Paulding County Board of Education, Dallas, Georgia, annual financial report for the fiscal year ended June 30, 2010 (including independent auditor's reports)

PAULDING COUNTY BOARD OF EDUCATION
DALLAS, GEORGIA
ANNUAL FINANCIAL REPORT FOR THE FISCAL YEAR ENDED
JUNE 30,2010
(Including Independent Auditor's Reports)

PAULDING COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS -

SECTION I

FINANCIAL

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

REQUIRED SUPPLEMENTARY INFORMATION

MANAGEMENT'S DISCUSSION AND ANALYSIS

EXHIBITS

BASIC FINANCIAL STATEMENTS

DISTRICT-WIDE FINANCIAL STATEMENTS

A

STATEMENT OF NET ASSETS

B

STATEMENT OF ACTIVITIES

FUND FINANCIAL STATEMENTS

C

BALANCE SHEET

GOVERNMENTAL FUNDS

D

RECONCILIATIONOF THE GOVERNMENTAL FUNDS BALANCE SHEET

TO THE STATEMENT OF NET ASSETS

E

STATEMENT OF REVENUES, EXPENDITURES AND CHANGES

IN FUND BALANCES

GOVERNMENTAL FUNDS

F

RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT

OF REVENUES, EXPENDITURES AND CHANGES IN FUND

BALANCES TO THE STATEMENT OF ACTIVITIES

G

STATEMENT OF FIDUCIARY NET ASSETS

FIDUCIARY FUNDS

H

NOTES TO THE BASIC FINANCIAL STATEMENTS

SCHEDULES

REQUIRED SUPPLEMENTARY INFORMATION

1 SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES
IN FUND BALANCES - BUDGET AND ACTUAL GENERAL FUND

PAULDING COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS -

SECTION I

FINANCIAL

SCHEDULES

SUPPLEMENTARY INFORMATION

COMPONENT UNIT FUND FINANCIAL STATEMENTS

2

STATEMENT OF NET ASSETS

PROPRIETARY FUND

3

STATEMENT OF REVENUES, EXPENSES AND CHANGES

IN NET ASSETS

PROPRIETARY FUND

4

STATEMENT OF CASH FLOWS

PROPRIETARY FUND

5

SELECTED FINANCIAL NOTES

6 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS

7 SCHEDULE OF STATE REVENUE

8 SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS

9 ALLOTMENTS AND EXPENDITURES

GENERAL FUND - QUALITY BASIC EDUCATION PROGRAMS (QBE)

BY PROGRAM

SECTION II
COMPLIANCE AND INTERNAL CONTROL REPORTS
INDEPENDENT AUDITOR'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WlTH GOVERNMENT AUDITING STANDARDS
INDEPENDENT AUDITOR'S REPORT ON COMPLIANCE WlTH REQUIREMENTS THAT COULD HAVE A DIRECT AND MATERIAL EFFECT ON EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WlTH OMB CIRCULAR A-133

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

PAULDING COUNTY BOARD OF EDUCATION
- TABLE OF CONTENTS -
SECTION IV FINDINGS AND QUESTIONED COSTS SCHEDULE OF FINDINGS AND QUESTIONED COSTS

SECTION I FlNANClAL

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

DEPARTMENOTF AUDITSAND ACCOUNTS
270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400
March 28,2011

Honorable Nathan Deal, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the Paulding County Board of Education
INDEPENDENT AUDITOR'S COMBINED REPORT ON BASIC FINANCIAL STATEMENTSAND SUPPLEMENTARY INFORMATION - SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
Ladies and Gentlemen:
We have audited the accompanying financial statements of the governmental activities, the discretely presented component unit, each major fund, and the aggregate remaining fund information (Exhibits A through H) of the Paulding County Board of Education, as of and for the year ended June 30, 2010, which collectively comprise the Board's basic financial statements as listed in the table of contents. These financial statements are the responsibility of the Paulding 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 of America and the standards applicable to financial audits contained in GovernmentAuditing Standards, issued by the Comptroller General of the 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 examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and the significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinions.
In our opinion, the financial statements referred to previously present fairly, in all material respects, the respective financial position of the governmental activities, the discretely presented component unit, each major fund, and the aggregate remaining fund information of the Paulding County Board of Education, as of June 30, 2010, 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.
As described in Note 2 to the financial statements, the School District has reported the financial activity of the Paulding Education Foundation, Inc. within the financial statements.

In accordance with Government Auditing Standards, we have also issued our report dated March 28, 2011, on our consideration of the Paulding County Board of Education's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing 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 Standardsand should be considered in assessingthe results of our audit.
Accounting principles generally accepted in the United States of America require that the Management's Discussion and Analysis and the Schedule of Revenues, Expendituresand Changes in Fund Balances - Budget and Actual, as presented on pages i through vii and page 29 respectively, be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reportingfor placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures, to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during the audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance.
Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Paulding County Board of Education'sfinancial statements as a whole. The accompanying supplementary information consists of Schedules 2 through 9, which includes the Schedule of Expenditures of Federal Awards as required by U. S. Office of Management and Budget Circular A-133, Audib of States, Local Governmen&, and Non-Profit Organizations, are presented for purposes of additional analysis and are not a required part of the financial statements. Such information is the responsibility of management and was derived from and relate directly to the underlying accounting and other records used to prepare the financial statements. The information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated, in all material respects, in relation to the financial statements 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,
Russell W. Hinton, CPA, CGFM State Auditor

PAULDING COUNTY BOARD OF EDUCATION MANAGEMENTS DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30,2010

The discussion and analysis of the Paulding County Board of Education's financial performance provides an overall review of the Board's financial activities for the fiscal year ended June 30, 2010. The intent of this discussion and analysis is to look at the Board's financial performance as a whole. Readers should also review the financial statements and the notes to the basic financial statements to enhance their understanding of the Board's financial performance.

The Paulding County School District has prepared the annual financial report to comply with the reporting model for financial statements (GASBStatement 34).

Financial Highlights

Key financial highlights for fiscal year 2010 are as follows:

J

The Board's financial status continued to improve during fiscal year 2010. In total, net

assets increased $15.9 million, which represents a 6.0 percent increase from the fiscal year

2009 balance. This total increase was due to governmental activities since the Board has no

business-type activities.

J

General revenues accounted for $116.7 million in revenue or 4 4 percent of all revenues.

Program specific revenues in the form of charges for services and sales, grants and

contributions accounted for $149.6 million or 5 6 percent of total revenues. Total revenues

were $266.3 million.

J

The Board had $250.4 million in expenses related to governmental activities; only $149.6

million of these expenses were offset by program specific charges for services, grants or

contributions. General revenues, primarily taxes, of $116.7 million were adequate to provide

for these programs.

J

Among major funds, the general fund had $231.2 million in revenues, $0.3 million in net

other financing sources and $235.9 million in expenditures. The general fund's balance

decreased to $19.7 million from $24.1 million.

Usingthe Basic Financial Statements

This annual report consists of a series of financial statements and notes to those statements. These statements are organized so the reader can understand the Paulding County Board of Education as a financial whole, or as an entire operating entity.

The Statemento f NetAssetsand Statement ofActivities provide information about the activities of the Board as a whole, presenting both an aggregate view of the Board's finances and a longer-term view of those finances. The fund financial statements provide the next level of detail. For governmental funds, these statements tell how services were financed in the short-term as well as what remains for future spending. The fund financial statements also look at the Board's most significant funds. In the case of the Paulding County Board of Education, the general fund is by far the most significant fund.

PAULDING COUNTY BOARD OF EDUCATION MANAGEMENTS DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30,2010

Reportingthe Board as a Whole

Statement of Net Assets and Statement of Activities

While these documents contain the large number of funds used by the Board to provide programs and activities, the view of the Board as a whole looks at all financial transactions and asks the
question, "How did we do financially during fiscal year 2010?" The Statement of Net Assets and the
Statement of Activities answer this question. These statements include all assets and all liabilities using the accrual basis of accounting similar to the accounting used by most 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 Board's net assetsand changes in those assets. This change in net assets is important because it tells the reader whether, for the Board as a whole, the financial positlbn of the Board has improved or diminished. The causes of this change may be the result of many factors, some financial, some not. Nonfinancial factors include the Board's property tax base, facility conditions, required educational programs and other factors.

In the Statement of Net Assets and the Statement of Activities, the Board has one distinct type of activity:

>

Governmental Activities-All of the Board's programs and services are reported here

including instruction, support services, operation and maintenance of plant, pupil

transportation, food service, after school program, school activity accounts and various

others.

Reportingthe Board's Most Significant Funds

Fund Financial Statements
Fund financial reports provide detailed information about the Board's major funds. The Board uses many funds to account for a multitude of financial transactions. However, these fund financial statements focus on the Board's most significant funds. The Board's major governmental funds are the General Fund, the District-wide Capital Projects Fund, and the Debt Service Fund.

Governmen&/Funds Most of the Board's activities are reported in governmental funds, which focus on how money flows into and out of those funds and the balances left at yearend available for spending in future periods. These funds are reported using an accounting method called modified accrualaccounting, which measures cash and all other financialassetsthat can readily be converted to cash. The governmental fund statements provide a detailed short-term view of the Board's general government operations and the basic services it provides. Governmental fund information helps you determine whether there are more or fewer financial resources that can be spent in the near future to finance educational programs. The relationship (or differences) between governmental activities (reported in the Statement of Net Assets and the Statement of Activities) and governmental funds is reconciled in the financial statements.

