IIIIII Davidson County Board of Education

Lexington, NorthCarolina

I ComprehensiveAnnualFinancial Report

I Fiscal Year Ended June 30,2011

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Davidson County SchoolsLexington, North Carolina

Comprehensive Annual Financial ReportFiscal Year Ended June 30,2011

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IndependentAuditor's ReportManagement's Discussion and AnalysisBasic Financial Statements:

Government-wide Financial Statements:Statement of Net Assets (Exhibit 1)

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INTRODUCTORY SECTION

Letter of Transmittal

FINANCIAL SECTION

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Statement of Activities (Exhibit 2) 15

Fund Financial Statements:Balance Sheet - Governmental Funds (Exhibit 3) 16

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Statement of Revenues, Expenditures, and Changes in Fund Balances - GovernmentalFunds (Exhibit 4) 17

Reconciliation of the Statement of Revenues, Expenditures, and Changes in FundBalances of Governmental Funds to the Statement of Activities (Exhibit 4) 18

Statement of Revenues, Expenditures, and Changes in Fund Balances - Budget andActual- General and Major Special Revenue Funds (Exhibit 5) 19

I Statement of Net Assets - Proprietary Fund (Exhibit 6) 20

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Statement of Revenues, Expenses, and Changes in Fund Net Assets - Proprietary Fund(Exhibit 7) 21

Statement of Cash Flows - Proprietary Fund (Exhibit 8) 22

Notes to the Financial Statements 24

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Combining and Individual Fund Statements and Schedules:Schedule of Revenues, Expenditures, and Changes in Fund Balance -Budgetto Actual - General Fund 39

Combining Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budgetto Actual - Special Revenue Funds 40

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II Schedule of Revenues, Expenditures, and Changes in Fund Balance -Budget

to Actual- Other Restricted Fund 41

I Schedule of Revenues, Expenditures, and Changes in Fund Balance -Budgetto Actual - State Public School Fund 43

I Schedule of Revenues, Expenditures, and Changes in Fund Balance -Budgetto Actual- Federal Grant Fund 44

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Combining Schedule of Revenues, Expenditures, and Changes in Fund Balances -Individual Schools 45

Schedule of Revenues, Expenditures, and Changes in Fund Balance -Budgetto Actual - Capital Outlay Fund 46

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Schedule of Revenues and Expenditures - Budget and Actual (Non-GMP) -School Food Service Fund 48

General Government Expenditures by Function - Last Ten Fiscal Years 50

STATISTICAL SECTION

I General Government Revenues by Source - Last Ten Fiscal Years 51

IComparative Average Daily Membership - Last Ten Fiscal Years 52

Average Daily Membership - Last Ten Fiscal Years 53

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Property Tax Levies and Collection for Davidson County - Last Ten Fiscal Years 54

Assessed Value of Taxable Property for Davidson County - Last Ten Fiscal Years 55

Property Tax Rates - Direct and Overlapping Governments for Davidson County - LastTen Fiscal Years 56

I Assessed Property Values - Direct and Overlapping Governments for Davidson County - LastTen Fiscal Years 57

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Ratio of Net General Bonded Debt to Assessed Value and Bonded Debt per Capita for DavidsonCounty - Last Ten Fiscal Years 58

Ratio of Annual Debt Service for General Bonded Debt to Total General Government Expendituresfor Davidson County - Last Ten Fiscal Years 59

I Computation of Legal Debt Margin for Davidson County - June 30,2011 60

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Computation of Direct and Overlapping Debt for DavidsonCounty - June 30, 2011 61

Demographic Statistics for Davidson County - Last Ten Fiscal Years 62

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IPrincipal Taxpayers in Davidson County - Fiscal Year Ended June 30, 2011 63

I COMPLIANCE SECTION

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Report on Internal Control Over Financial Reporting and On Compliance and Other Matters BasedOn An Audit Of Financial Statements Performed In Accordance With GovernmentAuditingstandards 64

Report on Compliance with Requirements Applicable to Each Major Federal Program andInternal Control over Compliance in Accordance with Applicable Sections of OMB CircularA-133 and the State Audit Implementation Act 66

Report on Compliance with Requirements Applicable to each Major State Program andInternal Control over Compliance in Accordance with Applicable Sections of OMBCircular A-133 and State Single Audit Implementation Act 68

I Schedule of Findings and Questioned Costs 70

Corrective Action Plan 73

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Summary Schedule of Prior Audit Findings 74

Schedule of Expenditures of Federal and State Awards 75

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I (}))~~county Schools Office of

SuperintendentII LEITER OF TRANSMIITAL

I October 26,2011

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TO THE MEMBERS OF THE DAVIDSON COUNTYBOARD OF EDUCATION AND CITIZENS OFDAVIDSON COUNTY, NORTH CAROLINA

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State law requires that all general-purpose local govemments publish, within six months of the close of eachfiscal year, a complete set of financial statements presented in conformity with generally acceptedaccounting principles (GAAP) and audited in accordance with generally accepted auditing standards by afirm of licensed certified public accountants. Pursuant to that requirement, we hereby issue theComprehensive Annual Financial Report of the Davidson County Board of Education (the Board) for thefiscal year ended June 30, 2011.

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The comprehensive annual financial report is presented in four sections: Introductory, Financial,Statistical, and Compliance. The Introductory section contains the letter of transmittal, a list of the Boardmembers and principal officials, and the organizational chart. The introductory section is unaudited. TheFinancial section presents the independent auditor's report, management's discussion and analysis, thebasic financial statements, and the combining and individual fund financial statements and schedules byfund type. The Statistical section contains tables of unaudited data covering a ten year financial history ofthe Board, as well as, statistical data for Davidson County. The Compliance section presents informationrequired by the OMB Circular A-133 and the State Single Audit Implementation Act.

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IThis report consists of management's representations conceming the finances of the Board. Consequently,management assumes full responsibility for the completeness and reliability of all of the informationpresented in this report. To provide a reasonable basis for making these representations, management ofthe Board has established a comprehensive internal control framework that is designed both to protect theBoard's assets from loss, theft, or misuse and compile sufficient reliable information for the preparation ofthe Board's financial statements in conformity with GAAP.IThe Board's financial statements have been audited by Rick Allred, CPA, PA, a firm of licensed certifiedpublic accountants. The goal of the independent audit was to provide reasonable assurance that thefinancial statements of the Board for the fiscal year ended June 30, 2011 are free of material misstatement.The independent audit involved examining, on a test basis, evidence supporting the amounts anddisclosures in the financial statements; assessing the accounting principles used and significant estimatesmade by management; and evaluating the overall financial statement presentation. The auditor's report canbe found in the financial section of this report.

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The independent audit of the financial statements of the Board was part of a broader, federally mandated"Single Audit" designed to meet the special needs of federal grantor agencies. The standards governingSingle Audit engagements require the independent auditor to report not only on the fair presentation of thefinancial statements, but also on the audited Board's intemal controls and compliance with legal

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I P.O. Box 2057 • Lexington, NC 27293-2057 • Phone (336) 249-8181 • Fax (336) 249-1062 • www.davidson.K12.nc.us

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requirements with special emphasis on internal controls and legal requirements involving the administrationof federal awards. These reports are available in the Board's separately issued Single Audit Report foundin the compliance section of this report.

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GAAP requires that management provide a narrative introduction, overview, and analysis to accompany thebasic financial statements in the form of Management's Discussion and Analysis (MD&A). This letter oftransmittal is designed to complement the MD&A and should be read in conjunction with it. The Board'sMD&A can be found immediately following the report of the independent auditors in the financial section ofthis report.

SCHOOL SYSTEM AND GOVERANCE

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The Davidson County School System is the nineteenth largest among North Carolina's 115 public schoolsystems. It serves 20,171 students in preschool through grade twelve. It extends across 33 campuses thatinclude 18 elementary schools, six middle schools, six high schools; one extended day school, one schoolfor students with special needs, and one early college. Davidson County Schools has six high schoolattendance areas comprised of a high school, middle school and two to four elementary schools. Studentsattend their neighborhood school.

The Davidson County Schools join Lexington City Schools (student population 2,920), Thomasville CitySchools (student population 2,408) and the Davidson County Community College as public providers ofeducation in the county. All four education agencies receive funding from federal, State, local and grantsources.

I The Davidson County School System is governed by a nonpartisan board of education whose five schooldistrict residents are elected at large and serve overlapping four-year terms. The Board is responsible forsetting educational policies consistent with State and federal laws governing public education. The Boardreceives government funding from state, local, and federal sources. The Board must comply with theestablished legal requirements of each funding source. The Board has no taxing authority and is requiredto maintain accounting records in a uniform format established by the State's General Assembly.

II GEOGRAPHY, POPULATION and ECONOMICS

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Davidson County is located in the Piedmont Triad Area of North Carolina. It is 552.68 square miles ofsuburban countryside. It is a neighbor to Winston-Salem in Forsyth County, High Point and Greensboro inGuilford County, Salisbury in Rowan County and Asheboro in Randolph County. The county seat isLexington.

Davidson County Schools is now the largest employer in Davidson County following layoffs and plantclosings of Thomasville Furniture Industries and Lexington Home Brands.

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Davidson County's population of 162,878 residents is 18% non-Caucasian, with the largest percentages ofnon-Caucasian located within Lexington and Thomasville city limits. Davidson County Schools continues toexperience a growth in the number of students who speak English as a second language. Most of theworkforce within the county is blue collar, many of whom are from families who have experienced career­long employment in furniture industries. Furniture and textiles have provided jobs without requiring posthigh school training, and in many cases high school completion. Since the late 1990's most of the textileand furniture companies have closed or moved overseas. Many workers have been forced to return toschool for retraining and college degrees. Davidson County Community College has seen enrollment grow.Today, 77.6% of the county's population over 25 years of age has a high school diploma or better, but only

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II 15.4% of the same population has a college degree. Many of the county's college graduates choose not to

retum home to work. If they retum, they must travel to neighboring counties and larger cities to findprofessional jobs.I

IClosings of the textile and fumiture plants have made it difficult for our community. The unemployment rateis 11.5% which is above the state average of 10.4%. New industries are moving to Davidson County but itwill take time to create jobs equal to those lost due to plant closings.

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FINANCIAL CHALLENGES

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In 2001, Davidson County commissioners committed to building six new schools over the next 10 years.Brier Creek Elementary, Friendship Elementary, Tyro Elementary, and Southmont Elementary schools,have been constructed. Southmont Elementary opened in the fall of 2009. Land has been purchased forthe North/Ledford area middle and high school. Construction is in progress on the new middle school thatis scheduled to open in 2012-2013. A high school is scheduled to be built at a yet-to-be determined time.

As part of the American Recovery and Reinvestment Act 2009 (ARRA), funds for construction bonds wereavailable through the Department of Public Instruction. In 2009-2010 the county govemment tookadvantage of the funds and issued a Qualified School Construction Bond (QSCB). Davidson CountySchools received $2,617,384.91 of the bond proceeds. These monies are to be used to repair roofs atStoner-Thomas, Midway, and Welcome. Davidson County Schools will repay the county for the bond'sdebt service (principal and interest at .5187%). The method of repayment began in 2010-2011. The countygovemment has chosen to reduce the Davidson County School's capital outlay budget annually for therepayment of the annual debt service. This method of payback to the county govemment will occur over aperiod of 15 years. This annual reduction in the capital outlay budget will delay capital outlay needs by ourolder schools.

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I Ed Stabilization 10,619,119 Race to the Top

$ 49,662

4,049,661

2,069,211

1,312,884

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In 2010-2011 the county issued another ARRA- QSCB in the amount of $12,863,316.00 to help pay for thenew middle school construction that began in the North/Ledford area. Davidson County Schools does nothave to repay the county for the debt service of these bond proceeds.

Beginning in 2009-2010 the Davidson County Schools began receiving ARRA funds, which helped to offsetState budget cuts. As of June 30, 2011, the Davidson County Schools have received the following ARRAfunds:

I IDEA

$2,007,711

4,302,915

18,470

Education TechnologyTitle I

Education Jobs

McKinney Vento School Improvement Grant

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Title 1, IDEA, McKinney Vento, and the Education Stabilization funds, are scheduled to end September 30,2011. This loss of $16,948,215 in ARRA funds and the State projected budget cuts, greater budgetchallenges lie ahead.

