CITY OF DUBLIN BOARD OF EDUCATION LAURENS COUNTY, GEORGIA ANNUAL FINANCIAL REPORT FOR THE FISCAL YEAR ENDED JUNE 30,2009 (Including Independent Auditor's Reports) 1t'! I1 - bhr - CITY OF DUBLIN BOARD OF EDUCATION - LAURENS COUNTY - TABLE OF CONTENTS - SECTION I FINANCIAL INDEPENDENT AUDITOR'S COMBINED REPORT ON BASIC FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION - SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS EXHIBITS BASIC FINANCIAL STATEMENTS DISTRICT-WIDE FINANCIAL STATEMENTS A STATEMENT OF NET ASSETS B STATEMENT OF ACTIVITIES FUND FINANCIAL STATEMENTS C BALANCE S E E T GOVERNMENTAL FUNDS D RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO THE STATEMENT OF NET ASSETS E STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS F RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES TO THE STATEMENT OF ACTIVITIES G STATEMENT OF FIDUCIARY NET ASSETS FIDUCIARY FUNDS H NOTES TO THE BASIC FINANCIAL STATEMENTS SCHEDULES REQUIRED SUPPLEMENTARYINFORMATION 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 DUBLIN BOARD OF EDUCATION - LAURENS COUNTY - TABLE OF CONTENTS - SECTION I FINANCIAL SCHEDULES SUPPLEMENTARY INFORMATION 4 SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS 30 5 ALLOTMENTS AND EXPENDITURES GENERAL FUND - QUALITY BASIC EDUCATION PROGRAMS (QBE) BY PROGRAM 3 1 SECTION I1 COMPLIANCE AND INTERNAL CONTROL REPORTS REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENTAUDITING STANDARDS REPORT ON COMPLIANCE WITH REQUIREMENTS APPLICABLE TO EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH OMB CIRCULAR A- 133 SECTION 111 AUDITEE'S RESPONSE TO PRIOR YEAR FINDINGS AND QUESTIONED COSTS SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS SECTION IV FINDINGS AND QUESTIONED COSTS SCHEDULE OF FINDINGS AND QUESTIONED COSTS CITY OF DUBLIN BOARD OF EDUCATION - LAURENS COUNTY - TABLE OF CONTENTS - SECTION V MANAGEMENT'S RESPONSES SCHEDULE OF MANAGEMENT'S RESPONSES SECTION I FINANCIAL Russell W. Hinton STATE AUDITOR (404) 656-2174 DEPARTMENOTF AUDITSAND ACCOUNTS 270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400 August 9,2010 Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education and Superintendent and Members of the City of Dublin Board of Education INDEPENDENT AUDITOR'S COMBINED REPORT ON BASIC FINANCIAL STATEMENTS AND SUPPLEMENTARYINFORMATION - 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 Dublin Board of Education, as of and for the year ended June 30, 2009, 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 Dublin Board of Education's management. Our responsibility is to express opinions on these financial statements based on our audit. We conducted ow audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the City of Dublin Board of Education's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinions. In our opinion, the financial statements referred to previously present fairly, in all material respects, the respective financial position of the governmental activities, each major fund, and the aggregate remaining fund information of the City of Dublin Board of Education, as of June 30, 2009, 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 Dublin 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 August 9, 2010, on our consideration of the City of Dublin Board of Education's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit. The Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual, as presented on page 27, is not a required part of the basic financial statements but is supplementary information required by the accounting principles generally accepted in the United States of America. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods of measurement and presentation of the required supplementary information. However, we did not audit the information and express no opinion on it. Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City of Dublin Board of Education's basic financial statements. The accompanying supplementary information which consist of Schedules 2 through 5, which includes the Schedule of Expenditures of Federal Awards as required by U. S. Office of Management and Budget Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations, are presented for purposes of additional analysis and are not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements, and in our opinion, is fairly stated, in all material respects, in relation to the basic financial statements taken 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, I Russell W. Hinton, CPA, CGFM State Auditor CITY OF DUBLIN BOARD OF EDUCATION - LAURENS COUNTY CITY OF DUBLIN BOARD OF EDUCATION - LAURENS COUNTY STATEMENT OF