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

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

PAULDING COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS -

SECTION I

FINANCIAL

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

REQUIRED SUPPLEMENTARY INFORMATION

MANAGEMENT'S DISCUSSION AND ANALYSIS

EXHIBITS

BASIC FINANCIAL STATEMENTS

DISTRICT-WIDE FINANCIAL STATEMENTS

A

STATEMENT OF NET ASSETS

B

STATEMENT OF ACTIVITIES

FUND FINANCIAL STATEMENTS

C

BALANCE SHEET

GOVERNMENTAL FUNDS

D

RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET

TO THE STATEMENT OF NET ASSETS

E

STATEMENT OF REVENUES, EXPENDITURES AND CHANGES

IN FUND BALANCES

GOVERNMENTAL FUNDS

F

RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT

OF REVENUES, EXPENDITURES AND CHANGES IN FUND

BALANCES TO THE STATEMENT OF ACTIVITIES

G

STATEMENT OF FIDUCIARY NET ASSETS

FIDUCIARY FUNDS

H

NOTES TO THE BASIC FINANCIAL STATEMENTS

SCHEDULES

REQUIRED SUPPLEMENTARY INFORMATION

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

Page
i
1 2 4 5 6 7 8 9
27

PAULDING COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS -

SECTION I

FINANCIAL

SCHEDULES

SUPPLEMENTARY INFORMATION

COMPONENT UNIT FUND FINANCIAL STATEMENTS

2

STATEMENT OF NET ASSETS

PROPRIETARY FUND

3

STATEMENT OF REVENUES, EXPENSES AND CHANGES

IN NET ASSETS

PROPRIETARY FUND

4

STATEMENT OF CASH FLOWS

PROPRIETARY FUND

5

SELECTED FINANCIAL NOTES

6 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS

7 SCHEDULE OF STATE REVENUE

8 SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS

9 ALLOTMENTS AND EXPENDITURES

GENERAL FUND - QUALITY BASIC EDUCATION PROGRAMS (QBE)

BY PROGRAM

Page
28 29 30 31 32 34 35 37

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

PAULDING COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS -
SECTION IV FINDINGS AND QUESTIONED COSTS SCHEDULE OF FINDINGS AND QUESTIONED COSTS

SECTION I FINANCIAL

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

DEPARTMENT OF AUDITS AND ACCOUNTS
270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400
February 21, 2012

Honorable Nathan Deal, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the Paulding 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, the discretely presented component unit, each major fund, and the aggregate remaining fund information (Exhibits A through H) of the Paulding County Board of Education, as of and for the year ended June 30, 2011, which collectively comprise the Board's basic financial statements as listed in the table of contents. These financial statements are the responsibility of the Paulding 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, the discretely presented component unit, each major fund, and the aggregate remaining fund information of the Paulding County Board of Education, as of June 30, 2011, and the respective changes in financial position and cash flows thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America.

2011ARL-11

In accordance with Government Auditing Standards, we have also issued our report dated February 21, 2012, on our consideration of the Paulding County Board of Education's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit.
Management's Discussion and Analysis and the Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual, as presented on pages i through vii and page 27 respectively, are not a required part of the basic financial statements but are supplementary information required by accounting principles generally accepted in the United States of America. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods of measurement and presentation of the required supplementary information. However, we did not audit the information and express no opinion on it.
Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Paulding County Board of Education's financial statements as a whole. The accompanying supplementary information consists of Schedules 2 through 9, which includes the Schedule of Expenditures of Federal Awards as required by U. S. Office of Management and Budget Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations, are presented for purposes of additional analysis and are not a required part of the financial statements. The information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, the information is fairly stated, in all material respects, in relation to the financial statements as a whole.
A copy of this report has been filed as a permanent record in the office of the State Auditor and made available to the press of the State, as provided for by Official Code of Georgia Annotated section 50-6-24.
Respectfully submitted,

RWH:as 2011ARL-11

Russell W. Hinton, CPA, CGFM State Auditor

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

The discussion and analysis of the Paulding County Board of Education's financial performance provides an overall review of the Board's financial activities for the fiscal year ended June 30, 2011. The intent of this discussion and analysis is to look at the Board's financial performance as a whole. Readers should also review the financial statements and the notes to the basic financial statements to enhance their understanding of the Board's financial performance.

The Paulding County School District has prepared the annual financial report to comply with the reporting model for financial statements (GASB Statement 34).

Financial Highlights

Key financial highlights for fiscal year 2011 are as follows:



The Board's financial status continued to improve during fiscal year 2011. In total, net

assets increased $19.2 million, which represents a 7 percent increase from the fiscal year

2010 balance. This total increase was due to governmental activities since the Board has no

business-type activities.



General revenues accounted for $104.8 million in revenue or 41 percent of all revenues.

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

contributions accounted for $148 million or 59 percent of total revenues. Total revenues

were $252.8 million.



The Board had $233.6 million in expenses related to governmental activities; only $148

million of these expenses were offset by program specific charges for services, grants or

contributions. General revenues, primarily taxes, of $104.8 million were adequate to provide

for these programs.



Among major funds, the general fund had $227.5 million in revenues, $2.2 million in net

other financing sources and $219.6 million in expenditures. The general fund's balance

increased to $29.5 million from $19.5 million.

Using the Basic Financial Statements

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

i

PAULDING COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2011
Reporting the Board as a Whole
Statement of Net Assets and Statement of Activities
While these documents contain the large number of funds used by the Board to provide programs and activities, the view of the Board as a whole looks at all financial transactions and asks the question, "How did we do financially during fiscal year 2011?" The Statement of Net Assets and the Statement of Activities answer this question. These statements include all assets and all liabilities using the accrual basis of accounting similar to the accounting used by most private-sector companies. This basis of accounting takes into account all of the current year's revenues and expenses regardless of when cash is received or paid.
These two statements report the Board's net assets and changes in those assets. This change in net assets is important because it tells the reader whether, for the Board as a whole, the financial position of the Board has improved or diminished. The causes of this change may be the result of many factors, some financial, some not. Nonfinancial factors include the Board's property tax base, facility conditions, required educational programs and other factors.
In the Statement of Net Assets and the Statement of Activities, the Board has one distinct type of activity:
Governmental Activities - All of the Board's programs and services are reported here including instruction, support services, operation and maintenance of plant, pupil transportation, food service, after school program, school activity accounts and various others.
Reporting the Board's Most Significant Funds
Fund Financial Statements
Fund financial reports provide detailed information about the Board's major funds. The Board uses many funds to account for a multitude of financial transactions. However, these fund financial statements focus on the Board's most significant funds. The Board's major governmental funds are the General Fund, the District-wide Capital Projects Fund, and the Debt Service Fund.
Governmental Funds: Most of the Board's activities are reported in governmental funds, which focus on how money flows into and out of those funds and the balances left at year-end available for spending in future periods. These funds are reported using an accounting method called modified accrual accounting, which measures cash and all other financial assets that can readily be converted to cash. The governmental fund statements provide a detailed short-term view of the Board's general government operations and the basic services it provides. Governmental fund information helps you determine whether there are more or fewer financial resources that can be spent in the near future to finance educational programs. The relationship (or differences) between governmental activities (reported in the Statement of Net Assets and the Statement of Activities) and governmental funds is reconciled in the financial statements.
Fiduciary Funds: The Board is the trustee, or fiduciary, for assets that belong to others, such as school clubs and organizations within the school activity accounts. The Board 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 Board excludes these activities from the District-wide financial statements because it cannot use these assets to finance its operations.
ii

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

The Board as a Whole
The perspective of the Statement of Net Assets is of the Board as a whole. Table 1 provides a summary of the Board's net assets for fiscal year 2011.

Net Assets (In Thousands)

Governmental Activities

Fiscal

Fiscal

Year 2011

Year 2010*

Assets Current and Other Assets Capital Assets, Net

$

101,813 $

104,500

386,394

384,714

Total Assets

$

488,207 $

489,214

Liabilities Current and Other Liabilities Long-Term Liabilities

$

37,335 $

39,763

149,157

166,661

Total Liabilities

$

186,492 $

206,424

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

$

264,141 $

245,152

22,259

23,527

15,315

14,111

Total Net Assets

$

301,715 $

282,790

* This table does not reflect the effects of any restatements. See note 2 in the basic financial statements for more information.

Total net assets increased $18.9 million.

Table 2 shows the changes in net assets for fiscal year 2011 compared to the changes in net assets in fiscal year 2010.

iii

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

Table 2 Change in Net Assets
(In Thousands)
Revenues Program Revenues: Charges for Services and Sales Operating Grants and Contributions Capital Grants and Contributions

Governmental Activities

Fiscal Year

Fiscal Year

2011

2010*

$

6,299 $

8,712

138,719

131,292

3,015

9,629

Total Program Revenues

$

148,033 $

149,633

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

$

59,162 $

69,948

9,460

11,106

24

20

9,997 3,644
961

13,394 1,134

17,276 84
4,194

16,803 175
4,162

16

$

104,818 $

116,742

$

252,851 $

266,375

$

153,734 $

159,188

6,851 4,943 4,113 1,520 13,354
977 16,164 10,414
1,233 190

8,417 7,870 4,371 1,554 14,450 1,087 17,360 11,176 1,704
213

1,433 29
12,652 6,023

1,963 1,537 12,714 6,864

$

233,630 $

250,468

$

19,221 $

15,907

PAULDING COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2011
* This table does not reflect the effects of any restatements. See note 2 in the basic financial statements for more information.
Governmental Activities
Instruction comprises 65.8 percent of governmental program expenses. Interest expense comprises 2.6 percent of governmental program expenses. Interest expense was attributable to the outstanding bonds for capital projects and capital leases.
The Statement of Activities shows the cost of program services and the charges for services and grants offsetting those services. Table 3 shows, for governmental activities, the total cost of services and the net cost of services. That is, it identifies the cost of these services supported by tax revenue and unrestricted State entitlements.

