster Other Programs Pass-Through From Georgia Department of Education Food Donation (1) Total U. S. Department of Agriculture Education, U. S. Department of Special Education Cluster Pass-Through From Georgia Department of Education Special Education Grants to States Preschool Grants Total Special Education Cluster Other Programs Pass-Through From Georgia Department of Education English Language Acquisition Grants Enhancing Education Through Technology Program Improving Teacher Quality State Grants Reading First State Grants Safe and Drug-Free Schools and Communities State Grants for Innovative Programs Title I Grants to Local Educational Agencies Vocational Education - Basic Grants to States Total U. S. Department of Education Defense, U. S. Department of Direct Department of the Marines R.O.T.C. Program Total Federal Financial Assistance N/A = Not Available CFDA NUMBER PASSTHROUGH ENTITY ID NUMBER EXPENDITURES IN PERIOD . 10.553 . 10.555 10.550 N/A NIA $ $ (2) 7,682,358 7,682,358 N/A $ 315 213 7,997,571 84.027 84.173 84.365 84.318 84.367 84.357 84.186 84.298 84.010 84.048 N/A $ NIA $ 2,993,231 114 058 3,107,289 N/A NIA N/A NIA NIA N/A N/A N/A $ 75,361 99 515,597 529,267 43,088 25,355 3,414,440 243160 7,953,656 $ 75740 $-====1='6,,;;02:;;6~,9=67;,., -28- NEWTON 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 ($1,138,140) 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 Newton County Board of Education and is presented on the modified accrual basis of accounting which is the basis of accounting used in the presentation of the fund financial statements. See notes to the basic financial statements. -29- NEWTON COUNTY BOARD OF EDUCATION SCHEDULE OF STATE REVENUE YEAR ENDED JUNE 30, 2007 SCHEDULE "3" 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 Middle School (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 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 Nursing Services Principal Supplements Vocational Supervisors Education Equalization Funding Grant Food Services Vocational Education Amended Formula Adjustment Other State Programs Alternative Program Apprenticeship Program Health Insurance National Teacher Certification K-3 Statewide Reading Program Tuition for Multi-Handicapped Children Preschool Handicapped Program High School Completion Counselor Project Adventure Middle School Remediation Teachers' Retirement Virtual Schools Grant GOVERNMENTAL FUND TYPES CAPITAL GENERAL PROJECTS FUND FUND $ 2,032,550 $ 5,101,966 625,282 11,920,448 951,464 5,520,754 678,141 8,013 9,877,175 8,862,499 1,604,986 11,382,045 2,307,616 5,990 423,973 1,672,708 507,470 356,977 1,748,764 2,976,384 4,662,133 1,578,723 155,285 317,728 61,648 37,717 7,694,953 387,894 1,601,160 -1,562,277 757,250 39,298 3,088,402 141,009 267,213 32,516 254,042 160,300 96,867 9,846 34,791 150 TOTAL 2,032,550 5,101,966 625,282 11,920,448 951,464 5,520,754 678,141 8,013 9,877,175 8,862,499 1,604,986 11,382,045 2,307,616 5,990 423,973 1,672,708 507,470 356,977 1,748,764 2,976,384 4,662,133 1,578,723 155,285 317,728 61,648 37,717 7,694,953 387,894 1,601,160 -1,562,277 757,250 39,298 3,088,402 141,009 267,213 32,516 254,042 160,300 96,867 9,846 34,791 150 30- NEWTON COUNTY BOARD OF EDUCATION SCHEDULE OF STATE REVENUE YEAR ENDED JUNE 30, 2007 SCHEDULE "3" AGENCY/FUNDING GRANTS Georgia State Financing and Investment Commission Reimbursement on Construction Projects Office of Treasury and Fiscal Services Public School Employees Retirement GOVERNMENTAL FUND TYPES CAPITAL GENERAL PROJECTS FUND FUND TOTAL $ 2,462,582 $ 2,462,582 17 723 $ 88,399,576 $ 2.462,582 $ ===90=,8=6=2=.1=58= See notes to the basic financial statements. - 31 - NEWTON COUNTY BOARD OF EDUCATION SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS YEAR ENDED JUNE 30, 2007 SCHEDULE "4" PROJECT To acquire, construct, and equip two new elementary schools, one new middle school, and one new high school, acquire school buses presently leased by it, and instructional and administrative technology improvements for existing schools, and to renovate, repair, improve and equip existing school buildings and other buildings and facilities useful or desirable in connection therewith, and acquire any necessary property therefore, both real and personal, all at a maximum cost of $46,500,000. To retire a portion of the Series 1996 Bonds, and the Series 1997 Bonds and Series 2003 Bonds by paying or making provisions for the payment of the principal of and interest on the Newton Bonds coming due August 1, 2010, in the maximum amount of $3,500,000. ORIGINAL ESTIMATED COST (1) CURRENT ESTIMATED COSTS (2) AMOUNT EXPENDED IN CURRENT YEAR (3) AMOUNT EXPENDED IN PRIOR YEARS (3) PROJECT STATUS $ 46,500,000 $ 58,727,855 $ 9,386,629 $ 49,341,226 Ongoing 3,500,000 3,500,000 600 000 925,000 Ongoing $ 50,000,000 $ 62,227,855 $ 9,986,629 $ 50,266,226 (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 Newton 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. - 32 - NEWTON COUNTY BOARD OF EDUCATION GENERAL FUND - QUALITY BASIC EDUCATION PROGRAM {QBE) ALLOTMENTS AND EXPENDITURES BY PROGRAM YEAR ENDED JUNE 30, 2007 SCHEDULE "5" DESCRIPTION Direct Instructional Programs Kindergarten Program Kindergarten Program-Early Intervention Program Primary Grades (1-3) Program Primary Grades-Early Intervention (1-3) Program Upper Elementary Grades (4-5) Program Upper Elementary Grades-Early Intervention (4-5) Program Middle Grades (6-8) Program 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 $ 5,776,747 $ 5,514,272 $ 283,073 $ 5,797,345 749,593 716,340 2,643 718,983 13,529,253 14,389,063 1,378,476 15,767,539 1,144,886 1,590,581 21,982 1,612,563 6,244,858 6,749,782 728,060 7,477,842 860,031 7,972 11,239,897 10,009,385 1,817,618 12,968,988 2,646,220 25,477 857,503 477145 1,012,726 80 12,038,140 11,410,296 1,882,134 243,070 1,555,890 12,542,705 135,726 23,530 1,726,883 154,543 1,198,361 579 734 7,279 10,285 1,014,063 1,557,429 214,077 25,132 80,711 309,737 38,434 4 193,228 21 454 1,020,005 10,365 13,052,203 12,967,725 2,096,211 268,202 1,636,601 12,852,442 135,726 23,530 1,765,317 154,547 1,391,589 601 188 $ 68,355,573 $ 73,463,856 $ 5,886,067 $ 79,349,923 1,907,298 414 370 2,115,721 494,220 2,609,941 434195 TOTAL QBE FORMULA FUNDS $ 70 677 241 $ 75,579,577 $ 6,380,287 $ ===82..,,.3.9..,.4,..,0..,5,...9 (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. - 33- SECTION II COMPLIANCE AND INTERNAL CONTROL REPORTS Russell W. Hinton STATE AUDITOR (404) 656-2174 DEPARTMENT OF AUDITS AND ACCOUNTS 270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400 January 29, 2008 Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education and Superintendent and Members of the Newton 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 ofNewton County Board of Education as ofand for the year ended June 30, 2007, which collectively comprise Newton County Board of Education's basic financial statements and have issued our report thereon dated January 29, 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 Newton 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 Newton County Board of Education's internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness of the Newton County Board of Education's internal control over financial reporting. A control deficiency exists when the design or operation ofa control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect misstatements on a timely basis. A significant deficiency is a control deficiency, or combination of control deficiencies, that adversely affect the Newton County Board ofEducation's ability to initiate, authorize, record, process, or report financial data reliably in accordance with generally accepted 2007YB-10 accounting principles such that there is more than a remote likelihood that a misstatement of the Newton County Board ofEducation's financial statements that is more than inconsequential will not be prevented or detected by the Newton 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 Newton 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 Newton 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 Newton County Board of Education in a separate letter dated January 29, 2008. This report is intended solely for the information and use of the management, members of the Newton 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, ~ ~f41 CQ_lb.-0~ Russell W. Hinton, CPA, CGFM State Auditor RWH:gp 2007YB-10 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 January 29, 2008 Honorable Sonny Perdue, Governor Members ofthe General Assembly Members of the State Board of Education and Superintendent and Members of the Newton 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 Newton 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. Newton County Board ofEducation's major Federal programs are identified in the Summary of Auditor's Results Section of the accompanying Schedule of Findings and Questioned Costs. Compliance with the requirements of laws, regulations, contracts and grants applicable to each of its major Federal programs is the responsibility of Newton County Board of Education's management. Our responsibility is to express an opinion on Newton County Board of Education's compliance based on our audit. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States ofAmerica; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General ofthe United States; and 0MB Circular A133, Audits 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 Newton 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 Newton County Board of Education's compliance with those requirements. 2007SA-10 In our opinion, the Newton County Board of Education complied, in all material respects, with the requirements referred to above that are applicable to each ofits major Federal programs for the year ended June 30, 2007. Internal Control Over Compliance The management of Newton 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 Newton 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 Newton 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 Newton 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. LL):4Lk Respectfully submitted, sell W. Hinton, CPA, CGFM State Auditor RWH:gp 2007SA-10 SECTION III AUDITEE'S RESPONSE TO PRIOR YEAR FINDINGS AND QUESTIONED COSTS NEWTON COUNTY BOARD OF EDUCATION AUDITEE'S RESPONSE SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2007 PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS FINDING CONTROL NUMBER AUDITEE'S RESPONSE/STATUS SEE AUDITOR'S COMMENTS FS-7071-05-01 Further Action Not Warranted FS-7071-06-01 Further Action Not Warranted (1) AUDITOR'S COMMENTS (1) Findings/internal control deficiencies ofthis nature, that are not deemed significant deficiencies or material weaknesses and do not require reporting in the audit report in accordance with Statements on Auditing Standards (SAS) 112 or Governmental Auditing Standards (Yellow Book), will be communicated in a management letter in subsequent periods. PRIOR YEAR FEDERAL AWARD FINDINGS AND QUESTIONED COSTS FINDING CONTROL NUMBER AUDITEE'S RESPONSE/STATUS FA-7071-06-01 Previously Reported Corrective Action Implemented SECTION IV FINDINGS AND QUESTIONED COSTS NEWTON 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 Newton 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 Newton County Board of Education did not disclose any significant deficiencies related to the financial statements. 3. Noncompliance Material to the Financial Statements The audit of the Newton 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 Newton 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 Newton 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 Newton County Board ofEducation's audit did not disclose audit findings required to be reported by section .510(a) ofOMB Circular A-133. 7. Major Programs Federal awards audited as major programs are as follows: 10.553 Food Services - School Breakfast Program 10.555 Food Services - National School Lunch Program 8. Type "A" Program Dollar Threshold The dollar threshold for type "A" programs was $480,809. 9. Low Risk Auditee The Newton County Board of Education qualified as a low risk auditee as defined by Section .530 ofOMB Circular A-133. II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS No matters were reported. - 1- NEWTON 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 -