NET ASSETS JUNE 30,2009 EXHIBIT " A ASSETS Cash and Cash Equivalents Investments Accounts Receivable, Net Taxes State Government Federal Government Other Inventories Deferred Charges Capital Assets, Non-Depreciable Capital Assets, Depreciable (Net of Accumulated Depreciation) Total Assets LIABILITIES Accounts Payable Salaries and Benefits Payable Payroll Withholdings Payable Contracts Payable Retainages Payable Other Current Liabilities Long-Term Debt Due Within One Year Due in More Than One Year Total Liabilities NET ASSETS Invested in Capital Assets, Net of Related Debt Restricted for Continuation of Federal Programs Debt Service Capital Projects Unrestricted Total Net Assets Total Liabilities and Net Assets GOVERNMENTAL ACTlVlTl ES The notes to the basic financial statements are an integral part of this statement. -1 - CITY OF DUBLIN BOARD OF EDUCATION - LAURENS COUNTY STATEMENT OF ACTIVITIES FOR THE YEAR ENDED JUNE 30,2009 GOVERNMENTAL ACTIVITIES Instruction Support Services Pupil Services Improvementof InstructionalServices Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student TransportationServices Central Support Services Other Support Services Operations of Non-Instructional Services Food Services Enterprise Operations Community Services Interest on Short-Term and Long-Term Debt Total Governmental Activities General Revenues Taxes Property Taxes For Maintenance and Operations Sales Taxes Special Purpose Local Option Sales Tax For Capital ProjectsIDebt Services Grants and ContributionsNot Restricted to Specific Programs Investment Earnings Miscellaneous Total General Revenues Changes in Net Assets Net Assets - Beginning of Year (Restated) Net Assets - End of Year EXPENSES CHARGES FOR SERVICES The notes to the basic financial statements are an integral part of this statement. - 2- EXHIBIT "B" PROGRAM REVENUES OPERATING CAPITAL GRANTS AND GRANTS AND CONTRIBUTIONS CONTRIBUTIONS NET (EXPENSES) REVENUES AND CHANGES IN NET ASSETS CITY OF DUBLIN BOARD OF EDUCATION - LAURENS COUNTY BALANCE SHEET GOVERNMENTAL FUNDS JUNE 30.2009 EXHIBIT "C" ASSETS Cash and Cash Equivalents Investments Accounts Receivable, Net Taxes State Government Federal Government Other Inventories Total Assets GENERAL FUND DISTRICTWIDE CAPITAL PROJECTS FUND DEBT SERVICE FUND TOTAL $ 4,345,381.04 $ 10,335,448.07 $ 3,112.13 $ 14,683,941.24 LIABILITIES AND FUND BALANCES LIABILITIES Accounts Payable Salaries and Benefits Payable Payroll Withholdings Payable Deposits and Deferred Revenue Contracts Payable Retainages Payable Other Current Liabilities Total Liabilities FUND BALANCES Reserved for: Continuation of Federal Programs Debt Service Capital Projects Unreserved Designated for Student Activities Undesignated Reported in: General Fund Total Fund Balances Total Liabilities and Fund Balances $ 4,345,381.04 $ 10,335,448.07 $ 3,112.13 $ 14,683,941.24 The notes to the basic financial statements are an integral part of this statement. - 4 - CITY OF DUBLIN BOARD OF EDUCATION - LAURENS COUNTY RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO THE STATEMENT OF NET ASSETS JUNE 30.2009 Total Fund Balances - Governmental Funds (Exhibit "C") Amounts reportedfor Governmental Activities in the Statement of Net Assets are different because: Capital Assets used in Governmental Activities are not financial resources and therefore are not reported in the funds. These assets consist of: Land Construction In Progress Land Improvements Buildings Equipment Accumulated Depreciation Total Capital Assets Taxes that are not available to pay for current period expenditures are deferred in the funds. Long-Term Liabilities, including Bonds Payable, are not due and payable in the current period and therefore are not reported as liabilities in the funds. Long-Term Liabilities at year-end consist of: Bonds Payable IntergovernmentalContract Capitalized Bond and Other Debt Issuance Costs Capital Leases 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. -5- CITY OF DUBLIN BOARD OF EDUCATION - LAURENS COUNTY STATEMENT OF REVENUES, EXPENDITURESAND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS YEAR ENDED JUNE 30.2009 EXHIBIT " E REVENUES Properly Taxes Sales Taxes State Funds Federal Funds Charges for Services Investment Eamings Miscellaneous Total Revenues EXPENDITURES Current Instruction Support Services Pupil Services Improvement of InstructionalServices Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Food Services Operation Enterprise Operations Community Services Capital Outlay Debt Services Principal Interest Total Expenditures Excess of Revenues over (under) Expenditures OTHER FINANCING SOURCES (USES) Transfers In Transfers