City of Social Circle Board of Education, Walton County, Georgia, annual financial report for the fiscal year ended June 30, 2014 (including independent auditor's reports)

CITY OF SOCIAL CIRCLE BOARD OF EDUCATION
WALTON COUNTY, GEORGIA
ANNUAL FINANCIAL REPORT FOR THE FISCAL YEAR ENDED JUNE 30, 2014
(Including Independent Auditor's Reports)

CITY OF SOCIAL CIRCLE BOARD OF EDUCATION - WALTON COUNTY - TABLE OF CONTENTS -

SECTION I

FINANCIAL

INDEPENDENT AUDITOR'S REPORT

REQUIRED SUPPLEMENTARY INFORMATION

MANAGEMENT'S DISCUSSION AND ANALYSIS

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

Page
i
1 2 3 4 5 6 7 9
27

CITY OF SOCIAL CIRCLE BOARD OF EDUCATION - WALTON COUNTY - TABLE OF CONTENTS -

SECTION I
FINANCIAL
SCHEDULES
SUPPLEMENTARY INFORMATION
2 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS 3 SCHEDULE OF STATE REVENUE 4 SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS 5 ALLOTMENTS AND EXPENDITURES
GENERAL FUND - QUALITY BASIC EDUCATION PROGRAMS (QBE) BY PROGRAM

Page
28 29 30 31

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 IN ACCORDANCE WITH OMB CIRCULAR A-133

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

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

SECTION I FINANCIAL

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

DEPARTMENT OF AUDITS AND ACCOUNTS
270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400
October 14, 2015

Honorable Nathan Deal, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the City of Social Circle 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 (Exhibits A through H) of the City of Social Circle Board of Education, as of and for the year ended June 30, 2014, and the related notes to the financial statements, 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 are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
2014ARL-11

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 basic financial statements referred to above 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 Social Circle Board of Education, as of June 30, 2014, 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 2014 the City of Social Circle Board of Education adopted new accounting guidance, Governmental Accounting Standards Board (GASB) Statement No. 65, Items Previously Reported as Assets and Liabilities. The School District restated beginning Net Position for the cumulative effect of this accounting change. Our opinion is not modified with respect to this matter.
Other Matters
Required Supplementary Information
Accounting principles generally accepted in the United States of America require that the Management's Discussion and Analysis and the Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual, as presented on pages i through viii and page 27 respectively, 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 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 Social Circle 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.
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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 Governm ent Auditing Standards
In accordance with Government Auditing Standards, we have also issued our report dated October 14, 2015, on our consideration of the City of Social Circle 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 Social Circle 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:as 2014ARL-11

Greg S. Griffin State Auditor

CITY OF SOCIAL CIRCLE BOARD OF EDUCATION - WALTON COUNTY MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2014
INTRODUCTION The intent of this discussion and analysis is to look at the District's financial performance as a whole. The reader should review the notes to the basic financial statements and the financial statements to enhance their understanding of the District's financial performance. The District's financial statements for the fiscal year ended June 30, 2014 includes a series of basic financial statements that report financial information for the District as a whole, its funds, and its fiduciary responsibilities. The Statement of Net Position and the Statement of Activities provide financial information about all of the District's activities and present both a short-term and long-term view of the District's finances. The fund financial statements provide information about all of the District's funds. FINANCIAL HIGHLIGHTS Key financial highlights for fiscal year 2014 are as follows: On the District-wide financial statements:
District-wide net position at June 30, 2014 was approximately $34.3 million. Net position reflects the difference between all assets of the District (including capital assets, net of depreciation) and all liabilities, both short-term and long-term. The net position at June 30, 2014 of $34.3 million represented an increase of approximately $600 thousand when compared to the prior year, after an adjustment for capitalized bond issuance costs.
The School District had over $16.0 million in expenses relating to governmental activities; only $11.2 million of these expenses were offset by program specific charges for services and operating grants and contributions. However, the general revenues (primarily property and sales taxes) of approximately $5.5 provided additional funding of these expenses.
As stated above, general revenues accounted for $5.5 million or about 33% of all revenues totaling approximately $16.0 million. Program specific revenues in the form of charges for services, operating and capital grants, and contributions accounted for the balance of these revenues.
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CITY OF SOCIAL CIRCLE BOARD OF EDUCATION - WALTON COUNTY MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2014
On the fund financial statements:
Among major funds, the General Fund had approximately $15.7 million in revenues and $15.6 million in expenditures. The General Fund balance of approximately $5.7 million at June 30, 2014 increased by approximately $20 thousand from the prior year.
OVERVIEW OF THE FINANCIAL STATEMENTS
These financial statements consists of three parts; management's discussion and analysis (this section), the basic financial statements, including notes to the financial statements, and required supplementary information. The basic financial statements include two levels of statements that present different views of the School District. These include the District-wide and fund financial statements.
The District-wide financial statements include the 'Statement of Net Position' and 'Statement of Activities'. These statements provide information about the activities of the School District presenting both short-term and long-term information about the School District's overall financial status.
The fund financial statements focus on individual parts of the School District, reporting the School District's operation in more detail. The 'Governmental Funds' statements disclose how basic services are financed in the short-term as well as what remains for future spending. The 'Fiduciary Funds' statements provide information about the financial relationships in which the School District acts solely as a trustee or agent for the benefit of others. In the case of the City of Social Circle School District, the General Fund and Capital Projects Fund are considered to be major funds. The District has no non-major funds as defined by GASB Statement 34 for purposes of this report.
The financial statements also include notes that explain some of the information in the statements and provide more detailed data. The statements are followed by a section of required supplementary information that further explains and supports the financial statements. Additionally, other supplementary information (not required) is also presented that further supplements understanding of the financial statements.
District-wide Statements
Since the City of Social Circle School District has no operations that have been classified as "Business Activities", the District-wide financial statements are basically a consolidation of the entire District's operating funds into one column called governmental activities. In reviewing the District-wide financial statements, a reader might ask the question, are we in a better financial position now than last year? The 'Statement of Net Position' and the 'Statement of Activities' provides the basis for answering this question. These financial statements include all District's assets and liabilities and uses the accrual basis of accounting similar to the accounting used by most private-sector companies. This basis of accounting takes into accounts all of the current year's revenues and expenses regardless of when cash is received or paid.
These two statements report the School District's net position and any changes in net position. The change in net position is important because it tells the reader that, for the School District as a whole, the financial position of the School District has improved or diminished. The causes of this change may be the results of many factors, including those not under the School District's control, such as the property tax base, facility conditions, required educational programs, student-teacher ratios, and other factors.
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CITY OF SOCIAL CIRCLE BOARD OF EDUCATION - WALTON COUNTY MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2014
When analyzing District-wide financial statements, it is important to remember these statements are prepared using an economic resources measurement focus (accrual accounting) and involve the following steps to format the Statement of Net Position:
Capitalize current outlays for capital assets Depreciate capital assets Report long-term debt as a liability Calculate revenue and expense using the economic resources measurement focus and the
accrual basis of accounting Allocate net position as follows:
o Net Investment in Capital Assets o Restricted net position is that with constraints placed on the use by external sources such
as creditors, grantors, contributors or laws and regulations. o Unrestricted net position is net position that does not meet any of the above restrictions.
Fund Financial Statements
The School District uses many funds or sub-funds to account for a multitude of financial transactions during the fiscal year. The fund financial statements presented in this report provide detail information about the School District's significant or major funds. As discussed previously, the District has no nonmajor Funds as defined by generally accepted accounting principles.
The District has two kinds of funds as discussed below:
Governmental Funds - Most of the School District's activities are reported in governmental funds, which focus on how money flows into and out of those funds and the balances left at year-end available for spending in future periods. These funds are reported using the modified accrual method of accounting which measures cash and all other financial assets that can be readily be converted to cash. The governmental fund statements provide a detailed short-term view of the School District's general government operations and the basic services it provides. Governmental fund information helps determine whether there are more or fewer financial resources that can be spent in the near future to finance educational programs. The differences between government activities (reported in the Statement of Net Position and the Statement of Activities) and governmental funds are reconciled in the financial statements.
Fiduciary Funds The School District is the trustee, or fiduciary, for assets that belong to clubs, organizations and others within the principals' accounts. The School District is responsible for ensuring that the assets reported in these funds are used only for their intended purposes and by those to whom the assets belong. The School District excludes these activities from the District-wide financial statements because it cannot use these assets to finance its operations.
FINANCIAL ANALYSIS OF THE SCHOOL DISTRICT AS A WHOLE
Net position, which is the difference between total assets and total liabilities, is one indicator of the financial condition of the District. When revenues exceed expenses, the result is an increase in net position. When expenses exceed revenues, the result is a decrease in net position. The relationship between revenues and expenses can be thought of as the District's operating results. The District's net position, as measured in the Statement of Net Position, can be one way to measure the District's financial health, or financial position. Over time, increases or decreases in the District's net position as measured in the Statement of Activities - are one indicator of whether its financial health is improving or deteriorating. However, the District's goal and mission is to provide success for each child's education, not to generate profits as private corporations do. For this reason, many other non-financial factors should be considered in assessing the overall health of the District.
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CITY OF SOCIAL CIRCLE BOARD OF EDUCATION - WALTON COUNTY MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2014

