CITY OF DUBLIN BOARD OF EDUCATION LAURENS COUNTY, GEORGIA ANNUAL FINANCIAL REPORT FOR THE FISCAL YEAR ENDED JUNE 30, 2013 (Including Independent Auditor's Reports) CITY OF DUBLIN BOARD OF EDUCATION LAURENS COUNTY - TABLE OF CONTENTS - INDEPENDENT AUDITOR'S REPORT SECTION I FINANCIAL EXHIBITS BASIC FINANCIAL STATEMENTS DISTRICT-WIDE FINANCIAL STATEMENTS A STATEMENT OF NET POSITION 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 POSITION 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 POSITION 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 4 SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS 5 ALLOTMENTS AND EXPENDITURES GENERAL FUND - QUALITY BASIC EDUCATION PROGRAMS (QBE) BY PROGRAM Page 1 2 4 5 6 7 8 9 27 28 29 30 31 (This page left intentionally blank) CITY OF DUBLIN BOARD OF EDUCATION LAURENS COUNTY - TABLE OF CONTENTS - SECTION II COMPLIANCE AND INTERNAL CONTROL REPORTS INDEPENDENT AUDITOR'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS INDEPENDENT AUDITOR'S REPORT ON COMPLIANCE FOR EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE REQUIRED BY OMB CIRCULAR A-133 SECTION III AUDITEE'S RESPONSE TO PRIOR YEAR FINDINGS AND QUESTIONED COSTS SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COST SECTION IV FINDINGS AND QUESTIONED COSTS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (This page left intentionally blank) SECTION I FINANCIAL (This page left intentionally blank) Greg S. Griffin STATE AUDITOR (404) 656-2174 DEPARTMENT OF AUDITS AND ACCOUNTS 270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400 April 13, 2016 Honorable Nathan Deal, 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 REPORT Ladies and Gentlemen: Report on the Financial Statements We have audited the accompanying financial statements of the governmental activities, each major fund, and the aggregate remaining fund information of the City of Dublin Board of Education, as of and for the year ended June 30, 2013, and the related notes to the financial statements (Exhibits A through H), which collectively comprise the Board's basic financial statements as listed in the table of contents. Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor's Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that 2013ARL-11 (This page left intentionally blank) are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. 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, 2013, and the respective changes in financial position thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America. Emphasis of Matter As described in Note 2 to the financial statements, in 2013, the City of Dublin Board of Education adopted new accounting guidance, Governmental Accounting Standards Board (GASB) Statement No. 63, Financial Reporting of Deferred Outflows of Resources, Deferred Inflows of Resources, and Net Position. Our opinion is not modified with respect to this matter. Starting in Fiscal Year 2011, the School District began accumulating a general fund deficit. As discussed in Note 2 to the financial statements, a $4.7 million dollar deficit of Unassigned Fund Balance in General Fund (Governmental Fund Statements) exists at June 30, 2013. The School District also has a deficit unrestricted net position in the amount of $3.9 million on the statement of net position. Note 2 discusses the District's deficit reduction plan as of the report date. The School District expects to be able to obtain financing to meet current cash flow needs. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. Our opinion is not modified with respect to this matter. Other Matters Required Supplementary Information Management has omitted the Management's Discussion and Analysis that accounting principles generally accepted in the United States of America require to be presented to supplement the basic financial statements. Such missing 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. Our opinion on the basic financial statements is not affected by this missing information. 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 27, 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 regarding the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other 2013ARL-11 (This page left intentionally blank) knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other Information 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, consisting of Schedules 2 through 5, is presented for the purposes of additional analysis and is not a required part of the basic financial statements. The Schedule of Expenditures of Federal Awards is presented for purposes of additional analysis as required by U. S. Office of Management and Budget Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations, and is not a required part of the basic financial statements. The accompanying supplementary information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated in all material respects in relation to the basic financial statements as a whole. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated April 13, 2016, 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 in considering City of Dublin Board of Education's internal control over financial reporting and compliance. A copy of this report has been filed as a permanent record in the office of the State Auditor and made available to the press of the State, as provided for by Official Code of Georgia Annotated Section 50-6-24. Respectfully submitted, GSG:kt 2013ARL-11 Greg S. Griffin State Auditor (This page left intentionally blank) CITY OF DUBLIN BOARD OF EDUCATION LAURENS COUNTY (This page left intentionally blank) CITY OF DUBLIN BOARD OF EDUCATION - LAURENS COUNTY STATEMENT OF NET POSITION JUNE 30, 2013 ASSETS Cash and Cash Equivalents Investments Accounts Receivable, Net Interest Taxes State Government Federal Government Local Other Inventories Prepaid Items 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 Short-Term Debt Interest Payable Deposits and Deferred Revenues Long-Term Liabilities Due Within One Year Due in More Than One Year Total Liabilities NET POSITION Net Investment in Capital Assets Restricted for Continuation of Federal Programs Debt Service Capital Projects Unrestricted (Deficit) Total Net Position EXHIBIT "A" GOVERNMENTAL ACTIVITIES $ 1,356,229.96 675,151.89 60.75 1,106,347.53 1,569,274.85 75,206.72 3,000.00 47,494.34 48,966.28 200,000.00 182,547.10 5,175,532.00 61,037,236.76 71,477,048.18 162,231.28 2,120,362.72 1,163,916.53 4,250,520.00 167,225.00 7,216.17 1,155,290.81 21,256,575.63 30,283,338.14 43,800,902.32 367,534.85 703,485.21 246,826.38 -3,925,038.72 $ 41,193,710.04 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, 2013 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-Instructional Services Enterprise Operations Community Services Food Services Interest on Short-Term and Long-Term Debt Total Governmental Activities General Revenues Taxes Property Taxes For Maintenance and Operations Sales Taxes Special Purpose Local Option Sales Tax For Debt Services Other Sales Tax Investment Earnings Miscellaneous Total General Revenues Change in Net Position Net Position - Beginning of Year Net Position - End of Year EXPENSES CHARGES FOR SERVICES $ 18,227,472.21 $ 1,719,441.94 1,717,980.63 450,919.36 629,926.51 1,437,614.56 753,438.06 2,262,692.25 1,333,461.24 270,879.94 145,328.49 6,939.07 5,866.00 1,586,084.02 864,223.76 $ 31,412,268.04 $ 109,249.76 36,332.54 145,582.30 The notes to the basic financial statements are an integral part of this statement. - 2 - EXHIBIT "B" PROGRAM REVENUES OPERATING GRANTS AND CONTRIBUTIONS CAPITAL GRANTS AND CONTRIBUTIONS NET (EXPENSES) REVENUES AND CHANGES IN NET POSITION $ 11,340,635.74 421,088.23 1,129,877.03 402,123.32 580,914.61 1,080,852.84 26,612.64 934,425.04 71,539.57 $ 4,069.60 141,356.40 6,606.93 1,712,517.60 $ 17,852,619.55 $ $ -6,777,586.71 76,219.50 -1,298,353.71 -588,103.60 -48,796.04 -49,011.90 -356,761.72 -726,825.42 -1,328,267.21 -1,185,702.17 -266,810.34 -3,972.09 -332.14 -5,866.00 162,766.12 -864,223.76 76,219.50 -13,337,846.69 8,218,395.72 2,634,861.68 68,180.07 2,681.44 554,309.96 11,478,428.87 -1,859,417.82 43,053,127.86 $ 41,193,710.04 - 3 - CITY OF DUBLIN BOARD OF EDUCATION - LAURENS COUNTY BALANCE SHEET GOVERNMENTAL FUNDS JUNE 30, 2013 EXHIBIT "C" ASSETS Cash and Cash Equivalents Investments Accounts Receivable, Net Interest Taxes State Government Federal Government Local Other Inventories Prepaid Items Total Assets LIABILITIES Accounts Payable Salaries and Benefits Payable Payroll Withholdings Payable Short-Term Debt Deposits and Deferred Revenue Total Liabilities FUND BALANCES Nonspendable Restricted Unassigned Total Fund Balances Total Liabilities and Fund Balances GENERAL FUND DISTRICTWIDE CAPITAL PROJECTS FUND DEBT SERVICE FUND TOTAL $ 1,309,098.70 $ 44,729.86 $ 2,401.40 $ 1,356,229.96 7,719.41 2,096.52 665,335.96 675,151.89 903,435.43 1,569,274.85 75,206.72 3,000.00 47,494.34 48,966.28 200,000.00 60.75 202,912.10 60.75 1,106,347.53 1,569,274.85 75,206.72 3,000.00 47,494.34 48,966.28 200,000.00 $ 3,964,195.73 $ 246,826.38 $ 870,710.21 $ 5,081,732.32 $ 162,231.28 2,120,362.72 1,163,916.53 4,250,520.00 558,810.14 8,255,840.67 $ 162,231.28 2,120,362.72 1,163,916.53 4,250,520.00 558,810.14 8,255,840.67 48,966.28 $ 200,000.00 318,568.57 46,826.38 $ 870,710.21 -4,659,179.79 -4,291,644.94 246,826.38 $ 870,710.21 248,966.28 1,236,105.16 -4,659,179.79 -3,174,108.35 $ 3,964,195.73 $ 246,826.38 $ 870,710.21 $ 5,081,732.32 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 POSITION JUNE 30, 2013 EXHIBIT "D" Total Fund Balances - Governmental Funds (Exhibit "C") Amounts reported for Governmental Activities in the Statement of Net Position are different because: Capital Assets used in Governmental Activities are not financial resources and therefore are not reported as assets in governmental 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 governmental funds. Property Taxes 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 Payable Revenue Bonds Payable Capital Leases Payable Deferred Charge for Bond Issuance Costs Bond Premiums, Net of Amortization Total Long-Term Liabilities Net Position of Governmental Activities (Exhibit "A") $ -3,174,108.35 $ 1,590,532.00 3,585,000.00 3,233,289.00 68,630,387.61 3,671,607.19 -14,498,047.04 66,212,768.76 551,593.97 $ -13,840,000.00 -167,225.00 -4,500,000.00 -3,648,600.04 182,547.10 -423,266.40 -22,396,544.34 $ 41,193,710.04 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, EXPENDITURES AND CHANGE IN FUND BALANCES GOVERNMENTAL FUNDS YEAR ENDED JUNE 30, 2013 EXHIBIT "E" REVENUES Property Taxes Sales Taxes State Funds Federal Funds Charges for Services Investment Earnings Miscellaneous Total Revenues EXPENDITURES Current Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Enterprise Operations Community Services Food Services Operation Capital Outlay Debt Services Principal Dues and Fees Interest Total Expenditures Excess of Revenues over (under) Expenditures OTHER FINANCING SOURCES (USES) Capital Leases Transfers In Transfers Out Total Other Financing Sources (Uses) Net Change in Fund Balances Fund Balances - Beginning Fund Balances - Ending GENERAL FUND DISTRICTWIDE CAPITAL PROJECTS FUND DEBT SERVICE FUND TOTAL $ 8,356,894.84 68,180.07 12,054,102.40 5,874,736.65 145,582.30 486.94 $ 554,309.96 27,054,293.16 $ 57.56 $ 8,356,894.84 2,634,861.68 2,703,041.75 12,054,102.40 5,874,736.65 145,582.30 2,136.94 2,681.44 554,309.96 57.56 2,636,998.62 29,691,349.34 16,246,515.46 1,719,441.94 1,773,867.30 450,919.36 588,110.75 1,437,614.56 701,081.62 2,125,373.10 1,473,700.66 270,879.94 145,328.49 6,939.07 5,866.00 1,547,803.73 8,437.21 28,501,879.19 -1,447,586.03 4,656,882.17 34,246.17 3,502.90 4,694,631.24 -4,694,573.68 150.00 2,800,000.00 1,130.00 741,590.33 3,542,870.33 -905,871.71 16,246,515.46 1,719,441.94 1,773,867.30 450,919.36 588,110.75 1,437,614.56 701,231.62 2,125,373.10 1,473,700.66 270,879.94 145,328.49 6,939.07 5,866.00 1,547,803.73 4,665,319.38 2,834,246.17 1,130.00 745,093.23 36,739,380.76 -7,048,031.42 -8,663.79 -8,663.79 -1,456,249.82 -2,835,395.12 3,682,846.21 293,315.23 3,976,161.44 -718,412.24 965,238.62 -284,651.44 -284,651.44 -1,190,523.15 2,061,233.36 3,682,846.21 293,315.23 -293,315.23 3,682,846.21 -3,365,185.21 191,076.86 $ -4,291,644.94 $ 246,826.38 $ 870,710.21 $ -3,174,108.35 The notes to the basic financial statements are an integral part of this statement. - 6 - CITY OF DUBLIN BOARD OF EDUCATION - LAURENS COUNTY RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES TO THE STATEMENT OF ACTIVITIES JUNE 30, 2013 EXHIBIT "F" Total Net Change in Fund Balances - Governmental Funds (Exhibit "E") Amounts reported for Governmental Activities in the Statement of Activities are different because: Capital Outlays are reported as expenditures in Governmental Funds. However, in the Statement of Activities, the cost of Capital Assets is allocated over their estimated useful lives as depreciation expense. In the current period, these amounts are: Capital Outlay Depreciation Expense Excess of Capital Outlay over Depreciation Expense The net effect of various miscellaneous transactions involving capital assets (i.e., sales, trade-ins, donations, and disposals) is to decrease net position. 