Harris County Board of Education, Hamilton, Georgia, report on audit of the financial statements for the fiscal year ended June 30, 2001

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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, EXPENDTI1JRES 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, EXPENDITTJRES

AND CHANGES IN FUND BALANCES

22

CAPITAL PROJECTS FUND

G

COMBINING BALANCE SHEET

24

H

COMBINING STATEMENT OF REVENUES, EXPENDITTJRES

AND CHANGES IN FUND BALANCES

26

DEBT SERVICE FUND

I

COMBINING BALANCE SHEET

28

J

COMBINING STATEMENT OF REVENUES, EXPENDITURES

AND CHANGES IN FUND BALANCES

29

SCHEDULES

I SCHEDULE OF EXPENDTI1JRES OF FEDERAL AWARDS

30

2 SCHEDULE OF STATE REVENUE

32

3 SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS

33

HARRIS COUN1Y BOARD OF EDUCATION -TABLE OF CONTENTS-

SECTION I

FINANCIAL

ADDffiONAL FINANCIAL INFORMATION

SCHEDULES

ALLOTMENTS AND EXPENDITURES

GENERAL FUND - QUALITY BASIC EDUCATION PROGRAMS (QBE)

4

BY PROGRAM

5

BY SITE

Page
34 35

SECTION II
COMPLIANCE AND INTERNAL CONTROL REPORTS
REPORT ON COMPLIANCE AND ON INTERNAL CONTROL OVER FINANCIAL REPORTING BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCEWITHGOVERNMENTAUDITINGSTANDARDS
REPORT ON COMPLIANCE WITH REQUIREMENTS APPLICABLE TO EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH 0MB CIRCULAR A-133

SECTION ID 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

w. RUSSELL

HINTON

STATE AUDITOR

(404) 65&2174

DEPARTMENT OF AUDITS AND ACCOUNTS
254 Washington Street, SW., Suite 214 Atlanta, Georgia 30334-8400
July 26, 2002

Honorable Roy E. Barnes, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the Harris County Board of Education
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 ofthe Harris County Board of Education, as of and for the year ended June 30, 2001, as listed in the table of contents. These general-purpose financial statements are the responsibility ofthe Harris County Board ofEducation'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 auditing standards generally accepted in the United States ofAmerica and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General ofthe United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free 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 opm1on.
As described in the notes to the general-purpose financial statements, the Board of Education'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:

2001ARL-13

* The general-purpose financial statements of the Board of Education did not contain a
General Fixed Assets Account Group to account for property and equipment owned by the Board of Education which should be included to conform to generally accepted accounting principles.
* 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 of Education did not recognize as expenditures, in the year ended
June 30, 2001, a portion of salaries and the corresponding employer's cost of related benefits earned for contractual services completed prior to June 30, 2001. Also funds received, subsequent to June 30, 2001, from the Georgia Department of Education for the State's share of these 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, 2000, were improperly recorded in the year ended June 30, 2001. 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 of these 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 of June 30, 2001, and the results of its operations for the year then ended, in conformity with accounting principles generally accepted in the United States of America.
In accordance with Government Auditing Standards, we have also issued our report dated July 26, 2002, on our consideration ofthe Harris County Board ofEducation's internal control over financial reporting and our tests of its compliance with certain provisions oflaws, regulations, contracts and grants. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be read in conjunction with this report in considering the results of our audit.
Our audit was performed for the purpose of forming an opinion on the general-purpose financial statements ofthe Harris County Board ofEducation taken as a whole. The accompanying combining statements (Exhibits E through J) and the financial schedules (Schedules 1 through 5), which includes the Schedule ofExpenditures ofFederal Awards as required by U.S. Office ofManagement and Budget Circular A-133, Audits ofStates, Local Governments, and Non-Profit Organizations, are presented for purposes of additional 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
2001ARL-13

audit of the general-purpose financial statements and in our opinion, except for the effects of the matters referred to in the third paragraph, such information is fairly stated, in all material respects, in relation to the general-purpose financial statements taken as a whole.
A copy ofthis report has been filed as a permanent record in the office ofthe State Auditor and made available to the press ofthe State, as provided for by Official Code ofGeorgia Annotated Section 506-24.
Respectfully submitted,

RWH:gp 2001ARL-13

sell W. Hinton State Auditor

HARRIS COUNTY BOARD OF EDUCATION

HARRIS COUNTY BOARD OF EDUCATION COMBINED BALANCE SHEET
ALL FUND TYPES AND ACCOUNT GROUP JUNE 30, 2001

ASSETS
Cash and Cash Equrvalents
Investments
Accounts Recervable
lnventones Food Donated Commodrt1es Purchased Food
Amount Available in Debt Service Fund
Amount to be Provided m Future Years For Payment of. Bond Debt Caprtal Lease Agreements

GENERAL FUND

GOVERNMENTAL FUND TYPES

SPECIAL

CAPITAL

REVENUE

PROJECTS

FUND

FUND

$

246,751.76 $

340,746 69 $

28,476.06

5,150,859 25

605,633 78

328,265.61

219,249 58

276,899.00

37,937 70 15,724 49

Total Assets

$ 5,725,876 62 $ 613,658 46 $

91100884

LIABILITIES AND FUND EQUITY
LIABILITIES
Accounts Payable Salanes Payable Expired Grant Balances Payable Contracts Payable Retamages Payable Deferred Revenue Capital Lease Agreements General Obligation Bonds Payable
Total L1abllrt1es
FUND EQUITY
Fund Balances Reserved For Continuation of Federal Programs For Debi Service For lnventones Food Donated Commod1t1es Purchased Food For Purpose of Bond Issue For SPLOST Projects For State Capital Outlay Projects Unreserved Undes1gnated
Total Fund Equity

$

90,271.55 $

43,495 31

197,932.11

2,599 53

6,660.04

$ 37,754.12

33,465.00

$

92,871 08 $ 285,841 58 $

33 465 00

$

37,937 70

15,724 49

$

$ 5,633,005 54 $ 5,633,005 54 $

274 154 69 327,816 BB $

59,912 89 792,630 95
25,000 00 877 543 84

Total Liabllrt1es and Fund Equrty

$ 5,7251876 62 $

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

-2-

6131658 46 $

9111008 84

EXHIBIT"A"

DEBT SERVICE
FUND

$

298,817.20

1,109,454.14

24,787.28

ACCOUNT GROUP
GENERAL LONG-TERM
DEBT

TOTALS

(Memorandum On!}'.)

JUNE 30, 2001

JUNE 30, 2000

$

914,791 71 $ 2,347,987 70

6,865,947.17

5,510,032.10

849,201.47

733,482 78

$ 1,433,058 62

37,937.70 15,724.49
1,433,058 62

28,201.56 17,926 61
890,042.92

12,276,941.38 1,047,361 62

12,276,941.38 1,047,361.62

13,389,957.08 1 915 817 47

$ 1,433,058.62 $ 14,757,361 62 $ 23,440,964 16 $ 24,833,448.22

$

133,766 86 $

661,949.21

197,932.11

257,682 72

9,259.57

73,10131

30,803.93

33,465 00

189,509.50

37,75412

3,483.08

$ 1,047,361.62

1,047,361 62

1,915,817.47

13,710,000.00

13,710,000 00

14,280,000 00

$ 14,757,361.62 $ 15,169,539.28 $ 17,412,347 22

$ 1,433,058 62

0 00

$

1,433,058 62

$

$

1,433,058.62

33,061.76 890,042.92

37,937.70 15,724 49 59,912.89 792,630.95

28,201 56 17,926 61 34,300 76 595,498 74 123,181.72

5,932,160 23

5,698,886.93

$ 8,271,424 88 $ 7,421,101 00

$ 1,433,058 62 $ 14,757,361 62 $ 23,440,964 16 $ 24,833,448 22

-3-

HARRIS COUNTY BOARD OF EDUCATION COMBINED STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES
ALL GOVERNMENTAL FUND TYPES
YEAR ENDED JUNE 30, 2001