In the case of the City of Social Circle School District, assets exceeded liabilities by approximately $34.3 million at June 30, 2014. To better understand the District's actual financial position and ability to deliver services in future periods, it is necessary to review the various components of the net position category. For example, of the $34.3 million of net position, about $1.7 million was restricted for continuation of Federal programs, debt service, ongoing capital projects and bus replacements. Accordingly, these funds were not available to meet the District's ongoing obligations to citizens and creditors.
In addition, the District had over $28.4 million (net of related debt) invested in capital assets (e.g., land, buildings, and equipment). The District uses these capital assets to provide educational services to students within geographic boundaries served by the District. Because of the very nature and ongoing use of the assets being reported in this component of net position, it must be recognized that this portion of the net position is not available for future spending.
The remaining balance of unrestricted net position of approximately $4.2 million may be used to meet the District's ongoing obligations to citizens and creditors.
Table 1 provides a summary of the School District's net position for this fiscal year as compared to the prior fiscal year.

Table 1 Net Position

Governmental Activities

Fiscal

Fiscal

Year 2014

Year 2013

Assets Current and Other Assets (2013 restated) Capital Assets, Net

$

9,615,667 $ 13,795,367

30,474,257

24,126,720

Total Assets

40,089,924

37,922,087

Liabilities Current and Other Liabilities

5,790,620

4,289,165

Net Position Net Investment in Capital Assets Restricted Unrestricted (2013 restated)

28,405,737 1,717,115 4,176,452

22,048,360 7,410,576 4,173,986

Total Net Position

$

34,299,304 $ 33,632,922

Total net position increased by $666 thousand in fiscal year 2014 from the prior year. This change in net position is detailed in Table 2 as presented below.

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CITY OF SOCIAL CIRCLE BOARD OF EDUCATION - WALTON COUNTY MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2014

Table 2 Change in Net Position

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

Governmental Activities

Fiscal Year

Fiscal Year

2014

2013

$

1,794,839 $

2,062,251

9,403,272

9,086,055

Total Program Revenues

11,198,111

11,148,306

General Revenues: Taxes Property Taxes Sales Taxes Grants and Contributions not Restricted to Specific Programs Investment Earnings Miscellaneous

2,554,316 1,067,809
1,449,411 85,065
351,994

2,422,839 1,154,354
1,616,940 66,300
324,627

Total General Revenues

5,508,595

5,585,060

Total Revenues

16,706,706

16,733,366

Program Expenses: 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 Food Services Interest on Short-Term and Long-Term Debt

9,609,626
480,143 337,411 333,183 661,719 1,176,629 150,805 1,328,756 730,323
650 211,891
144,980 870,833
3,374

9,860,818
450,497 306,679 324,878 650,828 1,133,190 150,084 1,211,619 754,388
860 190,081
169,737 858,285
3,753

Total Expenses

16,040,323

16,065,697

Increase in Net Position

$

666,383 $

667,669

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CITY OF SOCIAL CIRCLE BOARD OF EDUCATION - WALTON COUNTY MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2014

Cost of Providing Services
The Statement of Activities shows the cost of program services and the charges for services and grants offsetting these services. Table 3 shows, for governmental activities, the total cost of services and the net cost of services. Net cost of services can be defined as the total cost less fees generated by the activities and intergovernmental revenue provided for specific programs. The net cost reflects the financial burden on the School District's taxpayers by each activity as compared to the prior fiscal year.

Table 3 Governmental Activities

Total Cost of Services

Fiscal

Fiscal

Year 2014

Year 2013

Net Cost of Services

Fiscal

Fiscal

Year 2014

Year 2013

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

Food Services

Interest on Short-Term and Long-Term Debt

9,609,626 $
480,143 337,411 333,183 661,719 1,176,629 150,805 1,328,756 730,323
650 211,891
144,980 870,833
3,374

9,860,818 $
450,497 306,679 324,878 650,828 1,133,190 150,084 1,211,619 754,388
860 190,081
169,737 858,285
3,753

1,547,534 $
407,358 140,779 126,426 192,229 617,678 150,805 818,012 556,813
650 96,328
94,501 89,725
3,374

2,104,463
331,158 145,883
96,299 108,695 489,245 136,845 700,910 566,278
860 74,859
94,822 63,320
3,753

Total Expenses

$

16,040,323 $

16,065,697 $

4,842,212 $

4,917,390

FINANCIAL ANALYSIS OF THE SCHOOL DISTRICT'S FUNDS

Information about the School District's governmental funds is presented starting on Exhibit "E" of this report. Governmental funds are accounted for using the modified accrual basis of accounting. The governmental funds had total revenues over $16.7 million and total expenditures of $22.4 million in fiscal year 2014. Total governmental fund balances of approximately $5.8 million at June 30, 2014, decreased approximately $5.7 million from the prior year.

General Fund Budget Highlights

The School District's budget is prepared according to Georgia Law. The most significant budgeted fund is the General Fund. During the course of fiscal year 2014, the School District amended its general fund budget as needed.

The School District budget is adopted at the aggregate level and maintained at the program, function, object, and site levels to facilitate budgetary control. The budgeting systems are designed to control the total budget, but provide flexibility to meet the ongoing programmatic needs. The budgeting systems are also designed to control total site budgets but provide flexibility for site management as well.

vi

CITY OF SOCIAL CIRCLE BOARD OF EDUCATION - WALTON COUNTY MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2014

For the General Fund, the final actual revenues of $15.7 million were less than the final budgeted amount of $16.7 million by approximately $1.0 million. This can be attributed to receiving less Federal Funds, Charges for Services, and miscellaneous income than originally expected.
The General Fund's final actual expenditures of $15.6 million were less than the final budget amount of $16.7 by approximately $1.1 million. The District believes it effectively managed its budget during the fiscal year. Additionally, the District did include revenues and expenditures for school activity accounts in the final budget.
CAPITAL ASSETS AND DEBT ADMINISTRATION
Capital Assets
At fiscal year ended June 30, 2014, the School District had over $30.5 million invested in capital assets, net of accumulated depreciation, all in governmental activities. These assets are made up of a broad range of items including buildings; land; land improvements; and food service, transportation and maintenance equipment. Table 4 reflects a summary of these balances, net of accumulated depreciation, as compared to the prior fiscal year.

Table 4 Capital Assets (Net of Depreciation)

Governmental Activities

Fiscal

Fiscal

Year 2014

Year 2013

Land Construction In Progress Land Improvements Building and Improvements Equipment

$

1,132,964 $

7,177,031

21,015,837

601,819

546,606

1,132,964 544,403
21,239,651 666,884 542,819

Total

$

30,474,257 $

24,126,721

Additional information about the School District's Capital Assets can be found in the Notes to the Basic Financial Statements.
Long-Term Debt
At June 30, 2014, the School District had just over $2.0 million in total debt outstanding which consisted of $2.0 million in bond debt, and roughly $68,520 in installment sale agreement. Table 5 summarizes the School District's debt as compared to the prior fiscal year.

