Hart County Board of Education, Hartwell, Georgia, report on audit of the financial statements for the fiscal year ended June 30, 2003

HART COUNTY BOARD OF EDUCATION
HARTWELL, GEORGIA REPORT ON AUDIT
OF THE FINANCIAL STATEMENTS
FOR THE FISCAL YEAR ENDED JUNE 30, 2003
STATE OF GEORGIA
DEPARTMENT OF AUDITS AND ACCOUNTS
Russell W. Hinton State Auditor

HART COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS -

SECTION I

FINANCIAL

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

REQUIRED SUPPLEMENTARY INFORMATION

MANAGEMENT'S DISCUSSION AND ANALYSIS

EXHIBITS

BASIC FINANCIAL STATEMENTS

DISTRICT-WIDE FINANCIAL STATEMENTS

A

STATEMENT OF NET ASSETS

3

B

STATEMENT OF ACTIVITIES

4

FUND FINANCIAL STATEMENTS

C

BALANCE SHEET

GOVERNMENTAL FUNDS

6

D

RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET

TO THE STATEMENT OF NET ASSETS

7

E

STATEMENT OF REVENUES, EXPENDITURES AND CHANGES

IN FUND BALANCES

GOVERNMENTAL FUNDS

8

F

RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT

OF REVENUES, EXPENDITURES AND CHANGES IN FUND

BALANCES TO THE STATEMENT OF ACTIVITIES

9

G

STATEMENT OF FIDUCIARY NET ASSETS

FIDUCIARY FUNDS

11

H

NOTES TO THE BASIC FINANCIAL STATEMENTS

12

SCHEDULES

REQUIRED SUPPLEMENTARY INFORMATION

1 SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES

IN FUND BALANCES - BUDGET AND ACTUAL

GENERALFUND

29

HART COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS -

SECTION I

FINANCIAL

SCHEDULES

SUPPLEMENTARY INFORMATION

2 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS

30

3 SCHEDULE OF STATE REVENUE

32

4 SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS

33

5 ALLOTMENTS AND EXPENDITURES

GENERAL FUND - QUALITY BASIC EDUCATION PROGRAMS (QBE)

BY PROGRAM

35

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

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

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

SECTION I FINANCIAL

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

DEPARTMENT OF AUDITS AND ACCOUNTS
254 Washington Street, S.W. Suite 214 Atlanta, Georgia 30334-8400
April 29, 2004

Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members ofthe Hart County Board of Education
INDEPENDENT AUDITOR'S COMBINED REPORT ON BASIC FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION - SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
Ladies and Gentlemen:
We have audited the accompanying financial statements ofthe governmental activities, each major fund, and the aggregate remaining fund information (Exhibits A through H) of the Hart County Board of Education, as of and for the year ended June 30, 2003, which collectively comprise the Board's basic financial statements as listed in the table of contents. These financial statements are the responsibility of the Hart County Board of Education's management. Our responsibility is to express opinions on these financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United States ofAmerica and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General ofthe United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free 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 op1ruons.
In our opinion, the financial statements referred to above present fairly, in all material respects, the respective position ofthe governmental activities, each major fund, and the aggregate remaining fund information ofthe Hart County Board ofEducation, as ofJune 30, 2003, and the respective changes in financial position thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America.
2003-34ARL-11

As discussed in Note 2 to the basic financial statements, during fiscal year 2003, the Board completed a comprehensive inventory of its capital assets for inclusion in the basic financial statements, consolidated its individual school activity accounts for inclusion in the basic financial statements and changed its method of accounting for the salaries of certain ten-month employees from a cash basis to a basis that is generally accepted. These changes are in accordance with generally accepted accounting principles.
As described in Note 2, the Hart County Board of Education has implemented a new financial reporting model as required by provisions of Governmental Accounting Standards Board Statement No. 34, Basic Financial Statements - and Management's Discussion and Analysis - for State and Local Governments, as of June 30, 2003.
In accordance with Government Auditing Standards, we have also issued our report dated April 29, 2004, on our consideration of the Hart County Board of Education's internal control over financial reporting and our tests of its compliance with certain provisions of laws, regulations, contracts and grants. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be read in conjunction with this report in considering the results of our audit.
Management's Discussion and Analysis and the Schedule ofRevenues, Expenditures and Changes in Fund Balances - Budget and Actual, as presented on pages i through ix and page 29 respectively, are not a required part of the basic financial statements but are supplementary information required by the accounting principles generally accepted in the United States of America. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods ofmeasurement and presentation ofthe required supplementary information. However, we did not audit the information and express no opinion on it.
Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Hart County Board of Education's basic financial statements. The accompanying supplementary information which consist of Schedules 2 through 5, which includes the Schedule of Expenditures of Federal Awards as required by U.S. Office of Management and Budget Circular A-133, Audits ofStates, Local Governments, and Non-Profit Organizations, are presented for purposes of additional analysis and are not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements, and in our opinion, is fairly stated, in all material respects, in relation to the basic financial statements taken as a whole.
2003-34ARL-11

A copy ofthis report has been filed as a permanent record in the office ofthe State Auditor and made available to the press ofthe State, as provided for by Official Code ofGeorgia Annotated section 506-24.
Respectfully submitted,

RWH:gp 2003-34ARL-11

State Auditor

HART COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2003
INTRODUCTION
Our discussion and analysis of the Hart County Board of Education's financial performance provides an overview of the School District's financial activities for the fiscal year ended June 30, 2003. The intent of this discussion and analysis is to look at the School District's financial performance as a whole; readers should also review the transmittal letter, notes to the basic financial statements and financial statements to enhance their understanding of the School District's financial performance. The reader should also note that this fiscal year (FY 2003) is the School District's first year of implementation of GASB Statement No. 34, a new financial reporting model.
FINANCIAL HIGHLIGHTS
Key financial highlights for FY 2003 are as follows:
The School District implemented GASB 34 for FY 2003. Due to this being the implementation year, many comparisons are not available that will be available in FY 2004.
On the district-wide financial statements, the assets of the School District exceeded liabilities by $33.2 million. Of this amount, $3.2 million is unrestricted and is available for spending at the School District's discretion.
The School District had $30.1 million in expenses relating to governmental activities; only $19.8 million of these expenses were offset by program specific charges for services, grants and contributions. However, general revenues (primarily property and sales taxes) of almost $13 million were more than adequate to provide for these programs.
As stated above, General Revenues accounted almost $13 million or about 40% of all revenues totaling $32.8 million. Program specific revenues in the form of charges for services, grants and contributions accounted for the rest.
Overview of the Financial Statements
This annual report consists of three parts; management's discussion and analysis (this section), the basic financial statements and supplementary information. The basic financial statements include two levels of statements that present different views of the School District. These include the district-wide and fund financial statements.
The district-wide financial statements include the "Statement of Net Assets" and "Statement of Activities". These statements provide information about the activities of the School District presenting both short-term and long-term information about the School District's overall financial status.
1

HART COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2003
The fund financial statements focus on individual parts of the School District, reporting the School District's operation in more detail. The "Governmental Funds" statements disclose how basic services are financed in the short-term as well as what remains for future spending. The "Fiduciary Funds" statements provide information about the financial relationships in which the School District acts solely as a trustee or agent for the benefit of others. In the case of the Hart County Board of Education, the General Fund, Capital Projects Funds, and Debt Service Funds are all considered to be major funds. The School District has no nonmajor funds as defined by GASB Statement No. 34 for the purposes of this report.
The financial statements also include notes that explain some of the information in the statements and provide more detailed data. The statements are followed by a section of required supplementary information that further explains and supports the financial statements. Additionally, other supplementary information (not required) is also presented that further supplements understanding of the financial statements.
District-wide Statements
Since the Hart County Board of Education has no operations that have been classified as "Business Activities", the district-wide financial statements are basically a consolidation of all of the School District's operating funds into one column called governmental activities. In reviewing the district-wide financial statements, a reader might ask the question, are we in a better financial position now than last year? The "Statement of Net Assets" and the "Statement of Activities" provides the basis for answering this question. These financial statements include all School District's assets and liabilities and uses the accrual basis of accounting similar to the accounting used by most private-sector companies. This basis of accounting takes into account all of the current year's revenues and expenses regardless of when cash is received or paid.
These two statements report the School District's net assets and any changes in those assets. The change in net assets is important because it tells the reader that, for the School District as a whole, the financial position of the School District has improved or diminished. The causes of this change may be the results of many factors, including those not under the School District's control, such as the property tax base, facility conditions, required educational programs, student-teacher ratios, and other factors.
The "Statement of Net Assets" and the "Statement of Activities" reflects 100% of the School District's governmental activities.
Fund Financial Statements
The School District uses many funds or sub-funds to account for a multitude of financial transactions during the fiscal year. The fund financial statements presented in this report provide detail information about the School District's significant or major funds. As discussed previously, the School District has no nonmajor funds as defined by GASB Statement No. 34.
ii

