CHARTER CONSERVATORY
FOR LIBERAL ARTS & TECHNOLOGY, INC.
STATESBORO, GEORGIA
ANNUAL FINANCIAL REPORT
FOR THE FISCAL YEAR ENDED
JUNE 30,2009
(Including Independent Auditor's Reports)

CHARTER CONSERVATORY FOR LIBERAL ARTS & TECHNOLOGY, INC. - TABLE OF CONTENTS -

SECTION I

FINANCIAL

INDEPENDENT AUDITOR'S COMBINED REPORT ON BASIC FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION

EXHIBITS

BASIC FINANCIAL STATEMENTS

DISTRICT-WIDE FINANCIAL STATEMENTS

A

STATEMENT OF NET ASSETS

B

STATEMENT OF ACTIVITIES

FUND FINANCIAL STATEMENTS

C

BALANCE SHEET

GOVERNMENTAL FUND

D

RECONCILIATION OF THE GOVERNMENTAL FUND BALANCE SHEET

TO THE STATEMENT OF NET ASSETS

E

STATEMENT OF REVENUES, EXPENDITURES AND CHANGES

IN FUND BALANCE

GOVERNMENTAL FUND

F

RECONCILIATION OF THE GOVERNMENTAL FUND STATEMENT

OF REVENUES, EXPENDITURES AND CHANGES IN FUND

BALANCE TO THE STATEMENT OF ACTIVITIES

G

STATEMENT OF FIDUCIARY NET ASSETS

FIDUCIARY FUNDS

H

NOTES TO THE BASIC FINANCIAL STATEMENTS

SCHEDULES

SUPPLEMENTARY INFORMATION

I SCHEDULE OF STATE REVENUE 2 SCHEDULE OF FEDERAL REVENUE 3 ALLOTMENTS AND EXPENDITURES
GENERAL FUND - QUALITY BASIC EDUCATION PROGRAMS (QBE) BY PROGRAM

CHARTER CONSERVATORY FOR LIBERAL ARTS & TECHNOLOGY, INC.
- TABLE OF CONTENTS -
SECTION I1 COMPLIANCE AND INTERNAL CONTROL REPORTS REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENTAUDITING STANDARDS
SECTION 111 AUDITEE'S RESPONSE TO PRIOR YEAR FINDINGS AND QUESTIONED COSTS SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS
SECTION IV FINDINGS AND QUESTIONED COSTS SCHEDULE OF FINDINGS AND QUESTIONED COSTS
SECTION V MANAGEMENT'S RESPONSES SCHEDULE OF MANAGEMENT'S RESPONSES

SECTION I FINANCIAL

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

DEPARTMENOTF AUDITSAND ACCOUNTS
270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400
September 13,2010

Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education
and Director and Members of the Charter Conservatory for Liberal Arts & Technology, Inc. Governing Board
INDEPENDENT AUDITOR'S COMBINED REPORT ON BASIC FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION
Ladies and Gentlemen:
We have audited the accompanying financial statements of the governmental activities, general fund, and the aggregate remaining fund information (Exhibits A through H) of the Charter Conservatory for Liberal Arts & Technology, Inc. (Charter School), a component unit of the State of Georgia, as of and for the year ended June 30, 2009, which collectively comprise the Charter School's basic financial statements as listed in the table of contents. These financial statements are the responsibility of the Charter Conservatory for Liberal Arts & Technology, Inc.'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 Charter Conservatory for Liberal Arts & Technology, Inc.'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 o w opinion, the financial statements referred to previously present fairly, in all material respects, the respective financial position of the governmental activities, general fund, and

the aggregate remaining fund information of the Charter Conservatory for Liberal Arts & Technology, Inc., as of June 30,2009, and the respective changes in financial position thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America.
The Charter Conservatory for Liberal Arts & Technology, Inc. has not presented Management's Discussion and Analysis and the Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual 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 September 13, 2010, on our consideration of the Charter Conservatory for Liberal Arts & Technology, Inc.'s internal control over financial reporting and on o w 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.
Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Charter Conservatory for Liberal Arts & Technology, Inc.'s basic financial statements. The accompanying supplementary information which consist of Schedules 1 through 3, are presented for purposes of additional analysis and are not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements, and in our opinion, is fairly stated, in all material respects, in relation to the basic financial statements taken as a whole.
A copy of this report has been filed as a permanent record in the office of the State Auditor and made available to the press of the State, as provided for by Official Code of Georgia Annotated section 50-6-24.
Res~ectfullvsubmitted.
~ u d e lWl . Hinton, CPA, CGFM State Auditor

CHARTER CONSERVATORY FOR LIBERAL ARTS & TECHNOLOGY, INC.

