WHITFIELD COUNTY BOARD OF EDUCATION
DALTON, GEORGIA
ANNUAL FINANCIAL REPORT FOR THE FISCAL YEAR ENDED
JUNE 30,2010
(Including Independent Auditor's Reports)

WHITFIELD COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS -

SECTION I

FINANCIAL

INDEPENDENT AUDITOR'S COMBINED REPORT ON BASIC FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION - SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS

REQUIRED SUPPLEMENTARY INFORMATION

MANAGEMENT'S DISCUSSION AND ANALYSIS

EXHIBITS

BASIC FINANCIAL STATEMENTS

DISTRICT-WIDE FINANCIAL STATEMENTS

A

STATEMENT OF NET ASSETS

B

STATEMENT OF ACTlVlTlES

FUND FINANCIAL STATEMENTS

C

BALANCE SHEET

GOVERNMENTAL FUNDS

D

RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET

TO THE STATEMENT OF NET ASSETS

E

STATEMENT OF REVENUES, EXPENDITURES AND CHANGES

IN FUND BALANCES

GOVERNMENTAL FUNDS

F

RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT

OF REVENUES, EXPENDITURES AND CHANGES IN FUND

BALANCES TO THE STATEMENT OF ACTIVITIES

G

STATEMENT OF FIDUCIARY NET ASSETS

FIDUCIARY FUNDS

H

NOTES TO THE BASIC FINANCIAL STATEMENTS

SCHEDULES

REQUIRED SUPPLEMENTARY INFORMATION

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

WHITFIELD COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS -
SECTION I FINANCIAL SCHEDULES SUPPLEMENTARY INFORMATION 2 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS 3 SCHEDULE OF STATE REVENUE 4 SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS 5 ALLOTMENTS AND EXPENDITURES GENERAL FUND - QUALITY BASIC EDUCATION PROGRAMS (QBE) BY PROGRAM
SECTION II COMPLlANCE AND INTERNAL CONTROL REPORTS INDEPENDENT AUDITOR'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MAlTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WlTH GOVERNMENTAUDITING STANDARDS INDEPENDENT AUDITOR'S REPORT ON COMPLIANCE WlTH REQUIREMENTS THAT COULD HAVE A DIRECT AND MATERIAL EFFECT ON EACH MNOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WlTH OMB CIRCULAR A-133
SECTION Ill AUDITEE'S RESPONSE TO PRIOR YEAR FINDINGS AND QUESTIONED COSTS SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS
SECTION IV FINDINGS AND QUESTIONED COSTS SCHEDULE OF FINDINGS AND QUESTIONED COSTS

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

SECTION I FINANClAL

Russell W. Hinton
STATE AUDITOR
(404) 656-2174

DEPARTMENOTF AUDITSAND ACCOUNTS
270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400
October 6. 2 0 1 1

Honorable Nathan Deal, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the Whitfield County Board of Education
INDEPENDENTAUDITOR'S COMBINED REPORT ON BASIC FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION -SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
Ladies and Gentlemen:
We have audited the accompanying financial statements of the governmental activities, each major fund, and the aggregate remaining fund information (Exhibits A through H) of the Whitfield County Board of Education, as of and for the year ended June 30, 2010, which collectively comprise the Board's basic financial statements as listed in the table of contents. These financial statements are the responsibility of the Whitfield County Board of Education's management. Our responsibility is to express opinions on these financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in GovernmentAuditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and the significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinions.
In our opinion, the financial statements referred to previously present fairly, in all material respects, the respective financial position of the governmental activities, each major fund, and the aggregate remainingfund information of the Whitfield County Board of Education, as of June 30, 2010, and the respective changes in financial position thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America.
In accordance with GovernmentAuditing Standards, we have also issued our report dated October 6, 2011, on our consideration of the Whitfield 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 toprovide 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 Audl;tng Standardsand should be considered in assessingthe results of our audit.
Accounting principles generally accepted in the United States of America require that the Management's Discussionand Analysis and the Schedule of Revenues, Expendituresand Changes in Fund Balances - Budget and Actual, as presented on pages i through viii and page 25 respectively, be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures, to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during the audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance.
Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Whitfield 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 o f States, Local Governments, and Non-Prom Organiraions, are presented for purposes of additional analysis and are not a required part of the financial statements. Such information is the responsibility of management and was derived from and relate directly to the underlying accounting and other records used to prepare the financial statements. The information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated, in all material respects, in relation to the financial statements as a whole.
A copy of this report has been filed as a permanent record in the office of the State Auditor and made available to the press of the State, as provided for by Official Code of Georgia Annotated section 50-6-24.
Respectfully submitted,
q+34a2d d %
~ u d e lWl . Hinton, CPA, CGFM State Auditor

WHITFIELD COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30,2010
INTRODUCTION
Our discussion and analysis of the Whitfield County Board of Education's financial performance provides an overview of the School District's financial activities for the fiscal years ended June 30, 2009 and June 30, 2010. The intent of this discussion and analysis is to look at the School District's financial performance as a whole; readers should also review the notes to the basic financial statements and financial statements to enhance their understanding of the School District's financial performance.
FINANCIAL HIGHLIGHTS
Key financial highlights for the fiscal years 2010 and 2009 are as follows:
a On the District-wide financial statements, the assets of the School District exceeded liabilities by $195.6 million and $184.3 million, respectively, for the fiscal years ended June 30, 2010, and 2009. Of these amounts $10.7 and $12.1 million, respectively, for fiscal years 2010 and 2009 are available for spending a t the School District's discretion.
The School District had $122.5 million and $124.4 million, respectively, in expenses for the fiscal years ended June 30, 2010, and June 30, 2009, relating to governmental activities. Only $82.4 million and $79.8 million of the above mentioned expenses for 2010 and 2009 were offset by program specific charges for services, grants and contributions. General revenues (primarily property and sales taxes) totaling $51.4 million and $54.7 million, respectively,for 2010 and 2009 were adequate to provide for these programs.
As stated above, general revenues accounted for $51.4 million or 38.5% of all revenues totaling $133.8 million for fiscal year 2010 and $54.7 million or 40.7% of all revenues totaling $134.5 million for fiscal year 2009. Program specific revenues in the form of charges for services, grants and contribution accounted for the rest.
Overview of the Financial Statements
This annual report consists of three parts; management's discussion and analysis, the basic financial statements and required supplementary information. The basic financial statements include two levels of statements that present different views of the School District. These include the Districtwide and fund financial statements.
The District-wide financial statements include the Statement of Net Assets and Statement of Activities. These statements provide information about the activities of the School District presenting both short-term and long-term information about the School District's overall financial status.
The fund financial statements focus on individual parts of the School District, reporting the School District's operation in more detail. The Governmental Funds statements disclose how basic services are financed in the short-term as well as what remains for future spending. The Fiduciary Funds statements provide information about the financial relationships in which the School District acts solely as a trustee or agent for the benefit of others. The fund financial statements reflect the School District's most significant funds. In the case of the Whitfield County School District, the General Fund, District-wide Capital Projects Fund, and Debt Service Fund are the most significant funds.

WHITFIELD COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30,2010
The financial statements also include notes that explain some of the information in the statements and provide more detailed data. The statements are followed by a section of required supplementary information that further explains and supports the financial statements. Additionally, other supplementary information (not required) is also presented that further supplements understanding of the financial statements.
District-wide Statements
The District-wide financial statements are basically a consolidation of all of the School District's operating funds into one column called governmental activities. In reviewing the District-wide financial statements, a reader might ask the question, are we in a better financial position than last year? The Statement of Net Assets and the Statement of Activities provides the basis for answering this question. These financial statements include all School District's assets and liabilities and uses the accrual basis of accounting similar to the accounting used by most private-sector companies. This basis of accounting takes into account all of the current year's revenues and expenses regardless of when cash is received or paid.
These two statements report the School District's net assets and any changes in those assets. The change in net assets is important because it tells the reader that, for the School District as a whole, the financial position of the School District has improved or diminished. The causes of this change may be the results of many factors, including those not under the School District's control, such as the property tax base, facility conditions, required educational programs and other factors.
The Statement of Net Assets and the Statement of Activities reflects the School District's governmental activities.
Fund Financial Statements
The School District uses many funds to account for a multitude of financial transactions during the fiscal year. However, the fund financial statements presented in this report provide detail information about only the School District's significant or major funds.
Governmental Funds - Most of the School District's activities are reported in governmental funds, which focus on how money flows into and out of those funds and the balances left at year-end available for spending in future periods. These funds are reported using the modified accrual method of accounting, which measures cash and all other financial assets that can readily be converted to cash. The governmental fund statements provide a detailed short-term view of the School District's general government operations and the basic services it provides. Governmental fund information helps determine whether there are more or fewer financial resources that can be spent in the near future to finance educational programs. The differences between governmental activities (reported in the Statement of Net Assets and the Statement of Activities) and governmental funds are reconciled to the financial statements.
Fiduciary Funds -The School District is the trustee, or fiduciary, for assets that belong to others, such as school clubs and organizations within the principals' accounts. The School District is responsible for ensuring that the assets reported in these funds are used only for their intended purposes and by those to whom the assets belong. The School District excludes these activities from the District-wide financial statements because it cannot use these assets to finance its operations.

