CATOOSA COUNTY BOARD OF EDUCATION RINGGOLD, GEORGIA ANNUAL FINANCIAL REPORT FOR THE FISCAL YEAR ENDED JUNE 30, 2011 (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 EXPENDITURES OF FEDERAL AWARDS EXHIBITS BASIC FINANCIAL STATEMENTS DISTRICT-WIDE FINANCIAL STATEMENTS A STATEMENT OF NET ASSETS B STATEMENT OF ACTIVITIES FUND FINANCIAL STATEMENTS C BALANCE SHEET GOVERNMENTAL FUNDS D RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO THE STATEMENT OF NET ASSETS E STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS F RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES TO THE STATEMENT OF ACTIVITIES G STATEMENT OF FIDUCIARY NET ASSETS FIDUCIARY FUNDS H NOTES TO THE BASIC FINANCIAL STATEMENTS SCHEDULES REQUIRED SUPPLEMENTARY INFORMATION 1 SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL GENERAL FUND SUPPLEMENTARY INFORMATION 2 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS 3 SCHEDULE OF STATE REVENUE Page 1 2 4 5 6 7 9 10 29 30 32 CATOOSA COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS - SECTION I FINANCIAL SCHEDULES SUPPLEMENTARY INFORMATION 4 SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS 5 ALLOTMENTS AND EXPENDITURES GENERAL FUND - QUALITY BASIC EDUCATION PROGRAMS (QBE) BY PROGRAM Page 33 35 SECTION II COMPLIANCE AND INTERNAL CONTROL REPORTS INDEPENDENT AUDITOR'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS INDEPENDENT AUDITOR'S REPORT ON COMPLIANCE WITH REQUIREMENTS THAT COULD HAVE A DIRECT AND MATERIAL EFFECT ON EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH OMB CIRCULAR A-133 SECTION III AUDITEE'S RESPONSE TO PRIOR YEAR FINDINGS AND QUESTIONED COSTS SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS SECTION IV FINDINGS AND QUESTIONED COSTS SCHEDULE OF FINDINGS AND QUESTIONED COSTS SECTION I FINANCIAL Greg S. Griffin STATE AUDITOR (404) 656-2174 DEPARTMENT OF AUDITS AND ACCOUNTS 270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400 September 4, 2012 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, 2011, which collectively comprise the Board's basic financial statements as listed in the table of contents. These financial statements are the responsibility of the 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 Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Board's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinions. In our opinion, the financial statements referred to previously present fairly, in all material respects, the respective financial position of the governmental activities, each major fund, and the aggregate remaining fund information of the Catoosa County Board of Education, as of June 30, 2011, and the respective changes in financial position thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America. 2011ARL-11 The Catoosa County Board of Education has not presented Management's Discussion and Analysis that accounting principles generally accepted in the United States of America has determined is necessary to supplement, although not to be part of, the basic financial statements. In accordance with Government Auditing Standards, we have also issued our report dated September 4, 2012, 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 Standards and should be considered in assessing the results of our audit. The Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual, as presented on page 29, is not a required part of the basic financial statements but is supplementary information required by accounting principles generally accepted in the United States of America. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods of measurement and presentation of the required supplementary information. However, we did not audit the information and express no opinion on it. Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the 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. The information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, the information is fairly stated, in all material respects, in relation to the financial statements as a whole. A copy of this report has been filed as a permanent record in the office of the State Auditor and made available to the press of the State, as provided for by Official Code of Georgia Annotated section 50-6-24. Respectfully submitted, GSG:as 2011ARL-11 Greg S. Griffin State Auditor CATOOSA COUNTY BOARD OF EDUCATION CATOOSA COUNTY BOARD OF EDUCATION STATEMENT OF NET ASSETS JUNE 30, 2011 ASSETS Cash and Cash Equivalents Investments Accounts Receivable, Net Taxes State Government Federal Government Other Insurance Inventories Prepaid Items 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) Pollution Remediation Liability Deferred Revenue Long-Term Liabilities Due Within One Year Due in More Than One Year Total Liabilities NET ASSETS Invested in Capital Assets, Net of Related Debt Restricted for Continuation of Federal Programs Debt Service Capital Projects Unrestricted Total Net Assets Total Liabilities and Net Assets The notes to the basic financial statements are an integral part of this statement. - 1 - EXHIBIT "A" GOVERNMENTAL ACTIVITIES $ 38,174,705 21,500 2,662,045 6,959,488 851,527 30,039 30,065,432 139,942 1,000 8,714,757 129,611,041 $ 217,231,476 $ 1,713,789 11,624,958 356,250 255,605 102,521 18,861 9,064,646 10,002,355 $ 33,138,985 $ 119,258,797 818,462 9,102,069 37,575,068 17,338,095 $ 184,092,491 $ 217,231,476 CATOOSA COUNTY BOARD OF EDUCATION STATEMENT OF ACTIVITIES FOR THE YEAR ENDED JUNE 30, 2011 GOVERNMENTAL ACTIVITIES Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Operations of Non-Instructional Services Food Services Community Services Operations Interest on Short-Term and Long-Term Debt Total Governmental Activities General Revenues Taxes Property Taxes For Maintenance and Operations In Lieu of Taxes Sales Taxes Special Purpose Local Option Sales Tax For Capital Projects Intangible Recording Tax Real Estate Grants and Contributions not Restricted to Specific Programs Investment Earnings Miscellaneous Extraordinary Items Gain on Capitalized Assets Destroyed/Sold Gain on Impairment of Capital Assets - See Note 11 Insurance Proceeds on Non-Capitalized Assets Total General Revenues and Extraordinary Items Change in Net Assets Net Assets - Beginning of Year Net Assets - End of Year EXPENSES CHARGES FOR SERVICES $ 67,254,558 $ 3,860,098 2,358,803 1,965,673 886,706 6,770,664 560,541 8,191,118 4,075,638 432,976 1,235,202 5,071,828 549,357 757,767 $ 103,970,929 $ 267,318 201,490 4,189 28,953 71,999 62,212 247,795 1,758,506 138,613 2,781,075 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 $ 47,667,467 915,072 863,636 1,229,946 1,918,860 2,732,860 1,437 2,810,127 953,001 $ 1,368 116,640 3,298,798 1,880 $ 62,511,092 $ $ 305,168 305,168 $ -19,319,773 -2,743,536 -1,490,978 -706,774 1,032,154 -3,965,805 -559,104 -5,318,779 -2,817,469 -431,608 -870,767 -14,524 -408,864 -757,767 -38,373,594 $ 25,772,262 1,026,925 8,842,972 400,257 72,381 5,909,521 653,213 3,078,027 4,069,307 19,493,315 5,679,224 $ 74,997,404 $ 36,623,810 147,468,681 $ 184,092,491 - 3 - CATOOSA COUNTY BOARD OF EDUCATION BALANCE SHEET GOVERNMENTAL FUNDS JUNE 30, 2011 EXHIBIT "C" ASSETS Cash and Cash Equivalents Investments Accounts Receivable, Net Taxes State Government Federal Government Insurance Other Inventories Prepaid Items Total Assets LIABILITIES AND FUND BALANCES LIABILITIES Accounts Payable Salaries and Benefits Payable Deposits and Deferred Revenue Total Liabilities FUND BALANCES Nonspendable Restricted Committed Assigned Unassigned Total Fund Balances Total Liabilities and Fund Balances GENERAL FUND DISTRICTWIDE CAPITAL PROJECTS FUND DEBT SERVICE FUND TOTAL $ 20,259,730 $ 21,500 1,829,246 6,959,488 851,527 30,039 139,942 1,000 8,456,656 $ 832,799 8,428,740 9,458,319 $ 38,174,705 21,500 2,662,045 6,959,488 851,527 8,428,740 30,039 139,942 1,000 $ 30,092,472 $ 17,718,195 $ 9,458,319 $ 57,268,986 $ 37,362 $ 11,624,087 1,016,481 $ 12,677,930 $ 1,676,427 871 1,677,298 $ 1,713,789 11,624,958 1,016,481 $ 14,355,228 $ 139,942 678,520 $ 2,000,000 1,079,790 13,516,290 $ 17,414,542 $ 16,040,897 $ 16,040,897 $ $ 9,458,319 139,942 