REVENUES
State Funds Federal Funds Taxes Other Funds
Total Revenues
EXPENDITURES
Current I nstruct1on Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Adm1nistrat1on School Admm1strabon Busmess Admm1stration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support SeMces Food Services Operation Community SeMces Operations
Capital Outlay Debt Service
Pnncipal Interest Paying Agent Fees
Total Expenditures
Excess of Revenues over (under) Expenditures
OTHER FINANCIN~ SOURCES ,usESl
Operating Transfers In Operating Transfers Out
Total Other Financing Sources (Uses)
Excess of Revenues and Other Fmancmg Sources over (under) Expenditures and Other Financing Uses
FUND BALANCE JULY 1
Food Inventory - Net Change m Penod Donated Commod1lles Purchased Food

GENERAL FUND

SPECIAL REVENUE
FUND

$ 15,030,666 12 $
8,998,731.91 562.136 31
$ 24,591,534.34 $

930,200.39 1,924,512 47
836,652 20
3,691,365.06

$ 15,949,704 69 $
524,574.70 350,663 03 744,932 35
415,814 n
1,933,363 07 425,06916
1,662,619 56 1,495,160 37
140,133.53 42,467.68
2,895 73 152,693 70 216,814 97
378,659.89 53,032 39

1,514,933.73
198,151.55 58,941 82 29,595 13 116,694 01
1,097.00
17,000 00 34,10048
22,264 13 1,673,894.18

$ 24,488,599 59 $

$

102,934 75 $

3,666,672.03 24,693 03

$

$

-3 004 46

$

-3 004 46 $

$

99,930 29 $

5,533,075.25

3,004.46
3 004 46
27,697.49 220,001.61
9,736.14 -2,202 12

FUND BALANCE JUNE 30

$

The notes to the general-purpose financial statements are an :ntegral part of this statement

-4-

5,633,005 54 $ ===2=55=,2=3=3=1=-2

EXHIBIT"B"

CAPITAL PROJECTS
FUND

DEBT SERVICE
FUND

TOTALS

(Memorandum Only)

YEAR ENDED

JUNE 30, 2001

JUNE 30, 2000

$

15,771.40

$ 15,976,637 91 $ 15,272,254 27

1,924,512 47

1,776,629 09

578,117.20 $ 1,826,989.09

11,403,838.20

10,726,844.44

50,728.51

53 149.77

1,502,666 79

1,416,557 35

$

64461711 $ 1,880,138 86 $ 30,807,655.37 $ 29,192,285.15

$ 17,464,638 42 $ 15,930,609.10

$

31,163.87

722,726.25 409,604 85 774,527 48 532,508.78 1,934,460.07 425,06916 1,679,619.56 1,529,260.85 140,133 53
64,731 81 1,676,789 91
152,693.70 247,978 84

1,292,356.67 541,765.39 745,979 72 520,835.54
1,470,277.97 268,627.50
1,502,858 49 1,460,238.82
134,506.35 83,048.87 1,655,003.33 120,858.58 971,028 25

489,795 96 $ 24,094.66

570,000.00 763,242.50
3,880 66

1,438,455.85 840,369.55 3,880 66

1,433,733.21 911,227.35 4,831 22

$

545,054 49 $ 1,337,12316 $ 30,037,449 27 $ 29,047,786 36

$

99,562 62 $

543,015 70 $

770,20610 $

144,498 79

$

3,004 46 $

14,371 43

-3,004 46

-14 371 43

$

000 $

000

$

99,562 62 $

543,015 70 $

770,20610 $

144,498.79

777,981.22

890,042 92

7,421.101 00

7,263,117 91

9,736 14 -2,202 12

8,292 48 5,191.82

$

877 543 84 $ 1,433,058 62 $ 8,198,841 12 $ 7,421,101 00

-5-

HARRIS COUNTY BOARD OF EDUCATION COMBINED STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES
BUDGET AND ACTUAL - CNON-GAAP BASIS} GENERAL AND SPECIAL REVENUE FUNDS
YEAR ENDED JUNE 30, 2001

EXHIBIT "C"

GENERAL FUND

ACTUAL

(BUDGET

BUDGET

BASIS)

REVENUES

State Funds Federal Funds Taxes Other Funds

$ 14,705,774.98 $ 15,030,666.12

8,501,473 00 517,000.00

8,998,731.91 562,136 31

Total Revenues

$ 23,724,247 98 $ 24,591,534 34

EXPENDITURES

Current lnstruclton Support Services Pupil Services Improvement of Instructional Services Educational Media Services General AdmImstratIon School Adm1mstrallon Business Adm1nlstrallon Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support SeMces Food Services Operation Community Services Operations
Caprtal Outlay Debt Service

$ 16,819,236.98 $ 15,949,704 69

777,168.53 318,532 00 757,281 00 392,566.00 1,535,392 00 298,721.00 1,767,993 00 1,572,155.00 142,327.00
45,387 00 3,200.00
60,000 00 227,283 00

524,574 70 350,663 03 744,932 35 415,814 77 1,933,363 07 425,06916 1,662,619.56 1,495,160.37 140,133.53
42,467 68 2,895 73
152,693.70 216,814 97 431,692 28

Total Expenditures

$ 24,717,242 51 $ 24,488,599 59

Excess of Revenues over (under) Expenditures

$ -992,994 53 $

102,934 75

OTHER FINANCING SOURCES (USES}

Other Sources Other Uses

$

-3 004 46

Total Other Financing Sources (Uses)

$

-3 004 46

Excess of Revenues and Other Financing Sources

over (under) Expenditures and Other Financing

Uses

$

-992,994 53 $

99,930.29

FUND BALANCE JULY 1, 2000

5,804.275 88

5,533,075 25

Adjustments Food Inventory - Net Change in Penod
Donated Commod1t1es Purchased Food

34,681.08

FUND BALANCE JUNE 30, 2001

s 41845,962 43 $ 516331005.54

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

SPECIAL REVENUE FUND

ACTUAL

(BUDGET

BUDGET

BASIS)

$ 969,469.60 $ 930,200 39

1,962,225 00

1,924,512 47

820,200 00

836,652.20

$ 3,751,894 60 $ 3,691,365.06

$ 1,554,411.59 $ 1,514,933 73

197,856.00 82,536 14 29,635.00
129,535.00

198,151.55 58,941.82 29,595.13
116,694 01 1,097.00

21,500.00 47,451.00

17,000 00 34,100 48

25,022.00 1,676,148.00

22,26413 1,673,894 18

$ 3,764,094 73 $ 3,666,672.03

$ -12,200 13 $

24,693 03

$

3,004.46

$

3,004 46

s -12,200 13 $
219,126 95 23,608 61

27,697 49 220,001 61
9,73614 -2,202 12

s $ 230,535 43

2551233 12

HARRIS COUNTY BOARD OF EDUCATION

EXHIBIT "D"

NOTES TO TIIE GENERAL-PURPOSE FINANCIAL STATEMENTS

JUNE 30, 2001

Note 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
REPORTING ENTITY
The Harris County Board ofEducation (School District) was established under the laws ofthe State of Georgia and operates under the guidance of a school board elected by the voters and a Superintendent appointed by the Board. The School District 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.
FUND ACCOUNTING
The School District uses funds and an account group 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. An account group is a financial rep"orting 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 of purchase. A General Fixed Assets Account Group is not presently maintained by the School District. 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 of these 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 account for all State, Federal, Taxes and Other funds under control of the School District, 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 School District's educational activities. Governmental Fund Types include:
GENERAL FUND - the fund used to account for all financial resources of the School District 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.

