City of Buford Board of Education, a component unit of the City of Buford, Georgia, annual financial report for the fiscal year ended June 30, 2012 (including independent auditor's reports)

CITY OF BUFORD BOARD OF EDUCATION
A COMPONENT UNIT OF THE CITY OF BUFORD, GEORGIA
ANNUAL FINANCIAL REPORT FOR THE FISCAL YEAR ENDED JUNE 30, 2012
(Including Independent Auditor's Reports)

CITY OF BUFORD BOARD OF EDUCATION - GWINNETT COUNTY - 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 ACTIVITIES

FUND FINANCIAL STATEMENTS

C

BALANCE SHEET

GOVERNMENTAL FUNDS

D

RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET

TO THE STATEMENT OF NET ASSETS

E

STATEMENT OF REVENUES, EXPENDITURES AND CHANGES

IN FUND BALANCES

GOVERNMENTAL FUNDS

F

RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT

OF REVENUES, EXPENDITURES AND CHANGES IN FUND

BALANCES TO THE STATEMENT OF ACTIVITIES

G

STATEMENT OF FIDUCIARY NET ASSETS

FIDUCIARY FUNDS

H

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

Page
i
1 2 4 5 6 7 9 10
23

CITY OF BUFORD BOARD OF EDUCATION - GWINNETT COUNTY - 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

Page
24 25 26 27

SECTION II
COMPLIANCE AND INTERNAL CONTROL REPORTS
INDEPENDENT AUDITOR'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS
INDEPENDENT AUDITOR'S REPORT ON COMPLIANCE WITH REQUIREMENTS THAT COULD HAVE A DIRECT AND MATERIAL EFFECT ON EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH OMB CIRCULAR A-133

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

SECTION IV FINDINGS AND QUESTIONED COSTS SCHEDULE OF FINDINGS AND QUESTIONED COSTS

CITY OF BUFORD BOARD OF EDUCATION - GWINNETT COUNTY - TABLE OF CONTENTS -
SECTION V MANAGEMENT'S RESPONSES SCHEDULE OF MANAGEMENT'S RESPONSES

SECTION I FINANCIAL

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

DEPARTMENT OF AUDITS AND ACCOUNTS
270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400
August 5, 2013

Honorable Nathan Deal, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the City of Buford Board of Education
INDEPENDENT AUDITOR'S COMBINED REPORT ON BASIC FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION - SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
Ladies and Gentlemen:
We have audited the accompanying financial statements of the governmental activities, each major fund, and the aggregate remaining fund information (Exhibits A through H) of the City of Buford Board of Education, a component unit of the City of Buford, Georgia as of and for the year ended June 30, 2012, which collectively comprise the Board's basic financial statements as listed in the table of contents. These financial statements are the responsibility of the City of Buford Board of Education's management. Our responsibility is to express opinions on these financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Board's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinions.
In our opinion, the financial statements referred to previously present fairly, in all material respects, the respective financial position of the governmental activities, each major fund, and the aggregate remaining fund information of the City of Buford Board of Education, as of June 30, 2012, and the respective changes in financial position thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America.

2012ARL-11

In accordance with Government Auditing Standards, we have also issued our report dated August 5, 2013, on our consideration of the City of Buford Board of Education's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit.
Management's Discussion and Analysis and the Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual, as presented on pages i through ix and page 23 respectively, are not a required part of the basic financial statements but are supplementary information required by accounting principles generally accepted in the United States of America. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management regarding the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance.
Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City of Buford Board of Education's financial statements as a whole. The accompanying supplementary information consists of Schedules 2 through 5, which includes the Schedule of Expenditures of Federal Awards as required by U. S. Office of Management and Budget Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations, are presented for purposes of additional analysis and are not a required part of the financial statements. The accompanying supplementary information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the financial statements. The information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated, in all material respects, in relation to the basic financial statements as a whole.
A copy of this report has been filed as a permanent record in the office of the State Auditor and made available to the press of the State, as provided for by Official Code of Georgia Annotated section 50-6-24.
Respectfully submitted,

GSG:as 2012ARL-11

Greg S. Griffin State Auditor

CITY OF BUFORD BOARD OF EDUCATION GWINNETT COUNTY MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2012

The management's discussion and analysis of the City of Buford School District's financial performance provides an overall review of the School District's financial activities for the fiscal year ended June 30, 2012. 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 financial statements and the notes to the basic financial statements to enhance their understanding of the School District's financial performance.

Financial Highlights

Key financial highlights for fiscal year 2012 are as follows:



The School District's financial status increased during fiscal year 2012. Net assets increased

approximately $2.75 million. This increase was due to retirement of long-term debt

associated with an Intergovernmental Agreement with Gwinnett County Public Schools

associated with Special Purpose Local Option Sales Tax and an increase of funding from the

City of Buford Board of Commissioners.



General revenues accounted for $22.68 million in revenue, or 55 percent of all revenues.

Program specific revenues in the form of charges for services and sales, grants and

contributions accounted for $18.46 million or 45 percent of total revenues. Total revenues

were $41.14 million.



The School District had $38.39 million in expenses related to governmental activities; only

$18.46 million of these expenses were offset by program specific charges for services,

grants or contributions. General revenues of $22.68 million were adequate to provide for

these programs.



Among major funds, the general fund had $38.12 million in revenues and other financing

sources and $37.87 million in expenditures. The general fund's balance increased from

fiscal year 2011 to fiscal year 2012 by $248,009.

Using the Basic Financial Statements

This annual report consists of a series of financial statements and notes to those statements. These statements are organized so the reader can understand the City of Buford Board of Education as a financial whole, or as an entire operating entity.
The Statement of Net Assets and Statement of Activities provide information about the activities of the School District as a whole, presenting both an aggregate view of the School District's finances and a longer-term view of those finances. The fund financial statements provide the next level of detail. For governmental funds, these statements tell how services were financed in the short-term as well as what remains for future spending. The fund financial statements also look at the School District's most significant funds. In the case of the City of Buford Board of Education, the general fund is the most significant fund.

i

CITY OF BUFORD BOARD OF EDUCATION GWINNETT COUNTY MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2012
Reporting the School District as a Whole
Statement of Net Assets and Statement of Activities
While these documents contain the large number of funds used by the School District to provide programs and activities, the view of the School District as a whole looks at all financial transactions and asks the question, "How did we do financially during fiscal year 2012?" The Statement of Net Assets and the Statement of Activities answer this question. These statements include all assets and all liabilities using 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 changes in those assets. This change in net assets is important because it tells the reader whether, 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 result of many factors, some financial, some not. Nonfinancial factors include the School District's local allotments base, facility conditions, required educational programs and other factors.
In the Statement of Net Assets and the Statement of Activities, the School District has one distinct type of activity:
Governmental Activities - All of the School District's programs and services are reported here including instruction, support services, operation and maintenance of plant, pupil transportation, food service, after school program, school activity accounts and various others.
Reporting the School District's Most Significant Funds
Fund Financial Statements
Fund financial reports provide detailed information about the School District's major funds. The School District uses two funds to account for a multitude of financial transactions. However, these fund financial statements focus on the School District's most significant funds. The School District's major governmental funds are the General Fund and the District-wide Capital Projects Fund.
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 an accounting method called modified accrual 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 you determine whether there are more or fewer financial resources that can be spent in the near future to finance educational programs. The relationship (or differences) between governmental activities (reported in the Statement of Net Assets and the Statement of Activities) and governmental funds is reconciled in 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 school activity 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.
ii

CITY OF BUFORD BOARD OF EDUCATION GWINNETT COUNTY MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2012
The School District as a Whole
The perspective of the Statement of Net Assets is of the School District as a whole. Table 1 provides a summary of the School District's net assets for fiscal year 2012 compared to fiscal year 2011.

Table 1 Net Assets

Governmental Activities

Fiscal Year

Fiscal Year

2011

2012

Assets Current and Other Assets Capital Assets, Net

$ 14,927,632 $ 15,908,785

49,841,522

49,801,824

Total Assets

$ 64,769,154 $ 65,710,609

Liabilities Current and Other Liabilities Long-Term Liabilities

$

4,887,076 $ 5,903,973

7,024,809

4,200,348

Total Liabilities

$ 11,911,885 $ 10,104,321

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

$ 43,211,924 $ 45,601,476

1,167,458

887,963

8,477,887

9,116,849

Total Net Assets

$ 52,857,269 $ 55,606,288

iii

CITY OF BUFORD BOARD OF EDUCATION GWINNETT COUNTY MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2012
Chart 1 provides a visual summary of the School District's net assets for fiscal year 2012.
Chart 2 shows revenues for fiscal year 2012.
iv

CITY OF BUFORD BOARD OF EDUCATION GWINNETT COUNTY MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2012
Chart 3 shows expenses for the school district for fiscal year 2012.
v

CITY OF BUFORD BOARD OF EDUCATION GWINNETT COUNTY MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2012

Table 2 shows the changes in net assets for fiscal year 2011 compared to the changes in net assets for fiscal year 2012.
Table 2
Change in Net Assets

Revenues Program Revenues Charges for Services and Sales Capital Grants and Contributions Operating Grants and Contributions

Governmental Activities

Fiscal Year 2011

Fiscal Year 2012

$

2,329,215 $

2,805,544

152,511

15,260,513

15,500,682

Total Program Revenues

$

17,589,728 $

18,458,737

General Revenues:

Taxes

Property Taxes

For Maintenance and Operations

$

Sales Taxes

Special Purpose Local Option Sales Tax

For Capital Projects

Investment Earnings

Miscellaneous

Special Item

Transfer from City Government

11,761,804 $
2,837,465 3,212
1,404,406 5,558,189

9,427,680
3,037,224 17
1,591,074 8,628,409

Total General Revenues and Special Item

$

21,565,076 $

22,684,404

Total Revenues

$

39,154,804 $

41,143,141

Program Expenses

Instruction

$

24,247,460 $

25,404,857

Support Services

Pupil Services

1,547,793

1,679,237

Improvement of Instructional Service

257,575

308,930

Educational Media Services

638,891

570,468

General Administration

1,621,724

1,729,724

School Administration

2,240,762

2,307,039

Business Administration

306,477

318,607

Maintenance and Operation of Plant

2,334,358

2,595,762

Student Transportation Services

837,982

881,714

Other Support Services

16,388

10,813

Operation of Non-Instructional Services

Enterprise Operations

367,349

328,449

Community Services

264,542

275,003

Food Services

1,602,638

1,978,312

Interest on Short-term and Long-term Debt

5,207

5,207

Total Expenses

$

36,289,146 $

38,394,122

Increase in Net Assets

$

2,865,658 $

2,749,019

vi

CITY OF BUFORD BOARD OF EDUCATION GWINNETT COUNTY MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2012
Governmental Activities
The Statement of Activities shows the cost of program services and the charges for services and grants offsetting those services. Table 3 shows, for governmental activities, the total cost of services and the net cost of services comparing fiscal year 2011 with fiscal year 2012. That is, it identifies the cost of these services supported by tax revenue and unrestricted State entitlements.