Fiduciary Funds: The Board is the trustee, or fiduciary, for assets that belong to others, such as school clubs and organizations within the school activity accounts. The Board is responsible for ensuring that the assets reported in these funds are used only for their intended purposes and by those to whom the assets belong. The Board excludes these activities from the District-wide financial statements because it cannot use these assets t o finance its operations.

PAULDING COUNTY BOARD OF EDUCATION MANAGEMENTS DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30,2010

The Board as a Whole
The perspective of the Statement of Net Assets is of the Board as a whole. Table 1provides a summary of the Board's net assets for fiscal year 2010.
Table 1 Net Assets (In Thousands)

Governmental Activities

Fiscal

Fiscal

Year 2010

Year 2009

Assets Current and Other Assets Capital Assets, Net

Total Assets

Liabilities Current and Other Liabilities Long-Term Liabilities

Total Liabilities

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

Total Net Assets

Total net assets increased $15.9 million.
Table 2 shows the changes in net assets for fiscal year 2 0 1 0 compared to the changes in net assets in fiscal year 2009.

iii

PAULDINGCOUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30,2010

Table 2 Change in Net Assets
(In Thousands)

Governmental Activities

Fiscal Year

Fiscal Year

Revenues Program Revenues: Charges for Services and Sales Operating Grants and Contributions Capital Grants and Contributions
Total Program Revenues
General Revenues: Taxes Property Taxes For Maintenance and Operations For Debt S ~ N ~ C ~ S For Railroad Cars and Other Taxes Sales Taxes Special Purpose Local Option Sales Tax For Debt Service Intangible RecordingTax Grants and Contributions not Restricted to Specific Programs Investment Earnings Miscellaneous
Total General Revenues
Total Revenues
Program Expenses: Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Sewices Other Support Services Operations of Non-InstructionalServices Enterprise Operations Community Services Food Services Interest on Short-Term and Long-Term Debt
Total Expenses
Increase in Net Assets

PAULDING COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30,2010

Governmental Activities
lnstruction comprises 63.6 percent of governmental program expenses. lnterest expense comprises 2.7 percent of governmental program expenses. lnterest expense was attributable to the outstanding bonds for capital projects and capital leases.
The Statement of Activities shows the cost of program services and the charges for services and grants offsetting those services. Table 3 shows, for governmental activities, the total cost of services and the net cost of services. That is, it identifies the cost of these services supported by tax revenue and unrestricted State entitlements.
Table 3 Governmental Activities
(In Thousands)

Total Cost of Services

Fiscal

Fiscal

Year 2010

Year 2009

Net Cost of Services

Fiscal

Fiscal

Year 2010

Year 2009

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

Although program revenues make up a majority of the revenues, the Board is still dependent upon tax revenues for governmental activities. Over 33 percent of instruction activities are supported through taxes and other general revenues; for all governmental activities general revenue support is over 4 0 percent.
The Board's Funds
The Board's governmental funds are accounted for using the modified accrual basis of accounting. Total governmental funds had revenues and other financing sources of $270.8 million and expenditures and other financing uses of $309.3 million. There was a decrease of $39.2 million in the capital projects fund due to construction. The general fund had a decrease of $4.3 million and

PAULDING COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30,2010

the debt service fund had an increase of $5.0 million. The negative change in the fund balance of the general fund for the year reflects what the Board anticipated in the operating funds and was also reflective in the current year budget.

General Fund Budgeting Highlights

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

During the course of fiscal year 2010, the Board amended its general fund budget as needed. The Board uses site-based budgeting. The budgeting systems are designed to tightly control total site budgets but provide flexibility for site management.
For the General Fund, the final budgeted revenues of $232.7 million reflect a reduction to the original budgeted amount of $240.4 million by $7.7 million. This difference was primarily due to decreases in state revenues budgeted of $13.6 million offset by increases in Federal revenues budgeted of $5.9 million. The actual revenues of $231.2 million were less than the final budgeted amount by $1.5 million.

The final budgeted expenditures of $242.1 million reflect a reduction to the original budgeted amount of $245.7 million by $3.6 million. This difference was primarily due to a decrease in instruction of $5.7 million and a decrease of $0.3 million in Student Transportation offset by an increase in Pupil Services of $1.7 million and an increase in Maintenance and Operation of $0.9 million. The final budgeted amount of $242.1 exceeded the actual expenditures by $6.2 million.

General Fund expenditures exceeded revenues by $4.7 million. The Board has made a concerted effort to maintain an appropriate fund balance for current operations and anticipated austerity reductions.

Capital Assets and Debt Administration

Capita/ Assets
At the end of fiscal year 2010, the Board had $384.7 million invested in capital assets, all in governmental activities. Table 4 shows fiscal year 2010 balances compared with fiscal year 2009 balances.
Table 4 Capital Assets (Net of Depreciation,in Thousands)

Governmental Activities

Fiscal

Fiscal

Year 2010

Year 2009

Land Construction In Progress Building and lmprovements Equipment Land Improvements

Total

PAULDING COUNTY BOARD OF EDUCATION MANAGEMENTS DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30,2010
The primary increases occurred in Buildings and Improvements as a result of the completion of one elementary school and miscellaneous additions to other schools. Due to the ongoing growth in the county, the Board has numerous construction projects including new buildings, additions and renovations.
Debt
At June 30, 2010, the Board had $158.8 million in bonds outstanding with $17.7 million due within one year. The School District's legal debt limit is 1 0 percent of the net assessed valuation of $3,891.1 million for bond purposes, or a maximum bonded debt of $389.1 million. The total current bonded restricted debt of $158.8 million is well below the legal limit. Other long-term liabilities amounted to $7.9 million, which consists of unamortized bond premiums, capital leases and compensated absences.
Current Issues
With approximately 28,000 students, the Paulding County School District is one of the largest districts in the state. As home buying slowed, we had a window of opportunity to make greater strides in the demands on our facilities and resources in a district this size. The economy, recruitment and retention of highly qualified staff, erosion of state and local funding has resulted in increased reliance on Federal stimulus/sta bilization funding.
The School District is facing operating challenges due to the decline in the economy. The Paulding County School District is committed to finding solutions that provide the best education for our children with the least possible impact on the classroom while working to minimize the financial impact on our employees.
Contacting the Board's Financial Management
This financial report is designed to provide our citizens, taxpayers, investors, and creditors with a general overview of the Board's finances and to show the Board's accountability for the money it receives. If you have questions about this report or need additional information, contact Gayle W. Blalock, CPA, Chief Financial Officer at the Paulding County Board of Education, 3236 Atlanta Highway, Dallas, Georgia 30132.

PAULDING COUNTY BOARD OF EDUCATION

PAULDING COUNTY BOARD OF EDUCATION STATEMENT OF NET ASSETS JUNE 30.2010

EXHIBIT "A"

ASSETS
Cash and Cash Equivalents Investments Accounts Receivable, Net Taxes State Government
Federal Government Other Inventories Prepaid Items Capitalized Bond and Other Debt Issuance Cost Capital Assets, Non-Depreciable Capital Assets, Depreciable(Net of Accumulated Depreciation)

PRIMARY GOVERNMENT
GOVERNMENTAL ACTIVITIES

COMPONENT UNIT
PAULDING EDUCATION FOUNDATION, INC.

TotaI Assets

Accounts Payable Salaries and Benefits Payable Claims Incurred but not Reported (IBNR) Payroll Withholdings Payable Contracts Payable Retainages Payable Interest Payable Long-Term Liabilities:
Due Within One Year Due in More Than One Year
Total Liabilities
NET ASSETS
Invested in Capital Assets, Net of Related Debt Restricted for
Boles MemorialScholarship Continuationof Federal Programs Debt Service Logans Crossing Scholarship Rakestraw Memorial Scholarship Unrestricted
Total Net Assets
Total Liabilities and Net Assets
The notes to the basic financial statements are an integral part of this statement.
- 1-

PAULDING COUNTY BOARD OF EDUCATION STATEMENT OF ACTlVlTiES
FOR THE YEAR ENDED JUNE 30,2010

GOVERNMENTAL ACTIVITIES
Instruction Support Services
Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Operations of Non-Instructional Services Enterprise Operations Community Services Food Services Operation Interest on Short-Term and Long-Term Debt
Total Governmental Activities
COMPONENT UNIT
Paulding Education Foundation, Inc.
General Revenues: Taxes:
Property Taxes For Maintenance and Operations For Debt Services For Railroad Cars
Sales Taxes Special Purpose Local Option Sales Tax
For Debt Services Intangible Recording Tax Grants and Contributions Not Restr~ctedto Specific Programs Investment Earnings Miscellaneous
Total General Revenues
Changes in Net Assets
Net Assets - Beginning of Year (Restated)
Net Assets - End of Year

EXPENSES

CHARGES FOR SERVICES

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

EXHIBIT "B"

PROGRAM REVENUES OPERATING GRANTS AND
CONTRIBUTIONS

CAPITAL GRANTS AND CONTRIBUTIONS

NET (EXPENSES) REVENUES

PRIMARY

COMPONENT UNIT

GOVERNMENT

PAULDING

GOVERNMENTAL

EDUCATION

ACTlVlTlES

FOUNDATION. INC.

