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

CITY OF GAINESVILLE BOARD OF EDUCATION - HALL COUNTY - 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

1 SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES

IN FUND BALANCES - BUDGET AND ACTUAL

GENERAL FUND

27

CITY OF GAINESVILLE BOARD OF EDUCATION - HALL COUNTY - TABLE OF CONTENTS -

SECTION I

FINANCIAL

SCHEDULES

SUPPLEMENTARY INFORMATION

2 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS

28

3 SCHEDULE OF STATE REVENUE

30

4 SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS

32

5 ALLOTMENTS AND EXPENDITURES

GENERAL FUND - QUALITY BASIC EDUCATION PROGRAMS (QBE)

BY PROGRAM

35

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

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

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

SECTION I FINANCIAL

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

DEPARTMENT OF AUDITS AND ACCOUNTS
254 Washington Street, S.W. Suite 214 Atlanta, Georgia 30334-8400
May 14, 2004

Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the City of Gainesville Board of Education
INDEPENDENT AUDITOR'S COMBINED REPORT ON BASIC FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION - SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
Ladies and Gentlemen:
We have audited the accompanying financial statements ofthe governmental activities, each major fund, and the aggregate remaining fund information (Exhibits A through H) of the City of Gainesville Board of Education, as of and for the year ended June 30, 2003, which collectively comprise the Board's basic financial statements as listed in the table of contents. These financial statements are the responsibility of the City of Gainesville Board of Education's management. Our responsibility is to express opinions on these financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United States ofAmerica and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General ofthe United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free ofmaterial misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our op1mons.
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 City of Gainesville Board of Education, as of June 30, 2003, and the respective changes in financial position thereoffor the year then ended in conformity with accounting principles generally accepted in the United States of America.
2003-34ARL-11

As discussed in Note 2 to the basic financial statements, during fiscal year 2003, the Board consolidated its individual school activity accounts for inclusion in the basic financial statements. This change is in accordance with generally accepted accounting principles.
As described in Note 2, the City ofGainesville Board ofEducation has implemented a new financial reporting model as required by provisions ofGovernmental Accounting Standards Board Statement No. 34, Basic Financial Statements - and Management's Discussion and Analysis - for State and Local Governments, as of June 30, 2003.
In accordance with Government Auditing Standards, we have also issued our report dated May 14, 2004, on our consideration of the City of Gainesville 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 x and page 27 respectively, are not a required part ofthe basic financial statements but are supplementary information required by the accounting principles generally accepted in the United States of America. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods ofmeasurement and presentation ofthe required supplementary information. However, we did not audit the information and express no opinion on it.
Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City of Gainesville Board of Education's basic financial statements. The accompanying supplementary information which consist of Schedules 2 through 5, which includes the Schedule of Expenditures of Federal Awards as required by U.S. Office of Management and Budget Circular A-133, Audits ofStates, Local Governments, and Non-Profit Organizations, are presented for purposes of additional analysis and are not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements, and in our opinion, is fairly stated, in all material respects, in relation to the basic financial statements taken as a whole.
A copy ofthis report has been filed as a permanent record in the office ofthe State Auditor and made available to the press ofthe State, as provided for by Official Code ofGeorgia Annotated section 506-24.
Respectfully submitted,

RWH:as 2003-34ARL-11

State Auditor

CITY OF GAINESVILLE BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2003
INTRODUCTION
Our discussion and analysis of the Gainesville City School District's financial performance provides an overview of the School District's financial activities for the fiscal year ended June 30, 2003. The intent of this discussion and analysis is to look at the School District's financial performance as a whole; readers should also review the notes to the basic financial statements and financial statements to enhance their understanding of the School District's financial performance.
FINANCIAL HIGHLIGHTS
Key financial highlights for fiscal year 2003 are as follows:
The School District implemented GASB 34 for fiscal year 2003. Due to this being the implementation year, many comparisons are not available that will be available in fiscal year 2004.
On the District-wide financial statements, the assets of the School District exceeded liabilities by $30.2 million. Of this amount, $0.7 million is umestricted and is available for spending at the School District's discretion.
The School District had $41.98 million in expenses relating to governmental activities; only $25 million of these expenses are offset by program specific charges for services, grants and contributions. General revenues (primarily property and sales taxes) of $22.7 million were adequate to provide for these programs.
As stated above, general revenues accounted for $22.7 million or 47% of all revenues totaling $47.9 million. Program specific revenues in the form of charges for services, grants and contributions accounted for the rest.
OVERVIEW OF THE FINANCIAL STATEMENTS
This annual report consists of three parts; management's discussion and analysis, the basic financial statements and required supplementary information. The basic financial statements include two levels of statements that present different views of the School District. These include the District-wide and fund financial statements.
The District-wide financial statements include the Statement of Net Assets and Statement of Activities. These statements provide information about the activities of the School District presenting both short-term and long-term information about the School District's overall financial status.
1

CITY OF GAINESVILLE BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2003
The fund financial statements focus on individual parts of the School District, reporting the School District's operation in more detail. The Governmental Funds statements disclose how basic services are financed in the short-term as well as what remains for future spending. The Fiduciary Funds statements provide information about the financial relationships in which the School District acts solely as a trustee or agent for the benefit of others. The fund financial statements reflect the School District's most significant funds. In the case of the Gainesville City School District, the General Fund, District-wide Capital Projects Fund, and Debt Service Fund are the most significant funds.
The financial statements also include notes that explain some of the information in the statements and provide more detailed data. The statements are followed by a section of required supplementary information that further explains and supports the financial statements. Additionally, other supplementary information (not required) is also presented that further supplements understanding of the financial statements.
District-wide Statements
The District-wide financial statements are basically a consolidation of all of the District's operating funds into one column called governmental activities. In reviewing the District-wide financial statements, a reader might ask the question, are we in a better financial position than last year? The Statement of Net Assets and the Statement of Activities provides the basis for answering this question. These financial statements include all District's assets and liabilities and uses the accrual basis of accounting similar to the accounting used by most private-sector companies. This basis of accounting takes into account all of the current year's revenues and expenses regardless of when cash is received or paid.
These two statements report the School District's net assets and any changes in those assets. The change in net assets is important because it tells the reader that, for the School District as a whole, the financial position of the School District has improved or diminished. The causes of this change may be the results of many factors, including those not under the School District's control, such as the property tax base, facility conditions, required educational programs and other factors.
The Statement of Net Assets and the Statement of Activities reflects the School District's governmental activities.
Fund Financial Statements
The School District uses many funds to account for a multitude of financial transactions during the fiscal year. However, the fund financial statements presented in this report provide detail information about only the School District's significant or major funds.
11

CITY OF GAINESVILLE BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2003
Governmental Funds - Most of the School District's activities are reported in governmental funds, which focus on how money flows into and out of those funds and the balances left at yearend available for spending in future periods. These funds are reported using the modified accrual method of accounting which measures cash and all other financial assets that can readily be converted to cash. The governmental fund statements provide a detailed short-term view of the School District's general government operations and the basic services it provides. Governmental fund information helps determine whether there are more or fewer financial resources that can be spent in the near future to finance educational programs. The differences between governmental activities (reported in the Statement of Net Assets and the Statement of Activities) and governmental funds are reconciled to the financial statements.
Fiduciary Funds - The School District is the trustee, or fiduciary, for assets that belong to others, such as school clubs and organizations within the principals' accounts. The School District is responsible for ensuring that the assets reported in these funds are used only for their intended purposes and by those to whom the assets belong. The School District excludes these activities from the District-wide financial statements because it cannot use these assets to finance its operations.
FINANCIAL ANALYSIS OF THE SCHOOL DISTRICT AS A WHOLE
Recall that the Statement of Net Assets provides the perspective of the School District as a whole. Chart 1 provides a visual summary of Assets and Liabilities in relation to one another at June 30th. Table 1 provides a summary of the School District's net assets for this fiscal year. Since this is the first year the School District has prepared financial statements following GASB Statement 34, net asset comparisons to fiscal year 2002 are not available.
Chart 1 Assets and Liabilities
Current and Other Assets Capital Assets, Net
Current and Other Liabilities
Long-Term Liabilities
111

