OCONEE COUNTY BOARD OF EDUCATION WATKINSVILLE, GEORGIA ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED JUNE 30, 2012 (INCLUDING INDEPENDENT AUDITOR'S REPORTS) OCONEE COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS - SECTION I FINANCIAL INDEPENDENT AUDITOR'S COMBINED REPORT ON BASIC FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION - SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS REQUIRED SUPPLEMENTARY INFORMATION MANAGEMENT'S DISCUSSION AND ANALYSIS BASIC FINANCIAL STATEMENTS DISTRICT-WIDE FINANCIAL STATEMENTS STATEMENT OF NET ASSETS STATEMENT OF ACTIVITIES FUND FINANCIAL STATEMENTS BALANCE SHEET GOVERNMENTAL FUNDS STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES STATEMENT OF FIDUCIARY ASSETS AND LIABILITIES FIDUCIARY FUND NOTES TO THE BASIC FINANCIAL STATEMENTS REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL GENERAL FUND Page i 1 2 3 4 5 7 8 26 OCONEE COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS - SECTION I FINANCIAL SUPPLEMENTARY INFORMATION SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS SCHEDULE OF STATE REVENUE SCHEDULE OF APPROVED LOCAL OPTION SALES TAX (ELOST) PROJECTS ALLOTMENTS AND EXPENDITURES GENERAL FUND - QUALITY BASIC EDUCATION PROGRAMS (QBE) BY PROGRAM Page 27 29 30 31 SECTION II COMPLIANCE AND INTERNAL CONTROL REPORTS INDEPENDENT AUDITOR'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS INDEPENDENT AUDITOR'S REPORT ON COMPLIANCE WITH REQUIREMENTS THAT COULD HAVE A DIRECT AND MATERIAL EFFECT ON EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH OMB CIRCULAR A-133 SECTION III AUDITEE'S RESPONSE TO PRIOR YEAR FINDINGS AND QUESTIONED COSTS SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS SECTION IV FINDINGS AND QUESTIONED COSTS SCHEDULE OF FINDINGS AND QUESTIONED COSTS OCONEE COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS - SECTION V MANAGEMENT'S RESPONSES SCHEDULE OF MANAGEMENT'S RESPONSES 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 15, 2013 Honorable Nathan Deal, Governor Members of the General Assembly Members of the State Board of Education and Superintendent and Members of the Oconee County Board of Education INDEPENDENT AUDITOR'S COMBINED REPORT ON BASIC FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION - SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS Ladies and Gentlemen: We have audited the accompanying financial statements of the governmental activities, each major fund, and the aggregate remaining fund information of the Oconee County Board of Education, as of and for the year ended June 30, 2012, which collectively comprise the Board's basic financial statements as listed in the table of contents. These financial statements are the responsibility of the Oconee County Board of Education's management. Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Board's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinions. In our opinion, the financial statements referred to previously present fairly, in all material respects, the respective financial position of the governmental activities, each major fund, and the aggregate remaining fund information of the Oconee County Board of Education, as of June 30, 2012, and the respective changes in financial position thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America. 2012ARL-11 In accordance with Government Auditing Standards, we have also issued our report dated March 15, 2013, on our consideration of the Oconee County Board of Education's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit. Management's Discussion and Analysis and the Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual, as presented on pages i through viii and page 26 respectively, are not a required part of the basic financial statements but are supplementary information required by accounting principles generally accepted in the United States of America. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures 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. Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Oconee County Board of Education's financial statements as a whole. The accompanying supplementary information which includes the Schedule of Expenditures of Federal Awards as required by U. S. Office of Management and Budget Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations, are presented for purposes of additional analysis and are not a required part of the financial statements. The 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 financial statements. The information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the 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. 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 2012ARL-11 Greg S. Griffin State Auditor Oconee County Board of Education Management's Discussion and Analysis for Fiscal Year Ended June 30, 2012 INTRODUCTION This discussion and analysis of the Oconee County Board of Education's financial performance provides an overview of the School District's financial activities for the fiscal year ended June 30, 2012. The intent of the discussion and analysis is to look at the School District's financial performance as a whole; readers should also review the transmittal letter, notes to the basic financial statements and financial statements to enhance their understanding of the School District's financial performance. FINANCIAL HIGHLIGHTS Key financial highlights for fiscal year 2012 are as follows: On the district-wide financial statements, the assets of the School District exceeded liabilities by $97.30 million, or an increase of $3.61 million when compared to 2011. The School District had $61.02 million in expenses relating to governmental activities; only $31.63 million of these expenses were offset by program specific charges for services, grants and contributions. However, general revenues (primarily property and sales taxes) of $33.0 million were more than adequate to provide for these programs. As stated above, General Revenues accounted for $33.0 million or about 51% of all revenues totaling $64.64 million. Program specific revenues in the form of charges for services, grants and contributions accounted for the rest. The School District's M&O millage rate was 16.50 mills for the 2008-09 school year and continues at that rate for the 2011-12 school year. The current Bond millage rate is 1 mill. The District's overall millage rate is 17.50 mills. However without digest growth, which is either limited by current economic conditions, and/or by legislative action that adversely affects local governments ability to properly assess real property, the Board of Education may need to consider a millage increase in future years in order to maintain quality services. The School District is in very stable financial condition despite current economic conditions. The General fund balance reflects the full accrual of contracted salaries and benefits unpaid at June 30 in full compliance of GASB 34 and 54 regulations. OVERVIEW OF THE FINANCIAL STATEMENTS This annual report consists of three parts; management's discussion and analysis (this section), the basic financial statements and required supplementary information. The basic financial statements include two levels of statements that present different views of the School District. These include the district-wide and fund financial statements. The district-wide financial statements include the 'Statement of Net Assets' and 'Statement of Activities'. These statements provide information about the activities of the School District presenting both short-term and long-term information about the School District's overall financial status. The fund financial statements focus on individual parts of the School District, reporting the School District's operation in more detail. The 'Governmental Funds' statements disclose how basic services are financed in the short-term as well as what remains for future spending. The 'Fiduciary Funds' statements i OCONEE COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2012 provide information about the financial relationships in which the School District acts solely as a trustee or agent for the benefit of others. In the case of the Oconee County Board of Education, the General Fund, Capital Projects Funds, and Debt Service Funds are all considered to be major funds. The District has no nonmajor funds as defined by GASB Statement 34 for the purposes of this report. The financial statements also include notes that explain some of the information in the statements and provide more detailed data. The statements are followed by a section of required supplementary information that further explains and supports the financial statements. Additionally, other supplementary information (not required) is also presented that further supplements understanding of the financial statements. District-Wide Statements Since the Oconee County Board of Education has no operations that have been classified as "Business Activities", the District-Wide financial statements are basically a consolidation of all of the District's operating funds into one column called governmental activities. In reviewing the District-Wide financial statements, a reader might ask the question, are we in a better financial position now than last year? The 'Statement of Net Assets' and the 'Statement of Activities' provides the basis for answering this question. These financial statements include all District's assets and liabilities and uses 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. These two statements report the School District's net assets and any changes in those assets. The change in net assets is important because it tells the reader that, for the School District as a whole, the financial position of the School District has improved or diminished. The causes of this change may be the results of many factors, including those not under the School District's control, such as the property tax base, facility conditions, required educational programs, student-teacher ratios, and other factors. The 'Statement of Net Assets' and the 'Statement of Activities' reflects 100% of the School District's governmental activities. Fund Financial Statements The School District uses many funds or sub-funds to account for a multitude of financial transactions during the fiscal year. The fund financial statements presented in this report provide detail information about the School District's significant or major funds. As discussed previously, the District has no nonmajor Funds as defined by GASB Statement 34. Governmental Funds Most of the School District's activities are reported in governmental funds, which focus on how money flows into and out of those funds and the balances left at year-end available for spending in future periods. These funds are reported using the modified accrual method of accounting which measures cash and all other financial assets that can be readily 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 determine whether there are more or fewer financial resources that can be spent in the near future to finance educational programs. The differences between government activities (reported in the Statement of Net Assets and the Statement of Activities) and governmental funds are reconciled