BUDGETARY CONTROLS

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The North Carolina General Statutes require govemment units to adopt a balanced budget by July 1 ofeach year. The Board's annual budget resolution authorizes expenditures by function on the modified

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The budget is allocated to line item expenditure accounts, for internal management purposes. The budgetamounts in this report are presented in conformity with the legally adopted budget ordinance as amendedthroughout the fiscal year.

The Board uses a purchase order encumbrance system that records encumbrances against eachexpenditure line item. State and federal outstanding encumbrances are cancelled at year-end. Local andcapital outlay (category II & III) encumbrances are carried over into the subsequent year and the budgetamounts are re-appropriated.

I CASH MANAGEMENT

I Temporarily idle cash is invested in various instruments according to applicable State laws. The objective ofthe investment policy is to minimize market and credit risks while maintaining a competitive yield on theinvestment. The Board's deposits were either insured or collateralized in accordance with the stateguidelines as described in the Notes to the Financial Statements section III, A 1.I

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RISK MANAGEMENT

The Board is exposed to various risks of losses related to torts; theft of, damage to, and destruction ofassets; errors and omissions; injuries to employees; and natural disasters. The Board carries various formsof insurance including, but not limited to, general liability, errors and omissions coverage, risk control, riskfinancing, and property coverage. A detailed description of our insurance coverage can be found in theNotes to the Financial Statements section III, B. 4.

ACKNOWLEGMENTS

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The preparation of this report would not have been possible without the dedicated services of the financestaff and the Board's independent certified public accounting firm Rick Allred, CPA, PA. We would like toexpress our appreciation to all the employees who contributed and assisted with the preparation of thisreport.

In addition, we would like to thank the members of the Board of Education for their support and dedication inplanning and conducting the financial matters of the school system in a responsible manner. In conclusion,we would like to thank the Board of County Commissioners for their support throughout the fiscal year.I

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ReS~;?~y submitted

'0~~/rorTred L. M&kSuperintendent

~#\eiAPamela W. Sink, CPAFinance Officer

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III DAVIDSON COUNTY BOARD OF EDUCATION

I LIST OF PRINCIPAL OFFICIALS

I June 30, 2011

II BOARD OF EDUCATION MEMBERS

I Carol B. Crouse, Chairperson

I Alan W. Beck, Vice-Chairperson

I Karen T. Craver

Jeannie M. Leonard

I Allan E. Thompson

ISUPERINTENDENT OF SCHOOLS

I Dr. Fred L. Mock

II FINANCE OFFICER

I PamelaW. Sink, CPA

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DAVIDSON COUNTY SCHOOLSORGANIZATIONAL CHART

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Citizens

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Board of Education

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Superintendent

IIAssistant Superintendent Assistant Superintendent Director-School Community Executive Director

Chief Finance Officer IHuman Resources & Adm Curriculum & Instruction Relations & Public Information Auxiliary Services

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IIIIIIIII Financial Section

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RICK ALLRED, CPA, PACertified Public Accountant

I Independent Auditor's Report

ITo the Davidson County Board of EducationDavidson County, North Carolina

II have audited the accompanying financial statements of the governmental activities, the business-type activities and each majorfund of the Davidson County Board of Education, North Carolina, as of and for the year ended June 30, 2011, which collectivelycomprise the Davidson County Board of Education's basic financial statements as listed in the table of contents. These financialstatements are the responsibility of the Davidson County Board of Education's management. My responsibility is to express anopinion on these financial statements based on my audit.

I I conducted my audit in accordance with auditing standards generally accepted in the United States of America and thestandards applicable to financial audits contained in GovernmentAuditing Standards, issued by the Comptroller General of theUnited States. Those standards require that I plan and perform the audit to obtain reasonable assurance about whether thefinancial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting theamounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used andsignificant estimates made by management, as well as evaluating the overall financial statement presentation. I believe that myaudit provides a reasonable basis for my opinions.

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In my opinion, the financial statements referred to above present fairly, in all material respects, the respective financial positionof the governmental activities, the business-type activities and each major fund of the Davidson County Board of Education asof June 30, 2011, and the respective changes in financial position and its cash flows, where applicable, thereof and the respectivebudgetary comparison for the General Fund, the Other Restricted Fund, the State Public School Fund, the Federal Grants Fund,and the Capital Outlay Fund for the year then ended in conformity with accounting principles generally accepted in the UnitedStates of America.

I In accordance with GovernmentAuditing Standards, I have also issued my report dated October 26,2011 on my considerationof the Davidson County Board of Education's internal control over financial reporting and my tests of its compliance withcertain provisions of laws, regulations, contracts and grants and other matters. The purpose of the report is to describe the scopeof my testing of internal control over financial reporting and compliance and the results of that testing, and not to provide anopinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed inaccordance with GovernmentAuditing Standards and should be read in conjunction with this report in considering the results ofmy audit.

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Management's Discussion and Analysis is not a required part of the basic financial statements but are supplementaryinformation required by the Governmental Accounting Standards Board. I have applied certain limited procedures, whichconsisted principally of inquiries of management regarding the methods of measurement and presentation of the requiredsupplementary information. However, I did not audit this information and express no opinion thereon.

IMy audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the basicfinancial statements of the Davidson County Board of Education, North Carolina. The introductory information, combining andindividual fund statements, budgetary schedules and other schedules, and the statistical tables, as well as the accompanyingschedule of expenditures 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 Implementation Act, arepresented for purposes of additional analysis and are not a required part of the basic financial statements. The combining andindividual fund statements, budgetary schedules, other schedules and the accompanying schedule of expenditures of federal andState awards have been subjected to the auditing procedures applied in the audit of the basic financial statements and, in myopinion, is fairly stated, in all material respects, in relation to the basic financial statements taken as a whole. The introductoryinformation and the statistical tables have not been subjected to the auditing procedures applied in the audit of the basic financialstatements and, accordingly, I express no opinion on them.

III (jQckJlffrec£, C(Pjl, (Pjl

I October 26, 2011

I Member ofthe American InstituteofCertified Public Accountants

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Rick Allred269 Amber Lane. Lexington. NC 27292

336-247-2310rick(ivrickallredcpa.com

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II MANAGEMENT'S PISCUSSIONANP ANALYSIS

I This section of the Davidson County Board of Education's (the Board) financial report represents ourdiscussion and analysis of the financial performance of the Board for the year ended June 30, 2011. Thisinformation should read in conjunction with the audited financial statements included in this report.

I Financial Highlights

I• The Board experienced a decrease in enrollment of 151 students from the previous year.• Land was purchased for the North/Ledford area middle and high school. Construction began on the

new middle school that is scheduled to open in August of 2012. Construction for the high school hasnot been determined.

• The Board received Qualified School Construction Bond (ARRA) proceeds in the amount of$12,863,316 for construction of the new middle school.

• Due to the economy, the Board experienced State budget cuts. To offset the State budget shortfall,federal monies received from The American Recovery and Reinvestment Act of 2009 (ARRA) wereused in our Title I, Exceptional Children, Technology, Instructional and Non-Instructional Supportprograms.

III Overview of the Financial Statements

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The audited financial statements of the Davidson County Board of Education consist of four components.They are as follows:

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• Independent Auditor's Report• Management's Discussion and Analysis (required supplementary information)• Basic Financial Statements• Required supplemental section that presents combining and budgetary statements for govemmental

and enterprise funds

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The 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 onthe full accrual basis of accounting and include the statement of net assets and the statement of activities.The Statement of Net Assets includes all of the Board's assets and liabilities. Assets and liabilities areclassified in order of their relative liquidity for assets and due date for liabilities. This statement provides asummary of the Board's investment in assets and obligations to creditors. Liquidity and financial flexibilitycan be evaluated using the information contained in this statement. The Statement of Activities summarizesthe Board's revenues and expenses for the current year. A net (expense) revenue format is used to indicateto what extent each function is self-sufficient.

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The second set of statements included in the basic financial statements is the Fund Financial Statements,which are presented for the Board's governmental funds and proprietary fund. These statements presentthe governmental funds on the modified accrual basis of accounting, measuring the near term inflows andoutflows of the financial resources and what is available at year-end to spend in the next fiscal year. Theproprietary fund is presented on the full accrual basis of accounting. The fund financial statements focus onthe Board's most significant funds. Because a different basis of accounting is used in the government-widestatements, reconciliation from the governmental fund financial statements to the government-widestatements is required. The government-wide statements provide information about the Board as aneconomic unit while the fund financial statements provide information on the financial resources of each ofthe Board's major funds.

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II Government-wide Statements

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The government-wide statements report information about the unit as a whole using accounting methodssimilar to those used by private-sector companies. The Statement of Net Assets includes all of the Board'sassets and liabilities. All of the current year's revenues and expenses are accounted for in the Statement ofActivities regardless of when the cash is received or paid.

The two government-wide statements report the Board's net assets and how they have changed. Netassets - the difference between the Board's assets and liabilities - is one way to measure the unit'sfinancial health or position.

I • 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.

IThe unit's activities are divided into two categories in the government-wide statements:

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• Governmental activities: Most of the Board's basic services are included here, such as regular andspecial education, transportation, and administration. County funding and state and federal aid financemost of these activities.

• Business-type activities: The Board charges fees to help cover the cost of certain services it provides.School food services are included here.

The government-wide statements are shown as Exhibits 1 and 2 of this report.

Fund Financial Statements

I The fund financial statements provide more detailed information about the Board's funds, focusing on itsmost significant or "major" funds - not the unit as a whole. Funds are accounting devices the Board uses tokeep track of specific sources of funding and spending on particular programs.

I • Some funds are required by State law, such as the State Public School Fund.• The Board 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.IDavidson County Board of Education has two types of funds:

I Governmental funds: Most of the Board's basic services are included in the governmental funds, whichgenerally focus on two things - how cash and other assets can readily be converted to cash flow in and out,and the balances left at year-end that are available for spending. As a result of this focus, thegovernmental fund statements provide a detailed short-term view that helps the reader determine whetherthere are more or fewer financial resources that can be spent in the coming year to finance the Board'sprograms. Because this information does not encompass the additional long-term focus of the government­wide statements, additional information at the bottom of the governmental funds statements, in the form ofreconciliation, explains the relationship (or differences) between the government-wide and the fund financialstatements. The Board has several governmental funds: the General Fund, the State Public School Fund,the Individual Schools Fund, the Capital Outlay Fund, and the Federal Grants Fund.

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II The governmental fund statements are shown as Exhibits 3, 4, and 5 of this report.

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Proprietary funds: Services for which the Board charges a fee are generally reported in the proprietary fund.The proprietary fund statements are reported on the same full accrual basis of accounting as thegovernment-wide statements. Davidson County Board of Education has one proprietary fund - anenterprise fund - the School Food Service Fund.

The proprietary fund statements are shown as Exhibits 6,7, and 8 of this report.

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Financial Analysis of the District as a WholeNet assets are an indicator of the fiscal health of the Board. Assets exceeded liabilities by $168,402,742 asof June 30, 2011. The largest component of net assets is invested in capital assets, net of related debt, of$152,254,065. It comprises 90% of the total net assets.

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The following is a summary of the Statement of Net Assets:

Corllensed SeterrentofNet ~tsJune30. 2011 aid 2)10

Govemmmta Activities Business-type Activites Tota Pri mary Govemrrent

6-3()'11 6-30-10 6-3()'11 ~3l-10 ~3l-11 6-3l-10

Curreri assets $ 26;447,346 $ 22,143,52) $ 4.013,904 $ 3,417,800 $ 3l,461 ,200 $ 25,561,386

Capta assets 152,529,788 148,3Z3,775 803,281 8$,344 153,333,000 149,220,119

Tota asses 178,977,134 170,467,200 4,817,185 4,314,210 183,794,319 174,781,505

Curreri lallites 11,957,684 10,371,012 143,236 188,4$ 12,100,92) 10.559,508

Lorg-tenn liallities 3,290,658 2,788,004 3,200,658 2,788,004

Tota looilies 15,248,342 13,1fB,016 143,236 188,4$ 15,391,578 13,347,512

Investe:! i1 capta asses,net ci reated debt 151,450,784 147,667,411 803,281 8$,344 152,254,065 148,563,782

RestJtted net assets 2,294,803 3,251,800 2.294,803 3,251.808

Unrestrtted net ass Ets 9,983,206 6.3~.033 3,870,668 3,229.370 13,853.874 9.618,403

Tota net asses $ 163,728,793 $ 157.300,279 $ 4,673,949 $ 4.125.714 $ 168,4<r2,742 $ 161,433,993

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Note that net assets increased during the year, indicating an improvement in the financial condition of theBoard. The increase in net assets (4.3%) was due largely to the increase in capital assets in thegovernmental activities due to new school construction. Unrestricted net assets increased in the business­type activities primarily because of an increase in current assets in the Child Nutrition Fund. Also note thatthe Board carries capital assets for which Davidson County carries the offsetting debt.

