Franklin County Board of Education, Carnesville, Georgia, annual financial report for the fiscal year ended June 30, 2011 (including independent auditor's reports)

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

FRANKLIN COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS -

SECTION I

FINANCIAL

INDEPENDENT AUDITOR'S COMBINED REPORT ON BASIC FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION - SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS

REQUIRED SUPPLEMENTARY INFORMATION

MANAGEMENT'S DISCUSSION AND ANALYSIS

EXHIBITS

BASIC FINANCIAL STATEMENTS

DISTRICT-WIDE FINANCIAL STATEMENTS

A

STATEMENT OF NET ASSETS

B

STATEMENT OF ACTIVITIES

FUND FINANCIAL STATEMENTS

C

BALANCE SHEET

GOVERNMENTAL FUNDS

D

RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET

TO THE STATEMENT OF NET ASSETS

E

STATEMENT OF REVENUES, EXPENDITURES AND CHANGES

IN FUND BALANCES

GOVERNMENTAL FUNDS

F

RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT

OF REVENUES, EXPENDITURES AND CHANGES IN FUND

BALANCES TO THE STATEMENT OF ACTIVITIES

G

STATEMENT OF FIDUCIARY NET ASSETS

FIDUCIARY FUNDS

H

NOTES TO THE BASIC FINANCIAL STATEMENTS

SCHEDULES

REQUIRED SUPPLEMENTARY INFORMATION

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

Page
i
1 2 4 5 6 7 8 9
25

FRANKLIN COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS -

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

Page
26 27 28 29

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

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

SECTION IV FINDINGS AND QUESTIONED COSTS SCHEDULE OF FINDINGS AND QUESTIONED COSTS

SECTION I FINANCIAL

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

DEPARTMENT OF AUDITS AND ACCOUNTS
270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400
March 13, 2012

Honorable Nathan Deal, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the Franklin County Board of Education
INDEPENDENT AUDITOR'S COMBINED REPORT ON BASIC FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION - SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
Ladies and Gentlemen:
We have audited the accompanying financial statements of the governmental activities, each major fund, and the aggregate remaining fund information (Exhibits A through H) of the Franklin County Board of Education, as of and for the year ended June 30, 2011, which collectively comprise the Board's basic financial statements as listed in the table of contents. These financial statements are the responsibility of the Franklin County Board of Education's management. Our responsibility is to express opinions on these financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Board's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinions.
In our opinion, the financial statements referred to previously present fairly, in all material respects, the respective financial position of the governmental activities, each major fund, and the aggregate remaining fund information of the Franklin County Board of Education, as of June 30, 2011, and the respective changes in financial position thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America.

2011ARL-11

In accordance with Government Auditing Standards, we have also issued our report dated March 13, 2012, on our consideration of the Franklin County Board of Education's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit.
Management's Discussion and Analysis and the Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual, as presented on pages i through viii and page 25 respectively, are not a required part of the basic financial statements but are supplementary information required by accounting principles generally accepted in the United States of America. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods of measurement and presentation of the required supplementary information. However, we did not audit the information and express no opinion on it.
Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Franklin County Board of Education's financial statements as a whole. The accompanying supplementary information consists of Schedules 2 through 5, which includes the Schedule of Expenditures of Federal Awards as required by U. S. Office of Management and Budget Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations, are presented for purposes of additional analysis and are not a required part of the financial statements. The information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, the information is fairly stated, in all material respects, in relation to the financial statements as a whole.
A copy of this report has been filed as a permanent record in the office of the State Auditor and made available to the press of the State, as provided for by Official Code of Georgia Annotated section 50-6-24.
Respectfully submitted,

RWH:as 2011ARL-11

Russell W. Hinton, CPA, CGFM State Auditor

FRANKLIN COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2011
INTRODUCTION
Our discussion and analysis of the Franklin County School District's financial performance provides an overview of the School District's financial activities for the fiscal year ended June 30, 2011. The intent of this discussion and analysis is to look at the School District's financial performance as a whole. We encourage our readers to also review the transmittal letter, notes to the basic financial statements and financial statements to enhance their understanding of the School District's financial performance.
FINANCIAL HIGHLIGHTS
Key financial highlights for fiscal year 2011 are as follows
On the District-wide financial statements, the assets of the School District exceeded liabilities by $52.2 million.
The School District had slightly more than $33.8 million in expenses relating to governmental activities; only $22.8 million of these expenses are offset by program specific charges for services, grants and contributions. General revenues (primarily property and sales taxes) of $14.7 million were adequate to provide the remaining funding for these programs.
As stated above, general revenues accounted for $14.7 million or 39% of all revenues totaling $37.5 million. Program specific revenues in the form of charges for services, grants and contributions accounted for the rest.
OVERVIEW OF THE FINANCIAL STATEMENTS
This annual report consists of three parts; management's discussion and analysis (this section), the basic financial statements and required supplementary information. The basic financial statements include two levels of statements that present different views of the School District. These include the District-wide and fund financial statements.
The District-wide financial statements include the 'Statement of Net Assets' and 'Statement of Activities'. These statements provide information about the activities of the School District presenting both short-term and long-term information about the School District's overall financial status.
The fund financial statements focus on individual parts of the School District, reporting the School District's operation in more detail. The 'Governmental Funds' statements disclose how basic services are financed in the short-term as well as what remains for future spending. The 'Fiduciary Funds' statements provide information about the financial relationships in which the School District acts solely as a trustee or agent for the benefit of others. In the case of the Franklin County School District, the General Fund, Capital Projects Funds, and Debt Service Funds are all considered to be major funds. The School District has no nonmajor funds as defined by GASB Statement 34 for the purposes of this report.
The financial statements also include notes that explain some of the information in the statements and provide more detailed data. The statements are followed by a section of required supplementary information that further explains and supports the financial statements. Additionally, other supplementary information (not required) is also presented that further supplements understanding of the financial statements.
i

FRANKLIN COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2011
District-wide Statements
Since Franklin County School District has no operations that have been classified as "Business Activities", the District-wide financial statements are basically a consolidation of all of the School District's operating funds into one column called governmental activities. In reviewing the Districtwide financial statements, a reader might ask the question, are we in a better financial position now than last year? The 'Statement of Net Assets' and the 'Statement of Activities' provides the basis for answering this question. These financial statements include all the School District's assets and liabilities and uses the accrual basis of accounting similar to the accounting used by most privatesector companies. This basis of accounting takes into account all of the current year's revenues and expenses regardless of when cash is received or paid.
These two statements report the School District's net assets and any changes in those assets. The change in net assets is important because it tells the reader that, for the School District as a whole, the financial position of the School District has improved or diminished. The causes of this change may be the results of many factors, including those not under the School District's control, such as the property tax base, facility conditions, required educational programs, student-teacher ratios, and other factors.
The 'Statement of Net Assets' and the 'Statement of Activities' reflects 100% of the School District's financial activities.
Fund Financial Statements
The School District uses many funds or sub-funds to account for a multitude of financial transactions during the fiscal year. The fund financial statements presented in this report provide detail information about only the School District's significant or major funds. As discussed previously, the District has no nonmajor Funds as defined by GASB Statement 34.
Governmental Funds Most of the School District's activities are reported in the governmental funds, which focus on how money flows into and out of those funds and the balances left at year-end available for spending in future periods. These funds are reported using the modified accrual method of accounting which measures cash and all other financial assets that can be readily converted to cash. The governmental fund statements provide a detailed short-term view of the School District's general government operations and the basic services it provides. Governmental fund information helps determine whether there are more or fewer financial resources that can be spent in the near future to finance educational programs. The differences between government activities (reported in the Statement of Net Assets and the Statement of Activities) and governmental funds are reconciled in the financial statements.
Fiduciary Funds The School District is the trustee, or fiduciary, for assets that belong to school clubs and other organizations within the principals' accounts. The School District is responsible for ensuring that the assets reported in these funds are used only for their intended purposes and by those to whom the assets belong. The School District excludes these activities from the District-wide financial statements because it cannot use these assets to finance its operations.
FINANCIAL ANALYSIS OF THE SCHOOL DISTRICT AS A WHOLE
Recall that the Statement of Net Assets provides the perspective of the School District as a whole. The reader can think of the District's net assets as the difference between its assets (i.e., what the School District owns) and its liabilities (i.e., what the School District owes) at the end of a fiscal year.
ii

FRANKLIN COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2011

This balance represents one way to measure the District's financial health or its financial position. In the case of the Franklin County School District, assets exceeded liabilities by $52.2 million at June 30, 2011.

