WASHINGTON COUNTY BOARD OF EDUCATION SANDERSVILLE, GEORGIA ANNUAL FINANCIAL REPORT FOR THE FISCAL YEAR ENDED JUNE 30,2010 (Including Independent Auditor's Reports) WASHINGTON 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 EXHlBITS 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, EXPENDITURESAND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS F RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES TO THE STATEMENT OF ACTIVITIES G STATEMENT OF FIDUCIARY NET ASSETS FIDUCIARY FUNDS H STATEMENT OF CHANGES IN FIDUCIARY NET ASSETS FIDUCIARY FUNDS I 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 SCHEDULEOFSTATEREVENUE Page WASHINGTON 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 SECTION II COMPLIANCE AND INTERNAL CONTROL REPORTS INDEPENDENT AUDITOR'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WlTH GOVERNMENT AUDITING STANDARDS INDEPENDENT AUDITOR'S REPORT ON COMPLIANCE WlTH REQUIREMENTS THAT COULD HAVE A DIRECT AND MATERIAL EFFECT ON EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WlTH OMB CIRCULAR A-133 SECTION Ill AUDITEE'S RESPONSE TO PRIOR YEAR FINDINGS AND QUESTIONED COSTS SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS SECTION IV FINDINGS AND QUESTIONED COSTS SCHEDULE OF FINDINGS AND QUESTIONED COSTS WASHINGTON COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS - SECTION V MANAGEMENT'S RESPONSES SCHEDULE OF MANAGEMENT'S RESPONSES SECTION I FINANClAL Russell W. Hinton STATE AUDITOR (404) 656-2174 DEPARTMENOTF AUDITSAND ACCOUNTS 270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400 March 22,2011 Honorable Nathan Deal, Governor Members of the General Assembly Members of the State Board of Education and Superintendent and Members of the Washington County Board of Education INDEPENDENT AUDITOR'S COM BlNED REPORT ON BASIC FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION - SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS Ladies and Gentlemen: We have audited the accompanyingfinancial statements of the governmental activities, each major fund, and the aggregate remaining fund information (Exhibits A through I) of the Washington County Board of Education, as of and for the year ended June 30, 2010, which collectively comprise the Board's basic financial statements as listed in the table of contents. These financial statements are the responsibility of the Washington 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 GovernmentAuditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and the significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinions. In our opinion, the financial statements referred to previously present fairly, in all material respects, the respective financial position of the governmental activities, each major fund, and the aggregate remaining fund information of the Washington County Board of Education, as of June 30, 2010, and the respective changes in financial position thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America. The Washington County Board of Education has not presented Management's Discussion and Analysis that accounting principles generally accepted in the United States of America has determined is necessary to supplement, although not to be part of, the basic financial statements. In accordance with GovernmentAuditng Standards, we have also issued our report dated March 22, 2011, on our consideration of the Washington 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 Standardsand should be considered in assessingthe results of our audit. Accounting principles generally accepted in the United States of America require that the Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual, as presented on page 25, be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures, to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during the audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Washington County Board of Education's financial statements as a whole. The accompanyingsupplementary 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. Such information is the responsibility of management and was derived from and relate directly to the underlying accounting and other records used to prepare the financial statements. The information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated, in all material respects, in relation to the financial statements as a whole. A copy of this report has been filed as a permanent record in the office of the State Auditor and made available to the press of the State, as provided for by Official Code of Georgia Annotated section 50-6-24. Respectfully submitted, ~ u & e l lW. Hinton, CPA, CGFM State Auditor WASHINGTON COUNTY BOARD OF EDUCATION WASHINGTON COUNTY BOARD OF EDUCATION STATEMENT OF NET ASSETS JUNE 30.2010 ASSETS Cash and Cash Equivalents Accounts Receivable, Net Taxes State Government Federal Government Other Inventories Deferred Charges Capital Assets, Non-Depreciable Capital Assets, Depreciable (Net of Accumulated Depreciation) Total Assets LIABILITIES Accounts Payable Salaries and Benefits Payable Interest Payable Contracts Payable Long-Term Liabilities Due Within One Year Due in More Than One Year Total Liabilities NET ASSETS Invested in Cap~taAl ssets, Net of Related Debt Restricted for Continuation of Federal Programs Debt Service Capital Projects Unrestricted Total Net Assets Total Liabilities and Net Assets EXHIBIT "A" GOVERNMENTAL ACTIVITIES The notes to the basic financial statements are an integral part of this statement. - 1- WASHINGTON COUNTY BOARD OF EDUCATION STATEMENT OF ACTIVITIES FOR THE YEAR ENDED JUNE 30.2010 EXHIBIT "B" GOVERNMENTAL ACTIVITIES Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Malntenance and Operation of Plant Student Transportation Services Central Support Servlces Other Support Services Operations of Non-InstructionalServices Food Services Interest on Short-Term and Long-Term Debt Total GovernmentalActivities General Revenues Taxes Property Taxes For Maintenance and Operations For Debt Services Railroad Cars Sales Taxes Special Purpose Local Option Sales Tax For Debt Services For Capital Projects Other Sales Tax Grants and Contributions not Restricted to Specific Programs Investment Earnings Miscellaneous Special ltems Loss on Disposal of Building Total General Revenues and Special ltems Change in Net Assets Net Assets - Beginning of Year EXPENSES PROGRAM REVENUES OPERATING CHARGES FOR GRANTS AND SERVICES CONTRIBUTIONS NET (EXPENSES) REVENUES AND CHANGES IN NET ASSETS Net Assets - End of Year The notes to the basic financial statements are an integral part of this statement. - 2 - WASHINGTON COUNTY BOARD OF EDUCATION BALANCE SHEET GOVERNMENTAL FUNDS JUNE 30,2010 GENERAL FUND DISTRICTWIDE CAPITAL PROJECTS FUND DEBT SERVICE FUND Cash and Cash Equivalents Accounts Receivable, Net Taxes State Government Federal Government Other Inventories Total Assets LIABILITIES AND FUND BALANCES LIABILITIES Accounts Payable Salaries and Benefits Payable Interest Payable Contracts Payable Deposits and Deferred Revenue Total Liabilities FUND BALANCES Resewed for: Continuation of Federal Programs Debt Service capital Projects UnreSe~ed Designated for Anticipated Revenue Shortfall Designated for Student Activities Designated for Self-Insurance Undesignated Reported in: General Fund Total Fund Balances Total Liabilities and Fund Balances EXHIBIT "C" TOTAL The notes to the basic financial statements are an integral part of this