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IIIIIIIIIIIIIIIIIII

II Financial Analysis of the Board's Funds

Governmental Funds: The focus of Davidson County Board of Education's governmental funds is to provideinformation on near-term inflows, outflows, and balances of usable resources. Such information is useful inassessing the Board's financing requirements.I

I The Board's governmental funds reported a combined fund balance of $19,349,199, a $2,841,037 increaseover last year. Revenues and other financing sources exceeded expenditures and other uses in the amountof $1,699,841 in the General Fund, $682,735 in the Other Restricted Fund, $395,246 in the Capital OutlayFund, and $63,215 in the Individual Schools. Two sources of funding increased over the prior year: Statefunding increased $3,148,855 and Federal funding increased by $1,784,749. County funding decreased by$4,389,771. Expenditures increased by $3,550,546, which included $2,335,873 in the State Fund.

IIIIII

Proprietary Fund: The Board's School Food Service Fund performed well in the past year. Revenuesdecreased $648,137 while expenses decreased by $867,415 when compared with the previous year. Thedecrease in expenses primarily consisted of food purchases decreasing by $392,796 while suppliesdecreased by $48,775.

Expenditure analysis: Instructional programs represented 84% of governmental expenditures, excludingcapital outlay. Total governmental expenditures are categorized below:

Categorization of Expenditures forGovernmental Funds (excluding capital outlay)

IIIIIIIII

84%

o Instructional Programs

• System-Wide Services

oAncillary Services

n Non-ProgrammedServices

Expenditures presented on modified accrual basis of accounting.

General Fund Budget Highlights

Over the course of the year, the Board revised the budget several times to account for changes in revenueexpectations but was able to keep spending below the amended budgeted amounts. Even with thereductions in revenue, the Board was able to reduce spending and end the year with a surplus.

-12-

IIIIIIIIIIIIIIIIIII

II Capital Assets

III

Capital assets increased by $4,112,951 (or 2.76%) from the previous year. This was largely due toadditions exceeding depreciation taken. The following is a summary of the capital assets, net ofdepreciation at year-end.

I

Suml1!JYd Ccpitll Assets

GowmrrentclMillitie; BLSile;!rlypeAdM ties Totll Prinary Govemrrent6-lJ·11 6·lJ·10 6·30·11 6·3()'10 6-lJ·11 6·3()'10

LCIld $ 2,249,668 $ 1,371.055 $ $ $ 2,2491)68 $ 1,371.055C.LP. 24,185,551 40,982,450 24,185,551 40,982:f50Buildilgs 114,667,704 95,590,708 114,667,704 95,590,708LCIld injlOwments 3,007,958 3,312,594 3,007,958 3,312,594Equprrent CIldfumlure 2,800.176 2,893,695 803,261 800,344 3,603:f57 3,790.039Vehoes 5,616,222 4,169,508 5,616222 4,169,508Othff 2,510 3,765 2,510 3,765

$ 152,529,789 $ 148,323,775 $ 803,261 $ 800,344 $ 153,333.070 $ 149220,119III

Economic Factors

II

The Davidson County Schools' student population decreased this year. Davidson County has beenexperiencing conditions similar to those of other North Carolina counties that have relied on one or twomajor industries. With a high unemployment rate in Davidson County and throughout the State, newindustries are expanding into the area. As a result, compared to last year, Davidson County'sunemployment rate decreased .4%. This is encouraging when you compare it to the state's unemploymentrate increase of .5%. Additional industries are needed in our community to expand the tax base in order toprovide funding for construction and to provide adequate funding for the instructional programs.

I Requests for Information

This report is intended to provide a summary of the financial condition of Davidson County Board ofEducation. Questions or requests for additional information should be addressed to:I

II

Pamela W. Sink, Chief Finance OfficerDavidson County Board of Education250 County School RoadLexington, NC 27292

III -13-

I

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

I Net changes in fund balances - total governmental funds

IGovernmental 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 whichcapital outlays exceeded depreciation in the current period.

I The issuance of long-term debt provides current financial resources to governmentalfunds while the repayment of the principal of long-term debt consumes the current financialresources of governmental funds. Neither transaction has any effect on net assets.This amount is the net effect of these differences in the treatment of long-term debt.ILoss on disposal of asset

I Difference in accrued interest payable and interest expensed on fund statements.

ISome expenses reported in the statement of activities do not require the use ofcurrent financial resources and therefore, are not reported as expenditures ingovernmental funds.

Compensated absences

ITotal changes in net assets of governmental activities

IIIIIIIII The notes to the financial statements are an integral part of this statement.

I-18-

Exhibit 4 Continued

$ 2,841,037

4,207,887

(422,667)

5,565

(211,308)

$ 6,420,514

IIIIIIIIIIIIIIIIIII

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- - - - - - - - - - - - - - - - - - -

IIIIIIIIIIIIIIIIIII

I Exhibit 6

I

Davidson County Board of EducationProprietary Fund

Statement of Net AssetsJune 30, 2011

I

II

Current assets:Cash and cash equivalentsDue li'om other governmentsAccounts receivableInventories

Total current assets

$ 3,499,563169,89216,709

327,7404,013,904

I Noncurrent assets:Capital assets:

Equipment, netTotal noncurrent assets

803,281

II

803,281

Total Assets 4,817,185

ILiabilities and Fund Balances

Current liabilities:Accounts payable and accrued expensesDeferred revenue- prepayments

Total current liabilities

Total Net Assets

1,41258,93560,347

82,88982,889

143,236

803,2813,870,668

$ 4,673,949

I Noncurrent liabilities:Compensated absences payable

Total noncurrent liabilities

I Total Liabilities

II

Net AssetsInvested in capital assetsUnrestricted

IIIIII

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

·20·

IIIIIIIIIIIIIIIIIII

I Davidson County Board of EducationStatement of Revenues, Expenses, and Changes in Fund Net Assets

Proprietary FundFor the Fiscal Year Ended June 30, 2011

IExhibit 7

III

Operating revenues:Food salesOther

Total operating revenues

I Operating expenses:Food cost

Purchase of foodDonated commodities

Salaries and fringe benefitsIndirect costsMaterials and suppliesRepairs and maintenanceDepreciationSmall equipmentContract and purchase servicesOther

III

Total operating expenses

I Operating income (loss)

INonoperating revenues (expenses):

USDA grants - regularUSDA grants - commoditiesState reimbursement - kindergarten breakfastRental of school propertyInterest earnedLoss on fixed assets retired

Total nonoperating revenue (expenses)

II Income (loss) before contributions and transfers

I Transfers from (to) other funds:Local Current ExpenseCapital Outlay Fund

I Change in net assets

Total net assets - beginning

III

Total net assets - ending

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

-21-

I

Enterprise FundMajor FundSchool Food

Service

3,962,71885,239

4,047,957

3,425,331235,485

3,946,031116,844309,74226,743116,086

97,52458,676

8,332,462

(4,284,505)

4,221,800490,768

4,4301,451

22,834

4,741,283

456,778

41,45750,000

548,235

4,125,714

$ 4,673,949

IIIIIIIIIIIIIIIIIII

IIIIIIIIIIIIIIIIIII

Exhibit 8

DavidsonCounty Boardof EducationStatementof Cash Flows

Proprietary FundFiscal Year EndedJune 30,2011

Cash flows from operating activities:Collections from customersCash paid for goods and servicesCash paid for suppliers and employeesOther operating revenue

Net cash provided (used) by operating activities

Major FundSchool Food Service Fund

$ 3,979,227(3,780,899)(3,946,031)

86,690(3,661,013)

4,226,2304,226,230

(28,963)41,45750,00062,494

22,83422,834

650,545

2,849,018

$ 3,499,563

Cash flows from noncapital financing activities:Operating grants received

Net cash provided (used) by noncapital financing activities

Cash flows from capital and related financing activities:Acquisition of fixed assetsTransfer from Local Current ExpenseTransfer from (to) Capital Outlay

Net cash provided (used) by capital and related finanCing activities

Cash flows from investing activities:Interest on investments

Net cash provided (used) by investing activities

Net increase (decrease) in cash

Cash at beginning of year

Cash at end of year

Reconciliation of operating income to net cash provided by operating activities:

Operating lossAdjustments to reconcile operating loss to net cash usedby operating activities:

DepreciationDonated federal commoditiesRental of school propertyChange in assets and liabilities:

(Increase) decrease in accounts receivable(Increase) decrease in inventory, at costIncrease (decrease) in accounts payableIncrease (decrease) in accrued expensesIncrease (decrease) in deferred revenue

$ (4,284,505)

116,086490,768

1,451

16,50943,938(48,982)(2,264)5,986

Net cash used by operating activities $ (3,661,013)

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

-22-

IIIIIIIII

I

IIIIIIIIIII

----~~"-.-

II

Exhibit 8

II

Noncash operating and noncapital financing activities:

IThe School Food Service Fund received donated commodities with a value of $490,768 during the fiscal year.The receipt of these commodities is recognized as a nonoperating revenue on Exhibit 7 and 0-1.

IIIIIIIIIIIII

-23-

I

IIIIIIIIIIIIIIIIIII

I Davidson County Board of EducationNotes to the Financial Statements

For the Fiscal Year Ended June 30,2011

II. Summary of Significant Accounting Policies

The accounting policies of the Davidson County Board of Education conform to generally accepted accounting principles asapplicable to governments. The following is a summary of the more significant accounting policies:

II

A. Reporting EntitvThe Davidson County Board of Education (Board) is a Local Education Agency empowered by State law [Chapter 115C of theNorth Carolina General Statutes) with the responsibility to oversee and control all activities related to public school education inDavidson County, North Carolina. The Board receives State, local, and federal government funding and must adhere to the legalrequirements of each funding entity.

I B. Basis of PresentationGovemment-wide Statements: The statement of net assets and the statement of activities display information about the Board.These statements include the financial activities of the overall government. Eliminations have been made to minimize the effectof internal activities upon revenues and expenses. These statements distinguish between the govemmental and business-typeactivities of the Board. Governmental activities generally are financed through intergovernmental revenues, and other non­exchange transactions. Business-type activities are financed in whole or in part by fees charged to external parties.

II

I

The statement of activities presents a comparison between direct expenses and program revenues for the different business­type activities of the Board and for each function of the Board's governmental activities. Direct expenses are those that arespeCifically associated with a program or function and, therefore, are clearly identifiable to a particular function. Indirect expenseallocations that have been made in the funds have been reversed for the statement of activities. Program revenues include (a)fees and charges paid by the reopients of goods or services offered by the programs and (b) grants and contributions that arerestricted to meeting the operational or capital requirements of a particular program. Revenues that are not classified asprogram revenues are presented as general revenues.

II

Fund Financial Statements: The fund financial statements provide information about the Board's funds. Separate statements foreach fund category - governmental and proprietary - are presented. The emphasis of fund financial statements is on majorgovernmental and enterprise funds, each displayed in a separate column.

Proprietary fund operating revenues, such as charges for services, result from exchange transactions associated with theprincipal activity of the fund. Exchange transactions are those in which each party receives and gives up essentially equalvalues. Non-operating revenues, such as subsidies and investment earnings, result from non-exchange transactions or ancillaryactivities.

II

The Board reports the following major governmental funds:

General Fund - The General Fund is the general operating fund of the Board. The General Fund accounts for all financialresources 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-426).

I Other Restricted Fund - The Other Restricted Fund includes specific revenues that are legally restricted for certain purposes andnot intended for the general K-12 population.

IIII

State Public School Fund - The State Public School Fund includes appropriations from the Department of Public Instruction forthe current operating expenditures of the public school system.

Federal Fund - The Federal Fund includes appropriations from the federal government for the current operating expenditures ofthe public school system.

-24-

IIIIIIIIIIIIIIIIIII

I Davidson County Board of EducationNotes to the Financial Statements

For the Fiscal Year Ended June 3D, 2011

IIII

Individual Schools Fund - The Individual Schools Fund includes revenues and expenditures of the activity funds of the individualschools. The primary revenue sources include funds held on the behalf of various clubs and organizations, receipts from athleticevents, and proceeds from various fund raising activities. The primary expenditures are for athletic teams, club programs,activity buses, and instructional needs. The Individual Schools Fund is reported as a special revenue fund.

