Twiggs County Board of Education, Jeffersonville, Georgia, annual financial report for the fiscal year ended June 30, 2012 (including independent auditor's reports)

TWIGGS COUNTY BOARD OF EDUCATION
JEFFERSONVILLE, GEORGIA
ANNUAL FINANCIAL REPORT FOR THE FISCAL YEAR ENDED JUNE 30, 2012
(Including Independent Auditor's Reports)

TWIGGS 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

EXHIBITS

BASIC FINANCIAL STATEMENTS

DISTRICT-WIDE FINANCIAL STATEMENTS

A

STATEMENT OF NET ASSETS

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 ASSETS

E

STATEMENT OF REVENUES, EXPENDITURES AND CHANGES

IN FUND BALANCES

GOVERNMENTAL FUNDS

F

RECONCILIATION OF THE STATEMENT

OF REVENUES, EXPENDITURES AND CHANGES IN FUND

BALANCES OF GOVERNMENTAL FUNDS

TO THE STATEMENT OF ACTIVITIES

G

STATEMENT OF FIDUCIARY ASSETS AND LIABILITIES

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

Page
1 2 3 4 5 6 7 8
31 32 33

TWIGGS COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS -

SECTION I
FINANCIAL
SCHEDULES
SUPPLEMENTARY INFORMATION
4 SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS 5 ALLOTMENTS AND EXPENDITURES
GENERAL FUND - QUALITY BASIC EDUCATION PROGRAMS (QBE) BY PROGRAM

Page
34 35

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 WITH REQUIREMENTS THAT COULD HAVE A DIRECT AND MATERIAL EFFECT ON EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH 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

TWIGGS COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS -
SECTION V MANAGEMENT'S RESPONSES SCHEDULE OF MANAGEMENT'S RESPONSES

SECTION I FINANCIAL

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

DEPARTMENT OF AUDITS AND ACCOUNTS
270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400
August 29, 2013

Honorable Nathan Deal, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the Twiggs County Board of Education
INDEPENDENT AUDITOR'S COMBINED REPORT ON BASIC FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION - SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
Ladies and Gentlemen:
We have audited the accompanying financial statements of the governmental activities, each major fund, and the aggregate remaining fund information (Exhibits A through H) of the Twiggs County Board of Education, as of and for the year ended June 30, 2012, which collectively comprise the Board's basic financial statements as listed in the table of contents. These financial statements are the responsibility of the Twiggs 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 consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Board's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinions.
In our opinion, the financial statements referred to previously present fairly, in all material respects, the respective financial position of the governmental activities, each major fund, and the aggregate remaining fund information of the Twiggs County Board of Education, as of June 30, 2012, and the respective changes in financial position thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America.
Management has omitted Management's Discussion and Analysis that accounting principles generally accepted in the United States of America requires to be presented to supplement the basic financial statements. Such missing information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an
2012ARL-11

essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. Our opinion on the basic financial statements is not affected by this missing information.
In accordance with Government Auditing Standards, we have also issued our report dated August 29, 2013, on our consideration of the Twiggs 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 and should be considered in assessing the results of our audit.
The Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual, as presented on page 31, is not a required part of the basic financial statements but is supplementary information required by accounting principles generally accepted in the United States of America. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management regarding the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance.
Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Twiggs 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, Audits of States, Local Governments, and Non-Profit Organizations, are presented for purposes of additional analysis and are not a required part of the financial statements. The accompanying supplementary information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the financial statements. The information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated, in all material respects, in relation to the basic financial statements as a whole.
A copy of this report has been filed as a permanent record in the office of the State Auditor and made available to the press of the State, as provided for by Official Code of Georgia Annotated section 50-6-24.
Respectfully submitted,

GSG:as 2012ARL-11

Greg S. Griffin State Auditor

TWIGGS COUNTY BOARD OF EDUCATION

TWIGGS COUNTY BOARD OF EDUCATION
STATEMENT OF NET ASSETS JUNE 30, 2012
ASSETS
Cash and cash equivalents Investments Receivables:
Taxes Intergovernmental:
State Federal Interest Other Inventory Deferred charges Capital assets (nondepreciable) Capital assets (depreciable, net of accumulated depreciation) Total assets
LIABILITIES
Accounts payable Salaries and benefits payable Accrued interest payable Bonds payable due within one year Bonds payable due in more than one year
Total liabilities
NET ASSETS
Invested in capital assets, net of related debt Restricted for:
Bus replacement Continuation of federal programs Capital projects Debt service Unrestricted
Total net assets

EXHIBIT "A"

Governmental Activities

$

1,602,502

4,164,372

590,825

520,435

333,372

48,771

18,126

63,881

44,261

141,716

11,032,276

$

18,560,537

$

359,130

947,658

12,994

65,000

4,295,000

$

5,679,782

$

6,813,992

62,443

386,689

975,331

4,203,452

438,848

$

12,880,755

The accompanying notes are an integral part of these financial statements. - 1 -

TWIGGS COUNTY BOARD OF EDUCATION
STATEMENT OF ACTIVITIES FOR THE FISCAL YEAR ENDED JUNE 30, 2012

EXHIBIT "B"

Functions/Programs 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 Enterprise operations Food service operations Community service operation Interest on long-term debt Total governmental activities

Expenses

Program Revenues

Operating

Capital

Charges for Grants and Grants and

Services Contributions Contributions

Net (Expense) Revenue and
Changes in Net Assets Governmental Activities

$ 6,686,999

$ 3,336,559 $ 464,398 $ (2,886,042)

571,501

106,147

(465,354)

582,472 169,306 434,589 589,317 236,352 966,481 730,226
9,778 32,581
2,301 642,150 $
44,201 26,243 $ 11,724,497 $

32,535 32,535 $

573,285 113,393 360,054 369,827
13,712 310,482 306,021
28,603
675,851 43,855
6,237,789 $

1,386 10,030 76,220
14,548
566,582 $

(9,187) (55,913) (74,535) (219,490) (221,254) (645,969) (347,985)
(9,778) (3,978) (2,301) 80,784
(346) (26,243) (4,887,591)

General revenues: Taxes: Property taxes, levied for maintenance and operations Sales taxes, for capital projects Intangible taxes Transfer taxes Railroad equipment tax Unrestricted investment earnings Miscellaneous Total general revenues Change in net assets
Net assets, beginning of year Net assets, end of year

$ 3,607,445 767,063 9,317 3,274 27,823 188,849 229,050
$ 4,832,821 (54,770)
12,935,525 $ 12,880,755

The accompanying notes are an integral part of these financial statements - 2 -

TWIGGS COUNTY BOARD OF EDUCATION
BALANCE SHEET GOVERNMENTAL FUNDS
JUNE 30, 2012

EXHIBIT "C"

ASSETS
Cash and cash equivalents Investments Receivables:
Taxes Intergovernmental:
State Federal Interest Other Due from other funds Inventory
Total assets
LIABILITIES AND FUND BALANCES
LIABILITIES Accounts payable Salaries and benefits payable Due to other funds Deferred revenue
Total liabilities
FUND BALANCES Nonspendable: inventory Restricted for:
Continuation of federal programs Bus replacement Debt service Capital projects Assigned for: Student activities Unassigned
Total fund balances
Total liabilities and fund balances

General

District-Wide Capital Projects

Debt Service

Total Governmental
Funds

$ 697,180 $

902,019 $

3,303 $

4,164,372

1,602,502 4,164,372

531,457

59,368

590,825

520,435 333,372
1,837
63,881

16,289 16,134

48,771

520,435 333,372
48,771
18,126 16,134 63,881

$ 2,148,162 $

993,810 $ 4,216,446 $ 7,358,418

$ 340,651 $ 947,658 16,134 393,756
1,698,199
$ 63,881
322,808 62,443
$
4,186 (3,355) $ 449,963 $ $ 2,148,162 $

18,479 18,479

$

359,130

947,658

16,134

393,756

$ 1,716,678

$
$ 4,216,446 975,331
975,331 $ 4,216,446 $ 993,810 $ 4,216,446 $

63,881
322,808 62,443
4,216,446 975,331
4,186 (3,355)
5,641,740
7,358,418

The accompanying notes are an integral part of these financial statements. - 3 -

TWIGGS COUNTY BOARD OF EDUCATION
RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO THE STATEMENT OF NET ASSETS JUNE 30, 2012

EXHIBIT "D"

Total fund balances - governmental funds (Exhibit "C")

$ 5,641,740

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 are not reported in the funds.