Table 3 Governmental Activities

Total Cost of Services

Fiscal

Fiscal

Year 2011

Year 2012

Net Cost of Services

Fiscal

Fiscal

Year 2011

Year 2012

Program Expenses

Instruction

$

Support Services

Pupil Services

Improvement of Instructional Service

Educational Media Services

General Administration

School Administration

Business Administration

Maintenance and Operation of Plant

Student Transportation Services

Other Support Services

Operation of Non-Instructional Services

Enterprise Operations

Community Services

Food Services

Interest on Short-term and Long-term Debt

24,247,460 $
1,547,793 257,575 638,891
1,621,724 2,240,762
306,477 2,334,358
837,982 16,388
367,349 264,542 1,602,638
5,207

25,404,857 $
1,679,237 308,930 570,468
1,729,724 2,307,039
318,607 2,595,762
881,714 10,813
328,449 275,003 1,978,312
5,207

12,495,527 $
1,464,138 83,077
192,721 742,821 1,418,261 305,776 1,342,096 690,749
564
-136,667 94,697 452 5,207

12,863,378
1,579,616 109,656 162,480
1,153,829 1,568,072
318,292 1,557,062
605,490 2,448
-259,975 47,095
222,734 5,207

Total Expenses

$ 36,289,146 $ 38,394,122 $ 18,699,419 $ 19,935,384

The School District's Funds

The School District's governmental funds are accounted for using the modified accrual basis of accounting. Total governmental funds had revenues of $32.53 million and an allotment from the city in the amount of $8.63 million for a total of $41.16 million in receipts. General Fund expenditures totaled $37.87 million and Capital Projects expenditures totaled $2.43 million. The fund balance for the General Fund grew by $248,009. The fund balance for the Capital Projects Fund grew by $607,975.

General Fund Budgeting Highlights

The School District's budget is prepared according to Georgia law. The most significant budgeted fund is the General Fund.

For the General Fund, the actual revenues and other financing sources were $38.12 million. The final actual expenditures were $37.87 million. The School District was able to maintain its financial reserves despite the continuous precipitous decline of the economy during the fiscal year 2012 budget.

vii

CITY OF BUFORD BOARD OF EDUCATION GWINNETT COUNTY MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2012
Capital Assets and Debt Administration
Capital Assets
At the end of the fiscal year 2012, the School District had $49.80 million invested in capital assets, all in governmental activities. Table 4 indicates balances at June 30, 2012.

Table 4 Capital Assets (Net of Depreciation)

Governmental Activities

Fiscal

Fiscal

Year 2011

Year 2012

Land Land Improvements Buildings and Improvements Equipment

$

145,000 $

145,000

197,997

373,165

48,748,320

48,415,723

750,205

867,936

Debt

Total

$ 49,841,522 $ 49,801,824

Table 5 shows the School District's debt for compensated absences, the capital lease and the Intergovernmental Agreement.
Table 5 Debt at June 30

Governmental Activities

Fiscal

Fiscal

Year 2011

Year 2012

Captial Lease Compensated Absences Intergovernmental Agreement

$

362,630 $

181,315

32,581

6,629,598

4,200,349

Total

$ 7,024,809 $ 4,381,664

Current Issues

The City of Buford School District is buffered from some of the financial hardships other school districts experience by the financial support of a well run and fiscally responsible city government. However, changes in the student clientele, State and Federal regulations, and legal requirements continue to impact system operations and finance.
With 2012 State mandates but flexibility in expenditure controls, the school system provided the same level of service to our students.
With the increase in 2012 of revenues, the school system was able to maintain the ending fund equity to provide for a stable financial future and absorb some of the downturn in the economy.
viii

CITY OF BUFORD BOARD OF EDUCATION GWINNETT COUNTY MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2012
The School District has employed appropriate personnel and funded all programs adequately.
Contacting the School District's Financial Management This financial report is designed to provide our citizens, taxpayers, investors, and creditors with a general overview of the School District's finances and to show the School District's accountability for the money it receives. If you have questions about this report or need additional information, contact Mrs. Angela Adams, Director of Finance, City of Buford School District, 2625 Sawnee Avenue, Buford, Georgia 30518. You may also email your questions to angela.adams@bufordcityschools.org.
ix

CITY OF BUFORD BOARD OF EDUCATION - GWINNETT COUNTY

CITY OF BUFORD BOARD OF EDUCATION - GWINNETT COUNTY STATEMENT OF NET ASSETS JUNE 30, 2012
ASSETS
Cash and Cash Equivalents Investments Accounts Receivable, Net
Taxes State Government Federal Government Local Government Inventories Prepaid Items Capital Assets, Non-Depreciable Capital Assets, Depreciable (Net of Accumulated Depreciation)
Total Assets
LIABILITIES
Accounts Payable Salaries and Benefits Payable Payroll Withholdings Payable Deferred Revenue 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 Capital Projects Debt Service Unrestricted
Total Net Assets
Total Liabilities and Net Assets

EXHIBIT "A"

GOVERNMENTAL ACTIVITIES

$

6,826,516.44

200,000.00

1,997,264.41 1,873,622.84
754,986.23 4,069,699.78
21,949.98 164,745.69 145,000.00 49,656,824.27

$

65,710,609.64

$

1,776,194.86

3,483,473.68

229,948.89

233,040.26

181,315.18 4,200,348.60

$

10,104,321.47

$

45,601,475.67

32,134.86 648,267.79 207,560.75 9,116,849.10

$

55,606,288.17

$

65,710,609.64

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

CITY OF BUFORD BOARD OF EDUCATION - GWINNETT COUNTY STATEMENT OF ACTIVITIES
FOR THE YEAR ENDED JUNE 30, 2012

GOVERNMENTAL ACTIVITIES
Instruction Support Services
Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Other Support Services Operations of Non-Instructional Services Enterprise Operations Community Services Food Services Interest on Short-Term and Long-Term Debt
Total Governmental Activities
General Revenues Taxes Property Taxes For Maintenance and Operations Sales Taxes Special Purpose Local Option Sales Tax For Capital Projects Investment Earnings Miscellaneous
Special Item Transfer from City Government
Total General Revenues and Special Item
Change in Net Assets
Net Assets - Beginning of Year
Net Assets - End of Year

EXPENSES

CHARGES FOR SERVICES

$ 25,404,856.89 $ 1,449,320.74

1,679,237.37 308,929.90 570,468.34
1,729,724.09 2,307,039.45
318,606.63 2,595,761.96
881,713.79 10,812.58

328,449.27 275,002.54 1,978,311.80
5,207.32

588,138.10 227,907.09 540,177.61

$ 38,394,121.93 $ 2,805,543.54

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

EXHIBIT "B"

PROGRAM REVENUES

OPERATING

CAPITAL

GRANTS AND

GRANTS AND

CONTRIBUTIONS CONTRIBUTIONS

NET (EXPENSES) REVENUES
AND CHANGES IN NET ASSETS

$ 11,092,158.55
99,621.38 199,273.64 407,988.78 575,895.31 738,967.61
314.22 1,038,699.81
123,712.36 $ 8,364.52
286.19
1,215,400.04
$ 15,500,682.41 $

$ -12,863,377.60

152,511.50

-1,579,615.99 -109,656.26 -162,479.56
-1,153,828.78 -1,568,071.84
-318,292.41 -1,557,062.15
-605,489.93 -2,448.06

259,975.02 -47,095.45 -222,734.15
-5,207.32

152,511.50 $ -19,935,384.48

$

9,427,679.67

3,037,224.19 16.75
1,591,073.51

8,628,409.40

$ 22,684,403.52

$

2,749,019.04

52,857,269.13

$ 55,606,288.17

- 3 -

CITY OF BUFORD BOARD OF EDUCATION - GWINNETT COUNTY BALANCE SHEET
GOVERNMENTAL FUNDS JUNE 30, 2012

EXHIBIT "C"

ASSETS
Cash and Cash Equivalents Investments Accounts Receivable, Net
Taxes State Government Federal Government Local Government Inventories Prepaid Items
Total Assets

GENERAL FUND

DISTRICTWIDE
CAPITAL PROJECTS
FUND

TOTAL

$ 6,826,516.44 200,000.00

$ 6,826,516.44 200,000.00

1,739,703.65 $ 257,560.76 1,873,622.84
754,986.23 3,047,459.85 1,022,239.93
21,949.98 164,745.69

1,997,264.41 1,873,622.84
754,986.23 4,069,699.78
21,949.98 164,745.69

$ 14,628,984.68 $ 1,279,800.69 $ 15,908,785.37

LIABILITIES AND FUND BALANCES
LIABILITIES
Accounts Payable Salaries and Benefits Payable Payroll Withholdings Payable Deferred Revenue
Total Liabilities
FUND BALANCES
Nonspendable Restricted Assigned Unassigned
Total Fund Balances
Total Liabilities and Fund Balances

$ 1,352,222.71 $ 423,972.15 $ 1,776,194.86

3,483,473.68

3,483,473.68

229,948.89

229,948.89

1,870,203.76

1,870,203.76

$ 6,935,849.04 $ 423,972.15 $ 7,359,821.19

$

186,695.67

$ 186,695.67

10,184.88 $ 855,828.54

866,013.42

639,621.61

639,621.61

6,856,633.48

6,856,633.48

$ 7,693,135.64 $ 855,828.54 $ 8,548,964.18

$ 14,628,984.68 $ 1,279,800.69 $ 15,908,785.37

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

CITY OF BUFORD BOARD OF EDUCATION - GWINNETT COUNTY RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET
TO THE STATEMENT OF NET ASSETS JUNE 30, 2012

EXHIBIT "D"

Total Fund Balances - Governmental Funds (Exhibit "C")
Amounts reported for Governmental Activities in the Statement of Net Assets are different because:
Capital Assets used in Governmental Activities are not financial resources and therefore are not reported in the funds. These assets consist of:
Land Land Improvements Buildings and Improvements 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 are not due and payable in the current period and therefore are not reported as liabilities in the funds. Long-Term Liabilities at year-end consist of:
Intergovernmental Agreement Capital Lease
Total Long-Term Liabilities
Net Assets of Governmental Activities (Exhibit "A")

$ 8,548,964.18

$

145,000.00

949,506.19

57,191,381.89

3,132,794.74

-11,616,858.55

49,801,824.27

1,637,163.50

$ -4,200,348.60 -181,315.18

-4,381,663.78

$ 55,606,288.17

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

CITY OF BUFORD BOARD OF EDUCATION - GWINNETT COUNTY STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES
GOVERNMENTAL FUNDS YEAR ENDED JUNE 30, 2012

EXHIBIT "E"

REVENUES
Property Taxes Sales Taxes State Funds Federal Funds Charges for Services Investment Earnings Miscellaneous
Total Revenues
EXPENDITURES
Current Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Other Support Services Enterprise Operations Community Services Food Services Operation
Debt Services Principal Interest
Total Expenditures
Excess of Revenues over (under) Expenditures
OTHER FINANCING SOURCES
Transfers from City Government
Net Change in Fund Balances
Fund Balances - Beginning (Restated)
Fund Balances - Ending

GENERAL FUND

DISTRICTWIDE
CAPITAL PROJECTS
FUND

TOTAL

$ 9,444,129.81

$

$ 3,037,224.19

13,240,724.11

2,412,469.80

2,805,543.54

16.75

1,591,073.51

9,444,129.81 3,037,224.19 13,240,724.11 2,412,469.80 2,805,543.54
16.75 1,591,073.51

