City of Commerce Board of Education, Jackson County, Georgia, annual financial report for the fiscal year ended June 30, 2010 (including independent auditor's reports)

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

CITY OF COMMERCE BOARD OF EDUCATION -JACKSON COUNTY - TABLE OF CONTENTS -

SECTION I

FINANCIAL

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

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, EXPENDITURESAND CHANGES

IN FUND BALANCES

GOVERNMENTAL FUNDS

F

RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT

OF REVENUES, EXPENDITURES AND CHANGES IN FUND

BALANCES TO THE STATEMENT OF ACTIVITIES

G

STATEMENT OF FIDUCIARY NET ASSETS

FIDUCIARY FUNDS

H

NOTES TO THE BASIC FINANCIAL STATEMENTS

SCHEDULES

REQUIRED SUPPLEMENTARY INFORMATION

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

SUPPLEMENTARY INFORMATION

2 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS 3 SCHEDULE OF STATE REVENUE

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

CITY OF COMMERCE BOARD OF EDUCATION -JACKSON COUNTY - TABLE OF CONTENTS -
SECTION V MANAGEMENT'S RESPONSES SCHEDULE OF MANAGEMENT'S RESPONSES

SECTION I FI NANClAL

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

DEPARTMENOTF AUDITSAND ACCOUNTS
270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400
May 9 , 2 0 1 1

Honorable Nathan Deal, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the City of Commerce 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 Commerce Board of Education, as of and for the year ended June 30, 2010, which collectively comprise the Board's basic financial statements as listed in the table of contents. These financial statements are the responsibility of the City of Commerce Board of Education's management. Our responsibility is to express opinions on these financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in GovernmentAuditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and the significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinions.
In our opinion, the financial statements referred to previously present fairly, in all material respects, the respective financial position of the governmental activities, each major fund, and the aggregate remaining fund information of the City of Commerce Board of Education, as of June 30, 2010, and the respective changes in financial position thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America.
The City of Commerce Board of Education has not presented Management's Discussion and Analysis that accounting principles generally accepted in the United States of America has determined is necessary to supplement, although not to be part of, the basic financial statements.

In accordance with Government Auditing Standards, we have also issued our report dated May 9, 2011, on our consideration of the City of Commerce 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 Standardsandshould be considered in assessing the results of our audit.
Accounting principles generally accepted in the United States of America require that the Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual, as presented on page 25, be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures, to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during the audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance.
Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City of Commerce Board of Education's financial statements as a whole. The accompanyingsupplementary information consists of Schedules 2 through 5, which includes the Schedule of Expenditures of Federal Awards as required by U. S. Office of Management and Budget Circular A-133, Audits o f States, local Governmen6 and Non-Profit Organizations, are presented for purposes of additional analysis and are not a required part of the financial statements. Such information is the responsibility of management and was derived from and relate directly to the underlying accounting and other records used to prepare the financial statements. The information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated, in all material respects, in relation to the financial statements as a whole.
A copy of this report has been filed as a permanent record in the office of the State Auditor and made available to the press of the State, as provided for by Official Code of Georgia Annotated section 50-6-24.
Respectfully submitted,
~u)sell W. ini ion, CPA, CGFM
State Auditor

CITY OF COMMERCE BOARD OF EDUCATION -JACKSON COUNTY

CITY OF COMMERCE BOARD OF EDUCATION -JACKSON COUNTY STATEMENT OF NET ASSETS JUNE 30.2010
ASSETS
Cash and Cash Equivalents Investments Accounts Receivable, Net
Taxes State Government Federal Government Local Inventories Capitalized Bond and Other Debt IssuanceCosts Capital Assets, Non-Depreciable Capital Assets, Depreciable (Net of Accumulated Depreciation)
Total Assets
LIABILITIES
Accounts Payable Salaries and Benefits Payable Interest Payable Contracts Payable Retainages Payable Long-Term Liabilities
Due Within One Year Due in More Than One Year
Total Liabilities
NET ASSETS
Invested in Capital Assets, Net of Related Debt Restricted for
Continuation of Federal Programs Debt Service Capital Projects Other Unrestricted
Total Net Assets
Total Liabilities and Net Assets

EXHIBIT "A"
GOVERNMENTAL ACTIVITIES

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

CITY OF COMMERCE BOARD OF EDUCATION -JACKSON COUNW STATEMENT OF ACTIVITIES
FOR THE YEAR ENDED JUNE 30.2010

EXHIBIT "B"

GOVERNMENTAL ACTIVITIES
Instruction Support Services
Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Operations of Non-InstructionalServices Enterprise Operations Food Services Interest on Short-Term and Long-Term Debt
Total GovernmentalActivities
General Revenues Taxes Property Taxes For Maintenance and Operations Sales Taxes Special Purpose Local Option Sales Tax For Capital Projects Other Sales Tax Grants and Contributions not Restricted to Specific Programs Investment Earnings Miscellaneous
Total General Revenues
Change in Net Assets
Net Assets - Beginningof Year

EXPENSES

PROGRAM REVENUES

OPERATING

CHARGES FOR

GRANTS AND

SERVICES

CONTRIBUTIONS

NET (EXPENSES) REVENUES
AND CHANGES IN NET ASSETS

- Net Assets End of Year

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

CITY OF COMMERCE BOARD OF EDUCATION -JACKSON COUNTY BALANCE SHEET
GOVERNMENTAL FUNDS JUNE 30,2010

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

GENERAL FUND

DISTRICTWIDE
CAPITAL PROJECTS
FUND

DEBT SERVICE
FUND

LIABILITIES AND FUND BALANCES
LIABILITIES
Accounts Payable Salaries and Benefits Payable Contracts Payable Retainages Payable Deposits and Deferred Revenue
Total Liabilities
FUND BALANCES
Reserved for: Continuation of Federal Programs Debt Service Capital Projects Other
Unreserved Designatedfor Student Activities Undesignated Reported in: General Fund
Total Fund Balances
Total Liabilities and Fund Balances

EXHIBIT "C" TOTAL

The notes to the basic financial statements are an integral part of this statement. -3-

CITY OF COMMERCE BOARD OF EDUCATION -JACKSON COUNTY RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET
TO THE STATEMENT OF NET ASSETS JUNE 30.2010
Total Fund Balances - Governmental Funds (Exhibit "C")
Amounts reported for GovernmentalActivities in the Statement of Net Assets are different because:
Capital Assets used in GovernmentalActivities are not financial resources and therefore are not reDorted in the funds. These assets consist of:
Land Construction in Progress Land Improvements Buildings Equipment Accumulated Depreciation
Total Capital Assets
Taxesthat are not available to payfor current period expenditures are deferred in the funds.
Long-Term Liabilities, including Bonds Payable, are not due and payable in the current period and therefore are not reported as liabilities in the funds. Long-Term Liabilities at year-end consist of:
Bonds Payable Accrued Interest Installment Sales Agreement Capitalized Bond and Other Debt Issuance Costs Unamortized Bond Premiums
Total Long-Term Liabilities
Net Assets of GovernmentalActivities (Exhibit "A")

EXHIBIT "D"

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

CITY OF COMMERCE BOARD OF EDUCATION -JACKSON COUNTY STATEMENTOF REVENUES. EXPENDITURESAND CHANGES IN FUND BALANCES
GOVERNMENTAL FUNDS YEAR ENDEDJUNE 30,2010

