BARROW COUNTY BOARD OF EDUCATION WINDER, GEORGIA ANNUAL FINANCIAL REPORT FOR THE FISCAL YEAR ENDED JUNE 30, 2018 (Including Independent Auditor's Reports) BARROW 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 SCHEDULES REQUIRED SUPPLEMENTARY INFORMATION 1 SCHEDULE OF PROPORTIONATE SHARE OF THE NET PENSION LIABILITY TEACHERS RETIREMENT SYSTEM OF GEORGIA 2 SCHEDULE OF PROPORTIONATE SHARE OF THE NET PENSION LIABILITY EMPLOYEES' RETIREMENT SYSTEM OF GEORGIA 3 SCHEDULE OF PROPORTIONATE SHARE OF THE NET PENSION LIABILITY PUBLIC SCHOOL EMPLOYEES RETIREMENT SYSTEM OF GEORGIA 4 SCHEDULE OF PROPORTIONATE SHARE OF THE NET OPEB LIABILITY SCHOOL OPEB FUND Page i 1 2 4 5 6 7 8 9 37 38 39 40 BARROW COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS - Page SECTION I FINANCIAL SCHEDULES REQUIRED SUPPLEMENTARY INFORMATION 5 SCHEDULE OF CONTRIBUTIONS TEACHERS RETIREMENT SYSTEM OF GEORGIA 41 6 SCHEDULE OF CONTRIBUTIONS EMPLOYEES' RETIREMENT SYSTEM OF GEORGIA 42 7 SCHEDULE OF CONTRIBUTIONS SCHOOL OPEB FUND 43 8 NOTES TO THE REQUIRED SUPPLEMENTARY INFORMATION 44 9 SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL GENERAL FUND 45 SUPPLEMENTARY INFORMATION 10 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS 46 11 SCHEDULE OF STATE REVENUE 47 12 SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS 49 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 SECTION I FINANCIAL Greg S. Griffin STATE AUDITOR (404) 656-2174 DEPARTMENT OF AUDITS AND ACCOUNTS 270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400 March 26, 2019 The Honorable Brian P. Kemp, Governor of Georgia Members of the General Assembly of the State of Georgia Members of the State Board of Education and Superintendent and Members of the Barrow County Board of Education INDEPENDENT AUDITOR'S REPORT 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 Barrow County Board of Education (School District), as of and for the year ended June 30, 2018, 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 the effectiveness of the entity's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. Opinions In our opinion, the financial statements referred to 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, 2018, and the respective changes in financial position 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 2018, the School District adopted new accounting guidance, Governmental Accounting Standards Board (GASB) Statement No. 75, Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions, as amended by GASB Statement No. 85, Omnibus 2017. The School District restated beginning net position for the effect of GASB Statement No. 75. 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 and required supplementary information listed in the table of contents 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 about 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, as listed in the table of contents, is presented for the purposes of additional analysis and is not a required part of the basic financial statements. The Schedule of Expenditures of Federal Awards is presented for purposes of additional analysis as required by 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 taken as a whole. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated March 26, 2019 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 solely to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the School District's 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 BARROW COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2018 INTRODUCTION The School District's financial statements for the fiscal year ended June 30, 2018 includes a series of basic financial statements that report financial information for the School District as a whole, its funds, and its fiduciary responsibilities. The Statement of Net Position and the Statement of Activities provide financial information about all of the School District's activities and present both a short-term and long-term view of the School District's finances on a global basis. The fund financial statements provide information about all of the School District's funds. Information about these funds, such as the School District's general fund, is important in its own right, but will also give insight into the School District's overall soundness as reported in the Statement of Net Position and the Statement of Activities. FINANCIAL HIGHLIGHTS Key financial highlights for fiscal year 2018 are as follows: On the government-wide financial statements: In June 2015, the Governmental Accounting Standards Board (GASB) issued Statement No. 75, Accounting and Financial Reporting for Postemployment Benefits Other than Pensions. This statement requires all School Districts to recognize and disclose the School District's proportionate share of the collective net OPEB liability for each cost sharing benefit plan in which the School District participates. Due to the adoption of GASB Statement No. 75, net position was restated and decreased by $113.5 million. Therefore the School District's liabilities and deferred inflow of resources exceeded assets and deferred outflow of resources by $56.3 million at June 30, 2018. Net position reflects the difference between all assets and deferred outflows of resources of the School District (including capital assets, net of depreciation) and all liabilities, both short-term and long-term, and deferred inflows of resources. The net position at June 30, 2018 of negative $56.3 million includes the restatement mentioned above of $113.5 million and an increase of $5.8 million when compared to the prior year. This increase is due to additional state funds received, sales tax revenues, and additional property taxes collected. The School District had nearly $148.2 million in expenses relating to governmental activities; $93.4 million of these expenses were offset by program specific charges for services, grants and contributions. General revenues (primarily property and sales taxes) of $59.0 million were adequate to provide for these programs. As stated above, general revenues accounted for $59.0 million or nearly 38.4% of all revenues totaling almost $154.0 million. Program specific revenues in the form of charges for services, grants, and contributions accounted for the balance of these revenues. (Percentages in table below have been rounded to one decimal place.) i BARROW COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2018 The current ratio, which measures the School District's ability to transform current assets into cash and pay its short-term liabilities, was 3.48 for the fiscal year ended June 30, 2018. Generally, a ratio greater than 2.0 is considered very financially stable. In fiscal year 2018 the School District was donated 91.8 acres of land with a value of $1.4 million. This land is to be used by our School District's agriculture programs. On the fund financial statements: Among major funds, the general fund had nearly $140.4 million in revenues and over $135.7 million in expenditures. The general fund balance of roughly $21.9 million at June 30, 2018 increased by over $4.6 million from the prior year. This increase in general fund balance resulted primarily because of increased revenues from the State of Georgia funding. Capital projects fund ended the year with a fund balance of almost $26.0 million, an increase of $12.9 million or 99.0% from the previous year primarily due to a lull in school construction, bond proceeds, and increased ESPLOST collections with a strong economy. Moody's Investor Services stated the Barrow County School District's credit position is very high quality at Aa2 rating. Notable credit factors include a favorable financial position, a large tax base and a solid wealth and income profile. ii BARROW COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2018 OVERVIEW OF THE FINANCIAL STATEMENTS These financial Statements consists of three parts; management's discussion and analysis (this section), the basic financial statements including notes to the financial statements and required supplementary information. The basic financial statements include two levels of statements that present different views of the School District. These include the government-wide and fund financial statements. The government-wide financial statements include the `Statement of Net Position' and `Statement of Activities'. These statements provide information about the activities of the School District presenting both short-term and long-term information about the School District's overall financial status. The fund financial statements focus on individual parts of the School District, reporting the School District's operation in more detail. The `governmental funds' statements disclose how basic services are financed in the short-term as well as what remains for future spending. The `fiduciary funds' statements provide information about the financial relationships in which the School District acts solely as a trustee or agent for the benefit of others. In the case of the Barrow County School District, the general fund, capital projects fund, and debt service fund are all considered to be major funds. The School District has no funds reported as nonmajor funds as defined by generally accepted accounting principles. The financial statements also include notes that explain some of the information in the statements and provide more detailed data. The statements are followed by a section of required supplementary information that further explains and supports the financial statements. Additionally, other supplementary information (not required) is also presented that further supplements understanding of the financial statements. iii BARROW COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2018 Government-Wide Statements Since Barrow County School District has no operations that have been classified as "Business Activities", the government-wide financial statements are basically a consolidation of all of the School District's operating funds into one column called governmental activities. In reviewing the Governmentwide financial statements, a reader might ask the question, are we in a better financial position now than last year? The `Statement of Net Position' and the `Statement of Activities' provides the basis for answering this question. These financial statements include all School District's assets and liabilities and uses the accrual basis of accounting similar to the accounting used by most private-sector companies. This basis of accounting takes into account all of the current year's revenues and expenses regardless of when cash is received or paid. These two statements report the School District's net position and any changes in net position. The change in net position is important because it tells the reader that, for the School District as a whole, the financial position of the School District has improved or diminished. The causes of this change may be the results of many factors, including those not under the School District's control, such as the property tax base, facility conditions, required educational programs, student-teacher ratios, and other factors. When analyzing government-wide financial statements, it is important to remember these statements are prepared using an economic resources measurement focus (accrual accounting) and involve the following steps to format the Statement of Net Position: Capitalize current outlays for capital assets Depreciate capital assets Report long-term debt, including pension and other post-employment benefit obligations, as a liability Calculate revenue and expense using the economic resources measurement focus and the accrual basis of accounting. Allocate net position as follows: o Net Investment in capital assets o Restricted net position is amounts with constraints placed on the use by external sources such as creditors, grantors, contributors or laws and regulations. o Unrestricted for no specific use. Fund Financial Statements The School District uses many funds or sub-funds to account for a multitude of financial transactions during the fiscal year. The fund financial statements presented in this report provide detail information about the School District's significant or major funds. As discussed previously, the School District has no nonmajor funds as defined by generally accepted accounting principles. The School District has two kinds of funds as discussed below: Governmental Funds Most of the School District's activities are reported in governmental funds, which focus on how money flows into and out of those funds and the balances left at year-end available for spending in future periods. These funds are reported using the modified accrual method of accounting which measures cash and all other financial assets that can be readily converted to cash. The governmental fund statements provide a detailed short-term view of the School District's general government operations and the basic services it provides. Governmental fund information helps determine whether there are more or fewer financial resources that can be spent in the near future to iv BARROW COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2018 finance educational programs. The differences between governmental activities (reported in the Statement of Net Position and the Statement of Activities) and governmental funds are reconciled in the financial statements. Fiduciary Funds The School District is the trustee, or fiduciary, for assets that belong to clubs, organizations and others within the principals' accounts. The School District is responsible for ensuring that the assets reported in these funds are used only for their intended purposes and by those to whom the assets belong. The School District excludes these activities from the government-wide financial statements because it cannot use these assets to finance its operations. NOTES TO THE FINANCIAL STATEMENTS The notes provide disclosures and additional information that are essential to a full understanding of the financial information presented in the government-wide and fund financial statements. OTHER INFORMATION In addition to the basic financial statements and accompanying notes, this report also provides certain required supplementary information and schedules. FINANCIAL ANALYSIS OF THE SCHOOL DISTRICT AS A WHOLE Net position, which is the difference between total assets and deferred outflows of resources, and total liabilities and deferred inflows of resources, is one indicator of the financial condition of the School District. When revenues exceed expenses, the result is an increase in net position. When expenses exceed revenues, the result is a decrease in net position. The relationship between revenues and expenses can be thought of as the School District's operating results. The School District's net position, as measured in the Statement of Net Position is one way to measure the School District's financial health, or financial position. Over time, increases or decreases in the School District's net position, as measured in the Statement of Activities, are one indicator of whether