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"' HALL COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS - SECTION I FINANCIAL INDEPENDENT AUDITOR'S COMBINED REPORT ON BASIC FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION - SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS REQUIRED SUPPLEMENTARY INFORMATION MANAGEMENT'S DISCUSSION AND ANALYSIS EXHIBITS BASIC FINANCIAL STATEMENTS DISTRICT-WIDE FINANCIAL STATEMENTS A STATEMENT OF NET ASSETS 3 B STATEMENT OF ACTIVITIES 4 FUND FINANCIAL STATEMENTS C BALANCE SHEET GOVERNMENTAL FUNDS 6 D RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO THE STATEMENT OF NET ASSETS 7 E STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS 8 F RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES TO THE STATEMENT OF ACTIVITIES 9 G STATEMENT OF FIDUCIARY NET ASSETS FIDUCIARY FUNDS 11 H NOTES TO THE BASIC FINANCIAL STATEMENTS 12 SCHEDULES REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL GENERAL FUND 28 HALL COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS - SECTION I FINANCIAL SCHEDULES SUPPLEMENTARY INFORMATION 2 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS 29 3 SCHEDULE OF STATE REVENUE 31 4 SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS 33 ALLOTMENTS AND EXPENDITURES GENERAL FUND - QUALITY BASIC EDUCATION PROGRAMS (QBE) 5 BY PROGRAM 34 6 BY SITE 35 SECTION II COMPLIANCE AND INTERNAL CONTROL REPORTS REPORT ON COMPLIANCE AND ON INTERNAL CONTROL OVER FINANCIAL REPORTING BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS REPORT ON COMPLIANCE WITH REQUIREMENTS APPLICABLE TO EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH 0MB CIRCULAR A-133 SECTION III AUDITEE'S RESPONSE TO PRIOR YEAR FINDINGS AND QUESTIONED COSTS SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS SECTION IV FINDINGS AND QUESTIONED COSTS SCHEDULE OF FINDINGS AND QUESTIONED COSTS SECTION I FINANCIAL RUSSELL W. HINTON STATE AUDITOR (404) 656-2174 DEPARTMENT OF AUDITS AND ACCOUNTS 254 Washington Street, S.W. Suite 214 Atlanta, Georgia 30334-8400 May 24, 2003 Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education and Superintendent and Members of the Hall County Board of Education INDEPENDENT AUDITOR'S COMBINED REPORT ON BASIC FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION - SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS Ladies and Gentlemen: We have audited the accompanying financial statements of the governmental activities, each major fund, and the aggregate remaining fund information (Exhibits A through H) of the Hall County Board of Education, as of and for the year ended June 30, 2002, which collectively comprise the Board's basic financial statements as listed in the table of contents. These financial statements are the responsibility of the Hall 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 ofAmerica and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General ofthe United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes 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 opm1ons. In our opinion, the financial statements referred to above present fairly, in all material respects, the respective position ofthe governmental activities, each major fund, and the aggregate remaining fund information ofthe Hall County Board of Education, as ofJune 30, 2002, 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. 2002-34ARL-l l As discussed in Note 2 to the basic financial statements, during fiscal year 2002, the Board completed a comprehensive inventory of its capital assets for inclusion in the basic financial statements, the Board consolidated its individual school activity accounts for inclusion in the basic financial statements and the Board changed its method of accounting for the salaries of certain tenmonth employees from a cash basis to a basis that is generally accepted. These changes are in accordance with generally accepted accounting principles. As described in Note 2, the Hall County Board of Education has implemented a new financial reporting model as required by provisions ofGovernmental Accounting Standards Board Statement No. 34, Basic Financial Statements - and Management's Discussion and Analysis - for State and Local Governments, as of June 30, 2002. In accordance with Government Auditing Standards, we have also issued our report dated May 24, 2003, on our consideration of the Hall County Board of Education's internal control over financial reporting and our tests of its compliance with certain provisions of laws, regulations, contracts and grants. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be read in conjunction with this report in considering the results of our audit. Management's Discussion and Analysis and the Schedule ofRevenues, Expenditures and Changes in Fund Balances - Budget and Actual, as presented on pages i through ix and page 28 respectively, are not a required part of the basic financial statements but are supplementary information required by the Governmental Accounting Standards Board. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods of measurement and presentation ofthe required supplementary information. However, we did not audit the information and express no opinion on it. Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Hall County Board of Education's basic financial statements. The accompanying supplementary information which consist of Schedules 2 through 6, which includes the Schedule of Expenditures of Federal Awards as required by U.S. Office of Management and Budget Circular A-133, Audits o/States, Local Governments, and Non-Profit Organizations, are not a required part ofthe basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements, and in our opinion, is fairly stated, in all material respects, in relation to the basic financial statements taken as a whole. 2002-34ARL-11 A copy ofthis report has been filed as a permanent record in the office ofthe State Auditor and made available to the press ofthe State, as provided for by Official Code of Georgia Annotated section 506-24. Respectfully submitted; -------- lo.~.:.k Rus ell W. Hinton State Auditor RWH:as 2002-34ARL-11 HALL COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2002 INTRODUCTION Our discussion and analysis of the Hall County School District's financial performance provides an overview of the School District's financial activities for the fiscal year ended June 30, 2002. The intent of this discussion and analysis is to look at the School District's finan~~a,l performance as a whole; readers should also review the notes to\the basic financial stateme'nts and financial statements to enhance their understanding of the School District's financial performance. FINANCIAL HIGHLIGHTS Key financial highlights for fiscal year 2002 are as follows: The School District implemented GASB 34 for fiscal year 2002. Due to this being the implementation year, many comparisons are not available that will be available in fiscal year 2003. On the district-wide financial statements, the assets of the School District exceeded liabilities by $133.1 million. Of this amount, $10.7 million is unrestricted and is available for spending at the School District's discretion. The School District had $152 million in expenses relating to governmental activities; only $102.7 million of these expenses are offset by program specific charges for services, grants and contributions. General revenues (primarily property and sales taxes) of $69.2 million were adequate to provide for these programs. As stated above, general revenues accounted for $69.2 million or 40% of all revenues totaling $171.9 mHlion. Program specific revenues in the form of charges for services, grants and contributions accounted for the rest. OVERVIEW OF THE FINANCIAL STATEMENTS This annual report consists of three parts; management's discussion and analysis, the basic financial statements and required supplementary information. The basic financial statements include two levels of statements that present different views of the School District. These include the district-wide and fund financial statements. The district-wide financial statements include the Statement of Net Assets and Statement of Activities. These statements provide information about the activities of the School District presenting both short-term and long-term information about the School District's overall financial status. HALL COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2002 The fund financial statements focus on individual parts of the School District, reporting the School District's operation in more detail. The Governmental Funds statements disclose how basic services are financed in the short-term as well as what remains for future spending. The Fiduciary Funds statements provide information about the financial relationships in which the School District acts solely as a trustee or agent for the benefit of others. The fund financial statements reflect the School District's most significant funds. In the case of the Hall County School District, the General Fund, District-wide Capital Projects Fund, and Debt Service Fund are the most significant funds. The financial statements also include notes that explain some of the information in the statements and provide more detailed data. The statements are followed by a section of required supplementary information that further explains and supports the financial statements. Additionally, other supplementary information (not required) is also presented that further supplements understanding of the financial statements. District-Wide Statements The District-Wide financial statements are basically a consolidation of all of the District's operating funds into one column called governmental activities. In reviewing the District-Wide financial statements, a reader might ask the question, are we in a better financial position than last year? The Statement of Net Assets and the Statement of Activities provides the basis for answering this question. These financial statements include all District's assets and liabilities and uses the accrual basis of accounting similar to the accounting used by most private-sector companies. This basis of accounting takes into account all of the current year's revenues and expenses regardless of when cash is received or paid. These two statements report the School District's net assets and any changes in those assets. The change in net assets is important because it tells the reader that, for the School District as a whole, the financial position of the School District has improved or diminished. The causes of this change may be the results of many factors, including those not under the School District's control, such as the property tax base, facility conditions, required educational programs and other factors. The Statement of Net Assets and the Statement of Activities reflects the School District's governmental activities. Fund Financial Statements The School District uses many funds to account for a multitude of financial transactions during the fiscal year. However, the fund financial statements presented in this report provide detail information about only the School District's significant or major funds. 