CHARTER CONSERVATORY FOR LIBERAL ARTS & TECHNOLOGY, INC. STATEMENT OF NET ASSETS JUNE 30,2009

EXHIBIT " A

ASSETS CapitalAssets, Depreciable(Net of Accumulated Depreciation)
LIABILITIES Cash Overdraft Accounts Payable Short-Term Debt Interest Payable
Total Liabilities NET ASSETS Investedin Capital Assets Unrestricted (Deficit) Total Net Assets
Total Liabilities and Net Assets

GOVERNMENTAL ACTIVITIES

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

CHARTER CONSERVATORY FOR LIBERAL ARTS & TECHNOLOGY, INC. STATEMENT OF ACTIVITIES
FOR THE YEAR ENDED JUNE 30,2009

EXHIBIT "B"

GOVERNMENTAL ACTIVITIES
Instruction Support Services
Pupil Services Improvement of InstructionalServices School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services
Total General Revenues
Miscellaneous Revenues
Change in Net Assets
Net Assets - Beginning of Year

EXPENSES

PROGRAM REVENUES

OPERATING

CHARGES FOR

GRANTS AND

SERVICES

CONTRIBUTIONS

NET (EXPENSES) REVENUES
AND CHANGES IN NET ASSETS

$

-148,347.54

232,678.83

Net Assets - End of Year

$

84,331.29

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

CHARTER CONSERVATORY FOR LIBERAL ARTS & TECHNOLOGY, INC. BALANCE SHEET
GOVERNMENTAL FUND JUNE 30.2009

EXHIBIT "C"

ASSETS Total Assets

GENERAL FUND

LIABILITIESAND FUND BALANCE
LIABILITIES
Cash Overdraft Accounts Payable Short-Term Debt Interest Payable
Total Liabilities
FUND BALANCE
Unreserved Undesignated (Deficit)

Total Liabilities and Fund Balance

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

CHARTER CONSERVATORY FOR LIBERAL ARTS 8 TECHNOLOGY, INC. RECONCILIATION OF THE GOVERNMENTAL FUND BALANCE SHEET TO THE STATEMENT OF NET ASSETS JUNE 30,2009

EXHIBIT " D

Total Fund Balance - Governmental Fund (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:
Furniture and Equipment Leasehold Improvements Accumulated Depreciation
Total Capital Assets

Net Assets of Governmental Activities (Exhibit "A")

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

CHARTER CONSERVATORY FOR LIBERAL ARTS 8 TECHNOLOGY, INC. STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE
GOVERNMENTAL FUND YEAR ENDED JUNE 30.2009

EXHIBIT " E

REVENUES
State Funds Federal Funds Charges for Services Miscellaneous
Total Revenues
EXPENDITURES
Current Instruction Support Services Pupil Services Improvement of Instructional Services School Administration Business Administration Maintenan,@ and Operation of Plant Student Transportation Services Central Support Services
Total Expenditures
Net Change in Fund Balance
Fund Balance - Beginning
Fund Balance - Ending

GENERAL FUND

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

CHARTER CONSERVATORY FOR LIBERAL ARTS & TECHNOLOGY, INC. RECONCILIATION OF THE GOVERNMENTAL FUND STATEMENT OF REVENUES, EXPENDITURESAND CHANGES IN FUND BALANCE TO THE STATEMENT OF ACTIVITIES JUNE 30,2009
Total Net Change in Fund Balances - Governmental Funds (Exhibit " E )
Amounts reported for Governmental Activities in the Statement of Activities are different because:
Capital Outlays are reported as expenditures in Governmental Funds. However, in the Statement of Activities, the cost of Capital Assets is allocated over their estimated useful lives as depreciation expense. In the current period, these amounts are:
Depreciation Expense
In the Statement of Activities, only the gain on the sale of the equipment is reported, whereas in the Governmental Funds, the entire proceeds from the sale increase financial resources. Thus, the change in net assets differs from the change in fund balances by the carrying value of the equipment sold.
Change in Net Assets of Governmental Activities (Exhibit "6")