its financial health is improving or deteriorating. However, the School District's goal and mission is to provide success for each child's education, not to generate profits as private corporations do. For this reason, many other nonfinancial factors should be considered in assessing the overall health of the School District. In the case of the Barrow County School District, liabilities and deferred inflows of resources exceeded assets and deferred outflows of resources by $56.3 million at June 30, 2018. To better understand the School District's actual financial position and ability to deliver services in future periods, it is necessary to review the various components of the net position category. For example, of the $56.3 million of net position, just over $18.0 million was restricted for continuation of various State and Federal programs, debt service and ongoing capital projects. Accordingly, these funds were not available to meet the School District's ongoing obligations to citizens and creditors. In addition, the School District had $116.3 million (net of related debt) invested in capital assets (e.g., land, buildings, and equipment). The School District uses these capital assets to provide educational services to students within geographic boundaries served by the School District. Because of the very nature and on-going use of the assets being reported in this component of net position, it must be recognized that this portion of the net position is not available for future spending. v BARROW COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2018 Because of the restrictions on net position as discussed above and because of implementation of GASB No. 68, Accounting and Financial Reporting for Pensions, implemented in fiscal year 2015, and GASB No. 75, Accounting and Financial Reporting for Postemployment Benefits Other than Pensions, implemented this year, the School District had a deficit of $190.7 million in unrestricted net position at June 30, 2018. However, the School District's overall net position can also be viewed in the following manner: Net position June 30, 2018 $ (56,297,879) Pension and Postemployment Benefits related to net position 210,590,333 Net position (excluded pension and postemployment benefts), June 30, 2018 $ 154,292,454 The above analysis reflects, removal of pension and post-employment benefits obligations (which are managed in a state run, stable fund), the School District's net position is a positive, nearly $154.3 million, and management believes the School District's financial position is sound. vi BARROW COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2018 Table 1 provides a summary of the School District's net position for this fiscal year as compared to the prior fiscal year. Table 1 Net Position Assets Current and Other Assets Capital Assets, Net Governmental Activities Fiscal Year Fiscal Year 2018 2017 (1) $ 74,596,187 $ 187,990,690 53,274,025 190,363,399 Total Assets 262,586,877 243,637,424 Deferred Outflows of Resources 24,115,565 32,014,947 Total Assets and Deferred Outflows of Resources 286,702,442 275,652,371 Liabilities Current and Other Liabilities Long-Term Liabilities 21,437,003 311,084,715 17,659,634 205,597,047 Total Liabilities 332,521,718 223,256,681 Deferred Inflows of Resources 10,478,603 1,002,532 Total Liabilities and Deferred Inflows of Resources 343,000,321 224,259,213 Net Position Net Investment in Capital Assets Restricted Unrestricted (Deficit) 116,337,302 18,023,335 (190,658,516) 117,351,333 13,312,289 (79,270,464) Total Net Position $ (56,297,879) $ 51,393,158 (1) Fiscal year 2017 balances do not reflect the effect of the restatement of net position. See note 14 in the Notes to the Basic Financial Statements for additional information. Total net position decreased $107.7 million in fiscal year 2018 from the prior year, not including the effects of the restatement. In connection with GASB No. 68, accounting standards for pensions, and GASB No. 75 accounting for other post-employment benefits, management presents the following additional information: Total Unrestricted net position (deficit) $ (190,658,517) Less unrestricted deficit in net position resulting from recognition of net pension obligations and other post-employment benefits 210,590,333 Unrestricted net position, exclusive of the net pension liability effect $ 19,931,816 vii BARROW COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2018 Table 2 provides a summary of the School District's net position for this fiscal year as compared to the prior fiscal year. Table 2 Change in Net Position Revenues Program Revenues: Charges for Services Operating Grants and Contributions Capital Grants and Contributions Governmental Activities Fiscal Year Fiscal Year 2018 2017 (1) $ 3,510,787 $ 3,230,686 89,295,710 83,087,246 636,217 6,467,980 Total Program Revenues General Revenues: Property Taxes Sales Taxes Grants and Contributions not Restricted to Specific Programs Investment Earnings Miscellaneous 93,442,714 37,156,406 12,029,396 7,811,896 514,214 1,619,418 92,785,912 33,410,480 11,172,617 8,697,070 137,890 1,984,990 Total General Revenues Special Item: Donation of Land 59,131,330 1,377,000 55,403,047 - Total Revenues Program Expenses Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Operations of Non-Instructional Services Enterprise Operations Food Services Interest on Short-Term and Long-Term Debt 153,951,044 91,528,061 4,232,319 6,536,349 2,011,939 1,531,918 7,753,756 2,280,443 9,184,221 8,626,029 760,912 9,949 2,752,403 8,239,529 2,732,432 148,188,959 89,523,201 4,335,207 5,431,559 1,839,067 1,466,640 7,278,111 2,061,177 8,019,317 7,968,534 623,039 6,927 2,744,095 7,872,067 3,365,632 Total Expenses 148,180,260 142,534,573 Increase in Net Position $ 5,770,784 $ 5,654,386 (1) Fiscal year 2017 balances do not reflect the effects of the restatement of net position. See note 14 in the Notes to the Basic Financial Statements for additional information. viii BARROW COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2018 The Statement of Activities shows the cost of program services and the charges for services and grants offsetting these services. Table 3 shows, for governmental activities, the total cost of services and the net cost of services. Net cost of services can be defined as the total cost less fees generated by the activities and intergovernmental revenue provided for specific programs. The net cost reflects the financial burden on the School District's taxpayers by each activity as compared to the prior fiscal year. Expenses increased about $5.6 million from the prior year, while the net costs of providing services increased about $5.0 million. Approximately $4.6 million of the additional expenses were for personnel expenses which includes a $2.2 million increase in pension and OPEB costs. Additional increases were in maintenance expenses and contracted services. Table 3 Governmental Activities Total Cost of Services Fiscal Year 2018 Fiscal Year 2017 (1) Net Cost of Services Fiscal Year 2018 Fiscal Year 2017 (1) Instruction $ Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Operations of Non-Instructional Services Enterprise Operations Food Services Interest on Short-Term and Long-Term Debt 91,528,061 $ 4,232,319 6,536,349 2,011,939 1,531,918 7,753,756 2,280,443 9,184,221 8,626,029 760,912 9,949 2,752,403 8,239,529 2,732,432 89,523,201 $ 4,335,207 5,431,559 1,839,067 1,466,640 7,278,111 2,061,177 8,019,317 7,968,534 623,039 6,927 2,744,095 7,872,067 3,365,632 26,410,567 $ 3,528,325 2,489,155 208,333 (809,932) 4,378,646 2,274,490 4,950,020 7,354,868 753,993 (2,124) 457,372 11,401 2,732,432 24,293,260 3,585,019 1,533,332 160,929 (533,101) 4,180,835 2,033,371 3,386,434 6,724,897 619,578 4,656 731,230 (337,411) 3,365,632 Total Expenses $ 148,180,260 $ 142,534,573 $ 54,737,546 $ 49,748,661 (1) Fiscal year 2017 balances do not reflect the effects of the restatement of net position. See note 14 in the Notes to the Basic Financial Statements for additional information. FINANCIAL ANALYSIS OF THE SCHOOL DISTRICT'S FUNDS Information about the School District's governmental funds is presented starting on Exhibit "C" of this report. Governmental funds are accounted for using the modified accrual basis of accounting. The governmental funds had total revenues of $152.9 million and total expenditures of $147.3 million in fiscal year 2018. Total governmental fund balances of $52.5 million at June 30, 2018, increased nearly $18.0 million from the prior year. $12.9 million of the increase in fund balance resulted from a pause/reduction in construction of new buildings and receiving bond proceeds for a future school. Property taxes increased by almost $3.0 million and State funds increased by approximately $4.8 million in the general fund. As stated earlier the main increase in expenditures was salaries and TRS pension cost. Capital projects fund reserves increased by $12.9 million during the fiscal year. The general fund had an increase of $4.7 million during fiscal year 2018. ix BARROW COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2018 Shown here is a graph of property tax and state funds received in the past 6 years: Total Property Taxes and State Funds Received by Fiscal Year $90,000,000 $80,000,000 $70,000,000 $60,000,000 $50,000,000 $40,000,000 $30,000,000 $20,000,000 $10,000,000 $- FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 Property Taxes Received State Revenues (QBE) Received General Fund Budget Highlights The School District's budget is prepared according to Georgia Law. The most significant budgeted fund is the general fund. During the course of fiscal year 2018, the School District amended its general fund budget as needed. The School District budget is adopted at the aggregate level and maintained at the program, function, object, and site levels to facilitate budgetary control. The budgeting systems are designed to control the total budget, but provide flexibility to meet the ongoing programmatic needs. The budgeting systems are also designed to control total site budgets but provide flexibility for site management as well. For the general fund, the final actual revenues of $140.4 million exceeded the final budgeted revenues of $132.1 million by $8.3 million. This variance was primarily due to state funding being fully restored by Governor Deal and property taxes coming in higher than projected. In addition revenues for school activity accounts being included as a part of the general fund financial statements, even though school activity accounts are not required by the School District to have a formal budget. The general fund's final actual expenditures of almost $135.7 million exceeded the final budget amount of $135.5 million by roughly $200 thousand. This variance was primarily due to expenditures for school activity accounts being included in general fund financial statements, but school activity accounts are not required by the School District to have a formal budget. This situation makes it appear the School District exceeded its formal budget for expenditures for the general fund when that was not the case. x BARROW COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2018 CAPITAL ASSETS AND DEBT ADMINISTRATION Capital Assets At fiscal year ended June 30, 2018, the School District had $188.0 million invested in capital assets, net of accumulated depreciation, all in governmental activities. These assets are made up of a broad range of items including buildings; land; land improvements; and food service, transportation and maintenance equipment. Table 4 reflects a summary of these balances, net of accumulated depreciation, as compared to the prior fiscal year. Table 4 Capital Assets at June 30 (Net of Depreciation) Land Construction in Progress Land Improvements Buildings and Improvements Equipment Total Governmental Activities Fiscal Year Fiscal Year 2018 2017 $ 5,400,605 $ 4,028,605 22,360 18,781,067 850,860 967,265 176,853,681 162,210,563 4,863,184 4,375,899 $ 187,990,690 $ 190,363,399 The overall capital assets decreased in fiscal year 2018 by $2.4 million. Depreciation expenses of $5.3 million reduced the total capital assets. The School District was donated land in the amount of $1.4 million, purchased buses and had facility improvements all adding to the total capital assets balance. Additional information about the School District's capital assets can be found in the Notes to the Basic the Financial Statements. xi BARROW COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2018 Long-Term Debt At June 30, 2018, the School District had $87.2 million in total debt outstanding which consisted of $80.1 million in bond debt, $753 thousand in energy efficient leases, $240 thousand in revenue bonds, $449 thousand in compensated absences debt, and $5.7 million in unamortized bond premiums. Table 5 summarizes the School District's debt as compared to the prior fiscal year. Table 5 Debt at June 30 Bonds Payable $ Energy Efficient Lease Revenue Bonds Compensated Absences Unamortized Bond Premiums Total $ Governmental Activities Fiscal Year Fiscal Year 2018 2017 80,060,000 $ 752,889 240,380 448,744 5,743,288 74,260,000 839,490 314,160 432,665 5,031,804 87,245,301 $ 80,878,119 The School District closed on bonds of $10.8 million to be used for construction of a new school. Additional information about the School District's debt can be found in the Notes to the Basic Financial Statements. FACTORS BEARING ON THE SCHOOL 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 2018 was 18.50, which produced approximately $2.0 million per mill. Fund balances are beginning to return to the levels they were prior to recession. The School District will attempt to maintain adequate balances to shield the School District from the adverse effect of economic fluctuations. The economy continues to improve. General fund revenues from the State of Georgia increased 6.05% from the prior year, and property tax revenues showed an increase of 8.87% from the prior year. The general fund had an unassigned fund balance of over $18.0 million at June 30, 2018, which is an increase of about $4.5 million from the prior year. This increase in general fund balance was primarily attributable to these increased revenues. In fiscal year 2019, the cost of the employer portion of TRS pension will increase from 16.81% of employee salary to 20.9% resulting in an additional $4.0 million. Health insurance premiums for certified and non-certified employees is expected to be stable at $945 per employee per month. In spite of these hardships, the School District plans to add numerous teaching positions due to growth and add additional support positions for our teachers. Property taxes should increase due to reassessments, new residential housing projects and a rise in commercial construction. xii BARROW COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2018 The School District will be breaking ground on the new high school that is estimated to cost $19.0 million to be paid out of SPLOST funds and from state reimbursements. In light of these challenges and opportunities, the School