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

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

ROCKDALE COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS -

SECTION I

FINANCIAL

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

REQUIRED SUPPLEMENTARY INFORMATION

MANAGEMENT'S DISCUSSION AND ANALYSIS

EXHIBITS

BASIC FINANCIAL STATEMENTS

DISTRICT-WIDE FINANCIAL STATEMENTS

A

STATEMENT OF NET ASSETS

1

B

STATEMENT OF ACTIVITIES

2

FUND FINANCIAL STATEMENTS

C

BALANCE SHEET

GOVERNMENTAL FUNDS

4

D

RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET

TO THE STATEMENT OF NET ASSETS

5

E

STATEMENT OF REVENUES, EXPENDITURES AND CHANGES

IN FUND BALANCES

GOVERNMENTAL FUNDS

6

F

RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT

OF REVENUES, EXPENDITURES AND CHANGES IN FUND

BALANCES TO THE STATEMENT OF ACTIVITIES

7

G

STATEMENT OF FIDUCIARY NET ASSETS

FIDUCIARY FUNDS

8

H

STATEMENT OF CHANGES IN FIDUCIARY NET ASSETS

FIDUCIARY FUNDS

9

I

NOTES TO THE BASIC FINANCIAL STATEMENTS

10

SCHEDULES

REQUIRED SUPPLEMENTARY INFORMATION

1 SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES

IN FUND BALANCES - BUDGET AND ACTUAL

GENERAL FUND

25

ROCKDALE COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS -

SECTION I

FINANCIAL

SCHEDULES

SUPPLEMENTARY INFORMATION

2 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS

26

3 SCHEDULE OF STATE REVENUE

28

4 SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS

30

5 ALLOTMENTS AND EXPENDITURES

GENERAL FUND - QUALITY BASIC EDUCATION PROGRAMS (QBE)

BY PROGRAM

31

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

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

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

ROCKDALE COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS -
SECTIONV MANAGEMENT'S RESPONSES SCHEDULE OF MANAGEMENT'S RESPONSES

SECTION I FINANCIAL

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

DEPARTMENT OF AUDITS AND ACCOUNTS
270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400
January 8, 2007

Honorable Sonny Perdue, Governor Members ofthe General Assembly Members of the State Board of Education
and Superintendent and Members of the Rockdale County Board of Education
INDEPENDENT AUDITOR'S COMBINED REPORT ON BASIC FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION - SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
Ladies and Gentlemen:
We have audited the accompanying financial statements ofthe governmental activities, each major fund, and the aggregate remaining fund information (Exhibits A through I) ofthe Rockdale County Board of Education, as of and for the year ended June 30, 2006, which collectively comprise the Board's basic financial statements as listed in the table of contents. These financial statements are the responsibility ofthe Rockdale County Board of Education's management. Our responsibility is to express opinions on these financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United States ofAmerica and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General ofthe United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free ofmaterial misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opm1ons.
In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, each major fund, and the aggregate remaining fund information of the Rockdale County Board of Education, as of June 30, 2006, and the respective changes in financial position thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America.
2006ARL-11

In accordance with Government Auditing Standards, we have also issued our report dated January 8, 2007, on our consideration of the Rockdale County Board of Education's internal control over financial reporting and our tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements and other matters. The purpose ofthat report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit.
Management's Discussion and Analysis and the Schedule ofRevenues, Expenditures and Changes in Fund Balances - Budget and Actual, as presented on pages i through viii and page 25 respectively, are not a required part ofthe basic financial statements but are supplementary information required by the accounting principles generally accepted in the United States of America. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods ofmeasurement and presentation ofthe required supplementary information. However, we did not audit the information and express no opinion on it.
Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Rockdale County Board of Education's basic financial statements. The accompanying supplementary information which consist of Schedules 2 through 5, which includes the Schedule of Expenditures of Federal Awards as required by U.S. Office of Management and Budget Circular A-133, Audits ofStates, Local Governments, and Non-Profit Organizations, are presented for purposes of additional analysis and are not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements, and in our opinion, is fairly stated, in all material respects, in relation to the basic financial statements taken as a whole.
A copy of this report has been filed as a permanent record in the office of the State Auditor and made available to the press of the State, as provided for by Official Code of Georgia Annotated section 50-6-24.
Respectfully submitted,

RWH:as 2006ARL-l l

Ru ell W. Hinton, CPA, CGFM State Auditor

ROCKDALE COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2006
INTRODUCTION
Our discussion and analysis of Rockdale County School District's financial performance provides an overview of the School District's financial activities for the fiscal year ended June 30, 2006. The intent of this discussion and analysis is to look at the School District's financial performance as a whole; readers should also review the notes to the basic financial statements and financial statements to enhance their understanding of the School District's financial performance.
FINANCIAL HIGHLIGHTS
Key financial highlights for 2006 are as follows:
On the District-wide financial statements, the assets of the School District exceeded liabilities by $147.4 million. Of this amount, $16.4 million is unrestricted and is available for spending at the School District's discretion.
The School District had $131.0 million in expenses relating to governmental activities; only $75.7 million of these expenses are offset by program specific charges for services, grants and contributions. General revenues (primarily property and sales taxes) of $74.2 million were adequate to provide for these programs.
As stated above, general revenues accounted for $74.2 million or 49% of all revenues totaling $149.9 million. Program specific revenues in the form of charges for services, grants and contributions accounted for the rest.
OVERVIEW OF THE FINANCIAL STATEMENTS
This report consists of several parts including management's discussion and analysis, the basic financial statements and required supplementary information. The basic financial statements include two levels of statements that present different views of the School District. These include the District-wide and fund financial statements.
The District-wide financial statements include the Statement of Net Assets and Statement of Activities. These statements provide information about the activities of the School District presenting both short-term and long-term information about the School District's overall financial status.
The fund financial statements focus on individual parts of the School District, reporting the School District's operation in more detail. The Governmental Funds statements disclose how basic services are financed in the short-term as well as what remains for future spending. The Fiduciary Funds statement provides information about the financial relationships in which the School District acts solely as a trustee or agent for the benefit of others. The fund financial
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ROCKDALE COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2006
statements reflect the School District's most significant funds. In the case of the Rockdale County School District, the General Fund, District-wide Capital Projects Funds, and Debt Service Funds are the most significant funds.
The financial statements also include notes that explain some of the information in the statements and provide more detailed data. The statements are followed by a section of required supplementary information that further explains and supports the financial statements. Additionally, other supplementary information (not required) is also presented that further supplements understanding of the financial statements.
District-wide Statements
The District-wide financial statements are basically a consolidation of all of the School District's operating funds into one column called governmental activities. In reviewing the District-wide financial statements, a reader might ask the question, are we in a better financial position than last year? The Statement of Net Assets and the Statement of Activities provides the basis for answering this question. These financial statements include all School District's assets and liabilities and uses the accrual basis of accounting similar to the accounting used by most private-sector companies. This basis of accounting takes into account all of the current year's revenues and expenses regardless of when cash is received or paid.
These two statements report the School District's net assets and any changes in those assets. The change in net assets is important because it tells the reader that, for the School District as a whole, the financial position of the School District has improved or diminished. The causes of this change may be the results of many factors, including those not und~r the School District's control, such as the property tax base, facility conditions, required educational programs and other factors.
The Statement of Net Assets and the Statement of Activities reflects the School District's governmental activities.
Fund Financial Statements
The School District uses many funds to account for a multitude of financial transactions during the fiscal year. However, the fund financial statements presented in this report provide detail information about only the School District's significant or major funds.
Governmental Funds: Most of the School District's activities are reported in governmental funds, which focus on how money flows into and out of those funds and the balances left at year-end available for spending in future periods. These funds are reported using the modified accrual method of accounting which measures cash and all other financial assets that can readily be converted to cash. The governmental fund statements provide a detailed short-term view of the School District's general government operations and the basic services it provides. Governmental fund information helps determine whether there are more or fewer financial resources that can be spent in the near future to finance educational programs. The differences
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ROCKDALE COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2006

between governmental activities (reported in the Statement of Net Assets and the Statement of Activities) and governmental funds are reconciled within the financial statements.

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

FINANCIAL ANALYSIS OF THE SCHOOL DISTRICT AS A WHOLE

Recall that the Statement of Net Assets provides the perspective of the School District as a whole. Table 1 provides a summary of the School District's net assets for fiscal year 2006 compared to fiscal year 2005.