in the financial statements. Fiduciary Funds The School District is the trustee, or fiduciary, for assets that belong to others and school clubs and organizations within the principals' accounts. The School District is responsible for ensuring that the assets reported in these funds are used only for their intended purposes and by those to whom the assets belong. The School District excludes these activities from the district-wide financial statements because it cannot use these assets to finance its operations. ii OCONEE COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2012 FINANCIAL ANALYSIS OF THE SCHOOL DISTRICT AS A WHOLE Recall that the Statement of Net Assets provides the perspective of the School District as a whole. The reader can think of the District's net assets as the difference between its assets (i.e., what the District owns) and its liabilities (i.e., what the District owes) at the end of a fiscal year. This balance represents one way to measure the District's financial health or its financial position. In the case of the Oconee County Board of Education, assets exceeded liabilities by $97.30 million at June 30, 2012. To better understand the District's actual financial position and ability to deliver services in future periods, the reader will need to review the various components of the net asset category. For example, of the $97.30 million of net assets, $4.79 million was restricted for continuation of federal programs, debt service, and completion of ongoing capital projects. Accordingly, these funds were not available to meet the District's ongoing obligations to citizens and creditors. In addition, the District had $81.40 million (net of related debt) invested in capital assets (e.g., land, buildings, and equipment). The District uses these capital assets to provide educational services to students within geographic boundaries served by the District. Because of the very nature and on-going use of the assets being reported in this component of net assets, it must be recognized that this portion of the net assets is not available for future spending. The remaining balance of unrestricted net assets of $11.10 million may be used to meet the District's ongoing obligations to citizens and creditors. The funds are used to meet payroll and operational costs through the month of September; after which, local tax revenues are received and permit the infusion of cash necessary to operate the school system. Table 1 provides a summary of the School District's net assets for the current fiscal year and for prior year fiscal year 2011. Assets Current and Other Assets Capital Assets, Net Total Assets Liabilities Current and Other Liabilities Long-Term Liabilities Total Liabilities Net Assets Invested in Capital Assets, Net of Related Debt Restricted Unrestricted Total Net Assets Table 1 Net Assets Governmental Governmental Activities Activities FY 2012 FY 2011 Current Year to Prior Year Difference $ 33,094,904 97,300,199 $ 130,395,103 $ 22,520,513 95,211,906 $ 117,732,419 $ 10,574,391 2,088,293 $ 12,662,684 $ 16,787,041 16,306,697 $ 33,093,738 $ 7,085,313 16,961,073 $ 24,046,386 $ 9,701,728 (654,376) $ 9,047,352 $ 81,400,430 4,795,932 $ 11,105,003 $ 97,301,365 $ 78,250,833 3,742,529 $ 11,692,671 $ 93,686,033 $ 3,149,597 1,053,403 $ (587,668) $ 3,615,332 iii OCONEE COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2012 Table 2 shows categorical Changes in Net Assets for the current fiscal year and for prior year fiscal year 2011. Table 2 Change in Net Assets Governmental Activities Revenues Program Revenues: Charges for Services and Sales Operating Grants and Contributions Capital Grants and Contributions Total Program Revenues General Revenues: Property Taxes for Maintenance and Operations Debt Service Sales Taxes Special Purpose Local Option For Debt Service FY 2012 FY 2011 $ 1,724,024 29,362,159 547,454 $ 31,633,637 $ 1,755,648 31,255,390 228,876 $ 33,239,914 $ 23,987,072 1,492,261 0 0 5,464,240 $ 24,651,480 1,535,531 0 0 5,181,911 Intangible Recording & Real Estate Transfer 554,426 390,402 Investment Earnings Miscellaneous Special Item: Gain on sale of assets 75,502 1,435,646 0 82,244 1,323,090 11,767 Total General Revenues and Special Item $ 33,009,147 $ 33,176,425 Total Revenues $ 64,642,784 $ 66,416,339 Program Expenses Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Operations of Non-Instructional Services Enterprise Operations Food Services Interest on Short-Term/Long-Term Debt Total Expenses $ 39,707,224 0 1,611,171 1,065,242 1,026,166 1,280,171 5,058,782 333,179 4,150,173 2,954,036 136,994 305,037 0 532,826 2,240,482 625,969 $ 61,027,452 $ 39,290,831 0 1,576,579 1,067,828 978,732 1,116,230 5,026,829 345,619 4,180,965 2,918,842 165,092 298,175 0 602,372 2,218,709 735,551 $ 60,522,354 Increase in Net Assets $ 3,615,332 $ 5,893,985 iv OCONEE COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2012 Governmental Activities The Statement of Activities shows the cost of program services and the charges for services and grants offsetting these services. Table 3 shows, for governmental activities, the total cost of services and the net cost of services. Data are presented for the current fiscal year and for prior fiscal year fiscal year 2011. Net cost of services can be defined as the total cost less fees generated by the activities and intergovernmental revenue provided for specific programs. The net costs reflect the financial burden on the School District's taxpayers by each activity. Table 3 Governmental Activities Total Cost of Services FY 2012 Total Cost of Services FY 2011 Net Cost of Services FY 2012 Net Cost of Services FY 2011 Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Operations of Non-Instructional Services Enterprise Operations Food Services Interest on Short-term & Long-term Debt Total Expenses $39,707,224 0 1,611,171 1,065,242 1,026,166 1,280,171 5,058,782 333,179 4,150,173 2,954,036 136,994 305,037 0 532,826 2,240,482 625,969 $61,027,452 $39,290,831 0 1,576,579 1,067,828 978,732 1,116,230 5,026,829 345,619 4,180,965 2,918,842 165,092 298,175 0 602,372 2,218,709 735,551 $60,522,354 $ 18,379,151 0 1,305,048 592,166 181,089 74,119 3,015,318 302,149 1,992,789 1,985,430 124,424 238,677 0 532,826 44,660 625,969 $29,393,815 $ 17,136,470 0 1,191,339 542,904 107,206 (198,308) 2,762,680 320,513 1,838,066 1,854,230 148,440 210,937 0 602,372 30,061 735,530 $27,282,440 FINANCIAL ANALYSIS OF THE SCHOOL DISTRICT'S FUNDS The School District's governmental funds are accounted for using the modified accrual basis of accounting. The governmental funds had total revenues of $64.53 million and total expenditures of $70.51 million. Included in the expenditures of $70.51 million were capital project expenditures of $4.70 million which do not constitute recurring expenditures and $7.78 million in debt service payments. General Fund Budget 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 2012, the School District amended its general fund budget as needed. The School District uses site-based budgeting as a part of the budget process. The budgeting systems are designed to control total site budgets but provide flexibility for site management. v OCONEE COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2012 For the General Fund, the final actual revenues of $57.52 million were more than the final budgeted amounts of $55.18 million, a difference of $2.34 million. This major portion of the difference demonstrates that the District underestimated its final revenues which are primarily the result of mid-year state and Federal budget additions and greater than projected tax collections. The final actual expenditures of $58.02 million are less than the final budgeted amount of $58.50 million by $480 thousand. This difference (final actual vs. final budget) was due to a combination of expenditure controls and revenue conservation efforts. CAPITAL ASSETS AND DEBT ADMINISTRATION Capital Assets At June 30, 2012, the School District had $97.30 million invested in capital assets, including land, buildings and furniture and equipment for its governmental activities. Table 4 reflects a summary of these balances net of accumulated depreciation for the current year and for the prior year of fiscal year 2011. Oconee County School District began a capital project building campaign that includes an all-sports field house addition at one high school, and the renovations of one elementary and one high school. Table 4 Capital Assets at June 30 (Net of Depreciation) Governmental Activities FY 2012 Governmental Activities FY 2011 Land $ 4,753,482 $ 4,753,482 Construction in Progress 3,742,934 0 Land Improvements 4,725,290 4,806,645 Buildings 81,021,093 82,434,876 Equipment 3,057,400 3,216,903 Total $ 97,300,199 $ 95,211,906 Additional information on the District's Capital Assets can be found in the Notes to the Financial Statements. Debt At June 30, 2012, the School District had $23.88 million in debt outstanding. This debt is the result of General Obligation Bonds (repaid through a property tax levy) originally sold by the District in 1993 and 1995 (refinanced in 2004 and 2005) for the purpose of the acquisition, construction, equipping, renovating, and repairing of school facilities. In the fall of 2006, the School District sold $24 million in Revenue Bonds (repaid through local option sales tax) for the purpose of the acquisition of land for future schools, construction of new classrooms, renovations of current facilities, a new elementary school ,and other facilities as approved by the board of Education. In February of 2012, the district sold $13.5 million in new Revenue Bonds (to be repaid by the extension of the special purpose local option sales tax) for the purpose of additions, modifications and renovations to school facilities and for system-wide technology. Oconee County School District's most recent rating (January 2012) by Moody's Investors Service, Inc. and Standard and Poor's Ratings Services have assigned underlying bond ratings to the District of "Aa2" and "AA+", respectively. Part of the basis for the ratings is the inclusion of the bond indebtedness in the State Aid Intercept Program. Table 5 summarizes the School District's debt. vi OCONEE COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2012 Table 5 Debt at June 30 Governmental Governmental Activities Activities FY 2012 FY 2011 Installment Sales Agreement General Obligation Bonds Bond Premium Total Debt Outstanding $ 200,283 22,990,000 698,007 $ 23,888,290 $ 220,852 16,575,000 165,221 $ 16,961,073 Installment Sales Agreement General Obligation Bonds Due within One Year 21,593 7,560,000 $ 7,581,593 0 7,085,000 $ 7,085,000 Additional Information can be found on the District's Debt obligations in the Notes to the Financial Statements. FACTORS BEARING ON THE SCHOOL DISTRICT'S FUTURE Currently known facts, decisions or conditions that are expected to have a significant effect on financial positions or results of operations in future years are as follows: Local Revenue Oconee County School Districts' priority on academic instruction continues to attract new residents and businesses into the county because of the public school system's focus on quality instructional programs. The District consistently ranks within the top five (5) achieving school systems in Georgia. In February 2012, Caterpillar, Inc. announced that it would begin immediately to build a $200 million manufacturing plant on land shared by Oconee and Clarke counties. The plant has the potential to bring over 2,000 jobs to the area. In addition, the county continues to experience local commercial development centered around U.S. Highway 316, Oconee Connector and the U.S. 10 Loop. Oconee County generally collects above 98% of the assessed taxes. This consistent collection of property taxes has assisted the local school district to meet financial obligations. Current economic conditions, a local digest that has decreased by over 6%, and recent state legislation has adversely affected the district's ability to maintain the fiscal year 2012 millage levy of 16.5 mills for M&O and 1 mill for debt service. The district actually raised the M&O rate to 17.5 mills for fiscal year 2013 and will need to consider reducing permanent expenses in order to maintain quality instructional services for fiscal year 2014. Less than 18% of the local property digest consists of commercial, utility and retail properties. Education-Special-Purpose-Local-Option-Sales-Tax (ELOST) receipts may be used to pay for specified capital improvements. Receipts continue to be dependent on the local businesses and the citizens' ability to spend. There has been, and continues to be, increased commercial development. The current ELOST was extended by the voters in November 2012 and therefore will continue to collect the extra one-cent on most retail goods sold in the county through December 2018. The District sold $13.5 million in bonds in January 2012. Bond proceeds will be used to fund the renovation of two current facilities, the completion of an All-Sports athletic facility and to fund system-wide technology improvements. Capital Improvements The School District continues to implement the capital improvement plan approved by the Board in 2006. District enrollment is expected to remain relatively consistent and therefore no new permanent classroom space is considered necessary at this time. vii OCONEE COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2012 State Revenue Legislation over the past years has reduced revenue sources available for education, and when coupled with poor economic conditions, the state has had to drastically reduce funding available to public schools and other state services. State funds are providing no more than 50% of the local budget where a number of years ago the state funded closer to 60%. The upcoming General Assembly (January 2013) must carefully examine the impact, on both the citizens and the quality of services, of not adequately funding education and other state services that support education (health care, social and judicial services). Additionally, the General Assembly must follow through on analyzing the impact of tax exemptions and credits on the state's revenue streams in order to fund services and then be bold enough to take action based on the analysis in order to preserve and protect the economic stability of the State of Georgia. Despite these challenges, the Oconee County Board of Education is strong financially and we remain optimistic about the ability of the School District to maximize all of the financial resources to provide an exceptional educational experience for our students. However, the District may find it challenging to maintain services for school year fiscal year 2014 (2013/14) if state funding for K-12 education are not restored. The challenge will be to balance revenue streams (the state not fully funding education, the expiration of federal stimulus funds, and a decline in the local tax digest) with occurring increases in expenses (personnel, employer paid benefits, and operational costs). The long-term solution can only be found when the state implements consist funding for public education. The School District continues to maintain a very active process of monitoring departments and programs for efficiency and to evaluate areas to sustain services without additional personnel or operational costs. CONTACTING THE SCHOOL DISTRICT'S FINANCIAL MANAGEMENT This financial report is designed to provide our citizens, taxpayers, investors and creditors with a general overview of the School District's finances and to show the School District's accountability for the money it receives. If you have questions about this report or need additional financial information contact Mr. Randy Morrison, Assistant Superintendent for Financial Operations, Oconee County Board of Education, Post Office Box 146, 34-B School Street, Watkinsville, Georgia 30677. You may also email your questions to Mr. Morrison at rmorrison@oconeeschools.org. viii OCONEE COUNTY BOARD OF EDUCATION OCONEE COUNTY BOARD OF EDUCATION STATEMENT OF NET ASSETS JUNE 30, 2012 ASSETS Cash and cash equivalents Investments Receivables: Taxes Intergovernmental: State Federal Inventory Deferred charges Capital assets (nondepreciable) Capital assets (net of accumulated depreciation) Total assets LIABILITIES Accounts payable Salaries and benefits payable Contracts payable Accrued interest payable Retainage payable Bonds payable due within one year Bonds payable due in more than one year Installment sales agreement due within one year Installment sales agreement due in more than one year Total liabilities NET ASSETS Invested in capital assets, net of related debt Restricted for: Continuation of federal programs Capital projects Debt service Unrestricted Total net assets Governmental Activities $ 22,015,855 5,042,255 1,409,342 4,093,704 166,233 79,147 288,368 8,496,416 88,803,783 130,395,103 500 6,951,565 1,636,280 254,182 362,921 7,560,000 16,128,007 21,593 178,690 33,093,738 81,400,430 211,638 289,492 4,294,802 11,105,003 $ 97,301,365 The accompanying notes are an integral part of these financial statements. 1 OCONEE COUNTY BOARD OF EDUCATION STATEMENT OF ACTIVITIES FOR THE FISCAL YEAR ENDED JUNE 30, 2012 Functions/Programs Governmental activities: Instruction Support services: Pupil services Improvement of instructional services Educational media services General administration School administration Business administration Maintenance and operation of facilities Student transportation services Central support services Other support services Enterprise operation Food services operation Interest on long-term debt Total governmental activities Expenses Charges for Services Program Revenues Operating Grants and Contributions Capital Grants and Contributions Net (Expense) Revenue and Changes in Net Assets Governmental Activities $ 39,707,224 $ 553,203 $ 20,256,909 $ 517,961 $ (18,379,151) 1,611,171 - 306,123 - (1,305,048) 1,065,242 - 472,661 1,026,166 - 843,258 1,280,171 - 1,205,637 5,058,782 - 2,040,775 333,179 - 24,139 4,150,173 3,410 2,144,863 2,954,036 - 968,606 136,994 - 11,176 305,037 - 66,360 532,826 - - 2,240,482 1,167,411 1,021,652 625,969 - - $ 61,027,452 $ 1,724,024 $ 29,362,159 $ 415 1,819 415 2,689 6,891 9,111 1,394 6,759 547,454 (592,166) (181,089) (74,119) (3,015,318) (302,149) (1,992,789) (1,985,430) (124,424) (238,677) (532,826) (44,660) (625,969) (29,393,815) General revenues: Taxes: Property taxes, levied for general purposes Property taxes, levied for debt service Sales taxes: For debt service Other taxes Miscellaneous revenues Unrestricted investment earnings Total general revenues Change in net assets Net assets, beginning of year Net assets, end of year 23,987,072 1,492,261 5,464,240 554,426 1,435,646 75,502 33,009,147 3,615,332 93,686,033 $ 97,301,365 The accompanying notes are an integral part of these financial statements. 2 OCONEE COUNTY BOARD OF EDUCATION BALANCE SHEET GOVERNMENTAL FUNDS JUNE 30, 2012 ASSETS General Cash and cash equivalents Investments Receivables: Taxes Intergovernmental: State Federal Inventory $ 13,026,389 $ 885,465 3,698,690 166,233 79,147 Total assets $ 17,855,924 $ LIABILITIES AND FUND BALANCES LIABILITIES Accounts payable Salaries and benefits payable Retainage payable Contracts payable Deferred revenue $ 500 $ 6,951,565 286,892 Total liabilities 7,238,957 FUND BALANCES Nonspendable for inventory 79,147 Restricted for capital projects Restricted for debt service Restricted for continuance of federal programs 166,233 Assigned for future debt service 1,500,000 Assigned for appropriation of fund balance for next year's budget 1,000,000 Assigned for principal discretionary funds 699,921 Unassigned 7,171,666 Total fund balances 10,616,967 Total liabilities and fund balances $ 17,855,924 $ DistrictWide Capital Projects 4,946,591 $ 5,042,255 395,014 10,383,860 $ $ 362,921 1,636,280 395,014 2,394,215 7,989,645 7,989,645 10,383,860 $ Debt Service 4,042,875 523,877 4,566,752 17,768 17,768 4,548,984 4,548,984 4,566,752 Total Governmental Funds $ 22,015,855 5,042,255 1,409,342 4,093,704 166,233 79,147 $ 32,806,536 $ 500 6,951,565 362,921 1,636,280 699,674 9,650,940 79,147 7,989,645 4,548,984 166,233 1,500,000 1,000,000 699,921 7,171,666 23,155,596 Amounts reported for governmental activities in the statement of net assets are different because: Capital assets used in governmental activities are not financial resources and, therefore, are not reported in the funds. Cost 118,591,617 Less accumulated depreciation (21,291,418) Other long-term assets are not available to pay for current-period expenditures and, therefore, are deferred in the funds. Property taxes 304,660 GSFIC Funding 395,014 Long-term liabilities are not due and payable in the current period and, therefore, are not reported in the funds. Bonds Bond premium, net of amortization Bond issuance costs, net of amortization Accrued interest Installment sales agreement (22,990,000) (698,007) 288,368 (254,182) (200,283) 97,300,199 699,674 (23,854,104) Net assets of governmental activities $ 97,301,365 The accompanying notes are an integral part of these financial statements. 3 OCONEE COUNTY BOARD OF EDUCATION STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS FOR THE FISCAL YEAR ENDED JUNE 30, 2012 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 facilities Student transportation services Central support services Other support services Enterprise operations Food services operation Capital outlay Debt service: Principal retirement Interest and fees Bond issuance cost Total expenditures Excess (deficiency) of revenues over (under) expenditures OTHER FINANCING SOURCES (USES) Transfers in Transfers out Bonds issued Premium on bonds sold Total other financing sources (uses) Net changes in fund balance FUND BALANCE, beginning of year FUND BALANCE, end of year General District Wide Capital Projects $ 24,256,968 $ $ 522,744 26,289,591 3,225,008 1,724,024 71,941 1,435,646 57,525,922 1,124 1,124 37,842,783 1,611,171 1,063,172 1,017,085 1,247,295 5,045,360 248,604 4,048,132 2,696,937 130,040 271,295 532,826 2,240,482 20,569 9,609 58,025,360 (499,438) 30,803 56,554 4,357,062 262,381 4,706,800 (4,705,676) (748,405) (748,405) (2,067,017) 13,500,000 641,635 12,074,618 (1,247,843) 7,368,942 11,864,810 620,703 $ 10,616,967 $ 7,989,645 $ Debt Service Total Governmental Funds 1,509,554 $ 5,464,240 31,682 2,437 7,007,913 25,766,522 5,464,240 554,426 26,289,591 3,225,008 1,724,024 75,502 1,435,646 64,534,959 7,085,000 696,563 7,781,563 (773,650) 2,815,422 2,815,422 2,041,772 2,507,212 4,548,984 $ 37,842,783 1,611,171 1,063,172 1,017,085 1,278,098 5,045,360 248,604 4,104,686 2,696,937 130,040 271,295 532,826 2,240,482 4,357,062 7,105,569 706,172 262,381 70,513,723 (5,978,764) 2,815,422 (2,815,422) 13,500,000 641,635 14,141,635 8,162,871 14,992,725 23,155,596 The accompanying notes are an integral part of these financial statements. 