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

WALTON COUNTY BOARD OF EDUCATION
MONROE, 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

WALTON 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

NOTES TO THE BASIC FINANCIAL STATEMENTS

9

SCHEDULES

REQUIRED SUPPLEMENTARY INFORMATION

1 SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES

IN FUND BALANCES - BUDGET AND ACTUAL

GENERALFUND

25

WALTON COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS -

SECTION I

FINANCIAL

SCHEDULES

SUPPLEMENTARY INFORMATION

2 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS

26

3 SCHEDULE OF STATE REVENUE

28

4 SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS

29

5 ALLOTMENTS AND EXPENDITURES

GENERAL FUND - QUALITY BASIC EDUCATION PROGRAMS (QBE)

BY PROGRAM

31

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

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

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

WALTON 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) 858-2174

DEPARTMENT OF AUDITS AND ACCOUNTS
270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400
April 24, 2007

Honorable Sonny Perdue, Governor Members ofthe General Assembly Members ofthe State Board of Education
and Superintendent and Members ofthe Walton 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 H) of the Walton 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 Walton County Board ofEducation's management. Our responsibility is to express opinions on these financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United States ofAmerica and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General ofthe United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free 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 ofthe Walton County Board ofEducation, as ofJune 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 St~dards, we have also issued our report dated April 24, 2007, on our consideration ofthe Walton County Board ofEducation's internal control over financial reporting and our tests ofits compliance with certain provisions oflaws, regulations, contracts and grant agreements and other matters. The purpose ofthat report is to describe the scope ofour testing ofinternal control over financial reporting and compliance and the results ofthat testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit.

Management's Discussion and Analysis and the Schedule ofRevenues, Expenditures and Changes in Fund Balances - Budget and Actual, as presented on pages i through vii 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 ofAmerica. 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 Walton 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,

..

~.~U)4}~

ell W. Hinton, CPA, CGFM State Auditor

RWH:gp 2006ARL-11

WALTON COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2006
Introduction
Our discussion and analysis of the Walton 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 to enhance their understanding of the School District's financial performance.
Financial Highlights
Key financial highlights for fiscal year 2006 are as follows:
On the District-wide financial statements, the assets of the School District exceeded liabilities by $122.5 million. Of this amount, $18.8 million is unrestricted and is available for spending at the School District's discretion.
The School District had $104.0 million in expenses relating to governmental activities; only $58.4 million of these expenses are offset by program specific charges for services, grants, and contributions. General revenues (primarily property and sales taxes) of $54.5 million were provided for these programs.
As stated above, general revenues accounted for $54.5 million or 48% of all revenues totaling $112.9 million. Program specific revenues in the form of charges for services, grants and contributions accounted for the rest.
Overview of the Financial Statements
This annual report consists of three parts; 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 statements provide 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 statements reflect the School District's most significant funds. In the case of the Walton County School District, the General Fund, District-wide Capital Projects Fund, and Debt Service Fund are the most significant funds.

WALTON COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2006
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 under 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 yearend available for spending in future periods. These funds are reported using the modified accrual method of accounting, which measures cash and all other financial assets that can readily be converted to cash. The governmental fund statements provide a detailed short-term view of the School District's general government operations and the basic services it provides. Governmental fund information helps determine whether there are more or fewer financial resources that can be spent in the near future to finance educational programs. The differences between governmental activities (reported in the Statement of Net Assets and the Statement of Activities) and governmental funds are reconciled to the financial statements.
11

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

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 this fiscal year.

Table 1 Net Assets

Governmental Activities

Fiscal

Fiscal

Year 2006

Year 2005

Assets Current and Other Assets Capital Assets, Net

$ 106,733,626 $ 109,209,003

113,923.038

103,297.838

Total Assets

$ 220,656.664 $ 212,506.841

Liabilities Current and Other Liabilities Long-Term Liabilities

$ 15,634,076 $ 15,038,978

82,500.230

83,878.521

Total Liabilities

$ 98,134.306 $ 98,917.499

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

$ 98,433,408 5,352,993 18,735.957

$ 94,298,834 2,450,624 16.839.884

Total Net Assets

$ 122,522,358 $ 113,589.342

Table 2 shows the Changes in Net Assets for this fiscal year.

iii

WALTON 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

$ 2,799,499 53,947,312 1,608,899

$ 1,827,050 50,602,119 201,017

Total Program Revenues

$ 58,355,710 $ 52,630,186

General Revenues:

Taxes

Property Taxes

For Maintenance and Operations

$

For Debt Service

Railroad Cars

Sales Taxes

Special Purpose Local Option Sales Tax

Intangible Recording Tax

Real Estate

Grants and Contributions not Restricted to

Specific Programs

Investment Earnings

Miscellaneous

Special Items

Bond Defeasance

36,091,285 3,308,905
8,677,399 1,456,210
553,460
96,708 3,890,534
466,104

$ 35,323,368 1,543,514 7,136
6,992,733 1,175,281
404,364
2,458,184 665,550
1,731,378
-386,739

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

$ 54,540,605 $ 112,896,315

$ 49,914,769 $ 102,544,955

$ 62,029,147
3,286,814 3,495,857 1,562,805 1,140,501 5,571,829
688,454 6,756,691 9,456,281
818,983 1,467,068
404,134 4,799,181 2,485,554
$ 103,963,299
$ 8,933.016

$ 57,857,059
2,660,268 2,909,063 1,532,890 1,739,277 5,259,607 1,160,929 6,304,161 5,110,044
639,127 1,320,156
344,250 3,915,759
231,881
$ 90,984,471
$ 11,560,484

lV

WALTON 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. Net cost of services can be defined as the total cost less fees generated by the activities and intergovernmental revenue provided for specific programs. The net cost reflects the financial burden on the School District's taxpayers by each of these functions.