EXHIBIT " F

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

CHARTER CONSERVATORY FOR LIBERAL ARTS & TECHNOLOGY, INC. STATEMENT OF FIDUCIARY NET ASSETS FIDUCIARY FUNDS JUNE 30,2009

EXHIBIT

ASSETS Cash and Cash Equivalents
LIABILITIES Funds Held for Others

AGENCY FUNDS

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

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CHARTER CONSERVATORY FOR LIBERAL ARTS & TECHNOLOGY, INC. EXHIBIT "H" NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30,2009
Note 1: DESCRIPTION OF SCHOOL DISTRICT AND REPORTTNG ENTITY
REPORTING ENTITY
The Charter Conservatory for Liberal Arts & Technology, Inc. (Charter School) is incorporated as a non-profit corporation pursuant to Georgia law and operates under the guidance of a governing board. The Special State Start-up Charter is an agreement between the Charter Conservatory for Liberal Arts & Technology, Inc. and the Georgia State Board of Education pursuant to Georgia's charter school law, O.C.G.A. $20-2-2060 et seq., and Georgia Board of Education Rule 160-4-9-05. The governing board consists of ten members; six members who are parents or guardians of children currently enrolled in the school and who are not employed by the school, two members who are faculty members with no children at the school, a member of the community at large, and the Director is a non-voting member. The Charter Conservatory for Liberal Arts & Technology, Inc. is considered a component unit of the State of Georgia for financial reporting purposes because of the significance of its legal, operational and financial relationships with the Georgia Department of Education.
Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The Charter School'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 Charter Conservatory for Liberal Arts & Technology, Inc.
District-wide Statements: The Statement of Net Assets and the Statement of Activities display information about the financial activities of the overall Charter School, except for fiduciary activities. Eliminations have been made to minimize the double counting of internal activities. Governmental activities generally are financed through intergovernmental revenues, and other nonexchange transactions.
The Statement of Activities presents a comparison between direct expenses and program revenues for each function of the Charter School'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 Charter School related to the administration and support of the Charter School'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.

CHARTER CONSERVATORY FOR LIBERAL ARTS & TECHNOLOGY, INC. EXHIBIT " H NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30,2009
Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Fund Financial Statements: The fund financial statements provide information about the Charter School'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.
The Charter School reports the following major governmental fund:
General Fund is the Charter School's primary operating fund. It accounts for all financial resources of the Charter School.
The Charter School reports the following fiduciary fund type:
Agency funds account for assets held by the Charter School as an agent for various funds, governments or individuals.
BASIS OF ACCOUNTING
The basis of accounting determines when transactions are reported on the financial statements. The District-wide governmental and fiduciary fund financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded at the time liabilities are incurred, regardless of when the related cash flows take place. Nonexchange transactions, in which the Charter School gives (or receives) value without directly receiving (or giving) equal value in exchange, include grants and donations. Revenue from grants and donations is recognized in the fiscal year in which all eligibility requirements have been satisfied.
The Charter School 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 Charter School considers all revenues reported in the governmental funds to be available if they are collected within sixty days after year-end. Interest is considered to be susceptible to accrual. Expenditures are recorded when the related fund liability is incurred. Capital asset acquisitions are reported as expenditures in governmental funds.
The Charter School funds certain programs by a combination of specific cost-reimbursement grants, categorical grants, and general revenues. Thus, when program costs are incurred, there

CHARTER CONSERVATORY FOR LIBERAL ARTS & TECHNOLOGY, INC. EXHIBIT "H" NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30,2009

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

are both restricted and unrestricted net assets available to finance the program. It is the Charter School's policy to first apply grant resources to such programs, followed by cost-reimbursement grants, then general revenues.

