bcps audit report period ending june 30 2010

8/2/2019 BCPS Audit Report Period Ending June 30 2010

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BURKE COUNTY PUBLIC SCHOOLSMORGANTON, NORTH CAROLINAFinancial Statements, Supplemental Schedules,

Independent Auditors' Report and Single Audit ReportsFor the Year Ended June 30, 2010

Lowdermilk Church &Co., L.L.P.Certified Public Accountants

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BURKE COUNTY PUBLIC SCHOOLSFor the Year Ended June 30, 2010

Members of the Board of EducationMr. Buddy Armour, Chairman of the Board

Ms. Catherine Thomas, Vice Chair of the BoardMr. Tim Buff, Board Member

Mr. Rob Hairfield, Board MemberMs. Karen Sain, Board MemberMs. Susan Stroup, Board MemberMr. Sam Wilkinson, Board Member

Administrative Personnel

Dr. Arthur Stellar, SuperintendentMr. Blair Propst, Director of Human ResourcesMr. Keith Lawson, Chief Finance Director


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BURKE COUNTY PUBLIC SCHOOLSTable of Contents

Page(s)Independent Auditors' Report 1-2Management's Discussion and Analysis 3-8Basic Financial Statements:

ScheduleCombining Individual Fund Statements and Schedules:Schedule of Revenues, Expenditures and Changes in Fund Balance -Budget and Actual - General Fund

Schedule of Revenues, Expenditures and Changes in Fund Balance -Budget and Actual- Federal Grants Fund

Schedule of Revenues, Expenditures and Changes in Fund Balance -Budget and Actual- Capital Outlay Fund

Schedule of Revenues and Expenditures - Budget and Actual (Non-GAAP) -Child Nutrition Fund

Exhibit

2Government-wide Financial Statements:Statement of Net AssetsStatement of Activities 910-11

334

Fund Financial Statements:Balance Sheet - Governmental FundsReconciliation of the Balance Sheet to the Statement of Net AssetsStatement of Revenues, Expenditures, and Changes in Fund Balances -Governmental Funds

Reconciliation of the Statement of Revenues, Expenditures, and Changes inFund Balances of Governmental Funds to the Statement of Activities

Statement of Revenues, Expenditures, and Changes in Fund Balances -Budget and Actual- General Fund and Annually Budgeted Major SpecialRevenue Fund

Statement of Net Assets - Proprietary FundStatement of Revenues, Expenses, and Changes in Fund Net Assets-Proprietary Fund

Statement of Cash Flows - Proprietary FundNotes to the Financial Statements

1819

20-34

1212

13-144

145

67

15 - I 617

8

135-37

2383

39-404

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BURKE COUNTY PUBLIC SCHOOLSTable of Contents (continued)

Compliance Section:Report On Internal Control Over Financial Reporting And On Compliance AndOther Matters Based On An Audit Of Financial Statements Performed InAccordance With Government Auditing Standards 42-43

Report On Compliance With Requirements Applicable To Each Major Federal ProgramAnd Internal Control Over Compliance In Accordance With OMB Circular A-133

And The State Single Audit Implementation Act 44-45Report On Compliance With Requirements Applicable To Each Major State Program AndInternal Control Over Compliance In Accordance With Applicable Sections OfOMB Circular A-133 And The State Single Audit Implementation Act 46-47

Schedule of Findings and Questioned Costs 48-50Corrective Action Plan 51Summary Schedule of Prior Year Audit Findings 52Schedule of Expenditures of Federal and State Awards 53-56


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Lowdermilk Church & Co., L.L.P.Certified Public Accountants

121 N. Sterling StreetMorganton, North Carolina 28655

Phone: (828) 433-1226Fax: (828) 433-1230

Independent Auditors' Report

To the Board of EducationBurke County, North CarolinaWe have audited the accompanying financial statements of the governmental activities, the business-typeactivities, each major fund, and the aggregate remaining fund information of the Burke County Public Schools,North Carolina, as of and for the year ended June 30, 2010, which collectively comprise the Burke County PublicSchools' basic financial statements as listed in the table of contents. These financial statements are theresponsibility of the Burke County Public Schools, North Carolina's management. Our responsibility is toexpress 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 Americaand the standards applicable to financial audits contained in Government Auditing Standards, issued by theComptroller General of the United States. Those standards require that we plan and perform the audit to obtainreasonable assurance about whether the financial statements are free of material misstatement. An audit includesexamining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An auditalso includes assessing the accounting principles used and significant estimates made by management, as well asevaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis forour opinions,In our opinion, the financial statements referred to above present fairly, in all material respects, the respectivefinancial position of the governmental activities, the business-type activities, each major fund, and the aggregateremaining fund information of the Burke County Public Schools, North Carolina as of June 30, 2010, and therespective changes in financial position and cash flows, where applicable, thereof and the respective budgetarycomparison for the General Fund and the State Public School Fund for the year then ended in conformity withaccounting principles generally accepted in the United States of America.In accordance with Government Auditing Standards, we have also issued our report dated November 18, 2010 onour consideration of the Burke County Public Schools' internal control over financial reporting and our tests ofits 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 andcompliance and the results of that testing, and not to provide an opinion on the internal control over financialreporting or on compliance. That report is an integral part of an audit performed in accordance with GovernmentAuditing Standards and should be read in conjunction with this report in considering the results of our audit.

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Accounting principles generally accepted in the United States of America require that the management'sdiscussion and analysis and budgetary comparison information on pages 3 through 8 and 15 through 16 bepresented to supplement the basic financial statements. Such information, although not a part of the basicfinancial statements, is required by the Governmental Accounting Standards Board, who considers it to be anessential 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 supplementaryinformation in accordance with auditing standards generally accepted in the United States of America, whichconsisted of inquiries of management about the methods of preparing the information and comparing theinformation for consistency with management's responses to our inquiries, the basic financial statements, andother knowledge we obtained during our audit of the basic financial statements. We do not express an opinion orprovide any assurance on the information because the limited procedures do not provide us with sufficientevidence to express an opinion or provide any assurance.Our audit was conducted for the purpose of forming opinions on the financial statements that collectivelycomprise the Burke County Public Schools' basic financial statements. The combining and individual nonmajorfund financial statements are presented for purposes of additional analysis and are not a required part of thefinancial statements. The accompanying schedule of expenditures of federal and State awards is presented forpurposes of additional analysis as required by U.S. Office of Management and Budget Circular A-133, Audits ofStates, Local Governments, and Non-Profit Organizations, and is also not a required part of the financialstatements. The combining and individ~al nonmajor fund financial statements and the schedule of expendituresof federal and State awards are the responsibility of management and were derived from and relate directly to theunderlying accounting and other records used to prepare the financial statements. The information has beensubjected to the auditing procedures applied in the audit of the financial statements and certain additionalprocedures, including comparing and reconciling such information directly to the underlying accounting andother records used to prepare the financial statements or to the fmancial statements themselves, and otheradditional procedures in accordance with auditing standards generally accepted in the United States of America.In our opinion, the information is fairly stated in all material respects in relation to the financial statements as awhole.

November 18, 2010

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MANAGEMENT'S DISCUSSION AND ANALYSIS


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Management's Discussion and Analysis

This section of the Burke County Public Schools' (the Board) financial report represents our discussion andanalysis of the financial performance of the Board for the year ended June 30, 2010. This information should beread in conjunction with the audited financial statements included in this report.Financial Highlights

e The State of North Carolina decreased funding by $8,953,744 (11.2%) from the prior year.e Funding to the Board of Education by the County Commissioners was $14,154,127, representing an

increase of $163,442 (1.2%) over the prior year.Enrollment in Burke County Public Schools was 13,471 a 362 student decrease in comparison to theprevious year.

e The Middle Schools annual debt service of $1,753,500 was retired in February 2010.Overview of the Financial StatementsThe audited financial statements of the Burke County Public Schools consist of four components. They are asfollows:

.. Independent Auditors' Reporte Management's Discussion and Analysis (required supplementary information) Basic Financial Statementse Required supplemental section that presents combining and budgetary statements for non-major

governmental funds and budgetary statements for enterprise fundsThe Basic Financial Statements include two types of statements that present different views of the Board'sfinances. The first is the government-wide statements. The government-wide statements are presented on thefull accrual basis of accounting and include the statement of net assets and the statement of activities. TheStatement of Net Assets includes all of the Board's assets and liabilities. Assets and liabilities are classified inthe order of relative liquidity for assets and due date for liabilities. This statement provides a summary of theBoard's investment in assets and obligations to creditors. Liquidity and financial flexibility can be evaluatedusing the information contained in this statement. The Statement of Activities summarizes the Board's revenuesand expenses for the current year. A net (expense) revenue format is used to indicate to what extent eachfunction is self-sufficient.The second set of statements included in the basic financial statements is the Fund Financial Statements, whichare presented for the Board's governmental funds and proprietary fund. These statements present thegovernmental funds on the modified accrual basis of accounting, measuring the near term inflows and outflowsof financial resources and what is available at year-end to spend in the next fiscal year. The proprietary fund ispresented on the full accrual basis of accounting. The fund financial statements focus on the Board's mostsignificant funds. Because a different basis of accounting is used in the government-wide statements,reconciliation from the governmental fund financial statements to the government-wide statements is required.The government-wide statements provide information about the Board as an economic unit while the fundfinancial statements provide information on the financial resources of each of the Board's major funds.

