Cherokee County School District, Canton, Georgia, annual financial report, June 30, 2014

Canton, Georgia Annual Financial Report Fiscal Year Ended June 30, 2014

CHEROKEE COUNTY SCHOOL DISTRICT Annual Financial Report
Fiscal Year Ended June 30, 2014
- TABLE OF CONTENTS -
SECTION I
FINANCIAL
INDEPENDENT AUDITOR'S REPORT
BASIC FINANCIAL STATEMENTS
DISTRICT-WIDE FINANCIAL STATEMENTS STATEMENT OF NET POSITION STATEMENT OF ACTIVITIES
FUND FINANCIAL STATEMENTS BALANCE SHEET GOVERNMENTAL FUNDS STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES TO THE STATEMENT OF ACTIVITIES STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE BUDGET AND ACTUAL GENERAL FUND STATEMENT OF FIDUCIARY NET POSITION FIDUCIARY FUNDS
NOTES TO THE FINANCIAL STATEMENTS
COMBINING STATEMENTS AND SUPPLEMENTARY SCHEDULES
COMBINING BALANCE SHEET NONMAJOR GOVERNMENTAL FUNDS
COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES NONMAJOR GOVERNMENTAL FUNDS
SCHEDULE OF STATE REVENUE ALLOTMENTS AND EXPENDITURES
SCHEDULE OF QUALITY BASIC EDUCATION PROGRAM (QBE) BY PROGRAM
SCHEDULE OF EXPENDITURES OF EDUCATIONAL LOCAL OPTION SALES TAX PROCEEDS

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CHEROKEE COUNTY SCHOOL DISTRICT Annual Financial Report
Fiscal Year Ended June 30, 2014
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CHEROKEE COUNTY SCHOOL DISTRICT Annual Financial Report
Fiscal Year Ended June 30, 2014
- TABLE OF CONTENTS -
SECTION II AUDITEE'S RESPONSE TO PRIOR YEAR FINDINGS AND QUESTIONED COSTS SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS
SECTION III FINDINGS AND QUESTIONED COSTS SCHEDULE OF FINDINGS AND QUESTIONED COSTS

CHEROKEE COUNTY SCHOOL DISTRICT Annual Financial Report
Fiscal Year Ended June 30, 2014
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CHEROKEE COUNTY SCHOOL DISTRICT Annual Financial Report
Fiscal Year Ended June 30, 2014
SECTION I FINANCIAL

CHEROKEE COUNTY SCHOOL DISTRICT Annual Financial Report
Fiscal Year Ended June 30, 2014
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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
April 15, 2016

Honorable Nathan Deal, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the Cherokee County Board of Education
INDEPENDENT AUDITOR'S REPORT
Ladies and Gentlemen:
Report on the Financial Statements
We have audited the accompanying financial statements of the governmental activities, each major fund, and the aggregate remaining fund information of the Cherokee County Board of Education, as of and for the year ended June 30, 2014, and the related notes to the financial statements, which collectively comprise the Board's basic financial statements as listed in the table of contents.
Management's Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.
Auditor's Responsibility
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. 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 involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. Accordingly, we express no such opinion. An audit also

2014ARL-11

CHEROKEE COUNTY SCHOOL DISTRICT Annual Financial Report
Fiscal Year Ended June 30, 2014
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includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions.
Opinions
In our opinion, the basic financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, each major fund, and the aggregate remaining fund information of the Cherokee County Board of Education, as of June 30, 2014, and the respective changes in financial position thereof and the respective budgetary comparison for the general fund for the year then ended in accordance with accounting principles generally accepted in the United States of America.
Emphasis of Matter
As discussed in Note 2 to the financial statements, in 2014, the Cherokee County Board of Education restated the prior period financial statements to correct several misstatements. Our opinion is not modified with respect to this matter.
Other Matters
Required Supplementary Information
Management has omitted the Management's Discussion and Analysis that accounting principles generally accepted in the United States of America require to be presented to supplement the basic financial statements. Such missing 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. Our opinion on the basic financial statements is not affected by this missing information.
Other Information
Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Cherokee County Board of Education's basic financial statements. The accompanying supplementary information is presented for the purposes of additional analysis and is not a required part of the basic financial statements.
The accompanying supplementary information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic 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 basic financial statements as a whole.
2014ARL-11

CHEROKEE COUNTY SCHOOL DISTRICT Annual Financial Report
Fiscal Year Ended June 30, 2014
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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:er 2014ARL-11

Greg S. Griffin State Auditor

CHEROKEE COUNTY SCHOOL DISTRICT Annual Financial Report
Fiscal Year Ended June 30, 2014
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CHEROKEE COUNTY SCHOOL DISTRICT Annual Financial Report
Fiscal Year Ended June 30, 2014
CHEROKEE COUNTY BOARD OF EDUCATION

CHEROKEE COUNTY SCHOOL DISTRICT Annual Financial Report
Fiscal Year Ended June 30, 2014
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CHEROKEE COUNTY SCHOOL DISTRICT Statement of Net Position June 30, 2014
Assets and Deferred Outflows of Resources
Assets Cash and Cash Equivalents Restricted Cash Investments Receivables
Taxes State Government Federal Government Other Inventory Capital Assets, Nondepreciable Capital Assets, Net
Total Assets
Deferred Outflow of Resources Deferred Charges
Total Deferred Outflows of Resources Total Assets and Deferred Outflows of Resources
Liabilities Accounts Payable Salaries and Benefits Payable Accrued Interest Payable Retainage Payable Deposits and Unearned Revenue Long-term Liabilities
Due Within One Year Due in More Than One Year
Total Liabilities
Net Position Net Investment In Capital Assets Restricted For:
Capital Projects Debt Service Unrestricted
Total Net Position

Governmental Activities
$ 26,158,524 4,303,036
69,708,582
7,015,314 24,514,477
4,956,428 1,121,938
602,486 40,130,530 531,406,928 709,918,243
4,169,771 4,169,771 714,088,014
6,191,319 25,447,390
7,989,392 2,256,794
207,936
20,089,482 404,454,401 466,636,714
171,145,712
17,785,409 19,991,465 38,528,714 $ 247,451,300

The accompanying notes are an integral part of this financial statement.
-1 -

Functions/Programs
Governmental Activities : Instruction Support Services Pupil Services Improvement of Instruction Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operations Student Transportation Services Central Support Services Other Support Services Operations of Noninstructional Services: Community Service Operations Food Services Operations Interest on Long-term Debt Total Governmental Activities

CHEROKEE COUNTY SCHOOL DISTRICT Statement of Activities
For the Fiscal Year Ended June 30, 2014

Expenses

Program Revenues

Charges for Services

Operating Grants and Contributions

Capital Grants and Contributions

Net (Expense) Revenue and Changes in Net Position

$ 250,405,679
14,141,755 8,055,042 4,349,943 4,256,475
19,786,635 3,082,503
24,186,081 17,938,166
3,346,549 330,053

$ 11,665,861
24,473 512,126 -

$ 144,549,286 $
757,491 1,601,303 4,112,799
130 9,721,839
24,556 8,086,214
246,558 3,702,690
13,470

- $ (94,190,532)

2,040,947 -

(13,384,264) (6,453,739) (237,144) (4,231,872)
(10,064,796) (2,545,821)
(16,099,867) (15,650,661)
356,141 (316,583)

24,802 15,310,576 17,569,037
$ 382,783,296

6,190,901
-
$ 18,393,361

9,486,351
-
$ 182,302,687 $

2,873,240
4,914,187

(24,802) 366,676 (14,695,797)
(177,173,061)

General Revenues: Taxes:
Property Tax, Levied for General Purposes Property Tax, Levied for Debt Service Educational Local Option Sales Tax Other Sales Taxes Restricted Investment Earnings Unrestricted Investment Earnings Miscellaneous Gain on Sale of Capital Asset
Total General Revenues
Change in Net Position Net Position - Beginning of Year Prior Period Adjustment
Net Position - End of Year

115,437,762 2,440,652
31,148,497 3,795,929 379,995 14,958 1,472,405 8,912
154,699,110
(22,473,951) 270,641,357
(716,106)
$ 247,451,300

The accompanying notes are an integral part of this financial statement.
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CHEROKEE COUNTY SCHOOL DISTRICT Balance Sheet
Governmental Funds June 30, 2014

Assets Cash and Cash Equivalents Restricted Cash Investments Receivables
Taxes State Government Federal Government Other Inventory Due From Other Funds
Total Assets
Liabilities, Deferred Inflows of Resources, and Fund Balances
Liabilities Accounts Payable Salaries and Benefits Payable Deposits and Unearned Revenue Retainage Payable Due To Other Funds
Total Liabilities
Deferred Inflows of Resources Unavailable Revenue
Total Deferred Inflows of Resources
Fund Balances Nonspendable
Inventory Restricted
Debt Service Capital Projects Committed School Food Services School Activities Unassigned
Total Fund Balances Total Liabilities, Deferred Inflows of Resources, and Fund Balances

General Fund

District-Wide Capital Projects

Debt Service

Nonmajor Governmental
Funds

Total Governmental
Funds

$ 20,067,310 -
270,526

$

-

4,140,175

42,205,325

$

-

162,861

24,458,131

$ 6,091,214 -
2,774,600

$ 26,158,524 4,303,036
69,708,582

4,213,194 23,111,833
555,854 272,721 4,662,084
$ 53,153,522

1,402,644
-
$ 47,748,144

2,802,120 -
564,269 -
$ 27,987,381

4,956,428 1,815 329,765 -
$ 14,153,822

7,015,314 24,514,477
4,956,428 1,121,938
602,486 4,662,084
$ 143,042,869

$ 1,631,133 $ 4,455,049 $

24,349,823

-

-

-

-

2,256,794

-

-

25,980,956

6,711,843

6,525 -
6,525

$

98,612

1,097,567

207,936

-

4,662,084

6,066,199

$ 6,191,319 25,447,390 207,936 2,256,794 4,662,084
38,765,523

1,432,489 1,432,489

1,402,645 1,402,645

29,694 29,694

-

2,864,828

-

2,864,828

272,721

-

-

329,765

602,486

-

-

27,951,162

-

39,633,656

-

-

27,951,162

-

39,633,656

25,467,356
25,740,077
$ 53,153,522

-
39,633,656
$ 47,748,144

-
27,951,162
$ 27,987,381

3,519,574 4,238,284
-
8,087,623
$ 14,153,822

3,519,574 4,238,284 25,467,356
101,412,518
$ 143,042,869

Total Fund Balances Governmental Funds
Amounts reported for governmental activities in the Statement of Net Position are different because:
Capital assets used in governmental activities are not financial resources and therefore are not reported in the funds.
Cost Less Accumulated Depreciation
Other long-term assets are not available to pay for current-period expenditures and therefore, are deferred in the funds.
Property Taxes
Georgia State Financing and Investment Commission grants that are not available to pay current period expenditures are deferred in the funds.
Long-term liabilities are not due and payable in the current period and, therefore, are not reported in the funds.
Bonds Payable Bond Premium, Net of Amortization Loss on Bond Refunding, Net of Amortization
Claims Payable Accrued Interest Compensated Absences
Net Position Of Governmental Activities

763,154,090 (191,616,632)
(396,530,000) (25,594,630) 4,169,771 (894,914) (7,989,392) (1,524,339)

$ 101,412,518
571,537,458 1,462,183 1,402,645
(428,363,504) $ 247,451,300

The accompanying notes are an integral part of this financial statement.

