Schley County Board of Education, Ellaville, Georgia, annual financial report for the fiscal year ended June 30, 2010 (including independent auditor's reports)

SCHLEY COUNTY BOARD OF EDUCATION
ELLAVILLE, GEORGIA
ANNUAL FINANCIAL REPORT FOR THE FISCAL YEAR ENDED
JUNE 30,2010
(Including Independent Auditor's Reports)

SCHLEY COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS -

SECTION I

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

EXHlBITS

BASIC FINANCIAL STATEMENTS

DISTRICT-WIDE FINANCIAL STATEMENTS

A

STATEMENT OF NET ASSETS

B

STATEMENT OF ACTIVITIES

FUND FINANCIAL STATEMENTS

C

BALANCE SHEET

GOVERNMENTAL FUNDS

D

RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET

TO THE STATEMENT OF NET ASSETS

E

STATEMENT OF REVENUES, EXPENDITURES AND CHANGES

IN FUND BALANCES

GOVERNMENTAL FUNDS

F

RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT

OF REVENUES, EXPENDITURES AND CHANGES IN FUND

BALANCES TO THE STATEMENT OF ACTIVITIES

G

STATEMENT OF FIDUCIARY NET ASSETS

FIDUCIARY FUNDS

H

NOTES TO THE BASIC FINANCIAL STATEMENTS

SCHEDULES

REQUIRED SUPPLEMENTARY INFORMATION

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

SUPPLEMENTARY INFORMATION

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

SCHLEY COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS -
SECTION I FINANCIAL SCHEDULES SUPPLEMENTARY INFORMATION 4 SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS 5 ALLOTMENTSANDEXPENDITURES GENERAL FUND - QUALITY BASIC EDUCATION PROGRAMS (QBE) BY PROGRAM
SECTION II COMPLIANCE AND INTERNAL CONTROL REPORTS INDEPENDENT AUDITOR'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MAlTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WlTH GOVERNMENTAUDITING STANDARDS INDEPENDENT AUDITOR'S REPORT ON COMPLIANCE WlTH REQUIREMENTS THAT COULD HAVE A DIRECT AND MATERIAL EFFECT ON EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WlTH OMB CIRCULAR A-133
SECTION Ill AUDITEE'S RESPONSE TO PRIOR YEAR FINDINGS AND QUESTIONED COSTS SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS
SECTION IV FINDINGS AND QUESTIONED COSTS SCHEDULE OF FINDINGS AND QUESTIONED COSTS

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

SECTION I FINANCIAL

Russell W. Hinton
STATE AUDITOR
(404)6563174

DEPARTMENOTF AUDITSAND ACCOUNTS
270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400
March 17,2011

Honorable Nathan Deal, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the Schley County Board of Education
INDEPENDENT AUDITOR'S COMBINED REPORT ON BASIC FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION - SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
Ladies and Gentlemen:
We have audited the accompanying financial statements of the governmental activities, each major fund, and the aggregate remaining fund information (Exhibits A through H) of the Schley County Board of Education, as of and for the year ended June 30, 2010, which collectively comprise the Board's basic financial statements as listed in the table of contents. These financial statements are the responsibility of the Schley 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 GovernmentAuditing
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 examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and the 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 Schley County Board of Education, as of June 30, 2010, and the respective changes in financial position thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America.
The Schley 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 March 17, 2011, on our consideration of the Schley 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 petTormed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit.
Accounting principles generally accepted in the United States of America require that the Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual, as presented on page 23, be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures, to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during the audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance.
Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Schley 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. Such information is the responsibility of management and was derived from and relate directly to the underlying accounting and other records used to prepare the financial statements. The information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated, in all material respects, in relation to the 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,
~ u d e lWl . Hinton, CPA, CGFM State Auditor

SCHLEY COUNTY BOARD OF EDUCATION

SCHLEY COUNTY BOARD OF EDUCATION STATEMENT OF NET ASSETS JUNE 30.2010
ASSETS
Cash and Cash Equivalents Accounts Receivable, Net
Taxes State Government Federal Government Inventories Capital Assets, Non-Depreciable Capital Assets, Depreciable(Net of Accumulated Depreciation)
Total Assets
LIABILITIES
Accounts Payable Salaries and Benefits Payable Payroll Withholdings Payable Interest Payable Deposits and Deferred Revenues 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
Bus Replacement Continuation of Federal Programs Debt Service Capital Projects Unrestricted
Total Net Assets
Total Liabilities and Net Assets

EXHIBIT "A"
GOVERNMENTAL ACTIVITIES

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

SCHLEY COUNTY BOARD OF EDUCATION STATEMENT OF ACTIVITIES
FOR THE YEAR ENDEDJUNE 30,2010

GOVERNMENTAL ACTIVITIES
Instruction Support Services
Pupil Services Improvement of Instructional Services Educational Media Servlces General Adminlstratlon School Administration Business Administration Maintenance and Operation of Plant Student Transportation Servlces Central Support Services Other Support Servtces Operations of Non-lnstruct~onaSl ervlces Enterprise Operations Food Services Interest on Short-Term and Long-Term Debt
Total Governmental Actlvltles
General Revenues Taxes Property Taxes For Maintenance and Operations For Debt Services Other Taxes Sales Taxes Special Purpose Local Option Sales Tax For Capital Projects Other Sales Tax Grants and Contrlbutlons not Restricted to Specific Programs Investment Earnlngs M~scellaneaus
Total General Revenues
Change in Net Assets
Net Assets - Beginning of Year
Net Assets - End of Year

