OGLETHORPE COUNTY BOARD OF EDUCATION LEXINGTON, GEORGIA ANNUAL FINANCIAL REPORT FOR THE FISCAL YEAR ENDED JUNE 30,2009 (Including Independent Auditor's Reports) OGLETHORPE COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS - SECTION I INDEPENDENT AUDITOR'S COMBINED REPORT ON BASIC FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION -SCHEDULE OF EXPENDITURES OF FEDERALAWARDS EXHIBITS BASIC FINANCIAL STATEMENTS DISTRICT-WIDE FINANCIAL STATEMENTS A STATEMENT OF NET ASSETS B STATEMENT OF ACTIVITIES FUND FINANCIAL STATEMENTS C BALANCE SHEET GOVERNMENTAL FUNDS D RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO THE STATEMENT OF NET ASSETS E STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS F RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES TO THE STATEMENT OF ACTIVITIES G STATEMENT OF FIDUCIARY NET ASSETS FIDUCIARY FUNDS H NOTES TO THE BASIC FINANCIAL STATEMENTS SCHEDULES REQUIRED SUPPLEMENTARY INFORMATION 1 SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL GENERAL FUND SUPPLEMENTARY INFORMATION 2 SCHEDULE OF EXPENDITURES OF FEDERALAWARDS 3 SCHEDULE OF STATE REVENUE OGLETHORPE COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS - SECTION I FINANCIAL SCHEDULES SUPPLEMENTARY INFORMATION 4 SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS 5 ALLOTMENTS AND EXPENDITURES GENERAL FUND - QUALITY BASIC EDUCATION PROGRAMS (QBE) BY PROGRAM SECTION II COMPLIANCE AND INTERNAL CONTROL REPORTS REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MAlTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WlTH GOVERNMENTAUDITING STANDARDS REPORT ON COMPLIANCE WlTH REQUIREMENTSAPPLICABLE TO EACH MAJOR PROGRAMAND ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WlTH OMB CIRCULAR A-133 SECTION Ill AUDITEE'S RESPONSE TO PRIOR YEAR FINDINGS AND QUESTIONED COSTS SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS SECTION IV FINDINGS AND QUESTIONED COSTS SCHEDULE OF FINDINGS AND QUESTIONED COSTS SECTION I FI NANClAL Russell W. Winton STATE AUDITOR (404)656-2174 DEPARTMENOTF AUDITSAND ACCOUNTS 270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400 July 28, 2010 Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education and Superintendent and Members of the Oglethorpe County Board of Education INDEPENDENT AUDITOR'S COMBINED REPORT ON BASIC FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION -SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS Ladies and Gentlemen: We have audited the accompanying financial statements of the governmental activities, each major fund, and the aggregate remaining fund information (Exhibits A through H) of the Oglethorpe County Board of Education, as of and for the year ended June 30, 2009, which collectively comprise the Board's basic financial statements as listed in the table of contents. These financial statements are the responsibility of the Oglethorpe 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 Oglethorpe County Board of Education'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 Oglethorpe County Board of Education, as of June 30, 2009, 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. The Oglethorpe County Board of Education has not presented Management's Discussion and Analysis that accounting principles generally accepted in the United States of America has determined is necessaryto supplement, although not to be part of, the basic financial statements. In accordance with GovernmentAuditing Standards,we have also issued our report dated July 28, 2010, on our consideration of the Oglethorpe 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 Audi&!ngStandardsand should be considered in assessing the results of our audit. The Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual, as presented on page 27, is not a required part of the basic financial statements but is supplementary information required by the accounting principles generally accepted in the United States of America. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods of measurement and presentation of the required supplementary information. However, we did not audit the information and express no opinion on it. Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Oglethorpe County Board of Education's basic financial statements. The accompanying supplementary information which consist of Schedules 2 through 5, which includes the Schedule of Expenditures of Federal Awards as required by U. S. Office of Management and Budget Circular A-133, Audits of States, Local Governmentrs, and Non-Profit Organization, are presented for purposes of additional analysis and are not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements, and in our opinion, is fairly stated, in all material respects, in relation to the basic financial statements taken 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, ell W. ~ i n t ~CnP,A, CGFM OGLETHORPE COUNTY BOARD OF EDUCATION OGLETHORPE COUNN BOARD OF EDUCATION STATEMENT OF NET ASSETS JUNE 30,2009 ASSETS Cash and Cash Equivalents Investments Accounts Receivable, Net Taxes State Government Federal Government Local Other Inventories Capital Assets, Non-Deprecrable Capital Assets, Depreciable (Net of Accumulated Depreciation) Total Assets Accounts Payable Salaries and Benefits Payable Contracts Payable Retainages Payable Long-Term Liabilities Due Within One Year Due in More Than One Year Total Liabilities NET ASSETS Invested in Capital Assets, Net of Related Debt Restricted for Continuation of Federal Programs Debt Service Capital Projects Unrestricted Total Net Assets Total Liabilities and Net Assets EXHIBIT "A" GOVERNMENTAL ACTIVITIES The notes to the basic financial statements are an integral part of this statement. -1- OGLETHORPE COUNTY BOARD OF EDUCATION STATEMENT OF ACTIVITIES FOR THE YEAR ENDEDJUNE 30,2009 GOVERNMENTAL ACTIVITIES Instruction Support Services Pupil Services Improvementof 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 Operationsof Non-InstructionalServices Enterprise Operations Food Services Interest on Short-Term and Long-Term Debt Total Governmental Activities General Revenues Taxes Propem Taxes For Maintenance and Operations For Debt Services Sales Taxes Special Purpose Local Option Sales Tax For Capital Projects Other Sales Tax Grants and Contributions not Restrictedto Specific Programs Investment Earnings Miscellaneous Total General Revenues Change in Net Assets Net Assets - Beginn~ngof Year Net Assets - End of Year EXPENSES CHARGES FOR SERVICES The notes to the basic financial statements are an integral part of this statement. - 2 - EXHIBIT "B" PROGRAM REVENUES OPERATING GRANTS AND CONTRIBUTIONS CAPITAL GRANTS AND CONTRIBUTIONS NET (EXPENSES) REVENUES AND CHANGES IN NET ASSETS OGLETHORPE COUNTY BOARD OF EDUCATION BALANCE SHEET GOVERNMENTAL FUNDS JUNE 30,2009 ASSETS Cash and Cash Equivalents Investments Accounts Receivable, Net Taxes State Government Federal Government Local Other Inventories GENERAL FUND DISTRICTWIDE CAPITAL PROJECTS FUND DEBT SERVICE FUND Total Assets LIABILITIES AND FUND BALANCES LIABILITIES Accounts Payable Salaries and Benefits Payable Contracts Payable Retainages Payable Deposits and Deferred Revenue Total Liabilities FUND BAUNCES Reserved for: Continuation of Federal Programs Debt Service Capital Projects Unreserved Designatedfor Student Activities Undesignated Reported in: General Fund Capital Projects Total Fund Balances Total Liabilities and Fund Balances EXHIBIT "C" TOTAL The notes t o the basic financial statements are an integral part of this statement. -4- OGLETHORPE COUNTY BOARD OF EDUCATION RECONCILIATIONOF THE GOVERNMENTALFUNDS BALANCESHEET TO THE STATEMENT OF NET ASSETS JUNE 30.2009 Total Fund Balances - Governmental Funds (Exhibit "C") Amounts reported for Governmental Activit~esin the Statement of Net Assets are different because: Capital Assets used in GovernmentalActivities are not financial resources and therefore are not reported in the funds. These assets consist of: Land Construction in Progress Land Improvements Buildings Equipment Accumulated Depreciation Total Capital Assets Taxes that are not available to pay for current period expenditures are deferred in the funds. Long-Term Liab~lities.including Bonds Payable, are not due and payable in the current period and therefore are not reported as liabilities in the funds. Long-Term Liabilities at year-end consist of: Bonds Payable Installment Sales Agreement Unamortized Bond Premiums Total Long-Term Liabilities Net Assets of Governmental Activities (Exhibit "A") EXHIBIT "D" The notes t o the basic financial statements are an integral part of this statement. - 5 - OGLETHORPE COUNN BOARD OF EDUCATION STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BAIANCES GOVERNMENTAL FUNDS YEAR ENDEDJUNE 30.2009 EXHIBIT "E" REVENUES Property Taxes Sales Taxes State Funds Federal Funds Chargesfor Services Investment Earnings Miscellaneous Total Revenues EXPENDITURES Current Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Enterprise Operations Food Services Operation Capital Outlay Debt Services Principal Dues and Fees Interest Total Expenditures Excess of Revenues over (under) Expenditures OTHER FINANCING SOURCES (USES) Transfers In Transfers Out Total Other FinancingSources (Uses) Net Change in Fund Balances Fund Balances - Beginning GENERAL FUND DISTRICTWIDE CAPITAL PROJECTS FUND DEBT SERVICE FUND TOTAL $ 21,844,865.77 $ 