PAULDING COUNTY BOARD OF EDUCATION BALANCE SHEET
GOVERNMENTAL FUNDS JUNE 30,2010

ASSETS
Cash and Cash Equivalents Investments Accounts Receivable, Net Taxes State Government
Federal Government lnterfund Other Inventories P r e ~ a i dItems
Total Assets

GENERAL FUND

DISTRICTWIDE
CAPITAL PROJECTS
FUND

LIABILITIES AND FUND BALANCES
LIABILITIES
Accounts Payable
Accounts Payable - lnterfund
Salaries and Benefits Payable Payroll Withholdings Payable Contracts Payable Retainages Payable Deferred Revenue
Total Liabilities
FUND BALANCES
Resewed for: Continuation of Federal Programs Debt Service Capital Projects Unreserved:
Designated for School Activity Accounts: Undesignated Reported in:
General Fund
Total Fund Balances

Total Liabilities and Fund Balances

DEBT SERVICE
FUND

TOTAL

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

PAULDING COUNTY BOARD OF EDUCATION RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET
TO THE STATEMENT OF NET ASSETS JUNE 30,2010
- Total Fund Balances Governmental Funds (Exhibit "C")
Amounts reported for Governmental Activities in the Statement of Net Assets are different because:
Capital Assets used in Governmental Activities are not financial resources and therefore are not reported in the funds. These assets consist of:
Land Construction in Progress Land Improvements Buildings Machinery and Equipment Accumulated Depreciation Total Caoital Assets
Bond Issuance Costs (Deferred Charges reclassed to Assets and amortized in District-wide statements, expensed In Governmental Activities).
Taxes that are not available to pay for current period expenditures are deferred in the funds.
Long-Term Liabilities, including Bonds Payable, are not due and payable in the current period and therefore are not reported as liabilities in the funds. Long-Term Liabilities at year-end consist of:
Bonds Payable Capital Leases Payable Compensated Absences Unamortized Bond Premiums Claims Incurred but not Reported (IBNR) Interest Payable Total Long-Term Liabilities
Net Assets of Governmental Activities (Exhibit "A")

EXHIBIT 'D"

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

PAULDING COUNTY BOARD OF EDUCATION STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES
GOVERNMENTAL FUNDS YEAR ENDEDJUNE 30,2010

REVENUES
Property Taxes Sales Taxes State Funds Federal Funds Charges for Services Investment Earnings Miscellaneous
Total Revenues
EXPENDITURES
Current: Instruction Support Services Pupil Services Improvementof InstructionalServices Educational Media Servlces General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Enterprise Operations Community Services Food Services Operation
Capital Outlay Debt S e ~ i c e :
Principal Interest Dues and Fees
Total Expenditures
Excess of Revenues Over (Under) Expenditures
OTHER FINANCING SOURCES (USES)
Insurance Proceeds Transfers In Transfers Out
Total Other Financing Sources (Uses)
Net Changes in Fund Balances
Fund Balances - Beginning

GENERAL FUND

DISTRICTWIDE
CAPITAL PROJECTS
FUND

DEBT SERVICE
FUND

TOTAL

$ 231.254.947.10 $ 9,733,398.61 $ 24,823,118.09 $ 265,811,463.80

$ 235,915,166.46 $ 45,084,085.20 $ 24,061,628.26 $ 305,060,879.92

$

-4,660,219.36 $ -35,350,686.59 $

761,489.83 $ -39,249,416.12

$

302,014.95 $ 3,870,330.35 $ 4,303,255.35 $

734,939.95

$

-4,358,204.41 $ -39,221,016.94 $ 5,064,745.18 $ -38,514,476.17

24,125,428.18

60,074,943.30

16,286.348.63

100,486,720.11

Fund Balances - Ending

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

PAULDING COUNTY BOARD OF EDUCATION RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT OF
REVENUES. EXPENDITURES AND CHANGES IN FUND BALANCES TO THE STATEMENT OF ACTIVITIES JUNE 30.2010
Total Net Change in Fund Balances - GovernmentalFunds (Exhibit " E )
Amounts reported for GovernmentalActivities in the Statement of Activities are different because:
Capital Outlays are reported as expenditures in Governmental Funds. However, in the Statement of Activities, the cost of Capital Assets is allocated over their estimated useful lives as depreciation expense. In the current period, these amounts are:
Capital Outlay Depreciation Expense
Excess of Cap~taOl utlay over Depreciation Expense
Taxes reported in the Statement of Activities that do not provide current financial resources are not reported as revenues in the funds.
In the Statement of Actlvities, only the gain or loss on the sale or disposal of a capital assets are reported, whereas in the Governmental Funds, the entire proceeds from the sale increase financial resources. Thus, the change in net assets differs from the change in fund balances by the carrying value of the assets sold or disposed.
In the Statement of Activities, capital asset impairment losses are reported net of the associated insurance recovery, whereas in the Governmental Funds, the entire insurance recovery increases financial resources.
Bond issuance costs, deferred gains on refundings and similar items when debt is first issued are reported as an expenditure in Governmental Funds, but are reported as deferred charges on the Statement of Net Assets and amortized over the term of the debt, using the straight-line method. The details of this difference in the current period are as follows:
Amortization of Bond Issuance Costs
Repayment of Long-Term Debt is reported as an expenditure in Governmental Funds, but the repayment reduces Long-Term Liab~litiesin the Statement of Net Assets. In the current year, these amounts consist of:
Bond Principal Retirements Bond Premium Retirements Capital Lease Payments
Total LonETerm Debt-Repayments
Some items reported in the Statement of Activities do not require the use of current financial resourcesand therefore are not reported as expenditures in Governmental Funds. These activities consist of:
Decrease in Accrued Interest Increase in Compensated Absences Decrease in Claims and Judgments
Total Additional Expenditures
Change in Net Assets of GovernmentalAct~vities(Exhlbit"6")
The notes to the basic financial statements are an integral part of this statement. -7-

EXHIBIT "F"

(This page left intentionally blank)

PAULDING COUNTY BOARD OF EDUCATION STATEMENT OF FIDUCIARY NET ASSETS FIDUCIARY FUNDS JUNE 30,2010
ASSETS Cash and Cash Equivalents
LIABILITIES Funds Held for Others

EXHIBIT "G"
AGENCY FUNDS

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

PAULDING COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30,2010

EXHIBIT "H"

NOTE 1: DESCRIPTION OF SCHOOL DISTRICT AND REPORTING ENTITY
REPORTING ENTITY
The Paulding County Board of Education (School District) was established under the laws of the State of Georgia and operates under the guidance of a school board elected by the voters and a Superintendent appointed by the Board. The Board is organized as a separate legal entity and has the power to levy taxes and issue bonds. Its budget is not subject to approval by any other entity. Accordingly, the School District is a primary government and consists of all the organizations that compose its legal entity.
DISCRETELY PRESENTED COMPONENT UNIT
The Paulding Education Foundation, Inc. (Foundation) is a private, non-profit organization incorporated in 2006 to promote excellence in education in the School District. The Foundation encourages community and private sector support for educational activities. Contributions to the Foundation support scholarships, grants to teachers and schools as well as other School District programs.
The affairs and business of the Foundation are conducted by a Board of Trustees of not less than eight (8) but no more than twenty-two (22) voting members. In addition to the voting members, the Board of Trustees consists of three (3)non-voting members. These non-voting member positions are held by the Chairperson of the Paulding County Board of Education, the School District's Superintendent, and the School District's Chief Financial Officer, who also serves as the Foundation's treasurer. All powers, duties and functions of the Foundation conferred by the Articles of Incorporation, bylaws, state statutes, common law, court decisions, or otherwise, are exercised or performed by the Board of Trustees.
The School District deems it misleading to exclude the Foundation from its financial statements. Therefore, for fiscal year 2010, the School District included the Foundation as a discretely presented component unit in accordance with Governmental Accounting Standards Board (GASB) Statement No. 14. The Foundation has a December 3 1fiscal year end. The Foundation's December 31,2009, financial information is presented in a separate column on the School District's Statement of Net Assets and Statement of Activities. The Foundation does not issue separate financial statements. Accordingly, the Foundation's fund financial statements are included herein as supplementary information (Schedules 2 through 5).
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The School District's basic financial statements are collectively comprised of the District-wide financial statements, fund financial statements and notes to the basic financial statements of the Paulding 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 of internal activities. Governmental activities generally are financed through taxes, intergovernmental revenues, and other nonexchange transactions.

PAULDING COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30,2010

EXHIBIT "H"

The Statement of Activities presents a comparison between direct expenses and program revenues for each function of the School District's governmental activities.
Direct expenses are those that are specifically associated with a program or function and, therefore, are clearly identifiable to a particular function. Indirect expenses (expenses of the School District related to the administration and support of the School District's programs, such as office and maintenance personnel and accounting) are not allocated to programs.
Program revenues include (a) charges paid by the recipients of goods or services offered by the programs and (b) grants and contributions that are restricted to meeting the operational or capital requirements of a particular program. Revenues that are not classified as program revenues, including all taxes, are presented as general revenues.
Fund Financial Statemenix 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 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 of general long-term principal, interest and paying agent's fees.
The School District reports the following fiduciary fund type:
Agency funds account for assets held by the School District as an agent for various funds, governments or individuals.
BASIS OF ACCOUNTING
The basis of accounting determines when transactions are reported on the financial statements. The District-wide governmental and fiduciary fund financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded at the time liabilities are incurred, regardless of when the related cash flows take place. Nonexchange transactions, in which the School District gives (or receives) value without directly receiving (or giving) equal value in exchange, include property taxes, sales taxes, grants and donations. On an accrual basis, revenue from property taxes is recognized in the fiscal year for which the taxes are levied. Revenue from sales taxes is recognized in the fiscal year in which the underlying transaction (sale) takes place. Revenue from grants and donations are recognized in the fiscal year in which all eligibility requirements have been satisfied.
The School District uses funds to report on its financial position and the results of its operations. Fund accounting is designed to demonstrate legal compliance and to aid financial management by segregating transactions related to certain governmental functions or activities. A fund is a separate accounting entity with a self-balancingset of accounts.