EXPENSES

PROGRAM REVENUES

OPERATING

CHARGES FOR

GRANTS AND

SERVICES

CONTRIBUTIONS

NET (EXPENSES) REVENUES
AND CHANGES IN NET ASSETS

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

SCHLEY COUNTY BOARD OF EDUCATION BALANCE SHEET
GOVERNMENTAL FUNDS JUNE 30,2010

ASSETS
Cash and Cash Equivalents Accounts Receivable, Net
Taxes State Government Federal Government Inventories

GENERAL FUND

DISTRICTWIDE
CAPITAL PROJECTS
FUND

Total Assets

LIABILITIESAND FUND BALANCES
LIABILITIES
Accounts Payable Salaries and Benefits Payable Payroll Withholdings Payable Deposits and Deferred Revenue
Total Liabilities
FUND BALANCES
Resewed for: Bus Replacement Continuation of Federal Programs Debt Service Capital Projects
Unreserved Designated for Student Activities Undesignated Reported in: General Fund
Total Fund Balances
Total Liabilities and Fund Balances

DEBT SERVICE
FUND

TOTAL

The notes to the basic financial statements are an integral part of this statement. -3-

SCHLEY COUNTY BOARD OF EDUCATION RECONCILIATIONOF THE GOVERNMENTAL FUNDS BALANCESHEEl
TOTHESTATEMENTOFNETASSETS JUNE 30.2010
Total Fund Balances - Governmental Funds (Exhibit "C')
Amounts reported for GovernmentalActivities in the Statement of Net Assets are different because:
Capital Assets used in GovernmentalActivities are not financial resources and therefore are not reported in the funds. These assets consist of:
Land 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.
LongTerm Liabilities, includ~ngBonds 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 Accrued Interest Capital Leases Payable
Total Long-TermLiabilities
Net Assets of Governmental Activities (Exhibit "A")

EXHIBIT "D"

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

SCHLEY COUNTY BOARD OF EDUCATION STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES
GOVERNMENTAL FUNDS YEAR ENDEDJUNE 30.2010

REVENUES
Propem Taxes Sales Taxes State Funds Federal Funds Charges for Services Investment Earnings Miscellaneous
Total Revenues
EXPENDITURES
Current Instruction Support Services Pup11Services 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
Debt Services Principal Dues and Fees Interest
Total Expenditures
Excess of Revenues over (under) Expenditures
OTHER FINANCING SOURCES [USES)
Transfers In Transfers Out
Total Other FinancingSources (Uses)
Net Change in Fund Balances
Fund Balances- Beginning (Restated)
Fund Balances- Ending

GENERAL FUND

DiSTRICTWIDE
CAPITAL PROJECTS
FUND

DEBT SERVICE
FUND

TOTAL

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

SCHLEY COUNTY BOARD OF EDUCATION RECONCILIATIONOF THE GOVERNMENTALFUNDS STATEMENT OF
REVENUES. EXPENDITURESAND CHANGES iN FUND BALANCES TO THE STATEMENT OF ACTIVITIES JUNE 30,2010
Total Net Change in Fund Balances - Governmental Funds (Exhibit "E")
Amounts reported for Governmental Actlvltles In the Statement of Activit~esare different because:
Capital Outlays are reported as expenditures in Governmental Funds. However, in the Statement of Activ~ties,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.
Repayment of Long-Term Debt is reported as an expenditure In Governmental Funds, but the repayment reduces Long-Term Liabilities in the Statement of Net Assets. In the current year, these amounts consist of: Bond Principal Retirements Capital Lease Payments Total Long-Term Debt Repayments
Some items reported in the Statement of Activities do not require the use of current financial resources and therefore are not reported as expenditures in Governmental Funds. These activities consist of: Net Increase (Decrease)in Accrued Interest
Change in NetAssets of GovernmentalActivities (Exhibit"B")
The notes to the basic financial statements are an integral part of this statement. -6-

SCHLEY COUNTY BOARD OF EDUCATION STATEMENT OF FIDUCIARY NET ASSETS
FIDUCIARY FUNDS JUNE 30,2010
ASSETS Cash and Cash Equivalents
LIABILITIES Funds Held for Others

EXHIBIT "G"
AGENCY FUNDS

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

SCHLEY COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30,2010

EXHIBIT "H"

NOTE 1: DESCRIPTION OF SCHOOL DISTRICT AND REPORTING ENTITY
REPORTING ENTITY
The Schley 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 Schley County Board of Education.
Disfrict-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 t o meeting the operational or capital requirements of a particular program. Revenuesthat are not classified as program revenues, including all taxes, are presented as general revenues.
Fund Financial StatementE= The fund financial statements provide information about the School District's funds, including fiduciary funds. Eliminations have been made to minimize the double counting of internal activities. Separate statements for each category (governmental and fiduciary) are presented. The emphasis of fund financial statements is on major governmental funds, each displayed in a separate column.
The School District reports the following major governmental funds:
General Fund is the School District's primary operating fund. It accounts for all financial resources of the School District, except those resources required to be accounted for in another fund.