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

$ 62,029,147 $ 57,857,059 $ 21,440,919 $ 20,334,873

Support Services

Pupil Services

3,286,814 2,660,268 2,807,625 2,292,111

Improvement of Instructional Services

3,495,857 2,909,063 1,925,483 1,198,272

Educational Media Services

1,562,805 1,532,890

578,118

609,558

General Administration

1,140,501 1,739,277 -319,187

294,559

School Administration

5,571,829 5,259,607 3,652,623 3,419,683

Business Administration

688,454 1,160,929

687,217 1,160,929

Maintenance and Operation of Plant

6,756,691 6,304,161 3,875,749 3,561,669

Student Transportation Services

9,456,281 5,110,044 6,904,562 3,492,273

Central Support Services

818,983

639,127

760,455

601,765

Other Support Services

1,467,068 1,320,156 1,074,666 1,050,308

Operations of Non-Instructional Services

Enterprise Operations

404,134

344,250 -767,241

148,595

Food Services

4,799,181 3,915,759

501,046

-42,191

Interest on Short-Tenn and Long-Tenn Debt 2,485,554

231,881 2,485,554

231,881

Total Expenses

$103,963.299 $ 90,984.471 $ 45,607.589 $ 38,354.285

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 $115.8 million and total expenditures and other financing uses of $117.1 million.

General Fund Budgeting Highlights

The School District's budget is prepared according to Georgia Law. The most significant budgeted fund is the General Fund. During the course of fiscal year 2006, the School District amended its General Fund budgeted as needed. For the General Fund, the actual revenues and other financing sources of $98.0 million exceeded the original budgeted amounts of $89.6 million by $8.4 million. This difference was primarily due to the increase in State grants and the mid-year QBE adjustment.

V

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

The final actual expenditures and other financing uses of $94.7 million exceeded the original budgeted amount of $89.4 million by $5.3 million. This difference was primarily due to an increase in State grants and the mid-year QBE adjustment.

CAPITAL ASSETS AND DEBT ADMINISTRATION

Capital Assets

At fiscal year ended June 30, 2006, the School District had $113.9 million invested in capital assets, all in governmental activities. Table 4 reflects a summary of these balances net of accumulated depreciation.

Table 4 Capital Assets (Net of Depreciation)

Governmental Activities

Fiscal

Fiscal

Year 2006

Year 2005

Land Construction in Progress Buildings and Improvements Equipment

$ 9,210,723 33,277,472 68,280,736 3,154,107

$ 7,456,734 24,039,338 69,506,930 2,294,836

Total

$ 113,923.038 $ 103,291,838

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

Debt

At fiscal year ended June 30, 2006, the School District had $82.5 million in long-term liabilities outstanding. Table 5 summarizes the School District's debt for general obligation bonds and premium on bonds sold.

Table 5 Debt at June 30

Governmental Activities

Fiscal

Fiscal

Year 2006

Year 2005

Bonds Payable Unamortized Premiums on Bonds Sold

$ 78,265,000 $ 79,440,000

4,235,230

4,438,521

Total

$ 82,500.230 $ 83,878.521

VI

WALTON COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2006
Current Issues Currently known facts, decisions or conditions that are expected to have a significant effect on financial positions or results of operations.
Economic Slowdown - State funding for education has been stagnant and as a result more pressure is being placed on the local School Districts to prioritize its educational programs and provide additional local funding. Additional costs to the School District will be required with the continued implementation of House Bill 1187, which mandates lower teacher to student ratios, requiring additional teachers and additional classrooms. Despite these challenges, the Walton County School District is remaining optimistic about the ability of the School District to maximize all of the financial resources to provide a quality education to our students.
Capital Improvements - The School District plans capital improvements as future capital needs arise due to increased student population and facility repair and maintenance needs. Specific capital expenditure plans are formalized in conjunction with Special Purpose Local Option Sales Tax (SPLOST), anticipated annual receipts of capital outlay funds from the state of Georgia Department of Education and individual general obligation bond issues. The School District regularly monitors anticipated capital outlay needs.
Contacting the School District's Financial Management This financial report is designed to provide our citizens, taxpayers, investors and creditors with a general overview of the School District's finances and to show the School District's accountability for the money it receives. If you have questions about this report or need additional financial information, contact Mr. Harry S. Lee, Director of Budget and Finance at Walton County School District, 200 Double Springs Church Road, Monroe, Georgia 30656. You may also email your question to Mr. Lee at hlee@walton.kl2.ga.us.
vii

WALTON COUNTY BOARD OF EDUCATION

WALTON 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 Buildings Equipment Less: Accumulated Depreciation
Total Assets
LIABILITIES
Accounts Payable Salaries Payable Contracts Payable Retainages Payable Long-Term Liabilities
Due Within One Year Due in More Than One Year
Total Liabilities
NET ASSETS
Invested in Capital Assets, Net of Related Debt Restricted for
Continuation of Federal Programs Debt Service Capital Projects Unrestricted
Total Net Assets
Total Liabilities and Net Assets
The notes to the basic financial statements are an integral part of this statement. -1-

EXHIBIT"A"

GOVERNMENTAL ACTIVITIES

$

79,781,186

14,648,575

3,678,059 6,793,883 1,753,569
24,502 53,852

9,210,723 33,277,472 80,677,256 10,765,388 -20,007,801

$ =====2=2=0'=65=6=,6=64=

$

6,201,810

8,001,109

731,649

699,508

1,443,291 81,056,939

$

98,134,306

$

98,433,408

1,145,917 1,086,644 3,120,432 18,735,957

$

122,522,358

$ ===22..o._,6=5=6'=664====

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

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

EXPENSES

CHARGES FOR SERVICES

$

62,029,147

3,286,814 3,495,857 1,562,805 1,140,501 5,571,829
688,454 6,756,691 9,456,281
818,983 1,467,068

404,134 $ 4,799,181 2,485,554

$

103,963,299 $

1,163,220 1,636,279
2,799,499

Net Assets - End of Year

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

EXHIBIT"B"

