Marion County Board of Education, Buena Vista, Georgia, annual financial report for the fiscal year ended 2014 June 30 (including independent auditor's reports)

MARION COUNTY BOARD OF EDUCATION
BUENA VISTA, GEORGIA
ANNUAL FINANCIAL REPORT FOR THE FISCAL YEAR ENDED JUNE 30, 2014
(Including Independent Auditor's Reports)

MARION COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS -

SECTION I

FINANCIAL

INDEPENDENT AUDITOR'S REPORT

REQUIRED SUPPLEMENTARY INFORMATION

MANAGEMENT'S DISCUSSION AND ANALYSIS

EXHIBITS

BASIC FINANCIAL STATEMENTS

DISTRICT-WIDE FINANCIAL STATEMENTS

A

STATEMENT OF NET POSITION

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 STATEMENT OF REVENUES, EXPENDITURES

AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS

TO THE STATEMENT OF ACTIVITIES

F

STATEMENT OF FIDUCIARY NET POSITION

FIDUCIARY FUND

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 7 8
29

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
30 31 32 33

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 FOR EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE REQUIRED BY OMB CIRCULAR A-133

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

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

SECTION I FINANCIAL

Greg S. Griffin
STATE AUDITOR
(404) 656-2174

DEPARTMENT OF AUDITS AND ACCOUNTS
270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400
March 27, 2015

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
Ladies and Gentlemen:
Report on the Financial Statements
We have audited the accompanying financial statements of the governmental activities, each major fund, and the aggregate remaining fund information (Exhibits A through G) of the Marion County Board of Education, as of and for the year ended June 30, 2014, and the related notes to the financial statements, which collectively comprise the Board's basic financial statements as listed in the table of contents.
Management's Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.
Auditor's Responsibility
Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America 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 involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's

2014ARL-11

preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions.
Opinions
In our opinion, the basic financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, each major fund, and the aggregate remaining fund information of the Marion County Board of Education, as of June 30, 2014, and the respective changes in financial position thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America.
Other Matters
Required Supplementary Information
Accounting principles generally accepted in the United States of America require that the 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 29 respectively, be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management regarding the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance.
Other Information
Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Marion County Board of Education's basic financial statements. The accompanying supplementary information, consisting of Schedules 2 through 5, is presented for the purposes of additional analysis and is not a required part of the basic financial statements. The Schedule of Expenditures of Federal Awards is presented for purposes of additional analysis as required by U. S. Office of Management and Budget Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations, and is not a required part of the basic financial statements.
The accompanying supplementary information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and
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reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated in all material respects in relation to the basic financial statements as a whole.
Other Reporting Required by Governm ent Auditing Standards
In accordance with Government Auditing Standards, we have also issued our report dated March 27, 2015, 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 in considering Marion County Board of Education's internal control over financial reporting and compliance.
A copy of this report has been filed as a permanent record in the office of the State Auditor and made available to the press of the State, as provided for by Official Code of Georgia Annotated section 50-6-24.
Respectfully submitted,

GSG:as 2014ARL-11

Greg S. Griffin State Auditor

MARION COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2014

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, 2014. 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 2014 are as follows:



The School District's financial status remained stable during fiscal year 2014. In total, net

position increased $305,798, which represents an increase from fiscal year 2013. This total

increase was due to governmental activities since the School District has no business-type

activities.



General revenues accounted for $6.2 million or 41.3 percent of all revenues. Program specific

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

$8.9 million or 58.7 percent of total revenues. Total revenues were $15.1 million.



The School District had $14.8 million in expenses related to governmental activities; these

expenses were offset by $8.9 million in program specific charges for services, grants or

contributions. General revenues and taxes of $6.2 million also provided for these programs.



Among major funds, the General Fund had $12.7 million in revenues and $13.5 million in

expenditures. The General Fund's fund balance decreased from $3.5 million to $3.2 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 Position 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 nonmajor 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 Position 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 2014?" The Statement of Net Position 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, 2014
These two statements report the School District's net position and changes in net position. This change in net position 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. Nonfinancial factors include the School District's property tax base, facility conditions, required educational programs and other factors.
In the Statement of Net Position 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 Position 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.
The School District as a Whole
The perspective of the Statement of Net Position is of the School District as a whole. Table 1 provides a summary of the School District's net position for fiscal year 2014, compared to fiscal year 2013.
ii

MARION COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2014

Assets Current and Other Assets Capital Assets
Total Assets
Liabilities Long-Term Liabilities Outstanding Other Liabilities
Total Liabilities
Net Position Net Investment in Capital Assets Restricted Unrestricted
Total Net Position

Table 1 Net Position
$
$

Governmental Activities

Fiscal

Fiscal

Year 2014

Year 2013

7,394,713 $ 32,947,583
40,342,296

6,843,533 32,710,310
39,553,843

15,694,640 1,718,544
17,413,184

15,310,000 1,620,529
16,930,529

17,252,943 2,715,468 2,960,701
22,929,112 $

17,400,310 1,978,785 3,244,219
22,623,314

Table 2 shows the changes in net position for fiscal year 2014 compared to fiscal year 2013. The total net position increased $305,798, for fiscal year 2014, compared to a $645,623 decrease for fiscal year 2013.

iii

MARION COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2014

Table 2 Change in Net Position

Revenues Program Revenues: Charges for Services Operating Grants and Contributions Capital Grants and Contributions

Governmental Activities

Fiscal Year

Fiscal Year

2014

2013

$

391,162 $

305,301

7,919,287

7,814,743

551,711

1,731,243

Total Program Revenues

8,862,160

9,851,287

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

3,556,126 353,445 414,950 60,960
383,887 6,205
308,388

3,223,420 362,824 467,586 51,519
491,416 19,064
322,691

Total General Revenues

5,083,961

4,938,520

Total Revenues

13,946,121

14,789,807

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 Food Services Enterprise Operations Interest on Long-Term Debt

7,399,687
396,712 781,476 231,649 518,239 944,324 169,404 1,405,940 991,768
89,300
921,583 117,973 822,075

7,066,900
364,534 549,443 251,505 2,009,388 935,633 137,515 1,316,985 907,074 116,763
818,684 148,561 812,445

Total Expenses

14,790,130

15,435,430

Deficiency before Extraordinary Item

-844,009

-645,623

Extraordinary Item

1,149,807

Increase (Decrease) in Net Position

305,798

-645,623

Net Position, Beginning of Year

22,623,314

23,268,937

Net Position, End of Year

$

22,929,112 $

22,623,314

iv

MARION COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2014

Governmental Activities

Instruction comprises 50.0 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 2013 is also presented.