Capital Ouflay Fund - The Capital Outlay Fund accounts for financial resources to be used for the acquisition and construction ofmajor capital facilities (other than those financed by proprietary funds). It is mandated by State law [G.S. 115C-426). Capitalprojects are funded by Davidson County appropriations, restricted sales tax moneys, proceeds of Davidson County bonds issuedfor public school construction, lottery proceeds, as well as certain State assistance.

IThe Board reports the following major enterprise fund:

School Food SeNice Fund - The School Food Service Fund is used to account for the food service program within the schoolsystem.

I

III

C. Measurement Focus and Basis of AccountingGovemment-wide and Proprietary Fund Financial Statements. The government-wide and proprietary fund financial statementsare reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recordedwhen earned and expenses are recorded at 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 (or giving) equal value inexchange, include grants and donations. Revenue from grants and donations is recognized in the fiscal year in which alleligibility requirements have been satisfied.

I

Govemmental Fund Financial Statements. Governmental funds are reported using the current financial resources measurementfocus and the modified accrual basis of accounting. Under this method, revenues are recognized when measurable andavailable. The Board considers all revenues reported in the governmental funds to be available if the revenues are collectedwithin 60 days after year-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 and judgments and compensatedabsences, which are recognized as expenditures to the extent they have matured. General capital asset acquisitions arereported as expenditures in governmental funds. Acquisitions under capital leases are reported as other financing sources.

I Under the terms of grant agreements, the Board funds certain programs by a combination of specific cost-reimbursement grantsand general revenues. Thus when program expenses are incurred, there are both restricted and unrestricted net assetsavailable to finance the program. It is the Board's policy to first apply cost-reimbursement grant resources to such programs andthen general revenues.I

IAll governmental and business-type activities and enterprise funds of the Board follow FASB Statements and Interpretationsissued on or before November 30, 1989, Accounting Principles Board Opinions, and Accounting Research Bulletins, unlessthose pronouncements conflict with GASB pronouncements.

II

D. Budgetary DataThe Board's budgets are adopted as required by the North Carolina General Statutes. Annual budgets are adopted for all funds,except for the individual schools special revenue funds, as required by the North Carolina General Statutes. No budget isrequired by State law for individual school funds. All appropriations lapse at the fiscal year-end. All budgets are prepared usingthe modified accrual basis of accounting. Expenditures may not legally exceed appropriations at the functional level for allannually budgeted funds. All amendments must be approved by the governing board. During the year several immaterialamendments to the original budget were necessary. The budget ordinance must be adopted by July 1 of the fiscal year or thegoverning board must adopt an interim budget that covers that time until the annual ordinance can be adopted.

I

I-25-

I

IIIIIIIIIIIIIIIIIII

I Davidson County Board of EducationNotes to the Financial Statements

For the Fiscal Year Ended June 30, 2011

III

E. Assets. Liabilities. and Fund Equity

I

1. Deposits and InvestmentsAll deposits of the Board are made in board-designated official depositories and are secured as required by State law [G.S.115C-444]. The Board may designate, as an official depository, any bank or savings association whose principal office is locatedin North Carolina. Also, the Board may establish time deposit accounts such as NOW and SuperNOW accounts, money marketaccounts, and certificates of deposit. The Board also has money credited in its name with the State Treasurer and may issueState warrants against these funds.

IState law [G.S. 115C-443] authorizes the Board to invest in obligations of the United States or obligations fully guaranteed bothas to principal and interest by the United States; obligations of the State of North Carolina; bonds and notes of any NorthCarolina local government or public authority; obligations of certain non-guaranteed federal agencies; certain high quality issuesof commercial paper and bankers' acceptances; the North Carolina Capital Management Trust (NCCMT), an SEC-registered(2a-7) money market mutual fund; and the North Carolina State Treasurer's Short Term Investment Fund (STIF).

II

The STIF is managed by the staff of the Department of State Treasurer and operated in accordance with state laws andregulations. It is not registered with the SEC. It consists of an internal portion and an external portion in which the boardparticipates. Investments are restricted to those enumerated in G.S. 147-69.1.

The Board's investment in STIF securities are reported at cost and maintain a constant $1 per share value. Under the authorityof G.S. 147-69.3, no unrealized gains or losses of the STIF are distributed to external participants of the fund.

III

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

3. InventoriesInventories of the Board are valued at cost and the Board uses the first in, first out (FIFO) flow assumption in determining cost.The inventories of the Board's General Fund consist of expendable materials and supplies, which are recorded as expenditureswhen purchased. Proprietary Fund inventories consist of food and supplies and are recorded as expenses when consumed.

I4. Capital AssetsThe Board's capital assets are recorded at original cost. Donated assets are listed at their estimated fair value at the date ofdonation or forfeiture. Improvements are capitalized and depreciated over the remaining useful lives of the related capitalassets. Certain items acquired before 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 assets are considered as a whole.I It is the policy of the Board to capitalize all capital assets costing more than $5,000 with an estimated useful life of two or moreyears. In addition, other items which are purchased and used in large quantities such as student desks are capitalized. The costof normal maintenance and repairs that do not add to the value of the asset or materially extend asset lives are not capitalized.I

II

Davidson County holds title to certain properties, which are reflected as capital assets in the financial statements of the Board.The properties have been deeded to the County to permit installment purchase financing of acquisition and construction costsand to permit the County to receive refunds of sales tax paid for construction costs. Agreements between the County and theBoard gives the schools full use of the facilities, full responsibility for maintenance of the facilities, and provides that the Countywill convey the title of the property back to the Board, once all restrictions of the financing agreements and all sales taxreimbursement requirements have been met.

III

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IIIIIIIIIIIIIIIIIII

II

Davidson County Board of EducationNotes to the Financial Statements

For the FiscalYear Ended June 30,2011

I Capital assets are depreciated using the straight-line method over the following estimated useful lives:

II

BuildingsEquipment and furnitureVehiclesComputer equipment

20-50 years10-20 years6-8 years3-5 years

Depreciation for building and equipment that serve multiple purposes cannot be allocated ratably and is therefore reported as·unallocated depreciation" on the Statement of Activities.

I5. Long-Term ObligationsIn the government-wide financial statements, long-term debt and other long-term obligations are reported as liabilities in theapplicable governmental activities.

II

6. Compensated AbsencesThe Board follows the State's policy for vacation and sick leave. Employees may accumulate up to thirty (30) days earnedvacation leave with such leave being fully vested when earned. For the Board, the current portion of the accumulated vacationpay is not considered to be material. The Board's liability for accumulated earned vacation and the salary-related payments asof June 30, 2011 is recorded in the government-wide and proprietary fund financial statements on a FIFO basis. An estimatehas been made based on prior years' records, of the current portion of compensated absences.

I The sick leave policy of the Board provides for an unlimited accumulation of earned sick leave. Sick leave does not vest, but anyunused sick leave accumulated at the time of retirement may be used in the determination of length of service for retirementbenefit purposes. Since the board has no obligation for accumulated sick leave until it is actually taken, no accrual for sick leavehas been made.

II

7. Net Assets I Fund BalancesNet assets in the government-wide and proprietary fund financial statements are classified as invested in capital assets, net ofrelated debt; restricted; and unrestricted. Restricted net assets represent constraints on resources that are either externallyimposed by creditors, grantors, contributors, or the laws or regulations of other governments, or imposed by law through statestatute.

I Fund BalanceIn the governmental fund financial statements, fund balance is composed of five classifications designed to disclose thehierarchy of constraints placed on how fund balance can be spent.

II

The governmental fund types classify fund balances as follows:

Nonspendable Fund Balance - This classification includes amounts that cannot be spent because they are either (a) not inspendable form or (b) legally or contractually required to be maintained intact.

IInventories - portion of fund balance that is not an available resource because it represents the year-end balance ofending inventories, which are not spendable resources.

Assets held for resale - portion of fund balance that is not an available resource because it represents the year endbalance of assets held for resale, which are not spendable resources.

II

Restricted Fund Balance - This classification includes amounts that are restricted to specific purposes externally imposed bycreditors or imposed by law.

Restricted for Stabilization by State Statute - portion of fund balance that is restricted by State Statute [G.S. 115C-425(a)J.

II

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IIIIIIIIIIIIIIIIIII

I Davidson County Board of EducationNotes to the Financial Statements

For the Fiscal Year Ended June 30, 2011

II

Restricted for School Capital Outlay - portion of fund balance that can only be used for School Capital Outlay [G.S.159-18 through 22].

II

Restricted for Individual Schools - revenue sources restricted for expenditures for the various clubs and organizations,athletic events, and various fund raising activities for which they were collected.

Assigned Fund Balance - portion of fund balance that Davidson County Board of Education intends to use for specific purposes.

Subsequent year's expenditures - portion of fund balance that is appropriated in the next year's budget that is notalready classified in restricted or committed. The governing body approves the appropriation.

I

Unassigned Fund Balance - the portion of fund balance that has not been restricted, committed, or assigned to specificpurposes or other funds.

II

The Board has no formal revenue spending policy, but does have a informal practice of spending revenues for programs withmultiple revenue sources. The Finance Officer will use resources in the following hierarchy: federal funds, State funds, local non­Board of Education funds, Board funds. For purposes of fund balance classification expenditures are to be spent from restrictedfund balance first, followed in-order by committed fund balance, assigned fund balance and lastly unassigned fund balance. TheFinance Officer has the authority to deviate from this policy if it is in the best interest of the Board.

8. Reconciliation of Government-wide and Fund Financial Statements

II

a. Explanation of certain differences between the governmental fund balance sheet and the government-wide statementof net assets.

The governmental fund balance sheet includes a reconciliation between fund balance - total governmental funds andnet assets - governmental activities as reported in the government-wide statement of net assets. The net adjustmentof $144,379,590 consists of several elements as follows:

I Description

II

Capital assets used in governmental activities are not financial resources andare therefore not reported in the funds (total capital assets on thegovernment-wide statement in governmental activities column). $ 219,651,243

Net capital assets

(67,121,458)

152,529,785

Less accumulated depreciation

II

Liabilities that, because they are not due and payable in the current period, donot require current resources to pay and are therefore not recorded in the fundstatements:

Accrued interest payableInstallment financingCompensated absences

(5,565)(1,079,004)(7,065,626)

I Total adjustment $ 144,379,590

III

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IIIIIIIIIIIIIIIIIII

II

Davidson County Board of EducationNotes to the Financial Statements

For the Fiscal Year Ended June 30, 2011

II

b. Explanation of certain differences between the governmental fund statement of revenues, expenditures, andchanges in fund balance and the government-wide statement of activities.

The governmental fund statement of revenues, expenditures, and changes in fund balances includes a reconciliationbetween net changes in fund balances - total governmental funds and changes in net assets of governmentalactivities as reported in the government-wide statement of activities. There are several elements of that totaladjustment of $3,579,477 as follows:

I Description

II

Capital outlayexpendituresrecorded inthe fundstatementsbutc~iaized asassets in the staement of activies. $ 9,813,817

Depreciationexpense, the allocationof ttose assetsover their usefu lives, that isrecordedon the statementof activities but not in the Md statements. (5,600,365)

INew debt issueddurirg the year is recordedas asourceoffunds on the fund statements;it hasno effect on the statementof activities- it affects on~ the government-wdestaemeot of netassets. (2,158,008)

III

Principalpaymentson debt owed are recordedas a useoffunds on the Md statementsbut agah affecton~ the staement of netassets in the government-wile statements 1,735,341

Expensesreported in the statementof activlies that do not requirethe use ofcurrent resourcesto pay are net recordedas expendituresin the fund statements.

- Compensatedabsencesare accruedh the govemment-widestatementsbutnet in the fund statementsbecausethey do net usecurrent resources. (211,308)

Total adjJstment $ 3,579,477

I II. Stewardship. Compliance. and Accountability

I A. Material Violations of Finance-Related Legal and Contractual Provisions

Noncompliance with North Carolina General StatutesNone.

I Contractual ViolationsNone.

I B. Excess of Expenditures over AppropriationsNone.

I C Deficit in Fund Balance or Retained Earnings of Individual FundsNone.