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Government-wide Statements. The Government-wide statements report information about the unit as a wholeusing accounting methods similar to those used by private-sector companies. The Statement of Net Assetsincludes all of the Board's assets and liabilities. All of the current year's revenues and expenses are accounted forin the Statement of Activities regardless of when cash is received or paid.The two government-wide statements report the Board's net assets and how they have changed. Net assets - thedifference between the Board's assets and liabilities - is one way to measure the unit's financial health orposition.

~ Over time, increases or decreases in the Board's net assets are an indicator of whether its financialposition is improving or deteriorating.

G To assess the Board's overall health, you need to consider additional non-financial factors such aschanges in the County's property tax base and the condition of its school buildings and other physicalassets.

The unit's activities are divided into two categories in the government-wide statements: Governmental Activities: Most of the Board's basic services are included here, such as regular and

special education, transportation, and administration. County funding and state and federal aid financemost of these activities.

o Business-type Activities: The Board charges fees to help it cover the costs of certain services it provides.The School food services is included here.

The government-wide statements are shown as Exhibits 1 and 2 of this report.Fund Financial Statements. The fund financial statements provide more detailed information about the Board'sfunds, focusing on its most significant or "major" funds - not the unit as a whole. Funds are accounting devicesthe Board uses to keep track of specific sources of funding and spending on particular programs:

Some funds are required by state law, such as the State Public School Fund.e The Board has established other funds to control and manage money for a particular purpose or to show

that it is properly using certain revenues, such as in the Federal Grants Fund.Burke County Public Schools has two types of funds:Governmental funds. Most of the Board's basic services are included in governmental funds, which generallyfocus on two things - how cash and other assets can readily be converted to cash flow in and out, and the balancesleft at year-end that are available for spending. As a result of this focus, the governmental funds statementsprovide a detailed short-term view that helps the reader determine whether there are more or fewer financialresources that can be spent in the coming year to finance the Board's programs. Because this information doesnot encompass the additional long-term focus of the government-wide statements, additional information at thebottom of the governmental funds statements, in the form of a reconciliation, explains the relationship (ordifferences) between the government-wide and the fund financial statements. The Board has severalgovernmental funds: the General Fund, the State Public School Fund, the Individual Schools Fund, the CapitalOutlay Fund, the Federal Grants Fund.The governmental fund statements are shown as Exhibits 3, 4, 5 and 6 of this report.

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Proprietary funds. Services for which the Board charges a fee are generally reported in proprietary funds. Theproprietary fund statements are reported on the same full accrual basis of accounting as the government-widestatements. Burke County Public Schools has one proprietary fund - which is an enterprise fund - the ChildNutrition Fund.The proprietary fund statements are shown as Exhibits 7, 8 and 9 of this report.Financial Analysis of the Schools as a WholeNet assets is an indicator of the fiscal health of the Board. Assets exceeded liabilities by $125,922,126 as of June30,2010 and total net assets increased by $366,700 from the prior year. The largest component of net assets isinvested in capital assets, net of related debt, of$126,428,481. It comprises 100.40% of the total net assets.Following is a summary of the Statement of Net Assets:

Table 1Condensed Statement of Net Assets

as of June 30, 2010 and 2009

Current assetsCapital assets

Governmental Activities Business-ty~e Activities Total Government2010 2009 2010 2009 2010 2009

$ 6,973,827 $ 3,689,674 $1,249,295 $ 941,108 $ 8,223,122 $ 4,630,782126,734,064 129,087.580 694375 701042 127,428,439 129,788,622

$133.707.891 $ 132,777,254 $1,943,669 $1.642.150 $135.651.561 $134.419A04otal assets

Current liabilities $ 2,432,429 $ 1,613,344 $ 275,650 $ 3,440 $ 2,708,079 $ 1,616,784Long-term liabilities 6,905,608 7.142 861 115.748 104333 7021.356 7.247194Total liabilities $ 9.338,037 $ 8,756205 $ 391,398 $ 107.773 $ 9,729,435 $ 8,863,978

Invested in capital assets, $125,734,106 $ 127,892,556 $ 694,375 $ 701,042 $126,428,481 $128,593,598net of related debtRestricted net assets 3,209,830 3,689,689 3,209,830 3,689,689Unrestricted net assets (4,574,082) (7,561,196) 857897 833,335 (3.716,185) (6,727,861)Total net assets $ 124,369,854 $ 124,021,049 $1.552,272 $1,534.377 $125,922,126 $125,555.426

Net assets increased during the year, by ,29%, largely to the increase in net assets in the governmental activities.

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The following table shows the revenues and expenses for the Board for the current fiscal year.Table 2

Condensed Statement of Revenues, Expenses, and Changes in Net AssetsFor the Years Ended June 30, 2010 and 2008Governmental Activities Business-IT!!c Activities Total Government

Revenues: 2010 2009 2010 2009 2010 2009Program revenues:Charges for services $ 824,840 s 890,933 $2,404,435 $ 2,804,378 $ 3,229,275 s 3,695,311Operating grants and contributions 94,374,620 99,777,303 5,012,269 4,738,230 99,386,889 104,515,533Capital grants and contributions 523,137 910,026 523,137 910,026

General revenues:Other revenues 21485.946 20,825,040 1920 20827 21487,866 20,845,867

Total revenues 117208,543 122,403,302 7,4) 8,624 7,563,435 124627 167 129,966737

Expenses:Governmental activities:Instructional services 89,300,978 98,256,259 89,300,978 98,256,259System-wide support services 21,475,160 22,183,226 21,475,160 22,183,226Ancillary services 1,134,969 610,132 1,134,969 610,[32Non-programmed charges 1,013,423 1,040,268 1,013,423 1,040,268Interest on long-term debt 35,324 4,125 35,324 4,125Depreciation 3,899,886 3,893,224 3,899,886 3,893,224

Business-type activities:Child nutrition 7.400729 8,068,325 7400.729 8,068,325

Total expenses 116859740 125,987,234 7400729 8,068,325 124,260,469 134,055559

Change in net assets 348,803 (3,583,932) 17,895 (504,891) 366,698 (4,088,822)Beginning net assets 124.021,049 127.604,980 1 534377 2,039,269 125,555,426 129644.249

Ending net assets $124,369.854 $ 124,021,049 $1,552,272 $1534377 $125,922,124 $125,555.426

Total governmental activities generated revenues of$117.2 million while expenses in this category totaled $116.9million for the year ended June 30, 2010. Comparatively, revenues were $122.4 million and expenses totaled$125.9 million for the year ended June 30,2009. After transfers to the business-type activities, the increase innet assets stands at $.3 million at June 30, 2010, compared to a decrease of$3.6 million in 2009. Instructionalservices expenses comprised 76% of total governmental-type expenses while system-wide support services madeup 18% of those expenses for 2010. County funding comprised 12.2% of total governmental revenue whileunrestricted State funding added another 4.0% for 2010. In 2009, county funding was 13.5% and unrestrictedState funding added 1.9%. Much of the remaining 83.8% of total governmental revenue for 2010 consists ofrestricted State and federal money. This revenue represented 84.6% of total revenue in 2009. Business-typeactivities generated revenue of $7.4 million and had expenses of $7.4 million. Net assets increased in thebusiness-type activities by $17,895.

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Financial Analysis of the Board's FundsGovernmental Funds. The focus of Burke County Public Schools' governmental funds is to provide informationon near-term inflows, outflows, and balances of usable resources. Such information is useful in assessing theBoard's financing requirements.

The Board's governmental funds reported a combined fund balance of$2,599,606, an $1,975,400 decrease overlast year. All of the Board's governmental funds, except for the State Public School Fund, and the individualschool fund had revenues and other financing sources that did not exceed expenditures and other uses, thus totalfund balance decreased.Proprietary Funds. The Child Nutrition Programs reflected an increase in net assets over the prior year.Revenues exceeded expenditures by approximately $18,000, resulting in an increase in available fund balance.

Categorization of Expenditures for Governmental Funds

1%i%

Instructional ServicesSystem Wide Support ServicesNon Program ChargesCapital ProjectsDebt Services 2010I I I Ancillary ServicesnJ

Expenditures presented on modified accrual basis of accounting.General Fund Budgetary HighlightsOver the course of the year, the Board revised the budget several times to account for changes in revenueexpectations. State revenues received were approximately $150 thousand less than budgeted. The State allotspositions to the local system using a State average salary and benefits formula, Actual expenses paid out wereless than budgeted. The State revises the allotments to the local district on a monthly basis. These revisions aremade to the Burke County Board of Education's budget at fiscal year end 2010.

