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

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

RABUN 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

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

STATEMENT OF CHANGES IN FIDUCIARY NET ASSETS

FIDUCIARY FUNDS

I

NOTES TO THE BASIC FINANCIAL STATEMENTS

SCHEDULES

REQUIRED SUPPLEMENTARY INFORMATION

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

SUPPLEMENTARY INFORMATION

2 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS 3 SCHEDULE OF STATE REVENUE

Page
1 2 4 5 6 7 8 9 11
27 28 30

RABUN COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS -

SECTION I
FINANCIAL
SCHEDULES
SUPPLEMENTARY INFORMATION
4 SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS 5 ALLOTMENTS AND EXPENDITURES
GENERAL FUND - QUALITY BASIC EDUCATION PROGRAMS (QBE) BY PROGRAM

Page
31 33

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

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

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

RABUN COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS -
SECTION V MANAGEMENT'S RESPONSES SCHEDULE OF MANAGEMENT'S RESPONSES

SECTION I FINANCIAL

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

DEPARTMENT OF AUDITS AND ACCOUNTS
270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400
August 27, 2012

Honorable Nathan Deal, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the Rabun County Board of Education
INDEPENDENT AUDITOR'S COMBINED REPORT ON BASIC FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION - SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
Ladies and Gentlemen:
We have audited the accompanying financial statements of the governmental activities, each major fund, and the aggregate remaining fund information (Exhibits A through I) of the Rabun 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 Rabun County Board of Education's management. Our responsibility is to express opinions on these financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Board's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinions.
In our opinion, the financial statements referred to previously present fairly, in all material respects, the respective financial position of the governmental activities, each major fund, and the aggregate remaining fund information of the Rabun County Board of Education, as of June 30, 2011, and the respective changes in financial position thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America.

2011ARL-11

The Rabun County Board of Education has not presented Management's Discussion and Analysis that accounting principles generally accepted in the United States of America has determined is necessary to supplement, although not to be part of, the basic financial statements.
In accordance with Government Auditing Standards, we have also issued our report dated August 27, 2012, on our consideration of the Rabun 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.
The Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual, as presented on page 27, is not a required part of the basic financial statements but is supplementary information required by 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 Rabun County Board of Education's financial statements as a whole. The accompanying supplementary information consists of Schedules 2 through 5, which includes the Schedule of Expenditures of Federal Awards as required by U. S. Office of Management and Budget Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations, are presented for purposes of additional analysis and are not a required part of the financial statements. The information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, the information is fairly stated, in all material respects, in relation to the financial statements as a whole.
A copy of this report has been filed as a permanent record in the office of the State Auditor and made available to the press of the State, as provided for by Official Code of Georgia Annotated section 50-6-24.
Respectfully submitted,

GSG:as 2011ARL-11

Greg S. Griffin State Auditor

RABUN COUNTY BOARD OF EDUCATION

RABUN COUNTY BOARD OF EDUCATION STATEMENT OF NET ASSETS JUNE 30, 2011
ASSETS
Cash and Cash Equivalents Accounts Receivable, Net
Taxes State Government Federal Government Other Notes Receivable Inventories Capital Assets, Non-Depreciable Capital Assets, Depreciable (Net of Accumulated Depreciation)
Total Assets
LIABILITIES
Accounts Payable Salaries and Benefits Payable Long-Term Liabilities
Due Within One Year Due in More Than One Year
Total Liabilities
NET ASSETS
Invested in Capital Assets, Net of Related Debt Restricted for
Continuation of Federal Programs Debt Service Capital Projects Unrestricted
Total Net Assets
Total Liabilities and Net Assets

EXHIBIT "A"

GOVERNMENTAL ACTIVITIES
$ 30,407,525.98
998,536.35 783,710.00 432,484.95
80,465.67 249,079.95
11,393.38 3,864,840.98 55,724,907.87
$ 92,552,945.13

$

149.16

2,660,996.93

2,041,261.50 15,103,521.98

$ 19,805,929.57

$ 55,450,332.60
219,678.66 2,442,646.03 3,650,209.86 10,984,148.41
$ 72,747,015.56

$ 92,552,945.13

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

RABUN 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 Food Services Interest on Short-Term and Long-Term Debt
Total Governmental Activities
General Revenues Taxes Property Taxes For Maintenance and Operations Sales Taxes Special Purpose Local Option Sales Tax For Capital Projects Local Option Sales Tax Other Sales Tax Investment Earnings Miscellaneous
Special Items Proceeds from Sale of Land
Total General Revenues and Special Items
Change in Net Assets
Net Assets - Beginning of Year
Net Assets - End of Year

EXPENSES

CHARGES FOR SERVICES

$

19,578,004.71

850,374.21 468,344.88 431,196.63 377,432.39 1,492,358.06 353,240.46 1,985,575.91 1,405,511.71
76,869.13 206,525.41

162,707.97 $ 1,422,191.55
410,693.33

$

29,221,026.35 $

118,762.44 349,739.79
468,502.23

The notes to the basic financial statements are an integral part of this statement. - 2 -

EXHIBIT "B"

PROGRAM REVENUES OPERATING GRANTS AND
CONTRIBUTIONS

CAPITAL GRANTS AND CONTRIBUTIONS

NET (EXPENSES) REVENUES
AND CHANGES IN NET ASSETS

$

6,524,498.17

178,327.21 275,703.41 316,384.41 607,826.85 749,376.85
13,086.00 740,163.30 373,807.62 $
1,630.66 18,340.42

1,005,646.54

$

10,804,791.44 $

$
152,584.00 351,333.33 503,917.33 $

-13,053,506.54
-672,047.00 -192,641.47 -114,812.22 230,394.46 -742,981.21 -340,154.46 -1,245,412.61 -879,120.09
-75,238.47 -188,184.99
-43,945.53 -66,805.22 -59,360.00
-17,443,815.35

$

14,892,159.50

3,012,536.84 3,012,603.51
211,802.35 29,463.39
383,223.44

637,522.25

$

22,179,311.28

$

4,735,495.93

68,011,519.63

$

72,747,015.56

- 3 -

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

EXHIBIT "C"

ASSETS
Cash and Cash Equivalents Accounts Receivable, Net
Interest Taxes State Government Federal Government Other Notes Receivable Inventories
Total Assets

GENERAL FUND

DISTRICTWIDE
CAPITAL PROJECTS
FUND

DEBT SERVICE
FUND

TOTAL

$ 11,856,769.07 $ 18,550,756.91 $

697,740.71 783,710.00 432,484.95
80,465.67 249,079.95
11,393.38

300,795.64

0.00 $ 30,407,525.98
998,536.35 783,710.00 432,484.95
80,465.67 249,079.95
11,393.38