Table 3 Governmental Activities

Total Cost of Services

Fiscal

Fiscal

Year 2014

Year 2013

Net Cost of Services

Fiscal

Fiscal

Year 2014

Year 2013

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:

Food Services

Enterprise Operations

Interest on Short-Term and Long-Term Debt

7,399,687 $
396,712 781,476 231,649 518,239 944,324 169,404 1,405,940 991,768
89,300
921,583 117,973 822,075

7,066,900 $
364,534 549,443 251,505 2,009,388 935,633 137,515 1,316,985 907,074 116,763
818,684 148,561 812,445

2,019,225 $
293,164 532,810
64,672 135,780 585,577 167,643 951,362 542,196
79,506
90,478 117,973 347,584

844,405
222,322 381,452
71,404 1,558,534
520,585 131,736 866,388 429,586 100,665
11,531 148,561 296,974

Total Expenses

$

14,790,130 $

15,435,430 $

5,927,970 $

5,584,143

Although program revenues make up a majority of the revenues, the School District is still dependent upon tax revenues for governmental activities. Over 27 percent of instruction activities are supported through taxes and other general revenues; for all governmental activities general revenue support is 40.1 percent.
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 $14.3 million and expenditures and other financing uses of $15.1 million. There was an increase in fund balance of approximately $365 thousand in the District-Wide Capital Projects Fund and the fund balance of the General Fund had a decrease of approximately $375 thousand due to the completion of capital projects. We expected the decrease in General Fund due to our expenditures versus revenue. There was an increase in fund balance of approximately $430 thousand in the Debt Service Fund. This was because SPLOST III funds are being accumulated for sinking fund payments that begin in January 2015.
v

MARION COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2014

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 2014, 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 $11.51 million to $11.70 million while budgeted expenditures increased from $12.76 million to $12.79 million. Budgeted revenues increased due to receiving the 2012 tax reimbursement under the Forest Land Protection Act and receiving an increase in QBE at the midterm. Budgeted expenditures increased due to less teachers paid with federal funds; increase in energy prices; and Enterprise Operations (school activity accounts) were not budgeted.
The School District is compliant with the state's 65% rule for Minimum Direct Classroom Expenditures through its graduation rate. The State average is 72.5%. The School District average is 80.2%.
Capital Assets and Debt Administration
Capital Assets
At the end of fiscal year 2014, the School District had $32.95 million invested in capital assets, all in governmental activities. Table 4 indicates balances at June 30, 2014. Capital asset comparisons to fiscal year 2013 are also included.

Table 4 Capital Assets (Net of Depreciation)

Governmental Activities

Fiscal

Fiscal

Year 2014

Year 2013

Land Construction In Progress Land Improvements Building and Improvements Equipment

$

581,159 $

324,476

890,167

30,033,008

1,118,773

581,159
541,731 30,550,355
1,037,065

Total

$

32,947,583 $

32,710,310

vi

MARION COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2014

Debt

Long-Term Liabilities

At fiscal year ended June 30, 2014, the School District had $15.69 million in long-term liabilities outstanding. Table 5 summarizes the School District's liabilities as compared to the prior fiscal year.

Table 5 Long-Term Liabilities

Balance July 1, 2013

Additions

Governmental Activities

Balance

Deductions

June 30, 2014

Due Within One Year

Bonds Payable Capital Leases

$ 15,310,000 0$

395,820 $

$ -11,180

15,310,000 384,640 $

5,476

$ 15,310,000 $

395,820 $

-11,180 $ 15,694,640 $

5,476

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. We hope to hold this level for a few years as to not place a hardship on the property owners in Marion County.
Our SPLOST revenue and school bond ad valorem tax will be used to service our debt for the 2010B and 2010C bonds along with Federal subsidy payments.

We used a portion of an insurance settlement to add 1,500 square feet to our elementary school cafeteria. The decision is not final yet regarding the restoration of the auditorium destroyed by fire at our old middle school. The auditorium is over 50 years old and was used on a limited basis.

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 POSITION JUNE 30, 2014
ASSETS
Cash and cash equivalents Investments Receivables, net of allowances:
Taxes Intergovernmental:
State Federal Other Inventory Capital assets (nondepreciable) Capital assets (net of accumulated depreciation) Total assets
LIABILITIES
Accounts payable Salaries and benefits payable Contracts payable Accrued interest payable Bonds payable due in more than one year Capital leases due within one year Capital leases due in more than one year
Total liabilities
NET POSITION
Net investment in capital assets: Restricted for:
Continuation of federal programs Capital projects Debt service Unrestricted
Total net position

EXHIBIT "A"

Governmental Activities

$

4,112,375

1,542,650

729,136

755,093 242,896
500 12,063 905,635 32,041,948 40,342,296

141,778 1,215,740
22,463 338,563 15,310,000
5,476 379,164 17,413,184

17,252,943

281,599

1,228,658

1,205,211

2,960,701

$

22,929,112

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, 2014

EXHIBIT "B"

Functions/Programs

Expenses

Governmental activities:

Instruction

$ 7,399,687

Support services:

Pupil services

396,712

Improvement of instructional

services

781,476

Educational media services

231,649

General administration

518,239

School administration

944,324

Business administration

169,404

Maintenance and operation of plant

1,405,940

Student transportation services

991,768

Central support services

20,219

Other support services

69,081

Enterprise operations

117,973

Food service operations

921,583

Interest on long-term debt

822,075

Total governmental activities

$ 14,790,130

Charges for Services

Program Revenues Operating Grants and
Contributions

Capital Grants and Contributions

$ 224,980 $ 5,155,482 $

-

12,754

90,794

-

-

248,666

-

-

166,977

-

-

382,459

-

358,747

-

-

1,761

-

42,938

411,640

-

-

372,352

77,220

-

886

-

-

8,908

-

-

-

-

110,490

720,615

-

-

-

474,491

$ 391,162 $ 7,919,287 $ 551,711

Net (Expense) Revenue and
Changes in Net Position Governmental
Activities
$ (2,019,225)
(293,164)
(532,810) (64,672)
(135,780) (585,577) (167,643) (951,362) (542,196)
(19,333) (60,173) (117,973) (90,478) (347,584) (5,927,970)

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

3,556,126 353,445 414,950 25,899 16,401 18,660 383,887 6,205 308,388
5,083,961 1,149,807 6,233,768
305,798 22,623,314 $ 22,929,112

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

MARION COUNTY BOARD OF EDUCATION
BALANCE SHEET GOVERNMENTAL FUNDS
JUNE 30, 2014

EXHIBIT "C"