PROGRAM REVENUES

OPERATING

CAPITAL

GRANTS AND

GRANTS AND

CONTRIBUTIONS CONTRIBUTIONS

NET (EXPENSES) REVENUES
AND CHANGES IN . NET ASSETS

$

40,374,286 $

476,197 1,549,052
978,536 1,450,544 1,915,070

2,824,187 1,459,535
39,872 392,402

2,487,631

$

53,947,312 $

213,942 $
2,992 21,322
6,151 9,144 4,136 1,237 56,755 1,092,184 18,656
8,155 174,225
1,608,899 $

-21,440,919
-2,807,625 -1,925,483
-578, 118 319,187 -3,652,623 -687,217 -3,875,749 -6,904,562 -760,455 -1,074,666
767,241 -501,046 -2,485,554
-45,607,589

$

36,091,285

3,308,905

8,677,399 1,456,210
553,460 96,708 3,890,534 466 104

$

54,540,605

$

8,933,016

113,589,342

$ ===1=2=2.,,,5=22='=35=8=

- 3-

WALTON 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
Accounts Payable Salaries Payable Contracts Payable Retainages Payable
Total Liabilities
FUND BALANCES
Reserved for: Continuation of Federal Programs Debt Service Inventories Capital Projects
Unreserved Designated for Self-Insurance Designated for Land Acquisition Designatesd for Contingencies Undesignated Reported in: General Fund Capital Projects
Total Fund Balances
Total Liabilities and Fund Balances

GENERAL FUND

DISTRICTWIDE
CAPITAL PROJECTS
FUND

DEBT SERVICE
FUND

TOTAL

$ 7,794,453 $ 70,956,585 $

14,648,559

16

2,298,699 6,793,883 1,753,569
24,502 53,852

1,517,427

1,030,148 $ 79,781,186 14,648,575

250,011

4,066,137 6,793,883 1,753,569
24,502 53,852

$ 33,367,517 $ 72,474.028 $ 1,280,159 $ 107,121,704

$ 5,110,307 $ 8,001,109
$ 13,111,416 $

1,091,503
731,649 699,508
2,522,660

$ 6,201,810 8,001,109 731,649 699,508
$ 15,634,076

$ 1,092,065 $
53,852 $ 68,127,413

1,000,000 1,500,000 1,894,070

14,716,114

1,823,955

$ 20,256,101 $ 69,951,368 $

$ 1,280,159

1,092,065 1,280,159
53,852 68,127,413

1,000,000 1,500,000 1,894,070

14,716,114 1,823,955

1,280,159 $ 91,487,628

$ 33,367,517 $ 72,474,028 $ 112ao.159 $ 101,121,104

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

WALTON 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 Buildings Equipment Accumulated Depreciation
Total Capital Assets
Some of the School District's property tax revenues will be collected after year-end but are not available soon enough to pay for the current period's expenditures.
Long-Term Liabilities, including Bonds Payable, are not due and payable in the current period and therefore are not reported as liabilities in the funds. Long-Term Liabilities at year-end consist of:
Bonds Payable Unamortized Bond Premiums
Total Long-Term Liabilities
Net Assets of Governmental Activities (Exhibit "A")

$ 91,487,628

$

9,210,723

33,277,472

80,677,256

10,765,388

-20,007,801

113,923,038

-388,078

$ -78,265,000 -4,235,230

-82,500,230

$ 122,522,358

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

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

EXHIBIT"E"

REVENUES
Property Taxes Sales Taxes State Funds Federal Funds Charges for Services Investment Earnings Miscellaneous
Total Revenues
EXPENDITURES
Current Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Enterprise Operations Food Services Operation
Capital Outlay Debt Services
Principal Interest
Total Expenditures
Excess of Revenues over (under) Expenditures
OTHER FINANCING SOURCES {USES}
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

$ 37,663,437 1,884,128 $
45,713,078 8,537,124 2,799,499 762,790 651 105

$ 8,677,399 1,402,717
3,018,598

$ 98,011,161 $ 13,098,714 $

3,502,420 $ 125,542
109,146

41,165,857 10,687,069 47,115,795 8,537,124 2,799,499 3,890,534
651,105

3,737,108 $ 114,846,983

$ 61,183,072 $

10,012

3,267,985 3,361,695 1,524,100 1,094,814 5,545,806
883,965 6,532,117 4,032,183
701,591 1,467,068
352,822 3,702,894
100,500

911,000 17,819,613

$

$. 93,750,612 $ 18,740,625 $ $ 4,260,549 $ -5,641,911 $

$ 61,193,084

3,267,985 3,361,695 1,524,100 1,094,814 5,545,806
883,965 6,532,117 4,943,183
701,591 1,467,068
352,822 3,702,894 17,920,113

1,175,000 2,485,554

1,175,000 2,485,554

3,660,554 $ 116,151,791

76 554 $ -1,304,808

$ $ -903 196

903,196

$ -903 196 $

903 196

$ 3,357,353 $ -4,738,715 $

16,898,748

74,690,083

$

903,196

-903, 196

$

0

76,554 $ -1,304,808

1,203,605

92,792,436

$ 20,256,101 $ 69,951,368 $ 1,280,159 $ 91,487,628

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

WALTON 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 disposal 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 disposed.
Repayment of Long-Term Debt is reported as an expenditure in Governmental Funds, but the repayment reduces Long-Term Liabilities in the Statement of Net Assets. In the current year, these amounts consist of:
Bond Principal Retirements Unamortized Bond Premium
Total Long-Term Debt Repayments

$ -1,304,808

$ 12,819,201 -2,009,000

10,810,201 -1,765,667

-185,001

$

1,175,000

203 291

1,378,291

Change in Net Assets of Governmental Activities (Exhibit "8")

$ ==8,.,,,93=3..,,0=16=

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

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

EXHIBIT"G"
AGENCY FUNDS
$ ==4=0=6=57=3=
$ ==4=0=6,=57=3=

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

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

EXHIBIT "H"