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CHEROKEE COUNTY SCHOOL DISTRICT Statement of Revenues, Expenditures, and Changes in Fund Balances
Governmental Funds For the Year Ended June 30, 2014

Revenues Local Sources State Funds Federal Funds 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 Operations Student Transportation Services Central Supports Services Other Support Services Community Services Operations Food Services Operation Capital Outlay Debt Service Principal Retirement Interest and Fees Issuance Costs
Total Expenditures
Excess (Deficiency) of Revenues Over (Under) Expenditures
Other Financing Sources (Uses) Bond Issuance Bond Premium Deposit With Escrow Agent Proceeds From Sale of Capital Assets Transfers In Transfers Out Total Other Financing Sources (Uses)
Net Change in Fund Balances
Fund Balance, Beginning of Year
Prior Period Adjustment
Fund Balance, End of Year

General Fund

District Wide Capital Projects

Debt Service

Nonmajor Governmental
Funds

Total Governmental
Funds

$ 122,562,949 $ 159,411,773 1,139,708 10,547 -
283,124,977

456,659 $ 252,808
94,975
-
804,442

33,589,148 $ -
285,019 2,873,240
36,747,407

18,299,944 $ 980,278
22,710,566 4,411 -
41,995,199

174,908,700 160,644,859
23,850,274 394,952
2,873,240
362,672,025

204,967,820
9,710,754 5,551,240 4,350,082 3,672,562 19,691,257 2,015,498 24,789,844 15,487,339 3,347,920
10,019 26,684 153,274 141,034
42,054
293,957,381

12,377,445
324 30,276,079
712,137 43,365,985

-
-
16,150,000 18,031,743
34,181,743

18,716,369
4,440,865 2,512,406
143,907
3,536 -
301,115 -
320,273 -
15,166,732 -
41,605,203

236,061,634
14,151,619 8,063,646 4,350,082 3,816,469
19,695,117 2,015,498
24,789,844 15,788,454
3,347,920 330,292 26,684
15,320,006 30,417,113
16,150,000 18,073,797
712,137 413,110,312

(10,832,404)

(42,561,543)

2,565,664

389,996

(50,438,287)

78,918 (335,661)
(256,743)

(11,089,147) 28,089,633

8,739,591

$

25,740,077 $

81,315,000 13,311,060 (40,703,827)
147,600 -
54,069,833
11,508,290
43,047,837
(14,922,471)
39,633,656 $

-
2,565,664
25,385,498
-
27,951,162 $

335,661 335,661
725,657
7,361,966
-
8,087,623 $

81,315,000 13,311,060 (40,703,827)
226,518 335,661 (335,661) 54,148,751
3,710,464
103,884,934
(6,182,880)
101,412,518

The accompanying notes are an integral part of this financial statement.
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CHEROKEE COUNTY SCHOOL DISTRICT Reconciliation of the Statement of Revenues, Expenditures, and Changes
in Fund Balances to the Statement of Activities For the Year Ended June 30, 2014

Net Change in Fund Balances - Total Governmental Funds
Governmental funds report capital outlays as expenditures. However, in the statement of activities the cost of those assets is allocated over their estimated useful lives and reported as depreciation expense. The amount by which capital outlays exceeded depreciation expense is as follows:
Capital Outlay Depreciation Expense
The net effect of various miscellaneous transactions involving capital assets during the fiscal year decreased net position.
Revenues in the statement of activities that do not provide current financial resources are not reported as revenues in the funds.
Property Taxes Georgia State Financing and Investment Commission
The issuance of long-term debt provides current financial resources to governmental funds, while the repayment of the principal of long-term debt consumes the current financial resources of governmental funds. Neither transaction, however, has any effect on net position. This amount is the net effect of these differences in the treatment of long-term debt and related items.
Bond Issuance Deposit Into Escrow
Bond Premium Principal Payments - Bonds
Some expenses reported in the statement of activities do not require the use of current financial resources and, therefore, are not reported as expenditures in the governmental funds.
Change in Compensated Absences Amortization of Bond Premium
Amortization of Deferred Charge on Refunding Change in Claims Payable Change in Accrued Interest
Change in Net Position of Governmental Activities

$

3,710,464

$ 30,654,966 (17,508,834)
(1,986,141) (252,808)

13,146,132 (220,159)
(2,238,949)

(81,315,000) 40,703,827 (13,311,060) 16,150,000

(37,772,233)

479,362 357,040 (275,508) 228,929 110,971

900,794 $ (22,473,951)

The accompanying notes are an integral part of this financial statement.
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CHEROKEE COUNTY SCHOOL DISTRICT General Fund
Statement of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual For the Fiscal Year Ended June 30, 2014

Revenues Local Sources State Funds Federal Funds Investment Earnings
Total Revenues
Expenditures Instruction Support Services:
Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operations Student Transportation Services Central Support Services Other Support Services Community Services Operations Food Services Operation Capital Outlay Debt Service Interest and Fees
Total Expenditures
Excess (Deficiency) of Revenues Over (Under) Expenditures
Other Financing Sources Proceeds From Sale of Capital Assets Transfers Out
Total Other Financing Sources
Net Change In Fund Balance
Fund Balance, Beginning of Year
Prior Period Adjustment
Fund Balance, End of Year

Original Budget

Final Budget

Actual

$ 125,854,616 157,721,213 152,000 283,727,829

$ 125,854,616 157,721,213 152,000 283,727,829

$ 122,562,949 159,411,773 1,139,708 10,547 283,124,977

Variance With Final Budget
$ (3,291,667) 1,690,560 987,708 10,547 (602,852)

198,267,240
9,807,125 4,897,123 4,589,996 2,388,645 20,231,795 2,128,408 20,309,476 14,983,328 3,378,064
275,676
37,500 281,294,376

198,267,240
9,807,125 4,897,123 4,589,996 2,388,645 20,231,795 2,128,408 20,309,476 14,983,328 3,378,064
275,676
37,500 281,294,376

204,967,820
9,710,754 5,551,240 4,350,082 3,672,562 19,691,257 2,015,498 24,789,844 15,487,339 3,347,920
10,019 26,684 153,274 141,034
42,054 293,957,381

(6,700,580)
96,371 (654,117) 239,914 (1,283,917) 540,538 112,910 (4,480,368) (504,011)
30,144 (10,019) (26,684) (153,274) 134,642
(4,554) (12,663,005)

2,433,453

2,433,453

(10,832,404)

(13,265,857)

(827,000)
(827,000)

(827,000)
(827,000)

1,606,453

1,606,453

28,089,633

28,089,633

-

-

$ 29,696,086 $ 29,696,086

78,918 (335,661)
(256,743)

78,918 491,339
570,257

(11,089,147)

(12,695,600)

28,089,633

-

8,739,591

8,739,591

25,740,077 $ (3,956,009)

The accompanying notes are an integral part of this financial statement.
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CHEROKEE COUNTY SCHOOL DISTRICT Agency Fund
Statement of Fiduciary Net Position June 30, 2014
Assets Cash Total Assets
Liabilities Due to Others Total Liabilities

Agency Fund
$ 274,815 $ 274,815
$ 274,815 $ 274,815

The accompanying notes are an integral part of this financial statement.
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CHEROKEE COUNTY SCHOOL DISTRICT Annual Financial Report
Fiscal Year Ended June 30, 2014
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CHEROKEE COUNTY SCHOOL DISTRICT Notes to the Financial Statements June 30, 2014
Note 1 Description of School District and Reporting Entity
Reporting Entity
The Cherokee County School District (the "School District") was established under the laws of the State of Georgia and operates under the guidance of a seven member 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 the notes to the basic financial statements of the Cherokee County School District.
District-wide Statements:
The Statement of Net Position 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. All remaining governmental funds are aggregated and reported as nonmajor governmental funds.
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CHEROKEE COUNTY SCHOOL DISTRICT Notes to the Financial Statements June 30, 2014
The School District reports the following major governmental funds:
The 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.
The District-wide Capital Projects Fund accounts for financial resources including Educational Local Option Sales Tax (ELOST), bond proceeds, and grants from the Georgia State Financing and Investment Commission that are restricted for capital outlay expenditures, including the acquisition or construction of capital facilities and other capital assets.
The Debt Service Fund accounts for and reports financial resources that are restricted, including taxes (property and sales) legally restricted for the payment of general long-term principal and interest.
The School District reports the following fiduciary fund type:
Agency Fund accounts for assets of the school activity funds held by the School District in an agency capacity.
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. Property taxes are recognized as revenue in the period for which they were levied, if they are collected within sixty days of year end. All other revenues are also considered to be available when they are collectible within six months of year end, with the exception of grants and donations, which are recognized when all eligibility requirements have been met. Property taxes, sales taxes, grant revenue, 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, claims and judgments, and compensated absences, which are recognized as expenditures to the extent they have matured.
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CHEROKEE COUNTY SCHOOL DISTRICT Notes to the Financial Statements June 30, 2014

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, both restricted and unrestricted resources are 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.
Restatement of Prior Year Net Position/Fund Balance/Capital Assets
For the fiscal year 2014, the School District made a variety of prior period adjustments due to various errors or omissions. The result is a decrease in Net Position, an increase in General Fund Balance and a decrease in Capital Projects Fund Balance at July 1, 2013, of $716,106, $8,739,591 and $14,922,473, respectively.
For fiscal year 2014, the School District restated various Capital Assets due to errors and omissions. The School District increased construction in progress by $1,621,317. Additionally, the School District increased, net of accumulated depreciation, buildings and improvements by $2,190,005. The result is an increase in overall Capital Assets and related Retainages and Accounts Payable at July 1, 2013, of $3,811,322. There was no impact on Net Position for this change.
These changes are in accordance with generally accepted accounting principles.

