TOWNS COUNTY BOARD OF EDUCATION HIAWASSEE, GEORGIA ANNUAL FINANCIAL REPORT FOR THE FISCAL YEAR ENDED JUNE 30,2010 (Including IndependentAuditor's Reports) TOWNS COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS - SECTION I FINANCIAL INDEPENDENT AUDITOR'S COMBINED REPORT ON BASIC FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION - SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS REQUIRED SUPPLEMENTARY INFORMATION MANAGEMENT'S DISCUSSION AND ANALYSIS EXHIBITS BASIC FINANCIAL STATEMENTS DISTRICT-WIDE FINANCIAL STATEMENTS A STATEMENT OF NET ASSETS B STATEMENT OF ACTlVlTlES FUND FINANCIAL STATEMENTS C BALANCE SHEET GOVERNMENTAL FUNDS D RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO THE STATEMENT OF NET ASSETS E STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS F RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT OF REVENUES, EXPENDITURESAND CHANGES IN FUND BALANCES TO THE STATEMENT OF ACTIVITIES G STATEMENT OF FIDUCIARY NET ASSETS FIDUCIARY FUNDS H NOTES TO THE BASIC FINANCIAL STATEMENTS SCHEDULES REQUIRED SUPPLEMENTARY INFORMATION 1 SCHEDULE OF REVENUES, EXPENDITURESAND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL GENERAL FUND TOWNS COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS - SECTION I FINANCIAL SCHEDULES 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 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 WlTH GOVERNMENTAUDlnNG STANDARDS INDEPENDENT AUDITOR'S REPORT ON COMPLIANCE WlTH REQUIREMENTS THAT COULD HAVE A DIRECT AND MATERIAL EFFECT ON EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WlTH OMB CIRCULAR A-133 SECTION Ill AUDITEE'S RESPONSE TO PRIOR YEAR FINDINGS AND QUESTIONED COSTS SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS SECTION IV FINDINGS AND QUESTIONED COSTS SCHEDULE OF FINDINGS AND QUESTIONED COSTS SECTION I FINANCIAL Russell W. Hinton STATE AUDITOR (404) 656-2174 DEPARTMENOTF AUDITSAND ACCOUNTS 270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400 March 2 , 2 0 1 1 Honorable Nathan Deal, Governor Members of the General Assembly Members of the State Board of Education and Superintendent and Members of the Towns County Board of Education INDEPENDENTAUDITOR'S COMBIhED REPORT ON BASIC FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION -SCHEDULE OF EXPENDITURES OF FEDERALAWARDS Ladies and Gentlemen: We have audited the accompanyingfinancial statements of the governmental activities, each major fund, and the aggregate remaining fund information (Exhibits A through H) of the Towns County Board of Education, as of and for the year ended June 30, 2010, which collectively comprise the Board's basic financial statements as listed in the table of contents. These financial statements are the responsibility of the Towns County Board of Education's management. Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and the significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinions. In our opinion, the financial statements referred to previously present fairly, in all material respects, the respective financial position of the governmental activities, each major fund, and the aggregate remaining fund information of the Towns County Board of Education, as of June 30, 2010, and the respective changes in financial position thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America. In accordance with Government Auditing Standards, we have also issued our report dated March 2, 2011, on our consideration of the Towns 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 GovernmentAuditing Standards and should be considered in assessingthe results of our audit. Accounting principles generally accepted in the United States of America require that the Management's Discussion and Analysis and the Schedule of Revenues, Expendituresand Changes in Fund Balances - Budget and Actual, as presented on pages i through ix and page 2 1 respectively, be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures, to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during the audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Towns County Board of Education's financial statements as a whole. The accompanying supplementary information consists of Schedules 2 through 5, which includes the Schedule of Expenditures of Federal Awards as required by U. S. Office of Management and Budget Circular A-133, Audifs of States, local Governmen&, and Nun-Profit Organizations, are presented for purposes of additional analysis and are not a required part of the financial statements. Such information is the responsibility of management and was derived from and relate directly to the underlying accounting and other records used to prepare the financial statements. The information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated, in all material respects, in relation to the financial statements as a whole. A copy of this report has been filed as a permanent record in the office of the State Auditor and made available to the press of the State, as provided for by Official Code of Georgia Annotated section 50-6-24. Resoectfullv submitted. ~ u s k lWl . Hinton, CPA, CGFM State Auditor TOWNS COUNTY BOARD OF EDUCATION MANAGEMENTS DISCUSSION AND ANALYSIS FOR THE FISCALYEAR ENDEDJUNE 30,2010 INTRODUCTION The School Dlstrlct'sflnanclal statements for the f k a l year ended June 30, 20i0,includes a serles of Mslc flnanclal statements that report flnancial lnformatlon for the School Dlstrlct as a whale, Its funds, and i& fiduciary responslblllties. The Statement of Net Assets and the Statement of Actlvlties provideflnancial lrrformatlon abut all of the School Distridk activities and present both a short-term and longterm view of the School Districts flnances on a global basis. The fund flnanclal sbt9tnents provide Informatlan about all of the School Districtsfunds. Information a b u t these funds, such as the School Districts General Fund, is important in Its o w n right, but wlll also glve lnslght into the School Distrlet'soverall Wundng&Sas r e p o m In the Statement of Net h e & and the Statement of Actlvitlm. FINANCIAL HIGHUGHTS Key flnanclal hlghllghtsfor fiscal year 20i0are as follows: On the Dlstrlct-wide flnanclal statements: = District-wlde net assets at June 30, 2010 were almost $205 million. Net a m reflect the dlfferenca between all assets of the School Distrlet (lncludlng capltal asset9,net of depreclatlon) and all Ilabilltles, bath shork-@rm and long-term. The net =sets at June 30,2010of almost $203million decreased abut $200,000.00from the prior year. r The School District had $23.9 mlllion In expenses relattngto gwemmental activities; only $5.1 million uf these expenses were offset by program specific charges for eervlces, grants and contributions. The general revenues (prlmarlty property and sales taxes) of over $8.6 million provided for these programs, except for a shoftf!all (currentp a r deficit) of about $200,000.00,ThL shortf8ll lvas funded by beglnnlng net assets brought forward from the prlor year. As stated abwe, general revenues accounted for $8.8 mlllion or about 83% of all revenues bbllng $13.7 mllllon. Program specZfic revenues in the form of charges for services, grants,and contrlbutlons accountedfor the balance ofthese revenues. 