bcps audit report period ending june 30 2009

8/3/2019 BCPS Audit Report Period Ending June 30 2009

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BURKE COUNTY PUBLIC SCHOOLSftfORGA1VTON, NORTH (~ROLINA

Financial Statements, Supplemental Schedules,Independent Auditors' Report and Single Audit Reports

For the Year Ended June 30,2009

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


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BURKE COUNTY PUBLIC SCHOOLSFor the Year Ended June 30,2009

Members of the Board of EducationMs. Tracy Norman, Chairman of the BoardMr. Tim Buff, Vice Chairman of the BoardMe Buddy Armour, Board MemberMe John Aulgur, Board MemberMr. Rob Hairfield, Board Member

Administrative PersonnelMe David Burleson, SuperintendentMr. Rick Sherrill, Associate SuperintendentMr. Anthony Cox, Assistant SuperintendentMr. Winston Bagley, Human Resources DirectorMr. Keith Lawson, Chief Finance Director

Ms. Karen Sain, Board MemberMr. Sam Wilkinson, Board Member


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BURKE COUNTY PUBLIC SCHOOLSTable of Contents

Pagers)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

Exhibit12

Government-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 and Major Special Revenue Funds

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

Statement of Cash Flows - Proprietary FundNotes to the Financial Statements

1 819

20-36

121213

4 14567

15-1617

8

37-392

403

41-424

43


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BURKE COUNTY PUBLIC SCHOOLSTable () f Contents (tOntiDlled)

Compliance Section:Report O n Internal Control O ver F inancial Reporting A nd On C om pliance A ndO th er M atters B ased O n An Audi t Of F in ancia l S ta temen ts P er fo rmed InAcc ord an ce W i th G ov ernme nt A ud itin g S tan da rd sR epo rt O n C om pliance W ith R eq uirem en ts A pp licab le T QEach M ajor F ederal P ro gramA nd In tern al C on tro l O ver C om plian ce InA ccordance W ith O MB Circular A -I 33

A nd The S tate S ingle Audit Im plem entation A ctReport On Compliance W ith Requirements Applicab le To E ach M ajor S tare P rogram AndIn te rn al C on tro l O ve r C om p lia nc e In A ccordance W ith A pplicab le Sections O fOM B Circular A -133 And The S tate Single A udit Im ple men tatio n A ct

Schedule of Findings and Q uestioned Costs 50-53C orre ctiv e A ctio n Plan 54Sum mary Schedule of Prior Year A udit F indings 55Schedule of E xpenditures of Federal and State Awards 56-59\


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Lowdermilk Church & Co., L.L.P.Certified Public Accountants121 N. Sterling Street

Morganton, North Carolina 28655Phone: (828) 433-1226Fax: (828) 433-1230

Independent Auditors' ReportTo 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 30,2009, 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 forOUl\~niOI1S. \

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, 2009, and therespective changes infinancial position and cash flowsxwhere applicable, thereof and the respective budgetarycomparison for the Gene-ral Fund and the State Public SclToolFund 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 25,2009 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 grants. That report is an integral part ofan audit performed in accordance with Government Auditing Standards and should be read in conjunction withthis report in considering the results of our audit.Management's Discussion and Analysis is not a required part of the basic financial statements but issupplementary information required by the Governmental Accounting Standards Board. We have applied certainlimited procedures, which consisted principally of inquires of management regarding the methods ofmeasurement and presentation of the required supplementary information. However, we did not audit theinformation and express no opinion on it.


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Our audit was performed for the purpose of forming opinions on the financial statements that collectivelycomprise the basic financial statements of the Burke County Public Schools, North Carolina, The combining andindividual nonmajor fund financial statements and schedules, as well as the accompanying schedule ofexpenditures of federal and State awards as required by U.S. Office of Management and Budget Circular A-133,Audits of States, Local Governments, and Non-Profit Organizations, and the State Single Audit ImplementationAct, are presented for purposes of additional analysis and are not a required part of the basic financial statements.The combining and individual nonmajor fund financial statements and the accompanying schedule ofexpenditures of federal and State awards has been subjected to the auditing procedures applied in the audit of thebasic financial statements and, in our opinion, is fairly stated, in all material respects, in relation to the basicfinancial statements taken as a whole.

November 25,2009

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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 30,2009. This information should beread in conjunction with the audited financial statements included in this report.Financial Highlights

Enrollment in Burke County Public Schools was 13,833, a 345 student decrease in comparison to theprevious year.

.. The Burke County Public Schools opened Jimmy C. Draughn High School at the beginning of the2008/2009 school year to serve the eastern region of the county.The Burke County funding to the Board of Education was $13,990,685, a $290,685 (2.1%) increase overthe 2007/2008 fiscal year.

Overview of the Financial StatementsThe audited financial statements of the Burke County Public Schools consist of four components. They are asfollows:

D Independent Auditors' Report.. Management's Discussion and Analysis (required supplementary information) Basic Financial Statements 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.