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 an expenditure in Governmental Funds, but are reported as deferred charges on the Statement of Net Position 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 Amortization of Bond Premium Total Bond Issuance Costs Some of the Capital Assets acquired this year were financed with capital leases. In Governmental Funds, a capital lease arrangement is considered a source of financing, but in the Statement of Net Position, the lease obligation is reported as a Long-Term Liability. Repayment of Long-Term Debt is reported as an expenditure in Governmental Funds, but the repayment reduces Long-Term Liabilities in the Statement of Net Position. In the current year, these amounts consist of: Bond Principal Retirements Capital Lease Payments Total Long-Term Debt Repayments Interest expense reported in the Statement of Activities is recorded as incurred, whereas interest expense in the governmental fund statements is reported when paid. $ -3,365,185.21 $ 4,902,300.71 -2,420,972.04 2,481,328.67 -200.00 -138,499.12 $ -52,206.44 45,721.57 -6,484.87 -3,682,846.21 $ 2,800,000.00 34,246.17 2,834,246.17 18,222.75 Change in Net Position of Governmental Activities (Exhibit "B") $ -1,859,417.82 The notes to the basic financial statements are an integral part of this statement. - 7 - CITY OF DUBLIN BOARD OF EDUCATION - LAURENS COUNTY STATEMENT OF FIDUCIARY NET POSITION FIDUCIARY FUNDS JUNE 30, 2013 ASSETS Cash and Cash Equivalents Accounts Receivable, Net State Total Assets LIABILITIES Funds Held for Others EXHIBIT "G" AGENCY FUNDS $ 9,139.37 27,523.75 $ 36,663.12 $ 36,663.12 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, 2013 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 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 Dublin Board of Education. District-wide Statements: The Statement of Net Position 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. Eliminations have been made to minimize the double counting of internal activities. Separate statements for each category (governmental and fiduciary) are presented. The emphasis of fund financial statements is on major governmental funds. The School District reports the following major governmental funds: General Fund is the School District's primary operating fund. It accounts for and reports all financial resources not accounted for and reported in another fund. District-wide Capital Projects Fund accounts for and reports financial resources including Education Special Purpose Local Option Sales Tax (ESPLOST), and Bond Proceeds that are restricted, committed or assigned to the expenditure for capital outlays, including the acquisition or construction of capital facilities and other capital assets. Debt Service Fund accounts for and reports financial resources that are restricted, committed, or assigned including taxes (sales) legally restricted for the payment of general long-term principal and interest. - 9 - CITY OF DUBLIN BOARD OF EDUCATION LAURENS COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2013 EXHIBIT "H" 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 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. The School District considers all intergovernmental revenues to be available if they are collected within 120 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 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, both restricted and unrestricted resources are 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. NEW ACCOUNTING PRONOUNCEMENTS In fiscal year 2013, the School District adopted the Governmental Accounting Standards Board (GASB) Statement No. 60, Accounting and Financial Reporting for Service Concession Arrangements. The provisions of this Statement establish accounting and financial reporting standards for governments who enter into Service Concession Arrangements (SCA) with other governmental or nongovernmental entities. As of June 30, 2013, the School District has not entered into any arrangements that meet the qualifications to be reported as a SCA in accordance with this standard. In fiscal year 2013, the School District adopted the Governmental Accounting Standards Board (GASB) Statement No. 62, Codification of Accounting and Financial Reporting Guidance Contained in Pre-November 30, 1989 FASB and AICPA Pronouncements. The provisions of this Statement incorporate certain accounting and financial reporting guidance into authoritative GASB literature. - 10 - CITY OF DUBLIN BOARD OF EDUCATION LAURENS COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2013 EXHIBIT "H" In fiscal year 2013, the School District adopted the Governmental Accounting Standards Board (GASB) Statement No. 63, Financial Reporting of Deferred Outflows of Resources, Deferred Inflows of Resources and Net Position. The provisions of this Statement establish financial reporting standards for the presentation of deferred outflows of resources and deferred inflows of resources and their effects on a government's net position. The School District changed its presentation of net assets to net position for fiscal year 2013. There were no other applicable reporting changes for the School District. CASH AND CASH EQUIVALENTS Composition of Deposits Cash and cash equivalents consist of cash on hand, demand deposits and short-term investments with original maturities of three months or less from the date of acquisition in authorized financial institutions. Official Code of Georgia Annotated Section 45-8-14 authorizes the School District to deposit its funds in one or more solvent banks, insured Federal savings and loan associations or insured chartered building and loan associations. INVESTMENTS Composition of Investments Investments made by the School District in nonparticipating interest-earning contracts (such as certificates of deposit) and repurchase agreements are reported at cost. Participating interestearning contracts and money market investments with a maturity at purchase of one year or less are reported at amortized cost. Both participating interest-earning contracts and money market investments with a maturity at purchase greater than one year are reported at fair value. The Official Code of Georgia Annotated Section 36-83-4 authorizes the School District to invest its funds. In selecting among options for investment or among institutional bids for deposits, the highest rate of return shall be the objective, given equivalent conditions of safety and liquidity. Funds may be invested in the following: 1. Obligations issued by the State of Georgia or by other states, 2. Obligations issued by the United States government, 3. Obligations fully insured or guaranteed by the United States government or a United States government agency, 4. Obligations of any corporation of the United States government, 5. Prime banker's acceptances, 6. The Georgia Fund 1 administered by the State of Georgia, Office of the State Treasurer, 7. Repurchase agreements, and 8. Obligations of other political subdivisions of the State of Georgia. The School District does not have a formal policy regarding investment policies that address credit risks, custodial credit risks, concentration of credit risks, interest rate risks or foreign currency risks. RECEIVABLES Receivables consist of amounts due from property and sales taxes, grant reimbursements due on Federal, State or other grants for expenditures made but not reimbursed and other receivables disclosed from information available. Receivables are recorded when either the asset or revenue recognition criteria has been met. Receivables recorded on the basic financial statements do not include any amounts which would necessitate the need for an allowance for uncollectible receivables. - 11 - CITY OF DUBLIN BOARD OF EDUCATION LAURENS COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2013 EXHIBIT "H" PROPERTY TAXES The City of Dublin fixed the property tax levy for the 2012 tax digest year (calendar year) on November 15, 2012 (levy date) based on property values as of January 1, 2012. Taxes were due on January 25, 2013 (lien date). Taxes collected within the current fiscal year or within 60 days after year-end on the 2012 tax digest are reported as revenue in the governmental funds for fiscal year 2013. 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, 2013, for maintenance and operations amounted to $8,260,096.07. The tax millage rate levied for the 2012 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): School Operations 19.705 mills Additionally, Title Ad Valorem Tax revenues, at the fund reporting level, amounted to $96,798.77 during fiscal year ended June 30, 2013. SALES TAXES Education Special Purpose Local Option Sales Tax, at the fund reporting level, during the year amounted to $2,634,861.68 and is to be used for capital outlay for educational purposes or debt service. This sales tax was authorized by local referendum and the sales tax must be re-authorized at least every five years. INVENTORIES Food Inventories On the basic financial statements, inventories of donated food commodities used in the preparation of meals are reported at their Federally assigned value and purchased foods inventories are reported at cost (first-in first-out). The School District uses the consumption method to account for inventories whereby donated food commodities are recorded as an asset and as revenue when received, and expenses/expenditures are recorded as the inventory items are used. Purchased foods are recorded as an asset when purchased and expenses/expenditures are recorded as the inventory items are used. PREPAID ITEMS Payments made to vendors for services that will benefit periods subsequent to June 30, 2013, are recorded as prepaid items. CAPITAL ASSETS Capital assets purchased, including capital outlay costs, are recorded as expenditures in the fund financial statements at the time of purchase (including ancillary charges). On the District-wide financial statements, all purchased capital assets are valued at cost where historical records are available and at estimated historical cost based on appraisals or deflated current replacement cost where no historical records exist. Donated capital assets are recorded at estimated fair market value on the date donated. Disposals are deleted at depreciated recorded cost. The cost of normal maintenance and repairs that do not add to the value of assets or materially extend the useful lives of the assets is not capitalized. Depreciation is computed using the straight-line method. The School District does not capitalize book collections or works of art. During the fiscal year under review, no events or changes in circumstances affecting a capital asset that may indicate impairment were known to the School District. - 12 - CITY OF DUBLIN BOARD OF EDUCATION LAURENS COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2013 EXHIBIT "H" Capitalization thresholds and estimated useful lives of capital assets reported in the District-wide statements are as follows: Land Construction in Progress Land Improvements Buildings and Improvements Equipment Capitalization Policy Any Amount $ 5,000.00 $ 5,000.00 $ 5,000.00 $ 5,000.00 Estimated Useful Life N/A N/A 20 to 80 years 10 to 80 years 5 to 50 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. 