To better understand the District's actual financial position and ability to deliver services in future periods, the reader will need to review the various components of the net asset category. For example, of the $52.2 million of net assets, approximately $4.3 million was restricted for continuation of Federal programs, debt service, and completion of certain ongoing capital projects. Accordingly, these funds were not available to meet the District's ongoing obligations to citizens and creditors.

In addition, the School District also had $46.1 million (net of related debt) invested in capital assets (e.g., land, buildings, and equipment). The School District uses these capital assets to provide educational services to students within geographic boundaries served by the District. Because of the very nature and on-going use of the assets being reported in this component of net assets, it must be recognized that this portion of the net assets is not available for future spending.

Table 1 provides a summary of the School District's net assets for fiscal year 2011 compared to fiscal year 2010.
Table 1
Net Assets

Governmental Activities

Fiscal

Fiscal

Year 2011

Year 2010

Assets Current and Other Assets Capital Assets, Net

$ 12,260,655.16 $ 11,293,970.30

53,247,245.25

53,891,014.69

Total Assets
Liabilities Current and Other Liabilities Long-Term Liabilities

$ 65,507,900.41 $ 65,184,984.99

$ 4,032,953.23 $ 4,256,387.50

9,216,003.17

12,374,506.07

Total Liabilities
Net Assets Invested in Capital Assets, Net of Related Debt Restricted Unrestricted
Total Net Assets

$ 13,248,956.40 $ 16,630,893.57

$ 46,122,046.43 $ 43,645,652.87

4,341,499.84

4,339,111.61

1,795,397.74

569,326.94

$ 52,258,944.01 $ 48,554,091.42

Table 2 shows the Changes in Net Assets for fiscal year 2011 as compared to fiscal year 2010.

iii

FRANKLIN COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2011

Table 2 Change in Net Assets
Revenues Program Revenues: Charges for Services and Sales Operating Grants and Contributions Capital Grants and Contributions
Total Program Revenues
General Revenues: Taxes Property Taxes For Maintenance and Operations Railroad Cars Sales Taxes Special Purpose Local Option Sales Tax For Debt Services Intangible Recording Tax Real Estate Grants and Contributions not Restricted to Specific Programs Investment Earnings Miscellaneous Transfers
Total General Revenues
Total Revenues
Program Expenses: Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Operations of Non-Instructional Services Enterprise Operations Food Services Interest on Short-Term and Long-Term Debt
Total Expenses
Increase in Net Assets
iv

Governmental Activities

Fiscal Year

Fiscal Year

2011

2010

$

658,117.07 $

737,412.29

21,960,063.92

21,469,273.00

228,876.00

$ 22,847,056.99 $ 22,206,685.29

$ 9,845,280.20 $ 9,393,326.50

7,244.98

6,463.70

3,106,701.84 107,880.67 24,707.64

2,930,328.22 110,167.04 17,822.37

888,437.02 52,190.85
719,956.71 3,523.12

549,456.69 72,034.49
894,844.29 9,095.97

$ 14,755,923.03 $ 13,983,539.27

$ 37,602,980.02 $ 36,190,224.56

$ 21,582,710.64 $ 21,917,293.35

932,373.17 1,432,757.41
745,516.55 436,148.85 2,059,049.84 244,172.72 2,192,128.24 1,714,537.98
44,955.40 218,356.95

960,180.83 1,532,885.23
764,273.09 462,344.12 2,124,307.01 232,049.75 2,267,714.59 1,869,258.24
42,703.17 268,273.90

405,060.34 1,475,259.09
415,100.25

431,727.09 1,591,281.87
608,511.97

$ 33,898,127.43 $ 35,072,804.21

$ 3,704,852.59 $ 1,117,420.35

FRANKLIN COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2011

Governmental Activities
The Statement of Activities shows the cost of program services and the charges for services and grants offsetting these services. Table 3 shows, for governmental activities, the total cost of services and the net cost of services and compares fiscal year 2011 with fiscal year 2010. Net cost of services can be defined as the total cost less fees generated by the activities and intergovernmental revenue provided for specific programs. The net cost reflects the financial burden on the School District's taxpayers by each activity.
Table 3 Governmental Activities

Total Cost of Services

Fiscal

Fiscal

Year 2011

Year 2010

Net Cost of Services

Fiscal

Fiscal

Year 2011

Year 2010

Instruction Support Services:
Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Operations of Non-Instructional Services: Enterprise Operations Community Services Food Services Interest on Short-Term and Long-Term Debt

$ 21,582,710.64 $ 21,917,293.35 $ 5,495,072.97 $ 6,758,957.72

932,373.17 1,432,757.41
745,516.55 436,148.85 2,059,049.84 244,172.72 2,192,128.24 1,714,537.98
44,955.40 218,356.95

960,180.83 1,532,885.23
764,273.09 462,344.12 2,124,307.01 232,049.75 2,267,714.59 1,869,258.24
42,703.17 268,273.90

744,211.98 1,085,538.70
253,126.58 -323,471.82 990,961.55 243,406.71 1,043,479.31 753,996.84
44,955.40 159,136.75

719,812.10 951,335.70 264,496.33 -308,158.26 1,055,587.67 231,362.05 1,091,650.06 1,092,287.93
42,703.17 203,292.31

405,060.34
1,475,259.09 415,100.25

431,727.09
1,591,281.87 608,511.97

234,543.45 -2,239.66
-86,748.57 415,100.25

263,371.55 -1,763.80
-107,327.58 608,511.97

Total Expenses

$ 33,898,127.43 $ 35,072,804.21 $ 11,051,070.44 $ 12,866,118.92

FINANCIAL ANALYSIS OF THE SCHOOL DISTRICT'S FUNDS

The School District's governmental funds are accounted for using the modified accrual basis of accounting. The governmental funds had total revenues of $37.2 million and total expenditures of $36.4 million during fiscal year 2011. Included in the $36.4 million of expenditures were $95 thousand of Capital Outlay expenditures and $3.41 million in Debt Service. These expenditures were funded primarily through General Obligation Bonds issued in 2006 and 2007 and SPLOST receipts.

General Fund Budgeting Highlights

The School District's budget is prepared according to Georgia Law. The most significant budgeted fund of the School District is the General Fund. However under the GASB 34 reporting model the General Fund includes more than the "general fund' described in the Department of Education's

v

FRANKLIN COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2011

Accounting Manual. No changes were made to the General Fund budget as described in the Georgia Department of Education Accounting Manual, but amendments were made to other funds included in the broader GASB 34 definition. These amendments were the result of carry over funds and/or changes in tentative allocations.
For the General Fund, the final actual revenues of $34.1 were above the final budgeted amounts of $33.8 million by $0.3 million. This difference (final actual vs. final budget) was due to property tax collections which were slightly higher than budgeted due to a higher percentage of delinquent taxes collected in the current fiscal year, increases in state revenue, slight increases in state grant revenue received, and increased miscellaneous local revenue reported.
The final actual expenditures of $32.9 were under the final budgeted amount of $33.4 million by $0.5 million. This variance was a result in some salary and benefit expense, and a reduction in improvement of instructional services expenditures.
CAPITAL ASSETS AND DEBT ADMINISTRATION
Capital Assets
At fiscal year ended June 30, 2011, the School District had $53.2 million invested in capital assets, all in governmental activities. Table 4 reflects a summary of these balances net of accumulated depreciation and compares fiscal year 2011 with fiscal year 2010.
Table 4 Capital Assets (Net of Depreciation)

Governmental Activities

Fiscal

Fiscal

Year 2011

Year 2010

Land Construction In Progress Land Improvements Buildings Equipment Intangible Assets

$ 1,338,157.39 $ 65,000.00
7,011,610.84 42,581,364.33
2,184,372.17 66,740.52

1,338,157.39
7,120,788.89 43,231,621.97
2,200,446.44

Total

$ 53,247,245.25 $ 53,891,014.69

Additional information on the School District's Capital Assets can be found in the Notes to the Financial Statements.

The School District funded a few capital equipment purchases in fiscal year 2011 and began the design and pre-construction work on the new main building project at the high school.

vi

FRANKLIN COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2011

Debt
At fiscal year ended June 30, 2011, the School District had $9,205,000.00 in bonds outstanding, and $11,003.17 in other long-term debt. Table 5 summarizes the School District's debt for general obligation bonds and capital leases and compares fiscal year 2011 with fiscal year 2010.

