WASHINGTON COUNTY BOARD OF EDUCATION SANDERSVILLE, GEORGIA ANNUAL FINANCIAL REPORT FOR THE FISCAL YEAR ENDED JUNE 30, 2012 (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 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 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 SCHEDULE OF STATE REVENUE Page 1 2 4 5 6 7 8 9 10 27 28 30 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 31 33 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 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 February 14, 2013 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 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 I) of the Washington 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 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 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 Washington 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 2012ARL-11 statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. Our opinion on the basic financial statements is not affected by this missing information. In accordance with Government Auditing Standards, we have also issued our report dated February 14, 2013, 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 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 27 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 Washington 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 WASHINGTON COUNTY BOARD OF EDUCATION WASHINGTON COUNTY BOARD OF EDUCATION STATEMENT OF NET ASSETS JUNE 30, 2012 ASSETS Cash and Cash Equivalents Investments Accounts Receivable, Net Taxes State Government Federal Government Other Inventories Prepaid Items Deferred Charges Due From Other Funds Capital Assets, Non-Depreciable Capital Assets, Depreciable (Net of Accumulated Depreciation) Total Assets LIABILITIES Accounts Payable Salaries and Benefits Payable Payroll Withholdings Payable Interest Payable Contracts Payable Retainages Payable Long-Term Liabilities Due Within One Year Due in More Than One Year Total Liabilities NET ASSETS Invested in Capital Assets, Net of Related Debt Restricted for Debt Service Capital Projects Unrestricted Total Net Assets Total Liabilities and Net Assets The notes to the basic financial statements are an integral part of this statement. - 1 - EXHIBIT "A" GOVERNMENTAL ACTIVITIES $ 28,079,522.46 2,758,549.45 696,398.64 1,682,296.11 678,469.26 3,095.47 30,339.97 164,221.20 242,525.36 82.20 3,538,650.78 33,259,566.48 $ 71,133,717.38 $ 94,082.62 3,150,707.18 40.44 13,354.17 612,244.26 93,233.87 3,183,482.76 19,598,210.37 $ 26,745,355.67 $ 33,317,757.76 2,804,582.60 951,724.78 7,314,296.57 $ 44,388,361.71 $ 71,133,717.38 WASHINGTON COUNTY BOARD OF EDUCATION STATEMENT OF ACTIVITIES FOR THE YEAR ENDED JUNE 30, 2012 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 Other Support Services Operations of Non-Instructional Services Food Services Interest on Short-Term and Long-Term Debt Total Governmental Activities General Revenues Taxes Property Taxes For Maintenance and Operations For Debt Services Railroad Cars Sales Taxes Special Purpose Local Option Sales Tax For Capital Projects Other Sales Tax Investment Earnings Miscellaneous Total General Revenues Change in Net Assets Net Assets - Beginning of Year Net Assets - End of Year EXPENSES CHARGES FOR SERVICES $ 17,720,449.22 $ 425,201.85 1,123,041.11 1,143,560.40 394,936.07 676,290.47 2,040,496.47 727,443.03 2,233,410.80 1,777,273.08 121,816.27 1,731,948.19 489,872.87 74,314.22 $ 30,180,537.98 $ 499,516.07 The notes to the basic financial statements are an integral part of this statement. - 2 - EXHIBIT "B" PROGRAM REVENUES OPERATING GRANTS AND CONTRIBUTIONS CAPITAL GRANTS AND CONTRIBUTIONS NET (EXPENSES) REVENUES AND CHANGES IN NET ASSETS $ 10,053,687.88 384,987.83 738,667.80 402,495.20 563,421.98 964,288.90 35,676.86 973,475.88 791,501.54 $ 63,054.57 1,593,013.98 $ 16,564,272.42 $ $ 152,439.00 222,889.33 375,328.33 $ -7,241,559.49 -738,053.28 -404,892.60 7,559.13 -112,868.49 -1,076,207.57 -691,766.17 -1,259,934.92 -833,332.54 -58,761.70 -64,619.99 -266,983.54 -12,741,421.16 $ 10,897,241.99 1,050,013.17 47,695.28 3,112,559.32 15,989.09 104,467.33 514,590.70 $ 15,742,556.88 $ 3,001,135.72 41,387,225.99 $ 44,388,361.71 - 3 - WASHINGTON COUNTY BOARD OF EDUCATION BALANCE SHEET GOVERNMENTAL FUNDS JUNE 30, 2012 EXHIBIT "C" ASSETS Cash and Cash Equivalents Investments Accounts Receivable, Net Taxes State Government Federal Government Other Inventories Prepaid Items Due From Other Funds Total Assets GENERAL FUND DISTRICTWIDE CAPITAL PROJECTS FUND DEBT SERVICE FUND TOTAL $ 7,706,078.66 $ 17,582,492.52 $ 2,790,951.28 $ 28,079,522.46 2,758,549.45 2,758,549.45 378,264.34 1,682,296.11 678,469.26 3,095.47 30,339.97 164,221.20 82.20 281,225.95 36,908.35 696,398.64 1,682,296.11 678,469.26 3,095.47 30,339.97 164,221.20 82.20 $ 10,642,847.21 $ 20,622,267.92 $ 2,827,859.63 $ 34,092,974.76 LIABILITIES AND FUND BALANCES LIABILITIES Accounts Payable Salaries and Benefits Payable Payroll Withholdings Payable Contracts Payable Retainages Payable Deposits and Deferred Revenue Total Liabilities FUND BALANCES Nonspendable Restricted Assigned Unassigned Total Fund Balances Total Liabilities and Fund Balances $ 94,082.62 3,150,707.18 40.44 $ 100,992.06 $ 3,345,822.30 $ 612,244.26 93,233.87 $ 705,478.13 $ $ 9,922.86 94,082.62 3,150,707.18 40.44 612,244.26 93,233.87 110,914.92 9,922.86 $ 4,061,223.29 $ 194,561.17 $ 194,561.17 $ 19,916,789.79 $ 2,817,936.77 22,734,726.56 1,400,365.42 1,400,365.42 5,702,098.32 5,702,098.32 $ 7,297,024.91 $ 19,916,789.79 $ 2,817,936.77 $ 30,031,751.47 $ 10,642,847.21 $ 20,622,267.92 $ 2,827,859.63 $ 34,092,974.76 The notes to the basic financial statements are an integral part of this statement. - 4 - WASHINGTON 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") Amounts reported for Governmental Activities in the Statement of Net Assets are different because: Capital Assets used in Governmental Activities are not financial resources and therefore are not reported in the funds. These assets consist of: Land Construction in Progress 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 Long-Term 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 Long-Term Liabilities, including Bonds Payable, are not due and payable in the current period and therefore are not reported as liabilities in the funds. Long-Term Liabilities at year-end consist of: Bonds Payable Compensated Absences Payable Unamortized Bond Premiums Bond Interest Payable Total Long-Term Liabilities Net Assets of Governmental Activities (Exhibit "A") $ 30,031,751.47 $ 2,198,629.79 1,340,020.99 533,536.94 39,827,604.00 5,764,819.81 -12,866,394.27 36,798,217.26 110,914.92 242,525.36 $ -22,545,000.00 -61,244.84 -175,448.29 -13,354.17 -22,795,047.30 $ 44,388,361.71 The notes to the basic financial statements are an integral part of this statement. - 5 - WASHINGTON COUNTY BOARD OF EDUCATION STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS YEAR ENDED JUNE 30, 2012 EXHIBIT "E" REVENUES Property Taxes Sales Taxes State Funds Federal Funds Charges for Services Investment Earnings Miscellaneous Total Revenues EXPENDITURES Current Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Other Support Services Food Services Operation Capital Outlay Debt Services Principal Dues and Fees Interest Total Expenditures Excess of Revenues over (under) Expenditures OTHER FINANCING SOURCES (USES) Proceeds of Long-Term Capital Related Debt Premiums on Bonds Sold Transfers