Table 1 Net Assets

Governmental Activities

Fiscal

Fiscal

Year 2006

Year 2005

Assets Current and Other Assets Capital Assets, Net

$ 42,669,053 $ 47,916,845

117,477,943

101,389,514

Total Assets

$ 160,146,996 $ 149,306,359

Liabilities Current and Other Liabilities Long-Term Liabilities

$ 12,761,979 $ 11,331,208 9,470,000

Total Liabilities

$ 12,761,979 $ 20,801,208

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

$ 117,477,943 13,475,286 16,431,788

$ 91,919,514 21,217,232 15,368,405

Total Net Assets

$ 147,385,017 $ 128,505!151

Total net assets increased $18.9 million in fiscal year 2006.

Table 2 shows the changes in net assets for fiscal year 2006 compared to the changes in net assets for fiscal year 2005.

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

Table 2 Change in Net Assets

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

Governmental Activities

Fiscal

Fiscal

Year 2006

Year 2005

$ 2,996,847 66,123,429 626002960

$ 3,011,120 59,449,855 5,010,761

Total Program Revenues

$ 75,721,236 $ 67,471,736

General Revenues:

Taxes

Property Taxes

For Maintenance and Operations

$ 45,613,951

For Debt Service

5,769

Railroad Cars

Sales Taxes

Special Purpose Local Option Sales Tax 16,886,596

Intangible Recording Tax

1,549,577

Real Estate

476,100

Grants and Contributions not Restricted to

Specific Programs

4,232,174

Investment Earnings

1,712,939

Miscellaneous

3,697,042

$ 41,895,787
7,427
15,998,916 1,385,837 373,926
2,866,025 854,841
4,052,900

Total General Revenues

$ 74,174,148 $ 67,435,659

Total Revenues

$ 149,895,384 $ 134,907,395

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

$ 85,708,204
4,552,689 2,881,293 2,671,885 1,301,853 7,317,436 1,532,027 9,877,152 5,094,110 2,262,486 1,002,400
172,222 6,390,425
251,336

$ 72,285,898
3,950,510 2,677,116 2,669,695 1,223,644 6,276,031 1,486,064 8,679,542 3,792,941 1,699,681
837,438
6,320,180 542,963

Total Expenses

$ 131,0152518 $ 112,441,703

Increase in Net Assets

$ 18!879!866 $ 22i4651692

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

Governmental Activities

The Statement of Activities shows the cost of program services and the charges for services and grants offsetting these services. Table 3 shows, for governmental activities, the total cost of services and the net cost of services comparing fiscal year 2006 with fiscal year 2005. It identifies the cost of these services supported by tax revenue and unrestricted State entitlements.

Table 3 Governmental Activities

Total Cost of Services

Fiscal

Fiscal

Year 2006 Year 2005

Net Cost of Services

Fiscal

Fiscal

Year 2006 Year 2005

Instruction

$ 85,708,204 $ 72,285,898 $ 30,658,885 $ 23,963,496

Support Services

Pupil Services

4,552,689 3,950,510 3,228,449 2,825,004

Improvement of Instructional Services

2,881,293 2,677,116 2,224,927 2,075,578

Educational Media Services

2,671,885 2,669,695 1,234,057 1,356,275

General Administration

1,301,853 1,223,644 -259,581 -262,172

School Administration

7,317,436 6,276,031 4,504,596 3,649,058

Business Administration

1,532,027 1,486,064 1,532,027 1,481,064

Maintenance and Operation of Plant

9,877,152 8,679,542 5,666,546 4,685,044

Student Transportation Services

5,094,110 3,792,941 3,528,776 2,424,016

Central Support Services

2,262,486 1,699,681 2,106,365 1,575,440

Other Support Services

1,002,400

837,438

938,008

826,734

Operations ofNon-Instructional Services

Community Services

172,222

172,222

Food Services

6,390,425 6,320,180 -492,331 -172,533

Interest on Short-Term and Long-Term Debt

251,336

542,963

251,336

542,963

Total Expenses

$131,015.518 $112,441.703 $ 55.294.282 $ 44,969.967

FINANCIAL ANALYSIS OF THE SCHOOL DISTRICT'S FUNDS

The School District's governmental funds are accounted for using the modified accrual basis of accounting. The governmental funds had total revenues and other financing sources of $152,163,843 and total expenditures and other financing uses of $158,844,100.

General Fund Budgeting Highlights

The School District's budget is prepared according to Georgia Law and board policy. The most significant budgeted fund is the general fund.

During the course of fiscal year 2006, the School District amended its general fund budget as needed. The School District uses a system-wide and site based budgeting process. This process includes input from all schools, central office departments, parents, community members and school councils. The budgeting systems are designed to control total site and program budgets but provide flexibility for site management.

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ROCKDALE COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2006
The School District budget goals for fiscal year 2006 were: Recruiting/Retaining Personnel Staff Development Instructional Improvement Instructional Initiatives Safety Maintaining Facilities
For the general fund, the actual revenues of $126.0 million exceeded the final budgeted amounts of $114.0 million by $12.0 million. This difference was due to the state QBE revenue accrual, the property tax collections being slightly over budgeted primarily due to the growth in the county in residential housing and the inclusion of the principals' accounts and grants on our financial statements but not included in our budget. The actual expenditures of $124.9 million exceeded the final budgeted expenditure amount of $119.3 million by $5.6 million. This difference was due to the state QBE salary and benefit accrual and the inclusion of the principals' accounts in our financial statements but not in our budget. General Fund revenues and other financing sources exceeded the expenditures and other financing uses by $916,000. The School District has made a concerted effort to raise fund balance and this result is evidence of their work. CAPITAL ASSETS AND DEBT ADMINISTRATION Capital Assets At fiscal year ended June 30, 2006, the School District had $117.4 million invested in capital assets, all in governmental activities. Table 4 reflects a summary of these balances net of accumulated depreciation for fiscal year 2006 compared to fiscal year 2005 balances.
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ROCKDALE COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2006

Table 4 Capital Assets (Net of Depreciation)

Governmental Activities

Fiscal

Fiscal

Year 2006

Year 2005

Land Construction in Progress Buildings and Improvements Equipment Land Improvements

$ 7,537,663 30,589,226 72,641,520 4,250,650 2,458,884

$ 7,537,663 13,188,220 74,773,721 3,188,923 2,700,987

Total

$ 117A772943 $ 101,389,514

Due to the ongoing growth in the county, the School District has numerous construction projects including new buildings, additions and renovations.

Debt

During fiscal year 2006, the School District paid off the outstanding general obligation bonds. Table 5 summarizes the School District's debt which includes general obligation bonds for fiscal year 2006 compared to fiscal year 2005 balances.

Table 5 Debt at June 30

General Obligation Bonds CURRENT ISSUES

Governmental Activities

Fiscal

Fiscal

Year 2006

Year 2005

$====~0 $ 9A7o,ooo

Currently known facts, decisions or conditions that are expected to have a significant effect on the financial position or results of operations are as follows:

State revenues are on the upswing and our local taxes are up but student growth has increased at a higher percentage. With this continued growth, it is hard to project accurate enrollment and maintain state mandated class sizes from fall to spring of every school year. It also requires the purchase of instructional materials such as textbooks for the anticipated growth prior to receiving any state or local revenues generated due to the growth.