REVENUES
Property Taxes Sales Taxes State Funds Federal Funds Charges for Services Investment Earnings Miscellaneous
Total Revenues
EXPENDITURES
Current Instruction Support Services Pupil Services Improvementof Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Enterprise Operations Food Services Operation
Capital Outlay Debt Services
Principal Interest
Total Ex~enditureS
Excess of Revenuesover (under) Expenditures
OTHER FINANCING SOURCES (USES)
Proceeds of General Obligation Bonds Premiums on Bonds Sold Transfers In Transfers Out
Total Other FinancingSources (Uses)
Net Change in Fund Balances
- Fund Balances Beginning
- Fund Balances Ending

GENERAL FUND

DISTRICTWIDE
CAPITAL PROJECTS
FUND

DEBT SERVICE
FUND

EXHIBIT "E" TOTAL

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

CITY OF COMMERCE BOARD OF EDUCATION-JACKSON COUNTY RECONCILIATIONOF THE GOVERNMENTALFUNDSSTATEMENT OF
REVENUES. EXPENDITURESAND CHANGES IN FUND BALANCES TO THE STATEMENT OF ACTIVITIES JUNE 30,2010
Total Net Change in Fund Balances- Governmental Funds (Exhibit "E")
Amounts reported for Governmental Actlvitles 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 resourcesare not reported as revenues in thefunds.
The net effect of various miscellaneous transactions involving capital assets (i.e., sales, trade-ins, donations, and disposals) is to decrease net assets.
Bond proceeds provide current financial resourcesto Governmental Funds; however, issuingdebt increases Long-Term Liabilities in the Statement of Net Assets. In the current period, proceeds were receivedfrom: General Obligation Bonds Issued. Including a Premium of $173.838.85
Bond issuance costs, deferred gains on refundings and similar items when debt is first Issued are reported as an expenditure in Governmental Funds, but are reported as deferred charges on the Statement of Net Assets and amortized over the term of the debt, usingthe straight-line method. The details of this difference in the current period are as follows: Deferral of Bond IssuanceCosts
Repaymentof Long-Term Debt is reported as an expenditure In Governmental Funds, but the repayment reduces Long-Term Liabilities in the Statement of Net Assets. In the current year, these amounts consist of: Bond Principal Retirements Amortization of Premium Installment Sales Agreement Total Long-Term Debt Repayments
Some items reported in the Statement of Activities do not require the use of current financial resourcesand therefore are not reported as expenditures in Governmental Funds. These activities consist of: Net Increase in Accrued Interest
Change in Net Assets of GovernmentalActivities (Exhibit "6")
The notes to the basic financial statements are an integral part of this statement.
- 6 -

CITY OF COMMERCE BOARD OF EDUCATION-JACKSON COUNTY STATEMENT OF FIDUCIARY NET ASSETS FIDUCIARY FUNDS JUNE 30.2010
ASSETS Cash and Cash Equivalents
LIABILITIES Funds Held for Others

EXHIBIT "G"
AGENCY FUNDS

The notesto the basic financial statements are an integral part of this statement.

CITY OF COMMERCE BOARD OF EDUCATION -JACKSON COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 3 0 , 2 0 1 0

EXHIBIT "H"

Note 1: DESCRIPTION OF SCHOOL DISTRICT AND REPORTING ENTITY
REPORTING ENTIlY
The City of Commerce Board of Education (School District) was established under the laws of the State of Georgia and operates under the guidance of a school board elected by the voters and a Superintendent appointed by the Board. The Board is organized as a separate legal entity and has the power to levy taxes and issue bonds. Its budget is not subject to approval by any other entity. Accordingly, the School District is a primary government and consists of all the organizations that compose its legal entity.
Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The School District's basic financial statements are collectively comprised of the District-wide financial statements, fund financial statements and notes to the basic financial statements of the City of Commerce 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 nonexchangetransactions.
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 all financial resources of the School District, except those resources required to be accounted for in another fund.

CITY OF COMMERCE BOARD OF EDUCATION -JACKSON COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30,2010

EXHIBIT "H"

District-wide Capital Projects Fund accounts for financial resources including Special Purpose Local Option Sales Tax (SPLOST) and Bond Proceedsto be used for the acquisition, construction or renovation of major capital facilities.
Debt Service Fund accounts for taxes (sales) legally restricted for the payment of general longterm principal, interest and paying agent's fees.
The School District reports the following fiduciary fund type:
Agency funds account for assets held by the School District as an agent for various school activity accounts.
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, 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 installment sale agreements 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.

CITY OF COMMERCE BOARD OF EDUCATION -JACKSON COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 3 0 , 2 0 1 0

EXHIBIT "H"

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

CITY OF COMMERCE BOARD OF EDUCATION -JACKSON COUNTY NOTES TO THE BASIC FINANCIALSTATEMENTS JUNE 30,2010

EXHIBIT "H"

(4) Obligations of any corporation of the United States government, (5) Prime banker's acceptances,

(6) The Georgia Fund 1administered by the State of Georgia, Office of Treasury and Fiscal Services,

(7) Repurchaseagreements, and

(8) Obligations of other political subdivisions of the State of Georgia.
The School District does not have a formal policy regarding investment policies that address credit risks, custodial credit risks, concentration of credit risks, interest rate risks or foreign currency risks.

RECEIVABLES

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

PROPERTY TAXES

The City of Commerce fixed the property tax levy for the 2009 tax digest year (calendar year) on October 15, 2009 (levy date). Taxes were due on December 20, 2009 (lien date). Taxes collected within the current fiscal year or within 60 days after year-end on the 2009 tax digest are reported as revenue in the governmental funds for fiscal year 2010. The Jackson County Tax Commissioner 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 30,2010, for maintenance and operations amounted to $2,951,151.45.

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

School Operations
SALES TAXES

17.75 mills

Special Purpose Local Option Sales Tax, at the fund reporting level, during the year amounted to $1,236,191.72 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.

CITY OF COMMERCE BOARD OF EDUCATION -JACKSON COUNTY NOTES TO THE BASIC FINANCIALSTATEMENTS JUNE 30,2010

EXHIBIT "H"

INVENTORIES

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

CAPITAL ASSETS

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

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

Capitalization

Estimated

Policy

Useful Life

Land Land lmprovements Buildings and lmprovements Equipment

Any Amount

$

10,000.00

$

10,000.00

$

10,000.00

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

Depreciation is used to allocate the actual or estimated historical cost of all capital assets over estimated useful lives.

GENERAL OBLIGATION BONDS

The School District issues general obligation bonds to provide funds for the acquisition and construction of major capital facilities. In the District-wide financial statements, bond premiums and discounts, as well as issuance costs, are deferred and amortized over the life of the bonds using the straight-line method. Bond issuance costs are reported as deferred charges and amortized over the term of the debt.

CITY OF COMMERCE BOARD OF EDUCATION -JACKSON COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30,2010

EXHIBIT "H"

In the fund financial statements, the School District recognizes bond premiums and discounts, as well as bond issuance costs during the fiscal year bonds are issued. Premiums received on debt issuances are reported as other financing sources while discounts on debt issuances are reported as other financing uses. Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as debt service expenditures. To conform to generally accepted accounting
principles, the 2007 Series G. 0.bond issuance costs should be amortized over the life of the bonds
on the District-wide statements. The effect of this deviation is deemed to be immaterial to the fair presentation of the basic financial statements. General obligation bonds are direct obligations and pledge the full faith and credit of the government. The outstanding amount of these bonds is recorded in the Statement of Net Assets.
NET ASSETS
The School District's net assets in the District-wideStatements 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.
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 t o 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
Reserved Reserves represent those portions of fund balance equity that are legally segregated for a specific future use. A reserve fund balance exists in the General Fund for the construction of a performing arts center in the amount of $479,473.23.
Unreserved - Designated
Designatedfund balances represent tentative plans for future use of financial resources.
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.