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. 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 I 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. The Board has established other funds to control and manage money for a particular purpose or to showthat 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 resu It 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 corning 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 $125,555,426 as of June30, 2009 and total net assets decreased by $4,088,823 from the prior year. The largest component of net assets isinvested in capital assets, net of related debt, of$128,593,598. It comprises 102.42% 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, 2009 and 2008Governmental Activities Business-!Y!1e Activities Total Government.2009 2008 2009 2008 2009 2008

Current assets $ 3,689,674 $ 8,646,249 $ 941,108 $1,506,301 $ 4,630,782 $ 10,152,550Capital assets 129087.580 129918.389 701.042 667121 129,788.622 130585.510

Total assets $132,777.254 $138,564.638 $1.642.150 $2,173,422 $134.419404 $140738.060

Current liabilities s 1,613,344 $ 4,383,231 s 3,440 $ 5,026 $ 1,616,784 $ 4,388,257Long-term liabilities 7 142,861 6.576.427 104333 129.127 7.247.194 6.705,554

Total liabilities s 8,756,205 s 10.959,658 s 107,773 $ 134 153 s 8.863,978 s 11.093.811Invested in capital assets. $127,892,556 $129,631,152 $ 701,042 s 667,121 $128,593,598 $130,298.273net ofre!ated debtRestricted net assets 3,689,689 3,409,941 3,689,689 3,409,941Unrestricted net assets (7,561,196) (5.436.113) 833 335 _l,ll2.148 (6.727,86! ) (4.063,965)

Total net assets $ 124,02L049 s 127,604.980 $1,534.377 $2.039.269 $125.555.426 ~129,644.249-,"". . . . ,j"Z 'Net assets decreased during the year, by 3,15%, largely to the decrease 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, 2009 and 2008

Revenues:Program revenues:Charges for servicesOperating grants and contributionsCapital grants and contributions

General revenues:Other revenues

Total revenues

Expenses:Governmental activities:Instructional serv icesSystem-wide support servicesAncillary servicesNon-programmed chargesInterest on long-term debtDepreciation

Business-type activities:Child nutrition

Total expenses

Change in net assetsBeginning net assets

Ending net assets

G overnm enta I Activities Business-type Activities Total Government2 0 0 9 2 0 0 8 2 0 0 9 2 0 0 8 2 0 0 9 2 0 0 8

$ 890,933 $ 5,751,412 $ 2,804,378 $ 2,694,728 $ 3,695,311 s 8,446,14099,777,303 87,829,511 4,738,230 4,640,782 104,515,533 92,470,293

910,026 258,802 910,026 258,802

20,825,040 44888824 20827 74.824 20845 867 44963648122,403,302 138,728,549 7,563 435 7410334 129966737 146.138,883

98,256,259 97,516,080 98,256,259 97,516,08022,183,226 19,081,397 22,183,226 19,081,397

610,132 385,641 610,132 385,6411,040,268 1,245,377 1,040,268 1,245,377

4,125 87,239 4,125 87,2393,893,224 3,173,014 3,893,224 3,173,014

8,068,325 7947485 8.068.325 7.947.485125987234 121 488 748 8,068,325 7947,485 134,055,559 129,436,233

(3,583,932) 17,239,801 (504,891) (537,151) (4,088,822) 16,702,650127604980 110.365 179 2039.269 2 576,420 129644249 112,941 ,599

s 124,021.049 $127,604.980 $ 1:534.377 $ 2,039,269 $125.555426 $129,644.249\

Total governmental activities generated revenues of$I22.4 million while expenses in this category totaled $125,9million for the year ended June 30, 2009. Comparatively, revenues were $138.7 million and expenses totaled$121,5 million for the year ended June 30, 2008, After transfers to the business-type activities, the decrease innet assets stands at $3.6 million at June 30, 2009, compared to an increase of $17,2 million in 2008. Instructionalservices expenses comprised 78% of total governmental-type expenses while system-wide support services madeup 17,6% of those expenses for 2009. County funding comprised 13,5% of total governmental revenue whileunrestricted State funding added another 1.9% for 2009. In 2008, county funding was 24.5% and unrestrictedState funding added 2,6%, Much of the remaining 84.6% of total governmental revenue for 2009 consists ofrestricted State and federal money. This revenue represented 72.9% of total revenue in 2008. Business-typeactivities generated revenue of $7.6 million and had expenses of$8.1 million. Net assets decreased in thebusiness-type activities by $504,891.

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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 a decrease in net assets over the prior year. Expensesoutpaced revenues by approximately $300,000, resulting in a decrease in available fund balance.

Categorization of Expenditures for Governmental Funds

5%

Instructional Services.. System Wide Support Services

Non Program ChargesCapital ProjectsDebt Services 2010Ancillary Services

78%

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 $822 thousand more than budgeted. The State allotspositions to the local system using a State average salary and benefits formula. Actual expenses paid out weremore 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 2009.

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Capital AssetsCapital assets decreased by $796,888 (or 1%) from previous year. This was largely due to depreciation.The following is a summary of the capital assets, net of depreciation at year-end.