4 OCONEE COUNTY BOARD OF EDUCATION 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, 2012 Amounts reported for governmental activities in the statement of activities are different because Net change in fund balances - total governmental funds $ Governmental funds report capital outlays as expenditures. However, in the statement of activities the cost of Capital outlay Depreciation expense $ 4,060,330 (1,972,037) Revenues in the statement of activities that do not provide current financial resources are not reported as revenues in the funds. Property taxes GSFIC Funding (287,189) 395,014 The issuance of long-term debt provides current financial resources to governmental funds, while the repayment of the principal of long-term debt consumes the current financial resources of governmental funds. Neither transaction, however, has any effect on net assets. This amount is the net effect of these differences in the treatment of long-term debt and related items. 8,162,871 2,088,293 107,825 Principal payments - bonds Principal payments - installment sales agreement Issuance of general obligation debt Bond premium Bond premium amortization expense Bond issuance costs Bond issuance costs amortization expense $ 7,085,000 20,569 (13,500,000) (641,635) 108,849 262,381 (50,175) (6,715,011) Some expenses reported in the statement of activities do not require the use of current financial resources and, therefore, are not reported as expenditures in governmental funds Change in accrued interest (28,646) Change in net assets - governmental activities $ 3,615,332 The accompanying notes are an integral part of these financial statements 5 (This page left intentionally blank) OCONEE COUNTY BOARD OF EDUCATION STATEMENT OF FIDUCIARY ASSETS AND LIABILITIES FIDUCIARY FUND JUNE 30, 2012 Cash Funds held for others ASSETS LIABILITIES Agency Fund $ 145,876 $ 145,876 The accompanying notes are an integral part of these financial statements. 7 OCONEE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2012 Note 1: DESCRIPTION OF SCHOOL DISTRICT AND REPORTING ENTITY Reporting Entity The Oconee County Board of Education (the "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 Oconee County Board of Education. District-wide Statements: The Statement of Net Assets and the Statement of Activities display information about the financial activities of the overall School District, except for fiduciary activities. Eliminations have been made to minimize the double counting of internal activities. Governmental activities generally are financed through taxes, intergovernmental revenues, and other nonexchange transactions. The Statement of Activities presents a comparison between direct expenses and program revenues for each function of the School District's governmental activities. Direct expenses are those that are specifically associated with a program or function and, therefore, are clearly identifiable to a particular function. Indirect expenses (expenses of the School District related to the administration and support of the School District's programs, such as office and maintenance personnel and accounting) are not allocated to programs. Program revenues include (a) charges paid by the recipients of goods or services offered by the programs and (b) grants and contributions that are restricted to meeting the operational or capital requirements of a particular program. Revenues that are not classified as program revenues, including all taxes, are presented as general revenues. Fund Financial Statements: The fund financial statements provide information about the School District's funds, including fiduciary funds. Eliminations have been made to minimize the double counting of internal activities. Separate statements for each category (governmental and fiduciary) are presented. The emphasis of fund financial statements is on major governmental funds, each displayed in a separate column. 8 OCONEE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2012 Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) The School District reports the following major governmental funds: General Fund is the School District's primary operating fund. It accounts for all financial resources of the School District, except those resources required to be accounted for in another fund. District-Wide Capital Projects Fund accounts for financial resources including Special Purpose Local Option Sales Tax (SPLOST), Bond Proceeds and grants from Georgia State Financing and Investment Commission to be used for the acquisition, construction or renovation of major capital facilities. Debt Service Fund accounts for 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 Fund accounts for assets held by the School District as an agent for various governments or individuals. Basis of Accounting The basis of accounting determines when transactions are reported on the financial statements. The District-wide governmental and fiduciary fund financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded at the time liabilities are incurred, regardless of when the related cash flows take place. Nonexchange transactions, in which the School District gives (or receives) value without directly receiving (or giving) equal value in exchange, include property taxes, sales taxes, grants and donations. On an accrual basis, revenue from property taxes is recognized in the fiscal year for which the taxes are levied. Revenue from sales taxes is recognized in the fiscal year in which the underlying transaction (sale) takes place. Revenue from grants and donations is recognized in the fiscal year in which all eligibility requirements have been satisfied. The School District uses funds to report on its financial position and the results of its operations. Fund accounting is designed to demonstrate legal compliance and to aid financial management by segregating transactions related to certain governmental functions or activities. A fund is a separate accounting entity with a self-balancing set of accounts. Governmental funds are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Under this method, revenues are recognized when measurable and available. The School District considers all revenues reported in the governmental funds to be available if they are collected within sixty days after year-end, except for reimbursement grants. Reimbursement grants are considered to be available if they are collected within 120 says after year-end. Property taxes, sales taxes and interest are considered 9 OCONEE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2012 Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) to be susceptible to accrual. Expenditures are recorded when the related fund liability is incurred, except for principal and interest on general long-term debt, which are recognized as expenditures to the extent they have matured. Capital asset acquisitions are reported as expenditures in governmental funds. Proceeds of general long-term liabilities and acquisitions under capital leases are reported as other financing sources. The School District funds certain programs by a combination of specific cost-reimbursement grants, categorical grants, and general revenues. Thus, when program costs are incurred, there are both restricted and unrestricted net assets available to finance the program. It is the School District's policy to first apply grant resources to such programs, followed by cost-reimbursement grants, then general revenues. 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. Georgia Laws OCGA 45-8-14 authorize the School District to deposit its funds in one or more solvent banks or insured Federal savings and loan associations. Investments COMPOSITION OF INVESTMENTS Investments made by the School District in nonparticipating interest-earning contracts (such as certificates of deposit) and repurchase agreements are reported at cost. Participating interestearning contracts and money market investments with a maturity at purchase of one year or less are reported at amortized cost. Both participating interest-earning contracts and money market investments with a maturity at purchase greater than one year are reported at fair value. The Official Code of Georgia Annotated Section 36-83-4 authorizes the School District to invest its funds. In selecting among options for investment or among institutional bids for deposits, the highest rate of return shall be the objective, given equivalent conditions of safety and liquidity. Funds may be invested in the following: (1) Obligations issued by the State of Georgia or by other states, (2) Obligations issued by the United States government, (3) Obligations fully insured or guaranteed by the United States government or a United States government agency, (4) Obligations of any corporation of the United States government, (5) Prime banker's acceptances, 10 OCONEE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2012 Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) (6) The Local Government Investment Pool administered by the State of Georgia, Office of Treasury and Fiscal Services, (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. Receivables recorded on the basic financial statements do not include any amounts which would necessitate the need for an allowance for uncollectible receivables. Property Taxes The Oconee County Board of Commissioners fixed the property tax levy for the 2011 tax digest year (calendar year) on August 2, 2011 (levy date). Taxes were due on November 15, 2011 (lien date). Taxes collected within the current fiscal year or within 60 days after year-end on the 2011 tax digest are reported as revenue in the governmental funds for fiscal year 2012. The Oconee 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, 2012, for maintenance and operations amounted to $24,256,968 and for school bonds amounted to $1,509,554. The Georgia Constitution, Article VIII, Section VI, Paragraph I requires the board of education of each school system to annually certify to its fiscal authority or authorities a school tax not greater than 20 mills per dollar for the support and maintenance of education. The Oconee County Board of Education is in compliance with this law. Tax millage rates levied for the 2011 tax year (calendar year) for the Oconee County Board of Education were as follows (a mill equals $1 per thousand dollars of assessed value): School Operations School Bonds 16.50 mills 1.00 mills Total 17.50 mills 11 OCONEE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2012 Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Sales Taxes Special Purpose Local Option Sales Tax, at the fund reporting level, during the year amounted to $5,464,240 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 circumstances affecting a capital asset that may indicate impairment were known to the School District. Capitalization thresholds and estimated useful lives of capital assets reported in the District-wide statements are as follows: Capitalization Estimated Policy Useful Life Land Land Improvements Buildings and Improvements All Equipment Intangible Assets All $25,000 $25,000 $5,000 $25,000 N/A 70 years 15 to 70 years 5 to 25 years 15 to 20 years Depreciation is used to allocate the actual or estimated historical cost of all capital assets over estimated useful lives. 