Houston County Board of Education, Perry, Georgia, report on audit of the financial statements, for the fiscal year ended June 30, 2002

.....

(;:A .
fts.oi/~

.-,. '- . -.., -,, .

.- .'

::;Rl ' , ,;+'

.,,

.tet:ei1";::-: :..:.-
-~~.1/~f :~

'.- '". :
,.'r;

..- , ~. -. \ '

' I _,...

~-:;

'

.' ~
..... i ''

... . ' :..., -:.

.\ ) ;

,,

',:. '.. . _, , srATE00~:i<iioR(;iA

, .
._,.._

'

.

, ... ,_' '...

-,, '. ,"
\.

.-,. oEF,ARTMENT.o.i(.A,lio1ys:-AND--.AccouNTs'' :,:\~'

..... ,'

',.- -.,

..,, ,.,. I

' ~ -;;. ....

,



"

' "



" '! .: .'!, ....

~



I

, .. ,'f ~ .,.

t /

'



l

,

J '

-~ ,, ..

~ ~.,:

I

'
. '

~ J ,I

\ ,,

,.,

- -

1 ,

,- 1' :

J '

1,
. '",.
' . ., -,,.

,

)'

l ,I

.,' '
' ,1,, -
''

:::,

' i,
'
... ,

0
.L

'c

",.

, ........ . '.

I '

.

'.' ,

(

:,.

... ,

.._ ~ I

, .,.... ' , ., J',J
.,
'. ,'

-... ,.

.,.

-'

. ,...
- .
.~1-. ,' : ~ : J '{

-.'
. '"},
''.. ( ..

' , ,,,.
'J
' ... J

'' ,
1 l -.

,,.. .

', I

.

; ~

I <,

- ,, .... -. ,-. ' .... ': , . ' ..,,
, .J
' ,, I~ "
l -
..... , ... .I.\
. ,.: 'r.:

'.- ., .: .'if.;.

'
, ..

":;' ,i,
, -.

1. ' ' }
< ,.'-I

..
' ,

' ,:

i'.,
v .... \ ,.

. , . ,' '';., ',.I'

W. Russell .HlntQri 1,'_,1

~fate A~dltor"- ,;

' ,,

l l'

I

, . ', , ,,.

' .

'.

,, r >.,
.,,.,',

' .,

, "--.

'

I

. ,:' ' . ;~- '
.. ,.

- .'

\ . t"

.. '
.._. : ' . '

. ' J' - ... ' '

HOUSTON 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

10

H

NOTES TO THE BASIC FINANCIAL STATEMENTS

11

SCHEDULES

REQUIRED SUPPLEMENTARY INFORMATION

SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES

IN FUND BALANCES - BUDGET AND ACTUAL

GENERAL FUND

30

HOUSTON COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS -

SECTION I

FINANCIAL

SCHEDULES

SUPPLEMENTARY INFORMATION

2 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS

31

3 SCHEDULE OF STATE REVENUE

33

4 SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS

35

ALLOTMENTS AND EXPENDITURES

GENERAL FUND - QUALITY BASIC EDUCATION PROGRAMS (QBE)

5

BY PROGRAM

36

6

BY SITE

37

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

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

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

SECTION I FINANCIAL

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

DEPARTMENT OF AUDITS AND ACCOUNTS
254 Washington Street. S.W. Suite 214 Atlanta, Georgia 30334-8400
May 27, 2003

Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the Houston County Board of Education
INDEPENDENT AUDITOR'S COMBINED REPORT ON BASIC FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION -SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
Ladies and Gentlemen:
We have audited the accompanying financial statements of the governmental activities, each major fund, and the aggregate remaining fund information (Exhibits A through H) of the Houston County Board of Education, as of and for the year ended June 30, 2002, which collectively comprise the Board's basic financial statements as listed in the table of contents. These financial statements are the responsibility ofthe Houston County Board of Education's management. Our responsibility is to express opinions on these financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opm1ons.
In our opinion, the financial statements referred to above present fairly, in all material respects, the respective position ofthe governmental activities, each major fund, and the aggregate remaining fund information of the Houston County Board of Education, as of June 30, 2002, and the respective changes in financial position thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America.
2002-34ARL-11

As discussed in Note 2 to the basic financial statements, during fiscal year 2002, the Board completed a comprehensive inventory of its capital assets for inclusion in the basic financial statements; the Board consolidated its individual school activity accounts for inclusion in the basic financial statements; the Board changed its method of accounting for the salaries of certain tenmonth employees from a cash basis to a basis that is generally accepted; the Board reported compensated absences as required by generally accepted accounting principles; and the Board changed its method of accounting for local option sales tax collections from which revenue recognition had been deferred to future period to recording the revenue as required by generally accepted accounting principles. These changes are in accordance with generally accepted accounting principles.
As described in Note 2, the Houston County Board of Education has implemented a new financial reporting model as required by provisions of Governmental Accounting Standards Board Statement No. 34, Basic Financial Statements - and Management's Discussion and Analysis - for State and Local Governments, as of June 30, 2002.
In accordance with Government Auditing Standards, we have also issued our report dated May 27, 2003, on our consideration of the Houston 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 xi and page 30 respectively, are not a required part of the basic financial statements but are supplementary information required by the Governmental Accounting Standards Board. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods of measurement and presentation ofthe required supplementary information. However, we did not audit the information and express no opinion on it.
Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Houston County Board of Education's basic financial statements. The accompanying supplementary information which consist of Schedules 2 through 6, which includes the Schedule of Expenditures of Federal Awards as required by U.S. Office of Management and Budget Circular A-133, Audits ofStates, Local Governments, and Non-Profit Organizations, are not a required part ofthe basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements, and in our opinion, is fairly stated, in all material respects, in relation to the basic financial statements taken as a whole.
2002-34ARL-l l

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

RWH:gp 2002-34ARL-11

State Auditor

HOUSTON COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2002
The discussion and analysis of Houston County Board ofEducation's financial performance provides an overall review of the Board's financial activities for the fiscal year ended June 30, 2002. The intent of this discussion and analysis is to look at the Board's financial performance as a whole. Readers should also review the financial statements and the notes to the basic financial statements to enhance their understanding of the Board's financial performance.
Financial Highlights
Key financial highlights for 2002 are as follows:
The Board implemented GASB 34 for 2002. Due to this being the implementation year, many comparisons are not available that will be available for 2003.
In total, net assets increased $7.4 million which representsa 5.3 percent increase from 2001. This total increase was due to governmental activities since the Board has no business-type activities.
General revenues accounted for $68.3 million in revenue or 38 percent ofall revenues. Program specific revenues in the form of charges for services and sales, grants and contributions accounted for $111 .4 million or 62 percent of total revenues of$ 179.7 million.
The Board had $172.3 million in expenses related to governmental activities; only $111.4 million of these expenses were offset by program specific charges for services, grants or contributions. General revenues (primarily taxes) of $68.3 million were adequate to provide for these programs.
Among major funds, the General Fund has $169.6 million in revenues, $162.7 million in expenditures and a net change of .3 million from other financing sources/uses and the change in inventory. The General Fund's balance increased to $39.9 million from $32.7 million.
Using the Basic Financial Statements This annual report consists of a series of financial statements and notes to those statements. These statements are organized so the reader can understand the Houston County Board of Education as a financial whole, or as an entire operating entity.
The Statement ofNet Assets and Statement ofActivities provide information about the activities of the whole Board, presenting both an aggregate view of the Board's finances and a longer-term view of those finances. Fund financial statements provide the next level of detail. For governmental funds, these statements tell how services were financed in the short-term as well as what remains for future spending. The fund financial statements also look at the Board's most significant funds. In the case of the Houston County Board of Education, the General Fund is by far the most significant fund.

HOUSTON COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2002
Reporting the Board as a Whole
Statement ofNet Assets and the Statement ofActivities
While this document contains the large number of funds used by the Board to provide programs and activities for the schools, the view ofthe Board as a whole looks at all financial transactions and asks the question, "How did we do financially during fiscal year 2002?" The Statement ofNet Assets and the Statement of Activities answers this question. These statements include all assets and liabilities using the economic resources focus and accrual basis ofaccounting 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 the cash is received or paid.
These two statements report the Board's net assets and changes in those assets. This change in net assets is important because it tells the reader that, for the Board as a whole, thefinancial position of the Board has improved or diminished. The causes ofthis change may be the result ofmany factors, some financial, some not. Non-financial factors include the Board's property tax base, facility conditions, required educational programs and other factors.
In the Statement of Net Assets and the Statement of Activities, the Board has one distinct type of activity:
Governmental Activities - All ofthe Board's programs and services are reported here including instruction, support services, operation and maintenance of plant, pupil transportation, food service, after school program, principal's accounts and various others.
Reporting the Board's Most Significant Funds
Fund Financial Statements
Fund financial reports provide detailed information about the Board's major funds. The Board uses many funds to account for a multitude of financial transactions. However, these fund financial statements focus on the Board's most significant funds. The Board's major governmental funds are the General Fund, Capital Projects Fund and the Debt Service Fund.
Governmental Funds Most of the Board's activities are reported in governmental funds, which focus on how money flows into and out ofthose funds and the balances left at year-end available for spending in future periods. These funds are reported using the current financial resources measurement focus and the modified accrual accounting method, which measures cash and all other financial assets that can readily be converted to cash. The governmental fund statements provide a detailed short-term view of the Board's general government operations and the basic services it provides. Governmental fund information helps determine whether there is adequate financial resources that can be spent in the near future to finance educational programs. The relationship (or differences) between governmental activities (reported in the Statement of Net Assets and the Statement of Activities) and governmentalfunib- is reconciled in the financial statements.
ii

HOUSTON COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2002

Fiduciary Funds The Board is the trustee, orfiduciary, for assets that belong to others, such as the employee benefit programs, and school clubs and organizations within the principals' accounts. The 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 district excludes these activities from the district-wide financial statements because it cannot use these assets to finance its operations.

The Board as a Whole

The perspective of the statement of net assets is of the Board as a whole. Table 1 provides a summary of the Board's net assets for 2002. Since this is the first year the Board has prepared financial statements following GASB Statement 34, net assets comparisons to fiscal year 2001 are not available.