Table 5 Debt at June 30

Governmental Activities

Fiscal

Fiscal

Year 2011

Year 2010

Capital Leases Bonds Payable

$

11,003.17 $

199,506.07

9,205,000.00

12,175,000.00

Total

$ 9,216,003.17 $ 12,374,506.07

Additional information can be found on the School District's debt in the Notes to the Financial Statements.
CURRENT ISSUES

Currently known facts, decisions or conditions that are expected to have a significant effect on financial positions or results of operations in future years are as follows:
State QBE Revenue Reductions During the current fiscal year the State of Georgia again implemented statewide austerity reductions to all School Districts. Franklin County's QBE funding was reduced by $2,763,341. The School District did receive $671,000 in Federal Education Job Fund dollars that help offset some of the austerity. The austerity cut for fiscal year 2012 is $2,867,561 and the austerity cuts are expected to continue at the same rate in fiscal year 2013. The austerity cuts could be repeated in future years until the state and local economy grows. This shifting of financial responsibility to the local property taxpayer puts a burden on local leadership as it tries to communicate these changes to its electorate. Despite these challenges, the Franklin County School District is strong financially, and we remain optimistic about the ability of the School District to maximize all of the financial resources to provide a quality education to our students.
Capital Improvements The School District plans capital improvements as future capital needs arise due to increased student population and facility repair and maintenance needs. Specific capital expenditure plans are formalized in conjunction with individual general obligation bond issues and anticipated annual receipts of capital outlay funds from the State of Georgia Department of Education. The School District regularly monitors anticipated capital outlay needs, and prioritizes those needs so as to best utilize available funding. On March 15, 2011, the Franklin County voters approved the continuation of the Special Purpose Local Option Sales Tax (SPLOST). The SPLOST is a one cent per dollar sales tax and is to be used for capital projects in the Franklin County School District. The majority of these tax proceeds will be used to replace the main building at the Franklin County High School. This project will be funded with State capital outlay funds and the proceeds of the SPLOST proceeds collected from 2013-2018.

vii

FRANKLIN COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2011 CONTACTING THE SCHOOL DISTRICT'S FINANCIAL MANAGEMENT This financial report is designed to provide our citizens, taxpayers, investors and creditors with a general overview of the School District's finances and to show the School District's accountability for the money it receives. If you have questions about this report or need additional financial information, contact Mr. Matt McRee, Finance Director for Franklin County School District, 280 Busha Road, Carnesville, Georgia 30521. You may also email your questions to Mr. McRee at mmcree@franklin.k12.ga.us.
viii

FRANKLIN COUNTY BOARD OF EDUCATION

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

EXHIBIT "A"

GOVERNMENTAL ACTIVITIES

$

4,476,021.98

3,741,647.17

1,073,414.03 2,318,287.61
627,206.92 4,626.15 673.27
18,778.03 1,403,157.39 51,844,087.86

$

65,507,900.41

$

115,102.92

3,831,479.03

2,703.53

83,667.75

4,266,003.17 4,950,000.00

$

13,248,956.40

$

46,122,046.43

330,690.36 3,517,039.61
493,769.87 1,795,397.74

$

52,258,944.01

$

65,507,900.41

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

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

GOVERNMENTAL ACTIVITIES
Instruction Support Services
Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Operations of Non-Instructional Services Enterprise Operations Community Services Food Services Interest on Short-Term and Long-Term Debt
Total Governmental Activities
General Revenues Taxes Property Taxes For Maintenance and Operations Railroad Cars Sales Taxes Special Purpose Local Option Sales Tax For Debt Services Other Sales Tax Grants and Contributions not Restricted to Specific Programs Investment Earnings Miscellaneous
Special Items Transfers
Total General Revenues and Special Items
Change in Net Assets
Net Assets - Beginning of Year
Net Assets - End of Year

EXPENSES

CHARGES FOR SERVICES

$

21,582,710.64 $

932,373.17 1,432,757.41
745,516.55 436,148.85 2,059,049.84 244,172.72 2,192,128.24 1,714,537.98
44,955.40 218,356.95

405,060.34

1,475,259.09 415,100.25

$

33,898,127.43 $

14,800.00
53,025.00 11,496.33
170,516.89 2,239.66
406,039.19 658,117.07

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

EXHIBIT "B"

PROGRAM REVENUES OPERATING GRANTS AND
CONTRIBUTIONS

CAPITAL GRANTS AND CONTRIBUTIONS

NET (EXPENSES) REVENUES
AND CHANGES IN NET ASSETS

$

16,072,837.67

188,161.19 347,218.71 492,389.97 759,620.67 1,068,088.29
766.01 1,095,623.93
720,168.81 $

59,220.20

1,155,968.47

$

21,960,063.92 $

$ 228,876.00 228,876.00 $

-5,495,072.97
-744,211.98 -1,085,538.70
-253,126.58 323,471.82 -990,961.55 -243,406.71 -1,043,479.31 -753,996.84 -44,955.40 -159,136.75
-234,543.45 2,239.66
86,748.57 -415,100.25
-11,051,070.44

$

9,845,280.20

7,244.98

3,106,701.84 132,588.31 888,437.02 52,190.85 719,956.71

3,523.12

$

14,755,923.03

$

3,704,852.59

48,554,091.42

$

52,258,944.01

- 3 -

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

EXHIBIT "C"

ASSETS
Cash and Cash Equivalents Investments Accounts Receivable, Net
Taxes State Government Federal Government Local Inventories
Total Assets
LIABILITIES AND FUND BALANCES
LIABILITIES
Accounts Payable Salaries and Benefits Payable Payroll Withholdings Payable Deposits and Deferred Revenue
Total Liabilities
FUND BALANCES
Nonspendable Restricted Committed Assigned Unassigned
Total Fund Balances
Total Liabilities and Fund Balances

GENERAL FUND

DISTRICTWIDE
CAPITAL PROJECTS
FUND

DEBT SERVICE
FUND

TOTAL

$ 4,466,383.23 $ 9,638.75

$ 4,476,021.98

496,131.12 $ 3,245,516.05

3,741,647.17

718,551.34 2,318,287.61
627,206.92 4,626.15 673.27
18,778.03

354,862.69

1,073,414.03 2,318,287.61
627,206.92 4,626.15 673.27
18,778.03

$ 8,154,506.55 $ 505,769.87 $ 3,600,378.74 $ 12,260,655.16

$ 103,102.92 $ 3,831,479.03 2,703.53 467,107.27

12,000.00

$ 4,404,392.75 $ 12,000.00

$

115,102.92

3,831,479.03

2,703.53

467,107.27

$ 4,416,392.75

$

18,778.03

311,912.33 $ 493,769.87 $

421,134.77

1,551,603.00

1,446,685.67

$ 3,600,378.74

18,778.03 4,406,060.94
421,134.77 1,551,603.00 1,446,685.67

$ 3,750,113.80 $ 493,769.87 $ 3,600,378.74 $ 7,844,262.41

$ 8,154,506.55 $ 505,769.87 $ 3,600,378.74 $ 12,260,655.16

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

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

EXHIBIT "D"

Total Fund Balances - Governmental Funds (Exhibit "C")
Amounts reported for Governmental Activities in the Statement of Net Assets are different because:
Capital Assets used in Governmental Activities are not financial resources and therefore are not reported in the funds. These assets consist of:
Land Construction in Progress Land Improvements Buildings Equipment Intangible Assets Accumulated Depreciation
Total Capital Assets
Taxes that are not available to pay for current period expenditures are deferred in the funds.
Property Taxes
Long-Term Liabilities, including Bonds Payable, are not due and payable in the current period and therefore are not reported as liabilities in the funds. Long-Term Liabilities at year-end consist of:
Bonds Payable Accrued Interest Capital Leases Payable
Total Long-Term Liabilities
Net Assets of Governmental Activities (Exhibit "A")

$ 7,844,262.41

$ 1,338,157.39 65,000.00
7,675,786.19 50,113,066.70
5,396,644.98 105,379.62
-11,446,789.63

53,247,245.25

467,107.27

$ -9,205,000.00 -83,667.75 -11,003.17

-9,299,670.92

$ 52,258,944.01

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

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

EXHIBIT "E"

REVENUES
Property Taxes Sales Taxes State Funds Federal Funds Charges for Services Investment Earnings Miscellaneous
Total Revenues
EXPENDITURES
Current Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Enterprise Operations Food Services Operation
Capital Outlay Debt Services
Principal Interest
Total Expenditures
Excess of Revenues over (under) Expenditures
OTHER FINANCING SOURCES (USES)
Transfers In Transfers Out
Total Other Financing Sources (Uses)
Net Change in Fund Balances
Fund Balances - Beginning
Fund Balances - Ending