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

Table 1 Net Assets

Governmental Activities Fiscal Year 2003

Assets Current and Other Assets Capital Assets, Net

$ 14,378,066 47,061,859

Total Assets

$ 61,439,925

Liabilities Current and Other Liabilities Long-Term Liabilities

$ 6,758,187 24,528,050

Total Liabilities

$ 31,286,237

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

$ 26,947,317 2,502,821 703,550

Total Net Assets

$ 30.153.688

Chart 2 shows the School District's 2003 revenues. Chart 3 shows a breakdown of expenses for the School District for 2003. Table 2 shows the Changes in Net Assets for this fiscal year. Since this is the first year the School District has prepared financial statements following GASB Statement 34, revenue and expense comparisons to fiscal year 2002 are not available.

IV

CITY OF GAINESVILLE BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2003
Chart 2 Fiscal Year 2003 Revenues
Serv;ces and Sales Grants and Contributions Capital Grants Property Tax Sales Tax Other Revenue
Chart 3 Fiscal Year 2003 Expenses
Instruction Support serv;ces Operations of Non-
Instructional Serv;ces Interest On Short-Term
& Long-Term Debt
V

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

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

Governmental Activities Fiscal Year 2003
$ 1,062,944 21,062,295 3,068,713
$ 25,193,952
$ 16,916,893 1,174,103
3,327,025
262,644 357,979 495,725
147,066
$ 22,681,435
$ 47,875,387
$ 26,733,388
1,479,333 1,870,571
704,354 589,124 1,929,811 598,980 2,578,742 1,832,138
91,296 175,825
461,875 1,778,828 1,158,420
$ 41,982,685
$ 5.892.702

Vl

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

Governmental Activities

The Statement of Activities shows the cost of program services and the charges for services and grants offsetting these services. Table 3 shows, for governmental activities, the total cost of services and the net cost of services. Net cost of services can be defined as the total cost less fees generated by the activities and intergovernmental revenue provided for specific programs. The net cost reflects the financial burden on the School District's taxpayers by each activity. Since this is the first year the School District has prepared financial statements following GASB Statement 34, cost of service comparisons to fiscal year 2002 are not available.

Table 3 Governmental Activities

Total Cost of Services Fiscal Year 2003

Net Cost of Services Fiscal Year 2003

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

$ 26,733,388 $ 10,241,833

1,479,333 1,870,571
704,354 589,124 1,929,811 598,980 2,578,742 1,832,138
91,296 175,825

859,942 817,764 72,822
55,938 798,226 598,106 954,169 1,175,204
58,691 73,232

461,875 1,778,828 1,158,420

192,273 -267,887 1,158,420

Total Expenses

$ 4129822685 $ 16)882733

FINANCIAL ANALYSIS OF THE SCHOOL DISTRICT'S FUNDS

The School District's governmental funds are accounted for using the modified accrual basis of accounting. The governmental funds had total revenues and other financing sources of $49.97 million and total expenditures and other financing uses of $62.25 million.

Vll

CITY OF GAINESVILLE BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2003
General Fund Budgeting Highlights
The School District's budget is prepared according to Georgia Law. The most significant budgeted fund is the General Fund. During the course of fiscal year 2003, the School District amended its general fund budget as needed.
For the General Fund, the final actual revenues and other financing sources of $41.1 million exceeded the original budgeted amounts of $38.1 million by $3 million. This difference (actual vs. original budget) was due primarily due to an increase in charges for services by $0.7 million, Federal revenues over original budget by $0.6 million, charges for services over original budget by $0.68 million and miscellaneous revenues over original budget by $0.6 million. The miscellaneous revenues over original budget were primarily due to the inclusion of the principals' accounts in our financial statements, but not in the original budget.
The actual revenues and other financing sources of $41.1 million exceeded the final budgeted amounts by $2.3 million. Conservative budgeting for property taxes, sales taxes and state funds more than offset any shortfall in other revenue categories.
The final actual expenditures and other financing uses of $41.9 million exceeded the original budgeted amount of $38.4 million by $3.5 million. This difference was primarily due to lease payments not budgeted and our school principals' accounts not being included in the original budget process and not originally budgeting for other uses.
The School District used financial reserves to balance its fiscal year 2003 budget. General Fund expenditures and other financing uses exceeded the revenues and other financing sources by $0.8 million. This decrease is the result of actual expenditures exceeding budgeted expenditures. The School District budget actual expenditures and other financing uses of $41.9 million were right on track with the School District's final budget amounts.
CAPITAL ASSETS AND DEBT ADMINISTRATION
Capital Assets
At fiscal year ended June 30, 2003, the School District had $47 million invested in capital assets, all in governmental activities. Table 4 reflects a summary of these balances net of accumulated depreciation. Since this is the first year the School District has prepared financial statements following GASB Statement 34, capital assets comparisons to fiscal year 2002 are not available.
vm

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

Table 4 Capital Assets (Net of Depreciation)

Governmental Activities Fiscal Year 2003

Land Construction in Progress Buildings and Improvements Equipment

$ 5,331,706 11,372,387 26,562,953 3,794,813

Total

$ 47,061.859

Due to the ongoing growth in the city, the School District has numerous construction projects including new buildings, additions and renovations.

Debt

At fiscal year ended June 30, 2003, the School District had $16 million in general obligation bonds outstanding and $8.4 million in other long-term debt. Table 5 summarizes the School District's debt for general obligation bonds, long-term debt agreement, and capital leases outstanding.

Table 5 Debt at June 30

Governmental Activities Fiscal Year 2003

Capital Leases Long-Term Due in one year
Long-Term Debt Agreement with City of Gainesville Government Long-Term Due in one year
General Obligation Bonds Long-Term Due in one year

$ 1,749,320 373,730
5,655,000 650,000
13,555,000 2,545,000

Total

$ 24,528.050

IX

CITY OF GAINESVILLE BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2003
CURRENT ISSUES
Currently known facts, decisions or conditions that are expected to have a significant effect on the financial position or results of operations are as follows:
Economic Slowdown - State funding for education has been stagnant and as a result more pressure is being placed on the local school districts to prioritize its educational programs and provide additional local funding. Additional costs to the School District will be required with the continued implementation of House Bill 1187, which mandates lower teacher to student ratios, requiring additional teachers and additional classrooms. Despite these challenges, the Gainesville City School District is strong financially and we remain optimistic about the ability of the School District to maximize all of the financial resources to provide a quality education to our students. On a positive note the property tax digest continues to grow at a 2% to 3% annual growth rate. Enrollment also continues to grow at 5% to 6% annually.
Capital Improvements - The School District plans capital improvements as future capital needs arise due to increased student population and facility repair and maintenance needs. Specific capital expenditure plans are formalized in conjunction with individual general obligation bond issues and anticipated annual receipts of capital outlay funds from the State of Georgia Department of Education. The School District regularly monitors anticipated capital outlay needs.
Significant cost and budgetary control measures have been initiated by the school system in fiscal year 2004 and are budgeted to continue in fiscal year 2005. The Board of Education has taken budgetary action to see to it that the City of Gainesville School System will overcome the current economic downturns while maintaining the working reserve m order to sustain the school system through any future poor economic conditions.
CONTACTING THE SCHOOL DISTRICT'S FINANCIAL MANAGEMENT
This financial report is designed to provide our citizens, taxpayers, investors and creditors with a general overview of the School District's finances and to show the School District's accountability for the money it receives. If you have questions about this report or need additional financial information, contact Ms. Angela Parsons, Director of Finance at Gainesville City School District, 508 Oak Street, Gainesville, Georgia 30501. You may also email your question to Ms. Parsons at angela.parsons@gcssk12.net.
X