ASSETS

General

District - Wide Capital Projects

Debt Service

Total Governmental
Funds

Cash and cash equivalents Investments Receivables net of allowances:
Taxes Intergovernmental:
State Federal Other Inventory
Total assets

$

2,186,153 $

1,277,650 $

689,056

-

648,572 $ 853,594

678,419

-

50,717

755,093

-

-

242,896

-

-

-

500

-

12,063

-

-

$

4,563,680 $

1,278,150 $

1,552,883 $

4,112,375 1,542,650
729,136
755,093 242,896
500 12,063 7,394,713

LIABILITIES, DEFERRED INFLOWS, AND FUND BALANCES

LIABILITIES Accounts payable Salaries and benefits payable Contracts payable
Total liabilities

$

114,749 $

1,215,740

-

1,330,489

27,029 $ -
22,463 49,492

- $ -

141,778 1,215,740
22,463 1,379,981

DEFERRED INFLOWS Unavailable revenue - property taxes

50,723 50,723

-

5,876

56,599

-

5,876

56,599

FUND BALANCES Nonspendable: inventory Restricted:
Federal programs Capital projects Debt service Assigned: Student activities Subsequent years' budget Unassigned

12,063
269,536 -
109,094 596,100 2,195,675

-
1,228,658
-
-

-
1,547,007
-

12,063
269,536 1,228,658 1,547,007
109,094 596,100 2,195,675

Total fund balances

3,182,468

1,228,658

1,547,007

5,958,133

Total liabilities, deferred inflows, and fund balances

$

4,563,680 $

1,278,150 $

1,552,883

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

Capital assets used in governmental activities are not financial resources and are not reported in the funds.

Cost

39,101,584

Less accumulated depreciation

(6,154,001)

32,947,583

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

56,599

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

Bonds

(15,310,000)

Capital leases

(384,640)

Accrued interest

(338,563)

Net position of governmental activities

$

(16,033,203) 22,929,112

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, 2014

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 Total expenditures
Excess (deficiency) of revenues over (under) expenditures
OTHER FINANCING SOURCES Capital lease Proceeds from sale of capital assets
Total other financing sources
Net change in fund balances, before extraordinary item
Extraordinary item
Net change in fund balances
FUND BALANCES, beginning of year
FUND BALANCES, end of year

General
$ 3,529,012 37,897 18,660
6,589,613 1,790,781
391,162 6,131
308,388 12,671,644

District - Wide Capital Projects

$

-

-

-

-

-

-

8

-

8

Debt Service
$ 350,212 419,353 474,491 66 -
1,244,122

Total Governmental
Funds

$

3,879,224

457,250

18,660

6,589,613

2,265,272

391,162

6,205

308,388

13,915,774

6,853,879
396,712 765,248 231,649 510,852 915,215 169,404 1,145,929 934,324
43,320 69,081 117,973 890,371 395,820
11,180 9,524 13,460,481

-
16,228
495,105 172,456 100,668
784,457

-
-
812,551 812,551

6,853,879
396,712 781,476 231,649 510,852 915,215 169,404 1,641,034 1,106,780
43,320 69,081 117,973 890,371 496,488
11,180 822,075 15,057,489

(788,837)

(784,449)

431,571

(1,141,715)

395,820 18,906
414,726
(374,111)
-
(374,111)
3,556,579 $ 3,182,468 $

-

-

-

-

-

-

(784,449)

431,571

1,149,807

-

365,358

431,571

863,300

1,115,436

1,228,658 $ 1,547,007 $

395,820 18,906
414,726
(726,989)
1,149,807
422,818
5,535,315 5,958,133

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

MARION COUNTY BOARD OF EDUCATION

EXHIBIT "E"

RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES
FOR THE FISCAL YEAR ENDED JUNE 30, 2014

Amounts reported for governmental activities in the statement of activities are different because: Net change in fund balances - total governmental funds

$ 422,818

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 position.

Capital outlay Depreciation expense

1,093,886 (831,415)

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

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

262,471 (25,198) 30,347

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

Principal payments - bonds Principal payments - capital leases Capital lease proceeds

11,180 (395,820)

(384,640)

$ 305,798

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

(This page left intentionally blank)

Cash Investments
Total assets
Funds held for others

MARION COUNTY BOARD OF EDUCATION
STATEMENT OF FIDUCIARY NET POSITION FIDUCIARY FUND JUNE 30, 2014
ASSETS
LIABILITIES

EXHIBIT "F"

Agency Fund

$

2,808

31,456

$

34,264

$

34,264

The accompanying notes are an integral part of these financial statements. - 7 -

MARION COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2014

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 Position and the Statement of Activities display information about the financial activities of the overall School District, except for fiduciary activities. Eliminations have been made to minimize the double counting of internal activities. Governmental activities generally are financed through taxes, intergovernmental revenues, and other nonexchange transactions.
The Statement of Activities presents a comparison between direct expenses and program revenues for each function of the School District's governmental activities.
Direct expenses are those that are specifically associated with a program or function and, therefore, are clearly identifiable to a particular function. Indirect expenses (expenses of the School District related to the administration and support of the School District's programs, such as office and maintenance personnel and accounting) are not allocated to programs.
Program revenues include (a) charges paid by the recipients of goods or services offered by the programs and (b) grants and contributions that are restricted to meeting the operational or capital requirements of a particular program. Revenues that are not classified as program revenues, including all taxes, are presented as general revenues.
Fund Financial Statements
The fund financial statements provide information about the School District's funds, including fiduciary funds. Eliminations have been made to minimize the double counting of internal activities. Separate statements for each category (governmental and fiduciary) are presented. The emphasis of fund financial statements is on major governmental funds, each displayed in a separate column.
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MARION COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2014

EXHIBIT "G"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Fund Financial Statements (Continued)
The School District reports the following major governmental funds:
The General Fund is the School District's primary operating fund. It accounts for and reports 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 and reports financial resources including Special Purpose Local Option Sales Tax (SPLOST 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.
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.

