CITY OF GAINESVILLE BOARD OF EDUCATION
HALL COUNTY, GEORGIA REPORT ON AUDIT
OF THE FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2007
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

EXHIBITS

BASIC FINANCIAL STATEMENTS

DISTRICT-WIDE FINANCIAL STATEMENTS

A

STATEMENT OF NET ASSETS

1

B

STATEMENT OF ACTIVITIES

2

FUND FINANCIAL STATEMENTS

C

BALANCE SHEET

GOVERNMENTAL FUNDS

4

D

RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET

TO THE STATEMENT OF NET ASSETS

5

E

STATEMENT OF REVENUES, EXPENDITURES AND CHANGES

IN FUND BALANCES

GOVERNMENTAL FUNDS

6

F

RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT

OF REVENUES, EXPENDITURES AND CHANGES IN FUND

BALANCES TO THE STATEMENT OF ACTIVITIES

7

G

STATEMENT OF FIDUCIARY NET ASSETS

FIDUCIARY FUNDS

8

H

NOTES TO THE BASIC FINANCIAL STATEMENTS

9

SCHEDULES

REQUIRED SUPPLEMENTARY INFORMATION

1 SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES

IN FUND BALANCES - BUDGET AND ACTUAL

GENERALFUND

27

SUPPLEMENTARY INFORMATION

2 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS

28

3 SCHEDULE OF STATE REVENUE

30

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

SECTION I

FINANCIAL

SCHEDULES

SUPPLEMENTARY INFORMATION

4 SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS

32

5 ALLOTMENTS AND EXPENDITURES

GENERAL FUND - QUALITY BASIC EDUCATION PROGRAMS (QBE)

BY PROGRAM

33

SECTION II
COMPLIANCE AND INTERNAL CONTROL REPORTS
REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS 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

CITY OF GAINESVILLE BOARD OF EDUCATION - HALL COUNTY - TABLE OF CONTENTS -
SECTIONV MANAGEMENT'S RESPONSES SCHEDULE OF MANAGEMENT'S RESPONSES

SECTION I FINANCIAL

Russell W. Hinton
STATE AUDITOR
(404) 656-2174

DEPARTMENT OF AUDITS AND ACCOUNTS
270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400
September 16, 2008

Honorable Sonny Perdue, Governor Members ofthe General Assembly Members ofthe 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, 2007, which collectively comprise the Board's basic financial statements as listed in the table of contents. These financial statements are the responsibility ofthe City of Gainesville Board ofEducation's management. Our responsibility is to express opinions on these financial statements based on our audit.
Except as discussed in the following paragraphs, we conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose ofexpressing an opinion on the effectiveness of the City of Gainesville Board ofEducation's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, 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.

2007ARL-24X

The School District did not properly perform reconciliation procedures for cash and cash equivalents for the fiscal year under review. Errors made during the implementation of a new financial accounting system created reconciling and reporting problems for the School District's cash and cash equivalents, and the School District's records did not provide sufficient information for the application of other auditing procedures to verify the completeness of cash and cash equivalents as reported in the governmental activities, each major fund, and the aggregate remaining fund information reflected in the accompanying financial statements as ofJune 30, 2007. The aggregate effect on the financial statements was not reasonably determinable.
The School District did not provide sufficient documentary evidence to support the school activity (principal) accounts' agency fund activity presented in the fiduciary fund, which comprises 65 percent of the assets and liabilities, of the City of Gainesville Board of Education's aggregate remaining fund information. The School District's records did not provide sufficient information for the application of other auditing procedures to reasonably determine the accuracy ofthe aggregate remaining fund information reported in the financial statements.
In our opinion, except for the effects of such adjustments, if any, as might have been determined to be necessary had we been able to examine documentation supporting cash and cash equivalents in the governmental activities, each major fund and the aggregate remaining fund information and school activity (principal) accounts' agency fund activity in the aggregate remaining fund information, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, each major fund, and the aggregate remaining fund information ofthe City of Gainesville Board of Education, as ofJune 30, 2007, and the respective changes in financial position thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America.
The City of Gainesville Board of Education has not presented Management's Discussion and Analysis that accounting principles generally accepted in the United States of America has determined is necessary to supplement, although not to be part of, the basic financial statements.
In accordance with Government Auditing Standards, we have also issued our report dated September 16, 2008, on our consideration of the City of Gainesville Board of Education's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements and other matters. The purpose of that report is to describe the scope ofour testing ofinternal control over financial reporting and compliance and the results ofthat testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit.
The Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual, as presented on page 27, is not a required part of the basic financial statements but is 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.
2007ARL-24X

Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City ofGainesville 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 of this report has been filed as a permanent record in the office of the State Auditor and made available to the press of the State, as provided for by Official Code of Georgia Annotated section 50-6-24.
Respectfully submitted,
:~ro~;~~ State Auditor
RWH:gp 2007ARL-24X

CITY OF GAINESVILLE BOARD OF EDUCATION - HALL COUNTY

CITY OF GAINESVILLE BOARD OF EDUCATION - HALL COUNTY STATEMENT OF NET ASSETS JUNE 30, 2007

EXHIBIT"A"

ASSETS
Cash and Cash Equivalents Investments Accounts Receivable, Net
Interest Taxes State Government Federal Government Other Inventories Capital Assets Land Construction in Progress Land Improvements Buildings Equipment Less: Accumulated Depreciation
Total Assets
LIABILITIES
Accounts Payable Salaries and Benefits Payable Payroll Withholdings 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
Bus Replacement Continuation of Federal Programs Debt Service Capital Projects Unrestricted (Deficit)
Total Net Assets
Total Liabilities and Net Assets

GOVERNMENTAL ACTIVITIES

$

18,981,724

924,150

418 1,666,528 3,671,799 1,472,788
53,288 74,806

9,540,704 4,290,254
150,490 62,249,547 10,787,745 -26,941,364

$===8=6=,9=22:1:,8.,.7.7..

$

836,019

5,768,875

131,581

80,085

42,113

11,796

5,400,988 33,103,473

$

45,374,930

$

39,172,449

17,791 577,309 585,449 4,100,706 -2,905,757

$

41547947

$ ======86=,9=2=2=,8=77=

The notes to the basic financial statements are an integral part of this statement. -1-

CITY OF GAINESVILLE BOARD OF EDUCATION - HALL COUNTY STATEMENT OF ACTIVITIES
FOR THE YEAR ENDED JUNE 30, 2007

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 Capital Projects Real Estate Investment Earnings Miscellaneous
Total General Revenues
Change in Net Assets
Net Assets - Beginning of Year ( Restated)
Net Assets - End of Year

EXPENSES

CHARGES FOR SERVICES

$

37,419,812 $

2,665,607 1,544,342 1,084,888 1,163,392 3,910,669
919,656 2,715,322 1,967,517
267,694 644,451

249,333 3,187,410
652 404

$

58,392,497 $

332,326 242,084
5,107 26,031 190,500
336,466 309,773
1442287

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

EXHIBIT"B"

PROGRAM REVENUES

OPERATING

CAPITAL

GRANTS AND

GRANTS AND

CONTRIBUTIONS CONTRIBUTIONS

NET (EXPENSES) REVENUES
AND CHANGES IN NET ASSETS

$

21,444,601 $

1,124,652 436,858 695,344 830,522
1,274,164 10,382
1,751,262 388,020 3,948 132,075

2,254,957

$

30,346,785 $

318,546 $
513 1,535 15,877
173 36,343
474 6,744 184,116 6,719
98
34,059
605 197 $

-15,324,339
-1,298,358 -1,100,842
-347,636 -332,697 -2,409,662 -908,800 -957,316 -1,395,381 -257,027 -512,278
87,133 -588,621 -652 404
-25,998,228

$

21,839,658

207,284

4,708,868 72,523
625,712 237 780

$

27,691,825

$

1,693,597

39,854,350

$

41 547 947

-3-

CITY OF GAINESVILLE BOARD OF EDUCATION - HALL COUNTY BALANCE SHEET
GOVERNMENTAL FUNDS JUNE 30, 2007

EXHIBIT"C"

ASSETS
Cash and Cash Equivalents Investments Accounts Receivable, Net
Interest Taxes State Government Federal Government Other Inventories

GENERAL FUND

DISTRICTWIDE
CAPITAL PROJECTS
FUND

DEBT SERVICE
FUND

TOTAL

$ 20,564,674

$

37,565

485,246 $

418 4,123,638 3,250,718 1,472,788
53,288 74 806

807,686 421,081

$ 401,339
216,353

20,564,674 924,150
418 5,147,677 3,671,799 1,472,788
53,288 74 806

Total Assets

$ 9,013,221 $ 22,278,687 $

617,692 $===3=1,=90=9=,6=0=0

LIABILITIES AND FUND BALANCES

LIABILITIES

Cash Overdraft Accounts Payable Salaries and Benefits Payable Payroll Withholdings Payable Contracts Payable Retainages Payable Deposits and Deferred Revenue

