Stephens County Board of Education, Toccoa, Georgia, annual financial report for the fiscal year ended 2014 June 30 (including independent auditor's reports)

STEPHENS COUNTY BOARD OF EDUCATION
TOCCOA, GEORGIA
ANNUAL FINANCIAL REPORT FOR THE FISCAL YEAR ENDED JUNE 30, 2014
(Including Independent Auditor's Reports)

STEPHENS COUNTY BOARD OF EDUCATION - 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 FUNDS

D

RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET

TO THE STATEMENT OF NET POSITION

E

STATEMENT OF REVENUES, EXPENDITURES AND CHANGES

IN FUND BALANCES

GOVERNMENTAL FUNDS

F

RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT

OF REVENUES, EXPENDITURES AND CHANGES IN FUND

BALANCES TO THE STATEMENT OF ACTIVITIES

G

STATEMENT OF FIDUCIARY NET POSITION

FIDUCIARY FUNDS

H NOTES TO THE BASIC FINANCIAL STATEMENTS

SCHEDULES

REQUIRED SUPPLEMENTARY INFORMATION

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

SUPPLEMENTARY INFORMATION

2 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS 3 SCHEDULE OF STATE REVENUE 4 SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS 5 ALLOTMENTS AND EXPENDITURES
GENERAL FUND - QUALITY BASIC EDUCATION PROGRAMS (QBE) BY PROGRAM

Page
1 2 4 5 6 7 8 10
29 30 31 32 33

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STEPHENS COUNTY BOARD OF EDUCATION - 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 INDEPENDENT AUDITOR'S REPORT ON COMPLIANCE FOR EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE REQUIRED BY OMB CIRCULAR A-133
SECTION III AUDITEE'S RESPONSE TO PRIOR YEAR FINDINGS AND QUESTIONED COSTS SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS
SECTION IV FINDINGS AND QUESTIONED COSTS SCHEDULE OF FINDINGS AND QUESTIONED COSTS

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SECTION I FINANCIAL

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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
October 31, 2016

Honorable Nathan Deal, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the Stephens County Board of Education
INDEPENDENT AUDITOR'S REPORT
Ladies and Gentlemen:
Report on the Financial Statements
We have audited the accompanying financial statements of the governmental activities, each major fund, and the aggregate remaining fund information of the Stephens County Board of Education, as of and for the year ended June 30, 2014, and the related notes to the financial statements (Exhibits A through H), which collectively comprise the Board'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
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are appropriate in the circumstances, but not for the purpose of 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 basic financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, each major fund, and the aggregate remaining fund information of the Stephens County Board of Education, as of June 30, 2014, 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 2014 the Stephens County Board of Education also adopted new accounting guidance, Governmental Accounting Standards Board (GASB) Statement No. 65, Items Previously Reported as Assets and Liabilities. The School District restated beginning Net Position for the cumulative effect of this accounting change. Our opinion is not modified with respect to this matter.
As discussed in Note 2 to the financial statements, in 2014, the Stephens County Board of Education restated the prior period financial statements to correct a misstatement. 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 require 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 29 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
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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 Stephens County Board of Education's basic financial statements. The accompanying supplementary information, consisting of Schedules 2 through 5, is presented for the purposes of additional analysis and is not a required part of the basic financial statements. The Schedule of Expenditures of Federal Awards is presented for purposes of additional analysis as required by U. S. Office of Management and Budget Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations, and is not a required part of the basic 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 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.
The Department of Audits and Accounts provided basic accounting assistance limited to services such as preparing draft financial statements that were based on the School District's chart of accounts and general ledgers including any adjusting, correcting, and closing entries that have been approved by the School District's management; prepared draft notes to the financial statements based on information determined and approved by the School District's management; and prepared trial balances on the School District's chart of accounts.
Other Reporting Required by Government Auditing Standards
In accordance with Government Auditing Standards, we have also issued our report dated October 31, 2016, on our consideration of the Stephens County Board of Education's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering Stephens County Board of Education'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:cb 2014ARL-11

Greg S. Griffin State Auditor

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STEPHENS COUNTY BOARD OF EDUCATION

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STEPHENS COUNTY BOARD OF EDUCATION STATEMENT OF NET POSITION JUNE 30, 2014
ASSETS
Investments Accounts Receivable, Net
Taxes State Government Federal Government Inventories Capital Assets, Non-Depreciable Capital Assets, Depreciable (Net of Accumulated Depreciation)
Total Assets
LIABILITIES
Cash Overdraft Accounts Payable Salaries and Benefits Payable Short-Term Debt Interest Payable Long-Term Liabilities
Due Within One Year Due in More Than One Year
Total Liabilities
NET POSITION
Net Investment in Capital Assets Restricted for
Continuation of Federal Programs Debt Service Capital Projects Unrestricted (Deficit)
Total Net Position

EXHIBIT "A"

GOVERNMENTAL ACTIVITIES

$

3,646,140.47

745,841.50 2,682,721.77
690,860.33 57,383.97
2,708,973.00 83,535,082.93

94,067,003.97

356,179.12 633,344.01 4,264,134.86 1,304,000.00 132,329.00
2,463,024.90 13,783,132.16
22,936,144.05

70,420,705.05
465,590.22 3,191,476.27
545,208.13 -3,492,119.75

$

71,130,859.92

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

STEPHENS COUNTY BOARD OF EDUCATION STATEMENT OF ACTIVITIES
FOR THE YEAR ENDED JUNE 30, 2014

GOVERNMENTAL ACTIVITIES
Instruction Support Services
Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Operations of Non-Instructional Services Enterprise Operations Community Services Food Services Interest on Short-Term and Long-Term Debt
Total Governmental Activities
General Revenues Taxes Property Taxes For Maintenance and Operations Railroad Cars Sales Taxes Special Purpose Local Option Sales Tax For Capital Projects Other Sales Tax Investment Earnings Miscellaneous
Total General Revenues
Change in Net Position
Net Position - Beginning of Year, Restated
Net Position - End of Year

EXPENSES

CHARGES FOR SERVICES

$

29,523,825.90 $

1,512,843.75 577,378.74 813,772.02 797,202.60
2,432,079.66 575,005.86
3,191,468.28 2,567,180.91
292,327.62 177,533.79

396,884.90 486.72
2,587,209.95 581,092.47

$

46,026,293.17 $

254,165.55
101,452.00 277,147.98 632,765.53

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

$

18,071,812.40

975,333.14 396,351.63 495,104.69 541,532.71 1,360,242.15 152,290.20 1,913,797.87 1,449,092.04
47,843.84 121,376.77

338.07 2,281,484.91
$

$

27,806,600.42 $

$
77,626.68 77,626.68

-11,197,847.95
-537,510.61 -181,027.11 -318,667.33 -255,669.89 -1,071,837.51 -422,715.66 -1,277,670.41 -1,118,088.87 -244,483.78
-56,157.02
-396,884.90 101,303.35 -28,577.06 -503,465.79
-17,509,300.54

11,280,220.37 24,882.57
3,142,323.80 101,023.29 118,168.76
1,338,912.75
16,005,531.54
-1,503,769.00
72,634,628.92

$

71,130,859.92

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STEPHENS COUNTY BOARD OF EDUCATION BALANCE SHEET
GOVERNMENTAL FUNDS JUNE 30, 2014

EXHIBIT "C"

ASSETS
Investments Accounts Receivable, Net
Taxes State Government Federal Government Inventories

GENERAL FUND

DISTRICTWIDE
CAPITAL PROJECTS
FUND

DEBT SERVICE
FUND

TOTAL

$

74,373.19 $

469,678.13 2,682,721.77
669,777.58 57,383.97

269,044.76 $ 276,163.37

3,302,722.52 $

3,646,140.47
745,841.50 2,682,721.77
669,777.58 57,383.97

Total Assets
LIABILITIES
Cash Overdraft Accounts Payable Salaries and Benefits Payable Short-Term Debt
Total Liabilities
DEFERRED INFLOWS OF RESOURCES
Unavailable Revenue - Property Taxes
FUND BALANCES
Nonspendable Restricted Unassigned
Total Fund Balances

$ 3,953,934.64 $

545,208.13 $ 3,302,722.52 $

7,801,865.29

$

356,179.12

633,344.01

4,264,134.86

1,304,000.00

6,557,657.99

$

356,179.12

633,344.01

4,264,134.86

1,304,000.00

6,557,657.99

42,409.91

42,409.91

57,383.97 408,206.25 -3,111,723.48
-2,646,133.26

545,208.13 545,208.13

3,302,722.52 3,302,722.52

57,383.97 4,256,136.90 -3,111,723.48
1,201,797.39

Total Liabilities, Deferred Inflows of Resources, and Fund Balances

$ 3,953,934.64 $

545,208.13 $ 3,302,722.52 $

7,801,865.29

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

STEPHENS COUNTY BOARD OF EDUCATION RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET
TO THE STATEMENT OF NET POSITION JUNE 30, 2014

EXHIBIT "D"

Total Fund Balances - Governmental Funds (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:
Land Land Improvements Buildings and Improvements Equipment Accumulated Depreciation
Total Capital Assets
Taxes that are not available to pay for current period expenditures are deferred in the governmental funds.
Property Taxes
Qualified School Construction Bond interest subsidy not earned in the current period and therefore not reported as a receivable on the fund level.
Some Liabilities, including Bonds Payable, are not due and payable in the current period and therefore are not reported as liabilities in the funds. These consist of:
Bonds Payable Accrued Interest Payable Intergovernmental Agreement Compensated Absences Payable Bond Premiums, Net of Amortization

$ 1,201,797.39

$ 2,708,973.00 3,311,788.75
98,501,010.05 6,250,537.83
-24,528,253.70

86,244,055.93

42,409.91 21,082.75

-10,295,000.00 -132,329.00
-5,690,000.00 -69,057.43
-192,099.63

-16,378,486.06

Net Position of Governmental Activities (Exhibit "A")

$ 71,130,859.92

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

STEPHENS COUNTY BPOARD OF EDUCATION STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES
GOVERNMENTAL FUNDS YEAR ENDED JUNE 30, 2014

EXHIBIT "E"

REVENUES

Property Taxes

$

Sales Taxes

State Funds

Federal Funds

Charges for Services

Investment Earnings

Miscellaneous

Total Revenues

EXPENDITURES

Current Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Enterprise Operations Community Services Food Services Operation
Capital Outlay Debt Services
Principal Interest

Total Expenditures

Excess of Revenues over (under) Expenditures

OTHER FINANCING SOURCES (USES)

Transfers In Transfers Out

Total Other Financing Sources (Uses)

Net Change in Fund Balances

Fund Balances - Beginning

GENERAL FUND

DISTRICTWIDE
CAPITAL PROJECTS
FUND

11,273,445.37 101,023.29 $
22,868,342.10 4,938,258.32 632,765.53 2,876.69 1,338,912.75
41,155,624.05

3,142,323.80 958.04 $
3,143,281.84

27,576,965.93
1,512,843.75 577,378.74 813,772.02 797,202.60
2,432,079.66 571,428.35
2,841,685.69 2,223,756.73
292,327.62 177,533.79 396,884.90
486.72 2,552,172.33
46,416.98
42,812,935.81
-1,657,311.76