LandConstruction i n p rogr essBui ldingsEquipment and furnitureVehicles

Governmental Activities2009 2008

$ 3,414,165 $ 3,414,165351,033 27,709,101

122,268,147 96,434,802860,439 1,047.714

2.193.796 1.312.607

$129.087.580 $129.918,389

Business-type Activities2009 2008

70J,042 667,121

Total Primary Government2009 2008

$ 3,414,165 $ 3,414,165351,033 27,709,101

122,268,147 96,434,8021,561,481 1,714,8352.193796 1312.607

$129.788,622 $130.585.510

$ $

Total $701,042 $667.121

Debt OutstandingDuring the year the Board's outstanding debt increased by $907,787 due mainly to the use of installmentfinancing to pay for school buses. The Board is limited by North Carolina General Statutes with regards to thetypes of debt it can issue for what purpose that debt can be used. The County holds virtually all debt issued forschool capital construction.Economic FactorsEnrollment in Burke County Public Schools decreased by 345 students or (2.4%). This continued decline instudent enrollment is attributable primarily to the continued loss of jobs in Burke County, as families migrateelsewhere in search of employment opportunities. As a result, our State Funding Levels continue to decreaseaccordingly, with the exception of increases for State Legislated Pay raises. This trend continues to presentchallenges in managing operational expenses of the School System's almost 2.4 million square feet of facilities,At June 30,2009 Burke County unemployment was 14.9% verses 2008 of 7.8%, well above the state average atboth points in time.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 COUNTY PUBLIC SCHOOLSExhibit 1

Statement of Net AssetsJune 30, 2009

Governmental Business-typeActivities Activities Total

Assets $ \ ) ],818,811ash and investments $ 3,1 10,663 S 708,148Due from other governments 579,011 176,552 755,563Inventory 56,408 56,408Capital assets (Note 1):Land, improvements, and construction in progress 3,765,198 3,765,198Other capital assets, net of depreciation 125,322,382 701,042 126,023,424

Total assets $ 132,777,254 s 1,642,150 s 134,419,404LiabilitiesAccounts payable and accrued expenses s 84,868 $ s 84,868Deferred revenue 3,440 3,440Accrued salaries and wages payable 774,781 774,781Claims payable 24,750 24,750Long-term liabilities:Claims payable 24,750 24,750Due within one year 728,945 728,945Due in more than one year 7,118,111 [04,333 7,222,444

Total liabilities 8,756,205 107,773 8,863,978

Net AssetsInvested in capital, net of related debt 127,892,556 7(1l,042 128,593,598Restricted for:Individual schools 2,012,679 2,012,679Capital outlay 1,677,010 1,677,010Unrestricted (7,561,1961 833,335 ~6,727,861)Total net assets $124,021,049 $ 1,534.377 s 125,555,426See accompanying notes tofinancial statements.

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

Governmental FundsFor the Year Ended June 30, 2009

Non-MajorMajor Funds Fund TotalState Public Capital Individual Federal Governmental

General School !h!. l l i !x Scho(~ Grant FundsRevenues:State of North Carolina $ 2,283,220 $ 79,660,864 $ 2,210,992 s $ $ 84,155,076Burke County 13,990,685 4,136,490 18,127,175United States Government 2,047,697 8,801,099 10,848,796Other local sources 4,243,635 12,643 6,211,001 10,467,279Total revenues 22,565,237 79,660,864 6,360,125 6,211,001 8,801,099 123,598,327

Expenditures:Current:Instructional servicesRegular instructional 4,031,037 50,235,891 1,059,808 377,623 55,704,358Special populations 1,142,773 9,969,115 4,179,573 15,291,461Alternative programs 1,943,613 1,820,058 2,849,765 6,613,435Schoo! leadership 1,662,913 5,011,695 6,135,145 12,809,753Co-curricular 721,292 721,292School-based support 1,282,546 5,360,514 419,395 7,062,455System-wide support servicesSupport and development 324,478 379,305 492,631 1,196,414Special populations supportand development 58,085 128,633 127,418 314,136Alternative programs and servicessupport and development 647,803 105,804 140,903 894,5 toTechnology support 193,913 318,108 22,951 32,577 567,549Operational support 8,863,035 5,173,020 362,428 24,355 14,422,837Financial and human resource 1,115,443 558,818 14,309 1,688,570Accountability 30,402 29,560 59,962System-wide pupil support 279,962 279,962Pol icy, leadership and public 481,481 483,746 965,227Ancillary services 511,674 85,813 2,938 600,426Non-programmed charges 887,877 (l,529) 153,922 1,040,270Debt service:Principal 287,237 287,237Interest and other charges 4,[25 4,125Capital outlay:Real property and buildings 1,959,660 1,959,660Furniture and equipment 1,904,655 1,904,655Buses and motor vehicles 955,013 955,013Total expenditures 24,178,325 79,658,550 6,570,186 6,135,145 8,801,099 125,343,305Net change in fund balances (1,613,087) 2,314 (210,061) 75,856 (1,744,978)

Fund balances, beginning of year 1,163,620 1,445 1,936,823 4,575,006Fund balances (deficit), end of year s (449,467) $ $ 2,0 12,679 s $ 2,830,028

" cont.'~~-J

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BURKE COUNTY PUBLIC SCHOOLS

Statement of Revenues, Expenditures and Changes in Fund BalancesGovernmental Funds

For the Year Ended June 30, 2009

Exhibit 4, cont.Page 2 of2

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

Net change in fund balances - total governmental funds

Governmental funds report capital outlays as expenditures. However, in thestatement of activities, 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.