WHITFIELD COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30,2010

FINANCIALANALYSIS OF THE SCHOOL DISTRICT AS A WHOLE
Recall that the Statement of Net Assets provides the perspective of the School District as a whole. Table 1provides a summary of the School District's net assets for fiscal years 2010 and 2009.

Table 1 Net Assets

Governmental Activities

Fiscal

Fiscal

Year 2010

Year 2009

Assets Current and Other Assets Capital Assets, Net

Total Assets

Liabilities Current and Other Liabilities Long-Term Liabilities

Total Liabilities

Net Assets Invested in Capital Assets, Net of Related Debt Restricted Unrestricted

Total Net Assets

Table 2 shows the Changes in Net Assets for fiscal years ending June 30, 2 0 1 0 and June 30,2009.

WHITFIELD COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30,2010

Table 2 Change in Net Assets
Revenues Program Revenues: Chargesfor Services and Sales Operating Grants and Contributions Capital Grants and Contributions
Total Program Revenues
General Revenues: Taxes Property Taxes For Maintenance and Operations Railroad Cars Sales Taxes Special Purpose Local Option Sales Tax For Capital Projects Intangible RecordingTax Real Estate Transfer Tax Grants and Contributions not Restricted to Specific Programs Investment Earnings Miscellaneous
Total General Revenues
Total Revenues
Program Expenses: Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Bus~nessAdmlnlstration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Operations of Non-InstructionalServices Community Services Food Services Interest on Short-Termand Long-Term Debt
Total Expenses
Increase in Net Assets

Governmental Activities

Fiscal Year

Fiscal Year

2010

2009

WHITFIELD COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30,2010

Governmental Activities
The Statement of Activities shows the cost of program services and the charges for services and grants offsetting these services. Table 3 shows, for governmental activities, the total cost of services and the net cost of services. Net cost of services can be defined as the total cost less fees generated by the activities and intergovernmental revenue provided for specific programs. The net cost reflects the financial burden on the School District's taxpayers by each activity.

Table 3 Governmental Activities

Total Cost of Services

Fiscal

Fiscal

Year 2010

Year 2009

Net Cost of Services

Fiscal

F~scal

Year 2010

Year 2009

Instruction Support Services:
Pupil Services Improvement of Instructional Services EducationalMedia Serv~ces General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Servlces Other Support Services Operationsof Non-InstructionalServices: Community Services Food Services Interest on Short-Term and Long-Term Debt
Total Expenses

FINANCIAL ANALYSIS OF THE SCHOOL DISTRICT'S FUNDS
The School District's governmental funds are accounted for using the modified accrual basis of accounting. The governmental funds had total revenues of $133.3 million and total expenditures of $147.8 million for fiscal year 2010 and total revenues of $133.9 million and total expenditures of $156.4 million for fiscal year 2009. The decrease in expenditures is due to a decrease in ESPLOST activity.
General Fund Budgeting Highlights
The School District's budget is prepared according to Georgia Law. The most significant budgeted fund is the General Fund. During the course of fiscal years 2010 and 2009, the School District amended its general fund budget as needed.

WHITFIELD COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30,2010
During fiscal year 2010, the General Fund had final actual revenues totaling $116.8 million, which was more than the final budgeted amounts of $114.0 million by $2.8 million. This difference (final actual vs. final budget) was primarily due to conservative budgeting. Property and sales taxes (Intangible and Real Estate taxes) exceeded budgeted revenues $1.3 million due to conservative budgeting. State revenues were less than budgeted revenues $8.6 million due to slowing revenue collections. Federal revenue collections exceeded budgeted revenues $7.1 million primarily due to the receipt of Federal stimulus funding (American Reinvestment and Recovery Act). The American Recovery and Reinvestment Act of 2009, abbreviated ARRA and commonly referred to as the Stimulus or The Recovery Act, is an economic stimulus package enacted by the 1 1 1 t h United States Congress in February 2009 and signed into law on February 17, 2009 by President Barack Obama. The primary objective for ARRA was to save and create jobs almost immediately. Secondary objectives were to provide temporary relief programs for those most impacted by the recession and invest in infrastructure, education, health, and 'green' energy. The ARRA funds helped offset the declines in state revenue. Miscellaneous revenues exceeded budgeted revenues $2.7 due to unbudgeted revenues from school activity accounts of $2.6 million. lnvestment revenue is primarily derived from our investment of cash in the State's Local Government lnvestment Pool (LGIP). The rate of return continues to decrease as a result of declining interest rates.
During fiscal year 2009, the General Fund had final actual revenues totaling $118.5 million, which was less than the final budgeted amounts of $119.7 million by $1.2 million. This difference (final actual vs. final budget) was primarily due to a reduction in revenues due to a slowing economy. Property and sales taxes (Intangible and Real Estate taxes) exceeded budgeted revenues $1.4 million due to conservative budgeting. State revenues were less than budgeted revenues $6.9 million due to slowing revenue collections. Federal revenue collections exceeded budgeted revenues $1.2 million primarily due to American Recovery and Reinvestment Funds (ARRA). Miscellaneous revenues exceeded budgeted revenues $2.8 due to unbudgeted revenues from school activity accounts of $2.5 million. lnvestment revenue is primarily derived from our investment of cash in the State's Local Government lnvestment Pool (LGIP). The rate of return decreased as a result of the slow economy.
During the fiscal year 2010, the General Fund had final actual expenditures totaling $115.9 million, which was less than the final budgeted amount of $118.1 million by $2.2 million. Instructional budget exceeded actual expenses $1.7 million due to conservative budgeting. The total expenditures include unbudgeted expenditures from school activity accounts of $3.2 million.
During the fiscal year 2009, the General Fund had final actual expenditures totaling $118.2 million, which was less than the final budgeted amount of $121.6 million by $3.4 million. Instructional budget exceeded actual expenses $4.0 million due to conservative budgeting. The total expenditures include unbudgeted expenditures from school activity accounts of $3.0 million.
During the fiscal year 2010, the General Fund transferred to the Capital Projects Fund $2.2 million for the purpose of providing sewer service to the new high school under construction through an intergovernmental agreement with Dalton Utilities.
General fund expenditures exceeded revenues and other financing uses resulting in a deficit of $1,329,916 for the fiscal year 2010. General fund expenditures exceeded revenues and other financing uses resulting in a deficit of $155,569 for the fiscal year 2009.

WHITFIELD COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30,2010

CAPITAL ASSETS AND DEBT ADMINISTRATION
Capital Assets
At the fiscal years ended June 30, 2010 and June 30, 2009, the School District had $174.7 million and $160.0 million, respectively, invested in capital assets, all in governmental activities. Table 4 reflects a summary of these balances net of accumulated depreciation. The district completed the construction of Cedar Ridge Elementary School and renovation of Dug Gap Elementary School funded through ESPLOST. An Athletic Facility was constructed at Westside Middle School funded by a donation from a member of the Westside community.
Table 4 Capital Assets (Net of Depreciation)

Land Construction In Progress Buildingand Improvements Equipment Land Improvements
Total

Governmental Activities

Fiscal

Fiscal

Year 2010

Year 2009

$

8,624,659 $

20,652,693

132,198,317

8,204,594

5,057,881

7,426,174 22,397,164 116,767,922
8,248,348 5,172,501

In accordance with the 2006 referendum pass by 2/3's of the voters, the School District has numerous construction projects in progress including a new elementary and high school, additions and renovations.

Debt

At the fiscal years ending June 30, 2010 and June 30, 2009, the School District had $68.5 million and $78.2 million, respectively, in bonds outstanding. Table 5 summarizes the School District's debt for general obligation bonds.
Table 5 Debt at June 30

Governmental Activities

Fiscal

Fiscal

Year 2010

Year 2009

Compensated Absences Bonds Payable Bond Premium Amortized
Total

$

277,832 $

68,480,000

3,089,691

303,608 78,245,000
3,541,840

WHITFIELD COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCALYEAR ENDED JUNE 30,2010
At June 30, 2010 and June 30, 2009, the School District's assigned bond rating was "Aal" as determined by Moody's Investors Services, Inc.
Current Issues
Currently known facts, decisions or conditions that are expected to have a significant effect on financial positions or results of operations.
Economic Recession - decreases in total State funding for education have been forecasted as a result of slowing state tax revenues. Whitfield County Schools continues to prioritize its educational programs and seek opportunities for gained efficiencies within its resources to meet the growing demands of our customers. The School District continues to provide an increasing amount of local monies to meet various mandated educational requirements. Whitfield County School District remains optimistic about the ability of the School District to maximize all of the financial resources to provide a quality education to our students.
Capital Improvements - The School District will continue to meet its obligation to the citizens of Whitfield County in accordance with the 2006 ESPLOST referendum. This referendum includes plans for renovations, classroom technology, new elementary and high schools and other capital needs that may arise.
CONTACTING THE SCHOOL DISTRICT'S FINANCIAL MANAGEMENT
This financial report is designed to provide our citizens, taxpayers, investors and creditors with a general overview of the School District's finances and to demonstrate the School District's accountability for the funds it receives. If you have questions about this report or need additional financial information, contact Whitfield County Board of Education, 1306 South Thornton Avenue, Dalton, Georgia 30720.

