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

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

MARION 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

STATEMENT OF REVENUES, EXPENDITURES AND CHANGES

IN FUND BALANCES

GOVERNMENTAL FUNDS

E

RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT

OF REVENUES, EXPENDITURES AND CHANGES IN FUND

BALANCES TO THE STATEMENT OF ACTIVITIES

F

STATEMENT OF FIDUCIARY NET ASSETS

FIDUCIARY FUNDS

G

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 3 4 5 6 7
27

MARION 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
28 29 30 31

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

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

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

SECTION I FINANCIAL

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

DEPARTMENT OF AUDITS AND ACCOUNTS
270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400
May 16, 2012

Honorable Nathan Deal, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the Marion 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 G) of the Marion 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 Marion 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 Marion 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 May 16, 2012, on our consideration of the Marion 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 vii and page 27 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 Marion 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

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

The discussion and analysis of the Marion County Board of Education's (the "School District") financial performance provides an overall review 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; readers should also review the financial statements and the notes to the basic 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:



The School District's financial status remained stable during fiscal year 2011. In total, net

assets increased more than $6.8 million, which represents an increase from fiscal year

2010. This total increase was due to governmental activities since the School District has no

business-type activities.



General revenues accounted for $4.9 million or 24.5 percent of all revenues. Program

specific revenues in the form of charges for services and sales, grants and contributions

accounted for $15.0 million or 75.5 percent of total revenues. Total revenues were $19.9

million.



The School District had $13.1 million in expenses related to governmental activities; these

expenses were offset by $15.0 million in program specific charges for services, grants or

contributions. General revenues and taxes of $4.9 million also provided for these programs.



Among major funds, the General Fund had $12.9 million in revenues and $12.2 million in

expenditures. The General Fund's fund balance increased from $2.2 million to $3.0 million.

Using the Basic Financial Statements

This annual report consists of a series of financial statements and notes to those statements. These statements are organized so the reader can understand Marion County Board of Education as a financial whole, or as an entire operating entity.
The Statement of Net Assets and Statement of Activities provide information about the activities of the whole School District, presenting both an aggregate view of the School District's finances and a longterm view of those finances. The fund financial statements provide the next level of detail. For governmental funds, these statements tell how services were financed in the short-term as well as what remains for future spending. The fund financial statements also look at the School District's most significant funds with all other non-major funds, if any, presented in total in one column. In the case of the Marion County Board of Education, the general fund is by far the most significant fund.

Reporting the School District as a Whole Statement of Net Assets and Statement of Activities

While these documents contain the large number of funds used by the School District to provide programs and activities, the view of the School District as a whole looks at all financial transactions and asks the question, "How did we do financially during fiscal year 2011?" The Statement of Net Assets and the Statement of Activities answer this question. These statements include all assets and all liabilities using the accrual basis of accounting similar to the accounting used by most private-sector 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.

i

MARION COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2011
These two statements report the School District's net assets and changes in those assets. This change in net assets is important because it tells the reader whether, 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 result of many factors, some financial, some not. Non-financial factors include the School District's property tax base, facility conditions, required educational programs and other factors.
In the Statement of Net Assets and the Statement of Activities, the School District has one distinct type of activity:
Governmental Activities - All of the School District's programs and services are reported here including instruction, support services, operation and maintenance of plant, pupil transportation, food service, after school program, school activity accounts and various others.
Reporting the School District's Most Significant Funds Fund Financial Statements
Fund financial statements provide detailed information about the School District's major funds. The School District uses many funds to account for a multitude of financial transactions. However, these fund financial statements focus on the School District's most significant funds. The School District's major governmental funds are the General Fund, the District-Wide Capital Projects Fund and the Debt Service Fund. Governmental Funds All of the School District's activities are reported in 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 an accounting method called modified accrual accounting, which measures cash and all other financial assets that can readily be 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 you determine whether there are more or fewer financial resources that can be spent in the near future to finance educational programs. The relationship (or differences) between governmental activities (reported in the Statement of Net Assets and the Statement of Activities) and governmental funds is reconciled in the financial statements. Fiduciary Funds The School District is the trustee, or fiduciary, for assets that belong to others, such as school clubs and organizations within the school activity 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.
ii

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

The School District as a Whole

The perspective of the Statement of Net Assets is of the School District as a whole. 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

$

14,979,372 $ 4,684,048

24,889,774

11,138,944

Total Assets

$

39,869,146 $ 15,822,992

Liabilities Long-Term Liabilities Outstanding Other Liabilities

$

15,970,742 $ 1,307,656

4,461,270

1,892,627

Total Liabilities

$

20,432,012 $ 3,200,283

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

$

12,050,021 $ 9,477,764

4,174,377

738,338

3,212,736

2,406,607

Total Net Assets

$

19,437,134 $ 12,622,709

Table 2 shows the changes in net assets for fiscal year 2011 compared to fiscal year 2010. The total net assets increased over $6.8 million for fiscal year 2011, compared to a $1.0 million increase for fiscal year 2010.

iii

MARION 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 Operating Grants and Contributions Capital Grants and Contributions
Total Program Revenues
General Revenues: Taxes Property Taxes For Maintenance and Operations For Debt Services Sales Taxes Other Taxes Grants and Contributions not Restricted to Specific Programs Investment Earnings Miscellaneous
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 Other Support Services Operations of Non-Instructional Services School Nutrition Enterprise Operations Interest on Long-Term Debt
Total Expenses
Increase in Net Assets
Net Assets, Beginning of Year
Net Assets, End of Year
iv

Governmental Activities

Fiscal Year

Fiscal Year

2011

2010

$

192,319 $

8,563,445

6,286,510

$

15,042,274 $

204,138 9,010,184
346,364
9,560,686

$

3,132,812 $

3,133,918

364,471

379,551

514,716

448,089

38,254

47,233

492,656 4,451
327,134

595,004 14,447
251,118

$

4,874,494 $

4,869,360

$

19,916,768 $

14,430,046

$

7,183,859 $

7,735,760

304,100 129,340 268,268 699,187 895,168
87,192 942,398 880,189 157,482

445,996 174,409 302,173 716,297 831,274
83,186 1,228,290
822,625 125,991

753,024 83,369
718,767

799,899 82,891 78,061

$

13,102,343 $

13,426,852

$

6,814,425 $

1,003,194

12,622,709

11,619,515

$

19,437,134 $

12,622,709

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

Governmental Activities
Instruction comprises 54.8 percent of governmental program expenses.
The Statement of Activities shows the cost of program services and the charges for services and grants offsetting those services. Table 3 shows, for governmental activities, the total cost of services and the net cost of services. That is, it identifies the cost of these services supported by tax revenue and unrestricted state entitlements. Comparative data from fiscal year 2010 is also presented.
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 Services Maintenance and Operations Student Transportation Other Support Services School Nutrition Enterprise Operations Interest on Long-Term Debt