HART COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2003
Governmental Funds: Most of the School District's activities are reported in governmental funds, which focus on how money flows into and out of those funds and the balances left at yearend available for spending in future periods. These funds are reported using the modified accrual method of accounting which measures cash and all other financial assets that can be readily converted to cash. The governmental fund statements provide a detailed short-term view of the School District's general government operations and the basic services it provides. Governmental fund information helps determine whether there are more or fewer financial resources that can be spent in the near future to finance educational programs. The differences between government activities (reported in the Statement of Net Assets and the Statement of Activities) and governmental funds are reconciled in the financial statements.
Fiduciary Funds: The School District is the trustee, or fiduciary, for assets that belong to others and school clubs and organizations within the principals' accounts. The School District is responsible for ensuring that the assets reported in these funds are used only for their intended purposes and by those to whom the assets belong. The School District excludes these activities from the district-wide financial statements because it cannot use these assets to finance its operations.
Financial Analysis of the School District as a Whole
Recall that the Statement of Net Assets provides the perspective of the School District as a whole. The reader can think of the School District's net assets as the difference between its assets (i.e., what the School District owns) and its liabilities (i.e., what the School District owes) at the end of a fiscal year. This balance represents one way to measure the School District's financial health or its financial position. In the case of the Hart County Board of Education, assets exceeded liabilities by $33.2 million at June 30, 2003.
To better understand the School District's actual financial position and ability to deliver services in future periods, the reader will need to review the various components of the net asset category. For example, of the $33.2 million of net assets, $3.3 million was restricted for continuation of Federal programs, debt service, and completion of ongoing capital projects. Accordingly, these funds were not available to meet the School District's ongoing obligations to citizens and creditors.
In addition, the School District had $26.7 million (net of related debt) invested in capital assets (e.g., land, buildings, and equipment). The School District uses these capital assets to provide educational services to students within geographic boundaries served by the School District. Because of the very nature and on-going use of the assets being reported in this component of net assets, it must be recognized that this portion of the net assets is not available for future spending.
The remaining balance of unrestricted net assets of $3.2 million may be used to meet the School District's ongoing obligations to citizens and creditors.
111

HART COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2003

Table 1 provides a summary of the School District's net assets for this fiscal year. Since this is the first year the School District has prepared financial statements following GASB Statement No. 34, net asset comparisons to FY 2002 are not available.

Table 1 Net Assets

Governmental Activities Fiscal Year 2003

Assets Current and Other Assets Capital Assets, Net

$10,230,055 34,960,780

Total Assets

$45,190,835

Liabilities Current and Other Liabilities Long-Term Liabilities

$ 3,766,517 8,238,051

Total Liabilities

$12,004,568

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

$26, 722,729 3,298,751 3,164,787

Total Net Assets

$33,186,267

Table 2 shows the Changes in Net Assets for this fiscal year. Since this is the first year the School District has prepared financial statements following GASB Statement No. 34, revenue and expense comparisons to FY 2002 are not available.

IV

HART COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2003

Table 2 Change in Net Assets
Revenues Program Revenues: Charges for Services and Sales Operating Grants and Contributions Capital Grants and Contributions
Total Program Revenues
General Revenues: Taxes Property Taxes For Maintenance and Operations For Debt Service Sales Taxes Special Purpose Local Option Sales Tax For Debt Service Real Estate Grants and Contributions not Restricted to Specific Programs Investment Earnings Miscellaneous
Total General Revenues
Total Revenues
Program Expenses Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Operations of Non-Instructional Services Enterprise Operations Community Services Food Services Interest on Short-Term and Long-Term Debt
Total Expenses
Increase in Net Assets
V

Governmental Activities Fiscal Year 2003
$ 827,847 16,678,761 2,304,081
$19,810,689
$ 9,767,354 421,229
2,181,288 41,701
292,339 88,179
203,256
$12,995,346
$32,806,035
$19,791,979
384,773 520,543 424,755 459,387 1,753,239 194,159 2,512,198 1,668,769 43,332 139,935
168,189 6,826
1,578,279 476,716
$30,123,079
$ 2,682.956

HART COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2003

Governmental Activities

The Statement of Activities shows the cost of program services and the charges for services and grants offsetting these services. Table 3 shows, for governmental activities, the total cost of services and the net cost of services. Net cost of services can be defined as the total cost less fees generated by the activities and intergovernmental revenue provided for specific programs. The net cost reflects the financial burden on the School District's taxpayers by each activity. Since this is the first year the School District has prepared financial statements following GASB Statement No. 34, cost of service comparisons for FY 2002 are not available.

Table 3 Governmental Activities

Total Cost of Services Fiscal Year 2003

Net Cost of Services Fiscal Year 2003

Instruction Support Services
Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Operations of Non-Instructional Services Enterprise Operations Community Services Food Services Interest on Short-Term and Long-Term Debt

$ 19,791,979 $ 6,014,119

384,773 520,543 424,755 459,387 1,753,239 194,159 2,512,198 1,668,769
43,332 139,935

196,897 254,761 112,570 -120,956 1,085,795 194,159 1,638,860 290,613
43,332 139,935

168,189 6,826
1,578,279 476,716

60,088 2,006 -76,505 476,716

Total Expenses

$ 30!123!079 $ 10!312!390

Financial Analysis of the School District's Funds

The School District's governmental funds are accounted for using the modified accrual basis of accounting. The governmental funds had total revenues of almost $32.6 million and total expenditures of $35.3 million. Included in the expenditures of $35.3 million were capital outlay expenditures of $4 million which do not constitute recurring expenditures.

Vl

HART COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2003
General Fund Budget Highlights The School District's budget is prepared according to Georgia Law. The most significant budgeted fund is the General Fund. During the course of FY 2003, the School District amended its general fund budget as needed. The School District uses site-based budgeting as a part of the budget process. The budgeting systems are designed to control total site budgets but provide flexibility for site management. For the General Fund, the final actual revenues of $27.6 million exceeded the final budgeted amounts of $27.2 million, a difference of $.4 million or about 1.50%. This small overall difference demonstrates that the School District did an adequate job in forecasting its revenues. The final actual expenditures of $28.8 million exceeded the final budgeted amount of $27.6 million by $1.2 million. This difference (final actual vs. final budget) was due primarily to expenditures for Instruction exceeding budget by $.9 million and expenditures for Maintenance and Operation exceeding budget by $.3 million. Various other functional budget variances essentially offset each other. Actual General Fund expenditures exceeded revenues by almost $1.2 million. In addition, the General Fund transferred $1.5 million to the Capital Projects Fund to provide needed local funding to support various Capital Projects. The General Fund balance of $5.5 million at July l, 2002 was available to provide for this change in fund balance of almost $2.7 million. Capital Assets and Debt Administration Capital Assets At June 30, 2003, the School District had $34.9 million invested in capital assets, all in governmental activities. Table 4 reflects a summary of these balances net of accumulated depreciation. Since this is the first year the School District has prepared financial statements following GASB Statement No. 34, capital assets comparisons to fiscal year 2002 are not available.
Vll

HART COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2003

Table 4 Capital Assets (Net of Depreciation)

Governmental Activities Fiscal Year 2003

Land Construction in Progress Land Improvements Buildings Equipment

$ 1,963,130 2,153,942 761,519
28,012,198 2,069,991

Total

$34,960,780

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

Debt

At June 30, 2003, the School District had $8.2 million in debt outstanding. This debt is primarily the result of Capital Lease agreements to acquire assets to which the School District is a party and General Obligation Bonds sold by the School District for the purpose of the acquisition, construction, equipping, renovating, and repairing of school facilities.

Table 5 summarizes the School District's debt.

