Atkinson County Board of Education, Pearson, Georgia, annual financial report for the fiscal year ended 2011 (including independent auditor's reports)

ATKINSON COUNTY BOARD OF EDUCATION
PEARSON, GEORGIA
ANNUAL FINANCIAL REPORT FOR THE FISCAL YEAR ENDED JUNE 30, 2011
(Including Independent Auditor's Reports)

ATKINSON 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

EXHIBITS

BASIC FINANCIAL STATEMENTS

DISTRICT-WIDE FINANCIAL STATEMENTS

A

STATEMENT OF NET ASSETS

B

STATEMENT OF ACTIVITIES

FUND FINANCIAL STATEMENTS

C

BALANCE SHEET

GOVERNMENTAL FUNDS

D

RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET

TO THE STATEMENT OF NET ASSETS

E

STATEMENT OF REVENUES, EXPENDITURES AND CHANGES

IN FUND BALANCES

GOVERNMENTAL FUNDS

F

RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT

OF REVENUES, EXPENDITURES AND CHANGES IN FUND

BALANCES TO THE STATEMENT OF ACTIVITIES

G

STATEMENT OF FIDUCIARY NET ASSETS

FIDUCIARY FUNDS

H

NOTES TO THE BASIC FINANCIAL STATEMENTS

SCHEDULES

REQUIRED SUPPLEMENTARY INFORMATION

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

SUPPLEMENTARY INFORMATION

2 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS 3 SCHEDULE OF STATE REVENUE

Page
1 2 4 5 6 7 9 10
25 26 28

ATKINSON COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS -

SECTION I
FINANCIAL
SCHEDULES
SUPPLEMENTARY INFORMATION
4 SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS 5 ALLOTMENTS AND EXPENDITURES
GENERAL FUND - QUALITY BASIC EDUCATION PROGRAMS (QBE) BY PROGRAM

Page
29 31

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

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

ATKINSON COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS -
SECTION V 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
May 15, 2012

Honorable Nathan Deal, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the Atkinson 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 of the governmental activities, each major fund, and the aggregate remaining fund information (Exhibits A through H) of the Atkinson County Board of Education, as of and for the year ended June 30, 2011, which collectively comprise the Board's basic financial statements as listed in the table of contents. These financial statements are the responsibility of the Atkinson County Board of Education's management. Our responsibility is to express opinions on these financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes 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 Board'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.
In our opinion, the financial statements referred to previously 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 Atkinson County Board of Education, as of June 30, 2011, 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.

2011ARL-11

The Atkinson County Board of Education has not presented Management's Discussion and Analysis that accounting principles generally accepted in the United States of America has determined is necessary to supplement, although not to be part of, the basic financial statements.
In accordance with Government Auditing Standards, we have also issued our report dated May 15, 2012, on our consideration of the Atkinson County Board of Education's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit.
The Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual, as presented on page 25, are not a required part of the basic financial statements but are supplementary information required by accounting principles generally accepted in the United States of America. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods of measurement and presentation of the 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 Atkinson County Board of Education's financial statements as a whole. The accompanying supplementary information consists 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 of States, Local Governments, and Non-Profit Organizations, are presented for purposes of additional analysis and are not a required part of the financial statements. The information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, the information is fairly stated, in all material respects, in relation to the financial statements as a whole.
A copy of this report has been filed as a permanent record in the office of the State Auditor and made available to the press of the State, as provided for by Official Code of Georgia Annotated section 50-6-24.
Respectfully submitted,

RWH:as 2011ARL-11

Russell W. Hinton, CPA, CGFM State Auditor

ATKINSON COUNTY BOARD OF EDUCATION

ATKINSON COUNTY BOARD OF EDUCATION STATEMENT OF NET ASSETS JUNE 30, 2011
ASSETS
Cash and Cash Equivalents Investments Accounts Receivable, Net
Interest Taxes State Government Federal Government Other Inventories Capitalized Bond Issuance Costs Capital Assets, Non-Depreciable Capital Assets, Depreciable (Net of Accumulated Depreciation)
Total Assets
LIABILITIES
Accounts Payable Salaries and Benefits Payable Payroll Withholdings Payable Interest Payable Contracts Payable Retainages Payable Long-Term Liabilities
Due Within One Year Due in More than One Year
Total Liabilities
NET ASSETS
Invested in Capital Assets, Net of Related Debt Restricted for
Bus Replacement Continuation of Federal Programs Debt Service Capital Projects Unrestricted
Total Net Assets
Total Liabilities and Net Assets

EXHIBIT "A"

GOVERNMENTAL ACTIVITIES

$

4,048,320.42

3,146,199.63

64,632.37 169,375.84 1,152,081.00 484,497.75
81,649.02 13,291.78 34,017.00 911,824.00 15,699,025.00

$

25,804,913.81

$

227,951.41

1,673,594.30

107,038.27

9,929.17

119,124.10

27,307.00

610,974.22 1,271,948.42

$

4,047,866.89

$

16,243,272.69

91,801.00 428,410.37
19,858.33 619,103.29 4,354,601.24

$

21,757,046.92

$

25,804,913.81

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

ATKINSON COUNTY BOARD OF EDUCATION STATEMENT OF ACTIVITIES
FOR THE YEAR ENDED JUNE 30, 2011

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 Other Support Services Operations of Non-Instructional Services Food Services Interest on Short-Term and Long-Term Debt
Total Governmental Activities
General Revenues Taxes Property Taxes For Maintenance and Operations Other Taxes Sales Taxes Special Purpose Local Option Sales Tax For Capital Projects Other Sales Tax Grants and Contributions not Restricted to Specific Programs Investment Earnings Miscellaneous
Total General Revenues
Change in Net Assets
Net Assets - Beginning of Year
Net Assets - End of Year

EXPENSES

CHARGES FOR SERVICES

$ 10,413,509.54 $
344,599.62 460,131.23 301,524.65 516,427.28 991,040.06 269,661.85 1,154,038.45 767,071.88
90,058.22
1,166,208.28 73,350.78
$ 16,547,621.84 $

50,883.42
59,037.30 109,920.72

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

EXHIBIT "B"

PROGRAM REVENUES OPERATING GRANTS AND
CONTRIBUTIONS

CAPITAL GRANTS AND CONTRIBUTIONS

NET (EXPENSES) REVENUES
AND CHANGES IN NET ASSETS

$ 8,547,128.78
84,731.13 288,339.95 211,458.35 685,386.19 553,109.52
1,113.07 497,725.56 266,925.81 $
66,358.68
918,261.37
$ 12,120,538.41 $

$ 152,584.00 152,584.00 $

-1,815,497.34
-259,868.49 -171,791.28
-90,066.30 168,958.91 -437,930.54 -268,548.78 -656,312.89 -347,562.07 -23,699.54
-188,909.61 -73,350.78
-4,164,578.71

$

1,925,765.62

9,100.58

702,130.21 11,743.06
1,702,766.00 106,678.86 266,884.00

$

4,725,068.33

$

560,489.62

21,196,557.30

$ 21,757,046.92

- 3 -

ATKINSON COUNTY BOARD OF EDUCATION BALANCE SHEET
GOVERNMENTAL FUNDS JUNE 30, 2011

EXHIBIT "C"

ASSETS
Cash and Cash Equivalents Investments Accounts Receivable, Net
Interest Taxes State Government Federal Government Other Inventories
Total Assets

GENERAL FUND

DISTRICTWIDE
CAPITAL PROJECTS
FUND

DEBT SERVICE
FUND

TOTAL

$ 3,719,434.62 $ 328,838.69 $

1,508,516.99

1,637,682.64

11,273.71 105,585.07 1,152,081.00 484,497.75
81,649.02 13,291.78

53,358.66 63,790.77

47.11 $ 4,048,320.42 3,146,199.63
64,632.37 169,375.84 1,152,081.00 484,497.75
81,649.02 13,291.78

$ 7,076,329.94 $ 2,083,670.76 $

47.11 $ 9,160,047.81

LIABILITIES AND FUND BALANCES
LIABILITIES
Accounts Payable Salaries and Benefits Payable Payroll Withholdings Payable Contracts Payable Retainages Payable Deposits and Deferred Revenue
Total Liabilities
FUND BALANCES
Nonspendable Restricted Assigned Unassigned
Total Fund Balances
Total Liabilities and Fund Balances

