City of Trion Board of Education, Chattooga County, Georgia, report on audit of the financial statements for the fiscal year ended June 30, 2008

CITY OF TRION BOARD OF EDUCATION
CHATTOOGA COUNTY, GEORGIA REPORT ON AUDIT
OF THE FINANCIAL STATEMENTS
FOR THE FISCAL YEAR ENDED JUNE 30, 2008
STATE OF GEORGIA
DEPARTMENT OF AUDITS AND ACCOUNTS
Russell W. Hinton State Auditor

CITY OF TRION BOARD OF EDUCATION - CHATTOOGA COUNTY - TABLE OF CONTENTS -

SECTION I

FINANCIAL

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

EXHIBITS

BASIC FINANCIAL STATEMENTS

DISTRICT-WIDE FINANCIAL STATEMENTS

A

STATEMENT OF NET ASSETS

1

B

STATEMENT OF ACTIVITIES

2

FUND FINANCIAL STATEMENTS

C

BALANCE SHEET

GOVERNMENTAL FUNDS

3

D

RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET

TO THE STATEMENT OF NET ASSETS

4

E

STATEMENT OF REVENUES, EXPENDITURES AND CHANGES

IN FUND BALANCES

GOVERNMENTAL FUNDS

5

F

RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT

OF REVENUES, EXPENDITURES AND CHANGES IN FUND

BALANCES TO THE STATEMENT OF ACTIVITIES

6

G

STATEMENT OF FIDUCIARY NET ASSETS

FIDUCIARY FUNDS

7

H

NOTES TO THE BASIC FINANCIAL STATEMENTS

8

SCHEDULES

REQUIRED SUPPLEMENTARY INFORMATION

1 SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES

IN FUND BALANCES - BUDGET AND ACTUAL

GENERAL FUND

23

SUPPLEMENTARY INFORMATION

2 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS

24

3 SCHEDULE OF STATE REVENUE

25

CITY OF TRION BOARD OF EDUCATION - CHATTOOGA COUNTY - TABLE OF CONTENTS -

SECTION I

FINANCIAL

SCHEDULES

SUPPLEMENTARY INFORMATION

4 SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS

26

5 ALLOTMENTS AND EXPENDITURES

GENERAL FUND - QUALITY BASIC EDUCATION PROGRAMS (QBE)

BY PROGRAM

27

SECTION II
COMPLIANCE AND INTERNAL CONTROL REPORTS
REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS
REPORT ON COMPLIANCE WITH REQUIREMENTS APPLICABLE TO EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH 0MB CIRCULARA-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

CITY OF TRION BOARD OF EDUCATION - CHATTOOGA COUNTY -TABLE OF CONTENTS -
SECTIONV MANAGEMENT'S RESPONSES SCHEDULE OF MANAGEMENT'S RESPONSES

SECTION I FINANCIAL

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

DEPARTMENT OF AUDITS AND ACCOUNTS
270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400
August 20, 2009

Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the City of Trion Board of Education
INDEPENDENT AUDITOR'S COMBINED REPORT ON BASIC FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION - SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
Ladies and Gentlemen:
We have audited the accompanying financial statements ofthe governmental activities, each major fund, and the aggregate remaining fund information (Exhibits A through H) of the City of Trion Board of Education, as of and for the year ended June 30, 2008, which collectively comprise the Board's basic financial statements as listed in the table of contents. These financial statements are the responsibility of the City of Trion Board of Education's management. Our responsibility is to express opinions on these financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United States ofAmerica and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General ofthe United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the City of Trion Board of Education's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinions.

2008ARL-11

In our opinion, the financial statements referred to previously present fairly, in all material respects, the respective financial position ofthe governmental activities, each major fund, and the aggregate remaining fund information of the City of Trion Board of Education, as of June 30, 2008, and the respective changes in financial position thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America.
The City ofTrion Board ofEducation has not presented Management's Discussion and Analysis that accounting principles generally accepted in the United States of America has determined is necessary to supplement, although not to be part of, the basic financial statements.
In accordance with Government Auditing Standards, we have also issued our report dated August 20, 2009, on our consideration of the City of Trion 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 ofthat report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit.
The Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual, as presented on page 23, is not a required part of the basic financial statements but is supplementary information required by the accounting principles generally accepted in the United States of America. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods ofmeasurement and presentation ofthe required supplementary information. However, we did not audit the information and express no opinion on it.
Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City of Trion Board of Education's basic financial statements. The accompanying supplementary information which consist of Schedules 2 through 5, which includes the Schedule of Expenditures of Federal Awards as required by U. S. Office of Management and Budget Circular A-133, Audits ofStates, Local Governments, and Non-Pro.fit Organizations, are presented for purposes of additional analysis and are not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements, and in our opinion, is fairly stated, in all material respects, in relation to the basic financial statements taken as a whole.
A copy of this report has been filed as a permanent record in the office of the State Auditor and made available to the press of the State, as provided for by Official Code of Georgia Annotated section 50-6-24.
Respectfully submitted,

RWH:as 2008ARL-11

Rus 11 W. Hinton, CPA, CGFM State Auditor

CITY OF TRION BOARD OF EDUCATION - CHATTOOGA COUNTY

CITY OF TRION BOARD OF EDUCATION - CHATTOOGA COUNTY STATEMENT OF NET ASSETS JUNE 30, 2008

EXHIBIT"A"

ASSETS
Cash and Cash Equivalents Investments Accounts Receivable, Net
Taxes State Government Inventories Capital Assets, Depreciable (Net of Accumulated Depreciation)
Total Assets
LIABILITIES
Accounts Payable Salaries and Benefits Payable Contracts Payable Retainages Payable Deposits and Deferred Revenues Long-Term Liabilities
Due Within One Year Due in More Than One Year
Total Liabilities
NET ASSETS
Invested in Capital Assets, Net of Related Debt Restricted for
Continuation of Federal Programs Debt Service Capital Projects Unrestricted (Deficit)
Total Net Assets
Total Liabilities and Net Assets

GOVERNMENTAL ACTIVITIES

$

4,255,147.51

1,277,388.37

223,910.78 971,700.00
34,894.06 218,992.43

$ ======6,9~82~,,;;,;03;,;;3;;,,;.1~5

$

82,972.35

1,232,876.61

403,431.25

44,825.69

43,082.00

559,380.05 2,575,914.49

$

4,942,482.44

$

183,697.89

203,278.73 56,203.75
2,954,461.86 -1,358,091.52

$

2,039,550.71

$ =======6=,9=82='=03=3=.1=5

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

CITY OF TRION BOARD OF EDUCATION - CHATTOOGA COUNTY STATEMENT OF ACTIVITIES
FOR THE YEAR ENDED JUNE 30, 2008

EXHIBIT"B"

EXPENSES

PROGRAM REVENUES

OPERATING

CHARGES FOR

GRANTS AND

SERVICES

CONTRIBUTIONS

NET (EXPENSES) REVENUES
AND CHANGES IN NET ASSETS

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 Operations of Non-Instructional Services Enterprise Operations Community Services Food Services Interest on Short-Term and Long-Term Debt