WHITFIELD COUNTY BOARD OF EDUCATION

WHITFIELD COUNTY BOARD OF EDUCATION STATEMENT OF NET ASSETS JUNE 30,2010
ASSETS
Cash and Cash Equivalents Investments Accounts Rece~vableN, et
Taxes State Government Federal Government Local Other Inventories Capital Assets, Non-Depreciable Capital Assets, Depreciable (Net of Accumulated Depreciation)
Total Assets
LIABILITIES
Accounts Payable Salaries and Benefits Payable Claims Incurred but not Reported (IBNR) 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
Continuation of Federal Programs Debt Service Capital Projects Unrestricted
Total Net Assets
Total Liabilities and Net Assets

EXHIBIT "AA"
GOVERNMENTAL ACTIVITIES

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

WHITFIELD COUNTY BOARD OF EDUCATION STATEMENT OF ACTIVITIES
FOR THE YEAR ENDED JUNE 30,2010

GOVERNMENTAL ACTIVITIES
Instruction Support Services
Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Buslness Adm~nlstratlon Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Operations of Non-InstructionalServices Community Services Food Services Interest on Short-Term and Long-Term Debt
Total Governmental Act~vitles
General Revenues Taxes Property Taxes For Maintenance and Operations Other Taxes Sales Taxes Special Purpose Local Option Sales Tax For Capital Projects Other Sales Tax Grants and Contributions not Restricted to Speclfic Programs Investment Earnlngs Miscellaneous
Total General Revenues
Change In Net Assets
Net Assets - Beginning of Year
- Net Assets End of Year

EXPENSES

CHARGESFOR SERVICES

The notes to the basic financial statements are an integral part of this statement.
- 2 -

PROGRAM REVENUES OPERATING GRANTS AND
CONTRIBUTIONS

CAPITAL GRANTS AND CONTRIBUTIONS

NET (EXPENSES) REVENUES
AND CHANGES IN NET ASSETS

WHITFIELD COUNN BOARD OF EDUCATION BALANCE SHEET
GOVERNMENTAL FUNDS JUNE 30,2010

GENERAL FUND

DISTRICTWIDE
CAPITAL PROJECTS
FUND

DEBT SERVICE
FUND

Cash and Cash Equivalents Investments Accounts Receivable, Net
Taxes State Government Federal Government LOca l Other Inventories
Total Assets

LIABILITIES AND FUND BALANCES

Accounts Payable Salaries and Benefits Payable Contracts Payable Retainages Payable De~ositsand Deferred Revenue
Total Liabilities
FUND BALANCES
Reserved for: Continuation of Federal Programs Debt Service Capital Projects
Unreserved Designatedfor Student Act~vities Designatedfor Self-Insurance UndesignatedReported in: General Fund
Total Fund Balances
Total Liabilities and Fund Balances

TOTAL

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

WHITFIELD COUNN BOARD OF EDUCATION RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET
TO THE STATEMENT OF NET ASSETS JUNE 30.2010
- Total Fund Balances Governmental Funds (Exhibit "C")
Amounts reported for Governmental Activities in the Statement of Net Assets are different because:
Capital Assets used in Governmental Activities are not financial resources and therefore are not reported in the funds. These assets 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.
Long-Term Liabilities, including Bonds Payable, are not due and payable in the current period and therefore are not reported as liab~litiesin the funds. Long-Term Liabilities at year-end consist of:
Bonds Payable Accrued Interest Compensated Absences Unamortized Bond Premiums Claims and Judgments
Total Long-Term Liabilities
Net Assets of Governmental Activities (Exhibit "A")

EXHIBIT " D

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

WHITFIELD COUNTY BOARD OF EDUCATION STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES
GOVERNMENTAL FUNDS YEAR ENDEDJUNE 30,2010

REVENUES
Property Taxes Sales Taxes State Funds Federal Funds Chargesfor Services Investment Earnings Miscellaneous
Total Revenues
EXPENDITURES
Current lnstructlon Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operationof Plant Student Transportation Services Central Support Services Other Support Services CommunitySew~ces Food Services Operation
Capital Outlay Debt Services
Pr~nc~pal Interest
Total Expenditures
Excess of Revenuesover (under) Expenditures
OTHER FINANCING SOURCES (USES)
Transfers In Transfers Out
Total Other Financing Sources (Uses)
Net Change in Fund Balances
Fund Balances- Beginning
- Fund Balances Ending

GENERAL FUND

DISTRICTWIDE
CAPITAL PROJECTS
FUND

DEBT SERVICE
FUND

TOTAL

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

WHITFIELD COUNTY BOARD OF EDUCATION RECONCILIATION OFTHE GOVERNMENTALFUNDSSTATEMENT OF
REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES TO THE STATEMENT OF ACTIVITIES JUNE 30,2010
Total Net Change in Fund Balances- Governmental Funds (Exhibit" E ) Amounts reported for GovernmentaiActivities in the Statement of Activities are different because:
Capital Outlays are reported as expenditures in Governmentai 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
Capital Assets purchased with UniversalService Fund (e-rate) proceeds are not reported in Governmental Funds. However, in the Statement of Activities, the e-rate proceeds are shown as Capital Grants and Contributions.
Taxes reponed in the Statement of Activities that do not provide current financial resources are not reponed as revenues in the funds.
The net effect of various misceiianeoustransactions involving capital assets (i.e., sales, trade-ins, donations, and disposals) is to decrease net assets.
Repayment of Long-Term Debt is reported as an expenditure In Governmental Funds, but the repayment reduces Long-TermLiabilities 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 resourcesand therefore are not reported as expenditures in Governmental Funds. These activities consist of: Net Decrease in Accrued Interest Decrease in CompensatedAbsences Amortization of Bond Premium Decrease in Claims and Judgments Total Additional EXDenditUreS
Change in Net Assets of GovernmentalActivities (Exhibit "B")
The notes to the basic financial statements are an integral part of this statement.
- 7 -

WHITFIELD COUNTY BOARD OF EDUCATION STATEMENT OF FIDUCIARY NET ASSETS FIDUCIARY FUNDS JUNE 30,2010
ASSETS Cash and Cash Equivalents Investments
Total Assets
LIABILITIES Funds Held for Others

EXHIBIT "G"
AGENCY FUNDS

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

WHITFIELD COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30.2010

EXHIBIT "H"

NOTE 1: DESCRIPTION OF SCHOOL DISTRICT AND REPORTING ENTITY
REPORTING ENTITY
The Whitfield County Board of Education (School District) was established under the laws of the State of Georgia and operates under the guidance of a school board elected by the voters and a Superintendent appointed by the Board. The Board is organized as a separate legal entity and has the power to levy taxes and issue bonds. Its budget is not subject to approval by any other entity. Accordingly, the School District is a primary government and consists of all the organizations that compose its legal entity.
The Whitfield County Career Academy (Charter School) is responsible for the public education of all students attending its school. The Charter School was created through a contract between the School District and the Charter School whereby all State funding associated with the students attending the Charter School and certain specified local funds are turned over to the Charter School to cover the cost of its operations. The financial statements of the Charter School have been included with the School District's general fund.
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 Whitfield County Board of Education.
Disfrct-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 Financia/ Statements: The fund financial statements provide information about the School District's funds, including fiduciary funds. Eliminations have been made to minimize the double counting of internal activities. Separate statements for each category (governmental and fiduciary) are presented. The emphasis of fund financial statements is on major governmental funds, each displayed in a separate column.

WHITFIELD COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30,2010

EXHIBIT "H"

The School District reports the following major governmental funds:
General Fund is the School District's primary operating fund. It accounts for all financial resources of the School District, except those resources required to be accounted for in another fund.
District-wide Capital Projects Fund accounts for financial resources includingspecial Purpose Local Option Sales Tax (SPLOST), Bond Proceeds, and grants from Georgia State Financing and Investment Commission to be used for the acquisition, construction or renovation of major capital facilities.
Debt Service Fund accounts for taxes (sales) legally restricted for the payment of general long-term principal, interest and paying agent's fees.
The School District reports the following fiduciary fund type:
Agency funds account for assets held by the School District as an agent for various school activity accounts and flexible spending accounts.
BASIS OF ACCOUNTING
The basis of accounting determines when transactions are reported on the financial statements. The District-wide governmental and fiduciary fund financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded at the time liabilities are incurred, regardless of when the related cash flows take place. Nonexchange transactions, in which the School District gives (or receives) value without directly receiving (or giving) equal value in exchange, include property taxes, sales taxes, and grants. On an accrual basis, revenue from property taxes is recognized in the fiscal year for which the taxes are levied. Revenue from sales taxes is recognized in the fiscal year in which the underlying transaction (sale) takes place. Revenue from grants is recognized in the fiscal year in which all eligibility requirements have been satisfied.
The School District uses funds to report on its financial position and the results of its operations. Fund accounting is designed to demonstrate legal compliance and to aid financial management by segregating transactions related to certain governmental functions or activities. A fund is a separate accounting entity with a self-balancing set of accounts.
Governmental funds are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Under this method, revenues are recognized when measurable and available. The School District considers all revenues reported in the governmental funds to be available if they are collected within sixty days after year-end. 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, compensated absences and claims and judgments, 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.