$ 7,183,859 $ 7,735,760 $ -4,666,304 $ 1,260,001

304,100 129,340 268,268 699,187 895,168
87,192 942,398 880,189 157,482 753,024
83,369 718,767

445,996 174,409 302,173 716,297 831,274
83,186 1,228,290
822,625 125,991 799,899
82,891 78,061

199,524 59,388 63,264
220,488 528,457
86,880 496,453 353,242 153,010 -23,121
83,369 505,419

304,633 83,313
128,809 190,318 460,430
82,944 788,048 404,567 112,753 -110,602
82,891 78,061

Total Expenses

$ 13,102,343 $ 13,426,852 $ -1,939,931 $ 3,866,166

Although program revenues make up a majority of the revenues, the School District is still dependent upon tax revenues for governmental activities. In the current year, state funding through capital grants was received by the School District to offset the construction of the new middle/high school. These capital expenditures are capitalized on the District-wide financial statements and are not included in the expenses above.
The School District's Funds
The School District's governmental funds are accounted for using the modified accrual basis of accounting. Total governmental funds had revenues and other financing sources of $36.5 million and expenditures and other financing uses of $28.9 million. There was an increase in fund balance of approximately $6.1 in the District-wide Capital Projects Fund due to state reimbursement for capital projects (new middle/high school). The fund balance of the General Fund had an increase of over $846,000 due to the School District's anticipation of a "funding cliff" in FY 2012. This funding cliff was caused by the influx of federal money (ARRA) in FY10 and FY11 and then the absence of this funding for FY12. There was an increase in fund balance of approximately $660,000 in the Debt Service Fund. This was because all SPLOST distributions from the Department of Revenue were deposited directly to a debt service fund to pay our 2010A, 2010B, and 2010C bond payments.
v

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

General Fund Budgeting Highlights
The School District's budget is prepared according to Georgia law. The most significant budgeted fund is the General Fund.
During the course of fiscal year 2011, the School District amended its General Fund budget as needed. The School District uses function-based budgeting. The budgeting systems are designed to tightly control total function budgets but provide flexibility for site management.
For the General Fund, budgeted revenues increased from $12.01 million to $12.53 million while budgeted expenditures increased from $12.01 million to $12.22 million. These changes were due to an increase in our anticipated QBE allotment from the state and increase in anticipated federal grants. The budget increase in expenditures was due to added personnel.
The School District was in compliance with the state's 65% rule in 2011 through its graduation rate and Adequate Yearly Progress (AYP).
Capital Assets and Debt Administration
Capital Assets
At the end of fiscal year 2011, the School District had $24.9 million invested in capital assets, all in governmental activities. Table 4 indicates balances at June 30, 2011. Capital assets comparisons to fiscal year 2010 are also included.
Table 4 Capital Assets (Net of Depreciation)

Governmental Activities

Fiscal

Fiscal

Year 2011

Year 2010

Land Construction In Progress Land Improvements Building and Improvements Equipment

$

597,676 $

15,283,655

378,614

7,947,824

682,005

597,676 1,318,029
433,221 8,174,413
615,605

Total Debt

$

24,889,774 $

11,138,944

Long-Term Liabilities

At fiscal year ended June 30, 2011, the School District had $15.97 million in long-term liabilities outstanding. Table 5 summarizes the School District's liabilities as compared to the prior fiscal year.

vi

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

Table 5 Long-Term Liabilities

Governmental Activities:

Balance July 1, 2010

Additions

Reductions

Balance June 30, 2011

Due Within One Year

Bonds Payable Capital Leases

$

1,275,000 $ 16,261,113 $ -1,565,371 $ 15,970,742 $

32,656

-32,656

0

320,000

Total Long-Term Liabilities $

1,307,656 $ 16,261,113 $ -1,598,027 $ 15,970,742 $

320,000

Current Issues
The Marion County Board of Education's current operating millage rate is 14.546 mills. Our bond millage rate is 1.690 mills. Our SPLOST revenue and school bond ad valorem tax will be used to service our debt for the 2010A, B & C bonds. The completion date of the construction of our new middle/high school is scheduled for early April of 2012.
The School District will face challenges with the reduction of state and Federal funding for public education. How the state will balance the budget and how much will be taken from the QBE allotment will determine further cuts that will face the School District.
The School District obtained a waiver to increase some class sizes which allowed for a reduction in staff; however, we have maintained a quality education for our students.
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 information, contact Cathy Wiggins, Director of Finance, 1697 Pineville Road, Buena Vista, Georgia 31803. You may also email your questions to cwiggins@marion.k12.ga.us

vii

MARION COUNTY BOARD OF EDUCATION

MARION COUNTY BOARD OF EDUCATION
STATEMENT OF NET ASSETS JUNE 30, 2011

EXHIBIT "A"

ASSETS
Cash and cash equivalents Investments Receivables:
Taxes Intergovernmental:
State Federal Other Inventory Deferred charges Capital assets (nondepreciable) Capital assets (net of accumulated depreciation)
Total assets
LIABILITIES
Accounts payable Salaries and benefits payable Contracts payable Accrued interest payable Retainage payable Bonds payable due within one year Bonds payable due in more than one year
Total liabilities
NET ASSETS
Invested in capital assets, net of related debt Restricted for:
Continuation of federal programs Capital projects Debt service Unrestricted
Total net assets

Governmental Activities

$

7,829,379

3,664,056

287,477

2,568,513 258,256 4,500 16,380 350,811
15,881,331 9,008,443
39,869,146

129,946 1,184,671 1,594,260
343,980 1,208,413
320,000 15,650,742 20,432,012

12,050,021

253,349

3,165,220

755,808

3,212,736

$

19,437,134

The accompanying notes are an integral part of these financial statements. - 1 -

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

EXHIBIT "B"

Functions/Programs 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
Enterprise operations Food service operations Interest on long-term debt
Total governmental activities

Expenses
$ 7,183,859
304,100
129,340 268,268 699,187 895,168
87,192 942,398 880,189
94,935 62,547 83,369 753,024 718,767 13,102,343

Charges for Services

Program Revenues Operating Grants and
Contributions

Capital Grants and Contributions

$

47,253 $ 5,882,332 $ 5,920,578

-

104,576

-

28,929 116,137 192,319

69,952 205,004 478,699 366,711
312 417,016 374,363
255 4,217
660,008
8,563,445

152,584 213,348 6,286,510

Net (Expense) Revenue and
Changes in Net Assets Governmental Activities
$ 4,666,304
(199,524)
(59,388) (63,264) (220,488) (528,457) (86,880) (496,453) (353,242) (94,680) (58,330) (83,369) 23,121 (505,419) 1,939,931

