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

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

OCONEE 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

9

H

NOTES TO THE BASIC FINANCIAL STATEMENTS

10

SCHEDULES

REQUIRED SUPPLEMENTARY INFORMATION

1 SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES

IN FUND BALANCES - BUDGET AND ACTUAL

GENERAL FUND

25

OCONEE COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS -

SECTION I

FINANCIAL

SCHEDULES

SUPPLEMENTARY INFORMATION

2 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS

26

3 SCHEDULE OF STATE REVENUE

28

4 SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS

29

5 ALLOTMENTS AND EXPENDITURES

GENERAL FUND - QUALITY BASIC EDUCATION PROGRAMS (QBE)

BY PROGRAM

31

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

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

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

OCONEE COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS -
SECTION V 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, 2007

Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the Oconee 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 of the governmental activities, each major fund, and the aggregate remaining fund information (Exhibits A through H) of the Oconee County Board of Education, as of and for the year ended June 30, 2006, which collectively comprise the Board's basic financial statements as listed in the table of contents. These financial statements are the responsibility ofthe Oconee 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 ofmaterial misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opm10ns.
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 Oconee County Board of Education, as of June 30, 2006, and the respective changes in financial position thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America.
2006ARL-l 1

In accordance with Government Auditing Standards, we have also issued our report dated January 29, 2007, on our consideration of the Oconee County Board of Education's internal control over financial reporting and our tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements and other matters. The purpose ofthat report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit.
Management's Discussion and Analysis and the Schedule ofRevenues, Expenditures and Changes in Fund Balances - Budget and Actual, as presented on pages i through x and page 25 respectively, are not a required part of the 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 Oconee 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,
~ CfJ_~~~
Russell W. Hinton, CPA, CGFM State Auditor
RWH:as 2006ARL-11

OCONEE COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2006
INTRODUCTION
This discussion and analysis of the Oconee County Board of Education's financial performance provides an overview of the School District's financial activities for the fiscal year ended June 30, 2006. The intent of the discussion and analysis is to look at the School District's financial performance as a whole; readers should also review the notes to the basic financial statements and financial statements to enhance their understanding of the School District's financial performance.
FINANCIAL HIGHLIGHTS
Key financial highlights for fiscal year 2006 are as follows:
On the District-wide financial statements, the assets of the School District exceeded liabilities by $61.1 million. Ofthis amount, $4.2 million is unrestricted and is available for spending at the School District's discretion which traditionally has been targeted toward the payment ofsalaries, benefits, and operational costs until the next year's local tax revenues are received.
The School District had $51.3 million in expenses relating to governmental activities; only $28.9 million ofthese expenses were offset by program specific charges for services, grants and contributions. However, general revenues (primarily property and sales taxes) ofalmost $28.1 million were more than adequate to provide for these programs.
As stated above, General Revenues accounted almost $28.1 million or about 49% ofall revenues totaling $57 million. Program specific revenues in the form of charges for services, grants and contributions accountedfor the rest.
The School District passed a third SPLOST referendum in July 2006 which is expected to raise more than $30 million over the next five years for constructing educational facilities.
OVERVIEW OF THE FINANCIAL STATEMENTS
This annual report consists of three parts; management's discussion and analysis (this section), the basic financial statements and required supplementary information. The basic financial statements include two levels of statements that present different views of the School District. These include the District-wide and fund financial statements.
The District-wide financial statements include the 'Statement of Net Assets' and 'Statement of Activities'. These statements provide information about the activities of the School District presenting both short-term and long-term information about the School District's overall financial status.
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OCONEE COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2006
The fund financial statements focus on individual parts of the School District, reporting the School District's operation in more detail. The 'Governmental Funds' statements disclose how basic services are financed in the short-term as well as what remains for future spending. The 'Fiduciary Funds' statements provide information about the financial relationships in which the School District acts solely as a trustee or agent for the benefit of others. In the case of the Oconee County Board of Education, the General Fund, Capital Projects Funds, and Debt Service Funds are all considered to be major funds. The School District has no nonmajor funds as defined by GASB Statement 34 for the purposes of this report.
The financial statements also include notes that explain some of the information in the statements and provide more detailed data. The statements are followed by a section of required supplementary information that further explains and supports the financial statements. Additionally, other supplementary information (not required) is also presented that further supplements understanding of the financial statements.
District-wide Statements
Since the Oconee County Board of Education has no operations that have been classified as "Business Activities", the District-wide financial statements are basically a consolidation of all of the School District's operating funds into one column called governmental activities. In reviewing the District-wide financial statements, a reader might ask the question, are we in a better financial position now than last year? The 'Statement of Net Assets' and the 'Statement of Activities' provides the basis for answering this question. These financial statements include all School District's assets and liabilities and uses the accrual basis of accounting similar to the accounting used by most private-sector companies. This basis of accounting takes into account all of the current year's revenues and expenses regardless of when cash is received or paid.
These two statements report the School District's net assets and any changes in those assets. The change in net assets is important because it tells the reader that, for the School District as a whole, the financial position of the School District has improved or diminished. The causes of this change may be the results of many factors, including those not under the School District's control, such as the property tax base, facility conditions, required educational programs, student-teacher ratios, and other factors.
The 'Statement of Net Assets' and the 'Statement of Activities' reflects 100% of the School District's governmental activities.
Fund Financial Statements
The School District uses many funds or sub-funds to account for a multitude of financial transactions during the fiscal year. The fund financial statements presented in this report provide detail information about the School District's significant or major funds. As discussed previously, the School District has no nonmajor funds as defined by GASB Statement 34.
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OCONEE COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2006
Governmental Funds - Most of the School District's activities are reported in governmental funds, which focus on how money flows into and out of those funds and the balances left at yearend available for spending in future periods. These funds are reported using the modified accrual method of accounting which measures cash and all other financial assets that can be readily be converted to cash. The governmental fund statements provide a detailed short-term view of the School District's general government operations and the basic services it provides. Governmental fund information helps determine whether there are more or fewer financial resources that can be spent in the near future to finance educational programs. The differences between government activities (reported in the Statement of Net Assets and the Statement of Activities) and governmental funds are reconciled in the financial statements.
Fiduciary Funds - The School District is the trustee, or fiduciary, for assets that belong to others and school clubs and organizations within the principals' accounts. The School District is responsible for ensuring that the assets reported in these funds are used only for their intended purposes and by those to whom the assets belong. The School District excludes these activities from the District-wide financial statements because it cannot use these assets to finance its operations.
FINANCIAL ANALYSIS OF THE SCHOOL DISTRICT AS A WHOLE
Recall that the Statement of Net Assets provides the perspective of the School District as a whole. The reader can think of the School District's net assets as the difference between its assets (i.e., what the School District owns) and its liabilities (i.e., what the School District owes) at the end of a fiscal year. This balance represents one way to measure the School District's financial health or its financial position. In the case of the Oconee County Board of Education, assets exceeded liabilities by $61.1 million at June 30, 2006.
To better understand the School District's actual financial position and ability to deliver services in future periods, the reader will need to review the various components of the net asset category. For example, of the $61.1 million of net assets, $4.4 million was restricted for continuation of Federal programs, debt service, and completion of ongoing capital projects. Accordingly, these funds were not available to meet the School District's ongoing obligations to citizens and creditors.
In addition, the School District had $52.5 million (net of related debt) invested in capital assets (e.g., land, buildings, and equipment). The School District uses these capital assets to provide educational services to students within geographic boundaries served by the School District. Because of the very nature and on-going use of the assets being reported in this component of net assets, it must be recognized that this portion of the net assets is not available for future spending.
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OCONEE COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2006

The remaining balance of unrestricted net assets of $4.2 million may be used to meet the School District's ongoing obligations to citizens and creditors. The funds are used to meet payroll and operational costs through the month of September; after which, local tax revenues are received and permit the infusion of cash necessary to operate the school system. Table 1 provides a summary of the School District's net assets for the current fiscal year and for prior fiscal year 2005.

