CHARTER CONSERVATORY FOR LIBERAL ARTS & TECHNOLOGY, INC.
STATESBORO, GEORGIA
ANNUAL FINANCIAL REPORT FOR THE FISCAL YEAR ENDED JUNE 30, 2013
(Including Independent Auditor's Reports)

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

SECTION I

FINANCIAL

INDEPENDENT AUDITOR'S REPORT

EXHIBITS

BASIC FINANCIAL STATEMENTS

DISTRICT-WIDE FINANCIAL STATEMENTS

A

STATEMENT OF NET POSITION

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 POSITION

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 POSITION

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 4 5 6 7 8 9
17 18 19 21

CHARTER CONSERVATORY FOR LIBERAL ARTS & TECHNOLOGY, INC. - TABLE OF CONTENTS -
SECTION II COMPLIANCE AND INTERNAL CONTROL REPORTS INDEPENDENT AUDITOR'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS
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
May 1, 2014

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 REPORT
Ladies and Gentlemen:
Report on the Financial Statements
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. (Charter School) as of and for the year ended June 30, 2013, and the related notes to the financial statements, which collectively comprise the Charter School's basic financial statements as listed in the table of contents.
Management's Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.
Auditor's Responsibility
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 involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of
2013ARL-13

expressing an opinion on the effectiveness of the entity's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions.
Opinions
In our opinion, the financial statements referred to previously present fairly, in all material respects, the respective financial position of the governmental activities, the general fund, and the aggregate remaining fund information of the Charter Conservatory for Liberal Arts & Technology, Inc., as of June 30, 2013, and the respective changes in financial position thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America.
Emphasis of Matter
As described in Note 2 to the financial statements, in 2013, the Charter Conservatory for Liberal Arts & Technology, Inc. (Charter School) adopted new accounting guidance, Governmental Accounting Standards Board (GASB) Statement No. 63, Financial Reporting of Deferred Outflows of Resources, Deferred Inflows of Resources, and Net Position. Our opinion is not modified with respect to this matter.
Other Matters
Required Supplementary Information
Management has omitted the 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. 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 17, 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 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.
Other Information
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 consists of Schedules 2 through 4, is presented for purposes of additional analysis and is not a required part of the basic financial statements.
2013ARL-13

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 basic financial statements. Such 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 basic financial statements or to the basic 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.
Other Reporting Required by Governm ent Auditing Standards
In accordance with Government Auditing Standards, we have also issued our report dated May 1, 2014, 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 in considering Charter Conservatory for Liberal Arts & Technology, Inc.'s internal control over financial reporting and compliance.
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 2013ARL-13

Greg S. Griffin State Auditor

CHARTER CONSERVATORY FOR LIBERAL ARTS & TECHNOLOGY, INC.

CHARTER CONSERVATORY FOR LIBERAL ARTS & TECHNOLOGY, INC. STATEMENT OF NET POSITION JUNE 30, 2013
ASSETS Cash and Cash Equivalents Capital Assets, Depreciable (Net of Accumulated Depreciation)
Total Assets LIABILITIES Accounts Payable Payroll Withholdings Payable Total Liabilities NET POSITION Investment in Capital Assets Unrestricted
Total Net Position

EXHIBIT "A"

GOVERNMENTAL ACTIVITIES

$

125,652.14

191,225.05

$

316,877.19

$

750.00

2,460.56

$

3,210.56

$

191,225.05

122,441.58

$

313,666.63

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, 2013

GOVERNMENTAL ACTIVITIES
Instruction Support Services
Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services
Total Governmental Activities
Investment Earnings Miscellaneous
Change in Net Position
Net Position - Beginning of Year
Net Position - End of Year

EXPENSES

CHARGES FOR SERVICES

$

755,490.91 $

33,790.37 10,151.66 11,265.32 31,063.63 160,744.97 10,789.58 196,714.45 15,829.10
4,125.63 640.51

$

1,230,606.13 $

17,132.07 17,132.07

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

EXHIBIT "B"

