Catoosa County Board of Education, Ringgold, Georgia, annual financial report for the fiscal year ended June 30, 2010 (including independent auditor's reports)

CATOOSA COUNTY BOARD OF EDUCATION
RINGGOLD, GEORGIA
ANNUAL FINANCIAL REPORT FOR THE FISCAL YEAR ENDED JUNE 30,2010
(Including Independent Auditor's Reports)

CATOOSA COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS -

SECTION I

FINANCIAL

INDEPENDENT AUDITOR'S COMBINED REPORT ON BASIC FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION - SCHEDULE OF EXPENDITURESOF FEDERALAWARDS

REQUIRED SUPPLEMENTARY INFORMATION

MANAGEMENT'S DISCUSSION AND ANALYSIS

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

Page

CATOOSA COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS -

SECTION I
FINANCIAL
SCHEDULES
SUPPLEMENTARY INFORMATION
2 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS 3 SCHEDULE OF STATE REVENUE
4 SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS 5 ALLOTMENTS AND EXPENDITURES
GENERAL FUND - QUALITY BASIC EDUCATION PROGRAMS (QBE) BY PROGRAM

Page

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

SECTION Ill 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

CATOOSA 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

DEPARTMENOTF AUDITSAND ACCOUNTS
270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400
June 23,2011

Honorable Nathan Deal, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the Catoosa 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 Catoosa County Board of Education, as of and for the year ended June 30, 2010, which collectively comprise the Board's basic financial statements as listed in the table of contents. These financial statements are the responsibility of the Catoosa 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 GovernmentAuditing 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 examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and the 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 remainingfund information of the Catoosa County Board of Education, as of June 30, 2010, and the respective changes in financial position thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America.
In accordance with GovernmentAuditing Standards, we have also issued our report dated June 23, 2011, on our consideration of the Catoosa 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 Standardsand should be considered in assessing the results of our audit.

Accounting principles generally accepted in the United States of America require that the Management's Discussion and Analysis and the Schedule of Revenues, Expendituresand Changes in Fund Balances - Budget and Actual, as presented on pages i through ix and page 25 respectively, be presented to supplement the basic financial statements. 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, to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during the audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance.

Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Catoosa 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. Such information is the responsibility of management and was derived from and relate directly to the underlying accounting and other records used to prepare the financial statements. The information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. 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,

I

~ u d e lWl . Hinton, CPA, CGFM State Auditor

CATOOSA COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCALYEAR ENDEDJUNE 30,2010
INTRODUCTION
Our discussion and analysis of the Catoosa County School District's financial performance provides an overview of the School District's financial activities for the fiscal year ended June 30, 2010. The intent of this discussion and analysis is to look at the School District's financial performance as a whole; readers should also review the basic financial statements and the notes to the financial statements to enhance their understandingof the School District's financial performance.
The basic financial statements contain three components:
1) District-wide financial statements, including the Statement of Net Assets and the Statement of Activities, which provide a broad, long-term overview of the School District's overall financial status,
2) Fund financial statements, including the Balance Sheet and the Statement of Revenues, Expenditures and Changes in Fund Balance, which provide a greater level of detail of the School District's operations. Fund financial statements reflect the School District's significant funds: General Fund (which includes the general operating fund, special revenue funds and school activity accounts); Capital Projects Funds and Debt Service Funds. The Governmental Funds statements disclose how basic services are financed in the short-term and what remains for future spending. The Fiduciary Funds statements provide information about the financial relationships in which the School District acts solely as a trustee or agent for the benefit of others, and
3) Notesto the financial statements.
This report presents the financial highlights for the last year and contains other supplementary information.
OVERALL ANALYSIS
The School District currently serves approximately 10,400 students with a general fund budget of approximately $103.0 million. In general, the financial operations of the School District have remained strong in spite of experiencing continuing state revenue reductions.
Financial Highlights
Key financial highlights for 2010 are as follows: On the District-widefinancial statements:
> Total net assets of the School District increased from $141,224,785 at June 30, 2009,
to $147,468,681 a t June 30,2010, an increase of $6,243,896 or 4.42%.
> Total revenues decreased from $110,329,130 in fiscal year 2009 to $106,413,475 in
fiscal year 2010, a decrease of $3,915,655 or 3.55%.
> Total expenses decreased from $102,447,190 in fiscal year 2009 to $101,947,039 in
fiscal year 2010, a decrease of $500,151 or 0.49%.
On the fund financial statements: Ending fund balances of the School District decreased from $29,038,210 at June 30, 2009 to $28,166,566 at June 30,2010, a decrease of $871,644, or 3.01 %.

CATOOSA COUNTY BOARD OF EDUCATION MANAGEMENTS DISCUSSION AND ANALYSIS FOR THE FISCALYEAR ENDEDJUNE 30,2010
k In the General Fund, unreservedfund balance decreased from $13,110,740 at June 30,
2009 to $12,527,198 at June 30,2010, a decrease of $583,542 or 4.45%.
P Total General Fund actual revenues were $1,658,420, or 1.70%, less than original
budgeted revenues.
k Total General Fund actual expenditures were $4,859,938, or 4.73%, less than original
budgeted expenditures.
OVERVIEW OF DISTRICT-WIDE FINANCIAL STATEMENTS
The District-wide financial statements are designed to provide readers with a broad overview of the School District's finances in a manner similar to a private sector business. The Statement of Net Assets and the Statement of Activities provide information about the School District as a whole, presenting both an aggregate and long-term view of the finances. These statements include all assets and liabilities using the actual basis of accounting. This basis of accounting includes all of the current year's revenues and expenses regardless when the cash is received or paid.
The Statement of Net Assets presents information on all of the School District's assets and liabilities, with the difference between the two reported as net assets. Over time, increases or decreases in net assets may serve as a useful indicator of whether the financial position of the School District is improving or diminishing. Causes of the change in net assets are the results of many factors including those not under the control of the School District, such as property tax base, facility conditions, required educational programs, student-teacher ratios and other factors.
The Statement of Activities presents information showing how the School District's net assets changed during the most recent fiscal year. All changes in net assets are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods (e.g., uncollected taxes).
The District-wide financial statements outline functions of the School District that are principally supported by property taxes and intergovernmental revenues. The governmental activities of the School District include instruction, support services, community services, food services and interest on long-term debt.
Financial Analvsis of the School District as a Whole
All of the School District's services are reported in the District-wide financial statements, including instruction, pupil services, improvement of instructional services, educational media services, general administration, business administration, school administration, pupil transportation, maintenance and operations, central support services, other support services, food services and interest on long-term debt. Property taxes and operating grants and contributions finance most of these activities. Additionally, all capital and debt financing activities are reported here.