5,971,922.95 $ 515,148.69 $ 28,331,937.41 $ 828.717.37 $ -5,023,939.57 $ 703,749.91 $ -3,491,472.29 $ 719,906.73 $ -5,791,960.02 $ 1,580,581.00 S -3,491,472.29 Fund Balances - Ending The notes to the basicfinancial statements are an integral part of this statement. OGLETHORPE COUNTY BOARD OF EDUCATION RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT OF REVENUES,EXPENDITURESAND CHANGES IN FUND BALANCES TO THE STATEMENT OF ACTIVITIES JUNE 30,2009 Total Net Change in Fund Balances- Governmental Funds (Exhibit " E ) Amounts reported for Governmental Activities in the Statement of Activities are different because: Capital Outlays are reported as expenditures in Governmental Funds. However, in the Statement of Activities, the cost of Capital Assets is allocated over their estimated useful lifes as depreciation expense. In the current period, these amounts are: Capital Outlay Depreciation Expense Excess of Capital Outlay over Depreciation Expense Taxes reported in the Statement of Activities that do not provide current financial resourcesare not reported as revenues in the funds. Repayment of Long-Term Debt is reported as an expenditure in Governmental Funds, but the repayment reduces Long-Term L~ab~litieinsthe Statement of Net Assets. In the current year, these amounts consist of: Bond Premiums Amortized Capital Lease Payments Installment Sales Agreement Total Long-Term Debt Repayments Change in Net Assets of GovernmentalActivities (Exhibit "B") EXHIBIT "F" The notes t o the basic financial statements are an integral part of this statement. - 7 - (This page left intentionally blank) OGLETHORPE COUNTY BOARD OF EDUCATION STATEMENT OF FIDUCIARY NET ASSETS FIDUCIARY FUNDS JUNE 3 0 , 2 0 0 9 ASSETS Cash and Cash Equivalents l nvestments Total Assets LIABILITIES Funds Held for Others EXHIBIT "G" AGENCY FUNDS The notes to the basic financial statements are a n integral part of this statement. - 9 - OGLETHORPE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30,2009 EXHIBIT "H" REPORTING ENTITY The Oglethorpe County Board of Education (School District) was established under the laws of the State of Georgia and operates under the guidance of a school board elected by the voters and a Superintendent appointed by the Board. The Board is organized as a separate legal entity and has the power to levy taxes and issue bonds. Its budget is not subject to approval by any other entity. Accordingly, the School District is a primary government and consists of all the organizations that compose its legal entity. - Blended Component Unit Technical Career Academy of Northeast Georgia The Technical Career Academy of Northeast Georgia (Charter School) is responsible for the public education of all students attending its school. The Charter School was created through a contract between the School District and the Charter School whereby all State funding associated with the students attending the Charter School and certain specified local funds are turned over to the Charter School to cover the cost of its operations. The financial statements of the Charter School have been blended with the School District's general fund. NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BASIS OF PRESENTAllON 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 Oglethorpe 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 nonexchangetransactions. 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. Revenuesthat 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. The School District reports the following major governmental funds: OGLETHORPE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30,2009 EXHIBIT "H" 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 proceeds from an installment sales agreement to be used for the acquisition, construction or renovation of major capital facilities. Debt Service Fund accounts for taxes (property) legally restricted for the payment of general long-term principal, interest and paying agent's fees. The School District reports the following fiduciary fund type: Agency funds account for assets held by the School District as an agent for various funds 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. Property taxes, sales taxes and interest are considered to be susceptible to accrual. Expenditures are recorded when the related fund liability is incurred, except for principal and interest on general long-term debt, which are recognized as expenditures to the extent they have matured. Capital asset acquisitions are reported as expenditures in governmental funds. Proceeds of general long-term liabilities, acquisitions under an installment sales agreement 