0memt Revmum -Prop* Tams 55.1% Source of Revenues General ~svsnue Program, Rwenuss 37.9% -O m d Rmnw All Other 6.2% TOWNS COUNTY BOARD OF EDUCATION MANAGEMENTS DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30,2010 On the fund financial statements: The General Fund unreserved, undesignated fund balance of $1.5 million at June 30, 2010, decreased roughly $145,000.00 from the prior year. This decrease occurred mainly from continuing decreases in the level of State Funding. OVERVIEW OF THE FINANCIAL STATEMENTS These financial statements consists of three parts; management's discussion and analysis (this section), the basic financial statements including Notes to the Basic Financial Statements and required supplementary information. The basic financial statements include two levels of statements that present different views of the School District. These include the District-wide and fund financial statements. The District-wide financial statements include the 'Statement of Net Assets' and 'Statement of Activities'. These statements provide information about the activities of the School District presenting both short-term and long-term information about the School District's overall financial status. The fund financial statements focus on individual parts of the School District, reporting the School District's operation in more detail. The 'Governmental Funds' statements disclose how basic services are financed in the short-term as well as what remains for future spending. The 'Fiduciary Funds' statements provide information about the financial relationships in which the School District acts solely as a trustee or agent for the benefit of others. In the case of the Towns County School District, the General Fund and Capital Projects Funds are considered to be major funds. The School District has no nonmajor funds as defined by generally accepted accounting principles. The financial statements also include notes that explain some of the information in the statements and provide more detailed data. The statements are followed by a section of required supplementary information that further explains and supports the financial statements. Additionally, other supplementary information (not required) is also presented that further supplements understandingof the financial statements. District-wide Statements Since Towns County School District has no operations that have been classified as "Business Activities", the District-wide financial statements are basically a consolidation of all of the School District's operating funds into one column called governmental activities. In reviewing the Districtwide financial statements, a reader might ask the question, are we in a better financial position now than last year? The 'Statement of Net Assets' and the 'Statement of Activities' provides the basis for answering this question. These financial statements include all School District's assets and liabilities and uses the accrual basis of accounting similar to the accounting used by most private-sector companies. This basis of accounting takes into account all of the current year's revenues and expenses regardless of when cash is received or paid. These two statements report the School District's net assets and any changes in those assets. The change in net assets is important because it tells the reader that, for the School District as a whole, the financial position of the School District has improved or diminished. The causes of this change may be the results of many factors, including those not under the School District's control, such as the property tax base, facility conditions, required educational programs, student-teacher ratios, and other factors. TOWNS COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCALYEAR ENDED JUNE 30,2010 When analyzing District-wide financial statements, it is important to remember these statements are prepared using an economic resources measurement focus (accrual accounting) and involve the following steps to format the Statement of Net Assets: Capitalize current outlays for capital assets Depreciate capital assets Report long-term debt as a liability Calculate revenue and expense using the economic resources measurement focus and the accrual basis of accounting Allocate net assets as follows: o Net Assets invested in capital assets, net of related debt o Restrided net assetsare those with constraints placed on the use by external sources such as creditors, grantors, contributors or laws and regulations. o Unrestrictednetassetsarenet assets that do not meet any of the above restrictions. Fund Financial Statements The School District uses many funds or sub-funds to account for a multitude of financial transactions during the fiscal year. The fund financial statements presented in this report provide detail information about the School District's significant or major funds. As discussed previously, the School District has no nonmajor funds as defined by generally accepted accounting principles. The School District has two kinds of funds as discussed below: Governmental Funds - Most of the School District's activities are reported in governmental funds, which focus on how money flows into and out of those funds and the balances left at year-end available for spending in future periods. These funds are reported using the modified accrual method of accounting which measures cash and all other financial assets that can readily be converted to cash. The governmental fund statements provide a detailed short-term view of the School District's general government operations and the basic services it provides. Governmental fund information helps determine whether there are more or fewer financial resources that can be spent in the near future to finance educational programs. The differences between government activities (reported in the Statement of Net Assets and the Statement of Activities) and governmental funds are reconciled in the financial statements. Fiduciarv Funds - The School District is the trustee, or fiduciary, for assets that belong to clubs, organizations and others within the principals' accounts. The School District is responsible for ensuring that the assets reported in these funds are used only for their intended purposes and by those to whom the assets belong. The School District excludes these activities from the District-wide financial statements because it cannot use these assets to finance its operations. FINANCIAL ANALYSIS OF THE SCHOOL DISTRICT AS A WHOLE Net assets, which is the difference between total assets and total liabilities, is one indicator of the financial condition of the School District. When revenues exceed expenses, the result is an increase in net assets. When expenses exceed revenues, the result is a decrease in net assets. The relationship between revenues and expenses can be thought of as the School District's operating results. The School District's net assets, as measured in the Statement of Net Assets, can be one way to measure the School District's financial health, or financial position. Over time, increases or TOWNS COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30,2010 decreases in the School District's net assets, as measured in the Statement of Activities are one indicator of whether its financial health is improving or deteriorating. However, the School District's goal and mission is to provide success for each child's education, not to generate profits as private corporations do. For this reason, many other nonfinancial factors should be considered in assessing the overall health of the School District. In the case of the Towns County School District, assets exceeded liabilities by almost $20.5 million at June 30, 2010. To better understand the School District's actual financial position and ability to deliver services in future periods, it is necessary to review the various components of the net asset category. For example, of the $20.5 million of net assets, almost $2.4 million was restricted for bus replacement, continuation of Federal programs and continuation of ongoing capital projects. Accordingly, these funds were not available to meet the School District's ongoing obligations to citizens and creditors. In addition, the School District had almost $16.0 million (net of related debt) invested in capital assets (e.g., land, buildings, and equipment). The School District uses these capital assets to provide educational services to students within geographic boundaries served by the School District. Because of the very nature and on-going use of the assets being reported in this component of net assets, it must be recognized that this portion of the net assets is notavailable for future spending. The remaining balance of unrestrictednet assekof over $2.1 million may be used to meet the School District's ongoing obligations to citizens and creditors. Table 1provides a summary of the School District's net assets for this fiscal year as compared to the prior fiscal year. Table 1 Net Assets Assets Current and Other Assets Capital Assets, Net Governmental Activities N 2010 N 2009 Total Assets Liabilities