Table 1 Net Assets

Governmental Activities

Fiscal

Fiscal

Net

Year 2006

Year 2005

Change

Assets Current and Other Assets Capital Assets, Net

$ 14,502,235 $ 12,337,307 $ 2,164,928

69,310,411 68,811,360

499,051

Total Assets

$ 83,812,646 $ 81,148,667 $ 2,663,979

Liabilities Current and Other Liabilities Long-Term Liabilities

$ 5,706,600 $ 5,014,167 $ 692,433 16,957,837 20,709,761 -3,751,924

Total Liabilities

$ 22,664,437 $ 25,723,928 $ -3,059,491

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

$ 52,545,755 $ 48,294,780 $ 4,250,975

4,406,125

3,071,421

1,334,704

4,196,329

4,058,538

137,791

Total Net Assets

$ 61,148.209 $ 55,424.739 $ 5,723.470

Table 2 shows categorical Changes in Net Assets for the current fiscal year and for prior fiscal year 2005.

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

Table 2 Change in Net Assets

Revenues Program Revenues: Charges for Services and Sales Operating Grants and Contributions
Capital Grants and Contributions

Governmental Activities

Fiscal

Fiscal

Year 2006

Year 2005

$ 1,962,818 26,893,706 117,102

$ 2,381,409 25,563,221 821,023

Total Program Revenues

$ 28,973,626 $ 28,765,653

General Revenues:

Taxes

Property Taxes

For Maintenance and Operations

$

For Debt Service

Railroad Cars

Sales Taxes

Special Purpose Local Option Sales Tax

For Debt Service

For Capital Projects

Intangible Recording Tax and

Real Estate Transfer

Grants and Contributions not Restricted to

Specific Programs

Investment Earnings

Miscellaneous

Special Item

Gain on Sale of Land

17,736,149 1,631,170
3,431,150 1,866,892
846,230
936,349 417,728 1,220,991
10 000

$ 15,797,357 1,661,782 5,812
2,370,293 2,076,419
680,719
938,300 244,906 814,724

Total General Revenues and Special Item

$ 28,096,659 $ 24,590,312

Total Revenues

$ 57,070,285 $ 53,355,965

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

$ 33,633,772
1,049,685 865,704
1,099,115 1,130,504 3,701,946
189,294 3,853,914 2,093,840
22,847 191,460
732,661 2,209,821
572,252

$ 31,183,047
948,897 843,429 926,313 1,127,892 3,106,625 862,932 3,006,386 1,630,216
1,568 146,278
596,442 1,939,167
828,564

Total Expenses

$ 51,346,815 $ 47,147,756

Increase in Net Assets

$ 5,723,470 $ 6,208,209

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

Governmental Activities

The Statement of Activities shows the cost of program services and the charges for services and grants offsetting these services. Table 3 shows, for governmental activities, the total cost of services and the net cost of services. Data are presented for the current fiscal year and for prior fiscal year 2005. Net cost of services can be defined as the total cost less fees generated by the activities and intergovernmental revenue provided for specific programs. The net costs reflect the financial burden on the School District's taxpayers by each activity. Local taxpayers' burden increased from 39% of the total budget in 2005 to 43.7% for 2006.

Table 3 Governmental Activities

Total Cost of Services

Fiscal

Fiscal

Year 2006 Year 2005

Net Cost of Services

Fiscal

Fiscal

Year 2006 Year 2005

Instruction

$ 33,633,772 $ 31,183,047 $ 13,161,419 $ 10,899,522

Support Services

Pupil Services

1,049,685

948,897

822,914

783,363

Improvement of Instructional Services

865,704

843,429

521,937

493,003

Educational Media Services

1,099,115

926,313

535,922

395,910

General Administration

1,130,504 1,127,892

336,290

382,661

School Administration

3,701,946 3,106,625 2,451,070 1,918,963

Business Administration

189,294

862,932

189,294

862,932

Maintenance and Operation of Plant

3,853,914 3,006,386 2,334,308 1,507,361

Student Transportation Services

2,093,840 1,630,216 1,041,980

718,906

Central Support Services

22,847

1,568

22,847

166

Other Support Services

191,460

146,278

123,761

128,163

Operations ofNon-Instructional Services

Enterprise Operations

732,661

596,442

-22,308 -602,840

Food Services

2,209,821 1,939,167

281,503

65,429

Interest on Short-Term and Long-Term Debt

572,252

828,564

572,252

828,564

Total Expenses

$ 51,346,815 $ 47 147 756 $ 22,373,189 $ 18,382.103

FINANCIAL ANALYSIS OF THE SCHOOL DISTRICT'S FUNDS

The School District's governmental funds are accounted for using the modified accrual basis of accounting. The governmental funds had total revenues and other financing sources of $58.0 million and total expenditures of $55.9 million. Included in the expenditures and other financing uses of $56.4 million were capital outlay expenditures of $1.9 million which do not constitute recurring expenditures.

General Fund Budget Highlights

The School District's budget is prepared according to Georgia Law. The most significant budgeted fund is the General Fund.

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

During the course of fiscal year 2006, the School District amended its general fund budget as needed. The School District uses site-based budgeting as a part of the budget process. The budgeting systems are designed to control total site budgets but provide flexibility for site management.

For the General Fund, the final actual revenues of $50 million exceeded the final budgeted amounts of $46.4 million, a difference of $3.6 million or about 7%. This major portion of the difference demonstrates that the School District underestimated its final revenues which are primarily the result of property exchanges that occurred due to the population increase of the county. The remaining portion is the result of across-the-board savings in programs from budgets not being completely spent.

The final actual expenditures of $49.6 million exceeded the final budgeted amount of $47 million by $2.6 million. This difference (final actual vs. final budget) was due primarily to expenditures for expenses within the area of direct instructional services.

CAPITAL ASSETS AND DEBT ADMINISTRATION

Capital Assets

At June 30, 2006, the School District had $69.3 million invested in capital assets, including land, buildings and furniture and equipment for its governmental activities. Table 4 reflects a summary of these balances net of accumulated depreciation for the current year and for the prior year of fiscal year 2005. Oconee County School District began the construction of a music suite (band and chorus rooms) at Oconee Middle School and other small projects at various schools in 2006. The changes in capital assets are due primarily to those events.

Table 4 Capital Assets (Net of Depreciation)

Governmental Activities

Fiscal

Fiscal

Year 2006

Year 2005

Land Construction in Progress Land Improvements Buildings Equipment

$ 1,912,556 1,186,498 4,550,565
58,695,704 2,965,088

$ 1,912,556 674,388
4,622,810 58,598,423 3,003,183

Total

$ 69,310,411 $ 68!811!360

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

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

Debt

At June 30, 2006, the School District had $16.9 million in debt outstanding. This debt is the result of Capital Lease agreements to acquire assets to which the School District is a party and General Obligation Bonds (repaid through a property tax levy) sold by the School District in 1993 and 1995 for the purpose of the acquisition, construction, equipping, renovating, and repairing of school facilities. Regarding this specific General Obligation Debt, the Oconee County Board of Education refinanced both of these series in December of 2004 (replaced the 1995 series) and in January of 2005 (replaced the 1993A series) saving the local tax payers over $400,000.

In early spring of 2003, Oconee County School District, along with assistance from the Georgia General Assembly, created the Oconee County Public Facilities Authority and sold $8,000,000 in Revenue bonds (repaid with SPLOST proceeds) for the purpose of the construction and equipping of North Oconee High School and, if funds were still available, constructing and repairing other school facilities. The debt for these bonds will be serviced by April 2008.

In November 2006, Moody's Investors Service, Inc. and Standard and Poor's Ratings Services have assigned underlying bond ratings to the School District of "Aa2" and "AA+", respectively. Part of the basis for the ratings is the inclusion of the bond indebtedness in the State Aid Intercept Program. Table 5 summarizes the School District's debt.

