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

WHITFIELD COUNTY BOARD OF EDUCATION
DALTON# 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

WHITFIELD COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS -

SECTION I

FINANCIAL

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

REQUIRED SUPPLEMENTARY INFORMATION

MANAGEMENT'S DISCUSSION AND ANALYSIS

EXHIBITS

BASIC FINANCIAL STATEMENTS

DISTRICT-WIDE FINANCIAL STATEMENTS

A

STATEMENT OF NET ASSETS

1

B

STATEMENT OF ACTIVITIES

2

FUND FINANCIAL STATEMENTS

C

BALANCE SHEET

GOVERNMENTAL FUNDS

4

D

RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET

TO THE STATEMENT OF NET ASSETS

5

E

STATEMENT OF REVENUES, EXPENDITURES AND CHANGES

IN FUND BALANCES

GOVERNMENTAL FUNDS

6

F

RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT

OF REVENUES, EXPENDITURES AND CHANGES IN FUND

BALANCES TO THE STATEMENT OF ACTIVITIES

7

G

STATEMENT OF FIDUCIARY NET ASSETS

FIDUCIARY FUNDS

9

H

NOTES TO THE BASIC FINANCIAL STATEMENTS

10

SCHEDULES

REQUIRED SUPPLEMENTARY INFORMATION

1 SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES

IN FUND BALANCES - BUDGET AND ACTUAL

GENERAL FUND

27

WHITFIELD COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS -

SECTION I

FINANCIAL

SCHEDULES

SUPPLEMENTARY INFORMATION

2 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS

28

3 SCHEDULE OF STATE REVENUE

30

4 SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS

31

5 ALLOTMENTS AND EXPENDITURES

GENERAL FUND - QUALITY BASIC EDUCATION PROGRAMS (QBE)

BY PROGRAM

33

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

WHITFIELD 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
May 18, 2007

Honorable Sonny Perdue, Governor .Members of the General Assembly Members ofthe State Board of Education
and Superintendent and Members ofthe Whitfield 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) ofthe Whitfield 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 Whitfield 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 opinions.
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 Whitfield County Board of Education, as of June 30, 2006, and the respective changes in financial position thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America.
2006ARL-11

In accordance with Government Auditing Standards, we have also issued our report dated May 18, 2007. on our consideration of the Whitfield County Board of Education's internal control over financial reporting and our tests of its compliance with certain provisions of laws. regulations, contracts and grant agreements and other matters. The purpose ofthat report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing. and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit.
Management's Discussion and Analysis and the Schedule ofRevenues, Expenditures and Changes in Fund Balances - Budget and Actual, as presented on pages i through ix and page 27 respectively. are not a required part of the basic financial statements but are supplementary information required by the accounting principles generally accepted in the United States of America. We have applied certain limited procedures. which consisted principally of inquiries of management regarding the methods ofmeasurement and presentation ofthe required supplementary information. However, we did not audit the information and express no opinion on it.
Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Whitfield 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,
~~ro~~P~~ State Auditor
RWH:as 2006ARL-11

WHITFIELD COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2006
INTRODUCTION
Our discussion and analysis of the Whitfield County Board of Education's financial performance provides an overview of the School District's financial activities for the fiscal years ended June 30, 2006, and June 30, 2005. The intent of this discussion and analysis is to look at the School District's financial performance as a whole; readers should also review the notes to the basic financial statements and financial statements to enhance their understanding of the School District's financial performance.
FINANCIAL HIGHLIGHTS
Key financial highlights for the fiscal years 2006 and 2005 are as follows:
On the District-wide financial statements, the assets of the School District exceeded liabilities by $150.3 million and $135.6 million, respectively, for the fiscal years ended June 30, 2006, and June 30, 2005. Of these amounts, $10.1 million and $12.5 million, respectively, for fiscal years 2006 and 2005 are available for spending at the School District's discretion.
The School District had $109.6 million and $98.6 million, respectively, in expenses for the fiscal years ended June 30, 2006, and June 30, 2005, relating to governmental activities. Only $73.2 million and $68.3 million of the above mentioned expenses for 2006 and 2005 were offset by program specific charges for services, grants and contributions. General revenues (primarily property and sales taxes) totaling $51.2 million and $51.4 million, respectively, for 2006 and 2005 were adequate to provide for these programs.
As stated above, general revenues accounted for $51.2 million or 41.2% of all revenues totaling $124.3 million for fiscal year 2006 and $51.4 million or 43.0% of all revenues totaling $119.7 million for fiscal year 2005. Program specific revenues in the form of charges for services, grants and contribution 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.
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WHITFIELD COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2006
The fund financial statements focus on individual parts of the School District, reporting the School District's operation in more detail. The Governmental Funds statements disclose how basic services are financed in the short-term as well as what remains for future spending. The Fiduciary Funds statements provide information about the financial relationships in which the School District acts solely as a trustee or agent for the benefit of others. The fund financial statements reflect the School District's most significant funds. In the case of the Whitfield County School District, the General Fund, District-wide Capital Projects Fund, and Debt Service Fund are the most significant funds.
The financial statements also include notes that explain some of the information in the statements and provide more detailed data. The statements are followed by a section of required supplementary information that further explains and supports the financial statements. Additionally, other supplementary information (not required) is also presented that further supplements understanding of the financial statements.
District-wide Statements
The District-wide financial statements are basically a consolidation of all of the 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 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.
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WHITFIELD COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2006
Governmental Funds - Most of the School District's activities are reported in governmental funds, which focus on how money flows into and out of those funds and the balances left at yearend available for spending in future periods. These funds are reported using the modified accrual method of accounting, which measures cash and all other financial assets that can 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. Fiduciary Funds - The School District is the trustee, or fiduciary, for assets that belong to others, such as school clubs and organizations within the principals' accounts. The School District is responsible for ensuring that the assets reported in these funds are used only for their intended purposes and by those to whom the assets belong. The School District excludes these activities from the District-wide financial statements because it cannot use these assets to finance its operations. FINANCIAL ANALYSIS OF THE SCHOOL DISTRICT AS A WHOLE Recall that the Statement of Net Assets provides the perspective of the School District as a whole. Table 1 provides a summary of the School District's net assets for fiscal years 2006 and 2005.
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WHITFIELD COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2006

Table 1 Net Assets

Governmental Activities

Fiscal

Fiscal

Year 2006

Year 2005

Assets Current and Other Assets Capital Assets, Net

$ 47,779,469 $ 56,801,847

127,175,729

109,183,789

Total Assets

$ 174,955,198 $ 165,985,636

Liabilities Current and Other Liabilities Long-Term Liabilities

$ 15,083,695 $ 16,379,631

9,547,176

14,049,104

Total Liabilities

$ 24,630,871 $ 30,428,735

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

$ 124,900,022 15,308,769 10,115,536

$ 103,476,160 19,575,549 12,505,192

Total Net Assets

$ 150,324.327 $ 135,556.901

Table 2 shows the Changes in Net Assets for fiscal years ending June 30, 2006, and June 30, 2005.