Current and Other Liabilities Long-Term Liabilities Total Liabilities Net Assets Invested in Capital Assets, Net of Debt Restricted Unrestricted Total Net Assets TOWNS COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30,2010 Total net assets decreased about $200,000.00 from the prior year. Table 2 shows a comparison of revenues and expenses for fiscal year 2010 as compared to the prior fiscal year. Revenues Program Revenues: Charges for Services and Sales OperatingGrants and Contributions Capital Grants and Contributions Total Program Revenues General Revenues: Property Taxes Sales Taxes Investment Earnings Miscellaneous Gain or Loss on Disposals of Assets Total General Revenues Table 2 Change in Net Assets Governmental Activities FY 2010 FY 2009 Total Revenues Program Expenses Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administrat~on Business Administration Maintenanceand Operation of Plant Student Transportation Sewices Other Support Services Operations of Non-InstructionalServices Enterprise Operations Community Services Food Services Total Expenses Increase/Decrease in Net Assets TOWNS COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30.2010 Cost of ProvidingServices The Statement of Activities shows the cost of program services and the charges for services and grants offsetting these services. Table 3 shows, for governmental activities, the total cost of services and the net cost of services. Net cost of services can be defined as the total cost less fees generated by the activities and intergovernmental revenue provided for specific programs. The net cost reflects the financial burden on the School District's taxpayers by each activity as compared to the prior fiscal year. Table 3 Cost of Services Total Cost of Services FY 2010 FY 2009 Net Cost of Services FY 2010 FY 2009 Instruction Support Services Pupil Services Improvementof Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Other Support Services Operations of Non-InstructionalServices Enterprise Operations Community Services Food Services Total Expenses Expenditures for fiscal year 2010 increased about 0.35% from the prior year, while the net cost of services increased about 4.7% from the prior year. The relative increase in the net costs of services vs. the increase actual costs is the result of program revenues (mostly State Funding) not keeping pace with the cost of providing instruction. As a result, more funding from the local citizenry is required. FINANCIALANALYSIS OF THE SCHOOL DISTRICTS FUNDS Information about the School District's governmental funds is presented starting on Exhibit "C" of this report. Governmental funds are accounted for using the modified accrual basis of accounting. Total governmental fund balances of just under $4.0 million at June 30, 2010, decreased about $267,000.00 from the prior year. This decrease in fund balance occurred primarily because fund revenues were not adequate to cover expenditures during fiscal year 2010. TOWNS COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30,2010 General Fund Budget Highlights The School District's budget is prepared according to Georgia Law. The most significant budgeted fund is the General Fund. During the course of fiscal year 2010, the School District amended its General Fund budget as needed. The School District budget is adopted at the aggregate level and maintained at the program, function, object, and site levels to facilitate budgetary control. The budgeting systems are designed to control the total budget, but provide flexibility to meet the ongoing programmatic needs. The budgeting systems are also designed to control total site budgets but provide flexibility for site management as well. For the General Fund, the final actual revenues of $11.866 million were under the final budgeted amount of $11.951 million by about $84,000.00. The School District traditionally estimates revenue on a conservative basis to avoid shortfalls in actual revenues. Additionally, the School District did not include revenues for school activity accounts (included in miscellaneous revenues) in the final budget. The General Fund's final actual expenditures of almost $13.1 million were less the final budget amount of almost $14.7 million by about $1.6 million. This budget underexpenditure occurred primarily because actual expenditures for instruction were about $1.0 million less than the final budget and expenditures for maintenance and operation were $400,000.00 less than the final budget. CAPITAL ASSETS AND DEBT ADMINISTRATION Capital Assets At fiscal year ended June 30, 2010, the School District had almost $16.0 million invested in capital assets, net of accumulated depreciation, all in governmental activities. These assets are made up of a broad range of items including buildings; land; land improvements; and food service, transportation and maintenance equipment. Table 4 reflects a summary of these balances, net of accumulated depreciation, as compared to the prior fiscal year. Table 4 Capital Assets at June 30 (Net of Depreciation) Governmental Activities Land Construction in Progress Land Improvements Buildings and Improvements Equipment Total TOWNS COUNlY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCALYEAR ENDED JUNE 30,2010 Additional information about the School District's Capital Assets can be found in the Notes to the Basic Financial Statements. Long-Term Debt At June 30, 2010, the School District had almost $128,000.00 in total debt outstanding which consisted entirely of compensated absences debt. Table 5 summarizes the School District's debt as compared to the prior fiscal year. Table 5 Debt at June 30 Governmental Activities FY 2010 FY 2009 Compensated Absences Additional information about the School District's debt can be found in the Notes to the Basic Financial Statements. FACTORS BEARING ON THE SCHOOL DISTRICTS FUTURE Currently known circumstances that are expected to have a significant effect on financial position or results of operations in future years are as follows: The School District is financially stable. The School District's operating millage for fiscal year 2010 was 4.784, an increase from the prior year of millage of 3.544. The new millage rate produced approximately $881,771.00 per mill and resulted in revenues from Property Taxes increasing about $875,000.00 from the prior year. The School District anticipates little or no growth in regard to student population in the foreseeable future. The School District is financially challenged by the State's continuing reduction of revenue estimates and subsequent reduction of state revenue appropriations to local school districts. State Revenues in fiscal year 2010 were about 23% less than the prior year. Although State Funding for fiscal year 2 0 1 1 is relatively unchanged from the prior year, the school year has been shortened by two days and certified employees are required to take 6 days off from work without pay. Additionally, sales taxes have also slowed which have negatively affected both operating and construction revenues provided through those sources. In response to these reductions, the School District has increased the millage rate levied for property taxes for calendar year 2009 to 4.784 mills from 3.544 mills. In spite of these challenges the School District will continue to be a good steward of tax dollars while providing a quality educational opportunity. The School District will continue to face challenges from the implementation of the A+ Education Reform Act, which mandates lower teacher to student ratios. The School District will also continue to be impacted by the remedial actions required for schools under the No Child Left Behind Act. In the midst of these challenges, the School District remains confident in the ability to maximize resources to provide the best possible educational experience for all of our students. TOWNS COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCALYEAR ENDEDJUNE 30,2010 CONTACTING THE SCHOOL DISTRICT'S FINANCIAL MANAGEMENT This financial report is designed to provide our citizens, taxpayers, investors and creditors with a general overview of the School District's finances and to show the School District's accountability for the money it receives. If you have questions about this report or need additional financial information, contact Mrs. Myra Underwood, Finance Director for Towns County School District, 67 Lakeview Circle, Suite C, Hiawassee, Georgia 30546. You may also email your questions to Mrs. Underwoodat M~ra@towns.kl2.