statement. -3- WASHINGTON COUNTY BOARD OF EDUCATION RECONCILIATION OF THE GOVERNMENTALFUNDS BAWNCESHEEl TO THE STATEMENT OF NET ASSETS JUNE 30,2010 - Total Fund Balances Governmental Funds (Exh~bi"tC ) Amounts reported for GovernmentalActivities in the Statement of Net Assets are different because: Capital Assets used in GovernmentalActivities are not financial resources and therefore are not reported in the funds. These assets consist of: Land Land Improvements Buildings Equipment Accumulated Depreciation Total Capital Assets Taxes that are not available to pay for current period expenditures are deferred in the funds. Other LongTerm Assets are not available to pay for current period expenditures and therefore, are deferred on the Statement of Net Assets. Deferred Charges - Bond Issuance Costs Deferred Charges- Gain on RefundingBond Total Deferred Charges Long-Term Liabilities, including Bonds Payable, are not due and payable in the current period and therefore are not reported as liabilities in thefunds. Long-Term Liabilities at year-end consist of: Bonds Payable Compensated Absences Unamortized Bond Premiums Total Long-Term Liabilities Net Assets of Governmental Activities (Exhibit "A") EXHIBIT " D The notes to the basic financial statements are an integral part of this statement. - 4 - WASHINGTON COUNTY BOARD OF EDUCATION STATEMENT OF REVENUES, EXPENDITURESAND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS YEAR ENDEDJUNE 30.2010 REVENUES Property Taxes Sales Taxes State Funds Federal Funds Charges for Services Investment Earnings Miscellaneous Total Revenues EXPENDITURES Current Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Setvices Other Suppott S e ~ i c e s Food Services Operation Capital Outlay Debt Services Principal Dues and Fees Interest Total Expenditures Net Change in Fund Balances Fund Balances - Beginning Fund Balances - Ending GENERAL FUND DISTRICTWIDE CAPITAL PROJECTS FUND DEBT SERVICE FUND EXHIBIT " E TOTAL The notes to the basic financial statements are an integral part of this statement. -5- WASHINGTON COUNTY BOARD OF EDUCATION RECONClLlATlON OF THE GOVERNMENTAL FUNDS STATEMENT OF REVENUES. EXPENDITURES AND CHANGES IN FUND BALANCES TO THE STATEMENT OF ACTIVITIES JUNE 30,2010 Total Net Change in Fund Balances - Governmental Funds (Exhibit"E") Amounts reported for GovernmentalActivities in the Statement of Activities are different because: Capital Outlays are reported as expenditures in Governmental Funds. However. in the Statement of Act~vit~etsh,e cost of Capltal Assets is allocated over their estimated useful lives as depreciation expense. In the current period, these amounts are: Capital Outlay Depreciation Expense Excess of Capital Outlay over Depreciation Expense In the Statement of Activities, only the loss on the sale or disposal of the land, building, equipment and land improvements are reported, whereas in the GovernmentalFunds, the entire proceeds from the sale/disposal increase financial resources. Thus, the change In net assets differs from the change in fund balances by the carryingvalue of the land, building, equipment and land improvements sold. Taxes reported in the Statement of Activitiesthat do not provide current financial resourcesare not reported as revenues in the funds. Bond lssuance Cost and Deferred Gains on Refundingsare reported as expenditures In the Governmental Funds while the asset is allocated over the llfe of the bonds in the Statement of Activities. The details of this difference in the current period are as follows: Amortization of Bond lssuance Costs Amortization of Deferred Gain on Refundingof Bonds Total Bond lssuance Costs and Deferred Gains Repayment of Long-Term Debt is reported as an expenditure in Governmental Funds, but the repayment reduces Long-Term Liabilities in the Statement of Net Assets. In the current year, these amounts consist of: Bond Principal Retirements Some items reported in the Statement of Activities do not require the use of current financial resources and therefore are not reported as expenditures in Governmental Funds. These acZivities consist of: Net Decrease in Accrued Interest Decrease In CompensatedAbsences Amortizat~onof Bond Premium Total Additional Expenditures Change in Net Assets of GovernmentalActivities (Exhibit"8") The notes to the basic financial statements are an integral part of this statement. - 6 - WASHINGTON COUNTY BOARD OF EDUCATION STATEMENT OF FIDUCIARY NET ASSETS FIDUCIARY FUNDS JUNE 30,2010 ASSETS Cash and Cash Equivalents Investments Total Assets LIABILITIES Funds Held for Others NET ASSETS Held in Trust for Private Purposes Total Liabilities and Net Assets EXHIBIT "G" PRIVATE PURPOSE TRUSTS AGENCY FUNDS The notes to the bas~cfinancial statements are an integral part of this statement. - 7 - (This page left intentionally blank) WASHINGTON COUNTY BOARD OF EDUCATION STATEMENT OF CHANGES IN FIDUCIARY NET ASSETS FIDUCIARY FUNDS YEAR ENDED JUNE 30.2010 ADDITIONS Investment Earnings Interest DEDUCTIONS Scholarships Change in Net Assets Net Assets - Beginning Net Assets - Ending EXHIBIT "H" PRIVATE PURPOSE TRUSTS The notes t o the basic financial statements are an integral part o f this statement. - 9- WASHINGTON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30,2010 EXHIBIT "I" NOTE 1: DESCRIPTION OF SCHOOL DISTRICT AND REPORTING ENTITY REPORTING ENTITY The Washington County Board of Education (School District) was established under the laws of the State of Georgia and operates under the guidance of a school board elected by the voters and a Superintendent appointed by the Board. The Board is organized as a separate legal entity and has the power to levy taxes and issue bonds. Its budget is not subject to approval by any other entity. Accordingly, the School District is a primary government and consists of all the organizations that compose its legal entity. NOTE 2: SUMMARY OF 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 Washington 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. 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. Revenuesthat are not classified as program revenues, including all taxes, are presented as general revenues. Fund Financial Statemenis: The fund financial statements provide information about the School District's funds, including fiduciary funds. Eliminations have been made to minimize the double counting of internal activities. Separate statements for each category (governmental and fiduciary) are presented. The emphasis of fund financial statements is on major governmental funds, each displayed in a separate column. The School District reports the following major governmental funds: General Fund is the School District's primary operating fund. It accounts for all financial resources of the School District, except those resources required to be accounted for in another fund. WASHINGTON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30,2010 EXHIBIT "I" District-wide Capital Projects Fund accounts for financial resources including Special Purpose Local Option Sales Tax (SPLOST) to be used for the acquisition, construction or renovation of major capital facilities. Debt Service Fund accounts for taxes (property and 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 types: Private Purpose Trust funds report trust arrangements under which income may be expended to provide scholarships for selected students. Agency funds account for assets held by the School District as an agent