CASH AND CASH EQUIVALENTS

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

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 Charter School 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 Charter School.

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

Capitalization Estimated

Policy

Useful Life

Land Leasehold Improvements Furniture and Equipment

Any amount $ 5,000.00 $ 5,000.00

N/ A 10 to 40 years 3 to 10 years

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

CHARTER CONSERVATORY FOR LIBERAL ARTS & TECHNOLOGY, INC. EXHIBIT "H" NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30,2009

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NET ASSETS

The Charter School's net assets in the District-wide Statements are classified as follows:

Invested in capital assets - This represents the Charter School's total investment in capital
assets.

Unrestricted net assets - Unrestricted net assets represent resources derived from 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 Charter School, and may be used at the discretion of the Board to meet current expenses for those purposes.

DEFICIT FUND BALANCES

The fund reporting a deficit fund balance at June 30,2009, is as follows:

Fund TypeIFund Name

Deficit Balance

General Fund

$ -135.1 18.86

The administration of Charter Conservatory for Liberal Arts & Technology, Inc. will make additional cuts in the number of facultylstaff personnel and cost of benefits to reduce payroll expenditures. House Bill 881 was passed in fiscal year 2010 and the administration expects significant additional funding for the next fiscal year.

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 deposits consist 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,

CHARTER CONSERVATORY FOR LIBERAL ARTS & TECHNOLOGY, INC. EXHIBIT "H" NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30.2009

Note 3: DEPOSITS

(2) Insurance on accounts provided by the Federal Deposit Insurance Corporation,

(3) Bonds, bills, notes, certificates of indebtedness or other direct obligations of the United States or of the State of Georgia,

(4) Bonds, bills, notes, certificates of indebtedness or other obligations of the counties or municipalities of the State of Georgia,

(5) Bonds of any public authority created by the laws of the State of Georgia, providing that the statute that created the authority authorized the use of the bonds for this purpose,

(6) Industrial revenue bonds and bonds of development authorities created by the laws of the State of Georgia, and

(7) Bonds, bills, notes, certificates of indebtedness, or other obligations of a subsidiary corporation of the United States government, which are h l l y 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 At June 30, 2009, the bank balances were $46,375.00. The bank balances were entirely covered by Federal depository insurance.

Note 4: CAPITAL ASSETS

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

Governmental Activities Capital Assets, Not Being Depreciated:
Furniture and Equipment Leasehold Improvements
Less Accumulated Depreciation for: Furniture and Equipment Leasehold Improvements
Governmental Activity Capital Assets - Net

Balances July 1.2008

Increases

Decreases

Balances June 30,2009

$ 229,277.45 $ 177,551.40

0.00 $ 11,317.00 $ 217,960.45 177,551.40

$ 251,222.15 $ -21,681.00 $ 10,091.00 $219.450.15

CHARTER CONSERVATORY FOR LIBERAL ARTS & TECHNOLOGY, INC. EXHIBIT "H" NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30,2009
Note 4: CAPITAL ASSETS
Current year depreciation expense by function is as follows:
Instruction Support Services
School Administration Maintenance and Operation of Plant Student Transportation Services

Note 5: RISK MANAGEMENT

The Charter School 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 Charter School has obtained commercial insurance for risk of loss associated with torts, assets, errors or omissions and job related illness or injuries to employees. The Charter School has neither significantly reduced coverage for these risks nor incurred losses (settlements) which exceeded the Charter School's insurance coverage in any of the past three years.

The Charter School has elected to self-insure for all losses related to acts of God. The Charter School has not experienced any losses related to this risk in the past three years.

Note 6 : OPERATING LEASES

Charter Conservatory for Liberal Arts & Technology, Inc. has entered into a lease as lessee for rental of its school building. This lease is considered for accounting purposes to be an operating lease. Lease expenditures for the year ended June 30,2009, for governmental funds amounted to $78,000.00. Future minimum lease payments for these leases are as follows:

Year Ending

Governmental Funds

Total

CHARTER CONSERVATORY FOR LIBERAL ARTS & TECHNOLOGY, INC. EXHIBIT "H" NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30,2009

Note 7: SHORT-TERM DEBT

The Charter School obtains temporary loans in advance of grant collections, depositing the proceeds in its General Fund. This short-term debt is to provide cash for operations until grant collections are received by the Charter School.