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CITY OF SOCIAL CIRCLE BOARD OF EDUCATION - WALTON COUNTY MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2014

Table 5 Debt at June 30

Governmental Activities

Fiscal

Fiscal

Year 2014

Year 2013

Bonds Payable

$

Installment Sales Agreement

2,000,000 $ 68,520

2,000,000 78,360

Total

$

2,068,520 $

2,078,360

Additional information about the School District's debt can be found in the Notes to the Basic Financial Statements.
FACTORS BEARING ON THE DISTRICT'S FUTURE
Currently known circumstances that are expected to have a significant effect on financial position or results of operations in future years are as follows:
The District is financially stable. The School District's operating millage for fiscal year 2014 was 16.873, which produced approximately $146,155 per mill.
The District increased the operating millage for fiscal year 2015 to 19.79, which is projected to produce approximately $139,350 per mill and an increase in ad valorem revenue of $401,748 for fiscal year 2015.
The School District is financially challenged by the State's continuing reduction of state revenue appropriations to local school districts. The system is scheduled to receive $59,355 in increased revenue for fiscal year 2015. This is the result of a increase in fiscal year 2015 equalization of $362,328.
The District is expecting a revenue increase of $513,259 in fiscal year 2016 based on an increase in the state allotment to education and more funding applied to the equalization grant.
The District started Phase II of the Athletic Complex construction at Social Circle High School in fiscal year 2014 with the completion in fiscal year 2015. The project expenditures were formalized with Educational Local Option Sales Tax (ELOST). The District regularly monitors anticipated capital outlay needs for facility repair and maintenance. In November 2011, the citizens of Walton County voted to renew the current ELOST which began January 1, 2013 and will end December 31, 2017. In March 2013, the citizens of Newton County voted to renew the current ELOST which began January 1, 2015 and will end December 31, 2019. The District receives a small allocation from the Newton County ELOST.
CONTACTING THE SCHOOL DISTRICT'S FINANCIAL MANAGEMENT
This financial report is designed to provide our citizens, taxpayers, investors and creditors with a general overview of the School District's finances and to show the School District's accountability for the money it receives. If you have questions about this report or need additional financial information, contact Allison Pittard, Chief Financial Officer, City of Social Circle School District, 147 Alcova Drive, Social Circle, Georgia 30025. You may also email your questions to Allison Pittard at allison.pittard@socialcircleschools.org.
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CITY OF SOCIAL CIRCLE BOARD OF EDUCATION - WALTON COUNTY

CITY OF SOCIAL CIRCLE BOARD OF EDUCATION - WALTON COUNTY STATEMENT OF NET POSITION JUNE 30, 2014
ASSETS
Cash and Cash Equivalents Investments Accounts Receivable, Net
Taxes State Government Federal Government Other Inventories Capital Assets, Non-Depreciable Capital Assets, Depreciable (Net of Accumulated Depreciation)
Total Assets
LIABILITIES
Accounts Payable Salaries and Benefits Payable Payroll Withholdings Payable Contracts Payable Retainages Payable Deposits and Unearned 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 Other (Bus Replacement) Unrestricted
Total Net Position

EXHIBIT "A"
GOVERNMENTAL ACTIVITIES
$ 4,554,756.05 3,439,305.49 334,768.64 1,053,115.81 204,033.72 8,960.11 20,727.96 8,309,995.52
22,164,261.49 40,089,924.79
269,521.35 1,764,144.19
213,179.94 886,096.91 570,172.00
18,985.90 10,320.00 2,058,200.00 5,790,620.29
28,405,737.01 33,188.87
1,648,747.07 35,179.50
4,176,452.05
$ 34,299,304.50

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

CITY OF SOCIAL CIRCLE BOARD OF EDUCATION - WALTON COUNTY STATEMENT OF ACTIVITIES
FOR THE YEAR ENDED JUNE 30, 2014

EXHIBIT "B"

EXPENSES

PROGRAM REVENUES

OPERATING

CHARGES FOR

GRANTS AND

SERVICES

CONTRIBUTIONS

NET (EXPENSES) REVENUES
AND CHANGES IN NET POSITION

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 Food Services Interest on Short-Term and Long-Term Debt

$ 9,609,625.68 $ 1,545,614.18 $ 6,516,478.09 $

480,142.54 337,410.71 333,182.54 661,718.71 1,176,629.35 150,805.13 1,328,756.45 730,323.44
650.00 211,890.96

18,725.00

72,784.58 196,631.47 206,757.00 469,489.28 558,950.95
492,019.06 173,510.60
115,562.63

144,980.21 870,833.77
3,374.05

50,374.17 180,125.95

105.35 600,983.19

-1,547,533.41
-407,357.96 -140,779.24 -126,425.54 -192,229.43 -617,678.40 -150,805.13 -818,012.39 -556,812.84
-650.00 -96,328.33
-94,500.69 -89,724.63
-3,374.05

Total Governmental Activities

$ 16,040,323.54 $ 1,794,839.30 $ 9,403,272.20

-4,842,212.04

General Revenues Taxes Property Taxes For Maintenance and Operations Sales Taxes Special Purpose Local Option Sales Tax For Capital Projects Grants and Contributions not Restricted to Specific Programs Investment Earnings Miscellaneous

2,554,316.05
1,067,809.27 1,449,411.00
85,064.42 351,993.96

Total General Revenues

5,508,594.70

Change in Net Position

666,382.66

Net Position - Beginning of Year (Restated)

33,632,921.84

Net Position - End of Year

$ 34,299,304.50

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

CITY OF SOCIAL CIRCLE BOARD OF EDUCATION - WALTON COUNTY BALANCE SHEET
GOVERNMENTAL FUNDS JUNE 30, 2014

EXHIBIT "C"

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

GENERAL FUND

DISTRICTWIDE
CAPITAL PROJECTS
FUND

TOTAL

$ 4,965,161.03

$ 4,965,161.03

1,662,199.26 $ 1,777,106.23

3,439,305.49

245,400.98 1,053,115.81
204,033.72 8,760.11
20,727.96

89,367.66 200.00

334,768.64 1,053,115.81
204,033.72 8,960.11
20,727.96

$ 8,159,398.87 $ 1,866,673.89 $ 10,026,072.76

LIABILITIES, DEFERRED INFLOWS OF RESOURCES AND FUND BALANCES
LIABILITIES
Cash Overdraft Accounts Payable Salaries and Benefits Payable Payroll Withholdings Payable Contracts Payable Retainages Payable Deposits and Unearned Revenue
Total Liabilities
DEFERRED INFLOWS OF RESOURCES
Unavailable Revenue - Property Taxes
FUND BALANCES
Nonspendable Restricted Assigned Unassigned
Total Fund Balances

$ $ 269,521.35
1,764,144.19 213,179.94
18,985.90

410,404.98 $
886,096.91 570,172.00

410,404.98 269,521.35 1,764,144.19 213,179.94 886,096.91 570,172.00
18,985.90

2,265,831.38 1,866,673.89

4,132,505.27

141,597.36

141,597.36

20,727.96 1,709,558.46
113,146.10 3,908,537.61
5,751,970.13

20,727.96 1,709,558.46
113,146.10 3,908,537.61
5,751,970.13

Total Liabilities, Deferred Inflows of Resources and Fund Balances

$ 8,159,398.87 $ 1,866,673.89 $ 10,026,072.76

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

CITY OF SOCIAL CIRCLE BOARD OF EDUCATION - WALTON COUNTY RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET
TO THE STATEMENT OF NET POSITION JUNE 30, 2014

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 Installment Sales Agreement
Total Long-Term Liabilities
Net Position of Governmental Activities (Exhibit "A")

$ 5,751,970.13

$ 1,132,964.29 7,177,031.23 878,397.38
29,255,704.38 1,868,336.32 -9,838,176.59

30,474,257.01

141,597.36

$ -2,000,000.00 -68,520.00

-2,068,520.00

$ 34,299,304.50

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

CITY OF SOCIAL CIRCLE BOARD OF EDUCATION - WALTON COUNTY STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES
GOVERNMENTAL FUNDS YEAR ENDED JUNE 30, 2014