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

-9-

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

EXHIBIT "H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The School District 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), Bond Proceeds 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 type:
Agency funds account for assets held by the School District as an agent for various funds, governments or individuals.
BASIS OF ACCOUNTING
The basis ofaccounting determines when transactions are reported on the financial statements. The District-wide governmental and fiduciary fund financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded at the time liabilities are incurred, regardless ofwhen the related cash flows take place. Nonexchange transactions, in which the School District gives (or receives) value without directly receiving (or giving) equal value in exchange, include property taxes, sales taxes, grants and donations. On an accrual basis, revenue from property taxes is recognized in the fiscal year for which the taxes are levied. Revenue from sales taxes is recognized in the fiscal year in which the underlying transaction (sale) takes place. Revenue from grants and donations is recognized in the fiscal year in which all eligibility requirements have been satisfied.
The School District uses funds to report on its financial position and the results of its operations. Fund accounting is designed to demonstrate legal compliance and to aid financial management by segregating transactions related to certain governmental functions or activities. A fund is a separate accounting entity with a self-balancing set of accounts.
Governmental funds are reported using the current financial resources measurement focus and the modified accrual basis ofaccounting. Under this method, revenues are recognized when measurable and available. The School District considers all revenues reported in the governmental funds to be 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
- 10 -

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

EXHIBIT "H"

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

- 11 -

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

EXHIBIT "H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(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 Walton County Board ofCommissioners fixed the property tax levy for the 2005 tax digest year (calendar year) on September 15, 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 Walton County Tax Commissioner bills and collects the property taxes for the School District, withholds 2.5% of taxes collected as a fee for tax collection and remits the balance of taxes collected to the School District. Property tax revenues, at the fund reporting level, during the fiscal year ended June 30, 2006, for maintenance and operations amounted to $37,642,295 and for school bonds amounted to $3,502,420.

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

School Operations School Bonds

17.24 mills 1.60 mills

18.84 mills

- 12 -

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

EXHIBIT"H"

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 $8,677,399 and is to be used for capital outlay for educational purposes or debt service. This sales tax was authorized by local referendum and the sales tax must be re-authorized at least every five years.

INVENTORIES

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

CAPITAL ASSETS

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

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

Capitalization Policy

Estimated Useful Life

Land Buildings and Improvements Equipment

All

NIA

$

50,000 15 to 80 years

$

5,000 3 to 50 years

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

- 13 -

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

EXHIBIT"H"

Note 2: SUMMARY OF SIGNIFIG::ANT 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. In addition, general obligation bonds have been issued to refund existing general obligation bonds. General obligation bonds are direct obligations and pledge the full faith and credit of the government. The outstanding amount of these bonds is recorded in the Statement ofNet Assets.
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 ofthe State of Georgia, and

- 14 -

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

EXHIBIT "H"

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 AtJune 30, 2006, the bank balances were $81,940,384. The amounts of the total bank balances are classified into four categories of custodial credit risk:

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

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

Custodial Credit Risk Category

Bank Balance

1

$ 70,374,983

2

11,508,919

3

56,482

4

0

Total

$ 81,940,384

CATEGORIZATION OF INVESTMENTS Custodial Credit Risk Custodial credit risk for investments is the risk that, in the event of a failure ofthe counterparty to a transaction, the School District will not be able to recover the value of the investment or collateral securities that are in the possession of an outside party. The School District does not have a formal policy for managing custodial credit risk.

Investments are classified as to custodial credit risk by the categories described below:

- 15 -

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

EXHIBIT"H"

Note 3: DEPOSITS AND INVESTMENTS
Category 1 - Insured or registered, or securities held by the School District or the School District's agent in the School District's name.
Category 2 - Uninsured or unregistered, with securities held by the counterparty's trust department or agent in the School District's name.
Category 3 - Uninsured or unregistered, with securities held by the counterparty's trust department or agent, but not in the School District's name.
Funds invested in an investment pool managed by another government are not required to be categorized unless the investing entity owns specific, identifiable investment securities in the pool.
At June 30, 2006, the carrying value of the School District's total investments was $14,648,575 which is materially the same as fair value. These investments included funds in the amount of $11,214,575 invested in the Local Government Investment Pool administered by the State of Georgia, Office of Treasury and Fiscal Services which are not required to be categorized since the School District did not own any specific identifiable securities in the pool. The investment policy of the 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 of the Primary Liquidity Portfolio is as follows:
The Primary Liquidity Portfolio consists ofGeorgia 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 ofthe 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.

- 16 -

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

EXHIBIT "H"

Note 3: DEPOSITS AND INVESTMENTS

At June 30, 2006, the carrying value ofthe School District's investments was $14,648,575 which is materially the same as fair value. Fair value is based on quoted market prices, unless otherwise noted. The investments are classified as to custodial credit risk categories as follows:

Tx11e oflnvestment
Debt Securities Repurchase Agreements $

Risk Categories

2

3

$ 3 434 QQQ $

Carrying Amount

Fair Value

$ 3 434 QQQ $ 3 434 QQQ

Interest Rate Risk Interest rate risk is the risk that changes in interest rates ofdebt investment will adversely affect the fair value ofan investment. The School District does not have a formal policy for managing interest rate risk.

Investments are classified as to investment maturity as follows:

Investment Type

Fair Value

Investment Maturity

1- 5

More Than

Years

10 Years

Debt Securities Repurchase Agreements

$ 3,434.000 $ 1,886.525 $ 1,547.475

Credit Quality Risk Credit quality risk is the risk that an issuer or other counterparty to an investment will not fulfill its obligations. The School District does not have a formal policy for managing credit quality risk.

The repurchase agreements have a credit quality rating of AAA by Standard and Poor's.

