OCONEE COUNTY BOARD OF EDUCATION ANNUAL FINANCIAL REPORT FOR THE FISCAL YEAR ENDED JUNE 30, 2008 (Including Independent Auditor's Report) 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 BASIC FINANCIAL STATEMENTS DISTRICT-WIDE FINANCIAL STATEMENTS STATEMENT OF NET ASSETS 1 STATEMENT OF ACTIVITIES 2 FUND FINANCIAL STATEMENTS BALANCE SHEET GOVERNMENTAL FUNDS 3 STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS 4 RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES 5 STATEMENT OF FIDUCIARY ASSETS AND LIABILITIES FIDUCIARY FUNDS 6 NOTES TO THE BASIC FINANCIAL STATEMENTS 7 REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL GENERAL FUND 21 OCONEE COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS - SECTION I FINANCIAL SUPPLEMENTARY INFORMATION SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS 22 SCHEDULE OF STATE REVENUE 24 SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS 26 ALLOTMENTS AND EXPENDITURES GENERAL FUND - QUALITY BASIC EDUCATION PROGRAMS (QBE) BY PROGRAM 27 SECTION II COMPLIANCE AND INTERNAL CONTROL REPORTS REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS REPORT ON COMPLIANCE WITH REQUIREMENTS APPLICABLE TO EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH 0MB CIRCULAR A-133 SECTION III AUDITEE'S RESPONSE TO PRIOR YEAR FINDINGS AND QUESTIONED COSTS SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS SECTION IV FINDINGS AND QUESTIONED COSTS SCHEDULE OF FINDINGS AND QUESTIONED COSTS SECTION I FINANCIAL Russell W. Hinton STATE AUDITOR (404) 656-2174 DEPARTMENT OF AUDITS AND ACCOUNTS 270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400 August 6, 2009 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 ofthe governmental activities, each major fund, and the aggregate remaining fund information ofthe Oconee County Board ofEducation, as of and for the year ended June 30, 2008, which collectively comprise the Board's basic financial statements as listed in the table of contents. These financial statements are the responsibility 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 of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Oconee County Board of Education's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinions. 2008ARL-11 In our opinion, the financial statements referred to previously present fairly, in all material respects, the respective financial position ofthe governmental activities, each major fund, and the aggregate remaining fund information ofthe Oconee County Board ofEducation, as ofJune 30, 2008, and the respective changes in financial position thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America. In accordance with GovernmentAuditing Standards, we have also issued our report dated August 6, 2009, on our consideration of the Oconee County Board of Education's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements and other matters. The purpose 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 21 respectively, are not a required part ofthe basic financial statements but are supplementary information required by the accounting principles generally accepted in the United States of America. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods ofmeasurement and presentation ofthe required supplementary information. However, we did not audit the information and express no opinion on it. Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Oconee County Board of Education's basic financial statements. The accompanying supplementary information, which includes the Schedule ofExpenditures ofFederal Awards as required by U.S. Office of Management and Budget Circular A-133, Audits ofStates, Local Governments, andNon-Profit Organizations, are presented for purposes ofadditional analysis and are not a required part ofthe basic financial statements. Such information has been subjected to the auditing procedures applied in the audit ofthe 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, ~~... . .QQ~. .g~ Russell W. Hinton, CPA, CGFM State Auditor RWH:as 2008ARL-ll OCONEE COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2008 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, 2008. The intent of the discussion and analysis is to look at the School District's financial performance as a whole; readers should also review 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 2008 are as follows: On the District-wide financial statements, the assets of the School District exceeded liabilities by $77.4 million. Of this amount, $8.1 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 $63.4 million in expenses relating to governmental activities; only $38.1 million ofthese expenses were offset by program specific charges for services, grants and contributions. However, general revenues (primarily property and sales taxes) o/$34.2 million were more than adequate to provide/or these programs. As stated above, General Revenues accounted almost $34.2 million or about 48% ofall revenues totaling $72.3 million. Program specific revenues in the form of charges for services, grants and contributions accountedfor the rest. The School District's M&O millage rate was 16.5 mills/or the 2007-08 school year and continues at that rate for the 2008/09 school year. The School District lowered the General Obligation bond millage rate by 2/10th ofa one mill for 2006/07 and again by 2/10th ofa mill for the 2007/08 school year. The current bond millage rate is 1 mill. The School District was able to reduce the bond millage rate due to the growth in the tax digest. However, without digest growth, either limited by current economic conditions, or by legislative action that adversely affects local governments ability to properly assess real property, the Board ofEducation may need to consider a bond millage increase in future years in order to meet debt service requirements. The School District is very stable financial condition despite current economic conditions and the State's continued reduction ofrevenue sources which have resulted in subsequent reductions ofalready budgeted allocations to local School Districts. -i- OCONEE COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2008 OVERVIEW OF THE FINANCIAL STATEMENTS This annual report consists of three parts; management's discussion and analysis (this section), the basic financial statements and required supplementary information. The basic financial statements include two levels of statements that present different views of the School District. These include the District-wide and fund financial statements. The District-wide financial statements include the 'Statement of Net Assets' and 'Statement of Activities'. These statements provide information about the activities of the School District presenting both short-term and long-term information about the School District's overall financial status. The fund financial statements focus on individual parts of the School District, reporting the School District's operation in more detail. The 'Governmental Funds' statements disclose how basic services are financed in the short-term as well as what remains for future spending. The 'Fiduciary Funds' statements provide information about the financial relationships in which the School District acts solely as a trustee or agent for the benefit of others. In the case of the 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 use 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. - 11 - OCONEE COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2008 The 'Statement of Net Assets' and the 'Statement of Activities' reflect 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. 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 $77.4 million at June 30, 2008. 