Out Total Other Financing Sources (Uses) Net Change in Fund Balances Fund Balances - Beginning GENERAL FUND DISTRICTWIDE CAPITAL PROJECTS FUND DEBT SERVICE FUND TOTAL $ 27,130,978.10 $ 10,218,094.02 $ 328.84 $ 37,349,400.96 $ 27,740,143.65 $ 20,976,982.10 $ 1,426,105.14 $ 50,143,230.89 $ -609,165.55 $ -10,758,888.08 $ -1,425,776.30 $ -12,793,829.93 $ -1,426,020.00 $ 1,426,020.00 $ 0.00 $ -609,165.55 $ -12,184,908.08 $ 243.70 $ -12,793,829.93 977,375.54 19,399,360.28 2,868.43 20,379,604.25 Fund Balances - Ending $ 368,209.99 $ 7,214,452.20 $ The notes to the basic financial statements are an integral part of this statement 3,112.13 $ 7,585,774.32 CITY OF DUBLIN BOARD OF EDUCATION - LAURENS COUNTY RECONCILIATIONOF THE GOVERNMENTAL FUNDS STATEMENT OF REVENUES, EXPENDITURESAND CHANGES IN FUND BALANCES TO THE STATEMENT OF ACTIVITIES JUNE 30,2009 Total Net Change in Fund Balances -Governmental Funds (Exhibit "E) Amounts reportedfor GovernmentalActivities in the Statement of Activities are different because: Capital Outlays are reported as expenditures in Governmental Funds. However, in the Statement of Activities, the cost of Capital Assets is allocated over their estimated useful lives as depreciation expense. In the current period, these amounts are: Capital Outlay Depreciation Expense Excess of Capital Outlay over Depreciation Expense Taxes reported in the Statement of Activities that do not provide current financial resources are not reported as revenues in the funds. Bond issuance costs, deferred gains on refundings and similar items when debt is first issued are reported as expenditures in Governmental Funds, but are reported as deferred charges on the Statement of Net Assets and amortized over the term of the debt, using the straight-line method. The details of this difference in the current period are as follows: Amortization of Bond Issuance Costs Repayment of Long-Term Debt is reported as an expenditure in Governmental Funds, but the repayment reduces Long-Term Liabilitiesin the Statement of Net Assets. In the current year, these amounts consist of: Bond Principal Retirements Capital Lease Payments Total Long-Term Debt Repayments Change in Net Assets of Governmental Activities (Exhibit "B") EXHIBIT "F" The notes to the basic financial statements are an integral part of this statement. CITY OF DUBLIN BOARD OF EDUCATION - LAURENS COUNTY STATEMENT OF FIDUCIARY NET ASSETS FIDUCIARY FUNDS JUNE 30,2009 EXHIBIT "G" ASSETS Cash and Cash Equivalents Accounts Receivable, Net Other Total Assets LIABILITIES Funds Held for Others AGENCY FUNDS The notes to the basic financial statements are an integral part of this statement - 8- CITY OF DUBLIN BOARD OF EDUCATION - LAURENS COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30,2009 EXHIBIT "H" Note 1: DESCRIPTION OF SCHOOL DISTRICT AND REPORTING ENTITY REPORTING ENTITY The City of Dublin 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 SIGNIFICANTACCOUNTING 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 Dublin Board of Education. District-wide Statements: The Statement of Net Assets and the Statement of Activities display information about the financial activities of the overall School District, except for fiduciary activities. Eliminations have been made to minimize the double counting of internal activities. Governmental activities generally are financed through taxes, intergovernmental revenues, and other nonexchange transactions. The Statement of Activities presents a comparison between direct expenses and program revenues for each function of the School District's governmental activities. Direct expenses are those that are specifically associated with a program or function and, therefore, are clearly identifiable to a particular function. Indirect expenses (expenses of the School District related to the administration and support of the School District's programs, such as office and maintenance personnel and accounting) are not allocated to programs. Program revenues include (a) charges paid by the recipients of goods or services offered by the programs and (b) grants and contributions that are restricted to meeting the operational or capital requirements of a particular program. Revenues that are not classified as program revenues, including all taxes, are presented as general revenues. Fund Financial Statements: The fund financial statements provide information about the School District's funds, including fiduciary funds. Eliminations have been made to minimize the double counting of internal activities. Separate statements for each category (governmental and fiduciary) are presented. The emphasis of fund financial statements