$ 8,114,149.57 $
803,286.99 130,891.47 237,787.21 153,110.65 836,766.90 155,862.12 1,055,555.56 22,758.68 57,810.18
44,514.78 46,805.46 571,804.38 114,968.54

175,617.17 $
100,352.67 560,302.38

6,444,665.66 $ 45,728.82 86,132.91 162,855.29
412,846.66 445,713.35
2,641.62 389,676.58
218,229.87

-1,493,866.74
-757,558.17 -44,758.56 -74,931.92 259,736.01
-391,053.55 -153,220.50 -665,878.98
-22,758.68 -57,810.18
55,837.89 -46,805.46 206,727.87 -114 968.54

Total Governmental Activities

$ 12,346,072.49 $

836,272.22 $

8,208,490.76 $ _ _ _-~3,~30_1~,3_0_9_.5_1

General Revenues Taxes Property Taxes For Maintenance and Operations Sales Taxes Local Option Sales Tax Special Purpose Local Option Sales Tax For Debt Services For Capital Projects Grants and Contributions not Restricted to Specific Programs Investment Earnings Miscellaneous
Special Items Capital Transfer to City of Trion

$

325,368.04

808,192.74

112,877.57 625,978.86
1,392,186.00 222,873.84 633,523.72
-894,604.08

Total General Revenues and Special Items

$ _ _--=3,::22::.;:6:.,.:,3a.;::9.,a6:.:a6=-9

Change in Net Assets

$

-74,912.82

Net Assets - Beginning of Year (Restated)

2,114,463.53

Net Assets - End of Year

$ =====2,..,0=39=,5=5=0=.7=1

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

CITY OF TRION BOARD OF EDUCATION - CHATTOOGA COUNTY BALANCE SHEET
GOVERNMENTAL FUNDS JUNE 30, 2008

EXHIBIT"C"

ASSETS
Cash and Cash Equivalents Investments Accounts Receivable, Net
Taxes Stale Government Inventories

GENERAL FUND

DISTRICTWIDE
CAPITAL PROJECTS
FUND

DEBT SERVICE
FUND

TOTAL

$ 2,197,128.49 $ 2,058,019.02 $ 1,277,388.37

180,763.68 971,700.00
34,894.06

124,115.16

0.00 $

4,255,147.51 1,277,388.37
304,878.84 971,700.00
34 894.06

Total Assets

$ 3,384,486.23 $ 3,459,522.55 $

0.00 $=====6=,8=44="'=00=8=7. =8

LIABILITIES AND FUND BALANCES

LIABILITIES

Accounts Payable Salaries and Benefits Payable Contracts Payable Retainages Payable Deposits and Deferred Revenue

$

82,372.35 $

1,232,876.61

43,082.00

600.00
403,431.25 44,825.69

Total Liabilities

$ 1,358,330.96 $ 448,856.94

FUND BALANCES

Reserved for: Continuation of Federal Programs Debt Service Capital Projects
Unreserved Designated for Student Activities Undesignated Reported in: General Fund

$ 203,278.73

$

$

56,203.75

2,954,461.86

205,812.22

1,617,064.32

Total Fund Balances

$ 2,026,155.27 $ 3,010,665.61 $

$

82,972.35

1,232,876.61

403,431.25

44,825.69

43,082.00

$

1 807 187.90

0.00 $ 0.00 $

203,278.73 56,203.75
2,954,461.86
205,812.22
1,617,064.32
5,036,820.88

Total Liabilities and Fund Balances

$ 3,384,486.23 $ 3,459,522.55 $

0.00 $ ======6=,8=44='=00=8=.7==8

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

CITY OF TRION BOARD OF EDUCATION - CHATTOOGA COUNTY RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET
TO THE STATEMENT OF NET ASSETS
JUNE 30, 2008

EXHIBIT"D"

Total Fund Balances - Governmental Funds (Exhibit "C")
Amounts reported for Governmental Activities in the Statement of Net Assets are different because:
Capital Assets used in Governmental Activities are not financial resources and therefore are not reported in the funds. These assets consist of:
Equipment Accumulated Depreciation
Total Capital Assets
Some of the School District's property tax revenues will be collected after year-end but are not available soon enough to pay for the current period's expenditures.
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 Capital Leases
Total Long-Term Liabilities
Net Assets of Governmental Activities (Exhibit "A")

$ 5,036,820.88

$ 446,737.00 -227,744.57

218,992.43

-80,968.06

$ -3, 100,000.00 -35,294.54

-3, 135,294.54

$ 2,039,550.71

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

CITY OF TRION BOARD OF EDUCATION - CHATTOOGA COUNTY STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES
GOVERNMENTAL FUNDS YEAR ENDED JUNE 30, 2008

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 Enterprise Operations Community Services Food Services Operation
Capital Outlay Debt Services
Principal Interest
Total Expenditures
Excess of Revenues over (under) Expenditures
OTHER FINANCING SOURCES
Capital Leases
Net Change in Fund Balances
Fund Balances - Beginning
Fund Balances - Ending

GENERAL FUND

DISTRICTWIDE
CAPITAL PROJECTS
FUND

DEBT SERVICE
FUND

TOTAL

$ 331,070.07

$ 331,070.07

808,192.74 $ 625,978.86 $ 112,877.57

1,547,049.17

9,129,194.73

9,129,194.73

471,482.03

471,482.03

836,272.22

836,272.22

75,640.13

147,233.71

222,873.84

633,523.72

633,523.72

$ 12,285,375.64 $ 773,212.57 $ 112,877.57 $ 13,171,465.78

$ 7,994,810.76 $ 119,338.81

$ 8,114,149.57

803,286.99 127,538.41 237,787.21 153,110.65 836,766.90 155,862.12 1,088,929.52
5,491.94 57,810.18 44,514.78 46,805.46 563,996.38

3,353.06 449,152.59 448,256.94

803,286.99 130,891.47 237,787.21 153,110.65 836,766.90 155,862.12 1,538,082.11
5,491.94 57,810.18 44,514.78 46,805.46 563,996.38 448,256.94

12,410.93 2,090.97

$ 112,877.57

12,410.93 114,968.54

$ 12,131,213.20 $ 1,020,101.40 $ 112,877.57 $ 13,264,192.17

$ 154,162.44 $ -246,888.83 $

0.00 $

-92,726.39

$

47 705.47

$ 201,867.91 $ -246,888.83 $

1,824,287.36 3,257,554.44

$

47 705.47

0.00 $

-45,020.92

0.00

5,081,841.80

$ 2,026,155.27 $ 3,010,665.61 $ =====0.=00= $ 5,036,820.88

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

CITY OF TRION BOARD OF EDUCATION - CHATTOOGA COUNTY RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT OF
REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES TO THE STATEMENT OF ACTIVITIES JUNE 30, 2008

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 - Equipment
Excess of Capital Outlay over Depreciation Expense
Because some property taxes will not be collected for several months after the School District's fiscal year ends, they are not considered "available" revenues.
Proceeds received from execution of Capital Leases are reported as liabilities in the Statement of Activities, whereas in the Governmental Funds these proceeds are reported as Other Financing Sources:
Capital Lease Debt Incurred in Period
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 Assets. In the current year, these amounts consist of:
Payment of Capital Lease Debt