for various funds, governments or individuals. BASIS OF ACCOUNTING The basis of accounting determines when transactions are reported on the financial statements. The District-wide (governmental and fiduciary) 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 are 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 t o be available if they are collected within sixty days after year-end. Property taxes, sales taxes and interest are considered to be susceptible to accrual. Expenditures are recorded when the related fund liability is incurred, except for 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 are reported as other financing sources. The School District funds certain programs by a combination of specific cost-reimbursement grants, categorical grants, and general revenues. Thus, when program costs are incurred, there are both restricted and unrestricted net assets available to finance the program. It is the School District's policy to first apply grant resources to such programs, followed by cost-reimbursement grants, then general revenues. WASHINGTON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30.2010 EXHIBIT "I" The State of Georgia reimburses the School District for teachers' salaries and operating costs through the Quality Basic Education Formula Earnings program (QBE). Generally teachers are contracted for the school year (July 1- June 30) and paid over a twelve month contract period, generally September 1through August 31. In accordance with the respective rules and regulations of the QBE program, the State of Georgia reimburses the School District over the same twelve month period in which teachers are paid. At June 30, the amount of teachers' salaries incurred but not paid until July and August of the subsequent year are accrued. Since the State of Georgia recognizes its QBE liability for the July and August salaries at June 30, the School District recognizes the same QBE as a receivable and revenue, consistent with symmetrical recognition. NEW ACCOUNTING PRONOUNCEMENTS In fiscal year 2010, the School District adopted the Governmental Accounting and Standards Board (GASB) Statement No. 51, Accounting and Reporting for Intangible Assets. The provisions of this Statement generally require retroactive reporting for intangible assets acquired after June 30, 1980, with the exception of those intangible assets that have indefinite useful lives and those that are considered internally generated. In addition, the School District adopted GASB Statement No. 53, Accounting and Financial Reporting for Derivative Instruments, The provisions of this Statement impacts disclosure regarding derivative instruments entered into by the state and local governments. Derivative disclosures, if any, will be identified in Note 3. CASH AND CASH EQUIVALENTS Composition of Deposits Cash and cash equivalents consist of cash on hand, demand deposits and short-term investments with original maturities of three months or less from the date of acquisition in authorized financial institutions. Official Code of Georgia Annotated Section 45-8-14 authorizes the School District to deposit its funds in one or more solvent banks, insured Federal savings and loan associations or insured chartered building and loan associations. INVESTMENTS Composition of lnvestments lnvestments made by the School District in nonparticipating interest-earning contracts (such as certificates of deposit) and repurchase agreements are reported at cost. Participating interestearning 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, WASHINGTON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30,2010 EXHIBIT "I" 4. Obligations of any corporation of the United States government, 5 . Prime banker's acceptances, 6. The Georgia Fund 1administered by the State of Georgia, Office of Treasury and Fiscal Services, 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 due on Federal, State or other grants for expenditures made but not reimbursed and other receivables disclosed from information available. Receivables are recorded when either the asset or revenue recognition criteria has been met. Receivables recorded on the basic financial statements do not include any amounts which would necessitate the need for an allowance for uncollectible receivables. PROPERTY TAXES The Washington County Board of Commissioners fixed the property tax levy for the 2009 tax digest year (calendar year) on August 28, 2009 (levy date). Taxes were due on December 10, 2009 (lien date). Taxes collected within the current fiscal year or within 6 0 days after year-end on the 2009 tax digest are reported as revenue in the governmental funds for fiscal year 2010. The Washington County Tax Commissioner bills and collects the property taxes for the School District, withholds 2.5% of taxes collected as a fee for tax collection and remits the balance of taxes collected to the School District. Property tax revenues, at the fund reporting level, during the fiscal year ended June 30, 2010, for maintenance and operations amounted to $11,097,488.83 and for school bonds amounted to $1,070,310.56. Tax millage rates levied for the 2009 tax year (calendar year) for the Washington County Board of Education were as follows (a mill equals $1per thousand dollars of assessed value): School Operations School Bonds 14.922 mills 1.437 mills 16.359 mills SALES TAXES Special Purpose Local Option Sales Tax, at the fund reporting level, during the year amounted to $3,092,166.98 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. WASHINGTON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30,2010 EXHIBIT "I" 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. CAPITAL ASSETS Capital assets purchased, including capital outlay costs, are recorded as expenditures in the fund financial statements at the time of purchase (including ancillary charges). On the District-wide financial statements, all purchased capital assets are valued at cost where historical records are available and at estimated historical cost based on appraisals or deflated current replacement cost where no historical records exist. Donated capital assets are recorded at estimated fair market value on the date donated. Disposals are deleted at depreciated recorded cost. The cost of normal maintenance and repairs that do not add to the value of assets or materially extend the useful lives of the assets is not capitalized. Depreciation is computed using the straight-line method. The School District does not capitalize book collections or works of art. During the fiscal year under review, no events or changes in circumstances affecting a capital asset that may indicate impairment were known to the School District. Capitalization thresholds and estimated useful lives of capital assets reported in the District-wide statements are as follows: Capitalization Estimated Policy Useful Life Land Land Improvements Buildings and Improvements Equipment Intangible Assets All $ 5,000.00 $ 5,000.00 $ 5,000.00 $ 300,000.00 N/A up t o 50 years up to 8 0 years 3 to 2 0 years 1 0 to 2 0 years Depreciation is used to allocate the actual or estimated historical cost of all capital assets over estimated useful lives, with the exception of intangible assets which are amortized. Amortization of intangible assets such as water, timber, and mineral rights, easements, patents, trademarks, copyrights and internally generated software is computed using the straight-line method over the estimated useful lives of the assets, generally 10to 20 years. 