$ 14,111,643.73 $ 18,851,552.55 $

0.00 $ 32,963,196.28

LIABILITIES AND FUND BALANCES
LIABILITIES
Accounts Payable Salaries and Benefits Payable Deposits and Deferred Revenue
Total Liabilities
FUND BALANCES
Nonspendable Restricted Committed Assigned Unassigned
Total Fund Balances
Total Liabilities and Fund Balances

$

149.16

2,660,996.93

476,785.95

$ 3,137,932.04

$

149.16

2,660,996.93

476,785.95

$ 3,137,932.04

$

11,393.38

208,285.28 $ 18,851,552.55 $

105,814.55

3,760,350.00

6,887,868.48

$ 10,973,711.69 $ 18,851,552.55 $

$ 0.00

11,393.38 19,059,837.83
105,814.55 3,760,350.00 6,887,868.48

0.00 $ 29,825,264.24

$ 14,111,643.73 $ 18,851,552.55 $

0.00 $ 32,963,196.28

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

RABUN 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 Equipment Accumulated Depreciation
Total Capital Assets
Taxes that are not available to pay for current period expenditures are deferred in the funds.
Long-Term Accounts receivable that are not available to pay for current period expenditures are deferred in the funds.
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
Total Long-Term Liabilities

$ 29,825,264.24

$ 3,154,777.73 710,063.25
3,474,225.69 62,716,440.54
3,505,342.06 -13,971,100.42

59,589,748.85

227,706.00

249,079.95

$ -17,080,000.00 -64,783.48

-17,144,783.48

Net Assets of Governmental Activities (Exhibit "A")

$ 72,747,015.56

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

RABUN 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 Food Services Operation
Capital Outlay Debt Services
Principal Interest
Total Expenditures
Excess of Revenues over (under) Expenditures
OTHER FINANCING SOURCES (USES)
Proceeds of Bonds Sale of Equipment Proceeds from Sale of Buildings Insurance Proceeds Transfers In Transfers Out
Total Other Financing Sources (Uses)
SPECIAL ITEMS
Proceeds from Sale of Land
Net Change in Fund Balances
Fund Balances - Beginning

GENERAL FUND

DISTRICTWIDE
CAPITAL PROJECTS
FUND

DEBT SERVICE
FUND

TOTAL

$ 15,059,820.50 3,279,668.81 $ 6,848,572.00 3,757,470.11 468,502.23 17,945.21 291,716.88
$ 29,723,695.74 $

1,968,439.33 $ 11,518.18

$ 1,099,360.00
351,333.33

15,059,820.50 6,347,468.14 6,848,572.00 3,757,470.11 468,502.23 29,463.39 643,050.21

1,979,957.51 $ 1,450,693.33 $ 33,154,346.58

$ 16,076,812.30 $
850,374.21 468,344.88 431,196.63 377,432.39 1,492,358.06 287,462.55 1,843,608.24 1,228,096.94
76,869.13 206,525.41 162,707.97 1,396,426.80
33,299.73 2,017.23
$ 24,933,532.47 $
$ 4,790,163.27 $

70,354.67

$ 16,147,166.97

255,777.18 183,399.51
9,380.00 1,152,278.95

850,374.21 468,344.88 431,196.63 377,432.39 1,492,358.06 543,239.73 2,027,007.75 1,228,096.94
76,869.13 206,525.41 162,707.97 1,405,806.80 1,152,278.95

$ 1,040,000.00 410,693.33

1,073,299.73 412,710.56

1,671,190.31 $ 1,450,693.33 $ 28,055,416.11

308,767.20 $

0.00 $ 5,098,930.47

$ 16,000,000.00

$

8,990.89

50,920.05

82,515.67

2,510,350.00

100.00

-100.00

-2,510,350.00

$ 2,652,676.61 $ 13,489,750.00

$ 16,000,000.00 8,990.89
50,920.05 82,515.67 2,510,450.00 -2,510,450.00
$ 16,142,426.61

$

637,522.25

$ 7,442,839.88 $ 14,436,039.45 $

3,530,871.81

4,415,513.10

$

637,522.25

0.00 $ 21,878,879.33

0.00

7,946,384.91

Fund Balances - Ending

$ 10,973,711.69 $ 18,851,552.55 $

0.00 $ 29,825,264.24

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

RABUN 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 Change in Fund Balances - Governmental Funds (Exhibit "E")
Amounts reported for Governmental Activities in the Statement of Activities are different because:
Capital Outlays are reported as expenditures in Governmental Funds. However, in the Statement of Activities, the cost of Capital Assets is allocated over their estimated useful 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 proceeds provide current financial resources to Governmental Funds; however, issuing debt increases Long-Term Liabilities in the Statement of Net Assets. In the current period, proceeds were received from:
General Obligation Bonds Issued
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:
Capital Lease Payments Redemption of Principal
Total Long-Term Debt Repayments
Change in Net Assets of Governmental Activities (Exhibit "B")

$ 21,878,879.33

$ 3,467,528.28 -1,740,616.32

1,726,911.96

-278,186.44

-3,646,236.96

-16,000,000.00 -11,803.69

$

25,931.73

1,040,000.00

1,065,931.73

$ 4,735,495.93

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

RABUN COUNTY BOARD OF EDUCATION STATEMENT OF FIDUCIARY NET ASSETS
FIDUCIARY FUNDS JUNE 30, 2011

EXHIBIT "G"

ASSETS Cash and Cash Equivalents Investments
Total Assets

PRIVATE PURPOSE TRUSTS

AGENCY FUNDS

$

23,402.53 $ 193,319.19

146,402.16

$ 169,804.69 $ 193,319.19

LIABILITIES Funds Held for Others
NET ASSETS Held in Trust for Private Purposes

$ 193,319.19 $ 169,804.69

Total Liabilities and Net Assets

$ 169,804.69 $ 193,319.19

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

RABUN COUNTY BOARD OF EDUCATION STATEMENT OF CHANGES IN FIDUCIARY NET ASSETS
FIDUCIARY FUNDS YEAR ENDED JUNE 30, 2011
ADDITIONS Contributions Donors Investment Earnings Interest Total Additions
DEDUCTIONS Scholarships Change in Net Assets
Net Assets - Beginning
Net Assets - Ending

EXHIBIT "H"

PRIVATE PURPOSE TRUSTS

$

3,000.00

315.47

$

3,315.47

$

2,350.00

$

965.47

168,839.22

$ 169,804.69

The notes to the basic financial statements are an integral part of this statement. - 9 -