Table 5 Debt at June 30

Governmental Activities Fiscal Year 2003

Capital Leases General Obligation Bonds

$ 2,788,051 5,450,000

Total

$ 8,238,051

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

vm

HART COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2003
Current Issues
Currently known facts, decisions or conditions that are expected to have a significant effect on financial positions or results of operations in future years are as follows:
As was the case in the prior year, the State of Georgia is suffering from the effects of the prevailing unfavorable economic conditions. Total revenue collections for the State for the 2003 fiscal year were down roughly 3% compared to the previous period. This has forced the State's Office of Planning and Budget to continue reducing the budgets of the various government agencies.
State QBE Revenue Reductions - During the current fiscal year the State of Georgia implemented a 2.5% QBE revenue formula funding reduction to all state school districts. This funding reduction carried forward into the fiscal year 2004. Additionally, because state revenues are falling well below the projected amounts, all state school districts have been warned to expect a 5% reduction of revenues for fiscal year 2005. Considering the stagnant economy of the past few years, these formula funding reductions will seriously affect the long-term financial stability of the School District. Despite these challenges, the Hart County Board of Education is strong financially and we remain optimistic about the ability of the School District to maximize all of the financial resources to provide a quality education to our students.
Capital Improvements - The School District plans capital improvements as future capital needs arise due to increased student population and facility repair and maintenance needs. Specific capital expenditure plans are formalized in conjunction with individual general obligation bond issues, education local option sales taxes and anticipated annual receipts of capital outlay funds from the State of Georgia Department of Education. The School District regularly monitors anticipated capital outlay needs.
Contacting the School District's Financial Management
This financial report is designed to provide our citizen's taxpayers, investors and creditors with a general overview of the School District's finances and to show the School District's accountability for the money it receives. If you have questions about this report or need additional financial information contact Mr. Lonnie Burns, Chief Financial Officer, Hart County Board of Education, P.O. Box 696, 284 Campbell Drive, Hartwell, Georgia 30643. You may also email your questions to Mr. Bums at lburns@hart.kl2.ga.us.
IX

HARTCOUNTYBOARDOFEDUCATION

HART COUNTY BOARD OF EDUCATION STATEMENT OF NET ASSETS JUNE 30, 2003
ASSETS
Cash and Cash Equivalents Investments Accounts Receivable. Net
Taxes State Government Federal Government Other Inventories Capital Assets Land Construction in Progress Land Improvements Buildings Equipment Less: Accumulated Depreciation
Total Assets
LIABILITIES
Accounts Payable Salaries Payable Contracts Payable Retainages Payable Long-Term Liabilities
Due Within One Year Due in More Than One Year
Total Liabilities
NET ASSETS
Invested in Capital Assets, Net of Related Debt Restricted for
Continuation of Federal Programs Debt Service Capital Projects Unrestricted
Total Net Assets
Total Liabilities and Net Assets
The notes to the basic financial statements are an integral part of this statement. -3-

EXHIBIT"A"

GOVERNMENTAL ACTIVITIES

$

3,150,690

3,302,201

1,521,530 1,836,833
390,510 1,959
26,332

1,963,130 2,153,942 1,078,730 30,904,300 3,416,612 -4 555 934

$ ===4=5=,1=9=0,==83=5=

$

708,738

2,594,015

269,354

194,410

2,093,335 6 144 716

$

12,004,568

$

26,722,729

479,701 2,813,070
5,980 3 164 787

$

33,186,267

$ ===4=5=,1=9=0,=83=5=

HART COUNTY BOARD OF EDUCATION STATEMENT OF ACTIVITIES
FOR THE YEAR ENDED JUNE 30, 2003

EXPENSES

CHARGES FOR SERVICES

GOVERNMENTAL ACTIVITIES

Instruction Support Services
Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Operations of Non-Instructional Services Enterprise Operations Community Services Food Services Interest on Short-Term and Long-Term Debt

$

19,791,979 $

384,773 520,543 424,755 459,387 1,753,239 194,159 2,512,198 1,668,769
43,332 139,935

168,189 6,826
1,578,279 476 716

219,930
108,101 499,816

Total Governmental Activities

$ ====:::3::0:i,i1i::2::3!:,:0::7:=9= $

General Revenues Taxes Property Taxes For Maintenance and Operations For Debt Services Sales Taxes Special Purpose Local Option Sales Tax For Debt Services Real Estate Grants and Contributions not Restricted to Specific Programs Investment Earnings Miscellaneous

827 847

Total General Revenues

Change in Net Assets

Net Assets - Beginning of Year

Net Assets - End of Year

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

EXHIBIT"B"

PROGRAM REVENUES OPERATING GRANTS AND
CONTRIBUTIONS

CAPITAL GRANTS AND CONTRIBUTIONS

NET (EXPENSES) REVENUES
AND CHANGES IN NET ASSETS

$

12,278,628 $

187,876 265,782 312,185 524,315 658,226

844,503 659,723

4,820 942,703

$

16 678 761 $

1,279,302 $
56,028 9,218
28,835 718,433
212,265 2,304,081 $

-6,014,119
-196,897 -254,761 -112,570 120,956 -1,085,795 -194, 159 -1,638,860 -290,613
-43,332 -139,935
-60,088 -2,006 76,505
-476,716
-10,312,390

$

9,767,354

421,229

2,181,288 41,701
292,339 88,179
203 256

$

12,995,346

$

2,682,956

30,503,311

$ ===33=,1=8=6,=26=7=

-5-

HART COUNTY BOARD OF EDUCATION BALANCE SHEET
GOVERNMENTAL FUNDS JUNE 30, 2003

EXHIBIT"C"

ASSETS
Cash and Cash Equivalents Investments Accounts Receivable, Net
Taxes State Government Federal Government Other Inventories
Total Assets
LIABILITIES AND FUND BALANCES
LIABILITIES
Accounts Payable Salaries Payable Contracts Payable Retainages Payable
Total Liabilities
FUND BALANCES
Reserved for: Continuation of Federal Programs Debt Service Inventories Capital Projects
Unreserved Undesignated Reported in: General Fund
Total Fund Balances
Total Liabilities and Fund Balances

GENERAL FUND

DISTRICTWIDE
CAPITAL PROJECTS
FUND

DEBT SERVICE
FUND

TOTAL

$ 2,406,562 $ 469,744 $ 274,384 $ 3,150,690

1,212,073

2,090,128

3,302,201

271,630 1,836,833
390,510 1,959
26,332

440,931

712,561 1,836,833
390,510 1,959
26,332

$ 6,145,899 $ 469744 $ 2,805,443 $ 9,421,086

$

708,738

2,594,015

$ 269,354

194 410

$ 3,302,753 $ 463,764

$ 708,738 2,594,015 269,354 194 410
$ 3,766,517

$

453,369

26,332 $

$ 5,980

$ 2,805,443

453,369 2,805,443
26,332 5,980

2,363,445 $ 2,843,146 $

2,363,445 5,980 $ 2,805,443 $ 5,654,569

$ 6,145,899 $ 469,744 $ 2,805,443 $ 9,421,086

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

HART COUNTY BOARD OF EDUCATION RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET
TO THE STATEMENT OF NET ASSETS JUNE 30. 2003

EXHIBIT"D"

Total Fund Balances - Governmental Funds (Exhibit "C")
Amounts reported for Governmental Activities in the Statement of Net Assets are different because:
Capital Assets used in Governmental Activities are not financial resources and therefore are not reported in the funds. These assets consist of:
Land Construction in Progress Land Improvements Buildings Equipment Accumulated Depreciation
Total Capital Assets
Some of the School District's property tax revenues will be collected after year end but are not available soon enough to pay for the current period's expenditures.
Long-Term Liabilities, including Bonds Payable, are not due and payable in the current period and therefore are not reported as liabilities in the funds. Long-Term Liabilities at year-end consist of:
Bonds and Notes Payable Capital Leases
Total Long-Term Liabilities

$

5,654,569

$

1,963,130

2,153,942

1,078,730

30,904,300

3,416,612

-4,555,934

34,960,780

808,969

$ -5,450,000 -2,788,051

-8,238,051

Net Assets of Governmental Activities (Exhibit "A")

$ 33,186,267

The notes to the basic financial statements are an integral part of this statement. -7-

HART COUNTY BOARD OF EDUCATION STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES
GOVERNMENTAL FUNDS YEAR ENDED JUNE 30, 2003

EXHIBIT"E"

REVENUES
Property Taxes Sales Taxes State Funds Federal Funds Charges for Services Investment Earnings Miscellaneous
Total Revenues
EXPENDITURES
Current Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Enterprise Operations Community Services Food Services Operation
Capital Outlay Debt Services
Principal Interest
Total Expenditures
Excess of Revenues over (under) Expenditures
OTHER FINANCING SOURCES (USES)
Transfers In Transfers Out
Total Other Financing Sources (Uses)
Net Change in Fund Balances
Fund Balances - Beginning

GENERAL FUND

DISTRICTWIDE
CAPITAL PROJECTS
FUND

DEBT SERVICE
FUND

TOTAL

$ 9,535,767 41,701
14,146,014 $ 2,825,086
827,847 48,572
203,256

$ 413,602 $ 9,949,369

2,181,288

2,222,989

2,304,081

16,450,095

2,825,086

827,847

846

38,761

88,179

203,256

$ 27,628,243 $ 2,304,927 $ 2,633,651 $ 32,566,821

$ 19,011,164

$ 19,011,164

384,773 520,543 424,755 418,910 1,746,579 192,754 $ 2,501,367 1,492,961
43,332 139,935 168,189
6,826 1,463,177

1,405 4,005,863

384,773 520,543 424,755 418,910 1,746,579 194,159 2,501,367 1,492,961
43,332 139,935 168,189
6,826 1,463,177 4,005,863