$

1,489,445

833,075 $

5,768,875

131,581

11 796

$ 2,944
80,085 42,113

Total Liabilities

$ 8,234.772 $

125 142 $

FUND BALANCES

Reserved for: Bus Replacement Continuation of Federal Programs Debt Service Inventories Capital Projects
Unreserved Designated for Student Activities Undesignated Reported in: General Fund (Deficit) District-wide Capital Projects Fund

$

17,791

502,503

$

61,262 $

74,806

21,401,666

241,242

-57,893

690 617

Total Fund Balances

$

778 449 $ 22,153,545 $

93,505 $
93 505 $ $
524,187
524187 $

1,582,950 836,019
5,768,875 131,581 80,085 42,113 11 796
8,453,419
17,791 502,503 585,449
74,806 21,401,666
241,242
-57,893 690 617
23,456,181

Total Liabilities and Fund Balances

$ 9,013,221 $ 22,278,687 $

617,692 $===3=1,=90=9=,6=0=0

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

CITY OF GAINESVILLE BOARD OF EDUCATION - HALL COUNTY RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET
TO THE STATEMENT OF NET ASSETS JUNE 30, 2007

EXHIBIT"D"

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

$ 23,456,181

$ 9,540,704 4,290,254 150,490
62,249,547 10,787,745 -26,941,364

60,077,376

-3,481, 149

$ -23,835,000 -3,490,000 -5,527,912 -4,545,000 -1, 106,549

-38,504,461

Net Assets of Governmental Activities (Exhibit "A")

$ 41,547,947

The notes to the basic financial statements are an integral part of this statement. -5-

CITY OF GAINESVILLE BOARD OF EDUCATION HALL COUNTY STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES
GOVERNMENTAL FUNDS YEAR ENDED JUNE 30, 2007

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}
Issuance of Bonds Premiums on Bonds Sold Installment Sales Agreement Capital Leases Transfers In Transfers Out
Total Other Financing Sources (Uses)
Net Change in Fund Balances
Fund Balances - Beginning

GENERAL FUND

DISTRICTWIDE
CAPITAL PROJECTS
FUND

DEBT SERVICE
FUND

TOTAL

$ 22,309,565 72,523 $
23,766,278 6,764,623 1,442,287
64,441 241,794
$ 54,661,511 $

$ 4,708,868
421,081

999,873 $

536,203

25,068

5,666,152 $ 1,024,941 $

23,309,438 4,781,391 24,187,359 6,764,623 1,442,287
625,712 241,794
61,352,604

$ 36,954,651 $
2,662,749 1,531,307
898,706 1,167,503 3,510,458
764,491 3,968,226 1,849,743
244,394 682,875 249,333 2,776,116
371,288 68,523
$ 57,700,363 $
$ -3,038,852 $

39,089

$

149,956 $

2,432

12,070,832

390,027 73 321

4,310,000 587,405

12,723,225 $ 4,899,837 $

-7,057,073 $ -3,874,896 $

36,993,740
2,662,749 1,531,307
898,706 1,167,503 3,510,458
916,879 3,968,226 1,849,743
244,394 682,875 249,333 2,776,116 12,070,832
5,071,315 729,249
75,323,425
-13,970,821

$
$ 1,129,339 276,152
$ 1,405,491 $ $ -1,633,361 $
2,411,810

20,160,000 1,183,393 4,545,000 1,213,536 $ -2,121,910

$ 1,845,758

24,980,019 $ 1,845,758 $

17,922,946 $ -2,029,138 $

4,230,599

2,553,325

20,160,000 1,183,393 4,545,000 2,342,875 2,121,910 -2, 121,910
28,231,268
14,260,447
9,195,734

Fund Balances - Ending

$

778449 $

22,153,545 $

524,187 $ 23,456,181

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 STATEMENT OF
REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES TO THE STATEMENT OF ACTIVITIES JUNE 30, 2007

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 loss on the sale of the 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 carrying value of the equipment sold.
Bond proceeds provide current financial resources to Governmental Funds; however, issuing debt increases Long-Term Liabilities in the Statement of Net Assets. In the current period, proceeds were received from:
General Obligation Bonds Issued, including a premium of$ 1,183,393
Some of the School District's assets acquired this year were financed with an installment sales agreement. In Governmental Funds, an installment sales arrangement is considered a source of financing, but in the Statement of Net Assets, the agreement is reported as a Long-Term Liability.
Some of the 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 Long-Term Debt Agreement
Total Long-Term Debt Repayments
Some items reported in the Statement of Activities do not require the use of current financial resources and therefore are not reported as expenditures in Governmental Funds. These activities consist of:
Amortization of Bond Premiums

$ 14,260,447

$ 14,695,898 -2,913, 129

11,782,769 -1,262,496

-4,014

-21,343,393 -4,545,000 -2,342,875

$ 3,550,000 761,315 760,000

5,071,315

76 844

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

$ ==1,.6.9..,.3=,5=9=7

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 FIDUCIARY NET ASSETS FIDUCIARY FUNDS JUNE 30, 2007

EXHIBIT"G"

ASSETS Cash and Cash Equivalents Accounts Receivable
Total Assets
LIABILITIES Funds Held for Others

AGENCY FUNDS

$

48,045

25,946

$ ===73='=99=1=

$ ===73===99=1=

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

CITY OF GAINESVILLE BOARD OF EDUCATION - HALL COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007

EXHIBIT "H"

Note 1: DESCRIPTION OF SCHOOL DISTRICT AND REPORTING ENTITY
REPORTING ENTITY
The City ofGainesville 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 ofgoods or services offered by the programs and (b) grants and contributions that are restricted to meeting the operational or capital requirements of a particular program. Revenues that are not classified as program revenues, including all taxes, are presented as general revenues.
Fund Financial Statements: The fund financial statements provide information about the School District's funds, including fiduciary funds. Eliminations have been made to minimize the double counting ofinternal activities. Separate statements for each category (governmental and fiduciary) are presented. The emphasis of fund financial statements is on major governmental funds, each displayed in a separate column.

-9-

CITY OF GAINESVILLE BOARD OF EDUCATION - HALL COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007

EXHIBIT"H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The School District reports the following major governmental funds:
General Fund is the School District's primary operating fund. It accounts for all financial resources ofthe School District, except those resources required to be accounted for in another fund.
District-wide Capital Projects Fund accounts for financial resources including Special Purpose Local Option Sales Tax (SPLOST), Bond Proceeds, proceeds from an installment sales agreement 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 of when the related cash flows take place. Nonexchange transactions, in which the School District gives (or receives) value without directly receiving (or giving) equal value in exchange, include property taxes, sales taxes, grants and donations. On an accrual basis, revenue from property taxes is recognized in the fiscal year for which the taxes are levied. Revenue from sales taxes is recognized in the fiscal year in which the underlying transaction (sale) takes place. Revenue from grants and donations is recognized in the fiscal year in which all eligibility requirements have been satisfied.
The School District uses funds to report on its financial position and the results of its operations. Fund accounting is designed to demonstrate legal compliance and to aid financial management by segregating transactions related to certain governmental functions or activities. A fund is a separate accounting entity with a self-balancing set of accounts.
Governmental funds are reported using the current financial resources measurement focus and the modified accrual basis 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

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CITY OF GAINESVILLE BOARD OF EDUCATION - HALL COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007

EXHIBIT"H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
liability is incurred, except for principal and interest on general long-term debt, which are recognized as expenditures to the extent they have matured. Capital asset acquisitions are reported as expenditures in governmental funds. Proceeds ofgeneral long-term liabilities, acquisitions under an installment sales agreement and acquisitions under capital leases are reported as other financing sources.
The School District funds certain programs by a combination ofspecific cost-reimbursement grants, categorical grants, and general revenues. Thus, when program costs are incurred, there are both restricted and unrestricted net assets available to finance the program. It is the School District's policy to first apply grant resources to such programs, followed by cost-reimbursement grants, then general revenues.
RESTATEMENT OF PRIOR YEAR NET ASSETS
For fiscal year 2007, the School District restated various Capital Assets due to errors and omissions. The School District increased land and construction in progress by $268,502 and $51,019, respectively. Additionally, the School District decreased, net of accumulated depreciation, buildings and improvements by $2,147,926 and increased, net of accumulated depreciation, equipment and land improvements, by $464,608 and $1,064, respectively. The result is a decrease in Net Assets at July 1, 2006, of $1,362,733. This change is in accordance with generally accepted accounting principles.
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. Official Code of Georgia Annotated Section 45-8-14 authorize the School District to deposit its funds in one or more solvent banks or insured Federal savings and loan associations.
INVESTMENTS
COMPOSITION OF INVESTMENTS Investments made by the School District in nonparticipating interest-earning contracts (such as certificates ofdeposit) and repurchase agreements are reported at cost. Participating interest-earning contracts and money market investments with a maturity at purchase ofone year or less are reported at amortized cost. Both participating interest-earning contracts and money market investments with a maturity at purchase greater than one year are reported at fair value. The Official Code ofGeorgia Annotated Section 36-83-4 authorizes the School District to invest its funds. In selecting among options for investment or among institutional bids for deposits, the highest rate ofreturn shall be the objective, given equivalent conditions of safety and liquidity. Funds may be invested in the following:

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CITY OF GAINESVILLE BOARD OF EDUCATION - HALL COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007

EXHIBIT"H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(1) Obligations issued by the State of Georgia or by other states,
(2) Obligations issued by the United States government,
(3) Obligations fully insured or guaranteed by the United States government or a United States government agency,
(4) Obligations of any corporation of the United States government,
(5) Prime banker's acceptances,
(6) The Local Government Investment Pool administered by the State ofGeorgia, Office of Treasury and Fiscal Services,
(7) Repurchase agreements, and
(8) Obligations of other political subdivisions of the State of Georgia.
The School District does not have a formal policy regarding investment policies that address credit risks, custodial credit risks, concentration ofcredit risks, interest rate risks or foreign currency risks.
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 fixed the property tax levy for the 2006 tax digest year (calendar year) on June 20, 2006 (levy date). Taxes were due on December 20, 2006 (lien date). Taxes collected within the current fiscal year or within 60 days after year-end on the 2006 tax digest are reported as revenue in the governmental funds for fiscal year 2007. The Gainesville City Clerk bills and collects the property taxes for the School District, withholds 1% oftaxes collected as a fee for tax collection and remits the balance of taxes collected to the School District. Property tax revenues, at the fund reporting level, during the fiscal year ended June 30, 2007, for maintenance and operations amounted to $22,309,565 and for school bonds amounted to $999,873.

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CITY OF GAINESVILLE BOARD OF EDUCATION - HALL COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007

EXHIBIT"H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Tax millage rates levied for the 2006 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

7.45 mills ~ mills

7.83 mills

SALES TAXES

Special Purpose Local Option Sales Tax, at the fund reporting level, during the year amounted to $4,708,868 and is to be used for capital outlay for educational purposes or debt service. This sales tax was authorized by local referendum and the sales tax must be re-authorized at least every five years.

INVENTORIES

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

CAPITAL ASSETS

Capital assets purchased, including capital outlay costs, are recorded as expenditures in the fund financial statements at the time of purchase (including ancillary charges). 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 estimated fair market value on the date donated. Disposals are deleted at depreciated recorded cost. The cost of normal maintenance and repairs that do not add to the value ofassets 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 ofart. During the fiscal year under review, no events or changes in circumstances affecting a capital asset that may indicate impairment were known to the School District.

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

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CITY OF GAINESVILLE BOARD OF EDUCATION - HALL COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007

EXHIBIT"H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Capitalization Policy

Estimated Useful Life

Land Land Improvements Buildings and Improvements Equipment

All

NIA

$

500

20 years

$

500 10 to 50 years

$

500 5 to14 years

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

GENERAL OBLIGATION BONDS

The School District issues general obligation bonds to provide funds for the acquisition and construction of major capital facilities. Bond issuance costs are recognized in the financial statements during the fiscal year bonds are issued. 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.

NET ASSETS

The School District's net assets in the District-wide Statements are classified as follows:

Invested in capital assets, net of related debt - This represents the School District's total investment in capital assets, net ofoutstanding debt obligations related to those capital assets. To the extent debt has been incurred but not yet expended for capital assets, such amounts are not included as a component of invested in capital assets, net of related debt.

Restricted net assets - These represent resources for which the School District is legally or contractually obligated to spend resources for bus replacement, continuation of Federal programs, debt service and capital projects in accordance with restrictions imposed by external third parties.

Unrestricted net assets - Unrestricted net assets represent resources derived from property taxes, sales taxes, charges for services, and miscellaneous revenues. These resources are used for transactions relating to the educational and general operations of the School District, and may be used at the discretion of the Board to meet current expenses for those purposes.

DEFICIT FUND BALANCES

The fund reporting a deficit fund balance at June 30, 2007, is as follows:

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CITY OF GAINESVILLE BOARD OF EDUCATION - HALL COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007

EXHIBIT"H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Fund Type/Fund Name

Deficit Balance

Governmental Fund Type General Fund - Regular

$

57,893

The School District plans to liquidate this deficit through a combination ofraising the millage rate, enacting a deficit reduction plan and reducing expenditures.

Note 3: DEPOSITS AND INVESTMENTS

COLLATERALIZATION OF DEPOSITS Official Code of Georgia Annotated (OCGA) Section 45-8-12 provides that there shall not be on deposit at any time in any depository for a time longer than ten days a sum of money which has not been secured by surety bond, by guarantee 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. At June 30, $30,358 ofdeposits were not secured by surety bond, insurance or collateral as specified above. The School District is working with the affected financial institutions to ensure appropriate levels of collateral are maintained for all of the School District's deposits.

Acceptable security for deposits consists of any one of or any combination of the following:

(1) Surety bond signed by a surety company duly qualified and authorized to transact business within the State of Georgia,

(2) Insurance on accounts provided by the Federal Deposit Insurance Corporation,

(3) Bonds, bills, notes, certificates of indebtedness or other direct obligations of the United States or of the State of Georgia,

(4) Bonds, bills, notes, certificates of indebtedness or other obligations of the counties or municipalities of the State of Georgia,

(5) Bonds of any public authority created by the laws of the State of Georgia, providing that the statute that created the authority authorized the use of the bonds for this purpose,

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

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CITY OF GAINESVILLE BOARD OF EDUCATION - HALL COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007

EXHIBIT"H"

Note 3: DEPOSITS AND INVESTMENTS

(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, 2007, the bank balances were $21,186,518. The amounts of the total uninsured bank
balances are classified into three categories of custodial credit risk:

Category 1 - Uncollateralized, Category 2 - Cash collateralized with securities held by the pledging financial institution, or Category 3 - Cash collateralized with securities held by the pledging financial institution's
trust department or agent but not in the School District's name.

The School District's uninsured deposits are classified by custodial credit risk category at June 30, 2007, as follows:

Custodial Credit Risk Category

Bank Balance

1

$

30,358

2

20,783,597

3

0

Total

$ 20,813.955

CATEGORIZATION OF INVESTMENTS
The School District's investments as of June 30, 2007, are presented below. All investments are
presented by investment type and debt securities are presented by maturity.

Investment Type

Fair Value

Investment Maturity Less Than 1 Year

Debt Securities U. S. Agencies Implicitly Guaranteed

$ 297,160 $=====2==97,,,,.,,-16==0

Other Investments U. S. Treasury Money Market Funds

589.425

Total Investments

$=====8==86-,5===8==5

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CITY OF GAINESVILLE BOARD OF EDUCATION - HALL COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007

EXHIBIT"H"

Note 3: DEPOSITS AND INVESTMENTS

Interest Rate Risk Interest rate risk is the risk that changes in interest rates of debt investment will adversely affect the fair value ofan investment. The School District does not have a formal policy for managing interest rate risk.

Custodial Credit Risk Custodial credit risk for investments is the risk that, in the event ofthe failure ofthe counterparty to a transaction, the School District will not be able to recover the value ofthe investment or collateral securities that are in the possession ofan outside party. The School District does not have a formal policy for managing custodial credit risk.

At June 30, 2007, $886,585 ofthe School District's applicable investments were uninsured, are not registered in the name of the School District and are held by either the counterparty or the counterparty's trust department or agent, but not in the School District's name.

Credit Quality Risk Credit quality risk is the risk that an issuer or other counterparty to an investment will not fulfill its obligations. The School District does not have a formal policy for managing credit quality risk.

The investments subject to credit quality risk are reflected below:

Rated Debt Investments

Fair Value

Quality Ratings

AAA

Unrated

Debt Securities U. S. Agencies Implicitly Guaranteed

$ 297,160

$ 297,160

Other Investments U.S. Treasury Money Market Funds

Totals by Quality Ratings

$

589,425 $
886.585 $

589.425
589.425 $

297,160

Concentration of Credit Risk Concentration of credit risk is the risk of loss attributed to the magnitude of a government's investment in a single issuer. The School District does not have a formal policy for managing concentration of credit risk. More than 5% of the School District's investments are in Farmers Agricultural Mortgage Corporation and the Federal National Mortgage Association debt securities. These investments are 8% and 25%, respectively, ofthe School District's total investments.