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

EXHIBIT "I"

Note 1: DESCRIPTION OF SCHOOL DISTRICT AND REPORTING ENTITY
REPORTING ENTITY
The Rabun County Board of Education (School District) was established under the laws of the State of Georgia and operates under the guidance of a school board elected by the voters and a Superintendent appointed by the Board. The Board is organized as a separate legal entity and has the power to levy taxes and issue bonds. Its budget is not subject to approval by any other entity. Accordingly, the School District is a primary government and consists of all the organizations that compose its legal entity.
Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The School District's basic financial statements are collectively comprised of the District-wide financial statements, fund financial statements and notes to the basic financial statements of the Rabun County Board of Education.
District-wide Statements: The Statement of Net Assets and the Statement of Activities display information about the financial activities of the overall School District, except for fiduciary activities. Eliminations have been made to minimize the double counting of internal activities. Governmental activities generally are financed through taxes, intergovernmental revenues, and other nonexchange transactions.
The Statement of Activities presents a comparison between direct expenses and program revenues for each function of the School District's governmental activities.
Direct expenses are those that are specifically associated with a program or function and, therefore, are clearly identifiable to a particular function. Indirect expenses (expenses of the School District related to the administration and support of the School District's programs, such as office and maintenance personnel and accounting) are not allocated to programs.
Program revenues include (a) charges paid by the recipients of goods or services offered by the programs and (b) grants and contributions that are restricted to meeting the operational or capital requirements of a particular program. Revenues that are not classified as program revenues, including all taxes, are presented as general revenues.
Fund Financial Statements: The fund financial statements provide information about the School District's funds, including fiduciary funds. Eliminations have been made to minimize the double counting of internal activities. Separate statements for each category (governmental and fiduciary) are presented. The emphasis of fund financial statements is on major governmental funds, each displayed in a separate column.
The School District reports the following major governmental funds:
General Fund is the School District's primary operating fund. It accounts for and reports all financial resources not accounted for and reported in another fund.

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

EXHIBIT "I"

District-wide Capital Projects Fund accounts for and reports financial resources including Special Purpose Local Option Sales Tax (SPLOST) and Bond Proceeds that are restricted, committed or assigned to the expenditure for capital outlays, including the acquisition or construction of capital facilities and other capital assets.
Debt Service Fund accounts for and reports financial resources that are restricted, committed, or assigned including taxes (sales) legally restricted for the payment of general long-term principal and interest.
The School District reports the following fiduciary fund types:
Private Purpose Trust fund reports trust arrangements under which principal is to be invested and preserved intact with the resultant income to be used to provide awards or scholarships.
Agency funds account for assets held by the School District as an agent for various scholarship
funds and principal's accounts.
BASIS OF ACCOUNTING
The basis of accounting determines when transactions are reported on the financial statements. The District-wide governmental and fiduciary fund financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded at the time liabilities are incurred, regardless of when the related cash flows take place. Nonexchange transactions, in which the School District gives (or receives) value without directly receiving (or giving) equal value in exchange, include property taxes, sales taxes, grants and donations. On an accrual basis, revenue from property taxes is recognized in the fiscal year for which the taxes are levied. Revenue from sales taxes is recognized in the fiscal year in which the underlying transaction (sale) takes place. Revenue from grants and donations is recognized in the fiscal year in which all eligibility requirements have been satisfied.
The School District uses funds to report on its financial position and the results of its operations. Fund accounting is designed to demonstrate legal compliance and to aid financial management by segregating transactions related to certain governmental functions or activities. A fund is a separate accounting entity with a self-balancing set of accounts.
Governmental funds are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Under this method, revenues are recognized when measurable and available. The School District considers all revenues reported in the governmental funds to be available if they are collected within sixty days after year-end. Property taxes, sales taxes and interest are considered to be susceptible to accrual. Expenditures are recorded when the related fund liability is incurred, except for principal and interest on general long-term debt, which are recognized as expenditures to the extent they have matured. Capital asset acquisitions are reported as expenditures in governmental funds. Proceeds of general long-term liabilities and acquisitions under capital leases are reported as other financing sources.
The School District funds certain programs by a combination of specific cost-reimbursement grants, categorical grants, and general revenues. Thus, when program costs are incurred, there are both restricted and unrestricted net assets available to finance the program. It is the School District's policy to first apply grant resources to such programs, followed by cost-reimbursement grants, then general revenues.
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RABUN COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2011

EXHIBIT "I"

The State of Georgia reimburses the School System 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 System 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 System 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.
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.
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,

- 13 -

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

EXHIBIT "I"

(6) The Georgia Fund 1 administered by the State of Georgia, Office of the State Treasurer,

(7) Repurchase agreements, and

(8) Obligations of other political subdivisions of the State of Georgia.

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, a long term lease with the City of Clayton from the sale of land and buildings to the city, 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 Rabun County Board of Commissioners fixed the property tax levy for the 2010 tax digest year (calendar year) on August 5, 2010 (levy date). Taxes were due on December 20, 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 Rabun County Tax Commissioner bills and collects the property taxes for the School District 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 $15,059,820.50.

The tax millage rate levied for the 2010 tax year (calendar year) for the Rabun County Board of Education was as follows (a mill equals $1 per thousand dollars of assessed value):

School Operations

8.9 mills

SALES TAXES

Local Option Sales Tax revenue, at the fund reporting level, during the fiscal year amounted to $3,067,866.46 and was recorded in the General Fund. Local Option Sales Tax is to be used for the maintenance and operation of the School District.

Special Purpose Local Option Sales Tax, at the fund reporting level, during the year amounted to $3,067,799.33 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

- 14 -

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

EXHIBIT "I"

inventories whereby donated food commodities are recorded as an asset and as revenue when received, and expenses/expenditures are recorded as the inventory items are used. Purchased foods are recorded as an asset when purchased and expenses/expenditures are recorded as the inventory items are used.

CAPITAL ASSETS

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

Capitalization thresholds and estimated useful lives of capital assets reported in the District-wide

statements are as follows:

Estimated

Capitalization Policy

Useful Life

Land Land Improvements Buildings and Improvements Equipment Intangible Assets Construction in Progress

All $ 10,000.00 $ 10,000.00 $ 10,000.00 $ 100,000.00 - $ 1,000,000.00 $ 10,000.00

N/A 20 to 80 years 10 to 80 years
3 to 20 years 10 to 20 years
N/A

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.

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 10 to 20 years.

