Atkinson County Board of Education, Pearson, Georgia, annual financial report for the fiscal year ended June 30, 2016 (including independent auditor's reports) [June 30, 2016]

ATKINSON COUNTY BOARD OF EDUCATION
PEARSON, GEORGIA
ANNUAL FINANCIAL REPORT FOR THE FISCAL YEAR ENDED JUNE 30, 2016
(Including Independent Auditor's Reports)

ATKINSON COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS -

SECTION I

FINANCIAL

INDEPENDENT AUDITOR'S REPORT

REQUIRED SUPPLEMENTARY INFORMATION

MANAGEMENT'S DISCUSSION AND ANALYSIS

EXHIBITS

BASIC FINANCIAL STATEMENTS

GOVERNMENT-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

Page
i
1 2 4 5 6 7 8 10

SCHEDULES

REQUIRED SUPPLEMENTARY INFORMATION

1 SCHEDULE OF PROPORTIONATE SHARE OF THE NET PENSION LIABILITY

TEACHERS RETIREMENT SYSTEM OF GEORGIA

29

2 SCHEDULE OF PROPORTIONATE SHARE OF THE NET PENSION LIABILITY

PUBLIC SCHOOL EMPLOYEES RETIREMENT SYSTEM OF GEORGIA

30

3 SCHEDULE OF CONTRIBUTIONS TEACHERS RETIREMENT SYSTEM OF GEORGIA

31

4 NOTES TO THE REQUIRED SUPPLEMENTARY INFORMATION

32

5 SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES

IN FUND BALANCES - BUDGET AND ACTUAL

GENERAL FUND

33

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ATKINSON COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS -

SECTION I
FINANCIAL
SCHEDULES
SUPPLEMENTARY INFORMATION
6 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS 7 SCHEDULE OF STATE REVENUE 8 SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS

Page
34 36 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 REQUIRED BY THE UNIFORM GUIDANCE

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

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SECTION I FINANCIAL

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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 15, 2017

Honorable Nathan Deal, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the Atkinson County 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 of the Atkinson County Board of Education (School District), as of and for the year ended June 30, 2016, and the related notes to the financial statements, which collectively comprise the School District'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 from 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 expressing an opinion on

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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 basic financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, each major fund, and the aggregate remaining fund information of the School District, as of June 30, 2016, and the respective changes in financial position, and, where applicable, cash flows 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 2016, the School District adopted new accounting guidance, Governmental Accounting Standards Board (GASB) Statement No. 72, Fair Value Measurement and Application, GASB Statement No. 73, Accounting and Financial Reporting for Pensions and Related Assets that are not within the Scope of GASB Statement No. 68, and Amendments to Certain Provisions of GASB Statements No. 67 and 68, and GASB Statement No. 79, Certain External Investment Pools and Pool Participants. Our opinions are 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, Schedules of Proportionate Share of the Net Pension Liability, Schedule of Contributions to Retirement Systems, Notes to the Required Supplementary Information and the Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual as presented on pages i through viii and pages 29 through 33 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 School District's basic financial statements. The accompanying supplementary information, consisting of Schedules 6 through 8, is presented for the purposes of additional analysis and is not a required part of the basic financial statements. The Schedule of

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Expenditures of Federal Awards is presented for purposes of additional analysis as required by Title 2 U. S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, and is also 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 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 15, 2017, on our consideration of the School District'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 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 the School District'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,
Greg S. Griffin State Auditor

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ATKINSON COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2016
INTRODUCTION
As management of the Atkinson County Board of Education (School District), we offer readers of the Atkinson County Board of Education's financial statements this narrative overview and analysis of the financial activities of the Atkinson County Board of Education for the fiscal year ended June 30, 2016. We encourage readers to read the information presented here in conjunction with additional information that we have furnished in the School District's financial statements, which follow this narrative.
FINANCIAL HIGHLIGHTS
Key financial highlights for fiscal year 2016 are as follows:
The government-wide net position at June 30, 2016 was approximately $12.3 million. Net position reflects the difference between total assets and deferred outflows and total liabilities and deferred inflows. The net position at June 30, 2016 of $12.3 million represented an increase of approximately $958 thousand when compared to the prior year net position of $11.3 million.
The School District had $17.2 million in expenses relating to governmental activities; only $12.6 million of these expenses were offset by program specific revenues charges for services, operating and capital grants and contributions.
The governmental funds ending fund balance at June 30, 2016 was approximately $9.2 million, with a net increase of about $535 thousand from the prior year. Included in the governmental funds ending fund balance was $4.5 million unassigned fund balance and $4.7 million restricted, assigned, and non-spendable inventory.
The $4.5 million unassigned fund balance for the general fund was 27% of total general fund expenditures for the fiscal year.
OVERVIEW OF THE FINANCIAL STATEMENTS
This discussion and analysis is intended to serve as an introduction to Atkinson County Board of Education's basic financial statements. The School District's basic financial statements consist of three components: (1) government-wide financial statements, (2) fund financial statements, and (3) notes to the financial statements (see Table 1). The basic financial statements present two different views of the School District through the use of government-wide statements and fund financial statements. In addition to the basic financial statements, this report contains other supplementary information that will enhance the reader's understanding of the financial condition of the Atkinson County Board of Education.
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ATKINSON COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2016
Table 1 Required Components of Annual Financial Report