156,238 119 024

$ 2,125,000 357,692

2,281,238 476 716

$ 28,790,527 $ 4,007,268 $ 2,482,692 $ 35,280,487

$ -1, 162,284 $ -1,702,341 $ 150,959 $ -2,713,666

$ 1,491,374 $ -1 491 374

$ 1,491,374 -1 491 374

$ -1 491 374 $ 1 491 374

$

0

$ -2,653,658 $ -210,967 $ 150,959 $ -2,713,666

5,496,804

216 947 2,654,484

8,368,235

Fund Balances - Ending

$ 2,843,146 $ ==,;;,5,;;;9;:;,;80= $ 2,805,443 $ 5,654,569

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

HART COUNTY BOARD OF EDUCATION RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT OF
REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES TO THE STATEMENT OF ACTIVITIES JUNE 30, 2003

EXHIBIT"F"

Total Net Change in Fund Balances - Governmental Funds (Exhibit "E")
Amounts reported for Governmental Activities in the Statement of Activities are different because:
Capital Outlays are reported as expenditures in Governmental Funds. However, in the Statement of Activities, the cost of Capital Assets is allocated over their estimated useful lives as depreciation expense. In the current period, these amounts are:
Capital Outlay Depreciation Expense
Excess of Capital Outlay over Depreciation Expense
Because some property taxes will not be collected for several months after the School District's fiscal year ends, they are not considered "available" revenues.
Repayment of Long-Term Debt is reported as an expenditure in Governmental Funds, but the repayment reduces Long-Term Liabilities in the Statement of Net Assets. In the current year, these amounts consist of:
Bond Principal Retirements Capital Lease Payments
Total Long-Term Debt Repayments

$ -2,713,666

$

3,395,559

-519,389

2,876,170 239,214

$

2,125,000

156,238

2,281,238

Change in Net Assets of Governmental Activities (Exhibit "B")

$

2,682,956

The notes to the basic financial statements are an integral part of this statement. -9-

HART COUNTY BOARD OF EDUCATION STATEMENT OF FIDUCIARY NET ASSETS
FIDUCIARY FUNDS JUNE 30, 2003
ASSETS Cash and Cash Equivalents
LIABILITIES Funds Held for Others

EXHIBIT"G"
AGENCY FUNDS
$=====18=6=,6=42=
$=====1=86=,6=4=2=

The notes to the basic financial statements are an integral part of this statement.
- 11 -

HART COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2003

EXHIBIT"H"

Note 1: DESCRIPTION OF SCHOOL DISTRICT AND REPORTING ENTITY
REPORTING ENTITY
The Hart County Board ofEducation (School District) was established under the laws ofthe State of Georgia and operates under the guidance of a school board elected by the voters and a Superintendent appointed by the Board. The Board is organized as a separate legal entity and has the power to levy taxes and issue bonds. Its budget is not subject to approval by any other entity. Accordingly, the School District is a primary government and consists of all the organizations that compose its legal entity.
Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The School District's basic financial statements are collectively comprised of the District-wide financial statements, fund financial statements and notes to the basic financial statements ofthe Hart County Board of Education.
District-wide Statements: The Statement ofNet Assets and the Statement ofActivities display information about the financial activities ofthe overall School District, except for fiduciary activities. Eliminations have been made to minimize the double counting of internal activities. Governmental activities generally are financed through taxes, intergovernmental revenues, and other nonexchange transactions.
The Statement of Activities presents a comparison between direct expenses and program revenues for each function of the School District's governmental activities.
Direct expenses are those that are specifically associated with a program or function and, therefore, are clearly identifiable to a particular function. Indirect expenses (expenses of the School District related to the administration and support ofthe School District's programs, such as office and maintenance personnel and accounting) are not allocated to programs.
Program revenues include (a) charges paid by the recipients of goods or services offered by the programs and (b) grants and contributions that are restricted to meeting the operational or capital requirements of a particular program. Revenues that are not classified as program revenues, including all taxes, are presented as general revenues.
Fund Financial Statements: The fund financial statements provide information about the School District's funds, including fiduciary funds. Eliminations have been made to minimize the double counting ofinternal activities. Separate statements for each category (governmental and fiduciary) are presented. The emphasis of fund financial statements is on major governmental funds, each displayed in a separate column.

- 12 -

HART COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2003

EXHIBIT"H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The School District reports the following major governmental funds:
General Fund is the School District's primary operating fund. It accounts for all financial resources ofthe School District, except those resources required to be accounted for in another fund.
District-wide Capital Projects Fund accounts for financial resources including Bond Proceeds and grants from Georgia State Financing and Investment Commission to be used for the acquisition, construction or renovation of major capital facilities.
Debt Service Fund accounts for taxes (property and sales) legally restricted for the payment of general long-term principal, interest and paying agent's fees.
The School District reports the following fiduciary fund type:
Agency funds account for assets held by the School District as an agent for various funds; governments or individuals.
BASIS OF ACCOUNTING
The basis of accounting determines when transactions are reported on the financial statements. The District-wide governmental and fiduciary fund financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded at the time liabilities are incurred, regardless of when the related cash flows take place. Nonexchange transactions, in which the School District gives (or receives) value without directly receiving (or giving) equal value in exchange, include property taxes, sales taxes, grants and donations. On an accrual basis, revenue from property taxes is recognized in the fiscal year for which the taxes are levied. Revenue from sales taxes is recognized in the fiscal year in which the underlying transaction (sale) takes place. Revenue from grants and donations is recognized in the fiscal year in which all eligibility requirements have been satisfied.
The School District uses funds to report on its financial position and the results of its operations. Fund accounting is designed to demonstrate legal compliance and to aid financial management by segregating transactions related to certain governmental functions or activities. A fund is a separate accounting entity with a self-balancing set of accounts.
Governmental funds are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Under this method, revenues are recognized when measurable and available. The School District considers all revenues reported in the governmental funds to be available if they are collected within sixty days after year-end. Property taxes, sales taxes and interest are considered to be susceptible to accrual. Expenditures are recorded when the related fund liability is incurred, except for principal and interest on general long-term debt, which are recognized
- 13 -

HART COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2003

EXHIBIT "H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
as expenditures to the extent they have matured. Capital asset acquisitions are reported as expenditures in governmental funds. Proceeds ofgeneral long-term liabilities and acquisitions under capital leases are reported as other financing sources.
The School District funds certain programs by a combination ofspecific cost-reimbursement grants, categorical grants, and general revenues. Thus, when program costs are incurred, there are both restricted and unrestricted net assets available to finance the program. It is the School District's policy to first apply grant resources to such programs, followed by cost-reimbursement grants, then general revenues.
For fiscal year 2003, the School District changed its method of accounting for the final two payments on one hundred and ninety day contracts and for the related revenue due from the State to fund these contracts. Adjustments have been made in the fiscal year 2003 financial statements to record costs for salaries and fringe benefits earned by employees through June 30, 2003, (even though paid in July and August 2003) and the related revenue due from the State to fund these contracts. Adjustments were also made for the similar salaries, benefits and related State revenues earned in fiscal year 2002 and recorded in fiscal year 2003.
The net effect of the above accounting treatment results in the accompanying financial statements reflecting costs for those salaries and benefits earned by employees during fiscal year 2003 and the related State revenue to fund these contracts. In addition, both the net assets and fund balance at July 1, 2002, have been restated for salaries and benefits earned by employees in fiscal year 2002 but not paid until July and August 2002 and for the related State revenue for these contracts. This change is in accordance with generally accepted accounting principles. See Restatement of Prior Year Fund Balance.
RESTATEMENT OF PRIOR YEAR FUND BALANCE - GENERAL FUND
In prior years, the financial activities of the School District's School Food Services Fund, Lottery Programs and Federal Programs were reported as Special Revenue Funds. These funds had a combined fund balance of $490,114 at July 1, 2002. For fiscal year 2003, these funds have been reported as part of the General Fund. In addition, governmental fund activity from the various school activity accounts, which were not reported in the prior year's financial statements, have been reported within the General Fund for fiscal year ended June 30, 2003. The governmental fund activity ofthe various school activity accounts had a fund balance of$131,304 at July 1, 2002. This change is in accordance with generally accepted accounting principles.

- 14 -

HART COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2003

EXHIBIT"H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

General Fund Balance July 1, 2002

$ 5,832,309

Add Funds Consolidated with General Fund: School Food Services Fund School Activity Account - Governmental Activity

490,114 131,304

Add: State Revenue Related to July and August 2002 Salary Payments Earned by Employees in Fiscal Year 2002

1,862,452

Deduct: July and August 2002 Salary Payments Earned by Employees in Fiscal Year 2002

2,819,375

General Fund Balance July 1, 2002 (Restated)

$ 5,496,804

CHANGES IN ACCOUNTING PRINCIPLES

The Hart County Board of Education has implemented a new financial reporting model as required by provisions of Governmental Accounting Standards Board Statement No. 34, Basic Financial Statements - and Management's Discussion and Analysis - for State and Local Governments, as of June 30, 2003.