III

-29-

IIIIIIIIIIIIIIIIIII

II

Davidson County Board of EducationNotes to the Financial Statements

For the Fiscal Year Ended June 30, 2011

II

III. Detail Notes on All Funds

I

1. DepositsAll of the Board's deposits are either insured or collateralized by using one of two methods. Under the Dedicated Method, alldeposits exceeding the federal depository insurance coverage level are collateralized with securities held by the Board's agentsin the unit's name. Under the Pooling Method, which is a collateral pool, all uninsured deposits are collateralized with securitiesheld by the State Treasurer's agent in the name of the State Treasurer. Since the State Treasurer is acting in a fiduciarycapacity for the Board, these deposits are considered to be held by the agent in the entity's name. The amount of the pledgedcollateral is based on an approved averaging method for non-interest bearing deposits and the actual current balance forinterest-bearing deposits. Depositories using the Pooling Method report to the State Treasurer the adequacy of their pooledcollateral covering uninsured deposits. The State Treasurer does not confirm this information with the Board or with the escrowagent. Because of the inability to 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 cash flows. However, the State Treasurerof North Carolina enforces strict standards of financial stability for each depository that collateralizes public deposits under thePooling Method. The Board has no policy regarding custodial credit risk for deposits, but relies on the State Treasurer to enforcestandards of minimum capitalization for all pooling method financial institutions and to monitor them for compliance. The Boardcomplies with the provisions of G.S. 159-31 when designating official depositories and verifying that deposits are properlysecured.

I

IIII

At June 30, 2011, the Board had deposits with banks and savings and loans with a carrying amount of $23,842,749 and with theState Treasurer of $10,645. The bank balances with the financial institutions and the State Treasurer was $23,449,966 and$268,463, respectively. Of these balances, $323,881 was covered by federal depository insurance and $23,126,085 wascovered by collateral held by authorized escrow agents in the name of the State Treasurer.

I2. InvestmentsAt June 30, 2011, the Board had $5,912 invested with the State Treasurer in the Short Term Investment Fund (STIF). The STIFis unrated and had a weighted average maturity of 1.9 years at June 30, 2011. The Board has no policy for managing interestrate risk or credit risk.

IIIIIII -30-

I

IIIIIIIIIIIIIIIIIII

I Davidson County Board of EducationNotes to the Financial Statements

For the Fiscal Year Ended June 30, 2011

I

II

3. Accounts ReceivableReceivables at the government-wide level at June 30, 2011, were as follows:

OJe fromother funds OJe from~ntemal otherbalancesl ~vernrrents Other

Governmental activities:General FUM $ $ 61,513 $Special Revenue Fund 4,527,146Other governmental activities 1,476,981 21,964

Total $ $ 6,065,640 $ 21,964

Business-type activities:School Food Service 169,892

Total $ $ 169,892 $

III

II

II

Due from other governments consists of the following:

Governmental activities:General Fund $ 61,513 - Miscellaneous tax revenue from State and

federal governments.State Public School FUM 4,063,997 - Instalment receivable and tax revenue from StateFederal Fund 439,392 - Federal grant funds and instalment receivables

and tax revenue from State.Other Restricted Fund 23,757 - Federal grant fuMs ard instalment receivables

and tax revenue from State.Capital Outlay FUM 1,476,981 - Project revenue from County and sales tax

revenue from StateTotal $ 6,065,640

Business-type activities:USDA reimbursement $ 167,430 - Federal fundsSchool Food Service 2,462 - Sales tax revenue from State

Total $ 169,892

III

IIIII

-31-

IIIIIIIIIIIIIIIIIII

I-zs-

II~8t£08 $ vv£'968 $ lau '$lasse lel!deo s8!I!lI!lOeadAj-ssau!sns

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IIIIIIIIIIIIIIIIIII

I Davidson County Board of EducationNotes to the Financial Statements

For the Fiscal Year Ended June 30,2011

II

Construction CommitmentsDavidson County has active construction projects as June 30, 2011. At year end, the commitments with contractors for schoolconstruction were as follows:

I

ewgEast I BrownBusParkirgSouthrront BusEntranceNorthI LedfordAreaMetalRoofsNewWest Bementcry

SPent-toil ate$ 275,581

55,8133,293,421385,750

11,641,600$ 15,652,165

RemailirgCgnmi!ment

$ 87,530203,188

14,928,579237,56215,400

I

$ 15,472,259

II B. Liabilities

III

1. Pension Plan Obligations

a. Teachers' and State Employees' Retirement System

I

Plan DeSCription - Davidson County Board of Education contributes to the statewide Teachers' and State Employees'Retirement System (TSERS), a cost-sharing multiple-employer defined benefit pension plan administered by the State of NorthCarolina. TSERS provides retirement benefits to plan members and beneficiaries. Article 1 of G. S. Chapter 135 assigns theauthority to establish and amend benefit provisions to the North Carolina General Assembly. The Teachers' and StateEmployees' Retirement System is included in the Comprehensive Annual Financial Report (CAFR) for the State of NorthCarolina. The State's CAFR includes financial statements and required supplementary information for TSERS. That report maybe obtained by writing to the Office of the State Controller, 1410 Mail Service Center, Raleigh, North Carolina 27699-1410, or bycalling (919) 981-5454.

IFunding Policy - Plan members are required to contribute six percent of their annual covered salary and the Board is required tocontribute at an actuarially determined rate. The current rate is 10.51% of annual covered payroll. The contributionrequirements of plan members and Davidson County Board of Education are established and may be amended by the NorthCarolina General Assembly. The Board's contributions to TSERS for the years ended June 30, 2011, 2010, and 2009, were$9,847,735, $8,253,640, and $8,105,278 respectively, equal to the required contributions for each year.

I b. Other Post-employment Benefits

(1) Healthcare Benefits

IIII

Plan Description. The post employment healthcare benefits are provided through a cost-sharing multiple-employer definedbenefit plan administered by the Executive Administrator and the Board of Trustees of the Comprehensive Major Medical Plan(the Pian). The Executive Administrator and the Board of Trustees of the Plan establishes premium rates except as may beestablished by the General Assembly in an appropriation act. The Plan's benefit and contribution provisions are established byChapter 135-7, Article 1, and Chapter 135, Article 3 of the General Statutes and may be amended only by the North CarolinaGeneral Assembly. By General Statute, the Plan accumulates contributions from employers and any earnings on thosecontributions in the Retiree Health Benefit Fund. These assets shall be used to provide health benefits to retired and disabledemployees and their applicable beneficiaries. These contributions are irrevocable. Also by law, these assets are not subject tothe claims of creditors of the employers making contributions to the Plan.

II

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IIIIIIIIIIIIIIIIIII

I Davidson County Board of EducationNotes to the Financial Statements

For the Fiscal Year Ended June 30, 2011

I

I

The. State of North Carolina issues a publicly available financial report that includes financial statements and requiredsupplementary information for the State's Comprehensive Major Medical Plan (also, referred to as the State Health Pian). Anelectronic version of this report is available by accessing the North Carolina Office of the State Controller's Internet home pagehttp://www.ncosc.net!and clicking on "Financial Reports", or by calling the State Controller's Financial Reporting Section at(919)981-5454.

I

III

Funding PolicY - The Comprehensive Major Medical Plan is administered by the Executive Administrator and Board of Trusteesof the Plan, which establishes premium rates except as, may be established by the General Assembly in an appropriation act.The healthcare benefits for retired and disabled employees are the same as for active employees, except that the coveragebecomes secondary when former employees become eligible for Medicare. For employees first hired on and after October 1,2006, future coverage as retired employees is subject to the requirement that the future retiree have 20 or more years ofretirement service credit in order to receive coverage on a noncontributory basis. Employees first hired on and after October 1,2006 with 10 but less than 20 years of retirement service credit are eligible for coverage on a partially contributory basis. Forsuch future retirees, the State will pay 50% of the State Health Plan's total noncontributory premium. For employees hiredbefore October 1, 2006, healthcare benefits are provided to retirees (at no charge to the retirees) who have at least five years ofcontributing retirement membership prior to disability or retirement. In addition, persons who became surviving spouses ofretirees prior to October 1, 1986, receive the same coverage as retirees at the State's expense.

I

Contributions are determined as a percentage of covered monthly payroll. Annually, the monthly contribution rates to the Plan,which are intended to finance benefits and administrative expenses on a pay-as-you-go basis, are determined by the GeneralAssembly in the Appropriations Bill. For the fiscal years ended June 30, 2011, 2010, and 2009, the School Board paid all annualrequired contributions to the Plan for post-employment health care benefits of $4,591,237, $4,244,729, and $4,082,511,respectively. These contributions represented 4.90%, 4.50%, and 4.10% of covered payroll, respectively.

I(2) Long-term Disability Benefits

II

The State of North Carolina issues a publicly available financial report that includes financial statements and requiredsupplementary information for the DIPNC. An electronic version of this report is available by accessing the North Carolina Officeof the State Controller's Internet home page http://www.ncosc.net!and clicking on "Financial Reports", or by calling the StateController's Financial Reporting Section at (919)981-5454.

II

Plan Description - Short-term and long-term disability benefits are provided through the Disability Income Plan of North Carolina(DIPNC), a cost-sharing, multiple-employer defined-benefit plan. The DIPNC is administered by the Board of Trustees of theTeachers' and State Employees' Retirement System. Long-term disability benefits are payable as an other post employmentbenefit from DIPNC after the conclusion of the short-term disability period or after salary continuation payments cease,whichever is later, for as long as an employee is disabled. Benefit and contribution provisions are established by Chapter 135,Article 6, of the General Statutes and may be amended only by the North Carolina General Assembly. The Plan accumulatescontributions from employers and any earnings on those contributions in the Disability Income Plan Trust Fund. The Plan doesnot provide for automatic post-retirement benefit increases.

I

Funding Policy - An employee is eligible to receive long-term disability benefits provided the following requirements are met: (1)the employee has five or more years of contributing membership service in the Teachers' and State Employees' RetirementSystem of North Carolina, earned within 96 months prior to the end of the short-term disability period or cessation of salarycontinuation payments, whichever is later; (2) the employee must make application to receive long-term benefits within 180 daysafter the conclusion of the short-term disability period or after salary continuation payments cease or after monthly payments forWorkers' Compensation cease (excluding monthly payments for permanent partial benefits), whichever is later; (3) the employeemust be certified by the Medical Board to be mentally or physically disabled for the further performance of his/her usualoccupation; (4) the disability must have been continuous, likely to be permanent, and incurred at the time of active employment;(5) the employee must not be eligible to receive an unreduced retirement benefit from the Retirement System; and (6) theemployee must terminate employment as a permanent, full-time employee. An employee is eligible to receive an unreducedretirement benefit from the Retirement System after (1) reaching the age of 65 and completing five years of creditable service, or(2) reaching the age of 60 and completing 25 years of creditable service, or (3) completing 30 years of creditable service, at anyage.

III

II

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- - -- ---- -- - - - _. -- - -

IIIIIIIIIIIIIIIIIII

I Davidson County Board of EducationNotes to the Financial Statements

For the Fiscal Year Ended June 30,2011

II

I

For members with five or more years of membership service as of July 31, 2007, the monthly long-term disability benefit is equalto 65% of one-twelfth of an employee's annual 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 twelfth of the annual longevity payment to whichthe participant or beneficiary would be eligible. The monthly benefits are subject to a maximum of $3,900 per month reduced byany primary Social Security disability benefits and by monthly payments for Workers' Compensation to which the participant ofbeneficiary may be entitled. The monthly benefit shall be further reduced by the amount of any monthly payments from theDepartment of Veterans Affairs, any other federal agency or any payments made under the provisions of G.S. 127A-108, towhich the participant or benefiCiary may be entitled on account of the same disability. Provided in any event, the benefitspayable shall be no less than $10 a month. When an employee qualifies for an unreduced service retirement allowance from theRetirement System, the benefits payable from DIPNC will cease, and the employee will commence retirement under the TSERS.For members who obtain five years of membership service on or after August 1, 2007, the monthly long-term disability benefit isreduced by the primary Social Security retirement benefit to which you might be entitled should you become age 62 during thefirst 36 months. After 36 months of long-term disability, there will be no further payments from the DIPNC unless the member isapproved for and are in receipt of primary Social Security disability benefits. It is payable so long as the member remainsdisabled and is in receipt of a primary Social Security disability benefit until eligible for an unreduced service retirement benefit.When an employee qualifies for an unreduced service retirement allowance from the Retirement System, the benefits payablefrom DIPNC will cease, and the employee will commence retirement under the TSERS.