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

Beginning Balance

Issued

Redeemed

Ending Balance

Temporary Loans

Note 8: 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 Charter School believes that such disallowances, if any, will be immaterial to its overall financial position.

The Charter School is a defendant in various legal proceedings pertaining to the constitutionality of House Bill 881. The ultimate disposition of these proceedings is not presently determinable.

Note 9: POSTEMPLOYMENT BENEFITS

Georgia Retiree Health Benefit Fund

Plan Description. The Charter School contributes to the Georgia Retiree Health Benefit Fund ("GRHBF"), a cost-sharing multiple-employer defined benefit postemployment healthcare plan administered by the Department of Community Health. The GRHBF is a cost-sharing multipleemployer defined benefit postemployment healthcare plan that covers retired employees of the State including all departments, agencies and local school systems. GRHBF provides health insurance benefits to eligible retirees and their qualified beneficiaries through the health insurance plan for State employees. Pursuant to Title 45, Chapter 18 of the Official Code of Georgia Annotated, the authority to establish and amend the benefit provisions of the employees' health insurance plan (including benefits to retirees) is assigned to the Board of Community Health (Board). The Department of Community Health issues a publicly available financial report that includes financial statements and required supplementary information for GRHBF. That report may be obtained from the Department of Community Health at 2 Peachtree Street, Atlanta, Georgia 30303.

Funding Policy. The contribution requirements of plan members and participating employers are established by the Board in accordance with the current Appropriations Act and may be amended by the Board. Contributions of plan members or beneficiaries receiving benefits vary based on plan election, dependent coverage, and Medicare eligibility and election. On average, plan members pay approximately twenty-five percent (25%) of the cost of health insurance coverage.

CHARTER CONSERVATORY FOR LIBERAL ARTS & TECHNOLOGY, INC. EXHIBIT "H" NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30,2009

Note 9: POSTEMPLOYMENT BENEFITS

Participating employers are statutorily required to contribute in accordance with the employer contribution rates established by the Board. The contribution rate is established to fund both the active and retired employee health insurance plans based on projected "pay-as-you-go" financing requirements. The combined rates for the active and retiree plans for the fiscal year ended June 30,2009, were as follows:

Certzped employees
July 2008 - January 2009
February 2009 March 2009 - May 2009
June 2009

18.534% of state-based salaries for August - February coverage 8.579% of state-based salaries for March coverage 3.688% of state-based salaries for April - June coverage 0.000% of state-based salaries for July coverage

Non-Certificated Employees

$162.72 per month

No additional contribution was required by the Board for fiscal year 2009 nor contributed to GRHBF 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 Charter School's contributions to the health insurance plans for the years ended June 30, 2008, and June 30, 2009, were $60,404.69, and $55,248.52, respectively, which equaled the required contribution.

Note 10: RETIREMENT PLANS

TEACHERS RETIREMENT SYSTEM OF GEORGIA (TRS)

Plan Description. The TRS is a cost-sharing multiple-employer defined benefit plan created in 1943 by an act of the Georgia General Assembly to provide retirement benefits for qualifying employees in educational service. A Board of Trustees comprised of active and retired members and ex-officio State employees is ultimately responsible for the administration of TRS. The Teachers Retirement System of Georgia issues a separate stand alone financial audit report and a copy can be obtained from the Georgia Department of Audits and Accounts.

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

CHARTER CONSERVATORY FOR LIBERAL ARTS & TECHNOLOGY, INC. EXHIBIT "H" NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30,2009

Note 10: RETIREMENT PLANS

TRS provides service retirement, disability retirement, and survivor's benefits. The benefit structure of TRS is defined and may be amended by State statute. A member is eligible for normal service retirement after 30 years of creditable service, regardless of age, or after 10 years of service and attainment of age 60. A member is eligible for early retirement after 25 years of creditable service.