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. OGLETHORPE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2009 CASH AND CASH EQUIVALENTS EXHIBIT "H" Composition of Deposits Cash and cash equivalents consist of cash on hand, demand deposits and short-term investments with original maturities of three months or less from the date of acquisition in authorized financial institutions. Official Code of Georgia Annotated Section 45-8-14 authorizes the School District to deposit its funds in one or more solvent banks, insured Federal savings and loan associations or insured chartered building and loan associations. INVESTMENTS Composition of Investments Investments made by the School District in nonparticipating interest-earning contracts (such as certificates of deposit) and repurchase agreements are reported at cost. Participating interestearning contracts and money market investments with a maturity at purchase of one year or less are reported at amortized cost. Both participating interest-earning contracts and money market investments with a maturity at purchase greater than one year are reported at fair value. The Official Code of Georgia Annotated Section 36-83-4 authorizes the School District to invest its funds. In selecting among options for investment or among institutional bids for deposits, the highest rate of return shall be the objective, given equivalent conditions of safety and liquidity. Funds may be invested in the following: 1. Obligations issued by the State of Georgia or by other states, 2. Obligations issued by the United States government, 3. Obligations fully insured or guaranteed by the United States government or a United States government agency, 4. Obligations of any corporation of the United States government, 5. Prime banker's acceptances, 6. The Georgia Fund 1administered 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 Oglethorpe County Board of Commissioners fixed the property tax levy for the 2008 tax digest year (calendar year) on July 30, 2008 (levy date). Taxes were due on December 20, 2008 (lien date). Taxes collected within the current fiscal year or within 6 0 days after year-end on the 2008 tax digest are reported as revenue in the governmental funds for fiscal year 2009. The Oglethorpe 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 - 12- OGLETHORPE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2009 EXHIBIT "H" District. Property tax revenues, at the fund reporting level, during the fiscal year ended June 30, 2009, for maintenance and operations amounted to $7,364,142.11and for school bonds amounted to $654,920.46. Tax millage rates levied for the 2008 tax year (calendar year) for the Oglethorpe County Board of Education were as follows (a mill equals $1per thousand dollars of assessed value): School Operations School Bonds 17.896 mills 1.720 mills 19.616 mills SALES TAXES Special Purpose Local Option Sales Tax, at the fund reporting level, during the year amounted to $705,053.59 and is to be used for capital outlay for educational purposes or debt services. This sales tax was authorized by local referendum and the sales tax must be re-authorized at least every five years. INVENTORIES Food Inventaries On the basic financial statements, inventories of donated food commodities used in the preparation of meals are reported at their Federally assigned value and purchased foods inventories are reported at cost (first-in, first-out). The School District uses the consumption method to account for inventories whereby donated food commodities are recorded as an asset and as revenue when received, and expenses/expenditures are recorded as the inventory items are used. Purchased foods are recorded as an asset when purchased and expenses/expenditures are recorded as the inventory items are used. CAPITAL ASSETS Capital assets purchased, including capital outlay costs, are recorded as expenditures in the fund financial statements at the time of purchase (including ancillary charges). On the District-wide financial statements, all purchased capital assets are valued at cost where historical records are available and at estimated historical cost based on appraisals or deflated current replacement cost where no historical records exist. Donated capital assets are recorded at estimated fair market value on the date donated. Disposals are deleted at depreciated recorded cost. The cost of normal maintenance and repairs that do not add to the value of assets or materially extend the useful lives of the assets is not capitalized. Depreciation is computed using the straight-line method. The School District does not capitalize book collections or works of art. During the fiscal year under review, no events or changes in circumstances