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 and 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. To conform to generally accepted accounting principles, bond premiums and discounts, as well as bond issuance costs should be amortized over the life of the bonds on the District-wide statements. The effect of this deviation is deemed to be immaterial to the fair presentation of the basic financial statements. General obligation bonds are direct obligations and pledge the full faith and credit of the government. The outstanding amount of these bonds is recorded in the Statement of Net Assets.

- 15 -

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

EXHIBIT "I"

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 bus replacement, continuation of Federal programs, debt service and capital projects in accordance with restrictions imposed by external third parties.
Unrestricted net assets - Unrestricted net assets represent resources derived from property taxes, sales taxes, grants and contributions not restricted to specific programs, charges for services, and miscellaneous revenues. These resources are used for transactions relating to the educational and general operations of the School District, and may be used at the discretion of the Board to meet current expenses for those purposes.
FUND 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.

- 16 -

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

EXHIBIT "I"

Fund Balances of the Governmental Funds at June 30, 2011, are as follows:

Nonspendable Inventories
Restricted Continuation of Federal Programs Capital Projects Debt Service
Committed School Activity Accounts
Assigned Local Capital Outlay Projects Subsequent Years' Expenditures
Unassigned

$

11,393.38

$ 208,285.28 16,408,906.52 2,442,646.03

19,059,837.83

105,814.55

$ 2,510,350.00 1,250,000.00

3,760,350.00 6,887,868.48

Fund Balance, June 30, 2011

$ 29,825,264.24

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.

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

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,

- 17 -

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

EXHIBIT "I"

(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
Custodial credit risk is the risk that in the event of a bank failure, the School District's deposits may not be returned to it. The School District does not have a deposit policy for custodial credit risk. At June 30, 2011, the bank balances were $31,817,373.83. The bank balances were entirely covered by Federal depository insurance or collateralized with securities held by the pledging financial institution's trust department or agent in the School District's name.
Note 4: LEASE RECEIVABLE

On May 20, 2010, the Rabun County Board of Education entered into an Installment Sales Contract with the City of Clayton, Georgia, whereby the School District agreed to sell 15.68 acres of land. The agreement commenced on July 20, 2010, with a maturity date of December 20, 2015.

Fiscal Year Ended June 30

Minimum Lease Payment Receivable

Less Unearned Income

Net Investment in Sales Type Lease

2012

$

2013

2014

2015

2016

60,000.00 $ 60,000.00 60,000.00 60,000.00 26,371.54

-6,763.17 -5,126.24 -3,457.22 -1,737.42
-207.54

53,236.83 54,873.76 56,542.78 58,262.58 26,164.00

$

266,371.54 $

Note 5: NON-MONETARY TRANSACTIONS

-17,291.59 $

249,079.95

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

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

EXHIBIT "I"

Note 6: CAPITAL ASSETS

The following is a summary of changes in the Capital Assets during the fiscal year:

Balances

July 1, 2010

Increases

Decreases

Governmental Activities

Capital Assets, Not Being Depreciated:

Land

$ 4,229,590.90 $ 2,510,350.23 $ 3,585,163.40 $

Construction Work In Progress

0.00

710,063.25

Balances June 30, 2011
3,154,777.73 710,063.25

Total Capital Assets, Not Being Depreciated $ 4,229,590.90 $ 3,220,413.48 $ 3,585,163.40 $ 3,864,840.98

Capital Assets, Being Depreciated: Buildings and Improvements Equipment Land Improvements

$ 62,726,594.05 3,258,227.26 $ 3,474,225.69

$ 247,114.80

10,153.51 $

62,716,440.54 3,505,342.06 3,474,225.69

Less: Accumulated Depreciation: Buildings and Improvements Equipment Land Improvements

9,080,767.62 1,796,548.41 1,353,168.07

1,266,598.14 298,301.80 175,716.38

10,347,365.76 2,094,850.21 1,528,884.45

Total Capital Assets, Being Depreciated, Net $ 57,228,562.90 $ -1,493,501.52 $

10,153.51 $ 55,724,907.87

Governmental Activity Capital Assets - Net

$ 61,458,153.80 $ 1,726,911.96 $ 3,595,316.91 $ 59,589,748.85

Current year depreciation expense by function is as follows:

Instruction Support Services
Student Transportation Services Food Services

$

1,510,219.88

223,909.94 6,486.50

$

1,740,616.32

Note 7: 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

General Fund

$ 2,510,350.00

District-wide Capital Projects

$

100.00

Total

$

100.00 $ 2,510,350.00

- 19 -

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

EXHIBIT "I"

In prior years, the General Fund funded expenditures for SPLOST approved projects in the amount of $2,510,350.00 by either paying expenses directly for SPLOST projects or by advancing funds to the Capital Projects Fund. The School District has formally approved a motion to recover these General Fund expenditures through Qualified School Construction Bonds and reimburse the General Fund.

Note 8: 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 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:

Claims and

Beginning of Year

Changes in

Claims

End of Year

Liability

Estimates

Paid

Liability

2010 $ 2011 $

0.00 $ 0.00 $

26,360.00 $ 20,232.76 $

26,360.00 $ 20,232.76 $

0.00 0.00

The School District participates in the Georgia Education Workers' Compensation Trust, a public entity risk pool organized on December 1, 1991, to develop, implement and administer a program of workers' compensation self-insurance for its member organizations. The School District pays an annual premium to the Trust for its general insurance coverage. Additional insurance coverage is provided through an agreement by the Trust with the Safety National Casualty Company to provide coverage for potential losses sustained by the Trust in excess of $1,000,000.00 loss per occurrence, up to the statutory limit. Employers' Liability insurance coverage is also provided by Safety National Casualty Company with a loss fund percentage of 100%, based on the Fund's annual normal premium, up to a maximum limit of indemnity of aggregate limit of $2,000,000.00.

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

Position Covered

Amount

Superintendent All Employees

$

100,000.00

$

50,000.00

- 20 -

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

EXHIBIT "I"

Note 9: OPERATING LEASES

Rabun County Board of Education has entered into various leases as lessee for copiers. These

leases are considered for accounting purposes to be operating leases. Lease expenditures for the

year ended June 30, 2011, for governmental funds amounted to $7,368.00. Future minimum lease

payments for these leases are as follows:

Governmental

Year Ending

Funds

2012 2013 2014

$

4,991.00

1,968.00

1,804.00

Total

$

8,763.00

Note 10: LONG-TERM DEBT

CAPITAL LEASES

The Rabun County Board of Education entered into various lease agreements for copiers. 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.