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MARION COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2014

EXHIBIT "G"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Basis of Accounting (Continued)
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 long-term liabilities and acquisitions under capital leases are reported as other financing sources.
The School District funds certain programs by a combination of specific cost-reimbursement grants, categorical grants, and general revenues. Thus, when program costs are incurred, there are both restricted and unrestricted net position available to finance the program. It is the School District's policy to first apply grant resources to such programs, followed by cost-reimbursement grants, then general revenues.
The State of Georgia reimburses the School System for teachers' salaries and operating costs through the Quality Basic Education (QBE) Formula Earnings program. State of Georgia law defines the formula driven grant that determines the cost of an academic school year and the State of Georgia's share in this cost. 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 requirements of the enabling legislation of the QBE program, the State of Georgia reimburses the School System over the same 12-month period in which teachers are paid, funding the academic school year expenditures. At June 30, the amount of teachers' salaries incurred but not paid until July and August of the subsequent year are accrued as the State of Georgia has only postponed the final payment of their share of the cost until the subsequent appropriations for cash management purposes. By June 30 of each year, the State of Georgia has a signed appropriation that includes this final amount, which represents the State of Georgia's intent to fund this final payment. Based on guidance in Government Accounting Standards Board (GASB) Statement No. 33, paragraph 74, the State of Georgia recognizes its QBE liability for the July and August salaries at June 30, and the School System recognizes the same QBE as a receivable and revenue, consistent with symmetrical recognition.
Cash and Cash Equivalents
Composition of Deposits - Cash and cash equivalents consist of cash on hand, demand deposits and short-term investments with original maturities of three months or less from the date of acquisition in authorized financial institutions. Official Code of Georgia Annotated 45-8-14 authorizes the School District to deposit its funds in one or more solvent banks, insured Federal savings and loan associations, or insured chartered building and loan associations.
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MARION COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2014

EXHIBIT "G"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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 local government investment pool (Georgia Fund 1) administered by the State of
Georgia, Office of the State Treasurer, (7) Repurchase agreements, and (8) Obligations of other political subdivisions of the State of Georgia.
The School District does not have a formal policy regarding investment policies that address credit risks, 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 2013 tax digest year (calendar year) on September 10, 2013 (levy date). Taxes were due on December 20, 2013 (lien date). Taxes collected within the current fiscal year or within 60 days after year-end on the 2013 tax digest are reported as revenue in the governmental funds for fiscal year 2014. The 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, 2014, for maintenance and operations and debt service, amounted to $3,362,358 and $341,877, respectively.
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MARION COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2014

EXHIBIT "G"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Property Taxes (Continued)
Tax millage rates levied for the 2013 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

14.546 mills 1.690 mills
16.236 mills

Additionally, Title Ad Valorem Tax revenues, at the fund reporting level, during the fiscal year ended June 30, 2014, for maintenance and operations and debt service, amount to $166,654 and $8,335, respectively.
Sales Taxes
Special Purpose Local Option Sales Tax, at the fund reporting level, during the year amounted to $414,950 and is to be used for capital outlay for educational purposes or debt service. This sales tax was authorized by local referendum and the sales tax must be re-authorized at least every five years.
Inventories
Food Inventories - On the basic financial statements, inventories of donated food commodities used in the preparation of meals are reported at their Federally assigned value and purchased foods inventories are reported at cost (first-in, first-out). The School District uses the consumption method to account for inventories whereby donated food commodities are recorded as an asset and as revenue when received, and expenses/expenditures are recorded as the inventory items are used. Purchased foods are recorded as an asset when purchased and expenses/expenditures are recorded as the inventory items are used.
Capital Assets
Capital assets purchased, including capital outlay costs, are recorded as expenditures in the fund financial statements at the time of purchase (including ancillary charges). On the District-wide financial statements, all purchased capital assets are valued at cost where historical records are available and at estimated historical cost based on appraisals or deflated current replacement cost where no historical records exist. Donated capital assets are recorded at estimated fair market value on the date donated. Disposals are deleted at depreciated recorded cost. The cost of normal maintenance and repairs that do not add to the value of assets or materially extend the useful lives of the assets is not capitalized. Depreciation is computed using the straight-line method. The School District does not capitalize book collections or works of art. During the fiscal year under review, no events or changes in circumstances affecting a capital asset that may indicate impairment were known to the School District.

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MARION COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2014

EXHIBIT "G"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Capital Assets (Continued)

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

Capitalization Policy

Estimated Useful Life

Land

All

N/A

Construction in Progress

All

N/A

Land Improvements Buildings and Improvements Equipment

$ 5,000 5,000 5,000

15 to 80 Years 10 to 80 Years
5 to 14 Years

Intangible Assets

100,000 15 to 80 Years

Depreciation is used to allocate the actual or estimated historical cost of all capital assets over estimated useful lives.
Deferred Outflows / Inflows of Resources

In addition to assets, the statement of financial position and/or balance sheet will sometimes report a separate section for deferred outflows of resources. This separate financial statement element represents a consumption of resources that applies to a future period(s) and therefore will not be recognized as an outflow of resources (expense / expenditure) until then. The School District did not have any items that qualified for reporting in this category for the year ended June 30, 2014.

In addition to liabilities, the statement of financial position and/or balance sheet will sometimes report a separate section for deferred inflows of resources. This separate financial statement element represents an acquisition of resources that applies to future period(s) and so will not be recognized as an inflow of resources (revenue) until that time. The School District has only one type of item, which arises only under a modified accrual basis of accounting that qualifies for reporting in this category. Accordingly, the item, unavailable revenue, is reported only in the governmental funds balance sheet. The governmental funds report unavailable revenues from property taxes and these amounts are deferred and will be recognized as an inflow of resources in the period in which the amounts become available.

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MARION COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2014

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 are deferred and amortized over the life of the bonds using the straight-line method. Bond issuance costs are recognized as an outflow of resources in the fiscal year in which the bonds are issued.
In the fund financial statements, the School District recognizes bond premiums and discounts, as well as bond issuance costs during the fiscal year bonds are issued. Premiums received on debt issuances are reported as other financing sources while discounts on debt issuances are reported as other financing uses. Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as debt service expenditures. General obligation bonds are direct obligations and pledge the full faith and credit of the government. The outstanding amount of these bonds is recorded in the Statement of Net Position.
Net Position
The School District's net position in the District-wide Statements are classified as follows:
Net Investment in Capital Assets - 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 Position - This represents resources for which the School District is legally or contractually obligated to spend resources for bus replacement, continuation of Federal programs, debt service and capital projects in accordance with restrictions imposed by external third parties.
Unrestricted Net Position - Unrestricted net position represents resources derived from property taxes, sales taxes, grants and contributions not restricted to specific programs, charges for services, and miscellaneous revenues. These resources are used for transactions relating to the educational and general operations of the School District, and may be used at the discretion of the Board to meet current expenses for those purposes.
Fund Balance
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).

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MARION COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2014

EXHIBIT "G"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Fund Balance (Continued)
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.
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.