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Capital AssetsCapital assets decreased by $2,360,181 (or 2%) from previous year. This was largely due to depreciation.The following is a summary of the capital assets, net of depreciation at year-end.

Governmental Activities Business-tYl!e Activities Total Primary Government2010 2009 2010 2009 2010 2009Land s 3,414,165 $ 3,414,165 s s $ 3,414,165 $ 3,414,165Construction in progress 1,891,143 351,033 1,891,143 351,033Buildings 119,OI5,189 122,268,147 119,015.189 1.22,268,147Equipment and furniture 82],966 860,439 694,377 701,042 1,516,343 1,561,481Vehicles 159L601 2 193.796 1 591.601 2.193,796Total $126.734,064 $129.087.580 $694.377 $701.042 $127.428.441 $129.788.622

Debt OutstandingDuring the year the Board's outstanding debt decreased by $195,066 due mainly to the payment of principal. TheBoard is limited by North Carolina General Statutes with regards to the types of debt it can issue for whatpurpose that debt can be used. The County holds virtually all debt issued for school capital construction.Economic FactorsEnrollment in Burke County Schools decreased by 362 students (2.6%). This continued decline in enrollment isdue to several factors. Attributable factors are the continued increase in home schooling, the continued growth ofthe local Charter School, as we!! as families of school age children migrating elsewhere in search of employmentopportunities. As a result the continued issued of drastic reductions in state funding is compounded by areduction due to declining enrollment. This continued trend presents many challenges in managing operationalexpenses of the School System's almost 2.4 million square feet of facilities. As a result the consolidation of sixschools into three was approved by the Board of Education for the 2010/2011 fiscal year and it appears continuedconsolidation is inevitable,Requests for InformationThis report is intended to provide a summary of the financial condition of Burke County Public Schools.Questions or requests for additional information should be addressed to:

Keith Lawson, Chief Finance DirectorBurke County Board of Education

P. O. Drawer 989Morganton, NC 28680

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BASIC FINANCIAL STATEMENTS


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BURKE COIJNTY PUBLIC SCHOOLSExhibit 1

Statement of Net AssetsJune 30, 2010

Governmental Business-typeActivities Activities Total

AssetsCash and investments $ 5,331,658 $ 987,676 $ 6,319,334Due from other governments 1,642,169 175,488 1,817,657Inventory 86,13] 86,131Capital assets (Note 1):Land, improvements, and construction in progress 5,305,308 5,305,308Other capital assets, net of depreciation 121,428,756 694,375 122,123,131

Total assets $ 133,707,891 $ 1,943,669 $135,651,561

LiabilitiesAccounts payable and accrued expenses $ 613,727 $ 275,650 $ 889,377Accrued salaries and wages payable 1,152,497 1,152,497Claims payable 24,750 24,750Long-term liabilities:Due within one year 641,455 641,455Due in more than one year 6,905,608 115,748 7,021,356

Total liabilities 9,338,037 391,398 9,729,435

Net AssetsInvested in capital assets, net of related debt 125,734,106 694,375 126,428,481Restricted for:Individual schools 1,979,032 1,979,032Capital outlay 1,230,798 1,230,798

Unrestricted (4,574,082) 857,897 (3,716,185)Total net assets $ 124,369,854 $ 1,552,272 $ 125,922,126See accompanying notes tofinancial statements.

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BURKE COUNTY PUBLIC SCHOOLSExhibit 4

Page 1 of2Statement of Revenues, Expenditures and Changes in Fund Balances

Governmental FundsFor the Year Ended June 30, 2010

Non-MajorMajor Funds Fund TotalState Public Capital Individual Federal Governmental

General School Outlay Schools Grant FundsRevenues!State of North Carolina s 2,404,655 s 70,707,120 $ 2,012,532 $ $ $ 75,124,307Burke County 14,154,127 4,750,094 18,904,221United States Government 2,269,027 12,272,756 14,541,783Other local sources 3,025,998 13,785 5,598,449 8,638,232Total revenues 21,853,808 70,707,120 6,776,411 5,598,449 12,272,756 117,208,544Expenditures:Current:Instructional servicesRegular instructional 1,864,277 44,741,726 1,966,456 1,419,435 49,991,894Special populations 589,641 9,101,864 4,212,975 13,904,480Alternative programs 1,940,997 1,060,695 5,730 3,138,789 6,146,211School leadership 1,466,380 2,600,026 5,632,096 1,980,383 11,678,885Co-curricular 637,085 85,340 722,425School-based support 1,204,876 5,113,726 624,323 6,942,925System-wide support servicesSupport and development 163,750 443,246 9,051 374,207 990,253Special populations supportand development 7,084 102,541 58,854 168,479Alternative programs and servicessupport and development 641,238 173,146 126,492 940,876Technology support 268,266 235,687 2,135,142 2,639,096Operational support 6,691,930 6,115,792 998,192 20,004 13,825,918Financial and humand resource 889,263 625,135 50,495 (625) 1,564,268Accountability 7,881 12,217 20,098System-wide pupil support 155,570 155,570Policy, leadership and public relations 1,086,359 340,514 4,554 1,431,429

Ancillary services 1,055,137 43,829 37,506 1,136,472Non-programed charges 740,588 (3,025) 275,860 1,013,423Debt service:Principal 912,005 912,005Interest and other charges 35,324 35,324

Capital outlay:Rea l p r op e r ty and buildings 120,740 120,740Furniture and equipmentBuses and motor vehicles 1,207,133 1,207,133Total expenditures 19,410,321 70,707,120 7,525,609 5,632,096 12,272,756 115,547,903

cant.

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BURKE COUNTY PUBLIC SCHOOLSExhibit 4, cont,

Page 2 of2Statement of Revenues, Expenditures and Changes in Fund Balances

Governmental FundsFor the Year Ended June 30, 20UI

Excess (deficiency) of revenuesover expenditures $ 2,443,487 s $ (749,199) $ (33,647) s s 1,660,642Other Financing Sources (Uses):Installment purchase obligation issued 716,939 716,939

Net change in fund balance 2,443,487 (32,260) (33,647) 2,377,581Fund balances (deficit), beginning year (449,467) 3,759 1,263,057 2,012,679 2,830,028Fund balances, end of year s 1,994,020 $ 3,759 $ 1,230,797 $ 1,979,032 $ $ 5,207,609

Amounts reported for governmental activities in the statement of activitiesare different because:

Net change in fund balances" total governmental funds S ; 2,377,581

Governmental funds report capital outlays as expenditures. However, in thestatement of activit ies, the cost of those assets is allocated over their estimateduseful lives and reported as depreciation expense. This is the amount by whichdepreciation exceeded capital outlay in the current period. (2,323,885)

Installment purchases provide current financial resources to governmentalfunds, while the repayment of the principal of installment purchasesconsumes the current financial resources of governmental funds.Neither transaction has any effect on net assets. This amount is thenet effect of these differences in the treatment of installment purchasesand related items. 195,066

Disposal of capital assets reported on the statement of activit ies but noton the fund statements (29,636)

Some expenditures reported in the fundhave already been accrued in the statement of activities.Claims and judgementsCompensated absences 24,750104,927

Changes in net assets of governmental activities. $ 348,803See accompanying notes tofinancial statements.

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Statement of Net AssetsProprietary Fund

June 30, 2010

AssetsCurrent assets:Cash and investmentsAccounts receivableInventory

$ 987,676175,48886,131

Total current assets 1,249,294Noncurrent assets:Fixed assets, net of accumulated depreciation 694,375Total assets $1,943,670LiabilitiesCurrent liabilities:Accounts payable $ 275,650Non-current liabilities:Compensated absencesTotal liabilities 391,398Net assets:Invested in capital assetsUnrestrictedTotal net assets

694,375857,897

$1,552.272See accompanying notes to financial statements.

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BURKE CO{JNTY PUBLIC SCHOOLSExhibit 7

Statement of Revenues, Expenses, and Changes in Fund Net AssetsProprietary Fund

For the Year Ended June 30, lOUIOperating Revenues:Food salesMiscellaneousTotal operating revenuesOperating Expenses:Food cost:Purchased foodDonated commoditiesSalaries and benefitsMaterials and suppliesRepairs and maintenanceDepreciationContracted servicesNon-capitalized equipmentIndirect costTravelOther .Total operating expensesOperating lossNonoperating Revenues:Federal reimbursementsFederal commoditiesInterest earned on investmentsFederal grants - regularState grants - regularIndirect cost subsidyChange in net assetsTotal net assets, beginningTotal net assets, endingSee accompanying notes tofinancial statements.