1,591.25 1,000.00
308,040.50
310,631.75 2,832,650.09

-191,821.26 -191,821.26 -1,849,133.02 -797,000.24

-2,907,328.84 -2,907,328.84
-74,678.75 619,886.88

DEBT SERVICE
FUND

TOTAL

$
114,334.03 77,626.68
191,960.71

11,273,445.37 3,243,347.09
22,868,342.10 4,938,258.32 632,765.53 118,168.76 1,416,539.43
44,490,866.60

1,986.26
2,325,000.00 616,503.50
2,943,489.76 -2,751,529.05

27,576,965.93
1,512,843.75 577,378.74 813,772.02 797,202.60
2,432,079.66 575,005.86
2,842,685.69 2,223,756.73
292,327.62 177,533.79 396,884.90
486.72 2,552,172.33
308,040.50
2,325,000.00 662,920.48
46,067,057.32
-1,576,190.72

3,099,150.10
3,099,150.10 347,621.05
2,955,101.47

3,099,150.10 -3,099,150.10
0.00 -1,576,190.72 2,777,988.11

Fund Balances - Ending

$

-2,646,133.26 $

545,208.13 $

3,302,722.52 $

1,201,797.39

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

STEPHENS COUNTY BOARD OF EDUCATION RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT OF
REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES TO THE STATEMENT OF ACTIVITIES JUNE 30, 2014

EXHIBIT "F"

Total Net Change in Fund Balances - Governmental Funds (Exhibit "E")
Amounts reported for Governmental Activities in the Statement of Activities are different because:
Capital Outlays are reported as expenditures in Governmental Funds. However, in the Statement of Activities, the cost of Capital Assets is allocated over their estimated useful lives as depreciation expense. In the current period, these amounts are:
Depreciation Expense
Taxes reported in the Statement of Activities that do not provide current financial resources are not reported as revenues in the funds.
Repayment of Long-Term Debt is reported as an expenditure in Governmental Funds, but the repayment reduces Long-Term Liabilities in the Statement of Net Position. In the current year, these amounts consist of:
Bond Principal Retirements Amortization of Bond Premium
Total Long-Term Debt Repayments
Some items reported in the Statement of Activities do not require the use of current financial resources and therefore are not reported as expenditures in Governmental Funds. These activities consist of:
Accrued Interest Increase in Compensated Absences
Change in Net Position of Governmental Activities (Exhibit "B")

$

-1,576,190.72

-2,365,864.33 31,657.57

$ 2,325,000.00 48,024.90

2,373,024.90

$

33,803.11

-199.53

$

33,603.58 -1,503,769.00

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

STEPHENS COUNTY BOARD OF EDUCATION STATEMENT OF FIDUCIARY NET POSITION
FIDUCIARY FUNDS JUNE 30, 2014
ASSETS Cash and Cash Equivalents Investments
Total Assets LIABILITIES Funds Held for Others

EXHIBIT "G"
AGENCY FUNDS $ 61,980.76 27,665.26 $ 89,646.02 $ 89,646.02

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

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STEPHENS COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2014

EXHIBIT "H"

NOTE 1: DESCRIPTION OF SCHOOL DISTRICT AND REPORTING ENTITY
REPORTING ENTITY
The Stephens County Board of Education (School District) was established under the laws of the State of Georgia and operates under the guidance of a school board elected by the voters and a Superintendent appointed by the Board. The Board is organized as a separate legal entity and has the power to levy taxes and issue bonds. Its budget is not subject to approval by any other entity. Accordingly, the School District is a primary government and consists of all the organizations that compose its legal entity.
BLENDED COMPONENT UNIT
The Stephens County School Building Authority was created by House Bill 837 during the 2005 session of the Georgia General Assembly. The purpose of the Authority is to provide, acquire, construct, equip, maintain, and operate public service facilities, to acquire the necessary property therefore, both real and personal, and to lease or sell any or all of such facilities, including real and personal property for the benefit of the Stephens County Board of Education. The Authority consists of five members appointed by the governing authority of the Stephens County School District.
The Stephens County School Building Authority is a component unit of the Stephens County Board of Education and as such the Authority's financial activity has been blended with the Stephens County Board of Education's basic financial statements.
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The School District's basic financial statements are collectively comprised of the District-wide financial statements, fund financial statements and notes to the basic financial statements of the Stephens County Board of Education.
District-wide Statements:
The Statement of Net Position and the Statement of Activities display information about the financial activities of the overall School District, except for fiduciary activities. Eliminations have been made to minimize the double counting of internal activities. Governmental activities generally are financed through taxes, intergovernmental revenues, and other nonexchange transactions.
The Statement of Activities presents a comparison between direct expenses and program revenues for each function of the School District's governmental activities.
Direct expenses are those that are specifically associated with a program or function and, therefore, are clearly identifiable to a particular function. Indirect expenses (expenses of the School District related to the administration and support of the School District's programs, such as office and maintenance personnel and accounting) are not allocated to programs.
Program revenues include (a) charges paid by the recipients of goods or services offered by the programs and (b) grants and contributions that are restricted to meeting the operational or capital requirements of a particular program. Revenues that are not classified as program revenues, including all taxes, are presented as general revenues.
Fund Financial Statements:
The fund financial statements provide information about the School District's funds, including fiduciary funds. Eliminations have been made to minimize the double counting of internal activities. Separate statements for each category (governmental and fiduciary) are presented. The emphasis of fund financial statements is on major governmental funds.
The School District reports the following major governmental funds:
General Fund is the School District's primary operating fund. It accounts for and reports all financial resources not accounted for and reported in another fund. - 10 -

STEPHENS COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2014

EXHIBIT "H"

District-wide Capital Projects Fund accounts for and reports financial resources including Education Special Purpose Local Option Sales Tax (ESPLOST) that are restricted, committed or assigned to the expenditure for capital outlays, including the acquisition or construction of capital facilities and other capital assets.
Debt Service Fund accounts for and reports financial resources that are restricted, committed, or assigned including taxes (sales) legally restricted for the payment of general long-term principal and interest.
The School District reports the following fiduciary fund type:
Agency funds account for assets held by the School District 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 financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded at the time liabilities are incurred, regardless of when the related cash flows take place. Nonexchange transactions, in which the School District gives (or receives) value without directly receiving (or giving) equal value in exchange, include property taxes, sales taxes, and grants. On an accrual basis, revenue from property taxes is recognized in the fiscal year for which the taxes are levied. Revenue from sales taxes is recognized in the fiscal year in which the underlying transaction (sale) takes place. Revenue from grants is recognized in the fiscal year in which all eligibility requirements have been satisfied.
The School District uses funds to report on its financial position and the results of its operations. Fund accounting is designed to demonstrate legal compliance and to aid financial management by segregating transactions related to certain governmental functions or activities. A fund is a separate accounting entity with a self-balancing set of accounts.
Governmental funds are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Under this method, revenues are recognized when measurable and available. The School District considers all revenues reported in the governmental funds to be available if they are collected within sixty days after year-end. The School District considers all intergovernmental revenues to be available if they are collected within 120 days after year-end. Property taxes, sales taxes and interest are considered to be susceptible to accrual. Expenditures are recorded when the related fund liability is incurred, except for principal and interest on general longterm debt and compensated absences, which are recognized as expenditures to the extent they have matured. Capital asset acquisitions are reported as expenditures in governmental funds. Proceeds of general long-term liabilities are reported as other financing sources.
The School District funds certain programs by a combination of specific cost-reimbursement grants, categorical grants, and general revenues. Thus, when program costs are incurred, both restricted and unrestricted resources are available to finance the program. It is the School District's policy to first apply grant resources to such programs, followed by cost-reimbursement grants, then general revenues.
RESTATEMENT OF PRIOR YEAR NET POSITION
For fiscal year 2014, the School District made prior period adjustments due to the adoption of GASB Statement No. 65, as described in "New Accounting Pronouncements" below, which require the restatement of the June 30, 2013, Net Position in Governmental Activities and to correct for errors and omissions in Capital Assets. The result is an increase in Net Position at July 1, 2013 of $1,032,355.11. This change is in accordance with generally accepted accounting principles.

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STEPHENS COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2014

EXHIBIT "H"

Net Position, July 1, 2013, as previously reported Reclassification of Bond Issuance Costs Adjustments to Capital Assets Accumulated Depreciation

$

71,602,273.81

-231,276.32

1,263,631.43

Net Position, July 1, 2013, as restated

$

72,634,628.92

NEW ACCOUNTING PRONOUNCEMENTS
In fiscal year 2014, the School District adopted the Governmental Accounting Standards Board (GASB) Statement No. 65, Items Previously Reported as Assets and Liabilities. The provisions of this statement establish accounting and financial reporting standards that reclassify, as deferred outflows or inflows of resources, certain items that were previously reported as assets and liabilities and recognizes, as outflows or inflows of resources, certain items that were previously reported as assets and liabilities. As noted above the School District restated beginning Net Position for the cumulative effect of this accounting change.
FUTURE ACCOUNTING PRONOUNCEMENTS
In fiscal year 2015, the School District will adopt Governmental Accounting Standards Board (GASB) Statement No. 68, Accounting and Financial Reporting for Pensions. The provisions of this statement establish accounting and financial reporting standards for pensions that are provided to the employees of state and local governmental employers through pensions that are provided to the employees of state and local governmental employers through pension plans that are administered through trusts. Implementation of this statement will require the School District to record a liability for its proportionate share of the Net Pension Liability of pension plans in which it participates. Based on information provided by the Teachers' Retirement System of Georgia (TRS), the School District's proportionate share of the Net Pension Liability of the pension plan administered through TRS is estimated to be $27.1 million at June 30, 2015.
CASH AND CASH EQUIVALENTS
Composition of Deposits
Cash and cash equivalents consist of cash on hand, demand deposits and short-term investments with original maturities of three months or less from the date of acquisition in authorized financial institutions. Official Code of Georgia Annotated Section 45-8-14 authorizes the School District to deposit its funds in one or more solvent banks, insured Federal savings and loan associations or insured chartered building and loan associations.
INVESTMENTS
Composition of Investments
Investments made by the School District in nonparticipating interest-earning contracts (such as certificates of deposit) and repurchase agreements are reported at cost. Participating interest-earning contracts and money market investments with a maturity at purchase of one year or less are reported at amortized cost. Both participating interest-earning contracts and money market investments with a maturity at purchase greater than one year and equity investments are reported at fair value. The Official Code of Georgia Annotated Section 36-83-4 authorizes the School District to invest its funds. In selecting among options for investment or among institutional bids for deposits, the highest rate of return shall be the objective, given equivalent conditions of safety and liquidity. Funds may be invested in the following:
1. Obligations issued by the State of Georgia or by other states,
2. Obligations issued by the United States government,
3. Obligations fully insured or guaranteed by the United States government or a United States government agency,
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STEPHENS COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2014

EXHIBIT "H"