Table 1 Net Assets (in Thousands)

Governmental Activities Fiscal Year 2002

Assets Current and Other Assets Capital Assets, Net

$150,389 116,477

Total Assets

$266,866

Liabilities Current and Other Liabilities Long-Term Liabilities

$ 21,673 97,121

Total Liabilities

$118,794

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

$ 74,197 43,486 30,389

Total Net Assets

$148,072

lll

HOUSTON COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2002 Total net assets increased $7.4 million to $148.1 million. In addition the Board had a significant increase in the Long - Term Liabilities. The Board issued $50.0 million in general obligation bonds during the current fiscal year to be financed from the proceeds of a Special Purpose Local Option Sales Tax to be collected in the next five fiscal years as approved by the voters. The proceeds from this issue were not received until late in the fiscal year and the majority of the proceeds will be disbursed on the related construction costs in the near future. Table 2 shows the changes in net assets for fiscal year 2002. Since this is the first year the Board has prepared financial statements following GASB Statement 34, revenue and expense comparisons to fiscal year 2001 are not available.
IV

HOUSTON COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2002

Table 2 Change in Net Assets
(in Thousands)
Revenues Program Revenues: Charges for Services and Sales Operating Grants and Contributions Capital Grants and Contributions
Total Program Revenues
General Revenues: Taxes Property Taxes For Maintenance and Operations For Debt Service Railroad Cars Sales Taxes Local Option Sales Tax Special Purpose Local Option Sales Tax For Debt Service and Capital Projects Intangible Recording Tax 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 oflnstructional 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 2002
$ 8,388 101,250 1,808
$111,446
$ 26,265 1
14
15,629
8,041 796 214
11,310 2,405 3,576
$ 68,251
$179.697
$116,096
3,862 3,646 4,728
902 9,104 2,132 10,844 4,470 2,087
893
1,643 821
8,552 2.515
$172,295
$ 7,40_2

HOUSTON COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2002

Figure A shows the funding sources for the revenues. 57 percent ofthe Board's revenues are derived from state grants. Property Taxes make up 13 percent of the total funding, while an additional 14 percent is earned from the county's sales taxes.

Figure A Sources of Revenue for Fiscal Year 2002

Federal Funds
8%

Property Tams 13% \

Sales Taxes 14%
\

r Charges for Services

I

&9/4

I

Other

------ 3%

State Funds 57"/4

As shown in Figure B, Instruction comprised 67.4 percent of governmental program expenses. Administration and Other Services (4.9 percent) consist ofthe central office, business & warehouse, community services and other operations of the School District. Interest expense equal to 1.5 percent of total expenses was attributable to capital leases and the outstanding bonds for capital projects.

FigureB FunctionalExpensesforFiscalYear2002

nstruction

674%

I

I

\

!Admnistrabon &

Other Serv,ces

49%
L _ _ _____,
School AdmmstrabOn-
53%
Ei:lucabonal M!<ia - n-proverrent of

M!1ntenance and

------ Q:,erat,on

''\ I

63%

\ 1.

Student

- TransportatJon

'I

'''' '\' Interest on Debt

26% Food Services
50%

\-

15%

I

27%

tlstruc:llon AJpi Services

21%

22%

VI

HOUSTON COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR' ENDED JUNE 30, 2002

Governmental Activities

The Statement of Activities shows the cost of program services and the charges for services and grants offsetting those services. Table 3 shows, for governmental activities, the total cost ofservices and the net cost ofservices. That is, it identifies the cost of these services supported by tax revenue and unrestricted State entitlements. Since this is the first year the Board has prepared financial statements following GASB Statement 34, the cost ofservice comparisons are not available for fiscal year 2001.

Table 3 Governmental Activities
(in Thousands)

Total Cost of Services Fiscal Year 2002

Net Cost of Services Fiscal Year 2002

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

$116,096
3,862 3,646 4,728
902 9,104 2,132 10,844 4,470 2,087
893
1,643 821
8,552 2,515

$ 35,434
2,554 2,560 2,657 -1,479 4,835 2,132 4,979 2,041 2,051
622
-480 821 -393 2,515

Total Expenses

$172,295

$ 60,842

Although program revenues make up a majority ofthe funding, the Board is still dependent upon tax revenues for governmental activities. Over 30.5 percent of instruction activities are supported through taxes and other general revenues, and for all governmental activities general revenue support is 35.3 percent.

vu

HOUSTON COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2002
The Board's Funds
The Board's governmental funds are accounted for using the modified accrual basis of accounting. Total governmental funds had revenues and other financing sources of $233.4 million and expenditures and other financing uses of$180.0 million. There was an increase in the fund balance totaling $53.6 million for the governmental funds as a whole. The General Fund had an increase of $7.2 million, the Capital Projects Fund had an increase of $46.2 million due to the unspent bond proceeds and the Debt Service Fund had an increase of$0.2 million. The positive change in the fund balance of the general fund for the year reflects that the Board was able to meet current costs.
General Fund Budgeting Highlights
The Board's budget is prepared in accordance with Georgia law. The most significant budgeted fund is the General Fund.
During the course of fiscal year 2002, the Board amended its General Fund budget as needed. The Board uses site-based budgeting. The budgeting systems are designed to tightly control total site budgets but provide flexibility for site management.
For the General Fund, the final budgeted revenues and other financing sources of $158.3 million exceeded the original budgeted amount of $154.2 million by $4.1 million. This difference was due to an increase in state revenues budget of $2.4 million, an increase in federal revenues of $1.2 million and an increase of .5 million for other sources. The actual revenues and other financing sources of$170.5 million exceeded the budgeted amount by $12.2 million. The additional revenues were mainly the result of the District obtaining additional state and Federal grants, conservative budgeting for property and sales taxes, and the inclusion of the individual school and principal accounts that were not included in the final budget.
The final budgeted expenditures and other financing uses of $158.3 million exceeded the original budgeted amount of $156.5 million by $1.8 million. This difference was due mainly to an increase in state and federally funded grant expenditures. The actual expenditures and other financing uses of $163.5 million was $5.2 million more than budgeted. The additional expenditures were a result of the aforementioned school accounts and the issuance costs of the general obligation bond issue.
The differences in the beginning and ending fund balances is the result of the Board's decision to include the individual school activity accounts and the inclusion of Local Option Sales Taxes that had previously been reported as deferred. This change in accounting principles is further explained in the Notes to the Basic Financial Statements.
General Fund revenues and otherfinancing sources exceeded the expenditures and otherfinancing uses by $7.0 million. The Board made a concerted effort to increase the fund balance for specific expenditures in fiscal year 2003 and this result is evidence of their work. The fiscal year 2003 budget includes expenditures for a $1,000 increase in the local teacher's supplement for each
Vlll

HOUSTON COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2002

teacher, locally funded construction projects, the purchase of 20 additional buses, additional technology purchases and the furnishings and instructional supplies for the opening of two new elementary schools.

Capital Assets and Debt Administration

Capital Assets

At the end of fiscal year 2002 the Board had $116.5 million invested in capital assets, net of depreciation, all in governmental activities. Table 4 shows fiscal year 2002 balances. Since this is the first year the Board has prepared financial statements following GASB Statement 34, capital assets comparisons to fiscal year 2001 are not available.

Table 4 Capital Assets at June 30 (Net of Depreciation, in Thousands)

Governmental Activities Fiscal Year 2002

Land Construction in Progress Buildings and Building Improvements Equipment Land Improvements

$ 1,857 1,204
103,996 9,031 389

Total

$116,477

The overall capital assets decreased in fiscal year 2002 due to the depreciation expense exceeding current year additions; however, this decrease is for this fiscal year only. Late in fiscal year 2002, the Board began an aggressive $109.5 million capital outlay program funded by the issuance ofthe aforementioned general obligation bonds, Special Purpose Local Option Sales Tax proceeds, local funding and state capital outlay grants. This program included the construction of two new elementary schools and two new middle schools, as well as, several additions and the renovation of another twenty-one schools. This program was implemented to ensure adequate classroom space is available for our rapidly growing system. Construction expenses in excess of $19.2 million and $40.0 million are projected for the fiscal years 2003 and 2004 budgets, respectively.

IX

HOUSTON COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2002

Debt

At June 30, 2002, the Board had $78.8 million in bonds outstanding with $1.2 million due within one year, $11.8 million in intergovernmental contract trust certificates with .3 million due within one year and $3.0 million in capital leases outstanding with $1.3 million due within one year. However, in fiscal year 2003, the Board will call for redemption of the remainder of the outstanding 1996 bonds in the amount of$27.6 million. This early redemption will reduce the outstanding bond debt at June 30, 2003, to the $50.0 million issued in 2002, resulting in a savings of$12.7 million in debt service payments over the next 14 years.

Table 5 summarizes the long-term debt outstanding at June 30, 2002. Since this is the first year the Board has prepared its financial statements following GASB Statement 34, debt comparisons to fiscal year 2001 are not available.

Table 5 Debt at June 30 (in Thousands)

Governmental Activities Fiscal Year 2002

General Obligation Bonds Intergovernmental Contract Trust Certificates Capital Leases Compensated Absences

$ 78,755 11,755 3,035 1.752

Total

$ 95,297

At June 30, 2002, the Board's overall legal bonding authority was $135.3 million based on the assessed value of taxable property as of December 31, 2001. The Board's bonds have assigned ratings of A2 and A+. In addition, the State of Georgia limits the amount available to be spent each year on multiyear leases, purchase, or lease purchase contracts to 7.5 percent ofthe locally generated taxes for the maintenance and operation of the school system. Both the current year payments and subsequently scheduled payments are well below the $3.1 million threshold.

Current Issues

The Houston County School System consists of 33 campuses located in Houston County, a fast-
growing area with a population of 110,765. Current enrollment is approximately 22,221 students in grades PK-12. Among Georgia's 159 counties, Houston ranks 13th in population, 16th in economics, I 5th in income and 115th in overall millage rate.