GENERAL FUND

DISTRICTWIDE
CAPITAL PROJECTS
FUND

DEBT SERVICE
FUND

TOTAL

$ 9,546,883.33 132,588.31
18,277,285.55 4,800,091.39 658,117.07 43,814.57 $ 719,956.71
$ 34,178,736.93 $

$ 1,240.59

$ 3,106,701.84
7,135.69

9,546,883.33 3,239,290.15 18,277,285.55 4,800,091.39
658,117.07 52,190.85
719,956.71

1,240.59 $ 3,113,837.53 $ 37,293,815.05

$ 20,906,171.47

$ 20,906,171.47

932,373.17 1,432,757.41
730,094.69 436,148.85 2,012,253.51 219,824.92 $ 2,184,840.88 1,768,504.07
44,955.40 218,356.95 405,060.35 1,437,493.67

2,493.75 14,124.00
95,191.45

932,373.17 1,432,757.41
730,094.69 436,148.85 2,012,253.51 222,318.67 2,184,840.88 1,782,628.07
44,955.40 218,356.95 405,060.35 1,437,493.67
95,191.45

181,012.90 6,103.20

$ 2,970,000.00 441,910.00

3,151,012.90 448,013.20

$ 32,915,951.44 $ 111,809.20 $ 3,411,910.00 $ 36,439,670.64

$ 1,262,785.49 $ -110,568.61 $ -298,072.47 $

854,144.41

$

3,523.12 $ 18,468.00

-18,468.00

$

21,991.12

-18,468.00

$

-14,944.88 $ 18,468.00

$

3,523.12

$ 1,247,840.61 $ -92,100.61 $ -298,072.47 $

857,667.53

2,502,273.19

585,870.48

3,898,451.21

6,986,594.88

$ 3,750,113.80 $ 493,769.87 $ 3,600,378.74 $ 7,844,262.41

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

FRANKLIN COUNTY BOARD OF EDUCATION RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT OF
REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES TO THE STATEMENT OF ACTIVITIES
FOR THE YEAR ENDED JUNE 30, 2011

EXHIBIT "F"

Total Net Change in Fund Balances - Governmental Funds (Exhibit "E")
Amounts reported for Governmental Activities in the Statement of Activities are different because:
Capital Outlays are reported as expenditures in Governmental Funds. However, in the Statement of Activities, the cost of Capital Assets is allocated over their estimated useful lives as depreciation expense. In the current period, these amounts are:
Capital Outlay Depreciation Expense
Excess of Capital Outlay over Depreciation Expense
Taxes reported in the Statement of Activities that do not provide current financial resources are not reported as revenues in the funds.
Repayment of Long-Term Debt is reported as an expenditure in Governmental Funds, but the repayment reduces Long-Term Liabilities in the Statement of Net Assets. In the current year, these amounts consist of:
Bond Principal Retirements Capital Lease Payments
Total Long-Term Debt Repayments
Interest expense reported in the Statement of Activities is recorded as incurred, whereas interest expense in the governmental fund statements is reported when paid.
Change in Net Assets of Governmental Activities (Exhibit "B")

$

857,667.53

$ 427,497.62 -1,071,267.06

-643,769.44 305,641.85

$ 2,970,000.00 188,502.90

3,158,502.90

26,809.75

$ 3,704,852.59

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

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

EXHIBIT "G"
AGENCY FUNDS $ 127,078.07
$ 127,078.07

The notes to the basic financial statements are an integral part of this statement. - 8 -

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

EXHIBIT "H"

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

- 9 -

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

EXHIBIT "H"

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

- 10 -

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

EXHIBIT "H"

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

- 11 -

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

EXHIBIT "H"

PROPERTY TAXES
The Franklin County Board of Commissioners fixed the property tax levy for the 2010 tax digest year (calendar year) on July 16, 2010 (levy date). Taxes were due on November 15, 2010 (lien date). Taxes collected within the current fiscal year or within 60 days after year-end on the 2010 tax digest are reported as revenue in the governmental funds for fiscal year 2011. The Franklin County Tax Commissioner bills and collects the property taxes for the School District, withholds 2.5% of taxes collected as a fee for tax collection and remits the balance of taxes collected to the School District. Property tax revenues, at the fund reporting level, during the fiscal year ended June 30, 2011, for maintenance and operations amounted to $9,539,638.35.
The tax millage rate levied for the 2010 tax year (calendar year) for the Franklin County Board of Education was as follows (a mill equals $1 per thousand dollars of assessed value):

School Operations

14.868 mills

SALES TAXES

Special Purpose Local Option Sales Tax, at the fund reporting level, during the year amounted to $3,106,701.84 and is to be used for capital outlay for educational purposes or debt service. This sales tax was authorized by local referendum and the sales tax must be re-authorized at least every five years.

INVENTORIES

Food Inventories

On the basic financial statements, inventories of donated food commodities used in the preparation of meals are reported at their Federally assigned value and purchased foods inventories are reported at cost (first-in, first-out). The School District uses the consumption method to account for inventories whereby donated food commodities are recorded as an asset and as revenue when received, and expenses/expenditures are recorded as the inventory items are used. Purchased foods are recorded as an asset when purchased and expenses/expenditures are recorded as the inventory items are used.

CAPITAL ASSETS

Capital assets purchased, including capital outlay costs, are recorded as expenditures in the fund financial statements at the time of purchase (including ancillary charges). On the District-wide financial statements, all purchased capital assets are valued at cost where historical records are available and at estimated historical cost based on appraisals or deflated current replacement cost where no historical records exist. Donated capital assets are recorded at estimated fair market value on the date donated. Disposals are deleted at depreciated recorded cost. The cost of normal maintenance and repairs that do not add to the value of assets or materially extend the useful lives of the assets is not capitalized. Depreciation is computed using the straight-line method. The School District does not capitalize book collections or works of art. During the fiscal year under review, no events or changes in circumstances affecting a capital asset that may indicate impairment were known to the School District.

- 12 -

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

EXHIBIT "H"

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

statements are as follows:

Capitalization

Estimated

Policy

Useful Life

Land Land Improvements Buildings and Improvements Equipment Intangible Assets

Any Amount $ 10,000.00 $ 20,000.00 $ 5,000.00 $ 20,000.00

N/A 20 to 80 years 25 to 80 years
5 to 50 years Estimated Life

Depreciation is used to allocate the actual or estimated historical cost of all capital assets over estimated useful lives, with the exception of intangible assets which are amortized.
Amortization of intangible assets such as water, timber, and mineral rights, easements, patents, trademarks, copyrights and internally generated software is computed using the straight-line method over the estimated useful lives of the assets, generally 10 to 20 years.
GENERAL OBLIGATION BONDS
The School District issues general obligation bonds to provide funds for the acquisition and construction of major capital facilities.
In the District-wide and 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. To conform to generally accepted accounting principles, bond premiums and discounts, as well as bond issuance costs should be amortized over the life of the bonds on the District-wide statements. The effect of this deviation is deemed to be immaterial to the fair presentation of the basic financial statements. General obligation bonds are direct obligations and pledge the full faith and credit of the government. The outstanding amount of these bonds is recorded in the Statement of Net Assets.
NET ASSETS
The School District's net assets in the District-wide Statements are classified as follows:
Invested in capital assets, net of related debt - This represents the School District's total investment in capital assets, net of outstanding debt obligations related to those capital assets. To the extent debt has been incurred but not yet expended for capital assets, such amounts are not included as a component of invested in capital assets, net of related debt.
Restricted net assets - These represent resources for which the School District is legally or contractually obligated to spend resources for continuation of Federal Programs, debt service and capital projects in accordance with restrictions imposed by external third parties.
Unrestricted net assets - Unrestricted net assets represent resources derived from property taxes, sales taxes, grants and contributions not restricted to specific programs, charges for services, and miscellaneous revenues. These resources are used for transactions relating to the educational and general operations of the School District, and may be used at the discretion of the Board to meet current expenses for those purposes.

- 13 -

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

EXHIBIT "H"

FUND BALANCES

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

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

Committed Amounts that can be used only for specific purposes pursuant to constraints imposed by formal action of the Board of Education. The Board of Education is the School District's highest level of decision-making authority, and the formal action that is required to be taken to establish, modify, or rescind a fund balance commitment is a resolution approved by the Board. Committed fund balance also should incorporate contractual obligations to the extent that existing resources in the fund have been specifically committed for use in satisfying those contractual requirements.
Assigned Amounts that are constrained by the School District's intent to be used for specific purposes, but are neither restricted nor committed. The intent should be expressed by (1) the Board of Education or (2) the budget or finance committee, or the Superintendent, or designee, to assign amounts to be used for specific purposes.
Unassigned The residual classification for the General Fund. This classification represents fund balances that has not been assigned to other funds and that has not been restricted, committed, or assigned to specific purposes within the General Fund.