-7-

HARRIS COUNTY BOARD OF EDUCATION

EXHIBIT "D"

NOTES TO THE GENERAL-PURPOSE FINANCIAL STATEMENTS

JUNE 30, 2001

Note 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
SPECIAL REVENUE FUND - the fund used to account for the proceeds of specific 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 of Education and from the Federal government to accomplish specific educational objectives.
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 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 ofthese 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 ofaccounting under which:
Revenues are recognized when susceptible to accrual (i.e., when they become both measurable and available). "Measurable" means the amount of the transaction can be determined and "available" means collectible within the current period or soon enough thereafter to be used to pay liabilities of the current period. The School District considers receivables collected within sixty days after yearend to be available and therefore susceptible to accrual. Nonexchange transactions, in which the School District gives (or receives) value without directly receiving (or giving) equal value in exchange, include property taxes, local option sales taxes, intergovernmental grants and donations. Revenue for property taxes is recognized in the fiscal year for which the taxes are levied. Revenue from sales taxes is recognized in the fiscal year the resources are received or susceptible to accrual. Revenue from grants and donations is recognized in the fiscal year in which all eligibility requirements have been satisfied.
-8-

HARRIS COUNTY BOARD OF EDUCATION

EXHIBIT "D"

NOTES TO TIIE GENERAL-PURPOSE FINANCIAL STATEMENTS

mNE 30. 2001

Note 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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 2001, a substantial number ofpersonnel ofthe School District were employed for a one hundred and ninety day period beginning in August 2000 and ending in early June 2001. Personnel contracts for this employment period specify that compensation be paid in twelve equal monthly payments beginning in September 2000 and ending in August 2001. State grants to fund the State's share of these contracts were disbursed from the Georgia Department of Education to the School District in the same twelve months. As of June 30, 2001, compensation under these employment contracts had been earned, but two of the twelve monthly payments, due for July and August 2001, had not been made. Payments for these two months were made and recorded as expenditures by the School District subsequent to June 30, 2001. Also, the State's portion ofthe compensation paid in July and August 2001 was received and recorded as revenue in the fiscal year subsequent to June 30, 2001. Conversely, the similar expenditures and related revenues for contractual services completed prior to June 30, 2000, were recorded in the year ended June 30, 2001. 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 ofEducation's budget is a complete financial plan for the School District'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 governmental funds is prepared by fund, function and object. The legal level of budget 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 School District'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 of general 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(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.
CASH AND CASH EQUIVALENTS
COMPOSITION OF DEPOSITS Cash and cash equivalents consist ofcash on hand, demand deposits and short-term investments with original maturities of three months or less from the date of acquisition in authorized financial
-9-

HARRIS COUNfY BOARD OF EDUCATION

EXHIBIT "D"

NOTES TO THE GENERAL-PURPOSE FINANCIAL STATEMENTS

JUNE 30, 2001

Note 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
institutions. Georgia Laws OCGA 45-8-14 authorize the School District to deposit its funds in one or more solvent banks or insured Federal savings and loan associations.
INVESTMENTS
COMPOSITION OF INVESTMENTS Investments made by the School District in nonparticipating interest-earning contracts (such as certificates ofdeposit) and repurchase agreements are reported at cost. Participating interest-earning contracts and money market investments with a maturity at purchase ofone 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 ofGeorgia 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 ofreturn 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 Local Government Investment Pool administered by the State of Georgia, Office of Treasury and Fiscal Services,
(7) Repurchase agreements, and
(8) Obligations of other political subdivisions of the 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.

HARRIS COUNTY BOARD OF EDUCATION

EXHIBIT "D"

NOTES TO THE GENERAL-PURPOSE FINANCIAL STATEMENTS

JUNE 30. 2001

Note 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PROPERTY TAXES

The Harris County Board of Commissioners fixed the property tax levy for the 2000 tax year (calendar year) on October 24, 2000 (levy date). Taxes were due on December 31, 2000 (lien date). Taxes collected within the current fiscal year or within 60 days after year-end are reported as revenue in fiscal year 2001. The Harris County Tax Commissioner bills and collects the property taxes for the School District, withholds 2.5% oftaxes collected as a fee for tax collection and remits the balance of taxes collected to the School District. Property tax revenues during the fiscal year ended June 30, 2001 for maintenance and operations amounted to $8,661,285.60 and for school bonds amounted to $703,397.75.

Tax millage rates levied for the 2000 tax year (calendar year) for the Harris County Board of Education were as follows (a mill equals $1 per thousand dollars of assessed value):

School Operations School Bonds

15.40 mills -1..J. mills

16.56 mills

SALES TAXES

Special Pwpose Local Option Sales Tax is to be used for capital outlay for educational pwposes and debt service. Special Purpose Local Option Sales Tax revenue during the fiscal year amounted to $1,671,365.73 and was recorded in the Capital Projects and Debt Service Funds. The State will terminate collection of this tax once an additional $2,189,890.08 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.

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

- 11 -

HARRIS COUNTY BOARD OF EDUCATION

EXHIBIT "D"

NOTES TO TIIE GENERAL-PURPOSE FINANCIAL STATEMENTS

JUNE 30. 200 I

Note 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
relates only to vesting accumulating leave in which payment is probable and can be reasonably estimated. No liability has been recorded in the individual funds for the current portion of this obligation as this amount is deemed immaterial to the general-purpose financial statements.
Additionally, the dollar value of accumulated compensated absences at June 30, which will be payable from future resources has not been recorded in the General Long-Term Debt Account Group as this liability is also deemed to be immaterial to the fair presentation ofthese financial statements.
GENERAL OBLIGATION BONDS
The School District issues general obligation bonds to provide funds for the acquisition and construction ofmajor capital facilities. Bond premiums and discounts, as well as issuance costs, are recognized in the financial statements during the year bonds are issued. In addition, general obligation bonds have been issued to refund existing general obligation bonds. General obligation bonds are direct obligations and pledge the full faith and credit ofthe government. The outstanding amount of these bonds is recorded in the General Long-Term Debt Account Group.
INTERFUND TRANSACTIONS
The School District has the following types of interfund transactions:
Reimbursements ofexpenditures initially made from a fund that are properly applicable to another fund are recorded as expenditures in the reimbursing fund and as reductions of expenditures in the fund that is reimbursed.
Operating transfers are recorded for all interfund transactions other than reimbursements.
MEMORANDUM ONLY - TOTAL COLUMNS
Total columns on the general-purpose financial statements are captioned "Memorandum Only" to indicate that they are presented only to facilitate financial analysis. Data in these columns do not present financial position or results ofoperations in conformity with generally accepted accounting principles. Neither are such data comparable to a consolidation. Interfund eliminations have not been made in the aggregation of this data.
Note 2: DEPOSITS AND INVESTMENTS
COLLATERALIZATION OF DEPOSITS Official Code of Georgia Annotated (OCGA) Section 45-8-12 provides that there shall not be on deposit at any time in any depository for a time longer than ten days a sum ofmoney 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 I IO percent ofthe public funds being secured after the deduction ofthe amount ofdeposit insurance.
- 12 -

HARRIS COUNTY BOARD OF EDUCATION

EXHIBIT "D"

NOTES TO THE GENERAL-PURPOSE FINANCIAL STATEMENTS

JUNE 30. 2001

Note 2: DEPOSITS AND INVESTMENTS
If a depository elects the pooled method (OCGA 45-8-13.1) the aggregate ofthe market value ofthe securities pledged to secure a pool ofpublic funds shall be not less than 110 percent ofthe daily pool balance. OCGA Section 45-8-11 (b) provides an officer holding public funds may, in his discretion, waive the requirement for security in the case ofoperating funds placed in demand deposit checking accounts.
Acceptable security for deposits consists of any one of or any combination of the following:
(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 ofdevelopment 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 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 At June 30, 2001, the bank balances were $2,184,852.27. The amounts ofthe 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 School District or by the School District's agent in the School District's name.
Category 2 - Cash collateralized with securities held by the pledging financial institution's trust department or agent in the School District's name.