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 $77.4 million of net assets, $3.45 million was restricted for continuation of Federal programs and debt service. Accordingly, these funds were not available to meet the School District's ongoing obligations to citizens and creditors. In addition, the School District had $65.85 million (net of related debt) invested in capital assets (e.g., land, buildings, and equipment). The School District uses these capital assets to provide - 111 - OCONEE COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2008 educational services to students within geographic boundaries served by the School District. Because of the very nature and on-going use of the assets being reported in this component of net assets, it must be recognized that this portion of the net assets is not available for future spending. The remaining balance of unrestricted net assets of $8.1 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 year fiscal year 2007. Table 1 Net Assets Governmental Activities Fiscal Fiscal Net Year2008 Year2007 Change Assets Current and Other Assets Capital Assets, Net $ 33,216,316 $ 43,287,296 $ -10,070,980 87.128,886 71,092,527 16,036,359 Total Assets $ 120,345,202 $ 114,379,823 $ 5,965,379 Liabilities Current and Other Liabilities Long-Term Liabilities $ 7,505,161 $ 7,043,410 $ 461,751 35,436.832 38,819,743 -3,382,911 Total Liabilities $ 42,941,993 $ 45,863,153 $ -2,921,160 Net Assets Invested in Capital Assets, Net ofRelated Debt Restricted Unrestricted $ 65,850,702 $ 54,561,154 $ 11,289,548 3,451,248 8,507,115 -5,055,867 8,101,259 5,448,401 2,652.858 Total Net Assets $ 77,403,202 $ 68151616:Z0 $ 8,886,532 Table 2 shows categorical Changes in Net Assets for the current fiscal year and for prior year fiscal year 2007. - IV - OCONEE COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2008 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 2008 Year2007 $ 3,019,241 33,426,953 126152576 $ 2,448,315 30,946,048 2172599 Total Program Revenues $ 3820612770 $ 3326112962 General Revenues: Taxes Property Taxes For Maintenance and Operations $ 24,540,857 For Debt Service 1,540,113 Sales Taxes Special Purpose Local Option Sales Tax For Debt Service 5,383,704 For Capital Projects Other 869,196 Investment Earnings 1,324,819 Gain on Sale of Capital Assets Miscellaneous 5492719 $ 23,179,858 1,680,111 1,630,205 3,836,768 1,263,627 1,200 12668234 Total General Revenues $ 342208,408 $ 3322602003 Total Revenues $ 72270J78 $ 6628712965 Program Expenses Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and OJ?eration of Plant Student Transportation Services Central Support Services Other Support Services Operations of Non-Instructional Services Enterprise Operations Food Services Interest on Short-Term and Long-Term Debt $ 40,870,211 1,392,471 1,557,982 1,140,008 1,254,477 4,495,277 616,015 4,515,049 2,778,239 146,378 219,368 827,888 2,335,588 122342688 $ 38,036,492 1,224,969 1,180,083 1,152,205 1,178,896 4,301,470 280,473 4,435,577 2,965,296 116,198 214,647 951,119 2,216,088 12492991 Total Expenses $ 63J832639 $ 59503504 Increase in Net Assets $ 8,886,539 $ 1,368A61 -v- OCONEE COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2008 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 year fiscal year 2007. 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. Table 3 Governmental Activities Total Cost of Services Fiscal Fiscal Year 2008 Year 2007 Net Cost of Services Fiscal Fiscal Year 2008 Year 2007 Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation ofPlant Student Transportation Services Central Support Services Other Support Services Operations ofNon-Instructional Services Enterprise Operations Food Services Interest on Short-Term and Long-Term Debt $ 40,870,211 $ 38,036,492 $14,846,880 $14,282,315 1,392,471 1,557,982 1,140,008 1,254,477 4,495,277 616,015 4,515,049 2,778,239 146,378 219,368 1,224,969 1,180,083 1,152,205 1,178,896 4,301,470 280,473 4,435,577 2,965,296 116,198 214,647 1,124,880 1,068,345 217,445 -45,651 2,262,409 592,780 2,444,014 1,410,683 142,680 72,730 1,029,364 826,274 341,083 185,902 2,678,713 271,613 2,704,479 1,822,841 110,221 117,708 827,888 2,335,588 1.234.688 951,119 2,216,088 1.249.991 -184,085 134,071 1,234.688 139,367 131,671 1.249.991 Total Expenses $ 63.383.639 $ 59,503.504 $25,321.869 $ 25,891.542 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 of almost $72.3 million and total expenditures of $82.7 million. Included in the expenditures of $82.7 million were capital outlay expenditures of $18.2 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. - vi - OCONEE COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2008 During the course of fiscal year 2008, 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 $62.99 million exceeded the final budgeted amounts of $60.9 million, a difference of $2.1 million or about 3%. 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 $59.98 million are more than the final budgeted amount of $59.9 million by $61,666. This small difference (final actual vs. final budget) was due to a combination of expenditure controls and revenue conservation efforts. CAPITAL ASSETS AND DEBT ADMINISTRATION Capital Assets At June 30, 2008, the School District had $87.12 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 2007. Oconee County School District began a capital project building campaign that includes additions at one elementary and two middle schools, as well as the construction of one new elementary school. Table 4 Capital Assets (Net of Depreciation) Governmental Activities Fiscal Fiscal Year 2008 Year 2007 Land Construction in Progress Land Improvements Buildings Equipment $ 3,742,771 11,213,344 4,705,519 64,201,017 3,266,235 $ 2,623,853 2,189,208 4,478,320 58,620,172 3,180,974 Total $ 87,128,886 $ 11,022,521 Additional information on the School District's Capital Assets can be found in the Notes to the Basic Financial Statements. - vu - OCONEE COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2008 Debt At June 30, 2008, the School District had $35.44 million in debt outstanding. This debt is the result of General Obligation Bonds (repaid through a property tax levy) originally sold by the School District in 1993 and 1995 (refinanced in 2004 and 2005) for the purpose of the acquisition, construction, equipping, renovating, and repairing of school facilities. In the fall of 2007, the School District sold $24 million in Revenue Bonds (repaid through local option sales tax) for the purpose of the acquisition of land for future schools, construction of new classrooms, renovations of current facilities, a new elementary school, and other facilities as approved by the Board of Education. 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 was totally serviced by April 2008. All current debt will be serviced by December 2021. Oconee County School District's most recent rating (November 2006) by 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 2008 Year2007 Capital Leases Installment Sales Agreement General Obligation Bonds Revenue Bond Bond Premium Claims Payable $ 278,253 34,450,000 708,579 $ 517 296,020 35,950,000 1,520,000 920,081 133.125 Total Debt Outstanding $ 35,436.832 $ 38,819.743 Debt Due Within One Year: Capital Leases General Obligation Bonds Revenue Bonds $ $ 5,025,000 517 1,500,000 1,520,000 Total Debt Outstanding $ 5,025.000 $ 3,020,517 - Vlll - OCONEE COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2008 Additional information can be found on the School District's Debt obligations in the Notes to the Basic Financial Statements. FACTORS BEARING ON THE SCHOOL DISTRICT'S FUTURE 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 The School District has implemented a new financial software accounting system for fiscal year 2009 that will improve our capacity ofaccounting and reporting in conformity with generally accepted accounting principles (GAAP). o Local Revenue - Oconee County School District's priority on academic instruction continues to fuel the residential and economic growth of the county. New residents and businesses move into the county because of the public school system's focus on quality instructional programs. o Oconee County generally collects above 97% of the assessed taxes. This consistent collection of property taxes has assisted the local School District to meet financial obligations. Current economic conditions and recent state legislation may adversely affect the School District's ability to maintain the current millage levy of 16.5 mills for M&O and 1 mill for debt service. The School District may need to consider reducing expenses, raising the millage rate or a combination of both approaches in order to maintain quality instructional services. Less than 18% of the local property digest consists ofcommercial, utility and retail properties. o ELOST receipts continue to be dependent on the local businesses and the citizens' ability to spend. There has been and continues to be increased commercial development but at the same time there have been numerous business closings. The current ELOST was developed with a high ceiling but a conservative collection rate. The School District had hoped to fund pay-as-you-go projects but all current ELOST receipts are dedicated to debt service. o Capital Improvements - The School District continues to implement the capital improvement plan approved by the Board in 2006. Current demand for new classroom space has leveled off and the School District can now focus on maintaining current buildings, planning improvements to athletic facilities and for a new central office complex. o State Revenue - Legislation over the past years has reduced revenue sources available for education, and when coupled with poor economic conditions, the state has had to drastically reduce funding available to public schools and other state services. In addition, the state continues to enact legislation that lessens local control of the public schools and thereby creating unfunded mandates. State funds are providing no more than 55% of the local budget where a number of years ago the state funded closer to 60%. - lX - OCONEE COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2008 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, school years fiscal year 10 (2009/10) and fiscal year 11 (2010/11) will be challenging to maintain quality services if state revenue is further reduced. Though American Recovery and Reinvestment Act (ARRA) funds have been used to stabilize services and to forgo the need to implement personnel RIF policies or use operating reserves, this strategy can only be sustained so long without a consist funding mechanism for public education. 