Required Supplementary Information

Basic Financial Statements

Government-wide Financial Statements

Fund Financial Statements

Notes to the Basic Financial Statements

Basic Financial Statements
The first two statements (Exhibits A and B) of the basic financial statements are the governmentwide financial statements. They provide both short-term and long-term information about the School District's financial status.
The next statements (Exhibits C through G) are the fund financial statements. These statements focus on the activities of the individual parts of the School District's government and provide more detail than the government-wide statements. There are two types of funds presented in the fund financial statements: (1) governmental funds and (2) fiduciary funds.
The next section (Exhibit H) of the basic financial statements reflects the notes to the basic financial statements. The notes explain in detail some of the data contained in the government-wide and fund financial statements.
Government-wide Financial Statements
The government-wide financial statements are designed to provide the reader with a broad overview of the School District's finances in a format similar to the financial statements of a private-sector business. The government-wide statements provide short-term and long-term information about the School District's financial status as a whole.
The two government-wide statements report the School District's net position and how it has changed. Net position is the difference between the School District's total assets and deferred outflows of resources and total liabilities and deferred inflows of resources. Measuring net position is one way to gauge the School District's financial condition.
These statements are presented using the economic resources measurement focus (accrual accounting), which is similar to the accounting used by most private-sector businesses. This basis of accounting includes all of the current year's revenues and expenditures regardless of when cash is received or paid.
The government-wide statements include the School District's basic services such as instruction, support services, food services, and enterprise operations. Property taxes and state and Federal grant funds finance most of these activities.
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ATKINSON COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2016
Fund Financial Statements
The fund financial statements provide a more detailed look at the School District's most significant activities. A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. The Atkinson County Board of Education, like other governmental entities in Georgia, uses fund accounting to ensure and reflect compliance (or non-compliance) with legal, grant, etc. requirements.
The School District has two kinds of funds as discussed below:
Governmental Funds Governmental funds are used to account for those functions reported as governmental activities in the government-wide financial statements. Most of the Board's basic services are accounted for in governmental funds. These funds focus on how assets can readily be converted into cash flow in and out, and what monies are left at year-end that will be available for spending in the next year. Governmental funds are reported using the modified accrual method of accounting, which provides a short-term spending focus. As a result, the governmental fund financial statements give the reader a detailed short-term view that helps him or her determine if there are more or fewer financial resources available to finance the School District's programs. The relationship between government activities (reported in the Statement of Net Position and the Statement of Activities) and governmental funds is reflected in a reconciliation, which is part of the fund financial statements.
Fiduciary Funds Fiduciary funds are used to account for resources held for clubs, organizations and others within the principals' accounts for which the School District is the trustee, or fiduciary. The School District is responsible for ensuring that the assets reported in the funds are used only for their intended purposes and by those to whom the assets belong. The School District excludes these activities from the government-wide financial statements because it cannot use these assets to finance its operations.
GOVERNMENT-WIDE FINANCIAL ANALYSIS
Table 2 below provides a summary of the School District's net position for the current year and the prior fiscal year. As noted above, net position may serve, over time, as one useful indicator of a government's financial condition.
For the current year, the total assets and deferred outflows of the Atkinson County Board of Education exceeded the total liabilities and deferred inflows by $12.3 million (net position) at June 30, 2016. The largest portion of net position is the School District's investment in capital assets (net of related debt) of approximately $16.4 million. The School District uses these capital assets (e.g., land, buildings, and equipment) to provide services to the students. Consequently, this net position is not available for future spending. An additional portion of the School District's net position totaling approximately $1.1 million represents resources that are subject to external restrictions regarding how they may be used. The remaining portion of the board's net position is the unrestricted deficit balance of approximately $5.3 million. This deficit balance is due to the School District's proportionate share of the Teachers Retirement System of net pension liability.
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ATKINSON COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2016
Table 2 Net Position

Current and Other Assets Capital Assets, Net Deferred Outflows of Resources

Governmental Activities

Fiscal Year

Fiscal Year

2016

2015

$

11,271,724 $

11,149,411

16,222,461

16,589,878

1,374,889

1,322,146

Total Assets and Deferred Outflows of Resources
Current and Other Liabilities Long-term Liabilities Deferred Inflow of Resources

28,869,075
1,831,486 13,540,508
1,219,914

29,061,435
2,248,725 11,904,302
3,588,812

Total Liabilities and Deferred Inflows of Resources
Net Position Net Investment in Capital Assets Restricted Unrestricted (Deficit)
Total Net Position

16,591,908

17,741,839

16,439,506 1,142,184 (5,304,523)

16,555,416 867,299
(6,103,119)

$

12,277,167 $

11,319,596

Table 3 below provides a summary of the School District's change of net position for the current year and the change of net position for the prior fiscal year. Current year net position increased by approximately $958 thousand, from fiscal year 15, and the prior year net position increased by approximately $644 thousand, from fiscal year 14, therefore the change in net position for the current year as compared to the change in the prior year increased by $314 thousand. The School System financial position as a whole improved as compared to last year's financial position.
The $958 thousand net position increase was primarily due to the reduction of program expenditures. The student transportation expenditures was less because a bus was purchased in prior year. The school made a concerted effort to control cost and manage expenditures.

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ATKINSON COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2016

Table 3 Changes in Net Position
Revenues: Program Revenue: Charges for Services and Sales Operating Grants and Contributions Capital Grants and Contributions
Total Program Revenues
General Revenues: Taxes Property Taxes For Maintenance and Operations Other Taxes Sales Taxes Special Purpose Local Sales Tax for Capital Projects Local Option Sales Tax Grants and Contributions not Restricted to Specific Programs Investment Earnings Miscellaneous
Total General Revenues
Total Revenues
Program Expenses: Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Operations of Non-Instructional Services Food Services Interest on Short-Term and Long-Term Debt
Total Expenses
Increase in net position

Governmental Activities

Fiscal

Fiscal

Year 2016

Year 2015

$

130,156 $

144,327

12,260,885

12,330,300

173,584

317,476

12,564,625

12,792,103

2,198,192 5,303
639,481 3,174
2,250,049 43,701
412,985
5,552,885
18,117,510

2,211,822 5,235
687,822 7,143
2,130,304 35,260
318,040
5,395,626
18,187,729

10,935,379

11,184,808

378,053 445,198 338,620 384,652 1,059,684 236,204 1,239,768 802,510
300 130,084

378,088 499,499 329,646 377,091 1,001,337 183,599 1,255,687 903,368
42 124,840

1,185,718 23,769

1,275,593 29,662

17,159,939

17,543,260

$

957,571 $

644,469

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ATKINSON COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2016
FINANCIAL ANALYSIS OF THE SCHOOL DISTRICT'S FUNDS
The focus of the Atkinson County Board of Education's governmental funds is to provide information on near-term inflows and outflows, and balances of usable resources. Such information is useful in assessing the Atkinson County Board of Education's financing requirements.
Table 4 below provides a summary of the School District's governmental fund balances for this fiscal year as compared to the prior fiscal year.
At June 30, 2016, the governmental funds of Atkinson County Board of Education reported a combined fund balance of approximately $9.2 million, which represents a net increase in fund balance of more than $500 thousand. The fund balance available in the general fund was approximately $4.8 million and the Capital Projects was $4.4 million. The Atkinson County Board of Education has determined that the School District should maintain an available fund balance of 15% of general fund expenditures in case unforeseen needs or opportunities arise in addition to meeting the cash flow needs of the School District. The School District currently has an unassigned general fund balance of $4.5 million, which is 27% of total general fund expenditures.