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ROCKDALE COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2006
A strategic plan has been created that has many costs associated with it. In the future, the budget will be based on it and we will need to find creative ways to fund the strategic planning initiatives with the majority of our budget already spoken for.
Capital Improvements - the School District plans capital improvements as future capital needs arise due to increased student population and facility repair or maintenance needs. Specific capital expenditure plans are formalized in conjunction with anticipated SPLOST receipts and anticipated annual receipts for capital outlay funds from the State of Georgia Department of Education. The School District regularly monitors anticipated capital outlay needs and has a board as well as state approved 5 year Facilities Plan that documents our needs and plans to address them.
Opening two new schools increased overhead costs and expenses not covered by state revenues putting an additional temporary financial strain on the system.
Increased utility costs for fuel, electricity, and natural gas. Despite these challenges, the School District is strong financially and we remain optimistic about the ability of the School District to maximize all of the financial resources to provide a quality education to our students. CONTACTING THE SCHOOL DISTRICT'S FINANCIAL MANAGEMENT This financial report is designed to provide our citizen's, taxpayers, investors and creditors with a general overview of the School District's finances and to show the School District's accountability for the money it receives. If you have questions about this report or need additional financial information, contact Mr. Brad C. Boling, Director of Business Services for the Rockdale County School System, 954 North Main Street, Conyers, Georgia 30012. You may also email your questions to Mr. Boling at bboling@rockdale.k12.ga.us.
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ROCKDALE COUNTY BOARD OF EDUCATION

ROCKDALE COUNTY BOARD OF EDUCATION STATEMENT OF NET ASSETS JUNE 30, 2006
ASSETS
Cash and Cash Equivalents Investments Accounts Receivable, Net
Taxes State Government Federal Government Other Inventories Capital Assets Land Construction in Progress Land Improvements Buildings Equipment Less: Accumulated Depreciation
Total Assets
LIABILITIES
Accounts Payable Salaries Payable Retainages Payable
Total Liabilities
NET ASSETS
Invested in Capital Assets, Net of Related Debt Restricted for
Continuation of Federal Programs Capital Projects Unrestricted
Total Net Assets
Total Liabilities and Net Assets

EXHIBIT"A"

GOVERNMENTAL ACTIVITIES

$

17,005,410

11,834,228

3,563,016 9,349,914
241,431 453,355 221,699

7,537,663 30,589,226
5,484,080 108,624,938
15,153,997 -49,911,961

$ ===16=0=,1=4=-6,=99=6=

$

2,822,184

8,624,654

1 315141

$

12 761 979

$

117,477,943

1,141,664 12,333,622 16 431 788

$

147 385 017

$ ===16=0=1,=46='=99=6=

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

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

GOVERNMENTAL ACTIVITIES
Instruction Support Services
Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Operations of Non-Instructional Services Community Services Food Services Interest on Short-Term and Long-Term Debt
Total Governmental Activities
General Revenues Taxes Property Taxes For Maintenance and Operations For Debt Services Sales Taxes Special Purpose Local Option Sales Tax For Debt Services For Capital Projects Intangible Recording Tax Real Estate Grants and Contributions not Restricted to Specific Programs Investment Earnings Miscellaneous
Total General Revenues
Change in Net Assets
Net Assets - Beginning of Year
Net Assets - End of Year

EXPENSES

CHARGES FOR SERVICES

$

85,708,204 $

4,552,689 2,881,293 2,671,885 1,301,853 7,317,436 1,532,027 9,877,152 5,094,110 2,262,486 1,002,400

172,222 6,390,425
251,336

$

131,015,518 $

242,285
2,754,562 2,996,847

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

EXHIBIT"B"

PROGRAM REVENUES

OPERATING

CAPITAL

GRANTS AND

GRANTS AND

CONTRIBUTIONS CONTRIBUTIONS

NET (EXPENSES) REVENUES
AND CHANGES IN NET ASSETS

$

49,984,102 $

1,197,139 656,366
1,279,744 1,561,434 2,557,101

3,651,846 1,346,790
13,640 64,392

3,810,875

$

66,123,429 $

4,822,932 $ 127,101 158,084 255,739 558,760 218,544 142,481
317,319
6 600 960 $

-30,658,885
-3,228,449 -2,224,927 -1,234,057
259,581 -4,504,596 -1,532,027 -5,666,546 -3,528,776 -2, 106,365
-938,008
-172,222 492,331 -251 336
-55,294,282

$

45,613,951

5,769

7,794,032 9,092,564 1,549,577
476,100 4,232,174 1,712,939 3 697 042

$

74 174 148

$

18,879,866

128 505 151

$ ===1=47=3=8=5=0=17=

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

EXHIBIT"C"

ASSETS
Cash and Cash Equivalents Investments Accounts Receivable, Net
Taxes State Government Federal Government Other Inventories
Total Assets
LIABILITIES AND FUND BALANCES
LIABILITIES
Cash Overdraft Accounts Payable Salaries Payable Retainages Payable
Total Liabilities
FUND BALANCES
Reserved for: Continuation of Federal Programs Inventories Capital Projects
Unreserved Designated for Self-Insurance Undesignated Reported in: General Fund Debt Service
Total Fund Balances
Total Liabilities and Fund Balances

GENERAL FUND

DISTRICTWIDE
CAPITAL PROJECTS
FUND

DEBT SERVICE
FUND

TOTAL

$ 17,776,431 256,561 $
1,264,357 9,349,914
241,431 453,355 221,699

$ 11,577,667
2,856,158

14,041 $ 17,790,472 11,834,228

59

4,120,574

9,349,914

241,431

453,355

221,699

$ 29,563,748 $ 14,433,825 $ ===14===10=0= $ 44,011,673

$ $ 2,822,184
8,624,654
$ 11,446,838 $

785,062
1 315 141 2,100,203

$ 785,062 2,822,184 8,624,654 1 315 141
$ 13 547 041

$ 919,965 221,699 $ 65,350
16,909,896
$ 18,116,910 $

12,333,622
$ 12,333,622 $

$ 919,965 221,699
12,333,622

65,350

14 100

16,909,896 14 100

14100 $ 30,464,632

$ 29,563,748 $ 14,433,825 $====14='=10=0= $ 44,011,673

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

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

EXHIBIT "D"

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

$ 30,464,632

$

7,537,663

30,589,226

5,484,080

108,624,938

15,153,997

-49 911 961

117,477,943

-557 558

Net Assets of Governmental Activities (Exhibit "A")

$ 147,385,017

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

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

EXHIBIT"E"

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

GENERAL FUND

DISTRICTWIDE
CAPITAL PROJECTS
FUND

DEBT SERVICE
FUND

TOTAL

$ 45,616,901

$

1,125 $

2,025,677 $ 9,092,564

7,794,032

61,018,183

6,382,416

9,555,964

2,996,847

984,333

713,561

15,045

3,847,169

45,618,026 18,912,273 67,400,599 9,555,964 2,996,847
1,712,939 3,847,169

$ 126,045,074 $ 16,188,541 $ 7,810,202 $ 150,043,817

$ 80,907,120 $

17,340

$ 80,924,460

4,404,780 2,881,293 2,502,870 1,288,868 7,049,726 1,530,925 9,047,046 5,497,190 2,148,288 1,002,400
172,222 6,462,111

12,985 $
231,124
21,845,348

1,102

4,404,780 2,881,293 2,502,870 1,301,853 7,049,726 1,532,027 9,278,170 5,497,190 2,148,288 1,002,400
172,222 6,462,111 21,845,348

9,470,000 251,336

9,470,000 251,336

$ 124,894,839 $ 22,106,797 $ 9,722,438 $ 156,724,074

$ 1,150,235 $ -5,918,256 $ -1,912,236 $ -6,680,257

$ 234,414 $ 1,885,612 $

$ -234 414

-1,885,612

$ -234 414 $ -1,651,198 $ 1,885,612 $

$

915,821 $ -7,569,454 $

-26,624 $

17,201,089 19,903,076

40 724

2,120,026 -2,120,026
0 -6,680,257
37,144,889

$ 18, 116191 o $ 1213331622 $

14 100 $ 30,464,632

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

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

EXHIBIT"F"

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

$
$ 19,564,090 -3,446,376

-6,680,257
16,117,714 1,694
-29,285 9,470,000

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

$ 18,879,866

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

ROCKDALE COUNTY BOARD OF EDUCATION STATEMENT OF FIDUCIARY NET ASSETS FIDUCIARY FUNDS JUNE 30, 2006

EXHIBIT "G"

ASSETS Cash and Cash Equivalents Investments
Local Government Investment Pool
Total Assets
LIABILITIES Funds Held for Others
NET ASSETS Held in Trust for Private Purposes
Total Liabilities and Net Assets

PRIVATE PURPOSE TRUSTS

AGENCY FUNDS

$

15,750 $

390,869

60 001

$

75751 $==39=0=8=69=

$

390,869

$ _ _--'-7-"-5'-'-7-"-51-'-

$

75 751 $ ==3=90====86=9=

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

ROCKDALE COUNTY BOARD OF EDUCATION STATEMENT OF CHANGES IN FIDUCIARY NET ASSETS
FIDUCIARY FUNDS YEAR ENDED JUNE 30, 2006

EXHIBIT "H"

ADDITIONS Investment Earnings Interest
DEDUCTIONS Scholarships Change in Net Assets
Net Assets - Beginning
Net Assets - Ending

PRIVATE PURPOSE TRUSTS

$

2 460

$

1 000

$

1,460

74 291

$ ===75====75=1=

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

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

EXHIBIT "I"