is on major governmental funds, each displayed in a separate column. CITY OF DUBLIN BOARD OF EDUCATION - LAURENS COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30,2009 EXHIBIT "H" Note 2: SUMMARY OF SIGNIFICANTACCOUNTING POLICIES The School District reports the following major governmental funds: General Fund is the School District's primary operating fund. It accounts for all financial resources of the School District, except those resources required to be accounted for in another fund. District-wide Capital Projects Fund accounts for financial resources including Special Purpose Local Option Sales Tax (SPLOST), Bond Proceeds and grants from Georgia State Financing and Investment Commission to be used for the acquisition, construction or renovation of major capital facilities. Debt Service Fund accounts for taxes (sales) legally restricted for the payment of general long-term principal, interest and paying agent's fees. The School District reports the following fiduciary fund type: Agency funds account for assets held by the School District as an agent for various funds, governments or individuals. BASIS OF ACCOUNTING The basis of accounting determines when transactions are reported on the financial statements. The District-wide governmental and fiduciary fund financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded at the time liabilities are incurred, regardless of when the related cash flows take place. Nonexchange transactions, in which the School District gives (or receives) value without directly receiving (or giving) equal value in exchange, include property taxes, sales taxes, grants and donations. On an accrual basis, revenue from property taxes is recognized in the fiscal year for which the taxes are levied. Revenue from sales taxes is recognized in the fiscal year in which the underlying transaction (sale) takes place. Revenue fiom 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 CITY OF DUBLIN BOARD OF EDUCATION - LAURENS COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30,2009 EXHIBIT "H" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES are recorded when the related f'und 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 capital leases are reported as other financing sources. The School District funds certain programs by a combination of specific cost-reimbursement grants, categorical grants, and general revenues. Thus, when program costs are incurred, there are both restricted and unrestricted net assets available to finance the program. It is the School District's policy to first apply grant resources to such programs, followed by cost-reimbursement grants, then general revenues. RESTATEMENT OF PRIOR YEAR NET ASSETS For fiscal year 2009, the School District restated Construction in Progress due to a change in the capitalization policy and errors and omissions. The School District had previously not included architect payments as capitalizable expenditures; however, the Finance Director requested that the Board change the policy to specifically include these expenditures. The result is an increase in Net Assets at July 1, 2008, of $1,115,554.70. This change is in accordance with generally accepted accounting principles. 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 h d s in one or more solvent banks, insured Federal savings and loan associations or insured chartered building and loan associations. INVESTMENTS COMPOSITION OF INVESTMENTS Investments made by the School District in nonparticipating interest-earning contracts (such as certificates of deposit) and repurchase agreements are reported at cost. Participating interestearning contracts and money market investments with a maturity at purchase of one year or less are 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: CITY OF DUBLIN BOARD OF EDUCATION - LAURENS COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30,2009 EXHIBIT "H" Note 2: SUMMARY OF SIGNIFICANTACCOUNTING POLICIES (1) Obligations issued by the State of Georgia or by other states, (2) Obligations issued by the United States government, (3) Obligations hlly insured or guaranteed by the United States government or a United States government agency, (4) Obligations of any corporation of the United States government, (5) Prime banker's acceptances, (6) The Georgia Fund 1 administered by the State of Georgia, Office of Treasury and Fiscal Services, (7) Repurchase agreements, and (8) Obligations of other political subdivisions of the State of Georgia. The School District does not have a formal policy regarding investment policies that address credit risks, custodial credit risks, concentration of credit