CATOOSA COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCALYEAR ENDED JUNE 3 0 , 2 0 1 0

Statement of Net Assets

2010

GOVERNMENTAL ACTIVITIES

2009

Change

%Change

Assets Current and Other Assets Capital Assets, Net

Total Assets

Liabilities Currentand Other Liabilities Long-Term L~abilities

Total L i a b i l i t i e s $ 39,785,715 $ 46,114,203 $

-6,328,488

-13.72%

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

Total N e t A s s e t s $ 147,468,681 $ 141,224,785 $

6,243,896

NET ASSETS - JUNE 30,2010

CATOOSA COUNTY BOARD OF EDUCATION MANAGEMENTS DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30,2010

Current Assets virtually remained the same, showing only an immaterial decrease from the prior year.

Current Liabilities increased due to a change in reportingfrom the prior year. In fiscal year 2010, the Board reported Claims Incurred but not Reported (IBNR) and Debt Service lnterest Payable not reported in previous years.

Long-Term Liabilities are attributable to the debt associated with the current outstanding bond issue.

Statement of Activities
Revenues Program Revenues: Charges for Services OperatingGrants and Contributions Capital Grants and Contributions General Revenues: Property Taxes Special Purpose Local Option Sales Tax For Capital Projects Other Taxes Grants and Contributions not Restrictedto Specific Programs Unrestricted Investment Earnings Miscellaneous

2010

GovernmentalActivities

2009

Change

% Change

25,797,215 25,796,374

841

Insignificant

Total Revenues

$ 106.413.475 $ 110,329,130 $ -3,915,655

-3.55%

Program Expenses: Instruction Support Services Community Services Food Services Interest and Fees on Long-Term Debt

$ 66,706,951 $ 66,517,863 $

28,382,616 28,614,238

506,707

589,514

5,275,276

5,249,877

1,075,489

1,475.698

189,088 -231,622 -82,807
25.399 -400.209

0.28% -0.81% -14.05% 0.48% -27.12%

Total Expenses

$ 101,947.039 $ 102,447,190 $

-500,151

-0.49%

Change in Net Assets Net Assets - Beginning(Restated)
Net Assets - Ending

$ 4,466,436 $ 7,881,940 $ 143,002,245 133,342,845

-3,415,504 9,659,400

-43.33% 7.24%

OVERVIEW OF FUND FINANCIAL STATEMENTS

A fund is a grouping of related accounts used to maintain control over resources that have been segregated for specific activities or objectives. The School District uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. All funds of the School District can be divided into two categories: governmental funds and fiduciary funds.

Governmentalfunds are used to account for essentially the same functions reported as governmental activities in the District-wide financial statements. However, unlike the District-wide statements, governmental fund financial statements focus on near-term inflows o fspendableresources, as well as on balances o f spendable resourcesavailable at the end of the fiscal year. Such information may be useful in evaluating the School District's near-term financing requirements.

CATOOSA COUNTY BOARD OF EDUCATION MANAGEMENTS DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30,2010

Because the focus of governmental funds is narrower than that of the District-wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the District-wide financial statements. By doing so, readers may better understand the long-term impact of the School District's near-term financing decisions. The governmental funds Balance Sheet and the Statement o f Revenues, Expenditures and Changes in Fund Balance provide a reconciliation to facilitate this comparison between governmental funds and governmental activities.
The School District's fund financial statements provide detailed information about the most
significant funds - not the School District as a whole. The majority of the School District's services
are reported in governmental funds. Governmental fund reporting focuses on showing how money flows into and out of funds and the balances left at year-end that are available for spending. They are reported using modified accrual accounting, which measures cash and all other financial assets that can readily be converted to cash. The governmental funds financial statements provide a detailed short-term view of the School District's operations and the services it provides.

In accordance with generally accepted accounting principles, the School District maintains many individual governmental funds. Information is presented separately in the governmental funds Balance Sheet and the Statement of Revenues, Expenditures and Changes in Fund Balances for the General Fund, Capital Projects Fund and the Debt Service Fund, each of which is considered to be a significant or major fund. The School District has no nonmajor funds as described by generally accepted accounting principles.
Fiduciary Funds are used to account for those assets belonging to clubs, organizations and others. The School District acts as a trustee, or fiduciary, and as such is responsible for ensuring the assets reported in these funds are used only for their intended purposes and by those to whom the assets belong. Fiduciary fund activity is excluded from the District-wide financial statements as these assets cannot be used to finance its operations.
Revenuesand Other FinancingSources - Fund Financial Statements
The following schedule presents a summary of the governmental funds revenues and other financing sources for the period ended June 30, 2010, as compared to June 30, 2009. It depicts both the absolute value and percentage changes in relation to the prior year.

FY 2010

% of Total

FY 2009

$ Change

% Change

Property Taxes

$

Sales Taxes

State Funds

Federal Funds

Other

26,109,456 8,946,230 49,520,946 14,755,246 6,741,383

24.61% $ 8.43% 46.69% 13.91% 6.36%

26,483,822 $ 8,710,010 59,200,249 8,573,817 7,015,005

-374,366 236,220 -9,679,303 6,181,429 -273,622

-1.41% 2.71% -16.35% 72.10% -3.90%

CATOOSA COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCALYEAR ENDED JUNE 30,2010

Expenditures and Other Financing Uses- Fund Financial Statements
The following schedule presents a summary of the governmental funds expenditures and other financing uses for the period ended June 30, 2010, as compared to June 30, 2009. It depicts both the absolute value and percentage changes in relation to the prior year.

FY 2010

% of Total

PI 2009

$ Change

% Change

Current Instruction Support Services Pupil Services Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operations Student Transportation Service Central Support Services Other Support Services CornmuniQ Services Operations Food Services Operations
Capital Outlay Debt Services

Total

GENERAL FUND BUDGETARY HIGHLIGHTS
The School District's annual budget is prepared on a basis consistent with generally accepted accounting principles. The most significant budgeted fund is the General Fund. During the course of the fiscal year, the School District amends its General Fund budget as needed.
During fiscal year 2010, the General Fund had actual revenues totaling $97.4 million, which was less than the original budgeted amounts of $99.0 million by approximately $1.6 million. While Federal revenues were $2.2 million more than the original budgeted amount of $12.6 million, mostly attributable to American Recovery and Reinvestment Act of 2009 (ARRA) funds received, state revenues were $7.5 million less than anticipated in the original budget amount of $57.0 million. In addition, miscellaneous revenues from various sources not included in the original budget, primarily school activity (principal) accounts, totaled approximately $2.9 million.
General Fund original budgeted expenditures for fiscal year 2010 totaled $102.7 million. In anticipation of reduced state revenues, management assumed a proactive plan to maintain an adequate fund balance. By doing so, actual expenditures were reduced to $97.9 million, a reduction of approximately $4.8 million.
The original budget adopted by the School District included the anticipated use of $3.7 million of fund balance. During the year the budget was amended several times to provide for reduced state revenues and for the mid-term adjustment to state allotments not included in the original budget. As

