WHITFIELD COUNTY BOARD OF EDUCATION DALTON, GEORGIA REPORT ON AUDIT OF THE FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2007 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 29 4 SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS 30 5 ALLOTMENTS AND EXPENDITURES GENERAL FUND - QUALITY BASIC EDUCATION PROGRAMS (QBE) BY PROGRAM 31 SECTION II COMPLIANCE AND INTERNAL CONTROL REPORTS REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS REPORT ON COMPLIANCE WITH REQUIREMENTS APPLICABLE TO EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH 0MB 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) 656-2174 DEPARTMENT OF AUDITS AND ACCOUNTS 270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400 March 14, 2008 Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education and Superintendent and Members of the 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, 2007, 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 of Education's management. Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States ofAmerica and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General ofthe United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Whitfield County Board of Education's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinions. 2007ARL-11 In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, each major fund, and the aggregate remaining fund information of the Whitfield County Board of Education, as of June 30, 2007, and the respective changes in financial position thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America. In accordance with Government Auditing Standards, we have also issued our report dated March 14, 2008, on our consideration of the Whitfield County Board of Education's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements and other matters. The purpose ofthat report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit. Management's Discussion and Analysis and the Schedule ofRevenues, Expenditures and Changes in Fund Balances - Budget and Actual, as presented on pages i through viii and page 27 respectively, are not a required part ofthe basic financial statements but are supplementary information required by the accounting principles generally accepted in the United States of America. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods ofmeasurement and presentation ofthe required supplementary information. However, we did not audit the information and express no opinion on it. Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the 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, ' Lu.~ ell W. Hinton, CPA, CGFM State Auditor RWH:gp 2007ARL-11 WHITFIELD COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2007 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, 2007, and June 30, 2006. The intent of this discussion and analysis is to look at the School District's financial performance as a whole; readers should also review the notes to the basic financial statements and financial statements to enhance their understanding of the School District's financial performance. FINANCIAL HIGHLIGHTS Key financial highlights for the fiscal years 2007 and 2006 are as follows: On the District-wide financial statements, the assets of the School District exceeded liabilities by $161.8 million and $150.3 million, respectively, for the fiscal years ended June 30, 2007, and 2006. Of these amounts $10.5 and $10.1 million, respectively, for fiscal years 2007 and 2006 are available for spending at the School District's discretion. The School District had $120.1 million and $109.6 million, respectively, in expenses for the fiscal years ended June 30, 2007, and June 30, 2006, relating to governmental activities. Only $77.1 million and $73.2 million of the above mentioned expenses for 2007 and 2006 were offset by program specific charges for services, grants and contributions. General revenues (primarily property and sales taxes) totaling $54.4 million and $51.2 million, respectively, for 2007 and 2006 were adequate to provide for these programs. As stated above, general revenues accounted for $54.4 million or 41.4% of all revenues totaling $131.6 million for fiscal year 2007 and $51.2 million or 41.2% of all revenues totaling $124.3 million for fiscal year 2006. 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. 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 WHITFIELD COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2007 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 School District's operating funds into one column called governmental activities. In reviewing the District-wide financial statements, a reader might ask the question, are we in a better financial position than last year? The Statement of Net Assets and the Statement of Activities provides the basis for answering this question. These financial statements include all School District's assets and liabilities and uses the accrual basis of accounting similar to the accounting used by most private-sector companies. This basis of accounting takes into account all of the current year's revenues and expenses regardless of when cash is received or paid. These two statements report the School District's net assets and any changes in those assets. The change in net assets is important because it tells the reader that, for the School District as a whole, the financial position of the School District has improved or diminished. The causes of this change may be the results of many factors, including those not under the School District's control, such as the property tax base, facility conditions, required educational programs and other factors. The Statement of Net Assets and the Statement of Activities reflects the School District's governmental activities. FUND FINANCIAL STATEMENTS The School District uses many funds to account for a multitude of financial transactions during the fiscal year. However, the fund financial statements presented in this report provide detail information about only the School District's significant or major funds. Governmental Funds: Most of the School District's activities are reported in governmental funds, which focus on how money flows into and out of those funds and the balances left at yearend available for spending in future periods. These funds are reported using the modified accrual method of accounting, which measures cash and all other financial assets that can readily be converted to cash. The governmental fund statements provide a detailed short-term view of the School District's general government operations and the basic services it provides. Governmental fund information helps determine whether there are more or fewer financial ii WHITFIELD COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2007 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 2007 and 2006. Table 1 Net Assets Governmental Activities Fiscal Fiscal Year 2007 Year 2006 Assets Current and Other Assets Capital Assets, Net $ 79,911,134 $ 47,779,469 125,503,425 127,175,729 Total Assets $ 205,414,559 $ 174,955,198 Liabilities Current and Other Liabilities Long-Term Liabilities $ 14,764,083 $ 15,083,695 28,826,445 9,547,176 Total Liabilities $ 43,590,528 $ 24,630,871 Net Assets Invested in Capital Assets, Net of Related Debt Restricted Unrestricted $ 120,662,865 30,625,163 10,536,003 $ 124,900,022 15,308,769 10,115,536 Total Net Assets $ 161,824,031 $ 150,324,327 Table 2 shows the Changes in Net Assets for