WHITFIELD COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30,2010

EXHIBIT "H"

The State of Georgia reimburses the School District for teachers' salaries and operating costs through the Quality Basic Education Formula Earnings program (QBE). Generally teachers are contracted for the school year (July 1- June 30) and paid over a twelve month contract period, generally September 1through August 31. In accordance with the respective rules and regulations of the QBE program, the State of Georgia reimburses the School District over the same twelve month period in which teachers are paid. At June 30, the amount of teachers' salaries incurred but not paid until July and August of the subsequent year are accrued. Since the State of Georgia recognizes its QBE liability for the July and August salaries at June 30, the School District recognizes the same QBE as a receivable and revenue, consistent with symmetrical recognition.
NEW ACCOUNTING PRONOUNCEMENTS
In fiscal year 2010, the School District adopted the Governmental Accounting and Standards Board
(GASB) Statement No. 51, Accounting and Reporfing for Intangible Assets. The provisions of this Statement generally require retroactive reporting for intangible assets acquired after June 30, 1980,
with the exception of those intangible assets that have indefinite useful lives and those that are considered internally generated.
In addition, the School District adopted GASB Statement No. 53, Accounting and financial Reporting for Derivative Instruments. The provisions of this Statement impacts disclosure
regarding derivative instruments entered into by the state and local governments. Derivative disclosures, if any, will be identified in Note 3.
CASH AND CASH EQUIVALENTS
Composition of Deposits Cash and cash equivalents consist of cash on hand, demand deposits and short-term investments with original maturities of three months or less from the date of acquisition in authorized financial institutions. Official Code of Georgia Annotated Section 45-8-14 authorizes the School District to deposit its funds in one or more solvent banks, insured Federal savings and loan associations or insured chartered building and loan associations.
l NVESTM ENTS
Composition of lnvestments lnvestments made by the School District in nonparticipating interest-earning contracts (such as certificates of deposit) and repurchase agreements are reported at cost. Participating interestearning contracts and money market investments with a maturity at purchase of one year or less are reported at amortized cost. Both participating interest-earning contracts and money market investments with a maturity at purchase greater than one year are reported at fair value. The Official Code of Georgia Annotated Section 36-83-4 authorizes the School District to invest its funds. In selecting among options for investment or among institutional bids for deposits, the highest rate of return shall be the objective, given equivalent conditions of safety and liquidity. Funds may be invested in the following:
I . 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,

WHITFIELD COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30,2010

EXHIBIT "H"

4. Obligations of any corporation of the United States government, 5. Prime banker's acceptances, 6. The Georgia Fund 1administered by the State of Georgia, Office of Treasury and Fiscal
Services, 7. Repurchase agreements, and 8. Obligations of other political subdivisions of the State of Georgia.

The School District does not have a formal policy regarding investment policies that address credit risks, custodial credit risks, concentration of credit risks, interest rate risks or foreign currency risks.

RECEIVABLES

Receivables consist of amounts due from property and sales taxes, grant reimbursements due on Federal, State or other grants for expenditures made but not reimbursed and other receivables disclosed from information available. Receivables are recorded when either the asset or revenue recognition criteria has been met. Receivables recorded on the basic financial statements do not include any amounts which would necessitate the need for an allowance for uncollectible receivables.

PROPERTY TAXES

The Whitfield County Board of Commissioners fixed the property tax levy for the 2009 tax digest year (calendar year) on November 7, 2009 (levy date). Taxes were due on January 8, 2010 (lien date). Taxes collected within the current fiscal year or within 6 0 days after year-end on the 2009 tax digest are reported as revenue in the governmental funds for fiscal year 2010. The Whitfield County Tax Commissioner bills and collects the property taxes for the School District, withholds 2.5% of taxes collected as a fee for tax collection and remits the balance of taxes collected to the School District. Property tax revenues, at the fund reporting level, during the fiscal year ended June 30, 2010, for maintenance and operations amounted to $25,885,771.44.

The tax millage rate levied for the 2009 tax year (calendar year) for the Whitfield County Board of Education was as follows (a mill equals $1per thousand dollars of assessed value):

School Operations

14.756 mills

SALES TAXES

Special Purpose Local Option Sales Tax, at the fund reporting level, during the year amounted to $11,701,762.99 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

Consumable Supplies On the basic financial statements, inventories of consumable supplies are reported at cost (first-in, first-out). The School District uses the consumption method to account for inventories whereby consumable supplies are recorded as an asset when purchased and expense/expenditure are recorded as the inventory items are used.

WHITFIELD COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30,2010

EXHIBIT "H"

Food Inventories On the basic financial statements, inventories of donated food commodities used in the preparation of meals are reported at their Federallyassigned value and purchased foods inventories are reported at cost (first-in, first-out). The School District uses the consumption method to account for inventories whereby donated food commodities are recorded as an asset and as revenue when received, and expenses/expenditures are recorded as the inventory items are used. Purchased foods are recorded as an asset when purchased and expenses/expenditures are recorded as the inventory items are used.

CAPITAL ASSETS

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

Capitalization thresholds and estimated useful lives of capital assets reported in the District-wide

statements are as follows:

Capitalization

Estimated

Policy

Useful Life

Land Land Improvements Buildings and Improvements Equipment

All $ 20,000.00 $ 100,000.00 $ 10,000.00

N/A 1 5 years 7 0 years 1 0 to 1 2 years

Depreciation is used to allocate the actual or estimated historical cost of all capital assets over estimated useful lives.
COMPENSATED ABSENCES
Members of the Teachers Retirement System of Georgia (TRS) may apply unused sick leave toward early retirement. The liability for early retirement will be borne by TRS rather than by the individual school districts. Otherwise, sick leave does not vest with the employee, and no liability is reported in the School District's financial statements.
Vacation leave of 1 0 days is awarded on a fiscal year basis to all full time personnel employed on a twelve month basis. No other employees are eligible to earn vacation leave. Vacation leave not utilized during the fiscal year may be carried over to the next fiscal year, providing such vacation leave does not exceed 15 days. At the end of September, all vacation leave in excess of 15 days is forfeited.

WHITFIELD COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30,2010

Beginning of Year Liability

Increases

Decreases

EXHIBIT "H"
End of Year Liability

GENERAL OBLIGATION BONDS
The School District issues general obligation bonds to provide funds for the acquisition and construction of major capital facilities. In the District-wide financial statements, bond premiums and discounts are deferred and amortized over the life of the bonds using the straight-line method. The School District recognizes bond issuance costs during the fiscal year bonds are issued. To conform to generally accepted accounting principles, bond issuance costs should be amortized over the life of the bonds on the District-wide statements. The effect of this deviation is deemed to be immaterial to the fair presentation of the basic financial statements. In the fund financial statements, the School District recognizes bond premiums and discounts, as well as bond issuance costs during the fiscal year bonds are issued. Premiums received on debt issuances are reported as other financing sources while discounts on debt issuances are reported as other financing uses. Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as debt service expenditures. General obligation bonds are direct obligations and pledge the full faith and credit of the government. The outstanding amount of these bonds is recorded in the Statement of Net Assets.
N ET ASSETS
The School District's net assets in the District-wide Statements are classified as follows:
Invested in capital assets, net of related debt -This represents the School District's total investment in capital assets, net of outstanding debt obligations related to those capital assets. To the extent debt has been incurred but not yet expended for capital assets, such amounts are not included as a component of invested in capital assets, net of related debt.
Restricted net assets-These represent resources for which the School District is legally or contractually obligated to spend resources for continuation of Federal Programs, debt service and capital projects in accordance with restrictions imposed by external third parties.
Unrestricted net assets - Unrestricted net assets represent resources derived from property taxes, sales taxes, grants and contributions not restricted to specific programs, charges for services, and miscellaneous revenues. These resources are used for transactions relating to the educational and general operations of the School District, and may be used at the discretion of the Board to meet current expenses for those purposes.
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.