PAULDING COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30,2010

EXHIBIT "H"

Governmental funds are reported using the current financial resources measurement focus and the modified accrual basis of accounting. 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, claims and judgments, and compensated absences, which are recognized as expenditures to the extent they have matured. Capital asset acquisitions are reported as expenditures in governmental funds. Proceeds of general long-term liabilities and acquisitions under capital leases are reported as other financing sources.
The School District funds certain programs by a combination 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.
The State of Georgia reimburses the School District for teachers' salaries and operating costs through the Quality Basic Education Formula Earnings program (QBE). Generally teachers are contracted for the school year (July 1- June 30) and paid over a twelve month contract period, generally September 1through August 31. In accordance with the respective rules and regulations of the QBE program, the State of Georgia reimburses the School District over the same twelve month period in which teachers are paid. At June 30, the amount of teachers' salaries incurred but not paid until July and August of the subsequent year are accrued. Since the State of Georgia recognizes its QBE liability for the July and August salaries at June 30, the School District recognizes the same QBE as a receivable and revenue, consistent with symmetrical recognition.
NEW ACCOUNTING PRONOUNCEMENTS
In fiscal year 2010, the School District adopted the Governmental Accounting and Standards Board (GASB) Statement No. 51, Accounting and Reporting for Intangible Assets. The provisions of this Statement generally require retroactive reporting for intangible assets acquired after June 30, 1980, with the exception of those intangible assets that have indefinite useful lives and those that are considered internally generated.
In addition, the School District adopted GASB Statement No. 53, Accounting and Financial Reporting for Derivative Instruments. The provisions of this Statement impacts disclosure regarding derivative instruments entered into by the state and local governments. Derivative disclosures, if any, will be identified in Note 3.
RESTATEMENT - CHANGE IN REPORTING ENTITY
The School District deems it misleading to exclude the Paulding Education Foundation, Inc. (Foundation) from its financial statements. Therefore, for fiscal year 2010, the School District included the Foundation as a discretely presented component unit in accordance with GASB Statement No. 14. The Foundation has a December 3 1fiscal year end. The Foundation's December 31, 2009, financial information is presented in a separate column on the School District's Statement of Net Assets and Statement of Activities. Accordingly, July 1,2009, discretely presented component unit net assets have been restated as follows:

PAULDING COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30,2010

EXHIBIT "H"

Discretely Presented Component Unit Net Assets, July 1,2009, as Previously Reported
Change in Reporting Entity - Paulding Education Foundation, Inc. Change in Assets and Revenues
Discretely Presented Component Unit Net Assets, July 1, 2009, as Restated
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 of three months or less from the date of acquisition in authorized financial institutions. Official Code of Georgia Annotated Section 45-8-14 authorizes the School District to deposit its funds in one or more solvent banks, insured Federal savings and loan associations or insured chartered building and loan associations.
INVESTMENTS
Composition of Investments lnvestments made by the School District in nonparticipating interest-earning contracts (such as certificates of deposit) and repurchase agreements are reported at cost. Participating interestearning 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 of return shall be the objective, given equivalent conditions of safety and liquidity. Funds may be invested in the following:
1. Obligations issued by the State of Georgia or by other states,
2. Obligations issued by the United States government,
3. Obligations fully insured or guaranteed by the United States government or a United States government agency,
4. Obligations of any corporation of the United States government,
5. Prime banker's acceptances,
6. The Georgia Fund 1administered by the State of Georgia, Office of Treasury and Fiscal Services,
7. Repurchase agreements, and
8. Obligations of other political subdivisions of the State of Georgia.
The School District does not have a formal policy regarding investment policies that address credit risks, custodial credit risks, concentration of credit risks, interest rate risks or foreign currency risks.

PAULDING COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30,2010

EXHIBIT "H"

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 Paulding County Board of Commissioners fixed the property tax levy for the 2009 tax digest year (calendar year) on August 11,2009 (levy date). Taxes were due on November 15, 2009 (lien date). Taxes collected within the current fiscal year or within 6 0 days after year-end on the 2009 tax digest are reported as revenue in the governmental funds for fiscal year 2010. The Paulding County Tax Commissioner bills and collects the property taxes for the School District, withholds 2.5% of taxes collected as a fee for tax collection and remits the balance of taxes collected to the School District. Property tax revenues, at the fund reporting level, during the fiscal year ended June 30, 2010, for maintenance and operations amounted to $69,227,197.93 and for school bonds amounted to $10,953,490.01.
Tax millage rates levied for the 2009 tax year (calendar year) for the Paulding County Board of Education were as follows (a mill equals $1per thousand dollars of assessed value):

School Operations School Bonds

18.909 mills 2.963 mills

21.872 mills
SALES TAXES
Special Purpose Local Option Sales Tax, at the fund reporting level, during the year amounted to $13,702,560.29 and is to be used for capital outlay for educational purposes or debt service. This sales tax was authorized by local referendum and the sales tax must be re-authorized at least every five years.
INVENTORIES
Food Inventories On the basic financial statements, inventories of donated food commodities used in the preparation of meals 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.
PREPAID ITEMS
Payments made to vendors for services that will benefit periods subsequent to June 30, 2010, are recorded as prepaid items.

PAULDING COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30,2010

EXHIBIT "H"

CAPITAL ASSETS

Capital assets purchased, including capital outlay costs, are recorded as expenditures in the fund financial statements at the time of purchase (including ancillary charges). On the District-wide financial statements, all purchased capital assets are valued at cost where historical records are available and at estimated historical cost based on appraisals or deflated current replacement cost where no historical records exist. Donated capital assets are recorded at estimated fair market value on the date donated. Disposals are deleted at depreciated recorded cost. The cost of normal maintenance and repairs that do not add to the value of assets or materially extend the useful lives of the assets is not capitalized. Depreciation is computed using the straight-line method. The School District does not capitalize book collections or works of art. During the fiscal year under review, certain school facilities sustained flood damage in the amount of $734,939.95. The School District received insurance proceeds in the amount of $734,939.95 to cover the cost of the repairs related to the flood damage. No other events or changes in circumstances affecting a capital asset that may indicate impairment were known to the School District. Capitalization thresholds and estimated useful lives of capital assets reported in the District-wide statements are as follows:

Capitalization Policy

Estimated Useful Life

Land Land Improvements Buildings and Improvements Equipment Intangible Assets

ALL

$

5,000.00

$

5,000.00

$

5,000.00

$

100,000.00

N/A 2 0 years 50 years
5 to 25 years 20 years

Depreciation is used to allocate the actual or estimated historical cost of all capital assets over estimated useful lives, with the exception of intangible assets which are amortized.

Amortization of intangible assets such as water, timber, and mineral rights, easements, patents, trademarks, copyrights and internally generated software is computed using the straight-line method over the estimated useful lives of the assets, generally 2 0 years.

COMPENSATED ABSENCES

Members of the Teachers Retirement System of Georgia (TRS) may apply unused sick leave toward early retirement. The liability for early retirement will be borne by TRS rather than by the individual school districts. Otherwise, sick leave does not vest with the employee, and no liability is reported in the School District's financial statements.

Vacation leave of 1 2 days (1.0 day per month) is awarded on a fiscal year basis to all full time personnel employed on a twelve month basis with less than 5 years experience and 15 days (1.25 days per month) per fiscal year is awarded to all full time personnel employed on a twelve month basis with 5 or more years of experience. No other employees are eligible to earn vacation leave.

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. Bond premiums and discounts are amortized based on percentage of principal paid. Bond issuance costs are reported as deferred charges and amortized over the term of the debt using the straight-line method.

PAULDING COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30,2010

EXHIBIT "H"

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. In addition, general obligation bonds have been issued to refund existing general obligation bonds. General obligation bonds are direct obligations and pledge the full faith and credit of the government. The outstanding amount of these bonds is recorded in the Statement of Net Assets.
NET ASSETS
The School District's net assets in the District-wide Statements are classified as follows:
Invested in capital assets, net of related debt -This represents the School District's total investment in capital assets, net of outstanding 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 in accordance with restrictions imposed by external third parties.
Unrestricted net assets - Unrestricted net assets represent resources derived from property taxes, sales taxes, grants and contributions not restricted to specific programs, charges for services, and miscellaneous revenues. These resources are used for transactions relating to the educational and general operations of the School District, and may be used at the discretion of the Board to meet current expenses for those purposes.
FUND BALANCES
Reserved Reserves represent those portions of fund balance equity that are legally segregated for a specific future use.
Unreserved - Designated Designatedfund balances represent tentative plans for future use of financial resources.
USE OF ESTIMATES
The preparation of the financial statements in conformity with accounting principles generally accepted in the United States requires management t o make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results may differ from those estimates.
NOTE 3: DEPOSITS AND INVESTMENTS
COLLATERALIZATION OF DEPOSITS
Official Code of Georgia Annotated (O.C.G.A.) Section 45-8-12 provides that there shall not be on deposit at any time in any depository for a time longer than ten days a sum of money which has not been secured by surety bond, by guarantee of insurance, or by collateral. The aggregate of the face

PAULDING COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30,2010

EXHIBIT "H"

value of such 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 (O.C.G.A. Section 45-8-23.1) the aggregate of the market value of the securities pledged to secure a pool of public funds shall be not less than 110 percent of the daily pool balance.

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

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

2. lnsurance on accounts provided by the Federal Deposit lnsurance Corporation,

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

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

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

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

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

CATEGORIZATION OF DEPOSITS

PRIMARY GOVERNMENT

Custodial credit risk is the risk that in the event of a bank failure, the School District's deposits may not be returned to it. The School District does not have a formal policy for managing custodial credit risk. At June 30, 2010, the bank balances were $41,424,050.62. The amounts exposed to custodial credit risk are classified into three categories as follows:

Category 1Category 2 -
Category 3 -

Uncollateralized, Cash collateralized with securities held by the pledging financial institution, or Cash collateralized with securities held by the pledging financial institution's trust department or agent but not in the School District's name.