fiscal years ending June 30, 2007, and June 30, 2006. lll WHITFIELD COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2007 Table 2 Change in Net Assets Revenues Program Revenues: Charges for Services and Sales Operating Grants and Contributions Capital Grants and Contributions Governmental Activities Fiscal Fiscal Year 2007 Year 2006 $ 2,187,705 74,394,286 557,612 $ 1,872,883 66,658,020 4,629,686 Total Program Revenues $ 77,139,603 $ 73,160,589 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 25,766,816 13,237,194 580,562 345,548 8,273,440 2,420,906 3,800,931 $ 25,055,889 13,498,946 439,441 205,023 6,681,124 1,160,736 4,138,207 Total General Revenues $ 54,425,397 $ 51,179,366 Total Revenues $ 131,565,000 $ 124,339,955 Program Expenses Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Operations ofNon-Instructional Services Community Services Food Services Interest on Short-Term and Long-Term Debt $ 78,245,225 4,213,414 2,713,874 2,750,380 586,632 7,269,339 775,140 7,621,139 5,198,278 1,873,060 936,323 584,318 7,024,875 273,300 $ 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 Total Expenses Increase in Net Assets $ 120,065,297 $ I IA99!703 $ 109,572,529 $ ' 14)67A26 IV WHITFIELD COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2007 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. Table 3 Governmental Activities Total Cost of Services Fiscal Fiscal Year 2007 Year 2006 Net Cost of Services Fiscal Fiscal Year 2007 Year 2006 Instruction $ 78,245,225 $ 69,799,495 $ 25,003,681 $ 16,732,740 Support Services Pupil Services 4,213,414 4,602,661 2,715,158 3,058,599 Improvement of Instructional Services 2,713,874 2,252,468 1,458,384 1,208,672 Educational Media Services 2,750,380 2,541,247 1,070,937 1,255,295 General Administration 586,632 1,178,738 -1,463,146 -583,421 School Administration 7,269,339 6,171,178 3,562,433 3,517,723 Business Administration 775,140 1,188,413 746,722 1,188,413 Maintenance and Operation of Plant 7,621,139 7,349,033 3,209,210 3,705,680 Student Transportation Services 5,198,278 4,176,291 2,922,980 2,439,854 Central Support Services 1,873,060 1,634,283 1,762,326 1,617,303 Other Support Services 936,323 1,079,943 828,651 946,067 Operations ofNon-Instructional Services Community Services 584,318 652,528 581,271 649,840 Food Services 7,024,875 6,533,228 253,786 262,152 Interest on Short-Term and Long-Term Debt 273,300 413,023 273,300 413,023 Total Expenses $120,065.297 $109.572.529 $ 42,925,693 $ 36,411.940 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 $132.3 million and total expenditures of$123.2 million for fiscal year 2007 and total revenues of $124.9 million and total expenditures of $132.1 million for fiscal year 2006. The decrease in expenditures is due to a decrease in construction activity. 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 2007 and 2006, the School District amended its general fund budget as needed. V WHITFIELD COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2007 During fiscal year 2007, the General Fund had final actual revenues totaling $117.2 million, which exceeded the final budgeted amounts of $103 .1 million by $14.1 million. This difference (final actual vs. final budget) was primarily due to conservative budgeting principles relative to local, State and Federal revenues. Local taxes exceeded budgeted revenues $1.2 million due to growth in the tax digest. State revenues exceeded budgeted revenues $3 .4 million due to State supplemental budget adjustments relative to enrollment growth and increases in State grants. Federal revenue exceeded budgeted revenues $4.5 million due to conservative budgeting. Miscellaneous revenues exceeded budgeted revenues $3.8 due to unbudgeted revenues from school activity accounts of $3.8 million. Investment revenue is primarily derived from our investment of cash in the State's Local Government Investment Pool (LGIP). The rate of return was better than anticipated and interest was maximized through better than expected cash flow. 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 (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 the fiscal year 2007, the General Fund had final actual expenditures totaling $116.0 million, which exceeded the final budgeted amount of $106.5 million by $9.5 million. The instructional budgeted expenditures exceeded actual expenditures $6.2 million due to increase services funded through Federal and State grants. The total expenditures include unbudgeted expenditures from school activity accounts of $2.2 million. Final actual expenditures and other financing uses 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. General fund revenues exceeded expenditures and other financing uses resulting in a surplus of $1,176,450 for the fiscal year 2007. 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. CAPITAL ASSETS AND DEBT ADMINISTRATION Capital Assets At the fiscal years ended June 30, 2007, and June 30, 2006, the School District had $125.5 million and $127.2 million, respectively, invested in capital assets, all in governmental activities. Table 4 reflects a summary of these balances net of accumulated depreciation. The School VI WHITFIELD COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2007 District completed construction of a new elementary school and a new middle school during the fiscal year. Table 4 Capital Assets (Net of Depreciation) Governmental Activities Fiscal Fiscal Year 2007 Year 2006 Land Construction in Progress Buildings and Improvements Equipment Land Improvements $ 5,648,417 533,156 107,321,221 6,170,953 5,829,678 $ 4,275,610 21,482,515 91,595,699 4,821,404 5,000,501 Total $ 1251503.425 $ 12711751729 Due to the ongoing growth in the county, the School District has numerous construction projects including new buildings, additions and renovations. Debt At the fiscal years ending June 30, 2007 and June 30, 2006, the School District had $28.8 million and $9.5 million, respectively, in debt outstanding. The School District issued two bonds during the fiscal year totaling $23.9 million. Table 5 summarizes the School District's debt for general obligation bonds. Table 5 Debt at June 30 Governmental Activities Fiscal Fiscal Year 2007 Year 2006 Compensated Absences Bonds Payable $ 256,446 $ 237,176 28,570,000 9,310,000 Total $ 28,826,446 $ 9,547,176 At June 30, 2007, and June 30, 2006, the School District's assigned bond rating was "Aa2" as determined by Moody's Investors Services, Inc. vii WHITFIELD COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2007 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. Vlll WHITFIELD COUNTY BOARD OF EDUCATION WHITFIELD COUNTY BOARD OF EDUCATION STATEMENT OF NET ASSETS JUNE 30, 2007 ASSETS Cash and Cash Equivalents Investments Accounts Receivable, Net Interest 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 and Benefits Payable Contracts 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 $ 4,325,933.95 61,289,424.02 395,926.21 2,425,945.64 8,944,425.20 1,411,001.24 878,208.57 240,269.58 5,648,416.67 533,155.80 8,925,059.76 120,797,790.20 11,874,424.26 -22,275,421. 