~a.us. TOWNS COUNTY BOARD OF EDUCATION TOWNS COUNTY BOARD OF EDUCATION STATEMENT OF NET ASSETS JUNE 30,2010 ASSETS Cash and Cash Equ~valents Accounts Receivable, Net Taxes State Government Federal Government Local Other Inventories Capital Assets, Non Depreciable Capital Assets, Depreciable (Net of Accumulated Depreciation) Total Assets LIABILITIES Accounts Payable Salaries and Benefits Payable Long-Term Debt Due in More Than One Year Total Liabilities NET ASSETS Invested in Capital Assets Restricted for: Bus Replacement Cont~nuationof Federal Programs Capital Projects Unrestricted Total Net Assets Total Liabilities and Net Assets EXHIBIT "A" GOVERNMENTAL ACTIVITIES The notes to the basic financial statements are an integral part of this statement. -1- TOWNS COUNTY BOARD OF EDUCATION STATEMENT OF ACTIVITIES FOR THEYEAR ENDEDJUNE 30.2010 GOVERNMENTAL ACTIVITIES Instruction Support Sewlces Pupil SeNlWS Improvement of Instructional S e ~ ~ c e s Educational Med~aSelvlces General Administration School Adm~nistration Bus~nessAdministration Maintenance And Operation Of Plant Services Student Transportation S e ~ ~ c e Other Support Selvlces Operations of Non-lnstructlonal Sewlces Enterprise Operations Community Sewices Operat~ons Food S e ~ l c e s Total Governmental Activities General Revenues Taxes Properly Taxes For Maintenance and Operations Sales Taxes Speclal Purpose Local Optlon Sales Tax For Capital Projects Local Opt~onSales Tax Investment Earnings M~scellaneous Total General Revenues Change in Net Assets Net Assets - Beginning of Year Net Assets - End of Year EXPENSES PROGRAM REVENUES OPERATING CHARGES FOR GRANTS AND SERVICES CONTRIBUTIONS NET (EXPENSES) REVENUES AND CHANGES IN NET ASSETS The notes to the basic financial statements are an integral p a n o f this statement. -2- TOWNS COUNTY BOARD OF EDUCATION BALANCE SHEET GOVERNMENTAL FUNDS JUNE 30,2010 ASSETS Cash and Cash Equivalents Accounts Receivable, Net Taxes State Government Federal Government Local Other Inventories Total Assets GENERAL FUND DISTRICTWIDE CAPITAL PROJECTS FUND LIABILITIESAND FUND BALANCES LIABILITIES Accounts Payable Salaries and Benefits Payable Deposits and Deferred Revenue Total Liabilities FUND BALANCES Reserved for: Bus Replacement Continuation of Federal Programs Capital Projects Unreserved Designatedfor Student Activities Undesignated Reported in: General Fund Total Fund Balances Total Liabilities and Fund Balances EXHIBIT "C" TOTAL The notes to the basic financial statements are an integral part of this statement. - 3- TOWNS COUNTY BOARD OF EDUCATION RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEEl TO THE STATEMENT OF NET ASSETS JUNE 30.2010 Total Fund Balances - Governmental Funds (Exhibit "C") Amounts reported for Governmental Activities In the Statement of Net Assets are different because: Capital Assets used in Governmental Activities are not financial resources and therefore are not reported in the funds. These assets conslst Of: Land Land Improvements Bulldings Equipment Accumulated Depreciation Total Caaital Assets Taxes that are not available to pay for current period expenditures are deferred in the funds. Long-Term Liabilities are not due and payable in the current period and therefore are not reported as llabilltles In the funds. Long-Term Liabilities at year-end consist of: Compensated Absences Net Assets of Governmental Activit~es(Exh~b"~At") The notes to the bas~cflnanclal statements are an Integral part of this statement. - 4 TOWNS COUNTY BOARD OF EDUCATION STATEMENT OF REVENUES, EXPENDITURESAND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS YEAR ENDED JUNE 30.2010 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 Admin~stration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Other Support Services Enterprise Operations Community Services Food Services Operation Capital Outlay Total Expenditures Excess of Revenuesover (under) Expenditures OTHER FINANCING SOURCES (USES) Transfers In Transfers Out Total Other Financing Sources (Uses) Net Change in Fund Balances Fund Balances - Beginning Fund Balances - Ending GENERAL FUND DISTRICTWIDE CAPITAL PROJECTS FUND TOTAL The notes to the basic financial statements are an integral part of this statement -5- TOWNS COUNlY BOARD OF EDUCATION RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT OF REVENUES, EXPENDITURESAND CHANGES IN FUND BALANCES TO THE STATEMENT OF ACTIVITIES JUNE 30.2010 Total Net Change In Fund Balances - Governmental Funds (Exhibit " E ) Amounts reported for GovernmentalActivities 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: Cap~taOl utlay Depreciation Expense Excess of Depreciation Expense over Capital Outlay Taxes reported in the Statement of Activitiesthat do not provide current financial resourcesare not re~ortedas revenues in the funds. In the Statement of Activities, only the gain on the sale or dlsposal of the equipment is reported, whereas In the Governmental Funds, the entire proceeds from the sale increase financial resources.Thus, the change in net assets differs from the change in fund balance by the cost of the carrying value of the equipment sold or disposed. Some items reported in the Statement of Activities do not require the use of current financial resourcesand therefore are not reported as expenditures in Governmental Funds. These activities consist of: Decrease in CompensatedAbsences Change in Net Assets of GovernmentalActivities (Exhibit "6") EXHIBIT "F" The notes to the basic f~nanciasl tatements are an integral part of this statement. -6- TOWNS COUNTY BOARD OF EDUCATION STATEMENT OF FIDUCIARY NET ASSETS FIDUCIARY FUNDS JUNE 30,2010 ASSETS Cash and Cash Equivalents LIABILITIES Funds Held for Others EXHIBIT "G" AGENCY FUNDS The notes to the basic financial statements are an integral part of this statement. TOWNS COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30,2010 EXHIBIT "H" Note 1: DESCRIPTION OF SCHOOL DISTRICTAND REPORTING ENTITY REPORTING ENTITY The Towns County Board of Education (School District) was established under the laws of the State of Georgia and operates under the guidance of a school board elected by the voters and a Superintendent appointed by the Board. The Board is organized as a separate legal entity and has the power to levy taxes and issue bonds. Its budget is not subject to approval by any other entity. Accordingly, the School District is a primary government and consists of all the organizations that compose its legal entity. Note 2: SUMMARY OF SIGNIFICANTACCOUNTING 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 Towns County Board of Education. District-wide Statements: The Statement of Net Assets and the Statement of Activities display information about the financial activities of the overall School District, except for fiduciary activities. Eliminations have been made to minimize the double counting of internal activities. Governmental activities generally are financed through taxes, intergovernmental revenues, and other nonexchangetransactions. 