Table 5 Debt at June 30

Governmental Activities

Fiscal

Fiscal

Year 2006

Year 2005

Capital Leases General Obligation Bonds Revenue Bonds

$ 562,837 13,395,000 3,000,000

$ 409,761 14,800,000 5,500,000

Total

$ 16,957,837 $ 20,709,761

Additional Information can be found on the School District's Debt obligations in the Notes to the Basic Financial Statements.

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OCONEE COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2006
CURRENT ISSUES
Currently known facts, decisions or conditions that are expected to have a significant effect on financial positions or results of operations in future years are as follows:
o State Revenue - New state revenue growth may not be sufficient to overcome major weaknesses in the state education budget. For example:
o The austerity reductions that were imposed in fiscal year 2002 were only partially restored for fiscal year 2007. The partial restoration (formula adjustment) came at the same time the General Assembly passed a 4% raise for certified employees, bus drivers and food service workers, an increase in the employer's portion of health insurance premiums, and mandated lower ofclass sizes in grades K-8.
o Capital Improvements - The School District plans capital improvements as future capital needs arise due to increased student population and facility repair and maintenance needs. Specific capital expenditure plans are formalized in conjunction with individual general obligation bond issues, education local option sales taxes and anticipated annual receipts ofcapital outlay funds from the State of Georgia Department ofEducation. The School District regularly monitors anticipated capital outlay needs.
o Long-Term Debt - The citizens of Oconee County approved the extension of the School District's education local option sales tax to fund future educational facilities. The referendum permits the School District to sell up to $24 million in bonds to forward fund construction projects. The School District expects to close on the sale of those bonds in December 2006. SPLOST revenues will service the debt by April 2013.
o Oconee County School Districts' academic strength continues to fuel the residential and economic growth ofthe county. New residents move into the county because ofthe public school system's focus on quality instructional programs. As a result, commercial development has increased to provide services to the increased population ofthe county.
Increases in the property digest (averages of 12.26% each year for the past three years) may be sufficient to meet the increased demand for public education services without the need to increase property taxes.
Despite these challenges, the Oconee County Board of Education is strong financially and we remain optimistic about the ability of the School District to maximize all of the financial resources to provide a quality education to our students. However, the School District is maintaining a very active process of monitoring departments and programs for efficiency and to evaluate areas to increase services without additional personnel or operational costs. Raising local property taxes may be needed to off-set state revenue short falls but is not the only strategy being evaluated.
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OCONEE COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2006 CONTACTING THE SCHOOL DISTRICT'S FINANCIAL MANAGEMENT This financial report is designed to provide our citizen's taxpayers, investors and creditors with a general overview of the School District's finances and to show the School District's accountability for the money it receives. If you have questions about this report or need additional financial information contact Mr. Randy Morrison, Assistant Superintendent for Financial Operations, Oconee County Board of Education, Post Office Box 146, 34-B School Street, Watkinsville, Georgia 30677. You may also email your questions to Mr. Morrison at rmorrison@oconee.k 12 .ga.us.
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OCONEE COUNTY BOARD OF EDUCATION

OCONEE COUNTY BOARD OF EDUCATION STATEMENT OF NET ASSETS JUNE 30, 2006
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 Payable Contracts Payable Deposits and Deferred Revenues Long-Term Liabilities
Due Within One Year Due in More Than One Year
Total Liabilities
NET ASSETS
Invested in Capital Assets, Net of Related Debt Restricted for
Continuation of Federal Programs Debt Service Capital Projects Unrestricted
Total Net Assets
Total Liabilities and Net Assets

EXHIBIT"A"

GOVERNMENTAL ACTIVITIES

$

9,183,177

500,000

1,170,096 3,350,831
191,503 11,052 95,576

1,912,556 1,186,498 5,057,167 66,989,351 5,385,940 -11 221 101

$ ===8=3=,8=1=2=,6=46==

$

1,241,519

4,355,926

107,025

2,130

3,076,293 13 881 544

$

22 664 437

$

52,545,755

304,977 2,983,484 1,117,664 4 196 329

$

61,148,209

$ ===8=3=,8=1=2=,6=46==

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

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

GOVERNMENTAL ACTIVITIES
Instruction Support Services
Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Operations of Non-Instructional Services Enterprise Operations 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 Sales Taxes Special Purpose Local Option Sales Tax For Debt Services For Capital Projects Intangible Recording Tax Grants and Contributions not Restricted to Specific Programs Investment Earnings Miscellaneous
Special Item Gain on Sale of Land
Total General Revenues and Special Item
Change in Net Assets
Net Assets - Beginning of Year
Net Assets - End of Year

EXPENSES

CHARGES FOR SERVICES

$

33,633,772 $

1,049,685 865,704
1,099,115 1,130,504 3,701,946
189,294 3,853,914 2,093,840
22,847 191,460

732,661 2,209,821
572,252

$

51,346,815 $

32,876
754,969 1,174,973 1,962,818

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

$

20,439,477

226,771 343,767 563,193 794,214 1,250,876

1,519,606
934,758 $

67,699

753,345

$

26 893 706 $

$
117,102
117 102 $

-13,161,419
-822,914 -521,937 -535,922 -336,290 -2,451,070 -189,294 -2,334,308 -1,041,980
-22,847 -123,761
22,308 -281,503 -572 252
-22,373, 189

$

17,736,149

1,631,170

3,431,150 1,866,892
846,230 936,349 417,728 1,220,991

10 000

$

28 096 659

$

5,723,470

55 424 739

$ ===61=,1=4=8'=2=09==

-3-

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

EXHIBIT"C"

GENERAL FUND

DISTRICTWIDE
CAPITAL PROJECTS
FUND

DEBT SERVICE
FUND

TOTAL

Cash and Cash Equivalents Investments Accounts Receivable, Net
Taxes State Government Federal Government Other Inventories

$ 5,917,717 $ 1,749,259 $ 1,516,201 $ 500,000

691,764 3,350,831
191,503 11,052 95 576

1,010,844

9,183,177 500,000
1,702,608 3,350,831
191,503 11,052 95 576

Total Assets

$ 10,258,443 $ 1,749,259 $

3,027,045 $ ====a::;15;;i;0=3~4~7=47=

LIABILITIES AND FUND BALANCES
LIABILITIES
Accounts Payable Salaries Payable Contracts Payable Deposits and Deferred Revenue
Total Liabilities
FUND BALANCES
Reserved for: Continuation of Federal Programs Debt Service Inventories Capital Projects
Unreserved Undesignated Reported in: General Fund Capital Projects
Total Fund Balances

$ 1,231,275 $

10,244

$

4,355,926

107,025

2 130

$ 5,589,331 $

117 269

$

$

209,401

$

$ 3,027,045

95,576

$ 1,117,664

4,364,135

514,326

$ 4,669,112 $ 1,631,990 $ 3,027,045 $

1,241,519 4,355,926
107,025 2130
5 706 600
209,401 3,027,045
95,576 1,117,664
4,364,135 514 326
9 328147

Total Liabilities and Fund Balances

$ 10,258,443 $ 1,749,259 $

3,027,045 $ ====a::;15;;i;0=3~4~74=7=

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

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

EXHIBIT "D"

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

$

9,328,147

$

1,912,556

1,186,498

5,057,167

66,989,351

5,385,940

-11 221101

69,310,411

-532,512

$ -16,395,000 -562 837

-16957837

$ 61,148,209

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

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

EXHIBIT "E"