$ -45,020.92

$ 41,288.00 -30,183.33

11,104.67 -5,702.03

-47,705.47

12,410.93

Change in Net Assets of Governmental Activities (Exhibit "B")

$ -74,912.82

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

CITY OF TRION BOARD OF EDUCATION - CHATTOOGA COUNTY STATEMENT OF FIDUCIARY NET ASSETS FIDUCIARY FUNDS JUNE 30, 2008

EXHIBIT "G"

ASSETS Cash and Cash Equivalents
LIABILITIES Funds Held for Others

AGENCY FUNDS
$ 73,287.42
$ 73,287.42

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

CITY OF TRION BOARD OF EDUCATION - CHATTOOGA COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2008

EXHIBIT"H"

Note 1: DESCRIPTION OF SCHOOL DISTRICT AND REPORTING ENTITY
REPORTING ENTITY
The City of Trion Board of Education (School District) was established under the laws ofthe 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. 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 ofthe City of Trion Board of Education.
District-wide Statements: The Statement ofNet Assets and the Statement ofActivities display information about the financial activities ofthe 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 ofActivities 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 ofthe 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 ofgoods 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 ofinternal activities. Separate statements for each category (governmental and fiduciary) are presented. The emphasis of fund financial statements is on major governmental funds, each displayed in a separate column.
The School District reports the following major governmental funds:

- 8-

CITY OF TRION BOARD OF EDUCATION - CHATTOOGA COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2008

EXHIBIT"H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
General Fund is the School District's primary operating fund. It accounts for all financial resources ofthe School District, except those resources required to be accounted for in another fund.
District-wide Capital Projects Fund accounts for financial resources including Special Purpose Local Option Sales Tax (SPLOST), Bond Proceeds and grants from Georgia State Financing and Investment Commission to be used for the acquisition, construction or renovation ofmajor capital facilities.
Debt Service Fund accounts for taxes (sales) legally restricted for the payment ofgeneral longterm principal, interest and paying agent's fees.
The School District reports the following fiduciary fund type:
Agency funds account for assets held by the School District as an agent for various funds or individuals.
BASIS OF ACCOUNTING
The basis ofaccounting determines when transactions are reported on the financial statements. The District-wide governmental and fiduciary fund financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded at the time liabilities are incurred, regardless ofwhen the related cash flows take place. Nonexchange transactions, in which the School District gives (or receives) value without directly receiving (or giving) equal value in exchange, include property taxes, sales taxes, grants and donations. On an accrual basis, revenue from property taxes is recognized in the fiscal year for which the taxes are levied. Revenue from sales taxes is recognized in the fiscal year in which the underlying transaction (sale) takes place. Revenue from grants and donations is recognized in the fiscal year in which all eligibility requirements have been satisfied.
The School District uses funds to report on its financial position and the results of its operations. Fund accounting is designed to demonstrate legal compliance and to aid financial management by segregating transactions related to certain governmental functions or activities. A fund is a separate accounting entity with a self-balancing set of accounts.
Governmental funds are reported using the current financial resources measurement focus and the modified accrual basis ofaccounting. Under this method, revenues are recognized when measurable and available. The School District considers all revenues reported in the governmental funds to be available if they are collected within sixty days after year-end. Property taxes, sales taxes and interest are considered to be susceptible to accrual. Expenditures are recorded when the related fund liability is incurred, except for principal and interest on general long-term debt, which are recognized

-9-

CITY OF TRION BOARD OF EDUCATION - CHATTOOGA COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2008

EXHIBIT"H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
as expenditures to the extent they have matured. Capital asset acquisitions are reported as expenditures in governmental funds. Proceeds ofgeneral long-term liabilities and acquisitions under capital leases are reported as other financing sources.
The School District funds certain programs by a combination ofspecific cost-reimbursement grants, categorical grants, and general revenues. Thus, when program costs are incurred, there are both restricted and unrestricted net assets available to finance the program. It is the School District's policy to first apply grant resources to such programs, followed by cost-reimbursement grants, then general revenues.
RESTATEMENT OF PRIOR YEAR NET ASSETS
For fiscal year 2008, the School District restated various Capital Assets due to omissions. The School District increased equipment by $185,562.00 and also increased accumulated depreciation on equipment by $116,798.98. The result ofthese adjustments is a net increase in Net Assets at July 1, 2007, of$68,763.02. This change is in accordance with generally accepted accounting principles.
CASH AND CASH EQUIVALENTS
COMPOSITION OF DEPOSITS Cash and cash equivalents consist ofcash 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 ofGeorgia 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 ofdeposit) and repurchase agreements are reported at cost. Participating interest-earning contracts and money market investments with a maturity at purchase ofone 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 ofGeorgia 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 ofreturn 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,

- 10 -

CITY OF TRION BOARD OF EDUCATION - CHATTOOGA COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2008

EXHIBIT"H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(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 administered by the State of Georgia, Office of Treasury and Fiscal Services,

(7) Repurchase agreements, and

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

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

RECEIVABLES

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

PROPERTY TAXES

The City ofTrion fixed the property tax levy for the 2007 tax digest year (calendar year) on October 19, 2007 (levy date). Taxes were due on January 10, 2008 (lien date). Taxes collected within the current fiscal year or within 60 days after year-end on the 2007 tax digest are reported as revenue in the governmental funds for fiscal year 2008. The City of Trion City Clerk bills and collects the property taxes for the School District, and remits the taxes collected to the School District. Property tax revenues, at the fund reporting level, during the fiscal year ended June 30, 2008, for maintenance and operations amounted to $331,070.07.

The tax millage rates levied for the 2007 tax year (calendar year) for the City of Trion Board of Education was as follows (a mill equals $1 per thousand dollars of assessed value):

School Operations

S.:Z mills

- 11 -

CITY OF TRION BOARD OF EDUCATION - CHATTOOGA COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2008

EXHIBIT"H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
SALES TAXES
Local Option Sales Tax revenue, at the fund reporting level, during the fiscal year amounted to $808,192.74 and was recorded in the General Fund. Local Option Sales Tax is to be used for the maintenance and operation of the School District.
Special Purpose Local Option Sales Tax, at the fund reporting level, during the year amounted to $738,856.43 and is to be used for capital outlay for educational purposes or debt service. This sales tax was authorized by local referendum and the sales tax must be re-authorized at least every five years. The latest authorization expires March 31, 2012.
INVENTORIES
Inventories of donated food commodities used in the preparation of meals are not reported on the financial statements. To conform to generally accepted accounting principles, these amounts should be recorded in the basic financial statements. The effect ofthis deviation is deemed to be immaterial to the fair presentation of the basic financial statements.
FOOD INVENTORIES On the basic financial statements, inventories of purchased foods inventories are reported at cost (first-in, first-out). 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 ofassets 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. The land and buildings are owned by the City of Trion. During the fiscal year, no events or changes in circumstances affecting a capital asset that may indicate impairment were known to the School District.
Capitalization thresholds and estimated useful lives of capital assets reported in the District-wide statements are as follows:

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CITY OF TRION BOARD OF EDUCATION - CHATTOOGA COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2008

EXHIBIT"H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Capitalization Policy

Estimated Useful Life

Equipment

$ 5,000.00 10 to 12 years

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

GENERAL OBLIGATION BONDS

The School District issues general obligation bonds to provide funds for the acquisition and construction of major capital facilities.