Table 4 Governmental Activities
Fund Balance
Fiscal Year 2016

Fiscal Year 2015

General Fund

$

Capital Projects Fund

Debt Service Fund

Total

$

4,847,959 $ 4,399,108
1,087
9,248,154 $

4,194,925 4,516,842
1,079
8,712,846

General Fund Budgeting Highlights
The Atkinson County Board of Education adopts an annual budget for its general fund, as required by Georgia Law. The budget is a legally adopted document that incorporates input from the citizens of the School District, the management of the School District, and the decisions of the School District regarding the services to provide and how to pay for them. It also authorizes the School District to obtain funds from identified sources to finance these current period activities. The Schedule of Revenues, Expenditures and Changes in Fund Balances Budget and Actual provided for the general fund demonstrates how well the School District complied with the budget policy and whether or not the School District succeeded in providing the services planned when the budget was adopted. The schedule shows four columns: (1) the original budget as adopted by the School District; (2) the final budget as amended by the School District; (3) the actual revenues, expenditures and ending fund balances in the general fund; and 4) the difference or variance between the final budget and the actual revenues and expenditures.
Generally, budget amendments fall into one of three categories: (1) amendments made to adjust the estimates that are used to prepare the original budget ordinance once exact information is available; (2) amendments made to recognize new funding amounts from external sources, such as

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ATKINSON COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2016

Federal and state grants; and (3) increases in appropriations that become necessary to maintain services. In the current year, the School District revised its budget periodically during the year to recognize new funding amounts from external sources.
For the general fund, the final actual revenues of $17.5 million were more than the final budgeted amount of $16.9 million by approximately $585 thousand. This can be attributed to receiving more revenue than originally expected from the Georgia Department of Community Health for Medicaid reimbursements for occupational and physical therapy services provided to certain students. Also, the school activity account revenues are not included in the budget.
The general fund's final actual expenditures of $16.8 million were less than the final budget amount of $18.4 million by approximately $1.6 million. There were several instructional positions that were budgeted in the General Fund that were actually paid from federal grants, which saved the general fund several thousand dollars. The School District believes it effectively managed its budget during the fiscal year. Additionally, the School District did not include expenditures for school activity accounts in the final budget.
CAPITAL ASSETS
At fiscal year ended June 30, 2016, the School District had $16.4 million invested in capital assets, net of accumulated depreciation, and related debt 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 5 reflects a summary of these balances, net of accumulated depreciation, as compared to the prior fiscal year.

Table 5 Capital Assets (Net of Depreciation)

Governmental Activities

Fiscal Year

Fiscal Year

2016

2015

Land

$

Construction in Progress

Building and Improvements

Equipment

Land Improvements

Total

$

611,420 $ -
13,916,189 1,159,816 535,036
16,222,461 $

611,420 145,978 14,064,010 1,183,730 584,740
16,589,878

Additional information about the School District's capital assets can be found in the Notes of the Basic Financial Statements.

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ATKINSON COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2016
DEBT
At June 30, 2016 the Atkinson County Board of Education had $1,215,000.00 in bonds outstanding with $400,000.00 due within one year. Table 6 represents the outstanding bond balances.

Table 6 Debt at June 30

Governmental Activities

Fiscal

Fiscal

Year 2016

Year 2015

General Obligation Bonds

$

1,215,000 $

1,610,000

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 School District is financially stable. The School District's operating millage for fiscal year 2016 was 14.81, which produced approximately $2.2 million. The School District plans to fund additional capital outlays with the one percent local sales tax revenue.
The School District is financially challenged by the State's continuing reduction of state revenue appropriations to local school districts.
REQUESTS FOR INFORMATION
This report is designed to provide an overview of the Board's finances for those with an interest in this area. Questions concerning any of the information found in this report or requests for additional information should be directed to Lessie Youngblood Bookkeeper, Atkinson County Board of Education, 98 East Roberts Ave, Pearson, GA. One may also call (912) 422-7373, visit our website www.atkinsonschools,org or send an email to lyoungblood@atkinson.k12.ga.us.

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ATKINSON COUNTY BOARD OF EDUCATION

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ATKINSON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2016

EXHIBIT "H"

NOTE 1: DESCRIPTION OF SCHOOL DISTRICT AND REPORTING ENTITY
REPORTING ENTITY
The Atkinson County Board of Education (School District) was established under the laws of the State of Georgia and operates under the guidance of a board elected by the voters and a Superintendent appointed by the Board. The School District 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
The accompanying financial statements of the School District have been prepared in conformity with generally accepted accounting principles (GAAP) as prescribed by the Governmental Accounting Standards Board (GASB). GASB is the accepted standard-setting body for governmental accounting and financial reporting principles. The most significant of the School District's accounting policies are described below.
BASIS OF PRESENTATION
The School District's basic financial statements are collectively comprised of the government-wide financial statements, fund financial statements and notes to the basic financial statements. The government-wide statements focus on the School District as a whole, while the fund financial statements focus on major funds. Each presentation provides valuable information that can be analyzed and compared between years and between governments to enhance the information's usefulness.
GOVERNMENT-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 Net Position presents the School District's non-fiduciary assets and liabilities, with the difference reported as net position. Net position is reported in three categories as follows:
1. Net investment in capital assets consists of the School District's total investment in capital assets, net of accumulated depreciation, and reduced by 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.
2. Restricted net position consists of resources for which the School District is legally or contractually obligated to spend in accordance with restrictions imposed by external third parties or imposed by law through constitutional provisions or enabling legislation.
3. Unrestricted net position consists of resources not meeting the definition of the two preceding categories. Unrestricted net positon often has constraints on resources imposed by management which can be removed or modified.
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.
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ATKINSON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2016

EXHIBIT "H"

