Audit report, Pioneer Regional Educational Service Agency, Cleveland, Georgia, year ended 2019 June 30

PIONEER REGIONAL EDUCATIONAL SERVICE AGENCY
CLEVELAND, GEORGIA
FINANCIAL REPORT FOR THE FISCAL YEAR ENDED JUNE 30, 2019
(Including Independent Auditor's Report)

PIONEER REGIONAL EDUCATIONAL SERVICE AGENCY - TABLE OF CONTENTS -
FINANCIAL INDEPENDENT AUDITOR'S REPORT
FINANCIAL STATEMENT STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES NOTES TO THE BASIC FINANCIAL STATEMENT

Page
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FINANCIAL

GREG S. GRIFFIN
STATE AUDITOR
(404) 656-2174

DEPARTMENT OF AUDITS AND ACCOUNTS
270 Washington Street, S.W., Suite 4-101 Atlanta, Georgia 30334-8400
INDEPENDENT AUDITOR'S REPORT

The Honorable Brian P. Kemp, Governor of Georgia Members of the General Assembly of the State of Georgia Members of the State Board of Education
and Executive Director and Members of the Pioneer Regional Educational Service Agency Board of Control
Report on the Financial Statements
We have audited the accompanying Statement of Revenues, Expenditures, and Changes in Fund Balances and the related notes (financial statement) of the Pioneer Regional Educational Service Agency (RESA), as of and for the year ended June 30, 2019.
Management's Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of the financial statement 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 the statements is free from material misstatement, whether due to fraud or error.
Auditor's Responsibility
Our responsibility is to express an opinion on the financial statement based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statement is free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statement. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statement, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the RESA's preparation and fair presentation of the financial statement in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the RESA'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 statement. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion
In our opinion, the financial statement referred to above presents fairly, in all material respects, in accordance with accounting principles generally accepted in the United States of America.
Emphasis of Matter
As discussed in Note 2 to the financial statement, the Statement of Revenues, Expenditures and Changes in Fund Balances was prepared for the purpose of meeting the requirements of the RESA and Georgia Department of Education and is not intended to be a complete presentation of the RESA's assets, liabilities, revenues and expenses nor does it constitute a complete set of financial statements in accordance with generally accepted accounting principles. Our opinion is not modified with respect to this matter.
Restriction on Use
Our report is intended solely for the information and use of the RESA's management, the Board of Control, and the Georgia Department of Education and is not intended to be and should not be used by any other parties.
Respectfully submitted,

December 16, 2020

Greg S. Griffin State Auditor

PIONEER REGIONAL EDUCATIONAL SERVICE AGENCY

PIONEER REGIONAL EDUCATIONAL SERVICE AGENCY STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES
YEAR ENDED JUNE 30, 2019

REVENUES
State Funds Federal Funds Investment Earnings Miscellaneous
Total Revenues
EXPENDITURES
Current Instruction Pupil Services Improvement of Instructional Services General Administration Business Administration Maintenance and Operation of Plant Central Support Services Other Support Services Facilities Acquisition and Construction Services Debt Services Principal Interest
Total Expenditures
Net Change in Fund Balances
Fund Balances - Beginning

GENERAL FUND

CAPITAL PROJECTS
FUND

TOTAL

$

3,511,761.33 $

1,471,427.85

26,277.68

4,100,989.93

9,110,456.79

363,298.28 $ -
182,777.69
546,075.97

3,875,059.61 1,471,427.85
26,277.68 4,283,767.62
9,656,532.76

2,257,740.97 346,421.48
4,035,501.07 358,256.30 252,886.71 261,698.58 6,923.88
1,394,207.32 -
-
8,913,636.31
196,820.48
2,361,629.82

982,243.71
253,664.28 5,370.86
1,241,278.85
(695,202.88)
528,886.51

2,257,740.97 346,421.48
4,035,501.07 358,256.30 252,886.71 261,698.58 6,923.88
1,394,207.32 982,243.71
253,664.28 5,370.86
10,154,915.16
(498,382.40)
2,890,516.33

Fund Balances - Ending

$

2,558,450.30 $

(166,316.37) $

2,392,133.93

The notes to the financial statement are an integral part of this statement.