CITY OF GAINESVILLE BOARD OF EDUCATION - HALL COUNTY

CITY OF GAINESVILLE BOARD OF EDUCATION- HALL COUNTY STATEMENT OF NET ASSETS JUNE 30, 2003

EXHIBIT"A"

ASSETS
Cash and Cash Equivalents Investments Accounts Receivable, Net
Taxes State Government Federal Government Other Inventories Capital Assets Land Construction in Progress Buildings Equipment Less: Accumulated Depreciation
Total Assets
LIABILITIES
Accounts Payable Salaries Payable Contracts Payable Retainages Payable Deposits and Deferred Revenues 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 Unrestricted
Total Net Assets
Total Liabilities and Net Assets

GOVERNMENTAL ACTIVITIES

$

8,228,922

37,192

1,669,460 3,612,890
752,430 50,930 26,242

5,331,706 11,372,387 39,324,925
8,093,588 -17 060 747

$ ===6=1=,4=3=9,=92=5=

$

950,775

3,372,900

1,480,286

950,430

3,796

3,568,730 2019591320

$

3112861237

$

26,947,317

573,348 1,929,473
7031550

$

3011531688

$ ===6=1=,4=3~9,=92=5=

The notes to the basic financial statements are an integral part of this statement. -3-

CITY OF GAINESVILLE BOARD OF EDUCATION - HALL COUNTY STATEMENT OF ACTIVITIES
FOR THE YEAR ENDED JUNE 30 2003

GOVERNMENTAL ACTIVITIES
Instruction Support Services
Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Operations of Non-Instructional Services Enterprise Operations Food Services Interest on Short-Term and Long-Term Debt
Total Governmental Activities
General Revenues Taxes Property Taxes For Maintenance and Operations For Debt Services Sales Taxes Special Purpose Local Option Sales Tax For Debt Services Grants and Contributions not Restricted to Specific Programs Investment Earnings Miscellaneous
Special Items Gain on Sale of Land
Total General Revenues
Change in Net Assets
Net Assets - Beginning of Year
Net Assets - End of Year

EXPENSES

CHARGES FOR SERVICES

$

26,733,388 $

1,479,333 1,870,571
704,354 589,124 1,929,811 598,980 2,578,742 1,832,138
91,296 175,825

461,875 1,778,828 1,158,420

$

4119821685 $

407,498
76,260 269,602 309,584 110621944

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

$

14,099,432 $

613,890 1,046,115
477,270 530,122 900,964

1,402,587 444,769

101,956

1,445,190

$

2110621295 $

1,984,625 $
5,501 6,692 154,262 3,064 230,621
874 145,726 212,165
32,605 637
291,941
310681713 $

-10,241,833
-859,942 -817,764
-72,822 -55,938 -798,226 -598, 106 -954, 169 -1,175,204 -58,691 -73,232
-192,273 267,887 -11158,420
-16,788,733

$

16,916,893

1,174,103

3,327,025 262,644 357,979 495,725

147,066

$

22,6811435

$

5,892,702

241260,986

$ =======3=0=11::::::::53~1::::::::68=8=

-5-

CITY OF GAINESVILLE BOARD OF EDUCATION - HALL COUNTY BALANCE SHEET
GOVERNMENTAL FUNDS JUNE 30, 2003

EXHIBIT"C"

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

GENERAL FUND

DISTRICTWIDE
CAPITAL PROJECTS
FUND

DEBT SERVICE
FUND

TOTAL

$ 3,293,995 $ 3,913,170 $ 1,021,757 $ 8,228,922

37,192

37,192

2,052,213 2,168,151
752,430 50,930 26,242

1,444,739

1,002,749

3,054,962 3,612,890
752,430 50,930 26,242

$ 8,381,153 $ 5,357,909 $ 2,024,506 $ 15,763,568

$ 950,775 3,372,900 $ 1,480,286 950,430 3,796
$ 4,327,471 $ 2,430,716

$ 950,775 3,372,900 1,480,286 950,430 3,796
$ 6,758,187

$ 547,106

$ 547,106

$ 2,024,506

2,024,506

26,242

26,242

$ 2,927,193

2,927,193

54,486

54,486

3,425,848

3,425,848

$ 4,053,682 $ 2,927,193 $ 2,024,506 $ 9,005,381

$ 8,381,153 $ 5,357,909 $ 2,024,506 $ 15,763,568

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

CITY OF GAINESVILLE BOARD OF EDUCATION- HALL COUNTY RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET
TO THE STATEMENT OF NET ASSETS JUNE 30, 2003

EXHIBIT "D"

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

$ 9,005,381

$ 5,331,706 11,372,387 39,324,925 8,093,588 -17,060,747

47,061,859

-1,385,502

$ -22,405,000 -2, 123,050

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

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

EXHIBIT"E"

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

GENERAL FUND

DISTRICTWIDE
CAPITAL PROJECTS
FUND

DEBT SERVICE
FUND

TOTAL

$ 16,759,922
16,119,377 $ 5,225,021 1,062,944
142,383 748,890

$ 3,068,713
190,425 1 119

1,192,801 $ 3,327,025
25,171

17,952,723 3,327,025
19,188,090 5,225,021 1,062,944 357,979 750,009

$ 4010581537 $ 3,260,257 $ 4 1544 1997 $ 47!863,791

$ 25,588,151

$ 25,588,151

1,478,919 1,875,252
599,955 587,960 1,775,051 591,909 2,497,362 1,921,061
89,619 175,349 461,875 1,687,426 1,221,251 $

$ 14,653,623

6,418

1,478,919 1,875,252
599,955 587,960 1,775,051 598,327 2,497,362 1,921,061
89,619 175,349 461,875 1,687,426 15,874,874

236,206 97A09

92,313

4,525,000 1,061iD11

4,853,519 1,158A20

$ 40 1884 1755 $ 141745 1936 $ 5,592A29 $ 61,223,120 $ -826,218 $ -11 !485,679 $ -1,047,432 $ -13,359,329

$ 1,073,073 $
-1,031,549

98,476 $ 1,563,504

$ 933,073

1,073,073 1,031,549 -1,031,549 1,563,504

$

41,524 $ 1,661,980 $ 933,073 $ 2,636,577

$ -784,694 $ -9,823,699 $ -114,359 $ -10,722,752

4,838,376

12,750,892

2,138,865

19,728,133

$ 4,053,682 $ 2,927,193 $ 2,024,506 $ 9,005,381

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

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

EXHIBIT"F"