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

GENERAL FUND

DISTRICTWIDE
CAPITAL PROJECTS
FUND

DEBT SERVICE
FUND

TOTAL

$ 17,872,662 771,997 $
25,450,386 2,496,771 1,962,818 289,752 1 217 490

$ 1,866,892
53,089 9 536

1,639,178 $ 3,505,383
74,887

$ 50 061 876 $ 1 929 517 $ 5 219 448 $

19,511,840 6,144,272
25,450,386 2,496,771 1,962,818 417.728 1 227 026
57210841

$ 32,371,735

$ 32,371,735

1,049,685 865,704
1,086,425 1,130,504 3,679,091
186,119 3,827,729 2,050,035
21,450 191,460 732,661 2,161,781 271,454 $

$ 1,650,641

3,175

1,049,685 865,704
1,086,425 1,130,504 3,679,091
189,294 3,827,729 2,050,035
21,450 191,460 732,661 2,161,781 1,922,095

8,656 1 410

103,734 14 754

3,905,000 556 088

4,017,390 572 252

$ 49 635 899 $ 1 769 129 $ 4 464 263 $ 55 869 291

$

425 977 $

160 388 $

755 185 $

1 341 550

$

265,466

$

550,000

-550 000

$

-284 534 $

550 000

$

265,466

550,000

-550 000

$

265 466

$

10 000

$

151,443 $

4 517 669

$

710,388 $

755,185 $

921 602

2,271,860

10 000 1,617,016 7711131

Fund Balances - Ending

$ 4,669,112 $ 1 631 990 $ 3 027 045 $ ====9=3=28==14=7=

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

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

EXHIBIT"F"

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

$

1,617,016

$

1,913,488

-1,408,402

505,086 -144,521

-6,035

-265,466

$

3,905,000

112,390

4017390

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

$ ====5,!=72=3=,4=7=0

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

(This page left intentionally blank)

OCONEE COUNTY BOARD OF EDUCATION STATEMENT OF FIDUCIARY NET ASSETS
FIDUCIARY FUNDS JUNE 30, 2006
ASSETS Cash and Cash Equivalents
LIABILITIES Funds Held for Others

EXHIBIT"G"
AGENCY FUNDS
$ ==1=9=1,=58=9=
$ ====19=1=,5=89=

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

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

EXHIBIT "H"

Note 1: DESCRIPTION OF SCHOOL DISTRICT AND REPORTING ENTITY
REPORTING ENTITY
The Oconee 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.
Blended Component Unit - Oconee County Public Facilities Authority The Oconee County Public Facilities Authority (the "Authority") was created by House Bill No. 938 during the 2003 session of the Georgia General Assembly. The purpose of the Authority is to provide buildings, facilities, and services for the benefit ofthe Oconee County School District. The Authority consists of five members who are appointed by the Oconee County School District.
The Oconee County Public Facilities Authority is a component unit ofthe Oconee County Board of Education and, as such, the Authority's financial activity has been blended with the Oconee County Board of Education's basic financial statements.
Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The School District's basic financial statements are collectively comprised of the District-wide financial statements, fund financial statements and notes to the basic financial statements of the Oconee 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.

- 10 -

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

EXHIBIT "H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Program revenues include (a) charges paid by the recipients of goods 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 of internal activities. Separate statements for each category (governmental and fiduciary) are presented. The emphasis of fund financial statements is on major governmental funds, each displayed in a separate column.
The School District reports the following major governmental funds:
General Fund is the School District's primary operating fund. It accounts for all financial resources ofthe School District, except those resources required to be accounted for in another fund.
District-wide Capital Projects Fund accounts for financial resources including Special Purpose Local Option Sales Tax (SPLOST) Proceeds to be used for the acquisition, construction or renovation of major 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 type:
Agency funds account for assets held by the School District as an agent for various funds or individuals.
BASIS OF ACCOUNTING
The basis ofaccounting determines when transactions are reported on the financial statements. The District-wide governmental and fiduciary fund financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded at the time liabilities are incurred, regardless of when the related cash flows take place. Nonexchange transactions, in which the School District gives (or receives) value without directly receiving (or giving) equal value in exchange, include property taxes, sales taxes, grants and donations. On an accrual basis, revenue from property taxes is recognized in the fiscal year for which the taxes are levied. Revenue from sales taxes is recognized in the fiscal year in which the underlying transaction (sale) takes place. Revenue from grants and donations is recognized in the fiscal year in which all eligibility requirements have been satisfied.

- 11 -

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

EXHIBIT "H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The School District uses funds to report on its financial position and the results of its operations. Fund accounting is designed to demonstrate legal compliance and to aid financial management by segregating transactions related to certain governmental functions or activities. A fund is a separate accounting entity with a self-balancing set of accounts.
Governmental funds are reported using the current financial resources measurement focus and the modified accrual basis ofaccounting. Under this method, revenues are recognized when measurable and available. The School District considers all revenues reported in the governmental funds to be available if they are collected within sixty days after year-end. Property taxes, sales taxes and interest are considered to be susceptible to accrual. Expenditures are recorded when the related fund liability is incurred, except for principal and interest on general long-term debt, 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. Georgia Laws OCGA 45-8-14 authorize the School District to deposit its funds in one or more solvent banks or insured Federal savings and loan associations.
INVESTMENTS
COMPOSITION OF INVESTMENTS Investments made by the School District in nonparticipating interest-earning contracts (such as certificates ofdeposit) and repurchase agreements are reported at cost. Participating interest-earning contracts and money market investments with a maturity at purchase ofone year or less are reported 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:

- 12 -

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

EXHIBIT "H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(1) Obligations issued by the State of Georgia or by other states,
(2) Obligations issued by the United States government,
(3) Obligations fully insured or guaranteed by the United States government or a United States government agency,
(4) Obligations of any corporation of the United States government,
(5) Prime banker's acceptances,
(6) The Local Government Investment Pool administered by the State of Georgia, Office of Treasury and Fiscal Services,
(7) Repurchase agreements, and
(8) Obligations of other political subdivisions of the State of Georgia.
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 Oconee County Board ofCommissioners fixed the property tax levy for the 2005 tax digest year (calendar year) on July 26, 2005 (levy date). Taxes were due on November 15, 2005 (lien date). Taxes collected within the current fiscal year or within 60 days after year-end on the 2005 tax digest are reported as revenue in the governmental funds for fiscal year 2006. The Oconee County Tax Commissioner bills and collects the property taxes for the School District, withholds 2.5% of taxes collected as a fee for tax collection and remits the balance of taxes collected to the School District. Property tax revenues, at the fund reporting level, during the fiscal year ended June 30, 2006, for maintenance and operations amounted to $17,872,662 and for school bonds amounted to $1,639,178.

- 13 -

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

EXHIBIT "H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Tax millage rates levied for the 2005 tax year (calendar year) for the Oconee County Board of Education were as follows (a mill equals $1 per thousand dollars of assessed value):

School Operations School Bonds

15.50 mills 1.40 mills

16.90 mills

SALES TAXES

Special Purpose Local Option Sales Tax, at the fund reporting level, during the year amounted to $5,298,042 and is to be used for capital outlay for educational purposes or debt service. This sales tax was authorized by local referendum and the sales tax must be re-authorized at least every five years.

INVENTORIES

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

CAPITAL ASSETS

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

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

- 14 -

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

EXHIBIT "H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Capitalization Policy

Estimated Useful Life

Land Land Improvements Buildings and Improvements Equipment

All

NIA

$

25,000

70 years

$

25,000

70 years

$

5,000 5 to 25 years

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

GENERAL OBLIGATION AND REVENUE BONDS

The School District issues general obligation and revenue 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 and revenue 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.

Note 3: DEPOSITS

COLLATERALIZATION OF DEPOSITS Official Code of Georgia Annotated (OCGA) Section 45-8-12 provides that there shall not be on deposit at any time in any depository for a time longer than ten days a sum of money which has not been secured by surety bond, by guarantee of insurance, or by collateral. The aggregate of the 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. If a depository elects the pooled method (OCGA 45-8-13 .1) the aggregate ofthe market value ofthe securities pledged to secure a pool ofpublic funds shall be not less than 110 percent ofthe daily pool balance.