Net Position, July 1, 2013, as previously reported Correction of Accounts Receivable Correction of Accounts Payable
Net Position, July 1, 2013, as restated

$ 270,641,357 (1,681,332) 965,226
$ 269,925,251

General Fund Balance, July 1, 2013 as previously reported Correction of Investments
General Fund Balance, July 1, 2013 as restated

$ 28,089,633 8,739,591
$ 36,829,224

Capital Projects Fund Balance, July 1 2013 as previously reported Correction of Investments Correction of Accounts Receivable Correction of Accounts Payable Correction of Retainage Payable
Capital Projects Fund Balance, July 1, 2013 as restated

$ 43,047,837 (8,739,591) (3,336,785) (3,763,721) 917,626
$ 28,125,366

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 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.

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CHEROKEE COUNTY SCHOOL DISTRICT Notes to the Financial Statements June 30, 2014
Investments
Composition of Investments: Investments made by the School District in nonparticipating interestearning contracts (such as certificates of deposits) and repurchase agreements are reported at cost. Participating interest-earning 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 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:
Obligations issued by the State of Georgia or by other states, Obligations issued by the United States Government, Obligations fully insured or guaranteed by the United States government or a United
States government agency, Obligations of any corporation of the United States government, Prime banker's acceptances, The local government investment pool (Georgia Fund 1) administered by the State of
Georgia, Office of the State Treasurer, Repurchase agreements, and Obligations of the other political subdivisions of the State of Georgia.
The School System does not have a formal policy regarding investments that addresses 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 Cherokee County Board of Commissioners adopted the property tax levy for the 2013 tax digest year (calendar year) on July 25, 2013 (levy date) to be paid by December 20, 2013 (lien date). Taxes collected within the current fiscal year or within 60 days after year-end on the 2013 tax digest are reported as revenue in the governmental funds for fiscal year 2014. The Cherokee County Tax Commissioner bills and collects the property taxes for the School District, withholds 2.3% 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, 2014, for maintenance and operations amounted to $110,011,581 and for school bonds amounted to $2,368,648.
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CHEROKEE COUNTY SCHOOL DISTRICT Notes to the Financial Statements June 30, 2014

Tax millage rates levied for the 2013 tax year for the Cherokee County School District were as follows (a mil equals $1 per thousand dollars of assessed value):

School Operations School Bonds

19.45 mils .40 mils
19.85 mils

Additionally, Title Ad Valorem Tax revenues, at the fund reporting level, amounted to $7,394,322 during the fiscal year ended June 30, 2014.

Sales Taxes
Educational Local Option Sales Tax revenue, at the fund reporting level, during the year amounted to $31,148,497 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 reauthorized 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 using the first-in, first-out method. 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 are recorded as the inventory items are used.
Supplies/Equipment Inventories: On the basic financial statements, inventories of stored supplies and equipment are reported at cost using the first-in, first-out method. The School District uses the consumption method to account for the inventories whereby items are recorded as an asset when purchased and expenses are recorded when the item is put into use.
Capital Assets
Capital assets purchased, including capital outlay costs, are recorded as expenditures in the fund financial statements at the time of purchase (including ancillary charges). On the District-wide financial statements, all purchased capital assets are valued at cost where historical records are available and at estimated historical cost based on appraisals or deflated current replacement cost where no historical records exist. Donated capital assets are recorded at estimated fair market value on the date donated. Disposals are deleted at depreciated recorded cost. The cost of normal maintenance and repairs that do not add to the value of assets or materially extend the useful lives of the assets is not capitalized. Depreciation is computed using the straight-line method. The School District does not capitalize book collections or works of art. During the fiscal year under review, no events or changes in circumstances affecting a capital asset that may indicate impairment were known to the School District.

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CHEROKEE COUNTY SCHOOL DISTRICT Notes to the Financial Statements June 30, 2014
Capitalization thresholds and estimated useful lives of capital assets reported in the District-wide statements are as follows:

Description

Policy

Useful Life

Land Land Improvements Buildings and Improvements Equipment

Any Amount

$

10,000

$

10,000

$

10,000

N/A 20 years 20-50 years 5-10 years

Depreciation is used to allocate the actual or estimated historical cost of all capital assets over their estimated useful lives.
Deferred Outflows/Inflows of Resources
In addition to assets, the Statement of Net Position and/or the Balance Sheet will sometimes report a separate section for deferred outflows of resources. This separate financial statement element represents a consumption of resources that applies to a future period and therefore will not be recognized as an outflow of resources (expense/expenditure) until then. The School District has only one item that qualifies for reporting in this category. The deferred charge on refunded debt resulting from the difference in the carrying value of the refunded debt and its reacquisition price is deferred and amortized over the shorter of the life of the refunded or refunding debt.
In addition to liabilities, the Statement of Net Position and/or the Balance Sheet will sometimes report a separate section for deferred inflows of resources. This separate financial statement element represents an acquisition of resources that applies to a future period and therefore will not be recognized as an inflow of resources (revenue) until that time. The School District has only one item that qualifies for reporting in this category. Accordingly the item, unavailable revenue, is reported only in the governmental funds balance sheet. The governmental funds report unavailable revenues from property taxes levied and grant reimbursements that are not collected within 60 days of year end. These amounts are deferred and will be recognized as an inflow of resources in the period in which the amounts become available.
Compensated Absences
Members of the Teachers' Retirement System of Georgia (TRS) may apply unused sick leave toward early retirement. The liability for early retirement will be borne by TRS rather than by the individual school districts. Otherwise, sick leave does not vest with the employee, and no liability is reported in the School District's financial statements.
Vacation leave of 12 days is awarded on a fiscal year basis to all full time personnel employed on a twelve month basis. No other employees are eligible to earn vacation leave. Vacation leave not utilized during the fiscal year may be carried over to the next fiscal year, providing such vacation leave does not exceed 45 days. Vacation leave of 20 days is awarded on a fiscal year basis to the Superintendent and there are no limits on the amount that may be carried over.

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CHEROKEE COUNTY SCHOOL DISTRICT Notes to the Financial Statements June 30, 2014
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, and gains or losses on bond refundings are deferred and amortized over the life of the bonds using the effective interest method or the straight line method. Bond issuance costs are recognized as an outflow of resources in the fiscal year in which the bonds are issued.
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 School District. The outstanding amount of these bonds is recorded in the Statement of Net Position.
Service Concession Arrangements
Service concession arrangements are between a government (transferor) and a third party (operator) in which all of the following criteria are met:
The School District conveys to the operator the right and obligation to provide public services through the use and operation of a capital asset in exchange for significant consideration. Significant consideration could be in the form of up-front payments, installment payments, a new facility or improvements to existing facility.
The operator collects and is compensated by fees from third parties.
The School District has the ability to modify or approve what services the operator is required to provide, to whom services are provided, and prices or rates that can be charged for those services.
The School District is entitled to significant residual interest in the service utility of the asset at the end of the arrangement.
At June 30, 2014, the School District was not participating in any service concession arrangements.
Net Position
The School District's net position in the District-wide Statements is classified as follows:
Net Investment in Capital Assets - This represents the School District's total investment in capital assets, net of accumulated depreciation less 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 net investment in capital assets.
Restricted Net Position - These represent resources for which the School District is legally or contractually obligated to spend for bus replacement, continuation of Federal programs, debt service and capital projects in accordance with restrictions imposed by external third parties.
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CHEROKEE COUNTY SCHOOL DISTRICT Notes to the Financial Statements June 30, 2014
Unrestricted Net Position - Unrestricted net position represents 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 and 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 (3) 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 have not been assigned to other funds and that have not been restricted, committed, or assigned to specific purposes within the General Fund.
When multiple categories of fund balance are available for expenditure, the School District will start with the most restricted category and spend those funds first before moving down to the next category with available funds.
Use of Estimates
The preparation of the financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results may differ from those estimates.
Note 3 Budgetary Data
The budget is a complete financial plan for the School District's fiscal year, and is based upon careful estimates of expenditures together with probable funding sources. The budget is legally adopted each year for the General Fund, the Debt Service Fund, the Capital Projects Fund, and each special revenue fund. There is no statutory prohibition regarding over expenditure of the
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CHEROKEE COUNTY SCHOOL DISTRICT Notes to the Financial Statements June 30, 2014
budget at any level. The budget for all governmental funds, except the various school activity (principal) accounts, is prepared and adopted by fund, function, and object. The legal level of budgetary control was established by the Board at the aggregate function level. The budget for the General Fund was prepared in accordance with accounting principles generally accepted in the United States of America. After the Board has tentatively adopted the budget, the budget is advertised at least once in the local newspaper of general circulation. At the next regularly scheduled meeting after advertisement, the Board receives comment, makes revisions as necessary, and adopts the final budget. The approved budget is then submitted in accordance with provisions of Official Code of Georgia Annotated 20-2-167(c), to the Georgia Department of Education. The Board may increase or decrease the budget at any time during the year. All unexpended budget authority lapses at fiscal year-end. See page 6, General Fund Statement of Revenues, Expenditures, and Changes in Fund Balance Budget and Actual for a detail of any over/under expenditures during the fiscal year under review. Budgetary/GAAP Basis Reconciliation In the General Fund, accounting principles used in developing budgets on a budgetary basis differ from those used in preparing financial statements in conformity with Generally Accepted Accounting Principles (GAAP). The primary differences between the budget basis and GAAP basis are:
Payments made by the State of Georgia for school district employee benefits are recognized as revenues and expenditures under GAAP and are not recognized on the budget basis.
Proceeds and repayments of tax anticipation notes are budgeted by the School District as revenues and expenditures of the General Fund. Under generally accepted accounting principles, a tax anticipation note is considered a short-term debt issuance.
Thus, there is an accounting basis difference between the budget and actual Statement of Revenues, Expenditures and Changes in Fund Balances in the General Fund that is reconciled as follows:
- 17 -

CHEROKEE COUNTY SCHOOL DISTRICT Notes to the Financial Statements June 30, 2014

Actual Revenues, GAAP Basis Add TAN Proceeds Less On Behalf Contributions Actual Revenues, Budgetary Basis

$ 283,124,977 18,030,000 (16,593,540)
$ 284,561,437

Actual Expenditures, GAAP Basis Add Payback of TAN Principal Less On Behalf Benefits Expenditures Actual Expenditures, Budgetary Basis

$ 293,957,381 18,030,000 (16,593,540)
$ 295,393,841

Other Financing Sources (Uses), Net GAAP Basis

$ (256,743)

Other Financing Sources (Uses), Net Budgetary Basis $ (256,743)

Revenues Over Expenditures and Other Financing Sources (Uses), Budgetary Basis

$ (11,089,147)

Revenues Over Expenditures and Other Financing Sources (Uses), GAAP Basis Note 4 - Deposits and Investments

$ (11,089,147)

Collateralization of Deposits

Official Code of Georgia Annotated 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. 45-8-13.1) the aggregate of the market value of the securities pledged to secure a pool of public funds shall not be less than 110 percent of the daily pool balance. As of June 30, 2014, the School District's deposits were secured by surety bond, insurance, or collateral.