X

HOUSTON COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2002
The county has thrived even during the recent downturn in the economy. Sales tax revenue growth is better than other parts ofGeorgia, with shoppers paying seven percent tax on purchases. In calendar year 2002 the System's Local Option Sales Tax rose 3.4 percent over the prior year's collections, even though the State as a whole has experienced a severe decrease in its collections over the same period. The unemployment rate was just over three percent in 2002, down from a ten-year high of six percent in 1992 and continues to be below the state rate.
Houston County is home to Robins Air Force Base, Georgia's largest single industry. Robins Air Force Base had an estimated fiscal year 2002 economic impact on the State of Georgia of $4.1 billion, with Houston County being by far the largest beneficiary of that impact. Other large employers located in the county include the Board ofEducation, Frito-Lay Company, Anchor Glass, Cagle Foods Inc., the Houston County Development Authority and Wal-mart Associates. Of Houston's employed residents, 75.3% work in county.
Houston is Georgia's sixty-fifth largest county in total area. As one ofthe fastest growing counties in Georgia, Houston had a 15% population increase from 1980-1990 and a 24% increase from 19902000. The population is projected to grow by 14% by 2010 to 129,065. This growth results in an average school system enrollment increase of around 500 students per year.
Houston has three municipalities: Centerville with a population of 4,278; Perry with 9,602; and Warner Robins with 48,804. The county also includes the communities of Bonaire, Elko, Haynesville, Clinchfield and Henderson.
The median household income as of 1997 was $41,188 per year. As of 2000, the per capita income was $24,548. About 43 percent ofthe county's adult population has an education level ranging from some college to professional or doctorate degree.
Contacting the Board's Financial Management
This financial report is designed to provide our citizen's, taxpayers, investors and creditors with a general overview of the Board's finances and to show the Board's accountability for the money it receives. If you have questions about this report or need additional financial information, contact Stephen J. Thublin, CPA, Comptroller at the Houston County Board of Education, P.O. Box 1850, 1100 Main Street, Perry, Georgia 31069. You may also email your questions to sthublin@hcbe.net.
xi

HOUSTON COUNTY BOARD OF EDUCATION

HOUSTON COUNTY BOARD OF EDUCATION STATEMENT OF NET ASSETS JUNE 30, 2002
ASSETS
Cash and Cash Equivalents Investments Accounts Receivable, Net
Taxes State Government Federal Government Other Inventories Capital Assets Land Construction m Progress Land Improvements Buildings Equipment Less Accumulated Depreciation
Total Assets
LIABILITIES
Accounts Payable Salaries 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

$

4,830,198 48

123,043,793 43

6,277,323.74 13,275,245.26
819,031.35 338,477.26 1,805,344.08

1,857,204.00 1,204,381.41
469,816.00 147,020,865.67
15,259,637.60 -49,335,084.66

$ 266,866,233 62

$

8,593,675.86

13,079,447 41

2,652,212.57 94,469,041.37

$ 118,794,377.21

$

74,197,238.17

1,024,714 38 42,352,843.42
108,052.37 30,389,008.07

$ 148,071,856.41

$ 266,866,233.62

HOUSTON COUNTY BOARD OF EDUCATION STATEMENT OF ACTIVITIES
FOR THE YEAR ENDED JUNE 30, 2002

EXPENSES

CHARGES FOR SERVICES

GOVERNMENTAL ACTIVITIES

Instruction Support Services
Pupil Services Improvement of Instructional Services Educational Media Services General AdmImstration 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

$ 116,096,112 70 $
3,862,041.39 3,646,325.77 4,727,803.06
902,374.91 9,103,810.62 2,132,117.27 10,844,015.13 4,469,647.21 2,086,510.70
893,271.35
1,643,201.50 820,676.80
8,551,850 19 2,515,065.93

2,434,020 41
19,015 63 2,123,636 50 3,811,41668

Total Governmental Act1vit1es

$ 172,294,824.53 $

8,388,089.22

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

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

CAPITAL

GRANTS AND

GRANTS AND

CONTRIBUTIONS CONTRIBUTIONS

NET (EXPENSES) REVENUES
AND CHANGES IN NET ASSETS

$

77,609,193.63 $

1,307,593.19 702,142.91
2,070,095.00 2,381,576 78 4,269,094.00

5,845,894 00 1,624,113.42
35,573.79 271,320.20

5,133,162.05 $ 101,249,758.97 $

618,764.84 $ 470.00
384,309 00
804,466 32
1,808,010.16 $

-35,434, 133 82
-2,553,978.20 -2,559,873.86 -2,657,708.06 1,479,201.87 -4,834, 716.62 -2, 132,117.27 -4,979, 105.50 -2,041,067.4 7 -2,050,936.91
-621,951.15
480,435.00 -820,676.80 392,728.54 -2,515,065.93
-60,848,966.18

$

26,264,519.35

477.79

14,200.10

15,628,958.61

8,040,720.72 796,395.67 214,533.43
11,309,692.08 2,405,169.47 3,576,321.03

$

68,250,988 25

$

7,402,022.07

140,669,834.34

$ 148,071,856 41

- 5-

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -- -- --- -
HOUSTON COUNTY BOARD OF EDUCATION BALANCE SHEET
GOVERNMENTAL FUNDS JUNE 30 2002

EXHIBIT "C"

ASSETS
Cash and Cash Equivalents Investments Accounts Recervable, Net
Taxes State Government Federal Government Other lnventones
Total Assets

GENERAL FUND

DISTRICTWIDE
CAPITAL PROJECT
FUNDS

DEBT SERVICE FUNDS

TOTAL

$ 3,896,706 98 $ 236,087 12 $ 697,404 38 $ 4,830,19848 34,253,749 35 49,650,282 44 39,139,761 64 123,043,793 43

3,448,725 44 12,902,343 56
819,031 35 338,477 26 1,805,344 08

372,901 70

2,515,677 40

5,964,402 84 13,275,245 26
819,031 35 338,477 26 1,805,344 08

$ 57,464,378 02 $ 50,259,271 26 $ 42,352,843 42 $ 150,076,492 70

LIABILITIES AND FUND BALANCES
LIABILITIES
Accounts Payable Salanes Payable Cla:ms Payable
Total L:ab:l:t1es
FUND BALANCES
Reserved for Conbnuabon of Federal Programs Debt Service lnventones Capital Protects
Unreserved Designated for Subsequent Years' Expenditures Undes1gnated Reported m General Fund Capital Protects
Total Fund Balances

$ 3,896,931 00 $ 13,079,447 41 601,198 00

4,095,546.86

$ 17,577,576 41 $ 4,095,546 86

$ 7,992,477 86 13,079,447 41 601,198 00
$ 21,673, 123.27

$ 349,33810

$

349,33810

$ 42,352,843 42

42,352,843 42

675,376.28

675,376 28

$ 46,156,919 39

46,156,919 39

25,573,752 94

25,573,752 94

13,288,334 29

6,805 01

13,288,334 29 6 805 01

$ 39,886,801 61 $ 46,163,724 40 $ 42,352,843 42 $ 128,403,369 43

Total L:ab1hties and Fund Balances

$ 57,464,378 02 $ 50,259,271 26 $ 42,352,843 42 $ 150,076,492 70

The notes to the bas:c financial statements are an Integral part of this statement -6-

HOUSTON COUNTY BOARD OF EDUCATION RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET
TO THE STATEMENT OF NET ASSETS
JUNE 30. 2002

EXHIBIT"D"

Total Fund Balances - Governmental Funds (Exhibit "C")
Amounts reported for Governmental Act1vrt1es 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 D1stncts property tax revenues will be collected after year end but are not available soon enough to pay for the current penod's expenditures
Long-Term L1ab1lrt1es, including Bonds Payable, are not due and payable in the current period and therefore are not reported as hab1ht1es in the funds Long-Term L1ab1lrt1es at year-end consist of Bonds Payable Trust Certificates Capital Leases Compensated Absences Bond Premium Total Long-Term L1ab1lrt1es

$ 128,403.369 43

$ 1.857,204 00 1,204,381 41 469,816 00
147,020,865 67 15,259,637.60 -49,335,084 66

116,476,820.02

312,920 90

$ -78,755,000 00 -11,755,000 00 -3,034,656.34 -1,752,229 60 -1,824,368 00

-97, 121,253 94

Net Assets of Governmental Activities (Exhibit "A")

$ 148,071,856 41

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

--------------------------------- - - -- -

HOUSTON COUNTY BOARD OF EDUCATION STATEMENT OF REVENUES. EXPENDITURES AND CHANGES IN FUND BALANCES
GOVERNMENTAL FUNDS YEAR ENDED JUNE 30. 2002

EXHIBIT "E"

REVENUES
Property Taxes Sales Taxes State Funds Federal Funds Charges for Sel'\llces Investment Earnings Miscellaneous
Total Revenues
EXPENDITURES
Current Instruction Support SeMces Pupil Services Improvement of Instructional Services Educallonal Media Services General Admin1strat1on School Admin1strat1on Business Administration Maintenance and Operation of Plant Student Transportation SeMces Central Support Services Other Support Services Enterpnse Operations Community Services Food Services Operation
Capital Outlay Debt Services
Pnncipal Interest
Total Expenditures
Excess of Revenues over (under) Expenditures
OTHER FINANCING SOURCE (USES}
Accrued Interest on Bonds Sold Proceeds of Long-Term Capital-Related Debt Premiums on Bonds Sold Capital Leases Transfers In Transfers Out
Total Other Financmg Sources (Uses)
Net Change in Fund Balances
Fund Balances - Beginning
Inventory - Net Change 1n Period

GENERAL FUND

DISTRICTWIDE
CAPITAL PROJECT
FUNDS

DEBT SERVICE
FUNDS

TOTAL

$ 24,546,498 77 16,639,887 71
103,276,724 04 $ 13,505,012 21 7,256,562 34 964,372.86 3,419,827 44
$ 169,608,885 37 $

$ 372,901 70
108,052 37 156,493 59

477 79 $ 8,040,720 72
1,332,744 24

24,546,976 56 24,680,608 43 103,649,625 74 13,505,012 21
7,256,562 34 2,405,169 47 3,576,321 03

637,447 66 $ 9,373,942 75 $ 179,620,275 78

$ 109,835,380 64

$ 109,835,380 64

3,843,439.95 3,616,192.70 3,313,639 74
782,209 51 8,968,188 60 1,148,976 29 $ 10,694,402 15 4,925,767 43 1,904.159.37
893,271 35 1,643,201 50
820,676 80 9,077,90448
39,034 21

809,614 50 $ 5,535,318 77

110,940 35

3,843,439 95 3,616,192 70 3,313,639 74
782,209.51 8,968,188 60 2,069,531 14 10,694,402.15 4,925,767 43 1,904,15937
893,271 35 1,643,201.50
820,676 80 9,077,904 48 5,574,352 98

1,011,204 48 154 346 41

7,505,000 00 2,512,675 08

8,516,204 48 2,667,021 49

$ 162,671,995.61 $ 6,344,933 27 $ 10,128,615 43 $ 179,145,544 31

$ 6,936,889 76 $ -5,707,485 61 $ -754,672 68 $

474 731 47

$

151,955 56 $

151,955 56

$ 50,000,000 00

50,000,000 00

1,824,368 00

1,824,368 00

$

922,578 60

922,578 60

40,205.00

841,968.08

882,173 08

-882,173 08

-882,173 08

$

40 405 52 $ 51,864,573 00 $

993,92364 $ 52,898,902 16

$ 6,977,295 28 $ 46,157,087.39 $

239,250.96 $ 53,373,633.63

32,663,129 95

6,637 01

42,113,592 46

74,783,359 42

246,376 38

246,376 38

Fund Balances - Ending

$ 39,886,801 61 $ 461163,724 40 $ 42,352,843 42 $ 128,403,369 43

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

HOUSTON COUNTY BOARD OF EDUCATION RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT OF
REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES TO THE STATEMENT OF ACTIVITIES JUNE 30, 2002