SCHLEY COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30,2010

EXHIBIT "H"

District-wide Capital Projects Fund accounts for financial resources including Special Purpose Local Option Sales Tax (SPLOST)to be used for the acquisition, construction or renovation of major capital facilities.
Debt Service Fund accounts for taxes (property and sales) legally restricted for the payment of general long-term principal, interest and paying agent's fees.
The School District reports the following fiduciary fund type:
Agency funds account for assets held by the School District as an agent for various funds, governments or individuals.
BASIS OF PRESENTATION
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, and grants. On an accrual basis, revenue from property taxes is recognized in the fiscal year for which the taxes are levied. Revenue from sales taxes is recognized in the fiscal year in which the underlying transaction (sale) takes place. Revenue from grants and donations are recognized in the fiscal year in which all eligibility requirements have been satisfied.
The School District uses funds to report on its financial position and the results of its operations. Fund accounting is designed to demonstrate legal compliance and to aid financial management by segregating transactions related to certain governmental functions or activities. A fund is a separate accounting entity with a self-balancing set of accounts.
Governmental funds are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Under this method, revenues are recognized when measurable and available. The School District considers all revenues reported in the governmental funds to be available if they are collected within sixty days after year-end. Property taxes, sales taxes and interest are considered to be susceptible to accrual. Expenditures are recorded when the related fund liability is incurred, except for principal and interest on general long-term debt, 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.
The State of Georgia reimburses the School District for teachers' salaries and operating costs through the Quality Basic Education Formula Earnings program (QBE). Generally teachers are contracted for the school year (July 1- June 30) and paid over a twelve month contract period, generally September 1through August 31. In accordance with the respective rules and regulations

SCHLEY COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30,2010

EXHIBIT "H"

of the QBE program, the State of Georgia reimburses the School District over the same twelve month period in which teachers are paid. At June 30, the amount of teachers' salaries incurred but not paid until July and August of the subsequent year are accrued. Since the State of Georgia recognizes its QBE liability for the July and August salaries at June 30, the School District recognizes the same QBE as a receivable and revenue, consistent with symmetrical recognition.
NEW ACCOUNTING PRONOUNCEMENTS
In fiscal year 2010, the School District adopted the Governmental Accounting and Standards Board (GASB) Statement No. 51, Accounting and Reporting for Intangible Assee. The provisions of this Statement generally require retroactive reportingfor intangible assets acquired after June 30, 1980, with the exception of those intangible assets that have indefinite useful lives and those that are considered internally generated.
In addition, the School District adopted GASB Statement No. 53, Accounting and Financial Reporting for Derivative Instruments. The provisions of this Statement impacts disclosure regarding derivative instruments entered into by the state and local governments. Derivative disclosures, if any, will be identified in Note 3.
RESTATEMENT OF PRIOR YEAR NET ASSETS/FUND BALANCE
For fiscal year 2010, the School District made a prior period adjustment due to an error related to cash balances by bank and fund between General Fund, Capital Projects and Debt Service, which required the restatement of the June 30,2009, fund balance in each of those funds. These changes are in accordance with generally accepted accounting principles.
General Fund:
Fund Balance, July 1,2009, as previously reported
Reclassificiation of cash balances
Fund Balance, July 1,2009, as restated
Capital Projects Fund:
Fund Balance,July 1,2009, as previously reported
Reclassificiation of cash balances
Fund Balance,July 1,2009, as restated
Debt Service Fund:
Fund Balance,July 1,2009, as previously reported
Reclassificiation of cash balances
Fund Balance, July 1,2009, as restated

SCHLEY COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30,2010

EXHIBIT "H"

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.

RECEIVABLES

Receivables consist of amounts due from property and sales taxes, grant reimbursements due on Federal, State or other grants for expenditures made but not reimbursed and other receivables disclosed from information available. Receivables are recorded when either the asset or revenue recognition criteria has been met. Receivables recorded on the basic financial statements do not include any amounts which would necessitate the need for an allowance for uncollectible receivables.

PROPERTY TAXES

The Schley County Board of Commissioners fixed the property tax levy for the 2009 tax digest year (calendar year) on December 8, 2009 (levy date). Taxes were due on February 20, 2010 (lien date). Taxes collected within the current fiscal year or within 6 0 days after year-end on the 2009 tax digest are reported as revenue in the governmental funds for fiscal year 2010. The Schley County Tax Commissioner bills and collects the property taxes for the School District, withholds 2.5% of taxes collected as a fee for tax collection and remits the balance of taxes collected to the School District. Property tax revenues, at the fund reporting level, during the fiscal year ended June 30, 2010, for maintenance and operations amounted to $1,739,756.38 and for school bonds amounted to $270,530.25.

Tax millage rates levied for the 2009 tax year (calendar year) for the Schley County Board of Education were as follows (a mill equals $ 1 per thousand dollars of assessed value):

School Operations School Bonds

16.68 mills 2.43 mills

19.11 mills

SALES TAXES
Special Purpose Local Option Sales Tax, at the fund reporting level, during the year amounted to $338,327.50 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.

SCHLEY COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30,2010

EXHIBIT "H"

INVENTORIES

Food Inventories On the basic financial statements, inventories of donated food commodities used in the preparation of meals are reported at their Federally assigned value and purchased foods inventories are reported at cost (first-in, first-out). The School District uses the consumption method to account for inventories whereby donated food commodities are recorded as an asset and as revenue when received, and expenses/expenditures are recorded as the inventory items are used. Purchased foods are recorded as an asset when purchased and expenses/expenditures are recorded as the inventory items are used.

CAPITAL ASSETS

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

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

Capitalization Policv

Estimated Useful Life

Land Land Improvements Buildings and Improvements Equipment Construction in Progress

All

N/A

$

5,000.00

up to 15 years

$

5,000.00

10to 60 years

$

5,000.00

up to 15 years

All

N/A

Depreciation is used to allocate the actual or estimated historical cost of all capital assets over estimated useful lives.

