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

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

CITY OF PELHAM BOARD OF EDUCATION - MITCHELL COUNTY - TABLE OF CONTENTS -

SECTION I

FINANCIAL

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

EXHIBlTS

BASIC FINANCIAL STATEMENTS

DISTRICT-WIDE FINANCIAL STATEMENTS

A

STATEMENT OF NET ASSETS

B

STATEMENT OF ACTIVITIES

FUND FINANCIAL STATEMENTS

C

BALANCE SHEET

GOVERNMENTAL FUNDS

D

RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET

TO THE STATEMENT OF NET ASSETS

E

STATEMENT OF REVENUES, EXPENDITURESAND CHANGES

IN FUND BALANCES

GOVERNMENTAL FUNDS

F

RECONCILIATIONOF THE GOVERNMENTAL FUNDS STATEMENT

OF REVENUES, EXPENDITURES AND CHANGES IN FUND

BALANCES TO THE STATEMENT OF ACTIVITIES

G

STATEMENT OF FIDUCIARY NET ASSETS

FIDUCIARY FUNDS

H

STATEMENT OF CHANGES IN FIDUCIARY NET ASSETS

FIDUCIARY FUNDS

I

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

C l N OF PELHAM BOARD OF EDUCATION - MITCHELL C O U N N -TABLE OF CONTENTS -
SECTION I FINANCIAL SCHEDULES SUPPLEMENTARY INFORMATION 4 SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS 5 ALLOTMENTS AND EXPENDITURES GENERAL FUND -QUALITY BASIC EDUCATION PROGRAMS (QBE) BY PROGRAM
SECTION II COMPLIANCE AND INTERNAL CONTROL REPORTS INDEPENDENT AUDITOR'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MAlTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WlTH GOVERNMENTAUDlTlNG STANDARDS INDEPENDENT AUDITOR'S REPORT ON COMPLlANCE WlTH REQUIREMENTSTHAT COULD HAVE A DIRECT AND MATERIAL EFFECT ON EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH OMB CIRCULAR A-133
SECTION Ill AUDITEE'S RESPONSE TO PRIOR YEAR FINDINGS AND QUESTIONED COSTS SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS
SECTION IV FINDINGS AND QUESTIONED COSTS SCHEDULE OF FINDINGS AND QUESTIONED COSTS

CITY OF PELHAM BOARD OF EDUCATION - MITCHELL COUNTY - TABLE OF CONTENTS -
SECTION V MANAGEMENT'S RESPONSES SCHEDULE OF MANAGEMENT'S RESPONSES

SECTION I FINANCIAL

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

DEPARTMENOTF AUDITSAND ACCOUNTS
270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400
September 20, 2 0 1 1

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

In accordance with GovernmentAuditing Standards, we have also issued our report dated September 20, 2011, on our consideration of the City of Pelham 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 Standardsand should be considered in assessingthe results of our audit.
Accounting principles generally accepted in the United States of America require that the Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual, as presented on page 25, be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures, to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during the audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance.
Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City of Pelham Board of Education's financial statements as a whole. The accompanying supplementary information consists of Schedules 2 through 5, which includes the Schedule of Expenditures of Federal Awards as required by U. S. Office of Management and Budget Circular A-133, Audi& of States, Local Governments, and Non-Profit Organizations, are presented for purposes of additional analysis and are not a required part of the financial statements. Such information is the responsibility of management and was derived from and relate directly to the underlying accounting and other records used to prepare the financial statements. The information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated, in all material respects, in relation to the financial statements as a whole.
A copy of this report has been filed as a permanent record in the office of the State Auditor and made available to the press of the State, as provided for by Official Code of Georgia Annotated section 50-6-24.
. Respectfully submitted, I
CPA, CGFM

CITY OF PELHAM BOARD OF EDUCATION - MITCHELL COUNTY

CITY OF PELHAM BOARD OF EDUCATION - MITCHELL COUNTY STATEMENT OF NET ASSETS JUNE 30,2010
ASSETS
Cash and Cash Equivalents Accounts Receivable, Net
lnterest Taxes State Government Federal Government Inventories Prepaid Items Capital Assets Land Land Improvements Buildings Equipment Less: Accumulated Depreciation
Total Assets
LIABILITIES
Accounts Payable Salaries and Benefits Payable Interest Payable Long-Term Liabilities
Due Within One Year Due in More Than One Year
Total Liabilities
NET ASSETS
Invested in Capital Assets, Net of Related Debt Restricted for
Bus Replacement Continuat~onof Federal Programs Debt Service Capital Projects Unrestricted
Total Net Assets
Total Liabilities and Net Assets

EXHIBIT "A"
GOVERNMENTAL ACTlVlTl ES

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

CITY OF PELHAM BOARD OF EDUCATION - MITCHELL COUNTY STATEMENT OF ACTIVITIES
FOR THE YEAR ENDED JUNE 3 0 , 2 0 1 0

GOVERNMENTAL ACTIVITIES
Instruction Support Setvices
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 Food Services Interest on Short-Term and Long-Term Debt
Total Governmental Activities
General Revenues Taxes Property Taxes For Maintenance and Operations Sales Taxes Speciai Purpose Local Option Sales Tax For Debt Services For Capital Projects Local Option Sales Tax Grants and Contributions not Restricted to Specific Programs investment Earnings Miscellaneous
Total General Revenues
Change in Net Assets
Net Assets - Beginning of Year
Net Assets - End of Year