26,177,736 2,000,000 1,079,790 13,516,290 9,458,319 $ 42,913,758 $ 30,092,472 $ 17,718,195 $ 9,458,319 $ 57,268,986 The notes to the basic financial statements are an integral part of this statement. - 4 - CATOOSA COUNTY BOARD OF EDUCATION RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO THE STATEMENT OF NET ASSETS JUNE 30, 2011 EXHIBIT "D" Total Fund Balances - Governmental Funds (Exhibit "C") Amounts reported for Governmental Activities in the Statement of Net Assets are different because: Capital Assets used in Governmental Activities are not financial resources and therefore are not reported in the funds. These assets consist of: Land Construction in Progress Land Improvements Buildings Equipment Accumulated Depreciation Total Capital Assets Taxes that are not available to pay for current period expenditures are deferred in the funds. Insurance Proceeds not yet received but realizable. Long-Term Liabilities, including Bonds Payable, are not due and payable in the current period and therefore are not reported as liabilities in the funds. Long-Term Liabilities at year-end consist of: Bonds Payable Accrued Interest Capital Leases Payable Claims Incurred but not Reported (IBNR) Pollution Remediation Unamortized Bond Premiums Total Long-Term Liabilities Net Assets of Governmental Activities (Exhibit "A") $ 42,913,758 $ 5,751,266 2,963,491 2,121,981 142,554,832 9,476,866 -24,542,638 138,325,798 997,620 21,636,692 $ -19,000,000 -356,250 -4,552 -255,605 -102,521 -62,449 -19,781,377 $ 184,092,491 The notes to the basic financial statements are an integral part of this statement. - 5 - CATOOSA COUNTY BOARD OF EDUCATION STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS YEAR ENDED JUNE 30, 2011 EXHIBIT "E" REVENUES Property Taxes Sales Taxes State Funds Federal Funds Charges for Services Investment Earnings Miscellaneous Total Revenues EXPENDITURES Current Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Community Services Food Services Operation Capital Outlay Debt Services Principal Dues and Fees Interest Total Expenditures Excess of Revenues over (under) Expenditures OTHER FINANCING SOURCES (USES) Insurance Proceeds Capital Leases Transfers In Transfers Out Total Other Financing Sources (Uses) EXTRAORDINARY ITEMS Insurance Proceeds Net Change in Fund Balances Fund Balances - Beginning GENERAL FUND DISTRICTWIDE CAPITAL PROJECTS FUND DEBT SERVICE FUND TOTAL $ 26,621,521 472,638 $ 56,869,673 11,856,108 2,781,075 477,898 3,020,609 $ 102,099,522 $ 8,842,972 38,120 $ 57,418 8,938,510 $ $ 137,195 137,195 $ 26,621,521 9,315,610 56,869,673 11,856,108 2,781,075 653,213 3,078,027 111,175,227 $ 64,977,114 3,862,616 $ 2,121,230 1,965,074 1,024,311 6,777,911 560,541 6,837,047 3,785,479 432,976 1,235,202 549,248 5,088,138 2,048 402 $ 99,219,337 $ $ 2,880,185 $ $ 447 250,000 166,717 4,050,215 120,774 513 368,295 $ 8,000,000 600 1,015,000 4,956,961 $ 9,015,600 $ 3,981,549 $ -8,878,405 $ 64,977,114 3,863,063 2,371,230 1,965,074 1,191,028 6,777,911 560,541 10,887,262 3,906,253 432,976 1,235,202 549,248 5,088,651 368,295 8,002,048 600 1,015,402 113,191,898 -2,016,671 $ 26,373 26,373 6,600 6,600 $ 9,690,112 $ 9,690,112 $ -9,690,112 -9,690,112 $ 32,973 $ -9,690,112 $ 9,690,112 $ 32,973 $ 16,730,890 $ 2,913,158 $ 11,022,327 $ 14,501,384 5,018,570 $ 811,707 $ 8,646,612 16,730,890 14,747,192 28,166,566 Fund Balances - Ending $ 17,414,542 $ 16,040,897 $ The notes to the basic financial statements are an integral part of this statement. - 6 - 9,458,319 $ 42,913,758 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, 2011 EXHIBIT "F" Total Net Change in Fund Balances - Governmental Funds (Exhibit "E") Amounts reported for Governmental Activities in the Statement of Activities are different because: Capital Outlays are reported as expenditures in Governmental Funds. However, in the Statement of Activities, the cost of Capital Assets is allocated over their estimated useful lives as depreciation expense. In the current period, these amounts are: Capital Outlay Depreciation Expense Excess of Capital Outlay over Depreciation Expense Taxes reported in the Statement of Activities that do not provide current financial resources are not reported as revenues in the funds. Insurance proceeds reported in the Statement of Activities that do not provide financial resources are not reported as revenues in the funds. The net effect of various miscellaneous transactions involving capital assets (i.e., sales, trade-ins, donations, and disposals) is to decrease net assets. Some of the equipment acquired this year was financed with capital leases. In Governmental Funds, a capital lease arrangement is considered a source of financing, but in the Statement of Net Assets, the lease obligation is reported as a Long-Term Liability. Repayment of Long-Term Debt is reported as an expenditure in Governmental Funds, but the repayment reduces Long-Term Liabilities in the Statement of Net Assets. In the current year, these amounts consist of: Bond Principal Retirements Capital Lease Payments Total Long-Term Debt Repayments Some items reported in the Statement of Activities do not require the use of current financial resources and therefore are not reported as expenditures in Governmental Funds. These activities consist of: Decrease in Accrued Interest Payable Amortization of Bond Premium Increase in Pollution Remediation Decrease in Claims and Judgments Total Additional Expenditures Change in Net Assets of Governmental Activities (Exhibit "B") $ 14,747,192 $ 3,765,561 -2,704,767 1,060,794 177,663 21,636,692 -9,152,110 -6,600 $ 8,000,000 2,048 8,002,048 $ 133,333 124,902 -102,521 2,417 158,131 $ 36,623,810 The notes to the basic financial statements are an integral part of this statement. - 7 - (This page left intentionally blank) CATOOSA COUNTY BOARD OF EDUCATION STATEMENT OF FIDUCIARY NET ASSETS FIDUCIARY FUNDS JUNE 30, 2011 ASSETS Cash and Cash Equivalents LIABILITIES Salaries and Benefits Payable Funds Held for Others Total Liabilities EXHIBIT "G" AGENCY FUNDS $ 168,769 $ 3,536 165,233 $ 168,769 The notes to the basic financial statements are an integral part of this statement. - 9 - CATOOSA COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2011 EXHIBIT "H" Note 1: DESCRIPTION OF SCHOOL DISTRICT AND REPORTING ENTITY REPORTING ENTITY The 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. District-wide Statements: The Statement of Net Assets and the Statement of Activities display information about the financial activities of the overall School District, except for fiduciary activities. Eliminations have been made to minimize the double counting of internal activities. Governmental activities generally are financed through taxes, intergovernmental revenues, and other nonexchange transactions. The Statement of Activities presents a comparison between direct expenses and program revenues for each function of the School District's governmental activities. Direct expenses are those that are specifically associated with a program or function and, therefore, are clearly identifiable to a particular function. Indirect expenses (expenses of the School District related to the administration and support of the School District's programs, such as office and maintenance personnel and accounting) are not allocated to programs. Program revenues include (a) charges paid by the recipients of goods or services offered by the programs and (b) grants and contributions that are restricted to meeting the operational or capital requirements of a particular program. Revenues that are not classified as program revenues, including all taxes, are presented as general revenues. Fund Financial Statements: The fund financial statements provide information about the School District's funds, including fiduciary funds. Eliminations have been made to minimize the double counting of internal activities. Separate statements for each category (governmental and fiduciary) are presented. The emphasis of fund financial statements is on major governmental funds, each displayed in a separate column. The School District reports the following major