Cost

$ 21,123,470

Less accumulated depreciation

(9,949,478)

11,173,992

Other long-term assets are not available to pay for current-period expenditures and are deferred in the funds. Property taxes

393,756

Long-term liabilities are not due and payable in the current period and, therefore, are not reported in the funds.

Bonds

$ (4,360,000)

Bond issuance costs, net of amortization

44,261

Accrued interest

(12,994)

(4,328,733)

Net assets of governmental activities (Exhibit "A")

$ 12,880,755

The accompanying notes are an integral part of these financial statements. - 4 -

TWIGGS COUNTY BOARD OF EDUCATION
EXHIBIT "E" STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES
GOVERNMENTAL FUNDS FOR THE FISCAL YEAR ENDED JUNE 30, 2012

REVENUES Property taxes Sales taxes Other 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 Food service operation Community service operation Debt service: Principal retirement Interest and fees Total expenditures
Net change in fund balances
FUND BALANCE, beginning of year
FUND BALANCE, end of year

General

District-Wide Capital Projects

Debt Service

Total Governmental
Funds

$ 3,445,437 12,591 $ 27,823
4,404,120 1,909,889
32,535 3,655
229,050 $ 10,065,100 $

767,063
2,641 $ 769,704 $

182,553 182,553

$ 3,445,437 779,654 27,823
4,404,120 1,909,889
32,535 188,849 229,050 $ 11,017,357

$ 5,976,314 $
570,018 582,472 169,306 362,997 588,292 209,261 937,614 706,563
9,778 32,581
2,301 625,630
44,201
$ 10,817,328 $ $ (752,228) $
1,202,191 $ 449,963 $

240,972

$ 6,217,286

1,483
7,244 1,025 15,218 49,440 22,528

571,501 582,472 169,306 370,241 589,317 224,479 987,054 729,091
9,778 32,581
2,301 625,630
44,201

337,910 431,794 543,537 975,331

$

60,000

27,728

$

87,728

$

94,825

4,121,621 $ 4,216,446

60,000 27,728 $ 11,242,966
$ (225,609)
5,867,349 $ 5,641,740

The accompanying notes are an integral part of these financial statements - 5 -

TWIGGS COUNTY BOARD OF EDUCATION
EXHIBIT "F" RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES
FOR THE FISCAL YEAR ENDED JUNE 30, 2012

Net change in fund balances - total governmental funds (Exhibit "E")

$

Amounts reported for governmental activities in the statement of activities are different because:

Governmental funds report capital outlays as expenditures. However, in the statement of activities the cost of those assets is allocated over their estimated useful lives and reported as depreciation expense. The net effect of the amount by which depreciation expense exceeded capital outlay is to decrease net assets.

Capital outlay Depreciation expense

$

656,173

(634,179)

Net effect of various miscellaneous transactions involving capital assets (sales, trade-ins, donations, etc.) is to decrease net assets.

Revenues in the statement of activities that do not provide current financial resources are not reported as revenues in the funds.

Property taxes

Issuance of long-term debt provides current financial resources to governmental funds, while repayment of the principal of long-term debt consumes the current financial resources of governmental funds. Neither transaction, however, has any effect on net assets. This amount is the net effect of these differences in the treatment of longterm debt and related items.

Principal payments - bonds Bond issuance costs amortization expense

$

60,000

(10,300)

Some expenses 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.

Change in accrued interest

Changes in net assets of governmental activities (Exhibit "B")

$

(225,609)
21,994 (64,348) 162,008
49,700 1,485
(54,770)

The accompanying notes are an integral part of these financial statements. - 6 -

TWIGGS COUNTY BOARD OF EDUCATION
STATEMENT OF FIDUCIARY ASSETS AND LIABILITIES FIDUCIARY FUNDS JUNE 30, 2012

Cash Funds held for others

ASSETS LIABILITIES

EXHIBIT "G"

Agency Funds

$

11,762

$

11,762

The accompanying notes are an integral part of these financial statements. - 7 -

TWIGGS COUNTY BOARD OF EDUCATION

EXHIBIT "H"

NOTES TO THE BASIC FINANCIAL STATEMENTS

JUNE 30, 2012

Note 1: DESCRIPTION OF SCHOOL DISTRICT AND REPORTING ENTITY
Reporting Entity
The Twiggs 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.
The Twiggs County Recreation Authority (the "Recreation Authority") was created by House Bill 1897 during the 1996 session of the Georgia General Assembly. The purpose of the Authority is to acquire, construct, own and convey real and personal property for the benefit of the citizens of Twiggs County. The members of the Authority consist of the Chairperson of the Twiggs County Board of Education, the Superintendent of the Twiggs County Board of Education, the Chairperson of the Board of Commissioners of Twiggs County, one nongovernmental citizen member appointed by the Twiggs County Board of Education and one nongovernmental citizen member appointed by the Board of Commissioners of Twiggs County.
The Recreation Authority qualifies as a component unit of the School District under Government Accounting Standards Board Statement (GASBS) No. 14, the Financial Reporting Entity and GASB Statement No. 39, Determining Whether Certain Organizations are Component Units. However, currently there are no standing members of the Recreation Authority and no financial activity. As of the year ended June 30, 2012, the Recreation Authority has no assets or liabilities. The Recreation Authority Bonds, Series 2001, as described in Note 10, are paid by the School District. As such, the basic financial statements of the School District do not include the financial activity of the Recreation Authority.
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 Twiggs 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 nonexchange transactions.
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TWIGGS COUNTY BOARD OF EDUCATION

EXHIBIT "H"

NOTES TO THE BASIC FINANCIAL STATEMENTS

JUNE 30, 2012

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Basis of Presentation (Continued)
District-Wide Statements (Continued)
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, each displayed in a separate column.
The School District reports the following major governmental funds:
The General Fund is the School District's primary operating fund. It accounts for and reports all financial resources of the School District, except those resources required to be accounted for in another fund.
The District-Wide Capital Projects Fund accounts for and reports financial resources including Special Purpose Local Option Sales Tax (SPLOST), that are restricted, committed, or assigned to the expenditure for capital outlays, including the acquisition or construction of capital facilities and other capital assets.

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TWIGGS COUNTY BOARD OF EDUCATION

EXHIBIT "H"

NOTES TO THE BASIC FINANCIAL STATEMENTS

JUNE 30, 2012

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Basis of Presentation (Continued)
Fund Financial Statements (Continued)
The 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, interest and paying agent's fees.
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 School 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 60 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 long-term 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 and acquisitions under capital leases are reported as other financing sources.
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TWIGGS COUNTY BOARD OF EDUCATION

EXHIBIT "H"

NOTES TO THE BASIC FINANCIAL STATEMENTS

JUNE 30, 2012

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Basis of Accounting (Continued)
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 System for teachers' salaries and operating costs through the Quality Basic Education (QBE) Formula Earnings program. State of Georgia law defines the formula driven grant that determines the cost of an academic school year and the State of Georgia's share in this cost. Generally teachers are contracted for the school year (July 1 - June 30) and paid over a 12-month contract period, generally September 1 through August 31. In accordance with the requirements of the enabling legislation of the QBE program, the State of Georgia reimburses the School System over the same 12-month period in which teachers are paid, funding the academic school year expenditures. At June 30, the amount of teachers' salaries incurred but not paid until July and August of the subsequent year are accrued as the State of Georgia has only postponed the final payment of their share of the cost until the subsequent appropriations for cash management purposes. By June 30 of each year, the State of Georgia has a signed appropriation that includes this final amount, which represents the State of Georgia's intent to fund this final payment. Based on guidance in Government Accounting Standards Board (GASB) Statement No. 33, paragraph 74, the State of Georgia recognizes its QBE liability for the July and August salaries at June 30, and the School System recognizes the same QBE as a receivable and revenue, consistent with symmetrical recognition.
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. The 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.