- 13 -

HARRIS COUNTY BOARD OF EDUCATION

EXHIBIT "D"

NOTES TO THE GENERAL-PURPOSE FINANCIAL STATEMENTS

JUNE 30. 2001

Note 2: DEPOSITS AND INVESTMENTS

Category 3 - Uncollateralized deposits. (This includes any bank balance that is collateralized with securities held by the pledging financial institution, or by its trust department or agent but not in the School District's name.)

The School District's deposits are classified by risk category at June 30, 2001, as follows:

Risk Category

Bank Balance

1

$ 498,817.20

2

1,686,035.07

3

0.00

Total

$ 2,184,852.27

CATEGORIZATION OF INVESTMENTS At June 30, 2001, the carrying value of the School District's total investments was $6,865,947.17 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 ofGeorgia, Office ofTreasury and Fiscal Services which are not required to be categorizecfsince the School District 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 ofthe Primary Liquidity Portfolio is as follows:

The Primary Liquidity Portfolio com,ists 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 AAArn rated money market funds. The pool is not registered with the SEC as an investment company but does operate Georgia Fund 1 in a manner consistent with Rule 2a-7 ofthe Investment Company Act of 1940 and is considered to be a Rule 2a7 like pool. 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 values 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 ofthe shares. Participation in the pool is voluntary and deposits consist of funds from local governments; operating and trust funds of Georgia's state agencies, colleges 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

- 14 -

HARRIS COUNTY BOARD OF EDUCATION

EXHIBIT "D"

NOTES TO THE GENERAL-PURPOSE FINANCIAL STATEMENTS

JUNE 30. 2001

Note 2: DEPOSITS AND INVESTMENTS

agreements. The weighted average maturity of Georgia Fund 1 may not exceed 60 days. The weighted average maturity for Georgia Fund 1 on June 30, 2001, was 39 days. The average investment duration for Fund 6 on June 30, 2001, was 6 months.

Note 3: NON-MONETARY TRANSACTIONS

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

Note 4: RISK MANAGEMENT

The School District is exposed to various risks of loss related to torts; theft of, damage to, and destruction ofassets; errors or omissions;job related illness or injuries to employees; natural disaster and unemployment compensation.

The School District has obtained commercial insurance for risk ofloss associated with torts, assets, errors or omissions and job related illness or injuries to employees. 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 elected to self-insure for all losses related to natural disaster. The School District has not experienced any losses related to this risk in the past three years.

The School District is self-insured With regard to unemployment compensation claims. The School District 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:

Beginning of Year Liability

Claims and Changes in Estimates

Claims Paid

End of Year Liabthty

2000 2001

$

0.00 $

6.212.00 $

6.212.00 $

0.00

$

0.00 $

0.00 $

0.00 $

0.00

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

Position Covered
Superintendent All Other Employees

Amount
$ 50,000.00 $ 10,000.00

- 15 -

HARRIS COUNTY BOARD OF EDUCATION

EXHIBIT "D"

NOTES TO THE GENERAL-PURPOSE FINANCIAL STATEMENTS

JUNE 30. 2001

Note 5: GENERAL LONG-TERM DEBT

CAPITAL LEASES The Harris County Board ofEducation 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 of the date of their inception.

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

Purpose

Interest Rates

Amount

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

3.75%- 5.20% 3.70%- 5.25% 3.20% - 6.25%

$ 4,740,000.00 6,100,000.00 2.870.000.00

$13.710.000.00

The changes in General Long-Term Debt during the fiscal year ended June 30, 2001, were as follows:

Capital Leases

General Obligation
Bonds

Total

Balance July 1, 2000

$ 1,915,817.47 $14,280,000.00 $16,195,817.47

Deductions Debt Retired

868,455.85

570,000.00 1,438,455.85

Balance June 30, 2001

$ 1,047,361.62 $13.710.000.00 $14,757,361.62

At June 30, 2001, 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, 2001

Note 5: GENERAL LONG-TERM DEBT

Fiscal Year Ended June 30

Capital Leases

General Obligation
Bonds

Total Debt

2002 2003 2004 2005 2006 2007 - 2011 2012 - 2016

$ 677,184.25 $ 1,336,925.00 $ 2,014,109.25 427,959.93 1,335,278.00 1,763,237.93 1,336,550.00 1,336,550.00 1,336,138.00 1,336,138.00 1,341,593.00 1,341,593.00 6,741,091.00 6,741,091.00 6.883.500.00 6,883,500.00

Total Principal and Interest $1,105,144.18 $20.311,075.00 $21,416,219.18

Deduct: Imputed Interest

57,782.56

Net Present Value of Future Minimum Lease Payments $1,047,361.62

Note 6: ON-BEHALF PAYMENTS

The School District has recognized revenues and expenditures in the amount of $359,281.67 for health insurance and retirement contributions paid on the School District's behalf by the following State Agencies.

Georgia Department of Education Paid to the Georgia Department of Community Health For Health Insurance of Non-Certified Personnel In the amount of $269,725.67

Office of Treasury and Fiscal Services Paid to the Public School Employees Retirement System For Public School Employees Retirement (PSERS) Employer's Cost In the amount of $89,556.00

Note 7: 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 School District believes that such disallowances, if any, will be immaterial to its overall financial position.

- 17 -

HARRIS COUNTY BOARD OF EDUCATION

EXHIBIT "D"

NOTES TO THE GENERAL-PURPOSE FINANCIAL STATEMENTS

JUNE 30. 2001

Note 7: CONTINGENT LIABILITIES
The School District is a defendant in various legal proceedings pertaining to matters incidental to the performance ofroutine School District operations. The ultimate disposition ofthese proceedings is not presently determinable, but is not believed to be material to the general-purpose financial statements.
Note 8: SUBSEQUENT EVENTS
In the subsequent fiscal year, voters ofthe School District voted in favor of a Special Purpose Local Option Sales Tax referendum for educational purposes. The imposition of the tax by the voters, as stated on the Official Ballot of Harris County and applicable to the Harris County Board of Education is as follows:
"Shall a special one percent sales and use tax be imposed in Harris County for a period oftime not to exceed 20 calendar quarters, beginning immediately upon expiration ofthe one percent sales and use tax for educational purposes which was approved by the voters ofHarris County in June, 1997, and for the raising of not more than $8,500,000.00 for the purpose of funding (i) the repayment of principal and interest on the School District's outstanding general obligation bonds coming due December 1, 2002, thrpugh and including December 1, 2007, the maximum amount ofsuch principal and interest to be repaid not to exceed $4,250,000.00, and (ii) the acquisition, construction, furnishing and equipping of additional classrooms at Harris County High School, Pine Ridge Elementary School, Park Elementary School and New Mountain Hill Elementary School, and the costs of renovating and modifying the existing gymnasiums at Harris County Carver Middle School, Park Elementary School, New Mountain Hill Elementary School and Pine Ridge Elementary School, including the acquisition of all necessary property, the acquisition ofproperty for future school sites and the costs ofacquiring necessary technology and other capital improvements at all schools, the maximum costs of such projects to be paid from sales and use tax proceeds not to exceed $4,250,000.00, as described in the Notice of Election..."
Note 9: ACCUMULATED EMPLOYEES' LEAVE
The School District's administrative staffand 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, ifthis is not possible, up to 20 days of accumulated leave may be paid to the employee. See Note 1 - Compensated Absences

- 18 -

HARRIS COUNTY BOARD OF EDUCATION

EXHIBIT "D"

NOTES TO THE GENERAL-PURPOSE FINANCIAL STATEMENTS

JUNE 30, 2001

Note 10: RETIREMENT PLANS

TEACHERS RETIREMENT SYSTEM OF GEORGIA (TRS)

TRS PLAN DESCRIPTION Substantially all teachers, administrative and clerical personnel employed by local school districts are covered by the Teachers Retirement System ofGeorgia (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.