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

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

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

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

- 15 -

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

EXHIBIT "H"

Note 3: DEPOSITS

(4) Bonds, bills, notes, certificates of indebtedness or other obligations of the counties or municipalities of the State of Georgia,

(5) Bonds of any public authority created by the laws of the State of Georgia, providing that the statute that created the authority authorized the use of the bonds for this purpose,

(6) Industrial revenue bonds and bonds of development authorities created by the laws of the State of Georgia, and

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

CATEGORIZATION OF DEPOSITS At June 30, 2006, the bank balances were $11,404,704. The amounts of the total bank balances are classified into four categories of custodial credit risk:

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

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

Custodial Credit Risk Category

Bank Balance

1

$ 200,000

2

11,204,704

3

0

4

0

Total

$ l 1!404!704

- 16 -

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

EXHIBIT "H"

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, 2005

Increases

Decreases

Balances June 30, 2006

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

$ 1,912,556 674 388 $ 1,186,498 $

$ 1,912,556

674 388

1,186,498

Total Capital Assets Not Being Depreciated $ 2,586,944 $ 1,186,498 $ 674 388 $ 3,099,054

Capital Assets Being Depreciated Buildings and Improvements Equipment Land Improvements

$ 65,881,715 $ 5,250,798 5,057,167

1,107,636 293,742 $

$ 66,989,351

158,600

5,385,940

5,057,167

Less Accumulated Depreciation for: Buildings and Improvements Equipment Land Improvements

7,283,292 2,247,615
434 357

1,010,355 325,802 72 245

152,565

8,293,647 2,420,852
506,602

Total Capital Assets, Being Depreciated, Net $ 66,224,416 $

-7 024 $

6 035 $ 66,211,357

Governmental Activity Capital Assets - Net $ 68,811,360 $ 1179474 $ 680 423 $ 69,310,411

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

Governmental Funds

Buildings Less: Accumulated Depreciation

$ 880,176 445 177

$====4-34-9===9==9

- 17 -

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

EXHIBIT "H"

Note 5: CAPITAL ASSETS

Current year depreciation expense by function is as follows:

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

$ 1,091,674

$

9,081

16,355

45,669

210,246

1 000

282,351 34 377

$ 1,408.402

Note 6: RESTRICTED ASSETS

Special Purpose Local Option Sales Tax (SPLOST) and property tax levied specifically for retirement of outstanding 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, 2006, were as follows:

District-wide Capital Projects SPLOST

Debt Service Funds

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

$ 1,516,201 $ 1,152,124
$ 500,000

Note 7: INTERFUND TRANSFERS

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

Transfer to

Transfers From General Fund

District-wide Capital Projects

$===5=5==-0==00==0

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

EXHIBIT "H"

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.

Note 8: RISK MANAGEMENT

The School District is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors or omissions; job related illness or injuries to employees; acts of God and unemployment compensation.

The School District has obtained commercial insurance for risk ofloss associated with torts, assets and errors or omissions. The School District has neither significantly reduced coverage for these risks nor incurred losses (settlements) which exceeded the School District's insurance coverage in any of the past three years.

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

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

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

Beginning of Year Liability

Claims and Changes in Estimates

Claims Paid

End ofYear Liability

2005 2006

$

0 $

9 125 $

8 009 $

1 116

$

1 116 $

318 $

1434 $

0

The School District participates in the Georgia School Boards Association Workers' Compensation Fund, a public entity risk pool organized on July 1, 1992, to develop, implement, and administer a program ofworkers' compensation self-insurance for its member organizations. The School District pays an annual premium to the Fund for its general insurance coverage. Additional insurance coverage is provided through an agreement by the Fund with the Safety National Casualty Corporation to provide coverage for potential losses sustained by the Fund in excess of $400,000 loss per occurrence, up to $1,000,000.

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

- 19 -

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

EXHIBIT "H"

Note 8: RISK MANAGEMENT

Position Covered

Amount

Superintendent

$ 100,000

Note 9: LONG-TERM DEBT

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

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

Purpose

Interest Rates

Amount

General Government - Refunding - Series 2004 General Government - Refunding - Series 2005 Revenue Bonds - Series 2003

3.16% 2.60% 2.45%

$ 9,540,000 3,855,000 3,000,000

$ 16)95,000

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

Balance July I, 2005
Additions Capital Leases
Deductions Debt Retired
Balance June 30, 2006
Portion of Long-Term Debt Due within One Year

Capital Leases

Governmental Funds

General

Obligation

Revenue

Bonds

Bonds

Total

$ 409,761 $ 14,800,000 $ 5,500,000 $ 20,709,761

265,466

265,466

112 390

I 405 000

2 500 000

4 017 390

$ 562 837 $~95,00Q $ 3 000 000 $ 16957837

$ 151 293 $ I 445 000 $ 1 480 000 $ 3 076 293

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

- 20 -

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

EXHIBIT "H"

Note 9: LONG-TERM DEBT

Fiscal Year Ended June 30
2007 2008 2009 2010 2011 2012 - 2014
Total Principal and Interest
Fiscal Year Ended June 30
2007 2008
Total Principal and Interest

Ca11ital Leases

Princi11al

Interest

$ 151,293 $ 153,446 150,01 I 55,358 52,729

20,227 13,903 7,517 3,324
1,063

General Obligation Debt

Princi11al

Interest

$ 1,445,000 $ 1,500,000 1,550,000 1,635,000 1,705,000 5,560,000

382,321 342,846 301,992 255,407 202,635 268,442

$ 562.837 $

46,034 $ 13,395.000 $ 1,753.643

Revenue Bonds

Princi11al

Interest

$ 1,480,000 $ 1,520,000

73,500 37 240

$ 3,000.000 $ 110 740

Note 10: ON-BEHALF PAYMENTS

The School District has recognized revenues and costs in the amount of $818,338 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 $810,647

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 $7,691

Note 11: SIGNIFICANT COMMITMENTS

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

- 21 -

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

EXHIBIT "H"

Note 11: SIGNIFICANT COMMITMENTS

Project

Unearned Executed Contracts

North Oconee High School Stadium Oconee County Middle School Music Suite

$ 395,675 65,611

$====4==61-,2==8===6 The amounts described in this note are not reflected in the basic financial statements.

Note 12: SIGNIFICANT CONTINGENT LIABILITIES

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

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

Note 13: SUBSEQUENT EVENTS

In the subsequent fiscal year, on July 18, 2006, voters ofOconee County authorized the continuance ofa one percent sales tax (SPLOST) to raise no more than $38,000,000 for the purpose ofproviding funds to pay the costs of acquiring real property (improved or unimproved) for future school sites; acquiring, constructing and equipping a new elementary school; adding to, renovating, repairing, improving and equipping existing educational buildings, properties and facilities ofthe infrastructure and equipment; and to the extent there are additional funds available, constructing additional new schools and administrative facilities and paying expenses incident thereto (including the payment of any capitalized interest). In conjunction with the continuing ofthis one percent sales tax, the voters authorized the School District to issue general obligation debt in the amount of $24,000,000 for the above purpose.