The School District's uninsured deposits are classified by custodial risk category at June 30, 2010, as follows:

PAULDING COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30,2010

EXHIBIT "H"

Custodial Credit Risk Categow

Bank Balance

Total

COMPONENT UNIT
At December 31, 2009, the carrying amount of deposits and bank balance for the Paulding Education Foundation, Inc., the discretely presented component unit, was $201,035.59, which was fully covered by federal depository insurance.
CATEGORIZATION OF INVESTMENTS
The School District's investments as of June 30, 2010, are presented below. All investments are presented by investment type and debt securities are presented by maturity.

lnvestment Type

Fair Value

Other Investments U.S. Treasury Money Market Mutual Funds

lnvestment Pools Office o f Treasulyand Fiscal Services Georgia Fund 1

Total Investments
The Georgia Fund 1,formerly referred to as LGIP, administered by the State of Georgia, Office of Treasury and Fiscal Services is not required to be categorized since the School District did not own any specific identifiable securities in the pool. The investment policy of the State of Georgia, Office of Treasury and Fiscal Services for the Georgia Fund 1(Primary Liquidity Portfolio) does not provide for investment in derivatives or similar investments. Additional information on the Georgia Fund 1is disclosed in the State o f GeorgiaComprehensive Annual Financial Report. This audit can be obtained from the Georgia Department of Audits and Accounts at htt~://www.audits.aa.aov/SGD/cafr.html.
The Primary Liquidity Portfolio consists of Georgia Fund 1which is not registered with the SEC as an investment company but does operate in a manner consistent with the SEC's Rule 2a-7 of the lnvestment Company Act of 1940. The investment is valued at the pool's share price, $1.00 per share. The pool is an AAAm rated investment pool by Standard and Poor's. The weighted average maturity of Georgia Fund 1may not exceed 6 0 days. The weighted average maturity for Georgia Fund 1on June 30,2010, was 46 days.
The U. S. Treasury Money Market Mutual Funds have a credit quality rating of AAAm by Standard and Poor's and Aaa by Moody's. The funds have a weighted average maturity of approximately 1 0 days.

PAULDING COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30,2010

EXHIBIT "H"

NOTE 4: NON-MONETARY TRANSACTIONS

The School District receives food commodities from the United States Department of Agriculture (USDA) for school breakfast and lunch programs. These commodities are recorded at their Federally assigned value. See Note 2 - Inventories
NOTE 5: CAPITAL ASSETS

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

July 1.2009

Increases

Decreases

Balances June 30,2010

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

$ 9,939,185.54

$ 9,939,l85.54

99,962,150.00 $ 43.570.677.55 $ 106,589,653.18

36,943,174.37

$ 109,901,335.54 $ 43,570,677.55 $ 106.589.653.18 5 46.882.359.91

Capital Assets Being Depreciated Buildings and lrnprovements Equipment Land Improvements

Less Accumulated Depreciation for: Buildings and Improvements Equipment Land Improvements

Total Capital Assets, Being Depreciated, Net

$ 239,504,592.55 $ 99,120,538.10 $

792,886.16 $ 337,832,244.49

Governmental Activity Capital Assets - Net

$ 349,405,928.09 5 142,691.215.65 $ 107,382.539.34 $ 384,714,604.40

Current year depreciation expense by function is as follows:
Instruction Support Services
Pupil Services lmprovements of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Community Services Food Services

$ 6,319,962.32

PAULDING COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30,2010

EXHIBIT "H"

NOTE 6: INTERFUND ASSETS AND LIABILITIES

During the course of its operations, the School District makes transfers between funds to finance operations, provide services, and acquire assets. To the extent that certain transfers among funds had not been received as of year end, balances of interfund amounts receivable or payable have been recorded. It is management's intent to repay interfund balances within the next fiscal year. lnterfund balances at June 30, 2010, consisted of the following:

Due From

Due To

Other Funds

Other Funds

District-wide Capital Projects Debt Service Fund

NOTE 7: INTERFUNDTRANSFERS lnterfund transfers for the year ended June 30, 2010, consisted of the following:

Transfers to

Transfers From

District-w ide

General

Capital

Fund

Projects

Debt Service Fund

Transfers are used to move property tax revenues collected by the General Fund and bond proceeds collected by the Capital Projects Fund to the Debt Service Fund to pay principal, interest and administration fees on Bonds.
NOTE 8: RISK MANAGEMENT
The School District is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors or omissions; job related illness or injuries to employees; acts of God and unemployment compensation.
The School District participates in the Georgia School Boards Association Risk and Insurance Management System, a public entity risk pool organized on July 1,1994, to develop and administer a plan to reduce risk of loss on account of general liability, motor vehicle liability, or property damage, including safety engineering and other loss prevention and control techniques, and to administer one or more groups of self-insurance funds, including the processing and defense of claims brought against members of the system. The School District pays an annual premium to the system for its general insurance coverage. Additional coverage is provided through agreements by the system with other companies according to their specialty for property, boiler and machinery

PAULDING COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30,2010

EXHIBIT "H"

(including coverage for flood and earthquake), general liability (including coverage for sexual harassment, molestation and abuse), errors and omissions, crime and automobile risks. Payment of excess insurance for the system varies by line of coverage.

The School District participates in the Georgia School Boards Association Workers' Compensation Fund, a public entity risk pool organized on July 1,1992, to develop, implement, and administer a program of workers' compensation self-insurance for its member organizations. The School District pays an annual premium to the Fund for its general insurance coverage. Additional insurance coverage is provided through an agreement by the Fund with the Safety National Casualty Corporation to provide coverage for potential losses sustained by the Fund in excess of $500,000.00 loss per occurrence, up to the statutory limit. Employers' Liability insurance coverage is also provided by Safety National Casualty Corporation to provide coverage for potential losses sustained by the Fund in excess of $500,000.00 loss per occurrence, up to $2,000,000.00. The School District is self-insured with regard to workers compensation claims that do not exceed $100,000.00 per claim. The School District accounts for claims within the General Fund with expenses/expenditures and liability being reported when it is probable that a loss has occurred, and the amount of that loss can be reasonably estimated.

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

Beginning of Year Liability

Claims and Changes in Estimates

Claims
Pa id

End of Year Liability

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

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

follows:

Beginning

Claims and

of Year

Changes in

Claims

End of Year

Liability

Estimates

Pa id

Liability

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

Position Covered

Amount

Superintendent All Other Employees

$

250,000.00

$

250,000.00

PAULDING COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30,2010

EXHIBIT "H"

NOTE 9: LONG-TERM DEBT

CAPITAL LEASES

The Paulding County Board of Education has entered into various lease agreements for computer equipment. These lease agreements qualify as capital leases for accounting purposes, and, therefore, have been recorded at the present value of the future minimum lease payments as of the date of their inception.

COMPENSATED ABSENCES

Compensated absences represent obligations of the School District relating to employees' rights to receive compensation for future absences based upon service already rendered. This obligation relates only to vesting accumulating leave in which payment is probable and can be reasonably estimated. Typically, the General Fund is the fund used to liquidate this long-term debt. The School District uses the vesting method to compute compensated absences.

Changes in the compensated absences liability for the last three fiscal years are as follows:

Beginning of Year Liability

Increases

Decreases

End of Year Liabililty

GENERAL OBLIGATION DEBT OUTSTANDING

General Obligation Bonds currently outstanding are as follows:

Purpose

Interest Rates

General Government - Series 2008 General Government - Series 2007
General Government - Series 2004
General Government - Refunding-Series 2003
General Government - Series 1995

3.00%- 5.00% $ 4.25%- 5.00% 2.50%- 5.00%
2.87% 5.50%- 6.00%

Amount
56,870,000.00 62,500,000.00 26,685,000.00
6,335,000.00 6,360,000.00

PAULDING COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30,2010

EXHIBIT "H"

The changes in Long-Term Debt during the fiscal year ended June 30,2010, were as follows:

Balance July 1,2009

Additions

Governmental Funds

Balance

Deductions

June 30,2010

Due Within One Year

G.O. Bonds

$ 175.055.000.00

$ 16,305,000.00$ 158,750.000.00$ 17,735,000.00

Capital Leases

1,480,486.62

964,502.02

515.984.60

490,130.99

Compensated Absences

538,778.44$ 1,043,860.58 1,026,505.52

556,133.50

492,250.68

Bond Premiums Amortized

7,683,253.88

843,775.62 6,839,478.26 914,274.25

At June 30, 2010, payments due by fiscal year which includes principal and interest for these items are as follows:

C a ~ i t aLl eases

Fiscal Year Ended June 30:

Principal

Interest

Total Principal and lnterest Fiscal Year Ended June 30:

General Obligation Debt

Principal

Interest

Unamortized Bond Premium

Total Principaland Interest $ 158,750,000.00 $ 83,280,490.00 $

6,839,478.26

NOTE 10: ON-BEHALF PAYMENTS
The School District has recognized revenues and costs in the amount of $527,376.33 for health insurance and retirement contributions paid on the School District's behalf by the following State Agencies.