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,

Disposal of capital assets reported on the statement of activit ies but not

Some expenditures reported in the fund statementshave already been accrued in the statement of activities.Claims and judgementsCompensated absences

Changes in net assets of governmental activities

See accompanying notes tofinancial statements.

14

s (1,744,978)

(830,809)

(907,790)

24,750(125,105)

$ (3,583,932)


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Statement of Net AssetsProprietary FundJune 30, 2009

AssetsCurrent assets:Cash and investmentsAccounts receivableInventoryTotal current assetsNoncurrent assets:Fixed assets, net of accumulated depreciationTotal assetsLiabilitiesCurrent liabilities:Deferred revenueNon-current liabilities:Compensated absencesTotal liabilitiesNet assets:Invested in capital assetsUnrestrictedTotal net assetsSee accompanying notes to financial statements.

17

$ 708,148176,55256,408941,107

701,042$1,642,150

$ 3,440

104,333107,773

701,042833,335

$1,534,377


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

For the Year Ended June 30, 2009Operating Revenues:Food salesMiscellaneousTotal operating revenuesOperating Expenses:Food cost:Purchased foodDonated commoditiesSalaries and benefitsMaterials and suppliesUtilitiesRepairs and maintenanceDepreciationContracted servicesIndirect costTravelAdvertisingOtherTotal operating expensesOperating lossNonoperating Revenues:Federal reimbursementsFederal commoditiesInterest earned on investmentsState grants ~regularIndirect cost subsidyChange in net assetsTotal net assets, beginningTotal net assets, endingSee accompanying notes to financial statements.

18

$ 2,592,140212,238

2,804,378

3,094,862476,015

3,541,163236,22411,14254,190108,96045,700461,17037,448334I 116

8,068,325(5,263,947)

4,079,430472,15020,8279,923

176,727(504,891)2,039,269

$ J,534,377


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BURKE COUNTY PUBLIC SCHOOLSExhibit 8Statement of Cash Flows

Proprietary FundFor the Year Ended June 30, 2009

Cash 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 activities

$ 2,741,534(3,759,134)(3,565,956)(4,583,556)

4,089,353

~142,8832(142,883)

20,827(616,259)1,324,407s 708 148

-,

~'\"'1(5,263,947)108,960472,150176,727(61,335)10,269(1,510)

~24,8702680,391

" ' , . . 1 $ (4583,556)

Cash Flows Provided by Noncapital Financing Activities:Federal and State reimbursementsCash Flows Used by Capital and Related 'Financing Activities:Acquisition of capital assetsTotal

Cash Flows Provided by Investing Activities:Interest on investmentsNet increase (decrease) in cash and cash equivalentsCash and cash equivalents:Beginning of yearEnd of yearReconciling 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 $176,727 that would be due to the General 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 $472,150 during the fiscal year.The receipt of the commodities is recognized as a nonopertating revenue. The fund recorded theconsumption of$476,015 worth of donated commodities during the fiscal year as an operating expense,These transactions are reported on Exhibit 7.See accompanying notes tofinancial statements,

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BURKE COUNTY PUBLIC SCHOOLSNotes to the Financial StatementsFor the Year Ended June 30~2009

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 ChapterIISC 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 PresentationGovemment-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 intemal 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. All 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 all financial 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.llSC-426].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.lISC-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.

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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.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 DataThe 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 $] ,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 (G.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 i n its namewith the State Treasurer and may issue State warrants against these funds.State law (G.S. IlSC-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 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 sharepnce.

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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 Iives 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 30,2009 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.Sick 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 Assets/Fund 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.l1SC-42S(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.

9. Reconciliation of Government-wide and Fund Financial Statements1. Explanation of certain differences between the governmental fund balance sheet and the

government-wide statement of net assets.The governmental fund balance sheet includes a reconciliation between fund balance -total governmental funds and net assets - governmental activities as reported in thegovernment-wide statement of net assets. The net adjustment of $121,191,022 consistsof several elements as follows:Description AmountCapital assets used in governmental activities are notfinancial resources and are therefore not reportedin the funds (total capital assets on government-widestatement in governmental activities column) $200,786,931

Less accumulated depreciationNet capital assets 71699.351129,087,580Liabilities that, because they are not due and payablein the current period, do not require current resourcesto pay and are therefore not recorded in the fund statements:Compensated absencesClaims payableInstallment purchase obligationTotal adjustment

(6,652,032)(49,500)(1,195.026)$12Ll91.022

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2. E xplanation of certain differences betw een the g ov ernmen ta l f un d s ta tem en t o f re ve nu es ,ex pend im res, and ch ang es in fun d b alan ce an d th e go vern men t-w id e statem en t o factivities.T he g ov ernmen tal fu nd statemen t o f rev en ue s, e xp en ditu res , a nd ch an ge s in fundbalances includes a reco nciliatio n b etw een net ch an ges in fu nd b alan ces - totalg ov ernmen ta l f un ds a nd ch an ge s in n et a ss ets o f g ov ernmen ta l ac tiv ities a s rep orte d inth e g ov ernme nt-w id e sta teme nt o f a ctiv itie s. T here are se ve ral e lem en ts o f that totala dju stm en t o f$ (l,8 3S ,9 54 ) as f ollows:Des:criptionCapi ta l ou tl ay expend itu re s r ec or ded in th e f un d s ta teme nts butcapital ized a s a ss ets in th e s ta tem en t o f a ctiv itie s.