CATOOSA COUNTY BOARD OF EDUCATION MANAGEMENTS DISCUSSION AND ANALYSIS FOR THE FISCALYEAR ENDED JUNE 30,2010

actual revenues were less than original budgeted revenues by approximately $1.7 million, the $4.8 million reduction in actual expenditures from the budgeted amount resulted in a decrease of only $475,800.
Subsequent Year Budget and Rates
9 The School District adopted a General Fund budget for fiscal year 2 0 1 1 reflecting total resources, including appropriations, of $82.0 million and total expenditures of $88.5 million with the anticipated use of $6.5 million of fund balance.
9 The fiscal year 2010 budget was based on a tax rate for maintenance and operations of schools (M&O) of 16.773 mills. In fiscal year 2011, the tax rate for M&O remained at 16.773 mills.
CAPITAL ASSETS AND DEBT ADMINISTRATION
Capital Assets
At fiscal year ended June 30, 2010, the School District had $146,417,114 invested in capital assets, net of accumulated depreciation, all in governmental activities. This amount represents a net increase (including additions, deletions and depreciation) of $434,565 or 0.30%, from fiscal year 2009. The assets are made up of a broad range of items including buildings, land, land improvements and equipment (transportation, maintenance and food service). The following schedule reflects a summary of these balances as compared to the prior year.

Capital Assets, Net of Depreciation June 30

Governmental Activities

FY 2 0 1 0

FY 2009

Land Land Improvements Buildingand Improvements Equipment

$

5,659,982 $

1,980,939

134,416,215

4,359,978

5,659,982 1,927,060 133,757,417 4,638,090

Total

Additional information related to the Schools District's capital assets can be found in the Notes to the Basic Financial Statements.
Long-Term Debt
The following schedule summarizes the School District's debt for the Series 2006 General Obligation Bonds:
Debt at June 30.2010
Bonds Payable (including unamortized Bond Premium)

vii

CATOOSA COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCALYEAR ENDED JUNE 30,2010
CURRENT ISSUES
Currently known facts, decisions or conditions that are expected to have a significant effect on financial positions or results of operations:
9 Economic Slowdown - The Catoosa County Board of Education has maintained its economic stability through conservative budgeting and continual monitoring of expenditures. In developing the current budgets, administration addressed the need to maintain a quality education for all students while dealing with unstable State funding and declining local tax digests. In developing budgets, the Board of Education set priorities through which all decisions were to be assessed. These priorities are: (1) to minimize negative classroom impact; (2) to preserve employment; and (3) to maintain reserves adequate to meet cash flow requirements.
Legislation over the past years has reduced revenue sources available for education. Coupled with poor economic conditions, the state has drastically reduced funding available to public schools. In the fiscal year 2010 budget, state funds provide approximately 57.6% of the local budget (a reduction of 6.32% from previous year). Most of the funding reductions have occurred due to austerity or budget cuts imposed by the State. These reductions to the amounts earned by school systems (based on a funding formula written in State law and unadjusted for inflation in recent years) have been allocated to all systems across the state to help the State provide for a balanced budget.
Fiscal year 2010 and fiscal year 2 0 1 1 reductions in state funds were offset somewhat by funds from the American Recovery and Reinvestment Act and the Federal Jobs Funding Grant. The School District implemented a critical review of required personnel and services to prioritize expenses. This strategy, coupled with long-term planning, has allowed the School District to forgo the need of a reduction in force without exhausting the operating reserve.
Catoosa County generally collects 96.09% of the assessed taxes. This consistent collection of property taxes has assisted the local School District to meet financial obligations and the School District's ability to maintain the current millage rate of 16.773.
9 Capital Improvements - In March 2011, the citizens of Catoosa County voted to continue the imposition of a 1% Special Purpose Local Option Sales Tax (ESPLOST). The funds are to be used for construction of a new school, additions and renovations to existing schools, educational technology and service the debt associated with the authorization of General Obligation Bonds up to $49,000,000. Specific capital expenditure plans are formalized in conjunction with the general obligation bond issue and anticipated annual receipts of capital outlay funds from the State of Georgia Department of Education. The School District regularly monitors anticipated capital outlay needs.
9 Natural Disaster - In April 2011, a major tornado struck the northwest part of Georgia resulting in significant damage to the town of Ringgold, Georgia and the Catoosa County School District. A high school and middle school, as well as the Administrative Offices, were directly impacted and rendered unusable for the remainder of the 2010-2011 school year. Misplaced students were transported to other facilities to complete the year. Financial operations continued uninterrupted in various facilities throughout the School District. While the impact of the disaster is still being evaluated, Administration is currently making plans to address the financial impact expected due to a decline in the local tax digest.

CATOOSA COUNTY BOARD OF EDUCATION MANAGEMENTS DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30,2010
k Future Conditions - Despite these challenges, the Catoosa County Board of Education is
financially strong and remains optimistic of its ability to maximize all of the financial resources to provide a quality education to its students.
CONTACTING THE SCHOOL DISTRICT'S FINANCIAL MANAGEMENT
This financial report is designed to provide the citizens, taxpayers, parents, students, investors and creditors with a general overview of the School District's finances. The report also demonstrates the School District's accountability for the funds it receives. Additional information can be requested by mail at the following address:
Catoosa County Board of Education
P.O. Box 130
307 Cleveland Street Ringgold, Georgia 30736

CATOOSA COUNTY BOARD OF EDUCATION

CATOOSA COUNTY BOARD OF EDUCATION STATEMENT OF NET ASSETS JUNE 30,2010
ASSETS
Cash and Cash Equivalents Investments Accounts Receivable, Net
Taxes State Government Federal Government Other Inventories Prepaid Expenditures Capital Assets, Non-Depreciable Capital Assets, Depreciable(Net of Accumulated Depreciation)
Total Assets
LIABILITIES
Accounts Payable Salaries and Benefits Payable Interest Payable Claims Incurred but not Reported (IBNR) Deferred Revenue Long-Term Liabilities
Due Within One Year Due in More Than One Year
Total Liabilities
NET ASSETS
Invested in CapitalAssets - Net of Related Debt
Restricted for: Continuation of Federal Programs Debt Services Capital Projects
Unrestricted
Total Net Assets
Total Liabilities and Net Assets