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 Statemen& The fund financial statements provide information about the School District's funds, including fiduciary funds. Eliminations have been made to minimize the double counting of internal activities. Separate statements for each category (governmental and fiduciary) are presented. The emphasis of fund financial statements is on major governmental funds, each displayed in a separate column. The School District reports the following major governmental funds: General Fund is the School District's primary operating fund. It accounts for all financial resources of the School District, except those resources required to be accounted for in another fund. TOWNS COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30,2010 EXHIBIT "H" District-wide Capital Projects Fund accounts for financial resources including Special Purpose Local Option Sales Tax (SPLOST) to be used for the acquisition, construction or renovation of major capital facilities. The School District reports the following fiduciary fund type: Agency funds account for assets held by the School District as an agent for various clubs or individuals. BASIS OF ACCOUNTING The basis of accounting determines when transactions are reported on the financial statements. The District-wide governmental and fiduciary fund financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded at the time liabilities are incurred, regardless of when the related cash flows take place. Nonexchange transactions, in which the School District gives (or receives) value without directly receiving (or giving) equal value in exchange, include property taxes, sales taxes, grants and donations. On an accrual basis, revenue from property taxes is recognized in the fiscal year for which the taxes are levied. Revenue from sales taxes is recognized in the fiscal year in which the underlying transaction (sale) takes place. Revenue from grants and donations 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. 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 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 and acquisitions under capital leases are reported as other financing sources. The School District funds certain programs by a combination of specific cost-reimbursement grants, categorical grants, and general revenues. Thus, when program costs are incurred, there are both restricted and unrestricted net assets available to finance the program. It is the School District's policy to first apply grant resources to such programs, followed by cost-reimbursement grants, then general revenues. The State of Georgia reimburses the School District for teachers' salaries and operating costs through the Quality Basic Education Formula Earnings program (QBE). Generally teachers are contracted for the school year (July 1- June 30) and paid over a twelve month contract period, generally September 1through August 31. In accordance with the respective rules and regulations of the QBE program, the State of Georgia reimburses the School District over the same twelve month period in which teachers are paid. At June 30, the amount of teachers' salaries incurred but not paid until July and August of the subsequent year are accrued. Since the State of Georgia recognizes its QBE liability for the July and August salaries at June 30, the School District recognizes the same QBE as a receivable and revenue, consistent with symmetrical recognition. TOWNS COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30,2010 EXHIBIT "H" NEW ACCOUNTING PRONOUNCEMENTS In fiscal year 2010, the School District adopted the Governmental Accounting and Standards Board (GASB) Statement No. 51,Accounting and Reporting for Intangible Assets. The provisions of this Statement generally require retroactive reporting for intangible assets acquired after June 30, 1980, with the exception of those intangible assets that have indefinite useful lives and those that are considered internally generated. In addition, the School District adopted GASB Statement No. 53, Accounting and Financial Reporting for Derivative Instruments. The provisions of this Statement impacts disclosure regarding derivative instruments entered into by the state and local governments. Derivative disclosures, if any, will be identified in Note 3. CASH AND CASH EQUIVALENTS Composition of Deposits Cash and cash equivalents consist of cash on hand, demand deposits and short-term investments with original maturities of three months or less from the date of acquisition in authorized financial institutions. Official Code of Georgia Annotated Section 45-8-14 authorizes the School District to deposit its funds in one or more solvent banks, insured Federal savings and loan associations or insured chartered building and loan associations. RECEIVABLES Receivables consist of amounts due from property and sales taxes, grant reimbursements due on Federal, State or other grants for expenditures made but not reimbursed and other receivables disclosed from information available. Receivables are recorded when either the asset or revenue recognition criteria has been met. Receivables recorded on the basic financial statements do not include any amounts which would necessitate the need for an allowance for uncollectible receivables. PROPERTY TAXES The Towns County Board of Commissioners fixed the property tax levy for the 2009 tax digest year (calendar year) on October 19, 2009 (levy date). Taxes were due on January 10, 2010 (lien date). Taxes collected within the current fiscal year or within 6 0 days after year-end on the 2009 tax digest are reported as revenue in the governmental funds for fiscal year 2010. The Towns County Tax Commissioner bills and collects the property taxes for the School District, withholds 2.5% of taxes collected as a fee for tax collection and remits the balance of taxes collected to the School District. Property tax revenues, at the fund reporting level, during the fiscal year ended June 30, 2010, for maintenance and operations amounted to $4,218,394.79. The tax millage rate levied for the 2009 tax year (calendar year) for the Towns County Board of Education was as follows (a mill equals $ 1 per thousand dollars of assessed value): School Operations 4.784 mills SALES TAXES Local Option Sales Tax revenue, at the fund reporting level, during the fiscal year amounted to $1,785,586.28 and was recorded in the General Fund. Local Option Sales Tax is to be used for the maintenance and operation of the School District. TOWNS COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30,2010 EXHIBIT "H" Special Purpose Local Option Sales Tax, at the fund reporting level, during the year amounted to $1,784,671.42 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 Federallyassigned value and purchased foods inventories are reported at cost (first-in, first out). The School District uses the consumption method to account for inventories whereby donated food commodities are recorded as an asset and as revenue when received, and expenses/expenditures are recorded as the inventory items are used. Purchased foods are recorded as an asset when purchased and expenses/expenditures are recorded as the inventory items are used. CAPITAL ASSETS Capital assets purchased, including capital outlay costs, are recorded as expenditures in the fund financial statements at the time of purchase (including ancillary charges). On the District-wide financial statements, all purchased capital assets are valued at cost where historical records are available and at estimated historical cost based on appraisals or deflated current replacement cost where no historical records exist. Donated capital assets are recorded at estimated fair market value on the date donated. Disposals are deleted at depreciated recorded cost. The cost of normal maintenance and repairs that do not add to the value of assets or materially extend the useful lives of the assets is not capitalized. Depreciation is computed using the straight-line method. The School District does not capitalize book collections or works of art. During fiscal year 2010, 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 Pol icy Estimated Useful Life Land Land Improvements Buildings and Improvements Equipment Intangible Assets All $ 20,000.00 $ 100,000.00 $ 5,000.00 $ 100,000.00 N/A 10 to 60 years 10 to 60 years 8 to 50 years individually determined Depreciation is used to allocate the actual or estimated historical cost of all capital assets over estimated useful lives, with the exception of intangible assets which are amortized. Amortization of intangible assets such as water, timber, and mineral rights, easements, patents, trademarks, copyrights and internally generated software is computed using the straight-line method over the estimated useful lives of the assets, generally 1 0 to 2 0 years. TOWNS COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30,2010 EXHIBIT "H" 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. Sick