CITY OF COMMERCE BOARD OF EDUCATION -JACKSON COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30,2010

EXHIBIT "H"

Note 3: DEPOSITS AND INVESTMENTS
COLIATERALIZATION 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 1 1 0 percent of the public funds being secured after the deduction of the amount of deposit insurance. If a depository elects the pooled method (O.C.G.A. Section 45-8-13.1) the aggregate of the market value of the securities pledged to secure a pool of public funds shall be not less than 110 percent of the daily pool balance.
Acceptable security for deposits consists of any one of or any combination of the following:
(1) Surety bond signed by a surety company duly qualified and authorized to transact business within the State of Georgia,
(2) lnsurance on accounts provided by the Federal Deposit lnsurance Corporation,
(3) Bonds, bills, notes, certificates of indebtedness or other direct obligations of the United States or of the State of Georgia,
(4) Bonds, bills, notes, certificates of indebtedness or other obligations of the counties or municipalities of the State of Georgia,
(5) Bonds of any public authority created by the laws of the State of Georgia, providing that the statute that created the authority authorized the use of the bonds for this purpose,
(6) Industrial revenue bonds and bonds of development authorities created by the laws of the State of Georgia, and
(7) Bonds, bills, notes, certificates of indebtedness, or other obligations of a subsidiary corporation of the United States government, which are fully guaranteed by the United States government both as to principal and interest or debt obligations issued by or securities guaranteed by the Federal Land Bank, the Federal Home Loan Bank, the Federal Intermediate Credit Bank, the Central Bank for Cooperatives, the Farm Credit Banks, the Federal Home Loan Mortgage Association, and the Federal National Mortgage Association.
CATEGORIZATION OF DEPOSITS
Custodial credit risk is the risk that in the event of a bank failure, the School District's deposits may not be returned to it. The School District does not have a deposit policy for custodial credit risk. At June 30, 2010, the bank balances were $5,703,022.23. The bank balances were entirely covered by Federal depository insurance.

CITY OF COMMERCE BOARD OF EDUCATION -JACKSON COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30,2010

EXHIBIT "H"

CATEGORIZATION OF INVESTMENTS

The School District's investments as of June 30, 2010, are presented below. All investments are presented by investment type and debt securities are presented by maturity.

lnvestment Type

Fair Value

Other lnvestments U. S. Treasury Money Market Funds

lnvestment Pools Office of Treasury and Fiscal Services Georgia Fund 1

Total Investments

The Georgia Fund 1,formerly referred to as LGIP, administered by the State of Georgia, Office of Treasury and Fiscal Services is not required to be categorized since the School District did not own any specific identifiable securities in the pool. The investment policy of the State of Georgia, Office of Treasury and Fiscal Services for the Georgia Fund 1(Primary Liquidity Portfolio) does not provide for investment in derivatives or similar investments. Additional information on the Georgia Fund 1is disclosed in the State of GeorgiaComprehensive Annual Financial Report. This audit can be obtained from the Georgia Department of Audits and Accounts at htt~://www.audits.ga.aov/SGD/cafr.html.
The Primary Liquidity Portfolio consists of Georgia Fund 1which is not registered with the SEC as an investment company but does operate in a manner consistent with the SEC's Rule 2a-7 of the lnvestment Company Act of 1940. The investment is valued at the pool's share price, $1.00 per share. The pool is an AAAm rated investment pool by Standard and Poor's. The weighted average maturity of Georgia Fund 1may not exceed 6 0 days. The weighted average maturity for Georgia Fund 1on June 30,2010, was 4 6 days.
The U. S. Treasury Money Market funds are in an Institutional Treasury Portfolio Fund managed by Fidelity Investments. The Institutional Treasury Portfolio Fund is rated AAAm by Standard and Poor's. The weighted average maturity of the fund is approximately 5 4 days.
Note 4: NON-MONETARY TRANSACTIONS
The School District receives food commodities from the United States Department of Agriculture (USDA) for school breakfast and lunch programs. These commodities are recorded at their Federally
assigned value. See Note 2 - Inventories

CITY OF COMMERCE BOARD OF EDUCATION -JACKSON COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30,2010

EXHIBIT "H"

Note 5: CAPITAL ASSETS

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

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

Balances July l,2009

Increases

Decreases

Balances June 30,2010

$ 563,703.80 2,788,930.06$ 11,207,241.10$

$ 563,703.80 189,646.85 13,806,524.31

Total Capital Assets, Not Being Depreciated $ 3,352,633.86$ 11,207,241.10$ 189,646.85 $ 14,370,228.11

Capital Assets, Being Depreciated: Buildings and Improvements Equipment Land Improvements

$ 13,327,733.45$ 950,358.15 769,526.75

189,646.85 $ 70,028.00

54,12177 $ 17,000.00

13,463,25853 1,020,386.15
752,526.75

Less: Accumulated Depreciation: Buildings and Improvements Equipment Land Improvements

2,950,651.68 664,824.76 438,781.87

264,881.78 56,510.51 30,377.87

39,419.85

3,176,113.61 721,335.27 469,159.74

Total Capital Assets, Being Depreciated, Net $ 10,993,360.04$ -92,095.31$

31,70192 $ 10,869,562.81

Governmental Activity Capital Assets - Net $ 14,345,993.90$ 11,115,145.79$ 221,348.77$ 25,239,790.92

Capital assets being acquired under an Installment Sales Agreement as of June 30, 2010, are as follows:
Governmental Funds
Buildingsand Improvements Less: Accumulated Depreciation

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

CIlY OF COMMERCE BOARD OF EDUCATION -JACKSON COUNTY NOTES TO THE BASIC FINANCIALSTATEMENTS JUNE 30,2010

EXHIBIT "H"

Note 6: INTERFUNDTRANSFERS

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

Transfer to

Transfers From
District-wide Capital Projects

General Fund All Others

Total

$ 1,044,253.47

Transfers are used to move Special Purpose Local Option Sales Tax (SPLOST) revenues collected by the District-wide Capital Projects Fund to (1) the Debt Service Fund for current year bond principal and interest payments, and to (2) the General Fund for the purpose of reimbursing for capital construction related expenditures.
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 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 General Fund with expenses/expenditures and liability being reported when it is probable that a loss has occurred, and the amount of that loss can be reasonably estimated.