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. CONTACTING THE SCHOOL DISTRICT'S FINANCIAL MANAGEMENT This financial report is designed to provide our citizens, 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.k12.ga.us. -x- OCONEE COUNTY BOARD OF EDUCATION OCONEE COUNTY BOARD OF EDUCATION STATEMENT OF NET ASSETS JUNE 30, 2008 ASSETS Cash and cash equivalents Investments Receivables: Taxes Intergovernmental: State Federal Inventory Deferred charges Capital assets (nondepreciable) Capital assets (net of accumulated depreciation) Total assets LIABILITIES Salaries and benefits payable Accrued interest payable Retainage payable Bonds payable due within one year Bonds payable due in more than one year Installment sales agreement due in more than one year Total liabilities NET ASSETS Invested in capital assets, net of related debt Restricted for: Continuation of federal programs Debt service Unrestricted Total net assets The accompanying notes are an integral part of these financial statements. Governmental Activities $ 26,698,088 178,368 1,570,267 4,120,587 203,223 119,157 326,626 14,956,115 72,172,771 120,345,202 6,364,608 428,910 711,643 5,025,000 30,133,579 278,253 42,941,993 65,850,702 354,557 3,096,691 8,101,259 $ 77,403,209 OCONEE COUNTY BOARD OF EDUCATION STATEMENT OF ACTIVITIES FOR THE FISCAL YEAR ENDED JUNE 30, 2008 Functions/Pro1;1;rams Governmental activities: Instruction $ Support services: Pupil services Improvement of instructional services Educational media services General administration School administration Business adminstration Maintenance and operation of facilities Student transportation services Central support services Other support services Enterprise operation Food services operation Interest on long-term debt Total governmental activities $ Exeenses 40,870,211 1,392,471 1,557,982 1,140,008 1,254,477 4,495,277 616,015 4,515,049 2,778,239 146,378 219,368 827,888 2,335,588 1,234,688 63,383,639 Charges for Services Program Revenues Operating Grants and Contributions Capital Grants and Contributions $ 522,390 $ 24,366,029 $ 1,134,912 2,208 265,383 13,903 62,604 450,426 34,958 7,512 643,718 1,281,522 475,734 851,161 1,300,128 1,767,731 6,572 1,989,636 1,000,266 2,729 146,638 368,255 886,691 8,798 14,711 16,663 46,441 359,778 969 33,304 $ 3,019,241 $ 33,426,953 $ 1,615,576 Net (Expense) Revenue and Changes in Net Assets Governmental Activities $ (14,846,880) (I, 124,880) (1,068,345) (217,445) 45,651 (2,262,409) (592,780) (2,444,014) (1,410,683) (142,680) (72,730) 184,085 (134,071) (1,234,688) (25,321,869) General revenues: Taxes: Property taxes, levied for general purposes Property taxes, levied for debt service Sales taxes: For debt service Other Miscellaneous revenues Unrestricted investment earnings Total general revenues Change in net assets Net assets, beginning of year Net assets, end of year The accompanying notes are an integral part of these financial statements. 24,540,857 1,540,113 5,383,704 869,196 549,719 1,324,819 34,208,408 8,886,539 68,516,670 $ 77,403,209 2 OCONEE COUNTY BOARD OF EDUCATION BALANCE SHEET GOVERNMENTAL FUNDS JUNE 30, 2008 ASSETS Cash and cash equivalents Investments Receivables: Taxes Intergovernmental: State Federal Inventory Total assets LIABILITIES AND FUND BALANCES LIABILITIES Salaries and benefits payable Retainage payable Deferred revenue Total liabilities FUND BALANCES Reserved for: Inventory Capital projects Debt service Federal programs Unreserved, undesignated: Reported in: General fund Capital projects fund Total fund balances Total liabilities and fund balances General DistrictWide Capital Projects $ 10,493,348 $ 13,980,280 $ 178,368 671,226 4,120,587 203,223 119,157 $ 15,785,909 $ 13,980,280 $ Debt Service 2,224,460 899,041 Total Governmental Funds $ 26,698,088 178,368 1,570,267 4,120,587 203,223 119,157 3,123,501 $ 32,889,690 $ 6,364,608 $ 172,760 6,537,368 $ 711,643 711,643 $ 26,810 26,810 6,364,608 711,643 199,570 7,275,821 119,157 178,368 235,400 8,715,616 13,268,637 9,248,541 13,268,637 $ 15,785,909 $ 13,980,280 $ 3,096,691 3,096,691 3,123,501 I 19,157 178,368 3,096,691 235,400 8,715,616 13,268,637 25,613,869 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. Cost 101,200,043 Less accumulated depreciation (14,071,157) Other long-term assets are not available to pay for current-period expenditures and, therefore, are deferred in the funds. Property taxes Long-term liabilities are not due and payable in the current period and, therefore, are not reported in the funds. Bonds (34,450,000) Bond premium, net of amortization (708,579) Bond issuance costs, net of amortization 326,626 Accrued interest (428,910) Installment sales agreement (278,253) 87,128,886 199,570 (35,539,116) Net assets of governmental activities The accompanying notes are an integral part of these financial statements. $ 77,403,209 3 OCONEE COUNTY BOARD OF EDUCATION STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS FOR THE FISCAL YEAR ENDED JUNE 30, 2008 REVENUES Property ta,ces Sales ta,ces Other taxes State funds Federal funds Charges for services Investment earnings Miscellaneous Tot al 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 facilities Student transportation services Central support services Other support services Enterprise operations Food services operation Capital outlay Debt service: Principal retirement Interest and fees Total expenditures General $ 24,567,439 $ 861,877 30,891,179 2,644,879 3,019,241 461,489 549,719 62,995,823 District Wide Capital Projects $ 1,496,306 756,368 2,252,674 Debt Service Total Governmental Funds 1,528,358 $ 5,383,704 7,319 106,962 7,026,343 26,095,797 5,383,704 869,196 32,387,485 2,644,879 3,019,241 1,324,819 549,719 72,274,840 38,921,208 1,392,471 1,557,982 1,137,506 1,251,591 4,491,093 273,386 4,501,840 2,709,832 146,102 209,895 827,888 2,335,588 193,549 18,284 10,718 59,978,933 2,886 240,396 18,027,728 4,000 18,275,010 3,020,000 1,451,574 4,471,574 38,921,208 1,392,471 1,557,982 1,137,506 1,254,477 4,491,093 513,782 4,501,840 2,709,832 146,102 209,895 827,888 2,335,588 18,221,277 3,038,284 1,466,292 82,725,517 Excess (deficiency) of revenues over (under) expenditures 3,016,890 (16,022,336) 2,554,769 ( I0,450,677) OTHER FINANCING SOURCES (USES) Transfers in Transfers out Total other financing sources (uses) Net changes in fund balance FUND BALANCE, beginning of year FUND BALANCE, end of year (500,000) (500,000) 4,384,276 4,384,276 (3,884,276) (3,884,276) 2,516,890 (11,638,060) (1,329,507) 6,731,651 24,906,697 4,426,198 $ 9,248,541 $ 13,268,637 $ 3,096,691 $ 4,384,276 (4,384,276) (10,450,677) 36,064,546 25,613,869 The accompanying notes are an integral part of these financial statements. 4 OCONEE COUNTY BOARD OF EDUCATION RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES FOR THE FISCAL YEAR ENDED JUNE 30, 2008 Amounts reported for governmental activities in the statement of activities are different because: Net change in fund balances - total governmental funds $ Governmental funds report capital outlays as expenditures. However, in the statement of activities the cost of those assets is allocated over their estimated useful lives and reported as depreciation expense. This is the amount by which capital outlays exceeded depreciation expense in the current period. Capital outlay Depreciation expense $ 17,580,867 (1,544,508) Revenues in the statement of activities that do not provide current financial resources are not reported as revenues in the funds. Property taxes The issuance of Jong-term debt provides current financial resources to governmental funds, while the repayment of the principal of long-term debt consumes the current financial resources of governmental funds. Neither transaction, however, has any effect on net assets. This amount is the net effect of these differences in the treatment of long-term debt and related items. (10,450,677) 16,036,359 (4,662) Principal payments - bonds Principal payments - capital leases Claims paid Principal payments - installment sales agreement Bond premiun amortization expense Bond issuance costs amortization expense $ 3,020,000 517 133,125 17,767 211,502 (97,494) Some expenses reported in the statement of activities do not require the use of current financial resources and, therefore, are not reported as expenditures in governmental funds. Change in accrued interest $ 20,102 $ The accompanying notes are an integral part of these financial statements. 