Note 1: DESCRIPTION OF SCHOOL DISTRICT AND REPORTING ENTITY
REPORTING ENTITY
The Rockdale County Board of Education (School District) was established under the laws of the State of Georgia and operates under the guidance of a school board elected by the voters and a Superintendent appointed by the Board. The Board is organized as a separate legal entity and has the power to levy taxes and issue bonds. Its budget is not subject to approval by any other entity. Accordingly, the School District is a primary government and consists of all the organizations that compose its legal entity.
Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The School District's basic financial statements are collectively comprised of the District-wide financial statements, fund financial statements and notes to the basic financial statements of the Rockdale County Board of Education.
District-wide Statements: The Statement ofNet Assets and the Statement ofActivities display information about the financial activities ofthe overall School District, except for fiduciary activities. Eliminations have been made to minimize the double counting of internal activities. Governmental activities generally are financed through taxes, intergovernmental revenues, and other nonexchange transactions.
The Statement ofActivities presents a comparison between direct expenses and program revenues for each function of the School District's governmental activities.
Direct expenses are those that are specifically associated with a program or function and, therefore, are clearly identifiable to a particular function. Indirect expenses (expenses of the School District related to the administration and support ofthe School District's programs, such as office and maintenance personnel and accounting) are not allocated to programs.
Program revenues include (a) charges paid by the recipients ofgoods or services offered by the programs and (b) grants and contributions that are restricted to meeting the operational or capital requirements of a particular program. Revenues that are not classified as program revenues, including all taxes, are presented as general revenues.
Fund Financial Statements: The fund financial statements provide information about the School District's funds, including fiduciary funds. Eliminations have been made to minimize the double counting ofinternal activities. Separate statements for each category (governmental and fiduciary) are presented. The emphasis of fund financial statements is on major governmental funds, each displayed in a separate column.

- 10 -

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

EXHIBIT "I"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The School District reports the following major governmental funds:
General Fund is the School District's primary operating fund. It accounts for all financial resources ofthe School District, except those resources required to be accounted for in another fund.
District-wide Capital Projects Fund accounts for financial resources including Special Purpose Local Option Sales Tax (SPLOST) and grants from Georgia State Financing and Investment Commission to be used for the acquisition, construction or renovation ofmajor capital facilities.
Debt Service Fund accounts for taxes (property and sales) legally restricted for the payment of general long-term principal, interest and paying agent's fees.
The School District reports the following fiduciary fund types:
Private Purpose Trust fund reports a trust arrangement under which the income earned on the trust may be expended to provide college scholarships to the students from Rockdale County, Georgia.
Agency funds account for assets held by the School District as an agent for various funds, governments or individuals.
BASIS OF ACCOUNTING
The basis ofaccounting determines when transactions are reported on the financial statements. The District-wide governmental and fiduciary fund financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded at the time liabilities are incurred, regardless of when the related cash flows take place. Nonexchange transactions, in which the School District gives (or receives) value without directly receiving (or giving) equal value in exchange, include property taxes, sales taxes, grants and donations. On an accrual basis, revenue from property taxes is recognized in the fiscal year for which the taxes are levied. Revenue from sales taxes is recognized in the fiscal year in which the underlying transaction (sale) takes place. Revenue from grants and donations is recognized in the fiscal year in which all eligibility requirements have been satisfied.
The School District uses funds to report on its financial position and the results of its operations. Fund accounting is designed to demonstrate legal compliance and to aid financial management by segregating transactions related to certain governmental functions or activities. A fund is a separate accounting entity with a self-balancing set of accounts.

- 11 -

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

EXHIBIT "I"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Governmental funds are reported using the current financial resources measurement focus and the modified accrual basis ofaccounting. Under this method, revenues are recognized when measurable and available. The School District considers all revenues reported in the governmental funds to be available if they are collected within sixty days after year-end. Property taxes, sales taxes and interest are considered to be susceptible to accrual. Expenditures are recorded when the related fund liability is incurred, except for principal and interest on general long-term debt, which are recognized as expenditures to the extent they have matured. Capital asset acquisitions are reported as expenditures in governmental funds. Proceeds ofgeneral long-term liabilities and acquisitions under capital leases are reported as other financing sources.
The School District funds certain programs by a combination ofspecific cost-reimbursement grants, categorical grants, and general revenues. Thus, when program costs are incurred, there are both restricted and unrestricted net assets available to finance the program. It is the School District's policy to first apply grant resources to such programs, followed by cost-reimbursement grants, then general revenues.
CASH AND CASH EQUIVALENTS
COMPOSITION OF DEPOSITS Cash and cash equivalents consist ofcash on hand, demand deposits and short-term investments with original maturities of three months or less from the date of acquisition in authorized financial institutions. Georgia Laws OCGA 45-8-14 authorize the School District to deposit its funds in one or more solvent banks or insured Federal savings and loan associations.
INVESTMENTS
COMPOSITION OF INVESTMENTS Investments made by the School District in nonparticipating interest-earning contracts (such as certificates ofdeposit) and repurchase agreements are reported at cost. Participating interest-earning contracts and money market investments with a maturity at purchase 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 ofGeorgia Annotated Section 36-83-4 authorizes the School District to invest its funds. In selecting among options for investment or among institutional bids for deposits, the highest rate ofreturn shall be the objective, given equivalent conditions of safety and liquidity. Funds may be invested in the following:
(1) Obligations issued by the State of Georgia or by other states,
(2) Obligations issued by the United States government,
(3) Obligations fully insured or guaranteed by the United States government or a United States government agency,
- 12 -

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

EXHIBIT "I"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(4) Obligations of any corporation of the United States government,

(5) Prime banker's acceptances,

(6) The Local Government Investment Pool administered by the State of Georgia, Office of Treasury and Fiscal Services,

(7) Repurchase agreements, and

(8) Obligations of other political subdivisions of the State of Georgia.

The School District does not have a formal policy regarding investment policies that address credit risks, custodial credit risks, concentration ofcredit risks, interest rate risks or foreign currency risks.

RECEIVABLES

Receivables consist of amounts due from property and sales taxes, grant reimbursements due on Federal, State or other grants for expenditures made but not reimbursed and other receivables disclosed from information available. Receivables are recorded when either the asset or revenue recognition criteria has been met. Receivables recorded on the basic financial statements do not include any amounts which would necessitate the need for an allowance for uncollectible receivables.

PROPERTY TAXES

The Rockdale County Board of Commissioners fixed the property tax levy for the 2005 tax digest year (calendar year) on July 26, 2005 (levy date). Taxes were due on November 15, 2005 (lien date). Taxes collected within the current fiscal year or within 60 days after year-end on the 2005 tax digest are reported as revenue in the governmental funds for fiscal year 2006. The Rockdale County Tax Commissioner bills and collects the property taxes for the School District, withholds 1% of taxes collected as a fee for tax collection and remits the balance of taxes collected to the School District. Property tax revenues, at the fund reporting level, during the fiscal year ended June 30, 2006, for maintenance and operations amounted to $45,616,901 and for school bonds amounted to $1,125.

The tax millage rate levied for the 2005 tax year (calendar year) for the Rockdale County Board of Education was as follows (a mill equals $1 per thousand dollars of assessed value):

School Operations

21.44 mills

- 13 -

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

EXHIBIT "I"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

SALES TAXES

Special Purpose Local Option Sales Tax, at the fund reporting level, during the year amounted to $16,886,596 and is to be used for capital outlay for educational purposes or debt service. This sales tax was authorized by local referendum and the sales tax must be re-authorized at least every five years.