EXHIBIT"F"

Total Net Change in Fund Balances - Governmental Funds (Exh1b1t "E")
Amounts reported for Governmental Act1v1t1es in the Statement of Acttvrt1es are different because
Capital OuUays are reported as expenditures 1n Governmental Funds However, in the Statement of Act1v1ties, the cost of Caprtal Assets 1s allocated over their estimated useful hves as depreciation expense In the current penod, these amounts are
Capital Outlay Depreciation Expense
Excess of Capital OuUay over Depreciation Expense
Because some property taxes will not be collected for several months after the School D1stnct's fiscal year ends, they are not considered "available" revenues
Bond proceeds provide current financial resources to Governmental Funds, however, issuing debt increases Long-Term L1abil1hes in the Statement of Net Assets In the current penod, proceeds were received from
General Obhgat1on Bonds Issued, 1nduding a premium of $1,824,368 00
Some of the capital assets acquired this year were financed With caprtal leases In Governmental Funds, a capital lease arrangement 1s considered a source of finanong, but in the Statement of Net Assets, the lease obhgat1on 1s reported as a Long-Term L1abll1ty
Repayment of Long-Term Debt 1s reported as an expenditure in Governmental Funds, but the repayment reduces Long-Term L1ab1ht1es in the Statement of Net Assets In the current year, these amounts consist of
Trust Certificate Retirements Bond Pnncipal Retirements Caprtal Lease Payments
Total Long-Term Debt Repayments
Food lnventones are expensed on the D1stnct-W1de Statements using the consumption method while on the fund level Food lnventones are recorded as expenditures when purchased In the current penod this difference amounts to
Some rtems reported 1n the Statement of Activ1bes do not require the use of current financial resources and therefore are not reported as expenditures 1n Governmental Funds These act1vrties consist of
Increase in Compensated Absences

$ 53,373,633 63

$ 2,810,625 51 -5,056,967 28

-2,246,341 77

76,570 82

-51,824,368 00 -922,578 60

$ 285,000 00 7,220,000 00 1,011,204 48

8,516,204 48

675,376 28

-246474 77

Change in Net Assets of Governmental Act1vrties (Exh1b1t "B")

$ 7,402,022 07

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

HOUSTON COUNTY BOARD OF EDUCATION STATEMENT OF FIDUCIARY NET ASSETS FIDUCIARY FUNDS JUNE 30, 2002
ASSETS Cash and Cash Equivalents
LIABILITIES Funds Held for Others

EXHIBIT"G"
AGENCY FUNDS
$ ===-=64=0:!:i7, =8=0.=04=
$ 640,780 04

The notes to the basic financial statements are an integral part of this statement. - 10 -

HOUSTON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2002

EXHIBIT "H"

Note 1: DESCRIPTION OF SCHOOL DISTRICT AND REPORTING ENTITY
REPORTING ENTITY
The Houston County Board of Education (School District) was established under the laws of the State of Georgia and operates under the guidance of a school board elected by the voters and a Superintendent appointed by the Board. The Board is organized as a separate legal entity and has the power to levy taxes and issue bonds. Its budget is not subject to approval by any other entity. Accordingly, the School District is a primary government and consists of all the organizations that compose its legal entity.
Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The School District's basic financial statements are collectively comprised of the District-wide financial statements, fund financial statements and notes to the basic financial statements of the Houston County Board of Education.
District-wide Statements: The Statement ofNet Assets and the Statement of Activities 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. Separate statements for each category (governmental and fiduciary) are presented. The emphasis of fund financial statements is on major governmental funds, each displayed in a separate column. All remaining governmental funds are aggregated and reported as nonrnajor funds.

- 11 -

HOUSTON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2002

EXHIBIT "H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The School District reports the following major governmental funds:
General Fund is the School District's primary operating fund. It accounts for all financial resources ofthe School District, except those resources required to be accounted for in another fund.
District-wide Capital Projects Fund accounts for financial resources including Bond Proceeds, grants from Georgia State Financing and Investment Commission and Special Purpose Local Option Sales Tax proceeds to be used for the acquisition, construction or renovation of major capital facilities.
Debt Service Fund accounts for taxes (property and sales) legally restricted for the payment of general long-term principal, interest and paying agent's fees.
The School District reports the following fiduciary fund type:
Agency funds account for assets held by the School District as an agent for various funds, governments or individuals.
BASIS OF ACCOUNTING
The basis ofaccounting determines when transactions are reported on the financial statements. The District-wide governmental and fiduciary fund financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded at the time liabilities are incurred, regardless of when the related cash flows take place. Nonexchange transactions, in which the School District gives (or receives) value without directly receiving (or giving) equal value in exchange, include property taxes, sales taxes, grants and donations. On an accrual basis, revenue from property taxes is recognized in the fiscal year for which the taxes are levied. Revenue from sales taxes is recognized in the fiscal year in which the underlying transaction (sale) takes place. Revenue from grants and donations is recognized in the fiscal year in which all eligibility requirements have been satisfied.
The School District uses funds to report on its financial position and the results of its operations. Fund accounting is designed to demonstrate legal compliance and to aid financial management by segregating transactions related to certain governmental functions or activities. A fund is a separate accounting entity with a self-balancing set of accounts.
Governmental funds are reported using the current financial resources 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
- 12 -

HOUSTON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2002

EXHIBIT "H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
liability is incurred, except for principal and interest on general long-term debt, claims and judgments, and compensated absences, which are recognized as expenditures to the extent they have matured. Capital asset acquisitions are reported as expenditures in governmental funds. Proceeds of general long-term liabilities and acquisitions under capital leases are reported as other financing sources.
The School District funds certain programs by a combination ofspecific cost-reimbursement grants, categorical grants, and general revenues. Thus, when program costs are incurred, there are both restricted and unrestricted net assets available to finance the program. It is the School District's policy to first apply grant resources to such programs, followed by cost-reimbursement grants, then general revenues.
For fiscal year 2002, the School District changed its method of accounting for the final two payments on one hundred and ninety day contracts and for the related revenue due from the State to fund these contracts. Adjustments have been made in the fiscal year 2002 financial statements to record costs for salaries and fringe benefits earned by employees through June 30, 2002, (even though paid in July and August 2002) and the related revenue due from the State to fund these contracts. Adjustments were also made for the similar salaries, benefits and related State revenues earned in fiscal year 2001 and recorded in fiscal year 2002.
The net effect of the above accounting treatment results in the accompanying financial statements reflecting costs for those salaries and benefits earned by employees during fiscal year 2002 and the related State revenue to fund these contracts. In addition, both the net assets and fund balance at July 1, 2001, have been restated for salaries and benefits earned by employees in fiscal year 2001 but not paid until July and August 2001 and for the related State revenue for these contracts. This change is in accordance with generally accepted accounting principles. See Restatement of Prior Year Fund Balance.
RESTATEMENT OF PRIOR YEAR FUND BALANCE - GENERAL FUND
In prior years, the financial activities 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$940,479.19 at July 1, 2001. For fiscal year 2002, 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, 2002. The governmental fund activity of the various school activity accounts had a fund balance of $947,012.49 at July 1, 2001. This change is in accordance with generally accepted accounting principles.

- 13 -

HOUSTON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2002

EXHIBIT "H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

General Fund Balance July 1, 2001
Add Funds Consolidated with General Fund: School Food Services Fund School Activity Account - Governmental Activity
Add: State Revenue Related to July and August 200 I Salary Payments Earned by Employees in Fiscal Year 2001
Local Option Sales Tax (LOST) Revenue Received in Prior Year that Board Recorded as Unearned Revenue
Deduct: July and August 2001 Salary Payments Earned by Employees in Fiscal Year 2001
General Fund Balance July 1, 2001 (Restated)

$ 7,598,959.09 940,479.19 947,012.49
12,030,055.86
24,094,078.64 $ 45,610,585.27
-12,947,455.32 $ 32,663,129.95

CHANGES IN ACCOUNTING PRINCIPLES

The Houston County Board of Education has implemented a new financial reporting model as required by provisions of Governmental Accounting Standards Board Statement No. 34, Basic Financial Statements - and Management's Discussion and Analysis - for State and Local Governments, as of June 30, 2002.

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

General Fund (Restated) July 1, 2001 Capital Projects Fund Debt Service Fund
Governmental Funds (Restated) July 1, 2001 Capital Assets Accumulated Depreciation Property Tax Revenue Timing Differences Bonds and Trust Certificates Payable Capital Leases Payable Compensated Absences Food Inventories Costing Differences
Net Assets Beginning (See Exhibit "B")

$ 32,663,129.95 6,637.01
42,113,592.46
$ 74,783,359.42 163,001,279.17 -44,278,117.38 236,350.08 -48,015,000.00 -3,123,282.22 -1,505, 754.83 -428,999.90
$140.669,834,34

- 14 -

HOUSTON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2002

EXHIBIT "H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CASH AND CASH EQUIVALENTS
COMPOSITION OF DEPOSITS Cash and cash equivalents consist ofcash on hand, demand deposits and short-term investments with original maturities of three months or less from the date of acquisition in authorized financial institutions. Georgia Laws OCGA 45-8-14 authorize the Board to deposit its funds in one or more solvent banks or insured Federal savings and loan associations.
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
- 15 -

HOUSTON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2002

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 Houston County Board of Commissioners fixed the property tax levy for the 200 I tax digest year (calendar year) on October 18, 2001 (levy date). Taxes were due on December 31, 2001 (lien date). Taxes collected within the current fiscal year or within 60 days after year-end on the 2001 tax digest are reported as revenue in the governmental funds for fiscal year 2002. The Houston County Tax Commissioner bills and collects the property taxes for the School District, withholds 2.5% of taxes collected as a fee for tax collection and remits the balance of taxes collected to the School District. Property tax revenues, at the fund reporting level, during the fiscal year ended June 30, 2002, for maintenance and operations amounted to $24,532,298.67 and for school bonds amounted to $477.79.

The tax millage rate levied for the 2001 tax year (calendar year) for the Houston County Board of Education was as follows (a mill equals $1 per thousand dollars of assessed value):

School Operations

11.78 mills

SALES TAXES

Local Option Sales Tax revenue, at the fund reporting level, during the fiscal year amounted to $15,628,958.61 and was recorded in the General Fund. Local Option Sales Tax is to be used for the maintenance and operation of the School District.

Special Purpose Local Option Sales Tax revenue, at the fund reporting level, during the year amounted to $8,040,720.72 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 district-wide financial statements, inventories of donated food commodities used in the preparation ofmeals are reported at their Federally assigned value and purchased foods inventories are reported at cost (weighted average). 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 are recorded as the inventory items are used. Purchased foods are recorded as an asset when purchased and expenses are recorded as the inventory items are used.