79 $ 205,414,559.31 $ 970,449.76 13,744,928.13 48,705.13 13,105,000.00 15,721,445.57 $ 43,590,528.59 $ 120,662,865.36 991,467.51 5,379,359.11 24,254,335.30 10,536,003.44 $ 161,824,030.72 $ 205,414,559.31 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, 2007 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 EXPENSES CHARGES FOR SERVICES $ 78,245,225.19 $ 4,213,414.30 2,713,873.74 2,750,380.21 586,631.71 7,269,338.65 775,139.78 7,621,138.73 5,198,278.42 1,873,059.68 936,322.67 584,318.55 7,024,875.12 273,300.00 $ 120,065,296.75 $ 7,744.35 366,676.35 1,813,284.43 2,187,705.13 Net Assets - End of Year The notes to the basic financial statements are an integral part of this statement. -2 - EXHIBIT"B" PROGRAM REVENUES OPERATING CAPITAL GRANTS AND GRANTS AND CONTRIBUTIONS CONTRIBUTIONS NET (EXPENSES) REVENUES AND CHANGES IN NET ASSETS $ 53,165,070.05 $ 1,131,579.98 1,255,489.26 1,676,880.96 2,049,588.31 3,704,791.36 28,418.27 4,410,855.52 1,799,777.15 110,733.27 107,671.52 3,047.55 4,950,382.84 $ 74,394,286.04 $ 68,730.25 $ 2,562.32 189.73 2,114.16 1,072.68 475,521.60 7,421.75 557 612.49 $ -25,003,680.54 -2,715,157.97 -1,458,384.48 -1,070,936.93 1,463,146.33 -3,562,433.13 -746,721.51 -3,209,210.53 -2,922,979.67 -1,762,326.41 -828,651.15 -581,271.00 -253, 786.10 -273 300.00 -42,925,693.09 $ 25,766,815.42 13,237,194.21 580,562.47 345,548.04 8,273,440.14 2,420,905.79 3,800,930.74 $ 54,425,396.81 $ 11,499,703.72 150,324,327.00 $ 161,824,030.72 -3- WHITFIELD COUNTY BOARD OF EDUCATION BALANCE SHEET GOVERNMENTAL FUNDS JUNE 30, 2007 EXHIBIT "C" ASSETS Cash and Cash Equivalents Investments Accounts Receivable, Net Interest Taxes State Government Federal Government Other Inventories Total Assets LIABILITIES AND FUND BALANCES LIABILITIES Accounts Payable Salaries and Benefits Payable Contracts Payable Total Liabilities FUND BALANCES Reserved for: Continuation of Federal Programs Debt Service Inventories Capital Projects Unreserved Designated for Student Activities Designated for Self Insurance Undesignated Reported in: General Fund Total Fund Balances Total Liabilities and Fund Balances GENERAL FUND DISTRICTWIDE CAPITAL PROJECTS FUND DEBT SERVICE FUND TOTAL $ 3,873,484.17 $ 452,449.78 $ 4,325,933.95 10,407,210.48 45,985,144.66 $ 4,897,068.88 61,289,424.02 1,117,847.12 8,944,425.20 1,411,001.24 878,208.57 240,269.58 395,926.21 2,130,876.04 395,926.21 3,248,723.16 8,944,425.20 1,411,001.24 878,208.57 240,269.58 $ 26,872,446.36 $ 48,964,396.69 $ 4,897,068.88 $ 80,733,911.93 $ 777,269.76 $ 13,744,928.13 $ 14,522,197.89 $ 193,180.00 48 705.13 241 885.13 $ 970,449.76 13,744,928.13 48 705.13 $ 14,764,083.02 $ 811,023.05 $ 811,023.05 $ 482,290.23 $ 4,897,068.88 5,379,359.11 240,269.53 240,269.53 48,240,221.33 48,240,221.33 1,033,514.28 1,123,287.47 1,033,514.28 1,123,287.47 9142154.14 9142154.14 $ 12,350,248.47 $ 48,722,511.56 $ 4,897,068.88 $ 65,969,828.91 $ 26,872,446.36 $ 48,964,396.69 $ 4,897,068.88 $ 80,733,911.93 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, 2007 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 $ 65,969,828.91 $ 5,648,416.67 533,155.80 8,925,059.76 120,797,790.20 11,874,424.26 -22,275,421. 79 125,503,424.90 -822,777.52 $ -28,570,000.00 -256 445.57 -28,826,445.57 Net Assets of Governmental Activities (Exhibit "A") $ 161,824,030.72 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, 2007 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) Accrued Interest on Bonds Sold Proceeds of Long-Term Capital Related Debt Premiums on Bonds Sold Sale of Equipment Transfers In Transfers Out Total Other Financing Sources (Uses) Net Change in Fund Balances Fund Balances - Beginning GENERAL FUND DISTRICTWIDE CAPITAL PROJECTS FUND DEBT SERVICE FUND TOTAL $ 26,534,159.94 926,110.51 $ 13,237,194.21 72,350,106.10 107,992.50 9,994,269.93 2,187,705.13 655,649.43 1,761,331.23 $ 4,533,098.66 $ 117181 099.70 $ 15,106,517.94 $ $ 3,925.13 26,534,159.94 14,163,304.72 72,458,098.60 9,994,269.93 2,187,705.13 2,420,905.79 4,533,098.66 3 925.13 $ 132,291,542.77 $ 75,230,963.77 $ 75,230,963.77 4,213,414.30 2,713,873.74 2,633,789.11 577,991.18 7,180,978.76 490,193.83 $ 7,582,788.01 5,293,758.05 1,888,136.87 936,322.67 584,318.55 6,696,145.39 284,945.95 1,923,296.72 4,213,414.30 2,713,873.74 2,633,789.11 577,991.18 7,180,978.76 775,139.78 7,582,788.01 5,293,758.05 1,888,136.87 936,322.67 584,318.55 6,696,145.39 1,923,296.72 $ 4,650,000.00 273,300.00 4,650,000.00 273 300.00 $ 116,022,674.23 $ 2,208,242.67 $ 4,923,300.00 $ 123,154,216.90 $ 1,158,425.47 $ 12,898,275.27 $ -4,919,374.87 $ 9,137,325.87 $ 22,777.22 $ 22,777.22 $ 23,910,000.00 23,910,000.00 130,493.50 130,493.50 $ 18,025.00 18,025.00 4,858,043.53 4,858,043.53 -4,858,043.53 -4,858,043.53 $ 18,025.00 $ 19,182,449.97 $ 4,880,820.75 $ 24,081,295.72 $ 1,176,450.47 $ 32,080,725.24 $ -38,554.12 $ 33,218,621.59 11 173 798.00 16,641,786.32 4,935,623.00 32,751,207.32 Fund Balances - Ending $ 12,350,248.47 $ 48,722,511.56 $ 4,897,068.88 $ 65,969,828.91 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, 2007 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. Bond proceeds provide current financial resources to Governmental Funds; however, issuing debt increases Long-Term Liabilities in the Statement of Net Assets. In the current period, proceeds were received from: General Obligation Bonds Issued $23,910,000 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") $ 33,218,621.59 $ 1,247,578.28 -2,919,881.71 -1,672,303.43 -767,344.87 -23,910,000.00 4,650,000.00 -19,269.57 $ 11 A99,703.72 The notes to the basic financial statements are an integral part of this statement. -7- (This page left intentionally blank) WHITFIELD COUNTY BOARD OF EDUCATION STATEMENT OF FIDUCIARY NET ASSETS FIDUCIARY FUNDS JUNE 30, 2007 ASSETS Cash and Cash Equivalents Investments Total Assets LIABILITIES Funds Held for Others EXHIBIT"G" AGENCY FUNDS $ 223,982.95 55,035.52 $ 279,018.47 $ 279,018.47 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, 2007 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 of its 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 of Activities presents a comparison between direct expenses and program revenues for each function of the School District's governmental activities. Direct expenses are those that are specifically associated with a program or function and, therefore, are clearly identifiable to a particular function. Indirect expenses (expenses of the School District related to the administration and support ofthe School District's programs, such as office and maintenance personnel and accounting) are not allocated to programs. Program revenues include (a) charges paid by the recipients ofgoods or services offered by the programs and (b) grants and contributions that are restricted to meeting the operational or capital requirements of a particular program. Revenues that are not classified as program revenues, including all taxes, are presented as general revenues. - 10 - WHITFIELD COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007 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, 2007 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 tnethod, 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. Official Code of Georgia Annotated Section 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 of Georgia Annotated Section 36-83-4 authorizes the School District to invest its funds. In selecting among options for investment or among institutional bids for deposits, the highest rate ofreturn shall be the objective, given equivalent conditions of safety and liquidity. Funds may be invested in the following: (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, 2007 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 of Georgia, Office of Treasury and Fiscal Services, (7) Repurchase agreements, and (8) Obligations of other political subdivisions of the State of Georgia. The School District does not have a formal policy regarding investment policies that address credit risks, custodial credit risks, concentration ofcredit risks, interest rate risks or foreign currency risks. RECEIVABLES Receivables consist of amounts due from property and sales taxes, grant reimbursements due on Federal, State or other grants for expenditures made but not reimbursed and other receivables disclosed from information available. Receivables are recorded when either the asset or revenue recognition criteria has been met. Receivables recorded on the basic financial statements do not include any amounts which would necessitate the need for an allowance for uncollectible receivables. PROPERTY TAXES The Whitfield County Board of Commissioners fixed the property tax levy for the 2006 tax digest year (calendar year) on October 20, 2006 (levy date). Taxes were due on December 20, 2006 (lien date). Taxes collected within the current fiscal year or within 60 days after year-end on the 2006 tax digest are reported as revenue in the governmental funds for fiscal year 2007. 