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

Nonspendable Inventories
Restricted Continuation of Federal Programs Capital Projects Debt Service
Committed School Activity Accounts
Assigned Subsequent Period Expenditures
Unassigned

$

$

311,912.33

493,769.87

3,600,378.74

18,778.03
4,406,060.94 421,134.77
1,551,603.00 1,446,685.67

Fund Balance, June 30, 2011

$

7,844,262.41

It is the goal of the School District to achieve and maintain a committed, assigned, and unassigned fund balance in the general fund at fiscal year end of not less than 5% of revenues, not to exceed 15% of the total budget of the subsequent fiscal year, in compliance with Official Code of Georgia Annotated Section 20-2-167(a)5. If the unassigned fund balance at fiscal year end falls below the goal, the School District shall develop a restoration plan to achieve and maintain the minimum fund balance.
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.

- 14 -

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

EXHIBIT "H"

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: DEPOSITS AND INVESTMENTS
COLLATERALIZATION OF DEPOSITS
Official Code of Georgia Annotated (O.C.G.A.) Section 45-8-12 provides that there shall not be on deposit at any time in any depository for a time longer than ten days a sum of money which has not been secured by surety bond, by guarantee of insurance, or by collateral. The aggregate of the face value of such surety bond and the market value of securities pledged shall be equal to not less than 110 percent of the public funds being secured after the deduction of the amount of deposit insurance. If a depository elects the pooled method (O.C.G.A. Section 45-8-13.1) the aggregate of the market value of the securities pledged to secure a pool of public funds shall be not less than 110 percent of the daily pool balance.
Acceptable security for deposits consists of any one of or any combination of the following:
1. Surety bond signed by a surety company duly qualified and authorized to transact business within the State of Georgia,
2. Insurance on accounts provided by the Federal Deposit Insurance Corporation,
3. Bonds, bills, notes, certificates of indebtedness or other direct obligations of the United States or of the State of Georgia,
4. Bonds, bills, notes, certificates of indebtedness or other obligations of the counties or municipalities of the State of Georgia,
5. Bonds of any public authority created by the laws of the State of Georgia, providing that the statute that created the authority authorized the use of the bonds for this purpose,
6. Industrial revenue bonds and bonds of development authorities created by the laws of the State of Georgia, and
7. Bonds, bills, notes, certificates of indebtedness, or other obligations of a subsidiary corporation of the United States government, which are fully guaranteed by the United States government both as to principal and interest or debt obligations issued by or securities guaranteed by the Federal Land Bank, the Federal Home Loan Bank, the Federal Intermediate Credit Bank, the Central Bank for Cooperatives, the Farm Credit Banks, the Federal Home Loan Mortgage Association, and the Federal National Mortgage Association.
CATEGORIZATION OF DEPOSITS
Custodial credit risk is the risk that in the event of a bank failure, the School District's deposits may not be returned to it. The School District does not have a deposit policy for custodial credit risk. At June 30, 2011, the bank balances were $5,089,998.64. The bank balances were entirely covered by Federal depository insurance or collateralized with securities held by the pledging financial institution's trust department or agent in the School District's name.

- 15 -

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

EXHIBIT "H"

CATEGORIZATION OF INVESTMENTS
At June 30, 2011, the carrying value of the School District's total investments was $3,741,647.17, which is materially the same as fair value. This investment consisted entirely of funds invested in the Georgia Fund 1, formerly referred to as LGIP, administered by the State of Georgia, Office of the State Treasurer which are not required to be categorized since the School District did not own any specific identifiable securities in the pool. The investment policy of the State of Georgia, Office of the State Treasurer for the Georgia Fund 1 (Primary Liquidity Portfolio) does not provide for investment in derivatives or similar investments. Additional information on the Georgia Fund 1 is disclosed in the State of Georgia Comprehensive Annual Financial Report. This audit can be obtained from the Georgia Department of Audits and Accounts at 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 but does operate in a manner consistent with the SEC's Rule 2a-7 of the Investment Company Act of 1940. The investment is valued at the pool's share price, $1.00 per share. The pool is an AAAm rated investment pool by Standard and Poor's. The weighted average maturity of Georgia Fund 1 may not exceed 60 days. The weighted average maturity for Georgia Fund 1 on June 30, 2011, was 59 days.
NOTE 4: NON-MONETARY TRANSACTIONS
The School District receives food commodities from the United States Department of Agriculture (USDA) for school breakfast and lunch programs. These commodities are recorded at their Federally assigned value. See Note 2 - Inventories
NOTE 5: CAPITAL ASSETS

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

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

Balances July 1, 2010

Increases

Decreases

Balances June 30, 2011

$ 1,338,157.39 0.00 $

$ 65,000.00

0.00 $ 1,338,157.39 65,000.00

Total Capital Assets, Not Being Depreciated $ 1,338,157.39 $ 65,000.00 $

0.00 $ 1,403,157.39

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

$ 50,113,066.70 5,203,896.35 $ 7,675,786.19

257,118.00 $ 105,379.62

$ 50,113,066.70

64,369.37

5,396,644.98

7,675,786.19

105,379.62

Less: Accumulated Depreciation: Buildings and Improvements Equipment Land Improvements Intangible Assets

6,881,444.73 3,003,449.91
554,997.30

650,257.64 273,192.27 109,178.05
38,639.10

64,369.37

7,531,702.37 3,212,272.81
664,175.35 38,639.10

Total Capital Assets, Being Depreciated, Net $ 52,552,857.30 $ -708,769.44 $

0.00 $ 51,844,087.86

Governmental Activity Capital Assets - Net $ 53,891,014.69 $ -643,769.44 $

0.00 $ 53,247,245.25

- 16 -

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

EXHIBIT "H"

Capital assets being acquired under capital leases as of June 30, 2011, are as follows:
Governmental Funds

Equipment Less: Accumulated Depreciation

$

375,330.00

64,577.45

$

310,752.55

Current year depreciation expense by function is as follows:

Instruction

Support Services

Educational Media Services

$

School Administration

Business Administration

Maintenance and Operation of Plant

Student Transportation Services

Food Services

$
17,500.48 53,103.75 38,639.10
8,269.58 198,485.05

707,374.66
315,997.96 47,894.44

$

1,071,267.06

NOTE 6: INTERFUND TRANSFERS

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

Transfer to

Transfers From

General

Agency

Fund

Fund

General Fund District-wide Capital Projects

$

$

18,468.00

$

18,468.00 $

3,523.12 3,523.12

Transfers are used (1) to move property tax revenues collected by the General Fund to the Districtwide Capital Projects Fund for reimbursement of temporary classrooms and (2) to transfer funds from Agency account balances to the General Fund to reimburse Governmental School Activity Accounts for shared transactions with Agency School Activity Accounts.
NOTE 7: RISK MANAGEMENT
The School District is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors or omissions; job related illness or injuries to employees; acts of God and unemployment compensation.
The School District participates in the Georgia School Boards Association Risk and Insurance Management System, a public entity risk pool organized on July 1, 1994, to develop and administer a plan to reduce risk of loss on account of general liability, motor vehicle liability, or property

- 17 -

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

EXHIBIT "H"

damage, including safety engineering and other loss prevention and control techniques, and to administer one or more groups of self-insurance funds, including the processing and defense of claims brought against members of the system. The School District pays an annual premium to the system for its general insurance coverage. Additional coverage is provided through agreements by the system with other companies according to their specialty for property, boiler and machinery (including coverage for flood and earthquake), general liability (including coverage for sexual harassment, molestation and abuse), errors and omissions, crime and automobile risks. Payment of excess insurance for the system varies by line of coverage.

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

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

Beginning of Year Liability

Claims and Changes in Estimates

Claims Paid

End of Year Liability

2010 $ 2011 $

0.00 $ 0.00 $

15,083.33 $ 44,561.00 $

15,083.33 $ 44,561.00 $

0.00 0.00

The School District participates in the Georgia School Boards Association Workers' Compensation Fund, a public entity risk pool organized on July 1, 1992, to develop, implement, and administer a program of workers' compensation self-insurance for its member organizations. The School District pays an annual premium to the Fund for its general insurance coverage. Additional insurance coverage is provided through an agreement by the Fund with the Safety National Casualty Corporation to provide coverage for potential losses sustained by the Fund in excess of $500,000.00 loss per occurrence, up to the statutory limit. Employers' Liability insurance coverage is also provided by Safety National Casualty Corporation to provide coverage for potential losses sustained by the Fund in excess of $500,000.00 loss per occurrence, up to $2,000,000.00.