- 16 -

HOUSTON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2002

EXHIBIT "H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

SUPPLY INVENTORY Inventories of consumable supplies and materials are reported on the Balance Sheet at cost (weighted average). The School District uses the consumption method to account for inventories of consumable supplies whereby an asset is recorded when supplies are purchased and expenditures are recorded at the time the supplies are consumed.

On the fund statements, inventories of governmental funds are reported at cost (weighted average). The School District uses the consumption method to account for inventories whereby expenditures are recorded when inventory items are used.

CAPITAL ASSETS

Capital assets purchased, including capital outlay costs, are recorded as expenditures in the fund financial statements at the time 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:

Land Land Improvements Buildings and Improvements Machinery and Equipment
a. Vehicles b. Other Machinery and Equipment Construction in Progress Library Collections

Capitalization Policy

Estimated Useful Life

ALL

NIA

ALL

NIA

ALL

10 to 50 years

ALL $ 10,000.00
ALL ALL

5 to 14 years
6 to 10 years
NIA
10 years

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

- 17 -

HOUSTON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2002

EXHIBIT "H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
GENERAL OBLIGATION BONDS
The School District issues general obligation bonds to provide funds for the acquisition and construction of major capital facilities. Bond issuance costs are recognized in the financial statements during the fiscal year bonds are issued. In addition, general obligation bonds have been issued to refund existing general obligation bonds. General obligation bonds are direct obligations and pledge the full faith and credit of the government. The outstanding amount of these bonds is recorded in the Statement of Net Assets.
FUND BALANCES UNRESERVED - DESIGNATED
In prior years the School District elected to record a portion of the Local Option Sales Tax collections for use in a subsequent period as a liability (Deferred Revenue) rather than revenue. To conform to generally accepted accounting principles, the Local Option Sales Tax collections were recorded as revenue in the fiscal year received or susceptible to accrual. To ensure these funds will remain available for use in the subsequent period, a Designated for Subsequent Period Expenditures fund balance will be shown on the fund statements.
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 of money which has not been secured by surety bond, by guarantee ofinsurance, or by collateral. The aggregate of the face value of such surety bond and the market value of securities pledged shall be equal to not less than 110 percent ofthe public funds being secured after the deduction ofthe amount ofdeposit insurance. Ifa depository elects the pooled method (OCGA 45-8-13. l) 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 45-8-1 l(b) provides an officer holding public funds may, in his discretion, waive the requirement for security in the case of operating funds placed in demand deposit checking accounts.
Acceptable security for deposits consists of any one of or any combination of the following:
(I) Surety bond signed by a surety company duly qualified and authorized to transact business within the State of Georgia,
(2) Insurance on accounts provided by the Federal Deposit Insurance Corporation,
(3) Bonds, bills, notes, certificates of indebtedness or other direct obligations of the United States or of the State of Georgia,

- 18 -

HOUSTON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2002

EXHIBIT "H"

Note 3: DEPOSITS AND INVESTMENTS

(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, 2002, the bank balances were $12,500,014.08. 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.
Category 3 - Uncollateralized deposits. (This includes any bank balance that is collateralized with securities held by the pledging financial institution, or by its trust department or agent but not in the School District's name.)

The School District's deposits are classified by risk category at June 30, 2002, as follows:

Risk Category

Bank Balance

I

$ 2,362,034.39

2

8,094,321.16

3

2,043,658.53

Total

$12,500,014.08

CATEGORIZATION OF INVESTMENTS Investments are classified as to risk by the three categories described below:

- 19 -

HOUSTON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2002

EXHIBIT "H"

Note 3: DEPOSITS AND INVESTMENTS

Category 1 - Insured or registered, or securities held by the School District or the School District's agent in the School District's name.
Category 2 - Uninsured or unregistered, with securities held by the counterparty's trust department or agent in the School District's name.
Category 3 - Uninsured or unregistered, with securities held by the counterparty, or by its trust department or agent but not in the School District's name.

Funds invested in an investment pool managed by another government are not required to be categorized unless the investing entity owns specific, identifiable investment securities in the pool.

At June 30, 2002, the carrying value ofthe School District's total investments was $122,283,026.98 which is materially the same as fair value. The investments are classified as to risk categories as follows:

Type of Investment

Risk Categories

2

3

Carrying Amount

Fair Value

U. S. Government

$37 83 I 550 75 $ 2,242.106 09 $47 853 377 06 $ 87,927,033.90 $ 87,927,033.90

Local Government Investment Pools

34,355,993.08 34,355,993.08

Total Investments

$)22 283 026 98 $122,283 026 98

The carrying amounts shown above includes amounts maintained in an investment pool by the State of Georgia, Office ofTreasury and Fiscal Services in which the School District owns no identifiable securities. The investment policy ofthe State of Georgia, 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 of the Investment Company Act of 1940 and is considered to be a 2a-7 like pool. The pool's primary objectives are safety of capital, investment income, liquidity and diversification while maintaining principal ($1.00 per share value). Net asset value is calculated weekly to ensure stability. The pool distributes earnings (net of management fees) on a monthly basis and values participant's shares sold and redeemed based on $1.00 per share. Pooled cash and cash equivalents and investments are reported at cost, which approximates fair value. The pool does not issue any legally binding guarantees to support the value of the shares. Participation in the pool is voluntary and deposits consist of funds from local governments; operating and trust funds ofGeorgia's state agencies, colleges and universities; and current operating funds of the State of Georgia's General Fund.

-20 -

' ..
HOUSTON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2002

EXHIBIT "H"

Note 3: DEPOSITS AND INVESTMENTS

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, 2002, was 0.12 years. The average investment duration for Fund 6 on June 30, 2002, was 0.75 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 1 - Inventories

Note 5: CAPITAL ASSETS

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

Balances Jul:'%'. I, 2001

Increases

Decreases

Balances June 30, 2002

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

$ 1,857,204.00 1,482, I02.00

$ 1,857,204.00

$ 1,204,381.41 $ 1,482, I02.00

1,204,381.41

Total Capital Assets Not Being Depreciated

$ J,339,306.00 $ 1,204,381.41 $ 1,482, I02.00 $ 3,061,585.41

Capital Assets Being Depreciated Buildings and Improvements Equipment Land Improvements

$145,394,124.17 13,798,033.00 469,816.00

$1,626,741.50 $ 1,461,604 60

0.00 $147,020,865.67 15,259,637.60 469,816.00

Less Accumulated Depreciation for: Buildings and Improvements Equipment Land Improvements

39,115,790.58 5,096,736.18 65,590.62

3,909,489.30 1,131,817.62
15,660.36

43,025,279.88 6,228,553.80 81,250.98

Total Capital Assets, Being Depreciated, Net

$115,383,855.79 $-1,968,621.18 $

0.00 $113,415,234.61

Governmental Activity Capital Assets - Net

$118123 16112 $ -164,23211 $ 1,482, 102 00 $ I 16 476Jl.0...02

Capital assets being acquired under capital leases as of June 30, 2002, are as follows:

Equipment Less: Accumulated Depreciation

Governmental Funds
$ 4,077,927.20 907,010.76

$ 3,170,916.44

- 21 -

HOUSTON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2002

EXHIBIT"H"

Note 5: CAPITAL ASSETS

Current year depreciation expense by function is as follows:

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

$ 3,232,799.63
8,738.70 14,156.10 664,354.42 120,165.40 29,402.10 120,356.40 407,858.04 85,666.14 373,470.35

$ 5,056,967.28

Note 6: RESTRICTED ASSETS

Special Purpose Local Option Sales Tax (SPLOST) and property tax levied specifically for retirement ofoutstanding bond principal, interest and paying agent's fees (Debt Service Funds) and G. 0. Bond proceeds are reported as restricted assets in the Statement of Net Assets because their use is limited by applicable bond covenants or statutory provisions. Restricted assets at June 30, 2002, were as follows:

Capital Projects
Bond Proceeds

Debt Service Funds

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

$ 602,183.81 $49,650,282.44

$ 697,404.38 $39,139,761.64

Note 7: INTERFUND TRANSFERS

Interfund transfers for the year ended June 30, 2002, consisted of the following:

- 22 -

HOUSTON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2002

EXHIBIT "H"

Note 7: INTERFUND TRANSFERS

Transfer to

Transfers From General Fund

Capital Projects Regular GSFIC
All Others

$ 21,012.50 19,192.50
841,968.08

Total

$ 882~113.QS

Transfers are used to move property tax revenues collected by the General Fund to (1) the Capital Projects Fund as required match or supplemental funding source for capital construction projects and to (2) the Debt Service Fund as supplemental funding source for debt service payments.

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 of God. However, the errors or omissions policy excludes coverage for sexual harassment and discrimination. 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 has established a limited risk management program for workers' compensation claims. A premium is charged when needed by the General Fund to each user program on the basis of the percentage of that program's payroll to total payroll in order to cover estimated claims budgeted by management based on known claims and prior experience. The School District accounts for claims with expenses/expenditures and liability being reported when it is probable that a loss has occurred, and the amount of that loss can be reasonably estimated. An excess coverage insurance policy covers individual claims in excess of $250,000.00 loss per occurrence, up to the statutory limit.

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

Beginning of Year Liability

Claims and Changes in Estimates

Claims Paid

End of Year Liability

2001 2002

$ 456,636.00 $ 506,490.63 $ 277,630.63 $ 685,496.00 $ 685,496.00 $ 335,351.27 $ 419,649.27 $ 601,198.00

- 23 -

---- -------

HOUSTON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2002

EXHIBIT "H"

Note 8: RISK MANAGEMENT

The School District is self-insured with regard to unemployment compensation claims. The School District accounts for claims within the same fund that the employee's salary and benefits were paid. Claims are accounted for with expenditure and liability being reported when it is probable that a loss has occurred and the amount of that loss can be reasonably estimated.

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

Beginning of Year Liability

Claims and Changes in Estimates

Claims Paid

End of Year Liability

2001 2002

$

0.00 $ 16,351.75 $ 16,351.75 $

0.00

$

0.00 $ 20,816.00 $ 20,816.00 $

0.00

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

Position Covered

Amount

Superintendent All Employees (Blanket Bond)

$ 50,000.00 $ 250,000.00 - $ 500,000.00

Note 9: LONG-TERM DEBT

CAPITAL LEASES The Houston County Board ofEducation entered into an agreement with the Georgia School Board Association (GSBA), Incorporated for the lease of buses and portable classrooms. Under the terms ofthe lease agreement, the School District will make semi-annual payments through August 1, 2002. The lease includes an annual renewal clause.
The Houston County Board of Education has entered into various lease agreements as lessee for buses, vehicles, equipment and computers. 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.
COMPENSATED ABSENCES Compensated absences represent obligations of the School District relating to employees' rights to receive compensation for future absences based upon service already rendered. This obligation relates only to vesting accumulating leave in which payment is probable and can be reasonably estimated. The School District uses the vesting method to compute compensated absences.
For fiscal year 2002, the School District began recording the accumulated compensated absences liability at June 30 in the District-wide financial statements. This is a change in accounting principle.