In Transfers Out Total Other Financing Sources (Uses) Net Change in Fund Balances Fund Balances - Beginning GENERAL FUND DISTRICTWIDE CAPITAL PROJECTS FUND DEBT SERVICE FUND TOTAL $ 10,912,013.11 15,989.09 $ 12,347,513.00 4,369,198.42 499,516.07 75,463.68 457,238.91 $ 28,676,932.28 $ $ 1,047,311.75 $ 3,112,559.32 222,889.33 29,003.65 11,959,324.86 3,128,548.41 12,347,513.00 4,592,087.75 499,516.07 104,467.33 457,238.91 3,141,562.97 $ 1,270,201.08 $ 33,088,696.33 $ 17,136,287.28 1,123,041.11 1,133,555.51 394,936.07 676,290.47 2,040,496.47 462,696.69 $ 2,206,467.04 1,796,792.14 121,970.27 1,710,449.84 $ 28,802,982.89 $ $ -126,050.61 $ $ 17,136,287.28 274,923.78 2,230,723.79 1,123,041.11 1,133,555.51 394,936.07 676,290.47 2,040,496.47 737,620.47 2,206,467.04 1,796,792.14 121,970.27 1,710,449.84 2,230,723.79 $ 4,320,000.00 1,110.12 488,741.91 4,320,000.00 1,110.12 488,741.91 2,505,647.57 $ 4,809,852.03 $ 36,118,482.49 635,915.40 $ -3,539,650.95 $ -3,029,786.16 $ 20,300,000.00 $ 20,300,000.00 233,931.05 233,931.05 $ 21,619.34 $ 1,231,437.32 1,253,056.66 -1,253,056.66 -1,253,056.66 $ 21,619.34 $ 19,280,874.39 $ 1,231,437.32 $ 20,533,931.05 $ -104,431.27 $ 19,916,789.79 $ -2,308,213.63 $ 17,504,144.89 7,401,456.18 0.00 5,126,150.40 12,527,606.58 Fund Balances - Ending $ 7,297,024.91 $ 19,916,789.79 $ 2,817,936.77 $ 30,031,751.47 The notes to the basic financial statements are an integral part of this statement. - 6 - WASHINGTON COUNTY BOARD OF EDUCATION RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES TO THE STATEMENT OF ACTIVITIES JUNE 30, 2012 EXHIBIT "F" Total Net Change in Fund Balances - Governmental Funds (Exhibit "E") Amounts reported for Governmental Activities in the Statement of Activities are different because: Capital Outlays are reported as expenditures in Governmental Funds. However, in the Statement of Activities, the cost of Capital Assets is allocated over their estimated useful lives as depreciation expense. In the current period, these amounts are: Capital Outlay Depreciation Expense Excess of Capital Outlay over Depreciation Expense Taxes reported in the statement of activities that do not provide current financial resources are not reported as revenues in the funds. The net effect of various miscellaneous transactions involving capital assets (i.e., sales, trade-ins, donations, and disposals) is to decrease net assets. Bond proceeds provide current financial resources to Governmental Funds; however, issuing debt increases Long-Term Liabilities in the Statement of Net Assets. In the current period, proceeds were received from: General Obligation Bonds issued, Including a Premium of $233,931.05 Bond issuance costs, deferred gains on refundings and similar items when debt is first issued are reported as an expenditure in Governmental Funds, but are reported as deferred charges on the Statement of Net Assets and amortized over the term of the debt, using the straight-line method. The details of this difference in the current period are as follows: Deferral of Bond Issuance Costs Amortization of Bond Issuance Costs Amortization of Deferred Gain on Refunding of Bonds Total Bond Issuance Costs 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 activities consist of: Net Increase in Accrued Interest Increase in Compensated Absences Amortization of Bond Premium Total Additional Expenditures Change in Net Assets of Governmental Activities (Exhibit "B") $ 17,504,144.89 $ 2,622,936.33 -1,134,414.50 1,488,521.83 35,625.58 -74,716.75 -20,533,931.05 $ 274,923.78 -82,906.44 -44,727.04 147,290.30 4,320,000.00 $ -20.84 -639.16 114,860.92 114,200.92 3,001,135.72 The notes to the basic financial statements are an integral part of this statement. - 7 - ASSETS Cash and Cash Equivalents Investments Accounts Receivable, Net Other WASHINGTON COUNTY BOARD OF EDUCATION STATEMENT OF FIDUCIARY NET ASSETS FIDUCIARY FUNDS JUNE 30, 2012 EXHIBIT "G" PRIVATE PURPOSE TRUSTS AGENCY FUNDS $ 80,810.40 $ 45,847.41 26,818.98 275.12 57.22 Total Assets $ 46,122.53 $ 107,686.60 LIABILITIES Accounts Payable Due to Other Funds Funds Held for Others Total Liabilities NET ASSETS Held in Trust for Private Purposes $ 602.63 $ 333.73 82.20 107,352.87 $ 684.83 $ 107,686.60 45,437.70 Total Liabilities and Net Assets $ 46,122.53 $ 107,686.60 The notes to the basic financial statements are an integral part of this statement. - 8 - WASHINGTON COUNTY BOARD OF EDUCATION STATEMENT OF CHANGES IN FIDUCIARY NET ASSETS FIDUCIARY FUNDS YEAR ENDED JUNE 30, 2012 ADDITIONS Investment Earnings Interest DEDUCTIONS Scholarships Change in Net Assets Net Assets - Beginning Net Assets - Ending EXHIBIT "H" PRIVATE PURPOSE TRUSTS $ 602.64 $ 602.64 $ 0.00 45,437.70 $ 45,437.70 The notes to the basic financial statements are an integral part of this statement. - 9 - WASHINGTON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2012 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. Revenues that are not classified as program revenues, including all taxes, are presented as general revenues. Fund Financial Statements: The fund financial statements provide information about the School District's funds, including fiduciary funds. Eliminations have been made to minimize the double counting of internal activities. Separate statements for each category (governmental and fiduciary) are presented. The emphasis of fund financial statements is on major governmental funds. The School District reports the following major governmental funds: General Fund is the School District's primary operating fund. It accounts for and reports all financial resources not accounted for and reported in another fund. District-wide Capital Projects Fund accounts for and reports financial resources including Special Purpose Local Option Sales Tax (SPLOST) and Bond Proceeds that are restricted, committed or assigned to the expenditure for capital outlays, including the acquisition or construction of capital facilities and other capital assets. Debt Service Fund accounts for and reports financial resources that are restricted, committed, or assigned including taxes (property and sales) legally restricted for the payment of general long-term principal and interest. - 10 - WASHINGTON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2012 EXHIBIT "I" The School District reports the following fiduciary fund types: Private Purpose Trust fund reports trust arrangements under which principal and 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 financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded at the time liabilities are incurred, regardless of when the related cash flows take place. Nonexchange transactions, in which the School District gives (or receives) value without directly receiving (or giving) equal value in exchange, include property taxes, sales taxes, grants and donations. On an accrual basis, revenue from property taxes is recognized in the fiscal year for which the taxes are levied. Revenue from sales taxes is recognized in the fiscal year in which the underlying transaction (sale) takes place. Revenue from grants and donations is recognized in the fiscal year in which all eligibility requirements have been satisfied. The School District uses funds to report on its financial position and the results of its operations. Fund accounting is designed to demonstrate legal compliance and to aid financial management by segregating transactions related to certain governmental functions or activities. A fund is a