4. Obligations of any corporation of the United States government,
5. Prime banker's acceptances,
6. The local government investment pool (Georgia Fund 1) administered by the State of Georgia, Office of the State Treasurer,
7. Repurchase agreements, and
8. Obligations of other political subdivisions of the State of Georgia.
The School District does not have a formal policy regarding investment policies that address credit risk, custodial credit risks, concentration of credit risks, interest rate risks or foreign currency risks.
RECEIVABLES
Receivables consist of amounts due from property and sales taxes, grant reimbursements due on Federal, State or other grants for expenditures made but not reimbursed and other receivables disclosed from information available. Receivables are recorded when either the asset or revenue recognition criteria has been met. Receivables recorded on the basic financial statements do not include any amounts which would necessitate the need for an allowance for uncollectible receivables.
PROPERTY TAXES
The Stephens County Board of Commissioners adopted the property tax levy for the 2013 tax digest year (calendar year) on September 15, 2013 (levy date) based on property values as of January 1, 2013. Taxes were due on November 15, 2013 (lien date). Taxes collected within the current fiscal year or within 60 days after year-end on the 2013 tax digest are reported as revenue in the governmental funds for fiscal year 2014. The Stephens County Tax Commissioner bills and collects the property taxes for the School District, withholds 2.5% of taxes collected as a fee for tax collection and remits the balance of taxes collected to the School District. Property tax revenues, at the fund reporting level, during the fiscal year ended June 30, 2014, for maintenance and operations amounted to $11,031,177.65.
Tax millage rates levied for the 2013 tax year (calendar year) for the Stephens County Board of Education were as follows (a mill equals $1 per thousand dollars of assessed value):

School Operations

18.40 mills

Additionally, Title Ad Valorem Tax revenues, at the fund reporting level, amounted to $217,385.15 during fiscal year ended June 30, 2014.
SALES TAXES
Education Special Purpose Local Option Sales Tax, at the fund reporting level, during the year amounted to $3,142,323.80 and is to be used for capital outlay for educational purposes or debt service. This sales tax was authorized by local referendum and the sales tax must be re-authorized at least every five years.
INVENTORIES
Food Inventories
On the basic financial statements, inventories of donated food commodities used in the preparation of meals are reported at their Federally assigned value and purchased foods inventories are reported at cost (first-in, first-out ). The School District uses the consumption method to account for inventories whereby donated food commodities are recorded as an asset and as revenue when received, and expenses/expenditures are recorded as the inventory items are used. Purchased foods are recorded as an asset when purchased and expenses/expenditures are recorded as the inventory items are used.

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STEPHENS COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2014

EXHIBIT "H"

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

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

Capitalization Policy

Estimated Useful Life

Land Land Improvements Buildings and Improvements Equipment Intangible Assets

Any Amount

$

10,000.00

$

10,000.00

$

10,000.00

$ 100,000.00

N/A 20 to 80 years 25 to 80 years
8 to 50 years 5 to 100 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.

DEFERRED OUTFLOWS/INFLOWS OF RESOURCES
In addition to assets, the statement of net position and/or the balance sheet will sometimes report a separate section for deferred outflows of resources. This separate financial statement element represents a consumption of resources that applies to a future period(s) and therefore will not be recognized as an outflow of resources (expense/expenditure) until then. The School District did not have any items that qualified for reporting in this category for the year ended June 30, 2014.

In addition to liabilities, the statement of net position and/or the balance sheet will sometimes report a separate section for deferred inflows of resources. This separate financial statement element represents an acquisition of resources that applies to a future period(s) and therefore will not be recognized as an inflow of resources (revenue) until that time. The School District has only one type of item, which arises only under a modified accrual basis of accounting that qualifies for reporting in this category. Accordingly, the item, unavailable revenue, is reporting only in the governmental funds balance sheet. The governmental funds report unavailable revenues from property taxes and grants and these amounts are deferred and will be recognized as an inflow of resources in the period in which the amounts become available.

COMPENSATED ABSENCES
Members of the Teachers' Retirement System of Georgia (TRS) may apply unused sick leave toward early retirement. The liability for early retirement will be borne by TRS rather than by the individual school districts. Otherwise, sick leave does not vest with the employee, and no liability is reported in the School District's financial statements.

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STEPHENS COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2014

EXHIBIT "H"

Vacation leave of 15 days is awarded on a fiscal year basis to all full time personnel employed on a twelve month basis. No other employees are eligible to earn vacation leave. Vacation leave not utilized during the fiscal year may be carried over to the next fiscal year, providing such vacation leave does not exceed 20 days.
GENERAL OBLIGATION BONDS
The School District issues general obligation bonds to provide funds for the acquisition and construction of major capital facilities. In the District-wide financial statements, bond premiums and discounts are deferred and amortized over the life of the bonds using the straight-line method. Bond issuance costs are recognized as an outflow of resources in the fiscal year in which the bonds are issued.
In the fund financial statements, the School District recognizes bond premiums and discounts, as well as bond issuance costs during the fiscal year bonds are issued. Premiums received on debt issuances are reported as other financing sources while discounts on debt issuances are reported as other financing uses. Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as debt service expenditures. General obligation bonds are direct obligations and pledge the full faith and credit of the government. The outstanding amount of these bonds is recorded in the Statement of Net Position.
NET POSITION
The School District's Net Position in the District-wide Statements is classified as follows:
Net Investment in Capital Assets - This represents the School District's total investment in capital assets, net of outstanding debt obligations related to those capital assets.
Restricted Net Position - This represents resources for which the School District is legally or contractually obligated to spend resources for continuation of Federal Programs, debt service and capital projects in accordance with restrictions imposed by external third parties.
Unrestricted Net Position - Unrestricted Net Position represent resources derived from property taxes, sales taxes, grants and contributions not restricted to specific programs, charges for services, and miscellaneous revenues. These resources are used for transactions relating to the educational and general operations of the School District, and may be used at the discretion of the Board to meet current expenses for those purposes.
FUND BALANCES
The School District's fund balances are classified as follows:
Nonspendable Amounts that cannot be spent either because they are in a nonspendable form or because they are legally or contractually required to be maintained intact.
Restricted Constraints are placed on the use of resources are either (1) externally imposed conditions by creditors, grantors, contributors, or laws and regulations of other governments or (2) imposed by law through constitutional provisions or enabling legislation.
Committed Amounts that can be used only for specific purposes pursuant to constraints imposed by formal action of the Board of Education. The Board of Education is the School District's highest level of decision-making authority, and the formal action that is required to be taken to establish, modify, or rescind a fund balance commitment is a resolution approved by the Board. Committed fund balance also should incorporate contractual obligations to the extent that existing resources in the fund have been specifically committed for use in satisfying those contractual requirements.
Assigned Amounts that are constrained by the School District's intent to be used for specific purposes, but are neither restricted nor committed. The intent should be expressed by (1) the Board of Education or (2) the budget or finance committee, or the Superintendent, or designee, to assign amounts to be used for specific purposes.
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STEPHENS COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2014

EXHIBIT "H"

Unassigned The residual classification for the General Fund. This classification represents fund balances that have not been assigned to other funds and that have not been restricted, committed, or assigned to specific purposes within the General Fund.
Fund Balances of the Governmental Funds at June 30, 2014, are as follows:

Nonspendable Inventories
Restricted Continuation of Federal Programs Capital Projects Debt Service
Unassigned

$

57,383.97

$ 408,206.25 545,208.13
3,302,722.52

4,256,136.90 -3,111,723.48

Fund Balance, June 30, 2014

$ 1,201,797.39

When multiple categories of fund balance are available for expenditure, the School District will start with the most restricted category and spend those funds first before moving down to the next category with available funds.

DEFICIT FUND BALANCES
The fund reporting a deficit fund balance at June 30, 2014, is as follows:

Fund Type/Fund Name

Deficit Balance

Governmental Fund Type General Fund Unassigned

$

3,111,723.48

The General Fund reported an unassigned deficit fund balance of $3,111,723.48 at June 30, 2014. To address the deficit, Stephens County Board of Education implemented a reduction of school calendar days as well as a reduction of staff. After a restructuring of the elementary schools grade levels, one elementary school will be closed during fiscal year 2016. The millage rate has been increased to 20.00 mils.
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 School District'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, debt service, and capital projects funds. There is no statutory prohibition regarding over expenditure of the budget at any level. The budget for all governmental funds is prepared and adopted by fund and function. The legal level of budgetary control was established by the Board at the aggregate fund 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 School District'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. After approval of this tentative budget by the Board, such budget is advertised at least once in a newspaper of general circulation in the locality, as well as the School
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STEPHENS COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2014

EXHIBIT "H"

District's website. 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, in accordance with provisions of Official Code of Georgia Annotated section 20-2-167(c), 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.
The Superintendent is authorized by the Board to approve adjustments of no more than 5 percent of the amount budgeted for expenditures in any budget function for any fund. The Superintendent shall report any such adjustments to the Board. If expenditure of funds in any budget function for any fund is anticipated to be more than 5 percent of the budgeted amount, the Superintendent shall request Board approval for the budget amendment. Any position or expenditure not previously approved in the annual budget that exceeds $10,000.00 shall require Board approval unless the Superintendent deems the position or purchase an emergency. In such case, the expenditure shall be reported to the Board at its regularly scheduled meeting. Under no circumstance is the Superintendent or other staff person authorized to spend funds that exceed the total budget without approval by the Board.
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 AND INVESTMENTS
COLLATERALIZATION OF DEPOSITS
Official Code of Georgia Annotated (O.C.G.A.) Section 45-8-12 provides that there shall not be on deposit at any time in any depository for a time longer than ten days a sum of money which has not been secured by surety bond, by guarantee of insurance, or by collateral. The aggregate of the face value of such surety bond and the market value of securities pledged shall be equal to not less than 110 percent of the public funds being secured after the deduction of the amount of deposit insurance. If a depository elects the pooled method (O.C.G.A. Section 45-8-13.1) the aggregate of the market value of the securities pledged to secure a pool of public funds shall be not less than 110 percent of the daily pool balance.
Acceptable security for deposits consists of any one of or any combination of the following:
1. Surety bond signed by a surety company duly qualified and authorized to transact business within the State of Georgia,
2. Insurance on accounts provided by the Federal Deposit Insurance Corporation,
3. Bonds, bills, notes, certificates of indebtedness or other direct obligations of the United States or of the State of Georgia,
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.

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STEPHENS COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2014

EXHIBIT "H"

CATEGORIZATION OF DEPOSITS
Custodial credit risk is the risk that in the event of a bank failure, the School District's deposits may not be returned to it. The School District does not have a deposit policy for custodial credit risk. At June 30, 2014, the School District had deposits with a carrying amount of $2,877,275.59, which includes $3,171,473.95 in Certificates of Deposit that are reported as Investments, and a bank balance of $3,574,986.59. The bank balances insured by Federal depository insurance were $755,551.09.

The amounts exposed to custodial credit risk are classified into three categories as follows:

Category 1 Category 2 -
Category 3 -

Uncollateralized, Cash collateralized with securities held by the pledging financial institution, or Cash collateralized with securities held by the pledging financial institution's trust department or agent but not in the School District's name.