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MARION COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2014

EXHIBIT "G"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Use of Estimates
The preparation of the financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results may differ from those estimates.
Note 3: BUDGETARY DATA
The budget is a complete financial plan for the School District's fiscal year, and is based upon careful estimates of expenditures together with probable funding sources. The budget is legally adopted each year for the general, debt service, and capital projects funds. There is no statutory prohibition regarding over expenditure of the budget at any level. The budget for all governmental funds, except the various school activity (principal) accounts, is prepared and adopted by fund. The legal level of budgetary control was established by the Board at the aggregate fund level. The budget for the General Fund was prepared in accordance with accounting principles generally accepted in the United States of America.
The budgetary process begins with the School District's administration presenting an initial budget for the Board's review. The administration makes revisions as necessary based on the Board's guidelines and a tentative budget is approved. After approval of this tentative budget by the Board, such budget is advertised at least once in a newspaper of general circulation in the locality, as well as the School District's website. At the next regularly scheduled meeting of the Board after advertisement, the Board receives comments on the tentative budget, makes revisions as necessary and adopts a final budget. The approved budget is then submitted, in accordance with provisions of Official Code of Georgia Annotated section 20-2-167(c), to the Georgia Department of Education. The Board may increase or decrease the budget at any time during the year. All unexpended budget authority lapses at fiscal year-end.
The Superintendent is authorized by the Board to approve adjustments of no more than five percent of the amount budgeted for expenditures in any budget function for any fund. The Superintendent shall report any such adjustments to the Board. If expenditure of funds in any fund is anticipated to be more than five percent of the budgeted amount, the Superintendent shall request Board approval for the budget amendment. Under no circumstances is the Superintendent or other staff person authorized to spend funds that exceed the total budget without approval by the Board.

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MARION COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2014

EXHIBIT "G"

Note 3: BUDGETARY DATA (CONTINUED)

See Schedule 1 General Fund Schedule of Revenues, Expenditures and Changes in Fund Balances Budget to Actual for a detail of any over/under expenditures during the fiscal year under review.

Note 4: DEPOSITS

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 (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, 2014, the bank balances were $5,143,522. The amounts exposed to custodial credit risk are classified into three categories as follows:

Category 1 Category 2 Category 3 -

Uncollateralized, Cash collateralized with securities held by the pledging financial institution, or Cash collateralized with securities held by the pledging financial institution's trust department or agent but not in the School District's name.

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MARION COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2014

EXHIBIT "G"

Note 4: DEPOSITS (CONTINUED)

Categorization of Deposits (Continued)

The School District's deposits by custodial credit risk category at June 30, 2014 are as follows:

Custodial Credit Risk Category

Bank Balance

1 2 3
Categorization of Investments At June 30, 2014, the School System had the following investments:

$

-

-

4,893,522

$ 4,893,522

Investment Certificate of deposit Certificate of deposit Certificate of deposit Fidelity Institutional Government
(money market mutual fund)

Maturities May 14, 2015 February 1, 2015 August 27, 2014
52 day weighted average

Rating* N/A N/A N/A
AAAm

Fair Value $ 31,456
131,103 557,953
853,594 $ 1,574,106

*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, 2014, $853,594 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.

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MARION COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2014

EXHIBIT "G"

Note 4: DEPOSITS (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 Fidelity Institutional Government money market mutual fund and two Certificates of Deposit. The money market mutual fund represents 54% of the School District's total investments and the Certificates of Deposit maturing on February 1, 2015 and August 27, 2014 represent 8% and 35% of the School District's total investments, respectively.

Note 5: 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 6: CAPITAL ASSETS

The following is a summary of changes in the capital assets during the fiscal year:

Beginning Balance

Increases

Decreases

Ending Balance

Governmental activities:

Capital assets, not being depreciated:

Land

$

Construction in progress

Total

581,159 $

- $

-

324,476

581,159

324,476

- $ -

581,159 324,476 905,635

Capital assets, being depreciated: Buildings and improvements Equipment Land improvements Total

33,731,025 2,922,395 1,032,659
37,686,079

54,025 307,625 407,760 769,410

(259,540)
(259,540)

33,785,050 2,970,480 1,440,419
38,195,949

Less accumulated depreciation for: Buildings and improvements Equipment Land improvements Total

(3,180,670)
(1,885,330) (490,928)
(5,556,928)

(571,372)
(200,719) (59,324)
(831,415)

-
234,342 -
234,342

(3,752,042)
(1,851,707) (550,252)
(6,154,001)

Total capital assets, being depreciated, net

32,129,151

(62,005)

(25,198) 32,041,948

Governmental activities capital assets, net

$ 32,710,310 $ 262,471 $ (25,198) $ 32,947,583

- 19 -

MARION COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2014

EXHIBIT "G"

Note 6: CAPITAL ASSETS (CONTINUED)

Capital assets being acquired under capital leases as of June 30, 2014 are as follows:

Land Improvements Less: Accumulated Depreciation

$ 395,820 (3,958)
$ 391,862

Current year depreciation expense by function is as follows:

Instruction Support Services
General Administration School Administration Maintenance and Operations Student Transportation Central Support Services Food Services

$ 627,368

1,095 34,109 14,064 120,448
3,119

172,835 31,212

Total Depreciation Expense

$ 831,415

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.
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 Superintendent Board Chair

Amount $ 50,000 $ 12,000

- 20 -

MARION COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2014

EXHIBIT "G"

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, 2014, for governmental funds amounted to $10,436. Future minimum lease payments for these leases are as follows:

Fiscal Year Ended June 30

Governmental Activities

2015 2016 2017

$

10,436

10,436

10,436

$

31,308

The School District, a lessor, leases excess office space to various private companies and accounts for these leases as operating leases.

Lease terms vary and extend through June 30, 2023. Rental revenues under these operating leases during the year ended June 30, 2014 were $39,768. Minimum future rentals to be received under operating leases are as follows:

Fiscal Year Ended June 30
2015 2016 2017 2018 2019 2020-2023

Payments

$

39,768

35,368

34,968

34,968

34,968

128,216

$ 308,256

Note 9: LONGTERM DEBT
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.

- 21 -

MARION COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2014

EXHIBIT "G"

Note 9: LONGTERM DEBT (CONTINUED)

General obligation bonds currently outstanding are as follows:

Purpose General Government - Series 2010B General Government - Series 2010C

Interest Rates 5.05%
5.168% - 5.768%

Amount $ 7,595,000
7,715,000 $ 15,310,000

Capital Leases

On July 8, 2013, Marion County ("the County") and the Board of Education entered into an agreement to connect the new Middle High School to the County's existing water system. In order to provide sufficient water pressure and volume to the Middle High School, the County has constructed and installed a new elevated water tank to be incorporated into the County's water system. The new water tank was funded by a loan of $783,980. The Board of Education signed an intergovernmental agreement with the County to pay half of the loan payments with an interest rate of 2.5% resulting in a payment of principal and interest of $1,294 per month for 480 months. This lease agreement qualifies as a capital lease for accounting purposes, and therefore, has been recorded at the present value of the future minimum lease payments as of the date of its inception.