District will continue to be a good steward of tax dollars while providing a quality educational opportunity. CONTACTING THE SCHOOL DISTRICT'S FINANCIAL MANAGEMENT This financial report is designed to provide our citizens taxpayers, investors and creditors with a general overview of the School District's finances and to show the School District's accountability for the money it receives. If you have questions about this report or need additional financial information, please contact Ms. Jennifer Houston, CPA, Assistant Superintendent for Business Services, Barrow County Board of Education, 179 West Athens Street, Winder, Georgia, 30680. You may also email your questions to Ms. Houston at Jennifer.Houston@barrow.k12.ga.us xiii BARROW COUNTY BOARD OF EDUCATION BARROW COUNTY BOARD OF EDUCATION STATEMENT OF NET POSITION JUNE 30, 2018 ASSETS Cash and Cash Equivalents Investments Receivables, Net Interest Taxes State Government Federal Government Other Inventories Restricted Assets Cash and Investments with Fiscal Agent or Trustee Capital Assets, Non-Depreciable Capital Assets, Depreciable (Net of Accumulated Depreciation) Total Assets DEFERRED OUTFLOWS OF RESOURCES Deferred Charge on Debt Refunding Related to Defined Benefit Pension Plans Related to OPEB Plan Total Deferred Outflows of Resources LIABILITIES Accounts Payable Salaries and Benefits Payable Payroll Withholdings Payable Interest Payable Net Pension Liability Net OPEB Liability Long-Term Liabilities Due Within One Year Due in More Than One Year Total Liabilities DEFERRED INFLOWS OF RESOURCES Related to Defined Benefit Pension Plans Related to OPEB Plan Total Deferred Inflows of Resources NET POSITION Net Investment in Capital Assets Restricted for Continuation of Federal Programs Debt Service Capital Projects Unrestricted (Deficit) Total Net Position EXHIBIT "A" GOVERNMENTAL ACTIVITIES $ 57,712,306.46 46,884.20 37,028.16 3,992,621.73 11,045,878.59 1,189,336.85 421,853.34 62,763.91 87,513.90 5,422,964.82 182,567,725.26 262,586,877.22 387,880.70 19,627,512.38 4,100,172.00 24,115,565.08 116,598.58 15,390,387.05 4,642,342.46 1,287,675.40 113,014,034.00 110,825,380.00 5,926,523.77 81,318,777.24 332,521,718.50 1,469,135.00 9,009,468.00 10,478,603.00 116,337,302.21 2,644,656.14 3,298,198.78 12,080,480.25 (190,658,516.58) $ (56,297,879.20) The notes to the basic financial statements are an integral part of this statement. - 1 - BARROW COUNTY BOARD OF EDUCATION STATEMENT OF ACTIVITIES FOR THE YEAR ENDED JUNE 30, 2018 GOVERNMENTAL ACTIVITIES Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Operations of Non-Instructional Services Enterprise Operations Food Services Interest on Short-Term and Long-Term Debt Total Governmental Activities General Revenues Taxes Property Taxes For Maintenance and Operations For Debt Services Railroad Cars Sales Taxes Special Purpose Local Option Sales Tax For Capital Projects Other Sales Tax Grants and Contributions not Restricted to Specific Programs Investment Earnings Miscellaneous Special Item Donation of Land Total General Revenues and Special Item Change in Net Position Net Position - Beginning of Year (Restated) EXPENSES CHARGES FOR SERVICES PROGRAM REVENUES $ 91,528,060.54 $ 4,232,318.67 6,536,349.15 2,011,939.19 1,531,917.75 7,753,755.57 2,280,442.74 9,184,221.23 8,626,029.34 760,912.34 9,949.41 2,752,403.26 8,239,529.23 2,732,431.63 $ 148,180,260.05 $ - 65,900.13 - 2,295,031.15 1,149,855.90 - 3,510,787.18 Net Position - End of Year The notes to the basic financial statements are an integral part of this statement. - 2 - EXHIBIT "B" PROGRAM REVENUES OPERATING GRANTS AND CONTRIBUTIONS CAPITAL GRANTS AND CONTRIBUTIONS NET (EXPENSES) REVENUES AND CHANGES IN NET POSITION $ 64,564,613.62 $ 695,589.40 4,037,684.01 1,803,442.00 2,337,926.01 3,375,108.98 4,545.15 4,123,472.45 1,271,160.86 6,349.72 11,307.55 7,064,510.20 - $ 89,295,709.95 $ 552,879.44 $ 8,404.58 9,510.55 164.61 3,923.56 1,407.87 44,828.41 570.02 765.82 13,762.44 - 636,217.30 (26,410,567.48) (3,528,324.69) (2,489,154.59) (208,332.58) 809,931.82 (4,378,646.59) (2,274,489.72) (4,950,020.24) (7,354,868.48) (753,992.60) 2,123.96 (457,372.11) (11,400.69) (2,732,431.63) (54,737,545.62) 37,128,869.84 8,393.42 19,143.07 10,854,905.96 1,174,490.30 7,811,896.00 514,213.71 1,619,418.18 1,377,000.00 60,508,330.48 5,770,784.86 (62,068,664.06) $ (56,297,879.20) - 3 - BARROW COUNTY BOARD OF EDUCATION BALANCE SHEET GOVERNMENTAL FUNDS JUNE 30, 2018 EXHIBIT "C" ASSETS Cash and Cash Equivalents Investments Receivables, Net Interest Taxes State Government Federal Government Other Due from Other Funds Inventories Restricted Cash and Investments with a Fiscal Agent or Trustee GENERAL FUND CAPITAL PROJECTS FUND DEBT SERVICE FUND TOTAL $ 28,203,344.91 $ 24,938,309.92 $ 46,884.20 - 4,570,651.63 $ - 57,712,306.46 46,884.20 2,999,436.22 11,045,878.59 1,189,336.85 419,534.03 - 62,763.91 31,361.27 983,629.85 2,319.31 292.30 - 5,666.89 9,555.66 - 37,028.16 3,992,621.73 11,045,878.59 1,189,336.85 421,853.34 292.30 62,763.91 - 87,513.90 - 87,513.90 Total Assets LIABILITIES Accounts Payable Salaries and Benefits Payable Payroll Withholdings Payable Due to Other Funds Total Liabilities DEFERRED INFLOWS OF RESOURCES Unavailable Revenue - Property Taxes FUND BALANCES Nonspendable Restricted Assigned Unassigned Total Fund Balances $ 43,967,178.71 $ 26,043,426.55 $ 4,585,874.18 $ 74,596,479.44 $ 68,537.97 $ 15,390,387.05 4,642,342.46 292.30 20,101,559.78 48,060.61 $ - 48,060.61 - $ 116,598.58 - 15,390,387.05 - 4,642,342.46 - 292.30 - 20,149,620.39 1,955,510.88 - 9,555.66 1,965,066.54 62,763.91 2,581,892.23 1,221,611.67 18,043,840.24 21,910,108.05 25,995,365.94 - 25,995,365.94 4,576,318.52 - 4,576,318.52 62,763.91 33,153,576.69 1,221,611.67 18,043,840.24 52,481,792.51 Total Liabilities, Deferred Inflows of Resources, and Fund Balances $ 43,967,178.71 $ 26,043,426.55 $ 4,585,874.18 $ 74,596,479.44 The notes to the basic financial statements are an integral part of this statement. - 4 - BARROW COUNTY BOARD OF EDUCATION RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO THE STATEMENT OF NET POSITION JUNE 30, 2018 EXHIBIT "D" Total fund balances - governmental funds (Exhibit "C") Amounts reported for governmental activities in the Statement of Net Position are different because: Capital assets used in governmental activities are not financial resources and therefore are not reported in the funds. Land Construction in progress Buildings and improvements Equipment Land improvements Accumulated depreciation Some liabilities are not due and payable in the current period and, therefore, are not reported in the funds. Net pension liability Net OPEB liability Deferred charges or credits on debt refundings are applicable to future periods and are therefore not reported in the funds and are amortized over the life of the new debt. Deferred outflows and inflows of resources related to pensions and OPEB are applicable to future periods and, therefore, are not reported in the funds. Related to pensions Related to OPEB Taxes that are not available to pay for current period expenditures are deferred in the funds. Long-term liabilities, and related accrued interest, are not due and payable in the current period and therefore are not reported in the funds. Bonds payable Accrued interest payable Revenue bonds Compensated absences payable Unamortized bond premiums Energy efficiency leases payable $ 52,481,792.51 $ 5,400,604.82 22,360.00 225,528,420.91 21,726,396.63 3,592,009.84 (68,279,102.12) 187,990,690.08 $ (113,014,034.00) (110,825,380.00) (223,839,414.00) 387,880.70 $ 18,158,377.38 (4,909,296.00) 13,249,081.38 1,965,066.54 $ (80,060,000.00) (1,287,675.40) (240,379.90) (448,743.49) (5,743,288.26) (752,889.36) (88,532,976.41) Net position of governmental activities (Exhibit "A") $ (56,297,879.20) The notes to the basic financial statements are an integral part of this statement. - 5 - BARROW COUNTY BOARD OF EDUCATION STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS YEAR ENDED JUNE 30, 2018 EXHIBIT "E" REVENUES Property Taxes Sales Taxes State Funds Federal Funds Charges for Services Investment Earnings Miscellaneous Total Revenues EXPENDITURES Current Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Enterprise Operations Food Services Operation Capital Outlay Debt Services Principal Interest Total Expenditures Revenues over (under) Expenditures OTHER FINANCING SOURCES (USES) Proceeds of Bonds Premiums on Bonds Sold Sale of Capital Assets Transfers In Transfers Out Total Other Financing Sources (Uses) Net Change in Fund Balances Fund Balances - Beginning GENERAL FUND CAPITAL PROJECTS FUND DEBT SERVICE FUND TOTAL $ 36,735,801.40 $ 1,174,490.30 84,028,690.24 13,079,095.17 3,510,787.18 220,429.07 1,617,098.87 140,366,392.23 - $ 10,854,905.96 1,392,682.60 - 251,697.28 2,319.31 12,501,605.15 - $ 42,087.36 - 36,735,801.40 12,029,396.26 85,421,372.84 13,079,095.17 3,510,787.18 514,213.71 1,619,418.18 42,087.36 152,910,084.74 84,655,177.67 4,118,271.66 6,329,611.96 1,962,427.77 1,103,078.91 7,577,049.29 2,075,775.85 8,643,717.33 7,643,779.95 744,640.20 9,949.41 2,746,003.75 8,099,560.08 - - 135,709,043.83 4,657,348.40 934,903.32 49,955.72 357,487.76 179,783.63 450,317.07 868,244.00 48,060.61 - 405,527.45 160,380.29 36,431.48 3,491,091.33 9,010,513.82 - - 5,025,000.00 3,068,124.44 8,093,124.44 (8,051,037.08) 85,590,080.99 4,118,271.66 6,379,567.68 1,962,427.77 1,460,566.67 7,577,049.29 2,255,559.48 9,094,034.40 8,512,023.95 792,700.81 9,949.41 2,746,003.75 8,099,560.08 405,527.45 5,185,380.29 3,104,555.92 147,293,259.60 5,616,825.14 - - 4,657,348.40 17,252,759.65 10,825,000.00 1,269,647.95 258,250.00 (8,431,747.63) 3,921,150.32 12,931,664.14 13,063,701.80 8,431,747.63 - 8,431,747.63 380,710.55 4,195,607.97 10,825,000.00 1,269,647.95 258,250.00 8,431,747.63 (8,431,747.63) 12,352,897.95 17,969,723.09 34,512,069.42 Fund Balances - Ending $ 21,910,108.05 $ 25,995,365.94 $ 4,576,318.52 $ 52,481,792.51 The notes to the basic financial statements are an integral part of this statement. - 6 - BARROW COUNTY BOARD OF EDUCATION RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES TO THE STATEMENT OF ACTIVITIES JUNE 30, 2018 EXHIBIT "F" Net change in fund balances total governmental funds (Exhibit "E") Amounts reported for governmental activities in the Statement of Activities are different because: Governmental funds report capital outlays as expenditures. However, in the Statement of Activities, the cost of capital assets is allocated over their estimated useful lives as depreciation expense. Capital outlay Depreciation expense The net effect of various miscellaneous transactions involving capital assets (i.e., sales, trade-ins, donations, and disposals) is to decrease net position. Donated captial assets are not reported in governmental funds. However, in the Statement of Activities, the donations are shown as special items. Taxes reported in the Statement of Activities that do not provide current financial resources are not reported as revenues in the funds. The issuance of long-term debt provides current financial resources to governmental funds, while the repayment of the principal of long-term debt consumes the current financial resources of governmental funds. Neither transaction, however, has any effect on net position. Also, governmental funds report the effect of premiums, discounts and the difference between the carrying value of refunded debt and the acquisition cost of refunded debt when debt is first issued. These amounts are deferred and amortized in the Statement of Activities. General obligation bonds issued, including a premium of $1,269,647.95 Deferral of loss on refunding bonds Amortization of bond premiums Bond principal retirements Energy efficiency lease payments Revenue bond payments District pension contributions are reported as expenditures in the governmental funds when made. However, they are reported as deferred outflows of resources in the Statement of Net Position because the reported net pension/OPEB liability is measured a year before the District's report date. Pension/OPEB expense, which is the change in the net pension/OPEB liability adjusted for changes in deferred outflows and inflows of resources related to pensions/OPEB, is reported in the Statement of Activities. Pension expense OPEB expense Georgia State Financing and Investment Commission grants that are not available to pay current period expenditures are deferred in the fund statements but recognized on the Statement of Activities. Some items reported in the Statement of Activities do not require the use of current financial resources and therefore are not reported as expenditures in governmental funds. Accrued interest on issuance of bonds Compensated absences $ 17,969,723.09 $ 1,787,667.45 (5,316,461.81) (3,528,794.36) (220,914.65) 1,377,000.00 420,604.93 $ (12,094,647.95) (96,970.18) 558,164.13 5,025,000.00 86,600.32 73,779.97 (6,448,073.71) $ (664,292.86) (2,272,854.00) (2,937,146.86) (756,465.30) $ (89,069.66) (16,078.62) (105,148.28) Change in net position of governmental activities (Exhibit "B") $ 5,770,784.86 The notes to the basic financial statements are an integral part of this statement. - 7 - BARROW COUNTY BOARD OF EDUCATION STATEMENT OF FIDUCIARY NET POSITION FIDUCIARY FUNDS JUNE 30, 2018 ASSETS Cash and Cash Equivalents LIABILITIES Funds Held for Others EXHIBIT "G" AGENCY FUNDS $ 195,308.47 $ 195,308.47 The notes to the basic financial statements are an integral part of this statement. - 8 - BARROW COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2018 EXHIBIT "H" NOTE 1: DESCRIPTION OF SCHOOL DISTRICT AND REPORTING ENTITY REPORTING ENTITY The Barrow 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 position 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. - 9 - BARROW COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2018 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), Bond Proceeds and grants from Georgia State Financing and Investment Commission 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 (property and 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, grants and donations. On an accrual basis, revenue from property taxes is recognized in the fiscal year for which the taxes are levied. Revenue from sales taxes is recognized in the fiscal year in which the underlying transaction (sale) takes place. Revenue from grants and donations is recognized in the fiscal year in which all eligibility requirements have been satisfied. The School District uses funds to report on its financial position and the results of its operations. Fund accounting is designed to demonstrate legal compliance and to aid financial management by segregating transactions related to certain governmental functions or activities. A fund is a separate accounting entity with a self-balancing set of accounts. Governmental funds are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Under this method, revenues are recognized when measurable and available. The School District considers all revenues reported in the governmental funds to be available if they are collected within sixty days after year-end. The School