The School District's deposits by custodial risk category at June 30, 2014, are as follows:

Custodial Credit Risk Category

Bank Balance

1

$

0.00

2

2,819,435.50

3

0.00

Total

$ 2,819,435.50

CATEGORIZATION OF INVESTMENTS

At June 30, 2014, the carrying value of the School District's total investments was $3,673,805.73. This includes $3,171,473.95 invested in Certificates of Deposit, which are collateralized in the same manner as other cash deposits. The School District's investments as of June 30, 2014, are presented below. All investments are presented by investment type and debt securities are presented by maturity.

Investment Type

Fair Value

Investment Maturity 6 - 10 Years

Debt Securities U. S. Treasuries

$

233,287.02 $ 233,287.00

Investment Pools Office of the State Treasurer Georgia Fund 1

269,044.76

Total Investments

$

502,331.78

The Georgia Fund 1 (local government investment pool) administered by the State of Georgia, Office of the State Treasurer is not required to be categorized since the School District did not own any specific identifiable securities in the pool. The investment policy of the State of Georgia, Office of the State Treasurer for the Georgia Fund 1 (Primary Liquidity Portfolio) does not provide for investment in

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STEPHENS COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2014

EXHIBIT "H"

derivatives or similar investments. Additional information on the Georgia Fund 1 is disclosed in the State of Georgia Comprehensive Annual Financial Report. This audit can be obtained from the Georgia Department of Audits and Accounts at http://www.audits.ga.gov/SGD/cafr.html.
The Primary Liquidity Portfolio consists of Georgia Fund 1 which is not registered with the SEC as an investment company but does not operate in a manner consistent with the SEC's Rule 2a-7 of the Investment Company Act of 1940. The investment is valued at the pool's share price, $1.00 per share. The pool is an AAAf rated investment pool by Standard and Poor's. The weighted average maturity of Georgia Fund 1 may not exceed 60 days. The weighted average maturity for Georgia Fund 1 on June 30, 2014, was 62 days.
The investment in Debt Securities held for retirement of QSCB bonds is invested in United States Treasury SLG Certificate of Indebtedness managed by Regions Bank.
Interest Rate Risk
Interest rate risk is the risk that changes in interest rates of debt investment will adversely affect the fair value of an investment. The School District does not have a formal policy for managing interest rate risk.
Custodial Credit Risk
Custodial credit risk for investments is the risk that, in the event of the failure of the counterparty to a transaction, the School District will not be able to recover the value of the investment or collateral securities that are in the possession of an outside party. The School District does not have a formal policy for managing custodial credit risk for investments.
At June 30, 2014, $233,287.02 of the School District's applicable investments were uninsured and unregistered, with securities held by the counterparty's trust department or agent in the name of the School District.
NOTE 5: NON-MONETARY TRANSACTIONS
The School District receives food commodities from the United States Department of Agriculture (USDA) for school breakfast and lunch programs. These commodities are recorded at their Federally assigned value. See Note 2 Inventories.

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STEPHENS COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2014

EXHIBIT "H"

NOTE 6: CAPITAL ASSETS
The following is a summary of changes in the Capital Assets during the fiscal year:

Balances July 1, 2013 (Restated)

Increases

Decreases

Balances June 30, 2014

Governmental Activities Capital Assets, Not Being Depreciated:
Land
Capital Assets Being Depreciated Buildings and Improvements Equipment Land Improvements
Less Accumulated Depreciation for: Buildings and Improvements Equipment Land Improvements

$

2,708,973.00 $

0.00 $

0.00 $

2,708,973.00

98,501,010.05 6,250,537.83 3,311,788.75

0.00

98,501,010.05 6,250,537.83 3,311,788.75

14,845,841.29 4,561,697.70 2,754,850.38

1,966,118.52 332,827.83 66,917.98

16,811,959.81 4,894,525.53 2,821,768.36

Total Capital Assets, Being Depreciated, Net

85,900,947.26

-2,365,864.33

0.00

83,535,082.93

Governmental Activity Capital Assets - Net $

88,609,920.26 $

-2,365,864.33 $

0.00 $ 86,244,055.93

Current year depreciation expense by function is as follows:

Instruction Support Services
Maintenance and Operation of Plant Student Transportation Services Food Services

$

12,388.24

232,415.53

$ 2,104,043.74
244,803.77 17,016.82

$ 2,365,864.33

NOTE 7: INTERFUND TRANSFERS
Interfund transfers for the year ended June 30, 2014, consisted of the following:

Transfers to

Transfers From

General Fund

District-wide Capital Projects

Debt Service Fund

$ 191,821.26 $ 2,907,328.84

Transfers are used to move property tax revenues collected by the General Fund and sales tax revenues collected by the Capital Projects Fund to the Debt Service Fund as needed to meet scheduled debt service requirements.

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STEPHENS COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2014

EXHIBIT "H"

NOTE 8: RISK MANAGEMENT
The School District is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors or omissions; job related illness or injuries to employees; acts of God and unemployment compensation.
The School District has obtained commercial insurance for risk of loss associated with torts, assets, errors or omissions, and acts of God However, the errors or omissions policy excludes coverage for sexual harassment and discrimination. The School District has neither significantly reduced coverage for these risks nor incurred losses (settlements) which exceeded the School District's insurance coverage in any of the past three years.
The School District is self-insured with regard to unemployment compensation claims. The School District accounts for claims within the General Fund with expenses/expenditures and liability being reported when it is probable that a loss has occurred, and the amount of that loss can be reasonably estimated.
Changes in the unemployment compensation claims liability during the last two fiscal years are as follows:

Beginning of Year Liability

Claims and Changes in Estimates

Claims Paid

End of Year Liability

2013 $ 2014 $

0.00 $ 0.00 $

1,956.00 $ 9,799.00 $

1,956.00 $ 9,799.00 $

0.00 0.00

The School District participates in the Georgia Education Workers' Compensation Trust, a public entity risk pool organized on December 1, 1991, to develop, implement and administer a program of workers' compensation self-insurance for its member organizations. The School District pays an annual premium to the Trust for its general worker's compensation insurance coverage. Specific excess of loss insurance coverage is provided through an agreement by the Trust with the Safety National Casualty Company to provide coverage for potential losses sustained by the Trust in excess of $1 million loss per occurrence, up to the statutory limit. Employers' Liability insurance coverage is also provided with limits of $2 million. The Trust covers the first $1 million of each Employers liability claim with Safety National providing additional Employers Liability limits up to a $2 million per occurrence maximum. Safety National Casualty Company also provides $2 million in aggregate coverage to the Trust, attaching at 110% of the loss fund and based on the Fund's annual normal premium.
NOTE 9: SHORT-TERM DEBT
The School District obtains temporary loans in advance of property tax collections, depositing the proceeds in its General Fund. This short-term debt is to provide cash for operations until property tax collections are received by the School District. Article IX, Section V, Paragraph V of the Constitution of the State of Georgia limits the aggregate amount of short-term debt to 75 percent of the total gross income from taxes collected in the preceding year and requires all short-term debt to be repaid no later than December 31 of the calendar year in which the debt was incurred.

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STEPHENS COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2014

EXHIBIT "H"

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

Beginning Balance

Issued

Temporary Loans

$ 1,926,000.00 $ 4,378,000.00 $

Redeemed

Ending Balance

5,000,000.00 $ 1,304,000.00

NOTE 10: LONG-TERM LIABILITIES

COMPENSATED ABSENCES
Compensated absences represent obligations of the School District relating to employees' rights to receive compensation for future absences based upon service already rendered. This obligation relates only to vesting accumulating leave in which payment is probable and can be reasonably estimated. Typically, the General Fund is the fund used to liquidate this long-term debt. The School District uses the vesting method to compute compensated absences.

REVENUE BONDS PAYABLE
The Stephens County Board of Education entered into contracts with the Stephens County School Building Authority dated August 5, 2005 and December 15, 2010, for the issuance of revenue bonds to provide funds to Liberty Elementary School, Crossroads Education Center, Big A Elementary School, Eastanollee Elementary School and Toccoa Elementary School capital outlay projects of the School District. Under the terms of the contracts, the Stephens County School Building Authority issued $5,690,000.00 less issuance costs of $121,050.00 in bonds on behalf of the School District. The obligation of the School District is absolute and unconditional so long as any of the bonds remain outstanding. Under the contract, the School District will exercise its power of taxation to the extent necessary to pay the amounts required to be paid by the contract.

GENERAL OBLIGATION DEBT OUTSTANDING
General Obligation Bonds currently outstanding are as follows:

Purpose

Interest Rates

Amount

General Government - Series 2008 General Government - Series 2009

4.0% - 5.0% $ 3.5% - 5.0%

9,295,000.00 1,000,000.00

$ 10,295,000.00

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STEPHENS COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2014

EXHIBIT "H"

The changes in Long-Term Liabilities during the fiscal year ended June 30, 2014, were as follows:

G.O. Bonds Compensated Absences(1) Revenue Bonds Payable Bond Premiums Amortized

Balance July 1, 2013

Additions

Governmental Activities

Balance

Deductions

June 30, 2014

Due Within One Year

$ 12,620,000.00 68,857.90 $
5,690,000.00 240,124.53

$ 66,722.51

2,325,000.00 $ 10,295,000.00 $

66,522.98

69,057.43

5,690,000.00

48,024.90

192,099.63

2,415,000.00 48,024.90

$ 18,618,982.43 $

66,722.51 $ 2,439,547.88 $ 16,246,157.06 $ 2,463,024.90

(1) The portion of Compensated Absences due within one year has been determined to be immaterial to the basic financial statements.