18

$ 2,328,708757272,404,435

2,707,035525,667

3,189,443201,75056,473106,626115,84836,270

426,12534,3041.187

7400.729(4,996,294)

4,307,833552,1361,92011,8489,077

131 37317,895

1,534,377$ 1.552.272_


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Statement of Cash FlowsProprietary Fund

For the Year Ended June 30, 2010Cash Flows From Operating Activities:Cash received from customers and othersCash paid for goods and servicesCash paid to employees for servicesNet cash provided (used) by operating activitiesCash Flows Provided by Noncapital Financing Activities:Federal and State reimbursementsCash Flows Used by Capital and Related Financing Activities:Acquisition offixed assetsTotal

Cash Flows Provided by Investing Activities:Interest on investmentsNet increase (decrease) in cash and cash equivalentsCash and cash equivalents:Beginning of yearEnd afyearReconciling of Operating Loss to Net Cash Provided (Used) by Operating Activities:Operating lossAdjustments to reconcile operating loss to net cash provided (used) by operating activities:DepreciationDonated commoditiesIndirect costs subsidyChange in assets and liabilities:(Increase) decrease in accounts receivable(Increase) decrease in inventoriesIncrease (decrease) in deferred revenueIncrease (decrease) in accounts payable and accrued vacation

Total adjustmentsNet cash provided (used) by operating activitiesNoncash Operating and Noncapital Financial Activities:Indirect costs of$426,125 that would be due to the Genera! Fund were not paid. These unpaid costs are reflectedas nonoperating revenue and an operating expense on Exhibit 7.The Child Nutrition Fund received donated commodities with a value of $552,136 during the fiscal year.The receipt of the commodities is recognized as a nonopertating revenue. The fund recorded theconsumption of $525,667 worth of donated commodities during the fiscal year as an operating expense.These transactions are reported on Exhibit 7.See accompanying notes tofinancial statements.

19

$ 2,531,417(2,952,860)(3,529,749}(3,951,192)

4,328,758

{99,958}(99,958)

1,920279,528708,148

$ 987676

$ (4,996,294)106,626552,136131,3731,064

(29,723)(3,440)

287,0661,045,102

$ (3,951,192)


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BURKE COUNTY PUBLIC SCHOOLSNotes to the Financial StatementsFor the Year Ended June 30, 2010

I. Summary of Significant Accounting PoliciesThe accounting policies of the Burke County Public Schools conform to generally accepted accountingprinciples as applicable to governments. The following is a summary of the more significant accountingpolicies:A. Reporting Entity

Burke County Public Schools (Board) is a Local Education Agency empowered by State law ChapterlI5C of the North Carolina General Statutes with the responsibility to oversee and control allactivities related to public school education in Burke County, North Carolina. The Board receivesState, local and federal government funding and must adhere to the legal requirements of eachfunding entity.

B. Basis of PresentationGovernment-wide Statements: The statement of net assets and the statement of activities displayinformation about the Board. These statements include the financial activities of the overallgovernment. Eliminations have been made to minimize the effect of internal activities upon revenuesand expenses. These statements distinguish between the governmental and business-type activities ofthe Board. Governmental activities generally are financed through intergovernmental revenues, andother non-exchange transactions. Business-type activities are financed in whole or in part by feescharged to external parties.The statement of activities presents a comparison between direct expenses and program revenues forthe business-type activity of the Board and for each function of the Board'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 expense allocations that have been made inthe funds have been reversed for the statement of activities. Programs revenues include (a) fees andcharges paid by the recipients of goods or services offered by the programs and (b) grants andcontributions that are restricted to meeting the operational or capital requirements of a particularprogram. Revenues that are not classified as program revenues are presented as general revenues.Fund Financial Statements: The fund financial statements provide information about the Board'sfunds. Separated statements for each fund category - governmental and proprietary are presented.The emphasis of fund financial statements is on major governmental and enterprise funds, eachdisplayed in a separate column. AU remaining governmental and enterprise funds are aggregated andreported as nonmajor funds.Proprietary fund operating revenues, such as charges for services, result from exchange transactionsassociated with the principal activity of the fund. Exchange transactions are those in which eachparty receives and gives up essentially equal values. Nonoperating revenues, such as subsidies andinvestment earnings, result from nonexchange transactions or ancillary activities.

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The Board reports the following major governmental funds:General Fund ~The General Fund is the general operating fund of the Board. The General Fundaccounts for a11financial resources except those that are required to be accounted for in another fund.This fund is the "Local Current Expense Fund," which is mandated by State law [G.S.115C-426J.State Public School Fund - The State Public School Fund includes appropriations from theDepartment of Public Instruction for the current operating expenditures of the public school system.Individual Schools Fund - The Individual Schools Fund includes revenues and expenditures of theactivity funds of the individual schools. The primary revenue sources include funds held on thebehalf of various clubs and organizations, receipts from athletic events, and proceeds from variousfund raising activities. The primary expenditures are for athletic teams, club programs, activitybuses, and instructional needs.Capital Outlay Fund ~The Capital Outlay Fund accounts for financial resources to be used for theacquisition and construction of major capital facilities (other than those financed by proprietaryfunds and trust funds). It is mandated by State law [G.S.IlSC-426]. Capital projects are funded byBurke County appropriations, restricted sales tax moneys, proceeds of Burke County bonds issuedfor public school construction, lottery proceeds, as well as certain State assistance.The Board reports the following major enterprise fund:Child Nutrition Fund - The Child Nutrition Fund is used to account for the food service programwithin the school system.

C. Measurement Focus and Basis of AccountingGovernment-wide and Proprietary Fund Financial Statements. The government-wide andproprietary fund financial statements are reported using the economic resources measurement focusand the accrual basis of accounting. Revenues are recorded when earned and expenses are recordedat the time liabilities are incurred, regardless of when the related cash flows take place. Non-exchange transactions, in which the Board gives (or receives) value without directly receiving (orgiving) equal value in exchange, include grants and donations. Revenue from grants and donations isrecognized in the fiscal year in which all eligibility requirements have been satisfied.Governmental Fund Financial Statements, Governmental funds are reported using the currentfinancial resources measurement focus and the modified accrual basis of accounting. Under thismethod, revenues are recognized when measurable and available. The Board considers all revenuesreported in the governmental funds to be available if the revenues are collected within 60 days afteryear-end. These could include federal, State, and county grants, and some charges for services.Expenditures are recorded when the related fund liability is incurred, except for claims andjudgments and compensated absences, which are recognized as expenditures to the extent they havematured. General capital asset acquisitions are reported as expenditures in governmental funds.Acquisitions under capital leases are reported as other financing sources.Under the terms of grant agreements, the Board funds certain programs by a combination of specificcost-reimbursement grants and general revenues. Thus when program expenses are incurred, thereare both restricted and unrestricted net assets available to finance the program. It is the Board'spolicy to first apply cost-reimbursement grant resources to such programs and then general revenues.

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All governmental and business-type activities and enterprise funds of the Board follow FASBStatements and Interpretations issued on or before November 30, 1989, Accounting Principles BoardOpinions, and Accounting Research Bulletins, unless those pronouncements conflict with GASBpronouncements.

D. Budgetary Data

The Board's budgets are adopted as required by the North Carolina General Statutes. Annualbudgets are adopted for all funds, except for the individual schools special revenue funds, as requiredby the North Carolina General Statutes. No budget is required by State law for individual schoolfunds. All appropriations lapse at the fiscal year-end. All budgets are prepared using the modifiedaccrual basis of accounting. Expenditures may not legally exceed appropriations at the functionallevel for all annually budgeted funds. The Board has authorized the Superintendent to move moneys(up to $1,000) from one function to another within a fund. Such transfers must be reported to thegoverning board at its next regular meeting. Transfers in excess of this amount or transfers betweenfunds require governing board approvaL Amendments which alter the county appropriation ortransfer money to or from the Capital Project Fund also require the approval of the Burke CountyBoard of Commissioners. All amendments must be approved by the governing board. During theyear, several immaterial amendments to the original budget were necessary. The budget ordinancemust be adopted by July 1 of the fiscal year or the governing board must adopt an interim budget thatcovers that time until the annual ordinance can be adopted.