WHITFIELD COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30,2010

EXHIBIT "H"

NOTE 3: DEPOSITS AND INVESTMENTS
COLLATERALIZATIONOF DEPOSITS
Official Code of Georgia Annotated (O.C.G.A.) Section 45-8-12 provides that there shall not be on deposit at any time in any depository for a time longer than ten days a sum of money which has not been secured by surety bond, by guarantee of insurance, or by collateral. The aggregate of the face value of such surety bond and the market value of securities pledged shall be equal to not less than 110 percent of the public funds being secured after the deduction of the amount of deposit insurance. If a depository elects the pooled method (O.C.G.A. Section 45-8-13.1) the aggregate of the market value of the securities pledged to secure a pool of public funds shall be not less than 110 percent of the daily pool balance.
Acceptable security for deposits consists of any one of or any combination of the following:
1. Surety bond signed by a surety company duly qualified and authorized to transact business within the State of Georgia,
2. lnsurance on accounts provided by the Federal Deposit lnsurance Corporation,
3 . Bonds, bills, notes, certificates of indebtedness or other direct obligations of the United States or of the State of Georgia,
4. Bonds, bills, notes, certificates of indebtedness or other obligations of the counties or municipalities of the State of Georgia,
5. Bonds of any public authority created by the laws of the State of Georgia, providing that the statute that created the authority authorized the use of the bonds for this purpose,
6. Industrial revenue bonds and bonds of development authorities created by the laws of the State of Georgia, and
7. Bonds, bills, notes, certificates of indebtedness, or other obligations of a subsidiary corporation of the United States government, which are fully guaranteed by the United States government both as to principal and interest or debt obligations issued by or securities guaranteed by the Federal Land Bank, the Federal Home Loan Bank, the Federal Intermediate Credit Bank, the Central Bank for Cooperatives, the Farm Credit Banks, the Federal Home Loan Mortgage Association, and the Federal National Mortgage Association.
CATEGORIZATION OF DEPOSITS
Custodial credit risk is the risk that in the event of a bank failure, the School District's deposits may not be returned to it. At June 30, 2010, the bank balances were $93,115,930.19. The bank balances were entirely covered by Federal depository insurance or collateralized with securities held by the pledgingfinancial institution's trust department or agent in the School District's name.
CATEGORIZATION OF INVESTMENTS
The School District's investments as of June 30, 2010, are presented below. All investments are presented by investment type and debt securities are presented by maturity.

WHITFIELD COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 3 0 , 2 0 1 0

EXHIBIT "H"

lnvestment Type

Fair Value

Investment Maturity Less than 1Year

Debt Securities U. S. Treasuries

$

44.33 $

44.33

lnvestment Pools Office of Treasury and Fiscal Services Georgia Fund 1

5,365,358.37

Total Investments

$ 5,365,402.70

The Georgia Fund 1,formerly referred to as LGIP, administered by the State of Georgia, Office of Treasury and Fiscal Services 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 Treasury and Fiscal Services for the Georgia Fund 1(Primary Liquidity Portfolio) does not provide for investment in derivatives or similar investments. Additional information on the Georgia Fund 1is disclosed in the State of GeorgiaComprehensive Annual Financial Report. This audit can be obtained from the Georgia Department of Audits and Accounts at htt~://www.audits.aa.aov/SGD/cafr.htmI.

The Primary Liquidity Portfolio consists of Georgia Fund 1which 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 lnvestment 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 1may not exceed 6 0 days. The weighted average maturity for Georgia Fund 1on June 30,2010, was 46 days.

lnterest Rate Risk lnterest rate risk is the risk that changes in interest rates of debt investment will adversely affect the fair value of an investment. The School District does not have a formal policy for managing interest rate risk.

Custodial Credit Risk Custodial credit risk for investments is the risk that, in the event of the failure of the counterparty to a transaction, the School District will not be able to recover the value of the investment or collateral securities that are in the possession of an outside party. The School District does not have a formal policy for managing custodial credit risk.

At June 30, 2010, $44.33 of the School District's applicable investments were (1) uninsured and unregistered, with securities held by the counterparty's trust department or agent in the name of the School District and (2) uninsured or unregistered, with securities held by the counterparty, or by its trust department or agent, but not in the School District's name.

Credit Quality Risk Credit quality risk is the risk that an issuer or other counterparty to an investment will not fulfill its obligations. The School District does not have a formal policy for managing credit quality risk.

WHITFIELD COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30,2010

EXHIBIT "H"

NOTE 4: NON-MONETARY TRANSACTIONS

The School District receives food commodities from the United States Department of Agriculture (USDA) for school breakfast and lunch programs. These commodities are recorded at their Federally assigned value. See Note 2 - Inventories

NOTE 5: CAPITAL ASSETS

The following is a summary of changes in the Capital Assets during the fiscal year:

Governmental Activities Capital Assets, Not Being Depreciated:
Land Construction Work In Progress

Balances July 1, 2009

Increases

Decreases

$

7,416,174.07 $

1,265,388.81 $

56,903.80 $

22,397,163.58

18,207,289.76

19,951,760.58

Balances June 30,2010
8,624,659.08 20,652,692.76

Total Capital Assets, Not Being Depreciated $ 29,813,337.65 $ 19,472,678.57 $ 20,008,664.38 $ 29,277,351.84

Capital Assets, Being Depreciated: Bulldings and Improvements Equ~pment Land Improvements

$ 133,806,757.77 $ 15,904,949.84 9,227,290.07

17,475,666.77 $ 1,553,902.42 385,708.50

0.00 $

151,282,424.54 17,458,852.26 9,612,998.57

Less: Accumulated Depreciation: Buildings and Improvements Equipment Land Improvements

4,054,789.46

500,328.10

4,555,117.56

Total Capital Assets, Being Depreciated, Net $ 130,188,770.93 $
Governmental Activity Capital Assets - Net $ 160,002,108.58 $

15,272,021.56 $ 34,744,700.13 $

0.00 $ 145,460,792.49 20,008,664.38 $ 174,738,144.33

Current year depreciation expense by function is as follows:
Instruction Support Services
Educational Media Services General Administration School Administration Maintenance and Operation of Plant Student Transportation Services Food Services

WHITFIELD COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30,2010

EXHIBIT "H"

NOTE 6: INTERFUND TRANSFERS

Interfund transfers for the year ended June 30, 2010, consisted of the following:

Transfer to

Transfers From

District-wide

General Fund

Capital Proiects

District-wide Capital Projects Debt Service Fund

Total

Transfers are used (1)to move SPLOST funds from Capital Projects to Debt Service for bond payments and, (2) to move local funds from the General Fund to Capital Projects for local building projects.

NOTE 7: RISK MANAGEMENT

The School District is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors or omissions; job related illness or injuries to employees; acts of God and unemployment compensation.

The School District participates in the Georgia School Boards Association Risk and Insurance Management System, a public entity risk pool organized on July 1,1994, to develop and administer a plan to reduce risk of loss on account of general liability, motor vehicle liability, or property damage, including safety engineering and other loss prevention and control techniques, and to administer one or more groups of self-insurance funds, including the processing and defense of 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 has established a limited risk management program for workers' 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. An excess coverage insurance policy covers individual claims in excess of $250,000.00 loss per occurrence, up to the statutory limit.

Changes in the workers' 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

WHITFIELD COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30,2010

EXHIBIT "H"

The School District is self-insured with regard to unemployment compensation claims. The School District accounts for claims within the General Fund with expenses/expenditures and liability being reported when it is probable that a loss has occurred, and the amount of that loss can be reasonably estimated.

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

follows:

Claims and

Beginningof Year

Changes in

Claims

End of Year

Liability

Estimates

Paid

Liability

The School District has purchased surety bonds to provide additional insurance coverage as follows:

Position Covered
Superintendent All Other Employees NOTE 8: OPERATING LEASES

Amount

Whitfield County Board of Education has entered into various leases as lessee for office equipment and mobile units. These leases are considered for accounting purposes to be operating leases. Lease expenditures for the year ended June 30, 2010, for governmental funds amounted to $332,377.04. Future minimum lease payments for these leases are as follows:

Year Ending

Governmental Funds

Total
NOTE 9: 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.

WHITFIELD COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30.2010
GENERAL OBLIGATION DEBT OUTSTANDING General Obligation Bonds currently outstanding are as follows:
Interest Rates
General Government- Series 2006 General Government- Series 2009

EXHIBIT "H"
Amount

The changes in Long-Term Debt during the fiscal year ended June 30, 2010, were as follows:

Balance July 1, 2009

Additions

Governmental Funds

Balance

Deductions

June 30, 2010

Due Within One Year

G. 0. Bonds Compensated Absences (1) Bond Premiums Amortrzed

$ 78,245,000.00 303,607.83 $
3,541,840.30

$ 185,557.24

9,765,000.00 $ 211,332.92 452.149.80

68,480,000.00 $ 277.832.15
3,089.690.50

10,145,000.00 452,149.80

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

At June 30, 2010, payments due by fiscal year which includes principal and interest for these items are as follows:

General Obligation Debt

Unamortized

Principal

Interest

Bond Premium

Fiscal Year Ended June 30:

Total Principal and Interest
NOTE 10: ON-BEHALF PAYMENTS
The School District has recognized revenues and costs in the amount of $223,426.48 for health insurance and retirement contributions paid on the School District's behalf by the following State Agencies.