EXHIBIT "A"
GOVERNMENTAL ACTIVITIES

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

CATOOSA COUNTY BOARD OF EDUCATION STATEMENT OF ACTIVITIES
FOR THE YEAR ENDEDJUNE 30,2010

GOVERNMENTAL ACTIVITIES
Instruction Support Services
Pupil Sewices ImprovementOf Instructional Services Educational Media Sewices General Administration School Administration Business Administration MaintenanceAnd Operation Of Plant Sewices Student Transportation Sewice
Support Services - Central
Other Support Services Operations of Non-InstructionalSewices
School Nutrition Program Community Services Operations Interest On Short-Term And Long-Term Debt and Fees
Total Governmental Activities
General Revenues Taxes Property Taxes For Maintenance and Operations In Lieu of Taxes Railroad Cars Sales Tax Special Purpose Local Option Sales Tax For Capital Projects Intangible RecordingTax Real Estate Grants and Contributions not Restricted to Specific Programs Investment Earnings Miscellaneous
Total General Revenues
Change in NetAssets
- NetAssets Beginningof Year (Restated)
- Net Assets End of Year

EXPENSES

CHARGES FOR SERVICES

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

CATOOSA COUNTY BOARD OF EDUCATION BALANCE SHEET
GOVERNMENTAL FUNDS JUNE 30.2010

EXHIBIT "CC

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

GENERAL FUND

DISTRICTWIDE
CAPITAL PROJECTS
FUND

DEBT SERVICE
FUND

TOTAL

LIABILITIES AND FUND BALANCES
LIABILITIES
Accounts Payable Salaries and Benefits Payable DeDosits and Deferred Revenue
Total Liabilities
FUND BALANCES
Resewed for: Continuationof Federal Programs Debt Sewice Capital Projects
Unrese~ed Designatedfor Student Activities Undesignated Reported in: General Fund Capital Projects
Total Fund Balances
Total Liabilities and Fund Balances

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

CATOOSA COUNTY BOARD OF EDUCATION RECONCILIATIONOF THE GOVERNMENTALFUNDS BALANCE SHEET
TO THE STATEMENT OF NET ASSETS JUNE 30,2010
Total Fund Balances- Governmental Funds (Exhibit "CC)
Amounts reported for Governmental Activities in the Statement of Net Assets are different because:
Capital Assets used in GovernmentalActivities are not financial resources and therefore are not reported in the funds. These assets consist of:
Land Land Improvements Buildings Equipment Accumulated Depreciation
Total Capital Assets
Taxes not available to pay for current period expenditures are deferred in the funds.
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 yearend consist of:
Bonds Payable Accrued Interest Claims Incurred but not Reported(IBNR) Unamortized Bond Premiums
Total LonETerm Liabilities
Net Assets of Governmental Activities (Exhibit "A")

EXHIBIT "Dm

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

CATOOSA COUNTY BOARD OF EDUCATION STATEMENT OF REVENUES, EXPENDITURESAND CHANGES IN FUND BALANCES
GOVERNMENTAL FUNDS JUNE 30.2010

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 Service Central Support Services Other Support Services Community Services Operations Food Services Operation
Capital Outlay Debt Services
Principal Dues and Fees Interest
Total Expenditures
Excess of Revenuesover (under) Expenditures
OTHER FINANCING SOURCES (USES)
Insurance Proceeds 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

EXHIBIT "E" TOTAL

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

CATOOSA COUNTY BOARD OF EDUCATION RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT OF
REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES TO THE STATEMENT OF ACTIVITIES JUNE 30,2010
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 DepreciationExpense
The net effect of various miscellaneous transactions involving capital assets (i.e., sales, trade-ins, donations, and disposals) is to decrease net assets.
Taxes reported in the Statement of Activities that do not providecurrent financial resources are not reported as revenues in the funds.
Repaymentof Long-Term Debt is reported as an expenditure in Governmental Funds, but the repaymentreduces Long-Term Liabilities in the Statement of Net Assets. In the current year, these amounts consist of:
Bond PrincipalPayments
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:
Decrease in Accrued Interest Payable Amortization of Bond Premium Increase in Claims and Judgments
Total Long-Term Debt
Change in Net Assets of GovernmentalActivities (Exhibit "B")

EXHIBIT "F"

The notesto the basic financial statements are an integral part of this statement
- 7 -

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CATOOSA COUNTY BOARD OF EDUCATION STATEMENT OF FIDUCIARY NET ASSETS
FIDUCIARY FUNDS JUNE 30,2010
ASSETS Cash and Cash Equivalents
LIABILITIES Salaries and Benefits Payable Funds Held for Others
Total Liabilities

EXHIBIT "G"
AGENCY FUNDS

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

CATOOSA COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30,2010

EXHIBIT "H"

Note 1: DESCRIPTION OF SCHOOL DISTRICT AND REPORTING ENTITY
REPORTING ENTITY
The Catoosa 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 Catoosa County Board of Education.
Disfnnct-wideStatemen& 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 nonexchangetransactions.
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 Statemenix 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 all financial resources of the School District, except those resources required to be accounted for in another fund.

CATOOSA COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30,2010

EXHIBIT "H"

District-wide Capital Projects Fund accounts for financial resources including Special Purpose Local Option Sales Tax (SPLOST) and Bond Proceedsto be used for the acquisition, construction or renovation of major capital facilities.
Debt Service Fund accounts for taxes (sales) legally restricted for the payment of general longterm principal, interest and paying agent's fees.
The School District reports the following fiduciary fund type:
Agency funds account for assets held by the School District as an agent for various 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, grants and donations. On an accrual basis, revenue from property taxes is recognized in the fiscal year for which the taxes are levied. Revenue from sales taxes is recognized in the fiscal year in which the underlying transaction (sale) takes place. Revenue from grants and donations is recognized in the fiscal year in which all eligibility requirements have been satisfied.
The School District uses funds to report on its financial position and the results of its operations. Fund accounting is designed to demonstrate legal compliance and to aid financial management by segregating transactions related to certain governmental functions or activities. A fund is a separate accounting entity with a self-balancing set of accounts.
Governmental funds are reported using the current financial resources measurement focus and the modified accrual basis 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 and claims and judgments, 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 District 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,

CATOOSA COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30,2010

EXHIBIT "H"

generally September 1through August 31. In accordance with the respective rules and regulations of the QBE program, the State of Georgia reimburses the School District 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 District recognizes the same QBE as a receivable and revenue, consistent with symmetrical recognition.
NEW ACCOUNTING PRONOUNCEMENTS
In fiscal year 2010, the School District adopted the Governmental Accounting and Standards Board (GASB) Statement No. 51, Accounting and Reporting for Intangible Assets. The provisions of this Statement generally require retroactive reportingfor intangible assets acquired after June 30, 1980, with the exception of those intangible assets that have indefinite useful lives and those that are considered internally generated.
In addition, the School District adopted GASB Statement No. 53, Accounting and Financial Reporting for Derivative Instruments. The provisions of this Statement impacts disclosure regarding derivative instruments entered into by the state and local governments. Derivative disclosures, if any, will be identified in Note 3.
RESTATEMENT OF PRIOR YEAR NET ASSETS
For fiscal year 2010, the School District restated various Capital Assets due to errors and omissions. The School District increased, net of accumulated depreciation, buildings and improvements $2,598,339. The result is an increase in Net Assets at July 1,2009, of $2,598,339.
For fiscal year 2010, the School District made a variety of prior period adjustments due to various errors or omissions, which require the restatement of the June 30, 2010, net assets in Governmental Activities. The result is a decrease in Net Assets at July 1,2009, of $820,879. These changes are in accordance with generally accepted accounting principles.