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WHITFIELD 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

Year2006

Year2005

$ 1,872,883 66,658,020 426292686

$ 2,170,126 61,523,131 425592755

Total Program Revenues

$ 7321602589 $ 6822532012

General Revenues:

Taxes

Property Taxes

For Maintenance and Operations

$ 25,055,889

Railroad Cars

Sales Taxes

Special Purpose Local Option Sales Tax

For Capital Pr~ects

13,498,946

Intangible Recor ing Tax

439,441

Real Estate

205,023

Grants and Contributions not Restricted to

Specific Programs

6,681,124

Investment Earnings

1,160,736

Miscellaneous

421382207

$ 24,480,665 58,286
12,411,074 658,970
8,500,428 1,878,087 3A342052

Total General Revenues

$ 5121792366 $ 51A212562

Total Revenues

$ 12423392955 $ 11926742574

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

$ 69,799,495
4,602,661 2,252,468 2,541,247 1,178,738 6,171,178 1,188,413 7,349,033 4,176,291 1,634,283 1,079,943
652,528 6,533,228
4132023

$ 63,752,957
4,131,663 1,809,425 2,380,920
821,619 5,771,771 1,165,193 6,160,459 3,655,965 1,238,437 1,060,778
600,188 5,483,893
5302785

Total Expenses

$ 10925722529 $ 9825642053

Increase in Net Assets

$ 14.:Z6:Z.426 $ 21 1110.s21

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WHITFIELD 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 activity.

Table3 Governmental Activities

Total Cost of Services

Fiscal

Fiscal

Year 2006 Year 2005

Net Cost of Services

Fiscal

Fiscal

Year 2006 Year 2005

Instruction

$ 69,799,495 $63,752,957 $ 16,732,740 $ 14,147,828

Support Services

Pupil Services

4,602,661 4,131,663 3,058,599 2,960,650

Improvement of Instructional Services

2,252,468 1,809,425 1,208,672

981,524

Educational Media Services

2,541,247 2,380,920 1,255,295 1,015,566

General Administration

1,178,738

821,619 -583,421 -830,203

School Administration

6,171,178 5,771,771 3,517,723 3,195,508

Business Administration

1,188,413 1,165,193 1,188,413 1,160,599

Maintenance and Operation ofPlant

7,349,033 6,160,459 3,705,680 2,704,046

Student Transportation Services

4,176,291 3,655,965 2,439,854 2,082,149

Central Support Services

1,634,283 1,238,437 1,617,303 1,222,105

Other Support Services

1,079,943 1,060,778

946,067

958,528

Operations ofNon-Instructional Services

Community Services

652,528

600,188

649,840

599,954

Food Services

6,533,228 5,483,893

262,152 -417,998

Interest on Short-Term and Long-Term Debt

413.023

530.785

413.023

530.785

Total Expenses

$109.572.529 $ 98.564.053 $36,411.940$ 30,311.041

FINANCIAL ANALYSIS OF THE SCHOOL DISTRICT'S FUNDS

The School District's governmental funds are accounted for using the modified accrual basis of accounting. The governmental funds had total revenues of $124.9 million and total expenditures of $132.1 million for fiscal year 2006 and total revenues of $119.7 million and total expenditures of $129.4 million for fiscal year 2005.

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 years 2006 and 2005, the School District amended its general fund budget as needed.

During fiscal year 2006, the General Fund had final actual revenues totaling $106.3 million, which exceeded the final budgeted amounts of $97.1 million by $9.2 million. This difference

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WHITFIELD COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2006
(final actual vs. final budget) was primarily due to an increase in state revenues over original budget by $3 .5 million and actual miscellaneous revenue from primarily school activity accounts, over original budget by $4.1 million. Other differences include increase in Federal funding over budget, conservative budgeting relative to sales tax (real estate transfer and intangible taxes) and conservative budgeting relative to investment income all resulting in $1.6 million actual over budget.
During fiscal year 2005, the General Fund had final actual revenues totaling $101.3 million, which exceeded the final budgeted amounts of $94.4 million by $6.9 million. This difference (final actual vs. final budget) was primarily due to an increase in state revenues over original budget by $1.7 million and actual miscellaneous revenue from primarily school activity accounts, over original budget by $3.5 million. Other differences include increase in Federal funding over budget, conservative budgeting relative to sales tax (real estate transfer and intangible taxes) and conservative budgeting relative to investment income all resulting in $1.7 million actual over budget.
Final actual expenditures during fiscal year 2006, totaling $108.1 million represented an increase from the final budgeted amount of $101.2 million. The increase in actual expenditures versus final budgeted expenditures totaling $6.8 million was primarily due to increase in actual instructional expenses of $1.4 million due to increased Federal funding and growing enrollment and school activity related expenses of $3.5 million.
Final actual expenditures during fiscal year 2005, totaling $95.8 million represented an increase from the final budgeted amount of $91.0 million. The increase in actual expenditures versus final budgeted expenditures totaling $4.8 million was primarily due to increase in actual instructional expenses of $2.1 million due to increased Federal funding and growing enrollment and school activity related expenses of $3.4 million. A decrease of $0.62 million in actual expenditures verses final budgeted expenditures relative to central support services was due to conservative budgeting relative to technology.
General fund expenditures and other financing uses exceeded revenues resulting in a deficit of $2,051,800 that was funded with reserves in the fiscal year 2006. General fund revenues and other financing sources exceeded expenditures and other financing uses resulting in a surplus of $5,349,459 for the fiscal year 2005.
CAPITAL ASSETS AND DEBT ADMINISTRATION
Capital Assets
At the fiscal years ended June 30, 2006, and June 30, 2005, the School District had $127.2 million and $109.2 million, respectively, invested in capital assets, all in governmental activities. Table 4 reflects a summary of these balances net of accumulated depreciation.
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WHITFIELD COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2006

Table 4 Capital Assets (Net of Depreciation)

Governmental Activities

Fiscal

Fiscal

Year 2006

Year 2005

Land Construction in Progress Buildings and Improvements Equipment Land Improvements

$ 4,275,610 21,482,515 91,595,699 4,821,404 5,000,501

$ 4,275,610 31,115,218 69,734,884 3,236,008 822,069

Total

$ 127,175.729 $ 109,183,789

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

Debt

At June 30, 2006, and June 30, 2005, the School District had $9.5 million and $14.0 million, respectively, in debt. Table 5 summarizes the School District's debt for fiscal years 2006 and 2005.

Table 5 Debt at June 30

Governmental Activities

Fiscal

Fiscal

Year 2006

Year 2005

Compensated Absences Bonds Payable

$ 237,176 $ 234,104

9,310,000

13,815,000

Total

$ 9,547.176 $ 14,049.104

At June 30, 2006 and June 30, 2005, the School District's assigned bond rating was "Aa2" as determined by Moody's Investors Services, Inc.