$ 29,493,957.52 $ 3,037,224.19 $ 32,531,181.71

$ 24,468,094.19

$ 24,468,094.19

1,678,921.37 308,929.90 570,468.34
1,756,050.32 2,313,757.47
322,194.66 2,746,444.52
966,181.37 10,812.58
328,449.27 275,002.54 1,942,528.75

1,678,921.37 308,929.90 570,468.34
1,756,050.32 2,313,757.47
322,194.66 2,746,444.52
966,181.37 10,812.58
328,449.27 275,002.54 1,942,528.75

181,315.19 $ 2,429,248.84 5,207.32

2,610,564.03 5,207.32

$ 37,874,357.79 $ 2,429,248.84 $ 40,303,606.63

$ -8,380,400.27 $ 607,975.35 $ -7,772,424.92

8,628,409.40

$ 248,009.13 $ 607,975.35 $

7,445,126.51

247,853.19

8,628,409.40 855,984.48
7,692,979.70

$ 7,693,135.64 $ 855,828.54 $ 8,548,964.18

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

CITY OF BUFORD BOARD OF EDUCATION - GWINNETT COUNTY RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT OF
REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES TO THE STATEMENT OF ACTIVITIES JUNE 30, 2012

EXHIBIT "F"

Total Net Change in Fund Balances - Governmental Funds (Exhibit "E")
Amounts reported for Governmental Activities in the Statement of Activities are different because:
Capital Outlays are reported as expenditures in Governmental Funds. However, in the Statement of Activities, the cost of Capital Assets is allocated over their estimated useful lives as depreciation expense. In the current period, these amounts are:
Capital Outlay Depreciation Expense
Excess of Capital Outlay over Depreciation Expense
Taxes reported in the Statement of Activities that do not provide current financial resources are not reported as revenues in the funds.
Repayment of Long-Term Debt is reported as an expenditure in Governmental Funds, but the repayment reduces Long-Term Liabilities in the Statement of Net Assets. In the current year, these amounts consist of:
Capital Lease Payments Intergovernmental Agreement Retirements
Total Long-Term Debt Repayments
Some items reported in the Statement of Activities do not require the use of current financial resources and therefore are not reported as expenditures in Governmental Funds. These activities consist of:
Decrease in Compensated Absences

$ 855,984.48

$ 436,195.54 -1,169,855.90

-733,660.36 -16,450.14

$ 181,315.19 2,429,248.84

2,610,564.03

32,581.03

Change in Net Assets of Governmental Activities (Exhibit "B")

$ 2,749,019.04

The notes to the basic financial statements are an integral part of this statement. - 7 -

(This page left intentionally blank)

CITY OF BUFORD BOARD OF EDUCATION - GWINNETT COUNTY STATEMENT OF FIDUCIARY NET ASSETS FIDUCIARY FUNDS JUNE 30, 2012
ASSETS Cash and Cash Equivalents
LIABILITIES Funds Held for Others

EXHIBIT "G"

AGENCY FUNDS

$

27,809.63

$

27,809.63

The notes to the basic financial statements are an integral part of this statement. -9 -

CITY OF BUFORD BOARD OF EDUCATION - GWINNETT COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2012

EXHIBIT "H"

NOTE 1: DESCRIPTION OF SCHOOL DISTRICT AND REPORTING ENTITY
REPORTING ENTITY
The City of Buford 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 not organized as a separate legal entity and does not have the power to levy taxes or issue bonds. Its budget is subject to approval by the City of Buford, Georgia. Accordingly, the City of Buford Board of Education is determined to be a component unit of the City of Buford, Georgia, which is the primary government.
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 City of Buford Board of Education.
District-wide Statements: The Statement of Net Assets and the Statement of Activities display information about the financial activities of the overall School District, except for fiduciary activities. Eliminations have been made to minimize the double counting of internal activities. Governmental activities generally are financed through taxes, intergovernmental revenues, and other nonexchange transactions.
The Statement of Activities presents a comparison between direct expenses and program revenues for each function of the School District's governmental activities.
Direct expenses are those that are specifically associated with a program or function and, therefore, are clearly identifiable to a particular function. Indirect expenses (expenses of the School District related to the administration and support of the School District's programs, such as office and maintenance personnel and accounting) are not allocated to programs.
Program revenues include (a) charges paid by the recipients of goods or services offered by the programs and (b) grants and contributions that are restricted to meeting the operational or capital requirements of a particular program. Revenues that are not classified as program revenues, including all taxes, are presented as general revenues.
Fund Financial Statements: The fund financial statements provide information about the School District's funds, including fiduciary funds. Eliminations have been made to minimize the double counting of internal activities. Separate statements for each category (governmental and fiduciary) are presented. The emphasis of fund financial statements is on major governmental funds, each displayed in a separate column.
The School District reports the following major governmental funds:
General Fund is the School District's primary operating fund. It accounts for and reports all financial resources not accounted for and reported in another fund.
District-wide Capital Projects Fund accounts for and reports financial resources including Special Purpose Local Option Sales Tax (SPLOST) that are restricted to the expenditure for capital outlays, including the acquisition or construction of capital facilities and other capital assets.
The School District reports the following fiduciary fund type:
Agency funds account for assets held by the School District as an agent for various funds, governments or individuals.

- 10 -

CITY OF BUFORD BOARD OF EDUCATION - GWINNETT COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2012

EXHIBIT "H"

BASIS OF ACCOUNTING

The basis of accounting determines when transactions are reported on the financial statements. The District-wide governmental and fiduciary fund financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded at the time liabilities are incurred, regardless of when the related cash flows take place. Nonexchange transactions, in which the School District gives (or receives) value without directly receiving (or giving) equal value in exchange, include property taxes, sales taxes, grants and donations. On an accrual basis, revenue from property taxes is recognized in the fiscal year for which the taxes are levied. Revenue from sales taxes is recognized in the fiscal year in which the underlying transaction (sale) takes place. Revenue from grants and donations is recognized in the fiscal year in which all eligibility requirements have been satisfied.

The School District uses funds to report on its financial position and the results of its operations. Fund accounting is designed to demonstrate legal compliance and to aid financial management by segregating transactions related to certain governmental functions or activities. A fund is a separate accounting entity with a self-balancing set of accounts.

Governmental funds are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Under this method, revenues are recognized when measurable and available. The School District considers all revenues reported in the governmental funds to be available if they are collected within sixty days after year-end. Property taxes, sales taxes and interest are considered to be susceptible to accrual. Expenditures are recorded when the related fund liability is incurred, except for principal and interest on general long-term debt and compensated absences, which are recognized as expenditures to the extent they have matured. Capital asset acquisitions are reported as expenditures in governmental funds. Proceeds of general long-term liabilities and acquisitions under capital leases are reported as other financing sources.

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.
RESTATEMENT OF PRIOR YEAR NET ASSETS/FUND BALANCE

For fiscal year 2012, the School District made a variety of prior period adjustments due to various errors or omissions, which require the restatement of the June 30, 2011, net assets in Governmental Activities and fund balance in the Capital Projects Fund. The result is an increase in net assets and a decrease in fund balance at July 1, 2011, of $693,962.75. This change is in accordance with generally accepted accounting principles.

Fund Balance, July 1, 2011, as previously reported Prior Year Unrecognized Liability to City of Buford

$

941,815.94

-693,962.75

Fund Balance, July 1, 2011, as restated

$

247,853.19

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.
- 11 -

CITY OF BUFORD BOARD OF EDUCATION - GWINNETT COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2012

EXHIBIT "H"

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 City of Buford Board of Commissioners fixed the property tax levy for the 2011 tax digest year (calendar year) on August 1, 2011 (levy date). Taxes were due on November 20, 2011 (lien date). Taxes collected within the current fiscal year or within 60 days after year-end on the 2011 tax digest are reported as revenue in the governmental funds for fiscal year 2012. The Buford City Clerk bills and collects the property taxes for the School District and remits the balance of taxes collected to the School District. Property tax revenues, at the fund reporting level, during the fiscal year ended June 30, 2012, for maintenance and operations amounted to $9,444,129.81.
The tax millage rate levied for the 2011 tax year (calendar year) for the City of Buford Board of Education was as follows (a mill equals $1 per thousand dollars of assessed value):

School Operations

13.10 mills

SALES TAXES
Special Purpose Local Option Sales Tax, at the fund reporting level, during the year amounted to $3,037,224.19 and is to be used for capital outlay for educational purposes or debt service. This sales tax was authorized by local referendum and the sales tax must be re-authorized at least every five years.
INVENTORIES
Food Inventories On the basic financial statements, inventories of donated food commodities used in the preparation of meals are reported at their Federally assigned value and purchased foods inventories are reported at cost (first-in, first-out). The School District uses the consumption method to account for inventories whereby donated food commodities are recorded as an asset and as revenue when received, and expenses/expenditures are recorded as the inventory items are used. Purchased foods are recorded as an asset when purchased and expenses/expenditures are recorded as the inventory items are used.
PREPAID ITEMS
Payments made to vendors for services that will benefit periods subsequent to June 30, 2012, are recorded as prepaid items.
CAPITAL ASSETS
Capital assets purchased, including capital outlay costs, are recorded as expenditures in the fund financial statements at the time of purchase (including ancillary charges). On the District-wide financial statements, all purchased capital assets are valued at cost where historical records are available and at estimated historical cost based on appraisals or deflated current replacement cost where no historical records exist. Donated capital assets are recorded at estimated fair market value on the date donated. Disposals are deleted at depreciated recorded cost. The cost of normal maintenance and repairs that do not add to the value of assets or materially extend the useful lives of the assets is not capitalized. Depreciation is computed using the straight-line method. The School District does not capitalize book collections or works of art. During the fiscal year under review, no events or changes in circumstances affecting a capital asset that may indicate impairment were known to the School District.
- 12 -

CITY OF BUFORD BOARD OF EDUCATION - GWINNETT COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2012

EXHIBIT "H"

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

statements are as follows:

Capitalization

Estimated

Policy

Useful Life

Land Land Improvements Buildings and Improvements Equipment Intangible Assets

All $ 5,000.00 $ 5,000.00 $ 5,000.00 $ 5,000.00

N/A 15 years
15 to 60 years 5 to 12 years
individually determined

Depreciation is used to allocate the actual or estimated historical cost of all capital assets over estimated useful lives, with the exception of intangible assets which are amortized.

Amortization of intangible assets such as water, timber, and mineral rights, easements, patents, trademarks, copyrights and internally generated software is computed using the straight-line method over the estimated useful lives of the assets, generally 10 to 20 years.
COMPENSATED ABSENCES
Members of the Teachers' Retirement System of Georgia (TRS) may apply unused sick leave toward early retirement. The liability for early retirement will be borne by TRS rather than by the individual school districts. Otherwise, sick leave does not vest with the employee, and no liability is reported in the School District's financial statements.
Prior to March 15, 2004, vacation leave not utilized during a fiscal year could be carried over to the next fiscal year. Vacation leave of 10 days was awarded on a fiscal year basis to all full time personnel employed on a twelve month basis until they had reached 15 fiscal years of service. After 15 years of service, employees earned 15 days per fiscal year. No other employees are eligible to earn vacation leave. After March 15, 2004, employees are no longer allowed to carry over unused vacation leave from one fiscal year to the next, except for the vacation days carried forward prior to these changes in the Vacation Leave Policy.
The amount of compensated absences reported at June 30, 2012, is for unused vacation leave days for twelve month employees earned and carried forward prior to the change in the School District's Leave Policy as of June 30, 2012. The compensated absence balance was calculated by the School District using the individual employee's current daily pay rate.