In the District-wide and fund financial statements, the School District recognizes bond issuance costs during the fiscal year bonds are issued. Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as debt service expenditures. To conform to generally accepted accounting principles, issuance costs should be deferred and amortized over the life of the bonds using the straight-line method. The effect of this deviation is deemed to be immaterial to the fair presentation ofthe basic financial statements. General obligation bonds are direct obligations and pledge the full faith and credit of the government. The outstanding amount of these bonds is recorded in the Statement ofNet Assets.

NET ASSETS

The School District's net assets in the District-wide Statements are classified as follows:

Invested in capital assets, net of related debt - This represents the School District's total investment in capital assets, net ofoutstanding debt obligations related to those capital assets. To the extent debt has been incurred but not yet expended for capital assets, such amounts are not included as a component of invested in capital assets, net of related debt.

Restricted net assets - These represent resources for which the School District is legally or contractually obligated to spend resources for bus replacement, continuation ofFederal programs, debt service and capital projects in accordance with restrictions imposed by external third parties.

Unrestricted net assets - Unrestricted net assets represent resources derived from property taxes, sales taxes, grants and contributions not restricted to specific programs, charges for services, and miscellaneous revenues. These resources are used for transactions relating to the educational and general operations of the School District, and may be used at the discretion of the Board to meet current expenses for those purposes.

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CITY OF TRION BOARD OF EDUCATION - CHATTOOGA COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2008

EXHIBIT"H"

Note 3: DEPOSITS AND INVESTMENTS
COLLATERALIZATION OF DEPOSITS Official Code of Georgia Annotated (OCGA) 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 ofthe face value of such surety bond and the market value of securities pledged shall be equal to not less than 110 percent ofthe public funds being secured after the deduction ofthe amount ofdeposit insurance. Ifa depository elects the pooled method (OCGA 45-8-13.1) the aggregate ofthe market value ofthe securities pledged to secure a pool ofpublic funds shall be not less than 110 percent ofthe 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, notes, 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 At June 30, 2008, the bank balances were $4,609,787.34. The amounts ofthe total uninsured bank balances are classified into three categories of custodial credit risk:
Category 1 - Uncollateralized, Category 2 - Cash collateralized with securities held by the pledging financial institution, or Category 3 - 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 TRION BOARD OF EDUCATION - CHATTOOGA COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2008

EXHIBIT"H"

Note 3: DEPOSITS AND INVESTMENTS

The School District's uninsured deposits are classified by custodial credit risk category at June 30, 2008, as follows:

Custodial Credit Risk Category

Bank Balance

1

$

0.00

2

4,027,824.94

3

381,962.40

Total

$ 4A09,787.34

CATEGORIZATION OF INVESTMENTS At June 30, 2008, the carrying value of the School District's total investments was $1,277,388.37, which is materially the same as fair value. This investment consisted entirely of funds invested in the Georgia Fund 1, formerly referred to as LGIP, administered by the State of Georgia, Office of Treasury and Fiscal Services which are not required to be categorized since the School District did not own any specific identifiable securities in the pool. The investment policy of the State of Georgia, Office ofTreasury and Fiscal Services for the Georgia Fund 1(Primary Liquidity Portfolio) does not provide for investment in derivatives or similar investments. Additional information on the Georgia Fund 1 is disclosed in the State ofGeorgia Comprehensive Annual Financial Report. This audit can be obtained from the Georgia Department of Audits and Accounts at http://www.audits.state.ga.us/intemet/searchRpts.html.

The Primary Liquidity Portfolio consists ofGeorgia Fund 1 which is not registered with the SEC as an investment company but does operate in a manner consistent with the SEC's Rule 2a-7 of the Investment Company Act of 1940. The investment is valued at the pool's share price, $1.00 per share. The pool is an AAAm rated investment pool by Standard and Poor's. The weighted average maturity of Georgia Fund 1 may not exceed 60 days. The weighted average maturity for Georgia Fund 1 on June 30, 2008, was 40 days.

Note 4: NON-MONETARY TRANSACTIONS

The School District receives food commodities from the United States Department of Agriculture (USDA) for school breakfast and lunch programs. See Note 2 - Inventories

Note 5: CAPITAL ASSETS

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

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CITY OF TRION BOARD OF EDUCATION - CHATTOOGA COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2008

EXHIBIT"H"

Note 5: CAPITAL ASSETS

Governmental Activities Capital Assets Being Depreciated
Equipment
Less Accumulated Depreciation for: Equipment
Governmental Activity Capital Assets - Net

Balances July 1, 2007 (Restated)

Increases

Decreases

Balances June 30, 2008

$ 405,449.00 $ 41,288.00 $

197,561.24 $ 201,881.16 $

30,183.33 11,104.61 $

0.00 $ 446,737.00
227,744.57 0.00 $ 218,222.43

Capital assets being acquired under capital leases as of June 30, 2008, are as follows:

Governmental Funds

Equipment Less: Accumulated Depreciation

$ 41,288.00 2,064.40

Current year depreciation expense by function is as follows:

$ 39,223.60

Support Services Maintenance and Operation of Plant Student Transportation Services
Food Services

$

5,108.70

17,267.00 $ 22,375.70

7,807.63

Note 6: RESTRICTED ASSETS

$==3'==0"=1,==83==.3==3

Special Purpose Local Option Sales Tax (SPLOST) and general obligation bond proceeds are restricted assets in the Statement of Net Assets because their use is limited by applicable bond covenants or statutory provisions. Restricted assets at June 30, 2008, were as follows:

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CITY OF TRION BOARD OF EDUCATION - CHATTOOGA COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2008

EXHIBIT"H"

Note 6: RESTRICTED ASSETS

District-wide Capital Projects

Bond

SPLOST

Proceeds

Restricted Cash and Cash Equivalents: Capital Acquisitions
Restricted Investments: Capital Acquisitions Debt Services

$ 740,034.25 $ 1,317,984.77
$ 1,221,184.62 $ 56,203.75

Note 7: RISK MANAGEMENT

The School District is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors or omissions; job related illness or injuries to employees; acts of God and unemployment compensation.

The School District participates in the Georgia School Boards Association Risk and Insurance Management System, a public entity risk pool organized on July 1, 1994, to develop and administer a plan to reduce risk of loss on account of general liability, motor vehicle liability, or property damage, including safety engineering and other loss prevention and control techniques, and to administer one or more groups of self-insurance funds, including the processing and defense of claims brought against members ofthe system. The School District pays an annual premium to the system for its general insurance 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 liabilities being reported when it is probable that a loss has occurred, and the amount ofthat loss can be reasonably estimated.