GENERAL OBLIGATION BONDS

The School District issues general obligation bonds to provide funds for the acquisition and construction of major capital facilities. In the District-wide 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

SCHLEY COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30,2010

EXHIBIT "H"

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. In addition, general obligation bonds have been issued to refund existing general obligation bonds. General obligation bonds are direct obligations and pledge the full faith and credit of the government. The outstanding amount of these bonds is recorded in the Statement of Net Assets.
NET ASSETS
The School District's net assets in the District-wide Statements are classified as follows:
Invested in capital assets, net of related debt - This represents the School District's total investment in capital assets, net of outstanding debt obligations related to those capital assets. To the extent debt has been incurred but not yet expended for capital assets, such amounts are not included as a component of invested in capital assets, net of related debt.
Restricted net assets-These represent resources for which the School District is legally or contractually obligated to spend resources for 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.
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,

SCHLEY COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30,2010

EXHIBIT "H"

2. lnsurance on accounts provided by the Federal Deposit lnsurance Corporation,
3. Bonds, bills, notes, certificates of indebtedness or other direct obligations of the United States or of the State of Georgia,
4. Bonds, bills, notes, certificates of indebtedness or other obligations of the counties or municipalities of the State of Georgia,
5. Bonds of any public authority created by the laws of the State of Georgia, providing that the statute that created the authority authorized the use of the bonds for this purpose,
6. Industrial revenue bonds and bonds of development authorities created by the laws of the State of Georgia, and
7. Bonds, bills, notes, certificates of indebtedness, or other obligations of a subsidiary corporation of the United States government, which are fully guaranteed by the United States government both as to principal and interest or debt obligations issued by or securities guaranteed by the Federal Land Bank, the Federal Home Loan Bank, the Federal Intermediate Credit Bank, the Central Bank for Cooperatives, the Farm Credit Banks, the Federal Home Loan MortgageAssociation, and the Federal National MortgageAssociation.
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. At June 30, 2010, the bank balances were $4,179,241.98. The bank balances were entirely covered by Federal depository insurance.
NOTE 4: NON-MONETARY TRANSACTIONS
The School District receives food commodities from the United States Department of Agriculture (USDA)for school breakfast and lunch programs. These commodities are recorded at their Federally assigned value. See Note 2 - Inventories

SCHLEY COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30,2010

EXHIBIT "H"

NOTE 5: CAPITAL ASSETS

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

Governmental Activities Capital Assets, Not Being Depreciated:

Balances July 1.2009

Increases

Decreases

Balances June 30.2010

Capital Assets, Being Depreciated: Buildings Land Improvements Equipment

$ 11,996,370.00$ 833,069.00
1.473.158.00

105,565.24 7,320.00
106,169.94 $

$ 115,463.00

12,101,935.24 840,389.00
1,463,864.94

Less: Accumulated Depreciation: Buildings Land Improvements Equipment

1,978,513.52 335,349.56
1,018,881.16

258,178.45 54,308.75 93,458.29

115,463.00

2,236,691.97 389,658.31 996,876.45

Total Capital Assets, Being Depreciated. Net $ 10.969.852.76$ -186,890.31$

0.00 $ 10,782,962.45

Governmental Activity Capital Assets - Net $ 11,220,412.76$ -186,890.31$

0.00 $ 11,033,522.45

Capital assets being acquired under capital leases as of June 30, 2010, are as follows:
Governmental Funds

Equipment Less: Accumulated Depreciation

Current year depreciation expense by function is as follows:
Instruction Support Services
School Administration Maintenance and Operation of Plant Student Transportation Services Food Services

SCHLEY COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30.2010

EXHIBIT "H"

NOTE 6: INTERFUNDTRANSFERS Interfund transfers for the year ended June 30,2010, consisted of the following:

Transfer to

Transfers From District-wide Capital Proiects

Debt Service Fund

$ 165,678.00

Transfers are used to move sales tax revenues collected by the District-wide Capital Projects Fund to the Debt Service Fund for Bond principal and interest payments.
NOTE 7: RISK MANAGEMENT
The School District is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors or omissions; job related illness or injuries to employees and acts of God.
The School District has obtained commercial insurance for risk of loss associated with torts, assets, and errors or omissions. The School District has neither significantly reduced coverage for these risks nor incurred losses (settlements) which exceeded the School District's insurance coverage in any of the past three years.
The School District has elected to self-insure for all losses related to acts of God. The School District has not experienced any losses related to this risk in the past three years.
The School District participates in the Georgia Education Workers' Compensation Trust, a public entity risk pool organized on December 1,1991, to develop, implement and administer a program of workers' compensation self-insurance for its member organizations. The School District pays an annual premium to the Trust for its general insurance coverage. Additional insurance coverage is provided through an agreement by the Trust with the Midwest Employers Casualty Company to provide coverage for potential losses sustained by the Trust in excess of $700,000.00 loss per occurrence, up to the statutory limit. Employers' Liability insurance coverage is also provided by Midwest Employers Casualty Company to provide coverage for potential losses sustained by the Fund in excess of $700,000.00 loss per occurrence, up to $1,000,000.00, with an 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

SCHLEY COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30,2010

EXHIBIT "H"

NOTE 8: OPERATING LEASES

Schley County Board of Education has entered into various leases as lessee for copiers and portable buildings. These leases are considered for accounting purposes to be operating leases. Lease expenditures for the year ended June 30, 2010, for governmental funds amounted to $36,468.48. Future minimum lease payments for these leases are as follows:

Year Ending

Governmental Funds

Total

NOTE 9: SHORT-TERM DEBT

The School District obtains temporary loans in advance of property tax collections, depositing the proceeds in its General Fund. This short-term debt is to provide cash for operations until property tax collections are received by the School District. Article IX, Section V, Paragraph V of the Constitution of the State of Georgia limits the aggregate amount of short-term debt to 75 percent of the total gross income from taxes collected in the preceding year and requires all short-term debt to be repaid no later than December 3 1of the calendar year in which the debt was incurred.

Short-term debt activity for the fiscal year is as follows:

Beg~nning Balance

Issued

Redeemed

Ending Balance

Temporary Loans

$

0.00 $ 1,131,763.07$ 1,131,763.07$

0.00

NOTE 10: LONG-TERM DEBT
CAPITAL LEASES
The Schley County Board of Education entered into various lease agreements for buses and computers. 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.