E. Assets, Liabilities and Fund Equity1. Deposits and Investments

All deposits of the Board are made in board-designated official depositories and are secured asrequired by State law eG.S. 11SC-444). The Board may designate, as an official depository,any bank or savings association whose principal office is located in North Carolina. Also, theBoard may establish time deposit accounts such as NOW and Super NOW accounts, moneymarket accounts, and certificates of deposit. The Board also has money credited in its namewith the State Treasurer and may issue State warrants against these funds.State law eG.S. 11SC-443) authorizes the Board to invest in obligations of the United States orobligations fully guaranteed both as to principal and interest by the United States; obligationsof the State of North Carolina; bonds and notes of any North Carolina local government orpublic authority; obligations of certain non-guaranteed federal agencies; certain high qualityissues of commercial paper and bankers' acceptances; and the North Carolina CapitalManagement Trust (NCCMT), an SEC-registered (2a-7) money market mutual fund.The STIF is managed by the staff of the Department of State Treasurer and operated inaccordance with state laws and regulations. It is not registered with the SEC. It consists of aninternal portion and an external portion in which the board participates. Investments arerestricted to those enumerated in G.S. 147-69.1.The Board's investments are reported at fair value as determined by quoted market prices. TheNCCMT Cash Portfolio's securities are valued at fair value, which is the NCCMT's shareprice. The STIF securities are reported at cost and maintain a constant $1 per share value.Under the authority ofG.S. 147-69.3, no unrealized gains or losses of the STIF are distributedto external participants of the fund.

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2. Cash and Cash EquivalentsThe Board pools money from several funds to facilitate disbursement and investment and tomaximize investment income. Therefore, all cash and investments are essentially demanddeposits and are considered cash and cash equivalents.

3. InventoriesThe inventories of the Board are valued at cost and the Board uses the first-in, first-out (FIFO)flow assumption in determining cost.Proprietary Fund inventories consist of food and supplies and are recorded as expenses whenconsumed.

4. Capital AssetsThe Board's capital assets are recorded at original cost. Donated assets are listed at theirestimated fair value at the date of donation or forfeiture. Improvements are capitalized anddepreciated over the remaining useful lives of the related capital assets. Certain items acquiredbefore July 1, 1950 are recorded at an estimated original historical cost. The total of theseestimates is not considered large enough that any errors would be material when capital assetsare considered as a whole.It is the policy of the Board to capitalize all capital assets costing more than $5,000 with anestimated useful life of two or more years. In addition, other items that are purchased and usedin large quantities such as student desks are capitalized. The cost of normal maintenance andrepairs that do not add to the value of the asset or materially extend asset lives are notcapitalized.Burke County holds title to certain properties, which are reflected as capital assets in thefinancial statements of the Board. The properties have been deeded to the County to permitinstallment purchase financing of acquisition and construction costs and to permit the Countyto receive refunds of sales tax paid for construction costs. Agreements between the Countyand the Board give the schools full use of the facilities, full responsibility for maintenance ofthe facilities, and provides that the County will convey title of the property back to the Board,once all restrictions of the financing agreements and all sales tax reimbursement requirementshave been met.Capital assets are depreciated using the straight-line method over the following estimateduseful lives:

BuildingsFurniture and equipmentVehicles and motorized equipmentComputer equipment

Years50563

Depreciation for building and equipment that serve multiple purposes cannot be allocatedratably and is therefore reported as "unallocated depreciation" on the statement of activities.

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5. Long-Tenn ObligationsIn the government-wide financial statements, long-term debt and other long-term obligationsare reported as liabilities in the applicable governmental activities.

6. Compensated AbsencesThe Board follows the State's policy for vacation and sick leave. Employees may accumulateup to thirty (30) days earned vacation leave with such leave being fully vested when earned.For the Board, the current portion of the accumulated vacation pay is not considered to bematerial. The Board's liability for accumulated earned vacation and the salary-relatedpayments as of June 30,2010 is recorded in the government-wide and proprietary fundfinancial statements on a FIFO basis. An estimate has been made based on prior years'records, of the current portion of compensated absences.The sick leave policy of the Board provides for an unlimited accumulation of earned sick leave.Siok leave does not vest, but any unused sick leave accumulated at the time of retirement maybe used in the determination of length of service for retirement benefit purposes. Since theBoard has no obligation for accumulated sick leave until it is actually taken, no accrual for sickleave has been made.

7. Net AssetslFund BalancesNet assets in the government-wide and proprietary fund financial statements are classified asinvested in capital assets, net of related debt; restricted; and unrestricted. Restricted net assetsrepresent constraints on resources that are either externally imposed by creditors, grantors,contributors, or the laws or regulations of other governments, or imposed by law through statestatute.In the governmental fund financial statements, reservations or restrictions of fund balancerepresent amounts that are not appropriable, are legally segregated for a specific purpose, orare restricted by the grant agreement. Designations of fund balance represent tentativemanagement plans that are subject to change.State law (G.S.l15C-425(a)) restricts the appropriation of fund balance or fund equity to anamount not to exceed the sum of cash and investments minus the sum of liabilities,encumbrances, and deferred revenues arising from cash receipts as those amounts stand at theclose of the fiscal year preceding the budget year.The governmental fund types classify fund balances as follows:Reserved:Reserved by State statute - portion of fund balance, in addition to reserves for encumbrancesand reserves for inventories, which is not available for appropriation under State law. Thisamount is usually comprised of accounts receivable and interfund receivables which are notoffset by deferred revenues.Unreserved:Designated for subsequent year's expenditures - portion of total fund balance available forappropriation which has been designated for the adopted 2009 - 2010 budget ordinance.

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Undesignated - portion of total fund balance available for appropriation which is uncommittedat year-end.

8. Use of EstimatesThe preparation of financial statements in conformity with generally accepted accountingprinciples requires management to make estimates and assumptions that affect certain reportedamounts and disclosures. Accordingly, actual results could differ from those estimates.Significant areas where estimates are made are indirect costs and depreciable asset lives.

U. Stewardship, Compliance, and AccountabilityA. Significant Violations of Finance-Related Legal and Contractual Provisions

Noncompliance with North Carolina General StatutesThe budget resolution for the year ended June 30, 2010 was adopted January 11, 2010. Normally thebudget resolution is adopted soon after the fiscal year begins, in this case July 1,2009.

B. Excess of Expenditures over AppropriationsDuring the fiscal year ended June 30, 2010, the Board reported expenditures within the General Fundand the State Public School Fund that violated State law [G.S. lI5C-44I] because they exceeded theamounts appropriated in the budget ordinance.In the Generai Fund, the Board spent in excess of the budget for the following functions (level ofbudgetary control):

School leadership - $6,678Operational support - $9,693Finance and human resources - $11,807 Policy, leadership and public relations - $8,484

In the Capital Outlay Fund, the Board spent in excess of the budget for the following functions (levelof budgetary control):

Buses and motor vehicles - $1,207,133Debt service - $947,329 - .:-:c:t.. i"J ,:;,.,'""The excess above was a result of entries to accrue payables after June 30, 2010 and can be correctedwith a retroactive budget amendment.

C. Deficit in Fund Balance of Individual FundsNone reported.

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ill. Detail Notes on An FundsA. Assets

1. Deposits

All of the Board's deposits are either insured or collateralized by using one of two methods.Under the Dedicated Method, ail deposits exceeding the federal depository insurance coveragelevel are collateralized with securities held by the Board's agents in the unit's name. Under thePooling Method, which is a collateral pool, all uninsured deposits are collateralized withsecurities held by the State Treasurer's agent in the name of the State Treasurer. Since theState Treasurer is acting in a fiduciary capacity for the Board, these deposits are considered tobe held by the agent in the entity's name. The amount of the pledged collateral is based on anapproved averaging method for non-interest bearing deposits and the actual current balance forinterest-bearing deposits. Depositories using the Pooling Method report to the State Treasurerthe adequacy of their pooled collateral covering uninsured deposits. The State Treasurer doesnot confirm this information with the Board or with the escrow agent. Because of the inabilityto measure the exact amount of collateral pledged for the Board under the Pooling Method, thepotential exists for under-collateralization, and this risk may increase in periods of high cashflows. However, the State Treasurer of North Carolina enforces strict standards of financialstability for each depository that collateralizes public deposits under the Pooling Method. TheBoard has no policy regarding custodialcredit risk for deposits.

---.~__../~./'

At June 30, 2010, the Board had deposits with banks and savings and loans with a carryingamount of $4,624,345 and with the State Treasurer of$3,448. The bank balances with thefinancial institutions and the State Treasurer were $6,455,901 and $987,752, respectively. Ofthese balances, $250,000 was covered by federal depository insurance and $7,193,653 wascovered by collateral held by authorized escrow agents in the name of the State Treasurer.

2. InvestmentsAt June 30, 2010, the Board of Education had $1,691,541 invested with the North CarolinaCapital Management Trust's Cash Portfolio which carried a credit rating of AAAm byStandard and Poor's. The Board has no policy for managing interest rate risk or credit risk.