Changes in Long-Term Debt

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

Beginning Balance

Increases Decreases

Ending Balance

Due Within One Year

General Obligation Bonds $ 15,310,000 $

- $

- $ 15,310,000 $

Capital Leases

- 395,820

(11,180)

384,640

Total

$ 15,310,000 $ 395,820 $ (11,180) $ 15,694,640 $

5,476 5,476

- 22 -

MARION COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2014

EXHIBIT "G"

Note 9: LONGTERM DEBT (CONTINUED)
Scheduled Maturities of Long-Term Debt
At June 30, 2014, payments due by fiscal year which includes principal and interest for these items are as follows:

Fiscal Year Ended June 30

Capital Leases Principal Interest

2015 2016 2017 2018 2019 2020-2024 2025-2029 2030-2034 2035-2039 2040-2044 2045-2049 2050-2053

$

5,476 $

6,119

6,273

6,432

6,595

35,561

40,291

45,650

51,721

58,600

66,394

55,528

8,758 9,409 9,255 9,096 8,933 42,079 37,349 31,990 25,919 19,040 11,246 2,701

Total Principal and Interest $ 384,640 $ 215,775

General Obligation Bonds

Principal

Interest

$

- $

-

-

-

-

-

8,570,000

2,735,000

3,275,000

730,000

-

-

812,551 812,551 812,551 812,551 812,551 4,062,756 3,270,855 1,608,592 789,268
42,106 -

$ 15,310,000 $ 13,836,332

Note 10: ON-BEHALF PAYMENTS
The School District has recognized revenues and costs in the amount of $485,552 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 $464,100
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 $21,452
Funds paid to the Georgia Department of Community Health by the Georgia Department of Education on behalf of the School District are reported as part of the Quality Basic Education revenue allotments on Schedule 3 Schedule of State Revenue.

- 23 -

MARION COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2014

EXHIBIT "G"

Note 11: 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 12: SIGNIFICANT COMMITMENTS

The following is an analysis of significant outstanding construction or renovation contracts

executed by the School District as of June 30, 2014. Project

Unearned Executed Contracts

Old Marion County Middle School Fire Damage Repair and Renovations $ Additions to L.K. Moss Elementary School Cafeteria

13,974 427,201

$ 441,175

Note 13: 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 postemployment healthcare plan that covers eligible former employees of public school systems, libraries and regional educational service agencies. The School OPEB Fund provides health insurance benefits to eligible former employees and their qualified beneficiaries through the State Employees Health Insurance Plan administered by the Department of Community Health. The Official Code of Georgia Annotated (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. For members with fewer than five years of service as of January 1, 2012, contributions also vary based on years of service. On average, members with five years or more of service as of January 1, 2012, pay approximately 25 percent of the cost of the health insurance coverage. In accordance with the Board resolution dated December 8, 2011, for members with fewer than five years of service as of January 1, 2012, the state provides a premium subsidy in retirement that ranges from 0% for fewer than 10 years of service to 75% (but no greater than the subsidy percentage offered to active employees) for 30 or more years of service. The subsidy for eligible dependents ranges from 0% to 55% (but no greater than the subsidy percentage offered to dependents of active employees minus 20%). No subsidy is available to Medicare eligible members not enrolled in a Medicare Advantage Option.

- 24 -

MARION COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2014

EXHIBIT "G"

NOTE 13: OTHER POST EMPLOYMENT BENEFITS (CONTINUED)

Georgia Retiree Health Benefit Fund (Continued)

The Board of Community Health sets all member premiums by resolution and in accordance with the law and applicable revenue and expense projections. Any subsidy policy adopted by the Board may be changed at any time by Board resolution and does not constitute a contract or promise of any amount of subsidy.
Participating employers are statutorily required to contribute in accordance with the employer contribution rates established by the Board. The contribution rates are established to fund all benefits due under the health insurance plans for both active and retired employees based on projected "pay-as-you-go" financing requirements. Contributions are not based on the actuarially calculated annual required contribution (ARC) which represents a level of funding that, if paid on an ongoing basis, is projected to cover normal cost each year and amortize any unfunded actuarial liabilities (or funding excess) over a period not to exceed 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, 2014:

For certificated teachers, librarians and regional educational service agencies:

Period July 1, 2013- June 30, 2014

Contribution $945 per member per month

For non-certificated school personnel:
Period July 1, 2013 - June 30, 2014

Contribution $596.20 per member per month

No additional contribution was required by the Board for fiscal year 2014 nor contributed to the School OPEB Fund to prefund retiree benefits. Such additional contribution amounts are determined annually by the Board in accordance with the School plan for other postemployment benefits and are subject to appropriation.

The School District's combined active and retiree contributions to the health insurance plans,

which equaled the required contribution, for the current fiscal year and the preceding two fiscal

years were as follows:

Percentage

Required

Fiscal Year

Contributed

Contribution

2014

100%

$ 1,419,026

2013

100%

1,219,609

2012

100%

1,225,268

- 25 -

MARION COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2014

EXHIBIT "G"

Note 14: 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 SRPB-TRS whenever their benefits under TRS exceed the IRC Section 415 imposed limitation on benefits.
TRS provides service retirement, disability retirement, and survivor's benefits. The benefit structure of TRS is defined and may be amended by state statute. A member is eligible for normal service retirement after 30 years of creditable service, regardless of age, or after 10 years of service and attainment of age 60. A member is eligible for early retirement after 25 years of creditable service. Normal retirement (pension) benefits paid to members are equal to 2% of the average of the member's two highest paid consecutive years of service, multiplied by the number of years of creditable service up to 40 years. Early retirement benefits are reduced by the lesser of one-twelfth of 7% for each month the member is below age 60 or by 7% for each year or fraction thereof by which the member has less than 30 years of service. It is also assumed that certain cost-of-living adjustments, based on the Consumer Price Index, will be made in future years. Retirement benefits are payable monthly for life. A member may elect to receive a partial lump-sum distribution in addition to a reduced monthly retirement benefit. Death, disability and spousal benefits are also available.
Funding Policy. TRS is funded by member and employer contributions as adopted and amended by the Board of Trustees. Members become fully vested after 10 years of service. If a member terminates with less than 10 years of service, no vesting of employer contributions occurs, but the member's contributions may be refunded with interest. Member contributions are limited by state law to not less than 5% or more than 6% of a member's earnable compensation. Member contributions as adopted by the Board of Trustees for the fiscal year ended June 30, 2014, were 6.00% of annual salary. Employer contributions required for fiscal year 2014 were 12.28% of annual salary as required by the June 30, 2011, actuarial valuation.

