CHARTER CONSERVATORY FOR LIBERAL ARTS & TECHNOLOGY, INC.
STATESBORO, GEORGIA
ANNUAL FINANCIAL REPORT FOR THE FISCAL YEAR ENDED JUNE 30, 2012
(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

REQUIRED SUPPLEMENTARY INFORMATION

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

SUPPLEMENTARY INFORMATION

2 SCHEDULE OF STATE REVENUE 3 SCHEDULE OF FEDERAL REVENUE 4 ALLOTMENTS AND EXPENDITURES
GENERAL FUND - QUALITY BASIC EDUCATION PROGRAMS (QBE) BY PROGRAM

Page
1 2 3 4 5 6 7 8
17 18 19 21

CHARTER CONSERVATORY FOR LIBERAL ARTS & TECHNOLOGY, INC. - TABLE OF CONTENTS -
SECTION II COMPLIANCE AND INTERNAL CONTROL REPORT 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
SECTION III FINDINGS AND QUESTIONED COSTS SCHEDULE OF FINDINGS AND QUESTIONED COSTS

SECTION I FINANCIAL

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

DEPARTMENT OF AUDITS AND ACCOUNTS
270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400
January 18, 2013

Honorable Nathan Deal, 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, the general fund, and the aggregate remaining fund information (Exhibits A through H) of the Charter Conservatory for Liberal Arts & Technology, Inc., a component unit of the State of Georgia, as of and for the year ended June 30, 2012, 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 an opinion 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 School's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinions.
In our opinion, the financial statements referred to previously present fairly, in all material respects, the financial position of the governmental activities, the general fund, and the aggregate remaining fund information of the Charter Conservatory for Liberal Arts & Technology, Inc., as of June 30, 2012, 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.

2012ARL-13

Management has omitted Management's Discussion and Analysis that accounting principles generally accepted in the United States of America requires to be presented to supplement the basic financial statements. Such missing 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. Our opinion on the basic financial statements is not affected by this missing information.
In accordance with Government Auditing Standards, we have also issued our report dated January 18, 2013, on our consideration of the Charter Conservatory for Liberal Arts & Technology, Inc.'s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit.
The Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual, as presented on page 17, is not a required part of the basic financial statements but is supplementary information required by the accounting principles generally accepted in the United States of America. 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 regarding 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 our 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 Charter Conservatory for Liberal Arts & Technology, Inc.'s financial statements. The accompanying supplementary information consists of Schedules 2 through 4, is presented for purposes of additional analysis and is not a required part of the financial statements. The accompanying supplementary information is the responsibility of management and was derived from and relates 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 basic 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 basic financial statements as a whole.
2012ARL-13

A copy of this report has been filed as a permanent record in the office of the State Auditor and made available to the press of the State, as provided for by Official Code of Georgia Annotated section 50-6-24.
Respectfully submitted,

GSG:as 2012ARL-13

Greg S. Griffin State Auditor

CHARTER CONSERVATORY FOR LIBERAL ARTS & TECHNOLOGY, INC.

CHARTER CONSERVATORY FOR LIBERAL ARTS & TECHNOLOGY, INC. STATEMENT OF NET ASSETS JUNE 30, 2012

EXHIBIT "A"

ASSETS
Cash and Cash Equivalents Accounts Receivable, Net
Federal Government Capital Assets, Depreciable (Net of Accumulated Depreciation)

GOVERNMENTAL ACTIVITIES

$

78,810.84

2,152.91 195,154.05

Total Assets

$

276,117.80

LIABILITIES Accounts Payable Payroll Withholdings Payable
Total Liabilities NET ASSETS Invested in Capital Assets Unrestricted Total Net Assets
Total Liabilities and Net Assets

$

1,784.59

1,691.93

$

3,476.52

$

195,154.05

77,487.23

$

272,641.28

$

276,117.80

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, 2012

EXHIBIT "B"