Amount$ 3,644,161

D e prec ia tio n ex pe ns e, th e allo catio n o f those assetso ver th eir u se fu l liv es ; th at is rec ord ed o n th es ta temen t o f a cti vit ie s but no t inthe f und s ta tement s. (4,474,970)I ns ta llm e nt p urc ha se s p ro vid e c ur re nt f in an cia l r es ou rc es tothe governmental funds.Principal payments on debt ow ed are recorded as a use offunds on th e fund s tatemen ts b ut a ga in af fec t o nly th es tatem en t o f n et as se ts in the gO\le tt rn1ent~wlde statements .Claims p ay ab le a re a cc ru ed in t he gove rnmen t-w id e s ta temen tsb ut n ot in th e fund statem ents b ecause they do n ot u se currentresources.

(1.713,522)

805 .732 \

24,750Compen sa te da bs en ce s a re a cc ru ed in th e g ov er nmen t-w id es ta tem en ts b ut n ot in th e f un d sta teme nts b ec au se t h e y do notusc current resources. (125,105)

$ (1.838.954)o ta l ad jus tmen tII. Stewardship, CompJiauce, and Accountability

A. Significant Violations Q f Fi:rumce-Reiated Legal and Cos:trnetual ProvisionsNoncompliance with NQrtb Carolina Gen.eral StaturesT he b udg et reso lu tio n for th e y ear end ed Ju ne 30 ; 2()09 w as ad op ted A pril 27, 2 00 9. N orm ally th eb ud get resolution is ado pted so on after th e fiscal year b eg in s; in th is case Ju ly 1 , 200K

B. Excessof Expenditures over AppropriationsDuring t he f is ca l year en ded Ju ne 3 0, 20 09 > th e B oard rep orted ex pend itu res w ith in th e G en eral F un dand the State Public School F und th at v iolated S tate law [0 .8 . 1 15 C~ 44 1J because they e xc ee de d th eamoun ts appropr ia ted in th e b ud ge t ordinance.In the G eneral P und, th e B oard spent in excess o f th e b ud get for th e fo llo wing fu nctio ns (lev el o fbudgetary control): P olicy, leadership and public relations M $30}224.

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In the Capital Outlay Fund, the Board spent in excess of the budget for the following functions (levelof budgetary control):~ Real property and buildings - $1,814,339;

Buses and motor vehicles - $955,013;Debt service - $291,362.

Management should monitor budgets monthly and make necessary amendments to avoidexpenditures in excess of appropriations.

C. Deficit in Fund Balance of Individual FundsAt June 30,2009, the General Fund had a deficit fund balance of $449,467. The swing in the actualfund balance amount to estimated fund balance is attributable to the classification of $1,000,000being an interfund payable rather than revenue.

III. Detail Notes on All Funds

A. Assets1. Deposits

All of the Board's deposits are either insured or collateralized by using one of two methods.Under the Dedicated Method, all 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 custodial credit risk for deposits.At June 30, 2009, the Board had deposits with banks and savings and loans with a carryingamount of$I,735,730 and with the State Treasurer of$3,759. The bank balances with thefinancial institutions and the State Treasurer were $3,111,076 and $584,495, respectively. Ofthese balances, $250,000 was covered by federal depository insurance and $3,445,571 wascovered by collateral held by authorized escrow agents in the name of the State Treasurer.

2. InvestmentsAt June 30, 2009, the Board of Education had $2,079,823 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.

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3. Accounts ReceivableReceivables at the government-wide level at June 30, 2009, were as follows:

Due From Other Due FromFunds (Internal Other OtherBalances) Governments Receivables TotalGovernmental Activities:

General fund $ $571,091 $ $ 571,091Other governmental activities 1 000,000 7920 - 1007920--Total $1,000,000 $579,011 $ - $1.579,011Business-type Activities:Child Nutrition s 230,422 $172.595 $3,957 $ 406974

Due from other governments consists of the following:

Governmental Activities:General fundState public school fund

$571,0917.920 Local grant fundsOperating funds from DPI

Total $579,011Business-type Activities:Child Nutrition Fund $172,594 Food service funds from the State