governmental funds: General Fund is the School District's primary operating fund. It accounts for and reports all financial resources not accounted for and reported in another fund. - 10 - CATOOSA COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2011 EXHIBIT "H" District-wide Capital Projects Fund accounts for and reports financial resources including Special Purpose Local Option Sales Tax (SPLOST), bond and insurance proceeds that are restricted, committed or assigned to the expenditure for capital outlays, including the acquisition or construction of capital facilities and other capital assets. Debt Service Fund accounts for and reports financial resources that are restricted, committed, or assigned including taxes legally restricted for the payment of general long-term principal, interest and paying agent's fees. The School District reports the following fiduciary fund type: Agency funds account for assets held by the School District as an agent for various funds, governments or individuals. BASIS OF ACCOUNTING The basis of accounting determines when transactions are reported on the financial statements. The District-wide governmental and fiduciary fund financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded at the time liabilities are incurred, regardless of when the related cash flows take place. Nonexchange transactions, in which the School District gives (or receives) value without directly receiving (or giving) equal value in exchange, include property taxes, sales taxes, 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 and acquisitions under capital leases 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, - 11 - CATOOSA COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2011 EXHIBIT "H" generally September 1 through August 31. In accordance with the respective rules and regulations of the QBE program, the State of Georgia reimburses the School 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 2011, the School District adopted the Governmental Accounting Standards Board (GASB) Statement No. 54, Fund Balance Reporting and Governmental Fund Type Definitions. The provisions of this Statement establish accounting and financial reporting standards for all governments that report governmental funds. It establishes criteria for classifying fund balances into specifically defined classifications and clarifies definitions for governmental funds. CASH AND CASH EQUIVALENTS Composition of Deposits Cash and cash equivalents consist of cash on hand, demand deposits and short-term investments with original maturities of three months or less from the date of acquisition in authorized financial institutions. Official Code of Georgia Annotated Section 45-8-14 authorizes the School District to deposit its funds in one or more solvent banks, insured Federal savings and loan associations or insured chartered building and loan associations. INVESTMENTS Composition of Investments Investments made by the School District in nonparticipating interest-earning contracts (such as certificates of deposit) and repurchase agreements are reported at cost. Participating interestearning contracts and money market investments with a maturity at purchase of one year or less are reported at amortized cost. Both participating interest-earning contracts and money market investments with a maturity at purchase greater than one year are reported at fair value. The Official Code of Georgia Annotated Section 36-83-4 authorizes the School District to invest its funds. In selecting among options for investment or among institutional bids for deposits, the highest rate of return shall be the objective, given equivalent conditions of safety and liquidity. Funds may be invested in the following: (1) Obligations issued by the State of Georgia or by other states, (2) Obligations issued by the United States government, (3) Obligations fully insured or guaranteed by the United States government or a United States government agency, (4) Obligations of any corporation of the United States government, (5) Prime banker's acceptances, (6) The Georgia Fund 1 administered by the State of Georgia, Office of the State Treasurer, (7) Repurchase agreements, and - 12 - CATOOSA COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2011 EXHIBIT "H" (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 2010 tax digest year (calendar year) on July 27, 2010 (levy date). Taxes were due on December 20, 2010 (lien date). Taxes collected within the current fiscal year or within 60 days after year-end on the 2010 tax digest are reported as revenue in the governmental funds for fiscal year 2011. The 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, 2011, for maintenance and operations amounted to $25,594,596. The tax millage rate levied for the 2010 tax year (calendar year) for the Catoosa 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 $8,842,972 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. - 13 - CATOOSA COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2011 EXHIBIT "H" 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. Assets are tested for impairment when the magnitude of the decline in service utility is significant and unexpected. Impaired assets are measured under the restoration cost approach and reported at the new carrying value. Service life of impaired assets is reassessed at the time of impairment. See Note 11 Extraordinary Items Capitalization thresholds and estimated useful lives of capital assets reported in the District-wide statements are as follows: Capitalization Estimated Policy Useful Life Land Land Improvements Buildings and Improvements Equipment Intangible Assets All N/A $ 10,000 20 to 80 years $ 10,000 20 to 80 years $ 10,000 5 to 15 years $ 100,000 10 to 20 years Depreciation is used to allocate the actual or estimated historical cost of all capital assets over estimated useful lives, with the exception of intangible assets which are amortized. Amortization of intangible assets such as water, timber, and mineral rights, easements, patents, trademarks, copyrights and internally generated software is computed using the straight-line method over the estimated useful lives of the assets, generally 10 to 20 years. GENERAL OBLIGATION BONDS The School District issues general obligation bonds to provide funds for the acquisition and construction of major capital facilities. In the District-wide financial statements, bond premiums and discounts, as well as issuance costs, are deferred and amortized over the life of the bonds using the straight-line method. Bond issuance costs are reported 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 and discounts, as well as bond issuance costs during the fiscal year bonds are issued. Premiums received on debt issuances are reported as other financing sources while discounts on debt issuances are reported as other financing uses. Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as debt service expenditures. General obligation bonds are direct obligations and pledge the full faith and credit of the government. The outstanding amount of these bonds is recorded in the Statement of Net Assets. - 14 - CATOOSA COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2011 EXHIBIT "H" NET ASSETS The School District's net assets in the District-wide Statements are classified as follows: Invested in capital assets, net of related debt - This represents the School District's total investment in capital assets, net of outstanding debt obligations related to those capital assets. To the extent debt has been incurred but not yet expended for capital assets, such amounts are not included as a component of invested in capital assets, net of related debt. Restricted net assets - These represent resources for which the School District is legally or contractually obligated to spend resources for 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. FUND BALANCES The School District's fund balances are classified as follows: Nonspendable Amounts that cannot be spent either because they are in a nonspendable form or because they are legally or contractually required to be maintained intact. Restricted Constraints are placed on the use of resources are either (1) externally imposed conditions by creditors, grantors, contributors, or laws and regulations of other governments or (2) imposed by law through constitutional provisions or enabling legislation. Committed Amounts that can be used only for specific purposes pursuant to constraints imposed by formal action of the Board of Education. The Board of Education is the School District's highest level of decision-making authority, and the formal action that is required to be taken to establish, modify, or rescind a fund balance commitment is a resolution approved by the Board. Committed fund balance also should incorporate contractual obligations to the extent that existing resources in the fund have been specifically committed for use in satisfying those contractual requirements. Assigned Amounts that are constrained by the School District's intent to be used for specific purposes, but are neither restricted nor committed. The intent should be expressed by (1) the Board of Education or (2) the budget or finance committee, or the Superintendent, or designee, to assign amounts to be used for specific purposes. Unassigned The residual classification for the General Fund. This classification represents fund balances that has not been assigned to other funds and that has not been restricted, committed, or assigned to specific purposes within the General Fund. - 15 - CATOOSA COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2011 EXHIBIT "H" Fund Balances of the Governmental Funds at June 30, 2011, are as follows: Nonspendable Inventories Restricted Continuation of Federal Programs Capital Projects Debt Service Committed Capital Outlay Assigned School Activity Unassigned $ $ 678,520 16,040,897 9,458,319 139,942 26,177,736 2,000,000 1,079,790 13,516,290 Fund Balance, June 30, 2011 USE OF ESTIMATES $ 42,913,758 The preparation of the financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results may differ from those estimates. Note 3: DEPOSITS COLLATERALIZATION OF DEPOSITS Official Code of Georgia Annotated (O.C.G.A.) Section 45-8-12 provides that there shall not be on deposit at any time in any depository for a time longer than ten days a sum of money which has not been secured by surety bond, by guarantee of insurance, or by collateral. The aggregate of the face value of such surety bond and the market value of securities pledged shall be equal to not less than 110 percent of the public funds being secured after the deduction of the amount of deposit insurance. If a depository elects the pooled method (O.C.G.A. Section 45-8-13.1) the aggregate of the market value of the securities pledged to secure a pool of public funds shall be not less than 110 percent of the daily pool balance. Acceptable security for deposits consists of any one of or any combination of the following: (1) Surety bond signed by a surety company duly qualified and authorized to transact business within the State of Georgia, (2) Insurance on accounts provided by the Federal Deposit Insurance Corporation, (3) Bonds, bills, notes, certificates of indebtedness or other direct obligations of the United States or of the State of Georgia, (4) Bonds, bills, notes, certificates of indebtedness or other obligations of the counties or municipalities of the State of Georgia, (5) Bonds of any public authority created by the laws of the State of Georgia, providing that the statute that created the authority authorized the use of the bonds for this purpose, - 16 - CATOOSA COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2011 EXHIBIT "H" (6) Industrial revenue bonds and bonds of development authorities created by the laws of the State of Georgia, and (7) Bonds, bills, notes, certificates of indebtedness, or other obligations of a subsidiary corporation of the United States government, which are fully guaranteed by the United States government both as to principal and interest or debt obligations issued by or securities guaranteed by the Federal Land Bank, the Federal Home Loan Bank, the Federal Intermediate Credit Bank, the Central Bank for Cooperatives, the Farm Credit Banks, the Federal Home Loan Mortgage Association, and the Federal National Mortgage Association. CATEGORIZATION OF DEPOSITS Custodial credit risk is the risk that in the event of a bank failure, the School District's deposits may not be returned to it. The School District does not have a deposit policy for custodial credit risk. At June 30, 2011, the bank balances were $41,120,013. The bank balances were entirely covered by Federal depository insurance or collateralized with securities held by the pledging financial institution or 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 - 17 - CATOOSA COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2011 EXHIBIT "H" Note 5: CAPITAL ASSETS The following is a summary of changes in the Capital Assets during the fiscal year: Governmental Activities Capital Assets, Not Being Depreciated: Land Construction Work In Progress Balances July 1, 2010 Increases Decreases Balances June 30, 2011 $ 5,659,982 $ 91,284 $ 0 2,963,491 0$ 5,751,266 2,963,491 Total Capital Assets, Not Being Depreciated $ 5,659,982 $ 3,054,775 $ 0$ 8,714,757 Capital Assets, Being Depreciated: Buildings and Improvements Equipment Land Improvements $ 160,517,961 $ 9,007,711 3,021,141 156,521 $ 469,155 85,110 18,119,650 $ 984,270 142,554,832 9,476,866 2,121,981 Less: Accumulated Depreciation: Buildings and Improvements Equipment Land Improvements 26,101,746 4,647,733 1,040,202 2,112,269 524,594 67,904 9,504,390 447,420 18,709,625 5,172,327 660,686 Total Capital Assets, Being Depreciated, Net $ 140,757,132 $ -1,993,981 $ 9,152,110 $ 129,611,041 Governmental Activity Capital Assets - Net $ 146,417,114 $ 1,060,794 $ 9,152,110 $ 138,325,798 Current year depreciation expense by function is as follows: Instruction Support Services Improvements of Instructional Services $ General Administration Maintenance and Operation of Plant Student Transportation Services Food Services $ 1,387 29,923 46,128 408,544 $ 2,171,746 485,982 47,039 2,704,767 - 18 - CATOOSA COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2011 EXHIBIT "H" Note 6: INTERFUND TRANSFERS Interfund transfers for the year ended June 30, 2011, consisted of the following: Transfer to Transfers From District-wide Capital Projects Debt Service Fund $ 9,690,112 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, 2011, and August 1, 2011, 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 errors or omissions and acts of God. The School District has not significantly reduced coverage for these risks. For the 2011 fiscal year, a natural disaster claim filed by the School District exceeded commercial insurance coverage. Federal Emergency Management Agency (FEMA) and Georgia Emergency Management Agency (GEMA) funds in the amount of $804,406 have been awarded to the School District to cover shortage. Settled claims did not exceed commercial insurance for the two years preceding fiscal year 2011. 