GOVERNMENTAL ACTIVITIES
Instruction Support Services
Pupil Services Improvement of Instructional Services General Administration School Administration Business Administration Maintenance and Operation of Plant Central Support Services Other Support Services
Total Governmental Activities
Investment Earnings Miscellaneous
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

$ 714,756.42 $
28,317.58 5,918.25
24,947.17 118,695.37
18,385.95 167,604.46
28,238.15 213.82
$ 1,107,077.17 $

15,711.00 $

853,684.74 $
26,920.54 4,822.21
17,645.19 108,414.51
124,397.63

15,711.00 $ 1,135,884.82 $

$

154,639.32
-1,397.04 -1,096.04 -7,301.98 -10,280.86 -18,385.95 -43,206.83 -28,238.15
-213.82
44,518.65
5.05 6,569.03
51,092.73
221,548.55

Net Assets - End of Year

$

272,641.28

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, 2012

EXHIBIT "C"

ASSETS Cash and Cash Equivalents Accounts Receivable, Net
Federal Government
Total Assets

GENERAL FUND

$

78,810.84

2,152.91

$

80,963.75

LIABILITIES AND FUND BALANCE LIABILITIES
Accounts Payable Payroll Withholdings Payable
Total Liabilities FUND BALANCE
Unassigned
Total Liabilities and Fund Balance

$

1,784.59

1,691.93

$

3,476.52

77,487.23

$

80,963.75

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

CHARTER CONSERVATORY FOR LIBERAL ARTS & TECHNOLOGY, INC. RECONCILIATION OF THE GOVERNMENTAL FUND BALANCE SHEET
TO THE STATEMENT OF NET ASSETS JUNE 30, 2012

EXHIBIT "D"

Total Fund Balance - Governmental Fund (Exhibit "C")

$ 77,487.23

Amounts reported for Governmental Activities in the Statement of Net Assets are different because:

Capital Assets used in Governmental Activities are not financial resources and therefore are not reported as assets in governmental funds. These assets consist of:

Furniture and Equipment Leasehold Improvements Accumulated Depreciation
Total Capital Assets

$ 261,358.35 177,551.40 -243,755.70

195,154.05

Net Assets of Governmental Activities (Exhibit "A")

$ 272,641.28

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

CHARTER CONSERVATORY FOR LIBERAL ARTS & TECHNOLOGY, INC. STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE
GOVERNMENTAL FUND YEAR ENDED JUNE 30, 2012

EXHIBIT "E"

REVENUES
State Funds Federal Funds Charges for Services Investment Earnings Miscellaneous
Total Revenues
EXPENDITURES
Current Instruction Support Services Pupil Services Improvement of Instructional Services General Administration School Administration Business Administration Maintenance and Operation of Plant Central Support Services Other Support Services
Total Expenditures
Net Change in Fund Balance
Fund Balance - Beginning
Fund Balance - Ending

GENERAL FUND

$

1,091,827.13

44,057.69

15,711.00

5.05

6,569.03

$

1,158,169.90

$

696,924.39

28,317.58 5,918.25
24,947.17 117,108.40
18,385.95 168,088.46
28,238.15 213.82

$

1,088,142.17

$

70,027.73

7,459.50

$

77,487.23

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, EXPENDITURES AND CHANGES IN FUND BALANCE TO THE STATEMENT OF ACTIVITIES JUNE 30, 2012

EXHIBIT "F"

Total Net Change in Fund Balance - Governmental Fund (Exhibit "E")
Amounts reported for Governmental Activities in the Statement of Activities are different because:
Capital Outlays are reported as expenditures in Governmental Funds. However, in the Statement of Activities, the cost of Capital Assets is allocated over their estimated useful lives as depreciation expense. In the current period, these amounts are:
Capital Outlay Depreciation Expense
Excess of Capital Outlay over Depreciation Expense

$

70,027.73

$

5,150.00

-24,085.00

-18,935.00

Change in Net Assets of Governmental Activities (Exhibit "B")

$

51,092.73

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, 2012

EXHIBIT "G"

ASSETS Cash and Cash Equivalents

AGENCY FUNDS

$

1,359.67

LIABILITIES Funds Held for Others

$

1,359.67

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

CHARTER CONSERVATORY FOR LIBERAL ARTS & TECHNOLOGY, INC. NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2012

EXHIBIT "H"

Note 1: DESCRIPTION OF CHARTER SCHOOL AND REPORTING 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 member 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 Charter School Commission and 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.
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.