General revenues: Taxes: Property taxes, levied for maintenance and operations Property taxes, levied for debt service Sales taxes, for debt service Sales taxes, for capital projects Intangible taxes Transfer taxes Railroad equipment tax Grants and contributions not restricted to specific programs Unrestricted investment earnings Miscellaneous Total general revenues Change in net assets
Net assets, beginning of year Net assets, end of year

3,132,812 364,471 484,183 30,533 17,694 9,026 11,534 492,656 4,451 327,134
4,874,494 6,814,425 12,622,709 $ 19,437,134

The accompanying notes are an integral part of these financial statements. - 2 -

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

EXHIBIT "C"

ASSETS
Cash and cash equivalents Investments Receivables:
Taxes Intergovernmental:
State Federal Other Inventory
Total assets
LIABILITIES AND FUND BALANCES
LIABILITIES Accounts payable Salaries and benefits payable Contracts payable Retainage Payable Deferred revenue
Total liabilities
FUND BALANCES Nonspendable: inventory Restricted:
Federal programs Capital projects Debt service Assigned: Student activities Subsequent years' budget Unassigned
Total fund balances
Total liabilities and fund balances

General

District - Wide Capital Projects

$

3,134,401 $

4,203,451 $

-

3,130,989

212,283

-

787,590

1,780,923

258,256

-

4,500

-

16,380

-

$

4,413,410 $

9,115,363 $

Debt Service
491,527 533,067
75,194
1,099,788

Total Governmental
Funds

$

7,829,379

3,664,056

287,477

2,568,513 258,256 4,500 16,380
$ 14,628,561

$

113,465 $

16,481 $

1,184,671

-

-

1,594,260

-

1,208,413

108,589

-

1,406,725

2,819,154

- $ 12,660 12,660

129,946 1,184,671 1,594,260 1,208,413
121,249 4,238,539

16,380

-

-

236,969 -

6,296,209
-

1,087,128

88,597

-

-

1,589,915

-

-

1,074,824

-

-

3,006,685

6,296,209

1,087,128

$

4,413,410 $

9,115,363 $

1,099,788

16,380
236,969 6,296,209 1,087,128
88,597 1,589,915 1,074,824
10,390,022

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 are not reported in the funds

Cost

32,071,552

Less accumulated depreciation

(7,181,778)

Other long-term assets are not available to pay for current-period expenditures and are deferred in the funds Property taxes

Long-term liabilities are not due and payable in the current period and, therefore, are not reported in the funds

Bonds

(15,960,000)

Bond premium, net of amortization

(10,742)

Bond issuance costs, net of amortization

350,811

Accrued interest

(343,980)

Net assets of governmental activities

$

24,889,774 121,249
(15,963,911) 19,437,134

The accompanying notes are an integral part of these financial statements. - 3 -

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

EXHIBIT "D"

REVENUES Property taxes Sales taxes Other 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 service: Principal retirement Interest and fees Bond issuance cost Total expenditures
Excess (deficiency) of revenues over (under) expenditures
OTHER FINANCING SOURCES (USES) Bonds issued Refunding bonds issued Premium on bonds sold Bonds refunded Proceeds from sale of capital assets Transfers in Transfers out
Total other financing sources (uses)
Net change in fund balances
FUND BALANCE, beginning of year
FUND BALANCE, end of year

General

District - Wide Capital Projects

$

3,092,971 $

-

23,930

30,533

11,534

-

7,056,826

5,920,579

2,151,858

-

192,319

-

2,519

1,372

327,134

-

12,859,091

5,952,484

Debt Service

Total Governmental
Funds

$

359,713 $

3,452,684

486,973

541,436

-

11,534

-

12,977,405

213,348

2,365,206

-

192,319

560

4,451

-

327,134

1,060,594

19,872,169

6,933,313
304,100 129,340 268,268 696,655 895,168
87,192 920,723 944,172 91,038 62,547 83,369 709,166
-
32,656 1,584
12,159,291

-
4,860
7,098
9,491 412,905 25,892
13,551,447
7,297 374,037 14,393,027

699,800

(8,440,543)

2,338 144,346 -
146,684

15,310,000 935,000 16,113
(1,275,000) -
(404,346)
14,581,767

846,484

6,141,224 -

2,160,201

154,985 -

$

3,006,685 $

6,296,209 - $

-
-
285,000 372,507
657,507

6,933,313
304,100 134,200 268,268 703,753 895,168 96,683 1,333,628 970,064 91,038 62,547 83,369 709,166 13,551,447
317,656 381,388 374,037 27,209,825

403,087

(7,337,656)

260,000 260,000
663,087
424,041
1,087,128 $

15,310,000 935,000 16,113
(1,275,000) 2,338
404,346 (404,346) 14,988,451
7,650,795
2,739,227
10,390,022

The accompanying notes are an integral part of these financial statements. - 4 -

MARION COUNTY BOARD OF EDUCATION

EXHIBIT "E"

RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT OF REVENUES, EXPENDITURES AND

CHANGES IN FUND BALANCES TO THE STATEMENT OF ACTIVITIES FOR THE FISCAL YEAR ENDED JUNE 30, 2011

Amounts reported for governmental activities in the statement of activities are different because:

Net change in fund balances - total governmental funds

$ 7,650,795

Governmental funds report capital outlays as expenditures. However, in the statement of activities the cost of those assets is allocated over their estimated useful lives and reported as depreciation expense. The net effect of the amount by which capital outlay exceeded depreciation is to increase net assets.

Capital outlay Depreciation expense

$ 14,162,200

(409,010)

13,753,190

Net effect of various miscellaneous transactions involving fixed assets (sales, trade-ins, donations, etc.) is to decrease net assets.

(2,360)

Revenues in the statement of activities that do not provide current financial resources are not reported as revenues in the funds.

Property taxes

44,599

Issuance of long-term debt provides current financial resources to governmental funds, while repayment of the principal of longterm debt consumes the current financial resources of governmental funds. Neither transaction, however, has any effect on net assets. This amount is the net effect of these differences in the treatment of long-term debt and related items.

Principal payments - bonds Principal payments - capital leases Issuance of general obligation debt Bond premium Bond premium amortization expense Bond issuance costs Bond issuance costs amortization expense Issuance of refunding general obligation debt

$

1,560,000

32,656

(15,310,000)

(16,113)

5,371

374,037

(23,226)

(935,000)

Some expenses reported in the statement of activities do not require the use of current financial resources and, therefore, are not reported as expenditures in governmental funds.

(14,312,275)

Change in accrued interest

(319,524) $ 6,814,425

The accompanying notes are an integral part of these financial statements. - 5 -

MARION COUNTY BOARD OF EDUCATION
STATEMENT OF FIDUCIARY NET ASSETS FIDUCIARY FUND JUNE 30, 2011

Cash Investments
Total assets
Funds held for others

ASSETS LIABILITIES

EXHIBIT "F"

Agency Fund

$

14,955

30,442

$

45,397

$

45,397

The accompanying notes are an integral part of these financial statements. - 6 -

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

EXHIBIT "G"

Note 1: DESCRIPTION OF SCHOOL DISTRICT AND REPORTING ENTITY
Reporting Entity
The Marion 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 Marion 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.

