Audit report, Harris County Board of Education, Hamilton, Georgia, year ended June 30, 1998

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AUDIT REPORT HARRIS COUNTY BOARD OF EDUCATION
HAMILTON, GEORGIA YEAR ENDED JUNE 30, 1998
STATE OF GEORGIA DEPARTMENT OF AUDITS AND ACCOUNTS
254 WASHINGTON STREET
ATLANTA, GEORGIA 30334-8400

HARRIS COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS -

SECTION I

FINANCIAL

INDEPENDENT AUDITOR'S COMBINED REPORT ON GENERAL PURPOSE FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS

EXHIBITS

GENERAL PURPOSE FINANCIAL STATEMENTS

COMBINED STATEMENTS - OVERVIEW

A

COMBINED BALANCE SHEET

ALL FUND TYPES AND ACCOUNT GROUP

2

B

COMBINED STATEMENT OF REVENUES, EXPENDITURES AND

CHANGES IN FUND BALANCES

ALL GOVERNMENTAL FUND TYPES

4

C

COMBINED STATEMENT OF REVENUES, EXPENDITURES AND

CHANGES IN FUND BALANCES - BUDGET AND ACTUAL

(NON-GAAP BASIS)

GENERAL AND SPECIAL REVENUE FUNDS

6

D NOTES TO THE GENERAL PURPOSE FINANCIAL STATEMENTS

7

ADDmONAL FINANCIAL INFORMATION

COMBINING STATEMENTS

SPECIAL REVENUE FUND

E

COMBINING BALANCE SHEET

20

F

COMBINING STATEMENT OF REVENUES, EXPENDITURES

AND CHANGES IN FUND BALANCES

21

CAPITAL PROJECTS FUND

G

COMBINING BALANCE SHEET

22

H

COMBINING STATEMENT OF REVENUES, EXPENDITURES

AND CHANGES IN FUND BALANCES

24

DEBT SERVICE FUND

I

COMBINING BALANCE SHEET

26

J

COMBINING STATEMENT OF REVENUES, EXPENDITURES

AND CHANGES IN FUND BALANCES

27

SCHEDULES

1 SCHEDULE OF REQUIRED SUPPLEMENTARY INFORMATION

28

2 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS

29

3 SCHEDULE OF STATE REVENUE

31

4 SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS

32

HARRIS COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS -

SECTION I

FINANCIAL

ADDmONAL FINANCIAL INFORMATION

SCHEDULES

5 SCHEDULE OF EXPENDITURES

LOTTERYPROGRAMS

33

ANALYSIS OF MINlMUM EXPENDITURE REQUIREMENTS

GENERAL FUND - QUALITY BASIC EDUCATION PROGRAMS

6

OVERALL

35

7

BY PROGRAM

36

SECTIONll
COMPLIANCE AND INTERNAL CONTROL REPORTS
REPORT ON COMPLIANCE AND ON INTERNAL CONTROL OVER FINANCIAL REPORTING BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS
REPORT ON COMPLIANCE WITH REQUIREMENTS APPLICABLE TO EACH MAJOR PROGRAM AND INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH OMB CIRCULAR A-133

SECTIONID AUDITEE'S RESPONSE TO PRIOR YEAR FINDINGS AND QUESTIONED COSTS SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS

SECTION IV FINDINGS AND QUESTIONED COSTS SCHEDULE OF FINDINGS AND QUESTIONED COSTS

SECTION I FINANCIAL
.'

RUSSELL W. HINTON
STATE AUDITOR
(404) 6562174

DEPARTMENT OF AUDITS AND ACCOUNTS
254 Washington Street, S.w., Suite 214 Atlanta, Georgia 30334-8400
July 1, 1999

Honorable Roy E. Barnes, Governor Members ofthe General Assembly Members of the State Board ofEducation
and Superintendent and Members ofthe Harris County Board ofEducation
INDEPENDENT AUDITOR'S COMBINED REPORT ON GENERAL PURPOSE
FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION -
SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
Ladies and Gentlemen:
We have audited the accompanying general purpose financial statements of the Harris County Board of Education, as of and for the year ended June 30, 1998, as listed in the table of contents. These general purpose financial statements are the responsibility of the Harris County Board of Education's management. Our responsibility is to express an opinion on these general purpose financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General ofthe United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free ofmaterial misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
As described in the notes to the general purpose financial statements, the Board's financial statements have been prepared using certain accounting practices and policies which, in our opinion, vary in some respects
from generally accepted accounting principles. These variances are described as follows:
* The general purpose financial statements of the Board did not contain a General Fixed Assets
Account Group to account for property and equipment owned by the Board which should be included to conform to generally accepted accounting principles.

98ARL-13B

* School activity accounts maintained at the individual schools are not included in the general purpose
financial statements. To conform to generally accepted accounting principles, these accounts should be included in the general purpose financial statements.
* The Board did not recognize as expenditures, in the year ended June 30, 1998, a portion of salaries
and the corresponding employer's cost ofrelated benefits earned for contractual services completed prior to June 30, 1998. Also funds received, subsequent to June 30, 1998, from the Georgia Department ofEducation for the State's share ofthese unrecorded salaries and related benefits were not recorded as revenue in the year under review. Conversely, the similar expenditures and related revenues for contractual services completed prior to June 30, 1997, were improperly recorded in the year ended June 30, 1998. To conform to generally accepted accounting principles, revenues should be recorded when available and measurable and expenditures should be recorded when incurred, rather than when funds are received or disbursed.
The aggregate effects on the general purpose financial statements ofthese variances or omissions have not been determined, but are believed to be material.
In our opinion, except for the effects on the general purpose financial statements of the matters referred to in the preceding paragraph, the general purpose financial statements referred to above present fairly, in all material respects, the financial position ofthe Harris County Board ofEducation as ofJune 30, 1998, and the results ofits operations for the year then ended, in confonnity with generally accepted accounting principles.
In accordance with Government Auditing Standards, we have also issued our report dated July 1, 1999, on our consideration ofthe Harris County Board ofEducation's internal control over financial reporting and our tests ofits compliance with certain provisions of laws, regulations, contracts and grants.
The year 2000 supplementary information on Schedule "1" is not a required part of the basic financial statements but is supplementary infonnation required by the Governmental Accounting Standards Board. We have applied certain limited procedures, which consisted principally of inquiries ofmanagement regarding the methods ofmeasurement and presentation ofthe supplementary information. However we did not audit the information and do not express an opinion on it. In addition, we do not provide assurance that Harris County Board ofEducation is or will become year 2000 compliant, that the Board's year 2000 remediation efforts will be successful in whole or in part, or that parties with which Harris County Board of Education does business are or will become year 2000 compliant.
Our audit was performed for the purpose offonning an opinion on the general purpose financial statements of the Harris County Board of Education taken as a whole. The accompanying combining statements (Exhibits E through J) and the financial schedules (Schedules 2 through 7), which includes the Schedule of Expenditures of Federal Awards as required by U. S. Office of Management and Budget Circular A-133,
Audits ofStates, Local Governments, and Non-Profit Organizations, are presented for purposes ofadditional
analysis and are not a required part of the general purpose financial statements. Such information has been subjected to the auditing procedures applied in the audit of the general purpose financial statements and in our opinion, except for the effects ofthe matters referred to in the third paragraph, such information is fairly presented in all material respects in relation to the general purpose financial statements taken as a whole.
.~. 98ARL-13B

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,
~"LSl2W.~~ Russell W. Hinton State Auditor
RWH:jb 98ARL-13B

HARRIS COUNTY BOARD OF EDUCATION

HARRIS COUNTY BOARD OF EDUCATION COMBINED BALANCE SHEET
ALL FUND TYPES AND ACCOUNT GROUP JUNE 30,1998

ASSETS
Cash and Cash Equivalents
Investments
Accounts Receivable
Prepaid Items
Due from Other Funds
Inventories Food Donated Commodities Purchased Food
Amount Available in Debt Service Fund
Amount to be Provided in Future Years For Payment of: Bond Debt Capital Lease Agreements

GENERAL FUND

GOVERNMENTAL FUND TYPES

SPECIAL

CAPITAL

REVENUE

PROJECTS

FUND

FUND

$ 3,343,889,79 $

411,390,39 $

1,066,171,54

3,574,450,87

4,571,058,44

240,471,86

166,957,81

371,822,28

6,863.05

43,955,09

13,340.44 8,936,56

Total Assets

$ 7,165,675,57 $

644,580.29 $ 6,009,052.26

LIABILITIES AND FUND EQUITY
LIABILITIES
Accounts Payable Salaries Payable Expired Grant Balances Payable Contracts Payable Retainages Payable Due to Other Funds Capital Lease Agreements General Obligation Bonds Payable
Total Liabilities
FUND EQUITY
Fund Balances Reserved For Construction of Greenhouse For Continuation of Federal Programs For Debt Service For Expired Grant Balances/Questioned Costs For Inventories Food Donated Commodities Purchased Food For Purpose of Bond Issue For SPLOST Projects For State Capital Outlay Projects Unreserved Undesignated
Total Fund EqUity

$

419,658,26 $

67,844,79 $

123,720.41

197,875,25

18,292,86

320.980.40

528,764,60

$

419,658,26 $

284,012.90 $

973,465,41

$

$

52,457.36

152,108,19

8,513.16

$ 6l46,017.31 $ 6,746,017,31 $

13,340,44 8,936.56
133,724.84 360,567.39 $

1,696,856,68 515,301,47
2,814,915,54
0,00
5,035,586,85

Total Liabilities and Fund Equity

$ 7,165,675,57 $

644,580,29 $ 6,009,052,26

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

EXHIBIT "A"

DEBT SERVICE
FUND

$

332,807.05

33,799.21

ACCOUNT GROUP
GENERAL LONG-TERM
DEBT

TOTALS

(Memorandum Only)