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CHARTER CONSERVATORY FOR LIBERAL ARTS & TECHNOLOGY, INC. NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2012

EXHIBIT "H"

The Charter School reports the following major governmental fund:
General Fund is the Charter School's primary operating fund. It accounts for and reports 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 property taxes, sales taxes, 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 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 from 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.

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CHARTER CONSERVATORY FOR LIBERAL ARTS & TECHNOLOGY, INC. NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2012

EXHIBIT "H"

RECEIVABLES

Receivables consist of amounts due from grant reimbursements due on Federal 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.

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 Intangible Assets

Any Amount $ 5,000.00 $ 5,000.00 $ 100,000.00

N/A 10 to 40 years
3 to 10 years 10 to 20 years

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

Amortization of intangible assets such as water, timber, and mineral rights, easements, patents, trademarks, copyrights and internally generated software is computed using the straight-line method over the estimated useful lives of the assets, generally 10 to 20 years.

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.

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CHARTER CONSERVATORY FOR LIBERAL ARTS & TECHNOLOGY, INC. NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2012

EXHIBIT "H"

FUND BALANCES
The Charter School's fund balances are classified as follows:
Unassigned The residual classification for the General Fund. This classification represents fund balances that has not been assigned to other funds and that has not been restricted, committed, or assigned to specific purposes within the General Fund.
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: BUDGETARY DATA
The budget is a complete financial plan for the Charter School's fiscal year, and is based upon careful estimates of expenditures together with probable funding sources. The budget is legally adopted each year for the general fund. There is no statutory prohibition regarding over expenditure of the budget at any level. The budget for all governmental funds, except the various school activity accounts, is prepared and adopted by fund, function and object. The legal level of budgetary control was established by the Board at the aggregate function level. The budget for the General Fund was prepared in accordance with accounting principles generally accepted in the United States of America.
The budgetary process begins with the Charter School's administration presenting an initial budget for the Board's review. The administration makes revisions as necessary based on the Board's guidelines and a tentative budget is approved. At the next regularly scheduled meeting of the Board after advertisement, the Board receives comments on the tentative budget, makes revisions as necessary and adopts a final budget. The approved budget is then submitted to the Georgia Department of Education. The Board may increase or decrease the budget at any time during the year. All unexpended budget authority lapses at fiscal year-end.
See Schedule 1 General Fund Schedule of Revenues, Expenditures and Changes in Fund Balance Budget to Actual for a detail of any over/under expenditures during the fiscal year under review.
Note 4: 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.

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CHARTER CONSERVATORY FOR LIBERAL ARTS & TECHNOLOGY, INC. NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2012

EXHIBIT "H"

Acceptable security for deposits consists of any one of or any combination of the following:
(1) Surety bond signed by a surety company duly qualified and authorized to transact business within the State of Georgia,
(2) Insurance on accounts provided by the Federal Deposit Insurance Corporation,
(3) Bonds, bills, notes, certificates of indebtedness or other direct obligations of the United States or of the State of Georgia,
(4) Bonds, bills, notes, certificates of indebtedness or other obligations of the counties or municipalities of the State of Georgia,
(5) Bonds of any public authority created by the laws of the State of Georgia, providing that the statute that created the authority authorized the use of the bonds for this purpose,
(6) Industrial revenue bonds and bonds of development authorities created by the laws of the State of Georgia, and
(7) Bonds, bills, notes, certificates of indebtedness, or other obligations of a subsidiary corporation of the United States government, which are fully guaranteed by the United States government both as to principal and interest or debt obligations issued by or securities guaranteed by the Federal Land Bank, the Federal Home Loan Bank, the Federal Intermediate Credit Bank, the Central Bank for Cooperatives, the Farm Credit Banks, the Federal Home Loan Mortgage Association, and the Federal National Mortgage Association.
CATEGORIZATION OF DEPOSITS
Custodial credit risk is the risk that in the event of a bank failure, the Charter School's deposits may not be returned to it. The Charter School does not have a deposit policy for custodial credit risk. At June 30, 2012, the bank balances were $121,907.54. The bank balances were entirely covered by Federal depository insurance.
Note 5: CAPITAL ASSETS
The following is a summary of changes in the Capital Assets during the fiscal year:

Governmental Activities Capital Assets, Being Depreciated:
Furniture and Equipment Leasehold Improvements

Balances July 1, 2011

Increases

Decreases

Balances June 30, 2012

$ 256,208.35 $ 177,551.40

5,150.00 $

0.00 $

261,358.35 177,551.40

Less: Accumulated Depreciation: Furniture and Equipment Leasehold Improvements

178,674.70 40,996.00

19,419.00 4,666.00

198,093.70 45,662.00

Total Capital Assets, Being Depreciated, Net $ 214,089.05 $

-18,935.00 $

0.00 $ 195,154.05

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CHARTER CONSERVATORY FOR LIBERAL ARTS & TECHNOLOGY, INC. NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2012

EXHIBIT "H"

Current year depreciation expense by function is as follows:

Instruction Support Services
School Administration Maintenance and Operation of Plant

$

$

1,654.00

4,666.00

17,765.00 6,320.00

$

24,085.00

Note 6: 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. However, the errors or omissions policy excludes coverage for sexual harassment and discrimination. 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 7: 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, 2012, for governmental funds amounted to $78,000.00. Future minimum lease payments for this lease is as follows:

Year Ending

Governmental Funds

2013

$

71,500.00

Note 8: 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

$

50,750.00 $

0.00 $

50,750.00 $

0.00

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CHARTER CONSERVATORY FOR LIBERAL ARTS & TECHNOLOGY, INC. NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2012

EXHIBIT "H"

Note 9: 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.
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 SRBP-TRS whenever their benefits under TRS exceed the IRC Section 415 imposed limitation on benefits.
TRS provides service retirement, disability retirement, and survivor's benefits. The benefit structure of TRS is defined and may be amended by State statute. A member is eligible for normal service retirement after 30 years of creditable service, regardless of age, or after 10 years of service and attainment of age 60. A member is eligible for early retirement after 25 years of creditable service.
Normal retirement (pension) benefits paid to members are equal to 2% of the average of the member's two highest paid consecutive years of service, multiplied by the number of years of creditable service up to 40 years. Early retirement benefits are reduced by the lesser of one-twelfth of 7% for each month the member is below age 60 or by 7% for each year or fraction thereof by which the member has less than 30 years of service. It is also assumed that certain cost-of-living adjustments, based on the Consumer Price Index, will be made in future years. Retirement benefits are payable monthly for life. A member may elect to receive a partial lump-sum distribution in addition to a reduced monthly retirement benefit. Death, disability and spousal benefits are also available.
Funding Policy. TRS is funded by member and employer contributions as adopted and amended by the Board of Trustees. Members become fully vested after 10 years of service. If a member terminates with less than 10 years of service, no vesting of employer contributions occurs, but the member's contributions may be refunded with interest. Member contributions are limited by State law to not less than 5% or more than 6% of a member's earnable compensation. Member contributions as adopted by the Board of Trustees for the fiscal year ended June 30, 2012, were 5.53% of annual salary. The member contribution rate will increase to 6.00% effective July 1, 2012. Employer contributions required for fiscal year 2012 were 10.28% of annual salary as required by the June 30, 2009, actuarial valuation. The employer contribution rate will increase to 11.41% effective July 1, 2012.