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

- 22 -

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

EXHIBIT "H"

Note 14: RETIREMENT PLANS

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 9.24% and employer contributions for the current fiscal year and the preceding two fiscal years are as follows:

Fiscal Year

Percentage Contributed

Required Contribution

2006 2005 2004

100% 100% 100%

$ 2,649,336 $ 2,452,546 $ 2,325,159

- 23 -

(This page left intentionally blank)

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

SCHEDULE "1"

REVENUES
Property Taxes Sales Taxes State Funds Federal Funds Charges for Services Investment Earnings Miscellaneous
Total Revenues
EXPENDITURES
Current Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Enterprise Operations Food Services Operation
Capital Outlay Debt Service
Total Expenditures
Excess of Revenues over (under) Expenditures
OTHER FINANCING SOURCES {USES)
Other Sources Other Uses
Total Other Financing Sources (Uses)
SPECIAL ITEM
Proceeds from Sale of Land
Net Change in Fund Balances
Fund Balances - Beginning

NONAPPROPRIATED BUDGETS

ORIGINAL

FINAL

ACTUAL AMOUNTS

$

17,569,989 $

17,569,989 $

17,872,662

650,000

650,000

771,997

24,181,679

24,221,633

25,450,386

2,351,733

2,477,840

2,496,771

1,344,094

1,344,094

1,962,818

56,800

56,800

289,752

48 500

48500

1 217 490

$

46,202,795 $

46,368,856 $

50,061,876

$

31,619,160 $

31,861,822 $

32,371,735

1,161,990 822,863 995,534
1,124,397 3,168,290
200,072 3,590,746 1,895,550
108,632 113,373
16,800 2,086,599

1,187,419 690,516 983,674
1,130,910 3,170,096
200,072 3,590,946 1,900,550
108,632 113,373
16,800 2,086,599

1,049,685 865,704
1,086,425 1,130,504 3,679,091
186,119 3,827,729 2,050,035
21,450 191,460 732,661 2,161,781 271,454
10 066

$

46,904,006 $

47 041 409 $

49,635,899

$

-701 211 $

-672 553 $

425 977

$

265,466

$

-300 000 $

-300 000

-550 000

$

-300 000 $

-300 000 $

-284 534

$

-1,001,211 $

5 892 745

$ -972,553 $ 4 238 876

10000 151,443 4 517 669

Fund Balances - Ending

$

4 891 534 $

3,266,323 $

4669112

Notes to the Schedule of Revenues, Ex1:1enditures and Changes in Fund Balances Budget and Actual
The accompanying schedule of revenues, expenditures and changes in fund balances budget and actual is presented on the modified accrual basis of accounting which is the basis of accounting used in the presentation of the fund financial statements.

See notes to the basic financial statements.

- 25 -

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

SCHEDULE "2"

FUNDING AGENCY PROGRAM/GRANT
Agriculture, U. S. Department of Child Nutrition Cluster Pass-Through From Georgia Department of Education Food Services School Breakfast Program National School Lunch Program
Total Child Nutrition Cluster
Other Programs Pass-Through From Georgia Department of Education Food Donation (1)
Total U. S. Department of Agriculture
Corporation for National and Community Service Pass-Through From Georgia Department of Education Learn and Serve America School and Community Based Programs
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 Hurricane Education Recovery Improving Teacher Quality 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
Total Federal Financial Assistance
N/A = Not Available

CFDA NUMBER

PASSTHROUGH
ENTITY ID
NUMBER

EXPENDITURES IN PERIOD

10.553 10.555

N/A

N/A

$

$

(2) 1 882 000
1,882,000

10.550

N/A
$

71 608 1 953 608

94.004

N/A

$

1 689

84.027 84.173

N/A

$

NIA

$

1,052,616 36 898
1,089,514

84.365 84.318 84.938 84.367 84.186 84.298 84.010 84.048

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

10,848 8,492
(3) 166,189 27,758 14,494 422,570 41 725
1 781 590

$ ====3,=73=6=8=8=7

- 26 -

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

SCHEDULE "2"

Notes to the Schedule of Expenditures of Federal Awards
(1) The amount shown for the Food Donation Program represents the Federally assigned value of nonmonetary assistance for donated commodities received and/or consumed by the School District during the current fiscal year.
(2) Expenditures for the funds earned on the School Breakfast Program ($79,923) were not maintained separately and are included in the 2006 National School Lunch Program.
(3) Funds earned on the Hurricane Education Recovery program, in the amount of $85,655, do not require reporting of expenditures.
Major Programs are identified by an asterisk (*) in front of the CFDA number.
The School District did not provide Federal Assistance to any Subrecipient.
The accompanying schedule of expenditures of Federal awards includes the Federal grant activity of the Oconee 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.

- 27 -

OCONEE COUNTY BOARD OF EDUCATION SCHEDULE OF STATE REVENUE YEAR ENDED JUNE 30, 2006
AGENCY/FUNDING
GRANTS Education, Georgia Department of Quality Basic Education Direct Instructional Cost Kindergarten Program Kindergarten Program - Early Intervention Program Primary Grades (1-3) Program Primary Grades - Early Intervention (1-3) Program Upper Elementary Grades (4-5) Program Upper Elementary Grades - Early Intervention (4-5) Program Middle School (6-8) Program High School General Education (9-12) Program Vocational Laboratory (9-12) Program Students with Disabilities Category I Category II Category Ill Category IV Category V Gifted Student - Category VI Remedial Education Program Alternative Education Program English Speakers of Other Languages (ESOL) Media Center Program 20 Days Additional Instruction Staff and Professional Development Indirect Cost Central Administration School Administration Facility Maintenance and Operations Categorical Grants Pupil Transportation Regular Bus Replacement Sparsity Nursing Services Principal Supplements Education Equalization Funding Grant Food Services Vocational Education Austerity Reduction Other State Programs Health Insurance National Teacher Certification Preschool Handicapped Program Statewide K-8 Reading and Mathematics Program Virtual Schools State Grant
Office of Treasury and Fiscal Services Public School Employees Retirement

See notes to the basic financial statements.

- 28 -

SCHEDULE "3"

GOVERNMENTAL FUND TYPE GENERAL FUND

$

1,697,385

35,586

3,866,139

236,282

1,842,736

181,211

3,710,249

3,440,019

1,053,152

79,414 156,335 1,326,744 394,086 282,143 1,225,306
13,625 303,278
96,060 561,099 184,551 104,409

785,509 1,225,098 1,519,606

748,056 117,102
20,000 122,396
19,964 118,011 125,508
44,550 -1,289,994
810,647 158,395
54,769 72,869
400

7 691

$ ===2=5=,4=5=0=,3=86=

OCONEE COUNTY BOARD OF EDUCATION SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS
YEAR ENDED JUNE 30, 2006

SCHEDULE "4"

PROJECT
For the retirement of a portion of the School District's previously issued Series 1993A general obligation bond debt for the years 2004, 2005, 2006, 2007 and 2008, in the amount of $1,000,000, representing a portion of the principal and interest due thereon during such years
Providing funds to pay a portion of the costs of constructing and equipping a second high school in the School District and to the extent there are sufficient funds available, to provide funds for the costs of constructing new educational facilities and adding to, modifying, renovating, repairing, improving and equipping existing educational buildings, properties and facilities of the School District, including the acquisition of any necessary real property, making system-wide technology improvements, and paying expenses incident to any of the foregoing

ORIGINAL ESTIMATED
COST (1)

CURRENT ESTIMATED COSTS (2)

AMOUNT EXPENDED IN CURRENT YEAR (3) (4)

AMOUNT EXPENDED
IN PRIOR YEARS (3) (4)

PROJECT STATUS

$ 1,000,000 $ 1,000,000 $

900,000 $

100,000 Completed

24,000,000

24,000,000

1,187,879

22,269,852 Ongoing

$ 25,000,000 $ 25,000,000 $ 2,087,879 $ 22,369,852

(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 Oconee 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.

(4) In addition to the expenditures shown above, the School District has incurred interest to provide advance funding for the above projects as follows:

Prior Years

$

297,267

Current Year

134,750

Total

$ ==4=3=2=,0=17=

See notes to the basic financial statements.