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

Claims and

Beginning of Year

Changes in

Claims

End of Year

Liability

Estimates

Paid

Liability

CITY OF COMMERCE BOARD OF EDUCATION -JACKSON COUNTY NOTES TO THE BASIC FINANCIALSTATEMENTS JUNE 30,2010

EXHIBIT "H"

The School District participates in the Georgia Education Workers' Compensation Trust, a public entity risk pool organized on December 1,1991, to develop, implement and administer a program of workers' compensation self-insurance for its member organizations. The School District pays an annual premium to the Trust for its general insurance coverage. Additional insurance coverage is provided through an agreement by the Trust with the Midwest Employers Casualty Company to provide coverage for potential losses sustained by the Trust in excess of $700,000.00 loss per occurrence, up to the statutory limit. Employers' Liability insurance coverage is also provided by Midwest Employers Casualty Company to provide coverage for potential losses sustained by the Fund in excess of $700,000.00 loss per occurrence, up to $1,000,000.00, with an aggregate limit of $2,000,000.00.
The School District has purchased a surety bond to provide additional insurance coverage as follows:

Position Covered

Amount

Superintendent

$

100,000.00

Note 8: LONG-TERM DEBT
INSTALLMENT SALES AGREEMENT
The City of Commerce Board of Education entered into an agreement dated June 1,2006, with the Northeast Georgia Regional Educational Service Agency for the construction and subsequent lease of the Rutland Center. Under the terms of the agreement, the School District will make annual paymentsthrough July 15,2020.
GENERAL OBLIGATION DEBT OUTSTANDING
General Obligation Bonds currently outstanding are as follows:

Purpose

Interest Rates

Amount

General Government -Series 2007 General Government -Series 2 0 0 9

Voters have authorized $1,400,000.00 in general obligation debt for capital outlay which was not issued as of June 30,2010.

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

Balance July 1,2009

Additions

Governmental Funds

Balance

Deductions

June 30,2010

Due Within One Year

G. 0.Bonds InstallmentSales Agreement Bond PremiumsAmortized

$ 10,000,000.00$ 8,600,000.00$

190,200.00

0.00

173,838.85

580,000.00 $ 18,020,000.00$ 13,028.79 177,171.21 4,828.86 169,009.99

605,000.00 14,600.00 9,657.71

CITY OF COMMERCE BOARD OF EDUCATION -JACKSON COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30,2010

EXHIBIT "H"

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

Installment Sales Agreement

Principal

Interest

Fiscal Year Ended June 30:

Total Principal and lnterest FiscalYear EndedJune 30:

General Obligation Debt

Principal

Interest

Unamortized Bond Premium

Total Principal and lnterest
Note 9: ON-BEHALF PAYMENTS
The School District has recognized revenues and costs in the amount of $41,842.78 for health insurance and retirement contributions paid on the School District's behalf by the following State Agencies.
Georgia Department of Education Paid to the Georgia Department of Community Health For Health Insurance of Non-Certified Personnel In the amount of $20,642.99
Paid to the Teachers Retirement System of Georgia For Teachers Retirement System (TRS) Employer's Cost In the amount of $15,825.42
Office of Treasury and Fiscal Services Paid to the Public School Employees Retirement System For Public School Employees Retirement (PSERS) Employer's Cost In the amount of $5.374.37

CITY OF COMMERCE BOARD OF EDUCATION -JACKSON COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30,2010

EXHIBIT "H"

Note 10: SIGNIFICANT COMMITMENTS

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

Project

Unearned Executed Contracts

New Commerce High School

The amount described in this note is not reflected in the basic financial statements. 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.

Note 12: SUBSEQUENT EVENTS

In the subsequent fiscal year, on March 17, 2011, voters of the Commerce City School District authorized the continuance of a one percent sales tax (SPLOST) to raise no more than $12,725,000.00 or to be collected for 2 0 consecutive quarters, whichever occurs first, to be used for (i) paying a portion of the debt service on the outstanding Series 2007 and 2009 General Obligation Bonds previously issued by the City of Commerce, the maximum amount of debt service to be paid with sales tax proceeds to be $7,250,000.00; (ii) adding to, renovating, repairing, improving, equipping and furnishing existing school buildings or other buildings or facilities useful or desirable in connection therewith, including, but not limited to, HVAC and elementary gymnasium; (iii) acquiring a portion of a psychoeducational facility; (iv) acquiring school buses, school vehicles, maintenance vehicles and transportation and maintenance equipment; (v) acquiring textbooks and band instruments; (vi) acquiring new technology, safety and security equipment and other school equipment; (vii) acquiring land; and (viii) acquiring any property necessary or desirable therefor, both real and personal, the maximum amount of the Commerce School Projects to be paid with sales tax proceeds to be $12,725,000.00 less the amount of Commerce City School District's share of such proceeds used to pay the Outstanding Commerce Debt.
Note 13: POST-EMPLOYMENT BENEFITS

GEORGIA SCHOOL PERSONNEL EMPLOYEES POST-EMPLOYMENT HEALTH BENEFIT FUND
Plan Description. The Georgia School Personnel Post-Employment Health Benefit Fund (School OPEB Fund) is a cost-sharing multiple-employer defined benefit post-employment healthcare plan that covers eligible former employees of public school systems, libraries and regional educational service agencies. The School OPEB Fund provides health insurance benefits to eligible former employees and their qualified beneficiaries through the State Employees Health Insurance Plan administered by the Department of Community Health. The Official Code of Georgia Annotated (OCGA) assigns the authority to establish and amend the benefit provisions of the group health plans, including benefits for retirees, to the Board of Community Health (Board).

CITY OF COMMERCE BOARD OF EDUCATION -JACKSON COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30,2010

EXHIBIT "H"

Funding Policy. The contribution requirements of plan members and participating employers are established by the Board in accordance with the current Appropriations Act and may be amended by the Board. Contributions of plan members or beneficiaries receiving benefits vary based on plan election, dependent coverage, and Medicare eligibility and election. On average, plan members pay approximately 25 percent of the cost of the health insurance coverage.
Participating employers are statutorily required to contribute in accordance with the employer contribution rates established by the Board. The contribution rates are established to fund all benefits due under the health insurance plans for both active and retired employees based on projected "pay-as-you-go" financing requirements. Contributions are not based on the actuarially calculated annual required contribution (ARC) which represents a level of funding that, if paid on an ongoing basis, is projected to cover normal cost each year and amortize any unfunded actuarial liabilities (or funding excess) over a period not to exceed thirty years.
The combined active and retiree contribution rates established by the Board for employers participating in the School OPEB Fund were as follows for the fiscal year ended June 30, 2010:
For certificated teachers, librarians and regional educational service agencies:

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

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

For non-certificated school personnel:

July 2009 -June 2010

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

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

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

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

as follows:

Percentage

Required

Fiscal Year

Contributed

Contribution

CITY OF COMMERCE BOARD OF EDUCATION - JACKSON COUNTY
NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30.2010

EXHIBIT "H"