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CITY OF GAINESVILLE BOARD OF EDUCATION - HALL COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007

EXHIBIT"H"

Note 4: NON-MONETARY TRANSACTIONS

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

Note 5: CAPITAL ASSETS

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

Balances July 1, 2006 (Restated)

Increases

Decreases

Balances June 30, 2007

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

$ 5,600,208 $ 3,940,496

51 019

4,647,450 $

$ 9,540,704

408,215

4,290,254

Total Capital Assets Not Being Depreciated $ 5,651,227 $ 8,587,946 $ 408,215 $ 13,830,958

Capital Assets Being Depreciated Buildings and Improvements Equipment Land Improvements

$ 57,570,955 $ 9,049,262 73,396

4,678,592 1,760,481 $
77,094

$ 62,249,547 21,998 10,787,745
150,490

Less Accumulated Depreciation for: Buildings and Improvements Equipment Land Improvements

18,505,002 5,536,579
4,638

1,845,690 1,052,390
15 049

17,984

20,350,692 6,570,985 19,687

Total Capital Assets, Being Depreciated, Net $ 42,647,394 $ 3,603,038 $

4 014 $ 46,246,418

Governmental Activity Capital Assets - Net $ 48,228,621 $ 12, 120,284 $ 412,222 $ 60,0:Z:Z,3:Z6

Capital assets being acquired under capital leases and installment sales agreement as of June 30, 2007, are as follows:

Governmental Funds

Buildings and Improvements Equipment Less: Accumulated Depreciation

$ 3,588,004 1,583,810 1,317,488

$ 3,854.326

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CITY OF GAINESVILLE BOARD OF EDUCATION - HALL COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007

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

$ 2,121,270

$

3,415

10,222

105,731

1,150

242,016

3,153

44,911

109,054

44,744

653

565,049 226,810

$ 2,913.129

Note 6: RESTRICTED ASSETS

Special Purpose Local Option Sales Tax (SPLOST), general obligation bond proceeds and Qualified Zone Academy Bonds (QZAB) escrow account, property tax levied specifically for retirement of outstanding bond principal, interest and paying agent's fees (Debt Service Funds) are restricted assets in the Statement ofNet Assets because their use is limited by applicable bond covenants or statutory provisions. Restricted assets at June 30, 2007, were as follows:

District-wide Capital Projects

Bond

SPLOST

Proceeds

Debt Service Funds

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

$

61,262

$ 2,225,906 $ 17,586,889

$
$ 485,246

401,339

Note 7: INTERFUND TRANSFERS

Interfund transfers for the year ended June 30, 2007, consisted of the following:

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CITY OF GAINESVILLE BOARD OF EDUCATION - HALL COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007

EXHIBIT"H"

Note 7: INTERFUND TRANSFERS

Transfer to
General Fund Debt Service Fund

Transfers From District-wide
Capital Projects
$ 276,152 1,845,758

Total

$ 2,121,910

Transfers are used to move Special Purpose Local Option Sales Tax revenue (SPLOST) collected by the District-wide Capital Project Fund to the Debt Service Fund as needed for repayment ofbond principal and interest and to move Georgia State Financing and Investment Commission (GSFIC) funds to the General Fund for reimbursement of expense.

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 ofGod. The School District has neither significantly reduced coverage for these risks nor incurred losses (settlements) which exceeded the School District's insurance coverage in any of the past three years.

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

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

2006 2007

Beginning ofYear Liability

Claims and Changes in Estimates

Claims Paid

End of Year Liability

$

0 $

0 $

0 $

0

$

0 $

22,211 $

12,549 $

9,662

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 ofemployee participation in order to cover estimated claims budgeted by management based on known claims and prior

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CITY OF GAINESVILLE BOARD OF EDUCATION - HALL COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007

EXHIBIT "H"

Note 8: RISK MANAGEMENT

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:

2006 2007

Beginning ofYear Liability

Claims and Changes in Estimates

Claims Paid

End ofYear Liability

$

0 $

340,223 $

340,223 $

0

$

0 $

519 776 $

519 776 $

0

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

Position Covered

Amount

All Employees

$ 280,000

Note 9: SHORT-TERM DEBT

The School District issues tax anticipation notes in advance ofproperty tax collections, depositing the proceeds in its General Fund. This short-term debt is to provide cash for operations until property tax collections are received by the School District. Article IX, Section V, Paragraph V of the Constitution ofthe State ofGeorgia limits the aggregate amount ofshort-term debt to 75 percent ofthe total gross income from taxes collected in the preceding year and requires all short-term debt to be repaid no later than December 31 of the calendar year in which the debt was incurred.

Short-term debt activity for the fiscal year is as follows:

Beginning Balance

Issued

Redeemed

Ending Balance

Tax Anticipation Notes

$==~0 $ 3,940.496 $ 3,940.496 $===0

Note 10: LONG-TERM DEBT

CAPITAL LEASES The City of Gainesville Board of Education entered into various lease agreements for computers, mobile classrooms, facilities, air/heat management and a Qualified Zone Academy Bond lease for renovation projects and equipment. These lease agreements qualify as capital leases for accounting purposes, and, therefore, have been recorded at the present value of the future minimum lease payments as of the date of their inception.

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CITY OF GAINESVILLE BOARD OF EDUCATION - HALL COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007

EXHIBIT"H"

Note 10: LONG-TERM DEBT

INSTALLMENT SALES AGREEMENT The City ofGainesville Board of Education entered into an agreement dated January 1, 2007, with the Gainesville Redevelopment Authority for the acquisition of land, by paying off the Board of Education's Tax Anticipation Note, Series 2006, dated October 5, 2006, incurred to acquire the land, and construction and installation of site improvements for new middle school facilities to be constructed thereon. Under the terms of the agreement, the Board of Education will purchase the project by making annual payments through February 1, 2018.

LONG-TERM DEBT AGREEMENT Prior to January 1, 1994, the School District was a component unit of the City of Gainesville, Georgia (City) and was not legally authorized to issue debt instruments. Accordingly, the City issued general obligation debt on behalf of the School District to finance the cost of acquiring, constructing, renovating, modifying, improving, extending and equipping capital outlay projects of the School District.

The Georgia General Assembly passed legislation effective January 1, 1994 authorizing the separation ofthe School District and the City. Under this legislation, the School District possesses all powers granted to Boards of Education under general law, including the power to issue debt instruments. Although the City is legally liable for the general obligation bonds issued on the School District's behalf, the legislation specified that the School District would be responsible for the retirement of the bonds according to the terms of the debt instrument.

At June 30, 2007, the School District is responsible for repayment of $3,490,000 in principal and $481,268 in interest on Series 1993 general obligation bonds issued by the City on the School District's behalf.

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

Purpose

Interest Rates

Amount

General Government - Series 2001 General Government - Series 2002 General Government - Series 2006

2.55% - 3.50% 3.125% - 3.60%
4%- 5.5%

$ 1,815,000 1,860,000
20,160,000

$ 23,835.000

The changes in Long-Term Debt during the fiscal year ended June 30, 2007, were as follows:

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CITY OF GAINESVILLE BOARD OF EDUCATION - HALL COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007

EXHIBIT"H"

Note 10: LONG-TERM DEBT

Capital Leases

Governmental Funds

Long-Term Installment

General

Debt

Sales

Obligation

Agreement Agreement

Bonds

Premium on Bonds Sold

Total

Balance July 1, 2006

$ 3,946,352 $ 4,250,000 $

0 $ 7,225,000 $

0 $ 15,421,352

Additions Capital Leases Installment Sales Agreement G.O.Bonds Unamortized Bonds

2,342,875

4,545,000

20,160,000

1,183,393

2,342,875
4,545,000 20,160,000
1,183,393

Deductions Debt Retired Bond Premiums Amortized

761,315

760,000

3,550,000

76,844

5,071,315 76,844

Balance June 30, 2007 $ 5.527.912 $ 3.490.000 $ 4.545.000 $ 23.835.000 $ J,106 549 $ 38 504.461

Portion ofLong-Term Debt Due within One Year $

741,563 $

s soo,ooo $_ _ _____:.o $ 3,67s,ooo

184,425 $ 5,400,988

At June 30, 2007, payments due by fiscal year which includes principal and interest for these items are as follows:

Fiscal Year Ended June 30

Capital Leases

Principal

Interest

Long-Tenn Debt Agreement

Principal

Interest

2008 2009 2010 2011 2012 2013 - 2017 2018 - 2022

$ 741,563 $ 790,406 657,359 367,825 247,531 102,975
2,620,253

137,349 $ 96,360 55,697 27,679 10,871
2,284

800,000 $ 850,000 895,000 945,000

93,494 144,588 98,900 50,787

Total Principal and Interest

$ 5.527.912 $ 330,240 $ 3,490.000 $ 387.769

Fiscal Year Ended June 30

Installment Sales Agreement

Principal

Interest

General Obligation

Debt

Principal

Interest

Unamortized Bond
Premium

2008 2009 2010 2011 2012 2013 - 2017 2018 - 2022

$
$ 3,565,000 980,000

185,512 $ 3,675,000 $ 1,134,136 $

179,528

3,565,000

1,003,650

179,528

3,865,000

836,050

179,528

4,190,000

646,050

179,528

4,535,000

440,050

693,225

4,005,000

218,800

38,710

184,425 184,425 184,425 184,425 184,425 184,424

Total Principal and

Interest

$ 4,545.000 $ 1,635.559 $ 23,835.000 $ 4,278.736 $ 1.106.549

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CITY OF GAINESVILLE BOARD OF EDUCATION - HALL COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007

EXHIBIT"H"

Note 11: ON-BEHALF PAYMENTS

The School District has recognized revenues and costs in the amount of $855,036 for health insurance and retirement contributions paid on the School District's behalf by the following State Agencies.