risks, interest rate risks or foreign currency risks. RECEIVABLES Receivables consist of amounts due from property and sales taxes, grant reimbursements due on Federal, State or other grants for expenditures made but not reimbursed and other receivables disclosed from information available. Receivables are recorded when either the asset or revenue recognition criteria has been met. Receivables recorded on the basic financial statements do not include any amounts which would necessitate the need for an allowance for uncollectible receivables. PROPERTY TAXES The City of Dublin Board of Commissioners fixed the property tax levy for the 2008 tax digest year (calendar year) on October 2, 2008 (levy date). Taxes were due on January 6, 2009 (lien date). Taxes collected within the current fiscal year or within 60 days after year-end on the 2008 tax digest are reported as revenue in the governmental funds for fiscal year 2009. The Dublin City Clerk bills and collects the property taxes for the School District, withholds 2.5% of taxes collected as a fee for tax collection and remits the balance of taxes collected to the School District. Property tax revenues, at the fund reporting level, during the fiscal year ended June 30, 2009, for maintenance and operations amounted to $7,893,553.00. The tax millage rate levied for the 2008 tax year (calendar year) for the City of Dublin Board of Education was as follows (a mill equals $1 per thousand dollars of assessed value): - CITY OF DUBLIN BOARD OF EDUCATION LAURENS COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30,2009 EXHIBIT "H" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES School Operations 16.270 mills SALES TAXES Special Purpose Local Option Sales Tax, at the fund reporting level, during the year amounted to $2,503,373.32 and is to be used for capital outlay for educational purposes or debt service. This sales tax was authorized by local referendum and the sales tax must be re-authorized at least every five years. INVENTORIES FOOD INVENTORIES On the basic financial statements, inventories of donated food commodities used in the preparation of meals are reported at their Federally assigned value and purchased foods inventories are reported at cost (first-in, first-out). The School District uses the consumption method to account for inventories whereby donated food commodities are recorded as an asset and as revenue when received, and expenses/expenditures are recorded as the inventory items are used. Purchased foods are recorded as an asset when purchased and expenses/expenditures are recorded as the inventory items are used. 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. During 1994, the School District became a separate legal entity and the City of Dublin deeded all land and buildings in use by the School District to the School District. A stipulation in the agreement was made that if the property was no longer needed for educational purposes, the property would revert to the City of Dublin. Currently, all property transferred to the School District's possession at that time is being used for educational purposes, therefore these capital assets are considered to be the property of the City of Dublin Board of Education and will be reported on the School District's basic financial statements. CITY OF DUBLIN BOARD OF EDUCATION - LAURENS COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30,2009 EXHIBIT "H" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Capitalization thresholds and estimated useful lives of capital assets reported in the District-wide statements are as follows: Capitalization Estimated Policv Useful Life Land Land Improvements Buildings and Improvements Equipment Construction in Progress All N/A $ 5,000.00 20 years $ 5,000.00 50 years $ 5,000.00 5 to 25 years $ 5,000.00 N/ A 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. In the fund financial statements, the School District recognizes bond premiums and discounts, as well as bond issuance costs during the fiscal year bonds are issued. Premiums received on debt issuances are reported as other financing sources while discounts on debt issuances are reported as other financing uses. Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as debt service expenditures. General obligation bonds are direct obligations and pledge the full faith and credit of the government. The outstanding amount of these bonds is recorded in the Statement of Net Assets. NET ASSETS The School District's net assets in the District-wide Statements are classified as follows: Invested in capital assets, net of related debt - This represents the School District's total investment in capital assets, net of outstanding debt obligations related to those capital assets. To the extent debt has been incurred but not yet expended for capital assets, such amounts are not included as a component of invested in capital assets, net of related debt. Restricted net assets - These represent resources for which the School District is legally or contractually obligated to spend resources for bus replacement, continuation of Federal programs, debt service and capital projects in accordance with restrictions imposed by external third parties. CITY OF DUBLIN BOARD OF EDUCATION - LAURENS COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30,2009 EXHIBIT "H" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Unrestricted net assets - Unrestricted net assets represent resources derived from property taxes, sales taxes, grants and contributions not restricted to specific programs, charges for services, and miscellaneous revenues. These resources are used for transactions relating to the educational and general operations of the School District, and may be used at the discretion of the Board to meet current expenses for those purposes. DEFICIT FUND BALANCE The fund reporting a deficit fund balance at June 30,2009, is as follows: Fund TvpeIFund Name Deficit Balance General Fund The School District's plan to eliminate this deficit is as follows: $ 63,808.86 a A reduction in force plan is in place to eliminate 20 positions through attrition during fiscal year 2010. a The millage rate will be increased by 0.50 mills in fiscal year 2010. In-System Travel will be eliminated. a Furlough days will be enforced for all employees - 6 in fiscal year 2010 and 6 in fiscal year 201 1. Note 3: DEPOSITS AND INVESTMENTS COLLATERALIZATION OF DEPOSITS Official Code of Georgia Annotated (O.C.G.A.) Section 45-8-12 provides that there shall not be on deposit at any time in any depository for a time longer than ten days a sum of money which has not been secured by surety bond, by guarantee of insurance, or by collateral. The aggregate of the face value of such surety bond and the market value of securities pledged shall be equal to not less than 110 percent of the public funds being secured after the deduction of the amount of deposit insurance. If a depository elects the pooled method (O.C.G.A. Section 45-8-13.1) the aggregate of the market value of the securities pledged to secure a pool of public funds shall be not less than 110 percent of the daily pool balance Acceptable security for deposits consists of any one of or any combination of the following: (1) Surety bond signed by a surety company duly qualified and authorized to transact business within the State of Georgia, (2) Insurance on accounts provided by the Federal Deposit Insurance Corporation, CITY OF DUBLIN BOARD OF EDUCATION - LAURENS COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30,2009 EXHIBIT "H" Note 3: DEPOSITS AND INVESTMENTS (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 formal deposit policy for managing custodial credit risk. At June 30, 2009, the bank balances were $1,947,636.28. The bank balances were entirely covered by Federal depository insurance. CATEGORIZATION OF INVESTMENTS At June 30, 2009, the carrying value of the School District's total investments was $10,021,082.55, which is materially the same as fair value. This investment consisted entirely of funds invested in the Georgia Fund 1, formerly referred to as LGIP, administered by the State of Georgia, Office of Treasury and Fiscal Services which are 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 1 is disclosed in the State of Georgia Comprehensive Annual Financial Report. This audit can be obtained from the Georgia Department of Audits and Accounts at htt~://www.audits.state.~a.us/intemet~searchR~ts.html. The Primary Liquidity Portfolio consists of Georgia Fund 1 which is not registered with the SEC as an investment company but does operate in a manner consistent with the SEC's Rule 2a-7 of the Investment Company Act of 1940. The investment is valued at the pool's share price, $1.OO per share. The pool is an AAAm rated investment pool by Standard and Poor's. The weighted average maturity of Georgia Fund 1 may not exceed 60 days. The weighted average maturity for Georgia Fund 1 on June 30,2009, was 41 days. CITY OF DUBLIN BOARD OF EDUCATION - LAURENS COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30,2009 EXHIBIT "H" Note 4: NON-MONETARY TRANSACTIONS The School District receives food commodities from the United States Department of Agriculture (USDA) for school breakfast and lunch programs. These commodities are recorded at their Federally