separate accounting entity with a self-balancing set of accounts. Governmental funds are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Under this method, revenues are recognized when measurable and available. The School District considers all revenues reported in the governmental funds to be available if they are collected within sixty days after year-end. Property taxes, sales taxes and interest are considered to be susceptible to accrual. Expenditures are recorded when the related fund liability is incurred, except for 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. CASH AND CASH EQUIVALENTS Composition of Deposits Cash and cash equivalents consist of cash on hand, demand deposits and short-term investments with original maturities of three months or less from the date of acquisition in authorized financial institutions. Official Code of Georgia Annotated Section 45-8-14 authorizes the School District to deposit its funds in one or more solvent banks, insured Federal savings and loan associations or insured chartered building and loan associations. INVESTMENTS Composition of Investments Investments made by the School District in nonparticipating interest-earning contracts (such as certificates of deposit) and repurchase agreements are reported at cost. Participating interestearning contracts and money market investments with a maturity at purchase of one year or less are - 11 - WASHINGTON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2012 EXHIBIT "I" 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 banker's 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 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 2011 tax digest year (calendar year) on October 10, 2011 (levy date). Taxes were due on December 10, 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 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, 2012, for maintenance and operations amounted to $10,864,317.83 and for school bonds amounted to $1,047,311.75. Tax millage rates levied for the 2011 tax year (calendar year) for the Washington County Board of Education were as follows (a mill equals $1 per thousand dollars of assessed value): School Operations School Bonds 14.922 mills 1.440 mills 16.362 mills - 12 - WASHINGTON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2012 EXHIBIT "I" SALES TAXES Special Purpose Local Option Sales Tax, at the fund reporting level, during the year amounted to $3,112,559.32 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. PREPAID ITEMS Payments made to vendors for services that will benefit periods subsequent to June 30, 2012, are recorded as prepaid items. CAPITAL ASSETS Capital assets purchased, including capital outlay costs, are recorded as expenditures in the fund financial statements at the time of purchase (including ancillary charges). On the District-wide financial statements, all purchased capital assets are valued at cost where historical records are available and at estimated historical cost based on appraisals or deflated current replacement cost where no historical records exist. Donated capital assets are recorded at estimated fair market value on the date donated. Disposals are deleted at depreciated recorded cost. The cost of normal maintenance and repairs that do not add to the value of assets or materially extend the useful lives of the assets is not capitalized. Depreciation is computed using the straight-line method. The School District does not capitalize book collections or works of art. During the fiscal year under review, no events or changes in circumstances affecting a capital asset that may indicate impairment were known to the School District. Capitalization thresholds and estimated useful lives of capital assets reported in the District-wide statements are as follows: Capitalization Policy Estimated Useful Life Land Land Improvements Buildings and Improvements Equipment Intangible Assets ALL $ 5,000.00 $ 5,000.00 $ 5,000.00 $ 300,000.00 N/A up to 50 years up to 80 years 3 to 20 years 10 to 20 years Depreciation is used to allocate the actual or estimated historical cost of all capital assets over estimated useful lives, with the exception of intangible assets which are amortized. Amortization of intangible assets such as water, timber, and mineral rights, easements, patents, trademarks, copyrights and internally generated software is computed using the straight-line method over the estimated useful lives of the assets, generally 10 to 20 years. - 13 - WASHINGTON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2012 EXHIBIT "I" 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 10 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 10 days. Beginning of Year Liability Increases Decreases End of Year Liability 2010 2011 2012 $ 70,216.39 $ 87,184.73 $ 94,699.55 $ 62,701.57 $ 62,701.57 $ 78,574.31 $ 80,670.20 $ 60,605.68 $ 60,605.68 $ 77,114.23 $ 76,475.07 $ 61,244.84 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. 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 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. - 14 - WASHINGTON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2012 EXHIBIT "I" FUND BALANCES The School District's fund balances are classified as follows: Nonspendable Amounts that cannot be spent either because they are in a nonspendable form or because they are legally or contractually required to be maintained intact. Restricted Constraints are placed on the use of resources are either (1) externally imposed conditions by creditors, grantors, contributors, or laws and regulations of other governments or (2) imposed by law through constitutional provisions or enabling legislation. Committed Amounts that can be used only for specific purposes pursuant to constraints imposed by formal action of the Board of Education. The Board of Education is the School District's highest level of decision-making authority, and the formal action that is required to be taken to establish, modify, or rescind a fund balance commitment is a resolution approved by the Board. Committed fund balance also should incorporate contractual obligations to the extent that existing resources in the fund have been specifically committed for use in satisfying those contractual requirements. Assigned Amounts that are constrained by the School District's intent to be used for specific purposes, but are neither restricted nor committed. The intent should be expressed by (1) the Board of Education or (2) the budget or finance committee, or the Superintendent, or designee, to assign amounts to be used for specific purposes. Unassigned The residual classification for the General Fund. This classification represents fund balances that has not been assigned to other funds and that has not been restricted, committed, or assigned to specific purposes within the General Fund. Fund Balances of the Governmental Funds at June 30, 2012, are as follows: Nonspendable Inventories Prepaid Assets Restricted Capital Projects Debt Service Assigned Contracts School Activity Accounts Self-Insurance Unassigned $ 30,339.97 164,221.20 $ 194,561.17 $ 19,916,789.79 2,817,936.77 22,734,726.56 $ 1,189,580.98 159,861.51 50,922.93 1,400,365.42 5,702,098.32 Fund Balance, June 30, 2012 $ 30,031,751.47 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 Balance School Nutrition Fund $ 70,866.76 The deficit will be resolved as funds are available to pay accrued expenditures. - 15 - WASHINGTON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2012 