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TWIGGS COUNTY BOARD OF EDUCATION

EXHIBIT "H"

NOTES TO THE BASIC FINANCIAL STATEMENTS

JUNE 30, 2012

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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 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, (4) Obligations of any corporation of the United States government, (5) Prime bankers' acceptances, (6) The 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 risks, 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 from 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.

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TWIGGS COUNTY BOARD OF EDUCATION

EXHIBIT "H"

NOTES TO THE BASIC FINANCIAL STATEMENTS

JUNE 30, 2012

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Property Taxes
The Twiggs County Board of Commissioners set the property tax levy for the 2011 tax digest year (calendar year) on September 1, 2011 (levy date). Taxes were due on November 30, 2011 (lien date). Taxes collected within the current fiscal year or within 60 days after year-end on the 2011 tax digest are reported as revenue in the governmental funds for fiscal year 2012. The Twiggs 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, 2012, for maintenance and operations amounted to $3,445,437.
The tax millage rate levied for the 2011 tax year (calendar year) for the Twiggs County Board of Education was as follows (a mill equals $1 per thousand dollars of assessed value):

School Operations

15.600 mills

Sales Taxes
Special Purpose Local Option Sales Tax, at the fund reporting level, during the year amounted to $767,063 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.

- 13 -

TWIGGS COUNTY BOARD OF EDUCATION

EXHIBIT "H"

NOTES TO THE BASIC FINANCIAL STATEMENTS

JUNE 30, 2012

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

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. During the fiscal year under review, the School District revised its policy to increase the capitalization threshold for depreciable assets to $10,000.

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

Land Land Improvements Buildings and Improvements Equipment

Capitalization Policy
All $ 10,000
10,000 10,000

Estimated Useful Life
N/A 15 to 20 Years
5 to 50 Years 3 to 15 Years

Depreciation is used to allocate the actual or estimated historical cost of all capital assets over estimated useful lives.
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.
Vacation leave of 15 days is awarded on a fiscal year basis to the Superintendent. Various other 12-month employees had accrued vacation leave but are no longer allowed to be compensated for it. Vacation leave not utilized during the fiscal year may be carried over to the next fiscal year, providing such vacation leave does not exceed 45 days.

- 14 -

TWIGGS COUNTY BOARD OF EDUCATION

EXHIBIT "H"

NOTES TO THE BASIC FINANCIAL STATEMENTS

JUNE 30, 2012

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Compensated Absences (Continued) Changes in the compensated absences liability for the last three fiscal years are as follows:

Beginning of Year Liability

Current Year Current Year End of Year

Increase

Decrease

Liability

2010 2011 2012

$ 11,000

$ 15,911

$

-

$ 6,722

$

-

$

-

$ 1,811

$ 15,911

$

-

$ 15,911

$

-

$

-

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, as well as issuance costs, are deferred and amortized over the life of the bonds using the straight-line method. Bond issuance costs are reported as deferred charges and amortized over the term of the debt.
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 Assets.
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.

- 15 -

TWIGGS COUNTY BOARD OF EDUCATION

EXHIBIT "H"

NOTES TO THE BASIC FINANCIAL STATEMENTS

JUNE 30, 2012

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Net Assets (Continued)
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
The School District's fund balances are classified as follows:
Nonspendable - Amounts that are not in spendable form (e.g., inventory and prepaid items) or are legally or contractually required to be maintained intact (e.g., permanent fund principal).
Restricted - Amounts that can be spent only on specific purposes stipulated by external resource providers (e.g., grants or donations), constitutionally, or through enabling legislation.
Committed - Amounts that can only be used for the specific purposes determined by a formal action of the Board. Commitments may be changed or lifted only by referring to the formal action of the Board that imposed the constraint originally (e.g., the Board's commitment in connection with future construction projects). Funds may be committed prior to the end of the fiscal year, with a corresponding amount determined in the same manner.
Assigned - Amounts intended to be used by the School District for specific purposes. Intent can be expressed by the Board of Education, the Superintendent, or the Assistant Superintendent for Finance and Business Operations. In governmental funds other than the General Fund, assigned fund balance represents the amount that is not restricted or committed. This indicates the resources in other governmental funds are, at a minimum, intended to be used for the purpose of that fund.
Unassigned - All amounts not contained in other classifications and the residual classification of the General Fund only. Unassigned amounts are available for any legal purpose.

- 16 -

TWIGGS COUNTY BOARD OF EDUCATION

EXHIBIT "H"

NOTES TO THE BASIC FINANCIAL STATEMENTS

JUNE 30, 2012

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Fund Balances (Continued)

The responsibility for designating funds to specific classification is as follows:

Committed Fund Balance - 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. Funds should be committed prior to the end of the fiscal year, although the exact amount may be determined in the subsequent fiscal year.

Assigned Fund Balance - The Board of Education has authorized the Superintendent and the Assistant Superintendent of Finance and Business Operations as officials authorized to assign fund balance to a specific purpose in accordance with the School District's policy.

It is the goal of the School District to achieve and maintain an unassigned fund balance in the General Fund at fiscal year end of not less than 4% of budgeted expenditures, not to exceed 15% of the total budget of the subsequent fiscal year, net of any committed fund balance for capital expenditures, in compliance with Official Code of Georgia Annotated Section 20-2-167(a)5. If the unassigned fund balance at fiscal year end falls below the goal, the School District shall develop a restoration plan to achieve and maintain the minimum fund balance. 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, 2012, is as follows:

Fund Type/Fund Name

Deficit Balances

Governmental Fund Type General Fund

$3,355

The School District's plan to eliminate this deficit is as follows:

- Limiting paraprofessional positions, work hours and overtime pay. - Plan to consolidate bus routes and eliminate one bus driver position. - Plan to outsource summer janitorial services.

- 17 -

TWIGGS COUNTY BOARD OF EDUCATION

EXHIBIT "H"

NOTES TO THE BASIC FINANCIAL STATEMENTS

JUNE 30, 2012

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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: BUDGETS
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 fund. There is no statutory prohibition regarding over expenditure of the budget at any level. The budget for all governmental funds, except the various school activity (principal) accounts, is prepared and adopted by fund, function and object. The legal level of budgetary control was established by the Board at the aggregate function level. The budget for the General Fund was prepared in accordance with accounting principles generally accepted in the United States of America.
The budgetary process begins with the 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 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 for expenditures within any budget function for any fund. Expenditures may not exceed the total appropriation at the aggregate level by function without the board's approval of a budget amendment. 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.

- 18 -

TWIGGS COUNTY BOARD OF EDUCATION

EXHIBIT "H"

NOTES TO THE BASIC FINANCIAL STATEMENTS

JUNE 30, 2012

Note 4: DEPOSITS AND INVESTMENTS
Collateralization of Deposits - The Official Code of Georgia Annotated (OCGA) Section 45-812 provides that there shall not be on deposit at any time in any depository for a time longer than 10 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 (OCGA 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 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 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, 2012, the bank balances were $1,918,748. The bank balances were entirely covered by Federal depository insurance or collateralized with securities held by the pledging financial institution's agent in the School District's name.

- 19 -

TWIGGS COUNTY BOARD OF EDUCATION

EXHIBIT "H"

NOTES TO THE BASIC FINANCIAL STATEMENTS

JUNE 30, 2012

Note 4: DEPOSITS AND INVESTMENTS (CONTINUED)

Categorization of Investments - The School District's investments as of June 30, 2012, are presented below.