3,285,417 20,102 8,886,539 5 OCONEE COUNTY BOARD OF EDUCATION STATEMENT OF FIDUCIARY ASSETS AND LIABILITIES FIDUCIARY FUND JUNE 30, 2008 Cash Funds held for others ASSETS LIABILITIES The accompanying notes are an integral part of these financial statements. Agency Fund $ 245,696 $ 245,696 6 OCONEE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2008 Note 1: DESCRIPTION OF SCHOOL DISTRICT AND REPORTING ENTITY Reporting Entity The Oconee County Board ofEducation (the "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 ofthe 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 of the 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 ofthe Oconee County Board of Education. District-wide Statements: The Statement of Net Assets and the Statement of Activities display information about the financial activities of the overall School District, except for fiduciary activities. Eliminations have been made to minimize the double counting ofinternal activities. Governmental activities generally are financed through taxes, intergovernmental revenues, and other nonexchange transactions. The Statement ofActivities presents a comparison between direct expenses and program revenues for each function of the School District's governmental activities. Direct expenses are those that are specifically associated with a program or function and, therefore, are clearly identifiable to a particular function. Indirect expenses (expenses ofthe School District related to the administration and support of the School District's programs, such as office and maintenance personnel and accounting) are not allocated to programs. 7 OCONEE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2008 Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) 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 ofa 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 of the School District, except those resources required to be accounted for in another fund. District-wide Capital Projects Fund accounts for financial resources including Special Purpose Local Option Sales Tax (SPLOST), Bond Proceeds and grants from Georgia State Financing and Investment Commission to be used for the acquisition, construction or renovation of major capital facilities. Debt Service Fund accounts for taxes (property and sales) legally restricted for the payment ofgeneral long-term principal, interest and paying agent's fees. The School District reports the following fiduciary fund types: Agency Funds account for assets held by the School District as an agent for various funds, governments or individuals. Basis of Accounting The basis ofaccounting determines when transactions are reported on the financial statements. The Districtwide governmental and fiduciary fund financial statements are reported using the economic resources measurement focus and the accrual basis ofaccounting. Revenues are recorded when earned and expenses are recorded at the time liabilities are incurred, regardless of when the related cash flows take place. Nonexchange transactions, in which the School District gives (or receives) value without directly receiving (or giving) equal value in exchange, include property taxes, sales taxes, grants and donations. On an accrual basis, revenue from property taxes is recognized in the fiscal year for which the taxes are levied. Revenue from sales taxes is recognized in the fiscal year in which the underlying transaction (sale) takes place. Revenue from grants and donations is recognized in the fiscal year in which all eligibility requirements have been satisfied. The School District uses funds to report on its financial position and the results of its operations. 8 OCONEE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2008 Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) 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 of general long-term liabilities and acquisitions under capital leases are reported as other financing sources. The School District funds certain programs by a combination of specific cost-reimbursement grants, categorical grants, and general revenues. Thus, when program costs are incurred, there are both restricted and unrestricted net assets available to finance the program. It is the School District's policy to first apply grant resources to such programs, followed by cost-reimbursement grants, then general revenues. Cash and Cash Equivalents COMPOSITION OF DEPOSITS Cash and cash equivalents consist of cash on hand, demand deposits and short-term investments with original maturities ofthree 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 of deposit) and repurchase agreements are reported at cost. Participating interest-earning contracts and money market investments with a maturity at purchase of one 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 of Georgia 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: (I) Obligations issued by the State of Georgia or by other states, (2) Obligations issued by the United States government, 9 OCONEE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2008 Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) (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, OfficeofTreasury 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 of credit 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 of Commissioners fixed the property tax levy for the 2007 tax digest year (calendar year) on July 23, 2007 (levy date). Taxes were due on November 15, 2007 (lien date). Taxes collected within the current fiscal year or within 60 days after year-end on the 2007 tax digest are reported as revenue in the governmental funds for fiscal year 2008. The 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 oftaxes collected to the School District. Property tax revenues, at the fund reporting level, during the fiscal year ended June 30, 2008, for maintenance and operations amounted to $24,557,274 and for school bonds amounted to $1,528,358. Tax millage rates levied for the 2007 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 16.50 mills 1.00 mills Total 17.50 mills 10 OCONEE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2008 Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES {Continued) Sales Taxes Special Purpose Local Option Sales Tax, at the fund reporting level, during the year amounted to $5,383,704 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 ofpurchase (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 of assets or materially extend the useful lives ofthe 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 ofcapital assets reported in the District-wide statements are as follows: Capitalization Policy Estimated Useful Life Land Land Improvements Buildings and Improvements All Equipment All $25,000 $25,000 $5,000 NIA 70 years 70 years 5 to 25 years Depreciation is used to allocate the actual or estimated historical cost of all capital assets over estimated useful lives. 11 OCONEE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2008 Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued} General Obligation Bonds The School District issues general obligation bonds to provide funds for the acquisition and construction of major capital facilities. In the District-wide financial statements, bond premiums and discounts, as well as issuance costs, are deferred and amortized over the life of the bonds using the straight-line method. Bond issuance costs are reported as deferred charges and amortized over the term of the debt. In the fund financial statements, the School district recognizes bond premiums and discounts, as well as bond issuance costs during the fiscal year bonds are issued. Premiums received on debt issuances are reported as other financing sources while discounts on debt issuances are reported as other financing uses. Issuance costs, whether or not withheld :from the actual debt proceeds received, are reported as debt service expenditures. General obligation bonds are direct obligations and pledge the full faith and credit of the government. The outstanding amount of these bonds is recorded in the Statement of Net Assets. Net Assets The School District's net assets in the District-wide Statements are classified as follows: Invested in capital assets, net of related debt - This represents the School District's total investment in capital assets, net ofoutstanding debt obligations related to those capital assets. To the extent debt has been incurred but