Total Net Change in Fund Balances - Governmental Funds (Exhibit "E")
Amounts reported for Governmental Activities in the Statement of Activities are different because:
Capital Outlays are reported as expenditures in Governmental Funds. However, in the Statement of Activities, the cost of Capital Assets is allocated over their estimated useful lives as depreciation expense. In the current period, these amounts are:
Capital Outlay Depreciation Expense
Excess of Capital Outlay over Depreciation Expense
Because some property taxes will not be collected for several months after the School District's fiscal year ends, they are not considered "available" revenues.
In the Statement of Activities, only the gain on the sale of the (land/building/equipment) is reported, whereas in the Governmental Funds, the entire proceeds from the sale increase financial resources. Thus, the change in net assets differs from the change in fund balances by the (cost of the land/carrying value of the building/equipment) sold.
Some of the Capital Assets acquired this year were financed with capital leases. In Governmental Funds, a capital lease arrangement is considered a source of financing, but in the Statement of Net Assets, the lease obligation is reported as a Long-Term Liability.
Repayment of Long-Term Debt is reported as an expenditure in Governmental Funds, but the repayment reduces Long-Term Liabilities in the Statement of Net Assets. In the current year, these amounts consist of:
Bond Principal Retirements Capital Lease Payments
Total Long-Term Debt Repayments
Change in Net Assets of Governmental Activities (Exhibit "B")

$ -10,722,752

$ 16,082,766 -1!6721665

14,410,101

138,273

-1,713,366

-1,073,073

$ 4,525,000 3281519

4,853!519

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

CITY OF GAINESVILLE BOARD OF EDUCATION - HALL COUNTY STATEMENT OF FIDUCIARY NET ASSETS FIDUCIARY FUNDS JUNE 30, 2003

EXHIBIT"G"

ASSETS Cash and Cash Equivalents
LIABILITIES Funds Held for Others

AGENCY FUNDS
$ ======9=4==3=11==
$ ===94:::::::'=31=1=

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

CITY OF GAINESVILLE BOARD OF EDUCATION - HALL COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30. 2003

EXHIBIT "H"

Note 1: DESCRIPTION OF SCHOOL DISTRICT AND REPORTING ENTITY
REPORTING ENTITY
The City of Gainesville Board ofEducation (School District) was established under the laws ofthe State of Georgia and operates under the guidance of a school board elected by the voters and a Superintendent appointed by the Board. The Board is organized as a separate legal entity and has the power to levy taxes and issue bonds. Its budget is not subject to approval by any other entity. Accordingly, the School District is a primary government and consists of all the organizations that compose its legal entity.
Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The School District's basic financial statements are collectively comprised of the District-wide financial statements, fund financial statements and notes to the basic financial statements ofthe City of Gainesville Board of Education.
District-wide Statements: The Statement ofNet Assets and the Statement ofActivities display information about the financial activities ofthe overall School District, except for fiduciary activities. Eliminations have been made to minimize the double counting of internal activities. Governmental activities generally are financed through taxes, intergovernmental revenues, and other nonexchange transactions.
The Statement ofActivities presents a comparison between direct expenses and program revenues for each function of the School District's governmental activities.
Direct expenses are those that are specifically associated with a program or function and, therefore, are clearly identifiable to a particular function. Indirect expenses (expenses of the School District related to the administration and support ofthe School District's programs, such as office and maintenance personnel and accounting) are not allocated to programs.
Program revenues include (a) charges paid by the recipients of goods or services offered by the programs and (b) grants and contributions that are restricted to meeting the operational or capital requirements of a particular program. Revenues that are not classified as program revenues, including all taxes, are presented as general revenues.
Fund Financial Statements: The fund financial statements provide information about the School District's funds, including fiduciary funds. Eliminations have been made to minimize the double counting ofintemal activities. Separate statements for each category (governmental and fiduciary) are presented. The emphasis of fund financial statements is on major governmental funds, each displayed in a separate column.
The School District reports the following major governmental funds:
- 11 -

CITY OF GAINESVILLE BOARD OF EDUCATION - HALL COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2003

EXHIBIT "H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
General Fund is the School District's primary operating fund. It accounts for all financial resources ofthe School District, except those resources required to be accounted for in another fund.
District-wide Capital Projects Fund accounts for financial resources including Bond Proceeds and grants from Georgia State Financing and Investment Commission to be used for the acquisition, construction or renovation of major capital facilities.
Debt Service Fund accounts for taxes (property and sales) legally restricted for the payment of general long-term principal, interest and paying agent's fees.
The School District reports the following fiduciary fund type:
Agency funds account for assets held by the School District as an agent for various funds, governments or individuals.
BASIS OF ACCOUNTING
The basis 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 ofwhen 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 ofaccounting. Under this method, revenues are recognized when measurable and available. The School District considers all revenues reported in the governmental funds to be available if they are collected within sixty days after year-end. Property taxes, sales taxes and interest are considered to be susceptible to accrual. Expenditures are recorded when the related fund liability is incurred, except for principal and interest on general long-term debt, which is recognized as expenditures to the extent they have matured. Capital asset acquisitions are reported as expenditures in governmental funds. Proceeds ofgeneral long-term liabilities and acquisitions under capital leases are reported as other financing sources.
- 12 -

CITY OF GAINESVILLE BOARD OF EDUCATION - HALL COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2003

EXHIBIT "H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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.

A substantial number of personnel of the School District were employed for a one hundred and ninety day period beginning in August 2002 and ending in early June 2003. Employment contracts for these employment periods typically specify that compensation be paid in twelve equal monthly payments beginning in September 2002 and ending in August 2003. State grants to fund the State's share of these contracts are disbursed to the School District in the same twelve month period. In accordance with generally accepted accounting principles, salary and fringe benefit costs and the related revenue from the State to fund these contracts are recorded in the fiscal period covered by these financial statements.

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, Federal Programs and Athletic Fund were reported as Special Revenue Funds. These funds had a combined fund balance of$499,516 at July 1, 2002. For fiscal year 2003, these funds have been reported as part of the General Fund. In addition, governmental fund activity from the various school activity accounts, which were not reported in the prior year's financial statements, have been reported within the General Fund for fiscal year ended June 30, 2003. The governmental fund activity ofthe various school activity accounts had a fund balance of $146,216 at July 1, 2002. This change is in accordance with generally accepted accounting principles.

General Fund Balance July 1, 2002

$ 4,192,644

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

467,207 32,309 146,216

General Fund Balance July 1, 2002 (Restated)

$ 4,838.376

CHANGES IN ACCOUNTING PRINCIPLES

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

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

- 13 -

CITY OF GAINESVILLE BOARD OF EDUCATION - HALL COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2003

EXHIBIT "H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

$ 4,838,376 12,750,892 2,138,865

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

$ 19,728,133 53,397,763 -19,032,639 -1,523,775 -26,930,000 -1,378,496

Net Assets Beginning (See Exhibit "B")

$ 24~260~986

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,

- 14 -

CITY OF GAINESVILLE BOARD OF EDUCATION - HALL COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2003

EXHIBIT "H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(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 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 City of Gainesville Board ofCommissioners fixed the property tax levy for the 2002 tax digest year (calendar year) on June 18, 2002 (levy date). -Taxes were due on December 31, 2002 (lien date). Taxes collected within the current fiscal year or within 60 days after year-end on the 2002 tax digest are reported as revenue in the governmental funds for fiscal year 2003. The City of Gainesville City Clerk bills and collects the property taxes for the School District, withholds 1% 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, 2003, for maintenance and operations amounted to $16,759,922 and for school bonds amounted to $1,192,801.

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

School Operations School Bonds

7.50 mills .50 mills

8.00 mills

SALES TAXES

Special Purpose Local Option Sales Tax, at the fund reporting level, during the year amounted to $3,327,025 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.