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 Position. NET POSITION The School District's net position in the District-wide Statements is classified as follows: Net Investment in Capital Assets - 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 net investment in capital assets. Restricted Net Position - This represents resources for which the School District is legally or contractually obligated to spend resources for continuation of Federal Programs, debt service and capital projects in accordance with restrictions imposed by external third parties. Unrestricted Net Position - Unrestricted net position represents 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. - 13 - CITY OF DUBLIN BOARD OF EDUCATION LAURENS COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2013 EXHIBIT "H" FUND BALANCES The School District's fund balances are classified as follows: Nonspendable Amounts that cannot be spent either because they are in a nonspendable form or because they are legally or contractually required to be maintained intact. Restricted Constraints are placed on the use of resources are either (1) externally imposed conditions by creditors, grantors, contributors, or laws and regulations of other governments or (2) imposed by law through constitutional provisions or enabling legislation. Committed Amounts that can be used only for specific purposes pursuant to constraints imposed by formal action of the Board of Education. The Board of Education is the School District's highest level of decision-making authority, and the formal action that is required to be taken to establish, modify, or rescind a fund balance commitment is a resolution approved by the Board. Committed fund balance also should incorporate contractual obligations to the extent that existing resources in the fund have been specifically committed for use in satisfying those contractual requirements. Assigned Amounts that are constrained by the School District's intent to be used for specific purposes, but are neither restricted nor committed. The intent should be expressed by (1) the Board of Education or (2) the budget or finance committee, or the Superintendent, or designee, to assign amounts to be used for specific purposes. Unassigned The residual classification for the General Fund. This classification represents fund balances that has not been assigned to other funds and that has not been restricted, committed, or assigned to specific purposes within the General Fund. Fund Balances of the Governmental Funds at June 30, 2013, are as follows: Nonspendable Inventories Prepaid Assets Restricted Continuation of Federal Programs Capital Projects Debt Service Unassigned Fund Balance, June 30, 2013 $ 48,966.28 200,000.00 $ 248,966.28 $ 318,568.57 46,826.38 870,710.21 1,236,105.16 -4,659,179.79 -3,174,108.35 It is the goal of the School District to achieve and maintain a committed, assigned, and unassigned fund balance in the general fund at fiscal year end of not less than 8% of expenditures, not to exceed 15% of the total budget of the subsequent fiscal year, in compliance with Official Code of Georgia Annotated Section 20-2-167(a)5. If the unassigned fund balance at fiscal year end falls below the goal, the School District shall develop a restoration plan to achieve and maintain the minimum fund balance. When multiple categories of fund balance are available for expenditure, the School District will start with the most restricted category and spend those funds first before moving down to the next category with available funds. - 14 - CITY OF DUBLIN BOARD OF EDUCATION LAURENS COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2013 EXHIBIT "H" DEFICIT FUND BALANCES Funds reporting a deficit fund balance at June 30, 2013, are as follows: Fund Type/Fund Name Deficit Balances Governmental Funds General Fund General Fund Title 1 Special Education Improving Teacher Quality Twenty First Century R.O.T.C Program Pre-K $ 3,676,237.29 197,459.94 311,226.59 23,107.71 36,284.53 337,485.33 77,378.40 $ 4,659,179.79 The City of Dublin Board of Education has filed a deficit reduction plan with the Georgia Department of Education in March 2016 to address the deficit noted above. Management plans to eliminate the deficit by reducing staff and future expenditures. The Board of Education voted to close one school (As noted in Note 13) and to not fill vacant positions as a result of attrition (retirements and resignation). Accordingly, these measures are anticipated to reduce future expenditures by an estimated amount of $849 thousand and $205 thousand with respect to salaries and benefits, and other operational expenditures, respectively. Additionally, the School District expects to recognize an increase in fiscal year 2017 revenues of $314 thousand in QBE funding from the State and an estimated increase of $527 thousand in property tax revenue associated with anticpated increases in tax digest values. The total impact from this plan is estimated to reduce existing General Fund deficits by $1.9 million in fiscal year 2017. The School District will apply for interim financing to meet current cash flow needs as appropriate. USE OF ESTIMATES The preparation of the financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results may differ from those estimates. NOTE 3: BUDGETARY DATA The budget is a complete financial plan for the School District's fiscal year, and is based upon careful estimates of expenditures together with probable funding sources. The budget is legally adopted each year for the general, debt service, and capital projects funds. There is no statutory prohibition regarding over expenditure of the budget at any level. The budget for all governmental funds is prepared and adopted by fund and function. The legal level of budgetary control was established by the Board at the aggregate fund level. The budget for the General Fund was prepared in accordance with accounting principles generally accepted in the United States of America. The budgetary process begins with the School District's administration presenting an initial budget for the Board's review. The administration makes revisions as necessary based on the Board's guidelines and a tentative budget is approved. After approval of this tentative budget by the Board, such budget is advertised at least once in a newspaper of general circulation in the locality, as well as the School District's website. At the next regularly scheduled meeting of the Board after advertisement, the Board receives comments on the tentative budget, makes revisions as necessary and adopts a final budget. The approved budget is then submitted, in accordance with provisions of - 15 - CITY OF DUBLIN BOARD OF EDUCATION LAURENS COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2013 EXHIBIT "H" Official Code of Georgia Annotated section 20-2-167(c), to the Georgia Department of Education. The Board may increase or decrease the budget at any time during the year. All unexpended budget authority lapses at fiscal year-end. The Superintendent is authorized by the Board to approve adjustments. See Schedule 1 General Fund Schedule of Revenues, Expenditures and Changes in Fund Balances Budget to Actual for a detail of any over/under expenditures during the fiscal year under review. NOTE 4: DEPOSITS AND INVESTMENTS COLLATERALIZATION OF DEPOSITS Official Code of Georgia Annotated (O.C.G.A.) Section 45-8-12 provides that there shall not be on deposit at any time in any depository for a time longer than ten days a sum of money which has not been secured by surety bond, by guarantee of insurance, or by collateral. The aggregate of the face value of such surety bond and the market value of securities pledged shall be equal to not less than 110 percent of the public funds being secured after the deduction of the amount of deposit insurance. If a depository elects the pooled method (O.C.G.A. Section 45-8-13.1) the aggregate of the market value of the securities pledged to secure a pool of public funds shall be not less than 110 percent of the daily pool balance. Acceptable security for deposits consists of any one of or any combination of the following: 1. Surety bond signed by a surety company duly qualified and authorized to transact business within the State of Georgia, 2. Insurance on accounts provided by the Federal Deposit Insurance Corporation, 3. Bonds, bills, notes, certificates of indebtedness or other direct obligations of the United States or of the State of Georgia, 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, 2013, the bank balances were $1,790,017.71. The bank balances were entirely covered by Federal depository insurance or collateralized with securities held by the pledging financial institution in the School District's name. CATEGORIZATION OF INVESTMENTS At June 30, 2013, the carrying value of the School District's total investments was $675,151.89, which is materially the same as fair value. This investment consisted entirely of funds invested in the Georgia Fund 1, formerly referred to as LGIP, administered by the State of Georgia, Office of the - 16 - CITY OF DUBLIN BOARD OF EDUCATION LAURENS COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2013 EXHIBIT "H" State Treasurer which is not required to be categorized since the School District did not own any specific identifiable securities in the pool. The investment policy of the State of Georgia, Office of the State Treasurer for the Georgia Fund 1 (Primary Liquidity Portfolio) does not provide for investment in derivatives or similar investments. Additional information on the Georgia Fund 1 is disclosed in the State of Georgia Comprehensive Annual Financial Report. This audit can be obtained from the Georgia Department of Audits and Accounts at http://www.audits.ga.gov/SGD/cafr.html. The Primary Liquidity Portfolio consists of Georgia Fund 1 which is not registered with the SEC as an investment company but does operate in a manner consistent with the SEC's Rule 2a-7 of the Investment Company Act of 1940. The investment is valued at the pool's share price, $1.00 per share. The pool is an AAAf 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, 2013, was 43 days. NOTE 5: NON-MONETARY TRANSACTIONS The School District receives food commodities from the United States Department of Agriculture (USDA) for school breakfast and lunch programs. These commodities are recorded at their Federally assigned value. See Note 2 - Inventories NOTE 6: CAPITAL ASSETS The following is a summary of changes in the Capital Assets during the fiscal year: Balances July 1, 2012 Increases Decreases Transfers Balances June 30, 2013 Governmental Activities Capital Assets, Not Being Depreciated: Land Construction in Progress $ 1,590,732.00 $ 3,820,887.00 $ 4,052,437.61 200.00 $ 1,590,532.00 $ -4,288,324.61 3,585,000.00 Total Capital Assets Not Being Depreciated $ 5,411,619.00 $ 4,052,437.61 $ 200.00 $ -4,288,324.61 $ 5,175,532.00 Capital Assets Being Depreciated Buildings and Improvements Equipment Land Improvements $ 66,350,417.00 2,929,339.09 $ 1,117,340.00 $ 742,268.10 107,595.00 0.00 $ 2,279,970.61 $ 68,630,387.61 3,671,607.19 2,008,354.00 3,233,289.00 Less Accumulated Depreciation for: Buildings and Improvements Equipment Land Improvements 9,949,664.00 1,251,224.00 876,187.00 1,563,715.23 743,065.24 114,191.57 11,513,379.23 1,994,289.24 990,378.57 Total Capital Assets, Being Depreciated, Net $ 58,320,021.09 $ -1,571,108.94 $ 0.00 $ 4,288,324.61 $ 61,037,236.76 Governmental Activity Capital Assets - Net $ 63,731,640.09 $ 2,481,328.67 $ 200.00 $ 0.00 $ 66,212,768.76 - 17 - CITY OF DUBLIN BOARD OF EDUCATION LAURENS COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2013 EXHIBIT "H" Capital assets being acquired under capital leases as of June 30, 2013, are as follows: Governmental Funds Equipment Construction In Progress Less: Accumulated Depreciation $ 97,846.21 3,585,000.00 9,784.62 $ 3,673,061.59 Current year depreciation expense by function is as follows: Instruction Support Services General Administration Maintenance and Operation of Plant Student Transportation Services Food Services $ 63,438.33 227,870.12 134,289.57 $ 1,835,643.44 425,598.02 159,730.58 $ 2,420,972.04 NOTE 7: INTERFUND TRANSFERS Interfund transfers for the year ended June 30, 2013, consisted of the following: Transfer to District-wide Capital Projects Transfers From General Debt Service Fund Fund $ 8,663.79 $ 284,651.44 Transfers are used to move property tax revenues to provide supplemental funding for capital construction projects, and