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 financial statements are presented for governmental and fiduciary funds. 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:
The general fund is the School District's primary operating fund. It accounts for and reports all financial resources not accounted for and reported in another fund.
The capital projects fund accounts for and reports financial resources including Education Special Purpose Local Option Sales Tax (ESPLOST), and Bond Proceeds that are restricted, committed or assigned for capital outlay expenditures, including the acquisition or construction of capital facilities and other capital assets.
The debt service fund accounts for and reports financial resources that are restricted, committed, or assigned including taxes (sales) legally restricted for the payment of general long-term principal and interest.
The School District reports the following fiduciary fund type:
Agency funds are used to report resources held by the School District in a purely custodial capacity (assets equal liabilities) and do not involve measurement of results of operations.
BASIS OF ACCOUNTING
The basis of accounting determines when transactions are reported on the financial statements. The government-wide 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 and grants. 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 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. The School District considers all intergovernmental revenues to be available if they are collected within 120 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

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ATKINSON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2016

EXHIBIT "H"

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 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 2016, the School District adopted Governmental Accounting Standards Board (GASB) Statement No. 72, Fair Value Measurement and Application. This statement addresses accounting and financial reporting issues related to fair value measurements. The definition of fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. This statement provides guidance for determining a fair value measurement for financial reporting purposes. This statement also provides guidance for applying fair value to certain investments and disclosures related to all fair value measurements. The School District did not have any items that required a reassessment of value for reporting purposes as a result of adoption of this statement.
In fiscal year 2016, the School District adopted Governmental Accounting Standards Board (GASB) Statement No. 73, Accounting and Financial Reporting for Pensions and Related Assets that are not within the Scope of GASB Statement No. 68, and Amendments to Certain Provisions of GASB Statements No. 67 and 68. This statement establishes requirements for defined benefit pensions that are not within the scope of Statement No. 68, Accounting and Financial Reporting for Pensions, as well as for the assets accumulated for purposes of providing those pensions. In addition, it establishes requirements for defined contribution pensions that are not within the scope of Statement 68. It also amends certain provisions of Statement No. 67, Financial Reporting for Pension Plans, and Statement No. 68 for pension plans and pensions that are within their respective scopes. The adoption of this statement does not have a significant impact on the School District's financial statements.
In fiscal year 2016, the School District adopted Governmental Accounting Standards Board (GASB) Statement No. 79, Certain External Investment Pools and Pool Participants. This statement addresses accounting and financial reporting for certain external investment pools and pool participants. If an external investment pool meets the criteria in this statement and measures all of its investments at amortized cost, the pool's participants also should measure their investments in that external investment pool at amortized cost for financial reporting purposes. The School District participates in an external investment pool, the State of Georgia local government investment pool (Georgia Fund 1), which does not meet the criteria of this statement. Therefore, the investment in this pool is measured at fair value as provided in paragraph 11 of GASB Statement No. 31, as amended.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of cash on hand, demand deposits, investments in the State of Georgia local government investment pool (Georgia Fund 1) 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 (O.C.G.A.) 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.

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ATKINSON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2016

EXHIBIT "H"

INVESTMENTS
The School District can invest its funds as permitted by O.C.G.A. 36-83-4. 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.
Investments made by the School District in nonparticipating interest-earning contracts (such as certificates of deposit) and repurchase agreements are reported at cost. Participating interestearning contracts and money market investments with a maturity at purchase of one year or less are reported at amortized cost. All other investments are reported at fair value.
For accounting purposes, certificates of deposit are classified as investments if they have an original maturity greater than three months when acquired.
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.
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 (calculated on the first-in, first-out basis). The School District uses the consumption method to account for inventories whereby donated food commodities are recorded as an asset and as revenue when received, and expenses/expenditures are recorded as the inventory items are used. Purchased foods are recorded as an asset when purchased and expenses/expenditures are recorded as the inventory items are used.
CAPITAL ASSETS
On the government-wide financial statements, capital assets are recorded 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 acquisition cost value on the date donated. 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. The School District does not capitalize book collections or works of art.
Capital acquisition and construction are recorded as expenditures in the governmental fund financial statements at the time of purchase (including ancillary charges), and the related assets are reported as capital assets in the governmental activities column in the government-wide financial statements.
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.

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ATKINSON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2016

EXHIBIT "H"

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

Capitalization Policy

Estimated Useful Life

Land

Any Amount

Land Improvements

$

25,000.00

Buildings and Improvements $

25,000.00

Equipment

$

10,000.00

Intangible Assets

$

100,000.00

N/A 20 to 80 years up to 80 years
5 to 50 years 10 to 20 years

DEFERRED OUTFLOWS/INFLOWS OF RESOURCES
In addition to assets, the statement of financial position will report a separate section for deferred outflows of resources. This separate financial statement element, represents a consumption of resources that applies to a future period(s) and therefore will not be recognized as an outflow of resources (expense/expenditure) until then.
In addition to liabilities, the statement of financial position will report a separate section for deferred inflows of resources. This separate financial statement element represents an acquisition of resources that applies to a future period(s) and therefore will not be recognized as an inflow of resources (revenue) until that time.
LONG-TERM LIABILITIES AND BOND DISCOUNTS/PREMIUMS
In the School District's government-wide financial statements, outstanding debt is reported as liabilities. Bond premiums and discounts and the difference between the reacquisition price and the net carrying value of refunded debt are deferred and amortized over the life of the bonds using the straight-line method. To conform to generally accepted accounting principles, bond premiums and discounts should be amortized using the effective interest method. The effect of this deviation is deemed to be immaterial to the fair presentation of the basic financial statements. Bond issuance costs are recognized as an outflow of resources in the fiscal year in which the bonds are issued.
In the governmental fund financial statements, the School District recognizes the proceeds of debt and premiums as other financing sources of the current period. Bond issuance costs are reported as debt service expenditures.
PENSIONS
For purposes of measuring the net pension liability, deferred outflows of resources and deferred inflows of resources related to pensions, and pension expense, information about the pension plan's fiduciary net position and additions to/deductions from the plan's fiduciary net position have been determined on the same basis as they are reported by the plan. For this purpose, benefit payments (including refunds of employee contributions) are recognized when due and payable in accordance with the benefit terms. Investments are reported at fair value.
FUND BALANCES
Fund balance for governmental funds is reported in classifications that comprise a hierarchy based primarily on the extent to which the government is bound to honor constraints on the specific purposes for which amounts in those funds can be spent.
The School District's fund balances are classified as follows:
Nonspendable consists of resources that cannot be spent either because they are in a nonspendable form or because they are legally or contractually required to be maintained intact.
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ATKINSON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2016

EXHIBIT "H"

Restricted consists of resources that can be used only for specific purposes pursuant constraints either (1) externally imposed by creditors, grantors, contributors, or laws and regulations of other governments or (2) imposed by law through constitutional provisions or enabling legislation.