- 15 -

CITY OF GAINESVILLE BOARD OF EDUCATION - HALL COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2003

EXHIBIT "H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

INVENTORIES

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

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 ofnormal maintenance and repairs that do not add to the value of assets or materially extend the useful lives of the assets is not capitalized. Depreciation is computed using the straight-line method. The School District does not capitalize book collections or works of art.

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

Capitalization Policy

Estimated Useful Life

Land Buildings and Improvements Equipment

$

500

NIA

$

500 25 to 100 years

$

500 5 to 10 years

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

LONG-TERM DEBT AGREEMENT

Prior to January 1, 1994, the City of Gainesville Board of Education was a component unit of the City of Gainesville, Georgia and was thereby not authorized to issue debt. Accordingly, the City of Gainesville, Georgia issued General Obligation Bonds to provide funds for the acquisition and construction of major school facilities. The general obligation bonds issued during this time are

- 16 -

CITY OF GAINESVILLE BOARD OF EDUCATION - HALL COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2003

EXHIBIT "H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
direct obligations and pledge the full faith and credit ofthe City of Gainesville. However, the City of Gainesville Board ofEducation is required by House Bill 841 ofthe 1993 Session ofthe Georgia General Assembly to levy taxes for remittance to the City of Gainesville, Georgia in the amounts necessary to retire this outstanding debt.
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. General obligation bonds are direct obligations and pledge the full faith and credit of the government. The outstanding amount of these bonds is recorded in the Statement of Net Assets.
Note 3: DEPOSITS
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 of insurance, or by collateral. The aggregate ofthe face value of such surety bond and the market value of securities pledged shall be equal to not less than 110 percent ofthe public funds being secured after the deduction ofthe amount ofdeposit insurance. Ifa depository elects the pooled method (OCGA 45-8-13.1) the aggregate ofthe market value ofthe securities pledged to secure a pool ofpublic funds shall be not less than 110 percent ofthe daily pool balance. OCGA Section 45-8-11 (b) provides an officer holding public funds may, in his discretion, waive the requirement for security in the case of operating funds placed in demand deposit checking accounts.
Acceptable security for deposits consists of any one of or any combination of the following:
(1) Surety bond signed by a surety company duly qualified and authorized to transact business within the State of Georgia,
(2) Insurance on accounts provided by the Federal Deposit Insurance Corporation,
(3) Bonds, bills, notes, certificates of indebtedness or other direct obligations of the United States or of the State of Georgia,
(4) Bonds, bills, notes, certificates of indebtedness or other obligations of the counties or municipalities of the State of Georgia,
(5) Bonds of any public authority created by the laws of the State of Georgia, providing that the statute that created the authority authorized the use of the bonds for this purpose,

- 17 -

CITY OF GAINESVILLE BOARD OF EDUCATION - HALL COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2003

EXHIBIT "H"

Note 3: DEPOSITS

(6) Industrial revenue bonds and bonds of development authorities created by the laws of the State of Georgia, and

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

CATEGORIZATION OF DEPOSITS At June 30, 2003, the bank balances were $10,551,014. The amounts ofthe total bank balances are classified into three categories of credit risk:

Category 1 - Cash that is insured (e.g., Federal depository insurance) or collateralized with securities held by the School District or by the School District's agent in the School District's name.
Category 2 - Cash collateralized with securities held by the pledging financial institution's trust department or agent in the School District's name.
Category 3 - Uncollateralized deposits. (This includes any bank balance that is collateralized with securities held by the pledging financial institution, or by its trust department or agent but not in the School District's name.)

The School District's deposits are classified by risk category at June 30, 2003, as follows:

Risk Category

Bank Balance

1

$ 302,394

2

10,189,796

3

58,824

Total

$ 10,551.014

Note 4: NON-MONETARY TRANSACTIONS

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

- 18 -

CITY OF GAINESVILLE BOARD OF EDUCATION - HALL COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2003

EXHIBIT "H"

Note 5: CAPITAL ASSETS

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

Balances July 1, 2002

Increases

Decreases

Balances June 30, 2003

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

$ 3,985,970 $ 2,762,174 $ 1,416,438 $ 5,331,706

0 11,372,387

11,372,387

Total Capital Assets Not Being Depreciated $ 3,985,970 $ 14,134,561 $ 1,416,438 $ 16,704,093

Capital Assets Being Depreciated Buildings and Improvements Equipment

$ 42,040,178 $

44,276 $ 2,759,529 $ 39,324,925

7,371,615

1,903,929

1,181,956

8,093,588

Less Accumulated Depreciation for: Buildings and Improvements Equipment

14,372,263 4,660,376

923,590 749,075

2,533,881 1,110,676

12,761,972 4,298,775

Total Capital Assets, Being Depreciated, Net $ 30,379,154 $ 275,540 $ 296,928 $ 30,357,766

Governmental Activity Capital Assets - Net $ 34 365 124 $ 14 410 101 $ 1 713.366 $ 47 061 859

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

Governmental Funds

Buildings and Improvements Less: Accumulated Depreciation

$ 3,081,558 341,994

$ 2,739.564

- 19 -

CITY OF GAINESVILLE BOARD OF EDUCATION - HALL COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2003

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 General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Food Services

$ 1,081,761

$

2,999

3,648

84,083

1,670

125,705

476

79,431

115,645

17,772

347

431,776 159,128

$ 1.672.665

Note 6: RESTRICTED ASSETS

General obligation bond proceeds and property tax levied specifically for retirement ofoutstanding bond principal, interest and paying agent's fees (Debt Service Funds) are reported as restricted assets in the Statement ofNet Assets because their use is limited by applicable bond covenants or statutory prov1s1ons. Restricted assets at June 30, 2003, were as follows:

District-wide Capital Projects Bond Proceeds

Debt Service Funds

Restricted Cash and Cash Equivalents: Debt Services Capital Acquisitions

$ 1,021,757 $ 4,603,933

- 20 -

CITY OF GAINESVILLE BOARD OF EDUCATION - HALL COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2003

EXHIBIT "H"

Note 7: INTERFUND TRANSFERS

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

Transfer to

Transfers From General Fund

District-wide Capital Projects Debt Service Funds

$

98,476

933,073

Total

$ 1,031.549

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

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; unemployment compensation and dental care.

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

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

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

2002 2003

Beginning of Year Liability

Claims and Changes in Estimates

Claims Paid

End of Year Liability

$

0 $

6,500 $

6,500 $

0

$

0 $

7 300 $

7,300 $

0

- 21 -

CITY OF GAINESVILLE BOARD OF EDUCATION - HALL COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2003

EXHIBIT "H"

Note 8: RISK MANAGEMENT

The School District has established a limited risk management program for dental insurance claims. A premium is charged by the General Fund to each user fund on the basis of employee participation in order to cover estimated claims budgeted by management based on known claims and prior experience. The School District accounts for claims with expenditures and liability being reported when it is probable that a loss has occurred, and the amount ofthat loss can be reasonably estimated.

Changes in the dental 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

2002 2003

$

0 $

258,289 $

258,289 $

0

$

0 $

259,297 $

259,297 $

0

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

Position Covered

Amount

Superintendent Treasurer

$

50,000

$

50,000

Note 9: LONG-TERM DEBT

CAPITAL LEASES The City of Gainesville Board of Education has entered into various lease agreements as lessee for portable classrooms, facilities and air/heat management system. These lease agreements qualify as capital leases for accounting purposes and, therefore, have been recorded at the present value ofthe future minimum lease payments as of the date of their inception.