- 26 -

MARION COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2014

EXHIBIT "G"

Note 14: RETIREMENT PLAN (CONTINUED)

Teachers Retirement System of Georgia (TRS) (Continued)

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

Fiscal Year
2013 2012 2011

Percentage Contributed
100% 100% 100%

Required Contribution
$ 855,348 795,803 710,760

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 10: On-behalf payments for information on the contributions made by the State of Georgia on behalf of the School District's employees.
Note 15: NEW ACCOUNTING PRONOUNCEMENT
In fiscal year 2015, the School District will adopt Governmental Account Standards Board (GASB) Statement No. 68, Accounting and Financial Reporting for Pensions. The provisions of this Statement establish accounting and financial reporting standards for pensions that are provided to the employees of state and local governmental employers through pension plans that are administered through trusts. Implementation of this statement will require the School District to record a liability for its proportionate share of the Net Pension Liability of pension plans in which it is a member. Actuarial estimates are currently being made to determine the School District's liability, the effects of which are believed to be material.
Note 16: EXTRAORDINARY ITEM
In June 2013, a fire destroyed approximately 17% of the former middle school facility. Insurance proceeds of $1,149,807 are recorded as an extraordinary item in the District-wide Capital Projects Fund.

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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, 2014

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 Capital outlay Debt service: Principal retirement Interest and fiscal charges Total expenditures
Excess (deficiency) of revenues over (under) expenditures
OTHER FINANCING SOURCES (USES) Capital lease 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

$

3,209,884 $

24,000

-

6,331,905

1,740,869

197,354

200

6,062

11,510,274

Final
3,209,884 $ 24,000 -
6,347,924 1,884,375
197,354 200
6,062 11,669,799

Actual

Variance With Final Budget

3,529,012 $ 37,897 18,660
6,589,613 1,790,781
391,162 6,131
308,388 12,671,644

319,128 13,897 18,660 241,689 (93,594) 193,808
5,931 302,326 1,001,845

6,824,640
367,614 566,515 237,862 605,177 921,562 165,713 1,068,440 969,519 59,027 66,909
903,730
-
12,756,708

6,636,523
411,336 740,200 237,862 602,086 921,562 165,713 1,068,440 969,519 59,027 71,231
903,730
-
12,787,229

6,853,879
396,712 765,248 231,649 510,852 915,215 169,404 1,145,929 934,324
43,320 69,081 117,973 890,371 395,820
11,180 9,524 13,460,481

(1,246,434)

(1,117,430)

(788,837)

2,600 (2,600) -

2,600 (2,600) -

(1,246,434)

(1,117,430)

3,556,579

3,556,579

$

2,310,145 $

2,439,149 $

395,820 18,906 414,726
(374,111)
3,556,579
3,182,468 $

(217,356)
14,624 (25,048)
6,213 91,234
6,347 (3,691) (77,489) 35,195 15,707 2,150 (117,973) 13,359 (395,820)
(11,180) (9,524) (673,252)
328,593
395,820 18,906 (2,600)
2,600 414,726
743,319
-
743,319

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 ($477,173) or expenditures ($486,894) 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.

- 29 -

MARION COUNTY BOARD OF EDUCATION
SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS FOR THE FISCAL YEAR ENDED JUNE 30, 2014

SCHEDULE "2"

Funding Agency Program/Grant

CFDA Number

PassThrough Entity
ID Number

Expenditures In Period

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

*

10.553

*

10.555

N/A

$

N/A

(1) 865,732 (2) 865,732

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

84.027

N/A

84.173

N/A

252,972 6,014

Total Special Education Cluster

258,986

Other Programs Pass-Through From Georgia Department of Education Improving Teacher Quality State Grants Migrant Education - State Grant Program Rural Education Title I Grants to Local Educational Agencies Career and Technical Education - Basic Grants to States Pass-Through From Southwest Georgia Regional Educational Services Agency Title III - Limited English Proficient

84.367

N/A

84.011

N/A

84.358

N/A

*

84.010

N/A

84.048

N/A

84.365

N/A

97,565 27,231 23,906 660,052 26,473
591 835,818

Total Expenditures of Federal Awards

$

1,960,536

N/A = Not Available

Notes to the Schedule of Expenditures of Federal Awards

(1) Expenditures for the funds earned on the School Breakfast Program ($208,387) 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 $22,440. 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.

- 30 -

MARION COUNTY BOARD OF EDUCATION
SCHEDULE OF STATE REVENUE FOR THE FISCAL YEAR ENDED JUNE 30, 2014

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 (1) Direct Instructional Cost Kindergarten Program Kindergarten Program - Early Intervention Program Primary Grades (1-3) Program Primary Grades - Early Intervention (1-3) Program Upper Elementary Grades (4-5) Program Upper Elementary Grades - Early Intervention (4-5) Program Middle School (6-8) Program High School General Education (9-12) Program Vocational Laboratory (9-12) Program Students with Disabilities Program for Intellectually Gifted Students - Category VI Remedial Education Program Alternative Education Program Media Center Program 20 Days Additional Instruction Staff and Professional Development Principal, Staff and Professional Development Indirect Cost Central Administration School Administration Facility Maintenance and Operations Categorical Grants Pupil Transportation Pupil Transportation State Bonds Nursing Services Vocational Supervisors Education Equalization Funding Grant Food Services Vocational Education Amended Formula Adjustment Other State Programs Math and Science Supplements Total Grants from Georgia Department of Education
Office of the State Treasurer Public School Employees Retirement

GOVERNMENTAL FUND TYPE General Fund

$

245,796

475,975 70,005
957,340 125,861 342,164
70,422 1,022,258
799,691 212,977 736,191 124,408
69,237 67,113 142,665 46,179 26,410
572
323,535 300,559 338,776

356,349 77,220 24,181 6,683
383,887 21,145 38,128
(840,889)
3,323 6,322,365

21,452

$

6,589,613

(1) Payments to the Georgia Department of Community Health by the Georgia Department of Education on behalf of the School District in the amount of $464,100 are included as part of the Quality Basic Education revenue allotments.

See Notes to the Basic Financial Statements.