Table 3 Governmental Activities
(In Thousands)

Total Cost of Services

Fiscal

Fiscal

Year 2011

Year 2010 *

Net Cost of Services

Fiscal

Fiscal

Year 2011

Year 2010 *

Instruction

$

153,734 $

159,188 $

Support Services:

Pupil Services

6,851

8,417

Improvement of Instructional Services

4,943

7,870

Educational Media Services

4,113

4,371

General Administration

1,520

1,554

School Administration

13,354

14,450

Business Administration

977

1,087

Maintenance and Operation of Plant

16,164

17,360

Student Transportation Services

10,414

11,176

Central Support Services

1,233

1,704

Other Support Services

190

213

Operations of Non-Instructional Services:

Enterprise Operations

1,433

1,963

Community Services

29

1,537

Food Services

12,652

12,714

Interest on Short-Term and Long-Term Debt

6,023

6,864

45,899 $
5,685 1,515
967 -1,577 7,605
973 8,671 7,914 1,205
119
57 28 514 6,023

52,744
7,299 4,419 1,084 -1,478 8,570 1,056 9,599 9,059 1,580
115
25 -36 -65 6,865

Total Expenses

$

233,630 $

250,468 $

85,598 $

100,836

* This table does not reflect the effects of any restatements. See note 2 in the basic financial statements for more information.

Although program revenues make up a majority of the revenues, the Board is still dependent upon tax revenues for governmental activities. 30 percent of instruction activities are supported through taxes and other general revenues; for all governmental activities general revenue support is over 36 percent.
v

PAULDING COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2011
The Board's Funds
The Board's governmental funds are accounted for using the modified accrual basis of accounting. Total governmental funds had revenues and other financing sources of $256.9 million and expenditures and other financing uses of $257.2 million. There was a decrease of $6.6 million in the capital projects fund due to construction. The general fund had an increase of $10.0 million and the debt service fund had a decrease of $3.7 million. The negative change in the fund balance of the debt service fund for the year is due to the required principal and interest payments of the General Obligation Bonds. General Fund Budgeting Highlights
The Board's budget is prepared according to Georgia law. The most significant budgeted fund is the General Fund.
During the course of fiscal year 2011, the Board amended its general fund budget as needed. The Board uses site-based budgeting. The budgeting systems are designed to tightly control total site budgets but provide flexibility for site management.
For the General Fund, the final budgeted revenues of $226.8 million reflect an increase to the original budgeted amount of $221.3 million by $5.5 million. This difference was primarily due to increases in state revenues budgeted of $2.0 million and Federal revenues budgeted of $3.5 million. The actual revenues of $227.5 million were more than the final budgeted amount by $0.7 million.
The final budgeted expenditures of $225.2 million reflect an increase to the original budgeted amount of $223.4 million by $1.8 million. This difference was primarily due to an increase in instruction of $0.7 million, an increase of $0.7 million in Student Transportation and an increase in Maintenance and Operation of $0.3 million. The final budgeted amount of $225.2 exceeded the actual expenditures by $5.6 million.
General Fund revenues exceeded expenditures by $7.9 million. The Board has made a concerted effort to maintain an appropriate fund balance for current operations and anticipated austerity reductions.
Capital Assets and Debt Administration Capital Assets
At the end of fiscal year 2011, the Board had $386.4 million invested in capital assets, all in governmental activities. Table 4 shows fiscal year 2011 balances compared with fiscal year 2010 balances.
vi

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

Table 4 Capital Assets (Net of Depreciation, in Thousands)

Governmental Activities

Fiscal

Fiscal

Year 2011

Year 2010

Land

$

Construction In Progress

Building and Improvements

Equipment

Land Improvements

11,170 $ 16,910 341,764 14,268
2,282

9,939 36,944 321,741 13,845
2,246

Total

$

386,394 $

384,715

The primary increases occurred in Buildings and Improvements as a result of the completion of one elementary school and miscellaneous additions to other schools. Due to the ongoing growth in the County, the Board has numerous construction projects including new buildings, additions and renovations.
Debt

At June 30, 2011, the Board had $141.0 million in bonds outstanding with $19.3 million due within one year. The School District's legal debt limit is 10 percent of the net assessed valuation of $3,211.9 million for bond purposes, or a maximum bonded debt of $321.2 million. The total current bonded restricted debt of $141.0 million is well below the legal limit. Other long-term liabilities amounted to $8.1 million, which consists of unamortized bond premiums, capital leases and compensated absences.

Current Issues

With approximately 28,000 students, the Paulding County School District is one of the largest districts in the state. As home buying slowed, we had a window of opportunity to make greater strides in the demands on our facilities and resources in a district this size. The economy, recruitment and retention of highly qualified staff and erosion of state and local funding has resulted in increased reliance on Federal stimulus/stabilization funding.

The School District is facing operating challenges due to the decline in the economy. The Paulding County School District is committed to finding solutions that provide the best education for our children with the least possible impact on the classroom while working to minimize the financial impact on our employees.

Contacting the Board's Financial Management

This financial report is designed to provide our citizens, taxpayers, investors, and creditors with a general overview of the Board's finances and to show the Board's accountability for the money it receives. If you have questions about this report or need additional information, contact Gayle W. Blalock, CPA, Chief Financial Officer at the Paulding County Board of Education, 3236 Atlanta Highway, Dallas, Georgia 30132.

vii

PAULDING COUNTY BOARD OF EDUCATION

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

EXHIBIT "A"

ASSETS
Cash and Cash Equivalents Investments Accounts Receivable, Net Taxes State Government Federal Government Other Inventories Prepaid Capitalized Bond and Other Debt Issuance Cost Capital Assets, Non-Depreciable Capital Assets, Depreciable (Net of Accumulated Depreciation)
Total Assets
LIABILITIES
Accounts Payable Salaries and Benefits Payable Claims Incurred but not Reported (IBNR) Payroll Withholdings Payable Contracts Payable Retainages Payable Interest Payable Long-Term Liabilities: Due Within One Year Due in More Than One Year
Total Liabilities
NET ASSETS
Invested in Capital Assets, Net of Related Debt Restricted for Boles Memorial Scholarship Continuation of Federal Programs Debt Service Capital Projects Logans Crossing Scholarship Martin Scholarship Rakestraw Memorial Scholarship Unrestricted
Total Net Assets
Total Liabilities and Net Assets

PRIMARY GOVERNMENT GOVERNMENTAL
ACTIVITIES

COMPONENT UNIT PAULDING EDUCATION
FOUNDATION, INC.

$ 50,693,034.47 $ 21,314,529.94
8,129,258.58 17,035,015.99
2,606,445.74 176,388.73 397,409.58 101,659.81
1,359,327.65 28,079,929.31 358,313,904.87
$ 488,206,904.67 $

210,535.17 21,996.15
232,531.32

$

7,520,413.41

25,497,795.98

369,172.16

28,817.29

879,069.36

305,365.27

2,733,907.08

21,325,165.50 127,832,241.71

$ 186,491,947.76

$ 264,141,471.85
$ 4,550,513.57 15,336,051.29 2,371,646.46

15,315,273.74 $ 301,714,956.91 $

$ 488,206,904.67 $

9,300.00
1,000.00 23,904.45 155,000.00 43,326.87 232,531.32
232,531.32

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

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

GOVERNMENTAL ACTIVITIES
Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Operations of Non-Instructional Services Enterprise Operations Community Services Food Services Operation Interest on Short-Term and Long-Term Debt
Total Governmental Activities
COMPONENT UNIT
Paulding Education Foundation, Inc.
General Revenues: Taxes: Property Taxes
For Maintenance and Operations For Debt Services For Railroad Cars Sales Taxes Special Purpose Local Option Sales Tax For Debt Services For Capital Projects Other Sales Tax Grants and Contributions Not Restricted to Specific Programs Investment Earnings Miscellaneous Special Items Gain on Sale of Equipment
Total General Revenues
Changes in Net Assets
Net Assets - Beginning of Year, Restated
Net Assets - End of Year

EXPENSES

CHARGES FOR SERVICES

$ 153,734,064.26

6,850,703.82 4,943,050.72 4,112,585.23 1,520,094.18 13,353,891.02
977,049.53 16,163,922.97 10,414,333.94
1,233,122.68 189,525.03

1,433,663.47 $ 29,653.77
12,652,055.38 6,023,159.68

1,376,833.27 1,266.57
4,921,334.56

$ 233,630,875.68 $ 6,299,434.40

$

51,312.35

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

PRIMARY

COMPONENT UNIT

GOVERNMENT

PAULDING

GOVERNMENTAL

EDUCATION

ACTIVITIES

FOUNDATION, INC.

$ 105,726,385.13 $ 2,108,628.55 $ -45,899,050.58

1,163,950.00 3,427,144.64 3,074,562.02 3,094,694.61 5,684,309.80
3,186.33 7,433,592.51 2,042,679.43
7,047.66 68,795.05

1,340.78 766.01
71,524.58 2,081.52
64,905.98 1,001.83
59,373.24 457,752.00
21,458.25 1,580.86

-5,685,413.04 -1,515,140.07
-966,498.63 1,576,681.95 -7,604,675.24
-972,861.37 -8,670,957.22 -7,913,902.51 -1,204,616.77
-119,149.12

292.50 6,991,983.46

126.82 224,293.18

-56,830.20 -27,967.88 -514,444.18 -6,023,159.68

$ 138,718,623.14 $ 3,014,833.60 $ -85,597,984.54

$

-51,312.35

$ 59,162,526.05 9,459,918.13 23,729.05
9,997,121.84 3,643,717.63
961,309.70 17,276,058.00
84,030.91 $ 4,194,441.00
15,628.51
$ 104,818,480.82 $
$ 19,220,496.28 $
282,494,460.63
$ 301,714,956.91 $

128.81 82,679.27
82,808.08 31,495.73 201,035.59
232,531.32

- 3 -

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

EXHIBIT "C"

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

GENERAL FUND

DISTRICTWIDE
CAPITAL PROJECTS
FUND

DEBT SERVICE
FUND

TOTAL

$ 39,785,111.59 $ 1,107,500.05
5,855,798.44 16,310,592.59
2,606,445.74 176,388.73 397,409.58 101,659.81

9,118,122.35 $ 1,789,800.53 $

4,625,890.61

15,581,139.28

1,370,119.98 724,423.40

903,340.16

50,693,034.47 21,314,529.94
8,129,258.58 17,035,015.99
2,606,445.74 176,388.73 397,409.58 101,659.81