Committed consists of resources that can be used only for specific purposes pursuant to constraints imposed by formal action of the Board. The Board is the School District's highest level of decisionmaking 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 consists of resources 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 or (2) the budget or finance committee, or the Superintendent, or designee, to assign amounts to be used for specific purposes.

Unassigned consists of resources within the general fund not meeting the definition of any aforementioned category. The general fund should be the only fund that reports a positive unassigned fund balance amount. In other governmental funds, it may be necessary to report a negative unassigned fund balance.
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.
PROPERTY TAXES

The Atkinson County Board of Commissioners adopted the property tax levy for the 2015 tax digest year (calendar year) on October 4, 2015 (levy date) based on property values as of January 1, 2015. Taxes were due on December 20, 2015 (lien date). Taxes collected within the current fiscal year or within 60 days after year-end on the 2015 tax digest are reported as revenue in the governmental funds for fiscal year 2016. The Atkinson County Board of Commissioners bills and collects the property taxes for the School District, withholds 2.5% of taxes collected as a fee for tax collection and remits the balance of taxes collected to the School District. Property tax revenues, at the fund reporting level, during the fiscal year ended June 30, 2016, for maintenance and operations amounted to $2,022,950.87.

The tax millage rate levied for the 2015 tax year (calendar year) for the School District was as follows (a mill equals $1 per thousand dollars of assessed value):

School Operations

14.81 mills

Additionally, Title Ad Valorem Tax revenues, at the fund reporting level, amounted to $171,491.43 during fiscal year ended June 30, 2016.
SALES TAXES
Education Special Purpose Local Option Sales Tax (ESPLOST), at the fund reporting level, during the year amounted to $639,481.15 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.

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ATKINSON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2016

EXHIBIT "H"

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 fund. 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 (principal) accounts, is prepared and adopted by fund and function. The legal level of budgetary control was established by the Board at the aggregate fund level. The budget for the general fund was prepared in accordance with accounting principles generally accepted in the United States of America.
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 O.C.G.A. 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 year-end.
See the General Fund Schedule of Revenues, Expenditures and Changes in Fund Balances Budget to Actual in the Supplementary Information Section for a detail of any over/under expenditures during the fiscal year under review.
NOTE 4: DEPOSITS AND CASH EQUIVALENTS
COLLATERALIZATION OF DEPOSITS
O.C.G.A. 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% 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. 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% of the daily pool balance.
Acceptable security for deposits consists of any one of or any combination of the following:
(1) Surety bond signed by a surety company duly qualified and authorized to transact business within the State of Georgia,
(2) Insurance on accounts provided by the Federal Deposit Insurance Corporation,
(3) Bonds, bills, notes, certificates of indebtedness or other direct obligations of the United States or of the State of Georgia,
(4) Bonds, bills, notes, certificates of indebtedness or other obligations of the counties or municipalities of the State of Georgia,
(5) Bonds of any public authority created by the laws of the State of Georgia, providing that the statute that created the authority authorized the use of the bonds for this purpose,
(6) Industrial revenue bonds and bonds of development authorities created by the laws of the State of Georgia, and

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ATKINSON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2016

EXHIBIT "H"

(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, 2016, School District had deposits with a carrying amount of $8,759,300.79 and a bank balance of $9,348,134.71. The bank balances insured by Federal depository insurance were $561,773.13 and the bank balances collateralized with securities held by the pledging financial institution in the School District's name were $8,786,361.58.

Reconciliation of cash and cash equivalents balances to carrying value of deposits:

Statement of Net Position Cash and cash equivalents
Statement of Fiduciary Net Position Cash and cash equivalents
Total cash and cash equivalents
Add: Deposits with original maturity of three months or less reported as investments
Less: Investment pools reported as cash and cash equivalents
Georgia Fund 1

$ 6,823,573.21 77,989.24
6,901,562.45 2,768,355.33
910,616.99

Total carrying value of deposits - June 30, 2016

$ 8,759,300.79

CATEGORIZATION OF CASH EQUIVALENTS
The School District reported cash equivalents of $910,616.99 in Georgia Fund 1, a local government investment pool. Georgia Fund 1 is not registered with the SEC as an investment company and does not 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, which approximates fair value. 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, 2016, was 42 days.
Georgia Fund 1, 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, 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.

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ATKINSON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2016

EXHIBIT "H"

NOTE 5: CAPITAL ASSETS

The following is a summary of changes in the capital assets for governmental activities during the fiscal year:

Balances July 1, 2015

Increases

Decreases

Balances June 30, 2016

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

$

611,420.00 $

145,977.67

- $ -

- $ 145,977.67

611,420.00 -

Total Capital Assets Not Being Depreciated

757,397.67

-

145,977.67

611,420.00

Capital Assets Being Depreciated Buildings and Improvements Equipment Land Improvements
Less Accumulated Depreciation for: Buildings and Improvements Equipment Land Improvements

18,406,838.00 2,881,786.00 1,095,495.00
4,342,828.00 1,698,056.00
510,755.00

230,854.33 223,850.14
-
378,674.84 176,010.90
49,703.71

167,176.00
0.23
95,422.50
-

18,637,692.33 2,938,460.14 1,095,494.77
4,721,502.84 1,778,644.40
560,458.71

Total Capital Assets, Being Depreciated, Net

15,832,480.00

(149,684.98)

71,753.73

15,611,041.29

Governmental Activity Capital Assets - Net

$ 16,589,877.67 $ (149,684.98) $

217,731.40 $ 16,222,461.29

Current year depreciation expense by function is as follows:

Instruction Support Services
Pupil Services General Administration Maintenance and Operation of Plant Student Transportation Services Food Services

$

4,040.39

13,253.67

14,263.84

102,575.50

$ 396,610.98
134,133.40 73,645.07
$ 604,389.45

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ATKINSON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2016

EXHIBIT "H"

NOTE 6: INTERFUND TRANSFERS Interfund transfers for the year ended June 30, 2016, consisted of the following:

Transfers to

Transfers From

General Fund

Capital Projects Fund

Capital Projects Debt Service Fund

$ 50,000.00 -

$

-

420,091.25

Total

$ 50,000.00 $ 420,091.25

Transfers are used to move property tax revenues collected by the general fund to the capital projects fund as supplemental funding source for capital construction projects, and move sales tax revenue collected by the capital projects fund to the debt service fund for debt repayments.
NOTE 7: LONG-TERM LIABILITIES
The changes in long-term liabilities during the fiscal year for governmental activities, were as follows:

Balance July 1, 2015

Additions

Governmental Activities

Balance

Deductions

June 30, 2016

Due Within One Year

General Obligation Bonds

$ 1,610,000.00 $

- $ 395,000.00 $ 1,215,000.00 $ 400,000.00

GENERAL OBLIGATION DEBT OUTSTANDING

The School District's bonded debt consists of an issue of general obligation bonds that is generally noncallable with interest payable semiannually. Bond proceeds primarily pay for acquiring or constructing capital facilities. The School District repays general obligation bonds from voterapproved sales taxes. General obligation bonds are direct obligations and pledge the full faith and credit of the School District.

General obligation bonds currently outstanding are as follows:

Description

Interest Rates

Issue Date

Maturity Date

Amount Issued

Amount Outstanding

General Government - Series -2013

1.50% - 2.25%

9/17/2013

12/1/2018 $ 2,000,000.00 $ 1,215,000.00

The following schedule details debt service requirements to maturity for the School District's total general obligation bonds payable:

Fiscal Year Ended June 30:

General Obligation Debt

Principal

Interest

2017 2018 2019

$

400,000.00 $

405,000.00

410,000.00

18,300.00 12,262.50
4,612.50

Total Principal and Interest $

1,215,000.00 $

35,175.00

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ATKINSON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2016

EXHIBIT "H"

NOTE 8: RISK MANAGEMENT
INSURANCE
Commercial Insurance
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; and natural disasters. Except as described below, the School District carries commercial insurance for these risks. Settled claims resulting from these insured risks have not exceed commercial insurance coverage in any of the past three fiscal years.
Georgia School Boards Association Risk and Insurance Management System
The School District participates in the Georgia School Boards Association Risk and Insurance Management System (the System), a public entity risk pool organized on July 1, 1994, to develop and administer a plan to reduce risk of loss on account of general liability, motor vehicle liability, or property damage, including safety engineering and other loss prevention and control techniques, and to administer one or more groups of self-insurance funds, including the processing and defense of claims brought against members of the system. The School District pays an annual premium to the System for its general insurance coverage. Additional coverage is provided through agreements by the System with other companies according to their specialty for property, boiler and machinery (including coverage for flood and earthquake), general liability (including coverage for sexual harassment, molestation and abuse), errors and omissions, crime and automobile risks. Payment of excess insurance for the System varies by line of coverage.
WORKERS' COMPENSATION
Georgia Education Workers' Compensation Trust
The School District participates in the Georgia Education Workers' Compensation Trust (the Trust), a public entity risk pool organized on December 1, 1991, to develop, implement and administer a program of workers' compensation self-insurance for its member organizations. The School District pays an annual premium to the Trust for its general workers' compensation insurance coverage. Specific excess of loss insurance coverage is provided through an agreement by the Trust with the Safety National Casualty Company to provide coverage for potential losses sustained by the Trust in excess of $1.0 million loss per occurrence, up to the statutory limit. Employers' Liability insurance coverage is also provided with limits of $2.0 million. The Trust covers the first $1.0 million of each Employers Liability claim with Safety National providing additional Employers Liability limits up to a $2.0 million per occurrence maximum. Safety National Casualty Company also provides $2.0 million in aggregate coverage to the Trust, attaching at 110% of the loss fund and based on the Fund's annual normal premium.
UNEMPLOYMENT COMPENSATION
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.

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ATKINSON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2016

EXHIBIT "H"

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

Beginning of Year Liability

Claims and Changes in Estimates

Claims Paid

End of Year Liability

2015

$

-

$

5,521.00

$

5,521.00

$

-

2016

$

-

$

2,640.00

$

2,640.00

$

-

SURETY BOND

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

Position Covered

Amount

Superintendent NOTE 9: FUND BALANCE CLASSIFICATION DETAILS

$

50,000.00

The School District's financial statements include the following amounts presented in the aggregate at June 30, 2016:

Nonspendable Inventories
Restricted Continuation of Federal Programs Capital Projects Debt Service
Assigned Local Capital Outlay Projects School Activity Accounts
Unassigned

$ 13,498.22

$ 182,091.01 931,956.86 410,650.00

1,524,697.87

3,057,588.74 114,218.16

3,171,806.90 4,538,151.24

Fund Balance, June 30, 2016

$ 9,248,154.23

When multiple categories of fund balance are available for expenditure, the School District will start with the most restricted category and spend those funds first before moving down to the next category with available funds.
NOTE 10: SIGNIFICANT CONTINGENT LIABILITIES
FEDERAL GRANTS
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. Any disallowances resulting from the grantor audit may become a liability of the School District. However, the School District believes that such disallowances, if any, will be immaterial to its overall financial position.
NOTE 11: POST-EMPLOYMENT BENEFITS
GEORGIA SCHOOL PERSONNEL 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 post-employment healthcare plan that
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ATKINSON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2016

EXHIBIT "H"

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 Benefit Plan administered by the Department of Community Health. The Official Code of Georgia Annotated (O.C.G.A.) 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 (Board). Additional information about the School OPEB Fund is disclosed in the State of Georgia Comprehensive Annual Financial Report. This report can be obtained from the Georgia Department of Audits and Accounts at www.audits.ga.gov/SGD/CAFR.html.

Funding Policy. The contribution requirements of plan members and participating employers are established by the Board in accordance with the current Appropriations Act and may be amended by the 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% of the cost of the health insurance coverage. In accordance with the Board resolution dated December 8, 2011, for members with fewer than five years of service as of January 1, 2012, the State provides a 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 Board may be changed at any time by 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 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 Board for employers participating in the School OPEB Fund were as follows for the fiscal year ended June 30, 2016:

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

July 1, 2015 June 30, 2016

$945.00 per member per month

For non-certificated school personnel:

July 1, 2015 December 31, 2015 $596.20 per member per month

January 1, 2016 June 30, 2016 $746.20 per member per month

No additional contribution was required by the Board for fiscal year 2016 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.