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WHITFIELD 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 - Increases in total State funding for education have been minimal and as a result more pressure is being placed on the local school districts to prioritize its educational programs and provide additional local funding. The School District continues to provide an increasing amount of local monies to meet various mandated educational requirements. 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 Whitfield County School District remains 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 individual general obligation bond issues and anticipated annual receipts of capital outlay funds from the State of Georgia Department of Education. 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 Whitfield County Board of Education, 1306 South Thornton Avenue, Dalton, Georgia 30720.
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WHITFIELD COUNTY BOARD OF EDUCATION

WHITFIELD COUNTY BOARD OF EDUCATION STATEMENT OF NET ASSETS JUNE 30, 2006
ASSETS
Cash and Cash Equivalents Investments Accounts Receivable, Net
Taxes State Government Federal Government Other Inventories Capital Assets Land Construction in Progress Land Improvements Buildings Equipment Less: Accumulated Depreciation
Total Assets
LIABILITIES
Accounts Payable Salaries Payable 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

EXHIBIT"A"

GOVERNMENTAL ACTIVITIES

$

9,754,132

23,492,653

3,031,872 9,050,881 1,520,891
714,645 214,395

4,275,610 21,482,515
7,664,861 103,472,234
9,863,223 -19,582,714

$==1==7=14,~95;;,;;5i.;1.,~98=

$

4,035,176

9,657,087

411,691

979,741

4,650,000 4,897,176

$

24,630,871

$

124,900,022

765,653 4,935,623 9,607,493 10,115,536

$

150,324,327

$ ==1=7=4,_95=5=1,=98=

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

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

GOVERNMENTAL ACTIVITIES
Instruction Support Services
Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Operations of Non-Instructional Services Community Services Food Services Interest on Short-Term and Long-Term Debt
Total Governmental Activities
General Revenues Taxes Property Taxes For Maintenance and Operations 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
Change in Net Assets
Net Assets - Beginning of Year
Net Assets - End of Year

EXPENSES

CHARGES FOR SERVICES

$

69,799,495 $

4,602,661 2,252,468 2,541,247 1,178,738 6,171,178 1,188,413 7,349,033 4,176,291 1,634,283 1,079,943

652,528 6,533,228
413,023

$ 109,572,529 $

112,733
38 378 2,118
14,943
1,183 585
44,151
2,112 1,694,642
118721883

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

$

48,910,779 $

1,544,024 1,043,418 1,283,834 1,761,194 2,638,512

3,519,527 1,512,718
6,500 89,725

576 4,347,213

$

66,658,020 $

4,043,243 $
965 122,643 223,134
10,480
229,221 416291686 $

-16,732,740
-3,058,599 -1,208,672 -1,255,295
583,421 -3,517,723 -1,188,413 -3,705,680 -2,439,854 -1,617,303
-946,067
-649,840 -262,152 -413,023
-36,411,940

$

25,055,889

13,498,946 439,441 205,023
6,681,124 1,160,736 4,138,207

$

51,179,366

$

14,767,426

135,556,901

$===1=50.,.3..2.=4==,3..,27_

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WHITFIELD 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

GENERAL FUND

DISTRICTWIDE
CAPITAL PROJECTS
FUND

DEBT SERVICE
FUND

TOTAL

$ 8,274,490 $ 1,479,642

$

3,755,694

14,801,336 $ 4,935,623

891,959 9,050,881 1,520,891
712,695 214,395

2,195,346 1,950

9,754,132 23,492,653
3,087,305 9,050,881 1,520,891
714,645 214 395

Total Assets

$ 24,421,005 $ 18,478,274 $ 4,935,623 $ ===4=7=,8=3=4,=90=2=

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 Undesignated Reported in: General Fund
Total Fund Balances

$ 3,590,120 $ 9,657,087
$ 13,247,207 $

445,056
411,691 979 741
1,836,488

$

607,195

$

214,395

$ 16,641,786

1,612,297

8,739,911

$ 11.173,798 $ 16,641,786 $

$ $ $ 4,935,623
4,935,623 $

4,035,176 9,657,087
411,691 979 741
15,083,695
607,195 4,935,623
214,395 16,641,786
1,612,297
8 739 911
32,751,207

Total Liabilities and Fund Balances

$ 24,421,005 $ 18,478,274 $ 4,935,623 $ ==~47~,8~34~,9~02:.,,

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

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

EXHIBIT"D"

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

$ 32,751,207

$ 4,275,610 21,482,515 7,664,861 103,472,234 9,863,223 -19,582,714

127,175,729

-55,433

$ -9,310,000 -237,176

-9,547,176

$ 150,324,327

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

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

EXHIBIT"E"

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

GENERAL FUND

DISTRICTWIDE
CAPITAL PROJECTS
FUND

DEBT SERVICE
FUND

TOTAL

$ 25,642,578

644,464 $ 13,498,946

62,766,494

4,406,552

10,114,884

1,872,883

510,620

649,656 $

4,823,052

$ 106,374,975 $ 18,555,154 $

$
460

25,642,578 14,143,410 67,173,046 10,114,884
1,872,883 1,160,736 4,823,052

460 $ 124,930,589

$ 68,062,655

$ 68,062,655

4,602,661 2,252,468 2,495,146
947,088 6,359,057 1,188,413 7,302,377 5,139,179 1,631,600 1,079,943
652,528 6,348,666
$ 19,090,538

4,602,661 2,252,468 2,495,146
947,088 6,359,057 1,188,413 7,302,377 5,139,179 1,631,600 1,079,943
652,528 6,348,666 19,090,538

$ 4,505,000 413,023

4,505,000 413,023

$ 108,061,781 $ 19,090,538 $ 4,918,023 $ 132,070,342

$ -1,686,806 $ -535,364 $ -4,917,563 $ -7,139,753

$ 364,994 $ 4,997,204 $

$ -364,994

-4,997,204

$ -364,994 $ -4,632,210 $ 4,997,204 $

$ -2,051,800 $ -5,167,594 $

79,641 $

13,225,598 21,809,380

4,855,982

5,362,198 -5,362,198
0 -7,139,753
39,890,960

$ 11,173,798 $ 16,641,786 $ 4,935,623 $ 32,751,207

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

WHITFIELD 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.
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
Some items reported in the Statement of Activities do not require the use of current financial resources and therefore are not reported as expenditures in Governmental Funds. These activities consist of:
Increase in Compensated Absences
Change in Net Assets of Governmental Activities (Exhibit "B")

$ -7,139,753

$ 20,274,682 -2,282,742

17,991,940 -586,689

4,505,000

-3,072 $ 14,767,426

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

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WHITFIELD COUNTY BOARD OF EDUCATION STATEMENT OF FIDUCIARY NET ASSETS FIDUCIARY FUNDS JUNE 30, 2006
ASSETS Cash and Cash Equivalents Investments
Certificate of Deposit Accounts Receivable, Net
Other
Total Assets
LIABILITIES Funds Held for Others