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CHARTER CONSERVATORY FOR LIBERAL ARTS & TECHNOLOGY, INC. NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2012

EXHIBIT "H"

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

Fiscal Year

Percentage Contributed

Required Contribution

2012 2011 2010

100%

$

100%

$

100%

$

60,271.25 68,533.59 48,574.44

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CHARTER CONSERVATORY FOR LIBERAL ARTS & TECHNOLOGY, INC. GENERAL FUND
SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE BUDGET AND ACTUAL
YEAR ENDED JUNE 30, 2012

SCHEDULE "1"

REVENUES
State Funds Federal Funds Charges for Services Investment Earnings Miscellaneous
Total Revenues
EXPENDITURES
Current Instruction Support Services Pupil Services Improvement of Instructional Services General Administration School Administration Business Administration Maintenance and Operation of Plant Central Support Services Other Support Services
Total Expenditures
Net Change in Fund Balances
Fund Balances - Beginning
Fund Balances - Ending

NONAPPROPRIATED BUDGETS

ORIGINAL

FINAL

ACTUAL AMOUNTS

VARIANCE OVER/UNDER

$ 906,180.00 $ 1,030,411.00 $ 1,091,827.13 $

53,086.00

53,086.00

44,057.69

10,000.00

10,000.00

15,711.00

5.05

30,000.00

30,000.00

6,569.03

$ 999,266.00 $ 1,123,497.00 $ 1,158,169.90 $

61,416.13 -9,028.31 5,711.00
5.05 -23,430.97
34,672.90

$ 872,227.00 $
13,703.55 8,095.00 1,600.00
12,500.00
5,000.00 1,500.00
464.00
$ 915,089.55 $
$ 84,176.45 $
7,526.53

872,227.00 $ 696,924.39 $

13,703.55 8,095.00 1,600.00
12,500.00
5,000.00 1,500.00
464.00

28,317.58 5,918.25
24,947.17 117,108.40
18,385.95 168,088.46
28,238.15 213.82

915,089.55 $ 1,088,142.17 $

208,407.45 $

70,027.73 $

7,526.53

7,459.50

175,302.61
-14,614.03 2,176.75
-23,347.17 -104,608.40
-18,385.95 -163,088.46
-26,738.15 250.18
-173,052.62
-138,379.72
-67.03

$ 91,702.98 $ 215,933.98 $

77,487.23 $

-138,446.75

Notes to the Schedule of Revenues, Expenditures and Changes in Fund Balances Budget and Actual
The accompanying schedule of revenues, expenditures and changes in fund balances budget and actual is presented on the modified accrual basis of accounting which is the basis of accounting used in the presentation of the fund financial statements.

See notes to the basic financial statements.

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CHARTER CONSERVATORY FOR LIBERAL ARTS & TECHNOLOGY, INC. SCHEDULE OF STATE REVENUE YEAR ENDED JUNE 30, 2012

SCHEDULE "2"

AGENCY/FUNDING
GRANTS Education, Georgia Department of Quality Basic Education Direct Instructional Cost Middle Grade (6-8) Program Middle School (6-8) Program High School General Education (9-12) Program Vocational Laboratory (9-12) Program Students with Disabilities Gifted Student - Category VI Remedial Education Program Alternative Education Program Media Center Program 20 Days Additional Instruction Staff and Professional Development Indirect Cost Central Administration School Administration Facility Maintenance and Operations Amended Formula Adjustment Nursing Services State Health Reimbursement State Special Charter Supplement Other State Programs Charter Schools - Facilities Dual Enrollment Funding Math and Science Supplements Virtual Schools Grant

GOVERNMENTAL FUND TYPE GENERAL FUND

$

20,036.00

119,767.00

128,360.00

13,518.00

105,723.00

68,933.00

66,693.00

9,016.00

12,396.00

4,274.00

3,245.00

14,264.00 87,640.00 39,932.00 -124,309.00 21,762.00 94,528.00 316,335.00

75,000.00 4,088.00
10,576.13 50.00

$

1,091,827.13

See notes to the basic financial statements.