assigned value. See Note 2 - Inventories Note 5: CAPITAL ASSETS The following is a summary of changes in the Capital Assets during the fiscal year: Governmental Activities Capital Assets, Not Being Depreciated: Land Construction in Progress Total Capital Assets Not Being Depreciated Capital Assets Being Depreciated Buildings and Improvements Equipment Land Improvements Less Accumulated Depreciation for: Buildings and Improvements Equipment Land Improvements Total Capital Assets, Being Depreciated, Net - Governmental Activity Capital Assets Net Balances July 1, 2008 (Restated) Increases Decreases Balances June 30.2009 $ 1,600,732.00 $ 3,992.5 13.60 $20.371.710.88 $ 5,593,245.60 $20,371,710.88 $ 0.00 $ 1,600,732.00 24.364.224.48 0.00 % 25,964,956.48 $20,596,587.10 $ -639,744.00 $ 0.00 $ 19,956.843.10 $26,189:832.70 $ 19.731.966.88 S o . 0 0 $4532139958 Current year depreciation expense by function is as follows: Instruction Support Services General Administration Maintenance and Operation of Plant Student Transportation Services Food Services Note 6: RESTRICTED ASSETS Special Purpose Local Option Sales Tax (SPLOST) and general obligation bond proceeds are restricted assets in the Statement of Net Assets because their use is limited by applicable bond covenants or statutory provisions. Restricted assets at June 30,2009, were as follows: CITY OF DUBLIN BOARD OF EDUCATION - LAURENS COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30,2009 EXHIBIT "H" Note 6: RESTRICTED ASSETS District-wide Capital Projects Bond SPLOST Proceeds Debt Service Funds Restricted Cash and Cash Equivalents: Debt Services Capital Acquisitions Restricted Investments: Debt Services Capital Acquisitions $ $ 14,506.28 $ 203,799.37 $ $ 8,973,666.36 $ 814,972.00 2,127.83 984.30 Note 7: INTERFUND TRANSFERS Interfund transfers for the year ended June 30, 2009, consisted of the following: Transfer to Transfers From District-wide Capital Projects Debt Service Fund $ 1.426.020.00 Transfers are used to move Special Purpose Local Option Sales Tax revenue from the District-wide Capital Projects Fund to the Debt Service Fund to service bond debt. Note 8: 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 automobiles. The School District has neither significantly reduced coverage for these risks nor incurred losses (settlements) which exceeded the School District's insurance coverage in any of the past three years. The School District participates in the Georgia School Boards Association Risk and Insurance Management System, a public entity risk pool organized on July 1, 1994, to develop and administer a plan to reduce risk of loss on account of general liability, motor vehicle liability, or property damage, including safety engineering and other loss prevention and control techniques, and to administer one or more groups of self-insurance funds, including the processing and defense of claims brought against members of the system. The School District pays an annual CITY OF DUBLIN BOARD OF EDUCATION - LAURENS COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30,2009 EXHIBIT "H" Note 8: RISK MANAGEMENT premium to the system for its general insurance coverage. Additional coverage is provided through agreements by the system with other companies according to their specialty for property, boiler and machinery (including coverage for flood and earthquake), general liability (including coverage for sexual harassment, molestation and abuse), errors and omissions, crime and automobile risks. Payment of excess insurance for the system varies by line of coverage. The School District is self-insured with regard to unemployment compensation claims. The School District accounts for claims within the same fund that the employee's salary and benefits were paid. Claims are accounted for with expenditures and liability being reported when it is probably that a loss has occurred, and the amount of that loss can be reasonably estimated. Changes in the unemployment compensation claims liability during the last two fiscal years are as follows: Beginning of Year Liabilitv Claims and Changes in Estimates Claims Paid End of Year Liabilitv 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. The School District has purchased surety bonds to provide additional insurance coverage as follows: Position Covered Amount Superintendent All Employees CITY OF DUBLIN BOARD OF EDUCATION - LAURENS COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30,2009 EXHIBIT "H" Note 9: SHORT-TERM DEBT The School District obtains temporary loans in advance of property tax collections, depositing the proceeds in its General Fund. This short-term debt is to provide