$ 66,340,906.53 $ 15,838,556.34 $ 18,274,279.97 $ 100,453,742.84

$ 7,143,564.90 $ 25,497,795.98 28,817.29
4,187,875.51 $ 36,858,053.68 $

376,848.51
879,069.36 305,365.27
$ 1,561,283.14 $

$
642,336.38 642,336.38 $

7,520,413.41 25,497,795.98
28,817.29 879,069.36 305,365.27 4,830,211.89
39,061,673.20

$

499,069.39

$

4,153,103.99 $ 14,277,273.20 $ 17,631,943.59

1,341,433.01

23,489,246.46

$ 29,482,852.85 $ 14,277,273.20 $ 17,631,943.59 $

499,069.39 36,062,320.78
1,341,433.01 23,489,246.46
61,392,069.64

$ 66,340,906.53 $ 15,838,556.34 $ 18,274,279.97 $ 100,453,742.84

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

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

EXHIBIT "D"

Total Fund Balances - Governmental Funds (Exhibit "C")
Amounts reported for Governmental Activities in the Statement of Net Assets are different because:
Capital Assets used in Governmental Activities are not financial resources and therefore are not reported in the funds. These assets consist of:
Land Construction in Progress Land Improvements Buildings Machinery and Equipment Accumulated Depreciation Total Capital Assets
Taxes that are not available to pay for current period expenditures are deferred in the funds.
Property Taxes
Other Long-Term Assets are not available to pay for current period expenditures and therefore, are deferred on the Statement of Net Assets.
Deferred Charges - Capitalized Bond Issuance Costs
Long-Term liabilities, including Bonds Payable, are not due and payable in the current period and therefore are not reported as liabilities in the funds. Long-Term Liabilities at year-end consist of:
Bonds Payable Capital Leases Payable Compensated Absences Unamortized Bond Premiums Claims Incurred but not Reported (IBNR) Interest Payable Total Long-Term Liabilities

$ 61,392,069.64

$ 11,170,087.54 16,909,841.77 4,162,321.76
400,367,580.06 34,830,038.51 -81,046,035.46

386,393,834.18

4,830,211.89

1,359,327.65

$ -141,015,000.00 -1,642,471.19 -574,732.01 -5,925,204.01 -369,172.16 -2,733,907.08

-152,260,486.45

Net Assets of Governmental Activities (Exhibit "A")

$ 301,714,956.91

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

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

EXHIBIT "E"

REVENUES
Property Taxes Sales Taxes State Funds Federal Funds Charges for Services Investment Earnings Miscellaneous
Total Revenues
EXPENDITURES
Current: Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Enterprise Operations Community Services Food Services Operation Capital Outlay Debt Service: Principal Interest Dues and Fees
Total Expenditures
Excess of Revenues Over (Under) Expenditures
OTHER FINANCING SOURCES (USES)
Sale of Equipment Capital Leases Transfers In Transfers Out
Total Other Financing Sources (Uses)
Net Changes in Fund Balances
Fund Balances - Beginning, Restated

GENERAL FUND

DISTRICTWIDE
CAPITAL PROJECTS
FUND

DEBT SERVICE
FUND

TOTAL

$ 59,692,909.30 826,464.40 $
132,670,567.61 23,781,865.53 6,299,434.40 62,230.61 4,194,441.00
$ 227,527,912.85 $

$ 3,643,717.63 2,557,081.60
16,183.02

9,519,017.41 $ 10,131,967.14
5,617.28

69,211,926.71 14,602,149.17 135,227,649.21 23,781,865.53
6,299,434.40 84,030.91
4,194,441.00

6,216,982.25 $ 19,656,601.83 $ 253,401,496.93

$ 147,007,601.39

$ 147,007,601.39

6,843,534.90 4,943,594.35 3,835,694.62 1,511,684.69 13,095,233.36
966,200.16 16,167,271.46
9,573,706.04 1,147,298.80
182,672.14 1,433,663.47
29,152.54 11,893,063.95
$

11,401,747.66

6,843,534.90 4,943,594.35 3,835,694.62 1,511,684.69 13,095,233.36
966,200.16 16,167,271.46
9,573,706.04 1,147,298.80
182,672.14 1,433,663.47
29,152.54 11,893,063.95 11,401,747.66

1,006,508.51 31,006.15

$ 3,675.00

17,735,000.00 7,028,939.50 5,028.30

18,741,508.51 7,059,945.65 8,703.30

$ 219,667,886.53 $ 11,405,422.66 $ 24,768,967.80 $ 255,842,276.99

$

7,860,026.32 $ -5,188,440.41 $ -5,112,365.97 $

-2,440,780.06

$

31,397.00

$

31,397.00

2,124,753.75

2,124,753.75

$ 1,393,215.75

1,393,215.75

-5,003.00 $ -1,388,212.75

-1,393,215.75

$

2,151,147.75 $ -1,388,212.75 $ 1,393,215.75 $

2,156,150.75

$ 10,011,174.07 $ -6,576,653.16 $ -3,719,150.22 $

-284,629.31

19,471,678.78

20,853,926.36

21,351,093.81

61,676,698.95

Fund Balances - Ending

$ 29,482,852.85 $ 14,277,273.20 $ 17,631,943.59 $

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

61,392,069.64

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

EXHIBIT "F"

Total Net Changes in Fund Balances - Governmental Funds (Exhibit "E")
Amounts reported for Governmental Activities in the Statement of Activities are different because:
Capital Outlays reported as expenditures in Governmental Funds. However, in the Statement of Activities, the cost of Capital Assets is allocated over their estimated useful lives as depreciation expense. In the current period, these amounts are:
Capital Outlay Depreciation Expense
Excess of Capital Outlay over Depreciation Expense
Taxes reported in the Statement of Activities that do not provide current financial resources are not reported as revenues in the funds.
The net effect of various miscellaneous transactions involving capital assets (i.e., sales, trade-ins, donations, and disposals) is to decrease net assets.
Bond issuance costs, deferred gains on refundings and similar items when debt is first issued are reported as an expenditure in Governmental Funds, but are reported as deferred charges on the Statement of Net Assets and amortized over the term of the debt, using the straight-ling method. The details of this difference in the current period are as follows:
Amortization of Bond Issuance Costs
Some of the Capital Assets acquired this year were financed with capital leases. In Governmental Funds, a capital lease arrangement is considered a source of financing, but in the Statement of Net Assets, the lease obligation is reported as a Long-Term Liability.
Repayment of Long-Term Debt is reported as an expenditure in Governmental Funds, but the repayment reduces Long-Term Liabilities in the Statement of Net Assets. In the current year, these amounts consist of:
Bond Principal Retirements Bond Premium Retirements Capital Lease Payments
Total Long-Term Debt-Repayments
Interest expense reported in the Statement of Activities is recorded as incurred, whereas interest expense in the governmental fund statements is reported when paid.
Some items 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. These activities consist of:
Increase in Compensated Absences Decrease in Claims and Judgments
Total Additional Expenditures
Change in Net Assets of Governmental Activities (Exhibit "B")

$

-284,629.31

$ 12,314,813.93 -10,619,815.66

1,694,998.27

-565,753.48

-15,768.49

-175,430.99 -2,132,995.10

$ 17,735,000.00 914,274.25
1,006,508.51

19,655,782.76

297,942.71

$

-18,598.51

764,948.42

746,349.91

$ 19,220,496.28

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

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

EXHIBIT "G"

AGENCY FUNDS

$

302,381.88

$

302,381.88

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

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

EXHIBIT "H"

NOTE 1: DESCRIPTION OF SCHOOL DISTRICT AND REPORTING ENTITY
REPORTING ENTITY
The Paulding 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.
DISCRETELY PRESENTED COMPONENT UNIT
The Paulding Education Foundation, Inc. (Foundation) is a private, non-profit organization incorporated in 2006 to promote excellence in education in the School District. The Foundation encourages community and private sector support for educational activities. Contributions to the Foundation support scholarships, grants to teachers and schools as well as other School District programs.
The affairs and business of the Foundation are conducted by a Board of Trustees of not less than eight (8) but no more than twenty-two (22) voting members. In addition to the voting members, the Board of Trustees consists of three (3) non-voting members. These non-voting member positions are held by the Chairperson of the Paulding County Board of Education, the School District's Superintendent, and the School District's Chief Financial Officer, who also serves as the Foundation's treasurer. All powers, duties and functions of the Foundation conferred by the Articles of Incorporation, bylaws, state statutes, common law, court decisions, or otherwise, are exercised or performed by the Board of Trustees.
The School District deems it misleading to exclude the Foundation from its financial statements. Therefore, for fiscal year 2011, the School District included the Foundation as a discretely presented component unit in accordance with GASB Statement No. 14. The Foundation has a December 31 fiscal year end. The Foundation's December 31, 2010 financial information is presented in a separate column on the School District's Statement of Net Assets and Statement of Activities. The Foundation does not issue separate financial statements. Accordingly, the Foundation's fund financial statements are included herein as supplementary information (Schedules 2 through 5).
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 Paulding 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.
- 9 -

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

EXHIBIT "H"

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. 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 funds account for assets held by the School District as an agent for various funds, government, 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 are 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, claims and judgments, and compensated absences, 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.
- 10 -

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

EXHIBIT "H"

The School District funds certain programs by a combination of specific cost-reimbursement grants, categorical grants, and general revenues. Thus, when program costs are incurred, there are both restricted and unrestricted net assets available to finance the program. It is the School District's policy to first apply grant resources to such programs, followed by cost-reimbursement grants, then general revenues.
The State of Georgia reimburses the School District for teachers' salaries and operating costs through the Quality Basic Education Formula Earnings program (QBE). Generally teachers are contracted for the school year (July 1 June 30) and paid over a twelve month contract period, generally September 1 through August 31. In accordance with the respective rules and regulations of the QBE program, the State of Georgia reimburses the School District over the same twelve month period in which teachers are paid. At June 30, the amount of teachers' salaries incurred but not paid until July and August of the subsequent year are accrued. Since the State of Georgia recognizes its QBE liability for the July and August salaries at June 30, the School District recognizes the same QBE as a receivable and revenue, consistent with symmetrical recognition.
NEW ACCOUNTING PRONOUNCEMENTS
In fiscal year 2011, the School District adopted the Governmental Accounting Standards Board (GASB) Statement No. 54, Fund Balance Reporting and Governmental Fund Type Definitions. The provisions of this Statement establish accounting and financial reporting standards for all governments that report governmental funds. It establishes criteria for classifying fund balances into specifically defined classifications and clarifies definitions for governmental funds.
RESTATEMENT OF PRIOR YEAR NET ASSETS/FUND BALANCE
For fiscal year 2011, the School District made a prior period adjustment due to an omission of accounts payable, which require the restatement of the June 30, 2010, net assets in Governmental Activities and fund balance in the General Fund. The result is an increase in Net Assets and Fund Balance at July 1, 2010, of $295,544.99. These changes are in accordance with generally accepted accounting principles.
District-wide Financial Statements