WHITFIELD COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30,2010

EXHIBIT "H"

Georgia Department of Education Paid to the Georgia Department of Community Health For Health lnsurance of Non-Certified Personnel In the amount of $153,001.01

Paid to the Teachers Retirement System of Georgia For Teachers Retirement System (TRS) Employer's Cost In the amount of $27,705.13

Office of Treasury and Fiscal Services Paid to the Public School Employees Retirement System For Public School Employees Retirement (PSERS) Employer'sCost In the amount of $42,720.34

NOTE 11: SIGNIFICANT COMMITMENTS

The following is an analysis of significant outstanding construction or renovation contracts executed by the School District as of June 30, 2010, together with funding available:

Project

Unearned Executed Contracts

Funding Available From State

Career Academy Eastbrook Middle School New High School

The amounts described in this note are not reflected in the basic financial statements.
NOTE 12: SIGNIFICANT CONTINGENT LIABILITIES
Amounts received or receivable principally from the Federal government are subject to audit and review by grantor agencies. This could result in requests for reimbursement to the grantor agency for any costs which are disallowed under grant terms. The School District believes that such disallowances, if any, will be immaterial to its overall financial position.
The School District is a defendant in various legal proceedings pertaining to matters incidental to the performance of routine School District operations. The ultimate disposition of these proceedings is not presently determinable, but is not believed to be material to the basic financial statements.
NOTE 13: POST-EMPLOYMENT BENEFITS
GEORGIA SCHOOL PERSONNEL EMPLOYEES POST-EMPLOYMENT HEALTH BENEFIT FUND
Plan Description. The Georgia School Personnel Post-employment Health Benefit Fund (School OPEB Fund) is a cost-sharing multiple-employer defined benefit post-employment healthcare plan that covers eligible former employees of public school systems, libraries and regional educational service agencies. The School OPEB Fun provides health insurance benefits to eligible former employees and their qualified beneficiaries through the State Employees Health lnsurance Plan administered by the Department of Community Health. The Official Code of Georgia Annotated (OCGA) assigns the authority to establish and amend the benefit provisions of the group health plans, including benefits for retirees, to the Board of Community Health (Board).

WHITFIELD COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30,2010

EXHIBIT "H"

Funding Policy. The contribution requirements of plan members and participating employers are established by the Board in accordance with the current Appropriations Act and may be amended by the Board. Contributions of plan members or beneficiaries receiving benefits vary based on plan election, dependent coverage, and Medicare eligibility and election. On average, plan members pay approximately 25 of the cost of health insurance coverage.

Participating employers are statutorily required to contribute in accordance with the employer contribution rates established by the Board. The contribution rates are established to fund all benefits due under the health insurance plans for both active and retired employees based on projected "pay-as-you-go" financing requirements. Contributions are not based on the actuarially calculated annual required contribution (ARC) which represents a level of funding that, if paid on an ongoing basis, is projected to cover normal cost each year and amortize any unfunded actuarial liabilities (or funding excess) over a period not to exceed thirty years.

The combined active and retiree contribution rates established by the Board for employers participating in the School OPEB Fund were as follows for the fiscal year ended June 30, 2010:
For certificated teachers, librarians and regional educational service agencies:

July 2009 August 2009 - October 2009 November 2009 -June 2010

18.534% of covered payroll for August Coverage 14.492% of covered payroll for September - November Coverage 18.534% of covered payroll for December - July Coverage

For non-certificatedschool personnel:

July 2009 -June 2010

$162.72 per member per month plus Department of Education contribution of $22,838,311.00

No additional contribution was required by the Board for fiscal year 2010 nor contributed to the State OPEB Fund to prefund retiree benefits. Such additional contribution amounts are determined annually by the Board in accordance with the State plan for other post-employment benefits and are subject to appropriation.

The School District's combined active and retiree contributions to the health insurance plans, which

equaled the required contribution, for the current fiscal year and the preceding two fiscal years were

as follows:

Percentage

Required

Fiscal Year

Contributed

Contribution

NOTE 14: RETIREMENT PLANS
TEACHERS RETIREMENT SYSTEM OF GEORGIA (TRS)
Plan Description. The TRS is a cost-sharing multiple-employer defined benefit plan created in 1943 by an act of the Georgia General Assembly to provide retirement benefits for qualifying employees in educational service. A Board of Trustees comprised of active and retired members and ex-officio State employees is ultimately responsible for the administration of TRS. The Teachers Retirement System of Georgia issues a separate stand alone financial audit report and a copy can be obtained from the Georgia Department of Audits and Accounts.

WHITFIELD COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30,2010

EXHIBIT "H"

On October 25, 1996, the Board created the Supplemental Retirement Benefits Plan of the Georgia Teachers Retirement System (SRBP-TRS). SRBP-TRS was established as a qualified excess benefit plan in accordance with Section 415 of the Internal Revenue Code (IRC) as a portion of TRS. The purpose of SRBP-TRS is to provide retirement benefits to employees covered by TRS whose benefits are otherwise limited by IRC Section 415. Beginning July 1,1997, all members and retired former members in TRS are eligible to participate in the SRBP-TRS whenever their benefits under TRS exceed the IRC Section 415 imposed limitation on benefits.
TRS provides service retirement, disability retirement, and survivor's benefits. The benefit structure of TRS is defined and may be amended by State statute. A member is eligible for normal service retirement after 3 0 years of creditable service, regardless of age, or after 1 0 years of service and attainment of age 60. A member is eligible for early retirement after 25 years of creditable service.

Normal retirement (pension) benefits paid to members are equal to 2% of the average of the member's two highest paid consecutive years of service, multiplied by the number of years of creditable service up to 40 years. Early retirement benefits are reduced by the lesser of one-twelfth of 7% for each month the member is below age 60 or by 7% for each year or fraction thereof by which the member has less than 3 0 years of service. It is also assumed that certain cost-of-living adjustments, based on the Consumer Price Index, will be made in future years. Retirement benefits are payable monthly for life. A member may elect to receive a partial lump-sum distribution in addition to a reduced monthly retirement benefit. Death, disability and spousal benefits are also available.
Funding Policy. TRS is funded by member and employer contributions as adopted and amended by the Board of Trustees. Members become fully vested after 1 0 years of service. If a member terminates with less than 1 0 years of service, no vesting of employer contributions occurs, but the member's contributions may be refunded with interest. Member contributions are limited by State law to not less than 5% or more than 6% of a member's earnable compensation. Member contributions as adopted by the Board of Trustees for the fiscal year ended June 30, 2010, were 5.25% of annual salary. The member contribution rate will increase to 5.53% effective July 1,2010. Employer contributions required for fiscal year 2010 were 9.74% of annual salary as required by the June 30, 2007, actuarial valuation. The employer contribution rate will increase to 10.28% effective July 1,2010.
Employer contributions for the current fiscal year and the preceding two fiscal years are as follows:

Fiscal Year

Percentage Contributed

Required Contribution

(This page left intentionally blank)

WHITFIELD COUNTY BOARD OF EDUCATION GENERAL FUND
SCHEDULE OF REVENUES. EXPENDITURES AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL
YEAR ENDED JUNE 30,2010

REVENUES
Property Taxes Sales Taxes State Funds Federal Funds Charges for Services Investment Earnings Miscellaneous
Total Revenues
EXPENDITURES
Current Instruct~on Support Services Pupil Services Improvement of Instructional ServlCeS Educational Media Services General Admin~stratlon School Administration Business Administration Maintenance and Operation of Plant Student Transportat~onServices Central Support Services Other Support Services Commun~tyServices Food Services Operation
Total Expenditures
Excessof Revenuesover (under) Expenditures
OTHER FINANCING SOURCES [USES)
Other Sources Other Uses
Total Other Financing Sources (Uses)
Net Change in Fund Balances
Fund Balances - Beginning
Fund Balances- Ending

NONAPPROPRIATED BUDGETS

ORIGINAL (1)

FINAL (1)

Notes to the Schedule of Revenues. Exoenditures and Changes in Fund Balances Budoet and Actual
(1) Original and Final Budget amounts do not include budgeted revenues or expendituresof the various principal accounts
The accompanying schedule of revenues, expenditures and changes in fund balances budget and actual is presented on the modified accrual b a s s of accounting whlch IS the basis of accounting used in the presentatlon of the fund financial statements.

SCHEDULE "1"
ACTUAL AMOUNTS

See notes to the baslc financial Statements.