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

GENERAL FUND

DISTRICTWIDE
CAPITAL PROJECTS
FUND

TOTAL

$ 2,580,624.39

$ 2,580,624.39

$ 1,067,809.27

1,067,809.27

9,521,347.18

9,521,347.18

1,331,336.02

1,331,336.02

1,794,839.30

1,794,839.30

74,051.52

11,012.90

85,064.42

348,822.36

3,171.60

351,993.96

15,651,020.77 1,081,993.77 16,733,014.54

9,355,163.03
480,142.54 337,410.71 333,182.54 674,101.04 1,176,131.37 150,793.04 1,165,238.71 648,874.16
650.00 211,890.96 144,980.21 864,003.88
9,840.00 3,374.05
15,555,776.24
95,244.53

41,639.28
15,990.00 12.09
211,904.30
6,572,378.45
6,841,924.12 -5,759,930.35

9,396,802.31
480,142.54 337,410.71 333,182.54 674,101.04 1,192,121.37 150,805.13 1,377,143.01 648,874.16
650.00 211,890.96 144,980.21 864,003.88 6,572,378.45
9,840.00 3,374.05
22,397,700.36
-5,664,685.82

-75,518.38 -75,518.38 19,726.15 5,732,243.98

75,518.38
75,518.38 -5,684,411.97 5,684,411.97

75,518.38 -75,518.38
0.00 -5,664,685.82 11,416,655.95

Fund Balances - Ending

$ 5,751,970.13 $

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

0.00 $ 5,751,970.13

CITY OF SOCIAL CIRCLE BOARD OF EDUCATION - WALTON COUNTY RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT OF
REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES TO THE STATEMENT OF ACTIVITIES JUNE 30, 2014

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 increase net position.
Taxes reported in the Statement of Activities that do not provide current financial resources are not reported as revenues in the funds.
Repayment of Long-Term Debt is reported as an expenditure in Governmental Funds, but the repayment reduces Long-Term Liabilities in the Statement of Net Position. In the current year, these amounts consist of:
Installment Sales Agreement
Change in Net Position of Governmental Activities (Exhibit "B")

$ -5,664,685.82

$ 6,804,244.91 -488,540.09

6,315,704.82

31,832.00

-26,308.34

9,840.00 $ 666,382.66

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

CITY OF SOCIAL CIRCLE BOARD OF EDUCATION - WALTON COUNTY STATEMENT OF FIDUCIARY NET POSITION FIDUCIARY FUNDS JUNE 30, 2013
ASSETS Cash and Cash Equivalents
LIABILITIES Funds Held for Others

EXHIBIT "G"

AGENCY FUNDS

$

94,819.28

$

94,819.28

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

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CITY OF SOCIAL CIRCLE BOARD OF EDUCATION - WALTON COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2014

EXHIBIT "H"

NOTE 1: DESCRIPTION OF SCHOOL DISTRICT AND REPORTING ENTITY
REPORTING ENTITY
The City of Social Circle 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 Social Circle 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, 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. All remaining governmental funds are aggregated and reported as nonmajor 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) that are restricted, committed or assigned to the expenditure for capital outlays, including the acquisition or construction of capital facilities and other capital assets.
The School District reports the following fiduciary fund type:
Agency funds account for assets held by the School District as an agent for various governments or individuals.
- 9 -

CITY OF SOCIAL CIRCLE BOARD OF EDUCATION - WALTON COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2014

EXHIBIT "H"

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, and grants. 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 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 longterm 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.

RESTATEMENT OF PRIOR YEAR NET POSITION
For fiscal year 2014, the School District made several prior period adjustments due to the adoption of GASB Statement No. 65, as described in "New Accounting Pronouncements" below, which require the restatement of the June 30, 2013, net position in Governmental Activities. The result is a decrease in Net Position at July 1, 2013 of $36,437.50. This change is in accordance with generally accepted accounting principles.

Net Position, July 1, 2013, as previously reported

$ 33,669,359.34

Reclassification of Bond Issuance Costs

-36,437.50

Net Position, July 1, 2013, as restated

$ 33,632,921.84

NEW ACCOUNTING PRONOUNCEMENTS
In fiscal year 2014, the School District adopted the Governmental Accounting Standards Board (GASB) Statement No. 65, Items Previously Reported as Assets and Liabilities. The provisions of this Statement establish accounting and financial reporting standards that reclassify, as deferred outflows or inflows of resources, certain items that were previously reported as assets and liabilities and recognizes, as
- 10 -

CITY OF SOCIAL CIRCLE BOARD OF EDUCATION - WALTON COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2014

EXHIBIT "H"

outflows or inflows of resources, certain items that were previously reported as assets and liabilities. As noted above the School District restated beginning Net Position for the cumulative effect of this accounting change.
FUTURE ACCOUNTING PRONOUNCEMENTS
In fiscal year 2015, the School District will adopt Governmental Accounting Standards Board (GASB) Statement No. 68, Accounting and Financial Reporting for Pensions. The provisions of this Statement establish accounting and financial reporting standards for pensions that are provided to the employees of state and local governmental employers through pension plans that are administered through trusts. Implementation of this statement will require the School District to record a liability for its proportionate share of the Net Pension Liability of pension plans in which it participates. Based on information provided by the Teacher Retirement System of Georgia (TRS) the School District's liability for its proportionate share of the Net Pension Liability of the pension plan administered through TRS is estimated to be $10.6 million at June 30, 2015.
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 interest-earning 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 local government investment pool (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 risk, credit quality risks, custodial of credit risks, interest rate risks, or foreign currency risks.

- 11 -

CITY OF SOCIAL CIRCLE BOARD OF EDUCATION - WALTON COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2014

EXHIBIT "H"

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

PROPERTY TAXES
The City of Social Circle fixed the property tax levy for the 2013 tax digest year (calendar year) on October 16, 2013 (levy date) based on property values as of January 1, 2013. Taxes were due on December 17, 2013 (lien date). Taxes collected within the current fiscal year or within 60 days after year-end on the 2013 tax digest are reported as revenue in the governmental funds for fiscal year 2014. The City of Social Circle 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, 2014, for maintenance and operations amounted to $2,466,067.33.
The tax millage rate levied for the 2013 tax year (calendar year) for the City of Social Circle Board of Education was as follows (a mill equals $1 per thousand dollars of assessed value):

School Operations

16.873 mills

Additionally, Title Ad Valorem Tax revenues, at the fund reporting level, amounted to $114,557.06 during fiscal year ended June 30, 2014.
SALES TAXES
Education Special Purpose Local Option Sales Tax, at the fund reporting level, during the year amounted to $1,067,809.27 and is to be used for capital outlay for educational purposes. This sales tax was authorized by local referendum and the sales tax must be re-authorized at least every five years.
INVENTORIES
Food Inventories
On the basic financial statements, inventories of donated food commodities used in the preparation of meals are reported at their Federally assigned value and purchased foods inventories are reported at cost (first-in, first-out). The School District uses the consumption method to account for inventories whereby donated food commodities are recorded as an asset and as revenue when received, and expenses/expenditures are recorded as the inventory items are used. Purchased foods are recorded as an asset when purchased and expenses/expenditures are recorded as the inventory items are used.
CAPITAL ASSETS
Capital assets purchased, including capital outlay costs, are recorded as expenditures in the fund financial statements at the time of purchase (including ancillary charges). On the District-wide financial statements, all purchased capital assets are valued at cost where historical records are available and at estimated historical cost based on appraisals or deflated current replacement cost where no historical records exist. Donated capital assets are recorded at estimated fair market value on the date donated. Disposals are deleted at depreciated recorded cost. The cost of normal maintenance and repairs that do not add to the value of assets or materially extend the useful lives of the assets is not capitalized. Depreciation is computed using the straight-line method. The School District does not capitalize book collections or works of art. During the fiscal year under review, no events or changes in circumstances affecting a capital asset that may indicate impairment were known to the School District.