PAULDING COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30,2010

EXHIBIT "H"

Georgia Department of Education Paid to the Georgia Department of Community Health For Health Insurance of Non-Certified Personnel In the amount of $358,823.81
Paid to the Teachers Retirement System of Georgia For Teachers Retirement System (TRS) Employer's Cost In the amount of $76,909.84
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 $91,642.68
NOTE 11: SIGNIFICANT COMMITMENTS

The following is an analysis of significant outstanding construction or renovation contracts executed by the School District as of June 30, 2010, together with funding available:

Project

Unearned Executed Contracts

Funding Available From
State

Abney ElementarySchool

$

Carl Scoggins Middle School

East Paulding Middle School Addition

Hiram High School Classroom Addition

New Middle School # 9

North Paulding High School Addition

Paulding County High School Addition

Paulding County High School Athletic Building Addition

Paulding County High School Fieldhouse

South Paulding High School Addition

The amounts described in this note are not reflected in the basic financial statements.
NOTE 12: SIGNIFICANT CONTINGENT LIABILITIES
Amounts received or receivable principally from the Federal government are subject to audit and review by grantor agencies. This could result in requests for reimbursement to the grantor agency for any costs which are disallowed under grant terms. The School District believes that such disallowances, if any, will be immaterial to its overall financial position.
The School District is a defendant in various legal proceedings pertaining to matters incidental to the performance 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.

PAULDING COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30,2010

EXHIBIT "H"

NOTE 13: RELATED PARTY TRANSACTIONS

The Paulding Education Foundation, Inc., a discretely presented component unit, expended funds to South Paulding Middle School related to fundraising in the amount of $65.00 during the component unit's fiscal year ended December 31, 2009. The School District, primary government, did not have any transactions with the Paulding Education Foundation, Inc. during the School District's fiscal year ended June 30,2010.
NOTE 14: POST-EMPLOYMENT BENEFITS
GEORGIA SCHOOL PERSONNEL EMPLOYEES POST-EMPLOYMENT HEALTH BENEFIT FUND
Plan Description. The Georgia School Personnel Post-employment Health Benefit Fund (School OPEB Fund) is a cost-sharing multiple-employer defined benefit post-employment healthcare plan that covers eligible former employees of public school systems, libraries and regional educational service agencies. The School OPEB Fun provides health insurance benefits to eligible former employees and their qualified beneficiaries through the State Employees Health Insurance Plan administered by the Department of Community Health. The Official Code of Georgia Annotated (OCGA) assigns the authority to establish and amend the benefit provisions of the group health plans, including benefits for retirees, to the Board of Community Health (Board).
Funding Policy. The contribution requirements of plan members and participating employers are established by the Board in accordance with the current Appropriations Act and may be amended by the Board. 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 25%of the cost of health insurance coverage.

Participating employers are statutorily required to contribute in accordance with the employer contribution rates established by the Board. The contribution rates are established to fund all benefits due under the health insurance plans for both active and retired employees based on projected "pay-as-you-go" financing requirements. Contributions are not based on the actuarially calculated annual required contribution (ARC) which represents a level of funding that, if paid on an ongoing basis, is projected to cover normal cost each year and amortize any unfunded actuarial liabilities (or funding excess) over a period not to exceed thirty years.
The combined active and retiree contribution rates established by the Board for employers participating in the School OPEB Fund were as follows for the fiscal year ended June 30, 2010:
For certificated teachers, librarians and regional educational service agencies:

July 2009 August 2009 - October 2009 November 2009 -June 2010

18.534% of covered payrollfor August Coverage
14.492% of covered payrollfor September - November Coverage
18.534% of covered payrollfor Decernber - July Coverage

For non-certificated school personnel:

July 2009 -June 2010

$162.72 per member per month plus Department of Education contribution of $22,838,311.00

PAULDING COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30,2010

EXHIBIT "H"

No additional contribution was required by the Board for fiscal year 2010 nor contributed to the State OPEB Fund to prefund retiree benefits. Such additional contribution amounts are determined annually by the Board in accordance with the State plan for other post-employment benefits and are subject to appropriation.

The School District's combined active and retiree contributions to the health insurance plans, which

equaled the required contribution, for the current fiscal year and the preceding two fiscal years were

as follows:

Required

Percent

Fiscal Year

Contribution

Contributed

NOTE 15: RETIREMENT PLANS
TEACHERS RETIREMENT SYSTEM OF GEORGIA (TRS)
Plan Description. The TRS is a cost-sharing multiple-employer defined benefit plan created in 1943 by an act of the Georgia General Assembly to provide retirement benefits for qualifying employees in educational service. A Board of Trustees comprised of active and retired members and ex-officio State employees is ultimately responsible for the administration of TRS. 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.
On October 25, 1996, the Board created the Supplemental Retirement Benefits Plan of the Georgia Teachers Retirement System (SRBP-TRS). SRBP-TRS was established as a qualified excess benefit plan in accordance with Section 415 of the Internal Revenue Code (IRC) as a portion of TRS. The purpose of SRBP-TRS is to provide retirement benefits to employees covered by TRS whose benefits are otherwise limited by IRC Section 415. Beginning July 1, 1997, all members and retired former members in TRS are eligible to participate in the SRBP-TRS whenever their benefits under TRS exceed the IRC Section 415 imposed limitation on benefits.
TRS provides service retirement, disability retirement, and survivor's benefits. The benefit structure of TRS is defined and may be amended by State statute. A member is eligible for normal service retirement after 3 0 years of creditable service, regardless of age, or after 1 0 years of service and attainment of age 60. A member is eligible for early retirement after 25 years of creditable service.
Normal retirement (pension) benefits paid to members are equal to 2% of the average of the member's two highest paid consecutive years of service, multiplied by the number of years of creditable service up to 40 years. Early retirement benefits are reduced by the lesser of one-twelfth
of 7% for each month the member is below age 6 0 or by 7% for each year or fraction thereof by
which the member has less than 3 0 years of service. It is also assumed that certain cost-of-living adjustments, based on the Consumer Price Index, will be made in future years. Retirement benefits are payable monthly for life. A member may elect to receive a partial lump-sum distribution in addition to a reduced monthly retirement benefit. Death, disability and spousal benefits are also available.

PAULDING COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30,2010

EXHIBIT "H"

Funding Policy. TRS is funded by member and employer contributions as adopted and amended by the Board of Trustees. Members become fully vested after 1 0 years of service. If a member terminates with less than 1 0 years of service, no vesting of employer contributions occurs, but the member's contributions may be refunded with interest. Member contributions are limited by State law to not less than 5% or more than 6% of a member's earnable compensation. Member contributions as adopted by the Board of Trustees for the fiscal year ended June 30, 2010, were 5.25% of annual salary. The member contribution rate will increase to 5.53% effective July 1,2010. Employer contributions required for fiscal year 2010 were 9.74% of annual salary as required by the June 30, 2007, actuarial valuation. The employer contribution rate will increase to 10.28% effective
July 1,2010.

Employer contributions for the current fiscal year and the preceding two fiscal years are as follows:

Fiscal Year

Percentage Contributed

Reauired Contribution

(This page left intentionally blank)

PAULDING COUNTY BOARD OF EDUCATION GENERAL FUND
SCHEDULE OF REVENUES, EXPENDITURESAND CHANGES IN FUND BALANCES BUDGET AND ACTUAL
YEAR ENDEDJUNE 30,2010

REVENUES
Property Taxes Sales Tax State Funds Federal Funds Charges for Services Investment Earnings Miscellaneous
Total Revenues
EXPENDITURES
Current Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Adrninistrat~on Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Enterprise Operations Community Service Food Services Operation
Debt Service
Total Ex~enditures
Excess of Revenues over (under) Expenditures
OTHER FINANCING SOURCES (USES1
Other Sources Other Uses
Total Other Financing Sources (Uses)
Net Change in Fund Balances
- Fund Balances Beginning

NONAPPROPRIATED BUDGETS

ORIGINAL (1)

FINAL (1)

SCHEDULE "1"
ACTUAL AMOUNTS

Fund Balances - Ending

Notes to the Schedule of Revenues. Exoendituresand Changes in Fund Balances Budget and Actual
(1) Original and Final Budget amounts do not include budgeted revenues or expenditures of the various principal accounts.
The accompanyingschedule of revenues, expenditures and changes in fund balances budget and actual is presented on the modified accrual basis of accounting which is the basis of accounting used In the presentation of the fund financial statements.
See notes to the basic financial statements.

PAULDING COUNTY BOARD OF EDUCATION COMPONENT UNIT
STATEMENT OF NET ASSETS PROPRIETARY FUND DECEMBER 31,2009
(ComponentUnit Fiscal Year End)
ASSETS Current Assets
Cash and Cash Equivalents Restricted Cash and Cash Equivalents
Total Assets
NET ASSETS Restricted for:
Expendable: Boles Memorial Scholarship Logans CrossingScholarship Rakestraw Memorial Scholarship
Unrestricted
Total Net Assets

SCHEDULE "2"
PAULDING EDUCATION FOUNDATION. INC.

See notes to the basic financial statements.

PAULDING COUNTY BOARD OF EDUCATION COMPONENT UNIT
STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS PROPRIETARY FUND
YEAR ENDED DECEMBER 31,2009 (Component Unit Fiscal Year End)
OPERATING REVENUES
Miscellaneous Individual Contributions Educators Payroll Deduction Contributions Corporate Contributions Fund Raisers
Total Operating Revenues
OPERATING EXPENSES
Bank Charges Dues and Subscriptions Grants to Teachers Insurance Printing Purchased Services Savings Bond Awards Scholarships School Projects
Total Operating Expenses
Operating Income (Loss)
NONOPERATING REVENUES (EXPENSES)
Interest and Investment Revenue
Changes in Net Assets
Total Net Assets - Beginning
Total Net Assets - Ending

SCHEDULE "3"
PAULDING EDUCATION FOUNDATION, INC.