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

Beginning ofYear Liability

Claims and Changes in Estimates

Claims Paid

EndofYear Liability

2007 2008

$

0.00 $

251.50 $

251.50 $

0.00

$

0.00 $

3,683.24 $

3,683.24 $

0.00

The School District participates in the Georgia Education Workers' Compensation Trust, a public entity risk pool organized on December 1, 1991, to develop, implement and administer a program of workers' compensation self-insurance for its member organizations. The School District pays an

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CITY OF TRION BOARD OF EDUCATION - CHATTOOGA COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2008

EXHIBIT"H"

Note 7: RISK MANAGEMENT

annual premium to the Trust for its general insurance coverage. Additional insurance coverage is provided through an agreement by the Trust with the Midwest Employers Casualty Company to provide coverage for potential losses sustained by the Trust in excess of $500,000.00 loss per occurrence, up to $2,000,000.00.

Position Covered

Amount

Superintendent All Employees

$ 50,000.00 $ 100,000.00

Note 8: LONG-TERM DEBT

CAPITAL LEASES The City of Trion Board ofEducation entered into an agreement dated September 7, 2007, with the John Deere Company for the lease purchase of maintenance equipment. Under the terms of the agreement, the School District will make annual payments through October 2010. This lease agreement qualifies as a capital lease for accounting purposes, and, therefore, has been recorded at the present value of the future minimum lease payments as of the date of its inception.

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

Purpose

Interest Rates

Amount

General Government - Series 2006

3.50% - 3.75% $ 3,100,000.00

The changes in Long-Term Debt during the fiscal year ended June 30, 2008, were as follows:

G.O. Bonds Capital Leases

Balance July 1, 2007

Governmental Funds

Additions

Deductions

Balance June 30, 2008

Due Within One Year

$ 3,100,000.00

$ 3,100,000.00 $ 545,000.00

0.00 $ 47,705.47 $ 12,410.93

35,294.54

14,380.05

$ 3, lQQ,QQQ,QQ $ 41,105.41 $ 12,410.23 $ 3 135 224.54 $ 552,380 05

At June 30, 2008, payments due by fiscal year which includes principal and interest for these items are as follows:

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CITY OF TRION BOARD OF EDUCATION - CHATTOOGA COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2008

EXHIBIT"H"

Note 8: LONG-TERM DEBT

Fiscal Year Ended June 30

Ca11ital Leases

Princi11al

Interest

General Obligation Debt

Princi11al

Interest

2009 2010 2011 2012 2013

$ 14,380.05 $ 16,605.87 4,308.62

1,572.04 $ 796.41 42.95

545,000.00 $ 605,000.00 630,000.00 650,000.00 670,000.00

102,870.00 82,593.75 60,515.00 37,150.00 12,562.50

Total Principal and Interest

$ 35,224.54 $

2,411.~Q $ 3,100,0QQ,QQ $ 225,621.25

Note 9: ON-BEHALF PAYMENTS

The School District has recognized revenues and costs in the amount of $211,494.08 for health insurance and retirement contributions paid on the School District's behalf by the following State Agencies.

Georgia Department of Education Paid to the Georgia Department of Community Health For Health Insurance ofNon-Certified Personnel In the amount of $210,514.08

Office of Treasury and Fiscal Services Paid to the Public School Employees Retirement System For Public School Employees Retirement (PSERS) Employer's Cost In amount of$980.00

Note 10: SPECIAL ITEMS

The School District expended $894,604.08 for the following capital expenditures in fiscal year 2008.

Lunchroom Addition New Tennis Courts Stadium Renovation

$ 260,000.00 100,881.26 533,722.82

$ 824!604.08

Title to these assets is vested in the City of Trion government. Accordingly, these expenses are reported as Special Items - Capital Transfers on the Statement of Activities.

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CITY OF TRION BOARD OF EDUCATION - CHATTOOGA COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2008

EXHIBIT"H"

Note 11: SIGNIFICANT COMMITMENTS

The following is an analysis ofsignificant outstanding construction or renovation contracts executed by the School District as of June 30, 2008:

Project

Unearned Executed Contracts

Stadium Renovation

$ 350,347.06

The amount described in this note is not reflected in the basic financial statements. This project will be funded from proceeds from Special Purpose Local Option Sales Taxes and Bond proceeds.

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.

Note 13: POSTEMPLOYMENT BENEFITS

Georgia Retiree Health Benefit Fund

Plan Description. The School District contributes to the Georgia Retiree Health Benefit Fund ("GRHBF"), a cost-sharing multiple-employer defined benefit postemployment healthcare plan administered by the Department ofCommunity Health. GRHBF provides health insurance benefits to eligible retirees and their qualified beneficiaries. Pursuant to Title 45, Chapter 18 ofthe Official Code ofGeorgia Annotated, the authority to establish and amend the benefit provisions ofthe plan is assigned to the Board of Community Health. The Department of Community Health issues a publicly available financial report that includes financial statements and required supplementary information for GRHBF. That report may be obtained from the Department ofCommunity Health at 2 Peachtree Street, Atlanta, Georgia 30303.

Funding Policy. The contribution requirements of plan members and participating employers are established and may be amended by the Board of Community Health. Contributions of plan members or beneficiaries receiving benefits vary based on plan election, dependent coverage, and Medicare eligibility and election. On average, plan members pay approximately twenty-five percent (25%) of the cost of health insurance coverage.

Participating employers are statutorily required to contribute in accordance with the employer contribution rate established by the Board of Community Health. This contribution rate is established to fund both the active and retired employee health insurance plans based on projected pay-as-you-go financing requirements. The employer contribution rates for the combined active and retiree plans for the fiscal year ended June 30, 2008, were as follows:

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CITY OF TRION BOARD OF EDUCATION - CHATTOOGA COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2008

EXHIBIT"H"

Note 13: POSTEMPLOYMENT BENEFITS

Teachers Non-Certificated Employees

18.534% of state-based salaries $162.72 per month

The School District's contribution to the health insurance plans for the fiscal year ended June 30, 2008, were $1,054,011.26, which equaled the required contribution.

Note 14: RETIREMENT PLANS

TEACHERS RETIREMENT SYSTEM OF GEORGIA (TRS)

TRS PLAN DESCRIPTION Substantially all teachers, administrative and clerical personnel employed by local school systems are covered by the Teachers Retirement System of Georgia (TRS), which is a cost-sharing multiple employer defined benefit pension plan. TRS provides service retirement, disability retirement and survivors benefits for its members in accordance with State statute. 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.