to move Special Purpose Local Option Sales Tax collected in the Debt Service Fund to pay for capital construction projects. - 18 - CITY OF DUBLIN BOARD OF EDUCATION LAURENS COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2013 EXHIBIT "H" 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 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. A premium is charged when needed by the General Fund to each user program on the basis of the percentage of that fund's payroll to total payroll in order to cover estimated claims budgeted by management based on known claims and prior experience. The School District accounts for claims with expenses/expenditures and liability being reported when it is probable that a loss has occurred, and the amount of that loss can be reasonably estimated. Changes in the unemployment compensation claims liability during the last two fiscal years are as follows: Beginning of Year Liability Claims and Changes in Estimates Claims Paid End of Year Liability 2012 $ 40,045.00 $ 36,688.88 $ 34,542.88 $ 42,191.00 2013 $ 42,191.00 $ -22,213.04 $ 19,977.96 $ 0.00 The School District participates in the Georgia Education Workers' Compensation Trust, a public entity risk pool organized on December 1, 1991, to develop, implement and administer a program of workers' compensation self-insurance for its member organizations. The School District pays an annual premium to the Trust for its general worker's compensation insurance coverage. Specific excess of loss insurance coverage is provided through an agreement by the Trust with the Safety National Casualty Company to provide coverage for potential losses sustained by the Trust in excess of $1 million loss per occurrence, up to the statutory limit. Employers' Liability insurance coverage is also provided with limits of $2 million. The Trust covers the first $1 million of each Employers liability claim with Safety National providing additional Employers Liability limits up to a $2 million per occurrence maximum. Safety National Casualty Company also provides $2 million in aggregate coverage to the Trust, attaching at 110% of the loss fund and based on the Fund's annual normal premium. The School District has purchased surety bonds to provide additional insurance coverage as follows: Position Covered Superintendent Drivers Education All Employees Amount $ 50,000.00 $ 2,500.00 $ 100,000.00 - 19 - CITY OF DUBLIN BOARD OF EDUCATION LAURENS COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2013 EXHIBIT "H" NOTE 9: SHORT-TERM DEBT The School District issues tax anticipation notes in advance of property tax collections, depositing the proceeds in its General Fund. This short-term debt is to provide cash. 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-term debt activity for the fiscal year is as follows: Tax Anticipation Notes Beginning Balance $ 3,050,916.66 $ Issued 7,695,800.10 $ Redeemed Ending Balance 6,496,196.76 $ 4,250,520.00 NOTE 10: LONG-TERM DEBT CAPITAL LEASES The City of Dublin Board of Education also entered into various lease agreements for a Solar Panel Project and 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. REVENUE BONDS PAYABLE The City of Dublin Board of Education entered into a contract with the Laurens County Public Facilities Authority dated 4/1/2008, for the issuance of bonds to provide funds to acquire, construct, and equip capital outlay projects of the School District. Under the terms of the contract, the Laurens County Public Facilities 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 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 General Government - Series 2010 General Government - Series 2011 Interest Rates Amount 3.0% - 4.0% $ 2.5% - 4.0% 9,755,000.00 4,085,000.00 $ 13,840,000.00 Voters have authorized $3,910,000.00 in general obligation debt for various construction projects which was not issued as of fiscal year end June 30, 2013 or report date of April 2016. - 20 - CITY OF DUBLIN BOARD OF EDUCATION LAURENS COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2013 EXHIBIT "H" The changes in Long-Term Debt during the fiscal year ended June 30, 2013, were as follows: Balance July 1, 2012 Additions Governmental Funds Balance Deductions June 30, 2013 Due Within One Year G.O. Bonds Capital Leases Revenue Bonds Payable Bond Premiums Amortized $ 16,640,000.00 $ 0.00 $ 3,682,846.21 4,500,000.00 468,987.97 2,800,000.00 $ 34,246.17 45,721.57 13,840,000.00 $ 3,648,600.04 4,500,000.00 423,266.40 500,000.00 109,569.24 500,000.00 45,721.57 $ 21,608,987.97 $ 3,682,846.21 $ 2,879,967.74 $ 22,411,866.44 $ 1,155,290.81 At June 30, 2013, payments due by fiscal year which includes principal and interest for these items are as follows: Fiscal Year Ended June 30: 2014 2015 2016 2017 2018 2019 - 2023 2024 - 2028 2029 - 2033 2034 - 2037 Total Principal and Interest Fiscal Year Ended June 30: 2014 2015 2016 2017 2018 2019 - 2023 Total Principal and Interest Capital Leases Principal Interest $ 109,569.24 $ 99,569.24 99,569.24 89,892.32 90,000.00 525,000.00 690,000.00 945,000.00 1,000,000.00 163,313.95 213,501.45 209,501.45 220,178.38 199,375.00 923,350.00 754,912.50 502,287.50 151,775.00 $ 3,648,600.04 $ 3,338,195.23 General Obligation Debt Principal Interest $ 500,000.00 $ 750,000.00 1,000,000.00 1,250,000.00 1,400,000.00 8,940,000.00 13,840,000.00 $ 491,600.00 476,600.00 454,100.00 424,100.00 386,600.00 928,350.00 3,161,350.00 Revenue Bonds Payable Principal Interest $ 500,000.00 $ 700,000.00 1,000,000.00 1,100,000.00 1,200,000.00 177,300.00 157,600.00 130,020.00 90,620.00 47,280.00 $ 4,500,000.00 $ Unamortized Bond Premium 602,820.00 $ 45,721.57 45,721.57 45,721.57 45,721.57 45,721.57 194,658.55 $ 423,266.40 - 21 - CITY OF DUBLIN BOARD OF EDUCATION LAURENS COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2013 EXHIBIT "H" NOTE 11: ON-BEHALF PAYMENTS The School District has recognized revenues and costs in the amount of $1,438,855.24 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 Certificated Personnel In the amount of $1,388,988.00 Paid to the Teachers' Retirement System of Georgia For Teachers' Retirement System (TRS) Employer's Cost In the amount of $15,695.24 Office of the State Treasurer Paid to the Public School Employees' Retirement System For Public School Employees' Retirement (PSERS) Employer's Cost In the amount of $34,172.00 Funds paid to the Georgia Department of Community Health by the Georgia Department of Education on behalf of the School District are reported as part of the Quality Basic Education revenue allotments on Schedule 3 Schedule of State Revenue. NOTE 12: SIGNIFICANT CONTINGENT LIABILITIES Amounts received or receivable principally from the Federal government are subject to audit and review by grantor agencies. This could result in requests for reimbursement to the grantor agency for any costs which are disallowed under grant terms. The School District believes that such disallowances, if any, will be immaterial to its overall financial position. The School District is a defendant in various legal proceedings pertaining to matters incidental to the performance of routine School District operations. The ultimate disposition of these proceedings is not presently determinable, but is not believed to be material to the basic financial statements. NOTE 13: SUBSEQUENT EVENTS In fiscal year 2016, the City of Dublin Board of Education voted to close the Saxon Heights Elementary School at the end of the 2015 2016 school term. NOTE 14: POST-EMPLOYMENT BENEFITS GEORGIA SCHOOL PERSONNEL POST-EMPLOYMENT HEALTH BENEFIT FUND Plan Description. The Georgia School Personnel Post-employment Health Benefit Fund (School OPEB Fund) is a cost-sharing multiple-employer defined benefit post-employment healthcare plan that covers eligible former employees of public school systems, libraries and regional educational service agencies. The School OPEB Fund provides health insurance benefits to eligible former employees and their qualified beneficiaries through the State Employees' Health Benefit Plan administered by the Department of Community Health. The Official Code of Georgia Annotated (O.C.G.A.) assigns the authority to establish and amend the benefit provisions of the group health plans, including benefits for retirees, to the Board of Community Health (Board). The Department of Community Health, which includes the School OPEB Fund, issues a separate stand alone financial audit report and a copy can be obtained from the Georgia Department of Audits and Accounts. Funding Policy. The contribution requirements of plan members and participating employers are established by the Board in accordance with the current Appropriations Act and may be amended by the Board. Contributions of plan members or beneficiaries receiving benefits vary based on plan election, dependent coverage, and Medicare eligibility and election. For members with fewer than five years of service as of January 1, 2013, contributions also vary based on years of service. On - 22 - CITY OF DUBLIN BOARD OF EDUCATION LAURENS COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2013 EXHIBIT "H" average, members with five years or more of service as of January 1, 2013, pay approximately 25 percent of the cost of the health insurance coverage. In accordance with the Board resolution dated December 8, 2011, for members with fewer than five years of service as of January 1, 2013, the State provides a premium subsidy in retirement that ranges from 0% for fewer than 10 years of service to 75% (but no greater than the subsidy percentage offered to active employees) for 30 or more years of service. The subsidy for eligible dependents ranges from 0% to 55% (but no greater than the subsidy percentage offered to dependents of active employees minus 20%). No subsidy is available to Medicare eligible members not enrolled in a Medicare Advantage Option. The Board of Community Health sets all member premiums by resolution and in accordance with the law and applicable revenue and expense projections. Any subsidy policy adopted by the Board may be changed at any time by Board resolution and does not constitute a contract or promise of any amount of subsidy. Participating employers are statutorily required to contribute in accordance with the employer contribution rates established by the Board. The contribution rates are established to fund all benefits due under the health insurance plans for both active and retired employees based on projected "pay-as-you-go" financing requirements. Contributions are not based on the actuarially calculated annual required contribution (ARC) which represents a level of funding that, if paid on an ongoing basis, is projected to cover normal cost each year and amortize any unfunded actuarial liabilities (or funding excess) over a period not to exceed thirty years. 