At June 30, 2014, payments due by fiscal year which includes principal and interest for these items are as follows:

Fiscal Year Ended June 30:

Revenue Bonds Payable

Principal

Interest

2015 2016 2017 2018 2019 2020 - 2024

$

$

5,690,000.00

84,331.00 84,331.00 84,331.00 84,331.00 84,331.00 126,496.50

Total Principal and Interest

$

5,690,000.00 $

548,151.50

Fiscal Year Ended June 30:
2015 2016 2017 2018
Total Principal and Interest

General Obligation Debt

Principal

Interest

$

2,415,000.00 $

2,520,000.00

2,625,000.00

2,735,000.00

444,985.00 324,235.00 217,135.00 112,135.00

$

10,295,000.00 $

1,098,490.00

Unamortized Bond Premium

$

48,024.90

48,024.90

48,024.90

48,024.93

$

192,099.63

NOTE 11: ON-BEHALF PAYMENTS
The School District has recognized revenues and costs in the amount of $2,132,939.86 for health insurance and retirement contributions paid on the School District's behalf by the following State Agencies.
Georgia Department of Education Paid to the Georgia Department of Community Health For Health Insurance of Certificated Personnel In the amount of $2,021,064.00
Paid to the Teachers' Retirement System of Georgia For Teachers' Retirement System (TRS) Employer's Cost In the amount of $5,308.86

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STEPHENS COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2014

EXHIBIT "H"

Office of the State Treasurer Paid to the Public School Employees Retirement System For Public School Employees Retirement (PSERS) Employer's Cost In the amount of $106,567.00
Funds paid to the Georgia Department of Community Health by the Georgia Department of Education on behalf of the School District are reported as part of the Quality Basic Education revenue allotments on Schedule 3 Schedule of State Revenue.
NOTE 12: SIGNIFICANT CONTINGENT LIABILITIES
Amounts received or receivable principally from the Federal government are subject to audit and review by grantor agencies. This could result in requests for reimbursement to the grantor agency for any costs which are disallowed under grant terms. The School District believes that such disallowances, if any, will be immaterial to its overall financial position.
NOTE 13: POST-EMPLOYMENT BENEFITS
GEORGIA SCHOOL PERSONNEL POST-EMPLOYMENT HEALTH BENEFIT FUND
Plan Description. The Georgia School Personnel Post-employment Health Benefit Fund (School OPEB Fund) is a cost-sharing multiple-employer defined benefit post-employment healthcare plan that covers eligible former employees of public school systems, libraries and regional educational service agencies. The School OPEB Fund provides health insurance benefits to eligible former employees and their qualified beneficiaries through the State Employees Health Benefit Plan administered by the Department of Community Health. The Official Code of Georgia Annotated (O.C.G.A.) assigns the authority to establish and amend the benefit provisions of the group health plans, including benefits for retirees, to the Board of Community Health (Board). The Department of Community Health, which includes the School OPEB Fund, issues a separate stand alone financial audit report and a copy can be obtained from the Georgia Department of Audits and Accounts.
Funding Policy. The contribution requirements of plan members and participating employers are established by the Board in accordance with the current Appropriations Act and may be amended by the Board. Contributions of plan members or beneficiaries receiving benefits vary based on plan election, dependent coverage, and Medicare eligibility and election. For members with fewer than five years of service as of January 1, 2012, contributions also vary based on years of service. On average, members with five years or more of service as of January 1, 2012, pay approximately 25 percent of the cost of the health insurance coverage. In accordance with the Board resolution dated December 8, 2011, for members with fewer than five years of service as of January 1, 2012, the State provides a premium subsidy in retirement that ranges from 0% for fewer than 10 years of service to 75% (but no greater than the subsidy percentage offered to active employees) for 30 or more years of service. The subsidy for eligible dependents ranges from 0% to 55% (but no greater than the subsidy percentage offered to dependents of active employees minus 20%). No subsidy is available to Medicare eligible members not enrolled in a Medicare Advantage Option. The Board of Community Health sets all member premiums by resolution and in accordance with the law and applicable revenue and expense projections. Any subsidy policy adopted by the Board may be changed at any time by Board resolution and does not constitute a contract or promise of any amount of subsidy.
Participating employers are statutorily required to contribute in accordance with the employer contribution rates established by the Board. The contribution rates are established to fund all benefits due under the health insurance plans for both active and retired employees based on projected "payas-you-go" financing requirements. Contributions are not based on the actuarially calculated annual required contribution (ARC) which represents a level of funding that, if paid on an ongoing basis, is projected to cover normal cost each year and amortize any unfunded actuarial liabilities (or funding excess) over a period not to exceed thirty years.

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STEPHENS COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2014

EXHIBIT "H"

The combined active and retiree contribution rates established by the Board for employers participating in the School OPEB Fund were as follows for the fiscal year ended June 30, 2014:

For certificated teachers, librarians and regional educational service agencies and certain other eligible participants:

July 1, 2013 June 30, 2014

$945.00 per member per month

For non-certificated school personnel:

July 1, 2013 June 30,2014

$596.20 per member per month

No additional contribution was required by the Board for fiscal year 2014 nor contributed to the School OPEB Fund to prefund retiree benefits. Such additional contribution amounts are determined annually by the Board in accordance with the School plan for other post-employment benefits and are subject to appropriation.

The School District's combined active and retiree contributions to the health insurance plans, which equaled the required contribution, for the current fiscal year and the preceding two fiscal years were as follows:

Fiscal Year

Percentage Contributed

Required Contribution

2014 2013 2012

100% 100% 100%

$ 4,750,611.94 $ 4,347,321.61 $ 4,199,851.16

NOTE 14: 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

- 25 -

STEPHENS COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2014

EXHIBIT "H"

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 ten years of service. If a member terminates with less than ten 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, 2014, were 6.00% of annual salary. Employer contributions required for fiscal year 2014 were 12.28% of annual salary as required by the June 30, 2011, actuarial valuation.
Employer contributions for the current fiscal year and the preceding two fiscal years are as follows:

Fiscal Year

Percentage Contributed

Required Contribution

2014 2013 2012

100% 100% 100%

$ 2,697,309.84 $ 2,554,049.81 $ 2,447,326.58

PUBLIC SCHOOL EMPLOYEES RETIREMENT SYSTEM (PSERS)
Bus drivers, lunchroom personnel, and maintenance and custodial personnel are members of the Public School Employees Retirement System of Georgia. The System is funded by contributions by the employees and by the State of Georgia. The School District makes no contribution to this plan.
DEFINED CONTRIBUTION PLAN
In September 1998, Stephens County Board of Education began an employer paid 403(b) annuity plan for the group of employees covered under the Public School Employees Retirement System (PSERS). Recognizing that PSERS was a limited defined contribution and defined benefit plan which did not provide for an adequate retirement for this group of employees, it was the Board's desire to supplement the retirement of this group.
The Board selected Lincoln Financial Group as the provider of this plan. For each employee covered under PSERS, the Board began contributing to the plan an amount equal to the amount contributed by the employee (a match), not to exceed $25.00 per employee, per month.
The employee becomes vested in the plan with five years of experience. Employees who had already achieved 5 years of experience at the time the plan was implemented were vested upon enrollment.
Funds accumulated in the employer paid accounts are only available to the employee upon termination of employment and five years of service to Stephens County Board of Education. If an employee terminates employment prior to achieving five years of service, they receive 20% of the employer contributions for each year of completed service (20% for year 1, 40% for year 2, 60% for year 3 and 80% for year 4). The remaining funds paid on behalf of the non-vested employee are credited back to the Board.

- 26 -

STEPHENS COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2014

EXHIBIT "H"

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

Fiscal Year

Percentage Contributed

Required Contribution

2014 2013 2012

100% 100% 100%

$

26,225.01

$

25,350.00

$

26,615.00

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STEPHENS COUNTY BOARD OF EDUCATION GENERAL FUND
SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL
YEAR ENDED JUNE 30, 2014

SCHEDULE "1"

REVENUES
Property Taxes Sales Taxes State Funds Federal Funds Charges for Services Investment Earnings Miscellaneous
Total Revenues
EXPENDITURES
Current Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Enterprise Operation Community Services Food Services Operation
Debt Service
Total Expenditures
Excess of Revenues over (under) Expenditures
OTHER FINANCING USES
Other Uses
Net Change in Fund Balances
Fund Balances - Beginning
Adjustments

NONAPPROPRIATED BUDGETS

ORIGINAL (1)

FINAL (1)

ACTUAL AMOUNTS

VARIANCE OVER/UNDER

$

10,075,513.50 $

5,249,504.75 $

11,273,445.37 $

101,023.29

19,766,485.80

22,115,758.00

22,868,342.10

4,188,859.70

4,689,870.60

4,938,258.32

480,435.35

480,435.35

632,765.53

8,550.00

8,550.00

2,876.69

67,500.00

67,500.00

1,338,912.75

34,587,344.35

32,611,618.70

41,155,624.05

6,023,940.62 101,023.29 752,584.10 248,387.72 152,330.18 -5,673.31
1,271,412.75
8,544,005.35

24,645,852.06 1,268,865.51 552,271.30 643,342.17 647,229.63 1,940,490.00 220,725.90 2,312,830.20 1,729,626.11 152,322.13 87,411.76
2,253,000.38
36,453,967.15 -1,866,622.80
-1,866,622.80 -511,053.68 40,451.98

25,459,978.96 1,365,213.56 959,590.17 643,342.17 652,625.81 1,940,490.00 220,725.90 2,312,830.20 1,728,529.20 152,322.13 92,229.76
2,253,000.38
37,780,878.24 -5,169,259.54
-5,169,259.54 3,990,774.48 -1,110,134.88

27,576,965.93
1,512,843.75 577,378.74 813,772.02 797,202.60
2,432,079.66 571,428.35
2,841,685.69 2,223,756.73
292,327.62 177,533.79 396,884.90
486.72 2,552,172.33
46,416.98
42,812,935.81
-1,657,311.76
-191,821.26
-1,849,133.02
-797,000.24

-2,116,986.97
-147,630.19 382,211.43 -170,429.85 -144,576.79 -491,589.66 -350,702.45 -528,855.49 -495,227.53 -140,005.49 -85,304.03 -396,884.90
-486.72 -299,171.95
-46,416.98
-5,032,057.57
3,511,947.78
-191,821.26
3,320,126.52
-4,787,774.72
1,110,134.88

Fund Balances - Ending

$

-2,337,224.50 $

-2,288,619.94 $

-2,646,133.26 $

-357,513.32

Notes to the Schedule of Revenues, Expenditures and Changes in Fund Balances Budget and Actual
(1) Original and Final Budget amounts do not include the budgeted revenues or expenditures of the various principal accounts and Stephens-Franklin Teacher's Credit Union. The actual revenues and expenditures of the various principal accounts are $1,131,186.80 and $1,116,408.27, respectively. The actual revenues and expenditures of the Stephens-Franklin Teacher's Credit Union are $312,135.13 and $309,147.18, respectively.
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.

- 29 -

STEPHENS COUNTY BOARD OF EDUCATION SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
YEAR ENDED JUNE 30, 2014

SCHEDULE "2"

FUNDING AGENCY PROGRAM/GRANT
Agriculture, U. S. Department of Child Nutrition Cluster Pass-Through From Georgia Department of Education Food Services School Breakfast Program National School Lunch Program
Total Child Nutrition Cluster
Forest Service Schools and Roads Cluster Pass-Through From Office of the State Treasurer Schools and Roads - Grants to States
Total U. S. Department of Agriculture
Education, U. S. Department of Special Education Cluster Pass-Through From Georgia Department of Education Special Education Grants to States Preschool Grants
Total Special Education Cluster
Other Programs Pass-Through From Georgia Department of Education Career and Technical Education - Basic Grants to States Improving Teacher Quality State Grants Rural Education Title I Grants to Local Educational Agencies Twenty-First Century Community Learning Centers
Total Other Programs
Total U. S. Department of Education
Defense, U. S. Department of Direct Department of the Army R.O.T.C. Program

CFDA NUMBER

PASSTHROUGH
ENTITY ID
NUMBER

EXPENDITURES IN PERIOD

* 10.553 * 10.555

N/A

(2)

N/A

$

2,335,066.98 (1)

2,335,066.98

10.665

N/A

(3) 2,335,066.98

* 84.027

N/A

* 84.173

N/A

84.048

N/A

84.367

N/A

84.358

N/A

* 84.010

N/A

* 84.287

N/A

713,722.00 30,903.73
744,625.73
44,463.85 260,937.53
74,215.66 1,225,079.43
334,573.42 1,939,269.89 2,683,895.62
61,382.13

Total Expenditures of Federal Awards

$

N/A = Not Available

Notes to the Schedule of Expenditures of Federal Awards

(1) Includes the Federally assigned value of donated commodities for the Food Donation Program in the amount of $195,397.81.
(2) Expenditures for the funds earned on the School Breakfast Program ($585,082.27) were not maintained separately and are included in the 2014 National School Lunch Program.
(3) Funds earned on this program, in the amount of $16,964.42, do not require reporting of expenditures.