JUNE 30,1998

JUNE 30, 1997

$ 5,154,258.77 $ 10,048,622.12

8,145,509.31

7,035,022.50

813,051.16

977,204.80

50,818.14

303,000.00

$

366,606.26

13,340.44 8,936.56
366,606.26

10,884.88 6,690.79
545,387.60

14,968,393.74 4,311,586.75

14,968,393.74 4,311,586.75

15,274,612.40 1,047,153.05

$

366,606.26 $ 19,646,586.75 $ 33,832,501.13 $ 35.248.578.14

$

611,223.46 $

55,991.81

197,875.25

184,012.31

18,292.86

319.94

320,980.40

528,764.60

696,510.50

303,000.00

$ 4,311,586.75

4,311,586.75

1,047,153.05

15,335,000.00

15,335,000.00

15,820,000.00

$ 19,646,586.75 $ 21,323,723.32 $ 18,106.987.61

$

366,606.26

0.00

$

366.606.26

$

8,513.16 $

8,513.16

52,457.36

208.47

366,606.26

545,387.60

152,108.19

13,340.44 8,936.56 1,696,856.68 515,301.47 2,814,915.54

10,884.88 6,690.79 7,870,754.48
2,000,491.43

6,879.742.15

6,698,659.72

$ 12,508,777.81 $ 17,141,590.53

$

366,606.26 $ 19,646,586.75 $ 33,832,501.13 $ 35.248,578.14

-3-

HARRIS COUNTY BOARD OF EDUCATION COMBINED STATEMENT OF REVENUES. EXPENDITURES AND CHANGES IN FUND BALANCES
ALL GOVERNMENTAL FUND TYPES YEAR ENDED JUNE 30.1998

EXHIBIT-B-

CAPITAL PROJECTS
FUND

DEBT SERVICE
FUND

TOTALS

(Memorandum Only)

YEAR ENDED

JUNE 30.1998

JUNE 30.1997

$ 12,725.555.51 $ 18,100.731.90

1,583,546.39

1,374,272.20

$

807.374.10 $ 1,125,896.05

8,761,888.39

8,212,494.68

587.697.42

29.905.63

1,545,573.95

1.370.656.59

$ 1.395.071.52 $ 1.155.801.68 $ 24.616.564.24 $ 29.058.155.37

$

18,000.00

10,804.020.44 244,897.97 $ 48,787.13
$ 11.115.705.54 $ $ -9,720,634.02 $

$
485.000.00 843,797.50
5.785.52 1,334,583.02 $ -178,781.34 $

12,675,297.26 $
1,000,041.40 562,426.20 437,252.79 402,041.41
1,182,320.65 271,962.91
1,031,298.72 1,137,754.89
24,872.84 32,334.99 1,292,291.70 81,397.14 10,944,540.40
1.163,019.62 951,893.17
5,785.52
33,196,531.61 $
-8.579,967.37 $

10.848,805.44
896,118.31 390,625.60 562,517.47 369,773.88 873,289.34 211,150.80 1,094,863.34 1,079,289.89 23,283.90
93,820.76 1,315,066.00
68.350.26 8.660,869.23
910,736.14 1,198,112.20
866.06 1,623.64
28,599.162.26
458.993.11

$ 2,000,000.00 430,000.00
$ 2,430,000.00
$ -7,290,634.02 $ 12,326,220.87

$ 3,942,453.32 $

49,850.00

443,177.43

1,258,355.65

-443.177.43

-1,258.355.65

$ 3,942,453.32 $

49.850.00

-178,781.34 $ 545,387.60

-4,637,514.05 $ 17,141,590.53

508,843.11 16,640,735.~5

2,245.77 2,455.56

-6,466.33 -1,522.20

$ 5.035,586.85 $

366.606.26 $ 12.508.777.81 $ 17.141 .590.53

-5-

HARRIS COUNTY BOARD OF EDUCATION COMBINED STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES
BUDGET AND ACTUAL - (NON-GAAP BASIS) GENERAL AND SPECIAL REVENUE FUNDS
YEAR ENDED JUNE 30,1998

EXHIBIT"C"

GENERAL FUND

ACTUAL

(BUDGET

BUDGET

BASIS)

REVENUES

State Funds Federal Funds Taxes Other Funds

$ 11,365,565.00 $ 11,734,304.23

27,943.65

6,288,966.00

6,828,618,24

167,500.00

371,892,49

Total Revenues

$ 17,822,031.00 $ 18,962,758.61

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 Operations
. Capital Outlay Debt Service

$ 11,198,643.00 $ 11,533,852.33

903,194.00 366,095.00 585,229.00 323,362.00 1,035,470.00 246,246,00 1,348,196,00 1,257,945,00
28,872.00 33,798.00

902,424,39 502,736.49 428,746.00 328,803,17 1,182,320.65 253,962.91 1,007,990.58 1,096,210.21 24,872.84
15,627.28

40,000.00 691,310.00

81,397,14 140,519.96 431,178.49

Total Expenditures

$ 18,058,360.00 $ 17,930,642,44

Excess of Revenues over (under) Expenditures

$ -236,329.00 $ 1,032,116.17

OTHER FINANCING SOURCES (USES)

Other Sources Other Uses

$

96,757.00 $ 1,942,453.32

-254,257.00

-443,177.43

Total Other Financing Sources (Uses)

$ -157,500.00 $ 1,499,275.89

Excess of Revenues and Other Financing Sources over (under) Expenditures and Other Financing Uses $

-393,829.00 $ 2,531,392.06

FUND BALANCE JULY 1, 1997

4,156,244.48

4,214,625.25

Food Inventory - Net Change in Period Donated Commodities Purchased Food

FUND BALANCE JUNE 30, 1998

$ 3,762,415.48 $ 6,746,017.31

SPECIAL REVENUE FUND

ACTUAL

(BUDGET

BUDGET

BASIS)

$ 831,664,00 $ 991,251.28

1,436,943.00

1,555,602.74

462,000,00

556,078.41

$ 2,730,607.00 $ 3,102,932.43

$ 1,052,661.00 $ 1,141,444,93

81,573.00 41,543.00
78,426.00 1,141,00

97,617.01 59,689,71
8,506.79 73,238.24

117,339.00 22,800.00

23,308,14 41,544.68

32,360.00 1,295,933,00

16,707.71 1,292,291,70

61,251,70

$ 2,723,776.00 $ 2,815,600.61

$

6,831.00 $ 287,331.82

$

1,500.00 $

13,177.43

$

1,500.00 $

13,177.43

$

8,331.00 $ 300,509.25

58,415.87

55,356.81

2,245.77 2,455.56

$

66,746,87 $ 360,567.39

The notes to the general purpose financial statements are an integral part of this statement. -6-

HARRIS COUNTY BOARD OF EDUCATION

EXHIBIT "D"

NOTES TO THE GENERAL PURPOSE FINANCIAL STATEMENTS

JUNE 3D. 1998

Note 1: SUMMARy OF SIGNIFICANT ACCOUNTING POLICIES
REPORTING ENTITY
The Harris County Board of Education (Board) was established under the laws ofthe State of Georgia and operates under the guidance of a school board elected by the voters and a Superintendent appointed by the Board. The Board is organized as a separate legal entity and has the power to levy taxes and issue bonds. Its budget is not subject to approval by any other entity. Accordingly, the Board is a primary government and consists of all the organizations that compose its legal entity.
FUND ACCOUNTING ..
The Board uses funds and an account group to report on its financial position and the results ofits 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. An account group is a financial reporting device designed to provide accountability for certain assets and liabilities that are not recorded in the funds because they do not directly affect expendable available financial resources.
General Fixed Assets are recorded as expenditures in the various funds at the time ofpurchase. A General Fixed Assets Account Group is not presently maintained by the Board. To conform to generally accepted accounting principles, a General Fixed Assets Account Group should be maintained for reporting the cost of assets acquired by governmental fund types.
Although "school activity accounts" are maintained at the individual schools, neither the assets, liabilities and fund equity, nor the revenues, expenditures and changes in fund balances ofthese accounts are reflected in these financial statements. To conform to generally accepted accounting principles, these accounts should be recorded in the general purpose financial statements.
The general purpose financial statements acc.ount for all State, Federal, Taxes and Other funds under control ofthe Board, in compliance with generally accepted accounting principles applicable to governmental units, unless otherwise disclosed in these notes. Funds and the account group presented in this report are as follows:
GOVERNMENTAL FUND TYPES - are used to account for all or most of a Board's educational activities. Governmental Fund Types include:
GENERAL FUND - the fund used to account for all financial resources ofthe Board except those required to be accounted for in another fund. These transactions relate to .resources obtained and used for services provided by a board of education.
SPECIAL REVENUE FUND - the fund used to account for the proceeds ofspecific revenue sources (other than for major capital projects) that are legally restricted to expenditures for specified purposes. These funds are received primarily from the Georgia Department ofEdupation and from the Federal government to accomplish specific educational objectives.
-7-

HARRIS COUNTY BOARD OF EDUCATION

EXHIBIT "D"

NOTES TO THE GENERAL PURPOSE FINANCIAL STATEMENTS

JUNE 30. 1998

Note 1: SUMMARy OF SIGNIFICANT ACCOUNTING POLICIES
CAPITAL PROJECTS FUND - the fund used to account for financial resources to be used for the acquisition or construction of major capital facilities.
DEBT SERVICE FUND - the fund used to account for the accumulation ofresources for, and the payment of, general long-term principal, interest and paying agent fees.
ACCOUNT GROUP
GENERAL LONG-TERM DEBT ACCOUNT GROUP - A financial reporting device used to account for general obligation debt outstanding and material capital lease obligations.
BASIS OF ACCOUNTING
The accounting and financial reporting treatment applied to a fund is determined by its measurement focus. All governmental funds are accounted for using a current financial resources measurement focus. With this measurement focus, only current assets and current liabilities generally are included on the balance sheet. Operating statements of these funds present increases (i.e., revenues and other financing sources) and decreases (i.e., expenditures and other financing uses) in net current assets. Their reported fund balance is considered a measure of available spendable resources.
Liabilities which are expected to be financed from available spendable resources are reported as liabilities in the governmental funds. Other liabilities, which are not expected to be financed from available spendable resources, are reported in the General Long-Term Debt Account Group.
Governmental funds are accounted for using the modified accrual basis of accounting under which:
Revenues are recognized when susceptible to accrual (Le., when they become both measurable and available). "Measurable" means the amount ofthe transaction can be determined and "available" means collectible within the current period or soon enough thereafter to be used to pay liabilities ofthe current period. Those revenues considered susceptible to accrual are property taxes, local option sales taxes, intergovernmental grants and investment income.
Expenditures are generally recognized when the related fund liability is incurred.
A departure from the above definitions is the accounting treatment afforded the final two payments on General Fund teachers' and bus drivers' contracts, and the resources available from the Georgia Department of Education for the State's share of these contracts. During fiscal year 1998, a substantial nuniber of personnel ofthe Board were employed. for a one hundred and ninety day period beginning in late August 1997 and ending in early June 1998. Personnel contracts for this employment period specify that compensation be paid in twelv~ equal monthly payments beginning in September 1997 and ending in August 1998. State grants to fund the State's share ofthese contracts were disbursed from the Georgia Department of Education to the Board in the same twelve months. As of June 30, 1998, compensation under these employment
-8-