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,

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CHEROKEE COUNTY SCHOOL DISTRICT Notes to the Financial Statements June 30, 2014

(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 formal deposit policy for managing custodial credit risk. At June 30, 2014, the School District had deposits with a carrying amount of $31,342,773 which includes $610,883 in Certificates of Deposit that are recorded as investments, and cash deposit balance of $33,259,411. The deposit balances insured by Federal depository insurance were $5,783,037 and the bank balances collateralized with securities held by the pledging institution or by the pledging institution's trust department or agent in the School District's name were $25,185,100.
The amounts exposed to custodial credit risk are classified into three categories as follows:
Category 1 Uncollateralized
Category 2 Cash collateralized with securities held by the pledging financial institution
Category 3 Cash collateralized with securities held by the pledging financial institution's trust department or agent but not in the School District's name.
The School District's deposits by custodial risk category at June 30, 2014 are as follows:

Credit Risk Category
1 2 3

Bank Balance

$

-

-

2,291,274

Total $ 2,291,274

Categorization of Investments
At June 30, 2014, the carrying value of the School District's total investments was $69,708,582 which is materially the same as fair value. This includes $610,883 invested in Certificates of Deposit which are collateralized in the same manner as other cash deposits.

At June 30, 2014 the School District's investments consisted of funds invested in the Georgia Fund 1, formerly referred to as the Local Government Investment Pool, Treasury/Agency Securities held through the Securities Service Network, and Certificates of Deposits at various

- 19 -

CHEROKEE COUNTY SCHOOL DISTRICT Notes to the Financial Statements June 30, 2014

financial institutions within the State of Georgia. The Georgia Fund 1 (local governmental investment pool) is administered by the State of Georgia, Office of the State Treasurer which is not required to be categorized since the School District did not own any specific identifiable securities in the pool. The investment policy of the State of Georgia, Office of the State Treasurer for the Georgia Fund 1 (Primary Liquidity Portfolio) does not provide for investment in derivatives or similar investments. Additional information on the Georgia Fund 1 is disclosed in the State of Georgia Comprehensive Annual Financial Report. This audit can be obtained from the Georgia Department of Audits and Accounts at http://www.audits. ga.gov/SGD/cafr.html.
The Primary Liquidity Portfolio consists of Georgia Fund 1 which is not registered with the SEC as an investment company and does not operate in a manner consistent with the SEC's Rule 2a7 of the Investment Company Act of 1940. The investment is valued at the pool's share price, $1.00 per share. The pool is an AAAf rated investment pool by Standard and Poor's. The weighted average maturity for Georgia Fund 1 on June 30, 2014, was 62 days.
The School District's investments in the Georgia Fund 1, the agency/treasury securities, and the certificates of deposit as of June 30, 2014 are presented below. All investments are presented by investment type and debt securities are presented by maturity.

Investment Type Investment Pools
Georgia Fund 1 Federal Home Loan
Treasuries Certificates of Deposit Repurchase Agreement
Total

Fair Value

Maturity

$ 60,262,877 62 Days

144,317 610,883 8,690,505 $ 69,708,582

1-5 Years 1-5 Years Less Than One Year

Interest Rate Risk
Interest rate risk is the risk that changes in interest rates of debt investments will adversely affect the fair value of an investment. The School District does not have a formal policy for managing interest rate risk.
Custodial Credit Risk
Custodial credit risk for investments is the risk that, in the event of the failure of the counterparty to a transaction, the School District will not be able to recover the value of the investment or collateral securities that are in the possession of an outside party. The School District does not have a formal policy for managing custodial credit risk.
At June 30, 2014, $8,834,822 of the School District's applicable investments were insured or registered, with securities held by the entity or its agent, in the School District's name.

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CHEROKEE COUNTY SCHOOL DISTRICT Notes to the Financial Statements June 30, 2014

Credit Quality Risk

Credit quality risk is the risk that an issuer or other counterparty to an investment will not fulfill its obligations. The School District does not have a formal policy for managing credit quality risk.

Credit Quality Risk

Fair Value

AA

Unrated

U.S. Agency Securities FHLMC

$ 144,317 $ 144,317

Repurchase Agreement

8,690,505

8,690,505

Total

$ 8,834,822 $ 144,317 $ 8,690,505

Note 5 - Nonmonetary 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.
Note 6 - Capital Assets
The following is a summary of changes in capital assets for the fiscal year ended June 30, 2014:

Governmental Activities:

Restated Balance Additions and

July 1, 2013

Transfers

Capital Assets Not Being Depreciated Land Construction in Progress
Total

$ 30,574,954 19,316,629 49,891,583

$

12,550

23,062,175

23,074,725

Deletions and Transfers

Balance June 30, 2014

$ (138,688) $ 30,448,816

(32,697,090)

9,681,714

(32,835,778)

40,130,530

Capital Assets Being Depreciated Buildings and Improvements Equipment Land Improvements
Total

629,995,889 38,475,120 16,275,643
684,746,652

37,565,611 1,584,028 1,127,692
40,277,331

(1,533,487) (466,936) -
(2,000,423)

666,028,013 39,592,212 17,403,335
723,023,560

Less Accumulated Depreciation For: Buildings and Improvements Equipment Land Improvements
Total

(135,368,744) (29,217,970) (11,440,036)
(176,026,750)

(14,052,251) (2,840,856) (615,727)
(17,508,834)

1,453,541 465,411 -
1,918,952

(147,967,454) (31,593,415) (12,055,763)
(191,616,632)

Capital Assets Being Depreciated, Net

508,719,902

22,768,497

(81,471)

531,406,928

Governmental Activities Capital Assets, Net

$ 558,611,485 $ 45,843,222 $ (32,917,249) $ 571,537,458

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CHEROKEE COUNTY SCHOOL DISTRICT Notes to the Financial Statements June 30, 2014

Depreciation expense by function:

Instruction General Administration School Administration Support Services - Business Maintenance and Operation Student Transportation Services School Nutrition Program
Total Depreciation

$ 14,517,604 571,628 107,307 44,148 98,628
2,159,387 10,132
$ 17,508,834

Note 7 - Interfund Assets and Liabilities

Due to and due from other funds are recorded for interfund receivables and payables which arise

from interfund transactions. Interfund balances at June 30, 2014, consisted of the following:

Due From

Due To

Other Funds

Other Funds

General Fund Title I Federal Fund Title II Federal Fund Title III Federal Fund Special Education Federal Fund Vocational Federal Fund Headstart Federal Fund Race to the Top Federal Fund School Food Service Federal Fund

$ 4,662,084 -
$ 4,662,084

$

-

1,295,045

302,069

155,395

2,229,699

54,355

44,687

190,038

390,796

$ 4,662,084

Note 8 - Interfund Transfers Interfund transfers for the fiscal year ended June 30, 2014, consisted of the following:

Transfer From
General Fund General Fund General Fund General Fund General Fund General Fund General Fund

Transfer To
Title I Federal Fund Title II Federal Fund Title III Federal Fund Special Education Federal Fund Vocational Federal Fund Race to the Top Federal Fund Pre-Kindergarten Fund

Amount

$

96,465

62,287

9,381

61

6,388

64,289

96,790

$

335,661

Transfers are used to move funds from the General Fund to the various nonmajor governmental funds to provide local support to federal programs.

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CHEROKEE COUNTY SCHOOL DISTRICT Notes to the Financial Statements June 30, 2014

Note 9 - 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; natural disaster, unemployment compensation, and dental claims.

The School District is self-insured for workers' compensation, unemployment claims, and dental claims. The School District purchases commercial insurance for all other risks of loss. Settled claims have not exceeded purchased commercial insurance coverage in any of the past three years. There was no significant reduction in insurance coverage since last fiscal year.

Workers Compensation Claims

The School District is self-insured for workers' compensation claims. The School District accounts for workers' compensation claims in the General Fund. Workers' compensation claims expenditures and liability are reported when it is probable that a loss has occurred, and the amount of that loss can be reasonably estimated. These losses include an estimate of claims that have been incurred but not reported and related claims administration expenses.

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

Fiscal Year
2014 2013

Beginning Of Year Liability
$ 1,123,843 1,180,433

Claims and Changes in Estimates
$ 852,292 1,555,774

Claims Paid
$ (1,081,221) (1,612,364)

End Of Year Liability
$ 894,914 1,123,843

Unemployment Claims
The School District is self-insured with regard to unemployment compensation claims. These claims are accounted for in the School District's General Fund. Unemployment compensation expenditures and liabilities are reported when it is probable that a loss has occurred, and the amount of that loss can be reasonably estimated. These losses include an estimate of claims that have been incurred but not reported and claims administration expenses. Changes in the unemployment compensation liability during the last two fiscal years are as follows:

Fiscal Year
2014 2013

Beginning Of Year Liability

$

-

-

Claims and Changes in Estimates
$ 147,870 16,421

Claims Paid
$ (147,870) (16,421)

End Of Year Liability

$

-

-

Dental Claims
The School District is self-insured with regard to dental claims. The School District accounts for dental claims expenditures and liability being reported in the General Fund when it is probable that a loss has occurred and the amount of the loss can be reasonably estimated.