Major Programs are identified by an asterisk (*) in front of the CFDA number.

The School District did not provide Federal Assistance to any Subrecipient.

The accompanying schedule of expenditures of Federal awards includes the Federal grant activity of the Stephens County Board of Education and is presented on the modified accrual basis of accounting which is the basis of accounting used in the presentation of the fund financial statements.

5,080,344.73

See notes to the basic financial statements.

- 30 -

STEPHENS COUNTY BOARD OF EDUCATION SCHEDULE OF STATE REVENUE YEAR ENDED JUNE 30, 2014

SCHEDULE "3"

AGENCY/FUNDING
GRANTS Bright From the Start: Georgia Department of Early Care and Learning Pre-Kindergarten Program
Education, Georgia Department of Quality Basic Education (1) Direct Instructional Cost Kindergarten Program Kindergarten Program - Early Intervention Program Primary Grades (1-3) Program Primary Grades - Early Intervention (1-3) Program Upper Elementary Grades (4-5) Program Upper Elementary Grades - Early Intervention (4-5) Program Middle School (6-8) Program High School General Education (9-12) Program Vocational Laboratory (9-12) Program Students with Disabilities Gifted Student - Category VI Remedial Education Program Alternative Education Program English Speakers of Other Languages (ESOL) Media Center Program 20 Days Additional Instruction Staff and Professional Development Indirect Cost Central Administration School Administration Facility Maintenance and Operations Mid-term Adjustment Hold-Harmless Amended Formula Adjustment Categorical Grants Pupil Transportation Regular Nursing Services DCH Direct Payment (1) Education Equalization Funding Grant Other State Programs Food Services Math and Science Supplements Preschool Handicapped Program Teachers' Retirement Vocational Education
Office of the State Treasurer Public School Employees Retirement
CONTRACTS Education, Georgia Department of Communities in Schools
Human Resources, Georgia Department of Family Connection

GOVERNMENTAL FUND TYPE
GENERAL FUND

$

355,403.60

1,244,143.00 462,213.00
2,992,702.00 531,389.00
1,283,917.00 320,659.00
2,564,799.00 1,896,840.00
991,948.00 4,054,221.00 1,216,306.00
101,597.00 174,169.00
42,735.00 458,245.00 135,635.00
88,028.00
617,283.00 945,325.00 1,001,266.00 105,550.00 -2,952,528.00
596,881.00 75,963.00
2,021,064.00 1,012,559.00
61,804.00 22,360.46 57,412.87
5,308.86 177,725.00
106,567.00
54,966.25
43,885.06

$ 22,868,342.10
(1) Payments to the Georgia Department of Community Health by the Georgia Department of Education on behalf of the School District are reported seperately in the schedule above; however, the payments are part of the Qulaity Basic Education revenue allotments for the School District

See notes to the basic financial statements.

- 31 -

PROJECT

STEPHENS COUNTY BOARD OF EDUCATION SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS
YEAR ENDED JUNE 30, 2014

SCHEDULE "4"

ORIGINAL ESTIMATED
COST (1)

CURRENT ESTIMATED COSTS (2)

AMOUNT EXPENDED IN CURRENT YEAR (3) (4)

AMOUNT EXPENDED IN PRIOR YEARS (3) (4)

TOTAL COMPLETION
COST

EXCESS PROCEEDS NOT EXPENDED (6) (7) (8)

ESTIMATED COMPLETION
DATE

Acquiring, constructing and equipping a new high school;

$ 20,000,000.00 $ 40,505,903.07

Rehabilitating, repairing, renovating, extending and improving existing schools and related facilities useful or desirable in connection therewith, including without limitation, additional classrooms, roof replacements and repairs, mechanical system repairs and replacements, wiring and infrastructure modifications, renovations and improvements to physical education and athletic facilities;

75,000.00

125,891.79

$ 40,505,903.07 125,891.79

Retiring outstanding general obligation debt of the School District previously incurred and issued with respect to capital outlay projects in the amount not to exceed $15,457,805.00 comprised of the principal and interest on the School District's Series 2008 and 2009 Bonds and the payments coming due on the 2010 Qualified School Construction Bonds coming due in the years 2013 through 2018;

15,457,805.00

Rehabilitating, repairing, renovating, extending and improving existing schools and related facilities useful or desirable in connection therewith, including without limitation, additional classrooms, roof replacements and repairs, mechanical system repairs and replacements, wiring and infrastructure modifications, renovations and improvements to physical education and athletic facilities;

2,507,195.00

Acquiring, installing and improving system-wide instructional and administrative technology, including but not limited to, information systems hardware, associated software and accessories and infrastructure at all District facilities related to these technology acquisitions and improvements;
Acquiring system-wide equipment and furnishings, including but not limited to, safety and security equipment, food service, vocational, fine arts, physical education and athletic equipment;

300,000.00 200,000.00

Acquisition of school buses, vehicles and transportation equipment.

35,000.00

13,723,272.00 $ 2,941,503.50

2,011,925.00

310,631.75

250,000.00 200,000.00
80,000.00

2,935,316.00

$ 38,575,000.00 $ 56,896,991.86 $ 3,252,135.25 $ 43,567,110.86

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

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

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

(4) in addition to the expenditures shown above, the School District has incurred related paying agent fees associated with bond debt service for the above projects as follows:

Prior Years

$

10,292.29

Current Year

1,986.26

Total

$

12,278.55

Completed
Completed
December 31, 2017
December 31, 2017 December 31, 2017 December 31, 2017 December 31, 2017

See notes to the basic financial statements.

- 32 -

STEPHENS COUNTY BOARD OF EDUCATION GENERAL FUND - QUALITY BASIC EDUCATION PROGRAMS (QBE)
ALLOTMENTS AND EXPENDITURES - BY PROGRAM YEAR ENDED JUNE 30, 2014

SCHEDULE "5"

DESCRIPTION

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

Direct Instructional Programs

Kindergarten Program

$

Kindergarten Program-Early Intervention Program

Primary Grades (1-3) Program

Primary Grades-Early Intervention (1-3) Program

Upper Elementary Grades (4-5) Program

Upper Elementary Grades-Early Intervention (4-5)

Program

Middle School (6-8) Program

High School General Education (9-12) Program

Vocational Laboratory (9-12) Program

Students with Disabilities

Category I

Category II

Category III

Category IV

Category V

Gifted Student - Category VI

Remedial Education Program

Alternative Education Program

English Speakers of Other Languages (ESOL)

1,482,092.00 $ 517,331.00
3,465,475.00 644,508.00
1,495,641.00
398,433.00 3,011,462.00 2,205,170.00 1,153,710.00 4,720,041.00
1,412,507.00 151,325.00 207,150.00 51,603.00

TOTAL DIRECT INSTRUCTIONAL PROGRAMS

20,916,448.00

Media Center Program Staff and Professional Development

536,293.00 100,827.00

ELIGIBLE QBE PROGRAM COSTS

SALARIES

OPERATIONS

TOTAL

1,515,009.71 $ 527,631.30
2,426,446.47 1,599,136.82 1,669,392.06
784,221.57 3,649,307.96 3,327,794.69
963,867.20
60,762.59 534,566.16 2,311,131.24 790,850.36 1,000,079.58 798,766.51 455,752.32 196,260.04
46,153.87
22,657,130.45
677,386.57 10,531.41

38,973.75 $ 2,232.88
30,540.74 6,781.19
16,524.26

1,553,983.46 529,864.18
2,456,987.21 1,605,918.01 1,685,916.32

4,614.57 47,741.23 97,092.14 71,815.15

788,836.14 3,697,049.19 3,424,886.83 1,035,682.35

19,574.58 6,924.75
10,457.98
1,383.73 1,415.11

60,762.59 534,566.16 2,330,705.82 797,775.11 1,000,079.58 809,224.49 455,752.32 197,643.77
47,568.98

356,072.06

23,013,202.51

34,204.63 30,921.93

711,591.20 41,453.34

TOTAL QBE FORMULA FUNDS

$

21,553,568.00 $ 23,345,048.43 $ 421,198.62 $ 23,766,247.05

(1) Comprised of State Funds plus Local Five Mill Share. (2) Allotments do not include the impact of the State amended formula adjustment.

See notes to the basic financial statements.

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SECTION II COMPLIANCE AND INTERNAL CONTROL REPORTS

(This page left intentionally blank)

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
October 31, 2016

Honorable Nathan Deal, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the Stephens County Board of Education
INDEPENDENT AUDITOR'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS
Ladies and Gentlemen:
We have audited, 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, the financial statements of the governmental activities, each major fund, and the aggregate remaining fund information of Stephens County Board of Education as of and for the year ended June 30, 2014, and the related notes to the financial statements, which collectively comprise Stephens County Board of Education's basic financial statements and have issued our report thereon dated October 31, 2016.
Internal Control Over Financial Reporting
In planning and performing our audit of the financial statements, we considered Stephens County Board of Education'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 Stephens County Board of Education's internal control. Accordingly, we do not express an opinion on the effectiveness of the Stephens County Board of Education's internal control.
Our consideration of internal control was for the limited purpose described in the preceding paragraph and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies and therefore, material weaknesses or significant deficiencies may exist that were not identified. However, as described in the accompanying Schedule of Findings and Questioned Costs, we identified certain deficiencies in internal control over financial reporting that we consider to be material weaknesses.

2014YB-60

(This page left intentionally blank)

A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect and correct misstatements on a timely basis. A material weakness is a deficiency, or combination of deficiencies, in internal control such that there is a reasonable possibility that a material misstatement of the entity's financial statements will not be prevented, or detected and corrected on a timely basis. We consider the deficiencies described in the accompanying Schedule of Findings and Questioned Costs as items FS 2014-001, FS 2014-002, and FS 2014-003 to be material weaknesses.
Compliance and Other Matters
As part of obtaining reasonable assurance about whether Stephens County Board of Education'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 an instance of noncompliance or other matters that are required to be reported under Government Auditing Standards which is described in the accompanying Schedule of Findings and Questioned Costs as item FS 2014-003.
We also noted certain matters that we have reported to management of Stephens County Board of Education in a separate letter dated October 31, 2016.
Stephens County Board of Education's Response to Findings
Stephens County Board of Education's response to the findings identified in our audit is described in the accompanying Schedule of Findings and Questioned Costs. Stephens County Board of Education's response was not subjected to the auditing procedures applied in the audit of the financial statements and, accordingly, we express no opinion on it.
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, and not to provide an opinion on the effectiveness of the entity'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 entity's internal control and compliance. Accordingly, this communication is not suitable for any other purpose.
Respectfully submitted,

GSG:cb 2014YB-60

Greg S. Griffin State Auditor

(This page left intentionally blank)

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
October 31, 2016

Honorable Nathan Deal, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the Stephens County Board of Education
INDEPENDENT AUDITOR'S REPORT ON COMPLIANCE FOR EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE REQUIRED BY OMB CIRCULAR A-133
Ladies and Gentlemen:
Report on Compliance for Each Major Federal Program
We have audited Stephens County Board of Education's compliance with the types of compliance requirements described in the OMB Circular A-133 Compliance Supplement that could have a direct and material effect on each of its major federal programs for the year ended June 30, 2014. Stephens County Board of Education's major federal programs are identified in the Summary of Auditor's Results section of the accompanying Schedule of Findings and Questioned Costs.
Management's Responsibility
Management is responsible for compliance with the requirements of laws, regulations, contracts, and grants applicable to its federal programs.
Auditor's Responsibility
Our responsibility is to express an opinion on compliance for each of Stephens County Board of Education's major federal programs based on our audit of the types of compliance requirements referred to above. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and OMB Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations. Those standards and OMB Circular A-133 require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major federal program occurred. An audit includes examining, on a test basis, evidence about the Stephens County Board of Education's compliance with those requirements and performing such other procedures as we considered necessary in the circumstances.