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. WASHINGTON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30,2010 EXHIBIT "I" Vacation leave of 1 0 days is awarded on a fiscal year basis to all full time personnel employed on a twelve month basis. No other employees are eligible to earn vacation leave. Vacation leave not utilized during the fiscal year may be carried over to the next fiscal year, providing such vacation leave does not exceed 1 0 days. Beginning of Year Liability Increase Decrease End of Year Liability 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-widefinancial 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. In addition, general obligation bonds have been issued to refund existing general obligation bonds. 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. Restricted net assets-These represent resources for which the School District is legally or contractually obligated to spend resources for continuation of Federal Programs, debt service and capital projects in accordance with restrictions imposed by external third parties. Unrestricted net 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 Unreserved - Designated Designated fund balances represent tentative plans for future use of financial resources. WASHINGTON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30,2010 EXHIBIT "I" Funds have been designated in the General Fund in anticipation of subsequent year revenue reductions that may cause a deficit. NOTE 3: DEPOSITS COLLATERALIZATION OF DEPOSITS Official Code of Georgia Annotated (O.C.G.A.) Section 45-8-12 provides that there shall not be on deposit at any time in any depository for a time longer than ten days a sum of money which has not been secured by surety bond, by guarantee of insurance, or by collateral. The aggregate of the face value of such surety bond and the market value of securities pledged shall be equal to not less than 110 percent of the public funds being secured after the deduction of the amount of deposit insurance. If a depository elects the pooled method (O.C.G.A. Section 45-8-13.1) the aggregate of the market value of the securities pledged to secure a pool of public funds shall be not less than 110 percent of the daily pool balance. Acceptable security for deposits consists of any one of or any combination of the following: 1 . Surety bond signed by a surety company duly qualified and authorized to transact business within the State of Georgia, 2. lnsurance on accounts provided by the Federal Deposit lnsurance Corporation, 3. Bonds, bills, notes, certificates of indebtedness or other direct obligations of the United States or of the State of Georgia, 4. Bonds, bills, notes, certificates of indebtedness or other obligations of the counties or municipalities of the State of Georgia, 5 . Bonds of any public authority created by the laws of the State of Georgia, providing that the statute that created the authority authorized the use of the bonds for this purpose, 6. Industrial revenue bonds and bonds of development authorities created by the laws of the State of Georgia, and 7. Bonds, bills, notes, certificates of indebtedness, or other obligations of a subsidiary corporation of the United States government, which are fully guaranteed by the United States government both as to principal and interest or debt obligations issued by or securities guaranteed by the Federal Land Bank, the Federal Home Loan Bank, the Federal Intermediate Credit Bank, the Central Bank for Cooperatives, the Farm Credit Banks, the Federal Home Loan MortgageAssociation, and the Federal National Mortgage Association. CATEGORIZATION OF DEPOSITS Custodial credit risk is the risk that in the event of a bank failure, the School District's deposits may not be returned to it. At June 30, 2010, the bank balances were $13,752,983.89. The amounts exposed to custodial credit risk are classified into three categories as follows: Category 1Category 2 - Category 3 - Uncollateralized, Cash collateralized with securities held by the pledging financial institution, or Cash collateralized with securities held by the pledging financial institution's trust department or agent but not in the School District's name. WASHINGTON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30,2010 EXHIBIT "I" The School District's deposits by custodial risk category at June 30, 2010, are as follows: Custodial Credit Risk Category Bank Balance Total NOTE 4: NON-MONETARY TRANSACTIONS The School District receives food commodities from the United States Department of Agriculture (USDA) for school breakfast and lunch programs. These commodities are recorded at their Federally assigned value. See Note 2 - Inventories NOTE 5: CAPITAL ASSETS The following is a summary of changes in the Capital Assets during the fiscal year: Governmental Activities Capital Assets, Not Being Depreciated: Land ConstructionWork In Progress Balances July 1,2009 Increases Decreases Balances June 30.2010 $ 1,290,487.00 $ 21,096,656.86 0.00 $ 41,670.11 $ 1,248,816.89 21,096,656.86 0.00 Total Capital Assets, Not Being Depreciated $ 22,387,143.86 $ 0.00 $ 21,138,326.97 $ 1,248,816.89 Capital Assets, Being Depreciated: Buildings and Improvements Equipment Land Improvements $ 22,493,729.31 $ 20,673,848.07 $ 3,317,709.30 $ 39,849,868.08 4,167,538.00 881,417.61 190.081.12 4,858.874.49 504,978.54 176,897.00 681,875.54 Less: Accumulated Depreciation: Buildings and lmprovements Equipment Land lmprovements Total Capital Assets, Being Depreciated, Net $ 15,108.733.67 $ 20,556,475.79 $ 968,890.01 $ 34,696,319.45 Governmental Activity Capital Assets- Net $ 37,495,877.53 $ 20,556,475.79 $ 22,107,216.98 $ 35,945,136.34 WASHINGTON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30,2010 EXHIBIT "I" Current year depreciation expense by function is as follows: Instruction Support Services Improvement of InstructionalServices Business Administration Maintenance and Operation of Plant Student TransportationServices Other Support Services Food Services NOTE 6: RISK MANAGEMENT $ 1,175,686.89 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 assets, and job related illness or injuries to employees. 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 participates in the Georgia School Boards Association Risk and Insurance Management System, a public entity risk pool organized on July 1,1994, to develop and administer a plan to reduce risk of loss on account of general liability, motor vehicle liability, or property damage, including safety engineering and other loss prevention and control techniques, and to administer one or more groups of self-insurance funds, including the processing and defense of claims brought against members of the system. The School District pays an annual premium to the system for its general insurance coverage. Additional coverage is provided through agreements by the system with other companies according to their specialty for property, boiler and machinery (including coverage for flood and earthquake), general liability (including coverage for sexual harassment, molestation and abuse), errors and omissions and crime. Payment of excess insurance for the system varies by line of coverage. The School District is self-insured with regard to unemployment compensation claims. In connection with this program, a self-insurance reserve has been established within the General Fund