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ATKINSON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2016

EXHIBIT "H"

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:

Fiscal Year

Percentage Contributed

Required Contribution

2016 2015 2014

100%

$

1,827,860.70

100%

$

1,754,621.13

100%

$

1,711,959.99

NOTE 12: RETIREMENT PLANS

The School District participates in various retirement plans administered by the State of Georgia, as further explained below.

TEACHERS RETIREMENT SYSTEM OF GEORGIA (TRS)
Plan Description: All teachers of the School District as defined in O.C.G.A 47-3-60 and certain other support personnel as defined by 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 audit 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. Pursuant to O.C.G.A. 47-3-63, the employer contributions for certain full-time public school support personnel are funded on behalf of the employer by the State of Georgia. 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% of their annual pay during fiscal year 2016. The School District's contractually required contribution rate for the year ended June 30, 2016 was 14.27% of annual School District payroll, of which 14.19% of payroll was required form the School District and .08% of payroll was required from the State. For the current fiscal year, employer contributions to the pension plan were $1,221,511.37 and $6,955.14 from the School District and the State, respectively.

PUBLIC SCHOOL EMPLOYEES RETIREMENT SYSTEM (PSERS)
Plan description: PSERS is a cost-sharing multiple-employer defined benefit pension plan established by the Georgia General Assembly in 1969 for the purpose of providing retirement allowances for public school employees who are not eligible for membership in the Teachers Retirement System of Georgia. The ERS Board of Trustees, plus two additional trustees, administers

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ATKINSON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2016

EXHIBIT "H"

PSERS. Title 47 of the O.C.G.A. assigns the authority to establish and amend the benefit provisions to the State Legislature. PSERS issues a publicly available financial report that can be obtained at www.ers.ga.gov/formspubs/formspubs.
Benefits provided: A member may retire and elect to receive normal monthly retirement benefits after completion of ten years of creditable service and attainment of age 65. A member may choose to receive reduced benefits after age 60 and upon completion of ten years of service.

Upon retirement, the member will receive a monthly benefit of $14.75, multiplied by the number of years of creditable service. Death and disability benefits are also available through PSERS. Additionally, PSERS may make periodic cost-of-living adjustments to the monthly benefits. Upon termination of employment, member contributions with accumulated interest are refundable upon request by the member. However, if an otherwise vested member terminates and withdraws his/her member contribution, the member forfeits all rights to retirement benefits.
Contributions: The general assembly makes an annual appropriation to cover the employer contribution to PSERS on behalf of local school employees (bus drivers, cafeteria workers, and maintenance staff). The annual employer contribution required by statute is actuarially determined and paid directly to PSERS by the State Treasurer in accordance with O.C.G.A. 47-4-29(a) and 60(b). 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.

Individuals who became members prior to July 1, 2012 contribute $4 per month for nine months each fiscal year. Individuals who became members on or after July 1, 2012 contribute $10 per month for nine months each fiscal year. The State of Georgia, although not the employer of PSERS members, is required by statute to make employer contributions actuarially determined and approved and certified by the PSERS Board of Trustees. The current fiscal year contribution was $26,009.00.
Pension Liabilities, Pension Expense, and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions

At June 30, 2016, the School District reported a liability of $12,325,508.00 for its proportionate share of the net pension liability for TRS.

The TRS net pension liability reflected a reduction for support provided to the School District by the State of Georgia for certain public school support personnel. The amount recognized by the School District as its proportionate share of the net pension liability, the related State of Georgia support, and the total portion of the net pension liability that was associated with the School District were as follows:

School District's proportionate share of the net pension liability

$ 12,325,508.00

State of Georgia's proportionate share of the net pension liability associated with the School District

68,813.00

Total

$ 12,394,321.00

The net pension liability for TRS was measured as of June 30, 2015. The total pension liability used to calculate the net pension liability was based on an actuarial valuation as of June 30, 2014. An expected total pension liability as of June 30, 2015 was determined using standard roll-forward techniques. The School District's proportion of the net pension liability was based on contributions to TRS during the fiscal year ended June 30, 2015.
At June 30, 2015, the School District's TRS proportion was 0.080961%, which was a decrease of 0.000522% from its proportion measured as of June 30, 2014.
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ATKINSON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2016

EXHIBIT "H"

At June 30, 2016, the School District did not have a PSERS liability for a proportionate share of the net pension liability because of a Special Funding Situation with the State of Georgia, which is responsible for the net pension liability of the plan. The amount of the State's proportionate share of the net pension liability associated with the School District is $121,368.00.

The PSERS net pension liability was measured as of June 30, 2015. The total pension liability used to calculate the net pension liability was based on an actuarial valuation as of June 30, 2014. An expected total pension liability as of June 30, 2015 was determined using standard rollforward techniques. The State's proportion of the net pension liability associated with the School District was based on actuarially determined contributions paid by the State during the fiscal year ended June 30, 2015.

For the year ended June 30, 2016, the School District recognized pension expense of $836,076.00 for TRS and $7,238.00 for PSERS and revenue of $4,873.00 for TRS and $7,238.00 for PSERS. The revenue is support provided by the State of Georgia. For TRS the State of Georgia support is provided only for certain support personnel.

At June 30, 2016, the School District reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources:

TRS

Deferred

Deferred

Outflows of

Inflows of

Resources

Resources

Differences between expected and actual experience

$

-

$ 108,409.00

Net difference between projected and actual earnings on pension plan investments

-

1,039,670.00

Changes in proportion and differences between School District contributions and proportionate share of contributions

153,378.00

71,835.00

School District contributions subsequent to the measurement date

1,221,511.37

-

Total

$ 1,374,889.37 $ 1,219,914.00

The School District contributions subsequent to the measurement date of $1,221,511.37 for TRS are reported as deferred outflows of resources and will be recognized as a reduction of the net pension liability in the year ended June 30, 2017. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized in pension expense as follows:

Year Ended June 30:

TRS

2017 2018 2019 2020 2021

$ (480,586.00) $ (480,586.00) $ (480,586.00) $ 383,803.00 $ (8,580.00)

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ATKINSON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2016

EXHIBIT "H"

Actuarial assumptions: The total pension liability as of June 30, 2015 was determined by an actuarial valuation as of June 30, 2014, using the following actuarial assumptions, applied to all periods included in the measurement:

Teachers Retirement System:

Inflation

3.00%

Salary increases

3.75% 7.00%, average, including inflation

Investment rate of return

7.50%, net of pension plan investment expense, including inflation

Mortality rates were based on the RP-2000 Combined Mortality Table for Males or Females set back two years for males and set back three years for females.