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

Position Covered

Amount

Superintendent

$

100,000.00

NOTE 8: LONG-TERM DEBT
CAPITAL LEASES
The Franklin County Board of Education entered into various lease agreements for equipment, buses, and software. These lease agreements qualify as capital leases for accounting purposes, and, therefore, have been recorded at the present value of the future minimum lease payments as of the date of their inception.

- 18 -

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

EXHIBIT "H"

GENERAL OBLIGATION DEBT OUTSTANDING

General Obligation Bonds currently outstanding are as follows:

Purpose

Interest Rates

General Government - Series 2006 General Government - Series 2007

3.73% 3.46%

Amount
$ 5,505,000.00 3,700,000.00
$ 9,205,000.00

Voters have authorized $15,000,000.00 in general obligation debt for the replacement of the academic building at Franklin County High School, adding to, renovating, repairing, improving, acquiring and equipping school buildings, acquiring new equipment and technology for the school system, acquiring textbooks and ebooks, repaying a portion of prior debt related to the 2006 and 2007 bonds, and other capital outlay projects which was not issued as of June 30, 2011.

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

Balance July 1, 2010

Additions

Governmental Funds

Balance

Deductions

June 30, 2011

Due Within One Year

G. O. Bonds Capital Leases

$ 12,175,000.00 $ 199,506.07

0.00 $ 2,970,000.00 $ 9,205,000.00 $ 4,255,000.00

188,502.90

11,003.17

11,003.17

$ 12,374,506.07 $

0.00 $ 3,158,502.90 $ 9,216,003.17 $ 4,266,003.17

At June 30, 2011, payments due by fiscal year which includes principal and interest for these items are as follows:

Fiscal Year Ended June 30:

Capital Leases

Principal

Interest

2012 Fiscal Year Ended June 30:

$

11,003.17 $

492.93

General Obligation Debt

Principal

Interest

2012 2013
Total Principal and Interest

$

4,255,000.00 $

4,950,000.00

$

9,205,000.00 $

333,356.50 178,965.00
512,321.50

- 19 -

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

EXHIBIT "H"

NOTE 9: ON-BEHALF PAYMENTS
The School District has recognized revenues and costs in the amount of $110,165.92 for health insurance and retirement contributions paid on the School District's behalf by the following State Agencies.
Georgia Department of Education Paid to the Georgia Department of Community Health For Health Insurance of Non-Certified Personnel In the amount of $67,929.20
Paid to the Teachers' Retirement System of Georgia For Teachers Retirement System (TRS) Employer's Cost In the amount of $16,970.72
Office of State Treasurer Paid to the Public School Employees Retirement System For Public School Employees Retirement (PSERS) Employer's Cost In the amount of $25,266.00
NOTE 10: SIGNIFICANT CONTINGENT LIABILITIES
Amounts received or receivable principally from the Federal government are subject to audit and review by grantor agencies. This could result in requests for reimbursement to the grantor agency for any costs which are disallowed under grant terms. The School District believes that such disallowances, if any, will be immaterial to its overall financial position.
The School District is a defendant in various legal proceedings pertaining to matters incidental to the performance of routine School District operations. The ultimate disposition of these proceedings is not presently determinable, but is not believed to be material to the basic financial statements.
NOTE 11: POST-EMPLOYMENT BENEFITS
GEORGIA SCHOOL PERSONNEL POST-EMPLOYMENT HEALTH BENEFIT FUND
Plan Description. The Georgia School Personnel Post-employment Health Benefit Fund (School OPEB Fund) is a cost-sharing multiple-employer defined benefit post-employment healthcare plan that covers eligible former employees of public school systems, libraries and regional educational service agencies. The School OPEB Fund provides health insurance benefits to eligible former employees and their qualified beneficiaries through the State Employees Health Benefit Plan administered by the Department of Community Health. The Official Code of Georgia Annotated (O.C.G.A.) assigns the authority to establish and amend the benefit provisions of the group health plans, including benefits for retirees, to the Board of Community Health (Board). The Department of Community Health, which includes the School OPEB Fund, issues a separate stand alone financial audit report and a copy can be obtained from the Georgia Department of Audits and Accounts.
Funding Policy. The contribution requirements of plan members and participating employers are established by the Board in accordance with the current Appropriations Act and may be amended by the Board. Contributions of plan members or beneficiaries receiving benefits vary based on plan election, dependent coverage, and Medicare eligibility and election. On average, plan members pay approximately 25 percent of the cost of the health insurance coverage.
Participating employers are statutorily required to contribute in accordance with the employer contribution rates established by the Board. The contribution rates are established to fund all benefits due under the health insurance plans for both active and retired employees based on

- 20 -

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

EXHIBIT "H"

projected "pay-as-you-go" financing requirements. Contributions are not based on the actuarially calculated annual required contribution (ARC) which represents a level of funding that, if paid on an ongoing basis, is projected to cover normal cost each year and amortize any unfunded actuarial liabilities (or funding excess) over a period not to exceed thirty years.
The combined active and retiree contribution rates established by the Board for employers participating in the School OPEB Fund were as follows for the fiscal year ended June 30, 2011:
For certificated teachers, librarians and regional educational service agencies:

July 2010 - April 2011 May 2011 - June 2011

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

For non-certificated school personnel:

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

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

The Department of Education was appropriated an additional $25,081,633 for non-certificated personnel health insurance payments. The amount attributable to the School District is reflected in the On-behalf note disclosure.
No additional contribution was required by the Board for fiscal year 2011 nor contributed to the School OPEB Fund to prefund retiree benefits. Such additional contribution amounts are determined annually by the Board in accordance with the School plan for other post-employment benefits and are subject to appropriation.

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

Fiscal Year

Percentage Contributed

Required Contribution

2011 2010 2009

100%

$

100%

$

100%

$

3,217,896.09 2,952,658.96 2,286,108.61

NOTE 12: RETIREMENT PLANS
TEACHERS RETIREMENT SYSTEM OF GEORGIA (TRS)
Plan Description. The TRS is a cost-sharing multiple-employer defined benefit plan created in 1943 by an act of the Georgia General Assembly to provide retirement benefits for qualifying employees in educational service. A Board of Trustees comprised of active and retired members and ex-officio State employees is ultimately responsible for the administration of TRS. The Teachers Retirement System of Georgia issues a separate stand alone financial audit report and a copy can be obtained from the Georgia Department of Audits and Accounts.
On October 25, 1996, the Board created the Supplemental Retirement Benefits Plan of the Georgia Teachers Retirement System (SRBP-TRS). SRBP-TRS was established as a qualified excess benefit plan in accordance with Section 415 of the Internal Revenue Code (IRC) as a portion of TRS. The purpose of SRBP-TRS is to provide retirement benefits to employees covered by TRS whose benefits are otherwise limited by IRC Section 415. Beginning July 1, 1997, all members and retired former members in TRS are eligible to participate in the SRBP-TRS whenever their benefits under TRS exceed the IRC Section 415 imposed limitation on benefits.

- 21 -

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

EXHIBIT "H"

TRS provides service retirement, disability retirement, and survivor's benefits. The benefit structure of TRS is defined and may be amended by State statute. A member is eligible for normal service retirement after 30 years of creditable service, regardless of age, or after 10 years of service and attainment of age 60. A member is eligible for early retirement after 25 years of creditable service.

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

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

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

Fiscal Year

Percentage Contributed

Required Contribution

2011 2010 2009

100%

$

100%

$

100%

$

1,887,110.62 1,840,590.05 1,759,207.60

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.
DEFINED CONTRIBUTION PLAN
In August 2000, Franklin County Board of Education began an employer paid 403(b) annuity 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 of this group.
The Board selected Lincoln as the provider of this plan. For each employee covered under PSERS, the Board began contributing to the plan an amount equal to the amount contributed by the employee (a match) each month, not to exceed $25.00 per employee per month.
The employee becomes vested in the plan with 5 years of experience. Employees who had already achieved 5 years of experience at the time the plan was implemented were vested upon enrollment.