District considers all intergovernmental revenues to be available if they are collected within 60 days after year-end. Property taxes, sales taxes and interest are considered to be susceptible to accrual. Expenditures are recorded when the related fund liability is incurred, except for principal and interest on general long-term debt and compensated absences, which are recognized as expenditures to the extent they have matured. - 10 - BARROW COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2018 EXHIBIT "H" 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 2018, the School District adopted Governmental Accounting Standards Board (GASB) Statement No. 75, Accounting and Financial Reporting for Postemployment Benefits Other than Pensions. This statement establishes standards for recognizing and measuring liabilities, deferred outflows of resources, deferred inflows of resources, and expense/expenditures. For defined benefit OPEB, this statement identifies the methods and assumptions that are required to be used to project benefit payments, discount projected benefit payments to their actuarial present value, and attribute that present value to periods of employee service. Note disclosure and required supplementary information requirements about defined benefit OPEB also are addressed. The adoption of this statement has a significant impact on the School District's financial statements. As noted in the Restatement of Net Position note disclosure, the School District restated beginning net position for the cumulative effect of this accounting change. In fiscal year 2018, the School District adopted Governmental Accounting Standards Board (GASB) Statement No. 81, Irrevocable Split-Interest Agreements. This statement requires that a government that receives resources pursuant to an irrevocable split-interest agreement recognize assets, liabilities, and deferred inflows of resources at the inception of the agreement. Furthermore, this statement requires that a government recognize assets representing its beneficial interests in irrevocable split-interest agreements that are administered by a third party, if the government controls the present service capacity of the beneficial interests. This statement requires that a government recognize revenue when the resources become applicable to the reporting period. The adoption of this statement does not have a significant impact on the School District's financial statements. In fiscal year 2018, the School District adopted Governmental Accounting Standards Board (GASB) Statement No. 85, Omnibus 2017. The objective of this statement is to address practice issues that have been identified during implementation and application of certain GASB Statements. This statement addresses a variety of topics including issues related to blending component units, goodwill, fair value measurement and application, and postemployment benefits (pensions and other postemployment benefits [OPEB]). The adoption of this statement does not have a significant impact on the School District's financial statements. In fiscal year 2018, the School District adopted Governmental Accounting Standards Board (GASB) Statement No. 86, Certain Debt Extinguishment Issues. The primary objective of this statement is to improve consistency in accounting and financial reporting for in-substance defeasance of debt by providing guidance for transactions in which cash and other monetary assets acquired with only existing resources--resources other than the proceeds of refunding debt--are placed in an irrevocable trust for the sole purpose of extinguishing debt. This statement also improves accounting and financial reporting for prepaid insurance on debt that is extinguished and notes to financial statements for debt that is defeased in substance. The adoption of this statement does not have a significant impact on the School District's financial statements. - 11 - BARROW COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2018 EXHIBIT "H" 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. 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. The School District does not have a formal policy regarding investment policies that address credit risk, custodial credit risks, concentrated credit risk, interest rate risks, or foreign currency risks. Investments made by the School District in nonparticipating interest-earning contracts (such as certificates of deposit) and repurchase agreements are reported at cost. Participating interest-earning contracts and money market investments with a maturity at purchase of one year or less are reported at amortized cost. 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. Due to other funds and due from other funds consist of activities between funds that are representative of lending/borrowing arrangements outstanding at the end of the fiscal year. 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. RESTRICTED ASSETS Certain resources set aside for repayment of debt are classified as restricted assets on the Statement of net position because their use is limited by applicable debt statutes, e.g. Rutland Center revenue bonds. - 12 - BARROW COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2018 EXHIBIT "H" 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 the acquisition 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. Capitalization thresholds and estimated useful lives of capital assets reported in the government-wide statements are as follows: Capitalization Policy Estimated Useful Life Land All Land Improvements $ 5,000.00 Buildings and Improvements $ 5,000.00 Equipment $ 5,000.00 Intangible Assets $ 5,000.00 DEFERRED OUTFLOWS/INFLOWS OF RESOURCES N/A 20 to 80 years 10 to 80 years 3 to 20 years 10 to 20 years 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. COMPENSATED ABSENCES Compensated absences payable consists of vacation leave employees earned based on services already rendered. Vacation leave of 12 days is awarded on a fiscal year basis to all full-time personnel employed on a twelve-month basis until they have reached 5 fiscal years of service. Between 5 to 10 fiscal years of service, employees earn 15 days and after 10 fiscal years of service they earn 18 days per fiscal year. No other employees are eligible to earn vacation leave. Vacation leave not utilized during the fiscal year may be carried over to the next fiscal year, providing such vacation leave does not exceed 30 days. Upon terminating employment, the School District pays all unused and unforfeited vacation benefits to employees. Accordingly, vacation benefits are accrued as a liability in the government-wide financial statements. A liability for these amounts is reported in the governmental fund financial statements only if they have matured, for example, as a result of employee resignations and retirements by fiscal-year end. - 13 - BARROW COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2018 EXHIBIT "H" Members of the Teachers Retirement System of Georgia (TRS) may apply unused sick leave toward early retirement. The liability for early retirement will be borne by TRS rather than by the individual School Districts. Otherwise, sick leave does not vest with the employee, and no liability is reported in the School District's financial statements. 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. POSTEMPLOYMENT BENEFITS OTHER THAN PENSIONS (OPEB) For purposes of measuring the net OPEB liability, deferred outflows of resources and deferred inflows of resources related to OPEB, and OPEB expense, information about the fiduciary net position of the Georgia School Employees Postemployment Benefit Fund (School OPEB Fund) and additions to/deductions from School OPEB Fund fiduciary net position have been determined on the same basis as they are reported by School OPEB Fund. For this purpose, benefit payments 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. 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. - 14 - BARROW COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2018 EXHIBIT "H" 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 Barrow County Board of Commissioners adopted the property tax levy for the 2017 tax digest year (calendar year) on September 15, 2017 (levy date) based on property values as of January 1, 2017. Taxes were due on November 15, 2017 (lien date). Taxes collected within the current fiscal year or within 60 days after year-end on the 2017 tax digest are reported as revenue in the governmental funds for fiscal year 2018. The Barrow 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, 2018, for maintenance and operations amounted to $33,601,532.68. The tax millage rate levied for the 2017 tax year (calendar year) for the School District was as follows (a mill equals $1 per thousand dollars of assessed value): School Operations 18.50 mills Additionally, Title Ad Valorem Tax revenues, at the fund reporting level, amounted to $3,115,125.65 during fiscal year ended June 30, 2018. SALES TAXES Education Special Purpose Local Option Sales Tax (ESPLOST), at the fund reporting level, during the year amounted to $10,854,905.96 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 reauthorized at least every five years. NOTE 3: BUDGETARY DATA The budget is a complete financial plan for the School District's fiscal year, and is based upon careful estimates of expenditures together with probable funding sources. The budget is legally adopted each year for the general, debt service, and capital projects funds. There is no statutory prohibition regarding over expenditure of the budget at any level. The budget for all governmental funds, except the various school activity (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 - 15 - BARROW COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2018 EXHIBIT "H" 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, CASH EQUIVALENTS AND INVESTMENTS 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 (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, 2018, the School District had deposits with a carrying amount of $32,869,551.47, and a bank balance of $33,437,378.39. The bank balances insured by Federal depository insurance were $677,769.74 and the bank balances collateralized with securities held by the pledging financial institution's trust department or agent in the School District's name were $32,759,608.65. - 16 - BARROW COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2018 EXHIBIT "H" Reconciliation of cash and cash equivalents balances to carrying value of deposits: Cash and cash equivalents Statement of Net Position Statement of Fiduciary Net Position $ 57,712,306.46 195,308.47 Total cash and cash equivalents 57,907,614.93 Add: Deposits with original maturity of three months or more reported as investments 46,884.20 Less: Investment pools reported as cash and cash equivalents Georgia Fund 1 25,084,947.66 Total carrying value of deposits - June 30, 2018 $ 32,869,551.47 CATEGORIZATION OF CASH EQUIVALENTS The School District reported cash equivalents of $25,084,947.66 in Georgia Fund 1, a local government investment pool, which is included in the cash balances above. 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, 2018, was 10 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. CATEGORIZATION OF INVESTMENTS At June 30, 2018, the School District had the following investments: Investment Type Fair Value Investment Maturity Less Than 1 Year Mutual Bond Fund $ 87,513.90 $ 87,513.90 Fair Value of Investments The School District measures and records its investments using fair value measurement guidelines established by generally accepted accounting principles. These guidelines recognize a three-tiered fair value hierarchy, as follows: Level 1: Quoted prices for identical measurements in active markets; Level 2: Observable inputs other than quoted market prices; and, Level 3: Unobservable inputs. - 17 - BARROW COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2018 EXHIBIT "H" At June 30, the School District had the following investments by fair value level: Mutual Bond Funds of $87,513.90 are valued using quoted prices for identical instruments in active markets. (Level 1 inputs) Interest Rate Risk Interest rate risk is the risk that changes in interest rates of debt investment will adversely affect the fair value of an investment. The School District does not have a formal policy for managing interest rate risk. Custodial Credit Risk Custodial credit risk for investments is the risk that, in the event of the failure of the counterparty to a transaction, the School District will not be able to recover the value of the investment or collateral securities that are in the possession of an outside party. The School District does not have a formal policy for managing custodial credit risk. At June 30, 2018, $87,513.90 of the School District's applicable investments were held by the investment's counterparty, not in the School District's name. NOTE 5: RESTRICTED ASSETS The restricted investment balance, totaling $87,513.90 is for the Rutland Center revenue bonds. These assets are pledged to redeem revenue bonds upon maturity. NOTE 6: CAPITAL ASSETS The following is a summary of changes in the capital assets for governmental activities during the fiscal year: Balances July 1, 2017 Increases Decreases Balances June 30, 2018 Governmental Activities Capital Assets, Not Being Depreciated: Land Construction in Progress $ 4,028,604.82 $ 1,377,000.00 $ 5,000.00 $ 18,781,067.50 385,652.45 19,144,359.95 5,400,604.82 22,360.00 Total Capital Assets Not Being Depreciated 22,809,672.32 1,762,652.45 19,149,359.95 5,422,964.82 Capital Assets Being Depreciated Buildings and Improvements Equipment Land Improvements Less Accumulated Depreciation for: Buildings and Improvements Equipment Land Improvements 207,164,427.11 20,038,529.40 3,645,320.34 18,858,507.72 1,687,867.23 - 44,953,864.21 15,662,630.55 2,678,055.32 4,002,299.66 1,200,581.50 113,580.65 494,513.92 - 53,310.50 225,528,420.91 21,726,396.63 3,592,009.84 281,423.64 - 50,486.13 48,674,740.23 16,863,212.05 2,741,149.84 Total Capital Assets, Being Depreciated, Net 167,553,726.77 15,229,913.14 215,914.65 182,567,725.26 Governmental Activity Capital Assets - Net $ 190,363,399.09 $ 16,992,565.59 $ 19,365,274.60 $ 187,990,690.08 - 18 - BARROW COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2018 EXHIBIT "H" Current year depreciation expense by function is as follows: Instruction Support Services Pupil Services $ Improvements of Instructional Services Educational Media Services General Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Enterprise Services Food Services 70,231.75 79,473.61 1,375.51 32,786.70 11,764.66 374,602.37 774,736.38 4,763.31 6,399.51 $ 3,845,324.05 1,356,133.80 115,003.96 $ 5,316,461.81 NOTE 7: INTERFUND ASSETS, LIABILITIES, AND TRANSFERS INTERFUND ASSETS AND LIABILITIES Due to and due from other funds are recorded for interfund receivables and payables which arise from interfund transactions. Interfund balances at June 30, 2018, consisted of the following: Due From Other Funds Due To Other Funds General Fund $ Capital Projects Fund - $ 292.30 292.30 - $ 292.30 $ 292.30 The general fund owes the capital projects fund money that was deposited in the general fund but needs to go into the capital projects fund. INTERFUND TRANFERS Interfund transfers for the year ended June 30, 2018, consisted of the following: Transfers to Transfers From Capital Projects Fund Debt Service Fund $ 8,431,747.63 Transfers are used to move sales tax revenues collected by the capital projects fund to the debt service fund to pay principal and interest on bonds. - 19 - BARROW COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2018 EXHIBIT "H" NOTE 8: LONG-TERM LIABILITIES The changes in long-term liabilities during the fiscal year for governmental activities, were as follows: Balance July 1, 2017 Additions Governmental Activities Balance Deductions June 30, 2018 Due Within One Year General Obligation (G.O.) Bonds Unamortized Bond Premiums Energy Efficiency Leases Revenue Bonds Compensated Absences(1) $ 74,260,000.00 $ 10,825,000.00 $ 5,025,000.00 $ 80,060,000.00 $ 5,195,000.00 5,031,804.44 1,269,647.95 558,164.13 5,743,288.26 565,460.96 839,489.68 - 86,600.32 752,889.36 89,109.51 314,159.87 - 73,779.97 240,379.90 76,953.30 432,664.87 436,982.60 420,903.98 448,743.49 - $ 80,878,118.86 $ 12,531,630.55 $ 6,164,448.40 $ 87,245,301.01 $ 5,926,523.77 (1) The portion of compensated absences due within one year has been determined to be immaterial to the basic financial statements. GENERAL OBLIGATION DEBT OUTSTANDING The School District's bonded debt consists of various issues of general obligation bonds that are generally noncallable with interest payable semiannually. Bond proceeds primarily pay for acquiring or constructing capital facilities. Bonds have also been issued to advance-refund previously issued bonds. The School District repays general obligation bonds from voter-approved sales taxes. General obligation bonds are direct obligations and pledge the full faith and credit of the School District. During the current year, the School District issued general obligation bonds totaling $10,825,000.00 to be used for capital outlay, buses, IT equipment, and another school under the ESPLOST agreement. Of the total amount authorized, $496,821.06 remains unissued. General obligation bonds currently outstanding are as follows: Description Interest Rates Issue Date Maturity Date Amount Issued Amount Outstanding General Government - Refunding - Series 2010 General Government - Series 2012A General Government - Series 2012B General Government - Series 2014 General Government - Refunding - Series 2016 General Government - Series 2017 3.75% - 5.00% 2.00% - 3.00% 3.00% - 4.00% 2.55% 3.00% - 4.00% 3.00% - 5.00% 11/18/2010 11/15/2012 11/15/2012 2/14/2014 3/29/2016 8/15/2017 2/1/2027 $ 38,700,000.00 $ 32,450,000.00 2/1/2027 9,475,000.00 9,475,000.00 2/1/2022 5,945,000.00 4,595,000.00 2/1/2027 5,880,000.00 5,355,000.00 2/1/2032 17,360,000.00 17,360,000.00 2/1/2032 10,825,000.00 10,825,000.00 $ 88,185,000.00 $ 80,060,000.00 - 20 - BARROW COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2018 EXHIBIT "H" 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 Unamortized Bond Premium 2019 2020 2021 2022 2023 2024 - 2028 2029 - 2032 $ 5,195,000.00 $ 3,086,115.00 $ 565,460.96 5,405,000.00 2,899,487.50 565,460.96 5,620,000.00 2,705,349.60 565,460.96 5,845,000.00 2,497,662.50 565,460.96 6,070,000.00 2,252,162.50 532,565.32 31,480,000.00 7,394,032.50 2,209,334.03 20,445,000.00 1,736,450.00 739,545.07 Total Principal and Interest $ 80,060,000.00 $ 22,571,259.60 $ 5,743,288.26 REVENUE BONDS The School District entered into a contract with the Northeast Georgia Regional Educational Service Agency, dated June 01, 2006, for the issuance of revenue bonds to provide funds for the construction and subsequent lease of the Rutland Center. Under the terms of the contract, the Northeast Georgia Regional Educational Service Agency issued $912,332.95 in revenue bonds on behalf of the School District. The obligation of the School District is absolute and unconditional so long as any of the bonds remain outstanding. Under the contract, the School District will exercise its power of taxation to the extent necessary to pay the amounts required to be paid by the contract. Debt currently outstanding under Revenue Bonds is as follows: Purpose Interest Rate Issue Date Maturity Date Amount Issued Amount Outstanding General Government-Rutland Center Revenue Bonds 4.16% 6/1/2006 8/1/2020 $ 912,332.95 $ 240,379.90 The following is a schedule of total revenue bond payments: Fiscal Year Ended June 30: Principal 2019 2020 2021 $ 76,953.30 $ 80,126.63 83,299.97 Total Principal and Interest $ 240,379.90 $ Interest 9,999.80 6,798.55 3,465.28 20,263.63 OBLIGATIONS UNDER ENERGY EFFICIENCY LEASES An energy efficiency lease agreement dated October 06, 2015 was executed by and between the School District, the lessee, and TCF Equipment Finance, the lessor. The agreement authorized the borrowing of $944,319.00 for the purchase of energy efficiency equipment, machinery, supplies, building modifications and other energy saving items. Payments of the lease shall be made from the School District's capital projects fund. - 21 - BARROW COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2018 EXHIBIT "H" Debt currently outstanding is as follows: Purpose Interest Rate General Government-Energy Lease 2.85% Issue Date 10/6/2015 Maturity Date Amount Issued Amount Outstanding 2/1/2026 $ 944,319.00 $ 752,889.36 The following is a schedule of total energy efficiency lease payments: Fiscal Year Ended June 30: 2019 2020 2021 2022 2023 2024 - 2027 Total Principal and Interest Principal $ 89,109.51 $ 91,691.38 94,348.03 97,081.67 99,894.53 280,764.24 $ 752,889.36 $ Interest 20,367.93 17,786.06 15,129.41 12,395.77 9,582.91 11,175.60 86,437.68 COMPENSATED ABSENCES Compensated absences represent obligations of the School District relating to employees' rights to receive compensation for future absences based upon service already rendered. This obligation relates only to vesting accumulating leave in which payment is probable and can be reasonably estimated. Typically, the general fund is the fund used to liquidate this long-term debt. The School District uses the vesting method to compute compensated absences. NOTE 9: 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 exceeded 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. - 22 - BARROW COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2018 EXHIBIT "H" WORKERS' COMPENSATION Georgia School Boards Association Workers' Compensation Fund The School District participates in the Georgia School Boards Association Workers' Compensation Fund (the Fund), a public entity risk pool organized on July 1, 1992, 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 Fund for its Workers' Compensation insurance coverage. Excess insurance coverage is provided through an agreement by the Fund with the Safety National Casualty Corporation to provide coverage for potential losses sustained by the Fund in excess of $550 thousand loss per occurrence, up to the statutory limit. Employers' Liability insurance coverage is also provided by Safety National Casualty Corporation to provide coverage for potential losses sustained by the Fund in excess of $550 thousand loss per occurrence, up to $2.0 million. In addition to the $550,000.00 per occurrence retention, the Fund also retains an additional $200,000.00 per year corridor retention. 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. 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 2017 $ - $ 3,736.00 $ 3,736.00 $ - 2018 $ - $ 10,708.79 $ 10,708.79 $ - SURETY BOND The School District purchased a surety bond to provide additional insurance coverage as follows: Position Covered Amount Superintendent $ 100,000.00 NOTE 10: FUND BALANCE CLASSIFICATION DETAILS The School District's financial statements include the following amounts presented in the aggregate at June 30, 2018: Nonspendable Inventories Restricted Continuation of Federal Programs Capital Projects Debt Service Assigned School Activity Accounts Unassigned $ 62,763.91 $ 2,581,892.23 25,995,365.94 4,576,318.52 33,153,576.69 1,221,611.67 18,043,840.24 Fund Balance, June 30, 2018 $ 52,481,792.51 - 23 - BARROW COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2018 EXHIBIT "H" 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 11: 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. LITIGATION The School District is a defendant in various legal proceedings pertaining to matters incidental to the performance of routine School District operations. The ultimate disposition of these proceedings is not presently determinable, but is not believed to have a material adverse effect on the financial condition of the School District. On May 21, 2004, a previous workers' compensation insurer of the School District, Cornerstone Mutual Insurance Company, was placed under an order of administrative supervision of the Georgia Department of Insurance and is insolvent. As a result, the School District may be liable for one outstanding workers' compensation claim that was being administered by the company. Due to the nature of the claim, the amount of future liability of the School District is not determinable; however, it is not believed to be material to the basic financial statements. NOTE 12: OTHER POST-EMPLOYMENT BENEFITS (OPEB) GEORGIA SCHOOL PERSONNEL POST-EMPLOYMENT HEALTH BENEFIT FUND Plan Description: Certified teachers and non-certified public school employees of the School District as defined in 20-2-875 of the Official Code of Georgia Annotated (O.C.G.A.) are provided OPEB through the School OPEB Fund - a cost-sharing multiple-employer defined benefit postemployment healthcare plan, reported as an employee trust fund and administered by a Board of Community Health (Board). Title 20 of the O.C.G.A. assigns the authority to establish and amend the benefit terms of the group health plan to the Board. Benefits Provided: The School OPEB Fund provides healthcare benefits for retirees and their dependents due under the group health plan for public school teachers, including librarians, other certified employees of public schools, regional educational service agencies and non-certified public school employees. Retiree medical eligibility is attained when an employee retires and is immediately eligible to draw a retirement annuity from Employees' Retirement System (ERS), Georgia Judicial Retirement System (JRS), Legislative Retirement System (LRS), Teachers Retirement System (TRS) or Public School Employees Retirement System (PSERS). If elected, dependent coverage starts on the same day as retiree coverage. Medicare-eligible retirees are offered Standard and Premium Medicare Advantage plan options. Non-Medicare eligible retiree plan options include Health Reimbursement Arrangement (HRA), Health Maintenance Organization (HMO) and a High Deductible Health Plan (HDHP). The School OPEB Fund also pays for administrative expenses of the fund. By law, no other use of the assets of the School OPEB Fund is permitted. Contributions: As established by the Board, the School OPEB Fund is substantially funded on a payas-you-go basis; that is, annual cost of providing benefits will be financed in the same year as claims occur. Contributions to the School OPEB Fund from the School District were $4,067,758.00 for the year ended June 30, 2018. Active employees are not required to contribute to the School OPEB Fund. - 24 - BARROW COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2018 EXHIBIT "H" OPEB Liabilities, OPEB Expense, and Deferred Outflows of Resources and Deferred Inflows of Resources Related to OPEB At June 30, 2018, the School District reported a liability of $110,825,380.00 for its proportionate share of the net OPEB liability. The net OPEB liability was measured as of June 30, 2017. The total OPEB liability used to calculate the net OPEB liability was based on an actuarial valuation as of June 30, 2016. An expected total OPEB liability as of June 30, 2017 was determined using standard roll-forward techniques. The School District's proportion of the net OPEB liability was actuarially determined based on employer contributions during the fiscal year ended June 30, 2017. At June 30, 2017, the School District's proportion was 0.788795%, which was a decrease of 0.004541% from its proportion measured as of June 30, 2016. For the year ended June 30, 2018, the School District recognized OPEB expense of $6,340,612.00. At June 30, 2018, the School District reported deferred outflows of resources and deferred inflows of resources related to OPEB from the following sources: Deferred Outflows of Resources OPEB Deferred Inflows of Resources Changes of assumptions $ - $ 8,439,070.00 Net difference between projected and actual earnings on OPEB plan investments 32,414.00 - Changes in proportion and differences between School District contributions and proportionate share of contributions - 570,398.00 School District contributions subsequent to the measurement date 4,067,758.00 - Total $ 4,100,172.00 $ 9,009,468.00 School District contributions subsequent to the measurement date of $4,067,758.00 are reported as deferred outflows of resources and will be recognized as a reduction of the net OPEB liability in the year ended June 30, 2019. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to OPEB will be recognized in OPEB expense as follows: Year Ended June 30: OPEB 2019 2020 2021 2022 2023 2024 $ (1,612,305.00) $ (1,612,305.00) $ (1,612,305.00) $ (1,612,305.00) $ (1,620,409.00) $ (907,425.00) - 25 - BARROW COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2018 EXHIBIT "H" Actuarial assumptions: The total OPEB liability as of June 30, 2017 was determined by an actuarial valuation as of June 30, 2016 using the following actuarial assumptions and other inputs, applied to all periods included in the measurement and rolled forward to the measurement date of June 30, 2017: OPEB: Inflation 2.75% Salary increases ERS 3.25% - 7.00%, including inflation JRS 4.50%, including inflation LRS None TRS 3.25 -- 9.00%, including inflation PSERS N/A Long-term expected rate of return Healthcare cost trend rate 3.88%, compounded annually, net of investment expense, and including inflation Pre-Medicare Eligible 7.75% Medicare Eligible 5.75% Ultimate trend rate Pre-Medicare Eligible Medicare Eligible 5.00% 5.00% Year of Ultimate trend rate 2022 Mortality rates were based on the RP-2000 Combined Mortality Table for Males or Females, as appropriate, with adjustments for mortality improvements based on Scale BB as follows: For ERS, JRS and LRS members: The RP-2000 Combined Mortality Table projected to 2025 with projection scale BB and set forward 2 years or both males and females is used for the period after service retirement and for dependent beneficiaries. The RP-2000 Disabled Mortality Table projected to 2025 with projection scale BB and set back 7 years for males and set forward 3 years for females is used for the period after disability retirement. For TRS members: The RP-2000 White Collar Mortality Table projected to 2025 with projection scale BB (set forward 1 year for males) is used for death after service retirement and beneficiaries. The RP-2000 Disabled Mortality Table projected to 2025 with projection scale BB (set forward two years for males and four years for females) is used for death after disability retirement. For PSERS members: The RP-2000 Blue-Collar Mortality Table projected to 2025 with projection scale BB (set forward 3 years for males and 2 years for females) is used for the period after service retirement and for beneficiaries of deceased members. The RP-2000 Disabled Mortality Table projected to 2025 with projection scale BB (set forward 5 years for both males and females) is used for the period after disability retirement. The actuarial assumptions used in the June 30, 2016 valuation were based on the results of an actuarial experience study for the pension systems, which covered the five-year period ending June 30, 2014. - 26 - BARROW COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2018 EXHIBIT "H" Projection of benefits for financial reporting purposes are based on the substantive plan (the plan as understood by the employer and plan members) and include the types of benefits provided at the time of each valuation and the historical pattern of sharing of benefit costs between the employer and plan members to that point. The actuarial methods and assumptions used include techniques that are designed to reduce the effects of short-term volatility in actuarial accrued liabilities and the actuarial value of assets, consistent with the long-term perspective of the calculation. Additionally, there was a change of assumptions that affected measurement of the total OPEB liability since the prior measurement date. The methodology used to determine employee and retiree participation in the School OPEB Fund is based on their current or last employer payroll location. Current and former employees of public school districts, libraries, regional educational service agencies and community colleges are allocated to the School OPEB Fund irrespective of retirement system affiliation. In addition, the discount rate increased from 3.07% to 3.58%. The long-term expected rate of return on OPEB plan investments was determined using a log-normal distribution analysis in which best-estimate ranges of expected future real rates of return (expected nominal returns, net of investment expense and the assumed rate of 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 allocation and best estimates of arithmetic real rates of return for each major asset class are summarized in the following table: Asset Class Target Allocation Long-Term Expected Real Rate of Return* Local Government Investment Pool 100.00% 1.13% * Rate shown is net of the 2.75% assumed rate of inflation. Discount rate: In order to measure the total OPEB liability for the School OPEB Fund, a single equivalent interest rate of 3.58% was used as the discount rate. This is comprised mainly of the yield or index rate for 20 year tax-exempt general obligation municipal bonds with an average rating of AA or higher (3.56% per the Bond Buyers Index). The projection of cash flows used to determine the discount rate assumed that contributions from members and from the employer will be made at the current level as averaged over the last five years, adjusted for annual projected changes in headcount. Projected future benefit payments for all current plan members were projected through 2115. Based on these assumptions, the OPEB plan's fiduciary net position was projected to be available to make OPEB payments for inactive employees through year 2029. Therefore, the calculated discount rate of 3.58% was applied to all periods of projected benefit payments to determine the total OPEB liability. Sensitivity of the District's proportionate share of the net OPEB liability to changes in the discount rate: The following presents the School District's proportionate share of the net OPEB liability calculated using the discount rate of 3.58%, as well as what the District's proportionate share of the net OPEB liability would be if it were calculated using a discount rate that is 1-percentage-point lower (2.58%) or 1 percentage-point higher (4.58%) than the current discount rate: 1% Decrease (2.58%) Current Discount Rate (3.58%) 1% Increase (4.58%) Net OPEB Liability $ 131,585,287.00 $ 110,825,380.00 $ 94,441,609.00 - 27 - BARROW COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2018 EXHIBIT "H" Sensitivity of the District's proportionate share of the net OPEB liability to changes in the healthcare cost trend rates: The following presents the School District's proportionate share of the net OPEB liability, as well as what the District's proportionate share of the net OPEB liability would be if it were calculated using healthcare cost trend rates that are 1-percentage-point lower or 1-percentage-point higher than the current healthcare cost trend rates: 1% Decrease Current Healthcare Cost Trend Rate 1% Increase Net OPEB Liability $ 91,861,614.00 $ 110,825,380.00 $ 135,516,175.00 OPEB plan fiduciary net position: Detailed information about the OPEB plan's fiduciary net position is available in the Comprehensive Annual Financial Report (CAFR) which is publicly available at https://sao.georgia.gov/comprehensive-annual-financial-reports. NOTE 13: 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 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 2018. The School District's contractually required contribution rate for the year ended June 30, 2018 was 16.81% of annual School District payroll, of which 16.74% of payroll was required from the School District and 0.07% of payroll was required from the State. For the current fiscal year, employer contributions to the pension plan were $11,909,355.80 and $48,817.46 from the School District and the State, respectively. - 28 - BARROW COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2018 EXHIBIT "H" EMPLOYEES' RETIREMENT SYSTEM Plan description: The Employees' Retirement System of Georgia (ERS) is a cost-sharing multiple-employer defined benefit pension plan established by the Georgia General Assembly during the 1949 Legislative Session for the purpose of providing retirement allowances for employees of the State of Georgia and its political subdivisions. ERS is directed by a Board of Trustees. Title 47 of the O.C.G.A. assigns the authority to establish and amend the benefit provisions to the State Legislature. ERS issues a publicly available financial report that can be obtained at www.ers.ga.gov/formspubs/formspubs. Benefits provided: The ERS Plan supports three benefit tiers: Old Plan, New Plan, and Georgia State Employees' Pension and Savings Plan (GSEPS). Employees under the old plan started membership prior to July 1, 1982 and are subject to plan provisions in effect prior to July 1, 1982. Members hired on or after July 1, 1982 but prior to January 1, 2009 are new plan members subject to modified plan provisions. Effective January 1, 2009, new state employees and rehired state employees who did not retain membership rights under the Old or New Plans are members of GSEPS. ERS members hired prior to January 1, 2009 also have the option to irrevocably change their membership to GSEPS. Under the old plan, the new plan, and GSEPS, a member may retire and receive normal retirement benefits after completion of 10 years of creditable service and attainment of age 60 or 30 years of creditable service regardless of age. Additionally, there are some provisions allowing for early retirement after 25 years of creditable service for members under age 60. Retirement benefits paid to members are based upon the monthly average of the member's highest 24 consecutive calendar months, multiplied by the number of years of creditable service, multiplied by the applicable benefit factor. Annually, postretirement cost-of-living adjustments may also be made to members' benefits, provided the members were hired prior to July 1, 2009. The normal retirement pension is payable monthly for life; however, options are available for distribution of the member's monthly pension, at reduced rates, to a designated beneficiary upon the member's death. Death and disability benefits are also available through ERS. Contributions: Member contributions under the old plan are 4% of annual compensation, up to $4,200.00, plus 6% of annual compensation in excess of $4,200.00. Under the old plan, the state pays member contributions in excess of 1.25% of annual compensation. Under the old plan, these state contributions are included in the members' accounts for refund purposes and are used in the computation of the members' earnable compensation for the purpose of computing retirement benefits. Member contributions under the new plan and GSEPS are 1.25% of annual compensation. The School District's required contribution rate for the year ended June 30, 2018 was 24.81% of annual covered payroll for old and new plan members and 21.81% for GSEPS members. The rates include the annual actuarially determined employer contributions rate of 24.69% of annual covered payroll for old and new plan members and 21.69% for GSEPS members, plus a 0.12% adjustment for the HB 751 one-time benefit adjustment of 3% to retired state employees. 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. Employer contributions to the pension plan were $12,581.58 for the current fiscal year. - 29 - BARROW COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2018 EXHIBIT "H" 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 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 $184,299.00. Pension Liabilities, Pension Expense, and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions At June 30, 2018, the School District reported a liability of $113,014,034.00 for its proportionate share of the net pension liability for TRS ($112,929,721.00) and ERS ($84,313.00). 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 $ 112,929,721.00 State of Georgia's proportionate share of the net pension liability associated with the School District 411,850.00 Total $ 113,341,571.00 The net pension liability for TRS and ERS was measured as of June 30, 2017. The total pension liability used to calculate the net pension liability was based on an actuarial valuation as of June 30, 2016. An expected total pension liability as of June 30, 2017 was determined using standard roll-forward techniques. The School District's proportion of the net pension liability was based on contributions to TRS and ERS during the fiscal year ended June 30, 2017. - 30 - BARROW COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2018 EXHIBIT "H" At June 30, 2017, the School District's TRS proportion was 0.607629%, which was an increase of 0.003588% from its proportion measured as of June 30, 2016. At June 30, 2017, the School District's ERS proportion was 0.002076%, which was a decrease of 0.000007% from its proportion measured as of June 30, 2016. At June 30, 2018, 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 $951,640.00. The PSERS net pension liability was measured as of June 30, 2017. The total pension liability used to calculate the net pension liability was based on an actuarial valuation as of June 30, 2016. An expected total pension liability as of June 30, 2017 was determined using standard roll-forward 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, 2017. For the year ended June 30, 2018, the School District recognized pension expense of $12,615,542.00 for TRS, $11,564.00 for ERS and $191,793.00 for PSERS and revenue of $41,144.00 for TRS and $191,793.00 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, 2018, the School District reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: TRS Deferred Outflows of Resources Deferred Inflows of Resources ERS Deferred Deferred Outflows of Inflows of Resources Resources Differences between expected and actual experience $ 4,224,267.00 $ 426,185.00 $ 924.00 $ 1.00 Changes of assumptions 2,475,560.00 - 192.00 - Net difference between projected and actual earnings on pension plan investments - 777,145.00 - 210.00 Changes in proportion and differences between School District contributions and proportionate share of contributions 1,004,256.00 265,412.00 376.00 182.00 School District contributions subsequent to the measurement date 11,909,355.80 - 12,581.58 - Total $ 19,613,438.80 $ 1,468,742.00 $ 14,073.58 $ 393.00 - 31 - BARROW COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2018 EXHIBIT "H" The School District contributions subsequent to the measurement date of $11,909,355.80 for TRS and $12,581.58 for ERS 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, 2019. 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 ERS 2019 $ (528,211.00) $ (727.00) 2020 $ 6,129,050.00 $ 3,270.00 2021 $ 3,291,176.00 $ 946.00 2022 $ (2,737,147.00) $ (2,390.00) 2023 $ 80,473.00 $ - Actuarial assumptions: The total pension liability as of June 30, 2017 was determined by an actuarial valuation as of June 30, 2016, using the following actuarial assumptions, applied to all periods included in the measurement: Teachers Retirement System: Inflation 2.75% Salary increases 3.25% 9.00%, average, including inflation Investment rate of return 7.50%, net of pension plan investment expense, including inflation Post-retirement mortality rates were based on the RP-2000 White Collar Mortality Table with future mortality improvement projected to 2025 with the Society of Actuaries' projection scale BB (set forward one year for males) for service requirements and dependent beneficiaries. The RP-2000 Disabled Mortality table with future mortality improvement projected to 2025 with Society of Actuaries' projection scale BB (set forward two years for males and four years for females) was used for the death after disability retirement. Rates of mortality in active service were based on the RP-2000 Employee Mortality Table projected to 2025 with projection scale BB. The actuarial assumptions used in the June 30, 2016 valuation were based on the results of an actuarial experience study for the period July 1, 2009 June 30, 2014. Employees' Retirement System: Inflation 2.75% Salary increases 3.25% - 7.00%, average, including inflation Investment rate of return 7.50%, net of pension plan investment expense, including inflation Post-retirement mortality rates were based on the RP-2000 Combined Mortality Table with future mortality improvement projected to 2025 with the Society of Actuaries' projection scale BB and set forward 2 years for both males and females for service retirements and dependent beneficiaries. The RP- 2000 Disabled Mortality Table with future mortality improvement projected to 2025 with Society of Actuaries' projection scale BB and set back 7 years for males and set forward 3 years for females was used for death after disability retirement. There is a margin for future mortality improvement in the tables used by the System. Based on the results of the most recent experience study adopted by the Board on December 17, 2015, the numbers of expected future deaths