7

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

EXHIBIT "G"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Fund Financial Statements
The fund financial statements provide information about the School District's funds, including fiduciary funds. Eliminations have been made to minimize the double counting of internal activities. Separate statements for each category (governmental and fiduciary) are presented. The emphasis of fund financial statements is on major governmental funds, each displayed in a separate column.
The School District reports the following major governmental funds:
The General Fund is the School District's primary operating fund. It accounts for all financial resources of the School District, except those resources required to be accounted for in another fund.
The District-Wide Capital Projects Fund accounts for financial resources including Special Purpose Local Option Sales Tax (SPLOST), grants from the Georgia State Financing and Investing Commission, and Bond Proceeds that are restricted, committed, or assigned to the expenditure of capital outlays, including the acquisition or construction of capital facilities and other capital assets.
The Debt Service Fund accounts for and reports financial resources that are restricted, committed, or assigned including taxes (property and sales) legally restricted for the payment of general long-term principal, interest and paying agent's fees.
The School District reports the following fiduciary fund type:
Agency Funds account for assets held by the School District as an agent for various funds, governments or individuals.
Basis of Accounting
The basis of accounting determines when transactions are reported in the financial statements. The District-Wide governmental activities and fiduciary fund financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded at the time liabilities are incurred, regardless of when the related cash flows take place. Nonexchange transactions, in which the School District gives (or receives) value without directly receiving (or giving) equal value in exchange, include property taxes, sales taxes, grants and donations. On an accrual basis, revenue from property taxes is recognized in the fiscal year for which the taxes are levied. Revenue from sales taxes is recognized in the fiscal year in which the underlying transaction (sale) takes place. Revenue from grants and donations is recognized in the fiscal year in which all eligibility requirements have been satisfied.

8

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

EXHIBIT "G"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Basis of Accounting (Continued)
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 60 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 longterm 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.
Revenue from grants and donations is recognized in the year in which all eligibility requirements have been satisfied. Eligibility requirements include timing requirements, which specify the year when the resources are required to be used or the year when use is first permitted, matching requirements, in which the School System must provide local resources to be used for a specified purpose, and expenditure requirements, in which the resources are provided to the School System on a reimbursement basis.
The State of Georgia reimburses the School District for teachers' salaries and operating costs through the Quality Basic Education Formula Earnings program (QBE). Generally, teachers are contracted for the school year (July 1 - June 30) and paid over a 12-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 12-month period in which teachers are paid. At June 30, the amount of teachers' salaries incurred but not paid until July and August of the subsequent year are accrued. Since the State of Georgia recognizes its QBE liability for the July and August salaries at June 30, the School District recognizes the same QBE as a receivable and revenue, consistent with symmetrical recognition.

9

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

EXHIBIT "G"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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 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 45-8-14 authorize 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 interest-earning contracts and money market investments with a maturity at purchase of one year or less are reported at amortized cost. Both participating interest-earning contracts and money market investments with a maturity at purchase greater than one year are reported at fair value. The Official Code of Georgia Annotated Section 36-83-4 authorizes the School District to invest its funds. In selecting among options for investment or among institutional bids for deposits, the highest rate of return shall be the objective, given equivalent conditions of safety and liquidity.
Funds may be invested in the following:
(1) Obligations issued by the State of Georgia or by other states, (2) Obligations issued by the United States government, (3) Obligations fully insured or guaranteed by the United States government or a United
States government agency, (4) Obligations of any corporation of the United States government, (5) Prime bankers' acceptances, (6) The Georgia Fund 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.

10

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

EXHIBIT "G"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Investments (Continued)
The School District does not have a formal policy regarding investment policies that address credit risks, custodial credit risks, concentration of credit risks, interest rate risks or foreign currency risks.
Receivables
Receivables consist of amounts due from property and sales taxes, grant reimbursements due on Federal, state or other grants for expenditures made, but not reimbursed, and other receivables disclosed from information available. Receivables are recorded when either the asset or revenue recognition criteria has been met.
Property Taxes
The Marion County Board of Commissioners fixed the property tax levy for the 2010 tax digest year (calendar year) on September 16, 2010 (levy date). Taxes were due on January 20, 2011 (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 Marion 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 and debt service, amounted to $3,092,971 and $359,713, respectively.
Tax millage rates levied for the 2010 tax year (calendar year) for the Marion County Board of Education were as follows (a mill equals $1 per thousand dollars of assessed value):

School Operations School Bonds
Total

14.557 mills 1.697 mills 16.254 mills

Sales Taxes
Special Purpose Local Option Sales Tax, at the fund reporting level, during the year amounted to $514,716 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.

11

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

EXHIBIT "G"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Inventories

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

Capital Assets

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

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

Capitalization Policy

Estimated Useful Life

Land Construction in Progress Land Improvements Buildings and Improvements Equipment

All All $ 5,000 5,000 5,000

N/A N/A 15 to 80 Years 10 to 80 Years 5 to 14 Years

Depreciation is used to allocate the actual or estimated historical cost of all capital assets over estimated useful lives.

12

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

EXHIBIT "G"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
General Obligation Bonds
The School District issues general obligation bonds to provide funds for the acquisition and construction of major capital facilities. In the District-wide financial statements, bond premiums and discounts, as well as issuance costs, are deferred and amortized over the life of the bonds using the straight-line method. Bond issuance costs are reported as deferred charges and amortized over the term of the debt.
In the fund financial statements, the School District recognizes bond premiums and discounts, as well as bond issuance costs during the fiscal year bonds are issued. Premiums received on debt issuances are reported as other financing sources while discounts on debt issuances are reported as other financing uses. Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as debt service expenditures. In addition, general obligation bonds have been issued to refund existing general obligation bonds. 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 for bus replacement, continuation of Federal programs, debt service and capital projects in accordance with restrictions imposed by external third parties.
Unrestricted Net Assets - Unrestricted net assets represent resources derived from property taxes, sales taxes, grants and contributions not restricted to specific programs, charges for services, and miscellaneous revenues. These resources are used for transactions relating to the educational and general operations of the School District, and may be used at the discretion of the Board to meet current expenses for those purposes.
Fund Balance
The Marion County Board of Education implemented Governmental Accounting Standards Board (GASB) Statement No. 54, Fund Balance Reporting and Governmental Fund Type Definitions, effective July 1, 2010.

