CITY OF GAINESVILLE BOARD OF EDUCATION
HALL COUNTY, GEORGIA
ANNUAL FINANCIAL REPORT FOR THE FISCAL YEAR ENDED JUNE 30, 2013
(Including Independent Auditor's Reports)

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

SECTION I

FINANCIAL

INDEPENDENT AUDITOR'S REPORT

REQUIRED SUPPLEMENTARY INFORMATION

MANAGEMENT'S DISCUSSION AND ANALYSIS

EXHIBITS

BASIC FINANCIAL STATEMENTS

DISTRICT-WIDE FINANCIAL STATEMENTS

A

STATEMENT OF NET POSITION

B

STATEMENT OF ACTIVITIES

FUND FINANCIAL STATEMENTS

C

BALANCE SHEET

GOVERNMENTAL FUNDS

D

RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET

TO THE STATEMENT OF NET POSITION

E

STATEMENT OF REVENUES, EXPENDITURES AND CHANGES

IN FUND BALANCES

GOVERNMENTAL FUNDS

F

RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT

OF REVENUES, EXPENDITURES AND CHANGES IN FUND

BALANCES TO THE STATEMENT OF ACTIVITIES

G

STATEMENT OF FIDUCIARY NET POSITION

FIDUCIARY FUNDS

H

NOTES TO THE BASIC FINANCIAL STATEMENTS

SCHEDULES

REQUIRED SUPPLEMENTARY INFORMATION

1 SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL GENERAL FUND

Page
i
1 2 4 5 6 7 9 10
31

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

SECTION I
FINANCIAL
SCHEDULES
SUPPLEMENTARY INFORMATION
2 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS 3 SCHEDULE OF STATE REVENUE 4 SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS 5 ALLOTMENTS AND EXPENDITURES
GENERAL FUND - QUALITY BASIC EDUCATION PROGRAMS (QBE) BY PROGRAM

Page
32 34 35 37

SECTION II
COMPLIANCE AND INTERNAL CONTROL REPORTS
INDEPENDENT AUDITOR'S 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
INDEPENDENT AUDITOR'S REPORT ON COMPLIANCE FOR EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH OMB CIRCULAR A-133

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

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

SECTION I FINANCIAL

Greg S. Griffin
STATE AUDITOR
(404) 656-2174

DEPARTMENT OF AUDITS AND ACCOUNTS
270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400
March 26, 2014

Honorable Nathan Deal, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the City of Gainesville Board of Education
INDEPENDENT AUDITOR'S REPORT
Ladies and Gentlemen:
Report on the Financial Statements
We have audited the accompanying financial statements of the governmental activities, each major fund, and the aggregate remaining fund information (Exhibits A through H) of the City of Gainesville Board of Education, as of and for the year ended June 30, 2013, and the related notes to the financial statements, which collectively comprise the Board's basic financial statements as listed in the table of contents.
Management's Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.
Auditor's Responsibility
Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of
2013ARL-11

expressing an opinion on the effectiveness of the entity's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions.
Opinions
In our opinion, the financial statements referred to previously present fairly, in all material respects, the respective financial position of the governmental activities, each major fund, and the aggregate remaining fund information of the City of Gainesville Board of Education, as of June 30, 2013, and the respective changes in financial position thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America.
Emphasis of Matter
As described in Note 2 to the financial statements, in 2013, the City of Gainesville Board of Education adopted new accounting guidance, Governmental Accounting Standards Board (GASB) Statement No. 63, Financial Reporting of Deferred Outflows of Resources, Deferred Inflows of Resources, and Net Position. Our opinion is not modified with respect to this matter.
Other Matters
Required Supplementary Information
Accounting principles generally accepted in the United States of America require that the Management's Discussion and Analysis and the Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual, as presented on pages i through ix and page 31 respectively, be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management regarding the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance.
Other Information
Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City of Gainesville Board of Education's basic financial statements. The accompanying supplementary information, consisting of Schedules 2 through 5, is presented for the purposes of additional analysis and is not a required part of the basic financial statements. The Schedule of Expenditures of Federal Awards is presented for purposes of additional analysis as required by U. S. Office of Management and Budget Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations, and is not a required part of the basic financial statements.
The accompanying supplementary information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the
2013ARL-11

audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated in all material respects in relation to the basic financial statements as a whole.
Other Reporting Required by Government Auditing Standards
In accordance with Government Auditing Standards, we have also issued our report dated March 26, 2014, 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 of our testing of internal control over financial reporting and compliance and the results of that 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 in considering City of Gainesville Board of Education's internal control over financial reporting and compliance.
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,

GSG:as 2013ARL-11

Greg S. Griffin State Auditor

CITY OF GAINESVILLE BOARD OF EDUCATION HALL COUNTY MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2013

INTRODUCTION
The Gainesville City School District's financial statements for the fiscal year ended June 30, 2013 includes a series of basic financial statements that report financial information for the District as a whole, its funds, and its fiduciary responsibilities. The Statement of Net Position and the Statement of Activities provide financial information about all of the District's activities and present both a shortterm and long-term view of the District's finances on a global basis. The fund financial statements provide information about all of the District's funds. Information about these funds, such as the District's General Fund, is important in its own right, but will also give insight into the District's overall soundness as reported in the Statement of Net Position and the Statement of Activities.
FINANCIAL HIGHLIGHTS
Key financial highlights for fiscal year 2013 are as follows:
On the District-wide financial statements:
District-wide net position at June 30, 2013 was $91.0 million. Net position reflects the difference between all assets of the District (including capital assets, net of depreciation) and all liabilities, both short-term and long-term. The net position at June 30, 2013 of $91.0 million represented an increase of nearly $8.6 million in net position when compared to the prior year.
The School District had just over $67.1 million in expenses relating to governmental activities; only $46.4 million of these expenses were offset by program specific charges for services, grants and contributions. However, general revenues (primarily property and sales taxes) of over $29.3 million were adequate to provide for these programs.
As stated above, general revenues accounted for over $29.3 million or about 38.7% of all revenues totaling just over $75.7 million. Program specific revenues in the form of charges for services, grants, and contributions accounted for the balance of these revenues.

Source of Revenues

General Revenue - Property Taxes
30.7%

Program Revenues
61.3%

General Revenue - All Other 1.2%

General Revenue - Sales Taxes 6.8%

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CITY OF GAINESVILLE BOARD OF EDUCATION HALL COUNTY MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2013
On the fund financial statements:
Among major funds, the General Fund had nearly $67.2 million in revenues and other financing sources, and nearly $64.8 million in expenditures and other financing uses. The General Fund's net change in fund balance of $2.4 million allowed the District to increase its beginning fund balance of $9.7 million to an end of the fiscal year General Fund balance of nearly $12.2 million at June 30, 2013.
OVERVIEW OF THE FINANCIAL STATEMENTS
These financial Statements consists of three parts; management's discussion and analysis (this section), the basic financial statements including notes to the financial statements and required supplementary information. The basic financial statements include two levels of statements that present different views of the School District. These include the District-wide and fund financial statements.
The District-wide financial statements include the 'Statement of Net Position' and 'Statement of Activities'. These statements provide information about the activities of the School District presenting both short-term and long-term information about the School District's overall financial status.
The fund financial statements focus on individual parts of the School District, reporting the School District's operation in more detail. The 'Governmental Funds' statements disclose how basic services are financed in the short-term as well as what remains for future spending. The 'Fiduciary Funds' statements provide information about the financial relationships in which the School District acts solely as a trustee or agent for the benefit of others. In the case of the City of Gainesville School District, the General Fund, Capital Projects Fund, and Debt Service Fund are all considered to be major funds. The District has no nonmajor funds as defined by GASB Statement 34 for the purposes of this report.
The financial statements also include notes that explain some of the information in the statements and provide more detailed data. The statements are followed by a section of required supplementary information that further explains and supports the financial statements. Additionally, other supplementary information (not required) is also presented that further supplements understanding of the financial statements.
District-Wide Statements
Since the City of Gainesville School District has no operations that have been classified as "Business Activities", the District-wide financial statements are basically a consolidation of all of the District's operating funds into one column called governmental activities. In reviewing the District-wide financial statements, a reader might ask the question, are we in a better financial position now than last year? The 'Statement of Net Position' and the 'Statement of Activities' provide the basis for answering this question. These financial statements include all the School District's assets and liabilities, and use the accrual basis of accounting similar to the accounting used by most privatesector companies. This basis of accounting takes into account all of the current year's revenues and expenses regardless of when cash is received or paid.
These two statements report the School District's net position and any changes in that position. The change in net position is important because it tells the reader that, for the School District as a whole, the financial position of the School District has improved or diminished. The causes of this change may be the results of many factors, including those not under the School District's control, such as the property tax base, facility conditions, required educational programs, student-teacher ratios, and other factors.
ii

CITY OF GAINESVILLE BOARD OF EDUCATION HALL COUNTY MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2013
When analyzing District-wide financial statements, it is important to remember these statements are prepared using an economic resources measurement focus (accrual accounting) and involve the following steps to format the Statement of Net Position:
Capitalize current outlays for capital assets Depreciate capital assets Report long-term debt as a liability Calculate revenue and expense using the economic resources measurement focus and the
accrual basis of accounting Allocate net position as follows:
o Net investment in capital assets o Restricted net position are those assets with constraints placed on the use by external
sources such as creditors, grantors, contributors or laws and regulations. o Unrestricted net position is net assets that do not meet any of the above restrictions.
Fund Financial Statements
The School District uses many funds or sub-funds to account for a multitude of financial transactions during the fiscal year. The fund financial statements presented in this report provide detail information about the School District's significant or major funds. As discussed previously, the District has no nonmajor Funds as defined by generally accepted accounting principles.
The District has two kinds of funds as discussed below:
Governmental Funds Most of the School District's activities are reported in governmental funds, which focus on how money flows into and out of those funds and the balances left at year-end available for spending in future periods. These funds are reported using the modified accrual method of accounting which measures cash and all other financial assets that can be readily be converted to cash. The governmental fund statements provide a detailed short-term view of the School District's general government operations and the basic services it provides. Governmental fund information helps determine whether there are more or fewer financial resources that can be spent in the near future to finance educational programs. The differences between government activities (reported in the Statement of Net Position and the Statement of Activities) and governmental funds are reconciled in the financial statements.
Fiduciary Funds The School District is the trustee, or fiduciary, for assets that belong to clubs, organizations and others within the principals' accounts. The School District is responsible for ensuring that the assets reported in these funds are used only for their intended purposes and by those to whom the assets belong. The School District excludes these activities from the District-wide financial statements because it cannot use these assets to finance its operations.
FINANCIAL ANALYSIS OF THE SCHOOL DISTRICT AS A WHOLE
Net position, which is the difference between total assets and total liabilities, is one indicator of the financial condition of the District. When revenues exceed expenses, the result is an increase in net position. When expenses exceed revenues, the result is a decrease in net position. The relationship between revenues and expenses can be thought of as the District's operating results. The District's net position, as measured in the Statement of Net Position, can be one way to measure the District's financial health, or financial position. Over time, increases or decreases in the District's net position, as measured in the Statement of Activities, are one indicator of whether its financial health is improving or deteriorating. However, the District's goal and mission is to provide success for each child's education, not to generate profits as private corporations do. For this reason, many other nonfinancial factors should be considered in assessing the overall health of the District.
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CITY OF GAINESVILLE BOARD OF EDUCATION HALL COUNTY MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2013