are 9-12% less than the - 32 - BARROW COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2018 EXHIBIT "H" actual number of deaths that occurred during the study period for service retirements and beneficiaries and for disability retirements. Rates of mortality in active service were based on the RP-2000 Employee Mortality Table projected to 2025 with projection scale BB. The actuarial assumptions used in the June 30, 2016 valuation were based on the results of an actuarial experience study for the period July 1, 2009 June 30, 2014. Public School Employees Retirement System: Inflation 2.75% Salary increases N/A Investment rate of return 7.50%, net of pension plan investment expense, including inflation Post-retirement mortality rates were based on the RP-2000 Blue-Collar Mortality Table projected to 2025 with projection scale BB (set forward 3 years for males and 2 years for females) for the period after service retirements and for dependent beneficiaries. The RP-2000 Disabled Mortality projected to 2025 with projection scale BB (set forward 5 years for both males and females) was used for death after disability retirement. There is a margin for future mortality improvement in the tables used by the System. Based on the results of the most recent experience study adopted by the Board on December 17, 2015, the numbers of expected future deaths are 9-11% less than the actual number of deaths that occurred during the study period for healthy retirees and 9-11% less than expected under the selected table for disabled retirees. Rates of mortality in active service were based on the RP-2000 Employee Mortality Table projected to 2025 with projection scale BB. The actuarial assumptions used in the June 30, 2016 valuation were based on the results of an actuarial experience study for the period July 1, 2009 June 30, 2014. The long-term expected rate of return on TRS, ERS and PSERS pension plan investments were 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: Asset class Fixed income Domestic large stocks Domestic mid stocks Domestic small stocks International developed market stocks International emerging market stocks Alternative Total * Rates shown are net of the 2.75% assumed rate of inflation TRS Target allocation 30.00% 39.80% 3.70% 1.50% 19.40% 5.60% - 100.00% ERS/PSERS Target allocation 30.00% 37.20% 3.40% 1.40% 17.80% 5.20% 5.00% 100.00% Long-term expected real rate of return* (0.50)% 9.00% 12.00% 13.50% 8.00% 12.00% 10.50% Discount rate: The discount rate used to measure the total TRS, ERS 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, ERS and PSERS pension plan's fiduciary net position was projected to be available to make all projected future - 33 - BARROW COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2018 EXHIBIT "H" 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: 1% Decrease (6.50%) Current Discount Rate (7.50%) 1% Increase (8.50%) School District's proportionate share of the net pension liability $ 185,330,922.00 $ 112,929,721.00 $ 53,287,404.00 Employees' 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%) $ 119,004.00 $ 84,313.00 $ 54,721.00 Pension plan fiduciary net position: Detailed information about the pension plan's fiduciary net position is available in the separately issued TRS, ERS and PSERS financial report which is publicly available at www.trsga.com/publications and http://www.ers.ga.gov/formspubs/formspubs.html. NOTE 14: RESTATEMENT OF PRIOR YEAR NET POSITION For fiscal year 2018, the School District made prior period adjustments due to the adoption of GASB Statement No. 75, as described in "New Accounting Pronouncements", which require the restatement of the June 30, 2017, net position in Governmental Activities. The result is a decrease in net position at July 1, 2017 of $113,461,822.00 This change is in accordance with generally accepted accounting procedures. Net Position, July 1, 2017 as previously reported $ 51,393,157.94 Prior Period Adjustment - Implementation of GASB No. 75: Net OPEB Liability (measurement date) (117,574,662.00) Deferred Outflows - School District's Contributions made during fiscal year 2017 4,112,840.00 Net Position, July 1, 2017, as restated $ (62,068,664.06) NOTE 15: PRIOR YEAR DEFEASEMENT OF DEBT In prior years, the School District defeased certain general obligation bonds by placing the proceeds of new bonds in an irrevocable trust to provide for all future debt service payments on the old bonds. Accordingly, the trust account assets and the liability for the defeased bonds are not included in the School District's basic financial statements. On March 29, 2016 a portion of these bonds were redeemed. At June 30, 2018, $3,100,000.00 of bonds outstanding are considered defeased. - 34 - BARROW COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2018 EXHIBIT "H" NOTE 16: TAX ABATEMENTS Barrow County enters into property tax abatement agreements with local businesses for the purpose of attracting or retaining businesses within their jurisdictions. The abatements may be granted to any business located within or promising to relocate to Barrow County. For the fiscal year ended June 30, 2018, Barrow County abated property taxes due to the School District that were levied on September 15, 2017 and due on November 15, 2017 totaling $312,216.84 under these programs including the following tax abatement agreements: Through the Joint Development Authority, a $70,526.63 property tax abatement to a company for expansion of their existing operations in the County, producing jobs and $20,000,000 in capital investment in the community. The company is in year 5 of the 7 year tax abatement. Through the Industrial Building Authority, a $197,088.77 property tax abatement for a new business locating in the County creating 315,000 square feet of manufacturing and distribution capabilities and increasing employment. The Company is in year 4 of the 5 year tax abatement. If the Company does not meet the community jobs goals and community investment goals, all or a portion of the ad valorem property taxes saved for that year will be recouped. Through the Industrial Building Authority, a $44,601.44 property tax reduction for a new business locating in the County assuming 550,000 square feet of manufacturing and distribution capabilities and increasing employment. The Company is in year 3 of the 7 year tax abatement. If the Company does not meet the community jobs goals and community investment goals, all or a portion of the ad valorem property taxes saved for that year will be recouped. NOTE 17: SPECIAL ITEMS The School District had a donation of 91.8 acres of land in the fiscal year that was valued at $1,377,000.00. - 35 - (This page left intentionally blank) BARROW COUNTY BOARD OF EDUCATION REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF PROPORTIONATE SHARE OF THE NET PENSION LIABILITY TEACHERS RETIREMENT SYSTEM OF GEORGIA FOR THE YEAR ENDED JUNE 30 SCHEDULE "1" Year Ended 2018 2017 2016 2015 School District's proportion of the net pension liability School District's proportionate share of the net pension liability State of Georgia's proportionate share of the net pension liability associated with the School District Total 0.607629% $ 112,929,721.00 $ 0.604041% $ 124,620,393.00 $ 0.599861% $ 91,322,881.00 $ 0.603543% $ 76,249,697.00 $ 411,850.00 528,982.00 393,997.00 231,196.00 $ 113,341,571.00 $ 125,149,375.00 $ 91,716,878.00 $ 76,480,893.00 School District's covered payroll $ 70,026,217.71 $ 66,544,306.24 $ 63,523,332.29 $ 61,738,810.11 School District's proportionate share of the net pension liability as a percentage of its covered payroll 161.27% 187.27% 143.76% 123.50% Plan fiduciary net position as a percentage of the total pension liability 79.33% 76.06% 81.44% 84.03% This schedule is intended to show information for 10 years. Additional years will be displayed as they become available. - 37 - BARROW COUNTY BOARD OF EDUCATION REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF PROPORTIONATE SHARE OF THE NET PENSION LIABILITY EMPLOYEES' RETIREMENT SYSTEM OF GEORGIA FOR THE YEAR ENDED JUNE 30 SCHEDULE "2" Year Ended School District's proportion of the net pension liability School District's proportionate share of the net pension liability 2018 2017 2016 2015 0.002076% $ 0.002083% $ 0.002017% $ 0.001803% $ 84,313.00 98,535.00 81,717.00 67,624.00 School District's covered payroll $ 50,911.46 $ 48,428.04 $ 46,118.54 $ 40,592.54 School District's proportionate share of the net pension liability as a percentage of covered payroll 165.61% 203.47% 177.19% 166.59% Plan fiduciary net position as a percentage of total net pension liability 76.33% 72.34% 76.20% 77.99% This schedule is intended to show information for 10 years. Additional years will be displayed as they become available. - 38 - BARROW COUNTY BOARD OF EDUCATION REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF PROPORTIONATE SHARE OF THE NET PENSION LIABILITY PUBLIC SCHOOLS EMPLOYEES RETIREMENT SYSTEM OF GEORGIA FOR THE YEAR ENDED JUNE 30 SCHEDULE "3" Year Ended 2018 2017 2016 2015 School District's proportion of the net pension liability School District's proportionate share of the net pension liability 0.00% $ - 0.00% $ - 0.00% $ - 0.00% $ - State of Georgia's proportionate share of the net pension liability associated with the School District $ 951,640.00 $ $ 1,194,924.00 $ $ 818,369.00 $ $ 670,954.00 $ Total 951,640.00 1,194,924.00 818,369.00 670,954.00 School District's covered payroll $ 3,308,495.81 $ 2,662,254.99 $ 2,675,995.22 $ 2,334,651.88 School District's proportionate share of the net pension liability as a percentage of its covered payroll Plan fiduciary net position as a percentage of the total pension liability N/A 85.69% N/A 81.00% N/A 87.00% N/A 88.29% This schedule is intended to show information for 10 years. Additional years will be displayed as they become available. - 39 - BARROW COUNTY BOARD OF EDUCATION REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF PROPORTIONATE SHARE OF THE NET OPEB LIABILITY SCHOOL OPEB FUND FOR THE YEAR ENDED JUNE 30 SCHEDULE "4" Year Ended 2018 School District's proportion of the net OPEB liability School District's proportionate share of the net OPEB liability State of Georgia's proportionate share of the net OPEB liability associated with the School District Total 0.788795% $ 110,825,380.00 $ - $ 110,825,380.00 School District's covered-employee payroll School District's proportionate share of the net OPEB liability as a percentage of its covered-employee payroll Plan fiduciary net position as a percentage of the total OPEB liability $ 61,303,196.01 180.78% 1.61% This schedule is intended to show information for 10 years. Additional years will be displayed as they become available. - 40 - BARROW COUNTY BOARD OF EDUCATION REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF CONTRIBUTIONS TEACHERS RETIREMENT SYSTEM OF GEORGIA FOR THE YEAR ENDED JUNE 30 SCHEDULE "5" Year Ended Contractually required contribution Contributions in relation to the contractually required contribution Contribution deficiency School District's covered (excess) payroll 2018 $ 2017 $ 2016 $ 2015 $ 11,909,355.80 $ 9,956,429.10 $ 9,455,738.40 $ 8,317,398.59 $ 11,909,355.80 $ 9,956,429.10 $ 9,455,738.40 $ 8,317,398.59 $ - $ 71,144,105.55 - $ 70,026,217.71 - $ 66,544,306.24 - $ 63,523,332.29 Contribution as a percentage of covered payroll 16.74% 14.22% 14.21% 13.09% This schedule is intended to show information for 10 years. Additional years will be displayed as they become available. - 41 - BARROW COUNTY BOARD OF EDUCATION REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF CONTRIBUTIONS EMPLOYEES' RETIREMENT SYSTEM OF GEORGIA FOR THE YEAR ENDED JUNE 30 SCHEDULE "6" Year Ended Contractually required contribution Contributions in relation to the contractually required contribution Contribution deficiency (excess) 2018 $ 12,581.58 $ 12,581.58 $ - 2017 $ 12,631.14 $ 12,631.14 $ - 2016 $ 11,971.44 $ 11,971.44 $ - 2015 $ 10,127.30 $ 10,127.30 $ - School District's covered payroll $ 50,711.80 $ 50,911.46 $ 48,428.04 $ 46,118.54 Contribution as a percentage of covered payroll 24.81% 24.81% 24.72% 21.96% This schedule is intended to show information for 10 years. Additional years will be displayed as they become available. - 42 - BARROW COUNTY BOARD OF EDUCATION REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF CONTRIBUTIONS SCHOOL OPEB FUND FOR THE YEAR ENDED JUNE 30 SCHEDULE "7" Year Ended 2018 2017 Contractually required contribution Contributions in relation to the contractually required contribution Contribution deficiency (excess) $ 4,067,758.00 $ 4,067,758.00 $ - $ 4,112,840.00 $ 4,112,840.00 $ - School District's coveredemployee payroll Contribution as a percentage of covered- employee payroll $ 62,419,660.99 $ 61,303,196.01 6.52% 6.71% This schedule is intended to show information for 10 years. Additional years will be displayed as they become available. - 43 - BARROW COUNTY BOARD OF EDUCATION NOTES TO THE REQUIRED SUPPLEMENTARY INFORMATION FOR THE YEAR ENDED JUNE 30, 2018 SCHEDULE "8" Teachers Retirement System Changes of assumptions: In 2010 and later, the expectation of retired life mortality was changed to the RP2000 Mortality Tables rather than the 1994 Group Annuity Mortality Table, which was used prior to 2010. In 2010, rates of withdrawal, retirement, disability and mortality were adjusted to more closely reflect actual experience. In 2010, assumed rates of salary increase were adjusted to more closely reflect actual and anticipated experience. On November 18, 2015, the Board adopted recommended changes to the economic and demographic assumptions utilized by the System. Primary among the changes were the updates to rates of mortality, retirement, disability, withdrawal and salary increases. The expectation of retired life mortality was changed to RP2000 White Collar Mortality Table with future mortality improvement projected to 2025 with the Society of Actuaries' projection scale BB (set forward one year for males). Employees' Retirement System Changes of assumptions: On December 17, 2015, the Board adopted recommended changes to the economic and demographic assumptions utilized by the System. Primary among the changes were the updates to rates of mortality, retirement, disability, withdrawal and salary increases. Public School Employees Retirement System Changes of assumptions: In 2010 and later, the expectation of retired life mortality was changed to the RP2000 Mortality Tables rather than the 1994 Group Annuity Mortality Table, which was used prior to 2010. In 2010, rates of withdrawal, retirement, disability and mortality were adjusted to more closely reflect actual experience. On December 17, 2015, the Board adopted recommended changes to the economic and demographic assumptions utilized by the System. Primary among the changes were the updates to rates of mortality, retirement and withdrawal. The expectation of retired life mortality was changed to the RP2000 Blue Collar Mortality Table projected to 2025 with projection scale BB (set forward 3 years for males and 2 years for females). School OPEB Fund Changes of