HARRIS COUNTy BOARD OF EDUCATION

EXHIBIT "D"

NOTES TO THE GENERAL PURPOSE FINANCIAL STATEMENTS

JUNE 30,1998

Note 1: SUMMARy OF SIGNIFICANT ACCOUNTING POLICIES
contracts had been earned, but two of the twelve monthly payments, due for July and August 1998, had not been made. Payments for these two months were made and recorded as expenditures by the Board subsequent to June 30, 1998, Also, the State's portion of the compensation paid in July and August 1998 was received and recorded as revenue in the fiscal year subsequent to June 30, 1998. Conversely, the similar expenditures and related revenues for contractual services completed prior to June 30, 1997, were recorded in the year ended June 30, 1998. Generally accepted accounting principles require that revenues be recorded when available and measurable and that expenditures be recorded when incurred, rather than when funds are received or disbursed,
BUDGET
The Harris County Board of Education's budget is a complete financial plan for the Board's fiscal year and is based upon estimates of expenditures together with probable funding sources. There is no statutory prohibition regarding overexpenditure of the budget at any level. The budget for all govemniental funds is prepared by fund, function and object. The legal level ofbudget control was established by the Board at the aggregate level. The budget for governmental funds was prepared on a basis other than generally accepted accounting principles.
The budget process begins when the Board's administration prepares a tentative budget for the Board's approval. After approval ofthis tentative budget by the Board, such budget is advertised at least once in a newspaper ofgeneral circulation in the locality. At the next regular meeting ofthe Board after advertisement, the Board receives comments on the tentative budget, makes revisions as necessary and adopts a final school budget. This final budget is then submitted, in accordance with provisions of the Quality Basic Education Act, OCGA Section 20-2-167, to the Georgia Department ofEducation. The Board may increase or decrease the budget at any time during the year. All unexpended budget authority lapses at fiscal year-end.
CASH AND CASH EQUIVALENTS
COMPOSITION OF DEPOSITS Cash and cash equivalents consist of deposits in authorized financial institutions. Georgia Laws authorize the Board to deposit its funds in one or more solvent banks, insured Federal savings and loan associations, or insured State chartered building and loan associations.
INVESTMENTS
COMPOSITION OF INVESTMENTS Investments made by the Board in nonparticipating interest-earning contracts (such as certificates of deposit) and repurchase agreements are reported at cost. Participating interest-earning 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 Board to
- 9-

HARRIS COUNTY BOARD OF EDUCATION

EXHIBIT "D"

NOTES TO THE GENERAL PURPOSE FINANCIAL STATEMENTS

JUNE 30. 1998

Note 1: SUMMARy OF SIGNIFICANT ACCOUNTING POLICIES

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 oithe United States government,

(5) Prime banker's acceptances,

(6) The Local Government Investment Pool administered by the State of Georgia, Office of Treasury and Fiscal Services,

(7) Repurchase agreements, and

(8) Obligations ofother political subdivisions ofthe State of Georgia.

RECEIVABLES

Receivables consist of 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 general purpose financial statements do not include any amounts which would necessitate the need for an allowance for uncollectible receivables.

PROPERTY TAXES

The Harris County Board ofCommissioners fixed the property tax levy for the 1997 tax year (calendar year) on December 3, 1997 (levy date). Taxes were due on February 2, 1998. The lien date for property taxes was January 1, 1997. Taxes collected within the current fiscal year or within 60 days after year-end are reported as revenue "in fiscal year 1998. The Harris County Tax Commissioner bills and collects the property taxes for the Board of Education, withholds 2.5% of taxes collected as a fee for tax collection and remits the balance oftaxes collected to the Board.

Tax millage rates levied for the 1997 tax year (calendar year) for the Harris County Board of Education were

as follows (a mill equals $1 per thousand dollars of assessed value):

.

-10 -

HARRIS COUNTy BOARD OF EDUCATION

EXHIBIT "D"

NOTES TO THE GENERAL PURPOSE FINANCIAL STATEMENTS

JUNE 3D. 1998

Note 1; SUMMARy OF SIGNIFICANT ACCOUNTING POLICIES

School Operations School Bonds

14.70 mills
--L.1.5. mills

16.45 mills

SALES TAXES

Special Purpose Local Option Sales Tax is to be used for capital outlay for educational purposes and debt service. Special Purpose Local Option Sales Tax revenue during the fiscal year amounted to $1,045,145.35 and was recorded in the Capital Projects and Debt Service Funds. The State will terminate collection of this tax once an additional $7,254,854.65 has been collected or on September 30, 2002, whichever occurs first.

INVENTORIES

FOOD INVENTORIES Inventories of donated food commodities used in the preparation of meals are reported on the Combined Balance Sheet at their Federally assigned value. Purchased foods inventories are reported on the Combined Balance Sheet at cost (first-in, first-out). Donated food commodities are recorded as revenues and expenditures at the time commodity items are received. Purchased foods inventories are recorded as expenditures at the time of purchase. The inventories reported on the balance sheet for donated food commodities and for purchased foods are equally offset by reservations of fund balance which indicates that these amounts do not constitute "available spendable resources" even though they are a component of net current assets.

PREPAID ITEMS

Payments made to vendors for services that will benefit periods subsequent to June 30, 1998, are recorded

as prepaid items.

.

COMPENSATED ABSENCES

Compensated absences represent obligations of the Board 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 re~onablyestimated. No liability has been recorded in the individual funds for the current portion ofthis obligation as this amount is deemed immaterial to the general purpose financial statements.

Additionally, the dollar value ofaccumulated compensated absences at June 30, which will be payable from future resources has not been recorded in the General Long-Tenn Debt Account Group as thi,s liability is also deemed to be immaterial to the fair presentation of these financial statements.

- 11 -

HARRIS COUNTY BOARD OF EDUCATION

EXHIBIT "D"

NOTES TO THE GENERAL PURPOSE FINANCIAL STATEMENTS

JUNE 30. 1998

Note 2: DEPOSITS AND INVESTMENTS
(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 ofindebtedness or other obligations ofthe 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 and debt obligations issued by the Federal Land Bank, the Federal Home Loan Bank, the Federal Intennediate 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 At June 30, 1998, the bank balances were $6,098,115.34. The amounts of the total bank balances are classified into three categories of credit risk:
Category 1 - Cash that is insured (e.g., Federal depository insurance) or collateralized with securities held by the Board or by the Board's agent in the Board's name.
Category 2 - Cash collateralized with securities held by the pledging financial institution's trust department or agent in the Board's name.
Category 3 - Uncollateralized deposits. (This includes any bank balance that is collateralized with securities held by the pledging financial institution, or by its trust department or agent but not in the Board's name.)
The Board's deposits are classified by risk category at June 30, 1998, as follows:

-13 -

HARRIS COUNTy BOARD OF EDUCATION

EXHIBIT "D"

NOTES TO THE GENERAL PURPOSE FINANCIAL STATEMENTS

JUNE 30, 1998

Note 2: DEPOSITS AND INVESTMENTS

Risk Category
1
2 3
Total

Bank Balance
$ 536,284.68 5,561,830.66 0.00
$ 6,098,115.34

CATEGORIZATION OF INVESTMENTS At June 30, 1998, the carrying value ofthe Board's total investments was $8,145,509.31 which is materially the same as fair value. This investment consisted entirely of funds invested in the Local Government Investment Pool administered by the State of Georgia, Office of Treasury and Fiscal Services which are not required to be categorized since the Board did not own any specific identifiable securities in the pool. The investment policy ofthe State of Georgia, Office of Treasury and Fiscal Services for the Local Government Investment Pool (primary Liquidity Portfolio) does not provide for investment in derivatives or similar investments. A description of the Primary Liquidity Portfolio is as follows:

The Primary Liquidity Portfolio consists of Georgia Fund 1, which is a combination local and state government investment pool, and Fund 6. Georgia Fund 1 is a stable net asset value investment pool which
follows Standard and Poor's criteria for AAAm rated money market funds. However, Georgia Fund 1
operates in a manner consistent with Rule 2a-7 ofthe Investment Company Act of 1940 and is considered to be a 2a-7 like pool. The pool is not registered with the SEC as an investment company. The pool's primary objectives are safety of capital, investment income, liquidity and diversification while maintaining principal ($1.00 per share value). Net asset value is calculated weekly to ensure stability. The pool distributes earnings (net of management fees) on a monthly basis and determines participant's shares sold and redeemed based on $1.00 per share. Pooled cash and cash equivalents and investments are reported at cost which approximates fair value. The pool does not issue any legally binding guarantees to support the value of the shares. Participation in the pool is voluntary and deposits consist of funds from local governments; operating and trust funds of Georgia's state agencies, c.olleges and universities; and current operating funds of the State of Georgia's General Fund.

Investments in Georgia Fund 1 and Fund 6 are directed toward short-term instruments such as U. S. Treasury obligations, securities issued or guaranteed as to principal and interest by the U. S. Government or any of its agencies or instrumentalities, banker's acceptances and repurchase agreements, The weighted average maturity of Georgia Fund 1 may not exceed 60 days. Fund 6 maintains a duration of approximately one year, The weighted average maturity for Georgia Fund 1 on June 30, 1998 was 29 days. The average investment duration for Fund 6 on June 30, 1998 was ,96 years.