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CHEROKEE COUNTY SCHOOL DISTRICT Notes to the Financial Statements June 30, 2014

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

Claims and

Fiscal

Beginning Of

Changes in

Claims

End Of

Year

Year Liability

Estimates

Paid

Year Liability

2014 2013

$ 67,748 65,239

$ 2,207,839 2,230,468

$ (2,199,213) $ (2,227,959)

76,374 67,748

Note 10 Operating Leases

The Cherokee County School District has entered into various lease agreements for office equipment. These leases are considered for accounting purposes to be operating leases. Lease expenditures for the year ended June 30, 2014 amounted to $315,417.

Future minimum lease payments for these leases are as follows:

Year Ending

Lease Payments

2015

$

2016

2017

2018

Total

$

333,054 309,498 309,498
25,792 977,842

Note 11 Short-term Debt

During fiscal 2014, the School District issued tax anticipation notes in advance of property tax collections, depositing the proceeds in its General Fund. This short-term debt was to provide cash for operations until property tax collections are received by the School District. Article IX, Section V, Paragraph V of the Constitution of the State of Georgia limits the aggregate amount of short-term debt to 75 percent of the total gross income from taxes collected in the preceding year and requires all short-term debt to be repaid no later than December 31 of the calendar year in which the debt was incurred. Short-term debt activity for the fiscal year was as follows:

Tax Anticipation Notes

Beginning Balance

$

-

Issued $ 18,030,000

Redeemed $ (18,030,000)

Ending Balance

$

-

Note 12 - Long-Term Debt
Compensated Absences
Compensated absences represent obligations of the School District relating to employees' rights to receive compensation for future absences based upon service already rendered. This obligation relates only to vesting accumulating leave in which payment is probable and can be reasonably estimated. Typically, the General Fund is the fund used to liquidate this long-term debt.
The School District uses the vesting method to compute compensated absences.

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CHEROKEE COUNTY SCHOOL DISTRICT Notes to the Financial Statements June 30, 2014

Advance Refunding

During fiscal year 2014, the Cherokee County Board of Education issued $81,315,000 in General Obligation Bonds. A portion of the issue was used to advance refund $35,500,000 of outstanding bonds. The bond issue of $81,315,000, plus premiums of $13,311,060 less underwriters and bond issuance cost of $712,136 provided net proceeds of $93,913,923. Of those proceeds, $40,703,827 were deposited in an irrevocable trust with an escrow agent to provide for future debt service payments on portions of the 2007A Bond issue. As a result, portions of the 2007A Series Bonds are considered defeased, and the liability for these portions has been removed from the District-wide Statement of Net Position. The Cherokee County Board of Education refunded the aforementioned bonds to reduce its total Debt Service payments over 12 years beginning in fiscal year 2015 by a combined amount of $1,682,831 and to obtain an economic gain of $1,388,733.

General Obligation Debt Outstanding

General Obligation Bonds currently outstanding are as follows:

General Obligation Bonds:

Balance June 30, 2014

2003 Series, 4.00%-5.00%, Matures 8/1/2014 2006 Series, 3.75%-4.75%, Matures 8/1/2017 2007A Series, 3.60%-5.00%, Matures 8/1/2028 2007B Series, 5.00%, Matures 8/1/2017 2009A Series, 4.00%-5.00%, Matures 8/1/2023 2009B Series, 5.87%, Matures 8/1/2028 2010A Series, 4.00%, Matures 8/1/2015 2010B Series, 5.63%, Matures 8/1/2028

$ 3,965,000 15,995,000 76,000,000 40,475,000 52,880,000 48,375,000 1,540,000 40,055,000

2012 Series, 4.00%-5.00%, Matures 8/1/2033

35,930,000

2014A Series, 5.00%, Matures 8/1/2033 2014B Series, 3.75%-5.00%, Matures 8/1/2025
Total General Obligation Bonds

46,885,000 34,430,000 $ 396,530,000

Voters have authorized $75,185,000 in general obligation debt for capital outlay projects and the costs of issuing and paying capitalized interest on bonds, which was not issued as of June 30, 2014.

- 25 -

CHEROKEE COUNTY SCHOOL DISTRICT Notes to the Financial Statements June 30, 2014

The changes in general long-term debt during the year ended June 30, 2014, were as follows:

Governmental Activities:

Beginning Balance

Additions

Reductions

Ending Balance

Due Within One Year

General Obligation Bonds Bond Premiums Loss on Bond Refunding Claims Payable Compensated Absences

$ 366,865,000 $ 81,315,000 $ (51,650,000) $ 396,530,000 $ 16,230,000

14,505,760

14,708,122

(3,619,252)

25,594,630

2,334,097

(1)

1,123,843

852,292

(1,081,221)

894,914

894,914

2,003,701

786,865

(1,266,227)

1,524,339

630,471

Total

$ 384,498,304 $ 97,662,279 $ (57,616,700) $ 424,543,883 $ 20,089,482

(1) Deferred amounts on refunding were reclassified as Deferred Outflows of Resources with the adoption of GASB No. 65 in the previous year.

At June 30, 2014, principal and interest payments due by fiscal year for general obligation bonds are as follows:

Payments Due in Fiscal Year Ending June 30
2015 2016 2017 2018 2019 2020-2024 2025-2029 2030-2034
Total

Principal
$ 16,230,000 17,635,000 19,210,000 20,900,000 9,760,000
108,445,000 179,035,000
25,315,000
$ 396,530,000

Interest
$ 19,114,673 18,655,707 17,804,769 16,856,032 16,136,357 67,010,810 33,204,431 2,967,440
$ 191,750,219

Amortization of Bond Premium
$ 2,334,097 2,846,141 2,701,374 2,569,343 2,364,245 8,774,261 3,081,186 923,983
$ 25,594,630

Note 13 - On-Behalf Payments
The School District has recognized revenues and costs in the amount of $16,593,540 for health insurance and retirement contributions paid on the School District's behalf by the following State agencies:
The Georgia Department of Education paid to the State Health Benefit Plan $15,861,600 for public employee health insurance coverage cost.
Georgia Department of Education paid to the Teachers' Retirement System of Georgia (TRS) employer's cost in the approximate amount of $106,379.
Office of Treasury and Fiscal Services paid to the Public School Employees' Retirement System (PSERS) for public school employees retirement employer's cost in the approximate amount of $625,561.

- 26 -

CHEROKEE COUNTY SCHOOL DISTRICT Notes to the Financial Statements June 30, 2014

Funds paid to the Georgia Department of Community Health by the Georgia Department of Education on behalf of the School District are reported as part of the Quality Basic Education revenue allotments on the Schedule of State Revenue located on page 37 of this report.

Note 14 Significant Commitments

The following is an analysis of significant outstanding construction or renovation contracts executed by the School District as of June 30, 2014:

Project

Unearned Executed Contracts

Bascomb Elementary School Boiler

$

Bascomb Elementary School Chiller

Cherokee High School Athletic Improvements

Cherokee High School Boiler

Creekview Field House

Dean Rusk Middle School

ET Booth Middle School

Sequoyah High School

16,082 21,326 1,441,957
5,119 15,364 35,919,327 173,096
8,579

Total $

37,600,850

The amounts described in this note are not reflected in the basic financial statements. Note 15 - Postemployment Benefits Georgia School Personnel Postemployment Health Benefit Fund

Plan Description. The Georgia School Personnel Postemployment Health Benefit Fund (School OPEB Fund) is a cost-sharing multiple-employer defined benefit postemployment 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 Insurance Plan administered by the Department of Community Health. The Official Code of Georgia Annotated assigns the authority to establish and amend the benefit provisions of the group health plans, including benefits to 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. For members with fewer than five years of service as of January 1, 2012, contributions also vary based on years of service. On average, members with five years or more of service as of January 1, 2012, pay approximately

- 27 -

CHEROKEE COUNTY SCHOOL DISTRICT Notes to the Financial Statements June 30, 2014

25% of the cost of the health insurance coverage. In accordance with the Board resolution dated December 8, 2011, for members with fewer than five years of service as of January 1, 2012, the State provides a premium subsidy in retirement that ranges from 0% for fewer than 10 years of service to 75% (but no greater than the subsidy percentage offered to active employees) for 30 or more years of service. The subsidy for eligible dependents ranges from 0% to 55% (but no greater than the subsidy percentage offered to dependents of active employees minus 20%). No subsidy is available to Medicare eligible members not enrolled in a Medicare Advantage Option. The Board of Community Health sets all member premiums by resolution and in accordance with the law and applicable revenue and expense projections. Any subsidy policy adopted by the Board may be changed at any time by Board resolution and does not constitute a contract or promise of any amount of subsidy.

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, 2014:

Certified Employees July 1, 2013-June 30, 2014
Non-Certified Employees July 1, 2013-June 30, 2014

$945.00 per member per month $596.20 per member per month

No additional contribution was required by the Board for fiscal year 2014 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 postemployment benefits and are subject to appropriation.

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

Fiscal Year
2014 2013 2012

Percentage Contributed
100% 100% 100%

Required Contribution
$ 32,217,856 31,119,034 29,519,600

- 28 -

CHEROKEE COUNTY SCHOOL DISTRICT Notes to the Financial Statements June 30, 2014
Note 16 - Retirement Plans
1) Teachers' Retirement System of Georgia (TRS)
Plan Description. The TRS is a cost-sharing multiple-employer defined benefit plan created in 1943 by an act of the Georgia General Assembly to provide retirement benefits for qualifying employees in educational service. A Board of Trustees comprised of active and retired members and ex-officio State employees is ultimately responsible for the administration of TRS.
The Teachers' Retirement System of Georgia issues a separate stand alone financial audit report and a copy can be obtained from the Georgia Department of Audits and Accounts.
On October 25, 1996, the Board created the Supplemental Retirement Benefits Plan of the Georgia Teachers' Retirement System (SRBP-TRS). SRPB-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 SRPBTRS 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 onetwelfth 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 lumpsum 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, 2014, were 6.00% of annual salary. Employer contributions required for fiscal year 2014 were 12.28% of annual salary as required by the June 30, 2011, actuarial valuation.
- 29 -

CHEROKEE COUNTY SCHOOL DISTRICT Notes to the Financial Statements June 30, 2014

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

Fiscal Year

Percentage Contributed

Required Contribution

2014 2013 2012

100% 100% 100%

$ 23,551,556 21,799,182 19,919,520

2) Public School Employees' Retirement System (PSERS)
Bus drivers, lunchroom personnel, and maintenance and custodial personnel are members of the Public School Employees' Retirement System of Georgia. The System is funded by contributions by the employees and by the State of Georgia. The School District makes no contribution to this plan.
3) Defined Contribution Plan

In August 2001, Cherokee County Board of Education adopted the CCSD 403(b) pension plan for the group of employees covered under the Public School Employees' Retirement System (PSERS). Recognizing that PSERS was a limited defined contribution and defined benefit plan which did not provide for an adequate retirement for this group of employees, it was the Board's desire to supplement the retirement savings of this group.