The provisions of GASB Statement No. 34 require the inclusion ofa Statement ofNet Assets. The elements comprising Net Assets - Beginning include the following:

General Fund (Restated) July 1, 2002 Capital Projects Fund Debt Service Fund

$ 5,496,804 216,947
2,654,484

Governmental Funds (Restated) July 1, 2002 Capital Assets Accumulated Depreciation Property Tax Revenue Timing Differences Bonds Payable Capital Leases Payable

$ 8,368,235 36,121,155 -4,036,545 569,755 -7,575,000 -2,944,289

Net Assets Beginning (See Exhibit "B")

$ 30,503,311

- 15 -

HART COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2003

EXHIBIT"H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CASH AND CASH EQUIVALENTS
COMPOSITION OF DEPOSITS Cash and cash equivalents consist ofcash on hand, demand deposits and short-term investments with original maturities of three months or less from the date of acquisition in authorized financial institutions. Georgia Laws OCGA 45-8-14 authorize the Board to deposit its funds in one or more solvent banks or insured Federal savings and loan associations.
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 amounts due from property and sales taxes, grant reimbursements due on Federal, State or other grants for expenditures made but not reimbursed and other receivables
- 16 -

HART COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2003

EXHIBIT"H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

disclosed from information available. Receivables are recorded when either the asset or revenue recognition criteria has been met. Receivables recorded on the basic financial statements do not include any amounts which would necessitate the need for an allowance for uncollectible receivables.

PROPERTY TAXES

The Hart County Board of Commissioners fixed the property tax levy for the 2002 tax digest year (calendar year) on December 5, 2002 (levy date). Taxes were due on February 20, 2003 (lien date). Taxes collected within the current fiscal year or within 60 days after year-end on the 2002 tax digest are reported as revenue in the governmental funds for fiscal year 2003. The Hart County Tax Commissioner bills and collects the property taxes for the School District, withholds 2.5% oftaxes collected as a fee for tax collection and remits the balance of taxes collected to the School District. Property tax revenues, at the fund reporting level, during the fiscal year ended June 30, 2003, for maintenance and operations amounted to $9,535,767 and for school bonds amounted to $413,602.

Tax millage rates levied for the 2002 tax year (calendar year) for the Hart County Board of Education were as follows (a mill equals $1 per thousand dollars of assessed value):

School Operations School Bonds

12.24 mills ____,_12_ mills

12.69 mills

SALES TAXES

Special Purpose Local Option Sales Tax, at the fund reporting level, during the year amounted to $2,181,288 and is to be used for capital outlay for educational purposes or debt service. This sales tax was authorized by local referendum and the sales tax must be re-authorized at least every five years.

INVENTORIES

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

- 17 -

HART COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2003

EXHIBIT"H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

CAPITAL ASSETS

Capital assets purchased, including capital outlay costs, are recorded as expenditures in the fund financial statements at the time ofpurchase. On the District-wide financial statements, all purchased capital assets are valued at cost where historical records are available and at estimated historical cost based on appraisals or deflated current replacement cost where no historical records exist. Donated capital assets are recorded at fair market value on the date donated. Disposals are deleted at depreciated recorded cost. The cost of normal maintenance and repairs that do not add to the value of assets or materially extend the useful lives of the assets is not capitalized. Depreciation is computed using the straight-line method. The School District does not capitalize book collections or works of art.

Capitalization thresholds and estimated useful lives of capital assets reported in the District-wide statements are as follows:

Capitalization Policy

Estimated Useful Life

Land Land Improvements Buildings and Improvements Equipment

Any Amount

$

5,000

$

50,000

$

5,000

NIA 20 years 25 to 80 years 5 to 20 years

Depreciation is used to allocate the actual or estimated historical cost of all capital assets over estimated useful lives.

GENERAL OBLIGATION BONDS

The School District issues general obligation bonds to provide funds for the acquisition and construction of major capital facilities. Bond issuance costs are recognized in the financial statements during the fiscal year bonds are issued. In addition, general obligation bonds have been issued to refund existing general obligation bonds. General obligation bonds are direct obligations and pledge the full faith and credit of the government. The outstanding amount of these bonds is recorded in the Statement of Net Assets.

Note 3: DEPOSITS 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 ofthe face value of such surety bond and the market value of securities pledged shall be equal to not less than 110 percent ofthe public funds being secured after the deduction ofthe amount ofdeposit insurance.

- 18 -

HART COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2003

EXHIBIT"H"

Note 3: 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 of development authorities created by the laws of the State of Georgia, and
(7) Bonds, bills, notes, certificates of indebtedness, or other obligations of a subsidiary corporation of the United States government, which are fully guaranteed by the United States government both as to principal and interest or debt obligations issued by 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, 2003, the bank balances were $4,225,680. 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 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.

- 19 -

HART COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2003

EXHIBIT"H"

Note 3: 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, 2003, as follows:

Risk Category

Bank Balance

1

$ 753,906

2

3,250,097

3

221,677

Total

$ 4,225.680

CATEGORIZATION OF INVESTMENTS At June 30, 2003, the carrying value ofthe School District's total investments was $3,095,383 which is materially the same as fair value. The investments are classified as to risk categories as follows:

Type of Investment

Carrying Amount

Fair Value

Not Subject to Categorization Requirements Local Government Investment Pools
Mutual Funds

$ 3,083,913 $ 3,083,913

11,470

11,470

Total Investments

$ 3,095.383 $ 3,095.383

The carrying amounts shown above includes amounts maintained in an investment pool by the State ofGeorgia, Office ofTreasury and Fiscal Services in which the School District owns no identifiable securities. The investment policy ofthe State ofGeorgia, Office ofTreasury 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 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. The pool is not registered with the Securities and Exchange Commission as an investment company but does operate Georgia Fund 1 in a manner consistent with Rule 2a-7 ofthe Investment Company Act of 1940. The pool's primary objectives are safety ofcapital, investment income, liquidity and diversification while maintaining principal ($1.00 per share value). Net asset value is calculated daily and reported to the rating agency to ensure stability. The pool distributes earnings (net of management fees) on a

-20-

HART COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2003

EXHIBIT"H"

Note 3: DEPOSITS AND INVESTMENTS

monthly basis and values participant's shares sold and redeemed at the pool's share price, $1.00 per share. Pooled cash and cash equivalents and investments are reported at cost. 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, 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 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, 2003, was 30 days. The average investment duration for Fund 6 on June 30, 2003, was 0.39 years.

Note 4: NON-MONETARY TRANSACTIONS

The School District receives food commodities from the United States Department of Agriculture (USDA) for school breakfast and lunch programs. These commodities are recorded at their Federally assigned value. See Note 2 - Inventories

Note 5: CAPITAL ASSETS

The following is a summary of changes in the Capital Assets during the fiscal year:

Balances July 1, 2002

Increases

Balances Decreases June 30, 2003

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

$ 1,963,130

$ 1,963,130

17,837,071 $ 2,860,704 $ 18,543,833

2,153,942

Total Capital Assets Not Being Depreciated $ 19,800,201 $ 2,860,704 $ 18,543,833 $ 4,117,072

Capital Assets Being Depreciated Buildings and Improvements Equipment Land Improvements

$ 12,360,467 $ 18,543,833

2,881,757

534,855

1,078,730

$ 30,904,300 3,416,612 1,078,730

Less Accumulated Depreciation for: Buildings and Improvements Equipment Land Improvements

2,621,007 1,139,493
276,045

271,095 207,128
41 166

2,892,102 1,346,621
317211

Total Capital Assets, Being Depreciated, Net $ 12,284,409 $ 18,559,299

$ 30,843,708

Governmental Activity Capital Assets - Net $ 32,084.610 $ 21,420.003 $ 18,543.833 $ 34,960.780

- 21 -

HART COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2003

EXHIBIT"H"

Note 5: CAPITAL ASSETS Capital assets being acquired under capital leases as of June 30, 2003, are as follows:

Governmental Funds

Land Improvements Less: Accumulated Depreciation

$ 195,394 14,655

Current year depreciation expense by function is as follows:

Instruction

Support Services

General Administration

$

School Administration

Maintenance and Operation of Plant

Student Transportation Services

Food Services

$====1===80-,7=="3==9

$
12,630 2,078 6,500 161,950

288,382
183,158 47 849

Note 6: RESTRICTED ASSETS

$===5===1=='9==38===9

General obligation bond proceeds, Georgia State Financing and Investment Commission (GSFIC) funds and property tax levied specifically for retirement of outstanding bond principal, interest and paying agent's fees (Debt Service Funds) are reported as restricted assets in the Statement of Net Assets because their use is limited by applicable bond covenants or statutory provisions. Restricted assets at June 30, 2003, were as follows:

District-wide CaQital Projects

Bond

Proceeds

GSFIC

Debt Service Funds

Restricted Cash and Cash Equivalents: Debt Services Capital Acquisitions
Restricted Investments: Debt Services

$ 274,384

$

5,980 $ 463,764

$ 2,090,128

- 22 -

HART COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2003

EXIIlBIT "H"

Note 7: INTERFUND TRANSFERS

Interfund transfers for the year ended June 30, 2003, consisted of the following:

Transfer to District-wide Capital Projects

Transfers From General Fund
$ 1,491,374

Transfers are used to move property tax revenues collected by the General Fund to the District-wide Capital Projects Fund as required match or supplemental funding source for capital construction projects.