TRS CONTRIBUTIONS REQUIRED AND MADE Employees ofthe School District who are covered by TRS are required by State statute to contribute 5% of their gross earnings to TRS. The School District makes monthly employer contributions to TRS at rates adopted by the TRS Board of Trustees in accordance with State statute and as advised by their independent actuary. The required employer contribution rate is 9.28% and employer contributions for the current fiscal year and the preceding two fiscal years are as follows:

Fiscal Year

Percentage Contributed

Required Contribution

2008 2007 2006

100% 100% 100%

$ 594,034.01 $ 563,225.21 $ 532,304.03

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CITY OF TRION BOARD OF EDUCATION - CHATTOOGA COUNTY GENERAL FUND
SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL
YEAR ENDED JUNE 30, 2008

SCHEDULE "1"

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

NONAPPROPRIATED BUDGETS

ORIGINAL {1)

FINAL {1)

ACTUAL AMOUNTS

$

1,084,582.19 $

1,084,582.19 $

331,070.07

808,192.74

8,735,411.18

8,735,411.18

9,129,194.73

413,532.81

413,532.81

471,482.03

486,000.00

486,000.00

836,272.22

19,504.71

19,504.71

75,640.13

633,523.72

$ 1o,739,030.89 $ 1o,739,030.89 $ 12,285,375.64

$

7,596,825.32 $

7,596,825.32 $

7,994,810.76

200,027.20 146,228.01 232,884.95 165,698.32 886,820.99 131,097.40 1,062,541.79 10,500.00 68,373.00
576,686.16

200,027.20 146,228.01 232,884.95 165,698.32 886,820.99 131,097.40 1,061,521.79 10,500.00 68,373.00
576,686.16

803,286.99 127,538.41 237,787.21 153,110.65 836,766.90 155,862.12 1,088,929.52
5,491.94 57,810.18 44,514.78 46,805.46 563,996.38 14 501.90

$ 11,077,683.14 $ 11,076,663.14 $ 12,131,213.20

$

-338,652.25 $

-337,632.25 $

154,162.44

47 705.47

$

-338,652.25 $

-337,632.25 $

201,867.91

2,599,798.00

2,599,798.00

1,824,287.36

87,833.46

Fund Balances - Ending

$

2,261,145.75 $

2,349,999.21 $ ~ - 2.,.0.=26.,.,,.15_5.,..2.7..

Notes to the Schedule of Revenues. Expenditures and Changes in Fund Balances Budget and Actual
(1) Original and Final Budget amounts do not include budgeted revenues or expenditures of the various principal accounts.
The accompanying schedule of revenues, expenditures and changes in fund balances budget and actual is presented on the modified accrual basis of accounting which is the basis of accounting used in the presentation of the fund financial statements.

See notes to the basic financial statements.

-23-

CITY OF TRION BOARD OF EDUCATION - CHATTOOGA COUNTY SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS YEAR ENDED JUNE 30, 2008

SCHEDULE "2"

FUNDING AGENCY PROGRAM/GRANT
Agriculture, U.S. Department of Child Nutrition Cluster Pass-Through From Georgia Department of Education Food Services School Breakfast Program National School Lunch Program
Total Child Nutrition Cluster
Other Programs Pass-Through From Georgia Department of Education Food Donation
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
Other Programs Pass-Through From Georgia Department of Education Career and Technical Education - Basic Grants to States Improving Teacher Quality State Grants State Grants for Innovative Programs Title I Grants to Local Educational Agencies
Total U. S. Department of Education

CFDA NUMBER

PASSTHROUGH
ENTITY ID
NUMBER

EXPENDITURES IN PERIOD

* 10.553 * 10.555

N/A

N/A

$

$

(2) 542,450.07
542,450.07

10.550

N/A $

(1 l
542,450.07

84.027 84.173

N/A

$

N/A

$

215,354.00 5,942.00
221,296.00

84.048 84.367 84.298 84.010

N/A N/A N/A N/A
$

1,810.00 39,175.00
1,079.00 29,831.00
293,191.00

Total Federal Financial Assistance
N/A = Not Available

$ ===8=3=5,!=64=1=.0==7

Notes to the Schedule of Expenditures of Federal Awards

(1} Commodities valued in the amount of $39,470.00 were received during the current fiscal year and were not recorded in the School District's financial statements.
(2) Expenditures for the funds earned on the School Breakfast Program ($22,911.48} were not maintained separately and are included in the 2008 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 Trion 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.

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CITY OF TRION BOARD OF EDUCATION - CHATTOOGA COUNTY SCHEDULE OF STATE REVENUE YEAR ENDED JUNE 30, 2008

SCHEDULE "3"

AGENCY/FUNDING
GRANTS Bright From the Start: Georgia Department of Early Care and Learning Pre-Kindergarten Program
Education, Georgia Department of Quality Basic Education Direct Instructional Cost Kindergarten Program Kindergarten Program - Early Intervention Program Primary Grades (1-3) Program Primary Grades - Early Intervention (1-3) Program Upper Elementary Grades (4-5) Program Upper Elementary Grades - Early Intervention (4-5) Program Middle School (6-8) Program High School General Education (9-12) Program Vocational Laboratory (9-12) Program Students with Disabilities Gifted Student - Category VI Remedial Education Program Alternative Education Program English Speakers of Other Languages (ESOL) Media Center Program 20 Days Additional Instruction Staff and Professional Development Indirect Cost Central Administration School Administration Facility Maintenance and Operations Categorical Grants Sparsity Nursing Services Mid-term Adjustment Hold-Harmless Vocational Supervisors Education Equalization Funding Grant Food Services Vocational Education Amended Formula Adjustment Other State Programs Graduation Coaches Health Insurance Middle School Remediation Preschool Handicapped Program Virtual Schools Grant
Office of Treasury and Fiscal Services Public School Employees Retirement

GOVERNMENTAL FUND TYPE GENERAL FUND

$

401,872.65

442,516.00 38,874.00
1,051,834.00 14,038.00
530,101.00 10,883.00
780,868.00 570,869.00 396,491.00 1,081,495.00 411,757.00
82,237.00 66,323.00 94,616.00 150,588.00 44,339.00 29,170.00
382,987.00 383,346.00 361,512.00
27,802.00 40,842.00 40,568.00
8,663.00 1,392,177.00
31,580.00 21,664.00 -124,868.00
124,250.00 210,514.08
271.00 27,035.00
1,000.00
980.00
$ ===9='1=2.,,.9,=19=4=7.=3

See notes to the basic financial statements.

- 25 -

CITY OF TRION BOARD OF EDUCATION - CHATTOOGA COUNTY SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS
YEAR ENDED JUNE 30, 2008

SCHEDULE "4"

PROJECT
The addition, renovation, repair and improvement to existing school buildings and facilities, including, but not limited to, all existing school buildings, food services facilities, transportation facilities, athletic facilities, and administrative offices; the acquisition and purchase of system-wide technology and safety equipment, including, but not limited to, computer hardware and software and security and safety equipment; the acquisition and purchase of school vehicles, including, but not limited to, school buses and maintenance vehicles; the addition, renovation, repair, paving and improvement to driveways and parking facilities; the acquisition and purchase of band instruments, and the acquisition and purchase of any property necessary and desirable therefore, both real and personal.

ORIGINAL ESTIMATED
COST (1)

CURRENT ESTIMATED COSTS (2)

AMOUNT EXPENDED IN CURRENT
YEAR (3)

AMOUNT EXPENDED
IN PRIOR YEARS (3)

PROJECT STATUS

$ 3,550,000.00 $ 3,550,000.00 $ 1,132,978.97 $ 1,347,761.74 Ongoing

(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 project. Includes all cost from project inception to completion.
(3) The voters of City of Trion approved the imposition of a 1% sales tax to fund the above project and retire associated debt. Amounts expended for this project may include sales tax proceeds, state, local property taxes and/or other funds over the life of the project.

See notes to the basic financial statements.