EXHIBIT"G"
AGENCY FUNDS
$ 222,056 101,725 33A48
$ ======3=57='=22=9=
$ =====3=5=7'=22=9=

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

WHITFIELD 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 Whitfield County Board of Education (School District) was established under the laws of the State of Georgia and operates under the guidance of a school board elected by the voters and a Superintendent appointed by the Board. The Board is organized as a separate legal entity and has the power to levy taxes and issue bonds. Its budget is not subject to approval by any other entity. Accordingly, the School District is a primary government and consists of all the organizations that compose its legal entity.
Blended Component Unit The Whitfield County Career Academy (Charter School) is responsible for the public education of all students attending its school. The Charter School was created through a contract between the School District and the Charter School whereby all State funding associated with the students attending the Charter School and certain specified local funds are turned over to the Charter School to cover the cost ofits operations. The financial statements ofthe Charter School have been blended with the School District's general fund.
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 Whitfield County Board of Education.
District-wide Statements: The Statement ofNet Assets and the Statement ofActivities display information about the financial activities ofthe overall School District, except for fiduciary activities. Eliminations have been made to minimize the double counting of internal activities. Governmental activities generally are financed through taxes, intergovernmental revenues, and other nonexchange transactions.
The Statement ofActivities presents a comparison between direct expenses and program revenues for each function of the School District's governmental activities.
Direct expenses are those that are specifically associated with a program or function and, therefore, are clearly identifiable to a particular function. Indirect expenses (expenses of the School District related to the administration and support ofthe School District's programs, such as office and maintenance personnel and accounting) are not allocated to programs.
Program revenues include (a) charges paid by the recipients ofgoods or services offered by the programs and (b) grants and contributions that are restricted to meeting the operational or capital requirements of a particular program. Revenues that are not classified as program revenues, including all taxes, are presented as general revenues.
- 10 -

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

EXHIBIT "H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Fund Financial Statements: The fund financial statements provide information about the School District's funds, including fiduciary funds. Eliminations have been made to minimize the double counting ofinternal activities. Separate statements for each category (governmental and fiduciary) are presented. The emphasis of fund financial statements is on major governmental funds, each displayed in a separate column.
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 (sales) legally restricted for the payment ofgeneral longterm 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 school activity accounts and employee flexible spending accounts.
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.
- 11 -

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

EXHIBIT "H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Governmental funds are reported using the current financial resources measurement focus and the modified accrual basis ofaccounting. Under this method, revenues are recognized when measurable and available. The School District considers all revenues reported in the governmental funds to be available if they are collected within sixty days after year-end. Property taxes, sales taxes and interest are considered to be susceptible to accrual. Expenditures are recorded when the related fund liability is incurred, except for principal and interest on general long-term debt and compensated absences, which are recognized as expenditures to the extent they have matured. Capital asset acquisitions are reported as expenditures in governmental funds. Proceeds of general long-term liabilities 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,
- 12 -

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

EXHIBIT "H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

(5) Prime banker's acceptances,

(6) The Local Government Investment Pool administered by the State ofGeorgia, 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 Whitfield County Board of Commissioners fixed the property tax levy for the 2005 tax digest year (calendar year) on October 20, 2005 (levy date). Taxes were due on December 20, 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 Whitfield 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 $25,642,578.

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

School Operations

16.115 mills

- 13 -

WHITFIELD 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 $13,498,946 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
CONSUMABLE SUPPLIES On the basic financial statements, inventories of consumable supplies are reported at cost (first-in, first-out). The School District uses the consumption method to account for inventories whereby consumable supplies are recorded as an asset when purchased and expense/expenditure are recorded as the inventory items are used.
FOOD INVENTORIES On the basic financial statements, inventories of donated food commodities used in the preparation ofmeals are reported at their Federally assigned value and purchased foods inventories are reported at cost (first-in, first-out). The School District uses the consumption method to account for inventories whereby donated food commodities are recorded as an asset and as revenue when received, and expenses/expenditures are recorded as the inventory items are used. Purchased foods are recorded as an asset when purchased and expenses/expenditures are recorded as the inventory items are used.
CAPITAL ASSETS
Capital assets purchased, including capital outlay costs, are recorded as expenditures in the fund financial statements at the time of purchase (including ancillary charges). On the District-wide financial statements, all purchased capital assets are valued at cost where historical records are available and at estimated historical cost based on appraisals or deflated current replacement cost where no historical records exist. Donated capital assets are recorded at estimated fair market value on the date donated. Disposals are deleted at depreciated recorded cost. The cost of normal maintenance and repairs that do not add to the value ofassets or materially extend the useful lives of the assets is not capitalized. Depreciation is computed using the straight-line method. The School District does not capitalize book collections or works of art.
Capitalization thresholds and estimated useful lives of capital assets reported in the District-wide statements are as follows:

- 14 -

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

EXHIBIT "H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Capitalization Policy

Estimated Useful Life

Land Land Improvements Buildings and Improvements Equipment

All

NIA

$

20,000

15 years

$ 100,000

70 years

$

10,000 10 to 12 years

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

GENERAL OBLIGATION BONDS

The School District issues general obligation bonds to provide funds for the acquisition and construction of major capital facilities. Bond issuance costs are recognized in the financial statements during the fiscal year bonds are issued. General obligation bonds are direct obligations and pledge the full faith and credit of the government. The outstanding amount of these bonds is recorded in the Statement of Net 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,

- 15 -

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

EXHIBIT"H"

Note 3: DEPOSITS AND INVESTMENTS

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

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

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

CATEGORIZATION OF DEPOSITS At June 30, 2006, the bank balances were $14,223,072. The amounts ofthe total bank balances are classified into four categories of custodial credit risk:

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

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

Custodial Credit Risk Category

Bank Balance

1

$ 445,681

2

700,399

3

13,076,992

4

0

Total

$ 14,223,012

- 16 -

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

EXHIBIT "H"

Note 3: DEPOSITS AND INVESTMENTS
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:
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 $23,421,627 which is materially the same as fair value. These investments included funds in the amount of $3,721,804 invested in the Local Government Investment Pool administered by the State ofGeorgia, 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 ofGeorgia, Office ofTreasury 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 of Georgia Fund 1, which is a combination local and state government investment pool. Georgia Fund 1 is a stable net asset value investment pool which follows Standard and Poor's criteria for AAAm rated money market funds. The pool is not registered with the SEC as an investment company but does operate Georgia Fund 1 in a manner consistent with Rule 2a-7 of the Investment Company Act of 1940. The pool's primary objectives are safety of capital, investment income, liquidity and diversification while maintaining principal ($1.00 per share value). Net asset value is calculated daily and reported to the rating agency weekly to ensure stability. The pool distributes earnings (net of management fees) on a monthly basis and values participant's shares sold and redeemed at the pool's share price, $1.00 per share. Pooled cash and cash equivalents and investments are reported at cost. The pool does not issue any legally binding guarantees to support the value of the shares. Participation in the pool is voluntary and deposits consist of funds from local governments; operating and trust funds of Georgia's state agencies, colleges and universities; and current operating funds of the State of Georgia's General Fund.