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We believe that our audit provides a reasonable basis for our opinion on compliance for each major federal program. However, our audit does not provide a legal determination of Stephens County Board of Education's compliance.
Basis for Qualified Opinion on Title I Grants to Local Educational Agencies
As described in the accompanying Schedule of Findings and Questioned Costs, Stephens County Board of Education did not comply with requirements regarding Title I Grants to Local Educational Agencies as described in item FA 2014-001 for Allowable Costs/Cost Principles, Cash Management and Financial Reporting. Compliance with such requirements is necessary, in our opinion, for Stephens County Board of Education to comply with requirements applicable to that program.
Unmodified Opinion on Each of the Other Major Federal Programs
In our opinion, Stephens County Board of Education complied, in all material respects, with the types of compliance requirements referred to above that could have a direct and material effect on each of its other major federal programs identified in the Summary of Auditor's Results section of the accompanying Schedule of Findings and Questioned Costs for the year ended June 30, 2014.
Other Matters
The results of our auditing procedures disclosed another instance of noncompliance, which is required to be reported in accordance with OMB Circular A-133 and which is described in the accompanying Schedule of Findings and Questioned Costs as item FA 2014-002. Our opinion on each major federal program is not modified with respect to this matter.
Stephens County Board of Education's response to the noncompliance findings identified in our audit is described in the accompanying Schedule of Findings and Questioned Costs. Stephens County Board of Education's response was not subjected to the auditing procedures applied in the audit of compliance and, accordingly, we express no opinion on the response.
Report on Internal Control over Compliance
Management of Stephens County Board of Education is responsible for establishing and maintaining effective internal control over compliance with the types of compliance requirements referred to above. In planning and performing our audit of compliance, we considered Stephens County Board of Education's internal control over compliance with the types of requirements that could have a direct and material effect on each major federal program to determine the auditing procedures that are appropriate in the circumstances for the purpose of expressing an opinion on compliance for each major federal program and to test and report on internal control over compliance in accordance with OMB Circular A-133, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of the Stephens County Board of Education's internal control over compliance.
Our consideration of internal control over compliance was for the limited purpose described in the preceding paragraph and was not designed to identify all deficiencies in internal control over compliance that might be material weaknesses or significant deficiencies and therefore, material weaknesses or significant deficiencies may exist that were not identified. However, as discussed below, we identified certain deficiencies in internal control over compliance that we consider to be material weaknesses and significant deficiencies.
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A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a federal program on a timely basis. A material weakness in internal control over compliance is a deficiency, or combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a federal program will not be prevented, or detected and corrected, on a timely basis. We consider the deficiency in internal control over compliance described in the accompanying Schedule of Findings and Questioned Costs as item FA-2014-001 to be a material weakness.
A significant deficiency in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance with a type of compliance requirement of a federal program that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance. We consider the deficiency in internal control over compliance described in the accompanying Schedule of Findings and Questioned Costs as item FA-2014-002 to be a significant deficiency.
Stephens County Board of Education's response to the internal control over compliance findings identified in our audit is described in the accompanying Schedule of Findings and Questioned Costs. Stephens County Board of Education's response was not subjected to the auditing procedures applied in the audit of compliance and, accordingly, we express no opinion on the response.
The purpose of this report on internal control over compliance is solely to describe the scope of our testing of internal control over compliance and the results of that testing based on the requirements of OMB Circular A-133. Accordingly, this report is not suitable for any other purpose.
Respectfully submitted,

GSG:cb 2014SA-55

Greg S. Griffin State Auditor

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

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STEPHENS COUNTY BOARD OF EDUCATION AUDITEE'S RESPONSE
SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2014

PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

FINDING CONTROL NUMBER AND STATUS

FS-7271-13-01 FS-7271-13-02 FS-7271-13-03

Unresolved - See Corrective Action/Responses Unresolved - See Corrective Action/Responses Unresolved - See Corrective Action/Responses

CORRECTIVE ACTION/RESPONSES

FINANCIAL REPORTING Inadequate Controls over Reporting Process Finding Control Number: FS-7271-13-01

The School District will attempt to prepare the fiscal year 2015 financial statements with the assistance of a certified public accountant.

CASH AND CASH EQUIVALENTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS GENERAL LEDGER CAPITAL ASSETS Inadequate Internal Control Procedures Finding Control Number: FS-7271-13-02

The School District is in the process of implementing a corrective action plan in regards to this finding. The School District has hired a new finance director from another School District. She has over twenty years of experience in the position. The new finance director has indicated that several of the items in this finding from fiscal year 2013 will likely continue to be an issue through fiscal year 2015 and will take until fiscal year 2016 before we can expect to see the results of all items in the corrective action plan.

BUDGET PREPARATION/EXCECUTION Deficit Fund Balance Failure to Adopt a Balanced Budget Finding Control Number: FS-7271-13-03

This will be a repeat finding for fiscal year 2014. The School District has prepared and submitted a corrective action and deficit elimination plan to the Georgia Department of Education (GDOE). GDOE has approved the plans. The School District will adopt balanced budgets going forward and implement the deficit elimination plan.

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STEPHENS COUNTY BOARD OF EDUCATION AUDITEE'S RESPONSE
SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2014

PRIOR YEAR FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

FINDING CONTROL NUMBER AND STATUS

FA-7271-13-01 FA-7271-13-02 FA-7271-13-03

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

CORRECTIVE ACTION/RESPONSES

ACTIVITIES ALLOWED OR UNALLOWED ALLOWABLE COSTS/COST PRINCIPLES PERIOD OF AVAILABILITY OF FEDERAL FUNDS Inadequate Internal Control Procedures Finding Control Number: FA-7271-13-02

Due to the timing of the 2013 fiscal year audit, the School District did not have time to fully implement corrective action to resolve this finding for the 2014 fiscal year.

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SECTION IV FINDINGS AND QUESTIONED COSTS

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STEPHENS COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2014

I SUMMARY OF AUDITOR'S RESULTS

Financial Statements

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

Unmodified

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

Yes None Reported

Noncompliance material to financial statements noted:

Yes

Federal Awards

Internal Control over major programs:

Material weaknesses identified?

Yes

Significant deficiency identified?

Yes

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

Unmodified for all major programs except for Title I Grants to Local Educational Agencies, which was qualified.

Any audit findings disclosed that are required to be reported in

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

Yes

Identification of major programs:

CFDA Numbers

Name of Federal Program or Cluster

10.553, 10.555 84.010 84.027, 84.173 84.287

Child Nutrition Cluster Title I Grants to Local Educational Agencies Special Education Cluster Twenty-First Century Community Learning Centers

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

$300,000.00

Auditee qualified as low-risk auditee?

No

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STEPHENS COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2014

II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

FS 2014-001 Control Category: Internal Control Impact:

Inadequate Controls over Financial Reporting Financial Reporting Material Weakness

Description: This is a repeat finding (FS-7271-13-01) from fiscal year ended June 30, 2013. The School District did not prepare their financial statements in accordance with generally accepted accounting principles.

Criteria: Management is responsible for having adequate controls over the preparation of financial statements in accordance with generally accepted accounting principles (GAAP). The School District's internal controls over GAAP financial reporting should include adequately trained personnel with the knowledge, skills and experience to prepare GAAP based financial statements and include all disclosures as required by the Governmental Accounting Standards Board (GASB).

GASB Statement No. 34, Basic Financial Statement Management's Discussion and Analysis for State and Local Governments (Statement), requires governments to present government-wide and fund financial statements as well as a summary reconciliation of the (a) total governmental funds balances to the net position of governmental activities in the Statement of Net Position, and (b) total change in governmental fund balances to the change in the net position of governmental activities in the Statement of Activities. In addition, the statement requires information about the government's major and non-major funds in the aggregate, to be provided in the fund financial statements.

Chapter 22A Annual Financial Reporting of the Financial Management for Georgia Local Units of Administration provides that School Districts must prepare their financial statements in accordance with generally accepted accounting principles.

Condition: The Department of Audits and Accounts provided basic accounting assistance limited to services such as preparing draft financial statements that were based on the entity's chart of accounts and general ledgers including any adjusting, correcting, and closing entries that have been approved by the entity's staff; prepared draft notes to the financial statements based on information determined and approved by management; and prepared trial balances based on the entity's chart of accounts.

Cause: In discussing this deficiency with the School District, they stated that the cause was a direct result of the resignation of key accounting personnel who were knowledgeable in the preparation of financial statements. Personnel who were subsequently hired did not receive training in time to prepare the financial statements prior to the start of the audit engagement.

Effect or Potential Effect: The School District did not comply with the requirements of the Department of Education regarding financial reporting. Several adjustments were necessary in order for the School District's financial statements to be in conformity with generally accepted accounting principles.

Recommendation: The School District should establish and implement controls over the financial statement reporting process as required by the Financial Management for Georgia Local Units of Administration.

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STEPHENS COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2014
II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS
Views of Responsible Officials and Corrective Action Plans: We concur with this finding. We will be assisted by a certified public accountant, who is familiar with school accounting, to provide assistant and training for accuracy with preparing financials for future audits.
Contact Person: Alicia Fitzpatrick Phone: 706-886-1069 Fax: 706-886-3882 Email: alicia.fitzpatrick@stephenscountyschools.org

FS 2014-002 Control Categories:
Internal Control Impact:

Inadequate Internal Control Procedures Cash and Cash Equivalents Revenues/Receivables/Receipts Expenditures/Liabilities/Disbursements Employee Compensation General Ledger Capital Assets Material Weakness

Description: This is a repeat finding (FS-7271-13-02) from fiscal year ended June 30, 2013. The accounting procedures of the School District were insufficient to provide adequate internal controls over operations.

Criteria: The School District's management is responsible for designing and maintaining internal controls that provide reasonable assurance that transactions are accurately processed and recorded according to established procedures.