EXPENSES

PROGRAM REVENUES

OPERATING

CHARGES FOR

GRANTS AND

SERVICES

CONTRIBUTIONS

NET (EXPENSES) REVENUES
AND CHANGES IN NET ASSETS

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

CITY OF PELHAM BOARD OF EDUCATION - MITCHELL COUNTY
BALANCE SHEET GOVERNMENTAL FUNDS
JUNE 30,2010

GENERAL FUND

DISTRICTWIDE
CAPITAL PROJECTS
FUND

DEBT SERVICE
FUND

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

LIABILITIES AND FUND BALANCES
LIABILITIES
Accounts Payable Salaries and Benefits Payable Dewsits and Deferred Revenue
Total Liabilities
FUND BALANCES
Resewed for: Bus Replacement Continuation of Federal Programs Debt Service Capital Projects
Unresewed Designatedfor Student Activities Undesignated Reportedin: General Fund Capital Projects
Total Fund Balances
Total Liabilities and Fund Balances

TOTAL

The notes to the basicfinancial statements are an integral part ofthis statement. - 3-

CITY OF PELHAM BOARD OF EDUCATION - MITCHELL COUNTY
RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO THE STATEMENT OF NET ASSETS JUNE 30.2010
Total Fund Balances - Governmental Funds (Exhibit "C")
Amounts reported for Governmental Activities in the Statement of Net Assets are different because:
Capital Assets used in Governmental Activities are not financial resources and therefore are not reported in the funds. These assets consist of:
Land Land Improvements Buildings Equipment Accumulated Depreciation
Total Capital Assets
Taxes that are not available to pay for current period expenditures are deferred in the funds.
Long-TermLiabilities, including Bonds Payable, are not due and payable in the current period and therefore are not reported as l~ab~litieinsthe funds.
Long-Term Liabilities a t year-end consist of:
Bonds Payable Accrued Interest
Total Long-Term Llabllit~es
Net Assets of Governmental Activities (Exh~bi"tA")

EXHIBIT "D"

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

CITY OF PELHAM BOARD OF EDUCATION - MITCHELL COUNTY
STATEMENT OF REVENUES, EXPENDITURESAND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS
YEAR ENDEDJUNE 30.2010

REVENUES
Property Taxes Sales Taxes State Funds Federal Funds Charges for Services Investment Earnings Miscellaneous
Total Revenues

GENERAL FUND

DISTRICTWIDE
CAPITAL PROJECTS
FUND

DEBT SERVICE
FUND

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 Food Services Operation
Capital Outlay Debt Services
Interest
Total Expend~tures
Excess of Revenues over (under) Expenditures
OTHER FINANCING SOURCES (USES)
Transfers In Transfers Out
Total Other FinancingSources (Uses)
Net Change in Fund Balances
Fund Balances - Beginning
Fund Balances- Ending

EXHIBIT "C' TOTAL

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

CITY OF PELHAM BOARD OF EDUCATION - MITCHELL COUNTY RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT OF
REVENUES, EXPENDITURESAND CHANGES IN FUND BALANCES TO THE STATEMENT OF ACTIVITIES JUNE 30.2010
Total Net Change in Fund Balances - Governmental Funds (Exhibit"En)
Amounts reported for GovernmentalActiv~t~einsthe Statement of Activities are different because:
Capital Outlays are reported as expenditures in Governmental Funds. However, in the Statement of Activities, the cost of Capital Assets is allocated over their estimated useful lives as depreciation expense. In the current period, these amounts are:
Capital Outlay Depreciation Expense
Excess of Capital Outlay over Depreciation Expense
Taxes reported in the Statement of Activities that do not providecurrent financial resources are not reported as revenue in the funds.
Change in Net Assets of Governmental Activities (Exhibit "B")

EXHIBIT "F"

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

ASSETS
Cash and Cash Equivalents Investments Accounts Receivable, Net
Interest and Dividends

CITY OF PELHAM BOARD OF EDUCATION - MITCHELL COUNTY STATEMENT OF FIDUCIARY NET ASSETS FIDUCIARY FUNDS JUNE 30,2010
PRIVATE PURPOSE TRUSTS

EXHIBIT "G"
AGENCY FUNDS

Total Assets

LIABILITIES Funds Held for Others
NET ASSETS Held in Trust for Private Purposes

Total Liabilities and Net Assets

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

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CITY OF PELHAM BOARD OF EDUCATION - MITCHELL COUNTY
STATEMENT OF CHANGES IN FIDUCIARY NET ASSETS FIDUCIARY FUNDS
YEAR ENDEDJUNE 30.2010
ADDITIONS Contributions Donors Investment Earnings Interest Total Additions
DEDUCTIONS Scholarships Change in Net Assets
Net Assets - Beginning
Net Assets - Ending

EXHIBIT "H"
PRIVATE PURPOSE TRUSTS

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

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

EXHIBIT "I"

Note 1: DESCRIPTION OF SCHOOL DISTRICT AND REPORTING ENTITY
REPORTING ENTITY
The City of Pelham Board of Education (School District) was established under the laws of the State of Georgia and operates under the guidance of a school board elected by the voters and a Superintendent appointed by the Board. The Board is organized as a separate legal entity and has the power to levy taxes and issue bonds. Its budget is not subject to approval by any other entity. Accordingly, the School District is a primary government and consists of all the organizations that compose its legal entity.
Note 2: SUMMARY OF SIGNIFICANTACCOUNTING POLICIES
BASIS OF PRESENTATION
The School District's basic financial statements are collectively comprised of the District-wide financial statements, fund financial statements and notes to the basic financial statements of the City of Pelham Board of Education.
District-wide Statements: The Statement of Net Assets and the Statement of Activities display information about the financial activities of the overall School District, except for fiduciary activities. Eliminations have been made to minimize the double counting of internal activities. Governmental activities generally are financed through taxes, intergovernmental revenues, and other nonexchangetransactions.
The Statement of Activities presents a comparison between direct expenses and program revenues for each function of the School District's governmental activities.
Direct expenses are those that are specifically associated with a program or function and, therefore, are clearly identifiable to a particular function. Indirect expenses (expenses of the School District related to the administration and support of the School District's programs, such as office and maintenance personnel and accounting) are not allocated to programs.
Program revenues include (a) charges paid by the recipients of goods or services offered by the programs and (b) grants and contributions that are restricted to meeting the operational or capital requirements of a particular program. Revenues that are not classified as program revenues, including all taxes, are presented as general revenues.
Fund Financial Statements: The fund financial statements provide information about the School District's funds, including fiduciary funds. Eliminations have been made to minimize the double counting of internal activities. Separate statements for each category (governmental and fiduciary) are presented. The emphasis of fund financial statements is on major governmental funds, each displayed in a separate column.
The School District reports the following major governmental funds:
General Fund is the School District's primary operating fund. It accounts for all financial resources of the School District, except those resources required to be accounted for in another fund.