by the School District. The School District accounts for claims within the General Fund with expenses/expenditures and liability being reported when it is probable that a loss has occurred, and the amount of that loss can be reasonably estimated. Changes in the unemployment compensation claims liability during the last two fiscal years are as follows: Claims and Beginningof Year Changes in Claims End of Year Liability Estimates Paid Liability WASHINGTON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30,2010 EXHIBIT "I" The School District has purchased surety bonds to provide additional insurance coverage as follows: Position Covered Amount Superintendent All Employees NOTE 7: 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 DEBT OUTSTANDING General Obligation Bonds currently outstanding are as follows: Purpose Interest Rates Amount General Government -Series 2 0 0 7 General Government - Refunding- Series 2 0 0 8 4.25% - 5.00% 2.485% $ 6,290,000.00 4,455,000.00 Voters have authorized $28,000,000.00 in general obligation debt for various construction projects which was not issued as of June 30,2010. The changes in Long-Term Debt during the fiscal year ended June 30,2010, were as follows: G. 0. Bonds Compensated Absences Bond Premiums Amortized Balance July 1,2009 Additions Governmental Funds Deductions Balance June 30,2010 Due Within One Year (1) $ 14,785,000.00 70.216.39 $ 169,134.48 $ 87,184.73 4,040.000.00 $ 10,745,000.00 $ 94.699.55 62,701.57 56,378.16 112,756.32 4,180,000.00 56,378.16 (1) The portion of Compensated Absences due within one year has been determined to be immaterial t o the basic financial statements. WASHINGTON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30,2010 EXHIBIT "I" At June 30, 2010, payments due by fiscal year which includes principal and interest for these items are as follows: General Obligation Debt Unamortized Principal Interest Bond Premium Fiscal Year Ended June 30: Total Principal and Interest NOTE 8: ON-BEHALF PAYMENTS The School District has recognized revenues and costs in the amount of $53,506.82 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 Non-Certified Personnel In the amount of $39,768.12 Paid to the Teachers Retirement System of Georgia For Teachers Retirement System (TRS) Employer's Cost In the amount of $3,127.64 Office of Treasury and Fiscal Services Paid to the Public School Employees Retirement System For Public School Employees Retirement (PSERS) Employer's Cost In the amount of $10,611.06 NOTE 9: SPECIAL ITEMS Special Items are those items of financial performance that the Board of Education believes should be disclosed separately on the face of the statements to assist in the understanding of the underlying financial performance achieved by the School District. Such items are material in nature and require separate disclosure. Exceptional items falling under this classification are a direct result of Washington County Board of Education's decision to consolidate all of its Primary and Elementary operations with the opening of its new Ridge Road Complex. The consolidation caused the School District to experience a reduction in overhead costs and has aided in maximizing efficiencies for the School District. In order to receive the full benefits from the above mentioned consolidation, the School District effectively closed four previously utilized Primary and Elementary School Buildings, two of which were disposed of in fiscal year 2010. The Washington County Board of Education depreciates all buildings according to its Capital Assets policy, which states that buildings are to be depreciated over a useful life of up to 8 0 years. The disposal of the two buildings required the School District to reflect a one-time loss of $922,363.81 due to the buildings not being fully depreciated at the time of disposal. WASHINGTON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30,2010 EXHIBIT "I" Building T. J. Elder Primary D. D. Crawford Acquisition Date Disposal Method Undepreciated Value Remaining at Disposal 1958 1959 Demolition $ Transfer to City of Tennille $ 597,248.94 325,114.87 NOTE 10: SIGNIFICANT CONTINGENT LIABILITIES Amounts received or receivable principally from the Federal government are subject to audit and review by grantor agencies. This could result in requests for reimbursement to the grantor agency for any costs which are disallowed under grant terms. The School District believes that such disallowances, if any, will be immaterial to its overall financial position. NOTE 11: POST-EMPLOYMENT BENEFITS GEORGIASCHOOL 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 Fun 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). Funding Policy. The contribution requirements of plan members and participating employers are established by the Board in accordance with the current Appropriations Act and may be amended by the Board. Contributions of plan members or beneficiaries receiving benefits vary based on plan election, dependent coverage, and Medicare eligibility and election. On average, plan members pay approximately 25 of the cost of health insurance coverage. Participating employers are statutorily required to contribute in accordance with the employer contribution rates established by the Board. The contribution rates are established to fund 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 thirty 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, 2010: For certificated teachers, librarians and regional educational service agencies: July 2009 August 2009 -October 2009 November 2009 -June 2010 18.534%of covered payroll for August Coverage 14.492%of covered payroll for September - November Coverage 18.534%of covered payroll for December - July Coverage WASHINGTON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30,2010 EXHIBIT "I" For non-certificated school personnel: July 2009 -June 2010 $162.72 per member per month plus Department of Education contributionof $22,838,311.00 No additional contribution was required by the Board for fiscal year 2010 nor contributed to the State OPEB Fund to prefund retiree benefits. Such additional contribution amounts are determined annually by the Board in accordance with the State plan for other post-employment benefits and are subject to appropriation. The School District's combined active and retiree contributions to the health insurance plans, which equaled the required contribution, for the current fiscal year and the preceding two fiscal years were as follows: Percentage Required Fiscal Year Contributed Contribution NOTE 12: RETIREMENT PLANS TEACHERS RETIREMENT SYSTEM OF GEORGIA (TRS) Plan Description. The TRS is a cost-sharing multiple-employer defined benefit plan created in 1943 by an act of the Georgia General Assembly to provide retirement benefits for qualifying employees in educational service. A Board of Trustees comprised of active and retired members and ex-officio State employees is ultimately responsible for the administration of TRS. The Teachers Retirement System of Georgia issues a separate stand alone financial audit report and a copy can be obtained from the Georgia Department of Audits and Accounts. On October 25, 1996, the Board created the Supplemental Retirement Benefits Plan of the Georgia Teachers Retirement System (SRBP-TRS). SRBP-TRS was established as a qualified excess benefit plan in accordance with Section 415 of the Internal Revenue Code (IRC) as a portion of TRS. The