leave may vest with the employee in certain situations. Incentive pay is defined as any sick leave earned that is not eligible to be used in calculating an employee's retirement benefits. Employees are eligible to be paid incentive pay up to a maximum of sixty days. These payments are made at a rate of $50.00 per day for certified employees and $6.25 per hour for classified employees. Activity for the current and two preceding years is as follows: Beginningof Year Liability Increase Decrease End of Year Liability NET ASSETS The School District's net assets in the District-wide Statements are classified as follows: Invested in capital assets, net of related debt - This represents the School District's total investment in capital assets, net of outstanding debt obligations related to those capital assets. To the extent debt has been incurred but not yet expended for capital assets, such amounts are not included as a component of invested in capital assets, net of related debt. Restricted net assets-These represent resources for which the School District is legally or contractually obligated to spend resources for bus replacement, continuation of Federal programs, debt service and capital projects in accordance with restrictions imposed by external third parties. Unrestricted net assets - Unrestricted net assets represent resources derived from property taxes, sales taxes, grants and contributions not restricted to specific programs, charges for services, and miscellaneous revenues. These resources are used for transactions relating to the educational and general operations of the School District, and may be used at the discretion of the Board to meet current expenses for those purposes. FUND BALANCES Reserved Reserves represent those portions of fund balance equity that are legally segregated for a specific future use. - Unreserved Designated Designatedfund balances represent tentative plans for future use of financial resources. 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. - 12 - TOWNS COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30,2010 EXHIBIT "H" Note 3: DEPOSITS COLLATERALIZATION OF DEPOSITS Official Code of Georgia Annotated (O.C.G.A.) Section 45-8-12 provides that there shall not be on deposit at any time in any depository for a time longer than ten days a sum of money which has not been secured by surety bond, by guarantee of insurance, or by collateral. The aggregate of the face value of such surety bond and the market value of securities pledged shall be equal to not less than 110 percent of the public funds being secured after the deduction of the amount of deposit insurance. If a depository elects the pooled method (O.C.G.A. Section 45-8-13.1) the aggregate of the market value of the securities pledged to secure a pool of public funds shall be not less than 110 percent of the daily pool balance. Acceptable security for deposits consists of any one of or any combination of the following: (1)Surety bond signed by a surety company duly qualified and authorized to transact business within the State of Georgia, (2) lnsurance on accounts provided by the Federal Deposit lnsurance Corporation, (3) Bonds, bills, notes, certificates of indebtedness or other direct obligations of the United States or of the State of Georgia, (4) Bonds, bills, notes, certificates of indebtedness or other obligations of the counties or municipalities of the State of Georgia, (5) Bonds of any public authority created by the laws of the State of Georgia, providing that the statute that created the authority authorized the use of the bonds for this purpose, (6) Industrial revenue bonds and bonds of development authorities created by the laws of the State of Georgia, and (7) Bonds, bills, notes, certificates of indebtedness, or other obligations of a subsidiary corporation of the United States government, which are fully guaranteed by the United States government both as to principal and interest or debt obligations issued by or securities guaranteed by the Federal Land Bank, the Federal Home Loan Bank, the Federal Intermediate Credit Bank, the Central Bank for Cooperatives, the Farm Credit Banks, the Federal Home Loan Mortgage Association, and the Federal National Mortgage Association. CATEGORIZATION OF DEPOSITS Custodial credit risk is the risk that in the event of a bank failure, the 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, 2010, the School District's bank balances were $4,595,403.70. The amounts exposed to custodial credit risk are classified into three categories as follows: Category 1Category 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. TOWNS COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30.2010 EXHIBIT "H" The School District's deposits by custodial credit risk category at June 30, 2010, are as follows: Custodial Credit Risk Category Bank Balance Total $ 3,955,309.17 Note 4: NON-MONETARY TRANSACTIONS The School District receives food commodities from the United States Department of Agriculture (USDA) for school breakfast and lunch programs. These commodities are recorded at their Federally assigned value. See Note 2 - Inventories Note 5: CAPITAL ASSETS The following is a summary of changes in the Capital Assets during the fiscal year: Governmental Activities Capital Assets, Not Being Depreciated: Land Construction Work In Progress Balances July 1, 2009 Increases Decreases Balances June 30,2010 $ 1,101,858.00 $ 1,101,858.00 213.137.00 $ 352,905.00 $ 566,042.00 0.00 Total Capital Assets. Not Being Depreciated $ 1,314.995.00 $ 352,905.00 $ 566,042.00 $ 1.101,858.00 CapitalAssets. Being Depreciated: Buildings and Improvements Equipment Land Improvements $ 13,887.949.00 $ 566.042.00 1,793.716.00 52.082.00 $ 2,218.624.00 $ 18,799.00 14,453,991.00 1,826,999.00 2,218,624.00 Less: Accumulated Depreciation: Buildings and Improvements Equipment Land Improvements Total Capital Assets, Being Depreciated,Net $ 14,693,647.00 $ 200,099.00 8 940.00 $ 14,892.806.00 Governmental Activity Capital Assets - Net $ 16.008.642.00 $ 553,004.00 $ 566,982.00 $ 15,994,664.00 TOWNS COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30,2010 Current year depreciation expense by function is as follows: Instruction $ Support Services School Administration Maintenance and Operation of Plant Student Transportation Services Enterprise Operations Food Services EXHIBIT "H" 307,444.00 Note 6: INTERFUND TRANSFERS Interfund transfers for the year ended June 30, 2010, consisted of the following: Transfers From Transfer to Capital Projects General Fund (Net) In prior years, the General Fund funded expenditures for SPLOST approved projects in the amount of $5,146,228.97 by either paying expenses directly for SPLOST projects or by advancing funds t o the Capital Projects Fund. The School District has formally approved a motion to recover these General Fund monies to the extent possible as funds become available through SPLOST revenues to repay the General Fund. In fiscal years 2009, and 2010, respectively, $1,500,000.00 and $1,200,000.00 were transferred from the Capital Projects Fund to the General Fund as reimbursement for prior year expenditures. The remaining balance of $2,446,228.97 will be recovered by the General Fund to the extent that SPLOST revenues become available in subsequent years. Additionally, in fiscal year 2010, the School District transferred $100,000.00 from the General Fund to the Capital Projects Fund as advance funding for a planned future project. Note 7: RISK MANAGEMENT The School District is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors or omissions; job related illness or injuries to employees; acts of God and unemployment compensation. The School District participates in the Georgia School Boards Association Risk and Insurance Management System, a public entity risk pool organized on July 1,1994, to develop and administer a plan to reduce risk of loss on account of general liability, motor vehicle liability, or property damage, including safety engineering and other loss prevention and control techniques, and to administer one or more groups of self-insurance funds, including the processing and defense of TOWNS COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30,2010 EXHIBIT "H" claims brought against members of the system. The School District pays an annual premium to the system for its general insurance coverage. Additional coverage is provided through agreements by the system with other companies according to their specialty for property, boiler and machinery (including coverage for flood and earthquake), general liability (including coverage for sexual harassment, molestation and abuse), errors and omissions, crime and automobile risks. Payment of excess insurance for the system varies by line of coverage. 