TRS CONTRIBUTIONS REQUIRED AND MADE Employees ofthe School District who are covered by TRS are required by State statute to contribute 5% of their gross earnings to TRS. The School District makes monthly employer contributions to TRS at rates adopted by the TRS Board of Trustees in accordance with State statute and as advised by their independent actuary. The required employer contribution rate is 11.29% and employer contributions for the current fiscal year and the preceding two fiscal years are as follows:

Fiscal Year

Percentage Contributed

Required Contribution

2001 2000 1999

100% 100% 100%

$ 1,744,682.77 $ 1,624,834.28 $ 1,573,888.83

- 19 -

HARRIS COUNTY BOARD OF EDUCATION COMBINING BALANCE SHEET SPECI.A:L REVENUE FUND JUNE 30, 2001

ASSETS
Cash and Cash Equivalents
Accounts Receivable
Inventories Food Donated Commodities Purchased Food

SCHOOL FOOD
SERVICES FUND

LOTTERY PROGRAMS

$

284,997.62 $

55,749.07

3,809.28

37,937.70 15 724.49

Total Assets

$

342,469.09 $ ===--55='7=4=9=.0=7

LIABILITIES AND FUND EQUITY
LIABILITIES
Cash Overdraft Accounts Payable Salaries Payable Expired Grant Balances Payable Deferred Revenue
Total Liabilities
FUND EQUITY
Fund Balances Reserved For Continuation of Federal Programs For Inventories Food Donated Commodities Purchased Food Unreserved Undes1gnated
Total Fund Equity
Total Liabilities and Fund Equity
See notes to the general-purpose financial statements.
- 20 -

$

6,968 70 $

9,776.13

72,159.90

45,858.68

114.26

8107.37

$

87,235.97 $

55,749.07

$

37,937.70

15,724 49

201,570 93 $

0.00

$

255,233 12 $

000

$

342,469 09 $===5=5=,7=4=9=.0=7

EXHIBIT "E"

FEDERAL PROGRAMS

TOTALS

JUNE 30, 2001

JUNE 301 2000

$

340,746.69 $

378,215 46

$

215,440.30

219,249.58

211,875.88

37,937.70 15,724 49

28,201.56 17,926.61

$

215,440.30 $

613,658.46 $-=====63=6=,2=1-=9=.5=1

$

72,583.76 $

72,583.76

26,750.48

43,495.31 $

94,022.62

79,913.53

197,932.11

257,682.72

6,545.78

6,660.04

61,029.48

29,646.75

37,754.12

3,483.08

$

215,440.30 $

358,425.34 $

416,217.90

$

33,061.76

$

37,937.70

15,724.49

28,201.56 17,926.61

$

0.00

201,570.93

140,811.68

$

0.00 $

255,233.12 $

220,001.61

$

215,440.30 $

613,658.46 $=-===63=6=,2=1=9-=5=1

- 21 -

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -- - -- --
HARRIS COUNTY BOARD OF EDUCATION COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES
SPECIAL REVENUE FUND YEAR ENDED JUNE 30, 2001

REVENUES
State Funds Federal Funds Other Funds
Total Revenues
EXPENDITURES
Current Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Maintenance and Operation of Plant Student Transportation Services Other Support Services Food Services Operation
Debt Service Principal Interest
Total Expenditures
Excess of Revenues over (under) Expenditures
OTHER FINANCING SOURCES
Operating Transfers In
Excess of Revenues and Other Financing Sources over (under) Expenditures
FUND BALANCE JULY 1
Food Inventory - Net Change in Penod Donated Commodities Purchased Food
FUND BALANCE JUNE 30 ,
See notes to the general-purpose financial statements. - 22 -

SCHOOL FOOD
SERVICES FUND

LOTTERY PROGRAMS

$

117,124.00 $

780,877.23

836,652.20

$ 1,734,653.43 $

813,076.39 813,076.39

$

743,789.89

48,652.92

$ 1,673,894.18

17,000.00 3,633.58

$ 1,673,894 18 $

$

60,759.25 $

813,076.39 0.00

$

60,759.25 $

0.00

186,939.85

0.00

9,736.14 -2,202.12

$

255,233.12 $====-0=.0;,,;.0

EXHIBIT "F"

FEDERAL
PROGRAMS

TOTALS

YEAR ENDED

JUNE 30, 2001

JUNE 30, 2000

$

930,200.39 $ 1,069,077.24

$ 1,143,635.24

1,924,512.47

1,736,755.09

836,652.20

811,537.90

$ 1,143,635.24 $ 3,691,365.06 $ 3,617,370.23

$

771,143.84 $ 1,514,933.73 $ 1,492,460.94

149,498.63 58,941.82 29,595.13 116,694.01
1,097.00
30,466.90 22,264.13

198,151.55 58,941.82 29,595.13 116,694.01
1,097.00 17,000.00 34,100 48 22,264.13 1,673,894.18

132,805.66 52,687.58 22,238.50 100,919.53
4,888.50 - 21,905.55 20,377.12 29,424.32 1,651,936.30

115,959.51 16,644.34

$ 1,179,70146 $ 3,666,672.03 $ 3,662,247.85

$

-36,066.22 $

24,693.03 $

-44,877.62

3 004 46

3,004.46

14 371.43

$

-33,061.76 $

27,697.49 $

-30,506.19

33,061.76

220,001.61

237,023.50

9,736.14 -2,202 12

8,292.48 5,191.82

$

0.00 $

255,233.12 $ =-=22=0=,0=0=1_.6_1

- 23 -

HARRIS COUNTY BOARD OF EDUCATION COMBINING BALANCE SHEET CAPITAL PROJECTS FUND JUNE 30, 2001

ASSETS Cash and Cash Equivalents Investments Accounts Receivable

REGULAR

BOND PROCEEDS

GEORGIA STATE FINANCING AND
INVESTMENT COMMISSION

$

25,000.00

$

11,500.00

$

361,124 92

Total Assets

$

25,000.00 $

361,124 92 $....,,,,,.,._,.....,11_._so_o_o=o

LIABILITIES AND FUND EQUITY
LIABILITIES
Cash Overdraft Contracts Payable Retamages Payable
Total Liab1ht1es
FUND EQUITY
Fund Balances Reserved For Purposes of Bond Issue For SPLOST Projects For State Capital Outlay Projects Unreserved Undes1gnated
Total Fund Equity

$

301,212 03

$

$

301,212.03 $

11,500 00 11,500 00

$

59,912 89

$

25,000 00

000 $

0.00

$

25,000 00 $

59,912 89 $

000

Total L1ab1lrt1es and Fund Equity

$

25,000 00 $

361,124.92 $===-=1=15=00_,_0,.,.0

See notes to the general-purpose financial statements -24-

EXHIBIT"G"

SPECIAL PURPOSE LOCAL OPTION SALESTAA

$

308,95949

244,508.86

261,127 60 $

LOTTERY PROJECT

TOTALS

JUNE 30, 2001

JUNE 30, 2000

$

345,459 49 $

682,963.77

605,633.78

405,74619

15 771 40

276,899 00

281,03012

$

814 595 95 $

15 771 40 $

1,227,992.27 $

1,369,740.08

$ $ _ _ _2_1...,_,96_5_0__0_

$

21,965.00 $

15,771.40 $ 1577140 $

316,98343 $ 33 465 00

371,445.43 30,803 93
189,509 50

350 448 43 $ _ _ _59_1..,.7. ~5...8......8....._6

$

792,630 95

000 $

$

792,630.95 $

$
000 000 $

59,912.89 $ 792,630.95
25,000 00 877,54384 $

34,30076 595,498 74 123,181 72
25,000 00
777 981.22

$

814,595 95 $

1577140 $

1,227,992 27 $

1,369,740 08

- 25-

HARRIS COUNTY BOARD OF EDUCATION COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES
CAPITAL PROJECTS FUND YEAR ENDED JUNE 30. 2001

REVENUES
State Funds Taxes Other Funds
Total Revenues
EXPENDITURES
Capital Outlay Professional and Technical Services Land and Land Improvements Building and Building Improvements Equipment
Debt Service Pnncipal Interest
Total Expenditures
Excess of Revenues over (under) Expenditures
OTHER FINANCING SOURCES (USES)
Operating Transfers In Operating Transfers Out
Total Other Financing Sources (Uses)
Excess of Revenues and Other Financing Sources over (under) Expenditures and Other Financing Uses
FUND BALANCE JULY 1

REGULAR

BOND PROCEEDS

GEORGIA STATE FINANCING AND
INVESTMENT COMMISSION

$

000 $

25,61213 $

0 00

$

000 $

25,612 13 $

000

$

0.00 $

0.00 $

0.00

$

000 $

0 00 $

000

$

000 $

25,612 13 $

0 00

$

0.00 $

25,61213 $

000

25,000 00

34 300 76

000

FUND BALANCE JUNE 30

$

25,000 00 $

59 912.89 $-=------0.0.0.,.