Net assets, July 1,2009, as previously reported

$ 141,224,785

Capital Assets Claims Incurred but not Reported (IBNR) Bond Interest Payable

Net assets, July 1,2009, as restated
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.

CATOOSA COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30,2010

EXHIBIT "H"

INVESTMENTS
Composition of Investments lnvestments 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 bankers' acceptances,
(6) The Georgia Fund 1administered by the State of Georgia, Office of Treasury and Fiscal Services,
(7) Repurchase agreements, and
(8) Obligations of other political subdivisions of the State of Georgia.
The School District does not have a formal policy regarding investment policies that address credit risks, custodial credit risks, concentration 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.
PROPERTY TAXES
The Catoosa County Board of Commissioners fixed the property tax levy for the 2009 tax digest year (calendar year) on August 4, 2009 (levy date). Taxes were due on December 20, 2009 (lien date). Taxes collected within the current fiscal year or within 6 0 days after year-end on the 2009 tax digest are reported as revenue in the governmental funds for fiscal year 2010. The Catoosa 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, 2010, for maintenance and operations amounted to $25,279,073.

CATOOSA COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30,2010

EXHIBIT "H"

The tax millage rate levied for the 2009 tax year (calendar year) for the Catoosa County Board of Education was as follows (a mill equals $ 1 per thousand dollars of assessed value):

School Operations

16.773 mills

SALES TAXES

Special Purpose Local Option Sales Tax, at the fund reporting level, during the year amounted to $8,373,077 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.

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

Capitalization Policy

Estimated Useful Life

Land Land Improvements Buildings and Improvements Equipment Intangible Assets

All

N/A

$

10,000

2 0 to 8 0 years

$

10,000

2 0 to 8 0 years

$

10,000

5 to 1 5 years

$

100,000

10to 2 0 years

CATOOSA COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30,2010

EXHIBIT "H"

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 internally generated software is computed using the straight-line method over the estimated useful lives of the assets, generally 1 0 to 2 0 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 are deferred and amortized over the life of the bonds using the straight-line method. Bond issuance costs are reported during the fiscal year bonds are issued. To conform to generally accepted accounting principles, bond issuance costs should be amortized over the life of the bonds on the District-wide statements. The effect of this deviation is deemed to be immaterial to the fair presentation of the basic financial statements.
In the fund financial statements, the School District recognizes bond premiums, 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-wideStatements 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 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.
USE OF ESTIMATES
The preparation of the financial statements in conformity with accounting principles generally accepted in the United States requires management t o make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results may differ from those estimates.

CATOOSA COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30,2010

EXHIBIT "H"

Note 3: DEPOSITS
COLIATERALIZATION 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 1 1 0 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.
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) lnsurance on accounts provided by the Federal Deposit lnsurance 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, 2010, the bank balances were $33,774,245. The bank balances were entirely covered by Federal depository insurance or collateralized with securities held by the pledging financial institution's trust department or agent in the School District's name.
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

CATOOSA COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30,2010

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

Balances July 1,2009
(Restated)

Increases

Decreases

Balances June 30,2010

Capital Assets, Being Depreciated: Buildings and Improvements Equipment Land Improvements

$ 160,348,014$ 8,772,090 2,899,800

238,897 $ 235,621 121,341

68,950 $

160,517,961 9,007,711 3,021,141

Less: Accumulated Depreciation: Buildings and Improvements Equipment Land Improvements

23,992,258 4,134,000
972,740

2,146,088 513,733 67,462

36,600

26,101,746 4,647,733 l,040,202

Total Capital Assets, Being Depreciated, Net $ 142,920,906$ -2,131,424$
Governmental Activity Capital Assets - Net $ 148,580,888$ -2,131,424$

32,350 $ 140,757,132 32,350 $ 146,417,114

Current year depreciation expense by function is as follows:

Instruction

Support Services

General Administration

$

Maintenance and Operation of Plant

Student Transportation Services

Food Services

$
16,697 46,543

2,207.623

Note 6: INTERFUND TRANSFERS

Interfund transfers for the year ended June 30,2010, consisted of the following:

Transfer to

Transfers From
District-wide Capital Projects

Debt Service Fund

CATOOSA COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30,2010

EXHIBIT "H"

Transfers are used to move sales tax revenues collected by the District-wide Capital Projects Fund to the Debt Service Fund for principal and interest payments due February 1,2010, and August 1, 2010, for the Series 2006 General Obligation Bonds.

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

The School District has elected to self-insure for all losses related to acts of God. The School District has not experienced any losses related to this risk in the past three years.

The School District has established a limited risk management program for workers' compensation claims. The School District accounts for claims within the General Fund with expenses/expenditures and liability being reported when it is probable a loss has occurred, and the amount of that loss can be reasonably estimated. An excess coverage insurance policy covers individual claims in excess of $300,000 loss per occurrence, up to the statutory limit.

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

Beginningof Year Liability

Claims and Changes in Estimates

Claims Paid

End of Year Liability

2010 (restated) $

207,337 $

172,329 $

121,644 $

258,022

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 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:

Beginningof Year Liability

Claims and Changes in Estimates

Claims Paid

End of Year Liability

CATOOSA COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30,2010

EXHIBIT "H"

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

Position Covered

Amount

Superintendent All Other Employees

Note 8: LONG-TERM DEBT

GENERAL OBLIGATION DEBT OUTSTANDING

General Obligation Bonds currently outstanding are as follows:

Purpose

Interest Rates

GeneralGovernment -Series2006

4.00%- 4.50%

Amount $ 27,000,000

The changes in Long-Term Debt during the fiscal year ended June 30,2010, were as follows:

Balance July 1,2009

Additions

Governmental Funds

Balance

Deductions

June 30,2010

Due Within One Year

G. 0. Bonds Bond PremiumsAmortized

$ 34,000,000 $ 312,254

0 $

7,000,000 $ 124,903

27,000,000 $ 187,351

8,000,000 124,902

At June 30, 2010, payments due by fiscal year which includes principal and interest for these items are as follows:

General Obligation Debt

Unamortized

Principal

Interest

Bond Premium

Fiscal Year Ended June 30:

Total Principal and Interest
Note 9: ON-BEHALF PAYMENTS
The School District has recognized revenues and costs in the amount of $220,751 for health insurance and retirement contributions paid on the School District's behalf by the following State Agencies.