affecting a capital asset that may indicate impairment were known to the School District. Capitalization thresholds and estimated useful lives of capital assets reported in the District-wide statements are as follows: OGLETHORPE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30,2009 EXHIBIT "H" Capitalization Policy Estimated Useful Life Land Land Improvements Buildings and Improvements Equipment All N/A $ 5,000.00 2 0 to 8 0 years $ 5,000.00 5 0 to 8 0 years $ 5,000.00 5 to 5 0 years Depreciation is used to allocate the actual or estimated historical cost of all capital assets over estimated useful lives. GENERAL OBLIGATION BONDS The School District issues general obligation bonds to provide funds for the acquisition and construction of major capital facilities. In the District-wide financial statements, bond premiums and discounts are deferred and amortized over the life of the bonds using the straight-line method. In the fund financial statements, the School District recognizes bond premiums and discounts 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. In the District-wide and fund financial statements, issuance costs, whether or not withheld from the actual debt proceeds received, are reported as debt service expenditures. To conform to generally accepted accounting principles, issuance costs should be amortized over the life of the bonds on the District-wide statements. The effect of this deviation is deemed to be immaterial to the fair presentation of the basic financial statements. General obligation bonds are direct obligations and pledge the full faith and credit of the government. The outstanding amount of these bonds is recorded in the Statement of Net Assets. NET ASSETS The School District's net assets in the District-wideStatements are classified as follows: Invested in capital assets, net of related debt - This represents the School District's total investment in capital assets, net of outstanding debt obligations related to those capital assets. To the extent debt has been incurred but not yet expended for capital assets, such amounts are not included as a component of invested in capital assets, net of related debt. Restricted net assets-These represent resources for which the School District is legally or contractually obligated to spend resources for continuation of Federal Programs, debt service and capital projects in accordance with restrictions imposed by external third parties. Unrestricted net assets - Unrestricted net assets represent resources derived from property taxes, sales taxes, grants and contributions not restricted to specific programs, charges for services, and miscellaneous revenues. These resources are used for transactions relating to the educational and general operations of the School District, and may be used at the discretion of the Board to meet current expenses for those purposes. FUND BALANCES Reserved Reserves represent those portions of fund balance equity that are legally segregated for a specific future use. OGLETHORPE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2009 EXHIBIT "H" - Unreserved Designated Designated fund balances represent tentative plans for future use of financial resources. NOTE 3: DEPOSITS AND INVESTMENTS COLLATERALIZATION OF DEPOSITS Official Code of Georgia Annotated (O.C.G.A.) Section 45-8-12 provides that there shall not be on deposit at any time in any depository for a time longer than ten days a sum of money which has not been secured by surety bond, by guarantee of insurance, or by collateral. The aggregate of the face value of such surety bond and the market value of securities pledged shall be equal to not less than 1 1 0 percent of the public funds being secured after the deduction of the amount of deposit insurance. If a depository elects the pooled method (O.C.G.A. Section 45-8-13.1) the aggregate of the market value of the securities pledged to secure a pool of public funds shall be not less than 1 1 0 percent of the daily pool balance. Acceptable security for deposits consists of any one of or any combination of the following: 1 . Surety bond signed by a surety company duly qualified and authorized to transact business within the State of Georgia, 2. lnsurance on accounts provided by the Federal Deposit lnsurance Corporation, 3. Bonds, bills, notes, certificates of indebtedness or other direct obligations of the United States or of the State of Georgia, 4. Bonds, bills, notes, certificates of indebtedness or other obligations of the counties or municipalities of the State of Georgia, 5 . Bonds of any public authority created by the laws of the State of Georgia, providing that the statute that created the authority authorized