Normal retirement (pension) benefits paid to members are equal to 2% of the average of the member's two highest paid consecutive years of service, multiplied by the number of years of creditable service up to 40 years. Early retirement benefits are reduced by the lesser of onetwelfth of 7% for each month the member is below age 60 or by 7% for each year or fraction thereof by which the member has less than 30 years of service. It is also assumed that certain cost-of-living adjustments, based on the Consumer Price Index, will be made in future years. Retirement benefits are payable monthly for life. A member may elect to receive a partial lumpsum distribution in addition to a reduced monthly retirement benefit. 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. 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, 2009, were 5% of annual salary. The member contribution rate will increase to 5.25% effective July 1, 2009, and to 5.53% effective July 1, 2010. Employer contributions required for fiscal year 2009 were 9.28% of annual salary as required by the June 30, 2006, actuarial valuation. The employer contribution rate will increase to 9.74%effective July 1,2009, and 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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CHARTER CONSERVATORY FOR LIBERAL ARTS 8. TECHNOLOGY, INC. SCHEDULE OF STATE REVENUE YEAR ENDED JUNE 30,2009

SCHEDULE "1"

GRANTS Education, Georgia Department of Quality Basic Education Direct Instructional Cost Middle Grade (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 Media Center Program 20 Days Additional Instruction Staff and Professional Development Indirect Cost Central Administration School Administration Facility Maintenance and Operations Sparsity Nursing Services Other State Programs Charter Schools Facilities Funding High School Graduation Coach Special Education Low Incidence

GOVERNMENTAL FUND TYPE GENERAL FUND

See notes to the basic financial statements

CHARTER CONSERVATORY FOR LIBERAL ARTS & TECHNOLOGY, INC. SCHEDULE OF FEDERAL REVENUE YEAR ENDED JUNE 30,2009

SCHEDULE " 2

Education, U. S. Department of Special Education Cluster Pass-Through From Georgia Department of Education Special Education Grants to States
Other Programs Pass-Through From Georgia Department of Education Improving Teacher Quality State Grants
Safe and Drug-Free Schools and Communities - National Programs
Title I Grants to Local EducationalAgencies
Total Federal Revenue

GOVERNMENTAL FUND TYPE GENERAL FUND

See notes to the basic financial statements.

CHARTER CONSERVATORY FOR LIBERALARTS 8 TECHNOLOGY, INC. GENERAL FUND - QUALITY BASIC EDUCATION PROGRAM (QBE) ALLOTMENTS AND EXPENDITURES- BY PROGRAM
YEAR ENDED JUNE 30,2009

SCHEDULE "3"

DESCRIPTION
Direct Instructional Programs Middle Grades (6-8) Program High School General Education (9-12) Program Vocational Laboratory (9-12) Program Students with Disabilities
Gifted Student - Category VI
Remedial Education Program Alternative Education Program
TOTAL DIRECT INSTRUCTIONAL PROGRAMS
Media Center Program Staff and Professional Development

ALLOTMENTS FROM GEORGIA DEPARTMENT OF
EDUCATION

ELIGIBLE QBE PROGRAM COSTS

SALARIES OPERATIONS

TOTAL

TOTAL QBE FORMULA FUNDS

$

434,692.00 $ 515,801.16 $ 127,579.04 $

643,380.20

See notes to the basic financial statements.

SECTION I1 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
September 13,2010

Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education
and Director and Members of the Charter Conservatory for Liberal Arts & Technology, Inc. Governing Board
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, general fund, and the aggregate remaining h d information of Charter Conservatory for Liberal Arts & Technology, Inc. (Charter School), a component unit of the State of Georgia, as of and for the year ended June 30, 2009, which collectively comprise Charter School's basic financial statements and have issued our report thereon dated September 13,2010. 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
In planning and performing our audit, we considered Charter Conservatory for Liberal Arts & Technology, Inc.'s internal control over financial reporting as a basis for designing o w 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 Charter Conservatory for Liberal Arts & Technology, Inc.'s internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness of the Charter Conservatory for Liberal Arts & Technology, Inc.'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 would not necessarily identify all deficiencies in internal control over financial reporting that might be significant deficiencies or material weaknesses. However, as discussed below, we identified a certain deficiency in internal control over financial reporting that we consider to be a significant deficiency.