CATOOSA COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30,2010

EXHIBIT "H"

Georgia Department of Education Paid to the Georgia Department of Community Health For Health lnsurance of Non-Certified Personnel In the amount of $169,394
Paid to the Teachers Retirement System of Georgia For Teachers Retirement System (TRS) Employer's Cost In the amount of $10,153
Office of Treasury and Fiscal Services Paid to the Public School Employees Retirement System For Public School Employees Retirement (PSERS) Employer's Cost In the amount of $41,204
Note 10: 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 11: SUBSEOUENT EVENTS
In the subsequent fiscal year, voters approved the imposition of a 1% sales tax to fund the acquisition and construction of major capital facilities and retire associated debt. The voters authorized the School District to obtain advance funding through the issue of general obligation bonds up to $49,000,000.
In the subsequent year, the School District incurred significant damage from an EF4 tornado which struck the town of Ringgold, Georgia. Ringgold High School and Ringgold Middle School, as well as the Central Administrative Office Buildings, were damaged beyond use for the remainder of the 2010-2011 school year. In addition, Ringgold Elementary School received significant damage; however, not as to make the facility unusable. The intent of the School District is to repair the facilities and no permanent impairment will be reported.
Note 12: POST-EMPLOYMENT BENEFITS
GEORGIA SCHOOL PERSONNEL EMPLOYEES 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 lnsurance Plan administered by the Department of Community Health. The Official Code of Georgia Annotated (OCGA) 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).

CATOOSA COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30,2010

EXHIBIT "H"

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 2 5 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, 2010:
For certificated teachers, librarians and regional educational service agencies:

July 2009 August 2009 - October 2009
November 2009 -June 2010

18.534% of covered payroll for August Coverage
14.492% of covered payroll for September - November Coverage
18.534% of covered payroll for December - July Coverage

For non-certificatedschool personnel:

July 2009 -June 2010

$162.72 per member per month plus Department of Education contribution of $22,838,311

No additional contribution was required by the Board for fiscal year 2010 nor contributed to the State OPEB Fund to prefund retiree benefits. Such additional contribution amounts are determined annually by the Board in accordance with the State 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:

Percentage

Required

Fiscal Year

Contributed

Contribution

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.

CATOOSA COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30,2010

EXHIBIT "H"

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 3 0 years of creditable service, regardless of age, or after 1 0 years of service and attainment of age 60. A member is eligible for early retirement after 2 5 years of creditable service.

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 4 0 years. Early retirement benefits are reduced by the lesser of one-twelfth of 7% for each month the member is below age 6 0 or by 7% for each year or fraction thereof by which the member has less than 3 0 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 1 0 years of service. If a member terminates with less than 1 0 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, 2010, were 5.25% of annual salary. The member contribution rate will increase to 5.53% effective July 1,2010. Employer contributions required for fiscal year 2010 were 9.74% of annual salary as required by the June 30, 2007, actuarial valuation. The employer contribution rate will increase to 10.28% effective July 1,2010.

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

Fiscal Year

Percentage Contributed

Required Contribution

CATOOSA COUNTY SCHOOLS NON-TRS EMPLOYEES' 403(B) PLAN
The Catoosa County Schools Non-TRS Employees' 403(B) Plan is an Employer Contributory Plan originally established July 1,2006, by the Catoosa County Board of Education with Variable Annuity Life Insurance Company. The Plan was transferred to Lincoln Financial Group effective January 1, 2009. Employees eligible for this plan are those employees covered under the Public School

CATOOSA COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30,2010

EXHIBIT "H"

Retirement System (PSERS) and thus not eligible for Teachers Retirement System (TRS). The Board of Education, recognizing PSERS as a Limited Benefit Plan with a Limited Defined Contribution, desired to supplement the retirement income available for this group of employees.

The Plan is funded by member Employee Elective Deferral Contributions and Employer Discretionary Contributions. An eligible employee enters the Plan on the first day of the payroll period provided he/she agrees to defer at least $200 annually.

Employer Discretionary Contributions are contributions the Employer may make to the Plan on behalf of the employee without regard to the amount of the Employee's Elective Deferral Contribution. These contributions are made at the sole discretion of the Employer and in some years such contributions may not be made to the Plan. Employer contributions for fiscal year 2010 were 9.28% of member's annual base salary.

An employee becomes 100% vested with respect to Employer Discretionary Contributions made on his/her behalf after 5 years of service to the Catoosa County School System. Employees are always 100%vested with respect to his/her Employee Elective Deferral Contributions.

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

Fiscal Year

Percentage Contributed

Contribution

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CATOOSA COUNTY BOARD OF EDUCATION GENERAL FUND
SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL
YEAR ENDEDJUNE 30,2010

Property Taxes Sales Taxes State Funds Federal Funds Charges for Services Investment Earnings Miscellaneous
Total Revenues
EXPENDITURES
Current Instruction Support Services Pupil Services Improvementof Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenanceand Operation of Plant Student Transportation Services Central Support Services Other Support Services Food Serv~cesOperation Community Services Operations
Total Expenditures
Excessof Revenuesover (under) Expenditures
DTHFR FINANCING SOURCES (USES)
Other FinancingSources Other FinancingUses
Total Other FinancingSources (Uses)
Net Change in Fund Balances
- Fund Balances Beginning
Fund Balances - Ending

NONAPPROPRIATED BUDGETS

ORIGINAL (1)

FINAL (1)

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

SCHEDULE "lo
ACTUAL AMOUNTS

See notes to the basic financial statements.