cash for operations until property tax collections are received by the School District. Article IX, Section V, Paragraph V of the Constitution of the State of Georgia limits the aggregate amount of short-term debt to 75 percent of the total gross income from taxes collected in the preceding year and requires all short-term debt to be repaid no later than December 31 of the calendar year in which the debt was incurred. Short-termdebt activity for the fiscal year is as follows: Beginning Balance Issued Redeemed Ending Balance Temporary Loans $ 0.00 $ 3,250,000.00 $ 3,250,000.00 $ 0.00 Note 10: LONG-TERM DEBT CAPITAL LEASES The City of Dublin Board of Education entered into various lease agreements for equipment. These lease agreements qualify as capital leases for accounting purposes, and, therefore, have been recorded at the present value of the future minimum lease payments as of the date of their inception. INTERGOVERNMENTAL CONTRACT The City of Dublin Board of Education entered into a contract with the Laurens County Public Facilities Authority, dated April 1, 2008, for the issuance of revenue bonds to provide funds to acquire, construct, and equip capital outlay projects of the School District. Under the terns of the contract, the Authority issued $4,500,000.00 (less issuance costs of $83,500.00) in revenue bonds on behalf of the School District. The obligation of the School District is absolute and unconditional so long as any of the bonds remain outstanding. Under the contract, the School District will recommend to the Mayor and the Council of the City of Dublin, Georgia, to exercise its power of taxation on behalf of the School District, to the extent necessary to pay the amounts required to be paid by the contract. GENERAL OBLIGATION DEBT OUTSTANDING General Obligation Bonds currently outstanding are as follows: Purpose Interest Rates Amount General Government - Series 2007 General Government - Series 2008 CITY OF DUBLIN BOARD OF EDUCATION - LAURENS COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30,2009 EXHIBIT "H" Note 10: LONG-TERM DEBT INTERGOVERNMENTAL CONTRACT The debt at June 30,2009, associated with this agreement is as follows: Purpose Interest Rate Laurens County Public Facility Authority 3.94% Amount $ 4,500,000.00 Voters have authorized $17,750,000.00 in general obligation debt for various construction projects which was not issued as of June 30,2009. The changes in Long-Tern Debt during the fiscal year ended June 30,2009, were as follows: Balance July 1,2008 Governmental Funds Additions Balance Deductions June 30,2009 Due Within One Year G.O. Bonds $ lO,lOO,OOO.OO $ Intergovernmental Contract 4,500,000.00 Capital Leases 308.401.00 0.00 $ 1,000,000.00 $ 9,100,000.00 $ 1,500,000.00 4,500,000.00 109,805.00 198.596.00 76,491.00 At June 30, 2009, payments due by fiscal year which includes principal and interest for these items are as follows: Fiscal Year Ended June 30 Capital Leases Principal Interest Total Principal and Interest Fiscal Year Ended June 30 General Obligation Debt Principal Interest Laurens County Public Facility Authority Principal Interest Total Principal and Interest CITY OF DUBLIN BOARD OF EDUCATION - LAURENS COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30,2009 EXHIBIT "H" Note 11: ON-BEHALF PAYMENTS The School District has recognized revenues and costs in the amount of $201,717.08 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 $178,413.50 Paid to the Teachers Retirement System of Georgia For Teachers Retirement System (TRS) Employer's Cost In the amount of $12,822.58 Office of Treasury and Fiscal Services Paid to the Public School Employees Retirement System For Public School Employees Retirement (PSERS) Employer's Cost In the amount of $10,481.OO Note 12: SIGNIFICANT COMMITMENTS The following is an analysis of significant outstanding construction or renovation contracts executed by the School District as of June 30,2009, together with funding available: Proi ect Unearned Executed Contracts Funding Available From State Dublin High School $ 6.491,520.22 $ 1,324,986.20 The amounts described in this note are not reflected in the basic financial statements. Note 13: 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 terns. The School District believes that such disallowances, if any, will be immaterial to its overall financial position. The School District is a defendant in various legal proceedings pertaining to matters incidental to the performance of routine School District operations. The ultimate disposition of these proceedings is not presently determinable, but is not believed to be material to the basic financial statements.