Note 3: NON-MONETARY TRANSACTIONS

The Board receives food commodities from the United States Department ofAgriculture (USDA) for school breakfast and lunch programs. These commodities are recorded at their Federally assigned value. See Note 1 - Inventories

-14 -

HARRIS COUNTy BOARD OF EDUCATION

EXHIBIT "D"

NOTES TO THE GENERAL PURPOSE FINANCIAL STATEMENTS

JUNE 30. 1998

Note 4: RISK MANAGEMENT

The Board 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; natural disaster and unemployment compensation.

The Board has obtained commercial insurance for risk ofloss associated with torts, assets, errors or omissions and job related illness or injuries to employees. The "Board has neither significantly reduced coverage for these risks nor incurred losses (settlements) which exceeded the Board's insurance coverage in any ofthe past three years.

The Board has elected to self-insure for all losses related to natural disaster. The Board has not experienced any losses related to this risk in the past three years.

The Board is self-insured with regard to unemployment compensation claims. The Board accounts for claims within the General Fund with expenditure and liability being reported when it is probable that a loss has occurred, and the amount ofthat loss can be reasonably estimated.

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

1997 1998

Beginning of Year Liability

Claims and Changes in Estimates

$

0.00 $

5.389.00 $

$

0.00 $

941.00 $

Claims Paid

End ofYear Liability

5.389.00 $

0.00

941.00 $

0.00

The Board has purchased surety bonds to provide additional insurance coverage as follows:

Position Covered

Amount

Superintendent All Other Employees

$ 50,000.00 $ 10,000.00

Note 5: GENERAL LONG-TERM DEBT

CAPITAL LEASES The Harris County Board of Education has entered into various lease agreements as lessee for office equipment, modular classrooms and computer equipment. These lease agreements qualify as capital leases for accounting purposes and, therefore, have been recorded at the present value of the future minimum lease payments as ofthe date of their inception.

GENERAL OBLIGATION DEBT OUTSTANDING General Obligation Bonds currently outstanding are as follows:

- 15 -

HARRIS COUNTY BOARD OF EDUCATION

EXHIBIT "D"

NOTES TO THE GENERAL PURPOSE FINANCIAL STATEMENTS

JUNE 30, 1998

Note 5: GENERAL LONG-TERM DEBT

Pw::pose

Interest Rates

Amount

General Government - Series 1996 General Government - Series 1995 General Government - Refunding - Series 1992 General Government - Series 1975

3,75% - 5,20% 3.70% - 5.25% 3.20% - 6.25% 6.75% -7.80%

$ 4,920,000.00 6,400,000.00 3,800,000.00 215,000.00

$ 15,335,000.00

The changes in General Long-Term Debt during the fiscal year ended June 30, 1998, were as follows:

Capital Leases

General Obligation
Bonds

Balance July 1, 1997

$ 1,050,488.24 $15,820,000.00 $ 16,870,488.24

Retroactive Restatement ofPrior Year Balances

-3.335.19

-3.335.19

Balance July 1, 1997 Restated

$ 1,047,153.05 $15,820,000.00 $ 16,867,153.05

Additions

3,942,453.32

3,942,453.32

Deductions Payments Regular

678,019.62

485,000.00 1.163,019.62

Balance June 30, 1998

At June 30, 1998, payments due by fiscal year which includes principal and interest for these items are as follows:

- 16-

HARRIS COUNTY BOARD OF EDUCATION

EXHIBIT "D"

NOTES TO THE GENERAL PURPOSE FINANCIAL STATEMENTS

JUNE 30, 1998

Note 5: GENERAL LONG-TERM DEBT

Fiscal Year Ended June 30

1999 2000 2001 2002 2003 2004 - 2008 2009 - 2013 2014 - 2018

Total Principal and Interest

Deduct: Imputed Interest

Net Present Value ofFuture Minimum Lease Payments

$ 4.311.586.75

Note 6: ON-BEHALF PAYMENTS

The Board has recognized revenues and expenditures in the amount of$303,922.16 for health insurance and retirement contributions paid on the Board's behalfby the following State Agencies.

Georgia Department of Education Paid to the State Merit System of Personnel AQministration For Health Insurance ofNon-Certified Personnel In the amount of$238,009,16

Office ofTreasury and Fiscal Services Paid to the Public School Employees Retirement System For Public School Employees Retirement (PSERS) Employer's Cost In the amount of$65,913,00

Note 7: SIGNIFICANT COMMITMENTS

The following is an analysis of significant outstanding construction or renovation contracts executed by the Board as of June 30, 1998, together with funding available:

- 17 -

HARRIS COUNTy BOARD OF EDUCATION

EXHIBIT "D"

NOTES TO THE GENERAL PURPOSE FINANCIAL STATEMENTS

JUNE 30, 1998

Note 7: SIGNIFICANT COMMITMENTS

PrQject

Unearned Executed Contracts

Funding Available From State

97/96-672-029 97-672-033 99G/98S-672-055

$ 541,205.08 534,057.86
2,997,782.50

$ 60,841,85 515,155.00

$ 4,073,045.44 $ 575,996.85.

The amounts described in this note are not reflected in the general purpose financial statements.

Note 8: 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 expenditures which are disallowed under grant terms. The Board believes that such disallowances, if any, will be immaterial to its overall financial position.

The Board is a defendant in various legal proceedings pertaining to matters incidental to the performance of routine Board operations. The ultimate disposition of these proceedings is not presently determinable, but is not believed to be material to the general purpose financial statements.

Note 9: ACCUMULATED EMPLOYEES' LEAVE

The Board's administrative staff and certain other full-time employees earn 10 days per year of annual leave. Annual leave may be accumulated to a maximum of 20 days. Upon notice of retirement or termination of employment, the employee is requested to .use up all accumulated annual leave; however, if this is not possible, up to 20 days of accumulation is paid to the employee. See Note 1 - Compensated Absences

Note 10: RETIREMENT PLANS

TEACHERS RETIREMENT SYSTEM OF GEORGIA (TRS)

TRS PLAN DESCRIPTION Substantially all teachers, administrative and clerical personnel employed by local school systems are covered by the Teachers Retirement System of Georgia (TRS), which is a cost-sharing multiple employer defined benefit pension plan. TRS provides service retirement, disability retirement and survivors benefits for its members in accordance with State statute. The Teachers Retirement System of Georgia issues a separate stand alone financial audit report and a copy can be obtained from the Georgia Department of Audits and Accounts.

- 18-

HARRIS COUNTY BOARD OF EDUCATION

EXHIBIT "D"

NOTES TO THE GENERAL PURPOSE FINANCIAL STATEMENTS

JUNE 30. 1998

Note 10: RETIREMENT PLANS

TRS CONTRIBUTIONS REQUIRED AND MADE Employees ofthe Board who are covered by TRS are required by State statute to contribute 5% oftheir gross earnings to TRS. The Board makes monthly employer contributions to TRS at rates adopted by the TRS Board of Trustees in accordance with State statute and as advised by their independent actuary. The required employer contribution rate is 11.81% and employer contributions for the current fiscal year and the preceding two fiscal years are as follows:

Fiscal Year

Percentage Contributed

Required Contribution

1998 1997 1996

100% 100% 100%

$ 1,370,239.63 $ 1,230,342.47 $ 1,103,774.95

- 19-

HARRIS COUNTY BOARD OF EDUCATION COMBINING BALANCE SHEET SPECIAL REVENUE FUND JUNE 30.1998

EXHIBIT "E"

ASSETS
cash and cash Equivalents
Accounts Receivable
Prepaid Items
Inventories Food Donated Commodities Purchased Food

SCHOOL FOOD
SERVICES FUND

LOTIERY PROGRAMS

FEDERAL PROGRAMS

TOTALS JUNE 30.1998 JUNE 30. 1997

$ 197.674.30 $ 214.340.68

$ 412.014.98 $ 182.297.19

$ 166.957.81

166.957.81

119.368.68

43.955.09

43.955.09

13.340.44 8,936.56

13,340.44 8,936.56

10.884.88 6,690.79

Total Assets

$ 219.951.30 $ 258.295.77 $ 166,957.81 $ 645.204.88 $ 319.241.54

LIABILITIES AND FUND EQUITY
LIABILITIES
cash Overdraft Accounts Payable Salaries Payable Expired Grant Balances Payable
Total Uabilities
FUND EQUITY
Fund Balances Reserved For Continuation of Federal Programs For Expired Grant Balances/Questioned Costs For Inventories Food Donated Commodities Purchased Food Unreserved Undesignated
Total Fund Equity

$

624.59 $

624.59 $ 47.650.29

$ 12.391.20 $ 28.603.98

26,849.61

67,844.79

31.902.19

51.558.26

77,583.60

68,733.39

197,875.25

184,012.31

18.292.86

18,292.86

319.94

$ 63.949.46 $ 106.187.58 $ 114,500.45 $ 284.637.49 $ 263.884.73

$ $ 152.108.19

52,457.36 $

52,457.36 $ 152.108.19

208.47

$ 13.340.44 8,936.56

133.724.84

0.00

$ 156.001.84 $ 152.108.19 $

0.00 52,457.36 $

13.340.44 8.936.56
133,724.84
360,567.39 $

10.884.88 6.690.79
37.572.67
55.356.81

Total Liabilities and Fund Equity

$ 219,951.30 $ 258.295.77 $ 166.957.81 $ 645,204.88 $ 319.241.54

See notes to the general purpose financial statements.