- 12 -

CITY OF SOCIAL CIRCLE BOARD OF EDUCATION - WALTON COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2014

EXHIBIT "H"

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

Capitalization Policy

Estimated Useful Life

Land Land Improvements Buildings and Improvements Equipment Intangible Assets

ALL

$

10,000.00

$

10,000.00

$

10,000.00

$

10,000.00

N/A 20 to 80 years 25 to 80 years
8 to 50 years 15 to 50 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, and mineral rights, easements, patents, trademarks, copyrights and internally generated software is computed using the straight-line method over the estimated useful lives of the assets, generally 15 to 50 years.
DEFERRED OUTFLOWS/INFLOWS OF RESOURCES
In addition to assets, the statement of net position and/or the balance sheet will sometimes report a separate section for deferred outflows of resources. This separate financial statement element represents a consumption of resources that applies to a future period(s) and therefore will not be recognized as an outflow of resources (expense/expenditure) until then. The School District did not have any items that qualified for reporting in this category for the year ended June 30, 2014.
In addition to liabilities, the statement of net position and/or the balance sheet will sometimes report a separate section for deferred inflows of resources. This separate financial statement element represents an acquisition of resources that applies to a future period(s) and therefore will not be recognized as an inflow of resources (revenue) until that time. The School District has only one type of item, which arises only under a modified accrual basis of accounting that qualifies for reporting in this category. Accordingly, the item, unavailable revenue, is reporting only in the governmental funds balance sheet. The governmental funds report unavailable revenues from property taxes and grants and these amounts are deferred and will be recognized as an inflow of resources in the period in which the amounts become available.
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 are deferred and amortized over the life of the bonds using the straight-line method. Bond issuance costs are recognized as an outflow of resources in the fiscal year in which the bonds are issued.
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.

- 13 -

CITY OF SOCIAL CIRCLE BOARD OF EDUCATION - WALTON COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2014

EXHIBIT "H"

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 bus replacement, 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, grants and contributions not restricted to specific programs, charges for services, and miscellaneous revenues. These resources are used for transactions relating to the educational and general operations of the School District, and may be used at the discretion of the Board to meet current expenses for those purposes.
FUND BALANCES
The School District's fund balances are classified as follows:
Nonspendable Amounts that cannot be spent either because they are in a nonspendable form or because they are legally or contractually required to be maintained intact.
Restricted Constraints are placed on the use of resources are either (1) externally imposed conditions by creditors, grantors, contributors, or laws and regulations of other governments or (2) imposed by law through constitutional provisions or enabling legislation.
Committed Amounts that can be used only for specific purposes pursuant to constraints imposed by formal action of the Board of Education. The Board of Education is the School District's highest level of decision-making authority, and the formal action that is required to be taken to establish, modify, or rescind a fund balance commitment is a resolution approved by the Board. Committed fund balance also should incorporate contractual obligations to the extent that existing resources in the fund have been specifically committed for use in satisfying those contractual requirements.
Assigned Amounts that are constrained by the School District's intent to be used for specific purposes, but are neither restricted nor committed. The intent should be expressed by (1) the Board of Education or (2) the budget or finance committee, or the Superintendent, or designee, to assign amounts to be used for specific purposes.
Unassigned The residual classification for the General Fund. This classification represents fund balances that has not been assigned to other funds and that has not been restricted, committed, or assigned to specific purposes within the General Fund.

- 14 -

CITY OF SOCIAL CIRCLE BOARD OF EDUCATION - WALTON COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2014

EXHIBIT "H"

Fund Balances of the Governmental Funds at June 30, 2014, are as follows:

Nonspendable Inventories
Restricted Bus Replacement Continuation of Federal Programs Debt Service Other - Rutland Center
Assigned After School Program School Activity Accounts
Unassigned

$

20,727.96

$

35,179.50

12,460.91

1,648,747.07

13,170.98

1,709,558.46

$

34,133.66

79,012.44

113,146.10 3,908,537.61

Fund Balance, June 30, 2014

$ 5,751,970.13

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 5% 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.
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 fund. There is no statutory prohibition regarding over expenditure of the budget at any level. The budget for the general fund is prepared and adopted by function. The legal level of budgetary control was established by the Board at the aggregate function 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 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.

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CITY OF SOCIAL CIRCLE BOARD OF EDUCATION - WALTON COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2014

EXHIBIT "H"

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, 2014, the School District had deposits with a carrying amount of $6,295,003.73, which includes $1,645,428.40 in Certificates of Deposit that are reported as Investments, and a bank balance of $6,391,834.41. The bank balances insured by Federal depository insurance were $443,786.10.

The amounts exposed to custodial credit risk are classified into three categories as follows:

Category 1 Category 2 -
Category 3 -

Uncollateralized, Cash collateralized with securities held by the pledging financial 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.

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CITY OF SOCIAL CIRCLE BOARD OF EDUCATION - WALTON COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2014

EXHIBIT "H"

The School District's deposits by custodial risk category at June 30, 2014, are as follows:

Custodial Credit Risk Category

Bank Balance

1

$

0.00

2

0.00

3

5,948,048.31

Total

$ 5,948,048.31

CATEGORIZATION OF INVESTMENTS

At June 30, 2014, the carrying value of the School District's total investments were $3,439,305.49. This includes ($1,645,428.40) invested in Certificates of Deposit, which are collateralized in the same manner as other cash deposits. The School District's investments as of June 30, 2014, are presented below. All investments are presented by investment type and debt securities are presented by maturity.

Investment Type

Fair Value

Investment Maturity

Less Than 1 Year

1 - 5 Years

Debt Securities U. S. Agencies Implicitly Guaranteed U. S. Treasuries Money Market Funds

$ 1,643,852.04 13,033.77 $

$ 1,643,852.04 13,033.77

1,656,885.81 $

13,033.77 $ 1,643,852.04

Investment Pools Office of State Treasurer Georgia Fund 1

136,991.28

Total Investments

$ 1,793,877.09

The Georgia Fund 1 (local government investment pool) administered by the State of Georgia, Office of the State Treasurer 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 and does not 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 for Georgia Fund 1 on June 30, 2014, was 62 days.

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CITY OF SOCIAL CIRCLE BOARD OF EDUCATION - WALTON COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2014

EXHIBIT "H"

Interest Rate Risk
Interest rate risk is the risk that changes in interest rates of debt investment will adversely affect the fair value of an investment. The School District does not have a formal policy for managing interest rate risk.

Custodial Credit Risk
Custodial credit risk for investments is the risk that, in the event of the failure of the counterparty to a transaction, the School District will not be able to recover the value of the investment or collateral securities that are in the possession of an outside party. The School District does not have a formal policy for managing custodial credit risk for investments.

Credit Quality Risk
Credit quality risk is the risk that an issuer or other counterparty to an investment will not fulfill its obligations. The School District does not have a formal policy for managing custodial credit risk.
The investments subject to credit quality risk are reflected below:

Rated Debt Investments

Fair Value

Quality Ratings

AAAm

Unrated

Debt Securities U. S. Agencies Implicitly Guaranteed U. S. Treasuries Money Market

$ 1,643,852.04 13,033.77 $

$ 1,643,852.04 13,033.77

Totals by Quality Ratings $ 1,656,885.81 $

13,033.77 $ 1,643,852.04

Concentration of Credit Risk
Concentration of credit risk is the risk of loss attributed to the magnitude of a government's investment in a single issuer. The School District does not have a formal policy for managing concentration of credit risk. More than 5% of the School District's investments are in Federal Home Loan Mortgage Corporation Discount Notes. This investment is 91% of the School District's total investments.
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

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CITY OF SOCIAL CIRCLE BOARD OF EDUCATION - WALTON COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2014

EXHIBIT "H"

NOTE 6: CAPITAL ASSETS
The following is a summary of changes in the Capital Assets during the fiscal year:

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

Balances July 1, 2013

Adjustments

Increases

Decreases

Balances June 30, 2014

$ 1,132,964.29 $ 544,403.00

0.00 $

6,632,628.23 $

$ 1,132,964.29

0.00

7,177,031.23

Total Capital Assets, Not Being Depreciated

1,677,367.29

0.00

6,632,628.23

0.00

8,309,995.52

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

29,156,057.38 1,816,399.42 836,758.10

32,894.00

66,753.00 63,224.40 41,639.28

11,287.50

29,255,704.38 1,868,336.32 878,397.38

Less: Accumulated Depreciation: Buildings and Improvements Equipment Land Improvements

7,916,406.82 1,149,515.77
293,939.41

592.09

322,868.85 127,819.15
37,852.09

10,817.59

8,239,867.76 1,266,517.33
331,791.50

Total Capital Assets, Being Depreciated, Net

22,449,352.90

32,301.91

-316,923.41

469.91 22,164,261.49

Governmental Activity Capital Assets - Net $ 24,126,720.19 $ 32,301.91 $ 6,315,704.82 $

469.91 $ 30,474,257.01

Capital assets being acquired under an installment sales agreement as of June 30, 2014, are as follows:
Governmental Funds

Buildings and Improvements Less: Accumulated Depreciation

$

113,947.48

7,025.78

$

106,921.70

Current year depreciation expense by function is as follows:

Instruction Support Services
General Administration School Administration Maintenance and Operation of Plant Student Transportation Services Food Services

$
$ 10,606.05 533.00
2,217.55 112,865.68

$

352,773.84
126,222.28 9,543.97
488,540.09

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CITY OF SOCIAL CIRCLE BOARD OF EDUCATION - WALTON COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2014

EXHIBIT "H"

NOTE 7: INTERFUND TRANSFERS
Interfund transfers for the year ended June 30, 2014, consisted of the following:

Transfer to

Transfers From
General Fund

District-wide Capital Projects

$

75,518.38

Transfers are used to move property tax revenues collected by the General Fund to the Capital Projects Fund.