$ 178,563.38 $ 1,673,594.30 107,038.27
50,365.38

49,388.03
119,124.10 27,307.00

$ 2,009,561.33 $ 195,819.13

$ 227,951.41 1,673,594.30 107,038.27 119,124.10 27,307.00 50,365.38
$ 2,205,380.46

$

13,291.78

506,919.59 $ 1,728,524.48 $

77,888.72

159,327.15

4,468,668.52

$ 5,066,768.61 $ 1,887,851.63 $

$ 47.11

13,291.78 2,235,491.18
237,215.87 4,468,668.52

47.11 $ 6,954,667.35

$ 7,076,329.94 $ 2,083,670.76 $

47.11 $ 9,160,047.81

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

ATKINSON COUNTY BOARD OF EDUCATION RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET
TO THE STATEMENT OF NET ASSETS JUNE 30, 2011

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
Taxes that are not available to pay for current period expenditures are deferred in the funds.
Other Long-Term Assets are not available to pay for current period expenditures and therefore, are deferred on the Statement of Net Assets
Deferred Charges - Capitalized Bond Issuance Costs
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 Accrued Interest Unamortized Bond Premiums
Total Long-Term Liabilities
Net Assets of Governmental Activities (Exhibit "A")

$ 6,954,667.35

$

611,420.00

300,404.00

1,030,494.00

16,922,179.00

2,491,456.00

-4,745,104.00

16,610,849.00

50,365.38

34,017.00

$ -1,880,000.00 -9,929.17 -2,922.64

-1,892,851.81

$ 21,757,046.92

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

ATKINSON COUNTY BOARD OF EDUCATION STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES
GOVERNMENTAL FUNDS YEAR ENDED JUNE 30, 2011

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 Other Support Services Food Services Operation
Capital Outlay Debt Services
Principal Interest
Total Expenditures
Excess of Revenues over (under) Expenditures
OTHER FINANCING SOURCES (USES)
Transfers In Transfers Out
Total Other Financing Sources (Uses)
Net Change in Fund Balances
Fund Balances - Beginning
Fund Balances - Ending

GENERAL FUND

DISTRICTWIDE
CAPITAL PROJECTS
FUND

DEBT SERVICE
FUND

TOTAL

$ 1,890,437.06 11,743.06 $
11,016,799.75 2,959,088.66 109,920.72 37,045.75 266,884.00

702,130.21 75,795.29 $

$ 16,291,919.00 $ 777,925.50 $

$ 7.13

1,890,437.06 713,873.27
11,016,799.75 2,959,088.66 109,920.72 112,848.17 266,884.00

7.13 $ 17,069,851.63

$ 9,709,022.33 $
337,698.74 460,131.23 301,524.65 513,637.61 991,040.06 257,767.85 1,124,446.18 814,978.56
90,058.22 1,106,763.80

$ 15,707,069.23 $

$

584,849.77 $

211,280.44
$ 7,776.47 488,285.92
707,342.83 $ 70,582.67 $

$ 9,920,302.77

555.00

337,698.74 460,131.23 301,524.65 513,637.61 991,040.06 258,322.85 1,132,222.65 814,978.56
90,058.22 1,106,763.80
488,285.92

590,000.00 77,275.00

590,000.00 77,275.00

667,830.00 $ 17,082,242.06

-667,822.87 $

-12,390.43

$

50,000.00 $

$

-50,000.00

-667,830.00

$

-50,000.00 $ -617,830.00 $

$

534,849.77 $ -547,247.33 $

4,531,918.84

2,435,098.96

667,830.00 $

717,830.00 -717,830.00

667,830.00 $

0.00

7.13 $

-12,390.43

39.98

6,967,057.78

$ 5,066,768.61 $ 1,887,851.63 $

47.11 $ 6,954,667.35

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

ATKINSON COUNTY BOARD OF EDUCATION RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT OF
REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES T0 THE STATEMENT OF ACTIVITIES JUNE 30, 2011

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
Taxes reported in the Statement of Activities that do not provide current financial resources are not reported as revenues in the funds.
Investment Earnings reported in the Statement of Activities that do not provide current financial resources are not reported as revenues in the funds.
The net effect of various miscellaneous transactions involving capital assets (i.e. sales, trade-ins, donations, and disposals) is to decrease net assets.
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 Amortization of Premium
Total Long-Term Debt Repayments
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:
Amortization of Bond Issuance Cost Net Decrease in Accrued Interest
Total Additional Expenditures
Change in Net Assets of Governmental Activities (Exhibit "B")

$ -12,390.43

$ 531,373.00 -445,670.00

85,703.00

44,429.14

-6,169.31

-133,668.00

$ 590,000.00 974.22

590,974.22

$ -11,339.00 2,950.00

-8,389.00

$ 560,489.62

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

(This page left intentionally blank)

ATKINSON COUNTY BOARD OF EDUCATION STATEMENT OF FIDUCIARY NET ASSETS FIDUCIARY FUNDS JUNE 30, 2011
ASSETS Cash and Cash Equivalents
LIABILITIES Funds Held for Others

EXHIBIT "G"

AGENCY FUNDS

$

54,875.19

$

54,875.19

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

ATKINSON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2011

EXHIBIT "H"

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

- 10 -

ATKINSON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2011

EXHIBIT "H"

Debt Service Fund accounts for and reports financial resources that are restricted, committed, or assigned including taxes (sales) legally restricted for the payment of general long-term principal, interest and paying agent's fees.
The School District reports the following fiduciary fund type:
Agency funds account for assets held by the School District as an agent for various funds, governments or individuals.
BASIS OF ACCOUNTING
The basis of accounting determines when transactions are reported on the financial statements. The District-wide governmental and fiduciary fund financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded at the time liabilities are incurred, regardless of when the related cash flows take place. Nonexchange transactions, in which the School District gives (or receives) value without directly receiving (or giving) equal value in exchange, include property taxes, sales taxes, and grants. 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 is recognized in the fiscal year in which all eligibility requirements have been satisfied.
The School District uses funds to report on its financial position and the results of its operations. Fund accounting is designed to demonstrate legal compliance and to aid financial management by segregating transactions related to certain governmental functions or activities. A fund is a separate accounting entity with a self-balancing set of accounts.
Governmental funds are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Under this method, revenues are recognized when measurable and available. The School District considers all revenues reported in the governmental funds to be available if they are collected within sixty days after year-end. Property taxes, sales taxes and interest are considered to be susceptible to accrual. Expenditures are recorded when the related fund liability is incurred, except for principal and interest on general long-term debt, 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 of specific cost-reimbursement grants, categorical grants, and general revenues. Thus, when program costs are incurred, there are both restricted and unrestricted net assets available to finance the program. It is the School District's policy to first apply grant resources to such programs, followed by cost-reimbursement grants, then general revenues.
The State of Georgia reimburses the School System for teachers' salaries and operating costs through the Quality Basic Education Formula Earnings program (QBE). Generally teachers are contracted for the school year (July 1 June 30) and paid over a twelve month contract period, generally September 1 through August 31. In accordance with the respective rules and regulations of the QBE program, the State of Georgia reimburses the School System over the same twelve month period in which teachers are paid. At June 30, the amount of teachers' salaries incurred but not paid until July and August of the subsequent year are accrued. Since the State of Georgia recognizes its QBE liability for the July and August salaries at June 30, the School System recognizes the same QBE as a receivable and revenue, consistent with symmetrical recognition.

- 11 -

ATKINSON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2011

EXHIBIT "H"

NEW ACCOUNTING PRONOUNCEMENTS
In fiscal year 2011, the School District adopted the Governmental Accounting Standards Board (GASB) Statement No. 54, Fund Balance Reporting and Governmental Fund Type Definitions. The provisions of this Statement establish accounting and financial reporting standards for all governments that report governmental funds. It establishes criteria for classifying fund balances into specifically defined classifications and clarifies definitions for governmental funds.
CASH AND CASH EQUIVALENTS Composition of Deposits
Cash and cash equivalents consist of cash on hand, demand deposits and short-term investments with original maturities of three months or less from the date of acquisition in authorized financial institutions. Official Code of Georgia Annotated Section 45-8-14 authorizes the School District to deposit its funds in one or more solvent banks, insured Federal savings and loan associations or insured chartered building and loan associations.
INVESTMENTS Composition of Investments
Investments made by the School District in nonparticipating interest-earning contracts (such as certificates of deposit) and repurchase agreements are reported at cost. Participating interestearning contracts and money market investments with a maturity at purchase of one year or less are reported at amortized cost. Both participating interest-earning contracts and money market investments with a maturity at purchase greater than one year are reported at fair value. The Official Code of Georgia Annotated Section 36-83-4 authorizes the School District to invest its funds. In selecting among options for investment or among institutional bids for deposits, the highest rate of return shall be the objective, given equivalent conditions of safety and liquidity. Funds may be invested in the following:
1. Obligations issued by the State of Georgia or by other states,
2. Obligations issued by the United States government,
3. Obligations fully insured or guaranteed by the United States government or a United States government agency,
4. Obligations of any corporation of the United States government,
5. Prime banker's acceptances,
6. The Georgia Fund 1 administered by the State of Georgia, Office of the State Treasurer,
7. Repurchase agreements, and
8. Obligations of other political subdivisions of the State of Georgia.
The School District does not have a formal policy regarding investment policies that address credit risks, custodial credit risks, concentration of credit risks, interest rate risks or foreign currency risks.
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.