SCHLEY COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
J U N E 30,2010

GENERAL OBLIGATION DEBT OUTSTANDING

G e n e r a l O b l i g a t i o n Bonds c u r r e n t l y outstandingare as follows:

Purpose

Interest Rates

General Government -Series 1999 General Government - Refunding- Series 2004

4.30%- 5.00% 3.28%

EXHIBIT "H" Amount

T h e changes in L o n g - T e r m D e b t during the f i s c a l y e a r ended J u n e 30,2010, w e r e as follows:

Balance
July 1,2009

Additions

Governmental Funds

Balance

Deductions

June 30, 2010

Due Within One Year

G. 0. Bonds
Capital Leases

A t J u n e 30, 2010, p a y m e n t s due by f i s c a l y e a r w h i c h includes p r i n c i p a l and interest f o r these items are as follows:
Capital Leases

Fiscal Year Ended June 30:

Principal

Interest

Total Principal and lnterest Fiscal Year Ended June 30:

General Obligation Debt

Principal

Interest

Total Principal and Interest

SCHLEY COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30,2010

EXHIBIT "H"

NOTE 11: ON-BEHALF PAYMENTS
The School District has recognized revenues and costs in the amount of $19,368.74 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 lnsurance of Non-Certified Personnel In the amount of $15,785.82
Office of Treasury and Fiscal Services Paid to the Public School Employees Retirement System For Public School Employees Retirement (PSERS) Employer's Cost In the amount of $3,582.92
NOTE 12: 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 pertainingto 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 13: SUBSEOUENT EVENTS
In the subsequent fiscal year, the School District issued general obligation bonds in the amount of $2,855,000.00. The proceeds from these bonds will be used for refunding the outstanding Series 1999 General Obligation Bonds.
NOTE 14: POST-EMPLOYMENT BENEFITS
GEORGIASCHOOL PERSONNEL EMPLOYEES 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 OPE6 Fun provides health insurance benefits to eligible former employees and their qualified beneficiaries through the State Employees Health lnsurance Plan administered by the Department of Community Health. The Official Code of Georgia Annotated (OCGA) assigns the authority to establish and amend the benefit provisions of the group health plans, including benefits for retirees, to the Board of Community Health (Board).
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 of the cost of health insurance coverage.

SCHLEY COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30,2010

EXHIBIT "H"

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.
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, 2010:
in the School OPEB Fund were as follows for the fiscal year ended June 30,2010:
For certificated teachers, librarians and regional educational service agencies:

July 2009 August 2009 - October 2009 November 2009 -June 2010

18.534% of covered payroll for August Coverage
14.492% of covered payroll for September - November Coverage
18.534% of covered payroll for December - July Coverage

For non-certificated school personnel:

July 2009 -June 2010

$162.72 per member per month plus Department of Education contribution of $22,838,311.00

No additional contribution was required by the Board for fiscal year 2010 nor contributed to the State OPEB Fund to prefund retiree benefits. Such additional contribution amounts are determined annually by the Board in accordance with the State plan for other postemployment benefits and are subject to appropriation.
The School District's combined active and retiree contributions to the health insurance plans, which equaled the required contribution, for the current fiscal year and the preceding two fiscal years were as follows:

Fiscal Year

Percentage Contributed

Required Contribution

NOTE 15: RETIREMENT PLANS
TEACHERS RETlREMENT 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.

SCHLEY COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30.2010

EXHIBIT "H"

On October 25, 1996, the Board created the Supplemental Retirement Benefits Plan of the Georgia Teachers Retirement System (SRBP-TRS). SRBP-TRS was established as a qualified excess benefit plan in accordance with Section 415 of the Internal Revenue Code (IRC) as a portion of TRS. The purpose of SRBP-TRS is to provide retirement benefits to employees covered by TRS whose benefits are otherwise limited by IRC Section 415. Beginning July 1,1997, all members and retired former members in TRS are eligible to participate in the SRBP-TRS whenever their benefits under TRS exceed the IRC Section 415 imposed limitation on benefits.

TRS provides service retirement, disability retirement, and survivor's benefits. The benefit structure of TRS is defined and may be amended by State statute. A member is eligible for normal service retirement after 3 0 years of creditable service, regardless of age, or after 1 0 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 4 0 years. Early retirement benefits are reduced by the lesser of one-twelfth of 7% for each month the member is below age 6 0 or by 7% for each year or fraction thereof by which the member has less than 3 0 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 1 0 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, 2010, were
5.25% of annual salary. The member contribution rate will increase to 5.53% effective July 1,2010.
Employer contributions required for fiscal year 2010 were 9.74% of annual salary as required by the June 30, 2007, actuarial valuation. The employer contribution rate will increase to 10.28% effective July 1,2010.

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

Fiscal Year

Percentage Contributed

Required Contribution

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SCHLEY COUNTY BOARD OF EDUCATION GENERAL FUND
SCHEDULE OF REVENUES. EXPENDITURESAND CHANGES IN FUND BALANCES BUDGET AND ACTUAL
YEAR ENDED JUNE 30.2010

REVENUES
Property Taxes Sales Taxes State Funds Federal Funds Charges for Services Investment Earnlngs Miscellaneous
Total Revenues
EXPENDITURES
Current instruction Support Services Pup11Services Improvement of lnstruct~onaSl ervlces Educational Medla Services General Admlnlstratlon School Administration Buslness Admlnlstratlon Maintenance and Operation of Plant Student Transportation Serv~ces Central Support Services Other Support Servlces Food S e ~ l c e sOperabon Enterprise Operations
Capital Outlay Debt Servlce
Total Expendltures
Excess of Revenues over (under) Expendltures
OTHER FINANCING SOURCES
Other Sources
Net Change In Fund Balances
Fund Balances- Beginning(Restated)

NONAPPROPRIATED BUDGETS

ORIGINAL (1)

FINAL (1)

SCHEDULE "1"
ACTUAL AMOUNTS

Fund Balances - Endlng
Notes to the Schedule of Revenues. EXDendltUreSand Changes In Fund Balances Budget and Actual (1) Orlginaland Final Budget amounts do not include budgeted revenues or expenditures of the varlous principal accounts. The accompanyingschedule 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 baslc financlal statements.