13

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

EXHIBIT "G"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Fund Balance (Continued)
The School District's fund balances are classified as follows:
Nonspendable - Amounts that are not in spendable form (e.g., inventory and prepaid items) or are legally or contractually required to be maintained intact (e.g., permanent fund principal).
Restricted - Amounts that can be spent only on specific purposes stipulated by law through constitutional provisions or enabling legislation or by the external providers of those resources (e.g., grants or donations).
Committed - Amounts that can only be used for the specific purposes determined by a formal action of the Board. Commitments may be changed or lifted only by referring to the formal action of the Board that imposed the constraint originally (e.g., the Board's commitment in connection with future construction projects).
Assigned - Amounts intended to be used by the government for specific purposes. Intent can be expressed by the Board of Education or by a designee to whom the Board of Education delegates authority. In governmental funds other than the General Fund, assigned fund balance represents the amount that is not restricted or committed. This indicates the resources in other governmental funds are, at a minimum, intended to be used for the purpose of that fund.
Unassigned - All amounts not contained in other classifications and the residual classification of the General Fund only. Unassigned amounts are available for any legal purpose.
The responsibility for designating funds to specific classification is as follows:
Committed Fund Balance - 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. Funds should be committed prior to the end of the fiscal year, although the exact amount may be determined in the subsequent fiscal year.
Assigned Fund Balance - The Board of Education has authorized the Superintendent as the official authorized to assign fund balance to a specific purpose in accordance with the School District's policy.

14

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

EXHIBIT "G"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Fund Balance (Continued)
When restricted and unrestricted fund balances are both available for expenditure when the expenditure is incurred, the restricted fund balance is considered to be expended first.
When an expenditure is incurred for purposes for which amounts in any of the unrestricted fund balance classifications (committed, assigned or unassigned) could be used, the School District considers that committed amounts are to be reduced first, followed by assigned amounts, and then by unassigned amounts.
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 (OCGA) Section 45-8-12 provides that there shall not be on deposit at any time in any depository for a time longer than 10 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 (OCGA 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

15

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

EXHIBIT "G"

Note 3: DEPOSITS AND INVESTMENTS (CONTINUED)

(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 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 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 $8,098,271. The bank balances were entirely covered by Federal depository insurance or collateralized with securities held by the pledging financial institution's agent in the School District's name.
Categorization of Investments
At June 30, 2011, the School System had the following investments:

Investment Certificate of deposit Federated Treasury
(money market mutual fund)

Maturities May 12, 2012
44 day weighted average

Rating* N/A
AAAm

Fair Value

$

30,442

3,664,056 $ 3,694,498

*Rating as per Standard & Poor's
Interest Rate Risk - Interest rate risk is the risk that changes in interest rates of debt investments will adversely affect the fair value of an investment. The School District does not have a formal policy for managing interest rate risk.
Custodial Credit Risk - Custodial credit risk for investments is the risk that, in the event of the failure of the counterparty to a transaction, the School District will not be able to recover the value of the investment or collateral securities that are in the possession of an outside party. The School District does not have a formal policy for managing custodial credit risk.
As of June 30, 2011, $3,664,056 of the School District's applicable investments were uninsured, and are held by either the counterparty or the counterparty's trust department or agent in the School District's name.
Credit Quality Risk - Credit quality risk is the risk that an issuer or other counterparty to an investment will not fulfill its obligations. The School District does not have a formal policy for managing credit quality risk.

16

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

EXHIBIT "G"

Note 3: DEPOSITS AND INVESTMENTS (CONTINUED)

Concentration of Credit Risk - Concentration of credit risk is the risk of loss attributed to the magnitude of a government's investment in a single issuer. The School District does not have a formal policy for managing concentration of credit risk. More than 5% of the School District's investments are in a Federated Treasury money market fund. This investment is 99.2% of the School District's total investments.

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:

Balance July 1, 2010

Increases

Decreases

Balance June 30, 2011

Capital Assets Not Being Depreciated: Land Construction in Progress Total Capital Assets Not Being Dep reciat ed

$

597,676

$

1,318,029 $ 13,965,626

1,915,705

13,965,626

0$

597,676 15,283,655

0

15,881,331

Cap ital Assets Being Dep reciated Buildings and Improvements Equip ment Land Improvements Total Capital Assets Being Dep reciat ed

12,436,509 2,177,855 1,447,716
16,062,080

196,574 196,574

(68,433) (68,433)

12,436,509 2,305,996 1,447,716
16,190,221

Less Accumulated Depreciation for: Buildings and Improvements Equip ment Land Improvements Total Accumulated Depreciation

(4,262,096) (1,562,250) (1,014,495) (6,838,841)

(226,589) (127,814)
(54,607) (409,010)

66,073 66,073

(4,488,685) (1,623,991) (1,069,102) (7,181,778)

Total Capital Assets Being Depreciated, Net

9,223,239

(212,436)

(2,360)

9,008,443

Total Governmental Activities Capital Assets, Net

$ 11,138,944 $ 13,753,190 $

(2,360) $ 24,889,774

17

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

EXHIBIT "G"

Note 5: CAPITAL ASSETS (CONTINUED) Current year depreciation expense by function is as follows:

Instruction Support Services
General Administration Maintenance and Operation of Plant Student Transportation Central Support Services Food Services

$ 250,546

$

2,510

7,000

101,199

3,897

114,606 43,858

Total Depreciation Expense

$ 409,010

Note 6: INTERFUND TRANSFERS

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

Transfer to

Transfers From
District-Wide Capital Projects
Fund

General Fund Debt Service Fund
Total

$

144,346

260,000

$

404,346

Transfers were used to reimburse the General Fund for expenditures incurred in advance of the bond issuance and to establish a debt service reserve as required as part of the Series 2010B and Series 2010C bond issuances.

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 and acts of God.

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

18

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

EXHIBIT "G"

Note 7: RISK MANAGEMENT (CONTINUED)

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

The School District has purchased additional insurance coverage for all employees and board members in the amount of $250,000 for dishonesty, and $100,000 for forgery, alterations, theft, disappearance, destruction, and robbery.

The School District has purchased surety bonds to provide additional insurance coverage as

follows:

Position Covered

Amount

Superintendent Board Chair Driver Training School

$ 50,000 $ 12,000 $ 2,500

Note 8: OPERATING LEASES

Marion County Board of Education has entered into various leases as lessee for copiers. These leases are considered for accounting purposes to be operating leases. Lease expenditures for the year ended June 30, 2011, for governmental funds amounted to $46,710. Future minimum lease payments for these leases are as follows:

Fiscal Year Ended June 30
2012 2013 Total
Note 9: SHORT-TERM DEBT

Principal

$

17,860

5,140

$

23,000

Bond Anticipation Note

On June 28, 2010, the Board of Education of the School District approved a resolution authorizing a bond anticipation note not to exceed $500,000 for the purpose of funding capital outlay expenditures in advance of the issuance of general obligation bonds. The note was issued on June 29, 2010 and had an interest rate of 3.25% with a due date of December 29, 2010. One draw, in the amount of $353,524 was made on June 30, 2010. Article IX, Section V, Paragraph V of the Constitution of the State of Georgia limits the aggregate amount of short-term debt to 75 percent of the total gross income from taxes collected in the preceding year and requires all short-term debt to be repaid no later than December 31 of the calendar year in which the debt was incurred. The note was repaid on September 13, 2010.