- 12 -

ATKINSON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2011

EXHIBIT "H"

PROPERTY TAXES

The Atkinson County Board of Commissioners fixed the property tax levy for the 2010 tax digest year (calendar year) on July 22, 2010 (levy date). Taxes were due on December 20, 2010 (lien date). Taxes collected within the current fiscal year or within 60 days after year-end on the 2010 tax digest are reported as revenue in the governmental funds for fiscal year 2011. The Atkinson 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, 2011, for maintenance and operations amounted to $1,881,336.48.

The tax millage rate levied for the 2010 tax year (calendar year) for the Atkinson County Board of Education was as follows (a mill equals $1 per thousand dollars of assessed value):

School Operations

14.811 m ills

SALES TAXES
Special Purpose Local Option Sales Tax, at the fund reporting level, during the year amounted to $702,130.21 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
Food Inventories
On the basic financial statements, inventories of donated food commodities used in the preparation of meals are reported at their Federally assigned value and purchased foods inventories are reported at cost (first-in, first-out). The School District uses the consumption method to account for inventories whereby donated food commodities are recorded as an asset and as revenue when received, and expenses/expenditures are recorded as the inventory items are used. Purchased foods are recorded as an asset when purchased and expenses/expenditures are recorded as the inventory items are used.
CAPITAL ASSETS
Capital assets purchased, including capital outlay costs, are recorded as expenditures in the fund financial statements at the time of purchase (including ancillary charges). On the District-wide financial statements, all purchased capital assets are valued at cost where historical records are available and at estimated historical cost based on appraisals or deflated current replacement cost where no historical records exist. Donated capital assets are recorded at estimated fair market value on the date donated. Disposals are deleted at depreciated recorded cost. The cost of normal maintenance and repairs that do not add to the value of assets or materially extend the useful lives of the assets is not capitalized. Depreciation is computed using the straight-line method. The School District does not capitalize book collections or works of art. During the fiscal year under review, no events or changes in circumstances affecting a capital asset that may indicate impairment were known to the School District.

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ATKINSON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2011

EXHIBIT "H"

Capitalization thresholds and estimated useful lives of capital assets reported in the District-wide

statements are as follows:

C a pitaliz a tio n

Estim ate d

Policy

Useful Life

Land Land Im provem ents Buildings and Im provem ents Equipm e nt Intangible Assets

Any Amount $ 25,000.00 $ 25,000.00 $ 5,000.00 $ 100,000.00

N/A 20 to 80 years up to 80 years
5 to 50 years 10 to 20 years

Depreciation is used to allocate the actual or estimated historical cost of all capital assets over estimated useful lives, with the exception of intangible assets which are amortized.
Amortization of intangible assets such as water, timber, and mineral rights, easements, patents, trademarks, copyrights and software is computed using the straight-line method over the estimated useful lives of the assets, generally 10 to 20 years.
GENERAL OBLIGATION BONDS
The School District issues general obligation bonds to provide funds for the acquisition and construction of major capital facilities. In the District-wide financial statements, bond premiums and discounts, as well as issuance costs, are deferred and amortized over the life of the bonds using the straight-line method. Bond issuance costs are reported as deferred charges and amortized over the term of the debt.
In the fund financial statements, the School District recognizes bond premiums and discounts, as well as bond issuance costs during the fiscal year bonds are issued. Premiums received on debt issuances are reported as other financing sources while discounts on debt issuances are reported as other financing uses. Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as debt service expenditures. General obligation bonds are direct obligations and pledge the full faith and credit of the government. The outstanding amount of these bonds is recorded in the Statement of Net Assets.
NET ASSETS
The School District's net assets in the District-wide Statements are classified as follows:
Invested in capital assets, net of related debt - This represents the School District's total investment in capital assets, net of outstanding debt obligations related to those capital assets. To the extent debt has been incurred but not yet expended for capital assets, such amounts are not included as a component of invested in capital assets, net of related debt.
Restricted net assets - These represent resources for which the School District is legally or contractually obligated to spend resources for 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.

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ATKINSON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2011

EXHIBIT "H"

FUND BALANCES

The School District's fund balances are classified as follows:
Nonspendable Amounts that cannot be spent either because they are in a nonspendable form or because they are legally or contractually required to be maintained intact.

Restricted Constraints are placed on the use of resources are either (1) externally imposed conditions by creditors, grantors, contributors, or laws and regulations of other governments or (2) imposed by law through constitutional provisions or enabling legislation.

Committed Amounts that can be used only for specific purposes pursuant to constraints imposed by formal action of the Board of Education. The Board of Education is the School District's highest level of decision-making authority, and the formal action that is required to be taken to establish, modify, or rescind a fund balance commitment is a resolution approved by the Board. Committed fund balance also should incorporate contractual obligations to the extent that existing resources in the fund have been specifically committed for use in satisfying those contractual requirements.
Assigned Amounts that are constrained by the School District's intent to be used for specific purposes, but are neither restricted nor committed. The intent should be expressed by (1) the Board of Education or (2) the budget or finance committee, or the Superintendent, or designee, to assign amounts to be used for specific purposes.

Unassigned The residual classification for the General Fund. This classification represents fund balances that has not been assigned to other funds and that has not been restricted, committed, or assigned to specific purposes within the General Fund.

Fund Balances of the Governmental Funds at June 30, 2011, are as follows:

N o nspe nda ble In v e n to rie s
Restricted Bus Replacement Continuation of Federal Program s Capital Projects Debt Service
Assigned Local Capital Outlay Projects School Activity Accounts
Unassigned

$

$

9 1 ,8 0 1 .0 0

4 1 5 ,1 1 8 .5 9

1 ,6 9 8 ,7 8 4 .0 9

2 9 ,7 8 7 .5 0

$

1 5 9 ,3 2 7 .1 5

7 7 ,8 8 8 .7 2

1 3 ,2 9 1 .7 8
2 ,2 3 5 ,4 9 1 .1 8 2 3 7 ,2 1 5 .8 7
4 ,4 6 8 ,6 6 8 .5 2

Fund Balance, June 30, 2011

$

6 ,9 5 4 ,6 6 7 .3 5

When multiple categories of fund balance are available for expenditure, the School District will start with the most restricted category and spend those funds first before moving down to the next category with available funds.
USE OF ESTIMATES
The preparation of the financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results may differ from those estimates.

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ATKINSON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2011

EXHIBIT "H"

NOTE 3: DEPOSITS AND INVESTMENTS
COLLATERALIZATION OF DEPOSITS
Official Code of Georgia Annotated (O.C.G.A.) Section 45-8-12 provides that there shall not be on deposit at any time in any depository for a time longer than ten days a sum of money which has not been secured by surety bond, by guarantee of insurance, or by collateral. The aggregate of the face value of such surety bond and the market value of securities pledged shall be equal to not less than 110 percent of the public funds being secured after the deduction of the amount of deposit insurance. If a depository elects the pooled method (O.C.G.A. Section 45-8-13.1) the aggregate of the market value of the securities pledged to secure a pool of public funds shall be not less than 110 percent of the daily pool balance.
At June 30, 2011, $1,752,011.31 of deposits were not secured by surety bond, insurance or collateral as specified above. The School District is working with the affected financial institutions to ensure appropriate levels of collateral are maintained for all of the School District's deposits.
Acceptable security for deposits consists of any one of or any combination of the following:
1. Surety bond signed by a surety company duly qualified and authorized to transact business within the State of Georgia,
2. Insurance on accounts provided by the Federal Deposit Insurance Corporation,
3. Bonds, bills, notes, certificates of indebtedness or other direct obligations of the United States or of the State of Georgia,
4. Bonds, bills, notes, certificates of indebtedness or other obligations of the counties or municipalities of the State of Georgia,
5. Bonds of any public authority created by the laws of the State of Georgia, providing that the statute that created the authority authorized the use of the bonds for this purpose,
6. Industrial revenue bonds and bonds of development authorities created by the laws of the State of Georgia, and
7. Bonds, bills, notes, certificates of indebtedness, or other obligations of a subsidiary corporation of the United States government, which are fully guaranteed by the United States government both as to principal and interest or debt obligations issued by or securities guaranteed by the Federal Land Bank, the Federal Home Loan Bank, the Federal Intermediate Credit Bank, the Central Bank for Cooperatives, the Farm Credit Banks, the Federal Home Loan Mortgage Association, and the Federal National Mortgage Association.
CATEGORIZATION OF DEPOSITS
Custodial credit risk is the risk that in the event of a bank failure, the School District's deposits may not be returned to it. The School District does not have a deposit policy for custodial credit risk. At June 30, 2011, the bank balances were $7,405,547.19. The amounts exposed to custodial credit risk are classified into three categories as follows:

Category 1 Category 2 -
Category 3 -

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

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ATKINSON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2011

EXHIBIT "H"

The School District's deposits by custodial risk category at June 30, 2011, are as follows:

Custodial Credit Risk Category

Bank Balance

1 2 3
Total

$ 1,752,011.31 5 ,1 1 0 ,2 5 9 .1 0 0 .0 0
$ 6,862,270.41

CATEGORIZATION OF INVESTMENTS
At June 30, 2011, the carrying value of the School District's total investments was $467,724.71, which is materially the same as fair value. This investment consisted entirely of funds invested in the Georgia Fund 1, formerly referred to as LGIP, administered by the State of Georgia, Office of the State Treasurer which are not required to be categorized since the School District did not own any specific identifiable securities in the pool. The investment policy of the State of Georgia, Office of the State Treasurer for the Georgia Fund 1 (Primary Liquidity Portfolio) does not provide for investment in derivatives or similar investments. Additional information on the Georgia Fund 1 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 Audits and Accounts at www.audits.ga.gov/SGD/CAFR.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 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, 2011, was 59 days.
NOTE 4: NON-MONETARY TRANSACTIONS
The School District receives food commodities from the United States Department of Agriculture (USDA) for school breakfast and lunch programs. These commodities are recorded at their Federally assigned value. See Note 2 - Inventories

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ATKINSON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2011

EXHIBIT "H"

NOTE 5: CAPITAL ASSETS

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

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

Balances July 1, 2010

Increases

Decreases

Balances June 30, 2011

$ 611,420.00

$

2,059,578.00 $ 300,404.00 $ 2,059,578.00

611,420.00 300,404.00

Total Capital Assets, Not Being Depreciated $ 2,670,998.00 $ 300,404.00 $ 2,059,578.00 $

911,824.00

Capital Assets, Being Depreciated: Buildings and Improvements Equipment Land Improvements
Less: Accumulated Depreciation: Buildings and Improvements Equipment Land Improvements

$ 15,343,845.00 $ 2,054,273.00 $

2,521,471.00

236,274.00

1,030,494.00

475,939.00 $ 266,289.00

16,922,179.00 2,491,456.00 1,030,494.00

3,106,871.00 1,476,402.00
324,721.00

270,709.00 129,895.00
45,066.00

403,846.00 204,714.00

2,973,734.00 1,401,583.00
369,787.00

Total Capital Assets, Being Depreciated, Net $ 13,987,816.00 $ 1,844,877.00 $ 133,668.00 $ 15,699,025.00

Governmental Activity Capital Assets - Net $ 16,658,814.00 $ 2,145,281.00 $ 2,193,246.00 $ 16,610,849.00

Current year depreciation expense by function is as follows:

Instruction

Support Services

Pupil Services

$

General Adm inistration

M aintenance and Operation of Plant

Student Transportation Services

Food Services

$
4 ,0 4 0 .0 0 1 ,6 3 1 .0 0 1 7 ,9 0 5 .0 0 7 3 ,9 6 1 .0 0
$

2 9 5 ,1 7 5 .0 0
9 7 ,5 3 7 .0 0 5 2 ,9 5 8 .0 0 4 4 5 ,6 7 0 .0 0

NOTE 6: INTERFUND TRANSFERS

Interfund transfers for the year ended June 30, 2011, consisted of the following:

Transfer to

Transfers From

District-w ide

General

C apital

Fund

Projects

District-wide Capital Projects Debt Service Fund
Total

$

5 0 ,0 0 0 .0 0

6 6 7 ,8 3 0 .0 0

$

50,000.00 $

6 6 7 ,8 3 0 .0 0

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ATKINSON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2011

EXHIBIT "H"

Transfers are used (1) to move property tax revenues collected by the General Fund to the Districtwide Capital Projects Fund as supplemental funding for capital construction projects, and (2) to move sales tax revenues collected by the District-wide Capital Projects Fund to the Debt Service Fund for debt repayments.
NOTE 7: RISK MANAGEMENT

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

The School District participates in the Georgia School Boards Association Risk and Insurance Management System, a public entity risk pool organized on July 1, 1994, to develop and administer a plan to reduce risk of loss on account of general liability, motor vehicle liability, or property damage, including safety engineering and other loss prevention and control techniques, and to administer one or more groups of self-insurance funds, including the processing and defense of claims brought against members of the system. The School District pays an annual premium to the system for its general insurance coverage. Additional coverage is provided through agreements by the system with other companies according to their specialty for property, boiler and machinery (including coverage for flood and earthquake), general liability (including coverage for sexual harassment, molestation and abuse), errors and omissions, crime and automobile risks. Payment of excess insurance for the system varies by line of coverage.

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

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

Beginning of Year Liability

Claims and Changes in Estim ate s

C laim s Paid

End of Year Liability

2010

$

2011

$

3,200.00 $ 3,541.00 $

9,473.83 $ 843.98 $

9,132.83 $ 4,384.98 $

3 ,5 4 1 .0 0 0 .0 0

The School District participates in the Georgia Education Workers' Compensation Trust, a public entity risk pool organized on December 1, 1991, to develop, implement and administer a program of workers' compensation self-insurance for its member organizations. The School District pays an annual premium to the Trust for its general insurance coverage. Additional insurance coverage is provided through an agreement by the Trust with the Safety National Casualty Company to provide coverage for potential losses sustained by the Trust in excess of $1,000,000.00 loss per occurrence, up to the statutory limit. Employers' Liability insurance coverage is also provided by Safety National Casualty Company with a loss fund percentage of 100%, based on the Fund's annual normal premium, up to a maximum limit of indemnity of aggregate limit of $2,000,000.00.

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

Position Covered

Amount

Superintendent

$

5 0 ,0 0 0 .0 0

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ATKINSON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2011

EXHIBIT "H"

NOTE 8: LONG-TERM DEBT GENERAL OBLIGATION DEBT OUTSTANDING

General Obligation Bonds currently outstanding are as follows:

Purpose

Interest Rates

General Governm ent - Series 2008

3.00% - 3.25%

Am ount $ 1,880,000.00

The changes in Long-Term Debt during the fiscal year ended June 30, 2011, were as follows:

Balance July 1, 2010

Governmental Funds Balance
Additions Deductions June 30, 2011

Due Within One Year

G. O. Bonds Bond Premiums Amortized

$ 2,470,000.00 $ 3,896.86

0.00 $ 590,000.00 $ 1,880,000.00 $ 610,000.00

974.22

2,922.64

974.22

$ 2,473,896.86 $

0.00 $ 590,974.22 $ 1,882,922.64 $ 610,974.22

At June 30, 2011, 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

I n te r e st

U n a m o r ti z e d Bond Premium

2012 2013 2014

$

610,000.00 $

625,000.00

645,000.00

59,575.00 $ 41,275.00 20,962.50

974.22 974.22 974.22

Total Principal and Interest

$

1,880,000.00 $

121,812.50 $

2,922.66

NOTE 9: ON-BEHALF PAYMENTS
The School District has recognized revenues and costs in the amount of $37,814.29 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-Certificated Personnel In the amount of $25,560.99
Paid to the Teachers' Retirement System of Georgia For Teachers' Retirement System (TRS) Employer's Cost In the amount of $4,205.30
Office of the State Treasurer Paid to the Public School Employees' Retirement System For Public School Employees' Retirement (PSERS) Employer's Cost In the amount of $8,048.00

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ATKINSON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2011