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, 2007, for maintenance and operations amounted to $26,534,159.94. The tax millage rate levied for the 2006 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 15.934 mills - 13 - WHITFIELD COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007 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 $13,237,194.21 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. During the fiscal year under review, no events or changes in circumstances affecting a capital asset that may indicate impairment were known to the School District. Capitalization thresholds and estimated useful lives of capital assets reported in the District-wide statements are as follows: - 14 - WHITFIELD COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007 EXHIBIT "H" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Capitalization Policy Estimated Useful Life Land Land Improvements Buildings and Improvements Equipment All $ 20,000.00 $ 100,000.00 $ 10,000.00 NIA 15 years 70 years 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. NET ASSETS The School District's net assets in the District-wide Statements are classified as follows: Invested in capital assets, net of related debt - This represents the School District's total investment in capital assets, net ofoutstanding debt obligations related to those capital assets. To the extent debt has been incurred but not yet expended for capital assets, such amounts are not included as a component of invested in capital assets, net of related debt. Restricted net assets - These represent resources for which the School District is legally or contractually obligated to spend resources for bus replacement, continuation of Federal programs, debt service and capital projects in accordance with restrictions imposed by external third parties. Unrestricted net assets - Unrestricted net assets represent resources derived from property taxes, sales taxes, grants and contributions not restricted to specific programs, charges for services, and miscellaneous revenues. These resources are used for transactions relating to the educational and general operations of the School District, and may be used at the discretion of the Board to meet current expenses for those purposes. 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 - 15 - WHITFIELD COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007 EXHIBIT "H" Note 3: DEPOSITS AND INVESTMENTS been secured by surety bond, by guarantee of insurance, orby 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 ofthe State of Georgia, (4) Bonds, bills, notes, certificates of indebtedness or other obligations of the counties or municipalities of the State of Georgia, (5) Bonds of any public authority created by the laws of the State of Georgia, providing that the statute that created the authority authorized the use of the bonds for this purpose, (6) Industrial revenue bonds and bonds of development authorities created by the laws of the State of Georgia, and (7) Bonds, bills, notes, certificates of indebtedness, or other obligations of a subsidiary corporation of the United States government, which are fully guaranteed by the United States government both as to principal and interest or debt obligations issued by 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, 2007, the bank balances were $8,246,884.97. The amounts of the total uninsured bank balances are classified into three categories of custodial credit risk: Category 1 - Uncollateralized, Category 2 - Cash collateralized with securities held by the pledging financial institution, or by its trust department or agent in the School District's name, Category 3 - Cash collateralized with securities held by the pledging financial institution's trust department or agent but not in the School District's name. - 16 - WHITFIELD COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007 EXHIBIT"H" Note 3: DEPOSITS AND INVESTMENTS The School District's uninsured deposits are classified by custodial credit risk category at June 30, 2007, as follows: Custodial Credit Risk Category Bank Balance 1 $ 0.00 2 620,137.76 3 7,112,571.93 Total $ 7,732,709.69 CATEGORIZATION OF INVESTMENTS The School District's investments as of June 30, 2007, are presented below. All investments are presented by investment type and debt securities are presented by maturity. Investment Type Fair Value Investment Maturity Less Than 1 Year Debt Securities Repurchase Agreements $22,557,987.63 $22,557,987.63 Investment Pools Office of Treasury and Fiscal Services Georgia Fund 1 38,635,522.36 Total Investments $61,193.509.99 The Local Government Investment Pool administered by the State of Georgia, Office of Treasury and Fiscal Services is not required to be categorized since the School District did not own any specific identifiable securities in the pool. The investment policy ofthe State ofGeorgia, Office of Treasury and Fiscal Services for the Local Government Investment Pool [(Primary Liquidity Portfolio and Extended Asset Portfolio)] does not provide for investment in derivatives or similar investments. Additional information on the Local Government Investment Pool is disclosed in the State of Georgia Comprehensive Annual Financial Report. This audit can be obtained from the Georgia Department of Audits and Accounts at http://www.audits.state.ga.us/internet/searchRpts. html. The Primary Liquidity Portfolio consists of Georgia Fund 1 which is not registered with the SEC as an investment company but does operate in a manner consistent with the SEC's Rule 2a-7 of the Investment Company Act of 1940. The investment is valued at the pool's share price, $1.00 per - 17 - WHITFIELD COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007 EXHIBIT "H" Note 3: DEPOSITS AND INVESTMENTS share. The pool is an AAAm rated investment pool by Standard and Poor's. The weighted average maturity of Georgia Fund 1 may not exceed 60 days. The weighted average maturity for Georgia Fund 1 on June 30, 2007, was 15 days. 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. Custodial Credit Risk Custodial credit risk for investments is the risk that, in the event ofthe failure ofthe counterparty to a transaction, the School District will not be able to recover the value ofthe 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. At June 30, $22,557,987.63 of the School District's applicable investments were uninsured or unregistered, with securities held by the counterparty's trust department or agent in the School District's name. 