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: Beginning of Year Liability Claims and Changes in Estimates Claims Paid End of Year Liability 2010 $ 2011 $ 207,337 $ 258,022 $ 172,329 $ 184,904 $ 121,644 $ 187,321 $ 258,022 255,605 - 19 - CATOOSA COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2011 EXHIBIT "H" The School District is self-insured with regard to unemployment compensation claims. The School District accounts for claims within the General Fund with expenses/expenditures and liability being reported when it is probable that a loss has occurred, and the amount of that loss can be reasonably estimated. Changes in the unemployment compensation claims liability during the last two fiscal years are as follows: Claims and Beginning of Year Changes in Claims End of Year Liability Estimates Paid Liability 2010 $ 0$ 16,451 $ 16,451 $ 0 2011 $ 0$ 36,882 $ 36,882 $ 0 The School District has purchased surety bonds to provide additional insurance coverage as follows: Position Covered Superintendent All Employees Note 8: POLLUTION REMEDIATION OBLIGATIONS Amount $ 25,000 $ 100,000 The School District is the owner of a Bus Garage located at 56 Student Street, and is responsible for fuel cleanup related to a fuel tank leak. The School District has recorded an expense related to this pollution remediation in the amount of $47,523 and a liability and expense related to this pollution remediation in the amount of $95,694, on the Statement of Net Assets and on the Statement of Activities. The estimates of the liabilities are based on a range of expected outlays, net of expected cost recoveries, if any, for the type and amount of pollution contamination detected. The estimates are reviewed and adjusted periodically for price changes, additional contamination and any other changes detected. The School District is the owner of the Central Office located at 307 Cleveland Street, and is responsible for asbestos removal. The School District has recorded a liability and expense related to this pollution remediation in the amount of $6,827, on the Statement of Net Assets and on the Statement of Activities. The estimates of the liabilities are based on a range of expected outlays, net of expected cost recoveries, if any, for the type and amount of pollution contamination detected. The estimates are reviewed and adjusted periodically for price changes, additional contamination and any other changes detected. The School District is the owner of Ringgold Middle School located at 217 Tiger Trail, and is responsible for asbestos removal. The amount of the liability is not reasonably estimable at June 30, 2011. Pollution remediation liability activity in fiscal year 2011 was as follows: Beginning Balance July 1, 2010 Additions Reductions Ending Balance June 30, 2011 Current Portion Pollution Remediation Obligations $ 0$ 150,044 $ 47,523 $ 102,521 $ 0 - 20 - CATOOSA COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2011 EXHIBIT "H" Note 9: LONG-TERM DEBT CAPITAL LEASE The Catoosa County Board of Education entered into a lease agreement for a tractor. This lease agreement qualifies as capital lease for accounting purposes, and, therefore has been recorded at the present value of the future minimum lease payments as of the date of the inception. GENERAL OBLIGATION DEBT OUTSTANDING General Obligation Bonds currently outstanding are as follows: Purpose Interest Rates Amount General Government - Series 2006 4.00% - 4.50% $ 19,000,000 The changes in Long-Term Debt during the fiscal year ended June 30, 2011, were as follows: Balance July 1, 2010 Additions Governmental Funds Balance Deductions June 30, 2011 Due Within One Year G. O. Bonds $ 27,000,000 Capital Leases 0$ Bond Premiums Amortized 187,351 $ 6,600 8,000,000 $ 2,048 124,902 19,000,000 $ 4,552 62,449 9,000,000 2,197 62,449 $ 27,187,351 $ 6,600 $ 8,126,950 $ 19,067,001 $ 9,064,646 At June 30, 2011, payments due by fiscal year which includes principal and interest for these items are as follows: Capital Leases Principal Interest Fiscal Year Ended June 30: 2012 2013 $ 2,197 $ 253 2,355 95 Total Principal and Interest $ 4,552 $ 348 Fiscal Year Ended June 30: General Obligation Debt Principal Interest Unamortized Bond Premium 2012 2013 $ 9,000,000 $ 10,000,000 652,000 $ 225,000 62,449 Total Principal and Interest $ 19,000,000 $ 877,000 $ 62,449 - 21 - CATOOSA COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2011 EXHIBIT "H" Note 10: ON-BEHALF PAYMENTS The School District has recognized revenues and costs in the amount of $262,478 for health insurance and retirement contributions paid on the School District's behalf by the following State Agencies. Georgia Department of Education Paid to the Georgia Department of Community Health For Health Insurance of Non-Certificated Personnel In the amount of $196,434 Paid to the Teachers' Retirement System of Georgia For Teachers' Retirement System (TRS) Employer's Cost In the amount of $10,084 Office of the State Treasurer Paid to the Public School Employees' Retirement System For Public School Employees' Retirement (PSERS) Employer's Cost In the amount of $55,960 Note 11: EXTRAORDINARY ITEMS During fiscal year 2011, the School District incurred significant damage from an EF-4 tornado. Ringgold High School, Ringgold Middle School and the Central Administration buildings were damaged beyond use for the remainder of the 2010 2011 school year. These facilities incurred impairments losses in the amount of $6,474,137. The School District has recorded a receivable on the Statement of Net Assets and Statement of Activities in the amount of $21,636,692 for the remainder of the insurance proceeds to be received in the subsequent year. The receivable is based on the Third Party Insurance estimate for all damaged properties. A gain of $19,493,315 has been recorded on the Statement of Activities for the amount of insurance received or receivable netted against the incurred impairment loss. Impairment losses, insurance recovery, and net gains related to the School District's disaster claim are as follows: Impairment Loss Insurance Recovery Net Gain On Impairment Ringgold High School Impaired Facilities $ Ringgold Middle School Impaired Facilities Central Administration Impaired Facilities 3,403,403 $ 12,736,901 $ 3,054,239 11,306,750 16,495 1,923,801 9,333,498 8,252,511 1,907,306 Total $ 6,474,137 $ 25,967,452 $ 19,493,315 - 22 - CATOOSA COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2011 EXHIBIT "H" New carrying values for impaired assets were calculated and are as follows: Carrying Value June 30, 2010 Impairment Loss Depreciation Expense Carrying Value June 30, 2011 Ringgold High School Impaired Facilities $ 9,921,517 $ 3,403,403 $ Ringgold Middle School Impaired Facilities 3,113,975 3,054,239 Central Administration Impaired Facilities 35,313 16,495 182,847 $ 6,335,267 59,736 0 1,475 17,343 Total $ 13,070,805 $ 6,474,137 $ 244,058 $ 6,352,610 During the fiscal year 2011, several capital assets were destroyed, beyond repair, from damage incurred from the tornado. A net gain of $4,069,307 has been recorded on the Statement of Activities for the amount of insurance received or receivable netted against the carrying value of those assets at the time of destruction. Net gains on capital assets destroyed are as follows: Carrying Value (04/27/11) Insurance Recovery Net Gain on Recovery Ringgold High School Destroyed Capital Assets $ 1,323,670 $ 2,416,530 $ 1,092,860 Ringgold Middle School Destroyed Capital Assets 1,101,492 3,869,762 2,768,270 Central Administration Destroyed Capital Assets 252,810 460,987 208,177 TOTAL $ 2,677,972 $ 6,747,279 $ 4,069,307 The School District also filed various insurance claims related to non-capitalized assets. Insurance proceeds in the amount of $5,679,224 have been recorded on the Statement of Activities for the amount of insurance proceeds received or receivable for these claims. Proceeds recorded relate to the following: Insurance Received/ Receivable Repairs - Disater Related Repairs - Non-Disaster Related Content Replacement and Other Non-Capitalized Assets - Disaster Related Pollution Remediation - Disaster Related TOTAL $ 118,065 26,373 5,511,280 23,506 $ 5,679,224 - 23 - CATOOSA COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2011 EXHIBIT "H" Note 12: SIGNIFICANT COMMITMENTS The following is an analysis of significant outstanding construction or renovation contracts executed by the School District as of June 30, 2011: Unearned Executed Project Contracts Lakeview - Fort Oglethorpe High School Sewer Modifications $ 121,348 The amount described in this note is not reflected in the basic financial statements. Note 13: SIGNIFICANT CONTINGENT LIABILITIES Amounts received or receivable principally from the Federal government are subject to audit and review by grantor agencies. This could result in requests for reimbursement to the grantor agency for any costs which are disallowed under grant terms. The School District believes that such disallowances, if any, will be immaterial to its overall financial position. The School