The actuarial assumptions used in the June 30, 2014 valuation were based on the results of an actuarial experience study for the period July 1, 2004 June 30, 2009.
Public School Employees Retirement System:

Inflation

3.00%

Salary increases

N/A

Investment rate of return

7.50%, net of pension plan investment expense, including inflation

Mortality rates were based on the RP-2000 Combined Mortality Table set forward one year for males for the period after service retirement, for dependent beneficiaries, and for deaths in active service, and the RP-2000 Disabled Mortality Table set back two years for males and set forward one year for females for the period after disability retirement.
The actuarial assumptions used in the June 30, 2014 valuation were based on the results of an actuarial experience study for the period July 1, 2004 June 30, 2009.

The long-term expected rate of return on TRS and PSERS pension plan investments was determined

using a log-normal distribution analysis in which best-estimate ranges of expected future real rates

of return (expected returns, net of pension plan investment expense and inflation) are developed for

each major asset class. These ranges are combined to produce the long-term expected rate of return

by weighting the expected future real rates of return by the target asset allocation percentage and by

adding expected inflation. The target asset allocation and best estimates of arithmetic real rates of

return for each major asset class are summarized in the following table:

Long-term

Target

expected real

Asset class

allocation

rate of return*

Fixed income Domestic large stocks Domestic mid stocks Domestic small stocks International developed market stocks International emerging market stocks
Total

30.00% 39.70%
3.70% 1.60% 18.90% 6.10%
100.00%

3.00% 6.50% 10.00% 13.00% 6.50% 11.00%

* Rates shown are net of the 3.00% assumed rate of inflation

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ATKINSON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2016

EXHIBIT "H"

Discount rate: The discount rate used to measure the total TRS and PSERS pension liability was 7.50%. The projection of cash flows used to determine the discount rate assumed that plan member contributions will be made at the current contribution rate and that employer and nonemployer contributions will be made at rates equal to the difference between actuarially determined contribution rates and the member rate. Based on those assumptions, the TRS and PSERS pension plan's fiduciary net position was projected to be available to make all projected future benefit payments of current plan members. Therefore, the long-term expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the total pension liability.
Sensitivity of the School District's proportionate share of the net pension liability to changes in the discount rate: The following presents the School District's proportionate share of the net pension liability calculated using the discount rate of 7.50%, as well as what the School District's proportionate share of the net pension liability would be if it were calculated using a discount rate that is 1-percentage-point lower (6.50%) or 1-percentage-point higher (8.50%) than the current rate:

Teachers Retirement System:
School District's proportionate share of the Net Pension Liability

1% Decrease (6.50%)

Current Discount Rate (7.50%)

1% Increase (8.50%)

$ 21,180,454.00 $

12,325,508.00 $ 5,026,926.00

Pension plan fiduciary net position: Detailed information about the pension plan's fiduciary net position is available in the separately issued TRS and PSERS financial report which is publically available at www.trsga.com/publications and http://www.ers.ga.gov/formspubs/formspubs.html.

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SECTION II COMPLIANCE AND INTERNAL CONTROL REPORTS

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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 15, 2017

Honorable Nathan Deal, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the Atkinson County Board of Education
REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH
GOVERNMENT AUDITING STANDARDS
INDEPENDENT AUDITOR'S REPORT
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 Atkinson County Board of Education (School District) as of and for the year ended June 30, 2016, and the related notes to the financial statements, which collectively comprise the School District's basic financial statements and have issued our report thereon dated March 15, 2017.
Internal Control Over Financial Reporting
In planning and performing our audit of the financial statements, we considered the School District'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 School District's internal control. Accordingly, we do not express an opinion on the effectiveness of the School District'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.

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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 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 the School District'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.
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 School District'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 School District's internal control and compliance. Accordingly, this communication is not suitable for any other purpose.
Respectfully submitted,
Greg S. Griffin State Auditor

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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 15, 2017

Honorable Nathan Deal, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the Atkinson County Board of Education
REPORT ON COMPLIANCE FOR EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE REQUIRED BY THE UNIFORM GUIDANCE
INDEPENDENT AUDITOR'S REPORT
Ladies and Gentlemen:
Report on Compliance for the Major Federal Program
We have audited Atkinson County Board of Education's (School District) compliance with the types of compliance requirements described in the OMB Compliance Supplement that could have a direct and material effect on each of its major federal programs for the year ended June 30, 2016. The School District'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 federal statutes, regulations, and the terms and conditions of its federal awards applicable to its federal programs.
Auditor's Responsibility
Our responsibility is to express an opinion on compliance for the School District'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 the audit requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Those standards and the Uniform Guidance 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 School District's compliance with those requirements and performing such other procedures as we considered necessary in the circumstances.

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We believe that our audit provides a reasonable basis for our opinion on compliance for the major federal program. However, our audit does not provide a legal determination of the School District's compliance.
Opinion on the Major Federal Program
In our opinion, the School District complied, in all material respects, with the types of compliance requirements referred to above that could have a direct and material effect on its major federal programs for the year ended June 30, 2016.
Report on Internal Control over Compliance
Management of the School District 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 the School District'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 the Uniform Guidance, 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 School District'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 the Uniform Guidance. Accordingly, this report is not suitable for any other purpose.
Respectfully submitted,
Greg S. Griffin State Auditor

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

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ATKINSON COUNTY BOARD OF EDUCATION AUDITEE'S RESPONSE
SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2016
PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS No matters were reported.
PRIOR YEAR FEDERAL AWARD FINDINGS AND QUESTIONED COSTS No matters were reported.

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SECTION IV FINDINGS AND QUESTIONED COSTS

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ATKINSON COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2016

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 2 CFR 200.516(a)

No

Identification of major programs: CFDA Numbers

Name of Federal Program or Cluster

10.553, 10.555

Child Nutrition Cluster

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

$750,000.00

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.