- 26-

CITY OF TRION BOARD OF EDUCATION - CHATTOOGA COUNTY GENERAL FUND - QUALITY BASIC EDUCATION PROGRAM (QBE)
ALLOTMENTS AND EXPENDITURES - BY PROGRAM YEAR ENDED JUNE 30, 2008

SCHEDULE "5"

DESCRIPTION
Direct Instructional Programs Kindergarten Program Kindergarten Program-Early Intervention Program Primary Grades (1-3) Program Primary Grades-Early Intervention (1-3) Program Upper Elementary Grades (4-5) Program Upper Elementary Grades-Early Intervention (4-5) Program Middle School (6-8) Program High School General Education (9-12) Program Vocational Laboratory (9-12) Program Students with Disabilities Category II Category Ill CategoryV 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

$

458,349.00 $ 388,229.44 $

12,908.99 $

401,138.43

40,843.00

43,932.09

190.40

44,122.49

1,095,869.00

1,308,111.76

117,374.36

1,425,486.12

18,658.00

79,070.49

223.14

79,293.63

552,420.00

564,978.61

9,591.36

574,569.97

12,408.00 821,471.00 605,499.00 414,644.00 1,162,983.00
429,173.00 82,293.00 69,673.00
100,842.00

1,023,910.16 1,213,035.49
264,185.53
55,586.43 775,763.42
63,310.90 243,997.57
91,128.53

18,047.60 40,500.52 21,832.94
1,059.86 23,255.54
2,293.32
97.67

1,041,957.76 1,253,536.01
286,018.47
56,646.29 799,018.96
63,310.90 246,290.89
91,226.20

$

5,865, 125.00 $ 6, 115,240.42 $

247,375.70 $

6,362,616.12

158,038.00 30,922.00

177,879.28 24,934.19

54,313.64 21,965.71

232,192.92 46,899.90

TOTAL QBE FORMULA FUNDS

$

6,054,085.00 $ 6,318,053.89 $

323,655.05 $

6,641,708.94

(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.

-27-

SECTION II COMPLIANCE AND INTERNAL CONTROL REPORTS

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

DEPARTMENT OF AUDITS AND ACCOUNTS
270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400
August 20, 2009

Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the City of Trion Board of Education
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 the financial statements of the governmental activities, each major fund, and the aggregate remaining fund information of City of Trion Board of Education as of and for the year ended June 30, 2008, which collectively comprise City ofTrion Board ofEducation's basic financial statements and have issued our report thereon dated August 20, 2009. 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.
Internal Control Over Financial Reporting
In planning and performing our audit, we considered City of Trion Board of Education's internal control over financial reporting as a basis for designing our auditing procedures for the purpose of expressing our opinions on the financial statements, but not for the purpose ofexpressing an opinion on the effectiveness of the City of Trion Board of Education's internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness of the City of Trion Board of Education's internal control over financial reporting.
Our consideration of internal control over financial reporting was for the limited purpose described in the preceding paragraph and would not necessarily identify all deficiencies in internal control over financial reporting that might be significant deficiencies or material weaknesses. However, as discussed below, we identified certain deficiencies in internal control over financial reporting that we consider to be significant deficiencies.
2008YB-40

A control deficiency exists when the design or operation ofa control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect misstatements on a timely basis. A significant deficiency is a control deficiency, or combination of control deficiencies, that adversely affects the City ofTrion Board of Education's ability to initiate, authorize, record, process, or report financial data reliably in accordance with generally accepted accounting principles such that there is more than a remote likelihood that a misstatement ofthe City of Trion Board of Education's financial statements that is more than inconsequential will not be prevented or detected by the City of Trion Board ofEducation's internal control. We consider items FS-7911-08-01 and FS-7911-08-02 in the accompanying Schedule ofFindings and Questioned Costs to be significant deficiencies in internal control over financial reporting.
A material weakness is a significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood that a material misstatement ofthe financial statements will not be prevented or detected by the City of Trion Board of Education's internal control.
Our consideration of the internal control over financial reporting was for the limited purpose described in the first paragraph ofthis section and would not necessarily disclose all deficiencies in internal control that might be significant deficiencies and, accordingly, would not necessarily disclose all significant deficiencies that are also considered to be material weaknesses. However, of the significant deficiencies described above, we consider item FS-7911-08-01 to be a material weakness.
Compliance and Other Matters
As part of obtaining reasonable assurance about whether City of Trion Board of Education's financial statements are free of material misstatement, we performed tests of its compliance with certain provisions oflaws, 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 ofTrion Board of Education in a separate letter dated August 20, 2009.
City ofTrion Board of Education's response to the findings identified in our audit is described in the accompanying Schedule of Management's Responses. We did not audit City of Trion Board of Education's response and, accordingly, we express no opinion on it.
2008YB-40

This report is intended solely for the information and use of management, members of the City of Trion Board of Education, others within the entity, Federal awarding agencies and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties.
Respectfully submitted,
~w~.:i:s Russell W. Hinton, CPA, CGFM State Auditor
RWH:as 2008YB-40

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

DEPARTMENT OF AUDITS AND ACCOUNTS
270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400
August 20, 2009

Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the City of Trion Board of Education
REPORT ON COMPLIANCE WITH REQUIREMENTS APPLICABLE TO EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH 0MB CIRCULAR A-133
Ladies and Gentlemen:
Compliance
We have audited the compliance of City of Trion Board of Education with the types of compliance requirements described in the U.S. Office of Management and Budget (0MB) Circular A-133 Compliance Supplement that are applicable to each of its major Federal programs for the year ended June 30, 2008. City of Trion Board of Education's major Federal programs are identified in the Summary of Auditor's Results Section ofthe accompanying Schedule of Findings and Questioned Costs. Compliance with the requirements of laws, regulations, contracts and grants applicable to each of its major Federal programs is the responsibility of City of Trion Board of Education's management. Our responsibility is to express an opinion on City of Trion Board of Education's compliance based on our audit.
We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States ofAmerica; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General ofthe United States; and 0MB Circular A133, Audits of States, Local Governments, and Non-Profit Organizations. Those standards and 0MB 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 Trion Board of Education's compliance with those requirements and performing such other procedures as we considered necessary in the

2008SA-10

circumstances. We believe that our audit provides a reasonable basis for our opinion. Our audit does not provide a legal determination on City ofTrion Board ofEducation's compliance with those requirements.
In our opinion, the City of Trion Board of Education complied, in all material respects, with the requirements referred to above that are applicable to each ofits major Federal programs for the year ended June 30, 2008.
Internal Control Over Compliance
The management ofCity ofTrion Board ofEducation is responsible for establishing and maintaining effective internal control over compliance with requirements of laws, regulations, contracts and grants applicable to Federal programs. In planning and performing our audit, we considered City of Trion Board of Education's internal control over compliance with requirements that could have a direct and material effect on a major Federal program in order to determine our auditing procedures for the purpose of expressing our opinion on compliance, but not for the purpose of expressing an opinion on the effectiveness ofinternal control over compliance. Accordingly, we do not express an opinion on the effectiveness of the City of Trion Board of Education's internal control over compliance.
A control deficiency in an entity's internal control over compliance exists when the design or operation ofa control does not allow management or employees, in the normal course ofperforming their assigned functions, to prevent or detect noncompliance with a type ofcompliance requirement of a Federal program on a timely basis. A significant deficiency is a control deficiency, or combination ofcontrol deficiencies, that adversely affects the entity's ability to administer a Federal program such that there is more than a remote likelihood that noncompliance with a type of compliance requirement of a Federal program that is more than inconsequential will not be prevented or detected by the entity's internal control.
A material weakness is a significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood that material noncompliance with a type of compliance requirement of a Federal program will not be prevented or detected by the entity's internal control.
Our consideration ofthe internal control over compliance was for the limited purpose described in the first paragraph of this section and would not necessarily identify all deficiencies in internal control that might be significant deficiencies or material weaknesses. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses, as defined above.
2008SA-10