- 31 -

MARION COUNTY BOARD OF EDUCATION
SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS FOR THE FISCAL YEAR ENDED JUNE 30, 2014

SCHEDULE "4"

Project

Original Estimated Cost (1)

Current Estimated Costs (2)

Expended In Current Year (3) (4)

Expended In Prior Years (3) (4)

Total Completion
Cost

Estimated Completion
Date

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

150,000 $

363,091 $

180,661 $ 182,430 $ 363,091

Complete

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

78,000

4,105

-

4,105

4,105

Complete

Acquiring and installing system-wide instructional and administrative, technology safety and security equipment

75,000

15,396

-

15,396

15,396

Complete

Renovating, extending, repairing and equipping the bus shop

25,000

95,821

63,800

32,021

95,821

Complete

Acquisition of school buses, transportation equipment and maintenance equipment

150,000

128,788

92,296

36,492

128,788

Complete

Acquisition of fine arts, vocational, instructional and athletic equipment

100,000

7,709

-

7,709

7,709

Complete

Improving school facilities, purchasing school buses, school equipment, and acquiring safety and security equipment

750,000

750,000

-

-

- December 2017

Making system-wide technology improvements, including, but not limited to, the acquisition and installation of instruction technology, security, and information systems hardware and associated software and accessories, and infrastructure at all schools and selected other facilities

400,000

400,000

-

-

- December 2017

To retire a portion of the principal and interest on the school district's previously incurred general obligation Series 2010B and 2010C Bonds coming due in the years 2013 through 2018

2,250,000

2,250,000

$ 3,978,000 $ 4,014,910 $

-

-

- December 2017

336,757 $ 278,153 $ 614,910

(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 project(s). 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) Expenditures in the District-wide Capital Projects Fund included $447,700 not related to the Special Purpose Local Option Sales Tax.

(5) $812,551 Interest paid on bonds in FY2014; $474,491 from Federal Subsidy; $338,060 from property taxes.

(6) Sales Tax is being accumulated to make Sinking Fund Payments that start in January 2015.

See notes to the basic financial statements.

- 32 -

MARION COUNTY BOARD OF EDUCATION
SCHEDULE OF QUALITY BASIC EDUCATION PROGRAMS (QBE) ALLOTMENTS AND EXPENDITURES BY PROGRAM GENERAL FUND FOR THE FISCAL YEAR ENDED JUNE 30, 2014

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 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 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) (3)

Eligible QBE Program Costs

Salaries

Operations

Total

$ 549,634 $ 90,842
1,095,218 155,522 410,283 96,969
1,182,481 930,776 249,107 857,291 147,110 76,757 79,460

471,942 $ 79,542 989,513 145,832 534,572 80,357 945,568 869,281 363,195
52,407 172,429 275,911 41,508 24,244 32,012 55,432

5,921,450

5,133,745

166,440 30,851

209,561 1,400

3,048 -
18,223 -
7,935 -
9,328 46,162 12,980
637 1,371 -

$ 474,990 79,542
1,007,736 145,832 542,507 80,357 954,896 915,443 376,175 52,407 172,429 276,548 41,508 25,615 32,012 55,432

99,684

5,233,429

13,346 9,421

222,907 10,821

TOTAL QBE FORMULA FUNDS

$ 6,118,741 $ 5,344,706 $ 122,451 $ 5,467,157

(1) Comprised of State Funds plus Local Five Mill Share. (2) Allotments do not include the impact of the state amended budget adjustment. (3) Allotments do not include the State Health payments made by GDOE to the Department of Community Health for the certified employees.

See notes to the basic financial statements.

- 33 -

SECTION II COMPLIANCE AND INTERNAL CONTROL REPORTS

Greg S. Griffin
STATE AUDITOR
(404) 656-2174

DEPARTMENT OF AUDITS AND ACCOUNTS
270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400
March 27, 2015

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, in accordance with the 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, 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, 2014, and the related notes to the financial statements, which collectively comprise Marion County Board of Education's basic financial statements and have issued our report thereon dated March 27, 2015.
Internal Control Over Financial Reporting
In planning and performing our audit of the financial statements, we considered Marion County Board of Education's internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the Marion County Board of Education's internal control. Accordingly, we do not express an opinion on the effectiveness of the Marion County Board of Education's internal control.
A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity's financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance.

2014YB-10

Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified.
Compliance and Other Matters
As part of obtaining reasonable assurance about whether Marion County Board of Education's financial statements are free from 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 March 27, 2015.
Purpose of this Report
The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, not to provide an opinion on the effectiveness of the Marion County Board of Education's internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the Marion County Board of Education's internal control and compliance. Accordingly, this communication is not suitable for any other purpose.
Respectfully submitted,

GSG:as 2014YB-10

Greg S. Griffin State Auditor

Greg S. Griffin
STATE AUDITOR
(404) 656-2174

DEPARTMENT OF AUDITS AND ACCOUNTS
270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400
March 27, 2015

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 FOR EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE REQUIRED BY OMB CIRCULAR A-133
Ladies and Gentlemen:
Report on Compliance for Each Major Federal Program
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, 2014. 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.
Management's Responsibility
Management is responsible for compliance with the requirements of laws, regulations, contracts, and grants applicable to its federal programs.
Auditor's Responsibility
Our responsibility is to express an opinion on compliance for each of Marion County Board of Education's major federal programs based on our audit of the types of compliance requirements referred to above. 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 on compliance for each major federal program. However, our audit does not provide a legal determination of Marion County Board of Education's compliance.
2014SA-10

Opinion on Each Major Federal Program
In our opinion, the Marion County Board of Education complied, in all material respects, with the types of 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, 2014.
Report on Internal Control over Compliance
Management of Marion County Board of Education is responsible for establishing and maintaining effective internal control over compliance with the types of compliance requirements referred to above. In planning and performing our audit of compliance, we considered Marion County Board of Education's internal control over compliance with the types of requirements that could have a direct and material effect on each major federal program to determine the auditing procedures that are appropriate in the circumstances for the purpose of expressing an opinion on compliance for each major federal program 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. A significant deficiency in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance with a type of compliance requirement of a federal program that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance.
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 material weaknesses or significant deficiencies. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified.
The purpose of this report on internal control over compliance is solely to describe the scope of our testing of internal control over compliance and the results of that testing based on the requirements of OMB Circular A-133. Accordingly, this report is not suitable for any other purpose.
Respectfully submitted,

GSG:as 2014SA-10

Greg S. Griffin 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, 2014
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, 2014

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

Unmodified

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

Unmodified

Any audit findings disclosed that are required to be reported in

accordance with OMB Circular A-143, Section 510(a)?

No

Identification of major programs:

CFDA Numbers

Name of Federal Program or Cluster

10.553, 10.555 84.010

Child Nutrition Cluster Title I Grants to Local Educational Agencies

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

$300,000.00

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.