Georgia Department of Education Paid to the Georgia Department of Community Health For Health Insurance ofNon-Certified Personnel In the amount of $811,389

Paid to the Teachers Retirement System of Georgia For Teachers Retirement System (TRS) Employer's Cost In the amount of $39,634

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$4,013

Note 12: SIGNIFICANT COMMITMENTS

The following is an analysis ofsignificant outstanding construction or renovation contracts executed by the School District as of June 30, 2007, together with funding available:

Project

Unearned Executed Contracts

Funding Available From State

08RA-776-016 Gainesville High School Band Room Gainesville High School Vocational Building Frances Meadows Center and Gainesville
Middle School Site Development

$ 21,790,082 49,164 286,796

$ 11,018,304

858,007

$ 22,984.049 $ 11,018,304

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

Note 13: 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.

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CITY OF GAINESVILLE BOARD OF EDUCATION - HALL COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2007

EXHIBIT"H"

Note 13: SIGNIFICANT CONTINGENT LIABILITIES

The School District is a defendant in various legal proceedings pertaining to matters incidental to the performance ofroutine School District operations. The ultimate disposition ofthese proceedings is not presently determinable, but is not believed to be material to the basic financial statements.

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 9.28% and employer contributions for the current fiscal year and the preceding two fiscal years are as follows:

Fiscal Year

Percentage Contributed

Required Contribution

2007 2006 2005

100% 100% 100%

$ 2,758,750 $ 2,432,618 $ 2,227,934

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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, 2007

SCHEDULE "1"

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

NONAPPROPRIATED BUDGETS

ORIGINAL (1)

FINAL (1)

ACTUAL AMOUNTS

$

23,500,000 $

23,500,000 $

22,309,565

72,523

20,554,009

22,176,753

23,766,278

6,786,260

8,284,015

6,764,623

150,000

1,442,287

200,000

64,441

172 527

241 794

$

50,840,269 $

54,483,295 $

54,661,511

$

32,903,086 $

32,670,667 $

36,954,651

1,709,191 1,713,625
841,959 871,368 3,002,599 502,968 3,528,052 1,855,039 178,734 280,246
2,425,000 536,643

2,414,674 1,516,648
845,565 928,633 2,908,453 369,190 5,558,467 1,440,123 45,184 339,660
2,931,437

2,662,749 1,531,307
898,706 1,167,503 3,510,458
764,491 3,968,226 1,849,743
244,394 682,875 249,333 2,776,116
439 811

$

50,348,510 $

51,968,701 $

57,700,363

$

491,759 $

2,514,594 $

-3,038,852

14 000

1405491

$

491,759 $

2,528,594 $

-1,633,361

0

0

2411810

Fund Balances - Ending

$

491 759 $

2,528,594 $ ===7=7=8=4=49=

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.

The accompanying schedule of revenues, expenditures and changes in fund balances budget and actual is presented on the modified accrual basis of accounting which is the basis of accounting used in the presentation of the fund financial statements.

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, 2007

SCHEDULE "2"

FUNDING AGENCY PROGRAM/GRANT
Agriculture, U. S. Department of Child Nutrition Cluster Pass-Through From Georgia Department of Education Food Services School Breakfast Program National School Lunch Program
Total Child Nutrition Cluster
Other Programs Pass-Through From Georgia Department of Education Food Donation (1)
Total U. S. Department of Agriculture
Corporation for National and Community Service Pass-Through From Georgia Department of Education Learn and Serve America School and Community Based Programs
Education, U. S. Department of Special Education Cluster Pass-Through From Georgia Department of Education Special Education Grants to States Preschool Grants
Total Special Education Cluster
Direct Even Start Migrant Education
Other Programs Pass Through From Georgia Department of Education Education for Homeless Children and Youth English Language Acquisition Grants Enhancing Education Through Technology Program Improving Teacher Quality State Grants Migrant Education Safe and Drug-Free Schools and Communities - National Programs State Grants for Innovative Programs Title I Grants to Local Educational Agencies Twenty-First Century Community Learning Centers Vocational Education - Basic Grants to States
Total U. S. Department of Education

CFDA NUMBER

PASSTHROUGH
ENTITY ID
NUMBER

EXPENDITURES IN PERIOD

* 10.553 * 10.555

NIA NIA $
$

(2) 2,507,775
2,507,775

10.550

NIA $

125,665 2,633,440

94.004

NIA $

4810

84.027 84.173
* 84.214
84.196 84.365 84.318 * 84.367 84.011 84.184 84.298 84.010 * 84.287 84.048

NIA $ NIA
$
NIA NIA NIA NIA NIA NIA NIA NIA NIA NIA
$

822,467 28,892
851,359
316,312
118,844 253,452
71,864 303,606 142,704
28,656 10,756 1,765,634 661,917 51,286
4,576,390

Total Federal Financial Assistance
NIA = Not Available

$ =====7=,2=14='=64=0=

-28-

CITY OF GAINESVILLE BOARD OF EDUCATION - HALL COUNTY SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS YEAR ENDED JUNE 30, 2007

SCHEDULE "2"

Notes to the Schedule of Expenditures of Federal Awards
(1) The amount shown for the Food Donation 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 School Breakfast Program ($576,458) were not maintained separately and are included in the 2007 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 fund 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, 2007

SCHEDULE "3"

AGENCY/FUNDING

GOVERNMENTAL FUND TYPES

CAPITAL

GENERAL

PROJECTS

FUND

FUND

GRANTS

Bright From the Start:

Georgia Department of Early Care and Learning

Pre-Kindergarten Program

$

576,374

$

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 Category II Category Ill Category IV CategoryV Gifted Student - Category VI Remedial Education Program Alternative Education Program English Speakers of Other Languages (ESOL) Media Center Program 20 Days Additional Instruction Staff and Professional Development Indirect Cost Central Administration School Administration Facility Maintenance and Operations Categorical Grants Pupil Transportation Regular Bus Replacement State Bonds Sparsity Nursing Services Principal Supplements Vocational Supervisors Food Services Vocational Education Amended Formula Adjustment Other State Programs High School Graduation Coach Health Insurance Middle School Remediation and Intervention Grant National Teacher Certification Preschool Handicapped Program Special Education Low Incidence Grant Statewide K-8 Reading and Mathematics Program Teachers' Retirement Virtual Schools State Grant

2,156,496 20,233
4,413,585 171,212
2,004,146 160,105
2,838,246 1,785,290
528,396
1,049,987 61,954
291,960 79,302 14,934
361,542 41,772
191,121 1,819,333
530,783 155,859 101,147
628,184 924,892 1,351,967
340,405 34,116
150,000 20,000
131,078 19,429 18,859
118,990 9,104
-507,250
40,075 811,389
4,544 74,409 82,103 20,363 96,022 39,634
175

TOTAL
576,374
2,156,496 20,233
4,413,585 171,212
2,004,146 160,105
2,838,246 1,785,290
528,396
1,049,987 61,954
291,960 79,302 14,934
361,542 41,772
191,121 1,819,333
530,783 155,859 101,147
628,184 924,892 1,351,967
340,405 34,116
150,000 20,000
131,078 19,429 18,859
118,990 9,104
-507,250
40,075 811,389
4,544 74,409 82,103 20,363 96,022 39,634
175

- 30-

CITY OF GAINESVILLE BOARD OF EDUCATION - HALL COUNTY SCHEDULE OF STATE REVENUE YEAR ENDED JUNE 30, 2007

SCHEDULE "3"

AGENCY/FUNDING
GRANTS Georgia State Financing and Investment Commission Reimbursement on Construction Projects
Office of Treasury and Fiscal Services Public School Employees Retirement

GOVERNMENTAL FUND TYPES

CAPITAL

GENERAL

PROJECTS

FUND

FUND

TOTAL

$

421,081 $

$ _ _ _4~01_3_

421,081 4 013

$ 23,766,278 $

421,081 $====2=4=,1=8=7=,3=59...,

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, 2007

SCHEDULE "4"

PROJECT

ORIGINAL ESTIMATED
COST (1}

CURRENT ESTIMATED COSTS (2}

AMOUNT EXPENDED IN CURRENT
YEAR (3}

AMOUNT EXPENDED
IN PRIOR YEARS (3}

PROJECT STATUS

Paying a portion of the payments, including principal and interest, due on the Series 1991 and 1993 Bonds.

$ 2,000,000 $ 2,000,000 $

967,725

Ongoing

Acquiring, constructing and equipping of two new elementary schools, 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.