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PIONEER REGIONAL EDUCATIONAL SERVICE AGENCY NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2019
NOTE 1: DESCRIPTION OF REGIONAL EDUCATIONAL SERVICE AGENCY
REPORTING ENTITY
The Pioneer Regional Educational Service Agency (RESA) was created by the General Assembly to provide shared services to improve the effectiveness of educational programs and services of local school systems, to provide instructional programs directly to selected public school systems, and to provide Georgia Learning Resources System services.
RESAs are neither county nor independent school systems. Rather, they are service agencies, partly funded by the state, created to provide educational and support services to a group of school systems. O.C.G.A. 20-2-270.1 and 20-2-271 enumerates the specific kinds of assistance RESAs must provide to member school systems. Each RESA is governed by a board of control composed of the school superintendent of each member school system, the president or highest administrator of each member postsecondary institution, and a local public or regional library director appointed by the director of the Office of Public Library Services of the Board of Regents of the University System of Georgia. RESAs are subject to the rules of the State Board of Education that govern local school systems except where explicitly stated otherwise.
RESAs may acquire, lease, purchase, lease purchase, or dispose of real or personal property and may incur debts for those purposes subject to the approval of the board of control. The property will be held in the name of the RESA. RESAs may sell or provide at a reasonable cost goods to Georgia private schools. RESAs also may provide services relating to non-educational areas such as sales and service of audio-visual equipment, sales of office supplies and consumable educational materials. RESAs have wide latitude to identify and provide within their available resources other non-educational services to member school systems.
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying Statement of Revenues, Expenditures and Changes in Fund Balances of the RESA has been prepared for the purpose of meeting the requirements of the RESA and Georgia Department of Education. The Statement of Revenues, Expenditures and Changes in Fund Balances is not intended to be a complete presentation of the RESA's assets, liabilities, revenues, and expenses nor does it constitute a complete set of financial statements in accordance with generally accepted accounting principles. The more significant of the RESA's accounting policies are described below.
BASIS OF PRESENTATION
The RESA reports two major governmental funds, the general fund, which is the RESA's primary operating fund and the capital projects fund, which is used to segregate the costs associated with remodeling a building donated for the RESA's Georgia Network for Educational and Therapeutic Support (GNETS) program.
BASIS OF ACCOUNTING
The basis of accounting determines when transactions are reported on the financial statements. The RESA 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 RESA considers all revenues reported in the governmental funds to be available if they are collected within sixty days after year-end. Interest is considered to be susceptible to accrual. Expenditures are recorded when the related fund liability is incurred, except for principal and interest on general long-term debt, which are recognized 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.
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PIONEER REGIONAL EDUCATIONAL SERVICE AGENCY NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2019

The RESA 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 RESA's policy to first apply grant resources to such programs, followed by cost-reimbursement grants, then general revenues.
NEW ACCOUNTING PRONOUNCEMENTS
In fiscal year 2019, the RESA adopted GASB Statement No. 83, Certain Asset Retirement Obligations. This statement addresses accounting and financial reporting for certain asset retirement obligations (AROs). An ARO is a legally enforceable liability associated with the retirement of a tangible capital asset. A government that has legal obligations to perform future asset retirement activities related to its tangible capital assets should recognize a liability based on the guidance in this statement. The adoption of this statement did not have an impact on the RESA's financial statements.
In fiscal year 2019, the RESA adopted GASB Statement No. 88, Certain Disclosures Related to Debt, including Direct Borrowings and Direct Placements. The primary objective of this statement is to improve the information that is disclosed in notes to government financial statements related to debt, including direct borrowings and direct placements. It also clarifies which liabilities governments should include when disclosing information related to debt. The RESA included additional information in the Installment Sales Agreement note disclosure.
DEPRECIATION EXPENSE
Depreciation is computed using the straight-line for all assets, except land, and is used to allocate the actual or estimated historical cost of capital assets over estimated useful lives. Depreciation expense for the year ended June 30, 2019 was $82,976.71 and was charged to other support services. Capitalization thresholds and estimated useful lives of capital assets are as follows:

Capitalization Policy

Estimated Useful Life

Land

Any Amount

Land Improvements

$ 10,000.00 or more

Buildings and Improvements $ 10,000.00 or more

Equipment

$ 5,000.00 or more

Intangible Assets

$ 10,000.00 or more

N/A 20 years 20 to 50 years 5 to 7 years 5 to 20 years

USE OF ESTIMATES

The preparation of the financial statement 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 statement and accompanying notes. Actual results may differ from those estimates.

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PIONEER REGIONAL EDUCATIONAL SERVICE AGENCY NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2019

NOTE 3: LEASES OPERATING LEASES
The RESA leases an office building, copiers, a water cooler, and a postage machine under the provisions of one or more long-term lease agreements classified as operating leases for accounting purposes. Rental expenditures under the terms of the operating leases(s) totaled $46,468.00 and $3,840.00 for governmental activities and for business-type activities, respectively for the year ended June 30, 2019. The following future minimum lease payments were required under operating leases at June 30, 2019:
Year Ending

2020 2021

$

20,208.00

336.00

Total

$

20,544.00

NOTE 4: INSTALLMENT SALES AGREEMENT
In July 2015, the RESA entered into an installment sales agreement with Regions Bank for $583,049.00 to purchase real property located in Habersham County, Georgia and certain renovations to an existing facility thereon, and the acquisition, construction and installation of said renovated facility of certain equipment to be utilized by the RESA as the Georgia Network for Educational and Therapeutic Support (GNETS) Center. Under the terms of this agreement the RESA was contractually responsible to make monthly principal and interest payments to Regions Bank. The RESA paid off the outstanding balance of this agreement during fiscal year 2019.
The RESA's installment sales agreement was a direct borrowing. In the event the RESA would have failed to make any of the installment payments in full, or the purchase price would not have been paid in full, together with all other obligations arising under the installment purchase agreement, the seller had the right to demand that the RESA convey the project back to the seller, and upon such demand the RESA agreed to convey the project back to the seller immediately.
NOTE 5: OTHER POST-EMPLOYMENT BENEFITS (OPEB)
GEORGIA SCHOOL PERSONNEL POST-EMPLOYMENT HEALTH BENEFIT FUND
Plan Description: Certified teachers and non-certified public school employees of the RESA as defined in 20-2-875 of the Official Code of Georgia Annotated (O.C.G.A.) are provided OPEB through the School OPEB Fund - a cost-sharing multiple-employer defined benefit postemployment healthcare plan, reported as an employee trust fund and administered by a Board of Community Health (Board). Title 20 of the O.C.G.A. assigns the authority to establish and amend the benefit terms of the group health plan to the Board.
Benefits Provided: The School OPEB Fund provides healthcare benefits for retirees and their dependents due under the group health plan for public school teachers, including librarians, other certified employees of public schools, regional educational service agencies and non-certified public school employees. Retiree medical eligibility is attained when an employee retires and is immediately eligible to draw a retirement annuity from Employees' Retirement System (ERS), Georgia Judicial Retirement System (JRS), Legislative Retirement System (LRS), Teachers Retirement System (TRS) or Public School Employees Retirement System (PSERS). If elected, dependent coverage starts on the same day as retiree coverage. Medicare-eligible retirees are offered Standard and Premium Medicare Advantage plan options. Non-Medicare eligible retiree plan options include Health Reimbursement