- 24 -

HOUSTON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2002

EXHIBIT"H"

Note 9: LONG-TERM DEBT

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

Purpose

Interest Rates

Amount

General Government - Series 1996 General Government - Series 2002

4.00%- 7.50% 3.00%- 5.00%

$28,755,000.00 50,000,000.00

$78,755,000.00

Promissory Notes - As authorized in a county-wide referendum, the School District has entered into a lending agreement with a commercial lending institution. The debt at June 30, 2002, associated with this agreement was as follows:

Purpose

Interest Rates

Amount

General Government - Series 1994

4.20% - 6.00%

General Government - Refunding - Series 1998 3.20%-4.40%

$ 2,860,000.00 8,895,000.00

$11,755,000.00

The changes in Long-Term Debt during the fiscal year ended June 30, 2002, were as follows:

Capital Leases

Compensated Absences ( I)

General Obligation
Bonds

Trust Certificates

Unamortized Bond
Premium

Total

Balance July I. 2001

$ 3,123,282.22 $

0 00 $35,975,000.00 $12,040,000.00 $

0.00$ $51,138,282.22

Retroactive Restatement of Pnor Year Balances

1,505,754.83

1,505,754.83

Balance July I, 2001 Restated

$3,123,282.22 $1,505,754.83 $35,975,000.00 $12,040.000.00 $

0.00 $52,644,037.05

Additions Capital Leases Annual Leave Earned G. 0. Bonds Unamortized Bond Premium

922,578.60

1,130,185.45 50,000,000.00

922,578.60 1,130,185.45 50,000,000.00
1,824,368.00 1,824,368.00

Deductions Annual Leave U11hzed Debt Retired

1,011,204 48

883,710.68 7,220,000.00

285,000.00

883,710.68 8,516,204.48

Balance June 30, 2002 $ 3 034 656 34 $ J,752 229 60 $78 755 000 00 $1 I 755 000 00 $ I 824 368 00 $97 121 253 94

Portion of Long-Tenn Debt Due within One Year $ I 157.212.57 $.===='0="'.00~ $ !.200.000.00 $ 295 000 00 $.====!0~.00~ $ 2.652 212 57

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

- 25 -

HOUSTON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30. 2002

EXHIBIT "H"

Note 9: LONG-TERM DEBT

At June 30, 2002, payments due by fiscal year which includes principal and interest for these items are as follows:

Fiscal Year Ended June 30
2003 2004 2005 2006 2007 2008 - 2012 2013 - 2016
Total Principal and Interest
Fiscal Year Ended June 30
2003 2004 2005 2006 2007 2008 - 2012 2013 - 2016
Total Principal and Interest

Capital Leases

Principal

Interest

Intergovernmental Contract

Trust Certificates

Principal

Interest

$ 1,157,212.57 $ 509,201.34 501,321.64 512,113.56 354,807.23

138,467.62 $ 295,000.00 $ 540,255.00

88,719.70

300,000.00

525,895.00

64,721.80

315,000.00

511,045.00

41,367.42

330,000.00

495,235.00

17,481.05

340,000.00

478,172.50

6,620,000.00

1,781,357.50

3,555,000.00

234,540.00

$ 3,034,6.5.6....14 $ 350,75L.5_2 $ 11,755,000.00 $ 4,566,500.00

General Obligation

Bonds

Principal

Interest

Unamortized Bond
Premium

$ 1,200,000.00 $ 3,828,928.33 $ 1,265,000.00 3,563,595.00 1,330,000.00 3,504,772.50 I 5,405,000.00 3,171,597.50 I 7,485,000.00 2,517,752.50
28,840,000.00 5,576,840.00 13,230,000.00 2,081,475.00

0.00 0.00 0.00 510,823.00 583,798.00 729,747.00

$ 78,755,000,00 $ 24,244,260.83 $ I,8~.4.3.61U1Q

Note 10: PRIOR YEAR DEFEASEMENT OF DEBT

In fiscal year 1999, the School District defeased certain intergovernmental contracts trust certificates by placing the proceeds of new trust certificates in an irrevocable trust to provide for all future debt service payments on the old trust certificates. Accordingly, the trust account assets and the liability for the defeased trust certificates are not included in the School District's basic financial statements. At June 30, 2002, $8,175,000.00 of trust certificates are outstanding and are considered defeased.

Note 11: ON-BEHALF PAYMENTS

The Board has recognized revenues and costs in the amount of $1,221,477.08 for health insurance and retirement contributions paid on the Board's behalf by the following State Agencies.

- 26 -

HOUSTON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2002

EXHIBIT "H"

Note 11: ON-BEHALF PAYMENTS

Georgia Department of Education Paid to the Georgia Department of Community Health For Health Insurance of Non-Certified Personnel In the amount of$931,829.52

Paid to the Teachers Retirement System of Georgia For Teachers Retirement System (TRS) Employer's Cost In the amount of $77,937.56

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 $211,710.00

Note 12: SIGNIFICANT COMMITMENTS

The following is an analysis ofsignificant outstanding construction or renovation contracts executed by the School District as of June 30, 2002:

Project

Unearned Executed Contracts

Perry Primary New Entrance Road Perry Primary New Roof

$ 124,350.30 478,677.00

$ 603,027.30

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

Note 13: CONTINGENT LIABILITIES

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

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.

- 27 -

HOUSTON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2002

EXHIBIT "H"

Note 14: ACCUMULATED EMPLOYEES' LEAVE
Accrued vacation leave will be paid to all eligible employees at their daily rate up to a maximum of twenty days. Employees retiring under the Teachers Retirement System ofGeorgia are eligible to be paid for up to 60 days of leave at a rate of $22.50 per day, upon retirement. Employees retiring under the Public School Employees Retirement System will be eligible to sell all unused leave up to the one hundred day maximum accumulation, at $22.50 per day. The employee must have a minimum of five consecutive years of employment with the School District, contiguous with retirement.
Public School Employees Retirement System employees who terminate employment may apply to sell unused leave in excess of forty-five days but not to exceed one hundred days at $22.50 per day. The employee must have a minimum of five consecutive years of employment with the School District, contiguous to a voluntary termination. See Note 9 - Compensated Absences
Note 15: HOUSTON COUNTY SCHOOL DISTRICT BUILDING AUTHORITY
The Houston County School District Building Authority was created by House Bill 2038 during the 1994 session of the Georgia General Assembly. The purpose of the Authority is to acquire, construct. own and convey real property and personal property for the benefit ofthe Houston County Board ofEducation. The members ofthe Authority consist ofthe Chairman ofthe Houston County Board ofEducation, Superintendent ofthe Houston County Board ofEducation and the Chairman of the Board of Commissioners of Houston County.
The Houston County School District Building Authority is a component unit ofthe Houston County Board ofEducation and as such the Authority's financial activity has been blended with the Houston County Board of Education's basic financial statements.
Note 16: RETIREMENT PLANS
TEACHERS RETIREMENT SYSTEM OF GEORGIA (TRS)
TRS PLAN DESCRIPTION Substantially all teachers, administrative and clerical personnel employed by local school systems are covered by the Teachers Retirement System of Georgia (TRS), which is a cost-sharing multiple employer defined benefit pension plan. TRS provides service retirement, disability retirement and survivors benefits for its members in accordance with State statute. The Teachers Retirement System of Georgia issues a separate stand alone financial audit report and a copy can be obtained from the Georgia Department of Audits and Accounts.
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

- 28 -

HOUSTON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2002

EXHIBIT "H"

Note 16: RETIREMENT PLANS

by their independent actuary. The required employer contribution rate is 9.24% and employer contributions for the current fiscal year and the preceding two fiscal years are as follows:

Fiscal Year

Percentage Contributed

Required Contribution

2002 2001 2000

100% 100% 100%

$ 8,524,515.31 $ 9,599,111.00 $ 9,068,854.39

- 29 -

HOUSTON COUNTY BOARD OF EDUCATION GENERAL FUND
SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL
YEAR ENDED JUNE 30, 2002

SCHEDULE "1"

REVENUES
Property Taxes Sales Taxes State Funds Federal Funds Charges for Services Investment Earnings Miscellaneous
Total Revenues
EXPENDITURES
Current Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Admin1strat1on School Adm1mstrabon Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Enterpnse Operations Community Services Food Services Operation
Capital Outlay Debt Service
Total Expenditures
Excess of Revenues over (under) Expenditures
OTl::!ER FINANCING SO!,!RCES (USES)
Other Sources Other Uses
Total Other Financing Sources (Uses)
Net Change in Fund Balances
Fund Balances - Beginning
Inventory - Net Change in Penod
Fund Balances - Ending
See notes to the basic financial statements

NONAPPROPRIATED BUDGETS

ORIGINAL

FINAL

ACTUAL AMOUNTS

$ 23,600,000 00 $ 23,600,000 00 $ 24,546,498 77

14,149,284 00

14,164,348 83

16,639,887 71

99,262,979 94

101,043,988.66

103,276,724 04

11,391,268 00

12,637,507 00

13,505,012.21

3,838,504 00

3,847,504.00

7,256,562 34

1,360,000 00

1,360,000 00

964,372 86

644,00000

64910000

3,419,827 44

$ 154,246,035 94 $ 157,302,448 49 $ 169,608,885 37

$ 107,637,967 08 $ 108,315,784 45 $ 109,835,380 64

3,492,495.00 4,076,016 21 3,414,720 00
724,249 09 8,761,856.00 1,131,869.00 11,109,855 00 4,476,587 00 1,702,248 00
289,896 95
8,270,408 00 9,528 86
25,00000

4,020,670 83 4,174,11041 3,423,600 00
724,422.09 8,776,356 00 1,131,869 00 11,139,885 00 4,540,887 74 1,742,248 00
308,727 95
47907 8,268,408 00
25,000 00

3,843,439 95 3,616,192 70 3,313,639 74
782,209 51 8,968,188 60 1,148,976 29 10,694,402 15 4,925,767 43 1,904,159 37
893,271 35 1,643,201 50
820,676 80 9,077,904 48
39,034 21 1,165,550 89