GENERAL OBLIGATION DEBT OUTSTANDING

General Obligation Bonds currently outstanding are as follows:

Purpose

Interest Rates

Amount

General Government - Series 2006 General Government - Series 2010

3.71% 5.10%

$ 1,080,000.00 16,000,000.00

$ 17,080,000.00

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

Balance July 1, 2010

Additions

Governmental Funds

Balance

Deductions

June 30, 2011

Due Within One Year

G. O. Bonds Capital Leases

$ 2,120,000.00 $ 16,000,000.00 $ 1,040,000.00 $ 17,080,000.00 $ 2,014,612.00

78,911.52

11,803.69

25,931.73

64,783.48

26,649.50

$ 2,198,911.52 $ 16,011,803.69 $ 1,065,931.73 $ 17,144,783.48 $ 2,041,261.50

- 21 -

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

EXHIBIT "I"

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

Capital Leases

Principal

Interest

Fiscal Year Ended June 30:

2012 2013 2014

$

26,649.50 $

20,731.86

17,402.12

1,977.45 1,408.14 1,347.88

Total Principal and Interest Fiscal Year Ended June 30:

$

64,783.48 $

4,733.47

General Obligation Debt

Principal

Interest

2012 2013 2014 2015 2016 2017 - 2021 2022 - 2026 2027

$

2,014,612.00 $

836,034.00

1,004,359.20

816,000.00

1,004,359.20

816,000.00

1,004,359.20

816,000.00

1,004,359.20

816,000.00

5,021,796.00

4,080,000.00

5,021,796.00

4,080,000.00

1,004,359.20

408,000.00

Total Principal and Interest

$ 17,080,000.00 $ 12,668,034.00

Note 11: ON-BEHALF PAYMENTS
The School District has recognized revenues and costs in the amount of $111,897.04 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-Certificated Personnel In the amount of $60,926.19
Paid to the Teachers' Retirement System of Georgia For Teachers' Retirement System (TRS) Employer's Cost In the amount of $35,249.85
Office of the State Treasurer Paid to the Public School Employees' Retirement System For Public School Employees' Retirement (PSERS) Employer's Cost In the amount of $15,721.00

- 22 -

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

EXHIBIT "I"

Note 12: SPECIAL ITEMS
On August 25, 2010, the Rabun County Board of Education finalized a land exchange agreement with the U. S. Forestry Service for 137.86 acres to be used for the Rabun County Primary School site and 60.61 adjacent acres that it agreed to sell to the Rabun County Board of Commissioners. The 60.61 acres were sold for $1,103,671.70 with the final payment of $564,599.09 received during fiscal year 2011. The School District also received $72,063.97 from the U. S. Forestry Service for the difference in value of land exchanged and $859.19 of additional escrow funds remitted after the agreement closing.
Note 13: SIGNIFICANT CONTINGENT LIABILITIES
Amounts received or receivable principally from the Federal government are subject to audit and review by grantor agencies. This could result in requests for reimbursement to the grantor agency for any costs which are disallowed under grant terms. The School District believes that such disallowances, if any, will be immaterial to its overall financial position.
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 14: 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 the health insurance coverage.
Participating employers are statutorily required to contribute in accordance with the employer contribution rates established by the Board. The contribution rates are established to fund all benefits due under the health insurance plans for both active and retired employees based on projected "pay-as-you-go" financing requirements. Contributions are not based on the actuarially calculated annual required contribution (ARC) which represents a level of funding that, if paid on an ongoing basis, is projected to cover normal cost each year and amortize any unfunded actuarial liabilities (or funding excess) over a period not to exceed thirty years.

- 23 -

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

EXHIBIT "I"

The combined active and retiree contribution rates established by the Board for employers participating in the School OPEB Fund were as follows for the fiscal year ended June 30, 2011:

For certificated teachers, librarians and regional educational service agencies:

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 School OPEB Fund to prefund retiree benefits. Such additional contribution amounts are determined annually by the Board in accordance with the School plan for other 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
Note 15: RETIREMENT PLANS

100%

$

100%

$

100%

$

2,525,165.05 2,408,583.28 2,086,910.32

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.

- 24 -

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

EXHIBIT "I"

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

$

100%

$

100%

$

1,419,024.58 1,336,007.36 1,323,571.33

PUBLIC SCHOOL EMPLOYEES' RETIREMENT SYSTEM (PSERS)
Bus drivers, lunchroom personnel, and maintenance and custodial personnel are members of the Public School Employees' Retirement System of Georgia. The System is funded by contributions by the employees and by the State of Georgia. The School District makes no contribution to this plan.

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RABUN 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 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 Food Services Operation Enterprise Operations
Capital Outlay Debt Service
Total Expenditures
Excess of Revenues over (under) Expenditures
OTHER FINANCING SOURCES (USES)
Sale of Equipment Proceeds From Sale of Buildings Insurance Proceeds Operating Transfers from Other Funds Operating Transfers to Other Funds
Total Other Financing Sources (Uses)
Net Change in Fund Balances
Fund Balances - Beginning
Adjustments

NONAPPROPRIATED BUDGETS

ORIGINAL (1)

FINAL (1)

ACTUAL AMOUNTS

$

14,168,377.00 $

14,168,377.00 $

15,059,820.50

3,100,000.00

3,100,000.00

3,279,668.81

6,223,397.00

6,586,727.96

6,848,572.00

1,088,750.00

4,130,768.22

3,757,470.11

407,500.00

407,500.00

468,502.23

20,650.00

20,650.00

17,945.21

153,206.00

153,206.00

291,716.88

$

25,161,880.00 $

28,567,229.18 $

29,723,695.74

$

16,516,961.00 $

19,087,400.18 $

16,076,812.30

769,682.00 439,591.00 450,951.00 318,945.00 1,478,306.00 321,142.00 1,986,121.00 1,145,191.00
39,081.00 245,000.00 1,413,847.00
100,000.00

880,888.00 876,266.00 450,951.00 421,363.00 1,478,358.00 321,142.00 1,986,121.00 1,297,953.00
39,081.00 272,501.00 1,413,847.00
100,000.00

850,374.21 468,344.88 431,196.63 377,432.39 1,492,358.06 287,462.55 1,843,608.24 1,228,096.94
76,869.13 206,525.41 1,396,426.80 162,707.97
35,316.96

$

25,224,818.00 $

28,625,871.18 $

24,933,532.47

$

-62,938.00 $

-58,642.00 $

4,790,163.27

$

8,990.89

50,920.05

82,515.67

2,510,350.00

-100.00

$

2,652,676.61

$

-62,938.00 $

-58,642.00 $

7,442,839.88

3,784,304.44

3,784,304.44

3,530,871.81

-23,019.26

1,657.08

Fund Balances - Ending

$

3,698,347.18 $

3,727,319.52 $

10,973,711.69

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 -

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

SCHEDULE "2"