Investment Georgia Fund 1 Municipal Electric Authority of
Georgia, Series A

Maturities 48 day weighted average
January 1, 2015

Rating*

Fair Value

AAAm $

678,229

A

3,486,143

$ 4,164,372

*Rating as per Standard & Poor's
The Georgia Fund 1, formerly referred to as LGIP, 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 does not provide for investment in 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 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 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 AAAm rated investment pool by Standard & 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, 2012 was 48 days.
Interest Rate Risk - Interest rate risk is the risk that changes in interest rates of debt investments 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.
As of June 30, 2012, $3,486,143 of the School District's applicable investments was uninsured, and is held by either the counterparty or the counterparty's trust department or agent in the School District's name.
Credit Quality Risk - Credit quality risk is the risk that an issuer or other counterparty to an investment will not fulfill its obligations. The School District does not have a formal policy for managing credit quality risk.

- 20 -

TWIGGS COUNTY BOARD OF EDUCATION

EXHIBIT "H"

NOTES TO THE BASIC FINANCIAL STATEMENTS

JUNE 30, 2012

Note 4: DEPOSITS AND INVESTMENTS (CONTINUED)

Categorization of Investments (Continued)

Concentration of Credit Risk - Concentration of credit risk is the risk of loss attributed to the magnitude of a government's investment in a single issuer. The School District does not have a formal policy for managing concentration of credit risk. More than 5% of the School District's investments are in MEAG, Series A. This investment is 83.71% of the School District's total investments.

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

Note 6: CAPITAL ASSETS

The following is a summary of changes in the capital assets during the fiscal year:

Beginning Balance

Increases Decreases

Ending Balance

Governmental activities:

Capital assets, not being depreciated:

Land

$

Total

141,716 $ 141,716

- $ -

- $ -

141,716 141,716

Capital assets, being depreciated: Buildings and improvements Equipment Land improvements Total

13,435,455 2,291,208 4,997,649
20,724,312

656,173
656,173

(43,858) (304,359)
(50,514) (398,731)

13,391,597 2,643,022 4,947,135
20,981,754

Less accumulated depreciation for: Buildings and improvements Equipment Land improvements Total

(5,367,560) (1,809,854) (2,472,268) (9,649,682)

(290,086) (115,113) (228,980) (634,179)

24,033 262,246
48,104 334,383

(5,633,613) (1,662,721) (2,653,144) (9,949,478)

Total capital assets, being depreciated, net

11,074,630

21,994

(64,348) 11,032,276

Governmental activities capital assets, net

$ 11,216,346 $ 21,994 $ (64,348) $ 11,173,992

- 21 -

TWIGGS COUNTY BOARD OF EDUCATION

EXHIBIT "H"

NOTES TO THE BASIC FINANCIAL STATEMENTS

JUNE 30, 2012

Note 6: CAPITAL ASSETS (CONTINUED)
Current year depreciation expense by function is as follows:
Instruction Support Services
Business Administration Maintenance and Operations Student Transportation Food Services

$ 527,341

$ 1,573 11,390 77,355

90,318 16,520

Total Depreciation Expense

$ 634,179

Note 7: INTERFUND PAYABLES AND RECEIVABLES

Due to and due from other funds are recorded for interfund receivables and payables which arise from interfund transactions. These balances resulted from the time lag between the dates that (1) interfund goods and services are provided or reimbursable expenditures occur, (2) transactions are recorded in the accounting system, and (3) payments between funds are made. Interfund balances at June 30, 2012, consisted of the following:

Due To District-Wide Capital Projects Fund $

Due From General
Fund
16,134

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, and errors or omissions. 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 has elected to self-insure for all potential losses of property due to acts of God. The School District has not experienced any losses related to this risk in the past three years.

- 22 -

TWIGGS COUNTY BOARD OF EDUCATION

EXHIBIT "H"

NOTES TO THE BASIC FINANCIAL STATEMENTS

JUNE 30, 2012

Note 8: RISK MANAGEMENT (CONTINUED)

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 the loss can be reasonably estimated.

Changes in the unemployment compensation claims liability during the last two fiscal years are

as follows:

Beginning

Claims and

of Year

Changes in

Claims

End of Year

Liability

Estimates

Paid

Liability

2011

$

-

$ 46,012

$ 46,012

$

-

2012

$

-

$ 31,329

$ 31,329

$

-

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 insurance coverage. Additional insurance coverage is provided through an agreement by the Trust with the Midwest Employers Casualty Company to provide coverage for potential losses sustained by the Trust in excess of $700,000 loss per occurrence, up to the statutory limit. Employers' Liability insurance coverage is also provided by Midwest Employers Casualty Company to provide coverage for potential losses sustained by the Fund in excess of $700,000 loss per occurrence, up to $1,000,000, with an aggregate limit of $2,000,000.
The School District has purchased surety bonds to provide additional insurance coverage as follows:

Position Covered
Superintendent Principal Bookkeeper

Amount

$

500,000

30,000 to 50,000

30,000 to 100,000

- 23 -

TWIGGS COUNTY BOARD OF EDUCATION

EXHIBIT "H"

NOTES TO THE BASIC FINANCIAL STATEMENTS

JUNE 30, 2012

Note 9: SHORT-TERM DEBT

Tax Anticipation Note

On November 17, 2011, the Twiggs County Board of Education issued two temporary loans in advance of property tax collections with two separate financial institutions in the amounts of $375,000 and $225,000, respectively. Proceeds from these short-term loans were issued to provide cash for operations until property tax collections were 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. The maturity date of the loan was December 31, 2011. Two draws totaling $600,000 were required to meet the cash flow needs of the School District. The notes were repaid on December 13, 2011.

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

Beginning Balance

Increases

Decreases

Ending Balance

Tax Anticipation Note $

- $ 600,000 $ (600,000) $

-

Note 10: 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.

General Obligation Bonds Outstanding

General obligation bonds currently outstanding are as follows:

Purpose General Government - Twiggs County
Recreation Authority Bonds, Series 2001 General Government - QZAB Series 2002

Maturity
2019 2016

Interest Rates
4.95% 0.00%

- 24 -

Amount
$ 525,000 3,835,000
$ 4,360,000

TWIGGS COUNTY BOARD OF EDUCATION

EXHIBIT "H"

NOTES TO THE BASIC FINANCIAL STATEMENTS

JUNE 30, 2012

Note 10: LONG-TERM DEBT (CONTINUED)

Changes in Long-Term Debt

The changes in long-term debt during the fiscal year ended June 30, 2012, were as follows:

Beginning Balance

Increases

Decreases

Ending Balance

Due Within One Year

Twiggs County Recreation

Authority Bonds, Series 2001 $ 585,000 $

QZAB, Series 2001

3,835,000

Total

$ 4,420,000 $

- $ (60,000) $ 525,000 $

-

-

3,835,000

- $ (60,000) $ 4,360,000 $

65,000 -
65,000

Scheduled Maturities of Long-Term Debt
At June 30, 2012, payments due by fiscal year which includes principal and interest for these items are as follows:

Fiscal Year Ended June 30

2013

$

2014

2015

2016

2017

2018-2019

Total Principal and Interest $

Twiggs County Recreation

Authority Bonds, Series 2001

Principal

Interest

65,000 $ 70,000 70,000 75,000 80,000 165,000

24,379 $ 21,038 17,573 13,984 10,148
8,291

525,000 $

95,413 $

QZAB Series 2002
3,835,000 -
3,835,000

- 25 -

TWIGGS COUNTY BOARD OF EDUCATION

EXHIBIT "H"