Net Assets, July 1, 2010, as previously reported Less: Adjustment for prior year expenses

$

282,790,005.62

295,544.99

Net assets, July 1, 2010, as restated

$

282,494,460.63

Governmental Fund Financial Statements
Fund Balance, July 1, 2010, as previously reported Less: Adjustment for prior year expenditures

General Fund

$

19,767,223.77

295,544.99

Fund Balance, July 1, 2010, as restated

$

19,471,678.78

CASH AND CASH EQUIVALENTS
Composition of Deposits
Cash and cash equivalents consist of cash on hand, demand deposits and short-term investments with original maturities of three months or less from the date of acquisition in authorized financial institutions. Official Code of Georgia Annotated Section 45-8-14 authorizes the School District to deposit its funds in one or more solvent banks, insured Federal savings and loan associations or insured chartered building and loan associations.

- 11 -

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

EXHIBIT "H"

INVESTMENTS
Composition of Investments
Investments made by the School District in nonparticipating interest-earning contracts (such as certificates of deposit) and repurchase agreements are reported at cost. Participating interestearning contracts and money market investments with a maturity at purchase of one year or less are reported at amortized cost. Both participating interest-earning contracts and money market investments with a maturity at purchase greater than one year are reported at fair value. The Official Code of Georgia Annotated Section 36-83-4 authorizes the School District to invest its funds. In selecting among options for investment or among institutional bids for deposits, the highest rate of return shall be the objective, given equivalent conditions of safety and liquidity. Funds may be invested in the following:
1. Obligations issued by the State of Georgia or by other states,
2. Obligations issued by the United States government,
3. Obligations fully insured or guaranteed by the United States government or a United States government agency,
4. Obligations of any corporation of the United States government,
5. Prime banker's acceptances,
6. The Georgia Fund 1 administered by the State of Georgia, Office of State Treasurer,
7. Repurchase agreements, and
8. Obligations of other political subdivisions of the State of Georgia.
The School District does not have a formal policy regarding investment policies that address credit risks, custodial credit risks, concentration of credit risks, interest rate risks or foreign currency risks.
RECEIVABLES
Receivables consist of amounts due from property and sales taxes, grant reimbursements due on Federal, State or other grants for expenditures made but not reimbursed and other receivables disclosed from information available. Receivables are recorded when either the asset or revenue recognition criteria has been met. 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 Paulding County Board of Commissioners fixed the property tax levy for the 2010 tax digest year (calendar year) on August 10, 2010 (levy date). Taxes were due on November 15, 2010 (lien date). Taxes collected within the current fiscal year or within 60 days after year-end on the 2010 tax digest are reported as revenue in the governmental funds for fiscal year 2011. The Paulding County Tax Commissioner bills and collects the property taxes for the School District, withholds 2.5% of taxes collected as a fee for tax collection and remits the balance of taxes collected to the School District. Property tax revenues, at the fund reporting level, during the fiscal year ended June 30, 2011, for maintenance and operations amounted to $59,669,180.25 and for school bonds amounted to $9,519,017.41.

- 12 -

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

EXHIBIT "H"

Tax millage rates levied for the 2010 tax year (calendar year) for the Paulding County Board Of Education were as follows (a mill equals $1 per thousand dollars of assessed value):

School Operations School Bonds

18.909 mills 2.963 mills

21.872 mills

SALES TAXES
Special Purpose Local Option Sales Tax, at the fund reporting level, during the year amounted to $13,640,839.47 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.
PREPAID ITEMS
Payments made to vendors for services that will benefit periods subsequent to June 30, 2011, are recorded as prepaid items.
CAPITAL ASSETS
Capital assets purchased, including capital outlay costs, are recorded as expenditures in the fund financial statements at the time of purchase (including ancillary charges). On the District-wide financial statements, all purchased capital assets are valued at cost where historical records are available and at estimated historical cost based on appraisals or deflated current replacement cost where no historical records exist. Donated capital assets are recorded at estimated fair market value on the date donated. Disposals are deleted at depreciated recorded cost. The cost of normal maintenance and repairs that do not add to the value of assets or materially extend the useful lives of the assets is not capitalized. Depreciation is computed using the straight-line method. The School District does not capitalize book collections or works of art. During the fiscal year under review, no events or changes in circumstances affecting a capital asset that may indicate impairment were known to the School District. Capitalization thresholds and estimated useful lives of capital assets reported in the District-wide statements are as follows:

Capitalization Policy

Estimated Useful Life

Land Land Improvements Buildings and Improvements Equipment Intangible Assets

ALL

$

5,000.00

$

5,000.00

$

5,000.00

$

100,000.00

N/A 20 years 50 years
5 to 25 years 20 years

Depreciation is used to allocate the actual or estimated historical cost of all capital assets over estimated useful lives, with the exception of intangible assets which are amortized.

- 13 -

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

EXHIBIT "H"

Amortization of intangible assets such as water, timber, and mineral rights, easements, patents, trademarks, copyrights and internally generated software is computed using the straight-line method over the estimated useful lives of the assets, generally 20 years.
COMPENSATED ABSENCES

Members of the Teachers Retirement System of Georgia (TRS) may apply unused sick leave toward early retirement. The liability for early retirement will be borne by TRS rather than by the individual school districts. Otherwise, sick leave does not vest with the employee, and no liability is reported in the School District's financial statements.

Vacation leave of 12 days (1.0 day per month) is awarded on a fiscal year basis to all full time personnel employed on a twelve month basis with less than 5 years' experience and 15 days (1.25 days per month) per fiscal year is awarded to all full time personnel employed on a twelve month basis with 5 or more years of experience. No other employees are eligible to earn vacation leave. Vacation leave not utilized during the fiscal year may be carried over to the next fiscal year, providing such vacation leave does not exceed 20 days.

Changes in the compensated absences liability for the three fiscal years are as follows:

Beginning of Year Liability

Increases

Decreases

End of Year Liability

2009 $ 2010 $ 2011 $

456,796.85 $ 538,778.44 $ 556,133.50 $

661,924.80 $ 1,043,860.58 $
933,650.97 $

579,943.21 $ 1,026,505.52 $
915,052.46 $

538,778.44 556,133.50 574,732.01

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. Bond premiums and discounts are amortized based on percentage of principal paid. Bond issuance costs are reported as deferred charges and amortized over the term of the debt using the straight-line method.
In the fund financial statements, the School District recognizes bond premiums and discounts, as well as bond issuance costs during the fiscal year bonds are issued. Premiums received on debt issuances are reported as other financing sources while discounts on debt issuances are reported as other financing uses. Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as debt service expenditures. In addition, general obligation bonds have been issued to refund existing general obligation bonds. General obligation bonds are direct obligations and pledge the full faith and credit of the government. The outstanding amount of these bonds is recorded in the Statement of Net Assets.
NET ASSETS
The School District's net assets in the District-wide Statements are classified as follows:
Invested in capital assets, net of related debt - This represents the School District's total investment in capital assets, net of outstanding debt obligations related to those capital assets. To the extent debt has been incurred but not yet expended for capital assets, such amounts are not included as a component of invested in capital assets, net of related debt.
Restricted net assets - These represent resources for which the School District is legally or contractually obligated to spend resources for continuation of Federal Programs and debt service in accordance with restrictions imposed by external third parties.
- 14 -

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

EXHIBIT "H"

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
The School District's fund balances are classified as follows:
Nonspendable Amounts that cannot be spent either because they are in a nonspendable form or because they are legally or contractually required to be maintained intact.
Restricted Constraints are placed on the use of resources are either (1) externally imposed conditions by creditors, grantors, contributors, or laws and regulations of other governments or (2) imposed by law through constitutional provisions or enabling legislation.
Committed Amounts that can be used only for specific purposes pursuant to constraints imposed by formal action of the Board of Education. The Board of Education is the School District's highest level of decision-making authority, and the formal action that is required to be taken to establish, modify, or rescind a fund balance commitment is a resolution approved by the Board. Committed fund balance also should incorporate contractual obligations to the extent that existing resources in the fund have been specifically committed for use in satisfying those contractual requirements. Assigned Amounts that are constrained by the School District's intent to be used for specific purposes, but are neither restricted nor committed. The intent should be expressed by (1) the Board of Education or (2) the budget or finance committee, or the Superintendent, or designee, to assign amounts to be used for specific purposes.
Unassigned The residual classification for the General Fund. This classification represents fund balances that has not been assigned to other funds and that has not been restricted, committed, or assigned to specific purposes within the General Fund.
Fund Balances of the Governmental Funds at June 30, 2011, are as follows:
FUND BALANCES

Nonspendable Inventories Prepaid Assets
Restricted Debt Service Capital Projects Continuation of Federal Programs
Assigned School Activity Accounts
Unassigned

$ 397,409.58 101,659.81 $

499,069.39

$ 17,631,943.59 14,277,273.20 4,153,103.99

36,062,320.78

1,341,433.01 23,489,246.46

Fund Balance, June 30, 2011

$ 61,392,069.64

When multiple categories of fund balance are available for expenditure, the School District will start with the most restricted category and spend those funds first before moving down to the next category with available funds.