Note 14: RETIREMENT PLANS
TEACHERS RETIREMENTSYSTEM OF GEORGIA (TRS)
Plan Description. The TRS is a cost-sharing multiple-employer defined benefit plan created in 1943 by an act of the Georgia General Assembly to provide retirement benefits for qualifying employees in educational service. A Board of Trustees comprised of active and retired members and ex-officio State employees is ultimately responsible for the administration of TRS. The Teachers Retirement System of Georgia issues a separate stand alone financial audit report and a copy can be obtained from the Georgia Department of Audits and Accounts.
On October 25, 1996, the Board created the Supplemental Retirement Benefits Plan of the Georgia Teachers Retirement System (SRBP-TRS). SRBP-TRS was established as a qualified excess benefit plan in accordance with Section 415 of the Internal Revenue Code (IRC) as a portion of TRS. The purpose of SRBP-TRS is to provide retirement benefits to employees covered by TRS whose benefits are otherwise limited by IRC Section 415. Beginning July 1,1997, all members and retired former members in TRS are eligible to participate in the SRBP-TRS whenever their benefits under TRS exceed the IRC Section 415 imposed limitation on benefits.
TRS provides service retirement, disability retirement, and survivor's benefits. The benefit structure of TRS is defined and may be amended by State statute. A member is eligible for normal service retirement after 3 0 years of creditable service, regardless of age, or after 1 0 years of service and attainment of age 60. A member is eligible for early retirement after 2 5 years of creditable service.
Normal retirement (pension) benefits paid to members are equal to 2% of the average of the member's two highest paid consecutive years of service, multiplied by the number of years of creditable service up to 4 0 years. Early retirement benefits are reduced by the lesser of one-twelfth of 7% for each month the member is below age 6 0 or by 7% for each year or fraction thereof by which the member has less than 3 0 years of service. It is also assumed that certain cost-of-living adjustments, based on the Consumer Price Index, will be made in future years. Retirement benefits are payable monthly for life. A member may elect to receive a partial lump-sum distribution in addition to a reduced monthly retirement benefit. Death, disability and spousal benefits are also available.
Funding Policy. TRS is funded by member and employer contributions as adopted and amended by the Board of Trustees. Members become fully vested after 10 years of service. If a member terminates with less than 1 0 years of service, no vesting of employer contributions occurs, but the member's contributions may be refunded with interest. Member contributions are limited by State law to not less than 5% or more than 6% of a member's earnable compensation. Member contributions as adopted by the Board of Trustees for the fiscal year ended June 30, 2010, were 5.25% of annual salary. The member contribution rate will increase t o 5.53% effective July 1,2010. Employer contributions required for fiscal year 2010 were 9.74% of annual salary as required by the June 30, 2007, actuarial valuation. The employer contribution rate will increase to 10.28% effective July 1,2010.

CITY OF COMMERCE BOARD OF EDUCATION -JACKSON COUNTY NOTES TO THE BASIC FINANCIALSTATEMENTS JUNE 30,2010

EXHIBIT "H"

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

Fiscal Year

Percentage Contributed

Required Contribution

(This page left intentionally blank)

CITY OF COMMERCE BOARD OF EDUCATION-JACKSONCOUNTY GENERAL FUND
SCHEDULE OF REVENUES. EXPENDITURESAND CHANGES IN FUND BALANCES BUDGET AND ACTUAL
YEAR ENDEDJUNE 30,2010

SCHEDULE "1"

REVENUES
Property Taxes Sales Taxes State Funds Federal Funds Charges for Services Investment Earnings Miscellaneous
Total Revenues
EXPENDITURES
Current Instruction Support Services Pupil Services Improvementof Instructional Services EducationalMedia Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Food Services Operation Enterprise Operations
Capital Outlay Debt Sewice
Total Expenditures
Excess of Revenues over (under) Expenditures
OTHER FINANCING SOURCES
OperatingTransfers from Other Funds
Net Change in Fund Balances
- Fund Balances Beginning
Adjustments

NONAPPROPRIATED BUDGETS

ORIGINAL (1)

FINAL (1)

ACTUAL AMOUNTS

- Fund Balances Ending

$

1,435,351.42 $

1,440,366.66 $

1,954,174.40

Notes to the Schedule of Revenues. ExDenditures and Changes in Fund BalancesBudeetand Actual
(1) Original and Final Budget amounts do not include budgeted revenues or expendituresof the various principal accounts.
The accompanyingschedule of revenues, expendituresand changes in fund balances budget and actual is presentedon the modified accrual basis of accountingwhich is the basis of accounting used in the presentation of the fund financial statements.

See notesto the basicfinancial statements.

CITY OF COMMERCE BOARD OF EDUCATION - JACKSON COUNTY
SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS YEAR ENDEDJUNE 30,2010

SCHEDULE "2"

FUNDING AGENCY PROGRAM/GRANT
Agriculture, U. S. Department of Child Nutrition Cluster Pass-Through From Georgia Departmentof Education Food Services School Breakfast Program National School Lunch Program
Total Child Nutrition Cluster
Other Programs Pass-Through From Georgia Departmentof Education Food Services ARRA- Child Nutrition Discretionary Grants Limited Availability Fresh Fruit and Vegetable Program
Total Other Programs
Total U. S. Department of Agriculture
Education, U. S. Department of Education Technology State Grants Cluster Pass-Through From Georgia Department of Education Education Technology State Grants
Special Education Cluster Pass-ShroughFrom Georgia Departmentof Education Special Education ARRA- Grants to States ARRA- Preschool Grants Grants to States Preschool Grants
Total Special Education Cluster
State Fiscal Stabilization Fund Cluster Pass-Through From Georgia Department of Education ARRA- Education State Grants
Title I. Part A Cluster Pass-Through From Georgia Department of Education
ARRA - Title IGrants to Local EducationalAgencies
Title IGrantsto Local Educational Agencies
Total Title I. Part A Cluster
Other Programs Pass-ThroughFrom Georgia Departmentof Education
- Career and Technical Education Basic Grants to States
English Language Acquisition Grants ImprovingTeacher QualityState Grants
Safe and Dru&Free Schools and Communities - State Grants
Total Other Programs
Total U. S. Department of Education

CFDA NUMBER

PASSTHROUGH
ENTITY ID
NUMBER

EXPENDITURES IN PERIOD

CITY OF COMMERCE BOARD OF EDUCATION -JACKSON COUNTY SCHEDULEOF EXPENDITURESOF FEDERALAWARDS YEAR ENDEDJUNE 30,2010

SCHEDULE "2"

FUNDING AGENCY PROGRAM/GRANT
Health and Human Services. U. S. Department of Child Care and Development Fund Cluster Pass-Through From Bright From the Start: Georgia Department of Early Care and Learning
- ARRA Child Care and Development Block Grant

CFDA NUMBER

PASSTHROUGH
ENTITY ID
NUMBER

EXPENDITURES IN PERIOD

Total Federal Financial Assistance
N/A = Not Available
Notesto the Schedule of Ex~endituresof FederalAwards
(1) Includes the Federallyassigned value of donated commodities for the Food Donation Program in the amount of $43,289.87.
(2) Expendituresfor the funds earned on the School Breakfast Program ($144,616.24) were not maintained separately and are included in the 2010 National School Lunch Program.
Major Programs are identified by an asterisk (*) in front of the CFDA number.
The School District did not provide Federal Assistanceto any Subrecipient
The accompanyingschedule of expendituresof Federalawards includes the Federalgrant activity of the City of Commerce Board of Education and is presented on the modified accrual basis of accounting which is the basis of accounting used in the presentation of the fund financial statements.

See notes to the basic financial statements.

CITY OF COMMERCE BOARD OF EDUCATION -JACKSON COUNTY SCHEDULE OF STATE REVENUE YEAR ENDEDJUNE 30,2010
GRANTS Bright From the Start: Georgia Department of Early Care and Learning Pre-Kindergarten Program
Education, Georgia Departmentof QualityBasic Education Direct Instructional Cost Kindergarten Program
Kindergarten Program - Early lntervention Program
Primary Grades (1-3) Program
Primary Grades - Early Intervention (1-3) Program
Upper Elementary Grades (4-5) Program
Upper Elementary Grades - Early lntervention (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 - Categoly VI
Remedial Education Program Alternative Education Program EnglishSpeakers of Other Languages (ESOL) Media Center Program 20 Days Additional Instruction Staff and Professional Development Indirect Cost Central Administration School Administration Facility Maintenanceand Operations Categorical Grants Pupil Transportation Sparsity Nursing Services Vocational Supervisors Mid-termAdjustment Hold-Harmless Education Equalization FundingGrant Food Services Vocational Education Amended Formula Adjustment Other State Programs Dual Enrollment Health Insurance NationalTeacher Certification Preschool Handicapped Program Teachers' Retirement Virtual Schools Grant
Gffice of Treasury and FiscalServices Public School Employees Retirement

SCHEDULE "3"
GOVERNMENTAL FUND TYPE GENERAL FUND

See notesto the basic financial statements.