CATOOSA COUNTY BOARD OF EDUCATION SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
YEAR ENDEDJUNE 30,2010

SCHEDULE "2"

FUNDING AGENCY PROGRAM/GRANT
Agriculture, U. S. Department of Child Nutrition Cluster Pass-ThroughFrom Georgia Department of Education Food Services School Breakfast Program National School Lunch Program
Total Child Nutrition Cluster
Other Programs Pass-Through From Georgia Department of Education Food Services
ARRA - Child Nutrition DiscretionaryGrants Limited Availability
Total U. S. Department of Agriculture
Education. U. S. Department of Educationof HomelessChildren and Youth Cluster Pass-Through From Georgia Department of Education Educationfor HomelessChildren and Youth
EducationTechnology State Grants Cluster Pass-Through From Georgia Department of Educat~on Education Technology State Grants
Special EducationCluster Pass-Through From Georgia Department of Education Special Education
ARRA - Grants to States
ARRA Preschool Grants Grants to States Preschool Grants
Total Special EducationCluster
State Fiscal Stabilization Fund Cluster Pass-Through From Georgia Department of Education
ARRA - Education State Grants
Title I, Part A Cluster Pass-Through From Georgia Department of Education
ARRA - T~tieI Grants to Local EducationalAgencies
Title I Grants to Local EducationalAgencies
Total Title I, Part A Cluster
Other Programs Pass-Through From Georgia Department of Education
Career and Technical Education- Basic Grants to States
Engl~shLanguageAcquisition Grants ImprovingTeacher QualityState Grants
Safe and Drug-FreeSchools and Commun~ties- State Grants
Twenty-First Century Community Learning Centers
Total Other Programs
Total U. S. Department of Education

CFDA NUMBER

PASS THROUGH
ENTITY ID
NUMBER

EXPENDITURES IN PERIOD

CATOOSA COUNTY BOARD OF EDUCATION SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
YEAR ENDEDJUNE 30,2010

SCHEDULE '2"

FUNDING AGENCY PROGRAM/GRANT
Health and Human Services, U. S. Department of Child Care and Development Fund Cluster Pass-ThroughFrom Bright Fromthe Start: Georgia Department of Early Care and Learning
ARRA - Child Care and DevelopmentBlock Grant
Other Programs Pass-Through From Georgia Department of Human Resources, Division of Mental Health, Developmental Disabilitiesand Addictive Diseases Block Grants for Prevention and Treatment of Substance Abuse
Total U. S. Departmentof Health and Human Services
Homeland Security. U. S. Department of Pass-ThroughFrom Georgia Emergency ManagementAgency
Disaster Grants - Public Assistance
Defense. U. S. Department of Direct Departmentof the Army R.O.T.C. Program

CFDA NUMBER

PASSTHROUGH
ENTITY ID
NUMBER

EXPENDITURES IN PERIOD

Total Federal Financial Assistance N/A = Not Available

Notes to the Schedule of Exoenditures of Federal Awards
(1) Includesthe Federallyassigned value of donated commoditiesfor the Food Donation Program in the amount of $329,655.
(2) Expendituresfor the funds earned on the School Breakfast Program ($711.634) were not maintained separately and are included in the 2010 NationalSchool 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 expendituresof Federal awards includesthe Federal grant activity of the Catoosa Counv Board of Education and is presented on the modified accrual basis of accountingwhich is the basis of accountingused in the presentation of the fund financial statements.

See notes to the basic financial statements.

CATOOSA COUNTY BOARD OF EDUCATION SCHEDULE OF STATE REVENUE YEAR ENDEDJUNE 30,2010
GRANTS Bright From the Start Georgia Department of Early Care and Learning PreKindergarten Program
Education, Georgia Department of QualityBasic Education Direct Instructional Cost Kindergarten Program
Kindergarten Program - Early Intervention Program
Primary Grades (13) Program
Primary Grades - Early Intervention (1-3) Program
Upper Elementary Grades (4-5) Program
Upper Elementary Grades - Early Intervention(4-5) Program
Middle School (68) 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 DaysAdditional Instruction Staff and Professional Development Indirect Cost Central Administration School Administration Facility Maintenanceand Operations Categorical Grants Pupil Transportation Regular Nursing Services Vocational Supervisors Education Equalization Funding Grant Food Services Vocational Education Amended Formula Adjustment Other State Programs Apprenticeship Program Dual Enrollment Georgia Special Needs Scholarship Fund Health Insurance National Teacher Certification Preschool Handicapped Program Residential and Reintegration State Grant Rule 1 0 Special Education State Grant Teachers' Retirement Virtual Schools State Grant
Office of Treasury and FiscalServices Public School Employees Retirement
See notes to the basic financial statements.

SCHEDULE "3"
GOVERNMENTAL FUND TYPE GENERAL FUND

CATOOSA COUNTY BOARD OF EDUCATION SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS
YEAR ENDED JUNE 30.2010

SCHEDULE "4"

PROJECT

ORIGINAL ESTIMATED
COST (1)

CURRENT ESTIMATED COSTS (2)

AMOUNT EXPENDED IN CURRENT YEAR (3) (4)

AMOUNT EXPENDED IN PRIOR YEARS (3) (4)

To build, equip and furnish new schools: to make additions, modifications and renovationsto existing schools: to provide computers, computer technology equipment and personalty; to acquire land and pay for site preparation and paving at new and existing schools; to pay for construction, renovation, modifications, additions and repairs of areas and structures that will be jointly used by the School District for ~nstructionals, porting and physical activities: and to pay for the expenses incident to accomplishthe foregoingpurposes. $

46,500,000 $

54,647.233 $

768,285 $ 52,265.401

PROJECT STATUS (5)
Ongoing

To build. equip and furnish new schools. including but not limited to a new high school and a new elementary school; to make additions, modifications and renovations to existing schools: to provide computers, equipment and personalty (including school buses); to acquire land and pay for site preparation and paving at new and existing schools; to pay for construction, renovation. modifications. additions and repairs of areas and structures that will be jointly used for instructional, sports and physical education activ~ties;and to pay for the expenses incident to accomplish the foregoing purposes.

59,000,000

56,569,546

49.760.143 Ongoing

(1) The School District's original cost estimate as specified in the resolution calling for the imposition of the Local Option Sales Tax.

(2) The School District's current estimate of total cost for the projects. Includes all cost from project inception to completion.

(3) The voters of Catoosa County approved the imposition of a 1%sales tax to fund the above projects and retire associated debt. Amounts expended for these projects may include sales tax proceeds, state. local propem taxes and/or other funds over the life of the projects.

(4) In addition to the expendituresshown above. the School District has incurred interest to provide advance funding for the above projects as follows:

Prior Years

$ 4,181,653

Current Year

1.323.750

Total

(5) SPLOST II projectsare expected to be completed no later than June 30.2011. SPLOST Ill projectsare expected to be completed no later than August 1.2012.

See notesto the basic financial statements.