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PIONEER REGIONAL EDUCATIONAL SERVICE AGENCY NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2019
Arrangement (HRA), Health Maintenance Organization (HMO) and a High Deductible Health Plan (HDHP). The School OPEB Fund also pays for administrative expenses of the fund. By law, no other use of the assets of the School OPEB Fund is permitted. Contributions: As established by the Board, the School OPEB Fund is substantially funded on a payas-you-go basis; that is, annual cost of providing benefits will be financed in the same year as claims occur. Contributions to the School OPEB Fund from the RESA were $239,221.00 for the year ended June 30, 2019. Active employees are not required to contribute to the School OPEB Fund. NOTE 6: RETIREMENT PLANS
The RESA participates in a retirement plan administered by the State of Georgia, as further explained below. TEACHERS RETIREMENT SYSTEM OF GEORGIA (TRS) Plan Description: All teachers of the RESA as defined in O.C.G.A 47-3-60 and certain other support personnel as defined by O.C.G.A. 47-3-63 are provided a pension through the Teachers Retirement System of Georgia (TRS). TRS, a cost-sharing multiple-employer defined benefit pension plan, is administered by the TRS Board of Trustees (TRS Board). Title 47 of the O.C.G.A. assigns the authority to establish and amend the benefit provisions to the State Legislature. The Teachers Retirement System of Georgia issues a publicly available separate financial report that can be obtained at www.trsga.com/publications. Benefits Provided: TRS provides service retirement, disability retirement, and death benefits. Normal retirement benefits are determined as 2% of the average of the employee's two highest paid consecutive years of service, multiplied by the number of years of creditable service up to 40 years. An employee 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. Ten years of service is required for disability and death benefits eligibility. Disability benefits are based on the employee's creditable service and compensation up to the time of disability. Death benefits equal the amount that would be payable to the employee's beneficiary had the employee retired on the date of death. Death benefits are based on the employee's creditable service and compensation up to the date of death. Contributions: Per Title 47 of the O.C.G.A., contribution requirements of active employees and participating employers, as actuarially determined, are established and may be amended by the TRS Board. Contributions are expected to finance the costs of benefits earned by employees during the year, with an additional amount to finance any unfunded accrued liability. Employees were required to contribute 6.00% of their annual pay during fiscal year 2019. The RESA's contractually required contribution rate for the year ended June 30, 2019 was 20.90% of annual RESA payroll. For the current fiscal year, employer contributions to the pension plan were $988,329.00. NOTE 7: DEFICIT FUND BALANCE
The capital projects fund reported a deficit fund balance at the fiscal year end of $166,316.37. The RESA plans to fund this deficit with Georgia Network for Education and Therapeutic Support (GNETS) capital projects grant funds from the Georgia Department of Education through Georgia State Financing and Investment Commission and contributions from local GNETS center member school districts.
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PIONEER REGIONAL EDUCATIONAL SERVICE AGENCY NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2019
NOTE 8: SUBSEQUENT EVENTS In August 2019 Pioneer RESA entered into an installment sale agreement with United Community Bank (UCB) for a seven year loan of $2,461,948.00 for the construction of the addition to the Georgia Network for Educational and Therapeutic Support (GNETS) Center in Cornelia, Georgia. A portion of the funds for the project were awarded through a capital projects grant by the Georgia Department of Education through the Georgia State Financing and Investment Commission. The balance of the project is being paid by the ten member school districts of the GNETS Center. Pioneer RESA makes the monthly payments to UCB and on an annual basis bills the ten member systems for their portion of the payments. In December 2019, a strain of coronavirus (COVID-19) began to spread worldwide, resulting in a severe impact to the United States economy in March 2020. The spread of COVID-19 has had a negative impact on virtually all businesses, individuals, and governmental entities. The extent of this impact is uncertain but is expected to have some negative effects on financial operations, however the impact cannot be reasonably estimated at this time.
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