benefit terms: In June 30, 2010 actuarial valuation, there was a change of benefit terms to require Medicare-eligible recipients to enroll in a Medicare Advantage plan to receive the State subsidy. Changes in assumptions: In the revised June 30, 2017 actuarial valuation, there was a change relating to employee allocation. Employees were previously allocated based on their Retirement System membership, and currently employees are allocated based on their current employer payroll location. Additionally, there were changes to the discount rate and an increase in the investment rate of return due to a longer-term investment strategy. In the June 30, 2015 actuarial valuation, decremental and underlying inflation assumptions were changed to reflect the Retirement Systems' experience studies. In the June 30, 2012 actuarial valuation, a data audit was performed and data collection procedures and assumptions were changed. - 44 - BARROW COUNTY BOARD OF EDUCATION GENERAL FUND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL YEAR ENDED JUNE 30, 2018 SCHEDULE " 9" REVENUES Property Taxes Sales Taxes State Funds Federal Funds Charges for Services Investment Earnings Miscellaneous Total Revenues EXPENDITURES Current Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Enterprise Operations Food Services Operation Total Expenditures Excess of Revenues over (under) Expenditures OTHER FINANCING SOURCES (USES) Other Sources Other Uses Total Other Financing Sources (Uses) Net Change in Fund Balances Fund Balances - Beginning Fund Balances - Ending NONAPPROPRIATED BUDGETS ORIGINAL (1) FINAL (1) ACTUAL AMOUNTS VARIANCE OVER/UNDER $ 34,565,000.00 $ 34,565,000.00 $ 36,735,801.40 $ 435,000.00 435,000.00 1,174,490.30 80,753,519.00 80,930,578.11 84,028,690.24 12,476,606.00 13,537,447.00 13,079,095.17 1,804,490.00 1,804,490.00 3,510,787.18 - - 220,429.07 764,205.00 780,385.33 1,617,098.87 130,798,820.00 132,052,900.44 140,366,392.23 2,170,801.40 739,490.30 3,098,112.13 (458,351.83) 1,706,297.18 220,429.07 836,713.54 8,313,491.79 85,871,323.19 3,995,542.00 5,821,012.70 1,877,390.98 1,269,051.52 7,603,772.74 2,234,490.00 9,359,436.00 7,323,951.00 669,580.00 12,875.00 412,000.00 7,959,990.00 134,410,415.13 (3,611,595.13) 85,798,947.96 4,266,133.00 6,429,168.01 1,883,841.34 1,380,459.00 7,626,927.08 2,264,175.67 9,329,573.87 7,354,444.85 676,304.54 28,879.00 508,222.25 7,966,780.00 135,513,856.57 (3,460,956.13) 84,655,177.67 4,118,271.66 6,329,611.96 1,962,427.77 1,103,078.91 7,577,049.29 2,075,775.85 8,643,717.33 7,643,779.95 744,640.20 9,949.41 2,746,003.75 8,099,560.08 135,709,043.83 4,657,348.40 1,143,770.29 147,861.34 99,556.05 (78,586.43) 277,380.09 49,877.79 188,399.82 685,856.54 (289,335.10) (68,335.66) 18,929.59 (2,237,781.50) (132,780.08) (195,187.26) 8,118,304.53 540,626.00 (540,626.00) (3,611,595.13) 16,151,080.02 395,776.00 (395,776.00) (3,460,956.13) 16,151,080.02 4,657,348.40 17,252,759.65 (395,776.00) 395,776.00 8,118,304.53 1,101,679.63 $ 12,539,484.89 $ 12,690,123.89 $ 21,910,108.05 $ 9,219,984.16 Notes to the Schedule of Revenues, Expenditures and Changes in Fund Balances Budget and Actual (1) Original and Final Budget amounts do not include the budgeted revenues $3,588,272.30 or expenditures $3,471,930.63 of the various principal accounts. The accompanying schedule of revenues, expenditures and changes in fund balances budget and actual is presented on the modified accrual basis of accounting which is the basis of accounting used in the presentation of the fund financial statements. See notes to the basic financial statements. - 45 - BARROW COUNTY BOARD OF EDUCATION SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS YEAR ENDED JUNE 30, 2018 SCHEDULE "10" FUNDING AGENCY PROGRAM/GRANT Agriculture, U. S. Department of Child Nutrition Cluster Pass-Through From Georgia Department of Education Food Services School Breakfast Program National School Lunch Program Total Child Nutrition Cluster Other Programs Pass-Through From Georgia Department of Education Food Services Child Nutrition Discretionary Grants Limited Availability Total U. S. Department of Agriculture Education, U. S. Department of Special Education Cluster Pass-Through From Georgia Department of Education Special Education Grants to States Grants to States Preschool Grants Preschool Grants Total Special Education Cluster Other Programs Pass-Through From Georgia Department of Education Career and Technical Education - Basic Grants to States Career and Technical Education - Basic Grants to States Education for Homeless Children and Youth Education for Homeless Children and Youth English Language Acquisition State Grants English Language Acquisition State Grants Migrant Education - State Grant Program Supporting Effective Instruction State Grant Supporting Effective Instruction State Grants Student Support and Academic Enrichment Program Title I Grants to Local Educational Agencies Title I Grants to Local Educational Agencies Twenty-First Century Community Learning Centers Total Other Programs Total U. S. Department of Education Defense, U. S. Department of Direct Department of the Army R.O.T.C. Program CFDA NUMBER PASSTHROUGH ENTITY ID NUMBER EXPENDITURES IN PERIOD 10.553 10.555 18185GA324N1099 $ 18185GA324N1100 2,226,141.06 5,617,939.49 7,844,080.55 10.579 17173GA350N8103 10,000.00 7,854,080.55 84.027 84.027 84.173 84.173 H027A160073 H027A170073 H173A160081 H173A170081 84.048 84.048 84.196 84.196 84.365 84.365 84.011 84.367 84.367 84.424A 84.010 84.010 84.287 V048A160010 V048A170010 S196A160011 S196A170011 S365A160010 S365A170010 S011A170011 S367A160001 S367A170001 S424A170011 S010A160010 S010A170010 S287C170010 12.UNKNOWN 156,606.00 2,210,240.74 20,894.00 70,932.56 2,458,673.30 3,005.34 116,838.05 1,266.00 44,909.87 1,145.00 107,335.06 21,006.04 27,495.00 258,615.75 52,652.06 146,703.00 2,724,165.99 157,345.52 3,662,482.68 6,121,155.98 138,866.10 Total Expenditures of Federal Awards $ 14,114,102.63 Notes to the Schedule of Expenditures of Federal Awards Note 1. Basis of Presentation The accompanying schedule of expenditures of federal awards (the "Schedule") includes the federal award activity of the Barrow County Board of Education (the "Board") under programs of the federal government for the year ended June 30, 2018. The information in this Schedule is presented in accordance with the 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). Because the Schedule presents only a selected portion of the operations of the Board, it is not intended to and does not present the financial position or changes in net position of the Board. Note 2. Summary of Significant Accounting Policies Expenditures reported on the Schedule are reported on the modified accrual basis of accounting. Such expenditures are recognized following the cost principles contained in the Uniform Guidance, wherein certain types of expenditures are not allowable or are limited as to reimbursement. The Board has elected not to use the 10-percent de minimis indirect cost rate as allowed under the Uniform Guidance. See notes to the basic financial statements. - 46 - BARROW COUNTY BOARD OF EDUCATION SCHEDULE OF STATE REVENUE YEAR ENDED JUNE 30, 2018 SCHEDULE "11" AGENCY/FUNDING GRANTS Bright From the Start: Georgia Department of Early Care and Learning Pre-Kindergarten Program Education, Georgia Department of Quality Basic Education Direct Instructional Cost Kindergarten Program Kindergarten Program - Early Intervention Program Primary Grades (1-3) Program Primary Grades - Early Intervention (1-3) Program Upper Elementary Grades (4-5) Program Upper Elementary Grades - Early Intervention (4-5) Program Middle School (6-8) Program High School General Education (9-12) Program Vocational Laboratory (9-12) Program Students with Disabilities Gifted Student - Category VI Remedial Education Program Alternative Education Program English Speakers of Other Languages (ESOL) Media Center Program 20 Days Additional Instruction Staff and Professional Development Principal Staff and Professional Development Indirect Cost Central Administration School Administration Facility Maintenance and Operations Amended Formula Adjustment Charter System Adjustment Categorical Grants Pupil Transportation Regular Nursing Services Education Equalization Funding Grant Other State Programs Food Services Math and Science Supplements Preschool Disability Services Teacher of the Year Teachers Retirement Vocational Education Georgia State Financing and Investment Commission Reimbursement on Construction Projects Governor's Office of Student Achievement Connections for Classrooms Grant Innovation Fund Office of the State Treasurer Public School Employees Retirement GOVERNMENTAL FUND TYPES CAPITAL GENERAL PROJECTS FUND FUND TOTAL $ 1,732,568.75 $ - $ 1,732,568.75 3,431,266.00 1,790,327.00 9,392,816.00 2,084,642.00 5,207,230.00 822,306.00 8,934,649.00 6,869,933.00 2,697,851.00 12,479,635.00 3,832,737.00 895,536.00 612,160.00 2,146,919.00 1,581,895.00 463,674.00 281,276.00 4,024.00 1,922,589.00 2,837,143.00 3,586,839.00 (1,186,442.00) 1,293,703.00 1,082,875.00 272,280.00 7,811,896.00 190,382.00 165,739.19 274,568.78 507.25 48,817.46 181,744.95 - 3,431,266.00 - 1,790,327.00 - 9,392,816.00 - 2,084,642.00 - 5,207,230.00 - 822,306.00 - 8,934,649.00 - 6,869,933.00 - 2,697,851.00 - 12,479,635.00 - 3,832,737.00 - 895,536.00 - 612,160.00 - 2,146,919.00 - 1,581,895.00 - 463,674.00 - 281,276.00 - 4,024.00 - 1,922,589.00 - 2,837,143.00 - 3,586,839.00 - (1,186,442.00) - 1,293,703.00 - 1,082,875.00 - 272,280.00 - 7,811,896.00 - 190,382.00 - 165,739.19 - 274,568.78 - 507.25 - 48,817.46 - 181,744.95 - 89,404.86 10,899.00 184,299.00 1,392,682.60 - - 1,392,682.60 89,404.86 10,899.00 184,299.00 $ 84,028,690.24 $ 1,392,682.60 $ 85,421,372.84 See notes to the basic financial statements. - 47 - (This page left intentionally blank) BARROW COUNTY BOARD OF EDUCATION SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS YEAR ENDED JUNE 30, 2018 SCHEDULE "12" PROJECT SPLOST #5 A(i) the acquisition, construction, and equipping of two new schools and facilities, including but not limited to new school buildings, physical education/athletic facilities and equipment, classrooms,lunchrooms, gymnasiums, and auditoriums, renovations and equipment for existing facilities, and the acquisition and purchase of any property necessary and desirable therefore, both real and personal property, including but not limited to technology, safety and security equipment and transportation facilities and equipment. A(ii) paying capitalized interest on the bonds. A(iii) paying the costs of issuing the bonds. B(i) paying a portion of the debt service on the bonds. (B)(ii) paying debt service on the outstanding Barrow County School District General Obligation Bonds, Series 2010, Series 2012A, Series 2012B, Series 2014 coming due February 1, 2017, through and including February 1, 2022, the maximum amount to be retired not to exceed $36,994,167.10. The maximum cost of such projects to be funded from sales and use tax proceeds not to exceed $58,000,000.00 ORIGINAL ESTIMATED COST (1) CURRENT ESTIMATED COSTS (2) AMOUNT EXPENDED IN CURRENT YEAR (3) AMOUNT EXPENDED IN PRIOR YEARS (3) TOTAL COMPLETION COST EXCESS PROCEEDS NOT EXPENDED ESTIMATED COMPLETION DATE 20,826,049.37 45,826,049.37 3,311,307.70 14,661,442.88 - - - - - - - - 179,783.63 179,783.63 179,783.63 - - - 5,070,236.39 5,070,236.39 830,371.94 531,939.45 - - 31,923,930.61 31,923,930.61 7,262,752.50 1,118,876.25 - - SPLOST #5 Totals $ 58,000,000.00 $ 83,000,000.00 $ 11,584,215.77 $ 16,312,258.58 $ - $ - June 2022 (1) The School District's original cost estimate as specified in the resolution calling for the imposition of the Local Option Sales Tax. (2) The School District's current estimate of total cost for the projects. Includes all cost from project inception to completion. (3) The voters of Barrow County approved the imposition of a 1% sales tax to fund the above projects and retire associated debt. Amounts expended for these projects may include sales tax proceeds, state, local property taxes, bond proceeds and/or other funds over the life of the projects. See notes to the basic financial statements. - 49 - SECTION II COMPLIANCE AND INTERNAL CONTROL REPORTS Greg S. Griffin STATE AUDITOR (404) 656-2174 DEPARTMENT OF AUDITS AND ACCOUNTS 270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400 March 26, 2019 The Honorable Brian P. Kemp, Governor of Georgia Members of the General Assembly of the State of Georgia Members of the State Board of Education and Superintendent and Members of the Barrow County Board of Education INDEPENDENT AUDITOR'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS 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 the Barrow County Board of Education (School District), as of and for the year ended June 30, 2018, 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 26, 2019. 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. 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, and 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 Greg S. Griffin STATE AUDITOR (404) 656-2174 DEPARTMENT OF AUDITS AND ACCOUNTS 270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400 March 26, 2019 The Honorable Brian P. Kemp, Governor of Georgia Members of the General Assembly of the State of Georgia Members of the State Board of Education and Superintendent and Members of the Barrow County Board of Education INDEPENDENT AUDITOR'S REPORT ON COMPLIANCE FOR EACH MAJOR FEDERAL PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE REQUIRED BY THE UNIFORM GUIDANCE Report on Compliance for Each Major Federal Program We have audited the Barrow County Board of Education (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, 2018. 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 each of 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. We believe that our audit provides a reasonable basis for our opinion on compliance for each major federal program. However, our audit does not provide a legal determination of the School District's compliance. Opinion on Each 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 each of its major federal programs for the year ended June 30, 2018. 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 SECTION III AUDITEE'S RESPONSE TO PRIOR YEAR FINDINGS AND QUESTIONED COSTS BARROW COUNTY BOARD OF EDUCATION AUDITEE'S RESPONSE SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2018 PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS No matters were reported. PRIOR YEAR FEDERAL AWARD FINDINGS AND QUESTIONED COSTS No matters were reported. SECTION IV FINDINGS AND QUESTIONED COSTS BARROW COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2018 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 weaknesses identified? Significant deficiencies identified? No None Reported Noncompliance material to financial statements noted: No Federal Awards Internal Control over major programs: Material weaknesses identified? Significant deficiencies 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 program: CFDA Number 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.