23,462,770

28,959,183

4,298,270 $ 24,660,913 Ongoing

Acquiring, constructing and equipping a new middle school, acquiring, constructing and equipping additional classrooms and instructional and support space, remodeling, renovating and equipping existing classrooms and instructional and support space at existing schools, acquiring and conducting site preparation of real estate for School District purposes, and acquiring furnishing, equipment and fixtures for new and existing facilities system-wide, including technology equipment. In addition, the resolution authorized the issuance of $25,000,000 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.

32,000,000 32,000,000

7,847,904

Ongoing

$ 57,462,770 $ 62,959,183 $ 13,113,899 $ 24,660,913

(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.

See notes to the basic financial statements.

- 32 -

CITY OF GAINESVILLE BOARD OF EDUCATION - HALL COUNTY GENERAL FUND- QUALITY BASIC EDUCATION PROGRAM (QBE)
ALLOTMENTS AND EXPENDITURES - BY PROGRAM YEAR ENDED JUNE 30, 2007

SCHEDULE "5"

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

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

ELIGIBLE QBE PROGRAM COSTS

SALARIES OPERATIONS

TOTAL

$

2,731,483 $ 3,322,608 $

122,429 $

3,445,037

30,330

54,802

7,782

62,584

5,513,626

6,183,903

310,666

6,494,569

230,612

329,204

14,275

343,479

2,505,348

2,710,413

192,930

2,903,343

208,061 3,561,910 2,282,950
679,914 1,857,593
431,913 45,876
241,640 2,239,875

184,365 4,541,802 4,763,862
763,572
326,672 1,858,205
113,612 464,835
242,265 1,337,194

14,427 385,869 628,360 263,233
7,758 6,331 69,760 1,674 9,838
49,616 16 448

198,792 4,927,671 5,392,222 1,026,805
7,758 333,003 1,927,965 115,286 474,673
291,881 1,353,642

$

22,561,131 $ 27,197,314 $

2,101,396 $

29,298,710

667,627 129 756

767,663

77,171

844,834 321 508

TOTAL QBE FORMULA FUNDS

$

23 358 514 $ 27,964,977 $

2 178 567 $

30,465,052

(1) Comprised of State Funds plus Local Five Mill Share. (2) Allotments do not include the impact of the State amended formula adjustment.

See notes to the basic financial statements.

- 33 -

SECTION II COMPLIANCE AND INTERNAL CONTROL REPORTS

Russell W. Hinton
STATE AUDITOR
(404) 656-2174

DEPARTMENT OF AUDITS AND ACCOUNTS
270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400
September 16, 2008

Honorable Sonny Perdue, Governor Members ofthe General Assembly Members of the State Board of Education
and Superintendent and Members ofthe City of Gainesville Board of Education
REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS 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, 2007, which collectively comprise City of Gainesville Board of Education's basic financial statements and have issued our report thereon dated September 16, 2008. This report was qualified for a scope limitation, as identified in the auditor's report on the basic financial statements. 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 of the United States.
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 as a basis for designing our auditing procedures for the purpose ofexpressing our opinions on the financial statements, but not for the purpose ofexpressing an opinion on the effectiveness ofthe City ofGainesville Board ofEducation's internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness of the City of Gainesville Board of Education's internal control over financial reporting.
Our consideration ofinternal control over financial reporting was for the limited purpose described in the preceding paragraph and would not necessarily identify all deficiencies in internal control over

2007YB-40X

financial reporting that might be significant deficiencies or material weaknesses. However, as discussed below, we identified certain deficiencies in internal control over financial reporting that we consider to be significant deficiencies.
A control deficiency exists when the design or operation ofa control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect misstatements on a timely basis. A significant deficiency is a control deficiency, or combination of control deficiencies, that adversely affect the City of Gainesville Board of Education's ability to initiate, authorize, record, process, or report financial data reliably in accordance with generally accepted accounting principles such that there is more than a remote likelihood that a misstatement ofthe City ofGainesville Board ofEducation's financial statements that is more than inconsequential will not be prevented or detected by the City ofGainesville Board ofEducation's internal control. We consider items FS-7761-07-01, FS-7761-07-02, FS-7761-07-03, FS-7761-07-04 and FS-7761-07-05 in the accompanying Schedule of Findings and Questioned Costs to be significant deficiencies in internal control over financial reporting.
A material weakness is a significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood that a material misstatement ofthe financial statements will not be prevented or detected by the City of Gainesville Board of Education's internal control.
Our consideration of the internal control over financial reporting was for the limited purpose described in the first paragraph ofthis section and would not necessarily disclose all deficiencies in internal control that might be significant deficiencies and, accordingly, would not necessarily disclose all significant deficiencies that are also considered to be material weaknesses. However, of the significant deficiencies described above, we consider items FS-7761-07-02, FS-7761-07-03, FS7761-07-04 and FS-7761-07-05 to be material weaknesses.
Compliance and Other Matters
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 of laws, regulations, contracts and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards.
We noted certain matters that we have reported to management of City of Gainesville Board of Education in a separate letter dated September 16, 2008.
City ofGainesville Board ofEducation's response to the findings identified in our audit is described in the accompanying Schedule of Management's Responses. We did not audit City of Gainesville Board of Education's response and, accordingly, we express no opinion on it.
2007YB-40X

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:gp 2007YB-40X

Rus ell W. Hinton, CPA, CGFM State Auditor

Russell W. Hinton
STATE AUDITOR
(404) 656-2174

DEPARTMENT OF AUDITS AND ACCOUNTS
270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400
September 16, 2008

Honorable Sonny Perdue, Governor Members ofthe General Assembly Members of the State Board of Education
and Superintendent and Members ofthe 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 U.S. Office ofManagement and Budget (0MB) Circular A-133 Compliance Supplement that are applicable to each ofits major Federal programs for the year ended June 30, 2007. City of Gainesville Board of Education's major Federal programs are identified in the Summary of Auditor's Results Section ofthe accompanying Schedule ofFindings 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 ofcompliance 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 ofStates, 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.
2007SA-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 of its major Federal programs for the year ended June 30, 2007.
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 ofexpressing our opinion on compliance, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness ofthe City of Gainesville Board of Education's internal control over compliance.
A control deficiency in an entity's internal control over compliance exists when the design or operation ofa control does not allow management or employees, in the normal course ofperforming their assigned functions, to prevent or detect noncompliance with a type ofcompliance requirement of a Federal program on a timely basis. A significant deficiency is a control deficiency, or combination ofcontrol deficiencies, that adversely affects the entity's ability to administer a Federal program such that there is more than a remote likelihood that noncompliance with a type of compliance requirement ofa Federal program that is more than inconsequential will not be prevented or detected by the entity's internal control.
A material weakness is a significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood that material noncompliance with a type of compliance requirement of a Federal program will not be prevented or detected by the entity's internal control.
Our consideration ofthe internal control over compliance was for the limited purpose described in the first paragraph of this section and would not necessarily identify all deficiencies in internal control that might be significant deficiencies or material weaknesses. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses, as defined above.
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:gp 2007SA-10

R ssell W. Hinton, CPA, CGFM State Auditor

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, 2007

PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

FINDING CONTROL NUMBER

AUDITEE'S RESPONSE/STATUS

SEE AUDITOR'S COMMENTS

FS-7761-05-01 Further Action Not Warranted

FS-7761-05-02 Further Action Not Warranted

FS-7761-05-03 Further Action Not Warranted

FS-7761-05-04 Previously Reported Corrective Action Implemented

FS-7761-05-05 Previously Reported Corrective Action Implemented

FS-7761-05-06 Previously Reported Corrective Action Implemented

FS-7761-06-01 Unresolved - See Corrective Action/Responses

FS-7761-06-02 Previously Reported Corrective Action Implemented

FS-7761-06-03 Partially Resolved - See Corrective Action/Responses

FS-7761-06-04 Previously Reported Corrective Action Implemented

FS-7761-06-05 Further Action Not Warranted

(1)

CORRECTIVE ACTION/RESPONSES

CASH AND CASH EQUIVALENTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Controls over Principal Accounts Finding Control Number: FS-7761-06-01

The School District will improve its review of the adherence to proper procedures by personnel responsible for Principal Accounts to ensure that internal control practices are being followed.

Cash and Cash Equivalents All school level bookkeepers have been reminded of the importance of reconciling bank statements and for obtaining approvals ofthe reconciliations. Beginning with the start ofthe 2009 fiscal year, a copy ofeach school's bank reconciliations, with properly dated approvals, will be required to be sent to the Central Office within 30 days of the bank statement ending date.

Revenues/Receivables/Receipts Bookkeepers have been instructed in the proper documentation ofcash receipts. Each receipt is to include the date, name ofremitter and amount ofthe receipt. In addition each receipt shall show the purpose for which the money was received and the account to which it is to be credited.