EXHIBIT "I" USE OF ESTIMATES The preparation of the financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results may differ from those estimates. NOTE 3: BUDGETARY DATA The budget is a complete financial plan for the School District's fiscal year, and is based upon careful estimates of expenditures together with probable funding sources. The budget is legally adopted each year for the general fund and debt service fund. There is no statutory prohibition regarding over expenditure of the budget at any level. The budget for all governmental funds is prepared and adopted by fund and function. The legal level of budgetary control was established by the Board at the 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 in any budget function for any fund. Any position or expenditure not previously approved in the annual budget that exceeds $30,000.00 shall require Board approval unless the Superintendent deems the position or purchase an emergency. In such case, the expenditure shall be reported to the Board within 48 hours of the purchase. Revenues and Expenditures versus budget are reviewed at each monthly Board meeting. See Schedule 1 General Fund Schedule of Revenues, Expenditures and Changes in Fund Balances Budget to Actual for a detail of any over/under expenditures during the fiscal year under review. NOTE 4: DEPOSITS AND INVESTMENTS COLLATERALIZATION OF DEPOSITS Official Code of Georgia Annotated (O.C.G.A.) Section 45-8-12 provides that there shall not be on deposit at any time in any depository for a time longer than ten days a sum of money which has not been secured by surety bond, by guarantee of insurance, or by collateral. The aggregate of the face value of such surety bond and the market value of securities pledged shall be equal to not less than 110 percent of the public funds being secured after the deduction of the amount of deposit insurance. If a depository elects the pooled method (O.C.G.A. Section 45-8-13.1) the aggregate of the market value of the securities pledged to secure a pool of public funds shall be not less than 110 percent of the daily pool balance. Acceptable security for deposits consists of any one of or any combination of the following: 1. Surety bond signed by a surety company duly qualified and authorized to transact business within the State of Georgia, 2. Insurance on accounts provided by the Federal Deposit Insurance Corporation, 3. Bonds, bills, notes, certificates of indebtedness or other direct obligations of the United States or of the State of Georgia, - 16 - WASHINGTON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2012 EXHIBIT "I" 4. Bonds, bills, notes, certificates of indebtedness or other obligations of the counties or municipalities of the State of Georgia, 5. Bonds of any public authority created by the laws of the State of Georgia, providing that the statute that created the authority authorized the use of the bonds for this purpose, 6. Industrial revenue bonds and bonds of development authorities created by the laws of the State of Georgia, and 7. Bonds, bills, notes, certificates of indebtedness, or other obligations of a subsidiary corporation of the United States government, which are fully guaranteed by the United States government both as to principal and interest or debt obligations issued by or securities guaranteed by the Federal Land Bank, the Federal Home Loan Bank, the Federal Intermediate Credit Bank, the Central Bank for Cooperatives, the Farm Credit Banks, the Federal Home Loan Mortgage Association, and the Federal National Mortgage Association. CATEGORIZATION OF DEPOSITS Custodial credit risk is the risk that in the event of a bank failure, the School District's deposits may not be returned to it. At June 30, 2012, the bank balances were $29,010,165.37. The amounts exposed to custodial credit risk are classified into three categories as follows: Category 1 Category 2 - Category 3 - Uncollateralized, Cash collateralized with securities held by the pledging financial institution, or Cash collateralized with securities held by the pledging financial institution's trust department or agent but not in the School District's name. The School District's deposits by custodial risk category at June 30, 2012, are as follows: Custodial Credit Risk Category Bank Balance 1 $ 0.00 2 0.00 3 26,370,431.48 Total $ 26,370,431.48 CATEGORIZATION OF INVESTMENTS At June 30, 2012, the carrying value of the School District's total investments was $2,758,549.45, which is materially the same as fair value. This investment consisted entirely of funds invested in the Georgia Fund 1, formerly referred to as LGIP, administered by the State of Georgia, Office of the State Treasurer which is not required to be categorized since the School District did not own any specific identifiable securities in the pool. The investment policy of the State of Georgia, Office of the State Treasurer for the Georgia Fund 1 (Primary Liquidity Portfolio) does not provide for investment in derivatives or similar investments. Additional information on the Georgia Fund 1 is disclosed in the State of Georgia Comprehensive Annual Financial Report. This audit can be obtained from the Georgia Department of Audits and Accounts at http://www.audits.ga.gov/SGD/cafr.html. The Primary Liquidity Portfolio consists of Georgia Fund 1 which is not registered with the SEC as an investment company but does 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 and Poor's. The weighted average maturity of Georgia Fund 1 may not exceed 60 days. The weighted average maturity for Georgia Fund 1 on June 30, 2012, was 48 days. - 17 - WASHINGTON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2012 EXHIBIT "I" 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: Governmental Activities Capital Assets, Not Being Depreciated: Land Construction Work In Progress Balances July 1, 2011 Increases Decreases Balances June 30, 2012 $ 1,248,816.89 $ 1,024,529.65 $ 5,937.50 1,334,083.49 74,716.75 $ 2,198,629.79 1,340,020.99 Total Capital Assets, Not Being Depreciated Capital Assets, Being Depreciated: Buildings and Improvements Equipment Land Improvements Less: Accumulated Depreciation: Buildings and Improvements Equipment Land Improvements $ 1,254,754.39 $ 2,358,613.14 $ 74,716.75 $ 3,538,650.78 $ 39,849,868.08 5,525,640.51 $ 533,536.94 $ 264,323.19 22,264.08 $ 25,143.89 39,827,604.00 5,764,819.81 533,536.94 7,924,518.55 3,486,312.90 368,556.29 742,309.41 377,301.33 14,803.76 22,264.08 25,143.89 8,644,563.88 3,838,470.34 383,360.05 Total Capital Assets, Being Depreciated, Net $ 34,129,657.79 $ -870,091.31 $ 0.00 $ 33,259,566.48 Governmental Activity Capital Assets - Net $ 35,384,412.18 $ 1,488,521.83 $ 74,716.75 $ 36,798,217.26 Current year depreciation expense by function is as follows: Instruction Support Services Improvement of Instructional Services $ Business Administration Maintenance and Operation of Plant Student Transportation Services Food Services $ 13,679.20 5,562.48 36,678.49 209,128.02 830,476.06 265,048.19 38,890.25 $ 1,134,414.50 NOTE 7: INTERFUND ASSETS AND LIABILITIES Due to and due from other funds are recorded for interfund receivables and payables which arise from interfund transactions. Interfund balances at June 30, 2012, consisted of the following: Due From Other Funds Due To Other Funds General Fund Private Purpose $ 82.20 $ 82.20 $ 82.20 $ 82.20 - 18 - WASHINGTON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2012 EXHIBIT "I" NOTE 8: INTERFUND TRANSFERS Interfund transfers for the year ended June 30, 2012, consisted of the following: Transfer to Transfers From District-wide Capital Projects General Fund Debt Service Fund $ 21,619.34 1,231,437.32 Total $ 1,253,056.66 Transfers are used (1) to move SPLOST REVENUE TO THE DEBT SERVICE FUND FOR THE PAYMENT OF BONDS and (2) to reimburse the General Fund for expenditures for legal and architectural services made prior to the sale of bonds. NOTE 9: 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 assets. The School District has neither significantly reduced coverage for this risk 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, crime and automobile risks. Payment of excess insurance for the system varies by line of coverage. The School District is self-insured with regard to unemployment compensation claims. 