NOTES TO THE BASIC FINANCIAL STATEMENTS

JUNE 30, 2012

Note 11: ON-BEHALF PAYMENTS
The School District has recognized revenues and costs in the amount of $668,197 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 Certified Personnel In the amount of $649,776
Paid to the Teachers Retirement System For Teachers' Retirement System (TRS) Employer's Cost In the amount of $2,764
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 $15,657
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: OTHER POST-EMPLOYMENT BENEFITS
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 Insurance 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). 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.
- 26 -

TWIGGS COUNTY BOARD OF EDUCATION

EXHIBIT "H"

NOTES TO THE BASIC FINANCIAL STATEMENTS

JUNE 30, 2012

Note 13: OTHER POST EMPLOYMENT BENEFITS (CONTINUED)

Georgia School Personnel Employees Post-employment Health Benefit Fund (Continued)

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 "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 30 years.
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, 2012:
For certificated teachers, librarians and regional educational service agencies:
For certificated teachers, librarians and regional educational service agencies and certain other eligible participants:

June 2011 July 2011 August 2011 - March 2012 April 2012 - June 2012

1.429% of covered payroll for July coverage 18.534% of covered payroll for August coverage 24.000% of covered payroll for September - April coverage 3.958% of covered payroll for May - July coverage

For non-certificated school personnel:

July 2011 - August 2011 September 2011 - June 2012

$246.20 per member per month $296.20 per member per month

- 27 -

TWIGGS COUNTY BOARD OF EDUCATION

EXHIBIT "H"

NOTES TO THE BASIC FINANCIAL STATEMENTS

JUNE 30, 2012

Note 13: OTHER POST EMPLOYMENT BENEFITS (CONTINUED)
Georgia School Personnel Employees' Post-employment Health Benefit Fund (Continued)
No additional contribution was required by the Board for fiscal year 2012 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.
Currently, the state is requiring that local Boards of Education pay only on active employees. The District's contributions to the health insurance plans for the fiscal years ended June 30, 2012, 2011, 2010 were $1,024,246, $995,811 and $880,680, respectively, which equaled the required contribution. Currently, the State of Georgia has been making the remaining contributions to fund the pay-as-you-go financing on behalf of all local Boards of Education.
Note 14: RETIREMENT PLAN
Plan Description - The TRS is a cost-sharing multiple-employer defined benefit plan created in 1943 by an act of the Georgia General Assembly to provide retirement benefits for qualifying employees in educational service. A Board of Trustees comprised of active and retired members and ex-officio state employees is ultimately responsible for the administration of TRS. The Teachers' Retirement System of Georgia issues a separate stand alone financial audit report and a copy can be obtained from the Georgia Department of Audits and Accounts.
On October 25, 1996, the Board created the Supplemental Retirement Benefits Plan of the Georgia Teachers' Retirement System (SRBP-TRS). SRBP-TRS was established as a qualified excess benefit plan in accordance with Section 415 of the Internal Revenue Code (IRC) as a portion of TRS. The purpose of SRBP-TRS is to provide retirement benefits to employees covered by TRS whose benefits are otherwise limited by IRC Section 415. Beginning July 1, 1997, all members and retired former members in TRS are eligible to participate in the SRBPTRS whenever their benefits under TRS exceed the IRC Section 415 imposed limitation on benefits.
TRS provides service retirement, disability retirement, and survivor's benefits. The benefit structure of TRS is defined and may be amended by state statute. A member is eligible for normal service retirement after 30 years of creditable service, regardless of age, or after 10 years of service and attainment of age 60. A member is eligible for early retirement after 25 years of creditable service. Normal retirement (pension) benefits paid to members are equal to 2% of the average of the member's two highest paid consecutive years of service, multiplied by the number of years of creditable service up to 40 years. Early retirement benefits are reduced by the lesser of one-twelfth of 7% for each month the member is below age 60 or by 7% for each year or fraction thereof by which the member has less than 30 years of service. It is also assumed that certain cost-of-living adjustments, based on the Consumer Price Index, will be made in future years. Retirement benefits are payable monthly for life. A member may elect to receive a partial lump-sum distribution in addition to a reduced monthly retirement benefit. Death, disability and spousal benefits are also available.
- 28 -

TWIGGS COUNTY BOARD OF EDUCATION

EXHIBIT "H"

NOTES TO THE BASIC FINANCIAL STATEMENTS

JUNE 30, 2012

Note 14: RETIREMENT PLAN (CONTINUED)

Funding Policy. TRS is funded by member and employer contributions as adopted and amended by the Board of Trustees. Members become fully vested after 10 years of service. If a member terminates with less than 10 years of service, no vesting of employer contributions occurs, but the member's contributions may be refunded with interest. Member contributions are limited by state law to not less than 5% or more than 6% of a member's earnable compensation. Member contributions as adopted by the Board of Trustees for the fiscal year ended June 30, 2012, were 5.53% of annual salary. The member contribution rate will increase to 6.00% effective July 1, 2012. Employer contributions required for fiscal year 2012 were 10.28% of annual salary as required by the June 30, 2009, actuarial valuation. The employer contribution rate will increase to 11.41% effective July 1, 2012.

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

follows:

Percentage

Required

Fiscal Year Contributed

Contribution

2012 2011 2010

100% 100% 100%

$ 567,614 583,296 515,071

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 (PSERS). The PSERS is funded by contributions from employees and the State of Georgia. The School District makes no contribution to this plan. See Note 11: On-behalf payments for information on the contributions made by the State of Georgia on behalf of the School District's employees.
Note 15: SUBSEQUENT EVENT
Tax Anticipation Note
On September 24, 2012, the Twiggs County Board of Education issued a temporary loan in advance of property tax collections with a financial institution in the amount of $850,000. Proceeds from this short-term loan were issued to provide cash for operations until property tax collections were received by the School District. The maturity date of the loan was December 31, 2012. One draw totaling $850,000 was required to meet the cash flow needs of the School District. The note was repaid on December 18, 2012.

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TWIGGS COUNTY BOARD OF EDUCATION
SCHEDULE "1" GENERAL FUND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL FOR THE FISCAL YEAR ENDED JUNE 30, 2012

REVENUES Property taxes Sales taxes Other 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 Food service operations Community service operation Total expenditures
Net change in fund balances
FUND BALANCE, beginning of year
FUND BALANCE, end of year

Nonappropriated

Budget

Original (1)

Final (1)

Actual

Variance With Final Budget

$ 3,624,028 $ 3,624,028 $ 3,445,437 $ (178,591)

12,591

12,591

27,823

27,823

3,673,201

3,673,201

4,404,120

730,919

1,296,340

1,296,340

1,909,889

613,549

32,535

32,535

3,655

3,655

229,050

229,050

$ 8,593,569 $ 8,593,569 $ 10,065,100 $ 1,471,531

$ 5,379,936 $ 5,460,654 $ 5,976,314 $ (515,660)

520,516

503,714

570,018

(66,304)

529,488

636,307

582,472

53,835

177,517

163,366

169,306

(5,940)

245,362

247,423

362,997

(115,574)

534,854

522,775

588,292

(65,517)

139,932

117,454

209,261

(91,807)

938,487

886,300

937,614

(51,314)

546,095

538,193

706,563

(168,370)

5,000

3,000

9,778

(6,778)

28,417

37,787

32,581

5,206

2,301

(2,301)

634,974

634,974

625,630

9,344

44,000

44,373

44,201

172

$ 9,724,578 $ 9,796,320 $ 10,817,328 $ (1,021,008)

$ (1,131,009) $ (1,202,751) $ (752,228) $ 450,523

1,202,191

1,202,191

1,202,191

$

71,182 $

(560) $ 449,963 $

450,523

Note to the Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual
(1) Original and Final Budget amounts do not include budgeted revenues ($117,341) or expenditures ($121,481) of the various school activity accounts.
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.