PROGRAM REVENUES OPERATING GRANTS AND
CONTRIBUTIONS

CAPITAL GRANTS AND CONTRIBUTIONS

NET (EXPENSES) REVENUES
AND CHANGES IN NET POSITION

$

905,190.95

33,387.82 6,657.07
20,348.52 20,829.48 135,717.08

111,053.75 $

$

1,233,184.67 $

$
15,778.00 15,778.00 $

$

166,832.11
-402.55 -3,494.59 9,083.20 -10,234.15 -25,027.89 -10,789.58 -85,660.70
-51.10 -4,125.63
-640.51
35,488.61
11.05 5,525.69
41,025.35
272,641.28

$

313,666.63

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CHARTER CONSERVATORY FOR LIBERAL ARTS & TECHNOLOGY, INC. BALANCE SHEET
GOVERNMENTAL FUND JUNE 30, 2013

EXHIBIT "C"

ASSETS Cash and Cash Equivalents

GENERAL FUND

$

125,652.14

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

$

750.00

2,460.56

$

3,210.56

122,441.58

$

125,652.14

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

CHARTER CONSERVATORY FOR LIBERAL ARTS & TECHNOLOGY, INC. RECONCILIATION OF THE GOVERNMENTAL FUND BALANCE SHEET
TO THE STATEMENT OF NET POSITION JUNE 30, 2013

EXHIBIT "D"

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

Amounts reported for Governmental Activities in the Statement of Net Position 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

$
277,332.35 177,551.40 -263,658.70

122,441.58 191,225.05

Net Position of Governmental Activities (Exhibit "A")

$

313,666.63

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

CHARTER CONSERVATORY FOR LIBERAL ARTS & TECHNOLOGY, INC. STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE
GOVERNMENTAL FUND YEAR ENDED JUNE 30, 2013

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 Education Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services
Total Expenditures
Net Change in Fund Balance
Fund Balance - Beginning
Fund Balance - Ending

GENERAL FUND
$ 1,189,234.86 59,727.81 17,132.07 11.05 5,525.69
$ 1,271,631.48

$ 756,106.91

33,790.37 10,151.66 11,265.32 31,063.63 160,668.97 10,789.58 192,245.45 15,829.10
4,125.63 640.51

$ 1,226,677.13

$

44,954.35

77,487.23

$ 122,441.58

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

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, 2013

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

$

44,954.35

$ 15,974.00 -19,903.00

-3,929.00

$

41,025.35

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

CHARTER CONSERVATORY FOR LIBERAL ARTS & TECHNOLOGY, INC. STATEMENT OF FIDUCIARY NET POSITION FIDUCIARY FUNDS JUNE 30, 2013
ASSETS Cash and Cash Equivalents
LIABILITIES Funds Held for Others

EXHIBIT "G"

AGENCY FUNDS

$

469.89

$

469.89

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

CHARTER CONSERVATORY FOR LIBERAL ARTS & TECHNOLOGY, INC. NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2013

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.
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 Position 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.
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 or individuals.

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CHARTER CONSERVATORY FOR LIBERAL ARTS & TECHNOLOGY, INC. NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2013

EXHIBIT "H"

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, both restricted and unrestricted resources are 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.
NEW ACCOUNTING PRONOUNCEMENTS
In fiscal year 2013, the Charter School adopted the Governmental Accounting Standards Board (GASB) Statement No. 60, Accounting and Financial Reporting for Service Concession Arrangements. The provisions of this Statement establish accounting and financial reporting standards for governments who enter into Service Concession Arrangements (SCA) with other governmental or nongovernmental entities. As of June 30, 2013, the Charter School has not entered into any arrangements that meet the qualifications to be reported as a SCA in accordance with this standard.
In fiscal year 2013, the Charter School adopted the Governmental Accounting Standards Board (GASB) Statement No. 62, Codification of Accounting and Financial Reporting Guidance Contained in Pre-November 30, 1989 FASB and AICPA Pronouncements. The provisions of this Statement incorporate certain accounting and financial reporting guidance into authoritative GASB literature.
In fiscal year 2013, the Charter School adopted the Governmental Accounting Standards Board (GASB) Statement No. 63, Financial Reporting of Deferred Outflows of Resources, Deferred Inflows of Resources and Net Position. The provisions of this Statement establish financial reporting standards for the presentation of deferred outflows of resources and deferred inflows of resources and their effects on a government's net position. The Charter School changed its presentation of net assets to net position for fiscal year 2013. There were no other applicable reporting changes for the Charter School.