not yet expended for capital assets, such amounts are not included as a component of invested in capital assets, net of related debt. Restricted net assets - These represent resources for which the School District is legally or contractually obligated to spend resources for continuation of Federal programs and debt service and capital projects in accordance with restrictions imposed by external third parties. Unrestricted net assets - Unrestricted net assets represent resources derived :from property taxes, sales taxes, charges for services, and miscellaneous revenues. These resources are used for transactions relating to the educational and general operations of the School District, and may be used at the discretion of the Board to meet current expenses for those purposes. Note 3: DEPOSITS AND INVESTMENTS COLLATERALIZATION OF DEPOSITS Official Code ofGeorgia Annotated (OCGA) Section 45-8-12 provides that there shall not be on deposit at any time in any depository for a period longer than ten days a sum ofmoney which has not been secured by surety bond, by guarantee ofinsurance, or by collateral. The aggregate ofthe face value ofsuch surety bond and the market value of securities pledged shall be equal to not less than 110 percent of the public funds being secured after the deduction of the amount of deposit 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 of public funds shall be not less than 110 percent ofthe daily pool balance. At June 30, 2008, all deposits were secured by surety bond, insurance or collateral as specified above. 12 OCONEE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2008 Note 3: DEPOSITS AND INVESTMENTS Acceptable security for deposits consists of any one of or any combination of the following: (1) Surety bond signed by a surety company duly qualified and authorized to transact business within the State of Georgia, (2) Insurance on accounts provided by the Federal Deposit Insurance Corporation, (3) Bonds, bills, notes, certificates ofindebtedness or other direct obligations ofthe United States or of the State ofGeorgia, (4) Bonds, bills, notes, certificates of indebtedness or other obligations of the counties or municipalities ofthe State of Georgia, (5) Bonds ofany public authority created by the laws ofthe State ofGeorgia, providing that the statute that created the authority authorized the use of the bonds for this purpose, (6) Industrial revenue bonds and bonds ofdevelopment authorities created by the laws ofthe State of Georgia, and (7) Bonds, bills, notes, certificates ofindebtedness, or other obligations ofa 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 INVESTMENTS The School District's investments as ofJune 30, 2008, are presented below. All investments are presented by investment type. Fair Investment Type Value Other Investments U.S. Treasury Money Market Funds $ 178.368 The U.S. Treasury Money Market funds are in a Treasury Portfolio Fund managed by Fidelity Investments. The Treasury Portfolio Fund is rated AAAm by Standard and Poors and Aaa by Moodys. The weighted average maturity of the fund is approximately 60 days. Note 4: NON-MONETARY TRANSACTIONS The School District receives food commodities from the United States Department ofAgriculture (USDA) for school breakfast and lunch programs. These commodities are recorded at their federally assigned value. See Note 2 - Inventories 13 OCONEE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2008 Note 5: CAPITAL ASSETS The following is a summary of changes in the capital assets during the fiscal year: Capital assets not being depreciated Land Construction in progress Total capital assets not being depreciated Capital assets being depreciated Buildings and improvements Equipment Land improvements Total capital assets being depreciated Less accumulated depreciation for Buildings and improvements Equipment Land improvements Total accumulated depreciation Total capital assets being depreciated, net Total governmental activities capital assets, net Balance July 1, 2007 Increases Decreases Balance June 30, 2008 $ 2,623,853 $ 1,118,918 $ $ 3,742,771 211891208 1019322491 (1 19082355} 1112131344 4,813,061 12,051,409 (1,908,355) 14,956,115 67,944,809 5,856,973 5,057,167 78,858,949 6,665,196 471,018 301,599 7,437,813 (52,834) (52,834) 74,610,005 6,275,157 5,358,766 86,243,928 (9,324,637) (2,675,999) (57818471 021579,4831 (1,084,351) (385,757) (741400} 0,5441508} 52,834 52 834 (l 0,408,988) (3,008,922) (653 22471 O4107lz157} 6612791466 5,8931305 72,172,771 $ 71,092,527 $ 17,944,714 $ (1,908,355) $ 87,128,886 Current year depreciation expense by function is as follows. Instruction Support Seivices Educational Media Seivices School Administration Business Administration Maintenance and Operations of Facilities Student Transportation Seivices Central Support Services Food Seivices Operation $ 1,171,472 9,081 15,185 17,200 47,937 248,256 1,000 34,377 $ 1,544,508 14 OCONEE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2008 Note 6: INTERFUND TRANSFERS lnterfund transfers for the year ended June 30, 2008, consisted of the following: Transfers From Transfers To District-wide Capital Projects Total governmental funds General Debt Fund Service $ 500,000 $ 3,884,276 $ 500,000 $ 3,884,276 Note 7: RISK MANAGEMENT The School District is exposed to various risks ofloss 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 of loss associated with torts, assets and errors or omissions. The School District has neither significant reduced coverage for these risks nor incurred losses (settlements) which exceeded the School District's insurance coverage in any ofthe past three years. The School District has obtained commercial insurance 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 expense/expenditures and liability being reported when it is probable that a loss has occurred, and the amount of that loss can be reasonable estimated. Changes in the unemployment compensation claims liability during the last two fiscal years are as follows: Beginning of Year Claims and Changes in Estimates Claims Paid End of Year 2007 $ 2008 $ $ 3,945 $ 3,945 $ $ 75 $ 75 $ The School District participates in the Georgia School Boards Association Workers' Compensation Fund (the "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 15 OCONEE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2008 Note 7: RISK MANAGEMENT (Continued) potential losses sustained by the Fund in excess of $400,000 loss per occurrence, up to $1,000,000. The School District has purchased surety bonds to provide additional insurance coverage as follows: Position Covered Amount Superintendent $100,000 Note 8: LONG - TERM DEBT CAPITAL LEASES The Oconee County Board of Education has entered into various lease agreements as lessee for copiers. These lease agreements qualify as capital leases for accounting purposes, therefore, have been recorded at the present value ofthe future minimum lease payments as of the date of their inception. INSTALLMENT SALES AGREEMENT The Oconee County Board of Education entered into an agreement dated June 1, 2006, with the Northeast Georgia Regional Educational Service Agency for the construction and subsequent lease of the Rutland Center. Under the terms ofthe agreement, the School District will make annual payments through July 15, 2020. COMPENSATED ABSENCES Compensated absences represent obligations ofthe School District relating to employees' rights to receive compensation for future absences based upon service already rendered. This obligation relates only to vesting accumulating leave in which payment is probable and can be reasonably estimated. Typically, the General Fund is the fund used to liquidate this long-term debt. The School District uses the vesting method to compute compensated absences. This balance was immaterial to the financial statements for the current year. GENERAL OBLIGATION DEBT OUTSTANDING General Obligation Bonds currently outstanding are as follows: Purpose General Government - Refunding -Series 2004 General Government - Refunding -Series 2005 General Government - Series 2006 Interest Rates 3.16% 2.60% 4.00% - 5.00% Amounts $ 9,115,000 1,335,000 24,000,000 $ 34,450,000 16 OCONEE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2008 Note 8: LONG - TERM DEBT (Continued) The changes in Long-Term Debt during the fiscal year ended June 30, 2008, were as follows: Governmental Funds Installment General Capital Sales Obligation Revenue Bond Claims Leases Agreement Bonds Bonds Premium Pa~able Total Balance July I, 2007 $ Additions: Deductions: Debt Retired Bond Premium Amortized Balance June 30, 2008 $ 517 $ 296,020 $ 35,950,000 $ 1,520,000 $ 920,081 $ 133,125 $ 38,819,743 517 17,767 1,500,000 1,520,000 - $ 278,253 $ 34,450,000 $ 211,502 $ 708,579 $ 133,125 3,171,409 211,502 $ 35,436,832 Due within One Year $ ( 1) Paid during current year. -$ - $ 5,025,000 $ (I) $ $ $ 5,025,000 At June 30, 2008, payments due by fiscal year which includes principal and interest for these items are as follows: Fiscal Year Installment Sales Agreement Ended June 30 Principal Interest 2009 2010 2011 2012 2013 2014-2018 2019-2021 $ $ 18,314 11,194 19,133 10,415 19,953 9,602 20,774 8,755 117,259 29,819 82,820 5,259 Total $ 278,253 $ 75,044 Fiscal Year Ended June 30 2009 2010 2011 2012 2013 2014 Total Unamortized Bond Premium General Obli~ation Bonds Principal Interest $ 211,502 $ 5,025,000 $ 1,392,894 184,030 6,215,000 1,212,390 147,823 6,635,000 977,524 108,849 7,085,000 726,446 56,375 7,560,000 404,856 1,930,000 60,988 $ 708,579 $ 34,450,000 $ 4,775,098 17 OCONEE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2008 Note 9: ON-BEHALF PAYMENTS The School District has recognized revenues and costs in the amount of$1,181,446 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 $1,143,926 Georgia Department of Education Paid the Teachers Retirement System For Te~chers Retirement (TRS) In the amount of $30,172 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 $7,348 Note 10: SIGNIFICANT COMMITMENTS The following is an analysis ofsignificant outstanding construction or renovation contracts executed by the School District as of June 30, 2008, together with funding available: Project Malcom Bridge Middle School Addition High Shoal Elementary School Oconee County Elementary School Renovation Oconee County High School Auxiliary Gym Unearned Executed Contracts 36,187 1,043,249 75,000 70,667 $ 1,225,103 Funding Available From State $ 177,480 $ 177,480 The amounts described in this note are not reflected in the basic financial statements. Note 11: SIGNIFICANT CONTINGENT LIABILITIES Amounts received or receivable principally from the Federal government are subject to audit and review by grantor agencies. This could result in requests for reimbursement to the grantor agency for any costs which are disallowed under grant terms. The School District believes that such disallowances, if any, will be immaterial to its overall financial position. The School District is a defendant in various legal proceedings pertaining to matters incidental to the performance of routine School District operations. The ultimate disposition of these proceedings is not presently determinable, but is not believed to be material to the basic financial statements. 18 OCONEE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2008 Note 12: RETIREMENT PLANS TEACHERS RETIREMENT SYSTEM OF GEORGIA (TRS) TRS PLAN DESCRIPTION Substantially all teachers, administrative and clerical personnel employed by local school systems are covered by the Teachers Retirement System of Georgia (TRS), which is a cost-sharing multiple employer defined benefit pension plan. TRS provides service retirement, disability retirement and survivors benefits for its members in accordance with State statute. The Teachers Retirement System of Georgia issues a separate stand alone financial audit report and a copy can be obtained from the Georgia Department of Audits and Accounts. TRS CONTRIBUTIONS REQUIRED AND MADE Employees ofthe School District who are covered by TRS are required by State statute to contribute 5% of their gross earnings to TRS. The School District makes monthly employer contributions to TRS at rates adopted by the TRS Board ofTrustees in accordance with State statute and as advised by their independent actuary. The required employer contribution rate is 9.28% and employer contributions for the current fiscal year and the preceding two fiscal years are as follows: Fiscal Year Percentage Contributed Required Contribution 2008 2007 2006 100% 100% 100% $ 3,156,711 $ 2,917,259 $ 2,649,336 Note 13: POSTEMPLOYMENT BENEFITS Georgia Retiree Health Benefit Fund Plan Description. The School District contributes to the Georgia Retiree Health Benefit Fund ("GRHBF"), a cost-sharing multiple-employer defined benefit postemployment healthcare plan administered by the Department ofCommunity Health. GRHBF provides health insurance benefits to eligible retirees and their qualified beneficiaries. Pursuant to Title 45, Chapter 18 of the Official Code of Georgia Annotated, the authority to establish and amend the benefit provisions of the plan is assigned to the Board of Community Health. The Department of Community Health issues a publicly available financial report that includes financial statements and required supplementary information for GRHBF. That report may be obtained from the Department of Community Health at 2 Peachtree Street, Atlanta, Georgia 30303. Funding Policy. The contribution requirements of plan members and participating employers are established and may be amended by the Board of Community Health. Contributions of plan members or beneficiaries receiving benefits vary based on plan election, dependent coverage, and Medicare eligibility and election. On average, plan members pay approximately twenty-five percent (25%) ofthe cost ofhealth insurance coverage. 19 OCONEE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2008 Note 13: POSTEMPLOYMENT BENEFITS Participating employers are statutorily required to contribute in accordance with the employer contribution rate established by the Board of Community Health. This contribution rate is established to fund both the active and retired employee health insurance plans based on projected pay-as-you-go financing requirements. The employer contribution rates for the combined active and retiree plans for the fiscal year ended June 30, 2008, was as follows: Teachers Non-Certificated Employees 18.534% of state-based salaries $162.72 per month The School District's contribution to the health insurance plans for the fiscal year ended June 30, 2008, was $5,367,274, which equaled the required contribution. 20 OCONEE COUNTY BOARD OF EDUCATION GENERAL FUND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL FOR THE FISCAL YEAR ENDED JUNE 30, 2008 REVENUES Taxes State funds Federal funds Charges for services Investment earnings Miscellaneous Total revenues Nonappropriated Budget Original Final Actual Variance With Final Budget $ 24,777,918 $ 24,777,918 $ 29,425,217 29,462,622 2,321,070 2,582,078 2,045,855 2,045,855 321,970 321,970 1,722,326 1,722,326 60,614,356 60,912,769 25,429,316 $ 30,891,179 2,644,879 3,019,241 461,489 549,719 62,995,823 651,398 1,428,557 62,801 973,386 139,519 (1,172,607) 2,083,054 EXPENDITURES Current: Instruction Support services: Pupil services Improvement of instructional services Educational media services General administration School administration Business administration Maintenance and operation of facilities Student transportation services Central support services Other support services Enterprise operations Food services operation Capital outlay Debt service: Principal retirement Interest and fiscal charges Total expenditures 38,887,671 1,215,547 1,457,669 1,258,026 1,319,914 4,673,779 286,751 4,446,830 2,771,932 112,434 220,040 951,120 2,413,235 60,000 60,074,948 38,913,669 1,275,855 1,439,902 1,258,026 1,320,521 4,673,779 286,751 4,446,830 2,545,105 112,434 220,040 951,120 2,413,235 60,000 59,917,267 38,921,208 1,392,471 1,557,982 1,137,506 1,251,591 4,491,093 273,386 4,501,840 2,709,832 146,102 209,895 827,888 2,335,588 193,549 18,284 10,718 59,978,933 (7,539) (116,616) (118,080) 120,520 68,930 182,686 13,365 (55,010) (164,727) (33,668) 10,145 123,232 77,647 (133,549) (18,284) (10,718) (61,666) Excess of revenues over expenditures OTHER FINANCING USES Transfers out Total other financing uses 539,408 (200,000) (200,000) 995,502 (200,000) (200,000) 3,016,890 (500,000) (500,000) 2,021,388 (300,000) (300,000) Net change in fund balances 339,408 795,502 2,516,890 1,721,388 FUND BALANCE, beginning of year 6,731,651 6,731,651 6,731,651 FUND BALANCE, end of year $ 7,071,059 $ 7,527,153 =$====9=,2=4=8,=54=1= $ 1,721,388 Notes to the Scheudle of Revenues, Expenditures and Changes in Fund Balances Budget and Actual The accompanying schedule of revenues, expenditures and changes in fund Balances budget and actual is presented on the modified accrual basis of accounting which is the basis of accounting used in the presentation of the fund finncial statements. See notes to the basic financial statements. 