In the case of the School District, assets exceeded liabilities by $91.0 million at June 30, 2013. To better understand the District's actual financial position and ability to deliver services in future periods, it is necessary to review the various components of the net position category. For example, of the $91.0 million of net position, about $6.8 million was restricted for continuation of federal programs, debt service and ongoing capital projects. Accordingly, these funds were not available to meet the District's ongoing obligations to citizens and creditors.
In addition, the District had $73.5 million (net of related debt) invested in capital assets (e.g., land, buildings, and equipment). The District uses these capital assets to provide educational services to students within geographic boundaries served by the District. Because of the very nature and ongoing use of the assets being reported in this component of net assets, it must be recognized that this portion of the net position is not available for future spending.
The remaining balance of unrestricted net position of over $10.7 million may be used to meet the District's ongoing obligations to citizens and creditors.
Table 1 provides a summary of the School District's net position for this fiscal year as compared to the prior fiscal year.
Table 1 Net Position

Governmental Activities

Fiscal

Fiscal

Year 2013

Year 2012

Assets Current and Other Assets Capital Assets, Net

$

32,080,634 $

38,373,708

92,621,306

81,479,764

Total Assets

$

124,701,940 $ 119,853,472

Liabilities Current and Other Liabilities Long-Term Liabilities

$

11,099,948 $

10,684,215

22,526,695

26,671,027

Total Liabilities

$

33,626,643 $

37,355,242

Net Position Investment in Capital Assets Restricted Unrestricted

$

73,458,344 $

66,039,233

6,873,384

8,239,257

10,743,569

8,219,740

Total Net Position

$

91,075,297 $

82,498,230

Total net position increased $8.5 million in fiscal year 2013 from the prior year net position. This change in net position is detailed in Table 2 as presented below. Table 2 also shows the changes in net position as compared to the prior fiscal year.

iv

CITY OF GAINESVILLE BOARD OF EDUCATION HALL COUNTY MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2013

Table 2 Change in Net Position

Revenues Program Revenues: Charges for Services and Sales Operating Grants and Contributions Capital Grants and Contributions

Governmental Activities

Fiscal Year

Fiscal Year

2013

2012

$

990,191 $

1,155,197

41,750,386

38,149,668

3,663,907

5,570,794

Total Program Revenues

$

46,404,484 $

44,875,659

General Revenues: Taxes Property Taxes Sales Taxes Grants and Contributions not Restricted to Specific Programs Investment Earnings Miscellaneous
Special Item Loss on Demolition of Old Fair Street School

$

23,245,186 $

22,881,004

5,155,444

4,842,651

460,162 58,483
404,695

389,918 52,213
547,812

-465,228

Total General Revenues and Special Item

$

29,323,970 $

28,248,370

Total Revenues

$

75,728,454 $

73,124,029

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

$

43,303,733 $

42,281,583

1,832,891 1,087,860 1,124,263
763,706 4,116,724
698,278 4,663,363 2,755,991 1,374,105
552,871

1,874,735 1,248,855 1,047,191
700,982 4,230,584
702,968 4,481,343 2,445,779 1,359,925
708,478

426,217 3,970,946
480,439

427,717 3,463,663
500,857

Total Expenses

$

67,151,387 $

65,474,660

Increase in Net Position

$

8,577,067 $

7,649,369

The District's expenditures reflect an increase of almost $1.7 million in fiscal year 2013.

v

CITY OF GAINESVILLE BOARD OF EDUCATION HALL COUNTY MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2013

Cost of Providing Services
The Statement of Activities shows the cost of program services and the charges for services and grants offsetting these services. Table 3 shows, for governmental activities, the total cost of services and the net cost of services. Net cost of services can be defined as the total cost less fees generated by the activities and intergovernmental revenue provided for specific programs. The net cost reflects the financial burden on the School District's taxpayers by each activity as compared to the prior fiscal year.
Table 3 Governmental Activities

Total Cost of Services

Fiscal

Fiscal

Year 2013

Year 2012

Net Cost of Services

Fiscal

Fiscal

Year 2013

Year 2012

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

$

43,303,733 $

42,281,583 $

10,964,246 $

12,064,756

1,832,891 1,087,860 1,124,263
763,706 4,116,724
698,278 4,663,363 2,755,991 1,374,105
552,871

1,874,735 1,248,855 1,047,191
700,982 4,230,584
702,968 4,481,343 2,445,779 1,359,925
708,478

1,531,850 -27,890 15,729
-604,761 2,178,900
687,049 2,129,972 2,296,635
941,979 244,457

1,460,531 -48,980 -52,702
-384,260 2,096,242
657,220 1,984,575 1,536,400 1,026,712
290,182

426,217 3,970,946
480,439

427,717 3,463,663
500,857

-126,106 34,405
480,439

-54,812 -477,719 500,856

Total Expenses

$

67,151,387 $

65,474,660 $

20,746,904 $

20,599,001

Expenses for fiscal year 2013 increased by almost $1.7 million over the prior year and the net cost of services increased by about $148 thousand.

FINANCIAL ANALYSIS OF THE SCHOOL DISTRICT'S FUNDS

Information about the School District's governmental funds is presented starting on Exhibit "C" of this report. Governmental funds are accounted for using the modified accrual basis of accounting. As reflected on Exhibit "E", the governmental funds had total revenues and other financing sources of $75.3 million and total expenditures of nearly $82.8 million in fiscal year 2013. Total governmental fund balances of $17.8 million at June 30, 2013, decreased approximately $7.5 million from the prior year. This decrease in fund balance resulted primarily from the District's expenditure of capital outlay funds and payment of debt.

vi

CITY OF GAINESVILLE BOARD OF EDUCATION HALL COUNTY MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2013

General Fund Budget Highlights
The School District's budget is prepared according to Georgia Law. The most significant budgeted fund is the General Fund. During the course of fiscal year 2013, the School District amended its general fund budget as needed.
The School District budget is adopted at the aggregate level and maintained at the program, function, object, and site levels to facilitate budgetary control. The budgeting systems are designed to control the total budget, but provide flexibility to meet the ongoing programmatic needs. The budgeting systems are also designed to control total site budgets but provide flexibility for site management as well.
For the General Fund, the final actual revenues of over $67.1 million were over the final budgeted revenues of $65.6 million by nearly $1.5 million. The School District traditionally estimates revenues on a conservative basis to avoid shortfalls in actual revenues. The District did not budget for investment income.
The General Fund's final actual expenditures of $64.3 million were less than the final budget amount of $67.2 million by $2.9 million. This demonstrates how the School District effectively used its budget to manage its financial affairs during fiscal year 2013 in the face of the current economic situation.
CAPITAL ASSETS AND DEBT ADMINISTRATION
Capital Assets
At fiscal year ended June 30, 2013, the School District had in excess of $92.6 million invested in capital assets, net of accumulated depreciation, all in governmental activities. These assets are made up of a broad range of items including buildings; land; land improvements; and food service, transportation and maintenance equipment. Table 4 reflects a summary of these balances, net of accumulated depreciation, as compared to the prior fiscal year. Additional information about the School District's Capital Assets can be found in the Notes to the Basic Financial Statements.

Table 4 Capital Assets (Net of Depreciation)

Governmental Activities

Fiscal

Fiscal

Year 2013

Year 2012

Land Construction In Progress Land Improvements Building and Improvements Equipment

$

12,054,520 $

15,077,492

4,786,726

58,422,581

2,279,987

11,817,246 4,820,199 4,959,238
57,505,186 2,377,895

Total

$

92,621,306 $

81,479,764

vii

CITY OF GAINESVILLE BOARD OF EDUCATION HALL COUNTY MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2013

Long-Term Debt
At June 30, 2013, the School District had $22.5 million in total debt outstanding which consisted of $14.08 million in bond debt, $2.77 million in capital lease debt, $4.55 million in an Installment Sales Agreement, $195 thousand in an Intergovernmental Agreement, $126 thousand in compensated absences debt, and $817 thousand in unamortized bond premiums on bonds sold. Table 5 summarizes the School District's debt as compared to the prior fiscal year.

Table 5 Debt at June 30

Governmental Activities

Fiscal

Fiscal

Year 2013

Year 2012

Bonds Payable

$

Capital Leases

Installment Sales Agreement

Intergovernmental Agreement

Compensated Absences

Unamortized Premiums on Bonds Sold

14,075,000 $ 2,768,265 4,545,000 195,000 126,396 817,034

18,080,000 2,719,919 4,545,000
139,661 1,186,447

Total

$

22,526,695 $

26,671,027

The Board's issuer credit rating (ICR) assigned by Standard and Poor's is "A" which is unchanged from the prior year. The most recent bond issue, the 2011 GO Bonds, is rated "AA+" as determined by S&P. Additional information about the School District's debt can be found in the Notes to the Basic Financial Statements.

FACTORS BEARING ON THE DISTRICT'S FUTURE

Currently known circumstances that are expected to have a significant effect on financial position or results of operations in future years are as follows:

The District is operating with financial stability showing a positive financial position at the end of fiscal year 2013 with unrestricted net position of over $10.7 million and a General Fund unassigned fund balance of $9.7 million. The School District's operating millage for fiscal year 2013 was 7.59, which produced approximately $3.1 million per mill.

In March of 2011 the voters of Gainesville approved a one percent local option sales tax for five years. Based on this approval, the District issued general obligation bonds during fiscal year 2012 from which the proceeds combined with state capital outlay grants was used to construct a new Fair Street Elementary School and to fund other capital outlay projects. The new school was opened in October 2013.

Revenues from local property taxes increased slightly in fiscal year 2013 from fiscal year 2012. The increase was about a half million dollars. No significant increases are expected in the near future.