- 22 -

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

EXHIBIT "H"

Funds accumulated in the employer paid accounts are only available to the employee upon termination of employment and 5 years of service to Franklin County Board of Education. If an employee terminates employment prior to achieving 5 years of service, funds paid on behalf of the non-vested employee are credited back to the Board. Funds are vested at 20% per year of service.

The vendor for the plan has not changed since its inception.

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

Fiscal Year

Percentage Contributed

Required Contribution

2011 2010 2009

100%

$

100%

$

100%

$

19,315.00 18,862.50 19,580.00

- 23 -

(This page left intentionally blank)

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

SCHEDULE "1"

REVENUES
Property Taxes Sales Taxes State Funds Federal Funds Charges for Services Investment Earnings Miscellaneous
Total Revenues
EXPENDITURES
Current Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Food Services Operation Enterprise Operations
Debt Service
Total Expenditures
Excess of Revenues over (under) Expenditures
OTHER FINANCING SOURCES (USES)
Operating Transfers From Other funds Operating Transfers To Other funds
Total Other Financing Sources (Uses)
Net Change in Fund Balances
Fund Balances - Beginning
Adjustments

NONAPPROPRIATED BUDGETS

ORIGINAL (1)

FINAL (1)

ACTUAL AMOUNTS

$ 9,565,004.00 $ 9,469,599.00 $ 9,546,883.33

132,588.31

17,667,733.00

17,936,766.82

18,277,285.55

4,359,609.28

5,808,743.69

4,800,091.39

590,282.00

558,840.00

658,117.07

50,500.00

50,500.00

43,814.57

44,930.00

44,930.00

719,956.71

$ 32,278,058.28 $ 33,869,379.51 $ 34,178,736.93

$ 20,859,398.62 $ 21,259,113.04 $ 20,906,171.47

855,356.66 1,597,654.85
698,532.88 609,997.06 2,002,796.97 254,078.26 2,113,044.86 1,579,564.32
52,900.00 173,000.00 1,580,048.45

992,323.34 1,819,541.75
696,032.24 497,678.19 2,015,860.61 255,576.22 2,132,638.37 1,905,787.90
52,900.00 244,115.00 1,533,615.84

932,373.17 1,432,757.41
730,094.69 436,148.85 2,012,253.51 219,824.92 2,184,840.88 1,768,504.07
44,955.40 218,356.95 1,437,493.67 405,060.35 187,116.10

$ 32,376,372.93 $ 33,405,182.50 $ 32,915,951.44

$

-98,314.65 $

464,197.01 $ 1,262,785.49

$

45,000.00 $

45,000.00 $

3,523.12

-24,000.00

-24,000.00

-18,468.00

$

21,000.00 $

21,000.00 $

-14,944.88

$

-77,314.65 $

485,197.01 $ 1,247,840.61

2,503,635.92

2,502,273.19

2,502,273.19

-3,138.32

Fund Balances - Ending

$ 2,426,321.27 $ 2,984,331.88 $ 3,750,113.80

Notes to the Schedule of Revenues, Expenditures and Changes in Fund Balances Budget and Actual

(1) Original and Final Budget amounts do not include budgeted revenues or expenditures of the various principal accounts.

The accompanying schedule of revenues, expenditures and changes in fund balances budget and actual is presented on the modified accrual basis of accounting which is the basis of accounting used in the presentation of the fund financial statements.

See notes to the basic financial statements.

- 25 -

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

SCHEDULE "2"

FUNDING AGENCY PROGRAM/GRANT
Agriculture, U. S. Department of Child Nutrition Cluster Pass-Through From Georgia Department of Education Food Services School Breakfast Program National School Lunch Program
Total U. S. Department of Agriculture
Education, U. S. Department of Educational Technology State Grants Cluster Pass-Through From Georgia Department of Education Education Technology State Grants
Special Education Cluster Pass-Through From Georgia Department of Education Special Education ARRA - Grants to States Grants to States Preschool Grants
Total Special Education Cluster
Title I, Part A Cluster Pass-Through From Georgia Department of Education ARRA - Title I Grants to Local Educational Agencies Title I Grants to Local Educational Agencies
Total Title I, Part A Cluster
Other Programs Pass-Through From Georgia Department of Education Career and Technical Education - Basic Grants to States Education Jobs Fund English Language Acquisition Grants Improving Teacher Quality State Grants Rural Education Safe and Drug-Free Schools and Communities - State Grants Twenty-First Century Community Learning Centers
Total Other Programs
Total U. S. Department of Education

CFDA NUMBER

PASSTHROUGH
ENTITY ID
NUMBER

EXPENDITURES IN PERIOD

* 10.553 * 10.555

(2) N/A $ 1,541,892.84 (1)
$ 1,541,892.84

84.318

N/A $

312.00

* 84.391 * 84.027 * 84.173

N/A $ N/A N/A

178,025.40 808,042.14
41,434.50

$ 1,027,502.04

* 84.389 * 84.010

N/A $

102,798.19

N/A

1,278,378.60

$ 1,381,176.79

84.048 * 84.410
84.365 84.367 84.358 84.186 84.287

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

41,182.20 778,374.00
17,212.64 164,897.60
45,306.85 7,844.00
237,080.80

$ 1,291,898.09

$ 3,700,888.92

Total Expenditures of Federal Awards

$ 5,242,781.76

N/A = Not Available

Notes to the Schedule of Expenditures of Federal Awards

(1) Includes the Federally assigned value of donated commodities for the Food Donation Program in the amount of $38,879.09.
(2) Expenditures for the funds earned on the School Breakfast Program ($249,308.48) were not maintained separately and are included in the 2011 National School Lunch Program.

Major Programs are identified by an asterisk (*) in front of the CFDA number.

The School District did not provide Federal Assistance to any Subrecipient.

The accompanying schedule of expenditures of Federal awards includes the Federal grant activity of the Franklin County Board of Education and is presented on the modified accrual basis of accounting which is the basis of accounting used in the presentation of the fund financial statements.

See notes to the basic financial statements.

- 26 -

FRANKLIN COUNTY BOARD OF EDUCATION SCHEDULE OF STATE REVENUE YEAR ENDED JUNE 30, 2011
AGENCY/FUNDING
GRANTS Education, Georgia Department of Quality Basic Education Direct Instructional Cost Kindergarten Program Kindergarten Program - Early Intervention Program Primary Grades (1-3) Program Primary Grades - Early Intervention (1-3) Program Upper Elementary Grades (4-5) Program Upper Elementary Grades - Early Intervention (4-5) Program Middle School (6-8) Program High School General Education (9-12) Program Vocational Laboratory (9-12) Program Students with Disabilities Gifted Student - Category VI Remedial Education Program Alternative Education Program English Speakers of Other Languages (ESOL) Media Center Program 20 Days Additional Instruction Staff and Professional Development Indirect Cost Central Administration School Administration Facility Maintenance and Operations Categorical Grants Pupil Transportation Regular Nursing Services Vocational Supervisors Education Equalization Funding Grant Food Services Vocational Education Amended Formula Adjustment Other State Programs Dual Enrollment Health Insurance Math and Science Supplement Middle School Graduation Coach Mid-term Adjustment Hold-Harmless Move On When Ready Preschool Handicapped Program Pupil Transportation - State Bonds Teachers' Retirement Virtual Schools Grant
Office of State Treasurer Public School Employees Retirement
CONTRACT Human Resources, Georgia Department of Family Connection

See notes to the basic financial statements.

- 27 -

SCHEDULE "3"

GOVERNMENTAL FUND TYPE GENERAL FUND

$

1,303,183.00

44,382.00

3,018,822.00

248,997.00

1,457,834.00

161,096.00

2,417,927.34

2,181,504.66

817,455.00

2,457,604.00

689,180.00

221,462.00

192,068.00

99,893.00

420,092.00

130,576.00

74,185.00

574,849.00 893,189.00 933,043.00

596,466.00 70,231.00 14,635.00
920,599.00 56,616.00
155,739.00 -2,740,308.00
7,777.00 67,929.20 43,552.48
6,796.00 334,498.00
100.00 92,106.00 228,876.00 16,970.72
1,150.00

25,266.00

40,944.15

$

18,277,285.55

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

SCHEDULE "4"

PROJECT

ORIGINAL ESTIMATED
COST (1)

CURRENT ESTIMATED COSTS (2)

AMOUNT EXPENDED IN CURRENT YEAR (3) (4) (5)

AMOUNT EXPENDED IN PRIOR YEARS (3) (4) (5)

PROJECT STATUS

2006 SPLOST Locations and Project Identifiers

i) Acquiring, constructing, and equipping new school

buildings and other buildings and facilities useful or

desirable in connection therewith

$

ii) renovating, repairing, improving, and equipping the Old Franklin County Middle School for auxiliary offices, auxiliary education programs, and miscellaneous office space,
iii) acquiring communication equipment and other equipment, including buses and transportation equipment,

iv) adding to, renovating, repairing, improving and equipping existing school buildings and grounds, agricultural facilities and athletic facilities, and other buildings and facilities useful or desirable in connection therewith, including but not limited to Royston Elementary School, Lavonia Elementary School, Carnesville Elementary School, Franklin County Middle School, Franklin County High School, and Central Franklin Elementary School,

v) completing any capital outlay projects authorized in connection with the sales and use tax previously in effect.