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

Purpose

Interest Rates

Amount

General Government - Series 2001 General Government - Series 2002

2.55% - 3.50% 3.125% - 3.60%

$ 8,500,000 7,600,000

$ 16,100.000

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

- 22 -

CITY OF GAINESVILLE BOARD OF EDUCATION - HALL COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2003

EXHIBIT "H"

Note 9: LONG-TERM DEBT

Balance July 1, 2002
Additions Capital Leases
Deductions Debt Retired
Balance June 30, 2003
Portion of Long-Term Debt Due within One Year

Capital Leases

Governmental Funds

Long-Term General

Debt

Obligation

Agreement

Bonds

Total

$ 1,378,496 $ 6,920,000 $ 20,010,000 $ 28,308,496

1,073,073

1,073,073

328,519

615,000

3,910,000

4,853,519

$ 2 123 050 $ 6 305 000 $ 16 100 000 $ 24 528 050

$ 373,730 $ 650,000 $ 2,545,000 $ 3,568,730

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

Fiscal Year Ended June 30
2004 2005 2006 2007 2008 2009 -2013
Total Principal and Interest
Fiscal Year Ended June 30
2004 2005 2006 2007 2008 2009 - 2013
Total Principal and Interest

Capital Leases

Principal

Interest

Long-Term Debt Agreement

Principal

Interest

$ 373,730 $ 427,876 377,038 249,946 106,145 588,315

93,051 $ 650,000 $

81,340

685,000

60,199

720,000

43,481

760,000

34,201

800,000

78,328

2,690,000

155,497 299,263 264,328 226,888 186,988 294,275

$ 2 123 050 $

390 600 $ 6 305 000 $ 1,427 239

General Obligation

Debt

Principal

Interest

$ 2,545,000 $ 2,895,000 3,435,000 3,550,000 3,675,000 0

521,783 451,424 358,897 249,436 130,486
0

$ 16!100!000 $ 1!712!026

- 23 -

CITY OF GAINESVILLE BOARD OF EDUCATION - HALL COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2003

EXHIBIT "H"

Note 10: ON-BEHALF PAYMENTS

The Board has recognized revenues and costs in the amount of $288,303 for health insurance and retirement contributions paid on the Board's behalf by the following State Agencies.

Georgia Department of Education Paid to the Georgia Department of Community Health For Health Insurance ofNon-Certified Personnel In the amount of $253,480

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 $34,823

Note 11: SIGNIFICANT COMMITMENTS

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

Project

Unearned Executed Contracts

Funding Available From State

SAO 1S- 77 6-063 03/02S-776-30 Renovations to Fairstreet and
Enota Elementary Schools

$ 2,607,711 $ 818,443
323,223

961,652 180,442

$ 3,749.377 $ 1,142,094

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

Note 12: SIGNIFICANT CONTINGENT LIABILITIES

Amounts received or receivable principally from the Federal government are subject to audit and review by 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.

Note 13: SUBSEQUENT EVENTS

In the subsequent fiscal period the School District contracted with the Gainesville Redevelopment Authority to issue Gainesville Redevelopment Authority Revenue Bonds (City ofGainesville School District Qualified Zone Academy Project) Series 2003 in the principal amount of$1,209,357. The

- 24 -

CITY OF GAINESVILLE BOARD OF EDUCATION - HALL COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2003

EXHIBIT "H"

Note 13: SUBSEQUENT EVENTS

proceeds of the issue are to be used to (i) rehabilitate, repair, renovate, extend and improve Enota Elementary School, Gainesville Middle School, and related facilities useful or desirable in connection therewith, and (ii) purchase ofschool equipment and fixtures therefore for the use ofthe School District pursuant to a Contract between the Authority and the School District.

Note 14: RETIREMENT PLANS

TEACHERS RETIREMENT SYSTEM OF GEORGIA (TRS)

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

TRS CONTRIBUTIONS REQUIRED AND MADE Employees ofthe School District who are covered by TRS are required by State statute to contribute 5% of their gross earnings to TRS. The School District makes monthly employer contributions to TRS at rates adopted by the TRS Board of Trustees in accordance with State statute and as advised by their independent actuary. The required employer contribution rate is 9.24% and employer contributions for the current fiscal year and the preceding two fiscal years are as follows:

Fiscal Year

Percentage Contributed

Required Contribution

2003 2002 2001

100% 100% 100%

$ 1,988,206 $ 1,790,242 $ 2,061,498

- 25 -

CITY OF GAINESVILLE BOARD OF EDUCATION- HALL COUNTY GENERAL FUND
SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL
YEAR ENDED JUNE 30, 2003

SCHEDULE "1"

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

NONAPPROPRIATED BUDGETS

ORIGINAL (1)

FINAL (1)

ACTUAL AMOUNTS

$

16,677,961 $

16,677,961 $

16,759,922

16,143,767

15,967,819

16,119,377

4,602,021

5,439,196

5,225,021

363,449

410,149

1,062,944

179,500

140,038

142,383

151 173

175 870

748,890

$

38,117,871 $

38,811,033 $

40,058,537

$

25,096,223 $

25,463,545 $

25,588,151

1,580,972 1,660,611
551,777 584,576 1,929,927 377,927 2,458,103 1,846,002 107,210 157,278
1,565,254 393,164

1,589,296 1,984,973
593,597 593,445 1,928,681 388,603 2,519,239 1,902,041
89,335 182,987
1,603,235 443,935

1,478,919 1,875,252
599,955 587,960 1,775,051 591,909 2,497,362 1,921,061
89,619 175,349 461,875 1,687,426 1,221,251 333,615

$

38,309,024 $

39,282,912 $

40,884,755

$

-191 153 $

-471 879 $

-826,218

$

3,725 $

1,073,073

$

-94,000

-1,031,548

-1,031,549

$

-94 000 $

-1,027,823 $

41 524

$

-285,153 $

-1,499,702 $

-784,694

56,546,629

64,745,117

4,838,376

Fund Balances - Ending

$

56,261,476 $

63,245,415 $ ===4=,0=5=3'::::::68=2=

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

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

See notes to the basic financial statements.

-27-

CITY OF GAINESVILLE BOARD OF EDUCATION- HALL COUNTY SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS YEAR ENDED JUNE 30, 2003

SCHEDULE "2"

FUNDING AGENCY PROGRAM/GRANT
Agriculture, U. S. Department of Child Nutrition Cluster Pass-Through From Georgia Department of Education Food and Nutrition Program Food Services School Breakfast Program National School Lunch Program Pass-Through From Office of School Readiness Food and Nutrition Program Summer Food Service Program for Children
Total Child Nutrition Cluster
Other Programs Pass-Through From Georgia Department of Education Food and Nutrition Program Food Distribution Program (1)
Total U.S. Department of Agriculture
Education, U.S. Department of Special Education Cluster Pass-Through From Georgia Department of Education Individuals with Disabilities Education Act Part B - Special Education Flow Through Preschool Capacity Building Improvement Grant
Total Special Education Cluster
Other Programs Pass-Through From Georgia Department of Education Elementary and Secondary Education Act Title I Even Start Grants to Local Educational Agencies School Improvement Title II Enhancing Education Through Technology Improving Teacher Quality Eisenhower Professional Development Title Ill Limited English Proficient TitleV Innovative Education Program Strategies Title VI Rural and Low Income Schools Title VII Immigrant Education Safe and Drug-Free Schools and Communities Reading Excellence - Local Reading Improvement School Renovation - Schools