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CITY OF GAINESVILLE BOARD OF EDUCATION HALL COUNTY MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2013
In the midst of these challenges, the District remains confident in the ability to maximize resources to provide the best possible educational experience for all of our students.
CONTACTING THE SCHOOL DISTRICT'S FINANCIAL MANAGEMENT This financial report is designed to provide our citizens, taxpayers, investors and creditors with a general overview of the School District's finances and to show the School District's accountability for the money it receives. Those who have questions about this report or need additional financial information should contact Ms. Janet L. Allison, CPA, Chief Financial Officer, 508 Oak Street, Gainesville, Georgia 30501. Questions also may be emailed to Ms. Allison at janet.allison@gcssk12.net.
ix

CITY OF GAINESVILLE BOARD OF EDUCATION - HALL COUNTY

CITY OF GAINESVILLE BOARD OF EDUCATION - HALL COUNTY STATEMENT OF NET POSITION JUNE 30, 2013
ASSETS
Cash and Cash Equivalents Investments Accounts Receivable, Net
Taxes State Government Federal Government Other Inventories Prepaid Items Capitalized Bond and Other Debt Issuance Costs Capital Assets, Non-Depreciable Capital Assets, Depreciable (Net of Accumulated Depreciation)
Total Assets
LIABILITIES
Accounts Payable Salaries and Benefits Payable Payroll Liabilities Interest 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 POSITION
Net Investment in Capital Assets Restricted for
Continuation of Federal Programs Debt Service Capital Projects Unrestricted
Total Net Position

EXHIBIT "A"

GOVERNMENTAL ACTIVITIES

$

9,273,115.18

13,056,229.15

1,382,309.21 7,056,313.28
996,990.94 128,501.17 101,133.42
12,430.24 73,611.00 27,132,011.33 65,489,294.72

$ 124,701,939.64

$

336,963.36

7,131,549.39

1,364,406.98

119,265.63

848,871.99

1,295,101.00

3,789.23

4,052,674.49 18,474,020.64

$

33,626,642.71

$

73,458,344.32

2,045,952.62 4,679,660.18
147,770.64 10,743,569.17

$

91,075,296.93

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, 2013

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 Bond Debt Sales Taxes Special Purpose Local Option Sales Tax For Capital Projects/Debt Services Other Sales Taxes Investment Earnings Grants and Contributions not Restricted to Specific Programs Miscellaneous
Total General Revenues
Change in Net Position
Net Position - Beginning of Year
Net Position - End of Year

EXPENSES

CHARGES FOR SERVICES

$ 43,303,733.20 $
1,832,891.26 1,087,859.71 1,124,263.40
763,705.99 4,116,724.42
698,277.63 4,663,362.98 2,755,991.18 1,374,104.85
552,870.74
426,217.24 3,970,946.10
480,438.92
$ 67,151,387.62 $

194,272.21
105,343.80 94,636.18
552,323.33 43,615.61
990,191.13

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

EXHIBIT "B"

PROGRAM REVENUES OPERATING GRANTS AND
CONTRIBUTIONS

CAPITAL GRANTS AND CONTRIBUTIONS

NET (EXPENSES) REVENUES
AND CHANGES IN NET POSITION

$ 29,620,432.67 $
301,041.08 1,114,946.61
975,204.01 1,361,521.34 1,713,537.30
10,343.95 2,332,341.31
364,720.06 105,798.77 302,436.71
3,548,062.55
$ 41,750,386.36 $

2,524,782.63 $
803.02 133,330.60
6,945.55 224,286.96
885.06 95,705.68
326,327.23 5,976.74
344,863.27
3,663,906.74 $

-10,964,245.69
-1,531,850.18 27,889.92 -15,728.79
604,760.90 -2,178,900.16
-687,048.62 -2,129,972.19 -2,296,634.94
-941,978.85 -244,457.29
126,106.09 -34,404.67 -480,438.92
-20,746,903.39

$

23,243,514.66

1,671.52

5,035,889.84 119,554.21 58,482.94 460,162.00 404,694.86

$

29,323,970.03

$

8,577,066.64

82,498,230.29

$

91,075,296.93

- 3 -

CITY OF GAINESVILLE BOARD OF EDUCATION - HALL COUNTY BALANCE SHEET
GOVERNMENTAL FUNDS JUNE 30, 2013

EXHIBIT "C"

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

GENERAL FUND

DISTRICTWIDE
CAPITAL PROJECTS
FUND

DEBT SERVICE
FUND

TOTAL

$ 9,176,394.54 $

99,051.42

$

5,796,253.19

5,952,600.47 $ 1,307,375.49

950,987.49 4,611,656.84
996,990.94 128,501.17 101,133.42
12,430.24

431,321.72 2,444,656.44

9,275,445.96 13,056,229.15
1,382,309.21 7,056,313.28
996,990.94 128,501.17 101,133.42
12,430.24

Total Assets

$ 21,774,347.83 $ 8,927,630.05 $ 1,307,375.49 $

32,009,353.37

LIABILITIES AND FUND BALANCES
LIABILITIES
Cash Overdraft Accounts Payable Salaries and Benefits Payable Payroll Withholdings Payable Contracts Payable Retainages Payable Deposits and Deferred Revenue
Total Liabilities
FUND BALANCES
Nonspendable Restricted Committed Unassigned
Total Fund Balances

$

$

328,650.09 $

8,313.27

7,131,549.39

1,364,406.98

848,871.99

1,295,101.00

770,455.61

2,444,656.44

$ 9,595,062.07 $ 4,596,942.70 $

2,330.78 $ 2,330.78 $

2,330.78 336,963.36 7,131,549.39 1,364,406.98 848,871.99 1,295,101.00 3,215,112.05
14,194,335.55

$ 113,563.66

$

1,944,819.20 $ 4,330,687.35 $ 1,305,044.71

376,845.07

9,744,057.83

$ 12,179,285.76 $ 4,330,687.35 $ 1,305,044.71 $

113,563.66 7,580,551.26
376,845.07 9,744,057.83
17,815,017.82

Total Liabilities and Fund Balances

$ 21,774,347.83 $ 8,927,630.05 $ 1,307,375.49 $

32,009,353.37

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 POSITION JUNE 30, 2013

EXHIBIT "D"

Total Fund Balances - Governmental Funds (Exhibit "C")
Amounts reported for Governmental Activities in the Statement of Net Position 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 Accumulated Depreciation - Land Improvements Buildings Accumulated Depreciation - Buildings Machinery and Equipment Accumulated Depreciation - Machinery and Equipment
Total Capital Assets
Bond Issuance Costs when debt is first issued are reported as an expenditure in Governmental Funds, but are reported as deferred charges on the Statement of Net Position and amortized over the term of the debt, using the straight line method. The balance on the Statement of Net Position is as follows:
Capitalized Bond Issuance Costs
Some of the School District's tax revenues will be collected after year-end but are not available soon enough to pay for the current periods expenditures.
Georgia State Financing and Investment Commission grants that are not available to pay current period expenditures are deferred in the funds.
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 Accrued Interest on Long-Term Debt Compensated Absences Capital Leases Intergovernmental Agreement Installment Sales Agreement Unamortized Bond Premiums
Total Long-Term Liabilities
Net Position of Governmental Activities (Exhibit "A")

$ 17,815,017.82

$ 12,054,519.67 15,077,491.66 5,963,896.73 -1,177,170.47 86,353,075.54 -27,930,493.65 6,763,405.33 -4,483,418.76

92,621,306.05

73,611.00 766,666.38 2,444,656.44

$ -14,075,000.00 -119,265.63 -126,395.64
-2,768,265.49 -195,000.00
-4,545,000.00 -817,034.00

-22,645,960.76

$ 91,075,296.93

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, 2013

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 Dues and Fees Interest
Total Expenditures
Excess of Revenues over (under) Expenditures
OTHER FINANCING SOURCES (USES)
Proceeds of Long-Term Capital Related Debt 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

$ 23,414,563.62 119,554.21 $
33,195,181.41 9,015,366.95 990,191.13 9,754.78 366,598.84

$ 5,035,889.84 2,807,579.05
14,600.12 38,096.02

$ 67,111,210.94 $ 7,896,165.03 $

1,671.52 34,128.04

$ 23,416,235.14 5,155,444.05
36,002,760.46 9,015,366.95 990,191.13 58,482.94 404,694.86

35,799.56 $ 75,043,175.53

$ 41,277,567.20

$ 41,277,567.20

1,829,293.08 1,087,209.71 1,015,157.65
761,469.62 3,941,440.94
681,443.65 4,919,149.39 2,652,409.18 1,364,547.16
549,653.91 426,217.24 3,717,379.45

$

3,324.74

3,798.00

13,580,738.01

1,829,293.08 1,087,209.71 1,015,157.65
761,469.62 3,941,440.94
684,768.39 4,922,947.39 2,652,409.18 1,364,547.16
549,653.91 426,217.24 3,717,379.45 13,580,738.01

37,569.57 4,035.71

$ 4,005,000.00 5,105.37
931,877.50

4,042,569.57 5,105.37
935,913.21

$ 64,264,543.46 $ 13,587,860.75 $ 4,941,982.87 $ 82,794,387.08

$ 2,846,667.48 $ -5,691,695.72 $ -4,906,183.31 $ -7,751,211.55

$ 195,000.00

$ 195,000.00

$

85,916.25

85,916.25

2,362.34

320,680.52 $ 4,818,141.68

5,141,184.54

-465,719.52

-4,673,102.68

-2,362.34

-5,141,184.54

$ -377,440.93 $ -4,157,422.16 $ 4,815,779.34 $ 280,916.25

$ 2,469,226.55 $ -9,849,117.88 $ -90,403.97 $ -7,470,295.30

9,710,059.21 14,179,805.23

1,395,448.68 25,285,313.12

Fund Balances - Ending

$ 12,179,285.76 $ 4,330,687.35 $ 1,305,044.71 $ 17,815,017.82

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, 2013

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
Tax revenues are not deferred in the Statement of Activities based on availability as they are in the Governmental Funds.
Property Taxes
Bond issuance costs, deferred gains on refundings and similar items when debt is first issued are reported as an expenditure in Governmental Funds, but are reported as deferred charges on the Statement of Net Position and amortized over the term of the debt, using the straight-line method. The details of this difference in the current period are as follows:
Deferral of Bond Issuance Costs
Some of the Capital Assets acquired this year were financed with capital leases. In Governmental Funds, a capital lease arrangement is considered a source of financing, but in the Statement of Net Position, the lease obligation is reported as a Long-Term Liability.
Capital Leases
Certain property acquired this year was financed with an Intergovernmental Agreement. In Governmental Funds, this agreement is considered a source of financing but in the Statement of Net Position, the obligation is reported as a Long-Term Liability.
Purchase of Rainey Street Property
Georgia State Financing and Investment Commission grants that are not available to pay current period expenditures are deferred in the fund statements but recognized on the Statement of Activities.
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 Position. In the current year, these amounts consist of:
Bond Principal Retirements Capital Lease Payments
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 Net Decrease in Accrued Interest Decrease in Compensated Absences
Total Additional Expenditures
Change in Net Position of Governmental Activities (Exhibit "B")
The notes to the basic financial statements are an integral part of this statement. - 7 -

$ -7,470,295.30

$ 14,153,587.03 -3,012,045.78

11,141,541.25

-169,338.47

-16,667.00

-85,916.25

-195,000.00 856,327.69

$ 4,005,000.00 37,569.57

4,042,569.57

$ 369,413.00 91,166.66 13,265.49

473,845.15

$ 8,577,066.64

(This page left intentionally blank)

CITY OF GAINESVILLE BOARD OF EDUCATION - HALL COUNTY STATEMENT OF FIDUCIARY NET POSITION FIDUCIARY FUNDS JUNE 30, 2013
ASSETS Cash and Cash Equivalents
LIABILITIES Funds Held for Others

EXHIBIT "G"
AGENCY FUNDS $ 213,261.99
$ 213,261.99

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

CITY OF GAINESVILLE BOARD OF EDUCATION HALL COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2013

EXHIBIT "H"