21 OCONEE COUNTY BOARD OF EDUCATION SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS FOR THE FISCAL YEAR ENDED JUNE 30, 2008 Funding Agency Program/Grant Agriculture, U. S. Department of Child Nutrition Cluster Pass-Through From Georgia Department of Education Food Services School Breakfast Program National School Lunch Program Total Child Nutrition Cluster Other Programs Pass-Through From Georgia Department of Education Food Donation (1) Total U. S. Department of Agriculture Education, U. S. Department of Special Education Cluster Pass-Through From Georgia Department of Education Special Education Grants to States Preschool Grants Total Special Education Cluster Other Programs Pass-Through From Georgia Department of Education Title I Grants to Local Educational Agencies Improving Teacher Quality State Grants State Grants for Innovative Programs English Language Acquisition Grant CFDA Number PassThrough Entity ID Number Expenditures In Period 10.553 10.555 10.550 NIA $ NIA NIA (2) 1,879,476 1,879,476 152,833 2,032,309 84.027 NIA 84.173 NIA 982,285 37,098 1,019,383 84.010 NIA 84.367 NIA 84.298 NIA 84.365 NIA 414,712 152,134 7,280 31,399 22 OCONEE COUNTY BOARD OF EDUCATION SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS FOR THE FISCAL YEAR ENDED JUNE 30, 2008 Funding Agency Program/Grant Title IV Safe and Drug Free Schools And Communities CFDA Number 84.186 PassThrough Entity ID Number NIA Expenditures In Period 16,647 Vocational Education-Basic Grants to States Career and Technical Education 84.048 NIA 34,990 Total U.S. Department of Education 1,676,545 National Science Foundation Pass-Through From University of Georgia Partnership for Reform in Science and Mathematics 47.076 NIA 218,140 Total Expenditures of Federal Awards $ 3,926,994 NIA= Not Available Notes to the Schedule ofExpenditures of Federal Awards (I) The amounts shown for the Food Donation Program represent 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 were not maintained separately and are included in the National School Lunch Program. The School District did not provide Federal Assistance to any Subrecipient. The accompanying schedule of expenditures of Federal awards includes the Federal grant activity ofthe Oconee County Board ofEducation 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. 23 OCONEE COUNTY BOARD OF EDUCATION SCHEDULE OF STATE REVENUE FOR THE FISCAL YEAR ENDED JUNE 30, 2008 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 Grades (6-8) Program Middle School (6-8) Program High School General Education (9-12) Program Vocational Laboratory (9-12) Program Students with Disabilities Program for Intellectually Gifted Students - 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 Bus Replacement Sparsity Nursing Services Vocational Supervisors Food Services Vocational Education Amended Formula Adjustment Other State Programs National Teacher Certification Preschool Handicapped Program Governmental . Fund Types Capital General Projects Fund Fund $ 2,043,717 $ 58,132 4,928,825 139,160 2,229,753 52,316 4,087,706 3,756,737 1,235,384 2,664,970 l,893,123 112,527 334,542 191,312 685,808 214,442 118,546 913,562 1,378,430 1,599,931 762,664 119,270 20,000 124,873 17,327 131,506 99,515 (576,215) 186,517 93,212 29,617,592 Total $ 2,043,717 58,132 4,928,825 139,160 2,229,753 52,316 4,087,706 3,756,737 1,235,384 2,664,970 1,893,123 112,527 334,542 191,312 685,808 214,442 118,546 913,562 1,378,430 1,599,931 762,664 119,270 20,000 124,873 17,327 131,506 99,515 (576,215) 186,517 93,212 29,617,592 24 OCONEE COUNTY BOARD OF EDUCATION SCHEDULE OF STATE REVENUE FOR THE FISCAL YEAR ENDED JUNE 30, 2008 Agency/Funding Grants On Behalf Payments On Behalf Payments - Health Insurance On Behalf Payments -Teachers Retirement On Behalf Payments - Public School Employees Retirement Middle School Summer Remedial Program Other Grants from Georgia Department of Education Virtual Schools Grant Other Grants from Georgia Department of Education Graduation Coaches Other Grants from Georgia Department ofEducation Capital Outlay Grants: Georgia State Financing and Investment Commission Total State Funds See notes to the basic financial statements. Governmental Fund Types Capital General Projects Fund Fund Total $ 1,143,926 $ 30,172 7,348 1,181,446 $ 1,143,926 30,172 7,348 1,181,446 1,924 1,924 1,924 1,924 2,250 2,250 2,250 2,250 87,967 87,967 87,967 87,967 1,496,306 1,496,306 1,496,306 1,496,306 $ 30,891,179 $ 1,496,306 $ 32,387,485 25 OCONEE COUNTY BOARD OF EDUCATION SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS FOR THE FISCAL YEAR ENDED JUNE 30, 2008 Project Original Estimated Cost(!) Current Estimated Costs(2) Expended In Current Year (3)(4) Expended In Prior Years (3) (4) Project Status 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. 24,000,000 31,225,094 4,124,154 25,361,553 Ongoing Providing 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 of the School District, including, without limitation, athletic facilities, road improvement and technology infrastructure and equipment, and to the extent there are additional funds available, constructing additional new schools and administrative facilities, and pay expenses incident thereto, including the payment of any capitalized interest, at a cost of approximately $38,000,000 and the issuance of general obligation debt of Oconee County School District, in one or more series, in the aggregate principal amount of $24,000,000 for the above purpose. 38,000,000 38,000,000 15,206,931 1,666,494 Ongoing $ 62,000,000 $ 69,225,094 $ 19,331,085 $ 27,028,047 (I) The School District's original cost estimate as specified in the resolution calling for the imposition of the Local Option Sales Tax. (2) The School District's current estimate of total cost for the project(s). Includes all cost from project inception to completion. (3) The voters of Oconee County approved the imposition of a I% 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 project(s) as follows: Prior Years Current Year Total $ 862,234 37,240 $ 899,474 See notes to the basic financial statements. 26 OCONEE COUNTY BOARD OF EDUCATION SCHEDULE OF QUALITY BASIC EDUCATION PROGRAM (QBE) ALLOTMENTS AND EXPENDITURES BY PROGRAM GENERAL FUND FOR THE FISCAL YEAR ENDED JUNE 30, 2008 Description Allotments From Georgia Department of Education (1 )(2) Eligible QBE Program Costs Salaries Operations Total Direct Instructional Funds: 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 III Category IV Gifted Student - Category VI Remedial Education Program Alternative Education Program English Speakers of Other Languages (ESOL) 2,451,174 $ 2,580,726 $ 63,875 51,384 5,842,098 6,680,329 169,477 244,644 2,656,549 3,688,546 78,034 182,877 4,891,602 5,609,012 4,515,259 6,566,162 1,473,326 1,045,440 3,165,510 20,331 157,966 2,641,068 2,208,725 131,653 401,632 221,056 2,474,530 37,765 481,913 237,836 99,490 $ 410,530 1,800 229,718 847 292,975 412,534 156,951 12,520 25,498 1,224 20,373 547 6,378 269 2,680,216 51,384 7,090,859 246,444 3,918,264 183,724 5,901,987 6,978,696 1,202,391 20,331 170,486 2,666,566 1,224 2,494,903 38,312 488,291 238,105 TOTAL DIRECT INSTRUCTIONAL PROGRAMS 28,269,970 32,700,529 1,671,654 34,372,183 Media Center Program Staffand Professional Development 818,168 142,881 904,595 128,585 1,033,180 111,753 TOTAL QBE FORMULA FUNDS $ 29,231,019 $ 33,605,124 $ 1,800,239 $ 35,517,116 (I) Comprised of State Funds plus Local Five Mill Share. (2) Allotments do not include the impact of the State amended formula adjustment. See notes to the basic financial statements. 27 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 August 6, 2009 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, 2008, which collectively comprise Oconee County Board of Education's basic financial statements and have issued our report thereon dated August 6, 2009. 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 as a basis for designing our auditing procedures for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the Oconee County Board of Education's internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness of the Oconee County Board of Education's internal control over financial reporting. Our consideration of internal control over financial reporting was for the limited purpose described in the preceding paragraph and would not necessarily identify all deficiencies in internal control over financial reporting that might be significant deficiencies or material weaknesses. However, as discussed below, we identified a certain deficiency in internal control over financial reporting that we consider to be a significant deficiency. 