CFDA NUMBER

PASSTHROUGH
ENTITY ID
NUMBER

EXPENDITURES IN PERIOD

10.553 10.555
10.559

N/A N/A $
N/A
$

(2) 1,517,317
{2} 1,517,317

10.550

N/A
$

55,412 1!572z729

84.027 84.173 84.027

NIA $
NIA
N/A
$

359,425 27,678 7,286
394,389

* 84.213

N/A

* 84.010

N/A

84.010

N/A

84.318

N/A

84.367

N/A

84.281

N/A

84.365

N/A

84.298

N/A

84.358

N/A

84.162

N/A

84.186

N/A

* 84.338

N/A

84.352

N/A

491,318 1,479,043
11,865
82,377 229,709
809
85,773
14,412
39,716
3,843 34,973 580,600 52,487

- 28-

CITY OF GAINESVILLE BOARD OF EDUCATION - HALL COUNTY SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS YEAR ENDED JUNE 30, 2003

SCHEDULE "2"

FUNDING AGENCY PROGRAM/GRANT
Education, U. S. Department of Other Programs Pass-Through From Georgia Department of Education Stewart B. McKinney Homeless Assistance Act Education for Homeless Children and Youth Technology Literacy Challenge Fund Grants Vocational Education - Basic Grants to States High School Program Basic Grant Pass-Through From Piedmont Migrant Education Agency Elementary and Secondary Education Act Title I Migrant Education Pass-Through From Pioneer Regional Educational Service Agency Elementary and Secondary Education Act Title I Migrant Education Pass-Through From United Way of Metropolitan Atlanta Elementary and Secondary Education Act Community Technology Centers
Total U.S. Department of Education
Appalachian Regional Commission Direct Appalachian Area Development

CFDA
NUMBER

PASS-
THROUGH ENTITY ID
NUMBER

EXPENDITURES IN PERIOD

84.196 84.318
84.048

N/A $ N/A
N/A

58,034 44,373
42,813

84.011

N/A

89,021

84.011 84.341

N/A N/A
$

57,326
17195 318101076

23.002

$

43459

Total Federal Financial Assistance N/A = Not Available

$ ===5=,4=2=6=12::::::::64:::::::

Notes to the Schedule of Expenditures of Federal Awards

(1) The amounts shown for the Food Distribution Program represents the Federally assigned value of nonmonetary assistance for donated commodities received and/or consumed by the School District during the current fiscal year.
(2) Expenditures for the funds earned on the Summer Food Service Program for children ($44,817) and the School Breakfast Program ($313,537) were not maintained separately and are included in the 2003 National School Lunch Program.

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

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

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

See notes to the basic financial statements.

- 29 -

CITY OF GAINESVILLE BOARD OF EDUCATION - HALL COUNTY SCHEDULE OF STATE REVENUE YEAR ENDED JUNE 30 2003

SCHEDULE "3"

AGENCY/FUNDING
GRANTS Education, Georgia Department of Quality Basic Education Direct Instructional Cost Kindergarten Program Kindergarten Program - Early Intervention Program Primary Grades (1-3) Program Primary Grades - Early Intervention (1-3) Program Upper Elementary Grades (4-5) Program Upper Elementary Grades - Early Intervention (4-5) Program Middle School (6-8) Program High School General Education (9-12) Program Vocational Laboratory (9-12) Program Students with Disabilities Category I Gifted Student - Category VI English Speakers of Other Languages (ESOL) Media Center Program 20 Days Additional Instruction Staff and Professional Development Indirect Cost Central Administration School Administration Facility Maintenance and Operations Categorical Grants Pupil Transportation Regular Bus Replacement Sparsity Nursing Services Principal Supplements Vocational Supervisors Migrant Education Food Services Vocational Education Austerity Reduction Other State Programs 4-8 Statewide After School Program K-3 Statewide Reading Program Alternative Program Apprenticeship Program Health Insurance Mentor Teachers National Teacher Certification Preschool Handicapped Program Special Education Low Incidence Grant Lottery Programs Assistive Technology Computers in the Classroom Post Secondary Options
Georgia State Financing and Investment Commission Reimbursement on Construction Projects
Office of the Governor Georgia Council for the Arts

GOVERNMENTAL FUND TYPES

CAPITAL

GENERAL

PROJECTS

FUND

FUND

TOTAL

$ 1,144,202 358,138
2,699,715 784,926
1,125,203 346,767
1,963,099 1,768,223
417,509
801,124 124,224 1,124,267 357,366 118,218
71,842
386,411 642,420 1,031,009
296,642 64,195 19,000
100,240 18,197 21,676 8,096 95,162 21,864
-504,026
36,464 58,968 153,884 33,250 253,480
996 11,410 82,216 32,675
6,422 1,224 5,309

$ 1,144,202 358,138
2,699,715 784,926
1,125,203 346,767
1,963,099 1,768,223
417,509
801,124 124,224 1,124,267 357,366 118,218
71,842
386,411 642,420 1,031,009
296,642 64,195 19,000
100,240 18,197 21,676 8,096 95,162 21,864
-504,026
36,464 58,968 153,884 33,250 253,480
996 11,410 82,216 32,675
6,422 1,224 5,309

$

3,068,713

2,547

3,068,713 2,547

- 30 -

CITY OF GAINESVILLE BOARD OF EDUCATION - HALL COUNTY SCHEDULE OF STATE REVENUE YEAR ENDED JUNE 30. 2003

SCHEDULE "3"

AGENCY/FUNDING
GRANTS Office of Treasury and Fiscal Services Public School Employees Retirement

GOVERNMENTAL FUND TYPES

CAPITAL

GENERAL

PROJECTS

FUND

FUND

TOTAL

$ _ _....;;3...;.4i..;;.,82=3;_ - - - - - $ _ _ _3_4._,8_23_

$ 16,119,377 $

3,068,713 $ 19,188,090

See notes to the basic financial statements.

- 31 -

CITY OF GAINESVILLE BOARD OF EDUCATION-HALL COUNTY SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS
YEAR ENDED JUNE 30 2003

SCHEDULE "4"

PROJECT
Payments of a portion of the previously incurred obligation debts of capital outlay projects of the City of Gainesville School District are specifically 1986, 1991, 1993 bonds becoming due January 1, 1998 through and including December 31, 2002
Paying a portion of the payments, including principal and interest, due on the Gainesville City School District's Series 1991 and 1993 Bonds
Acquisition. construction, and equipping of new academic wing, renovation of existing instructional and support spaces, construction of new gymnasium at high school. In addition, the resolution authorized the issuance of $14, 190,000 in general obligation debt for the purposes set forth in the resolution. As a result, a portion of the SPLOST proceeds will be used to service these bonds
Acquiring, constructing and equipping of two new elementary school, additional classrooms, instructional and support space, remodeling, renovating, and equipping of existing classrooms, instructional and support spaces, acquiring furnishings, equipment and fixtures for new and existing facilities, and acquiring and conducting site preparation of real estate for School District purposes. In addition, the resolution authorized the issuance of $16,100,000 in general obligation debt. These bonds have been issued and the proceeds of the bonds will be used for the purposes set forth in the resolution. As a result, a portion of the SPLOST proceeds will be used to service these bonds

ORIGINAL ESTIMATED
COST (1)

CURRENT ESTIMATED COSTS (2)

AMOUNT EXPENDED IN CURRENT YEAR (3) (4)

AMOUNT EXPENDED
IN PRIOR YEARS (3) (4)

PROJECT STATUS

$ 2,038,737 $ 2,038,737

2,000,000

2,000,000

$

1,534,501 Completed

Ongoing

14,080,332

17,585,634 $

3,992,722

13,592,912 Ongoing

23,462,770

23,462i770

14!815,378

3,892,560 Ongoing

$ 41,581,839 $ 45,087,141 $

18,808,100 $ 19,019,973

- 32 -

CITY OF GAINESVILLE BOARD OF EDUCATION- HALL COUNTY SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS
YEAR ENDED JUNE 30, 2003

SCHEDULE "4"

(1) The School District's original cost estimate as specified in the resolution calling for the imposition of the Local Option Sales Tax.