Note 1: DESCRIPTION OF SCHOOL DISTRICT AND REPORTING ENTITY
REPORTING ENTITY
The City of Gainesville Board of Education (School District) was established under the laws of the State of Georgia and operates under the guidance of a school board elected by the voters and a Superintendent appointed by the Board. The Board is organized as a separate legal entity and has the power to levy taxes and issue bonds. Its budget is not subject to approval by any other entity. Accordingly, the School District is a primary government and consists of all the organizations that compose its legal entity.
Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The School District's basic financial statements are collectively comprised of the District-wide financial statements, fund financial statements and notes to the basic financial statements of the City of Gainesville Board of Education.
District-wide Statements: The Statement of Net Position and the Statement of Activities display information about the financial activities of the overall School District, except for fiduciary activities. Eliminations have been made to minimize the double counting of internal activities. Governmental activities generally are financed through taxes, intergovernmental revenues, and other nonexchange transactions.
The Statement of Activities presents a comparison between direct expenses and program revenues for each function of the School District's governmental activities.
Direct expenses are those that are specifically associated with a program or function and, therefore, are clearly identifiable to a particular function. Indirect expenses (expenses of the School District related to the administration and support of the School District's programs, such as office and maintenance personnel and accounting) are not allocated to programs.
Program revenues include (a) charges paid by the recipients of goods or services offered by the programs and (b) grants and contributions that are restricted to meeting the operational or capital requirements of a particular program. Revenues that are not classified as program revenues, including all taxes, are presented as general revenues.
Fund Financial Statements: The fund financial statements provide information about the School District's funds, including fiduciary funds. Eliminations have been made to minimize the double counting of internal activities. Separate statements for each category (governmental and fiduciary) are presented. The emphasis of fund financial statements is on major governmental funds, each displayed in a separate column.
The School District reports the following major governmental funds:
General Fund is the School District's primary operating fund. It accounts for all financial resources of the 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), proceeds from an installment sales agreement, and grants from the Georgia State Financing and Investment Commission that are restricted to be used for the acquisition, construction or renovation of major capital facilities.
-10-

CITY OF GAINESVILLE BOARD OF EDUCATION HALL COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2013

EXHIBIT "H"

Debt Service Fund accounts for and reports financial resources that are restricted including property taxes legally restricted for the payment of general long-term principal, interest and paying agent's fees.
The School District reports the following fiduciary fund type:
Agency funds account for assets held by the School District as an agent for various funds, governments, or individuals.
BASIS OF ACCOUNTING
The basis of accounting determines when transactions are reported on the financial statements. The District-wide governmental and fiduciary fund financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded at the time liabilities are incurred, regardless of when the related cash flows take place. Nonexchange transactions, in which the School District gives (or receives) value without directly receiving (or giving) equal value in exchange, include property taxes, sales taxes, grants and donations. On an accrual basis, revenue from property taxes is recognized in the fiscal year for which the taxes are levied. Revenue from sales taxes is recognized in the fiscal year in which the underlying transaction (sale) takes place. Revenue from grants and donations is recognized in the fiscal year in which all eligibility requirements have been satisfied.
The School District uses funds to report on its financial position and the results of its operations. Fund accounting is designed to demonstrate legal compliance and to aid financial management by segregating transactions related to certain governmental functions or activities. A fund is a separate accounting entity with a self-balancing set of accounts.
Governmental funds are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Under this method, revenues are recognized when measurable and available. The School District considers all revenues reported in the governmental funds to be available if they are collected within sixty days after year-end. Property taxes, sales taxes and interest are considered to be susceptible to accrual. Expenditures are recorded when the related fund liability is incurred, except for principal and interest on general long-term debt, and compensated absences, which are recognized as expenditures to the extent they have matured. Capital asset acquisitions are reported as expenditures in governmental funds. Proceeds of general long-term liabilities and acquisitions under capital leases are reported as other financing sources.
The School District funds certain programs by a combination of specific 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.
NEW ACCOUNTING PRONOUNCEMENTS
In fiscal year 2013, the School District adopted the Governmental Accounting Standards Board (GASB) Statement No. 60, Accounting and Financial Reporting for Service Concession Arrangements. The provisions of this Statement establish accounting and financial reporting standards for governments who enter into Service Concession Arrangements (SCA) with other governmental or nongovernmental entities. As of June 30, 2013, the School District has not entered into any arrangements that meet the qualifications to be reported as a SCA in accordance with this standard.
-11-

CITY OF GAINESVILLE BOARD OF EDUCATION HALL COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2013

EXHIBIT "H"

In fiscal year 2013, the School District adopted the Governmental Accounting Standards Board (GASB) Statement No. 62, Codification of Accounting and Financial Reporting Guidance Contained in Pre-November 30, 1989 FASB and AICPA Pronouncements. The provisions of this Statement incorporate certain accounting and financial reporting guidance into authoritative GASB literature.
In fiscal year 2013, the School District adopted the Governmental Accounting Standards Board (GASB) Statement No. 63, Financial Reporting of Deferred Outflows of Resources, Deferred Inflows of Resources and Net Position. The provisions of this Statement establish financial reporting standards for the presentation of deferred outflows of resources and deferred inflows of resources and their effects on a government's net position. The School District changed its presentation of net assets to net position for fiscal year 2013. There were no other applicable reporting changes for the School District.
CASH AND CASH EQUIVALENTS
COMPOSITION OF DEPOSITS Cash and cash equivalents consist of cash 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 authorizes the School District to deposit its funds in one or more solvent banks, insured Federal savings and loan associations or insured chartered building and loan associations.
INVESTMENTS
COMPOSITION OF INVESTMENTS Investments made by the School District in nonparticipating interest-earning contracts (such as certificates of deposit) and repurchase agreements are reported at cost. Participating interest-earning contracts and money market investments with a maturity at purchase of one 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 of Georgia 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 of return shall be the objective, given equivalent conditions of safety and liquidity. Funds may be invested in the following:
(1) Obligations issued by the State of Georgia or by other states,
(2) Obligations issued by the United States government,
(3) Obligations fully insured or guaranteed by the United States government or a United States government agency,
(4) Obligations of any corporation of the United States government,
(5) Prime banker's acceptances,
(6) The Georgia Fund 1 administered by the State of Georgia, Office of State Treasurer,
(7) Repurchase agreements, and
(8) Obligations of other political subdivisions of the State of Georgia.

-12-

CITY OF GAINESVILLE BOARD OF EDUCATION HALL COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2013

EXHIBIT "H"

The School District has a formal policy regarding investment policies that address credit risks, custodial credit risks, concentration of credit risks, or interest rate risks. Foreign currency risk does not apply to the School District.

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 2012 tax digest year (calendar year) on October 5, 2012 (levy date). Taxes were billed on October 20, 2012 and were due on December 20, 2012 (lien date). Taxes due and collected within the current fiscal year or within 60 days after year-end on the 2012 tax digest are reported as revenue in the governmental funds for fiscal year 2013. The Gainesville City Clerk bills and collects the property taxes for the School District, withholds 1% of taxes collected as a fee for tax collection and remits the balance of taxes collected to the School District. During the fiscal year the School District remitted $189,389.00 of its 2012 tax digest collections to the Hall County Board of Education as part of a tax sharing agreement that relates to the cost of educating students in areas annexed into the city. These Property tax revenues, at the fund reporting level, during the fiscal year ended June 30, 2013, for maintenance and operations amounted to $23,241,064.43. Property taxes for school bonds amounted to $1,671.52 consisting entirely of delinquent tax collections and this amount was transferred to the General Fund.

The tax millage rate levied for the 2012 tax year (calendar year) for the City of Gainesville Board of Education was as follows (a mill equals $1 per thousand dollars of assessed value):

School Operations

7.59 mills

Additionally, Title Ad Valorem Tax revenues, at the fund reporting level, amounted to $173,499.19 during fiscal year ended June 30, 2013.

SALES TAXES

Special Purpose Local Option Sales Tax, at the fund reporting level, during the year amounted to $5,035,889.84 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 of donated food commodities used in the preparation of meals 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.

-13-

CITY OF GAINESVILLE BOARD OF EDUCATION HALL COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2013

EXHIBIT "H"

PREPAID ITEMS
Payments made to vendors for services that will benefit periods subsequent to June 30, 2013, are recorded as prepaid items.
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 of assets or materially extend the useful lives of the assets is not capitalized. Depreciation is computed using the straight-line method. The School District does not capitalize book collections or works of art. 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:

Capitalization Policy

Estimated Useful Life

Land Land Improvements Buildings and Improvements Equipment Intangible Assets

All $ 5,000.00 $ 5,000.00 $ 5,000.00 $ 250,000.00

N/A 20 years 10 to 50 years 5 to 14 years individually determined

Depreciation is used to allocate the actual or estimated historical cost of all capital assets over estimated useful lives, with the exception of intangible assets which are amortized.

Amortization of intangible assets such as water, timber, and mineral rights, easements, patents, trademarks, copyrights and internally generated software is computed using the straight-line method over the estimated useful lives of the assets, generally 10 to 20 years.

COMPENSATED ABSENCES

Members of the Teachers Retirement System of Georgia (TRS) may apply unused sick leave toward early retirement. The liability for early retirement will be borne by TRS rather than by the individual school districts. Otherwise, sick leave does not vest with the employee, and no liability is reported in the School District's financial statements.

Vacation leave of 15 days is awarded on a fiscal year basis to all full time personnel employed on a twelve month basis. No other employees are eligible to earn vacation leave. Vacation leave not utilized during the fiscal year may be carried over to the next fiscal year, providing such vacation leave does not exceed five days. Information regarding the beginning of year liability, increases and decreases, and end of year liability for the current fiscal year and the preceding two fiscal years is as follows:

-14-

CITY OF GAINESVILLE BOARD OF EDUCATION HALL COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2013

EXHIBIT "H"

Beginning of Year Liability

Increases

Decreases

End of Year Liability

2011 $ 2012 $ 2013 $

107,627.43 $ 86,864.65 $
139,661.13 $

221,605.23 $ 287,939.87 $ 293,755.23 $

242,368.01 $ 235,143.39 $ 307,020.72 $

86,864.65 139,661.13 126,395.64

GENERAL OBLIGATION BONDS The School District issues general obligation bonds to provide funds for the acquisition and construction of major capital facilities. In the District-wide financial statements, bond premiums and discounts, as well as issuance costs, are deferred and amortized over the life of the bonds using the straight-line method. Bond issuance costs are reported as deferred charges and amortized over the term of the debt.
In the fund financial statements, the School District recognizes bond premiums and discounts, as well as bond issuance costs during the fiscal year bonds are issued. Premiums received on debt issuances are reported as other financing sources while discounts on debt issuances are reported as other financing uses. Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as debt service expenditures. 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 Position.

NET POSITION

The School District's net position in the District-wide Statements is classified as follows:

Net investment in capital assets - This represents the School District's total investment in capital assets, net of outstanding 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 net investment in capital assets.
Restricted net position - This represents resources for which the School District is legally or contractually obligated to spend resources for continuation of Federal programs, debt service and capital projects in accordance with restrictions imposed by external third parties.
Unrestricted net position - Unrestricted net position represents resources derived from property taxes, sales taxes, grants and contributions not restricted to specific programs, 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.

FUND BALANCES

The School District's fund balances are classified as follows:

Nonspendable Amounts that cannot be spent either because they are in a nonspendable form or because they are legally or contractually required to be maintained intact.