11 HALL COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2002 Governmental Funds - Most of the School District's activities are reported in governmental funds, which focus on how money flows into and out of those funds and the balances left at yearend available for spending in future periods. These funds are reported using the modified accrual method of accounting which measures cash and all other financial assets that can readily be converted to cash. The governmental fund statements provide a detailed short-term view of the School District's general government operations and the basic services it provides. Governmental fund information helps determine whether there are more or fewer financial resources that can be spent in the near future to finance educational programs. The .differences between governmental activities (reported in the Statement of Net Assets and the Statement of Activities) and governmental funds are reconciled to the financial statements. Fiduciary Funds - The School District is the trustee, or fiduciary, for assets that belong to others, such as school clubs and organizations within the principals' accounts. The School District is responsible for ensuring that the assets reported in these funds are used only for their intended purposes and by those to whom the assets belong. The School District excludes these activities from the district-wide financial statements because it cannot use these assets to finance its operations. FINANCIAL ANALYSIS OF THE SCHOOL DISTRICT AS A WHOLE Recall that the Statement of Net Assets provides the perspective of the School District as a whole. Table I provides a summary of the School District's net assets for this fiscal year. Since this is the first year the School District has prepared financial statements following GASB Statement 34, net asset comparisons to fiscal year 200 I are not available. lll HALL COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2002 Table 1 Net Assets Governmental Activities Fiscal Year 2002 Assets Current and Other Assets Capital Assets, Net $ 63,892,537.68 173,753,561.25 Total Assets $23 7.646.098.93 Liabilities Current and Other Liabilities Long-Term Liabilities $ 16,356,792.79 88.148,04 7 .22 Total Liabilities $104,504.840.01 Net Assets Invested in Capital Assets, Net of Related Debt Restricted Unrestricted $119,755,450.33 2,682,856.97 10. 702. 951.62 Total Net Assets $ 133.141,258.92 Table 2 shows the Changes in Net Assets for this fiscal year. Since this is the first year the School District has prepared financial statements following GASB Statement 34, revenue and expense comparisons to fiscal year 2001 are not available. IV HALL COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2002 Table 2 Change in Net Assets Revenues Program Revenues: Charges for Services and Sales Operating Grants and Contributions Capital Grants and Contributions Total Program Revenues General Revenues: Taxes Property Taxes For Maintenance and Operations For Debt Service Railroad Cars Sales Taxes Special Purpose Local Option Sales Tax Intangible Recording Tax Real Estate Grants and Contributions Investment Earnings Miscellaneous Special Items Proceeds from Sales of Land Total General Revenues Total Revenues Program Expenses Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Operations of Non-Instructional Services Enterprise Operations Community Services Food Services Interest on Short-Term and Long-Term Debt Total Expenses Increase in Net Assets Governmental Activities Fiscal Year 2002 $ 3,329,699.52 9 l ,499,853.04 7,882,6 l 7.32 $102,712,169.88 $ 39,203,974.21 -21,164.36 26,300.93 17,885,847.52 1,807,499.62 302,077.94 4,186,747.59 918,292.66 4,864,798. l 3 22,050.00 $ 69, l 96,424.24 $171,908,594.12 $ 99,573,404.07 5,261,256.56 1,947,879.33 3,352,237.27 727,258.13 9,500,480.44 1,000,004.82 9,813,587.83 5,856,985.90 1,652,233.32 165,241.60 761,179.40 l ,080,634.70 8,2 l l ,486.84 3,112,696.15 $152,0 l 6,566.36 $ 19,892,027.76 V HALL COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2002 Governmental Activities The Statement of Activities shows the cost of program services and the charges for services and grants offsetting these services. Table 3 shows, for governmental activities, the total cost of services and the net cost of services. Net cost of services can be defined as the total cost less fees generated by the activities and intergovernmental revenue provided for specific programs. The net cost reflects the financial burden on the School District's taxpayers by each activity. Since this is the first year the School District has prepared financial statements following GASB Statement 34, cost of service comparisons to fiscal year 2001 are not available. Table 3 Governmental Activities Total Cost of Services Fiscal Year 2002 Net Cost of Services Fiscal Year 2002 Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Operations of Non-Instructional Services Enterprise Operations Community Services Food Services Interest on Short-Term and Long-Term Debt $ 99,573,404.07 $24,599,623.84 5,261,256.56 1,947,879.33 3,352,237.27 727,258.13 9,500,480.44 1,000,004.82 9,813,587.83 5,856,985.90 1,652,233.32 165,241.60 4,031,705.86 1,172,009.53 1,371,471.48 -1,329,012.46 5,445,298.92 1,000,004.82 4,140,144.61 2,446,817.70 1,652,233.32 2,846.19 761,179.40 1,080,634.70 8,211,486.84 3,112,696.15 761,179.40 1,037,470.20 -140,093.08 3,112,696.15 Total Expenses $152.016.566.36 $49,304,396.48 FINANCIAL ANALYSIS OF THE SCHOOL DISTRICT'S FUNDS The School District's governmental funds are accounted for using the modified accrual basis of accounting. The governmental funds had total revenues and other financing sources of $214.5 million and total expenditures and other financing uses of $184 million. VI HALL COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2002 General Fund Budgeting Highlights The School District's budget is prepared according to Georgia Law. The most significant budgeted fund is the General Fund. During the course of fiscal year 2002, the School District amended its general fund budget as needed. For the General Fund, the final actual revenues and other financing sources of $147.1 million exceeded the original budgeted amounts of $137.9 million by $9.2 million. This difference (final actual vs. original budget) was due primarily due to an increase in state revenues over original budget by $3.0 million and miscellaneous revenues over original budget by $5.1 million. The miscellaneous revenues over original budget were primarily due to the inclusion of the principals' accounts in our financial statements, but not in the original budget. The actual revenues and other financing sources of $147.1 million exceeded the final budgeted amounts by $5.4 million. Conservative budgeting for property taxes, sales taxes and state funds more than offset any shortfall in other revenue categories. The final actual expenditures and other financing uses of $144.4 million exceeded the original budgeted amount of $141.3 million by $3.1 million. This difference was primarily due to our school principals' accounts not being included in the original budget process. Even though the School District intended to use financial reserves to balance its fiscal year 2002 budget, General Fund revenues and other financing sources exceeded the expenditures and other financing uses by $2.7 million. This increase is the result of actual revenues exceeding budgeted revenues and the School District's continued monitoring of the budgeted expenditures. The actual expenditures and other financing uses of $144.4 million were right on track with the School District's final budget amounts. CAPITAL ASSETS AND DEBT ADMINISTRATION Capital Assets At fiscal year ended June 30, 2002, the School District had $173 million invested in capital assets, all in governmental activities. Table 4 reflects a summary of these balances net of accumulated depreciation. Since this is the first year the School District has prepared financial statements following GASB Statement 34, capital assets comparisons to fiscal year 2001 are not available. Vll HALL COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2002 Table 4 Capital Assets (Net of Depreciation) Governmental Activities Fiscal Year 2002 Land Construction in Progress Buildings and Improvements Equipment Land Improvements $ 18,140,149.00 31,953,051.77 109,613,461.23 7,262,653.07 6,784,246.18 Total $173,753.561.25 Due to the ongoing growth in the county, the School District has numerous construction projects including new buildings, additions and renovations. Debt At fiscal year ended June 30, 2002, the School District had $83.7 million in bonds outstanding, and $4.5 million in other long-term debt. Table 5 summarizes the School District's debt for general obligation bonds, premium on bonds sold, capital leases and compensated absences outstanding. Table 5 Debt at June 30 Governmental Activities Fiscal Year 2002 Bonds and Notes Payable Premium on Bonds Sold Capital Leases Compensated Absences $ 83,675,000.00 1,260,719.50 3,129,503.11 82,824.61 Total $ 88,148,047.22 At June 30, 2002, the School District's assigned bond ratings was "Aa2" and "Al" as determined by Moody's Investors Services, Inc. and Standard and Poor's Rating Services. Vlll HALL COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2002 CURRENT ISSUES Currently known facts, decisions or conditions that are expected to have a significant effect on financial positions or results of operations. Economic Slowdown - State funding for education has been stagnant and as a result more pressure is being placed on the local school districts to prioritize its educational programs and provide additional local funding. Additional costs to the District will be required with the continued implementation of House Bill 1187, which mandates lower teacher to student ratios, requiring additional teachers and additional classrooms. Despite these challenges, the Hall County School District is strong financially and we remain optimistic about the ability of the School District to maximize all of the financial resources to provide a quality education to our students. Capital Improvements - The School District plans capital improvements as future capital needs arise due to increased student population and facility repair and maintenance needs. Specific capital expenditure plans are formalized in conjunction with individual general obligation bond issues and anticipated annual receipts of capital outlay funds from the State of Georgia Department of Education. The School District regularly monitors anticipated capital outlay needs. CONTACTING THE SCHOOL DISTRICT'S FINANCIAL MANAGEMENT This financial report is designed to provide our citizens, taxpayers, investors and creditors with a general overview of the School District's finances and to show the School District's accountability for the money it receives. If you have questions about this report or need additional financial information, contact Mr. Lee Lovett, Associate Superintendent of Business and Operations at Hall County School District, 711 Green Street, Suite 100, Gainesville, Georgia 30505. You may also email your question to Mr. Lovett at lee.lovett@hallco.org. IX HALL COUNTY BOARD OF EDUCATION HALL COUNTY BOARD OF EDUCATION STATEMENT OF NET ASSETS JUNE 30. 2002 ASSETS Cash and Cash Equivalents Accounts Receivable, Net Taxes State Government Federal Government Other Inventories Capital Assets Land Construction in Progress Land Improvements Buildings Equipment Less: Accumulated Depreciation Total Assets LIABILITIES Accounts Payable Salaries Payable Expired Grant Balances Payable Deposits and Deferred Revenues Long-Term Liabilities Due Within One Year Due in More Than One Year Total Liabilities NET ASSETS Invested in Capital Assets, Net of Related Debt Restricted for Continuation of Federal Programs Debt Service Capital Projects Unrestricted Total Net Assets Total Liabilities and Net Assets The notes to the basic financial statements are an integral part of this statement. -3- EXHIBIT"A" GOVERNMENTAL ACTIVITIES $ 46,093,106.28 5,242,516.12 11,431,100.88 671,523.59 199,512.61 254,778.20 18,140,149.00 31,953,051.77 12,663,451.00 134,661,438.00 13,244,362.00 -36,908,890.52 $ 237,646,098.93 $ 2,404,379.10 13,935,326.41 10,973.78 6,113.50 4,198,485.05 83,949,562.17 $ 104,504,840.01 $ 119,755,450.33 1,307,063.20 62,120.68 1,313,673.09 10,702,951.62 $ 133,141,258.92 $ 237,646,098.93 HALL COUNTY BOARD OF EDUCATION STATEMENT OF ACTIVITIES FOR THE YEAR ENDED JUNE 30, 2002 EXPENSES CHARGES FOR SERVICES GOVERNMENTAL ACTIVITIES Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Operations of Non-Instructional Services Enterprise Operations Community Services Food Services Interest on Short-Term and Long-Term Debt $ 99,573,404.07 $ 5,261,256.56 1,947,879.33 3,352,237.27 727,258.13 9,500,480.44 1,000,004.82 9,813,587.83 5,856,985.90 1,652,233.32 165,241.60 761,179.40 1,080,634.70 8,211,486.84 3,112,696.15 55,770.00 46,607.91 43,164.50 3,184,157.11 Total Governmental Activities $ 152,016,566.36 $ 3,329,699.52 General Revenues Taxes Property Taxes For Maintenance and Operations For Debt Services Railroad Cars Sales Taxes Special Purpose Local Option Sales Tax For Debt Services For Capital Projects Intangible Recording Tax Real Estate Grants and Contributions not Restricted to Specific Programs Investment Earnings Miscellaneous Special Items Proceeds from Sale of Land Total General Revenues, Special Items, and Transfers Change in Net Assets Net Assets - Beginning of Year Inventory - Net Change in Period Net Assets - End of Year The notes to the basic financial statements are an integral part of this statement. -4 - EXHIBIT"B" PROGRAM REVENUES OPERATING CAPITAL GRANTS AND GRANTS AND CONTRIBUTIONS CONTRIBUTIONS NET (EXPENSES) REVENUES AND CHANGES IN NET ASSETS $ 69,513,500.42 $ 1,229,550.70 407,621.80 1,951,169.00 2,039,406.51 3,771,460.10 5,536,728.00 2,051,387.07 162,395.41 5,404,509.81 $ 368,248.00 29,596.79 16,864.08 283,721.42 90,107.31 1,358,781.13 4,836,634.03 330,788.78 $ 91,499,853.04 $ 7,882,617.32 $ -24,599,623.84 -4,031,705.86 -1, 172,009.53 -1,371,471.48 1,329,012.46 -5,445,298.92 -1,000,004.82 -4, 140,144.61 -2,446,817.70 -1,652,233.32 -2,846.19 -761, 179.40 -1,037,470.20 140,093.08 -3112696.15 -49,304,396.48 $ 39,203,974.21 -21,164.36 26,300.93 5,984,832.50 11,901,015.02 1,807,499.62 302,077.94 4,186,747.59 918,292.66 4,864,798.13 22 050.00 $ 69 196 424.24 $ 19,892,027.76 113,214,659.08 34 572.08 $ ====1=3=3'=14=1=,2=5=8=.9=2 -5- HALL COUNTY BOARD OF EDUCATION BALANCE SHEET GOVERNMENTAL FUNDS JUNE 30. 2002 EXHIBIT"C" ASSETS Cash and Cash Equivalents Accounts Receivable, Net Taxes State Government Federal Government Other Due From Other Funds Inventories Total Assets GENERAL FUND DISTRICTWIDE CAPITAL PROJECT FUND DEBT SERVICE FUND TOTAL $ 9,770,756.78 $ 36,291,557.04 $ 2,111,269.68 11,328,244.00 671,523.59 199,512.61 5,375,000.00 254,778.20 3,154,298.86 102,856.88 30,792.46 $ 46,093,106.28 253.90 5,265,822.44 11,431,100.88 671,523.59 199,512.61 5,375,000.00 254,778.20 $ 29,711,084.86 $ 39,548,712.78 $ 31,046.36 $ 69,290,844.00 LIABILITIES AND FUND BALANCES LIABILITIES Accounts Payable Salaries Payable Expired Grant Balances Payable Due To Other Funds Deposits and Deferred Revenue Total Liabilities FUND BALANCES Reserved for: Continuation of Federal Programs Debt Service Inventories Capital Projects Unreserved Undesignated Reported in: General Fund Total Fund Balances Total Liabilities and Fund Balances $ 2,404,379.10 13,935,326.41 10,973.78 $ 6,113.50 5,375,000.00 $ 16,356,792.79 $ 5,375,000.00 $ 2,404,379.10 13,935,326.41 10,973.78 5,375,000.00 6 113.50 $ 21,731,792.79 $ 1,082,285.00 $ 254,778.20 $ 34,173,712.78 $ 31,046.36 1,082,285.00 31,046.36 254,778.20 34,173,712.78 12,017,228.87 $ 13,354,292.07 $ 34,173,712.78 $ 12,017,228.87 31,046.36 $ 47,559,051.21 $ 29,711,084.86 $ 39,548,712.78 $ 31,046.36 $ 69,290,844.00 The notes to the basic financial statements are an integral part of this statement. -6- HALL COUNTY BOARD OF EDUCATION RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO THE STATEMENT OF NET ASSETS JUNE 30. 2002 EXHIBIT"D" Total Fund Balances - Govemmental Funds (Exhibit "C") $ 47,559,051.21 Amounts reported for Govemmental Activities in the Statement of Net Assets are different because: Capital Assets used in Govemmental Activities are not financial resources and therefore are not reported in the funds. These assets consist of: Land Construction in Progress Land Improvements Buildings Equipment Accumulated Depreciation Total Capital Assets $ 18,140,149.00 31,953,051.77 12,663,451.00 134,661,438.00 13,244,362.00 -36,908,890.52 173,753,561.25 Some of the School District's property tax revenues will be collected after year end but are not available soon enough to pay for the current period's expenditures. -23,306.32 Long-Term Liabilities, including bonds payable, are not due and payable in the current period and therefore are not reported as liabilities in the funds. Long-Term Liabilities at year-end consist of: Bonds and Notes Payable $ -83,675,000.00 , Unamortized Bond Premium -1,260,719.50 Capital Leases -3, 129,503.11 Compensated Absences -82,824.61 Total Long-Term Liabilities Net Assets of Governmental Activities (Exhibit "A") The notes to the basic financial statements are an integral part of this statement. -7- HALL COUNTY BOARD OF EDUCATION STATEMENT OF REVENUES EXPENDITURES AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS YEAR ENDED JUNE 30 2002 EXHIBIT"E" REVENUES Property Taxes Sales Taxes State Funds Federal Funds Charges for Services Investment Earnings Miscellaneous Total Revenues EXPENDITURES Current Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Enterprise Operations Community Services Food Services Operation Capital Outlay Debt Services Principal Interest Total Expenditures Excess of Revenues over (under) Expenditures OTHER FINANCING SOURCES (USES} Accrued Interest on Bonds Sold Proceeds of Long-Term Capital-Related Debt Premiums on Bonds Sold Sale of Equipment Insurance Proceeds Transfers In Transfers Out Total Other Financing Sources (Uses) SPECIAL ITEMS Proceeds from Sale of Land Net Change in Fund Balances Fund Balances - Beginning Inventory - Net Change in Period GENERAL FUND DISTRICTWIDE CAPITAL PROJECT FUND DEBT SERVICE FUND TOTAL $ 39,129,017.15 $ 2,032.63 $ 39,131,049.78 2,109,577.56 $ 11,901,015.02 5,984,832.50 19,995,425.08 88,035,000.59 6,511,849.32 94,546,849.91 9,022,368.04 9,022,368.04 3,329,699.52 3,329,699.52 407,587.97 508,648.15 2,056.54 918,292.66 5,073,378.09 1 143.01 5,074,521.10 $ 147,106,628.92 $ 18,922,655.50 $ 5,988,921.67 $ 172,018,206.09 $ 95,172,717.14 $ 95,172,717.14 5,261,256.56 1,947,879.33 3,325,428.24 693,168.29 9,237,403.17 987,819.96 $ 9,721,001.12 5,039,214.71 1,652,233.32 165,241.60 761,179.40 1,080,634.70 7,911,855.43 202,849.51 218,400.00 $ 32,478,833.52 3,392.60 5,261,256.56 1,947,879.33 3,325,428.24 693,168.29 9,237,403.17 1,209,612.56 9,721,001.12 5,039,214.71 1,652,233.32 165,241.60 761,179.40 1,080,634.70 7,911,855.43 32,681,683.03 453,529.91 180,500.10 3,595,000.00 2,932,196.05 4,048,529.91 3,112,696.15 $ 143,793,912.49 $ 32,697,233.52 $ 6,530,588.65 $ 183.021 I734.66 $ 3,312,716.43 $ -13,774,578.02 $ -541,666.98 $ -11 003 528.57 $ 94,996.94 $ 94,996.94 $ 40,000,000.00 40,000,000.00 1,375,330.30 1,375,330.30 $ 3,215.00 3,215.00 2,156.66 2,156.66 597,010.02 447,325.78 1,044,335.80 -597,010.02 -447 325.78 -1,044,335.80 $ -591 638.36 $ 41 525 014.54 $ 542,322.72 $ 41475698.90 $ 22,050.00 $ 2,721,078.07 $ 27,772,486.52 $ 10,598,641.92 6,401,226.26 34 572.08 $ 22,050.00 655.74 $ 30,494,220.33 30,390.62 17,030,258.80 34 572.08 Fund Balances - Ending $ 13,354,292.07 $ 34 173 712.78 $ The notes to the basic financial statements are an integral part of this statement. -8- 31 046.36 $ 47,559,051.21 HALL COUNTY BOARD OF EDUCATION RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT OF REVENUES. EXPENDITURES AND CHANGES IN FUND BALANCES TO THE STATEMENT OF ACTIVITIES JUNE 30. 2002 EXHIBIT"F" Total Net Change in Fund Balances - Governmental Funds (Exhibit "E") $ 30,494,220.33 Amounts reported for Governmental Activities in the Statement of Activities are different because: Capital Outlays are reported as expenditures in Governmental Funds. However, in the Statement of Activities, the cost of Capital Assets is allocated over their estimated useful lives as depreciation expense. In the current period, these amounts are: Capital Outlay Depreciation Expense Excess of Capital Outlay over Depreciation Expense $ 29,963,031.47 -3, 179,839.30 ~ 26,783,192.17 Because some property taxes will not be collected for several months after the School District's fiscal year ends, they are not considered "available" revenues -137,033.63 Bond proceeds provide current financial resources to Governmental Funds; however, issuing debt increases Long-Term Liabilities in the Statement of Net Assets. In the current period, proceeds were received from: General Obligation Bonds Issued, Including a Premium of $1,375,330.30 -41,260, 719.50 Repayment of long-term debt is reported as an expenditure in Governmental Funds, but the repayment reduces Long-Term Liabilities in the Statement of Net Assets. In the current year, these amounts consist of: Bond Principal Retirements Capital Lease Payments Total Long-Term Debt Repayments $ 3,595,000.00 453,529.91 , 4,048,529.91 Some items 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. These activities consist of: Increase in Compensated Absences -36,161.52 Change in Net Assets of Governmental Activities (Exhibit "B") !$ 19,892'27.76 The notes to the basic financial statements are an integral part of this statement. -9- HALL COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2002 EXHIBIT "H" Note I: DESCRIPTION OF SCHOOL DISTRICT AND REPORTING ENTITY REPORTING ENTITY The Hall County Board ofEducation (School District) was established under the laws ofthe State of Georgia and operates under the guidance of a school board elected by the voters and a Superintendent appointed by the Board. The Board is organized as a separate legal entity and has the power to levy taxes and issue ~onds. Its budget is not subject to approval by any other entity. Accordingly, the School District is a primary government and consists of all the organizations that compose its legal entity. Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BASIS OF PRESENTATION The School District's basic financial statements are collectively comprised of the District-wide financial statements, fund financial statements and notes to the basic financial statements ofthe Hall County Board of Education. District-wide Statements: The Statement ofNet Assets and the Statement ofActivities display information about the financial activities ofthe overall School District, except for fiduciary activities. Eliminations have been made to minimize the double counting of internal activities. Governmental activities generally are financed through taxes, intergovernmental revenues, and other nonexchange transactions. The Statement of Activities presents a comparison between direct expenses and program revenues for each function of the School District's governmental activities. Direct expenses are those that are specifically associated with a program or function and, therefore, are clearly identifiable to a particular function. Indirect expenses (expenses of the School District related to the administration and support ofthe School District's programs, such as office and maintenance personnel and accounting) are not allocated to programs. Program revenues include (a) charges paid by the recipients ofgoods or services offered by the programs and (b) grants and contributions that are restricted to meeting the operational or capital requirements of a particular program. Revenues that are not classified as program revenues, including all taxes, are presented as general revenues. Fund Financial Statements: The fund financial statements provide information about the School District's funds, including fiduciary funds. Separate statements for each category (governmental and fiduciary) are presented. The emphasis of fund financial statements is on major governmental funds, each displayed in a separate column. All remaining governmental funds are aggregated and reported as nonmajor funds. - 12 - HALL COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2002 EXHIBIT "H" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The School District reports the following major governmental funds: General Fund is the School District's primary operating fund. It accounts for all financial resources ofthe School District, except those resources required to be accounted for in another fund . District-wide Capital Projects Fund accounts for financial resources including Bond proceeds, grants from Georgia State Financing and Investment Commission and Special Purpose Local Option Sales Tax proceeds to be used for the acquisition, construction or renovation of major capital facilities. Debt Service Fund accounts for taxes (property and sales) legally restricted for the payment of general long-term principal, interest and paying agent's fees. The School District reports the following fiduciary fund type: Agency funds account for assets held by the School District as an agent for various Principal's Accounts and for the Benevolent Fund. BASIS OF ACCOUNTING The basis ofaccounting determines when transactions are reported on the financial statements. The District-wide governmental and fiduciary fund financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded at the time liabilities are incurred, regardless of when the related cash flows take place. Nonexchange transactions, in which the School District gives (or receives) value without directly receiving (or giving) equal value in exchange, include property taxes, sales taxes, grants and donations. On an accrual basis, revenue from property taxes is recognized in the fiscal year for which the taxes are levied. Revenue from sales taxes is recognized in the fiscal year in which the underlying transaction (sale) takes place. Revenue from grants and donations is recognized in the fiscal year in which all eligibility requirements have been satisfied. The School District uses funds to report on its financial position and the results of its operations. Fund accounting is designed to demonstrate legal compliance and to aid financial management by segregating transactions related to certain governmental functions or activities. A fund is a separate accounting entity with a self-balancing set of accounts. Governmental funds are reported using the current financial resources measuremeht focus and the modified accrual basis ofaccounting. Under this method, revenues are recognized when measurable and available. The School District considers all revenues reported in the governmental funds to be available if they are collected within sixty days after year-end. Property taxes, .sales taxesand interest are considered to be susceptible to accrual. Expenditures are recorded when the related fund \ - 13 - HALL COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2002 EXHIBIT "H" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES liability is incurred, except for principal and interest on general long-term debt and compensated absences, which are recognized as expenditures to the extent they have matured. Capital asset acquisitions are reported as expenditures in governmental funds. Proceeds of general long-term liabilities and acquisitions under capital leases are reported as other financing sources. The School District funds certain programs by a combination ofspecific cost-reimbursement grants, categorical grants, and general revenues. Thus, when program costs are incurred, there are both restricted and unrestricted net assets available to finance the program. It is the School District's policy to first apply grant resources to such programs, followed by cost-reimbursement grants, then general revenues. For fiscal year 2002, the School District changed its method of accounting for the final two payments on one hundred and ninety day contracts and for the related revenue due from the State to fund these contracts. Adjustments have been made in the fiscal year 2002 financial statements to record costs for salaries and fringe benefits earned by employees through June 30, 2002, (even though paid in July and August 2002) and the related revenue due from the State to fund these contracts. Adjustments were also made for the similar salaries, benefits and related State revenues earned in fiscal year 2001 and recorded in fiscal year 2002. The net effect of the above accounting treatment results in the accompanying financial statements reflecting costs for those salaries and benefits earned by employees during fiscal year 2002 and the related State revenue to fund these contracts. In addition, both the net assets and fund balance at July 1, 2001, have been restated for salaries and benefits earned by employees in fiscal year2001 but not paid until July and August 2001 and for the related State revenue for these contracts. This change is in accordance with generally accepted accounting principles. See Restatement of Prior Year Fund Balance. RESTATEMENT OF PRIOR YEAR FUND BALANCE - GENERAL FUND In prior years, the financial activities ofthe School District's School Food Services Fund and Other Programs Fund were reported as Special Revenue Funds. These funds had a combined fund balance of$1,057,457.94 atJuly 1, 2001. For fiscal year 2002, these funds have been reported as part ofthe General Fund. In addition, governmental fund activity from the various school activity accounts, which were not reported in the prior year's financial statements, have been reported within the General Fund for fiscal year ended June 30, 2002. The governmental fund activity of the various school activity accounts had a fund balance of $868,257.75 at July 1, 2001. This change is in accordance with generally accepted accounting principles. - 14 - HALL COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2002 I EXHIBIT "H" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES General Fund Balance July 1, 2001 Add Funds Consolidated with General Fund: School Food Services Fund Other Programs School Activity Account - Governmental Activity $ 11,128,673.85 I 996,221.88 : 61,236.06 868,257.75 Add: State Revenue Related to July and August 2001 Salary Payments Earned by Employees in Fiscal Year 2001 10,114,276.00 Deduct: July and August 2001 Salary Payments Earned by Employees in Fiscal Year 2001 General Fund Balance July 1, 2001 (Restated) -12,570,023.62 I $ 10.598.641.92 CHANGES IN ACCOUNTING PRINCIPLES The Hall County Board of Education has implemented a new financial reporting model as required by provisions of Governmental Accounting Standards Board Statement No. 34, Basic Financial Statements - and Management's Discussion and Analysis -for State and Local Governments, as of June 30, 2002. I The provisions of GASB Statement No. 34 require the inclusion ofa Statement of~et Assets. The elements comprising Net Assets - Beginning include the following: General Fund (Restated) July 1, 2001 Capital Projects Fund Debt Service Fund $ 10,598,641.92 6,401,226.26 30,390.62 Governmental Funds (Restated) July 1, 2001 Capital Assets Accumulated Depreciation Property Tax Revenue Timing Differences Bonds and Notes Payable Capital Leases Payable Compensated Absences $ 17,030,258.80 180,699,420.30 -33, ?29,051.22 113,727.31 -47,270,000.00 -3,~83,033.02 .-46,663.09 Net Assets Beginning (See Exhibit "B") $113.214.659.08 - 15 - HALL COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2002 EXHIBIT "H" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CASH AND CASH EQUIVALENTS COMPOSITION OF DEPOSITS Cash and cash equivalents consist ofcash on hand, demand deposits and short-term investments with original maturities of three months or less from the date of acquisition in authorized financial institutions. Georgia Laws OCGA 45-8-14 authorize the Board to deposit its funds in one or more solvent banks or insured Federal savings and loan associations. RECEIVABLES Receivables consist of amounts due from property and sales taxes, grant reimbursements due on Federal, State or other grants for expenditures made but not reimbursed and other receivables disclosed from information available. Receivables are recorded when either the asset or revenue recognition criteria has been met. Receivables recorded on the basic financial statements do not include any amounts which would necessitate the need for an allowance for uncollectible receivables. PROPERTY TAXES The Hall County Board of Commissioners fixed the property tax levy for the 2001 tax digest year (calendar year) on September 10, 2001 (levy date). Taxes were due on December 20, 2001 (lien date). Taxes collected within the current fiscal year or within 60 days after year-end on the 2001 tax digest are reported as revenue in the governmental funds for fiscal year 2002. The Hall County Tax Commissioner bills and collects the property taxes for the School District, withholds 2.5% oftaxes collected as a fee for tax collection and remits the balance of taxes collected to the School District. Property tax revenues, at the fund reporting level, during the fiscal year ended June 30, 2002, for maintenance and operations amounted to $39,102,716.22 and for school bonds amounted to $2,032.63. The tax millage rate levied for the 2001 tax year (calendar year) for the Hall County Board of Education was as follows (a mill equals $1 per thousand dollars of assessed value): School Operations 14.51 mills SALES TAXES Special Purpose Local Option Sales Tax revenue during the year amounted to $17,885,847.52 and is to be used for capital outlay for educational purposes or debt service. This sales tax was authorized by local referendum and the sales tax must be re-authorized at least every five years. - 16 - HALL COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30. 2002 EXHIBIT"H" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES INVENTORIES FOOD INVENTORIES On the district-wide financial statements, inventories of donated food commodities used in the preparation of meals are reported at their Federally assigned value and purchased f6ods inventories are reported at cost (first-in, first-out). The School District uses the purchases meth6d to account for I inventories whereby expenditures are recorded at the time of purchase or when received. To conform to generally accepted accounting principles, all food inventories should l:>e accounted for using the consumption method whereby an asset is recorded when foods are purchJed/received and expenses are recorded at the time the food items are consumed. The effect of this deviation is deemed to be immaterial to the fair presentation of the basic financial statements. [ On the fund statements, inventories of governmental funds are reported at cost (fi~st-in, first-out). The School District uses the purchases method to account for inventories whereby ~xpenditures are recorded at the time of purchase or when received. I ! CAPITAL ASSETS I Capital assets purchased, including capital outlay costs, are recorded as expenditures in the fund financial statements at the time ofpurchase. On the District-wide financial statements, all purchased capital assets are valued at cost where historical records are available and at estimated historical cost based on appraisals or deflated current replacement cost where no historical records exist. Donated capital assets are recorded at fair market value on the date donated. Disposals are deleted at depreciated recorded cost. The cost of normal maintenance and repairs that do not add to the value of assets or materially extend the useful lives of the assets is not capitalized. Depreciation is computed using the straight-line method. The School District does not capitalize book collections or works of art. ' Capitalization thresholds and estimated useful lives of capital assets reported in the District-wide statements are as follows: Capitalization Policy 1$stimated Useful Life Land Land Improvements Buildings and Improvements Equipment ALL $ 5,000.00 $ 100,000.00 $ 5,000.00 , NIA i lQ-60 years 10-60 years 8-50 years Depreciation is used to allocate the actual or estimated historical cost of all capital assets over estimated useful lives. - 17 - HALL COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2002 EXHIBIT "H" Note 2: SUMMAR-Y OF SIGNIFICANT ACCOUNTING POLICIES GENERAL OBLIGATION BONDS The School District issues general obligation bonds to provide funds for the acquisition and construction of major capital facilities. Bond issuance costs are recognized in the financial statements during the fiscal year bonds are issued. In addition, general obligation bonds have been issued to refund existing general obligation bonds. General obligation bonds are direct obligations and pledge the full faith and credit of the government. The outstanding amount of these bonds is recorded in the Statement of Net Assets. Note 3: DEPOSITS COLLATERALIZATION OF DEPOSITS Official Code of Georgia Annotated (OCGA) Section 45-8-12 provides that there shall not be on deposit at any time in any depository for a time longer than ten days a sum of money which has not been secured by surety bond, by guarantee ofinsurance, or by collateral. The aggregate ofthe face value of such surety bond and the market value of securities pledged shall be equal to not less than 110 percent ofthe public funds being secured after the deduction ofthe amount ofdeposit insurance. Ifa depository elects the pooled method (OCGA 45-8-13.1) the aggregate ofthe market value ofthe securities pledged to secure a pool ofpublic funds shall be not less than 110 percent ofthe daily pool balance. OCGA Section 45-8-11 (b) provides an officer holding public funds may, in his discretion, waive the requirement for security in the case ofoperating funds placed in demand deposit checking accounts. Acceptable security for deposits consists of any one of or any combination of the following: (I) Surety bond signed by a surety company duly qualified and authorized to transact business within the State of Georgia, (2) Insurance on accounts provided by the Federal Deposit Insurance Corporation, (3) Bonds, bills, notes, certificates of indebtedness or other direct obligations of the United States or of the State of Georgia, (4) Bonds, bills, notes, certificates of indebtedness or other obligations of the counties or municipalities of the State of Georgia, (5) Bonds of any public authority created by the laws of the State of Georgia, providing that the statute that created the authority authorized the use of the bonds for this purpose, (6) Industrial revenue bonds and bonds of development authorities created by the laws of the State of Georgia, and - 18 - HALL COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2002 EXHIBIT "H" Note 3: DEPOSITS (7) Bonds, bills, notes, certificates of indebtedness, or other obligations of a subsidiary corporation of the United States government,- which are fully guaranteeq by the United States government both as to principal and interest or debt obligations issued by the Federal Land Bank, the Federal Home Loan Bank, the Federal Intermediate C~edit Bank, the Central Bank for Cooperatives, the Farm Credit Banks, the Federal Home Loan Mortgage Association, and the Federal National Mortgage Association. CATEGORIZATION OF DEPOSITS At June 30, 2002, the bank balances were $54,880,975.92. The amounts ofthe tota, bank balances are classified into three categories of credit risk: Category 1 - Cash that is insured (e.g., Federal depository insurance) or collateralized with I securities held by the School District or by the School District's agent in the School District's name. : Category 2 - Cash collateralized with securities held by the pledging finandial institution's trust department or agent in the School District's name. Category 3 - Uncollateralized deposits. (This includes any bank balance that .is collateralized with securities held by the pledging financial institution, .or by its trust department or agent but not in the School District's name.) The School District's deposits are classified by risk category at June 30, 2002, as follows: Risk Category Bank Balance 1 $ 1,409,755.23 2 53,471,220.69 3 0.00 Total $54.880,975.92 Note 4: NON-MONETARY TRANSACTIONS The School District receives food commodities from the United States Department of Agriculture (USDA) for school breakfast and lunch programs. These commodities are recorded at their Federally assigned value. See Note 1 - Inventories Note 5: CAPITAL ASSETS The following is a summary of changes in the Capital Assets during the fiscal year: - 19 - HALL COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30. 2002 EXHIBIT "H" Note 5: CAPITAL ASSETS Balances July I, 2001 Increases Balances Decreases June 30, 2002 Governmental Activities Capital Assets, Not Being Depreciated: Land Construction in Progress $ 14,782,000.00 $ 3,358,149.00 $ 12,508,521.30 19,444,530.47 0.00 $ 18,140,149.00 31,953,051.77 Total Capital Assets Not Being Depreciated $ 27,290,521.30 $22,802,679.47 $ 0.00 $ 50,093.200.77 Capital Assets Being Depreciated Buildings and Improvements Equipment Land Improvements $131,888,700.00 $ 2,772,738.00 $ 11,906,799.00 1,337,563.00 9,613,400.00 3,050,051.00 0.00 $134,661,438.00 13,244,362.00 12,663,451.00 Less Accumulated Depreciation for: Buildings and Improvements Equipment Land Improvements 22,949,609.10 5,361,583.96 5,417,858.16 2,098,367.67 620,124.97 461,346.66 25,047,976.77 5,981,708.93 5,879,204.82 Total Capital Assets, Being Depreciated, Net $119,679,847.78 $ 3,980,512.70 $ 0.00 $ I23,660,360.48 Governmental Activity Capital Assets - Net $146.970.369.08 $26.783.192.17 $ 0.00 $173,753,561.25 Current year depreciation expense by function is as follows: Instruction Support Services Educational Media Services General Administration School Administration Maintenance and Operation of Plant Student Transportation Services Food Services $2,371,832.07 $ 14,452.58 8,235.00 138,545.67 44,000.83 441,243.74 646,477.82 161,529.41 $ 3,179,839.30 Note 6: RESTRICTED ASSETS Capital Projects - Bond .Issue Proceeds and property tax levied specifically for retirement of outstanding bond principal, interest and paying agent's fees (Debt Service Funds) are reported as restricted assets in the Statement of Net Assets because their use is limited by applicable bond covenants or statutory provisions. Restricted assets at June 30, 2002, were as follows: - 20- HALL COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2002 EXHIBIT "H" Note 6: RESTRICTED ASSETS Capital Projects Bond Issue Proceeds Debt Service Funds Restricted Cash and Cash Equivalents: Debt Services Capital Acquisitions $34,173,712.78 $ 30,792.46 Note 7: INTERFUND ASSETS AND LIABILITIES Due to and due from other funds are recorded for interfund receivables and payables which arise from interfund transactions. Interfund balances at June 30, 2002, consisted of the following: Due From Other Funds Due To Other Funds General Fund Capital Projects Fund $ 5,375,000.00 $ 5,375,000.00 $ 5,375,000.00 $ 5,375,000.00 Transfers are used to move property tax revenues to provide supplemental funding for capital construction projects. All balances will be repaid within 1 year of the balance sheet date. Note 8: INTERFUND TRANSFERS Interfund transfers for the year ended June 30, 2002, consisted of the following: Transfer To Transfers From General Capital Projects Fund Bond Capital Projects Regular SPLOST All Others $ 303,962.88 293,047.14 $ 447,325.78 Total $ 597,010.02 $ 447,325.78 - 21 - HALL COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2002 EXHIBIT "H" Note 8: INTERFUND TRANSFERS Transfers are used to move property tax revenues collected by the General Fund to the Capital Projects Fund as required match or supplemental funding source for capital construction projects and to the Debt Service Fund to pay the interest payment of 2001 and 2002 bond issues. Note 9: RISK MANAGEMENT The School District is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors or omissions; job related illness or injuries to employees; acts of God and unemployment compensation. The School District has obtained commercial insurance for risk ofloss associated with torts, assets, errors or omissions and acts of God. For the 1999 fiscal year, an act of God claim (flood damage) filed by the School District exceeded commercial insurance coverage by $511,017.49. The Federal Emergency Management Agency (FEMA) in coordination with the Georgia Emergency Management Agency (GEMA) awarded funds to cover the loss. Settled claims did not exceed commercial insurance for the 2000 and 2001 fiscal years. The School District participates in the Georgia School Boards Association Risk and Insurance Management System, a public entity risk pool organized on July l, 1994, to develop and administer a plan to reduce risk of loss on account of general liability, motor vehicle liability, or property damage, including safety engineering and other loss prevention and control techniques, and to administer one or more groups of self-insurance funds, including the processing and defense of claims brought against members ofthe system. The School District pays an annual premium to the system for its general insurance coverage. Additional coverage is provided through agreements by the system with other companies according to their specialty for property, boiler and machinery (including coverage for flood and earthquake), general liability (including coverage for sexual harassment, molestation and abuse) and automobile risks. Payment of excess insurance for the system varies by line of coverage. The School District has established a limited risk management program for workers' compensation claims. A premium is charged when needed by the General Fund to each user program on the basis of the percentage of that program's payroll to total payroll in order to cover estimated claims budgeted by management based on known claims and prior experience. The School District accounts for claims with expenses/expenditures and liability being reported when it is probable that a loss has occurred, and the amount of that loss can be reasonably estimated. An excess coverage insurance policy covers individual claims in excess of $225,000.00 loss per occurrence, up to the statutory limit. Changes in the workers' compensation claims liability during the last two fiscal years are as follows: - 22 - HALL COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2002 EXHIBIT "H" Note 9: RISK MANAGEMENT Beginning of Year Liability Claims and Changes in Estimates Claims Paid End of Year Liability 2001 2002 $ 0.00 $ 194,161.95 $ 194,161.95 $ 0.00 $ 0.00 $ 131,363.71 $ 131,363.71 $ 0.00 The School District is self-insured with regard to unemployment compensation claims. The School District accounts for claims within the General Fund with expenses/expenditures and liability being reported when it is probable that a loss has occurred, and the amount of that loss can be reasonably estimated. Changes in the unemployment compensation claims liability during the last two fiscal years are as follows: Beginning of Year Liability Claims and Changes in Estimates Claims Paid End of Year Liability 2001 2002 $ 0.00 $ 12,071.44 $ 8,938.44 $ 3,133.00 $ 3,133.00 $ 9,552.00 $ 12,685.00 $ 0.00 The School District has purchased surety bonds to provide additional insurance coverage as follows: Position Covered Amount Superintendent All Other Employees $ 25,000.00 $ I 00,000.00 Note I0: LONG-TERM DEBT CAPITAL LEASES The Hall County Board of Education has entered into various lease agreements as lessee for computer equipment and heating, ventilation and air conditioning equipment. These lease agreements qualify as capital leases for accounting purposes and, therefore, have been recorded at the present value of the future minimum lease payments as of the date of their inception. COMPENSATED ABSENCES Compensated absences represent obligations of the School District relating to employees' rights to receive compensation for future absences based upon service already rendered. This obligation relates only to vesting accumulating leave in which payment is probable and can be reasonably estimated. The School District uses the vesting method to compute compensated absences. - 23 - HALL COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30. 2002 EXHIBIT"H" Note 10: LONG-TERM DEBT GENERAL OBLIGATION DEBT OUTSTANDING General Obligation Bonds currently outstanding are as follows: Purpose Interest Rates Amount General Government - Series 2002 General Government - Series 2001 General Government - Refunding - Series 1997 General Government - Refunding - Series 1992B 3.73%-4.50% 4.00% - 5.00% 4.50% - 5.00% 3.15% - 6.40% $14,000,000.00 26,000,000.00 31,935,000.00 11. 740,000.00 $83.675.000.00 The changes in Long-Term Debt during the fiscal year ended June 30, 2002, were as follows: Capital Leases Governmental Funds General Compensated Obligation Absences Bonds Premium on Bonds Sold Total Balance July I, 2001 $ 3,583,033.02 $47,270,000.00 $ 0.00 $50,853,033.02 Retroactive Restatement of Prior Year Balances $ 46,663.09 46,663.09 Balance July I, 2001 Restated $ 3,583,033.02 $ 46,663.09 $47,270,000.00 $ 0.00 $50,899,696.11 Additions Annual Leave Earned Unamortized Bond Premium G.O. Bonds 408,655.33 40,000,000.00 408,655.33 1,375,330.30 1,375,330.30 40,000,000.00 Deductions Annual Leave Utilized Debt Retired Bond Premium Amortized 453,529.91 372,49'3.8 I 3,595,000.00 114,610.80 372,493.81 4,048,529.91 114,610.80 Balance June 30, 2002 $ 3 122 503 II $ 82 824 61 $83 675 000 00 $ 1,260 719 50 $88 I48 047 22 Portion of Long-Tenn Debt Due within One Year $ 476,438.84 $ 82,824.61 $ 3,410,000.00 $ 229,221.60 $ 4,198,485.05 At June 30, 2002, payments due by fiscal year which includes principal and interest for these items are as follows: - 24 - HALL COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2002 EXHIBIT "H" Note 10: LONG-TERM DEBT Fiscal Year Ended June 30 Ca11ital Leases Princi11al Interest 2003 2004 2005 2006 2007 2008 - 2012 2013 - 2017 $ 476,438.84 500,523.25 333,675.93 352,169.32 371,687.64 1,095,008.13 $ 157,591.16 133,506.74 108,185.67 89,692.28 70,173.96 83,289.49 Total Principal and Interest $3 122 503 11 $ 642 432 JO General Obligation Debt Princi11al Interest Unamortized Bond Premium $ 3,410,000.00 $ 3,971,515.60 11,045.000.00 3,778,315.00 I l,6IO,OOO.OO 3,273,497.50 12, 150,000.00 2,731,070.00 12,685,000.00 2,142,511.25 23,585,000.00 4,330,087.50 9,190,000.00 659,625.00 $ 229.221.60 229.221.60 229,221.60 229.221.60 229,221.60 114,611.50 $83 6:Z5 000 QQ $20 886,621 85 $ I 260 :Zl2 50 Note 11: PRIOR YEAR DEFEASEMENT OF DEBT In fiscal year 1998 the School District defeased certain general obligation bonds by placing the proceeds of new bonds in an irrevocable trust to provide for all future debt service payments on the old bonds. Accordingly, the trust account assets and the liability for the defeased bonds are not included in the School District's basic financial statements. At June 30, 2002, $23,165,000.00 of bonds are outstanding and are considered defeased. Note 12: ON-BEHALF PAYMENTS The Board has recognized revenues and costs in the amount of $1,665,212.59 for health insurance and retirement contributions paid on the Board's behalf by the following State Agencies. Georgia Department of Education Paid to the Georgia Department of Community Health For Health Insurance of Non-Certified Personnel In the amount of $1,460,618.59 Office of Treasury and Fiscal Services Paid to the Public School Employees Retirement System For Public School Employees Retirement (PSERS) Employer's Cost In the amount of $204,594.00 Note 13: SIGNIFICANT COMMITMENTS The following is an analysis ofsignificant outstanding construction or renovation contracts executed by the School District as of June 30, 2002, together with funding available: - 25 - HALL COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2002 EXHIBIT "H" Note 13: SIGNIFICANT COMMITMENTS Project Unearned Executed Contracts Funding Available From State SA O1S-669-00S 01 /OOS-669-034 02/01S-669-047 Renovations for Various Schools Lyman Hall Elementary School Additions Sardis Elementary School Additions North Hall Middle School Re-roofing Sewer Renovations for Various Schools Classroom Additions for Various Schools $ 1,950,047.44 1,601,160.61 1,823,344.38 453,087.56 97,936.00 529,473.84 193,701.51 559,951.77 912,334.32 $ 420,978.60 69,259.00 213,567.00 53,030.30 210,360.78 $ 8,121,037.43 $ 967,195.68 The amounts described in this note are not reflected in the basic financial statements. Note 14: CONTINGENT LIABILITIES Amounts received or receivable principally from the Federal government are subject to audit and review by grantor agencies. This could result in requests for reimbursement to the grantor agency for any costs which are disallowed under grant terms. The School District believes that such disallowances, if any, will be immaterial to its overall financial position. Note 15: ACCUMULATED EMPLOYEES' LEAVE Full-time twelve month employees earn annual leave ranging from ten to fifteen days each year depending upon the employees length of continuous School District service with a maximum accumulation of five days. Employees are paid at their current rate of pay for unused accumulated annual leave upon retirement or termination ofemployment. See Note 10 - Compensated Absences Note 16: RETIREMENT PLANS TEACHERS RETIREMENT SYSTEM OF GEORGIA (TRS) TRS PLAN DESCRIPTION Substantially all teachers, administrative and clerical personnel employed by local school systems are covered by the Teachers Retirement System of Georgia (TRS), which is a cost-sharing multiple employer defined benefit pension plan. TRS provides service retirement, disability retirement and survivors benefits for its members in accordance with State statute. The Teachers Retirement System of Georgia issues a separate stand alone financial audit report and a copy can be obtained from the Georgia Department of Audits and Accounts. - 26 - HALL COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2002 EXHIBIT "H" Note 16: RETIREMENT PLANS I TRS CONTRIBUTIONS REQUIRED AND MADE i Employees ofthe School District who are covered by TRS are required by State statute to contribute 5% of their gross earnings to TRS. The School District makes monthly employer contributions to TRS at rates adopted by the TRS Board of Trustees in accordance with State statute and as advised by their independent actuary. The required employer contribution rate is 9.24% and employer contributions for the current fiscal year and the preceding two fiscal years are as follows: Fiscal Year Percentage Contributed Required Contribution 2002 2001 2000 100% 100% 100% $ 7,249,286.93 $8,187,097.74 $ 7,583,076.12 - 27 - , - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -- HALL COUNTY BOARD OF EDUCATION GENERAL FUND SCHEDULE OF REVENUES. EXPENDITURES AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL YEAR ENDED JUNE 30. 2002 SCHEDULE "1" REVENUES Property Taxes Sales Taxes State Funds Federal Funds Charges for Services Investment Earnings Miscellaneous Total Revenues EXPENDITURES Current Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Enterprise Operations Community Services Food Services Operation Capital Outlay Debt Service Total Expenditures Excess of Revenues over (under) Expenditures OTHER FINANCING SOURCES (USES) Other Sources Other Uses Total Other Financing Sources (Uses) Net Change in Fund Balances Fund Balances - Beginning Inventory - Net Change in Period Fund Balances - Ending See notes to the basic financial statements. NONAPPROPRIATED BUDGETS ORIGINAL FINAL ACTUAL AMOUNTS $ 38,638,898.00 $ 38,347,020.00 $ 39,129,017.15 325,000.00 325,000.00 2,109,577.56 85,012,227.00 85,335,615.53 88,035,000.59 8,975,433.00 9,371,270.00 9,022,368.04 4,176,786.00 4,176,786.00 3,329,699.52 573,000.00 573,000.00 407,587.97 225,100.00 3,421,988.93 5,073,378.09 $ 137,926,444.00 $ 141,550,680.46 $ 147,106,628.92 $ 95,832,482.00 $ 96,069,689.90 $ 95,172,717.14 3,911,579.00 2,108,699.00 3,269,920.00 652,259.00 8,816,734.00 826,902.00 9,718,974.00 5,453,287.00 1,740,171.00 336,000.00 880,000.00 7,383,418.00 200,767.00 5,439,352.53 2,057,453.80 3,253,877.25 643,452.00 9,200,575.11 828,912.00 9,824,818.00 5,451,289.00 1,811,563.26 386,000.00 761,179.40 961,347.45 7,386,737.20 200,767.00 5,261,256.56 1,947,879.33 3,325,428.24 693,168.29 9,237,403.17 987,819.96 9,721,001.12 5,039,214.71 1,652,233.32 165,241.60 761,179.40 1,080,634.70 7,911,855.43 202,849.51 634,030.01 $ 141,131,192.00 $ 144,277,013.90 $ 143,793,912.49 $ -3,204.748.00 $ -2,726,333.44 $ 3,312.716.43 $ 160,026.00 $ 205,026.00 $ 5,371.66 -150,000.00 -150,000.00 -597,010.02 $ 10,026.00 $ 55,026.00 $ -591,638.36 $ -3, 194,722.00 $ -2,671,307.44 $ 2,721,078.07 9,175,656.00 10,417,165.00 10,598,641.92 0.00 0.00 34,572.08 $ 5,980,934.00 $ 7,745,857.56 $ 13,354,292.07 - 28- HALL COUNTY BOARD OF EDUCATION SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS YEAR ENDED JUNE 30 2002 SCHEDULE "2" FUNDING AGENCY PROGRAM/GRANT CFDA NUMBER PASSTHROUGH ENTITY ID NUMBER FEDERAL REVENUE IN PERIOD EXPENDITURES IN PERIOD Agriculture, U. S. Department of Child Nutrition Cluster Pass-Through From Georgia Department of Education Food and Nutrition Program Food Services School Breakfast Program National School Lunch Program 10.553 10.555 NIA $ 906,268.20 NIA 2,843,424.15 $ (2) 7,264,060.50 Total Child Nutrition Cluster $ 3,749,692.35 $ 7,264,060.50 Other Programs Pass-Through From Georgia Department of Education Food and Nutrition Program Food Distribution Program (1) Fresh Produce Program (1) 10.550 NIA 10.550 NIA 457,514.78 75,288.84 457,514.78 75,288.84 Total U. S. Department of Agriculture $ 4,282,495.97 $ 7,796,864.12 Education, U. S. Department of Special Education Cluster Pass-Through From Georgia Department of Education Individuals with Disabilities Education Act Part B - Special Education Capacity Building Flow Through Preschool . 84.027 . 84.027 . 84.173 NIA $ 38,762.00 $ NIA 1,776,211.71 NIA 139,085.61 38,762.00 1,777,592.66 (3) 139 085.61 Total Special Education Cluster $ 1,954,059.32 $ 1,955,440.27 Other Programs Pass-Through From Georgia Department of Education Comprehensive School Reform Demonstration Project 84.332 Elementary and Secondary Education Act Title I Grants to Local Educational Agencies . 84.010 Migrant Education 84.011 TiUe II Eisenhower Professional Development 84.281 Title VI Innovative Education Program Strategies Class Size Reduction . 84.298 84.340 Title VII Immigrant Education 84.162 TitleV Funds for the Improvement of Education 84.215 Goals2000 State and Local Education Systemic Improvement Grants 84.276 Safe and Drug-Free Schools and Communities 84.186 Vocational Education - Basic Grants to States High School Program Basic Grant 84.048 NIA 50,000.00 50,000.00 NIA 1,544,698.03 1,544,698.03 NIA 215,829.89 215,829.89 NIA 98,772.52 98,772.52 N/A 89,560.00 89,560.00 N/A 359,019.00 359,465.05 (3) N/A 121,030.17 121,030.17 NIA 13,903.00 13,903.00 ) NIA 1,470.60 1,470.60 NIA 85,288.14 85,288.14 NIA 157,501.00 157 501.00 Total U. S. Department of Education $ 4,691,131.67 $ 4,692,958.67 - 29- HALL COUNTY BOARD OF EDUCATION SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS YEAR ENDED JUNE 30 2002 SCHEDULE "2" FUNDING AGENCY PROGRAM/GRANT Defense, U. S. Department of Direct Department of the Navy R.O.T.C. Program CFDA NUMBER PASSTHROUGH ENTITY ID NUMBER FEDERAL REVENUE IN PERIOD EXPENDITURES IN PERIOD $ 48 740.40 $ 118559.10 (3) Total Federal Financial Assistance $ 9,022,368.04 $ 12,608,381.89 N/A = Not Available Notes to the Schedule of Expenditures of Federal Awards (1) The amounts shown for the Food Distribution Program and the Fresh Produce Program represent the Federally assigned value of nonmonetary assistance for donated commodities received and/or consumed by the School District during the current fiscal year. (2) Expenditures for the School Breakfast Program were not maintained separately and are induded in the 2002 National School Lunch Program. (3) Expenditures for this program include State, and/or Other Funds. Expenditures are not maintained by fund source. Major Programs are identified by an asterisk (*) in front of the CFDA number. The School District did not provide Federal Assistance to any Subrecipient. The accompanying schedule of expenditures of Federal awards includes the Federal grant activity of the Hall County Board of Education and is presented on the modified accrual basis of accounting which is the basis of accounting used in the presentation of the basic financial statements. See notes to the basic financial statements. - 30- HALL COUNTY BOARD OF EDUCATION SCHEDULE OF STATE REVENUE YEAR ENDED JUNE 30. 2002 SCHEDULE "3" AGENCY/FUNDING GOVERNMENTAL FUND TYPES CAPITAL GENERAL PROJECTS FUND FUND TOTAL GRANTS Education. Georgia Department of Quality Basic Education Direct Instructional Cost Kindergarten Program Kindergarten Program - Early Intervention Program Primary Grades (1-3) Program Primary Grades - Earty Intervention (1-3) Program Upper Elementary Grades (4-5) Program Upper Elementary Grades - Earty Intervention (4-5) Program Middle Grades (6-8) Program Middle School (6-8) Program High School General Education (9-12) Program Vocational Laboratory (9-12) Program Students with Disabilities Category I Category II Category Ill Category IV CategoryV Gifted Student - Category VI Alternative Program English Speakers of Other Languages (ESOL) Media Center Program Twenty Days Additional Instruction Staff and Professional Development Indirect Cost Categorical Grants Pupil Transportation Regular Bus Replacement Nursing Services Principal Supplements Vocational Supervisors Deferred Summer Salaries (prior year) Deferred Summer Salaries (current year) Education Equalization Funding Grant Food Services Vocational Education Other State Programs Apprenticeship Program Environmental Science Program Health Insurance Indirect Cost School of Excellence Mentor Teachers National Teacher Certification Post Secondary Option - Spring Preschool Handicapped Program Statewide After School Program (4-8) Statewide Reading Program (K-3) Lottery Programs Assistive Technology Compu1ers in the Classroom Exceptional Growth-Capital Outlay $ 5,157,484.00 1,457,521.00 11,971,820.00 2,778,451.00 5,887,476.00 1,720,048.00 25,082.00 10,865,529.00 8,605,514.00 2,928,608.00 401,146.00 1,079,453.00 4,808,383.00 753,684.00 45,317.00 1,403,455.00 824,113.00 2,718,090.00 1,951,169.00 585,897.00 368,248.00 11,099,723.00 1,937,053.00 455,178.00 411,349.00 89,878.00 122,980.00 -10, 114,276.00 11,328,244.00 2,520,035.00 550,984.00 227,847.07 50,000.00 1,500.00 1,460,618.59 2,000.00 12,699.00 20,117.00 4,256.00 259,521.00 183,657.00 263,668.53 28,217.00 519,125.00 $ $ 5,157,484.00 1,457,521.00 11,971,820.00 2,778,451.00 5,887,476.00 1,720,048.00 25,082.00 10,865,529.00 8,605,514.00 2,928,608.00 401,146.00 1,079,453.00 4,808,383.00 753,684.00 45,317.00 1,403,455.00 824,113.00 2,718,090.00 1,951,169.00 585,897.00 368,248.00 11,099,723.00 2,049,918.00 1,937,053.00 455,178.00 411,349.00 89,878.00 122,980.00 -10, 114,276.00 11,328,244.00 2,520,035.00 550,984.00 227,847.07 50,000.00 1,500.00 1,460,618.59 2,000.00 12,699.00 20,117.00 4,256.00 259,521.00 183,657.00 263,668.53 28,217.00 519,125.00 2,049,918.00 Georgia State Financing and Investment Commission Reimbursement on Construction Projects 4,426,931.32 4,426,931.32 Office of Treasury and Fiscal Services Public School Employees Retirement 204,594.00 204,594.00 - 31 - HALL COUNTY BOARD OF EDUCATION SCHEDULE OF STATE REVENUE YEARENDED JUNE 30. 2002 SCHEDULE "3" AGENCY/FUNDING CONTRACT Human Resources, Ge'Orgia Department of Family Connection OTHER Community Affairs, Georgia Department of Local Assistance Grant GOVERNMENTAL FUND TYPES CAPITAL GENERAL PROJECTS FUND FUND TOTAL $ 59,544.40 $ 59,544.40 $ 35,000.00 35,000.00 $ 88,035,000.59 $ 6,511,849.32 $ 94,546,849.91 See notes to the basic financial statements. - 32 - HALL COUNTY BOARD OF EDUCATION SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS YEAR ENDED JUNE 30 2002 SCHEDULE "4" PROJECT ORIGINAL ESTIMATED COST Pl CURRENT ESTIMATED COSTS (2l AMOUNT EXPENDED IN CURRENT YEAR (3l AMOUNT EXPENDED IN PRIOR YEAR{3) PROJECT STATUS Payments of portion of payments including principal and interest due on the 1991, 1992, 1992B and 1994 bonds $ 27,500,000.00 $ 24,500,000.00 $ 5,984,832.50 $ 18,412,971.53 Ongoing Acquisition, construction and equipping of one elementary school, parking areas and grounds 6,500,000.00 7,200,000.00 364.00 7,114,472.30 Completed Acquisition, construction and equipping of two middle schools, parking areas and grounds 24,000,000.00 20,000,000.00 75,901.64 19,513,564.76 Completed Acquisition, construction and equipping of two high schools, parking areas, stadiums and grounds 31,000,000.00 36,000,000.00 18,950,407.43 14,553,102.34 Ongoing Acquisition and site preparation of real estate for future School District purposes 4,500,000.00 4,500,000.00 519,181.54 2,925,702.24 Ongoing Construction of additional classrooms, instructional and support space, remodeling and renovating existing classrooms, instructional and support space, furnishings, equipment and fixtures, technology equipment and retrofitting to accommodate such equipment for such areas at existing facilities 22,000,000.00 22,000,000.00 918,315.07 5,606,243.38 Ongoing Payment of portion of the payments, including principal and interest, due on the District's 1992B and Series 1992B and 1997 Bonds 28,450,584.00 28,450,584.00 Ongoing Acquiring, constructing and equipping of new elementary schools, a new middle school and a new technical vocational secondary school, acquiring and conducting site preparation of real estate for School District purposes, constructing and equipping additional classrooms, instructional and support space, remodeling, renovating and equipping existing classrooms, instructional and support space, and acquiring furnishings, equipment and fixtures for new and existing facilities, including technology equipment 102,086,646.00 102,086,646.00 11,973,044.50 Ongoing $ 246,0371230.00 $ 244,737,230.00 $ 38,422,046.68 $ 68,126,056.55 (1) The School District's original cost estimate as specified in the resolution calling for the imposition of the Local Option Sales Tax. (2) The School District's current estimate of total cost for the projects. Includes all cost from project inception to completion. (3) The voters of Hall County approved the imposition of a 1% sales tax to fund the above projects. Amounts expended for these projects may include sales tax proceeds. state, local property taxes and/or other funds over the life of the project. See notes to the basic financial statements. - 33 - HALL COUNTY BOARD OF EDUCATION GENERAL FUND- QUALITY BASIC EDUCATION PROGRAM (QBE) ALLOTMENTS AND EXPENDITURES - BY PROGRAM YEAR ENDED JUNE 30, 2002 SCHEDULE "5" DESCRIPTION ALLOTMENTS FROM GEORGIA DEPARTMENT OF EDUCATION (1) ELIGIBLE QBE PROGRAM COSTS SALARIES OPERATIONS TOTAL Direct Instructional Programs Kindergarten Program $ Kindergarten Program-Early Intervention Program Primary Grades (1-3) Program Primary Grades-Early Intervention (1-3) Program Upper Elementary Grades (4-5) Program Upper Elementary Grades-Early Intervention (4-5) Program Middle Grades (6-8) Program Middle School (6-8) Program High School General Education (9-12) Program Vocational Laboratory (9-12) Program Students with Disabilities Category I Category II Category Ill Category IV Category V Gifted Student - Category VI Alternative Education Program English Speakers of Other Languages (ESOL) 5,995,624.00 $ 6,067,291.78 $ 1,694,383.00 1,222,335.87 13,917,354.00 13,979,358.32 3,229,976.00 2,959,247.01 6,840,783.00 8,153,208.98 204,554.68 $ 594,231.67 433,203.24 6,271,846.46 1,222,335.87 14,573,589.99 2,959,247.01 8,586,412.22 2,003,032.00 29,158.00 12,631,279.00 10,003,991.00 3,404,534.00 8,239,846.00 1,631,530.00 958,039.00 3,159,806.00 1,253,727.33 13,726,679.22 11,553,665.68 3,135,833.20 53,866.40 1,405,175.79 6,790,209.07 345,061.90 54,783.07 1,439,026.60 948,098.21 2,802,063.37 769,293.39 668,254.89 290,742.30 17,894.47 30,487.31 91,676.57 47,227.84 24,899.01 10,673.20 26,368.41 1,253,727.33 14,495,972.61 12,221,920.57 3,426,575.50 71,760.87 1,435,663.10 6,881,885.64 392,289.74 54,783.07 1,463,925.61 958,771.41 2,828,431.78 TOTAL DIRECT INSTRUCTIONAL PROGRAMS $ 73,739,335.00 $ 75,889,631.80 $ 3,209,506.98 $ 79,099,138.78 Media Center Program Staff and Professional Development 2,268,250.00 428,091.00 2,611,097.53 238,693.29 469,575.28 202,859.09 3,080,672.81 441,552.38 TOTAL QBE FORMULA FUNDS $ 76,435,676.00 $ 78,739,422.62 $ 3,881,941.35 $ 82,621,363.97 (1) Comprised of State Funds plus Local Five Mill Share. See notes to the basic financial statements. - 34 - HALL COUNTY BOARD OF EDUCATION GENERAL FUND - QUALITY BASIC EDUCATION PROGRAM (QBE) ALLOTMENTS AND EXPENDITURES - BY SITE YEAR ENDED JUNE 30, 2002 SCHEDULE "6" SITE C. W. Davis Middle School Martin Elementary School Myers Elementary School West Hall High School Spout Springs Elementary School Mount Vernon Elementary School Friendship Elementary School Hall County/Gainesville Evening High School Chestatee Middle School Wauka Mountain Elementary School East Hall Middle School West Hall Middle School North Hall Middle School White Sulphur Elementary School East Hall High School North Hall High School Flowery Branch Elementary School Oakwood Elementary School Lanier Elementary School Riverbend Elementary School Chestnut Mountain Elementary School Lula Elementary School Sardis Elementary School South Hall Middle School Johnson High School Jones Elementary School Lyman Hall Elementary School McEver Elementary School Tadmore Elementary School Central Office (Alternative Education Program) Transportation Facility TOTAL (1) Comprised of State Funds plus Local Five Mill Share. ALLOTMENTS FROM GEORGIA DEPARTMENT OF EDUCATION (1) ELIGIBLE QBE PROGRAM COSTS $ 2,431,347.00 $ 2,770,675.92 2,448,883.00 2,489,209.06 2,743,349.00 2,826,250.90 4,834,718.00 5,369,539.10 2,101,903.00 2,300,976.93 2,543,770.00 2,689,339.12 1,983,012.00 2,077,949.15 529,374.00 697,752.27 2,708,233.00 3,006,153.99 1,465,232.00 1,619,552.91 2,686,309.00 2,836,374.12 2,850,177.00 3,169,734.05 2,964,953.00 3,473,818.51 2,148,579.00 2,128,441.18 3,028,893.00 3,453,056.30 4,789,939.00 5,416,602.36 1,954,682.00 2,098,414.78 1,978,852.00 2,183,031.85 2,246,861.00 2,341,771.35 1,908,312.00 1,901,824.16 1,853,682.00 2,014,611.35 1,547,090.00 1,733,401.12 2,413,245.00 2,456,139.68 2,833,314.00 3,124,345.71 4,298,402.00 4,316,743.73 1,570,707.00 1,642,305.74 2,816,722.00 2,741,560.30 1,787,599.00 1,773,091.79 3,313,157.00 3,279,885.90 958,039.00 1,163,403.81 3 181.64 $ 73,739,335.00 $ 79,099,138.78 See notes to the basic financial statements. - 35- SECTION II COMPLIANCE AND INTERNAL CONTROL REPORTS RUSSELL W. HINTON STATE AUDITOR (404) 656-2174 DEPARTMENT OF AUDITS AND ACCOUNTS 254 Washington Street, S. W. Suite 214 Atlanta, Georgia 30334-8400 May 24, 2003 Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education and Superintendent and Members of the Hall County Board of Education REPORT ON COMPLIANCE AND ON fNTERNAL CONTROL OVER FfNANCIAL REPORTfNG BASED ON AN AUDIT OF FfNANCIAL STATEMENTS PERFORMED fN ACCORDANCE WITH GOVERNMENT AUDITfNG STANDARDS Ladies and Gentlemen: We have audited the financial statements of Hall County Board of Education as of and for the year ended June 30, 2002, and have issued our report thereon dated May 24, 2003. 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. Compliance As part of obtaining reasonable assurance about whether Hall County Board ofEducation's financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts and grants, 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 ofour audit, and accordingly, we do not express such an opinion. The results ofour tests disclosed no instances ofnoncompliance that are required to be reported under Government Auditing Standards. Internal Control Over Financial Reporting In planning and performing our audit, we considered Hall County Board of Education's internal control over financial reporting in order to determine our auditing procedures for the purpose of expressing our opinion on the financial statements and not to provide assurance on the internal control over financial reporting. However, we noted a certain matter involving the internal control over financial reporting and its operation that we consider to be a reportable condition. Reportable 2002YB-41 conditions involve matters coming to our attention relating to significant deficiencies in the design or operation of the internal control over financial reporting that, in ourjudgment, could adversely affect Hall County Board of Education's ability to record, process, summarize and report financial data consistent with assertions of management in the financial statements. The reportable condition is described in the accompanying Schedule of Findings and Questioned Costs as item FS-6691-02-01. A material weakness is a condition in which the design or operation of one or more of the internal control components does not reduce to a relatively low level the risk that misstatements in amounts that would be material in relation to the financial statements being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. Our consideration of the internal control over financial reporting would not necessarily disclose all matters in the internal control that might be reportable conditions and, accordingly, would not necessarily disclose all reportable conditions that are also considered to be material weaknesses. However, we consider item FS-6691-02-01 to be a material weakness. This report is intended solely for the information and use of the management, members of the Hall County Board ofEducation, Federal awarding agencies and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties. ~-----Respectfully submitted, ~ &;. . ton RWH:as 2002YB-41 RUSSELL W. HINTON STATE AUDITOR (404) 656-2174 DEPARTMENT OF AUDITS AND ACCOUNTS 254 Washington Street, S.W. Suite 214 Atlanta, Georgia 30334-8400 May 24, 2003 Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education and Superintendent and Members of the Hall County Board of Education REPORT ON COMPLIANCE WITH REQUIREMENTS APPLICABLE TO EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH 0MB CIRCULAR A-133 Ladies and Gentlemen: Compliance We have audited the compliance of Hall County Board of Education with the types of compliance requirements described in the US. Office of Management and Budget (0MB) Circular A-133 Compliance Supplement that are applicable to each of its major Federal programs for the year ended June 30, 2002. Hall County Board of Education's major Federal programs are identified in the Summary of Auditor'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 Hall County Board of Education's management. Our responsibility is to express an opinion on Hall 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 0MB Circular Al 33, Audits ofStates, Local Governments, and Non-Profit Organizations. Those standards and 0MB Circular A-133 require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types ofcompliance 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 Hall 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 on Hall County Board of Education's compliance with those requirements. 2002SA-10 In our opinion, the Hall County Board of Education complied, in all material respects, with the requirements referred to above that are applicable to each of its major Federal programs for the year ended June 30, 2002. Internal Control Over Compliance The management ofHall County Board ofEducation is responsible for establishing and maintaining effective internal control over compliance with requirements of laws, regulations, contracts and grants applicable to Federal programs. In planning and performing our audit, we considered Hall County Board of Education's internal control over compliance with requirements that could have a direct and material effect on a major Federal program in order to determine our auditing procedures for the purpose of expressing our opinion on compliance and to test and report on internal control over compliance in accordance with 0MB Circular A-133. Our consideration ofthe internal control over compliance would not necessarily disclose all matters in the internal control that might be material weaknesses. A material weakness is a condition in which the design or operation ofone or more ofthe internal control components does not reduce to a relatively low level of risk that noncompliance with applicable requirements of laws, regulations, contracts and grants that would be material in relation to a major Federal program being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. We noted no matters involving the internal control over compliance and its operation that we consider to be material weaknesses. This report is intended solely for the information and use of the management, members of the Hall County Board ofEducation, Federal awarding agencies and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties. Respectfully submitted, RWH:as 2002SA-10 SECTION III AUDITEE'S RESPONSE TO PRIOR YEAR FINDINGS AND QUESTIONED COSTS HALL COUNTY BOARD OF EDUCATION AUDITEE'S RESPONSE SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30,2002 PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS FINDING CONTROL NUMBER AND STATUS FS-6691-00-01 FS-6691-01-0 I Further Action Not Warranted Previously Reported Corrective Action Implemented SECTION IV FINDINGS AND QUESTIONED COSTS HALL COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2002 I SUMMARY OF AUDITOR'S RESULTS I. Type of Report Issued on the Financial Statements The auditor's opinion on the Hall County Board of Education's financial statements was unqualified. 2. Reportable Conditions in Internal Control Disclosed by the Audit of the Financial Statements The audit report for the Hall County Board of Education disclosed financial statement reportable conditions related to the following control categories. Cash and Cash Equivalents Revenues/Receivables/Receipts Expenditures/Liabilities/Disbursements All of the reportable conditions described above are considered to be material weaknesses. 3. Noncompliance Material to the Financial Statements The audit of the Hall County Board of Education disclosed no instances of noncompliance that were deemed to be material to the financial statements. 4. Reportable Conditions in Internal Control Over Major Programs The audit report for the Hall County Board of Education did not disclose any reportable conditions in internal control over major programs. 5. Type of Report Issued on Compliance for Major Programs The auditor's opinion on the Hall County Board of Education's report on compliance with requirements applicable to major programs was unqualified. 6. Audit Findings Reguired to be Reported by Section .5 IO(a) of 0MB Circular A-133 The Hall County Board of Education's audit did not disclose audit findings required to be reported by section .510(a) ofOMB Circular A-133. 7. Major Programs Federal awards audited as major programs are as follows: 84.0 IO Elementary and Secondary Education Act - Title I - Grants to Local Educational Agencies 84.027 Individuals with Disabilities Education Act - Part B - Special Education Capacity Building 84.027 Individuals with Disabilities Education Act - Part B - Special Education Flow Through 84.173 Individuals with Disabilities Education Act - Part B - Special Education Preschool 84.340 Elementary and Secondary Education Act - Title VI - Class Size Reduction -I- HALL COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2002 I SUMMARY OF AUDITOR'S RESULTS 8. Type "A" Program Dollar Threshold The dollar threshold for type "A" programs was $300,000.00. 9. Low Risk Auditee The Hall County Board of Education was audited as a low risk auditee based on a waiver granted by the U.S. Department of Education. II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS CASH AND CASH EQUIVALENTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Separation of Duties Reportable Condition - Material Weakness Finding Control Number: FS-6691-02-01 Our examination of the Principal's accounts disclosed weaknesses in internal controls as discussed below: Cash and Cash Equivalents ( 1) The bank reconciliation function was not separated from the record keeping and voucher payment function. (2) Several accounts did not include evidence that a bank reconciliation had been performed. Revenues/Receivables/Receipts (1) Deposit preparation was not separated from the record keeping and cash custody functions. (2) Cash receipts for Athletic events were not reconciled to tickets sold. Pre-numbered tickets are not utilized for athletic events. Expenditures/Liabilities/Disbursements ( 1) The check writing function was not separated from record keeping or processing ofsigned checks. (2) Based on a sample of 50 items, fifteen voucher packets did not include sufficient documentation for the expenditure. -2- HALL COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30. 2002 II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS CASH AND CASH EQUIVALENTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Separation of Duties Reportable Condition - Material Weakness Finding Control Number: FS-6691-02-01 These deficiencies were a result ofmanagement's decision to limit the number ofadministrative staff made responsible for accounting functions and failure to ensure established controls were functioning as designed. Management should implement procedures to ensure that the key accounting functions of custody, record keeping and authorization be segregated. Additionally, controls should be established and implemented to ensure that bank reconciliations are prepared monthly and retained and that sufficient documentation is kept on file for all expenditures. III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS No matters were reported. -3-