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, 2013: For certificated teachers, librarians and regional educational service agencies and certain other eligible participants: July 2012 February 2013 $912.34 per member per month March 2013 June 2013 $937.34 per member per month For non-certificated school personnel: July 2012 June 2013 $446.20 per member per month No additional contribution was required by the Board for fiscal year 2013 nor contributed to the School OPEB Fund to prefund retiree benefits. Such additional contribution amounts are determined annually by the Board in accordance with the School plan for other post-employment benefits and are subject to appropriation. The School District's combined active and retiree contributions to the health insurance plans, which equaled the required contribution, for the current fiscal year and the preceding two fiscal years were as follows: Fiscal Year Percentage Contributed Required Contribution 2013 2012 2011 100% 100% 100% $ 2,515,153.29 $ 2,204,412.65 $ 2,285,969.00 - 23 - CITY OF DUBLIN BOARD OF EDUCATION LAURENS COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2013 EXHIBIT "H" NOTE 15: RETIREMENT PLANS TEACHERS' RETIREMENT SYSTEM OF GEORGIA (TRS) Plan Description. The TRS is a cost-sharing multiple-employer defined benefit plan created in 1943 by an act of the Georgia General Assembly to provide retirement benefits for qualifying employees in educational service. A Board of Trustees comprised of active and retired members and ex-officio State employees is ultimately responsible for the administration of TRS. The Teachers' Retirement System of Georgia issues a separate stand alone financial audit report and a copy can be obtained from the Georgia Department of Audits and Accounts. On October 25, 1996, the Board created the Supplemental Retirement Benefits Plan of the Georgia Teachers' Retirement System (SRBP-TRS). SRBP-TRS was established as a qualified excess benefit plan in accordance with Section 415 of the Internal Revenue Code (IRC) as a portion of TRS. The purpose of SRBP-TRS is to provide retirement benefits to employees covered by TRS whose benefits are otherwise limited by IRC Section 415. Beginning July 1, 1997, all members and retired former members in TRS are eligible to participate in the SRBP-TRS whenever their benefits under TRS exceed the IRC Section 415 imposed limitation on benefits. TRS provides service retirement, disability retirement, and survivor's benefits. The benefit structure of TRS is defined and may be amended by State statute. A member is eligible for normal service retirement after 30 years of creditable service, regardless of age, or after 10 years of service and attainment of age 60. A member is eligible for early retirement after 25 years of creditable service. Normal retirement (pension) benefits paid to members are equal to 2% of the average of the member's two highest paid consecutive years of service, multiplied by the number of years of creditable service up to 40 years. Early retirement benefits are reduced by the lesser of one-twelfth of 7% for each month the member is below age 60 or by 7% for each year or fraction thereof by which the member has less than 30 years of service. It is also assumed that certain cost-of-living adjustments, based on the Consumer Price Index, will be made in future years. Retirement benefits are payable monthly for life. A member may elect to receive a partial lump-sum distribution in addition to a reduced monthly retirement benefit. Death, disability and spousal benefits are also available. Funding Policy. TRS is funded by member and employer contributions as adopted and amended by the Board of Trustees. Members become fully vested after 10 years of service. If a member terminates with less than 10 years of service, no vesting of employer contributions occurs, but the member's contributions may be refunded with interest. Member contributions are limited by State law to not less than 5% or more than 6% of a member's earnable compensation. Member contributions as adopted by the Board of Trustees for the fiscal year ended June 30, 2013, were 6.00% of annual salary. Employer contributions required for fiscal year 2013 were 11.41% of annual salary as required by the June 30, 2010, actuarial valuation. The employer contribution rate will increase to 12.28% effective July 1, 2013. Employer contributions for the current fiscal year and the preceding two fiscal years are as follows: Fiscal Year 2013 2012 2011 Percentage Contributed 100% 100% 100% Required Contribution $ 1,687,641.93 $ 1,549,293.65 $ 1,609,593.00 - 24 - CITY OF DUBLIN BOARD OF EDUCATION LAURENS COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2013 EXHIBIT "H" PUBLIC SCHOOL EMPLOYEES RETIREMENT SYSTEM (PSERS) Bus drivers, lunchroom personnel, and maintenance and custodial personnel are members of the Public School Employees Retirement System of Georgia. The System is funded by contributions by the employees and by the State of Georgia. The School District makes no contribution to this plan. - 25 - (This page left intentionally blank) CITY OF DUBLIN BOARD OF EDUCATION - LAURENS COUNTY GENERAL FUND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL YEAR ENDED JUNE 30, 2013 SCHEDULE "1" REVENUES Property Taxes Sales Taxes State Funds Federal Funds Charges for Services Investment Earnings Miscellaneous Total Revenues EXPENDITURES Current Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Enterprise Operations Community Services Food Services Operation Capital Outlay Total Expenditures Excess of Revenues over (under) Expenditures OTHER FINANCING USES Operating Transfers to Other Funds Net Change in Fund Balances Fund Balances - Beginning Adjustments Fund Balances - Ending NONAPPROPRIATED BUDGETS ORIGINAL (1) FINAL (1) ACTUAL AMOUNTS VARIANCE OVER/UNDER $ 8,445,215.00 $ 8,505,215.00 $ 8,356,894.84 $ 68,180.07 11,020,155.55 11,116,930.91 12,054,102.40 5,427,744.00 5,647,450.00 5,874,736.65 53,030.00 53,030.00 145,582.30 6,814.00 6,814.00 486.94 60,000.00 100,000.00 554,309.96 $ 25,012,958.55 $ 25,429,439.91 $ 27,054,293.16 $ -148,320.16 68,180.07 937,171.49 227,286.65 92,552.30 -6,327.06 454,309.96 1,624,853.25 $ 14,444,008.43 $ 14,693,729.31 $ 16,246,515.46 $ 936,769.30 1,846,708.82 441,282.32 417,178.96 1,536,940.57 342,548.80 2,008,961.64 1,166,414.29 262,380.00 78,689.00 1,871,124.00 916,288.70 1,579,012.23 433,450.32 495,504.85 1,328,251.77 665,736.02 2,075,851.09 1,137,709.29 240,600.00 104,799.00 1,871,124.00 1,719,441.94 1,773,867.30 450,919.36 588,110.75 1,437,614.56 701,081.62 2,125,373.10 1,473,700.66 270,879.94 145,328.49 6,939.07 5,866.00 1,547,803.73 8,437.21 $ 25,353,006.13 $ 25,542,056.58 $ 28,501,879.19 $ $ -340,047.58 $ -112,616.67 $ -1,447,586.03 $ -1,552,786.15 -803,153.24 -194,855.07 -17,469.04 -92,605.90 -109,362.79 -35,345.60 -49,522.01 -335,991.37 -30,279.94 -40,529.49 -6,939.07 -5,866.00 323,320.27 -8,437.21 -2,959,822.61 -1,334,969.36 $ -8,663.79 $ -8,663.79 $ -340,047.58 $ -112,616.67 $ -1,456,249.82 $ -1,343,633.15 -3,256,388.24 -3,250,907.78 -2,835,395.12 415,512.66 36,541.36 958,183.74 -958,183.74 $ -3,559,894.46 $ -2,405,340.71 $ -4,291,644.94 $ -1,886,304.23 Notes to the Schedule of Revenues, Expenditures and Changes in Fund Balances Budget and Actual (1) Original and Final Budget amounts do not include the actual revenues ($322,316.09) or expenditures ($414,337.65) of the various principal accounts. The accompanying schedule of revenues, expenditures and changes in fund balances budget and actual is presented on the modified accrual basis of accounting which is the basis of accounting used in the presentation of the fund financial statements. See notes to the basic financial statements. - 27 - CITY OF DUBLIN BOARD OF EDUCATION - LAURENS COUNTY SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS YEAR ENDED JUNE 30, 2013 SCHEDULE "2" FUNDING AGENCY PROGRAM/GRANT Agriculture, U. S. Department of Child Nutrition Cluster Pass-Through From Georgia Department of Education Food Services School Breakfast Program National School Lunch Program Total Child Nutrition Cluster Other Programs Pass-Through From Georgia Department of Education Food Services Fresh Fruit and Vegetable Program Total U. S. Department of Agriculture Education, U. S. Department of Special Education Cluster Pass-Through From Georgia Department of Education Special Education Grants to States Preschool Grants Total Special Education Cluster Title I, Part A Cluster Pass-Through From Georgia Department of Education Title I Grants to Local Educational Agencies Other Programs Pass-Through From Georgia Department of Education Career and Technical Education - Basic Grants to States Education for Homeless Children and Youth Improving Teacher Quality State Grants Rural Education Twenty-First Century Community Learning Centers Total Other Programs Total U. S. Department of Education Defense, U. S. Department of Direct Department of the Air Force R.O.T.C. Program CFDA NUMBER PASSTHROUGH ENTITY ID NUMBER EXPENDITURES IN PERIOD * 10.553 * 10.555 N/A (2) N/A $ 2,184,792.66 (1) $ 2,184,792.66 10.582 N/A 64,820.02 $ 2,249,612.68 84.027 84.173 N/A $ N/A $ 630,886.19 26,020.74 656,906.93 * 84.010 N/A $ 2,157,405.73 84.048 84.196 84.367 84.358 84.287 N/A 38,135.93 N/A 30,876.45 N/A 264,289.19 N/A 36,906.37 N/A 674,950.77 $ 1,045,158.71 $ 3,859,471.37 $ 138,642.73 Total Expenditures of Federal Awards $ N/A = Not Available Notes to the Schedule of Expenditures of Federal Awards (1) Includes the Federally assigned value of donated commodities for the Food Donation Program in the amount of $114,552.34. (2) Expenditures for the funds earned on the School Breakfast Program ($466,085.18) were not maintained separately and are included in the 2013 National School Lunch Program. Major Programs are identified by an asterisk (*) in front of the CFDA number. The School District did not provide Federal Assistance to any Subrecipient. The accompanying schedule of expenditures of Federal awards includes the Federal grant activity of the City of Dublin 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. - 28 - 6,247,726.78 CITY OF DUBLIN BOARD OF EDUCATION - LAURENS COUNTY SCHEDULE OF STATE REVENUE YEAR ENDED JUNE 30, 2013 AGENCY/FUNDING GRANTS Bright From the Start: Georgia Department of Early Care and Learning Pre-Kindergarten Program Education, Georgia Department of Quality Basic Education (1) Direct Instructional Cost Kindergarten Program Kindergarten Program - Early Intervention Program Primary Grades (1-3) Program Primary Grades - Early Intervention (1-3) Program Upper Elementary Grades (4-5) Program Upper Elementary Grades - Early Intervention (4-5) Program Middle Grades (6-8) Program Middle School (6-8) Program High School General Education (9-12) Program Vocational Laboratory (9-12) Program Students with Disabilities Gifted Student - Category VI Remedial Education Program Alternative Education Program English Speakers of Other Languages (ESOL) Media Center Program 20 Days Additional Instruction Staff and Professional Development Indirect Cost Central Administration School Administration Facility Maintenance and Operations Amended Formula Adjustment Categorical Grants Pupil Transportation Regular Nursing Services Other State Programs Charter Schools - State Planning Grant Food Services Math and Science Supplements Preschool Handicapped Program Pupil Transportation - State Bonds Residential Treatment Centers Grant Teachers' Retirement Vocational Education Office of the State Treasurer Public School Employees' Retirement (1) Payments to the Georgia Department of Community Health by the Georgia Department of Education on behalf of the School District in the amount of $1,388,988 are included as part of the Quality Basic Education revenue allotments above. See notes to the basic financial statements. - 29 - SCHEDULE "3" GOVERNMENTAL FUND TYPE GENERAL FUND $ 585,016.32 964,566.00 133,849.00 1,917,015.00 237,861.00 1,027,962.00 160,291.00 291,576.00 1,410,104.00 1,795,899.00 348,567.00 1,423,961.98 314,208.00 144,219.00 143,389.00 6,337.00 298,442.00 95,530.00 53,166.00 444,535.00 793,013.00 693,009.00 -1,944,301.00 151,260.00 55,817.00 218,455.00 46,310.00 14,587.36 33,390.00 76,219.50 39,396.00 15,695.24 30,585.00 34,172.00 $ 12,054,102.40 CITY OF DUBLIN BOARD OF EDUCATION - LAURENS COUNTY SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS YEAR ENDED JUNE 30, 2013 SCHEDULE "4" PROJECT Acquiring, constructing, and equipping renovations and improvements to the Dublin Junior High School Auditorium, including partial demolition of Dublin Junior High School, renovations and additions at Dublin High School, the purchase of school buses, the installation of computer cabling on a system-wide basis and technology upgrades, the acquisition of certain property and equipment, including any heating and air conditioning equipment, which may be subject to lease by the Dublin School District, and additions, renovations, and improvements to Central Elementary School, Susie Dasher Elementary School, Saxon Heights Elementary School, Hillcrest Elementary School, Moore Street Elementary School, and Dublin Middle School. Acquisition of real property and construction, equipping and furnishing of new school buildings and facilities, including, but not limited to, a new elementary school including physical education and athletic facilities, and the completion of the new Dublin High School and auditorium; additions, renovations, repairs and improvements to existing school buildings and facilities, including, but not limited to Moore Street Elementary, Susie Dasher Elementary, Saxon Heights Elementary, Dublin Middle School, and Hillcrest Center; new physical education and athletic facilities for Dublin High School and Dublin Middle School, including, but not limited to, a tennis court complex at Dublin High School; technology equipment, school