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: Beginning of Year Liability Claims and Changes in Estimates Claims Paid End of Year Liability 2011 $ 2012 $ 2,560.00 $ 0.00 $ 545.00 $ 4,620.00 $ 3,105.00 $ 4,620.00 $ 0.00 0.00 - 19 - WASHINGTON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2012 EXHIBIT "I" The School District participates in the Georgia Education Workers' Compensation Trust, a public entity risk pool organized on December 1, 1991, to develop, implement and administer a program of workers' compensation self-insurance for its member organizations. The School District pays an annual premium to the Trust for its general worker's compensation insurance coverage. Specific excess of loss insurance coverage is provided through an agreement by the Trust with the Safety National Casualty Company to provide coverage for potential losses sustained by the Trust in excess of $1 million loss per occurrence, up to the statutory limit. Employers' Liability insurance coverage is also provided with limits of $2 million. The Trust covers the first $1 million of each Employers liability claim with Safety National providing additional Employers Liability limits up to a $2 million per occurrence maximum. Safety National Casualty Company also provides aggregate cover to the Trust with a loss fund percentage of 100%, based on the Fund's annual normal premium, up to a maximum limit of indemnity of aggregate limit of $2 million. The School District has purchased surety bonds to provide additional insurance coverage as follows: Position Covered Amount Superintendent All Employees $ 100,000.00 $ 100,000.00 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 DEBT OUTSTANDING General Obligation Bonds currently outstanding are as follows: Purpose Interest Rates Amount General Government - Refunding - Series 2008 General Government - Series 2011 A General Government - Series 2011 B (QSCB) 2.485% 2.0%-3.0% 3.360% $ 2,245,000.00 6,000,000.00 14,300,000.00 $ 22,545,000.00 Voters have authorized $7,700,000.00 in general obligation debt for capital outlay purposes which was not issued as of June 30, 2012. - 20 - WASHINGTON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2012 EXHIBIT "I" The changes in Long-Term Debt during the fiscal year ended June 30, 2012, were as follows: Balance July 1, 2011 Additions Governmental Funds Balance Deductions June 30, 2012 Due Within One Year (1) G. O. Bonds $ 6,565,000.00 $ 20,300,000.00 $ Compensated Absences 60,605.68 77,114.23 Bond Premiums Amortized 56,378.16 233,931.05 4,320,000.00 $ 22,545,000.00 $ 76,475.07 61,244.84 114,860.92 175,448.29 3,125,000.00 58,482.76 $ 6,681,983.84 $ 20,611,045.28 $ 4,511,335.99 $ 22,781,693.13 $ 3,183,482.76 (1) The portion of Compensated Absences due within one year has been determined to be immaterial to the basic financial statements. 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: General Obligation Debt Principal Interest Unamortized Bond Premium 2013 2014 2015 2016 2017 2018 - 2022 $ 3,125,000.00 $ 676,768.26 $ 3,500,000.00 592,365.76 2,490,000.00 504,780.00 1,915,000.00 480,480.00 1,915,000.00 480,480.00 9,600,000.00 2,162,160.00 58,482.76 58,482.76 58,482.76 Total Principal and Interest $ 22,545,000.00 $ 4,897,034.02 $ 175,448.28 In fiscal year 2012, the Washington County Board of Education sold $14,300,000.00 of Qualified School Construction Bonds (QSCBS) for the purpose of constructing a new high school in the School District. Under Federal Law, these bonds are eligible to receive an interest subsidy from the U. S. Government which will materially offset the School District's liability to make full interest debt service amortization payments as scheduled. To qualify for this subsidy the School District is required to periodically file appropriate documents with the Internal Revenue Service. The amount of interest due on the QSCBS bonds included from the above schedule is $4,564,560.00. The School District plans to receive 100% interest subsidy from the U. S. Government subsequent to June 30, 2012. NOTE 11: ON-BEHALF PAYMENTS The School District has recognized revenues and costs in the amount of $2,043,947.00 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 and Non-Certificated Personnel In the amount of $2,013,025.00 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 $30,922.00 - 21 - WASHINGTON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2012 EXHIBIT "I" NOTE 12: SIGNIFICANT COMMITMENTS The following is an analysis of significant outstanding construction or renovation contracts executed by the School District as of June 30, 2012: Unearned Executed Project Contracts New Washington County High School Complex $ 6,066,211.95 The amount described in this note is not reflected in the basic financial statements. NOTE 13: SUBSEQUENT EVENTS On October 4, 2012, the Board authorized the donation of Sandersville Elementary School to Oconee Fall Line Technical College via the State Properties Commission. NOTE 14: POST-EMPLOYMENT BENEFITS GEORGIA SCHOOL PERSONNEL POST-EMPLOYMENT HEALTH BENEFIT FUND Plan Description. The Georgia School Personnel Post-employment Health Benefit Fund (School OPEB Fund) is a cost-sharing multiple-employer defined benefit post-employment healthcare plan that covers eligible former employees of public school systems, libraries and regional educational service agencies. The School OPEB Fund provides health insurance benefits to eligible former employees and their qualified beneficiaries through the State Employees Health Benefit Plan administered by the Department of Community Health. The Official Code of Georgia Annotated (O.C.G.A.) assigns the authority to establish and amend the benefit provisions of the group health plans, including benefits for retirees, to the Board of Community Health (Board). The Department of Community Health, which includes the School OPEB Fund, issues a separate stand alone financial audit report and a copy can be obtained from the Georgia Department of Audits and Accounts. Funding Policy. The contribution requirements of plan members and participating employers are established by the Board in accordance with the current Appropriations Act and may be amended by the Board. Contributions of plan members or beneficiaries receiving benefits vary based on plan election, dependent coverage, and Medicare eligibility and election. For members with fewer than five years of service as of January 1, 2012, contributions also vary based on years of service. On average, members with five years or more of service as of January 1, 2012, pay approximately 25 