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 The School District participates in the Georgia School Boards Association Workers' Compensation Fund, a public entity risk pool organized on July 1,1992, 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 Fund for its general insurance coverage. Additional insurance coverage is provided through an agreement by the Fund with the Safety National Casualty Corporation to provide coverage for potential losses sustained by the Fund in excess of $500,000.00 loss per occurrence, up to the statutory limit. Employers' Liability insurance coverage is also provided by Safety National Casualty Corporation to provide coverage for potential losses sustained by the Fund in excess of $500,000.00 loss per occurrence, up to $2,000,000.00. The School District has purchased a surety bond to provide additional insurance coverage as follows: Position Covered All Employees Amount $ 50,000.00 Note 8: LONG-TERM DEBT 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. TOWNS COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30,2010 EXHIBIT "H" The changes in Long-Term Debt during the fiscal year ended June 30,2010, were as follows: Balance July 1.2009 Governmental Funds Additions Deductions Balance June 30,2010 CompensatedAbsences (1) $ 139.149.40 $ 71.006.95 $ 82.377.48 $ 127.778.87 (1) The portion of Compensated Absences due within one year has been determined t o be immaterial t o the basic financial statements. Note 9: ON-BEHALF PAYMENTS The School District has recognized revenues and costs in the amount of $48,528.03 for health insurance and retirement contributions paid on the School District's behalf by the following State Agencies. Georgia Department of Education Paid to the Georgia Department of Community Health For Health lnsurance of Non-Certified Personnel In the amount of $26,714.46 Paid to the Teachers Retirement System of Georgia For Teachers Retirement System (TRS) Employer's Cost In the amount of $16,301.51 Office of Treasury and Fiscal Services Paid to the Public School Employees Retirement System For Public School Employees Retirement (PSERS) Employer's Cost In the amount of $5,512.06 Note 10: 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 11: POST-EMPLOYMENTBENEFITS GEORGIA SCHOOL PERSONNEL EMPLOYEES POST-EMPLOYMENT HEALTH BENEFIT FUND Plan Description. The Georgia School Personnel Post-Employment Health Benefit Fund (School OPEB Fund) is a cost-sharing multiple-employer defined benefit post-employment healthcare plan that covers eligible former employees of public school systems, libraries and regional educational service agencies. The School OPEB Fund provides health insurance benefits to eligible former employees and their qualified beneficiaries through the State Employees Health lnsurance Plan administered by the Department of Community Health. The Official Code of Georgia Annotated (OCGA) assigns the authority to establish and amend the benefit provisions of the group health plans, including benefits for retirees, to the Board of Community Health (Board). TOWNS COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30,2010 EXHIBIT "H" Funding Policy. The contribution requirements of plan members and participating employers are established by the Board in accordance with the current Appropriations Act and may be amended by the Board. Contributions of plan members or beneficiaries receiving benefits vary based on plan election, dependent coverage, and Medicare eligibility and election. On average, plan members pay approximately 25 percent of the cost of the health insurance coverage. 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 both the active and retired employee health insurance plans based on projected "pay-as-you-go" financing requirements. Contributions are not based on the actuarially calculated annual required contribution (ARC) which represents a level of funding that, if paid on an ongoing basis, is projected to cover normal cost each year and amortize any unfunded actuarial liabilities (or funding excess) over a period not to exceed thirty years. The combined rates for the active and retiree contribution rates established by the Board for employers participating in the School OPEB Fund were as follows for the fiscal year ended June 30, 2010: For certificated teachers, librarians and regional educational service agencies: July 2009 August 2009 -October 2009 November 2009 -June 2010 18.534%of covered payroll for August Coverage 14.492%of covered payroll for September - November Coverage 18.534%of covered payroll for December - July Coverage For non-certificated school personnel: July 2009 -June 2010 $162.72 per member per month plus Departmentof Education contributionof $22,838,311.00 No additional contribution was required by the Board for fiscal year 2010 nor contributed to the State OPEB Fund to prefund retiree benefits. Such additional contribution amounts are determined annually by the Board in accordance with the State plan for other 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: Percentage Required Fiscal Year Contributed Contribution Note 12: 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 TOWNS COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30,2010 EXHIBIT "H" 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 3 0 years of creditable service, regardless of age, or after 1 0 years of service and attainment of age 60. A member is eligible for early retirement after 2 5 years of creditable service. Normal retirement (pension) benefits paid to members are equal to 2% of the average of the member's two highest paid consecutive years of service, multiplied by the number of years of creditable service up to 4 0 years. Early retirement benefits are reduced by the lesser of one-twelfth of 7% for each month the member is below age 6 0 or by 7% for each year or fraction thereof by which the member has less than 3 0 years of service. It is also assumed that certain cost-of-living adjustments, based on the Consumer Price Index, will be made in future years. Retirement benefits are payable monthly for life. A member may elect to receive a partial lump-sum distribution in addition to a reduced monthly retirement benefit. Death, disability and spousal benefits are also available. Funding Policy. TRS is funded by member and employer contributions as adopted and amended by the Board of Trustees. Members become fully vested after 1 0 years of service. If a member terminates with less than 1 0 years of service, no vesting of employer contributions occurs, but the member's contributions may be refunded with interest. Member contributions are limited by State law to not less than 5% or more than 6% of a member's earnable compensation. Member contributions as adopted by the Board of Trustees for the fiscal year ended June 30, 2010, were 5.25% of annual salary. The member contribution rate will increase to 5.53% effective July 1, 2010. Employer contributions required for fiscal year 2010 were 9.74% of annual salary as required by the June 30, 2007, actuarial valuation. The employer contribution rate will increase to 10.28% effective July 1,2010. Employer contributions for the current fiscal year and the preceding two fiscal years are as follows: Fiscal Year Percentage Contributed Required Contribution (This page left intentionally blank) TOWNS COUNTY BOARD OF EDUCATION GENERAL FUND SCHEDULE OF REVENUES, EXPENDITURESAND CHANGES IN FUND BALANCES BUDGET AND ACTUAL YEAR ENDED JUNE 30.2010 REVENUES Propem 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 Other Support