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

- 17 -

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

EXHIBIT"H"

Note 5: CAPITAL ASSETS

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

Balances July 1, 2005

Increases

Balances Decreases June 30, 2006

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

$ 7,456,734 $ 1,753,989 $

24,039,338

9,238,134

0 $ 9,210,723 33,277,472

Total Capital Assets Not Being Depreciated $ 31,496,072 $ 10,992,123 $

0 $ 42,488,195

Capital Assets Being Depreciated Buildings and Improvements Equipment

$ 80,678,491

$

9,743,647 $ 1,827,078

1,235 $ 80,677,256 805,337 10,765,388

Less Accumulated Depreciation for: Buildings and Improvements Equipment

11,171,561 7,448,811

1,224,959 784,041

621,571

12,396,520 7,611,281

Total Capital Assets, Being Depreciated, Net $ 71,801,766 $ -181,922 $ 185,001 $ 71,434,843

Governmental Activity Capital Assets - Net $ 103,22:Z,838 $ IQ,810,201 $ 185,QQI $ 113,223,038

Current year depreciation expense by function is as follows:

Instruction Support Services
Pupil Services Improvements of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Food Services Enterprise Operations

$ 306,413

$

4,286

30,5.37

8,810

13,097

5,923

1,771

81,285

1,268,950

262720

1,441,379 249,529 112679

$ 210021000

- 18 -

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

EXHIBIT "H"

Note 6: RESTRICTED ASSETS

Special Purpose Local Option Sales Tax (SPLOST), general obligation bond proceeds and property tax levied specifically for retirement of outstanding bond principal, interest and paying agent's fees (Debt Service Funds) are reported as restricted assets in the Statement of Net Assets because their use is limited by applicable bond covenants or statutory provisions. Restricted assets at June 30, 2006, were as follows:

District-wide Capital Projects

Bond

SPLOST

Proceeds

Debt Service Funds

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

$ 1,030,148 $ 1,984,908 $ 68,878,636

$

16

Note 7: INTERFUND TRANSFERS

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

Transfer to

Transfers From General Fund

District-wide Capital Projects

$=====9==03-,1==9==6

Transfers are used to move property tax revenues collected by the General Fund to the District-wjde Capital Projects Fund as required match or supplemental funding source for capital construction projects.

Note 8: RISK MANAGEMENT

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

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

- 19 -

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

EXHIBIT "H"

Note 8: RISK MANAGEMENT

The School District has established a limited risk management program for workers' compensation claims. A premium is charged when needed by the General Fund to each user program on the basis of the percentage of that program's payroll to total payroll in order to cover estimated claims budgeted by management based on known claims and prior experience. The School District accounts for claims with expenses/expenditures and liability being reported when it is probable that a 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:

Beginning ofYear Liability

Claims and Changes in Estimates

Claims Paid

End ofYear Liability

2005 2006

$

0 $

188,078 $

188,078 $

0

$

0 $

201,214 $

201,214 $

0

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

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

Beginning of Year Liability

Claims and Changes in Estimates

Claims Paid

EndofYear Liability

2005 2006

$

0 $

27,139 $

27,139 $

0

$

0 $

14 743 $

14 743 $

0

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

Position Covered

Amount

Superintendent All Other Employees

$ 100,000 $ 100,000

- 20-

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

EXHIBIT"H"

Note 9: LONG-TERM DEBT

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

Purpose

Interest Rates

Amount

General Government - Series 2005A

3.00% - 5.00%

General Government - Refunding - Series 2005B 2.625% - 3.50%

$ 71,500,000 6,765,000

$ 78,265.000

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

Governmental Funds

Unamortized

General

Bond

Obligation

Premium

Bonds

Total

Balance July 1, 2005

$ 4,438,521 $ 79,440,000 $ 83,878,521

Deductions Debt Retired Bond Premiums Amortized

203,291

1,175,000

1,175,000 203,291

Balance June 30, 2006

$ 4,235,230 $ 78,265.000 $ 82,500,230

Portion of Long-Term Debt Due within One Year

$ 203,291 $ 1,240,000 $ 1,443.291

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

- 21 -

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

EXHIBIT"H"

Note 9: LONG-TERM DEBT

Fiscal Year Ended June 30

General Obligation

Debt

Principal

Interest

Unamortized Bond
Premium

2007 2008 2009 2010 2011 2012 - 2016 2017 - 2021 2022- 2026

$

1,240,000 $ 3,577,719 $ 203,291

1,680,000

3,539,244

203,291

1,990,000

3,485,094

203,291

2,325,000

3,421,775

203,291

2,690,000

3,338,106

203,291

16,665,000

14,800,422

1,016,455

22,905,000

9,932,806

1,016,455

28,770.000

3,731.750

1.185,865

Total Principal and Interest $ 78,265.000 $ 45,826,916 $ 4,235.230

Note 10: PRIOR YEAR DEFEASEMENT OF DEBT

In fiscal year 2005, the School District defeased certain general obligation bonds by placing the proceeds ofnew bonds in an irrevocable trust to provide for all future debt service payments on the old bonds. Accordingly, the trust account assets and the liability for the defeased bonds are not included in the School District's basic financial statements. At June 30, 2006, $5,525,000 ofbonds are outstanding and are considered defeased.

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:

Project

Unearned Executed Contracts

Funding Available From State

Monroe Area High School Monroe Elementary School SW Elementary School NW Elementary School SW High School Loganville High School Athletic Facility

$

4,879 $ 469,463

5,169,559

6,048,835

12,042,852

682,517

171,308

962,500

140.630

$ 18,491.728 $ 7,200.815

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

- 22-

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

EXHIBIT"H"

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.