Beginning of Year Liability

Increases

Decreases

End of Year Liability

2010 2011 2012

$

61,193.44 $

$

42,776.50 $

$

32,581.03 $

888.37 $ 0.00 $ 0.00 $

19,305.31 $ 10,195.47 $ 32,581.03 $

42,776.50 32,581.03
0.00

NET ASSETS
The School District's net assets in the District-wide Statements are classified as follows:
Invested in capital assets, net of related debt - This represents the School District's total investment in capital assets, net of outstanding debt obligations related to those capital assets. To the extent debt has been incurred but not yet expended for capital assets, such amounts are not included as a component of invested in capital assets, net of related debt.
Restricted net assets - These represent resources for which the School District is legally or contractually obligated to spend resources for bus replacement, continuation of Federal programs, debt service and capital projects in accordance with restrictions imposed by external third parties.

- 13 -

CITY OF BUFORD BOARD OF EDUCATION - GWINNETT COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2012

EXHIBIT "H"

Unrestricted net assets - Unrestricted net assets represent resources derived from property taxes, sales taxes, grants and contributions not restricted to specific programs, charges for services, and miscellaneous revenues. These resources are used for transactions relating to the educational and general operations of the School District, and may be used at the discretion of the Board to meet current expenses for those purposes.
FUND BALANCES

The School District's fund balances are classified as follows:

Nonspendable Amounts that cannot be spent either because they are in a nonspendable form or because they are legally or contractually required to be maintained intact.

Restricted Constraints are placed on the use of resources are either (1) externally imposed conditions by creditors, grantors, contributors, or laws and regulations of other governments or (2) imposed by law through constitutional provisions or enabling legislation.

Committed Amounts that can be used only for specific purposes pursuant to constraints imposed by formal action of the Board of Education. The Board of Education is the School District's highest level of decision-making authority, and the formal action that is required to be taken to establish, modify, or rescind a fund balance commitment is a resolution approved by the Board. Committed fund balance also should incorporate contractual obligations to the extent that existing resources in the fund have been specifically committed for use in satisfying those contractual requirements.
Assigned Amounts that are constrained by the School District's intent to be used for specific purposes, but are neither restricted nor committed. The intent should be expressed by (1) the Board of Education or (2) the budget or finance committee, or the Superintendent, or designee, to assign amounts to be used for specific purposes.

Unassigned The residual classification for the General Fund. This classification represents fund balances that has not been assigned to other funds and that has not been restricted, committed, or assigned to specific purposes within the General Fund.

Fund Balances of the Governmental Funds at June 30, 2012, are as follows:

Nonspendable Inventories Prepaid Assets
Restricted Continuation of Federal Programs Capital Projects Debt Service
Assigned School Activity Accounts
Unassigned

$

21,949.98

164,745.69 $

186,695.67

$

10,184.88

648,267.79

207,560.75

866,013.42

639,621.61 6,856,633.48

Fund Balance, June 30, 2012

$ 8,548,964.18

It is the goal of the School District to achieve and maintain a committed, assigned, and unassigned fund balance in the general fund at fiscal year-end of not less than 8.3% of expenditures, not to exceed 15% of the total budget of the subsequent fiscal year, in compliance with Official Code of Georgia Annotated Section 20-2-167(a)5. If the unassigned fund balance at fiscal year-end falls below the goal, the School District shall develop a restoration plan to achieve and maintain the minimum fund balance.
When multiple categories of fund balance are available for expenditure, the School District will start with the most restricted category and spend those funds first before moving down to the next category with available funds.
- 14 -

CITY OF BUFORD BOARD OF EDUCATION - GWINNETT COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2012

EXHIBIT "H"

USE OF ESTIMATES
The preparation of the financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results may differ from those estimates.
NOTE 3: BUDGETARY DATA
The budget is a complete financial plan for the School District's fiscal year, and is based upon careful estimates of expenditures together with probable funding sources. The budget is legally adopted each year for the general and capital projects funds. There is no statutory prohibition regarding over expenditure of the budget at any level. The budget for all governmental funds is prepared and adopted by fund, function and object. The legal level of budgetary control was established by the Board at the aggregate fund level. The budget for the General Fund was prepared in accordance with accounting principles generally accepted in the United States of America.
The budgetary process begins with the School District's administration presenting an initial budget for the Board's review. The administration makes revisions as necessary based on the Board's guidelines and a tentative budget is approved. After approval of this tentative budget by the Board, such budget is advertised at least once in a newspaper of general circulation in the locality. At the next regularly scheduled meeting of the Board after advertisement, the Board receives comments on the tentative budget, makes revisions as necessary and adopts a final budget. The approved budget is then submitted, in accordance with provisions of Official Code of Georgia Annotated section 20-2167(c), to the Georgia Department of Education. The Board may increase or decrease the budget at any time during the year. All unexpended budget authority lapses at fiscal year-end.
The Superintendent is authorized by the Board to approve adjustments of no more than five percent of the amount budgeted for expenditures in any budget function for any fund. The Superintendent shall report any such adjustments to the Board no later than the regular Board meeting following such action. If expenditure of funds in any budget function for any fund is anticipated to be more than five percent of the budgeted amount, the Superintendent shall request Board approval for the budget amendment. Under no circumstance is the Superintendent or other staff person authorized to spend funds that exceed the total budget without approval by the Board.
See Schedule 1 General Fund Schedule of Revenues, Expenditures and Changes in Fund Balances Budget to Actual for a detail of any over/under expenditures during the fiscal year under review.
NOTE 4: DEPOSITS
COLLATERALIZATION OF DEPOSITS
Official Code of Georgia Annotated (O.C.G.A.) Section 45-8-12 provides that there shall not be on deposit at any time in any depository for a time longer than ten days a sum of money which has not been secured by surety bond, by guarantee of insurance, or by collateral. The aggregate of the face value of such surety bond and the market value of securities pledged shall be equal to not less than 110 percent of the public funds being secured after the deduction of the amount of deposit insurance. If a depository elects the pooled method (O.C.G.A. Section 45-8-13.1) the aggregate of the market value of the securities pledged to secure a pool of public funds shall be not less than 110 percent of the daily pool balance.
Acceptable security for deposits consists of any one of or any combination of the following:
1. Surety bond signed by a surety company duly qualified and authorized to transact business within the State of Georgia,
2. Insurance on accounts provided by the Federal Deposit Insurance Corporation,

- 15 -

CITY OF BUFORD BOARD OF EDUCATION - GWINNETT COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2012

EXHIBIT "H"

3. Bonds, bills, notes, certificates of indebtedness or other direct obligations of the United States or of the State of Georgia,

4. Bonds, bills, notes, certificates of indebtedness or other obligations of the counties or municipalities of the State of Georgia,

5. Bonds of any public authority created by the laws of the State of Georgia, providing that the statute that created the authority authorized the use of the bonds for this purpose,

6. Industrial revenue bonds and bonds of development authorities created by the laws of the State of Georgia, and

7. Bonds, bills, notes, certificates of indebtedness, or other obligations of a subsidiary corporation of the United States government, which are fully guaranteed by the United States government both as to principal and interest or debt obligations issued by or securities guaranteed by the Federal Land Bank, the Federal Home Loan Bank, the Federal Intermediate Credit Bank, the Central Bank for Cooperatives, the Farm Credit Banks, the Federal Home Loan Mortgage Association, and the Federal National Mortgage Association.
CATEGORIZATION OF DEPOSITS

Custodial credit risk is the risk that in the event of a bank failure, the School District's deposits may not be returned to it. The School District does not have a deposit policy for custodial credit risk. At June 30, 2012, the bank balances were $7,226,535.69. The bank balances were entirely covered by Federal depository insurance.
NOTE 5: NON-MONETARY TRANSACTIONS

The School District receives food commodities from the United States Department of Agriculture (USDA) for school breakfast and lunch programs. These commodities are recorded at their Federally assigned value. See Note 2 Inventories
NOTE 6: CAPITAL ASSETS

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

Balances July 1, 2011 (Restated)

Increases

Decreases

Balances June 30, 2012

Governmental Activities Capital Assets, Not Being Depreciated:
Land

$

145,000.00 $

0.00 $

0.00 $

145,000.00

Capital Assets Being Depreciated Buildings and Improvements Equipment Land Improvements

$ 57,083,982.77 $ 2,840,179.05 913,325.46

107,399.12 $ 292,615.69
36,180.73

0.00 $

57,191,381.89 3,132,794.74 949,506.19

Less Accumulated Depreciation for: Buildings and Improvements Equipment Land Improvements

7,811,958.54 2,089,974.54
545,069.57

963,700.40 174,883.97
31,271.53

8,775,658.94 2,264,858.51
576,341.10

Total Capital Assets, Being Depreciated, Net

$ 50,390,484.63 $ -733,660.36 $

0.00 $ 49,656,824.27

Governmental Activity Capital Assets - Net

$ 50,535,484.63 $ -733,660.36 $

0.00 $ 49,801,824.27

- 16 -

CITY OF BUFORD BOARD OF EDUCATION - GWINNETT COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2012

EXHIBIT "H"

Current year depreciation expense by function is as follows:

Instruction

$

Support Services

Pupil Services

$

2,316.00

General Administration

6,868.21

School Administration

2,281.30

Maintenance and Operation of Plant

48,041.34

Student Transportation Services

119,920.10

Food Services

954,645.89
179,426.95 35,783.06

$ 1,169,855.90

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 has obtained commercial insurance for risk of loss associated with torts, assets, errors or omissions, job related illness or injuries to employees, and acts of God. The School District has neither significantly reduced coverage for these risks nor incurred losses (settlements) which exceeded the School District's insurance coverage in any of the past three years.

The School District is self-insured with regard to unemployment compensation claims. The School District accounts for claims within the same fund that the employee's salary and benefits are paid. Claims are accounted for with expenses/expenditures and liability being reported when it is probable that a loss has occurred, and the amount of that loss can be reasonably estimated.