See notes to the general-purpose financial statements

- 26-

EXHIBIT"H"

SPECIAL PURPOSE LOCAL OPTION SALES TAX

LOTTERY PROJECT

TOTALS

YEAR ENDED

JUNE 30, 2001

JUNE 30, 2000

$

$

578,117.20

25 116.38

$

603,233.58 $

15,771 40 $ 15 771.40 $

15,771.40 $ 578,117.20
50,728 51
644 61711 $

193,458.10 1,020,176 98
60,330.59
1,273,965 67

$

15,392.47 $

489,795.96 24 094 66

$

529,283 09 $

$

73 95049 $

15,771 40 $
15 771 40 $ 000 $

$ 31,163.87
489,795.96 24,094 66
545,054 49 $ 99,562 62 $

32,533.98 9,300 00
684,482 49 51,985 00
489,795 96 47 736.96
1,315,834 39
-41 868 72

$

123,181 72

$

123,181 72 $

913,992.90

$

-123,181 72

-123,181.72

-913,992 90

$

123,181.72 $

-123,181.72 $

000 $

0 00

$

197,132.21 $

-123,181 72 $

99,562.62 $

-41,868 72

595,498 74

123.181 72

777,981 22

819,849 94

$

0 00 $

877,543.84 $...,._=1_11,1.9_8_1.,..2...,2

- 27 -

HARRIS COUNTY BOARD OF EDUCATION COMBINING BALANCE SHEET DEBT SERVICE FUND JUNE 30. 2001

EXHIBIT"!"

ASSETS Cash and Cash Equivalents Investments Accounts Receivable
Total Assets
FUND EQUITY Fund Balances
Reserved For Debt Service
Unreserved Undes19nated
Total Fund Equity

PROPERTY TAXES FOR BOND DEBT

SPECIAL PURPOSE LOCAL OPTION SALES TAX

TOTALS JUNE 30, 2001 JUNE 30, 2000

$ 298,817 20 $

0.00 $ 298,817 20 $ 866,853 55

1,109,454.14

1,109,454.14

24,787 28

24,787.28

23,189 37

$ 1.433,058 62 $ -====------0=00= $ 1.433,058.62 $

$ 1,433,058.62

$

0.00 $ ______0_0_=-0

1,433,058.62 $ 0 00

890,042.92 0 00

$ 1.433,058 62 $-===---=-o.o..=o $ 1,433,058 62 $ 890,042 92

See notes to the general-purpose financial statements

- 28-

HARRIS COUNTY BOARD OF EDUCATION
COMBINING STATEMENT OF REVENUES. EXPENDITURES AND CHANGES IN FUND BALANCES
DEBT SERVICE FUND YEAR ENDED JUNE 30, 2001

EXHIBIT "J"

REVENUES
Taxes Other Funds
Total Revenues
EXPENDITURES
Debt Service Pnnapal Interest Paying Agent Fees
Total Expenditures
Excess of Revenues over (under) Expenditures
FUND BALANCE JULY 1

PROPERTY TAXES FOR BOND DEBT

SPECIAL PURPOSE LOCAL OPTION SALES TAX

TOTALS YEAR ENDED JUNE 30, 2001 JUNE 30, 2000

$ 733,740 56 $ 1,093,248 53 $ 1,826,989 09 $ 1,534,942 39

53,149 77

53 149 77

33,833 11

$ 786,890 33 $ 1,093,248 53 $ 1,880,138 86 $ 1,568,775 50

$ $ 239,993.97
3,880 66

570,000 00 $ 523,248 53

570,000 00 $ 763,242 50
3,880 66

540,000.00 792,182.50
4,831 22

$ 243,874 63 $ 1,093,248 53 $ 1,337,123 16 $ 1,337,013 72

$ 543,015 70 $

000 $

543,015.70 $

231,761.78

890,042 92

0 00

890,042.92

658,281 14

FUND BALANCE JUNE 30

$ 1,433.058 62 $ =====-0=00= $ 1,433,058 62 $

890,042 92

See notes to the general-purpose financial statements.

- 29 -

HARRIS COUNTY BOARD OF EDUCATION SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
YEAR ENDED JUNE 30, 2001

SCHEDULE "1

FUNDING AGENCY PROGRAM/GRANT

CFDA NUMBER

PASSTHROUGH
ENTITY ID
NUMBER

FEDERAL REVENUE IN PERIOD

EXPENDITURES IN PERIOD

AgncuHure, U S Department of Child Nutnt1on Cluster Pass-Through From Georgia Department of Educabon Food and Nutrition Program Food Services School Breakfast Program National School Lunch Program

10.553 10.555

NIA $ 148,361.78

NIA

523,177 82 $

(2) 1,571,777.99 (3)

Total Child Nutnt1on Cluster

$ 671,539 60 $

1,571,777.99

Other Programs

Pass-Through From Georgia Department of Educabon

Food and Nutnbon Program

Food D1stnbut1on Program (1)

10 550

NIA

Fresh Produce Program (1)

10 550

NIA

Pass-Through From Office of School Readiness

Food and Nutrlbon Program

Child and AduH Care Food Program

10.558

NIA

88,11619 14,000.00
7,221 44

88,11619 14,000 00
(2)

Total U.S. Department of AgncuHure

$ 780,877.23 $

1,673,894 18

Educabon, U. S Department of Speaal Education Cluster Pass-Through From Georgia Department of Educabon lnd1v1duals with Disabill!les Education Act Part B - Special Education Flow Through Preschool

. 84.027
. 84.173

NIA $ 309,824.10 $

NIA

38,289 00

309,824 10 38,299.56 (3)

Total Special Educabon Cluster

$ 348,113.10 $

348,123.66

Other Programs

Pass-Through From Georgia Department of Education

Elementary and Secondary Education Act Trtlel Grants to Local Educabonal Agencies

. 84 010

NIA

Tille II

Eisenhower Professional Development

84 281

NIA

Title VI

Innovative Education Program Strategies

84.298

NIA

Class Size Reduction

84.340

NIA

Goals 2000

State and Local Education Systemic Improvement

Grants

84.276

NIA

Technology literacy Challenge Fund Grants

84.318

NIA

Vocational Educatton - Basic Grants to States

High School Program

Basic Grant

84.048

NIA

474,000.00 17,632.53 22,916 35 64,95544
79,867.80 91,278 92
44,871 10

476,747 BB (3) 17,632 53 22,916.35 65,201.46 (3)
89,820.54 114,387 94 (3)
44 87110

Total U. S Department of Education

$ 1, 143,635 24 $

1,179,70146

Total Federal Finanaal Assistance
NIA = Not Available

30

$ 1,924,512.47 $

2,853,595 64

HARRIS COUNTY BOARD OF EDUCATION SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
YEAR ENDED JUNE 30. 2001

SCHEDULE "1"

Notes to the Schedule of Expenditures of Federal Awards
(1) The amounts shown for the Food D1stnbut1on and Fresh Produce Programs represents the Federally assigned value of nonmonetary assistance for donated commod1t1es recerved and/or consumed by the system dunng 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 2001 National School Lunch Program.
(3) Expenditures for this program include State, and/or Other Funds Expenditures are not maintained by fund source.
Major Programs are 1dent1fied by an astensk (*) in front of the CFDA number
The School Dtstnct did not provide Federal Assistance to any Subreap1ent
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 basis of accounting used in the presentation of the general-purpose finanaal statements.