CITY OF COMMERCE BOARD OF EDUCATION -JACKSON COUNTY SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS
YEAR ENDEDJUNE 30.2010

SCHEDULE "4"

ORIGINAL ESTIMATED
COST (1)

CURRENT ESTIMATED COSTS (2)

AMOUNT EXPENDED IN CURRENT YEAR (3) (4) (5)

AMOUNT EXPENDED IN PRIOR YEARS (3) (4) (5)

PROJECT STATUS

(i. ~ iA)cquiring, constructing and equippingnew school

buildingsand other buildings or facilities useful or desirable:

addlngto, renovating, repalring, improvingand equipping

existingschool buildingsor other buildingsor facilities useful

or desirable

$

(iii) acquiring new school equipment (iv) acquiringany property necessaryor desirabletherefore. both real and personal

(i) payinga portion of the debt service on the outstanding Series 2001 General Obligation Bonds previously issued by the City of Commerce (ii, iii) Acquiring, constructing and equipping new school buildingsand other buildings or facilities useful or desirable; addingto, renovating, repairing improvingand equipping existingschool bulldingsor other buildingsor facilities
(iv) Acquiring part of a psychoeducational facility (v) Acquiringschool buses, school vehicles and transportation equipment
(vi) Acquiringtextbooks system-wide (vii) Acquiring new technologyand safev and security equipment system-wide
(viii) Acquiring land (ix)Acqu~ringand property necessaryor desirabletherefore, both real and personal

6,999,005.19 $ 43,010.90

9,136,360.00 $

57,283.91

$ 43,010.90
57,283.91

18.650,000.00 11,215,522.65

60,000.00

8,960,865.25 4,717,818.20
60,000.00

Ongoing Ongoing Ongoing
Ongoing
Ongoing Ongoing Ongoing Ongoing Ongoing Ongoing Completed

(1) The School District's original cost estimate as specified In the resolution callingfor the imposition of the Local Option Sales Tax.

(2) The School District'scurrent estimate of total cost for the projects. Includes all cost from project inceptionto completion.

(3) The voters of City of Commerce approved the impositionof a 1%sales tax to fund the above projectsand retire associated debt. Amounts expendedfor these projectsmay include sales tax proceeds. state. local property taxes and/or other funds over the life of the projects.

(4) In addition to the expendituresshown above, the School District has incurred interest to provideadvance funding for the above projectsas follows:

Prior Years

$ 423.705.00

Current Year

427,811.56

Total

$ 851,516.56

(5) In addition to the expenditures shown above, the School District has incurred $133,699.69 of bond issuance costs, related to the 2009 G. 0. Bond Issue.

See notes to the basic financial statements.

(This page left intentionally blank)

CITY OF COMMERCE BOARD OF EDUCATION -JACKSON COUNTY
GENERAL FUND - QUALITY BASIC EDUCATION PROGRAM (QBE)
ALLOTMENTS AND EXPENDITURES - BY PROGRAM YEAR ENDED JUNE 30.2010

SCHEDULE "5"

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

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

ELIGIBLE QBE PROGRAM COSTS

SALARIES

OPERATIONS

TOTAL

TOTAL QBE FORMULA FUNDS

(1) Comprisedof 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.

SECTION II COMPLIANCE AND INTERNAL CONTROL REPORTS

Russell W. Hinton
STATE AUDITOR
(404) 6563174

DEPARTMENOTF AUDITSAND ACCOUNTS
270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400
May 9 , 2 0 1 1

Honorable Nathan Deal, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the City of Commerce Board of Education
INDEPENDENT AUDITOR'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MAlTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENTAUDITING STANDARDS
Ladies and Gentlemen:
We have audited the financial statements of the governmental activities, each major fund, and the aggregate remainingfund information of City of Commerce Board of Education as of and for the year ended June 30, 2010, which collectively comprise City of Commerce Board of Education's basic financial statements and have issued our report thereon dated May 9, 2011. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in GovernmentAuditing Standards, issued by the Comptroller General of the United States.
Internal Control Over Financial Re~orting
In planning and performing our audit, we considered City of Commerce 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 Commerce Board of Education's internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness of the City of Commerce Board of Education's internal control over financial reporting.
A deficienncy in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect and correct misstatements on a timely basis. A material weakness is a deficiency, or combination of deficiencies, in internal control such that there is a reasonable possibility that a material misstatement of the entity's financial statements will not be prevented, or detected and corrected on a timely basis.
Our consideration of internal control over financial reporting was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over financial reporting that might be deficiencies, significant deficiencies, or material weaknesses. We did not identify any deficiencies in internal control over financial reporting that we consider to be

material weaknesses, as defined above. However, we consider items FS-7711-10-01, FS-7711-1002, FS-7711-10-03, and FS-7711-10-04, described in the accompanying Schedule of Findings and Questioned Costs to be significant deficiencies in internal control over financial reporting. A signficant deficiency is a deficiency, or combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance.
Com~lianceand Other Matters
As part of obtaining reasonable assurance about whether City of Commerce 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 Commerce Board of Education in a separate letter dated May 9,2011.
City of Commerce 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 Commerce Board of Education's response and, accordingly, we express no opinion on it.
This report is intended solely for the information and use of management, members of the City of Commerce Board of Education, others within the entity, Federal awarding agencies and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties.
Respectfully submitted,
~ u s s dWl . Hinton, CPA, CGFM State Auditor

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

DEPARTMENOTF AUDITSAND ACCOUNTS
270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400
May 9 , 2 0 1 1

Honorable Nathan Deal, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the City of Commerce Board of Education
INDEPENDENT AUDITOR'S REPORT ON COMPLIANCE WlTH REOUIREMENTS THAT COULD HAVE A DIRECT AND MATERIAL EFFECT ON EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WlTH OMB CIRCULAR A-133
Ladies and Gentlemen:

We have audited City of Commerce Board of Education's compliance with the types of compliance requirements described in the OMB Circular A-133 Compliance Supplement that could have a direct and material effect on each of its major Federal programs for the year ended June 30,2010. City of Commerce 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 Commerce Board of Education's management. Our responsibility is to express an opinion on City of Commerce 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, Low1 Governments, and Non-Profit Organkations. 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 Commerce 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 Commerce Board of Education's compliance with those requirements.