- 1-

CITY OF GAINESVILLE BOARD OF EDUCATION - HALL COUNTY AUDITEE'S RESPONSE
SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2007
PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS
CASH AND CASH EQUIVALENTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Controls over Principal Accounts Finding Control Number: FS-7761-06-01
Expenditures/Liabilities/Disbursements Local school personnel have been reminded that each check must be supported by a voucher package which adequately documents the check being written. That voucher package should include a purchase order approved by the principal in writing (ifa purchase order is required), an itemized original invoice and documentation that goods or services requested were delivered or received.
Periodic review of these and other procedures will be performed by the Central Office to ensure that procedures are implemented and are functioning properly at the school level.
REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS GENERAL LEDGER Incomplete General Ledger/DE046 Financial Report Finding Control Number: FS-7761-06-03
At fiscal year end, the School District will review its funds and accounts to determine if any funds or accounts require the transfer of funds to eliminate any fund deficits. Additionally, entries necessary to record long-term debt and capital leases will be made to ensure that financial statements are prepared in accordance with generally accepted accounting principles and with the requirements of the Georgia Department of Education.
AUDITOR'S COMMENTS
(1) Findings/internal control deficiencies ofthis nature, that are not deemed significant deficiencies or material weaknesses and do not require reporting in the audit report in accordance with Statements on Auditing Standards (SAS) 112 or Governmental Auditing Standards (Yellow Book), will be communicated in a management letter in subsequent periods.
-2 -

CITY OF GAINESVILLE BOARD OF EDUCATION - HALL COUNTY AUDITEE'S RESPONSE
SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2007

PRIOR YEAR FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

FINDING CONTROL NUMBER

AUDITEE'S RESPONSE/STATUS

SEE AUDITOR'S COMMENTS

FA-7761-05-02 Further Action Not Warranted

FA-7761-06-01 Unresolved - See Corrective Action/Responses

FA-7761-06-02 Unresolved - See Corrective Action/Responses

FA-7761-06-03 Further Action Not Warranted

(1)

CORRECTIVE ACTION/RESPONSES

ACTIVITIES ALLOWED OR UNALLOWED Inadequate Internal Control Procedures U.S. Department of Education Through Georgia Department of Education Finding Control Number: FA-7761-06-01

The School District relied on instructions from the Georgia Department of Education in the handling of Hurricane Education Recovery funds for students with disabilities. The School District will review, to the extent possible, the regulations applicable to each new program for which it receives new funding to determine if there are any specific accounting, record keeping or reporting requirements to which the School District must adhere.

The School District will refund to the Georgia Department of Education any funds which it received for which it did not account properly for the use of the funds.

ELIGIBILITY Failure to Properly Document Displaced Students U.S. Department of Education Through Georgia Department of Education Finding Control Number: FA-7761-06-02

The School District attempted to enroll displaced students so they could continue to receive an education. Every effort was made to obtain documentation that each student was eligible to be enrolled and was from disaster areas covered by Hurricane Katrina or Rita. Documentation was difficult to obtain due to many families having few if any documents that survived the disasters.

-3-

CITY OF GAINESVILLE BOARD OF EDUCATION - HALL COUNTY AUDITEE'S RESPONSE
SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2007
PRIOR YEAR FEDERAL AWARD FINDINGS AND QUESTIONED COSTS CORRECTIVE ACTION/RESPONSES ELIGIBILITY Failure to Properly Document Displaced Students U.S. Department of Education Through Georgia Department of Education Finding Control Number: FA-7761-06-02 In the future the School District will implement stricter guidelines on which students to admit under any programs similar to this program. The School District will refund to the Georgia Department ofEducation any funds which it received for which it did not account properly for the use of the funds. AUDITOR'S COMMENTS (1) Findings/internal control deficiencies ofthis nature, that are not deemed significant deficiencies or material weaknesses and do not require reporting in the audit report in accordance with Office ofManagement and Budget (0MB) Circular A-133, will be communicated -in a management letter in subsequent periods.
-4 -

SECTION IV FINDINGS AND QUESTIONED COSTS

CITY OF GAINESVILLE BOARD OF EDUCATION - HALL COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2007

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 qualified for a scope limitation.

2. Significant Deficiencies in Internal Control Disclosed by the Audit ofthe Financial Statements The audit report for the City ofGainesville Board ofEducation disclosed financial statement significant deficiencies related to the following control categories.

Cash and Cash Equivalents Employee Compensation Financial Reporting

Expenditures/Liabilities/Disbursements Revenues/Receivables/Receipts Budget Preparation/Execution

Of the significant deficiencies described above, Cash and Cash Equivalents, Revenues/ Receivables/Receipts, Expenditures/Liabilities/Disbursements, Employee Compensation and Financial Reporting are considered to be material weaknesses.

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. Significant Deficiencies in Internal Control Over Major Programs The audit report for the City of Gainesville Board of Education did not disclose any significant deficiencies 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 .510(a) ofOMB Circular A-133 The City ofGainesville Board ofEducation's audit did not disclose audit findings required to be reported by section .510(a) ofOMB Circular A-133.

7. Major Programs Federal awards audited as major programs are as follows: 10.553 Food Services - School Breakfast Program 10.555 Food Services - National School Lunch Program 84.214 Even Start Migrant Program 84.287 Twenty-First Century Community Leaming Centers 84.367 Improving Teacher Quality State Grants

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

- 1-

CITY OF GAINESVILLE BOARD OF EDUCATION - HALL COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2007

I SUMMARY OF AUDITOR'S RESULTS

9. Low Risk Auditee The City of Gainesville Board of Education did not qualify as a low risk auditee as defined by Section .530 of 0MB Circular A-133.

II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

BUDGET PREPARATION/EXECUTION Deficit Fund Balance Significant Deficiency Finding Control Number: FS-7761-07-01

Condition:

The General Fund of the School District reported a deficit fund balance.

Criteria:

Chapter 25 Reportingfor LUAs with General Fund Balances ofthe Financial Management for Georgia Local Units of Administration states in part: "The seriousness of fund balance deficits cannot be overstated. The Georgia Department of Education requires those LUAs with deficit balances to meet certain reporting requirements".

Questioned Cost: NIA

Information:

The School District's General Fund reported a deficit fund balance in the amount of $57,893.

Cause:

The School District incurred expenditures in excess of revenues during the year under review in the General Fund.

Effect:

A financial statement irregularity in accordance with O.C.G.A. 20-2-67.

Recommendation:

The School District should establish policies and procedures designed to ensure that in future periods the School District does not report a deficit fund balance.

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CITY OF GAINESVILLE BOARD OF EDUCATION - HALL COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2007

II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

CASH AND CASH EQUIVALENTS Inadequate Internal Controls Material Weakness Finding Control Number: FS-7761-07-02

Condition:

The School District's accounting procedures were insufficient to provide for adequate internal controls over cash and cash equivalents.

Criteria:

The School District's management is responsible for designing and maintaining an adequate system of internal controls that ensure that all cash accounts are supported by and reconciled to either cash on hand or bank accounts held at authorized financial institutions.

Questioned Cost: NIA

Information:

A review of the School District's cash procedures revealed the following: An examination ofthe bank reconciliations disclosed no evidence of supervisory review. The bank reconciliations presented for audit were not reconciled to the general ledger for seven months. An examination ofthe bank reconciliation for the month ofJune 2007 disclosed numerous adjustments and unknown variances among the reconciling items.

Cause:

These deficiencies were the result of errors during the implementation of a new financial accounting software system and because procedures were not established to ensure the completeness of cash activity recorded on the general ledger.

Effect:

This could result in errors in financial reporting and increases the risk of material misstatement in the financial statements including misstatements due to fraud. This is a financial statement irregularity in accordance with O.C.G.A. 20-2-67.

Recommendation:

The School District should implement appropriate procedures and controls to ensure proper supervision ofthe cash reconciliation process and to ensure the completeness ofall cash and cash equivalents recorded on the general ledger.

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CITY OF GAINESVILLE BOARD OF EDUCATION - HALL COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2007

II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

CASH AND CASH EQUIVALENTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Controls over School Activity Accounts Material Weakness Finding Control Number: FS-7761-07-03

Condition:

This is a repeat finding (FS-7761-06-01 and FS-7761-05-01) from the years ended June 30, 2006 and June 30, 2005, respectively. The accounting procedures of the School District were insufficient to provide for adequate internal controls over the school activity accounts.

Criteria:

The School District's management is responsible for designing and maintaining internal controls that provide reasonable assurance that transactions are processed according to established procedures.

Questioned Cost: NIA

Information:

Cash and Cash Equivalents The bank reconciliation function was not separated from the record keeping and check preparation functions. Bank reconciliations did not include evidence of approval by an administrator not directly connected with cash operations. The School District's Federal employee identification (FEI) number was used by five unauthorized organizations to open bank accounts. The School District was unable to provide adequate supporting documentation for $241,242 reported as cash on the Statement ofNet Assets and General Fund Balance Sheet and $48,045 reported as cash on the Statement of Fiduciary Net Assets.

Revenues/Receivables/Receipts The cash receipts and deposit preparation functions were not separated from the record keeping and cash custody functions. During the course of fieldwork, the School District did not provide adequate supporting documentation for $919,640 reported as revenues on the Statement of Activities and in the General Fund.