purpose of SRBP-TRS is to provide retirement benefits to employees covered by TRS whose benefits are otherwise limited by IRC Section 415. Beginning July 1,1997, all members and retired former members in TRS are eligible to participate in the SRBP-TRS whenever their benefits under TRS exceed the IRC Section 415 imposed limitation on benefits. TRS provides service retirement, disability retirement, and survivor's benefits. The benefit structure of TRS is defined and may be amended by State statute. A member is eligible for normal service retirement after 3 0 years of creditable service, regardless of age, or after 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 4 0 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 3 0 years of service. It is also assumed that certain cost-of-living adjustments, based on the Consumer Price Index, will be made in future years. Retirement benefits are payable monthly for life. A member may elect to receive a partial lump-sum distribution in addition to a reduced monthly retirement benefit. Death, disability and spousal benefits are also available. WASHINGTON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30,2010 EXHIBIT "I" Funding Policy. TRS is funded by member and employer contributions as adopted and amended by the Board of Trustees. Members become fully vested after 1 0 years of service. If a member terminates with less than 1 0 years of service, no vesting of employer contributions occurs, but the member's contributions may be refunded with interest. Member contributions are limited by State law to not less than 5% or more than 6% of a member's earnable compensation. Member contributions as adopted by the Board of Trustees for the fiscal year ended June 30, 2010, were 5.25% of annual salary. The member contribution rate will increase to 5.53%effective July 1,2010. Employer contributions required for fiscal year 2010 were 9.74%of annual salary as required by the June 30, 2007, actuarial valuation. The employer contribution rate will increase to 10.28% effective July 1,2010. Employer contributions for the current fiscal year and the precedingtwo fiscal years are as follows: Fiscal Year Percentage Contributed Required Contribution (This page left intentionally blank) WASHINGTON COUNTY BOARD OF EDUCATION GENERAL FUND SCHEDULE OF REVENUES, EXPENDITURESAND CHANGES IN FUND BALANCE BUDGET AND ACTUAL YEAR ENDEDJUNE 30,2010 SCHEDULE "1" REVENUES Property Taxes Sales Taxes State Funds Federal Funds Charges for Services Investment Earnings Miscellaneous Total Revenues EXPENDITURES Current Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Food Services Operation Total Expenditures Net Change in Fund Balances Fund Balances - Beginning Adjustments NONAPPROPRIATED BUDGETS ORIGINAL (1) FINAL (1) ACTUAL AMOUNTS $ 2,037,426.13 $ 1,328,983.88 $ -135,392.26 6,508,904.95 6,508.904.95 6,508.904.95 -21,049.93 -1,586.90 - Fund Balances Ending $ 8,525,281.15 $ 7,836,301.93 $ 6,373.512.69 Notes t o the Schedule of Revenues, Exwnditures and Chances in Fund Balances Budget and Actual (1) Original and Final Budget amounts do not include budgeted revenues or expenditures of the varlous principal accounts. The accompanyingschedule 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 basicfinancial statements. WASHINGTON COUNTY BOARD OF EDUCATION SCHEDULEOF EXPENDITURESOF FEDERALAWARDS YEAR ENDED JUNE 30.2010 SCHEDULE " 2 FUNDING AGENCY PROGRAM/GRANT Agriculture. U. S. Department of Chlld Nutrition Cluster Pass-ThroughFrom Georgla Department of Education Food Servlces School Breakfast Program Natlonal School Lunch Program Summer Food Service Program For Children Total Chlld Nutrition Cluster Other Programs Pass-Through From Georgia Department of Education Food Services ARRA- Child Nutrltlon Discretionary Grants L~mitedAvailability Total U. S. Department of Agriculture Education, U. S. Department of Education Technology State Grants Cluster Pass-Through From Georgia Department of Educatlon Education Technology State Grants School Improvement Grants Cluster Pass-Through From Georgia Department of Education School Improvement Grants Special Educat~onCluster Pass-Through From Georgla Department of Educanon Speclal Educatlon ARRA - Grants to States ARRA- Preschool Grants Grants t o States Preschool Grants Total Soeclal Educatron Cluster State Flscal Stablllzatlon Fund Cluster Pass-Through From Georgia Department of Educatlon ARRA - Education State Grants Title I. Part A Cluster Pass-Through From Georgla Department of Educatlon ARRA - Tltle I Grants to Local Educat~onaAl gencies Title I Grants to Local Educational Agencies Total Title I. Part A Cluster Other Programs Pass-ThroughFrom Georgia Department of Educatlon Career and Techn~calEducatlon Baslc Grants to States lmprovlngTeacher QualltyState Grants Rural Educatlon Safe and DrugFree Schools and Commun~t~e- Ss tate Grants Total Other Programs Total U. S. Department of Education Environmental Protection Agency Pass-ThroughFrom Unlverslty of Georgia ARRA - National Clean Diesel Emlsslons Reduction Program CFDA NUMBER PASSTHROUGH ENTITY ID NUMBER EXPENDITURES IN PERIOD WASHINGTON COUNTY BOARD OF EDUCATION SCHEDULE OF EXPENDITURES OF FEDERALAWARDS YEAR ENDED JUNE 30,2010 SCHEDULE " 2 " FUNDiNG AGENCY PROGRAM/GRANT Health and Human Services, U. S. Department of Ch~ldCare and Development Fund Cluster Pass-ThroughFrom Bright From the Start: Georg~aDepartment of Early Care and Learnlng ARRA- Child Care and Development Block Grant Labor, U. S. Department of Pass-ThroughFrom East Central Georg~aConsortium Workforce InvestmentAct Youth Activlttes ARRA - Workforce Investment Act Youth Actlvit~es Total U. S . Department of Labor Defense, U. S. Department of Direct Department of the Air Force R.O.T.C. Program CFDA NUMBER PASSTHROUGH ENTITY ID NUMBER EXPENDITURES IN PERIOD Total Federal F~nanciaAl ssistance N/A = Not Available Notes to the Schedule of ExDendituresof Federal Awards (1) Includes the Federallyassigned value of donated commodities for the Food Donation Program in the amount of $96,126.56. (2) Expenditures for the funds earned on the Summer Food Servlce Program for Chlldren ($835.20) and the School Breakfast Program ($422,126.86) were not maintained separately and are Included in the 2010 National School Lunch Program. Major Programsare ident~fiedby an asterisk (*)in front of the CFDA number. The School Distrlct did not provide Federal Ass~stanceto any Subrec~pient. The accompanylngschedule of expend~turesof Federal awards includes the Federal grant actlvlty of the Washington County Board of Educatton and is presented on the modlfled accrual basis of accounting which is the basis of accounting used in the presentatton of the fund financial Statements. See notes to the baslc financial statements. WASHINGTON COUNTY BOARD OF EDUCATION SCHEDULE OF STATE REVENUE YEAR ENDEDJUNE 3 0 , 2 0 1 0 GRANTS Bright From the Start: Georgia Department of Early Care and Learnlng Pre-Kindergarten Program Communities in Schools Georgia Pass-Through Funds to Local Communities In Schools Organ~zations Washington County Family Connect~onsand Communit~esin Schools Education, Georg~aDepartment of Quality Bas~cEducat~on D~recltnstruct~onaCl ost Klndergarten Program Klndergarten Program - Early lnterventlon Program Prlmary Grades (1-3) Program Primary Grades - Early Intervention (1-3) Program Upper Elementary Grades (4 5) Program Upper Elementary Grades - Early lnterventlon (4 5) Program Middle Grades (6 8) Program Hlgh School General Educat~on(9 12) Program Vocational Laboratory (9 12) Program Students wlth Dlsab~lit~es G~ftedStudent - Category VI Remed~aEl ducat~onProgram Alternat~veEducatlon Program Med~aCenter Prouam 2 0 Days Add~t~onlanlstructlon Staff and Professional Development lndlrect Cost Central Adrn~nistrat~on School Admlnlstratlon Faclllty Maintenance and Operations Categorical Grants Pup11Transportat~on Regular Sparsity Nursing S e N ~ c e s Voca'uonal Supervisors Mid-term Adlustment Hold Harmless Educat~onEqualization Fundlng Grant Food S e ~ l c e s vocat~onaEl ducatlon Amended Formula Adjustment Otner State Programs Dual Enrollment Fundlng ExPreSS Programfor Transportat~on Health Insurance National Teacher Certlflcatlon Preschool Handcapped Program Teachers Ret~rement Office of Treasuly and F~scaSl e ~ l c e s Public School Employees Retirement CONTRACT Human Resources. Georgia Department of Family Connection See notes to the baslc flnanclal statements. SCHEDULE "3" GOVERNMENTAL FUND TYPE GENERAL FUND WASHINGTON COUNTY BOARD OF EDUCATION SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS YEAR ENDED JUNE 30,2010 SCHEDULE "4" PROJECT ORIGINAL ESTIMATED COST (1) CURRENT ESTIMATED COSTS (2) AMOUNT EXPENDED IN CURRENT YEAR (3) AMOUNT EXPENDED IN PRIOR YEARS (3) The acquisition, construction, equipping and furnishing of new school buildings and facilities, including, but not limited to, a new primary/ elementary school complex: the addition, renovation, repair, improvement and equipping of existing school buildings and facilities; the demolition and destruction of existing school buildings and facilities; the addition, renovatlon. repalr, pavingand improvement to drivewaysand parkingfacilities; the acquisition and purchase of any property necessaryand desirable therefore. both real and personal, including, but not limited to, administrative and instructional technology equipment, computer hardware and software. safety and security equipment and transportation and maintenance vehlcles and equipment; and the purchase of land Project # 1 Ridge Road Primaty/Elementary Complex $ 20,000,000.00 $ 24,271,603.52 $ 936,934.75 $ 23,334,668.77 Project #2 Demolition of T. J. Elder Primary 297,940.00 297.940.00 PROJECT STATUS Completed Completed (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 Washington County approvedthe imposition of a 1%sales tax to fund the above projects and retire associated debt. Amounts expended for these projects may include sales tax proceeds, state, local property taxes and/or other funds over the life of the projects. The voters approved the issuance of $13.6 million in debt to forward fund the completion of Ridge Road Elementary/Primary Complex. In August of 2007, the School District issued debt in the form of General Obligation Bonds in the amount of $12.1 million. SPLOST proceeds have been used to service the debt over its five year term. The debt will be paid in full on December 1,2011. After the satisfaction of all project associated debt service requirements, it IS anticipated that funds will remain available to finance the other projects and obligations approved by the voters In the original resolution. The School District will identify future projects based upon the needs of the system and the actual funding available after the satisfaction of the debt. See notes to the basic financial statements. (This page left intentionally blank) WASHINGTON COUNTY BOARD OF EDUCATION GENERAL FUND - QUALITY BASIC EDUCATION PROGRAM (QBE) ALLOTMENTS AND EXPENDITURES - BY PROGRAM YEAR ENDEDJUNE 3 0 , 2 0 1 0 SCHEDULE "5" Direct Instructional Programs Kindergarten Program Kindergarten Program-Earlylntervention Program Pr~maryGrades (1-3) Program Pr~maryGrades-Early Intervention (1-3) Program Upper Elementary Grades (4-5) Program Upper Elementary Grades-Early lntervention (4-5) Program Middle School (6-8) Program H~ghSchool General Educatlon (9-12) Program Vocational Laboratory (9-12) Program Students w ~ t hDlsabllltles Category I Category II category III Gifted Student - Category VI Remed~aEl ducatlon Program Alternative Education Program TOTAL DIRECT INSTRUCTIONALPROGRAMS Media Center Program Staff and Profess~onaDl evelopment TOTAL QBE FORMULA FUNDS ALLOTMENTS FROM GEORGIA DEPARTMENT OF EDUCATION (1) (2) ELIGIBLE QBE PROGRAM COSTS SALARIES OPERATIONS TOTAL (1) Compr~sedof State Funds plus Local F~veM ~ lSl hare. (2) Allotments do not Include the Impact of the State amended formula adjustment. See notes to the bas~cfinancial statements. SECTION I1 COMPLIANCE AND INTERNAL CONTROL REPORTS Russell W. Hinton STATE AUDITOR (404) 656-2174 DEPARTMENOTF AUDITSAND ACCOUNTS 270 Washington Street, S.W., Suite 1- 156 Atlanta, Georgia 30334-8400 March 22,2011 Honorable Nathan Deal, Governor Members of the General Assembly Members of the State Board of Education and Superintendent and Members of the Washington 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 Washington County Board of Education as of and for the year ended June 30, 2010, which collectively comprise Washington County Board of Education's basic financial statements and have issued our report thereon dated March 22, 2011. 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 Re~orting In planning and performing our audit, we considered Washington 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 Washington County Board of Education's internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness of the Washington County Board of Education's internal control over financial reporting. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect and correct misstatements on a timely basis. A material weakness is a deficiency, or combination of deficiencies, in internal control such that there is a reasonable possibility that a material misstatement of the entity's financial statements will not be prevented, or detected and corrected on a timely basis. Our consideration of internal control over financial reporting was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over financial reporting that might be deficiencies, significant deficiencies, or material weaknesses. We did not identify any deficiencies in internal control over financial reporting that we consider to be material weaknesses, as defined above. However, we consider item FS-7501-10-01, described in the accompanying Schedule of Findings and Questioned Costs to be a significant deficiency in internal control over financial reporting. A significant deficiency is a deficiency, or 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. Com~lianceand Other Matters As part of obtaining reasonable assurance about whether Washington 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 a certain matter that we have reported to management of Washington County Board of Education in a separate letter dated March 22, 2011. Washington 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 Washington County Board of Education's response and, accordingly, we express no opinion on it. This report is intended solely for the information and use of management, members of the Washington 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, ~ u s & eWl l . Hinton, CPA, CGFM State Auditor Russell W. Hinton STATE AUDITOR (404) 656-2174 DEPARTMENOTF AUDITSAND ACCOUNTS 270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400 March 22,2011 Honorable Nathan Deal, Governor Members of the General Assembly Members