19

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

EXHIBIT "G"

Note 9: SHORT-TERM DEBT (CONTINUED)

Bond Anticipation Note (Continued)

Short-term debt activity for the fiscal year is as follows:

Beginning Balance

Increases

Decreases

Ending Balance

Bond Anticipation Note $ 353,524 $

- $ (353,524) $

-

Note 10: LONG-TERM DEBT

Capital Leases

The Marion County Board of Education has entered into various lease agreements as lessee for buses. 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. All capital leases were paid in full as of June 30, 2011.

General Obligation Bonds Outstanding
On September 2, 2010, the District issued General Obligation Bonds Series 2010B (Qualified School Construction Bonds) and Series 2010C (Build America Bonds) in the amounts of $7,595,000 and $7,715,000, respectively. The Series 2010B and Series 2010C Bonds were issued for the purpose of building a new middle/high school.

On September 16, 2010, the Marion County Board of Education issued $935,000 in General Obligation Refunding Bonds to currently refund $1,275,000 of outstanding bonds. The bond issue of $935,000 less bond issuance costs of $28,768 provided net proceeds of $906,232. The total net proceeds plus additional debt service funds of $356,000 were used to call or redeem the 1998 Bonds. The Marion County Board of Education refunded the aforementioned bonds to reduce its total debt service payments and to obtain an economic gain (difference between the present values of total debt service payments and the old and new debt) of $52,285.

General obligation bonds currently outstanding are as follows:

Purpose

Interest Rates

General Government - Refunding - Series 2010A

2.00%

General Government - Series 2010B

5.05%

General Government - Series 2010C

5.168% - 5.768%

Amount $ 650,000
7,595,000 7,715,000 $ 15,960,000

20

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

EXHIBIT "G"

Note 10: LONG-TERM DEBT (Continued)

Changes in Long-Term Debt

The changes in long-term debt during the fiscal year ended June 30, 2011, were as follows:

Balance July 1, 2010

Capital Leases $ 32,656

Governmental Funds General Obligation Bonds
$ 1,275,000

Total $ 1,307,656

Additions: General Obligation Bonds Premium

-

16,245,000

-

16,113

16,245,000 16,113

Deductions: Debt Retired Amortization of Premium

(32,656) -

Balance June 30, 2011

$

-

(1,560,000) (5,371)
$ 15,970,742

(1,592,656) (5,371)
$ 15,970,742

Due within One Year

$

-

$ 320,000

$ 320,000

Scheduled Maturities of Long-Term Debt

At June 30, 2011, payments due by fiscal year which includes principal and interest for these

items are as follows:

General Obligation Bonds

Unam o rt ized

P rin cip al

In t erest

Bond Premium

Fiscal Year Ended June 30:

2012 2013 2014 2015 2016 2017 - 2021 2022 - 2026 2027 - 2031 2032 - 2036 2037 - 2040

$

320,000 $

825,551 $

330,000

819,151

812,551

812,551

812,551

4,062,756

4,062,756

9,610,000

2,376,627

2,935,000

1,303,025

2,765,000

406,067

6,784 3,958

T otal Principal and Interest

$ 15,960,000 $ 16,293,586 $

10,742

21

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

EXHIBIT "G"

Note 11: ON-BEHALF PAYMENTS

The School District has recognized revenues and costs in the amount of $35,311 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 $28,012

Office of the State Treasurer Paid to the Public School Employees Retirement System For Public School Employees Retirement (PSERS) Employer's Cost In the amount of $7,299

Note 12: SIGNIFICANT COMMITMENTS

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

Project 10RA-696-009 10/09SLW-696-004

Unearned Executed Contracts
$ 8,273,888 -
$ 8,273,888

Funding Available From State
$ 2,755,658 1,592,937
$ 4,348,595

Note 13: SIGNIFICANT CONTINGENT LIABILITIES
Amounts received or receivable principally from the Federal government are subject to audit and review by grantor agencies. This could result in requests for reimbursement to the grantor agency for any costs which are disallowed under grant terms. The School District believes that such disallowances, if any, will be immaterial to its overall financial position.
Note 14: OTHER POST-EMPLOYMENT BENEFITS
Georgia Retiree 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

22

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

EXHIBIT "G"

Note 14: OTHER POST-EMPLOYMENT BENEFITS (CONTINUED)

Georgia Retiree Health Benefit Fund (Continued)

eligible former employees and their qualified beneficiaries through the State Employees Health Insurance Plan administered by the Department of Community Health. The Official Code of Georgia Annotated (OCGA) assigns the authority to establish and amend the benefit provisions of the group health plans, including benefits for retirees, to the Board of Community Health (Board). The Department of Community Health, which includes the School OPEB Fund, issues a separate stand alone financial audit report and a copy can be obtained from the Georgia Department of Audits and Accounts.

Funding Policy. The contribution requirements of plan members and participating employers are established by the Board in accordance with the current Appropriations Act and may be amended by the Board. Contributions of plan members or beneficiaries receiving benefits vary based on plan election, dependent coverage, and Medicare eligibility and election. On average, plan members pay approximately 25 percent of the cost of the health insurance coverage.

Participating employers are statutorily required to contribute in accordance with the employer contribution rates established by the Board. The contribution rates are established to fund all benefits due under the health insurance plans for both active and retired employees based on projected "pay-as-you-go" financing requirements. Contributions are not based on the actuarially calculated annual required contribution (ARC) which represents a level of funding that, if paid on an ongoing basis, is projected to cover normal cost each year and amortize any unfunded actuarial liabilities (or funding excess) over a period not to exceed 30 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:

Period July 2010 - April 2011 May 2011 - June 2011

Percentage of Covered Payroll 21.955% of covered payroll for August 2010 - May 2011 coverage 1.429% of covered payroll for June 2011 - July 2011 coverage

For non-certificated school personnel:

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

Contribution $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 Note 11: On-behalf payments.