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CHARTER CONSERVATORY FOR LIBERAL ARTS & TECHNOLOGY, INC. NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2013

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 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 Policy

Estimated 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 POSITION
The Charter School's net position in the District-wide Statements is classified as follows:
Investment in capital assets - This represents the Charter School's total investment in capital assets.
Unrestricted net position - Unrestricted net position represents 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, 2013

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, 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 Balances 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.
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,

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CHARTER CONSERVATORY FOR LIBERAL ARTS & TECHNOLOGY, INC. NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2013

EXHIBIT "H"

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, 2013, the bank balances were $180,840.07. 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:

Balances July 1, 2012

Increases

Decreases

Balances June 30, 2013

Governmental Activities Capital Assets Being Depreciated
Furniture and Equipment Leasehold Improvements
Less Accumulated Depreciation for: Furniture and Equipment Leasehold Improvements

$ 261,358.35 $ 177,551.40

15,974.00 $

198,093.70 45,662.00

15,434.00 4,469.00

0.00 $

277,332.35 177,551.40

213,527.70 50,131.00

Total Capital Assets, Being Depreciated, Net $ 195,154.05 $

-3,929.00 $

0.00 $ 191,225.05

Current year depreciation expense by function is as follows:

Instruction

Support Services

School Administration

$

Maintenance and Operation of Plant

$
76.00 4,469.00

$

15,358.00
4,545.00 19,903.00

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; acts of God and unemployment compensation.
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CHARTER CONSERVATORY FOR LIBERAL ARTS & TECHNOLOGY, INC. NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2013

EXHIBIT "H"

The Charter School has obtained commercial insurance for risk of loss associated with torts, assets, errors or omissions, job related illness or injuries to employees and unemployment compensation. 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 various leases as lessee for rental of its school building and copiers. These leases are considered for accounting purposes to be operating leases. Lease expenditures for the year ended June 30, 2013, for governmental funds amounted to $89,795.90. Future minimum lease payments for these leases are as follows:

Year Ending

Governmental Funds

2014 2015 2016 2017 2018

$

92,155.08

92,155.08

92,155.08

92,155.08

73,859.18

Total

$ 442,479.50

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.
NOTE 9: 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.

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CHARTER CONSERVATORY FOR LIBERAL ARTS & TECHNOLOGY, INC. NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2013

EXHIBIT "H"

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, 2013, were 6.00% of annual salary. Employer contributions required for fiscal year 2013 were 11.41% of annual salary as required by the June 30, 2010, actuarial valuation. The employer contribution rate will increase to 12.28% effective July 1, 2013.

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

Fiscal Year

Percentage Contributed

Required Contribution

2013 2012 2011

100% 100% 100%

$

64,003.22

$

60,271.25

$

68,533.59

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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, 2013

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 Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services
Total Expenditures
Net Change in Fund Balances
Fund Balances - Beginning

NONAPPROPRIATED BUDGETS

ORIGINAL

FINAL

ACTUAL AMOUNTS

VARIANCE OVER/UNDER

$ 1,030,411.00 $ 1,189,234.86 $ 1,189,234.86 $

53,086.00

59,727.81

59,727.81

10,000.00

17,132.07

17,132.07

11.05

11.05

30,000.00

5,525.69

5,525.69

$ 1,123,497.00 $ 1,271,631.48 $ 1,271,631.48 $

0.00 0.00 0.00 0.00 0.00
0.00

$ 872,227.00 $ 740,132.91 $ 756,106.91 $

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

33,790.37 9,573.64
11,265.32 31,641.65 160,668.97 10,789.58 192,245.45 15,829.10
4,125.63 640.51