(2) The School District's current estimate of total cost for the projects. Includes all cost from project inception to completion.

(3) The voters of Hall County approved the imposition of a 1% sales tax to fund the above projects and retire associated debt. Amounts expended for these projects may include sales tax proceeds, state, local property taxes and/or other funds over the life of the projects.

(4) In addition to the expenditures shown above, the School District has incurred interest to provide advance funding for the above projects as follows:

Prior Years

$ 2,005,224

See notes to the basic financial statements.

- 33 -

CITY OF GAINESVILLE BOARD OF EDUCATION- HALL COUNTY GENERAL FUND- QUALITY BASIC EDUCATION PROGRAM (QBE)
ALLOTMENTS AND EXPENDITURES - BY PROGRAM YEAR ENDED JUNE 30, 2003

SCHEDULE "5"

DESCRIPTION

ALLOTMENTS FROM GEORGIA DEPARTMENT OF EDUCATION {1} {2}

ELIGIBLE QBE PROGRAM COSTS

SALARIES

OPERATIONS

TOTAL

Direct Instructional Programs

Kindergarten Program

$

Kindergarten Program-Early Intervention Program

Primary Grades (1-3) Program

Primary Grades-Early Intervention (1-3) Program

Upper Elementary Grades (4-5) Program

Upper Elementary Grades-Early Intervention (4-5)

Program

Middle School (6-8) Program

High School General Education (9-12) Program

Vocational Laboratory (9-12) Program

Students with Disabilities

Category I

Category II

Category Ill

Category IV

Gifted Student - Category VI

Remedial Education Program

Alternative Education Program

English Speakers of Other Languages (ESOL}

1,441,744 $ 587,704
3,455,454 1,079,500 1,452,952

1,852,458 $ 175,056
3,580,366 874,878
2,145,179

502,248 2,558,651 2,314,201
559,336 1,049,407

196,794 2,573,267 2,990,701
592,168

166,294
201,530 1475439

381,175 1,003,529
183,069 316,042
129 213,680 1,267,472

57,380 $ 27,473 552,662 29,234 96,859
18,485 430,399 328,365
81,765
3,772 4,016 66,234
317 4,743
13,014 5,685

1,909,838 202,529
4,133,028 904,112
2,242,038
215,279 3,003,666 3,319,066
673,933
3,772 385,191 1,069,763 183,386 320,785
129 226,694 112731157

TOTAL DIRECT INSTRUCTIONAL PROGRAMS

$

16,844,460 $ 18,345,963 $ 1,720,403 $ 20,066,366

Media Center Program Staff and Professional Development

468,976 95 311

519,015 18!890

58,713 90 479

577,728 1091369

TOTAL QBE FORMULA FUNDS

$

17 408 747 $ 181883,868 $ 118691595 $ ==2=0=,7=5=3,=46=3=

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

See notes to the basic financial statements.

- 35 -

SECTION II COMPLIANCE AND INTERNAL CONTROL REPORTS

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

DEPARTMENT OF AUDITS AND ACCOUNTS
254 Washington Street, S.W. Suite 214 Atlanta, Georgia 30334-8400
May 14, 2004

Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the City of Gainesville Board of Education
REPORT ON COMPLIANCE AND ON INTERNAL CONTROL OVER FINANCIAL REPORTING BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS
Ladies and Gentlemen:
We have audited the financial statements of the governmental activities, each major fund, and the aggregate remaining fund information of City_ of Gainesville Board of Education as of and for the year ended June 30, 2003, which collectively comprise City of Gainesville Board of Education's basic financial statements and have issued our report thereon dated May 14, 2004. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States.
Compliance
As part of obtaining reasonable assurance about whether City of Gainesville Board of Education's financial statements are free of material misstatement, we performed tests of its compliance with certain provisions oflaws, regulations, contracts and grants, noncompliance with which could have a direct and material effect on the determination offinancial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances ofnoncompliance that are required to be reported under Government Auditing Standards.
Internal Control Over Financial Reporting
In planning and performing our audit, we considered City of Gainesville 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
2003-34YB-10

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 be material weaknesses. A material weakness is a condition in which the design or operation ofone 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 ofthe management, members ofthe City of Gainesville 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 ~- .
~~ell W. Hinton State Auditor
RWH:as 2003-34YB-10

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 14, 2004

Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the City of Gainesville 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 City of Gainesville Board of Education with the types of compliance requirements described in the US. 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, 2003. City of Gainesville 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 oflaws, regulations, contracts and grants applicable to each ofits major Federal programs is the responsibility of City of Gainesville Board of Education's management. Our responsibility is to express an opinion on City ofGainesville 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 ofAmerica; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General ofthe United States; and 0MB Circular A133, Audits of States, Local Governments, and Non-Profit Organizations. Those standards and 0MB Circular A-133 require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types ofcompliance requirements referred to above that could have a direct and material effect on a major Federal program occurred. An audit includes examining, on a test basis, evidence about the City of Gainesville 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 City ofGainesville Board ofEducation's compliance with those requirements.
2003SA-10

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

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

CITY OF GAINESVILLE BOARD OF EDUCATION - HALL COUNTY AUDITEE'S RESPONSE
SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2003
PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS No matters were reported.

SECTION IV FINDINGS AND QUESTIONED COSTS

CITY OF GAINESVILLE BOARD OF EDUCATION - HALL COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2003
I SUMMARY OF AUDITOR'S RESULTS
1. Type of Report Issued on the Financial Statements The auditor's opinion on the City of Gainesville 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 City of Gainesville Board of Education did not disclose any reportable conditions related to the financial statements.
3. Noncompliance Material to the Financial Statements The audit of the City of Gainesville 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 City of Gainesville Board of Education did not disclose any reportable conditions in internal control over major programs.
5. Type of Report Issued on Compliance for Major Programs The auditor's opinion on the City of Gainesville Board ofEducation's report on compliance with requirements applicable to major programs was unqualified.
6. Audit Findings Required to be Reported by Section .51 0(a) of 0MB Circular A-133 The City of Gainesville Board ofEducation's audit did not disclose audit findings required to be reported by section .510(a) of 0MB Circular A-133.
7. Maj or Programs Federal awards audited as major programs are as follows: 84.010 Elementary and Secondary Education Act-Title I- Grants to Local Educational Agencies 84.213 Elementary and Secondary Education Act - Title I - Even Start 84.338 Reading Excellence - Local Reading Improvement
8. Type "A" Program Dollar Threshold The dollar threshold for type "A" programs was $300,000.
9. Low Risk Auditee The City of Gainesville Bo~d of Education qualified as a low risk auditee as defined by Section .530 of 0MB Circular A-133.
- 1-

CITY OF GAINESVILLE BOARD OF EDUCATION - HALL COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2003
II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS No matters were reported. III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS No matters were reported.
-2 -