- 15 -

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

EXHIBIT "H"

USE OF ESTIMATES
The preparation of the financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results may differ from those estimates.
NOTE 3: DEPOSITS AND INVESTMENTS COLLATERALIZATION OF DEPOSITS
Official Code of Georgia Annotated (O.C.G.A.) Section 45-8-12 provides that there shall not be on deposit at any time in any depository for a time longer than ten days a sum of money which has not been secured by surety bond, by guarantee of insurance, or by collateral. The aggregate of the face value of such surety bond and the market value of securities pledged shall be equal to not less than 110 percent of the public funds being secured after the deduction of the amount of deposit insurance. If a depository elects the pooled method (O.C.G.A. Section 45-8-13.1) the aggregate of the market value of the securities pledged to secure a pool of public funds shall be not less than 110 percent of the daily pool balance.
Acceptable security for deposits consists of any one of or any combination of the following:
1. Surety bond signed by a surety company duly qualified and authorized to transact business within the State of Georgia,
2. Insurance on accounts provided by the Federal Deposit Insurance Corporation,
3. Bonds, bills, notes, certificates of indebtedness or other direct obligations of the United States or of the State of Georgia,
4. Bonds, bills, notes, certificates of indebtedness or other obligations of the counties or municipalities of the State of Georgia,
5. Bonds of any public authority created by the laws of the State of Georgia, providing that the statute that created the authority authorized the use of the bonds for this purpose,
6. Industrial revenue bonds and bonds of development authorities created by the laws of the State of Georgia, and
7. Bonds, bills, notes, certificates of indebtedness, or other obligations of a subsidiary corporation of the United States government, which are fully guaranteed by the United States government both as to principal and interest or debt obligations issued by or securities guaranteed by the Federal Land Bank, the Federal Home Loan Bank, the Federal Intermediate Credit Bank, the Central Bank for Cooperatives, the Farm Credit Banks, the Federal Home Loan Mortgage Association, and the Federal National Mortgage Association.
CATEGORIZATION OF DEPOSITS
PRIMARY GOVERNMENT
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 formal policy for managing custodial credit risk. At June 30, 2011, the bank balances were $51,970,741.58. The bank balance is either insured or collateralized with securities held by the pledging financial institution's trust department in the name of the School District.
COMPONENT UNIT
At December 31, 2010, the carrying amount of deposits and bank balance for the Paulding Education Foundation, Inc., the discretely presented component unit, was $213,396.97, which was fully covered by Federal depository insurance.
- 16 -

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

EXHIBIT "H"

CATEGORIZATION OF INVESTMENTS

The School District's investments as of June 30, 2011, are presented below. All investments are presented by investment type and debt securities are presented by maturity.

Investment Type

Fair Value

Other Investments U. S. Treasury Money Market Mutual Funds

$ 15,581,139.28

Investment Pools Office of State Treasurer Georgia Fund 1

5,733,390.66

Total Investments

$ 21,314,529.94

The Georgia Fund 1, formerly referred to as LGIP, administered by the State of Georgia, Office of State Treasurer 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 State Treasurer for the Georgia Fund 1 (Primary Liquidity Portfolio) does not provide for investment in derivatives or similar investments. Additional information on the Georgia Fund 1 is disclosed in the State of Georgia Comprehensive Annual Financial Report. This audit can be obtained from the Georgia Department of Audits and Accounts at www.audits.ga.gov/SGD/CAFR.html.
The Primary Liquidity Portfolio consists of Georgia Fund 1 which is not registered with the SEC as an investment company but does operate in a manner consistent with the SEC's Rule 2a-7 of the Investment Company Act of 1940. The investment is valued at the pool's share price, $1.00 per share. The pool is an AAAm rated investment pool by Standard and Poor's. The weighted average maturity of Georgia Fund 1 may not exceed 60 days. The weighted average maturity for Georgia Fund 1 on June 30, 2011, was 59 days.
The U. S. Treasury Money Market Mutual Funds have a credit quality rating of AAAm by Standard and Poor's and Aaa-mf by Moody's. The funds have a weighted average maturity of approximately 10 days.
NOTE 4: NON-MONETARY TRANSACTIONS
The School District receives food commodities from the United States Department of Agriculture (USDA) for school breakfast and lunch programs. These commodities are recorded at their Federally assigned value. See Note 2 - Inventories

- 17 -

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

EXHIBIT "H"

NOTE 5: CAPITAL ASSETS The following is a summary of changes in the Capital Assets during the fiscal year:

Go vernmental A ctivities

Capital A ssets, No t B eing Depreciated:

Land

$

Co nstructio n Wo rk In P ro gress

B eginning B alances July 1, 2010

Reclassificatio ns of
B eginning B alances

9,939,185.54 $ 36,943,174.37

0.00 $

A djusted B eginning B alances July 1, 2010
9,939,185.54 $ 36,943,174.37

Increases

Decreases

Ending B alances June 30, 2011

1,230,902.00 7,713,153.35 $

$ 27,746,485.95

11,170,087.54 16,909,841.77

To tal Capital A ssets, No t B eing Depreciated

$ 46,882,359.91 $

0.00 $ 46,882,359.91 $

8,944,055.35 $ 27,746,485.95 $ 28,079,929.31

Capital A ssets, B eing Depreciated:

B uildings and

B uilding Impro vements

$ 372,371,888.65 $

Equipment

32,712,431.52

Land Impro vements

3,961,271.76

-1,172,347.13 $ 1,172,347.13

371,199,541.52 $ 33,884,778.65
3,961,271.76

29,168,038.54 1,748,155.99 $ 201,050.00

Less: A ccumulated Depreciatio n: B uildings and B uilding Impro vements Equipment Land Impro vements

50,630,850.04 18,867,523.77
1,714,973.63

50,630,850.04 18,867,523.77
1,714,973.63

7,972,631.64 2,481,652.05
165,531.97

$ 802,896.13

400,367,580.06 34,830,038.51 4,162,321.76

787,127.64

58,603,481.68 20,562,048.18
1,880,505.60

To tal Capital A ssets, B eing Depreciated, Net

$ 337,832,244.49 $

0.00 $ 337,832,244.49 $ 20,497,428.87 $

15,768.49 $ 358,313,904.87

Go vernmental A ctivity Capital A ssets - Net

$ 384,714,604.40 $

0.00 $ 384,714,604.40 $ 29,441,484.22 $ 27,762,254.44 $ 386,393,834.18

Current year depreciation expense by function is as follows:

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 Community Services Food Services

$

$

5,568.40

3,181.30

297,048.75

8,644.75

269,561.01

4,160.68

246,583.02

1,524,930.56

89,118.25

6,565.46

526.70

$

7,232,414.76
2,455,888.88 931,512.02
10,619,815.66

- 18 -

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

EXHIBIT "H"

NOTE 6: INTERFUND TRANSFERS

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

Transfer to

Transfers From

District-wide

General

Capital

Fund

Projects

Debt Service Fund

$

5,003.00 $ 1,388,212.75

Transfers are used to move property tax revenues collected by the General Fund and SPLOST proceeds collected by the Capital Projects Fund to the Debt Service Fund to pay principal, interest and administration fees on Bonds.
NOTE 7: RISK MANAGEMENT
The School District is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors or omissions; job related illness or injuries to employees; acts of God and unemployment compensation.
The School District participates in the Georgia School Boards Association Risk and Insurance Management System, a public entity risk pool organized on July 1, 1994, to develop and administer a plan to reduce risk of loss on account of general liability, motor vehicle liability, or property damage, including safety engineering and other loss prevention and control techniques, and to administer one or more groups of self-insurance funds, including the processing and defense of claims brought against members of the system. The School District pays an annual premium to the system for its general insurance coverage. Additional coverage is provided through agreements by the system with other companies according to their specialty for property, boiler and machinery (including coverage for flood and earthquake), general liability (including coverage for sexual harassment, molestation and abuse), errors and omissions, crime and automobile risks. Payment of excess insurance for the system varies by line of coverage.
The School District participates in the Georgia School Boards Association Workers' Compensation Fund, a public entity risk pool organized on July 1, 1992, to develop, implement, and administer a program of workers' compensation self-insurance for its member organizations. The School District pays an annual premium to the Fund for its general insurance coverage. Additional insurance coverage is provided through an agreement by the Fund with the Safety National Casualty Corporation to provide coverage for potential losses sustained by the Fund in excess of $500,000.00 loss per occurrence, up to the statutory limit. Employers' Liability insurance coverage is also provided by Safety National Casualty Corporation to provide coverage for potential losses sustained by the Fund in excess of $500,000.00 loss per occurrence, up to $2,000,000.00. The School District is self-insured with regard to workers compensation claims that do not exceed $100,000.00 per claim. 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.

- 19 -

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

EXHIBIT "H"

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

Beginning of Year Liability

Claims and Changes in Estimates

Claims Paid

End of Year Liability

2010 2011

$ 1,457,014.58 $ 2,704,258.03 $ 3,027,152.03 $ 1,134,120.58

$ 1,134,120.58 $ 1,362,767.21 $ 2,127,715.63 $

369,172.16

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

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

Beginning of Year Liability

Claims and Changes in Estimates

Claims Paid

End of Year Liability

2010 $ 2011 $

0.00 $ 0.00 $

73,244.00 $ 791,962.50 $

73,244.00 $ 791,962.50 $

0.00 0.00

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

Position Covered

Amount

Superintendent All Other Employees

$

250,000.00

$

250,000.00

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

- 20 -

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

EXHIBIT "H"

GENERAL OBLIGATION DEBT OUTSTANDING

General Obligation Bonds currently outstanding are as follows:

Purpose

Interest Rates

General Government - Series 2008 General Government - Series 2007 General Government - Series 2004 General Government - Refunding - Series 2003 General Government - Series 1995

3.00% - 5.00% 4.25% - 5.00% 2.50% - 5.00%
2.87% 5.50% - 6.00%

Amount
$ 53,865,000.00 62,500,000.00 13,935,000.00 6,210,000.00 4,505,000.00
$ 141,015,000.00

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

Balance July 1, 2010

Adjustments

Governmental Funds

Additions

Deductions

Balance June 30, 2011

Due Within One Year

G. O. Bonds

$ 158,750,000.00

Capital Leases

515,984.60 $

Compensated Absences

556,133.50

Bond Premiums Amortized

6,839,478.26

8,241.35 $

$ 17,735,000.00 $ 141,015,000.00 $ 19,310,000.00

2,124,753.75 1,006,508.51

1,642,471.19

504,245.41

933,650.97

915,052.46

574,732.01

518,308.85

914,274.25

5,925,204.01

992,611.24

Balance June 30, 2011 $ 166,661,596.36 $

8,241.35 $ 3,058,404.72 $ 20,570,835.22 $ 149,157,407.21 $ 21,325,165.50

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

Fiscal Year Ended June 30:

Capital Leases

Principal

Interest

2012 2013 2014 2015
Total Principal and Interest

$

504,245.41 $

508,728.73

544,162.03

85,335.02

$

1,642,471.19 $

116,138.02 80,716.65 44,646.07 6,052.25
247,552.99

- 21 -

Fiscal Year Ended June 30:
2012 2013 2014 2015 2016 2017 - 2021 2022 - 2026 2027 - 2031 2032 - 2033
Total Principal and Interest

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

General Obligation Debt

Principal

Interest

EXHIBIT "H"
Unamortized Bond Premium

$ 19,310,000.00 $

6,254,102.00 $

5,800,000.00

5,706,739.50

6,265,000.00

5,444,683.50

6,695,000.00

5,191,925.50

3,740,000.00

4,959,325.00

21,460,000.00

21,936,575.00

27,100,000.00

16,242,725.00

34,395,000.00

9,286,975.00

16,250,000.00

1,228,500.00

$ 141,015,000.00 $ 76,251,550.50 $

992,611.24 150,638.07 157,537.53 164,666.96 172,026.38 987,081.85 1,194,273.88 1,430,516.95 675,851.15
5,925,204.01

NOTE 9: ON-BEHALF PAYMENTS
The School District has recognized revenues and costs in the amount of $605,275.54 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 $385,865.89

Paid to the Teachers' Retirement System of Georgia For Teachers Retirement System (TRS) Employer's Cost In the amount of $94,948.65

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 $124,461.00

NOTE 10: SIGNIFICANT COMMITMENTS

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

Project

Unearned Executed Contracts

Funding Available From State

New Middle School #9

$ 10,590,135.08 $

9,062,588.00

The amounts described in this note are not reflected in the basic financial statements.

- 22 -

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

EXHIBIT "H"

NOTE 11: SIGNIFICANT CONTINGENT LIABILITIES
Amounts received or receivable principally from the Federal government are subject to audit and review by grantor agencies. This could result in requests for reimbursement to the grantor agency for any costs which are disallowed under grant terms. The School District believes that such disallowances, if any, will be immaterial to its overall financial position.
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 12: RELATED PARTY TRANSACTIONS
The Paulding Education Foundation, Inc., discretely presented component unit, expended funds to the School District in the amount of $25,688 during the component unit's fiscal year ended December 31, 2010. The School District, primary government, did not have any transactions with the Paulding Education Foundation, Inc. during the School District's fiscal year ended June 30, 2011.
NOTE 13: POST-EMPLOYMENT BENEFITS
GEORGIA SCHOOL PERSONNEL POST-EMPLOYMENT HEALTH BENEFIT FUND
Plan Description. The Georgia School Personnel Post-employment Health Benefit Fund (School OPEB Fund) is a cost-sharing multiple-employer defined benefit post-employment healthcare plan that covers eligible former employees of public school systems, libraries and regional educational service agencies. The School OPEB Fund provides health insurance benefits to eligible former employees and their qualified beneficiaries through the State Employees Health Benefit Plan administered by the Department of Community Health. The Official Code of Georgia Annotated (O.C.G.A.) assigns the authority to establish and amend the benefit provisions of the group health plans, including benefits for retirees, to the Board of Community Health (Board). The Department of Community Health, which includes the School OPEB Fund, issues a separate stand alone financial audit report and a copy can be obtained from the Georgia Department of Audits and Accounts.
Funding Policy. The contribution requirements of plan members and participating employers are established by the Board in accordance with the current Appropriations Act and may be amended by the Board. Contributions of plan members or beneficiaries receiving benefits vary based on plan election, dependent coverage, and Medicare eligibility and election. On average, plan members pay approximately 25 percent of the cost of 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. Contributions are not based on the actuarially calculated annual required contribution (ARC) which represents a level of funding that, if paid on an ongoing basis, is projected to cover normal cost each year and amortize any unfunded actuarial liabilities (or funding excess) over a period not to exceed thirty years.
The combined rates for the active and retiree contribution rates established by the Board for employers participating in the School OPEB Fund were as follows for the fiscal year ended June 30, 2011:

- 23 -

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

EXHIBIT "H"

For certificated teachers, librarians and regional educational service agencies:

July 2010 - April 2011 May 2011 - June 2011

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

For non-certificated school personnel:

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

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

The Department of Education was appropriated an additional $25,081,633 for non-certificated personnel health insurance payments. The amount attributable to the School District is reflected in the On-behalf note disclosure.

No additional contribution was required by the Board for fiscal year 2011 nor contributed to the State OPEB Fund to prefund retiree benefits. Such additional contribution amounts are determined annually by the Board in accordance with the State plan for other post-employment benefits and are subject to appropriation.

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

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

as follows:

Percentage

Required

Fiscal Year

Contributed

Contribution

2011 2010 2009

100%

$

21,342,501.92

100%

$

20,902,510.22

100%

$

15,209,779.58

NOTE 14: RETIREMENT PLANS
TEACHERS RETIREMENT SYSTEM OF GEORGIA (TRS)
Plan Description. The TRS is a cost-sharing multiple-employer defined benefit plan created in 1943 by an act of the Georgia General Assembly to provide retirement benefits for qualifying employees in educational service. A Board of Trustees comprised of active and retired members and ex-officio State employees is ultimately responsible for the administration of TRS. The Teachers Retirement System of Georgia issues a separate stand alone financial audit report and a copy can be obtained from the Georgia Department of Audits and Accounts.
On October 25, 1996, the Board created the Supplemental Retirement Benefits Plan of the Georgia Teachers Retirement System (SRBP-TRS). SRBP-TRS was established as a qualified excess benefit plan in accordance with Section 415 of the Internal Revenue Code (IRC) as a portion of TRS. The purpose of SRBP-TRS is to provide retirement benefits to employees covered by TRS whose benefits are otherwise limited by IRC Section 415. Beginning July 1, 1997, all members and retired former members in TRS are eligible to participate in the SRBP-TRS whenever their benefits under TRS exceed the IRC Section 415 imposed limitation on benefits.
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.

- 24 -

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

EXHIBIT "H"

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

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

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

Fiscal Year

Percentage Contributed

Required Contribution

2011 2010 2009

100%

$

12,647,372.00

100%

$

13,316,799.98

100%

$

12,477,624.25

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

SCHEDULE "1"

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

NONAPPROPRIATED BUDGETS

ORIGINAL (1)

FINAL (1)

ACTUAL AMOUNTS

$ 57,994,096.00 $ 57,994,096.00 $ 59,692,909.30

944,100.00

944,100.00

826,464.40

129,274,218.89

131,237,653.49

132,670,567.61

22,601,173.51

26,088,665.55

23,781,865.53

6,664,104.72

6,665,098.05

6,299,434.40

58,570.00

58,570.00

62,230.61

3,752,881.00

3,773,425.00

4,194,441.00

$ 221,289,144.12 $ 226,761,608.09 $ 227,527,912.85

$ 148,259,925.03 $ 148,966,569.88 $ 147,007,601.39

7,968,862.70 5,122,160.49 3,802,199.04 1,509,565.48 13,301,647.78 1,068,961.05 17,363,253.79 9,049,533.36 1,126,302.11
185,607.67 1,254,443.59
13,443,744.00

7,932,217.03 5,235,815.08 3,815,589.81 1,558,719.25 13,137,721.94 1,041,643.15 17,655,956.71 9,745,604.24 1,104,182.03
185,734.80 1,254,443.59
13,596,707.84

6,843,534.90 4,943,594.35 3,835,694.62 1,511,684.69 13,095,233.36
966,200.16 16,167,271.46
9,573,706.04 1,147,298.80
182,672.14 1,433,663.47
29,152.54 11,893,063.95
1,037,514.66

$ 223,456,206.09 $ 225,230,905.35 $ 219,667,886.53

$

-2,167,061.97 $

1,530,702.74 $

7,860,026.32

$

629,100.00 $

629,100.00 $

2,156,150.75

-629,100.00

-629,100.00

-5,003.00

$

0.00 $

0.00 $

2,151,147.75

$

-2,167,061.97 $

1,530,702.74 $ 10,011,174.07

19,784,820.43

19,632,281.56

19,471,678.78

Fund Balances - Ending

$ 17,617,758.46 $ 21,162,984.30 $ 29,482,852.85

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

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

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

See notes to the basic financial statements.

- 27 -

PAULDING COUNTY BOARD OF EDUCATION COMPONENT UNIT
STATEMENT OF NET ASSETS PROPRIETARY FUND DECEMBER 31, 2010
(Component Unit Fiscal Year End)
ASSETS Current Assets
Cash and Cash Equivalents Restricted Cash and Cash Equivalents Restricted Investments
Total Assets NET ASSETS Restricted for: Expendable: Boles Memorial Scholarship Logans Crossing Scholarship Martin Scholarship Rakestraw Memorial Scholarship Unrestricted
Total Net Assets

SCHEDULE "2"

PAULDING EDUCATION FOUNDATION, INC.

$

43,326.87

167,208.30

21,996.15

$

232,531.32

$

9,300.00

1,000.00

23,904.45

155,000.00

43,326.87

$

232,531.32

See notes to the basic financial statements.

- 28 -

PAULDING COUNTY BOARD OF EDUCATION COMPONENT UNIT
STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS PROPRIETARY FUND DECEMBER 31, 2010
(Component Unit Fiscal Year End)

SCHEDULE "3"

OPERATING REVENUES
Miscellaneous Individual Contributions Educators Payroll Deduction Contributions United Way Deduction Contributions Corporate Contributions Fund Raisers
Total Operating Revenues
OPERATING EXPENSES
Bank Charges Dues and Subscriptions Grants to Teachers Insurance Miscellaneous Other Program Grants Purchased Services Savings Bond Awards Scholarships School Projects
Total Operating Expenses
Operating Income (Loss)
NONOPERATING REVENUES (EXPENSES)
Interest and Investment Revenue
Changes in Net Assets
Total Net Assets - Beginning
Total Net Assets - Ending

PAULDING EDUCATION FOUNDATION, INC.