-20-

HARRIS COUNTY BOARD OF EDUCATION COMBINING STATEMENT OF REVENUES. EXPENDITURES AND CHANGES IN FUND BALANCES
SPECIAL REVENUE FUND YEAR ENDED JUNE 30.1998

EXHIBIT"P

SCHOOL FOOD
SERVICES FUND

LOTIERY PROGRAMS

FEDERAL PROGRAMS

TOTALS YEAR ENDED JUNE 30.1998 JUNE 30. 1997

REVENUES

State Funds Federal Funds Other Funds

$

95.654.00 $ 895.597.28

$ 991.251.28 $ 956.737.87

736.711.46

$ 818.891.28

1,555.602.74

1.354.532.95

556.078.41

556.078.41

428,425.90

Total Revenues

$ 1.388.443.87 $ 895.597.28 $ 818.891.28 $ 3.102.932.43 $ 2.739.696.72

EXPENDITURES

Current Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration Maintenance and Operation of Plant Student Transportation Services Other Support Services Food Services Operation
Debt Service Principal Interest

$ $ 1,292,291.70

575.565.34 $
47,711.13
22,816.24 36,144.68
42,761.50 18,490.20

565.879.59 $ 1.141.444.93 $ 1.145,199.89

49,905.88 59.689.71
8.506.79 73,238.24
491.90 5,400.00 16,707.71

97,617.01 59,689.71
8.506.79 73,238.24 23,308.14 41,544.68 16,707.71 1,292,291.70

124,769.94 77,938.07 4,691.81 64,804.05 71.307.59 15,265.92 27,256.03
1,315,066.00

42,761.50 18,490.20

3,935.25 560.01

Total Expenditures

$ 1,292,291.70 $ 743,489.09 $ 779.819.82 $ 2.815.600.61 $ 2.850.794.56

Excess of Revenues over (under) Expenditures

$ 96,152.17 $ 152,108.19 $ 39.071.46 $ 287.331.82 $ -111.097.84

OTHER FINANCING SOURCES (USES)

Capital Leases Operating Transfers In

$

24,925.00

$

13.177.43 $

13,177.43

4,355.65

Total Other Financing Sources (Uses)

$ 13.177.43 $

13,177.43 $

29.280.65

Excess of Revenues and Other Financing Sources
over (under) Expenditures and Other Financing Uses $

96,152.17 $ 152,108.19 $

52,248.89 $ 300,509.25 $

-81,817.19

FUND BALANCE JULY 1

55,148.34

0.00

208.47

55.356.81

145,162.53

Food Inventory - Net Change in Period Donated Commodities Purchased Food

2,245.77 2,455.56

2,245.77 2,455.56

-6,466.33 -1,522.20

FUND BALANCE JUNE 30

$ 156.001.84 $ 152.108.19 $

52,457.36 $ 360.567.39 $

55.356.81

See notes to the general purpose financial statements.

'.
- 21 -

HARRIS COUNTY BOARD OF EDUCATION COMBINING BALANCE SHEET CAPITAL PROJECTS FUND JUNE 30,1998

ASSETS Cash and Cash Equivalents Investments Accounts Receivable

REGULAR

BOND PROCEEDS

GEORGIA STATE FINANCING AND
INVESTMENT COMMISSION

$

8,513,16 $

294,042,03 $

52,044,82

1,402,814.65

3,168,243,79

Total Assets

$

8,513.16 $

1,696,856.68 $ ======3=,2=:2=0,=28=:8=.6=1

LIABILITIES AND FUND EQUITY

LIABILITIES

Accounts Payable Contracts Payable Retainages Payable

Total Liabilities

FUND EQUITY

Fund Balances

Reserved

For Construction of Greenhouse

$

For Purposes of Bond Issue

For SPLOST Projects

For State Capital Outlay Projects

Unreserved

Undesignated

Total Fund Equity

$

$

107,427,41

17,470.06

337,714.60

$

462,612.07

8,513,16
$
0.00
8,513.16 $

1,696,856.68
$
0.00
1,696,856.68 $

2,757,676.54 0.00
2,757,676,54

Total Liabilities and Fund Equity

$

8,513.16 $

1,696,856.68 $ ===::i3,:=22=0~,2=8=8=.6=1

See notes to the general purpose financial statements. - 22-

EXHIBIT"G"

SPECIAL PURPOSE LOCAL OPTION SALES TAX

LOTIERY PROJECT

TOTALS

JUNE 30,1998

JUNE 30,1997

$

143,479.19 $

568,092.34 $ 1,066,171.54 $ 5,275,874.35

4,571,058.44

7,035,022.50

371,822.28

371,822.28

711,834.52

$

515,301.47 $

568,092.34 $ 6,009,052.26 $ 13,022,731.37

$

16,293.00 $

123,720.41

303,510.34

320,980.40

191,050.00

528,764.60 $

696,510.50

510,853.34 $

973,465.41 $

696,510.50

$

515,301.47

$

0.00

$

515,301.47 $

$
57,239.00 0.00
57,239.00 $

8,513.16 $ 1,696,856.68
515,301.47 2,814,915.54

8,513.16 7,870,754.48
2,000,491.43

0.00

2,446,461.80

5,035,586.85 $ 12,326,220.87

$

515,301.47 $

568,092.34 $ 6,009,052.26 $ 13,022,731.37

- 23-

HARRIS COUNTY BOARD OF EDUCATION COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES
CAPITAL PROJECTS FUND
YEAR ENDED JUNE 30, 1998

FUND BALANCE JUNE 30

$

8.513,16 $ 1.696,856.68 $ :;:;====2:1.7:'=57~.=67=6=.54==

See notes to the general purpose financial statements.

- 24-

EXHIBIT"H"

SPECIAL PURPOSE LOCAL OPTION SALES TAX

LOTIERY PROJECT

TOTALS

YEAR ENDED

JUNE 30,1998

JUNE 30.1997

$

807,374.10 $

1,612.47

$

808,986.57 $

0.00 $ 0.00 $

$ 807,374.10 587.697.42
1.395,071.52 $

6,585,323.09 594,454.96
7,179,778.05

$

0.00

$

18,000.00

$

1,708.56

3,763,769.23

341,915.20 $ 10,226,067.11
236,038.13

159,889.40 8,034,434.59

244,897.97 48,787.13

$

0.00 $ 3,765,477.79 $ 11,115,705.54 $ 8,194,323.99

$

808,986.57 $ -3,765,477.79 $ -9,720.634.02 $ -1,014,545.94

$ 2,000,000.00.

$ 2,117,239.46

9,675,993.06 $ 1,254,000.00

$

-293,685.10

-9,245,993.06

$

-293,685.10 $ 2,117,239.46 $ 2,430,000.00 $ 1,254,000.00

$

515,301.47 $ -1,648,238.33 $ -7,290,634.02 $

239,454.06

0.00

1,705,477.33

12,326,220.87

12.086,766.81

$

515,301.47 $

57.239.00 $ 5,035,586.85 $ 12,326,220.87

- 25-

HARRIS COUNTY BOARD OF EDUCATION COMBINING BALANCE SHEET DEBT SERVICE FUND JUNE 30,1998

EXHIBIT "I"

ASSETS Cash and Cash Equivalents Accounts Receivable
Total Assets

PROPERTY TAXES FOR BOND DEBT

SPECIAL PURPOSE LOCAL OPTION SALES TAX

TOTALS JUNE 30,1998 JUNE 30,1997

$ 332,807.05 $

0.00 $

332,807.05 $

823,248.38

33,799.21

33,799.21

25,139.22

$ 366,606.26 $

0.00 $

366,606.26. $ ====8=48:f,3=8=7=.6~0

LIABILITIES AND FUND EQUITY

LIABILITIES

Due to Other Funds

FUND EQUITY

Fund Balances

Reserved

For Debt Service

$

Unreserved

Undesignated

Total Fund Equity

$

366,606,26 0.00 $
366,606.26 $

Total Liabilities and Fund Equity $

366,606.26 $

$

303,000.00

$ 0.00 0.00 $

366,606.26 $ 0.00
366,606.26 $

545,387.60 0.00
545,387.60

0.00 $

366,606.26 $ ====8=48:f,3=8=7=.6~0

See notes to the general purpose financial statements.

-26-

HARRIS COUNTY BOARD OF EDUCATION COMBINING STATEMENT OF REVENUES. EXPENDITURES AND CHANGES IN FUND BALANCES
DEBT SERVICE FUND YEAR ENDED JUNE 30.1998

EXHIBIT"J"

FUND BALANCE JUNE 30

$ 366.606.26 $

0.00 $

366.606.26 $

545.387.60

See notes to the general purpose financial statements.

-27 -

HARRIS COUNTY BOARD OF EDUCATION

SCHEDULE "1"

SCHEDULE OF REQillRED SUPPLEMENTARY INfORMATION

YEAR 2000 DISCLOSURES
YEAR ENDED JUNE 30, 1998

At June 30, 1998, the Harris County Board ofEducation had no outstanding contractual commitments for the purpose of making computer systems and other electronic equipment year 2000 compliant. The year 2000 issue is the result ofshortcomings in many electronic data processing systems and other equipment that make operations beyond year 1999 troublesome. The year 2000 issue is ofprimary concern for the Board's financial accounting system. The following stages have been identified as necessary to implement a year 2000 compliant systems.
Awareness Stage - Encompasses establishing a budget and project plan for dealing with the year 2000 issue.
Assessment Stage - The actual process ofidentifying all ofits systems and individual components of the systems to check for compliance.
Remediation Stage - When changes are made to systems and equipment.
ValidationlTesting Stage - The process of ensuring that the changes made to systems and equipment will produce a year 2000 compliant system.
It will be necessary for the Board to progress through all four of these stages for each computer and/or electronic system, not already year 2000 compliant, in order to assure that these systems will not be adversely affected. As ofJune 30,1998, the financial accounting system was detennined to be at the Awareness Stage.
The Board's financial accounting software (GENESIS) and hardware (Wang VS) are owned by the State (Georgia Department ofEducation). These systems have been detennined to be critical to the Board's ability to successfully conduct operations. As ofJune 30, 1998, the State had not contracted for the remediation of either the Wang VS operating system or the GENESIS accounting software. In the subsequent period, the Georgia Department of Education remediated the Wang VS operating system and the updated operating system was installed at all GENESIS sites as ofDecember 9, 1998. The Georgia Department of Education has remediated the GENESIS software and conducted tests at nine pilot sites. The remediated GENESIS software has been provided to all boards of education currently utilizing the GENESIS accounting software.