Services Food Services Operation Enterprise Operations Communiv Sewices Operations Capital Outlay Total Expenditures Excess of Revenuesover (under) Expenditures OTHER FINANCING SOURCES Operating Transfers From Other Funds Net Change in Fund Balances Fund Balances - Beginning Adjustments NONAPPROPRIATED BUDGETS ORIGINAL (1) FINAL (1) Fund Balances - Ending Notes to the Schedule of Revenues. Exoenditures and ChanEes in Fund Balances Budeet and Actual (1) Or~ginaal nd Rnal Budget amounts do not Include budgeted revenues or expenditures of the varlous principal accounts The accompanying schedule of revenues, expenditures and changes in fund balances budget and actual IS presented on the modified accrual basis of accountingwhich is the basis of accounting used in the presentation of the fund financial statements. SCHEDULE "1" ACTUAL AMOUNTS See notes to the baslcfinancial statements. TOWNS COUNTY BOARD OF EDUCATION SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS YEAR ENDED JUNE 30,2010 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 Nat~onaSl chool Lunch Program Total Child Nutrition Cluster Other Programs Pass-Through From Georgia Department of Education Food S e ~ l c e s ARRA- Child Nutr~tionDiscretionary Grants Limited Ava~lability Schools and Roads Cluster Office of Treasury and Fiscal Services Schools and Roads - Grants to States Total U. S. Department of Agriculture Appalachian Reaonal Commission Direct Appalachian Research, Technical Assstance, and Demonstration Projects Education, U. S. Department of EducationTechnology State Grants Cluster Pass-Through From Georgia Department of Educat~on Education Technology State Grants Special Educauon Cluster Pass-ThroughFrom Georgia Department of Education Spec~aEl ducation ARRA - Grants to States ARRA - Preschool Grants Grants to States Preschool Grants Total Special Educat~onCluster State Fiscal Stabil~zat~oFnund Cluster Pass-Through From Georgia Department of Education ARRA - Education State Grants Title I, Part A Cluster Pass-ThroughFrom Georgia Department of Education ARRA - Title I Grants to Local Educational Agenc~es Title I Grants to Local EducationalAgencies Total Title I, Pan A Cluster Other Programs Pass-Through From Georgia Department of Education Career and Technical Education - Basic Grants to States ImprovingTeacher Quality State Grants Safe and Drug-FreeSchools and Communities - State Grants Twenty-First Century Community Learning Centers Total Other Programs Total U. S. Department of Education CFDA NUMBER PASSTHROUGH ENTITY ID NUMBER EXPENDITURES IN PERIOD TOWNS COUNTY BOARD OF EDUCATION SCHEDULEOF EXPENDITURESOF FEDERALAWARDS YEAR ENDED JUNE 30.2010 SCHEDULE "2" FUNDING AGENCY PROGRAM/GRANT Health and Human Sewlces, U. S. Department of Head Start Cluster Pass-Through from Nlnth Dlstrlct Opportunity, Inc. Head Start Other Programs Pass-Through From Georg~aDepartment of Behav~oral Health and Developmental Disabilities Block Grants for Prevenuon and Treatment of Substance Abuse Total U. S. Department of Health and Human S e ~ t c e s CFDA NUMBER PASSTHROUGH ENTlN ID NUMBER EXPENDITURES IN PERIOD Total Federal Flnanclal Ass~stance N/A = Not Available Notes to theSche0ule of Ex~endituresof FederalAwards (1) Includesthe Federallyass~gnedvalue of donated commod~uesfor the Food Donat~onProgram In the amount of $32,351 30 (2) Expenditures for the funds earned on the School Breakfast Program ($100,652 24) were not malntalned separately and are Included In the 2010 Natlonal School Lunch Program. (3) Funds earned on thls program. In the amount of $43,375 29, do not requlre reportlngof expendltures Major Programs are identified by an asterisk (*) In front of the CFDA number. The School Dlstrlct dld not prov~deFederalAss~stanceto any Subrec~p~ent. The accompanylngschedule of expendltures of Federal awards includes the Federal grant actlvlty of the Towns County Board of Education and is presented on the modified accrual bas~sof accountlng whlch is the bas~sof accountlng used In the presentation of the fund financial statements. See notes to the basic financial statements. TOWNS COUNTY BOARD OF EDUCATION SCHEDULE OF STATE REVENUE YEAR ENDEDJUNE 30.2010 GRANTS Bright From the Start: Georgia Department of Early Care and Learning Pre-K~ndergartenProgram Education, Georsa Department of Quality Baslc Educat~on Dlrect lnstructlonal Cost Kindergarten Program Kindergarten Program - Early lnterventlon Program Primary Grades (1-3) Program Pr~maryGrades - Early lnterventlon (1-3) Program Upper Elementary Grades (4 5) Program Upper Elementary Grades - Early lnterventlon (4-5) Program M~ddleGrades (6 8) Program High School General Educat~on(9-12) Program Vocat~onalLaboratory (9-12) Program Students with Dlsabillt~es Gifted Student - Category VI Remedial Educat~onProgram Alternauve Educat~onProgram Engllsh Speakers of Other Languages (ESOL) Med~aCenter Program 20 Days Addlt~onalnstructlon Staff and Professional Development lndlrect Cost Central Adm~nistration School Admlnistratlon Faclllty Maintenance and Operations Categorical Grants Pupil Transportation Regular Sparsity Nursing Sewlces Vocatlonal Supervisors Mid-term Adjustment Hold-Harmless Food Services Vocatlonal Education Amended Formula Adjustment Other State Programs Dual Enrollment Health Insurance Nat~onaTl eacher Certification Preschool Handlcapped Program Spars~tyGrant-Alternative Program Teachers' Retirement V~rtuaSl chools Grant Governor's Office for Children and Families Outdoor Adventure and Therapy Program wlth Parent b m p o n e n t Offlce of Treasury and Flscal Servlces Public School Employees Retirement CONTRACT Human Resources, Georgia Department of Family Connection See notes to the baslc flnanclal statements SCHEDULE "3" GOVERNMENTAL FUND TYPE GENERAL FUND TOWNS COUNTY BOARD OF EDUCATION SCHEDULE OF APPROVED LOCAL OPTION SALES TPX PROJECTS YEAR ENDEDJUNE 30.2010 PROJECT (1) Add~ng,to, renovating, repalrlng, Improving, demollshlng, furn~sh~nangd equlpplng existing school bulldlngs and other buildings and facilit~eSuseful and des~rablein connectlon therewith. ~ncludlngb, ut not llm~tedto agriculture and band bulldlngs and add~t~oncalal ssrooms; (2) system-widetechnology ~mprovements; (3) acquir~ngnew school equipment, including new buses and maintenance vehicles; (4) acqulrlng. constructlngand equipping new school bulldlngs and faclllt~esuseful and deslrable In connectlon therew~th,lncludlng athlet~c/phys~caelducat~onf a c ~ l ~ t i easnd transportation and maintenance facllltles; (5) acqulringany necessary or des~rable propeq, both real and personal; (6) ~ n c l u d ~ ntegxtbooks. ORIGINAL ESTIMATED COST (1) CURRENT ESTIMATED COSTS (2) AMOUNT EXPENDED IN CURRENT YEAR (3) AMOUNT EXPENDED IN PRIOR YEARS (3) PROJECT STATUS $ 2,950,000.00 $ 1,750,000.00 2,950,000.00 $ 1,750,000.00 557,131.73 $ 147,456.10 1,730.794.83 Ongoing 1,027,349.48 Ongoing 1,000,000.00 1,000,000.00 49,991.31 583,642.51 Ongoing 4.000.000.00 1,000,000.00 600,000.00 4,000.000.00 1,000,000.00 600,000.00 86.257.92 3,508.689.00 Ongoing 636,358.28 Ongoing 234,697.20 Ongoing (1) The School District's or~glnacl ost estlmate as speclfled In the resolution calllngfor the imposition of the Local Option Sales Tax. (2) The School D~stnct'scurrent estlmate of total cost for the projects. Includes all cost from project lnceptlon to completion. (3) The voters of Towns County approved the lrnposltlon of a 1%sales tax to fund the above projects. Amounts expended for these projects may include sales tax proceeds, state. local property taxes and/or other funds over the l ~ f eof the projects. See notes to the basic f~nanc~satlatements. (This page left intentionally blank) TOWNS COUNTY BOARD OF EDUCATION GENERAL FUND - QUALITY BASIC EDUCATION PROGRAM (QBE) ALLOTMENTS AND EXPENDITURES - BY PROGRAM YEAR ENDED JUNE 30.2010 SCHEDULE " 5 DESCRIPTION Direct Instructional Programs Kindergarten Program K~ndergartenProgram-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 lntervention (4-5) Program Middle School (6-8) Program High School General Education (9-12) Program Vocat~onaLl aboratory ($12) Program Students with Disabilities Category Ill Gifted Student - Category VI Remedial Education PrOg