- 31 -

TWIGGS COUNTY BOARD OF EDUCATION
SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS FOR THE FISCAL YEAR ENDED JUNE 30, 2012

SCHEDULE "2"

Funding Agency Program/Grant

CFDA Number

Pass-Through Entity ID Number

Expenditures In Period

Agriculture, U. S. Department of Child Nutrition Cluster Pass-Through From Georgia Department of Education Food Services School Breakfast Program National School Lunch Program

* 10.553 * 10.555

N/A N/A $

(1) 599,672 (2)

Total U. S. Department of Agriculture

599,672

Education, U. S. Department of Special Education Cluster Pass-Through From Georgia Department of Education Special Education Grants to States Preschool Grants

84.027

N/A

84.173

N/A

358,553 8,295

Total Special Education Cluster

366,848

Title I, Part A Cluster Pass-Through From Georgia Department of Education Title I Grants to Local Education Agencies

* 84.010

N/A

634,615

Other Programs Pass-Through From Georgia Department of Education Education Jobs Fund Improving Teacher Quality State Grants Rural Education Career and Technical Education - Basic Grants to States

84.410

N/A

84.367

N/A

84.358

N/A

84.048

N/A

2,481 130,351 19,494
18,970

Total U. S. Department of Education

1,172,759

Defense, U. S. Department of Direct Department of the Air Force R.O.T.C. Program

44,829

Total Expenditures of Federal Awards

$

1,817,260

N/A = Not Available

Notes to the Schedule of Expenditures of Federal Awards

(1) Expenditures for the funds earned on the School Breakfast Program ($207,670) were not maintained separately and are included in the 2012 National School Lunch Program.
(2) Includes the Federally assigned value of donated commodities for the Food Donation Program in the amount of $61,458.
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 Twiggs County Board of Education and is presented on the modified accrual basis of accounting used in the presentation of the fund financial statements.

See notes to the basic financial statements. - 32 -

TWIGGS COUNTY BOARD OF EDUCATION
SCHEDULE OF STATE REVENUE FOR THE FISCAL YEAR ENDED JUNE 30, 2012

Agency/Funding
Grants Bright from the Start Georgia Department of Early Care and Learning Pre-Kindergarten Program
Education, Georgia Department of Quality Basic Education 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 Grades (6-8) Program High School General Education (9-12) Program Vocational Laboratory (9-12) Program Students with Disabilities Gifted Students - Category VI Remedial Education Program Alternative Education Program Media Center Program 20 Days Additional Instruction Staff and Professional Development Indirect Cost Central Administration School Administration Facility Maintenance and Operations Categorical Grants Pupil Transportation Regular State Bonds Nursing Services Vocational Supervisors Mid-term Adjustment Hold-Harmless Food Services Vocational Education Amended Formula Adjustment Other State Programs Math and Science Supplements Preschool Handicapped State Grant Other State Programs
Human Resources, Georgia Department of Family Connection
On-Behalf Payments Georgia Department of Education Paid to the Georgia Department of Community Health Paid to the Teachers Retirement System Office of State Treasurer Paid to the Public School Employees Retirement System
Grand Total

See notes to the basic financial statements.

- 33 -

SCHEDULE "3"

Governmental Fund Type General Fund

$

109,038

263,665 12,796 492,146 62,629 248,760 40,407 435,275 531,395 22,684 656,227 7,817 17,467 35,121 76,994 24,162 16,777
251,902 252,628 205,500
262,339 76,220 32,700
7,047 157,442 18,036 24,619 (667,528)
1,903 15,772

43,983

649,776 2,764

15,657

$

4,404,120

TWIGGS COUNTY BOARD OF EDUCATION
SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS FOR THE FISCAL YEAR ENDED JUNE 30, 2012

SCHEDULE "4"

Project

Original Estimated Cost (1)

Funding the payment of principal and

interest on the School District's Twiggs

County Recreation Authority Bonds, Series

2001 beginning with an interest payment due

January 1, 2003.

$

463,245

Adding to, renovating, repairing, improving, modifying, and equipping existing school buildings and other facilities including, but not limited to, roofing and HVAC; acquiring system-wide vocational, musical, technology, physical education and safety equipment, including computer hardware, and security cameras and equipment; purchasing textbooks and desks; acquiring school buses and other school vehicles; acquiring and repairing maintenance and transportation equipment and facilities; payment of a portion of the principal of Twiggs County School District General Obligation QZAB Bonds, Series 2001, the maximum amount of such principal to be paid shall be $950,000, and the acquiring of any property desirable therefore, both real and personal.

5,000,000

$ 5,463,245

Current Estimated Costs (2) $ 842,596
5,000,000 $ 5,842,596

Expended In Current Year (3)

Expended In Prior Years (3)

$ 87,728 $ 754,868

283,063

920,636

$ 370,791 $ 1,675,504

Total Completion
Cost $ 842,596
1,203,699 $ 2,046,295

Estimated Completion
Date Ongoing
Ongoing

(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 Twiggs 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 project.

(4) As of June 30, 2012, there were no excess proceeds which were not yet expended.

See notes to the basic financial statements.

- 34 -

TWIGGS COUNTY BOARD OF EDUCATION
SCHEDULE OF QUALITY BASIC EDUCATION PROGRAMS (QBE) ALLOTMENTS AND EXPENDITURES BY PROGRAM GENERAL FUND FOR THE FISCAL YEAR ENDED JUNE 30, 2012

SCHEDULE "5"

Description

Allotments From Georgia Department of
Education (1) & (2)

Eligible QBE Program Costs

Salaries

Operations

Total

Direct Instructional Funds: 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

$ 337,226 $ 288,976 $

18,678

46

632,692

560,397

79,782

71,347

319,090

508,374

56,832

164,826

553,280

750,964

668,727

866,257

47,812

315,567

840,986

59,920

80,152

286,095

132,655

121,561

9,960

86,442

35,712

60

45,597

56,100

3,472 $ 292,448

46

10,961

571,358

71,347

7,691

516,065

164,826

8,065

759,029

44,729

910,986

5,514

321,081

41 45,283

59,961 80,152 331,378 132,655 121,561 86,442
60 56,100

TOTAL DIRECT INSTRUCTIONAL PROGRAMS

$ 3,646,374 $ 4,349,739 $ 125,756 $ 4,475,495

Media Center Program Staff and Professional Development

99,243 21,482

160,904

8,003

168,907 22,996

TOTAL QBE FORMULA FUNDS

$ 3,767,099 $ 4,510,643 $ 133,759 $ 4,667,398

(1) Comprised of state funds plus Local Five Mill Share. (2) Allotments do not include the impact of the state amended budget adjustment.

See notes to the basic financial statements.

- 35 -

SECTION II COMPLIANCE AND INTERNAL CONTROL REPORTS

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

DEPARTMENT OF AUDITS AND ACCOUNTS
270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400
August 29, 2013

Honorable Nathan Deal, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the Twiggs 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 the financial statements of the governmental activities, each major fund, and the aggregate remaining fund information of Twiggs County Board of Education as of and for the year ended June 30, 2012, which collectively comprise Twiggs County Board of Education's basic financial statements and have issued our report thereon dated August 29, 2013. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States.
Internal Control Over Financial Reporting
Management of Twiggs County Board of Education is responsible for establishing and maintaining effective internal control over financial reporting. In planning and performing our audit, we considered Twiggs County Board of Education's internal control over financial reporting as a basis for designing our auditing procedures for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the Twiggs County Board of Education's internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness of the Twiggs County Board of Education's internal control over financial reporting.
Our consideration of internal control over financial reporting was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over financial reporting that might be deficiencies, significant deficiencies, or material weaknesses and therefore, there can be no assurances that all deficiencies, significant deficiencies or material weaknesses have been identified. However, as described in the accompanying Schedule of Findings and Questioned Costs, we identified a certain deficiency in internal control over financial reporting that we consider to be a material weakness and other deficiencies that we consider to be significant deficiencies.