District is a defendant in various legal proceedings pertaining to matters incidental to the performance 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 14: SUBSEQUENT EVENTS In the subsequent fiscal year, the School District issued $40,000,000 in general obligation debt, as authorized by voters in the current fiscal year. The bond will be used for various capital outlay projects. Note 15: POST-EMPLOYMENT BENEFITS Georgia School Personnel Post-employment Health Benefit Fund Plan Description. The Georgia School Personnel Post-employment Health Benefit Fund (School OPEB Fund) is a cost-sharing multiple-employer defined benefit post-employment healthcare plan that covers eligible former employees of public school systems, libraries and regional educational service agencies. The School OPEB Fund provides health insurance benefits to eligible former employees and their qualified beneficiaries through the State Employees Health Benefit Plan administered by the Department of Community Health. The Official Code of Georgia Annotated (O.C.G.A.) assigns the authority to establish and amend the benefit provisions of the group health plans, including benefits for retirees, to the Board of Community Health (Board). The Department of Community Health, which includes the School OPEB Fund, issues a separate stand alone financial audit report and a copy can be obtained from the Georgia Department of Audits and Accounts. Funding Policy. The contribution requirements of plan members and participating employers are established by the Board in accordance with the current Appropriations Act and may be amended by the Board. Contributions of plan members or beneficiaries receiving benefits vary based on plan election, dependent coverage, and Medicare eligibility and election. On average, plan members pay approximately 25 percent of the cost of the health insurance coverage. - 24 - CATOOSA COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2011 EXHIBIT "H" Participating employers are statutorily required to contribute in accordance with the employer contribution rates established by the Board. The contribution rates are established to fund all benefits due under the health insurance plans for both active and retired employees based on projected "pay-as-you-go" financing requirements. Contributions are not based on the actuarially calculated annual required contribution (ARC) which represents a level of funding that, if paid on an ongoing basis, is projected to cover normal cost each year and amortize any unfunded actuarial liabilities (or funding excess) over a period not to exceed thirty years. The combined active and retiree contribution rates established by the Board for employers participating in the School OPEB Fund were as follows for the fiscal year ended June 30, 2011: For certificated teachers, librarians and regional educational service agencies: July 2010 - April 2011 May 2011 - June 2011 21.955% of covered payroll for August - May Coverage 1.429% of covered payroll for June - July Coverage For non-certificated school personnel: July 2010 - December 2010 January 2011 - May 2011 June 2011 $162.72 per member per month $218.20 per member per month $246.20 per member per month The Department of Education was appropriated an additional $25,081,633 for non-certificated personnel health insurance payments. The amount attributable to the School District is reflected in the On-behalf note disclosure. No additional contribution was required by the Board for fiscal year 2011 nor contributed to the School OPEB Fund to prefund retiree benefits. Such additional contribution amounts are determined annually by the Board in accordance with the School plan for other post-employment benefits and are subject to appropriation. The School District's combined active and retiree contributions to the health insurance plans, which equaled the required contribution, for the current fiscal year and the preceding two fiscal years were as follows: Percentage Required Fiscal Year Contributed Contribution 2011 2010 2009 100% $ 9,820,956 100% $ 9,351,182 100% $ 6,999,589 Note 16: 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. - 25 - CATOOSA COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2011 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 30 years of creditable service, regardless of age, or after 10 years of service and attainment of age 60. A member is eligible for early retirement after 25 years of creditable service. Normal retirement (pension) benefits paid to members are equal to 2% of the average of the member's two highest paid consecutive years of service, multiplied by the number of years of creditable service up to 40 years. Early retirement benefits are reduced by the lesser of one-twelfth of 7% for each month the member is below age 60 or by 7% for each year or fraction thereof by which the member has less than 30 years of service. It is also assumed that certain cost-of-living adjustments, based on the Consumer Price Index, will be made in future years. Retirement benefits are payable monthly for life. A member may elect to receive a partial lump-sum distribution in addition to a reduced monthly retirement benefit. Death, disability and spousal benefits are also available. Funding Policy. TRS is funded by member and employer contributions as adopted and amended by the Board of Trustees. Members become fully vested after 10 years of service. If a member terminates with less than 10 years of service, no vesting of employer contributions occurs, but the member's contributions may be refunded with interest. Member contributions are limited by State law to not less than 5% or more than 6% of a member's earnable compensation. Member contributions as adopted by the Board of Trustees for the fiscal year ended June 30, 2011, were 5.53% of annual salary. The member contribution rate will increase to 6.00% effective July 1, 2012. Employer contributions required for fiscal year 2011 were 10.28% of annual salary as required by the June 30, 2008, actuarial valuation. The employer contribution rate will increase to 11.41% effective July 1, 2012. Employer contributions for the current fiscal year and the preceding two fiscal years are as follows: Fiscal Year Percentage Contributed Required Contribution 2011 2010 2009 100% $ 5,692,442 100% $ 5,391,989 100% $ 5,185,416 CATOOSA COUNTY SCHOOLS NON-TRS EMPLOYEE'S 403(B) PLAN The Catoosa County Schools Non-TRS 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 Employees' 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. - 26 - CATOOSA COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2011 EXHIBIT "H" 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 2011 were 3.00% 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 Required Contribution 2011 2010 2009 100% $ 100% $ 100% $ 110,020 323,860 324,935 - 27 - (This page left intentionally blank) CATOOSA COUNTY BOARD OF EDUCATION GENERAL FUND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL YEAR ENDED JUNE 30, 2011 SCHEDULE "1" REVENUES Property Taxes Sales Taxes State Funds Federal Funds Charges for Services Investment Earnings Miscellaneous Total Revenues EXPENDITURES Current Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Food Services Operation Community Services Operations Debt Service Total Expenditures Excess of Revenues over (under) Expenditures OTHER FINANCING SOURCES (USES) Other Sources Other Uses Total Other Financing Sources (Uses) Net Change in Fund Balances Fund Balances - Beginning NONAPPROPRIATED BUDGETS ORIGINAL (1) FINAL (1) ACTUAL AMOUNTS $ 25,966,337 $ 400,000 55,497,559 10,171,930 2,488,692 349,000 $ 94,873,518 $ 25,966,337 $ 400,000 55,608,154 13,158,167 2,488,692 349,000 134,028 98,104,378 $ 26,621,521 472,638 56,869,673 11,856,108 2,781,075 477,898 3,020,609 102,099,522 $ 64,978,486 $ 4,109,318 2,286,609 1,771,433 2,083,151 7,001,528 613,197 7,452,296 3,818,479 764,017 400,072 6,052,692 67,588,683 $ 3,544,970 2,569,969 1,758,856 1,154,698 6,941,479 610,465 7,426,650 3,958,902 760,825 485,086 6,052,692 1,881 $ 101,331,278 $ $ -6,457,760 $ 102,855,156 $ -4,750,778 $ 64,977,114 3,862,616 2,121,230 1,965,074 1,024,311 6,777,911 560,541 6,837,047 3,785,479 432,976 1,235,202 5,088,138 549,248 2,450 99,219,337 2,880,185 $ 244,999 $ -274,167 $ -29,168 $ $ -6,486,928 $ 14,305,847 254,999 $ -283,293 -28,294 $ -4,779,072 $ 14,305,847 32,973 32,973 2,913,158 14,501,384 Fund Balances - Ending $ 7,818,919 $ 9,526,775 $ 17,414,542 Notes to the Schedule of Revenues, Expenditures and Changes in Fund Balances Budget and Actual (1) Original and Final Budget amounts do not include budgeted revenues or expenditures of the various principal accounts. The accompanying schedule of revenues, expenditures and changes in fund balances budget and actual is presented on the modified accrual basis of accounting which is the basis of accounting used in the presentation of the fund financial statements. See notes to the basic financial statements. - 29 - CATOOSA COUNTY BOARD OF EDUCATION SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS YEAR ENDED JUNE 30, 2011 SCHEDULE "2" FUNDING AGENCY PROGRAM/GRANT Agriculture, U. S. Department of Child Nutrition Cluster Pass-Through From Georgia Department of Education Food Services School Breakfast Program National School Lunch Program Total U. S. Department of Agriculture Education, U. S. Department of Education of Homeless Children and Youth Cluster Pass-Through From Georgia Department of Education Education for Homeless Children and Youth Educational Technology State Grants Cluster Pass-Through From Georgia Department of Education Education Technology State Grants Special Education Cluster Pass-Through From Georgia Department of Education Special Education ARRA - Grants to States ARRA - Preschool Grants Grants to States Preschool Grants Total Special Education Cluster Title I, Part A Cluster Pass-Through From Georgia Department of Education ARRA - Title I Grants to Local Educational Agencies Title I Grants to Local Educational Agencies Total Title I, Part A Cluster Other Programs Pass-Through From Georgia Department of Education Career and Technical Education - Basic Grants to States Education Jobs Fund Improving Teacher Quality State Grants Safe and Drug-Free Schools and Communities - State Grants Twenty-First Century Community Learning Centers Total Other Programs Total U. S. Department of Education Health and Human Services, U. S. Department of Child Care and Development Fund Cluster Pass-Through From Bright From the Start: Georgia Department of Early Care and Learning ARRA - Child Care and Development Block Grant CFDA NUMBER PASSTHROUGH ENTITY ID NUMBER EXPENDITURES IN PERIOD 10.553 10.555 N/A N/A $ $ (2) 4,945,686 (1) 4,945,686 84.196 N/A $ 84.318 N/A $ 40,372 18 * 84.391 * 84.392 * 84.027 * 84.173 N/A $ N/A N/A N/A $ 986,595 40,599 1,589,678 35,709 2,652,581 * 84.389 * 84.010 N/A $ N/A $ 500,578 2,293,114 2,793,692 84.048 * 84.410 84.367 84.186 84.287 N/A $ N/A N/A N/A N/A $ $ 116,866 2,241,481 391,441 6,145 343,342 3,099,275 8,585,938 93.713 N/A $ 2,397 - 30 - CATOOSA COUNTY BOARD OF EDUCATION SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS YEAR ENDED JUNE 30, 2011 SCHEDULE "2" FUNDING AGENCY PROGRAM/GRANT Defense, U. S. Department of Direct Department of the Army R.O.T.C. Program CFDA NUMBER PASSTHROUGH ENTITY ID NUMBER EXPENDITURES IN PERIOD $ 127,752 Total Expenditures of Federal Awards $ 13,661,773 N/A = Not Available Notes to the Schedule of Expenditures of Federal Awards (1) Includes the Federally assigned value of donated commodities for the Food Donation Program in the amount of $286,005. (2) Expenditures for the funds earned on the School Breakfast Program ($732,608) were not maintained separately and are included in the 2011 National School Lunch Program. Major Programs are identified by an asterisk (*) in front of the CFDA number. The School District did not provide Federal Assistance to any Subrecipient. The accompanying schedule of expenditures of Federal awards includes the Federal grant activity of the Catoosa County Board of Education and is presented on the modified accrual basis of accounting which is the basis of accounting used in the presentation of the fund financial statements. See notes to the basic financial statements. - 31 - CATOOSA COUNTY BOARD OF EDUCATION SCHEDULE OF STATE REVENUE YEAR ENDED JUNE 30, 2011 AGENCY/FUNDING GRANTS Bright From the Start: Georgia Department of Early Care and Learning Pre-Kindergarten Program Education, Georgia Department of Quality Basic Education Direct Instructional Cost Kindergarten Program Kindergarten Program - Early Intervention Program Primary Grades (1-3) Program Primary Grades - Early Intervention (1-3) Program Upper Elementary Grades (4-5) Program Upper Elementary Grades - Early Intervention (4-5) Program Middle School (6-8) Program High School General Education (9-12) Program Vocational Laboratory (9-12) Program Students with Disabilities Gifted Student - Category VI Remedial Education Program Alternative Education Program English Speakers of Other Languages (ESOL) Media Center Program 20 Days Additional Instruction Staff and Professional Development Indirect Cost Central Administration School Administration Facility Maintenance and Operations Categorical Grants Pupil Transportation Regular Nursing Services Vocational Supervisors Education Equalization Funding Grant Food Services Vocational Education Amended Formula Adjustment Other State Programs Dual Enrollment Funding Health Insurance Industry Certification Related Equipment - State Bonds Math and Science Supplements Preschool Handicapped Program State Bus Bonds Teachers' Retirement Virtual Schools Grant Office of the State Treasurer Public School Employees' Retirement See notes to the basic financial statements. - 32 - SCHEDULE "3" GOVERNMENTAL FUND TYPE GENERAL FUND $ 958,900 3,221,995 854,186 8,296,251 838,003 3,966,199 383,969 6,805,680 6,019,571 2,356,811 10,132,282 2,760,427 828,961 533,182 142,585 1,223,933 365,667 233,520 1,677,624 2,692,154 2,798,130 854,423 166,658 24,371 5,909,522 158,750 192,904 -8,346,250 3,650 196,434 14,617 57,286 176,016 305,168 10,084 50 55,960 $ 56,869,673 CATOOSA COUNTY BOARD OF EDUCATION SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS YEAR ENDED JUNE 30, 2011 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) PROJECT STATUS (5) SPLOST II To build, equip and furnish new schools; to make additions, modifications and renovations to 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 instructional, sporting and physical activities; and to pay for the expenses incident to accomplish the foregoing purposes. $ 46,500,000 $ 54,678,302 $ 846,605 $ 53,033,686 Ongoing SPLOST III 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 activities; and to pay for the expenses incident to accomplish the foregoing purposes. 59,000,000 57,157,546 49,760,143 Ongoing SPLOST IV (1) Making capital expenditures for instructional purposes, acquiring instructional and technological equipment (including but not limited to wireless electronic devices, desktop and laptop computers, smartboards, projectors, scanners, printers, and student response devices), and acquiring the wiring and other infrastructure necessary to accommodate the use of such technology equipment 23,121,409 23,121,409 Ongoing (2) Acquiring land for constructing and equipping new schools (including a new elementary school) 14,250,000 14,250,000 Ongoing (3) Making additions, expansions, modifications and renovations to existing school sites or campuses (including but not limited to classrooms, cafeterias, media centers, restrooms, band rooms and gymnasiums) 6,802,231 6,802,231 98,450 Ongoing (4) Acquiring, constructing and equipping new roofs, a new Lakeview Fort Oglethorpe High School gymnasium and new Ringgold High School theatre 13,546,360 13,546,360 106,413 Ongoing (5) Installing roofing, sprinklers, HVAC, paving, plumbing, electrical wiring and fixtures, painting, fences, alarms, telephone upgrading, equipping, lighting, and general land improvements 5,150,000 5,150,000 Ongoing (6) Acquiring, constructing and equipping facilities for student evaluation and testing, teacher