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

EXHIBIT "I"

District-wide Capital Projects Fund accounts for financial resources including Special Purpose Local Option Sales Tax (SPLOST) to be used for the acquisition, construction or renovation of major capital facilities.
Debt Service Fund accounts for taxes (sales) legally restricted for the payment of general longterm principal, interest and payingagent's fees.
The School District reports the following fiduciary fund types:
Private Purpose Trust funds report trust arrangements under which income provides scholarships to the most outstanding graduating student in the Agricultural Education (Future Farmers of America) Program at Pelham High School. Principal must be invested and preserved intact.
Agency funds account for assets held by the School District as an agent for various funds or individuals.
BASIS OF ACCOUNT1NG
The basis of accounting determines when transactions are reported on the financial statements. The District-wide governmental and fiduciary fund financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded at the time liabilities are incurred, regardless of when the related cash flows take place. Nonexchange transactions, in which the School District gives (or receives) value without directly receiving (or giving) equal value in exchange, include property taxes, sales taxes, grants and donations. On an accrual basis, revenue from property taxes is recognized in the fiscal year for which the taxes are levied. Revenue from sales taxes is recognized in the fiscal year in which the underlying transaction (sale) takes place. Revenue from grants and donations is recognized in the fiscal year in which all eligibility requirements have been satisfied.
The School District uses funds to report on its financial position and the results of its operations. Fund accounting is designed to demonstrate legal compliance and to aid financial management by segregating transactions related to certain governmental functions or activities. A fund is a separate accounting entity with a self-balancing set of accounts.
Governmental funds are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Under this method, revenues are recognized when measurable and available. The School District considers all revenues reported in the governmental funds to be available if they are collected within sixty days after year-end. Property taxes, sales taxes and interest are considered to be susceptible to accrual. Expenditures are recorded when the related fund liability is incurred, except for principal and interest on general long-term debt, which are recognized as expenditures to the extent they have matured. Capital asset acquisitions are reported as expenditures in governmental funds. Proceeds of general long-term liabilities are reported as other financing sources.
The School District funds certain programs by a combination of specific cost-reimbursement grants, categorical grants, and general revenues. Thus, when program costs are incurred, there are both restricted and unrestricted net assets available to finance the program. It is the School District's policy to first apply grant resources to such programs, followed by cost-reimbursement grants, then general revenues.

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

EXHIBIT "I"

The State of Georgia reimburses the School District for teachers' salaries and operating costs through the Quality Basic Education Formula Earnings program (QBE). Generally teachers are contracted for the school year (July 1- June 30) and paid over a twelve month contract period, generally September 1through August 31. In accordance with the respective rules and regulations of the QBE program, the State of Georgia reimburses the School District over the same twelve month period in which teachers are paid. At June 30, the amount of teachers' salaries incurred but not paid until July and August of the subsequent year are accrued. Since the State of Georgia recognizes its QBE liability for the July and August salaries at June 30, the School District recognizes the same QBE as a receivable and revenue, consistent with symmetrical recognition.
NEW ACCOUNTING PRONOUNCEMENTS
In fiscal year 2010, the School District adopted the Governmental Accounting and Standards Board (GASB) Statement No. 51, Accounting and Reporting for Intangible Assets. The provisions of this Statement generally require retroactive reporting for intangible assets acquired after June 30, 1980, with the exception of those intangible assets that have indefinite useful lives and those that are considered internally generated.
In addition, the School District adopted GASB Statement No. 53, Accounting and Financial Reporting for Derivative Instruments. The provisions of this Statement impacts disclosure regarding derivative instruments entered into by the state and local governments. Derivative disclosures, if any, will be identified in Note 3.
CASH AND CASH EQUIVALENTS
Composition of Deposits Cash and cash equivalents consist of cash on hand, demand deposits and short-term investments with original maturities of three months or less from the date of acquisition in authorized financial institutions. Official Code of Georgia Annotated Section 45-8-14 authorizes the School District to deposit its funds in one or more solvent banks, insured Federal savings and loan associations or insured chartered building and loan associations.
l NVESTM ENTS
Composition of 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,

CITY OF PELHAM BOARD OF EDUCATION - MITCHELL COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30.2010

EXHIBIT "I"

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

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

(7) Repurchaseagreements, and

(8) Obligations of other political subdivisions of the State of Georgia.

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

RECEIVABLES

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

PROPERW TAXES

The City of Pelham fixed the property tax levy for the 2009 tax digest year (calendar year) on September 21, 2009 (levy date). Taxes were due on December 20, 2009 (lien date). Taxes collected within the current fiscal year or within 6 0 days after year-end on the 2009 tax digest are reported as revenue in the governmental funds for fiscal year 2010. The City of Pelham City Clerk bills and collects the property taxes for the School District, and remits the balance of taxes collected to the School District. Property tax revenues, at the fund reporting level, during the fiscal year ended June 30,2010, for maintenance and operations amounted to $246,802.45.