The Board selected VALIC as the provider of the CCSD 403(b) plan. For each employee covered under PSERS, the Board began contributing to the plan an amount equal to $.50 for each $1.00 of employee contributions up to four percent of the employee's regular earnings.

An employee becomes vested in employer contributions in accordance with the following schedule:

0-35 months of service: 36-47 months of service: 48-59 months of service: 60+ months of service:

0% 50% 75% 100%

Employees who have already completed five years of service at the time of enrollment are immediately vested upon enrollment. Employees at all times are 100% vested in employee contributions.

Funds accumulated through employer contributions are only available to the employee upon termination of employment or by achieving normal retirement age as determined by the Internal Revenue Service. If an employee terminates employment prior to achieving vested status, funds contributed by CCSD on behalf of the non-vested employee are credited back to the Board.

- 30 -

CHEROKEE COUNTY SCHOOL DISTRICT Notes to the Financial Statements June 30, 2014

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

Fiscal Year
2014 2013 2012

Percentage Contributed
100% 100% 100%

Required Contribution
$ 128,632 158,349 143,064

Note 17 Contingencies
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 18 Subsequent Events
In fiscal year 2015, the School District will adopt Governmental Accounting Standards Board (GASB) Statement No. 68, Accounting and Financial Reporting for Pensions. The provisions of this statement establish accounting and financial reporting standards for pensions that are provided to the employees of state and local governmental employers through pension plans that are administered through trusts. Implementation of this statement in fiscal year 2015 will require the School District to record a liability for its proportionate share of the Net Pension Liability of pension plans in which it participates. Based on information provided by the Teachers' Retirement System of Georgia (TRS), the School District's liability for the proportionate share of the Net Pension Liability of the pension plan administered through TRS is estimated to be $237.7 million at June 30, 2015.
In March of 2015 the School District issued Series 2015 General Obligation Bonds in the amount of $108,960,000 for the purpose of acquiring, constructing, and equipping new school facilities and an administrative building, adding to, renovating, repairing, improving, and equipping existing school facilities, and acquiring system-wide technology improvements; refunding $64,000,000 of the Series 2007A General Obligation Bonds; and the payment of capitalized interest on the bonds through August 2017.

- 31 -

CHEROKEE COUNTY SCHOOL DISTRICT Annual Financial Report
Fiscal Year Ended June 30, 2014
(This page left intentionally blank)

CHEROKEE COUNTY SCHOOL DISTRICT Combining Balance Sheet
Nonmajor Governmental Funds June 30, 2014

Assets Cash Investments Receivables
Intergovernmental Accounts Inventory
Total Assets
Liabilities and Fund Balances
Liabilities Accounts Payable Salaries and Benefits Payable Deposits and Unearned Revenue Due To Other Funds
Total Liabilities
Fund Balances Nonspendable
Inventory Committed
School Food Services School Activities
Total Fund Balance
Total Liabilities and Fund Balances

Special Revenue

Title I Federal Fund

Title II Federal Fund

Title III Federal Fund

Special Education Federal Fund

Vocational Education Federal Fund

$

-$

-$

-$

-$

-

-

-

-

-

-

1,586,890
-

303,398
-

169,348
-

2,491,414
-

$ 1,586,890 $ 303,398 $ 169,348 $ 2,491,414 $

54,502 -
54,502

$

79 $

1,329 $

8,146 $ 23,255 $

291,766

-

5,807

238,460

-

-

-

-

1,295,045

302,069

155,395

2,229,699

1,586,890

303,398

169,348

2,491,414

147 -
54,355
54,502

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

$ 1,586,890 $ 303,398 $ 169,348 $ 2,491,414 $

-
-
54,502

33

Assets Cash and Cash Equivalents Investments Receivables
Intergovernmental Receivable Other Inventory
Total Assets
Liabilities and Fund Balances
Liabilities Accounts Payable Salaries and Benefits Payable Deposits and Unearned Revenue Due To Other Funds
Total Liabilities
Fund Balances Nonspendable
Inventory Committed
School Food Services School Activities
Total Fund Balance
Total Liabilities and Fund Balances

CHEROKEE COUNTY SCHOOL DISTRICT Combining Balance Sheet
Nonmajor Governmental Funds (Continued) June 30, 2014

Special Revenue Fund

Headstart Federal Fund

Race To The Top Federal
Fund

Pre-K Lottery

School Activities

School Food Service

Total Nonmajor Governmental
Funds

$

-$

- $ 48,715 $ 4,112,734 $ 1,929,765 $ 6,091,214

-

-

-

125,550

2,649,050

2,774,600

44,778

190,608

-

-

115,490

4,956,428

-

-

-

-

1,815

1,815

-

-

-

-

329,765

329,765

$ 44,778 $ 190,608 $ 48,715 $ 4,238,284 $ 5,025,885 $ 14,153,822

$

91 $

570 $

6,136 $

-

-

42,579

-

-

-

44,687

190,038

-

44,778

190,608

48,715

- $ 58,859 $

98,612

-

518,955

1,097,567

-

207,936

207,936

-

390,796

4,662,084

-

1,176,546

6,066,199

-

-

-

-

329,765

329,765

-

-

-

-

3,519,574

3,519,574

-

-

-

4,238,284

-

4,238,284

-

-

-

4,238,284

3,849,339

8,087,623

$ 44,778 $ 190,608 $ 48,715 $ 4,238,284 $ 5,025,885 $ 14,153,822

-34 -

CHEROKEE COUNTY SCHOOL DISTRICT Combining Statement of Revenues, Expenditures and Changes in Fund Balances
Nonmajor Governmental Funds For the Fiscal Year Ended June 30, 2014

Special Revenue

Revenues Local Sources State Sources Federal Sources Interest Income
Total Revenues
Expenditures Current
Instruction Support Services
Pupil Services Improvement of Instructional Services General Administration School Administration Student Transportation Service Other Support Services Food Services Operation Total Expenditures
Excess (Deficiency) of Revenues Over (Under) Expenditures
Other Financing Sources (Uses) Operating Transfers In
Total Other Financing Sources (Uses)
Net Change in Fund Balances
Fund Balance - Beginning of Year
Fund Balance - End of Year

Title I Federal Fund

Title II Federal Fund

Title III Federal Fund

Special Education Federal Fund

Vocational Education Federal Fund

$

-$

-$

-$

-$

-

-

-

-

-

-

4,214,667 -

763,139 -

396,619 -

7,324,687 -

209,040 -

4,214,667

763,139

396,619

7,324,687

209,040

2,964,387
974,122
44,309 3,536
12,318 312,460
4,311,132

-
816,424
9,002 -
825,426

243,317
151,057
3,132 -
681 7,813
406,000

2,385,297
4,440,865 131,718 79,334 287,534 -
7,324,748

149,334
57,964
8,130 -
215,428

(96,465)

(62,287)

(9,381)

(61)

(6,388)

96,465 96,465

62,287 62,287

-

-

-

-

$

-$

-$

9,381 9,381
-$

61 61
-$

6,388 6,388
-

-35 -

CHEROKEE COUNTY SCHOOL DISTRICT Combining Statement of Revenues, Expenditures and Changes in Fund Balances
Nonmajor Governmental Funds (Continued) For the Fiscal Year Ended June 30, 2014

Revenues Local Sources State Sources Federal Sources Interest Income
Total Revenues
Expenditures Current:
Instruction Support Services
Pupil Services Improvement of Instructional Services General Administration School Administration Student Transportation Service Other Support Services Food Services Operation Total Expenditures
Excess (Deficiency) of Revenues Over (Under) Expenditures
Other Financing Sources (Uses) Operating Transfers In
Total Other Financing Sources (Uses)
Net Change in Fund Balances
Fund Balance - Beginning of Year
Fund Balance - End of Year

Special Revenue

Headstart Federal Fund

Race To The Top Federal
Fund

Pre-K Lottery

School Activities

School Food Service

Total Nonmajor Governmental
Funds

$

-$

-$

- $ 12,109,043 $ 6,190,901 $ 18,299,944

-

-

526,270

-

454,008

980,278

445,149 -

352,741 -

125,455 -

-

8,879,069

-

4,411

22,710,566 4,411

445,149

352,741

651,725

12,109,043

15,528,389

41,995,199

445,149
445,149

38,045
378,985 -
417,030

745,797
2,136
582 748,515

11,745,043
11,745,043

-
15,166,732 15,166,732

-

(64,289)

(96,790)

364,000

361,657

-

64,289

96,790

-

64,289

96,790

-

-

-

-

-

-

-

364,000

361,657

-

-

-

3,874,284

3,487,682

$

-$

-$

- $ 4,238,284 $ 3,849,339

18,716,369
4,440,865 2,512,406
143,907 3,536
301,115 320,273 15,166,732 41,605,203
389,996
335,661 335,661
725,657
7,361,966
8,087,623

-36 -

CHEROKEE COUNTY SCHOOL DISTRICT Schedule of State Revenue
For the Fiscal Year Ended June 30, 2014

Agency/Funding
Grants Bright from the Start: Georgia Department of Early Care and Learning Pre-Kindergarten Program
Education, Georgia Department of Quality Basic Education (1) 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 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) Special Education - Itinerant Program Special Education - Supplemental Speech Media Center Program 20 Days Additional Instruction Staff and Professional Development Indirect Cost Central Administration School Administration Facility Maintenance and Operations Amended Formula Adjustment Categorical Grants Pupil Transportation Food Services Nursing Services
Other State Programs Agriculture Extended Year and Day Grants CTAE Grants Move on When Ready Math and Science Supplements Pre-school Handicapped Program Technology to Support Digital Learning Teachers' Retirement Vocational Construction Related Equipment - State Bonds Other Grants
Georgia State Financing and Investment Commission Reimbursement on Construction Projects
Office of the State Treasurer Public School Employees Retirement
Total State Revenues

Governmental Fund Types

General Fund

Other Funds

Total

$

-

$

526,270

$

526,270

11,581,965 698,036
29,532,565 1,858,321
14,007,598 869,294
21,796,667 22,064,777
3,096,609
1,830,160 728,755
13,535,275 9,922,502 2,030,715
14,055,049 991,227
1,577,080 2,517,598
57,453 37,390 4,112,799 1,202,806 838,164
3,676,699 8,951,069 7,803,793 (24,846,679)
2,040,947 -
757,491
13,206 52,983
5,900 225,892 694,357
82,000 106,379 266,104
13,266

-
-
-
454,008
-
-

11,581,965 698,036
29,532,565 1,858,321
14,007,598 869,294
21,796,667 22,064,777
3,096,609
1,830,160 728,755
13,535,275 9,922,502 2,030,715
14,055,049 991,227
1,577,080 2,517,598
57,453 37,390 4,112,799 1,202,806 838,164
3,676,699 8,951,069 7,803,793 (24,846,679)
2,040,947 454,008 757,491
13,206 52,983
5,900 225,892 694,357
82,000 106,379 266,104
13,266

-

252,808

252,808

625,561 $ 159,411,773

$ 1,233,086

625,561 $ 160,644,859

(1) Payments to the Georgia Department of Community Health by the Georgia Department of Education on behalf of the School District in the amount of $15,861,600 are included as part of the Quality Basic Education revenue allotments.