of the State Board of Education and Superintendent and Members of the Washington County Board of Education INDEPENDENT AUDITOR'S REPORT ON COMPLIANCE WlTH REQUIREMENTS THAT COULD HAVE A DIRECT AND MATERIAL EFFECT ON EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WlTH OMB CIRCULAR A-133 Ladies and Gentlemen: We have audited Washington County Board of Education's compliance with the types of compliance requirements described in the OM5 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, 2010. Washington 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 Washington County Board of Education's management. Our responsibility is to express an opinion on Washington 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 Auditng Standards, issued by the Comptroller General of the United States; and OMB Circular A-133, Audj& of States, Local Governmen&, 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 t o 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 Washington 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 Washington County Board of Education's compliance with those requirements. In our opinion, the Washington 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, 2010. Internal Control Over Com~liance Management of Washington 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 Washington 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 Washington 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. This report is intended solely for the information and use of management, members of the Washington 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. Respectfullysubmitted, , ~u&selWl . Hinton, CPA, CGFM State Auditor SECTION Ill AUDITEE'S RESPONSE TO PRIOR YEAR FINDINGS AND QUESTIONED COSTS WASHINGTON COUNTY BOARD OF EDUCATION AUDITEE'S RESPONSE SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30,2010 PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS No matters were reported. PRIOR YEAR FEDERAL AWARD FINDINGS AND QUESTIONED COSTS No matters were reported. SECTION IV FINDINGS AND QUESTIONED COSTS WASHINGTON COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONEDCOSTS YEAR ENDED JUNE 30,2010 I SUMMARYOFAUDITOR'SRESULTS Financial Statements Type of auditor's report issue: Governmental Activities; General Fund; Capital Projects Fund; Debt Service Fund; Aggregate Remaining Fund Information Internal control over financial reporting: Material weakness identified? Significant deficiency identified? Noncompliance material to financial statements noted: Federal Awards Internal Control over major programs: Material weakness identified? Significant deficiency identified? Type of auditor's report issued on compliance for major programs: All major programs Any audit findings disclosed that are required to be reported in accordance with OMB Circular A-133, Section 510(a)? Identification of major programs: CFDA Number(s1 Name of Federal Program or Cluster Title I, Part A Cluster Special Education Cluster State Fiscal Stabilization Fund Cluster Dollar threshold used to distinguish between Type A and Type B programs: Auditee qualified as low-risk auditee? Unqualified N 0 Yes No None Reported Unqualified $300,000.00 N o WASHINGTON COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30,2010 II FINANCIALSTATEMENT FINDINGSAND QUESTIONEDCOSTS CASH AND CASH EQUIVALENTS REVENUES/RECEIVABLES/RECEIPTS EXPENDlTURES/LIABILlTlES/DISBURSEMENTS GENERAL LEDGER Inadequate Internal Controls over School Activity Accounts Significant Deficiency Finding Control Number: FS-7501-10-01 Condition: The accounting procedures of the School District were insufficient to provide adequate separation of duties and internal controls over school activity accounts. Criteria: The School District's management is responsible for designing and maintaining internal controls that provide proper separation of duties and provide reasonable assurance that transactions are processed according to established procedures. Such internal controls would limit any one individual's access to both physical assets and the related accounting records. Questioned Cost: N/A Information: Cash and Cash Equivalents High School bank reconciliations were not properly reconciled. Revenues/Receivables/Receipts Numerous receipts were not supported by adequate documentation to determine if receipts were deposited in a timely manner or properly recorded. Several receipts were not properly recorded in the correct account. Numerous receipts lacked proper documentation. A receipt was not deposited timely. Expenditures/Liabilities/Disbursements Several vouchers had no documentation indicating approval prior to purchase. Several vouchers had no purchase order. Several vouchers had no evidence of receipt. General Ledger Numerousjournal entries had inadequate documentation. Several journal entries, in the amount of $3,949.41, moved funds from the School's General Account to the Principal's Discretionary Fund. Cause: The deficiencies were a result of management's failure to ensure that internal controls were established, implemented, and functioning at the school level and utilize management oversight of the incompatible activities to properlysafeguard assets. WASHINGTON COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30,2010 II FINANCIALSTATEMENT FINDINGSAND QUESTIONEDCOSTS CASH AND CASH EQUIVALENTS REVENUES/RECEIVABLES/RECEIPTS EXPENDlTURES/LIABILlTlES/DlSBURSEMENTS GENERAL LEDGER Inadequate Internal Controls over School Activity Accounts Significant Deficiency Finding Control Number: FS-7501-10-01 Effect: Errors and/or irregularities may not be detected in a timely manner. Recommendation: The School District should revise and monitor controls to provide reasonable assurance that transactions are processed according to established procedures and implement procedures to ensure that revenue is adequately documented, deposited timely, and recorded in the correct account and implement procedures to ensure that expenditures of school activity accounts are properly documented and approved prior to payment. The School District should ensure that all journal entries are properly documented and that transfers are allowable. The School District also should review these matters and determine if reimbursement is required. Ill FEDERAL AWARD FINDINGSAND QUESTIONEDCOSTS No matters were reported. SECTION V MANAGEMENT'S RESPONSES WASHINGTON COUNTY BOARD OF EDUCATION SCHEDULE OF MANAGEMENT'S RESPONSES YEAR ENDED JUNE 30,2010 FindingControl Number: FS-7501-10-01 We concur with this finding. The School District will revise and monitor controls to provide reasonable assurance that transactions are processed according to established procedures. The School District will re-double its efforts to ensure existing procedures are followed to adequately document revenue receipts, that deposits are made in a timely fashion, and that revenues are recorded in the correct account. Additionally, the School District will follow existing procedures to ensure that expenditures of school activity accounts are properly documented and approved prior to payment. The School District will ensure that all journal entries are properly documented and that transfers are allowable. The School District will review these matters and determine if reimbursement is required. Contact Person: Title: Telephone: Fax: E-mail: Sandra McMaster Director of Finance 478-553-2041, ext. 1205 478-552-3128 smcmaster@washington.kl2.ga.us