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

School Operations
SALESTAXES

8.684 mills

Local Option Sales Tax revenue, at the fund reporting level, during the fiscal year amounted to $423,210.80 and was recorded in the General Fund. Local Option Sales Tax is to be used for the maintenance and operation of the School District.

Special Purpose Local Option Sales Tax, at the fund reporting level, during the year amounted to $857,502.71 and is to be used for capital outlay for educational purposes or debt service. This sales tax was authorized by local referendum and the sales tax must be re-authorized at least every five years.

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

EXHIBIT "I"

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, 2010, 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 t o the School District.

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

statements are as follows:

Capitalization

Estimated

Policy

Useful Life

Land Land lmprovements Buildings and lmprovements Equipment Intangible Assets

$

0.00

$

5,000.00

$

5,000.00

$

5,000.00

$

5,000.00

N/A 20 to 80 years 10to 80 years
3 to 20 years 10to 20 years

Depreciation is used to allocate the actual or estimated historical cost of all capital assets over estimated useful lives, with the exception of intangible assets which are amortized.
Amortization of intangible assets such as water, timber, mineral rights, easements, patents, trademarks, copyrights and internally generated software is computed using the straight-line method over the estimated useful lives of the assets, generally 1 0 to 2 0 years.

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

EXHIBIT "I"

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 and fund financial statements, the School District recognizes bond premiums and discounts, as well as bond issuance costs during the fiscal year bonds are issued. Premiums received on debt issuances are reported as other financing sources while discounts on debt issuances are reported as other financing uses. Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as debt service expenditures. To conform to generally accepted accounting principles, bond premiums and discounts, as well as bond issuance costs should be amortized over the life of the bonds on the District-wide statements. The effect of this deviation is deemed to be immaterial to the fair presentation of the basic financial statements. General obligation bonds are direct obligations and pledge the full faith and credit of the government. The outstanding amount of these bonds is recorded in the Statement of Net Assets.
NET ASSrrS
The School District's net assets in the District-wide Statements are classified as follows:
Invested in capital assets, net of related debt - This represents the School District's total investment in capital assets, net of outstanding debt obligations related to those capital assets. To the extent debt has been incurred but not yet expended for capital assets, such amounts are not included as a component of invested in capital assets, net of related debt.
Restricted net assets - These represent resources for which the School District is legally or contractually obligated to spend resources for bus replacement, continuation of Federal programs, debt service and capital projects in accordance with restrictions imposed by external third parties.
Unrestricted net assets - Unrestricted net assets represent resources derived from property taxes, sales taxes, grants and contributions not restricted to specific programs, charges for services, and miscellaneous revenues. These resources are used for transactions relating to the educational and general operations of the School District, and may be used at the discretion of the Board to meet current expenses for those purposes.
USE OF ESTIMATES
The preparation of the financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results may differ from those estimates.
Note 3: DEPOSITS
COLLATERALIZATION OF DEPOSITS
Official Code of Georgia Annotated (O.C.G.A.) Section 45-8-12 provides that there shall not be on deposit at any time in any depository for a time longer than ten days a sum of money which has not been secured by surety bond, by guarantee of insurance, or by collateral. The aggregate of the face value of such surety bond and the market value of securities pledged shall be equal to not less than 110 percent of the public funds being secured after the deduction of the amount of deposit

CITY OF PELHAM BOARD OF EDUCATION - MITCHELL COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30.2010

EXHIBIT "I"

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. At June 30, 2010, $61,485.21 of deposits were not secured by surety bond, insurance or collateral as specified above. The School District is working with the affected financial institutions to ensure appropriate levels of collateral are maintained for all of the School District's deposits.

Acceptable security for deposits consists of any one of or any combination of the following:

(1)Surety bond signed by a surety company duly qualified and authorized to transact business within the State of Georgia,

(2) lnsurance on accounts provided by the Federal Deposit lnsurance Corporation,

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

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

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

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

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

CATEGORIZATION OF DEPOSITS

Custodial credit risk is the risk that in the event of a bank failure, the School District's deposits may not be returned to it. The School District does not have a deposit policy for custodial credit risk. At June 30, 2010, the bank balances were $3,344,190.95. The amounts exposed to custodial credit risk are classified into three categories as follows:

Category 1Category 2 -
Category 3 -

Uncollateralized, Cash collateralized with securities held by the pledgingfinancial institution, or Cash collateralized with securities held by the pledging financial institution's trust department or agent but not in the School District's name.

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

EXHIBIT "I"

The School District's deposits by custodial credit risk category at June 30, 2010, are as follows:

Custodial Credit Risk Category

Bank Balance

Total

Note 4: NON-MONETARY TRANSACTIONS
The School District receives food commodities from the United States Department of Agriculture (USDA) for school breakfast and lunch programs. These commodities are recorded at their Federally assigned value. See Note 2 - Inventories
Note 5: CAPITAL ASSETS
The following is a summary of changes in the Capital Assets during the fiscal year:

GovernmentalAct~vit~es Capital Assets, Not Being Depreciated:
Land ConstructionWork In Progress

Balances July 1, 2009

Increases

Decreases

Balances June 30,2010

$ 124,184.00 $

0.00

$ 124,184.00

Total Capital Assets, Not Being Depreciated $ 12,262,256.00 $

0.00 $ 12,138,072.00 $ 124,184.00

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

$ 8,492,747.00 $ 680,400.00
2,608,182.00

14,550,132.00 $ 225,934.00

0.00 $ 23,042,879.00 906,334.00
2,608,182.00

Less: Accumulated Depreciation: Buildings and lmprovements Equipment Land lmprovements

Total Capital Assets, Being Depreciated, Net $ 7,130,384.17 $ 14,140,850.83 $

0.00 $ 21,271,235.00

Governmental Activity Capital Assets - Net

$ 19,392,640.17 $ 14,140.850.83 $ 12,138,072.00 $ 21.395.419.00

CITY OF PELHAM BOARD OF EDUCATION - MITCHELL COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30.2010
Current year depreciation expense by function is as follows:
Instruction Support Services
Pupil Services Educational Media Services School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Food Services