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CHARTER CONSERVATORY FOR LIBERAL ARTS & TECHNOLOGY, INC. SCHEDULE OF FEDERAL REVENUE YEAR ENDED JUNE 30, 2012
AGENCY/FUNDING Education, U. S. Department of
Special Education Cluster Pass-Through From Georgia Department of Education Special Education Grants to States
Title I, Part A Cluster Pass-Through From Georgia Department of Education Title I Grants to Local Educational Agencies
Other Programs Pass-Through From Georgia Department of Education Improving Teacher Quality State Grants Education Jobs Fund
Total Other Programs
Total Federal Revenue

SCHEDULE "3"

GOVERNMENTAL FUND TYPE GENERAL FUND

$

25,173.00

$

18,076.69

$

458.00

350.00

$

808.00

$

44,057.69

See notes to the basic financial statements.

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CHARTER CONSERVATORY FOR LIBERAL ARTS & TECHNOLOGY, INC. GENERAL FUND - QUALITY BASIC EDUCATION PROGRAMS (QBE) ALLOTMENTS AND EXPENDITURES - BY PROGRAM YEAR ENDED JUNE 30, 2012

SCHEDULE "4"

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

ALLOTMENTS FROM GEORGIA DEPARTMENT OF EDUCATION (1)

ELIGIBLE QBE PROGRAM COSTS

SALARIES

OPERATIONS

TOTAL

$

20,036.00 $

14,976.28 $

4,213.63 $

19,189.91

119,767.00

91,997.14

25,883.76

117,880.90

128,360.00

115,177.87

29,271.45

144,449.32

13,518.00

23,976.70

7,346.68

31,323.38

105,723.00

111,741.32

34,238.55

145,979.87

68,933.00

85,944.02

26,334.03

112,278.05

66,693.00

56,240.75

17,232.67

73,473.42

9,016.00

7,246.89

2,220.52

9,467.41

$

532,046.00 $ 507,300.97 $

146,741.29 $

654,042.26

12,396.00 3,245.00

10,735.56 2,906.43

3,289.47 890.55

14,025.03 3,796.98

TOTAL QBE FORMULA FUNDS

$

547,687.00 $ 520,942.96 $

150,921.31 $

671,864.27

(1) Allotments do not include the impact of the State amended formula adjustment.

See notes to the basic financial statements.

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SECTION II COMPLIANCE AND INTERNAL CONTROL REPORTS

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

DEPARTMENT OF AUDITS AND ACCOUNTS
270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400
January 18, 2013

Honorable Nathan Deal, 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.
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, general fund, and the aggregate remaining fund information of Charter Conservatory for Liberal Arts & Technology, Inc. as of and for the year ended June 30, 2012, which collectively comprise Charter Conservatory for Liberal Arts & Technology, Inc.'s basic financial statements and have issued our report thereon dated January 18, 2013. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States.
Internal Control Over Financial Reporting
Management of Charter Conservatory for Liberal Arts & Technology, Inc. is responsible for establishing and maintaining effective 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 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 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 and Technology, Inc.'s internal control over financial reporting.
A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect and correct misstatements on a timely basis. A material weakness is a deficiency, or combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity's financial statements will not be prevented, or detected and corrected on a timely basis.

2012YB-10

Our consideration of internal control over financial reporting was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over financial reporting that might be deficiencies, significant deficiencies or material weaknesses. We did not identify any deficiencies in internal control over financial reporting that we consider to be material weaknesses, as defined above.
Compliance and Other Matters
As part of obtaining reasonable assurance about whether Charter Conservatory for Liberal Arts & Technology, Inc.'s financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards.
We noted certain matters that we have reported to management of Charter Conservatory for Liberal Arts and Technology, Inc. in a separate letter dated January 18, 2013.
This report is intended solely for the information and use of management, members of the Charter Conservatory for Liberal Arts & Technology, Inc., others within the entity, Federal awarding agencies and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties.
Respectfully submitted,

GSG:as 2012YB-10

Greg S. Griffin State Auditor

SECTION III FINDINGS AND QUESTIONED COSTS

CHARTER CONSERVATORY FOR LIBERAL ARTS & TECHNOLOGY, INC. SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2012
No matters were reported.