$ 155,122,69619 $ 156,592,448 54 $ 162,671,995 61

$

-876,660 25 $

709,999 95 $ 6,936,889 76

$

545,000 00 $

1,040,000 00 $

-1,402,945 00

-1,902,945 00

922,578 60 -882, 173 08

$

-857 945 00 $

-862,945 00 $

40405 52

$ -1,734,605 25 $

-152,945 05 $

6,977,295 28

8,972,825 49

8,744,436 88

32,663,129 95

246,376 38

$

7,238,220 24 $

8,591,491 83 $ 39,886,801.61

- 30 -

HOUSTON COUNTY BOARD OF EDUCATION SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
YEAR ENDED JUNE 30, 2002

SCHEDULE "2"

FUNDING AGENCY PROGRAM/GRANT

CFDA NUMBER

PASSTHROUGH
ENTITY ID
NUMBER

FEDERAL REVENUE IN PERIOD

EXPENDITURES IN PERIOD

Agnculture, U S Department of Child Nutnllon Cluster Pass-Through From Georgia Department of Education Food and NutntIon Program Food Services School Breakfast Program National School Lunch Program

10 553 10 555

NIA $ 847,151 39

NIA

3,059,848 93 $

(2) 8,492,750 78 (3)

Total Child Nutnt1on Cluster

$ 3,907,000 32 $

8,492,750 78

Other Programs

Pass-Through From Georgia Department of Education

Food and Nutnbon Program

Food D1stnbut1on Program (1)

10 550

NIA

Pass-Through From Office of School Readiness

Food and Nutnt1on Program

Child and Adult Care Food Program

10 558

NIA

583,160 48 36,029 25

583,16048 !2l

Total U S Department of Agncutture

$ 4,526,190 05 $

9,075,911 26

Education, U S Department of Special Educabon Cluster Pass-Through From Georgia Department of Education lnd1vlduals with Dlsab1h1Ies Education Act Part B - Special Education Flow Through Behavioral Intervention Preschool Capacity Building Improvement

84 027 84027 84173 84173

NIA $ 1,746,659 58 $

NIA

91,336 50

NIA

275,233 00

NIA

88,102 23

1,746,659 58 91,336 50
275,233 00 88,102 23

Total Special Education Cluster

$ 2,201,331 31 $

2,201,331 31

Other Programs Direct Impact AKI

. 84 041

1,655,649 86

(5)

Pass-Through From Georgia Department of Education

Comprehensive School Reform Demonstration ProJect

84 332

NIA

104,000 00

104,000 00

Elementary and Secondary Education Act

Trtlel

Accountab1hty Grants Even Start Grants to Local Educational Agencies

84 348

NIA

129,019 00

129,019.00

. 84 213 84 010

NIA NIA

139,271 54 2,704,814 90

139,271 54 2,704,814 90

Tille II

Eisenhower Professional Development

84 281

NIA

101,250 49

101,250 49

Title VI

Innovative Education Program Strategies

84298

NIA

156,788 90

156,788 90 (6)

Class Size Reduction

84 340

NIA

490,486 00

490,486 00

Goals 2000

State and Local Education Systemic Improvement

Grants

84 276

NIA

29,413 53

29,413 53

Safe and Drug-Free Schools and Communities

84186

NIA

83.696 43

83,696 43

Vocabonal Education - Basic Grants to States

High School Program

Basic Grant

84 048

NIA

218,425 00

218,425.00

Pass-Through From Office of School Readiness

TIiie ii

Summer Transition Grant

84 281

NIA

20,000 00

{4l

Total U S Department of Education

$ 8,034,146 96 $

6,358,497 10

- 31 -

----------------------------------------------- --- - ----

HOUSTON COUNTY BOARD OF EDUCATION SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
YEAR ENDED JUNE 30. 2002

SCHEDULE "2"

FUNDING AGENCY PROGRAM/GRANT
Defense, U S Department of Direct Department of the Air Force R O T.C Program PL 102-484
Total U S Department of Defense

CFDA NUMBER

PASSTHROUGH
ENTITY ID
NUMBER

FEDERAL REVENUE IN PERIOD

EXPENDITURES IN PERIOD

$ 203,523 28

(4)

741,151 92

(5)

$ 944,675 20

Total Federal Financial Assistance

$ 13,505,012 21 $ 15,434,408 36

NIA = Not Available

Notes to the Schedule of Expenditures of Federal Awards

(1) The amounts shown for the Food D1stnbullon Program represents the Federally assigned value of nonmonetary assistance for donated commod1bes received and/or consumed by the School Dlstnct dunng the current fiscal year
(2) Expenditures for the Child and Adult Care Food Program and the School Breakfast Program were not maintained separately and are included in the 2002 Natlonal School Lunch Program
(3) Expenditures for this program include State, and/or Other Funds Expenditures are not maintained by fund source
(4) Expenditures on thlS program were not maintained by fund source (5) Funds earned on this program do not require reporting of expenditures (6) Includes Federal Assistance of $1,760 00 provided to subrecip1ents

Ma1or Programs are identified by an astensk (*) in front of the CFDA number

The accompanying schedule of expenditures of Federal awards includes the Federal grant actrvrty of the Houston County Board of Education and Is presented on the modified accrual basis of accounting which 1s the basis of accounting used in the presentation of the basic financial statements

See notes to the basic financial statements

- 32 -

HOUSTON COUNTY BOARD OF EDUCATION SCHEDULE OF STATE REVENUE YEAR ENDED JUNE 30. 2002

SCHEDULE "3"

AGENCY/FUNDING

GOVERNMENTAL FUND TYPES

CAPITAL

GENERAL

PROJECTS

FUND

FUND

GRANTS Communrty Affairs, Georgia Department of Governor's Emergency Funds Local Assistance Grant

$

32,800 00

50,000 00

Education, Georgia Department of Quality Basic Education Direct Instructional Cost Kindergarten Program Kindergarten Program - Earty Intervention Program Pnmary Grades (1-3) Program Pnmary Grades - Earty 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 wrth D1sabIht1es Category I Category II Category Ill Category IV Category V Gifted Student - Category VI Remedial Education Program Alternatrve Education Program English Speakers of Other Languages (ESOL) Media Center Program Twenty Days AddrtIonal Instruction Staff and Professional Development Indirect Cost Central AdminIstratIon School AdmImstratIon Fac1lrty Maintenance and Operations Categoncal Grants Pupil Transportation Regular Bus Replacement Nursing Services Pnnc1pal Supplements Vocational Supervisors Deferred Summer Salaries (Pnor Year) Deferred Summer Salanes (Current Year) Education Equalization Funding Grant Food Services Vocational Education Other State Programs ApprentIcesh1p Program Health Insurance Indirect Cost - School of Excellence Mentor Teachers Outdoor Classrooms Post Secondary Options Preschool Handicapped Program Teachers' Retirement

4,954,479.00 726,637 00
12.584,399 00 2,048,256 00 6,398,458 00
1,454,667 00 340,971 00
12,267,403.00 10,569,104 00
2,258,816 00
354,949 00 1,670,911 00 6,110,36100 2,394,467 00
105,356 00 2,549,456.00
150,481.00 946,653 00 138,092 00 2,070,095 00 629,031 00 384,309 00
2,372,285.00 4,087,325 00 5,815,864 00
1,543,625 00 409,949 00 413,045 00 89,225 00 92,544.00
-12,030,055 86 12,743,934.08 10,088,215 00
606,972 00 285,475 93
64,999 92 931,829 52
4,000 00 28,917 00
2,250 00 3,069.00 303,781 00 77,937 56

TOTAL

$

32,800 00

50,000 00

4,954,479 00 726,637 00
12,584,399 00 2,048,256 00 6,398,458 00
1,454,667 00 340,971.00
12,267,403 00 10,569,104.00
2,258,816 00
354,949 00 1,670,911 00 6,110,361 00 2,394,467 00
105,356 00 2,549,456 00
150,481 00 946,653 00 138,092 00 2,070,095 00 629,031 00 384,309 00
2,372,285 00 4,087,325 00 5,815,864 00
1,543,625 00 409,949 00 413,045 00 89,225 00 92,544 00
-12,030,055 86 12,743,934 08 10,088,215 00
606,972 00 285,475 93
64,999 92 931,829 52
4,00000 28,917 00
2,25000 3,069 00 303,781 00 77,937 56

- 33 -

HOUSTON COUNTY BOARD OF EDUCATION SCHEDULE OF STATE REVENUE YEAR ENDED JUNE 30, 2002

SCHEDULE "3"

AGENCY/FUNDING
GRANTS Education, Georgia Department of Lottery Programs AssIstIve Technology Computers in the Classroom
Georgia State Financmg and Investment CommIssIon Reimbursement on Construction Projects
Office of School Readiness Pre-Kindergarten Program
Office of Treasury and F1Scal Services Public School Employees Retirement
CONTRACTS Children's Trust Fund of Georgia Second Step Violence Prevention
Education, Georgia Department of 4-8 After School Readmg Program K-3 StateW1de Reading Program
Human Resources, Georgia Department of Family Connection
Office of Planning and Budget Georgia Council for the Arts

GOVERNMENTAL FUND TYPES

CAPITAL

GENERAL

PROJECTS

FUND

FUND

TOTAL

$

35,011 84

605,838 62

$

35,011 84

605,838 62

$

372,901.70

2,771,443.72

211,71000

372,901 70 2,771,443 72
211,71000

12,683 83
190,577 20 272,020 68
50,000 00
2 100 00

12,683 83
190,577.20 272,020 68
50,000 00
2,10000

$ 103,276,724 04 $

372,901 70 $ 103,649,625 74

See notes to the basic financial statements

- 34 -

HOUSTON COUNTY BOARD OF EDUCATION SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS
YEAR ENDED JUNE 30. 2002

SCHEDULE "4"

PROJECT

ORIGINAL
ESTIMATED
COST Pl

CURRENT ESTIMATED COSTS (2)

AMOUNT EXPENDED IN CURRENT
YEAR

AMOUNT EXPENDED
IN PRIOR YEARS

PROJECT STATUS

Providing funds to finance repayment of general obhga!Jon bond indebtedness of the Houston County School D1stnct for Houston County School D1stnct General Obligation Bond Senes 1993 and 1996. by payment of pnncipal and interest as It becomes due or by payment of pnnc1pal by scheduled matunty or opltonal and mandatory redemplton pnor to matunty for bonds coming due on March 1, 1998 through September 1, 2016, in the maxtmum amount of $53,905,315 66

$ 53,905,315 66 $ 53,905,315 66 $ 9,178,730 00 $ 14,323,383 66 Ongoing

Providing funds to pay the cost of adding to, renovating, repamng, ImprovIng and equipping exIs!Jng school buildings and other buildings and facihlles useful or desirable in connection therewith, acquinng instructional and adm1mstrallve technology improvements for exIstIng schools, acquinng, construc!Jng and equipping one new elementary school and two new middle schools and acquInng any necessary property therefore, both real and personal, all at a maximum cost of $88,000,000 and provide for the issuance of the Houston County School D1stnct general obhgalton debt in the aggregate pnncipal amount of $50,000,000