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

Beginning

Claims and

of Year

Changes in

Claims

End of Year

Liability

Estimates

Paid

Liability

2011

$

2012

$

0.00 $ 0.00 $

115,631.02 $ 16,636.91 $

115,631.02 $ 16,636.91 $

0.00 0.00

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

Position Covered

Amount

Superintendent Assistant Superintendent Each Principal

$

50,000.00

$

50,000.00

$

3,000.00

NOTE 8: OPERATING LEASES

City of Buford Board of Education has entered into various leases as lessee for copiers. These leases are considered for accounting purposes to be operating leases. Lease expenditures for the year ended June 30, 2012, for governmental funds amounted to $20,167.81. Future minimum lease payments for these leases are as follows:

Governmental

Year Ending

Funds

2013 2014 2015

$

21,148.00

17,748.00

11,676.00

Total

$

50,572.00

- 17 -

CITY OF BUFORD BOARD OF EDUCATION - GWINNETT COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2012

EXHIBIT "H"

NOTE 9: LONG-TERM DEBT CAPITAL LEASES

The City of Buford Board of Education entered into a lease agreement for the purchase of computers. This lease agreement qualifies as a capital lease for accounting purposes, and, therefore, has been recorded at the present value of the future minimum lease payments as of the date of inception.
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.
INTERGOVERNMENTAL CONTRACT

In March 2007, the Gwinnett County School District issued general obligation bonds in the amount of $425,000,000.00 to provide advance funding for Capital Outlay projects associated with the voters' approval of a Special Purpose Local Option Sales Tax ("SPLOST"). Per an Intergovernmental Agreement signed on August 4, 2006, between the Gwinnett County School District ("Gwinnett") and the City of Buford Board of Education ("Buford"). Gwinnett agreed to provide advance funding of $18,700,000.00 of proceeds from the general obligation bonds to Buford. In exchange, Buford agreed to relinquish upon receipt from the State of Georgia, its share of proceeds from the SPLOST. The agreement also allows for a reduction in this advance funding for any deficiency of collected funds from advance funds related to the prior SPLOST project.

In fiscal year 2008, Gwinnett provided the advance funding of $18,700,000.00. SPLOST proceeds of $2,023,675.10 were received and remitted by Buford to Gwinnett during the fiscal year. SPLOST proceeds of $405,573.74 were received but not yet remitted by Buford to Gwinnett. This balance is considered matured debt expense/expenditure and is reported as an accounts payable on the School District's Statement of Net Assets and Governmental Funds Balance Sheet. The remaining advance funding proceeds of $4,200,348.60 is reported as long-term debt on the School District's Statement of Net Assets.

The changes in Long-Term Debt during the fiscal year ended June 30, 2012, were as follows:

Balance July 1, 2011

Additions

Governmental Funds

Balance

Deductions

June 30, 2012

Due Within One Year

Compensated Absences Intergovernmental Agreement Capital Leases

$ 32,581.03 $ 6,629,597.44 362,630.37

0.00 $

32,581.03 $ 2,429,248.84
181,315.19

0.00 $ 4,200,348.60
181,315.18

(1) 181,315.18

$ 7,024,808.84 $

0.00 $ 2,643,145.06 $ 4,381,663.78 $ 181,315.18

(1) Per the Intergovernmental Agreement with the Gwinnett County School District, portion of Long-term debt due within one year is equal to Special Purpose Local Option Sales Tax collections to be made by the School District in the subsequent fiscal yea It is not possible to determine the specific amount of these funds to be collected.

NOTE 10: ON-BEHALF PAYMENTS
The School District has recognized revenues and costs in the amount of $2,336,026.00 for health insurance and retirement contributions paid on the School District's behalf by the following State Agencies.

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CITY OF BUFORD BOARD OF EDUCATION - GWINNETT COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2012

EXHIBIT "H"

Georgia Department of Education Paid to the Georgia Department of Community Health For Health Insurance of Certificated Personnel In the amount of $2,310,975.00
Office of the State Treasurer Paid to the Public School Employees' Retirement System For Public School Employees' Retirement (PSERS) Employer's Cost In the amount of $25,051.00
NOTE 11: 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 12: POST-EMPLOYMENT BENEFITS
GEORGIA SCHOOL PERSONNEL POST-EMPLOYMENT HEALTH BENEFIT FUND
Plan Description. The Georgia School Personnel Post-employment Health Benefit Fund (School OPEB Fund) is a cost-sharing multiple-employer defined benefit post-employment healthcare plan that covers eligible former employees of public school systems, libraries and regional educational service agencies. The School OPEB Fund provides health insurance benefits to eligible former employees and their qualified beneficiaries through the State Employees Health Benefit Plan administered by the Department of Community Health. The Official Code of Georgia Annotated (O.C.G.A.) assigns the authority to establish and amend the benefit provisions of the group health plans, including benefits for retirees, to the Board of Community Health (Board). The Department of Community Health, which includes the School OPEB Fund, issues a separate stand alone financial audit report and a copy can be obtained from the Georgia Department of Audits and Accounts.
Funding Policy. The contribution requirements of plan members and participating employers are established by the Board in accordance with the current Appropriations Act and may be amended by the Board. Contributions of plan members or beneficiaries receiving benefits vary based on plan election, dependent coverage, and Medicare eligibility and election. For members with fewer than five years of service as of January 1, 2012, contributions also vary based on years of service. On average, members with five years or more of service as of January 1, 2012, pay approximately 25 percent of the cost of the health insurance coverage. In accordance with the Board resolution dated December 8, 2011, for members with fewer than five years of service as of January 1, 2012, the State provides a premium subsidy in retirement that ranges from 0% for fewer than 10 years of service to 75% (but no greater than the subsidy percentage offered to active employees) for 30 or more years of service. The subsidy for eligible dependents ranges from 0% to 55% (but no greater than the subsidy percentage offered to dependents of active employees minus 20%). No subsidy is available to Medicare eligible members not enrolled in a Medicare Advantage Option. The Board of Community Health sets all member premiums by resolution and in accordance with the law and applicable revenue and expense projections. Any subsidy policy adopted by the Board may be changed at any time by Board resolution and does not constitute a contract or promise of any amount of subsidy.

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CITY OF BUFORD BOARD OF EDUCATION - GWINNETT COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2012

EXHIBIT "H"

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

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

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

For non-certificated school personnel:

July 2011 - August 2011

$246.20 per member per month

September 2011 - June 2012 $296.20 per member per month

No additional contribution was required by the Board for fiscal year 2012 nor contributed to the School OPEB Fund to prefund retiree benefits. Such additional contribution amounts are determined annually by the Board in accordance with the School plan for other post-employment benefits and are subject to appropriation.

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

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

as follows:

Percentage

Required

Fiscal Year

Contributed

Contribution

2012 2011 2010

100% 100% 100%

$

2,980,644.97

$

2,736,845.75

$

2,760,694.36

NOTE 13: RETIREMENT PLANS
TEACHERS' RETIREMENT SYSTEM OF GEORGIA (TRS)
Plan Description. The TRS is a cost-sharing multiple-employer defined benefit plan created in 1943 by an act of the Georgia General Assembly to provide retirement benefits for qualifying employees in educational service. A Board of Trustees comprised of active and retired members and ex-officio State employees is ultimately responsible for the administration of TRS. The Teachers' Retirement System of Georgia issues a separate stand alone financial audit report and a copy can be obtained from the Georgia Department of Audits and Accounts.
On October 25, 1996, the Board created the Supplemental Retirement Benefits Plan of the Georgia Teachers' Retirement System (SRBP-TRS). SRBP-TRS was established as a qualified excess benefit plan in accordance with Section 415 of the Internal Revenue Code (IRC) as a portion of TRS. The purpose of SRBP-TRS is to provide retirement benefits to employees covered by TRS whose benefits are otherwise limited by IRC Section 415. Beginning July 1, 1997, all members and retired former members in TRS are eligible to participate in the SRBP-TRS whenever their benefits under TRS exceed the IRC Section 415 imposed limitation on benefits.

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CITY OF BUFORD BOARD OF EDUCATION - GWINNETT COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2012

EXHIBIT "H"

TRS provides service retirement, disability retirement, and survivor's benefits. The benefit structure of TRS is defined and may be amended by State statute. A member is eligible for normal service retirement after 30 years of creditable service, regardless of age, or after 10 years of service and attainment of age 60. A member is eligible for early retirement after 25 years of creditable service.

Normal retirement (pension) benefits paid to members are equal to 2% of the average of the member's two highest paid consecutive years of service, multiplied by the number of years of creditable service up to 40 years. Early retirement benefits are reduced by the lesser of one-twelfth of 7% for each month the member is below age 60 or by 7% for each year or fraction thereof by which the member has less than 30 years of service. It is also assumed that certain cost-of-living adjustments, based on the Consumer Price Index, will be made in future years. Retirement benefits are payable monthly for life. A member may elect to receive a partial lump-sum distribution in addition to a reduced monthly retirement benefit. Death, disability and spousal benefits are also available.

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

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

Fiscal Year

Percentage Contributed

Required Contribution

2012 2011 2010

100% 100% 100%

$

2,005,679.63

$

1,926,519.86

$

1,846,138.14

PUBLIC SCHOOL EMPLOYEES' RETIREMENT SYSTEM (PSERS)
Bus drivers, lunchroom personnel, and maintenance and custodial personnel are members of the Public School Employees' Retirement System of Georgia. The System is funded by contributions by the employees and by the State of Georgia. The School District makes no contribution to this plan.

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CITY OF BUFORD BOARD OF EDUCATION - GWINNETT COUNTY GENERAL FUND
SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL
YEAR ENDED JUNE 30, 2012

SCHEDULE "1"

REVENUES
Property Taxes State Funds Federal Funds Charges for Services Investment Earnings Miscellaneous
Total Revenues
EXPENDITURES
Current Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Other Support Services Enterprise Operations Community Services Food Services Operation
Debt Service
Total Expenditures
Excess of Revenues over (under) Expenditures
OTHER FINANCING SOURCES
Transfers From City Government
Net Change in Fund Balances
Fund Balances - Beginning

NONAPPROPRIATED BUDGETS

ORIGINAL (1)

FINAL (1)

ACTUAL AMOUNTS

VARIANCE OVER/UNDER

$ 17,900,000.00 $ 17,900,000.00 $ 9,444,129.81 $ -8,455,870.19

11,366,578.00 11,366,578.00 13,240,724.11

1,874,146.11

950,000.00

950,000.00

2,412,469.80

1,462,469.80

1,436,567.87

1,436,567.87

2,805,543.54

1,368,975.67

200.00

200.00

16.75

-183.25

45,450.00

45,450.00

1,591,073.51

1,545,623.51

$ 31,698,795.87 $ 31,698,795.87 $ 29,493,957.52 $ -2,204,838.35

$ 21,297,477.09 $ 21,514,506.31 $ 24,468,094.19 $ -2,953,587.88

1,238,858.34 163,212.52 580,618.77
1,876,516.76 2,128,311.83
347,822.99 2,508,797.97
863,653.72
1,498,467.43

1,238,442.54 237,643.52 580,618.77
1,884,979.76 2,128,042.11
347,822.99 2,508,797.97
863,653.72 8,262.50
1,498,467.43

1,678,921.37 308,929.90 570,468.34
1,756,050.32 2,313,757.47
322,194.66 2,746,444.52
966,181.37 10,812.58
328,449.27 275,002.54 1,942,528.75 186,522.51

-440,478.83 -71,286.38 10,150.43 128,929.44
-185,715.36 25,628.33
-237,646.55 -102,527.65
-2,550.08 -328,449.27 -275,002.54 -444,061.32 -186,522.51

$ 32,503,737.42 $ 32,811,237.62 $ 37,874,357.79 $ -5,063,120.17

$ -804,941.55 $ -1,112,441.75 $ -8,380,400.27 $ -7,267,958.52

8,628,409.40

8,628,409.40

$ -804,941.55 $ -1,112,441.75 $ 248,009.13 $ 1,360,450.88

7,061,928.44

7,078,281.18

7,445,126.51

366,845.33

Fund Balances - Ending

$ 6,256,986.89 $ 5,965,839.43 $ 7,693,135.64 $ 1,727,296.21

Notes to the Schedule of Revenues, Expenditures and Changes in Fund Balances Budget and Actual
(1) Original and Final Budget amounts do not include budgeted revenues or expenditures of the various principal accounts. The actual amounts include revenues ($1,920,981.90) and expenditures ($1,730,171.74) of the various principal accounts.
The accompanying schedule of revenues, expenditures and changes in fund balances budget and actual is presented on the modified accrual basis of accounting which is the basis of accounting used in the presentation of the fund financial statements.