INVENTORIES

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

CAPITAL ASSETS

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

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

Capitalization Policy

Estimated Useful Life

Land Land Improvements Buildings and Improvements Equipment

All

NIA

$

5,000

20 years

$

5,000 20 to 75 years

$

5,000 5 to 20 years

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

- 14 -

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

EXHIBIT "I"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
GENERAL OBLIGATION BONDS
The School District issues general obligation bonds to provide funds for the acquisition and construction of major capital facilities. Bond issuance costs are recognized in the financial statements during the fiscal year bonds are issued. General obligation bonds are direct obligations and pledge the full faith and credit of the government.
Note 3: DEPOSITS AND INVESTMENTS
COLLATERALIZATION OF DEPOSITS Official Code of Georgia Annotated (OCGA) Section 45-8-12 provides that there shall not be on deposit at any time in any depository for a time longer than ten days a sum of money which has not been secured by surety bond, by guarantee of insurance, or by collateral. The aggregate ofthe face value of such surety bond and the market value of securities pledged shall be equal to not less than 110 percent ofthe public funds being secured after the deduction ofthe amount ofdeposit insurance. Ifa depository elects the pooled method (OCGA 45-8-13.1) the aggregate ofthe market value ofthe securities pledged to secure a pool ofpublic funds shall be not less than 110 percent ofthe daily pool balance.
Acceptable security for deposits consists of any one of or any combination of the following:
(1) Surety bond signed by a surety company duly qualified and authorized to transact business within the State of Georgia,
(2) Insurance on accounts provided by the Federal Deposit Insurance Corporation,
(3) Bonds, bills, notes, certificates of indebtedness or other direct obligations of the United States or of the State of Georgia,
(4) Bonds, bills, notes, certificates of indebtedness or other obligations of the counties or municipalities of the State of Georgia,
(5) Bonds of any public authority created by the laws of the State of Georgia, providing that the statute that created the authority authorized the use of the bonds for this purpose,
(6) Industrial revenue bonds and bonds of development authorities created by the laws of the State of Georgia, and

- 15 -

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

EXHIBIT "I"

Note 3: DEPOSITS AND INVESTMENTS

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

CATEGORIZATION OF DEPOSITS At June 30, 2006, the bank balances were $27,164,604. The amounts ofthe total bank balances are classified into four categories of custodial credit risk:

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

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

Custodial Credit Risk Category

Bank Balance

1

$ 300,000

2

0

3

26,864,604

4

0

Total

$ 27,164,604

CATEGORIZATION OF INVESTMENTS At June 30, 2006, the carrying value of the School District's total investments was $11,894,229 which is materially the same as fair value. This investment consisted entirely of funds invested in the Local Government Investment Pool administered by the State ofGeorgia, Office ofTreasury and Fiscal Services which are not required to be categorized since the School District did not own any specific identifiable securities in the pool. The investment policy ofthe State of Georgia, Office of Treasury and Fiscal Services for the Local Government Investment Pool (Primary Liquidity Portfolio) does not provide for investment in derivatives or similar investments. A description ofthe Primary Liquidity Portfolio is as follows:

- 16 -

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

EXHIBIT "I"

Note 3: DEPOSITS AND INVESTMENTS
The Primary Liquidity Portfolio consists of Georgia Fund 1, which is a combination local and state government investment pool. Georgia Fund 1 is a stable net asset value investment pool which follows Standard and Poor's criteria for AAAm rated money market funds. The pool is not registered with the SEC as an investment company but does operate Georgia Fund 1 in a manner consistent with Rule 2a-7 of the Investment Company Act of 1940. The pool's primary objectives are safety of capital, investment income, liquidity and diversification while maintaining principal ($1.00 per share value). Net asset value is calculated daily and reported to the rating agency weekly to ensure stability. The pool distributes earnings (net of management fees) on a monthly basis and values participant's shares sold and redeemed at the pool's share price, $1.00 per share. Pooled cash and cash equivalents and investments are reported at cost. The pool does not issue any legally binding guarantees to support the value of the shares. Participation in the pool is voluntary and deposits consist of funds from local governments; operating and trust funds of Georgia's state agencies, colleges and universities; and current operating funds of the State of Georgia's General Fund.
Investments in Georgia Fund 1 are directed toward short-term instruments such as U.S. Treasury obligations, securities issued or guaranteed as to principal and interest by the U. S. Government or any of its agencies or instrumentalities, banker's acceptances and repurchase agreements. The weighted average maturity of Georgia Fund 1 may not exceed 60 days. The weighted average maturity for Georgia Fund 1 on June 30, 2006, was 28 days.
Note 4: NON-MONETARY TRANSACTIONS
The School District receives food commodities from the United States Department of Agriculture (USDA) for school breakfast and lunch programs. These commodities are recorded at their Federally assigned value. See Note 2 - Inventories
Note 5: CAPITAL ASSETS
The following is a summary of changes in the Capital Assets during the fiscal year:

- 17 -

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

EXHIBIT "I"

Note 5: CAPITAL ASSETS

Balances July 1, 2005

Increases

Balances Decreases June 30, 2006

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

$ 7,537,663 13,188,220 $ 17,521,848 $

$ 7,537,663 120,842 30,589,226

Total Capital Assets Not Being Depreciated $ 20,725,883 $ 17,521,848 $ 120,842 $ 38,126,889

Capital Assets Being Depreciated Buildings and Improvements Equipment Land Improvements

$ 108,341,328 $ 13,921,593 5,477,141

283,610 1,872,535 $
6,939

$ 108,624,938 640,131 15,153,997
5,484,080

Less Accumulated Depreciation for: Buildings and Improvements Equipment Land Improvements

33,567,607 10,732,670 2,776,154

2,415,811 781,523 249,042

610,846

35,983,418 10,903,347 3,025,196

Total Capital Assets, Being Depreciated, Net $ 80,663,631 $ -1,283,292 $

29,285 $ 79,351,054

Governmental Activity Capital Assets - Net $ 101.389,514 $ 16,238.556 $ 150.127 $ 117,477.943

Current year depreciation expense by function is as follows:

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

$ 2,233,474

$

68,632

85,362

138,094

301,719

370,812

76 937

1,041,556 171,346

$ 3,446.376

Note 6: RESTRICTED ASSETS

Special Purpose Local Option Sales Tax (SPLOST) funds are reported as restricted assets in the Statement of Net Assets because their use is limited by applicable statutory provisions. Restricted assets at June 30, 2006, were as follows:

- 18 -

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

EXHIBIT "I"

Note 6: RESTRICTED ASSETS

District-wide Capital Projects SPLOST

Restricted Investments: Capital Acquisitions

$ 11,577,667

Note 7: INTERFUND TRANSFERS

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

Transfer to

Transfers From

District-wide

General

Capital

Fund

Projects

District-wide Capital Projects
Debt Service Fund

$ 234,414 $ 1,885,612

Total

$ 234,414 $ 1,885,612

Transfers are used for payment of bonds and for kitchen modifications.

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 ofthe system. The School District pays an annual premium to the system for its general insurance coverage. Additional coverage is provided through agreements by the system with other companies according to their specialty for property, boiler and machinery (including coverage for flood and earthquake), general liability (including coverage for sexual harassment, molestation and abuse), errors and omissions, crime and automobile risks. Payment of excess insurance for the system varies by line of coverage.

- 19 -

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

EXHIBIT "I"

Note 8: RISK MANAGEMENT

The School District has established a limited risk management program for workers' compensation claims. In connection with this program, a self-insurance reserve has been established within the General Fund by the School District. 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. An excess coverage insurance policy covers individual claims in excess of $300,000 loss per occurrence, up to the statutory limit.

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

2005 2006

Beginning of Year Liability

Claims and Changes in Estimates

Claims Paid

End ofYear Liability

$

0 $

187,373 $

187,373 $

0

$

0 $

256,121 $

256,121 $

0

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

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

Beginning of Year Liability

Claims and Changes in Estimates

Claims Paid

EndofYear Liability

2005 2006

$

0 $

32,991 $

32,991 $

0

$

0 $

11 090 $

11 090 $

0

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

Position Covered

Amount

Superintendent

$ 100,000

Note 9: LONG-TERM DEBT

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

- 20 -

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

EXHIBIT "I"

Note 9: LONG-TERM DEBT

Governmental Funds General
Obligation Bonds

Balance July I, 2005

$ 9,470,000

Deductions Debt Retired

9,470,000

Balance June 30, 2006 Note 10: ON-BEHALF PAYMENTS

$======0

The School District has recognized revenues and costs in the amount of $2,325,334 for health insurance and retirement contributions paid on the School District's behalf by the following State Agencies.