III

II

The Board's contributions are established in the Appropriations Bill by the General Assembly. Benefit and contribution provisionsare 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 to other postemployment benefits andemployment benefits for active employees. Those individuals who are receiving extended short-term disability benefit paymentscannot be separated from the number of members currently eligible to receive disability benefits as another postemploymentbenefit. For the fiscal years ended June 30, 2011, 2010, and 2009, the Board paid all annual required contributions to theDIPNC for disability benefits of $487,233, $490,502, and $517,782, respectively. These contributions represented .52% ofcovered payroll for all three years.

I

(3) Life Insurance

I Term life insurance in the amount of $5,000 is provided by the Board for all employees. This coverage combined with thecoverage provided by the Teacher's and State Employees' Retirement System (Death Benefit Plan) in excess of $50,000 isconsidered taxable to the employee as a fringe benefit.

II

I

2. Accounts Payable

Accounts payable as June 30, 2011 are as follows:Salcries and

Vendors Benefits OtherGovernmental activities:

General $ 486,192 $ 571,631 $Other governmental 8,353 4,437,774 1,453,380

Total govemmental activities $ 494,545 $ 5,009,405 $ 1,453,380

Business-type activities:School Food Service $ 1,412 $ $

Total business-type actwlies $ 1,412 $ $

I

IIII

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IIIIIIIIIIIIIIIIIII

I Davidson County Board of EducationNotes to the Financial Statements

For the Fiscal Year Ended June 3D, 2011

III

3. Unearned Revenues

The balance in unearned revenues at year end is composed of the following elements:Unearned Revenue

$ 39,99790,175

Grants not yet earned (Special Revenue Funds)Sales tax refunds receivable (Special Revenue Funds)Sales tax refunds receivable (Capital Outlay Fund)

Total $ 130,172

I 4. Risk Management

I The Board is exposed to various risks of losses related to torts; theft of, damage to, and destruction of assets; errors andomissions; injuries to employees; and natural disasters. The Board maintains, through the Montgomery Insurance Company,general liability protection of $3 million with a $1 million per occurrence limit and errors and omissions coverage of $3 million limitwith a $1 million limit per wrongful act. The State of North Carolina provides workers' compensation for employees paid fromState funds. The Board also participates in the Public School Insurance Fund, a voluntary, self-funded risk control and riskfinancing fund administered by the North Carolina Department of Public Instruction. The Fund provides all risk, replacement costproperty coverage to protect the building and contents of Board assets. The Fund purchases reinsurance to cover catastrophiclosses in excess of $10 million. The maximum amount recoverable under the perils of flood or earthquake are $5 million peroccurrence and $15 million per occurrence for all insured locations.

IIIII

The Board also partiCipates in the Teachers' and State Employees' Comprehensive Major Medical Plan, a self-funded riskfinancing pool of the State administered by Blue Cross and Blue Shield of North Carolina. Through the Plan, permanent full-timeemployees of the Board are eligible to receive health care benefits up to a unlimited 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's monies at any given time of theBoard's funds are performance bonded through a commercial surety bond. The finance officer is bonded for $100,000. Theremaining employees that have access to funds are bonded under a blanket bond for $100,000.

The Board carries commercial coverage for all other risks of loss. There have been no significant reductions in insurancecoverage in the prior year, and claims have not exceeded coverage in any of the past three fiscal years.

I 5. Contingent Liabilities

II

At June 30, 2011, the Board was a defendant to various lawsuits. In the opinion of the Board's management and the Board'sattorney, the ultimate effect of these legal matters will not have a material adverse effect on the Board's financial position.

6. Long-Term Obligations

II

(a) Installment PurchaseThe Board is authorized to finance the purchase of school buses under G.S. 115C-528(a). Session law 2003-284, section 7.25authorized the State Board of Education to allot monies for the payments on financing contracts entered into pursuant to G.S.115C-528. The State has accepted the bid to purchase White International Truck buses through a special third party financingarrangement by Banc of America Public Capital Corporation at total payments less than the purchase price. The Board hascurrently entered into one installment purchase contract to finance the purchase of 24 school buses. The financing contractrequires principal payments totaling $1,079,004 for the year ending June 30, 2011.

II -36-

I

IIIIIIIIIIIIIIIIIII

II

Davidson County Board of EducationNotes to the Financial Statements

For the Fiscal Year Ended June 30, 2011

IThe future minimum payments of the installment purchase for this contract as of June 30, 2011, including $29,435 of interest, areas follows:

IYear Ending June 30,

20122013

Governmental ActivitiesPrincipal

$ 539,502539,502

$1,079,004

Interest$ 14,718

14717$ 29;435

I (b) Long-Term Obligation Activity

The following is a summary of changes in the Board's long-term obligations for the fiscal year ended June 30, 2011:

III

Current6-30-10 Addkions Reti'ements 6-30-11 Portion

Governmental activities:Accumulated vacation benefits $ 6,854,318 $ 4,525,778 $ (4,314,470) $ 7,065,626 $ 4,314,470Instalment purchases 656,337 2,158,008 (1,735,341~ 1,079,004 539,502

$ 7,510,655 $ 6,683,786 $ (6,049,811} $ 8,144,630 $ 4,853,972Business-type activities:

Accumulated vacation benefits $ 85,153 $ 170,454 $ (172,718} $ 82,889 $ 82,889

II

B. Interfund Balances and Activity

Transfers to/from other funds at June 30, 2011, consist of the following:

IAl11ClIrt

From General Fund tothe Schad Food Service Fund for meal charges by stlIlEllIs net pad, $ 41,457

II

From General Fund tothe IndMdual Schods, $

From General Fund to the Caplal OJUay Fund for coostructioo. $ 1,re6, 118

$ 50,000From C~ilal OJUay Fund to School Food Servee Fund fa equipnert.

IIIIII

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IIIIIIIIIIIIIIIIIII

IIIIIIIIIIIIIIIIIII

Davidson County Board of EducationNotes to the Financial Statements

For the Fiscal Year Ended June 30, 2011

C. Fund Balance

The Board has no formal revenue spending policy, but does have a informal practice of spending revenues for programs withmultiple revenue sources. The Finance Officer will use resources in the following hierarchy: federal funds, State funds, local non­Board of Education funds, Board funds. For purposes of fund balance classification expenditures are to be spent from restrictedfund balance first, followed in-order by committed fund balance, assigned fund balance and lastly unassigned fund balance. TheFinance Officer has the authority to deviate from this policy if it is in the best interest of the Board.

The following schedule provides management and citizens with information on the portion of General fund balance that isavailable for appropriation.

Total fund balance - General Fund $ 5,509,884Less:Stabilization by State StatuteAppropriated fund balance in 2012 budget

61,5134,000,000

Remaining fund balance 1,448,371

IV. 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 are required and certaincosts may be questioned as not being appropriate expenditures under the grant agreements. Such audits could result in therefund of grant moneys to the grantor agencies. Management believes that any required refunds will be immaterial. Noprovision has been made in the accompanying financial statements for the refund of grant moneys.

V. Significant Effects of Subsequent Events

Subsequent events occurring after the statement of net assets date have been evaluated through October 26, 2011, which is thedate the financial statements were available to be issued.

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IIIIIIIIIIIIIIIIIII

IIIIIIIIIIIIIIIIIII

General Fund

The General Fund is the principal operating fund for the Davidson CountyBoard of Education mandated by State law as the Local Current ExpenseFund.

IIIIIIIIIIIIIIIIIII

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IIIIIIIIIIIIIIIIIII

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Special Revenue Funds

Special Revenue Funds are used to account for specific revenues that arelegally restricted to expenditures for specific purposes.

Other Restricted Fund - This fund includes specific revenues that arelegally restricted for certain purposes and not intended for the generalK-12 population.

State Public School Fund - This fund includes appropriations for thecurrent operating expenditures of the public school system from moniesmade available to the local administrative unit by the State Board ofEducation.

Federal Grants Fund - This fund is used to account for various programsand grants which the federal govemment provided to the localadministrative unit.

Individual Schools - This fund accounts for the revenues and expendituresof the 33 individual schools.

---------------- ---- ------ - . -

IIIIIIIIIIIIIIIIIII

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~-8 I

IIIIIIIIIIIIIIIIIII

I 8-2Davidson County Board of Education

Other Restricted Fund

I Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and ActualFor the Fiscal Year Ended June 30, 2011

I Positive(Negative)

IBudget Actual Variance

Revenues:State of North Carolina:

I More at four grant $ 375,245 $ 327,221 $ (48,024)Truancy program 70,123 56,904 (13,219)Character ed grant 1,551 1,551

I Dropout prevention grant 175,000 175,000Smart start 654,292 654,292

I Total State of North Carolina 1,276,211 1,214,968 (61,243)

U.S. Govemment:

IMedicaid reimbursement - admin 100,000 130,663 30,663Medicaid reimbursement - fees for services 50,000 160,275 110,275Camp med grant 3,000 3,000

I Serve grant 3,000 3,000LSTAgrant 20,000 20,000

1,500 (1,500)

I ROTC grant 108,998 108,644 (354)

Total U.S. Government 286,498 425,582 139,084

I Davidson County:Appropriation from general revenues 480,543 480,543

I Total Davidson County 480,543 480,543

Other:

I School fees 257,549 253,969 (3,580)Rental of school property 4,100 12,971 8,871Interest earned on investments 86,400 83,607 (2,793)

I Indirect cost allocated 467,021 521,150 54,129Sales tax reimbursement 58,138 56,043 (2,095)

IInsurance settlement school property 33,293 35,330 2,037E-Rate reimbursement 63,197 47,764 (15,433)Other local operating revenues 149,777 150,670 893

I Other restricted local sources 1,500 156 (1,344)

Total Other 1,120,975 1,161,660 40,685

I Total revenues 3,164,227 3,282,753 118,526

(continued)

I-41-

I

IIIIIIIIIIIIIIIIIII

I Davidson County Board of EducationOther Restricted Fund

Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and ActualFor the Fiscal Year Ended June 30, 2011I

8-2

II

Budget ActualExpenditures:

Instructional services:Regular instructional servicesSpecial populations servicesAlternative programs and servicesSchool leadership servicesCo-Curricular instructionSchool-based support services

$ 315,101 $ 239,694403,020 285,256

1,270,661 1,205,727298,407 298,407

2,440 2,44077,258 71,296

2,366,887 2,102,820

373,940 236,677379,496 236,28140,000 20,336

793,436 493,294

3,904 3,904

III Total instructional programs

ISystem-Wide services:

Technology support servicesOperational support servicesPolicy, leadership and public relations servicesI

ITotal system-wide services

Ancillary Services:Nutrition services

I Non-programmed charges:Payments to other governmental unitsContingency

I Total non-programmed charges

I Total expenditures 3,164,227 2,600,018

Revenues over (under) expenditures 682,735

I Other financing sources (uses):Operating transfer out - School Food Service FundOperating transfer out - Capital Outlay FundOperating transfer out - Individual SchoolsI

II

Appropriation of fund balance

$ 682,735Net change in fund balance

Fund balance at beginning of year 9,446,309

$ 10,129,044Fund balance at end of year

I-42-

I

Positive(Negative)Variance

$ 75,407117,76464,934

5,962

264,067

137,263143,21519,664

300,142

564,209

(445,683)

$ (445,683)

IIIIIIIIIIIIIIIIIII

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9-8 I

IIIIIIIIIIIIIIIIIII

IIIIIIIIIIIIIIIIIII

Capital Outlay Fund

Capital outlay funds are used to account for the acquisition andconstruction of major capital facilities other than those financed byproprietary funds and trust funds.

Capital Outlay Fund - This fund, which is mandated by state law, is usedto account for the acquisition, construction, renovation, and replacementof the local administrative unit's fixed assets.

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Enterprise funds are used to account for operations that are financed andoperated in a manner similar to private business enterprises where theintent of the government's board is that the costs of providing goods orservices to the general public on a continuing basis be financed orrecovered primarily through user charges; or where the government'sboard has decided that the periodic determination of net income isappropriate for accountability purposes.

School Food Service Fund - This fund is used to account for the foodservice program within the school system.