FUNDING AGENCY PROGRAM/GRANT
Agriculture, U. S. Department of Child Nutrition Cluster Pass-Through From Georgia Department of Education Food Services School Breakfast Program National School Lunch Program
Total Child Nutrition Cluster
Schools and Roads Cluster Pass-Through From Office of the State Treasurer Schools and Roads - Grants to States
Other Programs Pass-Through From Georgia Department of Education Food Services Fresh Fruit and Vegetable Program
Total U. S. Department of Agriculture
Education, U. S. Department of Special Education Cluster Pass-Through From Georgia Department of Education Special Education ARRA - Grants to States Grants to States Preschool Grants
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 Pass-Through From Georgia Department of Education ARRA - Race-to-the-Top Incentive Grants Career and Technical Education - Basic Grants to States Education Jobs Fund English Language Acquisition Grants Improving Teacher Quality State Grants Migrant Education - State Grant Program Rural Education Safe and Drug-Free Schools and Communities - State Grants Twenty-First Century Community Learning Centers
Total Other Programs
Total U. S. Department of Education

CFDA NUMBER

PASSTHROUGH
ENTITY ID
NUMBER

EXPENDITURES IN PERIOD

10.553 10.555

N/A

N/A

$

$

(2) 1,305,469.77 (1)
1,305,469.77

10.665

N/A

(3)

10.582

N/A $

12,037.97 1,317,507.74

* 84.391 * 84.027 * 84.173

N/A

$

N/A

N/A

$

189,329.22 429,318.91
21,836.00
640,484.13

* 84.389 * 84.010

N/A

$

N/A

$

141,297.00 729,253.31
870,550.31

84.395 84.048 * 84.410 84.365 84.367 84.011 84.358 84.186 84.287

N/A

$

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

$

$

65,491.66 26,467.00 508,852.00 16,621.35 119,982.56
3,871.63 60,961.00
1,152.00 371,805.21
1,175,204.41
2,686,238.85

Total Expenditures of Federal Awards N/A = Not Available

$

4,003,746.59

- 28 -

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

SCHEDULE "2"

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 $59,432.73.
(2) Expenditures for the funds earned on the School Breakfast Program ($245,713.90) were not maintained separately and are included in the 2011 National School Lunch Program.
(3) Funds earned on this program, in the amount of $108,264.30, do not require reporting of expenditures.
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 Rabun 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.

- 29 -

RABUN COUNTY BOARD OF EDUCATION SCHEDULE OF STATE REVENUE YEAR ENDED JUNE 30, 2011
AGENCY/FUNDING
GRANTS Bright From the Start: Georgia Department of Early Care and Learning Pre-Kindergarten Program
Education, Georgia Department of Quality Basic Education Direct Instructional Cost Kindergarten Program Kindergarten Program - Early Intervention Program Primary Grades (1-3) Program Primary Grades - Early Intervention (1-3) Program Upper Elementary Grades (4-5) Program Upper Elementary Grades - Early Intervention (4-5) Program Middle School (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 Operations Categorical Grants Pupil Transportation Regular Nursing Services Vocational Supervisor Food Services Vocational Education Amended Formula Adjustment Other State Programs Dual Enrollment Funding Health Insurance Math and Science Supplements Move On When Ready Preschool Handicapped Program Pupil Transportation - State Bonds Teachers' Retirement
Office of the State Treasurer Public School Employees' Retirement

See notes to the basic financial statements.

- 30 -

SCHEDULE "3"

GOVERNMENTAL FUND TYPE GENERAL FUND

$

153,583.67

335,077.00 151,996.00 946,500.00 205,485.00 474,946.00
70,571.00 929,199.00 747,353.00 236,920.00 948,296.00 245,491.00
52,776.00 69,675.00 86,895.00 151,182.00 46,020.00 26,417.00
245,990.00 332,690.00 326,130.00
368,698.00 51,561.00 14,635.00 38,866.00 27,315.00
-747,703.00
4,609.00 60,926.19 12,479.29
267.00 30,171.00 152,584.00 35,249.85
15,721.00
$ 6,848,572.00

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

SCHEDULE "4"

PROJECT
The addition, renovation, repair, improvement and equipping of existing school buildings and facilities
Acquisition and purchase of any property necessary and desirable therefore, both real and personal (school buses, vehicles and transportation equipment)
Acquisition and purchase of any property necessary and desirable therefore, both real and personal (administrative and instructional technology software)
Acquisition and purchase of any property necessary and desirable therefore, both real and personal (administrative and instructional technology software)

ORIGINAL ESTIMATED
COST (1)

CURRENT ESTIMATED COSTS (2)

AMOUNT EXPENDED IN CURRENT YEAR (3) (4)

AMOUNT EXPENDED IN PRIOR YEARS (3) (4)

PROJECT STATUS

$ 200,000.00 $ 324,094.76 $ 228,207.41 $ 95,887.35 Ongoing

450,000.00

307,260.00

307,260.00 Ongoing

300,000.00

276,862.19 153,578.45

123,283.74 Ongoing

500,000.00

824,801.76 548,276.61

276,525.15 Ongoing

$ 1,450,000.00 $ 1,733,018.71 $ 930,062.47 $ 802,956.24

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

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

(3) The voters of Rabun County approved the imposition of a 1% sales tax to fund the above projects and retire associated debt. Amounts expended for these projects may include sales tax proceeds, state, local property taxes and/or other funds over the life of the projects.

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

Prior Years

$ 558,074.87

Current Year

59,360.00

Total

$ 617,434.87

See notes to the basic financial statements.

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

SCHEDULE "5"

DESCRIPTION
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)
TOTAL DIRECT INSTRUCTIONAL PROGRAMS
Media Center Program Staff and Professional Development

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

ELIGIBLE QBE PROGRAM COSTS

SALARIES

OPERATIONS

TOTAL

$

761,197.00 $

275,368.00

2,034,681.00

374,014.00

1,024,644.00

133,787.00 1,944,291.00 1,582,898.00
499,661.00 1,982,273.00

505,193.00 103,224.00 146,825.00 187,386.00
$ 11,555,442.00 $
315,553.00 55,494.00

854,600.88 $ 50,972.17
2,469,972.57 14,095.54
1,195,295.10
42,286.60 2,300,482.21 2,426,008.82
507,790.21
93,740.22 392,251.64 1,111,024.86 131,135.99
353.84 209,069.52
47,130.04 209,307.59 162,052.42
12,217,570.22 $
391,696.06

15,745.80 $
58,640.35
27,134.45
126.14 48,149.82 86,895.45 76,740.44
631.77 85,597.13
902.60 140.85 1,104.98 526.18 837.96 1,180.93
404,354.85 $
37,177.16

870,346.68 50,972.17
2,528,612.92 14,095.54
1,222,429.55
42,412.74 2,348,632.03 2,512,904.27
584,530.65
93,740.22 392,883.41 1,196,621.99 132,038.59
494.69 210,174.50
47,656.22 210,145.55 163,233.35
12,621,925.07
428,873.22 19,686.90

TOTAL QBE FORMULA FUNDS

$ 11,926,489.00 $

12,609,266.28 $

441,532.01 $ 13,070,485.19

(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.