33,790.37 10,151.66 11,265.32 31,063.63 160,668.97 10,789.58 192,245.45 15,829.10
4,125.63 640.51

$ 915,089.55 $ 1,210,703.13 $ 1,226,677.13 $

$ 208,407.45 $

60,928.35 $

44,954.35 $

7,526.53

77,487.23

77,487.23

-15,974.00 0.00 0.00
-578.02 0.00
578.02 0.00 0.00 0.00 0.00 0.00 0.00
-15,974.00
-15,974.00
0.00

Fund Balances - Ending

$ 215,933.98 $ 138,415.58 $ 122,441.58 $

-15,974.00

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, 2013
AGENCY/FUNDING
GRANTS Education, Georgia Department of Quality Basic Education Direct Instructional Cost 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 Special Charter Supplement Other State Programs Charter Schools - Facilities Math and Science Supplements

SCHEDULE "2"

GOVERNMENTAL FUND TYPE GENERAL FUND

$

179,208.00

124,020.00

29,949.00

73,538.00

58,411.00

62,076.00

13,375.00

13,285.00

4,802.00

3,122.00

13,599.00 88,606.00 40,741.00 -123,075.00 21,798.00 509,365.00

64,429.10 11,985.76

$

1,189,234.86

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, 2013
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

$

26,135.00

$

31,717.68

$

1,818.13

57.00

$

1,875.13

$

59,727.81

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, 2013

SCHEDULE "4"

DESCRIPTION
Direct Instructional Programs 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
TOTAL QBE FORMULA FUNDS

ALLOTMENTS FROM GEORGIA DEPARTMENT OF
EDUCATION

ELIGIBLE QBE PROGRAM COSTS

SALARIES

OPERATIONS

TOTAL

$

179,208.00 $ 164,314.54 $ 55,469.81 $ 219,784.35

124,020.00

150,917.05

55,961.78

206,878.83

29,949.00

24,662.90

9,849.47

34,512.37

73,538.00

55,996.15

22,362.83

78,358.98

58,411.00

48,077.12

19,200.25

67,277.37

62,076.00

47,797.08

19,088.42

66,885.50

13,375.00

10,640.29

4,249.35

14,889.64

$

540,577.00 $ 502,405.13 $ 186,181.91 $ 688,587.04

13,285.00 3,122.00

10,464.76 3,165.00

4,179.25 1,263.99

14,644.01 4,428.99

$

556,984.00 $ 516,034.89 $ 191,625.15 $ 707,660.04

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
May 1, 2014

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, in accordance with the 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, the financial statements of the governmental activities, the 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, 2013, and the related notes to the financial statements, which collectively comprise Charter Conservatory of Liberal Arts & Technology, Inc.'s basic financial statements and have issued our report thereon dated May 1, 2014.
Internal Control Over Financial Reporting
In planning and performing our audit of the financial statements, we considered Charter Conservatory for Liberal Arts & Technology, Inc.'s internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances 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. Accordingly, we do not express an opinion on the effectiveness of the Charter Conservatory for Liberal Arts & Technology, Inc.'s internal control.
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. A significant deficiency is 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.

2013YB-10

Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control over financial reporting that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified.
Compliance and Other Matters
As part of obtaining reasonable assurance about whether Charter Conservatory for Liberal Arts & Technology, Inc.'s financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards.
We noted a certain matter that we have reported to management of Charter Conservatory for Liberal Arts & Technology, Inc. in a separate letter dated May 1, 2014.
Purpose of this Report
The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, not to provide an opinion on the effectiveness of the Charter Conservatory for Liberal Arts & Technology, Inc.'s internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the Charter Conservatory for Liberal Arts & Technology, Inc.'s internal control and compliance. Accordingly, this communication is not suitable for any other purpose.
Respectfully submitted,

GSG:as 2013YB-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, 2013
No matters were reported.