percent of the cost of the health insurance coverage. In accordance with the Board resolution dated December 8, 2011, for members with fewer than five years of service as of January 1, 2012, the State provides a premium subsidy in retirement that ranges from 0% for fewer than 10 years of service to 75% (but no greater than the subsidy percentage offered to active employees) for 30 or more years of service. The subsidy for eligible dependents ranges from 0% to 55% (but no greater than the subsidy percentage offered to dependents of active employees minus 20%). No subsidy is available to Medicare eligible members not enrolled in a Medicare Advantage Option. The Board of Community Health sets all member premiums by resolution and in accordance with the law and applicable revenue and expense projections. Any subsidy policy adopted by the Board may be changed at any time by Board resolution and does not constitute a contract or promise of any amount of subsidy. Participating employers are statutorily required to contribute in accordance with the employer contribution rates established by the Board. The contribution rates are established to fund all benefits due under the health insurance plans for both active and retired employees based on projected "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. - 22 - WASHINGTON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2012 EXHIBIT "I" 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 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 $246.20 per member per month September 2011 - June 2012 $296.20 per member per month 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. The School District's combined active and retiree contributions to the health insurance plans, which equaled the required contribution, for the current fiscal year and the preceding two fiscal years were as follows: Fiscal Year Percentage Contributed Required Contribution 2012 2011 2010 100% 100% 100% $ 2,662,322.52 $ 2,655,892.43 $ 2,568,314.56 NOTE 15: RETIREMENT PLANS TEACHERS' RETIREMENT SYSTEM OF GEORGIA (TRS) Plan Description. The TRS is a cost-sharing multiple-employer defined benefit plan created in 1943 by an act of the Georgia General Assembly to provide retirement benefits for qualifying employees in educational service. A Board of Trustees comprised of active and retired members and ex-officio State employees is ultimately responsible for the administration of TRS. The Teachers' Retirement System of Georgia issues a separate stand alone financial audit report and a copy can be obtained from the Georgia Department of Audits and Accounts. On October 25, 1996, the Board created the Supplemental Retirement Benefits Plan of the Georgia Teachers' Retirement System (SRBP-TRS). SRBP-TRS was established as a qualified excess benefit plan in accordance with Section 415 of the Internal Revenue Code (IRC) as a portion of TRS. The purpose of SRBP-TRS is to provide retirement benefits to employees covered by TRS whose benefits are otherwise limited by IRC Section 415. Beginning July 1, 1997, all members and retired former members in TRS are eligible to participate in the SRBP-TRS whenever their benefits under TRS exceed the IRC Section 415 imposed limitation on benefits. TRS provides service retirement, disability retirement, and survivor's benefits. The benefit structure of TRS is defined and may be amended by State statute. A member is eligible for normal service retirement after 30 years of creditable service, regardless of age, or after 10 years of service and attainment of age 60. A member is eligible for early retirement after 25 years of creditable service. - 23 - WASHINGTON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2012 EXHIBIT "I" Normal retirement (pension) benefits paid to members are equal to 2% of the average of the member's two highest paid consecutive years of service, multiplied by the number of years of creditable service up to 40 years. Early retirement benefits are reduced by the lesser of one-twelfth of 7% for each month the member is below age 60 or by 7% for each year or fraction thereof by which the member has less than 30 years of service. It is also assumed that certain cost-of-living adjustments, based on the Consumer Price Index, will be made in future years. Retirement benefits are payable monthly for life. A member may elect to receive a partial lump-sum distribution in addition to a reduced monthly retirement benefit. Death, disability and spousal benefits are also available. Funding Policy. TRS is funded by member and employer contributions as adopted and amended by the Board of Trustees. Members become fully vested after 10 years of service. If a member terminates with less than 10 years of service, no vesting of employer contributions occurs, but the member's contributions may be refunded with interest. Member contributions are limited by State law to not less than 5% or more than 6% of a member's earnable compensation. Member contributions as adopted by the Board of Trustees for the fiscal year ended June 30, 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: Fiscal Year Percentage Contributed Required Contribution 2012 2011 2010 100% 100% 100% $ 1,682,505.01 $ 1,764,070.15 $ 1,732,763.08 PUBLIC SCHOOL EMPLOYEES' RETIREMENT SYSTEM (PSERS) Bus drivers, lunchroom personnel, and maintenance and custodial personnel are members of the Public School Employees' Retirement System of Georgia. The System is funded by contributions by the employees and by the State of Georgia. The School District makes no contribution to this plan. DEFINED CONTRIBUTION PLAN In 1982 the Washington County Board of Education began a tax deferred annuity plan under Internal Revenue Code Section 403(b) for its employees. This plan was established in order to provide retirement benefits in lieu of Social Security, The Board selected Lincoln National Life (Lincoln Alliance) as the provider of this plan from 1986 until currently. Certain contributions are required of all employees and are based on a percentage of earnings. For full-time employees, the employee and the Board contribute equally to the plan. All employees may contribute additional amounts on a voluntary basis as a pre-tax contribution or an after-tax Roth contribution. Full-time employees become vested in the board's contributions to the plan upon completing three years of service. Employee contributions are always vested. If an employee terminates before becoming vested, the Board's contributions and earnings are forfeited. Annually the accumulated forfeited balances are redistributed as a contribution to the accounts of active and vested employees of the Board. - 24 - WASHINGTON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2012 EXHIBIT "I" Employee-required contributions and earnings are available to the employee upon termination of service. Employee voluntary contributions are available upon reaching age 59.5 or termination of service, and under which certain circumstances, are available as loans or hardship distributions while employed. Employer contributions and earnings are available to the employee upon termination of service, but are only available in the form of a periodic retirement income payment such as a life-time annuity. Employer contributions for the current fiscal year and the preceding two fiscal years are as follows: Fiscal Year Percentage Contributed Required Contribution 2012 2011 2010 100% $ 100% $ 100% $ 987,621.30 1,038,023.83 