- 29 -

(This page left intentionally blank)

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

SCHEDULE "5"

DESCRIPTION

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

ELIGIBLE QBE PROGRAM COSTS

SALARIES

OPERATIONS

TOTAL

Direct Instructional Programs

Kindergarten Program

$

Kindergarten Program-Early Intervention Program

Primary Grades (1-3) Program

Primary Grades-Early Intervention (1-3) Program

Upper Elementary Grades-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)

2,009,850 $ 44,377
4,549,846 273,296
208,775 2,189,259 4,412,485 4,034,731 1,245,546 2,633,291
1,463,290 16,196
358,258 111 373

2,046,062 $ 179,256
4,987,876 439,805
255,762 3,105,005 5,111,464 6,353,066
947,719
136,032 304,305 1,409,384 181,606 160,764 945,449
32,949 258,984
91 453

46,375 $
178,229 1,799
1,240 110,435 282,507 583,571 102,406
3,121 1,062 15,128 6,979
12,735 241
34,222 206

2,092,437 179,256
5,166,105 441,604
257,002 3,215,440 5,393,971 6,936,637 1,050,125
139,153 305,367 1,424,512 188,585 160,764 958,184
33,190 293,206
91 659

TOTAL DIRECT INSTRUCTIONAL PROGRAMS

$

23,550,573 $ 26,946,941 $

1,380,256 $

28,327,197

Media Center Program Staff and Professional Development

663,587 124 570

825,079 37 818

146,527 62 117

971,606 99 935

TOTAL QBE FORMULA FUNDS

$

24,338,730 $ 27,809,838 $

1,588,900 $==~2~9,,;;;39~8;,g,7~3,;;;.8

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

See notes to the basic financial statements.

- 31 -

SECTION II COMPLIANCE AND INTERNAL CONTROL REPORTS

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

DEPARTMENT OF AUDITS AND ACCOUNTS
270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400
January 29, 2007

Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the Oconee 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 Oconee County Board of Education as of and for the year ended June 30, 2006, which collectively comprise Oconee County Board of Education's basic financial statements and have issued our report thereon dated January 29, 2007. 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 Oconee County Board of Education's internal control over financial reporting in order to determine our auditing procedures for the purpose of expressing our opinions on the financial statements and not to provide an opinion on the internal control over financial reporting. However, we noted a certain matter involving the internal control over financial reporting and its operation that we consider to be a reportable condition. Reportable conditions involve matters coming to our attention relating to significant deficiencies in the design or operation of the internal control over financial reporting that, in our judgment, could adversely affect Oconee County Board of Education's ability to record, process, summarize and report financial data consistent with assertions of management in the financial statements. The reportable condition is described in the accompanying Schedule ofFindings and Questioned Costs as item FS7081-06-01.
2006YB-30

A material weakness is a reportable condition in which the design or operation ofone or more ofthe internal control components does not reduce to a relatively low level the risk that misstatements caused by error or fraud in amounts that would be material in relation to the financial statements being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. Our consideration of the internal control over financial reporting would not necessarily disclose all matters in the internal control that might be reportable conditions and, accordingly, would not necessarily disclose all reportable conditions that are also considered to be material weaknesses. However, we believe the reportable condition described above is not a material weakness.
Compliance and Other Matters
As part of obtaining reasonable assurance about whether Oconee County Board of Education's financial statements are free of material misstatement, we performed tests of its compliance with certain provisions oflaws, regulations, contracts and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards.
This report is intended solely for the information and use of the management and members of the Oconee County Board of Education and is not intended to be and should not be used by anyone other than these specified parties.
Respectfully submitted,
<.0.~_j~ \___
Russell W. Hinton, CPA, CGFM State Auditor
RWH:as 2006YB-30

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

DEPARTMENT OF AUDITS AND ACCOUNTS
270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400
January 29, 2007

Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the Oconee 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 Oconee 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 of its major Federal programs for the year ended June 30, 2006. Oconee 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 Oconee County Board of Education's management. Our responsibility is to express an opinion on Oconee 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 Oconee County Board of Education's compliance with those requirements and performing such other procedures as we considered necessary in the

2006SA-15

circumstances. We believe that our audit provides a reasonable basis for our opinion. Our audit does not provide a legal determination on Oconee County Board of Education's compliance with those requirements.
In our opinion, the Oconee 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, 2006. However, the results of our auditing procedures disclosed a nonmaterial instance of noncompliance with those requirements, which is described in the accompanying Schedule of Findings and Questioned Costs as item FA-7081-06-01.
Internal Control Over Compliance
The management of Oconee 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 Oconee County Board ofEducation's internal control over compliance with requirements that could have a direct and material effect on a major Federal program in order to determine our auditing procedures for the purpose of expressing our opinion on compliance and to test and report on internal control over compliance in accordance with 0MB Circular A-133.
Our consideration ofthe internal control over compliance would not necessarily disclose all matters in the internal control that might be material weaknesses. A material weakness is a reportable condition in which the design or operation of one or more of the internal control components does not reduce to a relatively low level ofrisk that noncompliance with applicable requirements oflaws, regulations, contracts and grants caused by error or fraud that would be material in relation to a major Federal program being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. We noted no matters involving the internal control over compliance and its operation that we consider to be material weaknesses.
This report is intended solely for the information and use of the management, members of the Oconee County Board of Education, 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.
~ u).4:L:-1s. Respectfully submitted,
Russell W. Hinton, CPA, CGFM State Auditor
RWH:as 2006SA-15

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

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

PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

FINDING CONTROL NUMBER AND STATUS

FS-7081-04-01 FS-7081-05-01

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

CORRECTIVE ACTION/RESPONSES

REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Accounting/Internal Control Deficiencies Reportable Condition Finding Control Number: FS-7081-05-01

The Oconee County School District implemented the following corrective action steps related to school accounts:

1. A financial operations manual was generated and distributed to department heads, school principals and to school bookkeepers that outlines proper procedures for financial operations of school accounts. In addition, targeted personnel sat through question and answer sessions on how to implement the guidelines.

2. An independent review of the implementation of the financial procedures at each school has been completed by an outside certified public accountant. A review will be completed annually for some or all locations in the future by an outside reviewer.

3. Schools were asked to document their procedures for separation of duties, receipting and distribution of funds, including obtaining prior approval, and

4. Bank statements have been requested with the 2nd quarterly report and with the final, end-of-year report.
System level personnel will continue to monitor school accounts for compliance.

PRIOR YEAR FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

FINDING CONTROL NUMBER AND STATUS

FA-7081-05-01

Previously Reported Corrective Action Implemented

SECTION IV FINDINGS AND QUESTIONED COSTS

OCONEE COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2006
I SUMMARY OF AUDITOR'S RESULTS
1. Type of Report Issued on the Financial Statements The auditor's opinion on the Oconee County Board ofEducation's financial statements was unqualified.
2. Reportable Conditions in Internal Control Disclosed by the Audit of the Financial Statements The audit report for the Oconee County Board of Education disclosed a financial statement reportable condition related to the following control categories.
Expenditures/Liabilities/Disbursements Revenues/Receivables/Receipts
The reportable condition described above is not considered to be a material weakness.
3. Noncompliance Material to the Financial Statements The audit of the Oconee County Board of Education disclosed no instances of noncompliance that were deemed to be material to the financial statements.
4. Reportable Conditions in Internal Control Over Major Programs The audit report for the Oconee County Board of Education did not disclose any reportable conditions in internal control over major programs.
5. Type of Report Issued on Compliance for Major Programs The auditor's opinion on the Oconee 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 Oconee County Board ofEducation's audit did not disclose an audit finding required to be reported by section .510(a) ofOMB Circular A-133; however, we noted one instance of noncompliance that is included in section IV of this report.
7. Major Programs Federal awards audited as major programs are as follows: 84.010 Title I Grants to Local Educational Agencies 84.027 Special Education - Grants to States 84.173 Special Education - Preschool Grants
8. Type "A" Program Dollar Threshold The dollar threshold for type "A" programs was $300,000.
9. Low Risk Auditee The Oconee County Board ofEducation qualified as a low risk auditee as defined by Section .530 of 0MB Circular A-133.
- 1-

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

II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Controls over School Activity Accounts Reportable Condition Finding Control Number: FS-7081-06-01

Condition:

This is a repeat finding (FS-7081-05-01 and FS-7081-04-01) from the years ended June 30, 2005 and 2004, respectively. The accounting procedures of the School District were insufficient to provide for adequate internal controls over the school activity accounts.