This report is intended solely for the information and use of management, members of the City of Trion Board ofEducation, Federal awarding agencies and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties.
Respectfully submitted,

RWH:as 2008SA-10

Rusell W. Hinton, CPA, CGFM State Auditor

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

CITY OF TRION BOARD OF EDUCATION - CHATTOOGA COUNTY AUDITEE'S RESPONSE
SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2008

PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

FINDING CONTROL NUMBER AND STATUS

FS-7911-07-01

Previously Reported Corrective Action Implemented

PRIOR YEAR FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

No matters were reported.

SECTION IV FINDINGS AND QUESTIONED COSTS

CITY OF TRION BOARD OF EDUCATION - CHATTOOGA COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2008

I SUMMARY OF AUDITOR'S RESULTS

1. Type of Report Issued on the Financial Statements The auditor's opinion on the City of Trion Board of Education's financial statements was unqualified.

2. Significant Deficiencies in Internal Control Disclosed by the Audit ofthe Financial Statements The audit report for the City of Trion Board of Education disclosed financial statement significant deficiencies related to the following control categories.

Cash and Cash Equivalents Revenues/Receivables/Receipts

Expenditures/Liabilities/Disbursements General Ledger

Of the significant deficiencies described above, Cash and Cash Equivalents and General Ledger are considered to be material weaknesses.

3. Noncompliance Material to the Financial Statements The audit ofthe City ofTrion Board ofEducation disclosed no instances ofnoncompliance that were deemed to be material to the financial statements.

4. Significant Deficiencies in Internal Control Over Major Programs The audit report for the City of Trion Board of Education did not disclose any significant deficiencies in internal control over major programs.

5. Type of Report Issued on Compliance for Major Programs The auditor's opinion on the City of Trion Board of Education's report on compliance with requirements applicable to major programs was unqualified.

6. Audit Findings Required to be Reported by Section .510(a) ofOMB Circular A-133 The City of Trion Board of Education's audit did not disclose audit findings required to be reported by section .510(a) of 0MB Circular A-133.

7. Major Programs Federal awards audited as major programs are as follows: 10.553 Food Services - School Breakfast Program 10.555 Food Services - National School Lunch Program

8. Type "A" Program Dollar Threshold The dollar threshold for type "A" programs was $300,000.00.

9. Low Risk Auditee The City of Trion Board of Education did not qualify as a low risk auditee as defined by Section .530 ofOMB Circular A-133.

- 1-

CITY OF TRION BOARD OF EDUCATION - CHATTOOGA COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2008

II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

CASH AND CASH EQUIVALENTS GENERAL LEDGER Inadequate Separation of Duties Material Weakness Finding Control Number: FS-7911-08-01

Condition:

The accounting procedures ofthe School District were insufficient to provide adequate separation of duties over the accounting functions.

Criteria:

The School District's management is responsible for designing and maintaining internal controls that provide proper separation of duties. Such controls would limit any one individual's access to both physical assets and the related accounting records.

Questioned Cost: NIA

Information:

Cash and Cash Equivalents No administrative review was performed to determine that bank reconciliations were correct and that all required adjustments had been made for Central Office bank accounts.
General Ledger One employee has the responsibility for preparing and posting of journal entries with no administrative review.

Cause:

The School District did not assign responsibilities to achieve appropriate separation of duties nor utilized management oversight of the incompatible activities to properly safeguard assets.

Effect:

Errors and/or irregularities may not be detected in a timely manner.

Recommendation:

The School District should establish procedures to ensure that bank reconciliations are reviewed on a monthly basis. Also, the School District should implement procedures to ensure that key accounting functions of custody, record keeping and authorization are separated and/or utilize management oversight of these incompatible activities.

-2-

CITY OF TRION BOARD OF EDUCATION - CHATTOOGA COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2008

II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

CASH AND CASH EQUIVALENTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Control Procedures over School Activity Accounts Significant Deficiency Finding Control Number: FS-7911-08-02

Condition:

The accounting procedures ofthe School District were insufficient to provide for adequate internal controls over the school activity accounts.

Criteria:

The School District's management is responsible for designing and maintaining internal controls that provide reasonable assurance that transactions are processed according to established procedures.

Questioned Cost: NIA

Information:

Cash and Cash Equivalents One bank account was not properly reconciled to the general ledger. The bank reconciliation function was not separated from the record keeping and voucher payment function.
Revenues/Receivables/Receipts Deposit preparation was not separated from the record keeping and cash custody functions. We noted instances where: o Receipts did not have adequate supporting documentation. o Receipts did not always agree with deposit slip.
Expenditures/Liabilities/Disbursements We noted the following instances where: o Vouchers did not have an approved Request for Expenditure or Purchase Order. o Vouchers did not have an invoice. o Vouchers did not have evidence of receipt.

Cause:

These deficiencies were a result of management's failure to ensure that internal controls were established, implemented and functioning at the school level. Also, a formal School Activity Handbook is not in use at the School District.

Effect:

Errors and/or irregularities may not be detected in a timely manner.

-3-

CITY OF TRION BOARD OF EDUCATION - CHATTOOGA COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2008

II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

CASH AND CASH EQUIVALENTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Control Procedures over School Activity Accounts Significant Deficiency Finding Control Number: FS-7911-08-02

Recommendation:

Management should ensure all bank accounts are properly reconciled to the general ledger. Also, the School District should implement procedures to ensure that key accounting functions of custody, record keeping and authorization are separated and/or utilize management oversight of these incompatible activities. In addition, management should revise and monitor controls to provide reasonable assurance that transactions are processed according to established procedures.

III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

No matters were reported.

-4-

SECTIONV MANAGEMENT'S RESPONSES

CITY OF TRION BOARD OF EDUCATION - CHATTOOGA COUNTY SCHEDULE OF MANAGEMENT'S RESPONSES YEAR ENDED JUNE 30, 2008

Finding Control Number: FS-7911-08-01

Cash and Cash Equivalents: We concur with this finding. The Superintendent will review the bank reconciliations on a monthly basis.

General Ledger: We concur with this finding. The Superintendent will provide oversight by performing a review of documentation, preparation, and posting ofjournal entries.

Finding Control Number: FS-7911-08-02

We concur with this finding. Management will take steps to ensure that internal controls that have already been established will be reinforced by the development of a formal School Activity Handbook. The finance director will perform audits of the school activity accounts to provide reasonable assurance that transactions are processed according to established procedures.

Contact Person: Telephone: Fax: Email:

Marcia Giles (706) 734-4062 (706) 734-3397 mlgiles@windstream.net