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 investments subject to credit quality risk are reflected below: Rated Debt Investments Fair Value Quality Ratings AAA Debt Securities Repurchase Agreements $22,557,987.63 $22,557,987.63 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, 2007 EXHIBIT "H" Note 5: CAPITAL ASSETS Governmental Activities Capital Assets, Not Being Depreciated: Land Construction in Progress Total Capital Assets Not Being Depreciated Capital Assets Being Depreciated Building and Building Improvements Equipment Land Improvements Less Accumulated Depreciation for: Building and Building Improvements Equipment Land Improvements Total Capital Assets, Being Depreciated, Net Governmental Activity Capital Assets - Net Balances Juix I, 2006 Increases Decreases Balances June 30, 2007 $ 4,275,610.39 $ 1,372,806.28 $ 5,648,416.67 21,482,515.09 1,723,986.75 $22,673,346.04 533,155.80 $ 25,758,125.48 $ 3,096,793.03 $22,673,346.04 $ 6,181,572.47 $103,472,233.57 $17,325,556.63 $120,797,790.20 9,863,223.34 2,238,375.92 $ 227,175.00 11,874,424.26 7,664,861.02 1,260,198.74 8,925,059.76 11,876,535.25 5,041,819.34 2,664,360.49 1,600,034.00 888,826.73 431,020.98 227,175.00 13,476,569.25 5,703,471.07 3,095,381.47 $101,417,602.85 $17,904,249.58 $ 0.00 $119,321,852.43 $121,115,728 33 $21 QOI 042 61 $22,613,346 Q4 $125 5Q3,424,2Q 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 $ 1,858,316.95 $ 69,279.41 5,130.00 57,162.31 29,003.04 700,322.30 860,897.06 200,667.70 $2,919,881.71 Note 6: RESTRICTED ASSETS Special Purpose Local Option Sales Tax (SPLOST) and general obligation bond proceeds are restricted assets in the Statement of Net Assets because their use is limited by applicable bond covenants or statutory provisions. Restricted assets at June 30, 2007, were as follows: - 19 - WHITFIELD COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007 EXHIBIT "H" Note 6: RESTRICTED ASSETS District-wide Capital Projects Bond SPLOST Proceeds Debt Service Funds Restricted Cash and Cash Equivalents: Capital Acquisitions Restricted Investments: Debt Services Capital Acquisitions $ 151,971.33 $ 300,478.45 $ 482,290.23 $ 4,897,068.88 $21,555,768.77 $23,947,085.66 Note 7: INTERFUND TRANSFERS Interfund transfers for the year ended June 30, 2007, consisted of the following: Transfer to Transfers From District-wide Capital Projects Debt Service Funds $ 4,858,043.50 Transfers are used to move SPLOST collections from the 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 of the system. The School District pays an annual premium to the system for its general insurance 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 - 20 - WHITFIELD COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007 EXHIBIT"H" Note 8: RISK MANAGEMENT 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 $250,000.00 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 of Year Liability 2006 2007 $ 0.00 $ 521,132.00 $ 521,132.00 $ 0.00 $ 0.00 $ 465,510.00 $ 272,610.00 $ 192,900.00 The School District is self-insured with regard to unemployment compensation claims. The School District accounts for claims within the General Fund with expenses/expenditures and liability being reported when it is probable that a loss has occurred, and the amount ofthat loss can be reasonably estimated. Changes in the unemployment compensation claims liability during the last two fiscal years are as follows: Beginning of Year Liability Claims and Changes in Estimates Claims Paid End ofYear Liability 2006 2007 $ 0.00 $ 10,034.00 $ 10,034.00 $ 0.00 $ 0.00 $ 19,685.00 $ 19,685.00 $ 0.00 The School District has purchased surety bonds to provide additional insurance coverage as follows: Position Covered Amount Superintendent All Other Employees $ 100,000.00 $ 100,000.00 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, 2007, for governmental funds amounted to $353,607.10. Future minimum lease payments for these leases are as follows: - 21 - WHITFIELD COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007 EXHIBIT "H" Note 9: OPERATING LEASES Year Ending Governmental Funds 2008 2009 2010 2011 2012 $ 340,429.20 340,429.20 340,429.20 340,429.20 168,519.62 Total $ 1,530,236.42 Note 10: LONG-TERM DEBT COMPENSATED ABSENCES Compensated absences represent obligations of the School District relating to employees' rights to receive compensation for future absences based upon service already rendered. This obligation relates only to vesting accumulating leave in which payment is probable and can be reasonably estimated. Typically, the General Fund is the fund used to liquidate this long-term debt. The School District uses the vesting method to compute compensated absences. GENERAL OBLIGATION DEBT OUTSTANDING General Obligation Bonds currently outstanding are as follows: Purpose Interest Rates Amount General Government - Series 2002 General Government - Series 2006 General Government - Series 2007 2.00% - 3.20% 3.610% 4.00%- 5.00% $ 4,660,000.00 9,910,000.00 14,000,000.00 $28,570,000.00 The changes in Long-Term Debt during the fiscal year ended June 30, 2007, were as follows: -22 - WHITFIELD COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007 EXHIBIT "H" Note 10: LONG-TERM DEBT Governmental Funds General Compensated Obligation Absences ( 1) Bonds Total Balance July 1, 2006 $ 237,176.00 $ 9,310,000.00 $ 9,547,176.00 Additions Annual Leave Earned G.O. Bonds 204,690.61 204,690.61 23,910,000.00 23,910,000.00 Deductions Annual Leave Utilized Debt Retired 185,421.04 185,421.04 4,650,000.00 4,650,000.00 Balance June 30, 2007 $ 256,445.57 $28,570,000.00 $28,826,445.57 Portion of Long-Term Debt Due within One Year $_ _ _o_.o_o $13,Ios,ooo.oo $13,Ios,ooo.oo (1) The portion of Compensated Absences due within one year has been determined to be immaterial to the basic financial statements. At June 30, 2007, 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 2008 2009 2010 2011 2012 2013 - 2017 2018 $13,105,000.00 5,555,000.00 9,910,000.00 $ 719,359.11 774,551.00 481,701.00 357,751.00 357,751.00 1,788,755.00 178,875.50 Total Principal and Interest $28,570,000.00 $4,658,743.61 - 23 - WHITFIELD COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007 EXHIBIT "H" Note 11: ON-BEHALF PAYMENTS The School District has recognized revenues and costs in the amount of $1,821,364.25 for health insurance and retirement contributions paid on the School District's behalf by the following State Agencies. Georgia Department of Education Paid to the Georgia Department of Community Health For Health Insurance of Non-Certified Personnel In the amount of $1,789,541.25 Paid to the Teachers Retirement System of Georgia For Teachers Retirement System (TRS) Employer's Cost In the amount of $17,402.00 Office of Treasury and Fiscal Services Paid to the Public School Employees Retirement System For Public School Employees Retirement (PSERS) Employer's Cost In the amount of $14,421.00 Note 12: SIGNIFICANT COMMITMENTS The following is an analysis ofsignificant outstanding construction or renovation contracts executed by the School District as of June 30, 2007: Project Unearned Executed Contracts Antioch Elementary School Career Academy Dug Gap Elementary School Eastbrook Middle School Eastside Elementary School New Elementary New High School Northwest High