2012YB-40

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 item FS-7431-12-03 to be a material weakness.
A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. We consider items FS-7431-12-01 and FS-7431-12-02 in the accompanying Schedule of Findings and Questioned Costs to be significant deficiencies in internal control over financial reporting.
Compliance and Other Matters
As part of obtaining reasonable assurance about whether Twiggs County Board of Education's financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards.
We noted certain matters that we have reported to management of Twiggs County Board of Education in a separate letter dated August 29, 2013.
Twiggs County Board of Education's responses to the findings identified in our audit are described in the accompanying Schedule of Management's Responses. We did not audit Twiggs County Board of Education's responses and, accordingly, we express no opinion on the responses.
This report is intended solely for the information and use of management, members of the Twiggs County Board of Education, others within the entity, Federal awarding agencies and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties.
Respectfully submitted,

GSG:as 2012YB-40

Greg S. Griffin State Auditor

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
August 29, 2013

Honorable Nathan Deal, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the Twiggs County Board of Education
INDEPENDENT AUDITOR'S REPORT ON COMPLIANCE WITH REQUIREMENTS THAT COULD HAVE A DIRECT AND MATERIAL EFFECT ON EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH OMB CIRCULAR A-133
Ladies and Gentlemen:
Compliance
We have audited Twiggs 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, 2012. Twiggs 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. Compliance with the requirements of laws, regulations, contracts, and grants applicable to each of its major Federal programs is the responsibility of Twiggs County Board of Education's management. Our responsibility is to express an opinion on Twiggs County Board of Education's compliance based on our audit.
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 Twiggs County Board of Education's compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Our audit does not provide a legal determination on Twiggs County Board of Education's compliance with those requirements.
In our opinion, the Twiggs County Board of Education complied, in all material respects, with the compliance requirements referred to above that could have a direct and material effect on each of its major Federal programs for the year ended June 30, 2012. However, the results of our auditing procedures disclosed an instance of noncompliance with those requirements, 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-7431-12-01.
2012SA-40

Internal Control Over Compliance
Management of Twiggs County Board of Education is responsible for establishing and maintaining effective internal control over compliance with the requirements of laws, regulations, contracts, and grants applicable to Federal programs. In planning and performing our audit, we considered Twiggs County Board of Education's internal control over compliance with the requirements that could have a direct and material effect on a major Federal program to determine the auditing procedures for the purpose of expressing our opinion on compliance 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 Twiggs County Board of Education's internal control over compliance.
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.
Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over compliance that might be deficiencies, significant deficiencies, or material weaknesses. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses, as defined above. However, we identified a deficiency in internal control over compliance that we consider to be a significant deficiency as described in the accompanying Schedule of Findings and Questioned Costs as item FA-7431-12-01. 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.
Twiggs County Board of Education's response to the finding identified in our audit is described in the accompanying Schedule of Management's Responses. We did not audit Twiggs County Board of Education's response and, accordingly, we express no opinion on the response.
This report is intended solely for the information and use of management, members of the Twiggs County Board of Education, others within the entity, Federal awarding agencies and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties.
Respectfully submitted,

GSG:as 2012SA-40

Greg S. Griffin State Auditor

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

TWIGGS COUNTY BOARD OF EDUCATION AUDITEE'S RESPONSE
SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2012

PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

FINDING CONTROL NUMBER AND STATUS

FS-7431-10-01 FS-7431-11-01 FS-7431-11-02

Further Action Not Warranted Unresolved - See Corrective Action/Responses Unresolved - See Corrective Action/Responses

CORRECTIVE ACTION/RESPONSES

CAPITAL ASSETS Failure to Adequately Maintain Capital Assets Finding Control Number: FS-7431-11-01

The Administration concurs with this finding. The Administration will review the School District's capital asset controls and procedures, making appropriate adjustments to ensure capital assets records conform to the School District's capital assets policy, intangible assets policy and generally accepted accounting principles (GAAP). The Finance Department will develop a schedule to perform an annual inventory count of capital assets. The Administration worked with an outside consultant to develop and implement an asset impairment policy and intangible asset policy in fiscal year 2013, which includes guidelines for maintaining an accurate capital assets listing. The School District is hiring a Chief Financial Officer to oversee and ensure that proper procedures of GAAP are followed and administered.

EMPLOYEE COMPENSATION Inadequate Internal Controls over Employee Compensation Finding Control Number: FS-7431-11-02

The Administration concurs with the finding. The Administration will implement appropriate procedures to strengthen internal controls over processing employee compensation. For fiscal year 2013, the payroll office is under the guidance of the newly hired Chief Financial Officer. This will help ensure that all processes are followed under GAAP.

- 1 -

TWIGGS COUNTY BOARD OF EDUCATION AUDITEE'S RESPONSE
SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2012

PRIOR YEAR FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

FINDING CONTROL NUMBER AND STATUS

FA-7431-11-01

Partially Resolved - See Corrective Action/Responses

CORRECTIVE ACTION/RESPONSES

ALLOWABLE COSTS/COST PRINCIPLES Failure to Maintain Adequate Time and Effort Records U. S. Department of Education Early Reading First (CFDA 84.359) Through Georgia Department of Education Title I, Part A Cluster (CFDA 84.010 and 84.389) Questioned Cost: $21,469.55 Finding Control Number: FA-7431-11-01

The Administration concurs with this finding. The Administration will ensure that all salaries charged to Federal Programs are commensurate with the actual time devoted to those Federal Programs for fiscal year 2013. Any employees paid directly from a Federal Program are required to submit a monthly PAR that reflects the employees' exact times they are providing services for those programs. The employees' compensation will be reflective of the PAR submitted for the current pay period. The Federal Programs Director will review each time sheet and verify they are completed properly.

Auditor's Comment: The administration has refunded the questioned costs associated with this finding to the Georgia Department of Education.

- 2 -

SECTION IV FINDINGS AND QUESTIONED COSTS

TWIGGS COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2012

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

Unqualified

Internal control over financial reporting:

Material weakness identified?

Yes

Significant deficiencies identified?

Yes

Noncompliance material to financial statements noted:

No

Federal Awards

Internal Control over major programs:

Material weakness identified?

No

Significant deficiency identified?

Yes

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

Unqualified

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

Child Nutrition Cluster Title I, Part A Cluster

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

$300,000.00

Auditee qualified as low-risk auditee?

No

II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

CASH AND CASH EQUIVALENTS Inadequate Internal Control Procedures Significant Deficiency Finding Control Number: FS-7431-12-01

Condition: The accounting procedures of the School District were insufficient to provide adequate internal controls over the Cash and Cash Equivalents function.