EXHIBIT "H"

NOTE 10: SIGNIFICANT COMMITMENTS

The following is an analysis of significant outstanding construction or renovation contracts executed by the School District as of June 30, 2011, together with funding available:

Project

Unearned Executed Contracts

Funding Available From State

11LW-602-001

$ 169,443.12 $ 503,412.00

The amounts described in this note are not reflected in the basic financial statements.
NOTE 11: SIGNIFICANT CONTINGENT LIABILITIES
Amounts received or receivable principally from the Federal government are subject to audit and review by grantor agencies. This could result in requests for reimbursement to the grantor agency for any costs which are disallowed under grant terms. The School District believes that such disallowances, if any, will be immaterial to its overall financial position.
The School District is a defendant in various legal proceedings pertaining to matters incidental to the performance of routine School District operations. The ultimate disposition of these proceedings is not presently determinable, but is not believed to be material to the basic financial statements.
NOTE 12: POST-EMPLOYMENT BENEFITS
GEORGIA SCHOOL PERSONNEL POST-EMPLOYMENT HEALTH BENEFIT FUND
Plan Description. The Georgia School Personnel Post-employment Health Benefit Fund (School OPEB Fund) is a cost-sharing multiple-employer defined benefit post-employment healthcare plan that covers eligible former employees of public school systems, libraries and regional educational service agencies. The School OPEB Fund provides health insurance benefits to eligible former employees and their qualified beneficiaries through the State Employees Health Benefit Plan administered by the Department of Community Health. The Official Code of Georgia Annotated (O.C.G.A.) assigns the authority to establish and amend the benefit provisions of the group health plans, including benefits for retirees, to the Board of Community Health (Board). The Department of Community Health, which includes the School OPEB Fund, issues a separate stand alone financial audit report and a copy can be obtained from the Georgia Department of Audits and Accounts.
Funding Policy. The contribution requirements of plan members and participating employers are established by the Board in accordance with the current Appropriations Act and may be amended by the Board. Contributions of plan members or beneficiaries receiving benefits vary based on plan election, dependent coverage, and Medicare eligibility and election. On average, plan members pay approximately 25 percent of the cost of the health insurance coverage.
Participating employers are statutorily required to contribute in accordance with the employer contribution rates established by the Board. The contribution rates are established to fund all benefits due under the health insurance plans for both active and retired employees based on projected "pay-as-you-go" financing requirements. Contributions are not based on the actuarially calculated annual required contribution (ARC) which represents a level of funding that, if paid on an ongoing basis, is projected to cover normal cost each year and amortize any unfunded actuarial liabilities (or funding excess) over a period not to exceed thirty years.
The combined active and retiree contribution rates established by the Board for employers participating in the School OPEB Fund were as follows for the fiscal year ended June 30, 2011:

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ATKINSON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2011

EXHIBIT "H"

For certificated teachers, librarians and regional educational service agencies:

July 2010 - April 2011 May 2011 - June 2011

21.955% of covered payroll for August - May Coverage 1.429% of covered payroll for June - July Coverage

For non-certificated school personnel:

July 2010 - December 2010 January 2011 - May 2011 June 2011

$162.72 per member per month $218.20 per member per month $246.20 per member per month

The Department of Education was appropriated an additional $25,081,633 for non-certificated personnel health insurance payments. The amount attributable to the School District is reflected in the On-behalf note disclosure.

No additional contribution was required by the Board for fiscal year 2011 nor contributed to the School OPEB Fund to prefund retiree benefits. Such additional contribution amounts are determined annually by the Board in accordance with the School plan for other post-employment benefits and are subject to appropriation.

The School District's combined active and retiree contributions to the health insurance plans, which equaled the required contribution, for the current fiscal year and the preceding two fiscal years were as follows:

Fiscal Year

Percentage C o ntrib ute d

Required C o ntrib utio n

2011 2010 2009

100% 100% 100%

$

1 ,4 1 7 ,2 3 2 .3 5

$

1 ,4 1 0 ,4 8 9 .6 6

$

1 ,0 4 3 ,2 5 3 .8 9

NOTE 13: RETIREMENT PLANS
TEACHERS' RETIREMENT SYSTEM OF GEORGIA (TRS)
Plan Description. The TRS is a cost-sharing multiple-employer defined benefit plan created in 1943 by an act of the Georgia General Assembly to provide retirement benefits for qualifying employees in educational service. A Board of Trustees comprised of active and retired members and ex-officio State employees is ultimately responsible for the administration of TRS. The Teachers' Retirement System of Georgia issues a separate stand alone financial audit report and a copy can be obtained from the Georgia Department of Audits and Accounts.
On October 25, 1996, the Board created the Supplemental Retirement Benefits Plan of the Georgia Teachers' Retirement System (SRBP-TRS). SRBP-TRS was established as a qualified excess benefit plan in accordance with Section 415 of the Internal Revenue Code (IRC) as a portion of TRS. The purpose of SRBP-TRS is to provide retirement benefits to employees covered by TRS whose benefits are otherwise limited by IRC Section 415. Beginning July 1, 1997, all members and retired former members in TRS are eligible to participate in the SRBP-TRS whenever their benefits under TRS exceed the IRC Section 415 imposed limitation on benefits.
TRS provides service retirement, disability retirement, and survivor's benefits. The benefit structure of TRS is defined and may be amended by State statute. A member is eligible for normal service retirement after 30 years of creditable service, regardless of age, or after 10 years of service and attainment of age 60. A member is eligible for early retirement after 25 years of creditable service.

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ATKINSON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2011

EXHIBIT "H"

Normal retirement (pension) benefits paid to members are equal to 2% of the average of the member's two highest paid consecutive years of service, multiplied by the number of years of creditable service up to 40 years. Early retirement benefits are reduced by the lesser of one-twelfth of 7% for each month the member is below age 60 or by 7% for each year or fraction thereof by which the member has less than 30 years of service. It is also assumed that certain cost-of-living adjustments, based on the Consumer Price Index, will be made in future years. Retirement benefits are payable monthly for life. A member may elect to receive a partial lump-sum distribution in addition to a reduced monthly retirement benefit. Death, disability and spousal benefits are also available.

Funding Policy. TRS is funded by member and employer contributions as adopted and amended by the Board of Trustees. Members become fully vested after 10 years of service. If a member terminates with less than 10 years of service, no vesting of employer contributions occurs, but the member's contributions may be refunded with interest. Member contributions are limited by State law to not less than 5% or more than 6% of a member's earnable compensation. Member contributions as adopted by the Board of Trustees for the fiscal year ended June 30, 2011, were 5.53% of annual salary. The member contribution rate will increase to 6.00% effective July 1, 2012. Employer contributions required for fiscal year 2011 were 10.28% of annual salary as required by the June 30, 2008, actuarial valuation. The employer contribution rate will increase to 11.41% effective July 1, 2012.

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

Fiscal Year

Percentage C o ntrib ute d

Required C o ntrib utio n

2011 2010 2009

100% 100% 100%

$

8 5 8 ,3 6 0 .8 2

$

8 3 0 ,7 8 0 .5 1

$

7 9 8 ,0 8 6 .8 3

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ATKINSON COUNTY BOARD OF EDUCATION GENERAL FUND
SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL
YEAR ENDED JUNE 30, 2011

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 Other Support Services Food Services Operations
Total Expenditures
Excess of Revenues over (under) Expenditures
OTHER FINANCING USES
Other Uses
Net Change in Fund Balances
Fund Balances - Beginning
Adjustments

NONAPPROPRIATED BUDGETS

ORIGINAL (1)

FINAL (1)

ACTUAL AMOUNTS

$

1,866,617.00 $

1,866,617.00 $

1,890,437.06

11,743.06

10,352,996.00

10,607,612.00

11,016,799.75

2,452,808.90

2,611,493.90

2,959,088.66

51,600.00

51,600.00

109,920.72

1,500.00

1,500.00

37,045.75

61,700.00

61,700.00

266,884.00

$

14,787,221.90 $

15,200,522.90 $

16,291,919.00

$

10,340,033.90 $

10,601,794.00 $

9,709,022.33

370,376.00 413,927.00 337,021.00 516,247.00 950,044.00 231,710.00 1,172,205.00 804,040.00
46,039.00 1,162,392.00

294,851.00 639,131.00 337,011.00 575,782.00 950,414.00 231,531.00 1,170,705.00 767,311.00 110,418.40 1,162,392.00

337,698.74 460,131.23 301,524.65 513,637.61 991,040.06 257,767.85 1,124,446.18 814,978.56
90,058.22 1,106,763.80

$

16,344,034.90 $

16,841,340.40 $

15,707,069.23

$

-1,556,813.00 $

-1,640,817.50 $

584,849.77

-50,000.00

-50,000.00

$

-1,606,813.00 $

-1,690,817.50 $

4,607,177.54

4,607,177.54

-34,991.80

-50,000.00 534,849.77 4,531,918.84

Fund Balances - Ending

$

3,000,364.54 $

2,881,368.24 $

5,066,768.61

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

See notes to the basic financial statements.