2,500,000.00 $ 2,300,000.00
700,000.00
10,000,000.00 4,000,000.00

2,500,000.00 1,075,000.00 $ 2,750,000.00
7,853,852.00 3,266,117.00

$ 2,446,828.01 Ongoing

1,866.50

1,068,194.54 Ongoing

16,443.95

2,651,803.30 Ongoing

72,537.00

4,133,353.29 Ongoing

3,266,117.00 Ongoing

$ 19,500,000.00 $ 17,444,969.00 $

90,847.45 $ 13,566,296.14

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

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

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

[4] In addition to the expenditures shown above, the School District has incurred interest and related fees to provide advance funding for the above projects as follows:

Prior Years

$ 1,945,547.00

Current Year

441,910.00

Total

$ 2,387,457.00

(5) In addition to the expenditures shown above, the School District has incurred bond issuance costs and related paying agent fees associated with bond debt service for the above projects as follows:

Prior Years

$

265,057.05

Current Year

2,493.75

Total

$

267,550.80

See notes to the basic financial statements.

- 28 -

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

SCHEDULE "5"

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

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

ELIGIBLE QBE PROGRAM COSTS

SALARIES

OPERATIONS

TOTAL

$

1,511,429.00 $ 1,516,452.17 $

66,712.00

74,256.17

3,503,440.00

3,814,380.55

292,953.00

88,023.12

1,695,618.00

2,012,193.40

203,922.00 2,632,142.00 2,366,020.00
942,868.00 2,848,116.00
797,125.00 251,496.00 223,524.00 120,579.00

64,061.34 2,450,422.00 2,489,922.99
662,908.41
40,073.08 339,790.28 1,560,981.84 141,674.43
80,307.48 473,481.88
73,208.99 245,743.44 180,044.87

$ 17,455,944.00 $ 16,307,926.44 $

489,435.00 86,695.00

607,917.09

16,007.09 $
57,936.88 1,479.58
23,683.54

1,532,459.26 74,256.17
3,872,317.43 89,502.70
2,035,876.94

862.97 22,481.95 79,730.28 84,406.43

64,924.31 2,472,903.95 2,569,653.27
747,314.84

1,509.53 2,068.23 160,530.23 8,058.73 11,431.73 7,635.73 1,430.00 3,377.09
101.97

41,582.61 341,858.51 1,721,512.07 149,733.16
91,739.21 481,117.61
74,638.99 249,120.53 180,146.84

482,731.96 $ 16,790,658.40

51,823.33

659,740.42 74,317.01

$ 18,032,074.00 $ 16,915,843.53 $

534,555.29 $ 17,524,715.83

(1) Comprised of State Funds plus Local Five Mill Share. (2) Allotments do not include the impact of the State amended formula adjustment.

See notes to the basic financial statements.

- 29 -

SECTION II COMPLIANCE AND INTERNAL CONTROL REPORTS

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

DEPARTMENT OF AUDITS AND ACCOUNTS
270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400
March 13, 2012

Honorable Nathan Deal, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the Franklin County Board of Education
INDEPENDENT AUDITOR'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS
Ladies and Gentlemen:
We have audited the financial statements of the governmental activities, each major fund, and the aggregate remaining fund information of Franklin County Board of Education as of and for the year ended June 30, 2011, which collectively comprise Franklin County Board of Education's basic financial statements and have issued our report thereon dated March 13, 2012. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States.
Internal Control Over Financial Reporting
Management of Franklin County Board of Education is responsible for establishing and maintaining effective internal control over financial reporting. In planning and performing our audit, we considered Franklin County Board of Education's internal control over financial reporting as a basis for designing our auditing procedures for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the Franklin County Board of Education's internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness of the Franklin County Board of Education's internal control over financial reporting.
A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect and correct misstatements on a timely basis. A material weakness is a deficiency, or combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity's financial statements will not be prevented, or detected and corrected on a timely basis.

2011YB-10

Our consideration of internal control over financial reporting was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over financial reporting that might be deficiencies, significant deficiencies or material weaknesses. We did not identify any deficiencies in internal control over financial reporting that we consider to be material weaknesses, as defined above.
Compliance and Other Matters
As part of obtaining reasonable assurance about whether Franklin County Board of Education's financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards.
This report is intended solely for the information and use of management, members of the Franklin County Board of Education, others within the entity, Federal awarding agencies and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties.
Respectfully submitted,

RWH:as 2011YB-10

Russell W. Hinton, CPA, CGFM State Auditor

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

DEPARTMENT OF AUDITS AND ACCOUNTS
270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400
March 13, 2012

Honorable Nathan Deal, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the Franklin County Board of Education
INDEPENDENT AUDITOR'S REPORT ON COMPLIANCE WITH REQUIREMENTS THAT COULD HAVE A DIRECT AND MATERIAL EFFECT ON EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH OMB CIRCULAR A-133
Ladies and Gentlemen:
Compliance
We have audited Franklin County Board of Education's compliance with the types of compliance requirements described in the OMB Circular A-133 Compliance Supplement that could have a direct and material effect on each of its major Federal programs for the year ended June 30, 2011. Franklin County Board of Education's major Federal programs are identified in the Summary of Auditor's Results section of the accompanying Schedule of Findings and Questioned Costs. Compliance with the requirements of laws, regulations, contracts, and grants applicable to each of its major Federal programs is the responsibility of Franklin County Board of Education's management. Our responsibility is to express an opinion on Franklin County Board of Education's compliance based on our audit.
We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and OMB Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations. Those standards and OMB Circular A-133 require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major Federal program occurred. An audit includes examining, on a test basis, evidence about the Franklin County Board of Education's compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Our audit does not provide a legal determination on Franklin County Board of Education's compliance with those requirements.
In our opinion, the Franklin County Board of Education complied, in all material respects, with the compliance requirements referred to above that could have a direct and material effect on each of its major Federal programs for the year ended June 30, 2011.

2011SA-10

Internal Control Over Compliance
Management of Franklin County Board of Education is responsible for establishing and maintaining effective internal control over compliance with the requirements of laws, regulations, contracts, and grants applicable to Federal programs. In planning and performing our audit, we considered Franklin County Board of Education's internal control over compliance with the requirements that could have a direct and material effect on a major Federal program to determine the auditing procedures for the purpose of expressing our opinion on compliance and to test and report on internal control over compliance in accordance with OMB Circular A-133, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of the Franklin County Board of Education's internal control over compliance.
A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a Federal program on a timely basis. A material weakness in internal control over compliance is a deficiency, or combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a Federal program will not be prevented, or detected and corrected, on a timely basis.
Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over compliance that might be deficiencies, significant deficiencies, or material weaknesses. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses, as defined above.
This report is intended solely for the information and use of management, members of the Franklin County Board of Education, others within the entity, Federal awarding agencies and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties.
Respectfully submitted,

RWH:as 2011SA-10

Russell W. Hinton, CPA, CGFM State Auditor

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

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

PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

FINDING CONTROL NUMBER AND STATUS

FS-6951-09-01 FS-6951-10-01

Further Action Not Warranted Previously Reported Corrective Action Implemented

PRIOR YEAR FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

No matters were reported.

SECTION IV FINDINGS AND QUESTIONED COSTS

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

I SUMMARY OF AUDITOR'S RESULTS

Financial Statements

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

Unqualified

Internal control over financial reporting: Material weakness identified? Significant deficiency identified?

No None Reported

Noncompliance material to financial statements noted:

No

Federal Awards

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

No None Reported

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

Unqualified

Any audit findings disclosed that are required to be reported in

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

No

Identification of major programs: CFDA Numbers

Name of Federal Program or Cluster

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

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

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

$300,000.00

Auditee qualified as low-risk auditee?

Yes

II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

No matters were reported.

III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

No matters were reported.