As described in item FA-7711-10-01 in the accompanying Schedule of Findings and Questioned Costs, City of Commerce Board of Education did not comply with requirements regarding Maintenance of Effort that is applicable to its Special Education Cluster. Compliance with such requirements is necessary, in our opinion, for City of Commerce Board of Education to comply with requirements applicable to those programs.
In our opinion, except for the noncompliance described in the preceding paragraph, City of Commerce Board of Education complied, in all material respects, with the compliance requirements referred to above that could have a direct and material effect on each of its major Federal programs for the year ended June 30,2010.
Internal Control Over Com~liance
Management of City of Commerce 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 Commerce 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 Commerce Board of Education's internal control over compliance.
Our consideration of internal control over compliance was for the limited purpose described in the preceding paragraph and was not designed to identify all deficiencies in internal control over compliance that might be significant deficiencies or material weaknesses and therefore, there can be no assurance that all deficiencies, significant deficiencies, or material weaknesses have been identified. However, as discussed below, we identified certain deficiencies in internal control over compliance that we consider to be material weaknesses and other deficiencies that we consider to be significant deficiencies.
A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a Federal program on a timely basis. A material weakness in internal control over compliance is a deficiency, or combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a Federal program will not be prevented, or detected and corrected, on a timely basis. We consider the deficiency in internal control over compliance described in the accompanying Schedule of Findings and Questioned Costs as item FA-7711-10-01to be a material weakness.
A significant deficiency in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance with a type of compliance requirement of a Federal program that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance.
City of Commerce 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 Commerce 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 Commerce 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.
Respecffully submitted,
usb bell W. Hinton, CPA, CGFM
State Auditor

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

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

PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

FINDING CONTROL NUMBER AND STATUS

FS-7711-09-01 FS-7711-09-02

Partially Resolved - See Corrective Action/Responses Previously Reported Corrective Action Implemented

CORRECTIVE ACTION/RESPONSES

GENERAL LEDGER Inadequate Controls over Journal Entries Finding Control Number: FS-7711-09-01

Several journal entries, created during June 2010, were placed in the subsequent period (FY11) journal entry book and did not include supervisory approval. We will review on a weekly basis from this point forward.

PRIOR YEAR FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

No matters were reported.

SECTION IV FINDINGS AND QUESTIONED COSTS

CITY OF COMMERCE BOARD OF EDUCATION -JACKSON COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30,2010

I SUMMARY OF AUDITOR'S RESULTS

Financial Statements

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

Unqualified

Internal control over financial reporting:

Material weakness identified?

N 0

Significant deficiencies identified?

Yes

Noncompliance material to financial statements noted:

Federal Awards

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

Yes None Reported

Type of auditor's report issued on compliance for major programs: Unqualified for all major programs except for Special Education Cluster, which was qualified.

Any audit findings disclosed that are required to be reported in

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

Yes

Identification of major programs:

CFDA Num ber(s)

Name of Federal Program or Cluster

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

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

Auditee qualified as low-risk auditee?

II FINANCIALSTATEMENT FINDINGSAND QUESTIONEDCOSTS

REVENUES/RECEIVABLES/RECEIPTS EXPENDlTURES/LIABILlTlES/DISBURSEMENTS Inadequate Controls over School Activity Accounts Significant Deficiency Finding Control Number: FS-7711-10-01

Condition: The accounting procedures of the School District were insufficient to provide adequate controls over the school activity accounts.

CITY OF COMMERCE BOARD OF EDUCATION -JACKSON COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30,2010
II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS
REVENUES/RECEIVABLES/RECEIPTS EXPENDlTURES/LIABILlTlES/DISBURSEMENTS Inadequate Controls over School Activity Accounts Significant Deficiency Finding Control Number: FS-7711-10-01
Criteria: The School District's management is responsible for designing and maintaining internal controls that provide reasonable assurance transactions are properly processed and reported in accordance with State law, procedures established by the Georgia Department of Education and School District policies and procedures.
Questioned Cost: N/A
Information: Revenues/Receiva bles/Receipts Based on a review of receipt transactions at Commerce City High School, the following deficiencies were noted: 1. Receipts issued by teachers and staff for the collection of cash and checks were not adequately maintained. 2. All receipts issued by teachers and staff were collected, recorded and deposited by the same individual, evidencing an inadequate separation of duties.
Expenditures/Liabilities/Disbursements Based on a review of expenditure vouchers at Commerce City High School, the following deficiencies were noted: 1. Expenditures were not supported by pre-approved requisitions or purchase orders for several vouchers. 2. Procedures were not in place to properly document the receipt of goods prior to processing of paymentsfor several expenditures.
Cause: These deficiencies were a result of management's failure to ensure that internal controls were established, implemented and functioning at the school level.
Effect: Errors and/or irregularities may not be detected in a timely manner.
Recommendation: Management should establish adequate internal controls and accounting procedures at all schools to ensure that assets are adequately safeguarded. These controls should take into consideration collection procedures, separation of duties of critical accounting functions, and verification of goods/services received prior to vendor payment. Additionally, monitoring procedures should be implemented to provide reasonable assurance that transactions are processed according to established procedures.

CITY OF COMMERCE BOARD OF EDUCATION -JACKSON COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30,2010
II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS
EMPLOYEE COMPENSATION Inadequate Internal Controls over Employee Compensation Process Significant Deficiency Finding Control Number: FS-7711-10-02
Condition: The accounting procedures of the School District were insufficient to provide for adequate internal controls over employee compensation.
Criteria: The School District's management is responsible for designing and maintaining internal controls that provide reasonable assurance that transactions are processed according to established procedures.
The Official Code of Georgia Annotated (O.C.G.A.) 550-6-27 states in part: "Each...local Board of
Education is required and directed to submit to the state auditor, in a format prescribed by the state
auditor, a listing of all personnel of such ... local Board of Education showing name, title or functional
area, salary, and travel expense for each individual."
Questioned Cost: N/A
Information: A review of school activity account expenditures revealed additional compensation paid to employees of the School District in the amount of $26,438.00 that did not flow through the normal business processfor salaries as established by the School District.
A review of compensation paid to School Nurses identified improper coding of expenditures that resulted in $56,580.48 of salaries not being reported on the detailed listing of salary and travel as submitted to the Georgia Department of Audits and Accounts.
A review of compensation paid to paraprofessional personnel identified variances between hours originally budgeted to work per day and the employee's schedule for actual work performed. This resulted in numerous overpayments and instances where a few employees were paid for the same time period from separate funding sources.
An employee's salary was not properly pro-rated among funds in accordance with the duties assigned.
A review of compensation for several extra bus trips identified that the expenditures were charged to supplies rather than employee compensation, resulting in $180.00 not being reflected on the on the detailed listing of salary and travel as submitted to the Georgia Department of Audits and Accounts.
Cause: Management failed to implement and adequately monitor procedures to ensure that internal controls over initial determinations of employee compensation were established, implemented and functioning. The School District's management also failed to ensure that normal business procedures established for the payment of additional salaries were consistently followed.
Effect: Errors and/or irregularities may not be detected in a timely manner.

CITY OF COMMERCE BOARD OF EDUCATION -JACKSON COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30,2010
II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS
EMPLOYEE COMPENSATION lnadequate Internal Controls over Employee Compensation Process Significant Deficiency Finding Control Number: FS-7711-10-02
Recommendation: The School District should implement policies and procedures to ensure that normal business procedures are followed for all salaries, which includes ensuring that salaries are paid according to approved salary schedules and that adequate documentation is maintained to support the salary payments.
GENERAL LEDGER lnadequate Controls over Journal Entries Significant Deficiency Finding Control Number: FS-7711-10-03
Condition: The School District does not have controls and monitoring in place to ensure that all journal entries are accurate and recorded correctly on the general ledger.
Criteria: The School District's management is responsible for designing and maintaining internal controls that provide reasonable assurance that journal entries are properly approved, documented and processed.
Questioned Cost: N/A
Information: Journal entries are completed and entered into the system without any approval or monitoring of the entries.
Cause: These deficiencies were a result of management's failure to adequately monitor and implement procedures to ensure that journal entries were properly approved before posting to the accounting records.
Effect: The lack of adequate control over the journal entry process could result in errors in financial reportingand increases the risk of material misstatements.
Recommendation: Management should establish adequate internal controls and accounting procedures to ensure that entries are adequately documented and approved. Additionally, monitoring procedures should be implemented to provide reasonable assurance that transactions are processed according to established procedures.