3. Accounts ReceivableReceivables at the government-wide level at June 30, 2010, were as follows:

Due From Other Due FromFunds (Internal Other Other

Balances) Governments Receivables TotalGovernmental Activities:General fund $ $ 788,767 $ $ 788,767Other governmental activities 750.000 853,402 - 1.603,402--Total $750,000 $1,642,169 $ $2,392.169Business-type Activities:Child Nutrition $ s 173,117 $2.371 s 175,488

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Due from other governments consists of the following:Governmental Activities:General fundState public school fundFederal grant fund

$ 788,767712,709140693

Local grant fundsOperating funds from DPIGrant funds from U.S. Government

Total $1.642.169Business-type Activities:Child Nutrition Fund $ 173,117 Food service funds from the State

4. Capital AssetsCapital asset activity for the year ended June 30,2010, was as follows:

Beginning EndingBalance Increases Decreases BalanceGovernmental Activities:Capital assets not being depreciated:Land $ 3,414,165 $ $ $ 3,414,165Construction in progress 351 033 1.540,110 1,891,143Total capital assets not being depreciated 3,765,198 $ 1,540,110 $ 5,305.308Capital assets being depreciated:Buildings 181,187,782 $ $ 181,187,782Equipment and furniture 5,222,994 504,611 81,194 5,646,411Vehicles 10,610.957 114026 1,132,089 9,592894Total capital assets being depreciated 197,021,733 $ 618,637 $ 1,213,283 196,427,087Less accumulated depreciation for:Buildings 58,919,635 $ 3,252,958 $ 62,172,593Equipment and furniture 4,362,555 513,448 51,558 4,824,445Vehicles 8,417.161 716.221 1,132.089 8,001,293Total accumulated depreciation 71,699,351 $ 4,482.627 $ 1,183.647 74998331Total capital assets being depreciated, net 125,322382 121,428,756Governmental activity capital assets, net $129,087,580 $126,734,064

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Depreciation was charged to governmental functions as follows:Unallocated depreciationOperational support servicesTotal

$3,899,886582,741

$4.482,627

BeginningBalance Increases Decreases EndingBalanceBusiness-type Activities:Child Nutrition Fund:Capital assets being depreciated:Furniture and equipmentTotal capital assets being depreciated 3,435.133

$ 99,959 $114,293 $3.420,799$ 99,959 $114,293 3,420,799

$106,626 $114,295 2,726.422$106,626 $114,295 2,726,422

$ 694.377

$3,435,133

Less accumulated depreciation for:Furniture and equipment 2,734,091Total accumulated depreciation 2,734,091Child Nutrition capital assets, net $ 701,042

Construction CommitmentsBurke County Public Schools has active construction projects as of June 30, 2010. Theprojects include school lab construction and roofing for the benefit of Burke County PublicSchools. At year end, the commitments with contractors for school construction wereapproximately $500,000.

B. Liabilities1. Pension Plan Obligations

a. Teachers' and State Employees' Retirement SystemPlan Description. Burke County Public Schools contributes to the statewide Teachers'and State Employees' Retirement System (TSERS), a cost-sharing multiple-employerdefined benefit pension plan administered by the State of North Carolina. TSERSprovides retirement benefits to plan members and beneficiaries. Article 1 of O.S.Chapter 135 assigns the authority to establish and amend benefit provisions to the NorthCarolina General Assembly. The Teachers' and State Employees' Retirement System isincluded in the Comprehensive Annual Financial Report (CAFR) for the State of NorthCarolina. The State's CAFR includes financial statements and required supplementaryinformation for TSERS. This report may be obtained by writing to the Office of theState Controller, 1410 Mail Service Center, Raleigh, North Carolina 27699-1410, or bycalling (919) 981-5454.

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Funding Policy. Plan members are required to contribute six percent of their annualcovered salary and the Board is required to contribute at an actuarially determined rate.The current rate is 8.14% of annual covered payroll. The contribution requirements ofplan members and Burke County Public Schools are established and may be amended bythe North Carolina General Assembly. The Board's contributions to TSERS for theyears ended June 30, 2010, 2009, and 2008 were $6,141,056, $6,686,973, and$6,058,698, respectively, equal to the required contributions for each year.

b. Other Post-employment BenefitsHealthcare BenefitsPlan Description - The postemployment healthcare benefits are provided through a cost-sharing multiple-employer defined benefit plan administered by the ExecutiveAdministrator and the Board of Trustees of the Comprehensive Major Medical Plan (thePlan). The Executive Administrator and the Board of Trustees of the Plan establishespremium rates except as may be established by the General Assembly in an appropriationact. The Plan's benefit and contribution provisions are established by Chapter 135-7,Article 1, and Chapter 135, Article 3 of the General Statues and may be amended only bythe North Carolina General Assembly. By General Statue, the Plan accumulatescontributions from employees and any earnings on those contributions in the RetireeHealth Benefit Fund. These assets shall be used to provide health benefits to retired anddisabled employees and their applicable beneficiaries. These contributions areirrevocable. Also by law, these assets are not subject to the claims of creditors of theemployers making contributions to the Plan.The State of North Carolina issues a publicly available financial report that includesfinancial statements and required supplementary information for the State'sComprehensive Major Medical Plan (also, referred to as the State Health Plan). Anelectronic version of this report is available by accessing the North Carolina Office of theState Controller's Internet home page http://www.ncasc.net!and clicking on "FinancialReports", or by calling the State Controller's Financial Reporting Section at (919) 981-5454.Funding Policy - The Comprehensive Major Medical Plan is administered by theExecutive Administrator and Board of Trustees of the Plan, which establish premiumrates except as may be established by the General Assembly in an appropriation act. Thehealthcare benefits for retired and disabled employees are the same as for activeemployees, except that the coverage becomes secondary when fanner employees becomeeligible for Medicare. For employees first hired on and after October 1, 2006, futurecoverage as retired employees is subject to the requirement that the future retiree have 20or more years of retirement service credit in order to receive coverage on anoncontributory basis. Employees first hired on and after October 1, 2006 with 10 butless than 20 years of retirement service credit are eligible for coverage on a partiallycontributory basis. For such future retirees, the State will pay 50% of the State HealthPlan's total noncontributory premium. For employees hired before October 1, 2006,healthcare benefits are provided to retirees (at no charge to the retirees) who have at leastfive years of contributing retirement membership prior to disability or retirement. Inaddition, persons who became surviving spouses of retirees prior to October I, 1986,receive the same coverage as retirees at the State's expense.

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Contributions are determined as a percentage of covered monthly payroll. Annually, themonthly contribution rates to the Plan, which are intended to finance benefits andadministrative expenses on a pay-as-you-go basis, are determined by the GeneralAssembly in the Appropriations Bill. For the fiscal years ended June 30,2010,2009,and 2008, the School Board paid all annual required contributions to the Plan forpostemployment healthcare benefits of $3, 185,223, $3,381,367, and $3,172,498,respectively. These contributions represented 4.50%, 4.10%, and 4.10% of coveredpayroll, respectively.Long-term Disability BenefitsPlan Description - Short-term and long-term disability benefits are provided through theDisability Income Plan of North Carolina (DIT'NC), a cost-sharing, multiple-employerdefined benefit plan, The DIT'NC is administered by the Board of Trustees of theTeachers' and State Employees' Retirement System, Long-term disability benefits arepayable as an other postemployment benefit from DlllNC after the conclusion of theshort-term disability period or after salary continuation payments cease, whichever islater, for as long as an employee is disabled. Benefit and contribution provisions areestablished by Chapter 135, Article 6, of the General Statues and may be amended onlyby the North Carolina General Assembly, The Plan accumulates contributions fromemployers and any earnings on those contributions in the Disability Income Plan TrustFund. The plan does not provide for automatic post-retirement benefit increases,The State of North Carolina issues a publicly available financial report that includesfinancial statements and required supplementary information for the DIPNC Anelectronic version of this report is available by accessing the North Carolina Office of theState Controller's Internet home page http://,,vww.ncosc.net/and clicking on "FinancialReports", or by calling the State Controller's Financial Reporting Section at (919) 981-5454.Funding Policy - An employee is eligible to receive long-term disability benefitsprovided the following requirements are met: (1) the employee has five or more years ofcontributing membership service in the Teacher's and State Employee's RetirementSystem of North Carolina, earned within 96 months prior to the end of the short-termdisability period or cessation of salary continuation payments, which ever is later; (2) theemployee must make application to receive long-term benefits within 180 days after theconclusion of the short-term disability period or after salary continuation payments ceaseor after monthly payments for Workers' Compensation cease (excluding monthlypayments for permanent partial benefits), whichever is later; (3) the employee must becertified by the Medical Board to be mentally or physically disabled for the furtherperformance of hislher usual occupation; (4) the disability must have been continuous,likely to be permanent, and incurred at the time of active employment; (5) the employeemust not be eligible to receive an unreduced retirement benefit from the RetirementSystem; and (6) the employee must terminate employment as a permanent, full-timeemployee, An employee is eligible to receive an unreduced retirement benefit from theRetirement System after (1) reaching the age of 65 and completing 5 years of creditableservice, or (2) reaching the age of 60 and completing 25 years of creditable service, or(3) completing 30 years of creditable service, at any age.