Restricted Constraints are placed on the use of resources are either (1) externally imposed conditions by creditors, grantors, contributors, or laws and regulations of other governments or (2) imposed by law through constitutional provisions or enabling legislation.

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CITY OF GAINESVILLE BOARD OF EDUCATION HALL COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2013

EXHIBIT "H"

Committed Amounts that can be used only for specific purposes pursuant to constraints imposed by formal action of the Board of Education. The Board of Education is the School District's highest level of decision-making authority, and the formal action that is required to be taken to establish, modify, or rescind a fund balance commitment is a resolution approved by the Board. Committed fund balance also should incorporate contractual obligations to the extent that existing resources in the fund have been specifically committed for use in satisfying those contractual requirements.

Assigned Amounts that are constrained by the School District's intent to be used for specific purposes, but are neither restricted nor committed. The intent should be expressed by (1) the Board of Education or (2) the budget or finance committee, or the Superintendent, or designee, to assign amounts to be used for specific purposes.

Unassigned The residual classification for the General Fund. This classification represents fund balances that has not been assigned to other funds and that has not been restricted, committed, or assigned to specific purposes within the General Fund.

Fund Balances of the Governmental Funds at June 30, 2013 are as follows:

Nonspendable Inventories Prepaid Assets
Restricted Continuation of Federal Programs Capital Projects Debt Service
Committed School Activity Accounts
Unassigned

$

101,133.42

12,430.24 $

$ 1,944,819.20 836,806.25
4,798,925.81

113,563.66
7,580,551.26 376,845.07
9,744,057.83

Fund Balance, June 30, 2013

$ 17,815,017.82

When multiple categories of fund balance are available for authorized expenditure, the District will commence with the most restricted category and proceed in descending order with available funds.

USE OF ESTIMATES The preparation of the financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results may differ from those estimates.

Note 3: BUDGETARY DATA

The budget is a complete financial plan for the School District's fiscal year, and is based upon careful estimates of expenditures together with probable funding sources. The budget is legally adopted each year for the general, debt service, and capital projects funds. There is no statutory prohibition regarding over expenditure of the budget at any level. The budget for all governmental funds, except the various school activity accounts, is prepared and adopted by fund, function and object. The legal level of budgetary control was established by the Board at the aggregate level. The budget for the General Fund was prepared in accordance with accounting principles generally accepted in the United States of America.

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CITY OF GAINESVILLE BOARD OF EDUCATION HALL COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2013

EXHIBIT "H"

The budgetary process begins with the School District's administration presenting an initial budget for the Board's review. The administration makes revisions as necessary based on the Board's guidelines and a tentative budget is approved. After approval of this tentative budget by the Board, such budget is advertised at least once in a newspaper of general circulation in the locality, as well as the School District's website. At the next regularly scheduled meeting of the Board after advertisement, the Board receives comments on the tentative budget, makes revisions as necessary and adopts a final budget. The approved budget is then submitted, in accordance with provisions of Official Code of Georgia Annotated section 20-2-167(c), to the Georgia Department of Education. The Board may increase or decrease the budget at any time during the year. All unexpended budget authority lapses at fiscal yearend.
The Superintendent is authorized by the Board to approve adjustments of no more than 5% percent of the amount budgeted for expenditures in any budget function for any fund. The Superintendent shall report any such adjustments to the Board. If expenditure of funds in any budget function for any fund is anticipated to be more than 2.5% percent of the budgeted amount, the Superintendent shall request Board approval for the budget amendment. Under no circumstance is the Superintendent or other staff person authorized to spend funds that exceed the total budget without approval by the Board.
See Schedule 1 General Fund Schedule of Revenues, Expenditures and Changes in Fund Balances Budget to Actual for a detail of any over/under expenditures during the fiscal year under review.
Note 4: DEPOSITS AND INVESTMENTS
COLLATERALIZATION OF DEPOSITS Official Code of Georgia Annotated (O.C.G.A.) 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 of the face value of such surety bond and the market value of securities pledged shall be equal to not less than 110 percent of the public funds being secured after the deduction of the amount of deposit insurance. If a depository elects the pooled method (O.C.G.A. Section 45-8-13.1) the aggregate of the market value of the securities pledged to secure a pool of public funds shall be not less than 110 percent of the daily pool balance. At June 30, 2013, $1,420,655.80 of deposits 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,

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CITY OF GAINESVILLE BOARD OF EDUCATION HALL COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2013

EXHIBIT "H"

(6) Industrial revenue bonds and bonds of development authorities created by the laws of the State of Georgia, and
(7) Bonds, bills, notes, certificates of indebtedness, or other obligations of a subsidiary corporation of the United States government, which are fully guaranteed by the United States government both as to principal and interest or debt obligations issued by or securities guaranteed 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

Custodial credit risk is the risk that in the event of a bank failure, the School District's deposits may not be returned to it. The School District does not have a deposit policy for custodial credit risk. At June 30, 2013, the bank balances were $12,249,198.06. The amounts exposed to custodial credit risk are classified into three categories as follows:

Category 1 Category 2 -
Category 3 -

Uncollateralized, Cash collateralized with securities held by the pledging financial institution, or 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 deposits by custodial credit risk category at June 30, 2013, are as follows:

Custodial Credit Risk Category

Bank Balance

1

$ 1,420,655.80

2

0.00

3

0.00

Total

$ 1,420,655.80

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CITY OF GAINESVILLE BOARD OF EDUCATION HALL COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2013

EXHIBIT "H"

CATEGORIZATION OF INVESTMENTS

The School District's investments as of June 30, 2013, 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

$ 1,304,773.96 $ 1,304,773.96

Implicitly Guaranteed

Other Investments

U. S. Treasury

Money Market Funds

209.62

209.62

$ 1,304,983.58 $ 1,304,983.58

Investment Pools Office of State Treasurer Georgia Fund 1

11,661,355.52

Total Investments

$ 12,966,339.10

The Georgia Fund 1, formerly referred to as LGIP, administered by the State of Georgia, Office of the
State Treasurer is not required to be categorized since the School District did not own any specific
identifiable securities in the pool. The investment policy of the State of Georgia, Office of the State
Treasurer for the Georgia Fund 1 (Primary Liquidity Portfolio) does not provide for investment in derivatives or similar investments. Additional information on the Georgia Fund 1 is disclosed in the State of Georgia Comprehensive Annual Financial Report. This audit can be obtained from the Georgia Department of Audits and Accounts at www.audits.ga.gov/SGD/CAFR.html.

The Primary Liquidity Portfolio consists of Georgia Fund 1 which is not registered with the SEC as an investment company but does operate in a manner consistent with the SEC's Rule 2a-7 of the Investment Company Act of 1940. The investment is valued at the pool's share price, $1.00 per share. The pool is an AAAf rated investment pool by Standard and Poor's. The weighted average maturity of Georgia Fund 1 may not exceed 60 days. The weighted average maturity for Georgia Fund 1 on June 30, 2013, was 43 days.

Interest Rate Risk Interest rate risk is the risk that changes in interest rates of debt investment will adversely affect the fair value of an investment. The School District's policy for managing interest rate risk is to limit interest risk.

Custodial Credit Risk Custodial credit risk for investments is the risk that, in the event of the failure of the counterparty to a transaction, the School District will not be able to recover the value of the investment or collateral securities that are in the possession of an outside party. The School District's policy for managing custodial credit risk for investments is to limit credit risk.

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CITY OF GAINESVILLE BOARD OF EDUCATION HALL COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2013

EXHIBIT "H"

At June 30, 2013, $1,304,773.96 of the School District's applicable investments were uninsured or unregistered, with securities held by the counterparty, or by its 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

AAA-m

Debt Securities U. S. Agencies Implicitly Guaranteed
Other Investments U. S. Treasury Money Market Funds

$ 1,304,773.96 $ 1,304,773.96

209.62

$

209.62

Totals by Quality Ratings

$ 1,304,983.58 $ 1,304,773.96 $

209.62

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 Federal Home Loan Mortgage Company. This investment is 5.73% of the School District's total investments.
Note 5: 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

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CITY OF GAINESVILLE BOARD OF EDUCATION HALL COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2013

EXHIBIT "H"

Note 6: CAPITAL ASSETS

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

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

Balances July 1, 2012

Increases

Decreases

Balances June 30, 2013

$ 11,817,246.67 $

237,273.00

4,820,199.00

12,551,377.88 $

$ 12,054,519.67

2,294,085.22

15,077,491.66

Total Capital Assets, Not Being Depreciated $ 16,637,445.67 $ 12,788,650.88 $ 2,294,085.22 $ 27,132,011.33

Capital Assets, Being Depreciated: Buildings and Improvements Equipment Land Improvements

$ 83,240,802.11 $ 6,411,615.39 5,820,938.73

3,112,273.43 403,789.94 $ 142,958.00

$ 52,000.00

86,353,075.54 6,763,405.33 5,963,896.73

Less: Accumulated Depreciation: Buildings and Improvements Equipment Land Improvements

25,735,616.39 4,033,720.14 861,700.57

2,194,877.26 501,698.62 315,469.90

52,000.00

27,930,493.65 4,483,418.76 1,177,170.47

Total Capital Assets, Being Depreciated, Net $ 64,842,319.13 $

646,975.59 $

0.00 $ 65,489,294.72

Governmental Activity Capital Assets - Net $ 81,479,764.80 $ 13,435,626.47 $ 2,294,085.22 $ 92,621,306.05
Capital assets being acquired under capital leases as of June 30, 2013, are as follows:

Governmental Activities

Equipment Less: Accumulated Depreciation

$

166,351.88

10,143.84

$

156,208.04

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CITY OF GAINESVILLE BOARD OF EDUCATION HALL COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2013

EXHIBIT "H"

Current year depreciation expense by function is as follows:

Instruction Support 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 Food Services

$

$

650.00

109,105.75

4,751.03

182,976.63

716.50

70,056.42

119,242.52

211,408.21

4,840.97

$

2,028,157.42
703,748.03 280,140.33 3,012,045.78

Note 7: INTERFUND TRANSFERS Interfund transfers for the year ended June 30, 2013 consisted of the following:

Transfer to

General Fund

Transfers From District-wide Capital Projects

Debt Service Fund

General Fund District-wide Capital Projects Debt Service Fund

$

2,362.34

$

320,680.52

145,039.00 $ 4,673,102.68

Total

$

465,719.52 $ 4,673,102.68 $

2,362.34

Transfers are used to move revenues collected by the General Fund to the District-wide Capital Projects Fund to fund capital projects and to supplement the repayment of bond principal and interest. Transfers are used to move Special Purpose Local Option Sales Tax (SPLOST) revenue collected by the Districtwide Capital Projects Fund plus funds transferred from the General Fund to the Debt Service Fund as needed for repayment of bond principal and interest. Transfers are also used to move tax revenues and accumulated balances in the Debt Service Fund to the General Fund after all bonds were retired.
Note 8: RISK MANAGEMENT
The School District is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors or omissions; job related illness or injuries to employees; acts of God and unemployment compensation.
The School District has obtained commercial insurance for risk of loss associated with torts, assets, errors or omissions, job related illness or injuries to employees and acts of God. The School District has neither significantly reduced coverage for these risks nor incurred losses (settlements) which exceeded the School District's insurance coverage in any of the past three years.
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CITY OF GAINESVILLE BOARD OF EDUCATION HALL COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2013

EXHIBIT "H"

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

Changes in the unemployment compensation claims liability during the last three fiscal years are as

follows:

Claims and

Beginning of Year

Changes in

Claims

End of Year

Liability

Estimates

Paid

Liability

2011 $ 2012 $ 2013 $

0.00 $ 12,724.00 $
9,980.00 $

71,908.19 $ 34,562.00 $ 67,719.00 $

59,184.19 $ 37,306.00 $ 71,006.00 $

12,724.00 9,980.00 6,693.00

The School District has purchased a public employee blanket surety bond to provide insurance coverage not to exceed $50,000 for all employees including the Superintendent.