training and professional learning, special education and storage (7) Physical education equipment purchases and maintenance (8) School bus purchases (mainly for replacement) 5,000,000 250,000 6,800,000 5,000,000 250,000 6,800,000 Ongoing Ongoing Ongoing - 33 - CATOOSA COUNTY BOARD OF EDUCATION SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS YEAR ENDED JUNE 30, 2011 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) PROJECT STATUS (5) (9) Acquiring, constructing and equipping transportation facilities to house, drive into/under and repair school buses (including the acquisition of land, and construction of needed facilities and appurtenances therefore): and paying for the expenses incident to accomplish the foregoing purposes. $ 4,080,000 $ 4,080,000 Ongoing $ 184,500,000 $ 190,835,848 $ 1,051,468 $ 102,793,829 (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 property taxes and/or other funds over the life of the projects. (4) In addition to the expenditures shown above, the School District has incurred interest to provide advance funding for the above projects as follows: Prior Years $ 5,505,403 Current Year 1,015,000 Total $ 6,520,403 (5) SPLOST II projects are expected to be completed no later than June 30, 2012. SPLOST III projects are expected to be completed no later than August 1, 2012. See notes to the basic financial statements. - 34 - CATOOSA COUNTY BOARD OF EDUCATION GENERAL FUND - QUALITY BASIC EDUCATION PROGRAMS (QBE) ALLOTMENTS AND EXPENDITURES - BY PROGRAM YEAR ENDED JUNE 30, 2011 SCHEDULE "5" DESCRIPTION Direct Instructional Programs Kindergarten Program Kindergarten Program-Early Intervention Program Primary Grades (1-3) Program Primary Grades-Early Intervention (1-3) Program Upper Elementary Grades (4-5) Program Upper Elementary Grades-Early Intervention (4-5) Program Middle School (6-8) Program High School General Education (9-12) Program Vocational Laboratory (9-12) Program Students with Disabilities Category I Category II Category III Category IV Category V Gifted Student - Category VI Remedial Education Program Alternative Education Program English Speakers of Other Languages (ESOL) TOTAL DIRECT INSTRUCTIONAL PROGRAMS Media Center Program Staff and Professional Development ALLOTMENTS FROM GEORGIA DEPARTMENT OF EDUCATION (1) (2) ELIGIBLE QBE PROGRAM COSTS SALARIES OPERATIONS TOTAL $ 3,699,580 $ 3,845,825 $ 45,473 $ 3,891,298 922,349 344,287 9,677 353,964 8,907,967 9,385,744 183,356 9,569,100 932,177 897,631 17,635 915,266 4,507,407 5,157,781 91,006 5,248,787 438,433 7,721,904 6,259,991 2,717,559 11,452,433 3,099,067 871,845 607,412 157,104 477,879 7,129,128 7,536,475 2,771,284 2,831,998 683,700 6,316,289 781,423 173,896 1,816,075 53,232 1,125,153 267,682 11,275 168,873 308,031 238,175 72,787 12,763 35,101 17,747 18,419 65 5,931 489,154 7,298,001 7,844,506 3,009,459 2,904,785 696,463 6,351,390 799,170 173,896 1,834,494 53,232 1,125,218 273,613 $ 52,295,228 $ 51,595,482 $ 1,236,314 $ 52,831,796 1,389,394 265,684 1,729,655 27,529 137,075 51,275 1,866,730 78,804 TOTAL QBE FORMULA FUNDS $ 53,950,306 $ 53,352,666 $ 1,424,664 $ 54,777,330 (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. - 35 - SECTION II COMPLIANCE AND INTERNAL CONTROL REPORTS Greg S. Griffin STATE AUDITOR (404) 656-2174 DEPARTMENT OF AUDITS AND ACCOUNTS 270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400 September 4, 2012 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 MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS Ladies and Gentlemen: We have audited the financial statements of the governmental activities, each major fund, and the aggregate remaining fund information of Catoosa County Board of Education as of and for the year ended June 30, 2011, which collectively comprise Catoosa County Board of Education's basic financial statements and have issued our report thereon dated September 4, 2012. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Internal Control Over Financial Reporting Management of Catoosa County Board of Education is responsible for establishing and maintaining effective internal control over financial reporting. 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 expressing our 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 deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect and correct misstatements on a timely basis. A material weakness is a deficiency, or combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity's financial statements will not be prevented, or detected and corrected on a timely basis. 2011YB-10 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. Compliance and 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 Auditing Standards. We noted a certain matter that we have reported to management of Catoosa County Board of Education in a separate letter dated September 4, 2012. 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, GSG:as 2011YB-10 Greg S. Griffin State Auditor Greg S. Griffin STATE AUDITOR (404) 656-2174 DEPARTMENT OF AUDITS AND ACCOUNTS 270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400 September 4, 2012 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 WITH REQUIREMENTS THAT COULD HAVE A DIRECT AND MATERIAL EFFECT ON EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH OMB CIRCULAR A-133 Ladies and Gentlemen: Compliance We have audited 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, 2011. 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 Governments, and Non-Profit Organizations. Those standards and OMB Circular A-133 require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major Federal program occurred. An audit includes examining, on a test basis, evidence about the 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, 2011. 2011SA-10 Internal Control Over Compliance 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 planning and 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 deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a Federal program on a timely basis. A material weakness in internal control over compliance is a deficiency, or combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a Federal program will not be prevented, or detected and corrected, on a timely basis. 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, GSG:as 2011SA-10 Greg S. Griffin State Auditor SECTION III 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, 2011 PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS FINDING CONTROL NUMBER AUDITEE'S RESPONSE/STATUS SEE AUDITOR'S COMMENTS FS-6271-10-01 Further Action Not Warranted (1) AUDITOR'S COMMENT (1) Findings/internal control deficiencies of this nature, that are not deemed significant deficiencies or material weaknesses and do not require reporting in the audit report in accordance with Statements on Auditing Standards (SAS) 112 or Governmental Auditing Standards (Yellow Book), will be communicated in a management letter. PRIOR YEAR FEDERAL AWARD FINDINGS AND QUESTIONED 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, 2011 I SUMMARY OF AUDITOR'S RESULTS Financial Statements Type of auditor's report issue: Governmental Activities; General Fund; Capital Projects Fund; Debt Service Fund; Aggregate Remaining Fund Information Unqualified Internal control over financial reporting: Material weakness identified? Significant deficiency identified? No None Reported Noncompliance material to financial statements noted: No Federal Awards Internal Control over major programs: Material weakness identified? Significant deficiency identified? No 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)? No Identification of major programs: CFDA Numbers Name of Federal Program or Cluster 84.010, 84.389 84.027, 84.173, 84.391, 84.392 84.410 Title I, Part A Cluster Special Education Cluster Education Jobs Fund Dollar threshold used to distinguish between Type A and Type B programs: $409,853 Auditee qualified as low-risk auditee? No II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS No matters were reported. III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS No matters were reported.