"
See notes to the general purpose financial statements. - 28-

HARRIS COUNTY BOARD OF EDUCATION SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
YEAR ENDED JUNE 30,1998

SCHEDULE "2"

FUNDING AGENCY PROGRAM/GRANT

CFDA NUMBER

PASSTHROUGH
ENTITY ID
NUMBER

FEDERAL REVENUE IN PERIOD

EXPENDITURES IN PERIOD

Agriculture, U. S. Department of Pass-Through from Georgia Department of Education Food and Nutrition Program Food Services School Breakfast Program 1998 Grant National School Lunch Program 1998 Grant Food Distribution Program (1) Pass-Through from Office of School Readiness Food and Nutrition Program Child and Adult Care Food Program 1998 Contract

* 10.553 * 10.555
10.550
10.558

N/A $
N/A N/A

152,557.31
492,279.61 $ 84,257.91

(2)
1,208,033.79 (3) 84,257.91

N/A

7,616.63

(2)

Total U. S. Department of Agriculture

$

736,711.46 $ 1,292,291.70

Education, U. S. Department of Pass-Through from Georgia Department of Education Elementary and Secondary Education Act TiDe I Grants to Local Educational Agencies 1997 Summer 1998 Grant 1998 Summer TiDe I! Eisenhower Professional Development 1997 Grant 1998 Grant TiDe VI Innovative Education ProgramStrategies 1998 Grant Goals 2000 State and Local Education Systemic Improvement Grants 1998 Grant Individuals with Disabilities Education Act Part B - Special Education Flow Through 1998 Grant Preschool 1998 Grant Vocational Education - Basic Grants to States High School Program Basic Grant 1998 Grant Tech-Prep Education 1998 Grant

84.010 84.010 84.010
84.281 84.281
84.298
84.276
84.027 84.173
84.048 84.243

N/A $ N/A N/A

10,970.07 $ 450,846.19
5,027.00

10,970.07 450,846.19
5,027.00

N/A

-9,12

199.35

N/A

17,500.00

16,196.74

N/A

17,536.00

17,536.00

N/A

93,520.00

42,365.90

N/A

156,397.05

156,397.05

N/A

35,024.09

35,024.09

N/A

27,080,00

38,701.69 (3)

N/A

5,000.00

6,555,74 (3)

Total U. S. Department of Education

-29-

.$

818,891.28 $

779,819.82

HARRIS COUNTY BOARD OF EDUCATION SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
YEAR ENDED JUNE 30. 1998

SCHEDULE "2"

FUNDING AGENCY PROGRAM/GRANT

CFDA NUMBER

PASSTHROUGH
ENTITY 10
NUMBER

FEDERAL REVENUE IN PERIOD

EXPENDITURES IN PERIOD

OTHER FEDERAL ASSISTANCE

Defense, U. S. Department of Direct Defense Activity for Non-Traditional Educational Support Troops to Teachers

$

2""7,,,,",9;;..4;.;;3.;,;;.6~5

(4)

Total Federal Financial Assistance

$ 1,583,546.39 $ 2,072,111.52

N/A=Not Available

Notes to the Schedule of Expenditures of Federal Awards

(1) The amounts shown for the Food Distribution Program represents the Federally assigned value of nonmonetary assistance for donated commodities received and/or consumed by the system during the current fiscal year.
(2) Expenditures for the Child and Adult Care Food Program and the School Breakfast Program were not maintained separately and are included in the 1998 National School Lunch Program.
(3) Expenditures for this program include State, and/or Other Funds. Expenditures are not maintained by fund source.
(4) Expenditures on this program were not maintained by fund source.

Major Programs are identified by an asterisk (*) in front of the CFDA number.
The Board did not provide Federal Assistance to any Subrecipienl

The accompanying schedule of expenditures of Federal awards includes the Federal grant activity of the Harris County Board of Education and is presented on the modified accrual basis of accounting which is the same basis of accounting used in the presentation of the general purpose financial statements.

See notes to the general purpose financial statements.

- 30-

HARRIS COUNTY BOARD OF EDUCATION SCHEDULE OF STATE REVENUE YEAR ENDED JUNE 30,1998

SCHEDULE "3"

AGENCY/FUNDING
GRANTS Education, Georgia Department of Quality Basic Education General and Career Education Programs Special Education Programs Remedial Education Program Media Center Programs Staff Development Programs Indirect Cost Pupil Transportation Regular Bus Replacement Middle School Incentive Program Special Instructional Assistance In-School Suspension Mid-term Adjustment Counselors Grades 4 and 5 Technology Training Local Fair Share Educational Equalization Funding Grant Food Services Vocational Education Other State Programs Ad Valorem Tax Adjustment Advanced Placement Exams Alternative Program At-Risk Summer School Program Health Insurance Mentoring Program Mentor Teacher Program Preschool Handicapped Program Remedial Summer School Program Lottery Programs Alternative School Program Instructional Technology Assistive Technology Classroom Technology
Office of School Readiness Pre-Kindergarten Program
Office of Treasury and Fiscal Services Public School Employees Retirement
CONTRACT Education, Georgia Department of Leadership Development Program

GOVERNMENTAL FUND TYPES

SPECIAL

GENERAL

REVENUE

FUND

FUND

TOTAL

$ 7,376,570.00 964,678.00 206,981.00 303,943.00 93,337.00
2,044,686.00
478,160.00 166,483.00 274,661.00 530,779.00
80,606.00 421,077.00
28,529.00 57,684.00 -2,035,283.00 190,392.00
$ 6,810.00
115,471.00 225.50
60,044.00 10,907.06 238,009.16 4,500.00
1,692.00 40,995.00
5,689.51
65,913.00

$
95,654.00
4,132.00 6,935.00 97,544.00

7,376,570.00 964,678.00 206,981.00 303,943.00 93,337.00
2,044,686.00
478,160.00 166,483.00 274,661.00 530,779.00
80,606.00 421,077.00
28,529.00 57,684.00 -2,035,283.00 190,392.00 95,654.00
6,810.00
115,471.00 225.50
60,044.00 10,907.06 238,009.16 4,500.00
1,692.00 40,995.00
5,689.51
4,132.00
6,935.00 97,544.00

786,986.28

786,986.28

65,913.00

765.00

765.00

See notes to the general purpose financial statements.

$ 11,734,304.23 $ - 31 -

991,251.28 $ 12,725,555.51

HARRIS COUNTY BOARD OF EDUCATION SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS
YEAR ENDED JUNE 30. 1998

SCHEDULE "4"

PROJECT

Repayment of principal and interest on the

School District's outstanding general

obligation bonds coming due December 1,

1997, through and including December 1,

2003, the maximum amount of such principal

and interest to be repaid not to exceed

$4,150,000.00

$

Acquisition, construction, furnishing and equipping of an auditorium at the new Harris County High School and acquisition, construction, furnishing and equipping of additional classrooms at the existing high school as it is converted to a middle school, and the acquiring of necessary technology and other capital improvements at all schools, the maximum cost of such projects to be paid from sales and use
tax proceeds not to exceed $4,150,000.00

ORIGINAL ESTIMATED
COST (1)

CURRENT ESTIMATED
COST (2)

AMOUNT EXPENDED IN CURRENT
YEAR (3)

AMOUNT EXPENDED
IN PRIOR YEARS

4,150,000.00 $

4,150,000.00 $

237,n1.25 $

0.00

4,150,000.00

4,150,000.00

6,932,286.35

$

8,300,000.00 $

8,300,000.00 $

7,170,057.60 $

0.00

(1) The Board's original cost estimate as specified in the resolution calling for the imposition of the Local Option sales Tax.
(2) The Board's current estimate of local cost for each project. Includes all cost from project inception to completion.
(3) The voters of Harris County approved the imposition of a 1% sales tax to fund the above projects and retire associated debt. Amounts expended for these projects includes sales tax proceeds, state funds, local property taxes and/or other funds over the life of the project.

See notes to the general purpose financial statements.

- 32-

HARRIS COUNTY BOARD OF EDUCATION SCHEDULE OF EXPENDITURES LOTTERY PROGRAMS YEAR ENDED JUNE 30.1998

SCHEDULE "5"

EXPENDITURES

ALTERNATIVE SCHOOL PROGRAM

INSTRUCTIONAL TECHNOLOGY
ASSISTIVE TECHNOLOGY

PRE-KINDERGARTEN PROGRAM

Current

Instruction

$

Support Services

Pupil Services

Maintenance and Operation of Plant

Student Transportation Services

Debt Service

4,132.00 $

6,935.00 $

564,498.34 $
47,711.13 22,816.24 36,144.68 61,251.70

TOTAL
575,565.34
47,711.13 22,816.24 36,144.68 61,251.70

Total Expenditures
RECAP: Salaries and Benefits Pre-Kindergarten Program Other Expenditures Alternative School Program Instructional Technology Assistive Technology Pre-Kindergarten Program

$

4,132.00 $

6,935.00 $

732,422.09 $-===7=43"..,4=8=9.=0=9

$ 611,310.98
4,132.00
6,935.00 121,111.11

$ 743,489.09

See notes to the general purpose financial statements.

- 33-

HARRIS COUNTY BOARD OF EDUCATION ANALYSIS OF MINIMUM EXPENDITURE REQUIREMENTS - OVERALL
GENERAL FUND - QUALITY BASIC EDUCATION PROGRAMS YEAR ENDED JUNE 30.1998

SCHEDULE "6"

Minimum Expenditure Requirements (Total Allotment) Expenditures on Combined Program Basis
Salaries Operations
Less: Expenditures for Media Center Programs in Excess of Total Media Allotment
Expenditures per Audit
Amount of Underexpenditure for Total Allotment

FOURTEEN WEIGHTED AND MEDIA CENTER
PROGRAMS

100% TEST FOR OPERATIONS PORTION OF FOURTEEN WEIGHTED PROGRAMS

$

9,185,673.00 $ _ _--:;.:32;;;:;2;.!.,;:,0;.:;0,;:.;8.;.;:.00;:;,.