- 17 -

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

EXHIBIT"H"

Note 3: DEPOSITS AND INVESTMENTS

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.

Funds of$93 invested in U. S. Treasury Money Market Mutual Funds (open-end mutual funds) are not required to be classified by categories of custodial credit risk.

The investments are classified as to custodial credit risk categories as follows:

Type oflnvestment
Debt Securities Repurchase Agreements

Risk Categories

2

3

Carrying Amount

Fair Value

$===:!!.o $ 12,629.230 $===-o $ 12,622,130 $ 12 699,730

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

At June 30, 2006, the School District's investment consisted ofRepurchase Agreements which had an investment maturity of 1 - 5 years.

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 U. S. Treasury Money Market Mutual Fund (Open-End) has a credit quality rating ofAAA by Moody's and 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

Note 5: CAPITAL ASSETS

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

- 18 -

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

EXHIBIT "H"

Note 5: CAPITAL ASSETS

Balances July 1, 2005

Increases

Balances Decreases June 30, 2006

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

$ 4,275,610

$ 4,275,610

31,115,218 $ 18,154,071 $ 27,786,774 21,482,515

Total Capital Assets Not Being Depreciated $ 35,390,828 $ 18,154,071 $ 27,786,774 $ 25,758,125

Capital Assets Being Depreciated Buildings and Improvements Equipment Land Improvements

$ 80,300,650 $ 23,171,584

8,438,694

2,312,148 $

3,241,208

4,423,653

$ 103,472,234

887,619

9,863,223

7,664,861

Less Accumulated Depreciation for: Buildings and Improvements Equipment Land Improvements

10,565,766 5,202,686 2,419,139

1,310,769 726,752 245,221

887,619

11,876,535 5,041,819 2,664,360

Total Capital Assets, Being Depreciated, Net $ 73,792,961 $ 27,624,643 $

0 $ 101,417,604

Governmental Activity Capital Assets - Net $ 102,183,282 $ 45,118,114 $ 21,186.,11~ $ 122,125,222

Current year depreciation expense by function is as follows:

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

$ 1,428,592

$

46,101

5,130

35,322

29,262

612,450

728,265 125,885

$ 2,282,742

Note 6: RESTRICTED ASSETS

Special Purpose Local Option Sales Tax (SPLOST) and general obligation bond proceeds are reported as restricted assets in the Statement ofNet Assets because their use is limited by applicable bond covenants or statutory provisions. Restricted assets at June 30, 2006, were as follows:

- 19 -

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

EXHIBIT"H"

Note 6: RESTRICTED ASSETS

District-wide Ca12ital Projects

Bond

SPLOST

Proceeds

Debt Service Funds

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

$ 648,035 $ 632,668
$ 4,935,623 $ 7,661,542 $ 7,139,794

Note 7: INTERFUND TRANSFERS

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

Transfer to

Transfers From

District-wide

General

Capital

Fund

Projects

District-wide Capital Projects
Debt Service Fund

$ 364,994 $ 4,997,204

Total

$ 364,99~ $ 4,297,2Q4

Transfers are used to provide supplemental funding for local capital construction projects and to move excess SPLOST collections from Capital Projects Fund to the Debt Service Fund.

Note 8: RISK MANAGEMENT

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

The School District participates in the Georgia School Boards Association Risk and Insurance Management System, a public entity risk pool organized on July 1, 1994, to develop and administer a plan to reduce risk of loss on account of general liability, motor vehicle liability, or property damage, including safety engineering and other loss prevention and control techniques, and to administer one or more groups of self-insurance funds, including the processing and defense of claims brought against members ofthe system. The School District pays an annual premium to the

-20-

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

EXHIBIT"H"

Note 8: RISK MANAGEMENT

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

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 $250,000 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 of Year Liability

Claims and Changes in Estimates

Claims Paid

End ofYear Liability

2005 2006

$

0 $

449,101 $

449 101 $

0

$

0 $

521,132 $

521,132 $

0

The School District is self-insured with regard to unemployment compensation claims. A premium is charged when needed by the General Fund to each user program on the basis ofthe percentage of that fund'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.

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 $

13,069 $

13,069 $

0

$

0 $

10,034 $

10 034 $

0

- 21 -

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

EXHIBIT "H"

Note 8: RISK MANAGEMENT

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

Note 9: OPERATING LEASES

Whitfield County Board ofEducation has entered into various leases as lessee for office equipment and mobile units. These leases are considered for accounting purposes to be operating leases. Lease expenditures for the year ended June 30, 2006, for governmental funds amounted to $288,158. Future minimum lease payments for these leases are as follows:

Year Ending

Governmental Funds

2007 2008

$ 237,337 64,661

Total Note 10: LONG-TERM DEBT

$==3-01-,9~9=8

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

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

Purpose

Interest Rates

Amount

General Government - Series 2002

2.00% - 4.50% $ 9,310.000

- 22 -

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

EXHIBIT"H"

Note 10: LONG-TERM DEBT

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

Governmental Funds

General

Compensated Obligation

Absences ( I)

Bonds

Total

Balance July 1, 2005

$ 234,104 $ 13,815,000 $ 14,049,104

Additions Annual Leave Earned

226,273

226,273

Deductions Annual Leave Utilized Debt Retired

223,201

4,505,000

223,201 4,505,000

Balance June 30, 2006

$ 237.176 $ 9,310,000 $ 9,547.176

Portion of Long-Term Debt Due within One Year

$_ _ _ _0 $ 4,650,000 $ 4,650,000

(1) The portion of Compensated Absences due within one year has been determined to be immaterial to the basic financial statements.