nutrition program equipment, and improvements throughout the Dublin School District; the acquisition of school vehicles, including, but not limited to, school buses and equipment; additions renovations, repairs and improvements to the central office building including, but not limited to, HVAC; and to retire previously incurred general obligation debt. ORIGINAL ESTIMATED COST (1) CURRENT ESTIMATED COSTS (2) AMOUNT EXPENDED IN CURRENT YEAR (3) (4) AMOUNT EXPENDED IN PRIOR YEARS (3) (4) TOTAL COMPLETION COST EXCESS PROCEEDS NOT EXPENDED $ 14,850,000.00 $ 12,973,018.00 $ 3,797,395.53 $ 7,471,991.33 17,750,000.00 17,750,000.00 3,681,498.19 13,539,626.98 $ 32,600,000.00 $ 30,723,018.00 $ 7,478,893.72 $ 21,011,618.31 ESTIMATED COMPLETION DATE 6/30/2014 6/30/2015 (1) The School District's original cost estimate as specified in the resolution calling for the imposition of the Local Option Sales Tax. (2) The School District's current estimate of total cost for the projects. Includes all cost from project inception to completion. (3) The voters of Laurens County approved the imposition of a 1% sales tax to fund the above projects and retire associated debt. Amounts expended for these projects may include sales tax proceeds, state, local property taxes and/or other funds over the life of the projects. (4) In addition to the expenditures shown above, the School District has incurred interest to provide advance funding for the above projects as follows: Prior Years $ 2,139,771.62 Current Year 741,590.33 Total $ 2,881,361.95 See notes to the basic financial statements. - 30 - CITY OF DUBLIN BOARD OF EDUCATION - LAURENS COUNTY GENERAL FUND - QUALITY BASIC EDUCATION PROGRAMS (QBE) ALLOTMENTS AND EXPENDITURES - BY PROGRAM YEAR ENDED JUNE 30, 2013 SCHEDULE "5" DESCRIPTION Direct Instructional Programs Kindergarten Program Kindergarten Program-Early Intervention Program Primary Grades (1-3) Program Primary Grades-Early Intervention (1-3) Program Upper Elementary Grades (4-5) Program Upper Elementary Grades-Early Intervention (4-5) Program Middle Grades (6-8) Program Middle School (6-8) Program High School General Education (9-12) Program Vocational Laboratory (9-12) Program Students with Disabilities Category I Category II Category III Category IV Category V Gifted Student - Category VI Remedial Education Program Alternative Education Program English Speakers of Other Languages (ESOL) TOTAL DIRECT INSTRUCTIONAL PROGRAMS Media Center Program Staff and Professional Development ALLOTMENTS FROM GEORGIA DEPARTMENT OF EDUCATION (1) (2) (3) ELIGIBLE QBE PROGRAM COSTS SALARIES OPERATIONS TOTAL $ 1,190,764.00 $ 917,768.99 $ 12,437.73 $ 930,206.72 163,848.00 172,315.55 172,315.55 2,367,350.00 2,380,771.30 45,397.85 2,426,169.15 312,392.00 1,262,751.00 1,058,083.87 20,412.46 1,078,496.33 194,781.00 141.64 141.64 313,823.00 1,730,144.00 2,127,257.00 436,338.00 11,679.00 223,621.00 353,607.00 744,715.00 226,193.00 166,711.00 397,861.00 185,839.00 171,862.00 9,596.00 1,621,715.53 2,036,776.20 392,798.99 13,612.46 363,219.09 898,337.91 189.24 258,411.56 192,361.89 46,851.25 129,357.35 11,339.60 13,605.91 39,765.84 1,397.00 35.03 2,316.94 1,325.60 100.00 11,339.60 1,635,321.44 2,076,542.04 394,195.99 13,647.49 363,219.09 898,337.91 189.24 258,411.56 194,678.83 46,851.25 130,682.95 100.00 $ 12,591,132.00 $ 10,482,712.82 $ 148,133.96 $ 10,630,846.78 364,782.00 65,339.00 434,715.92 14,965.46 44,640.51 449,681.38 44,640.51 TOTAL QBE FORMULA FUNDS $ 13,021,253.00 $ 10,917,428.74 $ 207,739.93 $ 11,125,168.67 (1) Comprised of State Funds plus Local Five Mill Share. (2) Allotments do not include the impact of the State amended formula adjustment. (3) Allotments do not include the State Health payments made by GDOE to the Department of Community Health for the certified employees. See notes to the basic financial statements. - 31 - (This page left intentionally blank) SECTION II COMPLIANCE AND INTERNAL CONTROL REPORTS (This page left intentionally blank) Greg S. Griffin STATE AUDITOR (404) 656-2174 DEPARTMENT OF AUDITS AND ACCOUNTS 270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400 April 13, 2016 Honorable Nathan Deal, 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 REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS Ladies and Gentlemen: We have audited, 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, the financial statements of the governmental activities, each major fund, and the aggregate remaining fund information of City of Dublin Board of Education as of and for the year ended June 30, 2013, and the related notes to the financial statements, which collectively comprise City of Dublin Board of Education's basic financial statements and have issued our report thereon dated April 13, 2016. Internal Control Over Financial Reporting In planning and performing our audit of the financial statements, we considered City of Dublin Board of Education's internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances 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 Dublin Board of Education's internal control. Accordingly, we do not express an opinion on the effectiveness of the City of Dublin Board of Education's internal control. Our consideration of internal control was for the limited purpose described in the preceding paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies and therefore, material weaknesses or significant deficiencies may exist that were not identified. However, as described in the accompanying Schedule of Findings and Questioned Costs, we identified certain deficiencies in internal control over financial reporting that we consider to be material weaknesses. 2013YB-42 (This page left intentionally blank) A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect and correct misstatements on a timely basis. A material weakness is a deficiency, or combination of deficiencies, in internal control such that there is a reasonable possibility that a material misstatement of the entity's financial statements will not be prevented, or detected and corrected on a timely basis. We consider the deficiencies described in the accompanying Schedule of Findings and Questioned Costs as items FS 2013-001, FS 2013-002, FS 2013-003, and FS 2013-005 to be material weaknesses. Compliance and Other Matters As part of obtaining reasonable assurance about whether City of Dublin Board of Education's financial statements are free from 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 an instance of noncompliance or other matters that are required to be reported under Government Auditing Standards and which is described in the accompanying Schedule of Findings and Questioned Costs as item FS 2013-004. We noted certain matters that we have reported to management of City of Dublin Board of Education in a separate letter dated April 13, 2016. City of Dublin Board of Education's Response to Findings City of Dublin Board of Education's response to the findings identified in our audit is described in the accompanying Schedule of Findings and Questioned Costs. City of Dublin Board of Education's response was not subjected to the auditing procedures applied in the audit of the financial statements and, accordingly, we express no opinion on the response. Purpose of this Report The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the entity's internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the entity's internal control and compliance. Accordingly, this communication is not suitable for any other purpose. Respectfully submitted, GSG:kt 2013YB-42 Greg S. Griffin State Auditor (This page left intentionally blank) Greg S. Griffin STATE AUDITOR (404) 656-2174 DEPARTMENT OF AUDITS AND ACCOUNTS 270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400 April 13, 2016 Honorable Nathan Deal, 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 REPORT ON COMPLIANCE FOR EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE REQUIRED BY OMB CIRCULAR A-133 Ladies and Gentlemen: Report on Compliance for Each Major Federal Program We have audited City of Dublin 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, 2013. City of Dublin 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. Management's Responsibility Management is responsible for compliance with the requirements of laws, regulations, contracts, and grants applicable to its Federal programs. Auditor's Responsibility Our responsibility is to express an opinion on compliance for each of City of Dublin Board of Education's major Federal programs based on our audit of the types of compliance requirements referred to above. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and OMB Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations. Those standards and OMB Circular A-133 require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major Federal program occurred. An audit includes examining, on a test basis, evidence about the City of Dublin 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 on compliance for each major Federal program. However, our audit does not provide a legal determination of City of Dublin Board of Education's compliance. 2013SA-10 (This page left intentionally blank) Opinion on Each Major Federal Program In our opinion, the City of Dublin Board of Education complied, in all material respects, with the types of 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, 2013. Report on Internal Control over Compliance Management of City of Dublin Board of Education is responsible for establishing and maintaining effective internal control over compliance with the types of compliance requirements referred to above. In planning and performing our audit of compliance, we considered City of Dublin Board of Education's internal control over compliance with the types of requirements that could have a direct and material effect on each major Federal program to determine the auditing procedures that are appropriate in the circumstances for the purpose of expressing an opinion on compliance for each major Federal program 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 Dublin Board of Education's internal control over compliance. A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a Federal program on a timely basis. A material weakness in internal control over compliance is a deficiency, or combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a Federal program will not be prevented, or detected and corrected, on a timely basis. 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. Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over compliance that might be material weaknesses or significant deficiencies. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. The purpose of this report on internal control over compliance is solely to describe the scope of our testing of internal control over compliance and the results of that testing based on the requirements of OMB Circular A-133. Accordingly, this report is not suitable for any other purpose. Respectfully submitted, GSG:kt 2013SA-10 Greg S. Griffin State Auditor (This page left intentionally blank) SECTION III AUDITEE'S RESPONSE TO PRIOR YEAR FINDINGS AND QUESTIONED COSTS (This page left intentionally blank) CITY OF DUBLIN BOARD OF EDUCATION LAURENS COUNTY AUDITEE'S RESPONSE SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2013 PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS FINDING CONTROL NUMBER AUDITEE'S RESPONSE/STATUS FS-7741-11-01 FS-7741-11-02 FS-7741-11-03 FS-7741-11-04 FS-7741-12-01 FS-7741-12-02 FS-7741-12-03 FS-7741-12-04 FS-7741-12-05 Further Action Not Warranted Further Action Not Warranted Further Action Not Warranted Further Action Not Warranted Unresolved See Corrective Action/Responses Unresolved See Corrective Action/Responses Unresolved See Corrective Action/Responses Unresolved See Corrective Action/Responses Unresolved See Corrective Action/Responses CORRECTIVE ACTION/RESPONSES CASH AND CASH EQUIVALENTS EXPENDITURES/LIABILITIES/DISBURSEMENTS EMPLOYEE COMPENSATION REVENUES/RECEIVABLES/RECEIPTS GENERAL LEDGER Inadequate Internal Controls at the Central Office Finding Control Number: FS-7741-12-01 The Board is in the process of reviewing and revising current procedures to ensure all transactions are documented and approved. BUDGET PREPARATION/EXECUTION Deficit Fund Balance Finding Control Number: FS-7741-12-02 The Board has implemented a three year plan to reduce our negative fund balance, which includes staff reductions and reduction in days for staff. Property tax revenue is anticipated to increase during this three year period as property is re-assessed and taxes are levied accordingly. - 1 - CITY OF DUBLIN BOARD OF EDUCATION LAURENS COUNTY AUDITEE'S RESPONSE SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2013 PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS FINANCIAL REPORTING Inadequate Controls over Financial Reporting Finding Control Number: FS-7741-12-03 The Board will develop and implement internal controls over financial statement reporting and ensure that activity is properly recorded in the general ledger. We will verify that financial statements (including note disclosures) properly reflect the activity reported in the general ledger and that the financial information presented for audit will be accurate. The Board hired a new Director of Finance in fiscal year 2013. EXPENDITURES/LIABILITIES/DISBURSEMENTS Improper Use of SPLOST Proceeds Finding Control Number: FS-7741-12-04 The Board will review with legal counsel SPLOST referendums prior to the obligation of funds. CAPITAL ASSETS Failure to Adequately Maintain Capital Assets Finding Control Number: FS-7741-12-05 The School District will review its capital asset activity and ensure that activity conforms to the approved capital asset policy and generally accepted accounting principles. - 2 - CITY OF DUBLIN BOARD OF EDUCATION LAURENS COUNTY AUDITEE'S RESPONSE SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2013 PRIOR YEAR FEDERAL AWARD FINDINGS AND QUESTIONED COSTS FINDING CONTROL NUMBER AUDITEE'S RESPONSE/STATUS FA-7741-08-02 FA-7741-09-02 FA-7741-10-01 FA-7741-10-02 FA-7741-11-01 FA-7741-12-01 FA-7741-12-02 Further Action Not Warranted Previously Reported Corrective Action Implemented Previously Reported Corrective Action Implemented Previously Reported Corrective Action Implemented Previously Reported Corrective Action Implemented Unresolved See Corrective Action/Responses Previously Reported Corrective Action Implemented CORRECTIVE ACTION/RESPONSES CASH MANAGEMENT Excessive Cash Balances Failure to Refund Interest U.S. Department of Education Through Georgia Department of Education Title 1, Part A Cluster (CFDA 84.010, 84.389) Question Cost: $990.59 Finding Control Number: FA-7741-12-01 The School District will contact the Georgia Department of Education to determine if a refund is appropriate. - 3 - (This page left intentionally blank) SECTION IV FINDINGS AND QUESTIONED COSTS (This page left intentionally blank) CITY OF DUBLIN BOARD OF EDUCATION LAURENS COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2013 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 Internal control over financial reporting: Material weaknesses identified? Significant deficiency identified? Noncompliance material to financial statements noted: Federal Awards Internal Control over major programs: Material weakness identified? Significant deficiency identified? Type of auditor's report issued on compliance for major programs: All major programs Any audit findings disclosed that are required to be reported in accordance with OMB Circular A-133, Section 510(a)? Unmodified Yes None Reported Yes No None Reported Unmodified No Identification of major programs: CFDA Numbers Name of Federal Program or Cluster 10.553, 10.555 84.010, 84.389 Child Nutrition Cluster Title I, Grants to Local Educational Agencies Dollar threshold used to distinguish between Type A and Type B programs: $300,000.00 Auditee qualified as low-risk auditee? No - 1 - CITY OF DUBLIN BOARD OF EDUCATION LAURENS COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2013 II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS FS 2013-001 Inadequate Internal Controls at the Central Office Control Category: Cash and Cash Equivalents Employee Compensation Expenditures/Liabilities/Disbursements Internal Control Impact: Material Weakness Compliance Impact: None Description: This is a repeat finding (FS-7741-12-01) from the fiscal year ended June 30, 2012. The accounting procedures of the School District were insufficient to provide for adequate internal controls at the Central Office. 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. Condition: Cash and Cash Equivalents Five bank accounts were not properly reconciled to the General Ledger. The School District could not provide a reconciliation for one bank account. Reconciling items were not investigated and adjusted timely. An outstanding check list could not be provided for one account. Auditor was unable to determine if the accounts were reconciled in a timely manner. One bank account was reported under the School District's Federal Identification Number that was not owned by the School District. Employee Compensation The salaries and benefits payable amount contained $187,041.20 in invalid salaries payables at year end. The School District failed to deduct furlough days for one employee as approved by the Board. Expenditures/Liabilities/Disbursements The general ledger contained $77,231.93 of invalid accounts payables over one year old. In a review of 56 voucher packages, the following deficiencies were noted: o Two expenditures totaling $80,536.00 could not be documented. o One expenditure in the amount of $14,481.90 did not have documentation of approval prior to purchase. o Two expenditures totaling $23,686.15 were not expensed in the proper fiscal year. A review of credit card transactions revealed the following deficiencies: o Several credit card transactions were missing adequate documentation and proper approval. o Auditor was unable to determine if state travel regulations pertaining to meals were adhered to, due to lack of supporting documentation for meal purchases. - 2 - CITY OF DUBLIN BOARD OF EDUCATION LAURENS COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2013 II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS o Procedures were not in place to adequately monitor fuel card purchases. Large, irregular fluctuations from month-to-month were noted on fuel card purchases. Additionally, several non-fuel purchases were made on fleet cards that circumvent state travel regulations. Supporting documentation was not available to determine the actual amount of allowable and unallowable charges made on the fuel cards. Cause: These deficiencies were the result of management's failure to ensure that internal controls were established, implemented and functioning. Effect or Potential Effect: Errors and/or irregularities may not be detected in a timely manner. Recommendation: The School District should establish, revise and/or monitor procedures to ensure bank accounts are properly reconciled to the general ledger; payable accounts are accurate; and expenditures are properly documented, approved, and recorded accurately. Views of Responsible Officials and Corrective Action Plans: We concur with this finding. The Board has implemented procedures to reconcile all system bank accounts on a monthly basis to the general ledger and to have documented management review and approval. The school bank accounts are being reconciled to the general ledger and approved by the principal of each school, prior to being submitted to the Board office. Subsidiary listings for accounts payable and accounts receivable are being maintained and routinely verified for accuracy. Year-end payroll and benefit accrual procedures have been updated to ensure accuracy. State travel regulations are being followed with credit card usage being controlled as well as receipts submitted for proper documentation. Contact Person: Telephone: Fax: Email: Christi Thublin, Assistant Superintendent for Finance and Business Operations (478) 353-8013 (478) 353-8001 christi@dublincityschools.us FS 2013-002 Deficit Fund Balance Control Category: Budget Preparation/Execution Internal Control Impact: Material Weakness Compliance Impact: None Description: This is a repeat finding (FS-7741-12-02) from fiscal year ended June 30, 2012. At June 30, 2013, the General Fund of the School District reported a deficit fund balance. The School District also failed to adopt a balanced General Fund budget for fiscal year 2013. - 3 - CITY OF DUBLIN BOARD OF EDUCATION LAURENS COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2013 II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS Criteria: Chapter 25, Governmental Fund Deficits of the Financial Management for Georgia Local Units of Administration states in part: "The seriousness of fund balance deficits cannot be overstated. The Georgia Department of Education requires those LUAs with deficit governmental fund balances to meet certain reporting requirements." The Official Code of Georgia Annotated (O.C.G.A.) 20-2-67 Local school system or school subject to corrective action plan for budget deficit; financial operations form; publication; mailing to Department of Education and local governing body, states in part, "(b)..From the time such irregularity or budget deficit is discovered until the time it is eliminated, the local school superintendent shall present to each member of the local board of education for his or her review and written acknowledgement a monthly report containing all anticipated expenditures by budget function for such school or school system during the current month...(c) Not later than September 30 of the year, each local board of education shall cause to be published in the official county organ wherein the local school system is located once a week for two weeks a statement of the actual financial operations for such schools or school system identified by the Department of Audits and Accounts as having financial irregularities...(d) A copy of the actual financial operations form required to be published by subsection (c) of this code section shall be mailed by each local board of education to the Department of Education and the local county board of commissioners or local municipal governing authority..." Chapter 32, Preparing Operating Budgets of the Financial Management for Georgia Local Units of Administration states in part: "The budget must be balanced for all budgeted funds. Total anticipated revenues should equal total estimated expenditures. In the event anticipated revenues are insufficient to fund anticipated essential expenditures, a portion of unreserved fund balance from previous years must be used to fund the short fall. In the event there is insufficient unreserved fund balance from previous years to fund anticipated expenditures, then such expenditures must be reduced to equal anticipated revenues plus available unreserved fund balance". Condition: At June 30, 2013, the General Fund of the City of Dublin Board of Education reported an unassigned deficit fund balance of $4,659,179.79. In addition, the School District failed to abide by reporting regulations related to the June 30, 2012 deficit. The School District also failed to adopt a balanced General Fund budget for fiscal year 2013. The School District's original budget for the General Fund reflected a deficit fund balance in the amount of $3,559,894.46. Cause: The School District's General Fund incurred expenditures in excess of revenues during the year under review. In addition, management failed to use effective budgeting techniques and continued charging expenditures to state and federal programs after the award amounts had been depleted. Effect or Potential Effect: A financial statement irregularity in accordance with the Official Code of Georgia Annotated (O.C.G.A.) 20-2-67. - 4 - CITY OF DUBLIN BOARD OF EDUCATION LAURENS COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2013 II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS Recommendation: The School District should establish policies and procedures designed to ensure that expenditures do not exceed availability of resources, so that in future periods the School District does not report deficit fund balances. In addition, the School District should comply with reporting requirements applicable for deficit fund balances. Views of Responsible Officials and Corrective Action Plans: We concur with this finding. The Board submitted a deficit elimination plan to the Georgia Department of Education in March 2016. The plan should reduce the deficit