12 OCONEE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2012 Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) General Obligation Bonds The School District issues general obligation bonds to provide funds for the acquisition and construction of major capital facilities. In the District-wide financial statements, bond premiums and discounts, as well as issuance costs, are deferred and amortized over the life of the bonds using the effective interest method. Bond issuance costs are reported as deferred charges and amortized over the term of the debt. In the fund financial statements, the School district recognizes bond premiums and discounts, as well as bond issuance costs during the fiscal year bonds are issued. Premiums received on debt issuances are reported as other financing sources while discounts on debt issuances are reported as other financing uses. Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as debt service expenditures. General obligation bonds are direct obligations and pledge the full faith and credit of the government. The outstanding amount of these bonds is recorded in the Statement of Net Assets. 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. 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, function and object. The legal level of budgetary control was established by the Board at the aggregate function level. The budget for the General Fund was prepared in accordance with accounting principles generally accepted in the United States of America. 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. Fund Balance Generally, the fund balance represents the difference between assets and liabilities under the current financial resources measurement focus of accounting. In the fund financial statements, governmental funds report fund balance classifications that comprise a hierarchy based primarily on extent to which the School Board is bound to honor constraints on the specific purposes for which amounts in those funds can be spent. Fund balances are classified as follows: 13 OCONEE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2012 Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Fund Balance (Continued) (1) Nonspendable - Fund balances are reported as nonspendable when amounts cannot be spent because they are either (a) not in spendable form (i.e., items that are not expected to be converted to cash) or (b) legally or contractually required to be maintained intact. (2) Restricted - Fund balances are reported as restricted when there are limitations imposed on their use either through enabling legislation adopted by the School District or through external restrictions imposed by creditors, grantors or laws or regulations of other governments. (3) Committed - Fund balances are reported as committed when they can be used only for specific purposes pursuant to constraints imposed by formal action of the School District Board through the adoption of a resolution. Only the School District Board may modify or rescind the commitment. (4) Assigned - Fund balances are reported as assigned when amounts are constrained by the School District's intent to be used for specific purposes, but are neither restricted nor committed. Through resolution, the School District Board has authorized the School District's finance committee or the School District's finance director to assign funds. (5) Unassigned - Fund balances are reported as unassigned as the residual amount when the balances do not meet any of the above criterion. The School District reports positive unassigned fund balance only in the general fund. Negative fund balances may be reported in all funds. Flow Assumptions - When both restricted and unrestricted amounts of fund balance are available for use for expenditures incurred, it is the School District's policy to use restricted amounts first and then unrestricted amounts as they are needed. For unrestricted amounts of fund balance, it is the School District's policy to use fund balance in the following order: Committed Assigned Unassigned Net Assets The School District's net assets in the District-wide Statements are classified as follows: Invested in capital assets, net of related debt - This represents the School District's total investment in capital assets, net of outstanding debt obligations related to those capital assets. To the extent debt has been incurred but not yet expended for capital assets, such amounts are not included as a component of invested in capital assets, net of related debt. Restricted net assets - These represent resources for which the School District is legally or contractually obligated to spend resources for continuation of Federal programs and debt service and capital projects in accordance with restrictions imposed by external third parties. Unrestricted net assets - Unrestricted net assets represent resources derived from property taxes, sales taxes, 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. 14 OCONEE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2012 Note 3: DEPOSITS AND INVESTMENTS COLLATERALIZATION OF DEPOSITS Official Code of Georgia Annotated (OCGA) Section 45-8-12 provides that there shall not be on deposit at any time in any depository for a period longer than ten days a sum of money which has not been secured by surety bond, by guarantee of insurance, or by collateral. The aggregate of the face value of such surety bond and the market value of securities pledged shall be equal to not less than 110 percent of the public funds being secured after the deduction of the amount of deposit insurance. If a depository elects the pooled method (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. At June 30, 2012, all deposits were secured by surety bond, insurance or collateral as specified above. 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. 15 OCONEE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2012 Note 3: DEPOSITS AND INVESTMENTS (Continued) INVESTMENTS The School District's investments as of June 30, 2012, are presented below. Investment Type Maturities Rating* Fair Value Concentration U. S. Treasury Bill 1 year $ 1,399,938 33% Federal Home Loan MTG Corp Note 10 years AAA 522,055 12% Federal Home Loan MTG Corp Medium Term Note 3 years AAA 2,360,142 55% Total 4,282,135 100% Other Certificate of Deposits 760,120 Total Investments $ 5,042,255 Certificates of deposits noted above were considered in the collateralization of deposits disclosure. * Rating as per Moody's INTEREST RATE RISK Interest rate risk is the risk that changes in interest rates of debt investment 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. 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. 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 16 OCONEE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2012 Note 4: NON-MONETARY TRANSACTIONS The School District receives food commodities from the United States Department of Agriculture (USDA) for school breakfast and lunch programs. These commodities are recorded at their federally assigned value. See Note 2 - Inventories Note 5: CAPITAL ASSETS The following is a summary of changes in the capital assets during the fiscal year: Capital assets not being depreciated Land Construction in progress Total capital assets not being depreciated Capital assets being depreciated Buildings and improvements Equipment Land improvements Total capital assets being depreciated Less accumulated depreciation for Buildings and improvements Equipment Land improvements Total accumulated depreciation Total capital assets being depreciated, net Total governmental activities capital assets, net Balance July 1, 2011 Increases Decreases Balance June 30, 2012 $ 4,753,482 $ $ 3,742,934 4,753,482 3,742,934 $ 4,753,482 3,742,934 8,496,416 96,900,890 7,293,630 5,694,869 109,889,389 29,857 287,539 317,396 (98,984) (12,600) (111,584) 96,831,763 7,568,569 5,694,869 110,095,201 (14,466,014) (4,076,727) (888,224) (19,430,965) (1,443,640) (447,042) (81,355) (1,972,037) 98,984 12,600 111,584 (15,810,670) (4,511,169) (969,579) (21,291,418) 90,458,424 (1,654,641) $ 95,211,906 $ 2,088,293 $ 88,803,783 - $ 97,300,199 Current year depreciation expense by function is as follows. Instruction Support Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operations of Facilities Student Transportation Services Central Support Services Food Services Operation $ 1,567,709 2,070 9,081 2,073 13,422 34,400 45,487 257,099 6,954 33,742 $ 1,972,037 17 OCONEE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2012 Note 6: INTERFUND TRANSFERS Interfund transfers for the year ended June 30, 2012, consisted of the following: Transfers To Debt Service Fund Transfers From District-Wide Capital Projects General Fund Fund $ 2,067,017 $ 748,405 Total $ 2,815,422 Transfers are used to move funds from the General Fund and District-Wide Capital Projects Fund to the Debt Service Fund to pay debt service. Note 7: RISK MANAGEMENT The School District is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors or omissions; job related illness or injuries to employees; acts of God and unemployment compensation. The School District has obtained commercial insurance for risk of loss associated with torts, assets and errors or omissions. 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 obtained commercial insurance for all losses 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 is self-insured with regard to unemployment compensation claims. The School District accounts for claims within the General Fund with expense/expenditures and liability being reported when it is probable that a loss has occurred, and the amount of that loss can be reasonable estimated. Changes in the unemployment compensation claims liability during the last two fiscal years are as follows: Beginning of Year Liability Claims and Changes in Es timates Claims Paid End of Year Liability 2011 $ 1,650 $ 8,203 $ 9,853 $ - 2012 $ - $ 7,260 $ 7,260 $ - 18 OCONEE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2012 Note 7: RISK MANAGEMENT (Continued) The School District pays an annual premium to the Fund for its general insurance coverage. Additional insurance coverage is provided through an agreement by the Fund with the Safety National Casualty Corporation to provide coverage for potential losses sustained by the Fund in excess of $400,000 loss per occurrence, up to $1,000,000. The School District has purchased a surety bond to provide additional insurance coverage as follows: Position Covered Amount Superintendent $100,000 Note 8: LONG - TERM DEBT INSTALLMENT SALES AGREEMENT The Oconee County Board of Education entered into an agreement dated June 1, 2006, with the Northeast Georgia Regional Educational Service Agency for the construction and subsequent lease of the Rutland Center. Under the terms of the agreement, the School District will make annual payments through July 15, 2020. COMPENSATED ABSENCES Compensated absences represent obligations of the School District relating to employees' rights to receive compensation for future absences based upon service already rendered. This obligation relates only to vesting accumulating leave in which payment is probable and can be reasonably estimated. Typically, the General Fund is the fund used to liquidate this long-term debt. The School District uses the vesting method to compute compensated absences. This balance was immaterial to the financial statements for the current year. GENERAL OBLIGATION DEBT OUTSTANDING General Obligation Bonds currently outstanding are as follows: Purpose General Government - Refunding -Series 2004 General Government - Series 2006 Gereral Government - Series 2012 Interest Rates 3.16% 4.00% - 5.00% 1.50% - 4.00% Amounts $ 3,785,000 5,705,000 13,500,000 $ 22,990,000 In February 2012, the Oconee County School District issued $13,500,000 of General Obligation Bonds Series 2012. The 2012 bonds were issued to (i) finance certain capital outlay projects, (ii) pay all or a portion of the principal and interest on certain general obligation bonds maturing on April 1, 2012, (iii) pay capitalized interest, and (iv) pay expenses incident to the issuance of the Bonds. Interest on the Bonds is payable semiannually, on February 1 and August 1 of each year, commencing August 1, 2012. 