Note 13: 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%

$ 4,689,696 $ 4,339,163 $ 4,190,335

- 23 -

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

SCHEDULE "1"

REVENUES
Property Taxes Sales Taxes State Funds Federal Funds Charges for Services Investment Earnings Miscellaneous
Total Revenues
EXPENDITURES
Current Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Enterprise Operations Food Services Operation
Capital Outlay
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
Adjustments
Fund Balances - Ending

NONAPPROPRIATED BUDGETS

ORIGINAL (1)

FINAL (1)

ACTUAL AMOUNTS

$

34,996,338 $

36,996,338 $

37,663,437

1,656,056

1,656,056

1,884,128

43,187,214

44,168,674

45,713,078

7,366,340

8,884,822

8,537,124

1,800,141

1,800,141

2,799,499

276,400

676,400

762,790

31 929

206 937

651 105

$

89 314 418 $

94 389 368 $

98 011161

$

58,247,370 $

60,558,401 $

61,183,072

3,304,659 2,602,948 1,446,527 2,132,171 5,240,928
723,755 6,230,892 3,237,892
737,011 1,148,012
3,716,664

3,407,222 3,079,158 1,448,327 2,157,666 5,305,496
876,623 6,409,089 4,251,709
738,705 1,198,328
14,000 3,726,767
50 000

3,267,985 3,361,695 1,524,100 1,094,814 5,545,806
883,965 6,532,117 4,032,183
701,591 1,467,068
352,822 3,702,894
100 500

$

88,768,829 $

93,221,491 $

93,750,612

$

545 589 $

1 167 877 $

4,260,549

$

246,573 $

246,573

-582 073

-1 284 851 $

-903196

$

-335 500 $

-1,038,278 $

-903 196

$

210,089 $

129,599 $

3,357,353

14,886,698

14,886,698

16,898,748

-9 015

-9 015

$

15 087 772 $

15,007,282 $

20,256,101

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 -

WALTON 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
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 Direct Safe and Drug-Free Schools - National Programs Pass-Through From Coffee County Board of Education Fund for the Improvement of Education Pass-Through From Georgia Department of Education Charter Schools Comprehensive School Reform Demonstration English Language Acquisition Grants Enhancing Education Through Technology Program Hurricane Education Recovery Improving Teacher Quality State Grants Safe and Drug-Free Schools and Communities State Grants for Innovative Programs Title I Grants to Local Educational Agencies Twenty-First Century Community Learning Centers Vocational Education - Basic Grants to States
Total U. S. Department of Education
Labor, U. S. Department of Pass-Through From Georgia Department of Education Workforce Investment Act Adult Program

CFDA NUMBER

PASSTHROUGH
ENTITY ID
NUMBER

EXPENDITURES IN PERIOD

10.553 10.555
10.550

NIA NIA $
$

(2) 3,332,141
3,332,141

NIA
$

141 178 3 473 319

84.027 84.173

NIA $ NIA
$

1,999,619 83,830
2,083,449

84.184
84.215
84.282 84.332 84.365 84.318 * 84.938 * 84.367 84.186 84.298 * 84.010 84.287 84.048

NIA
NIA NIA NIA NIA NIA NIA NIA NIA NIA NIA NIA
$

39,872
326,372
199,181 189,374
27,445 36,551 (3) 508,660 61,706 33,194 2,124,606 330,614 74 516
6,035,540

17.258

NIA $

5 000

- 26 -

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

SCHEDULE "2"

FUNDING AGENCY PROGRAM/GRANT
Defense, U.S. Department of Direct Department of the Air Force R.O.T.C. Program

CFDA NUMBER

PASSTHROUGH
ENTITY ID
NUMBER

EXPENDITURES IN PERIOD

$ _ _ _ _5=9;,i,;5;;..;4=.6

Total Federal Financial Assistance
N/A = Not Available

$=="""""'9,..,57=3=,4=0==5

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 ($442,045) 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 $243,963, do not require reporting of expenditures. Additionally, this amount included Federal assistance of $2,970, provided to nonpublic 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 Walton 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 -

WALTON 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
Community Affairs, Georgia Department of Local Assistance Grant
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 Education Equalization Funding Grant Food Services Vocational Education Austerity Reduction other State Programs K-8 Reading and Mathematics Program National Teacher Certification Preschool Handicapped Program Special Education Low Incidence Grant
Georgia State Financing and Investment Commission Reimbursement on Construction Projects

GOVERNMENTAL FUND TYPES

CAPITAL

GENERAL

PROJECTS

FUND

FUND

$

1,373,924

$

50,000

3,187,291 169,201
7,161,599 530,299
3,305,666 258,648
5,870,667 4,781,791 1,370,997
802,654 869,647 3,020,003 626,700 1,108,523 1,741,561 154,175 443,400 173,292 978,536 301,066 205,262
1,247,350 1,852,331 2,824,187
1,393,412 206,182 213,128 39,550 96,708 240,258 973,069
-2,282,432
183,476 73,311 153,018 14,628

$

1,402,717

TOTAL
1,373,924
50,000
3,187,291 169,201
7,161,599 530,299
3,305,666 258,648
5,870,667 4,781,791 1,370,997
802,654 869,647 3,020,003 626,700 1,108,523 1,741,561 154,175 443,400 173,292 978,536 301,066 205,262
1,247,350 1,852,331 2,824,187
1,393,412 206,182 213,128 39,550 96,708 240,258 973,069
-2,282,432
183,476 73,311 153,018 14,628
1402717

$ 45,713,078 $

1.402,717 $ 47,115,795

See notes to the basic financial statements.

- 28-

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

SCHEDULE "4"

PROJECT
To pay the costs of adding to, renovating, repairing, improving and equipping existing educational buildings, properties and facilities of Walton County School District, including, but not limited to, acquiring, constructing and equipping two new elementary schools and a new middle school, acquiring any necessary real property, acquiring school buses and acquiring and installing computer and other technology related equipment.
To pay the costs of acquiring, constructing and equipping two new elementary schools and a new high school, acquiring land for future school sites and adding to, renovating, repairing, improving, furnishing and equipping existing educational buildings, properties and facilities of the Walton County School District.