EXHIBIT "I"

Note 6: INTERFUNDTRANSFERS

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

Transfer to

Transfers From
General Fund

District-wideCapital Projects

$ 1,722,103.31

Transfers are used to move property tax revenues collected by the General Fund to the District-wide Capital Projects Fund as required match or supplemental funding source for capital construction projects.
Note 7: RISK MANAGEMENT
The School District is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors or omissions; job related illness or injuries to employees; acts of God and unemployment compensation.
The School District participates in the Georgia School Boards Association Risk and Insurance Management System, a public entity risk pool organized on July 1,1994, to develop and administer a plan to reduce risk of loss on account of general liability, motor vehicle liability, or property damage, including safety engineering and other loss prevention and control techniques, and to administer one or more groups of self-insurance funds, including the processing and defense of claims brought against members of the system. The School District pays an annual premium to the system for its general insurance coverage. Additional coverage is provided through agreements by the system with other companies according to their specialty for property, boiler and machinery (including coverage for flood and earthquake), general liability (including coverage for sexual harassment, molestation and abuse), errors and omissions, crime and automobile risks. Payment of excess insurance for the system varies by line of coverage.
The School District has elected to self-insure for all losses related to acts of God. The School District has not experienced any losses related to this risk in the past three years.

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

EXHIBIT "I"

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

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

follows:

Claims and

Beginningof Year

Changes in

Claims

End of Year

Liability

Estimates

Paid

Liability

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

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

Position Covered

Amount

Superintendent Each Principal Finance Director Each Personnel/Payroll Clerk Accounts Payable Clerk All School Nutrition Managers All Employees

Note 8: LONG-TERM DEBT GENERAL OBLIGATION DEBT OUTSTANDING

General Obligation Bonds currently outstanding are as follows:

Purpose General Government- Series 2008

Interest Rate

Amount

Voters have authorized $1,275,000.00 in general obligation debt for capital outlay which was not issued as of June 30,2010.

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

EXHIBIT "I"

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

Balance July 1,2009

Additions

Governmental Funds

Balance

Deductions

June 30, 2010

Due Within One Year

G. 0. Bonds

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

General Obligation Debt

Principal

Interest

Fiscal Year Ended June 30:

Total Principal and Interest

$

4,725,000.00 $

705,910.00

Note 9: ON-BEHALF PAYMENTS
The School District has recognized revenues and costs in the amount of $33,035.61 for health insurance and retirement contributions paid on the School District's behalf by the following State Agencies.
Georgia Department of Education Paid to the Georgia Department of Community Health For Health Insurance of Non-CertifiedPersonnel In the amount of $17,000.11
Paid to the Teachers Retirement System of Georgia For Teachers Retirement System (TRS) Employer's Cost In the amount of $12,452.58
Office of Treasury and Fiscal Services Paid to the Public School Employees Retirement System For Public School Employees Retirement (PSERS) Employer's Cost In the amount of $3,582.92
Note 10: 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.

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

EXHIBIT "I"

Note 11: POST-EMPLOYMENT BENEFITS
GEORGIA SCHOOL PERSONNEL EMPLOYEES POST-EMPLOYMENT HEALTH BENEFIT FUND
Plan Description. The Georgia School Personnel Post-Employment Health Benefit Fund (School OPEB Fund) is a cost-sharing multiple-employer defined benefit post-employment healthcare plan that covers eligible former employees of public school systems, libraries and regional educational service agencies. The School OPEB Fund provides health insurance benefits to eligible former employees and their qualified beneficiaries through the State Employees Health Insurance Plan administered by the Department of Community Health. The Official Code of Georgia Annotated (OCGA) assigns the authority to establish and amend the benefit provisions of the group health plans, including benefits for retirees, to the Board of Community Health (Board).
Funding Policy. The contribution requirements of plan members and participating employers are established by the Board in accordance with the current Appropriations Act and may be amended by the Board. Contributions of plan members or beneficiaries receiving benefits vary based on plan election, dependent coverage, and Medicare eligibility and election. On average, plan members pay approximately 25 percent of the cost of the health insurance coverage.
Participating employers are statutorily required to contribute in accordance with the employer contribution rates established by the Board. The contribution rates are established to fund all benefits due under the health insurance plans for both active and retired employees based on projected "pay-as-you-go" financing requirements. Contributions are not based on the actuarially calculated annual required contribution (ARC) which represents a level of funding that, if paid on an ongoing basis, is projected to cover normal cost each year and amortize any unfunded actuarial liabilities (or funding excess) over a period not to exceed thirty years.
The combined active and retiree contribution rates established by the Board for employers participating in the School OPEB Fund were as follows for the fiscal year ended June 30, 2010:
For certificated teachers, librarians and regional educational service agencies:

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

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

For non-certificated school personnel:

July 2009 -June 2010

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

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

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

EXHIBIT "I"

The School District's combined active and retiree contributions to the health insurance plans, which equaled the required contribution, for the current fiscal year and the preceding two fiscal years were

as follows:

Percentage

Required

Fiscal Year

Contributed

Contribution

Note 12: 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 3 0 years of creditable service, regardless of age, or after 1 0 years of service and attainment of age 60. A member is eligible for early retirement after 25 years of creditable service.
Normal retirement (pension) benefits paid to members are equal to 2% of the average of the member's two highest paid consecutive years of service, multiplied by the number of years of creditable service up to 40 years. Early retirement benefits are reduced by the lesser of one-twelfth of 7% for each month the member is below age 6 0 or by 7% for each year or fraction thereof by which the member has less than 3 0 years of service. It is also assumed that certain cost-of-living adjustments, based on the Consumer Price Index, will be made in future years. Retirement benefits are payable monthly for life. A member may elect to receive a partial lump-sum distribution in addition to a reduced monthly retirement benefit. Death, disability and spousal benefits are also available.
Funding Policy. TRS is funded by member and employer contributions as adopted and amended by the Board of Trustees. Members become fully vested after 1 0 years of service. If a member terminates with less than 1 0 years of service, no vesting of employer contributions occurs, but the member's contributions may be refunded with interest. Member contributions are limited by State