- 25 -

ATKINSON COUNTY BOARD OF EDUCATION SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
YEAR ENDED JUNE 30, 2011

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 U. S. Department of Agriculture
Education, U. S. Department of Educational Technology State Grants Cluster Pass-Through From Georgia Department of Education Education Technology State Grants
Special Education Cluster Pass-Through From Georgia Department of Education Special Education ARRA - Grants to States ARRA - Preschool Grants Grants to States Preschool Grants
Total Special Education Cluster
Title I, Part A Cluster Pass-Through From Georgia Department of Education ARRA - Title I Grants to Local Educational Agencies Title I Grants to Local Educational Agencies
Total Title I, Part A Cluster
Other Programs Pass-Through From Georgia Department of Education Career and Technical Education - Basic Grants to States Education Jobs Fund English Language Acquisition Grants Improving Teacher Quality State Grants Migrant Education - State Grant Program Rural Education Pass-Through From Okefenokee Regional Educational Service Agency Safe and Drug-Free Schools and Communities - State Grants
Total Other Programs
Total U. S. Department of Education
Health and Human Services, U. S. Department of Child Care and Development Fund Cluster Pass-Through From Bright From the Start Georgia Department of Early Care and Learning ARRA - Child Care and Development Block Grant

CFDA NUMBER

PASSTHROUGH
ENTITY ID
NUMBER

EXPENDITURES IN PERIOD

* 10.553 * 10.555

N/A

(2)

N/A $ 1,049,484.01 (1)

$ 1,049,484.01

84.318

N/A $

4,141.16

* 84.391 * 84.392 * 84.027 * 84.173

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

117,714.12 8,299.44
326,859.17 15,657.62
468,530.35

* 84.389 * 84.010

N/A $ N/A

279,442.97 724,372.83

$ 1,003,815.80

84.048 * 84.410
84.365 84.367 84.011 84.358
84.186

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

23,116.00 347,647.00
24,576.46 85,140.26 80,997.59 39,028.89

N/A

4,494.86

$ 605,001.06

$ 2,081,488.37

93.713

N/A $

10,045.68

Total Expenditures of Federal Awards N/A = Not Available

$ 3,141,018.06

- 26 -

ATKINSON COUNTY BOARD OF EDUCATION SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
YEAR ENDED JUNE 30, 2011

SCHEDULE "2"

Notes to the Schedule of Expenditures of Federal Awards
(1) Includes the Federally assigned value of donated commodities for the Food Donation Program in the amount of $28,642.85.
(2) Expenditures for the funds earned on the School Breakfast Program ($281,741.54) were not maintained separately and are included in the 2011 National School Lunch Program.
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 Atkinson County Board of Education and is presented on the modified accrual basis of accounting which is the basis of accounting used in the presentation of the fund financial statements.

See notes to the basic financial statements.

- 27 -

ATKINSON COUNTY BOARD OF EDUCATION SCHEDULE OF STATE REVENUE YEAR ENDED JUNE 30, 2011
AGENCY/FUNDING
GRANTS Bright From the Start: Georgia Department of Early Care and Learning Pre-Kindergarten Program
Education, Georgia Department of Quality Basic Education Direct Instructional Cost Kindergarten Program Kindergarten Program - Early Intervention Program Primary Grades (1-3) Program Primary Grades - Early Intervention (1-3) Program Upper Elementary Grades (4-5) Program Upper Elementary Grades - Early Intervention (4-5) Program Middle Grades (6-8) Program 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 Sparsity Nursing Services Education Equalization Funding Grant Food Services Vocational Education Vocational Supervisors Amended Formula Adjustment Other State Programs Dual Enrollment Health Insurance Math and Science Supplements Preschool Handicapped Program Pupil Transportation - State Bonds Teachers' Retirement
Office of State Treasurer Public School Employees Retirement

See notes to the basic financial statements.

- 28 -

SCHEDULE "3"

GOVERNMENTAL FUND TYPE GENERAL FUND

$

468,561.50

566,896.00 175,016.00 1,258,417.00 394,885.00 604,022.00 238,612.00
52,808.00 1,047,849.00
740,673.00 499,723.00 1,695,544.00 121,995.00 158,994.00
87,726.00 201,312.00 198,260.00
59,796.00 40,323.00
409,813.00 510,024.00 464,133.00
242,043.00 90,436.00 42,720.00
1,702,766.00 31,348.00 6,175.00 7,318.00
-1,330,706.00
2,448.00 25,560.99
7,923.96 28,547.00 152,584.00
4,205.30
8,048.00
$ 11,016,799.75

ATKINSON COUNTY BOARD OF EDUCATION SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS
YEAR ENDED JUNE 30, 2011

SCHEDULE "4"

PROJECT
(i) Improvements at Atkinson County High School, including completion of additional wing and construction of a physical education activity classroom, (ii) renovations and improvements to the dining areas and media center at Willacoochee Elementary School, (iii) technology upgrades, (iv) adding to, remodeling, renovating, improving, and equipping existing educational buildings, properties, and facilities of the Atkinson County School District, and acquiring any necessary real or personal property therefor, to include safety and security equipment, school furnishings, various equipment including vocational, fine arts, physical education, and athletic equipment, school buses and maintenance vehicles, instructional and administrative technology, and the purchasing of textbooks, library books, and other instructional materials.

ORIGINAL ESTIMATED
COST (1)

CURRENT ESTIMATED COSTS (2)

AMOUNT EXPENDED IN CURRENT YEAR (3)

AMOUNT EXPENDED IN PRIOR YEARS (3)

PROJECT STATUS

$ 4,800,000.00 $ 4,800,000.00 $ 335,813.83 $ 2,011,962.21 Ongoing

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

See notes to the basic financial statements.

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ATKINSON COUNTY BOARD OF EDUCATION GENERAL FUND - QUALITY BASIC EDUCATION PROGRAM (QBE)
ALLOTMENTS AND EXPENDITURES - BY PROGRAM YEAR ENDED JUNE 30, 2011

SCHEDULE "5"

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

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

ELIGIBLE QBE PROGRAM COSTS

SALARIES

OPERATIONS

TOTAL

$

571,218.00 $ 441,931.97 $

194,859.00

92,308.19

1,271,639.00

1,467,176.00

437,854.00

302,513.47

618,964.00

932,240.85

5,656.75 $ 39,345.65
9,180.69

447,588.72 92,308.19
1,506,521.65 302,513.47 941,421.54

246,879.00 170,736.00 954,700.00 742,941.00 505,428.00 1,772,351.00
138,562.00 172,355.00
91,402.00 205,808.00

88,411.94 0.11
1,019,284.99 1,204,238.57
353,167.14
169,436.77 629,529.66
56,802.76 85,975.26
178,463.52 96,631.02
115,705.19

26,562.27 37,979.15 10,709.68
224.94 210.23

88,411.94 0.11
1,045,847.26 1,242,217.72
363,876.82
169,436.77 629,529.66
56,802.76 85,975.26
178,688.46 96,841.25
115,705.19

$

8,095,696.00 $ 7,233,817.41 $

129,869.36 $

7,363,686.77

209,954.00 42,847.00

270,747.45

17,935.54

288,682.99 40,803.35

$

8,348,497.00 $ 7,504,564.86 $

147,804.90 $

7,693,173.11

(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
May 15, 2012

Honorable Nathan Deal, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the Atkinson County Board of Education
INDEPENDENT AUDITOR'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS
Ladies and Gentlemen:
We have audited the financial statements of the governmental activities, each major fund, and the aggregate remaining fund information of Atkinson County Board of Education as of and for the year ended June 30, 2011, which collectively comprise Atkinson County Board of Education's basic financial statements and have issued our report thereon dated May 15, 2012. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States.
Internal Control Over Financial Reporting
Management of Atkinson County Board of Education is responsible for establishing and maintaining effective internal control over financial reporting. In planning and performing our audit, we considered Atkinson County Board of Education's internal control over financial reporting as a basis for designing our auditing procedures for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the Atkinson County Board of Education's internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness of the Atkinson 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 was not designed to identify all deficiencies in internal control over financial reporting that might be deficiencies, significant deficiencies, or material weaknesses and therefore, there can be no assurances that all deficiencies, significant deficiencies or material weaknesses have been identified. However, as described in the accompanying Schedule of Findings and Questioned Costs, we identified certain deficiencies in internal control over financial reporting that we consider to be material weaknesses and other deficiencies that we consider to be significant deficiencies.