Note 9: LONG-TERM DEBT

GENERAL OBLIGATION BONDS In a prior fiscal period, the voters of the City of Gainesville voted in favor of a Special Purpose Local Option Sales Tax for education purposes which commenced in October 2012 and is being levied for a period of 5 years. The imposition of the tax also constituted approval for the issuance of general obligation debt of the City of Gainesville School District in the maximum aggregate amount of $19,000,000.00 for the purposes as set forth in the referendum. In Fiscal Year 2012 the School District issued $14,075,000.00 in General Obligation debt.

CAPITAL LEASES The City of Gainesville Board of Education entered into lease agreements for maintenance equipment, and Qualified Zone Academy Bond leases 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.

COMPENSATED ABSENCES Compensated absences represent obligations of the School District relating to employees' rights to receive compensation for future absences based upon service already rendered. This obligation relates only to vesting accumulating leave in which payment is probable and can be reasonably estimated. Typically, the General Fund is the fund used to liquidate this long-term debt. The School District uses the vesting method to compute compensated absences.

INSTALLMENT SALES AGREEMENT The City of Gainesville 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.

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CITY OF GAINESVILLE BOARD OF EDUCATION HALL COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2013

EXHIBIT "H"

INTERGOVERNMENTAL AGREEMENT The City of Gainesville Board of Education entered into an agreement dated June 3, 2013, with the Hall County Board of Commissioners for the acquisition of land. Under the terms of the agreement, the Board of Education will complete the agreement by making payments on July 1, 2014 and July 1, 2015.

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

Purpose

Interest Rates

Amount

General Government - Series 2011

2.0% - 5.0%

$ 14,075,000.00

The changes in Long-Term Debt during the fiscal year ended June 30, 2013, were as follows:

Balance July 1, 2012

Additions

Governmental Activities

Balance

Deductions

June 30, 2013

Due Within One Year

G. O. Bonds Capital Leases Compensated Absences (1) Intergovernmental Agreement Installment Sales Agreement Bond Premiums Amortized

$ 18,080,000.00 2,719,918.81 $ 139,661.13 0.00 4,545,000.00 1,186,447.00

$ 85,916.25 293,755.23 195,000.00

4,005,000.00 $ 14,075,000.00 $

37,569.57

2,768,265.49

307,020.72

126,395.64

195,000.00

4,545,000.00

369,413.00

817,034.00

2,840,000.00 61,289.85
126,395.64
840,000.00 184,989.00

$ 26,671,026.94 $ 574,671.48 $ 4,719,003.29 $ 22,526,695.13 $ 4,052,674.49

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

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CITY OF GAINESVILLE BOARD OF EDUCATION HALL COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2013

EXHIBIT "H"

At June 30, 2013 payments due by fiscal year which includes principal for these items are as follows:

Fiscal Year Ended June 30:

General Obligation Debt

Principal

Interest

Capital Leases

Principal

Interest

2014 2015 2016 2017 2018 2019 - 2022

$

2,840,000.00 $

2,795,000.00

2,910,000.00

3,060,000.00

2,470,000.00

505,150.00 $ 434,825.00 334,700.00 200,000.00
61,750.00

61,289.85 $ 61,415.91 25,306.73
1,209,357.00 1,410,896.00

6,322.23 3,162.53
701.07

Total Principal and Interest

$ 14,075,000.00 $

1,536,425.00 $

2,768,265.49 $

10,185.83

Fiscal Year Ended June 30:

Intergovernmental Agreement Principal

Installment Sales Agreement

Principal

Interest

Amortized Bond Premium

2014 2015 2016 2017 2018

$

840,000.00 $

179,527.50 $

184,989.00

$

75,000.00

875,000.00

146,347.50

184,989.00

120,000.00

905,000.00

111,785.00

184,989.00

945,000.00

76,037.50

184,989.00

980,000.00

38,710.00

77,078.00

Total Principal and Interest

$

195,000.00 $

4,545,000.00 $

552,407.50 $

817,034.00

Note 10: ON-BEHALF PAYMENTS

The School District has recognized revenues and costs in the amount of $3,898,573.62 for health insurance and retirement contributions paid on the School District's behalf by the following State Agencies.

Georgia Department of Education Paid to the Georgia Department of Community Health For Health Insurance of Certified Personnel In the amount of $3,762,228.00

Paid to the Teachers Retirement System of Georgia For Teachers Retirement System (TRS) Employer's Cost In the amount of $72,350.62

Office of State Treasurer Paid to the Public School Employees Retirement System For Public School Employees Retirement (PSERS) Employer's Cost In the amount of $63,995.00

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CITY OF GAINESVILLE BOARD OF EDUCATION HALL COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2013

EXHIBIT "H"

Note 11: SIGNIFICANT COMMITMENTS

The following is an analysis of significant outstanding construction or renovation contracts executed by the School District as of June 30, 2013, together with funding available:

Project

Unearned Executed Contracts

Funding Available From State

13G-776-011 - New Fair Street Elementary School 13-776-088 - Enota Renovations Centennial Gym Reroofing

$ 2,311,459.74 $ 317,367.79 8,420.00

534,399.40 139,234.11

$ 2,637,247.53 $

673,633.51

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

Note 12: SIGNIFICANT CONTINGENT LIABILITIES

Amounts received or receivable principally from the Federal government are subject to audit and review by grantor agencies. This could result in requests for reimbursement to the grantor agency for any costs which are disallowed under grant terms. The School District believes that such disallowances, if any, will be immaterial to its overall financial position.
The School District is a defendant in various legal proceedings pertaining to matters incidental to the performance of routine School District operations. The ultimate disposition of these proceedings is not presently determinable, but is not believed to be material to the basic financial statements.

Note 13: POST-EMPLOYMENT BENEFITS

Georgia School Personnel Employees Post-employment Health Benefit Fund

Plan Description. The Georgia School Personnel Post-employment Health Benefit Fund (School OPEB Fund) is a cost-sharing multiple-employer defined benefit postemployment healthcare plan that covers eligible former employees of public school systems, libraries and regional educational service agencies. The School OPEB Fund provides health insurance benefits to eligible former employees and their qualified beneficiaries through the State Employees Health Insurance Plan administered by the Department of Community Health. The Official Code of Georgia Annotated (OCGA) assigns the authority to establish and amend the benefit provisions of the group health plans, including benefits for retirees, to the Board of Community Health (DCH Board). The Department of Community Health, which includes the School OPEB Fund, issues a separate stand alone financial audit report and a copy can be obtained from the Georgia Department of Audits and Accounts.
Funding Policy. The contribution requirements of plan members and participating employers are established by the DCH Board in accordance with the current Appropriations Act and may be amended by the DCH Board. Contributions of plan members or beneficiaries receiving benefits vary based on plan election, dependent coverage, and Medicare eligibility and election. For members with fewer than five years of service as of January 1, 2012, contributions also vary based on years of service. On average, members with five years or more of service as of January 1, 2012, pay approximately 25 percent of the cost of the health insurance coverage. In accordance with the DCH Board resolution dated December 8, 2011, for members with fewer than five years of service as of January 1, 2012, the State provides a

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CITY OF GAINESVILLE BOARD OF EDUCATION HALL COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2013

EXHIBIT "H"

premium subsidy in retirement that ranges from 0% for fewer than 10 years of service to 75% (but no greater than the subsidy percentage offered to active employees) for 30 or more years of service. The subsidy for eligible dependents ranges from 0% to 55% (but no greater than the subsidy percentage offered to dependents of active employees minus 20%). No subsidy is available to Medicare eligible members not enrolled in a Medicare Advantage Option. The Board of Community Health sets all member premiums by resolution and in accordance with the law and applicable revenue and expense projections. Any subsidy policy adopted by the DCH Board may be changed at any time by DCH Board resolution and does not constitute a contract or promise of any amount of subsidy.
Participating employers are statutorily required to contribute in accordance with the employer contribution rates established by the DCH Board. The contribution rates are established to fund all benefits due under the health insurance plans for both active and retired employees based on projected "pay-as-you-go" financing requirements. Contributions are not based on the actuarially calculated annual required contribution (ARC) which represents a level of funding that, if paid on an ongoing basis, is projected to cover normal cost each year and amortize any unfunded actuarial liabilities (or funding excess) over a period not to exceed thirty years.
The combined active and retiree contribution rates established by the DCH Board for employers participating in the School OPEB Fund were as follows for the fiscal year ended June 30, 2013:

For certificated teachers, librarians and regional educational service agencies and certain other eligible participants:

July 2012 - February 2013 March 2013 - June 2013

$912.34 per member per month $937.34 per member per month

For non-certificated school personnel:

July 2012 - June 2013

$446.20 per member per month

No additional contribution was required by the Board for fiscal year 2013 nor contributed to the School OPEB Fund to prefund retiree benefits. Such additional contribution amounts are determined annually by the Board in accordance with the School plan for other post-employment benefits and are subject to appropriation.