See notes to the basic financial statements.

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CITY OF BUFORD BOARD OF EDUCATION - GWINNETT COUNTY SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS YEAR ENDED JUNE 30, 2012

SCHEDULE "2"

FUNDING AGENCY PROGRAM/GRANT
Agriculture, U. S. Department of Child Nutrition Cluster Pass-Through From Georgia Department of Education Food Services School Breakfast Program National School Lunch Program
Total U.S. Department of Agriculture
Education, U.S. Department of Special Education Cluster Pass-Through From Georgia Department of Education Special Education Grants to States
Title I, Part A Cluster Pass-Through From Georgia Department of Education ARRA - Title I Grants to Local Educational Agencies Title I Grants to Local Educational Agencies
Total Title I, Part A Cluster
Other Programs Pass-Through From Georgia Department of Education Career and Technical Education - Basic Grants to States Education Jobs Fund Improving Teacher Quality State Grants
Total Other Programs
Total U. S. Department of Education

CFDA NUMBER

PASSTHROUGH
ENTITY ID
NUMBER

EXPENDITURES IN PERIOD

* 10.553 * 10.555

N/A

N/A

$

$

(2) 1,897,109.64 (1)
1,897,109.64

* 84.027

N/A

$

529,853.28

84.389 84.010

N/A

$

N/A

$

7,899.21 616,695.40
624,594.61

84.048 84.410 84.367

N/A

$

N/A

N/A

$

$

26,924.71 8,191.00
104,914.23
140,029.94
1,294,477.83

Total Expenditures of Federal Awards

$

N/A = Not Available

Notes to the Schedule of Expenditures of Federal Awards

(1) Includes the Federally assigned value of donated commodities for the Food Donation Program in the amount of $98,203.62.
(2) Expenditures for the funds earned on the School Breakfast Program ($290,883.33) were not maintained separately and are included in the 2012 National School Lunch Program.

Major Programs are identified by an asterisk (*) in front of the CFDA number.

The School District did not provide Federal Assistance to any Subrecipient.

The accompanying schedule of expenditures of Federal awards includes the Federal grant activity of the City of Buford 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.

3,191,587.47

See notes to the basic financial statements.

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CITY OF BUFORD BOARD OF EDUCATION - GWINNETT COUNTY SCHEDULE OF STATE REVENUE YEAR ENDED JUNE 30, 2012
AGENCY/FUNDING
GRANTS Education, Georgia Department of Quality Basic Education Direct Instructional Cost Kindergarten Program Kindergarten Program - Early Intervention Program Primary Grades (1-3) Program Primary Grades - Early Intervention (1-3) Program Upper Elementary Grades (4-5) Program Upper Elementary Grades - Early Intervention (4-5) Program Middle School (6-8) Program High School General Education (9-12) Program Vocational Laboratory (9-12) Program Students with Disabilities Gifted Student - Category VI Remedial Education Program Alternative Education Program English Speakers of Other Languages (ESOL) Media Center Program 20 Days Additional Instruction Staff and Professional Development Indirect Cost Central Administration School Administration Facility Maintenance and Operations Categorical Grants Pupil Transportation Regular Nursing Services Food Services Amended Formula Adjustment Other State Programs Apprenticeship Program CTAE - Middle School Support Grant Dual Enrollment Extended Day - Technology Health Insurance Math and Science Supplements Pupil Transportation - State Bonds Virtual Schools Grant Vocational Construction Related Equipment - State Bonds Vocation Supervisors
Office of State Treasurer Public School Employees' Retirement

SCHEDULE "3"

GOVERNMENTAL FUND TYPE GENERAL FUND

$

978,410.00

45,101.00

2,133,222.00

80,914.00

1,076,639.00

42,036.00

1,583,715.00

1,512,006.00

378,512.00

1,590,070.00

577,748.00

124,427.00

126,774.00

289,337.00

300,748.00

89,946.00

60,650.00

421,412.00 543,124.00 764,499.00

112,865.00 63,601.00 39,793.06
-2,155,328.00
-145.00 -5,420.01 4,996.00 12,194.69 2,310,975.00 2,188.44 152,511.50 3,100.00 -44,393.57
-555.00

25,051.00

$ 13,240,724.11

See notes to the basic financial statements.

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CITY OF BUFORD BOARD OF EDUCATION - GWINNETT COUNTY SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS
YEAR ENDED JUNE 30, 2012

SCHEDULE "4"

PROJECT

ORIGINAL ESTIMATED
COST (1)

CURRENT ESTIMATED COSTS (2)

AMOUNT EXPENDED IN CURRENT YEAR (3)

AMOUNT EXPENDED IN PRIOR YEARS (3)

TOTAL COMPLETION
COST

EXCESS PROCEEDS NOT
EXPENDED

ESTIMATED COMPLETION
DATE

Hall County SPLOST Projects: acquiring,

constructing and equipping additional

classrooms, instructional and support space

and remodeling, renovating, and equipping

existing classrooms, instructional and support

space; acquiring, constructing and equipping

new middle schools; acquiring and installing

technology improvements system-wide; and

renovating existing school buildings and

facilities.

$

3,000,000.00 $

3,000,000.00 $

0.00 $ 1,797,667.81 $

0.00 $

0.00

(1) The School District's original cost estimate as specified in the resolution calling for the imposition of the Local Option Sales Tax.
(2) The School District's current estimate of total cost for the project. Includes all cost from project inception to completion.
(3) The voters of Hall County approved the imposition of a 1% sales tax to fund the above project and retire associated debt. Amounts expended for this project may include sales tax proceeds, state, local property taxes and/or other funds over the life of the project.

See notes to the basic financial statements.

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CITY OF BUFORD BOARD OF EDUCATION - GWINNETT COUNTY GENERAL FUND - QUALITY BASIC EDUCATION PROGRAMS (QBE)
ALLOTMENTS AND EXPENDITURES - BY PROGRAM YEAR ENDED JUNE 30, 2012

SCHEDULE "5"

DESCRIPTION
Direct Instructional Programs Kindergarten Program Kindergarten Program-Early Intervention Program Primary Grades (1-3) Program Primary Grades-Early Intervention (1-3) Program Upper Elementary Grades (4-5) Program Upper Elementary Grades-Early Intervention (4-5) Program Middle School (6-8) Program High School General Education (9-12) Program Vocational Laboratory (9-12) Program Students with Disabilities Category I Category II Category III Category IV 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 QBE PROGRAM COSTS

SALARIES

OPERATIONS

TOTAL

$

1,311,418.00 $

62,794.00

2,880,225.00

109,320.00

1,454,106.00

57,382.00 2,141,827.00 1,988,072.00
503,037.00 2,140,813.00

754,154.00 168,270.00 170,339.00 389,914.00
$ 14,131,671.00 $
405,607.00 82,957.00

1,629,695.76 $ 192,219.71
3,619,406.86 255,746.25
2,044,380.59

61,812.89 $ 151,614.46
80,727.31

1,691,508.65 192,219.71
3,771,021.32 255,746.25
2,125,107.90

166,926.51 3,301,056.95 3,178,423.08
408,201.68

231,231.92 337,459.87
57,641.35

166,926.51 3,532,288.87 3,515,882.95
465,843.03

220,857.53
1,528,046.24 558,806.56 339,488.70
72,375.40 406,372.08

344,093.09 72.13
528.43
399.00 171.12
50.00

564,950.62 72.13
1,528,574.67 558,806.56 339,887.70 171.12 72,375.40 406,422.08

17,922,003.90 $ 1,265,801.57 $ 19,187,805.47

536,753.27 97,003.63

33,211.99

569,965.26 97,003.63

TOTAL QBE FORMULA FUNDS

$ 14,620,235.00 $ 18,555,760.80 $ 1,299,013.56 $ 19,854,774.36

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

See notes to the basic financial statements.

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SECTION II COMPLIANCE AND INTERNAL CONTROL REPORTS

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

DEPARTMENT OF AUDITS AND ACCOUNTS
270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400
August 5, 2013

Honorable Nathan Deal, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the City of Buford Board of Education
INDEPENDENT AUDITOR'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS
Ladies and Gentlemen:
We have audited the financial statements of the governmental activities, each major fund, and the aggregate remaining fund information of City of Buford Board of Education as of and for the year ended June 30, 2012, which collectively comprise City of Buford Board of Education's basic financial statements and have issued our report thereon dated August 5, 2013. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States.
Internal Control Over Financial Reporting
Management of City of Buford Board of Education is responsible for establishing and maintaining effective internal control over financial reporting. In planning and performing our audit, we considered City of Buford 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 City of Buford Board of Education's internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness of the City of Buford Board of Education's internal control over financial reporting.
Our consideration of internal control over financial reporting was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over financial reporting that might be deficiencies, significant deficiencies, or material weaknesses and therefore, there can be no assurances that all deficiencies, significant deficiencies or material weaknesses have been identified. However, as described in the accompanying Schedule of Findings and Questioned Costs, we identified a certain deficiency in internal control over financial reporting that we consider to be a material weakness and other deficiencies that we consider to be significant deficiencies.