WHITFIELD COUNTY BOARD OF EDUCATION SCHEDULE OF EXPENDITURESOF FEDERALAWARDS
YEAR ENDED JUNE 30,2010

SCHEDULE "2"

FUNDING AGENCY PROGRAM/GRANT
Agriculture, U. S. Department of Child Nutrition Cluster Pass-Through From Georgia Department of Education Food Services School Breakfast Program National School Lunch Program
Total Child Nutrition Cluster
Schools and Roads Cluster Pass-Through From Office of Treasury and Fiscal Services
Schools and Roads- Grants to States
Other Programs Pass-Through From Georgia Department of Education Food Services ARRA - Child Nutrition Discret~onaryGrants Lim~tedAvailability
Total U. S. Department of Agriculture
Education. U. S. Department of Education of Homeless Children and Youth Cluster Pass-ThroughFrom Georgia Departmentof Education Educationfor Homeless Ch~ldrenand Youth
Education Technology State Grants Cluster Pass-ThroughFrom Georgia Department of Education Education Technolow State Grants
Special Education Cluster Pass-ThroughFrom Georgia Department of Education Special Education
ARRA - Grants to States
ARRA - Preschool Grants Grants to States Preschool Grants
Total Special Education Cluster
State Fiscal Stabilization Fund Cluster Pass-ThroughFrom Georgia Department of Education
ARRA - Education State Grants
Title I, Part A Cluster Pass-ThroughFrom Georgia Department of Education
ARRA - Title I Grants to Local EducationalAgencies
Title IGrants to Local EducationalAgencies
Total Title I, Part A Ciuster
Other Programs Pass-ThroughFrom Georgia Department of Education Career and Technical Education-Basic Grants to States English Language Acquisition Grants ImprovingTeacher Quality State Grants
Migrant Education - State Grant Program Safe and Drug-FreeSchools and Communities - State Grants
Total Other Programs
Total U. S. Department of Education

CFDA NUMBER

PASSTHROUGH
ENTITY ID
NUMBER

EXPENDITURES IN PERIOD

WHITFIELD COUNTY BOARD OF EDUCATION SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
YEAR ENDEDJUNE 30.2010

SCHEDULE "2"

FUNDING AGENCY PROGRAM/GRANT
Health and Human Services. U. S. Department of Child Care and Development Fund Cluster Pass-ThroughFrom Bright From the Start: Georg~aDepartment of Eariy Care and Learning ARRA - Chlld Care and Development Block Grant

CFDA NUMBER

PASSTHROUGH
ENTITY ID
NUMBER

EXPENDITURES IN PERIOD

Total Federal Financial Assistance
N/A = Not Available
Notesto the Schedule of Expendituresof Federal Awards
(1) lnciudes the Federally assigned value of donated cornmodltles for the Food Donatlon Program in the amount of $437,925.10.
(2) Expendituresfor the funds earned on the School Breakfast Program ($1,530,268.60) were not malntalned separately and are included in the 2010 Nat~onaSl chool Lunch Program.
(3) Funds earned on this program. in the amount of $8,495.33, do not require reportingof expenditures.
Major Programs are identified by an asterisk ( * )in front of the CFDA number.
The School District did not provide Federal Assistance to any Subrecipient.
The accompanyingscheduie of expenditures of Federal awards includes the Federal grant activity of the Whiffield 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 bas~cf~nanciasl tatements.

WHITFIELD COUNTY BOARD OF EDUCATION SCHEDULE OF STATE REVENUE YEAR ENDEDJUNE 30,2010

GRANTS Bright From the Start: Georgia Department of Early Care and Learning Pre-Kindergarten Program
Education, Georgia Department of Quality Basic Education Direct Instructional Cost K~ndergartenProgram Kindergarten Program - Early Intervention Program PrimaryGrades (1-3) Program Primaty 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 Educatlon (9-12) Program Vocational Laboratory (9-12) Program Students with Disabilities Gifted Student - Category VI Remedial Education Program Alternative Education Program English Speakers of Other Languages (ESOL) Media Center Program 2 0 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 Educat~onEqualization FundingGrant Food Services Vocational Education Amended Formula Adjustment Other State Programs Dual Enrollment Health Insurance National Teacher Certification Preschool Handicapped Program Teachers' Retirement Virtual School State Grant
Georgia State Financing and Investment Commission Reimbursementon Construction Projects
Office of Treasury and Fiscal Services Public School Employees Retirement

GOVERNMENTAL FUND TYPES

CAPITAL

GENERAL

PROJECTS

FUND

FUND

SCHEDULE "3" TOTAL

See notes to the basicfinancial statements.

WHITFIELD COUNTY BOARD OF EDUCATION SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS
YEAR ENDED JUNE 3 0 , 2 0 1 0

SCHEDULE "4"

Acquisit~onsc, onstruction and equipping of a new elementary school, a new middle school and a new high school, includingthe acquisition of any furniture. fixtures and equipment necessaly or desirable therefore: renovations and improvements at existing schools, ~ncludingthe acquisition of any furniture, fixtures and equipment necessary or deslrable therefore; the acqulsltlon, construction and equipping of a central warehouse facility; the acquisition of school buses; and system-wide technology Improvements.
Acquisition, construction, equlpplng, and furnlshlng of new school build~ngsand facilities, includ~ngbut not llmited to, a new h~ghschool and a new elementary school; the addition, renovation, repalr and Improvement to existing school buildings and facilities: the acquisition and purchase of technology and safety equipment, ~ncludingbut not l~mitedto, computer hardware and software and security and safety equipment; the acquisition and purchaseof school buses and other transportation or maintenance vehicles: the acquisition of land; acquisition and purchase of any property necessary and desirable therefore, both real and personal.

ORIGINAL EST1MATED
COST (1)

CURRENT ESTIMATED COSTS ( 2 )

AMOUNT EXPENDED IN CURRENT YEAR (3) (4)

AMOUNT EXPENDED IN PRIOR YEARS (3) (4)

PROJECT STATUS

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

(2) Changes from the orlginal estimated costs reflect actual ESPLOST revenue, state capital grants, investment earnings and current estimated costs.

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

(4) In addition to the expendituresshown above, the School District has incurred interest to provide advance funding for the above projects as follows:

Prior Years

$ 1,697.285.61

Current Year

Total

See notes to the basic financial statements.

(This page left intentionally blank)

WHITFIELD COUNTY BOARD OF EDUCATION GENERAL FUND - QUALITY BASIC EDUCATION PROGRAM (QBE)
ALLOTMENTS AND EXPENDITURES- BY PROGRAM YEAR ENDED JUNE 30,2010

SCHEDULE "5"

DESCRIPTION
Direct Instructional Programs Kindergarten Program K~ndergartenProgram-Early lnterventlon Program Pr1ma1-yGrades(1-3) Program Primary Grades-Early Intervention (1-3) Program Upper ElementaryGrades (4-5) Program Upper ElementaryGrades-Early Intervention (4-5) Program Middle School (6-8) Program High School General Educat~on(9-12) Program Vocational Laboratory (9-12) Program Students wlth Disabilities Category I Category II Category Ill Category IV Category V Gifted Student - Category VI Remedial Education Program Alternative Education Program English Speakers of Other Languages (ESOL)
TOTAL DIRECT INSTRUCTIONAL PROGRAMS
Media Center Program Staff and Professional Development

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

ELIGIBLE OBE PROGRAM COSTS

SALARIES

OPERATIONS

TOTAL

TOTAL QBE FORMULA FUNDS

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

See notes to the bas~cfinancial statements

SECTION II COMPLIANCE AND INTERNAL CONTROL REPORTS

Russell W. Hinton
STATE AUDITOR
(404) 6563174

DEPARTMENOTF AUDITSAND ACCOUNTS
270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400
October 6, 2 0 1 1

Honorable Nathan Deal, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the Whitfield County Board of Education
INDEPENDENT AUDITOR'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATERS 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 Whitfield County Board of Education as of and for the year ended June 30, 2010, which collectively comprise Whitfield County Board of Education's basic financial statements and have issued our report thereon dated October 6, 2011. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in GovernmentAuditing Standards, issued by the Comptroller General of the United States.
Internal Control Over Financial Re~orting
In planning and performing our audit, we considered Whitfield 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 Whitfield County Board of Education's internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness of the Whitfield County Board of Education's internal control over financial reporting.
A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect and correct misstatements on a timely basis. A material weakness is a deficiency, or combination of deficiencies, in internal control such that there is a reasonable possibility that a material misstatement of the entity's financial statements will not be prevented, or detected and corrected on a timely basis.

Our consideration of internal control over financial reporting was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over financial reporting that might be deficiencies, significant deficiencies, or material weaknesses. We did not identify any deficiencies in internal control over financial reporting that we consider to be material weaknesses, as defined above. However, we consider item FS-7551-10-01, described in the accompanying Schedule of Findings and Questioned Costs to be a significant deficiency in internal control over financial reporting. A signficant deficiency is a deficiency, or combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance.
Compliance and Other Matters
As part of obtaining reasonable assurance about whether Whitfield 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 Whitfield County Board of Education in a separate letter dated October 6, 2011.
Whitfield County Board of Education's response to the findings identified in our audit is described in the accompanying Schedule of Management's Responses. We did not audit Whitfield County Board of Education's response and, accordingly, we express no opinion on it.
This report is intended solely for the information and use of management, members of the Whitfield County Board of Education, others within the entity, Federal awarding agencies and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties.
Respectfully submitted,
~ u d s e lWl . Hinton, CPA, CGFM State Auditor

Russell W. Hinton
STATE AUDITOR
(404) 656-2174

DEPARTMENOTF AUDITSAND ACCOUNTS
270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400
October 6 , 2 0 1 1

Honorable Nathan Deal, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the Whitfield County Board of Education
INDEPENDENT AUDITOR'S REPORT ON COMPLIANCE WlTH REOUIREMENTS THAT COULD HAVE A DIRECT AND MATERIAL EFFECT ON EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WlTH OMB CIRCULAR A-133
Ladies and Gentlemen:
Compliance
We have audited Whitfield 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, 2010. Whitfield 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 Whitfield County Board of Education's management. Our responsibility is to express an opinion on Whitfield 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, L m l Governments, and Non-Profit Organizations. Those standards and 0MB 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 Whitfield 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 Whitfield County Board of Education's compliance with those requirements.