School Southeast High School Varnell Elementary School $ 205,355.00 425,935.00 169,645.00 267,855.00 77,725.00 852,500.00 2,414,285.00 210,000.00 175,000.00 218,750.00 $ 5.017,050.00 The amounts described in this note are not reflected in the basic financial statements. - 24 - WHITFIELD COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007 EXHIBIT "H" Note 13: 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 14: RETIREMENT PLANS TEACHERS RETIREMENT SYSTEM OF GEORGIA (TRS) TRS PLAN DESCRIPTION Substantially all teachers, administrative and clerical personnel employed by local school systems are covered by the Teachers Retirement System of Georgia (TRS), which is a cost-sharing multiple employer defined benefit pension plan. TRS provides service retirement, disability retirement and survivors benefits for its members in accordance with State statute. The Teachers Retirement System of Georgia issues a separate stand alone financial audit report and a copy can be obtained from the Georgia Department of Audits and Accounts. TRS CONTRIBUTIONS REQUIRED AND MADE Employees ofthe School District who are covered by TRS are required by State statute to contribute 5% of their gross earnings to TRS. The School District makes monthly employer contributions to TRS at rates adopted by the TRS Board of Trustees in accordance with State statute and as advised by their independent actuary. The required employer contribution rate is 9.28% and employer contributions for the current fiscal year and the preceding two fiscal years are as follows: Fiscal Year Percentage Contributed Required Contribution 2007 2006 2005 100% 100% 100% $ 5,868,585.66 $ 5,439,526.00 $ 5,111,840.00 - 25 - (This page left intentionally blank) WHITFIELD COUNTY BOARD OF EDUCATION GENERAL FUND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL YEAR ENDED JUNE 30, 2007 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 Inventory - Net Change in Period NONAPPROPRIATED BUDGETS ORIGINAL (1) FINAL (1) ACTUAL AMOUNTS $ 25,346,741.00 $ 25,346,741.00 $ 26,534,159.94 190,000.00 190,000.00 926,110.51 68,955,301.00 68,955,301.00 72,350,106.10 5,535,861.00 5,535,861.00 9,994,269.93 2,039,800.00 2,039,800.00 2,187,705.13 318,000.00 318,000.00 655,649.43 685,300.00 685,300.00 4,533,098.66 $ 103,071,003.00 $ 103,071,003.00 $ 117,181,099.70 $ 69,007,210.32 $ 69,007,210.32 $ 75,230,963.77 3,578,979.00 2,253,722.00 2,727,147.00 429,961.00 6,961,139.00 640,332.00 7,371,578.00 5,264,776.00 1,943,414.00 43,619.00 6,383,284.00 3,578,979.00 2,253,722.00 2,727,147.00 429,961.00 6,961,139.00 640,332.00 7,269,578.00 5,264,776.00 1,943,414.00 43,619.00 6,383,284.00 4,213,414.30 2,713,873.74 2,633,789.11 577,991.18 7,180,978.76 490,193.83 7,582,788.01 5,293,758.05 1,888,136.87 936,322.67 584,318.55 6,696,145.39 $ 106,605,161.32 $ 106,503,161.32 $ 116,022,674.23 $ -3,534, 158.32 $ -3,432, 158.32 $ 1,158,425.47 $ 110,323.00 $ 110,323.00 $ -510 323.00 -510,323.00 18,025.00 $ -400,000.00 $ -400,000.00 $ 18,025.00 $ -3,934, 158.32 $ -3,832, 158.32 $ 1,176,450.47 9,619,293.20 9,619,293.20 11,173,798.00 20,638.04 20,638.04 Fund Balances - Ending $ 5,705,772.92 $ 5,807,772.92 $ 12,350,248.47 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, 2007 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 Education for Homeless Children and Youth English Language Acquisition Grants Enhancing Education Through Technology Program Improving Teacher Quality State Grants Mathematics and Science Partnerships Migrant Education Safe and Drug-Free Schools and Communities - State Grants State Grants for Innovative Programs Title I Grants to Local Educational Agencies Vocational Education - Basic Grants to States Total U. S. Department of Education CFDA NUMBER PASSTHROUGH ENTITY ID NUMBER EXPENDITURES IN PERIOD 10.553 10.555 10.550 10.665 N/A (2) N/A $ 5,806,904.00 $ 5,806,904.00 N/A 440,653.19 NIA (3) $ 6,247,557.19 * 84.027 * 84.173 84.196 84.365 84.318 * 84.367 84.366 84.011 84.186 84.298 * 84.010 84.048 N/A $ 2,288,178.76 NIA 53,696.82 $ 2,341,875.58 N/A 69,992.90 NIA 263,758.43 N/A 17,380.25 NIA 357,094.73 NIA 72,803.26 N/A 67,312.14 NIA 18,453.78 N/A 17,077.00 N/A 1,990,771.16 N/A 133 531.87 $ 5,350,051.10 Total Federal Financial Assistance $ 11,597,608.29 NIA= Not Available 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 ($1,079,087.34) were not maintained separately and are included in the 2007 National School Lunch Program. (3) Funds earned on this program in the amount of $5,841.00 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. - 28 - WHITFIELD COUNTY BOARD OF EDUCATION SCHEDULE OF STATE REVENUE YEAR ENDED JUNE 30, 2007 SCHEDULE "3" AGENCY/FUNDING GRANTS Bright from the Start: Georgia Department of Early Care and Learning Pre-Kindergarten Program Education, Georgia Department of Quality Basic Education Direct Instructional Cost Kindergarten Program Kindergarten Program - Early Intervention Program Primary Grades (1-3) Program Primary Grades - Early Intervention (1-3) Program Upper Elementary Grades (4-5) Program Upper Elementary Grades - Early Intervention (4-5) Program Middle 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 Bus Replacement - State Bonds Nursing Services Principal Supplements Vocational Supervisors Education Equalization Funding Grant Food Services Vocational Education Amended Formula Adjustment Other State Programs Graduation Coaches Health Insurance K-8 Statewide Reading and Math Grants Middle School Remediation Grant National Teacher Certification Preschool Handicapped Program Teachers' Retirement Virtual Schools Georgia State Financing and Investment Commission Reimbursement on Construction Projects Office of Treasury and Fiscal Services Public School Employees Retirement GOVERNMENTAL FUND TYPES CAPITAL GENERAL PROJECTS FUND FUND TOTAL $ 250,730.97 $ 250,730.97 4,558,452.00 565,946.00 10,490,362.00 958,236.00 4,672,341.00 540,622.00 7,520,161.00 6,431,630.00 2,897,430.00 7,045,918.00 1,424,120.00 22,082.00 615,596.00 1,412,787.00 2,636,001.00 431,419.00 266,770.00 1,528,163.00 2,855,882.00 3,549,270.00 1,522,826.00 149,620.00 300,000.00 242,444.00 45,454.00 37,717.00 7,500,470.00 337,472.00 342,338.02 -1,279,183.00 160,300.00 1,789,541.25 184,163.98 3,239.98 193,455.00 114,305.90 17,402.00 200.00 4,558,452.00 565,946.00 10,490,362.00 958,236.00 4,672,341.00 540,622.00 7,520,161.00 6,431,630.00 2,897,430.00 7,045,918.00 1,424,120.00 22,082.00 615,596.00 1,412,787.00 2,636,001.00 431,419.00 266,770.00 1,528,163.00 2,855,882.00 3,549,270.00 1,522,826.00 149,620.00 300,000.00 242,444.00 45,454.00 37,717.00 7,500,470.00 337,472.00 342,338.02 -1,279,183.00 160,300.00 1,789,541.25 184,163.98 3,239.98 193,455.00 114,305.90 17,402.00 200.00 $ 107,992.50 14 421.00 107,992.50 14 421.00 $ 72,350,106.10 $ 107,992.50 $ 72,458,098.60 See notes to the basic financial statements. - 29 - WHITFIELD COUNTY BOARD OF EDUCATION SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS YEAR ENDED JUNE 30, 2007 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. 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; the addition, renovation, repair and improvement to existing school buildings and facilities; the acquisition and purchase of technology and safety equipment, including but not limited to, computer hardware and software and security and safety equipment; the acquisition and purchase of school buses and other transportation or maintenance vehicles; the acquisition of land; acquisition and purchase of any property necessary and desirable therefore, both real and personal. ORIGINAL ESTIMATED COST (1) CURRENT ESTIMATED COSTS (2) AMOUNT EXPENDED IN CURRENT YEAR (3) AMOUNT EXPENDED IN PRIOR YEAR (3) PROJECT STATUS $ 53,531,937.00 $ 53,531,937.00 $ 1,814,157.38 $ 50,784,552.00 Ongoing 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 projects. 