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, job related illness or injuries to employees, and acts of God. The School District has neither significantly reduced coverage for these risks nor incurred losses (settlements) which exceeded the School District's insurance coverage in any of the past three years.
The School District 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 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:

Beginning of Year Liability

Claims and Changes in Estimates

Claims Paid

End of Year Liability

2013

$

2014

$

0.00 $ 0.00 $

3,996.00 $ 3,264.00 $

3,996.00 $ 3,264.00 $

0.00 0.00

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CITY OF SOCIAL CIRCLE BOARD OF EDUCATION - WALTON COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2014

EXHIBIT "H"

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

Position Covered

Amount

Superintendent All Employees

$

25,000.00

$

100,000.00

NOTE 9: LONG-TERM LIABILITIES

INSTALLMENT SALES AGREEMENT
The City of Social Circle Board of Education entered into an agreement dated June 1, 2006 with Northeast Georgia Regional Educational Service Agency for the construction and subsequent lease of the Rutland Center. Under the terms of the agreement, the School District will make annual payments through July 15, 2020.

GENERAL OBLIGATION DEBT OUTSTANDING
General Obligation Bonds currently outstanding are as follows:

Purpose

Interest Rate

Amount

General Government - QZAB - Series 2003

0.00%

$ 2,000,000.00

The changes in Long-Term Liabilities during the fiscal year ended June 30, 2014, were as follows:

Balance July 1, 2013

Additions

Governmental Activities

Balance

Deductions

June 30, 2014

Due Within One Year

G. O. Bonds

$

Installment Sales Agreement

2,000,000.00 $ 78,360.00

0.00 $

$ 9,840.00

2,000,000.00 68,520.00 $

10,320.00

$ 2,078,360.00 $

0.00 $

9,840.00 $ 2,068,520.00 $

10,320.00

At June 30, 2014, payments due by fiscal year which includes principal and interest for these items are as follows:

Fiscal Year Ended June 30:

Installment Sales Agreement

Principal

Interest

General Obligation Debt

2015 2016 2017 2018 2019 2020 - 2023

$

10,320.00 $

10,680.00

11,160.00

11,640.00

12,120.00

12,600.00

2,850.47 2,421.12 1,976.83 1,512.58 1,028.35
524.16 $

2,000,000.00

Total Principal and Interest

$

68,520.00 $

10,313.51 $ 2,000,000.00

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CITY OF SOCIAL CIRCLE BOARD OF EDUCATION - WALTON COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2014

EXHIBIT "H"

NOTE 10: ON-BEHALF PAYMENTS
The School District has recognized revenues and costs in the amount of $807,715.36 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 $771,000.00
Paid to the Teachers' Retirement System of Georgia For Teachers' Retirement System (TRS) Employer's Cost In the amount of $13,879.36
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 $22,836.00

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 11: SIGNIFICANT COMMITMENTS
The following is an analysis of significant outstanding construction or renovation contracts executed by the School District as of June 30, 2014:

Project

Unearned Executed Contracts

Athletic Complex

$

1,448,108.47

The amount described in this note is not reflected in the basic financial statements.
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: 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
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CITY OF SOCIAL CIRCLE BOARD OF EDUCATION - WALTON COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2014

EXHIBIT "H"

authority to establish and amend the benefit provisions of the group health plans, including benefits for retirees, to the Board of Community Health (Board). The Department of Community Health, which includes the School OPEB Fund, issues a separate stand alone financial audit report and a copy can be obtained from the Georgia Department of Audits and Accounts.
Funding Policy. The contribution requirements of plan members and participating employers are established by the Board in accordance with the current Appropriations Act and may be amended by the Board. Contributions of plan members or beneficiaries receiving benefits vary based on plan election, dependent coverage, and Medicare eligibility and election. For members with fewer than five years of service as of January 1, 2012, contributions also vary based on years of service. On average, members with five years or more of service as of January 1, 2012, pay approximately 25 percent of the cost of the health insurance coverage. In accordance with the Board resolution dated December 8, 2011, for members with fewer than five years of service as of January 1, 2012, the State provides a premium subsidy in retirement that ranges from 0% for fewer than 10 years of service to 75% (but no greater than the subsidy percentage offered to active employees) for 30 or more years of service. The subsidy for eligible dependents ranges from 0% to 55% (but no greater than the subsidy percentage offered to dependents of active employees minus 20%). No subsidy is available to Medicare eligible members not enrolled in a Medicare Advantage Option. The Board of Community Health sets all member premiums by resolution and in accordance with the law and applicable revenue and expense projections. Any subsidy policy adopted by the Board may be changed at any time by Board resolution and does not constitute a contract or promise of any amount of subsidy.
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 "payas-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, 2014:
For certificated teachers, librarians and regional educational service agencies and certain other eligible participants:
July 1, 2013 - June 30, 2014 $945.00 per member per month
For non-certificated school personnel:
July 1, 2013 - June 30, 2014 $596.20 per member per month
No additional contribution was required by the Board for fiscal year 2014 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.

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CITY OF SOCIAL CIRCLE BOARD OF EDUCATION - WALTON COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2014

EXHIBIT "H"

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

2014 2013 2012

100%

$

100%

$

100%

$

1,597,233.52 1,510,060.60 1,494,376.67

NOTE 14: 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, 2014, were 6.00% of annual salary. Employer contributions required for fiscal year 2014 were 12.28% of annual salary as required by the June 30, 2011, actuarial valuation.

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CITY OF SOCIAL CIRCLE BOARD OF EDUCATION - WALTON COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2014

EXHIBIT "H"

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

Fiscal Year

Percentage Contributed

Required Contribution

2014 2013 2012

100%

$

100%

$

100%

$

1,054,077.25 991,148.26 879,725.51

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

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CITY OF SOCIAL CIRCLE BOARD OF EDUCATION - WALTON COUNTY GENERAL FUND
SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL
YEAR ENDED JUNE 30, 2014

SCHEDULE "1"

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

NONAPPROPRIATED BUDGETS

ORIGINAL

FINAL

ACTUAL AMOUNTS

VARIANCE OVER/UNDER

$ 2,403,474.00 $ 2,580,624.39 $ 177,150.39

$

322,423.14

9,382,873.14

9,521,347.18

138,474.04

1,468,621.37

1,486,133.25

1,331,336.02

-154,797.23

366,540.00

2,043,971.00

1,794,839.30

-249,131.70

2,700.00

7,700.00

74,051.52

66,351.52

262,136.00

1,367,057.00

348,822.36 -1,018,234.64

2,422,420.51 16,691,208.39 15,651,020.77 -1,040,187.62

9,920,903.39
544,296.00 405,683.11 353,698.00 653,097.00 1,220,646.68 154,374.00 1,321,087.00 700,058.12
250.00 228,388.00 1,006,489.62
76,968.00
16,585,938.92
-14,163,518.41

9,938,622.57
533,490.00 429,414.25 353,698.00 682,248.00 1,220,646.68 154,374.00 1,321,087.00 703,848.12
250.00 226,312.00 1,006,489.62
76,968.00
16,647,448.24
43,760.15

9,355,163.03
480,142.54 337,410.71 333,182.54 674,101.04 1,176,131.37 150,793.04 1,165,238.71 648,874.16
650.00 211,890.96 864,003.88 144,980.21
13,214.05
15,555,776.24
95,244.53

583,459.54
53,347.46 92,003.54 20,515.46
8,146.96 44,515.31
3,580.96 155,848.29
54,973.96 -400.00
14,421.04 142,485.74 -68,012.21 -13,214.05
1,091,672.00
51,484.38

3,500.00 -3,500.00
0.00 -14,163,518.41
5,375,560.76

3,500.00 -3,500.00
0.00 43,760.15 5,375,560.76 -5,019.02

-75,518.38 -75,518.38 19,726.15 5,732,243.98

-3,500.00 -72,018.38 -75,518.38 -24,034.00 356,683.22
5,019.02

$ -8,787,957.65 $ 5,414,301.89 $ 5,751,970.13 $ 337,668.24

Notes to the Schedule of Revenues, Expenditures and Changes in Fund Balances Budget and Actual
The accompanying schedule of revenues, expenditures and changes in fund balances budget and actual is presented on the modified accrual basis of accounting which is the basis of accounting used in the presentation of the fund financial statements.