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For members with five or more years of membership service as of July 31,2007, themonthly long-term disability benefit is equal to 65% of one-twelfth of an employee'sannual base rate of compensation last payable to the participant or beneficiary prior tothe beginning of the short-term disability period, plus the like percentage of one twelfthof the annual longevity payment to which the participant or beneficiary would beeligible. The monthly benefits are subject to a maximum of$3,900 per month reducedby any primary Social Security disability benefits and by monthly payments for Workers'Compensation to which the participant or beneficiary may be entitled. The monthlybenefit shall be further reduced by the amount of any monthly payments from theDepartment of Veterans Affairs, any other federal agency or any payments made underthe provisions of G.S.127 A-108, to which the participant or beneficiary may be entitledon account of the same disability. Providing in any event, the benefits payable shall beno less than $10 a month. When an employee qualifies for an unreduced serviceretirement allowance from the Retirement System, the benefits payable from DIPNC willcease, and the employee will commence retirement under the TSERS. For members whoobtain five years of membership service on or after August 1,2007, the monthly long-term disability benefit is reduced by the primary Social Security retirement benefit towhich you might be entitled should you become age 62 during the first 36 months. After36 months of long-term disability, there will be no further payments from the DIPNCunless the member is approved for and is in receipt of primary Social Security disabilitybenefits. It is payable so long as the member remains disabled and is in receipt of aprimary Social Security disability benefit. When an employer qualifies for an unreducedservice retirement allowance from the Retirement System, the benefits payable fromDIPNC will cease, and the employee will commence retirement under the TSERS.The Board's contributions are established in the Appropriations Bill by the GeneralAssembly. Benefit and contribution provisions are established by Chapter 135, Article 6,of the General Statutes and may be amended only by the North Carolina GeneralAssembly. The contributions cannot be separated between the amounts that relate toother postemployment benefits and employment benefits for active employees. Thoseindividuals who are receiving extended short-term disability benefit payments cannot beseparated from the number of members currently eligible to receive disability benefits asan other postemployment benefit. For the fiscal years ended June 30, 2010, 2009, and2008, the Board paid all annual required contributions to the DIPNC for disabilitybenefits of$368,070, $428,856, and $402,366, respectively. These contributionsrepresented .52%, .52% and .52% of covered payroll, respectively.

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3. Accounts PayableAccounts payable as June 30, 2010, are as follows:

Governmental activities:GeneralOther governmental

Vendors$227,096386.626

Total governmental activities $613,722Business-type activities:Child nutrition $275.650

4. Risk ManagementThe Board is exposed to various risks of losses related to torts; theft of, damage to, anddestruction of assets; errors and omissions; injuries to employees; and natural disasters. TheBoard maintains general liability and errors and omissions coverage of $1 million per claim,and workers' compensation coverage up to the statutory limits for employees to the extent theyare paid from Federal and local funds. The State of North Carolina provides workers'compensation for employees to the extent they are paid from State funds. The coverage has anannual aggregate limited for general liability of $2,000,000, and $1,000,000 for errors andomissions. The Board also participates in the Public Schoo! Insurance Fund (the Fund), avoluntary, self-insured risk control and risk financing fund administered by the North CarolinaDepartment of Public Instruction, insuring the tangible property assets of the Board. The Fundprovides coverage up to $10 million per occurrence and $20 million in aggregate annually.Excess reinsurance is purchased through commercial insurers, who participate in propertylosses in excess of the Fund's self-insured retention of$lO million. A total limit of$100million per occurrence is purchased for covered catastrophic events, $400 million maximumper occurrence for anyone flood or earthquake.The Board participates in the Teachers' and State Employees' Comprehensive Major MedicalPlan, a self-funded risk financing pool of the State administered by Blue Cross and Blue Shieldof North Carolina. Through the plan, permanent full-time employees of the Board are eligibleto receive health care benefits up to a $5 million lifetime limit. The Board pays the full cost ofcoverage for employees enrolled in the Comprehensive Major Medical Plan.In accordance with G.S. 1J5C-442, the Board's employees who have custody of the Board'smonies at any given time of the Board's funds are performance bonded through a commercialsurety bond. The finance officer is bonded for $100,000, The remaining employees that haveaccess to funds are bonded under a blanket bond for $100,000.The Board carries commercial coverage for all other risk of loss and a separate flood policy forcertain assets.There have been no significant reductions in insurance coverage in the prior year, and claimshave not exceeded coverage in any of the past three fiscal years.

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5. Contingent LiabilitiesAt June 30,2010, the Board was a defendant to various lawsuits. In the opinion of the Board'smanagement and the Board's attorney, the ultimate effect of these legal matters will not have amaterial adverse effect on the Board's financial position.

6. Long-term Obligationsa. Installment Purchase

The Board is authorized to finance the purchase of school buses under G.S. 115C-528(a).Session law 2003-284, section 7.25 authorized the State Board of Education to allotmonies for the payments on financing contracts entered into pursuant to G.S. 115C-528.The State has accepted the bid to purchase Thomas Built Buses through a special thirdparty financing arrangement by Bank of America Public Capital Corporation at totalpayments less than the purchase price.During the year ended June 30, 2010, the Board entered into one installment purchasecontract with Bank of America Public Capital Corporation to finance the purchase ofnine school buses. This financing contract requires payments of $15,343 due at thebeginning of each contract year.The future minimum payments of the installment purchases as of June 30,2010,including $36,275 of interest, are as follows:

Governmental ActivitiesYear Ending June 30, Principal Interest201120122013

$641,455177,647180,856

$999,958

$26,5296,4783,268

$36,275b. Long-Term Obligation Activity

The following is a summary of changes in the Board's long-term obligations for thefiscal year ended June 30,2010:

Balance Balance CurrentJuly 1~2009 Increases Decreases June 301 2010 PortionGovernmental Activities:Installment purchase $1,195,024 $716,939 $ 912,005 $ 999,958 $641,455Claims and judgments 49,500 24,750 24,750 24,750Compensated absences 6,652,032 104,927 6,547,105

Total $7,896,556 $716,939 $1,041.682 $7,571,813 $666,205Business-type Activities:Compensated absences $ 104,333 $ 11,415 $ $ 115,748 $

Compensated absences for governmental activities are typically liquidated by the generaland other governmental funds.

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C. Interfund Balances and ActivityThe composition of interfund balances at June 30, 2010 is as follows:

Receivables PayablesCapital Outlay FundGeneral Fund $750,000 $ 750,000

$750,000otal $750,000IV. Summary Disclosure of Significant Contingencies

Federal and State Assisted ProgramsThe Board has received proceeds from several federal and State grants. Periodic audits of these grants arerequired and certain costs may be questioned as not being appropriate expenditures under the grantagreements. Such audits could result in the refund of grant monies to the grantor agencies. Managementbelieves that any required refunds will be immaterial. No provision has been made in the accompanyingfinancial statements for the refund of grant moneys.

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INDIVIDUAL FUND SCHEDULES


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BURKE COUNTY PUBLIC SCHOOLSSchedule 1Page 1 of3General Fund

Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and ActualFor the Year Ended June 30, 2010

BudgetVariancePositive(Negative)

Revenues:State of North Carolina:Other $ 2,615,122 $ 2,404,655 $ (210,466)

14,251,211 14,154,127 (97,084)

3,696,232 2,269,027 (1,427,205)

279,994 254,359 (25,635)611,317 611,31748,243 45,091 (3,152)4,456 4,743 287

1,592,811 2,110,489 517,6772,536,821 3,025,998 489,17723,099,386 21 ,853,808 (1,245,5782

Burke County:Appropriation from general revenue

United States Government:OtherOther local sources:Tuition and fees, regularFines and forfeituresRental of school propertyInterest on investmentsOtherTotal other local sourcesTotal revenuesExpenditures:Instructional services:Regular instructional:RegularCTE

Total1,995,692 1,835,558 160,134

32,632 28,719 3,9132,028,324 1,864,277 164,047

523,376 491,096 .32,280105,326 98,545 6,7813,889 3,889

632,591 589,641 42,951

1,914,555 1,782,414 132,142271,263 158,584 112,679

2,185,818 1,940,997 244,821cant

Special populations:Children with DisabilitiesOtherLimited English Proficiency

TotalAlternative programs:Alternative instructionExtended day/year instruction

Total

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BURKE COUNTY PIJBLIC SCHOOLSSchedule 1~cont,

Page 2 of 3General Fund

Schedule of Revenues, Expenditures and. Changes in Fund Balance - Budget and. ActualFor the Year Ended June 30, 2010

School leadershipCo-curricularSchool-based support:Student accountingGuidance services/CTEHealth services supportInstructional technology servicesStaff development unallocated

TotalSystem-wide support services:Support and development:Regular curricularCTE curriclular

Total

Alternative programs and services support and development

143,946 125,73042,476 38,020186,423 163,7507,366 7,084

760,340 641,238268,266 268,266

43,988 44,02069,610 68,218

3,324,694 3,343,109578,913 513,3088,584 4,956362 362

2,656,086 2,717,9576,682,237 6,691,930

715,960 722,886161,436 166,377877,396 889,263

Special population support and development

Technology supportOperational support:CommunicationsPrinting and copyingPublic utility and energyCustidial/housekeepingTransportationFacilities planningMaintenance services

TotalFinancial a nd h uman resource:FinancialHuman resource

Total

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18,2164,45722,673

282119,102

(32)1,391

(18,415)65,6063,628

(61,871)(9,693)

(6,925)(4,941)(11,867)

cant.