Condition: The following deficiencies were noted during our audit procedures:

Cash and Cash Equivalents No administrative review was performed on bank reconciliations. Documentation of bank account reconciliations for June 30, 2014 were not available for the auditor to review for nine of the School District's sixteen bank accounts. In addition, two of the seven available reconciliations for June 2014 were not adequately reconciled back to the general ledger. The General Operating account bank statement for June 30, 2014 was not reconciled until June 2015. Numerous cash reconciling items totaling $1,058,270.92 were not adjusted to the general ledger in a timely manner. The School District's general ledger reflected an overall balance in the Inter-fund Cash account of $3,250,821.25. This account should always carry an overall balance of zero. Several club accounts maintained a negative balance at year-end. As a result, funds from other agency accounts were used to cover the balances. This use of funds violates the custodial nature of agency funds.

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STEPHENS COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2014

II

FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

Revenues/Receivables/Receipts The School District did not establish adequate separation of duties for the key accounting functions of recording and processing of property tax, special purpose local option sales tax, and Georgia Department of Education revenue. Monthly Special Purpose Local Option Sales Tax receipts totaling $276,163.37 were not recorded on the School District's general ledger.

Expenditures/Liabilities/Disbursements A review of thirty one disbursements revealed that purchase orders and expenditure voucher documentation could not be located for eight disbursements. Fiscal year 2014 Debt Service principal and interest payments were not reviewed prior to disbursement.

Employee Compensation A test of salaries for nine employees revealed two employees were paid for working days in excess of the number of days stipulated in their contract. The detailed listing of travel payments to employees as submitted to the Georgia Department of Audits and Accounts was not reconciled to the financial statements.

General Ledger Several journal entries made to the financial statements for prior year transfers of cash between funds were not recorded on the School District's general ledger. As a result, cash by fund on the general ledger was not accurate.

Capital Assets The School District has not implemented any type of capital asset review process such as an annual physical inventory.

Cause: In discussing this deficiency with the School District, management indicated that they failed to adequately monitor or review reports that would identify that day-to-day activities were being performed by accounting personnel.

Effect or Potential Effect: Without satisfactory accounting controls and procedures in place, the School District places itself in a position where potential misappropriation of assets could occur. Material errors were not detected in a timely manner. The lack of controls could impact reporting of its financial position and results of operations.

Recommendation: The School District should review accounting procedures in place and design and implement procedures relative to the above control categories to strengthen the internal controls over the accounting functions. Management should establish monitoring processes to provide reasonable assurance that the controls are functioning and financial transactions are properly processed and recorded.

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STEPHENS COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2014
II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS
Views of Responsible Officials and Corrective Action Plans: We concur with this finding. Staff have been made aware of the important in the timeliness of recording and balancing entries. Procedures have been communicated to personnel to eliminate this finding.
Contact Person: Alicia Fitzpatrick Phone: 706-886-9415 Fax: 706-886-3882 Email: alicia.fitzpatrick@stephenscountyschools.org

FS 2014-003 Control Category: Internal Control Impact: Compliance Impact:

Failure to Adopt a Balanced Budget, Deficit Fund Balance Budget Preparation/Execution Material Weakness Material Noncompliance

Description: This is a repeat finding (FS-7271-13-03) from fiscal year ended June 30, 2013. The General Fund of the School District reported a deficit fund balance and failed to adopt a balanced budget.

Criteria: Chapter 25 Reporting for LUAs with Governmental Fund Deficit Balances of the Financial Management for Georgia Local Units of Administration states in part: "The seriousness of fund balance deficits cannot be overstated. The Georgia Department of Education requires those LUAs with deficit governmental fund balances to meet certain reporting requirements".

Chapter 32, Preparing Operating Budgets of the Financial Management for Georgia Local Units of Administration states in part: "The budget must be balanced for all budgeted funds. Total anticipated revenues should equal total estimated expenditures. In the event anticipated revenues are insufficient to fund anticipated essential expenditures, a portion of unreserved fund balance from previous years must be used to fund the short fall. In the event there is insufficient unreserved fund balance from previous years to fund anticipated expenditures, then such expenditures must be reduced to equal anticipated revenues plus available unreserved fund balance."

The Department of Audits and Accounts is required to report all instances of budget deficits in accordance with the Official Code of Georgia Annotated 20-2-67(a) which states: "When an audit by the Department of Audits and Accounts finds and reports irregularities or budget deficits in the fund accounting information regarding a local school system or a school within the local school system, the Department of Audits and Accounts shall report the findings of irregularities or budget deficits to the State Board of Education and the local board of education."

Condition: The School District's General Fund reported a deficit unassigned fund balance in the amount of $3,111,723.48 at June 30, 2014. In addition, the School District's final budget for the General Fund was not balanced. Total anticipated revenues and beginning fund balance did not equal or exceed total estimated expenditures.

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STEPHENS COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2014
II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS
Cause: The School District's General Fund began the year with a deficit fund balance and incurred expenditures in excess of revenues during the year under review resulting in a deficit ending fund balance. Management adopted an unbalanced final budget for the General Fund. Management did not properly monitor the financial situation during the year and make necessary adjustments to decrease expenditures.
Effect or Potential Effect: The unassigned fund balance of the General Fund was not sufficient to meet the fund's obligations at June 30, 2014. This is a financial statement irregularity required to be reported in accordance with the Official Code of Georgia Annotated 20-2-67.
Recommendation: The School District should establish policies and procedures to ensure that expenditures do not exceed availability of resources, so that in future periods the School District does not report a deficit fund balance. In addition, appropriate procedures should be implemented to ensure that the adopted budget for each budgeted fund is balanced as required.
Views of Responsible Officials and Corrective Action Plans: We concur with this finding. By implementing the plan that was submitted to the Georgia Department of Education (GDOE), we have eliminated the deficit. A balanced budget has been adopted since fiscal year 2014.
Contact Person: Alicia Fitzpatrick Phone: 706-886-9415 Fax: 706-886-3882 Email: alicia.fitzpatrick@stephenscountyschools.org

III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

FA 2014-001 Compliance Requirements:
Internal Control Impact: Compliance Impact: Federal Awarding Agency: Pass-Through Entity: CFDA Number and Title:

Inadequate Internal Control Procedures Allowable Costs/Cost Principles Cash Management Financial Reporting Material Weakness Material Non-Compliance U. S. Department of Education Georgia Department of Education Title I Grants to Local Educational Agencies (CFDA 84.010)

Description: The procedures of the School District were insufficient to provide adequate internal controls over allowable costs/cost principles, cash management and financial reporting for the Title I Grants to Local Educational Agencies program.

Criteria: 34 CFR 80.21 requires that when funds are advanced, local education agencies must follow procedures to minimize the time elapsing between the transfer of funds and disbursement of such funds by the grantee or sub-grantee.

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STEPHENS COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2014
III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS
Provisions of the OMB Circular A-87, Cost Principals for State, Local and Indian Tribal Governments, require that costs charged to a Federal award be program necessary and reasonable for proper and efficient performance and administration of the Federal award; cost must be authorized or not prohibited under state or local laws or regulations as well as be adequately documented.
According to Georgia Department of Education's LEA Handbook for Title l Directors "School Districts must use fiscal control and fund accounting procedures that will ensure proper disbursement of, and accounting for, federal funds paid under this program."
Condition: A review of cash management for the Title I Grants to Local Educational Agencies program revealed that the School District failed to appropriately allocate Title I expenditures to the program in a timely manner. Cash draws were made that did not correspond with current or anticipated program expenditures. Documentation to support a journal entry that charged expenditures to the Title I program was not available. The Title I completion report due September 2013 included $312,519.53 of expenditures that were not adequately supported by the financial records of the School District.
Questioned Cost: $312,519.53
Cause: The School District attributes this deficiency to initial expenditures being charged to the general fund before the Title I budget was available. The School District believes the financial reporting deficiency was a result of a lack of policies and procedures in place over the financial reporting process for the Title I Grants to Local Educational Agencies program.
Effect or Potential Effect: Failure to accurately prepare completion reports, failure to accurately forecast cash needs, failure to ensure that federal expenditures were adequately documented and consistently charged to the program on a timely basis for the Title I Grants to Local Educational Agencies program resulted in noncompliance with requirements of the Federal grant.
Recommendation: The School District should implement controls and procedures to ensure that all Title I Grants to Local Educational Agencies program expenditures are allocated to the program in a timely manner and that cash needs are accurately forecast. Also, controls should be implemented to ensure that completion reports are accurate and appropriately supported by the accounting records and appropriate documentation maintained by the School District. The Georgia Department of Education should review this matter to determine if a reclaim of funds is appropriate.
Views of Responsible Officials and Corrective Action Plans: We concur with this finding. Staff have been made aware of fiscal control and fund accounting procedures to ensure these findings have been corrected.
Contact Person: Alicia Fitzpatrick Phone: 706-886-9415 Fax: 706-886-3882 Email: alicia.fitzpatrick@stephenscountyschools.org
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STEPHENS COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2014

III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

FA 2014-002 Compliance Requirements: Internal Control Impact: Compliance Impact: Federal Awarding Agency: Pass-Through Entity: CFDA Number and Title:

Inadequate Internal Control Procedures Allowable Costs/Cost Principles Significant Deficiency Nonmaterial Noncompliance U.S. Department of Agriculture Georgia Department of Education Child Nutrition Cluster (CFDA 10.553 and 10.555)

Description: This is a repeat finding (FA-7271-13-02) from fiscal year ended June 30, 2013. The internal controls of the School District were not operating as designed to provide adequate internal controls over activities allowed and allowable costs or special tests and provisions for the Child Nutrition Cluster.

Criteria: Provisions of the OMB Circular A-87, Cost Principals for State, Local and Indian Tribal Governments, require that costs charged to a Federal award be program necessary and reasonable for proper and efficient performance and administration of the Federal award; cost must be authorized or not prohibited under state or local laws or regulations as well as be adequately documented.

According to Georgia Department of Education's LEA Handbook for Title I Directors "School Districts must use fiscal control and fund accounting procedures that will ensure proper disbursement of, and accounting for, federal funds paid under this program."

Condition: A review of twenty five disbursements for the Child Nutrition Cluster revealed the following:
Three purchase orders did not include evidence of approval by the School Food Service Director.
Documentation could not be located for one expenditure.

Journal entries related to USDA donated commodities did not include evidence of approval.

Cause: In discussing this deficiency with the School District, they stated that the cause was staff turnover and inadequate training of new staff in fiscal year 2014.

Effect or Potential Effect: Failure to ensure that program expenditures are properly documented and that both expenditures and journal entries are properly reviewed resulted in noncompliance with requirements of the Federal Grant and could result in errors and/or irregularities not being detected in a timely manner.

Recommendation: Management should strengthen controls to ensure that all Child Nutrition Cluster disbursements and journal entries are properly reviewed and documented.

Views of Responsible Officials and Corrective Action Plans: We concur with this finding. Procedures have been put in place to eliminate these findings.

Contact Person: Alicia Fitzpatrick Phone: 706-886-9415 Fax: 706-886-3882 Email: alicia.fitzpatrick@stephenscountyschools.org
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