Note 8: RISK MANAGEMENT

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

The School District has obtained commercial insurance for risk ofloss associated with torts, assets, errors or omissions and acts ofGod. The School District has neither significantly reduced coverage for these risks nor incurred losses (settlements) which exceeded the Board's insurance coverage in any of 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 expenses/expenditures 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:

2002 2003

Beginning ofYear Liability

Claims and Changes in Estimates

$

0 $

0 $

$

0 $

2 754 $

Claims Paid

End ofYear Liability

0 $

0

2 754 $

0

The School District participates in the Georgia Education Workers' Compensation Trust, a public entity risk pool organized on December 1, 1991, to develop, implement and administer a program of workers' compensation self-insurance for its member organizations. The School District pays an annual premium to the Trust for its general insurance coverage. Additional insurance coverage is provided through an agreement by the Trust with the Midwest Employers Casualty Company to provide coverage for potential losses sustained by the Trust in excess of $400,000 loss per occurrence, up to $2,000,000.

- 23 -

HART COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2003

EXHIBIT"H"

Note 8: RISK MANAGEMENT

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

Position Covered All Employees

Amount

$

50,000

Note 9: LONG-TERM DEBT

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

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

Purpose
General Government - Refunding - Series 1993 General Government - Series 1999

Interest Rates
2.50% - 5.25% 4.25%- 4.75%

Amount
$ 1,265,000 4,185,000
$ 5,450.000

The changes in Long-Term Debt during the fiscal year ended June 30, 2003, were as follows:

Balance July 1, 2002
Retroactive Restatement of Prior Year Balances
Balance July 1, 2002 Restated
Deductions Debt Retired
Balance June 30, 2003
Portion of Long-Term Debt Due within One Year

Governmental Funds

General

Capital

Obligation

Leases

Bonds

Total

$ 2,766,250 $ 7,575,000 $ 10,341,250

178,039

178,039

$ 2,944,289 $ 7,575,000 $ 10,519,289

156,238

2,125,000

2,281,238

$ 2,788,051 $ 5,450,000 $ 8,238.051

$ 168,335 $ 1,925,000 $ 2,093,335

- 24 -

HART COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2003

EXHIBIT"H"

Note 9: LONG-TERM DEBT

At June 30, 2003, payments due by fiscal year which includes principal and interest for these items are as follows:

Fiscal Year Ended June 30

Canital Leases

Princinal

Interest

2004 2005 2006 2007 2008 2009 - 2013 2014 - 2017

$ 168,335 $ 117,561

175,787

110,110

183,575

102,321

191,717

94,179

200,228

85,669

957,379

310,466

911,030

96440

Total Principal and Interest

$ 2,788.051 $ 916 746

Fiscal Year Ended June 30

General Obligation

Debt

Princinal

Interest

2004 2005 2006 2007 2008

$ 1,925,000 $ 2,555,000 305,000 325,000 340,000

228,854 164,179 42,050 26,137
8,925

Total Principal and Interest

$ 5,450,000 $ 470 145

Note 10: ON-BEHALF PAYMENTS

The Board has recognized revenues and costs in the amount of $291,151 for health insurance and retirement contributions paid on the Board's behalf by the following State Agencies.

Georgia Department of Education Paid to the Georgia Department of Community Health For Health Insurance of Non-Certified Personnel In the amount of $237,547

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 $53,604

- 25 -

HART COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2003

EXHIBIT "H"

Note 11: SIGNIFICANT COMMITMENTS

The following is an analysis ofsignificant outstanding construction or renovation contracts executed by the School District as of June 30, 2003, together with funding available:

Project

Unearned Executed Contracts

Funding Available From State

SA-01 S-673-203

$ 2,059,330 $======5==64-,6==7==5

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

Note 12: SIGNIFICANT CONTINGENT LIABILITIES

Amounts received or receivable principally from the Federal government are subject to audit and review by granter agencies. This could result in requests for reimbursement to the granter agency for any costs which are disallowed under grant terms. The School District believes that such disallowances, if any, will be immaterial to its overall financial position.

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 basic financial statements.

Note 13: SUBSEQUENT EVENTS

On March 2, 2004, the voters of Hart County voted in favor of the issuance of General Obligation Debt and a Special Purpose Local Option Sales Tax. The issuance of general obligation debt and imposition of the tax approved by the voters, as stated on the Official Ballot of Hart County, is as follows:

"Shall a total of $19,000,000 in aggregate principal amount of Hart County School District general obligation debt (the "Bonds") be issued for the purpose ofproviding funds to pay (i) a portion of the costs of (a) acquiring, constructing, furnishing and equipping new school buildings and facilities useful or desirable, including a fine arts building, (b) acquiring real property, (c) adding to, renovating, repairing, improving and equipping existing school buildings and other building and facilities, including classrooms and athletic facilities, (d) purchasing band instruments and equipment, (e) making certain safety and technology improvements, and (f) acquiring any property necessary or desirable therefor, both real and personal (collectively, the "Projects"), (ii) capitalized interest on the Bonds through and including April 1, 2005, and (iii) the costs of issuing the Bonds, and shall a special one percent sales and use tax be continued in Hart County for a period of time not to exceed 20 calendar quarters and for the raising of not more than $13,800,000 for the purpose of funding (a) the payment of a portion ofthe principal and interest on the Bonds, the maximum amount of debt

- 26-

HART COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2003

EXHIBIT "H"

Note 13: SUBSEQUENT EVENTS
service to be paid on the Bonds will not exceed $12,000,000, and (b) a portion of the costs of the Projects, the maximum amount of Projects to be funded will not exceed the amount of remaining one percent sales and use tax proceeds, if any."

Note 14: 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.

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 9.24% and employer contributions for the current fiscal year and the preceding two fiscal years are as follows:

Fiscal Year

Percentage Contributed

Required Contribution

2003 2002 2001

100% 100% 100%

$ 1,398,136 $ 1,327,190 $ 1,548,579

- 27 -

HART COUNTY BOARD OF EDUCATION GENERAL FUND
SCHEDULE OF REVENUES. EXPENDITURES AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL
YEAR ENDED JUNE 30. 2003

SCHEDULE "1"

REVENUES
Property Taxes Sales Taxes State Funds Federal Funds Charges for Services Investment Earnings Miscellaneous
Total Revenues
EXPENDITURES
Current Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Enterprise Operations Community Services Food Services Operation
Capital Outlay Debt Service
Total Expenditures
Excess of Revenues over (under) Expenditures
OTHER FINANCING SOURCES (USES)
Other Sources Other Uses
Total Other Financing Sources (Uses)
Net Change in Fund Balances
Fund Balances - Beginning Adjustments

NONAPPROPRIATED BUDGETS

ORIGINAL (1}

FINAL (1}

ACTUAL AMOUNTS

$

9,213,922 $

9,213,922 $

9,535,767

41,701

13,972,253

14,312,223

14,146,014

725,700

3,011,298

2,825,086

500,700

500,700

827,847

158,874

158,874

48,572

25 000

25 000

203,256

$

24,596,449 $

27,222,017 $

27,628,243

$

16,142,122 $

18,076,285 $

19,011,164

371,707 399,270 434,360 375,087 1,735,826 193,706 2,183,357 1,205,501
32,334 122,274
1,353,900 389,974

529,731 658,850 452,319 496,055 1,745,309 193,706 2,183,357 1,337,270
32,334 122,274
5,258 1,353,900
389,974

384,773 520,543 424,755 418,910 1,746,579 192,754 2,501,367 1,492,961
43,332 139,935 168,189
6,826 1,463,177
275,262

$

24,939 418 $

27,576,622 $

28,790,527

$

-342 969 $

-354 605 $

-1, 162,284

$

342,969 $

357,105

$

-1 491 374

$

342 969 $

357 105 $

-1 491 374

$

0 $

2,500 $

-2,653,658

10,264,146 -4,227,561

10,264,146 -4,227,561

5,496,804

Fund Balances - Ending

$

6,036,585 $

6,039,085 $ ===2;!:8=4=3!=1=46=

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

(1) Original and Final Budget amounts do not include budgeted revenues or expenditures of the various principal accounts.