ORIGINAL ESTIMATED
COST (1)

CURRENT ESTIMATED COSTS (2)

AMOUNT EXPENDED IN CURRENT
YEAR (3)

AMOUNT EXPENDED
IN PRIOR YEAR (3)

PROJECT STATUS

$ 31,000,000 $ 39,642,370 $

36,299 $ 39,606,071 Ongoing

40,390,000 40,390,000

8,206,744 24,972,683 Ongoing

$ 71,390,000 $ 80,032,370 $ 8,243,043 $ 64,578,754

(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 Walton 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.

-29-

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

SCHEDULE "5"

DESCRIPTION
Direct Instructional Programs Kindergarten Program Kindergarten Program-Early Intervention Program Primary Grades (1-3) Program Primary Grades-Early Intervention (1-3) Program Upper Elementary Grades (4-5) Program Upper Elementary Grades-Early Intervention (4-5) Program Middle School (6-8) Program High School General Education (9-12) Program Vocational Laboratory (9-12) Program Students with Disabilities Category I Category II Category Ill Category IV CategoryV Gifted Student - Category VI Remedial Education Program Alternative Education Program English Speakers of Other Languages (ESOL)
TOTAL DIRECT INSTRUCTIONAL PROGRAMS
Media Center Program Staff and Professional Development

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

ELIGIBLE QBE PROGRAM COSTS

SALARIES OPERATIONS

TOTAL

$

3,814,687 $ 4,028,047 $

116,129 $

4,144,176

220,508

315,379

11,780

327,159

8,564,798

9,348,261

788,621

10,136,882

641,901

712,835

22,010

734,845

3,991,555

4,681,467

777,993

5,459,460

320,007 7,057,544 5,697,804 1,656,914 7,786,692
2,046,850 179,490 530,437 216,886

299,650 7,340,625 6,559,008 1,479,431
37,244 304,992 6,674,611
15,422 753,424 1,949,398
98,520 793,999 451 544

71,811 697,030 811,163 144,663
36,861 18,853 636,473 78,057 64,865 45,152
9,657 59,954
8106

371,461 8,037,655 7,370,171 1,624,094
74,105 323,845 7,311,084
93,479 818,289 1,994,550 108,177 853,953 459,650

$

42,726,073 $ 45,843,857 $

4,399,178 $

50,243,035

1,175,229 248,533

1,358,309 42 044

123,869 294,379

1,482,178 336,423

TOTAL QBE FORMULA FUNDS

$

44 149 835 $ 47,244,210 $

4,817.426 $=====5=2'=,0=61=,6=3_,6

(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
April 24, 2007

Honorable Sonny Perdue, Governor Members ofthe General Assembly Members of the State Board of Education
and Superintendent and Members ofthe Walton County Board of Education
REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS
Ladies and Gentlemen:
We have audited the financial statements of the governmental activities, each major fund, and the aggregate remaining fund information of Walton County Board of Education as of and for the year ended June 30, 2006, which collectively comprise Walton County Board of Education's basic financial statements and have issued our report thereon dated April 24, 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 Walton 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 certain matters involving the internal control over financial reporting and its operation that we consider to be reportable conditions. 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 Walton County Board ofEducation's ability to record, process, summarize and report financial data consistent with assertions ofmanagement in the financial statements. Reportable conditions are described in the accompanying Schedule ofFindings and Questioned Costs as items FS-7471-06-01 and FS-7471-06-02.
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 none of the reportable conditions described above are material weaknesses.
Compliance and Other Matters
As part of obtaining reasonable assurance about whether Walton 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 Walton County Board ofEducation and is not intended to be and should not be used by anyone other than these specified parties.
Respectfully submitted,
--~~~~
Ru 11 W. Hinton, CPA, CGFM State Auditor
RWH:gp 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
April 24, 2007

Honorable Sonny Perdue, Governor Members ofthe General Assembly Members ofthe State Board of Education
and Superintendent and Members of the Walton County Board of Education
REPORT ON COMPLIANCE WITH REQUIREMENTS APPLICABLE TO EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH 0MB CIRCULARA-133
Ladies and Gentlemen:
Compliance
We have audited the compliance ofWalton County Board ofEducation with the types ofcompliance requirements described in the U.S. Office of Management and Budget (0MB) Circular A-133 Compliance Supplement that are applicable to each ofits major Federal programs for the year ended June 30, 2006. Walton County Board of Education's major Federal programs are identified in the Summary ofAuditor's Results Section ofthe accompanying Schedule ofFindings 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 Walton County Board of Education's management. Our responsibility is to express an opinion on Walton County Board of Education's compliance based on our audit.
We conducted our audit ofcompliance in accordance with auditing standards generally accepted in the United States ofAmerica; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General ofthe United States; and 0MB Circular A133, Audits ofStates, Local Governments, and Non-Profit Organizations. Those standards and 0MB Circular A-133 require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major Federal program occurred. An audit includes examining, on a test basis, evidence about the Walton County Board ofEducation's compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Our audit does not provide a legal determination on Walton County Board of Education's compliance with those requirements.
2006SA-30

In our opinion, the Walton County Board of Education complied, in all material respects, with the requirements referred to above that are applicable to each ofits major Federal programs for the year ended June 30, 2006.
Internal Control Over Compliance
The management of Walton 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 Walton County Board ofEducation's internal control over compliance with requirements that could have a direct and material effect on a major Federal program in order to determine our auditing procedures for the purpose ofexpressing our opinion on compliance 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 Walton 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-7471-06-01.
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 Walton County Board ofEducation, Federal awarding agencies and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties.
Respectfully submitted,
~~
ell W. Hinton, CPA, CGFM Sta e Auditor
RWH:gp 2006SA-30

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

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

PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

FINDING CONTROL NUMBER AND STATUS

FS-7471-04-02 FS-7471-05-01 FS-7471-05-02

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

CORRECTIVE ACTION/RESPONSES

REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Control Procedures Finding Control Number: FS-7471-05-01

It is our plan to omit this finding in the fiscal year 2007 audit.

CAPITAL ASSETS Failure to Adequately Maintain Capital Assets Finding Control Number: FS-7471-05-02

It is our plan to omit this finding in the fiscal year 2007 audit.