See notes to the basic financial statements.
-37 -

CHEROKEE COUNTY SCHOOL DISTRICT Schedule of Quality Basic Education Program (QBE)
Allotments and Expenditures by Program For the Fiscal Year Ended June 30, 2014

Description
Kindergarten Kindergarten Early Intervention Primary Grades 1-3 Primary Grades 1-3 Early Intervention Upper Elementary Grades 4-5 Upper Elementary 4-5 Early Intervention Middle School 6-8 High School Grades 9-12 Vocational Laboratory 9-12 Students With Disabilities Gifted Program Remedial Education Program Alternative Education Program English Speakers of Other Languages (ESOL)
Total Direct Instructional Funds
Media Center Program Staff and Professional Development
Total QBE Formula Funds

Allotments From Georgia Department
of Education (1)(2)

Salaries

$

14,114,041 $ 13,891,883

776,146

562,504

34,861,538

29,776,863

2,250,420

1,996,012

16,963,147

17,482,652

1,052,712

1,436,017

26,395,679

29,202,872

26,720,359

30,712,943

3,749,981

3,604,542

34,047,423

32,188,894

17,053,341

7,859,764

1,200,372

1,164,438

1,907,611

3,090,832

3,051,028

2,645,968

184,143,798

175,616,184

Operations

$

383,341 $

-

589,221

-

523,890

-

784,550

1,064,559

263,187

270,102

166,215

21,703

14,649

15,965

4,097,382

Total
14,275,224 562,504
30,366,084 1,996,012
18,006,542 1,436,017
29,987,422 31,777,502
3,867,729 32,458,996
8,025,979 1,186,141 3,105,481 2,661,933
179,713,566

4,980,584 983,168

3,603,533 -

649,817 -

4,253,350 522,766

$

190,107,550 $ 179,219,717 $

4,747,199 $ 184,489,682

(1) Comprised of State funds plus local 5 mil share. (2) Allotments do not include the impact of the State austerity reduction.

-38 -

CHEROKEE COUNTY SCHOOL DISTRICT Schedule of Expenditures of Educational Local Option Sales Tax Proceeds For the Fiscal Year Ended June 30, 2014

2007 ELOST

Project

Acquisition, Construction, Renovation, and

Equipping of Schools

$

Original Estimated
Cost (1)
464,000,000 $

Current
Estimated Costs (2)

Amount Expended In
Prior Year (3) (4)

Amount Expended In
Current Years (3) (4)

281,442,815 $

281,442,815 $

- $

Total

Project Status

281,442,815 Complete

Debt Service Totals

176,000,000

142,193,731

142,193,731

$

640,000,000 $

423,636,546 $

423,636,546 $

- $

142,193,731 Complete 423,636,546

(1) The School District's original cost estimate as specified in the resolution calling for the imposition of the Educational 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 Cherokee 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) The 2009 A and B Series bonds were issued to advance fund a portion of the construction, renovation, and equipping of schools within the District.

2012 ELOST

Project

Original Estimated
Cost (1)

Current Estimated
Costs (2)

Amount Expended In
Prior Year (3)

Amount Expended In
Current Years (3)

Total

Payment of a portion of the principal and interest on the Series 2003, Series 2006, Series 2007, Series 2009, Series 2010, and Series 2011 General Obligation Bonds along with acquisition, construction, equipping, adding to, renovating, improving school facilities; acquiring, installing, and equipping portable classrooms; acquiring, installing, and implementing system-wide technology improvements; acquiring school buses; acquiring any property useful or desirable both real and personal

$ 170,000,000

Totals

$ 170,000,000

$ 170,000,000 $ 170,000,000

$ 10,900,630

$

$ 10,900,630

$

45,322,251 45,322,251

$ 56,222,881 $ 56,222,881

Project Status
Ongoing

(1) The School District's original cost estimate as specified in the resolution calling for the imposition of the Educational 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 Cherokee 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. Collections on the 2012 ELOST began January 2013. The tax will expire in December 2017.

This schedule is prepared on the modified accrual basis on accounting. -39 -

CHEROKEE COUNTY SCHOOL DISTRICT Annual Financial Report
Fiscal Year Ended June 30, 2014
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CHEROKEE COUNTY SCHOOL DISTRICT Annual Financial Report
Fiscal Year Ended June 30, 2014
SECTION II AUDITEE'S RESPONSE TO PRIOR YEAR FINDINGS AND QUESTIONED COSTS

CHEROKEE COUNTY SCHOOL DISTRICT Annual Financial Report
Fiscal Year Ended June 30, 2014
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CHEROKEE COUNTY SCHOOL DISTRICT AUDITEE'S RESPONSE
SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2014

PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

FINDING CONTROL NUMBER AND STATUS

2013-1

Partially Resolved - See Corrective Action/Responses

CORRECTIVE ACTION/RESPONSES

CASH AND CASH EQUIVALENTS Reconciliation of Cash Accounts Material Weakness Finding Control Number: 2013-1

Management has implemented additional internal control procedures to review accounts before annual closing of financial records in order to determine proper classification and reconciliation between accounts. Additionally, professional staff has been added to the Office of Financial Management to assist in the continued improvement in this regard.

CHEROKEE COUNTY SCHOOL DISTRICT Annual Financial Report
Fiscal Year Ended June 30, 2014
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CHEROKEE COUNTY SCHOOL DISTRICT Annual Financial Report
Fiscal Year Ended June 30, 2014
SECTION III FINDINGS AND QUESTIONED COSTS

CHEROKEE COUNTY SCHOOL DISTRICT Annual Financial Report
Fiscal Year Ended June 30, 2014
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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
April 15, 2016

Honorable Nathan Deal, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the Cherokee County Board of Education
COMMUNICATION OF INTERNAL CONTROL DEFICIENCIES
We have audited, in accordance with auditing standards generally accepted in the United States of America the financial statements of the governmental activities, each major fund, and the aggregate remaining fund information of the Cherokee County Board of Education as of and for the year ended June 30, 2014, and the related notes to the financial statements, which collectively comprise the Cherokee Board of Education's basic financial statements and have issued our report thereon dated April 15, 2016.
Internal Control Over Financial Reporting
In planning and performing our audit of the financial statements, we considered Cherokee County Board of Education's internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances 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 Cherokee County Board of Education's internal control. Accordingly, we do not express an opinion on the effectiveness of the Cherokee County Board of Education's internal control.
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. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. As discussed in the attached Schedule of Findings, we identified certain matters involving the internal control and operational matters. We consider the deficiencies FS 2014-001, FS 2014-002, FS 2014-003, and FS 2014-004 to be material weaknesses.

CHEROKEE COUNTY SCHOOL DISTRICT Annual Financial Report
Fiscal Year Ended June 30, 2014
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This communication is intended solely for the information and use of management, members of the Cherokee County Board of Education, and others within the entity, and is not intended to be and should not be used by anyone other than these specified parties.
Respectfully submitted,
Greg S. Griffin State Auditor

CHEROKEE COUNTY SCHOOL DISTRICT Annual Financial Report
Fiscal Year Ended June 30, 2014
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CHEROKEE COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS
YEAR ENDED JUNE 30, 2014

FINANCIAL STATEMENT FINDINGS

FS 2014-001 Control Category: Internal Control Impact:

Inadequate Internal Controls over Cash and Cash Equivalents and Investments Cash and Cash Equivalents Investments Material Weakness

Description: This is a repeat finding (2011-2, 2012-1 and 2013-1) from the years ended June 30, 2011, June 30, 2012 and June 30, 2013. While improvements have been made, the accounting procedures of the School District were still considered insufficient to provide adequate internal controls over the reporting of Cash and Cash Equivalents and Investments.

Criteria: The School District's management is responsible for designing and maintaining internal controls over the reporting of Cash and Cash Equivalents and Investments.

Condition: The following were noted during our audit procedures:

Deposits that were highly liquid in nature and readily convertible to cash totaling $14,673,768 were recorded as investments rather than cash equivalents. This was material to the General Fund, the Capital Projects Fund and to Governmental Activities.
The investment account for the School District's bond sinking fund totaling $8,553,116 was incorrectly recorded as restricted cash and cash equivalents. This was material to the Debt Service Fund.
The Local Government Investment Pool had not been properly reconciled between funds for several years, resulting in a material misclassification between the General and Capital Projects Funds of $8,739,591. A restatement to beginning balance for these funds was necessary. In addition, an unreconciled amount $354,641 remained after this adjustment.
Corrections were proposed and accepted to correct various other errors found in the financial statements and note disclosures.

Cause: In discussing this deficiency with School District management, they stated that the money market account and sinking fund misclassifications (the first and second items above) were due to a change in the nature of their bank accounts and a misunderstanding by the financial statement preparer relative to the reporting of these accounts. Management stated that the Local Government Investment Pool deficiency (third item above) was due to the School District's inability to correct the situation during the poor economic conditions in previous years. The other various errors and omissions (fourth item above) were due to the short turnaround time between the presentation of the audit report to management by the financial statement preparer and the necessity to publish the report in time to close on a bond sale.