Georgia Department of Education Paid to the Georgia Department of Community Health For Health Insurance of Non-Certified Personnel In the amount of $2,307,485

Office of Treasury and Fiscal Services Paid to the Public School Employees Retirement System For Public School Employees Retirement (PSERS) Employer's Cost In the amount of $17,849

Note 11: SIGNIFICANT COMMITMENTS

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

- 21 -

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

EXHIBIT "I"

Note 11: SIGNIFICANT COMMITMENTS

Project

Unearned Executed Contracts

Funding Available From State

SA0lS-722-295 SA0l S-722-297 Hightower Trail Elementary School
Classroom Additions Sims Elementary School Classroom Additions Elementary School Gyms - HVAC Kitchen HVAC Upgrades

$ 1,123,317 $ 311,631
1,172,106 928,298 115,099 148,255

426,358 380,350
495,105 495,105

$ 3,798.706 $ 1,796.918

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

Note 12: SIGNIFICANT CONTINGENT LIABILITIES

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

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

Note 13: SUBSEQUENT EVENTS

On November 7, 2006, the voters of Rockdale County voted in favor of a Special Purpose Local Option Sales Tax referendum for education purposes. The imposition of the tax approved by the voters, as stated on the Official Ballot of Rockdale County is as follows:

- 22 -

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

EXHIBIT "I"

Note 13: SUBSEQUENT EVENTS

"Shall a one percent sales and use tax for educational purposes of the Rockdale County School District (the "School District") be reimposed within Rockdale County, upon the termination ofthe one percent sales and use tax for educational purposes presently in effect, for a maximum period oftime of20 calendar quarters, for the purposes ofproviding funds to pay (1) the cost of: (a) acquiring land for future schools and instructional and administrative technology improvements for existing and new schools, and (b) adding to, renovating, repairing, improving, and equipping existing school buildings and other buildings and facilities useful or desirable in connection therewith, and acquiring any necessary property therefor, both real and personal, and (2) the cost of: (a) acquiring school buses, and (b) adding to renovating, repairing, improving, and equipping existing athletic facilities and other facilities useful or desirable in connection therewith, and acquiring any necessary property therefor, both real and personal, the maximum cost of the projects described in clauses (1) and (2) above to be $94,800,000?"

Note 14: RETIREMENT PLANS

TEACHERS RETIREMENT SYSTEM OF GEORGIA (TRS)

TRS PLAN DESCRIPTION Substantially all teachers, administrative and clerical personnel employed by local school systems are covered by the Teachers Retirement System of Georgia (TRS), which is a cost-sharing multiple employer defined benefit pension plan. TRS provides service retirement, disability retirement and survivors benefits for its members in accordance with State statute. The Teachers Retirement System of Georgia issues a separate stand alone financial audit report and a copy can be obtained from the Georgia Department of Audits and Accounts.

TRS CONTRIBUTIONS REQUIRED AND MADE Employees ofthe School District who are covered by TRS are required by State statute to contribute 5% of their gross earnings to TRS. The School District makes monthly employer contributions to TRS at rates adopted by the TRS Board of Trustees in accordance with State statute and as advised by their independent actuary. The required employer contribution rate is 9.24% and employer contributions for the current fiscal year and the preceding two fiscal years are as follows:

Fiscal Year

Percentage Contributed

Required Contribution

2006 2005 2004

100% 100% 100%

$ 6,363,625 $ 5,997,915 $ 5,796,708

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

SCHEDULE "1"

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

NONAPPROPRIATED BUDGETS

ORIGINAL (1)

FINAL (1)

ACTUAL AMOUNTS

$

43,564,570 $

43,564,570 $

45,616,901

1,348,083

1,348,083

2,025,677

55,585,391

55,600,391

61,018,183

9,190,122

9,749,327

9,555,964

3,063,108

3,063,108

2,996,847

307,000

307,000

984,333

392 000

392 000

3847169

$

113 450 274 $

114 024 479 $

126 045 074

$

75,225,786 $

79,258,480 $

80,907,120

2,919,511 2,939,207 2,104,113 1,251,969 6,623,333 1,439,620 8,161,091 4,264,383 1,653,645
368,854
6 425 682

3,390,669 2,922,173 2,084,945 1,284,322 6,634,501 1,440,220 8,243,853 5,160,281 1,952,440
390,664
6 524 748

4,404,780 2,881,293 2,502,870 1,288,868 7,049,726 1,530,925 9,047,046 5,497,190 2,148,288 1,002,400
172,222 6 462 111

$

113377194 $

119,287,296 $

124 894 839

$

73 080 $

-5 262 817 $

1 150 235

$

724,605 $

724,605

-724 605

-724 605 $

-234 414

$

0 $

0 $

-234 414

$

73,080 $

-5,262,817 $

915,821

17 981 053

17 981 053

17 201 089

Fund Balances - Ending

$

18 054133 $

12,718,236 $ ==1=8=1=16====91=0=

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

See notes to the basic financial statements.

- 25 -

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

SCHEDULE "2"

FUNDING AGENCY PROGRAM/GRANT
Agriculture, U. S. Department of Child Nutrition Cluster Pass-Through From Georgia Department of Education Food Services School Breakfast Program National School Lunch Program
Total Child Nutrition Cluster
Other Programs Pass-Through From Georgia Department of Education Food Donation (1)
Total U.S. Department of Agriculture
Corporation for National and Community Service Pass-Through From Georgia Department of Education Learn and Serve America School and Community Based Programs
Education, U. S. Department of Special Education Cluster Pass-Through From Georgia Department of Education Special Education Grants to States Preschool Grants
Total Special Education Cluster
Other Programs Pass-Through From Georgia Department of Education Comprehensive School Reform Demonstration English Language Acquisition Grants Enhancing Education Through Technology Program Hurricane Education Recovery Improving Teacher Quality State Grants Mathematics and Science Partnerships Safe and Drug-Free Schools and Communities State Grants for Innovative Programs Title I Grants to Local Educational Agencies Vocational Education - Basic Grants to States
Total U. S. Department of Education
Defense, U.S. Department of Direct U.S. Marine Corps R.O.T.C. Program
Total Federal Financial Assistance
N/A = Not Available

CFDA NUMBER

PASSTHROUGH
ENTITY ID
NUMBER

EXPENDITURES IN PERIOD

.. 10.553 10.555

N/A

N/A

$

$

(2) 5 883 476
5,883,476

10.550

NIA $

333 947 6 217 423

94.004

NIA

$

6434

84.027 84.173

N/A

$

N/A

$

2,425,429 71 083
2,496,512

84.332 84.365
. 84.318 84.938 84.367 84.366 84.186 84.298 84.010 84.048

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

145,093 93,373 37,673
(3) 451,585 71,250 64,059 40,131
1,975,767 147 320
5 522 763

$

119 755

$ ===11,..,=86=6=,3=7=5

- 26 -

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

SCHEDULE "2"

Notes to the Schedule of Expenditures of Federal Awards
(1) The amount shown for the Food Donation Program represents the Federally assigned value of nonmonetary assistance for donated commodities received and/or consumed by the School District during the current fiscal year.
(2) Expenditures for the funds earned on the School Breakfast Program ($675,971) were not maintained separately and are included in the 2006 National School Lunch Program.
(3) Funds earned on the Hurricane Education Recovery program, in the amount of $450,294, do not require reporting of expenditures. Additionally, this amount included Federal assistance of $4,282, provided to non-public schools.
Major Programs are identified by an asterisk (*) in front of the CFDA number.
The School District did not provide Federal Assistance to any Subrecipient.
The accompanying schedule of expenditures of Federal awards includes the Federal grant activity of the Rockdale County Board of Education and is presented on the modified accrual basis of accounting which is the basis of accounting used in the presentation of the fund financial statements.

See notes to the basic financial statements.

- 27 -

ROCKDALE COUNTY BOARD OF EDUCATION SCHEDULE OF STATE REVENUE YEAR ENDED JUNE 30, 2006

SCHEDULE "3"

AGENCY/FUNDING
GRANTS Bright From the Start: Georgia Department of Early Care and Learning Pre-Kindergarten Program
Education, Georgia Department of Quality Basic Education Direct Instructional Cost Kindergarten Program Kindergarten Program - Early Intervention Program Primary Grades (1-3) Program Primary Grades - Early Intervention (1-3) Program Upper Elementary Grades (4-5) Program Upper Elementary Grades - Early Intervention (4-5) Program Middle Grades (6-8) Program High School General Education (9-12) Program Vocational Laboratory (9-12) Program Students with Disabilities Category I Category II Category Ill Category IV CategoryV Gifted Student - Category VI Remedial Education Program Alternative Education Program English Speakers of Other Languages (ESOL) Media Center Program 20 Days Additional Instruction Staff and Professional Development Indirect Cost Central Administration School Administration Facility Maintenance and Operations Categorical Grants Pupil Transportation Regular Bus Replacement Nursing Services Principal Supplements Vocational Supervisors Education Equalization Funding Grant Food Services Vocational Education Austerity Reduction Other State Programs Health Insurance K-8 Reading and Mathematics Program National Teacher Certification Preschool Handicapped Program

