Ronald L.

Jones, Chief Examiner
13-195





Report on the

Jefferson County
Board of Education

Jefferson County, Alabama

October 1, 2011 through September 30, 2012




Filed: May 3, 2013


Department of
Examiners of Public Accounts
50 North Ripley Street, Room 3201
P.O. Box 302251
Montgomery, Alabama 36130-2251
Website: www.examiners.alabama.gov

State of Alabama
Department of
Examiners of Public Accounts
Ronald L. Jones
Chief Examiner
P.O. Box 302251, Montgomery, AL 36130-2251
50 North Ripley Street, Room 3201
Montgomery, Alabama 36104-3833
Telephone (334) 242-9200
Honorable Ronald L. Jones
Chief Examiner ofPublic Accounts
Montgomery, Alabama 36130
Dear Sir:
FAX (334) 242-1775
Under the authority of the Code of Alabama 1975, Section 41-5-21, I submit this
report on the results of the audit of the Jefferson County Board of Education,
Jefferson County, Alabama, for the period October 1, 2011 through September 30, 2012.
Respectfully submitted,
Sworn to...e_nd subscribed before me this
the , 20 _a.
lfu COle Q . L01ct na., Amanda Hensley
Notary Public Examiner ofPublic Accounts
rb
13-195

Table of Contents
Page
J efferson County
Board of Education

Summary A

Contains items pertaining to federal, state and local legal compliance, Board
operations, and other matters.

Independent Auditor’s Report C

Reports on whether the financial information constitutes a fair presentation of
the financial position and results of financial operations in accordance with
generally accepted accounting principles (GAAP).

Management’s Discussion and Analysis F

Provides information required by the Governmental Accounting Standards
Board (GASB) that is prepared by management of the Board introducing the
basic financial statements and providing an analytical overview of the Board’s
financial activities for the year. This information has not been audited, and no
opinion is provided about the information.

Basic Financial Statements 1

Provides the minimum combination of financial statements and notes to the
financial statements that is required for the fair presentation of the Board’s
financial position and results of operations in accordance with GAAP.

Exhibit #1 Statement of Net Assets 2

Exhibit #2 Statement of Activities 3

Exhibit #3 Balance Sheet – Governmental Funds 5

Exhibit #4 Reconciliation of the Balance Sheet of Governmental Funds
to the Statement of Net Assets 7

Exhibit #5 Statement of Revenues, Expenditures and Changes in Fund
Balances – Governmental Funds 8

Exhibit #6 Reconciliation of the Statement of Revenues, Expenditures and
Changes in Fund Balances of Governmental Funds to the
Statement of Activities 10

Exhibit #7 Statement of Fiduciary Net Assets 11



Table of Contents
Page
J efferson County
Board of Education

Notes to the Financial Statements 12

Required Supplementary Information 37

Provides information required by the GASB to supplement the basic financial
statements. This information has not been audited and no opinion is provided
about the information.

Exhibit #8 Schedule of Revenues, Expenditures and Changes in Fund
Balances – Budget and Actual – General Fund 38

Exhibit #9 Schedule of Revenues, Expenditures and Changes in Fund
Balances – Budget and Actual – Special Revenue Fund 42

Supplementary Information 46

Contains financial information and notes relative to federal financial assistance.

Exhibit #10 Schedule of Expenditures of Federal Awards 47

Notes to the Schedule of Expenditures of Federal Awards 51

Additional Information 52

Provides basic information related to the Board, including reports and items
required by generally accepted government auditing standards and/or U. S.
Office of Management and Budget (OMB) Circular A-133 for federal
compliance audits.

Exhibit #11 Board Members and Administrative Personnel – a listing
of the Board members and administrative personnel. 53

Exhibit #12 Report on Internal Control Over Financial Reporting and on
Compliance and Other Matters Based on an Audit of Financial
Statements Performed in Accordance With Government Auditing
Standards – a report on internal controls related to the financial
statements and on whether the Board complied with laws and
regulations which could have a direct and material effect on
the Board’s financial statements. 54






Table of Contents
Page
J efferson County
Board of Education

Exhibit #13 Report on Compliance With Requirements That Could Have
a Direct and Material Effect on Each Major Program and on
Internal Control Over Compliance in Accordance With OMB
Circular A-133 – a report on internal controls over compliance
with requirements of laws, regulations, contracts, and grants
applicable to major federal programs and an opinion on whether
the Board complied with laws, regulations, and the provisions
of contracts or grant agreements which could have a direct and
material effect on each major program. 56

Exhibit #14 Schedule of Findings and Questioned Costs – a schedule
summarizing the results of audit findings relating to the financial
statements as required by Government Auditing Standards and
findings and questioned costs for federal awards as required
by OMB Circular A-133. 59

Exhibit #15 Auditee Response/Corrective Action Plan – a response by the
Board on the results of the audit and a corrective action plan
for federal audit findings. 62
__________________________________________________

13-195
A

Department of
Examiners of Public Accounts



SUMMARY


Jefferson County Board of Education
October 1, 2011 through September 30, 2012


The J efferson County Board of Education (the “Board”) is governed by a five-member body
elected by the citizens of J efferson County. The members and administrative personnel in
charge with governance of the Board are listed in Exhibit 11. The Board is the governmental
agency that provides general administration and supervision for J efferson County public
schools, preschool through high school, with the exception of school systems of Bessemer,
Birmingham, Fairfield, Homewood, Hoover, Leeds, Midfield, Mountain Brook, Tarrant,
Trussville, and Vestavia Hills, which are administered by separate Boards of Education
appointed by their municipal governments.

This report presents the results of an audit the objectives of which were to determine whether
the financial statements present fairly the financial position and results of financial operations
and whether the Board complied with applicable laws and regulations, including those
applicable to its major federal financial assistance programs. The audit was conducted in
accordance with auditing standards generally accepted in the United States of America and
the standards applicable to financial audits contained in Government Auditing Standards
issued by the Comptroller General of the United States as well as the requirements of the
Department of Examiners of Public Accounts under the authority of the Code of Alabama
1975, Section 41-5-14.

An unqualified opinion was issued on the financial statements, which means that the Board’s
financial statements present fairly, in all material respects, its financial position and the results
of its operations for the fiscal year ended September 30, 2012.

Tests performed during the audit did not disclose any significant instances of noncompliance
with applicable state and local laws and regulations.

Problems were found with the Boards internal controls over financial reporting (Exhibit 14) and
they are summarized below:

♦ 2012-01 relates to problems with properly accounting for athletic events at the local
schools.

♦ 2010-01 relates to problems with documentation of expenditures at the local schools.

♦ 2010-02 relates to problems with receipting of funds at the local schools.

13-195
B

The following officials/employees were invited to an exit conference to discuss the
findings and recommendations appearing in this report: Board Members: J ennifer H. Parsons,
Ronald A. Rhodes, J acqueline A. Smith, Karen Smith Nix, and Tommy L. Little;
Superintendent: Dr. Phillip Hammonds; Deputy Superintendent: Dr. Yancy Morris; Interim
Deputy Superintendent: Dr. J ulie Hannah; Deputy Superintendent: Dr. Anna Vacca; and Chief
School Finance Officer: Sheila J ones. The following individuals attended the exit conference,
held at the Board’s offices: Superintendent: Dr. Phillip Hammonds; Deputy Superintendent:
Dr. Yancy Morris; Board Members: Ronald A. Rhodes, J acqueline A. Smith; Chief School
Finance Officer: Sheila J ones; and representatives of the Department of Examiners of Public
Accounts: Brian Wheeler, Audit Manager; and Amanda Hensley, Examiner of Public
Accounts.


C

Independent Auditor’s Report
13-195
D

Independent Auditor’s Report






We have audited the accompanying financial statements of the governmental activities, each
major fund, and the aggregate remaining fund information of the J efferson County Board of
Education, as of and for the year ended September 30, 2012, which collectively comprise the
J efferson County Board of Education’s basic financial statements as listed in the table of
contents as Exhibits 1 through 7. These financial statements are the responsibility of the
J efferson County Board of Education’s management. Our responsibility is to express
opinions on these financial statements based on our audit.

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

In our opinion, the financial statements referred to above present fairly, in all material
respects, the respective financial position of the governmental activities, each major fund, and
the aggregate remaining fund information of the J efferson County Board of Education, as of
September 30, 2012, and the respective changes in financial position thereof for the year then
ended in conformity with accounting principles generally accepted in the United States of
America.

In accordance with Government Auditing Standards, we have also issued our report dated
April 16, 2013 on our consideration of the J efferson County Board of Education’s internal
control over financial reporting and on our tests of its compliance with certain provisions of
laws, regulations, contracts and grant agreements and other matters. The purpose of that
report is to describe the scope of our testing of internal control over financial reporting and
compliance and the results of that testing, and not to provide an opinion on the internal control
over financial reporting or on compliance. That report is an integral part of an audit
performed in accordance with Government Auditing Standards and should be considered in
assessing the results of our audit.





Accounting principles generally accepted in the United States of America require that the
Management ' s Discussion and Analysis (MD&A) and the Schedules of Revenues,
Expenditures and Changes in Fund Balances - Budget and Actual (Exhibits 8 and 9), be
presented to supplement the basic financial statements. Such information, although not a part
of the basic financial statements is required by the Governmental Accounting Standards
Board who considers it to be an essential part of financial reporting for placing the basic
financial statements in an appropriate operational, economic, or historical context. We have
applied certain limited procedures to the required supplementary information in accordance
with auditing standards generally accepted in the United States of America, which consisted
of inquiries of management about the methods of preparing the information and comparing
the information for consistency with management's responses to our inquiries, the basic
financial statements, and other knowledge we obtained during our audit of the basic financial
statements. We do not express an opinion or provide any assurance on the information
because the limited procedures do not provide us with sufficient evidence to express an
opinion or provide any assurance.
Our audit was conducted for the purpose of forming opinions on the financial statements that
collectively comprise the Jefferson County Board of Education' s basic financial statements.
The accompanying Schedule of Expenditures of Federal Awards (Exhibit 1 0) is presented for
the purposes of additional analysis as required by U. S. Office of Management and Budget
Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations, and is
not a required part of the basic financial statements. Such information is the responsibility of
management and was derived from and relates directly to the underlying accounting and other
records used to prepare the financial statements. The information has been subjected to the
auditing procedures, including comparing and reconciling such information directly to the
underlying accounting and other records used to prepare the financial statements or to the
financial statements themselves, and other additional procedures in accordance with auditing
standards generally accepted in the United States of America. In our opinion, the schedule of
expenditures of federal awards is fairly stated in all material respects in relation to the
financial statements as a whole.
Chief Examiner
Department of Examiners of Public Accounts
April 16, 2013
13-195
E
This Page Intentionally Blank

F

Management’s Discussion and Analysis
(Required Supplementary Information)
G
Jefferson County Board of Education
Management's Discussion and Analysis (MD&A)
September 30, 2012

Our discussion and analysis of the J efferson County Board of Education's (the "Board's")
financial performance provide an overview of the Board's financial activities for the fiscal
year ended September 30, 2012. Please read it in conjunction with the Board's financial
statements and notes to the financial statements, which immediately follow this analysis.

The Management's Discussion and Analysis (MD&A) is an element of the reporting
model adopted by the Governmental Accounting Standards Board (GASB) in their
Statement No. 34, Basic Financial Statements - and Management's Discussion and
Analysis - for State and Local Governments issued J une 1999.

Financial Highlights: Significant Items to Note

Our financial statements provide these insights into the results of this year's operations:

 The Board's financial status showed improvement for the 2012 fiscal year. The
board's total net assets increased by $2.3 million over the course of the fiscal year.
This increase is largely attributable to an increased investment in land and buildings
funded mainly by the J efferson County Commission Grant.

 The assets of the Board exceeded its liabilities at the close of the 2012 fiscal year by
$586.04 million (net assets). Of this amount, $63.52 million (unrestricted net assets)
may be used to meet the Board's future costs of operations.

 The total cost of the Board's programs for the year was $329.51 million. After taking
away a portion of these costs paid for with charges or fees, intergovernmental aid,
interest earnings and other miscellaneous sources, the net cost that required funding
from J efferson County taxpayers was $83.78 million. (The state's Foundation
Program provided $155.21 million towards the cost of the programs.)

 As a result of controlling expenditures, the General Fund revenues for the year
exceeded total expenditures by over $8.42 million.

 At the end of the current fiscal year, the unassigned fund balance for the General
Fund was $48.3 million, or 19 percent of the total General Fund expenditures, before
other financing uses and special items.

 Major capital outlay projects consisted of twenty five (25) local, state, and county
commission grant funded building projects, eleven (11) of which were still in
progress at year’s end.

 The Board saw a net decrease in its outstanding long-term debt by $9.09 million or
8.15 percent.
H

Using the Financial Statements - An Overview for the User

As a result of the implementation of the GASB 34 reporting model, the financial section
now consists of five parts - management's discussion and analysis (this section), the
independent auditors' report, the basic financial statements, required supplementary
information, and other supplementary information.

The Board's basic financial statements are comprised of three components:
1) government-wide financial statements, 2) fund financial statements, and 3) notes to the
basic financial statements.

Government-wide financial statements - The focus of these statements is to provide
readers with a broad overview of the Board's finances as a whole instead of on an
individual fund basis, in a manner similar to a private-sector business, indicating both
long-term and short-term information about the Board's overall financial status. It is
important to note that all of the activities of the board reported in the government-wide
financial statements are classified as governmental activities. These activities include the
following:

Instruction includes teacher salaries and benefits, teacher aides, substitute teachers,
textbooks, depreciation of instructional buildings, professional development, and
classroom instructional materials, supplies and equipment.
Instructional support includes salaries and benefits for school principals, assistant
principals, librarians, counselors, school secretaries, school bookkeepers, speech
therapists, and school nurses, as well as professional development expenses.
Operation and maintenance includes utilities, security services, janitorial services,
maintenance services, and depreciation of maintenance vehicles.
Auxiliary services includes student transportation expenses, such as bus driver salaries
and benefits, mechanics, bus aides, vehicle maintenance and repair expenses, vehicle
fuel, depreciation of buses and bus shops, and fleet insurance, and food service expenses
such as lunchroom managers, cooks, cashiers and servers' salaries and benefits as well as
donated and purchased food, food preparation and service supplies, kitchen and
lunchroom equipment and depreciation of food service equipment and facilities.
General administration and central support includes salaries and benefits for the
superintendent, assistants, clerical and financial staff, and other personnel that provide
system-wide support for the schools. Also included are legal expenses, liability
insurance, training for board members and general administrative staff, printing costs,
and depreciation of central office equipment and facilities.
Interest and fiscal charges includes interest, but not principal payments, on long-term
debt issues and other expenses related to the issuance and continuance of debt issues.
Other includes the salaries and benefits for adult and continuing education teachers,
preschool teachers and aides, extended day personnel, and community education
instructors. Also included are the materials, supplies, equipment, related depreciation,
and other expenses for operating programs outside of those for educating students in the
kindergarten through 12
th
grade instructional programs.
I

Government-wide statements report the capitalization of capital assets and depreciation of
all exhaustible capital assets and the outstanding balances of long-term debt and other
obligations. These statements report all assets and liabilities perpetuated by these
activities using the accrual basis of accounting. The accrual basis takes into account all
of the Board's current year revenues and expenses regardless of when received or paid.
This approach moves the financial reporting method for governmental entities closer to
the financial reporting methods used in the private sector. The following government-
wide financial statements report on all of the governmental activities of the Board as a
whole.

The statement of net assets (on page 2) is most closely related to a balance sheet.
It presents information on all of the board's assets (what it owns) and liabilities (what it
owes), with the difference between the two reported as net assets. The net assets reported
in this statement represent the accumulation of changes in net assets for the current fiscal
year and all fiscal years in the past combined. Over time, the increases or decreases in
net assets reported in this statement may serve as a useful indicator of whether the
financial position of the school board is improving or deteriorating.

The statement of activities (on page 3) is most closely related to an income
statement. It presents information showing how the Board's net assets changed during
the current fiscal year only. All of the current year's revenues and expenses are
accounted for in the statement of activities regardless of when cash is received or paid.
This statement shows gross expenses and offsetting program revenues to arrive at net cost
information for each major expense function or activity of the Board. By showing the
change in net assets for the year, the reader may be able to determine whether the Board's
financial position has improved or deteriorated over the course of the current fiscal year.
The change in net assets may be financial or non-financial in nature. Non-financial
factors which may have an impact on the Board's financial condition include: age and
condition of facilities, mandated educational programs for which little or no funding is
provided, and increases or decreases in funding from state and federal governments, to
name a few.

Fund financial statements - A fund is a grouping of related accounts that is used to
maintain control over resources that have been segregated for specific activities or
objectives. The Board has used fund accounting to ensure and demonstrate compliance
with finance-related legal requirements. The reporting model still requires the Board to
present financial statements on a fund basis, but with some modifications. All of the
funds of the Board can be classified into two categories: governmental funds and
fiduciary funds.






J

Governmental Funds - Governmental fund financial statements begin on page 5.
These statements account for basically the same governmental activities reported in the
government-wide financial statements. As required under the reporting model, the fund
financial statements presented herein display information on each of the Board's most
important governmental funds or major funds. This is required in order to better assess
the Board's accountability for significant governmental programs or certain dedicated
revenue. The Board's major funds are the General Fund and Special Revenue Fund.

The fund financial statements are still measured on the modified-accrual basis of
accounting as reported in the previous fiscal years, where revenues and expenditures are
recorded when they become measurable and available. As a result, the fund financial
statements focus more on the near term use and availability of spendable resources. The
information provided in these statements is useful in determining the Board's immediate
financial needs. This is in contrast to the accrual-based government-wide financial
statements which focus more on overall long-term availability of spendable resources.
The relationship between governmental activities reported in the government-wide
financial statements and the governmental funds reported in the fund financial statements
are reconciled on pages 7 and 10 of these financial statements. These reconciliations are
useful to readers in understanding the long-term impact of the Board's short-term
financing decisions.

Fiduciary Funds - The Board is the trustee, or fiduciary, for some of its booster
and parent organization activity funds which are under the control and administration of
its schools. However, balances of these funds are not considered material to the financial
statements and therefore have been included in the governmental funds. Fiduciary funds
also include the balances of agency funds, such as accounts payable clearing and payroll
clearing funds. All of the Board's fiduciary activities, with the exception of the
immaterial balances referred to above, are reported in a separate Statement of Fiduciary
Net Assets on page 11 of this section. These funds are not available to the Board to
finance its operations, and therefore not included in the government-wide financial
statements. The Board is responsible for ensuring that the assets reported by these funds
are used for their intended purposes.

Notes to the Basic Financial Statements - The notes to the basic financial statements
provide additional information that is essential for the statements to fairly represent the
Board's financial position and its operations. The notes contain important information
that is not part of the basic financial statements. However, the notes are an integral part
of the statements, not an appendage to them. The notes to the basic financial statements
begin on page 12 in this section.






K

After the presentation of the basic financial statements, the reporting model requires
additional required supplementary information to be presented following the notes to the
basic financial statements. The required supplementary information beginning on page
38 provides a comparison of the original adopted budget to the final amended budget of
the Board's General Fund and Special Revenue Fund, which are then further compared to
the actual operating results for the fiscal year. The comparison of this data allows users
to assess management's ability to project and plan for its operations throughout the year.

Analysis of the School Board's Overall Financial Position

As indicated earlier, net assets may serve over time as a useful indicator of a
government's financial position. Refer to Table 1 when reading the following analysis
of net assets. The Board's assets exceeded liabilities by $586.04 million at
September 30, 2012.

 Of this figure, 86.2 percent or $505.34 million reflects the Board's investment in
capital assets (e.g., land, buildings, improvements other than buildings, furniture and
equipment, and transportation equipment), less accumulated depreciation and debt
related to the acquisition of the assets. Since these capital assets are used in
governmental activities, this portion of net assets is not available for future spending
or funding of operations.
 Restricted net assets account for 2.9 percent or $17.18 million of total net assets.
Restricted net assets are reported separately to show the external legal constraints
from debt covenants and enabling legislation that limit the Board's ability to use those
net assets for day-to-day operations.
 The remaining balance of unrestricted net assets of $63.52 million may be used at the
Board's discretion to meet ongoing obligations to citizens and creditors and for future
operations.

















L

Table 1: Summary of Net Assets
As of September 30, 2012
(in millions)
Governmental Activities
9/30/2012 9/30/2011
Current and other assets $ 183.35 $ 204.06
Capital assets 605.76 593.81
Total Assets $ 789.11 $ 797.87

Current and other liabilities 100.67 102.63
Long-term liability 102.40 111.49
Total Liabilities $ 203.07 $ 214.12

Net Assets:
Invested in Capital Assets, Net of Related
Debt $ 505.34 $ 500.87
Restricted 17.18 24.52
Unrestricted 63.52 58.36
Total Net Assets $ 586.04 $ 583.75


At the end of the current fiscal year, the Board is able to report positive balances in all
three categories of net assets: invested in capital assets-net of related debt, restricted and
unrestricted. This means that the Board has enough available resources to cover all
outstanding obligations, including non-capital liabilities (such as compensated absences)
as of September 30, 2012, with resources left over to use for next year's operations.

The Board's improved financial position is the product of several factors. But most
significantly, this is the result of the following:

• Investment in Capital Assets, net of related debt increased by $4.46 million
funded mainly with the proceeds of the County Commission Grant
• controlling expenditures

The results of this fiscal year's operations as a whole are reported in detail in the
Statement of Activities on page 3. Table 2 below condenses the results of operations for
the fiscal year into a format where the reader can easily see the total revenues of the
Board for the year. It also shows the impact the operations had on changes in net assets
as of September 30, 2012.

M

Table 2: Summary of Changes in Net Assets from Operating Results
(in millions)
Governmental Activities
9/30/2012 9/30/2011
Revenues
Program Revenues:
Charges for services $ 28.83 $ 27.48
Operating grants and contributions 201.57 214.73
Capital grants and contributions 9.93 11.26
General Revenues:
Local property taxes 81.98 81.18
Alcohol beverage tax 0.80 0.84
Other taxes 1.00 0.99
Other 7.69 7.44
Total Revenues $ 331.80 $ 343.92

Expenses
Instructional services $ 182.18 $ 194.55
Instructional support services 53.28 55.54
Operation and maintenance services 27.32 27.78
Auxiliary services 43.08 42.63
General administrative services 9.39 8.87
Interest and fiscal charges 4.85 2.88
Other expenses 9.41 8.94
Total Expenses $ 329.51 $ 341.19

Increase in Net Assets 2.29 2.73
Net Assets - Beginning 583.75 581.02
Net Assets - Ending $ 586.04 $ 583.75

N

Governmental Activities - As shown in Table 2, the cost of services rendered from the
Board's governmental activities for the year ended September 30, 2012 was $329.51
million. It is important to note that not all of these costs were borne by the taxpayers of
J efferson County:

 Some of the cost, $28.83 million, was paid by users who benefited from services
provided during the year, such as school lunches, summer school, driver’s education
instruction, and transfer tuition.
 State and federal governments subsidized certain programs with grants and
contributions totaling $211.5 million.
 Other general revenue sources, such as interest earnings, sale of surplus property,
proceeds from Sixteenth Section Land Trust Fund distributions, etc., provided for
$7.69 million in revenues.
 $83.78 million of the Board's total costs of $329.51 million was financed by district
and state taxpayers, as follows: $81.98 million in property taxes, $0.80 million in
alcohol beverage tax, and $1.0 million in other taxes (business privilege tax, mineral
lease documentary tax, helping-school vehicle tags, and manufactured home
registration fees).

Table 3 is a condensed statement taken from the Statement of Activities on page 3
showing the total cost for providing identified services for six major Board activities.
Total cost of services is compared to the net cost of providing these services. The net
cost of services is the remaining cost of services after subtracting grants and charges for
services that the Board used to offset the program's total cost. In other words, the net cost
shows the financial burden that was placed on all taxpayers for each of these activities.
This information allows citizens to consider the cost of each program in comparison to
the benefits they believe are provided.

O

Table 3: Net Cost of Governmental Activities
(in millions)
Total Cost of Services
Net Cost
of Services
2012 2011 2012 2011


Instructional services

$182.18 $194.55 $ 30.20

$32.39
Instructional support services

53.28 55.54 16.58

14.35
Operation and maintenance services

27.32 27.78 18.53

18.16
Auxiliary services

43.08 42.63 6.85

8.72
General administrative services

9.39 8.87

8.34

7.50
Interest and fiscal charges

4.85 2.88 4.85

2.88
Other expenses 9.41 8.94 3.83

3.71
Total $ 329.51 $ 341.19 $ 89.18

$87.71


Performance of School Board Funds

As noted earlier, the Board uses fund accounting to control and manage resources in
order to ensure compliance with finance-related legal requirements. Using funds to
account for resources for particular purposes helps the reader to determine whether the
Board is being accountable for the resources provided by taxpayers and other entities, and
it may also help to provide more insight into the Board's overall financial health. The
following analysis of the Board's funds should be read in reference to the fund financial
statements which begin on page 5.
Governmental Funds - The focus of the Board's governmental funds is to
provide information on near-term inflows, outflows, and balances of spendable resources.
Such information is useful in assessing the Board's financial requirements (Note that the
relationship between the fund financial statements and the government-wide financial
statements are reconciled on pages 7 and 10). The strong financial performance of the
Board as a whole is reflected in its governmental funds as well. At the end of the fiscal
year, the Board's governmental funds reported combined ending fund balances of $82.85
million.



P

 General Fund - The General Fund is the primary operating fund of the Board.
The General Fund ended the year with a $49.62 million fund balance.
Approximately $48.3 million of this amount constitutes an unassigned fund
balance which is available as of the end of the fiscal year for spending on future
operations. An additional $1.32 million was designated as nonspendable for
inventories and prepaid items. The General Fund ended the fiscal year with a
positive $8.42 million net change in fund balance that was achieved primarily
from controlling expenditures.
 The Special Revenue Fund is used to account for and report the proceeds of
specific revenue sources that are restricted or committed to expenditure for
specified purposes other than debt service or capital projects. Various federal and
local funding sources are included in this fund. Some of the significant federal
funding sources include the federal funds that are received for Special Education,
Title I, and Child Nutrition. This fund ended the year with a fund balance of
$19 million.

Budgetary Highlights of Major Funds
On or before October 1 of each year, the Board is mandated by state law to prepare and
submit to the State Superintendent of Education the annual budget adopted by the Board.
The original 2012 fiscal year budget, adopted on September 13, 2011, was based on a
conservative approach that reflected current revenues and expenditures. The original
budget figures were amended when revenues or expenditures exceeded ten percent. Over
the course of the year, the Board revised the annual operating budgets two times on
J anuary 24, 2012 and May 24, 2012. For purposes of this budgetary analysis, only the
General Fund of the Board is discussed in accordance with the GASB 34 reporting
model.
General Fund - The comparison of the General Fund original budget to the final
amended budget is on page 38. The differences between the original budget and the final
amended budget of the Board were a $2.06 million increase in overall revenue
appropriations and $6.69 million increase in expenditure appropriations and can be
briefly summarized as follows:
Amendment #1 was necessary to budget beginning fund balances to reflect ending fund
balances from FY 2011 and budget federal programs carryover.

Additionally, revenues and expenditures were increased for the following additional state
allocations:
$.67 million National Board Professional Teacher Standards
$.54 million Catastrophic Special Education
$.23 million State Advanced Placement
Q

Amendment #2 was necessary to reduce budgeted pass through funds to the Child
Nutrition program, budget final federal program changes, and increase revenues and
expenditures for the following additional state allocations:
$.10 million State Contracts
$.20 million National Board Professional Teacher Standards
The positive variance between budgeted and actual expenditures was primarily the result
of conservative spending throughout the school system.
Overall, the final amended budget is reflective of the actual operating activity for the
year. Although actual revenues were higher than budgetary estimates ($6.89 million) and
actual expenditures were less than budgetary estimates ($4.28 million) the resulting
$13.69 million net change in fund balance (budgetary vs. actual) reflects a more positive
ending financial picture than was originally anticipated and reflected in the budget.
Capital Assets and Debt Administration
Capital Assets - The Board's investment in capital assets for its governmental activities
for the year ended September 30, 2012, amounted to $505.34 million, net of accumulated
depreciation, restricted net assets and debt related to the acquisition of the assets. The
Board's investment in capital assets includes land at estimated historical cost, buildings
and improvements at estimated historical cost, equipment and furniture at estimated
historical cost, buildings and improvements under capital lease, and construction in
progress, and is shown in Table 4.

Table 4: Capital Assets (net of accumulated depreciation)
(in Millions)

Governmental Activities
2012 2011

Land and land improvements $ 26.44 $ 26.58
Construction in progress 24.83 24.75
Buildings & Improvements 507.03 494.17
Equipment and Furniture 21.96 21.68
Buildings and Improvements
Under Capital Lease 25.50 26.63


$ 605.76

$ 593.81


R

Net capital assets increased by $11.94 million for the 2012 fiscal year. The Board
expended available resources to acquire $31.58 million in capital asset additions during
the year. These additions are reduced by the current year's net depreciation expense of
$16.97 million and $2.66 million in net capital assets taken out of service during the year.
The additions to capital assets were primarily for the following:
Land was purchased in the amount of $.66 million for Concord Elementary.
Building construction/improvements (paid for with state, local, and County Commission
grant funds) were completed on the following schools:

Clay Chalkville Middle $3,669,650.12
Centerpoint High 6,062,564.81
Bottenfield 660,318.87
Hueytown High 1,125,851.02
Irondale Community 7,056,689.75
McAdory High 1,295,205.83
Mortimer J ordan 879,064.68
Pleasant Grove High 4,955,051.59
Pinson Valley High 812,723.69
Brighton School 89,341.05
Gardendale High 316,743.59
McAdory Middle 181,730.79
Fultondale High 183,955.40
McAdory Elementary 181,000.00
Minor High 145,265.41


Total $ 27,655,156.60
















S

Construction in progress at year-end reflected the following projects paid for with state,
local, and County Commission Grant capital outlay funds:


Burkett 2,788,511.48 New Building
Concord 11,546,547.37 New Building
Various Schools 1,428,344.80 Roofing
Erwin Elementary 8,408,519.24 Additions
Pinson Valley High 118,545.15 Accessibility Improvements
Pleasant Grove High 72,022.80 Athletic Facilities
Center Point Elementary 446,364.94 Building Improvements
Central Office 9,110.00 Building Improvements
Erwin Middle 800.00 Fire Alarm System
Fultondale High 14,550.00 Field House


Total $24,833,315.78

The Board purchased $1.75 million in new vehicles, including twenty one new buses all
purchased with state and federal funds, one car for Driver’s Education (purchased with
state and local funds), and two service vehicles (purchased with local funds).
Equipment purchases totaling $2.02 million were primarily funded with Child Nutrition
funds at various cost centers.
Long-Term Debt - At year-end, the Board had $102.40 million in capital outlay
warrants, capital lease contracts payable, and other long-term debt outstanding as shown
in Table 5 below.

Table 5: Outstanding Long-Term Debt
(in millions)

Fiscal Year Ended September 30, 2012
Beginning Ending
Balance
Net
Change Balance
Governmental Activities:
Bonds and warrants payable $ 85.93 $ (6.94) $ 78.99
Unamortized Premium 1.37 (.16) 1.21
Unamortized Discount/Deferred Loss (3.42) 0.42 (3.00)
Other liabilities:
Capital leases 25.95 (2.28) 23.67
Compensated absences 1.66 (0.13) 1.53
Total other liabilities 27.61 (2.41) 25.20
Governmental activities long-term debt $ 111.49 $ (9.09) $ 102.40
T

Long-term debt activity for the year consisted of the following:
 The Board continued to pay down its capital outlay warrants issued in 2005, 2009,
and 2011 retiring $6.94 million in outstanding bonds during the fiscal year 2012. In
addition, the Board continued to make lease payments on its one remaining capital
lease agreement (the 2000 J efferson County Commission Sale Leaseback
Agreement), resulting in a decrease of $2.28 million in capital lease contracts
payable.
(More detailed information about the Board's long-term liabilities is presented in the
notes to the basic financial statements.)
Economic Factors and Next Year's Budget
The following are currently known J efferson County economic factors considered while
going into the 2012-2013 fiscal year.
 The unemployment rate in J efferson County for September 2012 is 7.3 percent, which
is lower than the September 2011 rate of 9.5 percent, indicating a positive economic
trend in this area. J efferson County's unemployment rate is lower than the state’s
average unemployment rate of 8.2 percent but is slightly higher than the national rate
of 7.8 percent for September 2012.
 The population in J efferson County as of the year 2010 census decreased slightly
since the last ten-year census taken in 2000. The population decreased by
approximately 3,581 people or 0.5 percent over a ten-year period for a total estimated
population of 658,466.
 According to the Center for Business and Economic Research, state tax revenues for
the fiscal year ended September 30, 2012 were up 3.8 percent or approximately
$324 million. Sales tax revenues rose 4.3 percent, corporate income tax receipts were
up $53 million, and personal income tax revenues increased 4.7 percent.
Appropriations to the Alabama Education Trust Fund, which come primarily from
income and sales taxes, increased by 7.0% or $369 million.
 Because of funding concerns at the state level and increasing expenditures in the
areas of retirement, health insurance, and pay increases, the Board continues to
budget for cautious spending for the 2013 fiscal year.
At the time these financial statements were prepared and audited, the Board was aware of
the following circumstances that could significantly affect the Board's financial health in
the future:


U

Establishment of Independent City School Districts - At the present time, there are
twelve public school systems operating within J efferson County--the Board and school
boards for the following municipalities in the County: Bessemer, Birmingham, Fairfield,
Homewood, Hoover, Leeds, Midfield, Mountain Brook, Tarrant, Trussville, and Vestavia
Hills (collectively, the "City Boards"). Under existing Alabama law, a city with a
population in excess of 5,000 is entitled to establish a separate public school system
within its jurisdiction with its own board of education, members of which are elected by
the governing body of such city. If an additional city system is established in the County,
the State and County revenues for general educational purposes and all county-wide
school property taxes would be apportioned among all school systems in the County
including the Board, the existing city school systems in the County and the new city
school system. Any district school property tax then being levied in the district in which
a system is established shall be distributed as follows: (1) that part of the district tax
collected in the city forming the independent system shall be apportioned to the
independent city system and (2) that part of the district tax collected in the County
outside the city forming the independent system shall be apportioned to the county board
of education. Other than the municipalities operating the City Boards, the municipalities
in the County that have a population of at least 5,000 are the Cities of Adamsville,
Centerpoint, Clay, Fultondale, Gardendale, Hueytown, Irondale, Pinson, and Pleasant
Grove. Reports in the news media would indicate that the establishment of independent
city boards of education by other municipalities is considered from time to time.

Proration of State Appropriations - Applicable provisions of the Constitution of
Alabama effectively prohibit the State from engaging in deficit financing--that is to say,
state expenditures during any fiscal year may not exceed available revenues. State law
provides procedures for delaying or, if necessary, reducing (or "prorating")
appropriations of state revenues in order to maintain and enforce the constitutional ban on
deficit financing. The Board received the largest share of its annual revenue from the
State. Although the State revenues provided for the payment of employee salaries and
benefits are prorated, State law prohibits the Board from reducing salaries and benefits
paid to employees. The postponement or reduction of State appropriations to the Board
as a consequence of proration may therefore result in reductions of expenditures by the
Board for certain budget items other than salaries (e.g. instructional materials, supplies
and maintenance). The following table sets forth the years in which proration has been
enforced since 1985 and the amounts of such proration:




V

Fiscal Year Proration Percentage
1986-86 4.2133%
1990-91 6.5000%
1992-92 3.0000%
2000-01 6.2000%
2002-03 4.4000%
2008-09 11.000%
2009-10 9.5000%
2010-11 3.0000%
Estimated Capital Needs - As of September 30, 2012, the Board's Five-Year Capital
Plan, based upon critical needs and a State facility assessment, included $133.09 million
in estimated capital needs through-out the system, $29.58 million of which will be state
or locally funded, $2.24 million will be funded by the J efferson County Commission
grant, and $101.27 million which is unfunded at this time.

Student Enrollment - The latest student enrollment figure for the 2012-2013 school year
of 36,068 indicates a slight increase in enrollment of approximately 10 students. This
increase will be reflected in the Board’s FY 2014 allocations from the State Department
of Education as prior school year enrollment is used to calculate allocations for a fiscal
year. It should be noted that the large decline from fiscal year 2005 to 2006 was the
result of the pullout of Trussville City Schools (4,032 students) and the decline from
2002 to 2003 was largely a result of the loss of 274 ADM to the Vestavia City Board of
Education upon transfer of the Cahaba Heights Community School, and approximately
1,265 ADM to the Leeds City Board of Education.

ADM Enrollment Change
Fiscal
Year School Year
36,058 106 2013 2011-2012
35,952 (220) 2012 2010-2011
36,172 (73) 2011 2009-2010
36,245
36,216
29 2010
2009
2008-2009
(190) 2007-2008
36,406 433
2008
2006-2007
35,973 224
2007
2005-2006
35,749 (3,694)
2006
2004-2005
39,443 844
2005
2003-2004
38,599 (107)
2004
2002-2003
38,706 (1,751)
2003
2001-2002
W

Medical and Retirement Costs - Employee health insurance is provided through the
Public Education Employees' Health Insurance Program (PEEHIP). The fiscal year
2012-2013 premium for health insurance for teachers and support personnel under
PEEHIP is projected to remain the same at $714 per month per employee. Also employer
contributions to the Teachers Retirement System (TRS) are expected to increase to
10.08 percent for all employees hires prior to J anuary 1 2013. For employees hired after
J anuary 1, 2013 a new rate of 9.44% is expected to be established.

CONTACTING THE SCHOOL BOARD'S FINANCIAL
MANAGEMENT
This financial report is designed to provide citizens, taxpayers, investors, and creditors
with a general overview of the Board's finances and to show the Board's accountability
for the money it receives. If you have any questions about this report or need additional
financial information, contact Sheila J ones, Executive Director of Business and Financial
Affairs, at the J efferson County Board of Education, 2100 18
th
Street South, Birmingham,
AL 35209-1891, or by calling (205) 379-2001 during regular office hours, Monday
through Friday, from 8:00 a.m. to 4:30 p.m., central standard time.

1

Basic Financial Statements
This Page Intentionally Blank
J efferson County
Board of Education 2 Exhibit #1
Statement of Net Assets
September 30, 2012
Governmental
Activities
Assets
Cash and Cash Equivalents 35,030,913.25 $
Cash with Fiscal Agent 4,841,421.03
Investments 59,693,583.87
Receivables (Note 4) 4,786,924.50
Property Taxes Receivable 75,175,217.91
Accrued Interest Receivable 34,794.17
Inventories 1,583,791.69
Deferred Charges - Issuance Costs 451,409.49
Restricted Cash 939,005.32
Prepaid Items 821,591.82
Capital Assets (Note 5):
Nondepreciable 48,030,188.90
Depreciable, Net 557,726,359.82
Total Assets 789,115,201.77
Liabilities
Payables (Note 10) 3,971,966.74
Deferred Revenue 78,438,290.70
Salaries and Benefits Payable 17,610,323.55
Accrued Interest Payable 649,250.97
Long-Term Liabilities:
Portion Due or Payable Within One Year:
Warrants Payable 7,223,243.94
Add: Unamortized Premium 154,399.15
Less: Deferred Loss on Refunding (415,274.02)
Capital Lease Contracts Payable 2,415,354.07
Estimated Liability for Compensated Absences 130,828.14
Portion Due or Payable After One Year:
Warrants Payable 71,773,568.87
Add: Unamortized Premium 1,059,408.94
Less: Deferred Loss on Refunding (2,588,490.52)
Capital Lease Contracts Payable 21,251,228.37
Estimated Liability for Compensated Absences 1,400,361.68
Total Liabilities 203,074,460.58
Net Assets
Invested in Capital Assets, Net of Related Debt 505,334,519.41
Restricted for:
Debt Service 4,192,170.06
Capital Projects 6,854,909.93
Child Nutrition Program 6,135,036.39
Unrestricted 63,524,105.40
Total Net Assets 586,040,741.19 $
The accompanying Notes to the Financial Statements are an integral part of this statement.
J efferson County
Board of Education 3 Exhibit #2
Statement of Activities
For the Year Ended September 30, 2012
Charges Operating Grants
Functions/Programs Expenses for Services and Contributions
Governmental Activities
Instruction 182,176,925.20 $ 3,771,204.93 $ 140,170,543.06 $
Instructional Support 53,282,357.14 1,581,024.02 35,087,647.40
Operation and Maintenance 27,321,681.14 1,009,429.60 7,599,038.06
Auxiliary Services:
Student Transportation 19,756,216.61 508,012.77 15,092,903.07
Food Service 23,321,133.13 17,770,963.06 1,202,621.61
General Administrative and Central Support 9,388,159.68 91,776.54 931,301.90
Other 9,410,284.75 4,095,595.55 1,486,399.06
Interest and Fiscal Charges 4,855,255.37
Total Governmental Activities 329,512,013.02 $ 28,828,006.47 $ 201,570,454.16 $
General Revenues:
Taxes:
Property Taxes for General Purposes
Alcohol Beverage Tax
Other Taxes
Investment Earnings
Miscellaneous
Total General Revenues
Changes in Net Assets
Net Assets - Beginning of Year
Net Assets - End of Year
The accompanying Notes to the Financial Statements are an integral part of this statement.
Program Revenues
J efferson County
Board of Education 4 Exhibit #2
Net (Expenses) Revenues
and Changes in Net Assets
Capital Grants Total Governmental
and Contributions Activities
8,033,185.89 $ (30,201,991.32) $
36,470.42 (16,577,215.30)
186,592.85 (18,526,620.63)
1,570,569.00 (2,584,731.77)
82,068.60 (4,265,479.86)
25,915.00 (8,339,166.24)
(3,828,290.14)
(4,855,255.37)
9,934,801.76 $ (89,178,750.63)
81,977,466.92
800,716.26
997,641.56
494,656.73
7,193,931.53
91,464,413.00
2,285,662.37
583,755,078.82
586,040,741.19 $
J efferson County
Board of Education 5 Exhibit #3
Balance Sheet
Governmental Funds
September 30, 2012
Special
General Revenue
Fund Fund
Assets
Cash and Cash Equivalents 9,743,032.16 $ 17,277,198.38 $
Cash with Fiscal Agent
Investments 59,124,225.00 569,358.87
Receivables (Note 4) 714,341.94 3,102,592.25
Property Taxes Receivable 75,175,217.91
Accrued Interest Receivable 320.55
Interfund Receivables 597,798.43 1,701.75
Inventories 494,610.17 1,089,181.52
Prepaid Items 821,591.82
Total Assets 146,671,137.98 22,040,032.77
Liabilities and Fund Balances
Liabilities
Payables (Note 10) 1,987,401.55 1,456,161.48
Interfund Payables 1,701.75 597,798.43
Deferred Revenues 78,124,199.11 314,091.59
Salaries and Benefits Payable 16,934,624.86 675,698.69
Total Liabilities 97,047,927.27 3,043,750.19
Fund Balances
Nonspendable:
Inventories 494,610.17 1,089,181.52
Prepaid Items 821,591.82
Restricted for:
Debt Service
Capital Projects
Child Nutrition Programs 6,881,422.38
Assigned to:
Local Schools 11,025,678.68
Other Purposes
Unassigned 48,307,008.72
Total Fund Balances 49,623,210.71 18,996,282.58
Total Liabilities and Fund Balances 146,671,137.98 $ 22,040,032.77 $
The accompanying Notes to the Financial Statements are an integral part of this statement.
J efferson County
Board of Education 6 Exhibit #3
Other Total
Governmental Governmental
Funds Funds
8,949,688.03 $ 35,969,918.57 $
4,841,421.03 4,841,421.03
59,693,583.87
969,990.31 4,786,924.50
75,175,217.91
320.55
599,500.18
1,583,791.69
821,591.82
14,761,099.37 183,472,270.12
528,403.71 3,971,966.74
599,500.18
78,438,290.70
17,610,323.55
528,403.71 100,620,081.17
1,583,791.69
821,591.82
5,811,411.34 5,811,411.34
7,793,915.25 7,793,915.25
6,881,422.38
11,025,678.68
627,369.07 627,369.07
48,307,008.72
14,232,695.66 82,852,188.95
14,761,099.37 $ 183,472,270.12 $
This Page Intentionally Blank
J efferson County
Board of Education 7 Exhibit #4
Reconciliation of the Balance Sheet of Governmental Funds to the
Statement of Net Assets
September 30, 2012
Total Fund Balances - Governmental Funds (Exhibit 3) 82,852,188.95 $
Amounts reported for governmental activities in the Statement of Net Assets
(Exhibit 1) are different because:
Capital assets used in governmental activities are not financial resources and therefore
are not reported as assets in governmental funds. 605,756,548.72
Other long-term assets are not available to pay for current-period expenditures and
therefore, are deferred on the Statement of Net Assets. 451,409.49
Interest on unmatured investments will not be collected this year and is not available
soon enough to pay for the current period`s expenditures, and therefore is not
accrued in the funds.
Accrued Interest Receivable 34,473.62
Long-term liabilities, including bonds payable, are not due and payable in the current
period and therefore are not reported as liabilities in the funds.
Portion Due or Payable Within One Year:
Warrants Payable 7,223,243.94 $
Unamortized Premium 154,399.15
Deferred Loss on Refunding (415,274.02)
Capital Lease Contracts Payable 2,415,354.07
Estimated Liability for Compensated Absences 130,828.14
Portion Due or Payable After One Year:
Warrants Payable 71,773,568.87
Unamortized Premium 1,059,408.94
Deferred Loss on Refunding (2,588,490.52)
Capital Lease Contracts Payable 21,251,228.37
Estimated Liability for Compensated Absences 1,400,361.68
(102,404,628.62)
Interest on long-term debt is not accrued in the funds but rather is recognized as an
expenditure when due.
Accrued Interest Payable (649,250.97)
Total Net Assets - Governmental Activities (Exhibit 1) 586,040,741.19 $
The accompanying Notes to the Financial Statements are an integral part of this statement.
J efferson County
Board of Education 8 Exhibit #5
Statement of Revenues, Expenditures and Changes in Fund Balances
Governmental Funds
For the Year Ended September 30, 2012
Special
General Revenue
Fund Fund
Revenues
State 177,779,955.40 $ $
Federal 2,301,593.72 32,219,677.46
Local 85,927,745.59 19,379,663.34
Other 369,522.65 1,602,564.74
Total Revenues 266,378,817.36 53,201,905.54
Expenditures
Current:
Instruction 150,956,545.95 19,710,526.65
Instructional Support 46,210,421.33 6,433,020.13
Operation and Maintenance 25,090,465.84 1,122,860.87
Auxiliary Services:
Student Transportation 17,022,224.95 569,377.43
Food Service 22,908,563.92
General Administrative and Central Support 9,046,766.62 495,438.01
Other 1,166,000.53 5,599,436.74
Capital Outlay 346,796.50 1,280,513.65
Debt Service:
Principal Retirement
Interest and Fiscal Charges
Total Expenditures 249,839,221.72 58,119,737.40
Excess (Deficiency) of Revenues Over Expenditures 16,539,595.64 (4,917,831.86)
Other Financing Sources (Uses)
Indirect Cost 1,834,584.64
Transfers In 159,805.96 3,740,721.75
Other Financing Sources 2,022,345.13
Sale of Capital Assets
Transfers Out (12,135,647.23)
Total Other Financing Sources (Uses) (8,118,911.50) 3,740,721.75
Net Changes in Fund Balances 8,420,684.14 (1,177,110.11)
Fund Balances - Beginning of Year 41,202,526.57 20,173,392.69
Fund Balances - End of Year 49,623,210.71 $ 18,996,282.58 $
The accompanying Notes to the Financial Statements are an integral part of this statement.
J efferson County
Board of Education 9 Exhibit #5
Other Total
Governmental Governmental
Funds Funds
9,908,886.76 $ 187,688,842.16 $
34,521,271.18
118,183.65 105,425,592.58
1,972,087.39
10,027,070.41 329,607,793.31
393,509.27 171,060,581.87
45,622.54 52,689,064.00
145,064.54 26,358,391.25
17,591,602.38
76,680.00 22,985,243.92
9,542,204.63
6,765,437.27
29,946,382.82 31,573,692.97
9,219,225.67 9,219,225.67
4,652,578.65 4,652,578.65
44,479,063.49 352,438,022.61
(34,451,993.08) (22,830,229.30)
1,834,584.64
12,166,834.99 16,067,362.70
168,244.34 2,190,589.47
56,394.65 56,394.65
(3,931,715.47) (16,067,362.70)
8,459,758.51 4,081,568.76
(25,992,234.57) (18,748,660.54)
40,224,930.23 101,600,849.49
14,232,695.66 $ 82,852,188.95 $
J efferson County
Board of Education 10 Exhibit #6
Reconciliation of the Statement of Revenues, Expenditures and Changes
in Fund Balances of Governmental Funds to the Statement of Activities
For the Year Ended September 30, 2012
Net Changes in Fund Balances - Total Governmental Funds (Exhibit 5) (18,748,660.54) $
Amounts reported for governmental activities in the Statement of Activities
(Exhibit 2) are different because:
Capital outlays to purchase or build capital assets are reported in governmental funds
as expenditures. However, in the Statement of Activities, the cost of those assets
is allocated over their estimated useful lives as depreciation expense. This is the
amount by which capital outlays ($31,573,692.97) differed from depreciation expense
($19,569,557.43) in the period. 12,004,135.54
Repayment of debt principal is an expenditure in the governmental funds, but it
reduces long-term liabilities in the Statement of Net Assets and does not
affect the Statement of Activities. 9,219,225.67
In the Statement of Activities, only the loss on the sale of capital assets is
reported, whereas in the governmental funds, the proceeds from the sale increase
financial resources. The change in net assets differs from the change in fund
balances this amount.
Proceeds from Sale of Capital Assets (56,394.65) $
Loss on Disposition of Capital Assets (5,464.50) (61,859.15)
Some expenses reported in the Statement of Activities do not require the use of
current financial resources and, therefore, are not reported as expenditures in
governmental funds.
Accrued Interest Payable, Current Year Decrease (58,198.15) $
Compensated Absences, Current Year Decrease
in Noncurrent Portion (129,655.73)
Amortization of Bond Premium (154,399.15)
Amortization of Bond Issuance Costs 53,450.77
Amortization of Deferred Loss on Refunding 415,274.02 (126,471.76)
Revenues in the Statement of Activities that do not provide current financial
resources are not reported as revenues in the funds:
Accrued Interest Receivable, Current Year Decrease (707.39)
Change in Net Assets of Governmental Activities (Exhibit 2) 2,285,662.37 $
The accompanying Notes to the Financial Statements are an integral part of this statement.
J efferson County
Board of Education 11 Exhibit #7
Statement of Fiduciary Net Assets
September 30, 2012
Agency
Funds
Assets
Cash and Cash Equivalents 6,946,132.51 $
Receivables 494.70
Total Assets 6,946,627.21
Liabilities
Salaries and Benefits Payable 6,946,627.21
Total Liabilities 6,946,627.21 $
The accompanying Notes to the Financial Statements are an integral part of this statement.
Notes to the Financial Statements
For the Year Ended September 30, 2012
J efferson County
Board of Education
12

Note 1 – Summary of Significant Accounting Policies

The financial statements of the J efferson County Board of Education (the “Board”) have been
prepared in conformity with generally accepted accounting principles (GAAP) as applied to
governmental units. The Governmental Accounting Standards Board (GASB) is the accepted
standard-setting body for establishing governmental accounting and financial reporting
principles. The more significant of the government’s accounting policies are described below.

A. Reporting Entity

The Board is governed by a separately elected board composed of five members elected by the
qualified electors of the County. The Board is responsible for the general administration and
supervision of the public schools for the educational interests of the County (with the exception
of cities having a city board of education).

Generally accepted accounting principles (GAAP) require that the financial reporting entity
consist of the primary government and its component units. Accordingly, the accompanying
financial statements present the Board (a primary government).

Component units are legally separate organizations for which the elected officials of the primary
government are financially accountable and other organizations for which the nature and
significance of their relationship with the primary government are such that exclusion would
cause the reporting entity’s financial statements to be misleading or incomplete. Based on the
application of these criteria, there are no component units which should be included as part of the
financial reporting entity of the Board.

B. Government-Wide and Fund Financial Statements

Government-Wide Financial 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, except for fiduciary
activities. Eliminations have been made to minimize the double counting of internal activities.
Governmental activities generally are financed through taxes, intergovernmental revenues, and
other nonexchange transactions.









Notes to the Financial Statements
For the Year Ended September 30, 2012
J efferson County
Board of Education
13

The statement of activities presents a comparison between direct expenses and program revenues
for each function of the Board’s governmental activities. Direct expenses are those that are
specifically associated with a program or function and, therefore, are clearly identifiable to a
particular function. The Board does not allocate indirect expenses to the various functions.
Program revenues include (a) charges to customers or applicants who purchase, use or directly
benefit from goods, services, or privileges provided by a given function or program and
(b) grants and contributions that are restricted to meeting the operational or capital requirements
of a particular program. Revenues that are not classified as program revenues, including all
taxes, are presented as general revenues.

Fund Financial Statements

The fund financial statements provide information about the Board’s funds, including fiduciary
funds. Separate statements for each fund category – governmental and fiduciary – are presented.
The emphasis of fund financial statements is on major governmental funds, each displayed in a
separate column. All remaining governmental funds are aggregated and reported as nonmajor
funds in the other governmental funds column.

The Board reports the following major governmental funds:

♦ General Fund – The general fund is the primary operating fund of the Board. It is used to
account for all financial resources except those required to be accounted for in another fund.
The Board primarily receives revenues from the Education Trust Fund (ETF) and local taxes.
Amounts appropriated from the ETF were allocated to the school board on a formula basis.

♦ Special Revenue Fund – This fund is used to account for and report the proceeds of specific
revenue sources that are restricted or committed to expenditure for specified purposes other
than debt service or capital projects. Various federal and local funding sources are included
in this fund. Some of the significant federal funding sources include the federal funds that
are received for Special Education, Title I, and the Child Nutrition Program in addition to
various smaller grants, which are required to be spent for the purposes of the applicable
federal grants. Also included in this fund are the public and non-public funds received by the
local schools which are generally not considered restricted or committed.











Notes to the Financial Statements
For the Year Ended September 30, 2012
J efferson County
Board of Education
14

The Board reports the following fund types in the Other Governmental Funds’ column:

Governmental Fund Types

♦ Debt Service Funds – These funds are used to account for and report financial resources that
are restricted, committed, or assigned to expenditure for principal and interest and the
accumulation of resources for principal and interest payments maturing in future years.

♦ Capital Projects Funds – These funds are used to account for and report financial resources
that are restricted, committed, or assigned to expenditure for capital outlay, including the
acquisition or construction of capital facilities and other capital assets.

The Board reports the following fiduciary fund type:

Fiduciary Fund Type

♦ Agency Funds – These funds are used to report assets held by the Board in a purely custodial
capacity. The Board collects these assets and transfers them to the proper individual, private
organizations, or other government.

C. Measurement Focus, Basis of Accounting and Financial Statement Presentation

The government-wide financial statements are reported using the economic resources
measurement focus and the accrual basis of accounting, as are the fiduciary fund financial
statements. Revenues are recorded when earned and expenses are recorded at the time liabilities
are incurred, regardless of the timing of related cash flows. Nonexchange transactions, in which
the Board gives (or receives) value without directly receiving (or giving) equal value in
exchange, include property taxes, grants, entitlements, and donations. On an accrual basis,
revenue from grants, entitlements, and donations is recognized in the fiscal year in which all
eligibility requirements have been satisfied. Revenue from property taxes is recognized in the
fiscal year for which the taxes are levied.

As a general rule, the effect of interfund activity has been eliminated from the government-wide
financial statements.









Notes to the Financial Statements
For the Year Ended September 30, 2012
J efferson County
Board of Education
15

Governmental fund financial statements are reported using the current financial resources
measurement focus and the modified accrual basis of accounting. Revenues are recognized as
soon as they are both measurable and available. Revenues are considered to be available when
they are collectible within the current period or soon enough thereafter to pay liabilities of the
current period. For this purpose, the Board considers revenues to be available if they are
collected within sixty (60) days of the end of the current fiscal year. Expenditures are recorded
when the related fund liability is incurred, except for principal and interest on general long-term
debt, which are recognized as expenditures to the extent they have matured. General capital
asset acquisitions are reported as expenditures in governmental funds. General long-term debt
issued and acquisitions under capital leases are reported as other financing sources.

Under the terms of grant agreements, the Board funds certain programs by a combination of
specific cost-reimbursement grants, categorical block grants, and general revenues. Thus, when
program expenses are incurred, there are both restricted and unrestricted net assets available to
finance the program. It is the Board’s policy to first apply cost-reimbursement grant resources to
such programs, followed by categorical block grants and then by general revenues.

Private-sector standards of accounting and financial reporting issued prior to December 1, 1989,
generally are followed in the government-wide financial statements to the extent that those
standards do not conflict with or contradict guidance of the Governmental Accounting Standards
Board.

D. Assets, Liabilities and Net Assets/Fund Balances

1. Deposits and Investments

Cash and cash equivalents include cash on hand, demand deposits and short-term investments
with original maturities of three months or less from the date of acquisition.

Statutes authorize the Board to invest in obligations of the U. S. Treasury, obligations of any
state of the United States, general obligations of any Alabama county or city board of education
secured by the pledged of the three-mill school tax, certificates of deposit and other obligations
as outlined in Note 3.

Investments are reported at fair value, based on quoted market prices, except for money market
investments and repurchase agreements, which are reported at amortized cost. The Board reports
all money market investments – U. S. Treasury bills and bankers’ acceptances having a
remaining maturity at time of purchase of one year or less – at amortized cost.






Notes to the Financial Statements
For the Year Ended September 30, 2012
J efferson County
Board of Education
16

2. Receivables

Millage rates for property taxes are levied at the first regular meeting of the County Commission
in February of each year. Property taxes are assessed for property as of October 1 of the
preceding year based on the millage rates established by the County Commission. Property taxes
are due and payable the following October 1 and are delinquent after December 31. Amounts
receivable, net of estimated refunds and estimated uncollectible amounts, are recorded for the
property taxes levied in the current year. However, since the amounts are not available to fund
current year operations, the revenue is deferred and recognized in the subsequent fiscal year
when the taxes are both due and collectible and available to fund operations.

Receivables due from other governments include amounts due from grantors for grants issued for
specific programs and capital projects.

3. Inventories

Inventories are valued at cost, which approximates market, using the first-in/first-out (FIFO)
method. Inventories of governmental funds are recorded as expenditures when consumed rather
than when purchased.

4. Prepaid Items

Certain payments to vendors reflect costs applicable to future accounting periods and are
recorded as prepaid items in both government-wide and fund financial statements.

5. Restricted Assets

Certain funds received from the State Department of Education for capital projects and
improvements, as well as certain resources set aside for repayment of debt, are considered
restricted assets because they are maintained separately and their use is limited. The Debt
Service Fund is used to report resources set aside to pay the principal and interest on debt as it
become due.












Notes to the Financial Statements
For the Year Ended September 30, 2012
J efferson County
Board of Education
17

6. Capital Assets

Capital assets, which include property and equipment, are reported in the government-wide
financial statements. Such assets are valued at cost where historical records are available and at
an estimated historical cost where no historical records exist. The Board estimated some of the
values associated with land and buildings because the original costs were not available. These
estimates were based upon research into the original acquisition of the assets. Some estimates
are based upon the selling prices of real property near the school during the time they were
acquired. Donated fixed assets are valued at their estimated fair market value on the date
received. Additions, improvements and other capital outlays that significantly extend the useful
life of an asset are capitalized. Other costs incurred for repairs and maintenance are expensed as
incurred. Major outlays of capital assets and improvements are capitalized as projects are
constructed.

Depreciation on all assets is provided on the straight-line basis over the assets estimated useful
life. Capitalization thresholds (the dollar values above which asset acquisitions are added to the
capital asset accounts) and estimated useful lives of capital assets reported in the government-
wide statements are as follows:




Capitalization
Threshold
Estimated
Useful Life

Land Improvements Exhaustible $50,000 10 years
Buildings and Improvements $50,000 40 years
Building Under Capital Lease $50,000 40 years
Equipment and Furniture $ 5,000 5 – 20 years
Equipment Under Capital Lease $ 5,000 10 years


7. Long-Term Obligations

In the government-wide financial statements long-term debt and other long-term obligations are
reported as liabilities in the governmental activities statement of net assets. Bond/Warrant
premiums and issuance costs are deferred and amortized over the life of the bonds.
Bonds/Warrants payable are reported net of the applicable bond/warrant premium.
Bond/Warrant issuance costs are reported as deferred charges and amortized over the term of the
related debt.

In the fund financial statements, governmental fund types recognize bond premiums and
issuance costs during the current period. The face amount of debt issued is reported as other
financing sources. Premiums received on debt issuances are reported as other financing sources.
Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as
debt service expenditures.

Notes to the Financial Statements
For the Year Ended September 30, 2012
J efferson County
Board of Education
18

8. Compensated Absences

The Board’s vacation leave policy consists of the following: Twelve-month employees with
less than fifteen years of service are entitled to ten days of vacation leave per year, earned at the
rate of 0.83 days per month. Twelve-month employees with fifteen years or more service are
entitled to fifteen days of vacation leave per year, earned at the rate of 1.25 days per month.
Vacation days will be accrued from J uly 1 of each year through J une 30 of the following year.
Vacation days accrued in a vacation year may be taken during that vacation year or may be
carried over for one additional year. Vacation days not taken within the additional carryover
year will be lost. Accumulated vacation days are not reimbursable upon resignation, termination
or retirement.

9. Net Assets/Fund Equity

Net assets are reported on the government-wide financial statements and are required to be
classified for accounting and reporting purposes into the following net asset categories:

♦ Invested in Capital Assets, Net of Related Debt – Capital assets, net of accumulated
depreciation and outstanding principal balances of debt attributable to the acquisition,
construction or improvement of those assets. Any significant unspent related debt proceeds
at year-end related to capital assets are not included in this calculation.

♦ Restricted – Constraints imposed on net asset by external creditors, grantors, contributors,
laws or regulations of other governments, or law through constitutional provision or enabling
legislation.

♦ Unrestricted – Net assets that are not subject to externally imposed stipulations. Unrestricted
net assets may be designated for specific purposes by action of the Board.

Fund balance is reported in governmental funds in the fund financial statements under the
following five categories:

A. Nonspendable fund balances include amounts that cannot be spent because they are either (a)
not in spendable form or (b) legally or contractually required to be maintained.

B. Restricted fund balances consist of amounts that are subject to externally enforceable legal
restrictions imposed by creditors, grantors, contributors, or provisions or enabling legislation.

C. Committed fund balances consist of amounts that are subject to purpose constraint imposed
by formal action of the Board before the end of the fiscal year and that require the same level
of formal action to remove the constraint.


Notes to the Financial Statements
For the Year Ended September 30, 2012
J efferson County
Board of Education
19

D. Assigned fund balances consist of amounts that are intended to be used by the school system
for specific purposes. The Board has authorized the Superintendent or Chief School Finance
Office to make a determination of the assigned amounts of fund balance. Such assignments
may not exceed the available (spendable, unrestricted, uncommitted) fund balance in any
particular fund. Assigned fund balances require the same level of authority to remove the
constraint.

E. Unassigned fund balances include all spendable amounts not contained in the other
classifications. This portion of the total fund balance in the general fund is available to
finance operating expenditures.

When an expenditure is incurred for purposes for which both restricted and unrestricted
(committed, assigned, or unassigned) amounts are available, it shall be the policy of the Board to
consider restricted amounts to have been reduced first. When an expenditure is incurred for the
purposes for which amounts in any of the unrestricted fund balance classifications could be used,
it shall be the policy of the Board that committed amounts would be reduced first, followed by
assigned amounts and then unassigned amounts. The Board, along with the Superintendent and
the Chief School Finance Officer will periodically review all restricted, committed, and assigned
fund balances. The Chief School Finance Officer will prepare and submit an annual report of all
restricted, committed, and assigned funds for the Board.

Note 2 – Stewardship, Compliance, and Accountability

Budgets

Budgets are adopted on a basis of accounting consistent with accounting principles generally
accepted in the United States of America (GAAP) for the General Fund with the exception of
salaries and benefits, which are budgeted only to the extent expected to be paid rather than on the
modified accrual basis of accounting. Also, ad valorem taxes are budgeted only to the extent
expected to be received rather than on the modified accrual basis of accounting. The Special
Revenue Fund budgets on a basis of accounting consistent with GAAP with the exception of
salaries and benefits, which are budgeted only to the extent expected to be paid rather than on the
modified accrual basis of accounting. All other governmental funds adopt budgets on the
modified accrual basis of accounting. The Capital Projects Fund adopts project-length budgets.
All appropriations lapse at fiscal year-end.

On or before October 1 of each year, each county board of education shall prepare and submit to
the State Superintendent of Education the annual budget to be adopted by the County Board of
Education. The Superintendent or County Board of Education shall not approve any budget for
operations of the school for any fiscal year which shall show expenditures in excess of income
estimated to be available plus any balances on hand.



Notes to the Financial Statements
For the Year Ended September 30, 2012
J efferson County
Board of Education
20

Note 3 – Deposits and Investments

A. Deposits

The custodial credit risk for deposits is the risk that, in the event of a bank failure, the Board will
not be able to cover deposits or will not be able to recover collateral securities that are in the
possession of an outside party. The Board’s deposits at year-end were entirely covered by
federal depository insurance or by the Security for Alabama Funds Enhancement Program
(SAFE Program). The SAFE Program was established by the Alabama Legislature and is
governed by the provisions contained in the Code of Alabama 1975, Sections 41-14A-1 through
41-14A-14. Under the SAFE Program all public funds are protected through a collateral pool
administered by the Alabama State Treasurer’s Office. Under this program, financial institutions
holding deposits of public funds must pledge securities as collateral against those deposits. In
the event of failure of a financial institution, securities pledged by that financial institution would
be liquidated by the State Treasurer to replace the public deposits not covered by the Federal
Deposit Insurance Corporation (FDIC). If the securities pledged fail to produce adequate funds,
every institution participating in the pool would share the liability for the remaining balance.
Some of the Board’s investments were in certificates of deposit. These certificates of deposit,
totaling $819,358.87, are classified as “Deposits” in order to determine insurance and
collateralization. However, they are classified as “Investments” on the financial statements.

B. Investments

Statutes authorize the Board to invest in obligations of the U. S. Treasury, obligations of
any state of the United States, general obligations of any Alabama county or city board of
education secured by pledge of the three-mill school tax and other obligations as outlined in the
Code of Alabama 1975, Section 19-3-120 and Section 19-3-120.1.

The Board’s investment policy states the following:

Funds not presently needed for operations should be invested. Such investments should
be properly authorized, recorded and safeguarded against physical loss or misuse. The
Board should invest available funds in order to maximize earnings and minimize risk
during the period of availability of the funds. The Board is authorized pursuant to the
Code of Alabama 1975, Section 19-3-120 and 19-3-120.1, to invest Board funds in investments
that are backed by U. S. Government Securities. Furthermore, Section 16-13-109, provides
authority for the investment of surplus funds from a warrant issue.







Notes to the Financial Statements
For the Year Ended September 30, 2012
J efferson County
Board of Education
21

As of September 30, 2012, the Board had the following investments and maturities:


Investment Maturity in Years
Investment Type Fair Value Less than 1 Less than 2

Federal Home Loan Mortgage Company $11,014,290.00 $ $11,014,290.00
Federal Home Loan Bank 14,545,930.00 13,003,240.00 1,542,690.00
Federal National Mortgage Association 1,000,870.00 1,000,870.00
Federal Farm Credit Bank 32,313,135.00 11,305,890.00 21,007,245.00
$58,874,225.00 $24,309,130.00 $34,565,095.00


Interest Rate Risk – Interest rate risk is the risk that changes in interest rates will adversely
affect the fair value of an investment. The Board’s investment policy does not specifically limit
investment maturities as a means of managing its exposure to fair value losses arising from
increased interest rates.

Credit Risk – Credit risk is the risk that an issuer or other counterparty to an investment will not
fulfill its obligation. The Board’s investment policy does not specifically address its investment
choices related to this risk. The J efferson County Board of Education has funds invested in
Federal Home Loan Mortgage Company, Federal Home Loan Bank, Federal National Mortgage
Association, and Federal Farm Credit Bank which each have a credit risk rating of Aaa from
Moody’s Investors Service.

Custodial Credit Risk – For an investment, this is the risk that, in the event of the failure of the
counterparty, the government will not be able to cover the value of its investments or collateral
securities that are in the possession of an outside party. The Board’s investment policy does not
limit the amount of securities that can be held by counterparties.

Concentrations of Credit Risk – Concentration of credit risk is the risk of loss attributed to the
magnitude of a government’s investment in a single issuer. The Board’s investment policy does
not place limits on the amount the Board may invest in any one issuer.

C. Cash with Fiscal Agents

The Board’s cash with fiscal agent is to be invested in accordance with applicable statutes and its
investment policy.







Notes to the Financial Statements
For the Year Ended September 30, 2012
J efferson County
Board of Education
22

As of September 30, 2012, the Board’s cash with fiscal agent was invested as follows:


Investment Type Maturities Fair Value

Bank of New York – Federated U. S. Treasury Securities Cash Money Market Unknown $ 3.23
Morgan Keegan – Dreyfus Government Money Market Unknown 1,125.50
U. S. Bank -Money Market Unknown 4,138,839.51
Total $4,139,968.24


Note 4 – Receivables

On September 30, 2012, receivables for the Board’s individual major funds and other
governmental funds in the aggregate, are as follows:




General
Fund
Special
Revenue
Fund
Other
Governmental
Funds Total

Receivables:
Intergovernmental $615,632.08 $3,096,876.45 $969,990.31 $4,682,498.84
Accounts 9,196.86 9,196.86
Other 89,513.00 5,715.80 95,228.80
Total Receivables $714,341.94 $3,102,592.25 $969,990.31 $4,786,924.50


Governmental funds report deferred revenues in connection with receivables for revenues that
are not considered to be available to liquidate liabilities of the current period. Governmental
funds also defer revenue recognition in connection with resources that have been received, but
not yet earned. At September 30, 2012, the various components of deferred revenue and
unearned revenue reported in the governmental funds were as follows:


Unavailable Unearned

Ad Valorem Taxes Receivable $74,243,942.42 $3,880,256.69
Funds Received But Not Yet Earned 293,422.05
Grant Drawdown Prior to Meeting All Eligibility Requirements 20,669.54
Total Deferred/Unearned Revenue for Governmental Funds $74,243,942.42 $4,194,348.28







Notes to the Financial Statements
For the Year Ended September 30, 2012
J efferson County
Board of Education
23

Note 5 – Capital Assets

Capital asset activity for the year ended September 30, 2012, was as follows:



Balance
10/01/2011
Additions/
Reclassifications (*)
Retirements/
Reclassifications (*)
Balance
09/30/2012

Governmental Activities:
Capital Assets, Not Being Depreciated:
Land and Land Improvements $ 23,131,113.12 $ 65,760.00 $ $ 23,196,873.12
Construction in Progress 24,750,478.38 18,563,786.14 (18,480,948.74) 24,833,315.78
Total Capital Assets, Not Being Depreciated 47,881,591.50 18,629,546.14 (18,480,948.74) 48,030,188.90

Capital Assets Being Depreciated:
Land Improvements 4,613,362.20 4,613,362.20
Buildings and Improvements 596,692,802.44 27,655,156.60 624,347,959.04
Buildings and Improvements Under
Capital Lease 45,210,000.00 45,210,000.00
Equipment and Furniture 51,710,093.68 3,769,938.97 (2,665,184.49) 52,814,848.16
Total Capital Assets Being Depreciated 698,226,258.32 31,425,095.57 (2,665,184.49) 726,986,169.40

Less Accumulated Depreciation for:
Land Improvements (1,160,512.44) (212,532.98) (1,373,045.42)
Buildings and Improvements (102,517,750.79) (14,801,399.30) (117,319,150.09)
Buildings and Improvements Under
Capital Lease (18,583,117.66) (1,130,250.00) (19,713,367.66)
Equipment and Furniture (30,032,196.60) (3,425,375.15) 2,603,325.34 (30,854,246.41)
Total Accumulated Depreciation (152,293,577.49) (19,569,557.43) 2,603,325.34 (169,259,809.58)
Total Capital Assets Being Depreciated, Net 545,932,680.83 11,855,538.14 (61,859.15) 557,726,359.82
Total Governmental Activities Capital
Assets, Net $ 593,814,272.33 $ 30,485,084.28 $(18,542,807.89) $ 605,756,548.72

(*) Included in the “Additions” and “Retirements” columns above are reclassifications totaling $18,480,948.74.


Depreciation expense was charged to functions/programs of the primary government as follows:



Current Year
Depreciation
Expense

Governmental Activities:
Instruction $11,123,461.43
Instructional Support 668,726.84
Operation and Maintenance 981,039.76
Auxiliary Services:
Food Services 1,892,047.64
Student Transportation 2,170,733.98
General Administrative and Central Support 85,420.01
Other Expenditures 2,648,127.77
Total Depreciation Expense – Governmental Activities $19,569,557.43



Notes to the Financial Statements
For the Year Ended September 30, 2012
J efferson County
Board of Education
24

Note 6 – Defined Benefit Pension Plan

A. Plan Description

The Board contributes to the Teachers’ Retirement System of Alabama, a cost-sharing multiple-
employer public employee retirement system for the various state-supported educational
agencies and institutions. This plan is administered by the Retirement Systems of Alabama.

Substantially all employees of the Board are members of the Teachers’ Retirement System.
Membership is mandatory for covered or eligible employees of the Board. Benefits vest after
10 years of creditable service. Vested employees may retire with full benefits at age 60 or after
25 years of service. Retirement benefits are calculated by two methods with the retiree receiving
payment under the method which yields the highest monthly benefit. The methods are
(1) Minimum Guaranteed, or (2) Formula, of which the Formula method usually produces the
highest monthly benefit. Under this method retirees are allowed 2.0125% of their average final
salary (best three of the last ten years) for each year of service. Retirees may also elect to receive
a reduced retirement allowance (Special Privileges at Retirement) in order to provide an
allowance to a designated beneficiary after the member’s death. Disability retirement benefits
are calculated in the same manner. Pre-retirement death benefits in the amount of the annual
salary for the fiscal year preceding death are provided to plan members.

The Teachers’ Retirement System was established as of October 1, 1941, under the provisions of
Act Number 419, Acts of Alabama 1939, for the purpose of providing retirement allowances and
other specified benefits for qualified persons employed by state-supported educational
institutions. The responsibility for general administration and operation of the Teachers’
Retirement System is vested in the Board of Control (currently 14 members). Benefit provisions
are established by the Code of Alabama 1975, Sections 16-25-1 through 16-25-113, as amended,
and Sections 36-27B-1 through 36-27B-6, as amended.

The Retirement Systems of Alabama issues a publicly available financial report that includes
financial statements and required supplementary information for the Teachers’ Retirement
System of Alabama. That report may be obtained by writing to The Retirement Systems of
Alabama, 201 South Union Street, Montgomery, Alabama 36130-2150.











Notes to the Financial Statements
For the Year Ended September 30, 2012
J efferson County
Board of Education
25

B. Funding Policy

Employees are required by statute to contribute 7.25 percent of their salary to the Teachers’
Retirement System. The Board is required to contribute the remaining amounts necessary to
fund the actuarially determined contributions to ensure sufficient assets will be available to pay
benefits when due. Each year the Teachers’ Retirement System recommends to the Legislature
the contribution rate for the following fiscal year, with the Legislature setting this rate in the
annual appropriation bill. The percentages of the contributions and the amount of contributions
made by the Board and the Board’s employees equal the required contributions for each year as
follows:


Fiscal Year Ended September 30, 2012 2011 2010

Total Percentage of Covered Payroll 17.25% 17.51% 17.51%

Contributions:
Percentage Contributed by the Board 10.00% 12.51% 12.51%
Percentage Contributed by the Employees 7.25% 5.00% 5.00%

Contributed by the Board $18,027,957 $23,158,992 $23,455,948
Contributed by the Employees 13,070,269 9,256,192 9,374,879
Total Contributions $31,098,226 $32,415,184 $32,830,827


Note 7 – Other Postemployment Benefits (OPEB)

A. Plan Description

The Board contributes to the Alabama Retired Education Employees’ Health Care Trust
(the “Trust”), a cost-sharing multiple-employer defined benefit postemployment healthcare plan.
The Trust provides health care benefits to state and local school system retirees and was
established in 2007 under the provisions of Act Number 2007-16, Acts of Alabama, as an
irrevocable trust fund. Responsibility for general administration and operations of the Trust is
vested with the Public Education Employees’ Health Insurance Board (PEEHIB) members. The
Code of Alabama 1975, Section 16-25A-4 provides the PEEHIB with the authority to amend the
benefit provisions in order to provide reasonable assurance of stability in future years. The Trust
issues a publicly available financial report that includes financial statements and required
supplementary information. That report may be obtained at the Public Educations Employees’
Health Insurance Plan website, http://www.rsa-al.gov/PEEHIP/peehip.html under the Trust Fund
Financials tab.




Notes to the Financial Statements
For the Year Ended September 30, 2012
J efferson County
Board of Education
26

B. Funding Policy

The Public Education Employees’ Health Insurance Fund (PEEHIF) was established in 1983
under the provisions of Act Number 83-455, Acts of Alabama, to provide a uniform plan of
health insurance for current and retired employees of state educational institutions. The plan is
administered by the PEEHIB. Any Trust fund assets used in paying administrative costs and
retiree benefits are transferred to and paid from the PEEHIF. The PEEHIB periodically reviews
the funds available in the PEEHIF and if excess funds are determined to be available, the
PEEHIB authorizes a transfer of funds from the PEEHIF to the Trust. Retirees are required to
contribute monthly as follows:



Fiscal Year
2012

Individual Coverage – Non-Medicare Eligible $151.00
Individual Coverage – Medicare Eligible $ 10.00
Family Coverage – Non-Medicare Eligible Retired Member and Non-Medicare Eligible Dependent(s) $391.00
Family Coverage – Non-Medicare Eligible Retired Member and Dependent Medicare Eligible $250.00
Family Coverage – Medicare Eligible Retired Member and Non-Medicare Eligible Dependent(s) $250.00
Family Coverage – Medicare Eligible Retired Member and Dependent Medicare Eligible $109.00
Surviving Spouse – Non-Medicare Eligible $658.00
Surviving Spouse – Non-Medicare Eligible and Dependent Non-Medicare Eligible $847.00
Surviving Spouse – Non-Medicare Eligible and Dependent Medicare Eligible $816.00
Surviving Spouse – Medicare Eligible $328.00
Surviving Spouse – Medicare Eligible and Dependent Non-Medicare Eligible $517.00
Surviving Spouse – Medicare Eligible and Dependent Medicare Eligible $486.00


For employees that retire other than for disability on or after October 1, 2005 and before
J anuary 1, 2012, for each year under 25 years of service, the retiree pays two percent of the
employer premium and for each year over 25 years of service, the retiree premium is reduced by
two percent of the employer premium. Employees who retire on or after J anuary 1, 2012, with
less than 25 years of service, are required to pay 4% for each year under 25 years of service. In
addition, non-Medicare eligible employees are required to pay 1% more for each year less than
65 (age premium) and to pay the net difference between the active employee subsidy and the
non-Medicare eligible retiree subsidy (subsidy premium). When the retiree becomes Medicare
eligible, the age and subsidy premium no longer applies, but the years of service premium
(if applicable to the retiree) will continue to be applied throughout retirement. These changes are
being phased in over a 5 year period. The tobacco premium is $28.00 per month for retired
members that smoke.







Notes to the Financial Statements
For the Year Ended September 30, 2012
J efferson County
Board of Education
27

The Board is required to contribute at a rate specified by the State for each active employee. The
Board’s share of premiums for retired Board employees health insurance is included as part of
the premium for active employees. The following shows the required contributions in dollars
and the percentage of that amount contributed for Board retirees:


Fiscal Year Ended
September 30,
Active Health
Insurance
Premiums
Paid By Board
Amount of
Premium
Attributable
to Retirees
Percentage of
Active Employees
Premiums
Attributable
to Retirees
Total
Amount Paid
Attributable
to Retirees
Percentage
of Required
Amount
Contributed

2012 $714.00 $228.85 32.05% $11,862,925.21 100%
2011 $752.00 $198.94 26.45% $10,562,827.07 100%
2010 $752.00 $241.27 32.08% $13,066,971.88 100%


Each year the PEEHIB certifies to the Governor and to the Legislature the contribution rates
based on the amount needed to fund coverage for benefits for the following fiscal year and the
Legislature sets the premium rate in the annual appropriation bill. This results in a pay-as-you-
go funding method.

Note 8 – Construction and Other Significant Commitments

As of September 30, 2012, the Board was obligated under the following significant construction
contracts:



Total
Amount
Paid
Total
Contract
Amount

Burkett $ 2,111,534.39 $ 2,243,817.00
Concord Elementary 10,486,407.36 11,583,000.00
Erwin Elementary 9,629,000.00 9,629,000.00
Pinson Valley High 378,929.64 378,929.64
Roofing Various Schools 585,097.00 585,097.00
Pleasant Grove High 4,455,146.91 4,540,046.91
Center Point High 4,701,802.97 5,103,000.00
Center Point Elementary 5,718,950.00
Total $32,347,918.27 $39,781,840.55







Notes to the Financial Statements
For the Year Ended September 30, 2012
J efferson County
Board of Education
28

Note 9 – Contingent Liabilities

The Board is a defendant in various lawsuits. Management is unable to predict the outcome of
the litigation, but believes it has strong grounds upon which to defend these proceedings.
Accordingly, no provision for possible loss, if any, is included in the financial statements.

Note 10 – Payables

On September 30, 2012, payables for the Board’s individual major funds and other governmental
funds in the aggregate are as follows:


Vendors
Total
Payables

Governmental Activities:
General Fund $1,987,401.55 $1,987,401.55
Special Revenue Fund 1,456,161.48 1,456,161.48
Other Governmental Funds 528,403.71 528,403.71
Total Governmental Activities $3,971,966.74 $3,971,966.74

























Notes to the Financial Statements
For the Year Ended September 30, 2012
J efferson County
Board of Education
29

Note 11 – Lease Obligations

Capital Leases

The Board is obligated under certain leases accounted for as capital leases. Assets under capital
leases totaled $45,210,000.00 at September 30, 2012. If the Board completes the lease payments
according to the schedule below, which is the stated intent of the Board, ownership of the leased
equipment will pass to the Board. Until that time, the leased equipment will be identified
separately on the balance sheet. The following is a schedule of future minimum lease payments
under capital leases, together with the net present value of the minimum lease payments as of
September 30, 2012.



Fiscal Year Ending
Governmental
Activities

September 30, 2013 $ 3,664,404.07
2014 3,660,941.57
2015 3,664,641.57
2016 3,660,091.57
2017 3,661,879.07
2018-2020 10,999,412.09
Total Minimum Lease Payments 29,311,369.94
Less: Amount Representing Interest 5,644,787.50
Present Value of Net Minimum Lease Payments $23,666,582.44


Note 12 – Long-Term Debt

On December 1, 2005, the Board issued the Refunding Warrant, Series 2005 for the purpose of
advance refunding the Board’s Capital Outlay Warrants, Series 1997-A which provided funds for
certain capital improvement projects.

On October 28, 2009, the Board, as part of a pooled bond issuance with other systems within the
State of Alabama, issued Capital Improvement Pool Refunding Bonds, Series 2009-B in
anticipation of their Public School Fund allocation, which are received from the Alabama
Department of Education. The Alabama Department of Education withholds the required debt
service payments from the Board’s Public School Fund allocation. The proceeds from these
bonds were used to pay the cost of refunding and retiring, on a current basis, the Board’s Capital
Improvement Pool Bonds, Series 1999-D, and to pay the costs of issuing the Series 2009-B
Bonds.





Notes to the Financial Statements
For the Year Ended September 30, 2012
J efferson County
Board of Education
30

On October 28, 2009, the Board, as part of a pooled bond issuance with other school systems
within the State of Alabama, issued Capital Improvement Pool Bonds, Series 2009-C for the
purpose of funding capital projects. The Board’s obligation is paid solely from the Board’s
portion the Public School Fund allocations, which are received from the Alabama Department of
Education. The Alabama Department of Education withholds the required debt service payments
from the Board’s Public School Fund allocation.

On November 4, 2010, the Alabama Public School and College Authority issued Capital
Improvement Pool Qualified School Construction Bond Direct Loan Bonds Series 2010 on
behalf of various Boards of Education in the State. The Board had a 5% participation in the
bonds resulting in the Board’s share of principal, issuance costs and net proceeds of
$7,740,000.00, $34,300.00 and $7,713,000.00, respectively. The Board is required to make
sinking fund deposits of $344,928.51 on September 1 of each year for sixteen years so that such
deposits and any interest earned thereon shall be used to pay the principal of the bonds upon
maturity and are pledged to pay the debt service requirements of the bonds. The sinking fund
deposits and interest payments are payable from and secured by a pledge of the Board’s allocable
share of Public School Capital Outlay Funds.

On February 9, 2011, the Board issued the Capital Outlay School Refunding Warrant,
Series 2011 for the purpose of paying the cost of refunding and retiring, on a current basis, the
Board’s Refunding Warrants, Series 1999-A and 1999-B.























Notes to the Financial Statements
For the Year Ended September 30, 2012
J efferson County
Board of Education
31

The following is a summary of long-term debt transactions for the Board for the year ended
September 30, 2012:



Debt
Outstanding
10/01/2011
Issued/
Increased
Repaid/
Decreased
Debt
Outstanding
09/30/2012
Amounts
Due Within
One Year

Governmental Activities:
Warrants Payable:
Capital Outlay School Refunding
Warrants:
Series 2005 $ 4,855,000.00 $ $ (485,000.00) $ 4,370,000.00 $ 495,000.00
Series 2011 42,339,000.00 (3,957,000.00) 38,382,000.00 4,121,000.00
Capital Improvement Pool Bonds:
Series 2009-C 11,851,979.94 (452,667.58) 11,399,312.36 466,436.93
Capital Improvement Pool Refunding
Bonds Series 2009-B 19,144,704.46 (2,039,204.01) 17,105,500.45 2,140,807.01
Qualified Zone Construction Bonds
Series 2010 7,740,000.00 7,740,000.00
Deferred Amounts:
Unamortized Premium 1,368,207.24 (154,399.15) 1,213,808.09 154,399.15
Loss on Refunding (3,419,038.56) 415,274.02 (3,003,764.54) (415,274.02)
Total Warrants Payable 83,879,853.08 (6,672,996.72) 77,206,856.36 6,962,369.07

Other Liabilities:
Capital Leases Contracts Payable:
Sale/Lease Back Agreement 2000 25,951,936.52 (2,285,354.08) 23,666,582.44 2,415,354.07
Total Capital Lease Contracts Payable 25,951,936.52 (2,285,354.08) 23,666,582.44 2,415,354.07
Compensated Absences 1,660,845.55 (129,655.73) 1,531,189.82 130,828.14
Total Other Liabilities 27,612,782.07 (2,415,009.81) 25,197,772.26 2,546,182.21
Total Governmental Activities
Long-Term Liabilities $111,492,635.15 $ $(9,088,006.53) $102,404,628.62 $9,508,551.28


Payments on the Series 2005 Capital Outlay School Refunding Warrants are made by the Debt
Service Fund with local financial resources provided by J efferson County Commission Grant
funds. Payments on the Series 2011 Capital Outlay School Refunding Warrants are made by the
Debt Service Fund with local financial resources provided by the Board’s share of the 8.8 mill
district ad valorem tax. Payments on the Capital Improvement Pool Bonds, Series 2009-C and
the Capital Improvement Pool Refunding Bonds, Series 2009-B are made with Public School
Funds withheld from the Board’s allocation from the Alabama Department of Education. The
obligations under capital lease were paid by the General Fund for buildings.

The compensated absences liability will be liquidated by the General Fund or the fund for which
the employee worked. In the past, approximately 98% has been paid by the General Fund.







Notes to the Financial Statements
For the Year Ended September 30, 2012
J efferson County
Board of Education
32

The following is a schedule of debt service requirements to maturity:



Total Principal
Warrants
Payable
Capital Lease
Contracts Payable
and Interest
Requirements
Fiscal Year Ending Principal Interest Principal Interest to Maturity

September 30, 2013 $ 7,223,243.94 $ 3,349,725.41 $ 2,415,354.07 $1,249,050.00 $ 14,237,373.42
2014 7,496,916.04 3,040,935.34 2,550,354.07 1,110,587.50 14,198,792.95
2015 7,822,294.71 2,720,848.99 2,700,354.07 964,287.50 14,207,785.27
2016 8,157,901.93 2,398,388.14 2,850,354.07 809,737.50 14,216,381.64
2017 8,518,320.80 2,049,393.10 3,015,354.07 646,525.00 14,229,592.97
2018-2022 26,254,999.13 5,367,851.63 10,134,812.09 864,600.00 42,622,262.85
2023-2027 11,664,266.46 3,065,424.64 14,729,691.10
2028-2029 1,858,869.80 140,533.52 1,999,403.32
Totals $78,996,812.81 $22,133,100.77 $23,666,582.44 $5,644,787.50 $130,441,283.52


Issuance Costs, Deferred Charges on Refunding, and Premiums

The Board has warrant issuance costs as well as deferred loss in connection with the issuance of
its School Refunding Warrants, Series 2005. The issuance costs and deferred loss are being
amortized using the straight-line method over a period of fifteen years.

The Board has issuance costs as well as premiums and deferred loss on refunding in connection
with the issuance of its PSCA Capital Improvement Pool Refunding Bonds, Series 2009-B. The
issuance cost, deferred amount on refunding, and premium are being amortized using the
straight-line method over a period of nine years and seven months.

The Board has issuance costs as well as premiums in connection with the issuance of its PSCA
Capital Improvement Pool Bonds, Series 2009-C. The issuance cost and premium are being
amortized using the straight-line method over a period of nineteen years and seven months.

The Board has issuance costs in connection with the issuance of its Qualified Zone Construction
Bonds, Series 2010. The issuance costs are being amortized using the straight-line method over
a period of sixteen years and ten months.










Notes to the Financial Statements
For the Year Ended September 30, 2012
J efferson County
Board of Education
33

The Board has issuance costs as well as deferred loss on refunding in connection with the
issuance of its Capital Outlay School Refunding Warrants, Series 2011. The issuance costs and
deferred loss are being amortized using the straight-line method over a period of nine years.



Issuance
Costs
Deferred Loss
on Refunding Premium

Total Issuance Costs, Deferred Loss, and Premium $615,745.57 $3,962,273.87 $1,664,138.94
Amount Amortized Prior Years 110,885.31 543,235.31 295,931.70
Balance Issuance Costs, Deferred Loss, and Premium 504,860.26 3,419,038.56 1,368,207.24
Current Amount Amortized 53,450.77 415,274.02 154,399.15
Balance Issuance Costs, Deferred Loss, and Premium $451,409.49 $3,003,764.54 $1,213,808.09


Pledged Revenues

The Board issued Series 2005 Capital Outlay School Refunding Warrants which are pledged to
advance refund the Board’s Capital Outlay Warrants, Series 1997-A, which provided funds for
certain capital improvement projects. Future revenues in the amount of $5,070,581.25 are
pledged to repay the remaining principal and interest on the bonds at September 30, 2012.
Proceeds of the 5.1 mill tax in the amount of $13,483,145.52 were received by the Board during
the fiscal year ended and were pledged to make payments for principal and interest. Pledged
funds in the amount of 661,451.25 were used to pay principal and interest on the bonds during
the fiscal year ended September 30, 2012. The Capital Outlay School Refunding Warrants,
Series 2005 will mature in fiscal year 2020.

On October 28, 2009, the Board, as part of a pooled bond issuance with other school
systems within the State of Alabama, issued PSCA Capital Improvement Pool Refunding Bonds,
Series 2009-B in anticipation of their Public School Fund Allocations, which are received
from the Alabama Department of Education. The proceeds were used to refund, on a current
basis, the Board’s Series 1999-D Capital Improvement Pool Bonds. Future revenues in the
amount of $20,652,032.63 are pledged to repay the remaining principal and interest on the bonds
at September 30, 2012. Proceeds of the Public School Fund allocation in the amount of
$8,257,941.00 were received by the Board during the fiscal year ended. Pledged funds in the
amount of $2,984,532.63 were used to pay principal and interest on the bonds during the fiscal
year ended September 30, 2012. This represents 36 percent of the pledged funds received by the
Board. The Capital Improvement Pool Bonds, Series 2009-B will mature in fiscal year 2019.








Notes to the Financial Statements
For the Year Ended September 30, 2012
J efferson County
Board of Education
34

On October 28, 2009, the Board, as part of a pooled bond issuance with other school systems
within the State of Alabama, issued PSCA Capital Improvement Pool Bonds, Series 2009-C in
anticipation of their Public School Fund Allocations, which are received from the Alabama
Department of Education. The proceeds are to be used for the acquisition, construction and
renovation of school facilities. Future revenues in the amount of $16,989,085.70 are pledged to
repay the remaining principal and interest on the bonds at September 30, 2012. Proceeds of the
Public School Fund allocation in the amount of $8,257,941.00 were received by the Board
during the fiscal year ended. Pledged funds in the amount of $999,379.86 were used to pay
principal and interest on the bonds during the fiscal year ended September 30, 2012. This
represents 12 percent of the pledged funds received by the Board. The Capital Improvement
Pool Bonds, Series 2009-C will mature in fiscal year 2029.

The Board, as part of a pooled bond issuance with other school systems within the State of
Alabama, issued Capital Improvement Pool Qualified School Construction Bonds, Series 2010
(Tax Credit Bonds) in anticipation of their Public School Fund allocations, which are received
from the Alabama Department of Education. The proceeds were used for the acquisition,
construction and renovation of school facilities. Future revenues in the amount of
$13,719,150.00 are pledged to repay the principal and interest on the bonds at
September 30, 2012. Proceeds of the Public School Fund allocations in the amount of
$8,257,941.00 were received by the Board during the fiscal year ended September 30, 2012, of
which $398,610.00 was used to pay interest on the bonds. The Capital Improvement Pool
Qualified School Construction Bonds, Series 2010, will mature in fiscal year 2027.

The Board issued Series 2011 Capital Outlay School Refunding Warrants for the purpose or
refunding, on a current basis, the Board’s Series 1999-A and 1999-B Capital Outlay School
Refunding Warrants. Future revenues in the amount of $44,699,064.00 are pledged to repay the
remaining principal and interest on the bonds at September 30, 2012. Proceeds of the 8.8 mill
district ad valorem tax in the amount of $22,332,941.05 were received by the Board during the
fiscal year ended. Pledged funds in the amount of $5,531,059.50 were used to pay principal and
interest on the bonds during the fiscal year ended September 30, 2012. The Capital Outlay
School Refunding Warrants, Series 2011 will mature in fiscal year 2020.













Notes to the Financial Statements
For the Year Ended September 30, 2012
J efferson County
Board of Education
35

Note 13 – Risk Management

The Board is exposed to various risks of loss related to torts; theft of, damage to, and destruction
of assets; errors and omissions; injuries to employees; and natural disasters. The Board has
insurance for its buildings and contents through the State Insurance Fund (SIF) part of the State
of Alabama, Department of Finance, Division of Risk Management, which operates as a
common risk management and insurance program for state owned properties and county boards
of education. The Board pays an annual premium based on the amount of coverage requested.
The SIF is self-insured up to $3.5 million per occurrence and purchases commercial insurance
for claims in excess of $3.5 million. Automobile liability insurance and errors and omissions
insurance are purchased from the Alabama Risk Management for Schools (ARMS), a public
entity risk pool. The ARMS collects the premiums and purchases excess insurance for any
amount of coverage requested by pool participants in excess of the coverage provided by the
pool. Employee health insurance is provided through the Public Education Employees’ Health
Insurance Fund (PEEHIF), administered by the Public Education Employees’ Health Insurance
Board (PEEHIB). The Fund was established to provide a uniform plan of health insurance for
current and retired employees of state educational institutions and is self-sustaining. Monthly
premiums for employee and dependent coverage are determined annually by the plan’s actuary
and are based on anticipated claims in the upcoming year, considering any remaining fund
balance on hand available for claims. The Board contributes a specified amount monthly to the
PEEHIF for each employee of state educational institutions. The Board’s contribution is applied
against the employees’ premiums for the coverage selected and the employee pays any
remaining premium.

Settled claims resulting from these risks have not exceeded the Board’s coverage in any of the
past three fiscal years.

The Board does not have insurance coverage of job-related injuries. Board employees who are
injured while on the job are entitled to salary and fringe benefits of up to ninety working days in
accordance with the Code of Alabama 1975, Section 16-1-18.1(d). Any unreimbursed medical
expenses and costs which the employee incurs as a result of an on-the-job injury may be filed for
reimbursement with the State Board of Adjustment.












Notes to the Financial Statements
For the Year Ended September 30, 2012
J efferson County
Board of Education
36

Note 14 – Interfund Transactions

Interfund Receivables and Payables

The interfund receivables and payables at September 30, 2012, were as follows:


Interfund Receivables

General
Fund
Special
Revenue
Fund Totals

Interfund Payables:
General Fund $ $1,701.75 $ 1,701.75
Special Revenue Fund 597,798.43 597,798.43
Totals $597,798.43 $1,701.75 $599,500.18


Interfund Transfers

The amounts of interfund transfers during the fiscal year ending September 30, 2012, were as
follows:


Transfers Out


General
Fund
Other
Governmental
Funds

Total

Transfers In:
General Fund $ $ 159,805.96 $ 159,805.96
Special Revenue Fund 3,740,721.75 3,740,721.75
Other Governmental Funds 8,394,925.48 3,771,909.51 12,166,834.99
Totals $12,135,647.23 $3,931,715.47 $16,067,362.70


The Board typically used transfers to fund ongoing operating subsidies and to transfer the portion
from the General Fund to the Debt Service Fund to service current-year debt requirements.



J efferson County
Board of Education
37
Required Supplementary Information
J efferson County
Board of Education 38 Exhibit #8
Schedule of Revenues, Expenditures and Changes in Fund Balances
Budget and Actual - General Fund
For the Year Ended September 30, 2012
Actual Amounts
Original Final Budgetary Basis
Revenues
State 174,958,992.00 $ 177,016,235.17 $ 177,779,955.40 $
Federal 2,301,593.72
Local 82,137,356.48 82,137,356.48 86,102,297.41
Other 508,389.19 508,389.19 369,522.65
Total Revenues 257,604,737.67 259,661,980.84 266,553,369.18
Expenditures
Current:
Instruction 150,697,048.97 154,908,614.11 155,334,767.71
Instructional Support 47,780,193.92 48,448,662.86 46,920,702.74
Operation and Maintenance 27,656,348.96 28,518,651.64 25,233,553.14
Auxiliary Services:
Student Transportation 17,327,102.98 17,330,350.16 17,350,587.22
General Administrative and Central Support 8,515,843.81 9,437,039.70 9,071,754.88
Other 1,071,374.59 1,080,861.05 1,190,902.85
Capital Outlay 10,332.00 346,796.50
Total Expenditures 253,047,913.23 259,734,511.52 255,449,065.04
Excess (Deficiency) of Revenues
Over Expenditures 4,556,824.44 (72,530.68) 11,104,304.14
Other Financing Sources (Uses)
Indirect Cost 1,767,863.00 1,878,584.61 1,834,584.64
Transfers In 204,430.00 204,430.00 159,805.96
Other Financing Sources 95,000.00 95,000.00 2,022,345.13
Transfers Out (13,641,376.49) (12,813,516.12) (12,135,647.23)
Total Other Financing Sources (Uses) (11,574,083.49) (10,635,501.51) (8,118,911.50)
Net Change in Fund Balances (7,017,259.05) (10,708,032.19) 2,985,392.64
Fund Balances - Beginning of Year 57,470,517.45 66,521,424.13 66,521,424.13
Fund Balances - End of Year 50,453,258.40 $ 55,813,391.94 $ 69,506,816.77 $
Budgeted Amounts
J efferson County
Board of Education 39 Exhibit #8
Budget to GAAP Actual Amounts
Differences GAAP Basis
$ 177,779,955.40 $
2,301,593.72
(1) (174,551.82) 85,927,745.59
369,522.65
(174,551.82) 266,378,817.36
(2) 4,378,221.76 150,956,545.95
(2) 710,281.41 46,210,421.33
(2) 143,087.30 25,090,465.84
(2) 328,362.27 17,022,224.95
(2) 24,988.26 9,046,766.62
(2) 24,902.32 1,166,000.53
346,796.50
5,609,843.32 249,839,221.72
5,435,291.50 16,539,595.64
1,834,584.64
159,805.96
2,022,345.13
(12,135,647.23)
(8,118,911.50)
5,435,291.50 8,420,684.14
(3) (25,318,897.56) 41,202,526.57
(19,883,606.06) $ 49,623,210.71 $
J efferson County
Board of Education 40 Exhibit #8
Schedule of Revenues, Expenditures and Changes in Fund Balances
Budget and Actual - General Fund
For the Year Ended September 30, 2012
Explanation of differences between Actual Amounts on Budgetary Basis and Actual
Amounts GAAP Basis:
The Board budgets on the modified accrual basis of accounting except as shown below:
(1) The Board recognizes property taxes and other taxes as they are actually received without
regard to when they were earned.
(2) The Board budgets for salaries only to the extent expected to be paid, rather than on the
modified accrual basis.
Net Increase in Fund Balance - Budget to GAAP
(3) The amount reported as "fund balance" on the budgetary basis of accounting derives
from the basis of accounting used in preparing the Board's budget. This amount
differs from the fund balance reported in the Statements of Revenues, Expenditures
and Changes in Fund Balances because of the cumulative effect of transactions such
as those described above.
J efferson County
Board of Education 41 Exhibit #8
(174,551.82) $
5,609,843.32
5,435,291.50 $
J efferson County
Board of Education 42 Exhibit #9
Schedule of Revenues, Expenditures and Changes in Fund Balances
Budget and Actual - Special Revenue Fund
For the Year Ended September 30, 2012
Actual Amounts
Original Final Budgetary Basis
Revenues
Federal 27,089,870.44 $ 34,866,408.98 $ 32,219,677.46 $
Local 19,419,679.00 19,419,679.00 19,379,663.34
Other 326,300.00 326,300.00 1,602,564.74
Total Revenues 46,835,849.44 54,612,387.98 53,201,905.54
Expenditures
Current:
Instruction 16,009,501.52 21,970,994.40 19,710,526.65
Instructional Support 5,499,216.31 6,645,305.67 6,433,020.13
Operation and Maintenance 923,949.00 974,489.00 1,122,860.87
Auxiliary Services:
Student Transportation 1,096,692.49 857,810.75 569,377.43
Food Service 22,528,999.45 23,702,044.36 23,243,749.43
General Administrative and Central Support 408,009.31 555,180.54 495,438.01
Other 4,869,556.50 5,568,797.40 5,604,860.30
Capital Outlay 167,482.00 1,280,513.65
Total Expenditures 51,335,924.58 60,442,104.12 58,460,346.47
Excess (Deficiency) of Revenues
Over Expenditures (4,500,075.14) (5,829,716.14) (5,258,440.93)
Other Financing Sources (Uses)
Transfers In 9,110,201.23 7,096,052.98 3,740,721.75
Transfers Out (2,480,458.00) (2,480,458.00)
Total Other Financing Sources (Uses) 6,629,743.23 4,615,594.98 3,740,721.75
Net Change in Fund Balances 2,129,668.09 (1,214,121.16) (1,517,719.18)
Fund Balances - Beginning of Year 22,099,257.16 21,189,700.45 21,189,700.45
Fund Balances - End of Year 24,228,925.25 $ 19,975,579.29 $ 19,671,981.27 $
Budgeted Amounts
J efferson County
Board of Education 43 Exhibit #9
Budget to GAAP Actual Amounts
Differences GAAP Basis
$ 32,219,677.46 $
19,379,663.34
1,602,564.74
53,201,905.54
19,710,526.65
6,433,020.13
1,122,860.87
569,377.43
(1) 335,185.51 22,908,563.92
495,438.01
(1) 5,423.56 5,599,436.74
1,280,513.65
340,609.07 58,119,737.40
340,609.07 (4,917,831.86)
3,740,721.75
3,740,721.75
340,609.07 (1,177,110.11)
(2) (1,016,307.76) 20,173,392.69
(675,698.69) $ 18,996,282.58 $
J efferson County
Board of Education 44 Exhibit #9
Schedule of Revenues, Expenditures and Changes in Fund Balances
Budget and Actual - Special Revenue Fund
For the Year Ended September 30, 2012
Explanation of differences between Actual Amount on Budgetary Basis and Actual
Amounts GAAP Basis:
The Board budgets on the modified accrual basis of accounting as shown below:
(1) The Board budgets for salaries only to the extent expected to be paid, rather than on the
modified accrual basis.
Net Increase in Fund Balance - Budget to GAAP
(2) The amount reported as "fund balance" on the budgetary basis of accounting derives
from the basis of accounting used in preparing the Board's budget. This amount
differs from the fund balance reported in the Statement of Revenues, Expenditures
and Changes in Fund Balances because of the cumulative effect of transactions such
as those described above.
J efferson County
Board of Education 45 Exhibit #9
340,609.07 $
340,609.07 $
This Page Intentionally Blank

J efferson County
Board of Education
46
Supplementary Information
J efferson County
Board of Education 47 Exhibit #10
Schedule of Expenditures of Federal Awards
For the Year Ended September 30, 2012
Federal Grantor/ Federal Pass-Through
Pass-Through Grantor/ CFDA Grantor's
Program Title Number Number
U. S. Department of Agriculture
Passed Through Alabama Department of Education
Child Nutrition Cluster:
School Breakfast Program 10.553 N.A.
National School Lunch Program:
Cash Assistance 10.555 N.A.
Non-Cash Assistance (Commodities) 10.555 N.A.
National School Lunch Program Sub-Total
Sub-Total Child Nutrition Cluster (M)
Fresh Fruit and Vegetable Program 10.582 N.A.
Total U. S. Department of Agriculture
U. S. Department of Education
Passed Through Alabama Department of Education
Special Education Cluster:
Special Education - Grants to States 84.027 N.A.
Special Education - Preschool Grants 84.173 N.A.
Sub-Total Special Education Cluster
Title I Grants to Local Educational Agencies (M) 84.010 N.A.
Career and Technical Education - Basic Grants to States 84.048 N.A.
Education for Homeless Children and Youth 84.196 N.A.
Education Technology State Grants 84.318 N.A.
Special Education - State Personnel Development 84.323 N.A.
Advanced Placement Program 84.330 N.A.
English Language Acquisition State Grants 84.365 N.A.
Improving Teacher Quality State Grants (M) 84.367 N.A.
School Improvement Grants 84.377 N.A.
Education J obs Fund 84.410 N.A.
Total U. S. Department of Education
Sub-Total Forward
J efferson County
Board of Education 48 Exhibit #10
Assistance Federal Revenue
Period Total Share Recognized Expenditures
10/01/2011 - 09/30/2012 2,570,641.01 $ 2,570,641.01 $ 2,570,641.01 $ 2,570,641.01 $
10/01/2011 - 09/30/2012 8,333,654.92 8,333,654.92 8,333,654.92 8,333,654.92
10/01/2011 - 09/30/2012 973,966.88 973,966.88 973,966.88 973,966.88
9,307,621.80 9,307,621.80 9,307,621.80 9,307,621.80
11,878,262.81 11,878,262.81 11,878,262.81 11,878,262.81
10/01/2011 - 09/30/2012 243,877.79 243,877.79 243,877.79 243,877.79
12,122,140.60 12,122,140.60 12,122,140.60 12,122,140.60


10/01/2011 - 09/30/2012 14,152,341.29 14,152,341.29 12,675,742.92 12,675,742.92
10/01/2011 - 09/30/2012 843,153.16 843,153.16 726,651.31 726,651.31
14,995,494.45 14,995,494.45 13,402,394.23 13,402,394.23
10/01/2011 - 09/30/2012 8,175,132.69 8,175,132.69 7,027,275.33 7,027,275.33
10/01/2011 - 09/30/2012 382,713.00 382,713.00 382,713.00 382,713.00
10/01/2011 - 09/30/2012 20,000.00 20,000.00 18,773.32 18,773.32
10/01/2011 - 09/30/2012 12,614.50 12,614.50 12,610.94 12,610.94
10/01/2011 - 09/30/2012 12,207.00 12,207.00 6,778.38 6,778.38
10/01/2011 - 09/30/2012 7,866.00 7,866.00 7,866.00 7,866.00
10/01/2011 - 09/30/2012 161,961.18 161,961.18 126,799.54 126,799.54
10/01/2011 - 09/30/2012 1,213,471.14 1,213,471.14 1,131,224.05 1,131,224.05
10/01/2011 - 09/30/2012 5,024.24 5,024.24 5,024.24 5,024.24
10/01/2011 - 09/30/2012 238,186.67 238,186.67 238,186.67 238,186.67
25,224,670.87 25,224,670.87 22,359,645.70 22,359,645.70

37,346,811.47 $ 37,346,811.47 $ 34,481,786.30 $ 34,481,786.30 $
Budget
J efferson County
Board of Education 49 Exhibit #10
Schedule of Expenditures of Federal Awards
For the Year Ended September 30, 2012
Federal Grantor/ Federal Pass-Through
Pass-Through Grantor/ CFDA Grantor's
Program Title Number Number
Sub-Total Brought Forward
U. S. Department of Health and Human Services
Passed Through Alabama Department of Education
Child Care and Development Block Grant 93.575 N.A.
Social Security Administration
Passed Through Alabama Department of Education
Social Security - Disability Insurance 96.001 N.A.
Other Federal Assistance
U. S. Department of the Interior
Direct Grant
Teacher to Ranger to Teacher Program N.A. N.A.
Total Expenditures of Federal Awards
(M) =Major Program
N.A. =Not Available or Not Applicable
The accompanying Notes to the Schedule of Expenditures of Federal Awards are an integral part of this schedule.
J efferson County
Board of Education 50 Exhibit #10
Assistance Federal Revenue
Period Total Share Recognized Expenditures
37,346,811.47 $ 37,346,811.47 $ 34,481,786.30 $ 34,481,786.30 $


10/01/2011 - 09/30/2012 25,000.00 25,000.00 24,387.98 24,387.98
10/01/2011 - 09/30/2012 18,948.00 18,948.00 18,948.00 18,948.00
10/01/2011 - 09/30/2012 773.14 773.14 773.14 773.14
37,391,532.61 $ 37,391,532.61 $ 34,525,895.42 $ 34,525,895.42 $
Budget
Notes to the Schedule of Expenditures
of Federal Awards
For the Year Ended September 30, 2012
J efferson County
Board of Education
51

Note 1 – Basis of Presentation

The accompanying Schedule of Expenditures of Federal Awards includes the federal grant
activity of the J efferson County Board of Education and is presented on the modified accrual
basis of accounting. The information in this schedule is presented in accordance with the
requirements of OMB Circular A-133, Audits of States, Local Governments, and Non-Profit
Organizations. Therefore, some amounts presented in this schedule may differ from amounts
presented in or used in the preparation of the financial statements.


J efferson County
Board of Education
52
Additional Information
Board Members and Administrative Personnel
October 1, 2011 through September 30, 2012
J efferson County Exhibit #11
Board of Education
53







Board Members Term Expires

Hon. J ennifer H. Parsons President November 2016

Hon. Ronald A. Rhodes Vice-President November 2012

Hon. J acqueline A. Smith Board Member November 2016

Hon. Karen Smith Nix Board Member November 2012

Hon. Tommy L. Little Board Member November 2014

Administrative Personnel

Dr. Phillip B. Hammonds Superintendent December 31, 2012

Dr. Yancy E. Morris Deputy Superintendent

Dr. J ulie P. Hannah Interim Deputy Superintendent

Dr. Anna M. Vacca Deputy Superintendent

Mrs. Sheila J ones Executive Director of Business and
Financial Affairs, Chief School
Finance Officer



Report on Internal Control Over Financial Reporting and on
Compliance and Other Matters Based on an Audit of
Financial Statements Performed in Accordance With
Government Auditing Standards
J efferson County Exhibit #12
Board of Education
54

We have audited the financial statements of the governmental activities, each major fund, and the
aggregate remaining fund information of the J efferson County Board of Education as of and for
the year ended September 30, 2012, which collectively comprise the J efferson County Board of
Education’s basic financial statements and have issued our report thereon dated April 16, 2013.
We conducted our audit in accordance with auditing standards generally accepted in the United
States of America and the standards applicable to financial audits contained in Government
Auditing Standards, issued by the Comptroller General of the United States.

Internal Control Over Financial Reporting

Management of the J efferson County Board of Education is responsible for establishing and
maintaining effective internal control over financial reporting. In planning and performing our
audit, we considered the J efferson County Board of Education’s internal control over financial
reporting as a basis for designing our auditing procedures for the purpose of expressing our
opinion on the financial statements, but not for the purpose of expressing an opinion on the
effectiveness of the J efferson County Board of Education’s internal control over financial
reporting. Accordingly, we do not express an opinion on the effectiveness of the J efferson
County Board of Education’s internal control over financial reporting.

A deficiency in internal control exists when the design or operation of a control does not allow
management or employees, in the normal course of performing their assigned functions, to
prevent or detect and correct misstatements on a timely basis. A material weakness is a
deficiency, or combination of deficiencies, in internal control such that there is a reasonable
possibility that a material misstatement of the entity’s financial statements will not be prevented,
or detected and corrected on a timely basis.

Our consideration of internal control over financial reporting was for the limited purpose
described in the first paragraph of this section and was not designed to identify all deficiencies in
internal control over financial reporting that might be deficiencies, significant deficiencies or
material weaknesses. We did not identify any deficiencies in internal control over financial
reporting that we consider to be material weaknesses, as defined above. However, we identified
certain deficiencies in internal control over financial reporting, described in the accompanying
Schedule of Findings and Questioned Costs as items 2010-01, 2010-02 and 2012-01 that we
consider to be significant deficiencies in internal control over financial reporting. A significant
deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe
than a material weakness, yet important enough to merit attention by those charged with
governance.



Report on Internal Control Over Financial Reporting and on
Compliance and Other Matters Based on an Audit of
Financial Statements Performed in Accordance With
Government Auditing Standards
Compliance and Other Matters
As part of obtaining reasonable assurance about whether the Jefferson County Board of
Education' s financial statements are free of material misstatement, we performed tests of its
compliance with certain provisions of laws, regulations, contracts and grant agreements,
noncompliance with which could have a direct and material effect on the determination of
financial statement amounts. However, providing an opinion on compliance with those
provisions was not an objective of our audit, and accordingly, we do not express such an opinion.
The results of our tests disclosed no instances of noncompliance or other matters that are
required to be reported under Government Auditing Standards.
The Jefferson County Board of Education's response to the findings identified in our audit is
described in the accompanying Auditee Response/Corrective Action Plan. We did not audit the
Jefferson County Board of Education's response and, accordingly, we express no opinion on it.
This report is intended solely for the information and use of management, members of the
Jefferson County Board of Education, the Superintendent, the Deputy Superintendents, the Chief
School Finance Officer, others within the entity, federal awarding agencies and pass-through
entities and is not intended to be and should not be used by anyone other than these specified
parties.
April 16, 2013
Jefferson County
Board of Education
55
f ~ ; < r
Ronald L. Jones
Chief Examiner
Department of Examiners of Public Accounts
Exhibit #12
Report on Compliance With Requirements That Could
Have a Direct and Material Effect on Each Major
Program and on Internal Control Over Compliance in
Accordance With OMB Circular A-133
J efferson County Exhibit #13
Board of Education
56

Independent Auditor's Report

Compliance

We have audited the J efferson County Board of Education’s compliance with the types of
compliance requirements described in the OMB Circular A-133 Compliance Supplement that
could have a direct and material effect on each of the J efferson County Board of Education’s
major federal programs for the year ended September 30, 2012. The J efferson County Board of
Education’s major federal programs are identified in the Summary of Examiner’s Results Section
of the accompanying Schedule of Findings and Questioned Costs. Compliance with the
requirements of laws, regulations, contracts and grants applicable to each of its major federal
programs is the responsibility of the J efferson County Board of Education’s management. Our
responsibility is to express an opinion on the J efferson County Board of Education’s compliance
based on our audit.

We conducted our audit of compliance in accordance with auditing standards generally accepted
in the United States of America; the standards applicable to financial audits contained in
Government Auditing Standards, issued by the Comptroller General of the United States; and
OMB Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations.
Those standards and OMB Circular A-133 require that we plan and perform the audit to obtain
reasonable assurance about whether noncompliance with the types of compliance requirements
referred to above that could have a direct and material effect on a major federal program
occurred. An audit includes examining, on a test basis, evidence about the J efferson County
Board of Education’s compliance with those requirements and performing such other procedures
as we considered necessary in the circumstances. We believe that our audit provides a
reasonable basis for our opinion. Our audit does not provide a legal determination of the
J efferson County Board of Education’s compliance with those requirements.

In our opinion, the J efferson County Board of Education complied, in all material respects, with
the compliance requirements referred to above that could have a direct and material effect on
each of its major federal programs for the year ended September 30, 2012.









Report on Compliance With Requirements That Could
Have a Direct and Material Effect on Each Major
Program and on Internal Control Over Compliance in
Accordance With OMB Circular A-133
J efferson County Exhibit #13
Board of Education
57

Internal Control Over Compliance

Management of the J efferson County Board of Education is responsible for establishing and
maintaining effective internal control over compliance with requirements of laws, regulations,
contracts and grants applicable to federal programs. In planning and performing our audit, we
considered the J efferson County Board of Education’s internal control over compliance with the
requirements that could have a direct and material effect on a major federal program to
determine the auditing procedures for the purpose of expressing our opinion on compliance and
to test and report on internal control over compliance in accordance with OMB Circular A-133,
but not for the purpose of expressing an opinion on the effectiveness of internal control over
compliance. Accordingly, we do not express an opinion on the effectiveness of the J efferson
County Board of Education’s internal control over compliance.

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

Our consideration of the internal control over compliance was for the limited purpose described
in the first paragraph of this section and was not designed to identify all deficiencies in internal
control over compliance that might be deficiencies, significant deficiencies or material
weaknesses. We did not identify any deficiencies in internal control over compliance that we
consider to be material weaknesses, as defined above.













Report on Compliance With Requirements That Could
Have a Direct and Material Effect on Each Major
Program and on Internal Control Over Compliance in
Accordance With OMB Circular A-133
This report is intended solely for the information and use of management, members of the
Jefferson County Board ofEducation, the Superintendent, the Deputy Superintendents, the Chief
School Finance Officer, others within the entity, federal awarding agencies and pass-through
entities and is not intended to be and should not be used by anyone other than these specified
parties.
April 16, 2013
Jefferson County
Board of Education
58
y$Jtxr
Ronald L. Jones
Chief Examiner
Department of Examiners of Public Accounts
Exhibit #13
Schedule of Findings and Questioned Costs
For the Year Ended September 30, 2012
J efferson County Exhibit #14
Board of Education
59

Section I – Summary of Examiner's Results

Financial Statements

Type of opinion issued: Unqualified
Internal control over financial reporting:
Material weakness(es) identified? Yes X No

Significant deficiency(ies) identified?

X Yes None reported
Noncompliance material to financial
statements noted?

Yes X No

Federal Awards

Internal control over major programs:
Material weakness(es) identified? Yes X No

Significant deficiency(ies) identified?

Yes X None reported
Type of auditor’s report issued on compliance
for major programs:

Unqualified
Any audit findings disclosed that are required
to be reported in accordance with
Section 510(a) of OMB Circular A-133?


Yes X No

Identification of major programs:


CFDA Numbers Name of Federal Program or Cluster

10.553 and 10.555 Child Nutrition Cluster
84.010 Title I Grants to Local Educational
Agencies
84.367 Improving Teacher Quality State Grants


Dollar threshold used to distinguish between
Type A and Type B programs:

$1,035,776.86

Auditee qualified as low-risk auditee? Yes X No





Schedule of Findings and Questioned Costs
For the Year Ended September 30, 2012
J efferson County Exhibit #14
Board of Education
60

Section II – Financial Statement Findings (GAGAS)

Ref.
No.
Type of
Finding

Finding/Noncompliance
Questioned
Costs
2010-01 Internal
Control
Finding:
The Board’s Local School Finance Manual requires a
purchase order to be obtained and approved by the
Principal before the purchase is made, all
disbursements to be secured by a valid invoice and
purchase order, and all invoices to be paid in a timely
manner. The following matters were noted at
Hueytown High School relating to local school
expenditures:
♦ Instances were noted in which purchase orders
were dated after the invoice date.
♦ Disbursements were made from statements rather
than the invoice.
♦ Late charges were paid.
♦ Invoices exceeded the purchase order amount.
Recommendation:
The Board should ensure that procedures related to
local school expenditures are followed.

2010-02 Internal
Control
Finding:
The Board’s Local School Finance Manual requires
all receipts written to be deposited on the day
received and all copies of voided receipts to be
stapled together and filed in numerical order with all
other receipts. In addition, a “Fundraiser Request
Form” is required be completed by the sponsor and
approved by the Principal before any fundraising
activity is started. The following matters were noted
at Hueytown High School relating to local school
receipting:
♦ Teacher receipts were not remitted to the school
office in a timely manner.
♦ All copies of voided receipts were not retained
for subsequent review.
♦ Fundraiser request forms were not completed for
several fundraisers.
Recommendation:
The Board should ensure that procedures related to
local school receipting are followed.


Schedule of Findings and Questioned Costs
For the Year Ended September 30, 2012
J efferson County Exhibit #14
Board of Education
61

Section II – Financial Statement Findings (GAGAS)

Ref.
No.
Type of
Finding

Finding/Noncompliance
Questioned
Costs
2012-01 Internal
Control
Finding:
The Board’s Local School Finance Manual requires a
“Ticket Sales Report” to be completed for each event
held on school property, including athletic events.
The Bookkeeper is responsible for filling in the
beginning ticket number on the report before the
event and the ending ticket number after the event,
based on the unused tickets returned by each cashier.
Unused tickets are required to be retained for
subsequent review. The following matters were
noted pertaining to athletic ticket sales at Hueytown
High School:
♦ Unsold tickets from the 2011 football season
were not retained for subsequent review.
♦ A sequence of tickets reflected as “sold” on a
Ticket Sales Report were actually included with
the unsold tickets from the 2012 football season.
♦ Not all of the unsold tickets from the 2012
football season could be accounted for.
♦ Proceeds from a softball game did not appear to
have been receipted and a Ticket Sales Report for
the game was not available for review.
♦ Some gate receipts did not appear to have been
remitted to the office bookkeeper in a timely
manner.
Recommendation:
The Board should ensure that procedures related to
athletic ticket sales are followed.


Section III – Federal Awards Findings and Questioned Costs

Ref.
No.
CFDA
No.

Program

Finding/Noncompliance
Questioned
Costs

No matters were reportable.



J efferson County Exhibit #15
Board of Education
62
Auditee Response/Corrective Action Plan
® JEF"t{•ED
Jefferson County Board Of Education
2100 18th Street South
Birmingham, Alabama 35209-1891
Telephone 205/379-2000
www.jefcoed.com
Corrective Action Plan
For the Year Ended September 30,2012
BOARD OF EDUCATION
Mrs. Jennifer H. Parsons
President
Mr. Ronald A. Rhodes
Vice-President
Ms. Jacqueline A. Smith
Mr. Tommy L. Little
Mr. Oscar S. Mann
Dr. Stephen Nowlin
Superintendent
As required by the Office of Management and Budget (OMB) Circular No. A-133, Audits of
States, Local Governments and Non-Profit Organizations, Section .15(c), the Jefferson
Countv Board of Education has prepared and hereby submits the following Corrective Action
Plan for the fmdings included in the Schedule of Findings and Questioned Costs for the year
ended September 30,2012.
Finding
Ref.
No.
Finding # 2010-01 :
Corrective Action Plan Details
The Board's Local School Finance Manual requires a purchase order to be obtained and approved
by the Principal before the purchase is made, all disbursements to be secured by a valid invoice
and purchase order, and all invoices to be paid in a timely manner. The following matters were
noted at Hueytown High School relating to local school expenditures:
• Instances were noted in which purchase orders were dated after the invoice date.
• Disbursements were made from statements rather than the invoice.
• Late charges were paid.
• Invoices exceeded the purchase order amount.
Response: A fmancial advisor (Assistant Director of Finance) will be assigned to Hueytown
High School. The financial advisor will be required to review and approve all fmancial related
items. The financial advisor will also provide additional training to the office coordinator at this
school.
Finding# 2010-02:
The Board's Local School Finance Manual requires all receipts written to be deposited on the day
received and all copies of voided receipts to be stapled together and filed in numerical order with
all other receipts. In addition, a "Fundraiser Request Form" is required to be completed by the
sponsor and approved by the Principal before any fundraising activity is started. The following
matters were noted at Hueytown High School relating to local school receipting:
• Teacher receipts were not remitted to the school office in a timely manner.
• All copies of voided receipts were not retained for subsequent review.
'IF A NATION EXPECTS TO BE IGNORANT AND FREE, IT E.fPECTS WHAT NEVER WAS AND NEVER WILL BE"
Thomas Jefferson
Response: A fmancial advisor (Assistant Director of Finance) will be assigned to Hueytown
High School to provide additional training regarding the proper handling of cash receipts.
Finding# 2012-01:
The Board's Local School Finance Manual requires a "Ticket Sales Report" to be completed for
each event held on school property, including athletic events. The Bookkeeper is responsible for
filling in the beginning ticket number on the report before the event and the ending ticket number
after the event, based on the unused tickets returned by each cashier. Unused tickets are required
to be retained for subsequent review. The following matters were noted pertaining to athletic
ticket sales at Hueytown High School:
• Unsold tickets from the 2011 football season were not retained for subsequent review.
• A sequence of tickets reflected as "sold" on a Ticket Sales report were actually included
with the unsold tickets from the 2012 football season.
• Not all of the unsold tickets from the 2012 football season could be accounted for.
• Proceeds from a softball game did not appear to have been receipted and a Ticket Sales
Report for the game was not available for review.
• Some gate receipts did not appear to have been remitted to the office bookkeeper in a
timely manner.
Response: A financial advisor (Assistant Director of Finance) will be assigned to Hueytown
High School. The fmancial advisor will be required to review and approve all fmancial related
items. The financial advisor will also provide additional training to the office coordinator at this
school.
Contacts: Chief School Finance Officer
Anticipated Completion Date: June 30, 2013
2

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