IIIIIIIIIIIIIIIIIII

- - - - --

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D-1Davidson County Board of Education

School Food Service FundSchedule of Revenues and Expenditures - Budget and Actual (Non-GAAP)

For the Fiscal Year Ended June 30,2011

ActualReconciliation of modified accrual to full accrual basis:Excess of revenues over expenditures

and other financing sourcesReconciling items:

DepreciationEquipment purchasesIncrease (decrease) in inventory(Increase) decrease in accrued expenses

Net income (loss)

$ 589,156

(116,086)28,96343,9382,264

$ 548,235

-49-

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Table 12Davidson County Board of Education

Computation of Direct and Overlapping DebtFor Davidson County

June 30, 2011(Unaudited)

Percentage AmountNet Applicable to Applicable to

Bonded Debt Davidson DavidsonOutstanding County County

Davidson County $ 72,105,000 100% $ 72,105,000

City of Lexington 7,964,318 100% 7,964,318

Total direct and overlappingdebt $ 8010691318 $ 8010691318

Source: Davidson County, North Carolina, Comprehensive Annual Financial Report for the year ended June 30, 2011.

-61-

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IIIIIIIIIIIIIIIIIII

IIIIIIIII Compliance Section

IIIIIIIIII

IIIIIIIIIIIIIIIIIII

-- ._ -_.

II

RICK ALLRED, CPA, PACertified Public Accountant

I Report On Internal Control Over Financial Reporting and On Compliance and Other Matters BasedOn An Audit Of Financial Statements Performed In Accordance With

Government Auditing Standards

I To the Davidson County Board of EducationDavidson County, North Carolina

I I have audited the financial statements of the governmental activities, business-type activities, andeach major fund of the Davidson County Board of Education, North Carolina, as of and for the yearended June 30, 2011, which collectively comprises the Davidson County Board of Education's basicfinancial statements, and have issued my report thereon dated October 26, 2011. I conducted myaudit in accordance with auditing standards generally accepted in the United States of America andthe standards applicable to financial audits contained in Government Auditing Standards, issued bythe Comptroller General of the United States.

III Internal Control Over Financial Reporting

Management of the Davidson County Board of Education is responsible for establishing andmaintaining effective internal control over financial reporting. In planning and performing my audit, Iconsidered the Davidson County Board of Education's internal control over financial reporting as abasis for designing my auditing procedures for the purpose of expressing my opinions on thefinancial statements, but not for the purpose of expressing an opinion on the effectiveness of theDavidson County Board of Education's internal control over financial reporting. Accordingly, I donot express an opinion on the effectiveness of the Board's internal control over financial reporting.

III A deficiency in internal control exists when the design or operation of a control does not allow

management or employees, in the normal course of performing their assigned functions, to prevent,or detect and correct misstatements on a timely basis. A material weakness is a deficiency, orcombination of deficiencies, in internal control, such that there is a reasonable possibility that amaterial misstatement of the entity's financial statements will not be prevented, or detected andcorrected on a timely basis.I

I My consideration of the internal control over financial reporting was for the limited purposedescribed in the first paragraph of this section and was not designed to identify all deficiencies ininternal control over financial reporting that might be deficiencies, significant deficiencies, ormaterial. We did not identify any deficiencies in internal control over financial reporting that Iconsider to be material weaknesses, as defined above.I

I Compliance and Other MattersAs part of obtaining reasonable assurance about whether the Davidson County Board of Education'sfinancial statements are free of material misstatement, I performed tests of its compliance withcertain provisions of laws, regulations, contracts, and grant agreements, noncompliance with whichcould have a direct and material effect on the determination of financial statement amounts.However, providing an opinion on compliance with those provisions was not an objective of myaudit, and accordingly, I do not express such an opinion. The results of my tests disclosed noinstances of noncompliance or other matters that are required to be reported under GovernmentAuditing Standards.

III

-64-Rick Allred

269 Amber Lane. Lexington. NC 27292336-247 -2310

ri.ckuvrickallredcpa.comI Member of the American Institute(?f Certified Public Accountants

IIIIIIIIIIIIIIIIIiII

II The Board's response to the findings identified in my audit are described in the accompanying

schedule of findings and responses. I did not audit the Board's response and, accordingly, I expressno opinion on it.

II

This report is intended solely for the information and use of the management, others within theentity, members of the Davidson County Board of Education, and federal and State awardingagencies and pass-through entities and is not intended to be and should not be used by anyone otherthan these specific parties.

I CRicV_{{red, C(p)1_, (p)1_

October 26, 2011

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IIIIIIIII

II

RICK ALLRED, CPA, PACertified Public Accountant

IIII

Report On Compliance With Requirements Applicable To Each Major FederalProgram And Internal Control Over Compliance In Accordance With OMB

Circular A-133 and the State Single Audit Implementation Act

To the Davidson County Board of EducationDavidson County, North Carolina

II

ComplianceI have audited the Davidson County Board of Education, North Carolina, compliance with the typesof compliance requirements described in the OMB Circular A-133 Compliance Supplement and theAudit Manual for Governmental Auditors in North Carolina, issued by the Local GovernmentCommission, that could have a direct and material effect on each of the Davidson County Board ofEducation's major federal programs for the year ended June 30, 2011. The Davidson County Boardof Education's major federal programs are identified in the summary of auditor's results section ofthe accompanying schedule of findings and questioned costs. Compliance with the requirements oflaws, regulations, contracts, and grants applicable to each of its major federal programs is theresponsibility of the Davidson County Board of Education's management. My responsibility is toexpress an opinion on the Davidson County Board of Education's compliance based on my audit.I

II

I conducted my audit of compliance in accordance with auditing standards generally accepted in theUnited States of America; the standards applicable to financial audits contained in GovernmentAuditing Standards, issued by the Comptroller General of the United States; and OMB Circular A-133,Audits of States, Local Governments, and Non-Profit Organizations, and the State Single AuditImplementation Act. Those standards, OMB Circular A-133, and the State Single AuditImplementation Act require that I plan and perform the audit to obtain reasonable assurance aboutwhether noncompliance with the types of compliance requirements referred to above that could havea direct and material effect on a major federal program occurred. An audit includes examining, on atest basis, evidence about the Davidson County Board of Education's compliance with thoserequirements and performing such other procedures as I considered necessary in the circumstances. Ibelieve that my audit provides a reasonable basis for my opinion. My audit does not provide a legaldetermination ofthe Davidson County Board of Education's compliance with those requirements.

III In my opinion, the Davidson County Board of Education complied, in all material respects, with the

compliance requirements referred to above that are applicable to each of its major federal programsfor the year ended June 30, 2011. However, the results of my auditing procedures disclosedinstances of noncompliance with those requirements, which are required to be reported in accordancewith OMB Circular A-133 and the State Single Audit Implementation Act, and which are describedin the accompanying schedule of findings and questioned costs as items #2011-01 and #2011-02.

IIII

Internal Control over ComplianceManagement of the Davidson County Board of Education is responsible for establishing andmaintaining effective internal control over compliance with the requirements of laws, regulations,contracts and grants applicable to federal programs. In planning and performing our audit, I

-66-Rick Allred

269 Amber Lane. Lexington. NC 27292336-247-23 10

rick@rickallredcpa.comI Member ofthe American InstituteofCertified Public Accountants

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I

considered the Davidson County Board of Education's internal control over compliance with therequirements that could have a direct and material effect on a major federal program in order todetermine my auditing procedures for the purpose of expressing my opinion on compliance and totest and report on internal control over compliance with applicable sections of OMB Circular A-133,but not for the purpose of expressing an opinion on the effectiveness of internal control overcompliance. Accordingly, I do not express an opinion on the effectiveness of the Board's internalcontrol over compliance.

I

IA deficiency in internal control over compliance exists when the design or operation of a controlover compliance does not allow management or employees, in the normal course of performing theirassigned functions, to prevent, or detect and correct, noncompliance with a type of compliancerequirement of a federal program on a timely basis. A material weakness in internal control overcompliance is a deficiency, or combination of deficiencies, in internal control over compliance, suchthat there is a reasonable possibility that material noncompliance with a type of compliancerequirement of a federal program will not be prevented, or detected and corrected on a timely basis.

III

My consideration of the internal control over compliance was for the limited purpose described in thefirst paragraph of this section and was not designed to identify all deficiencies in internal controlover compliance that might be deficiencies, significant deficiencies, or material weaknesses. I didnot identify any deficiencies in internal control over compliance that I consider to be materialweaknesses, as defined above. However, I identified certain deficiencies in internal control overcompliance that I consider to be significant deficiencies as described in the accompanying scheduleof findings and questioned costs as item #2010-02. A significant deficiency in internal control overcompliance is a deficiency, or a combination of deficiencies, in internal control over compliance witha type of compliance requirement of a federal program that is less severe than a material weakness ininternal control over compliance, yet important enough to merit attention by those charged withgovernance.

III The Davidson County Board of Education's response to the finding identified in our audit is

described in the accompanying schedule of findings and questioned costs. I did not audit the Board'sresponse and, accordingly, I express no opinion on the response.IThis report is intended solely for the information and use of the management, others within theorganization, members of the Davidson County Board of Education, and federal and State awardingagencies and pass-through entities and is not intended to be and should not be used by anyone otherthan these specified parties.I

I C1QcltJl({rerf, C(PjI, (PjI

I October 26, 2011

III

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II

RICK ALLRED, CPA, PACertified Public Accountant

II

Report On Compliance With Requirements Applicable To Each Major StateProgram And Internal Control Over Compliance In Accordance WithApplicable Sections ofOMB Circular A-133 and the State Single

Audit Implementation Act

I To the Davidson County Board of EducationDavidson County, North Carolina

III

ComplianceI have audited the compliance of the Davidson County Board of Education, North Carolina, withthe types of compliance requirements described in the Audit Manual for Governmental Auditorsin North Carolina, issued by the Local Government Commission, that are applicable to each of itsmajor State programs for the year ended June 30, 2011. The Davidson County Board ofEducation's major State programs are identified in the summary of auditor's results section of theaccompanying schedule of findings and questioned costs. Compliance with the requirements oflaws, regulations, contracts and grants applicable to each of its major State programs is theresponsibility of the Davidson County Board of Education's management. My responsibility is toexpress an opinion on the Davidson County Board of Education's compliance based on my audit.

II I conducted my audit of compliance in accordance with auditing standards generally accepted in

the United States of America; the standards applicable to financial audits contained inGovernment Auditing Standards, issued by the Comptroller General of the United States; andapplicable sections ofOMB Circular A-133, as described in the Audit Manualfor GovernmentalAuditors in North Carolina, and the State Single Audit Implementation Act. Those standards,applicable sections of OMB Circular A-133, and the State Single Audit Implementation Actrequire that I plan and perform the audit to obtain reasonable assurance about whethernoncompliance with the types of compliance requirements referred to above that could have adirect and material effect on a major State program occurred. An audit includes examining, on atest basis, evidence about the Davidson County Board of Education's compliance with thoserequirements and performing such other procedures as I considered necessary in thecircumstances. I believe that my audit provides a reasonable basis for my opinion. My auditdoes not provide a legal determination of the Davidson County Board of Education's compliancewith those requirements.

IIIII In my opinion, the Davidson County Board of Education complied, in all material respects, with

the requirements referred to above that could have a direct and material effect on each of itsmajor State programs for the year ended June 30, 2011.

IIII

Internal Control Over ComplianceManagement of the Davidson County Board of Education is responsible for establishing andmaintaining effective internal control over compliance with requirements of laws, regulations,

-68- Rick Allred269 Amber Lane. Lexington. NC 27292

336-247-2310rick@rickallredcpa.com

Member ofthe American InstituteofCertified Public Accountants

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contracts and grants applicable to State programs. In planning and performing our audit, Iconsidered the Davidson County Board of Education's internal control over compliance withrequirements that could have a direct and material effect on a major State program in order todetermine my auditing procedures for the purpose of expressing my opinion on compliance and totest and report on the internal control over compliance with applicable sections of OMB CircularA-133 and the State Single Audit Implementation Act, but not for the purpose of expressing anopinion on the effectiveness of internal control over compliance. Accordingly, I do not expressan opinion on the effectiveness of the Board's internal control over compliance.