4. Capital AssetsCapital asset activity for the year ended June 30, 2009, was as follows:

Beginning EndingBalance Increases Decreases BalanceGovernmental Activities:Capital assets not being depreciated:Land $ 3,414,165 s $ $ 3,414,165Construction in progress 27,709,101 351 033 27,709,101 351.033Total capital assets not being depreciated 31,123.266 $ 351,033 $27,709,101 3.765.198Capital assets being depreciated:Buildings 152,101,479 $29,086,303 s 181,187,782Equipment and furniture 5, I03,267 238,634 118,907 5,222,994Vehicles 8,933.665 1.677,292 10 610,957Total capital assets being depreciated 166,138,4 I 1 $31,002,229 $ J 18.907 197,021.733Less accumulated depreciation for:Buildings 55,666,677 $ 3,252,958 $ 58,919,635Equipment and furniture 4,055,553 425,909 118,907 4,362,555Vehicles 7,621,058 796 103 8417 161Total accumulated depreciation 67.343,288 $ 4,474,970 $ 118.907 71.699.351Total capital assets being depreciated, net 98,795,123 125.322.382Governmental activity capital assets, net $129,918.389 $129,087,580

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

$3,893,224581.746$4,474,970

BeginningBalance Increases Decreases EndingBalanceBusiness-type Activities:Child Nutrition Fund:Capital assets being depreciated:Furniture and equipment

Total accumulated depreciation 2.625,131

$142,881 $ $3,435,133$142,881 $ - 3,435,133

$108,960 _$- 2,734091$108,960 s 2,734,091

$ 701,042

$3,292.252Total capital assets being depreciated 3.292,252Less accumulated depreciation for:Furniture and equipment 2,625,131

Child Nutrition capital assets, net $ 667.12 IConstruction CommitmentsBurke County has active construction projects as of June 30,2009. The projects includeschool lab construction for the benefit of Burke County Public Schools. At year end, theCounty's commitments with contractors for school construction were approximately$1,600,000.

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 Iof G.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 30,2009,2008, and 2007 were $6,686,973, $6,058,698 and$4,220,991, 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.neose.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 former 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 1, 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, 2009, 2008,and 2007, the School Board paid all annual required contributions to the Plan forpostemployment health care benefits of $3,381 ,367, $3,172,498 and $2,246,466,respectively. These contributions represented 4.10%, 4.10%, and 3.80% of coveredpayroll, respectively.Long-term Disability BenefitsPlan Description - Short-term and long-term disability benefits are provided through theDisability Income Plan of North Carolina (DIPNC), a cost-sharing, multiple-employerdefined benefit plan. The DIPNC 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 DIPNC 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://www.ncosc.neU 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: (I) 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 his/her 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-I 08, 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 30,2009,2008, and2007, the Board paid all annual required contributions to the DIPNC for disabilitybenefits of $428,856, $402,366 and $307,411, respectively. These contributionsrepresented .52%, .52% and .52% of covered payroll, respectively.

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3. Accounts PayableAccounts payable as June 30, 2009, are as follows:

Governmental activities:GeneralOther governmental

Vendors$ 84,865413.953

Total governmental activities $498.818Business-type activities:Child nutrition $

4. Deferred RevenuesThe balance in unearned revenues at year-end is composed of the following elements:

Business-type activities:Child nutrition $ 3,440

5. 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 School 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 $10 million. A total limit of $100million per occurrence ispu.rc~ased for covered catastrophic events, $400 million maximumper occurrence for anyone tRr6d 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. 115C-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. Th~finance officer is bonded for $100,000. The remaining employees that haveaccess to funds are bonded under a blanket bond for $100,000.

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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.

6. Contingent LiabilitiesAt June 30, 2009, 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' 5 financial position.

7. 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 725 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 SunTrust Equipment Finance & Leasing Corporation attotal payments less than the purchase price.During the year ended June 30, 2009, the Board entered into four installment purchasecontracts with SunTrust Equipment Finance & Leasing Corporation to finance thepurchase of twenty two school buses. This financing contract requires payments of$764,268 due at the beginning of each contract year.The future minimum payments of the installment purchases as ofJune 30,2009,including $4,125 of interest, are as follows:

Year Ending June 30,Governmental ActivitiesPrincipal Interest

20102011

$ 728,945466.079

$1.195.024$35,32417782$53.106

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b. Long-Term Obligation ActivityThe following is a summary of changes in the Board's long-term obligations for thefiscal year ended June 30, 2009:

Balance Balance CurrentJuly 1, 2008 Increases Decreases June 30, 2009 PortionGovernmental Activities:

Installment purchase $ 287,237 $1,713,519 $805,732 $1,195,024 / $728,945Claims and judgments 74,250 24,750 49,500 24,750Compensated absences 6,526.927 125,105 6,652.032Total $6,888.414 $1,838,624 $830.482 $7,896,556 $753,695Business-type Activities:Compensated absences $ 129.127 $ $ 24794 $ 104333 s

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

C. Interfund Balances and ActivityThe composition of interfund balances at June 30, 2009 is as follows:

Receivables PayablesCapital Outlay FundGeneral Fund $1,000,000 s 1.000.000Total $1,000,000 $1,000,000During the 2008/2009 year the capital outlay fund loaned $1,000,000 to the general fund. This loanwas needed to cover expenses of the general fund due to reversions made to the state. Funds loanedconsisted of the accumulation of profits from the sale of Voc-ed live projects.