the use of the bonds for this purpose, 6. Industrial revenue bonds and bonds of development authorities created by the laws of the State of Georgia, and 7. Bonds, bills, notes, certificates of indebtedness, or other obligations of a subsidiary corporation of the United States government, which are fully guaranteed by the United States government both as to principal and interest or debt obligations issued by or securities guaranteed by the Federal Land Bank, the Federal Home Loan Bank, the Federal Intermediate Credit Bank, the Central Bank for Cooperatives, the Farm Credit Banks, the Federal Home Loan MortgageAssociation, and the Federal National Mortgage Association. CATEGORIZATION OF DEPOSITS Custodial credit risk is the risk that in the event of a bank failure, the School District's deposits may not be returned to it. The School District does not have a deposit policy for custodial credit risk. At June 30, 2009, the bank balances were $2,101,211.91. The bank balances were entirely covered by Federal depository insurance or collateralized with securities held by the pledging financial institution's trust department or agent in the School District's name. CATEGORIZATION OF INVESTMENTS The School District's investments as of June 30, 2009, are presented below. All investments are presented by investment type and debt securities are presented by maturity. lnvestment Type Debt Securities Municipal Obligation Repurchase Agreements OGLETHORPE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30,2009 Fair Value Investment Maturity 1-5 Less Than 1Year Years D(H1BlT "H" Other Investments U.S. Treasury Money Market Funds lnvestment Pools Office of Treasury and Fiscal Services Georgia Fund 1 Total Investments 16,733,094.02 The Georgia Fund 1,formerly referred to as LGIP, administered by the State of Georgia, M i c e of Treasury and Fiscal Services is not required to be categorized since the School District did not own any specific identifiable securities in the pool. The investment policy of the State of Georgia, Office of Treasury and Fiscal Services for the Georgia Fund 1(Primary Liquidity Portfolio) does not provide for investment in derivatives or similar investments. Additional information on the Georgia Fund 1is disclosed in the State of Georgia Comprehensive Annual Financial Report. This audit can be obtained from the Georgia Department of Audits and Accounts at htt~://www.audits.state.aa.us/internet/s.html. The Primary Liquidity Portfolio consists of Georgia Fund 1which is not registered with the SEC as an investment company but does operate in a manner consistent with the SEC's Rule 2a-7 of the lnvestment Company Act of 1940. The investment is valued at the pool's share price, $1.00 per share. The pool is an AAAm rated investment pool by Standard and Poor's. The weighted average maturity of Georgia Fund 1may not exceed 6 0 days. The weighted average maturity for Georgia Fund 1on June 30,2009, was 4 1 days. The U. S. Treasury Money Market funds are in an Institutional Treasury Portfolio Fund managed by Fidelity Investments. The Institutional Treasury Portfolio Fund is rated AAAm by Standard and Poor's. The weighted average maturity of the fund is approximately 6 0 days. 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. OGLETHORPE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30,2009 EXHIBIT "H" At June 30, 2009, $4,073,815.94 of the School District's applicable investments were uninsured or unregistered, with securities held by the counterparty, or by its trust department or agent, in the School District's name. Credit Quality Risk Credit quality risk is the risk that an issuer or other counterparty to an investment will not fulfill its obligations. The School District does not have a formal policyfor managing credit quality risk. The investments subject to credit quality risk are reflected below: Rated Debt Investments Fair Value Quality Ratings A2 Unrated Debt Securities Municipal Obligation Repurchase Agreements Totals by Quality Ratings $ 4,048,815.94 $ 4,048,815.94 25,000.00 $ 25,000.00 $ 4,073,815.94 $ 4,048,815.94 $ 25,000.00 Concentration of Credit Risk Concentration of credit risk is the risk of loss attributed to the magnitude of a government's investment in a single issuer. The School District does not have a formal policy for managing concentration of credit risk. More than 5% of the School District's investments are in Municipal Obligations. This investment is 19% of the School District's total investments. NOTE 4: NON-MONETARY TRANSACTIONS The School District receives food commodities from the United States Department of Agriculture (USDA) for school breakfast and lunch programs. These commodities