PRIOR YEAR FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

No matters were reported.

SECTION IV FINDINGS AND QUESTIONED COSTS

WALTON 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 Walton 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 Walton County Board of Education disclosed financial statement reportable conditions related to the following control categories.

Revenues/Receivables/Receipts

Capital Assets

None ofthe reportable conditions described above are considered to be material weaknesses.

3. Noncompliance Material to the Financial Statements The audit of the Walton 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 Walton County Board ofEducation 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 Walton County Board ofEducation's report on compliance with requirements applicable to major programs was unqualified.

6. Audit Findings Required to be Reported by Section .510(a) ofOMB Circular A-133 The Walton 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: 84.010 Title I Grants to Local Educational Agencies 84.367 Improving Teacher Quality State Grants 84.938 Hurricane Education Recovery

8. Type "A" Program Dollar Threshold The dollar threshold for type "A" programs was $300,000.

- 1-

WALTON 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 Walton County Board ofEducation qualified as a low risk auditee as defined by Section .530 ofOMB Circular A-133.

II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

REVENUES/RECEIVABLES/RECEIPTS Inadequate Internal Control Procedures over School Activity Accounts Reportable Condition Finding Control Number: FS-7471-06-01

Condition:

This is a repeat finding (FS-7471-05-01) from the year ended June 30, 2005. Our examination ofthe principal's accounts disclosed weaknesses in internal control as discussed below.

Criteria:

The School District's management is responsible for designing and maintaining internal controls that provide proper control over principal accounts.

Questioned Cost: NIA

Information:

Revenues/Receivables/Receipts Twelve receipts were not deposited in a timely manner. Adequate receipt documentation was not maintained for cash receipt transactions recorded in the general ledger. The cash receipt forms did not list amounts collected by student name. Cash was only listed in total. One gate receipt did not reconcile to supporting documentation. One receipt was credited to the wrong account.

Cause:

These deficiencies were a result of management's failure to ensure established controls were functioning as designed.

Effect:

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

Recommendation:

The School District should implement procedures to ensure that controls are revised and/or monitored to provide reasonable assurance that transactions are processed according to established procedures. Additionally, management should implement additional procedures to ensure that adequate receipt documentation is maintained.

-2-

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

II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

CAPITAL ASSETS Failure to Adequately Maintain Capital Assets Reportable Condition Finding Control Number: FS-7471-06-02

Condition:

This is a repeat finding (FS-7471-04-02 and FS-7471-05-02) from the years ended June 30, 2004, and June 30, 2005, respectively. The School District failed to adequately maintain the capital asset listing.

Criteria:

Chapter 37 Fixed Assets of the Financial Management for Georgia Local Units of Administration indicates that School Districts must establish fixed asset policies, define system requirements, implement a fixed asset system and maintain fixed asset inventory records.

Questioned Cost: NIA

Information:

The School District did not submit accurate capital asset balances in the DE0046 to the Georgia Department of Education. The balances do not agree with the School District's capital assets listing. Construction in Progress additions did not include all current year projects' contract payments, retainages payable and contracts payable. Proper controls are not in place over physical inventory counts.

Cause:

The School District failed to ensure that internal control procedures were working effectively in order to properly record and maintain capital asset records.

Effect:

The failure ofthe School District to maintain a complete and accurate capital assets listing can lead to inaccurate internal and external reporting, as well as noncompliance with generally accepted accounting principals.

Recommendation:

The School District should review and enhance policies and procedures to ensure that management's assertions of completeness and valuation are properly included in the Financial Statement presentation of capital assets. The School District should review its capital assets and make appropriate adjustments to ensure that the capital assets records and procedures in place for maintaining capital assets conform to the School District's approved capital assets policy and generally accepted accounting principals.

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WALTON 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 84.938) Finding Control Number: FA-7471-06-01

Condition:

There were no procedures in place to ensure that Hurricane Education Recovery Act (HERA) funds provided to the School District 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) of HERA, 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 ofGeorgia issued publication titled "Georgia Guidance ofFederally Impact Aid" (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 services consistent with the Individuals with Disabilities Education Act (IDEA). Both Volumes "I" and "II" ofUSED guidance state that the funds 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 part of a School District's special education budget to ensure that they are only used to pay for special education and related service consistent with 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 was also advised to consult with State and local staffwho are cognizant of IDEA requirements.

Questioned Costs: $67,149

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WALTON 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 84.938) Finding Control Number: FA-7471-06-01

Information:

HERA funds received by the School District included $67,149 for students with disabilities. Although required by Federal guidelines, the receipt and expenditure of these funds were not maintained separately.

Cause:

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

Effect:

We are unable to determine if the $67,149 of HERA funds earmarked for students with disabilities were used for special education and related purposes.

Recommendation:

Management should ensure 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

WALTON COUNTY BOARD OF EDUCATION SCHEDULE OF MANAGEMENT'S RESPONSES
YEAR ENDED JUNE 30, 2006
Finding Control Number: FS-7471-06-01
We concur with this finding. Based on previous year's findings, the School District developed a Pupil Activity Fund Handbook in fiscal year 2006 and has asked all principals and bookkeepers to follow. Additionally, meetings have been held to discuss the internal controls listed in the handbook. Monitoring schedules have been implemented to gain management's assurance that these internal controls are being followed. Management anticipates that this finding will be eliminated through the education of the workforce.
Finding Control Number: FS-7471-06-02
We concur with this finding. Management anticipates that this finding will be eliminated in fiscal year 2007.
Finding Control Number: FA-7471-06-01
We concur with this finding. Since this grant wasn't available in fiscal year 2007, this finding will not reoccur. Management will strive to assure that procedures are in place for administering Federal and State grants.
Contact Person: Harry S. Lee, Director of Budget and Finance Phone: (770) 266-4438 E-mail Address: hlee@walton.k12.ga.us