19 OCONEE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2012 Note 8: LONG - TERM DEBT (Continued) The changes in Long-Term Debt during the fiscal year ended June 30, 2012, were as follows: Installment Sales Agreement Governmental Activities General Obligation Bond Bonds Premium Total Balance July 1, 2011 $ 220,852 Additions: G.O. Bonds - G.O. Bonds Premium - Deductions: Debt Retired Bond Premium Amortized 20,569 - $ 16,575,000 $ 165,221 $ 16,961,073 13,500,000 - 641,635 13,500,000 641,635 7,085,000 - 108,849 7,105,569 108,849 Balance June 30, 2012 $ 200,283 $ 22,990,000 $ 698,007 $ 23,888,290 Due within One Year $ 21,593 $ 7,560,000 $ - $ 7,581,593 Intentionally Left Blank 20 OCONEE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2012 Note 8: LONG - TERM DEBT (Continued) At June 30, 2012, payments due by fiscal year which includes principal and interest for these items are as follows: Fiscal Year Ended June 30: Installment Sales Agreement P rin cip al In t erest 2013 2014 2015 2016 2017 2018-2021 $ 21,593 $ 22,413 23,506 24,327 25,420 83,024 7,723 7,311 6,493 5,515 4,503 6,981 T otal Principal and Interest Fiscal Year Ended June 30: $ 200,283 $ 38,526 General Obligation Debt P rin cip al In t erest 2013 2014 2015 2016 2017 2018 $ 7,560,000 $ 4,930,000 2,500,000 2,575,000 2,650,000 2,775,000 700,216 356,348 233,360 183,360 111,360 48,125 T otal Principal and Interest $ 22,990,000 $ 1,632,769 21 OCONEE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2012 Note 9: ON-BEHALF PAYMENTS The School District has recognized revenues and costs in the amount of $4,544,362 for health insurance and retirement contributions paid on the School District's behalf by the following State Agencies. Georgia Department of Education Paid the Georgia Department of Community Health For Health Insurance of Non-Certified Personnel In the amount of $ 4,428,812 Georgia Department of Education Paid the Teachers Retirement System For Teachers Retirement (TRS) In the amount of $32,961 Office of State Treasurer Paid to the Public School Employees Retirement System For Public School Employees Retirement (PSERS) Employer's Cost In the amount of $82,589 Note 10: SIGNIFICANT CONTINGENT LIABILITIES Amounts received or receivable principally from the Federal government are subject to audit and review by grantor agencies. This could result in requests for reimbursement to the grantor agency for any costs which are disallowed under grant terms. The School District believes that such disallowances, if any, will be immaterial to its overall financial position. The School District is a defendant in various legal proceedings pertaining to matters incidental to the performance of routine School District operations. The ultimate disposition of these proceedings is not presently determinable, but is not believed to be material to the basic financial statements. Note 11: SIGNIFICANT COMMITMENTS The following is an analysis of significant outstanding construction or renovation contracts executed by the School District as of June 30, 2012, together with funding available: Project Colham Ferry Elementary School North Oconee High School Field House Technology Upgrades Contracts $ 1,544,218 1,004,874 379,252 $ 2,928,344 The amounts described in this note are not reflected in the basic financial statements. 22 OCONEE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2012 Note 12: RETIREMENT PLANS TEACHERS RETIREMENT SYSTEM OF GEORGIA (TRS) TRS PLAN DESCRIPTION Substantially all teachers, administrative and clerical personnel employed by local school systems are covered by the Teachers Retirement System of Georgia (TRS), which is a costsharing multiple employer defined benefit pension plan. TRS provides service retirement, disability retirement and survivors benefits for its members in accordance with State statute. 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 governmental excess benefit plan in accordance with Section 415 of the Internal Revenue Code (IRC) as a portion of TRS. The purpose of SRBP-TRS is to provide retirement benefits to employees covered by TRS whose benefits are otherwise limited by IRC Section 415. Beginning July 1, 1997, all members and retired former members in TRS are eligible to participate in the SRBP-TRS whenever their benefits under TRS exceed the IRC Section 415 imposed limitation on benefits. TRS provides service retirement, disability retirement, and survivor's benefits. The benefit structure of TRS is defined and may be amended by State statute. A member is eligible for normal service retirement after 30 years of creditable service, regardless of age, or after 10 years of service and attainment of age 60. A member is eligible for early retirement after 25 years of creditable service. Normal retirement (pension) benefits paid to members are equal to 2% of the average of the member's two highest paid consecutive years of service, multiplied by the number of years of creditable service up to 40 years. Early retirement benefits are reduced by the lesser of onetwelfth of 7% for each month the member is below age 60 or by 7% for each year or fraction thereof by which the member has less than 30 years of service. It is also assumed that certain cost-of-living adjustments, based on the Consumer Price Index, may be made in future years. Retirement benefits are payable monthly for life. A member may elect to receive a partial lumpsum distribution in addition to a reduced monthly retirement benefit. Options are available for distribution of the members monthly pension, at a reduced rate, to a designated beneficiary on the member's death. 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, 2012, were 5.53% of annual salary. The member contribution rate will increase to 6.00% effective July 1, 2012. Employer contributions required for fiscal year 2012 were 10.28% of annual salary as required by the June 30, 2009, actuarial valuation. The employer contribution rate will increase to 11.41% effective July 1, 2012. 23 OCONEE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2012 Note 12: RETIREMENT PLANS (Continued) Fiscal Year Percentage Contributed Required Contribution 2012 100% $ 3,772,203 2011 100% $ 3,656,160 2010 100% $ 3,555,074 DEFINED CONTRIBUTION PLAN In 1993, Oconee County Board of Education began an employer paid 403(b) annuity plan for all employees. The plan includes the group of employees covered under the Public School Employees' Retirement System (PSERS) and for other employees who are covered under Georgia Teacher Retirement System whose 403(b) contributions are in lieu of Social Security. Recognizing that PSERS was a limited defined contribution and defined benefit plan which did not provide for an adequate retirement for this group of employees, it was the Board's desire to supplement the retirement of this group. The Board selected Cannon Financial Strategist/Lincoln National Life Insurance (Lincoln Alliance) as the provider of this plan. For each employee, the Board contributes to the plan an amount equal to 4.5 percent of the employee's pay. The employee becomes vested in the plan at inception. Employees hired at the time the plan was implemented are vested upon enrollment. Funds accumulated in the employer paid accounts are only available to the employee upon severance from employment with Oconee County Board of Education. Employer contributions for the current fiscal year and the preceding two fiscal years are as follows: Amount Fiscal Year Contributed 2012 $ 1,666,794 2011 $ 1,637,152 2010 $ 1,700,968 Note 13: POST-EMPLOYMENT BENEFITS Georgia Retiree Health Benefit Fund Plan Description. The Georgia School Personnel Post-employment Health Benefit Fund (School OPEB Fund) is a cost-sharing multiple-employer defined benefit post-employment healthcare plan that covers eligible former employees of public school systems, libraries and regional educational service agencies. The School OPEB Fund provides health insurance benefits to eligible former employees and their qualified beneficiaries through the State Employees Health 24 OCONEE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2012 Note 13: POST-EMPLOYMENT BENEFITS (Continued) Benefit Plan administered by the Department of Community Health. The Official Code of Georgia Annotated (O.C.G.A.) assigns the authority to establish and amend the benefit provisions of the group health plans, including benefits for retirees, to the Board of Community Health (Board). The Department of Community Health, which includes the School OPEB Fund, issues a separate stand alone financial audit report and a copy can be obtained from the Georgia Department of Audits and Accounts. Funding Policy. The contribution requirements of plan members and participating employers are established by the Board in accordance with the current Appropriations Act and may be amended by the Board. Contributions of plan members or beneficiaries receiving benefits vary based on plan election, dependent coverage, and Medicare eligibility and election. 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. 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. Certified Employees Period June 2011 July 2011 August 2011 - March 2012 April 2012 - June 2012 Percentage of Covered Payroll 1.429% of covered payroll for July coverage 18.534% of covered payroll for August coverage 24.000% of covered payroll for September - April coverage 3.958% of covered payroll for May - July coverage Non-certified employees July 2011 - August 2011 September 2011 - June 2012 $246.20 per member per month $296.20 per member per month No additional contribution was required by the Board of Community Health for fiscal year 2012 nor contributed to GRHBF to prefund retire benefits. Such additional contribution amounts are determined annually by the Board of Community Health in accordance with the State plan for other post-employment benefits and are subject to appropriation. The School District's contribution to the health insurance plans for the fiscal year ended June 30, 2012, was $5,816,448, which equaled the required contribution. The School District's contribution to the health insurance plans, which equaled the required contribution, for the fiscal year ended June 30, 2012, 2011, and 2010 were $5,816,448, $5,629,317, and $5,389,118, respectively. 