See notes to the basic financial statements.

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CITY OF SOCIAL CIRCLE BOARD OF EDUCATION - WALTON COUNTY SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS YEAR ENDED JUNE 30, 2014

SCHEDULE "2"

FUNDING AGENCY PROGRAM/GRANT
Agriculture, U. S. Department of Child Nutrition Cluster Pass-Through From Georgia Department of Education Food Services School Breakfast Program National School Lunch Program
Total U. S. Department of Agriculture
Education, U. S. Department of Special Education Cluster Pass-Through From Georgia Department of Education Special Education Grants to States Preschool Grants
Total Special Education Cluster
Title I, Part A 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 Improving Teacher Quality State Grants Rural Education
Total Other Programs
Total U. S. Department of Education
Defense, U. S. Department of Direct Department of the Army R.O.T.C. Program

CFDA NUMBER

PASSTHROUGH
ENTITY ID
NUMBER

EXPENDITURES IN PERIOD

* 10.553 * 10.555

N/A

(2)

N/A $ 827,015.95 (1)

827,015.95

84.027

N/A

84.173

N/A

* 84.010

N/A

84.048

N/A

84.367

N/A

84.358

N/A

264,258.67 7,703.00
271,961.67
312,641.79
15,500.00 72,475.00 32,768.78 120,743.78 705,347.24

63,476.25

Total Expenditures of Federal Awards

$ 1,595,839.44

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 $28,918.32.
(2) Expenditures for the funds earned on School Breakfast Program ($179,566.10) were not maintained separately and are included in the 2014 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 Social Circle 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 -

CITY OF SOCIAL CIRCLE BOARD OF EDUCATION - WALTON COUNTY SCHEDULE OF STATE REVENUE YEAR ENDED JUNE 30, 2014
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 Primary Grades Early Intervention Program 4-5 Middle Grades (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 Principal Staff & Professional Development Indirect Cost Central Administration School Administration Facility Maintenance and Operations Amended Formula Adjustment Categorical Grants Pupil Transportation Regular Nursing Services Vocational Supervisors Education Equalization Funding Grant Food Services Technology to Support Digital Learning Bonds Math and Science Supplements Move on When Ready Preschool Handicapped Program 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 $771,000.00 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

$

260,615.28

513,274.00 53,409.00
994,729.00 273,267.00 569,153.00 146,844.00 1,192,855.00 990,033.00 235,673.00 1,410,356.00 565,797.00
47,123.00 81,016.00 10,236.00 188,210.00 56,009.00 36,625.00
1,218.00
406,415.00 507,115.00 442,498.00 -1,186,611.00
122,850.00 29,742.00 6,682.18
1,449,411.00 23,085.00 18,972.00 13,918.28 2,300.00 15,999.00 13,879.36 5,813.08
22,836.00
$ 9,521,347.18

CITY OF SOCIAL CIRCLE BOARD OF EDUCATION - WALTON COUNTY SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS YEAR ENDED JUNE 30, 2014

SCHEDULE "4"

ORIGINAL ESTIMATED
COST (1)

CURRENT ESTIMATED COSTS (2)

AMOUNT EXPENDED IN CURRENT
YEAR (3)

AMOUNT EXPENDED IN PRIOR YEARS (3)

TOTAL COMPLETION
COST

EXCESS PROCEEDS NOT EXPENDED (4)

ESTIMATED COMPLETION
DATE

Walton County 2008/2013 SPLOST Projects:

Providing funds to pay the costs of :

1 Acquiring, constructing and equipping a

new elementary school

$

2 Acquiring land for future schools
3 Acquiring, constructing and equipping a new central facility

4 Acquiring, constructing and equipping an athletic complex

5 Acquiring buses

6 Acquiring textbooks

7 Acquiring technology upgrades
8 Financing a portion of the costs of a regional facility for special needs

9 Adding to, renovating, repairing,

improving, furnishing and equipping

existing athletic facilities

10 Adding to, renovating, repairing,

improving, furnishing and equipping

existing educational buildings, properties

and facilities of the City of Social Circle

School District

7,898,600.00 $ 12,000,000.00

$ 309,281.38

1,650,000.00 6,890,000.00

1,646,556.46 8,587,545.44 $ 6,570,688.02

1,646,556.46 $ 1,646,556.46 $ 478,922.35

6,000.00

6,000.00

4,902.60

53,166.49

1,100,000.00

207,244.00

460,413.00

June 30, 2020

3,443.54

Completed (5)

September 1, 2013

June 30, 2017 June 30, 2017

June 30, 2020

TOTAL - WALTON COUNTY SPLOST

16,444,600.00 23,340,101.90 6,831,098.51 2,900,075.79 1,646,556.46

3,443.54

Newton County 2003 SPLOST Projects: Providing funds to pay the costs of: 11 Adding to, renovating, repairing,
improving and equipping existing school buildings and other buildings and facilities useful or desirable in connection 12 Acquiring school buses 13 Acquiring system-wide technology improvements 14 Acquiring any necessary property, both real and personal

1,200,000.00 600,000.00

1,309,828.90 580,280.00

200,000.00

336,725.60

10,813.52

621,997.77 564,780.00

168,362.80

June 30, 2020 June 30, 2017 June 30, 2020

TOTAL - NEWTON COUNTY SPLOST

2,000,000.00

2,226,834.50

10,813.52 1,355,140.57

TOTAL WALTON AND NEWTON COUNTY SPLOST $ 18,444,600.00 $ 25,566,936.40 $ 6,841,912.03 $ 4,255,216.36 $ 1,646,556.46 $

3,443.54

(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 Walton County and of Newton 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) Project 1 /SPLOST-WALTON is underfunded as of June 30, 2014 in excess of $11,690,719.00. The lack of funds is due to the decrease in Sales Taxes experienced in the past 6 years (and GA DOE change in facility forward-funding). To compensate for the decrease in projected revenues, Social Circle City Schools has directed the Splost funds to Project 4-Acquiring, constructing, and equipping an athletics complex.
(5) Project 3 /SPLOST-WALTON was completed in June 2010 with total actual expenditures of $1,646,556.46. The previous estimated cost was $1,650,000. The surplus of SPLOST proceeds will be $3,443.54 to go towards construction Project 4.

See notes to the basic financial statements.