- 33 -

SECTION II COMPLIANCE AND INTERNAL CONTROL REPORTS

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

DEPARTMENT OF AUDITS AND ACCOUNTS
270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400
August 27, 2012

Honorable Nathan Deal, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the Rabun County Board of Education
INDEPENDENT AUDITOR'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS
Ladies and Gentlemen:
We have audited the financial statements of the governmental activities, each major fund, and the aggregate remaining fund information of Rabun County Board of Education as of and for the year ended June 30, 2011, which collectively comprise Rabun County Board of Education's basic financial statements and have issued our report thereon dated August 27, 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 Rabun County Board of Education is responsible for establishing and maintaining effective internal control over financial reporting. In planning and performing our audit, we considered Rabun 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 Rabun County Board of Education's internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness of the Rabun County Board of Education's internal control over financial reporting.
Our consideration of internal control over financial reporting was for the limited purpose described in the preceding paragraph and was not designed to identify all deficiencies in internal control over financial reporting that might be deficiencies, significant deficiencies, or material weaknesses and therefore, there can be no assurances that all deficiencies, significant deficiencies or material weaknesses have been identified. However, as described in the accompanying Schedule of Findings and Questioned Costs, we identified a certain deficiency in internal control over financial reporting that we consider to be a material weakness.

2011YB-41

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. We consider item FS-7191-11-01 in the accompanying Schedule of Findings and Questioned Costs to be a material weakness.
Compliance and Other Matters
As part of obtaining reasonable assurance about whether Rabun County Board of Education's financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards.
We noted certain matters that we have reported to management of Rabun County Board of Education in a separate letter dated August 27, 2012.
Rabun County Board of Education's response to the findings identified in our audit is described in the accompanying Schedule of Management's Responses. We did not audit Rabun County Board of Education's response and, accordingly, we express no opinion on it.
This report is intended solely for the information and use of the management, members of the Rabun County Board of Education, others within the entity, Federal awarding agencies and passthrough entities and is not intended to be and should not be used by anyone other than these specified parties.
Respectfully submitted,

GSG:as 2011YB-41

Greg S. Griffin State Auditor

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

DEPARTMENT OF AUDITS AND ACCOUNTS
270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400
August 27, 2012

Honorable Nathan Deal, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the Rabun 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 Rabun 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. Rabun 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 Rabun County Board of Education's management. Our responsibility is to express an opinion on Rabun 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 Rabun 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 Rabun County Board of Education's compliance with those requirements.
As described in item FA-7191-11-01 in the accompanying Schedule of Findings and Questioned Costs, Rabun County Board of Education did not comply with requirements regarding Activities Allowed or Unallowed and Allowable Costs/Cost Principles that are applicable to its Title 1 Grants to Local Educational Agencies Program. Compliance with such requirements is necessary, in our opinion, for Rabun County Board of Education to comply with requirements applicable to that program.
2011SA-55

In our opinion, except for the noncompliance described in the preceding paragraph, the Rabun 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. The results of our auditing procedures also disclosed an instance of noncompliance with those requirements, which is required to be reported in accordance with OMB Circular A-133 and which is described in the accompanying Schedule of Findings and Questioned Costs as item FA-7191-11-02.
Internal Control Over Compliance
Management of Rabun 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 Rabun 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 Rabun County Board of Education's internal control over compliance.
Our consideration of internal control over compliance was for the limited purpose described in the preceding paragraph and was not designed to identify all deficiencies in internal control over compliance that might be significant deficiencies or material weaknesses and therefore, there can be no assurance that all deficiencies, significant deficiencies, or material weaknesses have been identified. However, as discussed below, we identified a certain deficiency in internal control over compliance that we consider to be a material weakness and another deficiency that we consider to be a significant deficiency.
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. We consider the deficiency in internal control over compliance described in the accompanying Schedule of Findings and Questioned Costs as item FA-7191-11-01 to be a material weakness.
A significant deficiency in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance with a type of compliance requirement of a Federal program that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance. We consider the deficiency in internal control over compliance described in the accompanying Schedule of Findings and Questioned Costs as item FA-7191-11-02 to be a significant deficiency.
Rabun County Board of Education's responses to the findings identified in our audit are described in the accompanying Schedule of Management's Responses. We did not audit Rabun County Board of Education's responses and, accordingly, we express no opinion on the responses.
2011SA-55

This report is intended solely for the information and use of management, members of the Rabun County Board of Education, others within the entity, Federal awarding agencies and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties.
Respectfully submitted,

GSG:as 2011SA-55

Greg S. Griffin State Auditor

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

RABUN 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

FINDING CONTROL NUMBER AND STATUS

FS-7191-09-01 FS-7191-10-01

Further Action Not Warranted Unresolved - See Corrective Action/Responses

CORRECTIVE ACTION/RESPONSES

FINANCIAL REPORTING Inadequate Controls over Financial Reporting Finding Control Number: FS-7191-10-01

The Finance Director will implement procedures to insure that all activity is included in the financial statements in the correct classifications. We will be seeking continued guidance from the Department of Education to make sure correct procedures are followed.

PRIOR YEAR FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

No matters were reported.

SECTION IV FINDINGS AND QUESTIONED COSTS

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

I SUMMARY OF AUDITOR'S RESULTS

Financial Statements

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

Unqualified

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

Yes None Reported

Noncompliance material to financial statements noted:

No

Federal Awards

Internal Control over major programs:

Material weakness identified?

Yes

Significant deficiency identified?

Yes

Type of auditor's report issued on compliance for major programs: Unqualified for all major programs except for Title I, Grants to Local Educational Agencies, which was qualified.

Any audit findings disclosed that are required to be reported in

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

Yes

Identification of major programs:

CFDA Numbers

Name of Federal Program or Cluster

84.010, 84.389 84.027, 84.173, 84.391 84.410

Title I, Part A Cluster Special Education Cluster Education Jobs Fund

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

$300,000.00

Auditee qualified as low-risk auditee?