25 OCONEE 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, 2012 REVENUES Taxes State funds Federal funds Charges for services Investment earnings Miscellaneous Total revenues Nonappropriated Budget Original Final $ 23,525,212 $ 23,525,212 $ 25,596,316 25,595,081 2,673,511 2,898,683 1,820,173 1,820,173 23,942 23,942 1,321,588 1,321,588 54,960,742 55,184,679 Actual Variance With Final Budget 24,779,712 $ 26,289,591 3,225,008 1,724,024 71,941 1,435,646 57,525,922 1,254,500 694,510 326,325 (96,149) 47,999 114,058 2,341,243 EXPENDITURES Current: Instruction Support services: Pupil services Improvement of instructional services Educational media services General administration School administration Business administration Maintenance and operation of facilities Student transportation services Central support services Other support services Enterprise operations Food services operation Debt service: Principal retirement Interest and fiscal charges Total expenditures 37,936,305 1,597,678 958,120 997,380 1,200,734 5,267,464 300,990 4,287,163 2,497,118 122,985 204,617 601,282 2,379,761 22,380 57,038 58,431,015 37,851,246 1,577,089 1,047,536 997,380 1,284,721 5,267,464 300,990 4,287,163 2,497,118 122,985 211,717 601,282 2,379,761 22,380 57,038 58,505,870 37,842,783 1,611,171 1,063,172 1,017,085 1,247,295 5,045,360 248,604 4,048,132 2,696,937 130,040 271,295 532,826 2,240,482 20,569 9,609 58,025,360 8,463 (34,082) (15,636) (19,705) 37,426 222,104 52,386 239,031 (199,819) (7,055) (59,578) 68,456 139,279 1,811 47,429 480,510 Excess (deficiency) of revenues over (under) expenditures (3,470,273) (3,321,191) (499,438) 2,821,753 OTHER FINANCING SOURCES (USES) Proceeds from sale of capital assets Transfers out Total other financing uses 19,147 19,147 19,147 19,147 (748,405) (748,405) (19,147) (748,405) (767,552) Net change in fund balances (3,451,126) (3,302,044) (1,247,843) 2,054,201 FUND BALANCE, beginning of year FUND BALANCE, end of year 11,864,810 11,864,810 11,864,810 $ 8,413,684 $ 8,562,766 $ 10,616,967 $ 2,054,201 Notes to the Schedule of Revenues, Expenditures and Changes in Fund Balances Budget and Actual 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. 26 OCONEE COUNTY BOARD OF EDUCATION SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS FOR THE FISCAL YEAR ENDED JUNE 30, 2012 Funding Agency Program/Grant Agriculture, U. S. Department of Child Nutrition Cluster Pass-Through From Georgia Department of Education Food Services School Breakfast Program National School Lunch Program - Cash National School Lunch Program - Commodities (1) Total U. S. Department of Agriculture Education, U. S. Department of Special Education Cluster Pass-Through From Georgia Department of Education Special Education Grants to States Preschool Grants Preschool Grants - American Recovery and Reinvestment Act Total Special Education Cluster Title I, Part A Cluster Pass-Through From Georgia Department of Education Title I, Part A Title I Grants to Local Education Agencies ARRA - Title I Grants to Local Education Agencies Total Title I, Part A Cluster Other Programs Pass-Through From Georgia Department of Education Title II Improving Teacher Quality State Grants Title III English Language Acquisition Grant Vocational Education-Basic Grants to States Career and Technical Education Education Jobs Fund Total U. S. Department of Education Total Expenditures of Federal Awards N/A = Not Available CFDA Number 10.553 10.555 10.555 84.027 84.173 84.391 84.010 84.389 84.367 84.365 84.048 84.410 PassThrough Entity ID Number Expenditures In Period N/A $ N/A N/A - (2) 2,043,506 138,753 2,182,259 N/A 1,231,716 N/A 41,529 N/A 316,695 1,589,940 N/A 443,981 N/A 1,297 445,278 N/A N/A N/A N/A $ 128,381 11,581 34,103 16,244 2,225,527 4,407,786 27 OCONEE COUNTY BOARD OF EDUCATION SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS FOR THE FISCAL YEAR ENDED JUNE 30, 2012 Notes to the Schedule of Expenditures of Federal Awards (1) The amounts shown for the Food Donation Program represent the Federally assigned value of nonmonetary assistance for donated commodities received and/or consumed by the School District during the current fiscal year. (2) Expenditures for the funds earned on the School Breakfast Program were not maintained separately and are included in the National School Lunch Program. 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 Oconee County Board of Education and is presented on the modified accrual basis of accounting which is the basis of accounting used in the presentation of the fund financial statements. See notes to the basic financial statements. 28 OCONEE COUNTY BOARD OF EDUCATION SCHEDULE OF STATE REVENUE FOR THE FISCAL YEAR ENDED JUNE 30, 2012 Agency/Funding Grants Education, Georgia Department of Quality Basic Education Direct Instructional Cost Kindergarten Program Kindergarten Program - Early Intervention Program Primary Grades (1-3) Program Primary Grades - Early Intervention (1-3) Program Upper Elementary Grades (4-5) Program Primary Grades - Early Intervention (4-5) Program Middle Grades (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 English Speakers of Other Languages (ESOL) Media Center Program 20 Days Additional Instruction Staff and Professional Development Indirect Cost Central Administration School Administration Facility Maintenance and Operations Categorical Grants Pupil Transportation Pupil Transportation Nursing Services State Health Reimbursement Vocational Supervisors Food Services Vocational Education Amended Formula Adjustment Preschool Handicapped Program Teachers' Retirement Office of State Treasurer Public School Retirement Other Grants From Georgia Department of Education Pupil Transportation - State Bonds Dual Enrollment Virtual Schools Grant Math And Science Supplement Move on When Ready Grant Total State Funds Governmental Fund Types General Fund $ 1,663,063 (999) 3,906,747 3,631 2,175,657 12,745 3,457,129 3,091,593 803,365 3,374,332 1,497,304 426,329 270,883 169,891 591,772 179,599 118,880 804,297 1,240,299 1,509,929 666,432 107,149 4,428,812 28,189 73,032 86,073 (4,833,681) 149,930 32,961 26,035,343 82,589 152,439 11,892 5,125 1,903 300 171,659 $ 26,289,591 See notes to the basic financial statements. 29 OCONEE COUNTY BOARD OF EDUCATION SCHEDULE OF APPROVED LOCAL OPTION SALES TAX (ELOST) PROJECTS FOR THE FISCAL YEAR ENDED JUNE 30, 2012 2006 Referendum - ELOST III Projects Providing funds to pay the costs of: 1. Acquiring real property (improved or unimproved) for future school sites; 2. Acquiring, constructing and equipping a new elementary school; Original Estimated Cost(1) Current Estimated Costs(2) Expended In Current Year (3) (4) Expended In Prior Years (3) (4) Total Completion Cost Excess Estimated Proceeds Not Completion Expended (6) (7) Date $ 1,000,000 $ 964,000 $ $ 10,914,803 $ 11,222,896 $ - $ 815,747 $ 815,747 $ - $ 11,222,896 $ 11,222,896 $ 148,253 FY 2009 - FY 2007 3. Adding to, renovating, repairing, improving and equipping existing educational buildings, properties and facilities of the School District, including, without limitation, athletic facilities, road improvement and technology infrastructure and equipment, and to the extent there are additional funds available, constructing additional new schools and administrative facilities $ 21,972,577 $ 12,448,296 $ 522,512 $ 11,027,184 $ - $ 4. And pay expenses incident thereto, including the payment of any capitalized interest at a cost of approximately $38,000,000 and the issuance of general obligation debt of Oconee County School principal amount of $24,000,000 for the above purpose. $ 4,112,620 $ 4,321,590 $ 550,750 $ 3,485,590 $ - $ TOTAL - ELOST III $ 38,000,000 $ 28,956,782 $ 1,073,262 $ 26,551,417 $ 12,038,643 $ 2012 Referendum - ELOST IV Projects Providing funds to pay the costs of: - FY 2014 - FY 2013 148,253 FY 2014 1. Adding to, renovating, repairing, improving and equipping existing educational buildings, properties and facilities of the School District, including, without limitation, athletic facilities, concession areas, road improvements, heating and air systems, classrooms and technology infrastructure and equipment; $ 27,353,853 $ 27,500,000 $ 3,845,085 $ 2. Retiring that portion of the School District's series 2006 general obligation bonds maturing April 1, 2012, at a maximum cost of $3,000,000; $ 3,000,000 $ 1,800,000 $ 1,800,000 $ 3. Paying expenses incident thereto (including capitalized interest); $ 711,892 $ 268,852 $ 268,852 $ 4. And, to the extent there are funds available, acquiring real property (improved or unimproved) for future school sites; constructing additional new schools and administrative facilities and purchasing school buses and equipment for the Maintenance Department; $ - $ - $ - $ 5. Payment of principal and interest on bonds not to exceed $16,000,000; and $ 14,666,925 $ 14,666,925 $ - $ 6. Paying up to $1,000,000 in debt service due July 1, 2013 and January 1, 2014 on the School District's 2004 general obligation bonds. $ 1,000,000 $ 1,000,000 $ - $ TOTAL - ELOST IV $ 46,732,670 $ 45,235,777 $ 5,913,937 $ - $ - $ - $ 1,800,000 $ - $ 268,852 $ - $ - $ - $ - $ - $ - $ - $ 2,068,852 $ - FY 2018 - FY 2012 - FY 2012 - FY 2018 - FY 2018 - FY 2014 - FY 2018 TOTAL - ELOST III and ELOST IV $ 84,732,670 $ 74,192,559 $ 6,987,199 $ 26,551,417 $ 14,107,495 $ 148,253 FY 2018 (1) The School District's original cost estimate as specified in the resolution calling for the imposition of the Local Option Sales Tax. (2) The School District's current estimate of total cost for the projects. Includes all cost from project inception to completion. (3) The voters of Oconee County approved the imposition of a 1% sales tax to fund the above projects and retire associated debt. Amounts expended for these projects may include sales tax proceeds, state, local property taxes and/or other funds over the life of the projects. (4) In addition to the expenditures shown above, the School District has incurred interest to provide advance funding for the above projects as follows: Prior Years Current Year Total 899,474 - 899,474 (5) During fiscal year 2012, the Oconee County Board of Education DID NOT issue General Obligation Refunding Bonds. (6) Project 3/SPLOST III is underfunded as of June 30, 2012 by $9,524,281. The lack of funds is due to the decrease in Sales Taxes experienced in the past five years. To compensate for the decrease in projected revenues, the School District has limited the scope of the project specific to technology. (7) Project 1/SPLOST III was completed in June 2009 with total actual expenditures of $815,747. The previous estimated cost was $ 1,000,000. The surplus of SPLOST proceeds will be reallocated and used to pay debt service. See notes to the basic financial statements. 