See notes to the basic financial statements.

- 29 -

HART COUNTY BOARD OF EDUCATION SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
YEAR ENDED JUNE 30. 2003

SCHEDULE "2"

FUNDING AGENCY PROGRAM/GRANT
Agriculture, U. S. Department of Child Nutrition Cluster Pass-Through From Georgia Department of Education Food and Nutrition Program Food Services School Breakfast Program National School Lunch Program
Total Child Nutrition Cluster
Other Programs Pass-Through From Georgia Department of Education Food and Nutrition Program Food Distribution Program (1)
Total U. S. Department of Agriculture
Corporation for National and Community Service Pass-Through From Georgia Department of Education Learn and Serve America School and Community Based Programs
Education, U. S. Department of Special Education Cluster Pass-Through From Georgia Department of Education Individuals with Disabilities Education Act Part B - Special Education Flow Through Preschool Capacity Building Improvement
Total Special Education Cluster
Other Programs Pass-Through From Georgia Department of Education Elementary and Secondary Education Act Title I Comprehensive School Reform Demonstration Grant Grants to Local Educational Agencies Title II Enhancing Education Through Technology Improving Teacher Quality Title VI Innovative Education Program Strategies Rural and Low Income Schools Vocational Education - Basic Grants to States High School Program Basic Grant

CFDA NUMBER

PASSTHROUGH
ENTITY ID
NUMBER

EXPENDITURES IN PERIOD

* 10.553 * 10.555

N/A

N/A

$

$

(2) 1,286,813
1.286,813

10.550

NIA $

78847 1,365,660

94.004

N/A

$

11 518

84.027 84.173 84.027

N/A

$

N/A

N/A

$

426,332 33,076 11 217
470,625

84.332

NIA

* 84.010

N/A

84.318

N/A

84.367

N/A

84.298

N/A

84.358

N/A

84.048

N/A

215,229 835,843
151,360 168,100
23,011 49,284
41,559

- 30-

HART COUNTY BOARD OF EDUCATION SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
YEAR ENDED JUNE 30. 2003

SCHEDULE "2"

FUNDING AGENCY PROGRAM/GRANT
Education, U. S. Department of Other Programs Pass-Through From Pioneer Regional Educational Service Agency Elementary and Secondary Education Act Title IV Safe and Drug-Free Schools and Communities
Total U. S. Department of Education

CFDA NUMBER

PASSTHROUGH
ENTITY ID
NUMBER

EXPENDITURES IN PERIOD

84.186

N/A

$ _ _ _ _1.;..;:2=2=-=6-=-0

$ _ _--'-'1-'-96C--7-'"'2"-'-7--'-1

Total Federal Financial Assistance N/A = Not Available

$ =====3,=34=4=-,4=4===9

Notes to the Schedule of Expenditures of Federal Awards

(1) The amounts shown for the Food Distribution Program represent the Federally assigned value of nonmonetary assistance for donated commodities received and/or consumed by the School District during the current fiscal year.
(2) Expenditures for funds earned on the School Breakfast Program ($225,094) were not maintained separately and are included in the 2003 National School Lunch Program.

Major Programs are identified by an asterisk (*) in front of the CFDA number.

The School District did not provide Federal Assistance to any Subrecipient.

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

See notes to the basic financial statements.

- 31 -

HART COUNTY BOARD OF EDUCATION SCHEDULE OF STATE REVENUE YEAR ENDED JUNE 30. 2003

SCHEDULE "3"

AGENCY/FUNDING
GRANTS Education, Georgia Department of Quality Basic Education Direct Instructional Cost Kindergarten Program Kindergarten Program - Early Intervention Program Primary Grades (1-3) Program Primary Grades - Early Intervention (1-3) Program Upper Elementary Grades (4-5) Program Upper Elementary Grades - Early Intervention (4-5) Program Middle Grades (6-8) Program Middle School (6-8) Program High School General Education (9-12) Program Vocational Laboratory (9-12) Program Students with Disabilities Category I Category II Category Ill Category IV CategoryV Gifted Student - Category VI Remedial Education Program Alternative Education Program English Speakers of Other Languages (ESOL) Media Center Program 20 Days Additional Instruction Staff and Professional Development Indirect Cost Central Administration School Administration Facility Maintenance and Operations Categorical Grants Pupil Transportation Regular Bus Replacement Sparsity Nursing Services Principal Supplements Vocational Supervisors Mid-term Adjustment Hold-Harmless Education Equalization Funding Grant Food Services Vocational Education Austerity Reduction Other State Programs Health Insurance National Teacher Certification Preschool Handicapped Program Statewide After School Program (4-8) Statewide Reading Program (K-3) Lottery Programs Assistive Technology Computers in the Classroom
Georgia State Financing and Investment Commission Reimbursement on Construction Projects
Office of Treasury and Fiscal Services Public School Employees Retirement

GOVERNMENTAL FUND TYPES

CAPITAL

GENERAL

PROJECTS

FUND

FUND

TOTAL

$

970,855

50,258

2,046,694

129,835

1,092,538

95,085

22,084

1,913,956

1,354,964

611,450

88,754 336,732 826,436 339,018
20,097 393,499
82,360 144,012
47,082 295,515
98,784 57,800

410,266 604,411 844,503

471,408 119,993
19,000 83,750 13,944 26,842 15,559 60,642 96,406 244,805 -410,062
237,547 15,315 49,674 30,310 59,325
7,569 73,395

$

970,855

50,258

2,046,694

129,835

1,092,538

95,085

22,084

1,913,956

1,354,964

611,450

88,754 336,732 826,436 339,018
20,097 393,499
82,360 144,012
47,082 295,515
98,784 57,800

410,266 604,411 844,503

471,408 119,993
19,000 83,750 13,944 26,842 15,559 60,642 96,406 244,805 -410,062
237,547 15,315 49,674 30,310 59,325
7,569 73,395

$ 2,304,081 53,604

2,304,081 53604

See notes to the basic financial statements.

$ 14,146,014 $ 2,304,081 $ 16,450,095 - 32-

HART COUNTY BOARD OF EDUCATION SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS
YEAR ENDED JUNE 30. 2003

SCHEDULE "4"

PROJECT
For the purpose of funding, in whole or in part, the acquisition, construction, furnishing and equipping of two new elementary schools, parking areas and grounds, including the acquisition of all necessary real and personal property; the acquisition, construction, furnishing and equipping of additional classrooms, instructional and support space and the modification of existing space at Hart County Middle School; the renovation and modification of existing school district facilities; the acquisition of any necessary personal property, including computers and other technology; and the payment of expensed incident thereto (collectively, the "Projects"), the maximum cost of such Projects not to exceed $11,000,000

ORIGINAL ESTIMATED
COST (1)

CURRENT ESTIMATED COSTS (2)

AMOUNT EXPENDED IN CURRENT YEAR (3)

AMOUNT EXPENDED
IN PRIOR YEARS (3)

PROJECT STATUS

$ 11,000,000 $ 21,400,000 $ 1,733,179 $ 19,589,040 Ongoing

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

See notes to the basic financial statements.

- 33-

HART COUNTY BOARD OF EDUCATION GENERAL FUND - QUALITY BASIC EDUCATION PROGRAM (QBE}
ALLOTMENTS AND EXPENDITURES - BY PROGRAM YEAR ENDED JUNE 30. 2003

SCHEDULE "5"

DESCRIPTION
Direct Instructional Programs Kindergarten Program Kindergarten Program-Early Intervention Program Primary Grades (1-3) Program Primary Grades-Early Intervention (1-3) Program Upper Elementary Grades (4-5) Program Upper Elementary Grades-Early Intervention (4-5) Program Middle Grades (6-8) Program Middle School (6-8) Program High School General Education (9-12) Program Vocational Laboratory (9-12) Program Students with Disabilities Category I Category II Category Ill Category IV Gifted Student - Category VI Remedial Education Program Alternative Education Program English Speakers of Other Languages (ESOL)
TOTAL DIRECT INSTRUCTIONAL PROGRAMS
Media Center Program Staff and Professional Development

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

ELIGIBLE QBE PROGRAM COSTS

SALARIES

OPERATIONS

TOTAL

$

1,202,938 $

1,185,533 $

21,761 $

1,207,294

87,942

202,729

1,812

204,541

2,526,669

2,462,903

75,067

2,537,970

219,713

520,164

3,277

523,441

1,354,617

1,343,995

38,488

1,382,483

138,929 27,236 2,389,654 1,711,210 771,441 2,045,604
482,487 97,006 180,081 55,233

558,337 14,673
2,495,314 1,987,102
709,368
45,812 308,121 1,636,855 125,708 547,661
88,957 165,154
57,476

1,097 61,784 35,628 142,092 101,547
2,097 4,735 16,252 7,489 3,980 9,113 1,781
194

559,434 76,457 2,530,942 2,129,194 810,915
47,909 312,856 1,653,107 133,197 551,641
98,070 166,935 57,670

$

13,290,760 $ 14,455,862 $

528,194 $

14,984,056

370,387 72,834

392,287 3,395

29,149 69,958

421,436 73,353

TOTAL QBE FORMULA FUNDS

$

13,733,981 $ 14,851,544 $

627,301 $=====1=5'=47=8=,8=45=

(1) Comprised of State Funds plus Local Five Mill Share. (2) Allotments do not include the impact of the State budget austerity reduction.