1,071,517.41 - 25 - (This page left intentionally blank) WASHINGTON COUNTY BOARD OF EDUCATION GENERAL FUND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL YEAR ENDED JUNE 30, 2012 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 Excess of Revenues over (under) Expenditures OTHER FINANCING SOURCES Other Sources Net Change in Fund Balances Fund Balances - Beginning Adjustments NONAPPROPRIATED BUDGETS ORIGINAL (1) FINAL (1) ACTUAL AMOUNTS VARIANCE OVER/UNDER $ 12,004,999.00 $ 12,004,999.00 $ 10,912,013.11 $ -1,092,985.89 5,000.00 5,000.00 15,989.09 10,989.09 12,333,583.16 12,365,100.99 12,347,513.00 -17,587.99 4,270,169.65 4,555,260.65 4,369,198.42 -186,062.23 102,213.73 102,213.73 499,516.07 397,302.34 81,460.22 81,460.22 75,463.68 -5,996.54 53,410.79 63,184.29 457,238.91 394,054.62 $ 28,850,836.55 $ 29,177,218.88 $ 28,676,932.28 $ -500,286.60 $ 16,792,686.15 $ 16,985,003.14 $ 17,136,287.28 $ -151,284.14 1,175,128.40 1,242,794.91 442,528.46 686,505.33 2,153,705.16 409,679.66 2,517,068.90 1,547,708.93 2,999.81 134,872.00 855,857.10 1,187,443.57 1,347,598.10 442,528.46 686,718.33 2,139,611.16 409,679.66 2,517,068.90 1,629,594.93 2,999.81 137,853.84 855,857.10 1,123,041.11 1,133,555.51 394,936.07 676,290.47 2,040,496.47 462,696.69 2,206,467.04 1,796,792.14 121,970.27 1,710,449.84 64,402.46 214,042.59 47,592.39 10,427.86 99,114.69 -53,017.03 310,601.86 -167,197.21 2,999.81 15,883.57 -854,592.74 $ 27,961,534.81 $ 28,341,957.00 $ 28,802,982.89 $ -461,025.89 $ 889,301.74 $ 835,261.88 $ -126,050.61 $ -961,312.49 21,619.34 21,619.34 $ 889,301.74 $ 835,261.88 $ -104,431.27 $ -939,693.15 7,365,998.03 7,365,998.03 7,401,456.18 35,458.15 -27,134.06 3,205.91 -3,205.91 Fund Balances - Ending $ 8,228,165.71 $ 8,204,465.82 $ 7,297,024.91 $ -907,440.91 Notes 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 or expenditures of the various principal accounts. The principal accounts had actual revenues of $727,068.13 and actual expenditures of $649,526.55. 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. - 27 - WASHINGTON COUNTY BOARD OF EDUCATION SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS YEAR ENDED JUNE 30, 2012 SCHEDULE "2" FUNDING AGENCY PROGRAM/GRANT Agriculture, U. S. Department of Child Nutrition Cluster Pass-Through From Georgia Department of Education Food Services School Breakfast Program National School Lunch Program Total U. S. Department of Agriculture Education, U. S. Department of Educational Technology State Grants Cluster Pass-Through From Georgia Department of Education ARRA - Education Technology State Grants Special Education Cluster Pass-Through From Georgia Department of Education Special Education Grants to States Preschool Grants Total Special Education Cluster Title I, Part A Cluster Pass-Through From Georgia Department of Education ARRA - Title I Grants to Local Educational Agencies Title I Grants to Local Educational Agencies Total Title I, Part A Cluster Other Programs Pass-Through From Georgia Department of Education Career and Technical Education - Basic Grants to States Education Jobs Fund Improving Teacher Quality State Grants Rural Education Total Other Programs Total U. S. Department of Education Labor, U. S. Department of Workforce Investment Act Cluster Pass-Through From East Central Georgia Consortium Workforce Investment Act Youth Activities 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 * 10.553 * 10.555 N/A (2) N/A $ 1,599,361.72 (1) $ 1,599,361.72 * 84.386 N/A $ 462,410.27 84.027 84.173 N/A $ N/A $ 637,067.52 24,306.04 661,373.56 84.389 84.010 N/A $ 243.94 N/A 1,228,031.49 $ 1,228,275.43 84.048 84.410 84.367 84.358 N/A $ N/A N/A N/A 35,550.96 7,544.00 236,707.00 105,690.62 $ 385,492.58 $ 2,737,551.84 17.259 N/A $ 36,252.00 $ 55,828.60 Total Expenditures of Federal Awards N/A = Not Available $ 4,428,994.16 - 28 - WASHINGTON COUNTY BOARD OF EDUCATION SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS YEAR ENDED JUNE 30, 2012 SCHEDULE "2" Notes to the Schedule of Expenditures of Federal Awards (1) Includes the Federally assigned value of donated commodities for the Food Donation Program in the amount of $132,089.28. (2) Expenditures for the funds earned on the School Breakfast Program ($438,399.48) were not maintained separately and are included in the 2012 National School Lunch Program. 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 Washington County Board of Education and is presented on the modified accrual basis of accounting which is the basis of accounting used in the presentation of the fund financial statements. See notes to the basic financial statements. - 29 - WASHINGTON COUNTY BOARD OF EDUCATION SCHEDULE OF STATE REVENUE YEAR ENDED JUNE 30, 2012 AGENCY/FUNDING GRANTS Bright From the Start: Georgia Department of Early Care and Learning Pre-Kindergarten Program Communities in Schools Georgia Pass-Through Funds to Local Communities in Schools Organizations Washington County Family Connections and Communities in Schools Education, Georgia Department of Quality Basic Education Direct Instructional Cost Kindergarten Program Primary Grades (1-3) Program Upper Elementary Grades (4-5) Program Middle School (6-8) Program High School General Education (9-12) Program Vocational Laboratory (9-12) Program Students with Disabilities Gifted Student - Category VI Remedial Education Program Alternative Education Program 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 Nursing Services Vocational Supervisors Mid-term Adjustment Hold-Harmless Food Services Vocational Education Amended Formula Adjustment Other State Programs Dual Enrollment Funding Health Insurance Math and Science Supplements Preschool Handicapped Program Pupil Transportation - State Bonds Virtual Schools Grant Office of the State Treasurer Public School Employees Retirement CONTRACT Human Resources, Georgia Department of Family Connection See notes to the basic financial statements. - 30 - SCHEDULE "3" GOVERNMENTAL FUND TYPE GENERAL FUND $ 239,355.91 16,000.00 991,751.00 1,917,525.00 879,913.00 1,561,160.00 1,448,283.00 398,590.00 1,606,708.00 240,796.00 77,780.00 129,095.00 266,822.00 83,111.00 53,956.00 392,462.00 520,475.00 695,213.00 584,947.00 62,068.00 14,094.00 13,218.00 53,448.00 31,010.69 -2,233,345.00 4,709.00 2,013,025.00 2,188.44 55,593.00 152,439.00 200.00 30,922.00 43,999.96 $ 12,347,513.00 WASHINGTON COUNTY BOARD OF EDUCATION SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS YEAR ENDED JUNE 30, 2012 SCHEDULE "4" PROJECT 2007-2011 ESPLOST ORIGINAL ESTIMATED COST (1) CURRENT ESTIMATED COSTS (2) AMOUNT EXPENDED IN CURRENT YEAR (3) AMOUNT EXPENDED IN PRIOR YEARS (3) TOTAL COMPLETION COST EXCESS PROCEEDS NOT EXPENDED (4) ESTIMATED COMPLETION DATE 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, renovation, repair, paving and improvement to driveways and parking facilities; the acquisition and purchase of any property necessary and 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 vehicles and equipment; and the purchase of land Project #1 Ridge Road Primary/Elementary Complex $ 20,000,000.00 $ 24,604,960.83 $ 80,000.00 $ 24,524,960.83 $ 24,604,960.83 $ 0.00 Completed Project #2 Demolition of T.J. Elder Primary 298,520.00 298,520.00 298,520.00 0.00 Completed Project #3 Improvements at T.J. Elder Middle School 94,047.59 94,047.59 94,047.59 0.00 Completed Project #4 Purchase of Land 1,075,094.87 1,075,094.87 1,075,094.87 0.00 Completed Project #5 Unexpended Funds Remaining 675,451.28 675,451.28 