2012YB-40

A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect and correct misstatements on a timely basis. A material weakness is a deficiency, or combination of deficiencies, in internal control such that there is a reasonable possibility that a material misstatement of the entity's financial statements will not be prevented, or detected and corrected on a timely basis. We consider item FS-7641-12-03 to be a material weakness.
A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. We consider items FS-7641-12-01, FS-7641-12-02, FS-7641-12-04, FS-7641-12-05, and FS-7641-12-06 in the accompanying Schedule of Findings and Questioned Costs to be significant deficiencies in internal control over financial reporting.
Compliance and Other Matters
As part of obtaining reasonable assurance about whether City of Buford 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 City of Buford Board of Education in a separate letter dated August 5, 2013.
City of Buford 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 City of Buford 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 City of Buford Board of Education, others within the entity, Federal awarding agencies and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties.
Respectfully submitted,

GSG:as 2012YB-40

Greg S. Griffin State Auditor

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

DEPARTMENT OF AUDITS AND ACCOUNTS
270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400
August 5, 2013

Honorable Nathan Deal, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the City of Buford Board of Education
INDEPENDENT AUDITOR'S REPORT ON COMPLIANCE WITH REQUIREMENTS THAT COULD HAVE A DIRECT AND MATERIAL EFFECT ON EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH OMB CIRCULAR A-133
Ladies and Gentlemen:
Compliance
We have audited City of Buford Board of Education's compliance with the types of compliance requirements described in the OMB Circular A-133 Compliance Supplement that could have a direct and material effect on each of its major Federal programs for the year ended June 30, 2012. City of Buford 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 City of Buford Board of Education's management. Our responsibility is to express an opinion on City of Buford Board of Education's compliance based on our audit.
We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and OMB Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations. Those standards and OMB Circular A-133 require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major Federal program occurred. An audit includes examining, on a test basis, evidence about the City of Buford 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 City of Buford Board of Education's compliance with those requirements.
As described in item FA-7641-12-01, in the accompanying Schedule of Findings and Questioned Costs, City of Buford Board of Education did not comply with requirements regarding Reporting that is applicable to its Special Education Cluster. Compliance with such requirements is necessary, in our opinion, for City of Buford Board of Education to comply with requirements applicable to that program.
2012SA-65

In our opinion, except for the noncompliance described in the preceding paragraph, City of Buford Board of Education complied, in all material respects, with the compliance requirements referred to above that could have a direct and material effect on each of its major Federal programs for the year ended June 30, 2012.
Internal Control Over Compliance
Management of City of Buford 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 City of Buford 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 City of Buford 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 a deficiency in internal control over compliance that we consider to be a material weakness.
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-7641-12-01 to be a material weakness.
City of Buford 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 City of Buford 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 City of Buford Board of Education, others within the entity, Federal awarding agencies and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties.
Respectfully submitted,

GSG:as 2012SA-65

Greg S. Griffin State Auditor

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

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

PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

FINDING CONTROL NUMBER AND STATUS

FS-7641-10-01 FS-7641-10-02 FS-7641-10-03 FS-7641-10-04 FS-7641-10-05 FS-7641-11-01 FS-7641-11-02 FS-7641-11-03 FS-7641-11-04 FS-7641-11-05 FS-7641-11-06 FS-7641-11-07

Further Action Not Warranted Further Action Not Warranted Further Action Not Warranted Further Action Not Warranted Further Action Not Warranted Unresolved - See Corrective Action/Responses Unresolved - See Corrective Action/Responses Unresolved - See Corrective Action/Responses Unresolved - See Corrective Action/Responses Unresolved - See Corrective Action/Responses Previously Reported Corrective Action Implemented Unresolved - See Corrective Action/Responses

CORRECTIVE ACTION/RESPONSES

GENERAL LEDGER Inadequate Approval of Journal Entries Finding Control Number: FS-7641-11-01

The Board will implement steps to ensure adequate documentation and approvals of journal entries. These steps include utilizing journal entry forms and attaching backup documentation and utilizing current staff for preparation of journal entries. Each journal entry form has a place for preparer, entry, and approval signatures.

CASH AND CASH EQUIVALENTS Inadequate Internal Control Procedures Finding Control Number: FS-7641-11-02

Due to budgetary constraints, no additional staff can be added at this time. However, the Board will have an administrator independent of the general ledger review the bank statements on a monthly basis.

FINANCIAL REPORTING Inadequate Internal Controls over Financial Reporting Finding Control Number: FS-7641-11-03

The Board will complete the financial statements for the Department of Audits no later than December 2013 to ensure there is adequate time to review and revise statements before the arrival of the audit team. The finance department will review all points and findings from prior year to ensure that issues are resolved.

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

PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

CORRECTIVE ACTION/RESPONSES

CASH AND CASH EQUIVALENTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Controls over School Activity Accounts Finding Control Number: FS-7641-11-04

Due to budgetary constraints, no additional staff can be added at this time. However, the Board has implemented steps to ensure that internal controls and adequate separation of duties exist. These steps include meetings with individual school administration staffs to review the procedures necessary to ensure separation of duties exist.

CAPITAL ASSETS Failure to Properly Maintain Capital Assets Finding Control Number: FS-7641-11-05

The Board has implemented steps to ensure that capital assets are adequately maintained. These steps include a more in depth review of possible capital assets items from the fiscal year expenditure records.

ACCOUNTING CONTROLS Inadequate Internal Controls over Grants Finding Control Number: FS-7641-11-07

The Board has implemented internal controls to ensure that all Federal programs are properly closed at year end.

PRIOR YEAR FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

FINDING CONTROL NUMBER AND STATUS

FA-7641-10-01 FA-7641-10-02 FA-7641-10-03 FA-7641-10-04 FA-7641-11-01

Partially Resolved See Corrective Action/Responses Partially Resolved See Corrective Action/Responses Partially Resolved See Corrective Action/Responses Partially Resolved See Corrective Action/Responses Partially Resolved See Corrective Action/Responses

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CITY OF BUFORD BOARD OF EDUCATION - GWINNETT COUNTY AUDITEE'S RESPONSE
SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2012
PRIOR YEAR FEDERAL AWARD FINDINGS AND QUESTIONED COSTS
CORRECTIVE ACTION/RESPONSES
ACTIVITIES ALLOWED/UNALLOWED ALLOWABLE COSTS/COST PRINCIPLES Inadequate Internal Control Procedures U. S. Department of Education Through Georgia Department of Education Title I Grants to Local Educational Agencies (CFDA 84.389) Questioned Cost: $10,015.36 Finding Control Number: FA-7641-10-01
We are awaiting a final resolution from the Georgia Department of Education Financial Review.
ALLOWABLE COSTS/COST PRINCIPLES Time and Attendance Records not Utilized U. S. Department of Education Through Georgia Department of Education Special Education Cluster (CFDA 84.027 and 84.391) Title I Grants to Local Educational Agencies (CFDA 84.010 and 84.389) Finding Control Number: FA-7641-10-02
We are awaiting a final resolution from the Georgia Department of Education Financial Review.
ELIGIBILITY Failure to Document Eligibility Determinations U. S. Department of Education Through Georgia Department of Education Title I Grants to Local Educational Agencies (CFDA 84.010 and 84.389) Questioned Cost: $560.00 Finding Control Number: FA-7641-10-03
We are awaiting a final resolution from the Georgia Department of Education Financial Review.
SPECIAL TESTS AND PROVISIONS Inadequate Schoolwide Program Plans U. S. Department of Education Through Georgia Department of Education Title I Grants to Local Educational Agencies (CFDA 84.010 and 84.389) Finding Control Number: FA-7641-10-04
We are awaiting a final resolution from the Georgia Department of Education Financial Review.
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CITY OF BUFORD BOARD OF EDUCATION - GWINNETT COUNTY AUDITEE'S RESPONSE
SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2012
PRIOR YEAR FEDERAL AWARD FINDINGS AND QUESTIONED COSTS CORRECTIVE ACTION/RESPONSES CASH MANAGEMENT Excessive Cash Balances U. S. Department of Education Through Georgia Department of Education Special Education Cluster (CFDA 84.027 and 84.391) Finding Control Number: FA-7641-11-01 We are awaiting a final resolution from the Georgia Department of Education Financial Review.
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SECTION IV FINDINGS AND QUESTIONED COSTS

CITY OF BUFORD BOARD OF EDUCATION - GWINNETT COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2012

I SUMMARY OF AUDITOR'S RESULTS

Financial Statements

Type of auditor's report issue: Governmental Activities; General Fund; Capital Projects Fund; Aggregate Remaining Fund Information

Unqualified

Internal control over financial reporting:

Material weakness identified?

Yes

Significant deficiencies identified?

Yes

Noncompliance material to financial statements noted:

No

Federal Awards

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

Yes None Reported

Type of auditor's report issued on compliance for major programs: Child Nutrition Cluster Special Education Cluster
Any audit findings disclosed that are required to be reported in accordance with OMB Circular A-133, Section 510(a)?

Unqualified Qualified
Yes

Identification of major programs:

CFDA Numbers
10.553, 10.555 84.027

Name of Federal Program or Cluster
Child Nutrition Cluster Special Education Cluster

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

$300,000.00

Auditee qualified as low-risk auditee?

No

II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

GENERAL LEDGER Inadequate Approval of Journal Entries Significant Deficiency Finding Control Number: FS-7641-12-01

Condition: This is a repeat finding (FS-7641-11-01, FS-7641-10-04, and FS-7641-09-05) from the fiscal years ended June 30, 2011, June 30 2010, and June 30, 2009, respectively. School District personnel did not ensure that journal entries were properly approved based on the policies and procedures.