30 OCONEE 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, 2012 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 English Speakers of Other Languages (ESOL) TOTAL DIRECT INSTRUCTIONAL PROGRAMS Media Center Program Staff and Professional Development Allotments From Georgia Department of Education (1)(2) Eligible QBE Program Costs Salaries Operations Total $ 2,138,621 $ 2,460,460 $ 58,793 $ 2,519,253 - - 50 50 5,075,561 6,203,667 185,276 6,388,943 17,795 185,000 50 185,050 2,808,664 3,930,059 85,921 4,015,980 23,664 - 50 50 4,500,661 6,093,198 175,719 6,268,917 3,975,985 6,358,666 223,433 6,582,099 1,063,051 1,292,079 122,906 1,414,985 4,249,206 - - - - 238,681 8,333 247,014 - 151,204 14,251 165,455 - 2,913,007 29,126 2,942,133 - 58,468 305 58,773 1,938,203 2,371,036 18,716 2,389,752 532,833 - 1,976 1,976 351,213 387,747 2,045 389,792 218,509 196,996 4,967 201,963 26,893,966 32,840,268 931,917 33,772,185 765,682 153,794 810,218 89,061 109,231 - 919,449 89,061 TOTAL QBE FORMULA FUNDS $ 27,813,442 $ 33,739,547 $ 1,041,148 $ 34,780,695 (1) Comprised of State Funds plus Local Five Mill Share. (2) Allotments do not include the impact of the State amended formula adjustment. See notes to the basic financial statements. 31 SECTION II COMPLIANCE AND INTERNAL CONTROL REPORTS 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 15, 2013 Honorable Nathan Deal, Governor Members of the General Assembly Members of the State Board of Education and Superintendent and Members of the Oconee County Board of Education INDEPENDENT AUDITOR'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS Ladies and Gentlemen: We have audited the financial statements of the governmental activities, each major fund, and the aggregate remaining fund information of Oconee County Board of Education as of and for the year ended June 30, 2012, which collectively comprise Oconee County Board of Education's basic financial statements and have issued our report thereon dated March 15, 2013. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Internal Control Over Financial Reporting Management of Oconee County Board of Education is responsible for establishing and maintaining effective internal control over financial reporting. In planning and performing our audit, we considered Oconee County Board of Education's internal control over financial reporting as a basis for designing our auditing procedures for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the Oconee County Board of Education's internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness of the Oconee County Board of Education's internal control over financial reporting. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect and correct misstatements on a timely basis. A material weakness is a deficiency, or combination of deficiencies, in internal control such that there is a reasonable possibility that a material misstatement of the entity's financial statements will not be prevented, or detected and corrected on a timely basis. 2012YB-30 Our consideration of internal control over financial reporting was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over financial reporting that might be deficiencies, significant deficiencies, or material weaknesses. We did not identify any deficiencies in internal control over financial reporting that we consider to be material weaknesses, as defined above. However, we consider item FS-7081-12-01, described in the accompanying Schedule of Findings and Questioned Costs to be a significant deficiency in internal control over financial reporting. A significant deficiency is a deficiency, or 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. Compliance and Other Matters As part of obtaining reasonable assurance about whether Oconee County Board of Education's financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. We noted certain matters that we have reported to management of Oconee County Board of Education in a separate letter dated March 15, 2013. Oconee County Board of Education's response to the finding identified in our audit is described in the accompanying Schedule of Management's Responses. We did not audit Oconee County Board of Education's response and, accordingly, we express no opinion on the response. This report is intended solely for the information and use of management, members of the Oconee County Board of Education, others within the entity, Federal awarding agencies and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties. Respectfully submitted, GSG:as 2012YB-30 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 15, 2013 Honorable Nathan Deal, Governor Members of the General Assembly Members of the State Board of Education and Superintendent and Members of the Oconee County Board of Education INDEPENDENT AUDITOR'S REPORT ON COMPLIANCE WITH REQUIREMENTS THAT COULD HAVE A DIRECT AND MATERIAL EFFECT ON EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH OMB CIRCULAR A-133 Ladies and Gentlemen: Compliance We have audited Oconee 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 its major Federal program for the year ended June 30, 2012. Oconee County Board of Education's major Federal program is identified in the Summary of Auditor's Results section of the accompanying Schedule of Findings and Questioned Costs. Compliance with the requirements of laws, regulations, contracts, and grants applicable to its major Federal program is the responsibility of Oconee County Board of Education's management. Our responsibility is to express an opinion on Oconee County Board of Education's compliance based on our audit. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and OMB Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations. Those standards and OMB Circular A-133 require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major Federal program occurred. An audit includes examining, on a test basis, evidence about the Oconee County Board of Education's compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Our audit does not provide a legal determination on Oconee County Board of Education's compliance with those requirements. In our opinion, the Oconee County Board of Education complied, in all material respects, with the compliance requirements referred to above that could have a direct and material effect on its major Federal program for the year ended June 30, 2012. 2012SA-10 Internal Control Over Compliance Management of Oconee County Board of Education is responsible for establishing and maintaining effective internal control over compliance with the requirements of laws, regulations, contracts, and grants applicable to Federal programs. In planning and performing our audit, we considered Oconee County Board of Education's internal control over compliance with the requirements that could have a direct and material effect on a major Federal program to determine the auditing procedures for the purpose of expressing our opinion on compliance and to test and report on internal control over compliance in accordance with OMB Circular A-133, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of the Oconee County Board of Education's internal control over compliance. A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a Federal program on a timely basis. A material weakness in internal control over compliance is a deficiency, or combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a Federal program will not be prevented, or detected and corrected, on a timely basis. Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over compliance that might be deficiencies, significant deficiencies, or material weaknesses. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses, as defined above. This report is intended solely for the information and use of management, members of the Oconee County Board of Education, others within the entity, Federal awarding agencies and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties. Respectfully submitted, GSG:as 2012SA-10 Greg S. Griffin State Auditor SECTION III AUDITEE'S RESPONSE TO PRIOR YEAR FINDINGS AND QUESTIONED COSTS OCONEE COUNTY BOARD OF EDUCATION AUDITEE'S RESPONSE SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2012 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 OCONEE COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2012 I SUMMARY OF AUDITOR'S RESULTS Financial Statements Type of auditor's report issue: Governmental Activities; General Fund; Capital Projects Fund; Debt Service Fund; Aggregate Remaining Fund Information Unqualified Internal control over financial reporting: Material weakness identified? No Significant deficiency identified? Yes 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 the major program: Child Nutrition Cluster Unqualified Any audit findings disclosed that are required to be reported in accordance with OMB Circular A-133, Section 510(a)? No Identification of major program: CFDA Numbers Name of Federal Program or Cluster 10.553, 10.555 Child Nutrition Cluster Dollar threshold used to distinguish between Type A and Type B programs: $300,000.00 Auditee qualified as low-risk auditee? Yes II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS FINANCIAL REPORTING Inadequate Internal Controls over School Activity Accounts Significant Deficiency Finding Control Number: FS-7081-12-01 Condition: A review of principal account activity revealed that agency funds were inappropriately reported as governmental funds. - 1 - OCONEE COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2012 II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS Criteria: The School District's management is responsible for designing and maintaining internal controls that provide reasonable assurance that transactions are processed according to established procedures. According to the entity's Financial Guidelines for System and School Funds, all agency fund activity is coded to fund 705 and is used for all funds that are specific to students and all other funds as governmental. Questioned Cost: N/A Information: The auditor noted that agency fund cash and liabilities were understated by $36,219. An adjustment was proposed by the auditors and recorded by the entity to correct the financial statements. Cause: The School District had incorrectly classified certain funds as governmental type funds in violation of its Financial Guidelines for System and School Funds procedures. These funds should have been classified as agency funds. Effect: Potential misstatement to agency fund cash and liabilities. Recommendation: Management should revise and monitor controls to provide reasonable assurance that transactions are processed according to established procedures. III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS No matters were reported. - 2 - SECTION V MANAGEMENT'S RESPONSES OCONEE COUNTY BOARD OF EDUCATION SCHEDULE OF MANAGEMENT'S RESPONSES YEAR ENDED JUNE 30, 2012 Finding Control Number: FS-7081-12-01 We concur with this finding. The annual close-out procedure for school activity accounts now requires that school bookkeepers have sign-offs by the principal and Assistant Superintendent prior to entering final balances. Contact Person: Title: Telephone: Fax: Email: Randall Morrison Superintendent for Financial Operations (706) 769-5130 X 1109 (706) 769-3500 rmorrison@oconeeschools.org