(This page left intentionally blank)

CATOOSA COUNTY BOARD OF EDUCATION
GENERAL FUND - QUALITY BASIC EDUCATION PROGRAM (QBE) ALLOTMENTS AND EXPENDITURES - BY PROGRAM
YEAR ENDEDJUNE 30,2010

SCHEDULE "5'

DESCRIPTION
Direct Instructional Programs Kindergarten Program
Kindergarten Program - Early Intervention Program
Primary Grades (1-3) Program
Primary Grades - Early lntervention (1-3) Program
Upper ElementaryGrades (4-5) Program
Upper ElementaryGrades- Early lntervention ( 4 5 )
Program Middle School (6-8) Program High School General Education (9-12) Program Vocational Laboratory (9-12) Program Students With Disabilities
Category I Category II Category Ill Category IV 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 ProfessionalDevelopment

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

ELIGIBLE QBE PROGRAM COSTS

SALARIES

OPERATIONS

TOTAL

TOTAL QBE FORMULA FUNDS
(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.

SECTION II COMPLIANCE AND INTERNAL CONTROL REPORTS

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

DEPARTMENOTF AUDITSAND ACCOUNTS
270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400
June 2 3 , 2 0 1 1

Honorable Nathan Deal, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the Catoosa County Board of Education
INDEPENDENT AUDITOR'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MAlTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENTAUDITING STANDARDS
Ladies and Gentlemen:
We have audited the financial statements of the governmental activities, each major fund, and the aggregate remaining fund information of Catoosa County Board of Education as of and for the year ended June30, 2010, which collectively comprise Catoosa County Board of Education's basic financial statements and have issued our report thereon dated June 23, 2011. 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 Re~orting
In planning and performing our audit, we considered Catoosa County Board of Education's internal control over financial reporting as a basis for designing our auditing procedures for the purpose of expressingour opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the Catoosa County Board of Education's internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness of the Catoosa County Board of Education's internal control over financial reporting.
A det7cency 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, t o 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.
Our consideration of internal control over financial reporting was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over financial reporting that might be deficiencies, significant deficiencies, or material weaknesses. We did not identify any deficiencies in internal control over financial reporting that we consider to be material weaknesses, as defined above. However, we consider item FS-6231-10-01, described in

the accompanying Schedule of Findings and Questioned Costs to be a significant deficiency in internal control over financial reporting. A significant deficiency is a deficiency, or 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.
Com~lianceand Other Matters
As part of obtaining reasonable assurance about whether Catoosa 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 no instances of noncompliance or other matters that are required to be reported under Government Auditng Standards.
Catoosa County Board of Education's response to the finding identified in our audit is described in the accompanying Schedule of Management's Responses. We did not audit Catoosa 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 Catoosa 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,
~ u s * l l W. Hinton, CPA, CGFM State Auditor

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

DEPARTMENOTF AUDITSAND ACCOUNTS
270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400
June 23,2011

Honorable Nathan Deal, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the Catoosa County Board of Education
INDEPENDENT AUDITOR'S REPORT ON COMPLIANCE WlTH REQUIREMENTS THAT COULD HAVE A DIRECT AND MATERIAL EFFECT ON EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WlTH OMB CIRCULAR A-133
Ladies and Gentlemen:

We have audited Catoosa 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, 2010. Catoosa 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 Catoosa County Board of Education's management. Our responsibility is to express an opinion on Catoosa 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 Governmen&/ and Non-Profit Organilations. 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 Catoosa 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 Catoosa County Board of Education's compliance with those requirements.
In our opinion, the Catoosa 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 30,2010.

Internal Control Over Com~liance
Management of Catoosa 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 planningand performing our audit, we considered Catoosa 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 Catoosa County Board of Education's internal control over compliance.
A detlcenncy 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.
Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over compliance that might be deficiencies, significant deficiencies, or material weaknesses. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses, as defined above.
This report is intended solely for the information and use of management, members of the Catoosa 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,
RUSS)II W. Hinton, CPA, CGFM State Auditor

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

CATOOSA COUNTY BOARD OF EDUCATION AUDITEE'S RESPONSE
SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30,2010
PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND OUESTIONED COSTS No matters were reported. PRIOR YEAR FEDERAL AWARD FINDINGS AND OUESTIONED COSTS No matters were reported.

SECTION IV FINDINGS AND QUESTIONED COSTS

CATOOSA COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30,2010

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 weakness identified?

N 0

Significant deficiency identified?

Yes

Noncompliance material to financial statements noted:

N o

Federal Awards

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

N 0 None Reported

Type of auditor's report issued on compliance for major programs: All major programs

Unqualified

Any audit findings disclosed that are required to be reported in accordance with OMB Circular A-133, Section 510(a)?

Identification of major programs:

CFDA Numberb)

Name of Federal Program or Cluster

Title I, Part A Cluster Special Education Cluster State Fiscal Stabilization Fund Cluster

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

$498,284

Auditee qualified as low-risk auditee?

N o

II FINANCIALSTATEMENT FINDINGSAND QUESTIONED COSTS

REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Control Procedures over School Activity Accounts Significant Deficiency Finding Control Number: FS-6231-10-01

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

CATOOSA COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGSAND QUESTIONEDCOSTS
YEAR ENDED JUNE 30,2010
II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS
REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILlTlES/DISBURSEMENTS Inadequate Internal Control Procedures over School Activity Accounts Significant Deficiency Finding Control Number: FS-6231-10-01
Criteria: The School District's management is responsible for designing and maintaining internal controls that provide reasonable assurance that transactions are processed according to established procedures.
Questioned Cost: N/A
Information: Revenues/Receiva bles/Receipts
Deposit preparation was not separated from the record keeping and cash custodyfunctions.
The following deficiencies were noted during our tests of transactions:
Receipts were not deposited in a timely manner. Revenue was not recorded in the proper account. Receipts lacked documentation. Gate receipts were not reconciled properly.
Expenditures/Liabilities/Disbursements The following deficiencies were noted during our tests of transactions:
Vouchers did not have approval prior to purchase. Vouchers did not show evidence of receipt. Vouchers did not include invoices.
Cause: These deficiencies were a result of management's failure to ensure that internal controls were established, implemented and functioning at the school level.
Effect: Errors and/or irregularities may not be detected in a timely manner.
Recommendation: Management should revise and monitor controls to provide reasonable assurance that transactions are processedaccording to established procedures.
Ill FEDERALAWARD FINDINGSAND QUESTIONEDCOSTS
No matters were reported.

SECTION V MANAGEMENT'S RESPONSES

CATOOSA COUNTY BOARD OF EDUCATION SCHEDULE OF MANAGEMENT'S RESPONSES
YEAR ENDED JUNE 30,2010

Finding Control Number: FS-6231-10-01

We concur with this finding. The Board will continue to provide training to accounting personnel at the school level. In addition, Central Office monitoring of controls will continue throughout the year to provide reasonable assurance transactions are processed according to established procedures.

Contact Person: Telephone: Fax: Email:

Pearl Hogan, Financial Services Manager (706) 965-2297 (706) 935-6790 phogan@catoosa.kl2.ga.us