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 projects and retire associated debt. Amounts expended for these projects may include sales tax proceeds, state, local property taxes and/or other funds over the life of the projects. See notes to the basic financial statements. - 30- WHITFIELD COUNTY BOARD OF EDUCATION GENERAL FUND QUALITY BASIC EDUCATION PROGRAM (QBE) ALLOTMENTS AND EXPENDITURES BY PROGRAM YEAR ENDED JUNE 30, 2007 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 Gifted Student Category VI Remedial Education Program Alternative Education Program English Speakers of Other Languages (ESOL) 5,139,888.00 $ 5,277,614.51 $ 626,998.00 446,968.46 11,758,621.00 12,086,959.65 1,073,987.00 1,205,556.01 5,291,626.00 5,782,663.24 600,326.00 8,480,651.00 7,258,010.00 3,237,500.00 6,706,352.00 2,763,502.00 28,764.00 694,106.00 2,886,751.00 711,933.82 10,234,080.10 9,907,510.18 2,422,877.52 119.86 917,900.42 4,127,564.38 380,976.03 2,763,964.82 90,591.93 1,032,778.89 2 976 153.64 171,772.51 $ 338.14 564,205.55 4,321.57 237,179.35 5,449,387.02 447,306.60 12,651,165.20 1,209,877.58 6,019,842.59 1,082.19 738,038.76 470,846.11 214,860.55 713,016.01 10,972,118.86 10,378,356.29 2,637,738.07 16,840.58 80.58 24,602.38 958.30 15,162.15 68,182.06 13 099.79 16,960.44 917,981.00 4,152,166.76 381,934.33 2,779,126.97 90,591.93 1,100,960.95 2,989,253.43 TOTAL DIRECT INSTRUCTIONAL PROGRAMS $ 56,547,082.00 $ 60,366,213.46 $ 2,541,570.57 $ 62,907,784.03 Media Center Program Staff and Professional Development 1,591,159.00 303 900.00 2,265,811.20 254,999.23 328,621.47 2,520,810.43 328 621.47 TOTAL QBE FORMULA FUNDS $ 58442141.00 $ 62,632,024.66 $ 3,125,191.27 $ 65,757,215.93 (1) Comprised of State Funds plus Local Five Mill Share. (2) Allotments do not include the impact of the State amended formula adjustment. See notes to the basic financial statements. 31 SECTION II COMPLIANCE AND INTERNAL CONTROL REPORTS Russell W. Hinton STATE AUDITOR (404) 656-2174 DEPARTMENT OF AUDITS AND ACCOUNTS 270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400 March 14, 2008 Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education and Superintendent and Members of the 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, 2007, which collectively comprise Whitfield County Board of Education's basic financial statements and have issued our report thereon dated March 14, 2008. 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 as a basis for designing our auditing procedures for the purpose of expressing our opinions on the financial statements, but not for the purpose ofexpressing an opinion on the effectiveness of the Whitfield County Board of Education's internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness ofthe Whitfield County Board of Education's internal control over financial reporting. Our consideration of internal control over financial reporting was for the limited purpose described in the preceding paragraph and would not necessarily identify all deficiencies in internal control over financial reporting that might be significant deficiencies or material weaknesses. However, as discussed below, we identified certain deficiencies in internal control over financial reporting that we consider to be significant deficiencies. 2007YB-30 A control deficiency exists when the design or operation ofa control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect misstatements on a timely basis. A significant deficiency is a control deficiency, or combination of control deficiencies, that adversely affect the Whitfield County Board of Education's ability to initiate, authorize, record, process, or report financial data reliably in accordance with generally accepted accounting principles such that there is more than a remote likelihood that a misstatement ofthe Whitfield County Board ofEducation's financial statements that is more than inconsequential will not be prevented or detected by the Whitfield County Board ofEducation's internal control. We consider item FS-7551-07-01 in the accompanying Schedule ofFindings and Questioned Costs to be a significant deficiency in internal control over financial reporting. A material weakness is a significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood that a material misstatement ofthe financial statements will not be prevented or detected by the Whitfield County Board of Education's internal control. Our consideration of the internal control over financial reporting was for the limited purpose described in the first paragraph ofthis section and would not necessarily disclose all deficiencies in internal control that might be significant deficiencies and, accordingly, would not necessarily disclose all significant deficiencies that are also considered to be material weaknesses. However, we believe that the significant deficiency described above is not a material weakness. Compliance and Other Matters As part of obtaining reasonable assurance about whether 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. We noted certain matters that we have reported to management of Whitfield County Board of Education in a separate letter dated March 14, 2008. Whitfield County Board ofEducation's response to the findings identified in our audit is described in the accompanying Schedule ofManagement's Responses. We did not audit Whitfield County Board of Education's response and, accordingly, we express no opinion on it. 2007YB-30 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..k Russell W. Hinton, CPA, CGFM State Auditor RWH:gp 2007YB-30 Russell W. Hinton STATE AUDITOR (404) 656-2174 DEPARTMENT OF AUDITS AND ACCOUNTS 270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400 March 14, 2008 Honorable Sonny Perdue, Governor Members ofthe General Assembly Members of the 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, 2007. 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 ofits major Federal programs is the responsibility of Whitfield 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 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. 2007SA-10 In our opinion, the Whitfield County Board ofEducation complied, in all material respects, with the requirements referred to above that are applicable to each of its major Federal programs for the year ended June 30, 2007. 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, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of the Whitfield County Board of Education's internal control over compliance. A control deficiency in an entity's internal control over compliance exists when the design or operation ofa control does not allow management or employees, in the normal course ofperforming their assigned functions, to prevent or detect noncompliance with a type ofcompliance requirement of a Federal program on a timely basis. A significant deficiency is a control deficiency, or combination ofcontrol deficiencies, that adversely affects the entity's ability to administer a Federal program such that there is more than a remote likelihood that noncompliance with a type of compliance requirement of a Federal program that is more than inconsequential will not be prevented or detected by the entity's internal control. A material weakness is a significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood that material noncompliance with a type of compliance requirement ofa Federal program will not be prevented or detected by the entity's internal control. Our consideration ofthe internal control over compliance was for the limited purpose described in the first paragraph of this section and would not necessarily identify all deficiencies in internal control that might be significant deficiencies or material weaknesses. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses, as defined above. 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, RWH:gp 2007SA-10 sell W. Hinton, CPA, CGFM State Auditor 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, 2007 PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS FINDING CONTROL NUMBER AND STATUS FS-7551-05-01 FS-7551-06-01 FS-75 51-06-02 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 over School Activity Accounts Finding Control Number: FS-7551-06-01 Round table meetings of school bookkeepers are held for the purpose of communicating improvements in procedures and internal control deficiencies associated with the prior year findings. Items discussed include 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 authorization for all purchases before purchase is actually procured. Invoices must be maintained to support all purchases. School purchase cards must have the following controls: o Vendor must require purchase order/requisition to use cards o No traditional credit cards allowed o Must maintain tight physical control over card If purchase order is not applicable, a check request authorization should accompany support documentation. In addition to the bookkeeper meetings, bookkeepers are required to reconcile bank statements by the 15th ofthe succeeding month. LSA financial records are integrated into the system's general ledger on a monthly basis. The School District has updated the procedural manual (Pupil Activity Manual) providing support for bookkeepers relative to - 1- WHITFIELD COUNTY BOARD OF EDUCATION AUDITEE'S RESPONSE SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2007 PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS CORRECTIVE ACTION/RESPONSES CASH AND CASH EQUIVALENTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Control Procedures over School Activity Accounts Finding Control Number: FS-75 51-06-0 I internal control issues. The Pupil Activity Manual can be accessed through the School District's web site and will be updated periodically. Beginning in fiscal year 2008, randomly selected schools will be subject to surprise internal audits. These internal audits will be performed to examine selected transactions to ensure that procedures are being implemented. We expect that the finding will be either partially or fully resolved for the fiscal year 2008 audit. PRIOR YEAR FEDERAL AWARD FINDINGS AND QUESTIONED COSTS No matters were reported. -2 - SECTION IV FINDINGS AND QUESTIONED COSTS WHITFIELD COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2007 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. Significant Deficiencies in Internal Control Disclosed by the Audit ofthe Financial Statements The audit report for the Whitfield County Board ofEducation disclosed a financial statement significant deficiency related to the following control categories. Cash and Cash Equivalents Revenues/Receivables/Receipts Expenditures/Liabilities/Disbursements The significant deficiency described above is not considered to be a material weakness. 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. Significant Deficiencies in Internal Control Over Major Programs The audit report for the Whitfield County Board of Education did not disclose any significant deficiencies in internal control over major programs. 5. Type of Report Issued on Compliance for Major Programs The auditor's opinion on the 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 .510(a) ofOMB 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: 84.010 Title I Grants to Local Educational Agencies 84.027 Special Education - Grants to States 84.173 Special Education - Preschool Grants 84.367 Improving Teacher Quality State Grants 8. Type "A" Program Dollar Threshold The dollar threshold for type "A" programs was $348,103.48. 9. Low Risk Auditee The Whitfield County Board of Education qualified as a low risk auditee as defined by Section .530 of 0MB Circular A-133. - 1- WHITFIELD COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2007 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 Significant Deficiency Finding Control Number: FS-7551-07-01 Condition: This is a repeat finding (FS-7551-06-01 and FS-7551-05-01) from the years ended June 30, 2006, and June 30, 2005, 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. Revenues/Receivables/Receipts Deposit preparation was not separated from the record keeping and cash custody functions. Seventy-five transactions were selected for testing and it was noted that six gate receipts did not have adequate supporting documentation and one receipt did not have a bank deposit ticket. Only five receipts were tested at one school because numerous errors were noted. The receipting process in place at that school was not effective to prevent or detect misstatements in a timely manner. Expenditures/Liabilities/Disbursements One hundred transactions were selected for testing and the following problems were noted: 1. Twenty-seven vouchers did not have a purchase order, 2. three vouchers did not include an invoice, 3. two invoices were dated prior to the purchase order date, and 4. twenty-three vouchers did not have proper approval. -2- WHITFIELD COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2007 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 Significant Deficiency Finding Control Number: FS-7551-07-01 Cause: These deficiencies were a result of management's failure to ensure that internal controls were established, implemented and functioning at the school level. Effect: Errors and/or irregularities may not be detected in a timely manner. Recommendation: Management should revise and monitor controls to provide reasonable assurance that transactions are processed according to established procedures. III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS No matters were reported. -3- SECTIONV MANAGEMENT'S RESPONSES WHITFIELD COUNTY BOARD OF EDUCATION SCHEDULE OF MANAGEMENT'S RESPONSES YEAR ENDED JUNE 30, 2007 Finding Control Number: FS-7551-07-01 We concur with this finding. Additional training will be scheduled for school bookkeepers for the purpose of communicating the internal control deficiencies and reviewing internal control procedures associated with the prior year findings. These meetings will begin in May 2008. Future training meetings will be scheduled as necessary. We will continue to monitor our progress regarding these deficiencies by periodically reviewing internal control compliance with our Accounting Procedures Manual. Reviews and updates of our Accounting Procedures Manual (http://www.whitfield.kl2.ga.us/finance/) will be performed periodically to ensure that accounting controls are properly documented. Contact Person: Kenny Sheppard, Chief Financial Officer Phone: (706) 217-6701 Fax: (706) 217-6703 E-mail Address: ksheppard@whitfield.k12.ga.us