2008YB-30 A control deficiency exists when the design or operation ofa control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect misstatements on a timely basis. A significant deficiency is a control deficiency, or combination of control deficiencies, that adversely affects the Oconee County Board of Education's ability to initiate, authorize, record, process, or report financial data reliably in accordance with generally accepted accounting principles such that there is more than a remote likelihood that a misstatement of the Oconee County Board of Education's financial statements that is more than inconsequential will not be prevented or detected by the Oconee County Board of Education's internal control. We consider item FS-7081-08-01 in the accompanying Schedule ofFindings and Questioned Costs to be a significant deficiency in internal control over financial reporting. A material weakness is a significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood that a material misstatement ofthe financial statements will not be prevented or detected by the Oconee County Board of Education's internal control. Our consideration of the internal control over financial reporting was for the limited purpose described in the first paragraph ofthis section and would not necessarily disclose all deficiencies in internal control that might be significant deficiencies and, accordingly, would not necessarily disclose all significant deficiencies that are also considered to be material weaknesses. However, we believe that the significant deficiency 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. We noted certain matters that we have reported to management of Oconee County Board of Education in a separate letter dated August 6, 2009. Oconee County Board ofEducation's response to the findings identified in our audit is described in the accompanying Schedule ofManagement's Responses. We did not audit Oconee County Board of Education's response and, accordingly, we express no opinion on it. 2008YB-30 This report is intended solely for the information and use of management, members ofthe Oconee County Board of Education, others within the entity, Federal awarding agencies and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties. Respectfully submitted, RWH:as 2008YB-30 ~W-~ Russell W. Hinton, CPA, CGFM State Auditor Russell W. Hinton STATE AUDITOR (404) 656-2174 DEPARTMENT OF AUDITS AND ACCOUNTS 270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400 August 6, 2009 Honorable Sonny Perdue, Governor Members of the General Assembly Members ofthe State Board of Education and Superintendent and Members ofthe 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 ofits major Federal programs for the year ended June 30, 2008. Oconee County Board ofEducation's major Federal programs are identified in the Summary of Auditor's Results Section of the accompanying Schedule of Findings and Questioned Costs. Compliance with the requirements of laws, regulations, contracts and grants applicable to each of its major Federal programs is the responsibility of 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 ofcompliance in accordance with auditing standards generally accepted in the United States ofAmerica; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General ofthe United States; and 0MB Circular A133, Audits ofStates, Local Governments, and Non-Profit Organizations. Those standards and 0MB Circular A-133 require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major Federal program occurred. An audit includes examining, on a test basis, evidence about the Oconee County Board ofEducation's compliance with those requirements and performing such other procedures as we considered necessary in the 2008SA-10 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, 2008. 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 ofexpressing our opinion on compliance, but not for the purpose ofexpressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of the Oconee County Board of Education's internal control over compliance. A control deficiency in an entity's internal control over compliance exists when the design or operation ofa control does not allow management or employees, in the normal course ofperforming their assigned functions, to prevent or detect noncompliance with a type of compliance requirement of a Federal program on a timely basis. A significant deficiency is a control deficiency, or combination ofcontrol deficiencies, that adversely affects the entity's ability to administer a Federal program such that there is more than a remote likelihood that noncompliance with a type of compliance requirement of a Federal program that is more than inconsequential will not be prevented or detected by the entity's internal control. A material weakness is a significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood that material noncompliance with a type of compliance requirement of a Federal program will not be prevented or detected by the entity's internal control. Our consideration ofthe internal control over compliance was for the limited purpose described in the first paragraph of this section and would not necessarily identify all deficiencies in internal control that might be significant deficiencies or material weaknesses. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses, as defined above. 2008SA-10 This report is intended solely for the information and use of management, members of the Oconee County Board ofEducation, Federal awarding agencies and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties. Respectfully submitted, RWH:as 2008SA-10 Russ 1W. Hinton, CPA, CGFM State Auditor 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, 2008 PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS No matters were reported. PRIOR YEAR FEDERAL AWARD FINDINGS AND QUESTIONED COSTS No matters were reported. SECTION IV FINDINGS AND QUESTIONED COSTS OCONEE COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2008 I SUMMARY OF AUDITOR'S RESULTS 1. Type of Report Issued on the Financial Statements The auditor's opinion on the Oconee County Board of Education's financial statements was unqualified. 2. Significant Deficiencies in Internal Control Disclosed by the Audit ofthe Financial Statements The audit report for the Oconee County Board of Education disclosed a financial statement significant deficiency related to the following control category. Capital Assets The significant deficiency 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. Significant Deficiencies in Internal Control Over Major. Programs The audit report for the Oconee County Board of Education did not disclose any significant deficiencies in internal control over major programs. 5. Type of Report Issued on Compliance for Major Programs The auditor's opinion on the 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 audit findings required to be reported by section .510(a) of OMB Circular A-13 3. 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, 2008 II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS CAPITAL ASSETS Inadequate Reporting of Capital Assets Significant Deficiency Finding Control Number: FS-7081-08-01 Condition: The School District failed to adequately maintain internal controls over financial reporting to ensure the completeness of capital assets activity. Criteria: Chapter 37 Fixed Assets of the Financial Management for Georgia Local Units of Administration provides that School Districts must establish fixed assets policies, define system requirements, implement a fixed assets system and maintain fixed assets inventory records. Questioned Cost: NIA Information: The School District did not capitalize current year acquisitions of capital assets consisting ofland ($1,118,918), Construction in Progress ($142,138) and Buildings and Building Improvements ($482,432) in accordance with its capital assets policy. The School District made correcting entries to record the land acquisition and construction in progress. Cause: The School District did not implement accounting procedures to ensure the completeness of capital assets and related activity. Effect: The failure ofthe School District to maintain a complete and accurate capital assets listing can lead to inaccurate internal and external reporting, as well as noncompliance with generally accepted accounting principles. Recommendation: The School District should review its capital assets records and make appropriate adjustments to ensure that capital assets records conform to its approved capital assets policy and generally accepted accounting principles. III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS No matters were reported. -2 - SECTIONV MANAGEMENT'S RESPONSES OCONEE COUNTY BOARD OF EDUCATION SCHEDULE OF MANAGEMENT'S RESPONSES YEAR ENDED JUNE 30, 2008 Finding Control Number: FS-7081-08-01 We concur with this finding. As assets are purchased they will be captured and placed into inventory. A minimum of once a quarter, the Assistant Superintendent for Financial Operations and the system's part-time CPA will review purchases with objects 71 xxx through 75xxx and capture any assets that need to be capitalized. The asset list will be reconciled during the annual year-end closing procedures to verify that assets have been captured, capitalized and depreciated. Contact Person: Randall Morrison, Assistant Superintendent for Financial Operations Telephone: (706) 769-5130, extension 1109, Fax: (706) 769-3500 Email: rmorrison@oconee.k 12.ga.us