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CITY OF BUFORD BOARD OF EDUCATION - GWINNETT COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2012
II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS
Criteria: The School District's management is responsible for designing and maintaining internal controls that provide reasonable assurance journal entries are properly approved, documented, and processed.
Questioned Cost: N/A
Information: There was no evidence provided to document journal entries were reviewed and approved by someone independent of the general ledger journal entry function.
Cause: These deficiencies were a result of management's failure to adequately monitor and implement procedures to ensure journal entries are properly documented and approved before posting to the accounting records.
Effect: The lack of adequate controls over the journal entry process may result in errors in financial reporting and increases the risk of material misstatements, including misstatements due to fraud.
Recommendation: The School District should strengthen internal controls over the journal entry process to ensure journal entries are properly approved.
CASH AND CASH EQUIVALENTS Inadequate Internal Control Procedures Significant Deficiency Finding Control Number: FS-7641-12-02
Condition: This is a repeat finding (FS-7641-11-02, FS-7641-10-01, and FS-7641-09-01) from the fiscal years ended June 30, 2011, June 30, 2010, and June 30, 2009, respectively. The accounting procedures of the School District were insufficient to provide adequate internal controls over Cash and Cash Equivalents.
Criteria: The School District's management is responsible for designing and maintaining internal controls over Cash and Cash Equivalents.
Questioned Cost: N/A
Information: Weaknesses in internal controls related to Cash and Cash Equivalents were noted as follows:
Bank reconciliations were not performed by someone independent of the general ledger function.
The School District could not provide evidence that someone reviews and/or approves bank reconciliations.
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CITY OF BUFORD BOARD OF EDUCATION - GWINNETT COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2012
II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS
Bank reconciliations were not performed for the new Holding Account and a cash balance of $4,495.08 appears to be unreported at fiscal year end.
The School District's bank reconciliation for the School Food Service account had an unidentified variance of $3,111.75.
Cause: The School District did not design internal controls to properly reconcile and maintain cash activity on the general ledger.
Effect: Failure to maintain adequate internal controls over cash activity increases the risk that significant misstatements could occur in the financial statements due to error or fraud.
Recommendation: The School District should design and implement controls over cash to ensure bank reconciliations are performed by someone independent of the general ledger function and a supervisory review is performed over bank reconciliations.
FINANCIAL REPORTING Inadequate Internal Controls over Financial Reporting Material Weakness Finding Control Number: FS-7641-12-03
Condition: This is a repeat finding (FS-7641-11-03, FS-7641-10-05, and FS-7641-09-06) from the fiscal years ended June 30, 2011, June 30, 2010, and June 30, 2009, respectively. The School District did not have adequate internal controls in place over the financial statement reporting process.
Criteria: Chapter 22A Annual Financial Reporting of the Financial Management for Georgia Local Units of Administration provides that School Districts must prepare their financial statements in accordance with generally accepted accounting principles.
The Committee of Sponsoring Organizations of the Treadway Commission (COSO) Internal Control Integrated Framework states that an essential attribute to reliable financial reporting is the timely performance of procedures.
Questioned Cost: N/A
Information: The Governmental Accounting Standards Board (GASB) Statement 34 reporting model requires the preparation of both fund and entity-wide level statements in the School District's financial statements. The School District has not implemented an adequate level of internal control to ensure financial data is processed and reported. During the audit, the following significant correcting entries were proposed and accepted by the client to properly present the entity's financial statements:
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CITY OF BUFORD BOARD OF EDUCATION - GWINNETT COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2012
II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS
Transfers from City Government receivables of $483,333.53 were not recorded. An audit adjustment to record additional Accounts Receivable was proposed and accepted by the client to correct this misstatement.
Deferred Revenue for Property Taxes was not recorded. An audit adjustment of $1,637,163.50 was proposed and accepted by the client to correct this misstatement.
Intergovernmental Agreement receivables were overstated. An audit adjustment of $1,105,253.22 was proposed and accepted by the client to correct this misstatement.
Debt Service - Principal payments were understated. An audit adjustment of $222,176.15 was proposed and accepted by the client to correct this misstatement.
Overall misstatements were noted as a result of errors made during the conversion of the fund statements to the governmental activity statements. Audit adjustments were proposed and accepted by the client to correct these misstatements as follows: o Understatement of assets totaling $1,184,525.95, o Overstatement of liabilities totaling $4,010,978.92, o Overstatement of expense totaling $4,497,977.50, and o Understatement of net assets totaling $7,324,430.47.
Numerous reclassification entries were made to improve financial statement presentation.
Various misstatements and misclassifications greater than one percent of materiality were also encountered throughout the course of the audit.
Cause: The School District did not implement an adequate system of internal control over the financial statement reporting process.
Effect: The School District does not have adequate internal controls in place to ensure the financial statements are properly prepared in accordance with generally accepted accounting principles.
Recommendation: The School District should implement an adequate level of internal control to ensure all required financial data is processed timely and accurately included in the financial statements presented for audit.
CAPITAL ASSETS Failure to Properly Maintain Capital Assets Significant Deficiency Finding Control Number: FS-7641-12-04
Condition: This is a repeat finding (FS-7641-11-05, FS-7641-10-03, and FS-7641-09-04) from the fiscal years ended June 30, 2011, June 30, 2010, and June 30, 2009, respectively. Adequate policies and procedures are not in place to ensure capital assets inventory records are properly maintained.
Criteria: Chapter 37 Implementing a Capital Assets Management System of the Financial Management for Georgia Local Units of Administration provides that School Districts must establish fixed asset policies, define system requirements, implement a fixed asset system, and maintain fixed asset inventory records.
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CITY OF BUFORD BOARD OF EDUCATION - GWINNETT COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2012
II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS
Questioned Cost: N/A
Information: A review of the School District's capital assets inventory records noted deficiencies as discussed below:
Failure to maintain an ongoing analysis of capital projects resulted in unrecorded assets in a prior year which required a restatement of beginning net assets in current year.
Failure to ensure depreciation expense in the current year agreed with capital assets inventory records.
Failure to capitalize items in accordance with the capital assets policy resulting in items capitalized in error and items not capitalized in error.
Failure to perform a complete physical inventory for all capital assets during the fiscal year.
Cause: The School District did not design internal controls to properly maintain capital assets activity.
Effect: Failure to properly maintain capital assets inventory records could lead to inaccurate internal and external reporting, as well as noncompliance with generally accepted accounting principles.
Recommendation: The School District should design and implement controls over capital assets to ensure (1) an ongoing analysis of capital projects is maintained and (2) capital assets inventory records are reviewed for accuracy and appropriate adjustments are made as necessary.
ACCOUNTING CONTROLS Inadequate Internal Controls over Grants Significant Deficiency Finding Control Number: FS-7641-12-05
Condition: This is a repeat finding (FS-7641-11-07) from the fiscal year ended June 30, 2011. The accounting procedures of the School District were insufficient to provide adequate internal controls over state and Federal program funds.
Criteria: The School District's management is responsible for designing and maintaining internal controls that provide reasonable assurance transactions are processed according to established procedures.
Questioned Cost: N/A
Information: The School District did not reconcile Federal programs on a yearly basis to ensure the appropriate reimbursement requests have been timely made for Federal expenditures. As a result, Federal programs went into a deficit in prior years and the entity thus had to cover Federal expenditures with local funds. In the current year, the entity transferred $292,842.58 of local funds to Federal
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CITY OF BUFORD BOARD OF EDUCATION - GWINNETT COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2012
II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS
programs to cover deficit fund balances and Federal expenditures made in the current year which were either expenditures in excess of approved grant budgets or were expenditures for which a reimbursement request had not been made when grant funds were available for reimbursement. In the current year, the School District requested reimbursements for Title I in excess of actual expenditures incurred during the year in the amount of $95,676.17.
The School District did not reconcile state programs on a yearly basis to ensure the appropriate revenues have been recognized and accounts receivables have been recorded. As a result, revenues for state programs were improperly recognized in prior years and the entity had to correct beginning fund balance in the current year. The entity did so by taking prior year errors against current year activity, thus current year revenues are understated.
Cause: This deficiency was a result of management's failure to ensure Federal or state programs were properly closed out at year end.
Effect: Errors and/or irregularities may not be detected in a timely manner.
Recommendation: The School District should implement internal controls to ensure all Federal and state programs are properly closed at year end.
CASH AND CASH EQUIVALENTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Controls over School Activity Accounts Significant Deficiency Finding Control Number: FS-7641-12-06
Condition: This is a repeat finding (FS-7641-11-04, FS-7641-10-02, and FS-7641-09-02) from the fiscal years ended June 30, 2011, June 30, 2010, and June 30, 2009, respectively. The accounting procedures of the School District were insufficient to provide adequate internal controls school activity accounts.
Criteria: The School District's management is responsible for designing and maintaining internal controls that provide reasonable assurance transactions are processed according to established procedures and provide assurance of proper separation of duties, which would limit any one individual's access to both physical assets and the related accounting records.
Questioned Cost: N/A
Information: Cash and Cash Equivalents
The bank reconciliation function was not separated from record keeping and voucher payment function.
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CITY OF BUFORD BOARD OF EDUCATION - GWINNETT COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2012
II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS
Revenues/Receivables/Receipts The deposit preparation function was not separated from record keeping and cash custody. Controls in place over the receipt process were not consistently applied. The club sponsors and bookkeeper did not consistently complete funds collected forms and include signature certifying the funds were properly accounted.
Expenditures/Liabilities/Disbursements The check writing functions were not separated from record keeping or processing of signed checks.
Cause: The deficiencies were a result of management's failure to ensure internal controls were established, implemented, and functioning at the school level. The School District also has not assigned responsibilities to achieve appropriate separation of duties.
Effect: Failure to maintain adequate internal controls over school activity accounts increases the risk misstatements could occur in the financial statements due to error or fraud.
Recommendation: The School District should revise and implement internal controls to ensure proper separation of duties is established, account processes are adequately monitored, and the central office ledger is reconciled to any subsidiary school ledgers.
III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS
REPORTING Failure to File Accurate Completion Reports Material Weakness Material Noncompliance U. S. Department of Education Through Georgia Department of Education Special Education Cluster (CFDA 84.027) Finding Control Number: FA-7641-12-01
Condition: The School District failed to file an accurate completion report for the Special Education Cluster (CFDA 84.027).
Criteria: In accordance with provisions of OMB Circular A-133, Part 3 Compliance Supplement, Subpart L Reporting, states in part, "Each recipient must report program outlays and program income...as prescribed by the Federal awarding agency. The reporting requirements for sub recipients are as specified by the pass-through entity."
Chapter 41, State and Federal Fiscal Rules and Procedures of the Financial Management for Georgia Local Units of Administration states, "This chapter sets forth the principal requirements that a School District must meet to account for and externally report its budget and financial operations relating to state and Federally funded programs administered by the Georgia Department of Education."
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CITY OF BUFORD BOARD OF EDUCATION - GWINNETT COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2012
III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS Questioned Cost: N/A Information: A review of the School District's accounting records revealed that actual Special Education Flowthrough expenditures for the Special Education Cluster ending June 30, 2012, were $556,744.19, while expenditures were reported on the completion report as $529,853.28, resulting in a variance of $26,890.91. No fund balances resulted due to the reporting errors. Cause: Management failed to implement procedures to ensure amounts on the completion reports agreed with actual expenditures and/or that a completion report was completed for all applicable grants. Effect: Failure to accurately report Federal expenditures can result in inaccurate and incomplete disclosures for Federal grant reporting purposes and can result in excessive claims for reimbursement. Recommendation: Management should implement procedures to ensure completion reports, submitted to the Georgia Department of Education, (1) include all activity of the reporting period, (2) are supported by applicable accounting records, and (3) are properly presented in accordance with program requirements.
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SECTION V MANAGEMENT'S RESPONSES

CITY OF BUFORD BOARD OF EDUCATION - GWINNETT COUNTY SCHEDULE OF MANAGEMENT'S RESPONSES YEAR ENDED JUNE 30, 2012

Finding Control Number: FS-7641-12-01

We concur with this finding. The Board has implemented steps to ensure adequate documentation and approvals of journal entries occur. These steps include utilizing journal entry forms and attaching backup documentation and utilizing current staff for preparation of journal entries. Each Journal entry form has a place for preparer, entry and approval signatures. The Board anticipates correcting this significant deficiency by September 2013.

Finding Control Number: FS-7641-12-02

We concur with this finding. Due to budgetary constraints, no additional staff can be added at this time. However, the Board will have an administrator independent of the general ledger review the bank statements on a monthly basis. The Board anticipates correcting this significant deficiency by September 2013.

Finding Control Number: FS-7641-12-03

We concur with this finding. The Board will complete the financial statements for the Department of Audits no later than December 2013 to ensure there is adequate time to review and revise statements before the arrival of the audit team. The finance department will review all points and findings from prior year to ensure that issues are resolved.

Finding Control Number: FS-7641-12-04

We concur with this finding. The Board has implemented steps to ensure that capital assets are adequately maintained. These steps include a more in depth review of possible capital assets items from the fiscal year expenditure records. The Board anticipates correcting this failure to adequately maintain capital assets by September 2013.

Finding Control Number: FS-7641-12-05

We concur with this finding. The Board has implemented internal controls to ensure that all Federal programs are properly closed at year end. The Board anticipates correcting this significant deficiency by September 2013.

Finding Control Number: FS-7641-12-06

We concur with this finding. Due to budgetary constraints, no additional staff can be added at this time. However, the Board has implemented steps to ensure that internal controls and adequate separation of duties exist. These steps include meetings with individual school administration staffs to review the procedures necessary to ensure separation of duties exist. The Board anticipates correcting this inadequate separation of duties by November 2013.

Finding Control Number: FA-7641-12-01

We concur with this finding. The Board has implemented internal controls to ensure that completion reports, submitted to the Georgia Department of Education, (1) include all activity of the reporting period, (2) are supported by applicable accounting records, and (3) are properly presented in accordance with program requirements. The Board corrected this significant deficiency September 2013.

Contact Person: Title: Telephone: Fax: Email:

Angela Adams Director of Finance (770) 945-5035 (770) 945-4629 angela.adams@bufordcityschools.org