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

Fiscal Year Ended June 30

General Obligation

Debt

Principal

Interest

2007 2008

$ 4,650,000 $ 4,660,000

273,300 99,450

Total Principal and Interest

$ 9,310.Q00 $ 372.750

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:

- 23 -

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

EXHIBIT "H"

Note 11: SIGNIFICANT COMMITMENTS

Project

Unearned Executed Contracts

Funding Available From State

SA0lS-755-350 03/02S-755-025/03G/02S-755-042 Whitfield County Career Academy

$ 235,553 $ 401,398

481,233

281,974

653,712

$ 1!370!498 $ 683!372

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

Note 12: SIGNIFICANT CONTINGENT LIABILITIES

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

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

Note 13: SUBSEQUENT EVENTS

On September 19, 2006, the voters of Whitfield County voted in favor of a Special Purpose Local Option Sales Tax Referendum for educational purposes. The imposition ofthe tax approved by the voters, as stated in part on the Official Ballot of Whitfield County, is as follows:

"Shall a total of $96,100,000 in aggregate principal amount of Whitfield County School System general obligation debt (the "Whitfield Bonds") be issued for the purpose ofproviding funds to pay (i) a portion of the costs of the following projects for the Whitfield County School System: (a) the acquisition, construction, equipping and furnishing of new school buildings and facilities, including, but not limited to, a new high school and a new elementary school, (b) the addition, renovation, repair and improvement to existing school buildings and facilities, (c) the acquisition and purchase oftechnology and safety equipment, including, but not limited to, computer hardware and software and security and safety equipment, (d) the acquisition and purchase ofschool buses and other transportation or maintenance vehicles, (e) the acquisition of land, and (f) the acquisition and purchase of any property necessary and desirable therefor, both real and personal (the "Whitfield Projects"), (ii) capitalized interest on the Whitfield Bonds through and including April 1, 2007 and (iii) the costs of issuing the

- 24 -

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

EXHIBIT "H"

Note 13: SUBSEQUENT EVENTS

Whitfield Bonds, and shall a special one percent sales and use tax be continued in Whitfield County for a period oftime not to exceed 20 calendar quarters and for the raising ofnot more than $115,000,000 to be distributed between the Whitfield County School System and the City of Dalton School System..."

The Whitfield County School District issued bonds in the amount of $9,910,000 on December 5, 2006, and $14,000,000 on March 1, 2007, for the purpose of capital projects for Whitfield County School System.

Note 14: RETIREMENT PLANS

TEACHERS RETIREMENT SYSTEM OF GEORGIA (TRS)

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

TRS CONTRIBUTIONS REQUIRED AND MADE Employees ofthe School District who are covered by TRS are required by State statute to contribute 5% oftheir gross earnings to TRS. The School District makes monthly employer contributions to TRS at rates adopted by the TRS Board ofTrustees in accordance with State statute and as advised by their independent actuary. The required employer contribution rate is 9.24% 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%

$ 5,439,526 $ 5,111,840 $ 5,137,815

- 25 -

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

SCHEDULE "1"

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

NONAPPROPRIATED BUDGETS

ORIGINAL (1)

FINAL (1)

ACTUAL AMOUNTS

$

25,272,888 $

25,272,888 $

25,642,578

190,000

190,000

644,464

59,302,899

59,229,876

62,766,494

8,905,980

9,432,608

10,114,884

2,231,698

2,231,698

1,872,883

63,000

63,000

510,620

704 982

704 982

4 823 052

$

96 671 447 $

97,125,052 $

106 374 975

$

66,494,065 $

66,617,950 $

68,062,655

4,281,959 2,064,914 2,311,322
782,710 6,344,998
693,463 6,699,136 4,589,343 1,948,576
111,920 20,180
4,358,038

4,350,822 2,144,458 2,521,322
758,922 6,406,498
693,463 6,699,136 4,600,573 1,948,576
111,920 20,180
4 358 038

4,602,661 2,252,468 2,495,146
947,088 6,359,057 1,188,413 7,302,377 5,139,179 1,631,600 1,079,943
652,528 6,348,666

$

100,700,624 $

101,231,858 $

108 061 781

$

-4 029 177 $

-4 106 806 $

-1 686 806

$

5,221,274 $

5,221,274

-5 221 274

-5,221,274 $

-364 994

$

0 $

0 $

-364 994

$

-4,029,177 $

-4, 106,806 $

-2,051,800

13,290,253

13,290,253

13,225,598

Fund Balances - Ending

$

9 261 076 $

9183447$

11173 798

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.

- 27 -

WHITFIELD 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) Pass-Through From Office of Treasury and Fiscal Services National Forest Reserve Funds
Total U.S. Department of Agriculture
Education, U.S. Department of Special Education Cluster Pass-Through From Georgia Department of Education Special Education Grants to States Preschool Grants
Total Special Education Cluster
Other Programs Pass-Through From Georgia Department of Education Comprehensive School Reform Demonstration Education for Homeless Children and Youth English Language Acquisition Grants Enhancing Education Through Technology Program Hurricane Education Recovery Improving Teacher Quality State Grants Mathematics and Science Partnerships Migrant Education State Grants for Innovative Programs Title I Grants to Local Educational Agencies 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
Total Federal Financial Assistance
NIA = Not Available

CFDA NUMBER

PASSTHROUGH
ENTITY ID
NUMBER

EXPENDITURES IN PERIOD

. 10.553 . 10.555

N/A NIA $
$

(2) 5,753,530
5,753,530

10.550 10.665

N/A N/A
$

243,215 (3) 5,996,745

84.027 84.173

N/A $ N/A
$

2,344,701 111 335
2,456,036

84.332 84.196 84.365 84.318 84.938 84.367 84.366 84.011 84.298 84.010 84.048

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

107,607 68,162 263,266 97,564 (4) 509,650 83,547 87,905 37,938 2,175,941 127 171
6 014 787

17.258

N/A $

15 000

$===12='=02=6=,5=3=2

- 28-

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

SCHEDULE "2"

Notes to the Schedule of Expenditures of Federal Awards
(1) The amount shown for the Food Donation Program represents the Federally assigned value of nonmonetary assistance for donated commodities received and/or consumed by the School District during the current fiscal year.
(2) Expenditures for the funds earned on the School Breakfast Program ($974,134) were not maintained separately and are included in the 2006 National School Lunch Program.
(3) Funds earned on this program, in the amount of $5,783, do not require reporting of expenditures. (4) Funds earned on the Hurricane Education Recovery program, in the amount of $47,379, do not require reporting
of expenditures.
Major Programs are identified by an asterisk (*) in front of the CFDA number.
The School District did not provide Federal Assistance to any Subrecipient.
The accompanying schedule of expenditures of Federal awards includes the Federal grant activity of the Whitfield 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.

- 29-

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

SCHEDULE "3"

AGENCY/FUNDING

GOVERNMENTAL FUND TYPES

CAPITAL

GENERAL

PROJECTS

FUND

FUND

GRANTS Bright From the Start: Georgia Department of Early Care and Learning Pre-Kindergarten Program

$

141,415

$

Education, Georgia Department of Quality Basic Education Direct Instructional Cost Kindergarten Program Kindergarten Program - Early Intervention Program Primary Grades (1-3) Program Primary Grades - Early Intervention (1-3) Program Upper Elementary Grades (4-5) Program Upper Elementary Grades - Early Intervention (4-5) Program Middle School (6-8) Program High School General Education (9-12) Program Vocational Laboratory (9-12) Program Students with Disabilities Gifted Student - Category VI Remedial Education Program Alternative Education Program English Speakers of Other Languages (ESOL) Media Center Program 20 Days Additional Instruction Staff and Professional Development Indirect Cost Central Administration School Administration Facility Maintenance and Operations Categorical Grants Pupil Transportation Regular Bus Replacement Nursing Services Principal Supplements Vocational Supervisors Education Equalization Funding Grant Food Services Vocational Education Austerity Reduction Other State Programs Limited School Choice Program National Teacher Certification Preschool Handicapped Program Safe Schools Grant Virtual Schools State Grant