88,000,000 00

88,000,000 00

5,931,737 57

Ongoing

$ 141,905,315 66 $ 141,905,315 66 $ 15,110,46757 $ 14,323,383 66

(1) The School D1stnct's onginal cost estimate as specified in the resolu!Jon calling for the ImposI1ton of the Local Option Sales Tax
(2) The School D1stnct's current esltmate of total cost for the proJects Includes all cost from pro1ect Incep1ton to completion

See notes to the basic financial statements

- 35 -

HOUSTON COUNTY BOARD OF EDUCATION GENERAL FUND - QUALITY BASIC EDUCATION PROGRAM /QBE}
ALLOTMENTS AND EXPENDITURES - BY PROGRAM YEAR ENDED JUNE 30. 2002

SCHEDULE "5"

DESCRIPTION
Direct lnstrucllonal Programs Kindergarten Program Kindergarten Program-Earty lntervenllon Program Pnmary Grades (1-3) Program Primary Grades-Earty lntervenllon (1-3) Program Upper Elementary Grades (4-5) Program Upper Elementary Grades-Early lntervenllon (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 D1sab1lltles Category I Category II Category Ill Category IV CategoryV Gifted Student - Category VI Remedial Education Program Altemallve 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)

ELIGIBLE QBE PROGRAM COSTS

SALARIES

OPERATIONS

TOTAL

$

5,507,387 00 $ 6,051,399 27 $ 157,247 64 $ 6,208,646 91

807,728 00

903,089 30

18,294 96

921,384 26

13,988,784 00 14,589,504 82

615,258 55

15,204,763 37

2,276,838 00

3,138,000 81

40,05346

3,178,054 27

7,106,09900

9,598,495 60

434,10045

10,032,596 05

1,623,415 00 379,022 00
13,636,413 00 11,748,588 00 2,510,895 00 11,822,998 00
2,833,966 00 167,275 00
1,052,297 00 153,503 00

1,681,898 20 369,216 81
16,396,979 71 14,333,916.82 2,682,109 16
76,233 92 1,427,364 80 6,399,522 59 2,329,718 52
253,692 78 3,153,772 87
321,027.91 943,803 31 199,072 30

26,093 07 8,780 59
639,417 29 931,173 73 340,942 09
5,382 42 13,329 70 141,382 54 18,878 69
1,14460 109,17442
1,067 94 15,539 18 11,97306

1,707,991 27 377,997 40
17,036,397 00 15,265,090.55 3,023,051 25
81,616 34 1,440,694 50 6,540,905.13 2,348,597 21
254,837 38 3,262,947.29
322,095 85 959,342 49 211,045 36

$

75,615,208 00 $ 84,848,819 50 $ 3,529,234 38 $ 88,378,053 88

2,301,112.00 427,196 00

2,877,994 25 237,335 11

446,716.57 189,860.89

3,324,710 82 427,196 00

TOTAL QBE FORMULA FUNDS

$

78,343,516 00 $ 87,964,148 86 $ 4,165,811 84 $ 92,129,960 70

(1) Compnsed of State Funds plus Local Five Mill Share

See notes to the basic financial statements

- 36 -

HOUSTON COUNTY BOARD OF EDUCATION GENERAL FUND- QUALITY BASIC EDUCATION PROGRAM (QBE)
ALLOTMENTS AND EXPENDITURES - BY SITE YEAR ENDED JUNE 30, 2002

SCHEDULE "6"

SITE
Eagle Springs Elementary School Linwood Elementary School Pearl Stephens Elementary School Northside Elementary School Houston County High School Perdue Elementary School Quail Run Elementary School Feagin Mill Middle School Matthew Arthur Elementary School Perry Middle School Bonaire Middle School Houston County Career and Technology Center Perry Pnmary School Bonaire Elementary School Northside Middle School Perry High School Tabor Middle School Watson Center Centerville Elementary School Northside High School Morningside Elementary School Westside Elementary School Elberta Open Campus High School Parkwood Elementary School Bert Rumble Middle School Tucker Elementary School Kings Chapel Elementary School Lindsey Elementary School Perry Elementary School Russell Elementary School Warner Robins High School Miller Elementary School Shirley Hills Elementary School Warner Robins Middle School Central Office (Alternative Education Program) Other Auxiliary Facihty
TOTAL

ALLOTMENTS FROM GEORGIA DEPARTMENT OF EDUCATION (1)

ELIGIBLE QBE PROGRAM COSTS

$

1,819,880 00 $

1,989,884.50

902,046 00

1,350,100 14

1,788,828 00

2,110,866.32

2,233,738 00

2.418.470.06

5,409,728 00

6,111,570.07

3,290,967 00

3,385,211.28

2,671,773 00

2,976,553.79

2,744,161 00

3,161,595.85

2,319,434.00

2,651,684.27

2,997,293 00

3,628,660 37

2,875,440.00

3,343,816.50

257,163 00

517,864 04

2,331,323 00

2,532,122.98

2,424,949 00

2,718,148.37

2,260,080 00

2,661,223 01

3,037,574 00

4,011,679 19

2,463,996 00

2,943,267 16

593,692 00

637,499 21

2,291,813.00

2,632,733 69

4,783,840 00

5,822,600 33

940,027.00

1,137,041.03

1,965,928.00

2,272,084 12

301,360.00

648,865 29

1,903,086.00

2,213,246 38

1,862,535.00

2,378,739 71

1,132,670.00

1,386,123.31

1,134,679 00

1,490,601.36

1,269,874 00

1,708,631 67

1,093,375 00

1,293,914.73

2,181,717 00

2,641,489.32

4,758,297.00

5,861,060.68

1,985,241.00

2,312,989 41

1,794,533.00

2,044,431.91

2,741,871.00

3,350,570 46

1,052,297.00

32,713 37

$

75,615,208 00 $ 88,378,053 88

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

See notes to the basic financial statements

- 37 -

SECTION II COMPLIANCE AND INTERNAL CONTROL REPORTS

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

DEPARTMENT OF AUDITS AND ACCOUNTS
254 WJ!.hmgton Street.SW Suite 214 Atlanta. Gcorg1J 30334-8400
May 27, 2003

Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the Houston 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 Houston County Board of Education as of and for the year ended June 30, 2002, and have issued our report thereon dated May 27, 2003. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States.
Compliance
As part of obtaining reasonable assurance about whether Houston County Board of Education's financial statements are free of material misstatement, we performed tests of its compliance with certain provisions oflaws, regulations, contracts and grants, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results ofour tests disclosed no instances ofnoncompliance that are required to be reported under Government Auditing Standards.
Internal Control Over Financial Reporting
In planning and performing our audit, we considered Houston 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. Our consideration of the internal control over financial reporting would not necessarily disclose all matters in the internal control over financial reporting that might
2002YB-10

be material weaknesses. 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. We noted no matters involving the internal control over financial reporting and its operation that we consider to be material weaknesses.
This report is intended solely for the information and use of the management, members of the Houston County Board of Education, 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:Etl:i;...
RWH:gp 2002YB-10

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

DEPARTMENT OF AUDITS AND ACCOUNTS
254 Wa<;hmgton Street. S W Sulle 214 Allnla. Georgia 30334-8400
May 27, 2003

Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the Houston County Board of Education
REPORT ON COMPLIANCE WITH REQUIREMENTS APPLICABLE TO EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH 0MB CIRCULAR A-133
Ladies and Gentlemen:
Compliance
We have audited the compliance of Houston County Board of Education with the types of compliance requirements described in the U.S. Office ofManagement and Budget (0MB) Circular A-133 Compliance Supplement that are applicable to each of its major Federal programs for the year ended June 30, 2002. Houston 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 Houston County Board of Education's management. Our responsibility is to express an opinion on Houston County Board of Education's compliance based on our audit.
We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and 0MB Circular Al 33, Audits 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 ofcomp! iance 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 Houston 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 Houston County Board of Education's compliance with those requirements.
2002SA-10

In our opinion, the Houston County Board of Education complied, in all material respects. with the requirements referred to above that are applicable to each of its major Federal programs for the year ended June 30, 2002.
Internal Control Over Compliance
The management of Houston County Board of Education is responsible for establishing and maintaining effective internal control over compliance with requirements of laws, regulations, contracts and grants applicable to Federal programs. In planning and performing our audit, we considered Houston County Board ofEducation's internal control over compliance with requirements that could have a direct and material effect on a major Federal program in order to determine our auditing procedures for the purpose of expressing our opinion on compliance and to test and report on internal control over compliance in accordance with 0MB Circular A-133.
Our consideration ofthe internal control over compliance would not necessarily disclose all matters in the internal control that might be material weaknesses. A material weakness is a condition in which the design or operation ofone or more ofthe internal control components does not reduce to a relatively low level of risk that noncompliance with applicable requirements of laws, regulations, contracts and grants that would be material in relation to a major Federal program being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. We noted no matters involving the internal control over compliance and its operation that we consider to be material weaknesses.
This report is intended solely for the information and use of the management, members of the Houston County Board of Education, 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,
~.<ti._
Ru ell W. Hinton State Auditor
RWH:gp 2002SA-l0

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

HOUSTON COUNTY BOARD OF EDUCATION AUDITEE'S RESPONSE
SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2002

PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

FINDING CONTROL NUMBER AND STATUS

FS-6761-00-01 FS-6761-01-01

Further Action Not Warranted Previously Reported Corrective Action Implemented

SECTION IV FINDINGS AND QUESTIONED COSTS

HOUSTON COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2002
I SUMMARY OF AUDITOR'S RESULTS
I. Type of Report Issued on the Financial Statements The auditor's opinion on the Houston 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 Houston County Board ofEducation did not disclose any reportable conditions related to the financial statements.
3. Noncompliance Material to the Financial Statements The audit of the Houston 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 Houston County Board ofEducation 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 Houston 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 .Sl0(a) ofOMB Circular A-133 The Houston County Board of Education's audit did not disclose audit findings required to be reported by section .Sl0(a) of 0MB Circular A-133.
7. Major Programs Federal awards audited as major programs are as follows: 84.0 IO Elementary and Secondary Education Act - Title I - Grants to Local Educational Agencies 84.041 Impact Aid
8. Type "A" Program Dollar Threshold The dollar threshold for type "A" programs was $500,598.29.
9. Low Risk Auditee The Houston County Board of Education qualified as a low risk auditee as defined by Section .530 of 0MB Circular A-133.
II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS
No matters were reported.
- 1-

HOUSTON COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2002 III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS No matters were reported.
-2-