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BIJRKE COUNTY PUBLIC SCHOOLSSchedule 1, cont,

Page 3 of3General FundSchedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual

For the Year Ended June 30, lOU)

BudgetVariancePositive(Negative)

Accountability:Student testing $ 7,881 s 7,881 $System-wide pupil support:Educational media 7,422 7,422Attendance 26,045 26,045Safety and security 122,380 122,102 278

Total 155,847 155,570 278Policy, leadership and public relations:Board of education 92,234 96,339 (4,104)Legal services 408,919 385,327 23,592Audit services 30,000 53,708 (23,708)Leadership services 539,227 543,450 (4,223)Public relations and marketing services 7,495 7,536 ~42)

Total 1,077,876 1,086,359 (8,483)Ancillary services:Community services 1,910,884 993,965 916,919Nutrition services 61,233 61,172 62Total 1,972,117 1,055,137 916,981

Non-programmed charges:Payments to other governmental units 782,664 740,588 42,076Contingency 69,440 69,440

Total 852,104 740,588 111,515Total expenditures 21,021,069 19,410,321 1,610,748Net change in fund balance 2,078,317 2,443,487 365,170

Other Financing Sources (Uses):Fund balance appropriated (2,078,317) 2,078,317Excess of revenues and other sources over (under)expenditures and other uses $ 2,443,487 $ 2,443,487

Fund balance (deficit), beginning (449,467)Fund balance, ending $ 1)994,020

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BURKE COUNTY PUBLIC SCHOOLSSchedule 2

Federal Grants FundSchedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual

For the Year Ended June 30, 2010

Budget ActualVariancePositive

(Negative)Revenues:U.S. Government $16,563,672 $ 12,272,756 $(4,290,916)Total revenues 16,563,672 12,272,756 (4,290,916)Expenditures:Instructional programs 13,178,863 11,375,904 1,802,959Supporting services 696,010 583,486 112,524Nonprogram charges 2,688,799 313,366 2,375,433Total expenditures 16,563,672 12,272,756 4,290,916Excess of revenues and other sources over (under)expenditures and other uses $ $Fund balance, beginningFund balance, ending $

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BURKE COUNTY PUBLIC SCHOOLSSchedule 3Page 1 e r z

Capital Outlay FundSchedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual

For the Year Ended June 30, 2010

Revenues:State of North Carolina:Public school capital fund - LotteryState appropriations - busesSales and use tax revenue

Total State of North Carolina

VariancePositive

Budget Actual (Negative)

$ 520,218 $ 520,218 $490,194 1,437,523 (V947329,54,791 54,791

1,065,203 2,012,532 947,329Burke County:

Sales taxAppropriations from County - COPSTotal Burke County

4,629,354 4,629,354120,7404,629,354 4,750,094

1,119 1,1192,440 12,6653,560 13,785

5,698 117 6,776,411

2,632,553 2,057,5265,847,697 3,192,881

120,740120,740

Other:Disposition, fixed assetsOther

Total other10,22510,225

Total revenues 1,078,294Expenditures:

Regular instructional 575,027System wide support 2,654,816

Capital outlay:Real property and buildings:Category I ProjectsContingency

Total real property and buildings120,740 (120,740)

448,1l1 448,111448,111 120,740 327,371

1,207,133 Q,207,133}cont.

Buses and motor vehicles:Category III Projects

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BURKE COUNTY PUBLIC SCHOOLSSchedule 3,cout.Page 2 of2

Capital Outlay FundSchedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual

For the Year Ended June 30,2010

VariancePositive

Budget Actual (Negative)Debt service:Principal $ $ 912,005 $ (912,005)Interest 35,324 (35,324)

Total debt service 947,329 ,/t:j (947,329)Total expenditures 8,928,361 7,525,609 1,402,752

Revenues over (under) expenditures (3,230,244) (749,198) 2,481,046Other Financing Sources (Uses):Installment purchase obligation issued 716,939 716,939Fund balance appropriated 3,230,244 (3,230,244)Total other financing sources (uses) 3,230,244 716,939 (2,513,305)Excess of revenues and other sources over (under)expenditures and other uses $ (32,259) s (32.259)Fund balance, beginning 1,263,057

Fund balance, ending $ 1,230,798

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BURKE COUNTY PUBLIC SCHOOLSSchedule 4

Child Nutrition FundSchedule of Revenues and Expenditures

Budget and Actual (Non-GAAP)For the Year Ended June 30, 2010

ActualVariancePositive(Negative)

Operating Revenues:Food salesMiscellaneousTotal operating revenues

$2,786,10077500

$2,328,70875727

2,863,600 2,404.435$ (457,392)(1,773)(459.165)

Operating Expenditures:Food costs:Purchase of foodDonated commoditiesSalaries and benefitsMaterials and suppliesUtilitiesRepairs and maintenanceContracted servicesCapital outlayIndirect costTravelAdvertisingOtherTotal operating expendituresOperating income (loss)

3,205,000 2,707,035 497,965434,362 525,667 (91,305)3,540,745 3,189,443 351,302271,500 201,750 69,75014,000 14,00060,000 56,4 73 3,52755,000 115,848 (60,848)105,000 136,230 (31,230)230,500 426,125 (195,625)45,000 34,304 10,696

400 4001 500 1 188 312

7l963l007 7.394!063 568944(5,099,407) (4,989,628) 109779

4,298,000 4,307,833 9,833434,362 552,136 117,775

11,848 11,84810,000 9,077 (923)15,000 1,922 (13,078)

342,045 (342,045)5,099,407 4,882l817 (216,590)$ $ (] 06,811) $ (] 06.8] ])

$ (106,811)131,37399,960

(l06:626)$ 11825

Nonoperating Revenues:Federal reimbursementsFederal commoditiesFederal grants - regularState grants - regularInterest earned on investmentsFund balance appropriatedTotal nonoperating revenuesNet income (loss)Reconciliation of Modified Accrual to Full Accrual Basis:Net income (loss) (modified)Indirect cost not paidCapital outlayDepreciation

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COMPLIANCE SECTION


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Lowdermilk Church & ce., L.L.P.Certified Public Accountants

121 N. Sterling StreetMorganton, North Carolina 28655

Phone: (828) 433-1226Fax: (828) 433-1230

Report On Internal Control Over Financial Reporting And On Compliance AndOther Matters Based On An Audit Of Financial Statements Performed In Accordance With

Government Auditing StandardsTo the Board of EducationBurke County Public SchoolsMorganton, North CarolinaWe have audited the financial statements of the governmental activities, the business-type activities, each majorfund, and the aggregated remaining fund information of the Burke County Public Schools, North Carolina, ("theBoard") as of and for the year ended June 30, 2010, which collectively comprises the Burke County PublicSchools' basic financial statements, and have issued our report thereon dated November 18,2010. We conductedour audit in accordance with auditing standards generally accepted in the United States of America and thestandards applicable to financial audits contained in Government Auditing Standards issued by the ComptrollerGeneral of the United States.Internal Control Over Financial Reporting1 '1 planning and performing our audit, we considered the Burke County Public Schools' internal control overfinancial reporting as a basis for designing our auditing procedures for the purpose of expressing our opinion onthe financial statements, but not for the purpose of expressing an opinion on the effectiveness of the BurkeCounty Public Schools' internal control over financial reporting. Accordingly, we do not express an opinion onthe effectiveness of the Board's internal control over financial reporting.A deficiency in internal control exists when the design or operation of a control does not allow management oremployees, in the normal course of performing their assigned functions, to prevent, or detect and correctmisstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, ininternal control such that there is a reasonable possibility that a material misstatement of the entity's financialstatements will not be prevented, or detected and corrected on a timely basis.Our consideration of internal control over financial reporting was for the limited purpose described in the firstparagraph of this section and was not designed to identify all deficiencies in internal control over financialreporting that might be deficiencies, significant deficiencies, or material weaknesses. We did not identify anydeficiencies in internal control over financial reporting that we consider to be material weaknesses, as definedabove. However, we identified certain deficiencies in internal control over financial reporting, described in theaccompanying schedule of findings and questioned costs that we consider to be significant deficiencies ininternal control over financial reporting 2010-1. A significant deficiency is a deficiency, or a combination ofdeficiencies, in internal control that is less severe than a material weakness, yet important enough to meritattention by those charged with governance.

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bcps audit report period ending june 30 2010

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