CITY OF COMMERCE BOARD OF EDUCATION -JACKSON COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30,2010
II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS
CAPITAL ASSETS Failure to Adequately Maintain Capital Assets Significant Deficiency Finding Control Number: FS-7711-10-04
Condition: The School District failed to adequately maintain the capital assets records.
Criteria: Chapter 37, Implementing a Bpital AsseB Management System, of the Financial Management for Georgia Local Units of Administration indicates that School Districts must establish fixed asset policies, define system requirements, implement a fixed asset system and maintain fixed asset inventory records.
The provisions of Governmental Accounting Standards Board (GASB) Statement No. 51, Accounting and Reporting for Intangible Assets; defines intangible assets to include easements, computer software, water, timber and mineral rights, patents, and trademarks. The School District should have amended their capital assets policy to reflect the adoption of this statement in accordance with generally accepted accounting principles.
Questioned Cost: N/A
Information: A review of the School District's capital assets records and a physical inspection of inventory items revealed that several assets were not tagged and could not be accurately traced back to the capital assets listing because no serial numbers or other identifier were included in the listing. In addition, the capital assets listing failed to provide all elements of information as required by Chapter 3 7 of the Financial Management for Georgia Local Units of Administration, such as source of funding, percent of Federal participation and condition of items. The School District also failed to incorporate the changes required per GASB 5 1 regarding intangible assets. Finally, the School District failed to reduce its capital assets listing for an impairment of High School facilities due to demolition made in conjunction with new High School construction.
Cause: The School District failed to ensure that adequate accounting procedures were in place to process, record and report capital assets and related activity.
Effect: The failure of the School District to maintain a complete capital assets listing can lead to inaccurate internal and external reporting, as well as noncompliance with generally accepted accounting principles.

CITY OF COMMERCE BOARD OF EDUCATION -JACKSON COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30,2010
II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS
CAPITAL ASSETS Failure to Adequately Maintain Capital Assets Significant Deficiency Finding Control Number: FS-7711-10-04
Recommendation: The School District should strengthen internal control procedures related to capital assets to ensure that they are in place and operating effectively. An administrative review should be performed to ensure the accuracy and completeness of capital assets records as required by Chapter 3 7 of the Financial Management for Georgia Local Units of Administration.
We recommend management update and the Board approve the School District's capitalization policy to include Intangible Assets. Any assets meeting the definition of an intangible asset should be capitalized according to the policy.
Ill FEDERAL AWARD FINDINGS AND QUESTIONED COSTS
MATCHING, LEVEL OF EFFORT, EARMARKING Failure to Meet Maintenance of Effort Material Weakness Material Noncompliance U. S. Department of Education Through Georgia Department of Education Special Education Cluster (CFDA 84.027 and 84.391) Finding Control Number: FA-7711-10-01
Condition: The School District did not meet the maintenance of effort requirement.
Criteria: 3 4 CFR 300.203(a) and the Compliance Supplement, Part 4 (4-84.027, 111, G.2.1, IDEA, Part B) indicate that funds received by a Local Educational Agency (LEA) cannot be used, except under certain limited circumstances, to reduce the level of expenditures for the education of children with disabilities made by the LEA from local funds below the level of those expenditures for the preceding fiscal year. To meet this requirement, an LEA must expend, in any particular fiscal year, and amount of local funds for the education of children with disabilities that is at least equal to the amount of local funds expended for this purpose by the LEA in the prior fiscal year.
Questioned Cost: $67,811.65

CITY OF COMMERCE BOARD OF EDUCATION -JACKSON COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30,2010

Ill FEDERAL AWARD FINDINGS AND QUESTIONED COSTS
MATCHING, LEVEL OF EFFORT, EARMARKING Failure to Meet Maintenance of Effort Material Weakness Material Noncompliance U. S. Department of Education Through Georgia Department of Education Special Education Cluster (CFDA 84.027 and 84.391) Finding Control Number: FA-7711-10-01
Information: State and local funds for the education of children with disabilities decreased both in the aggregate and per pupil during the year under review.

Fiscal Year 2 0 1 0

Fiscal Year 2 0 0 9

State and Local Expenditures

$ 1,030,410.39 $ 1,098,222.04

Number of Students

170

177

State and Local Expenditures per Student

$

6,061.24 $

6,204.64

Cause: The School District did not properly manage its funds to meet the maintenance of effort requirement related to the education of children with disabilities.

Effect: Failure to monitor expenditures for compliance with maintenance of effort requirements can lead to a material noncompliance with the provisions of the Federal grant.

Recommendation: The School District should implement appropriate procedures to ensure that maintenance of effort is met regarding the education of children with disabilities. The Georgia Department of Education should review this matter to determine if a refund is appropriate.

SECTION V MANAGEMENT'S RESPONSES

CITY OF COMMERCE BOARD OF EDUCATION -JACKSON COUNTY SCHEDULE OF MANAGEMENT'S RESPONSES YEAR ENDED JUNE 30,2010

Finding Control Number: FS-7711-10-01

We concur with this finding. School activity revenues/receiva bles/receipts collected by teachers and staff will be receipted and deposited with the bookkeeper in the school office. No fund raisers will be independently operated outside the duties of the school bookkeeper. No outside fund raisers for the benefit of schools activities will be allowed. Expenditureswill be approved by requisition or purchase order. Receipts of goods will be properly documented prior to payment.

Contact Person: Title: Telephone: Fax: E-mail:

Ann Stokey Director of Finance 706-335-5500 706-335-521 4 astokey@commercecity.kl2.ga.us

Finding Control Number: FS-7711-10-02

We concur with this finding. All payments to employees for school duties performed after regular school hours will be paid through the payroll process. School nurse salaries will be properly coded t o reflect on the salary and travel report. Schedules for paraprofessional will be closely monitored to assure work per day and pay are correct.

Contact Person: Title: Telephone: Fax: E-mail:

Ann Stokey Director of Finance 706-335-5500 706-335-5214 astokey@commercecity.k12.ga.us

Finding Control Number: FS-7711-10-03

We concur with this finding. All journal entries will be reviewed by a second party to assure accuracy and that entries are processed according to established procedures. All entries will be signed off.

Contact Person: Title: Telephone: Fax: E-mail:

Ann Stokey Director of Finance 706-335-5500 706-335-5214 astokey@commerce-city.kl2.ga.u~

Finding Control Number: FS-7711-10-04

We concur with this finding. School District will strengthen control procedures assuring proper documentation of existing assets and adjustments for deleted assets.

Contact Person: Title: Telephone: Fax: E-mail:

Ann Stokey Director of Finance 706-335-5500 706-335-5214 astokey8commerce-city.kl2.ga.u~

CITY OF COMMERCE BOARD OF EDUCATION -JACKSON COUNTY SCHEDULE OF MANAGEMENT'S RESPONSES YEAR ENDED JUNE 30,2010

Finding Control Number: FA-7711-10-01

We concur with this finding. LEA will put in place procedures ensuring MOE is maintained for students with disabilities.

Contact Person: Title: Telephone: Fax: E-mail:

Ann Stokey Director of Finance 706-335-5500 706-335-521 4 astokey@commerce-city.kl2.ga.u~