are recorded at their Federally - assigned value. See Note 2 Inventories NOTE 5: CAPITAL ASSETS The following is a summary of changes in the Capital Assets during the fiscal year: OGLETHORPE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30,2009 EXHIBIT "H" Balance July 1,2008 Additions Reductions Balance June 30,2009 Governmental Activities Capital Assets, Not Being Depreciated: Land Construction Work In Progress $ 600,770.65 $ 600,770.65 343.790.71 $ 5,599,734.17 $ 384,482.69 5,559,042.19 Total Capital Assets, Not Being Depreciated $ 944.561.36 $ 5,599.734.17 $ 384,482.69 $ 6,159,812.84 Capital Assets Being Depreciated Buildingand lmprovements Equipment Land Improvements Less Accumulated Depreciation for: Buildingand lmprovements Equipment Land lmprovements Total Capital Assets, Being Depreciated, Net $ 13,060,249.14 $ 98,487.69 $ 0.00 $ 13,158,736.83 Governmental Activity Capital Assets - Net $ 14,004.810.50 $ 5,698,221.86 $ 384,482.69 $ 19,318,549.67 Capital Assets being acquired under an installment sales agreement as of June 30, 2009, are as follows: Governmental Funds Buildings and lmprovements Less: Accumulated Depreciation Current year depreciation expense by function is a s follows: $ 380,638.04 Instruction Support Services Improvementsof InstructionalServices Educational Media Services General Administration Maintenance and Operation of Plant Student Transportation Services Food Services $ 314,475.00 $ 1,130.00 4,566.00 4,108.00 7,847.00 192,359.00 210,010.00 6.065.00 OGLETHORPE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30,2009 EXHIBIT "H" Special Purpose Local Option Sales Tax (SPLOST) proceeds, proceeds from an installment sales agreement, general obligation bond proceeds, Qualified Zone Academy Bonds (QZAB) escrow account, and Property Tax levied specifically for retirement of outstanding bond principal, interest and paying agent's fees (Debt Service Funds) are restricted assets in the Statement of Net Assets because their use is limited by applicable bond covenants or statutory provisions. Restricted assets at June 30, 2009, were as follows: SPLOST District-wide Capital Projects Installment Sales Bond Proceeds Agreement Debt Service Funds Restricted Cash and Cash Equivalents: Debt Services Restricted Investments: Debt Services Capital Acquisitions $ 1,170,133.41 $ 11,510,614.28 $ $ $ 115.787.63 628,021.09 4.140.947.67 Interfund transfers for the year ended June 30, 2009, consisted of the following: Transfers From Transfer to General Fund Capital Projects District-wide Capital Projects $ Debt Service Fund 108,810.64 $ 876,831.09 Total Transfers are used to move property tax revenues collected by the General Fund to the District-wide Capital Projects Fund as required match or supplemental funding source for capital construction projects and to move Special Purpose Local Option Sales Tax (SPLOST) revenues to the Qualified Zone Academy Bonds (QZAB)escrow account. 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 elected to self-insure 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. OGLETHORPE COUNTY BOARD OF EDUCATION NOTES TO M E BASIC FINANCIAL STATEMENTS JUNE 30,2009 EXHIBIT "H" The School District is self-insured with regard to unemployment compensation claims. The School District accounts for claims within the General Fund with expenses/expenditures and liability being reported when it is probable that a loss has occurred, and the amount of that loss can be reasonably estimated. Changes in the unemployment compensation claims liability during the last two fiscal years are as follows: Beginning of Year Liability Claims and Changes in Estimates Claims Paid End of Year Liability The School District participates in the Georgia Education Workers' Compensation Trust, a public entity risk pool organized on December 1,1991,to develop, implement and administer a program of workers' compensation self-insurance for its member organizations. The School District pays an annual premium to the Trust for its general insurance coverage. Additional insurance coverage is provided through an agreement by the Trust with the Midwest Employers Casualty Company to provide coverage for potential losses sustained by the Trust in excess of $700,000.00 loss per occurrence, up to the statutory limit. Employers' Liability insurance coverage is also provided by Midwest Employers Casualty Company to provide coverage for potential losses sustained by the Fund in excess of $700,000.00 loss per occurrence, up to $1,000,000.00. The School District has purchased surety bonds to provide additional insurance coverage as follows: Position Covered Amount Superintendent All Employees NOTE 9: LONG-TERM DEBT CAPITAL LEASES