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

EXHIBIT "I"

law to not less than 5% or more than 6% of a member's earnable compensation. Member contributions as adopted by the Board of Trustees for the fiscal year ended June 30, 2010, were 5.25% of annual salary. The member contribution rate will increase to 5.53% effective July 1,2010. Employer contributions required for fiscal year 2010 were 9.74%of annual salary as required by the June 30, 2007, actuarial valuation. The employer contribution rate will increase to 10.28% effective July 1,2010.

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

Fiscal Year

Percentage Contributed

Required Contribution

(This page left intentionally blank)

CITY OF PELHAM BOARD OF EDUCATION - MITCHELL COUNTY GENERAL FUND
SCHEDULE OF REVENUES. EXPENDITURESAND CHANGES IN FUND BALANCES BUDGET AND ACTUAL
YEAR ENDED JUNE 30.2010

SCHEDULE "1"

REVENUES
Property Taxes Sales Taxes State Funds Federal Funds Chargesfor S e ~ l c e s Investment Earnings Miscellaneous
Total Revenues
EXPENDITURES
Current Instruction Support Services Pupil Services Improvementof Instructional Services Educational Media Services General Administration School Administration Busmess Administration Maintenance and Operation of Plant Student Transportation Services Central Support Servlces Other Support Services Enterpr~seOperations Food Services Operation
Total Expenditures
Excessof Revenues over (under) Expenditures
OTHER FINANCINGSOURCES (USES]
Other Sources Other Uses
Total Other Financing Sources (Uses)
Net Change in Fund Balances
Fund Balances - Beginning
Adjustments
- Fund Balances Ending

NONAPPROPRIATED BUDGETS

ORIGINAL (1)

FINAL (I)

ACTUAL AMOUNTS

Notes to the Schedule of Revenues Exoenditures and Changes ~nFund Balances BudEet and Actual
(1) Original and Final Budget amounts do not Include budgeted revenues or expenditures of the various principal accounts.
The accompanyingschedule 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 f~nanc~satal tements.

C I N OF PELHAM BOARDOF EDUCATION- MITCHELL COUNTY
SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS YEAR ENDED JUNE 30.2010

SCHEDULE "2"

FUNDING AGENCY PROGRAM/GRANT
Agriculture. U. S. Department of Child Nutrition Cluster Pass-Through From Georgia Department of Education Food Services School Breakfast Program National School Lunch Program
Total Child Nutrit~onCluster
Other Programs Pass-Through From Georgia Departmentof Education Food Services Fresh Fru~at nd Vegetable Program
Total U. S. Department of Agriculture
Educatlon, U. S. Department of Impact Aid Cluster D~rect lmoact Aid
EducatlonTechnologyState Grants Cluster Pass-Through From Georgia Department of Education Education Technology State Grants
School lmprovement Grants Cluster Pass-Through From Georgia Department of Education School ImprovementGrants
Special EducationCluster Pas-Through From Georgia Department of Educatlon Special Educatlon ARRA - Grants to States
ARRA - Preschool Grants
Grants to States Preschool Grants
Total Special EducatlonCluster
State F~scaSl tabilization Fund Cluster Pass-Through From Georgia Department of Education
ARRA - Education State Grants
Tltle I, Part A Cluster Pass-Through From Georgia Department of Education
ARRA - Title I Grants to Local EducationalAgencies
Title I Grants to Local EducationalAgencies Pass-Through From Mitchell County Board of Education
Title I Grants to Local Educational Agencies
Total Title I, Part A Cluster
Other Programs Pass-Through From Georgia Department of Educatlon
Career and Technical Education- Basic Grants to States
ImprovingTeacher QualityState Grants Rural Education
Total Other Programs
Total U. S. DeDartmentof Educatlon

CFDA NUMBER

PASSTHROUGH
ENTITY ID
NUMBER

EXPENDITURES IN PERIOD

CITY OF PELHAM BOARD OF EDUCATION - MITCHELL COUNTY
SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS YEAR ENDEDJUNE 30.2010

SCHEDULE " 2

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

CFDA NUMBER

PASSTHROUGH
ENTITY ID
NUMBER

EXPENDITURES IN PERIOD

Total Federal Financial Assistance
N/A = Not Available
Notes to the Schedule of Exoenditures of Federal Awards
(1) Includes the Federally assigned value of donated commodities for the Food Donation Program In the amount of $41.951.85.
(2) Expenditures for the funds earned on the School Breakfast Program ($159,344.62) were not maintamed separately and are included in the 2010 Natlonal School Lunch Program.
(3) Funds earned on the Impact Aid Program. in the amount of $9,534.62, do not require reporting of expenditures. (4) Includes Federal Assistance of $8,558.00, provided to subrecipients.
Major Programsare identified by an asterisk (*) in front of the CFDA number.
The accompanying schedule of expenditures of Federal awards includes the Federal grant activity of the City of Pelham Board of Education and IS presented on the mod~fiedaccrual basis of accounting which is the basis of accounting used in the presentation of the fund financial statements.

See notes to the bas~cfinancial statements.