$

9,717,678.74

867,702.31 $ _ _...:6;.:;8.:J5,~78::.:.7..:.7:..~4

$

10,585,381.05

-240,071.74 $ _----'1...;;.0=,3..;.;45~,3;;;.;;0...;;.9;;.;;..3..;.;1

$

0.00 $=====0='0==0

See notes to the general purpose financial statements. - 35 -

HARRIS COUNTY BOARD OF EDUCATION ANALYSIS OF MINIMUM EXPENDITURE REQUIREMENTS - BY PROGRAM
GENERAL FUND QUALITY BASIC EDUCATION PROGRAMS YEAR ENDED JUNE 30. 1998

GENERAL AND CAREER EDUCATION PROGRAMS Kindergarten (*) Grades 1 3 (*) Sub-Total K3 Grades 4 5 (*) Grades 6 8 (*)
Grades 9 12 r)
High School Laboratories (*) Vocational Education Laboratories (*)
Total General and Career Education Programs SPECIAL EDUCATION PROGRAMS
RegUlar Programs Category I (*) Category II (*) Category III (*) Category IV (*) Sub-Total Regular
Category VI (Gifted) r)
Total Special Education Programs REMEDIAL EDUCATION PROGRAM C*)
Total Fourteen Weighted Programs MEDIA CENTER PROGRAMS
salaries Operations
Total Media Center Programs
Total Fourteen Weighted and Media Center Programs

ALLOTMENTS FROM DEPARTMENT OF EDUCATION

REQUIRED

ORIGINAL ~

ORIGINAL

MID-TERM

$

830,704.00

$

747.633.60

2,103,589.00

1,893,230.10 $

$ 2.934,293.00 90 $ 2,640.863.70 $

851.094.00 90

765.984.60

1.632,452.00 90

1,469,206.80

944,956.00 90

850,460.40

618,581.00 90

556.722.90

395,194.00 90

355.674.60

$ 7,376.570.00

$ 6,638,913.00 $

212,183.00 212.183.00 90.859.00
14,400.00 317,442.00

$

796,383.00

$

716,744.70 $

1.366.00

$

796,383.00 90 $

716.744.70 $

168.295.00 90

151,465.50

$

964.678.00

$

868,210.20 $

$

206,981.00 90 $

186,282.90 $

$ 8.548,229.00

$ 7.693,406.10 $

1.366.00 1.600.00 2.966.00
0.00 320,408.00

$

246,165.00 90 $

221,548.50 $

57.n8.00 90

52.000.20

$

303,943.00

$

273.548.70 $

10,261.00 2,832.00
13,093.00

$ 8,852.172.00

$ 7.966.954.80 $

333,501.00

STAFF DEVELOPMENT PROGRAMS Cost of Instruction Professional Development
Total Staff Development Programs
r) Identifies Fourteen Weighted Programs.
see notes to the general purpose financial statements.

$

27.100.00

$

27,100.00 $

0.00

66.237.00

66,237.00

0.00

$

93.337.00 100 $

93,337.00 $======0=.00...

- 36

SCHEDULE...,..

TOTAL REQUIRED

ACTUAL EXPENDITURES

SALARIES

OPERATIONS

TOTAL

AMOUNT OF UNDEREXPENDITURE
FOR REQUIRED ALLOTMENT

$

747,633.60 $

895,522.01 $

31,306.71 $

926,828.72

2,105,413.10

2,467,781.71

93,661.52

2,561,443.23

$ 2,853,046.70 $ 3,363,303.72 $

124,968.23 $ 3,488,271.95 $

0.00

856,843.60

1,128,502.22

43,486.59

1,171,988.81

0.00

1,469,206.80

1,700,583.01

154,148.73

1,854,731.74

0.00

850,460.40

1,002,753.65

52,603.45

1,055,357.10

0.00

556,722.90

741,033.65

54,279.04

795,312.69

0.00

370,074.60

451,989.96

130,298.03

582,287.99

0.00

$ 6,956,355.00 $ 8,388,166.21 $

559,784.07 $ 8,947,950.28

$

718,110.70

$

4,954.88 $ 459,418.97 190,973.35
11,973.92

6,094.00 $ 4,932.19 21,343.73 21,567.38

11,048.88 464,351.16 212,317.08
33,541.30

$

718,110.70 $

667,321.12 $

53,937.30 $

721,258.42

0.00

153,065.50

144,058.45

20,426.33

164,484.78

0.00

$

871,176.20 $

811,379.57 $

74,363.63 $

885,743.20

$

186,282.90 $

142,939.79 $

51,640.04 $

194,579.83

0.00

$ 8,013,814.10 $ 9,342,485.57 $

685,787.74 $ 10,028,273.31

$

231,809.50 $

375,193.17

$

375,193.17

0.00

54,832.20

$

181,914.57

181,914.57

0.00

$

286,641.70 $

375,193.17 $

181,914.57 $

557,107.74

$ 8,300,455.80 $ 9,717,678.74 $

867,702.31 $ 10,585,381.05 $

0.00

$

27,100.00

66,237.00

$===9=3=,33...7....0.0=

$

33,608.38 $

33,608.38

60,963.65

60,963.65

$

94,572.03 $

94,572.03 $======0:.;;.00...

- 37 -

SECTIONll COMPLIANCE AND INTERNAL CONTROL REPORTS

RUSSELL W. HINTON
STATE AUDITOR
(404) 6562174

DEPARTMENT OF AUDITS AND ACCOUNTS
254 Washington Street, S.w', Suite 214 Atlanta, Georgia 30334-8400
July 1, 1999

Honorable Roy E. Barnes, Governor Members ofthe General Assembly Members ofthe State Board ofEducation
and Superintendent and Members ofthe Harris County Board ofEducation
REPORT ON COMPLIANCE AND ON INTERNAL CONTROL OVER FINANCIAL REPORTING
BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH
GOVERNMENT AUDITING STANDARDS
Ladies and Gentlemen:
We have audited the financial statements ofHarris County Board of Education as of and for the year ended June 30, 1998, and have issued our report thereon dated July 1, 1999. This report was qualified for various departures from generally accepted accounting principles, as identified in the auditor's report on the ge~eral purpose financial statements. We conducted our audit in accordance with generally accepted auditing standards and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States.
Compliance
As part of obtaining reasonable assurance about whether Harris County Board of Education's financial statements are free ofmaterial misstatement, we perfonned tests ofits compliance with certain provisions of laws, regulations, contracts and grants, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit and accordingly, we do not express such an opinion. The results ofour tests disclosed instances ofnoncompliance that are required to be reported under Government Auditing Standards which are described in the accompanying Schedule ofFindings and Questioned Costs as items FS6721-98-01 and FS-6721-98-02.
Internal Control Over Financial R~orting
In planning and perfonning our audit, we considered Harris County Board ofEducation's internal control over financial reporting in order to detennine our auditing procedures for the purpose of expressing our opinion on the financial statements and not to provide assurance on the internal control over financial reporting.
98YB-60

However, we noted a certain matter involving the internal control over financial reporting and its operation that we consider to be a reportable condition. Reportable conditions involve matters coming to our attention relating to significant deficiencies in the design or operation ofthe internal control over financial reporting that, in our judgement, could adversely affect Harris County Board of Education's ability to record, process, summarize and report financial data consistent with assertions of management in the financial statements. The reportable condition is described in the accompanying Schedule of Findings and Questioned Costs as item FS-6721-98-03.
A material weakness is a condition in which the design or operation of one or more of the internal control components does not reduce to a relatively low level the risk that misstatements in amounts that would be material in relation to the financial statements being audited may occur and not be detected within a timely period by employees in the normal course ofperforming their assigned functions. Our consideration of the internal control over financial reporting would not necessarily disclose all matters in the internal control that might be reportable conditions and accordingly, would not necessarily disclose all reportable conditions that are also considered to be material weaknesses. However, the reportable condition described above, is considered to be a material weakness.
This report is intended solely for the information and use of management, members of the Harris County Board ofEducation, Federal awarding agencies and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties.
Respectfully submitted,
~""Jfl tJ. 4~ Russell W. Hinton State Auditor
RWH:jb 98YB-60

RUSSELL W. HINTON
STATE AUDITOR
(404) 656-2174

DEPARTMENT OF AUDITS AND ACCOUNTS
254 Washington Street, S.w., Suite 214 Atlanta, Georgia 30334-8400
July 1, 1999

Honorable Roy E. Barnes, Governor Members of the General Assembly Members ofthe State Board ofEducation
and Superintendent and Members ofthe Harris County Board ofEducation
REPORT ON COMPLIANCE WITH REQUIREMENTS APPLICABLE TO EACH MAJOR PROGRAM AND lNTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH OMB CIRCULARA-133
Ladies and Gentlemen:
Compliance
We have audited the compliance of Harris County Board of Education with the types of compliance requirements described in the U.S. Office ofManagement and Budget (OMB) Circular A-133 Compliance Supplement that are applicable to each ofits major Federal programs for the year ended June 30, 1998. Harris County Board ofEducation's major Federal programs are identified in the accompanying Schedule ofFindings and Questioned Costs. Compliance with the requirements of laws, regulations, contracts and grants applicable to each ofits major Federal programs is the responsibility ofHarris County Board of Education's management. Our responsibility is to express an opinion on Harris County Board ofEducation's compliance based on our audit.
We conducted our audit of compliance in accordance with generally accepted auditing standards; 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 ofStates, 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 Harris 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 Harris County Board.?f Education's compliance with those requirements.

98SA-1O

In our opinion, the Harris County Board ofEducation complied, in all material respects, with the requirements referred to above that are applicable to each of its major Federal programs for the year ended June 30, 1998.

Internal Control Over Compliance

The management of Harris County Board of Education is responsible for establishing and maintaining

effective internal control over compliance with requirements of laws, regulations, contracts and grants

applicable to Federal programs. In planning and performing our audit, we considered Harris County Board

ofEducation's internal control over compliance with requirements that could have a direct and material effect

on a major Federal program in order to determine our auditing procedures for the purpose of expressing our

opinion on compliance and to test and report on internal control over compliance in accordance with OMB

Circular A-133.