See notes to the basic financial statements.

(This page left intentionally blank)

PAULDING COUNTY BOARD OF EDUCATION COMPONENT UNIT
STATEMENT OF CASH FLOWS PROPRIETARY FUND
YEAR ENDED DECEMBER 31,2009 (Component Unit Fiscal Year End)
CASH FLOWS FROM OPERATING ACTIVITIES Receipts from lnd~v~dual Receipts from Educators Payroll Deduction Receipts from Corporate Partners Receipts from Fund Raisers Payments to Suppliers Net Cash Provided (Used) by Operating Activities
CASH FLOWS FROM INVESTING ACTIVITIES Interest
Net Increase (Decrease) in Cash and Cash Equivalents Cash and Cash Equivalents, Beg~nn~nofgYear
Cash and Cash Equivalents, End of Year

SCHEDULE "4"
PAULDING EDUCATION FOUNDATION, INC.

See notes to the basic financial statements.

PAULDING COUNTY BOARD OF EDUCATION COMPONENT UNIT
SELECTED FINANCIAL NOTES YEAR ENDED DECEMBER 31,2009 (Component Unit Fiscal Year End)

SCHEDULE "5"

Selected Financial Notes to the Com~onenUt nit Statement of Net Assets: Statement of Revenues. E x o m Changes in Net Assets: and Statement of Cash Flows as presented on Schedules 2 through 4.
The financial statements of The Paulding Education Foundation, Inc. (Foundation) have been prepared in conformity with generally accepted accounting principles (GAAP) as applied to governmental units. The Governmental Accounting Standards Board (GASB) is the accepted standard-setting body for establishing governmental accounting and financial reporting principles.
The Foundation met the criteria to use enterprise fund accounting and financial reporting. Accordingly, the financial statements have been prepared using the economic resources measurement focus and the accrual basis of accounting. Revenues are recognized when earned and expenses are recognized when a liability is incurred, regardless of when the related cash flow occurs.
The Foundation has elected not to adopt the pronouncements of the Financial Accounting Standards Board (FASB) issued after November 30,1989.

The Foundation cons~dersassets to be current that can reasonably be expected, as part of its normal operations, to be converted to cash and available for liquidation of current liabilities within 1 2 months of the statement of net assets date. Liablllties that reasonably can be expected, as part of its normal operations, to be liquidated within 1 2 months of the statement of net assets date are considered to be current. All other assets and liabilities are considered to be noncurrent.

Cash and cash equivalents consist of cash on hand, demand deposits and short-term investments with original maturities of three months or less from the date of acquisition. Restricted cash and cash equivalents use is restricted by donors.
The Foundation is exempt from income taxes under section 501(c) (3) of the Internal Revenue Code. Accordingly, the financial statements reflect no provision for income taxes.
Restricted net assets represent resources for which the Foundation is obligated to spend in accordance with restrictions imposed by donors.
If both restricted and unrestricted assets are available for use for a certain purpose, i t is the Foundation's policy to use restricted assets first, and then use unrestricted assets as needed.

Contributions, including unconditional promises to give, are recorded as revenue when the unconditional pledge is made. All contr~butionsare available for unrestricted use unless specifically restricted by the donor. Non-cash contributions are recorded at estimated fair value as of the date of the gin.
The Foundation considers operating revenues and expenses in the Statement of Activities to be those revenues and expenses that result from exchange transactions or other activities that are connected directly with the Foundation's prrmary functions. Exchange transactions include charges for services rendered and the acquisition of goods and services. All revenues and expenses not meetlng this definition are reported as nonoperating revenues and expenses.

The Foundation's operating expenses by functional classification are shown below:

Natural Classification:

Program Services

Functional Classification

Services

Fundraising

Total

Bank Charges Dues and Subscriptions Grants to Teachers Insurance Printing Purchased Services Sav~ngsBond Awards Scholarships school Projects

Total Operating Expenses $ 14,347.96 $ 2,073.53 $ 1,536.00 $ 17.957.49

See notes to the basic financial statements.

PAULDING COUNTY BOARD OF EDUCATION SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
YEAR ENDED JUNE 30,2010

SCHEDULE '6"

FUNDING AGENCY PROGRAM/GRANT
Agnculture. U. S. Department of Chlld Nutritlon Cluster Pass-Through From GeorBa Department of Educatlon Food Services School Breakfast Program Natlonal School Lunch Program
Total Chlld Nutritlon Cluster
Other Programs Pass-Through From Georgia Department of Education Food Services
ARRA - Child Nutrltlon Discret~onatyGrants Llmlted Availabil~ty
Total U. S. Department of Agriculture
Education. U. S. Department Of Educatlon of Homeless Chlldren and Youth Cluster Pass-Through From Georgia Department of Education ARRA - Educationfor Homeless Ch~ldrenand Youth Educatlon for Homeless Ch~ldrenand Youth
Total Education of Homeless Children and Youth Clustel
Education Technology State Grants Cluster Pass-Through From Georgia Department of Education Education TechnologyState Grants
Speclal Educatlon Cluster Pass-ThroughFrom Georgia Department of Education Spec~aEl ducat~on
ARRA - Grants to States
ARRA - Preschool Grants Grants to States Preschool Grants
Total Special Education Cluster
State Fiscal Stabilizat~onFund Cluster Pass-Through From Georgia Department of Education
ARRA - EducationState Grants
Title I. Part A Cluster Pass-Through From Georgia Department of Educat~on
ARRA - Title I Grants to Local Educational Agencies
Title I Grants to Local Educational Agencles
Total Title I, Part A Cluster
Other Programs Pass-Through From GeorBa Department of Educatlon
Career and Technical Educatlon - Baslc Grants to States
Engl~shLanguage Acquisition Grants ImprovingTeacher Quality State Grants Mathematics and Science Partnerships
Total Other Programs
Total U. S. Department of Educat~on

CFDA NUMBER

PASS THROUGH
ENTITY ID
NUMBER

EXPENDITURES IN PERIOD

PAULDING COUNTY BOARD OF EDUCATION SCHEDULE OF EXPENDITURESOF FEDERALAWARDS
YEAR ENDED JUNE 30.2010

SCHEDULE " 6

FUNDING AGENCY PROGRAM/GRANT
Homeland Security, U. S. Department of Pass-Throughfrom Georg~aEmergency ManagementAgency Disaster Grants - Public Assistance
Defense, U. S. Department of Direct Department of the Air Force R.O.T.C. Program Department of the Army R.O.T.C. Program
Total U. S. Department of Defense

CFDA NUMBER

PASSTHROUGH
ENTITY ID
NUMBER

EXPENDITURES IN PERIOD

Total Federal Financ~aAl ssistance
-N/A Not Available
Notes t9 the Schedule of Exgenditures~f Federal Awards
(1) Includes the Federally assigned value of donated commodities for the Food Donation Program In the amount of $584.905.50.
(2) Expendlturesfor the funds earned on the School Breakfast Program ($1,160.753.22w)ere not maintained separately and are included In the 2010 Nabonal School Lunch Program.
Major Programs are identlfled by an aster~sk(*) In front of the CFDA number.
The School District d ~ ndot provide Federal Assistance to any Subreclplent
The accompanylngschedule of expend~turesof Federal awards Includes the Federalgrant actlvlty of the PauldlngCounty Board of Educat~onand 1s presented on the mod~f~eadccrual bas6 of account~ngwhlchIS the bass of accounting used In the presentation of the fund flnanclal statements.

See notes to the basic financial statements.

PAULDING COUNTY BOARD OF EDUCATION SCHEDULEOFSTATEREVENUE YEAR ENDEDJUNE 30,2010

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 Prevention (4-5) Program Middle Grades (6-8) Program High School General Education (9-12) Program Vocational Laboratory ( 9 1 2 ) Program Students with D~sabilities Gifted Student - Category VI Remedial Education Program Alternative Education Program English Speakers of Other Languages (ESOL) Media Center Program 20 Days Additional Instruction Staff and Professional Development Indirect Cost Central Administratlon School Administration Facility Maintenance and Operation Categorical Grants Pupil Transportation Regular Nursing Services Vocational Supervisors Education Equalization Funding Grant Food Services Vocational Education Amended Formula Adjustment Other State Programs Health Insurance National Teacher Certification Preschool Handicapped Program Rule 1 0 Special EducationState Grant Teachers' Retirement Virtual School State Grant
Georgia State Financing and Investment Commission Reimbursement on Construction Projects
Office of Treasury and Fiscal Services Public School Employees Retirement
Technical College System of Georgia Vocational-Technology School
CONTRACT Human Resources. Georgia Department of Family Connection

GOVERNMENTAL FUND TYPES

CAPITAL

GENERAL

PROJECTS

FUND

FUND

SCHEDULE "7" TOTAL

See notes to the basicfinancial statements.