by over $1.8 million each year. The plan includes the closing of Saxon Heights Elementary School, along with significant staff reductions. Property values in the City of Dublin were reassessed in 2015, resulting in an additional $500,000 in tax revenue that is to be used exclusively for deficit reduction. In fiscal year 2017 the District is budgeted to receive an increase in State QBE funding of $627,000 of which 50% is earmarked for deficit reduction. No salary increases will be implemented for teachers or staff in fiscal year 2017. Reporting requirements applicable for deficit fund balances with the Georgia Department of Education are being followed. Contact Person: Telephone: Fax: Email: Christi Thublin, Assistant Superintendent for Finance and Business Operations (478) 353-8013 (478) 353-8001 christi@dublincityschools.us FS 2013-003 Inadequate Controls over Financial Reporting Process Control Category: Financial Reporting Internal Control Impact: Material Weakness Compliance Impact: None Description: This is a repeat finding (FS-7741-12-03) from fiscal year ended June 30, 2012. Several misstatements were noted in the reporting of the District-wide, fund and fiduciary financial statements. In addition, numerous errors were noted in the Notes to the Financial Statements and the supporting Schedules. Criteria: Management is responsible for having adequate controls over the financial reporting process, which not only includes proper recording of transactions to the general ledger, but extends to accurate preparation and presentation of the financial statements, including the note disclosures and the SPLOST reporting requirements set forth in O.C.G.A. 48-8-122. Chapter 22A Annual Financial Reporting of the Financial Management for Georgia Local Units of Administration indicates that School Districts must prepare their financial statements in accordance with generally accepted accounting principles. - 5 - CITY OF DUBLIN BOARD OF EDUCATION LAURENS COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2013 II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS Condition: During the audit, numerous errors and misclassifications were noted with the financial statements presented for audit. These errors are summarized as follows: The School District failed to record property tax accounts receivables and the related tax revenues at year end in the amount of $551,593.97. In addition, the School District did not correctly record delinquent property taxes and the related deferred revenue of $551,593.97 in the General Fund. Audit adjustments were necessary to record this activity on the District-wide and Governmental financial statements. Long-Term Liabilities were not properly recorded on the District-wide financial statements. The School District does not maintain a long-term debt fund on the general ledger as provided for in the Georgia Department of Education chart of accounts. Audit adjustments totaling $5,457,213.37 were necessary to properly state Long-Term Liabilities. The School District failed to provide all of the required Exhibits to the financial statements. Specifically, the Reconciliation of the Governmental Funds Statements of Revenues, Expenditures and Changes in Fund Balances to the Statement of Activities and the Statement of Net Position - Fiduciary Funds were not completed and presented for audit by the Entity. Entity could not provide detailed support of the make-up of Funds Held for Others. As a result, classification of agency and governmental funds could not be tested. Numerous reclassification entries were made to improve financial statement presentation of Cash, Investments, Accounts Receivable, Capital Assets, Short-Term Debt Liability, Long-Term Liabilities, State Revenues, Federal Revenues, Sales Tax Revenues, Miscellaneous Revenues and Fund Balance Reserves. Numerous adjustments to the Notes to the Financial Statements were necessary to ensure that significant items were properly disclosed. The School District's SPLOST schedule as submitted to the Georgia Department of Audits and Accounts was inaccurate. The School District could not provide detailed support for two financial statement preparation journal entries that were made to the District-wide financial statements totaling $491,188.78. Cause: The School District did not implement an adequate system of internal control over the financial statement reporting process. Effect or Potential Effect: The School District did not comply with the requirements of the Georgia Department of Education regarding financial reporting. Numerous adjustments were necessary in order for the School District's financial statements to be in conformity with generally accepted accounting principles. Recommendation: The School District should establish and implement internal controls over the financial statement reporting process to ensure that all activity is properly recorded in the general ledger; to verify that financial statements (including note disclosures) properly reflect activity reported in the general ledger; and include a monitoring process to evaluate the accuracy of the financial statements presented for audit. In addition, the School District should ensure the SPLOST projects collections and expenditures are reported based on the requirements set forth in O.C.G.A. Code 48-8-122. - 6 - CITY OF DUBLIN BOARD OF EDUCATION LAURENS COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2013 II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS Views of Responsible Officials and Corrective Action Plans: We concur with this finding. During fiscal year 2012, the Board retained the services of an outside accounting firm to prepare the financial statements for audit at an expense of $26,000. The decision was made to prepare the fiscal year 2013 and fiscal year 2014 statements internally. The Board will continue to develop and implement internal controls over financial statement preparation and reporting and ensure that activity is properly recorded in the general ledger. We will verify that financial statements (including note disclosures) properly reflect the activity reported in the general ledger and that the financial information presented for audit is accurate. It is significant to note that the fiscal year 2013 and fiscal year 2014 audits were completed in tandem and that there was no opportunity to receive necessary feedback required to initiate new procedures and protocols between the two audit years. The Board hired a new Director of Finance in fiscal year 2013. Contact Person: Telephone: Fax: Email: Christi Thublin, Assistant Superintendent for Finance and Business Operations (478) 353-8013 (478) 353-8001 christi@dublincityschools.us FS 2013-004 Improper Use of SPLOST Proceeds Control Category: Expenditures/Liabilities/Disbursements Internal Control Impact: Significant Deficiency Compliance Impact: Nonmaterial Noncompliance Description: This is a repeat finding (FS-7741-12-04) from fiscal year ended June 30, 2012. The School District expended Special Purpose Local Option Sales Tax (SPLOST) proceeds on items which were not specifically identified in the SPLOST project referendum and do not appear to meet the definition of "capital outlay projects for educational purposes" in State laws regarding imposition and use of sales taxes for educational purposes. Criteria: According to Paragraph IV, Section VI, Article VIII of the Constitution of the State of Georgia, "the purpose or purposes for which the proceeds of the tax are to be used and may be expended include" (1) Capital Outlay projects for educational purposes; (2) the retirement of previously incurred general obligation debt with respect only to capital outlay projects of the school system..." Official Code of Georgia Annotated (O.C.G.A.) 48-8-121 states, "The proceeds received from the tax authorized by this part shall be used exclusively for the purpose or purposes specified in the resolution or ordinance calling for imposition of the tax". Condition: During the year under review, the School District expended $19,125.00 of SPLOST Proceeds for cleaning services that were not approved in the SPLOST referendum. Cause: The School District failed to have adequate controls in place to ensure that these expenditures were covered by the SPLOST referendum. - 7 - CITY OF DUBLIN BOARD OF EDUCATION LAURENS COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2013 II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS Effect or Potential Effect: Improper use of the Special Purpose Local Option Sales Tax (SPLOST) proceeds. Recommendation: The School District should research this issue, consult with legal counsel and verify if expenditures of this nature are an appropriate use of SPLOST funds in accordance with State law and the SPLOST referendum as approved by the voters of Laurens County. Views of Responsible Officials and Corrective Action Plans: We concur with the finding. The School District will use SPLOST funds exclusively for the purpose of retiring bond debt and in accordance with the referendum approved by the voters of Laurens County. Contact Person: Telephone: Fax: Email: Christi Thublin, Assistant Superintendent for Finance and Business Operations (478) 353-8013 (478) 353-8001 christi@dublincityschools.us FS 2013-005 Failure to Adequately Maintain Capital Assets Control Category: Capital Assets Internal Control Impact: Material Weakness Compliance Impact: None Condition: This is a repeat finding (FS-7741-12-05) from fiscal year ended June 30, 2012. The School District did not adequately maintain capital assets inventory records. Criteria: Chapter 37 Implementing a Capital Asset Management System of the Financial Management for Georgia Local Units of Administration provides that School Districts must establish fixed asset policies, define system requirements, implement a fixed asset system, and maintain fixed asset inventory records. Condition: A review of the School District's capital assets policies and procedures and the related capital assets records revealed the following deficiencies: Three assets related to capital leases in the amount of $3,682,846.21 were not capitalized in the current fiscal year. Numerous errors were noted during our review of capital assets. The School District included seven items totaling $27,056.50 within their capital asset records that did not meet their capitalization threshold. The School District has not updated their capitalization policy to include the adoption of Governmental Accounting Standards Board (GASB) Statement No. 51, Accounting and Reporting for Intangible Assets. A physical inventory of capital assets has not been performed in several years. - 8 - CITY OF DUBLIN BOARD OF EDUCATION LAURENS COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2013 II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS Cause: The School District failed to properly maintain its capital assets records in accordance with the School District's approved capital assets policy and requirements set forth in Chapter 37 Implementing a Capital Asset Management System of the Financial Management for Georgia Local Units of Administration. Effect or Potential Effect: The failure of the School District to properly account for capital assets activity can lead to inaccurate internal and external reporting, as well as noncompliance with generally accepted accounting principles. Recommendation: The School District should establish and implement controls over the capital asset function to ensure that capital assets are accurate and conform to the School District's approved capital asset policy and generally accepted accounting principles. In addition, appropriate adjustments should be made to correct the errors listed. Views of Responsible Officials and Corrective Action Plans: We concur with this finding. The School District will verify and use the updated, audited capital assets listing provided during the audit and keep it current with future capital asset activity and ensure that it conforms to the approved capital assets policy and generally accepted accounting principles. Contact Person: Telephone: Fax: Email: Christi Thublin, Assistant Superintendent for Finance and Business Operations (478) 353-8013 (478) 353-8001 christi@dublincityschools.us III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS No matters were reported. - 9 -