23

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

EXHIBIT "G"

Note 14: OTHER POST-EMPLOYMENT BENEFITS (CONTINUED)
Georgia Retiree Health Benefit Fund (Continued)
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 postemployment benefits and are subject to appropriation.
Currently, the state is requiring that local Boards of Education pay only on active employees. The School District's contribution to the health insurance plans for the fiscal years ended June 30, 2011, 2010 and 2009 was $1,142,098, $1,173,826 and $904,719 respectively, which equaled the required contribution. Currently, the State of Georgia has been making the remaining contributions to fund the pay as you go financing on behalf of all local Boards of Education (see Note 1 for discussion of on-behalf payments).
Note 15: RETIREMENT PLAN
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 SRBPTRS whenever their benefits under TRS exceed the IRC Section 415 imposed limitation on benefits.
TRS provides service retirement, disability retirement, and survivor's benefits. The benefit structure of TRS is defined and may be amended by state statute. A member is eligible for normal service retirement after 30 years of creditable service, regardless of age, or after 10 years of service and attainment of age 60. A member is eligible for early retirement after 25 years of creditable service. Normal retirement (pension) benefits paid to members are equal to 2% of the average of the member's two highest paid consecutive years of service, multiplied by the number of years of creditable service up to 40 years. Early retirement benefits are reduced by the lesser of one-twelfth of 7% for each month the member is below age 60 or by 7% for each year or fraction thereof by which the member has less than 30 years of service. It is also assumed that

24

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

EXHIBIT "G"

Note 15: RETIREMENT PLAN (CONTINUED)

Teachers Retirement System of Georgia (TRS) (Continued)

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, 2011. 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
2011 2010 2009

Percentage Contributed
100% 100% 100%

Required Contribution
$ 703,063 735,008 721,111

Public School Employees' Retirement System (PSERS)
Bus drivers, lunchroom personnel, and maintenance and custodial personnel are members of the Public School Employee's Retirement System of Georgia (PSERS). The PSERS is funded by contributions from employees and the State of Georgia. The School District makes no contribution to this plan. See Note 11: On-behalf payments for information on the contributions made by the State of Georgia on behalf of the School District's employees.

25

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

SCHEDULE "1"

REVENUES Property taxes Sales taxes Other 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 operations Debt service: Principal retirement Interest and fiscal charges Total expenditures
Excess of revenues over expenditures
OTHER FINANCING SOURCES (USES) Proceeds from sale of capital assets Transfers in Transfers out Total other financing sources (uses)
Net change in fund balances
FUND BALANCE, beginning of year
FUND BALANCE, end of year

Budget

Original (1)

Final (1)

Actual

Variance With Final Budget

$

3,180,236 $ 3,180,236 $ 3,092,971 $

18,000

18,000

23,930

-

-

11,534

6,782,559

6,974,460

7,056,826

1,798,441

2,130,217

2,151,858

186,686

186,686

192,319

7,000

7,000

2,519

36,375

36,375

327,134

12,009,297

12,532,974

12,859,091

(87,265) 5,930
11,534 82,366 21,641 5,633 (4,481) 290,759 326,117

6,780,303
279,709 181,012 261,460 799,422 829,997 152,380 894,607 888,303
64,099
878,005
12,009,297
-

6,854,974
281,591 173,023 261,460 802,831 829,997 152,380 920,444 1,001,706
63,945
878,605
12,220,956
312,018

6,933,313
304,100 129,340 268,268 696,655 895,168 87,192 920,723 944,172 91,038 62,547 83,369 709,166
32,656 1,584 12,159,291
699,800

2,400 (2,400)
-

2,400 (2,400)
-

2,338 144,346
146,684

-

312,018

846,484

2,160,201

2,160,201

2,160,201

$

2,160,201 $ 2,472,219 $ 3,006,685 $

(78,339)
(22,509) 43,683 (6,808) 106,176 (65,171) 65,188
(279) 57,534 (91,038) 1,398 (83,369) 169,439
(32,656) (1,584) 61,665
387,782
2,338 141,946
2,400 146,684
534,466
-
534,466

Note 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 school activity 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.

- 27 -

MARION COUNTY BOARD OF EDUCATION
SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS FOR THE FISCAL 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

CFDA Number

PassThrough
Entity ID
Number

Expenditures In Period

10.553 10.555

N/A

$

N/A

(1) 684,778 (2) 684,778

Education, U. S. Department of Special Education Cluster Pass-Through From Georgia Department of Education Special Education ARRA - Grants to States Grants to States Preschool Grants

* 84.391 * 84.027 * 84.173

Total Special Education Cluster

Title I, Part A Cluster Pass-Through From Georgia Department of Education ARRA - Title I grants to Local Education Agencies Title I grants to Local Education Agencies

* 84.389 * 84.010

Total Title I, Part A Cluster

Other Programs Pass-Through From Georgia Department of Education Career and Technical Education - Basic Grants to States Education Jobs Fund Improving Teacher Quality State Grants Migrant Education - State Grant Program Rural Education Safe and Drug-Free Schools and Communities - State Grants

84.048 * 84.410
84.367 84.011 84.358 84.186

Total Other Programs

Total U. S. Department of Education

Total Expenditures of Federal Awards

N/A = Not Available

Notes to the Schedule of Expenditures of Federal Awards

N/A

148,244

N/A

276,229

N/A

6,628

431,101

N/A

13,470

N/A

575,128

588,598

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

38,893 271,448 119,116
30,455 35,474
1,153
496,539
1,516,238
2,201,016

(1) Expenditures for the funds earned on the School Breakfast Program ($189,059) were not maintained separately and are included in the National School Lunch Program.

(2) Includes the Federally assigned value of donated commodities for the Food Donation Program in the amount of $35,890.

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 Marion County Board of Education and is presented on the modified accrual basis of accounting used in the presentation of the fund financial statements.

See notes to the basic financial statements.

- 28 -

MARION COUNTY BOARD OF EDUCATION
SCHEDULE OF STATE REVENUE FOR THE FISCAL YEAR ENDED JUNE 30, 2011

SCHEDULE "3"

Agency/Funding
Grants Bright from the Start: Georgia Department of Early Care and Learning Pre-Kindergarten Program
Education, Georgia Department of Quality Basic Education Direct Instructional Cost Kindergarten Program Kindergarten Program - Early Intervention Program Primary Grades (1-3) Program Primary Grades - Early Intervention (1-3) Program Upper Elementary Grades (4-5) Program Upper Elementary Grades - Early Intervention (4-5) Program Middle Grades (6-8) Program Middle School (6-8) Program High School General Education (9-12) Program Vocational Laboratory (9-12) Program Students with Disabilities Program for Intellectually Gifted Students - Category VI Remedial Education Program Alternative Education Program 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 Pupil Transportation Nursing Services Mid-term Adjustment Hold-Harmless Education Equalization Funding Grant Food Services Vocational Education Amended Formula Adjustment Other State Programs Dual Enrollment Health Insurance Pupil Transportation - State Bonds Math and Science Supplements Preschool Handicapped Program Virtual Schools Grant Total Grants from Georgia Department of Education
Georgia State Financing and Investment Commission Reimbursement on Construction Projects
Office of State Treasurer Public School Employees Retirement

Governmental

Fund Types

General

Capital Projects

Fund

Fund

Total

$

257,661 $

- $

257,661

486,329 57,782 915,960 107,978 464,475 178,923 67,314 823,232 824,472 309,782 745,861 145,701 42,235 74,048 143,777 46,604 25,869
350,578 306,480 332,168

-

486,329

-

57,782

-

915,960

-

107,978

-

464,475

-

178,923

-

67,314

823,232

-

824,472

-

309,782

-

745,861

-

145,701

42,235

-

74,048

-

143,777

-

46,604

-

25,869

-

350,578

-

306,480

-

332,168

358,085 37,737 86,684 492,656 24,388 50,847 (924,069)
2,016 28,012 152,584
5,685 27,623
50 6,791,866

-

358,085

-

37,737

-

86,684

-

492,656

-

24,388

-

50,847

-

(924,069)

-

2,016

-

28,012

-

152,584

-

5,685

-

27,623

-

50

-

6,791,866

-

5,920,579

5,920,579

7,299

-

7,299

$

7,056,826 $

5,920,579 $

12,977,405

See notes to the basic financial statements.