CITY OF PELHAM BOARD OF EDUCATION - MITCHELL COUNTY SCHEDULE OF STATE REVENUE YEAR ENDED JUNE 30,2010
GRANTS Bright From the Start: Georgia Department of Early Care and Learning Pre-Kindergarten Program
Education, Georgia Department of Quallty Basic Education Direct Instructional Cost Kindergarten Program
Kindergarten Program - Early Intervention Program
Primafy Grades (1-3) Program Primafy Grades - Early Intervention (1-3) Program Upper ElementaryGrades (4-5) Program Upper ElementaryGrades - Early Intervention (4-5)Program Middle Grades (6-8) Program High School General Education(9-12) Program Vocational Laboratory(9-12) Program
Students with Disabilities Categories I - V
Gifted Student - Category VI Remedial Education Program Alternative Education Program Media Center Program 20 Days Additional lnstruct~on Staff and Professional Development lndlrect Cost Central Administration School Administration Facility Maintenance and Operations Categorical Grants Pupil Transportation Regular Sparsity Mid-Term Hold Harmless Nursing Services Education Equalization Funding Grant Food Services Vocational Education Amended Formula Adjustment Other State Programs Dual Enrollment Health Insurance Preschool Handlcapped Program Teachers Retirement
Georgia Forestry Commission Improvement Grant
Office of Treasufy and Fiscal Services Publlc School Employees Retirement

SCHEDULE "3"
GOVERNMENTAL FUND TYPE GENERAL FUND

See notes to the basic financial statements.

CITY OF PELHAM BOARD OF EDUCATION - MITCHELL COUNTY
SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS YEAR ENDED JUNE 30,2010

SCHEDULE "4"

PROJECT

ORIGINAL ESTIMATED
COST (1)

(1) The acquiring, constructing, and equipping of a

new high school;

$

(2) rehabilitating, repairing, renovating, extending

and improving existing schools and related

facilities useful or desirable in connection

therewith, includ~ngwlthout limitation, addit~onal

classrooms, roof replacements and repairs,

mechanical systems repairs and replacements,

wiring and infrastructure modifications,

renovations and improvementsto physical

education and athletic facilities;

(3) acquiringand installingsystem-wide

instructional and administrative technology, safety

and security equipment;

(4) acquiringvocational, fine arts, physical

educat~onand athletic equipment:

(5) acquisition of school buses, vehicles and

transportation equipment;

(6) acquiringany necessary property, both real

and personal and acquiringany necessary or

desirable rights in connection therewith.

CURRENT EST1MATED COST (2)

AMOUNT EXPENDED IN CURRENT YEAR (3)

AMOUNT EXPENDED IN PRIOR YEARS (3)

PROJECT STATUS

Ongoing

Ongoing
Ongoing Ongoing Ongo~ng Ongoing

(1) The School District's original cost estimate as specified In the resolution calllngfor the lmposltion 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 Mitchell 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.

See notes to the basic financial statements.

(This page left intentionally blank)

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

SCHEDULE " 5

DESCRIPTION
Dlrect lnstructlonal Programs Kindergarten Program Kindergarten Program-Earlylntervention Program Prlmary Grades (1-3) Program Primary Grades-EarlyInterventIan (1-3) Program Upper Elementary Grades (4-5) Program Upper Elementary Grades-Early Intervention ( 4 5 ) Program Middle Grades (6-8) Program H~ghSchool General Education (9-12) Program Vocational Laboratory (9-12) Program Students with Disabilities Category II Category Ill G~ftedStudent - Category VI Remedlal 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 ( I ) (2)

ELIGIBLEQ8E PROGRAM COSTS

SALARIES

OPERATIONS

TOTAL

$

6,612,760.00 $ 5,419,614.81 $

108,354.84 $

5.527.969.65

TOTAL QBE FORMULA FUNDS

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

See notes to the basic f~nanciasltatements.

SECTION I1 COMPLIANCE AND INTERNAL CONTROL REPORTS

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

DEPARTMENOTF AUDITSAND ACCOUNTS
270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400
September 20,2011

Honorable Nathan Deal, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the City of Pelham 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 GOVERNMENTAUDlTlNG STANDARDS
Ladies and Gentlemen:
We have audited the financial statements of the governmental activities, each major fund, and the aggregate remaining fund information of City of Pelham Board of Education as of and for the year ended June 30, 2010, which collectively comprise City of Pelham Board of Education's basic financial statements and have issued our report thereon dated September 20, 2011. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in GovernmentAuditing Standards, issued by the Comptroller General of the United States.
Internal Control Over Financial Re~orting
In planning and performing our audit, we considered City of Pelham Board of Education's internal control over financial reporting as a basis for designing our auditing procedures for the purpose of expressingour opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the City of Pelham Board of Education's internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness of the City of Pelham Board of Education's internal control over financial reporting.
A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect and correct misstatements on a timely basis. A material weakness is a deficiency, or combination of deficiencies, in internal control such that there is a reasonable possibility that a material misstatement of the entity's financial statements will not be prevented, or detected and corrected on a timely basis.

Our consideration of internal control over financial reporting was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over financial reporting that might be deficiencies, significant deficiencies, or material weaknesses. We did not identify any deficiencies in internal control over financial reporting that we consider to be material weaknesses, as defined above. However, we consider item FS-7841-10-01, described in the accompanying Schedule of Findings and Questioned Costs to be a significant deficiency in internal control over financial reporting. A significant deficiency is a deficiency, or combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance.
Com~lianceand Other Matters
As part of obtaining reasonable assurance about whether City of Pelham Board of Education's financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards,
We noted certain matters that we have reported to management of City of Pelham Board of Education in a separate letter dated September 20, 2011.
City of Pelham Board of Education's response to the finding identified in our audit is described in the accompanying Schedule of Management's Responses. We did not audit City of Pelham Board of Education's response and, accordingly, we express no opinion on it.
This report is intended solely for the information and use of the budget/finance committee, management, members of the City of Pelham Board of Education, others within the entity, Federal awarding agencies and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties.
Respectfully submitted,
~u&pll W. Hinton, CPA, CGFM State Auditor