2011YB-60

A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect and correct misstatements on a timely basis. A material weakness is a deficiency, or combination of deficiencies, in internal control such that there is a reasonable possibility that a material misstatement of the entity's financial statements will not be prevented, or detected and corrected on a timely basis. We consider items FS-6021-11-01 and FS-6021-11-03 in the accompanying Schedule of Findings and Questioned Costs to be material weaknesses.
A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. We consider item FS-6021-11-02 in the accompanying Schedule of Findings and Questioned Costs to be a significant deficiency in internal control over financial reporting.
Compliance and Other Matters
As part of obtaining reasonable assurance about whether Atkinson County Board of Education's financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed an instance of noncompliance or other matter that is required to be reported under Government Auditing Standards and which is described in the accompanying Schedule of Findings and Questioned Costs as item FS-6021-11-01.
We also noted certain matters that we have reported to management of Atkinson County Board of Education in a separate letter dated May 15, 2012.
Atkinson County Board of Education's response to the findings identified in our audit is described in the accompanying Schedule of Management's Responses. We did not audit Atkinson County Board of Education's response and, accordingly, we express no opinion on it.
This report is intended solely for the information and use of management, members of the Atkinson County Board of Education, others within the entity, Federal awarding agencies and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties.
Respectfully submitted,

RWH:as 2011YB-60

Russell W. Hinton, CPA, CGFM State Auditor

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

DEPARTMENT OF AUDITS AND ACCOUNTS
270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400
May 15, 2012

Honorable Nathan Deal, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the Atkinson County Board of Education
INDEPENDENT AUDITOR'S REPORT ON COMPLIANCE WITH REQUIREMENTS THAT COULD HAVE A DIRECT AND MATERIAL EFFECT ON EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH OMB CIRCULAR A-133
Ladies and Gentlemen:
Compliance
We have audited Atkinson County Board of Education's compliance with the types of compliance requirements described in the OMB Circular A-133 Compliance Supplement that could have a direct and material effect on each of its major Federal programs for the year ended June 30, 2011. Atkinson County Board of Education's major Federal programs are identified in the Summary of Auditor's Results section of the accompanying Schedule of Findings and Questioned Costs. Compliance with the requirements of laws, regulations, contracts, and grants applicable to each of its major Federal programs is the responsibility of Atkinson County Board of Education's management. Our responsibility is to express an opinion on Atkinson County Board of Education's compliance based on our audit.
We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and OMB Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations. Those standards and OMB Circular A-133 require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major Federal program occurred. An audit includes examining, on a test basis, evidence about the Atkinson 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 Atkinson County Board of Education's compliance with those requirements.

2011SA-55

As described in item FA-6021-11-01 in the accompanying Schedule of Findings and Questioned Costs, Atkinson County Board of Education did not comply with requirements regarding Allowable Cost/Cost Principles that are applicable to its Child Nutrition Cluster program. Compliance with such requirements is necessary, in our opinion, for Atkinson County Board of Education to comply with requirements applicable to that program.
In our opinion, except for the noncompliance described in the preceding paragraph, the Atkinson County Board of Education complied, in all material respects, with the compliance requirements referred to above that could have a direct and material effect on each of its major Federal programs for the year ended June 30, 2011. The results of our auditing procedures also disclosed other instances of noncompliance with the requirements regarding Allowable Cost/Cost Principles that are applicable to its Title 1, Part A Cluster program, which is required to be reported in accordance with OMB Circular A-133 and which is described in the accompanying Schedule of Findings and Questioned Costs as item FA-6021-11-01.
Internal Control Over Compliance
Management of Atkinson County Board of Education is responsible for establishing and maintaining effective internal control over compliance with the requirements of laws, regulations, contracts, and grants applicable to Federal programs. In planning and performing our audit, we considered Atkinson County Board of Education's internal control over compliance with the requirements that could have a direct and material effect on a major Federal program to determine the auditing procedures for the purpose of expressing our opinion on compliance and to test and report on internal control over compliance in accordance with OMB Circular A-133, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of the Atkinson County Board of Education's internal control over compliance.
Our consideration of internal control over compliance was for the limited purpose described in the preceding paragraph and was not designed to identify all deficiencies in internal control over compliance that might be significant deficiencies or material weaknesses and therefore, there can be no assurance that all deficiencies, significant deficiencies, or material weaknesses have been identified. However, as discussed below, we identified certain deficiencies in internal control over compliance that we consider to be material weaknesses and other deficiencies that we consider to be significant deficiencies.
A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a Federal program on a timely basis. A material weakness in internal control over compliance is a deficiency, or combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a Federal program will not be prevented, or detected and corrected, on a timely basis. We consider the deficiency in internal control over compliance described in the accompanying Schedule of Findings and Questioned Costs as item FA-6021-11-01 to be a material weakness.
2011SA-55

Atkinson County Board of Education's responses to the findings identified in our audit are described in the accompanying Schedule of Management's Responses. We did not audit Atkinson County Board of Education's responses and, accordingly, we express no opinion on the responses.
This report is intended solely for the information and use of management, members of the Atkinson County Board of Education, others within the entity, Federal awarding agencies and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties.
Respectfully submitted,

RWH:as 2011SA-55

Russell W. Hinton, CPA, CGFM State Auditor

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

ATKINSON COUNTY BOARD OF EDUCATION AUDITEE'S RESPONSE
SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2011

PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

FINDING CONTROL NUMBER AND STATUS

FS-6021-10-01

Partially Resolved - See Corrective Action/Responses

CORRECTIVE ACTION/RESPONSES

EMPLOYEE COMPENSATION Inadequate Controls over Employee Compensation Finding Control Number: FS-6021-10-01

Controls have been implemented. But, due to the timing of the fiscal year 2010 audit, controls were not implemented until fiscal year 2012.

PRIOR YEAR FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

No matters were reported.

SECTION IV FINDINGS AND QUESTIONED COSTS

ATKINSON COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2011

I SUMMARY OF AUDITOR'S RESULTS

Financial Statements

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

Unqualified

Internal control over financial reporting:

Material weaknesses identified?

Yes

Significant deficiency identified?

Yes

Noncompliance material to financial statements noted:

Yes

Federal Awards

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

Yes None Reported

Type of auditor's report issued on compliance for major programs: Unqualified for all major programs except for Child Nutrition Cluster Program, which was qualified

Any audit findings disclosed that are required to be reported in

accordance with OMB Circular A-133, Section 510(a)?

Yes

Identification of major programs:

CFDA Numbers

Name of Federal Program or Cluster

10.553, 10.555 84.010, 84.389 84.027, 84.173, 84.391, 84.392 84.410

Child Nutrition Cluster Title I, Part A Cluster Special Education Cluster Education Jobs Fund

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

$300,000.00

Auditee qualified as low-risk auditee?

No

II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

CASH AND CASH EQUIVALENTS Uncollateralized Deposits Material Weakness Material Noncompliance Finding Control Number: FS-6021-11-01

Condition: The School District failed to have its bank balances fully collateralized.