See notes to the general-purpose finanaal statements

- 31 -

---------------------------
HARRIS COUNTY BOARD OF EDUCATION SCHEDULE OF STATE REVENUE YEAR ENDED JUNE 30. 2001

SCHEDULE "2"

AGENCY/FUNDING
GRANTS Education, Georgia Department of Quality Basic Education Kindergarten Kindergarten Early Intervention Primary Grades 1-3 Pnmary Grades Early Intervention Upper Elementary Grades 4-5 Middle School 6-8 High School Grades 9-12 Vocational Lab 9-12 Speaal Educabon Programs Category I Category II Category Ill Category IV CategoryV Remedial Education Program Altemabve Educallon Program Media Center Programs Staff Development Programs lnd1red Cost Pupil Transportallon Regular Bus Replacement Vocational Supervisors Mid-term AdJustment Pnnapal Supplements Grants for School Nurses Educallonal Equalizallon Funding Grant Food Services Vocational Educallon Other State Programs At-Risk Summer School Program Health Insurance lnnovabve Programs Mentor Teacher Program Preschool Handicapped Program Remedial Summer School Program Lottery Programs Ass1st1ve Technology Computers in the Classroom Exceptional Growth-Capital Outlay
Office of School Readiness Pre-Kindergarten Program
Office of Treasury and Fiscal Services Public School Employees Retirement
CONTRACTS Educallon, Georgia Department of Reading First ProJed Georgia's Reading Challenge

GOVERNMENTAL FUND TYPES

SPECIAL

CAPITAL

GENERAL

REVENUE

PROJECTS

FUND

FUND

FUND

TOTAL

$ 808,084.00 31,474 00
2,426,510 00 115,027 00
1,254,185.00 2,064,838.00 1,102,8n.oo
679,389.00

$ 808,084 00 31,474.00
2,426,510.00 115,027 00
1,254,185 00 2,064,838.00 1,702,877 00
679,389 00

32,416 00 83,689 00 667,108 00 71,560 00 305,690.00 143,489 00 160,642 00 352,647 00 90,917.00 2,193,336.00

32,416.00 83,689.00 667,108 00 71,560 00 305,690 00 143,489 00 160,642.00 352,647.00 90,917 00 2,193,336.00

528,227 00 174,ooo oo 28,686 00 87,037 00
16,348 00 95,869 00 368,428.00
$ 117,12400 35,053.89

528,227.00 174,000 00 28,686 00 87,037.00
16,348 00 95,869 00 368,428.00 117,124 00 35,053.89

5,268 78 269,725.67
5,000.00 1,956.00 49,240.00 5,396.20

5,268 78 269,725 67
5,00000 1,956 00 49,240 00 5,396 20

7,757 74 84,634.60
$ 15,771 40

7,757 74 84,634.60 15,771 40

720,684.05

720,684 05

89,556 00

89,556.00

36,982.00 50,014 58

36,982 00 50,014 58

$ 15,030,666 12 $ 930,200 39 $ 15 771 40 $ 15,976,637 91

See notes to the general-purpose finanaal statements

- 32 -

HARRIS COUNTY BOARD OF EDUCATION SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS
YEAR ENDED JUNE 30. 2001

SCHEDULE "3"

PROJECT
Repayment of pnndpal and interest on the School District's outstanding general obhgabon bonds coming due December 1, 1997, through and including December 1, 2003, the maximum amount of such pnncipal and interest to be repaid not to exceed $4,150,000.00
Acqu1srllon, constructron, fum1sh1ng and equipping of an audrtonum at the new Hams County High School and acqu1slllon, constructron, furnishing and equipping of addlllonal classrooms at the eX1sting high school as rt Is converted to a middle school and the acquinng 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 COSTS(2)

AMOUNT EXPENDED IN CURRENT
YEAR (3)

AMOUNT EXPENDED
IN PRIOR YEARS(3)

PROJECT STATUS

$ 4,150,000 00 $ 4,150,000.00 $ 1,093,248.53 $ 1,570,916.52 Ongoing

4,150,000.00 12,482,792 49

529,283.09

11,9531509 40 Complete

$ 8,300,00000 $ 16,632,79249 $ 1,622,531.62 $ 13,524,42592

(1) The School District's original cost estimate as specrfied in the resolution calhng for the Imposrllon of the Local Opllon Sales Tax
(2) The School District's current esllmate of total cost for the projects Includes all cost from project inception to completion
(3) The voters of Hams County approved the ImpoSll,on of a 1"k sales tax to fund the above pro1ects and retire
associated debt Amounts expended for these proJects may include sales tax proceeds, state, local property taxes and/or other funds over the hfe of the pro1ects

See notes to the general-purpose financial statements

- 33-

HARRIS COUNTY BOARD OF EDUCATION GENERAL FUND- QUALITY BASIC EDUCATION PROGRAM (QBEl
ALLOTMENTS AND EXPENDITURES - BY PROGRAM
YEAR ENDED JUNE 30. 2001

SCHEDULE 4

DESCRIPTION

ALLOTMENTS FROM GEORGIA DEPARTMENT OF EDUCATION (1)

ELIGIBLE QBE PROGRAM COSTS

SALARIES

OPERATIONS

TOTAL

Direct Instructional Programs

Kindergarten Program

$

Kindergarten Program-Early Intervention Program

Pnmary Grades (1-3) Program

Primary Grades-Early lnterven!Jon (1-3) Program

Upper Elementary Grades (4-5) Program

Middle Grades (6-8) Program

Middle School (6-8) Program

High School General Educa!Jon (9-12) Program

Vocational Laboratory (9-12) Program

Students with D1sab1h!Jes

Category I

Category II

Category Ill

Category IV

Gifted Student - Category VI

Remedial Educa!Jon Program

Alternative Educa!Jon Program

962,115.00 $ 37,473.00
2,889,038.00 136,953 00
1,493,251.00
2,458,426 00 2,027,470 00
808,891.00 1,017,705.00
363,958.00 170,840 00 191,263.00

1,304,497 67 $ 123,234 41
2,989,173 63 260,021.77
1,781,533.30 -10 88
2,393,958 76 2,303,305 76
631,478 23
9,916 88 468,515.82 505,768 65
15,055 30 401,632 47 126,010 62 241,155.02

10,307 77 $ 54,190.34 73,554 20 140,232 55 28,902.89
82,768.34 87,273 52 93,952.32
8,137.35 13,84813 18,172.20
3,324.30 59,750.24 60,729.20 4,474.04

1,314,80544 177,424 75
3,062,727.83 400,254.32
1,810,436.19 -10.88
2,476,727 10 2,390,579.28
725,430.55
18,054.23 482,363.95 523,940.85
18,379.60 461,382.71 186,739 82 245,629 06

TOTAL DIRECT INSTRUCTIONAL PROGRAMS

$

12,557,383.00 $ 13,555,247.41 $ 739,617 39 $ 14,294,864 80

Media Center Program Staff and Professional Development

419,867 00 108,247 00

503,190.61 31,566.97

227,073 01 76,640.05

730,263 62 108,207 02

TOTAL QBE FORMULA FUNDS

$

13,085,497 00 $ 14,090,004 99 $ 1,043,330 45 $ 15,133,335 44

(1) Comprised of State Funds plus Local Five Mill nare

See notes to the general-purpose financial statements

- 34 -

HARRIS COUNTY BOARD OF EDUCATION GENERAL FUND - QUALITY BASIC EDUCATION PROGRAM (QBE)
ALLOTMENTS AND EXPENDITURES - BY SITE YEAR ENDED JUNE 30, 2001

SCHEDULE w5n

SITE
Park Elementary School Pine Ridge Elementary School Mulbeny Creek Elementary School New Mountain Hill Elementary School Harris County High School Harris County Carver Middle School CrossRoads Alternative Central Office (Alternative Education Program)
TOTAL
(1) Comprised of State Funds plus Local Five Mill Share.