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CITY OF SOCIAL CIRCLE BOARD OF EDUCATION - WALTON COUNTY GENERAL FUND - QUALITY BASIC EDUCATION PROGRAMS (QBE)
ALLOTMENTS AND EXPENDITURES - BY PROGRAM YEAR ENDED JUNE 30, 2014

SCHEDULE "5"

DESCRIPTION
Direct Instructional Programs Kindergarten Programs Kindergarten Program - Early Intervention Program Primary Grades (1-3) Program Primary Grades Early Intervention (1-3) Program Upper Elementary Grades (4-5) Program Upper Elementary Grades-Early Intervention (4-5) Program Middle School (6-8) Program High School General Education (9-12) Program Vocational Laboratory (9-12) Program Students With Disabilities
Category I Category II Category III Gifted Student - CATEGORY VI Remedial Education Program Alternative Education Program English Speakers of Other Languages (ESOL)
TOTAL DIRECT INSTRUCTIONAL PROGRAMS
Media Center Program Staff and Professional Development

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

ELIGIBLE QBE PROGRAM COSTS

SALARIES

OPERATIONS

TOTAL

$

565,551.00 $ 590,988.08 $ 9,752.18 $ 600,740.26

56,435.00

53,081.35

53,081.35

1,102,334.00 1,392,107.32

48,933.19 1,441,040.51

294,692.00

147,044.86

226.53

147,271.39

610,093.00

708,348.58

31,025.22

739,373.80

169,864.00

137,811.49

596.15

138,407.64

1,301,492.00 1,056,779.05

57,708.99 1,114,488.04

1,078,897.00 1,440,393.87

58,552.68 1,498,946.55

263,163.00

279,918.19

3,698.32

283,616.51

1,532,246.00

248,752.42

501.99

249,254.41

832,158.42

857.46

833,015.88

322,529.02

565.80

323,094.82

623,233.00

343,907.46

343,907.46

54,756.00

89,747.00

172,161.56

508.70

172,670.26

9,643.00

38,620.95

38,620.95

7,752,146.00 7,764,602.62 212,927.21 7,977,529.83

205,976.00 40,179.00

313,288.18

19,894.36

333,182.54 26,156.23

TOTAL QBE FORMULA FUNDS

$

7,998,301.00 $ 8,077,890.80 $ 232,821.57 $ 8,336,868.60

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

See notes to the basic financial statements.

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SECTION II COMPLIANCE AND INTERNAL CONTROL REPORTS

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

DEPARTMENT OF AUDITS AND ACCOUNTS
270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400
October 14, 2015

Honorable Nathan Deal, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the City of Social Circle 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 Social Circle Board of Education as of and for the year ended June 30, 2014, and the related notes to the financial statements, which collectively comprise City of Social Circle Board of Education's basic financial statements and have issued our report thereon dated October 14, 2015.
Internal Control Over Financial Reporting
In planning and performing our audit of the financial statements, we considered City of Social Circle 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 Social Circle Board of Education's internal control. Accordingly, we do not express an opinion on the effectiveness of the City of Social Circle Board of Education's internal control.
Our consideration of internal control was for the limited purpose described in the preceding paragraph 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 a certain deficiency in internal control over financial reporting that we consider to be a material weakness.

2014YB-41

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. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. We consider the deficiency described in the accompanying Schedule of Findings and Questioned Costs as item FS 2014-001 to be a material weakness.
Compliance and Other Matters
As part of obtaining reasonable assurance about whether City of Social Circle 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 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 Social Circle Board of Education in a separate letter dated October 14, 2015.
City of Social Circle Board of Education's Response to Findings
City of Social Circle Board of Education's response to the finding identified in our audit is described in the accompanying Schedule of Findings and Questioned Costs. City of Social Circle 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 it.
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:as 2014YB-41

Greg S. Griffin State Auditor

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

DEPARTMENT OF AUDITS AND ACCOUNTS
270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400
October 14, 2015

Honorable Nathan Deal, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the City of Social Circle Board of Education 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 Social Circle Board of Education 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, 2014. City of Social Circle Board of Education 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 Social Circle Board of Education 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 Social Circle Board of Education 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 Social Circle Board of Education Board of Education's compliance.
2014SA-10

Opinion on Each Major Federal Program
In our opinion, the City of Social Circle Board of Education 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, 2014.
Report on Internal Control over Compliance
Management of City of Social Circle Board of Education 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 Social Circle Board of Education 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 Social Circle Board of Education 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:as 2014SA-10

Greg S. Griffin State Auditor

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

CITY OF SOCIAL CIRCLE BOARD OF EDUCATION - WALTON COUNTY AUDITEE'S RESPONSE
SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2014

PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

FINDING CONTROL NUMBER AND STATUS

FS-7861-13-01

Unresolved - See Corrective Action/Responses

CORRECTIVE ACTION/RESPONSES

Finding Control Number: FS-7861-13-01

Control Category:

Financial Reporting

Internal Control Impact: Material Weakness

The Chief Financial Officer will implement procedures to identify weaknesses and strengthen the controls over the preparation of the financial statements. They system will work closely with an independent certified public accountant in the preparation of future financial statements.

PRIOR YEAR FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

No matters were reported.

SECTION IV FINDINGS AND QUESTIONED COSTS

CITY OF SOCIAL CIRCLE BOARD OF EDUCATION - WALTON COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2014

I SUMMARY OF AUDITOR'S RESULTS

Financial Statements

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

Unmodified

Internal control over financial reporting: Material weakness identified? Significant deficiency identified?

Yes None Reported

Noncompliance material to financial statements noted:

No

Federal Awards

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

No None Reported

Type of auditor's report issued on compliance for major programs: All major programs

Unmodified

Any audit findings disclosed that are required to be reported in

accordance with OMB Circular A-143, Section 510(a)?

No

Identification of major programs:

CFDA Numbers

Name of Federal Program or Cluster

10.553, 10.555 84.010

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 SOCIAL CIRCLE BOARD OF EDUCATION - WALTON COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2014

II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

FS 2014-001 Inadequate Controls over Financial Reporting

Control Category: Internal Control Impact:

Financial Reporting Material Weakness

Description: The School District did not have adequate controls in place to ensure all required activity was included in the financial statement information presented for audit.

Criteria: The School District is required to maintain a system of controls over the preparation of financial statements in accordance with generally accepted accounting principles (GAAP). The School District's internal controls over GAAP financial reporting should include adequately trained personnel with the knowledge, skills and experience to prepare GAAP based financial statements and include all disclosures as required by the Governmental Accounting Standards Board (GASB).

GASB Statement No. 34, Basic Financial Statements - Management's Discussion and Analysis - for State and Local Governments (Statement), requires governments to present government-wide and fund financial statements as well as a summary reconciliation of the (a) total governmental funds balances to the net position of governmental activities in the Statement of Net Position, and (b) total change in governmental fund balances to the change in the net position of governmental activities in the Statement of Activities. In addition, the Statement requires information about the government's major and nonmajor funds in the aggregate, to be provided in the fund financial statements.

Chapter 22A Annual Financial Reporting of the Financial Management for Georgia Local Units of Administration provides that School Districts must prepare their financial statements in accordance with generally accepted accounting principles.

Condition: A material audit adjustment of $570,172.00 was proposed and accepted by the School District to record Construction in Progress as reported in Capital Assets, Non-depreciable within governmental activities. Additionally, certain adjustments were proposed and accepted to properly present the School District's note disclosures.

Cause: In discussing this deficiency with the School District, they indicated that the material adjustment was due to an oversight in the construction analysis completed and will be managed and corrected in the subsequent fiscal year.

Effect or Potential Effect: A material misstatement was included in the financial statements presented for audit. In addition, the lack of controls and monitoring could impact the reporting of the School District's financial position and results of operation.

Recommendation: As part of internal control over the preparation of financial statements, including disclosures, the School District should continue to strengthen comprehensive preparation and/or review procedures to ensure that the financial statements are complete and accurate. These procedures should be performed by a properly trained individual possessing a thorough understanding of the applicable GAAP, GASB pronouncements, and knowledge of the School District's activities and operations.
- 2 -

CITY OF SOCIAL CIRCLE BOARD OF EDUCATION - WALTON COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2014

II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

Views of Responsible Officials and Corrective Action Plans: We concur with the finding. The finding resulted from misplacement of retainage payable expense in the correct column of an excel spreadsheet used in calculating construction in progress. The misplacement of this expense caused the CIP to be understated in Capital Assets and overstated in various expense functions on the District-wide Statements. The chief financial officer will continue to implement procedures to identify the weaknesses and strengthen the controls over the preparation of the financial statements. The school system will continue to work closely with an independent certified public accountant to ensure all correct expenses are included in future financial statements.

Contact Person: Title: Telephone: Fax: Email:

Allison Pittard Chief Financial Officer (770) 464-2731 (770) 464-4920 allison.pittard@socialcircleschools.org

III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

No matters were reported.

- 3 -