As described in item FA-7551-10-01 in the accompanying Schedule of Findings and Questioned Costs, Whitfield County Board of Education did not comply with requirements regarding Activities Allowed/Unallowed and Allowable Costs/Cost Principles that are applicable to its Special Education Cluster. Compliance with such requirements is necessary, in our opinion, for Whitfield County Board of Educationto comply with requirements applicable to that program.
In our opinion, except for the noncompliance described in the preceding paragraph, Whitfield County Board of Education complied, in all material respects, with the compliance requirements referred to above that could have a direct and material effect on each of its major Federal programs for the year ended June 30,2010.
Internal Control Over Com~liance
Management of Whitfield 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 Whitfield 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 Whitfield County Board of Education's internal control over compliance.
Our consideration of internal control over compliance was for the limited purpose described in the preceding paragraph and was not designed to identify all deficiencies in internal control over compliance that might be significant deficiencies or material weaknesses and therefore, there can be no assurance that all deficiencies, significant deficiencies, or material weaknesses have been identified. However, as discussed below, we identified certain deficiencies in internal control over compliance that we consider to be material weaknesses and other deficiencies that we consider to be significant deficiencies.
A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a Federal program on a timely basis. A material weakness in internal control over compliance is a deficiency, or combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a Federal program will not be prevented, or detected and corrected, on a timely basis. We consider the deficiency in internal control over compliance described in the accompanying Schedule of Findings and Questioned Costs as item FA-7551-10-01to be a material weakness.
Whitfield County Board of Education's response to the finding identified in our audit is described in the accompanying Schedule of Management's Responses. We did not audit Whitfield County Board of Education's response and, accordingly, we express no opinion on the response.

This report is intended solely for the information and use of management, members of the Whitfield 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,
~us&elWl . Hinton, CPA, CGFM State Auditor

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

WHITFIELD COUNTY BOARD OF EDUCATION AUDITEE'S RESPONSE
SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30,2010

PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

FINDING CONTROL NUMBER AND STATUS

FS-7551-08-0 1 FS-7551-09-01 FS-7551-09-02

Further Action Not Warranted Partially Resolved - See Corrective Action/Responses Partially Resolved - See Corrective Action/Responses

CORRECTIVE ACTION/RESPONSES

CASH AND CASH EQUIVALENTS REVENUES/RECEIVABLES/RECEIPTS EXPENDlTURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Control Procedures over School Activity Accounts Finding Control Number: FS-7551-09-01

A Business Advisory Committee has performed Local School Accounting Internal audits for all schools. These audits have been designed to assess compliance with existing internal controls. In addition, the committee had conducted one-on-one training through internal audit exit conferences and have reviewed and modified existing procedures as considered necessary.

CAPITAL ASSETS Failure to Maintain and Report Capital Assets Finding Control Number: FS-7551-09-02

A physical inventory of all capital assets was conducted for the purpose of updating the fixed assets schedule in accordance with the School District's fixed asset policy. Necessary adjustments were made to both cost and accumulated depreciation. A schedule was prepared regarding a restatement of prior year fixed assets.

PRIOR YEAR FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

FINDING CONTROL NUMBER AND STATUS

FA-7551-08-01

Unresolved - See Corrective Action/Responses

WHITFIELD COUNTY BOARD OF EDUCATION AUDITEE'S RESPONSE
SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30,2010
PRIOR YEAR FEDERAL AWARD FINDINGS AND QUESTIONED COSTS
CORRECTIVE ACTION/RESPONSES
ALLOWABLE COSTS/COST PRINCIPLES Unallowable Expenditures U. S. Department of Agriculture Through Georgia Department of Education Child Nutrition Cluster (CFDA 10.553 and 10.555) Amount: $1,161.46 Finding Control Number: FA-7551-08-01
Procedures were created to ensure prior approval of promotional purchases from Food Service Funds. Procedures include a Promotion/Request/Approval form that contains the name of the school, name of promotion, dates of promotion, objective, description of plan, estimated cost and procedures for awarding items. A follow-up report was created to document the completion of the promotions and the results of the effort.

SECTION IV FINDINGS AND QUESTIONED COSTS

WHITFIELD COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30,2010

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?

N 0

Significant deficiency identified?

Yes

Noncompliance material to financial statements noted:

Federal Awards

Internal Control over major programs: Material weakness identified? Significant deficiency identified?

Yes None Reported

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

Unqualified for all major programs except for Special Education Cluster, which was qualified.

Any audit findings disclosed that are required to be reported in

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

Yes

Identification of major programs:

CFDA Numbeds)

Name of Federal Program or Cluster

Title I, Part A Cluster Special Education Cluster State Fiscal Stabilization Fund Cluster

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

Auditee qualified as low-risk auditee?

WHITFIELD COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30,2010
II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS
CASH AND CASH EQUIVALENTS REVENUES/RECEIVABLES/RECEIPTS EXPENDlTURES/LIABILlTlES/DISBURSEMENTS Inadequate Internal Control Procedures over School Activity Accounts Significant Deficiency Finding Control Number: FS-7551-10-01
Condition: This is a repeat finding (FS-7551-09-01, FS-7551-08-01 and FS-7551-07-01)from the years ended June 30, 2009, June 30, 2008, and June 30, 2007, respectively. The accounting procedures of the School District were insufficient to provide for adequate internal controls over the school activity accounts.
Criteria: The School District's management is responsible for designing and maintaining internal controls that provide reasonable assurance that transactions are processed according to established procedures.
Questioned Cost: N/A
Information: Cash and Cash Equivalents The bank reconciliation function was not separated from the record keeping and voucher payment functions.
Revenues/Receivables/Receipts Deposit preparation was not separated from the record keeping and cash custody functions.
The following deficiencies were noted during our tests of transactions: Receipts were not deposited in a timely manner. Revenues were not recorded in the proper account.
Expenditures/Liabilities/Disbursements The following deficiencies were noted during our tests of transactions:
Vouchers did not have approval prior to purchase. Vouchers did not show evidence of receipt. Vouchers did not include invoices. Expenditureswere not recorded in the proper account.
Cause: These deficiencies were a result of management's failure to ensure that internal controls were established, implemented and functioning at the school level.
Effect: Errors and/or irregularities may not be detected in a timely manner
Recommendation: Management should revise and monitor controls to provide reasonable assurance that transactions are processed according to established procedures.

WHITFIELD COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30,2010
Ill FEDERALAWARD FINDINGSAND QUESTIONEDCOSTS
ACTIVITIES ALLOWED/UNALLOWED ALLOWABLE COSTS/COST PRINCIPLES Inadequate Internal Control Procedures Material Weakness Material Noncompliance U. S. Department of Education Through Georgia Department of Education Special Education Cluster (CFDA 84.027,84.173, 84.391, and 84.392) Finding Control Number: FA-7551-10-01
Condition: A review of expenditures charged to the Special Education Cluster (CFDA 84.027, 84.173, 84.391, and 84.392) programs revealed that the School District failed to implement internal control procedures to ensure expenditures were in compliance with grant requirements.
Criteria: Provisions of 0MB Circular A-87, CostPrinciples for State, Local, and Indian Tribal Governments,require
... that "to be allowable under Federal awards, costs must be authorized or not prohibited under state
or local laws or regulations" and "conform to any limitations or exclusions set forth in these principles, Federal laws, terms and conditions of the Federal award, or other governing regulations as to types or amounts of cost items."
Questioned Cost: N/A
Information: A review of personal service expenditures for the Special Education Cluster revealed that approximately $1.3 million of salaries and benefits were paid to employees that were not Special Education employees. After this situation was discovered by the auditor, Georgia Department of Education allowed the School District to replace these expenditures with Quality Basic Education Special Education program expenditures which resulted in no questioned costs.
Cause: Management failed to monitor compliance with Federal guidelines to ensure that expenditures charged to the Federal Program were allowable.
Effect: Failure to ensure that program expenditures are allowable can result in noncompliance with the requirements of the Federal grant.
Recommendation: The School District should implement procedures to ensure that all expenditures charged to the Federal program are allowable under OMB Circular A-87. The Georgia Department of Education has reviewed this matter and determined that the School District will be able to replace those employees with Special Education employees in order to avoid returningthe grant funds.

SECTION V MANAGEMENT'S RESPONSES

WHITFIELD COUNTY BOARD OF EDUCATION SCHEDULE OF MANAGEMENT'S RESPONSES
YEAR ENDED JUNE 30,2010

Finding Control Number: FS-7551-10-01

We concur with this finding. Duringfiscal year 2009, a Business Advisory committee was created to support and assess accounting transactions and to ensure sound fiscal management through compliance with the district's internal controls. The committee continuously works with our schools' bookkeepers to strengthen their knowledge and understanding of the district's internal controls through internal audits and support.

Finding Control Number: FA-7551-10-01

We concur with this finding. The district will implement necessarytraining to ensure that employees charged with the responsibility to ensure compliance with federal programs are adequately trained.

Contact Person: Telephone: Fax: Email:

Kenny Sheppard, Controller 706-217-6701 706-2 17-6703 ksheppard@whitfield.k12.ga.u~