SCHLEY COUNTY BOARD OF EDUCATION SCHEDULE OF EXPENDITURESOF FEDERALAWARDS
YEAR ENDEDJUNE 30,2010

SCHEDULE "2"

FUNDING AGENCY PROGRAM/GRANT
Agriculture, U. S. Department Of Child Nutrition Cluster Pass-ThroughFrom Georgia Department of Education Food Services School Breakfast Program National School Lunch Program
Total U. S. Department of Agriculture
Education, U. S. Department of Education Technology State Grants Cluster Pass-Through From Georgia Department of Education Education Technology State Grants
Special Education Cluster Pass-Through From Georgia Department of Education Special Education
ARRA - Grants to States
Grants to States
Total Soecial Education Cluster
State Fiscal Stabilization Fund Cluster Pass-ThroughFrom Georgia Department of Education
ARRA - Education State Grants
Title 1, Part A Cluster Pass-ThroughFrom Georgia Department of Education ARRA - T~tleI Grants to Local Educational Agencies Title I Grants to Local Educational Agencies
Total Title I. Part A Cluster
Other Programs Pass-ThroughFrom Georgia Department of Education Career and Technical Education - Basic Grants to States ImprovingTeacher Quality State Grants Rural Education Pass-Through From Chattahoochee-Flint Regional Educational Service Agency
Safe and Drug-FreeSchools and Communities - State Grants
Total Other Programs
Total U. S. DeDartment of Education
Health and Human Services, U. S. Department of Child Care and Development Fund Cluster Pass-Through From Bright From the Start: Georgia Department of Early Care and Learning
- ARRA Child Care and Development Block Grant
Total Federal Financial Assistance
N/A = Not Available

CFDA NUMBER

PASSTHROUGH
ENTITY ID
NUMBER

EXPENDITURES IN PERIOD

SCHLEY COUNTY BOARD OF EDUCATION
SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
YEAR ENDEDJUNE 30,2010

SCHEDULE "2"

Notes to the Schedule of Exoendituresof Federal Awards
(1) Includes the Federallyassigned value of donated commodities for the Food Donation Program in the amount of $46,932.43.
(2) Expendituresfor the funds earned on the School Breakfast Program ($130,491.40) were not maintained separately and are included in the 2010 National School Lunch Program.
Major Programsare identifled by an asterisk (*) in front of the CFDA number.
The School District did not provide Federal Assistance to any Subrecipient.
The accompanying schedule of expend~turesof Federal awards includes the Federal grant activity of the Schley County Board of Education and is presented on the modified accrual basis of accounting whlch is the basis of accounting used in the presentation of the fund financial statements.

See notes to the basic financial statements.

SCHLEY COUNTY BOARD OF EDUCATION SCHEDULE OF STATE REVENUE YEAR ENDEDJUNE 30,2010
GRANTS Bright From the Start: Georgia Department of Early Care and Learning PreKindergarten Program
Education, Georgia Departmentof QualityBasic Education Direct Instructional Cost Kindergarten Program Kindergarten Program - Early Intervention Program Primary Grades (1-3) Program
Primary Grades - Early Intervention (1-3P)rogram
Upper Elementary Grades (4-5) Program Upper Elementary Grades - Early Intervention (4-5) Program Middle Grades (6-8) Program High School General Education (9-12) Program Vocational Laboratory (9-12) Program Students with Disabilities
Category I
Gifted Student - Category VI
Remedial Education Program Alternative Education Program Media Center Program 2 0 Days Additional Instruction Staff and Professional Development Indirect Cost Central Administration School Administration Facility Maintenanceand Operations Categorical Grants Pupil Transportation Regular Sparsity Nursing Services Vocational Supervisors Education Equalization Funding Grant Food Services Vocational Education Amended Formula Adjustment Other State Programs Dual Enrollment Funding Health Insurance National Teacher Certification
Office of Treasury and Fiscal Services Public School Employees Retirement
Southwest Georgia Reg~onaEl ducational Service Agency Limited English Proficient
See notes to the basic financial statements.

SCHEDULE " 3
GOVERNMENTAL FUND TYPE GENERAL FUND

SCHLEY COUNTY BOARD OF EDUCATION SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS
YEAR ENDEDJUNE 30.2010

SCHEDULE "4"

PROJECT
Paying a portion of the principal and interest due on outstanding Series 1993 General Obligation Bonds and Series 1999 General Obligation Bonds previously issued by the Schley County School District.
Adding to, renovating, repairing, improving and equipping existing school buildings or other buildings or facilities useful or desirable in connection therewith, less the amount of such proceeds used to pay the outstanding Schley County School Debt.