PAULDING COUNTY BOARD OF EDUCATION SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS
YEAR ENDED JUNE 30,2010

SCHEDULE "B"

ORIGINAL ESTIMATED
COST (1)

(I) Acqulsmon, constructlon, and equlpplng of two new

elementary schools, one new m~ddleschool, and one

new high school

$

96,398,858.00 $

(11)Renovat~onc,ompletlon, constructlon and expansion of new and existing school facllltles

27.826.284.00

(111)Acqu~sitionof any property necessaryor desirable therefore, both real and personal

3.235.630.00

(IV) Paymentof a portion of principal and interest on the School Distr~ct'soutstanding general obligation bonds comlngdue August 1,2006 through and lncludrng February 1 , 2 0 1 1

3,500,000.00

CURRENT ESTIMATED COSTS (2)

AMOUNT EXPENDED IN CURRENT YEAR (3) (4)

AMOUNT EXPENDED IN PRIOR YEARS (3) (4) (5)

PROJECT STATUS (6)

87.190.104.00 $

814,466.00 $ 86,375,638.00 Completed

19,170,210.00

141,666.00

19,028,544.00 Completed

Completed

Ongoing

(1) The School D~str~cto'srlg~nacl ost estlmate as spec~fiedIn the resolution callingfor the imposition of the Local OptlOn Sales Tax IS $90,000.000.00 The Local Opt~onSales Tax IS estimated to contr~bute$59,000.000.00 of the total projected cost. The orlglnal est~matedcost reported in prlor year financial statements of $90,000,000.00 was adjusted by $40,960,772.00 In order to Include all costs of the pro~ectsw, hlch Includes State, local propem taxes and/or other funds omltted from the balance reported In the prlor year

(2) The School D~stnct'scurrent estimate of total cost for the projects. Includes all cost from project lnceptlon to completlon.

(3) The voters of Pauldlng County approved the impos~t~oofna 1%sales tax to fund the above projects and retlre assoc~ateddebt. Amounts expended for these projects includes 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 D~strlcht as Incurred interest to provide advance funding for the above projects as follows:

Pr~oYr ears

$ 9,307,306.25

Current Year Adjustment
Total

(5) The amount expended in prlor years was adjusted to Include state, local property taxes and/or other funds om~ttedfrom the balance reported In the prlor year as shown below:

Amount expended in prior year as previously reported

$ 87,599,055.93

Add: State, local property taxes and/or other funds

Amount expended In prior year, restated

(6) Project (i)was completed in June 2010 with total actual expendltures of $87,190,104.00. The or~g~neaslt~matedcost was $96,398,858.00. Due to the decrease in Sales Tax revenues collected, the constructlon of two elementary schools was removed from thls plan est~matedat $22.0 million. The cost for the remaining schools was underestimated by $13.0 million.

Project (11)was completed in June 2010 with total actual expendltures of $19.170.210.00. The original estimated cost was $27,826,284.00. Due to the decrease in Sales Tax revenues collected, maintenance projects of $8.0 mllllon were removed from this plan.

Project (~iiw) as removed from thls plan due to the decrease In Sales Tax revenues collected.

Project (IV)will remain ongoing unt~tlhe completion of the SPLOST per~od Any funds In excess of the flnal bond payments will be appl~edto outstanding general obllgat~onbonds.

See notes to the basic financial statements.

PAULDING COUNTY BOARD OF EDUCATION
GENERAL FUND - QUALITY BASIC EDUCATION PROGRAM (QBE)
ALLOTMENTS AND EXPENDITURES - BY PROGRAM YEAR ENDED JUNE 3 0 . 2 0 1 0

SCHEDULE "9"

DESCRIPTION
Direct lnstruct~onalPrograms K~ndergartenProgram
Kindergarten Program - Early lnter~entionProgram
Primary Grades (1-3) Program
Primary Grades - Early Intervention (1-3) Program
Upper Elementary Grades (4-5) Program Upper Elementary Grades-Early lntervent~on(4-5)
Program M~ddleSchool (6-8) Program H ~ g hSchool General Education (9.12) Program Vocational Laboratory (9-12) Program Students with Disabilities
Category l Category II Category Ill Category IV Category V Gifted Student - Category Vl Remedial Education Program Alternative Education Program English Speakers of Other Languages (ESOL)
TOTAL DIRECT INSTRUCTIONAL PROGRAMS
M e d ~ aCenter Program Staff and Professional Development

ALLOTMENTS FROM GEORGIA

TOTAL QBE FORMULA FUNDS

$ 122,823.483.00 $ 114,939,311.67 $ 3,501,569.19 $ 118,440,880.86

(1) Compr~sedof State Funds plus Local Five Mill Share. (2)Allotments do not Include the impact of the State amended formula adjustment.

See notes t o the basic financ~asl tatements.

SECTION I I COMPLIANCE AND INTERNAL CONTROL REPORTS

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

DEPARTMENOTF AUDITSAND ACCOUNTS
270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400
March 28,2011

Honorable Nathan Deal, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the Paulding County Board of Education
INDEPENDENT AUDITOR'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MAlTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENTAUDITING STANDARDS
Ladies and Gentlemen:
We have audited the financial statements of the governmental activities, the discretely presented component unit, each major fund, and the aggregate remaining fund information of Paulding County Board of Education as of and for the year ended June 30, 2010, which collectively comprise Paulding County Board of Education's basic financial statements and have issued our report thereon dated March 28, 2011. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in GovernmentAuditingStandards, issued by the Comptroller General of the United States.
Internal Control Over Financial Reoorting
In planning and performing our audit, we considered Paulding 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 Paulding County Board of Education's internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness of the Paulding County Board of Education's internal control over financial reporting.
A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect and correct misstatements on a timely basis. A material weakness is a deficiency, or combination of deficiencies, in internal control such that there is a reasonable possibility that a material misstatement of the entity's financial statements will not be prevented, or detected and corrected on a timely basis.
Our consideration of internal control over financial reporting was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over financial reporting that might be deficiencies, significant deficiencies or material weaknesses. We did not identify any deficiencies in internal control over financial reporting that we consider to be material weaknesses, as defined above.

Com~lianceand Other Matters
As part of obtaining reasonable assurance about whether Paulding County Board of Education's financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, 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 Paulding County Board of Education in a separate letter dated March 28, 2011.
This report is intended solely for the information and use of management, members of the Paulding 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,
Russell W. Hinton, CPA, CGFM State Auditor

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

DEPARTMENOTF AUDITSAND ACCOUNTS
270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400
March 28,2011

Honorable Nathan Deal, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the Paulding County Board of Education
INDEPENDENT AUDITOR'S REPORT ON COMPLIANCE WITH REOUIREMENTS THAT COULD HAVE A DIRECT AND MATERIAL EFFECT ON EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH OMB CIRCULAR A-133
Ladies and Gentlemen:
Compliance
We have audited Paulding County Board of Education's compliance with the types of compliance requirements described in the OMB Circular A-133 Compliance Supplement that could have a direct and material effect on each of its major Federal programs for the year ended June 30, 2010. Paulding County Board of Education's major Federal programs are identified in the Summary of Auditor's Results section of the accompanying Schedule of Findings and Questioned Costs. Compliance with the requirements of laws, regulations, contracts, and grants applicable to each of its major Federal programs is the responsibility of Paulding County Board of Education's management. Our responsibility is to express an opinion on Paulding County Board of Education's compliance based on our audit.
We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and OMB Circular A-133, Audits of States, Low1 Governments, and Nun-Profit Organkatims. Those standards and OMB 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 Paulding County Board of Education's compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Our audit does not provide a legal determination on Paulding County Board of Education's compliance with those requirements.
In our opinion, the Paulding County Board of Education complied, in all material respects, with the compliance requirements referred to above that could have a direct and material effect on each of its major Federal programs for the year ended June 30,2010.

Internal Control Over Compliance
Management of Paulding County Board of Education is responsible for establishing and maintaining effective internal control over compliance with the requirements of laws, regulations, contracts, and grants applicable to Federal programs. In planning and performing our audit, we considered Paulding County Board of Education's internal control over compliance with the requirements that could have a direct and material effect on a major Federal program to determine the auditing procedures for the purpose of expressing our opinion on compliance and to test and report on internal control over compliance in accordance with OM6 Circular A-133, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of the Paulding County Board of Education's internal control over compliance.
A deficiency in internal control over complianceexists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a Federal program on a timely basis. A material weakness in internal control over compliance is a deficiency, or combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a Federal program will not be prevented, or detected and corrected, on a timely basis.
Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over compliance that might be deficiencies, significant deficiencies, or material weaknesses. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses,as defined above.
This report is intended solely for the information and use of management, members of the Paulding 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,
Russell W. Hinton, CPA, CGFM State Auditor

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

PAULDING COUNTY BOARD OF EDUCATION AU DITEE'S RESPONSE
SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 3 0 , 2 0 1 0

PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND OUESTIONED COSTS

No matters were reported.

PRIOR YEAR FEDERAL AWARD FINDINGS AND OUESTIONED COSTS

FINDING CONTROL NUMBER AND STATUS

FA-7101-06-01

Previously Reported Corrective Action Implemented

SECTION IV FINDINGS AND QUESTIONED COSTS

PAULDING COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30,2010

I SUMMARY OF AUDITOR'S RESULTS

Financial Statements

Type of auditor's report issue: Governmental Activities; Discretely Presented Component Unit; General Fund; Capital Projects Fund; Debt Service Fund; Aggregate Remaining Fund Information

Internal control over financial reporting: Material weakness identified? Significant deficiency identified?

Noncompliance material to financial statements noted:

Federal Awards

Internal Control over major programs: Material weakness identified? Significant deficiency identified?

Type of auditor's report issued on compliance for major programs: All major programs

Any audit findings disclosed that are required to be reported in accordance with OMB Circular A-133, Section 510(a)?

Identification of major programs:

CFDA Numbeds)

Name of Federal Program or Cluster

Title I, Part A Cluster Special Education Cluster State Fiscal Stabilization Fund Cluster

Dollar threshold used to distinguish between Type A and Type B programs:

Auditee qualified as low-risk auditee?

II FINANCIALSTATEMENT FINDINGSAND QUESTIONEDCOSTS

No matters were reported.

Ill FEDERALAWARD FINDINGSAND QUESTIONEDCOSTS

No matters were reported.

Unqualified N 0
None Reported
N 0 None Reported
Unqualified
$1,071,005.23 Yes