Effect or Potential Effect: The lack of adequate controls over cash and investments increases the risk for theft, fraud, or misuse of School District resources that may result in errors and/or irregularities which would not be detected in a timely manner. No such theft, fraud or misuse of School District resources was uncovered.

CHEROKEE COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS
YEAR ENDED JUNE 30, 2014
FINANCIAL STATEMENT FINDINGS (CONTINUED)
Recommendation: The School District should establish procedures to ensure that cash and investments are accurately recorded on the financial statements and are properly reconciled throughout the year.
Views of Responsible Officials and Corrective Action Plans: Management has implemented additional Internal Control procedures to review Investment Accounts before annual closing of Financial Records to determine proper classification and adjustments between accounts. Additionally, professional staff has been added to the Office of Financial Management in order to improve oversight in this regard.
Estimated Corrective Action Date: June 30, 2015 Contact Person: Kenneth Owen, Assistant Superintendent for Financial Management Telephone: (770) 704-4244 Fax: (770) 720-3379 E-mail: ken.owen@cherokee.k12.ga.us

FS 2014-002 Control Category: Internal Control Impact:

Inadequate Internal Controls over Financial Reporting Financial Reporting Material Weakness

Description: The School District did not have adequate internal controls in place to ensure that financial statement activity presented for audit was materially correct.

Criteria: The School District is required to maintain a system of controls over the preparation of financial statements in accordance with generally accepted accounting principles (GAAP). The School District's internal controls over GAAP financial reporting should include adequately trained personnel with the knowledge, skills and experience to prepare GAAP based financial statements and include all disclosures as required by the Governmental Accounting Standards Board (GASB).

GASB Statement No. 34, Basic Financial Statements - Management's Discussion and Analysis - for State and Local Governments (Statement), requires governments to present government-wide and fund financial statements as well as a summary reconciliation of the (a) total governmental funds balances to the net position of governmental activities in the Statement of Net Position, and (b) total change in governmental fund balances to the change in the net position of governmental activities in the Statement of Activities. In addition, the Statement requires information about the government's major and nonmajor funds in the aggregate, to be provided in the fund financial statements.

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

CHEROKEE COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS
YEAR ENDED JUNE 30, 2014
FINANCIAL STATEMENT FINDINGS (CONTINUED)
Condition: The following errors and omissions were noted in the School District's financial statements and note disclosures presented for audit:
Accounts Receivables of $2,721,372 were incorrectly classified as State Receivables instead of Tax Receivables, resulting in a material misclassification to the Debt Service Fund.
Material reclassification adjustments were necessary to correctly present the Net Investment in Capital Assets, Restricted for Capital Projects, Restricted for Debt Services, and Unrestricted Net Position balances on the Statement of Net Position.
Material reimbursements to the Debt Service Fund for Build America Bonds and Qualified School Construction Bonds totaling $2,873,240 were being reported against the interest expenditures instead of showing the revenues and expenditures at gross value.
On-behalf payments of $15,861,600 made to the Department of Community Health by the Georgia Department of Education were double booked by the School District. This amount was material to the General Fund and Governmental Activities and significant to the Nonmajor Funds.
A material audit adjustment was proposed in the Capital Projects Fund for State Revenue, Deferred Inflows, Accounts Receivables, and Beginning Fund Balance for $1,593,268, $1,402,645, $3,527,408 and $3,336,785 respectively, to account for invalid receivables and unavailable revenue.
In the Significant Commitments note disclosure, unearned executed contracts were overstated by $5,526,595 and funding available from the state was overstated by $17,643,703.
Internal activity was not eliminated at year end, resulting in a duplication of revenues and expenditures of $5,165,261.
Required note disclosures for the School District's current year refunding bond issuance, authorized but unissued debt, defined benefit plan and dental self-insurance were omitted.
Numerous other audit adjustments and reclassification entries were necessary to properly present the School District's financial statements and note disclosures.
Cause: In discussing this deficiency with the School District management, they stated the causes were due to errors in adjustments proposed by the financial statement preparer. In addition, there was a lack of guidance and review procedures regarding the reporting of various financial statements accounts and disclosures.
Effect or Potential Effect: Material misstatements, misclassifications and omissions were included in the financial statements and note disclosures presented for audit. In addition, the lack of controls and monitoring could impact the reporting of the School District's financial position and results of operations.
Recommendation: The School District should provide financial statement preparation training, review the accounting controls and procedures currently in place, identify weaknesses, and design and implement procedures necessary to strengthen controls over the preparation of the financial statements.

CHEROKEE COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS
YEAR ENDED JUNE 30, 2014
FINANCIAL STATEMENT FINDINGS (CONTINUED)
Views of Responsible Officials and Corrective Action Plans: Cherokee County School District will require Williamson and Company to reissue their 2013-14 Fiscal Year Cherokee County School District Annual Financial Report reflecting audit adjustments, reclassification entries and note disclosures as recommended by the State Auditors. Additionally, professional staff has been added to the Office of Financial Management in order to improve oversight in this regard.
Estimated Corrective Action Date: September 30, 2015 Contact Person: Kenneth Owen, Assistant Superintendent for Financial Management Telephone: (770) 704-4244 Fax: (770) 720-3379 E-mail: ken.owen@cherokee.k12.ga.us

FS 2014-003 Control Category: Internal Control Impact:

Inadequate Internal Controls over Payables Expenditures/Liabilities/Disbursements Material Weakness

Description: The School District does not have controls and monitoring procedures in place to ensure that payables are accurately recorded in the financial statements.

Criteria: The School District's management is responsible for designing and maintaining internal controls to provide reasonable assurance that accounts payables are recorded and reported accurately.

Condition: The following errors and omissions were noted during our audit procedures:

Prior fiscal year accounts payable were capitalized in the current fiscal year, resulting in a restatement of beginning fund balance for the Capital Projects Fund of $4,728,948.
Invalid accounts payable of $965,226 were noted by the School District, resulting in a restatement of beginning fund balance for the Capital Projects Fund.
Prior year retainage payable was overstated, resulting in a restatement of beginning balance for the Capital Projects fund of $917,626.
A review of subsequent expenditures revealed Account and Retainage Payables in the amounts of $502,463 and $49,302 that were not recorded.
Due to the entity not accurately setting up and clearing out payables from the prior and current years, Benefits Payable were understated by $629,918.
Due to errors in accrued interest calculations, prior year Interest Payable was overstated by $493,100 and current year Interest Payable was understated by $1,536,269.

Cause: In discussing this deficiency with the School District management, they stated the causes were due to a lack of review procedures to ensure that these liabilities were recorded in the correct period. The current year Interest Payable understatement was due to the liabilities being reported on a budget basis instead of the GAAP basis.

CHEROKEE COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS
YEAR ENDED JUNE 30, 2014
FINANCIAL STATEMENT FINDINGS (CONTINUED)
Effect or Potential Effect: Material misstatements and omissions were included in the financial statements presented for audit. In addition, the lack of controls and monitoring could impact the reporting of the School District's financial position and results of operations.
Recommendation: We recommend that management implement a system of monitoring controls and reconciliations to ensure that accounts payable balances are accurately recorded.
Views of Responsible Officials and Corrective Action Plans: Cherokee County School District Financial Management Staff has implemented additional Internal Control procedures to ensure supervisory review of Account, Retainage and Benefit Payables Reports for accuracy before presentment to auditors. Additionally, professional staff has been added to the Office of Financial Management in order to improve oversight in this regard.
Contact Person: Kenneth Owen, Assistant Superintendent for Financial Management Telephone: (770) 704-4244 Fax: (770) 720-3379 E-mail: ken.owen@cherokee.k12.ga.us

FS 2014-004 Control Category: Internal Control Impact:

Inadequate Internal Controls over Capital Assets Capital Assets Material Weakness

Description: The School District did not have adequate controls in place to ensure all required activity in capital assets were included in the financial statement information presented for audit.

Criteria: The School District's management is responsible for designing and maintaining internal controls that provide reasonable assurance that capital assets inventory records are properly maintained. Chapter 37 Implementing a Capital Assets Management System of the Financial Management for Georgia Local Units of Administration provides that School Districts must establish capital asset policies, define system requirements, implement a capital asset system, conduct a physical inventory, and maintain capital asset inventory records.

Condition: During the review of capital assets, records revealed the following:

The Capital Asset listing is not being properly tracked by projects which resulted in several misstatements. o Capital asset cost and accumulated depreciation beginning balances were misstated by $2,218,563 due to assets that were incorrectly deleted in the previous fiscal year. o The entity capitalized Land Improvement and Building projects in the amounts of $1,469,916 and $319,622, respectively, before the projects were substantially complete.

CHEROKEE COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS
YEAR ENDED JUNE 30, 2014
FINANCIAL STATEMENT FINDINGS (CONTINUED)
o The Teasley Middle School Construction in Progress completion totaling $32,697,090 was not capitalized as a building even though it was substantially complete. Three equipment items totaling $237,854 were also not capitalized accurately.
The entity did not provide evidence that an annual inventory over a significant portion of equipment assets was performed.
Cause: In discussing these deficiencies with the School District, they indicated the reason for not being able to provide an accurate current year activity report by projects was due to an issue with the perpetual capital asset system. Also, procedures for moving assets from CIP to Buildings were based on when the asset was put into use instead of when it was substantially complete. In regards to the annual inventory (final item above), they stated the cause was due to the fact that technology inventory is maintained in a system outside the perpetual capital asset system and the technology inventory was performed without procedures in place to reconcile those assets to the financial statements.
Effect or Potential Effect: When the School District does not maintain a complete and accurate capital assets listing, it results in inaccurate internal and external reporting, as well as noncompliance with generally accepted accounting principles.
Recommendation: The School District's management should track assets by projects within the capital asset listing, perform an inventory over all equipment items, and review the capital asset records and make appropriate adjustments to ensure that the capital assets records conform to the School District's approved capital assets policy.
Views of Responsible Officials and Corrective Action Plans: Cherokee County School District Financial Management staff is working with the perpetual capital asset system developer to implement a tracking system that utilizes projects within locations rather than by location only. Additionally, revised internal control procedures have been implemented to expand reconciliation of physical inventory procedures to technology equipment items and to continue to review capital asset records annually.
Estimated Corrective Action Date: June 30, 2015 Contact Person: Kenneth Owen, Assistant Superintendent for Financial Management Telephone: (770) 704-4244 Fax: (770) 720-3379 E-mail: ken.owen@cherokee.k12.ga.us