The School District's combined active and retiree contributions to the health insurance plans, which

equaled the required contribution, for the current fiscal year and the preceding two fiscal years were as

follows:

Percentage

Required

Fiscal Year

Contributed

Contribution

2013 2012 2011
Note 14: RETIREMENT PLANS

100% 100% 100%

$

6,033,425.82

$

5,650,099.74

$

4,796,567.97

TEACHERS RETIREMENT SYSTEM OF GEORGIA (TRS)
Plan Description. The TRS is a cost-sharing multiple-employer defined benefit plan created in 1943 by an act of the Georgia General Assembly to provide retirement benefits for qualifying employees in educational service. A Board of Trustees comprised of active and retired members and ex-officio State

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CITY OF GAINESVILLE BOARD OF EDUCATION HALL COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2013

EXHIBIT "H"

employees is ultimately responsible for the administration of TRS. 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.
On October 25, 1996, the Board created the Supplemental Retirement Benefits Plan of the Georgia Teachers Retirement System (SRBP-TRS). SRBP-TRS was established as a qualified excess benefit plan in accordance with Section 415 of the Internal Revenue Code (IRC) as a portion of TRS. The purpose of SRBP-TRS is to provide retirement benefits to employees covered by TRS whose benefits are otherwise limited by IRC Section 415. Beginning July 1, 1997, all members and retired former members in TRS are eligible to participate in the SRBP-TRS whenever their benefits under TRS exceed the IRC Section 415 imposed limitation on benefits.
TRS provides service retirement, disability retirement, and survivor's benefits. The benefit structure of TRS is defined and may be amended by State statute. A member is eligible for normal service retirement after 30 years of creditable service, regardless of age, or after 10 years of service and attainment of age 60. A member is eligible for early retirement after 25 years of creditable service.
Normal retirement (pension) benefits paid to members are equal to 2% of the average of the member's two highest paid consecutive years of service, multiplied by the number of years of creditable service up to 40 years. Early retirement benefits are reduced by the lesser of one-twelfth of 7% for each month the member is below age 60 or by 7% for each year or fraction thereof by which the member has less than 30 years of service. It is also assumed that certain cost-of-living adjustments, based on the Consumer Price Index, will be made in future years. Retirement benefits are payable monthly for life. A member may elect to receive a partial lump-sum distribution in addition to a reduced monthly retirement benefit. Death, disability and spousal benefits are also available.
Funding Policy. TRS is funded by member and employer contributions as adopted and amended by the Board of Trustees. Members become fully vested after 10 years of service. If a member terminates with less than 10 years of service, no vesting of employer contributions occurs, but the member's contributions may be refunded with interest. Member contributions are limited by State law to not less than 5% or more than 6% of a member's earnable compensation. Member contributions as adopted by the Board of Trustees for the fiscal year ended June 30, 2013, were 6.00% of annual salary. Employer contributions required for fiscal year 2013 were 11.41% of annual salary as required by the June 30, 2010, actuarial valuation. The employer contribution rate will increase to 12.28% effective July 1, 2013.
Employer contributions for the current fiscal year and the preceding two fiscal years are as follows:

Fiscal Year

Percentage Contributed

Required Contribution

2013 2012 2011

100% 100% 100%

$

3,936,913.62

$

3,511,747.87

$

3,400,387.54

PUBLIC SCHOOL EMPLOYEES' RETIREMENT SYSTEM OF GEORGIA (PSERS)

Bus drivers, lunchroom personnel and maintenance personnel are members of the Public School Employees Retirement System of Georgia. The System is funded by contributions by the employees and by the state of Georgia. The School District makes no contribution to the plan.

-28-

CITY OF GAINESVILLE BOARD OF EDUCATION HALL COUNTY NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2013

EXHIBIT "H"

DEFINED CONTRIBUTION PLAN
In fiscal year ending June 30, 2007, the Gainesville City School District began an employer paid 403(b) annuity plan for the group of employees covered under the Public School Retirement System (PSERS). Recognizing that PSERS was a limited defined contribution and defined benefit plan which did not provide for an adequate retirement for this group of employees, it was the Board's desire to supplement the retirement of this group.
The Board selected AIG Valic as the provider of this plan. For each employee covered under PSERS with five years or less of service, the Board contributes to the plan an amount equal to 2% percent of the employee's base pay. When the employee achieves six years of service, the Board contributes 4% of the employee's base pay.
The employee becomes vested in the plan with one year of experience. Employees who had already achieved one year of experience at the time the plan was implemented were vested upon enrollment.
Funds accumulated in the employer paid accounts are only available to the employee upon termination of employment and one year of service to Gainesville City School District.
Employer contributions for the current fiscal year and the preceding two fiscal years are as follows:

Fiscal Year

Percentage Contributed

Required Contribution

2013 2012 2011

100%

$

56,860.61

100%

$

56,898.59

100%

$

51,240.38

-29-

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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, 2013

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
Debt Service
Total Expenditures
Excess of Revenues over (under) Expenditures
OTHER FINANCING SOURCES (USES)
Other Sources Capital Leases Other Long-Term Debt Proceeds Other Uses
Total Other Financing Sources (Uses)
Net Change in Fund Balances
Fund Balances - Beginning
Fund Balances - Ending

NONAPPROPRIATED BUDGETS

ORIGINAL (1)

FINAL (1)

ACTUAL AMOUNTS

VARIANCE OVER/UNDER

$ 20,353,144.00 $ 21,899,886.00 $ 23,414,563.62 $

119,554.21

30,973,579.00 32,568,690.02 33,195,181.41

8,290,458.00

9,574,133.00

9,015,366.95

306,000.00

288,350.00

990,191.13

9,754.78

125,000.00

1,286,000.00

366,598.84

1,514,677.62 119,554.21 626,491.39 -558,766.05 701,841.13 9,754.78 -919,401.16

$ 60,048,181.00 $ 65,617,059.02 $ 67,111,210.94 $ 1,494,151.92

$ 40,846,136.77 $ 42,791,245.52 $ 41,277,567.20 $ 1,513,678.32

1,912,519.07 916,632.55 958,542.18 778,928.27
3,799,542.47 786,898.23
5,207,081.65 2,813,638.43 1,225,832.28
475,014.10
3,339,864.00

2,003,706.79 1,261,926.27 1,007,018.36 1,089,164.73 4,182,678.01
792,148.43 5,269,210.10 2,682,476.05 1,367,891.08
586,449.57 500,000.00 3,619,365.87

1,829,293.08 1,087,209.71 1,015,157.65
761,469.62 3,941,440.94
681,443.65 4,919,149.39 2,652,409.18 1,364,547.16
549,653.91 426,217.24 3,717,379.45
41,605.28

174,413.71 174,716.56
-8,139.29 327,695.11 241,237.07 110,704.78 350,060.71
30,066.87 3,343.92
36,795.66 73,782.76 -98,013.58 -41,605.28

$ 63,060,630.00 $ 67,153,280.78 $ 64,264,543.46 $ 2,888,737.32

$ -3,012,449.00 $ -1,536,221.76 $ 2,846,667.48 $ 4,382,889.24

$ 167,901.00 $ 304,281.06 $

2,362.34 $

85,916.25

6,087.20

-602,901.00

-748,554.06

-465,719.52

-301,918.72 85,916.25 -6,087.20
282,834.54

$ -435,000.00 $ -438,185.80 $ -377,440.93 $

60,744.87

$ -3,447,449.00 $ -1,974,407.56 $ 2,469,226.55 $ 4,443,634.11

6,500,000.00

9,029,846.37

9,710,059.21

680,212.84

$ 3,052,551.00 $ 7,055,438.81 $ 12,179,285.76 $ 5,123,846.95

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 actual revenues and expenditures of the various principal accounts are $851,789.92 and $863,934.42, respectively. 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.
- 31 -

CITY OF GAINESVILLE BOARD OF EDUCATION - HALL COUNTY SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS YEAR ENDED JUNE 30, 2013

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 Services Fresh Fruit and Vegetable Program
Total U. S. Department of Agriculture
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
Title I, Part A Cluster Pass-Through From Georgia Department of Education Title I Grants to Local Educational Agencies
Other Programs Pass-Through From Georgia Department of Education ARRA - Race-to-the-Top Incentive Grants Career and Technical Education - Basic Grants to States Education Jobs Fund English Language Acquisition Grants Improving Teacher Quality State Grants Migrant Education - State Grant Program
Total Other Programs
Total U. S. Department of Education
Health and Human Services, U. S. Department of Child Care and Development Fund Cluster Pass-Through From Bright From the Start: Georgia Department of Early Care and Learning ARRA - Child Care and Development Block Grant
Defense, U. S. Department of Direct Department of the Navy R.O.T.C. Program
Total Expenditures of Federal Awards
N/A = Not Available

CFDA NUMBER

PASSTHROUGH
ENTITY ID
NUMBER

EXPENDITURES IN PERIOD

* 10.553 * 10.555

N/A

(2)

N/A

$

3,597,307.13 (1)

$

3,597,307.13

10.582

N/A

116,340.97

$

3,713,648.10

* 84.027 * 84.173

N/A

$

1,148,410.00

N/A

30,006.00

$

1,178,416.00

84.010

N/A

$

3,052,126.26

* 84.395 84.048 84.410 84.365 84.367 84.011

N/A

$

N/A

N/A

N/A

N/A

N/A

534,406.47 70,981.56 2,768.38
250,118.84 255,775.57 146,751.81

$

1,260,802.63

$

5,491,344.89

93.575

N/A

$

4,000.00

$

61,163.72

$

9,270,156.71

- 32 -

CITY OF GAINESVILLE BOARD OF EDUCATION - HALL COUNTY SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS YEAR ENDED JUNE 30, 2013

SCHEDULE "2"

Notes to the Schedule of Expenditures of Federal Awards
(1) Includes the Federally assigned value of donated commodities for the Food Donation Program in the amount of $98,493.68.
(2) Expenditures for the funds earned on the School Breakfast Program ($813,687.36) were not maintained separately and are included in the 2013 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.

- 33 -

CITY OF GAINESVILLE BOARD OF EDUCATION - HALL COUNTY SCHEDULE OF STATE REVENUE YEAR ENDED JUNE 30, 2013

SCHEDULE "3"

AGENCY/FUNDING
GRANTS Bright From the Start: Georgia Department of Early Care and Learning Pre-Kindergarten Program
Education, Georgia Department of Quality Basic Education Direct Instructional Cost Kindergarten Program Kindergarten Program - Early Intervention Program Primary Grades (1-3) Program Primary Grades - Early Intervention (1-3) Program Upper Elementary Grades (4-5) Program Upper Elementary Grades - Early Intervention (4-5) Program Middle Grades (6-8) Program Middle School (6-8) Program High School General Education (9-12) Program Vocational Laboratory (9-12) Program Students with Disabilities 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 Amended Formula Adjustment Categorical Grants Pupil Transportation Regular Nursing Services DCH Direct Payment (1) Education Equalization Funding Grant Other State Programs Charter Schools - State Planning Grant Food Services Math and Science Supplements Preschool Handicapped Program Teachers' Retirement Vocational Supervisors Vocational Education
Georgia State Financing and Investment Commission Reimbursement on Construction Projects
Office of the State Treasurer Public School Employees' Retirement

GOVERNMENTAL FUND TYPES

CAPITAL

GENERAL

PROJECTS

FUND

FUND

TOTAL

$

607,473.97

$ 607,473.97

1,333,444.00 2,280,530.00 4,383,236.00 2,665,273.00 2,055,483.00 1,120,343.00
14,684.00 3,663,823.00 2,964,798.00
735,519.00 2,566,039.00 1,516,958.00
934,418.00 272,096.00 3,579,064.00 800,791.00 211,408.00 168,022.00
899,005.00 1,344,346.00 1,918,993.00 -8,573,554.00
281,403.00 127,590.00 3,762,228.00 460,162.00
622,969.00 89,008.00 87,327.08
113,980.00 72,350.62 14,062.00 37,913.74

1,333,444.00 2,280,530.00 4,383,236.00 2,665,273.00 2,055,483.00 1,120,343.00
14,684.00 3,663,823.00 2,964,798.00
735,519.00 2,566,039.00 1,516,958.00
934,418.00 272,096.00 3,579,064.00 800,791.00 211,408.00 168,022.00
899,005.00 1,344,346.00 1,918,993.00 -8,573,554.00
281,403.00 127,590.00 3,762,228.00 460,162.00
622,969.00 89,008.00 87,327.08
113,980.00 72,350.62 14,062.00 37,913.74

2,807,579.05

2,807,579.05

63,995.00

63,995.00

$ 33,195,181.41 $ 2,807,579.05 $ 36,002,760.46

(1) Payments to the Georgia Department of Community Health by the Georgia Department of Education on behalf of the School District are reported separately in the schedule above, however, the payments are part of the Quality Basic Education revenue allotments for the School District.
See notes to the basic financial statements.
- 34 -

CITY OF GAINESVILLE BOARD OF EDUCATION - HALL COUNTY SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS
YEAR ENDED JUNE 30, 2013

PROJECTS

ORIGINAL ESTIMATED
COST (1)

CURRENT ESTIMATED COSTS (2)

AMOUNT EXPENDED IN CURRENT YEAR (3) (4)

AMOUNT EXPENDED IN PRIOR YEARS (3) (4)

PROJECT STATUS

EXCESS PROCEEDS NOT
EXPENDED

Estimated Completion
Date

SPLOST III

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

$25,000,000.00 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.