IV. Summary Disclosure of Significant ContingenciesFederal 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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V. Significant Effects of Subsequent EventsFines, Forfeitures and Supplemental School TaxIn the case of Francine Delaney New School for Children, Inc. v. Asheville Board of Education, the StateSupreme Court ruled that the trial court had not erred in its summary judgment for the plaintiff (Delaney)which, as a charter school, sought additional funding from the school board in the form of an equal perpupil share from the board's supplemental school tax and penal fines and forfeitures revenues.Subsequently, the General Assembly, in the 2002 Technical Corrections bill (SB 1217), section 91.1,determined that payments would not begin until July!, 2003, and that no retroactive payments would bemade prior to that date. Therefore, beginning with the fiscal year 2003-2004, the Burke County PublicSchools must distribute any supplemental school tax revenue and fines and forfeitures revenue on an equalper-pupil basis to any charter school that has a student or students registered that are residents of thatcounty.Based on the following data, the Board has estimated its additional liability for next year to be $57.93 perstudent enrolled in a charter school. For the fiscal year ended June 30,2009, there were 76 residents ofBurke County enrolled in various charter schools in the State.

Total supplemental school tax revenue 2008-2009:Total fines and forfeitures revenues 2008-2009:

$120,000681.280

Total revenue $801.280Total ADM for 20082009 13 833Total per-pupil revenue $ 57.93

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COMBINING AND INDIVIDUAL FUND STATEMENTS AND SCHEDULES


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BURKE COUNTY PUBLIC SCHOOLSSchedule 1Page 1 of 3

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


VariancePositive(Negative)

Revenues:State of North Carolina:OtherBurke County:Appropriation from general revenue

$ 2,585,309 $ 2,283,220 $ (302,089)

13,990,685 13,990,685

2,109,799 2,047,697 (62,102)

329,660 285,433 (44,227)68I ,280 681,28034,765 37,549 2,78315,487 15,230 (258)

3,089,810 3,224,143 134,3334,151,004 4,243,635 92,63122,836,797 22,565,237 {271,560)

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

Total4,075,619 3,978,803 96,81662,726 52,234 10,492

4,138,345 4,031,037 ]07,308

1,069,449 1,025,745 43,704144,70] 113,454 31,2473,889 3,574 31 5

1,218,039 1,142,773 75,266

2,009,047 1,890,638 118,409154,071 52,974 101,096

2,163,118 1,943,613 219,505cont.

Special populations:Children with DisabilitiesOtherLimited English Proficiency

TotalAlternative programs:Alternative instructionExtended day/year instruction

Total

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BURKE COUNTY PUBLIC SCHOOLSSchedule 1, cont.

Page 2 of3General FundSchedule of Revenues, Expenditures and Changes in "Fund Balance - Budget and Actual


VariancePositive

Budget Actual (Negative)School leadership $ 1,669,844 $ 1,662,913 $ 6,932Co-curricular 721,292 721,292School-based support:Educational media 7,266 (7,266)Student accounting 339,164 276,300 62,864Guidance services/CTE 86,480 84,527 1,953Health services support 594,780 594,837 (57)Safety and security support 49,108 49,108Instructional technology services 327,491 314,841 12,650Staff development unallocated 3,300 4,774 (1,474)

Total 1,400,323 1,282,546 117,777System-wide support services:Support and development:Regular curricular 366,672 319,768 46,904CTE curriclular 4,709 {4,709)

Total 366,672 324,478 42,194Special population support and development 58,777 58,085 692Alternative programs and services support and development 696,136 647,803 48,334Technology support 193,913 193,913Operational support:Communications 101,202 101,850 (648)Printing and copying 162,094 57,545 104,549Public utility and energy 3,943,915 3,937,929 5,986Custodial/housekeeping 1,165,090 1,832,882 (667,791)Transportation 686,404 54,500 631,904Facilities planning 5,955 5,955Maintenance services 2,839,965 2,872,373 (32,4082

Total 8,904,626 8,863,035 41,591Financial and human resource:Financial 974,925 862,842 112,083Human resource 142,412 252,601 (110,189)

Total 1,117,337 1,115,443 1,894cont

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BURKE COUNTY PUBLIC SCHOOLSSchedule 1, cont,

Page 3 of 3General Fund

Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and ActualFor the Year Ended June 30, 2009

VariancePositive

Budget Actual (Negative)Accountability:Student testing s 30,717 $ 30,402 $ 315System-wide pupil support:Educational media 41,538 21,150 20,388Safety and security 340,609 257,837 82,772Instructional technology support 974 (974)

Total 382,147 279,962 102,186Policy, leadership and public relations:Board of education 65,336 44,609 20,727Legal services 74,750 102,399 (27,649)Audit services 30,080 30,000 80Leadership services 235,999 267,985 (31,986)Public relations and marketing services 45,092 36,489 8,603

Total 451,257 481,48l (30,224)Ancillary services:Community services 452,687 452,411 276Nutrition services 59,325 59,263 62Total 512,012 511,674 337

Non-programmed charges:Payments to other governmental units 781,437 758,497 22,940Contingency 317,498 129,380 188,118

Total [,098,935 887,877 211,058Total expenditures 25,123,490 24,178,325 945,166Net change in fund balance (2,286,693) (1,613,087) 673,606