GOVERNMENTAL FUND TYPES

CAPITAL

GENERAL

PROJECTS

FUND

FUND

$ 372,220

$

3,852,793 226,207
8,526,766 1,261,887 4,511,311
348,767 8,438,819 7,762,623 1,694,196
316,511 789,819 3,189,645 1,239,464 173,176 1,810,004 152,207 663,351 527,126 1,279,744 417,936 254,780
1,404,074 2,500,177 3,651,590
1,245,564 218,544 267,742 48,868 27,275
1,906,840 325,960
1,855,475 -3,061,592
2,307,485 221,991 86,286 184,703

TOTAL
372,220
3,852,793 226,207
8,526,766 1,261,887 4,511,311
348,767 8,438,819 7,762,623 1,694,196
316,511 789,819 3,189,645 1,239,464 173,176 1,810,004 152,207 663,351 527,126 1,279,744 417,936 254,780
1,404,074 2,500,177 3,651,590
1,245,564 218,544 267,742 48,868 27,275
1,906,840 325,960
1,855,475 -3,061,592
2,307,485 221,991 86,286 184,703

- 28 -

ROCKDALE COUNTY BOARD OF EDUCATION SCHEDULE OF STATE REVENUE YEAR ENDED JUNE 30, 2006

SCHEDULE "3"

AGENCY/FUNDING
GRANTS Georgia State Financing and Investment Commission Reimbursement on Construction Projects
Office of Treasury and Fiscal Services Public School Employees Retirement

GOVERNMENTAL FUND TYPES

CAPITAL

GENERAL

PROJECTS

FUND

FUND

TOTAL

$

6,382,416 $ 6,382,416

$ _ _ _17~84_9_

17 849

$ 61,018,183 $

6 382 416 $ 67,400,599

See notes to the basic financial statements.

- 29 -

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

SCHEDULE "4"

PROJECT
Rockdale County High School renovation, construction of a new elementary school, the addition of three new auditoriums for the existing high schools and the improvement of existing school buildings and other buildings and facilities.
The cost of acquiring, construction and equipping one new elementary school, one new middle school and one new high school, acquiring land for future schools and instructional and administrative technology improvements for existing schools, adding to, renovating, repairing, improving and equipping existing school buildings and other buildings and facilities useful or desirable in connection therewith and acquiring any necessary property therefor, both real and personal. The cost of acquiring school buses, acquiring, construction and equipping one new stadium for an existing high school, adding to, renovating, repairing, improving and equipping existing athletic facilities and other facilities useful or desirable in connection therewith and acquiring any necessary property therefor, both real and personal.
The cost of retiring a portion of the prior bonds by paying or making provision for the payment of the principal of and interest on the prior bonds coming due on January 1, 2004 through January 1, 2010.

ORIGINAL ESTIMATED
COST (1)

CURRENT ESTIMATED COSTS (2)

AMOUNT EXPENDED IN CURRENT
YEAR (3)

AMOUNT EXPENDED
IN PRIOR YEARS (3)

PROJECT STATUS

$ 27,300,000 $ 34,112,285 $

162,053 $ 33,950,232 Ongoing

65,000,000

65,000,000

21,944,744

16,512,006 Ongoing

15,000,000

15,000,000

9 679 644

3,723,357 Completed

$ 107,300,000 $ 114,112,285 $ 31786441 $ 54,185,595

(1) The School District's original cost estimate as specified in the resolution calling for the imposition of the Local Option Sales Tax.
(2) The School District's current estimate of total cost for the projects. Includes all cost from project inception to completion.
(3) The voters of Rockdale County approved the imposition of a 1% sales tax to fund the above projects. Amounts expended for these projects may include sales tax proceeds, state, local property taxes and/or other funds over the life of the projects.

See notes to the basic financial statements.

- 30-

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

SCHEDULE "5"

DESCRIPTION

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

ELIGIBLE QBE PROGRAM COSTS

SALARIES

OPERATIONS

TOTAL

Direct Instructional Programs

Kindergarten Program

$

Kindergarten Program-Early Intervention Program

Primary Grades (1-3) Program

Primary Grades-Early Intervention (1-3) Program

Upper Elementary Grades (4-5) Program

Upper Elementary Grades-Early Intervention (4-5)

Program

Middle Grades (6-8) Program

Middle School (6-8) Program

High School General Education (9-12) Program

Vocational Laboratory (9-12) Program

Students with Disabilities

Category I

Category II

Category Ill

Category IV

Gifted Student - Category VI

Remedial Education Program

Alternative Education Program

English Speakers of Other Languages (ESOL)

4,568,849 $ 262,197
10,157,347 1,485,763 5,330,537

3,841,870 $ 212,969
11,899,474 1,386,141 6,500,609

405,527
10,114,162 9,195,628 2,003,431 6,845,798
2,118,641 173,668 789,641 638 791

288,443 42,763
10,953,192 13,368,087
1,784,872
548,748 1,031,881 5,144,917
197,331 1,113,121
46,349 497,624 908 844

88,380 $ 215
210,397 207
1,300,888
218
767,811 1,108,693
101,577
8,070 4,966 63,557
514 10,241
2,323 44,788 10 621

3,930,250 213,184
12,109,871 1,386,348 7,801,497
288,661 42,763
11,721,003 14,476,780
1,886,449
556,818 1,036,847 5,208,474
197,845 1,123,362
48,672 542,412 919 465

TOTAL DIRECT INSTRUCTIONAL PROGRAMS

$

54,089,980 $ 59,767,235 $

3,723,466 $

63,490,701

Media Center Program Staff and Professional Development

1,522,304 306 060

1,940,855 79,822

244,605 109 436

2,185,460 189 258

TOTAL QBE FORMULA FUNDS

$

55,918,344 $ 61,787,912 $

4 077 507 $====6=5,=86=5=,4=1=9

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

See notes to the basic financial statements.

- 31 -

SECTION II COMPLIANCE AND INTERNAL CONTROL REPORTS

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

DEPARTMENT OF AUDITS AND ACCOUNTS
270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400
January 8, 2007

Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the Rockdale County Board of Education
REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS
Ladies and Gentlemen:
We have audited the financial statements of the governmental activities, each major fund, and the aggregate remaining fund information ofRockdale County Board ofEducation as ofand for the year ended June 30, 2006, which collectively comprise Rockdale County Board of Education's basic financial statements and have issued our report thereon dated January 8, 2007. We conducted our audit in accordance with auditing standards generally accepted in the United States ofAmerica and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States.
Internal Control Over Financial Reporting
In planning and performing our audit, we considered Rockdale County Board ofEducation's internal control over financial reporting in order to determine our auditing procedures for the purpose of expressing our opinions on the financial statements and not to provide an opinion on the internal control over financial reporting. However, we noted a certain matter involving the internal control over financial reporting and its operation that we consider to be a reportable condition. Reportable conditions involve matters coming to our attention relating to significant deficiencies in the design or operation of the internal control over financial reporting that, in our judgment, could adversely affect Rockdale County Board of Education's ability to record, process, summarize and report financial data consistent with assertions of management in the financial statements. The reportable condition is described in the accompanying Schedule ofFindings and Questioned Costs as item FS7221-06-01.
2006YB-30

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

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

DEPARTMENT OF AUDITS AND ACCOUNTS
270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400
January 8, 2007

Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the Rockdale County Board of Education
REPORT ON COMPLIANCE WITH REQUIREMENTS APPLICABLE TO EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH 0MB CIRCULAR A-133
Ladies and Gentlemen:
Compliance
We have audited the compliance of Rockdale County Board of Education with the types of compliance requirements described in the U.S. Office ofManagement and Budget (0MB) Circular A-133 Compliance Supplement that are applicable to each ofits major Federal programs for the year ended June 30, 2006. Rockdale County Board ofEducation's major Federal programs are identified in the Summary of Auditor's Results Section of the accompanying Schedule of Findings and Questioned Costs. Compliance with the requirements of laws, regulations, contracts and grants applicable to each of its major Federal programs is the responsibility of Rockdale County Board of Education's management. Our responsibility is to express an opinion on Rockdale County Board of Education's compliance based on our audit.
We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States ofAmerica; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General ofthe United States; and 0MB Circular A133, Audits of States, Local Governments, and Non-Profit Organizations. Those standards and 0MB Circular A-133 require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major Federal program occurred. An audit includes examining, on a test basis, evidence about the Rockdale 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
2006SA-30