4,277,418 502,697
9,439,866 851,039
4,498,379 439,732
7,029,060 6,114,144 2,540,302 5,247,960 2,147,944
43,053 578,736 2,338,300 1,273,111 399,470 250,466
1,423,642 2,566,990 3,478,285
1,324,072 223,134 244,836 45,722 29,172
6,000,223 316,176
1,334,601 -2,929,846
217,743 172,012 112,723
10,214 250

Georgia State Financing and Investment Commission Reimbursement on Construction Projects

$ 4,406,552

CONTRACT Education, Georgia Department of Foreign Language Model Program

83453

TOTAL
141,415
4,277,418 502,697
9,439,866 851,039
4,498,379 439,732
7,029,060 6,114,144 2,540,302 5,247,960 2,147,944
43,053 578,736 2,338,300 1,273,111 399,470 250,466
1,423,642 2,566,990 3,478,285
1,324,072 223,134 244,836 45,722 29,172
6,000,223 316,176
1,334,601 -2,929,846
217,743 172,012 112,723 10,214
250
4,406,552
83453

See notes to the basic financial statements.

$ 62,766,494 $ 4,406,552 $==-=6,.,,7,,..17=3=,04=6= - 30-

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

SCHEDULE "4"

PROJECT
Acquisitions, construction and equipping of a new elementary school, a new middle school and a new high school, including the acquisition of any furniture, fixtures and equipment necessary or desirable therefore; renovations and improvements at existing schools, including the acquisition of any furniture, fixtures and equipment necessary or desirable therefore; the acquisition, construction and equipping of a central warehouse facility; the acquisition of school buses; and system-wide technology improvements.

ORIGINAL ESTIMATED
COST(1)

CURRENT ESTIMATED COSTS (2)

AMOUNT EXPENDED IN CURRENT
YEAR (3)

AMOUNT EXPENDED
IN PRIOR YEARS (3)

PROJECT STATUS

$ 53,531,937 $ 53,531,937 $ 19,137,497 $ 31,647,055 Ongoing

(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 project. Includes all cost from project inception to completion.
(3) The voters of Whitfield County approved the imposition of a 1% sales tax to fund the above project and retire associated debt. Amounts expended for this project may include sales tax proceeds, state, local property taxes and/or other funds over the life of the project.

See notes to the basic financial statements.

- 31 -

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

SCHEDULE "5"

DESCRIPTION

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

ELIGIBLE QBE PROGRAM COSTS

SALARIES

OPERATIONS

TOTAL

Direct Instructional Programs

Kindergarten Program

$

Kindergarten Program-Early Intervention Program

Primary Grades (1-3) Program

Primary Grades-Early Intervention (1-3) Program

Upper Elementary Grades (4-5) Program

Upper Elementary Grades-Early Intervention (4-5)

Program

Middle 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)

4,861,995 $
568,545 10,697,572
976,776 5,104,449

4,650,585 $
473,913 10,868,843
950,170 5,326,113

512,080 8,029,984 6,901,365 2,864,769 6,036,197

795,971 9,170,297 9,107,125 2,066,526
2,876 1,042,164 3,516,233
362,712

2,419,500 50,523
656,503 2 630 713

2,154,423 100,055 893,770
2,415,442

146,212 $
4,030 324,948
9,491 134,116
4,784 291,821 873,272 348,325
16,444 6,581
26,569 4,768 667
32,043 1,748
20,630 20,226

4,796,797 477,943
11,193,791 959,661
5,460,229
800,755 9,462,118 9,980,397 2,414,851
19,320 1,048,745 3,542,802
367,480 667
2,186,466 101,803 914,400
2,435,668

TOTAL DIRECT INSTRUCTIONAL PROGRAMS

$

52,310,971 $ 53,897,218 $

2,266,675 $

56,163,893

Media Center Program Staff and Professional Development

1,446,329 286 665

2,065,006 96 359

334,796 169 119

2,399,802 265,478

TOTAL QBE FORMULA FUNDS

$

54,043,965 $ 56,058,583 $

2,770,590 $ =====5=8,,..8.2..9..,,1=7=3

(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.

- 33-

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
May 18, 2007

Honorable Sonny Perdue, Governor Members ofthe General Assembly Members ofthe State Board of Education
and Superintendent and Members ofthe Whitfield 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 ofWhitfield County Board ofEducation as ofand for the year ended June 30, 2006, which collectively comprise Whitfield County Board of Education's basic financial statements and have issued our report thereon dated May 18, 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 Whitfield 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 Whitfield County Board of Education's ability to record, process, summarize and report financial data consistent with assertions of management in the financial statements. Reportable conditions are described in the accompanying Schedule ofFindings and Questioned Costs as items FS-7551-06-01 and FS-7551-06-02.
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 Whitfield 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 Whitfield County Board of Education and is not intended to be and should not be used by anyone other than these specified parties.
Respectfully submitted,
4)~
Rus ell W. Hinton, CPA, CGFM State Auditor
RWH:as 2006YB-30

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
May 18, 2007

Honorable Sonny Perdue, Governor Members ofthe General Assembly Members ofthe State Board of Education
and Superintendent and Members of the Whitfield County Board of Education
REPORT ON COMPLIANCE WITH REQUIREMENTS APPLICABLE TO EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH 0MB CIRCULAR A-133
Ladies and Gentlemen:
Compliance
We have audited the compliance of Whitfield County Board of Education with the types of compliance requirements described in the U.S. Office ofManagement and Budget (0MB) Circular A-133 Compliance Supplement that are applicable to each ofits major Federal programs for the year ended June 30, 2006. Whitfield County Board ofEducation's major Federal programs are identified in the Summary of Auditor's Results Section of the accompanying Schedule of Findings and Questioned Costs. Compliance with the requirements of laws, regulations, contracts and grants applicable to each of its major Federal programs is the responsibility ofWhitfield County Board of Education's management. Our responsibility is to express an opinion on Whitfield 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 Whitfield County Board of Education's compliance with those requirements and performing such other procedures as we considered necessary in the

2006SA-10

circumstances. We believe that our audit provides a reasonable basis for our opinion. Our audit does not provide a legal determination on Whitfield County Board of Education's compliance with those requirements.
In our opinion, the Whitfield County Board ofEducation 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 Whitfield 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 Whitfield County Board of Education's internal control over compliance with requirements that could have a direct and material effect on a major Federal program in order to determine our auditing procedures for the purpose ofexpressing our opinion on compliance and to test and report on internal control over compliance in accordance with 0MB Circular A-133.
Our consideration ofthe internal control over compliance would not necessarily disclose all matters in the internal control that might be material weaknesses. A material weakness is a reportable condition in which the design or operation of one or more ofthe internal control components does not reduce to a relatively low level ofrisk that noncompliance with applicable requirements oflaws, regulations, contracts and grants caused by error or fraud that would be material in relation to a major Federal program being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. We noted no matters involving the internal control over compliance and its operation that we consider to be material weaknesses.
This report is intended solely for the information and use of the management, members of the Whitfield County Board of Education, Federal awarding agencies and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties.
Respectfully submitted,
~~w..J::\~
Russell W. Hinton, CPA, CGFM State Auditor
RWH:as 2006SA-10