No

II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

FINANCIAL REPORTING Inadequate Controls over Financial Reporting Material Weakness Finding Control Number: FS-7191-11-01

Condition: This is a repeat finding (FS-7191-10-01, FS-7191-09-02, and FS-7191-08-02) from fiscal years ended June 30, 2010, June 30, 2009, and June 30, 2008, respectively. The School District did not have adequate controls in place to ensure that all required activity was included in the financial statement information presented for audit.

- 1 -

RABUN COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2011
II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS Criteria: Chapter 22A Annual Financial Reporting of the Financial Management for Georgia Local Units of Administration provides that School Districts must prepare their financial statements in accordance with generally accepted accounting principles. Questioned Cost: N/A Information: During the audit, the following correcting entries were proposed and accepted by the client to properly present the entity's financial statements:
Numerous audit adjustments were required to be made to the District-wide statements to ensure that beginning net assets agreed to the ending balance from the prior year.
Numerous adjustments were required to be made to the Reconciliation of the Governmental Funds Statement of Revenues, Expenditures and Changes in Fund Balances to the Statement of Activities. The reconciliation originally provided by the entity did not balance.
Several other audit and reclassification entries were necessary to ensure that the financial statements were presented in accordance with generally accepted accounting principles.
Cause: The School District did not implement an adequate system of internal control over the financial reporting process. Effect: The School District did not comply with the requirements of the Georgia Department of Education regarding financial reporting. Several adjustments were necessary for the School District's financial statements to be in conformity with generally accepted accounting principles. Recommendation: The School District should implement controls over the financial reporting process to ensure that all required activity is included and properly reported within the financial statements.
- 2 -

RABUN COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2011
III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS
ACTIVITIES ALLOWED/UNALLOWED ALLOWABLE COSTS/COSTS PRINCIPLES Time and Attendance Records Not Utilized Material Weakness Material Noncompliance U. S. Department of Education Through Georgia Department of Education Title I Grants to Local Educational Agencies (CFDA 84.010 and 84.389) Finding Control Number: FA-7191-11-01
Condition: A review of salaries charged to the Title I Grants to Local Educational Agencies (CFDA 84.010 and 84.389) program revealed that amounts charged to this Federal Program were not supported by time and attendance records as required by OMB Circular A-87.
Criteria: Provisions of the OMB Circular A-87, Cost Principles for State, Local and Indian Tribal Governments, Attachment B, Selected items of Cost require that:
"Where employees work on multiple activities or cost objectives, a distribution of their salaries or wages will be supported by personnel activity reports or equivalent documentation that meets the following standards:
a) They must reflect an after-the-fact distribution of the actual activity of each employee, b) They must account for the total activity for which the employee is compensated, c) They must be prepared at least monthly and must coincide with one or more pay periods,
and d) They must be signed by the employee.
Such documentary support will be required where employees work on:
a) More than one Federal award, or b) A Federal award and a non-Federal award."
Questioned Cost: $37,178.62
Information: Testing of employee compensation payments charged to the Title I Program revealed that personnel activity reports were not sufficient to support the salary paid from Title I Funds to the Title I Director.
Cause: Management failed to implement controls for monitoring compliance with Federal guidelines to ensure that employee compensation expenses paid from Federal award programs were properly supported by time and attendance records.
- 3 -

RABUN COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2011
III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS
Effect: Failure to adequately monitor compliance related to employee compensation expenses paid from Federal award programs could result in material noncompliance with the requirements of this Federal grant.
Recommendation: The School District should strengthen controls to ensure that employee compensation expenses paid from Federal award programs are allowable and properly documented in accordance with OMB Circular A-87. The Georgia Department of Education should review this matter to determine if a refund is appropriate.
ELIGIBILITY Failure to Document Eligibility Determinations Significant Deficiency U. S. Department of Education Through Georgia Department of Education Title I Grants to Local Educational Agencies (CFDA 84.010 and 84.389) Finding Control Number: FA-7191-11-02
Condition: The School District failed to provide adequate documentation of eligibility determinations for its Title I Targeted Assistance Program. The policies and procedures of the School District were insufficient to provide adequate internal controls over maintaining student records to document that the school district correctly identified students for participation in the Targeted Assistance Program.
Criteria: As provided in Section 1115(a) of Title I of the Elementary and Secondary Education Act (ESEA), a school selected to operate as a Targeted Assistance Program may use funds only for programs that provide services to eligible children identified as having the greatest need for special assistance. In addition, Section 1115(b)(1)(B) provides that eligible children are identified by the school as failing, or most at-risk of failing, to meet the Georgia Department of Education challenging student academic achievement standards on the basis of multiple, educationally related, objective criteria established by the Local Education Agency and supplemented by the school.
Questioned Cost: N/A
Information: The School District failed to provide adequate documentation of eligibility determinations for its Targeted Assistance Title I School. The School District provided spreadsheets with the students listed in rank order based on multiple selection criteria; however, when testing students served, the school district failed to provide student records to substantiate the test scores used to rank the students.
Cause: Management failed to implement adequate internal controls for maintaining adequate documentation of eligibility determinations for its Targeted Assistance Title I schools.
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RABUN COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2011 III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS Effect: The School District may have served students with less need over those who have more need. Recommendation: The School District should ensure that proper procedures are implemented and followed in determining student eligibility for Targeted Assistance Schools. Documentation of these determinations should be maintained on file and made available for audit. The Georgia Department of Education should review this matter to determine if a reclaim of grant funds is appropriate.
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SECTION V MANAGEMENT'S RESPONSES

RABUN COUNTY BOARD OF EDUCATION SCHEDULE OF MANAGEMENT'S RESPONSES
YEAR ENDED JUNE 30, 2011

Finding Control Number: FS-7191-11-01

We concur with this finding. The Finance Director will implement procedures to insure that all activity is included in the financial statements in the correct classifications. We will continue seeking guidance from the Department of Education and Department of Audits to make sure correct procedures are followed.

Finding Control Number: FA-7191-11-01

We concur with this finding. The Finance Director will implement procedures to insure that all time and attendance records are available to support distribution of the actual activity of each employee in a Federal funded position.

Finding Control Number: FA-7191-11-02

We concur with this finding. The Finance Director will implement procedures to insure that all documentation is available for determining eligibility for Targeted Assistance Title I Schools.

Contact Person: Telephone: Fax: Email:

Lois Burrell, Finance Director (706) 746-5376 (706) 746-7560 lburrell@rabun.k12.ga.us