$ 32,000,000.00 $ 39,589,823.15 $

308,545.18 $ 39,281,277.97

Completed

SPLOST IV Paying a portion of the purchase payments due on that certain Installment Sale Agreement between the Gainesville City School District and the Gainesville Redevelopment Authority, with a maximum payment amount of $5,200.000.00;
1. Acquiring, constructing and equipping a new elementary school,

$ 5,200,000.00 $ 5,200,000.00 $

89,763.75

17,900,000.00 17,900,000.00 12,277,242.78 $

2,310,925.67

2. acquiring, constructing and equipping additional classrooms, instructional and support facilities, and physical education facilities,
3. remodeling, renovating and equipping existing classrooms and instructional and support facilities at existing schools,
4. acquiring land and conducting site preparation of real estate for school district purposes,

1,600,000.00

1,600,000.00

397,877.96

1,202,122.04

5. acquiring furnishings, equipment and fixtures for new and existing facilities system-wide, and acquiring technology equipment, text books, teaching software and school buses,

SPLOST IV Total

$ 24,700,000.00 $ 24,700,000.00 $ 12,764,884.49 $ 3,513,047.71

Ongoing Ongoing Ongoing Ongoing Ongoing
Ongoing

2/1/2018 12/31/2013 9/30/2017 9/30/2017 9/30/2017
9/30/2017

SPLOST Total

$ 56,700,000.00 $ 64,289,823.15 $ 13,073,429.67 $ 42,794,325.68

(1) The School District's original cost estimate as specified in the resolution calling for the imposition of the Local Option Sales Tax. The SPLOST IV resolution includes an amount of $34,717,000.00 as the estimated cost of projects which is the maximum amount which could be raised by the sales tax over the five years of the SPLOST period. Original cost estimate by the School District was $24,700,000.00 for planned projects.

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

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

SPLOST IV Prior Years
Current Year Total

$ 302,345.00 533,550.00
$ 835,895.00

See notes to the basic financial statements.

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CITY OF GAINESVILLE BOARD OF EDUCATION - HALL COUNTY GENERAL FUND - QUALITY BASIC EDUCATION PROGRAMS (QBE)
ALLOTMENTS AND EXPENDITURES BY PROGRAM YEAR ENDED JUNE 30, 2013

SCHEDULE "5"

DESCRIPTION
Direct Instructional Programs Kindergarten Program Kindergarten Program-Early Intervention Program Primary Grades (1-3) Program Primary Grades-Early Intervention (1-3) Program Upper Elementary Grades (4-5) Program Upper Elementary Grades-Early Intervention (4-5) Program Middle Grades (6-8) Program Middle School (6-8) Program High School General Education (9-12) Program Vocational Laboratory (9-12) Program Students with Disabilities Category I Category II Category III Category IV Category V 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 Charter Schools

ALLOTMENTS FROM GEORGIA DEPARTMENT OF EDUCATION (1) (2) (3)

ELIGIBLE QBE PROGRAM COSTS

SALARIES

OPERATIONS

TOTAL

$

1,604,622.00 $

2,895,890.44 $

84,120.15 $ 2,980,010.59

2,691,781.00

320,749.22

12,441.06

333,190.28

5,302,503.00

5,478,699.73

482,843.06

5,961,542.79

3,105,355.00

991,478.14

19,634.15

1,011,112.29

2,471,662.00

3,244,248.09

120,403.85

3,364,651.94

1,346,899.00 18,127.00
4,339,580.00 3,537,219.00
874,074.00 3,057,224.00
1,793,115.00 1,093,643.00
323,703.00 4,234,018.00

566,157.09
4,754,045.86 4,928,094.47
873,571.65
60.32 2,979,746.01
120,672.01
811,391.64
82,776.94 2,698,102.64

45,255.16
297,709.61 222,117.56
57,315.47
6,990.51 4,136.59 300,776.53 1,695.86
749.33 19,222.36
4,650.92 12,469.50

611,412.25
5,051,755.47 5,150,212.03
930,887.12
6,990.51 4,196.91 3,280,522.54 122,367.87
749.33 830,614.00
87,427.86 2,710,572.14

$

35,793,525.00 $ 30,745,684.25 $ 1,692,531.67 $ 32,438,215.92

945,166.00 202,162.00 622,969.00

843,201.14 80,870.55
677,925.70

105,320.10 94,979.10

948,521.24 175,849.65 677,925.70

TOTAL QBE FORMULA FUNDS

$

37,563,822.00 $ 32,347,681.64 $ 1,892,830.87 $ 34,240,512.51

(1) Comprised of State Funds plus Local Five Mill Share. (2) Allotments do not include the impact of the State amended formula adjustment. (3) Allotments do not include the State Health payments made by GDOE to the Department of Community Health for the certified employees.

See notes to the basic financial statements.

- 37 -

SECTION II COMPLIANCE AND INTERNAL CONTROL REPORTS

Greg S. Griffin
STATE AUDITOR
(404) 656-2174

DEPARTMENT OF AUDITS AND ACCOUNTS
270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400
March 26, 2014

Honorable Nathan Deal, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the City of Gainesville Board of Education
INDEPENDENT AUDITOR'S 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, in accordance with the 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, 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, 2013, and the related notes to the financial statements, which collectively comprise City of Gainesville Board of Education's basic financial statements and have issued our report thereon dated March 26, 2014.
Internal Control Over Financial Reporting
In planning and performing our audit of the financial statements, we considered City of Gainesville Board of Education's internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the City of Gainesville Board of Education's internal control. Accordingly, we do not express an opinion on the effectiveness of the City of Gainesville Board of Education's internal control.
A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity's financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance.

2013YB-10

Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control over financial reporting that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified.
Compliance and Other Matters
As part of obtaining reasonable assurance about whether City of Gainesville Board of Education's financial statements are free from 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 March 26, 2014.
Purpose of this Report
The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, not to provide an opinion on the effectiveness of the City of Gainesville Board of Education's internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the City of Gainesville Board of Education's internal control and compliance. Accordingly, this communication is not suitable for any other purpose.
Respectfully submitted,

GSG:as 2013YB-10

Greg S. Griffin State Auditor

Greg S. Griffin
STATE AUDITOR
(404) 656-2174

DEPARTMENT OF AUDITS AND ACCOUNTS
270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400
March 26, 2014

Honorable Nathan Deal, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the City of Gainesville Board of Education
INDEPENDENT AUDITOR'S REPORT ON COMPLIANCE FOR EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE REQUIRED BY OMB CIRCULAR A-133
Ladies and Gentlemen:
Report on Compliance for Each Major Federal Program
We have audited City of Gainesville Board of Education's compliance with the types of compliance requirements described in the OMB Circular A-133 Compliance Supplement that could have a direct and material effect on each of its major Federal programs for the year ended June 30, 2013. City of Gainesville Board of Education's major Federal programs are identified in the Summary of Auditor's Results section of the accompanying Schedule of Findings and Questioned Costs.
Management's Responsibility
Management is responsible for compliance with the requirements of laws, regulations, contracts, and grants applicable to its Federal programs.
Auditor's Responsibility
Our responsibility is to express an opinion on compliance for each of City of Gainesville Board of Education's major Federal programs based on our audit of the types of compliance requirements referred to above. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and OMB Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations. Those standards and OMB Circular A-133 require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance 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 on compliance for each major Federal program. However, our audit does not provide a legal determination of City of Gainesville Board of Education's compliance.
2013SA-10

Opinion on Each Major Federal Program
In our opinion, the City of Gainesville Board of Education complied, in all material respects, with the types of compliance requirements referred to above that could have a direct and material effect on each of its major Federal programs for the year ended June 30, 2013.
Report on Internal Control over Compliance
Management of City of Gainesville Board of Education is responsible for establishing and maintaining effective internal control over compliance with the types of compliance requirements referred to above. In planning and performing our audit of compliance, we considered City of Gainesville Board of Education's internal control over compliance with the types of requirements that could have a direct and material effect on each major Federal program to determine the auditing procedures that are appropriate in the circumstances for the purpose of expressing an opinion on compliance for each major Federal program and to test and report on internal control over compliance in accordance with OMB Circular A-133, 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 of the City of Gainesville Board of Education's internal control over compliance.
A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a Federal program on a timely basis. A material weakness in internal control over compliance is a deficiency, or combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a Federal program will not be prevented, or detected and corrected, on a timely basis. A significant deficiency in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance with a type of compliance requirement of a Federal program that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance.
Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over compliance that might be material weaknesses or significant deficiencies. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified.
The purpose of this report on internal control over compliance is solely to describe the scope of our testing of internal control over compliance and the results of that testing based on the requirements of OMB Circular A-133. Accordingly, this report is not suitable for any other purpose.
Respectfully submitted,

GSG:as 2013SA-10

Greg S. Griffin 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, 2013
PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS No matters were reported. PRIOR YEAR FEDERAL AWARD FINDINGS AND QUESTIONED COSTS No matters were reported.

SECTION IV FINDINGS AND QUESTIONED COSTS

CITY OF GAINESVILLE BOARD OF EDUCATION - HALL COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2013

I SUMMARY OF AUDITOR'S RESULTS

Financial Statements

Type of auditor's report issue: Governmental Activities; General Fund; Capital Projects Fund; Debt Service Fund; Aggregate Remaining Fund Information

Unmodified

Internal control over financial reporting: Material weakness identified? Significant deficiency identified?

No None Reported

Noncompliance material to financial statements noted:

No

Federal Awards

Internal Control over major programs: Material weakness identified? Significant deficiency identified?

No None Reported

Type of auditor's report issued on compliance for major programs: All major programs

Unmodified

Any audit findings disclosed that are required to be reported in

accordance with OMB Circular A-133, Section 510(a)?

No

Identification of major programs: CFDA Numbers

Name of Federal Program or Cluster

10.553, 10.555 84.027, 84.173 84.395

Child Nutrition Cluster Special Education Cluster ARRA -Race-to-the-Top Incentive Grants

Dollar threshold used to distinguish between Type A and Type B programs:

$300,000.00

Auditee qualified as low-risk auditee?

No

II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

No matters were reported. III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

No matters were reported.