ORIGINAL ESTIMATED
COST (1)

CURRENT ESTIMATED COSTS (2)

AMOUNT EXPENDED IN CURRENT YEAR (3)(4)

AMOUNT EXPENDED IN PRIOR YEARS (3)(4)

PROJECT STATUS

(1) The School D~strict'sorig~naclost estlmate as specifled in the resolut~oncalling for the imposition of the Local Optlon Sales Tax.
(2) The School D~strict'scurrent estlmate of total cost for the projects. includes all cost from project incept~onto completion
(3) Thevoters of Schley County approved the lmposltlon of a l%sales tax to fund the above projects Amounts expended for these projects may Include sales tax proceeds, state, local property taxes and/or other funds over the llfe of the projects.
(4) A portion of the Ser~es1993 Bonds were retired through the sale of the Series 2004 Refund~ngBond Issue. The School D~stricwt ill ut~llzethe SPLOST proceeds budgeted for thls project plus any excess SPLOST proceeds to retire the Series 2004 Refunding Bond Issue.

See notes t o the baslcflnancial statements.

(This page left intentionally blank)

SCHLEY COUNTY BOARD OF EDUCATION
GENERAL FUND - QUALITYBASIC EDUCATION PROGRAM (QBE)
ALLOTMENTS AND EXPENDITURES - BY PROGRAM YEAR ENDEDJUNE 30.2010

SCHEDULE "J"

DESCRIPTION
Direct Instructional Programs Kindergarten Program Kindergarten Program-Early Intervention Program Prlmary Grades (1-3) Program Pr~maryGrades-Early Intervention (1-3) Program Upper Elementary Grades (4-5) Program Upper Elementaly Grades-Earlylnte~ention(4-5) Program Mlddle Grades (6-8) Program High School General Educat~on(9-12) Program Vocational Laboratory (9-12) Program Students w ~ t hDisabilities Category Ill Gifted Student - Category VI Remedial Educat~onProgram Alternat~veEducation Program
TOTAL DIRECT INSTRUCTIONAL PROGRAMS
Media Center Program Staff and Professional Development
TOTAL QBE FORMULA FUNDS

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

ELIGIBLE QBE PROGRAM COSTS

SALARIES

OPERATIONS

TOTAL

(1)Compr~sedof State Funds plus Local Five Mill Share. (2) Allotments do not Include the impact of the State amended formula adjustment.

See notes t o the basic financial statements

SECTION II COMPLIANCE AND INTERNAL CONTROL REPORTS

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

DEPARTMENOTF AUDITSAND ACCOUNTS
270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400
March 1 7 . 2 0 1 1

Honorable Nathan Deal, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the Schley 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 Schley County Board of Education as of and for the year ended June 30, 2010, which collectively comprise Schley County Board of Education's basic financial statements and have issued our report thereon dated March 17, 2011. 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 Re~orting
In planning and performing our audit, we considered Schley 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 Schley County Board of Education's internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness of the Schley 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 first paragraph of this section and was not designed to identify all deficiencies in internal control over financial reporting that might be deficiencies, significant deficiencies, or material weaknesses. However, as described in the accompanying Schedule of Findings and Questioned Costs, we identified certain deficiencies in internal control over financial reporting that we consider to be material weaknesses and other deficiencies that we consider to be significant deficiencies.
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-7231-1041to be a material weakness.

A signficant deficiencyis a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. We consider item FS-7231-10-02 in the accompanying Schedule of Findings and Questioned Costs to be a significant deficiency in internal control over financial reporting.
Com~lianceand Other Matters
As part of obtaining reasonable assurance about whether Schley 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 Standads.
We noted certain matters that we have reported to management of Schley County Board of Education in a separate letter dated March 17, 2011.
Schley 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 Schley County Board of Education's responses and, accordingly, we express no opinion on it.
This report is intended solely for the information and use of management, members of the Schley 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,
usd dell W. Hinton, CPA, CGFM
State Auditor

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

DEPARTMENOTF AUDITSAND ACCOUNTS
270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400
March 17,2011

Honorable Nathan Deal, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the Schley County Board of Education
INDEPENDENT AUDITOR'S REPORT ON COMPLIANCE WlTH REOUIREMENTS THAT COULD HAVE A DIRECT AND MATERIAL EFFECT ON EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WlTH OMB CIRCULAR A-133
Ladies and Gentlemen:
Compliance
We have audited Schley County Board of Education's compliance with the types of compliance requirements described in the OMB Circular A-133 Compliance Supplement that couId have a direct and material effect on each of its major Federal programs for the year ended June 30, 2010. Schley 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 Schley County Board of Education's management. Our responsibility is to express an opinion on Schley 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, L m l Governments, and Non-Profit Organirations. Those standards and 0MB 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 Schley 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 Schley County Board of Education's compliance with those requirements.
In our opinion, the Schley 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, 2010.

Internal Control Over Com~liance
Management of Schley 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 Schley 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 Schley County Board of Education's internal control over compliance.
A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a Federal program on a timely basis. A material weakness in internal control over compliance is a deficiency, or combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a Federal program will not be prevented, or detected and corrected, on a timely basis.
Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over compliance that might be deficiencies, significant deficiencies, or material weaknesses. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses. as defined above.
This report is intended solely for the information and use of management, members of the Schley 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,
usd dell W. Hinton, CPA, CGFM
State Auditor

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

SCHLEY COUNTY BOARD OF EDUCATION AUDITEE'S RESPONSE
SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30,2010

PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND OUESTIONED COSTS

FINDING CONTROL NUMBER AND STATUS

FS-7231-08-01 FS-7231-08-02 FS-7231-09-01 FS-7231-09-02 FS-7231-09-03 FS-7231-09-04

Further Action Not Warranted Previously Reported Corrective Action Implemented Unresolved - See Corrective Action/Responses Previously Reported Corrective Action Implemented
Unresolved - See Corrective Action/Responses Previously Reported Corrective Action Implemented

CORRECTIVE ACTION/RESPONSES

FINANCIAL REPORTING Inadequate Controls over Financial Reporting Finding Control Number: FS-7231-09-01

Consensus opinion of the Board was that it was not financially feasible for our system to perform the financial statements due to financial resource shortage.