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CITY OF GAINESVILLE BOARD OF EDUCATION - HALL COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2007

II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

CASH AND CASH EQUIVALENTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Controls over School Activity Accounts Material Weakness Finding Control Number: FS-7761-07-03

Expenditures/Liabilities/Disbursements The check writing function was not separated from the record keeping function. During the course of fieldwork, the School District did not provide adequate supporting documentation for $940,441 reported as expense on the Statement of Activities and as expenditures in the General Fund and $48,045 reported as a component ofFunds Held for Others on the Statement of Fiduciary Net Assets.

Cause:

These deficiencies were a result of management's decision to limit the number ofadministrative staffmade responsible for accounting functions and management's failure to ensure that internal controls were established, implemented and functioning at the school level. Additionally, procedures were not established to ensure that financial activity at the school level was properly aggregated for reporting in the School District's financial statements.

Effect:

Errors and/or irregularities may not be detected in a timely manner.

Recommendation:

The School District should implement procedures to ensure that the key accounting functions of custody, record keeping and authorization are separated and/or utilize management oversight for these incompatible activities. In addition, management should monitor controls to provide reasonable assurance that transactions are processed according to established procedures; implement procedures deemed necessary to strengthen internal controls over the accounting functions; and establish procedures to ensure that all activity is properly aggregated and recorded on the financial statements.

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CITY OF GAINESVILLE BOARD OF EDUCATION - HALL COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2007

II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

EMPLOYEE COMPENSATION Inadequate Internal Controls Material Weakness Finding Control Number: FS-7761-07-04

Condition:

A review ofthe School District's internal control policies and procedures for employee compensation noted deficiencies in employee payroll records and personnel files.

Criteria:

The School District's management is responsible for designing and maintaining internal controls that ensure employee compensation payments are properly calculated, disbursed and documented.

Questioned Cost: NIA

Information:

Based on a review of forty-six employees' payroll records the following deficiencies were noted:
Three employees' salaries were based on an amount for which supporting signed contracts could not be provided.
Three employees appeared to be overpaid based on documentation provided.
Four employees appeared to be underpaid which appears to be due to problems incurred with implementation ofnew accounting software.
One employee was paid approximately $60,000 for compensatory time worked, in addition to an annual salary of $41,915. A time log was maintained by the employee; however, there was no evidence of supervisory review or approval ofthe time log during the fiscal year. The employee requested and received payment for the additional compensation based upon a letter submitted to the finance office.

Cause:

These deficiencies were the result of management's failure to implement adequate controls to ensure that internal controls were established, implemented and functioning.

Effect:

This could result in errors in financial reporting and increases the risk of material misstatement in the financial statements including misstatements due to fraud.

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CITY OF GAINESVILLE BOARD OF EDUCATION - HALL COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2007

II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

EMPLOYEE COMPENSATION Inadequate Internal Controls Material Weakness Finding Control Number: FS-7761-07-04

Recommendation:

The School District should implement appropriate procedures to strengthen internal controls over processing employee compensation. Additionally, the School District should implement procedures to ensure that all payroll disbursements are based on approved contracts and time worked. The School District should review this matter to determine if recovery or payment of funds is needed.

FINANCIAL REPORTING Inadequate Controls over Financial Reporting Material Weakness Finding Control Number: FS-7761-07-05

Condition:

The School District did not have adequate controls in place over the financial statement reporting process.

Criteria:

Management is responsible for having adequate controls over the financial reporting process, which not only includes proper recording oftransactions to the general ledger, but extends to accurate preparation and presentation ofthe financial statements, including note disclosures.

Questioned Cost: NIA

Information:

The Governmental Accounting Standards Board (GASB) Statement 34 reporting model requires that the presentation ofboth fund level and entitywide level statements in the School District's financial statements. During the audit, numerous correcting entries, including a restatement decreasing beginning net assets by $1,362,733, were proposed by the auditor and accepted by the client to properly present the entity's fund level and entitywide level financial statements.

Cause:

The School District did not implement an adequate system ofinternal control over the financial statement reporting process.

Effect:

The School District does not have adequate controls in place to ensure that the financial statements are properly prepared in accordance with generally accepted accounting principles.

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CITY OF GAINESVILLE BOARD OF EDUCATION - HALL COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2007

II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

FINANCIAL REPORTING Inadequate Controls over Financial Reporting Material Weakness Finding Control Number: FS-7761-07-05

Recommendation:

The School District should develop and implement internal controls over the financial statement reporting process to ensure that activity is properly recorded in the general ledger; to verify that financial statements (including note disclosures) properly reflect activity reported in the general ledger; and to include a monitoring process to evaluate the accuracy of the financials presented for audit.

III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

No matters were reported.

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SECTIONV MANAGEMENT'S RESPONSES

CITY OF GAINESVILLE BOARD OF EDUCATION - HALL COUNTY SCHEDULE OF MANAGEMENT'S RESPONSES YEAR ENDED JUNE 30, 2007
Finding Control Number: FS-7761-07-01
We concur with this finding. In the preparation of budgets for the fiscal year ended June 30, 2007, errors were made in preparing the underlying details ofbudgeted revenues and expenditures, and in the subsequent summarization ofthese details into the School District level budget. Problems with the implementation of a new accounting system delayed the closing of the 2007 fiscal year which postponed the realization of the budgeting errors until well after the close of the 2007 fiscal year.
The following year's budget had been prepared in much the same manner resulting in similar budget errors in the 2008 fiscal year. Unaware of these errors and of their impact, the Board lowered its millage rate for fiscal year 2008 thus compounding the deficit fund balance problem. The June 30, 2007 deficit fund balance will not be corrected in the subsequent fiscal period and the School District's deficit fund balance will increase by the end of the 2008 fiscal year.
The Board has addressed the deficit fund balance by conducting a thorough review of its entire budget and the budget preparation process. In addition to determining expenditures that can be reduced, the Board has increased its millage rate for fiscal year 2009 and has adopted a deficit reduction plan in accordance with instructions and guidance from the Georgia Department of Education.
Finding Control Number: FS-7761-07-02
We concur with this finding. The School District has been unable to completely reconcile its cash accounts since the implementation ofthe new accounting system. Since supervisory reviews are to be performed after the bank reconciliation is completed, there would not have been evidence of supervisory reviews being performed since the bank reconciliations were never completed.
The School District is acutely aware ofthe need to correct the problems in the accounting system so that cash can be reconciled on a timely basis. Extensive use will be made ofsystem personnel (and outside additional personnel as needed) to rectify the situation and bring the School District's cash accounts into balance.
Finding Control Number: FS-7761-07-03
We concur with this finding. The School District is limited in the number ofadministrative staffthat are available to provide additional internal controls. However, the School District will improve its oversight of the adherence to proper procedures by personnel responsible for School Activity Accounts to ensure that internal control practices are being followed.
Subsequent to the start of the 2009 fiscal year, the School Superintendent and the Director of Finance met with all principals and local school bookkeepers. During this meeting personnel were reminded of the deficiencies noted in prior year audit reports and what actions must be taken to resolve these problems. Requirements for the proper documentation ofreceipts and disbursements were covered in detail. A review ofpertinent portions ofthe Local School Accounting Manual was made and proper procedures emphasized. Follow-up meetings will be held during the year.
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CITY OF GAINESVILLE BOARD OF EDUCATION - HALL COUNTY SCHEDULE OF MANAGEMENT'S RESPONSES YEAR ENDED JUNE 30, 2007
Finding Control Number: FS-7761-07-03
Additional instructions were provided on the proper procedures ofreporting financial transactions of the Activity Accounts for inclusion in the School District's financial reports.
Periodic review of these and other procedures will be performed by the School District's Central Office to ensure that internal control procedures are implemented and are functioning properly at the school level.
Finding Control Number: FS-7761-07-04
We concur with this finding. During the latter part of fiscal year 2007, the School District implemented a new financial accounting system which included a new human resources/payroll system.
The School District will conduct a review of its human resources and payroll internal control procedures to determine the extent to which existing controls are effective and where additional controls, ifneeded, should be adopted. The School District will ensure that payments ofemployee compensation will be properly authorized and documented, and accurately calculated and disbursed.
The School District will review the instances reported to determine what further action is warranted.
Finding Control Number: FS-7761-07-05
We concur with this finding. Problems caused during the implementation of a new accounting system delayed the School District in the proper preparation ofits financial statements. Addressing operating issues involving the new accounting system adversely affected the capability ofthe School District to assure that all required financial activity was recorded accurately and promptly.
The School District will develop and implement procedures to assure that all financial activity is properly and timely reported. An extensive review will be made ofall financial statements prior to audit.
Contact Person: Janet L. Allison, CPA Title: ChiefFinancial Officer Phone: (770) 536-5275 Fax: (770) 287-2019 E-mail: janet.allison@gcssk12.net
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