- 1 -

ATKINSON COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2011
II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS
Criteria: The Official Code of Georgia Annotated (O.C.G.A.) 45-8-12 states in part: "The collecting officer or officers holding public funds may not have on deposit at any one time in any depository for a time longer than ten days a sum of money belonging to the public body when such depository has not given bond to the public body as set forth in this code section. The aggregate of the face value of such surety bond and the market value of securities pledged shall be equal to not less than 110 percent of the public funds being secured after the deduction of the amount of deposit insurance."
Questioned Cost: N/A
Information: As of June 30, 2011, the School District has $748,754.88 of bank balances that were not properly collateralized as required by O.C.G.A. 45-8-12.
Cause: The School District failed to adequately monitor the collateralization of it bank balances.
Effect: A financial loss could be incurred by the School District for the uncollateralized bank balances.
Recommendation: The School District should implement procedures to monitor the collateralization of bank balances to ensure compliance with State laws governing deposits.
EMPLOYEE COMPENSATION Inadequate Controls over Employee Compensation Significant Deficiency Finding Control Number: FS-6021-11-02
Condition: This is a repeat finding (FS-6021-10-01) from the year ended June 30, 2010. The School District did not have adequate controls in place to verify the accuracy of salary and benefits payments.
Criteria: The School District's management is responsible for designing and maintaining internal controls that ensure employee compensation payments are properly calculated and disbursed.
Questioned Cost: N/A
Information: Based on a review of employees' payroll records the following deficiencies were noted:
Some employees were not paid according to the local Board salary schedule. Errors were made in pay deductions for unpaid sick/personal leave. Errors were made in the calculation of benefits.
- 2 -

ATKINSON COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2011
II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS
Cause: These deficiencies were the result of management's failure to ensure that internal controls over the employee compensation process were established, implemented and functioning.
Effect: This could result in errors in financial reporting and increases the risk of material misstatement in the financial statements, including misstatements due to fraud.
Recommendation: The School District should implement appropriate procedures to strengthen internal controls over processing of employee compensation. Additionally, the School District should ensure that all payroll disbursements are based on approved salary schedules and all benefits are properly calculated. The School District should review this matter to determine if recovery or payment of funds is needed.
FINANCIAL REPORTING Inadequate Controls over Financial Reporting Material Weakness Finding Control Number: FS-6021-11-03
Condition: The School District did not have adequate controls in place over the financial statement preparation process.
Criteria: Chapter 22A Annual Financial Reporting of the Financial Management for Georgia Local Units of Administration indicates that School Districts must prepare their financial statements in accordance with generally accepted accounting principles.
Questioned Cost: N/A
Information: The Governmental Accounting Standards Board (GASB) Statement 34 reporting model requires the presentation of both fund level and entity-wide level statements in the School District's financial statements. During the audit, numerous correcting entries were proposed by the auditor and accepted by the client to properly present the entity's fund level and entity-wide level financial statements, including note disclosures
Cause: The School District did not implement an adequate system of internal control over the financial reporting process.
Effect: The School District did not comply with the requirements of the Georgia Department of Education regarding financial reporting. Adjustments were necessary in order for the School District's financial statements to be in conformity with generally accepted accounting principles.
- 3 -

ATKINSON COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2011
II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS
Recommendation: The School District should implement controls over the financial statement reporting process to ensure that all required activity is properly reflected in the financial statement information presented for audit, including note disclosures.
III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS
ALLOWABLE COST/COST PRINCIPLES Improper Time and Attendance Records Material Weakness Material Noncompliance U. S. Department of Education Through Georgia Department of Education Child Nutrition Cluster (CDFA 10.553 and 10.555) Title 1, Part A Cluster (CDFA 84.010 and 84.389) Finding Control Number: FA-6021-11-01
Condition: We identified deficiencies in internal controls related to employee compensation expenses paid from the Child Nutrition Cluster and the Title 1, Part A Cluster programs.
Criteria: Provisions of the OMB Circular A-87, Cost Principles for State, Local and Indian Tribal Governments, require that "Where employees work on multiple activities or cost objectives, a distribution of their salaries or wages will be supported by personnel activity reports or equivalent documentation that meets the following standards:
a) They must reflect an after-the-fact distribution of the actual activity of each employee. b) They must account for the total activity for which the employee is compensated. c) They must be prepared at least monthly and coincide with one or more pay periods, and d) They must be signed by the employee.
Such documentation support will be required where employees work on:
a) More than one Federal award, or b) A Federal award and a non-Federal award."
OMB Circular A-87 also states that "Budget estimates or other distribution percentages determined before the services are performed do not qualify as support for charges to Federal awards but may be used for interim accounting purposes, provided that:
a) The governmental unit's system for establishing the estimates produce reasonable approximations of the activity actually performed;
b) At least quarterly, comparisons of actual costs to budgeted distributions based on the monthly activity reports are made. Costs charged to Federal awards to reflect adjustments made as a result of the activity actually performed may be recorded annually if the quarterly comparisons show the difference between budgeted and actual costs are less than ten percent;
- 4 -

ATKINSON COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2011
III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS
c) And the budget estimates or other distribution percentages are revised at least quarterly, if necessary, to reflect changed circumstances.
Questioned Cost: $33,466.20 Child Nutrition Cluster (CFDA 10.553 and 10.555) $13,675.80 Title 1, Part A Cluster (CFDA 84.010 and 84.389)
Information: Testing of employee compensation payments charged to the Child Nutrition and Title 1, Part A programs revealed:
Two sets of timesheets were completed by split funded employees. One timesheet, which did not show a distribution of time charged to the Federal and non-Federal programs, was sent to the payroll department. The second timesheet, which did show a distribution of time charged to the Federal and non-Federal programs, was submitted to the Federal program Director but not to the payroll department. In addition, the two timesheets did not always agree in the number of hours worked during the day.
While interviewing three split funded Child Nutrition Cluster employees, it was revealed that the timesheets submitted to the Program Director were completed reflecting budget estimates instead of the actual time spent on the Federal program. It was also determined that the reason two of these employees were partially paid with Child Nutrition Cluster funds was due to budget cuts. These budget cuts resulted in insufficient funds to pay these employees a full time salary from a non-federal source.
While interviewing the Title 1, Part A Program Director, it was determined that an employee's timesheet was completed reflecting the budget estimate and not the actual time spent on the Federal program. It was also revealed that the Program Director was instructed by the Georgia Department of Education's Program Consultant to ensure that the split funded employee's timesheets submitted to the Program Director were based on budget estimates and not the actual time spent on the Federal program.
The School District Bookkeeper, nor either Federal Program Director, performed a quarterly comparison of the budget estimates to the actual time spent on the programs to ensure that any differences were less than ten percent. Also, there were no adjustments to the cost charged to the Child Nutrition Cluster and Title 1, Part A Cluster programs to reflect the actual cost to the federal programs.
Cause: Management failed to implement controls for monitoring compliance with Federal guidelines to ensure that proper documentation was maintained related to employee compensation expenses paid from Federal award programs.
Effect: Failure to adequately monitor compliance related to employee compensation expenses paid from Federal award programs could result in material noncompliance with the requirements of the Federal grants.
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ATKINSON COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2011 III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS Recommendation: The School District should establish procedures to ensure that adequate time records that support that support the actual time spent on the Federal award program are maintained for all split-funded Child Nutrition Cluster and Title 1, Part A Cluster employees. The time records should be used to accurately distribute the employee's salary between the Federal and non-Federal programs. The Georgia Department of Education should review this matter to determine if a reclaim of funds is appropriate.
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SECTION V MANAGEMENT'S RESPONSES

ATKINSON COUNTY BOARD OF EDUCATION SCHEDULE OF MANAGEMENT'S RESPONSES
YEAR ENDED JUNE 30, 2011

Finding Control Number: FS-6021-11-01

We concur with this finding. The superintendent spoke with Bank Personnel and this finding was corrected while audit was being conducted and funds were collateralized. Monthly reports are now being sent to Superintendent verifying funds are now properly collateralized.

Finding Control Number: FS-6021-11-02

We concur with this finding. A review process of payroll records will be implemented to ensure that the necessary controls are in place so that employee compensation will be correct.

Finding Control Number: FS-6021-11-03

We concur with this finding. The schedules and templates provided by Financial Review and the Georgia Department of Audits and Accounts will be used to prepare financials. The Bookkeeper will also attend training to learn how to prepare statements.

Finding Control Number: FA-6021-11-01

We concur with this finding. Personnel who performed duties for Title I and Child Nutrition Cluster did in fact maintain two documents, a time log and a time sheet. The time logs were logged by calendar month and required for program directors and time sheets were maintained by payroll months and required for the payroll office. There were clerical errors found in some of those time sheets and logs, and in order to prevent these errors in the future we will maintain one time log for all split funded personnel based on payroll month instead of calendar month, pending federal program consultant approval, so that the one document will meet the needs of both departments.

Staff did in fact adjust their times due to spending more time working in a federal program than was budgeted and approved. They were unaware of being able to reflect more time in a program than had been budgeted but this misinformation has been addressed. The School District Bookkeeper, nor either Federal Program Director, was aware that a quarterly comparison should be performed. This will be done in the future to make our program as strong and accurate as possible.

Contact Person: Telephone: Fax: Email:

Lessie Youngblood, Bookkeeper (912) 422-7373 (912) 422-7369 lyoungblood@atkinson.k12.ga.us