- 1 -

TWIGGS COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2012
II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS
Criteria: The School District's management is responsible for designing and maintaining an adequate system of internal controls that ensure all cash accounts are supported by and reconciled to either cash on hand or bank accounts held at authorized financial institutions.
Questioned Cost: N/A
Information: Weakness in internal controls related to Cash and Cash Equivalents were as follows:
Bank accounts confirmed by a bank as being reported under the School District's Federal Identification Number were not recorded on the School District's general ledger.
Outstanding checks identified on bank reconciliations which were written to the School District did not have corresponding deposits in transit recorded on the receiving bank reconciliations for the School District.
A bank account was not reconciled to the correct balance on the School District's general ledger.
One bank reconciliation lacked proper documentation for reconciling items. Controls were not operating effectively to ensure all bank reconciliations were properly
approved throughout the year.
Cause: These deficiencies were the result of management's failure to ensure internal control policies and procedures were established, implemented and functioning as intended with regard to Cash and Cash Equivalents.
Effect: The lack of adequate control over cash increases the risk for theft, fraud, or misuse of School District resources that may result in errors and/or irregularities which would not be detected in a timely manner.
Recommendation: The School District should establish policies and procedures to ensure bank reconciliations are completed in a timely manner and administrative reviews are performed to determine that bank reconciliations are correct and all required adjustments are made.
EMPLOYEE COMPENSATION Inadequate Internal Controls over Employee Compensation Significant Deficiency Finding Control Number: FS-7431-12-02
Condition: This is a repeat finding (FS-7431-11-02) from the fiscal year ended June 30, 2011. The accounting procedures of the School District were insufficient to provide adequate internal control procedures over employee compensation.
Criteria: The School District's management is responsible for designing and maintaining internal controls that ensure employee compensation payments are properly calculated, disbursed and documented.
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TWIGGS COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2012
II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS
Questioned Cost: N/A
Information: Based on a review of employees' payroll records, the following control deficiencies were noted:
Not all employees were paid according to the local Board approved salary schedules or pay calculation sheets.
Not all employees had adequate documentation of approved salaries on file.
Cause: These deficiencies were the result of management's failure to implement adequate controls to ensure internal controls were established, implemented and functioning.
Effect: This could result in errors in financial reporting and increases the risk of material misstatement in the financial statements including misstatements due to fraud.
Recommendation: The School District should implement appropriate procedures to strengthen internal controls over processing of employee compensation. The School District should review this matter to determine if recovery or payment of funds is needed.
CAPITAL ASSETS Failure to Adequately Maintain Capital Assets Material Weakness Finding Control Number: FS-7431-12-03
Condition: This is a repeat finding (FS-7431-11-01, FS-7431-10-01, and FS-7431-09-02) from fiscal years ended June 30, 2011, June 30, 2010, and June 30, 2009, respectively. The School District failed to adequately maintain capital assets records.
Criteria: Chapter 37 Implementing Capital Assets Management System of the Financial Management for Georgia Local Units of Administration indicates that School Districts must establish fixed assets policies, define system requirements, implement a fixed assets system, maintain fixed assets inventory records, and perform annual physical inventory counts of the fixed assets. GASB 42 requires School Districts to develop and implement an asset impairment policy, while GASB 51 requires School Districts to develop and implement an intangible asset policy.
Questioned Cost: N/A
Information: A review of the School District's capital assets records revealed the following deficiencies:
A periodic physical inventory count of capital assets is not performed. Numerous assets added to the listing do not include adequate identifying information such
as make, model, decal number or serial number.
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TWIGGS COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2012
II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS
Current year capital assets purchases were identified during testing that were not added to the capital assets listing and correcting entries were proposed and accepted by the client to properly present the entity's financial statements. Additionally, an asset was noted that should have been deleted in the prior year.
Depreciation expense for the current year was not charged in the correct amount. No adequate asset impairment or intangible assets policies have been developed by the
School District to date.
Cause: The School District failed to ensure that adequate accounting procedures were in place to process, record and report capital assets and related activity.
Effect: The failure of the School District to adequately maintain a complete and accurate capital assets listing can lead to inaccurate internal and external reporting, as well as noncompliance with generally accepted accounting principles.
Recommendation: The School District management should review their capital assets controls and procedures and make appropriate adjustments to ensure their capital assets records conform to the School District's approved capital assets policy and generally accepted accounting principles. The School District should formulate and implement an asset impairment policy and an intangible assets policy and conduct routine physical inventory counts of capital assets.
III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS
ALLOWABLE COSTS/COST PRINCIPLES Failure to Maintain Adequate Time and Effort Records Significant Deficiency Nonmaterial Noncompliance U. S. Department of Education Through Georgia Department of Education Title I, Part A Cluster (CFDA 84.010) Finding Control Number: FA-7431-12-01
Condition: This is a repeat finding (FA-7431-11-01) from the fiscal year ended June 30, 2011. A review of salaries charged to the Title I, Part A Cluster revealed that required time and effort records were inadequate and did not support charges to the Federal programs for one employee.
Criteria: Provisions of OMB Circular A-87, Cost Principles for State, Local and Indian Tribal Governments, require that salaries be documented as follows:
Where employees are expected to work solely on a single Federal award or cost objective, charges for their salaries and wages will be supported by periodic certifications that the employees worked solely on that program for the period covered by the certification. These certifications will be prepared at least semi-annually and will be signed by the employee or supervisory official having firsthand knowledge of the work performed.
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TWIGGS COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2012
III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS
Where employees work on multiple activities or cost objectives, a distribution of their salaries or wages will be supported by personnel activity reports (PARs) or equivalent documentation. Such documentary support will be required where employees work on more than one Federal award, or a Federal award and a non-Federal award. PARs must reflect an after-the-fact distribution of the actual activity of each employee, account for the total activity for which the employee is compensated, be prepared at least monthly and must coincide with one or more pay periods, and be signed by the employee.
Budget estimates or other distribution percentages determined before the services are performed do not qualify as support for charges to Federal awards but may be used for interim accounting purposes, provided that: o The governmental unit's system for establishing the estimates produce reasonable approximations of the activity actually performed; o At least quarterly, comparisons of actual costs to budgeted distributions based on the monthly activity reports are made. Costs charged to Federal awards to reflect adjustments made as a result of the activity actually performed may be recorded annually if the quarterly comparisons show the difference between budgeted and actual costs are less than ten percent; o And the budget estimates or other distribution percentages are revised at least quarterly, if necessary, to reflect changed circumstances.
Questioned Cost: $3,554.63 Title I, Part A Cluster (CFDA 84.010)
Information: The School District charged a total of $58,918.22 to the Title I, Part A Cluster for one employee. Upon review of this employee's PARs, it was noted that 81.84% of the employee's entire yearly salary was charged to the Title I, Part A Cluster, but the employee only worked for the Title I, Part A Cluster 76.98% of the time, which resulted in a questioned cost of $3,554.63.
Cause: Management failed to implement appropriate procedures to ensure compliance with Federal guidelines regarding charges for salaries and wages being supported by PARs.
Effect: Failure to adequately document the time and effort of the employees to support their compensation resulted in questioned costs and can result in material noncompliance with Federal grant requirements.
Recommendation: Management should ensure all salaries charged to Federal programs are commensurate with actual time devoted to those Federal programs. The School District should implement procedures to ensure, in line with Federal regulations, appropriate time and effort records are maintained to adequately support compensation charged to Federal programs. The Georgia Department of Education should review this matter to determine whether refunds are appropriate.
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SECTION V MANAGEMENT'S RESPONSES

TWIGGS COUNTY BOARD OF EDUCATION SCHEDULE OF MANAGEMENT'S RESPONSES
YEAR ENDED JUNE 30, 2012

Finding Control Number: FS-7431-12-01

The administration concurs with this finding. The administration has closed one bank account that was not recorded on the general ledger and has added the other one to the general ledger. The administration will implement appropriate procedures to strengthen controls over bank reconciliations. This includes improving separation of duties and management review and approval of monthly bank reconciliations of all accounts.

Finding Control Number: FS-7431-12-02

The administration concurs with this finding. The administration will implement appropriate procedures to strengthen internal controls over processing employee compensation. This includes superintendent review and approval of all salaries.

Finding Control Number: FS-7431-12-03

The administration concurs with this finding. The administration will review the district's capital asset controls and procedures, making appropriate adjustments to ensure capital asset records conform to the district's capital asset policy. The administration will develop and implement an asset impairment policy and an intangible asset policy in fiscal year 2014. The Finance Department performed an annual inventory count of capital assets in fiscal year 2013.

Finding Control Number: FA-7431-12-01

The administration concurs with this finding. The administration will ensure that all salaries charged to Federal Programs are commensurate with the actual time devoted to those programs. Any employee paid directly from a Federal Program is required to submit a monthly personnel activity report (PAR) that reflects the employee's exact time spent providing services for those programs. In fiscal year 2013, the Finance Department performed quarterly reviews of personnel activity reports to ensure the payroll reflected the effort reported.

Contact Person: Title: Telephone: Fax: Email:

Elgin Dixon Superintendent (478) 945-3127 (478) 945-3078 edixon@twiggs.k12.ga.us