See notes to the basic financial statements.

- 35-

SECTION II COMPLIANCE AND INTERNAL CONTROL REPORTS

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

DEPARTMENT OF AUDITS AND ACCOUNTS
254 Washington Street, S.W. Suite 214 Atlanta, Georgia 30334-8400
April 29, 2004

Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the Hart 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 of the governmental activities, each major fund, and the aggregate remaining fund information of Hart County Board of Education as of and for the year ended June 30, 2003, which collectively comprise Hart County Board ofEducation's basic financial statements and have issued our report thereon dated April 29, 2004. 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 ofobtaining reasonable assurance about whether Hart County Board ofEducation'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 of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances ofnoncompliance that are required to be reported under Government Auditing Standards.

2003-34YB-30

Internal Control Over Financial Reporting
In planning and performing our audit, we considered Hart County Board of Education's internal control over financial reporting in order to determine our auditing procedures for the purpose of expressing our opinion on the financial statements and not to provide assurance on the internal control over financial reporting. However, we noted certain matters involving the internal control over financial reporting and its operation that we consider to be reportable conditions. 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 Hart County Board of Education's ability to record, process, summarize and report financial data consistent with assertions of management in the financial statements. Reportable conditions are described in the accompanying Schedule of Findings and Questioned Costs as items FS-6731-03-01, FS-6731-03-02 and FS-6731-03-03.
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 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 believe none of the reportable conditions described above is a material weakness.
This report is intended solely for the information and use of the management, members of the Hart 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,
w.~

RWH:gp 2003-34YB-30

State Auditor

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

DEPARTMENT OF AUDITS AND ACCOUNTS
254 Washington Street, S.W. Suite 214 Atlanta, Georgia 30334-8400
April 29, 2004

Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the Hart County Board of Education
REPORT ON COMPLIANCE WITH REQUIREMENTS APPLICABLE TO EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH 0MB CIRCULARA-133
Ladies and Gentlemen:
Compliance
We have audited the compliance of Hart County Board of Education with the types of compliance requirements described in the US. Office of Management and Budget (0MB) Circular A-133 Compliance Supplement that are applicable to each of its major Federal programs for the year ended June 30, 2003. Hart 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 Hart County Board of Education's management. Our responsibility is to express an opinion on Hart County Board of Education's compliance based on our audit.
We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and 0MB Circular 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 Hart 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 Hart County Board of Education's compliance with those requirements.
2003SA-10

In our opinion, the Hart County Board of Education complied, in all material respects, with the requirements referred to above that are applicable to each of its major Federal programs for the year ended June 30, 2003.
Internal Control Over Compliance
The management ofHart County Board ofEducation is responsible for establishing and maintaining effective internal control over compliance with requirements of laws, regulations, contracts and grants applicable to Federal programs. In planning and performing our audit, we considered Hart County Board of Education's internal control over compliance with requirements that could have a direct and material effect on a major Federal program in order to determine our auditing procedures for the purpose of expressing our opinion on compliance and to test and report on internal control over compliance in accordance with 0MB Circular A-133.
Our consideration ofthe internal control over compliance would not necessarily disclose all matters in the internal control that might be material weaknesses. A material weakness is a condition in which the design or operation of one or more ofthe internal control components does not reduce to a relatively low level of risk that noncompliance with applicable requirements of laws, regulations, contracts and grants that would be material in relation to a major Federal program being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. We noted no matters involving the internal control over compliance and its operation that we consider to be material weaknesses.
This report is intended solely for the information and use of the management, members ofthe Hart 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,
w.~
State Auditor
RWH:gp 2003SA-10

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

HART COUNTY BOARD OF EDUCATION AUDITEE'S RESPONSE
SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2003

PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

FINDING CONTROL NUMBER AND STATUS

FS-6731-00-02 FS-6731-01-02 FS-6731-02-01

Previously Reported Corrective Action Implemented Further Action Not Warranted Previously Reported Corrective Action Implemented

SECTION IV FINDINGS AND QUESTIONED COSTS

HART COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2003

I SUMMARY OF AUDITOR'S RESULTS

1. Type of Report Issued on the Financial Statements The auditor's opinion on the Hart County Board of Education's financial statements was unqualified.

2. Reportable Conditions in Internal Control Disclosed by the Audit of the Financial Statements The audit report for the Hart County Board of Education disclosed financial statement reportable conditions related to the following control categories.

Cash and Cash Equivalents Revenues/Receivables/Receipts

Expenditures/Liabilities/Disbursements General Ledger

None ofthe reportable conditions described above are considered to be material weaknesses.

3. Noncompliance Material to the Financial Statements The audit of the Hart County Board of Education disclosed no instances of noncompliance that were deemed to be material to the financial statements.

4. Reportable Conditions in Internal Control Over Major Programs The audit report for the Hart 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 Hart County Board of Education's report on compliance with requirements applicable to major programs was unqualified.

6. Audit Findings Required to be Reported by Section .51 0(a) of 0MB Circular A-133 The Hart County Board of Education'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: 10.553 Food and Nutrition Program - Food Services - School Breakfast Program 10.555 Food and Nutrition Program - Food Services - National School Lunch Program 84.010 Elementary and Secondary Education Act - Title I - Grants to Local Educational Agencies

8. Type "A" Program Dollar Threshold The dollar threshold for type "A" programs was $300,000.

9. Low Risk Auditee The Hart County Board of Education qualified as a low risk auditee as defined by Section .530 of 0MB Circular A-133.

- 1-

HART COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2003
II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS
CASH AND CASH EQUIVALENTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Control Procedures Reportable Condition Finding Control Number: FS-6731-03-01
Our examination of the principal's accounts disclosed weaknesses in internal controls as discussed below:
Cash and Cash Equivalents The bank reconciliation function was not separated from the record keeping and voucher payment functions.
Revenues/Receivables/Receipts Deposit preparation was not separated from the record keeping and cash custody functions. Based on a sample of 25 items, six receipts were not deposited in a timely manner.
Expenditures/Liabilities/Disbursements The check writing function was not separated from record keeping or processing of signed checks. Based on a sample of 25 items, five vouchers did not contain supporting documentation.
These deficiencies were a result ofmanagement's decision to limit the number ofadministrative staff made responsible, at the various principal account sites, for the accounting functions and their failure to ensure established controls were functioning as designed. Management should implement additional procedures to ensure that the key accounting functions of custody, record keeping and authorization are segregated.
EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Lottery Inventory Records Reportable Condition Finding Control Number: FS-6731-03-02
An examination of lottery equipment was performed with the following deficiencies noted:
1. The School District did not maintain an equipment listing or inventory cards of equipment purchased with lottery funds.
2. Two computer servers could not be specifically identified and located. 3. No documentation or certificates were maintained for software licenses purchased during
fiscal year 2003.
-2-

HART COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2003
II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Lottery Inventory Records Reportable Condition Finding Control Number: FS-6731-03-02 The School District should establish accounting controls and procedures to implement an inventory system that provides for complete inventory records and identification of all lottery funded equipment. An annual physical inventory should be performed and reconciled to the equipment records to ensure the accuracy of inventory records. GENERAL LEDGER Detailed Listing of Salaries Not Reconciled Reportable Condition Finding Control Number: FS-6731-03-03 The detailed listing of salary payments made to employees as submitted by the School District to the Georgia Department of Audits was not reconciled with the general ledger or quarterly 941 reports. The variance was a result ofthe School District miscoding salary payments. Payments to school bus drivers for field trips were charged to energy expense. Payments to teachers for staff development classes were charged to purchased professional and technical services. This condition occurred because management did not reconcile amounts submitted to Georgia Department of Audits to the School District's general ledger and quarterly withholding reports. Procedures should be established by the School District to ensure that the detailed listing ofsalaries is reconciled to the accounting records prior to submission to the Georgia Department of Audits. III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS No matters were reported.
-3-