- 29 -

MARION COUNTY BOARD OF EDUCATION SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS - 2008 ISSUE
FOR THE FISCAL YEAR ENDED JUNE 30, 2011

SCHEDULE "4"

Project

Original Estimated Cost (1)

Current Estimated Costs (2)

Expended In Current Year (3) (4) (5)

Expended In Prior Years (3) (4)

Project Status

Renovating, extending, repairing and equipping existing schools, including roofs and HVAC

$

150,000 $

Planning new construction and acquiring any real property necessary therefore

722,000

Renovating, extending, repairing and equipping athletic facilities, including baseball field lights, baseball and softball dugouts and tennis concessions

78,000

Acquiring and installing systemwide instructional and administrative, technology, safety and security equipment

75,000

Renovating, extending, repairing and equipping the bus shop

25,000

Renovating, extending, repairing and equipping the sewage treatment plant

75,000

Acquisition of school buses, transportation equipment and maintenance equipment

150,000

Acquisition of fine arts, vocational, instructional and athletic equipment

100,000

Acquiring any necessary property therefore, both real and personal

25,000

Retiring the Marion County School District General Obligation Refunding Bonds, Series 1998

1,100,000

$ 2,500,000 $

150,000 $ 723,320
78,000
75,000 25,000 75,000 150,000 100,363 25,000
1,100,000 2,501,683 $

8,000 $

48,080 Ongoing

2,721

720,599 Complete

-

3,310 Ongoing

9,455 25,892 -

8,396 Ongoing - Ongoing - Ongoing
10,600 Ongoing 7,709 Ongoing - Ongoing

684,022 730,090 $

6 798,700

Ongoing

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

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

(3) The voters of Marion County approved the imposition of a 1% sales tax to fund the above projects and retire associated debt.

(4) In addition to the expenditures shown above, the School District has incurred interest to provide advance funding for the

above projects.

Prior years

$

18,781

Current year

7,013

Total

$

25,794

(5) Amounts above include $285,000 in principal payments on the 2010A Bonds paid in the Debt Service Fund.

(6) Expenditures in the capital projects fund included $13,947,937 not related to the special purpose local option sales tax.

See notes to the basic financial statements.

- 30 -

MARION COUNTY BOARD OF EDUCATION
SCHEDULE OF QUALITY BASIC EDUCATION PROGRAM (QBE) ALLOTMENTS AND EXPENDITURES BY PROGRAM GENERAL FUND FOR THE FISCAL YEAR ENDED JUNE 30, 2011

SCHEDULE "5"

Description
Direct Instructional Funds: Kindergarten Program Kindergarten Program - Early Intervention Program Primary Grades (1-3) Program Primary Grades - Early Intervention (1-3) Program Upper Elementary Grades (4-5) Program Upper Elementary Grades-Early Intervention (4-5) Program Middle Grades (6-8) Program Middle School (6-8) Program High School General Education (9-12) Program Vocational Laboratory (9-12) Program Students with Disabilities Category I Category II Category III Category IV Category V Gifted Student - Category VI Remedial Education Program Alternative Education Program
TOTAL DIRECT INSTRUCTIONAL PROGRAMS
Media Center Program Staff and Professional Development

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

Eligible QBE Program Costs

Salaries

Operations

Total

$ 552,756 $ 65,684
1,021,711 127,208 536,022 213,749 142,705 818,714 941,600 364,730 867,120 175,389 41,967 85,721

369,508 $ 18,803 798,444 207,941 457,977 228,397 875,472
712,221 270,342
111,204 142,828 245,775 30,877 13,232 91,383
171,311

10,009 $ -
26,525 -
17,302 -
14,647 7,569
55,041 42,051
3,192 430 7,569 -

379,517 18,803 824,969 207,941 475,279 228,397 890,119 7,569 767,262 312,393
111,204 142,828 248,967 30,877 13,232 91,813
7,569 171,311

5,955,076

4,745,715

184,335

4,930,050

167,332 29,985

205,970 -

14,094 -

220,064 8,014

TOTAL QBE FORMULA FUNDS

$ 6,152,393 $ 4,951,685 $ 198,429 $ 5,158,128

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

See notes to the basic financial statements. - 31 -

SECTION II COMPLIANCE AND INTERNAL CONTROL REPORTS

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

DEPARTMENT OF AUDITS AND ACCOUNTS
270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400
May 16, 2012

Honorable Nathan Deal, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the Marion 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 Marion County Board of Education as of and for the year ended June 30, 2011, which collectively comprise Marion County Board of Education's basic financial statements and have issued our report thereon dated May 16, 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 Marion County Board of Education is responsible for establishing and maintaining effective internal control over financial reporting. In planning and performing our audit, we considered Marion 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 Marion County Board of Education's internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness of the Marion 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 Marion County Board of Education's financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards.
We noted certain matters that we have reported to management of Marion County Board of Education in a separate letter dated May 16, 2012.
This report is intended solely for the information and use of management, members of the Marion 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
May 16, 2012

Honorable Nathan Deal, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the Marion 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 Marion 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. Marion 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 Marion County Board of Education's management. Our responsibility is to express an opinion on Marion 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 Marion 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 Marion County Board of Education's compliance with those requirements.
In our opinion, the Marion 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 Marion 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 Marion 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 Marion 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 Marion 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

MARION 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 No matters were reported. PRIOR YEAR FEDERAL AWARD FINDINGS AND QUESTIONED COSTS No matters were reported.

SECTION IV FINDINGS AND QUESTIONED COSTS

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

I SUMMARY OF AUDITOR'S RESULTS

Financial Statements

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

Unqualified

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

No None Reported

Noncompliance material to financial statements noted:

No

Federal Awards

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

No None Reported

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

Unqualified

Any audit findings disclosed that are required to be reported in

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

No

Identification of major programs: CFDA Numbers

Name of Federal Program or Cluster

84.010, 84.389 84.027, 84.173, 84.391 84.410

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

Auditee qualified as low-risk auditee?

No

II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

No matters were reported. III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

No matters were reported.