Other Financing Sources (Uses):Fund balance appropriated 2,286,693 (2,286,693)Excess of revenues and other sources over (under)expenditures and other uses $ (1,6] 3,087) s (1,613,087)Fund balance, beginning 1,163,620Fund balance, ending s (449,467}

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BURKE COUNTY PUBLIC SCHOOLSSchedule 2Federal Grants Fund


Budget ActualVariancePositive(Negative)

Revenues:u.S. Government $ 11,943,316 $ 8,801,099 $(3,142,217)Total revenues 11,943,316 8,801,099 (3,142,217)Expenditures:Instructional programsSupporting servicesNonprogram charges

8,313,855946,429

2,683,0327,826,356 487,500817,883 128,546156,860 2,526,171

8,801,099 3,142,217otal expenditures 11,943,316Excess 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 of 2Capital Outlay Fund


System wide support

VariancePositive

Budget Actual (Negative)

s 1,592,407 s 902,655 $ (689,752)1,246,375 1,246,37561,962 61,962

1,592,407 2,210,992 618,585

3,885,533 2,262,379 (1,623,154)1,874,111 1,874,1113,885,533 4,136,490 250,957

4,021 4,0218,622 8,62212,643 12,643

5.477,941 6.360 125 882,184

3,169,674 1,059,808 2,109,8661,156,544 399,688 756,856

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

Total State of North CarolinaBurke County:Sales taxAppropriations from county - COPS

Total'Burke CountyOther:Disposition, fixed assetsOther

Total otherTotal revenuesExpenditu res:Regular instructional

Capital outlay:Real property and buildings:Category IProjectsCategory IProjects-LotteryCategory IIProjectsContingency

Total real property and buildings

56,679 1,839,358 (l,782,680)91,431 (91,431)

30,002 28,871 1,13158,640 58,640145,321 1,959,660 (1,814,339)

1,817,656 885,032 932,624759,627 (759,627)

259,996 259,9962,077,652 1,904,655 172,997

955,013 {955,013 1cont.

Equipment and furniture:Category IProjectsCategory IProjects-LotteryCategory IIProjects

Total equipment and furnitureBuses and motor vehicles:Category II I Projects

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BURKE COUNTY PUBLIC SCHOOLSSchedule 3, cont.

Page 2 of2Capital Outlay FundSchedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual


VariancePositive

Budget Actual (Negative)Debt service:Principal s s 287,237 $ (287,237)Interest 4,125 (4,125}

Total debt service 29] ,362 (291,362)Total expenditures 6,549,191 6,570,186 (20,995)

Revenues over (under) expenditures (1,071,250) (210,061) 861,189Other Financing Sources (Uses):Fund balance appropriated 1,071,250 (I,OT! ,2502Total other financing sources (uses) 1,071,250 (1,071,250)Excess of revenues and other sources over (under)expenditures and other uses $ (210,061) $ (210,061 )Fund balance, beginning 1,473,118Fund balance, ending $ I263 057

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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, 2009

Operating Revenues:Food salesMiscellaneousTotal operating revenuesOperating Expenditures:Food costs:Purchase of foodDonated commoditiesSalaries and benefitsMaterials and suppliesUtilitiesRepairs and maintenanceContracted servicesCapital outlayIndirect costTravelAdvertisingOtherTotal operating expendituresOperating income (loss)Nonoperating Revenues:Federal reimbursementsFederal commoditiesState grants - regularInterest earned on investmentsFund balance appropriatedTotal nonoperating revenuesNet income (loss)

VariancePositive(Negative)

$2,886,00077.400

$2,592,140212,238

2.804.378$ (293,860)

134838(159.022),963,400

2,903,600 3,094,862 (191,262)424,379 476,015 (51,636)3,953,100 3,541,163 411,937264,000 236,224 27,77619,000 11,142 7,85860,000 54,190 5,81055,000 45,700 9,300144,700 142,884 1,816215,000 461,170 (246,170)45,000 37,448 7,552300 334 (34)1.500 -._j_Jfl_ 3838085.579 8.102,250 (16,671}

(5.122,179) (5,297.872) (175.693)

3,817,500 4,079,430 261,930424,379 472,150 47,77114,500 9,923 (4,578)40,000 20,827 (19,173)825 800 (825,800)

5,122,179 4,582,330 (539,849)$ $ 015,542) $ C715,542)

$ (715,542)176,728142,884(lO8,960)s (5 Q4 8 2])

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 & Co., L.L.P.Certified Public Accountants121 N. Sterling Street

Morganton, North Carolina 28655Phone: (828) 433-1226Fax: (828) 433-1230

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

Government Auditing Standards /To the Board of EducationBurke County Public Schools IMorganton, North CarolinaWe have audited the accompanying financial statements of the governmental activities, the business-typeactivities, each major fund, and the aggregated remaining fund information of the Burke County Public Schools,North Carolina, ("the Board") as of and for the year ended June 30,2009, which collectively comprises the BurkeCounty Public Schools' basic financial statements, and have issued our report

bcps audit report period ending june 30 2009

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