II

A deficiency in internal control over compliance exists when the design or operation of a controlover compliance does not allow management or employees, in the normal course of performingtheir assigned functions, to prevent, or detect and correct, noncompliance with a type ofcompliance requirement of a State program on a timely basis. A material weakness in internalcontrol over compliance is a deficiency, or combination of deficiencies, in internal control overcompliance, such that there is a reasonable possibility that material noncompliance with a type ofcompliance requirement of a federal program will not be prevented, or detected and corrected ona timely basis.I

I My consideration of the internal control over compliance was for the limited purpose described inthe first paragraph of this section and was not designed to identify all deficiencies in internalcontrol over compliance that might be deficiencies, significant deficiencies, or materialweaknesses. I did not identify any deficiencies in internal control over compliance that I considerto be material weaknesses, as defined above.I

II

This report is intended solely for the information and use of the management, others within theorganization, members of the Davidson County Board of Education, and federal and Stateawarding agencies and pass-through entities and is not intended to be and should not be used byanyone other than these specified parties.

ICRjcPJf_((recf, C(Pjl, (Pjl

October 26, 20II

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Page 1 of 5DavidsonCounty Boardof Education

Schedule of Findings and QuestionedCostsFiscal Year EndedJune 30,2011

I Section I. Summary of Auditor's Results

II

FINANCIAL STATEMENTSType of auditor's report issued: Unqualified.

Internal control over financial reporting:

- Material weakness(es) identified? ___ yes X no

III

- Significant Deficiency(s) identified that arenot considered to be material weaknesses. ___ yes X none reported

Noncompliance material to financial statements noted ___ yes X no

FEDERAL AWARDSInternal control over major federal programs:

- Material weakness(es) identified? ___ yes X no

I - Significant Deficiency(s) identified that arenot considered to be material weaknesses. X yes none reported---I Type of auditor's report issued on compliance for major federal programs: Unqualified.

II

Any audit findings disclosed that are required to bereported in accordance with Section 510(a) ofCircular A-133. ___ yes X no

Identification of major federal programs:

III

CFDA Numbers10.553, 10.555,84.027, 84.173,84.391, 84.39284.010,84.38984.39484.38894.395

Names of Federal Program or ClusterChild Nutrition Cluster

Special Education ClusterTiUe I - Basic and Concentration ClusterARRA 2009 - State Fiscal Stabilization FundARRA - School Improvement Grant 1003(g)ARRa - Race to the Top

IDollar threshold used to distinguishbetween Type A and Type B programs $ 653,992

Auditee qualified as low-risk auditee? X yes no

III

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Page 2 of 5Davidson County Board of Education

Schedule of Findings and Questioned CostsFiscal Year Ended June 30, 2011

III

Section I. Summary of Audito~s Results (continued)

STATE AWARDSInternal control over major State programs:

- Material weakness(es) identified? ___ yes X no

I- Significant Deficiency(s) identified that are

not considered to be material weaknesses. ___ yes X none reported

Type of audltor's report issued on compliance for major State programs: Unqualified.

I Any audit findings disclosed that are required to bereported in accordance with the State SingleAudit Implementation Act. ___ yes X no

I Identification of major State programs:

I Program NameState Public School FundTextbooks

III

Section II. Financial Statement Findings

Section III. Federal Award Findings and Questioned Costs

None reported.

U.S. Dept. of AgriculturePassed through the N.C. Dept. of Public InstructionProgram Name: Child Nutrition Cluster: National School Lunch Program I School Breakfast Program

I Finding #2011-01

II

SIGNIFICANT DEFICIENCY

Criteria: In accordance with the National School Lunch Act, as amended, and the Child Nutrition Act of 1966,as amended, the Verification Summary Report should be submitted to the State agency on or before March 1st.

Condition: The Verification Summary Report was not submitted to the State agency in a timely manner.

I Effect: The Board of Education's Child Nutrition Department was in violation of a compliance requirement perthe National School Lunch Act, as amended, and the Child Nutrition Act of 1966, as amended, concerningreporting.

II

Cause: The person responsible for submitting the Verification Summary Report did not pay attention to aState calendar or a reminder sent by the Child Nutrition Director to submit the report timely.

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Page 3 of 5Davidson County Board of Education

Schedule of Findings and Questioned CostsFiscal Year Ended June 30, 2011

ISection III. Federal Award Findings and Questioned Costs (continued)

I Finding #2011-01 (continued)

I Recommendation: I recommend that the Child Nutrition Director emphasize existing controls with the personresponsible for submitting the Verification Summary Report to ensure that the report is filed timely.

III

Views of Responsible Officials and Planned Corrective Actions: The Board of Education agrees with thisfinding, as does the Child Nutrition Director.

U.S. Dept. of AgriculturePassed through the N.C. Dept. of Public InstructionProgram Name: Child Nutrition Cluster: National School Lunch Program I School Breakfast Program

Finding #2011-02

SIGNIFICANT DEFICIENCY

I Criteria: In accordance with the National School Lunch Act, as amended, and the Child Nutrition Act of 1966,as amended, the Meal Participation Data Report should be submitted to the State agency on or before July 20thof the subsequent year.

II

Condition: The Meal Participation Data Report was not submitted to the State agency in a timely manner.

Effect: The Board of Education's Child Nutrition Department was in violation of a compliance requirement perthe National School Lunch Act, as amended, and the Child Nutrition Act of 1966, as amended, concerningreporting.

I Cause: The person responsible for submitting the Meal Participation Data Report did not pay attention to aState calendar or a reminder sent by the Child Nutrition Director to submit the report timely.

III

Recommendation: I recommend that the Child Nutrition Director emphasize existing controls with the personresponsible for submitting the Meal Participation Data Report to ensure that the report is filed timely.

Views of Responsible Officials and Planned Corrective Actions: The Board of Education agrees with thisfinding, as does the Child Nutrition Director.

Section IV. State Award Findings and Questioned Costs

I None reported.

III

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Page 4 of 5Davidson County Board of Education

Corrective Action PlanFiscal year ended June 30,2011

I Section II.· Financial Statement Findings

I N/A.

Section III.· Federal Award Findings and Questioned Costs

I Finding #2011·01

III

Name of contact person: Pam Sink, CPA· Chief Finance Officer (Child Nutrition Director position vacant)

Corrective action: The Child Nutrition Director will emphasize existing controls with the person responsible forsubmitting the Verification Summary Report to ensure the report is filed timely.

Proposed completion date: Immediately.

Finding #2011·02

IName of contact person: Pam Sink, CPA· Chief Finance Officer (Child Nutrition Director position vacant)

Corrective action: The Child Nutrition Director will emphasize existing controls with the person responsible forsubmitting the Meal Participation Data Report to ensure the report is filed timely.

I Proposed completion date: Immediately.

Section IV· State Award Findings and Questioned CostsI N/A.

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Page 5 of 5

Davidson County Board of EducationSummary Schedule of Prior Audit Findings

Fiscal Year Ended June 30, 2011

III

Finding #2010-01Status: The Child Nutrition Director appears to have more closely monitored expenditures to ensure thatpurchase orders were signed as this year's testing found no problems.

Finding #2010-02Status: The Chief Finance Officer increased bonding for her position to be in compliance with North CarolinaGeneral Statute 115C-442.

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I Davidson County Board of EducationSchedule of Expenditures of Federal and State Awards

I For the Fiscal Year Ended June 30,2011

State/GRANTOR/PASS-THROUGH Federal Pass-through

I GRANTOR / PROGRAM TITLE CFDA# Granto~s# Expend~ures

FEDERAL GRANTS:U.S. DEPARTMENT OF AGRICULTURE

Child Nutmion Cluster:

I Non-Cash Assistance (Commod~ies)Passed through the N.C. Department of AgricuHure

Emergency Food Assistance Program (Food Commodities) 10.569 $ 490,768Cash Assistance

I Passed through the N.C. Department of Public Instruction:National School Lunch Program 10.555 3,482,908School Breakfast Program 10.553 752,688

I 4,726,364U.S. DEPARTMENT OF EDUCATION

Cash AssistancePassed through the N.C. Department of Public Instruction:

IGrants to Local Educational Agencies

Safe and Drug-Free Schools and Commun~ies Act 84.186 PRC 048 751English Language Acquis~ion 84.365 PRC 104/111 53,513Improving Teacher Quality Education 84.367 PRC103 609,119

TRle 1 - Basic and Concentration Cluster

I TRle 1 - Basic and Concentration 84.01 PRC 050 2,619,472ARRA 2009 - TRle1 - Basic and Concentration 84.389 PRC 141 1,145,688

School Improvement Grants Cluster

IARRA - School Improvement Grant 1003(g) 84.388 PRC 143 523,100

Education Technology ClusterEducation Technology 84.318 PRC 107 139ARRA 2009 - Education Technology 84.386 PRC 146 200

Office of Special Education and Rehabil~ative Services

I Passed through the N.C. Department of Public Instruction:Special Education ClusterIndividuals with Disabil~ies Education Act

IChildren with Special Needs Risks 84.027 PRC 114 223,327EHA VI-B Handicapped 84.027 PRC060 2,901,288IDEA - Early Intervening Services (EIS) 84.027 PRC 070 160,160VI-B Special Needs Targeted Assistance 84.027 PRC 118 14,323

ICapacity Building Grant 84.027 PRC 044 106,022Handicapped Preschool Program 84.173 PRC049 134,142IDEA - Targeted Assistance 84.173A PRC 119 9,988ARRA 2009 VI-B Part B, Section 611 84.391 PRC 144 2,098,592

IARRA 2oo9-IDEA, Part B, Section 619 84.392 PRC 145 89,306

Office of Vocational and AduH EducationCarl D. Perkins Vocational and Applied Technology Education Act 2006Basic Grants to States:

ICareer and Technical Education 84.048 PRC 017 181,278

Office of State GovernorPassed through the N.C. Department of Public Instruction:

ARRA 2009-State Fiscal Stabilization Fund(SFSF) 83.394 PRC 140 5,431,206

IARRA - Race to the Top 84.395 PRC 156 305,537

Office of Insmution of Education SciencesEducation Sciences Reform Act of 2002-SERVE 84.305 PRC 341 2,760

Office of Education Research and Improvement

I Twenty-First Century Commun~y Learning Centers 84.287C PRC 110 391,24817,001,159

U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICESHeanh Resources and Services Administration

I Passed through the N.C. Department of Public Instruction:Direct Programs

CampMed None PRC 342 2,993

I (Continued)

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Davidson County Board of EducationSchedule of Expenditures of Federal and State Awards

For the Fiscal Year Ended June 30, 2011

IGRANTOR/PASS-THROUGHGRANTOR / PROGRAM TITLE

FederalCFDA#

State/Pass-throughGranto~s# Expend~ures

INATIONAL FOUNDATION ON THE ARTS AND THE HUMANITIES

Passed through NC Department of Cultural Resources:Library Services and Technology Ad(LSTA) 45.310 PRC 348 $ 20,000

IU.S. DEPARTMENT OF DEFENSE

Direct ProgramROTC Program None PRC 301 49,219

TOTAL FEDERAL ASSISTANCE 21,799,735

I STATE GRANTS:

ICASH ASSISTANCE:N.C. DEPARTMENT OF PUBLIC INSTRUCTION

State Public School FundVocational Education

-State Months of Employment-Program Support Funds

School Technology FundCharacter Education Mini GrantDropout Prevention Grant

$ 92,638,025

PRC 013 5,178,415PRC 014 265,278PRC 015 291,675PRC 415 1,551PRC 419 158,097

II OFFICE OF THE GOVERNOR

Passed through Davidson CountyDavidson County Truancy Program PRC 414 70,123

I N.C. DEPARTMENT OF TRANSPORTATIONPassed through the N.C. Department of Public Instruction:

Drivers Education PRC 012 430,926

I TOTAL STATE CASH ASSISTANCE 99,034,090

INON·CASH ASSISTANCE:N.C. DEPARTMENT OF PUBLIC INSTRUCTION

Public School Bus Debt ServiceTextbooks

TOTAL STATE ASSISTANCE

PRC 120PRC 130

1,735,34141,039

I 100,810,470

TOTAL FEDERAL AND STATE ASSISTANCE $ 122,610,205

I Notes to the Schedule of Expend~ures of Federal and State Financial Awards:The accompanying schedule of expend~ures of federal and State awards includes the federal and State grant activ~yof the Davidson County Board of Education and is presented on the modified accrual basis of accounting. Theinformation in this schedule is presented in accordance with the requirements of OMB Circular A-133,Audits of State Local Governments and Non-Profit Organizations and the State Single Audit Implementation Act,Therefore, some amounts presented in this schedule may differ from amounts presented in, or used in the preparationof the basic financial statements.

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