ALLOTMENTS FROM GEORGIA DEPARTMENT OF EDUCATION (1)

ELIGIBLE QBE PROGRAM COSTS

$

1,698,821.00 $

2,423,492.61

1,574,529.00

1,783,031.15

1,397,070.00

1,621,134.20

1,620,569.00

1,786,746.97

3,287,204.00

3,622,956.71

2,787,927.00

2,775,637.78

1,594.84

191,263.00

280,270.54

$

12,557,383.00 $ 14,294,864.80

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

SECTION II COMPLIANCE AND INTERNAL CONTROL REPORTS

RussELL W. H1NT0N
STATE AUDITOR
(404} 656-2174

DEPARTMENT OF AUDITS AND ACCOUNTS
254 Washington Street, S.W., Suite 214 Atlanta, Georgia 30334-8400
July 26, 2002

Honorable Roy E. Barnes, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the Harris County Board of Education
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 ofEducation as ofand for the year ended June 30, 2001, and have issued our report thereon dated July 26, 2002. This report was qualified for various departures from generally accepted accounting principles, as identified in the auditor's report on the general-purpose financial statements. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States.
Compliance
As part of obtaining reasonable assurance about whether Harris County Board of Education's financial statements are free of material misstatement, we performed tests of its compliance with certain provisions oflaws, regulations, contracts and grants, noncompliance with which could have a direct and material effect on the determination offinancial statement amounts. However, providing an opinion on compliance with those provisions was not an objective ofour audit, and accordingly, we do not express such an opinion. The results ofour tests disclosed no instances ofnoncompliance that are required to be reported under Government Auditing Standards.
Internal Control Over Financial Reporting
In planning and performing our audit, we considered Harris County Board of Education's internal control over financial reporting in order to determine our auditing procedures for the purpose of expressing our opinion on the financial statements and not to provide assurance on the internal
2001YB-41

control over financial reporting. However, we noted a certain matter involving the internal control over financial reporting and its operation that we consider to be a reportable condition. Reportable conditions involve matters coming to our attention relating to significant deficiencies in the design or operation ofthe internal control over financial reporting that, in ourjudgment, 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 ofFindings and Questioned Costs as item FS-6721-01-01.
A material weakness is a condition in which the design or operation of one or more of the internal control components does not reduce to a relatively low level the risk that misstatements in amounts that would be material in relation to the financial statements being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. Our consideration of the internal control over financial reporting would not necessarily disclose all matters in the internal control that might be reportable conditions and, accordingly, would not necessarily disclose all reportable conditions that are also considered to be material weaknesses. However, we consider item FS-6721-01-01 to be a material weakness.
This report is intended solely for the information and use ofthe management, members ofthe 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:gp 2001YB-41

Russell W. Hinton State Auditor

w. RtJSSELL

HINTON

STATE AUDITOR

1404) 656-2174

DEPARTMENT OF AUDITS AND ACCOUNTS
254 Washington Street, S W., Suite 214 Atlanta, Georgia 30334-8400
July 26, 2002

Honorable Roy E. Barnes, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the Harris County Board of Education
REPORT ON COMPLIANCE WITH REQUIREMENTS APPLICABLE TO EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH 0MB CIRCULAR A-133
Ladies and Gentlemen:
Compliance
We have audited the compliance ofHarris County Board ofEducation with the types ofcompliance requirements described in the U.S. Office of Management and Budget (0MB) Circular A-133 Compliance Supplement that are applicable to each of its major Federal programs for the year ended June 30, 2001. Harris 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 Harris County Board of Education's management. Our responsibility is to express an opinion on Harris County Board of Education's compliance based on our audit.
We conducted our audit ofcompliance 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 ofthe United States; and 0MB Circular A133, Audits of States, Local Governments, and Non-Profit Organizations. Those standards and 0MB Circular A-133 require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types ofcompliance requirements referred to above that could have a direct and material effect on a major Federal program occurred. An audit includes examining, on a test basis, evidence about the 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 of Education's compliance with those requirements.
2001SA-10

In our opinion, the Harris County Board of Education complied, in all material respects, with the requirements referred to above that are applicable to each ofits major Federal programs for the year ended June 30, 2001.
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 ofexpressing our opinion on compliance and to test and report on internal control over compliance in accordance with 0MB Circular A-133.
Our consideration ofthe internal control over compliance would not necessarily disclose all matters in the internal control that might be material weaknesses. A material weakness is a condition in which the design or operation ofone or more ofthe internal control components does not reduce to a relatively low level of risk that noncompliance with applicable requirements of laws, regulations, contracts and grants that would be material in relation to a major Federal program being audited may occur and not be detected within a timely period by employees in the normal course ofperforming 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 ofthe management, members ofthe 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:gp 2001SA-10

State Auditor

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

HARRIS COUNTY BOARD OF EDUCATION AUDITEE'S RESPONSE
SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30. 2001

PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

FINDING CONTROL NUMBER AND STATUS

FS-6721-99-01 FS-6721-00-01

Further Action Not Warranted Unresolved - See Corrective Action/Responses

CORRECTIVE ACTION/RESPONSES

GENERAL FIXED ASSETS Failure to Maintain General Fixed Assets Account Group Finding Control Number: FS-6721-00-01

The Harris County Board of Education has begun the process of gathering information with which to record general fixed assets on the financial statements.

SECTIONN- FINDINGS AND QUESTIONED COSTS

HARRIS COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2001
I SUMMARY OF AUDITOR'S RESULTS
I. Type of Report 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. Reportable Conditions in Internal Control Disclosed by the Audit of the Financial Statements The audit report for the Harris County Board of Education 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 no instances ofnoncompliance that were deemed to be material to the financial statements.
4. Reportable Conditions in Internal Control Over Maj~r Programs The audit report for the Harris County Board of Education did not disclose any reportable conditions in internal control over major programs.
5. Type of Report Issued on Compliance for Major Programs The auditor's opinion on the Harris County Board ofEducation's report on compliance with requirements applicable to major programs was unqualified.
6. Audit Findings Required to be Reported by Section .5 lO(a) of 0MB Circular A-133 The Harris County Board ofEducation's audit did not disclose audit findings required to be reported by section .510(a) of 0MB Circular A-133.
7. Major Programs Federal awards audited as major programs are as follows: 84.010 Elementary and Secondary Education Act - Title I- Grants to Local Educational Agencies 84.027 Individuals with Disabilities Education Act - Part B - Special Education Flow Through 84.173 Individuals with Disabilities Education Act - Part B - Special Education Preschool
8. Type "A" Program Dollar Threshold The dollar threshold for type "A" programs was $300,000.00.
- 1-

HARRIS COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30. 2001
I SUMMARY OF AUDITOR'S RESULTS
9. Low Risk Auditee The Harris County Board of Education qualified as a low risk auditee based on a waiver granted by the U.S. Department of Education.
II 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-6721-01-01
The Harris County Board of Education 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 School District being incomplete and not in accordance with generally accepted accounting principles. Appropriate action should be taken by the School District to establish accounting controls and procedures to provide for maintenance ofa General Fixed Assets Account Group. These subsidiary records should include an inventory of land, buildings and equipment owned by the School District and should include, but may not be limited to, date acquired, acquisition cost, estimated replacement cost, location and description. Detailed records should be maintained ofall additions and deletions to the General Fixed Assets Account Group.
Management's Response:
We concur with the recommendation. Due to staffing limitations we failed to maintain a systemwide General Fixed Assets Account Group within our formal accounting records during the 20002001 fiscal year. During the fiscal year 2001-2002 we gathered the information required to comply with the recommendation. The accounting records for the fiscal year ending June 2003 will be in compliance with the recommendation.
ill FEDERAL AWARD FINDINGS AND QUESTIONED COSTS
No matters were reported.
-2-