.

Our consideration of the internal control over compliance would not necessarily disclose all matters in the internal control that might be material weaknesses. A material weakness is a condition in which the design or operation ofone or more ofthe internal control components does not reduce to a relatively low level ofrisk that noncompliance with applicable requirements of laws, regulations, contracts and grants that would be material in relation to a major Federal program being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. We noted no matters involving the internal control over compliance and its operation that we consider to be material weaknesses.

This report is intended solely for the information and use of management, members of the Harris County Board ofEducation, Federal awarding agencies and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties.

Respectfully submitted,

RWH:jb 98SA-1O

ussell W. Hinton State Auditor

SECTION ill AUDITEE'S RESPONSE TO PRIOR YEAR FINDINGS AND QUESTIONED COSTS

HAroUSCOUNIYBOARDOFEDUCATION
AUDITEE'S RESPONSE
SUMMARy SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30. 1998

PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

FINDING CONTROL NUMBER AND STATUS

6721-93-02 FS-6721-97-01

Further Action Not Warranted Unresolved - See Corrective Action/Responses

CORRECTIVE ACTIONIRESPONSES

GENERAL FIXED ASSETS Failure to Maintain General Fixed Assets Account Group Finding Control Number: FS-6721-97-01

Due to the current staffing limitations and budgetary considerations prohibiting the hiring of additional administrative staff, the Board has decided not to pursue the recording of general fixed assets on the financial statements at this time.

SECTIONN FINDINGS AND QUESTIONED COSTS

HARRIS COUNTy BOARD OF EDUCATION
SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30. 1998
I SUMMARy OF AUDITOR'S RESULTS
1. TXVe ofRe.port Issued on the Financial Statements The auditor's opinion on the Harris County Board of Education's financial statements was qualified for various departures from generally accepted accounting principles.
2. Re.portable Conditions in Internal Control Disclosed by the Audit of the Financial Statements The audit report for the Harris County Board ofEducation disclosed a financial statement reportable condition related to the following control category.
General Fixed Assets
The reportable condition described above is considered to be a material weakness.
3. Noncompliance Material to the Financial Statements The audit ofthe Harris County Board ofEducation disclosed two instances ofnoncompliance deemed material to the financial statements. This noncompliance involved improper use of Lottery Program Funds.
4. Re.portable Conditions in Internal Control Over Major Programs The audit report for the Harris County Board ofEducation did not disclose any reportable conditions in internal control over major programs.
5. TXVe ofRe.port Issued on Compliance for Major Programs The auditor's opinion on the Harris County Board of Education's report on compliance with requirements applicable to major programs was unqualified.
6. Audit Findings Required to be Re.ported by Section .51O(a) ofOMB Circular A-133 The Harris County Board ofEducation's audit did not disclose audit findings required to be reported by section .510(a) ofOMB Circular A-133..
7. Major Programs Federal awards audited as major programs are as follows: 10.553 Food and Nutrition Program - Food Services - School Breakfast Program 10.555 Food and Nutrition Program - Food Services - National School Lunch Program
8. TXVe "A" Program Dollar Threshold The dollar threshold for type "A" programs was $300,000.00.
9. Low Risk Auditee The Harris County Board of Education was audited as a low risk auditee based on a waiver granted by the U. S. Department of Education.
- 1-

HARRIS COUNTy BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30. 1998
IT FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS
EXPENDITURESILIABILITIESIDISBURSEMENTS Supplanting Existing Resources Financial Statements Material Noncompliance Amount: $97,544.00 Finding Control Number: FS-6721-98-01
For the year under review, the Board received Lottery proceeds of$97,544.00 from the Georgia Department of Education for the Classroom Technology Project. The entire grant of $97,544.00 was utilized to pay portions of a 1994 capital lease, which in previous years had been funded' entirely from maintenance and operation funds of the General Fund. As a result, lottery funds were utilized to supplant existing resources previously dedicated for debt retirement. The Board's attention is directed to the Official Code of Georgia Annotated Section 50-27-2 (1) which states, in part, as follows:
"...That net proceeds of lottery games conducted pursuant to this chapter shall be used to support improvements and enhancements for educational purposes and programs and that such net proceeds shall be used to supplement, not supplant, existing resources for educational purposes and programs,..."
Audit adjustments were made transferring the expenditures for debt retirement to the Board's General Fund, resulting in an unobligated grant balance of$97,544.00 which should be returned to the Georgia Department of Education.
Management's Response:
Based on information I received at Bootstrap at the origination ofthis grant for technology, we were told that we could enter into a multi-year lease (for technology needs) since we would be unable to make a great impact on the technology needs ofthe school system with the amount we would be receiving for technology grants annually. We were told that these lottery gr~ts could be used to pay for a portion ofthese lease payments. Our school system entered into a lease in August of 1994. This lease was rolled into another technology lease in March of 1998. As you know, we mayor may not be provided technology funds from the lottery. Some years we do and some years we don't. The use of the lottery funds is not supplanting because we didn't receive other state dollars for technology.
Also, based on information we received regarding the FY 97 Classroom Technology Program, regarding Senate Bill 428, it is stated... "except as otherwise provided in this Code section, each county, independent, or area school system in this state shall be authorized to enter into multiyear lease, purchase, or lease purchase contracts ofall kinds for the acquisition ofgoods, materials, real and personal property, services, and supplies, provided that any such contract Shall contain provisions for the following: ...the contract shall state the total obligation ofthe school system for the calendar year of execution and shall further state the total obligation which will be incurred in each calendar year renewal term, if renewed...".
-2-

HARRIS COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30. 1998
II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS
EXPENDITURESILIABILITIESIDISBURSEMENTS Supplanting Existing Resources Financial Statements Material Noncompliance Amount: $97,544.00 Finding Control Number: FS-6721-98-01
Based on the above information, and my understanding of supplant and supplement, we have indeed used these funds to supplement (not supplant) the amount included in the general fund for the loan payment for the calendar year.
However, ifwe need to show expenditures for technology against this grant for FY 98, we have expenditures of$89,987.84 for hardware and software included in the FY 98 financial report for technology in the general fund and expenditures of$III,362.33 in our Fund 710 in which we included proceeds from the technology loan and of which most of these expenditures were purchased from interest which has been earned on the unspent portion of this loan.
We do not feel that we should have to transfer these funds back to the Georgia Department of Education for these lottery funds. These funds were spent on technology for the children of Harris County and were spent according to the rules and regulations we understood as being allowable.
. EXPENDITURESILIABILITIESIDISBURSEMENTS Failure to Utilize Funds for Intended Purpose Financial Statements Material Noncompliance Amount: $54,564.19 Finding Control Number: FS-6721-98-02
An analysis oflease payment activity for fiscal year 1998 identified $115,815.89 in lease payments charged to the 1998 Pre-Kindergarten Lottery Program. Ofthis amount, $61,251.70 was properly chargeable as 1998 grant program expenditures. Additionally, $43,955.09 charged as lease payments was for prepayments on fiscal year 1999 lease activity which were not approved in the 1998 grant award documents. The remaining $10,609.10 charged to the account for lease payments was for the General Fund's portion ofa split funded lease which was improperly charged to the Pre-Kindergarten Lottery Program. (This lease was set up to be paid fifty percent from the General Fund.) The Board's attention is directed to the Official Code of Georgia Annotated Section 50-27-2 (1) which states, in part, as follows:
". . .That net proceeds of lottery games conducted pursuant to this chapter shall be used to support improvements and enhancements for educational purposes and programs and that such net proceeds shall be used to supplement, not supplant, existing resources for educational purposes and programs,..."
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HARRIS COUNTy BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 1998
II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS
EXPENDITURESILIABILITIESIDISBURSEMENTS Failure to Utilize Funds for Intended Purpose Financial Statements Material Noncompliance Amount: $54,564.19 Finding Control Number: FS-6721-98-02
Audit adjustments were made to reflect the $43,955.09 as a prepaid asset in the Pre-Kindergarten Program, and to properly charge the $10,609.10 as an expenditure in the General Fund. The resulting unobligated fund balance of$54,564.19 in 1998 program funds should be returned to the Office of School Readiness.
Management's Response:
The original budget for the Pre-Kindergarten Lottery-Funded Program for FY 98 included $102,837.04 in the line item for rental. This was for payments for the modular classrooms which we had to lease/purchase and maintain for the pre-kindergarten students in our county. This was done at the origination of the prekindergarten program. During this school year, we used the available funds which were budgeted.
We do concur with the finding that we owe $10,609.10 back due to miscoding of a portion of the payments which were made in the pre-kindergarten funds and which should have been in the general fund. We will refund this amount to the Office of School Readiness or would, otherwise, request that this finding be carried for three years and then written off at the end of that period as being settled.
GENERAL FIXED ASSETS Failure to Maintain General Fixed Assets Account Group Reportable Condition - Material Weakness Repeated From Prior Year Finding Control Number: FS-6721-98-03
The Board did not maintain a system-wide General Fixed Assets Account Group within the formal accounting records as required by generally accepted accounting principles. This condition results in the general purpose financial statements ofthe Board being incomplete and not in accordance with generally accepted accounting principles. Appropriate action should be taken by the Board to establish accounting controls and procedures to provide for maintenance of a General Fixed Assets Account Group. These subsidiary records should include an inventory ofland, buildings and equipment owned by the Board and should include, but may not be limited to, date acquired, acquisition cost, estimated replacement cost, location and description. Detailed records should be maintained of all additions and deletions to the General Fixed Assets Account.
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HARRIS COUNTy BOARD OF EDUCATION
SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30. 1998
IT FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS GENERAL FIXED ASSETS Failure to Maintain General Fixed Assets Account Group Reportable Condition - Material Weakness Repeated From Prior Year Finding Control Number: FS-6721-98-03 Management's Response: We concur with the recommendation. However, due to current staffing limitations and budgetary considerations prohibiting the hiring of additional administrative staff, the Board has decided not to pursue the recording of general fixed assets on the financial statements.
III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS
No matters were reported.
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