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

WHITFIELD 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-7551-04-01 FS-7551-05-01 FS-7551-05-02

Further Action Not Warranted Partially Resolved - See Corrective Action/Responses Previously Reported Corrective Action Implemented

CORRECTIVE ACTION/RESPONSES

CASH AND CASH EQUIVALENTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Control Procedures Finding Control Number: FS-7551-05-01

A meeting ofschool bookkeepers was held for the purpose ofcommunicating the internal control deficiencies associated with the prior year findings. Items discussed included the following:

The importance of the building level administrator/principal rece1vmg and reviewing the monthly bank statements prior to the bookkeeper's reconciliation procedures and reviewing the reconciliation documents upon reconciliation completion.

The importance of documented authorization for all purchases before purchase is actually procured.

Original invoices must be maintained to support all purchases.

School credit and purchase cards must have the following controls:
Must have purchase order/requisition to use cards. No traditional credit cards allowed. Must maintain tight physical control over card.

Ifpurchase order is not applicable, a check request authorization should accompany support documentation.

- 1-

WHITFIELD 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 CASH AND CASH EQUIVALENTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Control Procedures Finding Control Number: FS-7551-05-01 In addition to the bookkeeper meeting, bookkeepers are required to reconcile bank statements by the 15th ofthe succeeding month. Also, financial records are integrated into the systems general ledger on a monthly basis. The School District provides support for bookkeepers relative to internal control issues through a procedure manual and consultation. The prior year audit report was issued in May of 2006. There was not sufficient time to address this finding for the fiscal year 2006 audit. We expect that the finding will be either partially or fully resolved in the fiscal year 2007 audit.
PRIOR YEAR FEDERAL AWARD FINDINGS AND QUESTIONED COSTS No matters were reported.
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SECTION IV FINDINGS AND QUESTIONED COSTS

WHITFIELD 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 Whitfield 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 Whitfield County Board ofEducation disclosed financial statement reportable conditions related to the following control categories.

Cash and Cash Equivalents Revenues/Receivables/Receipts

Expenditures/Liabilities/Disbursements General Ledger

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

3. Noncompliance Material to the Financial Statements The audit of the Whitfield 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 Whitfield County Board ofEducation did not disclose any reportable conditions in internal control over major programs.

5. Type of Report Issued on Compliance for Major Programs The auditor's opinion on the Whitfield County Board of Education's report on compliance with requirements applicable to major programs was unqualified.

6. Audit Findings Required to be Reported by Section .5 lO(a) of 0MB Circular A-133 The Whitfield County Board ofEducation's audit did not disclose audit findings required to be reported by section .510(a) ofOMB Circular A-133.

7. Major Programs Federal awards audited as major programs are as follows: 10.553 Food Services - School Breakfast Program 10.555 Food Services - National School Lunch Program

8. Type "A" Program Dollar Threshold The dollar threshold for type "A" programs was $362,391.

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

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

II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

CASH AND CASH EQUIVALENTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Control Procedures over School Activity Accounts Reportable Condition Finding Control Number: FS-7551-06-01

Condition:

This is a repeat finding (FS-7551-05-01 and FS-7551-04-01) from the years ended June 30, 2005, and June 30, 2004, respectively. The accounting procedures of the School District were insufficient to provide for adequate internal controls over the school activity accounts.

Criteria:

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

Questioned Cost: NIA

Information:

Cash and Cash Equivalents The bank reconciliation function was not separated from the record keeping and voucher payment function. The activity for two bank accounts and one certificate of deposit was not included on the financial statements. The total cash balance for the two accounts was $13,649 at June 30, 2006, and the certificate of deposit's balance was $45,203 at June 30, 2006.

Revenues/Receivables/Receipts Deposit preparation was not separated from the record keeping and cash custody functions. Receipt activity totaling $148,059 for two school accounts was omitted from the financial statements.

Expenditures/Liabilities/Disbursements Inquiry revealed the use of credit cards by school personnel without obtaining approved purchase orders or requisitions. In addition, no control procedures exist for the use of credit cards by school personnel.

Cause:

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

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

II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

CASH AND CASH EQUIVALENTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Control Procedures over School Activity Accounts Reportable Condition Finding Control Number: FS-7551-06-01

Effect:

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

Recommendation:

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

GENERAL LEDGER Incomplete General Ledger/DE046 Financial Report Reportable Condition Finding Control Number: FS-7551-06-02

Condition:

The School District failed to include Long-Term Debt activity in the DE046 financial report submitted to the Georgia Department of Education.

Criteria:

Chapter 22 Annual Financial Reporting of the Financial Management for Georgia Local Units of Administration indicates that School Districts must prepare their financial statements in accordance with generally accepted accounting principles.

Questioned Cost: NIA

Information:

Long-Term debt was not recorded in the School District's general ledger as required. An audit adjustment was proposed to record General Obligation Bonds of $9,310,000 and Compensated Absences debt of $237,176.

Cause:

Management failed to comply with the requirements of the Georgia Department of Education regarding financial reporting.

Effect:

The failure ofthe School District to maintain a complete and accurate general ledger can lead to inaccurate internal and external reporting.

Recommendation:

The School District should implement controls to ensure that Georgia Department of Education's policies and procedures are followed and implement procedures to ensure that all financial data is properly recorded in the general ledger and reported in the DE046.

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WHITFIELD COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2006 III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS No matters were reported.
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SECTIONV MANAGEMENT'S RESPONSES

WHITFIELD COUNTY BOARD OF EDUCATION SCHEDULE OF MANAGEMENT'S RESPONSES
YEAR ENDED JUNE 30, 2006
Finding Control Number: FS-7551-06-01
We concur with this finding. Additional training meetings for school bookkeepers will be scheduled for the purpose of communicating the internal control deficiencies associated with the prior year findings. In addition to the training meetings, bookkeepers will be required to reconcile bank statements by the 15th of the succeeding month. Also, financial records will be integrated into the system's general ledger on a monthly basis.
Finding Control Number: FS-7551-06-02
We concur with this finding. The ChiefFinancial Officer will implement procedures to assure that long-term debt transactions are properly posted and reported in accordance with Generally Accepted Accounting Principles and the requirements ofthe Georgia Department of Education.
Contact Person: Kenny Sheppard, Chief Financial Officer Phone: (706) 217-6701 Fax Number: (706) 217-6703 E-mail Address: ksheppard@whitfield.kl2.ga.us