The Oglethorpe County Board of Education has entered into a lease agreement for band instruments. This lease agreement qualifies as a capital lease for accounting purposes, and, therefore, has been recorded at the present value of the future minimum lease payments as of the date of its inception. INSTALLMENT SALES AGREEMENT The Oglethorpe 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 paymentsthrough July 15,2020. OGLETHORPE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30,2009 GENERAL OBLIGATION DEBT OUTSTANDING General Obligation Bonds currently outstanding are as follows: EXHIBIT "H" Purpose Interest Rates Amount General Government - QZAB -Series 2001 General Government -Series 2008 0.00% $ 5,000,000.00 3.50%- 5.00% 14,500,000.00 The changes in Long-Term Debt during the fiscal year ended June 30, 2009, were as follows: Balance July 1.2008 Additions Governmental Funds Deductions Balance June 30,2009 Due Within One Year G.O.Bonds $ Capital Leases Bond PremiumsAmortized Installment Sales Agreement 19,500,000.0$0 3,903.59 607,579.90 420,773.01 0.00 $ $ 3,903.59 40,505.33 27,693.31 19,500,000.00$ 0.00 567,074.57 393,079.70 680,000.00 40,505.33 28,933.31 OGLETHORPE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30,2009 EXHIBIT "H" At June 30, 2009, payments due by fiscal year which includes principal and interest for these items are as follows: Fiscal Year Ending June 30: Installment Sales Mreement Principal Interest Total Principal and lnterest Fiscal Year Ending June 30: General Obligation Debt Principal Interest Unamortized Bond Premium Total Principal and lnterest NOTE 10: ON-BEHALF PAYMENTS The School District has recognized revenues and costs in the amount of $233,522.84 for health insurance and retirement contributions paid on the School District's behalf by the following State Agencies. Georgia Department of Education Paid to the Georgia Department of Community Health For Health Insurance of Non-Certified Personnel In the amount of $190,933.75 Paid to the Teachers Retirement System of Georgia For Teachers Retirement System (TRS) Employer's Cost In the amount of $31,172.09 Office of Treasury and Fiscal Services Paid to the Public School Employees Retirement System For Public School Employees Retirement (PSERS) Employer's Cost In the amount of $11,417.00 OGLETHORPE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30,2009 EXHIBIT "H" 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, 2009: Proiect Unearned Executed Contracts New Middle School $ 10,286,901.06 The amount described in this note is not reflected in the basic financial statements. 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. GEORGIA RETIREE HEALTH BENEFIT FUND Plan Description. The School District contributes to the Georgia Retiree Health Benefit Fund (GRHBF), a cost-sharing multiple-employer defined benefit postemployment healthcare plan administered by the Department of Community Health. The GRHBF is a cost-sharing multipleemployer defined benefit postemployment healthcare plan that covers retired employees of the State including all departments, agencies and local school systems. GRHBF provides health insurance benefits to eligible retirees and their qualified beneficiaries through the health insurance plan for State employees. Pursuant to Title 45, Chapter 18 of the Official Code of Georgia Annotated, the authority to establish and amend the benefit provisions of the employees' health insurance plan (including benefits to retirees) is assigned to the Board of Community Health (Board). The Department of Community Health issues a publicly available financial report that includes financial statements and required supplementary information for GRHBF. That report may be obtained from the Department of Community Health at 2 Peachtree Street, Atlanta, Georgia 30303. Funding Policy. The contribution requirements of plan members and participating employers are established by the Board in accordance with the current Appropriations Act and may be amended by the Board. Contributions of plan members or beneficiaries receiving benefits vary based on plan election, dependent coverage, and Medicare eligibility and election. On average, plan members pay approximately twenty-five percent (25%)of the cost of health insurance coverage. Participating employers are statutorily required to contribute in accordance with the employer contribution rates established by the Board. The contribution rate is established to fund both the active and retired employee health insurance plans based on projected "pay-as-you-go" financing requirements. The combined rates for the active and retiree plans for the fiscal year ended June 30, 2009, were as follows: