HALL COUNTY BOARD OF EDUCATION
GAINESVILLE, GEORGIA
ANNUAL FINANCIAL REPORT FOR THE FISCAL YEAR ENDED JUNE 30, 2012
(Including Independent Auditor's Reports)

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

B

STATEMENT OF ACTIVITIES

FUND FINANCIAL STATEMENTS

C

BALANCE SHEET

GOVERNMENTAL FUNDS

D

RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET

TO THE STATEMENT OF NET ASSETS

E

STATEMENT OF REVENUES, EXPENDITURES AND CHANGES

IN FUND BALANCES

GOVERNMENTAL FUNDS

F

RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT

OF REVENUES, EXPENDITURES AND CHANGES IN FUND

BALANCES TO THE STATEMENT OF ACTIVITIES

G

STATEMENT OF FIDUCIARY NET ASSETS

FIDUCIARY FUNDS

H

NOTES TO THE BASIC FINANCIAL STATEMENTS

SCHEDULES

REQUIRED SUPPLEMENTARY INFORMATION

1 SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL GENERAL FUND

Page
i
1 2 4 5 6 7 8 9
31

HALL COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS -

SECTION I
FINANCIAL
SCHEDULES
SUPPLEMENTARY INFORMATION
2 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS 3 SCHEDULE OF STATE REVENUE 4 SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS 5 ALLOTMENTS AND EXPENDITURES
GENERAL FUND - QUALITY BASIC EDUCATION PROGRAMS (QBE) BY PROGRAM

Page
32 34 35 37

SECTION II
COMPLIANCE AND INTERNAL CONTROL REPORTS
INDEPENDENT AUDITOR'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS
INDEPENDENT AUDITOR'S REPORT ON COMPLIANCE WITH REQUIREMENTS THAT COULD HAVE A DIRECT AND MATERIAL EFFECT ON EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH OMB CIRCULAR A-133

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

Greg S. Griffin
STATE AUDITOR
(404) 656-2174

DEPARTMENT OF AUDITS AND ACCOUNTS
270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400
March 19, 2013

Honorable Nathan Deal, 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, 2012, 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 of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Board's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinions.
In our opinion, the financial statements referred to previously present fairly, in all material respects, the respective financial position of the governmental activities, each major fund, and the aggregate remaining fund information of the Hall County Board of Education, as of June 30, 2012, and the respective changes in financial position thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America.

2012ARL-11

In accordance with Government Auditing Standards, we have also issued our report dated March 19, 2013, on our consideration of the Hall County Board of Education's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit.
Management's Discussion and Analysis and the Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual, as presented on pages i through xi and page 31 respectively, are not a required part of the basic financial statements but are supplementary information required by accounting principles generally accepted in the United States of America. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management regarding the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance.
Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Hall County Board of Education's financial statements as a whole. The accompanying supplementary information consists of Schedules 2 through 5, which includes the Schedule of Expenditures of Federal Awards as required by U. S. Office of Management and Budget Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations, are presented for purposes of additional analysis and are not a required part of the financial statements. The accompanying supplementary information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the financial statements. The information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated, in all material respects, in relation to the basic financial statements as a whole.
A copy of this report has been filed as a permanent record in the office of the State Auditor and made available to the press of the State, as provided for by Official Code of Georgia Annotated section 50-6-24.
Respectfully submitted,

GSG:as 2012ARL-11

Greg S. Griffin State Auditor

HALL COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2012

INTRODUCTION
The School District's financial statements for the fiscal year ended June 30, 2012, includes a series of basic financial statements that report financial information for the School District as a whole, its funds, and its fiduciary responsibilities. The Statement of Net Assets and the Statement of Activities provide financial information about all of the School District's activities and present both a short-term and long-term view of the School District's finances on a global basis. The fund financial statements provide information about all of the School District's funds. Information about these funds, such as the School District's General Fund, is important in its own right, but will also give insight into the School District's overall soundness as reported in the Statement of Net Assets and the Statement of Activities. Amounts disclosed in the Management's Discussion and Analysis have been rounded and may not agree exactly to the amounts in the financial statements.
FINANCIAL HIGHLIGHTS
Key financial highlights for fiscal year 2012 are as follows:
On the District-wide financial statements:
District-wide net assets at June 30, 2012, were $284.2 million. Net assets reflect the difference between all assets of the School District (including capital assets, net of depreciation) and all liabilities, both short-term and long-term. The net assets at June 30, 2012, of almost $284.2 million represented an increase of $15.4 million in net assets when compared to the prior year.
The School District had $236.2 million in expenses relating to governmental activities; about $143.3 million of these expenses were offset by program specific charges for services, grants and contributions. However, general revenues and Special Item (primarily property and sales taxes) of $108.4 million were adequate to provide for these programs.
As stated above, general revenues and special item accounted for $108.4 million or about 43% of all revenues totaling almost $251.7 million. Program specific revenues in the form of charges for services, grants, and contributions accounted for the balance of these revenues.

Source of Revenues

General Revenue - Property Taxes
30.5%

Program Revenues
56.9%

General Revenue - Sales Taxes 9.2%

General Revenue - All Other 3.4%

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HALL COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2012
On the fund financial statements:
Among major funds, the General Fund had almost $221.0 million in revenues and $223.3 million in expenditures. The General Fund balance of $26.8 million at June 30, 2012, decreased by roughly $2.5 million from the prior year. This decrease in General Fund Balance of $2.5 million was substantially less than the Board anticipated based on its Final Amended Budget which reflected about a $10.2 million decrease in General Fund balance.
OVERVIEW OF THE FINANCIAL STATEMENTS
These financial Statements consists of three parts; management's discussion and analysis (this section), the basic financial statements including notes to the 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.
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. In the case of the Hall County School District, the General Fund, Capital Projects Funds, and Debt Service Funds are all considered to be major funds. The District has no funds required to be reported as nonmajor funds as defined by generally accepted accounting principles.
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
Since Hall County School District has no operations that have been classified as "Business Activities", the district-wide financial statements are basically a consolidation of all of the School 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 now 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 School 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
ii

HALL COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2012
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, student-teacher ratios, and other factors.
When analyzing District-wide financial statements, it is important to remember these statements are prepared using an economic resources measurement focus (accrual accounting) and involve the following steps to format the Statement of Net Assets:
Capitalize current outlays for capital assets Depreciate capital assets Report long-term debt as a liability Calculate revenue and expense using the economic resources measurement focus and the
accrual basis of accounting Allocate net assets as follows:
o Net Assets invested in capital assets, net of related debt o Restricted net assets are those with constraints placed on the use by external sources
such as creditors, grantors, contributors or laws and regulations. o Unrestricted net assets are net assets that do not meet any of the above restrictions.
Fund Financial Statements
The School District uses many funds or sub-funds to account for a multitude of financial transactions during the fiscal year. The fund financial statements presented in this report provide detail information about the School District's significant or major funds. As discussed previously, the School District has no nonmajor Funds as defined by generally accepted accounting principles.
The School District has two kinds of funds as discussed below:
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 year-end 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 be readily 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 government activities (reported in the Statement of Net Assets and the Statement of Activities) and governmental funds are reconciled in the financial statements.
Fiduciary Funds The School District is the trustee, or fiduciary, for assets that belong to clubs, organizations and others 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
Net assets, which is the difference between total assets and total liabilities, is one indicator of the financial condition of the School District. When revenues exceed expenses, the result is an increase in net assets. When expenses exceed revenues, the result is a decrease in net assets. The
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HALL COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2012
relationship between revenues and expenses can be thought of as the School District's operating results. The School District's net assets, as measured in the Statement of Net Assets, can be one way to measure the School District's financial health, or financial position. Over time, increases or decreases in the School District's net assets - as measured in the Statement of Activities - are one indicator of whether its financial health is improving or deteriorating. However, the School District's goal and mission is to provide success for each child's education, not to generate profits as private corporations do. For this reason, many other nonfinancial factors should be considered in assessing the overall health of the School District. In the case of the Hall County School District, assets exceeded liabilities by almost $284.2 million at June 30, 2012. To better understand the District's actual financial position and ability to deliver services in future periods, it is necessary to review the various components of the net assets category. For example, of the $284.2 million of net assets, about $24.7 million was restricted for continuation of various State and Federal programs, debt service and ongoing capital projects. Accordingly, these funds were not available to meet the School District's ongoing obligations to citizens and creditors. In addition, the School District had $242.7 million (net of related debt) invested in capital assets (e.g., land, buildings, and equipment). The School District uses these capital assets to provide educational services to students within geographic boundaries served by the School District. Because of the very nature and on-going use of the assets being reported in this component of net assets, it must be recognized that this portion of the net assets is not available for future spending. The remaining balance of unrestricted net assets of almost $16.8 million may be used to meet the School District's ongoing obligations to citizens and creditors.
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HALL COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2012

Table 1 provides a summary of the School District's net assets for this fiscal year as compared to the prior fiscal year.

Governmental Activities

Fiscal

Fiscal

Year 2012

Year 2011

Assets Current and Other Assets Capital Assets, Net

$

79,790,733 $ 77,928,379

276,448,563

264,790,393

Total Assets

$

356,239,296 $ 342,718,772

Liabilities Current and Other Liabilities Long-Term Liabilities

$

28,143,204 $ 27,176,544

43,934,122

46,817,518

Total Liabilities

$

72,077,326 $ 73,994,062

Net Assets Invested in Capital Assets, Net of Related Debt Restricted Unrestricted

$

242,661,914 $ 233,441,938

24,671,437

16,719,596

16,828,619

18,563,176

Total Net Assets

$

284,161,970 $ 268,724,710

Total net assets increased $15.4 million in fiscal year 2012 from the prior year. This change in net assets is detailed in Table 2 as presented below. Table 2 also shows the changes in net assets as compared to the prior fiscal year.

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HALL COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2012

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: Property Taxes Sales Taxes Grants and Contributions not Restricted to Specific Programs Investment Earnings Miscellaneous
Special Item Gain on Disposal of Capital Assets
Total General Revenues and Special Item
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 Community Services Food Services Interest on Short-Term and Long-Term Debt
Total Expenses
Increase in Net Assets

Governmental Activities

Fiscal Year

Fiscal Year

2012

2011

$

4,091,418 $

4,203,104

132,702,316

139,931,559

6,496,760

3,323,631

$ 143,290,494 $ 147,458,294

$

76,701,631 $

76,258,693

23,056,518

21,180,570

5,295,735

4,530,396

116,180 2,877,008

216,460 2,710,990

348,311

110,016

$ 108,395,383 $ 105,007,125

$ 251,685,877 $ 252,465,419

$ 153,078,032 $ 152,972,647

7,592,970 6,556,504 4,143,751
517,619 12,806,047
1,772,374 14,281,832 12,125,028
7,029,155 864,353

7,610,328 6,187,788 3,987,639
863,178 12,405,870
1,871,522 14,150,083 10,448,953
6,219,309 821,251

204,464 14,043,827
1,232,661

151,738 13,544,451
1,383,987

$ 236,248,617 $ 232,618,744

$

15,437,260 $

19,846,675

vi

HALL COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2012

Cost of Providing Services
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 as compared to the prior fiscal year.
Table 3 Governmental Activities

Total Cost of Services

Fiscal

Fiscal

Year 2012

Year 2011

Net Cost of Services

Fiscal

Fiscal

Year 2012

Year 2011

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: Community Services Food Services Interest on Short-Term and Long-Term Debt

$ 153,078,032 $ 152,972,647 $

7,592,970 6,556,504 4,143,751
517,619 12,806,047
1,772,374 14,281,832 12,125,028
7,029,155 864,353

7,610,328 6,187,788 3,987,639
863,178 12,405,870
1,871,522 14,150,083 10,448,953
6,219,309 821,251

204,464 14,043,827
1,232,661

151,738 13,544,451
1,383,987

56,654,587 $
5,598,915 2,616,816
887,287 -2,896,063 5,960,948 1,658,598 5,662,883 8,737,765 6,012,621
521,621
192,054 117,430 1,232,661

49,303,787
6,018,734 2,820,910
574,484 -2,919,375 5,779,337 1,826,518 5,975,018 8,232,270 5,804,739
12,580
148,684 233,879 1,348,887

Total Expenses

$ 236,248,617 $ 232,618,744 $

92,958,123 $

85,160,452

Expenses for fiscal year 2012 increased about 1.6% from the prior year while the net cost of services increased about 9.2%. This situation occurred because fiscal year 2012 program revenues fell about $4.2 million or 2.8% from the prior year. The decrease in program revenues occurred primarily because Federal Revenues decreased about 26% in fiscal year 2012 as compared to fiscal year 2011.

vii

HALL COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2012
The chart below shows a functional summary of the expenses made by the School District during fiscal year 2012:
Governmental Activities -- Cost of Services

Instructional 64.8%

Support Services 28.7%

Interest on Debt 0.5%

Food Services 5.9%

Community Services 0.1%

FINANCIAL ANALYSIS OF THE SCHOOL DISTRICT'S FUNDS
Information about the School District's governmental funds is presented starting on Exhibit "C" of this report. Governmental funds are accounted for using the modified accrual basis of accounting. The governmental funds had total revenues of $248.6 million, other financing sources/uses of $9.9 million and total expenditures of $260.3 million in fiscal year 2012. Total governmental fund balances of $45.1 million at June 30, 2012, decreased about $1.8 million from the prior year. This small decrease in fund balance resulted primarily from General Fund expenditures slightly exceeding available revenues during the fiscal year, as was anticipated by the School District in its operating budget for fiscal year 2012.
General Fund Budget 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 2012, the School District amended its general fund budget as needed.
The School District budget is adopted at the aggregate level and maintained at the program, function, object, and site levels to facilitate budgetary control. The budgeting systems are designed to control the total budget, but provide flexibility to meet the ongoing programmatic needs. The budgeting systems are also designed to control total site budgets but provide flexibility for site management as well.
For the General Fund, the final actual revenues of almost $221.0 million fell just short of the budgeted amount by about $200,000. This small budget variance demonstrates the School District did a creditable job in forecasting its revenues. The School District traditionally estimates revenue on a conservative basis to avoid substantial shortfalls in actual revenues.

viii

HALL COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2012

The General Fund's final actual expenditures of almost $223.3 million were less than the final budget amount of $231.2 million by roughly $7.9 million. This variance was primarily due to actual expenditures for instruction less than the budgeted amount by $3.2 million, actual expenditures for maintenance and operation less than the budgeted amount by almost $1.8 million, and expenditures for food services less than the budget amount by $1.3 million.
CAPITAL ASSETS AND DEBT ADMINISTRATION
Capital Assets
At fiscal year ended June 30, 2012, the School District had almost $276.4 million invested in capital assets, net of accumulated depreciation, all in governmental activities. These assets are made up of a broad range of items including buildings; land; land improvements; and food service, transportation and maintenance equipment. Table 4 reflects a summary of these balances, net of accumulated depreciation, as compared to the prior fiscal year.

Table 4 Capital Assets (Net of Depreciation)

Governmental Activities

Fiscal

Fiscal

Year 2012

Year 2011

Land Construction In Progress Land Improvements Building and Improvements Equipment

$

28,675,527 $

13,650,453

7,994,058

211,445,680

14,682,845

28,661,743 3,710,754 8,428,296
210,406,704 13,582,896

Total

$ 276,448,563 $

264,790,393

Additional information about the School District's Capital Assets can be found in the Notes to the Basic Financial Statements.

Long-Term Debt

At June 30, 2012, the School District had $43.9 million in total debt outstanding which consisted of $39.7 million in bond debt, $0.6 million in capital lease debt, $3.0 million in intergovernmental agreement debt, $0.6 million in compensated absences debt, and $37,000 in unamortized bond premiums on bonds sold. Table 5 summarizes the School District's debt as compared to the prior fiscal year.

ix

HALL COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2012

Table 5 Debt at June 30

Governmental Activities

Fiscal

Fiscal

Year 2012

Year 2011

Bonds Payable

$

Capital Leases

Intergovernmental Agreement

Compensated Absences

Unamortized Premium on Bonds Sold

39,690,000 $ 604,082
3,000,000 603,026 37,014

41,510,000 1,386,633 2,960,813 621,125 338,947

Total

$

43,934,122 $

46,817,518

At June 30, 2012, the School District's assigned bond rating was "Aa2" as determined by Moody's rating service.
Additional information about the School District's debt can be found in the Notes to the Basic Financial Statements.
FACTORS BEARING ON THE DISTRICT'S FUTURE
Currently known circumstances that are expected to have a significant effect on financial position or results of operations in future years are as follows:
The School District is financially stable. The School District's operating millage for fiscal year 2012 was 17.67, which produced approximately $4.2 million per mill. The School District continues to grow at the rate of about 100 students per year. The School District will construct additional facilities to accommodate the growth and reduce portable classrooms at various schools as needed. The School District plans to fund additional capital outlays with the one percent local sales tax revenue and state capital outlay grants.
The School District continues to be financially challenged by the continuing slow economy and stagnant property values. Revenues in fiscal year 2012 from property taxes decreased by roughly $5.1 million from the prior year while State Funds and Federal Funds combined decreased from the prior year by about $8.9 million.
Despite the constrained levels of revenues realized in fiscal year 2012, the School District is in excellent financial condition. The General Fund had an unassigned fund balance of almost $18.9 million at June 30, 2012, which is down roughly $2.8 million from last year. The Board anticipates significant financial challenges going forward due to expected continued flat revenues and higher health insurance costs for employees. In spite of these challenges, the School District will continue to be a good steward of tax dollars while providing a quality educational opportunity.

x

HALL COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2012 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, Deputy Superintendent, Hall County Board of Education, 711 Green Street, Gainesville, Georgia 30505. You may also email your questions to Mr. Lovett at lee.lovett@hallco.org.
xi

HALL COUNTY BOARD OF EDUCATION

HALL COUNTY BOARD OF EDUCATION STATEMENT OF NET ASSETS JUNE 30, 2012
ASSETS Cash and Cash Equivalents Investments Accounts Receivable, Net
Taxes State Government Federal Government Other Inventories Capitalized Bond and Other Debt Issuance Costs Capital Assets, Non-Depreciable Capital Assets, Depreciable (Net of Accumulated Depreciation)
Total Assets
LIABILITIES Salaries and Benefits Payable Claims Incurred but not Reported (IBNR) Payroll Withholdings Payable Interest Payable Retainages Payable 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. - 1 -

EXHIBIT "A"
GOVERNMENTAL ACTIVITIES
$ 45,590,564.35 1,361,083.93 7,517,109.85
20,319,205.96 4,396,617.05 90,103.14 412,856.79 103,192.20
42,325,980.23 234,122,582.33
$ 356,239,295.83
$ 26,635,396.96 43,923.09
382,937.53 176,313.33 904,632.85 12,616,349.64 31,317,772.24 $ 72,077,325.64
$ 242,661,914.44 6,530,567.50 3,214,312.67
14,926,556.31 16,828,619.27 $ 284,161,970.19
$ 356,239,295.83

HALL COUNTY BOARD OF EDUCATION STATEMENT OF ACTIVITIES
FOR THE YEAR ENDED JUNE 30, 2012

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 Community Services Food Services Interest on Short-Term and Long-Term Debt
Total Governmental Activities
General Revenues Taxes Property Taxes For Maintenance and Operations Sales Taxes Special Purpose Local Option Sales Tax For Debt Services For Capital Projects Other Sales Tax Grants and Contributions not Restricted to Specific Programs Investment Earnings Miscellaneous
Special Item Gain on Sale of Real Property
Total General Revenues and Special Item
Change in Net Assets
Net Assets - Beginning of Year
Net Assets - End of Year

EXPENSES

CHARGES FOR SERVICES

$ 153,078,031.97 $
7,592,970.13 6,556,504.23 4,143,751.14
517,618.65 12,806,046.62
1,772,373.97 14,281,832.25 12,125,028.17
7,029,154.68 864,352.64
204,464.25 14,043,827.17
1,232,660.96
$ 236,248,616.83 $

1,299,684.53
12,624.99 2,779,108.47 4,091,417.99

The notes to the basic financial statements are an integral part of this statement. - 2 -

EXHIBIT "B"

PROGRAM REVENUES OPERATING GRANTS AND
CONTRIBUTIONS

CAPITAL GRANTS AND CONTRIBUTIONS

NET (EXPENSES) REVENUES
AND CHANGES IN NET ASSETS

$ 90,503,466.21 $
1,991,900.53 3,939,687.92 3,256,464.60 3,413,681.97 6,679,195.47
74,881.01 8,534,197.13 2,548,268.42
614,586.66 342,731.35
12,409.68 10,790,845.14
$ 132,702,316.09 $

4,620,294.13 $ 2,154.91
165,902.84 38,894.77 72,127.55
838,994.50 401,947.43
356,443.84
6,496,759.97 $

-56,654,587.10
-5,598,914.69 -2,616,816.31
-887,286.54 2,896,063.32 -5,960,948.31 -1,658,598.19 -5,662,882.58 -8,737,765.25 -6,012,620.59
-521,621.29
-192,054.57 -117,429.72 -1,232,660.96
-92,958,122.78

$

76,701,630.63

12,770,836.67 8,879,738.43 1,405,942.68 5,295,735.00 116,179.58 2,877,008.39

348,311.37

$

108,395,382.75

$

15,437,259.97

268,724,710.22

$

284,161,970.19

- 3 -

ASSETS
Cash and Cash Equivalents Investments Accounts Receivable, Net
Taxes State Government Federal Government Other Inventories

HALL COUNTY BOARD OF EDUCATION BALANCE SHEET
GOVERNMENTAL FUNDS JUNE 30, 2012

GENERAL FUND

DISTRICTWIDE
CAPITAL PROJECTS
FUND

DEBT SERVICE
FUND

EXHIBIT "C" TOTAL

$ 31,409,013.62 $ 14,180,723.24 $

827.49 $ 45,590,564.35

67,313.40

462,758.29 831,012.24

1,361,083.93

5,615,658.80 15,367,612.11
4,396,617.05 90,103.14
412,856.79

1,901,451.05 4,951,593.85

7,517,109.85 20,319,205.96
4,396,617.05 90,103.14
412,856.79

Total Assets

$ 57,359,174.91 $ 21,496,526.43 $ 831,839.73 $ 79,687,541.07

LIABILITIES AND FUND BALANCES
LIABILITIES
Salaries and Benefits Payable Payroll Withholdings Payable Retainages Payable Deposits and Deferred Revenue
Total Liabilities
FUND BALANCES
Nonspendable Restricted Assigned Unassigned
Total Fund Balances

$ 26,635,396.96 382,937.53 $
3,511,009.37

904,632.85 3,150,272.26

$ 30,529,343.86 $ 4,054,905.11

$ 26,635,396.96 382,937.53 904,632.85
6,661,281.63
$ 34,584,248.97

$ 412,856.79 6,117,710.71 1,447,654.77
18,851,608.78

$ 17,441,621.32

$ 831,839.73

$ 412,856.79 24,391,171.76 1,447,654.77 18,851,608.78

$ 26,829,831.05 $ 17,441,621.32 $ 831,839.73 $ 45,103,292.10

Total Liabilities and Fund Balances

$ 57,359,174.91 $ 21,496,526.43 $ 831,839.73 $ 79,687,541.07

The notes to the basic financial statements are an integral part of this statement. - 4 -

HALL COUNTY BOARD OF EDUCATION RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET
TO THE STATEMENT OF NET ASSETS JUNE 30, 2012

EXHIBIT "D"

Total Fund Balances - Governmental Funds (Exhibit "C")
Amounts reported for Governmental Activities in the Statement of Net Assets are different because:
Capital Assets used in Governmental Activities are not financial resources and therefore are not reported as assets in governmental funds. These assets consist of:
Land Construction in Progress Land Improvements Buildings Equipment Accumulated Depreciation
Total Capital Assets
Property taxes that are not available to pay for current period expenditures are deferred in the governmental funds.
Georgia State Financing and Investment Commission grants that are not available to pay current period expenditures are deferred in the funds.
Other Long-Term Assets are not available to pay for current period expenditures and therefore, are deferred on the Statement of Net Assets.
Deferred Charges - Capitalized Bond Issuance Costs
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 Payable Accrued Interest Payable Capital Leases Payable Compensated Absences Payable Unamortized Bond Premiums Intergovernmental Agreement Claims and Judgments Payable
Total Long-Term Liabilities

$ 45,103,292.10

$ 28,675,527.05 13,650,453.18 21,197,174.09
270,125,410.88 30,028,809.07 -87,228,811.71

276,448,562.56

3,511,009.37

3,150,272.26

103,192.20

$ -39,690,000.00 -176,313.33 -604,082.14 -603,025.74 -37,014.00
-3,000,000.00 -43,923.09

-44,154,358.30

Net Assets of Governmental Activities (Exhibit "A")

$ 284,161,970.19

The notes to the basic financial statements are an integral part of this statement. - 5 -

HALL COUNTY BOARD OF EDUCATION STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES
GOVERNMENTAL FUNDS YEAR ENDED JUNE 30, 2012

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 Community Services Food Services Operation
Capital Outlay Debt Services
Principal Dues and Fees Interest
Total Expenditures
Excess of Revenues over (under) Expenditures
OTHER FINANCING SOURCES (USES)
Proceeds of Bonds Sale of Real Property Transfers In Transfers Out
Total Other Financing Sources (Uses)
Net Change in Fund Balances
Fund Balances - Beginning (Restated)

GENERAL FUND

DISTRICTWIDE
CAPITAL PROJECTS
FUND

DEBT SERVICE
FUND

TOTAL

$ 73,868,595.13 1,405,942.68 $
113,129,184.04 25,707,861.55 4,091,417.99 62,944.45 2,717,258.39

$ 73,868,595.13

8,879,738.43 $ 12,770,836.67

23,056,517.78

5,796,023.80

118,925,207.84

25,707,861.55

4,091,417.99

41,170.16

12,064.97

116,179.58

3,750.00

156,000.00

2,877,008.39

$ 220,983,204.23 $ 14,720,682.39 $ 12,938,901.64 $ 248,642,788.26

$ 144,912,176.50

$ 144,912,176.50

7,588,493.31
6,556,504.23 3,793,126.61
430,631.48 12,465,819.06
1,677,666.65 14,153,896.66 10,885,461.95
6,210,626.66 863,604.46 204,464.25
13,314,299.50 24,920.00

$ 350,624.53 2,407.00
21,780.57 938,965.50
22,269,129.27

7,588,493.31
6,556,504.23 4,143,751.14
433,038.48 12,465,819.06
1,699,447.22 14,153,896.66 11,824,427.45
6,210,626.66 863,604.46 204,464.25
13,314,299.50 22,294,049.27

199,223.69 12,198.57

583,327.42 $ 11,320,000.00

3,466.25

85,425.36

1,427,108.36

12,102,551.11 3,466.25
1,524,732.29

$ 223,293,113.58 $ 24,251,659.65 $ 12,750,574.61 $ 260,295,347.84

$ -2,309,909.35 $ -9,530,977.26 $ 188,327.03 $ -11,652,559.58

$ 9,500,000.00

398,850.00

$

$

-145,995.90

$

-145,995.90 $ 9,898,850.00 $

$ -2,455,905.25 $ 367,872.74 $

29,285,736.30 17,073,748.58

$ 145,995.90

9,500,000.00 398,850.00 145,995.90 -145,995.90

145,995.90 $ 9,898,850.00

334,322.93 $ -1,753,709.58

497,516.80

46,857,001.68

Fund Balances - Ending

$ 26,829,831.05 $ 17,441,621.32 $ 831,839.73 $ 45,103,292.10

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 STATEMENT OF
REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES TO THE STATEMENT OF ACTIVITIES JUNE 30, 2012

EXHIBIT "F"

Total Net Change in Fund Balances - Governmental Funds (Exhibit "E")
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
The net effect of various miscellaneous transactions involving capital assets (i.e., sales, trade-ins, donations, and disposals) is to decrease net assets.
Revenues reported in the Statement of Activities that do not provide current financial resources are not reported as revenues in the funds.
Property Tax Georgia State Financing and Investment Commission Grants
Total
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
Bond issuance costs, deferred gains on refundings and similar items when debt is first issued are reported as an expenditure in Governmental Funds, but are reported as deferred charges on the Statement of Net Assets and amortized over the term of the debt, using the straight-line method. The details of this difference in the current period are as follows:
Amortization of Bond Issuance Costs
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 Intergovernmental Agreement
Total Long-Term Debt Repayments
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:
Net Decrease in Accrued Interest on Issuance of Bonds Decrease in Compensated Absences Decrease in Claims and Judgments Amortization of Bond Premium
Total Additional Expenditures
Change in Net Assets of Governmental Activities (Exhibit "B")
The notes to the basic financial statements are an integral part of this statement.
- 7 -

$ -1,753,709.58

$ 18,658,454.42 -6,949,745.91

11,708,708.51

-50,538.63

$ 2,833,035.50 -138,258.33

2,694,777.17

-9,500,000.00

-84,580.17

$ 11,320,000.00 782,551.11 -39,187.18

12,063,363.93

$

32,792.11

18,099.67

6,414.31

301,932.65

359,238.74

$ 15,437,259.97

HALL COUNTY BOARD OF EDUCATION STATEMENT OF FIDUCIARY NET ASSETS
FIDUCIARY FUNDS JUNE 30, 2012
ASSETS Cash and Cash Equivalents
LIABILITIES Funds Held for Others

EXHIBIT "G"
AGENCY FUNDS $ 299,497.21
$ 299,497.21

The notes to the basic financial statements are an integral part of this statement. - 8 -

HALL COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2012

EXHIBIT "H"

Note 1: DESCRIPTION OF SCHOOL DISTRICT AND REPORTING ENTITY
REPORTING ENTITY
The Hall County Board of Education (School District) was established under the laws of the 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 bonds. 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 of the Hall County Board of Education.
District-wide Statements: The Statement of Net Assets and the Statement of Activities display information about the financial activities of the 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 of the 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 of goods 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. Eliminations have been made to minimize the double counting of internal activities. 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. The District had no funds that were required to be reported as nonmajor funds.
The School District reports the following major governmental funds:
General Fund is the School District's primary operating fund. It accounts for and reports all financial resources not accounted for and reported in another fund.

- 9 -

HALL COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2012

EXHIBIT "H"

District-wide Capital Projects Fund accounts for and reports financial resources including Special Purpose Local Option Sales Tax (SPLOST), Bond Proceeds and grants from Georgia State Financing and Investment Commission that are restricted, committed or assigned to the expenditure for capital outlays, including the acquisition or construction of capital facilities and other capital assets.
Debt Service Fund accounts for and reports financial resources that are restricted, committed, or assigned including taxes (sales) legally restricted for the payment of general long-term principal and interest.
The School District reports the following fiduciary fund type:
Agency funds account for assets held by the School District as an agent for various Principals' accounts.
BASIS OF ACCOUNTING
The basis of accounting 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 measurement focus and the modified accrual basis of accounting. 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 120 days after year-end. Property taxes, sales taxes and interest are considered to be susceptible to accrual. Expenditures are recorded when the related fund liability is incurred, except for principal and interest on general long-term debt, claims and judgments 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 of specific 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.
- 10 -

HALL COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2012

EXHIBIT "H"

RESTATEMENT OF PRIOR YEAR FUND BALANCE
For fiscal year 2012, the School District made a prior period adjustment due to an error in recognizing revenue from the Georgia State Financing and Investment Commission, which requires the restatement of the June 30, 2011, fund balance in the Capital Projects Fund. The result is a decrease in Fund Balance at July 1, 2011 of $3,288,530.59. This change is in accordance with generally accepted accounting principles.

Fund Balance, July 1, 2011, as previously reported

$

20,362,279.17

Improper recognition of GSFIC revenue

-3,288,530.59

Fund Balance, July 1, 2011, as restated

$

17,073,748.58

CASH AND CASH EQUIVALENTS
Composition of Deposits Cash and cash equivalents consist of cash 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. Official Code of Georgia Annotated Section 45-8-14 authorizes the School District to deposit its funds in one or more solvent banks, insured Federal savings and loan associations or insured chartered building and loan associations.
INVESTMENTS
Composition of Investments Investments made by the School District in nonparticipating interest-earning contracts (such as certificates of deposit) and repurchase agreements are reported at cost. Participating interestearning contracts and money market investments with a maturity at purchase of one year or less are reported at amortized cost. Both participating interest-earning contracts and money market investments with a maturity at purchase greater than one year are reported at fair value. The Official Code of Georgia Annotated Section 36-83-4 authorizes the School District to invest its funds. In selecting among options for investment or among institutional bids for deposits, the highest rate of return shall be the objective, given equivalent conditions of safety and liquidity. Funds may be invested in the following:
(1) Obligations issued by the State of Georgia or by other states,
(2) Obligations issued by the United States government,
(3) Obligations fully insured or guaranteed by the United States government or a United States government agency,
(4) Obligations of any corporation of the United States government,
(5) Prime banker's acceptances,
(6) The Georgia Fund 1 administered by the State of Georgia, Office of the State Treasurer,

- 11 -

HALL COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2012

EXHIBIT "H"

(7) Repurchase agreements, and

(8) Obligations of other political subdivisions of the State of Georgia.

The School District does not have a formal policy regarding investment policies that address credit risks, custodial credit risks, concentration of credit risks, interest rate risks or foreign currency risks.

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 2011 tax digest year (calendar year) on June 30, 2011 (levy date). Taxes were due on October 1, 2011 and could be paid in two installments on October 1, 2011 and December 1, 2011 (due dates). The Hall County Tax Commissioner asserts no liens will be placed for delinquent 2011 property taxes until March 1, 2012. Taxes collected within the current fiscal year or within 60 days after year-end on the 2011 tax digest are reported as revenue in the governmental funds for fiscal year 2012. The Hall County Tax Commissioner bills and collects the property taxes for the School District, withholds 2.5% of taxes 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, 2012, for maintenance and operations amounted to $73,868,595.13.

Tax millage rates levied for the 2011 tax year (calendar year) for the Hall County Board of Education were as follows (a mill equals $1 per thousand dollars of assessed value):

School Operations

17.67 mills

SALES TAXES

Special Purpose Local Option Sales Tax, at the fund reporting level, during the year amounted to $21,650,575.10 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. The most recent authorization expires on September 30, 2017.

- 12 -

HALL COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2012

EXHIBIT "H"

INVENTORIES

Food Inventories On the basic financial statements, inventories of donated food commodities used in the preparation of meals are reported at their Federally assigned value and purchased foods inventories are reported at cost (first-in, first-out). The School District uses the consumption method to account for inventories whereby donated food commodities are recorded as an asset and as revenue when received, and expenses/expenditures are recorded as the inventory items are used. Purchased foods are recorded as an asset when purchased and expenses/expenditures are recorded as the inventory items are used.

CAPITAL ASSETS

Capital assets purchased, including capital outlay costs, are recorded as expenditures in the fund financial statements at the time of purchase (including ancillary charges). 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 estimated 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. During the fiscal year 2012, no events or changes in circumstances affecting a capital asset that may indicate impairment were known to the School District.

Capitalization thresholds and estimated useful lives of capital assets reported in the District-wide

statements are as follows:

Capitalization

Estimated

Policy

Useful Life

Land Land Improvements Buildings and Improvements Equipment Intangible Assets

All $ 5,000.00 $ 100,000.00 $ 5,000.00 $ 100,000.00

N/A 10 to 60 years 10 to 70 years
5 to 50 years individually determined

Depreciation is used to allocate the actual or estimated historical cost of all capital assets over estimated useful lives, with the exception of intangible assets which are amortized.

Amortization of intangible assets such as water, timber, and mineral rights, easements, patents, trademarks, copyrights and internally generated software is computed using the straight-line method over the estimated useful lives of the assets, generally 10 to 20 years

COMPENSATED ABSENCES

Members of the Teachers' Retirement System of Georgia (TRS) may apply unused sick leave toward early retirement. The liability for early retirement will be borne by TRS rather than by the individual school districts. Otherwise, sick leave does not vest with the employee, and no liability is reported in the School District's financial statements.

- 13 -

HALL COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2012

EXHIBIT "H"

Vacation leave of 15 days is awarded on a fiscal year basis to all full time personnel employed on a twelve month basis. No other employees are eligible to earn vacation leave. Vacation leave not utilized during the fiscal year may be carried over to the next fiscal year, providing such vacation leave does not exceed 15 days.

Beginning of Year Liability

Increases

Decreases

End of Year Liability

2010

$

2011

$

2012

$

687,861.43 $ 669,798.85 $ 621,125.41 $

785,510.31 $ 725,280.06 $ 718,655.31 $

803,572.89 $ 773,953.50 $ 736,754.98 $

669,798.85 621,125.41 603,025.74

GENERAL OBLIGATION BONDS
The School District issues general obligation bonds to provide funds for the acquisition and construction of major capital facilities. In the District-wide financial statements, bond premiums and discounts, as well as issuance costs, are deferred and amortized over the life of the bonds using the straight-line method. Bond issuance costs are reported as deferred charges and amortized over the term of the debt.
In the fund financial statements, the School District recognizes bond premiums and discounts, as well as bond issuance costs during the fiscal year bonds are issued. Premiums received on debt issuances are reported as other financing sources while discounts on debt issuances are reported as other financing uses. Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as debt service expenditures. 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.
NET ASSETS
The School District's net assets in the District-wide Statements are classified as follows:
Invested in capital assets, net of related debt - This represents the School District's total investment in capital assets, net of outstanding debt obligations related to those capital assets. To the extent debt has been incurred but not yet expended for capital assets, such amounts are not included as a component of invested in capital assets, net of related debt.
Restricted net assets - These represent resources for which the School District is legally or contractually obligated to spend resources for continuation of Federal programs, debt service and capital projects in accordance with restrictions imposed by external third parties.
Unrestricted net assets - Unrestricted net assets represent resources derived from property taxes, sales taxes, grants and contributions not restricted to specific programs, charges for services, and miscellaneous revenues. These resources are used for transactions relating to the educational and general operations of the School District, and may be used at the discretion of the Board to meet current expenses for those purposes.

- 14 -

HALL COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2012

EXHIBIT "H"

FUND BALANCES The School District's fund balances are classified as follows:

Nonspendable Amounts that cannot be spent either because they are in a nonspendable form or because they are legally or contractually required to be maintained intact.

Restricted Constraints are placed on the use of resources are either (1) externally imposed conditions by creditors, grantors, contributors, or laws and regulations of other governments or (2) imposed by law through constitutional provisions or enabling legislation.

Committed Amounts that can be used only for specific purposes pursuant to constraints imposed by formal action of the Board of Education. The Board of Education is the School District's highest level of decision-making authority, and the formal action that is required to be taken to establish, modify, or rescind a fund balance commitment is a resolution approved by the Board. Committed fund balance also should incorporate contractual obligations to the extent that existing resources in the fund have been specifically committed for use in satisfying those contractual requirements.
Assigned Amounts that are constrained by the School District's intent to be used for specific purposes, but are neither restricted nor committed. The intent should be expressed by (1) the Board of Education or (2) the budget or finance committee, or the Superintendent, or designee, to assign amounts to be used for specific purposes.

Unassigned The residual classification for the General Fund. This classification represents fund balances that has not been assigned to other funds and that has not been restricted, committed, or assigned to specific purposes within the General Fund.

Fund Balances of the Governmental Funds at June 30, 2012, are as follows:

Nonspendable Inventories
Restricted Continuation of Federal Programs Capital Projecs Debt Service
Assigned School Activity Accounts
Unassigned

$
$ 6,117,710.71 14,882,835.05 3,390,626.00

412,856.79
24,391,171.76 1,447,654.77
18,851,608.78

Fund Balance, June 30, 2012

$ 45,103,292.10

When multiple categories of fund balance are available for expenditure, the School District will start with the most restricted category and spend those funds first before moving down to the next category with available funds.

- 15 -

HALL COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2012

EXHIBIT "H"

USE OF ESTIMATES
The preparation of the financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results may differ from those estimates.
Note 3: BUDGETARY DATA
The budget is a complete financial plan for the School District's fiscal year, and is based upon careful estimates of expenditures together with probable funding sources. The budget is legally adopted each year for the General, Debt Service, and Capital Projects funds. There is no statutory prohibition regarding over expenditure of the budget at any level. The budget for all governmental funds, except the various school activity (principal) accounts, is prepared and adopted by fund, function and object. The legal level of budgetary control was established by the Board at the aggregate fund, function level. The School District's formal budget was prepared using a methodology that produces essentially the same results as produced by generally accepted accounting principles in the United States of America.
The budgetary process begins with the School District's administration presenting an initial budget for the Board's review. The administration makes revisions as necessary based on the Board's guidelines and a tentative budget is approved. After approval of this tentative budget by the Board, such budget is advertised at least once in a newspaper of general circulation in the locality. At the next regularly scheduled meeting of the Board after advertisement, the Board receives comments on the tentative budget, makes revisions as necessary and adopts a final budget. The approved budget is then submitted, in accordance with provisions of Official Code of Georgia Annotated section 20-2167(c), to the Georgia Department of Education. The Board may increase or decrease the budget at any time during the year. All unexpended budget authority lapses at fiscal year-end.
The administrative staff is responsible for preparing monthly budget reports for the Board. If it becomes necessary to amend the budget, the Superintendent shall make such recommendation to the Board for action.
See Schedule 1 General Fund Schedule of Revenues, Expenditures and Changes in Fund Balances Budget to Actual for a detail of any over/under expenditures during fiscal year 2012.
Note 4: DEPOSITS AND INVESTMENTS
COLLATERALIZATION OF DEPOSITS
Official Code of Georgia Annotated (O.C.G.A.) 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 of insurance, or by collateral. The aggregate of the face value of such surety bond and the market value of securities pledged shall be equal to not less than 110 percent of the public funds being secured after the deduction of the amount of deposit insurance. If a depository elects the pooled method (O.C.G.A. Section 45-8-13.1) the aggregate of the market value of the securities pledged to secure a pool of public funds shall be not less than 110 percent of the daily pool balance.

- 16 -

HALL COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2012

EXHIBIT "H"

Acceptable security for deposits consists of any one of or any combination of the following:
(1) 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

(7) Bonds, bills, notes, certificates of indebtedness, or other obligations of a subsidiary corporation of the United States government, which are fully guaranteed by the United States government both as to principal and interest or debt obligations issued by or securities guaranteed by the Federal Land Bank, the Federal Home Loan Bank, the Federal Intermediate Credit 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

Custodial credit risk is the risk that in the event of a bank failure, the School District's deposits may not be returned to it. The School District does not have a deposit policy for custodial credit risk. At June 30, 2012, the bank balances were $61,615,705.22. The amounts exposed to custodial credit risk are classified into three categories as follows:

Category 1 - Uncollateralized, Category 2 - Cash collateralized with securities held by the pledging financial institution,
or Category 3 - Cash collateralized with securities held by the pledging financial institution's trust
department or agent but not in the School District's name.
The School District's deposits by custodial credit risk category at June 30, 2012, are as follows:

Custodial Credit Risk Category

Bank Balance

1

$

0.00

2

0.00

3

65,476.08

Total

$

65,476.08

- 17 -

HALL COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2012

EXHIBIT "H"

CATEGORIZATION OF INVESTMENTS

The School District's investments as of June 30, 2012, are presented below. All investments are

presented by investment type and debt securities are presented by maturity. These amounts do not

include $67,313.40 of certificates of deposits in various banks and credit unions which the School

District has classified as investments.

Investment

Maturity

Less than

Fair Value

1 Year

Investment Type

Debt Securities U. S. Treasuries Federated Treasury Obligations Fund

$

616,925.96 $

616,925.96

463,360.27

463,360.27

$ 1,080,286.23 $ 1,080,286.23

Investment Pools Office of State Treasurer Georgia Fund 1

213,484.30

Total Investments

$ 1,293,770.53

The Georgia Fund 1, formerly referred to as LGIP, administered by the State of Georgia, Office of the State Treasurer is not required to be categorized since the School District did not own any specific identifiable securities in the pool. The investment policy of the State of Georgia, Office of the State Treasurer for the Georgia Fund 1 (Primary Liquidity Portfolio) does not provide for investment in derivatives or similar investments. Additional information on the Georgia Fund 1 is disclosed in the State of Georgia Comprehensive Annual Financial Report. This audit can be obtained from the Georgia Department of Audits and Accounts at www.audits.ga.gov/SGD/CAFR.html.

The Primary Liquidity Portfolio consists of Georgia Fund 1 which is not registered with the SEC as an investment company but does operate in a manner consistent with the SEC's Rule 2a-7 of the Investment Company Act of 1940. The investment is valued at the pool's share price, $1.00 per share. The pool is an AAAm rated investment pool by Standard and Poor's. The weighted average maturity of Georgia Fund 1 may not exceed 60 days. The weighted average maturity for Georgia Fund 1 on June 30, 2012, was 48 days.

Interest Rate Risk Interest rate risk is the risk that changes in interest rates of debt investment will adversely affect the fair value of an investment. The School District does not have a formal policy for managing interest rate risk.

Custodial Credit Risk Custodial credit risk for investments is the risk that, in the event of the failure of the counterparty to a transaction, the School District will not be able to recover the value of the investment or collateral securities that are in the possession of an outside party. The School District does not have a formal policy for managing custodial credit risk.

- 18 -

HALL COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2012

EXHIBIT "H"

At June 30, 2012, $1,080,286.23 of the School District's applicable investments were uninsured or unregistered, with securities held by the counterparty, or by its trust department or agent, but not in the School District's name.

Credit Quality Risk Credit quality risk is the risk that an issuer or other counterparty to an investment will not fulfill its obligations. The School District does not have a formal policy for managing credit quality risk.

The investments subject to credit quality risk are reflected below:

Rated Debt Investments

Fair Value

Quality Ratings AAAm

Debt Securities Federated Treasury Obligations Fund

$ 463,360.27 $ 463,360.27

Concentration of Credit Risk Concentration of credit risk is the risk of loss attributed to the magnitude of a government's investment in a single issuer. The School District does not have a formal policy for managing concentration of credit risk. More than 5% of the School District's investments are in U. S. Treasuries and Federated Treasury Obligation Fund. These investments are 48% and 36%, respectively, of the School District's total investments.

Note 5: 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 2 - Inventories

- 19 -

HALL COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2012

EXHIBIT "H"

Note 6: CAPITAL ASSETS The following is a summary of changes in the Capital Assets during the fiscal year:

Governmental Activities Capital Assets, Not Being Depreciated:
Land Construction Work In Progress

Balances July 1, 2011

Increases

Decreases

Balances June 30, 2012

$ 28,661,742.88 $

42,547.00 $

3,710,753.50

15,237,974.99

28,762.83 $ 5,298,275.31

28,675,527.05 13,650,453.18

Total Capital Assets, Not Being Depreciated $ 32,372,496.38 $ 15,280,521.99 $

5,327,038.14 $ 42,325,980.23

Capital Assets, Being Depreciated: Buildings and Improvements Equipment Land Improvements

$ 264,709,835.57 $ 27,065,775.91 20,960,768.82

5,415,575.31 3,024,227.16 $
236,405.27

$ 61,194.00

270,125,410.88 30,028,809.07 21,197,174.09

Less: Accumulated Depreciation: Buildings and Improvements Equipment Land Improvements

54,303,131.24 13,482,879.82 12,532,472.94

4,376,599.97 1,902,502.66
670,643.28

39,418.20

58,679,731.21 15,345,964.28 13,203,116.22

Total Capital Assets, Being Depreciated, Net $ 232,417,896.30 $ 1,726,461.83 $

21,775.80 $ 234,122,582.33

Governmental Activity Capital Assets - Net $ 264,790,392.68 $ 17,006,983.82 $

5,348,813.94 $ 276,448,562.56

Current year depreciation expense by function is as follows:

Instruction Support Services
Pupil Services School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Food Services

$

$

2,647.00

203,787.62

47,776.59

88,598.25

747,306.40

493,734.24

$

4,928,056.15
1,583,850.10 437,839.66
6,949,745.91

- 20 -

HALL COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2012

EXHIBIT "H"

Note 7: INTERFUND TRANSFERS Interfund transfers for the year ended June 30, 2012, consisted of the following:

Transfer to

Transfers From
General Fund

Debt Service Fund

$

145,995.90

The above transfer was made to provide funding to the Debt Service Fund to pay the School District's annual deposit which provides for retirement of Qualified Zone Academy Bonds (QZAB) when they mature in fiscal year 2023.

Note 8: 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 of loss associated with commercial property, crime, general liability, commercial auto, and educator's liability. The coverage also includes torts, assets, errors or omissions, job related illness or injuries to employees and acts of God. The School District has neither significantly reduced coverage for these risks nor incurred losses (settlements) which exceeded the School District's insurance coverage in any of the past three years.
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 the related 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 $350,000.00 loss per occurrence, up to the statutory limit.

Changes in the workers' compensation claims liability during the last two fiscal years are as follows:

Beginning of Year Liability

Claims and Changes in Estimates

Claims Paid

End of Year Liability

2011

$

2012

$

0.00 $ 0.00 $

755,930.03 $ 811,131.70 $

755,930.03 $ 811,131.70 $

0.00 0.00

The School District is self-insured with regard to unemployment compensation claims. A premium is charged when needed by the General Fund to each user program on the basis of the percentage of that fund's payroll to total payroll in order to cover estimated claims budgeted by management based

- 21 -

HALL COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2012

EXHIBIT "H"

on known claims and prior experience. The School District accounts for claims with expenses/expenditures and the related 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

2011 $ 2012 $

0.00 $ 0.00 $

281,011.45 $ 157,292.63 $

281,011.45 $ 157,292.63 $

0.00 0.00

The School District has purchased a surety bond to provide additional insurance coverage as follows:

Position Covered

Amount

Superintendent

$25,000.00

Note 9: OPERATING LEASES

The Hall County Board of Education has entered into various leases as lessee for office equipment.

These leases are considered for accounting purposes to be operating leases. Lease expenditures for the year ended June 30, 2012, for governmental funds amounted to $354,330.05. Future minimum lease payments for these leases are as follows:

Governmental

Year Ending

Funds

2013 2014 2015

$

306,188.53

237,099.30

10,082.00

Total

$

553,369.83

Note 10: LONG-TERM DEBT

CAPITAL LEASES

The Hall County Board of Education entered into various lease agreements for energy, lawn equipment, and information technology equipment. Under the terms of the agreements, the School District will make annual payments through 2014. 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. Typically, the General Fund is the fund used to liquidate this long-term debt. The School District uses the vesting method to compute compensated absences.
- 22 -

HALL COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2012

EXHIBIT "H"

INTERGOVERNMENTAL INSTALLMENT SALE AGREEMENT (1)
The Hall County Board of Education entered into an intergovernmental installment sale agreement with the Gainesville and Hall County Development Authority, dated September 1, 2010. Under the terms of the agreement, the Authority issued $3,000,000.00 in Taxable Revenue Bonds (Hall County School District Qualified School Construction Bonds Project). The net proceeds of the bonds are being used by the Authority for the purpose of providing funds to pay defined capital costs of School District schools. The agreement makes the School District contractually liable to make annual payments of $174,165.46 to a Debt Service Fund in accordance with an amortization schedule sufficient to retire the bonds upon maturity in fiscal 2028. Additionally, the School District is contractually obligated to fund the annual interest expense accruing on these bonds in the amount of $156,000.00 annually. However, the Authority is responsible to the School District to file appropriate documents with the Internal Revenue Service to qualify these bonds as eligible to receive "subsidy payments" from the U. S. Government which will defray or entirely offset the School District's liability to make full interest debt service amortization payments to the Authority's Debt Sinking Fund as scheduled. In fiscal year 2012, sufficient "subsidy payments" were received from the U. S. Government to pay the interest due of $156,000.00 in full, resulting in no cash outlay by the School District for this purpose.
The obligation of the School District is absolute and unconditional so long as any of the bonds remain outstanding. Under the contract, the School District will exercise its power of taxation to the extent necessary to pay the amounts required to be paid by the agreement.
GENERAL OBLIGATION DEBT OUTSTANDING
General Obligation Bonds currently outstanding are as follows:

Purpose

Interest Rates

Amount

General Government - Series 2006 General Government - Series 2007 General Government - Series 2007A General Government - Refunding - Series 2007B General Government - QZAB - Series 2007 General Government - Series 2011 General Government - Series 2012

3.59% 4.25% - 5.00% 4.00% - 5.00% 4.00% - 5.00%
0.00% 1.81% 1.77%

$ 3,280,000.00 3,115,000.00 2,695,000.00 8,985,000.00 2,615,000.00 9,500,000.00 9,500,000.00

$ 39,690,000.00

Voters have authorized $6,000,000.00 in general obligation debt for various capital projects which was not issued as of June 30, 2012.

- 23 -

HALL COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2012

EXHIBIT "H"

The changes in Long-Term Debt during the fiscal year ended June 30, 2012, were as follows:

Balance July 1, 2011

Additions

Governmental Funds

Balance

Deductions

June 30, 2012

Due Within One Year

G. O. Bonds

$ 41,510,000.00 $

Capital Leases

1,386,633.25

Compensated Absences (1)

621,125.41

Intergovernmental Agreement

2,960,812.82

Bond Premiums Amortized

338,946.65

9,500,000.00 $ 11,320,000.00 $ 39,690,000.00 $ 12,040,000.00

782,551.11

604,082.14

482,835.64

718,655.31

736,754.98

603,025.74

56,500.00

-39,187.18

3,000,000.00

301,932.65

37,014.00

37,014.00

$ 46,817,518.13 $ 10,218,655.31 $ 13,102,051.56 $ 43,934,121.88 $ 12,616,349.64

(1) The portion of Compensated Absences due within one year has been determined to be immaterial to the basic financial statements.

At June 30, 2012, payments due by fiscal year which includes principal and interest for these items are as follows:

Capital Leases

Intergovernmental Agreement

Principal

Interest

Principal

Interest

Fiscal Year Ended June 30:

2013 2014 2015 2016 2017 2018 - 2022 2023 - 2027 2028

$

482,835.64 $

121,246.50

42,964.60

$

10,811.58

$ 3,000,000.00

156,000.00 156,000.00 156,000.00 156,000.00 156,000.00 780,000.00 780,000.00 156,000.00

Total Principal and Interest

$

604,082.14 $

53,776.18 $ 3,000,000.00 $ 2,496,000.00

Fiscal Year Ended June 30:

General Obligation Debt

Principal

Interest

Unamortized Bond Premium

2013 2014 2015 2016 2017 2018 - 2022 2023

$ 12,040,000.00 $ 6,190,000.00 6,685,000.00 3,780,000.00 4,050,000.00 4,330,000.00 2,615,000.00

944,964.50 $ 514,375.50 315,207.50 183,833.00 113,754.50
38,753.50

37,014.00

Total Principal and Interest

$ 39,690,000.00 $ 2,110,888.50 $

37,014.00

- 24 -

HALL COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2012

EXHIBIT "H"

Note 11: ON-BEHALF PAYMENTS

The School District has recognized revenues and costs in the amount of $17,828,102.39 for health insurance and retirement contributions paid on the School District's behalf by the following.

Georgia Department of Education Paid to the Georgia Department of Community Health For Health Insurance of District Personnel In the amount of $17,380,289.00

Paid to the Teachers' Retirement System of Georgia For Teachers' Retirement System (TRS) Employer's Cost In the amount of $162,863.39

Office of State Treasurer Paid to the Public School Employees' Retirement System For Public School Employees' Retirement (PSERS) Employer's Cost In the amount of $284,950.00

Note 12: SIGNIFICANT COMMITMENTS

The following is an analysis of significant outstanding construction or renovation contracts executed

by the School District as of June 30, 2012, together with funding available. Projects with unearned

contract balances in excess of $100,000.00 have been shown below individually. All other projects

have been combined and listed as "all others".

Unearned

Funding

Executed

Available

Project

Contracts

From State

Chestatee High School Da Vinci Academy East Hall High School Jones Elementary School Lula Elementary School Tadmore Elementary School West Hall Middle School All Others (16 Schools)

$

955,414.54

4,138,598.04

483,240.54 $

982,505.42

271,177.52

385,697.07

470,936.92

470,242.92

11,354.36
147,364.57 11,517.18

$ 8,157,812.97 $

170,236.11

The amounts described in this note are not reflected in the basic financial statements.
Note 13: SIGNIFICANT 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.

- 25 -

HALL COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2012

EXHIBIT "H"

The School District is a defendant in various legal proceedings pertaining to matters incidental to the performance of routine School District operations. The ultimate disposition of these proceedings is not presently determinable, but is not believed to be material to the basic financial statements.
Note 14: SPECIAL ITEM
During fiscal year 2012, the School District sold land having a carrying value of $50,538.63 to the Georgia Department of Transportation and the Georgia Retired Educator's Museum. The School District received proceeds from the sale in the amount of $398,850.00. This activity is reported as a Special Item on the Statement of Activities.
Note 15: POST-EMPLOYMENT BENEFITS
Georgia School Personnel Post-employment Health Benefit Fund
Plan Description. The Georgia School Personnel Post-employment Health Benefit Fund (School OPEB Fund) is a cost-sharing multiple-employer defined benefit post-employment healthcare plan that covers eligible former employees of public school systems, libraries and regional educational service agencies. The School OPEB Fund provides health insurance benefits to eligible former employees and their qualified beneficiaries through the State Employees Health Benefit Plan administered by the Department of Community Health. The Official Code of Georgia Annotated (O.C.G.A.) assigns the authority to establish and amend the benefit provisions of the group health plans, including benefits for retirees, to the Board of Community Health (Board). The Department of Community Health, which includes the School OPEB Fund, issues a separate stand alone financial audit report and a copy can be obtained from the Georgia Department of Audits and Accounts.
Funding Policy. The contribution requirements of plan members and participating employers are established by the Board in accordance with the current Appropriations Act and may be amended by the Board. Contributions of plan members or beneficiaries receiving benefits vary based on plan election, dependent coverage, and Medicare eligibility and election. For members with fewer than five years of service as of January 1, 2012, contributions also vary based on years of service. On average, members with five years or more of service as of January 1, 2012, pay approximately 25 percent of the cost of the health insurance coverage. In accordance with the Board resolution dated December 8, 2011, for members with fewer than five years of service as of January 1, 2012, the State provides a premium subsidy in retirement that ranges from 0% for fewer than 10 years of service to 75% (but no greater than the subsidy percentage offered to active employees) for 30 or more years of service. The subsidy for eligible dependents ranges from 0% to 55% (but no greater than the subsidy percentage offered to dependents of active employees minus 20%). No subsidy is available to Medicare eligible members not enrolled in a Medicare Advantage Option. The Board of Community Health sets all member premiums by resolution and in accordance with the law and applicable revenue and expense projections. Any subsidy policy adopted by the Board may be changed at any time by Board resolution and does not constitute a contract or promise of any amount of subsidy.
Participating employers are statutorily required to contribute in accordance with the employer contribution rates established by the Board. The contribution rates are established to fund all benefits due under the health insurance plans for both active and retired employees based on projected "pay-as-you-go" financing requirements. Contributions are not based on the actuarially calculated annual required contribution (ARC) which represents a level of funding that, if paid on an ongoing basis, is projected to cover normal cost each year and amortize any unfunded actuarial liabilities (or funding excess) over a period not to exceed thirty years.
- 26 -

HALL COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2012

EXHIBIT "H"

The combined active and retiree contribution rates established by the Board for employers participating in the School OPEB Fund were as follows for the fiscal year ended June 30, 2012:

For certificated teachers, librarians and regional educational service agencies and certain other eligible participants:

June 2011 July 2011 August 2011 - March 2012 April 2012 - June 2012

1.429% of covered payroll for July coverage 18.534% of covered payroll for August coverage 24.000% of covered payroll for September - April coverage
3.958% of covered payroll for May - July coverage

For non-certificated school personnel:

July 2011 - August 2011

$246.20 per member per month

September 2011 - June 2012 $296.20 per member per month

No additional contribution was required by the Board for fiscal year 2012 nor contributed to the School OPEB Fund to prefund retiree benefits. Such additional contribution amounts are determined
annually by the Board in accordance with the School plan for other post-employment benefits and are subject to appropriation.

The School District's combined active and retiree contributions to the health insurance plans, which

equaled the required contribution, for the current fiscal year and the preceding two fiscal years were

as follows:

Percentage

Required

Fiscal Year

Contributed

Contribution

2012 2011 2010

100%

$

21,596,502.61

100%

$

21,007,703.03

100%

$

19,623,730.08

Note 16: RETIREMENT PLANS

TEACHERS' RETIREMENT SYSTEM OF GEORGIA (TRS)
Plan Description. The TRS is a cost-sharing multiple-employer defined benefit plan created in 1943 by an act of the Georgia General Assembly to provide retirement benefits for qualifying employees in educational service. A Board of Trustees comprised of active and retired members and ex-officio State employees is ultimately responsible for the administration of TRS. 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.

On October 25, 1996, the Board created the Supplemental Retirement Benefits Plan of the Georgia Teachers' Retirement System (SRBP-TRS). SRBP-TRS was established as a qualified excess benefit plan in accordance with Section 415 of the Internal Revenue Code (IRC) as a portion of TRS. The purpose of SRBP-TRS is to provide retirement benefits to employees covered by TRS whose benefits are otherwise limited by IRC Section 415. Beginning July 1, 1997, all members and retired former members in TRS are eligible to participate in the SRBP-TRS whenever their benefits under TRS exceed the IRC Section 415 imposed limitation on benefits.

- 27 -

HALL COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2012

EXHIBIT "H"

TRS provides service retirement, disability retirement, and survivor's benefits. The benefit structure of TRS is defined and may be amended by State statute. A member is eligible for normal service retirement after 30 years of creditable service, regardless of age, or after 10 years of service and attainment of age 60. A member is eligible for early retirement after 25 years of creditable service.

Normal retirement (pension) benefits paid to members are equal to 2% of the average of the member's two highest paid consecutive years of service, multiplied by the number of years of creditable service up to 40 years. Early retirement benefits are reduced by the lesser of one-twelfth of 7% for each month the member is below age 60 or by 7% for each year or fraction thereof by which the member has less than 30 years of service. It is also assumed that certain cost-of-living adjustments, based on the Consumer Price Index, will be made in future years. Retirement benefits are payable monthly for life. A member may elect to receive a partial lump-sum distribution in addition to a reduced monthly retirement benefit. Death, disability and spousal benefits are also available.
Funding Policy. TRS is funded by member and employer contributions as adopted and amended by the Board of Trustees. Members become fully vested after 10 years of service. If a member terminates with less than 10 years of service, no vesting of employer contributions occurs, but the member's contributions may be refunded with interest. Member contributions are limited by State law to not less than 5% or more than 6% of a member's earnable compensation. Member contributions as adopted by the Board of Trustees for the fiscal year ended June 30, 2012, were 5.53% of annual salary. The member contribution rate will increase to 6.00% effective July 1, 2012. Employer contributions required for fiscal year 2012 were 10.28% of annual salary as required by the June 30, 2009, actuarial valuation. The employer contribution rate will increase to 11.41% effective July 1, 2012.

Employer contributions for the current fiscal year and the preceding two fiscal years are as follows:

Percentage

Required

Fiscal Year

Contributed

Contribution

2012 2011 2010

100%

$

12,375,331.12

100%

$

12,470,131.57

100%

$

12,038,280.79

PUBLIC SCHOOL EMPLOYEES' RETIREMENT SYSTEM (PSERS)

Bus drivers, lunchroom personnel, and maintenance and custodial personnel are members of the Public School Employees' Retirement System of Georgia. The System is funded by contributions by the employees and by the State of Georgia. The School District makes no contribution to this plan.

DEFINED CONTRIBUTION PLAN

The Hall County Board of Education maintains an employer paid 403(B) annuity plan for the group of employees covered under the Public School Employees' Retirement System of Georgia (PSERS). Recognizing that PSERS was a limited defined contribution and defined benefit plan which did not provide for an adequate retirement for this group of employees, it was the Board's desire to supplement the retirement of this group.

- 28 -

HALL COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2012

EXHIBIT "H"

The Board selected The Variable Annuity Life Insurance Company (VALIC) as the provider of this plan. For each employee covered under PSERS, the Board began contributing to the plan an amount equal to 5% percent of the employee's base pay.
The employee becomes vested in the plan immediately. Funds accumulated in the employer paid accounts are only available to the employee upon termination.
Employer contributions for the current fiscal year and the preceding two fiscal years are as follows:

Fiscal Year

Percentage Contributed

Required Contribution

2012 2011 2010

100%

$

100%

$

100%

$

190,917.67 201,523.35 218,363.65

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HALL COUNTY BOARD OF EDUCATION GENERAL FUND
SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL
YEAR ENDED JUNE 30, 2012

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 Food Services Operation Community Services Operation
Capital Outlay Debt Service
Total Expenditures
Excess of Revenues over (under) Expenditures
OTHER FINANCING SOURCES (USES)
Transfers from Other Funds Sale or Compensation for Loss of Fixed Assets Transfers to Other Funds
Total Other Financing Sources (Uses)
Net Change in Fund Balances
Fund Balances - Beginning (Restated)

NONAPPROPRIATED BUDGETS

ORIGINAL (1)

FINAL (1)

ACTUAL AMOUNTS

VARIANCE OVER/UNDER

$ 75,326,483.00 $ 74,569,329.00 $ 73,868,595.13 $

1,125,000.00

1,125,000.00

1,405,942.68

110,349,440.00 112,361,136.12 113,129,184.04

24,343,145.00

26,804,611.00

25,707,861.55

4,322,991.00

4,322,991.00

4,091,417.99

232,766.00

232,766.00

62,944.45

1,688,898.00

1,771,396.38

2,717,258.39

-700,733.87 280,942.68 768,047.92 -1,096,749.45 -231,573.01 -169,821.55 945,862.01

$ 217,388,723.00 $ 221,187,229.50 $ 220,983,204.23 $ -204,025.27

$ 145,810,803.00 $ 148,112,658.50 $ 144,912,176.50 $ 3,200,482.00

7,433,523.00 6,818,529.00 3,960,402.00 1,252,271.00 12,365,143.00 1,313,900.00 15,743,217.00 11,317,096.00 6,341,742.00
812,767.00 14,596,919.00
195,977.00 38,639.00

7,790,757.00 7,027,215.00 3,906,813.00 1,201,657.00 12,480,388.00 1,326,694.00 15,913,935.00 11,595,849.00 6,608,180.00
439,958.00 14,596,919.00
209,604.00 38,639.00

7,588,493.31 6,556,504.23 3,793,126.61
430,631.48 12,465,819.06
1,677,666.65 14,153,896.66 10,885,461.95
6,210,626.66 863,604.46
13,314,299.50 204,464.25 24,920.00 211,422.26

202,263.69 470,710.77 113,686.39 771,025.52
14,568.94 -350,972.65 1,760,038.34 710,387.05 397,553.34 -423,646.46 1,282,619.50
5,139.75 13,719.00 -211,422.26

$ 228,000,928.00 $ 231,249,266.50 $ 223,293,113.58 $ 7,956,152.92

$ -10,612,205.00 $ -10,062,037.00 $ -2,309,909.35 $ 7,752,127.65

$

94,005.00 $

94,005.00

$

-94,005.00

20,000.00

20,000.00

-20,000.00

-240,000.00

-240,000.00 $

-145,995.90

94,004.10

$

-125,995.00 $

-125,995.00 $

-145,995.90 $

-20,000.90

$ -10,738,200.00 $ -10,188,032.00 $ -2,455,905.25 $ 7,732,126.75

21,415,376.00

21,415,376.00

29,285,736.30

7,870,360.30

Fund Balances - Ending

$ 10,677,176.00 $ 11,227,344.00 $ 26,829,831.05 $ 15,602,487.05

Notes to the Schedule of Revenues, Expenditures and Changes in Fund Balances Budget and Actual

(1) Original and Final Budget amounts do not include budgeted revenues or expenditures of the various principal accounts. Principal accounts had actual revenues of $2,743,886.90 and actual expenditures of $2,717,791.30.

The accompanying schedule of revenues, expenditures and changes in fund balances budget and actual is presented on the modified accrual basis of accounting which is the basis of accounting used in the presentation of the fund financial statements.

See notes to the basic financial statements.

- 31 -

HALL COUNTY BOARD OF EDUCATION SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
YEAR ENDED JUNE 30, 2012

SCHEDULE "2"

FUNDING AGENCY PROGRAM/GRANT
Agriculture, U. S. Department of Child Nutrition Cluster Pass-Through From Georgia Department of Education Food Services School Breakfast Program National School Lunch Program
Total Child Nutrition Cluster
Other Programs Pass-Through From Georgia Department of Education Food Services ARRA - Child Nutrition Discretionary Grants Limited Availability
Total U. S. Department of Agriculture
Education, U. S. Department of Special Education Cluster Pass-Through From Georgia Department of Education Special Education ARRA - Grants to States ARRA - Preschool Grants Grants to States Preschool Grants
Total Special Education Cluster
Title I, Part A Cluster Pass-Through From Georgia Department of Education ARRA - Title I Grants to Local Educational Agencies Title I Grants to Local Educational Agencies
Tota Title I, Part A Cluster
Other Programs Pass-Through From Georgia Department of Education ARRA - Race-to-the-Top Incentive Grants Career and Technical Education - Basic Grants to States Charter Schools Education Jobs Fund English Language Acquisition Grants Improving Teacher Quality State Grants Migrant Education - State Grant Program Pass-Through From Governor's Office of Planning and Budget ARRA - Race-to-the-Top Incentive Grants
Total Other Programs
Total U. S. Department of Education

CFDA NUMBER

PASSTHROUGH
ENTITY ID
NUMBER

EXPENDITURES IN PERIOD

* 10.553 * 10.555

N/A

(2)

N/A

$ 12,890,618.32 (1)

$ 12,890,618.32

10.579

N/A

19,087.00

$ 12,909,705.32

84.391 84.392 84.027 84.173

N/A

$

7,104.00

N/A

846.00

N/A

4,693,724.29

N/A

148,127.21

$

4,849,801.50

84.389 84.010

N/A

$

N/A

$

31,498.28 6,862,231.17
6,893,729.45

* 84.395 84.048 84.282 84.410 84.365 84.367 84.011
* 84.395

N/A

$

N/A

N/A

N/A

N/A

N/A

N/A

868,009.59 219,479.29 261,254.45
64,331.00 679,364.26 840,335.97 280,810.49

N/A

26,783.53

$

3,240,368.58

$ 14,983,899.53

- 32 -

HALL COUNTY BOARD OF EDUCATION SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
YEAR ENDED JUNE 30, 2012

SCHEDULE "2"

FUNDING AGENCY PROGRAM/GRANT
Health and Human Services, U. S. Department of Direct Developmental Disabilities Basic Support Advocacy Grants Drug- Free Communities Support Program Grants
Total U. S. Department of Health and Human Services
Defense, U. S. Department of Direct Department of the Navy R.O.T.C. Program

CFDA NUMBER

PASSTHROUGH
ENTITY ID
NUMBER

EXPENDITURES IN PERIOD

93.630 93.276

$

108,998.01

126,538.88

$

235,536.89

$

71,475.98

Total Expenditures of Federal Awards

$ 28,200,617.72

N/A = Not Available

Notes to the Schedule of Expenditures of Federal Awards

(1) Includes the Federally assigned value of donated commodities for the Food Donation Program in the amount of $586,266.86.
(2) Expenditures for the funds earned on the School Breakfast Program ($2,934,025.76) were not maintained separately and are included in the 2012 National School Lunch Program.

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 fund financial statements.

See notes to the basic financial statements.

- 33 -

HALL COUNTY BOARD OF EDUCATION SCHEDULE OF STATE REVENUE YEAR ENDED JUNE 30, 2012

SCHEDULE "3"

AGENCY/FUNDING
GRANTS Bright From the Start: Georgia Department of Early Care and Learning Pre-Kindergarten Program
Education, Georgia Department of Quality Basic Education Direct Instructional Cost 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 Gifted Student - Category VI Remedial Education Program Alternative Education Program English Speakers of Other Languages (ESOL) Media Center Program 20 Days Additional Instruction Staff and Professional Development Indirect Cost Central Administration School Administration Facility Maintenance and Operations Amended Formula Adjustment Categorical Grants Pupil Transportation Regular Education Equalization Funding Grant Food Services Nursing Services State Health Reimbursement Vocational Education Vocational Supervisors Other State Programs Charter Schools - Facilities Charter Schools - State Planning Grant Dual Enrollment Funding Industry Certification Related Equipment Grant Math and Science Supplements Preschool Handicapped Program Pupil Transportation - State Bonds Teachers' Retirement Virtual Schools Grant Vocational Construction Related Equipment - State Bonds
Georgia State Financing and Investment Commission Reimbursement on Construction Projects
Health and Human Services, Georgia Department of Youth Development
Office of the State Treasurer Public School Employees Retirement

GOVERNMENTAL FUND TYPES

CAPITAL

GENERAL

PROJECTS

FUND

FUND

TOTAL

$

321,048.08

$

321,048.08

6,120,810.00 2,053,032.00 15,546,827.00 3,740,555.00 8,288,756.00
883,942.00 99,194.00
13,569,973.00 11,743,787.00
2,949,503.00 12,294,159.00
3,435,991.00 1,015,684.00 1,058,231.00 4,776,257.00 2,456,804.00
730,338.00 524,887.00
2,293,049.00 4,606,528.00 6,468,336.00 -19,366,246.00
1,820,946.00 5,295,735.00
358,364.00 377,543.00 17,380,289.00 194,249.77
28,189.00
51,979.79 14,754.55 103,718.00 14,933.36 134,945.71 370,243.00 838,994.50 162,863.39
7,225.00 48,800.58

6,120,810.00 2,053,032.00 15,546,827.00 3,740,555.00 8,288,756.00
883,942.00 99,194.00
13,569,973.00 11,743,787.00
2,949,503.00 12,294,159.00
3,435,991.00 1,015,684.00 1,058,231.00 4,776,257.00 2,456,804.00
730,338.00 524,887.00
2,293,049.00 4,606,528.00 6,468,336.00 -19,366,246.00
1,820,946.00 5,295,735.00
358,364.00 377,543.00 17,380,289.00 194,249.77
28,189.00
51,979.79 14,754.55 103,718.00 14,933.36 134,945.71 370,243.00 838,994.50 162,863.39
7,225.00 48,800.58

$ 5,796,023.80

5,796,023.80

29,015.31

29,015.31

284,950.00

284,950.00

See notes to the basic financial statements.

- 34 -

$ 113,129,184.04 $ 5,796,023.80 $ 118,925,207.84

HALL COUNTY BOARD OF EDUCATION SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS
YEAR ENDED JUNE 30, 2012

SCHEDULE "4"

PROJECT

ORIGINAL ESTIMATED
COST (1)

CURRENT ESTIMATED COSTS (2)

AMOUNT EXPENDED IN CURRENT YEAR (3)

AMOUNT EXPENDED IN PRIOR YEARS (3)

TOTAL COMPLETION
COST

EXCESS PROCEEDS NOT
EXPENDED

ESTIMATED COMPLETION
DATE

SPLOST III Payment of portion of the payments, including principal and interest, due on the Hall County School District's Series 1992B and 1997 Bonds with a maximum payment amount of $28,800,000;

$ 28,800,000.00 $ 28,800,000.00 $ 3,216,513.29 $ 15,222,650.32

11/01/12

Acquiring, constructing and equipping of new schools and facilities, acquiring and conducting site preparation of real estate for school district purposes, constructing and equipping additional classrooms and instructional and support space, remodeling, renovating and equipping existing classrooms and instructional and support space, and acquiring furnishings, equipment and fixtures for new and existing facilities system-wide, including technology equipment, textbooks, library books and school buses;

124,200,000.00 124,200,000.00

6,912,700.07

97,396,240.23

6/30/2013

Payment of any general obligation debt of the Hall County School District issued in conjunction with the imposition of this Sales Tax.

7,000,000.00

7,000,000.00

625,300.80

5,660,551.59

11/1/2013

SPLOST IV Payment of a portion of the payments, including principal and interest, due on the Hall County School District's Series 2007B Bonds, with a maximum payment amount of $9,604,500;

9,604,500.00

9,604,500.00

0.00

0.00

11/1/2014

Acquiring, constructing and equipping new schools, fine arts facilities, physical education facilities, student activity facilities and other school system facilities, acquiring and conducting site preparation of real estate for school district purposes, constructing and equipping additional classrooms and instructional and support space, remodeling, renovating and equipping classrooms, instructional and support space, and other school district facilities at existing school system facilities, and acquiring furnishings, equipment and fixtures for new and existing facilities system-wide, including technology equipment, textbooks, library books and school buses, with the estimated cost of such projects to be financed from funds raised by the Sales Tax being $152,983,000;

151,983,000.00 151,983,000.00 17,292,224.94

23,464.72

6/30/2018

Payment of any general obligation debt of the Hall County School District issued in conjunction with the imposition of the Sales Tax.

1,000,000.00

1,000,000.00

159,872.75

0.00

11/1/2017

$ 322,587,500.00 $ 322,587,500.00 $ 28,206,611.85 $ 118,302,906.86
(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 and retire
associated debt. Amounts expended for these projects may include sales tax proceeds, state, local property taxes and/or other funds over the life of the projects.

See notes to the basic financial statements.

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HALL COUNTY BOARD OF EDUCATION GENERAL FUND - QUALITY BASIC EDUCATION PROGRAMS (QBE)
ALLOTMENTS AND EXPENDITURES BY PROGRAM YEAR ENDED JUNE 30, 2012

SCHEDULE "5"

DESCRIPTION
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 III Category IV Gifted Student - Category VI Remedial Education Program Alternative Education Program English Speakers of Other Languages (ESOL)
TOTAL DIRECT INSTRUCTIONAL PROGRAMS
Media Center Program Staff and Professional Development

ALLOTMENTS FROM GEORGIA DEPARTMENT OF EDUCATION (1) (2)

ELIGIBLE QBE PROGRAM COSTS

SALARIES

OPERATIONS

TOTAL

$ 7,722,382.00 $ 7,682,248.98 $ 351,941.29 $ 8,034,190.27

2,349,360.00

2,872,405.14

2,872,405.14

19,451,467.00

18,243,251.51

486,821.31

18,730,072.82

4,146,921.00

6,141,538.25

6,141,538.25

10,166,017.00

12,171,500.92

406,149.68

12,577,650.60

1,056,219.00 108,190.00
16,645,588.00 14,384,099.00
3,658,859.00 14,979,450.00
4,255,899.00 1,190,100.00 1,295,853.00 5,976,019.00

1,108,382.12

21,731,410.52 19,797,571.12
3,603,862.12

436,625.28 1,108,799.43
103,602.60

71,115.69 1,882,654.61 13,020,802.82 2,034,132.70 2,022,657.79

8,450.49 10,613.89 77,898.30 81,317.15 32,531.03

891,416.65 4,376,096.65

3,251.50

1,108,382.12
22,168,035.80 20,906,370.55
3,707,464.72
79,566.18 1,893,268.50 13,098,701.12 2,115,449.85 2,055,188.82
891,416.65 4,379,348.15

$ 107,386,423.00 $ 117,651,047.59 $ 3,108,001.95 $ 120,759,049.54

3,019,088.00 646,623.00

3,480,299.77 351,470.49

181,060.22

3,661,359.99 351,470.49

TOTAL QBE FORMULA FUNDS

$ 111,052,134.00 $ 121,482,817.85 $ 3,289,062.17 $ 124,771,880.02

(1) Comprised of State Funds plus Local Five Mill Share. (2) Allotments do not include the impact of the State amended formula adjustment.

See notes to the basic financial statements.

- 37 -

SECTION II COMPLIANCE AND INTERNAL CONTROL REPORTS

Greg S. Griffin
STATE AUDITOR
(404) 656-2174

DEPARTMENT OF AUDITS AND ACCOUNTS
270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400
March 19, 2013

Honorable Nathan Deal, 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 REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS
Ladies and Gentlemen:
We have audited the financial statements of the governmental activities, each major fund, and the aggregate remaining fund information of Hall County Board of Education as of and for the year ended June 30, 2012, which collectively comprise Hall County Board of Education's basic financial statements and have issued our report thereon dated March 19, 2013. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States.
Internal Control Over Financial Reporting
Management of Hall County Board of Education is responsible for establishing and maintaining effective internal control over financial reporting. In planning and performing our audit, we considered Hall County Board of Education's internal control over financial reporting as a basis for designing our auditing procedures for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the Hall County Board of Education's internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness of the Hall County Board of Education's internal control over financial reporting.
A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect and correct misstatements on a timely basis. A material weakness is a deficiency, or combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity's financial statements will not be prevented, or detected and corrected on a timely basis.

2012YB-10

Our consideration of internal control over financial reporting was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over financial reporting that might be deficiencies, significant deficiencies or material weaknesses. We did not identify any deficiencies in internal control over financial reporting that we consider to be material weaknesses, as defined above.
Compliance and Other Matters
As part of obtaining reasonable assurance about whether Hall County Board of Education's financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards.
We noted certain matters that we have reported to management of Hall County Board of Education in a separate letter dated March 19, 2013.
This report is intended solely for the information and use of management, members of the Hall County Board of Education, others within the entity, Federal awarding agencies and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties.
Respectfully submitted,

GSG:as 2012YB-10

Greg S. Griffin State Auditor

Greg S. Griffin
STATE AUDITOR
(404) 656-2174

DEPARTMENT OF AUDITS AND ACCOUNTS
270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400
March 19, 2013

Honorable Nathan Deal, 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 REPORT ON COMPLIANCE WITH REQUIREMENTS THAT COULD HAVE A DIRECT AND MATERIAL EFFECT ON EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH OMB CIRCULAR A-133
Ladies and Gentlemen:
Compliance
We have audited Hall County Board of Education's compliance with the types of compliance requirements described in the OMB Circular A-133 Compliance Supplement that could have a direct and material effect on each of its major Federal programs for the year ended June 30, 2012. 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 OMB Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations. Those standards and OMB Circular A-133 require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major Federal program occurred. An audit includes examining, on a test basis, evidence about the 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.
In our opinion, the Hall County Board of Education complied, in all material respects, with the compliance requirements referred to above that could have a direct and material effect on each of its major Federal programs for the year ended June 30, 2012.

2012SA-10

Internal Control Over Compliance
Management of Hall County Board of Education is responsible for establishing and maintaining effective internal control over compliance with the 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 the requirements that could have a direct and material effect on a major Federal program to determine the auditing procedures for the purpose of expressing our opinion on compliance and to test and report on internal control over compliance in accordance with OMB Circular A-133, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of the Hall County Board of Education's internal control over compliance.
A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a Federal program on a timely basis. A material weakness in internal control over compliance is a deficiency, or combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a Federal program will not be prevented, or detected and corrected, on a timely basis.
Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over compliance that might be deficiencies, significant deficiencies, or material weaknesses. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses, as defined above.
This report is intended solely for the information and use of management, members of the Hall County Board of Education, others within the entity, Federal awarding agencies and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties.
Respectfully submitted,

GSG:as 2012SA-10

Greg S. Griffin State Auditor

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, 2012
PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS No matters were reported. PRIOR YEAR FEDERAL AWARD FINDINGS AND QUESTIONED COSTS No matters were reported.

SECTION IV FINDINGS AND QUESTIONED COSTS

HALL COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2012

I SUMMARY OF AUDITOR'S RESULTS

Financial Statements

Type of auditor's report issue: Governmental Activities; General Fund; Capital Projects Fund; Debt Service Fund; Aggregate Remaining Fund Information

Unqualified

Internal control over financial reporting: Material weakness identified? Significant deficiency identified?

No None Reported

Noncompliance material to financial statements noted:

No

Federal Awards

Internal Control over major programs: Material weakness identified? Significant deficiency identified?

No None Reported

Type of auditor's report issued on compliance for major programs: All major programs

Unqualified

Any audit findings disclosed that are required to be reported in

accordance with OMB Circular A-133, Section 510(a)?

No

Identification of major programs: CFDA Numbers

Name of Federal Program or Cluster

10.553, 10.555 84.395

Child Nutrition Cluster Race-to-the-Top Incentive Grants

Dollar threshold used to distinguish between Type A and Type B programs: Auditee qualified as low-risk auditee?

$846,018.53 Yes

II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

No matters were reported.

III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

No matters were reported.