does not provide a legal determination on Rockdale County Board of Education's compliance with those requirements.
In our opinion, the Rockdale County Board of Education complied, in all material respects, with the requirements referred to above that are applicable to each of its major Federal programs for the year ended June 30, 2006.
Internal Control Over Compliance
The management of Rockdale County Board of Education is responsible for establishing and maintaining effective internal control over compliance with requirements of laws, regulations, contracts and grants applicable to Federal programs. In planning and performing our audit, we considered Rockdale County Board of Education's internal control over compliance with requirements that could have a direct and material effect on a major Federal program in order to determine our auditing procedures for the purpose of expressing our opinion on compliance and to test and report on internal control over compliance in accordance with 0MB Circular A-133.
We noted a certain matter involving the internal control over compliance and its operation that we consider to be a reportable condition. Reportable conditions involve matters coming to our attention relating to significant deficiencies in the design or operation ofthe internal control over compliance that, in our judgment, could adversely affect the Rockdale County Board of Education's ability to administer a major Federal program in accordance with applicable requirements oflaws, regulations, contracts and grants. The reportable condition is described in the accompanying Schedule of Findings and Questioned Costs as item FA-7221-06-01.
A material weakness is a reportable condition in which the design or operation ofone or more ofthe internal control components does not reduce to a relatively low level ofrisk that noncompliance with the applicable requirements oflaws, regulations, contracts and grants caused by error or fraud that would be material in relation to a major Federal program being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. Our consideration ofthe internal control over compliance would not necessarily disclose all matters in the internal control that might be reportable conditions and, accordingly, would not necessarily disclose all reportable conditions that are also considered to be material weaknesses. However, we believe the reportable condition described above is not a material weakness.
This report is intended solely for the information and use of the management, members of the Rockdale County Board of Education, Federal awarding agencies and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties.
Respectfully submitted,
~int~~ ~ State Auditor
RWH:as 2006SA-30

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

ROCKDALE COUNTY BOARD OF EDUCATION AUDITEE'S RESPONSE
SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2006
PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS No matters were reported PRIOR YEAR FEDERAL AWARD FINDINGS AND QUESTIONED COSTS No matters were reported

SECTION IV FINDINGS AND QUESTIONED COSTS

ROCKDALE COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2006
I SUMMARY OF AUDITOR'S RESULTS
1. Type of Report Issued on the Financial Statements The auditor's opinion on the Rockdale County Board ofEducation's financial statements was unqualified.
2. Reportable Conditions in Internal Control Disclosed by the Audit of the Financial Statements The audit report for the Rockdale County Board ofEducation disclosed a financial statement reportable condition related to the following control category.
Revenues/ReceivabIes/Receipts
The reportable condition described above is not considered to be a material weakness.
3. Noncompliance Material to the Financial Statements The audit of the Rockdale County Board of Education disclosed no instances of noncompliance that were deemed to be material to the financial statements.
4. Reportable Conditions in Internal Control Over Major Programs The audit report for the Rockdale County Board of Education disclosed a reportable condition in internal control over major programs for the following compliance requirement.
Activities Allowed or Unallowed
The reportable condition described above is not considered to be a material weakness.
5. Type of Report Issued on Compliance for Major Programs The auditor's opinion on the Rockdale County Board of Education's report on compliance with requirements applicable to major programs was unqualified.
6. Audit Findings Required to be Reported by Section .510(a) ofOMB Circular A-133 The Rockdale County Board of Education's audit disclosed an audit finding required to be reported by section .510(a) of 0MB Circular A-133. This audit finding is included in section IV of this report.
7. Major Programs Federal awards audited as major programs are as follows: 10.553 Food Services - School Breakfast Program 10.555 Food Services - National School Lunch Program 84.938 Hurricane Education Recovery
8. Type "A" Program Dollar Threshold The dollar threshold for type "A" programs was $369,500.
- 1-

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

I SUMMARY OF AUDITOR'S RESULTS

9. Low Risk Auditee The Rockdale County Board of Education qualified as a low risk auditee as defined by Section .530 of 0MB Circular A-133.

II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

REVENUES/RECEIVABLES/RECEIPTS Inadequate Internal Controls Over School Activity Accounts Reportable Condition Finding Control Number: FS-7221-06-01

Condition:

The accounting procedures ofthe School District were insufficient to provide for adequate internal controls over the school activity accounts.

Criteria:

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

Questioned Cost: NIA

Information:

Based on a review of forty-five items, twenty-five receipts were not deposited in a timely manner.

Cause:

These deficiencies were a result of management's failure to ensure that internal controls were established, implemented and functioning at the school level.

Effect:

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

Recommendation:

Management should revise and monitor controls to provide reasonable assurance that transactions are processed according to established procedures.

-2-

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

III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

ACTIVITIES ALLOWED OR UNALLOWED Inadequate Internal Control Procedures Reportable Condition U.S. Department of Education Through Georgia Department of Education Hurricane Education Recovery (CFDA No. 84.938) Finding Control Number: FA-7221-06-01

Condition:

There were no procedures in place to ensure that Hurricane Education Recovery Act (HERA) funds provided to the Board for displaced students reported as having disabilities were used for the excess costs of providing special education and related services to students with disabilities.

Criteria:

The following guidance applied to the management of Emergency Impact Aid for Displaced Students to include funds made available for displaced students:

1. Section 107(e)(4) ofHERA, 2. Volumes "I" and "II" of U. S. Department of Education (USED)
guidelines included in "Frequently Asked Questions, Emergency Impact Aid for Displaced Students" and 3. State of Georgia issued publication titled "Georgia Guidance on Federal Emergency Hurricane Act" (GDOE Guidelines).

Provisions of HERA, USED and GDOE Guidelines state that HERA funds for students with disabilities may only be used to pay for special education and related service consistent with the Individuals with Disabilities Act (IDEA). Both Volume "I" and "II" of USED guidance state that the funds provide for students with disabilities must be recorded and tracked separately from those HERA funds provided for non-disabled students. This Federal requirement was not specifically included in GDOE Guidelines.

Provisions of HERA and GDOE guidelines state that these funds may become a part of a Board's special education budget to ensure that they are only used to pay for special education and related service consistent vvith IDEA. The guidelines further stated that since these funds are to be applied and used in a manner as funds made available under Part B ofIDEA, it ~as also advised to consult with State and local staff who are cognizant oflD EA requirements.

Questioned Cost: NIA

-3 -

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

III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

ACTIVITIES ALLOWED OR UNALLOWED Inadequate Internal Control Procedures Reportable Condition U.S. Department of Education Through Georgia Department of Education Hurricane Education Recovery (CFDA No. 84.938) Finding Control Number: FA-7221-06-01

Information:

HERA funds received by the School District included $2,344 for students with disabilities. Although required by Federal guidelines, the receipt and expenditure of these funds were not maintained separately.

We further noted that the budget for special education was not modified for the increase in HERA funds designated for special education and related purposes. There was no evidence that State or local special education staff were consulted about the use of these funds.

Cause:

The Board relied solely on GDOE Guidelines which did not require that the Board provide separate accountability of HERA funds provided for students with disabilities. Consideration had not been given to consulting with local and State special education staff or revising its special education budget to ensure that these HERA funds were applied in line with IDEA.

Effect:

We were unable to determine if the $2,344 of HERA funds earmarked for students with disabilities were used for special education and related purposes.

Recommendation:

Management should ensure that procedures are in place to comply with both Federal and State guidelines when administering HERA funds for special education purposes. GDOE should review this matter and determine ifthese funds were used properly or if a refund is appropriate.

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SECTIONV MANAGEMENT'S RESPONSES

ROCKDALE COUNTY BOARD OF EDUCATION SCHEDULE OF MANAGEMENT'S RESPONSES
YEAR ENDED JUNE 30, 2006
Finding Control Number: FS-7221-06-01
We concur with this finding. The Board will modify the financial guidelines and provide training to the bookkeepers, teachers and principals to assure the receipts are deposited in a timely manner. The modifications and training will be implemented by June 2007.
Finding Control Number: FA-7221-06-01
We do not concur with this finding. The Board followed Section III of the Hurricane Education Recovery Act guidelines obtained from Georgia Department of Education. Section III states the School District should record the funds in the General Fund using revenue source 4821, program code 1799. The funds were to be accounted for within the General Fund and there were no requirements to record expenditures associated with these funds, except for the amounts received for the non-public schools. The Board incurred and can support allowable expenditures up to and above the budgeted amounts for students with disabilities. A corrective action is unnecessary since this was a fiscal year 2006 grant and all refunds have been made to Georgia Department of Education.
Contact Person: Brad C. Boling, Director of Business Services Phone: (770) 860-4219 Fax Number: (770) 860-4266 E-mail Address: bboling@rockdale.k12.ga.us