CAPITAL ASSETS Failure to Adequately Maintain Capital Assets Finding Control Number: FS-7231-09-03

Currently updating assets with more accurate listing and description in addition to physical inventory by reassigning asset numbers.

PRIOR YEAR FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

No matters were reported.

SECTION IV FINDINGS AND QUESTIONED COSTS

SCHLEY COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30,2010

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?

Yes

= Significant deficiency identified?

Yes

Noncompliance material to financial statements noted:

Federal Awards

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

N 0 None reported

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

Unqualified

Any audit findings disclosed that are required to be reported in accordance with OMB Circular A-133, Section 510(a)?

Identification of major programs:

CFDA Numberls)

Name of Federal Propram or Cluster Child Nutrition Cluster Title I, Part A Cluster Special Education Cluster State Fiscal Stabilization Fund Cluster

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

Auditee qualified as low-risk auditee?

II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS
FINANCIAL REPORTING Inadequate Controls over Financial Reporting Material Weakness Finding Control Number: FS-7231-10-01

Condition: This is a repeat finding (FS-7231-07-01, FS-7231-08-01, and FS-7231-09-01) from fiscal years ended June 30, 2007, June 30, 2008, and June 30, 2009, 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.

SCHLEY COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30,2010
II FINANCIALSTATEMENT FINDINGSAND QUESTIONEDCOSTS
FINANCIAL REPORTING Inadequate Controls over Financial Reporting Material Weakness Finding Control Number: FS-7231-10-01
Criteria: Chapter 22A Annual Fliancjal Reportng 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 as follows:
Several entries were necessary to tie beginning net assets and beginning fund balance to the prior year totals.
Entries were necessary to properly accrue Property Tax and Sales Taxes on the District-wide and the Governmental Fund statements.
Beginning Net Asset and Beginning Fund Balance were restated for entries made to correct prior year errors and omissions.
Numerous reclassification entries were made to improve financial statement presentation.
Supplemental Schedules and Notes to the Basic Financial Statements required extensive auditor revision.
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 in order 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 statement reporting process to ensure that all required activity is included in the financial statement information.

SCHLEY COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30,2010
II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS
CAPITAL ASSETS Failure to Adequately Maintain Capital Assets Significant Deficiency Finding Control Number: FS-7231-10-02
Condition: This is a repeat finding (FS-7231-09-03) from fiscal year ended June 30, 2009. The School District failed to adequately maintain the capital assets listing and failed to accurately reflect the capital assets on the general ledger.
Criteria:
Chapter 37 Implementing a Capital Assets Management System of the Financial Management for
Georgia Local Units of Administration provides that School Districts must establish fixed assets policies, define system requirements, implement a fixed assets system and maintain fixed assets inventory records.
Questioned Cost: N/A
Information: A review of the School District's capital assets records noted deficiencies discussed below:
A physical inventory of capital assets has not been performed since fiscal year 2003.
Accumulated Depreciation listing for the year under review did not reconcile to the general ledger.
Depreciation expense recorded was not accurate. The School District failed to use the half-year convention on current year additions as stated in their capitalization policy.
The School District failed to update their capitalization policy to include the adoption of Governmental Accounting Standards Board (GASB) Statement No. 51, Accounting and Repotting for Intangible Assets.
Cause: The School District failed to properly maintain its capital assets records in accordance with the School District's approved capital assets policy.
Effect: The failure of the School District to maintain a complete and accurate capital assets listing can lead to inaccurate internal and external reporting, as well as noncompliance with generally accepted accounting principles.
Recommendation: The School District should review the capital assets records and make appropriate adjustments to ensure that the capital assets record conform to the School District's approved capital assets policy and generally accepted accounting principles.

SCHLEY COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30,2010
II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS
GENERAL LEDGER Outstanding Loan Nonmaterial Noncompliance Finding Control Number: FS-7231-10-03
Condition: There was an outstanding loan at December 31,2009.
Criteria: Article IX, Section V, Paragraph V of the Constitution of the State of Georgia provides, in part, as follows: "The governing authority of any county, municipality or other political subdivision of this
state may incur debt by obtaining temporary loans in each year to pay expenses...Such loans shall be
payable on or before December 3 1of the calendar year in which such loan is made...".
Questioned Cost: N/A
Information: The School District's General Fund had an unpaid loan outstanding at December 31, 2009.
Cause: The General Fund did not have adequate cash available to retire the loan on December 31,2009, as required.
Effect: Noncompliance with the Constitution of the State of Georgia.
Recommendation: The School District should repay loans in conformity with Constitutional provisions.
Ill FEDERAL AWARD FINDINGS AND QUESTIONED COSTS
No matters were reported.

SECTION V MANAGEMENT'S RESPONSES

SCHLEY COUNTY BOARD OF EDUCATION SCHEDULE OF MANAGEMENT'S RESPONSES
YEAR ENDED JUNE 30.2010

Finding Control Number: FS-7231-10-01

We concur with this finding. We will attempt to prepare the financial statements for future audits to ensure that all required activity is included and properly classified.

Finding Control Number: FS-7231-10-02

We concur with this finding. Financial Director is currently in the process of correcting the capital assets. Accumulated Depreciation will be corrected to balance to the general ledger. An inventory of Capital Assets will also be performed.

Finding Control Number: FS-7231-10-03

We concur with this finding. We will ensure that we have the cash available to repay loans by the end of the calendar year in which the loan was made.

Contact Person: Telephone: Fax: Email:

R. Larry Stubbs, Superintendent (229) 937-2405 (229) 937-5180 Istubbs@schleykl2.org