12/31/2013 $ 20,000,000.00 $ 26,748,074.57 $ 1,155,094.87 $ 24,917,528.42 $ 26,072,623.29 $ 675,451.28 - 31 - WASHINGTON COUNTY BOARD OF EDUCATION SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS YEAR ENDED JUNE 30, 2012 SCHEDULE "4" PROJECT 2011-2015 ESPLOST The (i) acquisition, construction, equipping and furnishing of a new high school, including related physical education and athletic facilities, (ii) the demolition and destruction of existing school buildings and facilities, (iii) the addition, renovation, repair, improvement and equipping of existing school buildings and facilities, including paving and improvement to driveways and parking facilities, (iv) the acquisition and purchase of any property necessary and desirable therefore, both real and personal, including, but not limited to, administrative and instructional technology equipment, computer hardware and software, safety and security equipment, (v) the acquisition of textbooks, vocational and fine arts equipment, (vi) the purchase of land, and (vii) purchasing school buses and transportation equipment ORIGINAL ESTIMATED COST (1) CURRENT ESTIMATED COSTS (2) AMOUNT EXPENDED IN CURRENT YEAR (3) AMOUNT EXPENDED IN PRIOR YEARS (3) TOTAL COMPLETION COST EXCESS PROCEEDS NOT EXPENDED (4) ESTIMATED COMPLETION DATE Project #1 New High School Complex $ 23,000,000.00 $ 29,583,931.00 $ 1,844,474.22 $ 0.00 $ 0.00 $ 0.00 12/31/2016 $ 23,000,000.00 $ 29,583,931.00 $ 1,844,474.22 $ 0.00 $ 0.00 $ 0.00 (1) The School District's original funding estimate as specified in the resolution calling for the imposition of the Local Option Sales Tax. This is the maximum amount to be contributed to the total project cost from this SPLOST. (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 approved the imposition of a 1% sales tax to fund the above projects and retire associated debt. Amounts expended for these projects may include sales tax proceeds, state, local property taxes and/or other funds over the life of the projects. (4) The unexpended funds remaining are available for use as approved in the original referendum. Any funds not required for those expenditures will be used to satisfy future debt service payments. On September 19, 2006, the voters approved the issuance of $13.6M in debt to forward fund the completion of Ridge Road Elementary/Primary Complex. In August of 2007, the Board issued debt in the form of General Obligation Bonds in the amount of $12.1M. SPLOST proceeds have been used to service the debt over its five year term. The debt was paid in full on December 1, 2011. On September 15th 2009, the voters approved the issuance of $28M in debt to forward fund the completion of a New Washington County High School Complex. On the same ballot, the voters approved the continuation of the existing SPLOST. In December 2011, the Board issued debt in the form of two General Obligation Bonds; Tax Exempt (Series A) in the amount of $6M and QSCBS (Series B) in the amount of $14.3M. SPLOST proceeds will be used to service the debt over their 2.5 year and 10 year terms, respectively. The debt will be paid in full on December 1, 2014 and December 1, 2021. See notes to the basic financial statements. - 32 - WASHINGTON COUNTY BOARD OF EDUCATION GENERAL FUND - QUALITY BASIC EDUCATION PROGRAMS (QBE) ALLOTMENTS AND EXPENDITURES BY PROGRAM YEAR ENDED JUNE 30, 2012 SCHEDULE "5" DESCRIPTION Direct Instructional Programs Kindergarten Program Kindergarten Program-Early Intervention Program Primary Grades (1-3) Program Primary Grades-Early Intervention (1-3) Program Upper Elementary Grades (4-5) Program Upper Elementary Grades-Early Intervention (4-5) Program Middle School (6-8) Program High School General Education (9-12) Program Vocational Laboratory (9-12) Program Students with Disabilities Category I Category II Category III Gifted Student - Category VI Remedial Education Program Alternative Education Program TOTAL DIRECT INSTRUCTIONAL PROGRAMS Media Center Program Staff and Professional Development ALLOTMENTS FROM GEORGIA DEPARTMENT OF EDUCATION (1) (2) ELIGIBLE QBE PROGRAM COSTS SALARIES OPERATIONS TOTAL $ 1,296,388.00 $ 290,923.83 $ 1,614.27 $ 292,538.10 344,331.03 344,331.03 2,537,975.00 2,379,060.87 6,109.08 2,385,169.95 1,175,022.00 2,077,337.00 1,901,474.00 560,217.00 2,103,879.00 624,238.14 1,062,404.01 151,918.92 2,474,410.19 2,953,844.44 610,240.46 318,003.00 112,628.00 171,020.00 276,105.23 1,371,065.46 258,331.22 178,730.17 365,589.78 5,700.00 8,033.58 36,717.76 35,044.60 405.29 536.50 219.92 400.05 1,180.18 624,238.14 1,068,104.01 151,918.92 2,482,443.77 2,990,562.20 645,285.06 405.29 276,641.73 1,371,285.38 258,731.27 178,730.17 366,769.96 $ 12,253,943.00 $ 13,341,193.75 $ 95,961.23 $ 13,437,154.98 353,982.00 71,489.00 393,088.15 22,149.82 1,108.75 394,196.90 22,149.82 TOTAL QBE FORMULA FUNDS $ 12,679,414.00 $ 13,756,431.72 $ 97,069.98 $ 13,853,501.70 (1) Comprised of State Funds plus Local Five Mill Share. (2) Allotments do not include the impact of the State amended formula adjustment. See notes to the basic financial statements. - 33 - 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 February 14, 2013 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, 2012, which collectively comprise Washington County Board of Education's basic financial statements and have issued our report thereon dated February 14, 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 Washington County Board of Education is responsible for establishing and maintaining effective internal control over financial reporting. 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. 2012YB-10 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. Compliance and 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 certain matters that we have reported to management of Washington County Board of Education in a separate letter dated February 14, 2013. 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, GSG:as 2012YB-10 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 February 14, 2013 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 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 Washington 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. 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 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 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, 2012. 2012SA-10 Internal Control Over Compliance 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. Respectfully submitted, GSG:as 2012SA-10 Greg S. Griffin State Auditor SECTION III 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, 2012 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 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? Significant deficiency identified? No None Reported Noncompliance material to financial statements noted: No Federal Awards Internal Control over major programs: Material weakness identified? Significant deficiency identified? No None Reported 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)? No Identification of major programs: CFDA Numbers Name of Federal Program or Cluster 10.553, 10.555 84.386 Child Nutrition Cluster Education Technology State Grants Cluster Dollar threshold used to distinguish between Type A and Type B programs: Auditee qualified as low-risk auditee? $300,000.00 Yes II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS No matters were reported. III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS No matters were reported.