Russell W. Hinton
STATE AUDITOR
(404) 656-21 74

DEPARTMENOTF AUDITSAND ACCOUNTS
270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400
September 20, 2 0 1 1

Honorable Nathan Deal, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the City of Pelham Board of Education
INDEPENDENTAUDITOR'S REPORT ON COMPLIANCE WlTH REOUIREMENTS THAT COULD HAVE A DIRECT AND MATERIAL EFFECT ON EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WlTH OMB CIRCULAR A-133
Ladies and Gentlemen:
Compliance
We have audited City of Pelham Board of Education's compliance with the types of compliance requirements described in the OMB Circular A-133 Compliance Supplement that could have a direct and material effect on each of its major Federal programs for the year ended June 30, 2010. City of Pelham Board of Education's major Federal programs are identified in the Summary of Auditor's Results section of the accompanying Schedule of Findings and Questioned Costs. Compliance with the requirements of laws, regulations, contracts, and grants applicable to each of its major Federal programs is the responsibility of City of Pelham Board of Education's management. Our responsibility is to express an opinion on City of Pelham Board of Education's compliance based on our audit.
We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and OMB Circular A-133, AuaLB of States, Loca/ Governments, and Non-Pmfit Organizations. Those etandards 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 Pelham Board of Education's compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Our audit does not provide a legal determination on City of Pelham Board of Education's compliance with those requirements.
In our opinion, the City of Pelham Board of Education complied, in all material respects, with the compliance requirements referred to above that could have a direct and material effect on each of its major Federal programsfor the year ended June 30,2010.

Internal Control Over Com~liance
Management of City of Pelham Board of Education is responsible for establishing and maintaining effective internal control over compliance with the requirements of laws, regulations, contracts, and grants applicable to Federal programs. In planning and performing our audit, we considered City of Pelham Board of Education's internal control over compliance with the requirements that could have a direct and material effect on a major Federal program to determine the auditing procedures for the purpose of expressing our opinion on compliance and to test and report on internal control over compliance in accordance with OMB Circular A-133, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of the City of Pelham 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.
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 deficiencies, significant deficiencies, or material weaknesses. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses, as defined above.
This report is intended solely for the information and use of the budget/finance committee, management, members of the City of Pelham Board of Education, others within the entity, Federal awarding agencies and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties.
Respectfully submitted, ,
~ u s J e lWl . Hinton, CPA, CGFM State Auditor

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

CITY OF PELHAM BOARD OF EDUCATION - MITCHELL COUNTY AUDITEE'S RESPONSE
SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30,2010
PRIOR YEAR FINANCIAL STATEMENT FIND1NGS AND QUESTIONED COSTS No matters were reported. PRIOR YEAR FEDERAL AWARD FINDINGS AND QUESTIONED COSTS No matters were reported.

SECTION IV FINDINGS AND QUESTIONED COSTS

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

I SUMMARY OF AUDITOR'S RESULTS

Financial Statements

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

Internal control over financial reporting: Material weakness 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)?

Identification of major programs:

CFDA Number(s1

Name of Federal Program or Cluster

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

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

Auditee qualified as low-risk auditee?

Unqualified N 0 Yes
No None Reported
Unqualified

CITY OF PELHAM BOARD OF EDUCATION - MITCHELL COUNTY SCHEDULE OF FINDINGSAND QUESTIONEDCOSTS YEAR ENDED JUNE 30,2010
II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS
RNENUES/RECEIVABLES/RECEIPTS EXPENDlTURES/LIABI LlTlES/DISBURSEM ENTS Inadequate Accounting Procedures over School Activity Accounts Significant Deficiency Finding Control Number: FS-7841-10-01
Condition: The accounting procedures were insufficient to provide for adequate internal controls over the school activity accounts.
Criteria: The School District's management is responsible for designing and maintaining internal controls that provide proper separation of duties and reasonable assurance that transactions are processed according to established procedures.
Questioned Cost: N/A
Information: Revenues/Receivables/Receipts The following deficiencies were noted during our tests of transactions:
Receipts were not supported by adequate supporting documentation. Receipts could not be traced to the accountings records with the information provided. Receipts were not deposited in a timely manner.
Expenditures/Liabilities/Disbursements The following deficiencies were noted during our tests of transactions:
Expenditures were not approved for payment. Adequate supporting documentation was not maintained with voucher packages. Expenditures could not be traced to the accounting records with the information provided.
Cause: These deficiencies were a result of management's failure to ensure that internal controls were established, implemented and functioning at the school level.
Effect: Errors and/or irregularities may not be detected in a timely manner.
Recommendation: The School District should implement procedures to ensure that the key accounting functions of custody, record keeping and authorization are separated and/or utilize management oversight of these incompatible activities. Additionally, management should also revise and monitor controls to provide reasonable assurance that transactions are processed according to established procedures.
Ill FEDERAL AWARD FINDINGSAND QUESTIONEDCOSTS
No matters were reported.

SECTION V MANAGEMENT'S RESPONSES

CITY OF PELHAM BOARD OF EDUCATION - MITCHELL COUNTY SCHEDULE OF MANAGEMENT'S RESPONSES YEAR ENDED JUNE 30.2010

Finding Control Number: FS-7841-10-01

We concur with this finding. We have implemented procedures to ensure that the key accounting functions of custody, record keeping, and authorization are separated and/or utilize management oversight of these incompatible activities. Management will revise and monitor controls to provide reasonable assurance that transactions are processed according to established procedures.

Contact Person: Telephone: Fax: Email:

James Arnold, Superintendent (229) 294-8715 (229) 294-2760 jarnold@pelham-city.kl2.ga.u~