$

35,714.45

5,691.11

3,796.71

26,501.00

10,976.00

$

82,679.27

$

150.00

430.00

9,900.00

744.00

2,195.33

7,500.00

1,055.02

150.00

11,000.00

18,188.00

$

51,312.35

$

31,366.92

128.81

$

31,495.73

201,035.59

$

232,531.32

See notes to the basic financial statements.

- 29 -

PAULDING COUNTY BOARD OF EDUCATION COMPONENT UNIT
STATEMENT OF CASH FLOWS PROPRIETARY FUND DECEMBER 31, 2010
(Component Unit Fiscal Year End)
CASH FLOWS FROM OPERATING ACTIVITIES Receipts from Individual Receipts from Educators Payroll Deduction Receipts from United Way Deduction Receipts from Corporate Partners Receipts from Fund Raisers Payments to Suppliers Net Cash Provided (Used) by Operating Activities
CASH FLOWS FROM INVESTING ACTIVITIES Interest Purchase of Investments Net Cash Provided (Used) by Investing Activities
Net Increase (Decrease) in Cash and Cash Equivalents Cash and Cash Equivalents, Beginning of Year
Cash and Cash Equivalents, End of Year

SCHEDULE "4"

PAULDING EDUCATION FOUNDATION, INC.

$

35,714.45

5,691.11

3,796.71

26,501.00

10,976.00

-51,312.35

$

31,366.92

$

128.81

-21,996.15

$

-21,867.34

$

9,499.58

201,035.59

$

210,535.17

See notes to the basic financial statements.

- 30 -

PAULDING COUNTY BOARD OF EDUCATION COMPONENT UNIT
SELECTED FINANCIAL NOTES YEAR ENDED DECEMBER 31, 2010 (Component Unit Fiscal Year End)

SCHEDULE "5"

Selected Financial Notes to the Component Unit Statement of Net Assets; Statement of Revenues, Expenses and Changes in Net Assets; and Statement of Cash Flows as presented on Schedules 6 through 8.
The financial statements of The Paulding Education Foundation Inc. (Foundation) have been prepared in conformity with generally accepted accounting principles (GAAP) as applied to governmental units. The Governmental Accounting Standards Board (GASB) is the accepted standard-setting body for establishing governmental accounting and financial reporting principles.

The Foundation met the criteria to use enterprise fund accounting and financial reporting. Accordingly, the financial statements have been prepared using the economic resources measurement focus and the accrual basis of accounting. Revenues are recognized when earned and expenses are recognized when a liability is incurred, regardless of when the related cash flow occurs.

The Foundation has elected not to adopt the pronouncements of the Financial Accounting Standards Board (FASB) issued after November 30, 1989.

The Foundation considers assets to be current that can reasonably be expected, as part of its normal operations, to be converted to cash and available for liquidation of current liabilities within 12 months of the statement of net assets date. Liabilities that reasonably can be expected, as part of its normal operations, to be liquidated within 12 months of the statement of net assets date are considered to be current. All other assets and liabilities are considered to be noncurrent.

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. Restricted cash and cash equivalents use is restricted by donors.

The Foundation is exempt from income taxes under section 501(c) (3) of the Internal Revenue Code. Accordingly, the financial statements reflect no provision for income taxes.

Restricted net assets represent resources for which the Foundation is obligated to spend in accordance with restrictions imposed by donors.

If both restricted and unrestricted assets are available for use for a certain purpose, it is the Foundation's policy to use restricted assets first, and then use unrestricted assets as needed.

Contributions, including unconditional promises to give, are recoded as revenue when the unconditional pledge is made. All contributions are available for unrestricted use unless specifically restricted by the donor. Non-cash contributions are recorded at estimated fair value as of the date of the gift.

The Foundation considers operating revenues and expenses in the Statement of Activities to be those revenues and expenses that result from exchange transactions or other activities that are connected directly with the Foundation's primary functions. Exchange transactions include charges for services rendered and the acquisition of goods and services. All revenues and expenses not meeting this definition are reported as non-operating revenues and expenses.

The Foundation's operating expenses by functional classification are shown below:

Natural Classification:

Program Services

Functional Classification

Services

Fundraising

Total

Bank Charges Dues and Subscriptions Grants to Teachers Insurance Miscellaneous Other Program Grants Purchased Services Savings Bond Awards Scholarships School Projects

$

150.00

$

150.00

$ 430.00

430.00

9,900.00

9,900.00

744.00

744.00

253.00

164.30 $ 1,778.03

2,195.33

7,500.00

7,500.00

1,055.02

1,055.02

150.00

150.00

11,000.00

11,000.00

18,188.00

18,188.00

Total Operating Expenses

$ 47,141.00 $ 2,393.32 $ 1,778.03 $ 51,312.35

See notes to the basic financial statements.

- 31 -

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

SCHEDULE "6"

FUNDING AGENCY PROGRAM/GRANT
Agriculture, U. S. Department of Child Nutrition Cluster Pass-Through From Georgia Department of Education Food Services School Breakfast Program National School Lunch Program
Total U. S. Department of Agriculture
Education, U. S. Department of Education of Homeless Children and Youth Cluster Pass-Through From Georgia Department of Education ARRA - Education for Homeless Children and Youth Education for Homeless Children and Youth
Total Education of Homeless Children and Youth Cluster
Education Technology State Grants Cluster Pass-Through From Georgia Department of Education Education Technology State Grants
Special Education Cluster Pass-Through From Georgia Department of Education Special Education ARRA - Grants to States ARRA - Preschool Grants Grants to States Preschool Grants
Total Special Education Cluster
Title I, Part A Cluster Pass-Through From Georgia Department of Education ARRA - Title I Grants to Local Educational Agencies Title I Grants to Local Educational Agencies
Total Title I, Part A Cluster
Other Programs Direct Fund for the Improvement of Education Pass-Through From Georgia Department of Education Career and Technical Education - Basic Grants to States Education Jobs Fund English Language Acquisition Grants Improving Teacher Quality State Grants Mathematics and Science Partnerships
Total Other Programs
Total U. S. Department of Education

CFDA NUMBER

PASSTHROUGH
ENTITY ID
NUMBER

EXPENDITURES IN PERIOD

* 10.553 * 10.555

N/A

(2)

N/A

$

11,500,637.95 (1)

$

11,500,637.95

84.387 84.196

N/A

$

N/A

$

53,039.92 50,311.89
103,351.81

84.318

N/A

$

20,958.30

* 84.391 * 84.392 * 84.027 * 84.173

N/A

$

N/A

N/A

N/A

$

2,942,114.96 99,647.13
3,402,811.40 82,589.64
6,527,163.13

84.389 84.010

N/A

$

N/A

$

630,151.05 2,622,672.91
3,252,823.96

84.215
84.048 * 84.410
84.365 84.367 84.366

$

279,708.43

N/A

196,191.38

N/A

5,320,242.00

N/A

63,465.43

N/A

563,822.97

N/A

629,696.22

$

7,053,126.43

$

16,957,423.63

- 32 -

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

SCHEDULE "6"

FUNDING AGENCY PROGRAM/GRANT
Defense, U. S. Department of Direct Department of the U. S. Air force R.O.T.C. Program - Air Force Department of the U. S. Army R.O.T.C. Program - Army
Total Department of Defense

CFDA NUMBER

PASSTHROUGH
ENTITY ID
NUMBER

EXPENDITURES IN PERIOD

$

62,149.42

160,118.62

$

222,268.04

Total Federal Financial Assistance

$

28,680,329.62

N/A = Not Available

Notes to the Schedule of Expenditures of Federal Awards

(1) Includes the Federally assigned value of donated commodities for the Food Donation Program in the amount of $429,335.13.
(2) Expenditures for the funds earned on the School Breakfast Program ($1,245,370.78) were not maintained separately and are included in the 2011 National School Lunch Program.

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

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

The accompanying schedule of expenditures of Federal awards includes the Federal grant activity of the Paulding 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.

- 33 -

PAULDING COUNTY BOARD OF EDUCATION SCHEDULE OF STATE REVENUE YEAR ENDED JUNE 30, 2011

SCHEDULE "7"

AGENCY/FUNDING
GRANTS Education, Georgia Department of Quality Basic Education
Direct Instructional Cost Kindergarten Program Kindergarten Program - Early Intervention Program Primary Grades (1-3) Program Primary Grades - Early Intervention (1-3) Program Upper Elementary Grades (4-5) Program Upper Elementary Grades - Early Prevention (4-5) Program Middle Grades (6-8) Program High School General Education (9-12) Program Vocational Laboratory (9-12) Program Students with Disabilities Gifted Student - Category VI Remedial Education Program Alternative Education Program English Speakers of Other Languages (ESOL) Media Center Program 20 Days Additional Instruction Staff and Professional Development Indirect Cost Central Administration School Administration Facility Maintenance and Operation Categorical Grants Pupil Transportation Regular State Bonds Nursing Services Education Equalization Funding Grant Food Services Vocational Education Amended Formula Adjustment Other State Programs Dual Enrollment Health Insurance Math and Science Supplements Move On When Ready Preschool Handicapped Program Residential Treatment Centers Grant Teachers' Retirement Virtual School State Grant
Georgia State Financing and Investment Commission Reimbursement on Construction Projects
Office of State Treasurer Public School Employees Retirement
CONTRACT Human Resources, Georgia Department of Family Connection

GOVERNMENTAL FUND TYPES

CAPITAL

GENERAL

PROJECTS

FUND

FUND

TOTAL

$ 10,383,417.59 95,515.00
22,982,214.41 1,355,869.00
10,559,669.00 1,405,126.00
18,357,454.00 15,801,284.00
4,943,549.00 18,103,100.00
2,781,311.00 775,012.00
1,444,682.00 468,758.00
3,061,469.00 958,530.00 580,195.00
2,805,267.00 5,636,060.00 7,403,567.00

$ 10,383,417.59 95,515.00
22,982,214.41 1,355,869.00
10,559,669.00 1,405,126.00
18,357,454.00 15,801,284.00
4,943,549.00 18,103,100.00
2,781,311.00 775,012.00
1,444,682.00 468,758.00
3,061,469.00 958,530.00 580,195.00
2,805,267.00 5,636,060.00 7,403,567.00

1,421,099.00 457,752.00 412,708.00
17,276,058.00 392,426.00 554,202.41
-18,943,395.00
3,169.00 385,865.89 126,831.60
1,669.00 322,480.00
96,096.00 94,948.65
225.00

1,421,099.00 457,752.00 412,708.00
17,276,058.00 392,426.00 554,202.41
-18,943,395.00
3,169.00 385,865.89 126,831.60
1,669.00 322,480.00
96,096.00 94,948.65
225.00

$ 2,557,081.60

2,557,081.60

124,461.00

124,461.00

41,922.06

41,922.06

See notes to the basic financial statements.