Criteria:

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

Questioned Cost: NIA

Information:

Revenues/Receivables/Receipts Deposit preparation was not separated from the record keeping and cash functions. Based on a review of twenty items, the following deficiencies were noted: 1) Three receipts were not supported by adequate supporting documentation, 2) Supporting documentation on file for two receipts did not agree to deposit amounts.

Expenditures/Liabilities/Disbursements Based on a review of twenty vouchers, the following deficiencies were noted: 1) One voucher could not be located, 2) One voucher was recorded on the accounting records at an incorrect amount, 3) Four vouchers did not include original invoices or documentation evidencing actual receipt of goods or services, 4) Three vouchers did not have proper approval.

Cause:

These deficiencies were a result of management's decision to limit the number of administrative staff made responsible for accounting functions, their failure to establish compensating controls and their failure to ensure established controls were functioning as designed.

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

II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Controls over School Activity Accounts Reportable Condition Finding Control Number: FS-7081-06-01

Effect:

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

Recommendation:

The School District should review the accounting procedures in place, design procedures which would enhance segregation of duties relative to the above control categories and implement procedures to strengthen the internal controls over these accounting functions.

EMPLOYEE COMPENSATION Inaccurate Reporting of Senior Management Compensation Nonmaterial Noncompliance Finding Control Number: FS-7081-06-02

Condition:

Our examination of compensation paid to senior management of the School District revealed an error in the amount reported as salary to the Department of Audits and Accounts.

Criteria:

O.C.G.A. 50-6-27 states in part: "Each ... local board of education is required and directed to submit to the state auditor, in a format prescribed by the state auditor, a listing of all personnel of such ... local board of education showing name, title or functional area, salary and travel expense for each individual."

Questioned Cost: NIA

Information:

The School District failed to include $8,579 as earned compensation for the employee's (1) housing allowance of$3,537; (2) travel allowance of$4,500 and (3) short-term disability premium of $542. These payments were in accordance with the contract between the Superintendent and the School District.

The School District reported a salary of $126,584 for Superintendent Dr. Thomas E. Dohrmann in its salary and travel report for the period ended June 30, 2006. The actual compensation for Dr. Dohrmann totaled $138,520, which includes the $8,579 in payments referenced above.

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

II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

EMPLOYEE COMPENSATION Inaccurate Reporting of Senior Management Compensation Nonmaterial Noncompliance Finding Control Number: FS-7081-06-02

Cause:

Management failed to implement procedures to ensure that all employee compensation is reported as salary to the Department of Audits and Accounts.

Effect:

The failure of the School District to submit total compensation paid to employees leads to inaccurate external reporting.

Recommendation:

The School District should implement procedures to ensure that all employee compensation is included in the salary total reported to the Department of Audits and Accounts.

III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

ELIGIBILITY Failure to Properly Allocate Funds to Each Participating School Nonmaterial Noncompliance Title I Grants to Local Educational Agencies (CFDA 84.010) U.S. Department of Education Through Georgia Department of Education Finding Control Number: FA-7081-06-01

Condition:

The School District in determining to serve attendance areas with less than 35 percent poverty rates, failed to allocate to each participating area or school an amount that equals at least 125 percent ofthe School District's Title I, Part A allocation per poor child.

Criteria:

0MB Circular A-133 Compliance Supplement Part 3E states in part: "If an LEA serves any attendance area with less than a 35 percent poverty rate, the LEA must allocate to all its participating areas an amount per poor child that equals at least 125 percent of the LEA's Part A allocation per poor child".

Questioned Cost: NIA

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

III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

ELIGIBILITY Failure to Properly Allocate Funds to Each Participating School Nonmaterial Noncompliance Title I Grants to Local Educational Agencies (CFDA 84.010) U.S. Department of Education Through Georgia Department of Education Finding Control Number: FA-7081-06-01

Information:

All of the School District's Title I participating schools had less than a 35 percent poverty rate. The per pupil amount that should have been allocated was calculated as $649. Two schools were allocated less than this amount ($543 and $578). Four schools were allocated more than the per pupil amount (one school $793 and three schools $880).

Cause:

The School District did not have procedures in place to ensure that the required allocation method was utilized when serving attendance areas with poverty percentage rates of less than 35 percent.

Effect:

Failure to properly allocate Title I funds to participating schools can result in noncompliance with the requirements of the Federal grant.

Recommendation:

The School District should properly allocate 125 percent oftheir Title I, Part A allocation per poor child to each participating school when serving attendance areas with a less than 35 percent poverty rate. The School District should seek guidance from Georgia Department ofEducation, ifneeded. The Georgia Department of Education should review this matter to determine if a reclaim of funds is appropriate.

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SECTION V MANAGEMENT'S RESPONSES

OCONEE COUNTY BOARD OF EDUCATION SCHEDULE OF MANAGEMENT'S RESPONSES
YEAR ENDED JUNE 30, 2006
Finding Control Number: FS-7081-06-01
We concur with this finding that after an examination of internal control procedures for School Principal Accounts revealed a weakness. The Oconee County School District implemented the following corrective action steps related to school accounts:
1. A financial operations manual was generated and distributed to department heads, school principals and to school bookkeepers that outlines proper procedures for financial operations of school accounts.
Training sessions will include specific emphasis on receipting funds and reconciling deposits with receipts, and on proper documentation to verify/justify expenditures.
2. An independent review of the implementation of the financial procedures at each school will be completed by an outside certified public accountant. A review will be completed annually for some or all location in the future by an outside reviewer, and
3. Bank statements have been requested with the 2nd quarterly report and with the final, endof-year report.
System level personnel will continue to monitor school accounts for compliance.
Finding Control Number: FS-7081-06-02
We concur with this finding that the School District failed to ensure that all employee compensation was reported to the Department of Audits and Accounts. The Oconee County School District has implemented the following procedure for reporting senior management compensation to the Department of Audits and Accounts:
1. All compensation will be reported to the Department of Audits and Accounts to include salary and any additional employer-paid compensation per the Superintendent's contract.
Finding Control Number: FA-7081-06-01
We concur with this finding that the School District failed to allocate in fiscal year 2006 to all participating schools in the identified attendance areas where there was less than 35% poverty an amount equal per poor child that equals at least 125 percent ofthe LEA's Part A allocation per poor child.
The Oconee County School District will implement the following procedures to ensure compliance and proper allocation without regard to serving more students:
1. Schools will be rank ordered by poverty criteria ofFree and Reduced Meals participation on October 1, of the preceding school year.
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OCONEE COUNTY BOARD OF EDUCATION SCHEDULE OF MANAGEMENT'S RESPONSES
YEAR ENDED JUNE 30, 2006
Finding Control Number: FA-7081-06-01 2. Schools that are equal to or greater than the system average for Free/Reduced Meals Participation will be considered eligible for a Title I Targeted Assisted Program. 3. Attendance areas to be served that are less than 35% poverty will have allocations calculated at 125 percent of the LEA's per pupil amount. 4. The school with the highest percentage of poverty rating in attendance areas with less than 35% poverty will receive funding at least equal to 125 percent of the LEA's per pupil amount. 5. Title I allocations to eligible schools will continue until funds are insufficient to support a program with less than 125 percent of the LEA's per pupil amount. Due to a limitation of funds, schools may be placed in the status of "eligible but not participating". Any excess funds will be redistributed to participating schools. The school with the highest poverty rating will receive the most per pupil funding with schools oflower poverty ratings receiving less.
Contact Person: Randall E. Morrison, Assistant Superintendent for Financial Operations Phone: (706) 769-5130 Fax Number: (706) 769-3500 E-mail Address: rmorrison@oconee.k12.ga.us
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