$ 132,670,567.61 $ 2,557,081.60 $ 135,227,649.21 - 34 -

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

SCHEDULE "8"

PROJECT (SPLOST III)

ORIGINAL ESTIMATED
COST (1)

CURRENT ESTIMATED COSTS (2)

AMOUNT EXPENDED IN CURRENT YEAR (3) (4)

AMOUNT EXPENDED IN PRIOR YEARS (3) (4)

PROJECT STATUS (5)

(i) Acquisition, construction, and equipping of two new elementary

schools, one new middle school, and one new high school

$

96,398,858.00 $

(ii) Renovation, completion, construction and expansion of new and existing school facilities

27,826,284.00

(iii) Acquisition of any property necessary or desirable therefore, both real and personal

3,235,630.00

(iv) Payment of a portion of principal and interest on the School District's outstanding general obligation bonds coming due August 1, 2006 through and including February 1, 2011

3,500,000.00

PROJECT (SPLOST IV)

(v) Paying a portion of the principal and interest on the School District's outstanding General Obligation Bonds, Series 1995, Series 2003, Series 2007, and Series 2008 coming due February 1, 2012 through and including August 1, 2016, in the maximum amount of $54,537,249.50
(vi)(a) Financing capital outlays for the maintenance, renovation, completion, construction, and expansion of new and existing school facilities and (b) acquiring any property necessary or desirable therefore, both real and personal, the maximum cost of such projects not to exceed $35,462,750.50

54,537,249.50 35,462,750.50

87,190,104.00 $ 19,170,210.00
1,338,992.00
54,537,249.50 35,462,750.50

0.00 $ 87,190,104.00 Completed 19,170,210.00 Completed Completed Ongoing
Ongoing
Ongoing

$ 220,960,772.00 $ 197,699,306.00 $

0.00 $ 106,360,314.00

(1) The School District's original cost estimate as specified in the SPLOST III resolution calling for the imposition of the Local Option Sales Tax is $90,000,000.00. The Local Option Sales Tax is estimated to contribute $59,000,000.00 of the total projected cost. The original estimated cost reported in prior year financial statements of $90,000,000.00 was adjusted by $40,960,772.00 in order to include all costs of the projects, which includes state, local property taxes and/or other funds omitted from the balance reported in the prior year.

(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 Paulding County approved the imposition of a 1% sales tax to fund the above projects and retire associated debt. Amounts expended for these projects includes 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

$ 10,683,114.58

Current Year

862,050.00

Total

$ 11,545,164.58

(5) Project (i) was completed in June 2010 with total actual expenditures of $87,190,104. The original estimated cost was $96,398,858. Due to the decrease in Sales Tax revenues collected, the construction of two elementary schools was removed from this plan estimated at $22 million. The cost for the remaining schools was underestimated by $13 million.
Project (ii) was completed in June 2010 with total actual expenditures of $19,170,210. The original estimated cost was $27,826,284. Due to the decrease in Sales Tax revenues collected, maintenance projects of $8 million were removed from this plan.
Project (iii) was removed from this plan due to the decrease in Sales Tax revenues collected.
Project (iv) will remain ongoing until the completion of the SPLOST period. Any funds in excess of the General Obligation Bond payments will be used to finance capital outlays as described in (vi)(a).

See notes to the basic financial statements.

- 35 -

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

SCHEDULE "9"

DESCRIPTION

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

ELIGIBLE QBE PROGRAM COSTS

SALARIES

OPERATIONS

TOTAL

Direct Instructional Programs

Kindergarten Program

$

Kindergarten Program-Early Intervention Program

Primary Grades (1-3) Program

Primary Grades-Early Intervention (1-3) Program

Upper Elementary Grades (4-5) Program

Upper Elementary Grades-Early Intervention (4-5)

Program

Middle School (6-8) Program

High School General Education (9-12) Program

Vocational Laboratory (9-12) Program

Students with Disabilities

Category I

Category II

Category III

Category IV

Category V

Gifted Student - Category VI

Remedial Education Program

Alternative Education Program

English Speakers of Other Languages (ESOL)

10,901,925.00 $ 150,086.00
24,810,727.00 1,606,917.00
12,073,177.00

7,444,519.28 $ 243,556.34
20,652,780.81 1,631,504.81
12,355,286.70

1,621,475.00 20,929,191.00 18,054,657.00
5,647,975.00 20,641,329.00

1,200,542.11 20,840,919.35 19,726,558.65
3,693,902.84

1,496,572.07 16,565,971.59
277,623.86

3,186,666.00 907,350.00
1,648,282.00 539,558.00

2,472,712.80
341,482.17 1,078,443.12

68,626.88 $ 603.77
448,774.64 4,853.78
133,754.74
4,531.20 312,247.32 839,409.09 432,904.52
49,312.80 6,263.55
421,104.87 13,282.85 15,533.07 31,294.29 2,961.54
17,893.31

7,513,146.16 244,160.11
21,101,555.45 1,636,358.59
12,489,041.44
1,205,073.31 21,153,166.67 20,565,967.74
4,126,807.36
49,312.80 1,502,835.62 16,987,076.46
290,906.71 15,533.07
2,504,007.09 2,961.54
341,482.17 1,096,336.43

TOTAL DIRECT INSTRUCTIONAL PROGRAMS

$ 122,719,315.00 $ 110,022,376.50 $ 2,803,352.22 $ 112,825,728.72

Media Center Program Staff and Professional Development

3,508,580.00 668,046.00

3,438,044.93 269,439.22

372,575.75

3,810,620.68 269,439.22

TOTAL QBE FORMULA FUNDS

$ 126,895,941.00 $ 113,729,860.65 $ 3,175,927.97 $ 116,905,788.62

(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.

- 37 -

SECTION II COMPLIANCE AND INTERNAL CONTROL REPORTS

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

DEPARTMENT OF AUDITS AND ACCOUNTS
270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400
February 21, 2012

Honorable Nathan Deal, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the Paulding 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, the discretely presented component unit, each major fund, and the aggregate remaining fund information of Paulding County Board of Education as of and for the year ended June 30, 2011, which collectively comprise Paulding County Board of Education's basic financial statements and have issued our report thereon dated February 21, 2012. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States.
Internal Control Over Financial Reporting
Management of Paulding County Board of Education is responsible for establishing and maintaining effective internal control over financial reporting. In planning and performing our audit, we considered Paulding 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 Paulding County Board of Education's internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness of the Paulding County Board of Education's internal control over financial reporting.
A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect and correct misstatements on a timely basis. A material weakness is a deficiency, or combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity's financial statements will not be prevented, or detected and corrected on a timely basis.

2011YB-10

Our consideration of internal control over financial reporting was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over financial reporting that might be deficiencies, significant deficiencies or material weaknesses. We did not identify any deficiencies in internal control over financial reporting that we consider to be material weaknesses, as defined above.
Compliance and Other Matters
As part of obtaining reasonable assurance about whether Paulding 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 a certain matter that we have reported to management of Paulding County Board of Education in a separate letter dated February 21, 2012.
This report is intended solely for the information and use of management, members of the Paulding County Board of Education, others within the entity, Federal awarding agencies and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties.
Respectfully submitted,

RWH:as 2011YB-10

Russell W. Hinton, CPA, CGFM State Auditor

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

DEPARTMENT OF AUDITS AND ACCOUNTS
270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400
February 21, 2012

Honorable Nathan Deal, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the Paulding 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 Paulding County Board of Education's compliance with the types of compliance requirements described in the OMB Circular A-133 Compliance Supplement that could have a direct and material effect on each of its major Federal programs for the year ended June 30, 2011. Paulding County Board of Education's major Federal programs are identified in the Summary of Auditor's Results section of the accompanying Schedule of Findings and Questioned Costs. Compliance with the requirements of laws, regulations, contracts, and grants applicable to each of its major Federal programs is the responsibility of Paulding County Board of Education's management. Our responsibility is to express an opinion on Paulding 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 Paulding 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 Paulding County Board of Education's compliance with those requirements.
In our opinion, the Paulding County Board of Education complied, in all material respects, with the compliance requirements referred to above that could have a direct and material effect on each of its major Federal programs for the year ended June 30, 2011.

2011SA-10

Internal Control Over Compliance
Management of Paulding 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 Paulding 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 Paulding 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 Paulding County Board of Education, others within the entity, Federal awarding agencies and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties.
Respectfully submitted,

RWH:as 2011SA-10

Russell W. Hinton, CPA, CGFM State Auditor

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

PAULDING COUNTY BOARD OF EDUCATION AUDITEE'S RESPONSE
SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2011
PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS No matters were reported. PRIOR YEAR FEDERAL AWARD FINDINGS AND QUESTIONED COSTS No matters were reported.

SECTION IV FINDINGS AND QUESTIONED COSTS

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

I SUMMARY OF AUDITOR'S RESULTS

Financial Statements

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

Unqualified

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

No None Reported

Noncompliance material to financial statements noted:

No

Federal Awards

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

No None Reported

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

Unqualified

Any audit findings disclosed that are required to be reported in

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

No

Identification of major programs:

CFDA Numbers

Name of Federal Program or Cluster

10.553, 10.555 84.027, 84.173, 84.391, 84.392 84.410

Child Nutrition Cluster Special Education Cluster Education Jobs Fund

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

$860,409.89

Auditee qualified as low-risk auditee?

Yes

II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

No matters were reported.

III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

No matters were reported.